On Ships and Chips

I just finished reading a wonderful book called “The Shipping Man”. It has story after story about what it’s like to own ships, the traditions of the shipping world, and the characters one will encounter in their adventure.

And now, I cannot stop thinking about the similarities between ships and chips.

  1. Structure: There is little difference between what CoreWeave did in 2023 and what the Greeks did in the 1950s. Greek shipowners would secure long term contracts to transport oil, then use those contracts to get financing to buy ships. CoreWeave secured long term contracts to provide compute to companies like Microsoft, then used those contracts to get financing to buy GPUs.
  2. Risk: Lock yourself into a long-term contract, and you miss the upside of the spot market. True for oil, grain, cargo, and true for tokens
  3. Risk (part 2): Both are violently dependent on the cost of capital and energy.
  4. Relationships: You are either “in” or you are “out”. You have to know the Greeks, and you have to know Jensen.
  5. Geopolitics: A drought in Russia can upend the dry cargo market. A new model release by the Chinese labs can upend token demand and prices.
  6. Construction: Data centers and ports are both really expensive and politically hard to build. America doesn’t have the best shipyards or the best chip factories. Asia does.
  7. Labor light: You don’t need that many bodies to run a ship or a data center  
  8. Capital: LOVES to flow to both
  9. Fortunes: Massive fortunes can be made very quickly, and lost just as quickly.
  10. Ownership: The siren sound of owning a ship and owning chips is very strong. Shipowner and Chipowner admittedly sound incredibly cool.

I don't know enough about shipping or chips yet to know how far this analogy goes. But I have a feeling that it goes deep. So allow me to indulge in 3 predictions:

  1. Liberia for data centers is coming: Shipping is weird. The Chinese build the ships, the Greeks own them, and Liberia registers them. Chips are weird. The Taiwanese make them, the Americans own them, and ____ registers them. Ships want to sail, and will sail to the geography of least resistance, ie, the best tax laws and regulations. Tokens want to flow too, where will they find their Liberia?
  2. The Chinese are coming: In 2000, China accounted for less than 7% of global shipbuilding. Today, it builds more than half. The most advanced chips are made in Taiwan today. For how long?
  3. Insurance Insurance Insurance: Shipowners invented P&I clubs in the 1850s to insure risks that traditional insurers wouldn't cover. Today, 12 clubs cover nearly 90% of the world's ocean going tonnage! Two H100s might be identical, but the risks of owning them can be wildly different. Where they live, who rents them, who financed them, etc.  Who pays when something goes wrong? I suspect that it won't just be the model companies.

The greatest adventure continues.