American companies have been ‘hollowed out’ by the Red Dragon
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American companies have been ‘hollowed out’ by the Red Dragon
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Palmer Luckey, the billionaire founder of defense technology company Anduril Industries and Oculus VR, is sounding the alarm on America’s dependence on China — and his warning goes far beyond cheap labor.
In a recent interview with the Hoover Institution (1), Luckey said China has become the place where much of the world’s most important engineering and manufacturing work gets done.
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“I used to make millions of virtual reality headsets in China,” Luckey said, noting that he has spent significant time in Shenzhen. “If you want to get stuff done and you want to build things, it is the place to be.”
According to Luckey, China’s advantage is not simply being a low-cost manufacturing hub. He argued that the country has built deep technical expertise across critical industries.
“Their people are just genuinely extremely good. They have the world’s best battery engineers,” he said. “They have many of the world’s best metallurgists, many of the world’s best optical engineers.”
Then came the warning that should make Americans pay attention: “American companies have been hollowed out,” Luckey said.
He argued that many U.S. companies no longer know how to actually build the products they design. In his view, America has shifted toward high-level concept work, while the difficult process of turning ideas into manufacturable products has increasingly been sent overseas.
That is where China comes in. Luckey said Chinese engineers are now doing much of the hard work of manufacturing, iteration, testing and production.
“They are the real engineers,” he said.
That is a brutal assessment. But it speaks to a much larger anxiety in America: The country may still own the brands, the patents and the corporate headquarters, but China increasingly controls the supply chains, materials, manufacturing know-how and engineering muscle needed to turn ideas into physical products.
‘Not in control of your own destiny’
The concern becomes even more serious when national security enters the picture.
“If you don’t control your raw materials, if you are dependent on your largest strategic adversary for everything that underpins your quality of life, you are fundamentally not in control of your own destiny,” Luckey said.
He compared the current situation to a Cold War scenario that would once have seemed impossible: America buying critical defense-related electronics from a company supervised by its top geopolitical rival.
“If you would’ve written our current situation in a Cold War novel,” Luckey said, imagining a Tom Clancy-style plot in which the Pentagon’s secure command-and-control devices were made by the Soviet Union, “it wouldn’t have even been believable as fiction.”
Yet, in Luckey’s view, America now faces a version of that reality with China. He pointed to Lenovo, the Chinese-owned technology giant, as a major laptop manufacturer for the Pentagon.
Luckey also raised the issue of population, stating: “We cannot beat China with 500 million Americans. It will never happen. We’ll become economically irrelevant.”
To be sure, the U.S. remains the world’s dominant economic powerhouse. And Luckey’s argument is not that America is doomed.
But his warning points to a real risk for investors: A world in which the U.S. is increasingly dependent on China for critical materials, manufacturing know-how and advanced engineering is also a world with greater geopolitical uncertainty.
Trade fights can intensify. Supply chains can break. Defense spending can shift. And investors can suddenly find themselves exposed to forces far outside quarterly earnings reports or Federal Reserve meetings.
Luckey’s warning that the U.S. could become “economically irrelevant” may sound extreme. But the broader concern is hard to ignore: If America’s industrial base weakens while geopolitical tensions rise, investors may want assets that are not entirely dependent on corporate profits, government policy or the strength of the dollar.
That is where gold often enters the conversation.
Known as the ultimate safe haven, gold has been used as a store of value for thousands of years. It is not tied to any single company, country or central bank. Its supply cannot be expanded at the push of a button. And during periods of geopolitical turmoil or economic uncertainty, investors often flock to it in search of stability.
Ray Dalio, founder of the world’s largest hedge fund, told CNBC last year that “people don’t have, typically, an adequate amount of gold in their portfolio,” adding that “when bad times come, gold is a very effective diversifier.”
The market has taken notice. Over the past five years, gold prices have surged by 145%.
Other prominent voices see further potential. JPMorgan CEO Jamie Dimon has said that in this environment, gold can “easily” rise to $10,000 an ounce.
One way to invest in gold that can also provide significant tax advantages is to open a gold IRA with the help of Goldco.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold, making it a compelling potential option for those wanting to ensure their retirement funds are diversified during rough economic times.
Gold can help investors hedge against uncertainty. But it is not the only asset that can hold appeal when the world feels less stable.
Real estate offers a different kind of protection: exposure to a basic need that does not disappear when geopolitical tensions rise.
If America’s industrial base is under pressure and global supply chains are vulnerable, investors may want part of their wealth anchored in assets connected to everyday domestic demand. Residential real estate fits that role because it is tangible, local and tied to a need that persists in good times and bad.
No matter what happens between the U.S. and China, people still need a place to live.
In fact, legendary investor Warren Buffett has often pointed to real estate as a prime example of a productive, income-generating asset.
In 2022, Buffett stated (2) that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check.”
Of course, you don’t need billions — or even to buy an entire property — to benefit from real estate investing. Mogul, a srowdfunding platforms, offers an easier way to get exposure to this income-generating asset class.
As a real estate investment option offering fractional ownership in blue-chip rental properties, it gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.
Each property undergoes a rigorous vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Another option is Lightstone DIRECT, which gives accredited investors access to single-asset multifamily and industrial deals.
Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
Prominent investors like Dalio often stress the importance of diversification — and for good reason. Many traditional assets tend to move in tandem, especially during periods of market stress.
That message feels especially relevant today. Nearly 40% of the S&P 500’s weight is concentrated in its ten largest stocks and the index’s CAPE ratio hasn’t been this high since the dot-com boom.
This is where, for many investors, alternative assets come into play. These can include everything from real estate and precious metals to private equity and collectibles.
But there’s one store of value that routinely flies under the radar: It’s scarce by design, coveted worldwide and frequently locked away by institutions.
We’re talking about post-war and contemporary art — a category that has outpaced the S&P 500 with low correlation since 1995.
It’s easy to see why art pieces often fetch new highs at auctions: The supply of the best works of art is limited and many of the most desirable pieces have already been snatched up by museums and collectors. That scarcity can also make art an attractive option for investors looking to diversify and preserve wealth during periods of high inflation.
Until recently, purchasing art has been a domain reserved for the ultra-wealthy — like in 2022 when a collection of art owned by the late Microsoft co-founder Paul Allen sold for $1.5 billion (3) at Christie’s New York, making it the most valuable collection in auction history.
Now, Masterworks — a platform for investing in shares of blue-chip artwork by renowned artists, including Pablo Picasso, Jean-Michel Basquiat and Banksy — can help you get started with this asset class. It’s easy to use and, with 27 successful exits to date, Masterworks has distributed more than $65 million in total proceeds (including principal).
