Thriving on Complexity
Simplify. Simplify. Simplify. It was the Prime Directive of the Industrial Era. It was the essence of the assembly line and carried over to business organizations of all sorts. Succeed by simplification.
Henry Ford simplified manufacturing. Walmart simplified retailing. Southwest simplified air travel.
No longer. In the AI economy, complexity is unavoidable. Those rewarded are companies that make overwhelming complexity manageable.
Modern semiconductor manufacturing is almost unimaginably complex. Microchips require thousands of manufacturing steps, atomic-scale precision, and tolerances measured in billionths of a meter.
Yet companies like Taiwan Semiconductor Manufacturing Company (NYSE: TSM) continue pushing the frontier of possibility year after year.
TSMC can do this not because semiconductor manufacturing has become simpler, but because a supporting ecosystem of companies has emerged to make that complexity comprehensible.
Nova (NASDAQ: NVMI) measures processes that cannot be observed directly. Camtek (NASDAQ: CAMT) inspects structures too small for the human eye. Synopsys (NASDAQ: SNPS) and Cadence Design Systems (NASDAQ: CDNS) allow engineers to design chips containing tens of billions of transistors without becoming hopelessly lost inside their own creations.
These companies do not reduce complexity. They make complexity intelligible. They turn systems so complicated that they would otherwise overwhelm human understanding into systems engineers can observe, measure, diagnose, and improve.
For decades, size created competitive advantage. Large companies enjoyed economies of scale. Bigger factories produced more efficiently. Larger organizations spread fixed costs across greater output.
Today’s greatest companies grow not because they simplify the world, but because their supporting ecosystems enable complexity.
TSMC can build the world’s most sophisticated semiconductor manufacturing system precisely because companies like Nova, Camtek, Synopsys, Cadence, Applied Materials (NASDAQ: AMAT), and KLA (NASDAQ: KLAC) continuously transform impossible complexity into something engineers can actually manage.
The same pattern appears across the modern economy.
Palantir Technologies (NASDAQ: PLTR) does not reduce the complexity of military operations or global supply chains. It allows decision-makers to operate successfully despite that complexity.
NVIDIA (NASDAQ: NVDA) does not reduce computational complexity. It makes vastly greater computational complexity economically useful.
Cloudflare (NYSE: NET) does not simplify the Internet. It helps make an increasingly complicated Internet secure and reliable enough to continue expanding.
These companies occupy what might be called the economy’s control points. They sit where information becomes action. They transform observation into decision. And as technology advances, those control points become progressively more valuable.
Every major technological advance creates new complexity. Artificial intelligence creates more data. More sensors create more information. Better software creates more interactions. Greater connectivity creates more dependencies.
Today, technology does not eliminate complexity; it drives it. Far from impeding growth, complexity has become one of the great engines of economic growth.
Every new layer of complexity creates demand for companies capable of making that complexity usable. The winners are the companies that make an increasingly complicated world intelligible.
The industrial economy rewarded those who mastered scale. The AI economy rewards those who make complexity work, although to be fair, this trend predates AI by decades.
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Eons ago—that is, in the 1990s—George Gilder and I visited a company called Akamai Technologies (NASDAQ: AKAM).
In the early days of the Internet, many people assumed the solution to growing traffic—and traffic jams—was simply bigger, faster servers. Akamai recognized the real problem wasn’t computing power; it was complexity. Rather than trying to centralize the Internet, Akamai distributed it, cached it, and made it manageable.
The Internet generated a tangle of complexity and produced Akamai. Storage threatened to make the world one gigantic basement of horrors. Storewidth, as George Gilder called it, was the ability to make enormous stores of data accessible with low latency, supported in those days by companies such as NetApp (NASDAQ: NTAP) and EMC (formerly NYSE: EMC; acquired by Dell in 2016).
Intelligibility became a huge source of value.
Akamai made a global Internet workable. Google—now Alphabet (NASDAQ: GOOGL)—made a global web searchable. Palantir makes massive organizations intelligible. Nova makes atomic-scale semiconductor manufacturing measurable. AI is beginning to make oceans of knowledge navigable.
Here is a guiding investment principle for our time. In the face of mounting complexity, wealth flows to the companies that make complexity legible.
