Consensus Capital
The End of The Contrarian in the Age of Industrial Strategy
I’m Lawrence, a pleasure. I’ll be investing from somewhere new soon. Stay tuned. lawrence@stateofthefuture.io if you want to know more.
I do like a sweeping general theory of the world. Your Guns, Germs and Steel’s, your Sapiens and your Debt: The First 5,000 Years. We all love a simple story that simplifies our ultimately meaningless existence. It’s my stock in trade. Simplified stories, not meaningless existence. It’s the generalist’s curse.
Now, this isn’t a new story. But I don’t think enough people are really thinking about the implications. DefenceTech. Make America Great Again. Industrial Strategy. Stargate. We are talking about a phase change in capital allocation.
1945-1980: The state coordinated capital through agencies like DARPA and programs like Apollo as the Cold War drove technological competition.
1980-2020: Venture capitalists took over for four decades as globalization and relative peace made markets the primary mechanism for capital allocation.
2008-2020: Crypto tried to disintermediate traditional gatekeepers entirely but got absorbed back into the system.
2020-Present: Geopolitics returned and the state came back as an architect of industrial outcomes. Megafunds scaled to sovereign wealth sizes and now coordinate alongside governments.
We’ve moved from Contrarian to Consensus. It’s a good slogan, and it helps that it’s true. The contrarian insight, the isolated bet that the world will eventually validate, are not viable strategies when capital goes to consensus companies in strategic sectors.
Painting: The Debate of Socrates and Aspasia, by Nicolas-André Monsiau (1754-1837). Photograph: Tibbut Archive/Alamy
1945-1980: The State Coordinates Capital
After World War II, the state was the dominant force in capital formation and technological development. The Cold War and proxy conflicts in Korea, Vietnam, and across the developing world drove demand for technologies that projected power and maintained superiority. DARPA funded the internet, GPS, and semiconductors. NASA’s Apollo program mobilised massive resources and created the aerospace industrial base. Bell Labs, while technically private, operated under regulated monopoly conditions that allowed decades of long-term R&D. The transistor came from there. The integrated circuit. Early computing. Radar systems. Jet engines and nuclear submarines. The space race. All of it emerged from state-funded or state-adjacent research. It wasn’t quite the “Entrepreneurial State” but it wasn’t far off.
The defence industry was the main customer and coordinating mechanism. Companies built what the Pentagon wanted to buy. Innovation was tied to national security, and capital flowed accordingly. That meant direct funding, procurement contracts, or the infrastructure investments that made private R&D viable. This was not Soviet central planning. It was coordination. The state picked sectors like defence, aerospace, telecommunications, and nuclear energy, then created the conditions for private actors to compete within those sectors.
The model worked because the state had goals that aligned with technological progress. Win the Cold War. Go to the moon. Counter Soviet advances in space, missiles, and cryptography. And capital requirements for frontier technology exceeded what private actors could fund alone. No VC was going to fund ARPANET or the Apollo program. The state did, and those investments created the substrate for everything that followed.
1980-2020: VCs Coordinate Capital
The shift happened in the late 1970s and accelerated through the 1980s as geopolitics transformed. It was the End of History. The Berlin Wall fell in 1989. Ich bin ein berliner. The Soviet Union collapsed in 1991. The Cold War ended and globalization became the dominant force. Even China got in on the act. Markets opened, trade barriers fell, and capital flowed across borders. Technology was no longer primarily a tool of national security but a driver of consumer abundance and global commerce. Three structural changes made venture capital the dominant coordinating mechanism for early-stage technological development. Golden times.
Structurally, a few things happened in the US that contributed to the rise of VC as the dominant allocator of innovation capital. First, the Bayh-Dole Act in 1980 allowed universities to commercialize federally funded research. The state still funded basic research, but private actors could now turn that research into products and keep the upside. Second, pension fund rules changed in 1979, allowing institutional capital to flow into venture funds. Limited partners suddenly had billions to deploy and venture capital had the fuel to scale. Third, the PC revolution proved that consumer markets, not defense contracts, could be the primary driver of technological progress. Apple, Microsoft, and later the internet boom with Netscape, Amazon, and Google showed that private capital could fund massive outcomes without needing the state.
Venture capital thrived because globalization created favourable conditions. Software required minimal capital. The internet was open infrastructure that no single actor controlled. Network effects and winner-take-all dynamics meant VC-backed companies could scale globally without state subsidies or industrial policy. Sweet sweet margins. No capex. Supply chains stretched across continents and manufacturing moved to wherever costs were lowest.
Information was still fragmented however, which meant a small group of well-connected investors could see opportunities that others missed. Capital was patient because exits took years and there was no pressure to deploy at speed. There was no war to win. The state was hands-off because technology was not yet seen as a national security issue and because the consensus was that markets allocated resources more efficiently than governments.
This was the golden age of the contrarian. (Now ironically the very same people that are winning the Consensus Capital game, too.) A lone partner at a venture firm could back a founder everyone else ignored, wait for the world to catch up, and generate returns. The model was information arbitrage. Spend time with technical founders before they were obvious. You could bet on business models that seemed too small or too strange for established players to care about. Renting out your spare room. etc, et al. You knew something the market did not, yet. And you got rewarded when consensus eventually formed around your insight. Being right and early was enough. You did not need to coordinate with anyone. You just needed to be correct. And once you were an “early Uber, Airbnb investor” like everyone else in the Valley, you could go on a start a podcast…
2008-2020: Crypto Tries to Disintermediate VCs
An interesting interregnum worth exploring is crypto. An experiment in alternative innovation financing, spiced up with a healthy dose of scamming.
Bitcoin launched in 2009 and Ethereum in 2015. By 2017, ICOs were raising billions outside the traditional VC model. Anyone could launch a token. And they did. I mean in theory they still are $Trump etc. The infrastructure is decentralized and the thesis was that permissionless capital allocation would be more efficient than gatekept VC. Price discovery (slash pump-and-dumps) happened through decentralized exchanges and coordination on Telegram and Twitter. TheDAO in 2016 was the explicit attempt to replace venture capital with crowd-coordinated allocation. It raised $150 million in weeks, then collapsed after a exploit. But the pattern persisted. DeFi summer in 2020 and the NFT boom in 2021 showed that capital could coordinate at scale without institutions like VC. Axie Infinity hit a $3 billion valuation before most VCs understood what play-to-earn meant. Bored Ape Yacht Club went from launch to $4 billion in under a year because everyone was watching the same wallets and following the same drops. For all these things, read: experiments. Exuberance fuelled by ZIRP but still was a god-to-honest challenge to VCs, for a while.
For a period it appeared that crypto might disintermediate traditional capital formation. Capital could coordinate through networks rather than institutions. Information asymmetry collapsed because everything was public, on-chain, or discussed in public forums. No longer would founders need to pitch Sand Hill Road. They could launch a token, build a “community”, and raise capital directly from users who became investors. The model promised to democratize access to early-stage opportunities and eliminate the intermediary entirely.
But it did not work (confirmation pending). Crypto did not replace VCs. It got absorbed. Classic story. A16z raised a $4.5 billion crypto fund in 2022. Sequoia has backed some of the best crypto companies (and FTX). Paradigm and Multicoin became prominent crypto-focused firms that operated like traditional venture firms despite their crypto-native expertise. Crypto deals started looking like venture deals with token allocations instead of equity. Coinbase went public through traditional markets. The coordination mechanism was new but the outcomes were the same. Capital concentrated around consensus picks that everyone could see.
The fundamental problem was scale. Community capital and retail investors could coordinate around early token launches, but they could not provide the sustained funding required over years. Retail frankly doesn’t have the patience. Building sustainable businesses requires multiple rounds of patient capital, operational support through down cycles, and the ability to fund development over years. Crypto communities faced the same constraint. Token launches could raise initial capital quickly, but they also created pressure to maintain hype and token prices rather than focus on long-term product development. When markets turned and speculation faded, capital disappeared. Projects that needed $50 million or $100 million in additional funding to reach sustainability had nowhere to go except back to traditional venture firms.
Traditional VCs provided something decentralized coordination couldn’t. Capital that stayed committed when excitement died. Liquidity is a cruel mistress for innovation funding. VCs are obviously the worst type of people. But some do bring networks that can open doors to customers and talent, and governance structures that aligned incentives over years.
2020-Present: Geopolitics Returns and the State Converges with Megafunds
So as crypto was failing to disrupt VCs, the big dogs entered the arena with the monopoly on violence. The geopolitical shift that began after 2008 accelerated dramatically in 2020. The 2008 financial crisis prompted governments to rescue the existing system and restore growth within the globalization framework. But COVID exposed the fragility of globally distributed supply chains. When borders closed, advanced economies discovered they could not produce essential goods. Then Russia invaded Ukraine in 2022, and I guess “strategic competition” became undeniable. The narrative on China changed as it became clear they were a genuine competitor across technology, manufacturing, and energy. America First became policy under Trump, Nationalism has usurped globalization as the organizing principle of the global order.
Global supply chains became national security vulnerabilities. Whilst, technologies that seemed purely commercial became strategic assets. Semiconductors, batteries, AI, and biotech can no longer be left to markets alone because markets did not care about sovereignty or security. States started picking winners again. And funds started talking about “American Dynamism”. And Europe mandated USB-C. lol. Nah, they are good people doing their best.
Semiconductors (more to come from me on that sooooon) became a national priority because they underpin everything from cars, to consumer devices to weapons systems. And most importantly AI. The U.S. recognized that dependence on Taiwan and South Korea for advanced chips created too much risk. The CHIPS Act channels $52 billion into domestic semiconductor manufacturing. Intel got $8.5 billion and much needed Government advice on how to run a chip company. TSMC got $6.6 billion. Samsung got $6.4 billion. The Inflation Reduction Act adds $369 billion into climate and energy infrastructure. Battery manufacturing saw over $100 billion in private investment after the IRA. They are coordinated industrial investments with national security goals, not venture bets.
AI became the defining strategic technology because whoever controls AI controls economic growth and military capability. So we don’t just have industrial policy in the US we have activist Government literally out there picking winners. Or rather who they can strong arm. Other nations are picking sectors and making the winners obvious through subsidies, procurement, and regulation, ideally crowding in private capital. (Ideally). Compound semi?
At the same time, megafunds scaled to sizes that compete with sovereign wealth. In 2024, a16z raised $7.2 billion and was over 11 percent of all US VC raised that year. Just nine firms raised $35 billion in 2024; half of all VC fundraising, while the top 30 firms secured 75 percent of total capital. These funds need $100 million cheques to generate returns at their scale. That shrinks the target universe to companies big enough, obvious enough, and growing fast enough to absorb that capital. OpenAI raised $40 billion at a $300 billion valuation in March 2025, led by SoftBank, the largest private funding round in history. Everyone knows who these companies are. Megafunds pile in together because no single fund can provide all the capital needed. These rounds included Thrive Capital, Microsoft, SoftBank, and constellations of other elite investors. That was not coordination, not competition.
The technologies that matter right now are too strategic and too capital-intensive to leave to markets alone. The state and megafunds have converged into a single coordinating mechanism. Capital flows where states designate strategic priority and where megafunds can deploy at scale.
The contrarian bet that worked in the era of globalization has diminished relevance in this new world.
Consensus not Contrarian
We are back to the future. The geopolitical conditions that made VC dominant from 1980 to 2020 have reversed. Globalization is over and markets are fragmenting along national lines. Technology is strategic again. The state coordinates capital in sectors that matter for sovereignty and security. The strategies that worked in 2000 will not work in 2025 because the underlying political economy has fundamentally changed.
Crypto tried to disintermediate gatekeepers but got absorbed because retail capital cannot sustain the scale required for continued innovation. Megafunds scaled to state-level sizes and now coordinate alongside governments rather than compete with them. The state returned because AI, semiconductors, batteries, and biotech are too strategic to leave to markets alone. The coordination layer is controlled by whoever can assemble the most capital using the deepest networks.
Being right in isolation, insofar as it ever was actually true, is a dead strategy. If you have an insight but cannot coordinate follow-on capital, you lose. If the state floods your sector with subsidies favouring different players, you lose. If megafunds deploy $500 million rounds and dilute your position to irrelevance, you lose. The era of the lone wolf VC who finds the overlooked founder and waits for the world to catch up has largely passed.
Success today is all about coordination. Sam raised $6.6 billion for OpenAI by assembling Microsoft, SoftBank, Nvidia, and a consortium of megafunds. Elon built SpaceX and Tesla by coordinating NASA contracts, state subsidies, and public market capital and crypto manipulation. Jensen turned Nvidia into a 5+ trillion-dollar company by becoming the essential supplier to every AI lab and every hyperscaler simultaneously. These are the new industrialists. Like Carnegie, Rockefeller, and Morgan before them, they understand that controlling capital flows matters as much as controlling production. They coordinate capital across institutions and align coalitions around a shared vision. Financing is the key to success.
Questions.
Can you and your founders access megafunds that write $100 million checks?
Can you coordinate with corporate strategics who bring procurement and distribution?
Can you navigate policy and plug into subsidy regimes?
Can you build relationships with sovereign funds that provide patient capital at scale?
If not, you are operating in a different game than the one being played at the frontier.
The best founder today assembles coalitions of capital across VCs, corporates, and government, then aligns them around a shared vision.
The best VC today is not the one who sees the future first. Or writes the best blog. It is the one who convenes the consortium that funds it. The future that is, not the blog.