---
title: "Part VI: The Commanding Heights"
part_of: "The Commanding Heights"
part_of_url: https://commanding-heights.com/commanding-heights.md
authors: ["Will Manidis", "Joe Roberts"]
date: 2026-10-29
url: https://commanding-heights.com/#part-vi
summary: "The Commanding Heights are scarce, controllable positions of economic power whose holders durably capture the gains of increasingly capable and diffused intelligence. In 1922, Lenin defended concessions to private trade on the justification that the state still held “all the Commanding Heights,” the vital branches of the economy through which all else flowed. Unlike fleeting bottlenecks, a Height durably captures a share of the economic activity it enables, and the multiplication of that activity further entrenches the Height."
---

## Part VI: The Commanding Heights

> *The Commanding Heights are scarce, controllable positions of economic power whose holders durably capture the gains of increasingly capable and diffused intelligence. In 1922, Lenin defended concessions to private trade on the justification that the state still held “all the Commanding Heights,” the vital branches of the economy through which all else flowed. Unlike fleeting bottlenecks, a Height durably captures a share of the economic activity it enables, and the multiplication of that activity further entrenches the Height.*

### der Russenzug

On a cold November morning in 1922, Vladimir Lenin was due to explain to the assembled delegates of the Fourth Congress of the Communist International why he allowed private enterprise to return to the Soviet Union. It was the antithesis of countless works of rhetoric written late into the night by the light of a dim bulb overhead, delivered with ferocity in the coffeehouses before he left Zurich by train for Russia to seize a territorial empire in the final stages of dissolution in 1917.

By autumn, the provisional government’s continuation of the Great War weakened popular support enough to create an opening for Comrade Lenin. During the October Revolution, his Bolshevik-led forces occupied the essential localities and centers of government power in St. Petersburg. Key railroads, junctions, and radio stations. Foot soldiers clambering up poles to snip telegraph wires. Lenin intimately understood the instruments of effective control over a populace and its government. But he was also a man of the times, understanding the then necessity of symbols and pageantry. His forces, identifiable by the red armbands, had to kick down the doors of the Winter Palace with their black India rubber boots and arrest the ministers. Good material for propaganda. Otherwise, would it really be a transfer of power?

The end was a communist utopia. It always is, each and every time. But before the state withers away, the vanguard needed to assume control over the country. It was the work of years, all against all, civil war and bloodletting.

The etymology of the word utopia implies the impossibility of ever creating it. This was soon evident to the Bolsheviks in 1921. After four years of civil war, they had won out over the monarchist-landlord class and assumed uncontested control over the state. But it was a precarious regime, made all the more so by the disruptions to agricultural production and the war’s imposition on the peasantry. An adjustment to the Communist paradigm would have to be made.

Outside the Kremlin Palace, the frozen wind whipped through quiet boulevards and around the towers. Inside, the delegates waited for Lenin, their voices a low murmur. A side door burst open and the Chairman of the Council of People’s Commissars strode quickly to the podium. The crowded assemblage jumped to its feet in a standing ovation, cadres standing at full height and peering over to get a glance at the Chairman as he hurried by. The applause continued. Somebody started a rendition of *The Internationale*, and their voices formed a multitude. He wearily surveyed the room. He was under a great deal of pressure and had been in ill health as of late. Too many late nights, much like back in Zurich, only now the rooms where he paced and worried were grander, and instead of writing political theory and exhortations to overthrow the capitalist-landlord class, he had to deal with the consequences of successfully doing so.

When the adulation died down, Lenin raised his hands outstretched and addressed the assembly. His remarks were short and concerned with one matter alone: the New Economic Policy. It was a policy of progress, progress beyond the old order that they had worked so hard to overturn. Lenin had written about this progress back in 1918 and referenced it in his opening. “State capitalism would be a step forward as compared with the present state of affairs,” meaning the state of affairs during the Russian Civil War.[^117]

[^117]: V. I. Lenin, “Five Years of the Russian Revolution and the Prospects of the World Revolution,” report to the Fourth Congress of the Communist International, November 13, 1922, in *Collected Works*, 2nd English ed., vol. 33 (Moscow: Progress Publishers, 1965), 415–32.

Lenin explained the economic reforms that were already underway at the direction of his government. While the revolution had made his government possible, Russia still lacked the productive capacity across industry and agriculture that would allow it to remain in place. Socialism alone at this moment would doom the Communist revolution, Lenin stated, so state capitalism would be permitted, as a necessary phase of the transition: The peasantry, after paying taxes, would be allowed to trade surpluses. Market activity would be permitted.

But the reforms were all for the purpose of preserving the party’s control and tightening its grip over the essential instruments of power. The state, and by extension the workers, would retain control over all the vital branches of industry, heavy and light.

“We hold all the Commanding Heights,”[^118] he triumphantly told the delegates. Their applause was thunderous. What was true during the October Revolution about the railway centers and radio stations was true on that November morning. All that is necessary is to occupy the essential corridors, those Commanding Heights. Everything else will come in time.

[^118]: V. I. Lenin, “Five Years of the Russian Revolution and the Prospects of the World Revolution,” report to the Fourth Congress of the Communist International, November 13, 1922, in *Polnoe sobranie sochinenii*, 5th ed., vol. 45, 289 (“все командные высоты”).

We are in the midst of a grand reordering, true now as it was then. The economic ownership and political control of the Commanding Heights are, after a long period of stagnation, once again up for grabs. In Lenin’s time, they were simple and obvious: the largest factories and the key rail lines. Today, they are found across a field renewed by Genesis. And they are far more powerful than mere steel.

As our technological capability marches ever forward, near now to the point where it can progress without our assistance, so too have the Commanding Heights moved ever upward. In scale, they have grown larger and more interconnected. In expense, only a few can afford to own any meaningful part of them. And in sophistication, they represent power that Lenin could only have dreamed of, or perhaps they would haunt his nightmares. There are new Commanding Heights:

**We define the Commanding Heights as scarce, controllable positions of economic power whose holders durably capture the gains of increasingly capable and diffused intelligence. The Commanding Heights set the terms upon which that intelligence becomes economic activity, shaping the expanding economy around them and in turn reinforcing their command.**

AI has barely begun to spread. Most of the world is still running on arrangements that were made in the old world, before any of this was possible. Those economic compacts will be rewritten. For a moment in time, right now, the positions that will command what comes next can still be bought or built. This is the opening: to seize the Heights before the reordering is complete and their worth becomes widely evident.

The economy that these Heights command will be far larger than the one in which they currently exist. Better intelligence means more can be made and whole new categories of business can form and grow. The owners of the Heights will be further entrenched and enriched by that expansion. Their valuations need not ever rise for their cash flows to multiply. The capital poured into Genesis keeps making the world beneath the Heights more productive, even when the financiers of adolescence fail to earn a decent return. This is the shape of things to come.

### Margin

Look first to scarcity. The old economic equilibrium of just a few years ago did not account for our machine intelligent actor. The activity it permits and rewards will be reshaped, because as the diffusion of intelligence progresses, the cost structures of a wide spread of enterprises will fall. It’s the first domino you think you’re already familiar with: The work of a team and their support staff becomes a skill file utilized by a model and perhaps a single individual, if that. The reduction in the cost of economic activity will see a corresponding Cambrian explosion in the number of activities undertaken.

We will not simply repeat the bargains of old with more velocity. New economic arrangements will become viable as the cost of physical and cognitive labor falls. The old bargains, vested throughout every walk of economic life, will have to be restruck. If you need an example, one of millions to come, look simply to the value of a money-center bank’s deposit franchise. Its valuation as a part of the whole is a capitalization of the bank’s customers having better things to do than chasing the highest savings yield. Personal AI agent providers will have an easy win in offering a mini-treasury function to every household in America. Those long-undisturbed trillions earning 0.53% APY will soon be boosting neobank deposits and raising the funding cost for the Systemically Important Financial Institutions. Deposits will autonomously glide to their highest return as friction falls across the economy. Things will get faster and stranger from here.

Consider the case of a completed data center waiting to be hooked up to the grid. All the equipment has been purchased, the structure constructed, the entire thing financed and booked in an Excel model somewhere in New York. But without its power interconnection, the facility must remain cold and dark. The data center owner has secured all the available prerequisites, but the critical path is halted by the single input that remains fatally scarce. Desperate to stay true to the Excel model’s schedule, power simply must be secured, whatever the price. Thus, the owner has no choice but to donate his margin to the power provider in order to secure supply. The value flows through and past the data center, pooling in the scarce resource that powers it.

But scarcity only tells us about the conceptual existence of margins. They are almost never where enduring value lies. The destinations where those margins accrue are dependent on an array of inputs. The power provider himself could be constrained in some other way, perhaps subject to the whims of a supplier upstream of his own product. In that case, the margins move further up the chain and perhaps farther still in an infinite regress to their subatomic origins. A fleeting scarcity, by its nature, is likely to be resolved. Any trade based on it is unlikely to remain an enduring position of dominance.

What characterizes the Commanding Heights is durability. Preceding this is identifying where they have moved in the past and where they are likely to remain today. We have already seen the Heights move since Lenin spoke in 1922. Today we’re seeing the movement of decades occur in weeks.

It’s all contingent. Variables and constants, and increasingly variables. The question is always what the next-best route might cost. Demand is an insatiable animal, and it will always clear at some price. In the short term, the owners of crossings tend to have a high degree of latitude to set their own prices and hold them there. But demand always clears, and few crossings are fortunate enough to forever be without competing routes.

Margins can jump to another crossing. If power is solved, transmission becomes the crossing. So the hyperscaler moves power generation on site. Then chips become the crossing. They’ll likely remain that way for the next few years, but not much longer. High margins will always attract capital that will ultimately push the margins down again. It’s a pattern that can be seen across any sufficiently sophisticated human endeavor. The law of large numbers.

The sovereign also retains a claim on the gains wherever they accrue, as a result of its backstop. It need not own a valuable crossing to determine what toll it extracts from the economy it oversees, something which extends beyond any enterprise the state chooses to finance. The sovereign can sustain a financially unsustainable frontier by drawing on the wealth intelligence creates throughout the economy. The enduring private fortunes will have negotiated those terms fortuitously.

This won’t apply to most sectors of what you currently consider the economy. The vast majority of firms and trades are not relevant here. The crossings are the barriers that interrupt the riotous run of machine intelligence through the old economy. Most human enterprise will be absorbed or indifferently crushed underfoot. It’s a fire sale, and you don’t want to be the last to sell.

Look at the value of certain sources of data. How many businesses are currently valued at some multiple of their revenue, for their position in the market? It could all go out from under their feet as Anthropic pushes a new update to Claude. All of a sudden, their value is their proprietary data. Historical marketplaces such as airline data are good for a single sale and little more.

Coal for the furnace. Your startup, the family firm, the international conglomerate. The value of the firm in the intelligence economy is different from how it was seen prior. Where a firm in earlier times would be priced at a multiple of its revenue or earnings, value more a product of constituent components than a sum, things are different now. Some firms will be stripped for parts, especially proprietary data sets. If your firm’s primary value comes from its data, you’ll want to sell. To be an installed base or a firm-as-training environment will be a profitable thing. It will just require a change in mindsets.

For crossings, things are less existential. But not by much. It’s still a mad scramble to establish an enduring position, determined by the nature of the ownership, the length of the contract, and the terms there necessitated.

The test of last resort is that of the political claim. It is a question of who else has claim on the rent accrued by the crossing. Is it a regulator or a ratepayer advocate? Will popular backlash against your buildout blunt your margins and force you to make countless third-world-like concessions to local interests, practically burlap sacks of green dollar bills for the right to develop your land? Or will your crossing be of such importance, so well or fortuitously chosen, that it draws the attention of the sovereign? Remember that the history of antitrust is a map of the accumulation of power within an economy. Margins too high, a reflection of insufficient competition or too much dominance, can ultimately prompt sovereign action. The dark forest of the market and material conditions remaining close to the historical norm being the only protection.

The smartest money is trying to escape that endless cycle of birth, woe and suffering, and the rapid black punctuation of death. Scarcity, bountiful margins, then the lean period afterward. Again and again. A sort of financialized Samsara.

------------------------------------------------------------------------

In the end, the only difference between the heights necessary to assert political control over a territory and the heights necessary to accrue value is the intention of the owner. Lenin was an idealist, a political theorist and agitator. As Chairman of the Soviet Union, his retreat to the Commanding Heights was from a position of weakness, yielding to the pressure that had been building on him for years. But he was no weaker than when his soldiers seized the vital arteries of St. Petersburg. Remain in control of the Commanding Heights and you can withstand anything.

We are not the only ones to recognize the importance of a few key industries and technologies. Chinese leader Xi Jinping, in speeches before the National People’s Congress and admonishments to provincial cadres, again and again stresses the importance of the development of China’s new quality productive forces.[^119] These are the constituent elements of the true productive economy. These new productive forces are ever changing, rising and falling as the capacity of technology marches forward. Society must adapt to the needs of new quality productive forces. Not all growth is good, nor is all growth equal in enhancing the power and well-being of the modern Chinese nation. Such vital branches of industry and technology must be developed with continually renewed vigor.

[^119]: Xinhua, “Xi Stresses Development of New Productive Forces.”

Of course, the question of ownership never arises. In his public appearances, Xi never raises the questions of state capitalism and socialist utopia that plagued Lenin. That’s because Xi is approaching the Commanding Heights from a position of strength. The power of the party-state is paramount. Its claim over every crossing is beyond question. This is the true nature of the sovereign. In the near future, America will realize the same.