We are often asked, “what is resilience?” when talking about the Steel Atlas thesis. We love this question. In this update we will share a framework for how we think about the different types of resilience and how they each drive value creation. We have found this framework is both useful for investors and founders. For investors, it can provide structure for why (or why not) to make an investment. For founders, it can inform how they think about their product strategy and positioning. Before diving into the framework though, we want to extend you an invitation to a few events we will be hosting in the near future.

All-In Summit Recap 

First, we want to thank all the LPs, founders, and VCs that attended our All-In Summit Reception last weekend in Los Angeles. The turn out was incredible and we are doing our best to keep up with all the follow-ups and interest around the fund. 


The All-In Podcast hosts did not hold back this year. The summit was over the top (think Casino Royal-themed poker events with some of the worlds most successful fund managers and founders). We were humbled to be a small piece of it.

Our focus of investing in resilience aligned directly with the topics of conversation. In fact, Former United States Secretary of the Treasury Larry Summers claimed resilience is the most important theme in American history [link]. Suffice to say, we received many emails and messages in reference to that quote! Because of this, we had the pleasure of meeting some of the phenomenal speakers – from famed hedge fund manager Ray Dalio to renowned mathematician Stephen Wolfram. If you are interested, you can watch the All-In Summit talks here.

How the Different Types of Resilience Create Value

To start, we define resilience as the ability of a system to maintain steady-state operations (internal) while facing exogenous (external) shocks. For our purposes, a system is either a firm or economy of some scale (local, regional, national, etc). However, we believe that this definition (and our framework that follows) could even be extended to individuals in regards to health, education, and economic opportunity.

The resilience provided by technologies can be further deconstructed. Resilience is not a singular, monolithic quality, but a set of attributes that function along two axes – the time axis (Proactive vs Reactive) and the type axis (Buffer vs Insulator). Together, these attributes form what we call, The Resilience Matrix.

The time axis defines when the technology or product takes action to mitigate volatility. Proactive technologies take action primarily prior to the volatility occurring whereas reactive technologies respond to a volatility in (or as near as possible to) real time.

The type axis characterizes how the technology mitigates volatility. Buffers ensure that there is slack in the system, ensuring there is excess capacity in advance or quickly provisioning extra resources when needed. Insulators either create barriers between the system and the volatility or minimize the time required to respond. With that in mind, we can now begin to understand the categories of the Resilience Matrix.

  1. Proactive Buffers: a technology, practice, or service that creates slack in the system before volatility occurs – eg. excess inventory.

  2. Reactive Buffers: a technology, practice, or service that provisions extra resources in response to volatility – eg. insurance.

  3. Proactive Insulators: a technology, practice, or service that creates a barrier between sources of volatility and the system – eg. a sea wall around a power plant.

  4. Reactive Insulators: a technology, practice, or service that enables real time response to volatility to mitigate its effects  – eg. a fire alarm. 

We have found that companies naturally fall into one of these four categories. By mapping these businesses and their technologies to the matrix categories, we can better understand how businesses should develop, position, and expand their product offerings based on comparables both within and outside their targeted sector. 

Furthermore, general technologies tend to be more applicable within certain categories than others. For example, advancements in AI and LLMs are leading to a high rate of innovation in Reactive Insulators, which are often reliant on the analysis and communication of large qualitative and quantitative data sources. Understanding this allows us to focus our attention to the areas most affected by broad technological tailwinds. 

With that in mind, let’s dig deeper into a few examples in order to ground the Resilience Matrix.

Proactive Buffers: Flexport’s Inventory Coordination

Suppliers can maintain excess inventory for the components your company requires. This strategy may seem simple on the surface, but as your number of suppliers increases (and your supplier’s suppliers and so on), the complexity increases exponentially. In order to manage this complexity, you need systems deployed to give you visibility deep into your supply chain along with the ability to coordinate across it.

Furthermore, it's not just about having extra screws or circuit boards lying around. It's about understanding that markets don't just fluctuate; they convulse. Labor strikes, geopolitical issues, or pandemics could suddenly strangle your supply chain. In such scenarios, your excess inventory becomes more than just a "buffer"; it becomes your alternative supply line. 

When others are scrambling to find resources, multilayer supply chain inventory gives you the luxury of time, enabling you to make more calculated decisions. The extra cost of maintaining this inventory is an insurance premium you pay against the market's unpredictability. Think of this as a chess game where you're always three moves ahead, even if the rules of the game keep changing.  

This is exactly what our legacy portfolio company Flexport ($8B valuation) enables as a digital freight forwarder. Their software platform allows companies to visualize their supply chains in real-time, enabling them to maintain "strategic reserves" at various layers. In this Proactive Buffer approach, Flexport sells slack in the system as a service. Companies pay for Flexport’s predictive intelligence that gives them the leeway they need when market conditions are volatile. 

Volatility in shipping container supply

The brilliance of Flexport's model is that they have made the cost of maintaining this slack variable, rather than fixed. Businesses can scale their logistical buffer up or down as needed, making it easier to justify the expense. Flexport has grown rapidly and attracted significant investment precisely because they offer a form of resilience that's both scalable and directly tied to the client's needs. When volatility hits – like trade wars or global pandemics – the companies that have invested in Flexport’s services are insulated from the worst of the chaos. Who profits the most? Flexport.

Reactive / Insulator: ALICE Technologies’ Elastic Response

Picture this: the largest infrastructure project in Europe, the HS2 railway, faces a significant dilemma. A key shipment of specialized steel, essential for building critical segments of the track, is unexpectedly delayed due to a supply chain disruption overseas. Each day the material is delayed not only pushes back the project schedule but also racks up holding costs and penalties. Traditional construction planning would likely lead to a chaotic reshuffling of tasks, delays in milestones, and costly overruns. In the high-stakes environment of large-scale infrastructure, this is a nightmare scenario that could destabilize the entire initiative.

Enter ALICE Technologies. What sets ALICE apart is its capacity to infuse resilience into the construction process, enabling real time responses to unforeseen setbacks even in complex projects. With its AI-powered platform, ALICE provides HS2's project managers the ability to quickly reassess the entire project, taking into account the delayed steel shipment. By running thousands of scenario simulations within minutes, the system can identify the most efficient alternative routes to keep the project on track. Today, this is a manual process with a structural engineer locked in a room for weeks trying to piece together a single path forward. This path will almost certainly not be the optimal one. 

ALICE’s solution? Perhaps the workforce could focus on different segments that do not require the delayed material or maybe secondary tasks like site preparation or electrical work could be advanced. ALICE enables HS2 to make data-driven decisions on the fly, converting what could be a devastating delay into a manageable hiccup, all while optimizing for cost and time. By partnering with ALICE Technologies, HS2 isn't merely purchasing a piece of software; it's buying resilience. This is resilience in the form of minimizing the shock’s effect on operations through real time response. ALICE Technologies equips HS2 with the tools to transform challenges into mere variables in an equation, variables that can be quickly recalculated to yield a new, optimal solution. That is the essence of resilience: not the absence of problems, but the ability to adapt and overcome them efficiently.

Reactive / Buffer: Provisioning Resources with AWS

Do you remember when every company had to buy, operate, and maintain its own servers? Thankfully, those days are long gone (and for good reason). Cloud has democratized access to compute and data storage in ways no one could have thought possible. The presence of software in every industry exploded over the last few decades. Ever heard of software eating the world? Every company requires reliable performance and compute. Every company requires secure servers and data. Every company requires a dedicated team to maintain these assets. Having every company build the same infrastructure made little sense.

That is why Amazon Web Services (AWS) entered the market. The resilience AWS sells is in the form of robust, virtually fail-proof cloud infrastructure. How do they do this? AWS does not have access to special hardware that individual businesses cannot buy and operate on their own. Instead, by serving many customers at a larger scale, AWS is able to maintain a large number of redundant servers. These services located around the globe provide excess capacity. Thus when your systems face an issue, instead of causing a fire drill at your company, AWS can react on your behalf to provision new resources. Businesses that migrate to AWS are less likely to suffer from costly downtime, mitigating the consequences of such technological volatility.

AWS has been outperforming competitors largely because it sells resilience with an attractive, scalable pricing model. AWS isn't just selling server space; it's selling the peace of mind that comes from knowing your data and services are safe. With high-profile clients who have experienced virtually zero downtime, AWS proves that its form of resilience is not just an abstract concept but a measurable business advantage. AWS is only 15% of Amazon's top line revenue. However, it accounts for 74% of Amazon’s total operating profit! Amazon would have posted a $10B operating loss without it in 2022 (vs. $12B operating profit). [link]

AWS is the main source of Amazon’s profits


In the realms of volatile industries and markets, resilience is the perennial strategy for the unseen and unpredictable adversaries that emerge from the highly interconnected world we live in today. It is not a one-off action but an integrated approach that combines foresight, preparation, fortification, and recovery. In a world characterized by constant flux, resilience is not just a protective shield; it's a competitive advantage.

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