Taiwan too dependent on AI, Franchises are good and BP —Good Samaritan, Bad business

Insights from The Economist, 30th May 2026 edition

Photo by Tommy Tsao on Unsplash

Taiwan is too dependent on AI

Two weeks back, we saw that several companies are in an AI induced boom that is funded by the cloud service providers. Turns out the boom extends to entire countries.

Countries like South Korea and Taiwan bring to mind industrialized economies with high standard of living. But the AI wave combined with increasing competition from China are putting the economies of these countries at risk.

Taiwan in particular is an export led economy. 70% of its GDP is from exports. AI related products now account for 80% of Taiwan’s exports, up from 50% in 2019. If we exclude semiconductors and AI servers, its exports have fallen 40% since 2022. Two-third of its exports goes to China and America. With China, the country’s historic trade surplus has now turned into a deficit.

One company, TSMC, the large fab, which is overbooked due to the AI boom, accounts for 9% of the country’s GDP and 40% of its stock market capitalization.

With youth employment already at 12%, a poor pension system and weak private consumption, a collapse in AI demand is likely to hit Taiwan hard. Especially its poorer citizens.

Franchises could be the path when AI swallows up jobs

For many decades, a college education was the way to build wealth. But with the disruption caused by AI, the increase in tuition fees and the relatively lower value of jobs after an education is prompting youth today to look at alternative paths. Franchising is one of them.

Franchises account for 3% of the US GDP and are in a wide variety of areas from fast food restaurants and hotels to fitness studios and home services.

Both the franchiser and the franchisee gain from the arrangement. The franchisee gets an established brand, proven systems and multi-million dollar marketing budgets. The franchiser gets local market knowledge and ownership to drive the business which would not be possible when operating centrally.

It is not a bed of roses though. Franchises require capital anywhere from a few hundred thousand to a over a million dollars. The risk of failure is only slightly lower than a regular business in the first 2 years. And it is important that we pick the right model. For e.g., models with royalty payments or profit sharing gives a stake for the franchiser in the franchisee’s success. In other models where the franchiser sells inputs to the franchisee, the franchiser can grow rich in the short term even when the franchisee is struggling to survive.

BP — Good Samaritan, bad business

It is a good time to be in the oil business. With the strait of hormuz closure, and uncertainty over its opening, oil prices have been increasing. Oil & gas companies have been raking in the profits through their trading desks.

Chevron and Exxon for instance have added over $400B in market capitalization in the last ten years. Things are not so great if you are British Petroleum though. The company focused on being good with goals such as net zero strategy where it would cut oil & gas production by 40% by 2030 and renewable energy investments.

In February 2025, it abandoned its net zero goals and started investing in oil & gas production again. A year later, in February 2026, it took a $3.1 B write-down on its renewable energy business. It suspended share buy backs to focus on paying back debts (it has the highest debt amongst top oil & gas players)

A key takeaway from BP’s debacle is the need for companies to be laser focused on profitability and returns when making long term decisions.