Episode 31: The Engineering State vs The Lawyerly State with Dan Wang - The Network State Podcast

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Dan, welcome to the Network State Podcast. And I think, you know, we hung out several years ago in the before COVID times. I think it's some Stripe thing. If I recall that Collison organized something like that one of these. Frames camp. We played a very my favorite board game together. Yeah. What was it? It was. It was one of these things. Was it werewolf? No. What was it? Something close. It's called Avalon, in which there are roughly seven of us around the table. Three people are evil, they know who each other are, and the four good people don't, in general, know who anyone else is. And the aim of the game is for the evil people to assert themselves as good, and for the good people to deduce who the evil people are.

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I've been playing this for many years now. I played in different cities and I'm glad to have been able to play it with you in the woods of Northern California. That's right. And I think I, as I remember I, I was because it was the first time I played it. And I was thinking, what if we wrote the state SPACe matrix on a whiteboard, which is either the really smart thing to do, a really dumb thing to do, and like Gwern got annoyed at that or something. As I vaguely recall, this like many years ago. Yes, that's right, but I still think there's something to that. I have to go back and play that and I feel like you might be able to maybe maybe bad to write it on the board and it takes away the mystique of it. But there's something to that. The possible nation. Anyway I. Remember you doing that? And I think I was evil and I managed to deduce who was like

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who, The Who, who the Merlin was based on your based on your calculations. Yeah, there's something, there's something about, like there's an underlying data structure behind the thing, some kind of possibilation, you know, sort of like the Monty Hall problem in stats where you actually write out the decision tree and then you can actually understand it there at least I wanted to see what would happen anyway. Maybe took some of the fun out of it, but it was fun for me at least. So maybe hopefully for you anyway. So, so we sort of travelled in some of the same circles and, you know, I, I liked your book, which we'll get into in a SECond. So breakneck and we'll put it on screen and I liked it because. So, you know, what's funny is maybe this conversation will be a little different than some of the other ones you've had, because it says a lot of things that I think are that Americans

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should understand, but are super obvious to anybody who's paying attention to Asia. And in fact, I actually think you go easy on the US. I'm much more of a bear perhaps on the US than you are. Maybe you pull your pull some bunches in that or, or what have you. Because I'm actually, I'm, I'm, I'm messaging, I'm talking to you right now from Singapore. And so let let me see if I can. You know, obviously others have summarized the book, but essentially China's an engineering state, America's lawyerly state. Chinactually is on the right in many ways because XI is all about the great rejuvenation of the Chinese nation, even if he's kept the communist symbols, you know, he, you know, Mao went after the four olds and, and went after a filial piety and so on so forth.

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Than GI completely reversed that where it's really, you know, nationalist, conservative, you know, revival of 5000 years of history and so on and so forth. And in many ways, when Doug Xiaoping took over in 1978, you know, a rebranding changes the logo but not the guts. And Deng Xiaoping did a reinterpretation where he kept the logo but changed the guts completely. It was basically, in my view, a coup, which which is funny because now the Communist Party nor Democrats nor Republicans admit the extreme discontinuity between Dong and Mao because like I'm, I'm no, I'm butchering the pronunciation. But Hua Gua Feng and the Gang of four were supposed to be like the successors to Mao and Dong managed to take over and shifted towards the capitalist Rd. even after he'd been pursed 3 times and a sudden been thrown

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through a window. And you know, the famous, you know, black cat, white cat doesn't matter if we catch spies and the Xiao gang contract where those villagers at least that was that was there's the idea of it. Maybe that was just a legend. But those there's villagers that had a contract to do capitalism and they weren't actually executed, unlike everybody else. And that was kind of like hell up a hand dunk shipping helping and said, OK, capitalism is legal in these regions, the special economic zones. And thus began Shenzhen and the things were on the Eastern seaboard. And that's how China modernized didn't go to capitalism all at once, right. So I may be getting some of that wrong, but was that roughly accurate kind of a quick capsule history go? Ahead. Yeah. The only thing that I would quickly add is that I think Dong had a lot of the governing styles of Mao. He certainly purged a lot of people.

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He was really ruthless against some of his enemies. He got rid of several of his successors and I think he was, in the words of wine party historian half a mile. And so I don't I don't think he's no no St. there. I mean, he was, he was as ruthless, I would say, even though his ends were much better for sure. He started out as communist, right and he was in the he was in the party for a long time and actually somebody said that even the war in Vietnam that which is one word that was, you know, was that dung hell that I had read this book. I see if I find it to distract the generals from because he was, he was doing a lot of changing of the guard in, in Beijing at that time. So he just sent them all to go anDeFight Vietnam again so he could go and do some reforms or whatever in the capital. I don't know if you have you

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heard that. Yeah, it was to get the Army support to give them a really fun war. And then he will. And then he'll have their support forever. Yeah, something like that, right. So and then, you know, that began through the tradition of, or maybe I'm wrong about this, maybe that predated Dung, but they were like there's like 3 posts that the head has, which are, you know, the ticular head of the state, the head of the party, and then also like the head of the military or something like that, right. And Dung began the tradition of holding all three of those crowns to run China is if that's correct, if I'm not mistaken, or maybe. Not state president, but he was, I'm not even sure he was head of the Communist Party, but he was head of the Central Military Commission. CMC, right? Yeah, this one, this one, I'll get some of the details wrong, but there's like 3 things that he had and he was kind of running. It's like a, you know, uniting the triforce to speak.

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OK, fine. So maybe we'll flash up what I what I got wrong. OK, so the reason I say that is here is what I will stipulate. Well, so I, I want to play your your book back, but to you and you tell me if I got it wrong. And then I want to actually debate with you what comes next. OK, first, everybody should read breakneck awesome book. And I think in many ways you sort of explain stuff because so many Americans are in cope mode, less so perhaps in 25. But for the last 10 years they've had extreme cope where they've been pretending, you know, the Peter Zihan kind of argument that China's going to get old before it gets rich, It's going to fall into a ditch, it's actually weak and blah, blah, blah, blah, blah. And that keeps not happening. And instead, it's number one in cars and #1IN solar and #1 in

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all kinds of industries, especially the post COVID burst of energy into advanced manufacturing and so on, by 2025 seems to have really worked. And it's also number one in surface ships. And it's signing all these trade deals and, and, and, and down the list, all kinds of things seem to be working for China, whereas the US keeps struggling in many ways. I would you, I mean, one way of I, I put it is your book is kind of explaining these sort of obvious things. I'm not, to be clear, I wouldn't say they're obvious to everybody, but it's like you're very gently kind of breaking reality to you. Let me, let me know your thoughts. Go, go. Yeah. I think that all of those things are true, Everything is real. And I think, but there is there is more to this, a little bit

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more to the story, which is where I feel like you're doing the a really good job of summarizing the business pages of the Wall Street Journal or, or whatever Bloomberg. But I think we could also flip a few pages into the economics and the politics pages in which I think the situation there does not look really good that, you know, the concurrent with China's rise in EVs and solar, all of which is real. You know, there's also crazy politics. The she constantly purchases generals, some purchases defense minister, purchases foreign minister. a lot of strange party politics that none of us really I think can understand outside of a few folks in Beijing. You cannot make growth has definitely weakened in some

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severe ways. The property implosion is real. The youth unemployment is real. There's a lot of folks who have decided to leave China. I'm sure a lot of them are washing up at your doorstep in Singapore. a lot of amazing Chinese entrepreneurs who have thrown up their hands at the political environment in China. a lot of Chinese have decided to fly to Ecuador where they don't need a visand try to walk across to the American border. And so last year Customs and Border Patrol were apprehending something like 40,000 Chinese nationals every single month. And so that's a lot of people who want to take leave of the great rejuvenation of the Chinese ethno state, right? So, you know, I think that there there are, you know, real economic issues. I think there's a lot of political uncertainty in addition to amazing

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technological growth. So, you know, we had to reconcile all of these. So you know, the Ecuador part, I've certainly heard those reports. That is the part that I don't fully understand because, you know, there's the other interpretation is China's just sending a bunch of people to go and embed in the US or what have, you know, military age males crossing the border, blah, blah, blah, blah. So, but the other piece of it, so let me discuss those other piece of excel give maybe, you know, obviously a lens you probably considered XI goes and purges Jack Ma because he doesn't want something like Elan to happen in China where the tech zillionaires of China get their own ideas and they control these giant networks and you

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know, they can turn against the state, right? We sort of see like 2 pads there with network versus state and state over network in, in my parlance, you know, and in some ways, this provocative, but in some ways, China is the best for the most and the Internet is the most for the best. Where if you're up to, let's say the 98th percentile in China, you have clean streets and no crime and 24/7 delivery services. And at an upper middle class, up to that level, you're fine. But once you start getting to the top one or 2% of society, now you better watch carefully. You know, you're basically constantly surveilled to make sure that you're in line with the with the party and what you could be hailed for a year or two ago.

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Suddenly you're on the outside of something and that's too sinuous A twist for a good chunk of people. So they head overseas to Singapore or Dubai or something like that. Would you say that's roughly right? Yeah, I think the great contrast, I think you're, you're exactly right in all of these. I think the great contrast, one of the great contrast between the US and China is that America works really, really well for the rich. If you're a rich in America, you know, you really don't have to suffer too many of the problems in, let's say, New York and California. You don't worry about the housing crisis. You have a giant home in Atherton. You don't worry about taking the New York subway to work every day, you know, which is like screechingly loud and dirty and doesn't work very well. You get to live in these skinny skyscrapers in Manhattan. I think that there's nowhere else in the world that's better to be enormously rich than in

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the United States. I disagree with that. Now I and the reason I say that is I think I think that maybe was true. The reason I smiled is just like it's I think that was true. And I think there's several bad parts about that now. The first is it's fine to be wealthy if other people are doing OK, but a good chunk of American wealth is Keynesianism, which is really like, you know how China's actually capitalist, but they call it communist. America's actually Keynesian, but they call it capitalist in the sense of the money printing is actually a gigantic redistribution of it's basically, you know, inflation is taxation without legislation, if you've heard that one by

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Milton Friedman. So they print trillions of dollars. It's like diluting down the currency for everybody. And they're doing that a lot. They're both both overtly and covertly. And then the Plunge Protection team. Have you heard that thing from Greenspan, the plunger protection team? OK, that's a useful thing to look up. That is why one thing you mentioned in the book is like, American stocks have done well and so on and so forth. And Chinese stocks are flat. But part of that is because there's almost a social contract in the US, which is the upper middle class and upper class have all these index funds, you know, it stakes in the mixed funds foreign case. So they expect the stock market to go up. And that's actually the metric, the number go up of the society. And so the plunge protection team at the Fed will actually print to make sure that in

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extreme circumstances stock market doesn't go down. Some of that was explicit, like the obviously the mortgage-backed SECurities that were bought in 2008. Some of that is implicit where they'll spot Goldman or Morgan, like the, you know, free or, or for example, the BTFP program that they just did where Treasuries weren't actually marked to market. They were valued on what they were bought for, not what they were sold for. So all kinds of manipulation they do just keep the market nominally going up. But in real terms versus gold or digital gold, it's going way down. Like for example, if you just saw it as of today, gold is actually outperformed S&P over the last, you know, right. So in my view, the US is actually a fake economy, a Keynesian economy. And actually, you know, actually, you know your thing on the engineering state for some

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lawyers state. I think we can do a lot of iterations on that. And I'll give you the ball in a SECond. But I've I love your book so much. I wanted to say so much so, so jump in. But yeah, I mean, I can I say I, I I'm going to be, I want to tease you a little bit about this. So you sound like teasing Ping, man. This he has this term that the Communist Party calls this the American economy, that fictitious economy and also the bubble economy, not like a financial bubble, but just something that can pop very easily. And I think there is certainly something to this. I mean, a lot of Americans would tell me, Dan, what are you talking about? This country has no problems. Look at these giant trillion dollar corporations that we can create and the Chinese cannot and no one else can. And I don't. And so again, I come coming back to just to slightly put a closest loop, which is that I think the US works extremely well for the rich. And I think it cannot stay a

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great power if it works only well for the rich. And you know, there is something strange about China where if you're an elite, let's say you're some sort of an elite in Beijing, you're working in tech, who knows if your tech company would be smashed by CZ and Ping as he did a. Couple of years ago like the gaming companies got just sent to 0. Online tutoring, you know, they really declared to be nonprofits. You know, let's say you're working in something like finance. And then he announces a salary cap, as he did two years ago, $300,000. And maybe you need to give your back pay if you're within the party military state elite, you never know when your patron might be taken down by some sort of an anti corruption purge and then your entire network will fall. And so, you know, there's something really precarious about being rich and powerful in China in which, you know, in the

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US, if you're rich, you can more or less transmute a lot of your wealth into political influence. Then maybe that's bad, but it's much easier to be rich here. But I fully agree with you that there is something like very strange and fictitious about the American economy. You know, the contrast that I, I like to set up is let's think about Apple, you know, something like $3.5 trillion market value now spent 10 years debating whether it could produce an electric vehicle and after. It. And what is Xiaomi's market value? Something like $200 billion last I checked. So the Apple is worth something like 15 and nearly 20 times more than Xiaomi. And you know what would you rather have a company that is able to build cars within four years of announcing it?

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I see how we did. And for these cars to go win a major race tracks in Nurburgring and in Western Germany or to be kind of Apple and just not, you know, debate this for a while and then give up. Now, I think I would rather take Salmi. And I think this less an indictment of, you know, Apple than an indictment of the financial system in the US, which assigns these crazy valuations to highly profitable companies, but these mostly software companies. Yeah. So Apple is a hardware coming also. But yes, your point is correct. So my view on this looking ahead to 20352040, maybe in 20-30. You know, I've written about this, but to briefly, Summers, I think I wouldn't even, I don't even think of it as the United

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States. I think of it as the dis United States because like, for example, there's no Korea, there's only North Koreand South Korea, right? Like it's not actually, you can't talk about Koreand Korea's position this in Korea because North Koreand South Korea literally have different foreign policies. They're opposed to each other. They're different mores. They both might write in Hungle, but they're saying totally different things in different vocabularies, you know, premises, all that kind of stuff, right. So there's. Only one Korea matters to us. You know only one Korea is in the global economy producing any memory chips, right? That's right. South Korea, exactly right. But North Korea obviously it's pointing missiles and so it's over. But yes, correct. So we can't talk about Korea. We have about South Korea, North Korea. In the same way I don't think we can talk about America. We can talk about blue America, red America and actually Tech America. And those are like 3 separate

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groups. And whatever you would hear a defense of America, it's almost always coming from tech America talking about the trillion dollar companies or sometimes red America talking about, well, we can still reindustrialize and we still have the 1945 spirit and so on and so forth. And blue America is sort of not really, you know, that animated in terms of its defense of democracy and so on and so forth nowadays. But they were a few years ago in my view at least. Maybe you'll disagree is like tech, America is actually the Internet and it overlaps with European tech and Indian tech and especially crypto, which is which I know you don't love crypto or you're probably

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skeptical about crypto, but the way I think you know how like when Rome fell, what survived was Christianity interest, right? In my view, like America is going to go to zero and what will survive is the Internet. And the bad version of the American legal system is the one you mentioned, which is obstructing and constricting and so on and so forth, and it's being abused by all these lawyers and so on and so forth. But the good version is the Internet legal system, which is a predictable order, and it's rule of code as opposed to rule of law. And it protects property rights and has the best monetary policy in the world and has smart contracts and so on. And even if Americans and Chinese can't trust each other's legal systems, actually lots of Chinese people do appreciate Bitcoin and BTC is actually the genuine balance to CCP as

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opposed to USA which is going to zero. Let me pause there as politics and say about that. That's a crazy idea man. That was BTC is going to be the alternative against CCP when USA goes to zero. I think that's a That's a great phrase. You should tweet that if you haven't yet. I have tweeted that I have to. That's actually the. So just to explain, it's more than just a meme. It's like a compact phrase, but right. Like in the 20th century, the contestation was symmetrical between EUR, Asian communism and Anglospheric capitalism. It was like tank for tank, plane for plane, USA versus USR, you know, and so and so forth. But I think in the 21st century, it's asymmetric. It's between China and the Internet. China is like Apple, vertically integrated with the nation. You know, the Han Chinese

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language, culture, thousands years of culture, the, the party state. And then of course, the network, which is the firewall and the apps and all the Chinese tech companies that's vertically integrated and something like 97% of people of Han Chinese descent are in this sort of vertically integrated, very functional Voltron, this Meta Organism that coordinates all these people in this really, really powerful way. And the other summing 7 billion people are going to initially and preps for a long time be the weaker of the two sides. And that'll be the Internet, which is messy, Android, chaotic, but also more free and, and that's how I think things square up after the fall of the dollar. Balaji, I think we're this conversation is going to be amazing when it's published. I hope everybody watches this on video because you'll see me

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smiling this entire time because I love your catch phrases. I love these on tweets. I'm still hung up by this idea of BTC being being the alternative against USand CCP. But then let me rephrase this. Which is that Oh well. It seems like USand CCP must both hate BTC and SO because it is representing the alternative order. What if they crush BTCI? Don't know if BTC is powerful enough. Well, that's the question. So basically the way I put it in the network state is actually, I say CCPNYTBTC the party, the paper and the protocol are sort of like a rock, paper scissors kind of thing. And when I wrote it, NYT still hadn't been defeated. But with Elon X is basically defeated. NYTI think NYT has lost its

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hegemony and so and so forth. So it's sort of like, you know, in the, in the mid 20th century, there was communism, fascism and democratic capitalism. And two of them teamed up on the 3rd and then the other two fought amongst themselves. And so sort of, so I feel NYT is just being knocked out-of-the-box of the shadow of what it was. I don't think it's going to be coming back. And because it depended on being ideologically hegemonic. So CCB versus BTC, you're right that there's like that is a genuine polarity because, you know, for example, in the early 20th century, the swing vote in Germany was like the German worker, like the Soviets would appeal to them as a worker and the Nazis would appeal to them as a German. So 1 was appealing the base of like class, another appealing on the base of race, right? And that was like the swing vote

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with this last election, somebody like the black American or female American or gay American, the wokes would appeal to them as black or female or gay, and the magus would appeal to them as American, right? That was like the swing vote, right in the center, OK. And I think in the dispensation that is to come, the swing vote will actually be the Chinese technologists, because the Chinese will appeal on the basis of China will appeal on the base of race and the interest will appeal on the base of class, right? So that's often a kind of thing like you see what I'm saying, right? Like sometimes it's the left that appeals on the basis of in, in the case of the books, they'd appeal on the base of race or genetics. And the mag is actually we're appealing on the base of class in sense of membership in the American class, you know, which is like a software thing, whereas race is like a hardware

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thing. You know, let me pause there. Yeah, maybe. I mean, I wonder. I mean, first I would wonder about your idea that Elon has defeated MIT. I think Elon has certainly defeated someone and that someone is himself. And I think Elon has been extremely adept at defeating himself. I mean he got himself out of being Co president. How's Tesla doing? I don't know if it doesn't look great. How's X doing? I'm not sure. I think NYT is winning this round. NYT. But you think so? It's pretty good to go see it. Somebody here Good. Yeah, I mean, I, I, I think that, you know, I'm, I don't know, I'm, I'm almost mostly off X at this point, but I'm, I'm, I'm reading more NYT. So maybe I'm not the target audience, maybe I'm defeating myself. But I would also say that, you know, I think the only force that is more powerful than the USA, the only force capable of defeating the USA is the USA, and the only force capable of

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defeating China is the CCP. And I see that both of these nation states have become extremely powerful at beating the shit out of themselves. And I think these humiliating self beatings will continue until morale improves. But I think that, you know, Biden did a terrible job. Trump is doing is being kind of apocalyptic. And I think they have a good chance of unraveling the United States. Yes. And I think the Chinese have been driving a lot of its smartest people of a lot of its most entrepreneurial people, a lot of its best creatives out of the country. And I think the CCP will also defeat the Chinese ethno state. They'll defeat the great rejuvenation. So that's my model. I'll pause there.

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What do you think? OK, So what I think is I think XI is a lot like FDR in the 30s where he was the least bad in the sense of like, there's lots of things. I mean, FDR in turn the Japanese, FDR basically did the gold seizures. You know, FDR essentially pushed, I mean, he used the government against all of his enemies. He went after Andrew Mellon. He pushed the great fortunes into foundations. People credibly alleged that he, you know, pushed the Japanese into World War 2. And so and so with all kinds of stuff have he ran for four terms which broke all previous norms, blah, blah blah, all kinds of stuff FDR did right. People think he made the Great Depression great. He prolonged it. But net, net, when all the dust settled, ultimately the US was in the strongest relative position and it screwed up the least.

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Not that it didn't screw up. Go ahead. Yes, go ahead. Right. It screwed up the least out of the Soviet Union, which has gotten killed. Nazi Germany, which has gotten itself blown up. The Japanese got naked the US both, both through competence and through luck or whatever screw up the least out of them and was therefore the most powerful in that dispensation. I think China's big instinct because the century of humiliation, you know how like a great founder will take a lower valuation but always preserve control, right? My view, and you can probably fill in the gaps on this especially also seeing what happened to Japan with the Plazaccords in the 80s, right? Lots of people, our friends will say something like, oh, you know, people were saying Japan was going to beat us in the 80s

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and therefore it'll happen exactly like that and we're going to beat China the same way. But Japan didn't just lose, it was basically killed because it's it's like AUS occupied country, right? There's a military base there, you know, thousand 10s thousands of troops. Japan's constitution is written by the US and most importantly, and Japan's not a sovereign. One way of putting that in 2017, actually, NYT released an article that said in 2010 China had killed a bunch of American spies in China, right? Japan can never do that. That means China has deliberations that America can't see in a way Japan couldn't. And so Japan with the Plaza cords, it was handicapped. It was forced to buy U.S. Treasuries. It's whole decade of stagnations, you know, began at that point. And China's hyper conscious of not going through that.

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So Chinat all, at all stages, it took less money to preserve more sovereignty. It took worse terms in some ways to preserve, right. So because of that instinct, that wall building, you know, for example, it took all these hits when it banned foreign social mediand it built its own right, all these PR hits constantly. And it was willing to do that to preserve sovereignty. I think that's going to end up being the farsighted decision, for better or worse in this century. For example, you see what happened with Ukraine, where they're scripting drones on Russian soil. No. What? What does that mean? So like a few months ago, the Ukrainians managed to like have some exploding drones activate within Russiand go blow things up, right? So they could, they could control things remotely, right? So in my view, that means, and I, and I talked with this

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actually 12 years ago, but now it's actually becoming real digital borders and physical borders are like the same thing, right? Your fire, the Great Firewall, will be seeing in some ways a very farsighted thing because it is digital hard borders. People won't be able to script drones on Chinese soil. They won't be able to script humanoids in Chinese soil. They won't be able to also send in destabilize memes, destabilize memes into Chinese soil, right? Whereas the unmoderated Anglospheric Internet will just be filled with all of these scissor statements and crazy things that are all driving everybody crazy, as we're seeing. And so China's also insulated against that because people only speak Chinese, so and, and G has taken English out of the schools. So they've got like multiple

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levels of firewall and they can just, like, sip green teand everybody is shooting each other, you know, in other countries as the dollar goes away. Like that is a reasonably compelling idea. I think that. I have a solution for this, but go ahead. Yeah, yeah, yeah. I feel like the Chinese are, They've really taken Napoleon's maxim to heart, that the game goes to he who does not lose. Now obviously, Napoleon. The do nothing win meme. Napoleon won like nearly all his battles, but he just lost Waterloo and a couple of others, right? And then he lost and he lost. He lost badly, right? And so I think the Chinese are very intent on not losing. And there is certainly some good things that I see that the Chinese are doing. I mean, I agree that the Great

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Firewall in retrospect looks like a good decision. You take a lot of PR heads. But, you know, as I wrote in one of my letters, it becomes really difficult to say that the Chinese really wanted the Internet in the late 20 tens when Congress was regularly dragging Zuckerberg and Twitter and everyone else into Congress to say your products suck, you're destroying us, you're killing us, man. And so, you know, I think like, you can't tell the Chinese you really need these products in your state. And I think that is that makes a lot of good sense. I take a look at what is going on with AI today and you know, last week we have Sora 2 and we are able to produce like hyerrealistic slop that like friends have told me that their family members have were not able to distinguish that this

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was an AI generated cameo, right? And I think that's kind of incredible. Like why are we so focused on releasing this stuff? And this seems like crazy decisions being taken by the AI labs without any real consideration for how the state, how the people might actually use it. And so, you know, there is a sense in which I think that China just wants to be totally stable and then, you know, close the doors and the Celestial Empire and then let the Barbarians tear each other apart and eat some mochi balls and then drink green tea. Yeah, I mean, that sounds good. but I think that there is a problem here, which is that the only force capable of hurting China is the CCP. In which I mean in my book I write about how. They 0 COVID. Had 0 COVID and they had the one

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child policy in which they were really dumb and they were really autistic about thinking in such literal minded terms. Oh there's going to be ecological doom if we have overpopulation. The solution is one child per couple and then, you know, conduct 300 million abortions over this period or, oh, you know, we don't care about people who need chemotherapy or need dialysis treatment. The only thing that we care about is preventing the spread of the COVID virus. And so we are going to, you know, prevent the spread of the virus at all costs. And so, you know, here is where I think the engineers who their literal mindedness will not be able to leave the people alone. I think the best case scenario is for China is if the CCP decides to spend all day sipping green teand then just leave

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the people alone. And I don't, I don't think they're going to do that. I think they're going to figure out new and novel ways to destroy the country themselves. What do you think? So it's interesting because I, I, I want to make the case for China and then I'll make the case against China, right? But that's to say, let's see, there's like V1V2V3V4 of an argument. You know what I mean? I think maybe you and I are on V4, but let me, let me, let me do the V1V2 just get to our progression, right? Because you go to under sophisticated arguments, you get the sophisticated one, right? OK, so the V1 is kind of the naive like that's a Chinese Communist Party. They're, you know, and people think they're all Maoists and it's slave labor and so on and so forth. And that's also that's a or that the still the ideological mouse. If you've got a very outdated

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view of what China is, they see the Chinese cities and their response is, Oh my God, there's LE DS on the cities. They don't realize the point is the cities didn't exist 30 years ago, right? And they're actually very clean and beautiful or whatever. Then the V2 is, I'm not attacking him, but let's say somebody like Arno Bertrand on X, right, or Carl Zha, which is basically, you know, I welcome our new Chinese overlord. Someone, someone will say something like that, right? And it's like their case is something like America's been blowing up the Middle East. China's been building up Africa. America just has a bailout economy for the wealthy. China has shared prosperity for everybody. China hasn't started any wars. America's starting all these wars. China's internally united, America's totally divided and actually also with these tariffs, China's been doing

33:05
trade deal after trade deal. And by the way, that also is why I think Xiaomi or you know, BYDDGI, their market caps will probably rise because Chinese market, Chinese market axis has expanded as functional as trade deals that, you know, she has recently inked as a function of the reverse thing on the tariffs. OK, then the V3, so that is like the first is, you know, USA is still 1945, it's going to win, China sucks. The SECond is actually China's super strong and it's good. Everything will be fine. The V3 argument is basically the US was on balance better than the Soviet Union from 45 to 91. But then after it won, it became by degrees worse and worse and worse behaved and started bombing people and abusing its power and so on.

33:51
And one way I think about it is at home, China's one party state, but abroad it's a two party state because it's checked by America Congress. The Americat home is a two party state with Democrat, Republican. But abroad was a one party state where it blow up everybody because it wasn't checked. It's an interesting way of thinking about the last 30 years or so, right? And now America's coming home because, you know, it's the National Defense strategy, if it's real, says pulling troops back from Asia like it's becoming a country non empire. It's giving up the imperial burden like the end of the Soviet Union. And so the bad part, the V3, is China will expand in such a way that it actually has unchecked power. And even, for example, 0 COVID would never have actually been undone in China without the signal from other countries because the Chinese diaspora

34:37
knew that 0 COVID wasn't working elsewhere because other countries were, you know, that external signal was certainly filtering into China in some ways. And people were aware that Chinese people didn't have to live like this. And that was part of the signal. And I think another part of it is she just wanted to win his re election in 2022. And 0 COVID was sort of a way to winkle out anybody who wasn't super loyal to him. And then right after, you know, I think the November 2022 Congress, then they unlocked everything. So it wasn't really about 0 COVID, it was about third term or fourth term, whatever, you know, and NTH term. And so then the V4 would basically say, OK, the USA is going to 0. It's it's not 36 trillion debt,

35:23
it's 175 trillion debt. The dollar is being devalued against gold. It's dropped by 100 million X against Bitcoin. It's pulling back its troops. People are shooting each other domestically. It's telling NAto go fight for itself. It's it's basically sanctioning itself on trade, essentially withdrawing itself from world affaIRS. It's like, you know, have you seen a steel cage match? Yeah, Yeah. So imagine, I imagine like a new Iron Curtain, like a steel cage UFC Octagon thing descending over America. And all talent is told go home. All the researchers are told to go home. All the wealth is getting going to the Internet. But where it's S&P 7 or the digital asset treasury companies, S&P 493 is flat, U.S. Treasuries are down to 0. And conversely, all the manufacturing, shooting and

36:09
militaries in China because of the robots and drones there and all the mediand money is on the Internet. And now North America is just this gigantic steel cage match with all the shouting and all the shooting. And it's like basically what the EUR Asian continent was under communism. Unfortunately in the 20th century. All kinds of crazy people shooting each other, warlord era collapse, the Soviet Union, Tujuksani Civil war, all that kind of stuff and things coming through North America. So in the V4 is basically OK in that world. Something needs to balance the Chinese drone Armada. China will be insanely, insanely, insanely insanely insanely powerful. It'll be like 5 or 10X America at its peak. It will because it's, it's actually hitting more steam. Chinese overproduction just means like so many widgets popping out of, you know, the ground.

36:54
They're they're, they're still gaining steam, right? Like the country still hasn't mean fully developed. And so China will just be the most powerful physical force to have ever existed. And right now, many Americans aren't mentally living in that world because they still think like the US military exists, right? But the US military has been unfortunately beaten by the Houthis. NATO is being beaten by Russia. If NATO can beaten by Russia to the point that there's peace treaty talks with Putin, China's like 10X Russia easily. You know, heck, set the set. Chinese hypersonics can sink all US aircraft carriers, right? The SECretary of the Navy said one Chinese shipyard makes more ships in the old U.S. Navy combined, right? Raytheon CEO has said you can't decouple from China. So what can possibly balance the Chinese throne Armada? I think the entire American mentality of like fighting with your fists and so on and so

37:39
forth is very romantic training century thing that can't be done against China. So you actually need something totally different, which is Gandhian nonviolence, decentralization, agility, invisibility, something totally, totally different against this enormous force. So that's where I'm at with like V4. Let me pause there because that was a lot, but let me give your thoughts. Yeah, I think my my problem is that I'm on like V 73 and it has a remarkable convergence with V1. And I think I'm I've kind of horseshoe my way back into the start of the snakes and ladders. Sure. I think this I think, I mean, you're right that there is kind of this negative element with both of them. And this where I, I would, you know, think about how you say that MAGA was appealing to

38:24
the gays as Americans rather than as gays. I, I, I think there is something to that. But there is also, you know, MAGA is also very interested in defining who the internal enemies are. And probably they're throwing. They would like to throw more of the gays in jail and 20. Five Yes, in 2024. AB. It was, it was a very different message up until the election and then shifted 34. Yeah, go. Ahead, but I mean I when you hear these terms like heritage Americans first, I think of like when you say heritage American, I think of like a giant Thanksgiving dinner that's with a big Turkey in the middle. And you know, I think that is just these very strange sort of terms. I agree that there is kind of this Iron Curtain that the Americans are self imposing on

39:09
themselves and that feels really strange. And maybe maybe it's good for the troops to withdraw from the rest of the world and give up the imperial burden. But I think it's not good to deport a lot of South Korean engineers, or let's just call them Korean engineers who are trying to build the battery heritage that's right and humiliate them in chains, that is like totally a horrible own goal. I'm just always very conscious of the ability for the Chinese to impose own goals for themselves as well. No, it would be great if they spent all day sipping green tea, but they can't leave anything alone and they just constantly have to meddle and everything. Is America Keynesian? Yeah, sure, maybe. But the Chinese are, according to Adam Tu's just so much more

39:55
Keynesian, the Keynes everything, right? And I think that there is kind of just this endless meddling mentality. Now let me just make a broader point, which is that I think the US and Chinare in competition and rather than one country having all of the structural advantages on its side, I think I I wouldn't agree with that characterization. I think that the US can very credibly point to these amazing strengths that the US has. I think China can also point to these amazing strengths, namely these drone armadas, which are very powerful side. There's also you can, if you wanted to focus on the most ugly parts of America, you can definitely paint a horrible picture just as the same with how you can do that with China. And so my mental model for all of this that this a long term competition. There will be no country that

40:40
completely implodes and fails to get up, get back up in the way that Gorbachev did, really kind of drive the Soviet Union. OK, so that's that's a big difference of opinion, but you just finish your saying and I'll say something go. I think that, you know, when 1 country is ahead, it is going to get overconfident and make a lot of mistakes. Because I felt like I lived through this in China when at the end of 2020, at the start of 2021, Xi Jinping felt like he was at the top of the world. He was able to control COVID, in which, you know, the US was not. January 6th just happened. And China looked like it was like a super stable, economically prosperous place. What does he decide to do? Smash a lot of tech companies, destroy the real estate SECtor and then also hold on too tightly to COVID? I think that is a classic mistake of overconfidence and

41:26
argue. Was it? But was it? Because let's analyze it now from 2025. OK, key, go ahead. The three red lines essentially were sort of a controlled demolition of the real estate bubble. It didn't actually fully crash the economy. He went after the video games. He went after after school tutoring, which there is a Red Queen phenomenon after school. He definitely hit all kinds of people on, you know, entrepreneurs and so on. But advanced manufacturing, the transition into it did work. I know you mentioned the little pinks in your book say this, but maybe they're actually right because he avoided the fire economy, no finance, insurance, real estate of the US. He avoided going too far into it, popped it, doesn't seem to have it caused some damage. I mean, one way of thinking about it, if the country, you

42:13
know, rather than talking about it in a very ideological terms, if the country is like the platform and the companies are like the apps on that platform, right? Sometimes Zuck will make like a breaking change to the Facebook API's and break Zynga, for example, if you remember when they did that right, because it was spamming the feed too much. Nothing, nothing against Zynga or whatever. You're just making that decision. The greatest good for the greatest number. Like Zynga is working in its own way, but long term, this spamming too many people with zombies or whatever it is. So actually, no, we don't want to have Zynga. We're going to push things into its own archived inbox, like a spam inbox and so on and so forth. And so in the same way, if he's like got, he's got root over the Chinese platform, he's like, actually we don't want these

42:58
apps. Yeah, we don't any more than we want the advanced manufacturing stuff, which seems to have worked. Yeah, I mean, if if the only thing that matters to your economy is advanced manufacturing. And I am going to let no one talk me down from my stance at manufacturing as almost everything. And so I think that manufacturing is really important. But you know, he didn't only hurt a lot of the video games. And maybe, yeah, you should control the video games. You should control the social media. You should control the short form video apps. You should control the AI slop. Frankly, the Americans ought to do more on all of these different things. He also smacked around people like Jack Ma, people like John. Yeah. Real guys. And other people, right? And so that's pretty important too. And so this where I think that it is still important to flip a few more pages past the business pages of the Wall Street Journal into the

43:43
economics pages because youth unemployment is real. Tom Ping is real. You talk about inflation being what's the Friedman line? inflation is a taxation. inflation is taxation without legislation. Without legislation. And I think, you know, yeah, inflation is bad, but the only thing that might be worse than inflation is deflation, which the Chinese are not quite able to get out of. And see is kind of this boomer who says, why do people dislike deflation? Don't people like lower prices? Well, not if you aren't. Well, so here's where I'll here's I want to argue with you Go, I'll go if you're saying all. Right. Let me let me just make one more point, which is that I think that, you know, the country that's going to be ahead is going to make all sorts of mistakes driven by overconfidence in hubris, which is what I think for the most part she did. I think that the controlled demolition of the property

44:28
SECtor destroyed a lot of confidence in housing and construction activity is still not back. And we're we still might like get some sort of a weird financial crisis because of the supposedly controlled demolition of the of the property SECtor. I think that this was not as controlled as we'd like to believe. And arguably you can say that the United States grew overconfident, which is how it imposed this Octagon upon itself to make it to make people destroy each other. That's a mistake of overconfidence. But the more that you're ahead, the more you'll make these sort of mistakes. The more that you're behind, the more that you're interested in patching up your deficiencies, which is why I think this going to be kind of a neck and neck race for a very long time because we we can't just look at a race based on structural advantages as it goes on, you know, people will trip up and stumble anDeFight harder.

45:15
OK, so here is my worldview and where I disagree with you on is basically a few things. First is I don't know if the US has that much longer live is like a coherent political entity. I think we're on the verge of a end of USSR type scenario. Dalio describes as a dead heart attack. Elon thinks the government isn't going to last very long. You're seeing gold flipping U.S. Treasuries, for example. If you saw that graph, gold is flipping U.S. Treasuries as reserve asset of states. And certainly Bitcoin has risen more than 100 million X against it. There is, you know, the US has not become the like the US used to be the number one destination for global millionaires up to 2019 + 10,000 millionaires. After 2020, it dropped 85%.

46:01
It hasn't recovered. And gold millionaires capital is relocated to Dubai in Singapore #1 and #2 they've left Chinas well, a good chunk of those millionaires. But China regenerates them so fast in, you know, that, that it's actually, it's, it's basically seemingly fine for them. And China's view, I think is that the new up and coming generation of 20 somethings is speaks purely Chinese. They have purely Chinese apps. They'll be Chinese nationalists. And unlike the 40 somethings that have some sympathy for the West, you know, a lot of these Gen. X or older millennial entrepreneurs, he's like, you know what, why don't you guys go as fine, Jack Ma can be a teacher in Japan or something like that, what he's, you know, doing and somebody else in China

46:46
can run that. We've got a billion Chinese people here, right? That's essentially XI's bet that he can do without these sort of older Chinese entrepreneurs. And now he just wants those, the younger ones who have grown up on Xi Jinping Thought and all the Chinese apps and think China's number one and luck in his better than Starbucks. And maybe they're right. BYD is outselling Tesla in neutral markets. Xiaomi is able to ship a car when Apple wasn't. TikTok needed total state intervention and the combined efforts of Google and Facebook and so on so forth couldn't be TikTok And DGI is the cheapest and largest scale drone manufacturer in the world. And then in an end, you know, like essentially the US can't compete with Chinabroad with the exception of maybe Elon and even Elon is having a tough time.

47:33
In any neutral market, Chinese products win and so the US has retreated to just trying to tariff and build tariff barriers around the US, which is going to fail in the medium to long run because the Democrats may defect from that. Like Newsom has said, hey, maybe he'll import goods from China. If you saw that right. Like that's why I say America. It's not the United States. It's just United States. Blue America has its own foreign policy distinct from red America. And Newsom and Walls and Hillary Clinton have all signaled that they may want to align more with China than than the Republicans do. Like, you know, you saw the thing with Newsom and how it wasn't just that they cleaned up San Francisco for GI. It was that Newsom was the only Democrat to get the meeting with GI. Do you remember that? My view on that is, again, a lot of Americans don't know this, but like, within China, you can't just jump straight to the

48:19
presidency, like Obama or Trump. You have to go from, like, you know, mayor of a village and then governor of a province and all the way up and make it to central committee. And so GI recognized Newsom is having a similar path going from San Francisco mayor to California governor to possibly president. So recognize him as a credible possible person. And when Newsom was in China, he said he wants to be China's long term stable and strong partner. My view is that after the dollar ends, that's the last strand that's holding blue and red together because blue's only 4%. Democrats marry Republicans. Democrats certainly don't vote for Republicans. Democrats don't even talk to Republicans anymore. They're in their own blue sky versus X, you know, kind of thing. Digital SECessions already here. They're now starting to shoot

49:04
each other, blow each other up. There's a new killing, crazy blowing up thing on X every single day nowadays, unfortunately. And it's the last piece of paper that's holding this thing together. It's not, you know how people say it's not a, it's a country, not an economic zone. You've seen that kind of post on X. It's actually an economic zone, not a country, because the only thing holding it together is this piece of paper called the dollar. And with that, tears. Unfortunately, there's nothing keeping blue and red together. And Democrats will side with she if they don't have DC. Yeah, well, I don't know. I mean, I why? Why would she want to meet Governor Newsom? This a guy who looks exactly like the lead actor in American Psycho. It's interest with me. That's just weird.

49:49
And I think there is someone who is more willing to give a bear hug to Xi Jinping than Governor Newsom, and that is President Donald Trump. I mean, I was digging up these quotes for an article I was writing, which Trump told the Wall Street Journal. She is so smart, brilliant, everything nearly perfect. There's no one in Hollywood like this guy. As if like Xi Jinping had like Tom Cruise levels of handsomeness, which I find. Out, Wendy. But Trump is unpredictable. Because you'll say that about someone, then you'll insult them, then you'll come back and say it. But right now, he's trying to bear hug Susan Ping. And so, you know, and so, you know, I think you're right. I mean, maybe there is more than one thing that unites Democrats and Republicans. That's the paper. Rather, it's like a love of Susan Ping. What do you think about? That what's interesting is a few

50:34
years ago people were saying that one bipartisan issue was being anti China, right. My view is Democrats were only anti China because there was a contestation for who would run the most powerful state. Like basically first China disruptive manufacturing so disruptive red America. Then post 2020 it seemed to become the most powerful state. So then blue America really fought it. And now recently finally tech America which always had a sense of superiority versus China has finally started to see wait Chinese AI models are actually giving us a run for the money? Chinese robotics are actually really good and for the first time, tech America is actually taking China seriously, not just one off like TikTok, but actually, whoa, actually the Chinese edge shares aren't just copycats, they're actually innovators and so on. That's that's always being the

51:19
thing which tech is, you know, American Tech has felt they've had the edge and now that edge is maybe slipping. So I think though at almost a genetic level, I think red Americans at the base, not Trump, have a more visceral aversion to China. Whereas Democrats, it's funny to put it this way, this A1 liner. OK, but Democrats in the and Chinare both natural communists. So they'll be that's it. That's a joke. OK, But there's, you know, they're statists right there. Democrats are willing to be administrators in a multi ethnic empire and so they coulDeFind something under the XI dispensation, sort of like you don't have Venezuela's like this dysfunctional kleptocracy, but it's sort of bailed out with Chinese goods.

52:05
China's willing to, as you know, it's willing to work with, you know, Iranian fundamentalists and Singaporean meritocrats and Venezuelan kleptocrats and Russian Orthodox so long as they don't interfere in China's internal affaIRS, right? And so I think they will support the Democrats and just ship them goods and support them in this way as the have you seen this thing on soft SECession that the Blues are doing right, Right. So in that soft SECession, they just get goods from the West Coast ports, from China. They don't enforce the tariffs. I think it's very likely something like that happens. Newsom has talked about, I'm not even, you know, inferring this. Go ahead. I don't know, Biden Democrats, this guy from Delaware, another potential port town, there's a port of Philadelphia didn't get a lot of didn't do a lot of good

52:50
for Joseph Biden when he was president and. But, but, but Biden, Biden is 19, born 1942 and Trump's born 1946 or something like that. So they're actually both of you zoom out. They're both like, you know, coarse, handsy guys from the northeastern US born at the time of, like, peak America who grew up thinking the USA is number 1 and everything effortlessly. And Biden would say things like we're the United States of America for Pete's sake. Like, essentially they just think USA #1 go ahead. Yeah. I mean, I think I, I mean, look, you're focused on a lot of weird shit happening in America. And no doubt the weird shit is real, but I am living. I'm, I'm speaking to you from San Francisco. I look out the window and I see three weird pieces of shit a day

53:36
before breakfast. You know, it's just, that's just how, how odd things are. But if I am, you know, trying to think a little bit about China as I looked at, you know, there's plenty of dissatisfaction. I don't know if they're regenerating all the millionaires very quickly. You know, there's a lot of this when she when the most, the biggest driver of wealth in China is the property SECtor. When you have a property SECtor collapse of 25% and then people aren't really buying homes, it's really hard to build more wealth after that. There's a lot of uncertainties about the corporate SECtor. There's a lot of young people who've decided to move to northern Thailand where they could smoke drugs that are legal in the state of Californiand they're taking leave of, you know, the great rejuvenation of the Chinese ethno state that's being undertaken in their name. And all of these millionaires are leaving and there are. I mean, I don't think the

54:21
definitely the demographics it's not an issue in the next 20 years, but in like 2530 years from now, demographics will yawn larger and larger. It seems like they're not going to be able to escape this whole very well understand there's deploying a lot of robots, but what if, you know, the Silicon Valley bed is real, which I don't really buy. But let's say we invent God in a box and we get the Super intelligence and they invent all these humanoid robots and then we get to take control of these humanoid robots because we have the AI and they don't. You know, that could be bad. You know, maybe finally all of this AI slop. We should just consume all of the Sora 2 videos just to support give OpenAIA hand so that they can take charge of the robots later. And you know, the Politburo seems pretty dysfunctional. She Jinping, you know, I know I

55:07
get he's like more handsome and then Tom Cruise, but he has a belly. I get by. The way. I said that, you know, he's smoking probably too much because, you know, she was born in like 1952 and all of these people smoke way too much. If he falls over one day, are we going to get tanks in the streets in Beijing? I don't think so. I think they'll have an orderly transition. But what are we really going to get? And so I think there are all of these, you know, disunited Politburo comments that we can also have as soon as this guy keels over. And so, you know, I, I don't know, it's like I think that the tariffs will be enforced. It's more likely for the tariffs to be enforced on California than for the Chinese somehow to figure out all of their own political problems too. What do you think? I think Lee Chang is very competent and he is potentially the number 2 after XI.

55:52
I think very few Americans even know who the seven. I'm sure butchering the pronunciation, but it's like LIQIANGI think. Yeah, and you know who this guy was? This guy was the party SECretary of Shanghai during the worst lockdown ever attempted in the history of humanity. Every other democracy was able toss out the bastard who enforced COVID on their policies. And then what the What did the Chinese decide to do? Elevate this guy into premier? That's weird. Wait a SECond, but Trump was the one who did COVID lockdowns in the US and he's president again, right? So I'm not sure. I'm not sure. Well, but yes, but I mean, Republicans ultimately didn't care that much about like COVID is a very complicated kind of thing because everybody switched positions on it like 4 times. Like at first Democrats said it

56:38
was racist to talk about COVID and Trump was calling it the China virus. It's Jan Feb 2020. And then Trump started saying, oh, OK, you know, we need to start, you know, covering up the testing and showing, you know, that the numbers going up and Democrats have been saying is a big deal. Then Democrats flipped in the US and said actually racism is a real pandemic and we need to go and do Black Lives Matter riots. And Trump was doing the warp speed vaccine and Karma Harris said that she wouldn't take a Trump vaccine then and the vaccine was actually blocked. People have said that they were, you know, I think, gosh, I forgot this guy's name. There's a scientist this reporting, like MIT tech review that they were blocking the vaccines approval until after the election to make sure Trump didn't get a bump from the vaccine, which is a big deal by

57:25
the way, close election to a tree. Then after the election, suddenly the vaccine became a tool in the hands of the Democrats. And fundamentally, I just looked at that as something where it wasn't a scientific issue. It was just something that was a tool and a power struggle. And similarly in China, I think it was just a tool for XI to get his third term. It was just that I don't think they actually believed in. It well, let me, let me give you a, a, a, an alternative view. But first of all, let me say that you know what the Americans got and the Chinese didn't? The vaccine, the mRNA vaccine. Yes, I know Farm did. Important, pretty important. I mean, the, the Chinese were, were, were locking people up and, and swabbing their noses and mouths, you know, every, every other day. And they did not do the

58:12
vaccines, which is, which is really, really strange. They, they were just using police to, to, to keep shutting people in. I think that after living in China, after living in Shanghai in 2022, what I observed was that yes, politics was part of it. She's coronation. I feel like she felt like he had the coronation in the back and he, like he did like the most blatant possible insult towards the Shanghainese by elevating their most hated politician into the head of premier. And I, I was surprised that I would have been surprised if Li Qiang was still vice premier, one of the four vice premier some after this. And then he was elevated to be premier. Think about how that distorts the incentive structures of all of these other, you know, party SECretaries who who thought this guy messed up big time and he gets promoted. I was living in China.

58:57
And I felt that the protesters did play perhaps some role in showing see, that they are dissatisfied. I was living in Shanghai. I went to one of the protests the day after that. All of these youths staggered out of their cocktail bars and, you know, started chanting down with TZ and ping down with the Communist Party, which is kind. Of yeah, that was very unusual. I America's very unusual to see that because usually it'll be something where they're just critiquing like a local party person versus the big dog or what have you. It's not their fault they had too many of these Western cocktails in the French Concession. But I think the other big thing was that I felt very strongly that the local governments everywhere throughout China, especially in smaller cities that are not as wealthy as Shanghai, they could no longer

59:42
enforce 0 COVID. They had just no state capacity to do on to Shanghai what the town did on to Shanghai and they had given up. They were really exhausted. And I think when the virus started really spreading in Beijing, the central government took a look at itself and said, can we, the central government, enforce A lockdown upon the central government? And then they decided no and threw up their hands. And then they completely let this whole thing collapse. And one, Yeah. And two. 23 here. Right, that sounded like a mistake to me. Didn't have to happen this way because you know what? You know what? They didn't have vaccines. Yeah, this Chinese vaccine did not work. So I'll agree with you on all of that, basically. And I know that the Shanghai lockdowns were actually like, seriously house, you know, like house arrest type things. And people who were zillionaires

60:27
or whatever were literally locked in their house. And people like had pregnancies, messed up. All kinds of bad stuff happened during that time period. So I will completely agree with you. I don't think China gets everything right at all. I just, however, think they're messing up less. And the reason I say they're messing up less is if you take a flight from San Francisco or Seattle or LA or any Western city which has syringes and refuse and drug addicts on the street and people attacking you as you walk down and so on and so forth. And you go to like the number 47 Chinese city. Not even the Tier 1, not even, you know, Shenzhen or Shanghai or Beijing, not even Tier 2, not

61:12
even like Chengdu, but like Tier 3 Chinese city. It's cleaner and more modern and safer and nicer then basically everything other than maybe like Hudson Yards, which is like the newest nicest part of, you know, in New York, right? Like the very tip top top end, like nicest neighborhood in New York is like at parody with like a tier 3 city in China, Tier 2 city. I don't know if you, I think that's now. True. I mean for sure. I mean, I, I I opened my book by saying by talking about my bike ride in 2021 from Guiyang to Chongqing, cycling through Guizhou, 1/4 poorest province deep in the southwestern mountains, anDeFinding much

61:58
better levels of infrastructure in China's 4th poorest province than California or New York. They have high speed rail, They have the highway. Yeah, exactly 100 billion is stolen by. But you know, something that Hudson Yards has that the Cuejo residents do not? That's money they can't shop. Isn't that important? So, so, OK, so now let's talk about the deflation part. OK, so this complicated. This something I think a lot about and because of crypto and so, so so at least at least give me, I'll give you my thesis. I may be wrong, but here's thesis. So first is, you know how like the Soviets had all these economists who talk about Marxism and right, but they're basically just all wrong for the most part. They had some things like, you know, that there's there's some stuff in terms of gosh, some of the stuff with optimal supply chains.

62:48
And so so the guy, some of the matrix algebra that they had was interesting, but I forgot the exact thing. Go ahead. No, go ahead. but a lot of it was basically just pseudoscientific, right? And similarly, American Keynesians are like that. And American Keynesians essentially stipulate, OK, extremely high inflation is bad, but deflation is also bad. So therefore we need 2% inflation a year, which is like this arbitrary New Zealand target. And that's good. Now actually what that is, is a 2% wealth tax. It's basically, you know, on top of everything else, you've got 2% diluted down. And by contrast, the deflationary SECtors of the economy, in fact the hyper deflationary SECtors economy are the ones that are the most productive. For example, Moore's law is

63:34
hyper deflation. That is to say every, you know, or at least it used to be something like every 24 months transition density, double S. It's not exactly that anymore, but you know, like conceptually you've got a Moore's like thing, you've got Crater's Law for storage. You've got these various kinds of laws and in theory, conventional macro would say, OK, that'll show hoarding behavior. If the price are dropping that fast, people won't buy, they'll wait because it's coming. But actually what we see is lots of spending behavior. Those are the most robust SECtors of the economy. Everything digital where costs are hyper deflating and moreover, China hyper deflates costs. Something about Chinese culture has all these guys beating shows brains in for the lowest possible prices, quote overproduction. China's. So, you know, they're seeing this to such an extent they're like, Oh my God, you know, we might need to pull back on the

64:19
level of competition in some of these SECtors. But the net of it is they just have this insane scale cost quality, massive scale, low cost production in China. That's hyper deflating costs. And So what that means is the cost of living in China is actually very low. And yes, China does print and it prints money in some ways at a superficial level like the US does. But I think the biggest difference is if printing money is taxation, China uses that tax money for two purposes. First is it actually builds infrastructure, but SECond is by printing, it also keeps the currency low so its exports are more competitive, so it gets a double dip out of it. It builds its domestic export infrastructure, and it uses the capital to build the public part of that infrastructure.

65:05
So it's basically a better capital allocator. One way to think about it, and I'd like your reaction this, is in the 20th century, you know, the Soviets measured their economy by the raw number of widgets they were cranking out, like a number of shoes in a Soviet factory and so on. And the Americans use a price system. And we were taught, which is true, that the American price system is better than the Soviet system because Soviets were not looking at the value of the object and the Americans were right. Now, I actually think that's being reversed because the Chinese crank out the widgets, right? The cars and the, you know, in, in just raw number of widgets, they're up and to the right. The key thing is, though they're disciplined by international markets. Those widgets have to sell in Kazakhstan and Uruguay and whatever, right? But the Americans have Keynesianism, and so their

65:51
ostensible price system is actually centrally planned. So even the 20th century has a weird funhouse mirror where if you push on it a little bit, American prices were more capitalist in the 20th century, and now they're really Keynesian And quote communist widgets were Stalinist in the 20th century, but they're actually capitalist now because they're being exported. Yeah. I mean, I think that is there's something to that. And let me just agree with you that I think that China has this amazing capability to produce widgets that fly out of the ground. I mean, that is actually really amazing. I went to China. I moved to Chinat the start of 2017 to be the technology analyst at a macro research firm and I was there. I moved away from Silicon Valley because I was kind of tired of the fictitious economy, namely, you know, consumer Internet.

66:40
We hadn't gotten to even to B to B SAS yet. But I was also skeptical of crypto and so I think that, you know, is there anything more bubble like and fictitious than BTCI? Don't know, man. I would say that it's more fictitious than NYT. OK, I'm going to. I'm going to argue about this in a SECond. Finish your thing. Go, go, go. I think that, you know, the Chinese really were making things, making witches. And I thought that they were much more ambitious than Silicon Valley. And I think that, you know, I was pretty optimistic that they were going to make a ton of shit. And even I am surprised at how much, how many EVs, how much of the batteries, how much of, you know, basically they're so dominant in all of these industrial robotics. And even at my high expectations, they were able to supersede that. And I definitely really worry that the US manufacturing base

67:26
is going to be deindustrialized. I mean, the German industrial base is already being pretty substantially deindustrialized by China today, but the US has about 12 million manufacturing workers. Could I see that going down? Yeah, I can. You know this. It already has for the last seven months total crash in manufacturing jobs. Yes, it's lost 40,000 manufacturing jobs since Liberation Day and this before we deported all those Koreans. And so you know the I could definitely think that the number of manufacturing workers halves in the next 10 years. And as that, you know, as we lose a lot of that in Michigan, Pennsylvania, Ohio, whatever else, I think the economy will weaken and I don't think that the politics will get better. And so, yeah, I think I agree with you there that there's a lot of disunity there. But I think that, you know,

68:11
fundamentally, if the US is able to get a lot of this manufacturing right, get Elon to fix first the chip supply chain, then the surface Naval supply chain, then the submarine supply chain, and then throw him into the munitions. Because he seems to like be kind of like the only person able to manufacture very well in America. I find this very strange. But even he seems to be losing to the Chinese and the EVs. And so, you know, if the Americans are able to solve a lot of these problems, I don't think there has to be so much disunity here. I think that maybe, you know, we'll just, you know, they're going to sip green tea in their tea houses. We're going to like watch the AI slop on our phones. It could be just like a lot of peace here. You know, people are just chilling out and hanging out and they're tomping and they're quiet quitting.

68:56
You know, we could just all like, just be very friendly and, you know, sip teand, like, watch the phones. No. Isn't that a nice optimistic scenario? Well, have you know this guy Han Fazy who writes for Asia Times? Yeah. That's a pseudonym, yes. Yeah, I think it's a donkey dog, twelve O 8 or something like that on X, right. At least he, he, he, he said he might be that person or whatever. So his point was essentially that China's grown so fast that the, the Sydney's trap has actually been overcome. Like by the time the US had time, you know, somebody said we don't even have time to be shocked, right? Like by the by the rate of growth of China, right? And so China's grown so fast that basically Hagseth has essentially surrendered and is

69:44
pulling back troops from Asia to focus on the Western Hemisphere. But I don't think that means, unfortunately, that one group can sip green teand their you guys can watch slop because the US economy only has, in my view, two things that are competitive. And I'll come back to your Elon point in a SECond. And those are basically the dollar in tech. Those are the only two exports Americactually has. When you really, really push it down, you look SECtor by SECtor and everything, are they really competitive in? And the dollar is very quickly going away. Because if you look at just gold soaring, I mean, going from $2000 an ounce to 4000 in two years is crazy, right? That's 50% devaluation, right? At all kinds of states are now just stocking up on gold. I can show.

70:32
Have you seen these graphs? Should I put some of these graphs on the screen? Look at that right now. There's another graph that actually shows gold already flipping. OK. But basically that's a curve. Yeah. OK. And if you look at China's like official gold reserves, it goes like like this, OK. and there's a bunch of graphs like this I can show. I mean, I may send them to you afterwards if you want to put them on the screen, but you can't go from, I mean, dollar inflation is global taxation. Let there say, let's say there's at least a billion in the in the global American empire. If you include Japan and you include Europe, you include Australia, all these places and the dollar is used there directly and indirectly because it's got U.S.

71:17
Treasuries. People have stakes in the US stock market. So as US becomes a country non empire and even Europeans are strip search and, and S Koreans are deported and researchers are shut off and trade is shut off because the trade shut off is basically like a, it's like the US sanctioning itself. It's like the US blockading itself. You know, it's going almost North Korean levels of autarky in terms of what they want to do. Then you go from a billion people, maybe down to 330 million people. There's like a 6070% drop in your tax base. That inflation is spread across fewer people because why would other countries hold dollars if they can't trade with America, right? Why they hold Treasuries when, you know, for example, starting January 2026, there's going to be a remittance tax. You see that like a 1%. So the US is going away from the open capital account, right?

72:02
It's shrinking its tax base, it's military's withdrawing all the things that backed the dollar. The only thing that's there are stablecoins. That's the only thing that's like expanding the scope of the dollar. That may be a Deus Ex machina that gives a few years on life. But my view on this, and I'd like your reaction. Oh, you mentioned something else about AGI, at least in the current thing. I mean, you know, a IS models have sort of topped out in the recent iteration. Like, you know, nothing against, you know, OpenAI. It's a great company. But GPT 5 is kind of, you know, it wasn't a huge leap. These things have not been huge leaps recently and the world model aspect like then AI model actually knowing something about the world. I think it's more likely to happen in China because they can do the humanoid robots which have sensing so simultaneous location and mapping. You actually have you know, there's there's a logic to the

72:48
3D World. They can pull in all the sensor data just like the cars driving down the road. You know, it can pull them essentially every drone, every self driving, you know, car, every humanoid pulls in all that data. They actually can have a world model. So I think like the Chinese robot servants, I mean, they already have the sidewalk robots, the hotel robots, the drone delivery, all that stuff's not sci-fi. It's already shipping, as you know, in Shenzhen. It's already there, right? So I think this, the very Abrahamic Western concept of a single AGI that will tell us what to do might have been plausible 3 years ago. I don't think it's really that plausible right now, at least in the through of the Gardner Gardner hive cycle where we are right now. And I definitely don't think it's going to be like this concept of, oh, this one guy discovers it and then they're super powerful forever. We're seeing that AGI is gated by the physical world. You can't just think your way

73:35
into an advantage. There's friction. OK, then ask for others. That's AGI just mocking that you mentioned. That's then there's Elon Deus mock Deus Ex mockina. The problem is Democrats and now Republicans are against Elon. So I wrote this post on the special Elon zone, if you like, in some carve out star based Texas. So he can move at the speed of physics, not permits. Maybe he could build, but lots of America dislikes him now, right? Democrats dislike him because, you know, he's capitalist Republicans, Oh my God, because he has immigrants, whatever, right. So Elon is sort of like a man against time in some ways, right? Like he's, you know, somebody who's being resisted by the so that's something where he's he's kind of pushing upstream right now. What I think actually.

74:22
So now we talk about Bitcoin just for a SECond, OK. I think roughly Democrats under estimate, Republicans underestimate China under estimate the Internet also under estate Indians that's like this, the hierarchy of the world in some ways, OK, like who under prices and underestimates who, right? And then they kind of surprise you to the upside, like Democrats under a Republicans and they managed to somehow take the White House. Republicans under the Chinese, they managed to build this giant military. And so it's over. So I'll give one reference that you might find interesting that may add to your kind of engineering state versus lawyer state. So Fukuyama's origins of political order and what that talks about is how China historically has had the state above the law. Like they took the very pragmatic attitude that the emperor can do what he wants, but the mountains are high,

75:08
emperor's far away. So therefore we can do what we want. And there's a pragmatic constraint, right? Because your chair can turn into a party official if they so will it. But otherwise, you know, so the balance was just practical as opposed to legalistic. Now, here's the part you might not know. Indiactually had the opposite tradition. They had law above state. Why? Because you could quote Dharmic law to a king, and they would actually believe that they wouldn't get reincarnated if they didn't follow Dharmic law. So you had weak kings and strong law, right? So what's the modern version of that crypto? You actually have hard smart contracts, hard cryptography that no state can break, right? As as Assange put it, no amount of violence can solve certain kinds of math problems.

75:54
And lots of Chinese people, especially the young ones, do not respect Americanymore, but they do respect Bitcoin the sense of like, it's just bursting through the roof. You can make a lot of money with a cryptocurrency. You can make a lot of money. And it's something that is intrinsically very difficult for China to, to, to copy. It can copy the physical, but the digital is harder, right? The intangible, the spiritual. In a sense, China is this amazing place in the physical world, but Buddhism, communism and techno capitalism were imported from India, Europe and America, respectively. It imported the software, it forked it and made the Chinese version with Chinese characteristics. But it's not like a software developer in the same way. I'd like the root, you know, it's, it's software modifier, right? This not a diss on China. It's got, you know, thousands of

76:40
years of philosophy. And so it's over. But it's a relative weakness. In the physical world, I think it's just total, total number one. But in the digital world, the spiritual world, the moral world, it's not as strong. I think you can compete with China that way, right? And so I look at the Internet and the free Internet and you know, communities that have consensual moderation. So you go like unmoderated as American anarchy, unconsensually moderated as Chinese control, consensually moderated, you'd opt into these new societies that actually have some degree of consensual mind. That's how you have thesis into the synthesis. That's what I see in the medium to long run. So that's a, and this a version of the lawyerly state. That's not the lawyerly state. It's the lawyerly network where you're not a lawyer, but you're a coder and you're quoting lost the network and that's actually helping you build as opposed to

77:25
helping you obstruct. OK, let me pause there. Yeah, well, I think that there's more than two great exports of America. It's not just the dollar as well as tech. I think it's also the universities. Imagine this, that CZ and Ping sends his daughter to be indoctrinated at Harvard. And a lot of these high Communist Party officials are still really eager to send their kids to Yale and Stanford where they get incredible indoctrination schemes. And so, you know, there is actually this one other great export from America, and I think that might export quite a lot of bad ideas, just as the Americans, mostly the Americans, but also partly the Europeans exported all of this ecological Dumor ISM into the Chinese state throughout the 1970s. And then what do they do if they impose something like the one

78:12
child policy because they were too dumb to, you know, really realize that, you know, the Western ecologists were full of shit. So I mean, I guess I just have, you know, I think your schema is very attractive biology. But I I think I have one question. If the Chinese are so smart, why are they against crypto and stablecoins? Oh, but they're not. That's thing is half like the Chinese diaspora. a lot of the overseas Chinese love it. That's. Like the Communist Party? If the Communist Party is so smart, why are they against cryptos and the crypto and the stablecoins? Because it's good for the people, but not it's good for the network but not the state. So that's a key thing. Crypto gives power to the individual at the expense of the state. And so it's rational for

78:57
especially for the way that China works, right? You can imagine a small state confused with the network, right? China's fused with the network in a different way where it's got root control over the great Firewall and so on and so forth. One thing I will say, by the way, you mentioned the universities, unfortunately, American universities are basically going to 0. Like Terry Tao got his research funding cut, if you saw that, and visas are being denied. And there are they're also woke and they're, they've got great inflation and AI is destroying the things. And if I look at the graphs, China's number one and highly set of papers now they've actually flipped on nature. They've they, you know, they work in areas like material science in the physical world that the US isn't even doing anymore. You know, there's civil engineering, mechanical engineering, the certain disciplines where just Chinese researchers are crushing it.

79:42
and I think that what she did is, if I'm not mistaken, you correct me if I'm wrong, he actually took English out of the curriculum in China, right? Which helps them sort of firewall themselves against the Barbarians, right? And with, you know, an exception for himself, I think it's also a disadvantage for people to have studied in America to now ascend within the Communist Party. He wants like people who are more right, nationalist because then they'll have fewer malware, less malware from abroad, you know, in their heads. I think the Chinese really need something like a vaccine where you introduce like the right amount of malware into your body and then you realize, like, what's bad? Because what if you get like a lot of like sophisticated

80:28
sounding stories like the air lakes and the population bomb? And then you said we're going to do something about it. And so you need like the correct level of exposure to the mind virus. And I think, you know, taking English out and taking, you know, Stanford educated people out. I don't think that's going to do it. I think you're correct and I think basically I think their form, I think the Chinese form like vertically integrated Apple 1.4 billion Han Chinese coordinated in a Meta Organism is going to be a very powerful form for the next 20 or 30 years as and I think the US is going to go to 0. And I do think there's going to be a lot of shooting. But I do agree with you that there's something good about that and that good part. So here last piece of them then maybe we can wrap in and give you can you know, we'll give your final words.

81:14
I think in the 20 tens, blue America and tech America were allied against red America. Then the twenty 20s red and tech rallied against blue. I think very soon already we're going to see blue and red allied against tech and tech is a very small group of people and actually most of violence in the 20th century was not on the basis of races, on the basis of class. And just like there was angry at the capitalists last century actually killing them. They killed landlords in China, they killed the kulaks in Russia. They killed the guys with classes in Cambodia. I think they're going to go after the guys with keyboards in America. OK. I'm, you know, like the level of anger towards if the dollar goes away and AI is blamed for taking all the jobs and crypto takes all the money, tech guys will

81:59
take all the blame. And tech is a class. And one of the few things, though, that sociologists got correct is a class and race interact. And so tech has a lot of Chinese Americans, a lot of Indian Americans, a lot of Jewish Americans for the right, immigrants, Chinese shoes and so on. And for the left, it's too white, it's too male, it's too capitalist, it's too rich. So I think tech in America, the part that's functional America is going to be driven out. I think it's not going to be able to find a home, you know, no country for tech men, so to speak. And I think it's going to have to find new countries around the world. All these places for digital nomads, remote workers. There's now 420 cities that have at least one unicorn. There's all these small countries from Palau to the Marshall Islands that have like crypto programs, El Salvador has, you know, nomad visas, etcetera, etcetera. All these places.

82:47
There's going to be a giant tech diaspora much as Europe. Unfortunately, in all the infighting, the trans century drove out many of its scientists. I think America is going to drive out its technologists. But that will be the thing you're talking about, where some of the good parts of the US get rebuilt as a version 3, like an Internet first kind of thing. I'll have a quick reaction and my last word will be that, yeah, I don't know, I don't think all of the Californians are going to move to Palau. Can you show me where that is on the map? No, they're not all going to move to Palau, but I think they will. It's in them. It's in like the Pacific Islands. But I think for example, Chinese people can get actually everybody can now get AK visa to China, right? Indians can get OCI, Jews can get Aaliyah ALIYH, many Americans can actually get an EU passport based on their ancestry

83:36
and then get to Eastern Europe and Poland places like that, which will actually be functional. It'll be like a reverse of the 20th century. Eastern Europe is more functional than Western Europe. And if you think about how mobile tech people are, they are global. They are mobile and only a fraction of tech. I mean, by the way, crypto already decentralized Asia five years ago. AI with the Chinese models. The open Chinese models are actually the majority of startups depending on how you count. Martine Casado tweeted about this one. Like 80% of new startups are using the open Chinese models. Robotics is already in China. Manufacturing is already in China, right? I think the leverage on SF Bay Area tech it's less essential than it was right? Also.

84:23
That's a nice idea, but the San Francisco, which is a city I deeply distrust and I'm like constantly wondering why I'm still here is actually did sort of decentralized up to Austin and Miami and New York, etcetera. And then what happened? It recentralized. We did not go to Palau. We didn't even all go to Poland. Now somehow we all ended up back over here. And so right now I think that there is, you know, in the global talent race, I'm skeptical that many people will take the K visa. There's a lot of Chinese. We're already like, what are you saying about Chinese tech talent? You know, we're not good enough. And I think that there's still plenty of Chinese researchers. They're really desperate to move to Silicon Valley such that maybe we can say right now that our Chinese are better than their Chinese. I'm not sure if that will be very stable for a very long time because I think you're right

85:08
that Trump is saying really mean things. And plenty of them may decide to go now, in part because of all the syringes on the street, in part because of. Trump Bank visas. Maybe they just want better noodles. And I think that would be like kind of a valid reason to move back to Asia. And I think, you know, sometimes, sometimes I think about like all of that great tropical fruits I would be eating in Singapore if I were if I were with you right then in. You should come and visit. So we're actually, I love, we're actually doing that. We're actually building decentralized Silicon Valley with NS and SO. Exactly fruits for me when I visit. I will absolutely have tropical fruits for you. You're welcome to come. And my view is that we should decentralize Silicon Valley and have something that's neither China nor America, but the Internet.

85:54
And yeah. That's a nice idea. I think that my final note on this that I hope, you know, I think I've never smiled so much on a podcast before because I love her remarks. Balaji, what is it that BTBTC will team up with CCP to destroy MIBI? Think that'll be great? I think that'll be great. Let's get rid of. Let's partner with BTC to destroy MIT. First BTC is I think the new axis, but something like that, Yes, yes, yes. So this a really fun conversation man. Great. Thank you so much. Thank you, Dan. And Breakneck 10, it's in Amazon's Amazon.com right now, so go get it. And Dan's a very smart guy and I reckon the book highly. Balaji, what do you prefer, breakneck or BTC? By both I mean break that's only like 20 bucks.

86:40
So buy that and then the rest in VTC. There you go. Thank you. OK, OK.