The Communist Party resembles something

like um the God of the Old Testament,

very generous sometimes, but then

randomly smite you.

>> Which society do you think is higher

agency?

>> China's major advantage in being a

technological superpower is that it can

just wait for the Americans to invent a

lot of stuff.

>> They're the prairie fire that uses the

American spark.

>> What should the US do that it's not

doing?

>> The future is made up of the a series of

short runs. If China is really able to

do super well in the next 5 years, 15

years, might be enough to subdue America

in pretty substantial ways. Why is there

no sense of crisis? Patrick, riddle me

this.

[Music]

>> What was the title of your book before

Breakneck? We had a series of titles and

the one that I thought that would make

the most sense was move fast and break

people. China's quest engineer the

future

>> publisher did not like that one

>> too much like Facebook they thought. So

um and they were right. Um and I think

breakneck is a nice snappy title. I love

that it mostly has a positive

connotation. We made the vaccines at

breakneck speed. We build the bridges at

breakneck speed. Yeah, look at that coil

of violence uh inside the title. I think

I think this one worked.

>> What about breaking people is relevant

though.

>> I think the part of China that I object

to the most is that for the most part

physical dynamism in building a lot of

new things, bridges, subways, highways,

new homes, hyperscalers, whatever else.

Some problems there, but mostly pretty

positive. The fundamental problem with

China is that they're not just physical

engineers. They're also social

engineers. And they treat society as if

it were just another building material.

And I object strongly to their practices

around ethnreligious minorities in Tibet

as well as Hingang. I object strongly to

the one child policy and I thought that

the zerocoid policy was also a disaster.

when they need to feel the need to run

rough shot over people. Whether that's

to build a giant dam like the three

gorgeous dam which displaced around a

million people or if it is to build a

really great train track or if it is to

stop overpopulation as they imagined it

throughout the 1980s. They barely

hesitate to do what are some brutal

pretty brutal measures.

>> Can you teach us the origins of that

aspect of their society? Yeah. So, China

is a country I call the engineering

state because they want to engineer the

physical environment, the economy, um

the people as well. I want to be just

pretty playful with this framework that

they're a country of engineers. Uh in

part, the roots are from the fact that

in recent years, if you take a look at

the most senior leadership, the entirety

of the standing committee of the pilot

bureau had degrees in engineering. I

also draw this back to slightly older

roots. Um, if we take a look at the

Chinese emperors way back in the past,

let's say 1500 years, two of China's

biggest projects include the Great Wall

uh as well as the Grand Canal, so a

fortification system uh in the first

case and then a big manage water

management uh system in the second case.

That is a country that has built a lot

of big projects in the past. uh a lot of

the emperors barely hesitated to

completely reorder a peasants's

relationship to her land. And throughout

Chinese history, they've really moved a

lot of people around to settle the

frontiers here or um defeat the nomadic

tribes over there. And so that's kind of

my playful framework for saying that

China is really ruled by this

engineering mindset that really wants to

build. Um they're often very

liberal-minded about governing society

as if uh people were just a series of

chess pieces to be moved around. Um and

that extends from the imperial times all

the way to the modern day.

>> What do you think the greatest aspect of

the US system is that you have the

hardest time imagining getting truly

adopted in China?

>> Pluralism.

I spent six years living in China. I

moved to China at the start of 2017 to

be a technology analyst at an economic

investment um research firm called

Goffcow Trigonomics.

At the time that I moved there at the

start of 2017, Trump had just taken

office. I remember watching these kind

of strange confirmation hearings for his

cabinet officials right when I left. And

I lived through this period when Trump

launched a trade war that quickly

morphed into a tech war. And I wrote a

lot of uh research notes about what

exactly was happening to companies like

Huawei and other sanctioned um entities.

Um and throughout this time I was open

to the idea. I didn't necessarily

believe it, but I was open to the idea

that we're at the start of something

like an Asian century in which China and

India were be going to become much

bigger powers. Um, by the time that I'd

left in 2023 when I uh returned to the

US to be a fellow not too far away from

here at the Yale Law School's Pai China

Center in Connecticut, I thought that

you know the experiences that I lived

through some incredible technological

successes along with worsening

repression along with a worsening

geopolitical environment for China. um

along with the centerpiece of zero covid

all three years of which I was there I

started being skeptical that China could

tolerate debate could really encourage

some measure of useful disscent uh

inside the official system that they

were going to be able to figure out

these persistent problems with

autocratic systems in terms of figuring

out succession planning for example

that they were capable of a great number

of successes. But because there is this

official voice that is meant to speak

over everyone else, because that

official voice is a little bit

idiosyncratic in terms of all of the

values that it really cares about. Some

degree of national power, some degree of

sovereignty, some thin skin about

anything that could be critical of the

regime. I don't feel like the Communist

Party has mastered some autocratic

formula in order to really build the

future because they cannot have anything

like debate, discussion, and a long-term

stable society. You have this great Andy

Grove quote in the book about the

difference between the mythical magical

moment of creation and innovation that

the US has has so dominated and this

ability to innovate on the factory floor

the scaling up that China has done so

well based on everything you just said

how do you relate to their ability to do

more innovation in the future there's

that famous stat of like only one noble

laureate has ever been from China or

something I think it's like that low say

a little bit about your your conclusions

around their current ability to innovate

and how that might change in the future.

>> Yeah. One of the things I want to try to

do in this book is to try to tackle this

idea of what is innovation. I think um

we here in the US and I as someone who

spents a lot of time in Silicon Valley

as a research fellow at the Hoover

Institution, I think there is this

mythical moment of invention in which

you have an amazing genius like Steve

Jobs hang out in a garage or or many

other geniuses hang out in garages and

some incredible product pops out of the

garage and you know a worldleading

product takes shape and I think that is

certainly an American strength. And I

think what the Chinese have been able to

do was to become a technological

superpower without

taking this Silicon Valley view of, you

know, we need to just be in nature, take

a lot of LSD, go into our garages, and

then Apple computer comes out. That's

not the way that they tend to do things.

The way they tend to do things is to

import uh a lot of managerial expertise

including from Apple computers work with

Apple's standards uh to put together and

assemble a lot of other components from

the US, Japan, Germany, whatever else

and then slowly iterate and learn a

million and one things on the shop floor

and then build a highly sophisticated

product that America is no longer really

able to build. Still most iPhones are

being built in China, increasing share

in India and Vietnam, but still most

iPhones in the world are being built in

China. And I think the Chinese method

for becoming a technological superpower

is to take this vast manufacturing

workforce. There's about 70 million

manufacturing workers in China versus

about 12 million in the US. the 70

million manufacturing workers in China

are working with some of these high-end

products that cannot be built um here in

the US. They're learning to solve three

new problems a day before breakfast. and

they um are really at the cutting edge

of figuring out how to do new things, do

it better, build up ecosystems of

suppliers, build up new ecosystems of

labor and just um you know generate all

of this process knowledge which can't

easily be written down which can't

easily be encoded in tools and equipment

and just use that to catapult into new

forms of products. So if you are a uh an

iPhone manufacturing worker um who was

there at the original assembly lines uh

in Shenzhen in 2008, you know, it's no

accident that Shenzhen is now the

capital of the hardware industry of the

world because that worker might be able

to start building a Huawei phone um in

the next year and a few years after that

uh maybe start a drone company. um

Shenzhen is also the center of the drone

business in the world and then maybe a

few years after that um start an

electric vehicle battery um business

which is also highly complex and

something that the US isn't building

very much of today and so I want to try

to dissolve this uh idea that innovation

is something that um is holding back

China too substantially um I think the

statistic about Nobel Prize winners only

a handful of Nobel prize winners in the

sciences have emerged from China. I

think that is a true statistic, but you

know, a lot of these Nobel prizes are

backwards looking by decades. We're

still giving out prizes for work in

Japan or the US in the 70s. Um, it is

pretty arbitrary. It's very rate

limited. Um, and what I want to propose

is that China's other major advantage in

being a technological superpower is that

it can just wait for the Americans to

invent a lot of

>> the spark

>> be the spark, right? And then they they

set the fire. They're the prairie fire

that uses the American spark. So I think

about something like solar photovoltaics

which was invented in New Jersey by Bell

Labs in 1954. The US mostly treated it

as a scientific project and not a giant

manufacturing industry. And now about

90% of the solar industry is in China.

Everything from the polysilicon

processing down to the final module

assembly. And so China can just wait for

a lot of these labs uh in the US and

Germany, Japan to figure out these new

sparks and then they set off the prairie

fire. And this is also one of these

crucial points in the classic Andy Grove

essay published in Bloomberg Business

Week in I believe 2010 that the US in my

words uh is really great at setting a

lot of ladders in place but its firms

are no longer really great at climbing

these ladders. It is really the Chinese

firms that are able to climb all of

these big technological ladders. If I

oversimplify this to the US is the

leader in zero to one and China is the

leader in one to n scale up in

manufacturing which would be harder for

for the other to get like would it be

harder for the US to get really good at

the scale up in manufacturing or harder

for China to get good at the 0ero to one

based on everything you know about both

what's more likely

>> I think that it is harder for the US um

the task is comparatively simpler for

China and China has already gotten

significantly better at a lot of these

scientific projects that used to be you

know only the preserve of American

universities and a few other places by

most metrics that we can identify

Chinese scientists are producing better

qualities of work not just quantity um

if we take a look at some of the most uh

the top 1% cited scientific papers um

Chinese researcher are producing uh an

increasing share of many of these uh top

papers we can see that China has

produced a a lot of uh really good

scientific projects. To say nothing of

um the moon missions, I think there's a

pretty strong sense now that China will

get to the moon um by the end of the

2020s and America might not be able to

get back to the moon, that it has

forgotten a lot of these skills. Um that

um China has invested a huge amount in

trying to improve its universities. we

can see that a lot of um American

researchers uh often American

researchers of Chinese descent have

decided to move to China because there's

better funding um there's more grad

students they can work with there's a

more stable environment for them to do

their science and conversely I think we

have not seen that the US is really

learning the hard parts of manufacturing

really well um I think there are some

successes uh we can see that the TSMC

fab in Arizona is actually doing fairly

well now according to the the latest

reporting. But if we take a look at many

of America's apex manufacturers,

companies like Boeing making aviation,

Intel making chips, Detroit and Tesla

making vehicles, mostly that's been

going downhill. Um the US isn't making a

huge number of iPhones. It's barely

making a huge number of um Apple's

desktop computers. And so I feel like

the Chinese are learning at a much

faster rate to patch up their

deficiencies than the Americans have.

>> What should the US do that it's not

doing? Like if you were the dictator of

the US economy and your goal was to make

it catch up in this regard as much as

possible because it seems like the

consensus is wouldn't it be great and

there's some people that are trying to

do this and in small ways so far if we

had manufacturing excellence back here

again and controlled vertically our

whole destiny. We have the spark

covered. Um, what would you do if you

were fully in control?

>> Yeah. Uh, I am against fully in control.

Uh, I want no dictator in China and so

therefore I renounce being dictator of

the US. I think what I am really

thinking about for this particular book

project as well as my broader writing

over the past 10 years on China is to be

less focused on policy prescriptions,

fixing statutes, fixing regulations.

What I really want to do is to inspire

Americans to treat technology as a

political project as well as an

aesthetic project. I think this is one

of the things that China really does

well is that it takes manufacturing

super seriously and the US has not taken

it super seriously since various points

in the 1980s. I'm fond of quoting a

former chairman of the economic

adviserss who said in the 1990s in this

glib quip which is quite funny um but

computer chips potato chips what's the

difference as if you know these things

could all be funible funibly measured in

um quantities of dollars and I think

there is something qualitatively

different between high-end

semiconductors as well as a spud so I

think that Um, various parts of the

American elite have decided that

manufacturing is not so important. We

don't need to manufacture socks and

t-shirts. Fine. We don't need to

manufacture televisions. And here's

where I uh start getting a little bit

nervous. We don't need to start

manufacturing um, you know, iPhones or

munitions or all sorts of other goods.

And that is where I get really nervous.

And what I really want is for Americans

to feel the importance of having a

robust manufacturing base, feel the need

to try to recover some of that and air

more on the side of doing more

manufacturing rather than less. And so

again, I I have no great policy

prescriptions. Um, I am critical of some

of the policies of the present

administration, but I think that if we

are all much more committed to just

building out and recognizing some of

these problems that we have and

recognizing China's trends, then I

think, you know, the conversation flows

much more naturally about what we need

to do and which statutes and regulations

we need to fix.

>> Can you imagine h that happening without

some sort of visceral crisis? like can

that happen slowly and organically?

In the 1950s, I think it was in 1957,

there was the Sputnik moment in which a

kind of

>> exactly what I'm thinking of

>> toy satellite uh emerged from the Soviet

Union and essentially over the last 15

years, the number of politicians

citing whatever new breakthrough uh as a

splitnick moment for the US. Um I I once

cataloged this. I I found a half dozen

instances of major figures that included

Barack Obama to various other uh US

senators have cited this thing or that

as a Sputnik moment. I think Obama cited

uh highspeed rail in China as the

Sputnik moment. Some other senators

cited um Huawei's lead in 5G um

telecommunications equipment. Um just

two weeks ago there was a um Harvard

professor uh Steven Greenblat who wrote

in the New York Times Chinese

universities are really rising in global

rankings in part because of they're

doing better and better science that if

that's not a Sputnik moment I I am

quoting him essentially if that's not a

Splutnick moment I don't know what will

be and what I'm actually kind of afraid

of is that the more we use this term

Sputnik moment um which Americans are

using quite often and the less that it

is actually accompanied by real action

as the original moment in the 1950s was

the more that this term is kind of just

bandied about

>> boy who cried wolf

>> glibly you know um crying wolf about

this or that and actually there's no

fundamental action and what I'm often

really surprised about is just the lack

of real sense of crisis with a lot of

Americans with um you know the rusting

manufacturing base we're uh chatting

together in New York city. The Second

Avenue uh subway extension cost about $2

billion per mile. Almost everything in

the US is uh in terms of major

infrastructure, especially in big

cities, is ends up being over budget and

over time. Voters originally approved

the California highspeed rail by

referendum in 2008. I think they said

this must be finished by 2020. Right

now, we're in 2025. How many people have

actually ridden California highspeed

rail? the answer is zero because the

first segment is supposed to start

operating between 2030 and 2033 between

Bakersfield and Merrced and so you know

there's just these rampant failures all

the time in America and somehow I don't

really see many heads rolling um from

the heads of agencies or you know US

senators stepping down because they

failed at a transportation project is

something that is more common in Asia um

and so why why is there no sense of

crisis Patrick riddle me this

>> I remember this idea from the

hundred-year marathon on um the book

about the you know very long-term

planning of China to be resurgent and

then be dominant that uh maybe it's

quite deliberate that there is some line

that operated below which no one notices

the compounding that's happening in

China and with no spikiness above the

line to their progress just more smooth

and steady it it you know all of a

sudden we're going to wake up in 2050

and be like oh my god what happened how

did this happen and it's been happening

for you know forever for 100 years and

so what do you think of that that it's

just been deliberately quiet and below

the radar. And that's a big reason that

Americans haven't noticed. They don't go

to China. They don't visit. They don't

see it. They don't go around Shenzhen.

They don't go anywhere. Uh and so it's

just completely invisible to them and

and they're used to the status quo here.

>> Well, it sounds like a problem with

Americans um rather than with the

Chinese. I mean, they are really happy

to broadcast all of their achievements.

They have these amazing trains they love

to highlight. They're constantly

inviting Americans to go come check out

these glimmering cities. um China's

infrastructure gleams and you only have

to go over there to take a look at it

and there are plenty of people uh

ringing the alarm but it does feel a

little bit like boy who cries wolf. So

um I think this is it's not just um you

know the sense of crisis with China

there's also the sense of crisis in

California and New York that even people

here kind of just shrug after such

obscene cost overruns.

>> Yeah. Um, what are the most what are the

highest similarities between the two

peoples between Americans and Chinese?

Obviously, you've talked about some of

the differences, but what are what's

most similar between the two countries?

>> Um, a lot. And what I really enjoy is um

I I start my book in my very first

paragraph to say that Chinese and

Americans are more alike than any other

people. And I think this is um something

of among people who have spent any time

in China. They're always um

congratulating me and saying, "Yeah,

that's exactly right. Chinese and

Americans are so alike." So, how are

they alike? Uh well, they're the two

great um fs of entrepreneurial dynamism

in the world. It is uh Shenzhen and

Silicon Valley that are inventing the

future and not so much Europe and Japan

uh any longer. So there's a kind of a

hustle energy. There's a hastiness.

There's a sense of taking shortcuts. And

a lot of that manifests in, you know,

some things that are that don't work

very well, but um, you know, you just

need a lot of hustle and dynamism that

you see among these people. Both

countries have a sense of the

technological sublime. So there's these

awe of grand projects like the Golden

Gate Bridge or Manhattan or Apollo that

the Chinese are um and that that the

Americans have and the Chinese also

share and both countries are filled with

elites and masses that really believe

themselves to be really important great

powers in the world. And if other

countries don't get in line, whether

that is uh the Philippines uh or South

Korea on that side of the Pacific uh or

the uh Canadians uh or the uh Danish

with Greenland, um then they they also

need to be muscled around a little bit.

And so I see far more similarities than

differences between these two peoples.

>> What would be something that you would

have put in the book if the book was

designed to be a bit more like out

there, speculative, unhinged? like what

was on the cutting room floor that you

would talk about with your friends, you

know, over beers more than you'd put it

in a New York Times bestselling book.

>> Well, Patrick, is this book not unhinged

enough for you? I thought the uh there's

plenty of people who believe that I've

>> What's the spinal tap version? I I I

I've gone off the deep end here, but um

you know, if we had to turn it into to

11, um then I think I would talk a

little bit more about

all of the ways that China believes in

the future. So, I think that China is

that's another similarity between the US

and China. I think they're often very

future oriented. they have a sense of

optimism and um much less much more so

than the Europeans um who have a sense

of optimism only about the past. So I

think that um both countries see

themselves to be pursuing some sort of a

destiny and they're driving really hard

towards it. And something that I'm quite

interested in is the path of Chinese

futurism. Um I think that there's a lot

of ways in which Chinese are much more

pro technology uh than Americans are. uh

China hasn't experienced this broad tech

clash um that um has come across big

tech companies in the US. Um there is no

sense that uh tech is partisan because

nothing in China is allowed to be

partisan. there's no sense of a tech

right and just if we take a look at

technology by technology whether that is

um something like e-commerce um the rate

of e-commerce purchases in China is

something like I I believe last I

checked something like twice as high uh

than in the US um they have um much more

of a sense that artificial intelligence

could be a friend um and something that

um you know is not they don't worry

about taking away all of their energy

and um they uh spend a lot more time on

their phones. Um you know, I think this

is and and this is not positive. This is

one of the things that most bugs me

about Chinese society today. Um last one

I went to Shanghai in um the end of

2024, you can just see people being on

their phones all the time. You could be

with a lot of friends at a restaurant

and people could be just on their phones

the entire time. You could be in a

business meeting and people are on their

phones. And on the one hand that speaks

to you know I think some sort of social

dysfunction among social interactions.

On the other hand that also speaks to

the fact that they are not very um

concerned about what smartphones may be

doing to their life and their brain. And

I would also want to try to write a

little bit about know how the communist

party uh sees itself to be modernizing

the country and how it feels about

various technologies that include um

let's say space missions uh going to the

moon and then Mars and the moons of

Saturn as well. Um, and then how they

view themselves to be much more of an

industrial civilization relative to uh

the Americans which they often denounce

uh in their terms a fictitious economy

or a bubble economy, not a financial

bubble sense, but a bubble that pops

very easily sense. Um, and I think

there's um various strands of Chinese

science fiction that could also be

really worth exploring too. What feels

like the very bleeding edge frontier if

I were to take a month and travel around

China and maybe you could pick like the

four cities I would go visit to to learn

the most and most see the bleeding edge

frontier of everything you just

described. What what does that feel like

today that people might not fully

appreciate?

>> Shanghai is uh my favorite city in

China. Maybe my favorite city in the

world.

>> Wow.

>> Feels a lot like New York. um in uh both

have been port cities with an industrial

past that has significantly moved away

from them. They Shanghai has a ton of

art deco buildings because the time of

its great boom in the 1920s and the

1930s was also a time when art deco uh

really boomed. There's a river that runs

um through both cities and there's a

sense of hustle and ambition that one

can see. It is really comfortable. It's

um like uh a city. It's a little bit

like New York if the French managed

significant parts of it and they put in

a lot of uh beautiful plain trees as

well as um cafes. I think it's uh

perhaps not the bleeding edge of

technology as such but I think Shanghai

represents a bleeding edge of um some

element of consumption. Um you can just

order food really easily in Shanghai.

you can um most of the um Uber like DD

taxis that you would get into um almost

all of them are electric. There are

parts of the city that are superbly well

managed in terms of a lot of traffic

flows. Um there's you can always tell

how much time a red light is going to be

um um to be on and you can see this in

the apps. Um and there's all sorts of

ways in which the city is very well

managed. um it has a subway system that

doesn't screech uh with this metallic uh

noise uh like in New York City. And so

as a place for consumption uh Shanghai

is really wonderful. I would then hop on

the highspeed rail uh from Shanghai to

go to the city of Huf in the province of

Anay which is pretty close by. Hu is

probably let's say 2 hours uh away by

train from um Shanghai. Historically,

Huf um has been um significantly poorer.

It is much more mountainous. Um but now

Huf is the center of uh China's electric

vehicle industry. And so there's several

big EV makers that are headquartered

there or have their operations there.

And um as a city, it has been growing

pretty consistently. There's a lot of um

Chinese first tier cities that have not

been growing quite fast anymore. Um, but

there's plenty of these second tier

cities uh that are growing uh really

well. And then I think um it is always

worthwhile going to Shenzhen uh which is

uh in the south pretty close to Hong

Kong. Um I find Shenzhen probably the

most boring city in China. It's um a lot

of these big office parks. Um a lot of

it is meant for driving. The city layout

is actually kind of uh weird. It's um

like there's several big hubs that are

connected by highways that are pretty

distant from each other. um not that

much interesting culture going on.

People there to people are there to

hustle and to work. Um but it is the

headquarters of companies like Huawei

and Tencent and DJI. A lot of China's

most innovative companies and you can

find a lot of really interesting

electronics there. And you ask for

fourth cities. So I guess the the fourth

one that I'll offer is uh Chongqing,

which is in also in the southwest.

Chongqing. I've um I've learned uh is

really big among the Tik Tok

influencers. Um you can see a lot of

these

>> very futuristic

>> very futuristic uh carved essentially

into cliffs. There's these shimmering

lights. Um there's this really

well-known subway station that goes

through the bottom of an apartment

building in one side and then out to the

other side. Uh and so that is a a really

wonderful imagery.

>> Um it's in the southwest which is where

my family is from. Uh I like

southwesterners. Um they have uh I think

the best sense of humor in China. People

uh there tend to just sit over tea and

chat. Uh they have great food. It's

often very spicy and it is also really

traumatic. So uh what else could you

want um than great food, great people?

where of all these places or or in a

different city, if you were to send an

envoy of US technology entrepreneurs

somewhere where when they emerged from

this this trip, they would be the most

inspired to come back and do things

differently maybe than they were

planning to. Where would you send them?

>> I think maybe the places to visit are

not necessarily in these big cities. uh

I think it would be to try to go to a

few factories and anchor your trip

around a few factories. Now these

factories might be something like

electric vehicle um manufacturers in Hu.

Uh it might be something like um let's

say battery manufacturers in Shenzhen.

Um but wherever you can go to find some

sophisticated factories um making

advanced manufacturing products um just

go there and you know drop by the cities

along the way to see how consumers live.

Um and I'm aware of several teams of

envoys um that have been traveling to

China um in the recent past. Um there's

um there's been a bunch of European

clean tech investors who who've just um

gone to China and in um California. I

know of you know something like um you

know two trips that have gone on this

year and three more trips that are being

planned. And so people are visiting um

and I think that you know it's um there

are these marvels out there and it's

only on us that we're not going out to

discover it. And so if you have the

chance to visit, if you have the chance

to go inside a factory, um definitely

take it. I I strongly believe that it

doesn't matter what a factory is making.

It is always fascinating. Whatever it

is, they could be the most boring

products that could be making brake

pads. And I've I've visited a superbly

interesting brake pad factory. I had no

idea how these things were were made.

When I was in China, I every time I had

the chance to do a factory tour, um to

perhaps uh eat with the workers, um I

always took it and I'd tell the uh

factory managers, I'll take put away all

my electronic devices. I'll sign

whatever you need me to sign, but um

just uh you know, walk me through the

factory floor. And that's always a

ravishing experience.

>> Can you compare and contrast the work

ethics of the two countries? I'm

especially curious at like the very

highest end like if you took America's

most productive people maybe in the

technology sector working all the time

to build you know new AI companies or

whatever and compared it to a similar

set in China how the two compare and

contrast also more broadly curious how

they compare and contrast but especially

at the very high end.

>> Yeah. So if we're taking a look at the

let's say top 0.01% to 01% of

entrepreneurs. I feel like there's a lot

of similarities and when I chat with

people who interact with their

counterparts um Silicon Valley folks

chatting with their counterparts in

Beijing, they tend to respect each other

and they look upon each other as peers

and I think there's some ways in which

the um Silicon Valley folks are a little

bit more philosophical. they're a little

bit more engaged with um you know policy

and trends and what um the uh their

impacts of um their companies and their

technologies are on society often

because the employees make them. I think

maybe the Chinese entrepreneurs are um a

little bit more involved with thinking

about the political trends often because

the communist party makes them. Um but

you know at a you know work ethic um

level I think they're probably pretty

comparable. But if we broaden it out a

little bit more, let's say the top 10%

of workers, um maybe here again there's

um there's more similarities than

dissimilarities, I I I would suspect

that the Chinese are putting in more

hours just trying to work harder here.

And if we take a look at the median um

engineer, median worker between the US

and China, I strongly suspect the

Chinese are just putting in much much

more hours um relative to the median in

the US. Uh I think in California, we'd

love to make fun of the Google offices

um which clears out by 3 p.m. on a

Friday. everyone's um at the Yoka

studios again and not uh not really

working super hard be in particular

because it's Google and that sort of

thing is pretty unimaginable in China

which uh invented this phrase 996

working from 9:00 a.m. to 9:00 p.m. six

days a week and I think there's some you

know really you know maybe inspiration

is really important working smart is

really important but I think working

hard is also uh very very important um

you know according to these um

statistics which are out there uh it

takes a an automaker from the US or

Japan or uh Germany roughly six years to

conceptualize of a new model and

actually get it out on the roads of a

new um vehicle And in China, it's

something more like 18 months um to two

years, right? So at a first

approximation, they're probably working

at least three times faster than the

Americans uh are are doing. Um there's

some, you know, founding mythos of uh

companies like MTW. Um I visited Mto

with my friend Eugene Wei who is also a

big fan and who has been on this show.

Um we went to visit uh their offices in

Beijing in uh 2018. And part of what the

story that Mtoan tells about itself

uh is that it survived 5,000 other

competitors who were all Groupon clones

that started at around the same time in

something like 2015 or so. Mine was a

big company now. It's one of China's

biggest uh tech companies. Mine was a

big company um back then and it's now

one of China's biggest tech companies

now. And you know, just imagine how

ruthless and cutthroat the executive

team has to be to survive this battle

royale of 5,000 companies. And so, you

know, I think there are some ways in

which um you know, maybe inspiration is

still better here. Maybe the sparks are

still better here, but I do often feel

that the Chinese are just

comprehensively outworking the Americans

in in some big ways. Maybe that doesn't

matter for technologies like AI. Um, but

for pretty much everything else, it pays

to just work at much faster cycles and

just learn much more. I'd love to ask

some investing questions as an investing

audience. Um, if I were to shrink down

the investing debate about China to a

single uh common debate, it would be

around bite dance because it's a company

that produces crazy amounts of free cash

flow. uh it's its equity trades at a

tiny fraction of that free cash flow in

terms of a multiple than it would if it

was just like if you could just take the

exact same financials and put it in in

America it might be I don't know 10

times more valuable or something like

this and so people use this as an

example of like what do you think about

bite dance when they're really asking

like what do you think about the

opportunity to invest in China and maybe

this is the right time to talk about

this sort of kneecapping that happened

several years ago around some of the

Chinese internet giants um and you know

what happened and why and what that

tells us about the about the the party

and and and and beyond. But I' I'd love

just your general framing on like how to

think about these companies which sound

really interesting and fantastic which

have produced lots of free cash flow in

some cases as an investment opportunity

or not or it just belongs in like the

too hard pile for American investors.

Yeah, I think the um as a former

technology analyst at Gavcow trackomics

um this question was on our minds um

every day and um our uh clients were um

endowments, pensions, hedge funds, asset

allocators of all sorts um from a

strictly macro perspective. So I never

said anything about buy sell particular

stocks but you know just thinking about

these um you know I think thinking about

these broad trends of China I think

there's several paradoxes I think the

first paradox uh is that Chinese

companies are uh really capable and um

China's economy has grown by an average

of something like 9% over the past uh 20

years and what has been happening to

China's stock market it's been

essentially flat where the the Shanghai

and the Shenzhin exchanges have not

risen very much. Nothing commensurate

with 9% growth. And so there's just a

variety of I think just structural

factors that makes it really difficult

um for China's uh stock markets to grow

at large. So that that is one component

um of of of the valuation puzzle um with

a big company like Bance or or Alibaba.

Alibaba is listed and um still

relatively cheap. I think another

paradox here is that yes, a company like

Alibaba uh or bite dance could be

throwing off so much cash. Um but the

nature of their businesses sometimes

entangles them with the Communist Party.

And the Communist Party um I I as I

think about it resemble something like

um the God of the Old Testament

>> which uh can be very generous sometimes

but then otherwise it could just um you

know randomly smite you um because it is

trying to pursue some sort of

valuesdriven uh belief system. bite

dance in uh 2018. I was living in um

Beijing at this time was humiliated by

the government when the government said

that one of the suite of apps of bite

dance had um violated core socialist

values because it had a lot of these

jokes out there and the communist party

didn't really like these jokes and the

founder of by danceying wrote this you

know totally self- flagagillating letter

saying we are so sorry that we did not

uphold core socialist values and I am at

fault and you know it is just impossible

to imagine any tech CEO in America

writing something like that. Um Alibaba

most famously uh is uh founded by a

loudmouth uh named Jack Ma who uh shot

off his mouth uh one too many times in

uh the year 2020 when he launched this

blistering broadside against financial

regulators um saying that they were so

behind the times. And shortly after that

um the communist parties smashed uh Ant

Financial and prevented it uh from going

public which is still uh the case today

and financial still not public and um

shortly after that the communist party

started taking the scalps of uh

companies uh that weren't just uh didn't

include only Alibaba but also online

education um e-commerce uh antitrust

actions against the entire sector. Um so

that part is real as well. Then there's

a third component of all of these risks

that I think investors have a hard time

putting to bed, which is um you know the

suite of geopolitical issues that are

kind of particular to China. American

investors aren't even buying Alibaba

directly. It is um buying from a Cayman

Island uh entity that has contractual

relationships with Bite Dance. And are

we really sure that we're getting

something real here? You know, it's hard

to lay that fear to bed. Um, China has

capital controls and um, that has

deterred a lot of investment um,

including portfolio flows uh, from a lot

of investors. And probably the biggest

geopolitical puzzle for a lot of people

uh is that

Beijing is very clear that it intends to

seize the island nation of Taiwan one

day. And um if it does so, it is pretty

likely that it will face um very hard

sanctions um from especially the US

government as well as probably u you

know all western governments. And we saw

what happened uh in 2021 when Russia

decided to move on Ukraine. Um a lot of

the central bank reserves in Russia uh

were frozen. Um American portfolio

managers were no longer able to invest

in Russia. And um you know even

McDonald's corporation had to leave

Russia because of American sanctions.

And can anyone really be sure that um a

few years from now? Um sometimes some

people feel like even a few months from

now Beijing is going to initiate some

sort of action against Taiwan. This is

not really my expectation that they will

do something but um none of us can be

sure that they won't do something. And

so long as that fear is present, I think

that goes some length to explaining why

it becomes pretty unappetizing.

>> Why buy trades for 10 times your cash

flow?

>> Yeah. uh you know if you're a pension or

you're a university endowment um do you

really want to hold this and then you

know the US government treasury comes

asking you know what are you doing

>> thinking about potential future

equilibrium states between the two

superpowers so let's just assume these

are the two you know big important

powers one of the things that always

caught my attention in the US maybe the

reason it's become less interested in

global affairs is how self-sufficient it

is there's actually not a huge percent

of the economy that's like relying on

the outside or pretty self-sufficient in

lots of ways in terms of you know major

goods. Understanding that is one of the

future scenarios that these two just

sort of exist as separate universes from

each other. Is that one? What are the

other like equilibrium states that you

could imagine 20 years from now, 30

years from now between the two

countries?

>> Yeah. Well, equilibrium is a really

important concept here because it

implies that um no state really feels

the need to shift in a big way. Um I

think the scary thing might be that um

you know something upsets the

equilibrium where one country feels the

feels under threat in some way. First I

think uh I uh only partially agree with

you that um the US feels very

self-sufficient at the moment. Um you're

right by a lot of you know just simple

conventional measures um imports are

something like 12% of US um GDP and it's

not a huge uh amount but um in a crisis

it turns out that the US actually really

needs something like this 12%. I think a

lot about the early days of COVID which

um is speaks to another difference

between um China as well as uh uh

America. Um, in the early days of COVID,

um, the US struggled to produce anything

as simple as masks and cotton swabs. Um,

I was living in China and one of the

most instructive little, um, moments I

remember was going up to a factory

manager um, in around Shanghai. And this

factory manager marveled to me that

Americans uh, manufacturers didn't get

their act together to produce really

important goods. And in this um Chinese

guys formulation

um too many of these American companies

ask themselves whether making masks and

cotton swabs is part of their core

competence. And for very few companies

that's where their core competence and

then they don't uh don't make it.

Chinese companies say that making money

is their core competence. Therefore they

go make what the market demands which uh

then was masks and cotton swabs. And so

I was, you know, grabbing masks made by

Foxcon, which normally makes iPhones,

and by JD.com, which is one of China's

biggest e-commerce retailers. They just

decided to retool a lot of their factory

lines to produce these things that the

market needed. And there was some

complacency and lack of um hustle among

American manufacturers to actually

produce these sort of things. In the

early days of the pandemic, a lot of

consumer goods uh were in shortage. A

lot of furniture was in shortage. um you

know, random fruits ran out depending on

which part of Mexico uh had a COVID

outbreak uh at that time. And just

generally speaking, I think that the

American manufacturing base has not

covered itself in glory um over the last

20 years. It's not just Boeing, Intel,

Tesla, Detroit broadly. Um there's all

sorts of rust um and inability to move.

If we take a look at uh China's energy

imports, um it is importing less and

less in part because it has scaled up uh

so much solar capacity uh within China.

So um by the end of this year, China is

um expected to add 500 gawatts of solar

capacity. The US is expected to add

about 50 gawatt. So just one order of

magnitude more. There's 33 nuclear

plants under construction in China right

now. there's zero under construction in

the US and the Chinese have beencome

been much much more successful in

shifting its consumers into buying

electric vehicles. So um at this point

by the end of this year one out of every

two cars sold in China will be electric

and so they've been able to blunt this

um dependence that they have on foreign

energy. It's not growing so much and

perhaps it will decline uh soon enough.

And there's all sorts of ways in which

they're also very serious about food

self-sufficiency. They're also very

serious about semiconductor

self-sufficiency. And so, um, this is

again where I see, you know, if the US

and China are in competition, China's

being much better at patching up its,

um, its its own problems than the US

has.

>> The the factory story, uh, the the

retooling to make masks and cotton swabs

sounds very high agency thing. Which

society do you think is higher agency?

>> I think it's uh, China. I think China is

a high agency high-te society where they

are really able to you know once they

decide to do something they um are you

know once they decide to build this

infrastructure it comes out and it

gleams once California decides to build

infrastructure you know it's 17 years

and it's going to be like 20 years um

before uh anyone is able to you know get

close to riding highspeed rail and you

know there's um there's various ways to

measure you know something like social

trust in China by a lot of conventional

measures like you know you lose your

wallet uh in the park nearby will

someone return it to you in China that

um share is rather low but um I was

thinking of this definition of social

trust from the scholar Francis Fukuyama

that said that he says something like

social trust is the measure of

spontaneous coordination of um people

able to get together quickly make

decisions quickly and act quickly and at

least in the early days of COVID that's

something that China really had um where

manufacturers were working really well

together, tech companies were making it

really clear where the uh fever clinics

were on the mapping services and the

government really stepped up in a big

way as well. Um and the US you know at

least in 2020 really did not do any of

these sort of things.

>> We haven't talked at all about the

lawyerly uh tendencies of US society

that's you know you talk about

engineering in China and the and the

sort of US being run by lawyers. What

are the pros and cons of of that very

different orientation?

>> The pros of the lawyerly society are um

a guarantee of my favorite value in

America, which is pluralism. That um

there is some measure of robust debate

that is guaranteed uh in the US. And one

of the things that really thrills me

about having moved back to uh the US um

over the last um two and a half years

now is that there's just always energy

uh among Americans to try to diagnose

their problems and try to improve on

them. Um, two weeks ago I uh went from

New York to Washington DC to speak at

the Abundance Conference um in um in in

in DC and that is just one strand of um

the recognition that America has lost a

lot of crucial abilities to build homes,

transit, um all sorts of infrastructure

and we need to get a lot better. I think

that folks in um New York and you're one

of these rallying points um you know are

helping people to understand the world

um as it is a little bit better to

really try to improve a lot of different

things. I am plugged into several

conversations at the Hoover Institution

and there's a tremendous sense that a

lot of things in the US are not working

and we need to get better. The problem

is that uh the US is not very good at

execution. And even though you know

we've realized for a long while that the

manufacturing base is quite deeply

broken in this country, the US has not

really been able to fix this uh in any

compelling ways. Um there are complaints

among the American left about what

should be done. There are complaints

about the American right about what

should be done. It's very strange to be

in this political system where

elections usually have these razor thin

uh margins and then one side takes over

seriously overreaches and then the other

side wins by really thin margins and

then overreaches uh again. I think the

fundamental problem of among lawyers is

that they are for the most part

protectors of the rich and and that is

essential in some ways because you can't

build companies worth $4 trillion like

Nvidia without substantial legal

protections. Um you know we need a lot

of lawyers in place for Nvidia to feel

comfortable about um doing everything

that it's doing. But I think the society

won't work well if it is mostly about

serving the rich. So, in New York City,

we're we're chatting now. The rich don't

really have to worry too much about

affordable housing. Um the rich have

access to these skinny uh skyscrapers

that you can see on the skyline. The um

you know, rich don't really have to deal

with the problems of the subways uh

which are just again screechingly loud

and um service is really quite bad

compared to any European or uh East

Asian uh country. And I think that, you

know, the lawyers need to get out of the

way a little bit uh in order for the US

to, you know, build things for the

broader masses. I just offer two

anecdotes that I I think about a lot. Um

both relating to trains. Um when I took

the Acceler down to Washington DC um two

weeks ago, um the acceler works okay.

It's not always very reliable and I find

that it is um really really wobbly. And

while I was on the acceler, I came

across this headline, acceler getting an

upgrade. We're going to get um new

trains. And I was happy about that until

I read deeper into the article. It said

that new trains are going to be

something like 11 minutes slower than

the old trains. And so, you know, at a

first approximation, we're we're like

moving slower um than before. The foam

seats are better. Uh they're more

comfortable, but we're going to take

longer um to actually um uh get to DC.

And uh I substantially wrote this book

in my you know um cloistered um uh

office at the um at Yale University. And

every so often I was uh tired of the

monastic life and I decided to you know

be seduced by the pleasures of New York

City. Uh I take the Metro North train um

to get from New Haven down to uh New

York City. That train is highly

reliable. It's a little bit slow. Um,

and I was uh radicalized um when I found

a timet from 1914

um in which it was faster to get from

Grand Central Terminal in New York to

New Haven about 100 years ago than it is

today. It's not totally apples to apples

comparison because the train now makes

many more stops. But again, out of first

approximation, we're moving slower than

100 years ago. That is in part because

of the lawyerly society in which a lot

of homeowners in Connecticut put up

their hands and said, "We shall not have

a rail line running through our

backyard." and that, you know, the

proposed route of Amtrak turned out to

be much more squiggly after these

homeowners um decided to use their very

expensive lawyers to sue and say um no

way in our backyard. And um you know

that has added quite a lot of time uh to

and quite a lot of expense to these

projects which cannot be very

technocratically rationally designed.

And so um this is where I'm hopeful that

the lawyers aren't going to get in the

way of absolutely everything especially

the sort of broader infrastructure

that's like you know serve the masses

needs.

>> It reminds me of this idea that if you

study eastern portraiture versus western

in the west almost all of them are you

know your face is most of the canvas

whereas in the east often the

portraiture is a small person amidst a

bigger landscape and quite quite

representative of the two different

styles. Um, I'm curious just to just for

a side quest for a minute, if you had to

write a sequel to the book about a

country that's not the US or China, what

next country you would be most

interested in writing about and why?

>> Yeah, I think this would be challenging

because I really believe that the future

will be determined by these two big

countries.

um that I think what's most important is

for these two countries to get along

because um on my very first page I

denounce Europe for being a mausoleum

economy um where things are very

beautiful but things are also very dead

and I don't quite yet believe that um

you know um India and Indonesia are

quite ready yet to challenge these um

two bigger powers but I think this um

gets back to um you know the the broader

question of

um the equilibrium that you brought up

and I think you know what we don't want

is for there to be um too much

destabilization. I think most Americans

as well as most Chinese ought to be

thinking about is how do we avoid a

confilration and how do we avoid a hot

war because World War I took something

like 10 million lives. um the World War

II two took something like 50 million

and we don't want to get um to World War

II in which you know tens of millions uh

die. you know there's a scenario in

which you know I think the US strategy

over the last 30 years has been to kind

of hope that markets and the internet

will change China for the better um and

change this communist system into

something um more like a liberal

democracy and that bet has not worked

out and that bet um I think could be

firmly uh laid to bed and so now we have

to ask you know what is this um you know

is there some sort of uneasy equilibrium

that we can really stumble in to avoid a

hot war and at least um my guru um at

the Hoover Institution historian Steven

Cotkin would say what we need is a new

cold war um in which um you know the two

countries decide not to have a very big

fight but rather um to compete on the

level of the systems to have um to

deliver better for the people. Now I

think um you know a lot of people are

nervous about this cold war framing uh

including me. The cold war was not very

cold for uh a lot of other countries uh

say something like Vietnam. Um the cold

war created so many crazy abuses um

within the Soviet Union as well as the

US and the name of competition. Um maybe

cold war is not the right analogy

because there's huge trade and

integration between um the US and China

right now whereas there was essentially

no trade uh between the US and the

Soviet Union in the past but then we

should come up with some new term really

to try to understand um both of these

countries and to try to you know keep

competition on the level of companies as

well as who's delivering the better

vision for their own people rather than

anything bigger involving a conflict

ration in the Pacific God forbid. the

USSR collapsed um at the end of the Cold

War. What is China doing most

differently from Russia that uh you

think will not lead to an eventual

collapse of the Chinese system? I think

the Chinese are excellent students of

history and I think the first may

there's maybe several study there's

several countries that they really study

um first and foremost it is the Soviet

Union um that they diagnose the problem

of the Soviet Union to have been in the

late 80s when Gorbachev tried to achieve

both economic reform as well as

political reform at the same time and um

you know the story of the Soviet Union

is one in which the political system

sort of imploded and then um the pieces

nobody picked up the pieces really to

try to get the system back up again. And

so that's the first thing that they try

to avoid. And there's they also really

try to avoid the fate of Japan which uh

suffered an economic implosion um by the

late 80s and also never quite got back

up again. And so I think the first

reason to believe that China will not

suffer a political collapse um like the

Soviet Union or an economic collapse

like Japan is that there's history here

to suggest a better path forward for

them um that they want to avoid a lot of

these mistakes. Um whether they could

actually avoid some of these mistakes is

a different question. Maybe they'll come

up with some whole new novel um

interesting mistake that um you know

creates some sort of a collapse in

either scenario. But I think history

will not repeat in exactly the same way.

China is is a Leninist system uh like

the Soviet Union. But it has a thriving

uh substantial consumer um economy which

is doing superbly well in terms of

creating all sorts of products that the

Soviet Union never created. All it did

was a ton of heavy industry. It produced

a lot of steel and chemicals, very

little goods for its people. Um China is

not like Japan. um for a variety of

ways, but one that's quite pertinent to

me is that if we take a look at um

Japanese exports uh throughout the 70s

and the 80s, a product from uh Nintendo

or Mitsubishi or Toyota was almost

entirely Japanese value ad. These were

Japanese companies making Japanese

products. Um and part of the complaint

of the Reagan administration was that

Japan was too closed and Japan needed to

open up. By contrast, China has been

much more open than Japan. Um, China

most famously is uh well known for

building Apple's iPhones and Tesla's um

vehicles and it the communist system

recognized that it was so far behind um

technological leaders mostly throw open

the doors with some restrictions to

Western companies to produce in China

and then you know previously make mostly

foreign goods only assembling uh these

different components until at this point

a great deal of Apple supply chain is

made up Chinese components as well. And

so, you know, it's not quite the Soviet

Union, it's not quite Japan, and I think

there's this ineffable um Chinese

characteristics um also thrown in which

the Chinese people, I think, are highly

entrepreneurial much like the Americans.

They're highly dynamic. They take

shortcuts. Um there's a million and one

huers trying to make a dime um and

trying to profit and trying to found

companies. And so, you know, maybe we

can say that uh China right now

um has some of the uh control uh

paranoia of the Soviet Union um some of

the manufacturing excellence of Japan

and some of the American entrepreneurial

hustle and you combine all of that and I

think that is um part of the reason that

I think that um China is going to be a

pretty formidable power going forward.

>> What do you think? Uh I think it was

Eugene, our friend Eugene that first

gave me the Seeing Like a State book by

James C. got of the of just the very

abstract idea that uh top- down systems

just don't work as well over the very

long term as bottom-up ones do. That in

the near term they actually can work

faster and better, but the the roots

aren't aren't as deep and as natural and

therefore, you know, they're they're

just more fragile top- down systems than

bottom-up ones. Do you think that holds

credence in this argument between the US

and, you know, more arguably a more

bottomup um society and organization

than China?

>> I do. I love the work of James C. Scott,

a former um Yale political scientist,

anthropologist who very sadly passed

away um just about a year ago, but I've

read pretty much all of Scott's works.

And um if I can throw in another Scott

work for listeners, it is the art of not

being governed, which is about highland

Southeast Asia. Um these parts of very

mountainous parts of um essentially

southwestern China, this region that is

about as big as Europe. um that includes

southwestern China as well as Vietnam,

Laos, Cambodia, uh northern Thailand in

which various peoples have decided to

run away from the state. Um whether

that's the Burmese state or the Tibetan

state or especially the Hanchinese

state, they were um wary of

conscription. They were wary of taxation

and they didn't really like assessors

coming over to look at their grain all

the time, sometimes bearing disease. And

Scott was really remarkable for um

having spent quite a lot of time in

these zones talking to people who have

oral histories which gives them more

malleable ethnic identities and they can

run away much more effectively. And I

think about this a lot because I've

spoken to a lot of Chinese who have

decided to run away exactly in these um

highlands. Um again my um family origins

are in Yinan province. This is exactly

the part of Zomia, Highland Southeast

Asia that um James Scott has written

about. I feel like people from um where

I'm from uh Yingan province are some of

the have some of the more libertarian

attitudes um in China. They really don't

like the state um looking over their

shoulder. Um many of them practice

agriculture up in the mountains which is

much more difficult for the uh state to

come over uh and assess. And I think

part of the problems of the engineering

state is that many people have decided

to retreat um to um these different

parts of these different corners of the

world. Um in 2023

I went on this walk and talk with Kevin

Kelly around Mai and we walked from one

of the highest mountains in Thailand

down to the city of Mai. And afterwards,

uh, my wife and I spent a lot of time

with mostly young Chinese, um, young

Chinese who are in their 20s or early

30s who ran away from China. Um, decided

that the sensorious uh, nature of the

overbearing state was more than they

could bear. And they decided to um, make

art, dabble in crypto, um, smoke dope

uh, in the mountains around Mai. And I

thought, you know, it is really strange

that, you know, Ciin Ping is trying to

achieve something he calls the great

rejuvenation of the Chinese uh people.

And there's a lot of young people who

are saying, "No thanks. We'll give that

a pass." There's a lot of millionaires

um by one count um 14,000 millionaires

departed from China in the year 2023 to

move to Singapore, to move to Japan, to

move to the UK and the US in part

because the Communist Party has smashed

a lot of their businesses. There's a lot

of um people who are not so creative,

who are not necessarily very wealthy,

who decided to hop on a plane to Ecuador

where they don't need a visa and then

walk across the Darian um gap into the

United States. And um at its peak in

2024, there were several months in which

um USCBP were was apprehending something

like 30 to 40,000 Chinese nationals um

at the Texan um border. And that that to

me is also something that um is really

uh striking that so many people are you

know willing to do this dangerous trek

essentially to uh escape from China. I

think that China will not become

anything like a cultural superpower in

part because the engineers are so

sensorious. They're so thin skinned.

They censor everything they can't

understand which is a lot. Um and if you

take a look at a lot of aspects of

cultural production whether that is

books, novels, uh films in China that

has really become much more constricted

uh over the past 12 years of cases rule.

I think that China will not become

anything like a big financial superpower

in part because the control tendencies

uh of the engineers is to impose a lot

of capital controls. Uh and that makes

it much more difficult for foreigners to

want to hold R&B. Last I checked, R&B

still only made up about 4% of uh global

trade volumes. And I I think I want to

make this narrow case that the

engineering state is really good at

building stuff. They have the

manufacturing workforce. They have the

entrepreneurial enthusiasm. They have um

the government support in order to keep

getting better and better at a lot of

advanced manufacturing industries. Um

but even if China, you know, pisses off

a lot of its own people, pisses off a

lot of its neighbors as well as um

broader set of people, the very fact

that it can make manufactured products

um better and better, that is a pretty

significant threat to the United States

because there is a chance I think that

they will do really well on artificial

intelligence as well. But even if they

just get much better at making vehicles,

I don't want to see the US further

de-industrialized. Um right now there's

12 million manufacturing workers in the

US. I don't want to get in a scenario

where a decade from now we have only 6

million and I think that is going to

hurt the economy and introduce greater

political dysfunctions and even if the

engineering state uh does very well in

the short run for um James C. got

reasons and even if the in the longer

run it does not do so well in part

because people want to leave in part

because of demographic problems the

future is made up of the a series of

short runs and if China is really able

to do super well in the next 5 years 15

years might be enough to subdue America

in pretty substantial ways later later

on

>> one of the things that jumps out is the

sensitivity of the Chinese model to the

person in charge and the people aligned

with with him if we had had this

conversation when Den Jaing was running

China or so important in China. Maybe

the trajectory we would have projected

to be very different than it's ended up

being. I'm curious what you think, you

know, the 3, four, five people that have

been the most important maybe since Mao

or something and how they've changed the

the trajectory of China and how how

likely it is that the next person is

more like Dingja or more liberal or more

uh more plurist pluralist leanings or

not. Such an interesting aspect of this

whole trajectory. Yeah, I would bet not

because um first I agree with you that

um the Chinese system is really under

the sway of a single leader um and that

is almost by design. I mean it is really

meant to the authority in China is meant

to vest um in the pallet bureau standing

committee which is made up of seven to

nine people. Um but you know it is also

u possible as we've seen in the case of

Cinping really to dominate um the entire

system and what she says more or less

goes and I think that but the the the

part that I would hesitate to fully um

you know imagine when ciin goes away

that the system will be different is

that even if we have a dangoing like

figure um China might still have a lot

of dysfunctions because I would say that

dangiaing introduced a lot of the

dysfunctions um that carry over to um to

Cinping. Broadly speaking, um Dangoing

ought to be best known for being the

architect of reform and opening which

liberalized the economy. And that is a

tremendous good that is perhaps the most

tremendous economic good ever in the

history of humanity because about 1.4 4

billion people were lifted out of

poverty and a few hundred million of

those are living very comfortable lives

and a few million of those are were

living lives on par with uh some of the

best uh in the United States and that is

an extraordinary achievement. On the

other hand, Deng Xiaoing was also uh

very autocratic himself and he was in

the words of one um historian who was

quite senior in the party he was half a

ma. Um he was someone who was really

really ruthless towards his political

enemies. Um he was never quite able to

figure out succession planning. He um

fired two of his handpicked successors

and almost fired um his third one

Tanzaming who ended up running the

country. Um but he was someone who um

was also really famous for ordering

tanks uh into Beijing um for a while

throughout the 1990s. people labeled him

as well as a few other communist party

members the butchers of Beijing um

because they ordered in the tanks. And

so Denging did not permit substantial

political reform. Um he promoted

tremendous economic reform but um he did

not figure out this problem of

succession. And so um you know we can

maybe situate Ciin Ping in kind of a a

direct analog of Deng Xiao Ping because

uh he is also grappling with questions

of succession what comes after him um

and he is has been pretty ruthless

towards people he has purged and so um

this is where I I'm uh skeptical that

there are deep pluralist genes in China.

I think that China um throughout its

imperial history has substantially

lacked a liberal tradition. Um a liberal

tradition meaning one that is interested

in restraining the power of the emperor.

Um and um you know promoting the power

of the individual or the family or the

corporation. I think that the future of

China my bet would be that there is it

looks politically much more similar um

in the future as it does today. I've

been a little surprised since the

original deepseek moment which for at

least a week really shook the US in

terms of the progress that had been made

in AI in China that I haven't heard more

about it since and and so I'm curious

your impression of AI in China the the

country and the party's orientation

towards it the state of the technology

relative to the U leading US you know

research labs etc. What does AI in China

feel like to you today? Yeah, I think um

AI for me um what is most important is

going to be um in the next five years.

Today I think that the US still has a

decisive lead on most aspects of

artificial intelligence

um mostly because it has the compute

resources. Um here it has the leading

Nvidia chips and China does not. But I

think if we are going to have much more

AI in our lives, I think the competition

is much more of a tossup. Um, again

looking forward um in the next 5 years,

which is a lifetime by the standards of

a lot of AI um but maybe maybe a shorter

time span for for the rest of us. And

here is where I think China actually

does have a lot of advantages uh in AI

uh relative to the US. So if we have uh

much broader AI in our lives, we're

going to be using um AI for all of our

queries, we're going to also demand much

more power than we currently have. And

the US has not been doing very well on

adding new power to the grid. As I said,

um it is only going to be adding

something like 50 gawatts of solar this

year relative to 500 in China. No new

nuclear plants under construction. Um

maybe that will change uh because the

Trump administration is more friendly

towards nuclear. Um but the US has

simply not added um much by way of power

and China I think as a civilization um

is um as a as the engineering state

civilization is just very interested in

making sure that no heavy industry ever

goes hungry for power and so just the

scale of the you know electrical

production in China is just vastly

outpacing the US. The question of talent

is um always very fluid. Um right now

you know how many researchers really

matter for artificial intelligence. I

don't know if the figure is more like um

10,000 or more like 1,000. And within

the 10,00 um it seems like China has a

lot of really good talent which is um

represented by DeepSeek earlier this

year which showed that it's not only

Silicon Valley that can produce really

good reasoning models. And at least from

what we can tell in some of the publicly

listed hires for Meta's super

intelligence lab um a substantial number

of these really elite I think there's 11

engineers who are publicly disclosed

something like um seven of them had gone

to uh Chinese universities and I believe

they're all Chinese nationals and um I

think there's some sense of nervousness

among some folks in Silicon Valley that

some of these really elite engineers um

might pack up their bags and decide to

repatriate back to China for a variety

of reasons. Either because, you know,

the byite dance is offering a much

better a comparable pay package to them

and they can live a much more

comfortable life in Beijing or Shanghai.

Maybe they just want the better noodles.

Um, which California doesn't really

have. Um, or, you know, there's some

sense in which they feel anti-Asian

hostility in the US. They fear the

rhetoric of the Trump administration.

And there's some nervousness among

Asian-Americans, even friends I have um

here, that the Trump administration is

going to turn super populist and drive

out all of the um Indian engineers as

well as the Chinese engineers as well.

And so within this talent pool um if a

substantial number of them decide to

repatriate, then it's a little bit tough

to see um to say exactly who's ahead on

talent, but um you know, it's possible

that the Chinese will will have some

sort of lead here. And then there's also

a question of if AI gets much better,

what will the Americans use it on? What

will uh the Chinese use it on? America

is much more of a servicesdriven

economy. Um maybe we have all of the

data to automate our healthcare sector

as well as our consulting sector. And so

and the Chinese are going to have the

data to automate their manufacturing

sector. And you know, to be very glib

here, I I'll say that, you know, maybe

America gets a much better McKenzie and

China gets a much better Foxcon and then

they're going to use this much better AI

Foxcon to produce a lot more drones and

munitions and ships as well. And the US

simply doesn't have the training data,

the process knowledge in place um really

to get much better at manufacturing. And

so um maybe right now we haven't seen

another big deepseek moment, but I think

the future is very much up for grabs. Um

and China right now has really good

talent, really good reasoning model. It

is now chips uh compute constraint, but

seems like Donald Trump wants to make a

deal and um impose an export tax of 15%

on Nvidia, but then give a lot more

compute to China. And I think that you

know the future is going to be a really

tight race between who can get to AGI

and who can deploy AGI in a much better

way.

>> What is the most interesting thing to

you about Huawei? I think Huawei

represents a Chinese company that is