Why Chinese Tech Is Crushing US Innovation in 2024 | Ben Harburg DSH #1071

Summary

Podcast Summary: Why Chinese Tech Is Crushing US Innovation in 2024 | Digital Social Hour (DSH #1071)
Host: Sean Kelly
Guest: Ben Harburg
Release Date: January 7, 2025

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Introduction

In episode #1071 of Digital Social Hour, host Sean Kelly engages in a compelling conversation with Ben Harburg, a prominent commentator on geopolitical and economic trends. The episode delves into the rapid advancements of Chinese technology and its implications for U.S. innovation and global standing. Skipping over the promotional segments, the discussion centers on China's economic strategies, technological breakthroughs, and the strategic responses necessary for the United States to maintain its competitive edge.

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Chinese Dominance in Technology and E-Commerce

E-Commerce and Fast Fashion

Ben Harburg opens the discussion by highlighting China's prowess in the e-commerce and fast fashion sectors. He points out how companies like Shein and Temu have revolutionized online shopping by gamifying the experience, allowing them to outpace Western competitors.

Ben Harburg [00:41]: "Fast fashion brands that they built, kind of gamifying e-commerce, just knocking the socks off of western competition."

This approach not only captures consumer attention but also ensures rapid scalability and market penetration, making Chinese brands dominant in emerging markets where affordability is a key factor.

Expansion into Hardware and Consumer Electronics

Harburg further emphasizes China's expansion into various hardware sectors, including photovoltaics and solar panels. He notes the prevalence of Chinese smartphones in emerging markets due to their affordability compared to brands like Apple.

Ben Harburg [00:53]: "Today, if you're in an emerging market, more likely than not you have a Chinese phone in your hand. Apple is way too expensive for anyone."

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Technological Advancements and Military Innovation

Leadership in Drone Technology

One of the standout points of the conversation is China's leadership in commercial drone technology. Harburg explains how drones have transformed modern warfare, offering capabilities that were previously unattainable.

Ben Harburg [05:17]: "China is definitively the world leader in commercial drones today. A couple of hundred-dollar drones can now immobilize a $5 million tank."

Advancements in Robotics and Hypersonic Missiles

China's advancements extend beyond drones to humanoid robots and hypersonic missiles. Harburg discusses the potential impact of these technologies on future warfare and national security.

Ben Harburg [08:29]: "They are also now a market leader in humanoid robots. This is the future of war."

Ben Harburg [10:01]: "They have something called the hypersonic missile that we don't have any defense for. It's impossible to intercept down."

These innovations present significant challenges for the U.S. military, necessitating urgent adaptations and advancements to keep pace.

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Geopolitical Implications and Economic Competition

Geopolitical Tensions and Proxy Wars

Harburg draws parallels between China’s current stance and historical geopolitical tensions, suggesting that while a direct conflict like World War III is unlikely, proxy wars are becoming more prevalent.

Ben Harburg [10:16]: "The more likely is some kind of a proxy war like we're seeing play out in Ukraine."

Economic Metrics and Misconceptions

Addressing common misconceptions, Harburg clarifies that while China's GDP remains behind the U.S., their focus on next-generation technologies positions them for long-term dominance.

Ben Harburg [04:53]: "Technically they are still behind us. But I'm not looking at that number. I'm looking at next-generation technologies that will shape our interaction with technology and the military."

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U.S. Strategic Response and Policy Recommendations

Implementation of Tariffs and Trade Policies

Harburg advocates for the use of tariffs as a strategic tool to protect American industries and generate revenue for tax cuts. He argues that tariffs can level the playing field by countering China's lower operating costs and unfair trade practices.

Ben Harburg [11:18]: "Tariffs make a lot of sense... They can protect existing industries and generate leverage in trade negotiations."

Re-industrialization and Educational Reforms

A significant portion of the discussion focuses on the need for re-industrializing the United States and reforming the education system to produce more engineers and skilled workers. Harburg emphasizes the importance of aligning education with industry needs from an early age.

Ben Harburg [12:39]: "We need to create a German-type education system where even in high school, a certain cohort branches off and starts going into trade schools to teach them engineering skills."

Protecting Intellectual Property and Encouraging Innovation

Harburg underscores the necessity of protecting American intellectual property and incentivizing innovation to maintain a competitive edge in emerging technologies.

Ben Harburg [13:52]: "We need to protect our IP and subsidize technologies like we did with the CHIPS Act to bring back industries like shipbuilding and automotive."

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Future Outlook and Call to Action

Optimism for American Rebirth

Despite the challenges, Harburg expresses optimism about a potential industrial rebirth in America, driven by a new generation of leaders and innovators.

Ben Harburg [14:27]: "We feel like this is dawn in America right now. An incredible new rebirth of industry."

Encouraging Civic Engagement

Harburg concludes with a strong call to action, urging listeners to engage in political processes and contribute to the nation's strategic goals rather than remaining passive.

Ben Harburg [15:09]: "Please contribute and get involved if you can. Don't sit on the sidelines and wait until you're older to get involved in politics."

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Conclusion

In this enlightening episode of Digital Social Hour, Sean Kelly and Ben Harburg dissect the multifaceted challenges posed by China's technological advancements and economic strategies. Harburg provides a thorough analysis of the areas where China is outpacing the U.S. and offers strategic recommendations for mitigating these challenges. The conversation underscores the urgency for the United States to innovate, protect its industries, and foster a skilled workforce to sustain its global leadership in technology and innovation.

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Find More from Ben Harburg:
For listeners interested in further insights from Ben Harburg, you can follow him on Twitter and other social media platforms. Engage with his work and join the movement towards a renewed American industrial landscape.

Transcript

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[Ben Harburg]

First, fast fashion brands that they built, kind of gamifying E commerce, just knocking the socks off of western competition. So you're going to see this over and you know, extends into photovoltaics and solar panels and of course into all kinds of hardware. So today, if you're in an emerging market, more likely than not you have a Chinese phone in your hand. Apple is way too expensive for anyone. So those are the metrics I'm worried about.

[Podcast Host]

All right, guys, we got Ben here today. We are at AM Fest. Is this your first one?

[Ben Harburg]

It is.

[Sponsor Host]

Let's go.

[Podcast Host]

What do you think so far?

[Ben Harburg]

Amazing. Amazing.

[Podcast Host]

I met some good people.

[Ben Harburg]

Yeah.

[Podcast Host]

You had a breakfast this morning with Charlie, right?

[Ben Harburg]

Yeah.

[Podcast Host]

How that go?

[Ben Harburg]

Really impressive seeing the results of all the work that they've done over the last year and how much of this vote they turned and how much, really, I think this election can be credited to their work.

[Podcast Host]

Dude, I think he, he might have been Trump's MVP this election for sure. I mean, he was going to college campuses every single day for sure. And the clips were getting tens of millions of views. Yeah. Is that how you found out about him? Through the clip?

[Ben Harburg]

No, no. I've known Charlie since 2016.

[Podcast Host]

Wow.

[Ben Harburg]

I met Charlie then and he invited me to his credit. So his. One of his events, I think it was an amfest or something in, in Washington with President Trump and I couldn't fit it in my schedule and I regret it. But I've, I've kept in touch and so they invited me out here this time around, but. And they've been trying to get me to come things for a while.

[Podcast Host]

I love it. So you've been going to China back and forth for the past nine years. What's been going on with your trips lately.

[Ben Harburg]

I mean, I, I took the view a long time ago that our biggest geopolitical, military, economic competitor was going to be China for the, for all of our lifetime and probably that of our children. And I was in, I was, I'm a little older than you, but I was in high school when 9, 11 happened. And the, you know, immediately after it happened, a few people had different reactions. Some race to join the military and enlist a lot, started studying Arabic and going to work in, and study in the Middle east and try to kind of understand Islam and you know what that dynamic was because we are fixated on this global war on terror. I see China as the same thing. So I really thought it was kind of my duty to go and understand China because our bench of people that actually understand China and are in a position to make a difference from a policy perspective is very, very thin.

[Podcast Host]

Yeah. And there's a lot of misinformation on China too, right?

[Ben Harburg]

That's right. I mean, people around here would understand this concept of fake news. I mean, fake news doesn't just extend to the Republican Party. There's a huge opacity around China and the way it's described and depicted economically, politically, militarily, and that leads to misadvised policy decisions.

[Podcast Host]

Right. What do you think the biggest misunderstandings are with China from ordinary people?

[Ben Harburg]

Well, I think one, one of the biggest ones today is that China somehow on its knees economically and that, you know, and that maybe it's unstable internally and that people are unhappy with and that therefore there's a chance for, in the, in the, you know, and maybe in the more modest case, a huge economic downturn and in the extreme, some kind of change of government. And I, I, and I think both of those are grossly overstated really, because.

[Podcast Host]

You see on social media there'll be clips of like the banks crashing or the real estate market crashing. So what do you think's going on exactly?

[Ben Harburg]

Definitively. The, the Chinese economy is in really bad shape. And I mean it's, and it's, it's, you know, some of it is natural, like the growth is slowed because it was growing at such a high caliber. It was 10% a year. And now it's a mature market that's highly efficient. And so it's going to grow at 4 or 5%, but there's still a lot. But it said it had its own kind of property sector bubble and crash a little like Japan did. It's had a huge geopolitical kind of pushback against it, not just from The United States, it's international relations with say India have fallen apart. Other parts of the world, say Japan, Korea, Australia are pushing back hard parts of Europe. So it's, you know, it's kind of facing a perfect storm of factors that have been beating it down. But that hasn't diminished the power of, of the ccp nor of our Xi Jinping. And I think he views this as kind of natural growing pains towards the ultimate kind of stability and long term growth of the country.

[Podcast Host]

You hear these stories of how their economy is catching up to ours. Where do they stand right now? Are they ahead of us? Are they still behind us?

[Ben Harburg]

So I mean the, the kind of scorecard that everyone looks at is just gdp and technically they are still behind us. The, there was narratives that they would surpass us very quickly. Yeah, but I'm not looking at that number. What I'm looking at, for instance are these next generation technologies and the things that will shape our interaction with technology, the military. So for instance, China is definitively the world leader in commercial drones today.

[Podcast Host]

Wow.

[Ben Harburg]

And if you, and if you look at drone technology, uh, it's what's changed the whole nature of warfare. You know, a couple hundred dollar drone is now able to, to immobilize, you know, a $5 million tank.

[Podcast Host]

Wow.

[Ben Harburg]

And so, you know, and so what they've got now is technology, hardware and software that is perfectly designed for the new era we live in. Shout out.

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[Ben Harburg]

You see it in everything you do too. I mean TikTok is the, is the most addictive and best consumer facing social media app. Shein and Temu are these quick, you know, quick commerce, fast fashion brands that they built kind of gamifying e commerce, just knocking the socks off of western competition. So you're going to see this over and you know, extends into photovoltaics and solar panels and of course into all kinds of hardware. So today if you're in an emerging market, more likely than not you have a Chinese phone in your hand. Apple is way too expensive for anyone. So those are the metrics I'm worried about.

[Podcast Host]

Right. Because they're able to price everyone out. That's right. Their labor is so cheap, you know, they could charge probably a drone here would cost triple the price. Right, right. If you got it American made. Right. So do you envision a future with a lot of drones? A lot of businesses like police officers, firefighters using drones?

[Ben Harburg]

Yeah, I think, you know, again, everything is going automated. So you know, they're, they're also now a market leader in humanoid robots. And so, you know, the likes of, you know, Boston Dynamics or Boston Scient, kind of one of these dogs with a gun strapped to its back. This is the future of war. I was, I was spending time with one of the four joint chiefs of staff a few months ago. All the concepts that we knew about warfare are out the window. The idea of a static battle line and of soldiers being able to take hot showers and have a meal cooked around a fire these days are over.

[Podcast Host]

Wow.

[Ben Harburg]

Because you can see everything with drones. You can see heat maps. No one's safe. And you know, you don't want to fight a dog, a robotic dog with a machine gun strapped to its back either.

[Podcast Host]

So I've heard a drone that are the size of a fly. They can enter buildings through like the sewage or whatever. Crazy stuff.

[Ben Harburg]

Yeah.

[Podcast Host]

Wow.

[Ben Harburg]

Yeah.

[Podcast Host]

So they could use it for spying as well.

[Ben Harburg]

Anything, anything scary. Saw that like in Dune. Right. When things like this.

[Podcast Host]

Super scary times. Yeah. Warfare is going to look a lot different for our, the next generation. I wonder if our military is adapting as fast as China's.

[Ben Harburg]

Yeah. Again, so you have this concept we call late mover advantage. Right. Which is like you don't have the, a burden of legacy hardware and legacy practices. So in China we used to talk about it from the perspective of adoption of things like mobile payment. So they didn't have, you know, they basically went straight from cash to mobile payment because they didn't have credit cards, they didn't have checks and so they didn't have to kind of go through that. They also went straight from like a wet market to a, to, to buying everything online, you know, you know, high double digit E commerce penetration levels. We went through these evolutions where we went from, you know, your corner store and big box retail in the shopping mall. And so the same is true for their military and for their hardware, which is they don't have the legacy that we have of all these old, you know, tanks and planes and being wedded to old aircraft carriers. They can kind of start fresh and build. So, you know, so you don't want to go up against a Chinese drone, you know, swarm or something like that today.

[Podcast Host]

So they're in the lead right now when it comes to that sort of military weapon.

[Ben Harburg]

I think in certain verticals, for instance, they have something called the hypersonic missile that we don't have any defense for, which is kind of this missile that goes straight up in the air and then it just kind of zigzags and goes like you can't even shoot it down. Impossible to intercept down, essentially.

[Podcast Host]

That is scary.

[Ben Harburg]

Yeah.

[Podcast Host]

I mean there's talks of like World War 3 and stuff. It might already be happening behind the scenes for all we know.

[Ben Harburg]

It's, you know, there's, there's always the threat of something happening over Taiwan and of course the South China Sea. I think the more likely is some kind of a proxy war like we're seeing play out in Ukraine right where. And so it could be, you know, it could be using the Filipinos or the Koreans or what happened in Syria where you've got, you know, different Sides backing their own kind of rebel or state backed groups because a head on.

[Podcast Host]

War would be too catastrophic, I think for both sides.

[Ben Harburg]

I think it's unlikely. I think it's unlikely. I'm, I'm more, I'm, I'm more cautionary when people are jumping to the possibility of a hot war.

[Podcast Host]

Yeah.

[Ben Harburg]

But I think they're a great foil for us because, you know, how do we, how do we motivate ourselves in, during the space race, the Russians.

[Podcast Host]

Yeah.

[Ben Harburg]

So how do we now motivate ourselves to maintain leadership in AI, to maintain leadership in hardware? We do it through, through having China as an adversary. Because if we didn't have them, I mean, Russia's nowhere, but Iran's nowhere, North Korea is nowhere.

[Podcast Host]

Good boy. Yeah. Are you a fan of the tariff stuff that Trump's trying to get through?

[Ben Harburg]

I think tariffs make a lot of sense. I think they make sense on kind of three levels. So one, they can be used actually as a tax, as a, as a revenue generation mechanism to fund tax cuts to, they can protect existing industries. So, you know, again, we've got a. To your point, you know, China has such lower kind of operating costs. They've been a currency manipulator. They use kind of national champions and subsidies to drive down the cost of businesses which would just put American companies out of business immediately, like our electric vehicles. So you have that. And then most importantly, I think it's a tactic for generating leverage in a kind of a negotiation around a new trade deal. The Chinese are terrified of a sexy percent tariff. It would create millions of persons in unemployment. And so for them it makes a lot of sense to come to the table rather than be affected by that.

[Podcast Host]

Yeah, the lever seems to be working with Canada right now.

[Ben Harburg]

You'll see it. The Chinese literally are through inner intermediaries right now, kind of reach out, trying to reach out to Mar a lago and saying what do you want?

[Podcast Host]

Really?

[Ben Harburg]

Yeah, what do you want?

[Podcast Host]

So they're willing to work with us.

[Ben Harburg]

They want to do a deal. I think they would be happy to do a deal.

[Podcast Host]

Right.

[Ben Harburg]

We just need to make sure we do the right deal. That isn't kind of a Farric victory where we give something that looks good on paper but actually doesn't protect American interests long term. Really, truly bring industries back home, create the kind of economic revolution that the President has, has stood behind.

[Podcast Host]

Absolutely. What, what could people watching this do to take action on this?

[Ben Harburg]

So we're, you know, we are going to put a full court press over the next four years and hopefully, you know, the next eight after that on the re industrialization of the United States and thinking about what can we bring back home, what we should we be protecting, how do we protect our ip? But it's an interagency interdisciplinary process, requires that we engage for inst sector. One of the biggest problems in America today is we don't have the engineers necessary to bring a lot of these kind of next generation technologies home or to build them domestically. So we need to create kind of a German type education system where even in high school a certain cohort branches off and starts going into trade schools to teach them engineering skills and kind of work in lockstep with industry. So they're being trained when they're 16, 17, rather than graduating with a degree and I don't know, liberal arts and then trying to like retroactively go backwards and become an engineer. And so it has, that has to do with immigration. How do we keep the best minds here and ensure that they don't take our knowledge and run back to wherever they came from? It relates to how we subsidize technologies like we did just with the CHIPS act, but now another hundred versions of this to bring back shipbuilding to America and to bring back, you know, automotive and to bring back hopefully some of this hardware.

[Podcast Host]

Yeah, that we've lost automotive needed. Right. We're falling behind in automotive for sure.

[Ben Harburg]

I mean you actually, the, you know, the CEO of Ford recently went to China and I think just blew his socks off. What they've been doing, really on the electric vehicle front, he, he tweeted about this. He, he spoke publicly about it. But I liked his response, which was not to say like, oh, they're cheaters and they're just doing it because they're, you know, lying about, you know, wages and whatever. He said, this is our motivator, this is our North Star. So now we need to come back and push our foot on the gas to catch up and hopefully exceed them.

[Podcast Host]

I love it. Ben, where can people find you man, and support you?

[Ben Harburg]

Just, you know, I'm not trying to sell anything, I'm not trying to raise anything. You can find me on Ben Harburg at Twitter or anywhere else. But yeah, please join us. And what's really exciting to me is that we've got this new quarter of people our age that are going to come into this administration hoping to really enact positive change. And these are kids out of Silicon Valley, out of large scale asset managers, the types that you didn't see in the 2016 group and so a lot of us feel like this is dawn in America right now. Kind of a new day for an incredible new rebirth of industry. And so please, please contribute and, and get involved if you can. Don't sit on the sidelines and wait to when you're older to get involved in politics.

[Sponsor Host]

Awesome.

[Podcast Host]

I love it, man.

[Sponsor Host]

Thanks for coming on.

[Ben Harburg]

Thanks for having me.

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