B (4:28)

Yeah, the Only thing that I would quickly add is that I think Deng had a lot of the governing styles of Mao. He certainly purged a lot of people. He was really ruthless against some of his enemies. He got rid of several of his successors. And I think he was, in the words of one party historian, half Amal. And so I don't. I don't think he's no, no saint there. I mean, he was, he was as ruthless, I would say, even though his ends were much better, for sure.

A (4:53)

He started out as communist. Right. And he was in the. He was in the party for a long time. And actually somebody said that even the war in Vietnam, that which is the one war that was, you know, was that Deng held that. I had read this book, I see if I can find it, to distract the generals from, because he was. He was doing a lot of changing of the guard in, In Beijing at that time. So he just sent them all to go and fight Vietnam again so he could go and do some reforms or whatever in the capital. I don't know if you. Have you heard that?

B (5:22)

Yeah, it was to get the army support, to give them a really fun war. And then he will. And then he'll have their support forever.

A (5:29)

Yeah, something like that. Right. So. And then, you know, that began sort of the tradition of. Or maybe I'm wrong about this, maybe that predated dung, but they were like, there's like three posts that the head has, which are, you know, the titular head of the state, the head of the party, and then also like the head of the military or something like that. Right.

B (5:44)

Yes.

A (5:45)

And Deng began the tradition of holding all three of those crowns to run China is if that's correct, if I'm not mistaken.

B (5:50)

Or maybe state president. But he was. I'm not even sure he was head of the Communist Party, but he was head of the Central Military Commission.

A (5:59)

Cmc. Right. Yeah, this is, this. I'll get some of the details wrong, but there's like three things that he had and he was kind of running. It's like a, you know, uniting the triforce, so to speak. Okay, fine. So maybe we'll flash up what I. What I got wrong. Okay, so the reason I say that is here is what I will stipulate. Well, so I, I want to play your. Your book back to you, and you tell me if I got it wrong, and then I want to actually debate with you what comes next.

B (6:23)

Sure.

A (6:23)

Okay. First, everybody should read Breakneck. Awesome book. And I think in many ways you sort of explain stuff because so many Americans are in cope mode, less so perhaps in 2025. But for the last 10 years, they've had extreme cope where they've been pretending, you know, the Peter Zeihan kind of argument, that China is going to get old before it gets rich. It's going to fall into a ditch, it's actually weak and blah, blah, blah, blah, blah. And that keeps not happening. And instead it's number one in cars and number one in solar and number one in all kinds of industries, especially the post Covid burst of energy into advanced manufacturing and so on. By 2025 seems to have really worked. And it's also number one in surface ships and it's signing all these trade deals. And down the list, all kinds of things seem to be working for China, whereas the US keeps struggling in many ways. I mean, one way of I put it is your book is kind of explaining these sort of obvious things, or I'm not to be clear. I wouldn't say they're obvious to everybody, but it's like you're very gently kind of breaking reality. Chivo, let me, let me know your thoughts. Go, go.

B (7:33)

Yeah, I think that all of those things are true. Everything is real. And I think. But there is, there is more to this, a little bit more to the story, which is where I feel like you're doing a really good job of summarizing the business pages of the Wall Street Journal or whatever, Bloomberg. But I think we could also flip a few pages, Economics and the politics pages, in which I think the situation there does not look really good. That concurrent with China's rise in EVs and solar, all of which is real, there's also crazy politics. Xi constantly purges his generals, purges his defense minister, purges his foreign minister. A lot of strange party politics that none of us really, I think, can understand outside of a few folks in Beijing. Economic growth has definitely weakened in some severe ways. Property implosion is real. The youth unemployment is real. There's a lot of folks who have decided to leave China. I'm sure a lot of them are washing up at your doorstep in Singapore. A lot of amazing Chinese entrepreneurs who have thrown up their hands at the political environment in China. A lot of Chinese have decided to fly to Ecuador, where they don't need a visa, and try to walk across to the American border. And so last year, customs and border patrol were apprehending something like 40,000 Chinese nationals every single month. And so that's a lot of people who want to take leave of the great Rejuvenation of the Chinese ethnostate. Right. So I think that there are real economic issues. I think there's a lot of political uncertainty in addition to amazing technological growth. So we had to reconcile all of these.

A (9:16)

So the Ecuador part, I've certainly heard those reports. That is the part that I don't fully understand because, you know, the other interpretation is China's just sending a bunch of people to go and embed in the US or what have you, you know, military age, males crossing the border, blah, blah, blah, blah. So, but, but the other piece of it. So let me discuss those other pieces of it. I'll give maybe, you know, obviously a lens you probably considered Xi goes and purges Jack Ma because he doesn't want something like Elon to happen in China, where the tech zillionaires of China get their own ideas and they control these giant networks and, you know, they can turn against the state. Right. We sort of see like two pads there with network versus state and state over network in, in my parlance, you know, and in some ways this is provocative, but in some ways China is the best for the most and the Internet is the most for the best. Where if you're up to, let's say, the 90th percentile in China, you have clean streets and no crime and 247 delivery services. And at an upper middle class up to that level, you're fine. But once you start getting to the top, 1 or 2% of society now, you better watch carefully. You know, you're basically constantly surveilled to make sure that you're in line with the, with the party and, and what you could be hailed for a year or two ago. Suddenly you're on the outside of something and that's too sinuous a twist for a good chunk of people. So they head overseas to Singapore or Dubai or something like that. Would you say that's roughly right?

B (10:59)

Yeah, I think the great contrast. I think you're exactly right in all of these. I think the great contrast, one of the great contrasts between the US and China is that America works really, really well for the rich. If you're rich in America, you really don't have to suffer too many of the problems in, let's say, New York and California. You don't worry about the housing crisis. You have a giant home in Atherton. You don't worry about taking the New York subway to work every day, which is screechingly loud and dirty and doesn't work very well. You get to live in these skinny skyscrapers in Manhattan. I think that there's nowhere else in the world that's better to be enormously rich than in the United States.

A (11:39)

I disagree with that. Now I, and the reason I say that is I think, I think that maybe was true. The reason I smiled is just like it's. I think that was true and I think there's several bad parts about that. Now the first is it's fine to be wealthy if other people are doing okay.

B (11:57)

Yeah.

A (11:58)

But a good chunk of American wealth is Keynesianism which is really like, you know how China's actually capitalist but they call it communist. America is actually Keynesian but they call it capitalist in the sense of the money printing is actually a gigantic redistribution of. It's basically, you know, inflation is taxation without legislation, if you've heard that one by Milton Friedman. So when they print trillions of dollars it's like diluting down the currency for everybody. And they're doing that a lot, both, both overtly and covertly. And then the plunge protection team. Have you heard that thing from Greenspan? The plunge protection team. Okay, that's a useful thing to, to look up. That is why one thing you mentioned in the book is like American stocks have done well and so on and so forth and Chinese stocks are flat. But part of that is because there's almost a social contract in the US which is the upper middle class and upper class have all these index funds, you know, stakes and index funds, 401k. So they expect the stock market to go up and that's actually the metric, the number go up of the society. And so the plunge protection team at the Fed will actually print to make sure that in extreme circumstances stock market doesn't go down. Some of that was explicit like the, obviously the mortgage backed securities that were bought in 2008. Some of that is implicit where they'll spot Goldman or Morgan like the, you know, or, or for example the BTFP program that they just did where Treasuries weren't actually mark to market, they were valued on what they were bought for, not what they were sold for, just all kinds of manipulation. They do just keep the market nominally going but in real terms versus gold or digital gold, it's going way down. Like for example if you just saw as of today, gold has actually outperformed S and P over the last, you know. Right. So in my view the US is actually a fake economy, a Keynesian economy. And actually, you know, actually you know, your thing on the engineering state versus the lawyers estate. I think we could do A lot of iterations on that and I'll give you the ball in a second. But I've, I've so, I love your book so much. I want to say so much, so jump in.

B (13:58)

But yeah, I mean, can I say I want to be, I want to tease you a little bit about this. Please sound like Xi Jinping, man. This is, he has this term that the Communist party calls this the American economy, that fictitious economy. And also the economy not, not like a financial bubble, but just something that can pop very easily. And I think there is certainly something to this. I mean a lot of Americans would tell me, Dan, what are you talking about? This country has no problems. Look at these giant trillion dollar corporations that we can create and the Chinese cannot and no one else can and I don't. And so again, coming back to just to slightly close this loop, which is that I think the US works extremely well for the rich and I think it cannot stay a great power if it works only well for the rich. And there is something strange about China where if you're an elite, let's say you're some sort of an elite in Beijing, you're working in tech. Who knows if your tech company would be smashed by Xi Jinping as he did a couple of years ago.

A (14:54)

Like the gaming companies Scott just sent.

B (14:55)

To 0 Online Tutoring, you know, they are really declared to be non profits. You know, let's say you're working in something like finance and then Xi announces a salary cap, as he did two years ago, of $300,000. And maybe you need to give your back pay. If you're within the party, military, state, elite, you never know when your patron might be taken down by some sort of an anti corruption purge and then your entire network will fall. And so, you know, there's something really precarious about being rich and powerful in China in which in the US if you're rich, you can more or less transm a lot of your wealth into political influence. Now maybe that's bad, but it's much easier to be rich here. But I fully agree with you that there is something like very strange and fictitious about the American economy. The contrast that I like to set up is let's think about Apple, something like $3.5 trillion market value now spent 10 years debating whether it could produce an electric vehicle. And after. Yeah, and what is Xiaomi's market value? Something like $200 billion last I checked. So the Apple is worth Something like 15, nearly 20 times more than Xiaomi. And you know what would you rather have a company that is able to build cars within four years of announcing it, as Xiaomi did, and for these cars to go win major racetracks in Nurburgring and in western Germany, or to be kind of Apple and just not, you know, debate this for a while and then give up. Now, I think I would rather take Xiaomi and I think this is less an indictment of Apple than an indictment of the financial system in the US which assigns these crazy valuations to highly profitable companies. But these mostly software companies.

A (16:37)

Yeah. So Apple is a hardware company also. But yes, your point is correct. So my view on this is looking ahead to 2035, 2040, maybe in 2030. You know, I've written about this, but to briefly summarize, I think I wouldn't even, I don't even think of it as the United States. I think of it as the disunited states. Because, like, for example, there's no Korea. There's only North Korea and South Korea. Right. Like, it's not actually, you can't talk about Korea and Korea's position on this and Korea because North Korea and South Korea literally have different foreign policies. They're opposed to each other, they're different mores, they both might write in Hangul, but they're saying totally different things, different vocabularies, you know, premises, all that kind of stuff. Right. So there's no, for the most part.

B (17:21)

Only one Korea matters to us. You know, only one Korea is in the global economy producing memory chips. Right?

A (17:26)

That's right. South Korea, exactly right. But North Korea, obviously it's pointing missiles and so and so forth, but yes, correct. So we can't talk about Korea. We have to talk about South Korea, North Korea, in the same way, I don't think we can talk about America. We can talk about Blue America, Red America and actually tech America. And those are like three separate groups. And whenever you would hear a defense of America, it's almost always coming from tech America talking about the trillion dollar companies, or sometimes red America talking about, well, we can still re industrialize and we still have the 1945 Spirit and so on and so forth. And Blue America is sort of not really, you know, that animated in terms of its defense of democracy and so on and so forth nowadays, but they were a few years ago. And my view, at least maybe you'll disagree, is like tech America is actually the Internet and it overlaps with European tech and Indian tech and especially crypto, which is which I know you don't love crypto, or you're probably skeptical about crypto.

B (18:32)

Yes.

A (18:32)

But the way I think, you know how like when Rome fell, what survived was Christianity.

B (18:36)

Interesting.

A (18:37)

In my view, like, like America is going to go to zero and what will survive is the Internet. And the bad version of the American legal system is the one you mentioned, which is obstructing and constricting and so on and so forth, and it's being abused by all these lawyers and so on and so forth. But the good version is the Internet legal system, which is a predictable order and it's rule of code as opposed to rule of law. And it protects property rights and has the best monetary policy in the world and has smart contracts and so on. And even if Americans and Chinese can't trust each other's legal systems, actually lots of Chinese people do appreciate Bitcoin and BTC is actually the genuine balance to CCP as opposed to usa, which is going to zero. Let me pause there. A lot I can say about that.

B (19:24)

That's a crazy idea, man. That was. BTC is going to be the alternative against CCP when USA goes to zero. I think that's a great phrase. You should tweet that if you haven't yet.

A (19:34)

I, I have tweeted that I have to. That's actually the. So to just to explain, it's more than just a meme, it's like a compact phrase, but. Right. Like in the 20th century, the contestation was symmetrical between Eurasian communism and Anglospheric capitalism. It was like tank for tank, plane for plane, USA versus ussr, you know, and so and so forth. But I think in the 21st century, it's asymmetric. It's between China and the Internet. China is like Apple, vertically integrated with the nation, you know, the Han Chinese language culture, thousands of years of culture, the, the party state and then of course the network, which is the firewall and the apps and all the Chinese tech companies that's vertically integrated. And something like 97% of people of Han Chinese descent are in this sort of vertically integrated, very functional Voltron, this meta organism that coordinates all these people in this really, really powerful way. And the other summing 7 billion people are going to initially and perhaps for a long time be the weaker of the two sides. And that'll be the Internet, which is messy, Android, chaotic, but also more free. And that's how I think things square up after the fall of the dollar.

B (20:43)

Balaji, I think this conversation is going to be amazing when it's published. I hope everybody watches this on video because you'll see me smiling this entire Time. Because I love your catchphrases. I love these tweets. I'm still hung up by this idea of BTC being the alternative against USA and ccp. But then let me rephrase this, which is that, oh, well, it seems like USA and CCP must both hate btc. And so because it is representing the alternative order. What if they crush btc? I don't know if BTC is powerful enough.

A (21:15)

Oh, that's the question. So basically, the way I put it in the network state is actually I say ccp, nyt, btc, the party, the paper and the protocol are sort of like a rock, paper, scissors kind of thing. And when I wrote it, NYT still hadn't been defeated, but with Elon X has basically defeated nyt, I think NYT has lost its hegemony and so and so forth. So it's sort of like, you know, in the, in the mid 20th century, there was communism, fascism and, and democratic capitalism. And two of them teamed up on the third and then the other two fought amongst themselves. And so. So I feel NYT is just being knocked out of the box as a shadow of what it was. I don't think it's going to be coming back. And because it depended on being ideologically hegemonic. So CCB versus btc. You're right, that there's like, that is a genuine polarity because, you know, for example, in the early 20th century, the swing vote in Germany was like the German worker. Like the Soviets would appeal to them as a worker and the Nazis would appeal to them as a German. So one was appealing on the basis of like, class and the other appealing on the basis of race. Right. And that was like the swing vote with this last election, somebody like the black American or female American or gay American, the wokes would appeal to them as black or female or gay, and the magus would appeal to them as American. Right. That was like the swing vote right in the center. Okay. And I think in the dispensation that is to come, the swing vote will actually be the Chinese technologist, because the Chinese will appeal on the basis of China will appeal on the basis of race, and the Internet will appeal on the basis of class. Right. So that's often a kind of thing, like, you see what I'm saying, right? Like, sometimes it's the left that appeals on the basis of. In the case of the wokes, they'd appeal on the base of race or genetics. And the mag is actually were appealing on the base of class in the sense of membership in the American class, you know, which is like a software thing, whereas race is like a hardware thing, you know. Let me pause there.

B (23:08)

Yeah, maybe. I mean, I wonder, I mean first I would wonder about your idea that Elon has defeated mit. I think Elon has certainly defeated someone and that someone is himself. And I think Elon has been extremely adept at defeating himself. I mean, he got himself out of being co president. How's Tesla doing? I don't know if it doesn't look great. How's X doing? I'm not sure. I think MIT's winning this round but.

A (23:33)

You think so?

B (23:33)

It's pretty important.

A (23:33)

Okay, go, go.

B (23:36)

Yeah, I mean, I think that, you know, I don't know, I'm almost mostly off X at this point, but I'm reading more nyt, so maybe I'm not the target audience, maybe I'm defeating myself. But I would also say that I think the only force that is more powerful than the usa, the only force capable of defeating the USA is the usa and the only force capable of defeating China is the ccp. And I see that both of these nation states have become extremely powerful at beating the shit out of themselves. And I think these humiliating self beatings will continue until morale improves. But I think that, you know, Biden did a terrible job. Trump is doing is being kind of apocalyptic and I think they have a good chance of unraveling the United States. Yes. And I think the Chinese have been driving a lot of its smartest people, a lot of its most entrepreneurial people, a lot of its best creatives out of the country. And I think the CCP will also defeat the Chinese ethnostate. They'll defeat the Great Rejuvenation. So that's my model. I'll pause there. What do you think?

A (24:40)

Okay, so what I think is, I think Xi is a lot like FDR in the 30s where he was the least bad in the sense of like there's lots of things. I mean, FDR interned the Japanese. FDR basically did the gold seizures. You know, FDR essentially pushed. I mean, he used the government against all of his enemies. He went after Andrew Mellon, he pushed the great fortunes into foundations. People credibly alleged that he, you know, push the Japanese into World War II and so on and so forth. All kinds of stuff. He ran for four terms which broke all previous norms, blah, blah, blah, all kinds of stuff FDR did. Right. People think he made the Great Depression great, he prolonged it. But net, net. When all the dust settled, ultimately the US was in the Strongest relative position. And it screwed up the least.

B (25:28)

Yes.

A (25:29)

Not that it didn't screw up. Go ahead.

B (25:31)

Yes, go ahead.

A (25:32)

Right. It screwed up the least out of the Soviet Union which has gotten killed, Nazi Germany which has gotten itself blown up, the Japanese got nuked. The US both, both through competence and through luck or whatever, screwed up the least out of them and was therefore the most powerful in that dispensation. I think China's big instinct, because the century of humiliation, you know, how like a great founder will take a lower valuation but always preserve control. Right. My view, and you can probably fill in the gaps on this, is especially also seeing what happened to Japan with the Plaza accords in the 80s, right. Lots of people, our friends will say something like, oh, you know, people were saying Japan was going to beat us in the 80s and therefore it'll happen exactly like that and we're going to beat China the same way. But Japan didn't just lose, it was basically killed because it's, it's like a U. S occupied country, right? There's a military base, there's, you know, thousands, tens of thousands of troops. Japan's constitution is written by the US and most importantly, Japan's not a sovereign. One way of putting that in 2017 actually NYT released an article that said in 2010 China had killed a bunch of American spies in, in China, right. Japan could never do that. That means China has deliberations that America can't see in a way Japan couldn't. And so Japan with the plaza cords, it was handicapped, it was forced to buy US Treasuries. Its whole decade of stagnations, you know, began at that point. And China's hyper conscious of not going through that. So China at all, at all stages, it took less money to preserve more sovereignty. It took worse terms in some ways to preserve.

B (27:05)

Right?

A (27:06)

So because of that instinct, that wall building, you know, for example, it took all these hits when it banned foreign social media and it built its own, right? All these PR hits constantly. And it was willing to do that to preserve sovereignty. I think that's going to end up being the far sighted decision, for better or worse in, in this century. For example, you see what happened with Ukraine where they're scripting drones on Russian soil.

B (27:28)

No, what, what does that mean?

A (27:31)

So like a few months ago the Ukrainians managed to like have some exploding drones activate within Russia and go blow things up, right? They could, they could control things remotely, right. So in my view that means, and I talked about this actually 12 years ago, but now it's actually becoming real digital borders. And physical borders are like the same thing.

B (27:53)

Right.

A (27:53)

The Great Firewall will be seen in some ways as a very far sighted thing because it is digital hard borders. People won't be able to script drones on Chinese soil. They won't be able to script humanoids in Chinese soil. They won't be able to also send in destabilized memes. Destabilized memes into Chinese soil. Right. Whereas the unmoderated Anglospheric Internet will just be filled with all of these scissor statements and crazy things that are all driving everybody crazy, as we're seeing.

B (28:24)

Yes.

A (28:25)

And so China's also insulated against that because people only speak Chinese and she's taking English out of the schools. So they've got like multiple levels of firewall and they can just like sip green tea and everybody is shooting each other in other countries as the dollar goes away.

B (28:40)

I think that is a reasonably compelling idea. I think that I have a solution for this. But.

A (28:48)

But go ahead.

B (28:49)

I feel like the Chinese are. They've really taken Napoleon's maxim to heart that the game goes to he who does not lose. Now, obviously Napoleon, the do nothing win meme. Napoleon won like nearly all his battles, but he just lost Waterloo and a couple of others. Right. And then he lost and he lost. He lost badly. Right. And so I think the Chinese are very intent on not losing. And there is certainly some good things that I see that the Chinese are doing. I mean, I agree that the Great Firewall, in retrospect looks like a good decision. You take a lot of PR heads. But as I wrote in one of my letters, it becomes really difficult to say that the Chinese really wanted the Internet in the late 2010s when Congress was regularly dragging Zuckerberg and Twitter and everyone else into Congress to say, your products suck. You're destroying us, you're killing us, man. And so, you know, I think like, you can't tell the Chinese you really need these products in your state. And I think that is, that makes a lot of good sense. I take a look at what is going on with AI today. You know, last week we have SORA too, and we are able to produce like hyper realistic slop that like friends have told me that their family members have. Were not able to distinguish that this was an AI generated cameo. Right. And I think that's kind of incredible. Like, why are we so focused on releasing this stuff? And this seems like crazy decisions being taken by the AI labs without any real consideration for how the state, how the people might actually use it. And so there is a sense in which I think that China just wants to be totally stable and then close the doors on the celestial empire and then let the barbarians tear each other apart and eat some mochi balls and then drink green tea. Yeah, I mean that sounds good, but I think that there is a problem here which is that the only force capable of hurting China is the ccp, which, I mean in my book I write about how they zero Covid had zero Covid and they had the one child policy in which they were really dumb and they were really autistic about thinking in such literal minded terms. Oh, there's going to be ecological doom if we have overpopulation. The solution is one child per couple and then, you know, conduct 300 million abortions over this period or oh, you know, we don't care about people who need chemotherapy or need dialysis treatment. The only thing that we care about is preventing the spread of the COVID virus. And so we are going to, you know, prevent the spread of the virus at all costs. And so, you know, here is where I think the engineers with their literal mindedness will not be able to leave the people alone. I think the best case scenario for China is if the CCP decides to spend all day sipping green tea and then just leave the people alone. And I don't, I don't think they're going to do that. I think they're going to figure out new and novel ways to destroy the country themselves. What do you think?

A (31:45)

So it's interesting because I want to make the case for China and then I'll make the case against China. Right? But that's to say, let's say there's like V1, V2, V3, V4 of an argument. You know what I mean? I think maybe you and I are on V4, but let me, let me, let me do the V1, V2 to get to our progression. Right? Because you go to, under sophisticated arguments, you get sophisticated one, right? Okay. So the V1 is kind of the naive, like that's a Chinese Communist Party. They're, you know, people think they're all Maoists and it's slave labor and so on and so forth. And that's also, that's a. Or that there's still the ideological. Maoists have got a very outdated view of what China is. They see the Chinese cities and their response is, oh my God, there's leds on the cities. They don't realize. The point is the cities didn't exist 30 years ago, right? And they're actually very clean and beautiful or whatever. Then the V2 is, I'm not attacking him, but let's say somebody like Arnaud Bertrand on X, right? Or Carl Za, which is basically, you know, I welcome our new Chinese overlord. Someone. Someone who will say something like that, right? And it's like their case is something like, America's been blowing up the Middle East. China's been building up Africa. America just has a bailout economy for the wealthy. China has shared prosperity for everybody. China hasn't started any wars. America's starting all these wars. China's internally united, America's internally divided. And actually also with these tariffs, China's been doing trade deal after trade deal. And by the way, that also is why I think Xiaomi or, you know, byd, dgi, their market caps will probably rise because Chinese market, Chinese market access has expanded as a function of all these trade deals that, you know, Xi has recently inked as a function of the reverse thing on the tariffs. Okay, then the V3. So that is like the first is, you know, USA is still 1945. It's going to win. China sucks. The second is actually China's super strong and it's good, everything will be fine. The V3 argument is basically the US was on balance better than the Soviet Union from 45 to 91, but then after it won, it became by degrees worse and worse and worse, behaved and started bombing people and abusing its power and so on. And one way I think about it is at home, China is a one party state, but abroad it's a two party state because it's checked by America. Conversely, America at home is a two party state with Democrat, Republican, but abroad was a one party state where it blow up everybody because it wasn't checked. It's an interesting way of thinking about the last 30 years or so, right? And now America's coming home because, you know, it's the national defense strategy, if it's real, says pulling troops back from Asia like it's becoming a country, not an empire. It's giving up the imperial burden like the end of the Soviet Union. And so the bad part, the V3 is China will expand in such a way that it actually has unchecked power. And even, for example, zero Covid would never have actually been undone in China without the signal from other countries because the Chinese diaspora knew that zero Covid wasn't working elsewhere because other countries were, you know, that that external signal was certainly filtering into China in some ways. And people were aware that Chinese people didn't have to live like this. And that was part of the signal. I think another part of it is Xi just wanted to win his reelection in 2022. And zero Covid was sort of a way to winkle out anybody who wasn't super loyal to him. And then right after, you know, I think the November 2022 Congress, then they un unlocked everything. So it wasn't really about zero co. It was about third term or fourth term, whatever, you know, nth term. And so then the V4 would basically say, okay, the USA is going to zero. It's, it's not 36 trillion debt, it's 175 trillion debt. The dollar is being devalued against gold, it's dropped by 100 million X against Bitcoin, it's pulling back its troops. People are shooting each other domestically, it's telling NATO to go fight for itself. It's, it's basically sanctioning itself on trade, essentially withdrawing itself from world affairs. It's like, you know, have you seen a steel cage match?

B (35:46)

Yeah.

A (35:47)

Yeah. So imagine, I imagine like a new iron Curtain, like a steel cage UFC octagon thing descending over America. And all talent is told go home. All the researchers are told to go home. All the wealth is getting going to either the Internet where It's S&P7 or the digital asset. Treasury companies S&P493 is flat. US treasuries are down to zero. And conversely, all the manufacturing and military is in China because of robots and drones. There's, and all the media and money is on the Internet. And now North America is just this gigantic steel cage match with all the shouting and all the shooting and it's like basically what the Eurasian continent was under communism, unfortunately in the 20th century. All kinds of crazy people shooting each other. Warlord era collapse, the Soviet Union, Tajikistani civil war, all that kind of stuff. I think it's coming to North America. So in the V4 is basically okay in that world. Something needs to balance the Chinese drone armada because China will be insanely, insanely, insanely, insanely, insanely powerful. It'll be like 5 or 10x America at its peak. It will be because it's, it's actually hitting more steam. Chinese overproduction just means like so many widgets popping out of, you know, the ground. They're, they're still gaining steam. Right? Like the country still hasn't been fully developed. And so China will just be the most powerful physical force to have ever existed. And right now Many Americans aren't mentally living in that world because they still think like, the US Military exists. Right. But the US military is being unfortunately beaten by the Houthis. NATO is being beaten by Russia. If NATO can be beaten by Russia to the point that there's peace treaty talks with Putin, China is like 10x Russia easily. You know, Hagset has said Chinese hypersonics can sink all US Aircraft carriers. Right. The Secretary of the Navy said one Chinese shipyard makes more ships than the whole US Navy combined. Right. Raytheon CO has said you can't decouple from China. So what can possibly balance a Chinese drone armada? I think the entire American mentality of like fighting with your fists and so on and so for is a very romantic 20th century thing that can't be done against China. So you actually need something totally different, which is Gandhian nonviolence, decentralization, agility, invisibility, something totally, totally different against this enormous force. So that's where I'm at with V4. Let me pause there because that was a lot, but I'll get your thoughts.

B (38:01)

Yeah, I think my problem is that I'm on V73 and it has a remarkable convergence with V1. And I think I'm. I've kind of horseshoed my way back into the start of this. Snakes and ladders.

A (38:14)

Sure.

B (38:14)

I think this is, I think, I mean, you're right that there is kind of this negative element with both of them. And this is where I, I would, you know, think about how you say that MAGA was appealing to the gays as Americans rather than as gays. I think there is something to that. But there is also, you know, MAGA is also very interested in defining who the internal enemies are. And probably they're throwing, they would like to throw more of the gays in jail.

A (38:44)

And this is in 2024. Maybe it was, it was a very different message up until the election and then shifted.34. Yeah, go ahead.

B (38:52)

Well, I mean, when you hear these terms like heritage Americans first, I think of like, when you say heritage American, I think of like a giant Thanksgiving dinner that's with a big turkey in the middle. And you know, I think that it's just these very strange sort of. I agree that there is kind of this iron curtain that the Americans are self imposing on themselves and that feels really strange. And maybe it's good for the troops to withdraw from the rest of the world and give up the imperial burden, but I think it's not good to deport a lot of South Korean engineers. Or let's just call them Korean engineers who are trying to build the battery issues. That's right. And humiliate them in chains. That is totally a horrible own goal. I'm just always very conscious of the ability for, for the Chinese to impose own goals for themselves as well. You know, it would be great if they spent all day sipping green tea, but they can't leave anything alone and they just constantly have to meddle in everything. Is America Keynesian? Yeah, sure, maybe. But the Chinese are, according to Adam Tooze, just so much more Keynesian. They Keynes everything. Right. And I think that there is kind of just this endless meddling mentality. And let me just make a broader point, which is that I think the US and China are in competition. And rather than one country having all of the structural advantages on its side, I think I wouldn't agree with that characterization. I think that the US can very credibly point to these amazing strengths that the US has. I think China can also point to these amazing strengths, namely these drone armadas, which are very powerful. But there's also, if you wanted to focus on the most ugly parts of America, you can definitely paint a horrible picture, just as the same with how you can do that with China. And so my fundamental model for all of this is that this is a long term competition. There will be no country that completely implodes and fails to get back up in the way that Gorbachev did really kind of drive the Soviet Union.

A (40:50)

Okay, so that's a big difference of opinion. If you just finish your saying and I'll say something, go over.

B (40:54)

I think that when one country is ahead, it is going to get overconfident and make a lot of mistakes. Because I felt like I lived through this in China when at the end of 2020, at the start of 2021, Xi Jinping felt like he was at the top of the world. He was able to control Covid, in which the US was not. January 6th just happened and China looked like it was a super stable, economically prosperous place. What does he decide to do? Smash a lot of tech companies, destroy the real estate sector, and then also hold on too tightly to Covid? I think that is a classic mistake of overconfidence.

A (41:30)

And arguably was it, but was it? Because. Let's analyze it now from 2025.

B (41:33)

Okay, go ahead.

A (41:35)

The three red lines essentially were sort of a controlled demolition of the real estate bubble. It didn't actually fully crash the economy. He went after the video games, he went after, after school tutoring, which there was A Red Queen phenomenon after school. He definitely hit all kinds of people on, you know, you know, entrepreneurs and so on. But advanced manufacturing, the transition into it did work. I know you mentioned the little pinks in your book say this, but maybe they're actually right because he avoided the fire economy, you know, finance, insurance, real estate of the US he avoided going too far into it popped it doesn't seem to have it caused some damage. I mean, one way of thinking about it, if the country, you know, rather than talking about it in a very ideological terms, if the country is like the platform and the companies are like the apps on that platform. Right. Sometimes Zuck will make like a breaking change to the Facebook APIs and Break Zynga, for example, if you remember when they did that. Right. Because it was spamming the feed too much. Nothing, nothing against Zynga or whatever. You're just making that decision. The greatest good for the greatest number, like Zynga is working in its own way. But long term this is spamming too many people with zombies or whatever it is. So actually no, we don't want to have Zynga. We're going to push Zynga into its own archived inbox, like a spam inbox and so on and so forth. And so in the same way, if he's like got, he's got root over the Chinese platform, he's like, actually we don't want these apps, we don't want any more of them. We want the advanced manufacturing stuff, which seems to have worked.

B (43:05)

Yeah. I mean if the only thing that matters to your economy is advanced manufacturing. And I am going to let no one talk me down from my stance that manufacturing is almost everything. And so I think that manufacturing is really important. But you know, he didn't only hurt a lot of the video games and maybe, yeah, you should control the video games, you should control the social media, you should control the short form video apps, you should control the AI slop, frankly, the Americans ought to do more on all of these different things. He also smacked around people like Jack Ma, people like John Gain. Yeah, real guys and other people. Right. And so that's pretty important too. And so this is where I think that it is still important to flip a few more pages past the business pages of the Wall Street Journal into the economics pages because youth unemployment is real. Tamping is real. You talk about inflation being. What's the Friedman line? Inflation is a taxation.

A (43:55)

Inflation is taxation without legislation, without legislation.

B (43:57)

And I think, you know, yeah, inflation is bad, but the only thing that might Be worse than inflation is deflation, which the Chinese are not quite able to get out of. And C is kind of this boomer who says, why do people dislike deflation? Don't people like lower prices? Well, not if you're an investor.

A (44:12)

Well, so here's where I'll, here's what I want to argue with you. Go, go.

B (44:16)

All right, let me, let me just make one more point, which is that I think that, you know, the country that's going to be ahead is going to make all sorts of mistakes driven by overconfidence in hubris, which is what I think for the most part she did. I think that the controlled demolition of the property sector destroyed a lot of confidence in housing and construction activity is still not back and we're, we still might like get some sort of a weird financial crisis because of the supposedly controlled demolition of the property sector. I think that this was not as controlled as we'd like to believe. And arguably you can say that the United States grew overconfident, which is how it imposed this octagon upon itself to make people destroy each other. That's a mistake of overconfidence. But the more that you're ahead, the more you'll make these sort of mistakes, the more that you're behind, the more that you're interested in patching up your deficiencies. Which is why I think this is going to be kind of a neck and neck race for a very long time. Because we can't just look at a race based on structural advantages as it goes on. People will trip up and stumble and fight harder.

A (45:18)

Okay, so here is my worldview and where I disagree with you on is basically a few things. First is I don't know if the US has that much longer to live as like a coherent political entity. I think we're on the verge of a end of USSR type scenario. Dalio describes as a debt heart attack. Elon thinks the government isn't going to last very long. You're seeing gold flipping US Treasuries, for example, if you saw that graph. Gold is flipping US Treasuries as reserve asset of states. And certainly bitcoin has risen more than 100 million X against it. There is, you know, the US has not become the like. The US used to be the number one destination for global millionaires up to 2019, plus 10,000 millionaires. After 2020 it dropped 85%. It hasn't recovered. And global millionaires capital has relocated to Dubai in Singapore, number one and number two, they've left China as well, a good chunk of those millionaires. But China regenerates them so fast in a, you know, that, that it's actually, it's, it's basically seemingly fine for them. And China's view, I think is that the new up and coming generation of 20 somethings is, speaks purely Chinese, they have purely Chinese apps, they'll be Chinese nationalists. And unlike the 40 somethings that have some sympathy for the west, you know, a lot of these Gen X or older millennial entrepreneurs, he's like, you know what, why don't you guys go and it's fine, Jack Ma can be a teacher in Japan or something like that, what he's, you know, doing and somebody else in China can run that. We've got a billion Chinese people here, right? That's essentially G's bet that he can do without these sort of older Chinese entrepreneurs. And now he just wants those, the younger ones who have grown up on Xi Jinping thought and all the Chinese apps and think China's number one and Luckin is better than Starbucks. And maybe they're right. BYD is outselling Tesla in neutral markets. Xiaomi was able to ship a car when Apple wasn't. TikTok needed total state intervention and the combined efforts of Google and Facebook and, and so on and so forth couldn't beat TikTok. And DJI is the cheapest and largest scale drone manufacturer in the world. And in an end, you know, like essentially the US can't compete with China abroad with the exception of maybe Elon, and even Elon is having a tough time in any neutral market. Chinese products win. And so the US has retreated to just trying to tariff and build tariff barriers around the US which is going to fail in the medium to long run because the Democrats may defect from that. Like Newsom has said, hey, maybe he'll import goods from China if he saw that. Right. Like that's why I say America, it's not the United States, it's just United States. Blue America has its own foreign policy distinct from red. America and Newsom and Walls and Hillary Clinton have all signaled that they may want to align more with China than, than the Republicans do. Like, you know, you saw the thing with Newsom and how he, it wasn't just that they cleaned up San Francisco for Xi, it was that Newsom was the only Democrat to get the meeting with Xi. Do you remember that?

B (48:14)

Yeah.

A (48:15)

My view on that is again, a lot of Americans don't know this, but like within China, you can't just jump straight to the presidency like Obama or Trump, you have to go from like, you know, mayor of a village and then governor of a province and all the way up and you make it to Central Committee. And so Xi recognized Newsom as having a similar path, going from San Francisco mayor to California governor to possibly president. So recognize him as a credible, possible person. And when Newsom was in China, he said he wants to be China's long term, stable and strong partner. My view is that after the dollar ends, that's the last strand that's holding blue and red together because blue's only 4%. Democrats marry Republicans. Democrats certainly don't vote for Republicans. Democrats don't even talk to Republicans anymore. They're in their own blue sky versus X kind of thing. Digital secession is already here. They're now starting to shoot each other, blow each other up. There's a new killing, crazy, blowing up thing on X every single day nowadays, unfortunately. And it's the last piece of paper that's holding this thing together. You know how people say it's not a, it's a country, not an economic zone? You've seen that kind of post on X. Yes, it's actually an economic zone, not a country, because the only thing holding it together is this piece of paper called the dollar. And when that tears, unfortunately, there's nothing keeping blue and red together. And Democrats will side with Xi if they don't have D.C. yeah, well, I don't know.

B (49:40)

I mean, why would Xi want to meet Governor Newsom? This is a guy who looks exactly like the lead actor in American Psycho. If this can be kind of dangerous for me, that's just weird. And I think there is someone who is more willing to give a bear hug to Xi Jinping than Governor Newsom, and that is President Donald Trump. I mean, I was digging up these quotes for an article I was writing in which Trump told the Wall Street Journal, xi is so smart, brilliant, everything nearly perfect. There's no one in Hollywood like this guy. As if, like Xi Jinping had, like, Tom Cruise levels of handsomeness, which I, I find, Wendy.

A (50:17)

But, but Trump is unpredictable because he'll say that about someone, then he'll insult them, then he'll come back and say it.

B (50:22)

Well, right now he's trying to bear hug Xi Jinping. And so, you know. And so, you know, I think you're right. I mean, maybe there is more than one thing that unites Democrats and Republicans. That's the paper. Rather, it's like a love of cgp. What do you think about that?

A (50:35)

Well, what's interesting Is a few years ago, people were saying the one bipartisan issue was being anti China. Right. My view is Democrats were only anti China because there was a contestation for who would run the most powerful state. Like basically first China disrupted manufacturing, so disrupted Red America. Then post 2020 it seemed to become the most powerful state. So then blue America really fought it. And now recently, finally tech America, which always had a sense of superiority versus China, has finally started to see, wait, Chinese AI models are actually giving us a run for the money. Chinese robotics are actually really good. And for the first time, Tech America is actually taking China seriously. Not just one off like TikTok, but actually, whoa. Actually the Chinese engineers aren't just copycats, they're actually innovators and so on. That's always being the thing which tech is, you know, American tech has felt they've had the edge and now that edge is maybe slipping. So I think though at almost a genetic level, I think red Americans at the base, not Trump, have a more visceral aversion to China. Whereas Democrats, it's funny to put it this way, this is a one liner. Okay? But Democrats and the, and China are both natural communists, so they'll be. That's, that's a joke. Okay. But there's, you know, they're statists, right. Democrats are willing to be administrators in a multi ethnic empire. And so they could find something under the Xi dispensation. Sort of like, you know, how Venezuela is like this dysfunctional kleptocracy, but it's sort of bailed out with Chinese goods. China's willing to, as, you know, it's willing to work with, you know, Iranian fundamentalists and Singaporean meritocrats and Venezuelan kleptocrats and Russian Orthodox, so long as they don't interfere in China's internal affairs. Right. And so I think they will support the Democrats and just ship them goods and support them in this way as the, have you seen this thing on soft secession that the blues are doing? Right, Right. So in that soft secession, they just get goods from the west coast ports from China, they don't enforce the tariffs. I think it's very likely something like that happens. Newsom has talked about, I'm not even, you know, inferring this. Go ahead.

B (52:45)

I don't know. Biden Democrats, this guy from Delaware, another potential port town, there's a port of Philadelphia, didn't get a lot of, didn't do a lot of good for Joseph Biden when he was president.

A (52:56)

And, but, but, but BIDEN Biden is 19, born 1942, and Trump's born 1946 or something like that. So they're actually both. If you zoom out, they're both like, you know, coarse, handsy guys from the northeastern U.S. born at the time of, like, peak America, who grew up thinking the USA is number one on everything, effortlessly. And Biden would say things like, we're the United States of America, for Pete's sake. Like, essentially they just think USA number one. Go ahead.

B (53:22)

Yeah, I mean, I think. I mean, look, you're focused on a lot of weird happening in America, and no doubt the weird is real, but I am living. I'm speaking to you from San Francisco. I look out the window and I see three weird pieces of shit a day before breakfast. You know, that's just how odd things are. But if I am, you know, trying to think a little bit about China, as I looked at, there's plenty of dissatisfaction. I don't know if they're regenerating all the millionaires very quickly. You know, there's a lot of this when Xi. When the biggest driver of wealth in China is the property sector. When you have a property sector collapse of 25% and then people aren't really buying homes, it's really hard to build more wealth after that. There's a lot of uncertainties about the corporate sector. There's a lot of young people who've decided to move to Northern Thailand where they could smoke drugs that are legal in the state of California, and they're taking leave of the great rejuvenation of the Chinese ethnostate that's being undertaken in their name. And all of these millionaires are leaving and there are. I mean, I don't think definitely the demographics is not an issue in the next 20 years, but in like, 25, 30 years from now, demographics will yawn larger and larger. It seems like they're not going to be able to escape this hole very well. Understand, they're deploying a lot of robots. Robots. But what if the Silicon Valley bed is real, which I don't really buy, but let's say we invent God in a Box and we get the superintelligence and they invent all these humanoid robots, and then we get to take control of these humanoid robots because we have the AI and they don't. That could be bad. Maybe finally all of this AI slop, we should just consume all of the Sora 2 videos just to support. Give OpenAI a hand so that they can take charge of the robots later. The politburo seems pretty dysfunctional. Xi Jinping, I know. I get he's like, more handsome than Tom Cruise, but he has a belly. I get.

A (55:14)

I don't know.

B (55:16)

I said that he's smoking probably too much because Xi was born in 1952 and all of these people smoke way too much. If he falls over one day, are we going to get tanks in the streets in Beijing? I don't think so. I think they'll have an orderly transition, but what are we really going to get? And so I think there are all of these disunited Politburo comments that we can also have as soon as this guy keels over. And so, you know, I. I don't know. It's like, I think that the tariffs will be enforced. It's more likely for the tariffs to be enforced on California than for the Chinese somehow to figure out all of their own political problems too. What do you think?

A (55:51)

I think Li Qiang is very competent and he is potentially the number two after Xi. I think very few Americans even know who the seven. I'm sure I'm butchering the pronunciation, but it's like L, I, Q, I, A, N, G, I think.

B (56:05)

Yeah. And you know who this guy was? This guy was the party secretary of Shanghai during the worst lockdown ever attempted in the history of humanity. Every other democracy was able to toss out the bastard who enforced Covid on their policies. And then what did the Chinese decide to do? Elevate this guy into premier? That's weird.

A (56:22)

Wait a second. But Trump was the one who did COVID lockdowns in the US and he's president again, right? So I'm not sure. I'm not sure that's true. Well, but yes, Freddie, I mean, Republicans ultimately didn't care that much about, like, Covid is a very complicated kind of thing because everybody switched positions on it like four times. Like, at first, Democrats said it was racist to talk about COVID and Trump was calling it the China virus is Jan. Feb. 2020. And then Trump started saying, oh, okay, you know, we need to start, you know, covering up the testing and showing, you know, that the numbers going up. And Democrats started saying it was a big deal. Then Democrats flipped in the US and said, actually racism is a real pandemic and we need to go and do Black Lives Matter riots. And Trump was doing the warp speed vaccine. And Kalamahara said that she wouldn't take a Trump vaccine then. And the vaccine was actually blocked. People said that they were, you know, I think, gosh, I forgot this guy's name. There's a scientist this report in, like, MIT Tech Review that they were blocking the vaccine's approval until after the election to make sure Trump didn't get a bump from the vaccine, which is a big deal, by the way, because a close election in 2020, then after the election, suddenly the vaccine became a tool in the hands of the Democrats. And fundamentally, I just looked at that as. As something where it wasn't a scientific issue, it was just something that was a tool in a power struggle. And similarly in China, I think it was just a tool for Xi to get his third term. It was just that. I don't think they actually believed in it.

B (57:53)

Well, let me give you an alternative view. But first of all, let me say that, you know what the Americans got and the Chinese didn't. The vaccine. The MRNA vaccine.

A (58:04)

Yeah, Sinopharm did.

B (58:05)

Important, right? We're pretty important. I mean, the Chinese were locking people up and swabbing their noses and mouths, you know, every other day, and they did not do the vaccines, which is really, really strange. They were just using police to keep. Keep shutting people in. I think that after living in China, after living in Shanghai in 2022, what I observed was that, yes, politics was part of it. Xi's coronation. I feel like Xi felt like he had the coronation in the back, and he did the most blatant possible insult towards the Shanghainese by elevating their most hated politician into the head of premier. And I was surprised that I would have been surprised if Li Qiang was still vice premier, one of the four vice premiers after that, this. And then he was elevated to be premier. Think about how that distorts the incentive structures of all of these other party secretaries who thought, this guy messed up big time and he gets promoted. I was living in China and I felt that the protesters did play perhaps some role in showing Xi that they are dissatisfied. I was living in Shanghai. I went to one of the protests. The day after that, all of these youths staggered out of their cocktail bars and started chanting, down with Xi Jinping. Down with the Communist Party. Which is kind of.

A (59:20)

It's very unusual. I remember because. Very unusual to see that, because usually it'll be something where they're just critiquing like a local party person versus the Big Dog or what have you.

B (59:30)

It's not their fault. They had too many of these Western cocktails in the French Concession. But I think the other big thing was that I felt very strongly that the local governments everywhere throughout China, especially in smaller cities that are not as wealthy as Shanghai. They could no longer enforce zero Covid. They had just no state capacity to do onto Shanghai what Li Qian did onto Shanghai. And they had given up. They were really exhausted. And I think when the virus started really spreading in Beijing, the central government took a look at itself and said can we, the central government, enforce a lockdown upon the central government? And then they decided no and threw up their hands and then they completely let this whole thing collapse in one.

A (60:08)

Yeah.

B (60:08)

In 2023 it sounded like a mistake to me. Didn't have to happen this way because you know, you know what? They didn't have vaccines.

A (60:16)

Yeah, the Chinese vaccine did not work. So I'll agree with you on all of that basically. And I know that the Shanghai lockdowns were actually like seriously house, you know, like house arrest type things and people who were zillionaires or whatever were literally locked in their house and people like had pregnancies, messed up. All kinds of bad stuff happened during that time period. So I will completely agree with you. I don't think China gets everything right at all. I, I just however think they're messing up less. And the reason I say they're messing up less is if you take a flight from San Francisco or Seattle or LA or any western city which has syringes and refuse and drug addicts on the street and people attacking you as you walk down and so on and so forth and you go to like the number 47 Chinese city, not even the tier one, not even you know, Shenzhen or Shanghai or Beijing, not even tier two, not even like Chengdu or but like tier three Chinese city. It's cleaner and more modern and safer and nicer. Yeah, than basically everything other than maybe like Hudson Yards, which is like the newest, nicest part of, of you know, New York. Right. Like the very tip top, top end, like nicest neighborhood in New York is like at parity with like a tier 3 city in China or tier 2 city. I don't know if you'd agree. I think that's now true.

B (61:46)

I mean for, for sure. I mean I, I, I open my book by say by talking about my bike ride in 2021 from Guiyang to Chongqing, cycling through Guizhou, fourth poorest province deep in the southwestern mountains and finding much better levels of infrastructure in China's fourth poorest province than California or New York. They have high speed rail, they have the highway.

A (62:07)

Yeah, exactly 100 billion stolen by.

B (62:09)

But you know something that Hudson Yards has that the Guizhou residents do not. That's money they can't shop isn't that important.

A (62:18)

Well, so, so, okay, so now let's talk about the deflation part. Okay, so this is complicated. This is something I think a lot about. And because crypto. And so at least, at least give me, I'll give you my thesis. I may be wrong, but here's the thesis. So first is, you know how like the Soviets had all these economists who talk about Marxism and. Right. But they're basically just all wrong for the most part. They had some things like, you know, there's, there's some stuff in terms of, gosh, some of the stuff with optimal supply chains and so, so gosh, some of the matrix algebra that they had was interesting, but I forgot the exact terms thing. Go ahead.

B (62:55)

No, go ahead.

A (62:56)

But, but a lot of it was basically just pseudoscientific, right? And similarly, American Keynesians are like that. And American Keynesians essentially stipulate, okay, extremely high inflation is bad, but deflation is also bad. So Therefore we need 2% inflation a year, which is like this arbitrary New Zealand target. And that's good. Now actually what that is is a 2% wealth tax. It's basically, you know, on top of everything else, you've got 2% diluted down. And by contrast, the deflationary sectors of the economy, in fact the hyper deflationary sectors economy are the ones that are the most productive. For example, Moore's law is hyper deflation. That is to say every, you know, or at least it used to be, something like every 24 months, transition density doubles. It's not exactly that anymore. But you know, like, conceptually you've got a Moore's like thing, you've got Kreider's law for storage, you've got these various kinds of laws. And in theory, conventional macro would say, okay, that'll show hoarding behavior. If the prices are dropping that fast, people won't buy. They'll wait because it's coming. But actually what we see is lots of spending behavior. Those are the most robust sectors of the economy. Everything digital, where costs are hyper deflating. And moreover, China hyper deflates costs. Something about Chinese culture has all these guys beating each other's brains in for the lowest possible prices, quote, overproduction. China's. So, you know, they're seeing this to such an extent. They're like, oh my God, you know, we might need to pull back on the level of competition in some of these sectors. But the net of it is they just have this insane scale cost quality, massive scale, low cost production in China that's hyper deflating costs. And so what that means is the cost of living in China is actually very low. And yes, China does print and it prints money in some ways at a superficial level, like the US does. But I think the biggest difference is if printing money is taxation, China uses that tax money for two purposes. First is it actually builds infrastructure. But second is by printing, it also keeps the currency low so its exports are more competitive. So it gets a double dip out of it. It builds its domestic export infrastructure and it uses the capital to build the public part of that infrastructure. So it's basically a better capital allocator. One way I think about it, and I'd like your reaction on this is in the 20th century, the Soviets measured their economy by the raw number of widgets they were cranking out, like the number of shoes in a Soviet factory and so on. And the Americans use a price system and we were taught, which was true, that the American price system was better than the Soviet system because Soviets were not looking at the value of the object and the Americans were right. Now I actually think that's being reversed because the Chinese crank out the widgets, right? The cars and the, you know, in, in just raw number of widgets, they're up and to the right. The key thing is though, they're disciplined by international markets. Those widgets have to sell in Kazakhstan and Uruguay and whatever. Right. But the Americans have Keynesianism and so their ostensible price system is actually centrally planned. So even the 20th century has a weird funhouse mirror where if you push on it a little bit, American prices were more capitalist in the 20th century and now they're really Keynesian and quote, communist widgets were Stalinist in the 20th century, but they're actually capitalists now because they're being exported.

B (66:15)

Yeah, I mean, I think that is, there's something to that. And let me just agree with you that I think that China has this amazing capability to produce widgets that fly out of the ground. I mean, that is actually really amazing. I went to China. I moved to China at the start of 2017 to be the technology analyst at a macro research firm. And I was there. I moved away from Silicon Valley because I was kind of tired of the fictitious economy, namely consumer Internet. We hadn't gotten to even to B2B SaaS yet. But I was also skeptical of crypto. And so I think that. Is there anything more bubble like and fictitious than btc? I don't know, man. I would say that it's more fictitious than NYT Okay, I'm going to argue.

A (66:58)

About this in a second. Finish your thing. Go, go, go.

B (67:01)

I think that the Chinese really were making things, making widgets. And I thought that they were much more ambitious than Silicon Valley. And I think that I was pretty optimistic that they were going to make a ton of shit. And even I am surprised at how many EVs, how much of the batteries, how much of. Basically they're so dominant in all of these industrial robotics. And even at my high expectations, they were able to supersede that. And I definitely really worry that the US manufacturing base is going to be de industrialized. I mean, the German industrial base is already being pretty substantially de industrialized by China today. But the US has about 12 million manufacturing workers. Could I see that going down? Yeah, I can.

A (67:43)

It already has, for the last seven months, total crash in manufacturing jobs.

B (67:46)

Yeah, it's lost 40,000 manufacturing jobs since Liberation Day. And this is before we deported all those Koreans. And so I could definitely think that the number of manufacturing workers halves in the next 10 years. And as that, you know, as we lose a lot of that in Michigan, Pennsylvania, Ohio, whatever else, I think the economy will weaken and I don't think that the politics will get better. And so, yeah, I think I agree with you there that there's a lot of disunity there. But I think that fundamentally, if the US Is able to get a lot of this manufacturing right, get Elon to fix first the chip supply chain, then the surface naval supply chain, then the submarine supply chain, and then throw him into the munitions because he seems to like, be kind of like the only person able to manufacture very well in America. I find this very strange. But even he seems to be losing to the Chinese and the EVs. And so, you know, if the Americans are able to solve a lot of these problems, I don't think there has to be so much disunity here. I think that maybe, you know, we'll just, you know, they're going to sip green tea in their tea houses. We're going to like watch the AI slop on our phones. It could be just like a lot of peace here. You know, people are just chilling out and hanging out and they're tum ping and they're quiet quitting. You know, we could just all like, just be very friendly and you know, sip tea and like watch the phones. No. Isn't that a nice optimistic scenario?

A (69:06)

Well, do you know this guy Han Fei Z, who writes for Asia Times?

B (69:10)

Yeah, that's a pseudonym. Yes.

A (69:12)

Yeah, I think it's doggy dog 1208 or something like that on X. Right. At least he, he, he, he said he might be that person or whatever. So his point was essentially that China's grown so fast that the, the city's trap has actually been overcome. Like by the time the US had time, you know, somebody said we don't even have time to be shocked. Right. Like by the, by the rate of growth of China. Right. And so China's grown so fast that basically Hegseth has essentially surrendered and is pulling back troops from Asia to focus on the Western hemisphere. But I don't think that means unfortunately that one group can sip green tea and other guys can watch slop. Because the US economy only has, in my view, two things that are competitive. And I'll come back to your elon point in a second. And those are basically the dollar and tech. Those are the only two exports America actually has. When you really, really push it down, you look sector by sector at everything or are they really competitive in. And the dollar is very quickly going away because if you look at just gold soaring, I mean going from $2,000 an ounce to 4,000 in two years is crazy. Right? That's 50% devaluation. Right. All kinds of states are now just stocking up on gold. I can show. Have you seen these graphs? Should I put some of these graphs on screen? Look at that. Right now there's another graph that actually shows gold already flipping. Okay, but basically that's a curve.

B (70:47)

Yeah.

A (70:48)

Okay. And if you look at China's like official gold reserves, it goes like, like this. Okay. And, and there's a bunch of graphs like this I can show. I mean I may send them to you afterwards if you want or put them on screen. But you can't go from, I mean dollar inflation is global taxation. Let's say there's at least a billion in the, in the global American empire. If you include Japan, you include Europe, you include Australia, all these places. And the dollar is used there directly and indirectly because it's got US Treasuries, people have stakes in the US stock market. So as the US becomes a country non empire and even Europeans are strip search and South Koreans are deported and researchers are shut off and trade is shut off because trade shut off is basically like a. It's like the US sanctioning itself. It's like the US blockading itself. You know, it's going almost North Korean levels of autarky in terms of what they want to do. Then you go from a billion people maybe down to 330 million people, which is like a 60, 70% drop in your tax base. That inflation is spread across fewer people. Because why would other countries hold dollars if they can't trade with America, right? Why do they hold Treasuries when, you know, for example, starting January 2026, there's going to be a remittance tax. You see that like a 1%. So the US is going away from the open capital account, right? It's shrinking its tax base. Its military is withdrawing all the things that back the dollar. The only thing that's there are stable coins. That's the only thing that's like expanding the scope of the dollar. That may be a deus ex machina that gives a few years on life. But my view on this, and I'd like your reaction. Oh, you mentioned something else about AGI, at least in the current thing. I mean, you know, AI models have served topped out in their recent iteration. Like, you know, nothing against, you know, OpenAI, it's a great company. But GPT5 is kind of, you know, it wasn't a huge leap. These things have not been huge leaps recently. And the world model aspect, like an AI model actually knowing something about the world, I think is more likely to happen in China because they can do the humanoid robots which have sensing, so simultaneous location and mapping. You actually have, you know, there's, there's a logic to the 3D world. They can pull in all the sensor data, just like the cars driving down the road, you know, it can pull them. Essentially every drone, every self driving, you know, car, every humanoid pulls in all that data. They actually can have a world model. So I think like the Chinese robot servants, I mean they already have the sidewalk robots, the hotel robots, the drone delivery. All that stuff's not sci fi. It's already shipping, as you know, in Shenzhen. It's already there. Right. So I think this, the very Abrahamic Western concept of a single AGI that will tell us what to do might have been plausible three years ago. I don't think it's really that plausible right now. At least in the trough of the Gartner hype cycle where we are right now. And I definitely don't think it's going to be like this concept of, oh, this one guy discovers it and then they're super powerful forever. We're seeing that AGI is gated by the physical world. You can't just think your way into an advantage. There's friction. Okay, then asked for others. That's AGI dismachina. You mentioned that's. Then there's Elon. Deus ex machina. The problem is Democrats, and now Republicans are against Elon Musk. So I wrote this post on the special Elon Zone. If Elon can somehow carve out Starbase Texas so he can move at the speed of physics, not permits, maybe he could build. But lots of America dislikes him now, right? Democrats dislike him because, you know, he's a capitalist. Republicans, oh my God, because he has immigrants, whatever, right? So Elon is sort of like a man against time in some ways, right? Like he's, you know, somebody who's being resisted by the. So that's something where he's. He's kind of pushing upstream right now. Where I. What I think actually. So now let me talk about Bitcoin just for a second, okay? I think roughly Democrats underestimate Republicans, underestimate China, underestimate the Internet, also underestimate Indians. That's like the. The hierarchy of the world in some ways. Okay, like who underprices and underestimates who, right? And then they kind of surprise you to the upside, like Democrats underestimate Republicans. They managed to somehow take the White House Republicans under us with the Chinese. They managed to build this giant military and so. And so forth. So I'll give one reference that you might find interesting that may add to your kind of engineering. State versus lawyer state. So Fukuyama's origins of political order. And what that talks about is how China historically has had the state above the law. Like, they took the very pragmatic attitude that the emperor can do what he wants, but the mountains are high, emperor's far away. So therefore we can do what we want. And there's a pragmatic constraint, right? Because your chair can turn into a party official if they so will it. But otherwise, you know, so the balance was just practical as opposed to legalistic. Now, here's a part you might not know. India actually had the opposite tradition. They had law above state. Why? Because you could quote dharmic law to a king and they would actually believe that they wouldn't get reincarnated if they didn't follow dharmic law. So you had weak kings and strong law. Right. So what's a modern version of that? Crypto. You actually have hard, smart contracts, hard cryptography that no state can break. Right. As Assange put it, no amount of violence can solve certain kinds of math problems. And lots of Chinese people, especially the young ones, do not respect America anymore. But they do respect bitcoin in the sense of it's just bursting through the roof. You can make a lot of money with a cryptocurrency. You can make a lot of money. And it's something that is intrinsically very difficult for China to copy. It can copy the physical, but the digital is harder, right? The intangible, the spiritual. In a sense, China is this amazing place in the physical world. But Buddhism, communism and techno capitalism were imported from India, Europe and America respectively. It imported the software, it forked it and made the Chinese version with Chinese characteristics. But it's not like a software developer in the same way, like the root, you know, it's software modifier. Right? This is not a diss on China. It's got, you know, thousands of years of philosophy and so and so forth, but it's a relative weakness. In the physical world, I think it's just total, total number one. But in the digital world, the spiritual world, the moral world, it's not as strong. I think you can compete with China that way. Right? And so I look at the Internet and the free Internet and you know, communities that have consensual moderation. So you go like, unmoderated is American anarchy. Unconsensually moderated is Chinese control. Consensually moderated. You'd opt into these new societies that actually have some degree of consensual model. That's how you have thesis into the synthesis. That's what I see in the medium to long run. So that's a. And this is a version of the lawyerly state. That's not the lawyerly state, it's the lawyerly network where you're not a lawyer, but you're a coder and you're quoting laws to the network. And that's actually helping you build as opposed to helping you obstruct. Okay, let me pause there.

B (77:29)

Yeah, Well, I think that there's more than two great exports of America. It's not just the dollar as well as tech. I think it's also the universities. Imagine this, that Xi Jinping sends his daughter to be indoctrinated at Harvard. And a lot of these high Communist party officials are still really eager to send their kids to Yale and Stanford where they get incredible indoctrination schemes. And so there is actually this one other great export from America. And I think that might export quite a lot of bad ideas, just as the Americans, mostly the Americans, but also partly the Europeans, exported all of this ecological doomerism into the Chinese state throughout the 1970s. And then what did they do? They imposed something like the one child policy because they were too dumb to really realize that the Western ecologists were full of shit. So, I mean, I guess I just have. I think your schema is very attractive, Malaji, but I think I have one question. If the Chinese are so smart, why are they against crypto and stablecoins?

A (78:32)

Oh, but they're not. That's the thing is half like the Chinese diaspora, a lot of the overseas Chinese love it.

B (78:40)

That's like the Communist Party. If the Communist Party is so smart, why are they against crypto and the crypto and the stable coins?

A (78:47)

Because it's good for the people, but not. It's good for the network, but not the state. So that's a key thing. Crypto gives power to the individual at the expense of the state. And so it's rational for. Especially for the way that China works. Right. You could imagine a small state confused with the network. Right. China's fused with the network in a different way where it's got root control over the great firewall and so on and so forth. One thing I will say, by the way, you mentioned the universities, unfortunately, American universities are basically going to zero. Like Terry Tao got his research funding cut, if you saw that, and visas are being denied and they're, they're also woke and they're, they've got great inflation and AI is destroying their things. And if I look at the graphs, China's number one on highly cited papers. Now they've actually flipped on nature. They've, they, you know, they work in areas like material science in the physical world that the US Isn't even doing anymore. You know, there's civil engineering, mechanical engineering. There's certain disciplines where just Chinese researchers are crushing it. And, and I think that what G did is, if I'm not mistaken, you correct me if I'm wrong. He actually took English out of the curriculum in China. Right. Which helps them sort of fireball themselves against the barbarians. Right. And with, you know, an exception for himself. I think it's also a disadvantage for people to have studied in America to now ascend within the Communist Party. He wants like people who are more. Right. Nationalist because then they'll have fewer malware, less malware from abroad, you know, in their heads.

B (80:19)

As I think the Chinese really need something like a vaccine where you introduce like the right amount of malware into your body and then you realize, like, what's bad? Because what if you get like a lot of like, sophisticated sounding stories like the Ehrlichs and the population bomb and then you said, we're going to do something about it. And so you need like the correct level of exposure to the mind virus. And I think you know, taking English out and taking you know, Stanford educated people out, I don't think that's going to do it.

A (80:45)

I think you're correct. And I think basically I think their form, I think the Chinese forum like vertically integrated Apple 1.4 billion Han Chinese coordinated and meta organism is going to be a very powerful form for the next 20 or 30 years as and I think the US is going to go to zero and I do think there's going to be a lot of shooting. But I do agree with you that there's something good about that and that good part. So here last piece and then, then maybe we can wrap and give, you can, you know, we'll give your final words. I think in the 2010s, blue America and tech America were allied against red America. Then the 2020s Red and Tech were allied against blue. I think very soon already we're going to see blue and red allied against tech. And tech is a very small group of people. And actually most of the violence of the 20th century was not on the basis of race, it was on the basis of class. And just like there was angry at the capitalists last century and actually killing them. They killed landlords in China, they killed the kulaks in Russia, they killed the guys with glasses in Cambodia. I think they're going to go after the guys with keyboards in America. Okay. I'm, you know like the, the level of anger towards if the dollar goes away and AI is blamed for taking all the jobs and crypto takes all the money, tech guys will take all the blame. And tech is a class. And one of the few things though that sociologists get correct is that class and race interact. And so tech has a lot of Chinese Americans, a lot of Indian Americans, a lot of Jewish Americans. For the right is immigrants, Chinese Jews and so on. And for the left, it's too white, it's too male, it's too capitalist, it's too rich. So I think tech in America, the part that's functional America is going to be driven out. I think it's not going to be able to find a home, you know, no country for tech men so to speak and think it's going to have to find new countries around the world. All these places for digital nomads, remote workers. There's now 420 cities that have at least one unicorn. There's all these small countries from Palau to the Marshall Islands that have like crypto programs. El Salvador has, you know, nomad visas, et cetera, et cetera. All these places. There's going to be a giant tech diaspora. Much as Europe, unfortunately, in all the infighting of the 20th century drove out many of its scientists. I think America is going to drive out its technologists. But that will be the thing you're talking about, where some of the good parts of the US get rebuilt as a version three, like an Internet first kind of thing.

B (83:07)

I'll have a quick reaction and my last word will be that, yeah, I don't know, I don't think all of the Californians are going to move to Palau. Can you show me where that is on the map?

A (83:17)

No, they're not all going to move to Palau, but I think they will. It's in like the Pacific Islands. But I think like, for example, Chinese people can get, actually everybody can now get a K visa to China. Right. Indians can get oci, Jews can get Aaliyah A L, I Y a H. Many Americans can actually get an EU passport based on their ancestry and then get to Eastern Europe and Poland and places like that, which will actually be functional. It'll be like a reverse of the 20th century. Eastern Europe is more functional than Western Europe. And if you think about how mobile tech people are, they are global, they are mobile, and only a fraction of tech. I mean, by the way, crypto already decentralized Asia five years ago. AI with the Chinese models. The open Chinese models are actually the majority of startups, depending on how you count. Martin Casado tweeted about this. I mean, like 80% of new startups are using the open Chinese models. Robotics is already in China, manufacturing is already in China. Right. I think the leverage on SF Bay Area tech, it's less essential than it was. Right?

B (84:24)

Also, as a whole, that's a nice idea. But San Francisco, which is a city I deeply distrust and I'm constantly wondering why I'm still here, actually did sort of decentralize up to Austin and Miami and New York, et cetera. And then what happened? It recentralized. We didn't all go to Palau, we didn't even all go to Poland. Somehow we all ended up back over here. And so right now I think that there's, you know, in the global talent race, I'm skeptical that many people will take the K visa. There's a lot of Chinese who are already like, what are you saying about Chinese tech talent? You know, we're not good enough. And I think that there's still plenty of Chinese researchers that are really desperate to move to Silicon Valley, such that maybe we can say right now that our Chinese are better than their Chinese. I'm not sure if that will be very stable for a very long time, because I think you're right that Trump is saying really mean things. And plenty of them may decide to go, in part because of all the syringes on the street, in part because of paying visas. Maybe they just want better noodles. And I think that would be, like, kind of a valid reason to move back to Asia. And I think sometimes. Sometimes I think about, like, all of that great tropical fruits I would be eating in Singapore if I were with you right then and right now you.

A (85:36)

Should come and visit. So we're actually. We're actually doing that. We're actually building decentralized Silicon Valley with ns. And so I've got tropical fruits for.

B (85:43)

Me when I visit.

A (85:44)

I will absolutely have tropical fruits for you. You're welcome to come. And my view is that we should decentralize Silicon Valley and have something that's neither China nor America, but the Internet.

B (85:57)

Yeah, that's a nice idea. I think that my final note on this is that I hope you know, I think I've never smiled so much on a podcast before because I love your remarks. Balaji. What is it lat that BTC will team up with CCP to destroy mib? I think that will be great. I think that will be great. Let's get rid of. Let's partner with BTC to destroy NYPD first.

A (86:19)

BTC is, I think, the new axis, but something like that. Yes, yes, yes.

B (86:23)

So this is a really fun conversation, man.

A (86:25)

Great. Thank you so much. Thank you, Dan. And Breakneck, it's in Amazon's Amazon.com right now, so go get it. And Dan's a very smart guy and a recommend the book highly Baliji.

B (86:37)

What do you Prefer, Breakneck or BTC?

A (86:40)

Buy both. I mean, Breakneck's only like 20 bucks, so buy that and then the rest in BTC.

B (86:45)

There you go. Thank you.

A (86:46)

Okay, Okay.