Interviewer (Jack) (8:42)

Say more about that.

Balaji Srinivasan (8:43)

Meaning they're covering up what China actually.

Interviewer (Jack) (8:45)

Is like by basically being so, you know, aggressively opposed. It's like not understanding your competition accurately. That kind of.

Balaji Srinivasan (8:54)

Yeah, exactly. They're the stealth on the Chinese stealth bomber. And the fact that they're covering up what China actually is and saying it's weak, it's weak, it's going to go to zero. It's nothing. Don't worry about it while you talk up China.

Interviewer (Jack) (9:09)

My competition is terrible. Instead of actually accurately understanding what they can do.

Balaji Srinivasan (9:13)

Exactly. That's right. The U.S. during the Cold War took the Soviets incredibly seriously. It's better to Overestimate the enemy or the competition or whatever you want to call it, than underestimate them. Part of it is the Soviets had actually fought in World War II, so Americans respect military strength and the Chinese had just been grinding in sweatshops. And lots of Americans haven't been to China. My prescription, by the way, for any American, any Westerner, there's like six or seven cities. If you haven't been to them the last three years, your worldview, if you've been to all of them, your worldview I think will be correctly calibrated. I'd say Dubai, Riyadh, Bangalore, Hoim City, Singapore, Shenzhen, and then maybe throw in a few more Chinese. Actually, you know what, you should also go to some tier 3 Chinese city, like the number 50 Chinese city, not even like Changdu or something like that.

Interviewer (Jack) (10:03)

Like just to see what, how impressive even that is.

Balaji Srinivasan (10:06)

Yes, exactly. It's more impressive than just about any American city, to be completely honest. Right. And yet their prices, like one of the things that's happened is they have sandbagged their currency and they've sandbagged. It suited Americans to pretend that they were still strong and it suited the Chinese to pretend they were still weak. And so there was something. It's kind of like a startup wants to, even when it's growing and it's become pretty big, it wants to still pretend it's like a revolutionary and like an incumbent, even if it's losing share, wants to pretend it's still in charge. Right. You know, and that, that illusion continues for a long, long time because both parties would be demoralized if the truth was acknowledged. Because the incumbent is based on being a big dog. We're Adobe or whatever and the, the startup is based on revolution, not on being, you know, the incumbent. Right. So that's what's basically happened. So anyway, so you put that together and here's the issue. The issue is those curves aren't slowing down. Now that the Internet has plowed through the resistance of blue America, all media and all money is going to become the Internet because all media is AI and social and all money is crypto and bitcoin and smart contracts and so on and so forth. And similarly, China has plowed through the resistance and all manufacturing is robots and all the military is drones, and those are Chinese drones and Chinese robots. Because I love my American friends who are working on re industrialize and so on and so forth. But the tariff thing is an acknowledgment that an American product is not price competitive in a Neutral market like Uruguay or Austria. If they have an American and a Chinese product on the shelves, the Chinese product is cheaper at comparable quality. I mean, look, Elon's our best guy. And BYD is competitive with an outselling Tesla in many foreign markets. He's our best guy, right? Lots of other hardware products are not even in the running. And so they're trying to protect the home American market. The same thing is happening with the journos, by the way, just like Red America is trying to protect the home American market rather than actually playing to win because they're getting killed by Chinese competition abroad. Blue America is trying to protect their home market of the Journal. This is happening less publicly. But lots of media corporations have unions that are trying to prevent AI from. From entering. Right? They're trying to freeze the current moment in amber.

Interviewer (Jack) (12:27)

Yeah.

Balaji Srinivasan (12:28)

And, and, and of course they're going to get disrupted by new entrants that just. You use AI in a. Not a slop way necessarily, but in a. In a proper way. Right.

Interviewer (Jack) (12:37)

Are you saying tariffs are necessarily a bad strategy or you're just saying that it's a reflection of these market dynamics?

Balaji Srinivasan (12:43)

Tariffs are a bad strategy when they're used in a. In a stupid way, right? Lots of things are tools, right? Like think about a surgeon. The surgeon has tools. They've got a scalpel, right? They got forceps. They've got all these tools there, okay? And you need to use the right tool for the right job at the right time in the right order. And a tariff is a tool. But like, imagine if you did a surgery with just like a mallet. You know what I mean? You need that at some points, you know, forceps or, you know, like. But you have to use them in the right. It's like an orchestra, right? It's an orchestration. And the problem is there's absolutely. Because policy is literally set by Twitter, everything is just stupid sloganeering. Where to be specific? What is a tariff? A tariff is a tax, okay? A tariff is a tax that says rather than if you buy this thing abroad and you import it, then you have to pay 10 or 20 or 30 or 49% more or whatever on it. The issue is modern supply chains have a part coming across the border that you do something with it, you send it back, you do something with it. You look at auto supply chains, they cross the borders six times, okay? Many of those crosses were assumed to have zero tariff, and now suddenly they have 49%. So it's as if you put like just. It just destroyed any supply chain that crosses American borders multiple times, number one. Number two is these tariffs were placed on raw materials like imports of, you know, of. Of steel, imports of, you know, minerals that aren't as frequent in the U.S. okay. They're placed on machine tools, which are the things that you actually need to go and quote re industrialize. Right? They're placed on Swiss chocolate. They were placed on French wine and Canadian maple syrup. They're placed on Vietnamese shoes after telling Southeast Asia that we needed them as a bulwark against China. And they placed higher tariffs on India than they did on China. And there's so many retarded things about this where fundamentally what many people don't realize is you could actually have an even worse. Like, Biden's foreign policy was hot war with Russia, cold war with China, cold civil war with Republicans and with tech, okay? While also alienating Israel, India and so on and so forth, right? So basically, A, they're tariffing allies, B, they're tariffing raw materials. C, they're tariffing machine tools. D, they're putting remaining American manufacturers out of business. Okay, why? Because if, like your cost structure, you have a spreadsheet of a bill of materials for how you're building something and this supply chain that you optimized carefully with deals crafted over years, okay, where you're just eking out a 17% margin on something that still happens to be made in America and suddenly like four of the parts hit 49% tariffs, you might immediately become unprofitable, okay? And no, it's not possible to necessarily just take that out of the supply. That's a whole negotiation as to who pays for what and so on and so forth, right? Like that's something which is. It is something which immediately causes conflict between the buyer and the seller, who's going to come out of whose hide, Maybe both parties go out of business because the end customer can't take it. Okay? So it's just a tax. And by the way, none of the American manufacturers asked for this. They were all hit by surprise by that. It's like, hey, I'm going to help you with this giant surprise tax. And by the way, they couldn't even like pay the tax a year from now. They've got a surprise tax where suddenly they have to go to the port and on a million dollar import, they have to pay like $390,000 cash on a 39% tariff right then and there. Or their shipment is impounded, which they often don't have the cash. So you have to Go into debt, they have to fire somebody. Complete disaster. And the way of thinking about it is, imagine I increase the price of your iPhone 40%. I just gave you an incentive to build Apple. Why aren't you building Apple in America? Huh? Obviously, all you wanted was some maple syrup, and they're trying to make you make a maple tree farm. It was an incentive, but it wasn't a correctly calculated one. In the right place at the right time, like, yeah, you're paying more for Apple. Are you going to go found Apple? No. Right. And now there's actually correct ways of doing this. For example, Sematech in the 80s went and looked at the specific things that were strategically important, like Japanese semiconductors, and they found, okay, here's like the 30 customers of this foreign company. Let's get them all together, form an industry consortium, invest in a domestic competitor, build that up over time. And now we've got a second supplier alternative to the foreign vendor. But it takes time to make a new company. Right. It's hard to do that. You know how hard it is? I know how hard that is. It doesn't. You can't just tariff it into. Into, you know. Right. And really the thing that they should have done the. The door that they didn't take is reduce regulations. Rather than attacking the entire world, you just reduce costs for American manufacturers. Cost you nothing. Cost you absolutely nothing.

Interviewer (Jack) (17:51)

I'm sure there are a bunch of places where the tariffs were very important and like, you know, it was kind of like used everywhere. So you probably figure it was randomly used correctly and randomly used incorrectly since it was.

Balaji Srinivasan (18:00)

So say it's 99.9% used incorrectly.

Interviewer (Jack) (18:04)

It was like, basically you're saying the places to use it correctly are if very strategic areas.

Balaji Srinivasan (18:09)

Yeah.

Interviewer (Jack) (18:10)

Like a foreign and, you know, like a. Like a national interest that's dominated by some foreign country.

Balaji Srinivasan (18:14)

Yes. Like, if it was just. See, the thing is, also, they're completely schizophrenic, where they're tariffing Vietnam and India and Canada and France and then saying, oh, but we're actually really going after China. That's like a gangster, like, firing into a crowd to get his enemy and then telling them, don't worry about the bullets in your back. I'm trying to get that guy.

Interviewer (Jack) (18:35)

It's definitely not what you expect from, like, nation states, at least it's certainly.

Balaji Srinivasan (18:39)

Not the hub of the global economy. Right. Which is ostensibly. Now this gets to a deeper point, which is the only reason. What is the US Actually doing, by the way, with all these imports? The reason that Trump is doing this is he's seeing correctly that on some level it's an unsustainable trade deficit. Okay, where the US it looks at first the US just keeps basically importing goods and paying for them and the national debt keeps growing. But what's also happening is the US is able to print the money, right? So wait, what's actually happening? Vietnam sends shoes and the US prints the money and gives these new database entries to Vietnam and then Vietnam goes back and buys U.S. treasury. So in a real sense Vietnam is like giving the shoes as tribute to the US for free in a sense. Why? Because the US used to, the left used to basically have the diplomatic agreements to run the global economy and the right provide the military force in exigent circumstances. And by the way, when the diplomats are working, the American empire was the greatest empire of all time. We should all pay respects. You know how hard it is to get 190 people to sign something on a cap table? It's pretty hard, right? You've probably done it. I've done it. Imagine getting 190 countries to sign an agreement.

Interviewer (Jack) (19:50)

Really hard, really hard.

Balaji Srinivasan (19:52)

So the infrastructure, the international order, the rules based order that American diplomats built was genuinely the greatest achievement diplomatically in world history. And the military force of course was important, but it was a secondary thing to that web of agreements, all those trade agreements and all of that stuff by the American empire was set up for the benefit of America. That's why there's a McDonald's everywhere, a Starbucks area. That's why Hollywood movies are everywhere. That's why there's 750 US military bases around the world and aircraft carriers in every port. That's why you have, as you know, many, many heads of state, by the way are trained in America. Have you seen the Kendi School of Government at Harvard alone? Their list of all their alumni has 20 heads of state at one college. Okay, so all kinds of foreign countries are actually American controlled or influenced directly or indirectly. They've got US military bases there, their government save in US Treasuries. They send their best students to America, send their best talent to America. Even China had Alibaba go public in America, blah blah blah. It goes on and on and on like the scale of the American empire. This was set up for American benefit. And it is true that the magas got less of a cut of that in recent years. But they genuinely, I don't think they understood how much worse it can get when they take the whole thing down and then they Lose the money printing ability. This by the way, is actually the deep point is there is a devil in deep blue sea aspect to this because the US has a money printer. Do you know what the Cantillon effect is?

Interviewer (Jack) (21:22)

No.

Balaji Srinivasan (21:23)

Okay. The closer you are to the printed money, the more you benefit from it. Makes sense. Okay. It's like imagine you got a counterfeiter, counterfeit bill, okay? The first guy you use it gets a full hundred bucks worth of the counterfeit bill. And by the time it makes its way through people's hands down to the poor cashier in Nebraska, inflation has already kicked in by then. So they get the least value of that purchasing power. Now the Kantolin effect, once you understand it, has several implications. Well, first is when the Fed prints money, who gets it first? It's US Government controlled entities and major banks, like the big blue banks, like the too big to fail banks. They're the ones who directly or indirectly are spotted the print of money. Either mortgage backed securities are bought off their balance sheet or they're given effectively sweetheart loans. And so there's many different mechanisms the Fed and Treasury use to give them this money. Sometimes they want to do it directly, the Fed directly buys assets. Other times they do it through partner banks. And they always have these crazy shell games they play where they pretend that like BTFP where they, you know, they suspend certain accounting rules so that you can treat a impaired asset if it wasn't impaired. All these shell games they play and then they think that they've done something special when they've actually just really given these banks money. Point is the big low entities get the money first and then that Nebraska cashier gets it last. But also American entities get it first and non American entities get it last. Right? So in a deep sense, and this is the deep point, dollar inflation is global taxation. When you inflate, when you go from let's say a 1 trillion money supply to 2 trillion, everybody in the world who holds dollars is diluted down 50%. That extra purchasing power is effectively a tax of 50%. Those new dollars, printed dollars, are spent by the US government and everybody's silently diluted down. The key point is that it's spread not just across 300 million Americans, but across the whatever billion people worldwide who hold U.S. treasuries who participate directly or indirectly in the U.S. financial system.

Interviewer (Jack) (23:08)

Is it a tax on everybody or a redistribution?

Balaji Srinivasan (23:10)

It is both a tax and a redistribution because the redistribution upward to essentially the US government and then the wealthiest Americans who hold equities because they get there's something. Do you know what the Plunge Protection team is?

Interviewer (Jack) (23:21)

No.

Balaji Srinivasan (23:21)

In the late 90s, it was admitted by Greenspan that the reason the stock market always goes up is that when it goes down too much, the Fed prints and directly or indirectly has people buy assets to buoy it back up. Okay? What that means is everybody else is taxed to push the stock market up. And, and that's an expectation. Now the upper middle class has so much in the way of index funds and so on and so forth. There's a political expectation that the stock market goes down too much, the government should act to buoy it back up. So prices in the US will not go down in nominal terms because there's a political expectation that you keep printing to prop them up. This is why housing prices are so high. This is why stock prices are high. This is why General Motors got bailed out. There's certain kinds of things that it looks bad if the prices go down politically. So they just keep propping them up. In nominal terms, in real terms, however, meaning relative to gold, relative to digital gold, the dollars collapse. 50% versus gold in two years and 75% versus digital gold in two years. That's like the real chart, right? Right. So the problem is the nominal chart is up, but the real chart is way down like this. And you have to actually look at the real number. Right? Which is the devaluation of dollar is already there. Anyway, point is, several things are happening at the same time. So first is by tariffing all these countries, they're giving an unmistakable signal to the whole world. See, normally when there's some economic issue, it's very hazy as to what caused it. Why are your health care premiums high? Someone could blame Obamacare. Maybe they're not. It's hard to tease out. It's multifactorial. But for 190 countries, they all got a tweet on the same day at the same time telling them that the reason that most pro American companies in each country were going out of business or radically impaired is because these tariffs were imposed. And by the way, just to explain that point, any company in Vietnam, in Thailand, in Hungary, whatever, right? Morocco, that's like exporting to the US. The guys who are doing that are the most pro American people in that country. They speak English, they have American partners on that side, they have vendors, suppliers, they probably studied in America or they have people there. They are the people who normally are lobbying their country to maintain good relations and good trade relations with America. Every single guy like that just Got completely wrecked in every country around the world simultaneously. When I mean wrecked, I mean like bankrupted, certainly humiliated. Anybody who invested in America trusted America just got rocked. And what does that do? That means the faction within every country that said hey, we should trade with China instead got radically strengthened as a consequence. For example, in Taiwan, there's a guy in Taiwan called Jim Boss. He's like the Joe Rogan of Taiwan. He used to be super pro independence. Now he wants Chinese reunification. Taiwanese influencers are completely flipped because they saw essentially the US kind of. Some people say they half assed on Ukraine. Some will say they should never gone to war in Ukraine. Some will say they should never have pulled out. Fine, whatever it is, the US is not winning the war in Ukraine. And Taiwan doesn't become like Ukraine, like a crumpled up tin can to use against China. And they don't think the US will back them, number one. And number two is China's actually pretty nice right now for many of them. And China's also doing something called. They issue something called the Taiwan compatriots card. Do you know what that is? No. Basically they want to do a peaceful reunification with Taiwan. So every Taiwanese citizen can get a card that basically makes them a de facto Chinese citizen. So they're on. Because what does it mean to make someone to reunify the island? It means they're all Chinese citizens. So what if you could get 50, 60, 70% of them? Because there's huge advantages if you're a Taiwanese person to do business on the mainland, which is like 30 times bigger or something like that. So it's a much bigger economy. You can live there, you can travel back and forth. What's not to like? So for the apolitical person, it's like you're living in Hawaii. Why wouldn't you want to travel to the US Mainland? Right? So the Taiwan compatriots card is this controversial issue within Taiwan. But it's so useful to Taiwanese people that China's all China. I remember they speak Chinese, right? They understand Taiwan. They're doing a lot more than simply just like invading the island. They have like 5 million spies in there. All kinds of stuff is happening there. So tldr the economic world war that the trade war is on the world. Just like the wokes. Remember the wokes ostensibly were for brown people and they're for Jewish people and black people and women and gay people and blah, blah, this, that and the other. They were supposedly for everybody, but in practice intersectionality turned everybody into an oppressor. You Know why?

Interviewer (Jack) (27:46)

Well, I haven't. Well, I want to hear from you.

Balaji Srinivasan (27:48)

Let's say you're Jewish, but you're also a white man and you're rich, so therefore you're an oppressor on that axis. Right? And this guy, he might be Indian, but he's rich and he's a man, so he's an oppressor on that axis. Right? So they could just selectively emphasize you're.

Interviewer (Jack) (28:03)

Basically whatever your most oppressive attribute is.

Balaji Srinivasan (28:06)

Exactly. And everybody. So for example, white women were victims during MeToo and two years later they were the oppressors during Karen as Karens. So 2018, they're the victims in MeToo when it was useful. Then 2020, they're the oppressors as Karen. The same woman is not treated sympathetically. So. And you know, the point is that they will just take your oppressor axis and stress that. And the thing is, everybody is either when you do an OR function, you know, like or, like either the probabilistic or the computer science version, you do the set theoretic. Or for example, everybody's either white or male or straight or CIS or successful. Or like when you do the or function, that's like Everybody's an oppressor. 99.9% of the world is an oppressor. Unless you've got every single intersectional. Bingo. Okay, so this is similar to what the Soviet Union did where it promised the workers paradise but actually delivered the gulag. Right. The difference is communism promised the working class better economics and delivered them worse economics. Wokeness promises the wokest class higher status. Like now everyone will respect you. Right? And it actually, once they buy into the premises of wokeness, they can be canceled at any time because they're also an oppressor on all these other axes that they're not thinking about at that moment. By buying into Wokeness, it's a devil's bargain where in the short run they can yell at you that you're mansplaining, but then three months later that white woman is checked from the side. She's got white privilege. Oh, boom, you're knocked out of the box. Okay? So intersectionality turns us all into oppressors. And so what Wokeness did is it created the global anti woke coalition. Wonderful, great. Okay. The problem is what Mag has done, unfortunately, is they've created the global post American coalition. This is what people are calling outside the U.S. world minus one. Everybody wants to trade in the U.S. the U.S. doesn't want to trade with everybody. So what are they going to do. Well, they're not going to wage trade war with each other. They're just going to do world minus one. And so they're redirecting trade flows. And what people are not seeing is China went and all of these guys. It was just the most amazing, crazy thing. Okay. Actually, both China and India have done this. I'm happier that India has done this. But right after Trump announced his trade war, all of these guys who were on the fence in Southeast Asia and so on, they started lighting up the towers in Chinese colors and they did state dinners for Xi and they just started signing. China just went and ran the table and all these swing states because they just got told fu by the US who said they don't need them. Right. And then obviously India got pushed into the BRICS column, in part more into the BRICS column by this trade war. And so they did deals with Europe and they did deals with China, did deals with Russia, did deals with every country other than the US India has just signed deals with or done, gone on stage with. Right. So world minus one is a very bad place for the US to be because. So that's like diplomatic isolation. Okay. We talked about the economics, right. The dollar. We talked about diplomatic. Go ahead, you're going to say something.

Interviewer (Jack) (31:11)

I just wanted to round out sort of this political map with like you started with kind of, you know, there's like these two twin battles. You know, there's like sort of like, let's say like woke sort of media academia, just like state stuff in tech. And then you've kind of got like China and the. Right. And then I guess what I'm curious about is the other sort of like the cross angles. And basically what I'm trying to get to is like what are the, what are the natural alliances or unholy alliances maybe that are going to form? And so like, you know, it's like obviously it's, it's not like, it's not like media and academia love the Right. And it's not like China and tech are naturally sort of like simpatico.

Balaji Srinivasan (31:53)

Exactly. It's a four way clash.

Interviewer (Jack) (31:54)

You put out a good tweet about how like China, you know, is sort of like state above capital and tech is naturally capital above state. Like what are the other directions here?

Balaji Srinivasan (32:03)

Other directions? Excellent question. So my view is the successors to American empire are China and the Internet in the same way that the successors to Europe were American capitalists. Like Europe was the center of the world in the 1900s, you know, like the UK and France and Germany and the barbarians were the Americans and Russians on either side. And then it involuted and collapsed and then basically got split down the middle between American capitalism and Russian communism.

Interviewer (Jack) (32:30)

Are you saying those are the would be successors or you're thinking that that will actually happen?

Balaji Srinivasan (32:34)

It's already happened. It just hasn't been priced in like media, for example, already. NYT and so on get much less engagement than social media. Right? Like the sec, Gensler and so on has been beaten. Crypto is by some measures the number four stock exchange globally. But it's very quickly becoming like hyper liquid alone does more revenue than Nasdaq with like 11 people. Right. Internet capital markets are here. The Internet has already taken over media and money and China's already taken over manufacturing and military. That just hasn't been like priced in by everybody. One other thing that's happening potentially is this new national defense strategy is coming out, which is supposedly we'll see what actually happens, but it's reportedly going to have the US essentially pulling back from Asia to focus on the western hemisphere and the issues at home. That is essentially the look Hegseth and these guys are actually, they're not dumb people. You know, if you see Hegseth on podcast before, on the Sean Ryan podcast, he said Chinese hypersonics can sink every US aircraft carrier.

Interviewer (Jack) (33:33)

And if 15 hypersonic missiles can take out our 10 aircraft carriers in the first 20 minutes of a conflict, what.

Balaji Srinivasan (33:38)

Does that look like? You saw actually the previous Secretary of the Navy, Carlos Del Toro, admitted one Chinese shipyard can generate more ships than the entire US Navy combined. The CEO of Raytheon said you can't decouple from China because it's like too important to the US economy. The relationship with China, we have to find way to get along. There is a codependency. There's graph after graph chart. I mean, the US military is made in China. There's a study by Gavini which is a U.S. military Pentagon Commission study, $400 million. And it shows like the Tomahawk and JDAM, their supplier. Supplier in China. That's already happened. The Internet and China are already the successors. So what's going to happen? In my view, we're going to see the third configuration. You asked about an unholy alliance. So we saw in the 2010s, blue and tech, blue sort of forced tech. But there are some guys in tech who are sympathetic to blue as well. Blue and tech against red to censor, deplatform, purge and so on and so forth. Then 2000s, we've just seen red in tech against blue, where the libertarians in tech sided with the conservatives, and that's Elon and X and Sachs and so forth. But we're going to see the third configuration, which is blue and red against tech, because the blues hate the capitalists and the reds hate the immigrants. And by the way, a lot of the center now hates the phones. And they're blaming, with some justification, and I'll get to this, the Internet for everything that's bad. What they're remembering is we had a good life 30 years ago.

Interviewer (Jack) (35:02)

The 90s were good. We didn't have all this Internet. We didn't have social media polluting everything.

Balaji Srinivasan (35:06)

Yeah, this Internet thing ruined everything. They are, they are taking that correlation. They're calling it causation. And there is some truth to that. But I think the important counterfactual is that for billions of people on the other side of the world, the Internet resulted in the greatest and highest standard of living they've ever had. Like in India, the Internet has radically increased the incomes and so on so forth. Southeast Asia, in Dubai, in Riyadh, in China, certainly for billions of people, you know, actually in Russia, Eastern Europe. Right, so Eastern Europe, Russia, India, China, to some extent Brazil, you know, Dubai, Riyadh, Southeast Asia. The Internet is good on balance. And the reason for that, crucially, is they're okay with a moderated Internet.

Interviewer (Jack) (35:52)

When you say blue and red versus tech, you really mean tech versus everybody else.

Balaji Srinivasan (35:57)

There's a great book by a woman named Amy Chua. She's actually the Tiger mother. Okay. It's called World on Fire. It was written in 2003, way before the current time. And she points out that there's something called a market dominant minority. That's when there's a. When you have capitalism and democracy together. But there's a small group identifiable that wins very publicly in the market. Then the group that wins the election starts to hate the group that wins in the market. Those are, for example, the Jews in Germany, whites in South Africa, Indians in Uganda. Okay. Overseas Chinese in Southeast Asia. These are people who are visible and who are winning in the market. And there's angry sentiment on their side. And she points out there's a review by Yale Review of Books, I think, that talks about this, and it says that the backlash takes three forms. First is a backlash by the majority against the wealth of the market dominant minority using the democratic process. Then there's a backlash of the market dominant minority against that initial thing, essentially with forces sympathetic to the Market dominant, pushing back. Finally, there's a third reaction where the frustrated majority that can't win either in elections or in the market just starts to get really insanely violent, perhaps genocidal. Okay? Now all of her examples involve a race, an ethnic group. However, most of the violence in the 20th century was actually not on the basis of race. You know what it's on the basis of? See, it's funny I put that as a blank, but it's always interesting to me that, and I'm not saying this is an attack or many educated people cannot answer that question. What I just posed, what most of.

Interviewer (Jack) (37:33)

The balance in the 20th century was.

Balaji Srinivasan (37:34)

Based on, it was class communism was class warfare. And kulaks were liquidated as a class in Cambodia. The guys with glasses were just liquidated as a class in China, the landowners, anybody who's considered rich. You know, the kulak had like two cows, so he was like a super rich peasant. So, you know Lenin's hanging order, hang the kulaks, right? Kill the rich man. Rich by rich, by some very modest definition of rich, okay? The enterprising smallest businessman was hung, quartered, murdered. Okay? Envy is a very powerful force.

Interviewer (Jack) (38:10)

If I had to have answered, I guess I would have, I guess incorrectly answered something like, like sort of like a political philosophy or something that is more balanced.

Balaji Srinivasan (38:20)

What happens is the guys who are being attacked build a political coalition to try and get to 50, 50 the other way. Right? But it's an actual massacre. Then it's like when they're totally outnumbered. Okay? So the issue is tech isn't a race. But you know what tech is? Tech is a class.

Interviewer (Jack) (38:36)

It is also kind of a political philosophy. In some ways it's kind of a.

Balaji Srinivasan (38:39)

Political philosophy to like to the clip.

Interviewer (Jack) (38:41)

You posted on X, which I want to, I'll link to, because I think it was really good sort of highlighting, like when I watched that, it sort of highlighted something about like the America that I don't think I had fully internalized. But I do also think that tech does stand for capitalism and some people kind of hate that.

Balaji Srinivasan (38:56)

Yes, oh, absolutely. Well, that's the thing. Well, you got it. Last century, what was a lot of the yelling about capitalists this century, what's a lot of the yelling going to be about? Technologists, but we are about techno capitalism. Last century, the capitalism was front page. The technology was kind of a little bit in the background. Here it's a technology that's front page and the capitalism that's a little bit in the background.

Interviewer (Jack) (39:15)

Do you think People are mad about the technology more than about the accrued wealth and power.

Balaji Srinivasan (39:20)

Yes, because they're blaming, blaming AI for making everything fake and they're blaming social media for radicalizing people. The blues blame it for radicalizing people to the right. The reds blame it for radicalizing people to the left.

Interviewer (Jack) (39:30)

They'll probably blame crypto for like de. Legitimizing like governments or something.

Balaji Srinivasan (39:35)

Once. Yeah, well, once, once bitcoin wins. Once bitcoin hits a million bucks and like governments need to actually have bitcoin to survive, which is going to happen, a lot of people are going to be very mad at bitcoin. Very mad. Right, because it basically all kinds of welfare, all kinds of, you know, redistribution stuff that would. The issue is what would have happened in the absence of bitcoin is everybody would be diluted and gone to zero. In the presence of bitcoin, some fraction of people can get to lifeboats, can get to parachutes. That's what bitcoin is. It's a lifeboat, it's a parachute. It didn't crash the plane. The money printing was happening beforehand, but it did allow some people to get away. The fact that some people are getting away, their relative wealth will be bid up. Like with the next 10x of Bitcoin, all fiat billionaires get diluted down, every USD holder gets diluted down. And somewhere between $100,000 and a million dollars per bitcoin wealth becomes cryptocurrency. Let's say most billionaires become crypto, most fortunes become crypto. The fiat world gets diluted down. It's a very deep point. Right? One more doubling of gold. For example, Gold is at 21% of global reserves. Dollar's at like 42. So even in their 50% increase, somewhere between 50 to 100% gold will flip USD. So gold and digital gold. Gold is flipping USD as the reserve currency of states and bitcoin is flipping as reserve currency on the network to pull it back. People are gonna be mad at the tech guys. Why? Because they're gonna blame AI for taking all the jobs and crypto for taking all the money. And tech guys will take all the blame. Plus, guess what? We're Jewish, an Indian, gay, immigrant, right to the right. But to the left we're white, male, capitalist. Okay, can't win. Cannot win.

Interviewer (Jack) (41:18)

So how's it go then?

Balaji Srinivasan (41:19)

Here's what I would say. Every American ethnic group other than the African Americans and Native Americans left behind, war, conflict, ethnic cleansing, murders, et cetera in their home country, to go far away, for example, The Pilgrims, they left. A huge thing of America was leaving. The wars of Europe. They were emigrants. It's not just a nation of immigrants. A nation of emigrants. EMI G R E N T S Right. The Roundheads and the Cavaliers left at various points. Different sizes. English Civil War, Germans left. The Revolutions of 1848, the Irish left. The Irish Potato Famine. You might know that story. There's more Irish abroad than there are Irish at home. Did they betray Ireland by becoming Irish Americans? Did they cut and run? Were they unpatriotic tax evaders? By leaving Ireland when Ireland was chaotic and they didn't, you know, they had the first mover advantage. They understood that their home country had nothing for them in any reasonable timeframe under their circumstances. So they did actually something that was bold and courageous and they picked up and moved. They made a move. Bold move. Right? Why are there so many smart Iranians, Persians in America? Because of the Iranian revolution. Why are there so many smart Chinese people, so many smart Koreans, so many smart Vietnamese? These because of the communist revolutions in those countries. Why are there so many smart Indians? Because India was socialist and Indira Gandhi declared. Most people don't know this. Indira Gandhi declared emergency in the 70s and there's a lot of persecution of various kinds of Indians of different groups. So a lot of them left and they were getting crushed under socialism. So they got out. Why is Elon in the us? Well, it wasn't a great place to be wide in South Africa in many ways. Why are there so many Russians after the end of the Soviet Union? Right. So all of these countries experienced meltdowns, and the smartest and most resourceful and the boldest and the ones who made a move came to America. And that goes all the way back to the 1600s and 1700s.

Interviewer (Jack) (43:12)

But don't you feel like then we still have all of that talent? They're still building companies in America and so America should still endure.

Balaji Srinivasan (43:20)

They're not building companies in America. They're building companies on the Internet. And this is the key thing. If you look at the S and P, it's the S&P493 and the Magnificent Seven. You've seen that before, right? That graph? Absolutely. So all the capital is going towards either Internet companies or the other big category is what? Digital asset treasury companies. So that means everything in the physical US economy is being liquidated and put into Internet companies and Internet currencies. Think about it like this. Many people identify the Internet in America, but what if you asked, are they distinct? What is America minus The Internet, it's not prosperous. The only thing people can point to when they say America. Right, right. Is the Internet.

Interviewer (Jack) (43:56)

Internet and technology generally, maybe I would say technology, yeah.

Balaji Srinivasan (43:59)

But that is the Internet. Like the Internet is like. It's a more precise way of talking about it. Because, for example, in San Francisco, San Francisco Tech, do they make their money from selling sourdough pretzels or ice cream cones on the Golden Gate Bridge? They make money at Candlestick Park. No. Or whatever it is. 3 Con park now, is it Oracle Park? Whatever it is, they don't make money from the city of San Francisco. They make money from Morocco and Mexico and Malaysia. And so there's credit card swipes happening all over the world. And those flows of funds are coming into companies in San Francisco and those are paying the taxes that are then enabling all of the crazy homeless addicts to smash your windows and do drugs and so on and so forth. Right. So that has nothing really to do with the city of San Francisco. You're not mining silicon out of the hills of Silicon Valley.

Interviewer (Jack) (44:52)

No, just people who happen to live there.

Balaji Srinivasan (44:55)

They just happen to live there for now. Right. And in my view, it's a terrible strategic error to be saying you're doing AI and saying it's going to disrupt all these jobs and so on. Especially blue jobs. Because it's going after blue jobs. Right. It's going after doctors, lawyers, journalists, artists, bureaucrats, teachers, professors. The blue base, which already feels imperiled and is already radicalized and crazy and mad.

Interviewer (Jack) (45:22)

Right. It's going to increase the more they feel on their heels.

Balaji Srinivasan (45:25)

Yes. And look, I actually think AI doesn't just take someone's job. It also lets you do any job. You can do a decent job as an artist. AI, you know, like the hype around job replacement I think is actually not really that true. Okay. Nevertheless, it's being presented as such.

Interviewer (Jack) (45:41)

You're saying it's not that true. Like it's like the data's not actually showing that it's happening.

Balaji Srinivasan (45:45)

No. Because AI does it middle to middle, not end to end.

Interviewer (Jack) (45:48)

Yeah. Do you think it'll stay that way or do you think it will get end to end? Matter of time?

Balaji Srinivasan (45:51)

It took a lot of effort to get self driving to work. End to end. A lot of effort.

Interviewer (Jack) (45:56)

Like 15 years or something.

Balaji Srinivasan (45:57)

Yeah, exactly. It'll take a lot of time for each application. It takes a lot of capital because polish, as Anybody knows, last 1% is 99% of the work or what have you. So the point being, it's in My view, a major strategic error to based in the blue city, in the blue state, in the union, to be identifiably rich, to have billions of dollars, to say you're putting blue people out of work, and to just simply trust that the country still exists and property rights still exist. When the left thinks you're white male capitalist and the right thinks you're immigrant, Jewish, Indians or whatever, and the center hates you because of the phones, that's just a bad place to be, in my view, given being a student of history. And by contrast, there's dozens of countries around the world that have digital nomad visas that actually want you there.

Interviewer (Jack) (46:50)

I have so much more I want to ask you about this, but I also. I know we only have four minutes, and I really want to hear about the network school and network state.

Balaji Srinivasan (46:56)

Okay, so look, you've known me for a while, and I think, you know, we had. We had a talk in 2019 or something like that before I left SF, and I think, like, those slides held up pretty, pretty well.

Interviewer (Jack) (47:07)

I can't believe it. Yes, they did.

Balaji Srinivasan (47:09)

They did.

Interviewer (Jack) (47:09)

And a lot of the stuff that you talked about that you're talking about now, you were saying then, and a humongous amount of it turned out to be right.

Balaji Srinivasan (47:18)

And I think the reason for that is, if you like, I'm kind of a student of history and sometimes, like, it's like billiard balls where things will kind of move in a certain way, you know, over time. And so I can't always get the individual wiggles and so on, right? But I can. I think I can get them. It's like a force diagram. You kind of have the macro forces. I'm doing ns.com and network school and so on and so forth because I actually am a centrist, right? They say I believe in capitalism, so I agree with the center right on that. But I believe in internationalism, and I agree with the central left on that. I agree with David Shore, for example, who's a central leftist, or Noah Smith. I feel they're pretty reasonable and I can get along with them. I agree with the capitalists who are kind of queasy about the tariffs, and I understand why everybody wishes they could just get along. But I also recognize that in my view, the solution doesn't lie in America any more than in 1989. The solution didn't lie within the Soviet Union. The Soviet Union was a big and powerful empire, but it just had to take some time to itself, wind down. Its empire had all kinds of crazy infighting for a long time. And the solution was on the other side of the world. So what am I doing with Network School Network State? I am trying to be as politically uninvolved as possible in the US But I'm trying to do my best to kind of continue what I think of as the best of American values. A fair handshake capitalism, but tolerant internationalists and capitalists. But also many smaller things like don't start a fight with somebody online for no reason. Try to be as win win as possible, pay it forward. Like all of these kind of basic aspects of etiquette where don't post private messages. There's a hundred different moral goofs and gallants from the small things like don't litter to the larger things like don't first strike, don't start a fight online. There's all of these kinds of moral premises that are the values that underpin the valuations that I want to and I think I am rebuilding on the other side of the world. And this is the third kind of thing.

Interviewer (Jack) (49:28)

And you inherently couldn't just try this on some little coastal plot of land in California.

Balaji Srinivasan (49:34)

I think that is doing it on extreme hard mode. I know people are trying that. It's not magic dirt, right? The US isn't magic dirt to take a right wing thing and kind of reappropriate. There's no reason that you have to do it in the US It's a very expensive place. It doesn't want immigrants anymore. It's anti tech. A lot of the structural forces you have to build on the right platform. And I am the Minority Report. For sure, I'm the Minority Report, but I'm a constructive minority Report because what I advocate for is people working together to build not just Internet companies, not just Internet currencies, but Internet communities where we know each other and can work together and we have win and help win. And you can join as a member and then when you decide to, you can also become a founder and then we can build the network states of the Internet.

Interviewer (Jack) (50:25)

I think it's fascinating and I just love the way that you break all this stuff down and it leads to these conclusions. And I've known you long enough and listened to you long enough that I know that a huge number of your predictions at the time sound unbelievable. Over time, a surprising number play out. And so I listen carefully and I appreciate it. Thanks a bunch for making the time for this. This was awesome. Yeah. Thanks again for doing that.

Balaji Srinivasan (50:49)

Thank you, Jack.