Balaji Profile picture
Jan 9, 2021 9 tweets 3 min read Read on X
This is all much bigger than US politics.

It is a matter of national security for India, Israel, and every other country to maintain a sovereign communications channel for their leaders to reach their people directly.

The world cannot be ruled by American corporations.
Every sovereign needs its own basic internet infrastructure: hosting, payments, anti-DDOS.

Over the long term, crypto is the obvious choice for the 80% of the world population that is neither American nor Chinese, as well as large swaths of both Americans & Chinese.
This is now going to happen.

China is already US-independent when it comes to communication & payments infrastructure.

India, Israel, Russia are obvious candidates to go techno-autarkic next. Then perhaps the EU, South Korea, Japan, Brazil.

Crypto is the demilitarized zone.
To be clear, I respect what Jack & Zuck have built. These decisions are never easy.

But the world is much bigger than the US, which is only 4% of the world.

Decentralization away from US control is not just a technical imperative, it’s a moral one. Self-determination for all.
Mexico’s Obrador is denouncing this, and he’s on the left.

We may be about to see a global reverse bandwagoning against foreign social media companies.

Countries will build their own sovereign apps — and block or regulate the American and Chinese apps. reuters.com/article/us-usa…
How would countries build sovereign apps?

1) Clone the features of WeChat, FB, or Twitter, which is much easier than developing from scratch

2) Encourage or requirr citizens to sign up, which is much easier if you’re a state

That’s product and distribution respectively.
Over the 20th century, many countries built cognates of US government institutions, like the “Japanese FDA”.

Now sovereigns with sufficient scale will build cognates of US & Chinese tech institutions, like social networks, messaging, payments, and hosting.

@India_Stack is v1.
Here’s what people don’t get about sovereign apps: unlike startups, they have guaranteed distribution.

A state can mandate that every citizen install an app by a certain date. With a decent clone, you get 10M users in a few days.

Not all states can pull this off. But some will.
Here’s @navalny, a Russian opposition politician.

People act as if these platforms are implicitly American when Americans are less than 25% of users on both Twitter and Facebook.

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More from @balajis

Mar 22
AI OVERPRODUCTION

China seeks to commoditize their complements. So, over the following months, I expect a complete blitz of Chinese open-source AI models for everything from computer vision to robotics to image generation.

Why? I’m just inferring this from public statements, but their apparent goal is to take the profit out of AI software since they make money on AI-enabled hardware. Basically, they want to do to US tech (the last stronghold) what they already did to US manufacturing. Namely: copy it, optimize it, scale it, then wreck the Western original with low prices.

I don’t know if they’ll succeed.
But here’s the logic:

(1) First, China noticed that DeepSeek’s release temporarily knocked ~$1T off US tech market caps.

(2) Second, China’s core competency is exporting physical widgets, more than it is software.

(3) Third, China’s other core competency is exporting things at such massive scale that all foreign producers are bankrupted and they win the market. See what they’re doing to German and Japanese cars, for example.

(4) Fourth, China is well aware that it lacks global prestige as it’s historically been a copycat. With DeepSeek, becoming #1 in AI is now something they actually consider possibly achievable, and a matter of national pride.

(5) Fifth, DeepSeek has gone viral in China and its open source nature means that everyone can rapidly integrate it, down to the level of local officials and obscure companies. And they are doing so, and posting the results for praise on WeChat.

(6) Finally, while DeepSeek was obscure before recent events, it’s now a household name, and the founder (Liang Wengfeng) has met both with Xi but also the #2 in China, Li Qiang. They likely have unlimited resources now.

So, if you put all that together, China thinks it has an opportunity to hit US tech companies, boost its prestige, help its internal economy, and take the margins out of AI software globally (at least at the model level).

They will instead make their money by selling inexpensive AI-enabled hardware of increasing quality, from smart homes and self-driving cars to consumer drones and robot dogs.

Basically, China is trying to do to AI what they always do: study, copy, optimize, and then bankrupt everyone with low prices and enormous scale.

I don’t know if they’ll succeed at the app layer. But it could be hard for closed-source AI model developers to recoup the high fixed costs associated with training state-of-the-art models when great open source models are available.

Last, I agree it’s surprising that the country of the Great Firewall is suddenly the country of open source AI. But it is consistent in a different way, which is that China is just focused on doing whatever it takes to win — even to the point of copying partially-abandoned Western values like open source, which seemed like the hardest thing to adopt.

On that point: they did build censorship into the released DeepSeek AI models, but in a manner that’s easily circumvented outside China. So, you might conclude they don’t really care what non-Chinese people are saying outside China in other languages, so long as this doesn’t “interfere with China’s internal affairs.”

Anyway —this is an area I’ve been watching, and my reluctant conclusion is that China is getting better at software faster than the West is getting better at hardware.
I think China is taking an asymmetric approach.

In a reversal of last century, the West is going closed: closed source, closed markets, closed borders. For understandable reasons.

But China is going open because it suits them. For similar reasons to why Meta open sourced Llama.
What can tech do in response?

I have some ideas, but for at least the next several years the question will not be “what if Google does this” but “how can we ensure China’s best can’t easily compete with this.”

Bitcoin is likely one answer.
Community is another.
Read 5 tweets
Mar 18
How did China go from Maoist to capitalist?
Well, Deng took power in 1978.
He inherited a brainwashed agrarian communist state.
And couldn't reform the whole country at once.
So...he set up a few key zones on China's coast.
He fenced them off, and introduced capitalism.
Of course, that worked.
With success, he gained political capital.
He used that to expand the special economic zones.
These zones had a new social contract.
He'd essentially refounded China — but fractally.
Those zones expanded till they took over the old China.
And that's how China went from Maoist to capitalist.Image
The idea that "Deng refounded China" is obvious yet non-obvious.

It's obvious because China failed under Mao & succeeded under Deng. It's non-obvious because many want to maintain China is on the communist left, when it's really on the nationalist right.
For different reasons, the Western left, Western right, and the Chinese Communist Party all want to maintain that there was ideological continuity between Mao and Deng. But there wasn't. It was a refounding moment, a total rewrite of the social contract.
Read 6 tweets
Mar 15
Everyone wants to reindustrialize.
No one wants to remember why the US deindustrialized in the first place. Image
Basically, tradeoffs exist.

The real problems of pollution and industrial accidents led to the proliferation of environmental and labor laws.

And after generations in the farms, mines, factories, and fields, many welcomed higher-paying and healthier work.

Of course, the cost of offshoring manufacturing is now clear. But it is important to understand that there were at least medium-term benefits in terms of reducing accidents and pollution. Because those benefits will go away if you naively reindustrialize.

Basically, mining and manufacturing were tough jobs that are now romanticized in the abstract but that can be difficult to recruit for in the concrete, *especially* if the resulting product needs to compete with China in a global market on price.

Your people need to work really hard, really smart, and really cost-effectively to compete. That is tough.

(Some are kind of talking about sending the effete intellectuals to the mines, Mao style, which is a “romantic” regression that does have many unfortunate precedents in history.)

Anyway, yes you can maybe increase safety or reduce pollution today with modern techniques — but physical risk will always exist. And without taking some physical risk you won’t ship a globally competitive product at a globally competitive price.
I agree with Dhruva’s post below too.

It is possible to improve the tradeoff between productivity and safety, and many US regulations don’t do what they say on the tin.

But still. Physical risk does exist in the mines and the factory floors. Much more than at the keyboards.
Read 9 tweets
Mar 15
I like @bungarsargon but this is incorrect.

If it was just a matter of price, then maybe tariffs could work. Just bring those jobs home!

Except China isn't cheap labor anymore. They're highly skilled. And skill doesn't easily come home.

Tim Cook explained this in 2018:
Unfortunately, China is far ahead here too.
They have robotic dark factories with no humans.
The complete opposite of "slave labor."
Important to understand the real challenge.
You can't solve this with a quick tariff.
@billmaher @bungarsargon @bariweiss
Yes, but this doesn't solve the Triffin dilemma.
(And that may be unsolvable.)
But it is the right direction, namely internal reform.
So: improve education.
And reduce regulation and taxation.
(Unfortunately, tariffs are regulation + taxation.)
Read 4 tweets
Mar 13
US universities were the best in the world when they sourced the best in the world. But now they don’t do that, because of DEI. And soon they can’t do that, because of visas.

So, they just become regional players.
And China takes the #1 spot. Image
US universities were set up to skim the cream of the world. If they shut down recruiting of foreign students and faculty, they’ll be limited to working with the ~4% of the world that lives in the US.

Reducing the recruiting pool by 25X means it’s unlikely to retain global #1.
The rise of China in science tracks with its rise in tech. So it’s not just one indicator.

That said, it’s possible China is gaming citations. But if you show exactly how (eg via Pagerank and link ring detection) you should publish a rebuttal in Nature.
nature.com/nature-index/n… x.com/lost_nomad__/s…Image
Read 5 tweets
Mar 11
FROM MAGA TO CHINA
Here are four things MAGA is getting wrong, and why it's handing over the world to China.

(1) First, MAGA correctly understands that America’s economic position is in decline but thinks this is due to economic competition itself, rather than lack of competitiveness.

(2) Second, MAGA also understands that the US has wasted trillions abroad in foreign wars, but thinks the problem is global leadership itself rather than poor leadership.

(3) Third, MAGA knows that their Blue American enemies have allies abroad, but has incorrectly overreacted to this by treating every non-Red-American as an enemy.

(4) Fourth, MAGA sees the billions of dollars flowing from the US to foreign recipients, but isn't grasping that the US can only print those dollars in the first place so long as it's the hub of a global empire.

When you put these together you can both understand MAGA's actions and understand why they will not lead to the intended result.

Basically: MAGA is hyperfocused on cutting off any apparent flow of funds from Red Americans to Blue Americans and non-Americans. And they only have ~500 days in power. So they're trying to quickly shut off imports, close down institutions, and exit all wars.

OK.

Except the reason the imports exist in the first place is because US products aren't competitive relative to Chinese products (or Fed printing). The reason those institutions exist is because the US set them up to run the world. And the reason those wars are happening is not because of American leadership per se, but because of the absence of good leadership.

If you shut all of that down at once — if you abandon global competition and global leadership — you shut down American Empire, and with it the ability to print money. And then everyone in that empire has a very bad time.
With all that said, we should have a lot of sympathy for the turnaround attempt, because this is the Flight 93 Administration. They've bravely rushed the cockpit and taken control from the terrorists, but the ship of state might just be irreversibly vectored into the ground.

We are after all talking about decades of accumulated problems, from Social Security to lack of competitive industry. These problems may well be unsolvable. To mix metaphors, it's easy to Monday morning quarterback and extremely hard to quarterback.

Nevertheless, sometimes an outside perspective is helpful. So, let's go through the points above:

(1) The issue is lack of competitiveness, not competition itself. You'd know the US was successful if American cars were outcompeting Chinese cars in neutral third party markets. Tariffs won't do that, but maybe deregulation could. Otherwise you get this map, with China moving into Canada/Mexico/Western Europe now that they've been cut off by US tariffs:

(2) The issue is lack of leadership, not leadership itself. Yes, Biden blew up Nord Stream 2. But think about what that means — the US is in such control of Germany that it can blow up a key pipeline within the country with no consequence! So, obviously, you can't blame Germans for their domestic situation. Red America should simply assume control of the country and reform it rather than cutting it loose and having it fend for itself, with Blue-selected politicians in charge and China waiting in the wings. They should reprogram the Terminator. Basically, success doesn't look like cutting Germany loose. That will just result in a neutral or even hostile Germany down the line.

(3) The issue is the far left, not non-Red. It's extremely dumb for Red America to turn even Canadian conservatives like Pierre Poilievre into reluctant enemies. They just revived the left in Canada for no reason and now there is a hostile blue power on their border.

(4) The issue is mismanaged empire, not empire itself. Perhaps the deepest point is that MAGA really thinks American power comes from the 77M Red Americans and their muscle, as opposed to the 1B+ in the global American Empire. Even if you grant that they have a higher percentage of soldiers — the economic heft of Red America is far less than the 1B+, their political control over the other 200M+ Americans is fragile, and they're facing the 1.4B Chinese. It's just foolish to attack all allies and trade partners — that is how you lose trade wars, and wars.

CITATIONS
A few links you might find interesting, from previous posts, supporting various subparts of the thesis above.

[0]: Seymour Hersh on how the US blew up Nord Stream in Germany without consequence: seymourhersh.substack.com/p/how-america-…

[1]: Rather than cutting the EU lose, reprogram the Terminator: x.com/balajis/status…

[2]: Ten Points on why tariffs are bad: x.com/balajis/status…

[3]: Ukraine may actually be the climactic battle of the Thucydides Trap. Even if it shouldn't have been started in the first place, a precipitous surrender there changes the world order: x.com/balajis/status…

[4]: There are only 77M MAGA, but 1B+ in the Golden Billion / American Empire: x.com/balajis/status…

[5]: The fundamental strategic constraint is the decline in G7 share of world GDP relative to BRICS: x.com/balajis/status…

[6]: Rise in Chinese free trade agreements: x.com/balajis/status…

[7]: Why deregulation is better than tariffs: x.com/balajis/status…

[8]: How the West lost Suez to the Houthis: x.com/balajis/status…

[9]: Why exiting institutions means losing them to China: x.com/balajis/status…Image
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No. China is competitive because they make good products at good prices, as proven by their traction over Western alternatives in neutral markets.

Eg: how are they wrecking even Germany & Japan in cars? Is everyone brainwashed? Or has China gotten good?
Image
Read 6 tweets

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