If you plot a histogram of latency before and after the introduction of a load balancer, you'll often find that average latency gets a bit worse (as you need to do two hops: load balancer and then server), but worst case latency gets way better.
Often an acceptable tradeoff.
Similarly, if you plot a histogram of expected financial profit before & after buying a collar, you'll find that the average profit gets a bit worse (due to the cost of the collar) but worst case profit gets way better.
Bitcoin ushered in the possibility of truly free markets, fully decentralized, high risk & high reward.
Often, however, thesis and antithesis form a synthesis. The success of stablecoins show how valuable volatility reduction can be in some contexts. stablecoinstats.com
In web2, the financial plumbing[1] that makes things possible is hidden from users. The volatility is hidden, as is the cost in privacy.
In web3, that financial plumbing is made more transparent. The volatility is visible, as is the cost in coins.
[1] adbutler.com/blog/article/w…
Think about ads: how often do you click? And how often do you actually buy? Rarely, right?
That means conversions are rare events. Rarity means high financial variance. Giant web2 companies can buffer this variance, this volatility, so it's not visible.
Oh, but it exists.
This thread prompted in part by @levie's thoughtful comments.
In short, I recognize that we do need tools to control the visible financial volatility of web3's coins.
But I want to note that this is in some ways better than the *invisible* financial volatility of web2's ads.
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Everyone wants to reindustrialize.
No one wants to remember why the US deindustrialized in the first place.
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.
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.)
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.
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…
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.
[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…
Unfortunately, the US Navy has been decisively defeated in the Red Sea. You can see it from the IMF Portwatch graph:
This has been clear since Biden announced the failed Operation Prosperity Guardian in late 2023. The US now lacks the combined military and diplomatic strength to stop the Houthi blockade, for structural reasons that will be difficult for the Trump administration to reverse. Let's go through a few of them:
(1) Technological disruption of the Pentagon. First, the Houthis have 1/1000 the cost structure. They can counter $2M in US military spend with $2K in technology spend. This means the ~$800B Pentagon budget may not be as effective as we think. It could be like any lumbering big company with a big budget that can be disrupted by a startup with better cost effectiveness. Except this time the "startup" is a group of heavily armed fundamentalists.
(2) Diplomatic disruption of the State Department. Second, the Chinese have been on a diplomatic offensive since early 2023, negotiating a Saudi/Iran treaty (without US involvement!) that puts them at the pivot of the Middle East. This means China has leverage over Iran, who in turn has leverage over the Houthis:
(3) Geopolitical disruption of the Red Sea. As a consequence, the Suez Canal is now de facto controlled by China, Russia, and Iran. Western ships can't get through, but the Houthis are allowing their allies through:
There are many other factors one could enumerate:
- the high level of organization of the Houthis
- the political capital spent dealing with Oct 7
- the low appetite for US intervention in the region
- the energy the US is already spending in Ukraine
- the lack of US capability in domestic drone mfg
- the failure of Navy initiatives like the LCS
- the 200X+ Chinese advantage in shipbuilding
- the level of fanatical Houthi commitment
But the net is that the Pentagon lacks the military might to cost-effectively stop the Houthis, and the State Department lacks the diplomatic influence to halt the shooting.
These are structural issues — rot that's set in for decades and generations — that the new administration will find difficult to fix. Fundamentally, undoing the Red Sea blockade isn't a matter of will, but of capability.
Wish it weren't so.
I know people will say "the US didn't try", but there was quite a lot of trying and quite a lot of shooting:
“This is the most sustained combat that the U.S. Navy has seen since World War II — easily, no question,” said Bryan Clark, a former Navy submariner and a senior fellow at the Hudson Institute.
At the start of Operation Prosperity Guardian, many memes were posted along the lines of "Houthis done FAFO!" or "Houthis gonna find out why we don't have universal healthcare!" That kind of thing.
But it wasn't tracking in a good direction even then:
China is just pursuing the exact opposite strategy. They're trying to expand into as many markets as possible, because they think they'll win the game of global technocapitalism.