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Balaji Profile picture
@balajis
Mar 11 • 6 tweets • 9 min read • Read on X
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?
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At one level, it doesn't really matter if China has 200X US shipbuilding capacity due to "unfair" competition or not.

Their "overproduction" means military strength, which means winning against anyone who isn't willing or able to build like that.

However, at another level, you really do need to get rid of the cope that says China is still just "cheap labor." Because it just misunderstands the world. China is more about robots than Maoists these days. And 1B+ people are now capitalist rather than socialist. Of course they're going to be competitive!

Anyway, here's Tim Cook on the topic. China has real skill, they're not slaves, and you are just not going to compete if you don't want to admit they're genuinely competitive.
China is sandbagging their strength. The cost of living there is low. Their society is undergoing technolocial hyperdeflation. If they actually freely floated their currency it'd rise, but they'd lose control. But maybe they do it with HKD. @GlennLuk
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👆 typo: should say "technological"

@VinnyLingham But China is very competitive with their current strategy. And their apparent goal is to finish crushing global competition in every market via "overproduction" and only then float the currency.

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More from @balajis

Balaji Profile picture
Mar 8
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.Image
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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.

apnews.com/article/us-nav…Image
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:
Read 8 tweets
Balaji Profile picture
Mar 5
Meanwhile, China is signing free trade agreements. Image
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.

Here's the list of their signed and ongoing FTA deals.
fta.mofcom.gov.cn/english/fta_qi…Image
China is expanding free trade because they are winning at free trade. Image
Read 8 tweets
Balaji Profile picture
Feb 25
In a military confrontation between the US and China over Taiwan, who has the upper hand?
Unfortunately, more like Superman vs Clark Kent. In a non-nuclear confrontation over Taiwan, missiles run out within days.
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No, the US doesn't have technological superiority.

In manufacturing, China is global #1 by far and the US isn't in the game.

In software, the US is #1 and China is a strong #2 (but competitive with Tiktok/Deepseek).

Taken together, China is way ahead.
Image
Read 8 tweets
Balaji Profile picture
Feb 15
AGENCY VS NPC

What are the limits of agency?

1) Until five minutes ago, the West was run by NPCs. You slotted into your role, waited decades to be president, propped up the postwar order, established the establishment.

2) Now it's run by high agency people. You can just do things people. Tech people, Trump people. Because the Internet increases variance. It means that small groups[1,2] of highly motivated individuals — as small as one, like Satoshi or Elon or Trump — can change the world.

3) But there are limits to agency. Historic forces, genetic constraints, physical limits. A high agency person can’t just grind their way into starting for the Lakers. They can’t intuit the preimage to a cryptographic hash. They can’t turn rye into wheat by pure willpower.

4) That way lies Neo-Lysenkoism. Lysenko was a communist who denied that genetic constraints existed at all — and executed Darwinists who thought they did. He believed rye could become wheat by pure willpower.

5) And, confusingly, the same NPCs that just ran the West also believe in a Neo-Lysenkoism where a Down's Syndrome patient[3] is only constrained by societal expectation rather than unfortunate chromosomal aberration. Genetics denial also underpins their insistence that XX=XY. And economics denial underpins most socialist policy.

6) So — wait. What then is the difference between the determined technocapitalist idea that “you can just do things” and the delusional communist idea that “constraints do not exist”? Does the far left also in some sense have a high agency model of the world?

7) To complicate this further, the technolibertarian view on agency often doesn't extend to the rest of the world. Deepseek can also just do things. As the military says, "the enemy also gets a vote."[4]

8) Moreover: high agency, taken to the ultra-alpha extreme, can impede large-scale cooperation. There is a reason beta cooperation arose[5]. Every man cannot be a leader on everything; indeed, he can only at most lead on one thing.

9) Steve Jobs' famous memo on how dependent he was on his species[6] acknowledged this. You are probably not leading the engineering of the screen you're looking at now. And you can't become a good leader till you've become a good follower, as you don't even know what good instructions look like.

10) As I think through this, I think the key distinction is numerical. The technocapitalist is soberly enumerating known constraints and calculating ways to solve for X=Y, while the delusional communist is simply asserting that XX=XY. And the technocapitalist also knows how to build teams, manage budgets, handle personnel, and generally acknowledge reality.

11) Or, to paraphrase Reinhold Niebuhr: may God give us the serenity to accept what cannot be changed, the courage to change what can be, and the mathematics to know the difference.

We can just do things.
But only if you can do the math.
This post was spurred by the realization that:

(a) I generally agree with the high agency view of tech founders
(b) I generally disagree with the Neo-Lysenkoism of the far left
(c) I respect but am concerned by the high cooperation of the Far East, which is distinct from high agency
(d) I also respect physical laws greater than any man

And I just wanted to think through the issues.

CITATIONS
Some citations follow:

[1]: Good thread on Medicis: x.com/sporadicalia/s…

[2]: Good thread by @ADoricko on agency: x.com/ADoricko/statu…

[3]: Unfortunate Neo-Lysenkoist ad that is essentially genetics denial: x.com/the_beardedsin…

[4]: I don't think open source is the enemy. It's a turn of phrase to emphasize that the "high agency" model often doesn't account for other actors' high agency. High agency means high global volatility and high unpredictability.

[5]: China's cooperation game is a visual depiction of the complement to high agency: x.com/PicturesFoIder…

[6]: Steve Jobs was an extremely high-agency uber-alpha by anyone's definition, and even he acknowledged how dependent he was on the rest of his species.Image
Oh, and here's a cite on Lysenko.

Communists have always been denying biological reality, but they used to do it for plants.
archive.is/X3Ip9Image
Read 4 tweets
Balaji Profile picture
Jan 19
FIRST CRYPTO PRESIDENT

Overnight, the vast majority of the net worth ($59B) of the next President of the United States is now held in cryptocurrency. This will hold true even with a 90% drop.

What are the implications?

1) First, President Trump just went from crypto being perhaps 1% of his net worth to 90%+. Many early Bitcoin, Ethereum, and Solana holders experienced the same thing.

2) Second, this phenomenon — the overnight relative devaluation of all non-crypto holdings — will be experienced by billions globally within our lifetime as fiat dies.

3) Third, every politician, influencer, and celebrity worldwide is watching mouth agog at the phenomenon. They’ll wait to see how it shakes out politically and financially, and if the memecoin shows staying power — big if! — they may do their own.

4) Next, if we do then get a large market with thousands of personal memecoins, it may actually be ok, because every buyer knows what they’re buying: the potential future brand value of the meme.

5) Much depends on how much value the TRUMP asset holds, if any. Other celeb memecoins went to zero quickly, but Trump is Trump, and has the unique qualities of (a) 100M+ followers, (b) daily non-stop coverage, (c) presidential immunity, and (d) unprecedented control over the government.

6) So, whatever form of political counterattack comes his way, Trump is now strongly incentivized to legalize cryptocurrency in the most aggressive way possible.

7) Of course, this will be attacked as a conflict of interest. But Biden took 10% for the big guy, and Pelosi traded her stocks, and Hillary monetized her speeches, and Podesta had his $300B climate slush fund, and Obama got his Netflix deal. All became millionaires via various deniable forms of payola for Democrats.

8) So, Trump’s rebuttal may be that he’s just doing everything in public. His claim may be that disclosure solves the conflict of interest problem.

9) And that may be true, but it doesn’t fully solve the *alignment* problem. As context: the CEO of a company is typically one of the largest shareholders, but he is aligned with all his employees because they hold the same shares. All holders rise and fall as one, ideally.

10) By analogy, you would ideally want the President to be aligned with his citizens, such that they all held (say) USA coin, which gave some dividend from the profits of the USA. Kind of like the Alaska Permanent Fund.

11) So, one way of solving the alignment problem would be for Trump to airdrop some TRUMP to every US citizen. However, it might be easier for him to just send an email in his personal capacity to every Trump supporter offering them some free TRUMP.

12) Specifically: he could give 72 hours notice and all kinds of Democrats would also sign up for his personal email list, just to get the airdrop.

13) Would it be legal? Well, it is certainly legal for politicians to email out *requests* for money. But to my knowledge no politician has attempted a personal airdrop before, to *give* away money — and certainly not at this scale.

13) At current valuations, Trump could give $100 of locked up TRUMP to all 77M Trump voters via airdrop and it would “only” cost him $7.7B in an asset that was worth zero two days ago. Heck, he could give $500 per person and still have $20B+ left over.

14) Yes, it would cost Trump some of his asset to do this. But if you needed to join his email list to get the coin, and if the airdrop could be effected without any cap gains, it would “pay for itself” by turning his base into even more rabid supporters.

15) It could even give him the political support necessary to completely destroy the Democrat patronage machine. Basically, by joining Trump’s email list and supporting his crypto policies you’d get a kind of UBI.

16) And if 77M Americans are also benefiting from TRUMP, charges of conflict of interest go away. It’d be a new kind of social contract, a personal relationship between President & citizen.

Worth thinking about.
To defend the asset after a potential crash, you need a huge base of holders. Not 770k, but 77M in the US.

So, the ideas below are fine, but the scalable strategy is an airdrop by the issuer. It boils down to enlightened self interest. Will Trump airdrop TRUMP to his email list?
No, it’s not liquid enough to buy Greenland.

But if it suddenly gained 77M Republican voters as users, and held them over time — very nontrivial ifs — it would gain value simply from the size of the distribution.
Read 5 tweets
Balaji Profile picture
Jan 19
A memecoin is a zero-sum* lottery.

There is no wealth creation. Every buy order is simply matched by a sell order. And after an initial spike, the price eventually crashes and the last buyers lose everything.

* It’s actually negative sum if the platform takes a cut.
If you want to gamble as entertainment, in moderation, like at Las Vegas, ok.

If you are a professional trader, ok.

But most should buy assets that retain their value over the long run.

It is sometimes possible to add use cases to a memecoin, or to keep it in the headlines to keep its value aloft indefinitely. And we’ve seen examples of that as well.

But in general, don’t invest anything you can’t afford to lose.
You are free to consider any asset a memecoin, and I’m not offended by that, but I’m happy to explain why I think Bitcoin is different.

1) Bitcoin is the base layer asset of a blockchain with ~800 Th/s in hashrate across hundreds of datacenters worldwide.

2) It hasn’t been hacked in 15+ years, and has survived several 80-90% drawdowns.

3) It has hundreds of millions of holders worldwide and a global network effect.

4) It grew gradually over time, rather than all at once, and the mining issuance schedule limits how much can be sold by any one party.

5) It has an “industrial use” in the sense that the Bitcoin blockchain permits hard to fake cryptographic proofs-of-existence.

6) It is the first of its kind and pioneered the entire space.

In short, I think Bitcoin has proven its staying power.Image
Read 5 tweets

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