The AI flippening. Crypto has also decentralized to Asia.

There's dark talent around the world, from the Midwest to the Middle East. Backing this talent is the right thing to do morally and the smart thing to do economically.

https://twitter.com/dabit3/status/1975750074748551375

To be clear: I'm not talking about sending more tech talent to the US. Instead, I'm talking about backing dark talent around the world.

That includes the many white kids from places like the Midwest who've been unfairly quota'd out of Harvard. But it also includes those outside America whose societies were ravaged by war, socialism, or communism...and who are just now starting to become productive again.

The goal is global equality of opportunity. The Internet actually now provides the basis for uniform rule-of-law via rule-of-code, starting with Bitcoin and smart contracts. We just need to execute from here.

Prime Minister Modi comprehensively defeated the far left in India.

It can be done.

https://twitter.com/theemissaryco/status/1968189876496703702

Naxalites drew their inspiration from Maoism and terrorized India for decades. Now these communists have formally surrendered.

britannica.com/topic/Naxalite x.com/thelegatein/st…

Both America and China were invested in the illusion that China wasn't already the world's strongest economy.

Psychologically, it suited the incumbent to appear strong. So America downplayed China's numbers.

Strategically, it suited the disruptor to appear weak. So China also sandbagged its own numbers.

But the illusion is becoming harder to maintain. In retrospect, all the China cope over the last decade or so was really just the stealth on the Chinese stealth bomber.

Hide your strength and bide your time was Deng's strategy. Amazingly, denying China's strength somehow also became America's strategy.

For example, all the cope on China's demographics somehow being uniquely bad...when they have 1.4B+ people that crush every international science competition with minimal drug addiction, crime, or fatherlessness...and when their demographic problems have obvious robotic solutions.

Or, for another example, how MAGA sought to mimic China's manufacturing buildout and industrial policy without deeply understanding China's strengths in this area, which is like competing with Google by setting up a website. Vague references to 1945 substituted for understanding the year 2025.

One consequence of the cope is that China knows far more about America's strengths than vice versa. Surprisingly few Americans interested in re-industrialization have ever set foot in Shenzhen. Those who have, like @Molson_Hart, understand what modern China actually is.

Anyway, what @DoggyDog1208 calls the "skull chart" is the same phenomenon @yishan and I commented on months ago. Once China truly enters a vertical, like electric cars or solar, their pace of ascent[1] is so rapid that incumbents often don't even have time to react.

Now apply this at country level. China has flipped America so quickly on so many axes[2], particularly military ones like hypersonics or military-adjacent ones like power, that it can no longer be contained.

A major contributing factor was the dollar illusion. All that money printing made America think it was richer than China. And China was happy to let America persist in the illusion. But an illusion it was. Yet another way in which Keynesianism becomes the epitaph of empire.

[1]: asiatimes.com/2025/07/thucyd…
[2]: x.com/balajis/status…

The dollar is losing reserve currency status. It’s down to 42% of global reserves, and gold is rapidly rising. Digital gold is becoming the reserve currency of the individual.

Gold is returning as the reserve currency of the state.

Original post below.

https://twitter.com/kobeissiletter/status/1962235795622035767

On many graphs of the physical world, China is in first place by a wide margin.

But if you look more closely, India is a distant but real runner up.
The same pattern holds in nuclear.
China is #1 in reactors under construction.
But India is in second place.

There are now two kinds of AI retards.

The first kind of retard uses AI everywhere, even where it shouldn’t be used.

The second kind of retard sees AI everywhere, even where it isn’t used. Usually, it’s obvious what threads are and aren’t AI-written.

But some people can’t tell the difference between normal writing and AI writing. And because they can’t tell the difference, they’ll either overuse AI…or accuse others of using AI!

What we actually may need are built-in statistical AI detectors for every public text field. Paste in a URL into an archive.is-like interface and get back the probability that any div on the page is AI-generated.

In general my view is that AI text shouldn’t be used raw. It’s like a search engine result, it’s lorem ipsum. Useful for research but not final results. AI code is different, but even that requires review. AI visuals are different still, and you can sometimes use them directly.

We’re still developing these conventions, as the tech itself is of course a moving target. But it is interesting that even technologists (who see the huge time-savings that AI gives for, say, data analysis or vibe coding) are annoyed by AI slop. Imagine how much the people who don’t see the positive parts of AI may hate AI.

TLDR: slop is the new spam, and we’ll need new tools and conventions to defeat it.

JP Morgan is updating their p(doom), but for the dollar. Just the fact that JPMC is now admitting this is a big step.

"De-dollarization has increasingly become a substantive topic of discussion among investors, corporates and market participants more broadly."

As the US deglobalizes, the globe dedollarizes.
jpmorgan.com/insights/globa…

AI PROMPTING → AI VERIFYING

AI prompting scales, because prompting is just typing.

But AI verifying doesn’t scale, because verifying AI output involves much more than just typing.

Sometimes you can verify by eye, which is why AI is great for frontend, images, and video. But for anything subtle, you need to read the code or text deeply — and that means knowing the topic well enough to correct the AI.

Researchers are well aware of this, which is why there’s so much work on evals and hallucination.

However, the concept of verification as the bottleneck for AI users is under-discussed. Yes, you can try formal verification, or critic models where one AI checks another, or other techniques. But to even be aware of the issue as a first class problem is half the battle.

For users: AI verifying is as important as AI prompting. I love everything @karpathy has done to popularize vibe coding.

But then after you prototype with vibe coding, you need to get to production with right coding.

And that means AI verifying, not just AI prompting. That’s easy when output is visual, much harder when it’s textual.

Democracy is creating startup cities.
Moving to Starbase was voting with feet.
Building up Starbase was voting with wallet.
And incorporating Starbase was voting with ballot.
This is the future of democracy.
Not a two-party system with the illusion of choice.
Instead, a 1000-city system with the reality of choice. This thread from @dpoddolphinpro has details on the new city limits & vote results. Elon's side won 212-6.

This is 97% democracy, rather than the 51% democracy of the legacy system. Because everyone who moved to Starbase was already spiritually aligned.

https://x.com/dpoddolphinpro/status/1918837843427803526

Ironically, one symptom of deindustrialization is that many commenters have never actually managed a physical business.

So. Suppose your US company imports $1M of high quality parts, and adds in its own components to produce finished goods sold for $1.2M per batch. Your gross profit is $200k per batch.

But wait! Suddenly a new 30% tariff is imposed on that $1M of parts. You now have to fork over $300k to customs before you sell anything. That’s cash you probably don’t have. Oh, and even if you do sell everything, you’re now losing $100k per batch.

With a sinking feeling, you realize your profitable business which you somehow managed to keep in America all these years has suddenly become unprofitable.

You post online about how bad this is but get shouted down by an angry mob, convinced that capitalists like you should die. You can’t tell nowadays if they’re on left or right.

Moreover, you don’t have the time, money, skills, or tools in house to build that $1M of parts yourself. You are being asked to do the equivalent of growing a maple tree when all you needed was a little maple syrup. So now you are faced with several tough choices.

(1) First, you may need to go into debt or fire people to quickly come up with the $300k in cash to pay for these surprise tariffs at customs. Even if the tariff might go away, it might not, so you have to get the cash somehow or risk having your shipment impounded.

(2) Next, you might need to reduce quality to stop losing $100k on each batch. You could order the lower quality $750k parts, grimace and pay 30% tariff at customs, and hope you can build and sell for the same price of $1.2M per batch despite the lower quality.

(3) Alternatively, you could keep the quality parts at $1M and instead raise prices to $1.5M per batch to get back your original margins of $200k per batch, which you need to pay employees after all. But that’s a big hike that your customer will probably not welcome, given that he’s likely dealing with his own tariff shock.

So: these tariffs don’t really give an incentive to build in the US. Because it’s far more expensive to build a screw factory than to pay even high tariffs on a foreign screw.

Instead what they likely mean is debt, layoffs, lower quality, and higher prices for any US company that buys parts abroad.

Just to understand how common that is: Ok, say you do.

It’s a 25% hike to go from $1.2M to $1.5M. You will lose customers. Maybe a lot. Maybe they go out of business at that price too.

Moreover, you aren’t making more money. That extra $300k is going straight to Uncle Sam. It’s a tax on the manufacturing sector.

https://twitter.com/theanon1776/status/1908238644520894556

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.

https://twitter.com/deanwball/status/1900601413148811474

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. 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.

https://x.com/balajis/status/1771899715191460187

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 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:

https://twitter.com/EricAbbenante/status/1900743275117768788

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

https://x.com/ErikGroset/status/1900964107622510797

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.

https://twitter.com/eigenrobot/status/1899650875083145613

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.

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…

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.

apnews.com/article/us-nav…

Meanwhile, China is signing free trade agreements.

https://twitter.com/mattparlmer/status/1897046044963483737

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…

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.

https://x.com/heresyfinancial/status/1894500776531337546

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.