Dan Wang - The US vs China In The 21st Century - [Invest Like the Best, EP.444]

My guest today is Dan Wang. Dan is a technology analyst and author who spent six years living in China studying its manufacturing ecosystem and tech development, best known for his new book Breakneck. Dan offers the most nuanced framework I've encountered for understanding US-China competition. We explore a critical asymmetry: it's far harder for the US to rebuild manufacturing capacity than for China to improve scientific research, with profound implications for AI, national security, and investment returns. For investors, Dan explains the "ByteDance problem"—why exceptional Chinese companies trade at massive discounts due to Communist Party unpredictability and geopolitical risks. He argues China is a "high agency" society that executes relentlessly while America deliberates endlessly, yet also reveals the societal cost. We discuss innovation, state capacity, and investing across both superpowers. Please enjoy my conversation with Dan Wang. For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠.⁠⁠⁠⁠⁠⁠⁠⁠ ----- This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Ramp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Ramp.com/invest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to sign up for free and get a $250 welcome bonus. – This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Ridgeline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Head to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ridgelineapps.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to learn more about the platform. – This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ AlphaSense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Invest Like the Best listeners can get a free trial now at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Alpha-Sense.com/Invest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://thepodcastconsultant.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠). Show Notes: (00:00:00) Welcome to Invest Like the Best (00:05:55) China's Engineering State and Social Engineering (00:12:15) US-China Competition: Innovation and Manufacturing (00:19:41) The Future of US and China: Technological and Economic Perspectives (00:25:22) Cultural and Work Ethic Comparisons (00:39:09) Investing in China: Opportunities and Risks (00:44:43) Future Equilibrium States Between US and China (00:48:32) China's High Agency and Infrastructure (00:49:58) Lawyerly Tendencies in US Society (00:53:41) Comparing US and Chinese Societal Structures (00:57:59) China's Historical Lessons and Future Prospects (01:10:39) AI and Technological Competition (01:15:30) Vertical Integration in Chinese Companies (01:26:39) The Kindest Thing

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Patrick O'Shaughnessy?

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• 0:42Patrick O'Shaughnessy?

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• 1:31Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review, along with all of our podcasts, at joincolossus.com.

• 1:56Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 2:25Patrick O'Shaughnessy?

  My guest today is Dan Wang. Dan is a technology analyst and author who spent six years living in China, studying its manufacturing ecosystem and tech development, best known for his new book, Break Neck. Dan offers the most nuanced framework I've encountered for understanding US-China competition. We explore a critical asymmetry. It's far harder for the US to rebuild manufacturing capacity than for China to improve scientific research, with profound implications for AI, national security, and investment returns. For investors, Dan explains the ByteDance problem, why exceptional Chinese companies trade at massive discounts due to Communist Party unpredictability and geopolitical risks. He argues China is a high-agency society that executes relentlessly, while America deliberates endlessly. We discuss innovation, state capacity, and investing across both superpowers.

• 3:10Patrick O'Shaughnessy?

  Please enjoy my great conversation with Dan Wang.

• 3:15Patrick O'Shaughnessy?

  What was the title of your book before Break Neck?

• 3:18Speaker 02

  We had a series of titles, and the one that I thought that would make the most sense was Move Fast and Break People: China's Quest Engineer of the Future.

• 3:27Patrick O'Shaughnessy?

  Publisher did not like that one?

• 3:28Speaker 02

  Too much like Facebook, they thought. They were right, and I think Break Neck is a nice, snappy title. I love that it mostly has a positive connotation. We made the vaccines at breakneck speed. We built the bridges at breakneck speed. Yeah, look at that coil of violence inside the title. I think this one worked.

• 3:48Patrick O'Shaughnessy?

  What about breaking people is relevant, though?

• 3:51Speaker 02

  I think the part of China that I object to the most is that, for the most part, physical dynamism in building a lot of new things, bridges, subways, highways, new homes, hyperscalers, whatever else. Some problems there, but mostly pretty positive. The fundamental problem with China is that they're not just physical engineers. They're also social engineers, and they treat society as if they were just another building material. And I object strongly to their practices around ethno-religious minorities in Tibet, as well as Xinjiang. I've checked strongly to the one-child policy, and I thought that the zero-COVID policy was also a disaster.

• 4:34Speaker 02

  I think the issue is that when feel the need to run roughshod over people, whether that's to build a giant dam, like the Three Gorges Dam, which displaced around a million people, or if it is to build a really great train track. Or if it is to stop overpopulation as they imagined it throughout the 1980s. They barely hesitate to do what are some pretty brutal measures.

• 4:58Patrick O'Shaughnessy?

  What is the, can you teach us the origins of that aspect of their society?

• 5:04Speaker 02

  So China's a country I call the engineering state because they want to engineer the physical environment, the economy, the people as well. And I want to be just pretty playful with this framework that they're a country of engineers. In part, the roots are from the fact that in recent years, if you take a look at the most senior leadership, the entirety of the Standing Committee of the Politburo had degrees in engineering. And I also draw this back to slightly older roots. If we take a look at the Chinese emperors way back in the past, let's say 1,500 years, two of China's biggest projects include the Great Wall as well as the Grand Canal.

• 5:45Speaker 02

  So a fortification system in the first case, and then a big water management system in the second case. That is a country that has built a lot of big projects in the past. A lot of the emperors barely hesitated to completely reorder a peasant's relationship to our land. And throughout Chinese history, they've really moved a lot of people around to settle the frontiers here or defeat the nomadic tribes over there. And so that's kind of my playful framework for saying that China is really ruled by this engineering mindset that really wants to build. They're often very liberal minded about governing society as if people were just a series of chess pieces to be moved around.

• 6:27Speaker 02

  And that extends from the imperial times all the way to the modern day.

• 6:31Patrick O'Shaughnessy?

  What do you think the greatest aspect of the US system is that you have the hardest time imagining getting truly adopted in China?

• 6:40Speaker 02

  Pluralism. I spent six years living in China. I moved to China at the start of 2017 to be a technology analyst at an economic investment research firm called Goff Cow Trigonomics. At the time that I moved there, at the start of 2017, Trump had just taken office. I remember watching these strange confirmation hearings for his cabinet officials right when I left. And I lived through this period when Trump launched a trade war that quickly morphed into a tech war. And I wrote a lot of research notes about what exactly was happening to companies like Huawei and other sanctioned entities. And throughout this time, I was open to the idea.

• 7:24Speaker 02

  I didn't necessarily believe it, but I was open to the idea that we're at the start of something like an Asian century in which China and India were going to become much bigger powers. By the time that I'd left in 2023, when I returned to the US to be a fellow, not too far away from here at the Yale Law School's Pol-Tai China Center in Connecticut, I thought that the experiences that I lived through, some incredible technological successes, along with worsening repression, along with a worsening geopolitical environment for China, along with the centerpiece of zero COVID, all three years of which I was there, I started

• 8:02Speaker 02

  being skeptical that China could tolerate debate, could really encourage some measure of useful dissent inside the official system, that they were going to be able to figure out these persistent problems with autocratic systems in terms of figuring out succession planning, for example, that they were capable of a great number of successes. But because there is this official voice that is meant to speak over everyone else, because that official voice is a little bit idiosyncratic in terms of all of the values that it really cares about, some degree of national power, some degree of sovereignty,

• 8:47Speaker 02

  some thin skin about anything that could be critical of the regime. I don't feel like the Communist Party has mastered some autocratic formula in order to really build the future because they cannot have anything like debate, discussion, and a long-term, stable society.

• 9:11Patrick O'Shaughnessy?

  And you have this great Andy Grove quote in the book about the difference between the mythical, magical moment of creation and innovation that the US has so dominated and this ability to innovate on the factory floor, the scaling up that China has done so well. Based on everything you just said, how do you relate to their ability to do more innovation in the future? There's that famous stat of only one Nobel laureate has ever been from China or something. I think it's that low. Say a little bit about your conclusions around their current ability to innovate and how that might change in the future.

• 9:43Speaker 02

  One of the things I want to try to do in this book is to try to tackle this idea of what is innovation. I think we here in the US, and I as someone who spends a lot of time in Silicon Valley as a research fellow at the Hoover Institution, I think there is this mythical moment of invention in which you have an amazing genius like Steve Jobs hang out in a garage or many other geniuses hang out in garages and some incredible product pops out of the garage and world-leading product takes shape. And that is certainly an American strength. I think what the Chinese have been able to do was to become a technological superpower

• 10:28Speaker 02

  without taking this Silicon Valley view of we need to just be in nature, take a lot of LSD, go into our garages, and then Apple Computer comes out. That's not the way that they tend to do things. The way they tend to do things is to... Import a lot of managerial expertise, including from Apple computers, work with Apple's standards to put together and assemble a lot of other components from the US, Japan, Germany, whatever else, and then slowly iterate and learn a million and one things on the shop floor and then build a highly sophisticated product that America is no longer really able to build.

• 11:12Speaker 02

  Still, most iPhones are being built in China, increasing share in India and Vietnam, but still, most iPhones in the world are being built in China. I think the Chinese method for becoming a technological superpower is to take this vast manufacturing workforce. There's about 70 million manufacturing workers in China versus about 12 million in the US. The 70 million manufacturing workers in China are working with some of these high-end products that cannot be built here in the US. They're learning to solve three new problems a day before breakfast. And they are really at the cutting edge of figuring out how to do new things, do it better, build up ecosystems of suppliers, build up new ecosystems of labor,

• 11:57Speaker 02

  and just generate all of this process knowledge, which can't easily be written down, which can't easily be encoded in tools and equipment, and just use that to catapult into new forms of products. So if you are an iPhone manufacturing worker who was there at the original assembly lines in Shenzhen in 2008, you know, it's no accident that Shenzhen is now the capital of the hardware industry of the world because that worker might be able to start building a Huawei phone in the next year and a few years after that, maybe start a drone company. Shenzhen is also the center of the drone business in the world. And then, maybe a few years after that, start an electric vehicle battery business, which is also highly complex and something that the US isn't building very much of today.

• 12:42Speaker 02

  So I want to try to dissolve this idea that innovation is something that is holding back China too substantially. I think the statistic about Nobel Prize winners, only a handful of Nobel Prize winners in the sciences have emerged from China. I think that is a true statistic, but a lot of these Nobel Prizes are backwards-looking by decades. We're still giving out prizes for work in Japan or the US in the 70s. It is pretty arbitrary. It's very rate limited. And what I want to propose is that China's other major advantage in being a technological superpower is that it can just wait for the Americans to invent a lot of stuff.

• 13:22Patrick O'Shaughnessy?

  To be the spark.

• 13:23Speaker 02

  Be the spark. And then they set the fire. So they're the prairie fire that uses the American spark. So I think about something like solar photovoltaics, which was invented in New Jersey by Bell Labs in 1954. The US mostly treated it as a scientific project and not a giant manufacturing industry. And now about 90% of the solar industry is in China, everything from the polysilicon processing down to the final module assembly. So China can just wait for a lot of these labs in the US, in Germany, Japan, to figure out these new sparks. And then they set off the prairie fire. And this is also one of these crucial points in the classic Andy Grove essay published

• 14:04Speaker 02

  in Bloomberg Business Week in, I believe, 2010, that the US, in my words, is really great at setting a lot of ladders in place, but its firms are no longer really great at climbing these ladders. It is really the Chinese firms that are able to climb all of these big technological ladders.

• 14:21Patrick O'Shaughnessy?

  If I oversimplify this to the US is the leader in zero to one and China is the leader in one to N scale up in manufacturing, which would be harder for the other to get? Like, would it be harder for the US to get really good at the scale up in manufacturing? Or harder for China to get good at the zero to one based on everything you know about both? What's more likely?

• 14:40Speaker 02

  I think that it is harder for the US. And the task is comparatively simpler for China. And China has already gotten significantly better at a lot of these scientific projects that used to be only the preserve of American universities and a few other places. By most metrics that we can identify, Chinese scientists are producing better qualities of work, not just quantity. If we take a look at the top 1% cited scientific papers, Chinese researchers are producing an increasing share of many of these top papers. We can see that China has produced a lot of really good scientific projects, to say nothing of the moon missions. I think there's a pretty strong sense now that China will

• 15:24Speaker 02

  Get to the moon by the end of the 2020s and America might not be able to get back to the moon, that it has forgotten a lot of these skills. That China has invested a huge amount in trying to improve its universities. We can see that a lot of American researchers, often American researchers of Chinese descent, have decided to move to China because there's better funding, there's more grad students they can work with, there's a more stable environment for them to do their science. And conversely, I think we have not seen that the US is really learning the hard parts of manufacturing really well. I think there are some successes. We can see that the TSMC fab in Arizona is actually doing fairly well now, according to the latest reporting.

• 16:08Speaker 02

  But if we take a look at many of America's apex manufacturers, companies like Boeing making aviation, Intel making chips, Detroit and Tesla making vehicles, mostly that's been going downhill. The US isn't making a huge number of iPhones, it's barely making a huge number of Apple's desktop computers. And so I feel like the Chinese are learning at a much faster rate to patch up their deficiencies than the Americans have.

• 16:37Patrick O'Shaughnessy?

  What should the US do that it's not doing? If you were the dictator of the US economy and your goal was to make it catch up in this regard as much as possible, because it seems like the consensus is, wouldn't it be great? And there's some people that are trying to do this in small ways so far. If we had manufacturing excellence back here again and controlled vertically our whole destiny, we have the spark covered. What would you do if you were fully in control?

• 17:01Speaker 02

  I am against fully in control. I want no dictator in China, and so therefore I renounce being dictator of the US. I think what I'm really thinking about for this particular book project, as well as my broader writing over the past 10 years on China, is to be less focused on policy prescriptions, fixing statutes, fixing regulations. What I really want to do is to inspire Americans to treat technology as a

• 17:33Speaker 02

  Political project as well as an aesthetic project. I think this is one of the things that China really does well is that it takes manufacturing super seriously. And the US has not taken it super seriously since various points in the 1980s. I'm fond of quoting a former chairman of the Economic Advisers who said in the 1990s in this glib quip, which is quite funny, but computer chips, potato chips, what's the difference? As if these things could all be fungibly measured in quantities of dollars. And I think there is something qualitatively different between high-end semiconductors as well as a spud.

• 18:14Speaker 02

  So I think that various parts of the American elite have decided that manufacturing is not so important. We don't need to manufacture socks and T-shirts. Fine. We don't need to manufacture televisions. And here's where I start getting a little bit nervous. We don't need to start manufacturing iPhones or munitions or all sorts of other goods. And that is where I get really nervous. What I really want is for Americans to feel the importance of having a robust manufacturing base, feel the need to try to recover some of that and err more on the side of doing more manufacturing rather than less. And so, again, I have no great policy prescriptions.

• 18:58Speaker 02

  I am critical of some of the policies of the present administration. But I think that if we are all much more committed to just building out and recognizing some of these problems that we have and recognizing China's strengths, then I think the conversation flows much more naturally about what we need to do and which statutes and regulations we need to fix.

• 19:19Patrick O'Shaughnessy?

  Can you imagine that happening without some sort of visceral crisis? Can that happen slowly and organically?

• 19:25Speaker 02

  In the 1950s, I think it was in 1957, there was the Sputnik moment. Yeah, exactly what I'm thinking of. Toy satellite emerged from the Soviet Union. And essentially, over the last 15 years, the number of politicians citing whatever new breakthrough as a Sputnik moment for the US. I once cataloged this. I found a half dozen instances of major figures that included Barack Obama. Various other US senators have cited this thing or that as a Sputnik moment. I think Obama cited a high-speed rail in China as the Sputnik moment. Some other senators cited Huawei's lead in 5G telecommunications equipment.

• 20:10Speaker 02

  Just two weeks ago, there was a Harvard professor, Stephen Greenblatt, who wrote in the New York Times, "Chinese universities are really rising in global rankings in part because if they're doing better and better science." I am quoting him essentially, "If that's not a Sputnik moment, I don't know what will be." And what I'm actually kind of afraid of is that the more we use this term Sputnik moment, which Americans are using quite often, and the less that it is actually accompanied by real action as the original moment in the 1950s was, the more that this term is just bandied about. Boy, you're a great wolf. Glibly crying wolf about this or that, and actually, there's no fundamental action. What I'm often really surprised about is just the lack of real sense of crisis

• 20:55Speaker 02

  with a lot of Americans with the rusting manufacturing base. We're chatting together in New York City. The Second Avenue subway extension costs about $2 billion per mile. Almost everything in the US is, in terms of major infrastructure, especially in big cities, ends up being over budget and over time. Voters originally approved the California High-Speed Rail by referendum in 2008. I think they said this must be finished by 2020. Right now, we're in 2025. How many people have actually ridden California High-Speed Rail? The answer is zero because the first segment is supposed to start operating between 2030 and 2033, between Bakersfield and Merced. So there's just these rampant failures all the time in America.

• 21:36Speaker 02

  And somehow, I don't really see many heads rolling from the heads of agencies or US senators stepping down because they failed at a transportation project. It's something that is more common in Asia. So why is there no sense of crisis, Patrick? Riddle me this.

• 21:52Patrick O'Shaughnessy?

  I remember this idea from The Hundred Year Marathon, the book about the very long-term planning of China to be resurgent and then be dominant, that maybe it's quite deliberate, that there is some line that operated below which no one notices the compounding that's happening in China. And with no spikiness above the line to their progress, just more smooth and steady, all of a sudden, we're going to wake up in 2050 and be like, oh, my God, what happened? How did this happen? And it's been happening for forever, for 100 years. And so what do you think of that? That it's just been deliberately quiet and below the radar? And that's a big reason that Americans haven't noticed. They don't go to China, they don't visit, they don't see it, they don't go around Shenzhen, they don't go anywhere. So it's just completely invisible to them and they're used to the status quo here.

• 22:36Speaker 02

  Well, it sounds like a problem with Americans.

• 22:38Patrick O'Shaughnessy?

  It sure does.

• 22:38Speaker 02

  Rather than with the Chinese. I mean, they are really happy to broadcast all of their achievements. They have these amazing trains they love to highlight. They're constantly inviting Americans to go, come check out these glimmering cities. China's infrastructure gleams and you only have to go over there to take a look at it. And there are plenty of people ringing the alarm, but it does feel a little bit like boy who cries wolf. So I think this is not just the sense of crisis with China. There's also the sense of crisis in California and New York, that even people here just shrug after such obscene cost overruns.

• 23:13Patrick O'Shaughnessy?

  What are the highest similarities between the two peoples, between Americans and Chinese? Obviously, you talked about some of the differences, but what's most similar between the two countries?

• 23:22Speaker 02

  A lot. And what I really enjoy is I start my book in my very first paragraph to say that Chinese and Americans are more alike than any other people. And I think this is something among people who have spent any time in China. They're always congratulating me and saying, yeah, that's exactly right. Chinese and Americans are so alike. So how are they alike? Well, they're the two great. Founts of entrepreneurial dynamism in the world. It is Shenzhen and Silicon Valley that are inventing the future and not so much Europe and Japan any longer. So there's a hustle energy, there's a hastiness, there's a sense of taking shortcuts. And a lot of that manifests in some things that don't work very well,

• 24:03Speaker 02

  but just need a lot of hustle and dynamism that you see among these people. Both countries have a sense of technological sublime. So there's these of grand projects like the Golden Gate Bridge or Manhattan or Apollo that the Americans have and the Chinese also share. And both countries are filled with elites and masses that really believe themselves to be really important, great powers in the world. And if other countries don't get in line, whether that is the Philippines or South Korea on that side of the Pacific, or the Canadians or the Danish with Greenland, then they also need to be muscled around a little bit. And so I see far more similarities than differences between these two peoples.

• 24:48Patrick O'Shaughnessy?

  What would be something that you would have put in the book if the book was designed to be a bit more like out there, speculative, unhinged? What was on the cutting room floor that you would talk about with your friends over beers more than you'd put it in a New York Times bestselling book?

• 25:02Speaker 02

  Well, Patrick, is this book not unhinged enough for you? I thought there's plenty of people who believe that I thought.

• 25:06Patrick O'Shaughnessy?

  What's the spinal attack version?

• 25:08Speaker 02

  I've gone off the deep end here, but if we had to turn it into 11, then I think I would talk a little bit more about all of the ways that China believes in the future. So I think that's another similarity between the US and China. I think they're often very future oriented. They have a sense of optimism and much more so than the Europeans, who have a sense of optimism only about the past. Both countries see themselves to be pursuing some sort of a destiny and they're driving really hard towards it. And something that I'm quite interested in is the path of Chinese futurism. There's a lot of ways in which Chinese are much more pro-technology than Americans are.

• 25:52Speaker 02

  China hasn't experienced this broad tech clash that has come across big tech companies in the US. There is no sense that tech is partisan because nothing in China is allowed to be partisan. There's no sense of a tech right. And just if we take a look at. Technology by technology, whether that is something like e-commerce, the rate of e-commerce purchases in China is something like, I believe last I checked, something like twice as high than in the US. They have much more of a sense that artificial intelligence could be a friend and something that they don't worry about taking away all of their energy. And they spend a lot more time on their phones. And this is not positive.

• 26:35Speaker 02

  This is one of the things that most bugs me about Chinese society today. Last when I went to Shanghai in the end of 2024, you can just see people being on their phones all the time. You could be with a lot of friends at a restaurant and people could be just on their phones the entire time. You could be in a business meeting and people are on their phones. And on one hand, that speaks to some sort of social dysfunction among social interactions. On the other hand, that also speaks to the fact that they are not very concerned about what smartphones may be doing to their life and their brain. And I would also want to try to write a little bit about how the Communist Party sees itself to be modernizing the country and how it feels about various technologies that include,

• 27:19Speaker 02

  let's say, space missions going to the moon and then Mars and moons of Saturn as well. And then how they view themselves to be much more of an industrial civilization relative to the Americans, which they often denounce in their terms, a fictitious economy or a bubble economy, not a financial bubble sense, but a bubble that pops very easily sense. And I think there's various strands of Chinese science fiction that could also be really worth exploring, too.

• 27:47Patrick O'Shaughnessy?

  What feels like the very bleeding edge frontier? If I were to take a month and travel around China and maybe you could pick like the four cities I would go visit to learn the most and most see the bleeding edge frontier of everything you just described, what does that feel like today that people might not fully appreciate?

• 28:03Speaker 02

  Shanghai is my favorite city in China, maybe my favorite city in the world. Why? Feels a lot like New York. And both have been port cities with an industrial past that has significantly moved away from them. Shanghai has a ton of art deco buildings because the time of its great boom in the 1920s and the 1930s was also a time when art deco really boomed. There's a river that runs through both cities and there's a sense of hustle and ambition that one can see. It is really comfortable. It's like a city, it's a little bit like New York if the French managed significant parts of it. And they put in a lot of beautiful plane trees as well as cafes. I think it's perhaps not the bleeding edge of technology as such,

• 28:49Speaker 02

  but I think Shanghai represents a bleeding edge of some element of consumption. You can just order food really easily in Shanghai. Most of the Uber, like Didi taxis that you would get into, almost all of them are electric. There are parts of the city that are superbly well managed in terms of a lot of traffic flows. You can always tell how much time a red light is going to be on and you can see this in the apps. And there's all sorts of ways in which the city is very well managed. It has a subway system that doesn't screech with this metallic noise like in New York City. And so as a place for consumption, Shanghai is really wonderful.

• 29:29Speaker 02

  I would then hop on the high-speed rail from Shanghai to go to the city of Hefei in the province of Anhui, which is pretty close by. Hefei is probably, let's say, two hours away by train from Shanghai. Historically, Hefei has been significantly poorer. It is much more mountainous. But now Hefei is the center of China's electric vehicle industry. And so there are several big EV makers that are headquartered there or have their operations there. As a city, it has been growing pretty consistently. There's a lot of Chinese first-tier cities that have not been growing quite fast anymore, but there's plenty of these second-tier cities that are growing really well. And then I think it is all.

• 30:13Speaker 02

  Always worthwhile going to Shenzhen, which is in the south, pretty close to Hong Kong. I find Shenzhen probably the most boring city in China is a lot of these big office parks, a lot of it is meant for driving. The city layout is actually there's several big hubs that are connected by highways that are pretty distant from each other. Not that much interesting culture going on. People are there to hustle and to work. But it is the headquarters of companies like Huawei and Tencent and DJI. A lot of China's most innovative companies and you can find a lot of really interesting electronics there. And you asked for fourth cities, so I guess the fourth one that I'll offer is Chongqing, which is also in the southwest.

• 30:56Speaker 02

  Chongqing, I've learned, is really big among the TikTok influencers. You can see a lot of these.

• 31:02Patrick O'Shaughnessy?

  Very futuristic.

• 31:03Speaker 02

  Very futuristic, carved essentially into cliffs. There's these shimmering lights. There's this really well-known subway station that goes through the bottom of an apartment building in one side and then out the other side. And so that is a really wonderful imagery.

• 31:17Patrick O'Shaughnessy?

  Yeah.

• 31:17Speaker 02

  It's in the southwest, which is where my family is from. I like Southwesterners. They have, I think, the best sense of humor in China. People there tend to just sit over tea and chat. They have great food. It's often very spicy and it is also really traumatic. So what else could you want than great food, great people?

• 31:35Patrick O'Shaughnessy?

  Of all these places or in a different city, if you were to send an envoy of US technology entrepreneurs somewhere where when they emerged from this trip, they would be the most inspired to come back and do things differently than maybe than they were planning to, where would you send them?

• 31:51Speaker 02

  I think maybe the places to visit are not necessarily in these big cities. I think it would be to try to go to a few factories and anchor your trip around a few factories. Now, these factories might be something like electric vehicle manufacturers in Hefei. It might be something like, let's say, battery manufacturers in Shenzhen. But wherever you can go to find some sophisticated factories making advanced manufacturing products, just go there and drop by the

• 32:23Speaker 02

  Cities along the way to see how consumers live. And I'm aware of several teams of envoys that have been traveling to China in the recent past. There's been a bunch of European clean tech investors who've just gone to China and California. I know of something like two trips that have gone on this year and three more trips that are being planned. And so people are visiting and I think that there are these marvels out there and it's only on us that we're not going out to discover it. And so if you have the chance to visit, if you have the chance to go inside a factory, definitely take it. I strongly believe that it doesn't matter what a factory is making. It is always fascinating, whatever it is. It could be the most boring products, it could be making brake pads. And I've visited a superbly interesting brake pad factory.

• 33:08Speaker 02

  I had no idea how these things were made. When I was in China, every time I had the chance to do a factory tour to perhaps eat with the workers, I always took it. And I'd tell the factory managers, I'll take, put away all my electronic devices. I'll sign whatever you need me to sign, but just walk me through the factory floor. And that's always a ravishing experience.

• 33:28Patrick O'Shaughnessy?

  Can you compare and contrast the work ethics of the two countries? I'm especially curious at the very highest end. If you took America's most productive people, maybe in the technology sector, working all the time to build AI companies or whatever, and compared it to a similar set in China, how the two compare and contrast, especially at the very high end?

• 33:47Speaker 02

  Yeah, so if we're taking a look at the, let's say, top 0.01% of entrepreneurs, I feel like there's a lot of similarities. When I chat with people who interact with their counterparts, Silicon Valley folks chatting with their counterparts in Beijing, they tend to respect each other and they look upon each other as peers. And I think there is some ways in which the Silicon Valley folks are a little bit more philosophical. They're a little bit more engaged with policy and trends and what their impacts of their companies and their technologies are on society, often because the employees make them.

• 34:25Speaker 02

  And I think maybe the Chinese entrepreneurs are a little bit more involved with thinking about the political trends, often because the Communist Party makes them. But at a work ethic level, I think they're probably pretty comparable. But if we broaden it out a little bit more, let's say the top 10% of workers, maybe here again, there's more similarities than dissimilarities. I would suspect that the Chinese are putting in more hours just trying to work harder here. And if we take a look at the median engineer, median worker between the US and China, I strongly suspect the Chinese are just putting in much, much more hours relative to the median in the US.

• 35:09Speaker 02

  In California, we love to make fun of the Google offices, which clears out by 3:00 PM on a Friday. Everyone's at the yoga studios again and not working super hard, in particular because it's Google. And that sort of thing is pretty unimaginable in China, which invented this phrase, 996, working from 9:00 AM to 9:00 PM, six days a week. And I think there's some really, maybe inspiration is really important, working smart is really important, but I think working hard is also very, very important. According to these statistics which are out there, it takes an automaker from the US or Japan or Germany roughly six years to conceptualize of a new model and actually get it out on the roads of a new vehicle.

• 35:52Speaker 02

  And in China, it's something more like 18 months to two years. So at a first approximation, they're probably working at least three times faster than the Americans are doing. There's some founding mythos of companies like Meituan. And I visited Meituan with my friend Yuchin Wei, who is also a big fan and who has been on this show. We went to visit their offices in Beijing in 2018. And part of what the story that Meituan tells about itself is that it's survived 5,000 other competitors, who were all Groupon clones that started at around the same time in something like 2015 or so. Meituan was a big company back then, and it's now one of China's biggest tech companies now.

• 36:33Speaker 02

  And just imagine how ruthless and cutthroat the executive team has to be to survive this battle royale of 5,000 companies. And so I think there are some ways in which maybe inspiration is still better here, maybe the sparks are still better here. But I do often feel that the Chinese are just comprehensively outworking the Americans in some big ways. Maybe that doesn't matter for technologies like AI, but for pretty much everything else, it pays to just work at much faster cycles and just learn much more.

• 37:04Patrick O'Shaughnessy?

  I'd love to ask some investing questions as an investing audience. If I were to shrink down the investing debate about China to a single common debate, it would be around ByteDance because it's a company that produces crazy amounts of free cash flow. Its equity trades at a tiny fraction of that free cash flow in terms of a multiple than it would if it would just take the exact same financials and put it in America. It might be, I don't know, 10 times more valuable or something like this. And so people use this as an example of like, what do you think about ByteDance? And when they're really asking, what do you think about the opportunity to invest in China? And maybe this is the right time to talk about this sort of kneecapping that happened several years ago around some of the Chinese internet giants, what happened and why, and what that tells us about the party and beyond.

• 37:49Patrick O'Shaughnessy?

  But I'd love just your general framing on how to think about these companies, which sound really interesting and fantastic, which have produced lots of free cash flow in some cases, as an investment opportunity or not? Or it just belongs in like the too hard pile for American investors?

• 38:05Speaker 02

  As a former technology analyst at Gofcout Economics, this question was on our minds every day. Our clients were endowments, pensions, hedge funds, asset allocators of all sorts from a strictly macro perspective. So I never said anything about buy, sell particular stocks. But just thinking about these broad trends of China, there's several paradoxes. The first paradox is that Chinese companies are really capable and China's economy has grown by an average of something like 9% over the past 20 years. And what has been happening to China's stock market? It's been essentially flat where the Shanghai and the Shenzhen exchanges have not risen very much. Nothing commensurate with 9% growth.

• 38:48Speaker 02

  So there's just a variety of structural factors that makes it really difficult for China's stock markets to grow at large. So that is one component of the valuation puzzle with a big company like ByteDance or Alibaba. Alibaba is listed and still relatively cheap. I think another paradox here is that, yes, a company like Alibaba or ByteDance could be throwing off so much cash, but the nature- Nature of their businesses sometimes entangles them with the Communist Party. And the Communist Party, as I think about it, resembles something like the god of the Old Testament, which can be very generous sometimes. But then otherwise, it could just randomly smite you because it's trying to pursue some sort of values-driven belief system.

• 39:34Speaker 02

  ByteDance, in 2018, I was living in Beijing at this time, was humiliated by the government when the government said that one of the suite of apps of ByteDance had violated core socialist values because it had a lot of these jokes out there, and the Communist Party didn't really like these jokes. And the founder of ByteDance, Zhang Yiming, wrote this totally self-flagellating letter saying, "We are so sorry that we did not uphold core socialist values, and I am at fault." And it is just impossible to imagine any tech CEO in America writing something like that. Alibaba, most famously, is founded by a loudmouth named Jack Ma, who shot off his mouth one too many times in the year 2020

• 40:19Speaker 02

  when he launched this blistering broadside against financial regulators, saying that they were so behind the times. And shortly after that, the Communist Party smashed Ant Financial and prevented it from going public, which is still the case today. Ant Financial is still not public. And shortly after that, the Communist Party started taking the scalps of companies that didn't include only Alibaba, but also online education, e-commerce, antitrust actions against the entire sector. So that part is real as well. And then there's a third component of all of these risks that I think investors have a hard time putting to bed, which is the suite of geopolitical issues that are particular to China.

• 41:02Speaker 02

  American investors aren't even buying Alibaba directly. It is buying from a Cayman Island entity that has contractual relationships with ByteDance. And are we really sure that we're getting something real here? It's hard to lay that fear to bed. China has capital controls, and that has deterred a lot of investment, including portfolio flows from a lot of investors. Probably the biggest geopolitical puzzle for a lot of people is that Beijing is very clear that it intends to seize the island nation of Taiwan one day. If it does so, it is pretty likely that it will face very hard sanctions from especially the US government, as well as probably all Western governments.

• 41:45Speaker 02

  We saw what happened in 2021 when Russia decided to move on Ukraine. A lot of the central bank reserves in Russia were frozen. American portfolio managers were no longer able to invest in Russia. And even McDonald's Corporation had to leave Russia because of American sanctions. Can anyone really be sure that a few years from now, sometimes some people feel like even a few months from now, Beijing is going to initiate some sort of action against Taiwan? This is not really my expectation that they will do something, but none of us can be sure that they won't do something. And so long as that fear is present, I think that goes some length to explaining why it becomes pretty unappetizing.

• 42:27Patrick O'Shaughnessy?

  By dense trades for 10 times your cash flow.

• 42:29Speaker 02

  Yeah.

• 42:30Patrick O'Shaughnessy?

  Whatever, three times.

• 42:31Speaker 02

  If you're a pension or you're a university endowment, do you really want to hold this?

• 42:35Patrick O'Shaughnessy?

  No, thanks.

• 42:35Speaker 02

  And then the US government treasury comes asking, what are you doing?

• 42:38Patrick O'Shaughnessy?

  Yeah. Thinking about potential future equilibrium states between the two superpowers. Let's just assume these are the two big important powers. One of the things that always caught my attention in the US, maybe the reason it's become less interested in global affairs is how self-sufficient it is. There's actually not a huge percent of the economy that's reliant on the outside. Pretty self-sufficient in lots of ways in terms of major goods. Understanding that is one of the future scenarios that these two just sort of exist as separate universes from each other? Is that one? What are the other equilibrium states that you could imagine 20 years from now, 30 years from now, between the two countries?

• 43:14Speaker 02

  Equilibrium is a really important concept here because it implies that no state really feels the need to shift in a big way. I think the scary thing might be that something upsets the equilibrium where one country feels under threat in some way. First, I think I only partially agree with you that the US feels very self-sufficient at the moment. You're right, by a lot of simple conventional measures, imports are something like 12% of US GDP, and it's not a huge amount. But in a crisis, it turns out that the US actually really needs something like this 12%. I think a lot about the early days of COVID, which speaks to another difference between China as well as America. In the early days of COVID,

• 43:59Speaker 02

  the US struggled to produce anything as simple as masks and cotton swabs. I was living in China, and one of the most destructive little moments I remember was going up to a factory manager around Shanghai. And this factory manager marveled to me that Americans manufacturers didn't get their act together to produce really important goods. And in this Chinese guy's formulation, too many of these American companies ask themselves whether making masks and cotton swabs is part of their core competence. And for very few companies, that's where their core competence, and then they don't make it. Chinese companies say that making money is their core competence. Therefore, they go make what the market demands, which then was masks and cotton swabs.

• 44:44Speaker 02

  And so I was grabbing masks made by Foxconn, which normally makes iPhones, and by JD.com, which is one of China's biggest e-commerce retailers. They just decided to retool a lot of their factory lines to produce these things that the market needed. Then there was some complacency and lack of hustle among American manufacturers to actually produce these sort of things. In the early days of the pandemic, a lot of consumer goods were in shortage, a lot of furniture was in shortage. Random fruits ran out, depending on which part of Mexico had a COVID outbreak at that time. And just generally speaking, I think that the American manufacturing base has not covered itself in glory over the last 20 years.

• 45:27Speaker 02

  It's not just Boeing, Intel, Tesla, Detroit broadly. There's all sorts of rust and inability to move. If we take a look at China's energy imports, it is importing less and less, in part because... It has scaled up so much solar capacity within China. So by the end of this year, China is expected to add 500 gigawatts of solar capacity. The US is expected to add about 50 gigawatts, so just one order of magnitude more. There's 33 nuclear plants under construction in China right now. There's zero under construction in the US. And the Chinese have been much, much more successful in shifting its consumers into buying electric vehicles.

• 46:09Speaker 02

  So at this point, by the end of this year, one out of every two cars sold in China will be electric. And so they've been able to blunt this dependence that they have on foreign energy. It's not growing so much, and perhaps it will decline soon enough. And there's all sorts of ways in which they're also very serious about food self-sufficiency. They're also very serious about semiconductor self-sufficiency. And so this is again where I see if the US and China are in competition, China's billion much better at patching up its own problems than the US has.

• 46:40Patrick O'Shaughnessy?

  The factory story, the retooling to make masks and cotton swabs, some very high agency thing. Which society do you think is higher agency?

• 46:49Speaker 02

  I think it's China. I think China is a high-agency, high-T society. Once they decide to build this infrastructure, it comes out and it gleams. Once California decides to build infrastructure, it's 17 years, and it's going to be 20 years before anyone is able to get close to riding high-speed rail. There's various ways to measure something like social trust in China by a lot of conventional measures. Like you lose your wallet in the park nearby. If someone returned it to you in China, that share is rather low. But I was thinking of this definition of social trust from the scholar Francis Fukuyama that said that. He said something like, "Social trust is the measure of spontaneous coordination

• 47:30Speaker 02

  of people able to get together quickly, make decisions quickly, and act quickly." And at least in the early days of COVID, that's something that China really had, where manufacturers were working really well together. Tech companies were making it really clear where the fever clinics were on the mapping services. And the government really stepped up in a big way as well. And the US, at least in 2020, really did not do any of these sort of things.

• 47:53Patrick O'Shaughnessy?

  We haven't talked at all about the lawyerly tendencies of US society. You talk about engineering in China and the US being run by lawyers. What are the pros and cons of that very different orientation?

• 48:05Speaker 02

  The pros of the lawyerly society are a guarantee of my favorite value in America, which is pluralism, that there is some measure of robust debate that is guaranteed in the US. And one of the things that really thrills me about having moved back to the US over the last two and a half years now is that there's just always energy among Americans to try to diagnose their problems and try to improve on them. Two weeks ago, I went from New York to Washington DC to speak at the Abundance Conference in DC, and that is just one strand of the recognition that America has lost a lot of

• 48:48Speaker 02

  crucial abilities to build homes, transit, all sorts of infrastructure, and we need to get a lot better. I think that folks in New York, and you're one of these rallying points, are helping people to understand the world as it is a little bit better, to really try to improve a lot of different things. I am plugged into several conversations at the Hoover Institution, and there's a tremendous sense that a lot of things in the US are not working and we need to get better. The problem is that the US is not very good at execution. And even though, you know, we've realized for a long while that the manufacturing base is quite deeply broken in this country, the US has not really been able to fix this in any compelling ways. There are complaints among the American left about what should be done, there are complaints

• 49:32Speaker 02

  about the American right about what should be done. It's very strange to be in this political system where elections usually have these razor-thin margins, and then one side takes over, seriously overreaches, and then the other side wins by really thin margins and then overreaches again. I think the fundamental problem among lawyers is that they are, for the most part, protectors of the rich. And that is essential in some ways, because you can't build companies worth $4 trillion like Nvidia without substantial legal protections. We need a lot of lawyers in place for Nvidia to feel comfortable about doing everything that it's doing. But I think the society won't work well if it is mostly about serving the rich. So in New York... New York City, where we're chatting now.

• 50:17Speaker 02

  The rich don't really have to worry too much about affordable housing. The rich have access to these skinny skyscrapers that you can see on the skyline. The rich don't really have to deal with the problems of the subways, which are just, again, screechingly loud and services really quite bad compared to any European or East Asian country. And I think that the lawyers need to get out of the way a little bit in order for the US to build things for the broader masses. I'll just offer two anecdotes that I think about a lot, both relating to trains. When I took the Excela train down to Washington DC two weeks ago, the Excela train works okay, it's not always very reliable, and I find that it is really, really wobbly.

• 51:02Speaker 02

  And while I was on the Excela train, I came across this headline, "Excela train's getting an upgrade, we're gonna get new trains." And I was happy about that until I read deeper into the article. It said that new trains are going to be something like 11 minutes slower than the old trains. And so, you know, at a first approximation, we're moving slower than before. The foam seats are better, they're more comfortable, but we're gonna take longer to actually get to DC. And I substantially wrote this book in my cloistered office at Yale University. And every so often, I was tired of monastic life and I decided to be seduced by the pleasures of New York City. I take the Metro North train to get from New Haven down to New York City. That train is highly reliable, it's a little bit slow.

• 51:46Speaker 02

  And I was radicalized when I found a timetable from 1914 in which it was faster to get from Grand Central Terminal in New York to New Haven about 100 years ago than it is today. It's not totally apples-to-apples comparison because the train now makes many more stops. But again, at a first approximation, we're moving slower than 100 years ago. And that is in part because of the lawyerly society in which a lot of homeowners in Connecticut put up their hands and said, "We shall not have a rail line running through our backyard." And that proposed route of Amtrak turned out to be much more squiggly after these homeowners decided to use their very expensive lawyers to sue and say, "No way in our backyard." And that has added quite a lot of time to and quite a lot of expense

• 52:29Speaker 02

  to these projects which cannot be very technocratically, rationally designed. And so, this is where I'm hopeful that lawyers aren't going to get in the way of absolutely everything, especially the sort of broader infrastructure that serve the masses' needs.

• 52:43Patrick O'Shaughnessy?

  It reminds me of this idea that if you study Eastern portraiture versus Western, in the West, almost all of them are your face is most of the canvas, whereas in the East, often the portraiture is a small person amidst the bigger landscape, quite representative of the two different styles. I'm curious, just for a side quest for a minute, if you had to write a sequel to the book about a country that's not the US or China, what next country you would be most interested in writing about and why?

• 53:09Speaker 02

  I think this would be challenging because I really believe that the future will be determined by these two big countries. That I think what's most important is for these two countries to get along because my very first page, I denounce Europe for being a mausoleum economy where things are very beautiful, but things are also very dead. And I don't quite yet believe that India and Indonesia are quite ready yet to challenge these two bigger powers. But I think this gets back to the broader question of the equilibrium that you brought up. And I think what we don't want is for there to be too much destabilization. I think most Americans, as well as most Chinese, ought

• 53:52Speaker 02

  to be thinking about is, how do we avoid a conflagration and how do we avoid a hot war? Because World War I took something like 10 million lives. The World War II took something like 50 million, and we don't want to get to World War III, in which tens of millions die. There's a scenario in which the US strategy over the last 30 years has been to hope that markets and the internet will change China for the better and change this communist system into something more like a liberal democracy. And that has not worked out. And that, I think, could be firmly laid to bed. And so now we have to ask, is

• 54:34Speaker 02

  there some sort of uneasy equilibrium that we can really stumble into, avoid a hot war? And at least my guru at the Hoover Institution, historian Stephen Kotkin, would say, what we need is a new Cold War, in which the two countries decide not to have a very big But rather to compete on the level of the systems to deliver better for the people. Now, I think a lot of people are nervous about this Cold War framing, including me. The Cold War was not very cold for a lot of other countries, say, something like Vietnam. The Cold War created so many crazy abuses within the Soviet Union as well as the US and the name of competition.

• 55:16Speaker 02

  Maybe Cold War is not the right analogy because there's huge trade and integration between the US and China right now. Whereas there was essentially no trade between the US and the Soviet Union in the past. But then we should come up with some new term really to try to understand both of these countries and to try to keep competition on the level of companies as well as who's delivering the better vision for their own people, rather than anything bigger involving a conflagration in the Pacific, God forbid.

• 55:44Patrick O'Shaughnessy?

  The USSR collapsed at the end of the Cold War. What is China doing most differently from Russia that you think will not lead to an eventual collapse of the Chinese system?

• 55:55Speaker 02

  I think the Chinese are excellent students of history. And I think the first, there's maybe several countries that they really study. First and foremost, it is the Soviet Union that they diagnosed the problem of the Soviet Union to have been in the late 80s when Gorbachev tried to achieve both economic reform as well as political reform at the same time. And the story of the Soviet Union is one in which political systems sort of imploded. And then nobody picked up the pieces really to try to get the system back up again. And so that's the first thing that they try to avoid. They also really try to avoid the fate of Japan, which suffered an economic implosion by the late 80s

• 56:38Speaker 02

  and also never quite got back up again. So I think the first reason to believe that China will not suffer a political collapse like the Soviet Union or an economic collapse like Japan is that there's history here to suggest a better path forward for them, that they want to avoid a lot of these mistakes. Whether they could actually avoid some of these mistakes is a different question. Maybe they'll come up with some whole new, novel, interesting mistake that creates some sort of a collapse in either scenario. But I think history will not repeat in exactly the same way. China is a Leninist system like the Soviet Union, but it has a thriving, substantial consumer economy, which is doing superbly well in terms of creating all sorts of products

• 57:22Speaker 02

  that the Soviet Union never created. All it did was heavy industry, it produced a lot of steel and chemicals, very little goods for its people. China is not like Japan for a variety of ways, but one that's quite pertinent to me is that if we take a look at Japanese exports throughout the 70s and the 80s, a product from Nintendo, or Mitsubishi, or Toyota was almost entirely Japanese value-add. These were Japanese companies making Japanese products. And part of the complaints of the Reagan administration was that Japan was too closed and Japan needed to open up. By contrast, China has been much more open than Japan. China, most famously, is well-known for building Apple's iPhones and Tesla's vehicles.

• 58:06Speaker 02

  And the communist system recognized that it was so far behind technological leaders that it mostly threw open the doors, with some restrictions, to Western companies producing China and then previously make mostly foreign goods, only assembling these different components. Until at this point, a great deal of Apple's supply chain is made up of Chinese components as well. It's not quite the Soviet Union, it's not quite Japan, and I think there's this ineffable Chinese characteristics also thrown in, which the Chinese people, I think, are highly entrepreneurial, much like the Americans. They're highly dynamic, they take shortcuts. There's a million and one hucksters trying to make a dime and trying to profit and trying to found companies.

• 58:48Speaker 02

  Maybe we can say that China right now has some of the control, paranoia of the Soviet Union, some of the manufacturing excellence of Japan, and some of the American entrepreneurial hustle. Combine all of that, and I think that is part of the reason that I think that China is going to be a pretty formidable power going forward.

• 59:09Patrick O'Shaughnessy?

  I think it was our friend Eugene that first gave me the Seeing Like a State book by James C. Scott. What do you think of just the very abstract idea that top-down systems just don't work as well over the very long term as bottom-up ones do? That in the near term, they actually can work faster and better, but the roots aren't as deep and as natural, and therefore, they're just more fragile top-down systems than bottom-up ones. Do you think that holds credence in this argument between the US and arguably a more bottom-up society and organization than China?

• 59:37Speaker 02

  I do. I love the work of James C. Scott, former Yale political scientist anthropologist, who very sadly passed away about a year ago. But I've read pretty much all of Scott's works. And if I can throw in another Scott work for our listeners, it is The Art of Not Being Governed, which is about a highland Southeast Asia, these very mountainous parts of essentially a southwestern China, this region that is about as big as Europe, and that includes southwestern China, as well as Vietnam, Laos, Cambodia, northern Thailand, in which various peoples have decided to run away from the state, whether that's the Burmese state, or the Tibetan state, or especially the Han Chinese state. They were wary of conscription.

• 1:00:21Speaker 02

  They were wary of taxation, and they didn't really like assessors coming over to look at their grain all the time, sometimes bearing disease. And Scott was really remarkable for having spent quite a lot of time in these zones, talking to people who have oral histories, which gives them more malleable ethnic identities, and they can run away much more effectively. I think about this a lot because I've spoken to a lot of Chinese who have decided to run away exactly in these highlands. And again, my family origins are in Yunnan Province. This is exactly the part of Zomia, a highland Southeast Asia, that James C. Scott has written about. I feel like people from where I'm from, Yunnan Province, have some of the more libertarian attitudes in China.

• 1:01:06Speaker 02

  They really don't like the state looking over their shoulder. Many of them practice agriculture up in the mountains, which is much more difficult for the state to come over and assess. And I think part of the... Problems of the engineering state is that many people have decided to retreat to these different parts of these different corners of the world. In 2023, I went on this walk and talk with Kevin Kelly around Chiang Mai. And we walked from one of the highest mountains in Thailand down to the city of Chiang Mai. And afterwards, my wife and I spent a lot of time with mostly young Chinese, young Chinese who are in their twenties or early thirties, who ran away from China, decided that the

• 1:01:51Speaker 02

  censorious nature of the overbearing state was more than they could bear. And they decided to make art, dabble in crypto, smoke dope in the mountains around Chiang Mai. And I thought, it is really strange that Xi Jinping is trying to achieve something he calls the Great Retravination of the Chinese people. And there's a lot of young people who are saying, no, thanks, we'll give that a pass. There's a lot of millionaires. By one count, 14,000 millionaires departed from China in the year 2023 to move to Singapore, to move to Japan, to move to the UK and the US, in part because the Communist Party has smashed a lot of their businesses. There's a lot of people who are not so creative, who are not necessarily very wealthy, who

• 1:02:32Speaker 02

  decided to hop on a plane to Ecuador, where they don't need a visa, walk across the Darien Gap into the United States. And at its peak in 2024, there were several months in which USCBP was apprehending something like 30,000 to 40,000 Chinese nationals at the Texan border. That, to me, is also something that is really striking, that so many people are willing to do this dangerous trek essentially to escape from China. I think that China will not become anything like a cultural superpower, in part because the engineers are so censorious, they're so thin-skinned, they censor everything they can't understand, which is a lot. And if you take a look at a lot of aspects of cultural production, whether that is books,

• 1:03:16Speaker 02

  novels, films in China, that has really become much more constricted over the past 12 years of Xi's rule. I think that China will not become anything like a big financial superpower, in part because the control tendency Of the engineers is to impose a lot of capital controls. And that makes it much more difficult for foreigners to want to hold RMB. If last I checked, RMB is still only made up about 4% of global trade volumes. I want to make this narrow case that the engineering state is really good at building stuff. They have the manufacturing workforce, they have the entrepreneurial enthusiasm. They have the government support in order to keep getting better and better at a lot of advanced manufacturing industries.

• 1:04:00Speaker 02

  But even if China pisses off a lot of its own people, pisses off a lot of its neighbors and as well as a broader set of people, the very fact that it can make manufactured products better and better, that is a pretty significant threat to the United States. Because there is a chance, I think, that they will do really well on artificial intelligence as well. But even if they just get much better at making vehicles, I don't want to see the US further deindustrialized. Right now, there's 12 million manufacturing workers in the US. I don't want to get in a scenario where a decade from now, we have only 6 million. I think that is going to hurt the economy and introduce greater political dysfunctions. And even if the engineering state does very well in the short run for James C. Scott reasons,

• 1:04:45Speaker 02

  and even if in the longer run, it does not do so well, in part because people want to leave, in part because of demographic problems. You know, the future is made up of a series of short runs. If China is really able to do super well in the next five years, 15 years, it might be enough to subdue America in pretty substantial ways later on.

• 1:05:04Patrick O'Shaughnessy?

  That's incredible answer that James C. Scott asked. One of the things that jumps out is the sensitivity of the Chinese model to the person in charge and the people aligned with him. If you had had this conversation with Deng Xiaoping was running China or so important in China, maybe the trajectory we would have projected to be very different than it's ended up being. I'm curious what you think the three, four, five people that have been the most important, maybe since Mao or something, and how they've changed the trajectory of China? And how likely it is that the next person is more like Deng Xiaoping or more liberal or more pluralist leanings or not? It's such an interesting aspect of this whole trajectory.

• 1:05:39Speaker 02

  Yeah, I would bet not. Because first, I agree with you that the Chinese system is really under the sway of a single leader. And that is almost by design. I mean, the authority in China is meant to vest in the Politburo Standing Committee, which is made up of seven to nine people. But it is also possible, as we've seen in the case of Xi Jinping, really to dominate the entire system. And what Xi says more or less goes. The part that I would hesitate to fully imagine when Xi Jinping goes away, that the system will be different, is that even if we have a Deng Xiaoping-like figure, China might still have a lot of dysfunctions. Because I would say that Deng Xiaoping introduced a lot of the dysfunctions

• 1:06:23Speaker 02

  that carry over to Xi Jinping. So I think Deng Xiaoping did, let's say broadly speaking, Deng Xiaoping ought to be best known for being the architect of reform and opening, which liberalized the economy. And that is a tremendous good. That is perhaps the most tremendous economic good ever in the history of humanity, because about 1.4 billion people were lifted out of poverty and a few hundred million of those are living very comfortable lives. And a few million of those are living lives on par with some of the best in the United States. And that is an extraordinary achievement. On the other hand, Deng Xiaoping was also very autocratic himself. And he was, in the words of one historian who was quite senior in the party,

• 1:07:08Speaker 02

  he was half a Mao. He was someone who was really, really ruthless towards his political enemies. He was never quite able to figure out succession planning. He fired two of his handpicked successors and almost fired his third one, Jiang Zemin, who ended up running the country. But he was someone who was also really famous for ordering tanks into Beijing. For a while, throughout the 1990s, people labeled him, as well as a few other Communist Party members, the butchers of Beijing, because they ordered in the tanks. And so Deng Xiaoping did not permit substantial political reform. He promoted tremendous economic reform, but he did not figure out this problem of succession.

• 1:07:51Speaker 02

  And so we can maybe situate Xi Jinping in a direct analog of Deng Xiaoping, because he is also grappling with questions of succession, what comes after him. And he has been pretty ruthless towards people he has purged. And so This is where I'm skeptical that there are deep pluralist genes in China. I think that China throughout its imperial history has substantially lacked a liberal tradition. Liberal tradition, meaning one that is interested in restraining the power of the emperor and promoting the power of the individual or the family or the corporation. And so I think that the future of China, my bet would be that it looks politically much more similar in the future as it does today.

• 1:08:33Patrick O'Shaughnessy?

  I've been a little surprised since the original DeepSeek moment, which for at least a week, really shook the US in terms of the progress that had been made in AI in China, that I haven't heard more about it since. So I'm curious, your impression of AI in China, the country and the party's orientation towards it, the state of the technology relative to the leading US research labs, et cetera. What does AI in China feel like to you today?

• 1:09:00Speaker 02

  Yeah, I think AI, for me, what is most important is going to be in the next five years. Today, I think that the US still has a decisive lead on most aspects of artificial intelligence, mostly because it has the compute resources here. It has the leading Nvidia chips and China does not. But if we are going to have much more AI in our lives, I think the competition is much more of a toss-up. Again, looking forward in the next five years, which is a lifetime by the standards of a lot of AI, maybe a shorter time span for the rest of us. And here is where I think China actually does have a lot of advantages in AI relative to the US.

• 1:09:41Speaker 02

  So if we have much broader AI in our lives, we're going to be using AI for all of our queries, we're going to also demand much more power than we currently have. And the US has not been doing very well on adding new power to the grid. As I said, it is only going to be adding something like 50 gigawatts of solar this year relative to 500 in China. No new nuclear plants under construction. Maybe that will change because the Trump administration is more friendly towards nuclear. But the US has simply not added much by way of power. And China, I think, as a civilization, as the engineering states Civilization is just very interested in making sure that no heavy industry ever goes hungry for power.

• 1:10:22Speaker 02

  And so just the scale of the, you know, electrical production in China is just vastly outpacing the US. The question of talent is always very fluid. Right now, how many researchers really matter for artificial intelligence? I don't know if the figure is more like 10,000 or more like 1,000. And within the 1,000, it seems like China has a lot of really good talent, which is represented by DeepSeek earlier this year, which showed that it's not only Silicon Valley that can produce really good reasoning models. And at least from what we can tell in some of the publicly listed hires for Meta's superintelligence lab, a substantial number of these really elite, I think there is 11 engineers who are publicly disclosed,

• 1:11:08Speaker 02

  something like seven of them had gone to Chinese universities, and I believe they're all Chinese nationals. And I think there's some sense of nervousness among some folks in Silicon Valley that some of these really elite engineers might pack up their bags and decide to repatriate back to China for a variety of reasons, either because ByteDance is offering a much better, a comparable pay package to them, and they can live a much more comfortable life in Beijing or Shanghai. Maybe they just want the better noodles, which California doesn't really have. Or there is some sense in which they feel anti-Asian hostility in the US. They fear the rhetoric of the Trump administration. And there is some nervousness among Asian Americans, even friends I have here,

• 1:11:51Speaker 02

  that the Trump administration is going to turn super populist and drive out all of the Indian engineers, as well as the Chinese engineers as well. And so within this talent pool, if a substantial number of them decide to repatriate, then it's a little bit tough to say exactly who's ahead in talent, but it's possible that the Chinese will have some sort of lead here. And then there's also a question of if AI gets much better. What will the Americans use it on? What will the Chinese use it on? America is much more of a services-driven economy. Maybe we have all of the data to automate our healthcare sector as well as our consulting sector. And the Chinese are going to have the data to automate their manufacturing sector. And to be very glib here, I'll say that maybe America gets a much better McKinsey

• 1:12:37Speaker 02

  and China gets a much better Foxconn. And then they're going to use this much better AI Foxconn to produce a lot more drones and munitions and ships as well. And the US simply doesn't have the training data, the process knowledge in place, really to get much better at manufacturing. And so maybe right now, we haven't seen another big deep-seak moment. But I think the future is very much up for grabs. And China right now has really good talent, really good reasoning model. It is now chips compute constrained, but seems like Donald Trump wants to make a deal and impose an export tax of 15% on Nvidia, but then give a lot more compute to China. And I think that the future is going to be a really tight race between who can get to AGI and who can deploy AGI in a much better way.

• 1:13:23Patrick O'Shaughnessy?

  What is the most interesting thing to you about Huawei?

• 1:13:26Speaker 02

  I think Huawei represents a Chinese company that is super vertically-integrated, which does a little bit of everything. Part of the founding myth of many Asian companies. I think the founding myth of Foxconn, which makes all the iPhones, the Taiwanese manufacturer, started by making something like the plastic television knobs before it made desktops and iPods and iPhones. I forget something related to switchboards. It's something that Huawei started on until it is now a company that makes 5G equipment, that makes all of these mobile stations, that makes a lot of mobile handsets, and kind of a million and one things. And according to parts of Washington DC, it also has a really close relationship with

• 1:14:11Speaker 02

  the People's Liberation Army and making some sensitive military goods for them as well. But there's a lot of these Chinese companies that decide, why not? Let's just be vertically-integrated. We're not only going to make all of our electric vehicles, we're also going to make the batteries, and we're also going to make some of the chips that are powering the vehicles as well. And there is this element of vertical integration in which, to go back to one of our earlier points, I also want to set up a contrast between two of America's handset companies. First, let's compare Apple. What is the valuation of Apple now? It's about three, four trillion dollars. With Xiaomi, whose market cap is, I don't know, not more than one-tenth of Apple's valuation,

• 1:14:54Speaker 02

  probably not even one-twentieth of Apple's valuation. Apple has been famously working on a car for about 10 years named Project Titan, until it decided to throw in the towel a couple of years ago. Xiaomi, which, let's say, is worth one-twentieth the level of Apple, which is mostly a handset maker, as well as a maker of rice cookers and fans and all sorts of other household consumer electronic goods. The CEO of Xiaomi declared in 2021, "I'm going to invest $10 billion in making my car. This is going to be my focus. This is going to be my last great entrepreneurial venture." And what happened afterwards? Again, Apple threw in the towel and decided not to make any vehicles. Xiaomi's first electric SUVs are now on the streets in China.

• 1:15:39Speaker 02

  They keep raising their production quantities because a lot of people really love these SUVs and they love these cars. And most striking to me, a few months ago, there's this very well-known German racecourse in western Germany called Norberg Ring, which has this racetrack named the Green Hell because it is twisting through these mountains in western Germany. And Xiaomi, in its first time submitting, going into this race, making its very first car, won one of the speed records, beating established companies like Porsche and BMW. And this is a company that just had the manufacturing workforce, that had the ecosystems of suppliers, that had, to some extent, government support, that was really able to do something

• 1:16:23Speaker 02

  that a much richer company was unable to do. And so this is where I come back to this idea. Are we undervaluing China? Should we really be looking at some of these measures, like Nobel Prizes? Are we undervaluing China because we are thinking too much about the market valuations of big companies like Nvidia and Apple? Maybe what actually matters is a company saying that it's going to do something and actually achieving it. And once it achieves it, it is making some really good products that are pretty world-beating. And so that's something that we see with Huawei, we see with Xiaomi, with a lot of other companies living in this fiercely dynamic entrepreneurial environment, tearing each other apart through market competition, sometimes underhanded, and producing great technology champions along the way.

• 1:17:09Patrick O'Shaughnessy?

  So if we were to step back and you frame this whole thing as, okay, the engineering state has its strengths and weaknesses, the lawyerly state has its strengths and weaknesses, and these are the two superpowers. If you were to boil the whole story down to the simplest narrative that you could imagine, how would you do that to like a 15 year old or a 10 year old, a kid that's trying to understand the trajectory of the world that may not understand the subtle difference between lawyerly and engineering? If you attempted to boil it down even to that level and create the best story for them to understand what's happening?

• 1:17:41Speaker 02

  What I would point out is that when China decides to do something, it moves really quickly. It is much more of a whole of society, a whole of government effort, and it is much more serious about doing a lot of big projects. And sometimes that goes disastrously off track because they end up committing to something like the one child policy or zero COVID, in which the number is right there in the name. It's almost an engineering project. There's no ambiguity about what these sort of things mean. Whereas the US is much more deliberative. It thinks a lot about things. Often it fails in some of these goals that it tries to do.

• 1:18:27Speaker 02

  Something like the US couldn't possibly have achieved zero COVID because there was no possible enforcement mechanism to get people actually staying indoors and not going outside in big way. So the US doesn't get stupid ideas like zero COVID, but it also doesn't get things that it says that it really wants to do, like California high speed rail. And so what I would say is that one of my conclusions, one of my new realizations after writing this book is that maybe there can be too much state capacity. Maybe you don't want a state to be too efficient. If the engineers are too efficient and they really decide to track society to go off track, they can go really off track before there's any course correction. So you want the ideal level of state capacity.

• 1:19:09Speaker 02

  That's much more than what the US has right now, but maybe a little bit less than what China has.

• 1:19:14Patrick O'Shaughnessy?

  Are there any other companies that, again, putting my investor hat on Huawei is a great example, Xiaomi is a great example, Foxconn is a good example. Any other companies that you think are the most interesting to study for people that are interested in what's working so well in China and may want to go visit, you know, one of their factories or whatnot? What's the canon of the other couple of companies that should be studied in detail in addition to the ones that we've talked about so far?

• 1:19:38Speaker 02

  I would love to get to know better company like Meituan, which again is one of these octopus-like conglomerates. When I visited Meituan in Beijing in 2018, they told me, we have about 50 core business lines. Then we went, what? How can you have 50 core business lines? But I think they really meant it. There's a lot of managers. They're really intent on making a lot of these different things work. There is a great book about Huawei written about the company by my friend Eva Do, a former reporter with the Wall Street Journal, now a reporter at the Washington Post called House of Huawei, released earlier this year.

• 1:20:16Patrick O'Shaughnessy?

  Really good.

• 1:20:17Speaker 02

  I endorsed it and I think it is really good. And so I would like to try to understand companies also better like Alibaba, BYD, as well as plenty of up and coming companies that I've never heard of, that I think are working in some pretty interesting things. Deepsea, all of these companies deserve much better profiles than what the Chinese government has allowed any reporters or any writers really to try to have access. These companies generally don't like to talk to foreigners at the best of times. And then you have overbearing states that in some cases forbids Deepsea from chatting with foreigners. But if we can get some real understanding of these companies, that would be amazing.

• 1:20:55Patrick O'Shaughnessy?

  Do you think that that's in the cards? Do you think there's a version of the world where those profiles are really good for China? If they're true and honest and high access?

• 1:21:03Speaker 02

  I think it would be great for China. I want the US to be 20% more engineering and I want China to be 50% more lawyerly. I think that it would be amazing if the Chinese state actually respected the creative impulses of its own people. I think it would be amazing if individual rights could actually be respected. I think there's a general Asian reticence towards real press and you can see this also among the Koreans as well as the Japanese. But right now in this environment, I don't really see it in the cards because the US and China are in some form of an adversarial relationship. Maybe Donald Trump will change that once he visits Beijing, as he's likely to do later this year. I'm not really counting on it. I think these two countries are pretty adversarial

• 1:21:48Speaker 02

  and I don't see either the Chinese state or the American state really waking up one day and deciding that we're going to trust the other party and then we're going to be friends.

• 1:21:58Patrick O'Shaughnessy?

  I wouldn't ask you to give me a probability or something of a hot war because it's just too freaking hard. It's too complicated. But if your life depended on creating that probability, what are the variables that you think will most influence whether or not one happens?

• 1:22:11Speaker 02

  I think that the flashpoints would be most likely something over Taiwan. That's kind of the obvious one. If the Chinese ever decide that their window is closing in actually reunifying the island, or in their words, liberating the island into socialism, either because the US is going to be much more militarily strong, the Taiwanese are going to be much more militarily strong, there's some sort of crisis in China, then perhaps they decide to move. Right now, I see the status quo persisting because the status quo works well for the Chinese, the Taiwanese and the Americans. But if there's some big shift in strategic calculations, then that's always a sign of nervousness.

• 1:22:55Speaker 02

  Maybe there's a flashpoint in the South China Sea, in which the Philippines and China right now have really been ramming each other's ships. And the Philippines has historically been a US protectorate, US ally. That could be a flashpoint. In 2020, shortly after the pandemic broke out of Wuhan and the world was really nervous about this respiratory virus. On top of this, the icing on the cake was that there was a minor border conflict between China and India way up in the Himalayas, which was fatal for a number of Chinese as well as Indian troops. And China is surrounded by, I think, something like 25 countries. It just has a lot of neighbors,

• 1:23:37Speaker 02

  some of whom, like North Korea and Russia, are not very nice and they don't fully trust themselves. And so maybe there is some sort of a border conflict that erupts with one of China's near neighbors. What I wouldn't think is likely is for

• 1:23:55Speaker 02

  The Americans that try to invade mainland China, I don't see that the Chinese would try to seize Oregon. What would they do with Oregon? It would be some sort of a conflict somewhere in the Pacific that erupts into a bigger war. And for something like Taiwan, that's not one of the things that really keeps me up at night right now. Maybe it could happen, but generally, if you bet on peace, that's been a pretty good bet, and I expect that will continue. The scary things are some sort of a totally unpredictable border conflict, as we saw in 2020 with India, or some ship sinking with respect to the Philippines that escalates from there.

• 1:24:35Patrick O'Shaughnessy?

  So you've been writing about China for a long time. Your annual letters have been some of my favorite things to read for many, many years, your research too, back when you were doing that. In the process of writing this specific book, did your mind change in any major ways or surprising ways?

• 1:24:50Speaker 02

  Yeah, I think that I feel more strongly that China will be a tech superpower in the way that it arguably already is. Mostly as I wrote my chapter about Shenzhen and process knowledge and just really trying to conceptualize Shenzhen as an ecosystem in which university professors and VCs and factory managers and workers are rubbing shoulders with each other. They're solving a lot of new problems every single day. They're not necessarily affected by policies from either Beijing or DC. And that gave me this metaphor of an engine of technological momentum that I think will not be derailed very easily

• 1:25:32Speaker 02

  because a lot of these investments have been in place for 10 years, some for 15 years. And there's no easy thing, not export controls, that will derail this tech engine very easily. At the same time, I think I appreciated How traumatic the second half of the 20th century has been for so many Chinese. You thought you were done with this rule of the Mao years, the famine of the Great Leap Forward, the total insanity of the Cultural Revolution. Deng Xiaoping comes along, he starts to make everyone richer through reform and opening. And then he unleashes the one-child policy, which I describe as a campaign of rural terror, meted out against overwhelmingly female bodies in the countryside.

• 1:26:17Speaker 02

  This was something that I never quite realized just how awful it was to so many people. You think of one child, and that sounds like nice and clean, but you don't associate 300 million abortions that China conducted throughout this period, 100 million sterilizations throughout this period, tens of thousands of Chinese girls being adopted by American couples who are living here because their parents had to give them up. And this was also the time period when I was writing this period that my wife suffered a miscarriage. And it was exactly during this time when I was writing about the traumas of other female bodies that something like that happened.

• 1:26:57Speaker 02

  I'm always trying to communicate that China could be very powerful, and it is extremely capable. At the same time, it is also highly capable, not just technologically, but inflicting these traumas and horrors upon the population. And we can and should recognize both of these things, that repression can grow worse while technological dynamism grows richer. And I'm always feeling myself that I have to fight this two-front war against people who think that China will collapse because of all the repression, or that because China's economic growth has been so impressive in lifting millions of people out of poverty, that gives the Communist Party a free pass

• 1:27:41Speaker 02

  on all of the source of violations that it has inflicted upon the people. I think we can acknowledge both things are true, that the Communist Party has grown repressive in more novel ways over the past 10, 30 years. At the same time, it has grown richer and more technologically capable.

• 1:28:00Patrick O'Shaughnessy?

  How do you think this book and this experience will change your relationship to China, the place, and Chinese nationals more generally? And was any part of it risky? Did it feel risky to you to write the book, given you lived there for so long? May want to live there again in the future?

• 1:28:14Speaker 02

  Yeah, I decided over the course of writing this book that I wanted to write the truest story that I know. And I decided to just try to do the best job that I possibly can. Part of the reason I moved out of China to the Yale Law School, where I substantially wrote this book, was in part to tear myself away from the headlines so that I don't have to be living in Shanghai and feel like I'm living through a lot of headlines. Partly, it is because the Chinese state is overwhelmingly censorious. In China, my personal site, danwang.co, has been blocked. I found that, to my surprise and some degree of distress, one day in 2022,

• 1:29:00Speaker 02

  I had to go see the Canadian consul general to ask whether I needed to leave in a hurry, because usually they block big sites like The New York Times, or Facebook, or Wikipedia, not rinky-dink websites like mine. And I have friends in China who have been detained by the Chinese state arbitrarily for a number of years, based on who they were and based on alleged activities that we don't believe are true. And I've decided that I wasn't going to give in to any sort of hard censorship or soft. There's a wonderful analogy about China's censorship by a sinologist named Perry Link, called The Anaconda and the Chandelier.

• 1:29:44Speaker 02

  So imagine that we're sitting around a dinner table. All of us are chatting over dinner. The censorship isn't necessarily very direct, but above us hangs a chandelier in which a giant anaconda lies sleeping. And you never really know when the anaconda might wake up and decide to strangle you. But you're kind of just aware that the anaconda is there and you start self-censoring yourself in all sorts of ways. And I decided I didn't need to live in China and have that. Now, I wonder whether the Chinese state will like my book. I tried to write the truest story as I can, which meant capturing the successes as well as the traumas of the Chinese state. What I plan to do is, in a couple of months from now,

• 1:30:29Speaker 02

  when I submit my visa application, they'll have some time to think about it. They'll have had time to react to my book. No surprises. If they give me a visa to go to my favorite city in the world, Shanghai, my favorite region of the world, southwest China, along with all those wonderful mountains and wonderful pickles and bowls of noodles in Guizhou, I would be delighted to visit. And if they do not give me a visa, then I cannot visit. And so I think my life is really quite simple.

• 1:30:58Patrick O'Shaughnessy?

  What's next for you? Having completed this really epic project that I think will be seen as the definitive account of what's going on in China these years for a long time, what do you do next?

• 1:31:11Speaker 02

  Curl up on my couch and read some great novels. Everyone's reading Middlemarch. I haven't read Middlemarch yet. So that is something that's quite exciting for me. I want to be engaged with the broader Chinese diaspora, people who have decided to move to Thailand. There's a set of people who've moved to New York. They host feminist stand-up comedy in Mandarin, and I want to be supportive of these sorts of efforts. Engineers I know in Silicon Valley. I want to help integrate them into society and help them appreciate the good parts of America that I enjoy the most. If there's anything that they can't necessarily access very easily, I want to be helpful in trying to give them a little bit of community.

• 1:31:55Speaker 02

  And then, otherwise, as I always do, think big thoughts and then write them down in my letters.

• 1:32:01Patrick O'Shaughnessy?

  Closing question I ask everybody is the same. What is the kindest thing that anyone's ever done for you?

• 1:32:06Speaker 02

  There's a quote I really like from Ursula K. Le Guin, which is that, "Love is not like a stone, which only sits there. Love has to be continuously made like a bread and remade once again." And that's something I think about with something like kindness. I think we can sub in kindness for love here. But the way that I think about kindness is not only a single act. I think it is more a disposition and a spirit of generosity. So I brought up before earlier Tyler Cowen, who has been a mentor of mine for over the past decade. We've traveled together in Asia. We've traveled together in Yunnan and Taiwan.

• 1:32:51Speaker 02

  We've gone to the opera together here in New York. We've seen a great Brahms concert here in New York. And Tyler has been very generous in helping me orient and tweak my thinking and giving me some degree of ambition, because that is something that Tyler is really good at, raising people's ambitions at crucial times. And because I bring up Ursula K. Ursula Krober-Legwin, I have to think about my other guru, Arthur Krober, who was the founder of Golf Cow Dragonomics. We were having lunch once near the end of 2016, where he told me about Made in China 2025, a big industrial plan, which I hadn't heard of at the time.

• 1:33:34Speaker 02

  And then a few months afterwards, I moved to Hong Kong to work for Golf Cow Dragonomics. And shortly after that, two years after that, I moved to Beijing and then I moved to Shanghai. Two hours from now, I'm going to go to Arthur's home for a book launch party, which he is very kindly hosting for me. And I find Arthur not only very wise about China, but very wise about all things. And so for me, kindness is an act that has to be performed again and again. This is something I want to try to do for other younger people, but to have these long-lasting relationships in which we try to help mentor each other, guide each other and raise our ambitions at crucial periods.

• 1:34:15Patrick O'Shaughnessy?

  A beautiful closing definition. I've never heard that quote despite having read many of her books.

• 1:34:20Speaker 02

  A new one. Great.

• 1:34:21Patrick O'Shaughnessy?

  Wonderful place to close, Dan. Thank you so much for your time.

• 1:34:23Speaker 02

  Thank you very much, Patrick.

• 1:34:26Patrick O'Shaughnessy?

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