Uncapped #24 | Balaji Srinivasan

[00:00] So it's actually not two factions left and right. It's four factions. The internet, Blue America, Red America, China. Blue America versus the internet is a tech clash. Blue America versus Red America is wokeness. Red America versus Blue America is Trump. Red America versus China is a trade war. Do you ever wonder what it's like to live in a startup society on an abandoned island? Well, let me show you. This place is an oasis for gym rats and startup founders. [00:30] real life experiment called the network school ran by Balaji Svonivasan where we're kind of testing what creating a new nation could feel like. This week I had group workouts every morning. Sometimes I hit two a days because energy here just makes it easy to stay dialed in. I led my first class to over 40 people. I had to hit them with that Riz 101 and I'll share more about that later. I went to a few classes this week and Balaji talks on AI and the future of tech and [00:55] took a field trip to the Super AI Conference in Singapore, which is just an hour away, and I wrapped it all up with a fun-ass weekend-long sports tournament competing for a fancy genetics kit. Oh, and we get three healthy meals a day, plus hours of deep combos with insanely interesting people. It's gonna really hurt going back to real life, I'm not gonna lie. This place feels fake in the best way possible. I almost forgot that World War III started this week. [01:18] All right, Balaji, I've been really looking forward to this. Thanks a bunch for doing this with me. [01:22] Awesome. Good to be here. So I want to start the conversation by just sort of getting your latest lay of the land of how you view like the political map, you know, whether it's sort of like the left, the right tech, crypto, America, other countries. Like, what is your latest mental map of the political field? So.

[01:42] I will reduce it to a few graphs. [01:45] And then from that, derive a bunch of other things. So the first graph is one that shows the internet disrupting blue American media. Blue American media was $67 billion in revenue around the year 2000, and it crashed to like $16, $17 billion in revenue by around 2010, 2011, 2012. And then Google and Facebook rose. Okay, so the internet disrupted blue media. And you know the saying, go woke, go broke. It was actually in reverse. It was go broke, go woke. [02:15] with media revenue cratering 75%, everybody had to have extreme message discipline to retain their jobs in US media. And they felt their pie shrinking. [02:25] And they, the tech guys who they had thought of as just another part of the Democrat Party, suddenly we were seemingly coming for all the marbles starting in, you know, the 2008-2012 window. And so... [02:39] The blues radicalized [02:41] And thus began both the tech lash and wokeness by about 2013. The other graph is China disrupting red America by disrupting manufacturing. And China also flips. [02:53] Republicans and Red American manufacturing around the same time, around 2010. And so Red America's economically hurting. That leads to Trump, which is also a backlash against Blue American wokeness, and it leads to the trade war against China. So it's actually not two factions, left and right. It's four factions, the internet, the internet, the internet, the internet, the internet, the internet,

[03:13] Blue America, Red America, China. Blue America versus the internet is a tech clash. Blue America versus Red America is wokeness. Red America versus Blue America is Trump. Red America versus China is a trade war. And all of that started heating up post-2013 after these twin disruptions with a reaction by both Blues and Reds to try to regain the ground that they had lost in the world. [03:35] And they were fighting each other, but they're also fighting out of the plane. Now, what happened was... [03:41] Tech, as we know, because we were in the middle of that, [03:44] It was just completely taken aback, most people, by the tech clash. I gave a talk on it in 2013 where I put two and two together and I can match to historical trends, which I'll talk about in a second. But I could see that we needed what I called Silicon Valley's ultimate exit, right? Which is a play on words, right? Exit is obviously like, you know, exiting a company. Trying for exits, yeah. [04:05] But it's also leaving, right? And it's also in a sense of Mars. It's in a sense of the frontier and transcendence, you know, leaving to get to the next thing, right? Exodus, okay? So it's several different meanings of that. [04:18] And so the ultimate exit is not simply like making another billion. It is [04:24] you know, it's a country of a million people. It's not a company of a billion dollars. We've done that. That's old news. How many unicorns do you and I have in our portfolio? I've lost count. You probably have too, okay, at this point, right? And so the, I'm not saying that to brag or whatever, I'm just saying like, that's now in our rear view mirror. That's like a known kind of thing. Another billion dollar fund doesn't mean anything. What we're going to need is actually our own jurisdictions, okay? And I'll come to it in a second. So I can see that coming in 2013. And we were taken aback.

[04:54] tech lash because everybody thought of themselves as Democrats, why the Democrats suddenly hate us so much. Right. And that went on for years and years and years. And then finally, in 2019, 2020, after the [05:06] People at Facebook realized, wait a second, the journalists don't want some edit, like a feature edit. It's not like, oh, change this policy, we'll be happy. They just wanted to kill Facebook. [05:17] Right. Like should Facebook exist was a common meme at the time. Right. They're trying to just trying to kill it. And they're trying to kill every tech company. They're trying to kill. Obviously, they almost killed Uber. They went after people low and high from somebody saying that they're you know, they were against homeless encampments on the sidewalks to, you know, somebody making an off color joke as an executive to everything in between. Everybody was was attacked. Right. Right. [05:40] And that, you know, peaked with the BLM riots of mid-2020. And then after that, essentially, tech managed to rally. And by 2022, came together. And then Elon and the 44 billion and X take over. And that was like X day, like D day, you know, like all the forces were just aligned behind X, all the centrist, center right, center left people. [06:10] so forth. And from that beachhead came, you know, essentially X marks the spot. Okay, fine. So after 2022, tech dialed it in, counterpunched. The same thing actually less visible to Americans happened with China. You see, China was also completely taken aback by the trade war in 2016. China thought the Republicans liked it. After all, so many Republicans had been involved in manufacturing and sending things to China. Republican businessmen basically thought that Chinese, you know, basically worked hard for a low wage and so on and so forth.

[06:40] FDI was actually spiking into the U.S. like this and then went completely in reverse after the Trump administration. That's one of the few graphs which you can see that's a total reversal graph. The other one that's like that is the curve for oil discoveries. Like I think it's a Hubbard curve and it looks like a bell curve and then fracking happens and it goes totally in reverse. Once in a while, a curve goes totally in reverse. OK, so Chinese FDI was spiking into the U.S. [07:01] And then it just completely crashed after Trump took over and the trade war began in earnest. And we didn't see that so much in the U.S., but it was a huge deal in China. All kinds of things were blown up. I mean, Meng Wanzhou, I'm probably mispronouncing that, but do you know who that is? [07:15] Mm-mm. [07:16] That was the very senior, I think the CFO of Huawei. [07:22] was just snatched off a plane in Canada, okay, and just held for years. And it was on some pretense or whatever. And then the Chinese were like, okay, you're going to do that. Then they snatched two Canadians and they held them as like kind of a ransom to get the Huawei CFO back, okay, because it was, of course, political. It wasn't like a commercial thing, really, right? It was like Huawei was selling something to Iran, but it was like a Chinese company that was being sanctioned by an American in Canada for selling something to Iran. The question is who has [07:52] Point is, [07:53] The trade war was actually a huge deal in China. And for the first whatever number of years, they were kind of taken aback by it. And they were thinking they can negotiate. And eventually they realized, oh, we just need to diversify all of our revenue streams away from the U.S. And now the U.S. became sub 15% of their revenue. And most of the revenue, they just built up other markets in the global south and so on. And then after the pandemic, what many Americans don't realize is they just completely just dialed it in, turned it up. They went vertical on cars, went vertical on solar.

[08:23] on everything, military, everything. They're just absolutely turned on to afterburners, and they're just far ahead in the physical world. There's just no contest, unfortunately. I'm just... [08:34] I'm a reality shell. I'm not a China shell. In fact, I think in many ways, all the people who have cope on China are the stealth on the Chinese stealth bomber. Say more about that. [08:43] Meaning they're covering up what China actually is. [08:46] like by basically being so, you know, aggressively opposed. It's like not understanding your competition accurately. That kind of thing. Yeah. [08:55] Exactly. They're the stealth on the Chinese stealth bomber. The fact that they're covering up what China actually is and saying it's weak, it's weak, it's going to go to zero. It's nothing. Don't worry about it. Why are you talking up China? You know, like because they're like saying my competition is terrible instead of actually, you know, accurately understanding what they can do. [09:13] Exactly. That's right. And so, I mean, the U.S. during the Cold War took the Soviets incredibly seriously. It's better to overestimate the enemy or the competition or whatever you want to call it than underestimate them. You know, part of it is the Soviets had actually fought in World War II. So Americans respect military strength and the Chinese had just been grinding in sweatshops and lots of Americans haven't been to China. You know, my prescription, by the way, for any American, any Westerner, there's like six or seven cities. If you haven't been to them the last three years, you're going to be able to do it. [09:42] your worldview, if you've been to all of them, your worldview, I think, will be correctly calibrated. I'd say Dubai, Riyadh, [09:49] Bangalore, Ho Chi Minh City, Singapore,

[09:54] Shenzhen and then maybe throw in a few more Chinese. Actually, you know what? You should also go to some tier three Chinese city, like the number 50 Chinese city, not even like Chengdu or something like that. Just to see how impressive even that is. [10:06] Yes. [10:07] Exactly. It's more impressive than just about any American city. [10:11] to be completely honest, right? And yet their prices, like one of the things that's happened is they have [10:18] sandbag their currency [10:20] And they've sandbagged. Like, it suited Americans to pretend that they were still strong, and it suited the Chinese to pretend they were still weak. And so there was something—it's kind of like, you know, a startup wants to—even when it's growing and it's become pretty big, it wants to still pretend it's like a revolutionary. And like an incumbent, even if it's losing share, wants to pretend it's still in charge. Right. Right. [10:39] And that illusion continues for a long, long time because both parties would be demoralized if the truth was acknowledged because the incumbent is based on being a big dog. We're Adobe or whatever. And the startup is based on revolution, not on being the incumbent. Right. So that's what's basically happened. So anyway, so you put that together. And here's the issue. The issue is those curves aren't slowing down. Now the Internet has plowed through the resistance of blue America. [11:07] All media and all money is going to become the internet because all media is AI and social and all money is crypto and Bitcoin. [11:15] and smart contracts and so on and so forth. And similarly, China has plowed through the resistance and all manufacturing is robots and all the military is drones.

[11:24] And those are Chinese drones and Chinese robots because I love my American friends who are working on re-industrialized and so on and so forth. But... [11:31] The tariff thing is an acknowledgement that an American product is not price competitive, but [11:37] in a neutral market like Uruguay. [11:40] right, or Austria. If they have an American and a Chinese product on the shelves, the Chinese product is cheaper... [11:48] at comparable quality. I mean, look, Elon's our best guy. [11:51] And BYD is competitive with an outselling Tesla in many foreign markets. [11:56] He's our best guy, right? Lots of other hardware products are not even... [12:00] In the running. And so they're trying to protect the home American market. The same thing is happening with the journos, by the way, just like Red America is trying to protect the home American market rather than actually playing to win because they're getting killed by Chinese competition abroad. [12:13] Blue America is trying to protect their home market of the journal. This is happening less publicly, but lots of media corporations have unions that are trying to prevent AI from entering. Mm-hmm. [12:24] Right. They're trying to freeze the current moment in amber. [12:27] And of course, they're going to get disrupted by new entrants that just use AI in a, not a slop way necessarily, but in a proper way, right? Are you saying tariffs are necessarily a bad strategy or you're just saying that it's a reflection of these market dynamics? Tariffs are a bad strategy when they're used in a stupid way, right? Lots of things are tools, right? Like think about a surgeon. The surgeon has tools. They've got a scalpel, right? They've got forceps. They've got all these tools there, okay?

[12:57] use the right tool for the right job at the right time in the right order. And a tariff is a tool to [13:05] But like, imagine if you did a surgery with just like a mallet, you know what I mean? It's, you know, you need that at some points, you know, forceps or, you know, like, but you have to use them in the right. It's like an orchestra, right? It's an orchestration. [13:17] And the problem is there's absolutely, because policy is literally set by Twitter, everything is just stupid sloganeering where, to be specific, right, what is a tariff? A tariff is a tax. [13:29] A tariff is a tax. It says... [13:32] Rather than, you know, if you buy this thing abroad and you import it, then you have to pay 10 or 20 or 30 or 49% more or whatever. The issue is modern supply chains have a part coming across the border. You do something with it, you send it back, you do something with it. Like you look at auto supply chains, they cross the borders like six times. Okay. Many of those crosses were assumed to have zero tariff. And now suddenly they have 49%. So it's as if you put like... [13:56] It just destroyed any supply chain that crosses American borders multiple times, number one. Number two is, [14:03] These tariffs were placed on raw materials like... [14:06] imports of, you know, of steel, imports of, you know, minerals that aren't as frequent in the U.S., okay? They're placed on machine tools, which are the things that you actually need to go and, quote, re-industrialize, right? They're placed on Swiss chocolate. They're placed on French wine and Canadian maple syrup. They're placed on Vietnamese shoes after telling Southeast Asia that we needed them as a bulwark against China. And they placed higher tariffs in India than they

[14:36] hearted things about this, okay, where fundamentally what many people don't realize is that [14:42] you could actually have an even worse, like Biden's foreign policy was hot war with Russia, cold war with China, [14:49] Cold Civil War with Republicans. [14:52] and with tech. [14:53] Okay, well, also alienating Israel, India, and so on and so forth, right? So basically... [14:59] Uh, [15:00] A, they're tariffing allies. B, they're tariffing raw materials. C, they're tariffing machine tools. D, they're putting remaining American manufacturers out of business. Okay. Why? Because if like your cost structure, you have a spreadsheet of, you know, a bill of materials, like for how you're building something. [15:22] And like this supply chain that you optimized carefully with deals crafted over years, okay, where you're just eking out a 17% margin on something that still happens to be made in America. And suddenly like four of the parts hit 49% tariffs. You might... [15:40] immediately become unprofitable. [15:42] Okay. And no, it's not possible to necessarily just take that out of the supply. That's a whole negotiation as to who pays for what and so on and so forth. Right. Like that's something which is, it is something which immediately causes conflict between the buyer and the seller. Who's going to come out of whose hide? Maybe both parties go out of business because, you know, the end customer can't take it. Okay. So it's just a tax. And by the way, [16:05] None of the American...

[16:08] And manufacturers asked for this. They were all hit by surprise by that. It's like, hey, I'm going to help you with this giant surprise tax. And by the way, they couldn't even like pay the tax a year from now. They've got a surprise tax where suddenly they have to go to the port and on a million dollar import, they have to pay like $390,000 cash on a 39% tariff right then and there or their shipment is impounded. [16:31] which they often don't have the cash. So you have to go into debt. They have to fire somebody. Complete disaster. And the way of thinking about it is, imagine I increased the price of your iPhone 40%. I just gave you an incentive to build Apple. [16:42] Why aren't you building Apple in America, huh? Obviously, all you wanted... [16:47] was some maple syrup and they're trying to make you make a maple tree farm. It was an incentive, but it wasn't a correctly calculated one in the right place at the right time. Like, yeah, you're paying more for Apple. Are you going to go found Apple? No. Right. And now there's actually correct ways of doing this. For example, Semitech in the eighties went and looked at the specific things that were strategically important, like Japanese semiconductors. And they found, okay, here's like the 30 customers of this foreign company. Let's get them all together. [17:17] form an industry consortium, invest in a domestic competitor, build that up over time. And now we've got a second supplier alternative to the foreign vendor, but it takes time to make a new company. [17:31] Right. It's hard to do that. You know how hard it is. I know how hard that is. It doesn't, you can't just tariff it into, into, you know, right. And,

[17:38] Really, the thing that they should have done, the door that they didn't take, is reduce regulations. Rather than attacking the entire world, you just reduce costs for American manufacturers. Cost you nothing. Cost you absolutely nothing. I'm sure there are a bunch of places where the tariffs were very important. And like, you know, it was kind of like used everywhere. So you probably figure it was randomly used correctly and randomly used incorrectly since it was so... I would say it's 99.9% used incorrectly. It was like... [18:08] Very strategic areas. Yeah. Like a foreign and, you know, like a like a national interest that's dominated by some foreign country. Yes. Like if it was just see the thing is also they're completely schizophrenic where they're tariffing Vietnam and India and Canada and France. And then. [18:24] Saying, oh, but we're actually really going after China. That's like a gangster, like firing into a crowd to get his enemy. [18:31] And then telling them, don't worry about the bullets in your back. I'm trying to get that guy. It's definitely not what you expect from like nation states, at least. It's certainly not the hub of the global economy. Right. Which is ostensibly like now this gets to a deeper point, which is. [18:45] The only reason, what is the U.S. actually doing, by the way, with all these imports? Like, the reason that Trump is doing this is he's seeing correctly that, you know, [18:53] On some level, it's an unsustainable trade deficit. [18:56] Okay. Where the U.S. it looks at first, the U.S. just keeps... [19:01] you know, basically importing goods and paying for them, and the national debt keeps growing. But what's also happening is the US is able to print the money, right? So wait, what's actually happening? Vietnam sends shoes and the US prints the money and gives these new database entries to Vietnam,

[19:15] And then Vietnam goes back and buys U.S. Treasury. So in a real sense, Vietnam is like giving the shoes as tribute to the U.S. for free, in a sense. Why? Because the U.S. used to, the left used to basically have... [19:27] the diplomatic agreements to run the global economy and the right provide the military force in exigent circumstances. And by the way, [19:35] When the diplomats were working, [19:37] The American empire was the greatest empire of all time. We should all pay respects. You know how hard it is to get 190 people to sign something on a cap table? It's pretty hard, right? You've probably done it. I've done it. Imagine getting 190 countries to sign an agreement. Really hard. [19:51] Really hard. So the infrastructure, the international order, the rules based order that American diplomats built was genuinely the greatest. [20:01] achievement diplomatically in world history. And the military force, of course, was important, but it was a secondary thing to that web of agreements, all those trade agreements. And all of that stuff, by the way, American empire was set up for the benefit of America. That's why there's a McDonald's everywhere, a Starbucks area. That's where Hollywood movies are everywhere. That's why there's 750 U.S. military bases around the world and aircraft carriers in every port. That's why you have, as you know, many, many heads of state, by the way, are trained in America. Have you seen like the Kennedy School of Government at Harvard alone?

[20:31] 20 heads of state at like one college. Okay. So all kinds of foreign countries are actually American controlled or influenced directly or indirectly. They've got U.S. military bases there. Their governments save in U.S. treasuries. They send their best students to America. They send their best talent to America. Even China had Alibaba go public in America. They, you know, blah, blah, blah. It goes on and on and on, like the scale of the American empire. This was set up [21:01] that the MAGAs got less of a cut of that in recent years, but they genuinely, I don't think they understood like how much worse it can get when they take the whole thing down and then they lose the money printing ability. [21:13] This, by the way, is actually the deep point is there is a devil in deep blue sea aspect to this because the U.S. has a money printer. Do you know what the cantaloupe effect is? No. No. [21:23] Okay, the closer you are to the printed money, [21:25] the more you benefit from it. [21:27] Makes sense. Okay. It's like, imagine you got a counterfeiter, counterfeit bill. Okay. The first guy you use it gets a full a hundred bucks worth of the counterfeit bill. And by the time it makes its way through people's hands down to the [21:38] you know, poor cashier in Nebraska, inflation has already kicked in by then. So they get the least value of that purchasing power. Now, the capital, in effect, once you understand it, has several implications. Well, first is when the Fed prints money, who gets it first? It's U.S. government controlled entities and major banks like the big blue banks, like the too big to fail banks. They're the ones who directly or indirectly are spotted the print of money, either mortgage backed securities are bought off their balance sheet or they're given effectively like sweetheart loans. And so there's many different mechanisms the Fed and Treasury use to give them

[22:08] Sometimes they want to do it directly. The Fed directly buys assets. Other times they do it through partner banks. And they always have these crazy shell games they play where they pretend that, you know, like BTFP, where they, you know, they suspend certain accounting rules so that you can treat an impaired asset if it wasn't impaired. All these shell games they play. And then they think that they've done something special when they've actually just, you know, really given these banks money. But the big blue entities get the money first. And then that Nebraska cashier gets it last. [22:38] last, right? So in a deep sense, and this is the deep point, dollar inflation is global taxation. When you inflate, when you go from, let's say, a $1 trillion money supply to $2 trillion, everybody in the world who holds dollars is diluted down 50%. [22:51] That extra purchasing power is effectively a tax of 50%. Those new dollars, printed dollars are spent by the U.S. government. And everybody's silently diluted down. The key point is that it's spread not just across 300 million Americans, but across the whatever billion people worldwide who hold U.S. treasuries, who participate directly or indirectly in the U.S. financial system. Is it a tax on everybody or a redistribution? It is both a tax and a redistribution because the redistribution upward to essentially the U.S. government and then the wealthiest Americans who hold equities. Because they get there's something to the plunge protection team is. [23:21] No. [23:21] In the late 90s, it was admitted by Greenspan that the reason the stock market always goes up is that when it goes down too much, the Fed prints and directly or indirectly has people buy assets to buoy it back up. OK, what that means is everybody else is taxed to push the stock market up. And that's an expectation now. The upper middle class has so much in the way of index funds and so on and so forth. There's a political expectation that the stock market goes down too much. The government should act to buoy it back up.

[23:51] go down in nominal terms because there's a political expectation that you keep printing to prop them up. This is why housing prices are so high. This is why stock prices are high. This is why General Motors got bailed out. There's certain kinds of things that it looks bad if the prices go down politically. So they just keep propping them up in nominal terms. In real terms, however, meaning relative to gold, relative to digital gold, the dollars collapse 50% versus gold in two years and 75% versus digital gold in two years. That's like the real chart. [24:21] but the real chart is way down like this. And you have to actually look at the real number, right? Which is the devaluation of dollars already there. Anyway, point is several things are happening at the same time. So first is, [24:32] By tariffing all these countries, they're giving an unmistakable signal to the whole world. See, normally when there's some economic issue, it's very hazy as to what caused it. Like, why are your health care premiums high? Someone could blame Obamacare, maybe they're not. It's like hard to tease out. It's multifactorial. But for 190 countries, they all got a tweet on the same day at the same time telling them that the reason that they're [24:54] most pro-American companies in each country were going out of business or radically impaired is because these tariffs were imposed. And by the way, just to explain that point, any company in Vietnam, in Thailand, in Hungary, whatever, right, Morocco, that's like, [25:10] exporting to the U.S., the guys who are doing that are the most pro-American people in that country. They speak English. They have American partners on that side. They have vendors, suppliers. They probably studied in America or the people there. They are the people who normally are lobbying their country to maintain good relations and good trade relations with America. Every single guy like that.

[25:29] just got completely wrecked in every country around the world simultaneously. When I mean wrecked, I mean like bankrupted, certainly humiliated. Anybody who invested in America, trusted America, just got... [25:42] China rocks. And what does that do? That means the faction within every country that said, hey, we should trade with China instead got radically strengthened as a consequence. For example, in Taiwan, there's a guy in Taiwan called Jim Boss. He's like the Joe Rogan of Taiwan. [25:56] He used to be super pro-independence. [25:59] Now he wants Chinese reunification. Taiwanese influencers are completely flipped because they saw essentially the U.S. kind of, some people say they half-assed on Ukraine. Some will say they should never go to war in Ukraine. Some will say they should never pull out. Fine, whatever it is, the U.S. is not winning the war in Ukraine. And Taiwan doesn't become like Ukraine, like a crumpled up tin can to use against China. And they don't think the U.S. will back them, number one. And number two is China is actually pretty nice right now for many of them. [26:29] Taiwan compatriots card. Do you know what that is? [26:31] No. Basically, they want to do a peaceful reunification with Taiwan. So every Taiwanese citizen can get a card that basically makes them a de facto Chinese citizen. So they're on, because what does it mean to make someone to reunify the island? It means they're all Chinese citizens. So what if you could get 50, 60, 70% of them? Because there's huge advantages if you're a Taiwanese person to do business on the mainland, which is like 30 times bigger, right? Or something like that. So it's a much bigger economy. You can live there. You can travel back and forth.

[27:01] political person, it's like you're living in Hawaii. Why wouldn't you want to travel to the U.S. mainland, right? So the Taiwan compatriots card is this controversial issue within Taiwan, but it's so useful to the Taiwanese people that China's all... China, I remember they speak, they speak Chinese, right? They understand Taiwan. They're doing a lot more than simply just like invading the island. They have like 5 million spies in there. You know, all kinds of stuff is happening there. So TLDR, the economic world war that the trade war is on the world, [27:31] possibly were [27:33] for brown people and therefore Jewish people and black people and women and gay people and blah, blah, this, that, and the other. They were supposedly for everybody. But in practice, intersectionality turned everybody into an oppressor. You know why? Well, I haven't. Well, I want to hear from you. Let's say you're Jewish, but you're also a white man and you're rich. So therefore, you're an oppressor on that axis, right? And this guy, he might be Indian, but he's rich and he's, you know, a man. So he's an oppressor on that axis, right? So they could just selectively [28:03] You're basically whatever your most oppressive attribute is. Exactly. And everybody. So, for example, white women were victims during Me Too. And two years later, they were the oppressors during Karen. [28:14] as Karen's. So 2018, they're the victims in Me Too when it was useful. Then 2020, they're the oppressors as Karen. The same woman is not treated sympathetically. So [28:24] And, you know, the point is that they will just take your oppressor axis and stress that. And the thing is, everybody is either, when you do an or function, you know, like either the probabilistic or the computer science version, you do the set theoretic or, for example, everybody's either white or white.

[28:44] Yeah. [28:45] male or straight or cis or successful or, or, or like when you do the or function, that's like, everybody's an oppressor. 99.9% of the world is an oppressor, unless you've got every single intersectional bingo. Okay. So this is similar to what the Soviet union did, where it promised the workers paradise, but actually delivered the Gulag, right? The difference is communism promised the working class, right? [29:10] better economics and deliver them worse economics, wokeness promises the wokest class higher status. [29:18] Like now, everybody will respect you, right? And it actually... [29:22] Once they buy into the premises of wokeness, they can be canceled at any time because they're also an oppressor on all these other axes that they're not thinking about at that moment. By buying into wokeness, it's a devil's bargain where in the short run, they can yell at you that you're mansplaining. But then three months later, that white woman is checked from the side. She's got white privilege. Oh, boom. You're knocked out of the box. OK, so intersectionality turns us all into oppressors. And so what wokeness did is it created the global anti-woke coalition. Wonderful. Great. OK. [29:52] Thank you. [29:53] Unfortunately, the [29:54] is they've created the global post-American coalition. This is what people are calling outside the U.S. world minus one. [30:00] Everybody wants to trade with the US. The US doesn't want to trade with everybody. So what are they going to do? Well, they're not going to wage trade war with each other. They're just going to do world minus one. And so they're redirecting trade flows. And what people are not seeing is China went and like all of these guys, it was just the most amazing...

[30:16] Crazy thing. Okay. Actually, both China and India have done this. I'm happier that India has done this. [30:21] But like right after Trump announced his trade war, all of these guys who were on the fence, like, you know, in Southeast Asia and so on, they like started lighting up the towers in like Chinese colors and they did state dinners for Xi. And they just started saying China just went and ran the table and all these like swing states. [30:38] Because they just got told FU by the US, who said they don't need them, right? And then, you know, obviously India got pushed into the BRICS column in part, more into the BRICS column, by this, you know, trade war. [30:52] Yeah. And so they did deals with Europe and deals with China, deals with Russia, deals with all. Every country other than the U.S. India has just signed deals with or done, gone on stage with. Right. So world minus one is a very bad place for the U.S. to be. [31:04] because, so that's like diplomatic isolation. Okay, we talked about the economics, right? The dollar, we talked about diplomatic. Go ahead, you're going to say something. I just wanted to round out sort of this political map with like you started with kind of, you know, there's like these two twin battles. You know, there's like sort of like, let's say like woke sort of... [31:22] media, academia, just like state stuff in tech. And then you've kind of got like China and the right. And then I guess what I'm curious about is [31:32] the other sort of like the cross angles. And basically what I'm trying to get to is like, what are the what are the natural alliances or unholy alliances maybe that are going to form? And so like, you know, it's like, obviously, it's not like it's not like media and academia love the right. And it's not like China and tech are naturally sort of like simpatico. Exactly. It's a four way clash. You put out a good tweet about how like China, you know, is sort of like

[32:02] What are the other directions here? Other directions. Excellent question. So my view is the successors to American empire are China and the internet. In the same way that the successors to Europe were American... Like, Europe was the center of the world in the 1900s. Yeah. You know, like... [32:19] the UK and France and Germany, and the barbarians were the Americans and Russians on either side. And then it involuted and collapsed. And then basically got split down the middle between American capitalism and Russian communism. Are you saying those are the would-be successors, or you're thinking that that will actually happen? It's already happened. It just hasn't been priced in. Like media, for example, already NYT and so on get much less engagement than social media, right? Like the SEC, Gensler, and so on has been beaten. Crypto is by some measures the [32:49] stock exchange globally, but it's very quickly becoming like Hyperliquid alone does more revenue than NASDAQ with like 11 people, right? Internet capital markets are here. The internet has already taken over media and money, and China's already taken over manufacturing and military. That just hasn't been like priced in by everybody. One other thing that's happening potentially is this new national defense strategy is coming out, which is supposedly, we'll see what actually happens, but it's reportedly... [33:14] Going to have the U.S. essentially pulling back from Asia to focus on the Western Hemisphere and the issues at home. That is essentially the look, Hegseth and these guys are actually they're not dumb people. You know, if you see Hegseth on podcasts before on the Sean Ryan podcast, he said Chinese hypersonics can sink every U.S. aircraft carrier. And if 15 hypersonic missiles can take out our 10 aircraft carriers in the first 20 minutes of a conflict, what does that look like?

[33:44] Navy combined. The CEO of Raytheon said you can't take a couple from China because it's like too important to the U.S. economy. The relationship with China, we have to find a way to get along. There is a codependency. There's graph after graph. I mean, the U.S. military is made in China. They're studied by Govini, which is a [33:59] US military Pentagon commissioned study, $400 million, and it shows like the Tomahawk and JDAM, their supplier supplier in China. That's already happened. The internet and China are already the successors. So what's going to happen? In my view, we're going to see the third configuration. You [34:14] So we saw in the 2010s, blue... [34:18] And tech, blue sort of forced tech, but there are some guys in tech who are sympathetic to blue as well. Blue and tech against red to like sensor, de-platform, purge, and so on and so forth. Then in 2020s, we've just seen... [34:30] Red in tech against blue were the libertarians in tech, [34:33] sided with the conservatives and that's Elon and X and Sachs and so forth. But we're going to see the third configuration, which is blue and red against tech. [34:44] Because the blues hate the capitalists and the reds hate the immigrants. And by the way, a lot of the center now hates the phones and [34:51] And they're blaming, with some justification, and I'll get to this, the internet for everything that's bad. [34:57] What they're remembering is we had a good life, [35:01] 30 years ago. The 90s were good. We didn't have all this internet. We didn't have social media polluting our people. Yeah, this internet thing ruined everything. They are taking that correlation. They're calling it causation. And there is some truth to that. But I think the important counterfactual is that for billions of people on the other side of the world,

[35:21] The internet resulted in the greatest and highest standard of living they've ever had. [35:25] Like in India, the internet has radically increased, you know, the incomes and so on, so forth. Southeast Asia, in Dubai, in Riyadh, in China, certainly for billions of people, you know, actually in Russia, Eastern Europe, right? So Eastern Europe, Russia, India, China... [35:42] To some extent, Brazil... [35:44] you know, Dubai, Riyadh, Southeast Asia, the internet is good on balance. And the reason for that, crucially, is they're okay with a moderated internet. When you say blue and red versus tech, you really mean tech versus everybody else. There's a great book by a woman named Amy Chua. She's actually the tiger mother. Okay. It's called World on Fire. It was written in 2003, way before the current time. And she points out that there's something called a market dominant minority. That's when there's this, when you have capitalism and democracy together, [36:14] group, identifiable, that wins very publicly in the market. [36:18] Then the group that wins the election starts to hate the group that wins in the market. Those are, for example, the Jews in Germany, whites in South Africa, the Jews in Germany, the Jews in South Africa. [36:27] Indians in Uganda, overseas Chinese in Southeast Asia. [36:33] These are people who are visible, [36:35] and who are winning in the market, and there's angry sentiment on their side. And she points out there's a review by Yale, review of books, I think, that talks about this. And it says that [36:47] is a backlash by the majority against the wealth of the market-dominated minority using the democratic process. Then there's a backlash of the market-dominated minority against that initial thing, essentially with forces sympathetic to the market-dominated minority pushing back. Finally, there's a third reaction where the frustrated majority that can't win either in elections...

[37:07] or in the market, [37:08] just starts to get really insanely violent, perhaps genocidal. [37:11] Okay. Now, all of her examples involve a race. Okay. Nothing to group. However, [37:17] Most of the violence in the 20th century was actually not on the base of race. You notice on the base of, see, it's funny. I put that as a blank. [37:24] But [37:25] It's always interesting to me that, and I'm not saying this is an attack or thing, many educated people cannot answer that question, what I just posed. What most of the violence of the 20th century was based on? [37:35] It was class. [37:36] Hmm. [37:37] Communism, [37:38] was class warfare. [37:40] And Kulaks [37:42] were liquidated as a class. In Cambodia, the guys with glasses were just liquidated as a class. In China, the landowners, anybody who's considered rich, you know, the kulak had like two cows. So he was like a super rich peasant. So, you know, Lenin's hang order, hang the kulaks, right? Kill the rich man. Rich by some very modest definition of rich, okay? The enterprising smallest businessman was hung, quartered, murdered, okay? Envy is a very powerful force. If I had to have answered... [38:11] I guess I would have, I guess incorrectly answered something like, like sort of like a political philosophy or something. That is more balanced. What happens is the guys who are being attacked build a political coalition to try and get to 50-[redacted address]. Right. But it's an actual massacre. Then it's like when they're totally outnumbered. OK. So the issue is tech isn't a race. But you know what tech is? Hmm. [38:35] Tech is a class. It is also kind of a political philosophy in some ways. It's kind of a political philosophy. To like to the clip you posted on X, which I want to I'll link to because I think it was really good sort of highlighting. Like when I watched that, it sort of highlighted something about like the America China thing that I don't think I had fully internalized. But I do also think that like tech does stand for like capitalism and some people kind of hate that. Yes. Oh, absolutely. Well, that's the thing. Well, you got it. Last century. What was a lot of the yelling about? Capitalists. This century, what's a lot of the yelling going to be about? Technologists.

[39:05] - Yeah. [39:05] But we are about techno capitalism. Last century, the capitalism was front page. The technology was kind of a little bit in the background. Here, it's the technology that's front page and the capitalism that's a little bit in the background. Do you think people are mad about the technology more than about like the accrued wealth and power? Yes, because they're blaming AI for making everything fake. [39:23] And they're blaming social media for radicalizing people. The blues blame it for radicalizing people to the right. The reds blame it for radicalizing people to the left. They'll probably blame crypto for like de-legitimizing governments or something. Yeah, well, once Bitcoin wins... [39:38] Once Bitcoin hits a million bucks and like governments need to actually have Bitcoin to survive, which is going to happen, a lot of people are going to be very mad at Bitcoin. Very mad, right? Because it basically all kinds of welfare, all kinds of redistribution, stuff that would. The issue is what would have happened in the absence of Bitcoin is everybody would have been diluted and gone to zero. In the presence of Bitcoin, some fraction of people can get to lifeboats, can get to parachutes. That's what Bitcoin is. It's a lifeboat. It's a parachute. It didn't crash the plane. The money printing was happening beforehand. [40:08] but it did allow some people to get away. The fact that some people are getting away, their relative wealth will be bid up. Like with the next 10x of Bitcoin... [40:16] All fiat billionaires get diluted down. Every USD holder gets diluted down. And somewhere between $100,000 to $1 million per Bitcoin, wealth becomes cryptocurrency. [40:27] Let's say most billionaires become crypto. Most fortunes become crypto. The fiat world gets diluted down. It's a very deep point, right? One more doubling of gold, for example, gold is at 21% of global reserves, dollars at like 42. So even like another 50% increase, starting between 50 to 100%, gold will flip USD. So gold and digital gold, gold is flipping USD as a reserve currency of states, and Bitcoin is flipping as reserve currency on the network.

[40:57] blame AI for taking all the jobs and crypto for taking all the money and tech guys will take all the blame. Plus, guess what? We're Jewish and Indian, gay, gay, [41:07] immigrant, right, to the right, [41:10] But to the left were white, male, capitalist, [41:15] Okay. Can't win. [41:17] Cannot win. So how's it go then? Here's what I would say. Every American ethnic group, other than the African-Americans and Native Americans... [41:26] Yeah. [41:27] left behind war, conflict, ethnic cleansing, murders, etc. in their home country to go far away. For example, the pilgrims. [41:37] They left. Like a huge thing of America was leaving the wars of Europe. [41:41] They were emigrants. It's not just a nation of immigrants, a nation of emigrants, E-M-I-G-R-E-N-T-S. The Roundheads and the Cavaliers... [41:49] They left at various points different sizes in the English Civil War. Germans left the revolutions of 1848. The Irish left the Irish potato famine. You might know that story. There's more Irish abroad than there are Irish at home. Did they betray Ireland? [42:02] by becoming Irish-Americans? Did they cut and run? Were they unpatriotic tax evaders by leaving Ireland when Ireland was chaotic? And they didn't, you know, they had the first mover advantage. They understood that their home country had nothing for them in any reasonable timeframe under their circumstances. So they did actually something that was bold and courageous and they picked up and moved. They made a move, bold move, right? [42:24] Why are there so many smart Iranians, Persians in America? Because of the Iranian revolution. Why are there so many smart Chinese people, so many smart Koreans, so many smart Vietnamese? Because of the communist revolutions in those countries. Why are there so many smart Indians? Because India was socialist. And, you know, Indira Gandhi, like declared, most people don't know this, Indira Gandhi, like declared emergency in the 70s. And like, there's a lot of persecution of various kinds of Indians of different groups. So a lot of them left, right? And they were getting crushed under socialism. So they got out.

[42:54] in many ways. Why are there so many Russians after the end of the Soviet Union? So all of these countries... [43:01] experienced meltdowns, and the smartest and most resourceful and the boldest and the ones who made a move came to America. And that goes all the way back to the 1600s and 1700s. [43:12] Don't you feel like then we still have all of that talent? They're still building companies in America. And so America should still... [43:19] endure. They're not building companies in America. They're building companies on the internet. And this is the key thing. If you look at the S&P, it's the S&P 493 and the Magnificent Seven. [43:28] You've seen that before, right? That graph. Absolutely. So all the capital is going towards either internet companies or the other big category is what? Digital asset treasury companies. So that means everything in the physical U.S. economy is being liquidated. [43:40] and put into internet companies and internet currencies. Think about it like this. Many people identify the internet in America, but what if you asked, [43:48] Are they distinct? What is America minus the internet? [43:51] it's not prosperous. The only thing people can point to when they say America, right? Is the internet. And then technology generally, maybe I would say. Technology. Yeah. But that, but that is the internet. Like the internet is like, it's a more precise way of talking about it because for example, in San Francisco, [44:06] San Francisco Tech. [44:08] Do they make their money from selling sourdough pretzels or like, you know, ice cream cones on the Golden Gate Bridge? Do they make money at Candlestick Park? No, or whatever it is, 3Com Park now? Is it Oracle Park? Whatever it is, you know. They don't make money from the city of San Francisco. They make money from Morocco and Mexico and, you know, Malaysia. And so there's credit card swipes happening all over the world.

[44:31] And those flows of funds are coming into companies in San Francisco, and those are paying the taxes that are then enabling all of the crazy homeless addicts to smash your windows and, you know, do drugs and so on and so forth. Right. So that that is nothing really to do with the city of San Francisco. You're not mining silicon out of the hills of Silicon Valley. No, just people who happen to live there. [44:54] They just happen to live there for now, right? And in my view, it's a terrible strategic error to be saying you're doing AI, right? [45:03] And saying it's going to disrupt all these jobs and so on, especially blue jobs, because going after blue jobs, right? It's going after doctors, lawyers. [45:11] journalists, artists, bureaucrats, teachers, professors, the blue base, which already feels imperiled and is already radicalized and crazy and mad. Right. It's going to increase the more they feel on their heels. Yes. And look, I actually think AI doesn't just take someone's job. It also lets you do any job. You can do a decent job as an artist. AI, you know, like the hype around job replacement, I think, is actually not really that true. OK. Nevertheless, it's being [45:41] You're saying it's not that true. Like it's like the data is not actually showing that it's happening. No, because AI does it middle to middle, not end to end. Yeah. Do you think it'll stay that way or do you think it will get end to end a matter of time? It took a lot of effort to get self-driving to work end to end. A lot of effort. Like 15 years or something like that. Yeah, exactly. It'll take a lot of time for each application. It takes a lot of capital, you know, because Polish, you know, as anybody knows, the last 1% is 99% of the work or what have you, right? So, um...

[46:10] The point being, it's, in my view, a major strategic error. [46:14] to be based in the blue city, in the blue state, in the union, to be identifiably rich, to have billions of dollars, to say you're putting blue people out of work, and to just simply trust that the country still exists and property rights still exist. When the left thinks you're white male capitalists and the right thinks you're immigrant Jewish Indians or whatever, right? And the center hates you because of the phones. That's just a bad place to be in my view, [46:44] And by contrast, there's dozens of countries around the world that have digital nomad visas that actually want you there. I have so much more I want to ask you about this, but I also I know we only have four minutes and I really want to hear about the network school and network state. OK, so look, you've known me for a while and I think, you know, we had we had a talk in 2019 or something like that before I left SF. And I think like those slides held up pretty, pretty well. I can't believe it. Yes, they did. They did. And a lot of the stuff that you talked about that you're talking about now, [47:14] then and a humongous amount of it [47:17] turned out to be right. And I think the reason for that is if you like, I'm kind of a student of history and sometimes like, it's like billiard balls where things will kind of move in a certain way, you know, over time. And so I can't always get the individual wiggles and so on. Right. But I can, I think I can get them. It's like, it's like a force diagram. You kind of have the macro forces I'm doing NS.com and network school and so on and so forth, because I actually am a centrist, right? They say, I believe in capitalism. So I grew the center right on that, but I believe

[47:47] internationalism, and I agree with the central left on that. I agree with David Shore, for example, who's like a central leftist, or Noah Smith, right? I feel they're pretty reasonable and I can get along with them. I agree with the capitalists who are kind of queasy about the tariffs. And I understand why everybody wishes they could just get along. But I also recognize that [48:08] In my view, the solution doesn't lie in America any more than in 1989, the solution didn't lie within the Soviet Union. [48:14] The Soviet Union was a big and powerful empire, but it just had to take some time to itself, wind down its empire, had all kinds of crazy infighting for a long time. And the solution was on the other side of the world. So what am I doing with Network School, Network State? [48:28] I am trying to be as politically uninvolved as possible in the U.S., [48:35] Thank you. [48:36] But I'm trying to do my best to kind of continue what I think of as the best of American values. [48:43] A fair handshake. [48:44] Capitalism, [48:45] but tolerant, right? You know, internationalists and capitalists, right? But also many smaller things like, you know, don't start a fight with somebody online for no reason. Like, you know, try to be as win-win as possible, pay it forward. You know, like all of these kind of basic aspects of etiquette where, you know, like don't post private messages. There's a hundred different moral goofs and gallants from the small things like don't litter to the larger things like, [49:15] fight online, right? There's all of these kinds of moral premises that are the values that underpin the valuations that I want to, and I think I am, rebuilding on the other side of the world. And this is the third kind of thing. And you inherently couldn't just try this on some little coastal plot of land in California? I think that is doing it on extreme hard mode.

[49:37] I know people are trying that. It's not magic dirt. [49:39] The U.S. isn't magic dirt. To take a right-wing thing and kind of reappropriate... There's no reason... [49:47] that you have to do in the U S it's a very expensive place. It doesn't want immigrants anymore. It's anti-tech. [49:54] A lot of the structural forces, you have to build on the right platform. And I am the minority report. For sure, I'm the minority report. But I'm a constructive minority report because what I advocate for is people working together to build not just internet companies, but... [50:08] Not just internet currencies, but internet communities where we know each other and can work together. And we have win and help win. [50:15] and you can join as a member. And then when you decide to, you can also become a founder. [50:22] And then we can build... [50:24] the network states of the internet. I think it's fascinating. And I just love the way that you break all this stuff down and it leads to these conclusions. And I've known you long enough and listened to you long enough that I know that a huge number of your predictions that at the time sound unbelievable over time, a surprising number play out. And so I listen carefully and I appreciate it. Thanks a bunch for making the time for this. This was awesome. Yeah. Thanks again for doing that. Thank you, Jack.