Summary
Dan Wang argues that Silicon Valley and China are the two main forces shaping tech and politics today. He warns that China’s industrial strength and rapid AI progress are often underestimated by Western elites. The U.S. must learn from China’s playbook and adapt to compete without losing its values.
Highlights
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Today, AI dictates everything in San Francisco while the tech scene plays a much larger political role in the United States.
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I enjoy San Francisco more than when I was younger because I now better appreciate what makes it work. I believe that Silicon Valley possesses plenty of virtues. To start, it is the most meritocratic part of America. Tech is so open towards immigrants that it has driven populists into a froth of rage. It remains male-heavy and practices plenty of gatekeeping. But San Francisco better embodies an ethos of openness relative to the rest of the country. Industries on the east coast — finance, media, universities, policy — tend to more carefully weigh name and pedigree.
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There’s still no better place for a smart, young person to go in the world than Silicon Valley. It adores the youth, especially those with technical skill and the ability to grind. Venture capitalists are chasing younger and younger founders: the median age of the latest Y Combinator cohort is only 24, down from 30 just three years ago.
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Narrowness of mind is something that makes me uneasy about the tech world. Effective altruists, for example, began with sound ideas like concern for animal welfare as well as cost-benefit analyses for charitable giving. But these solid premises have launched some of its members towards intellectual worlds very distant from moral intuitions that most people hold; they’ve also sent a few into jail. The well-rounded type might struggle to stand out relative to people who are exceptionally talented in a technical domain. Hedge fund managers have views about the price of oil, interest rates, a reliably obscure historical episode, and a thousand other things. Tech titans more obsessively pursue a few ideas — as Elon Musk has on electric vehicles and space launches — rather than developing a robust model of the world.
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Though San Francisco has produced so much wealth, it is a relative underperformer in the national culture. Indie movie theaters keep closing down while all sorts of retail and art institutions suffer from the crumminess of downtown.
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Tech cares less for dissent. Its movements are more herdlike, in which companies and startups chase one big technology at a time. Startups don’t need dissent; they want workers who can grind until the network effects kick in. VCs don’t like dissent, showing again and again that many have thin skins. That contributes to a culture I think of as Silicon Valley’s soft Leninism.
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Anthropic chief Dario Amodei takes pains to point out that AI could push the unemployment rate to 20 percent by eviscerating white-collar work.
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Once an AI reaches a certain capability threshold, it might need only weeks or hours to evolve into a superintelligence.
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As Sam Altman once said (and again this is fairly humorous): “AI will be either the best or the worst thing ever.” It’s a Pascal’s Wager, in which we’re sure that the values are infinite, but we don’t know in which direction. It also forces thinking to be obsessively short term. People start losing interest in problems of the next five or ten years, because superintelligence will have already changed everything.
Cuáles son los énfasis que deben tener las instituciones educativas en un escenario como este?
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Call me a romantic, but I believe that there will be a future, and indeed a long future, beyond 2027. History will not end. We need to cultivate the skill of exact thinking in demented times.
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China has other advantages in building AI. Superintelligence will demand a superload of power. By now everyone has seen the chart with two curves: US electrical generation capacity, which has barely budged upwards since the year 2000; and China’s capacity, which was one-third US levels in 2000 and more than two-and-a-half times US levels in 2024. Beijing is building so much solar, coal, and nuclear to make sure that no data center shall be in want. Though the US has done a superb job building data centers, it hasn’t prepared enough for other bottlenecks. Especially not as Trump’s dislike of wind turbines has removed this source of growth.
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The AI labs have not shown that they’re thinking seriously about how to diffuse the technology throughout society, which will require extensive regulatory and legal reform.
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I am not a skeptic of AI. I am a skeptic only of the decisive strategic advantage, which treats awakening the superintelligence as the final goal. Rather than “winning the AI race,” I prefer to say that the US and China need to “win the AI future.” There is no race with a clear end point or a shiny medal for first place. Winning the future is the more appropriately capacious term that incorporates the agenda to build good reasoning models as well as the effort to diffuse it across society. For the US to come ahead on AI, it should build more power, revive its manufacturing base, and figure out how to make companies and workers make use of this technology. Otherwise China might do better when compute is no longer the main bottleneck.
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Chinese manufacturers are far ahead of US capabilities on anything involving physical production.
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I believe that Chinese technological success is now the rule rather than the exception. There are two fields in which China is substantially behind the west: semiconductors and aviation. The chip sector is gingerly attempting to expand under the weight of US restrictions; meanwhile, China’s answer to Airbus and Boeing is on a very long runway. I grant that these are two critical technologies, but China has attained technological leadership almost everywhere else. And I believe its technological momentum will continue rolling onwards to engulf more of their western competitors over the next decade.
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The electric vehicle industry is the sharp tip of the spear of China’s global success. Chinese EVs have greater functionalities than western models while selling at lower price points. A rule of thumb is that it takes five years from an American, German, or Japanese automaker to dream up a new car design and launch that model on the roads; in China, it’s closer to 18 months. The Chinese market is full of demanding customers as well as fast-iterating automotive suppliers. It also has a more productive workforce. According to Tesla’s corporate disclosures, a worker at a Gigafactory in China produces an average of 47 vehicles a year; a worker at a Gigafactory in California produces an average of 20.8
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Our view is that China’s industrial success has roots in deep infrastructure. That includes not only ports and rail, it also includes data connectivity, electrification, and process knowledge. China’s strength lies in a robust manufacturing ecosystem full of self-reinforcing parts.
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Alexander Grothendieck used an analogy of a walnut to describe different approaches to mathematics, which might also apply to technology development. Some mathematicians crack their problems by finding the right spot to insert a chisel before making a clean strike. Grothendieck described his own approach as coming up with general solutions, as if he were immersing the walnut in a bath for such a long time that mere hand pressure would be enough to open it. The US comes up with exquisite and expensive solutions to its technology problems. China’s industrial ecosystem is more like a rising sea, softening many nuts at once.9
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Probably the most underrated part of the Chinese system is the ferocity of market competition. It’s excusable not to see that, given that the party espouses so much Marxism. I would argue that China embodies both greater capitalist competition and greater capitalist excess than America does today. Part of the reason that China’s stock market trends sideways is that everyone’s profits are competed away. Big Tech might enjoy the monopolistic success smiled upon by Peter Thiel, coming almost to genteel agreements not to tread too hard upon each other’s business lines. Chinese firms have to fight it out in a rough-and-tumble environment, expanding all the time into each other’s core businesses, taking Jeff “your margin is my opportunity” Bezos with seriousness.
China es más profundamente capitalista que EEUU.
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While Chinese universities have grown more capable at producing new ideas, it’s not clear that the American manufacturing base has grown stronger at commercializing new inventions.
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Beijing has been preparing for Cold War without eagerness for waging it, while the US wants to wage a Cold War without preparing for it.
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When I walk around the library at Stanford, I see students plugging everything into AI tools; when they need a break, they’re watching short-form videos on their phones. These videos have been marvelously transformed by AI tools. Shortly after OpenAI released Sora 2, I had brunch with a friend who told me that he created an AI video of himself expertly breakdancing that fooled his five-year-old; another friend piped up to say that she created an AI video of herself that fooled her mother. AI chatbots are skilled at providing emotional companionship: Jasmine Sun discussed how they are able to seduce any segment of society, while pointing to a survey that 52 percent of teens regularly interact with AI companions.
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Europe is losing the two-front battle against the Chinese on manufacturing and the Americans on services.
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Europeans are right to gloat they are not under the rule of Trump. But for all of Trump’s ills, I see him as a sign of the underlying dynamism of the US. Who else would have elected so whimsical a leader to this high office? Trump forces questions that Europeans have no appetite to confront, proud as they are in being superior to both Americans and Chinese. I submit that Europeans ought to be more circumspect in their self-satisfaction. Chaos is only one election away. Right-populist parties are outpolling ruling incumbent parties pretty much everywhere, and it is as likely as not that Trumps with European characteristics will engulf the continent by the end of the decade.
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One advantage for the US and China is that both countries are at least interested in growth. You don’t have to convince the elites or the populace that growth is good or that entrepreneurs could be celebrated. Meanwhile in Europe, perhaps 15 percent of the electorate actively believes in degrowth. I feel it’s impossible to convince Europeans to act in their self interest. You can’t even convince them to adopt air conditioning in the summer.
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I believe that modern China is one of the most ahistorical nations in the world. The state and the education system may talk insistently about its thousands of years of continuous history. But no other society has also been so destructive of its own history. The physical past has been disfigured by the attention of the Red Guards and the inattention of urban bulldozers. The social past is contorted by outrageous textbooks, which implement enforced forgetting of major traumas. For tragedies too widely experienced in modern times to be censored — the Cultural Revolution, the one-child policy, Zero Covid — the party discourages reflection in the name of protecting the state’s sensitivity.
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Lack of action due to the expectation of long timelines is one of the sins of the lawyerly society.
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I wonder whether we can accuse the California government of subverting the will of the people by making so little progress on its high-speed rail, which was approved by referendum in 2008; California rail authorities take more pride in creating jobs than doing the job. I am tempted to use the language from American foreign policy at home. Why talk about American credibility only in terms of combat? Why shouldn’t the failure to deliver on big projects, after spending so much money, constitute a more severe blow to the credibility of the American project?
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I hope that the US will stop attributing all of China’s successes to stealing. If such a program would be sufficient for building a world-class industry, then American spooks should dedicate their formidable capabilities to extracting Chinese industrial secrets. The reality is that there is little to be learned from blueprints. By failing to recognize China’s real strengths — the industrial ecosystems pulsating with process knowledge — the US is only cheating itself.
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Musicians don’t usually practice by running a whole piece from start to finish. Rather, practice sessions tend to focus on particular passages, with a full run-through only before performance. Before I publish this letter, I retype the whole thing from start to finish. It means I take the draft that lives in my Notes app on the left half of my screen while I retype the whole thing into the Google Docs on the right side of my screen. It’s a final check to catch infelicities. More importantly, by simulating the experience of a reader, it’s another way to see if the whole essay stands together.
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The piece of speaking advice I’ve remembered for many years came from Tim Harford: good speaking rewards those who are able to prepare extensively and who are also able to improvise.
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However strange our new world will become, there will always be a class of people who want to engage with essays and books. Over the long term, writing might enjoy the fate of the opera and the symphony. People have been heralding the death of classical music for a century. Yes, much of its audience is pretty old. But there will always be more old people — especially if Silicon Valley delivers on longevity treatments. The job of authors and opera houses is to keep holding on to people who are maturing into pleasures that technological platforms cannot provide. The demographic trend is on our side: the world is producing more old people than youths. I want to be a sunny Californian optimist about everything, including the fate of the written word.