4 ms·

Thanks for the explanation! Most of what you wrote makes sense to me. In particular, I think the concept that going hard -> soft economic assets is easier than

Thanks for the explanation! Most of what you wrote makes sense to me. In particular, I think the concept that going hard -> soft economic assets is easier than the reverse is really interesting. I'll have to think on that more. Things that still give me pause: 1. I don't understand why hard economic assets like manufacturing are more heavily impacted by this phenomenon. Wouldn't exporting a $50,000 car and a $50,000 software license have the same impact on the country's current account? I think it might have something to do with the marginal cost of replication point you made, but, for example, the marginal cost of manufacturing semiconductors is very small, and we trail in that too. 2. I disagree with your assertion that 'vertical integration is the key to “innovation” in the abstract.' I think this is often true, because vertical integration enables more control/flexibility and faster iteration, which allows innovation to occur. However, there are many cases (e.g. fabless semiconductors, meat poultry farming, software companies build on the cloud) where the innovation was actually to split the value chain into separate concerns with separate concerns.

sebmellen 2y ago
1. The further you are up the chain of abstraction, the less “valuable” the export is as a form of power. Think of this as a spectrum between hard and soft assets — if you decline to sell advanced computing software to your rival, you may harm their ability to optimize crop yields, or whatever. But if you decline to sell them steel, or oil, you may decimate their energy supply and bring their economy to a halt. So, generally speaking, harder assets have more “declination risk” for the purchaser than softer ones, because the softer ones are either a) at the tip of the value chain, or b) easier to clone and replace. China has done a great job of outright refusing US SaaS exports like social media companies, while “stealing” millions of Windows licenses from Microsoft. Said differently, IP is fragile! If your opponent does not respect your laws, you can’t enforce them. Hard assets are the opposite, because you can more easily cut them off. And again, they are usually at the bottom of the value chain, so everything else is dependent on them being available. No oil, no cloud computing. Not the other way around. 2. Great counterexamples. I think it depends on what you define as innovation, and perhaps more specifically what about innovation as a concept is important to you. - There are “open” kinds of innovation that push humanity forward, grow global wealth and prosperity, and make everyone better off. - There are also “closed” kinds of innovation that benefit only a particular group. Generally speaking, open innovation is “fangless.” What I mean by this is that it does not greatly increase your geopolitical power. The Dutch, for example, own ASML, but this doesn’t really give them any power, because their tools are relatively “open”. Swiss companies own massive numbers of pharmaceutical patents, but that’s just a domicile on paper. If Switzerland were invaded tomorrow, their patent regime wouldn’t offer much protection. By contrast, a more “closed” form of innovation (weapons manufacturing being the most extreme example) will dramatically increase your geopolitical power. Think back to the atomic bomb. Now look to the future. If the US develops killer drone swarm technology, or genome-targeted bioweapons, or whatever else, that means we have the cards. Once you have world (or space) domination technology, you can disproportionately benefit from it, and you can selectively enrich your allies by giving them access to it, like the US currently does with our weapons systems. If you don’t vertically integrate, you can’t do closed innovation. And closed innovation is the only “hard money” — and perhaps the dominant power struggle in geopolitics.
- parodysbird 2y ago
  The Dutch and Swiss are very powerful, relative to their size. You can say fantasy things like "if they were invaded tomorrow", but that's not reality. The US has atomic weapons, but has lost almost every war it has started since having nukes. Having weapons doesn't mean you will be faced with contexts to actually use them. "Genome-targeted bioweapons" is just made up nonsense. Just making up "if" statements of fantastical capabilities that do not have grounding in reality is just that: fantasy. Living in fantasy land is how the richest nation the world has ever seen could lose a war to teenagers in Afghanistan.
  - sebmellen 2y ago
    The idea of an "atomic bomb" would have seemed fantastical before it was developed. Bioweaponry is underfunded, far more dangerous than you think, and is a hot topic for the PRC [0]. And let's be clear — the US did not "lose a war" in Afghanistan or Iraq. Yes, we had failed pseudo-occupations. That is not the same as losing a war. No country, save perhaps Iraq during the Gulf War, has experienced the force of a modern American army. And if you want know what happened during the Gulf War, look at the "Casualties and losses" section on the Wikipedia page [1]. Spoiler: America won, Saddam lost. You, and I, and the entire world, have been living under a Pax Americana for the past 70-something years. As that world order fractures, you will see that no country without hard assets and military power, the Netherlands and Switzerland included, are as powerful as they may seem. Friedrich Merz, the incoming German Prime Minister, spoke very eloquently about this in his first televised conversation. Germany will lead the re-militarization of Europe (disclaimer: I am also a German citizen) [2]. [0]: https://en.wikipedia.org/wiki/Ethnic_bioweapon#People's_Republic_of_China https://en.wikipedia.org/wiki/Ethnic_bioweapon#People's_Repu... [1]: https://en.wikipedia.org/wiki/Gulf_War https://en.wikipedia.org/wiki/Gulf_War [2]: https://www.youtube.com/shorts/CBhioWra4rA https://www.youtube.com/shorts/CBhioWra4rA
    - parodysbird 2y ago
      America didn't lose the Iraq War to Saddam, it lost to disparate groups of Islamic jihadis who read some Mao. Losing a war is not body counts, it's a military withdrawal after a failure to achieve objectives. It doesn't mean there are winners. America went into Afghanistan to destroy Al-qaeda and remove the Taliban from power. At the end of the war, the Taliban were back in power and global jihadism is even stronger and more pervasive than before. That is losing a war. Pax Americana shows that big militarized states like the US and Russia (before that USSR) do not wield the operational war power they imagine. They lose every war they start (which, again, is not to say there is a triumphant winner).

sebmellen 2y ago

1. The further you are up the chain of abstraction, the less “valuable” the export is as a form of power. Think of this as a spectrum between hard and soft assets — if you decline to sell advanced computing software to your rival, you may harm their ability to optimize crop yields, or whatever. But if you decline to sell them steel, or oil, you may decimate their energy supply and bring their economy to a halt. So, generally speaking, harder assets have more “declination risk” for the purchaser than softer ones, because the softer ones are either a) at the tip of the value chain, or b) easier to clone and replace. China has done a great job of outright refusing US SaaS exports like social media companies, while “stealing” millions of Windows licenses from Microsoft. Said differently, IP is fragile! If your opponent does not respect your laws, you can’t enforce them. Hard assets are the opposite, because you can more easily cut them off. And again, they are usually at the bottom of the value chain, so everything else is dependent on them being available. No oil, no cloud computing. Not the other way around. 2. Great counterexamples. I think it depends on what you define as innovation, and perhaps more specifically what about innovation as a concept is important to you. - There are “open” kinds of innovation that push humanity forward, grow global wealth and prosperity, and make everyone better off. - There are also “closed” kinds of innovation that benefit only a particular group. Generally speaking, open innovation is “fangless.” What I mean by this is that it does not greatly increase your geopolitical power. The Dutch, for example, own ASML, but this doesn’t really give them any power, because their tools are relatively “open”. Swiss companies own massive numbers of pharmaceutical patents, but that’s just a domicile on paper. If Switzerland were invaded tomorrow, their patent regime wouldn’t offer much protection. By contrast, a more “closed” form of innovation (weapons manufacturing being the most extreme example) will dramatically increase your geopolitical power. Think back to the atomic bomb. Now look to the future. If the US develops killer drone swarm technology, or genome-targeted bioweapons, or whatever else, that means we have the cards. Once you have world (or space) domination technology, you can disproportionately benefit from it, and you can selectively enrich your allies by giving them access to it, like the US currently does with our weapons systems. If you don’t vertically integrate, you can’t do closed innovation. And closed innovation is the only “hard money” — and perhaps the dominant power struggle in geopolitics.

parodysbird 2y ago
The Dutch and Swiss are very powerful, relative to their size. You can say fantasy things like "if they were invaded tomorrow", but that's not reality. The US has atomic weapons, but has lost almost every war it has started since having nukes. Having weapons doesn't mean you will be faced with contexts to actually use them. "Genome-targeted bioweapons" is just made up nonsense. Just making up "if" statements of fantastical capabilities that do not have grounding in reality is just that: fantasy. Living in fantasy land is how the richest nation the world has ever seen could lose a war to teenagers in Afghanistan.
- sebmellen 2y ago
  The idea of an "atomic bomb" would have seemed fantastical before it was developed. Bioweaponry is underfunded, far more dangerous than you think, and is a hot topic for the PRC [0]. And let's be clear — the US did not "lose a war" in Afghanistan or Iraq. Yes, we had failed pseudo-occupations. That is not the same as losing a war. No country, save perhaps Iraq during the Gulf War, has experienced the force of a modern American army. And if you want know what happened during the Gulf War, look at the "Casualties and losses" section on the Wikipedia page [1]. Spoiler: America won, Saddam lost. You, and I, and the entire world, have been living under a Pax Americana for the past 70-something years. As that world order fractures, you will see that no country without hard assets and military power, the Netherlands and Switzerland included, are as powerful as they may seem. Friedrich Merz, the incoming German Prime Minister, spoke very eloquently about this in his first televised conversation. Germany will lead the re-militarization of Europe (disclaimer: I am also a German citizen) [2]. [0]: https://en.wikipedia.org/wiki/Ethnic_bioweapon#People's_Republic_of_China https://en.wikipedia.org/wiki/Ethnic_bioweapon#People's_Repu... [1]: https://en.wikipedia.org/wiki/Gulf_War https://en.wikipedia.org/wiki/Gulf_War [2]: https://www.youtube.com/shorts/CBhioWra4rA https://www.youtube.com/shorts/CBhioWra4rA
  - parodysbird 2y ago
    America didn't lose the Iraq War to Saddam, it lost to disparate groups of Islamic jihadis who read some Mao. Losing a war is not body counts, it's a military withdrawal after a failure to achieve objectives. It doesn't mean there are winners. America went into Afghanistan to destroy Al-qaeda and remove the Taliban from power. At the end of the war, the Taliban were back in power and global jihadism is even stronger and more pervasive than before. That is losing a war. Pax Americana shows that big militarized states like the US and Russia (before that USSR) do not wield the operational war power they imagine. They lose every war they start (which, again, is not to say there is a triumphant winner).