(This is my personal annual review post; here’s the piece I wrote for 2018)



Following the twists and turns of the trade war meant that I had less time for personal writing this year, so this letter is the only piece I’ll publish. I’m disappointed not to write more here, but on the other hand it might allow us to identify, for academic purposes, my lack of personal output to be the smallest and most trivial casualty of the trade war.



This year I want to discuss mostly science and technology. First, some thoughts on China’s technology efforts. Then I’ll present a few reflections on science fiction, with a focus on Philip K. Dick and Liu Cixin. Next I’ll discuss books I read on American industrial history. I save personal reflections for the end.



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I spend most of my time thinking about China’s technology trajectory. The main ideas can be summed up in two broad strokes. First, China’s technology foundations are fragile, which the trade war has made evident. Second, over the longer term, I expect that China will stiffen those foundations and develop firms capable of pushing forward the technological frontier.



In my view, there’s not yet much terribly impressive about China’s technology achievements. It’s true that the country leads on mobile payments and the consumer internet, as well as the buildout of infrastructure projects like a high-speed rail network. These however have more to do with differences in the social environment and regulatory regime. More importantly, much of China’s technology stack is built on American components, especially semiconductors. Failure to develop more foundational technologies has meant that the US has had an at-will ability to kneecap major firms, and to be able to impose at least significant operational hassles on Huawei. Over the medium term, US controls will disrupt the ability of Chinese firms to acquire leading technologies. And so long as substantial US tariffs stay in place, Chinese firms will have worse access to the world’s largest and best consumer market, meaning that they’ll be exposed to less export discipline.



I am constructive however for China’s longer-term industrial development. I expect that Chinese firms will build strong technological capabilities, with companies that will reach the leading edge and push it forward. On the supply side, Chinese workers engage in a greater amount of technological learning than anyone else, for the simple reason that most supply chains are in China. On the demand side, a huge and dynamic market will pull forward domestic capabilities. And US controls can only be successful in the short term; it’s not likely that it can monopolize key technologies forever.



Fragile foundations



There are certain lights under which Chinese technology efforts look spectacular. China is the only country other than the US to have been able to develop internet giants, which can look upon their Silicon Valley counterparts as peers. The Chinese mobile internet experience certainly is far more fun than what consumers in the US are able to play with. Chinese firms have built up credible positions in certain industrial technologies that include solar energy generation, mobile infrastructure equipment, and high-speed rail. They’re also making good inroads in consumer electronics, from smartphones to drones. And Chinese firms have a plausible shot at leading in emerging technologies like artificial intelligence and quantum computing.



These are not trivial achievements. But neither are they earth-shattering successes. Consider first the internet companies. I find it bizarre that the world has decided that consumer internet is the highest form of technology. It’s not obvious to me that apps like WeChat, Facebook, or Snap are doing the most important work pushing forward our technologically-accelerating civilization. To me, it’s entirely plausible that Facebook and Tencent might be net-negative for technological developments. The apps they develop offer fun, productivity-dragging distractions; and the companies pull smart kids from R&D-intensive fields like materials science or semiconductor manufacturing, into ad optimization and game development.



The internet companies in San Francisco and Beijing are highly skilled at business model innovation and leveraging network effects, not necessarily R&D and the creation of new IP. (That’s why, I think, that the companies in Beijing work so hard. Since no one has any real, defensible IP, the only path to success is to brutally outwork the competition.) I wish we would drop the notion that China is leading in technology because it has a vibrant consumer internet. A large population of people who play games, buy household goods online, and order food delivery does not make a country a technological or scientific leader.



Although Alibaba and Tencent may be technically impressive on software development, their business success is mostly a function of the size of the market as well as the social and regulatory environment. The ubiquity of mobile payments is the result not just of technological innovation (substantial though that might be), but also the financial regulatory regime and the leapfrog over credit cards. Ecommerce works great because China has built first-rate infrastructure and because many migrant workers are available to deliver goods in dense urban areas. These are fine companies, but in my view, the milestones of our technological civilization ought to be found in scientific and industrial achievements instead. Now even if one did want to consider consumer internet the be the most important sector, the US still looks good. A rough rule-of-thumb comparison: market caps of the five biggest US tech companies (Apple, Microsoft, Google, Amazon, and Facebook) add up to US$5tn at the time of this writing, while the two Chinese internet giants (Alibaba and Tencent) add up to US$1tn. This 5:1 advantage to the US feels intuitively right to me as a measure of relative capabilities.



As a tangent, I’ve found it curious that Congress has become so keen to publicly beat up on Facebook and Google while the US considers itself in technological competition with China. In my view, antitrust arguments apply better to companies like Intel and Boeing, which are the tech giants that wield much greater market power. Maybe the contrarian move however is to recognize the cleverness of Congress. The legislators might in fact understand that semiconductors and jet engines are a core strategic asset, in a way that social networks and search engines are not. Therefore Congress is actually exercising a judicious use of political power to bully cash-rich companies to do more on innovation, or at least employment.



China has a strong position when it comes to manufacturing industrial goods. A few firms have staked out leading positions in industries that include steel, solar power generation, and telecommunications equipment. The bulk still has a long way to go however before they can really be considered the peers of German, Japanese, Korean, and American giants. In fact, I suspect that Chinese firms should be considered underperformers as a whole. Few domestic firms have become globally-successful brands, and Chinese firms are still far behind more technologically-sophisticated industries like aviation and semiconductors. As a rule of thumb, it’s harder to name global Chinese brands than Japanese and Korean ones, even when they were close to China’s current level of per capita GDP. Shouldn’t we expect more from the world’s second-largest market?



How about emerging technologies like AI, quantum computing, biotechnology, hypersonics, and other buzzing areas? I think there’s no scientific consensus on China’s position on any of these technologies, but let’s consider it at least a plausible claim that Chinese firms might lead in them. So far however these fields are closer to being speculative science projects than real, commercial industries. AI is mostly a vague product or an add-on service whose total industry revenue is difficult to determine, and that goes for many of these other items. In my view, focusing the discussion on the Chinese position in emerging technologies distracts from its weaknesses in established technologies. Take semiconductors, machine tools, and commercial aviation, which are measured by clearer technical and commercial benchmarks. They are considerably more difficult than making steel and solar panels, and Chinese firms have a poor track record of breaking into these industries.



The focus on speculative science projects brings to light another issue around discussions of China and technology: an emphasis on quantifying inputs. So much of the general commentary focuses on its growth in patent registrations, R&D spending, journal publications, and other types of inputs. One can find data on these metrics, which is why measures of “innovation” are often constructed around them. But these inputs are irrelevant if they don’t deliver output, and it’s not clear that they often do, neither in China nor anywhere else. Wonderfully asymptoting charts on Chinese patent registrations and R&D spending suggest that Chinese firms might overrun the rest of the world any day now. So far however the commercial outputs are not so impressive.



The trade war has produced the clearest evidence that China’s technology foundations are fragile. When the US government decided to restrict technology exports to particular firms, it drove ZTE to near bankruptcy, crippled the operations of Fujian Jinhua, and has at least dealt a major blow to Huawei. US sanctions have revealed that most Chinese firms engage in only a thin layer of innovation, and that Chinese firms in general have not had serious success mastering more foundational technologies. The most important of these is the semiconductor. Without particular chips like CPUs, GPUs, and FPGAs, which for the most part come from American providers, even a firm as large as Huawei can struggle.



The US has the policy tools in place to slow down China’s technology progress, at least in the short term. Creating hassles for large companies slow down the entire ecosystem, because leading companies spend the most on R&D and serve as downstream buyers. The US can escalate the use of export controls in still more ominous ways, and in some cases also prevent other countries from shipping goods to China. CFIUS will make it more difficult for Chinese firms to engage in technological learning through equity investments. And if US tariffs stay on for an extended period, Chinese firms will not be able to learn to improve their products in the world’s largest market of sophisticated consumers. The medium-term outlook for China’s technology progress is in my view not so cheerful.



A calm look at China’s technology achievements should pick up strengths as well as weaknesses. China is the only country after the US to have built internet giants, which puts it in a good position to continue developing digital technologies. It has built credible firms in certain hardware technologies—like the smartphone—and many types of industrial goods. And they’re making good consumer products, though not global brands. The lack of success in brandbuilding shows that Chinese firms (not foreign firms producing in China) are actually poor exporters. In industries involving R&D-intensive technologies like automotives, semiconductors, and aviation, Chinese firms have a weak position even in the domestic market. In many ways, China’s technology success is too much like a paper tiger, impressive in appearance but in reality not so powerful.



Learning by doing



I think however that long-term prospects are bright. In my view, Chinese firms face favorable odds first in reaching the technological frontier and next in pushing it forward. I consider two advantages to be important. First, Chinese workers produce most of the world’s goods, which means that they’re capturing most of the knowledge that comes from the production process. Second, China is a large and dynamic market. On top of these structural factors, Chinese firms have stiffened their resolve to master important technologies after repeated US sanctions.



My essay How Technology Grows argues that technological capabilities ought to be represented in the form of an experienced workforce. We should distinguish technology in three forms: tools, direct instructions (like blueprints and IP), and process knowledge. The third is most important: “Process knowledge is hard to write down as an instruction: you can give someone a well-equipped kitchen and an extraordinarily detailed recipe, but absent cooking experience, it’s hard to make a great dish.”



We should think of technology as a living product, which has to be practiced for knowledge even to be maintained at its current level. I offered the example of the Ise Grand Shrine, which Japanese caretakers tear down and rebuild anew every generation so that they don’t lose its production knowledge. Here’s an example I came across more recently: Mother Jones reported in 2009 that the US government forgot how to produce “Fogbank,” a classified material essential to the production of the hydrogen bomb, because relevant experts had retired. The government then had to spend millions of dollars to recover that production knowledge. I believe that the hard-to-measure process knowledge is more important than the more easily observable tools and IP. We would be capable of making few meaningful advancements if a civilization from 2,000 years in the future were able to dump blueprints on us, just as the Pharaohs and Caesars from 2,000 years in the past would have been able to do nothing with the blueprints of today.



Today, Chinese workers produce most of the world’s goods, which means that they engage more than anyone else in the technological learning process. Few Chinese firms are world-leading brands. But workers in China are using the latest tools to manufacture many of the most sophisticated products in the world. They’re capturing the marginal process knowledge, and my hypothesis is that puts them in a better place than anyone else to develop the next technological advancements. To be more concrete, Chinese workers will be able to replicate the mostly-foreign capital equipment they currently use, make more of their own IP, and build globally-competitive final products.



That has roughly been the story in the consumer electronics sector. Every year over the last decade, Apple trained a million workers in Shenzhen and other cities to manufacture the world’s most complex consumer electronics. The smart narrative on the iPhone has been that Chinese workers are engaged in mere assembly, of mostly foreign parts to boot, while Apple keeps all the profits. That story is true, but it misses a great deal. First, even if most of the workforce learns little, a few thousand line engineers become the world’s greatest experts in electronics assembly. Combine that fact with the billions of dollars invested in the smartphone supply chain, and it’s no wonder that Shenzhen is driving the marginal innovation on hardware today, from consumer drones to scooters. Second, Chinese brands were able to tap into the same supply chain and learn how to make pretty good products; collectively they make up around 40% of global smartphone sales (though they earn little profit). Third, the Chinese share of added value per phone has zoomed up, from 4% to 25% over the course of a decade, according to an academic estimate. It’s no longer the case that China is responsible only for assembly; Chinese firms have figured out how to make the more valuable parts of the phone as well.



By aggregating the smartphone supply chain, Chinese firms learned how to make sophisticated components and become exportable brands. They’re still far behind on making the underlying software of the phone, but if one leaves that aside, isn’t it a pretty good success story for Chinese firms? The power of compounded workforce training pulled Chinese capabilities to the technological frontier, and now these firms are in a good place to push that frontier forward. Chinese firms are now also leading in all the follow-on technologies of the smartphone, like the consumer drone. Now consider that it’s not just the electronics supply chain that is centered in China. Design and production of many goods, from furniture to heavy industry, are concentrated in gigantic Chinese production hubs. These hubs allow for tight connections between R&D and manufacturing, shortening the circulation of knowledge in a production loop.



China is now responsible for around a fifth of the world’s total manufactures exports because few multinationals have resisted moving production there. US, German, and Japanese firms like to say that they’ve kept the most valuable work domestically. That’s true for the most part, but they’re betting that the Chinese workforce many of them are training will fail to digest foreign technologies and replicate it. That bet has failed at least in technologies that include high-speed rail, shipbuilding, and telecommunications equipment. And I expect that as China’s economy grows more sophisticated, its absorptive and learning capacity will improve as well.



Technological learning in the labor force is a supply-side factor pulling forward the capabilities of Chinese firms. They benefit also from a demand-side factor: the domestic market is really big. People tend to forget that fact. It’s true that Chinese firms haven’t yet had much success in creating global brands, but perhaps they can be forgiven for focusing on the world’s fastest-growing large market. The size of the market can overwhelm many deficiencies, like problems with the education system stifling creativity. And although consumer internet companies are not strategically so important, they buy upstream components, and are in a more credible position than European and Japanese firms in developing future digital technologies. China today is a huge internal market made up dynamic firms, ingenious workers, and a strong interest in technology. That’s rather like the US in the second half of the 19th century, which built the largest firms in the world mostly by relying on domestic demand.



And then there’s a matter of will. Chinese aspirations to replace US technology has long been a whimsical task. But after US sanctions started taking down giants, private companies are thinking more carefully about how to maintain continuous access to supplies. I’ve heard a company tell me that US political actions are now as unpredictable as major earthquakes, and have the same effects on supply chains. Every company has to cultivate non-US (and ideally Chinese) alternatives. That task is taken most seriously by the technology sector, since the lack of only a few components can defeat a system as complex as a smartphone or base station.



The government is on board. I’ve been quoted in saying that China finds it politically intolerable that the US has an at-will ability to cripple major firms like ZTE and Huawei. It’s now a matter of national security for China to strengthen every major technological capability. The US responded to the rise of the USSR and Japan by focusing on innovation; it’s early days, but so far the US is responding to the technological rise of China mostly by kneecapping its leading firms. So instead of realizing its own Sputnik moment, the US is triggering one in China. I’m surprised that esoteric details like the de minimis threshold of the export administration regulations is starting to be the subject of conversation of educated people in Beijing. Meanwhile, the strategic solution to Chinese problems cannot be more straightforward: replicate American products, or at least find alternative vendors.



China’s technology foundation has been fragile, but it will patch up now that everyone has realized it. Good Marxists after all have to make sure that workers own the means of production. And I’m constructive on the idea that many of these ideas will be successful. Chinese engineers are trying only to replace existing technologies, which is relatively simpler than inventing them de novo. Their existence in the first place removes the idea that there’s any theoretical barrier, and it’s rare in the history of technology for there to be only a single path to a product.



And it’s difficult for any country to monopolize a key technology over the long term. Baghdad couldn’t have done it with agriculture, the Chinese didn’t do it with gunpowder, and Britain failed to maintain its control over textile technologies. After the UK imposed export controls on industrial mills in the 18th century, US firms simply hired a few people who memorized their designs. One of them, Samuel Slater, is known as “Slater the Traitor” in the UK and the “father of the US industrial revolution” stateside. The saying I picked up when I worked in California is that knowledge travels at the speed of beer. Engineers like to share, and it’s hard to stop technical knowledge from diffusing. There wouldn’t be technological clusters like Silicon Valley in the first place if that principle were not true.



This commitment to technology and growth is not simply a reaction to a feeling of being besieged. The country still feels like a highly optimistic place. International survey results consistently show that Chinese rank at the top of feeling optimism for the future. And in my view, government institutions are organized around the ideas of adaptation and progress. Consider a few of their names. In 2003, the economic super-ministry renamed itself from the State Planning Commission to the National Development and Reform Commission. The most important government body is the Central Commission for Comprehensively Deepening Reform. “Development” and “reform” are splendidly Hegelian ideas: both are forward-looking and without end. Surely it’s better to be a developing country than a developed one, for the latter means that everything is done and finished. And a commitment to continuous “reform” recognizes the impossibility of overcoming every contradiction entailed by modernization, and therefore institutions need to be perpetually adaptive. Incantation alone cannot make something true, but getting names right is a nice part of institutional success.



I believe that technology ultimately progresses because of people and the deepening of the process knowledge they possess, and that the creation of new tools and IP are the milestones of better training. Chinese workers are working with the latest tools to produce most of the world’s goods; over the longer term, my hypothesis is that they’ll be able to replicate the tooling and make just as good final products. They can do so because the domestic market is huge and dynamic. China today has a large industrial system with few missing backward and forward linkages, which means it’s a mostly-complete learning loop. The government and businesses are motivated by a sense of urgency to master most technologies.



But I also recognize that this case is theoretical and a priori. There are many things that can get in the way. Perhaps workers fail to understand the tools they work with well enough to replicate it and invent the next iteration. Although the domestic market is large, policy distortions restrict competitive pressures. Productivity growth has been slowing down for a decade. And perhaps the market conditions aren’t yet right for engagement in high technology; it’s hard to see the case for investing in the development of the world’s best software and robotics systems when Chinese labor is still so much cheaper than developed levels. So let’s see how the constructive case runs against these practical challenges.



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Hegel proclaimed: “The philosopher must command as much aesthetic power as the poet.” So too, I submit, must the economist. But what sort of instrument is at her disposal to inspire people about economic growth? It’s fine and important to argue its case directly, as Tyler does in Stubborn Attachments. But I believe that more powerful instruments are available, and that science fiction is one of them. I want to discuss the utility of science fiction as a tool to promote cognitive wonder.



I read a dozen books by Philip K. Dick this year, which are intoxicating, but I’ll discuss them mostly for their negative inspirational value. More useful instead to take up works by authors like Olaf Stapledon, Neal Stephenson, and Liu Cixin.



Reading Philip K. Dick (PKD going forward) is like being plunged into a dreadful nightmare, of the type that he himself suffered as a result of far too much drug use. Everyone who drinks from the well of PKD is charmed and frustrated by different things, and every critic is eager to tell us how he correctly predicted this or that aspect of our modern world. I can do no differently. Instead of picking up his predictions of technology or corporatism, I want to dwell on how PKD’s political vision of elites. “We are sane and sober when engaged in trivial business,” Strauss wrote in Natural Right and History, “and gamble like madmen when confronted with serious issues—retail sanity and wholesale madness.” PKD excels at working through the logic of such systems, which I think are reflected a little too well in the developed world.



Such a system exists in Hong Kong (from where I departed in the beginning of the year). Visitors like to compare the city’s skyline to the physical setting of Blade Runner, which is based on one of PKD’s lesser books. Rather than limiting myself to the physical setting, I find the social system in PKD’s books a more useful guide to Hong Kong’s tycoon-dominated polity. As a city, Hong Kong is governed by a competent but fundamentally pessimistic elite, which administers a population bent on consumption. Instead of being hooked on drugs and TV like in PKD’s novels, people in Hong Kong are addicted to the extraordinary flow of liquidity from the mainland, which raises their asset values and dulls their senses. Hong Kong is organized entirely to serve elite business interests, which take the form of conglomerates and property developers. That is pretty much the setting of the modal PKD novel.



An afternoon of walking around Hong Kong is the best argument against the idea that growth is some sort of automatic process, which we can count on as a matter of course. Between its economic stagnation and general air of nostalgia, it’s difficult to identify anything in the streets of Hong Kong that didn’t already exist in the ‘90s. Instead of arguing that case here, I’ll refer readers to Simon Cartledge’s essay on the city’s lack of dynamism. Stagnation might be fine if Hong Kong were the only place afflicted. I worry that the rest of the developed world (namely the US, Europe, and Japan) is turning into larger Hong Kongs.



That’s when PKD becomes most relevant. His novels feature smart—and often even brilliant—elites, who feel hemmed in by forces they cannot understand. PKD’s novels are good at depicting the frustrations of elites, whose only satisfaction comes from toying with the fates of smaller characters. They have good reactive instincts and can manage problems that flare up, but lack the confidence that they can affect larger outcomes, and thus have no real sense of initiative beyond petty matters. That’s the story of an elite in Hong Kong, and I worry that US elites are giving in to the same tendencies. They are well-meaning and well-educated, but also risk-averse and pessimistic: retail sanity and wholesale madness. My feeling is that the main pre-occupation of US elites is to impress their peer class, an instinct that was honed by Girardian pressures in college. And it might be worse in Europe and Japan, where elites are even more pessimistic because they have to deal with lower growth rates and deeper population drags.



Disappointment with elites is the theme that shines most brightly in my reading of PKD. Here’s another reason I enjoy him, which I’ve never seen discussed: He’s an excellent writer on interiority, on this front the equal to Proust. (One interesting strand in his work is an abiding interest in German culture, history, and philosophy—thus surely he’s familiar with the idea of bildung, or personal cultivation.) PKD came of age in the postwar boom years of California, a setting in which people held earnest beliefs in utopia, inflected at the same time by paranoid fears driven by the Cold War. His books tend to feature a more-or-less ordinary person who is dropped into a perplexing dream. PKD places us in the shoes of a person who finds the world very odd. He’s telling us that the world is in fact deeply weird, and that it’s difficult to really understand other people. And that makes him a very good friend for the nerd.



It’s hard to discuss PKD’s books without acknowledging their terrible flaws. Even his best novels are blemished by a few too many twists and unnecessary complications. He wrote because he needed money—he published 11 books between 1963 and 1964—and it’s easy to be frustrated that he didn’t appropriately prosecute his many brilliant ideas. Drugs drove his life, which means that they also drove the lives of many of his characters, and that element quickly wore me out. And he’ll disappoint the science fiction reader who looks for at least a modicum of rigor; instead of engaging in technical details, he throws in zap guns and multi-armed aliens as gratuitous ornaments.



PKD’s whole body of works is difficult to negotiate, here’s my guide. I think it’s valid to start with his most acclaimed works: Ubik, Flow My Tears the Policeman Said, and The Man in the High Castle. The first two are fun, the third is more serious: untypically well-crafted and the result of deep research. It’s his only book I feel the urge to flip through every so often, for its discussions of the Nazi bureaucracy, and for the exquisite moral dilemma situated at the center of the plot. If one enjoys these three, move on to PKD’s weirder side. My favorites are Now Wait for Last Year, Our Friends from Frolix 8, and his final work, the Valis trilogy.



I describe PKD at length not because his books describe the mood of the current day. He’s fun to read, but he doesn’t represent my ideal of science fiction. Stubborn Attachments acknowledges that it’s difficult to make people feel strongly about preferring 2.1% economic growth to 2.0% economic growth. I don’t think that accountant-style arguments for structurally higher growth, even extrapolations of per capita GDP in different trend lines, are enough to change hearts and minds.



Instead we should harness the aesthetic powers of science fiction. Science fiction is uniquely capable of provoking imagination for radically better futures. By radically better, I mean far more than progress on a few technologies and social problems. Instead I like the idea of books that sketch out humanity 5,000 years from now, after we’ve made major advances in energy, materials science, space, and in civilizing humanity. I’m advocating to treat science fiction as a political project, to spur a better vision of the future as well as the hard work to make it reality.



Olaf Stapledon has written that type of book. His Last and First Men is one of my favorite two books this year (I discuss the other, Adam Tooze’s Wages of Destruction, below). Last and First Men has the dizzying ambition to present the evolution of human intelligence across two billion years, over 18 different iterations of the human species. Each round of humanity is wiped out by war, natural catastrophe, solar flares, or something more bizarre, each time nearly annihilated before bouncing back to reach a more civilized form. The book is made up of gestures like: “We have now followed man’s career during some forty million years,” and “The Fifteenth Men first set themselves to abolish five great evils, namely disease, suffocating toil, senility, misunderstanding, ill-will. The story of their devotion, their many disastrous experiments and ultimate triumph, cannot here be told.”



Last and First Men is 200 pages of high stimulation. The book ends on a joyfully triumphant note, after the Eighteenth Men have understood all the mysteries of physics and biology, thus commanding the ability to populate the rest of the galaxy. Stapledon is interested in civilizing the human species, which I think is just as worthwhile as discussing how to equip it with many types of technologies. I think more of us should read Stapledon and try our hands at writing out the next million years of human history.



After Stapledon, I most appreciate the works of Neal Stephenson and Liu Cixin. Cryptonomicon, my favorite Stephenson book, isn’t necessarily inspirational on the topic of growth or the future. Seveneves is. I like its challenge theme: humanity faces a civilization-ending threat; instead of giving in to despair, people work steadfastly on the scientific and engineering challenges required to overcome it; they succeed after enormous struggle. We need more books with that theme.



There’s another great part about Seveneves. I’m delighted that Stephenson pays homage to Stapledon in the final third of the book, which zooms 5,000 years into the future. By that point, humans have mastered many more technologies while also physically evolving in odd ways. Meanwhile, the new era offers more types of contradictions that they have to overcome. I admire Stephenson for another move: making this utopia free of the internet and social media. His advanced civilization maintains a focus on the material and industrial world.



And I’ve already written extensively on Liu’s Three-Body Problem trilogy. It shares the challenge theme: instead of giving in to despair about an imminent catastrophe, humanity overcomes the threat through ingenuity and a massive industrial effort. The trilogy’s mood is pessimistic, but its results are optimistic. Liu is telling us that the problems ahead are difficult, but they are solvable. He offers reminder after reminder against complacency. For example, after centuries of careful preparation, humanity’s fleet is abruptly wiped out by first contact with aliens. People have to remain undaunted and to move forward.



Science fiction is the most political genre. It’s fine that much of science fiction consists of critiques of contemporary society. It’s more interesting when it assumes a technological breakthrough or exaggerates a social trend to correctly predict an aspect of the future. It’s most useful when it can be used to spur hard work to build the future. Science fiction has the capacity to inspire by setting the vision of a radically better future, and by making it clear that the future won’t happen unless we put in the work.



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It’s time to talk about books.



I read Elena Ferrante’s Neapolitan Quartet early in the year. Certainly I enjoyed the series, but am now less struck by the idea of it, and want to read it through again in a few years to see how well it holds up before I offer comment. The main effect of these books is for me to want to spend some time in Naples, which I hope to do soon.



It’s easier to comment on another piece of fiction I enjoyed this year: American Tabloid by James Ellroy. It’s a thrilling plot in incandescent prose. Ellroy is the antidote to Philip K. Dick. It’s a portrait of a highly masculine era, when gangsters and government types displayed an extraordinary degree of personal initiative, believing themselves capable of anything, until they ran headfirst into the Bay of Pigs fiasco. What a mad idea it looks like in retrospect—D-Day this was not. Ellroy’s account is a work of fiction, but I wonder if that particular failure contributed significantly to the decline of ambition in the US government. Kennedy’s space program redeemed the some of the sense of optimism, but it feels today like the final effort of a system that had begun to run out of steam by the early ‘60s.



The best nonfiction I read this year were two books about the Nazis. Adam Tooze’s Wages of Destruction is an economic history of the Third Reich, from the ‘20s through the war. It’s my ideal of a history book: conceptually-driven (as opposed to being a psychological account of personalities), with a focus on structural factors like industrial capacities and economic facts. My main, incredible takeaway was how under-provisioned the Nazis were when they launched the war. They were short of everything: fuel, steel, coal, labor, foreign exchange, officers, winter coats, rubber, and on and on. By the middle of the war, economic administrators were engaged in grim mathematical calculations to determine the minimum amount of proteins required to extract an adequate amount of industrial output from workers.



Wages of Destruction is an excellent companion to Ben Shepherd’s book on the Wehrmacht, which offers operational details, and Victor David Hanson, who presents systematic comparative data. Each of them presents compelling arguments with carefully-researched arrays of facts. The lesson I draw from these books is something like the following: the most important priorities in war are management of material resources, then operational excellence, and finally general strategy. The Axis batted one out of three—operational excellence—while the Allies did well on each. If a country cannot convince the domestic population to deliver soldiers and industrial output, and if the logistics networks cannot transport these to the front, then strategy matters for little. And if soldiers are poorly trained, then strategy also matters little. Thus in my view, the best minds in wartime ought to be focused on motivating the home population, working on logistics, and improving operational capabilities of troops, all of which expand strategic space. Then one can worry about strategy more directly.



No less dreary than Tooze is Michael Kater’s Culture in Nazi Germany. Kater evaluates the artistic, literary, and musical output of the Third Reich, and makes a good case that the regime produced little of lasting value. It tried, but perhaps the failure ought not be so surprising, given that the state drove away or murdered many of its most creative talents. I enjoyed the section on Minister Goebbel’s struggles to manage public opinion after the war effort turned against Germany: “The public started asking detailed questions, such as: Why was Stalingrad not evacuated while there was still time? Why was the Red Army’s strength so obviously underestimated? Why was its pincer-movement offensive of last November not detected?” Another excellent section dealt with the difficulties that German artists encountered in California, where many had emigrated. These artists were miserable in sunny LA (their accents made them a poor fit for Hollywood blockbusters), and they took it out on newer arrivals, who “were exiled again by the exiles.”



Let’s return to discussing science and technology. I read a trio of books on US industrialization this year. The most interesting was David Hounshell’s From the American System to Mass Production, 1800-1932. The other two (biographies of Vannevar Bush and Gordon Moore) offer interesting facts but were less good books to read. I’ll focus the discussion on Hounshell.



From the American System to Mass Production is a technical history book. The “American system” stresses the concept of interchangeability. There were essentially two manufacturing principles in the 19th century: the British focused more on cultivating highly-skilled master craftsmen; the US placed greater emphasis on mechanization and the interchangeability of parts. Its prime mover was the United States Ordnance Department, which insisted on machine-made interoperable parts production of small arms. The department practiced this principle at its national armories in Springfield and Harpers Ferry, and also required its private contractors to adopt interchangeability. It wasn’t easy to do. The principle was more of a political and aesthetic ideal until the end of the century. It took two generations of skilled mechanics to perfect interchangeability, after having developed gauges capable of precise measurements and machine tools to produce fine enough components that could be assembled with little fitting.



The results were spectacular when they succeeded. Hounshell traces the development of the sewing machine, reaper, and bicycle as the practice rounds in the perfection of interchangeability. These led to innovations in machine tooling, woodworking, and metalworking. The story culminates with the triumph of Ford’s Model T, which propelled US industry to a philosophically-higher stage of development: mass production. The Ford system required the manufacture of massive quantities of interchangeable parts, the installation of huge numbers of specialized machine tools, and workers able to adapt to a mechanized environment. When it worked, it worked. Between 1908 and 1916, Ford increased production of the Model T by 40 times between while more than halving its price.



The progress towards mass production required decades of pain and experimentation. When it succeeded, General Patton could rightfully say: “Americans are the foremost mechanics in the world, and America as a nation has the greatest ability for mass production of machines.” My only issue with Hounshell’s book is that it doesn’t present on whether this investment in interchangeability was really worth it. Yes, Ford was able to mass produce the automobile, but is that so much because of principles long set by the Ordnance Department, or some other reason? After all, the British and Germans were not so far behind in becoming manufacturing giants, without such a long-running political obsession with interchangeability.



Suppose for the sake of argument however that this focus on interchangeability was a prerequisite for mass production later on. What should we learn? Here I’ll draw on the biographies of Gordon Moore and Vannevar Bush as well. One lesson is that technology is highly path-dependent. There are arguably only a half-dozen countries that really do high technology: the US, a few countries in Europe, and a few more in Asia. These countries are technology successes because they have favorable initial endowments and then have figured out important principles, like interchangeability. It’s really hard to get these things right. The skills US workers learned in the process of becoming an industrial giant helped set the US up for technological leadership over the rest of the century.



It’s still odd however how different places become major centers of production. Detroit became a major auto producer because it had large numbers of skilled mechanics in the form of marine and railroad engineers. Silicon Valley was seeded by William Shockley, who moved to Palo Alto because his mother was there; he brought Gordon Moore back from the east, who was eager to return to the San Mateo county area, where he grew up. They turned the Bay Area into the center of the semiconductor industry, which subsequently became the center of telecommunication, software, and the consumer internet. It’s not really clear how and why these clusters develop, and why they can endure for a long time.



The other apparent fact in these three books is how much government, and especially its demand for war, drove technological growth. It’s obvious in the case of Vannevar Bush, who helped to develop the radar and the atomic bomb while he administered the scientific research apparatus during the war. It’s also obvious in the case of interchangeability, which was driven by the Ordnance Department’s goal to produce weapons quickly and cheaply. And it’s also important in the history of semiconductors, to a degree that surprised me. Shockley, Texas Instruments, and Fairchild were set up explicitly with the idea of capturing the lucrative contracts of the US Air Force. The firms were all involved with weaponry, of the mass destruction kind: Bell Labs helped to transistorize the nuclear-armed Nike Missiles; Fairchild supplied the B-70 Valkyrie bomber and the Minuteman II ICBM. The Pentagon funded nearly all early semiconductor research, and played a big role in the industry by being a price-indiscriminate buyer. Arnold Thackray writes that a quarter of Intel’s transistors went to military uses by as late as 1972. A discussion of ethics in tech 40 years ago, which didn’t publicly happen in a big way, would have had higher stakes.



***



Personal matters for last.



The major event of my life this year was to move from Hong Kong to Beijing. Beijing has few redeeming qualities as a city—mostly unwalkable, unpleasant weather, generally maddening—but it’s a fascinating place to be. There are a few places that feel like the center of the world when you’re there, and Beijing is one of them. (I offer San Francisco, Tokyo, and DC as other candidates.) I like a remark from a friend: Beijing is a city that emanates a sense of sinister power, in a way that Mumbai and Naples also do. They’re each places that have had foreign rule over significant periods, filled with intimidating buildings that have entryways that convey mystery. It’s worth keeping in mind that the city has been sustained through sheer political will; which other major cities can be so far away from a significant river or body of water? Beijing was founded to be the point that connects the horse lands of the north with the rice lands of the south. Although muskets made horses obsolete, Beijing has clung on to be the capital mostly continuously for 800 years.



There are not many cities that are more interesting to live in. Beijing isn’t attracting people who want a pleasant life. There are many easier places in Asia for that: Hong Kong is a tropical island, Singapore basically the same, Taipei is wonderfully livable, and Tokyo is Tokyo. Beijing is the magnet for many of the smartest people in China, and then for many interesting people in the world. The conversations one has in San Francisco and New York now feel so limited, to no more than a dozen topics that people turn over and over again. I wish that more young people would spend some time living abroad. Beijing is the center of so many important stories, but moving to any city in Asia will be terribly interesting: the food is revelatory, one can live well, and it’s easy to get around to explore the world’s most dynamic region. One can after all always return to San Francisco or New York, after acquiring a much richer set of experiences than one’s peers.



Here’s an example of the type of interesting story I mean. I wrote last year that I could identify precisely a single example of a successful Chinese export of a cultural product: Liu’s Three-Body trilogy. This year I can add one more: TikTok. Both are great things. But in my view, it’s a stunning disappointment that China has failed to create more products that excite the rest of the world over the last decade, in the course of doubling its per capita GDP. Will the next decade be different, such that we see a burst of globally-exciting cultural creations? That question can best be answered from Beijing.



Friends tend to ask if the air in Beijing is bad. Certainly it can be, and my health was slightly wobbly this year, but I’m not sure if it’s the air or the fact that I tripled my amount of travel. I averaged two weeks on the road every month in 2019, mostly around Asia, California, and New York; the longest stretch was a continuous seven weeks away. I’m glad to know Taipei and Tokyo much better this year. And I loved each of the new cities I visited: Mumbai & Chennai—which made up my first trip to India—and Seoul. And I was pleased to have been in LA for a stretch, which is the first time I’ve properly seen the city. I’m now a partisan for Tinseltown: Isn’t LA superior in every way to SF? How sad that the semiconductor industry was centered in northern instead of southern California, as was nearly the case given the presence of the Air Force there as well as the electronics companies based in Fullerton in the ‘50s. Tech would be less made fun of if it were more integrated with LA.



Frequent travel is exhausting, but there’s almost no better way to learn how to be highly efficient. My total work output was higher this year in spite of much more time on the road. One has to learn to be effective at every step: preparing for trips, sustaining energy during the trip, and delivering output afterwards. Otherwise the whole thing breaks down. It’s great when it works out, I feel that I’m reaching close to my personal production possibilities frontier.



The best place to start for anyone interested in my work this year is the Bloomberg Odd Lots podcast I recorded with Joe in June. I was very happy this year to become a contributor to Bloomberg Opinion. I wrote only two pieces there in 2019, but I’m hopeful to do more next year, and here’s my author page if you’d like to follow along. I was also pleased to be invited by the Asia Society to give two talks. The first was at Stanford University in January, where I presented on semiconductors and China’s technology development. The second was an event co-hosted with the Financial Times at UC Berkeley, where I spoke on a panel on technology decoupling. Both recordings are on Youtube, and if scheduling works out I expect to do a bit more public speaking next year.



I liked this series of movie posters designed by Huang Hai; this one is of Spirited Away, my other favorites are of Ash is Purest White.

This year I came across three essays that show deep respect for the metaphysical lives of animals. They are good examples of what the best in humanities could be. And they exemplify the type of whimsical, passionate projects that I wish more of us would create.



In Castoria, by Justin E.H. Smith, is a meditation on the historical idea of the beaver. It’s the article I enjoyed the most this year. Among the issues it resolves: beavers and castration; their frightening power to fell whole trees; their portrayal as the most industrious of all animals.



Do elephants have souls?, by Caitrin Keiper, is the closest we’ll get to seeing the world from an elephantine perspective. The best is the section called “Elephantasies,” which ponders whether the big beast is capable of metaphysics. I wonder about the sort of novels we should hope that elephants can write.



Consider the whimsical animal series, by Katherine Rundell, an expanding set of profiles of delightful animals, like the wombat, the narwhal, the lemur. My favorites are the profiles of the swift and the golden mole, a poor blind creature distantly related to the elephant, whose fur gently glows. “So they burrow and breed and hunt, live and die under the African sun, unaware of their beauty, unknowingly shining.”

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