May 10, 2025 • 39 mins
Over the last several years, the world has watched as China edges close to or past the technological frontier in more and more areas. Earlier this year, US investors were jolted even further when DeepSeek's AI model proved to be close to the state of the art American models. So what is the process by which China actually develops new tech? Why has it worked out so well? And how do priorities set by President Xi Jinping actually get transmitted to researchers and businesses? On this episode, we speak to Kaiser Kuo, the host of the Sinica podcast. He discusses the cultural dimension of tariffs, and what he sees as a fundamentally different attitude towards the benefits of technological progress in China vs. what is seen in the US.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we talk a lot about the tech competition between
the US and China, but I still think we talked
about it in sort of broad strokes. We talked about
some of the policies obviously made in twenty twenty five,
but actually how the process of tech innovation in China
still seems like important. There's more to learn about there.
Speaker 3 (00:44):
I totally agree. And actually we have a really good
example recently in the form of deep Seek, right, and
this thing that people acted like it came out of nowhere,
but actually a lot of the papers had been published
over the course of months, but it seemed to surper right.
Speaker 2 (01:01):
I don't know if it's true, you know, the story that, oh,
is just the side project of a quantitative hedge fund,
Like that's such a good story. I'm not entirely sure
if that's true. And they made it so like, oh yeah,
well they were doing this quant fun they built deep
Seek on the side, like such a it's such an
alluring story.
Speaker 3 (01:18):
Well, not just a quant hedge fund. Isn't the story
supposedly that the founder decided to go into AI after
she Shinping was kind of complaining, Yeah, how much talent
and resources is being wasted on finance in various ways.
Speaker 4 (01:33):
Yeah, heard that.
Speaker 2 (01:34):
People like these are like great stories, right, and of
course there is a lot of truth to them in
the particularly in the broad sense that we know that
and we talked about this at the time. Several years
ago there was this sort of announced hard pivot away
from the sort of like consumer internet tech and they
sort of had their legs cut out from under them
(01:54):
towards these more like serious capital t tech hardware, hardware,
things like that, things that have more stakes than say
social networking or something like that. So like, how do
you actually do that?
Speaker 4 (02:07):
Though?
Speaker 2 (02:07):
How do you actually like direct talent in certain ways?
You know, I think that if President Trump came out
tomorrow and said, we want people to and you guys
actually talked about this, but then we want to do
more hard tech, I don't think there's like a real easy,
straightforward mechanism and how do you transmit certain ambitions into
the actual landscape. I think there's more to be learned
(02:28):
on that well.
Speaker 3 (02:29):
I think also We in America are very used to
thinking about technology as this like very creative process and
the outcome of Jeff Bezos working in his garage, Yeah,
something like that, And it's hard to imagine often the
same environment existing in China. I think that's just like
a cultural difference perhaps between Americans and Chinese.
Speaker 2 (02:51):
So we should talk about it totally. Well, I'm really
excited to say we're gonna be talking to one of
the best China watchers there is who has a lot
of interesting thoughts on this time topic, someone we've never
had on the podcast. We're going to be speaking with
Kaiser quote. He is the host of the Seneca Podcast,
which has been around since twenty ten.
Speaker 4 (03:09):
Wow.
Speaker 2 (03:09):
Yeah, we've been doing this for about little less than
ten years, so it's very impressive this sort of longevity.
Someone who spent a lot of time in China, splits
his time between the US and China, lived there for
several years. Kaiser, thank you so much for coming on Outlocks.
Speaker 4 (03:24):
Hi Joe, and Hey Tracy, This is a huge honor
for me. Thanks, thanks so much for having me.
Speaker 2 (03:29):
Thank you for coming on. What is the Seneca podcast?
What has been your project in the last fifteen years.
Speaker 4 (03:36):
Yeah, So Sinica is an hour longer, sometimes much longer,
interview format show. We bring on academics and policymakers occasionally.
I've had a number of the former assistant Secretaries of State,
Free Stasia Pacific on. I've had no ambassadors and so
forth on. But it's changed the mission. It initially started
off as being sort of more here's what's in the news,
(03:56):
and here's a couple of people who can talk about
it intelligently having to do with China. Since twenty sixteen,
when I moved to the States, the focus has really
been on US China relations, and it's got more American
guests on than previously. We're but we tuckle everything under
the sun. I mean US China relations, China, India, China, Russia, China, India, China,
(04:16):
what have you, and the Chinese macroeconomy. Technology. Lots on
technology and culture. But the idea is that it's it's
supposed to look at the way that we think and
talk about China. Now it's really evolved into something with
which I think has a longer shelf life.
Speaker 3 (04:31):
Wait, why did you decide to start it? Because you
were in a band, right, that was your main gig.
Speaker 4 (04:38):
Yeah, that's correct. Something for some reason, everyone knows about me.
I mean I transitioned. I went out. I left that
band in nineteen ninety nine, and like other people who
didn't have many marketable skills, I.
Speaker 3 (04:51):
Went into podcasting.
Speaker 4 (04:54):
Well not right away. I mean I worked for internet
companies for a number of years, and I worked as
a reporter for quite number of years, and then in
twenty ten it was just sort of on a lark.
I was about to start a job at bay Do
as they're head of international comms, and a very good
friend of mine in Beijing. We've gotten conversation about what
podcasts we're listening to, and I, you know, I said, oh,
(05:15):
you know, the usual, this American Life and Radio Lab
and whatnot, and he had a few, and then we
just sort of said, why don't we start a podcast.
We're both talkers, we both know everybody. Let's just do
one and see what happens. And we did and it
took off. It did pretty well. We got acquired in
twenty sixteen, right around the time I was moving to
the States, and the company that bought us folded in
(05:36):
twenty twenty three, and I just sort of struck out
on my own doing a sub stack, and I've stuck
with it, managed to find a little bit of support
and those few and hopefully after this more subscribers. But
we're continuing to put them out every week. It's just
me solo, but it's a group effort.
Speaker 2 (05:54):
I'm in a band. I'm trying to go the other direction.
I have a country music band, and maybe one day
I'll leave casting. No, no, no, I've never got to
leave podcasting behind.
Speaker 4 (06:04):
You know, I'm actually not going to leave podcasting, but
I've gotten back into my old band Reform when I
was back in China recently. So are you on Spotify
as of this summer? We are. Yeah, you can look
up Twins show C h U and Qiu. You've got
to put a space in between them for okays. It's
springing autumn in English.
Speaker 2 (06:21):
I'm going to start with like a really super broad
based question that maybe it's not even really that it's
probably a full hour long or too our long episode,
but in your years of covering China from a journalistic
perspective or at least from a sort of conversational perspective,
and watching American media or American pundit to talk about China,
(06:41):
is there like a persistent blind spot or a thing
that stands out to you as something that people talk
about China that does not accord with your experience of
having lived there and having reported on it yourself.
Speaker 4 (06:55):
Are There's so many I don't even know where to
start one that I would usually focus on. I mean,
and it's a whole cluster of issues that are related
to this. But I think that people aren't mindful of
just how compressed and how rapid China's transformation has been,
what has happened in the course of one working lifetime.
I mean, I like to tell people that if you
can imagine graduating junior high or high school in nineteen
(07:19):
seventy nine on the eve of reform and opening, and
then forty years later, at the end of your life,
the end of your working life, you're thinking about retiring,
and you've seen the per capitaal GDP go from about
one hundred and seventy five dollars at the beginning of
your working life till thirteen thousand dollars. Now, that transformation
is just profound and it's just so quick. So I
(07:40):
think that what people get wrong is that they don't
see that the hardware that's visibly advanced has done so,
just at a much faster pace than the software. People
don't change overnight. I mean, I like to that movie
I don't know, Joe, if you and Tracy have seen Big.
Speaker 2 (07:57):
With Ti Hang with My kids, keep going, yeah.
Speaker 4 (08:00):
Yeah, great movie. It's actually aged well. But you know,
Tom Hanks makes a wish and goes to bed at
what he's like eleven, and he wakes up and he's
in his thirties, right, And that's kind of China, right.
It's like the mind is still out of that eleven
year old in a lot of ways, but it's in
the body with thirty. So we look at this fully
grown adult and expect it to behave as a fully
(08:22):
grown adult.
Speaker 3 (08:24):
That's what people get wrong, you know how I measure
China's technological progress go on. So I remember in the
early two thousands, I was on a trip in the
countryside and I experienced one of the worst toilets I've
ever experienced in my entire life, like basically just a
hole in the ground. And then I went back in
(08:45):
twenty nineteen to Beijing and I went to one of
the nicest bathrooms that I've ever been in in like
a luxury shopping mall, and I thought, wow, things have changed.
Speaker 4 (08:57):
Yeah, Yeah, that's a good measure. It's a good propit.
Speaker 3 (09:00):
Yeah, I should do that all the time. Okay, So
I guess I'll just jump into the technology aspect of this.
But does technology come from a different place in China
versus the US? Kind of getting back to the intro,
there's this sense in America that technology is the product
of freedom and creativity, and you have the ability to
(09:22):
start a new company in your garage, whereas in China
maybe there's a different sense of how tech actually gets started.
Speaker 4 (09:31):
Yeah, so there's that American myth about the loan genius
toiling inbscurity in his garage, either in Menlo Park, New
Jersey or Menlo Park, California. Right. I think there's some
of that's definitely that mythology in China, but I think
the reality is very, very different. I think China does
place a premium on that kind of ex nilo kind
of from scratch zero to one innovation, but I think
(09:54):
it places more of a premium on the scaling up
of technology and the diffusion of technology in a way
that I think the American mythology has sort of blinded
us to Yeah, we're constantly caught off guard by Chinese
technological advances.
Speaker 2 (10:09):
Yeah.
Speaker 4 (10:10):
I think we keep seeing this tech momentum despite all
the decoupling, despite the chip bands, in spite of all
the economic headwinds that China is obviously facing. And I
think that the reasons are pretty deep. They're actually societal
and even cultural, so that I think that gets to
part of the way that technology is conceived of in China.
(10:30):
You'll find pockets, of course, in America where people are
still really really techno optimistic. There's still very solutionists, they're
still very accelerationist, right, but it's incredibly common in China,
whereas it's only here in pockets. I think American society now,
and I think the West more broadly has for some
(10:51):
time now had a fear. If you look at our
science fiction, if you look at the way technology is
thought about broadly in society, there's a real anxiety over it. Right.
Our leading technologists, are leading natural scientists talk all the
time about the existential threat that AI pose is. I
don't want to diminish that threat, but I have to
(11:11):
say that in China, you just do not hear that conversation,
certainly not nearly as frequently, and not coming from the
leading technologists themselves. So it's very different.
Speaker 2 (11:22):
Why is it different? You know, I'm thinking about your
big analogy. Actually I'm going to extend the metaphor a
little bit too far. But you know, my phone. I
have a love hate relationship with my phone. I'm on
it all the time, but I also think it's doing
significant damage to my mental health. Whereas if I were to, like,
you know, my daughter wants a phone, and if I
(11:42):
were to give her one, she would probably be thrilled
for a long time. I'm not going to let her
have a phone for a long time, but she would
be like thrilled, and this is an incredible addition to
my life that she would be very excited about. Again,
do people have the same love hate relationships with gadgets
and new technologies that we seem to have here?
Speaker 4 (12:00):
I mean, there are some people, of course who have
anxieties over it, but no, I think broadly speaking, you know,
when I've sat on the sidelines of a soccer game
watching our kids play, and I'm trying to talk to
the other parent about how they limit screen time he's
there scrolling on his device, going, hey, I secon let
me asker this email. What we're saying just now about
screen time? What I mean, It's like the question doesn't compute.
(12:20):
They don't see it as such a threat. I think
part of that, of course, is because the social media
environment in China is a lot more sanitized. There isn't
the threat that Junior is going to be scrolling porn
all day, right, That's part of it. But I think
really more to the point is that for these many
years now, ordinary Chinese people have seen their lives, their
(12:43):
material lives just improve pretty much in lockstep with the
quality of the technology they have in their hand or
in their purse or in their pocket. Right. Their bandwidth
at home, how fast their network speed is, and how
powerful their handheld device is basically tracked with their livelihood. Right.
(13:04):
So there's not that reason for suspicion. Now, that isn't
to say that everyone in China has experienced It's certainly not,
but I think for the vast majority, and not just
of urbanites, but the vast majority of people have seen
this correlation.
Speaker 3 (13:18):
Wait, but there is some negative feeling towards some technology
in China and I'm thinking specifically of She shin ping
and his big crackdown on consumer online tech. And he's
not a fan of video games precisely because he thinks
it's a waste of time and kids are staring at
the screen too much. So there is an element.
Speaker 4 (13:38):
Of that that also tracks with the Chinese parent thing, right,
they all want us to be really good on computers,
but not to waste our time playing video games or
just chatting up people. Yeah, I think you were saying
it in your intro, and I thought that was really
interesting how Donald Trump he wouldn't be able to just
simply order everyone, the physicists to start doing physics and
not go work for quantitative hedge funds in China, you
(14:00):
kind of can, It's not. I mean, again, that's an exaggeration.
There isn't a way. I mean, there are still plenty
of people who go to school and study the social sciences,
or who graduate with engineering degrees and then go to
work for a major social media company or go to
work designing complicated financial derivatives or whatever. But he doesn't
like that. He thinks that that's been one of the
(14:23):
pathologies of the United States is that it's over financialized,
and that our best and brightest here in the US
have gone to work for these companies that basically don't
make anything and just suck at people's time and create
polarization in the country. So they're worried about that and
they have more wherewithal to direct people. It's not coercive, though,
(14:44):
let me be clear about that. They have ways to
incentivize it. And I think that this again, this is
part of the popular culture. There's all sorts of reasons.
I mean, we can start at the top. If you
look at the composition of the Chinese leadership, I mean,
what do we have in Congress, Who do we have
heading major agencies. It's almost all lawyers, people with illegal training.
And that's good in a country that really prizes rule
(15:05):
of law, and it's good for many reasons. But in China,
the analogy is that you look at the senior leadership.
If you look at you know, who runs the provinces,
whether the party or the state. You look at who
are the mayors or the party secretaries of cities of
a million people or more, and you're almost all going
to find engineers. They're going to be like seventy eighty
percent engineers. If the ladder of success, if the people
(15:29):
who are top it all did one thing in common,
they did a four year degree in the natural sciences
or in engineering, there's a good chance that you're going
to tell your kids to do the same, or your
kid is the case, maybe yeah, to do the same.
So I think there's a lot of pressure that way
in terms just of social mobility, in terms of what
(15:50):
the perceived path of mobility is.
Speaker 2 (15:53):
By the way, this point about engineers and lawyers or
regular odd law I guess. Dan Wong has a book
coming out August twenty sixth, twenty twenty five. It's up
for sale on Amazon right now. You can pre order
it about exactly this dimension of a sort of lawyer
society versusn engineering society. I'm looking forward to reading that.
I'm looking forward to having this.
Speaker 4 (16:15):
Dan Wong is great. So I interviewed him for this
Nova documentary that I did called Inside China's Tech Boom,
and the whole thesis of it was really, I mean,
in many ways inspired by some of Dan's ideas about
the importance of process knowledge. How the fact that China
has not stopped manifacted there was not for a maker's
movement to China because they didn't need to be one.
(16:36):
They are always making stuff right the fact that they
still have all the hardware there. It creates this sort
of frictionless ecosystem of innovation where you know, if you're
a guy with an idea for some gadget and you're
in Shinjin, you can have your designer just send you
over on we Chat his latest design. You can take
it to your ODM, which is just a quick bike
(16:57):
ride down the street. They can have you a proto
type by the afternoon. You can make some tweaks and iterate,
and they'll just keep changing the thing over tight and
it's practically frictionless. And I think that's a huge piece
of China's innovation success as well.
Speaker 2 (17:11):
But what happens when hesion ping comes out and says,
you know what, we're not as into social networking anymore,
We're not as into video games. We really want to
focus on other areas of hard tech, important tech, something
like that. What is the process of here is this
national priority and then the transmission and diffusion of these
(17:31):
priorities into choices that maybe students make or technologists make.
Speaker 4 (17:36):
That's a great question. I think it's actually one that
I can answer with three letters KPI. Right. What happens
when you have these kind of abstract directives the will
of the leader from on high is that they get
translated not into specific policies, not right away certainly, but
into this expectation set you know, from the leadership on
(17:59):
down that this is how I'm going to score my
brownie points, this is how I am going to get
promoted within the party, is if I tick these boxes,
if I do these things. Let's say, you know, we
decide that the thing is we all need to have
data centers. So suddenly every municipality in every province is
going to want to build data centers. They're going to
fight each other for it. They're going to figure out,
here's the best place for us to build ours, and
(18:21):
here's all this money that we're going to put into that.
I mean, they're going to want to tick that box.
This is the sort of the way that everything gets
done in China. When recently, when She'sing Ping announced that
they were going to be and this is director that
came not out of just the State Council but out
of the party as well, that they were going to
boost consumption. A lot of people just sort of sneered
and said, yeah, I don't see a lot of policy
(18:43):
here in place to do that. But you can bet
your bottom dollar that every one on down they took
this very very seriously, and they're all figuring out ways
where in their little patch of dirt they're going to
figure out how we can boost consumption because that's the
way that I'm going to get promote. They did the
same thing with cleaning up air pollution. They do the
(19:03):
same thing with cleaning up rivers. They make it part
of your KPI. That's what they're going to do with
this as well. That's what they did. I mean the
question that you asked about how they made sure these
physicists were doing physics. It's much the same.
Speaker 3 (19:17):
There's also, I feel like a sense of clarity in
some of these policy directives. So China very often explicitly
will say where it's investing.
Speaker 1 (19:28):
Right.
Speaker 3 (19:28):
So when we have the consumer tech crackdown, it came
with a simultaneous announcement that everyone should go into hardware basically,
and we saw that repeated in various ways. I remember
Chairman Rabbit was tweeting that people should go to the
industries that actually fit the central government's general policies. So
(19:49):
I feel like it's just very clear as well, and
the messaging is kind of on point.
Speaker 4 (19:55):
We have a word in Chinese phone call which literally
means sort of wind mouth. It's the place where the
wind will be will be blowing. It's like that little
wind tunnel, and they telegraph that. They tell you, you know,
well in advance, here is where we're going to. This
in the fourteenth five year plan. This you know, in
the fifteenth five year Plan they say exactly which industries
are going to not only receive a lot of government investment,
(20:18):
but where the paths are going to be cleared. There's
going to be removal of a lot of regulatory hurdles,
there's going to be favorable policy for you if you
get into this, and if you're an investor, that's where
you're going to put your money. That's what you're going
to do. You're going to you know, it doesn't take
a genius. You need to read the important documents and
you figure out exactly what their priorities are. Just as
(20:40):
you say, there's that clarity.
Speaker 2 (20:58):
I have to admit, you know, like when I say
a sheson ping speech translated into English, or maybe I
just have a chat GPT translated Like, there is often
not a lot of like specifics or arguably even substance
in them. There's a lot of like really sort of
high level grand things. But this sort of makes sense now. Granted,
(21:21):
the leaders around the world often don't get into a
lot of specifics, but it makes a little bit more
sense to me in the context of Okay, these priorities
are announced and immediately on down I have to you know,
imagine provincial leaders, leaders of school systems, universities then immediately
get the message that their futures and their success in
(21:42):
their careers will be about who can show the best
results on what maybe sounds like some sort of vague priority.
Speaker 4 (21:50):
And you're missing the biggest piece of it, which is parents. Oh,
they're getting this message as well. They're the ones who
are ultimately deciding, No, you're not going to be in
a life actual historian if you're going to study yeah,
you know, you're going to study engineering physics, Sorry, buddy,
because you're going to get a job at ten Center,
at UID or at Huawei when you graduate. Yeah. So
(22:13):
I think that's the thing. A friend of mine once
joked that a lot of people in the West have
a great deal of difficulty imagining how the leader of
an authoritarian nation can do all these things that seem
so apparently cruel, arbitrary, but actually have your best interests
in mind. But for anyone who grew up with Chinese parents,
(22:33):
they know exactly how it works.
Speaker 3 (22:35):
Wait, so, just on the authoritarian point, I know you
touched on this already, but just to press on this,
would you say authoritarianism is a net positive or a
net negative for technological development?
Speaker 4 (22:48):
I think it's a wash in most stays. I mean, look,
maybe this is my upbringing talking, but you know, I
am not willing to discard the idea that a lack
of intellectual freedom, of academic freedom, of freedom to query
into to experiment without any ideological fetters, that if you
don't have that, in the long run, you are hobbled.
I think that's probably still the case. But I think
(23:11):
in America we've taken it too far. We have this idea.
I mean, do you remember back in twenty thirteen, twenty fourteen,
when Joe Biden and even Carly Fiorina, who really ought
to have known better. I mean, she was the see
of a major technology company. They were going around and
they were making these speeches. You know, Biden was making
these graduation speeches. Furina was on the campaign trail and
she was talking about that Biden was talking about. They
(23:31):
said the same talking point. It's like, show me one
thing that China's ever innovated. You know, as long as
we have freedom, we will always be in the lead
of innovation. And I mean I think that takes it
from a necessary condition, which I even have quibbles with.
In fact, I don't believe that it's a necessary Freedom
is a necessary condition for technological innovation, but it even
(23:53):
elevates it to sufficient condition. Yeah, where you know, it's
like just because we're free, we're always going to be
ahead in innovation. So I mean that's part of the
reason why we're constantly just being just sideswiped, just completely
just blindsided by Chinese tech advances.
Speaker 2 (24:08):
It's you hear that to this day. I think you
hear less of it, but it is less remarkable the
degree to which you still hear that. What's your version
of deep seek? Where did it come from? And how
much does it fit this story of like, oh, they
were doing quant stuff and then suddenly they're like, oh,
we should pivot to AI, Like, what's the deep Seek story?
Speaker 4 (24:28):
Well, I mean the biography of Young one film is
not in question. I mean he ran a quant fund
called high Flyer, right, and he pivoted. Now to what
extent they were just developing this as a sideline hobby
or I mean I think more likely they were developing
AI that would help them in trades, right, help them
in high frequency, high velocity trading. Right. But the pivot
(24:52):
being you know, attributed to Seizing making this policy changed.
It makes that totally tracks. I don't know the precise details,
but it totally tracks. It doesn't seem suspicious to me.
I have no reason to doubt that that's the case.
I mean, plenty of people have made that kind of
a pivot. I mean, maybe not all of them have
enjoyed the kind of world striding success that Deep Sea has,
(25:14):
but it certainly tracks.
Speaker 2 (25:16):
I want to talk.
Speaker 3 (25:17):
About the export controls from the Biden administration. So what
role would you say those have played in China's technological progress?
Because one thing I sometimes hear people used to use
the analogy of the three body problem. I don't know,
did you ever read that joke.
Speaker 2 (25:33):
I never read.
Speaker 4 (25:34):
I did.
Speaker 3 (25:34):
Yeah, oh sorry, Amfeizer, Yeah, oh yeah, for sure.
Speaker 4 (25:38):
Neil Ferguson actually used that at Davos a few years ago.
I was there. I was, you know, working this little
side hustle on. It's kind of a note taker for
the World economic for him. But he actually, without explaining anything,
he just simply said, you know, what the United States
is trying to do to China right now is exactly
what the Tri Solarians were trying to do earthbody help,
and without explaining what he meant, but just don the
(25:59):
assumption that when the audience had read it, and probably
most people had, but yeah, trying to basically stemy technological advance, right.
Speaker 3 (26:07):
Right, So I feel like we should explain it now.
But I guess it's the idea that in the three
body problem, Earth is threatened by this alien species and
because of that, humanity kind of reorganizes itself and technological
progress thrives, at least for a while.
Speaker 4 (26:23):
Yeah, And I think that that's kind of what we've
seen happen. I mean, I use a more Quotitian metaphor,
the one that I think not everyone has have read
this really really long turgid science fiction classic form. But
I think we've basically compelled the frog to leap again.
And it was happy enough just sort of hopping along
well behind the US when it came to cutting edge semiconductors.
(26:46):
But now it may leap the United States as the frog,
you know, our metaphoric frog did in five G or
in renewable energy like solar and and electric vehicles. Right,
So we have now given China both the kind of
urgency and the sense of imminent threat that was needed
(27:06):
to light a fire to that that frog's posterior and
now it's you know, it's in the air.
Speaker 5 (27:11):
It's maybe directly over our heads, maybe gon't land in
front of us.
Speaker 2 (27:31):
One of the things that's really elemental to us tech
is the vision in dreams of gigantic monopoly profits. This
is sort of like the Peterteel idea. It's like the
goal is to like build a monopoly and get insanely
rich doing it, and the people who go into tech
dreams of fortunes, et cetera. There is this huge liquid
(27:52):
stock market that becomes the destination either for I pos
or acquisitions. Talk to us about the capital markets component
of Chinese tech is it the same like path to
getting super rich that American technologists see here? Like what
incentivizes and motivate the technologists in China.
Speaker 4 (28:12):
Well, I think that they're exactly the same. I think
that there's very little daylight between. Well, first of all,
I mean in the nineties, in that first technology boom
in China came right on the heel of what you
saw in the United States. All these people Charles Jong
who left MIT and went back to China, and I
think it was like ninety seven or ninety eight to
(28:32):
start this company. So who all these other entrepreneurs, Robin
Lee who I used to work for it by do,
A lot of them were returneys from the United States,
and they had the same glint in their eye. And
you have to remember these guys, they had American business
business models. Essentially, they went to American vcs from Sandhill
Road to raise their money. They went to American capital
(28:54):
markets right when they wanted to list. Their exits were
always on Nasdaq or on New York Stock Exchange, only
in rare exceptions where they actually not ten cents. An exception,
Ali Baba is a little bit of an exception. But
most of them, I mean, hundreds of them went to
the United States forces, right, And yeah, I think it's
it's the same, it's the same motivating force. The cultures
(29:17):
are remarkably or were remarkably similar. So that was like
the only thing I felt comfortable working. I mean, as
a guileless American who just had my I would just
have my my, my posterior handed to me in any
kind of corporate setting except in the Internet, where you know,
the same kind of Silicon Valley egalitarianism and that kind
(29:39):
of enterprise culture prevailed. So that was like one of
the only safe places for people who you know, were
clueless like me. Since you mentioned so, I think they're
the same. I think they're the same.
Speaker 3 (29:49):
Since you mentioned culture, can I ask a slightly random question,
but I think I think you're a good person to
ask about it, given your background as a musician. But
China kah has been very successful in exporting technology, so
you know, whether it's byd cars or TikTok or whatever,
I think we can all agree that it's come from
(30:11):
nowhere basically and is now certainly a major player. Meanwhile,
in sort of pop cultural exports, the lack of Chinese
pop culture exports has been a sort of long running
discussion point now, and if you compare China to a
place like Japan where there's jpop, or Korea where there's
(30:33):
k pop, it does feel like something is kind of
lacking there. I guess my question is is it fair
to say that China has fallen down on cultural exports
at least compared to technology, and then b why is that?
Speaker 4 (30:48):
Yeah, No, that's a great question. It's something I've pondered
for a very long time too. I mean, I think
there's no arguing that China's got a gigantic gap. It's
not punching at its weight. But let's figure out how
we calculate that way. Because you know, when you look
at when did we all start eating sushi and watching
the Cure Kurosawa films like in the eighties? Right, So
that's when Japan's soft power starts to really really peak, right,
(31:10):
we all start driving Japanese cars. This is at a
point where Japan's per captain GDP was about seventy five
percent of what the United States was at that time,
and Koreas similarly, around the time where we start all
listening to Gongnam style and then you know, all our
daughters or whatever posters of bts on their walls, as
(31:30):
mon still does. This was at a time when South
Korea's per capita GDP it's like seventy two, seventy three
percent of America's GDP per capita. I think that has
something to do with it. I think that per capita
GDP kind of shows what a nation's priorities are going
to be. When it's low, it's still going to be
in that stage of we've got to work really, really hard.
Just this is why I mean in China. I mean,
(31:52):
I play music, so I'm constantly frustrated by the fact
that for most people, for the overwhelming number of people,
it is just entertainment. There's nobody who thinks of it
as an art form anymore, I mean, or if there
ever was. I think that it has to do with that.
But I think there's also and it's obvious to me
that the first rule of soft power should just be
(32:14):
don't talk about soft power. That China's government's obsession with
trying to create soft power is one of the big
impediments to it actually having soft power. Again, let me
let me be very very clear, it has plenty of
soft power in the developing world. I mean, if you
look in Southeast Asia, a lot of people are watching
these insufferable costume dramas about you know, the palace intrigue
(32:37):
in the Qing.
Speaker 3 (32:37):
Dynasty ones, a bunch of them nowadays.
Speaker 4 (32:44):
Yeah, yeah, I guess the Thai ones are really popular
these days.
Speaker 2 (32:48):
That's interesting, so that that's actually popular content in Southeast Asia.
Speaker 4 (32:52):
Yeah, it's huge. It's absolutely huge all over Southeast Asia,
in Indonesia and Malaysia and Thailand and the Philippines, even
in Vietnam anyway where in Southeast Asia, Ego, there's a
lot of this stuff. But yeah, but no, to your point,
in Europe and the United States, no, it's not really registering.
And I think there's that's one of the reasons. But
I think ultimately the reason is, well, soft power tends
(33:15):
to be created on the periphery. It creeps in through
the cracks, you know. It's a grassroots thing. It's not
supposed to be created top down. And yeah, you can
look at South Korea and say there was a lot
of government, you know, and a lot of these gigantic
conglomerates who created Korean soft power boy bands and stuff,
But that may be sort of the anomaly Kaiser.
Speaker 2 (33:35):
We could go on a long time. There are just
so many questions, but I think that's a good spot
to ramp it. Thank you so much for coming on, Odlocks.
We'll have to have you back on again soon.
Speaker 4 (33:44):
I would love to come back on. Thank you so
much for having me than you.
Speaker 3 (33:48):
That was fun.
Speaker 2 (34:01):
I thought it was really interesting. I like the point
about everyone getting the message and then everyone doing their
own thing to sort of prove that they're getting a message.
And we talked about this on our episode with Sam Damico,
the Impulse Labs guy. This idea of Okay, there's some priority,
and then all the different provinces compete on how well
they're doing and fulfilling their priority. It makes a lot
(34:22):
of sense that that's a very broadly applicable lesson to
like different sectors and different parts of the economy.
Speaker 3 (34:29):
Totally, I really think the messaging is kind of key here. Yeah,
the message is very clear. It's if you choose this
route that the Chinese government is encouraging you to take,
your life is going to be a lot easier than
if you take another route. And I think that's kind
of different to the way industrial policy, I guess works
(34:49):
in the States, where you know, even if a president
stands up and says we want a lot more semiconductors
in the US, there's still a lot of bureaucracy, a
lot of uncertainty, a lot of paperwork attached to getting
support from the government for a semiconductor project. And so
I think that uncertainty like still feeds into the US certainly.
Speaker 2 (35:13):
Yeah. Prisident Trump recently gave a speech at University of Alabama,
I think it was their graduation ceremony, and he said
that he was like, to the business students here, don't
just think about your portfolios, think about your country. And
I like that message, but I don't know, like, what
are the levers that actually get towards that. And so oh, also, Tracey,
(35:34):
I have a take?
Speaker 3 (35:35):
Oh oh really, just one?
Speaker 2 (35:37):
Yeah, just one take?
Speaker 3 (35:38):
Okay, hit me.
Speaker 2 (35:38):
This is something I've been workshopping, and so I'm leaving
it to the end.
Speaker 3 (35:42):
I can't believe you're not tweeting it. Are you going
to tweet it? Are you workshopping for a tweet?
Speaker 2 (35:47):
I'm workshopping it for you here. I figured a lot
of people aren't listening by this point, so I can
drop it here, which is I'm kind of coming around
to this idea that like complex financial products, that they
have a bad rep.
Speaker 3 (35:59):
They have a bad they are bad.
Speaker 2 (36:01):
Know that they have a bad rep. That actually, this
is like a sort of contra to a lot of
popular thing. It's like, oh, complex semiconductor is good, complex
financial products bad. I'm just throwing it out there that
maybe we should talk more about why people get paid
so much to design complex financial products in a market
(36:22):
economy and why they're so highly valued. I'm just throwing
it out there.
Speaker 3 (36:26):
We should do an episode on Ray Dalio and the
chicken nugget again.
Speaker 2 (36:29):
That's exactly right. That's exactly right. Derivatives gave us the
chicken nugget. Anyway, talking to Kaiser about this just reminded
me of that that I want to explore this idea,
and I'm saying it here now kind of as a
remind myself, reminder of myself to think about this one.
Speaker 3 (36:44):
Chicken nuggets is the ultimate example of American technological and
financial supremacy.
Speaker 2 (36:52):
We do great, complicated things in the United States, but
because we have this bias against finance as being extractive
or or something, I think we don't sufficiently recognize where
we're at the cutting edge.
Speaker 3 (37:04):
It is true that in China finance and industry are
often working hand in hand. And if the government says that,
for instance, hardware is now very important, you will see
the banks start to loosen up on lending standards and
things like that. So a valid point, Joe.
Speaker 2 (37:20):
What is a supply chain but a payment chain in reverse?
Speaker 3 (37:24):
That's Sultan Posar's line.
Speaker 2 (37:25):
Oh he said, stole that, Yeah, I stole it from Sultan.
All right, that's right, Yeah, credit to Sultan. But you know,
maybe we should think about this a little more.
Speaker 3 (37:32):
Yeah, all right, shall we leave it there?
Speaker 2 (37:34):
Let's leave it there.
Speaker 3 (37:35):
This has been another episode of the Odd Lots Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 2 (37:40):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Check out our guest, Kaiser Quote. He's at Kaiser Quo,
and check out the Cineca podcast and substack. Follow our
producers Kerman Rodriguez at Kerman Ermann, dash Ol Bennett at
Dashbot and Kale Brooks at Kale Brooks. For more Oddlots content,
go to Bloomberg dot com slash Odd Lots where we
have a daily newsletter and all of our episodes, and
(38:02):
you can chaut about all of these topics twenty four
to seven in our discord discord dot gg slash odlines.
Speaker 3 (38:08):
And if you enjoy Odd Lots, if you like it
when we check in on Chinese technology and how it
actually develops, then please leave us a positive review on
your favorite podcast platform. And remember, if you are a
Bloomberg subscriber, you can listen to all of our episodes
absolutely ad free. All you need to do is find
the Bloomberg channel on Apple Podcasts and follow the instructions there.
(38:29):
Thanks for listening
Speaker 1 (39:00):
And
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we talk a lot about the tech competition between
the US and China, but I still think we talked
about it in sort of broad strokes. We talked about
some of the policies obviously made in twenty twenty five,
but actually how the process of tech innovation in China
still seems like important. There's more to learn about there.
Speaker 3 (00:44):
I totally agree. And actually we have a really good
example recently in the form of deep Seek, right, and
this thing that people acted like it came out of nowhere,
but actually a lot of the papers had been published
over the course of months, but it seemed to surper right.
Speaker 2 (01:01):
I don't know if it's true, you know, the story that, oh,
is just the side project of a quantitative hedge fund,
Like that's such a good story. I'm not entirely sure
if that's true. And they made it so like, oh yeah,
well they were doing this quant fun they built deep
Seek on the side, like such a it's such an
alluring story.
Speaker 3 (01:18):
Well, not just a quant hedge fund. Isn't the story
supposedly that the founder decided to go into AI after
she Shinping was kind of complaining, Yeah, how much talent
and resources is being wasted on finance in various ways.
Speaker 4 (01:33):
Yeah, heard that.
Speaker 2 (01:34):
People like these are like great stories, right, and of
course there is a lot of truth to them in
the particularly in the broad sense that we know that
and we talked about this at the time. Several years
ago there was this sort of announced hard pivot away
from the sort of like consumer internet tech and they
sort of had their legs cut out from under them
(01:54):
towards these more like serious capital t tech hardware, hardware,
things like that, things that have more stakes than say
social networking or something like that. So like, how do
you actually do that?
Speaker 4 (02:07):
Though?
Speaker 2 (02:07):
How do you actually like direct talent in certain ways?
You know, I think that if President Trump came out
tomorrow and said, we want people to and you guys
actually talked about this, but then we want to do
more hard tech, I don't think there's like a real easy,
straightforward mechanism and how do you transmit certain ambitions into
the actual landscape. I think there's more to be learned
(02:28):
on that well.
Speaker 3 (02:29):
I think also We in America are very used to
thinking about technology as this like very creative process and
the outcome of Jeff Bezos working in his garage, Yeah,
something like that, And it's hard to imagine often the
same environment existing in China. I think that's just like
a cultural difference perhaps between Americans and Chinese.
Speaker 2 (02:51):
So we should talk about it totally. Well, I'm really
excited to say we're gonna be talking to one of
the best China watchers there is who has a lot
of interesting thoughts on this time topic, someone we've never
had on the podcast. We're going to be speaking with
Kaiser quote. He is the host of the Seneca Podcast,
which has been around since twenty ten.
Speaker 4 (03:09):
Wow.
Speaker 2 (03:09):
Yeah, we've been doing this for about little less than
ten years, so it's very impressive this sort of longevity.
Someone who spent a lot of time in China, splits
his time between the US and China, lived there for
several years. Kaiser, thank you so much for coming on Outlocks.
Speaker 4 (03:24):
Hi Joe, and Hey Tracy, This is a huge honor
for me. Thanks, thanks so much for having me.
Speaker 2 (03:29):
Thank you for coming on. What is the Seneca podcast?
What has been your project in the last fifteen years.
Speaker 4 (03:36):
Yeah, So Sinica is an hour longer, sometimes much longer,
interview format show. We bring on academics and policymakers occasionally.
I've had a number of the former assistant Secretaries of State,
Free Stasia Pacific on. I've had no ambassadors and so
forth on. But it's changed the mission. It initially started
off as being sort of more here's what's in the news,
(03:56):
and here's a couple of people who can talk about
it intelligently having to do with China. Since twenty sixteen,
when I moved to the States, the focus has really
been on US China relations, and it's got more American
guests on than previously. We're but we tuckle everything under
the sun. I mean US China relations, China, India, China, Russia, China, India, China,
(04:16):
what have you, and the Chinese macroeconomy. Technology. Lots on
technology and culture. But the idea is that it's it's
supposed to look at the way that we think and
talk about China. Now it's really evolved into something with
which I think has a longer shelf life.
Speaker 3 (04:31):
Wait, why did you decide to start it? Because you
were in a band, right, that was your main gig.
Speaker 4 (04:38):
Yeah, that's correct. Something for some reason, everyone knows about me.
I mean I transitioned. I went out. I left that
band in nineteen ninety nine, and like other people who
didn't have many marketable skills, I.
Speaker 3 (04:51):
Went into podcasting.
Speaker 4 (04:54):
Well not right away. I mean I worked for internet
companies for a number of years, and I worked as
a reporter for quite number of years, and then in
twenty ten it was just sort of on a lark.
I was about to start a job at bay Do
as they're head of international comms, and a very good
friend of mine in Beijing. We've gotten conversation about what
podcasts we're listening to, and I, you know, I said, oh,
(05:15):
you know, the usual, this American Life and Radio Lab
and whatnot, and he had a few, and then we
just sort of said, why don't we start a podcast.
We're both talkers, we both know everybody. Let's just do
one and see what happens. And we did and it
took off. It did pretty well. We got acquired in
twenty sixteen, right around the time I was moving to
the States, and the company that bought us folded in
(05:36):
twenty twenty three, and I just sort of struck out
on my own doing a sub stack, and I've stuck
with it, managed to find a little bit of support
and those few and hopefully after this more subscribers. But
we're continuing to put them out every week. It's just
me solo, but it's a group effort.
Speaker 2 (05:54):
I'm in a band. I'm trying to go the other direction.
I have a country music band, and maybe one day
I'll leave casting. No, no, no, I've never got to
leave podcasting behind.
Speaker 4 (06:04):
You know, I'm actually not going to leave podcasting, but
I've gotten back into my old band Reform when I
was back in China recently. So are you on Spotify
as of this summer? We are. Yeah, you can look
up Twins show C h U and Qiu. You've got
to put a space in between them for okays. It's
springing autumn in English.
Speaker 2 (06:21):
I'm going to start with like a really super broad
based question that maybe it's not even really that it's
probably a full hour long or too our long episode,
but in your years of covering China from a journalistic
perspective or at least from a sort of conversational perspective,
and watching American media or American pundit to talk about China,
(06:41):
is there like a persistent blind spot or a thing
that stands out to you as something that people talk
about China that does not accord with your experience of
having lived there and having reported on it yourself.
Speaker 4 (06:55):
Are There's so many I don't even know where to
start one that I would usually focus on. I mean,
and it's a whole cluster of issues that are related
to this. But I think that people aren't mindful of
just how compressed and how rapid China's transformation has been,
what has happened in the course of one working lifetime.
I mean, I like to tell people that if you
can imagine graduating junior high or high school in nineteen
(07:19):
seventy nine on the eve of reform and opening, and
then forty years later, at the end of your life,
the end of your working life, you're thinking about retiring,
and you've seen the per capitaal GDP go from about
one hundred and seventy five dollars at the beginning of
your working life till thirteen thousand dollars. Now, that transformation
is just profound and it's just so quick. So I
(07:40):
think that what people get wrong is that they don't
see that the hardware that's visibly advanced has done so,
just at a much faster pace than the software. People
don't change overnight. I mean, I like to that movie
I don't know, Joe, if you and Tracy have seen Big.
Speaker 2 (07:57):
With Ti Hang with My kids, keep going, yeah.
Speaker 4 (08:00):
Yeah, great movie. It's actually aged well. But you know,
Tom Hanks makes a wish and goes to bed at
what he's like eleven, and he wakes up and he's
in his thirties, right, And that's kind of China, right.
It's like the mind is still out of that eleven
year old in a lot of ways, but it's in
the body with thirty. So we look at this fully
grown adult and expect it to behave as a fully
(08:22):
grown adult.
Speaker 3 (08:24):
That's what people get wrong, you know how I measure
China's technological progress go on. So I remember in the
early two thousands, I was on a trip in the
countryside and I experienced one of the worst toilets I've
ever experienced in my entire life, like basically just a
hole in the ground. And then I went back in
(08:45):
twenty nineteen to Beijing and I went to one of
the nicest bathrooms that I've ever been in in like
a luxury shopping mall, and I thought, wow, things have changed.
Speaker 4 (08:57):
Yeah, Yeah, that's a good measure. It's a good propit.
Speaker 3 (09:00):
Yeah, I should do that all the time. Okay, So
I guess I'll just jump into the technology aspect of this.
But does technology come from a different place in China
versus the US? Kind of getting back to the intro,
there's this sense in America that technology is the product
of freedom and creativity, and you have the ability to
(09:22):
start a new company in your garage, whereas in China
maybe there's a different sense of how tech actually gets started.
Speaker 4 (09:31):
Yeah, so there's that American myth about the loan genius
toiling inbscurity in his garage, either in Menlo Park, New
Jersey or Menlo Park, California. Right. I think there's some
of that's definitely that mythology in China, but I think
the reality is very, very different. I think China does
place a premium on that kind of ex nilo kind
of from scratch zero to one innovation, but I think
(09:54):
it places more of a premium on the scaling up
of technology and the diffusion of technology in a way
that I think the American mythology has sort of blinded
us to Yeah, we're constantly caught off guard by Chinese
technological advances.
Speaker 2 (10:09):
Yeah.
Speaker 4 (10:10):
I think we keep seeing this tech momentum despite all
the decoupling, despite the chip bands, in spite of all
the economic headwinds that China is obviously facing. And I
think that the reasons are pretty deep. They're actually societal
and even cultural, so that I think that gets to
part of the way that technology is conceived of in China.
(10:30):
You'll find pockets, of course, in America where people are
still really really techno optimistic. There's still very solutionists, they're
still very accelerationist, right, but it's incredibly common in China,
whereas it's only here in pockets. I think American society now,
and I think the West more broadly has for some
(10:51):
time now had a fear. If you look at our
science fiction, if you look at the way technology is
thought about broadly in society, there's a real anxiety over it. Right.
Our leading technologists, are leading natural scientists talk all the
time about the existential threat that AI pose is. I
don't want to diminish that threat, but I have to
(11:11):
say that in China, you just do not hear that conversation,
certainly not nearly as frequently, and not coming from the
leading technologists themselves. So it's very different.
Speaker 2 (11:22):
Why is it different? You know, I'm thinking about your
big analogy. Actually I'm going to extend the metaphor a
little bit too far. But you know, my phone. I
have a love hate relationship with my phone. I'm on
it all the time, but I also think it's doing
significant damage to my mental health. Whereas if I were to, like,
you know, my daughter wants a phone, and if I
(11:42):
were to give her one, she would probably be thrilled
for a long time. I'm not going to let her
have a phone for a long time, but she would
be like thrilled, and this is an incredible addition to
my life that she would be very excited about. Again,
do people have the same love hate relationships with gadgets
and new technologies that we seem to have here?
Speaker 4 (12:00):
I mean, there are some people, of course who have
anxieties over it, but no, I think broadly speaking, you know,
when I've sat on the sidelines of a soccer game
watching our kids play, and I'm trying to talk to
the other parent about how they limit screen time he's
there scrolling on his device, going, hey, I secon let
me asker this email. What we're saying just now about
screen time? What I mean, It's like the question doesn't compute.
(12:20):
They don't see it as such a threat. I think
part of that, of course, is because the social media
environment in China is a lot more sanitized. There isn't
the threat that Junior is going to be scrolling porn
all day, right, That's part of it. But I think
really more to the point is that for these many
years now, ordinary Chinese people have seen their lives, their
(12:43):
material lives just improve pretty much in lockstep with the
quality of the technology they have in their hand or
in their purse or in their pocket. Right. Their bandwidth
at home, how fast their network speed is, and how
powerful their handheld device is basically tracked with their livelihood. Right.
(13:04):
So there's not that reason for suspicion. Now, that isn't
to say that everyone in China has experienced It's certainly not,
but I think for the vast majority, and not just
of urbanites, but the vast majority of people have seen
this correlation.
Speaker 3 (13:18):
Wait, but there is some negative feeling towards some technology
in China and I'm thinking specifically of She shin ping
and his big crackdown on consumer online tech. And he's
not a fan of video games precisely because he thinks
it's a waste of time and kids are staring at
the screen too much. So there is an element.
Speaker 4 (13:38):
Of that that also tracks with the Chinese parent thing, right,
they all want us to be really good on computers,
but not to waste our time playing video games or
just chatting up people. Yeah, I think you were saying
it in your intro, and I thought that was really
interesting how Donald Trump he wouldn't be able to just
simply order everyone, the physicists to start doing physics and
not go work for quantitative hedge funds in China, you
(14:00):
kind of can, It's not. I mean, again, that's an exaggeration.
There isn't a way. I mean, there are still plenty
of people who go to school and study the social sciences,
or who graduate with engineering degrees and then go to
work for a major social media company or go to
work designing complicated financial derivatives or whatever. But he doesn't
like that. He thinks that that's been one of the
(14:23):
pathologies of the United States is that it's over financialized,
and that our best and brightest here in the US
have gone to work for these companies that basically don't
make anything and just suck at people's time and create
polarization in the country. So they're worried about that and
they have more wherewithal to direct people. It's not coercive, though,
(14:44):
let me be clear about that. They have ways to
incentivize it. And I think that this again, this is
part of the popular culture. There's all sorts of reasons.
I mean, we can start at the top. If you
look at the composition of the Chinese leadership, I mean,
what do we have in Congress, Who do we have
heading major agencies. It's almost all lawyers, people with illegal training.
And that's good in a country that really prizes rule
(15:05):
of law, and it's good for many reasons. But in China,
the analogy is that you look at the senior leadership.
If you look at you know, who runs the provinces,
whether the party or the state. You look at who
are the mayors or the party secretaries of cities of
a million people or more, and you're almost all going
to find engineers. They're going to be like seventy eighty
percent engineers. If the ladder of success, if the people
(15:29):
who are top it all did one thing in common,
they did a four year degree in the natural sciences
or in engineering, there's a good chance that you're going
to tell your kids to do the same, or your
kid is the case, maybe yeah, to do the same.
So I think there's a lot of pressure that way
in terms just of social mobility, in terms of what
(15:50):
the perceived path of mobility is.
Speaker 2 (15:53):
By the way, this point about engineers and lawyers or
regular odd law I guess. Dan Wong has a book
coming out August twenty sixth, twenty twenty five. It's up
for sale on Amazon right now. You can pre order
it about exactly this dimension of a sort of lawyer
society versusn engineering society. I'm looking forward to reading that.
I'm looking forward to having this.
Speaker 4 (16:15):
Dan Wong is great. So I interviewed him for this
Nova documentary that I did called Inside China's Tech Boom,
and the whole thesis of it was really, I mean,
in many ways inspired by some of Dan's ideas about
the importance of process knowledge. How the fact that China
has not stopped manifacted there was not for a maker's
movement to China because they didn't need to be one.
(16:36):
They are always making stuff right the fact that they
still have all the hardware there. It creates this sort
of frictionless ecosystem of innovation where you know, if you're
a guy with an idea for some gadget and you're
in Shinjin, you can have your designer just send you
over on we Chat his latest design. You can take
it to your ODM, which is just a quick bike
(16:57):
ride down the street. They can have you a proto
type by the afternoon. You can make some tweaks and iterate,
and they'll just keep changing the thing over tight and
it's practically frictionless. And I think that's a huge piece
of China's innovation success as well.
Speaker 2 (17:11):
But what happens when hesion ping comes out and says,
you know what, we're not as into social networking anymore,
We're not as into video games. We really want to
focus on other areas of hard tech, important tech, something
like that. What is the process of here is this
national priority and then the transmission and diffusion of these
(17:31):
priorities into choices that maybe students make or technologists make.
Speaker 4 (17:36):
That's a great question. I think it's actually one that
I can answer with three letters KPI. Right. What happens
when you have these kind of abstract directives the will
of the leader from on high is that they get
translated not into specific policies, not right away certainly, but
into this expectation set you know, from the leadership on
(17:59):
down that this is how I'm going to score my
brownie points, this is how I am going to get
promoted within the party, is if I tick these boxes,
if I do these things. Let's say, you know, we
decide that the thing is we all need to have
data centers. So suddenly every municipality in every province is
going to want to build data centers. They're going to
fight each other for it. They're going to figure out,
here's the best place for us to build ours, and
(18:21):
here's all this money that we're going to put into that.
I mean, they're going to want to tick that box.
This is the sort of the way that everything gets
done in China. When recently, when She'sing Ping announced that
they were going to be and this is director that
came not out of just the State Council but out
of the party as well, that they were going to
boost consumption. A lot of people just sort of sneered
and said, yeah, I don't see a lot of policy
(18:43):
here in place to do that. But you can bet
your bottom dollar that every one on down they took
this very very seriously, and they're all figuring out ways
where in their little patch of dirt they're going to
figure out how we can boost consumption because that's the
way that I'm going to get promote. They did the
same thing with cleaning up air pollution. They do the
(19:03):
same thing with cleaning up rivers. They make it part
of your KPI. That's what they're going to do with
this as well. That's what they did. I mean the
question that you asked about how they made sure these
physicists were doing physics. It's much the same.
Speaker 3 (19:17):
There's also, I feel like a sense of clarity in
some of these policy directives. So China very often explicitly
will say where it's investing.
Speaker 1 (19:28):
Right.
Speaker 3 (19:28):
So when we have the consumer tech crackdown, it came
with a simultaneous announcement that everyone should go into hardware basically,
and we saw that repeated in various ways. I remember
Chairman Rabbit was tweeting that people should go to the
industries that actually fit the central government's general policies. So
(19:49):
I feel like it's just very clear as well, and
the messaging is kind of on point.
Speaker 4 (19:55):
We have a word in Chinese phone call which literally
means sort of wind mouth. It's the place where the
wind will be will be blowing. It's like that little
wind tunnel, and they telegraph that. They tell you, you know,
well in advance, here is where we're going to. This
in the fourteenth five year plan. This you know, in
the fifteenth five year Plan they say exactly which industries
are going to not only receive a lot of government investment,
(20:18):
but where the paths are going to be cleared. There's
going to be removal of a lot of regulatory hurdles,
there's going to be favorable policy for you if you
get into this, and if you're an investor, that's where
you're going to put your money. That's what you're going
to do. You're going to you know, it doesn't take
a genius. You need to read the important documents and
you figure out exactly what their priorities are. Just as
(20:40):
you say, there's that clarity.
Speaker 2 (20:58):
I have to admit, you know, like when I say
a sheson ping speech translated into English, or maybe I
just have a chat GPT translated Like, there is often
not a lot of like specifics or arguably even substance
in them. There's a lot of like really sort of
high level grand things. But this sort of makes sense now. Granted,
(21:21):
the leaders around the world often don't get into a
lot of specifics, but it makes a little bit more
sense to me in the context of Okay, these priorities
are announced and immediately on down I have to you know,
imagine provincial leaders, leaders of school systems, universities then immediately
get the message that their futures and their success in
(21:42):
their careers will be about who can show the best
results on what maybe sounds like some sort of vague priority.
Speaker 4 (21:50):
And you're missing the biggest piece of it, which is parents. Oh,
they're getting this message as well. They're the ones who
are ultimately deciding, No, you're not going to be in
a life actual historian if you're going to study yeah,
you know, you're going to study engineering physics, Sorry, buddy,
because you're going to get a job at ten Center,
at UID or at Huawei when you graduate. Yeah. So
(22:13):
I think that's the thing. A friend of mine once
joked that a lot of people in the West have
a great deal of difficulty imagining how the leader of
an authoritarian nation can do all these things that seem
so apparently cruel, arbitrary, but actually have your best interests
in mind. But for anyone who grew up with Chinese parents,
(22:33):
they know exactly how it works.
Speaker 3 (22:35):
Wait, so, just on the authoritarian point, I know you
touched on this already, but just to press on this,
would you say authoritarianism is a net positive or a
net negative for technological development?
Speaker 4 (22:48):
I think it's a wash in most stays. I mean, look,
maybe this is my upbringing talking, but you know, I
am not willing to discard the idea that a lack
of intellectual freedom, of academic freedom, of freedom to query
into to experiment without any ideological fetters, that if you
don't have that, in the long run, you are hobbled.
I think that's probably still the case. But I think
(23:11):
in America we've taken it too far. We have this idea.
I mean, do you remember back in twenty thirteen, twenty fourteen,
when Joe Biden and even Carly Fiorina, who really ought
to have known better. I mean, she was the see
of a major technology company. They were going around and
they were making these speeches. You know, Biden was making
these graduation speeches. Furina was on the campaign trail and
she was talking about that Biden was talking about. They
(23:31):
said the same talking point. It's like, show me one
thing that China's ever innovated. You know, as long as
we have freedom, we will always be in the lead
of innovation. And I mean I think that takes it
from a necessary condition, which I even have quibbles with.
In fact, I don't believe that it's a necessary Freedom
is a necessary condition for technological innovation, but it even
(23:53):
elevates it to sufficient condition. Yeah, where you know, it's
like just because we're free, we're always going to be
ahead in innovation. So I mean that's part of the
reason why we're constantly just being just sideswiped, just completely
just blindsided by Chinese tech advances.
Speaker 2 (24:08):
It's you hear that to this day. I think you
hear less of it, but it is less remarkable the
degree to which you still hear that. What's your version
of deep seek? Where did it come from? And how
much does it fit this story of like, oh, they
were doing quant stuff and then suddenly they're like, oh,
we should pivot to AI, Like, what's the deep Seek story?
Speaker 4 (24:28):
Well, I mean the biography of Young one film is
not in question. I mean he ran a quant fund
called high Flyer, right, and he pivoted. Now to what
extent they were just developing this as a sideline hobby
or I mean I think more likely they were developing
AI that would help them in trades, right, help them
in high frequency, high velocity trading. Right. But the pivot
(24:52):
being you know, attributed to Seizing making this policy changed.
It makes that totally tracks. I don't know the precise details,
but it totally tracks. It doesn't seem suspicious to me.
I have no reason to doubt that that's the case.
I mean, plenty of people have made that kind of
a pivot. I mean, maybe not all of them have
enjoyed the kind of world striding success that Deep Sea has,
(25:14):
but it certainly tracks.
Speaker 2 (25:16):
I want to talk.
Speaker 3 (25:17):
About the export controls from the Biden administration. So what
role would you say those have played in China's technological progress?
Because one thing I sometimes hear people used to use
the analogy of the three body problem. I don't know,
did you ever read that joke.
Speaker 2 (25:33):
I never read.
Speaker 4 (25:34):
I did.
Speaker 3 (25:34):
Yeah, oh sorry, Amfeizer, Yeah, oh yeah, for sure.
Speaker 4 (25:38):
Neil Ferguson actually used that at Davos a few years ago.
I was there. I was, you know, working this little
side hustle on. It's kind of a note taker for
the World economic for him. But he actually, without explaining anything,
he just simply said, you know, what the United States
is trying to do to China right now is exactly
what the Tri Solarians were trying to do earthbody help,
and without explaining what he meant, but just don the
(25:59):
assumption that when the audience had read it, and probably
most people had, but yeah, trying to basically stemy technological advance, right.
Speaker 3 (26:07):
Right, So I feel like we should explain it now.
But I guess it's the idea that in the three
body problem, Earth is threatened by this alien species and
because of that, humanity kind of reorganizes itself and technological
progress thrives, at least for a while.
Speaker 4 (26:23):
Yeah, And I think that that's kind of what we've
seen happen. I mean, I use a more Quotitian metaphor,
the one that I think not everyone has have read
this really really long turgid science fiction classic form. But
I think we've basically compelled the frog to leap again.
And it was happy enough just sort of hopping along
well behind the US when it came to cutting edge semiconductors.
(26:46):
But now it may leap the United States as the frog,
you know, our metaphoric frog did in five G or
in renewable energy like solar and and electric vehicles. Right,
So we have now given China both the kind of
urgency and the sense of imminent threat that was needed
(27:06):
to light a fire to that that frog's posterior and
now it's you know, it's in the air.
Speaker 5 (27:11):
It's maybe directly over our heads, maybe gon't land in
front of us.
Speaker 2 (27:31):
One of the things that's really elemental to us tech
is the vision in dreams of gigantic monopoly profits. This
is sort of like the Peterteel idea. It's like the
goal is to like build a monopoly and get insanely
rich doing it, and the people who go into tech
dreams of fortunes, et cetera. There is this huge liquid
(27:52):
stock market that becomes the destination either for I pos
or acquisitions. Talk to us about the capital markets component
of Chinese tech is it the same like path to
getting super rich that American technologists see here? Like what
incentivizes and motivate the technologists in China.
Speaker 4 (28:12):
Well, I think that they're exactly the same. I think
that there's very little daylight between. Well, first of all,
I mean in the nineties, in that first technology boom
in China came right on the heel of what you
saw in the United States. All these people Charles Jong
who left MIT and went back to China, and I
think it was like ninety seven or ninety eight to
(28:32):
start this company. So who all these other entrepreneurs, Robin
Lee who I used to work for it by do,
A lot of them were returneys from the United States,
and they had the same glint in their eye. And
you have to remember these guys, they had American business
business models. Essentially, they went to American vcs from Sandhill
Road to raise their money. They went to American capital
(28:54):
markets right when they wanted to list. Their exits were
always on Nasdaq or on New York Stock Exchange, only
in rare exceptions where they actually not ten cents. An exception,
Ali Baba is a little bit of an exception. But
most of them, I mean, hundreds of them went to
the United States forces, right, And yeah, I think it's
it's the same, it's the same motivating force. The cultures
(29:17):
are remarkably or were remarkably similar. So that was like
the only thing I felt comfortable working. I mean, as
a guileless American who just had my I would just
have my my, my posterior handed to me in any
kind of corporate setting except in the Internet, where you know,
the same kind of Silicon Valley egalitarianism and that kind
(29:39):
of enterprise culture prevailed. So that was like one of
the only safe places for people who you know, were
clueless like me. Since you mentioned so, I think they're
the same. I think they're the same.
Speaker 3 (29:49):
Since you mentioned culture, can I ask a slightly random question,
but I think I think you're a good person to
ask about it, given your background as a musician. But
China kah has been very successful in exporting technology, so
you know, whether it's byd cars or TikTok or whatever,
I think we can all agree that it's come from
(30:11):
nowhere basically and is now certainly a major player. Meanwhile,
in sort of pop cultural exports, the lack of Chinese
pop culture exports has been a sort of long running
discussion point now, and if you compare China to a
place like Japan where there's jpop, or Korea where there's
(30:33):
k pop, it does feel like something is kind of
lacking there. I guess my question is is it fair
to say that China has fallen down on cultural exports
at least compared to technology, and then b why is that?
Speaker 4 (30:48):
Yeah, No, that's a great question. It's something I've pondered
for a very long time too. I mean, I think
there's no arguing that China's got a gigantic gap. It's
not punching at its weight. But let's figure out how
we calculate that way. Because you know, when you look
at when did we all start eating sushi and watching
the Cure Kurosawa films like in the eighties? Right, So
that's when Japan's soft power starts to really really peak, right,
(31:10):
we all start driving Japanese cars. This is at a
point where Japan's per captain GDP was about seventy five
percent of what the United States was at that time,
and Koreas similarly, around the time where we start all
listening to Gongnam style and then you know, all our
daughters or whatever posters of bts on their walls, as
(31:30):
mon still does. This was at a time when South
Korea's per capita GDP it's like seventy two, seventy three
percent of America's GDP per capita. I think that has
something to do with it. I think that per capita
GDP kind of shows what a nation's priorities are going
to be. When it's low, it's still going to be
in that stage of we've got to work really, really hard.
Just this is why I mean in China. I mean,
(31:52):
I play music, so I'm constantly frustrated by the fact
that for most people, for the overwhelming number of people,
it is just entertainment. There's nobody who thinks of it
as an art form anymore, I mean, or if there
ever was. I think that it has to do with that.
But I think there's also and it's obvious to me
that the first rule of soft power should just be
(32:14):
don't talk about soft power. That China's government's obsession with
trying to create soft power is one of the big
impediments to it actually having soft power. Again, let me
let me be very very clear, it has plenty of
soft power in the developing world. I mean, if you
look in Southeast Asia, a lot of people are watching
these insufferable costume dramas about you know, the palace intrigue
(32:37):
in the Qing.
Speaker 3 (32:37):
Dynasty ones, a bunch of them nowadays.
Speaker 4 (32:44):
Yeah, yeah, I guess the Thai ones are really popular
these days.
Speaker 2 (32:48):
That's interesting, so that that's actually popular content in Southeast Asia.
Speaker 4 (32:52):
Yeah, it's huge. It's absolutely huge all over Southeast Asia,
in Indonesia and Malaysia and Thailand and the Philippines, even
in Vietnam anyway where in Southeast Asia, Ego, there's a
lot of this stuff. But yeah, but no, to your point,
in Europe and the United States, no, it's not really registering.
And I think there's that's one of the reasons. But
I think ultimately the reason is, well, soft power tends
(33:15):
to be created on the periphery. It creeps in through
the cracks, you know. It's a grassroots thing. It's not
supposed to be created top down. And yeah, you can
look at South Korea and say there was a lot
of government, you know, and a lot of these gigantic
conglomerates who created Korean soft power boy bands and stuff,
But that may be sort of the anomaly Kaiser.
Speaker 2 (33:35):
We could go on a long time. There are just
so many questions, but I think that's a good spot
to ramp it. Thank you so much for coming on, Odlocks.
We'll have to have you back on again soon.
Speaker 4 (33:44):
I would love to come back on. Thank you so
much for having me than you.
Speaker 3 (33:48):
That was fun.
Speaker 2 (34:01):
I thought it was really interesting. I like the point
about everyone getting the message and then everyone doing their
own thing to sort of prove that they're getting a message.
And we talked about this on our episode with Sam Damico,
the Impulse Labs guy. This idea of Okay, there's some priority,
and then all the different provinces compete on how well
they're doing and fulfilling their priority. It makes a lot
(34:22):
of sense that that's a very broadly applicable lesson to
like different sectors and different parts of the economy.
Speaker 3 (34:29):
Totally, I really think the messaging is kind of key here. Yeah,
the message is very clear. It's if you choose this
route that the Chinese government is encouraging you to take,
your life is going to be a lot easier than
if you take another route. And I think that's kind
of different to the way industrial policy, I guess works
(34:49):
in the States, where you know, even if a president
stands up and says we want a lot more semiconductors
in the US, there's still a lot of bureaucracy, a
lot of uncertainty, a lot of paperwork attached to getting
support from the government for a semiconductor project. And so
I think that uncertainty like still feeds into the US certainly.
Speaker 2 (35:13):
Yeah. Prisident Trump recently gave a speech at University of Alabama,
I think it was their graduation ceremony, and he said
that he was like, to the business students here, don't
just think about your portfolios, think about your country. And
I like that message, but I don't know, like, what
are the levers that actually get towards that. And so oh, also, Tracey,
(35:34):
I have a take?
Speaker 3 (35:35):
Oh oh really, just one?
Speaker 2 (35:37):
Yeah, just one take?
Speaker 3 (35:38):
Okay, hit me.
Speaker 2 (35:38):
This is something I've been workshopping, and so I'm leaving
it to the end.
Speaker 3 (35:42):
I can't believe you're not tweeting it. Are you going
to tweet it? Are you workshopping for a tweet?
Speaker 2 (35:47):
I'm workshopping it for you here. I figured a lot
of people aren't listening by this point, so I can
drop it here, which is I'm kind of coming around
to this idea that like complex financial products, that they
have a bad rep.
Speaker 3 (35:59):
They have a bad they are bad.
Speaker 2 (36:01):
Know that they have a bad rep. That actually, this
is like a sort of contra to a lot of
popular thing. It's like, oh, complex semiconductor is good, complex
financial products bad. I'm just throwing it out there that
maybe we should talk more about why people get paid
so much to design complex financial products in a market
(36:22):
economy and why they're so highly valued. I'm just throwing
it out there.
Speaker 3 (36:26):
We should do an episode on Ray Dalio and the
chicken nugget again.
Speaker 2 (36:29):
That's exactly right. That's exactly right. Derivatives gave us the
chicken nugget. Anyway, talking to Kaiser about this just reminded
me of that that I want to explore this idea,
and I'm saying it here now kind of as a
remind myself, reminder of myself to think about this one.
Speaker 3 (36:44):
Chicken nuggets is the ultimate example of American technological and
financial supremacy.
Speaker 2 (36:52):
We do great, complicated things in the United States, but
because we have this bias against finance as being extractive
or or something, I think we don't sufficiently recognize where
we're at the cutting edge.
Speaker 3 (37:04):
It is true that in China finance and industry are
often working hand in hand. And if the government says that,
for instance, hardware is now very important, you will see
the banks start to loosen up on lending standards and
things like that. So a valid point, Joe.
Speaker 2 (37:20):
What is a supply chain but a payment chain in reverse?
Speaker 3 (37:24):
That's Sultan Posar's line.
Speaker 2 (37:25):
Oh he said, stole that, Yeah, I stole it from Sultan.
All right, that's right, Yeah, credit to Sultan. But you know,
maybe we should think about this a little more.
Speaker 3 (37:32):
Yeah, all right, shall we leave it there?
Speaker 2 (37:34):
Let's leave it there.
Speaker 3 (37:35):
This has been another episode of the Odd Lots Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 2 (37:40):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Check out our guest, Kaiser Quote. He's at Kaiser Quo,
and check out the Cineca podcast and substack. Follow our
producers Kerman Rodriguez at Kerman Ermann, dash Ol Bennett at
Dashbot and Kale Brooks at Kale Brooks. For more Oddlots content,
go to Bloomberg dot com slash Odd Lots where we
have a daily newsletter and all of our episodes, and
(38:02):
you can chaut about all of these topics twenty four
to seven in our discord discord dot gg slash odlines.
Speaker 3 (38:08):
And if you enjoy Odd Lots, if you like it
when we check in on Chinese technology and how it
actually develops, then please leave us a positive review on
your favorite podcast platform. And remember, if you are a
Bloomberg subscriber, you can listen to all of our episodes
absolutely ad free. All you need to do is find
the Bloomberg channel on Apple Podcasts and follow the instructions there.
(38:29):
Thanks for listening
Speaker 1 (39:00):
And
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Joe Weisenthal
Tracy Alloway
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