Glenn Luk has worked as an investment banker, private equity investor, and startup founder. He has closely analyzed aspects of the Chinese economy, including its GDP and high speed rail system.
Steve and Glenn discuss:
(00:00) - Introduction
(01:21) - Glenn Luk's Background: HK, Taiwan, China
(07:59) - Evolution of Chinese Companies and Economy
(14:58) - From Banking to Private Equity and Venture Capital
(23:08) - Founding a Healthcare Startup and Entrepreneurial Ventures
(26:35) - China's Development and Economic Policies
(41:17) - Comparing US and China's Economies and Cultures
(47:12) - Demographics and Consumer Behavior in China
(49:09) - China's Economy: Beyond GDP
(56:34) - High Speed Rail: huge success, or white elephant?
Russell Clark is a hedge fund investor who has lived and worked in both Japan and China. He writes the widely followed Substack Capital Flows and Asset Markets: https://www.russell-clark.com/
Steve and Russell discuss:
0:00 Introduction
0:52 Russell's background and experiences in Japan
13:25 Hong Kong and finance
31:53 China property bubble
48:54 Dollar status as global reserve currency
56:09 Japan and China economies from a long run perspective
1:05:07 Inflation, US economy, and macro observations
Louis-Vincent Gave of Gavekal discusses China's economic growth, its focus on education, and the global implications of its economic and political policies.
I'm in the Philippines now. I flew here after the semester ended, in order to meet with outsourcing (BPO = Business Process Outsourcing) companies that run call centers for global brands. This industry accounts for ~8% of Philippine GPD (~$40B per annum), driven by comparative advantages such as the widespread use of English here and relatively low wages.
I predict that AIs of the type produced by my startup SuperFocus.ai will disrupt the BPO industry in coming years, with dramatic effects on the numbers of humans employed in areas like customer support. I was just interviewed for the podcast of the AI expert at IBPAP, the BPO trade association - he is tasked with helping local companies adopt AI technology, and adapt to a world with generative LLMs like GPT4. I'll publish a link to that interview when it goes live.
During my visit the latest PISA results were released. This year they provided data with students grouped by Socio-Economic Status [1], so that students in different countries, but with similar levels of wealth and access to educational resources, can be compared directly. See figures below - OECD mean ~500, SD~100.
Quintiles are defined using the *entire* international PISA student pool.
These figures allow us to compare equivalent SES cohorts across countries and to project how developing countries will perform as they get richer and improve schooling.
In some countries, such as Turkey or Vietnam, the small subset of students that are in the top quintile of SES (among all PISA students tested) already score better than the OECD average for students with similar SES. On the other hand, for most developing countries, such as the Philippines, Indonesia, Saudi Arabia, Brazil, Mexico, etc. even the highest quintile SES students score similarly to or worse than the most deprived students in, e.g., Turkey, Vietnam, Japan, etc.
Note the top 20% SES quintile among all PISA takers is equivalent to roughly top ~30% SES among Japanese. If the SES variable is even crudely accurate, typical kids in this category are not deprived in any way and should be able to achieve their full cognitive potential. In developing countries only a small percentage of students are in this quintile - they are among the elites with access to good schools, nutrition, and potentially with educated parents. Thus it is very bad news that even this subgroup of students score so poorly in almost all developing countries (with exceptions like Turkey and Vietnam). It leads to gloomy projections regarding human capital, economic development, etc. in most of the developing world.
I had not seen a similar SES analysis before this most recent PISA report. I was hoping to see data showing catch up in cognitive ability with increasing SES in developing countries. The results indicate that cognitive gaps will be very difficult to ameliorate.
In summary, the results suggest that many of these countries will not reach OECD-average levels of human capital density even if they somehow catch up in per capita GDP.
This suggests a Gloomy Prospect for development economics. Catch up in human capital density looks difficult for most developing countries, with only a few exceptions (e.g., Turkey, Vietnam, Iran, etc.).
Here is the obligatory US students by ancestry group vs Rest of World graph that reflects: 1. strong US spending on education (vs Rest of World) and 2. selective immigration to the US, at least for some groups.
The EV tipping point has arrived in China. Even most techology experts do not appreciate the coming huge impacts on global economics, manufacturing, energy transition, etc.
Chapters:
0:00 Introduction
2:21 How TP Huang became interested in electric vehicles
6:30 The perception and reality of Chinese products, future of Chinese auto market
9:24 The impact of Tesla on the Chinese electric vehicle market
14:41 Buying a car in China
27:05 China dominates with electric vehicle batteries
30:44 The challenges facing Tesla in China
40:11 The evolution of smart cars, autonomous vehicles, and self driving
50:48 LIDAR technology and autonomous driving
59:08 BYD, China’s energy independence, and power grid
1:14:04 The downstream impact of China leading in tech and electric vehicles
I really enjoyed this conversation. Taylor is a very unique investor who relocated his fund to Shenzhen in order to have direct access to information on Chinese tech companies.
Taylor Ogan is Chief Executive Officer of Snow Bull Capital, based in Shenzhen, China.
Bharat Karnad is an Emeritus Professor in National Security Studies at the Center for Policy Research in Delhi. He was a member of India's first National Security Advisory Board and has authored several books on nuclear weapons and Indian security.
Robert Trumbull Crowley, former Deputy Director of Clandestine Operations for the CIA. Recorded conversations (Conversations With The Crow) near the end of his life:
".. their head expert was fully capable of building a bomb and we knew what he was up to. He was warned several times but what an arrogant prick that one was. Told our people to fuck off and then made it clear that no one would stop him and India from getting nuclear parity"
Steve discusses the AI competition between Microsoft and Google, the competition between the U.S. and China in STEM, China’s new IVF policy, and a Science Magazine survey on polygenic screening of embryos.
00:00 Introduction
02:37 Bing vs Bard: LLMs and hallucination
20:52 China demographics & STEM
34:29 China IVF now covered by national health insurance
40:28 Survey on embryo screening in Science: ~50% of those under 35 would use it to enhance congnitivie ability
The state of Michigan required all public HS seniors to take the SAT last year (~91k out of ~107k total seniors in the state). This generated an unusually representative score sample. Full report.
I'm aware of this stuff because my kids attend a public HS here.
To the uninformed, the results are shocking in a number of ways. Look specifically at the top band with scores in the 1400-1600 range. These are kids who have a chance at elite university admission, based on academic merit. For calibration, the University of Michigan median SAT score is above 1400, and at top Ivies it is around 1500.
Some remarks:
1. In the top band there are many more males than females.
2. The Asian kids are hitting the ceiling on this test.
3. There are very few students from under-represented groups who score in the top band.
4. By looking at the math score distribution (see full report) one can estimate how many students in each group are well-prepared enough to complete a rigorous STEM major -- e.g., pass calculus-based physics.
Previously I have estimated that PRC is outproducing the US in top STEM talent by a factor as large as 10x. In a decade or two the size of their highly skilled STEM workforce (e.g., top engineers, AI researchers, biotech scientists, ...) could be 10x as large as that of the US and comparable to the rest of the world, ex-China.
This is easy to understand: their base population is about 4x larger and their K12 performance on international tests like PISA is similar to what is found in the table above for the Asian category. The fraction of PRC kids who perform in the top band is probably at least several times larger than the overall US fraction. (Asian vs White in the table above is about 6x, or 7x on the math portion.) Also, the fraction of college students who major in STEM is much larger in PRC than in the US.
Professor Goldstein recently retired after 20 years of service on the faculty of the U.S. Naval War College (NWC). During his career at NWC, he founded the China Maritime Studies Institute (CMSI) and has been awarded the Superior Civilian Service Medal for this achievement. He has written or edited seven books on Chinese strategy and is at work on a book-length project that examines the nature of China-Russia relations in the 21st century. He has a longstanding interest in great power politics, military competition, and security in the pacific region.
Goldstein is Director of Asia Engagement at the Washington think-tank Defense Priorities, which advocates for realism and restraint in U.S.defense policy, and also a visiting professor at the Watson Institute for International and Public Affairs at Brown University.
He earned a PhD at Princeton, an MA from Johns Hopkins SAIS, and an AB from Harvard. He is fluent in both Chinese and Russian.
Steve and Lyle discuss:
00:00 Early life and background
18:03 Goldstein’s dissertation on China’s nuclear strategy
37:35 Pushback on “Meeting China Halfway”
41:24 Could the U.S. have prevented war in Ukraine?
46:05 How territorial conflicts are influencing China’s relationship with Russia
1:00:16 Analyzing war games with U.S., China, and Taiwan
I've been asked to write something about PRC military buildup and a potential Taiwan (TW) conflict.
1. My perspective and bona fides: My father was a KMT officer, my mother's father was a KMT general and that side of the family is related to Chiang Kai Shek by marriage. I have relatives both in PRC and TW. My wife is a graduate of National Taiwan University. I should be biased in favor of TW and against CPC but I am a realist and rationalist so I call things as I see them.
2. PRC military technology has reached parity with the US and, overall, surpassed Russia. PLARF (dedicated rocket forces) may be decisive in a conflict in the pacific. They may have achieved A2AD and can make it very costly for the US navy to operate anywhere near TW.
3. Specifically, long range missile attack on surface ships, using initial targeting via satellites and drones, and final targeting from sensors on the missile itself, is probably a mature technology now and difficult to defeat with countermeasures / missile defense.
4. US estimates of PRC nuclear weapons stockpile have barely changed in 30y and are likely highly unreliable. Based on production capabilities alone they may already have ~1000 warheads (if not now, in a few years), and the ability to target the entire US. PRC is building up its arsenal to ensure that the US understands that they have a reliable MAD capability.
5. PRC can easily blockade TW if desired, and (at cost of significant escalation) can probably also blockade Japan and S. Korea as well. All of these countries import ~90% of energy and ~50% of food calories, so a protracted blockade would have serious impact.
6. I don’t believe PRC has near term plans to invade TW, but they have to maintain the capability to deter any change in the status quo. Both sides prefer the status quo but accidents can happen.
7. Thanks to stupid US strategy re: Ukraine, PRC can rely on Russian energy in the future and will become much more resistant to naval blockade (e.g., of oil supplies transiting the Malacca Strait). In other words, dumb US neocons solved PRC’s energy security problem for them.
No one talks about this because US strategy has been brain dead for a long time. No one even talks, in the immediate aftermath, about the trillions of dollars and millions of lives wasted over 20y in the Iraq/Afghanistan tragedies. Cui bono?
8. PRC spends a smaller fraction of GDP on defense than the US, but because they have mastered the entire military technology stack cost estimates should be PPP adjusted. After PPP adjustment the PRC economy is substantially larger than the US economy. This, plus the fact that their manufacturing capacity (e.g., ship building) is far beyond that of the US, means that their overall capability to produce war materiel (i.e., to engage in a rapid buildup on, e.g., a 5y timescale) has easily surpassed ours. Anyone following their recent naval or air power or missile or satellite build up can see that this is the case.
I'll be discussing some of these topics with Lyle Goldstein (US Naval War College, Watson China Initiative at Brown University; BA Harvard, PhD Princeton) in a future podcast.
See also this documentary produced by the US Army University Press. Queued to start at discussion of missile technology and nuclear weapons.
If you are scratching your head about what happened in Kazakhstan (perhaps as you were last summer about Afghanistan, remember that?), it may be because you only look at mainstream Western sources of information. You might also be the kind of person who swallows whole US propaganda stories about Ukraine, Syria, Xinjiang, Huawei, January 6, RussiaGate, etc.
Dmitry Orlov on January 09, 2022 · at 5:22 pm EST/EDT [ Comment on this blog post by the Saker ]
What happened in KZ was a paramilitary attack meticulously organized but launched in haste by Western intelligence that had the goal of destroying the statehood of KZ. It was not an attempt to take it over (no time for that) but simply to destroy. The entire state structure was sufficiently rotten that the defense/security agencies couldn’t even pick sides and became demoralized and inactive, but once the Russians were called in to help they immediately knew which side would win and fell back in line. The West’s goal was to set KZ ablaze prior to the talks in Geneva in order to have a better negotiating position vis-à-vis Russia: “You want to divide spheres of influence? Well, we already did that for you—in Kazakhstan!” Keep in mind, the RU-KZ border is open, undefendable and almost 8000km long, running from Volgograd to Tomsk in Siberia, making KZ, as a failed state, a major headache for Russia. Obviously, Russia knew that KZ, rife with Western NGOs and accompanying corruption, and with a weakening economy, could easily be tipped over, and prepared for just this case. Now that the attack on KZ statehood has failed and a mop-up operation is in progress, this has given Russia a huge trump card for the Geneva talks. The West has played its cards and lost. There will be no more color revolutions in the post-Soviet space. Its operatives in KZ are being hunted down and eliminated. Those in positions of authority in KZ have learned the same lesson as Lukashenko: they cannot trust the West; they have to trust Moscow.
On any particular issue Orlov might be right or he might be wrong, but guaranteed on certain topics he knows a lot more than the "experts" found on television or in the NYTimes. In recent years I have spent significant time with Western foreign policy and defense "experts" in think tank settings and I have to say that they are often poorly informed or miscalibrated in the confidence levels assigned to their predictions. Sadly, elites in the West have largely been fooled by their own propaganda, and often have entirely unrealistic views of what is really happening in the world. Alternative sources of information, especially individuals with good local knowledge, are always useful.
Wikipedia: Dmitry Orlov (Russian: Дми́трий Орло́в; born 1962) is a Russian-American engineer and writer on subjects related to "potential economic, ecological and political decline and collapse in the United States", something he has called "permanent crisis".[1] Orlov believes collapse will be the result of huge military budgets, government deficits, an unresponsive political system ...
Orlov was born in Leningrad (now Saint Petersburg) and moved to the United States at the age of 12. He has a BS in Computer Engineering and an MA in Applied Linguistics. He was an eyewitness to the collapse of the Soviet Union over several extended visits to his Russian homeland between the late 1980s and mid-1990s. ...
In 2006 Orlov published an online manifesto, "The New Age of Sail." In 2007 he and his wife sold their apartment in Boston and bought a sailboat, fitted with solar panels and six months supply of propane, and capable of storing a large quantity of food stuffs. He calls it a “survival capsule.” ...
Here is a different (internal coup and counter-coup) interpretation of events which is quite unlike Orlov's. I have not seen any evidence presented yet of foreign involvement, but perhaps I am not looking at the right sources...
which led me to the podcast interview below with Ryan Peterson, CEO and Founder of Flexport. It's one of the best startup founder interviews I've heard in a long time.
Is there any doubt that the best "generalist" talent among people aged 20-35 is in tech startups? Petersen understands more about the world (or, at least, how to get stuff done in the world) than any typical business school or social science prof, or any typical big company exec or government official.
Dan Wang of Gavekal is a great China tech and economics analyst -- well calibrated, in my opinion.
... China has strong entrepreneurs as well as a strong state, and these two sometimes reinforce each other. An interesting fact I noticed recently is that the party secretary of Zhejiang province, one of the country’s most important, used to be a director of China’s manned space program. A skim through the Wikipedia pages of provincial party secretaries would reveal a diverse range of technocratic experiences.
An important factor in China’s reform program includes not only a willingness to reshape the strategic landscape—like promoting manufacturing over the internet—but also a discernment of which foreign trends to resist. These include excessive globalization and financialization. Beijing diagnosed the problems with financialization earlier than the US, where the problem is now endemic. The leadership is targeting a high level of manufacturing output, rejecting the notion of comparative advantage. That static model constructed by economists with the aim of seducing undergrads has leaked out of the lecture hall and morphed into a political justification for only watching as American communities of engineering practice dissolved. And Beijing today looks prescient for having kept out the US social media companies that continuously infuriate their home government. ...
Only a retard (autistic economist) can overlook the pitfalls of blind acceptance of Comparative Advantage (Ricardo, etc.): "Gee, those guys are great at making hypersonic missiles and targeting radar. We'll let them do it and just buy the stuff from them. Everybody wins!" See Charlie Munger, Ricardo and finance.
I agree with Louis Gave's take on most of the topics discussed. Gavekal manages a China fixed income fund and some other China-focused funds, so he is talking his book. But the arguments stand on their own.
At ~45m, a good discussion of digital RMB and why it will break the technology record for fastest adoption by first 1 billion users. See earlier discussion (Ray Dalio) on de-dollarization and digital RMB here.
This is a good discussion of Eurasian geopolitics, Russia-China relations, decline of US empire, multipolarity, etc.
Note Diesen, originally from Norway and now a professor there, was previously professor at the Higher School of Economics in Moscow. I find his writing on Russia and Eurasian geostrategy much more realistic than what is produced by most US or European academics and analysts.
His latest book:
Will the increased economic connectivity across the Eurasian supercontinent transform Europe into the western peninsula of Greater Eurasia? The unipolar era entailed the US organising the two other major economic regions of the world, Europe and Asia, under US leadership. The rise of “the rest”, primarily Asia with China at the centre, has ended the unipolar era and even 500-years of Western dominance. China and Russia are leading efforts to integrate Europe and Asia into one large region. The Greater Eurasian region is constructed with three categories of economic connectivity – strategic industries built on new and disruptive technologies; physical connectivity with bimodal transportation corridors; and financial connectivity with new development banks, trading currencies and payments systems. China strives for geoeconomic leadership by replacing the US leadership position, while Russia endeavours to reposition itself from the dual periphery of Europe and Asia to the centre of a grand Eurasian geoeconomic constellation. Europe, positioned between the trans-Atlantic region and Greater Eurasia, has to adapt to the new international distribution of power to preserve its strategic autonomy.
Bonus: A good discussion of hypersonic missile technology and its strategic implications. See also LEO SAR, hypersonics, and the death of the naval surface ship. Effective ranges of hypersonic weapons that can be launched from land-based mobile TEL, submarine, small naval surface combatant, fighter jet, etc. are now in the thousands of kilometers. Combined with ubiquitous satellite imaging, we have a revolution in military affairs...
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