Add in stupid and divided. Some of the stupidity I see emanating from that country is like living in the twilight Zone.
The Fallacy of Vertical Integration (A Question of Rational Economics).
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Add in stupid and divided. Some of the stupidity I see emanating from that country is like living in the twilight Zone.
Part 3: The Decisive Factors
In Part 1 and 2, I argued for why vertical integration will lead to failure but if China can move up the value chain to monopoly capital, it can achieve a huge win. I believe that those like Peter Navarro are more terrified than anything of China moving up the value chain which is why they attacked Made in China 2025 from the very start of the trade war. When they couldn't get China to agree to ditch the goals of Made in China 2025, they started the tech war.
So which factors will determine whether China can move up the value chain? To do so it requires an examination of why the US has controlled the lead in monopoly capital for the past 100 years. The US (and Western) success essentially comes down to three major factors:
1) Culture.
The US has an open culture. Students are thought to think creatively and originally from a young age, and individual entrepreneurs are supported rather than suppressed. This is important because no one can really see ahead of time or plan out what the most successful innovations are going to be. Only by having many diverse efforts--and many failures-- can the true unicorns emerge in society.
Japanese-American entrepreneur William Saito argues that the key ingredient to business success is learning to fail.
“Japanese are taught to abhor failure and to shun those who fail at almost anything. The consequences for the nation’s entrepreneurial spirit are predictable,” he writes.
He also says:
"What’s amazing is that 40 percent of startups in Silicon Valley are done by Indians. I don’t see many Indians in Japan. Diversity is very, very important. The one and only biggest strength that the US has, the thing that makes it special, is diversity. It is the most diverse country on the planet."
2) Basic research.
The United States has led the world in basic research spending for decades. While China is catching up, Endogenous growth theory has shown that R&D plays a significant role in the economic growth of a country.
Basic research and material science provides the foundation for almost all other technological innovations.
Now it is obvious to everyone that R&D spending is important. However, what is not appreciated is just how much more China needs to spend, because it does not just need to keep up with the West, it needs to catch up and surpass it. Thus, China needs to spend considerably more than the West already spends in basic research to achieve its goals. If it simply spends the same amount, it will never catch up, as it is chasing a moving target. This leads us into...
3) Network effects.
Collaboration between the US, EU, Japan, India, and South Korea means that China is competing with the combined efforts of all of them, not just the US. This has many important implications.
It means that the forces arrayed against China collectively have a higher population, a higher GDP, a more advanced technological level, and greater landmass than China. On the East and the South, China is contained, while to the North and West, Russia is, at best, an unreliable partner.
Since they all collaborate with each other, researchers in one country can benefit from the work and spending done in another country. Many papers these days are published with coauthors from multiple countries. Invention and discovery is often like a scavenger hunt of many people looking for an answer. You don't know who will find the answer or when, but if you have 1,000 people searching, you will probably find it faster than 100 people searching. It's simple numbers. Thus greater numbers = greater chance of success.
To use the R&D point above, China must not only look at the $500 billion annual US R&D spending, but the $400 billion EU spending, $180 billion from Japan, $80 from South Korea, and so on. Overall probably $1.2-$1.4 trillion in annual R&D spending is controlled by the West. China must not only match this level, but exceed it.
If a company in Finland (say Ericsson) starts up to provide telecommunications, its potential market is all of North America, Europe, Japan, Latin America, and more, even though Finland's population is only 5 million. On the other hand, if a company in Shanghai starts telecommunications, even though China's population is 1.4 billion, its potential market is smaller if it is only restricted to China. Therefore the Finnish company can be more successful.
This is a 'Total War' situation that I am not sure the Chinese government is committed to maintaining. It would require increasing R&D spending annually to nearly 10% of GDP (!).
To win the 'network effect' competition China would have to improve its foreign relations, and bring more countries into its orbit.
=================
In short, the question is (1) Will China simply vertically integrate, and waste many efforts creating an inefficient economy, or (2) can it move up the value chain, thus achieving a major success?
The answer is that if China wants to move up the value chain, it needs to nurture (1) An open culture that rewards risk-taking and welcomes outsiders, (2) Increasing basic research spending x4-x5 over what it currently is today, and (3) improve its foreign relations, and bring more countries into its orbit.
In Part 1 and 2, I argued for why vertical integration will lead to failure but if China can move up the value chain to monopoly capital, it can achieve a huge win. I believe that those like Peter Navarro are more terrified than anything of China moving up the value chain which is why they attacked Made in China 2025 from the very start of the trade war. When they couldn't get China to agree to ditch the goals of Made in China 2025, they started the tech war.
So which factors will determine whether China can move up the value chain? To do so it requires an examination of why the US has controlled the lead in monopoly capital for the past 100 years. The US (and Western) success essentially comes down to three major factors:
1) Culture.
The US has an open culture. Students are thought to think creatively and originally from a young age, and individual entrepreneurs are supported rather than suppressed. This is important because no one can really see ahead of time or plan out what the most successful innovations are going to be. Only by having many diverse efforts--and many failures-- can the true unicorns emerge in society.
Japanese-American entrepreneur William Saito argues that the key ingredient to business success is learning to fail.
“Japanese are taught to abhor failure and to shun those who fail at almost anything. The consequences for the nation’s entrepreneurial spirit are predictable,” he writes.
He also says:
"What’s amazing is that 40 percent of startups in Silicon Valley are done by Indians. I don’t see many Indians in Japan. Diversity is very, very important. The one and only biggest strength that the US has, the thing that makes it special, is diversity. It is the most diverse country on the planet."
2) Basic research.
The United States has led the world in basic research spending for decades. While China is catching up, Endogenous growth theory has shown that R&D plays a significant role in the economic growth of a country.
Basic research and material science provides the foundation for almost all other technological innovations.
Now it is obvious to everyone that R&D spending is important. However, what is not appreciated is just how much more China needs to spend, because it does not just need to keep up with the West, it needs to catch up and surpass it. Thus, China needs to spend considerably more than the West already spends in basic research to achieve its goals. If it simply spends the same amount, it will never catch up, as it is chasing a moving target. This leads us into...
3) Network effects.
Collaboration between the US, EU, Japan, India, and South Korea means that China is competing with the combined efforts of all of them, not just the US. This has many important implications.
It means that the forces arrayed against China collectively have a higher population, a higher GDP, a more advanced technological level, and greater landmass than China. On the East and the South, China is contained, while to the North and West, Russia is, at best, an unreliable partner.
Since they all collaborate with each other, researchers in one country can benefit from the work and spending done in another country. Many papers these days are published with coauthors from multiple countries. Invention and discovery is often like a scavenger hunt of many people looking for an answer. You don't know who will find the answer or when, but if you have 1,000 people searching, you will probably find it faster than 100 people searching. It's simple numbers. Thus greater numbers = greater chance of success.
To use the R&D point above, China must not only look at the $500 billion annual US R&D spending, but the $400 billion EU spending, $180 billion from Japan, $80 from South Korea, and so on. Overall probably $1.2-$1.4 trillion in annual R&D spending is controlled by the West. China must not only match this level, but exceed it.
If a company in Finland (say Ericsson) starts up to provide telecommunications, its potential market is all of North America, Europe, Japan, Latin America, and more, even though Finland's population is only 5 million. On the other hand, if a company in Shanghai starts telecommunications, even though China's population is 1.4 billion, its potential market is smaller if it is only restricted to China. Therefore the Finnish company can be more successful.
This is a 'Total War' situation that I am not sure the Chinese government is committed to maintaining. It would require increasing R&D spending annually to nearly 10% of GDP (!).
To win the 'network effect' competition China would have to improve its foreign relations, and bring more countries into its orbit.
=================
In short, the question is (1) Will China simply vertically integrate, and waste many efforts creating an inefficient economy, or (2) can it move up the value chain, thus achieving a major success?
The answer is that if China wants to move up the value chain, it needs to nurture (1) An open culture that rewards risk-taking and welcomes outsiders, (2) Increasing basic research spending x4-x5 over what it currently is today, and (3) improve its foreign relations, and bring more countries into its orbit.
This is garbage to justify American exceptionalism once again, this time explaining 'diversity'.
Japanese culture is highly creative and innovative. A good symptom you can find of this is in the anime, manga, and game industry. Many of the companies that do all these are start ups, in addition to large established companies.
The failure of Japanese tech comes from another reason --- the large established corporations that are also zombie companies heavy in debt, saved by QE because the Japanese ministries deemed them too big to fail. If you understand the causes of the 'Lost Decade' of Japan, you see the same causes happening in the US.
A good expression of start ups is who and who are making mobile apps. How many mobile apps, including games, that you know are from India, or by Indians in Silicon Valley?
By the way, Ericsson is Swedish. Nokia is Finnish. Two tech companies that are from two countries that aren't very diverse. I have nothing against diversity, it only seems that diversity is an excuse because the non-immigrant population in the US hasn't been as entrepreneurial it once was, and quite bluntly, entrepreneurism tends to be driven by cultures and backgrounds heavy in poverty. You get to understand this as why Japan was able to breed companies like Sony and Honda after the war.
Lolllllll, indians are source of success? so if Japan had more Indians they would be more successful?
I think this guy should read up on what is correlation and what is causation.
Look some of his points are valid in terms of the need for China to build alliances and such. But some of its just silly. Japan has been in economic decline not because they are not diverse enough, but because the plaza accord which they had no choice but to agree to destroyed their economy, and they stopped innovating.
Diversity in ideas leads to innovation, diversity in race leads to division and national disintegration.
Look this post has valid points. But it doesn't address the immediate problems we are facing right now. Maybe in the long term we can peel South Korea or ASEAN from the US, but that means we still have to own domestic IP, provide military assurance, and also internationalize the RMB to displace this the USD. These are pretty Herculean tasks to do.
You're exaggerating the spend required.
Chinese R&D spending is currently at 2.2% of GDP.
Let's say Chinese R&D spending increased to 4.8%, which we see in South Korea.
And that it would take 5 years to ramp up fully.
If you look at the projected GDP figures in 2025, we would be looking at a scenario where Chinese R&D spending surpasses "total R&D spending controlled by the West" as you put it.
---
So it's not a total war situation as you put it.
The level of Chinese R&D spend required is comparable to the peacetime levels sustained by South Korea.
Points 2 and 3 are good. Gadgetcool's however doesn't understand that Americas "diverse" culture is because it's cheaper to import a foreign slave caste than it is to pay heritage Americans for their labor.
How many tech startups are ran by Mexicans? Exactly.
And allowing mass Indian immigration is like injecting poison into ur body. They quickly take over HR and start hiring fellow Indians only. No need for that predatory diversity.
How many tech startups are ran by Mexicans? Exactly.
And allowing mass Indian immigration is like injecting poison into ur body. They quickly take over HR and start hiring fellow Indians only. No need for that predatory diversity.
Honestly I really like tidal wave's posts. He looks very convincing and informed and usually back up his claims. I wonder what is his new username! He must be checking this forum constantly. Too bad he wasn't hired by Huwawei.