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8/ In China, money is like a public utility, not an industry. It can give and take authority to its generals far more flexibly than than the U.S. This is often GOOD because the central authority is what prevents market failures and tragedy-of-the-commons situations.
9/ In the U.S. the private sector can end up with too much power, weakening what the central authority can do even when it's well meaning.https://twitter.com/doctorow/status/1324391677788778497?s=20 …
10/ "That's because bankers will cheerfully set the whole economy on fire to turn a buck (see, e.g., America)."https://twitter.com/doctorow/status/1324392334969090048?s=20 …
11/ Let's zoom into some examples of these mini-empires headed by those who hold a miniature mandate of heaven. The factories in China and Uber are good example.
12/ They both create exploitative structures but what's key about them is that they're about empire BUILDING, not about being cash flow positive or sustainably profitable.
13/ Some numbers I'm going to make up: A company with 1M investment can make 100K gross and lose 50k in total. At 10M investment it can make 1M gross but lose 100k. If it decided to flip to profitability it could make 1K profit a day.
14/ As an investor you will notice that they 10x their growth! You want to give them 100M so that they can build more and more. If they wanted to bootstrap, at 1K profit a day, it'd take YEARS to get that kind of capital.
15/ Profitability should be ignored when there is growth potential. When there are lands to conquer, you want to give the generals more so that they can do more conquering. If you try to micro-manage the generals, you lose the war.
16/ This empire building mentality requires individuals with large appetites. People who can actually wield these giant streams of money. They're often very different people who want to manage razor thin margins of a factory or do social good. They're conquerors.
17/ In China's systems, these generals can be reigned in because there are fewer sources of easy debt. Generals run out of money faster. VS in the U.S. where they can access Saudi Arabia's money or a collectivized pool of dumbasses who overextended on credit-card/mortgage.
18/ In China, it's much harder to maintain your mandate of heaven and make it permanent by becoming a flywheel. E.g. tech companies have so much money that they don't NEED to print money, it just flows in. This erodes the influence of the central authority.
19/ Pawnbrokers are a source of debt in China but the market is small.https://twitter.com/doctorow/status/1324392326580432897?s=20 …
20/ What Ant financial is doing is that it's providing an alternative source of capital that is not under control of the central government.https://twitter.com/doctorow/status/1324392328207888384?s=20 …
21/ This makes it more difficult to reign in the generals who are hellbent on continuing their empire building. It's like creating a Bank of Braavos. If I am a general that wants to create a coup, I WANT the existence of sth like the Bank of Braavos to hire my mercenaries.
22/ The creation of this BoB is exactly what regulators are supposed to prevent.https://twitter.com/doctorow/status/1324392336843972608?s=20 …
23/ Note that the U.S. does NOT have a the moral high ground on this. Uber and Postmates don't provide value because their empire driven mentality can't be reigned in due to life support by BoB.https://twitter.com/doctorow/status/1324392349540102145?s=20 …
24/ To sum up. Giving agency to the private sector avoids the economy being micro-managed to death soviet union style. However, Banks of Braavos often become arms dealers, selling to both sides while growing in power to rival the central authority.
25/ The central authority isn't "good". After all, it came to power via various forms of warmongering. However, it leaves a useful skeleton of behaviors and ideas (like money) that require centralization and often is the only thing that can prevent market failures.
26/ Food for thought... maybe we need *more* centralization? To solve things like climate change. The Tianxia concept for example was often used as justification for war b/c of the benefits of unification.https://en.wikipedia.org/wiki/Tianxia
27/ It's kinda hard to trust the existing centralized behemoths though. China can't keep baby milk formula from killing its babies. Big tech seems to have its hands full.. Who knew generals sucked at peace.
28/ Addendum: To understand capital flight from China understand that generals can ONLY conquer. They can do nothing else. A restricted general will naturally find greener pastures to maintain their sense of freedom and power.https://twitter.com/doctorow/status/1324391667739226112?s=20 …
Thought Reference Pointer: Ant Financial as potential Bank of Braavos Arms Dealer. Money is Born of Blood.
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