Conversation

China is becoming increasingly vulnerable based on strengths. They import nothing they can’t do without that’s not raw materials, where they’re extra vulnerable. So tit-for-tat trade penalties don’t work.
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Post-Covid reconstruction, if there’s a lot of dematerialization and localization of consumption, so world’s export markets mainly consume industrial intermediates over finished goods, China will be significantly weakened.
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Margins on PLA filament will be much worse than on a million little plastic SKUs. This is why I have renewed interest in things like 3D printing. Low-energy last-mile decentralized finishing processes are separating from energy-intensive first-mile centralized scaled processes.
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Software platform monopolies unlike industrial base monopolies are much easier to replicate locally once the first instance is done. Industrial base goods have margins loaded on finished goods end where expensive markets intelligence matters most.
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Old data from Ghemawat’s World 3.0 (2011): For the iPod, Apple kept $163 of $297, or 54% purely for design IP. All the atoms are assembled by China. I imagine picture is similar for most finished goods.
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Round tripping is a weakness for China. Think of manufacturing as a multi-loop thing that makes several passes through China. It means if you pull the last 1-2 loops out of China and into market last-mile economy, you pull most of the margins, but very little of the energy input.
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