After seeing a couple of snippet of speeches from RNC, I see the Biden/Vance frame the great power competition as one about economy. And I think that’s good to see. We often hear the politicians talk the danger of America losing tech war to China, but I don’t think the rationale of its importance has been properly addressed.
As we moved from industry 2.0 to 3.0 to 4.0, the importance of human physical labor has continued to diminish while automation and machine has taken over. At the same time, the world economy has become more winner take all once computer age came along. With greater adoption of AI, big tech hyperscalers are investing in AI chips and data centers as if all of their future depend on it. This seems to point to the belief that those who want to be the winners of AI competition will survive. Those who do not will fall into irrelevance.
JD Vance talked about Chinese govt built a middle class at the back of American workers in his speech. He is talking about the idea that China industrialized over the past 30 years while the rust belt lost all the high quality labor jobs. The reality is that those labor jobs are never coming back to America, because cost of labor is too high. The question now is whether or not the cost of labor is too high in China. As many have already seen, China already leads the world in robotics installations
And as this video said, Chinese robots are replacing workers from other countries, because it has allowed Chinese manufacturing to fast charge past competition. But essentially, Vance’s underlying point is probably right. Losing manufacturing means losing quality middle class jobs. Right now, manufacturing jobs require operating robotics, so workers will probably need college degree. The days of which high school degree graduate able to secure comfortable middle class jobs is probably over.
But if move beyond that, then everything in life from manufacturing to farming to service to call centers to medical to law and other professional settings could be more automated. That means large portion of global jobs could be automated away. The market for automation is so large that many large and small tech firms will win at the expense of traditional businesses. The countries that have competitive AI industries will win at the expense of other countries. At present time, only America and China are heavily investing into AI. While American politicians talk about the need to “win” the tech war, the reality is that neither countries are likely to fully win. Both countries will have areas that they do better in. However, other advanced economies like EU, Japan and South Korea will suffer from not having competitive local AI industries. The top two competitors will get to share this pie. Everyone else will suffer. It is really dumb of Europeans to cheer America on while doing minimal investment in AI. An America that wins in more areas simply retain its lead in valued added industries, continue to attract tech talents from other advanced economies (+ India) and become even more wealthy than Europe. A China that wins in fewer areas (like ADAS, robots and smart ports) will get its own share of the pie and certainly not collapse. Everyone else will just lose more jobs and see minimal economic growth as traditional industries buy AI solutions from the AI tech companies to stay competitive.
In many ways, growth of AI will be disastrous for countries that have benefited from IT and call center outsourcing like India and Phillipines. For other countries that rely on traditional engineering field like auto industry, the demand for AI in those products will lead those companies to be uncompetitive going forward. Cheering on America or China does no good for your country. Your economy will just become smaller and smaller vs those 2 countries. You need to get in the game and establish your own AI industry.
The great power economic competition goes beyond AI. Trump provoked my thoughts this morning when he talked America’s hydrocarbon advantage over China. Hydrocarbon, batteries, liquid hydrogen, ammonia and methanol are all just energy stores. America is the largest producer of the former while China is the largest producer of the clean energy sources. America is already energy secure, while China is working toward that goal through growing its clean energy industry. China has already made solar and wind power generation cheaper than thermal power generation. Can it make green energy storage like green ammonia and methanol cost competive to hydrocarbon? If it can do so, then it can not only achieve energy security, but also become the largest energy exporter in the world. Even more than America, Saudi Arabia and Russia.
But even more than that, the largest green energy producer in the world will also have the world’s largest green energy trading platform/exchange. If green energy wins the energy war competition, green energy trading platform will become more important than ICE and CME, since energy is by far world’s most traded commodity. How oil is priced won’t matter all that matter if crude oil is no longer needed for transportation sector and chemical sector.
That to me is in the heart of the great power competition: economy. At the center of that, AI and energy trade.
US is overwhelmingly a "services economy". Meaning, first of all, "financial services". That in turn really means, ownership of businesses or rentable assets (eg land or energy assets or transport network or comms network) located elsewhere in the world, and collecting both the money and the strategic benefits of that ownership.
I think, to talk of manufacturing, China is already far ahead and much more self sufficient than anyone else. The strength of the US system, at this moment, is the ongoing ability to turn previously gained financial ownership of these faraway businesses or rentable assets, into geopolitical power. And then use that geopolitical power to block or at least slow down rivals from cutting into its share of ownership of similar assets going forward.
Perhaps the question of how AI could be applied to finance, business management, and contests over control in the world's quasi-market systems - might be more impactful, than the question of how AI might be applied to manufacturing - where China is already leading, and should be quite confident about at least keeping up (if not getting further ahead) due to the advent of the AI era.
Believe it or not, power is multidimensional. Economy and Technology are no doubt very important aspects of power, but not the only aspects.