China - <AUTHOR> http://blog.samaltman.com/china <comment><USER4> I disagree with a lot of this.

The Chinese value the appearance of working hard, not actual hard work. Cheating among Chinese students is pandemic. Chinese companies regularly publish misleading or outright fraudulent earning statements and quarterly reports. While the Chinese government seems to be taking steps to reverse these trends, it will take a long time to undo their culture of corruption. Contrast this with the American culture of honesty; fraud and cheating are national scandals, not the norm.

Second, the US currency is the world reserve currency because the world trusts that the US will keep paying interest on the debts. A trillion dollar debt is not actually that large, and this is reflected in the near-zero interest rates on treasury bonds. If there was a belief in the market that America would no longer be able to pay off the debts, interest rates would be sky-high. But the opposite is true. The national debt is just a talking point for people who don't understand economics. (The largest owner of American debt is...America!)

Finally, I am unsure what evidence there is that the US culture has moved away from innovation, risk-taking, etc. If anything, there are many more entrepreneurs today than there ever has been before; the maker movement, youtube celebrities, and startup culture is evidence of a growing number of people who are not employees of large corporations, but independent businesses.

<comment><USER5> China's growth has long since been an organism that feeds on the back of the gorilla of US growth. If the US economy would hit a major recession, China would come crashing down with it. On the other hand, if the Chinese economy would have a major collapse, the US would suffer, but still be able to re- route core-value manufacturing processes to new countries (or back home).

I agree with your cheating note, many of the Chinese take great pride in stealing innovation and ripping off US intellectual property, to the point where anyone well-informed on the matter knows that they have their fingers in the networks of almost every major US Corporation, siphoning away hard-earned gains by our workers. I have further exposure to this through product manufacturing, where Chinese companies are well-known for ripping off blueprints from the US companies that outsource their manufacturing. Tools like Alibaba have only increased this sort of misbehavior exponentially.

What the US has that China often doesn't demonstrate are the intangibles in regards to honest work-ethic that produce genuine "value", rather than "value" based on a manipulated currency and outright lazy copy-catting. Once they demonstrate their self-sufficiency by doing honest innovation, then I'll credit them for a job well done. There's a lot of value in US-China relations, but they still have yet to prove that they could "hop off the back of the gorilla" and stand alone.

<comment><USER6> I completely disagree with your notion that U.S. is less interdependent than China. The exchange is clear: U.S. needs cheap Chinese manufacturing to proliferate its innovation, and in turn, China gets direct access to U.S. blueprints, and is able to leverage and improve upon them to produce their own products. This is basic economics, not a question of "who is genuinely innovating". American companies need cheap manufacturing as much as the Chinese needs technological know-how. Why? Because if no one buys "innovative" products (because of how much cheaper they get) then we wouldn't get that innovation in the first place.

<comment><USER7> China is huge but US imports are pretty well diversified at this point. Today we import a whole lot from Vietnam, India, Malaysia, etc.

It's mainly the consumer electronics sector that would be hit hardest. The lower-tech manufacturing has already moved away from China to a large extent.

</comment></comment></comment></comment><comment><USER8> Should the goal of the US be to emulate happy, stable, wealthy, smaller economies but arguably more egalitarian northern European democracies?

Or rather, should we chase China in a race to the bottom? Lower corporate taxes, longer working hours, reduced environmental protections, with the goal of creating a fabulously wealthy klepto-capitalist ruling class? How dare people criticize kids burning the candle at both ends to make other people billions of dollars, China is beating us!

<comment><USER9> You can't have endless impressive growth. Once you're developed its going to hit a reasonable cap. China is still developing. You can't compare the most mature economy to one of least developed. The move from back-breaking farm labor all day to manufacturing is MASSIVE growth. The problem with Western democracies is that we moved past that stage over 100 years ago. Now we're in a service based economy. That just doesn't have that wonderful growth curve.

As many democratic and liberal nations have discovered, its a fool's errand to chase growth on that curve and, as you said, the wealth and stability of north Europe is a tempting target to emulate. With recent moves towards proper socialization like Obamacare and focusing on tax cuts for the middle class and raising the minimum wage, I feel like we're on the path to those economies and have long stepped off the path of just beating down workers for tiny gains as we fight the laws of diminishing returns. How much workers unrest does the CCP violently take down per year to keep people in line? How many secret police arrests?

These pro-China pieces are mystifying to me. Geeks always seem to worship autocrats and dictators for whatever reason. I guess they like the idea of a centralized control by elites, but that simply doesn't scale well and it invites corruption and other inefficiencies much faster than a more open political process. I'd rather live in the poorest Western nation than in China or Russia. Its crazy that we're actually seeing their system as superior to ours. Only on HN would this drivel be voted so highly. INTJ social and moral blindness is in full effect here.

I look forward to the scandinaviation of all things. I believe its the best path humanity has.

<comment><USER10> "Geeks always seem to worship autocrats and dictators for whatever reason."

I do not think this is entirely correct. You don't see widespread support for the majority of the world's autocrats. I think geeks want technocrats, not simply autocrats. In that sense, it is important to distinguish between different types of autocrats. There is a reason you see more pro-China pieces than pro-Russia, pro-Syria, pro-Cuba, or pro-Saudi pieces for example.

What people see in China is a society which has faced many challenges - demographic challenges, economic challenges, environmental challenges, stability challenges. They are not a democracy, and yet they perform much better on many issues than the vast majority of autocracies out there - <USER2> Syria falls to pieces, Russia's economy falters, and Egypt regresses from revolution, states like China are actually making some progress, however slight, in meeting needs of their populations.

China as a system that is superior to ours? I do not think sama and others are actually arguing this. However, I think that a state like China, while being an autocracy, does not make mistakes only - occasionally it does something right. And when a state occasionally does something right, there is a lesson to be learned.

<comment><USER9> >There is a reason you see more pro-China pieces than pro-Russia, pro-Syria, pro-Cuba, or pro-Saudi pieces for example.

I'm fairly political so I imagine I pay attention to this stuff more than most, but you bet your bottom dollar people here and on reddit and slashdot sing the praises of Cuba, Syria, and Russia. Usuallly the sentiment come from Europeans and others with an anti-US bone to pick. As someone who has done business with both the Chinese and the Russians, its incredible how shitty and dishonest their business culture is. I don't think a lot of the people cheerleading them have any idea what they are talking about.

<comment><USER11> > but you bet your bottom dollar people here and on reddit and slashdot sing > the praises of Cuba, Syria, and Russia. Usuallly the sentiment come from > Europeans and others with an anti-US bone to pick

I think its a lot more common that American Exceptionalists mistake arguments of the form that, e.g., Cuba does better on some narrow measure than the US despite its much poorer, economy, so one might want to consider how the US could do better, or that abuses being complained about in Russia have parallels in the US, or that US government (or popular media) complaints about Syria are hypocritical in light of the same sources defense of regimes with the same features, in greater degree, than Syria shows as "singing the praises of" Cuba, Russia, or Syria.

</comment></comment></comment></comment></comment><comment><USER12> > One thing that I've found puzzling over the last ten or so years is the > anger directed towards people who choose to work hard

That feels somewhat disingenuous. If 'sama is referring to the sentiments expressed on this board, from what I've seen, it's not anger towards people choosing to work hard, but anger towards demands of hard work _of_ others _from_ those who stand to benefit at their expense.

Ie, the anger is towards VCs who talk glowingly of start-up founders working themselves to the bone and, in turn, towards start-up founders who talk glowingly of 0.01% equity-holding employees grinding out hour after overtime hour.

<comment><USER13> Certainly working really hard without an expectation of being compensated it (either with equity or cash) is dumb. I've argued a lot that startups should give employees more equity, and I think that's shifting. Also, most startups I'm aware of, at least in the bay area, pay large salaries at this point.

<comment><USER14> "Also, most startups I'm aware of, at least in the bay area, pay large salaries at this point."

... which is all soaked up by real estate hyperinflation.

<comment> atom-morgan This is probably the single biggest factor that's keeping me from moving out to CA. There's a lot of great companies out there and I think I could learn a lot but I also don't want to go broke.

Edit: How are people making it without a _really_ high salary or living with three other people?

<comment><USER14> I call real estate the "evil sponge." As a region becomes more affluent, the price of real estate appreciates _at least_ in step with this. Due to the leveraged debt financing of RE, the reality is often that price appreciation is a _multiple_ of wage appreciation.

This takes pretty much all the surplus capital in a region -- among everyone but the rich -- and locks it up in an inert asset.

Think of it this way: a starter home in the Bay Area is about a million dollars. In SoCal -- not cheap by any means -- it's more like $400k. The average AngelList seed round is $400-$600k. So _every single house in the Bay Area locks up the capital required to seed fund at least one new venture_.

What could all those smart people in the Bay Area be doing if all their capital were not locked up by an inert asset?

What's worse is that there are idiots who cheer this on because it will supposedly exclude people they don't like (the poor, blacks, etc.) from their neighborhoods. I read a great book called Detroit: A Biography. It explained how RE hustlers used racism to fleece people: first they'd sell a neighborhood to white folks. Then they'd _pay black people to walk around in it._ Then they'd scare the white folks into selling below market, jack the price back up and sell it to blacks, and meanwhile sell a further-out more expensive neighborhood to those same white folks. Rinse and repeat. I suppose if you harbor these kinds of views it's kind of poetic when they're turned around and used to con you, but it harms everyone else too.

I was hoping the housing bubble crash would bring relief, but it's right back up there. Either the entire economy needs to inflate until RE is reasonable again -- which would give us $8 loaves of bread -- or real estate needs to fall over and burn. We need something like the 2008 housing crash with no recovery-- to unshackle the real economy from the rentier asset economy.

<comment><USER15> It's not an exact comparison...

For instance - if I bought a house in the 1990s for 200K and it's now worth a million dollars, it isn't stealing $800K from anywhere. That's new wealth that I have that I can also put to work. (Even if I don't take a mortgage out on the house, I can invest more of my other money more aggressively, if I'm paying less mortgage, or know that I have a high value asset in my home)

I think it's more appropriate to look at the monthly rent differential.

Let's say that a 1BR in Palo Alto costs $2,500, and a similar one in Austin costs $1,000. [0] In that case, there is a $1,500 * 12 = $18,000 differential. Let's double it to include how much you have to make to have that much take- home income, and you have a $36,000 per year difference. If an angel-fed startup has 3 employees, then there is a ~100K per year of effective real estate tax. (Approximately 20-25% rather than 100%[1])

The trade-off is, how much more likely are you to succeed and scale based on being in SF vs Austin?

[0] I'm basing both #s on the very accurate "Approximate the first Google result" method.

[1] One can argue that everything is more expensive in the bay area, but total cost of living comparisons are tough to do. Is it % of spending or absolute dollars? Does it depend on public schools? Quality of goods?

<comment><USER14> It's not "stealing" 800k. That would be a bit too strong. But the problem is that your 800k comes via the fact that newer entrants to the market must now take out monster mortgages. It's not wealth created, but a draw on future wealth and an increase in the interest payments of younger workers.

It's sort of a generationally regressive tax. I personally suspect that policies that protect and encourage RE hyperinflation have been pursued as a way for the baby boomers to economically eat their children.

Rent prices are also quite tied to real estate prices, so when the latter appreciates rents go up too.

<comment><USER15> Fair enough.

Over the long term, rent usually fixes to a certain % of "All in" housing costs. (Usually close to mortgage payments plus upkeep plus condo fees)

The difference is that rent is a short term costs, so for startups they're not eating the 30 year home ownership cost, just the monthly rental differences.

It is a generationally regressive tax only to the extent that parents die with no assets left. If they die with positive assets, then the value of their homes gets handed to their kids.

The CA system is painful for other reasons. At the outset, it's a tax by people with good credit on people with bad. (You can't get the tax benefits of home ownership unless you have good credit) The bigger issue is the nature of the taxation... Because tax increases on houses can't rise as fast as the homes themselves, new homeowners pay a penalty relative to the value of the house. (If you and I both both buy homes in the same neighborhood. You paid 500K 3 years ago, and I pay 1mm today, my tax burden will be almost double yours)

</comment></comment></comment></comment></comment></comment></comment></comment><comment><USER16> Why ignore the elephant in the room? The U.S. is more unequal than it has been since before WWII [1], and _that_ is a big reason why its growth is stagnating.[2] It's time to stop taking seriously any analyses that do not address this.

[1] [http://www.epi.org/publication/income-inequality-by- state-19...](http://www.epi.org/publication/income-inequality-by- state-1917-to-2012/#_note1)

[2] [http://www.washingtonpost.com/business/economy/income- inequa...](http://www.washingtonpost.com/business/economy/income-inequality- hurts-economic-growth-researchers- say/2014/01/24/cb6e02a0-83b0-11e3-9dd4-e7278db80d86_story.html)

<comment><USER17> [https://www.google.com/search?q=china+income+inequality](https://www.google.com/search?q=china+income+inequality)

If that was the case, China's growth would be stagnating as well. Not everything is caused by income inequality.

<comment><USER18> China's growth is stagnate. That's why they needed tens of trillions in new debt since the great recession to juice the GDP numbers. Subtract out the $30 trillion in new debt, throw in the real inflation rate (like many governments, China lies about their real inflation rate), you get economic contraction. That means the only difference between their fake growth today, and the horrific outcome on the way, is a little bit of time and tens of trillions in additional debt that will never be repaid.

</comment></comment></comment><comment><USER19> I don't mean to eye-roll, but Sam on economics tends to be, well, meh. The thing I always remind people when they say that China will take over the world is that everyone said the same thing about Japan in the 1980s (remember the movie/novel Rising Sun?). What happened?

Well, the mercantilist economic toolkit has an endgame. Neither Sam nor I knows when it's going to let them down, but building an entire economy on cheap labor and radical amounts of investment is hard to sustain. Eventually you need things like domestic demand and that requires wages, which short- circuits the export machine. Japan got caught in that trap, and China will eventually too.

<comment><USER20> There's a population difference. While the US is more than twice as populous as Japan, it is less than a fourth as populous as China. It would be crazy if Japan became wealthier than the US; it would be only natural if China did.

<comment><USER10> There are also many other differences: differences in resource/energy availability, differences in the global environment, differences in policy options available to the government, differences in internal structure and diversity, etc. The Japan-China comparison is popular these days but it misses a lot of the things that distinguish China from the old Japan.

</comment></comment></comment><comment><USER21> As a native Chinese (I'm tired to claim this every time when commenting on China related topics.), I think the op needs to do a lot more homework on China. It's not an easy task to know something you are not familiar with with just numbers, even if one has more than enough numbers.

<comment><USER22> As a native Chinese, I doubt anyone in Chine knows China good enough.

But as a native Chinese, what you should have known is China is growing faster and better in the recent 10 years.

</comment></comment><comment><USER23> The main fallacy in that article is that USA is important because innovation. The conservative solution proposed by the author is to go back to an hypothetical golden age "that encourages investment, welcomes immigrants, rewards risk-taking, hard work, and radical thinking, and minimizes impediments to doing new things", like the good old times before.

My question is: what are you talking about? The "social" America of the '50s and '60s? The America of the technological boom of the 90s?

America is even more innovative today than decades before. More risks are taken today than before (the crisis of 2008 is also proof of that).

Are you sure that lack of innovation is the problem? Do you think that china is getting bigger and bolder because more risk taking? LOL no. They are conservative and fatalistic and hierarchical as ever.

I think that the American disease should be explained in another way.

</comment><comment><USER24> In other words, stop complaining about unsustainable work habits leading to physical and mental problems among founders, and let venture capitalists turn that hard work into (a) profit for them while (b) keeping you all safe from Chinese Dominance.

<comment><USER25> I don't understand why Altman doesn't address the underlying arguments against "hard work". The modern workers movement was about receiving more of the profit from business. He seems to want workers to take the pay cut while still providing the same incentives to capital investment.

<comment><USER26> Which is pretty much what every capitalist ever has wanted from his workers.

</comment></comment></comment><comment><USER27> Mentioning China's lack of environmental regulations is just a red herring that distracts people from the real solution. Consider the following:

It's illegal for me to build a cruise missile in the US. Likewise, it's illegal for me to import a cruise missile into the US.

It's illegal for my startup to pollute when I produce a Gizmo in the US. However, it's totally legal for for me to import said Gizmo from China after I paid someone there to pollute _for me_.

Any sane environmental regulation must be applied at the point of sale as well. The problem here is _our_ environmental regulation. We can't change what China does but we can change _our_ broken laws.

</comment><comment><USER28> Two disparate observations:

1\. US GDP per capita is still almost 8x that of China: $53,042 US vs. $6,807 China ([http://data.worldbank.org/indicator/NY.GDP.PCAP.CD](http://data.worldbank.org/indicator/NY.GDP.PCAP.CD)). While there are other ways to measure this (such as the PPP Sam cites), the magnitude of difference remains large. So even if China's economy in the aggregate is larger than the US's, the US is still much richer per capita.

2\. As China grows richer, I expect the US will too. In modern inter-connected economies with few trade barriers growth in one generally benefits the other too. One example would be as one country's citizens gain greater purchasing power, they become bigger consumers of the other country's goods and services.

<comment><USER29> _US GDP per capita is still almost 8x that of China_

One reason this might not be the right metric is because absolute power of a country matters more than power per citizen. Imagine a country with only one citizen, but a trillion dollars. The country wouldn't be very relevant. Even if the citizen tried to hire a military and use it, they wouldn't get very far. They wouldn't exert much influence economically either, in the sense of causing other countries to become dependent.

Also, total number of citizens is an important metric in itself. People in both the US and China will pretty much do whatever their power structures tell them to do. If that means beating a war drum, there are going to be a lot of people agreeing with war on both sides, but far more in China. Overwhelming forces can be stopped with tactics and technology, but when technology is comparable the casualties are usually comparable. And China has been gathering our technology for a long time.

War isn't the concern right now, though. The example was just meant to illustrate that China seems to have more options than the US.

 _As China grows richer, I expect the US will too. In modern inter-connected economies with few trade barriers growth in one generally benefits the other too._

History seems to disagree. As one country grows richer, other countries tend to become subservient. There's no such thing as modern human nature.

<comment><USER30> "Imagine a country with only one citizen, but a trillion dollars"

A real world example (not that extreme) would be the Sultanate of Brunei:

[http://en.wikipedia.org/wiki/Brunei](http://en.wikipedia.org/wiki/Brunei)

It's " the fifth-richest nation out of 182, based on its petroleum and natural gas fields", yet it's hardly ever mentioned.

The Sultan, Hassanal Bolkiah, has an inmense fortune: "Forbes for example estimated the Sultan's total peak net worth at US$20 billion in 2008"

</comment></comment></comment><comment><USER31> It's difficult to explore this question without being accused of racism, but I'd like to better understand why some cultures are so much more economically successful than others. The Chinese are such a great example of this. Wherever they go, they seem to end up being very successful. For example, in the Philippines it's claimed that Chinese are 1% of the population, but control 60% of the economy ([http://opinion.inquirer.net/31223/ethnic-chinese- dominate-ph...](http://opinion.inquirer.net/31223/ethnic-chinese-dominate-ph- economy)).

<comment><USER32> (I'll probably get accused of cultural imperialism for this comment, but well, it's the Internet and people can accuse anyone of anything. I'll probably also get some facts wrong, but corrections are welcomed for that.)

I think a lot of it comes down to "culture has consequences". It may not be possible to say that one culture is "better" than another, but that doesn't mean that the collection of habits & worldviews that make up culture doesn't have real effects in the real world. And then when you apply the yardstick of economic success - which itself is a culturally relative value, many cultures don't care about money at all - of course some cultures will do better against that metric.

Some examples:

Many cultures (Indian, Pakistani, everything descended from Spain/Portugal/Latin America) have a very loose notion of time. When you say 6:00 PM, you really mean sometime between 6:00 and 7:30 PM. This is great for social occasions, where everyone shows up relaxed. It's not so great for business deals or transactions, because it makes it very difficult to plan or schedule anything efficiently. Imagine running an airline where every passenger might show up in a 2-hour window after the official departure time.

Some cultures (like the American South, Arabia, or Russia) tend to be very honor-based, where if someone slights you, you have to enact revenge or be seen as weak. Other cultures (like Silicon Valley, Christianity, or some Confucian cultures like China and Japan) are much more "turn the other cheek" \- when someone slights you, you refuse to associate with them and instead focus on building up yourself and your relationships so that your personal life improves, figuring that they'll get their come-uppance eventually. The former is more effective in sparsely-populated settlements where everybody knows everybody, because word travels around and a 3rd-parties assessment of you as weak could negatively impact future relationships. The latter is more effective in densely-populated environments with a number of chance encounters, because each new opportunity comes with no memory of previous encounters, and so your time is better spent on activities that are positive- sum for yourself rather than negative-sum for your opponents. The contemporary economic world is much more like the latter than the former.

Some cultures (notably the U.S.) believe that it is the responsibility of the person being offended to speak up and assert their boundaries. Other cultures (notably Japan and China, and historically Native American societies) believe that is the responsibility of the actor to avoid causing offense. Both of these are local maxima _within_ a society of like people; in the U.S. everyone is jostling for position and constantly negotiating what's okay and what's not, while in Japan everyone knows the rules for what's socially acceptable and doesn't step outside those bounds. However, when they contact each other, it's pretty clear that the culture that believes it's somebody else's responsibility to speak up when their rights are violated will run roughshod over the culture that believe it's somebody else's responsibility not to violate rights. Witness how the first American settlers reasoned "Hey, if the indigenous people don't have the concept of land rights, all this land must be free for the taking!" while the indigenous people were more like "You take our land, give us diseases, destroy our way of life, and herd us on to reservations, and all because we greeted you as friends."

(As a side note, I suspect the latter cultural disagreement is behind much of the distrust and criticism of Silicon Valley startups. As a startup founder, you have to believe that what you're doing is making the world a better place, and so you just _do things_ and see how it comes out. If people object, you take their objections into account and see if you can work out a compromise solution that respects their rights too, but you don't specifically try to think of everyone that might possibly be negatively affected and avoid doing it if there's even one such person. However, many people - even in the U.S. - operate under the assumption that "Other people should not do things that hurt me", and so they are somewhat justifiably upset when they lose their job due to technology or their private data is used by advertisers or their favorite product goes away.)

Anyway, bringing it back to China - I think that Chinese culture has a combination of elements that together are pretty well-adapted to the modern business environment. It highly values learning for learning's sake, which is very handy in today's information-focused world. It's pragmatic and engages with the real world. It generally focuses on positive-sum engagements and long-term relationships, placing a high premium on social harmony. It incorporates a strong work ethic and belief in duty as a virtue.

American culture is _also_ well adapted to the modern economic world, but in different ways. American culture places a high premium on risk-taking and pragmatic innovation. It is also a guilt-focused culture rather than a shame- focused culture; the latter is probably Chinese culture's greatest business weakness, as it encourages people to hide mistakes rather than learning from them.

Both of them are significantly more well-adapted than other cultures that focus on personal honor, shame avoidance, male-dominance (one of the U.S's key economic advantages over the last 60 years has been the entry of women into the labor force), or traditional values. These are not bad cultural traits, but they are disadvantages in competing in a system that values rapid adaptation to the needs of others.

<comment><USER33> This is a very insightful comment. Thank you. I think I saw an article on HN before talking about this different notion of time, unfortunately i cant remember the title.

</comment></comment></comment><comment><USER34> > The other stark contrast is how much harder people in China seem to work > than people here, and how working hard is considered a good thing, not a bad > thing.

It is a survival thing, not an inherently good thing. Those factory workers or university students aren't working 14 hour days because of the 'virtue of hard work'. They're doing it because they have to in order to stay alive in the continious stampede of progression that is China.

See how 'hard' most Chinese people work once they've got money. Most of the hard work of wealthy Chinese to conceal their wealth in western coutries.

</comment><comment><USER35>
      The historical track record of the largest economy being
      overtaken by another is not good.  Sometimes it's
      violent.  (For example, Germany and the UK in 1914.

To give WWI as an example of the consequences of GDP league tables seems like a bad reach to make the event sound apocalyptically important when it doesn't represent any radical change in balance of power at all.

As I understand it, the Kaiser's geopolitical motive was to avoid being dominated by the Dual Entente given Russia's growing strength. He expected GB to stay neutral given it was generally more friendly to Germany than Russia and was fairly isolated from European mainland issues given its interests in the colonies.

In any case, why compare UK GDP and not British Empire GDP which at that time would have dwarfed Germany?

<comment><USER36> The central question of the start of WWI was who gets to pick over the bones of the ottoman empire and to a lesser extent the bones of the austrian empire. Several very big players decided "it'll be me, and I'll fight everyone else for my share".

</comment></comment><comment><USER37> What's interesting is that it's very common for wealthy Chinese to invest in / move their families and their money into the States. Just look at places like Seattle, where around one-third of all $1+ homes are purchased by foreign Chinese, and according to this NYT article, three-quarters of their purchases are all cash. *

* [http://www.nytimes.com/2014/09/21/business/in-suburban-seatt...](http://www.nytimes.com/2014/09/21/business/in-suburban-seattle-new-nests-for-chinas-rich.html?_r=0)

<comment><USER38> San Francisco and Vancouver are in the same boat. Bids for property that are all cash and 20-30% over market price are commonplace.

Hopefully with the USD strengthening to foreign currencies, 2015 will be the year this trend reverses, as foreign investors advantageously start to move capital back into their home countries.

</comment></comment><comment><USER39> After listening to a recent episode of Invisibilia, I've become somewhat convinced that one of the root ills of current American society is _extremely low expectations_.

Whenever I think of countries like China, I think of an entire population driven to be more excellent. I know that's not true in general (people are people everywhere), but I still feel there is a stronger expectation that, as a human, you will do more than just exist and consume junk food and mass media.

America feels sluggish to me... safe and dumb and comfortable but not content. It's like the feeling I get when I spend an entire weekend on the couch binge- watching Netflix.

<comment><USER40> Maybe you're projecting your own lifestyle onto the entirety of society. Honest question: Have you been to China?

<comment><USER39> No. But you always hear in stories about the more disciplined populace and the focus on education standards. It's possible those are overblown, but I would argue that the average American (myself included) definitely gets the impression that we are a bunch of slobs compared to the Chinese.

<comment><USER40> I have never gotten that impression, and given that 1/3rd of the Chinese population are still in small farming communities, several of which do not have access to things the average American considers basic and fundamental to life, I don't see how anyone would have that impression.

</comment></comment></comment></comment><comment><USER41> I look forward to the day where nationalism is seen as an anachronism. I know this probably wasn't the primary message of this post and that YC has funded a number of non US startups but if you swap US and China in this post, I wonder what kind of reception it would get.

<comment><USER32> That'd also be an interesting thought experiment. The modern nation-state as a concept is barely a century old; before WW1, a number of prominent countries (Russia, China, Austria-Hungary, much of Africa) thought of themselves as empires or kingdoms, and people's daily allegiance was more toward local municipalities and neighborhoods than the abstract concept of a nation.

I wonder if at some point in the future we'll see pseudo-corporatism as a social organizing principle, much like in Neal Stephenson's books.

</comment></comment><comment><USER42> > We've had an environment that encourages investment, welcomes immigrants, > rewards risk-taking, hard work [2], and radical thinking, and minimizes > impediments to doing new things.

I think a major reason the middle class was able to live a fairly cushy lifestyle without doing much real work was some combination of:

\- A massive supply of overseas slave labor, coupled with a complete lack of environmental regulations both domestically and abroad.

\- Being able to tax people overseas by deflating the dollar.

\- Heavy investment in infrastructure.

\- A large population boom.

In other words about 20% sound policy, and 80% finding ways to steal money from other people and future generations. Since we're no longer investing in infrastructure or doing much in the way sound policy, and we're also losing our ability to steal money from others, I don't really see how the U.S. is going to sustain itself regardless of hard work, innovative thinking, immigration policies, etc.

</comment><comment><USER43> Speaking from personal experience, the atmosphere in the U.S. is a lot better than in China, in terms of the recognition of importance and respect to science and technology fields as well as scientists and engineers. I feel an implicit discrimination towards engineers in Chinese culture in the sense that "you are regarded successful if you hold a management position and live a (perceived) decent lifestyle, but not if you get your hands dirty, tinkering around stuff and being managed." when I worked in China. In Chinese college, the "elite majors" including cooperation and government management usually have the highest bar of admission.

<comment><USER44> All of that also seems true of the US. Everyone wants a "leadership" role, either in government or in the private sector as CEOs or management in general, and even schools nurture students into "leadership" more than "science". Even in Silicon Valley, engineers and scientists don't enjoy the highest status (founders are above them, and VCs above that).

Arguably, the only place in the US where scientists are on the top of the food chain (or close to) is academia.

<comment><USER43> Well, not really. Then you have all the funding agencies above them.

</comment></comment></comment><comment><USER45> This post isn't particularly well thought out or argued, but special mention must go to footnote [2] for being self serving nonsense. While those complainers do exist and are wrong about some aspects of the situation they are quite right to criticise the exploitative start up ecosystem.

</comment><comment><USER46> A third of China's population are still farmers -- compared to the US's low single digits. It's per capita GDP is somewhere around Peru's and Iraq's. While this has been rapidly changing, it is yet to be seen how much of China's rapid growth the last couple of years is propped up by government malinvestment (ghost cities, etc.). We've seen high growth rates in many countries throughout history. The question is whether this is sustainable, and how much of the low-hanging fruit of growth China has already used up.

</comment><comment><USER47> I lived in Shanghai and worked at a startup for a year after college. The startup expat and startup local communities are surprisingly developed.

There are a lot of co-working spaces, hacker spaces, and start up events. For anyone interested in China, you can live in Shanghai without speaking Mandarin.

Western training in programing, design and product is highly valued. Salary offerings are lower by a factor of 10. Regardless, its easy to live and identify alternative income sources.

I'd love to answer any questions for people interested in the Chinese startup space.

<comment><USER34> They've also started to block Gmail and seriously block most VPNs. A good number of expats are looking into leaving recently because of the recent restrictions.

<comment><USER47> Delayed response--

That was always the case. Even when I got there, there were "expats looking to leave". Because theres such a heavy influx of people coming in, it doesnt matter.

</comment></comment></comment><comment><USER48> I think idea of the RMB being a reserve currency is laughable. It's controlled by an authoritarian government whose only history with the currency is to manipulate it in their favor. And said government has repeatedly made it difficult for foreign companies to do business in the country. Why anyone would think that people would trust such a currency is beyond me.

</comment><comment><USER49> One major point often overlooked in this discussion is, that nobody trusts the Chinese government. In foreign policy, China has to pay dearly for very little trust/support in return. Therefore I don't see the dollar getting dethroned any time soon.

I also don't believe that China is getting risk management right. Corruption in government and industry, extreme growth rates and untrackable webs of debts will sooner or later stop Chinese growth unless it transforms into a much more liberal or democratic form of government.

For China, it's still a long way to the top.

</comment><comment><USER50> Just one caveat: [http://blogs.wsj.com/indiarealtime/2015/02/11/its- official-i...](http://blogs.wsj.com/indiarealtime/2015/02/11/its-official- india-has-passed-china-to-become-the-worlds-fastest-growing-economy/)

</comment><comment><USER51> He's Paul Krugman in (I think) 2003 discussing how people overstate the value of the dollar being the world reserve currency:

[http://web.mit.edu/krugman/www/seignor.html](http://web.mit.edu/krugman/www/seignor.html)

</comment><comment><USER52> The US could easily remain the world's only superpower if it was ruthlessly focused on doing that. Actually it would have been easier 40-50 years ago. The opportunity is fading away.

Interestingly, the US often behaves as if it wants to control the world. So either this is a misperception, and the leaders of the US don't want to control the world (and they're spectacularly bad at public relations), or they're spectacularly bad at implementing their plan.

With all the advantages the US enjoyed last century it would have been possible. Maybe actual control of the world territorially is unnecessary, and some group is content to control the world financially. Or maybe the people implementing whatever plan have some perspective that make whatever they're doing make sense to them.

I wonder if that perspective is actually good for the US (it probably is not meant to be, other than for the elite). Perhaps they're using a flawed model that will seem painfully obvious later. I'm guessing it is something like the banking crisis. Some guys are following a flawed model that they think should work, and other guys are looking out for themselves, and eventually the whole thing will fall apart.

</comment><comment><USER53> > People generally have to buy energy (oil) in our currency, which adds a > great deal of support (though we've already seen the very beginnings of the > PetroYuan).

Can someone explain why using USD as a medium of exchange supports the USD? I can see this effect insofar as central banks will hold a trade-weighted basket of currencies and having more trade in USD will increase that share of the basket. Other than this effect, is there (an) other(s)?

<comment><USER54> While products that can only be purchased with dollars are in demand there will always be commensurate demand for those dollars.

Demand for iPhones supports the dollar in the same way, though in a less directly obvious manner.

<comment><USER53> I understand that products and services sold by US companies boost USD (vis-a- vis buying iPhones in your example), but why would, say, a Brit buying a Xiaomi phone using USD boost the USD? The USD holding time would be rather short, I would imagine.

</comment></comment></comment><comment><USER55> > The most important story of 2014 that most people ignored was the Chinese > economy overtaking the US economy. (This is using the purchasing power > parity metric, which incorporates differences in the price of goods, but the > Chinese economy will overtake on other metrics soon enough.)

It is an important story, but I think it was largely ignored in the U.S. because it is essentially a domestic Chinese story. PPP GDP equivalence is a major step on the path of bringing Chinese living standards up to those in the U.S. and Europe. That is an achievement that will be good for the world, but it will really great for China.

If you want to compare China and U.S. as players on the global stage, then I think in most cases one will get a clearer picture of relative strength by sticking with nominal GDP. China's nominal GDP is bit more than half the U.S. GDP. It helps understand why the U.S. has the dominant currency, dominant military, etc.

China has grown its economy tremendously by taking the world's IP (by contract or theft) and building goods to export. That's how the U.S. caught up to Europe 150 years ago, so unlike other posters I don't think it's a terrible thing.

But it is true that China, to become a true economic superpower, must start creating innovative Chinese goods that other Chinese will buy, and which they can export. So Americans aren't just buying Apple phones that are made in China, but are buying Chinese products, the way they buy Japanese cameras or German cars.

That could be difficult to achieve, because the Chinese government does not permit free exchanges of ideas and views...which can make it hard to innovate. By its very nature, innovation makes people uncomfortable, and China's leaders do not currently permit things that make people too uncomfortable.

</comment><comment><USER18> China is also the most indebted country in world history, and has acquired that mantle at a faster pace than any other country in history.

[http://i.imgur.com/iwarkOm.png](http://i.imgur.com/iwarkOm.png)

From everything I've seen in the financial press about their rapid accumulation of shadow debt, the situation is even worse than that chart reveals.

So at at a time when robots are set to overtake human labor, China's demographics are rapidly aging, and they lack even a meaningful social safety net - you want me to buy the bogus claim that China is about to become the next dominant economy? Not a chance in hell.

In another five years they'll likely have accumulated another $20 to $30 trillion in new debt, all going toward faking economic growth so they can pretend their economy didn't stop growing six years ago when the global consumer crashed.

Back in reality, accounting for real inflation, and accounting for their need to leverage extreme debt to fake growth, China's economy is not growing at all, and is most likely headed toward decades of Japan style stagnation - in a best case scenario.

Worst case scenario, they get old way before they get rich (guaranteed), their 400-500 million farmers revolt as their future potential goes sideways, robots take half their manual labor jobs, they stack up $80 trillion in debt (on a third rate currency that nobody trusts even today), and collapse into social chaos and revolution, as the party fails to deliver on decades of promises.

Those 400-500 million farmers? China should have maybe 15 to 25 million farmers. So they have 400+ million unemployed persons the Chinese system is intentionally holding in stagnation to avoid upheaval, because there's zero chance China can create half a billion new jobs, much less at a time when the age of robotics is upon us.

</comment><comment><USER56> It seems like people are advocating for centralized solutions to "problems". But after recently reading Mitchel Resnick's book _Turtles, Termites and Traffic Jams_, I can't but help wondering what decentralized solutions might look like?

Here's a piece by him describing "decentralized" more: [http://hci.ucsd.edu/102a/readings/LearningAboutLifeAnnotated...](http://hci.ucsd.edu/102a/readings/LearningAboutLifeAnnotated.pdf)

Edit: And here's a similiar non-PDF piece: [http://web.media.mit.edu/~mres/papers/JLS/JLS-1.0.html](http://web.media.mit.edu/~mres/papers/JLS/JLS-1.0.html)

</comment><comment><USER57> >My explanation is that this is simply what happens in a low-growth, zero-sum environment.

Or perhaps it's due to globalization. There are other cultures in the world that don't value working very hard at the expense of other things in life. Perhaps it's sometimes good to listen to the arguments at look at values from other cultures. For example, working hard might not maximize the well-being of a person.

Now that the internet is widely used more and more people in the United States are exposed to other cultures around the world. Especially Europe, which includes many countries that have a reasonable standard of living, yet work slightly less.

</comment><comment><USER58> I have seen precisely this kind of national soul searching before.

The UK entered WWII the world's greatest power and exited as a small bankrupt island. But did the myth of exceptionalism evaporate with the change in status - hell no.

The UK's leading role in the world derived not from the exceptional nature of its people and/or institutions but from the fact that it was the first nation to fully embrace and benefit from the industrial revolution. If you want to understand the relationship between that kind of lead and innovation take a look at the stream of inventions, discoveries and innovations that the UK spawned at the time.

Similiarly, The US's leading role in the world derives not from the exceptional nature of its people and/or institutions but from the fact that it was the first LARGE nation to fully embrace and benefit from the industrial revolution. Unlike the small island that was the UK the US was large geographically and demographically and rich in natural resources that were readily accessed. The large domestic market enabled the US to steamroller over smaller foreign markets and competitors.

For the first time in its history the US is facing (as did the UK) an international competitor that has a bigger domestic market. This is a massive change.

Will the US do a better job adjusting to the new reality? Hell no!

If you want a good insight into the likely pattern of evolution of US culture study post war Britain.

</comment><comment><USER59> The RMB is growing in importance and rapidly becoming an increasingly stable financial instrument in global trade. That is not to be debated.

Even though China's economy has overtaken the US in scale, there is one MAJOR issue that is commonly overlooked when contemplating the possibility of them becoming the go-to global currency... They are still an authoritarian state that controls and manipulates the free flow of information in-and-out of its borders. Baidu, Tencent, Weibo, and Alibaba are all still clones of basic US internet infrastructure. Until there is a great lifting of restrictions on the flow of information inside of China, I don't see them building the next Google anytime soon. (Baidu does have Andrew Ng doing some cool stuff in Deep Learning tough!)

I'm not trying to say there isn't innovation coming out of China, just that there won't be a technological renaissance to the likes of Silicon Valley until people can communicate more openly online about potentially dangerous ideas.

Can the RMB survive and increase its power with constant tension with HK and Taiwan over political ideology? I'm not sure... If the Chinese can slowly open up its internal lines of communication without massive protests or radical power struggles, they will be unstoppable.

The only question left in my mind is when given the choice to purchase technical infrastructure from the likes of Google/Facebook or Baiudu, what are developing markets (SEA, Africa..) going to pick. Chinese tech companies ideals might be more inline with rapidly developing companies than the old guard in SV..

</comment><comment><USER60> Regarding exceptionalism, I had a course in law school taught by Justice Scalia. His first words were, "I believe in American exceptionalism and if you don't, you can find the door." His intentions were to provoke us and he was baiting a brave law student to disagree with him.

Required reading for the course included De Tocqueville's - Democracy in America - as to "leave it to a Frenchman to explain America to Americans." In summary, it was a hell of a course!

<comment><USER61> That's really interesting. Did he expound on why he thought this was the case? I agree; as sama said, the volume of inventions made here are highly disproportionate to the population share. Laser, semiconductor, airplane, assembly line, nuclear power, etc. I think two of the key drivers were the form of government (a republic "by and for the people") and a demographic boon of immigrants willing to work themselves to the bone for a better life, because they believed in equality of opportunity.

Ironically, I think he has had a big hand in the decline of the former with the Citizens United decision. And the equality of opportunity has been in decline for decades.

<comment><USER60> Yes, his focus was on the "separation of powers." He said the Soviet Union had more guarantees than our Constitution, however without separation of powers they were "mere parchment guarantees." He also touched on innovation and industriousness being in our DNA. Which all tied back into individual liberty and the role of government (to protect individual autonomy, as the people don't exist to serve govt).

However, most everything circled back to the separation of powers.

</comment></comment></comment><comment><USER62> Some choice quotes I've acquired from Wikipedia:

        > The main area of noncooperation with the United States
        > [was] resistance to repeated United States efforts to
        > ... open its market more to foreign goods and to change
        > other economic practices seen as adverse to United
        > States economic interests.

        > The relative economic power ... was undergoing sweeping
        > change ... This change went well beyond the implications
        > of the United States trade deficit ... The persisting
        > United States trade and budget deficits ...
        > led to a series of decisions in the middle of the decade
        > that brought a major realignment of the value of ...
        > currencies ... the ability to purchase more United States
        > goods and to make important investments in the United
        > States [resulting in them being] the main international
        > creditor.

        > ... growing investment in the United States ... led to
        > complaints from some American constituencies ... seemed well
        > positioned to use its economic power to invest in the
        > high-technology products in which United States ... were
        > still leaders. The United States's ability to compete under
        > these circumstances was seen by many ... as hampered by heavy
        > personal, government, and business debt and a low savings rate.

China since the turn of the millennium? No, Japan in the 1980s.

I am (and I suspect most of the readership is) too young to remember the fear the US felt about Japan in the 1980s, but a dense, ageing population and arguable a cultural rigidity capped growth.

</comment><comment><USER63> _The secret to this is not genetics or something in our drinking water. We've had an environment that encourages investment, welcomes immigrants, rewards risk-taking, hard work, and radical thinking, and minimizes impediments to doing new things._

It's disappointing (though not surprising) to see Altman dismiss the possibility of genetic differences between populations playing a role in differential economic success. While it's true that the US population has enjoyed many non-genetic advantages, genetic and non-genetic factors _are not mutually exclusive_. Showing that non-genetic factors _do_ play a role is not the same as showing that genetic factors _don 't_ play a role. (I'm tempted to call this the "Guns, Germs, and Steel Fallacy," since Jared Diamond's work on the subject is essentially a book-length expansion on this basic error.)

If you read Larry Bird's biography, you'll learn how in high school he became obsessed with basketball, practicing at every opportunity and shooting 500 free throws every morning. He also had the good fortune of having a series of outstanding coaches and living in a culture that valued basketball prowess. On the other hand, he also grew to be 6'9".

</comment><comment><USER64> I'm wondering how important it is to be the economical super-power?

This reminds me Steven Colbert interviewing Thomas Piketty. Colbert jokes about the short work weeks and two-months vacations in France. Piketty's reply: "in Europe, many people believe the purpose of civilization is to work less, have more vacation, take care of your friends and family. But you can make a different choice and that's fine". France is still the 6th economic power.

</comment><comment><USER65> There's so much biased and simplistic thinking here that it's hard to respond without writing a whole essay. But the note about China being more individualistic is just laughable considering the Communist Party's forceful manipulation of their economy. In fact, it is the US's strong individualism religion that will prevent any coordinated response to our decline, such as increased public spending on R&D.

</comment><comment><USER66> > "It's so stupid that these people play the startup lottery. What idiots. > They should just consult." or "Startups need to stop glorifying young > workers that can work all day and night"

No-one quite says that _working hard_ is stupid (well, except the few misguided ones we should all ignore anyway). What people go tsk, tsk, tsk at is working really hard and giving up responsibilities at home, not being with you family, even forgoing the biological imperative to reproduce (or delaying it -- usually not a good idea, again biologically speaking), giving up your mental/physical health for a dream that is realistically very remote, etc.

The other big thing is, alas, it _is_ a lottery. We guide our nephews toward a different direction that has a greater promise of economic security: be a neurosurgeon (and well, even if they don't become neurosurgeons, we hope they'll become at least primary care doctors :)). I mean, What is YC's acceptance rate at this point? Like 10%? And I bet the people applying are more able than other hopeful entrepreneurs who don't happen to apply to YC, so the success rate for the average entrepreneur is pretty bad.

<comment><USER51> Calling it a lottery is silly. I know some people who would have close to a 100% chance of getting into YC if they applied. I know other people who would have close to a 0% chance.

It's not random.

<comment><USER67> Maybe so but I thought the lottery wasn't getting into YC but working for a start up that becomes successful. In that sense it's very much like a lottery: you have a tiny probability of succeeding, but if you succeed you get an extremely large sum of money.

I'm not entirely sure it's like a lottery in terms of the expected value being negative though (if you consider the opportunity cost as a negative).

<comment><USER68> Its a lottery if you blind folded yourself and pointed at the startup you work at.

You can always mitigate the risk by researching and making an educated decision about where you work. Different startups have different degrees of risk.

<comment><USER67> Indeed, but the probabilities are still so low that it's like a lottery. Obviously it's not an actual lottery, just similar to one in the sense of low probability high reward.

</comment></comment></comment></comment></comment><comment><USER69> There are a lot of great issues discussed here, and I'm going to say that most of it is valid and on point.

After living and working in SF, I moved to china 6 months ago and have come to understand that Chinese compared to US simply have hugely divergent values. And they work hard. From a very young age, they are conditioned to do so; and with 1.4 Billion people competing, there's no other option.

The US is still, and should continue to remain the focal point of innovation. I find China to be so far behind in this area, I don't think there is any hope of catching anytime soon.

I say this because, much of the money in China is grounded in old and dying business principles. The new generation, those in the country's "top" business schools, are being taught dated ideas which don't promote innovation at all.

I do agree though, China will continue to grow and the West will find a way to coexist. But I'm still not trading my USD for RMB just yet.

Edit: typos

<comment><USER70> You should have traded it 10 years ago!

[http://www.google.com/finance?q=cnyusd](http://www.google.com/finance?q=cnyusd)

</comment></comment><comment><USER71> Some perspective:

How the US dollar became so important: [http://www.npr.org/blogs/money/2014/07/16/331743569/episode-...](http://www.npr.org/blogs/money/2014/07/16/331743569/episode-552-the- dollar-at-the-center-of-the-world)

US GDP per capita vs China's GDP: [http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&m...](http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_pcap_cd&idim=country:USA:GBR:CAN&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:USA:CHN&ifdim=region&hl=en_US&dl=en&ind=false)

In a nutshell, the cost of an iPhone is ~5% of China's GPD per capita, but will continue to shrink as they grow.

</comment><comment><USER72> From my perspective, Sam's essays have really been improving in quality.

Some of his early ones felt like they were searching for a voice and/or trying to force the essay before it was fully incubated.

This one feels like a breakthrough. Well written, interesting premise, explores the topic in a meandering but targeted way.

</comment><comment><USER73> > Even if there weren't a competitor in the picture, countries historically > don't do well with declining growth, and so it's in our interest to try to > continue to keep growth up. It's our standard advice to startups, and it > works for organizations at all levels. Things are either growing or dying.

Actually it's time to rethink this "wisdom" that was introduced by our grandparents. There is no such thing as infinite growth and only by seeing this, the West (actually I don't care about the USA so much, as I'm from Europe) is going to prosper. Because in no-growth there lies a different kind of growth and a lot of opportunities for those who can think out of the box.

Right now growth is measured in money, but maybe one day it's going to be trust or influence.

</comment><comment><USER74> _The most critical question, speaking as a hopeful US citizen, is whether or not it's possible for one country to remain as powerful as another with four times as many people._

This seems to be an extraordinarily naive point. India (pop 1.2B) and Canada (pop 35M) have similar strength economies and similar geopolitical strength outside their immediate vicinities, for example.

These kinds of analyses always seem to forget the immense land wealth that the US has - agricultural, mineral, water, temperate zone, so on and so forth. China has it as well, but many other big-pop nations don't. And when all big economies become service economies, the land wealth is still a differentiator. It's not to say it's the only factor, but it's far too frequently overlooked.

</comment><comment><USER75> > The other stark contrast is how much harder people in China seem to work > than people here, and how working hard is considered a good thing, not a bad > thing.

If continued growth is dependent on working harder (more hours), I'm completely fine with being over passed. If you have to give up more of your life to "grow" you have less time to enjoy the fruits of your labor. While America's growth is enviable, our work-life balance is not and many people outside the US think our labor and vacation policies are a joke.

I don't think the solution to growth is working harder or changing our attitude towards hard work, we're already at the top (excluding China) – it's about working smarter and with better legislation to support risk takers.

</comment><comment><USER76> I think it's important to make a distinction between working hard for work's sake and working hard because you really believe in what you're doing. The concept of hard work that most people who frown upon it in the US have is likely the former and I would tend to agree with them. Mindlessly doing menial tasks but putting in "18 hour days" is not something to be admired.

That being said, a culture that encourages people to dedicate a lot of time to a company, a cause, or an idea if they like it or believe in it is certainly worth fostering. If this is the kind of hard work that Sam talks about as being looked down upon in the US, then that is indeed troubling and we should try to correct that perception.

</comment><comment><USER77> The knee jerk for me, is the absence of regulatory control of industry standards that make US based companies grow for the benefit of the US economy. As far as being 2nd to China on overall economic power, that's just find in my book. We aren't racing for space here. It's the ethical challenges that present themselves by OTHER countries that provide hot beds for US business. I can just lean back on the banana republics of Latin America, as an example of economic explosion on the backs of others through brutality and instability of regional nations partners. From observation, if I'm not wrong, China has done exactly this to advance it's own economy via Africa endeavors. Am I wrong?

</comment><comment><USER78> the US's government is finally becoming too burdensome to do business under. The taxation of American business is one of the larger handicaps they operate under.

however the biggest issue facing the US is this message that excelling isn't to aspired too, acceptance of who you are and who someone else is is all that matters. It is a self defeating mindset. Don't worry if you fail, you had no choice, you just can't do better. Here let us take care of you....

With regards to China, what percentage of their population is experiencing this boon? I was always under the impression (don't know the truth) that quite a bit of their population really doesn't matter to their economic output.

<comment><USER25> How do you square this self-defeating mindset against the described millennial sensitivity where everybody expects a trophy and considers themselves special? Seems like you might be referring to older works who are already jaded by the system and not the new class of workers who will be taking over their jobs.

</comment></comment><comment><USER79> The question comes down to how you evaluate things. Are the growth rate and money the only measures here?

God doesn't favorite China. Looking at its past 100 years, huge political unrest and communism experiments kept the country so behind the rest of world.

The technology, free market reform and globalization help China quickly escape from its historical baggage and catch up with developed world. The question is what value would win out at the end now everyone has equal footing.

Culture, political system and work ethic are the deterministic factors going forward. Would you prefer a world looking more like America or China?

</comment><comment><USER80> I know at least one metric where China won't beat the US in while: GDP per capita

>It's almost unthinkable for most people born in the US in the last 70 or so years for the US not to be the world's superpower. But on current trajectories, we're about to find out what that looks like.

Things would have to go so horribly wrong as to make being a superpower irrelevant for the US to lose its superpower status. It's undeniable that in the future the US might have to share this status with China but I don't see this happening in the following years.

Quite frankly China's rise is overrated!

<comment><USER81> GDP per capita doesn't matter. PPP per capita is what truly matters when comparing countries.

> US to lose its superpower status

It already lost it. Not only to China, but also to the European Union. Both now equal or surpass the US in terms of PPP per capita.

> Quite frankly China's rise is overrated!

Perhaps you don't realize that an ~8% yearly economic growth means China's GDP/PPP per capita is DOUBLING(!) every 9 years. And it has been doubling every ~9 years for the last... 35 years.

</comment></comment><comment><USER82> "A remarkable number of the major technological developments—far in excess of our share of the world's population—have come from the US in the last century."

For the most part those technological developments were due to the import (or plundering, if you're judging it as a non-American nationalist) of minds and entrepreneurial resource from elsewhere, and less because America actually forged its own bright people. That kind of affair was the easiest thing to do when America was the only place reasonably safe and developed (after WW2). Things change.

</comment><comment><USER83> Right there in the first paragraph (emphasis added):

> The most important story of 2014 that most people ignored was the Chinese > economy overtaking the US economy. (This is using the purchasing power > parity metric, which incorporates differences in the price of goods, but the > Chinese economy will overtake on _other metrics_ soon enough.)

"Other metrics" does _not_ include GDP per capita. That seems to me something you might not want to overlook when comparing the US and China.

</comment><comment><USER84> It seems to be a fundamental assumption of most economy pieces out there that growth is good, stagnation is bad, and we should strive for ever more growth.

But how much growth can we actual sustain with the limited resources we have on earth? When is it time to stop?

Are there better things to optimize for? Happiness, maybe? Peace? Does growth make people happy and countries peaceful? Maybe we could achieve something good by re-distributing wealth, instead of trying to create and more and more.

</comment><comment><USER85> "whether or not it's possible for one country to remain as powerful as another with four times as many people"

I don't understand why one country whether it's the US, china or otherwise has to dominate the world.Assuming that shitty tradeoffs are made to get there, I wish there was a world country of some sort that dominated in the near future. Otherwise it seems to me like there are going to be many sony like episodes that just do more harm than good.

</comment><comment><USER86> The following quote says a lot more about Sam Altman, the people he hangs out with, and his lack of exposure to mainstream media and political discourse than it says about objective reality:

 _As a related sidenote, "exceptionalism" in the US has become almost a bad word—it's bad to talk about an individual being exceptionally good, and certainly bad to talk about the country as a whole being exceptional._

</comment><comment><USER87> I'm surprised that he didn't talk about the last decade of US science funding. The US has radically cut back on research support. In theory, it shouldn't matter where the science happens. Publication means anyone can read it. In practice, the country that hots the training and tech transfer sees a lot more from scientific progress then anyone else.

</comment><comment><USER88> GDP.... There's many big problems in China, like over dependence on Real Estate industry; environmental pollution; food safety; the aging of the population; And statistical data from China's official statistics office, most Chinese know that China cooks its numbers on inflation and GDP growth.

</comment><comment><USER89> What I hope for is not US coexisting with China, EU or any other state. I hope that more freedom-leaning countries open up to immigration and blur or erase the concept of being a citizen. In fact I hope everyone sees the current status quo as immoral rather than just not optimal. NWO ftw

</comment><comment><USER90> PPP adjusting GDP to compare economies makes zero sense. The rest of the article, fine. But when you're comparing countries internationally, why on earth would you compare their internal broad average purchasing power (heavily weighted by China's outsized GINI)?

</comment><comment><USER91> "US policy often encourages investment and job growth outside the US... and then hold/reinvest those profits offshore rather than pay high taxes repatriating their funds."

That's the most important part of the article. It's what made China rise in the first place.

</comment><comment><USER92> The chinese build factories where they make pretty much everything for the global market. The americans build free time-oriented startups, such as image sharing, social news aggregation and messaging. And advertising, gotta keep those leisure sites funded.

</comment><comment><USER93> I'm not entirely convinced on the US leading in innovation, particularly per head of population. The UK (as just one example) is surely way ahead by that measure and yet has come a long way from the global top spot.

</comment><comment><USER94> The China mentioned in the article is not China, actually it is the China belong to Communist Party of China. It will be the enemy and virus of the world until Communist Party of China step down.

</comment><comment> tuna-piano I think the arguments that it matters to be #1 are extremely weak. Besides having the USD as the world's reserve currency, is there any other good reason?

</comment><comment><USER95> I wish I was a high-profile VC. Then I too would be writing essays exhorting people to take on high amounts of risk and to spend their 20s and 30s grinding through 60 hour workweeks, so I could grow my portfolio. Because, we're losing to China!

Honestly, it has never been clear to me why "growth" was the metric that we, as a society, have been optimizing for. Who stands to benefit? You? The middle class? Everyone? Or... wealthy investors and a few lucky founders?

Why not focus on, say, average income per citizen (adjusted for purchasing power)? Or even more radical, why not stop using money as a proxy for wealth, and start optimizing for average citizen well-being? Is China beating us on that point?

Or why not see further and optimize for the growth of our scientific knowledge and our technological capabilities?

Economic growth is generally praised because it is a weak proxy for things such as the wealth of a society (assumed to be well distributed) and its technological progress. So why not directly aim for these core goals?

<comment><USER96> > Honestly, it has never been clear to me why "growth" was the metric that we, > as a society, have been optimizing for. Who stands to benefit? You? The > middle class? Everyone? Or... wealthy investors and a few lucky founders?

I think the answer to this is pretty obvious when you look around.

"95% of the gains from the [recent economic] recovery have gone to the richest 1% of people, whose share of overall income is once again close to its highest level in a century." [1]

When you optimize for "economic growth" you are optimizing for the well-being of the already well-off.

1: [http://www.economist.com/news/leaders/21586578-americas- inco...](http://www.economist.com/news/leaders/21586578-americas-income- inequality-growing-again-time-cut-subsidies-rich-and-invest)

</comment></comment><comment><USER97> Is it coincidence that this article on china appeared on the same day as Chinese president's visit to America is announced in news media?

</comment><comment><USER98> China has 3 times the population of the US. As soon as they started growing a middle class, it was inevitable that this would happen.

<comment><USER99> Can you provide any support for this statement? I don't believe population directly correlates with the size of your economy. I only ask because if America is going to remain relevant, its citizens need to stop making shit up as they go.

[http://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP...](http://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\))

<comment><USER98> There is a ratio between them based on how productive your workforce is. German workers, for example, are thought to be very productive. But expressed as a GDP-per-person ratio, not as productive as US workers. China is far behind in productivity, yet their enormous population means they're ahead in total dollars. And as Chinese workers move from low-productivity work such as family farming to industrial farming & factory work, their population will act as a lever and grow their GDP even more so.

        China: GDP 16,149  Pop 1,357,380
        US: GDP 16,768  Pop 320,206
        Germany: GDP 3,512  Pop 80,716
        (millions and thousands, respectively)

So the GDP per-person ratio of each country is:

        China:  $0.01189
        US:  $0.05236
        Germany:  $0.04351

Expressed in terms of productivity, China still has a lot of growing room, and I would expect their GDP numbers to continue to grow in the future.

<comment><USER99> How about India? They will soon be the most populated country in the world? Indonesia has about 250m people? Brazil, Pakistan, and Nigeria? All these countries have large populations. They probably have a lot of "growing room" too.

In short, this claim is meaningless:

"China has 3 times the population of the US. As soon as they started growing a middle class, it was inevitable that this would happen."

<comment><USER98> That gets into the societal aspects - after working for their basic subsistence, how much time in the day is left for working on other things that they could sell. In the US, the creation of industrial-scale farming meant that food became plentiful and cheap enough so that there was capacity & time left over for work that could then be used to create a profit.

There are other factors at play of course. India has an enormous bureaucracy that soaks up much of their excess capacity and stifles innovation. The remains of the caste system also means that some of their most productive people aren't working effectively. Nigeria is doing much better these days, but still suffers with a large amount of corruption. Pakistan & Brazil - <USER3> don't know enough to comment - perhaps you can fill in why they aren't growing as fast as they might.

</comment></comment></comment></comment></comment><comment><USER100> Historically, all superpowers collapsed, so maybe there is a point where you cannot grow more with current system?

</comment><comment><USER101> China Slowdown - www.economist.com/blogs/freeexchange/2015/01/chinas-slowdown

</comment><comment><USER102> I disagree with literally everything said in this article.

Virtually every point the author makes is based on false assumptions, inaccurate information, a misunderstanding or other fallacies.

I really, really didn't want to break it down point by point, and I still don't, but I'm going to tackle the most obvious ones. Keep in mind I don't get them all, there are more than what I list here. I've included sources for some of my claims at the bottom:

\- " _US growth has stagnated while Chinese growth has continued to do pretty well_ "

Sure, if you account for the fact that it's not organic growth. Their growth is meticulously planned and executed. They have entire ghost cities which still remain vacant. Approximately 64 million apartments and houses in China are empty and have never been lived in before. There was just an article on Forbes on how they're now starting to fall into disrepair.

China's growth isn't like any other countries' growth and shouldn't be compared as such. Their growth is hollow and empty. They're literally reporting what they want to attract investors and say "See how well we're doing?" That's not fortitude, it's something else.

\- " _there countries have surpassed our education system_ "

Public education or higher education? There's a huge difference. You can't lump them together, it's misleading to the point of being inaccurate. In terms of higher education, nobody beats the US. They house 7 of the top 10 ranked universities in the world. The UK has the other 3.

\- " _The historical track record of the largest economy being overtaken by another is not good._ "

Irrelevant. Prior examples are absolutely no comparison to the global economy of today. Back then, the "global" economy was non-existent. There were also no nukes, no internet and there wasn't a singular sole superpower. We're now in uncharted territory.

\- " _The US gets huge advantages from being the world's largest economy_ "

It also has its own drawbacks which you don't even touch on. And it also became the largest economy in the world for a reason, because people trust the U.S and its dollar. People invest in the U.S because they see that the country, economy and currency has value and fortitude. Even during the last recession, the damage was minimal despite ignorant people predicting the dollar would vanish after the U.S economy crashes. The only way that would happen is if the country itself vanished, due to war or a large asteroid destroying the continent. Plenty of rich and powerful (non-American) people/entities/corporations have a vested interest in a stable global market. If only because it makes them more money. In the end, that's all that matters. Stability is almost always good for business. That's why the U.S dollar will never "crash and burn". Because the only person who wants it to are your prototypical libertarian anarchists still living with their mothers.

\- " _The current business model of the US requires the dollar to be the world reserve currency, though the Chinese currency is rapidly becoming a viable alternative._ "

Any country that either manipulates or artificially keeps its currency low to help itself (As China does to keep its export market competitive) to the extent China does, will never hold the title of world's reserve currency. The biggest and most obvious issue is one of corruption and trust. Can you really trust China to act fairly with your billions/trillions? To not artificially screw with their currency and/or banks to benefit themselves? Of course not, China only cares about China. No major player is going to unpeg their currency from the dollar to go to a currency with less stability and more corruption. It's simply a lesser of two evils situation and the U.S has proven to be the go-to currency for years, weathering even the worst storms.

\- " _At some point, China will relax its currency controls, allowing trade and offshore investment to grow rapidly._ "

And causing their own economy to tank as their export market completely dries up as India or other southeast Asian countries pick up the slack. Adding to that is their populace demanding higher wages. They see what's out there, they too, want the latest Ipad. You can't have borderline slave labor forever. At some point, you have to advance and evolve. And when the export market dries up, so will the jobs. When the jobs dry up, well, you know what happens...

\- " _whether or not it's possible for one country to remain as powerful as another with four times as many people._ "

Using your logic, you shouldn't be talking about China, but instead India. They're set to overtake China. China is also going to experience what's known as the China Crunch sometime around 2030 (due to their 1 child policy).

\- " _The US should try very hard to find a way to grow faster._ "

Growing for the sake of growing is dumb. You're spending resources, time and energy on something that really, ultimately doesn't mean anything. We're not playing a game and there's no final score when the game ends. We should instead focus on bettering ourselves as a nation. If that means we grow as a side-effect, so be it. If it means we shrink, then that's ok too.

I think my father said it best, stop worrying about what everyone else is doing and worry about yourself.

[http://www.cbsnews.com/videos/nobodys-home-the-ghost- cities-...](http://www.cbsnews.com/videos/nobodys-home-the-ghost-cities-of- china/)

[http://www.theguardian.com/news/datablog/2013/oct/02/world-t...](http://www.theguardian.com/news/datablog/2013/oct/02/world- top-100-universities-times-higher-education)

[http://money.cnn.com/2015/01/21/news/economy/india-china- fas...](http://money.cnn.com/2015/01/21/news/economy/india-china-fastest- growth/)

</comment><comment><USER103> Something overlooked at is that products bought in China are often fraudulent and cheaply made versuses made in Europe and citizens in China and abroad know it.

Citizens in China will travel to Paris to buy a handbag instead of a cheaply made knockoff in Singapore.

</comment><comment><USER104> >The secret to this is not genetics or something in our drinking water. We've had an environment that encourages investment, welcomes immigrants, rewards risk-taking, hard work [2], and radical thinking, and minimizes impediments to doing new things. Unfortunately we've moved somewhat away from this. Our best hope, by far, is to find a way to return to it quickly. Although the changes required to become more competitive will likely be painful, and probably even produce a short-term economic headwind, they are critical to do.

On a high level I agree with this. The question is what's happened to cause growth to slow? The answer to this provides a prescription for what to do, but it's also a highly contentious and political question.

Here's a few suggestions, which will appeal to people of various political views. They're all true and all false to some degree.

1) Regulation has crept in to stifle innovation. It costs billions to test a new drug, so only a few firms can do it, and those firms will try to be really careful before spending any money. There's loads of rules no matter what sector of the economy you look at. Tax is a whole can of worms inside of this rubric. We want to have public services, but we also want people to have incentive to work.

2) Near-monopolies have taken over the economy. (You can tie this to regulation, of course.) You can work for one, or buy services from one, but they're so powerful few people would want to compete. As technology still inches ahead, a new one is up for grabs now and again (Operating System, Search, Social Network...) but this isn't all that great either. What happens to all those entrepreneurs and employees who aren't working for the next big ticket? What if the economy had real competition, with lots of little companies providing similar services?

3) Capital can move to where it makes the highest return. Labor can't. I wouldn't mind moving to the US, where I have lots of family, and there's work in both the fields I'm interested in (finance and startups). But I can't get a visa, apparently (been told not to bother). Plenty of people currently in the US can't really leave, even if their industries are leaving.

4) Perhaps China is just doing a Solow. They're behind, so their growth rate is higher. When they get closer (per capita) perhaps they will hit a wall like Japan. Not long ago everyone was lauding the Japanese model, now we think lifetime employment in large corporations is part of the problem. The danger of this explanation is it doesn't really spur on a lot of introspection.

Anyway, that's a bit disorganised, apologies for that. But those are just some things to think about in the debate.

</comment><comment><USER105> I continued to be impressed with Sam's clarity. Keep it up!

Sidenote: interesting to see that YC has a BBerg terminal (and careful with the RMB claim in the near-term)

</comment><comment><USER106> A bit off topic, it looks like Sam Altman is ramping up his blogging activity due to YC's S15 open sign-ups.

</comment><comment><USER107> Totally sanitizes the role of military power and research in explaining why the U.S. is economically dominant. This is like looking at the British Empire and saying it happened because Britain had some smart, hardworking entrepreneurs.

Countries like China are emerging in part because they have strong governments that just take money from the public and put it into industry. It's more more direct than having to come up with some military justification for it like we do in the U.S., like we have to invent lasers to shoot down Russian missiles, and then maybe later we can find some health care applications. It's quite inefficient. But figuring out a more efficient way runs directly counter to the self-congratulatory mythology of the Silicon Valley private sector.

Sam pins it all on "an environment that encourages investment, welcomes immigrants, rewards risk-taking, hard work, and radical thinking, and minimizes impediments to doing new things." This is a very rose-colored, sanitized view of American power.

There's also the little matter of _winning WWII_ while our chief competitors had their economies wrecked, then using that hegemony to maintain effective control of the primary energy reserves of the world, keeping major military competitors in check and keeping Third World nations from breaking out of their subservient role through massive applications of violence and political intervention.

Turning to Silicon Valley, our meritocracy of innovation, Sam completely omits the massive sustained and critical _military subsidy_ of Silicon Valley and the startup sector via government research and procurement to the tune of many billions per year, which has been the genesis of everything from the Internet to GPS to Siri.[1] This is to be expected coming from the private sector which loves to congratulate itself and claim it's all because of smart, hardworking entrepreneurs -- and therefore entitled to the full profits of the commercialization of government-funded research.

But if we are to rethink how to keep America economically dominant, it should start with a sober and clear understanding that it has always come from _massive_ state intervention in the economy, starting with the very nurturing, protectionist policies we forbid the Third World from adopting, and continuing today with high-tech taxpayer-funded research via agencies such as DARPA and government procurement of early-stage products.

"It's-all-because-of-smart-innovators-in-the-private-sector" is a tenant that investors must hold to justify taking all the profits without returning the lion's share to taxpayers -- and more generally to justify funneling taxpayer money to industry without taxpayer _control_ of industry. That is the function that the military-industrial system has served for the past century or so: public investment without public control. Because if the public did more directory control funds we'd probably steer a bit more towards education, health, public welfare, etc.

Let's have more real talk about how our system works.

[1] [https://www.americanprogress.org/issues/technology/report/20...](https://www.americanprogress.org/issues/technology/report/2012/12/10/47481/the- high-return-on-investment-for-publicly-funded-research/)

</comment><comment><USER108> A few things missing here, posed as a question:

Why should we want the US to be the largest (or one of the largest) economies in the world and/or maintain its position as a global superpower?

Maybe I'm missing something , but I didn't see SA give a good and/or specific reason here (he makes some arguments about not wanting to decline, which I think makes sense but that would be true for really any economic organization...).

Of course I think there are a number of good reasons why it is good for the US to be the largest economy in the world, and for brevity I'd probably put them into two basic buckets:

A. some self-interested reasons: I'd rather be part of a nation-state that has more control over the global political economy than less control so that it is easier for me to have control over my own economic situation, I'd rather be part of a nation-state that is prosperous and can maintain that prosperity so that it is easier for me to maintain my own prosperity.

B. some (allegedly) selfless reasons: I'd like the global superpower to at least maintain some semblance of respect for / commitment to human rights, rule of law, democracy, freedom of speech/religion, a market economy and all that good old american pie stuff (I'm being snarky but I really do value those things) - don't get me wrong, I understand there's a lot of hypocrisy/inconsistency with how the USA actually operates, but this is the "USA-is-not-the-best-but-better-than-the-alternatives" argument, which I really do believe.

There's a good argument that all the "human rights / rule of law / freedom of speech" stuff is just constructed-BS and that its worth trading off for high levels of growth (I'm Korean, and many Koreans see the military dictatorship after the Korean war as net positive since it allowed Korea to grow rapidly, in spite of major human rights abuses etc. which I don't entirely disagree with), but I guess at the end of the day I'm old-fashioned enough to say that I value those things in and of themselves and that I wish them upon pretty much everyone that exists or has existed or will exist.

That all being said, my Chinese counterpart (or really anyone from any other country) can pretty much say the same thing as (A) and I can't really give them a good reason to say that for some reason I (and the USA) deserve this position more than she and China (or anyone else and any other country in the world) does.

Therefore, when I say that I think it's good for the USA to be the most powerful nation I have to (1) admit that it's at least partially (if not more) motivated by A than B, in which case my position is not really any more valid than my Chinese counterparts and (2) hope it's at least partially motivated by B, because then it's actually a position that I believe(hope?) will actually benefit everyone involved. This is of course all predicated on my moral beliefs that don't allow me to say that my self-interest is always paramount, which I know many people just disagree with flat-out, which is fair - I pretty much am the same way, though I really do try (and most fail) to be another way, for reasons something like this: [http://moreintelligentlife.com/story/david-foster-wallace- in...](http://moreintelligentlife.com/story/david-foster-wallace-in-his-own- words)

<comment><USER108> One additional clarification: I'd say that I think continued growth is super important, I'm just not sure you need to be the biggest - see the UK, see Singapore, see South Korea, see Canada (all US allies, to be fair haha).

</comment></comment><comment><USER109> Clearly sama is preparing for a career in politics, because this is the standard canard of politicians everywhere. If we don't work harder, more efficiently, we'll be overtaken by country X, and be destitute.

It's a well known economic axiom, that long-term economic health of a country is directly proportional to productivity. It is not in any way true that its affected by the productivity of another country. Both countries can prosper, there's no zero-sum game here.

<comment><USER110> "If we don't work harder, more efficiently, we'll be overtaken by country X, and be destitute"

Before the days of the Internet, this might have been true (because it takes much longer for it to happen). But many companies can now hire overseas employees which will directly complete with potential employees in the US.

</comment></comment><comment><USER111> I'm sorry but I couldn't get past the first paragraph. It's common misconception that people claim China's economy has overtaken US, it's really a clickbait for media outlets last year.

Yes, using a calculation called "purchasing power parity," it looks as if China has passed America. But that calculation is a statistically manufactured one, which supposedly makes up for different costs of living in the two countries. In short, it doesn't measure anything that's real, but a concept that some economists — and certainly not all — believe is important. It's a phony comparison using a made-up number. So what do the numbers show when you compare real apples to real apples? Real U.S. GDP this year will be about $16.27 trillion, adjusted for inflation, according to data from the U.S. government, World Bank and IMF. China? It will be less than half that, about $8.06 trillion. Not only has China not passed the U.S., but it's quite possible it never will. China's population growth is heading for a dramatic Japan-style collapse, which will slash economic growth dramatically in coming years. Growth has already slowed from 10% a year in the 1990s and 2000s to 7% — and it's likely to fall further from there. That's not all. The real measure of a nation's standard of living, productivity and, ultimately, the size of its economy is GDP per capita. What does that tell us about the difference between the U.S. and China? This year, America will have per person output of $50,979 in real terms, China $5,947. So the average American is nine times more productive than the average Chinese. So don't panic. The U.S. isn't No. 2, except in certain IMF statisticians' minds. Nor will it be soon. This is from a credible research article.

<comment><USER90> Yes, thank you -- it makes zero sense to compare economies based on PPP adjusted GDP. Ridiculous.

</comment></comment><comment><USER112> I wish Sam Altman wouldn't talk so authoritatively in his essays. He comes off as an obnoxious, arrogant ass.

He sold Loopt and won PG's praise, but it doesn't follow that he has definitive answers the topics he writes about.

The simpler explanation is that he won PG's praise because he is a master imitator. He writes very much like PG, and I think PG saw a lot of himself in Sam, so he promoted him to YC president or whatever he is.</comment>