Daily Balajisms – History is running in reverse
The printing press gave us centralization, transistors gave us decentralization.
Balaji Srinivasan has a mental model with a strong predictive power, he calls “history is running in reverse” – historical events are repeating, but with the opposite results. Let us discuss some examples Balaji shared recently.
The West has hit its peak centralization moment back in 1950s, before, and after things were much more decentralized. One of the reasons was a centralizing technology of printing press and broadcast media that were able to manufacture the consent of the public and create big giga-states, the US and USSR that were fighting a Cold War.
The Western frontier closed in 1890 and the Internet frontier reopened in 1991 with commerce being legal on the internet. In the centralizing 20th century, the government promised to take care of you. But on the internet, you could set up a domain on a bare digital land again, and start from zero to a trillion dollar company.
Here it is important to mention Peter Thiel’s observation that in since 1990 only 17 companies were launched that have achieved over 100 billion capitalization – 11 in the US and 6 in China, none in Europe. The State is strong here, but the Network is weak.
Back in 1918 there was a Spanish flu, that was heavily censored, even the name comes from Spain not because of origin, but because the flu was less censored there. So people thought is spread from Spain. And now we had Covid 19 that has received 24/7 coverage and the attempts at censorship (e.g. of probable origin) failed.
Back then, in the US, they had the captains of industry and so-called robber barons, now we have tech founders like Elon Musk. Back then, journalists fought the business leaders and managed to defeat them. Balaji mentions Ida Tarbell and the trust-busting movement. Today it seems tech founders are winning over downstream media.
Back then, in a centralizing century the US government was able to attract top talent, the FDR’s brain trust – because it has shut avenues for ambitious people to realize their potential in the private sector – with high taxation and fighting the captains of industry.
Today Elon can attract the top talent to SpaceX and is shipping 8x more to the orbit than China. And China itself is shipping as much as the rest of the world combined, minus SpaceX – so it’s 80% (SpaceX), 10% (China) and 10% (the rest of the world).
This is contra to Mariana Mazzucato’s thesis of the Entrepreneurial State that rests on a historically exceptional 20th century. Before we had moonshots driven by the State, like Apollo or Manhattan Project, now we have moonshots driven by (sovereign) individuals and the Network (sovereign collectives).
Back then, there was a populist anti-gold movement, and William Bryan in the US had a famous Cross of Gold speech. Today we have a populist movement for bitcoin, a digital gold.
Back then, FDR has successfully attempted gold seizure, today we have a digital gold that has so far resisted even China’s attempts at partial crackdown, driving bitcoin miners outside the country.
Back then the US was seen as the top world exporter and China as a huge market for imports. Now is the reverse. Back in 1970s the US produced 10x the amount of steel that China did, today it is 10x the other way – so a 100x difference.
Back then the USSR was the senior partner in the Sino-Russian relationship. Now China, with Xi Jinping, is the senior partner to Putin’s Russia. The last 2 years have proven that if you have China on your side, you can withstand Western sanctions, and these have proven much less effective than was previously understood – with unintended second order consequences – the Rest is reverse-bandwagoning against the West.
Back then you had the British origin men running India, now you have Indian origin men running the UK. For many hundreds of years, Asia was the place where most of world’s GDP was produced, with the last 200 years being an exception due to Industrial revolution. Now the economic engine of the world is moving back to Asia – with BRICS’s GDP surpassing the G7 on price adjusted basis.
Back in 1800s you had big fortunes in the private hands, but in the centralizing century of 1900s, these people were taxed away in the West, or behind the Iron Curtain, their fortunes were seized and they were sent to gulag or killed. Now we are returning to a state, where young people can build fortunes thanks to tech startups.
Back then, America after WWII was ideologically very unified, both parties were voting together. While India and China were very disunited – with Chinese civil war and Indian partition throwing their societies in chaos. Now the situation has reversed – the parties in the US have diverged to the point that many call the US a bi-national republic of Democrats and Republicans – similar to Sunni and Shia in Iraq (with the tech tribe being a third tribe, akin to Kurds in Iraq).
While, India under Modi and China under Xi are the most unified they have been for a long time – proven also by the rapid buildout of infrastructure. Since 2007, China has built an order of magnitude longer high-speed rail (HSR) than Spain has, a country with the second largest HSR network – 39,000km vs 2,000km. India has a higher percentage of electrified rail than Germany.
Printing press and mass media with broadcast (1-to-n) modality has aided the centralizing tendencies during 20th century. And in the 1950s, during the peak era of centralization, with two giga-states engaged in the Cold War, the transistor was invented, which started the undoing of the State, as the new Leviathan, and ushered decentralization towards the Network (peer-to-peer interactions). To use Balaji’s God-State-Network mental model of distinguishing who is the prime mover across various (agrarian, industrial, network) ages.
Back when the Western frontier was open, the levels of taxation were very low compared to 1950s and even today’s standards. And since 1950s they started to decline again.
Balaji describes Keynesianism as Communism-lite, as a predator that has evolved camouflage. While Communists took your property all at once – during collectivization efforts in USSR, Keynesians take 90% of your wealth over time through inflation.
If the bitcoin wins, we will not get the same world as today, but just a bit more decentralized. Bitcoin changes everything, because it takes away the government power to spend indiscriminately. Bitcoin will become the world government.
History is running in reverse and so future is becoming our past, says Balaji. There was the Great Depression and we arguably live through a Great Inflation – where housing and other items are becoming rapidly unaffordable as the sclerotic governments in the West overregulate, over-financialize and are unable to build (cohesion, new infra and homes).
As the joke goes, God created bitcoin to make libertarians cooperate. Soon we will hopefully find out that it makes governments more peaceful, competitive, and fiscally responsible.