Dan Wang - The US vs China In The 21st Century - [Invest Like the Best, EP.444]

Beyond geopolitical tensions, Americans and Chinese are more culturally alike than any other peoples. Both societies are founts of entrepreneurial dynamism, hustle, and ambition. They share a belief in technological progress and see themselves as great world powers, creating a unique parallel between the two rivals.

A critical asymmetry exists in the US-China competition: It is far harder for the U.S. to rebuild its complex manufacturing ecosystems and tacit process knowledge than it is for China to improve its scientific research capabilities, where it is already making significant strides.

Profitable Chinese giants like ByteDance trade at a fraction of their Western counterparts' multiples. This "China discount" stems not from business fundamentals but from the unpredictable risk of the Communist Party "smiting" successful companies and overarching geopolitical tensions, making them un-investable for many.

China's "engineering state" mindset extends beyond physical projects to social engineering. The Communist Party treats its own people as a resource to be moved or molded—whether displacing a million for a dam or enforcing the one-child policy—viewing society as just another material to achieve its objectives.

Censorship in China operates less through direct orders and more through an atmosphere of unpredictable threat. Like an anaconda sleeping in a chandelier above a dinner party, the state's potential to strike at any moment for any reason causes individuals to self-censor constantly, stifling creativity and open discourse.

China achieved tech superpower status not through invention, but by mastering mass manufacturing and process knowledge. It allows the U.S. to create the initial spark (0-to-1), like solar PV, and then China creates the "prairie fire" by scaling it (1-to-N), ultimately dominating the industry.

China's durable advantage isn't just its massive workforce but the collective "process knowledge" generated on factory floors. This expertise in solving countless small manufacturing problems cannot be easily written down or encoded in equipment, creating a powerful, hard-to-replicate competitive moat.

China operates as a high-agency "engineering state" that executes relentlessly on large-scale projects. In contrast, America's deliberative, litigious society often leads to endless delays and failures on major infrastructure goals like the California high-speed rail, highlighting a fundamental difference in state capacity and approach.

U.S. leaders repeatedly declare Chinese advancements in areas like high-speed rail or 5G as new "Sputnik moments." However, the lack of subsequent, meaningful action has diluted the term's impact, creating a "boy who cried wolf" effect and preventing a genuine sense of national crisis or urgency.

China's immense state capacity allows for rapid infrastructure development but also enables disastrous national policies like the one-child policy or Zero-COVID. Unlike the deliberative U.S. system, China's efficiency means that when it goes off track, it can go catastrophically off track before any course correction is possible.

Beyond algorithms and talent, China's key advantage in the AI race is its massive investment in energy infrastructure. While the U.S. grid struggles, China is adding 10x more solar capacity and building 33 nuclear plants, ensuring it will have the immense power required to train and run future AI models at scale.

While Apple, valued in the trillions, abandoned its car project after a decade, Chinese electronics firm Xiaomi, worth a fraction as much, launched a record-beating electric vehicle in three years. This highlights the execution-focused, vertically integrated model that allows Chinese companies to out-maneuver wealthier but less agile Western competitors.