Is the Union About to Break? Blue vs. Red, China & the $1 Trillion Pivot | Impact Theory w Tom Bilyeu & Balaji

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Welcome back to part two of this incredible conversation

without further ado.

Here we go.

Do you think California has a rude awakening coming where they've

just hollowed out like a trillion dollars of their tax base?

Or are they doing it to be punitive and believe that they can

make up the shortfall through federal funds?

Like I'm not sure what their logic is.

Ah.

There's a metal logic to the meta organism.

So meta organism, another important concept to have.

It's certainly not original to me.

But you know, an ant colony, any individual ant doesn't necessarily

know what it's doing, but the colony has an intelligence.

It doesn't mean it's super intelligent.

It just means there's an emergent intelligence where you can talk

about the colony's interests.

Even if any individual ant is only kind of responding to local incentives.

Right.

Similarly, a flock of seagulls or a school of fish.

Right.

There's meta organisms.

In a sense, you as a human being, you have a collection of cells and your

epithelial cells don't necessarily know what's going on, but they obey

your orders in a sense.

Right.

If we model Democrats, California Democrats as a meta organism,

Republicans as a meta organism.

Right.

There's a bunch of individual sensors and they're not super intelligent.

But this way you can say, damn blue wants this, red wants this.

Okay.

Like at an abstract level over millions of people.

Well, for any Democrats, basically the well tax is for them a win win.

Why?

They either deport or rob their main competitors for political power within

California, where they check us.

That's fucking dark.

Right.

This is the same as a communist.

Right.

The communists like they would take control of Cuba and all the capitalists

either rob them or they force them out of gunpoint, be exiles in Miami.

And there's a meta rationality to this, which is the kind of person who's a

communist or a California Democrat is somebody who's not good at winning

in the market.

They're not good with numbers.

They're not good with building businesses, but they are good at

is coalitional politics.

They actually have a real, for lack of a term, talent for that.

Right.

So from somebody who has that talent and they can't build a business, they can't

build wealth or would have you.

What they can do is they can focus 100% of their energy on controlling the law and

the state.

And the tech guy can't do that.

And so they go upstream and they basically win the high ground and they drive out

their enemies or rob them.

Okay.

And every tech zillionaire who leaves California basically cements Democrat

political power because at a deep sense, and this is a really important,

another important concept.

Democrats destroyed democracy in California.

And the reason is California is a one party state.

Let me show you this.

Okay.

Do you see that?

Yep.

Yeah.

Democrats destroyed democracy.

That's wild.

Okay.

California is a one party state where elections are held, but the party always

wins.

That is crazy.

For anybody not looking at this, it shows that every year from 2011 to,

well, I guess technically, that's what we see.

It's 92 to 2024.

Governor of state.

Good.

Let's say 2011 to 2025.

It's just pure Democrats.

And the new gerrymandering bill is going to mean permanent Democrat rule forever.

Jesus.

Okay.

Schwarzenegger was like the last Republican era.

So here was he.

So he ended in 2011.

Yeah.

Okay.

That's right.

So he was the last one.

So 22 last time that we had.

Wow.

That's right.

And so then going a little further, basically, it was right around then that California started topping

out.

And basically, one party democracy is why you can have graphs like this.

Do you see this graph that shows the Department of Homelessness budget?

Jesus.

Yeah.

Yeah.

So this is a thing like lots of people who are like, oh, you need to stay in fight.

We need to fix California and so on.

The thing they don't understand is that for Democrats, the state is their startup.

Like, so here's a specific example.

The purpose of the San Francisco government for Democrats is to award hundreds of millions.

In this case, more than a billion dollars per year to quote homeless NGOs that hand out

the syringes and set up the safe injection sites, so to speak, to get people addicted

to drugs, to increase the homeless population, and thereby increase the justification for

their existence.

Whether they conceptualize it that way or not, they'll say they mean to do good, but they

really mean to do well for themselves because what they're optimizing is the NGO budget.

This is a really important mechanism and I don't want to lose people from a political angle.

So taking that out to the mechanism that recurs in the human mind is every human, every

organism when we get together is going to try to grow.

And when humans get together to build something, whether it is a local government, whether

it's a company, they are going to, they have an incentive structure both inside their

own mind and just at the ground level of getting resources to survive, to make it bigger,

to grow, to acquire more resources.

And so if your homelessness project requires homeless people, then the thing that you have

to acquire more of in order to grow is homeless people.

That is really fascinating.

It goes to show at an incentive level how high risk this kind of thing is.

Exactly.

Instead of the Republican version of this is like the military industrial complex.

Well said.

Well said.

Okay.

It's the piece of it for which the state is their startup.

And so in both cases, it's smaller than the other piece, but it's still trillion dollars

over to have you, right?

And so when you see this, you realize, okay, those people who, for whom the state is their

startup, like it is their full time job to gain power, they can gain the money.

Like basically their NGO budget or their military industrial complex budget to a lesser

extent.

But certainly, let's say the NGO budget, the grant or something like that.

Somebody had a, there's a good phrase on X on this, they're net long taxation.

Taxation on balance is good for them because they might lose $10,000 a year or whatever

as for their bureaucrat salary, but they gain $20 billion a year to be able to throw around

and allocate because there's more that is being controlled by the central government,

right?

So and when you actually towed up how many people are downstream of the state in one way

or the other, you have like 40 million people on snap, you have all the academic grants,

you have all the NGOs, you have all the bureaucrat positions, it's much larger than the federal

government per se.

It's all the flows of money that go out to things that are directly or indirectly government

state, local federal funded, okay?

Because of that, anybody for whom the state is their startup, you're not going to beat

them or rather, it's a miracle if you ever do beat them because it's their full-time job

and it's like your part-time job.

So the California tech guys cannot win against the people who the state is their startup,

right?

Now in response, by the way, California Democrats creating one party state in California,

Republicans are trying to do the same thing in Florida and Texas.

And of course, China's also one party state.

So democracy is ending within states.

The gerrymandering and so on is also meaning that there's response gerrymandering in Republican

states as well, right?

Virginia's gerrymandering for Democrats, California's gerrymandering for Democrats, Florida

and Texas are trying to do this for Republicans, right?

So essentially, you get an equilibrium where you have all of these one-party states where

elections are held, but the party always wins.

So that means democracy is actually going to be between states rather than within them.

You have to vote with your feet.

You have to move between states.

That's the only practical choice you have, right?

So the internet becomes a guardian of true democracy because people vote with their

feet with their wall and their ballot.

That's actually how you have a choice of the government that under which you live.

Okay, it's a more expensive vote, in a sense, but we can reduce the barest exit.

We can reduce the cost of migration and so on with the internet.

Okay.

Back up.

Once we understand these dynamics, the issue is that all of the debt is causing, because

the thing is Democrats were actually much more reasonable in the 90s and the 2000s and

so were Republicans because they weren't under the same financial stress.

Their pie has shrunk, like people feel that, right?

The pie has shrunk.

They have to work harder for less, the dollars to climb a value.

Because basically, you know, it's hard to go up from where America was in the 90s.

It's the most dominant empire of all time.

Many people thought that America would then be able to essentially run both Russia and

China.

And in fact, in the 90s, Yeltsin and so on, like Americans could do business and, you

know, Russia was actually part of the so-called G8 up until the 2000s, right?

And then they got kicked out.

So, but Russia was a place where Americans could do business.

And certainly many in China sent their children to American schools and Americans could do business

there as well.

So, there's an expectation in the 90s and the 2000s that, you know, it was the end of history.

I know Fukuyama's had a more sophisticated thesis than that, but that's part of his thesis,

right?

That basically, you know, liberal democracy, capitalism had become dominant.

So there's an expectation that you could graduate from college.

And while it wasn't articulated such at a meta-organism level, you could administer a province

like Siberia or Shanghai, just like you could South Dakota, right?

Essentially, the American empire would run the world and you'd have expansion territories

to go into.

The fact that that didn't happen, and the fact that Putin and Xi and others rose, and

so those territories got closed off to Americans abroad, and that the internet arose domestically

and started, you know, disrupting opportunities at home, meant that the Democrats probably

were getting squeezed from both sides.

That's like another, to be clear, this is complimentary to the whole debt thing, but

it's just another way of thinking about what the last 20, 30 years were.

And so the, what happens is, you know, in 2008, China and the internet weren't ready

to take over.

They were still insured.

But the financial stress, and that's why people fled into the dollar at that time, you

know, you heard the term, the cleanest dirty shirt, right?

Like for all the faults of the U.S. at that time, it was still, where else are you going

to go?

Right?

So people flooded into the dollar, and with that financial crisis, basically, they're

able to print and kind of keep the system going because who is ready to take it over?

One way of thinking about it is, when a human dies, they can die without an air.

But when a system dies, it has to have an obvious air.

Although it's a can't die, because they'll just continue in a zombie state.

And so the last 18 years have kind of been like zombie America, like that graph that shows

the magnificent seven versus S&P 493, you know, you know, General Motors got a bailout

in 2008, right?

And the banks got a bailout, right?

Those are companies that like should have died.

And they basically are essentially, though it's not called this, they were nationalized

at that time.

Because the government bought steaks in them, right?

In fact, the government nationalized much of American property because all of the, and

this is going to be an argument that you're probably going to see in the next, whatever

number of years, the government owns your house.

Why?

Because the Fed bought mortgage-backed securities, therefore, like you should be grateful

to them and so on and so forth, okay?

So much of the economy was de facto nationalized at that time with the purchase of mortgage-cuse-backed

securities, the bailouts of the banks, the bailout of General Motors, the American Investment

Recovery Act, and so on and so forth.

All this was using that money-printing power to basically tax the whole world to bail

out America.

And that's why Britain, for example, their growth just stopped in 2008.

And if you've seen that graph that shows like Britain's GDP growth, it just like stopped

then.

Because there, remember the cantalant effect, the Brits are further from the money printer

than Americans are.

And so the only two districts that did well in America after the financial crisis were

basically the broad DC area, which got a lot of the bailout money and the banks and so

on, and Silicon Valley, which could do a lot with the little, like just a guy on a laptop.

One tiny, rivulet of all the printed money made its way down into, because interest rates

have gone all the way down, people for any return, they'd take high risk, they'd take

much higher risk than they needed to do during the post-war era, right?

And so they started to finally invest in risky things again, like they did in the 1800s,

and a tiny, tiny sliver, like a few billion dollars out of a few trillion made its way

to Silicon Valley tech startups, and a funded, Zuck, and Elon, and so on and so forth.

And that's another big piece of this is the internet was ready for that at that time.

So relatively small amount of capital in Miracle Grow, this system started getting stood up.

And the same thing was happening abroad in China where they were also willing to do more

with less, right?

They're willing to have every scene of Chinese factory online and stuff, yes, not in person.

Okay, so like they have dormitories there, right?

They sleep at the factory.

They basically will, you know, they'll go back for like Chinese New Year, you know,

this is big migration.

They go and see their kids, wife, whatever, once a year, then they come back and they

grind in the factory, right?

And because it was such a huge improvement over the rice paddy of communism, like they

were just happy to have four meals in a cot.

This was amazing for them.

It was a huge level up over the poverty they had, right?

Anybody that remembered Mao would have been ecstatic.

Yes, that's right.

So for them, this was a huge level up.

They were happy to have it relative to what they had, right?

So they weren't feeling oppressed over there, right?

I'm not saying, you know, I'm not totally romanticizing it or anything like that, but basically

something that would have been considered a huge level down from work conditions for many

Americans was a huge level up for many Chinese, right?

So they were also the equivalent of the guy on a laptop, you know, who didn't need much

in the way of resources, turning, doing a lot with a little.

They were willing to do a lot with a little in China and places like that, okay?

So those two deflationary forces basically are kind of what, you know, there's a graph

that shows what increase in price and what decrease in price.

Have you seen that one?

Or what time period?

Like the last few decades, let me see if I can find it.

No, I'm not.

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Now let's get back to it.

It's an interesting point that you're making that we have these two parallel things,

China and Silicon Valley, both being able to thrive in this otherwise depressed state,

and so they end up sort of overshooting the mark in both of them coming up together.

That's really interesting.

Now, I take a slightly different lens on why China did as well as it did, but some of

the things you're putting on the table are, I think, incredibly interesting and round

out.

My more going into the WTO, outsourcing jobs to those guys just full stop, sending over

Apple and sending over our best VC people to teach them manufacturing, to teach them

how the VC model worked, all of that, but this is a really interesting element of the puzzle

that I had not thought about before.

Yeah.

The thing is, I would agree with everything, you know, it is, it's one of these things

where China's complicated, I mean, just like America's complicated, where a lot of the

negative stuff and the positive stuff is true.

Like, did they copy all types of stuff?

Yes.

Did they violate all kinds of IP?

Absolutely.

Do they have elections in the sense Americans had them?

No.

Do they, like, do they have a surveillance to absolute, all this has true, right?

But they also execute, like, it's a weird thing where, do they have, for example, low

quality plastic stuff and, you know, absolutely true?

On their hand, are your phones, are the pieces of them made in China?

They are, right?

Yeah.

So the cook talked about that.

He said, listen, I don't know who keeps saying that you go to China for low quality manufacturing.

He's like, these are the, like, highest, most high tech engineers that you're going to

find anywhere.

Now, the party left out is that he's one of the people that taught them how to do it,

but nonetheless, they really have accomplished something extraordinary.

They are a very complex picture.

Give us the punchline of what we're looking at here.

And then I want to ask you about what you think the US's strategy is, like, I get you

are like, look, America's already died, I don't even know what we're talking about here.

But America is trying to outperform China, at least in our own hemisphere, we're at war

right now with Iran.

So I'm very curious once you show us this, what you think of, what should you next?

Yes.

Okay.

Or what we are doing, is it working or should we be doing something different?

Okay.

So let me first show this graph.

Then let's talk about that.

Okay.

So first, this graph shows inflation and deflation.

And the crucial thing is it's a vector, not a scalar.

That is to say, you have to, it's not just like one number that you quote for inflation.

You're like up 40% in college tuition, but you're down like more than 100% on televisions.

Right.

And basically, if you look at this, everything that China and or the internet touch has come

radically down in cost, televisions, personal computers, phones, toys, cell phone, clothing,

all this stuff is either made in China or on the internet or both.

Right.

All right.

All right.

All right.

All right.

All right.

All right.

All right.

All right.

All right.

All right.

I would say to see the things that China has touched have gone down and then all the bureaucratic

nightmares that we've created on our side are driving costs up.

That's right.

Exactly.

That's right.

So the things that are going up are all the things the American state is touching, which

are.

Yes, man.

Right.

Education, health care, right, like, you know, everything that is regulated by the US

government is going up in cost because, in many ways, Keynesianism, again, is communism

for whims.

So the point is, and to understand at a system level, there are always short-term

costs to disruption.

If you were to, what did it look like to disrupt education?

Well, all kinds of universities and schools go out of work, teachers go out of work,

and so on and so forth.

But you have hyper-deflated cost of education.

So the system will fight that because there's millions, there's teachers unions, there,

you know, universities are very powerful political actors, right?

Similarly, like real estate, Trump has actually said he doesn't want real estate prices to

go down.

Yeah.

Xi and China.

Go ahead.

I just said, don't get me started.

That one's a wind up for me.

Right.

So, so that's why literally Fed policy for last few, for a long period of time has been

to prop up housing prices.

And in fact, if you've seen the so-called case Schiller index, right, like it is actually

beyond where the housing price bubble was, right?

Yeah.

This is going to be mad.

I can already tell.

Yeah.

So, so look at this, this bad boy.

Here we are.

This was the the so-called mortgage bubble and here's the crash and look at how much

we've moond since then.

Oh, I can't help.

Okay.

That is crazy.

So, we're due for something that's much, much, much bigger than 2008.

Yeah.

Yeah.

Yeah.

Unfortunately, right?

And the thing about this just to just to show that this is it's an unusual article that

is actually very explicit about how like the connection between the money printing and

this.

So, how did this happen?

Well, this article from NPR of all places in in 2010 back when they printed some true

things.

Okay.

How to spend $1.25 trillion?

So, these two people are at the Fed and how do they spend $1.25 trillion?

So, they basically, let's look at this, right?

They just hit a button.

They told us they were 61, sure.

They bought $1 trillion, $249 billion, $999 million, $999,000, $999,000, $39 dollars worth

of mortgage-back bonds.

The Fed was able to spend so much money so quickly because as a unique power, it can create

money out of the narrative whenever it decides to do so.

So the mortgage team would decide to buy a bond, they'd push a bond into the computer,

and a lot of money is created.

Wow.

They actually get rid of all of the obfuscation, all this stuff about, go ahead.

That's right there.

It's just right there.

Okay.

So, it has unique power.

It can create.

So, this is, as Milton Friedman said, inflation is taxation without legislation.

Now, by the way, $1.25 trillion, just to put that in context, like, I mean, you're an

entrepreneur, right?

You sold the, like, the, I was the protein or health bars.

Yep.

Right?

Quest.

Quest bars.

It's great.

Now, $1 trillion, imagine selling $1,000 worth of quest bars to everybody in China.

That's what a trillion, a thousand times a billion is a trillion, right?

And obviously, that's, that's a trillion in revenue.

That's not a trillion in profit.

Like, what are your actual margins on those quest bars?

I don't know.

Like, whatever, whatever percent it is.

Okay.

So, so this was a trillion in profit.

And instantly, with no, by hitting a button, right?

So the time expenditure, right, the labor expenditure, the profitability and the invisibility

of it, right?

Nobody even understands that this is happening.

That's the problem.

Even people hearing this right now, I know some percentage of them do not understand

that that is the worst thing in the world, that that is taking money.

It's taking purchasing power, but you might as well think of it as taking money from you.

It's absolutely insane.

All right, Balaji, you just put a really important piece on the table that I'd never considered.

It's a very powerful look at China through a totally new lens.

Certainly, the housing market is terrifying.

Now, walk me through, so the US, from where I'm sitting, I can paint you a picture of

the moves that Trump is making, have everything to do with China, very little to do with Venezuela,

very little to do with Iran.

And it is an American empire in decline that realizes that it has to establish itself as

the dominant power, basically anywhere that it can.

I think it's given up, you already touched on this, I think it's given up on the Southeast

Asia.

It's just like that's going to be China's neighborhood, but we're going to lock down

South America.

We're going to lock down North America.

And because he's running as far as I'm concerned, a do or die strategy with the economy where

he's going to spend and inflate the currency like crazy, devalue the dollar, do the whole

Shabang.

And his only chance out from under that is to grow.

And so when he looks at the Middle East, which is aggregated, just an unbelievable amount

of capital, he went early on in his second term.

He got $2 trillion roughly in deals, but he knows that that's contingent on a stable

Middle East where the straight of Hormuz isn't being choked out by the Iranians where

the Gulf States, that he's getting these contributions from, they don't have to hold that money

back to repair a desalination plant or to deal with other oil infrastructure that Iran

has bombed into oblivion.

So when I look at the move that he makes, I'm like, oh, this is him.

Trying to make sure that he doesn't go to jail effectively, because I think if he gets

impeached, or if he loses midterms, he will get impeached.

Once he's out of office, they will hound him until he is in prison.

So I think for him, this is existential.

And I think he understands, okay, I've got that wind in my back.

And then I also have to deal with the fact that we've got to quarantine China somehow.

And so by making their unsanctionable oil, impossible for them to grab, eh, it may only

be 20% of their oil, but it's better than nothing.

And so you put all that together and that to me explains the behavior that I see on behalf

of America right now.

Do you see something different or does that map for you?

I understand where that's coming from, but I would say I do see a fair amount different

and here's why.

First is, I think the word American is like the word Korean.

And when you say Korean, I think one has to distinguish immediately, is it North Korean

or South Korean?

Yo, you're saying something here, biology, all right?

Say more.

I know where this argument goes, but let's hear it.

Yeah.

So the thing is that when one says American, unfortunately, like, you know, when you and

I grew up, you know, when we were kids, you'd say, you know, I pledge allegiance to the United

States of America and to the public, which sends one republic indivisible with liberty

and justice for all right.

And the unfortunate thing is, and I can show chart after chart on this, but it is actually

so polarized that like, like America doesn't exist.

There's blue America and red America and tech America and all these different sub tribes

within it, right?

Just to show you some graphs on this, right?

I'll show you three, okay.

So there is this graph, which shows Congress polarizing before Trump even arose, okay?

This is like, you know, 2015, okay.

So I'm not sure if you can see that, but each, do you see 1965 and 1995, how it like comes

apart like this?

Yep.

Very clear.

What you're seeing here, each node is a congressman, blue is Democrat, red is Republican,

and the 1960s and 1950s, an edge between the means they voted the same way on the same

bill.

Yes, together and no together, okay?

After 1991, without the Soviet Union as a common enemy to keep the US together, the only

people, Democrats and Republicans had to fight was each other.

And so they politely polarized, okay?

This is crazy to see it like this.

Yes.

So it's quantitative, right?

And this is something which has gone on for 70 years.

It's not like a short term thing.

And then what happened was this actually extended from Congress to the population, so that

last graph was up to 2011 and it was calculated in 2015.

This is totally different graphic that shows the same concept, but it's on Twitter.

And you can see blue nodes and red nodes.

This is 2017, right as Trump was elected.

And blues just don't friend reds and vice versa.

They don't even follow the same kinds of groups.

That is crazy.

Okay, so this is 2017 and you can see the mitosis happening.

By 2025, the digital secession was already here where blues are on blue sky and they're

on threads and they're on, you know, TikTok, right?

And reds are on X and they're on truth social and gab and whatever, right?

And so the, you know, Americans like blue sky and truth social, they're both speaking

English, but their entire world view and premises are completely different as different.

I would argue as like North Korea and South Korea, you know, or becoming as different.

The digital split has already happened where Democrats and Republicans, they don't talk

to each other.

They don't marry each other, by the way.

So like that's another thing, Democrats, um, essentially only 4% of Democrats marry

Republicans.

Wow.

Okay.

So this one.

Yeah, so here's this graphic, right?

Um, so what that means is, if you see, this marriage is between Democrats, Republicans

are rare, between Democrats.

This study shows 4%, okay?

That means ideology becomes biology in one generation.

Like it's like an ethnic split, right?

It's at a minimum Protestant, Catholic, Sunni Shiite is Democrat Republican.

It's a crazy statement, biology, those groups kill each other historically.

Unfortunately, yes.

And that's what's like basically, for example, this Minnesota confrontation that happened

earlier this year was these two clouds getting printed out in the physical world.

Why were the Democrats running around looking for ice?

Because the blue meta organism wanted to fight the red and red organism in physical space

finally.

And it's not like Democrats are actually against the concept of strong borders in mass

deportation.

Why?

They wanted to deport ice, ice out, right?

They wanted Republicans out of Democrat territory.

Okay.

And so for example, there's this concept that has been going viral on Democrat channels

called soft secession.

And basically, it's taking all the, this is a, it's time for Americans to start talking

about soft secession.

Blue states are finally learning what red states have known all along.

You don't need federal permission to govern.

So invoking all the 10th Amendment rhetoric, you know, wargames scenarios for federal

agents show up, could you transgress further and further pass what is legal, right?

And so essentially, Democrat governors are filing lawsuits and so on to basically three

sources between Democrat AG say the same phrase keeps coming up.

The nobody wants to say publicly soft secession.

We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere.

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Let's get right back into the action.

What exactly would soft succession be?

For example, Newsom has said he does not want to enforce tariffs on China at California ports.

Whoa!

Okay, so because that is a, if you think about what that means,

that is a way for him to have like a left populist thing versus Trump, right?

And he can reduce costs in theory in California by taking Chinese goods.

And actually, so this is a thing that I don't think people fully get is you're going to see,

you're actually are already seeing Democrats lining up with China more, right?

For example, just to just be very concrete about this because I'm not saying this as,

oh, it's for example, in 2023, okay.

Newsom actually made a trip to China and he's actually the only Democrat who actually

was able to sit on stage with Xi.

And there's this long set of articles and so on where what Newsom said is he wanted to

he said this quote, is willing to be China's long term stable and strong partner?

Right? Welcome more Newsom's to come.

Okay, this is not an isolated article.

It's like, you know, welcome Newsom's to come.

Newsom willing to push California to be China's long term stable strong partner,

strengthen relationship.

California government says China's excessive benefit the world, right?

And the thing is that even in 2023, there's a 20 point gap between Democrats and Republicans

on China where Democrats want to cooperate more with China than Republicans do.

It's roughly like Republicans are more sympathetic to Russia, Democrats are more

sympathetic to China, roughly, okay.

And so as a consequence, you know, you're going to see, I thought it was going to happen with

Newsom first, but it actually happened with Carney and Canada first.

The Western left has lost DC, so turns to Xi.

Yeah.

And so the emerging effect, I'm going to talk about the forced diagram, right?

Democrats are driving the tech guys out of California, out of Seattle.

And they're going to bring in Chinese money in.

Apology, one thing that I've always been, I've always struggled with with your philosophy

is the geography doesn't matter part of it.

Now, seeing some of the things you're doing with the network state, I think maybe either I

misunderstood your philosophy or you've come to my side, which is that the physicality of it

really does matter. Walk me through how America breaks apart if this continues.

Yes. So the thing about network state and so on is it's cloud first land last, but not land never.

Got it. So say you start with an online community and then you crowdfund territory

because of course we're physical beings. But the land is just a parameter that's to say,

if you hold an impact theory conference, does it matter that much which city it's in?

No. The community matters first. Cloud first, land last, but not land never.

So first they see you online, they click the thing, then they come to the physical location,

but that's secondary and the community's primary.

Okay. Understood. Now give me now. How does that fight America?

Yeah. Okay. So my view is Mark Karney, his speech earlier this year, was the most important speech

since Trump came down the escalator in 2015. Damn. And the reason is that Trump basically said

that the West is losing to China and Mark Karney basically said whether you agree or not,

the West has lost to China. So Trump was basically we, you know, we need to push back like,

he was kind of like a turnaround CEO. There's a term used in the first term which was the flight 93

administration or the flight 93 election. Do you remember that? I remember flight 93. I don't

remember this statement about the administration. The argument for Trump in the first term was there's

an argument, basically an article in Claremont, which was called the flight 93 election. And basically

said, conservatives would always say the country's going to hell in a hand basket, but if you actually see

what's happening, it really is we need to hit the emergency button and Trump is at emergency button.

Now many didn't agree with this at that time and they felt the Trump was a radical move that

wasn't necessary, but the condition of the US has worsened since that point and some will argue

was due to it or whatever. I mean, there's truth to all of it. Okay. Point being, this in many ways

is the sequel to that. This is a flight 93 administration. They've rushed the cockpit. But

is the plane still going to crash? Unfortunately, I think it is. I think it's like, it's not something

where not everything can be saved. Like it's something where, like Rome did fall, unfortunately,

right? Like the British Empire, the sun did set on the British Empire. There's certain things where

the late breaking turnaround kind of thing just doesn't work and it hits the ground. Okay.

So what do I think it happens? I think what's already happening.

Carney's Canada is like a land bridge where if you visualize it, there's

Washington and Oregon and California, the Great Lakes states and New York and the New England states

and basically all the blue states border Canada. And what Trump said is that,

you know, he doesn't want Canada to become a drop-off point for Chinese goods. But it's

exactly what Carney is doing because he basically said that he's going to take away tariffs on Chinese

EVs. But more than that, he also said, and this was missed, that he's going to essentially allow

the supply chain. Okay. What does that mean? It means that he's talked about, we're going to

add all kinds of electricity to Canada. Canada has too many regulations or whatever to do that

historically. But China can do it. So the Chinese are going to build the Canadian electrical grid.

Also, if you notice, Carney is suddenly much more confident when he's talking about Greenland

and things like that. He said, if there's an actual military action Greenland, we can't tell if

Trump is kidding around or what have you or he's serious about it sometimes hard to tell. But

Canada and NATO treat it really seriously or they're scared of it. Fine. And also Trump said he's

going to invade Canada. That actually, I don't know if you saw the graph on that.

Basically, the conservatives in Canada were ahead. This was stupid. This was stupid.

Right? So, because there's a Canada we're way ahead. And then Trump said he's going to invade

Canada. And the problem is he had already lost the liberal Canadians and the liberal Americans,

but then he lost the conservative Canadians as well. And Carney just suddenly won. Okay.

So the thing is the speculation because Carney hasn't said this publicly. Why is he suddenly so

confident? He said, if there's any invasion of Greenland, then, you know, like Canada will resist

that because he'll have Chinese drones. That's wild, man. That is wild. And so the, and, you know,

like you can see Democrat influencers like Hassan. He's talking about China Maxing on his Twitter.

You know, right? So there's a there's a sense like a guy Alexander. Yeah, right. So

now the thing about this is Scott Alexander has this good concept of in group out group far group

where basically it's like it's it's an already saying your enemy's enemy is your friend, right? So

Democrats think their primary enemy is the Republicans. And the Republicans enemy is China.

And remember, the Democrats are like a information kind of thing, right? And the Republicans

are like a physical manufacturing thing. So the Democrats are getting like a new husband,

who's G instead of DC. That'll provide all the physical stuff, the manufacturing, and so on,

the Democrats are less good at. Meanwhile, Democrats are about how would they actually break apart?

Like if right now if California tried to secede while Trump was in office,

military incursion guaranteed. So just take a look what's having with ice, right? Like,

basically is that it's like a half military incursion, but is it working? Not really, right?

Kind of. It's it's not like the thing is it's all like a slap fest, right? It's not, um,

this is a hard counter. This is all early days. I want you to imagine. Right. Let's say that these

states do start breaking away much like the UK learned the hard way when you're not a part of Europe,

things don't get easier. They get harder. Very good point. Yes. So so actually there's a great book

called Disunion. Okay. It's actually about the American Civil War and the title of it is very good.

And even just you can read like the first few chapters and it just made something clear

that you sort of read in a dusty way in the history books, but I didn't fully viscerally understand

it till I read this book. And you know how people the the modern American interpretation of the

Civil War is it was about slavery and you know the South wanted to have the slaves and that was

absolutely an important component of it. But you'll often hear people also say something like

Lincoln wanted to preserve the Union. Right. You've heard that. That feels very abstract. Right.

What was the concrete thing? The concrete thing was many Americans have come from Europe and they'd

see in all the wars in Europe. And the wars in Europe arose from the fact that Europe wasn't united.

And because it wasn't united, you had all these guys fighting amongst each other.

And so Disunion was considered to be this crazy thing the southerners were trying that would lead

to a fragmented bunch of states in North America that would fight each other, tax each other,

they would lose economies of scale that would fight each other tariff each other. Basically,

they wanted the economy of scale and the peace that came with the Union. Like for them,

the Union meant peace, it meant prosperity, it meant unity, it meant a large free trade zone,

it meant the opposite of all the chaos and fighting that they had in Europe.

So in other words, in the same way, you know, like a lot of tech guys today think of decentralization

in almost a quasi religious way, like it is good to decentralize because it means freedom and

personal sovereignty and so on and so forth. Right. At the time, these guys thought of

centralization as good in a quasi religious way because it meant order and stability and scale

and strength as opposed to the anarchy of Europe. Because their centralization and decentralization

cycles in history, like once you're totally centralized, you want freedom and so on. And once

you're totally decentralized, you're like, oh, this is anarchy, I want order. That's, you know,

the Chinese have a saying which is like the empire long united must divide, long divided must unite.

Because they've been through many of these cycles in their history, right? Sure.

And Europe has as well, but it's like break up of Rome, rebuilding, break up,

unbundling, this call it different names. Okay. Point being that

disunion was something that the Republicans of the time opposed. I mean, you can argue

the party's switch sides, they switch sides multiple times, whatever. But they opposed it.

Once you can articulate their case for it, it's like the case against the 10th Amendment.

It's a case that you should have a strong union because otherwise, as you point out,

like think about Russia, Ukraine. They used to be part of the USSR. And now they're not.

And talk about losing an economy of scale. They're like killing each other by the hundreds of

thousands, maybe the millions, spending billions and billions of dollars on something which

within our lifetimes was a border you could just drive across and nobody would care at all.

Right? I mean, like it wasn't that easy to drive in the Soviet Union, but you understand my point,

right? Like that was simply not a conflict zone. But by decentralizing, it created one.

And actually, you realize this when you realize, think about how many countries have united or union

in their name. United States America, it's not a country, but the European Union,

the United, the Union of Soviet Socialist Republics, the United Arab Emirates, right?

Even, you know, like India, for example, like Russia is called the Russian Federation today,

right? India has a concept like union territories, which are basically like it's got a federal

government. Brazil, all the stars on its flag are like the individual states, right? The United

Kingdom, okay? The reason that people put united in the name is that it's so hard to do.

That's why they prompt you with the United States America. Like, you know, the people who

architected this, like that's why Ben Franklin had joined or die. You know, like the people who

architected this were really smart and they understood how artificial it was to maintain a union

over huge numbers of squabbling people. By default, you have lots of tribes that fight with each

other. That's also actually monotheism accomplishes the same thing where it's like one god rather than

end gods, right? So monotheism, decentralization, polytheism, decentralization, again, you have an

oscillation between these two, depending on where you are in history. Okay. So, so I'm granting

everything you're saying, which is that a breakup does cause problems, huge problems, massive

problems. It reduces the kind of scale, like, but we've actually already seen a preview of this.

You know, in 2008, like the money printing became a preview for the decade to follow,

like the $787 billion bailout was this like enormous thing,

completely unprecedented and then became precedented. One of the things that happened during COVID,

hard borders arose between states. Do you remember like Rhode Island and New York,

like the COVID cross-border thing, like even if the virus didn't actually abide by state borders,

nevertheless, you saw things that you had never seen before, like, people cared about the

Rhode Island, you know, border or whatever, right? So like Russia, Ukraine, it was a complete,

you nobody cared about that border suddenly became a real border, right? Another concept was like,

you know, California was saying it wasn't going to pay for California legislators who went to

red states because they disagreed with the social policies there, right? Okay. Another is,

obviously, the polarization we just talked about. Another is the, you have the mass migrations

from blue to red states. Huge exodus out of California and that's similar to partition in India,

right? Huge migration from Pakistan, you know, of Hindus,

India and Muslims went to Pakistan, right? That's similar to the blue and red migrations, okay?

And I could continue on this, but one other key point that happened during COVID that people

forget are the so-called interstate compacts, which is a tool that exists in the constitution.

Basically, state governors didn't want to wait for Trump to act at that time,

say, form like the Western states compact, the Great Lakes compact, the New England compact,

and is basically breakaway things that were unprecedented, but then became unprecedented.

You can go and look at that. The interstate's compact in 2020. So a lot of these muscles for like

hard state borders, interstate compacts, soft succession by Democrats, like, you know, lawsuits

against the federal government, left and right have been doing that and at the social level,

it's just been escalating, escalating. And I think a big problem with a lot of my American friends

when I talk about this, when we talk about, you know, like, where's it going to go, and so on?

They have a mental model that says, don't worry, the pendulum will swing back.

Right? They have a model of homeostasis where it always comes back to like an equilibrium like this,

right? There's a different model. Have you ever seen the Tacoma Nara's bridge in Seattle?

I grew up in Tacoma. I've been on it many, many, many, many times.

Fine. So Gallup and Gerdy, as you're aware, swung from left to right,

and then harder to the left and harder to the right to the whole thing just collapse into a million

pieces in the ocean. Yeah. That, I think, is a better model for what is happening now,

where if you go back and look at the 90s, like, I mean, you and I grew up in the 90s.

Nobody cared about politics then in America. It was like, that was like, being interested in politics

and was like, being interested in the bus schedule. You know, all people cared about where music,

movies, sports, video games, like, it was just this amazing vacation from history.

And you go back and you look in the Democrats Republicans were on the same page about a lot of

things. Republicans were much more moderate, Democrats were much more moderate, like, people go

and they will often use those old quotes to say, what happened? Yeah. Right? But what happened was

the Met Organisms upstream of them were nowhere near as desperate. Blues and Reds and Met Organisms

had much more of a food supply. They didn't feel constrained by China and the internet as they did.

So because they didn't feel desperate, they could afford to be generous. Democrats didn't feel

they had to tax everybody to oblivion. Republicans didn't feel like they had to be, you know, so

aggressive abroad. They didn't feel like cornered, right? These Met Organisms feel cornered. They

feel desperate. They feel they have to strike out. That's a big part of what we're seeing. And

and I'm very sympathetic and I'm empathetic to it, but I also want to be far away from it.

So like, you know, in the sense that what one thing that's happening now is blue America,

red America, and tech America are all taxing each other. So blue America is doing the wealth tax

on tech America. But it's also doing the China tax on red America where they're all

language China. This is the carny thing. Even though carny is not technically a Democrat,

he is aligned with them, right? Like a western left, it was called that, right? So the thing that

that tech guys prize the most, which is their businesses and their ability to innovate,

Democrats are going after that. And the thing that Republicans prize the most, which is their

country and their land, well, the alliance with China, which is burgeoning, they're going to go

after that. Okay. What are Republicans doing to blues and to tech? Well, to tech, they're going after

talent. They're stopping tech guys from assembling talent, which is their other lifeblood, right?

You can't bring talent from India. You can't bring talent from China anywhere near as easily as

you could. All these visas can cut off. And I understand why, but they're doing it. And

where are they doing to Democrats? They're going after the thing that Democrats love the most,

which is their global empire, all the like USAID or the NGOs, the universities, all the diplomatic

relationships, the prestige abroad. That was the thing that Democrat diplomats built over generations.

And Republicans are just like the UN, they're cutting the budget. All these things that Democrats

care about the most are dismantling that, right? And then finally, what are tech guys doing? Well,

with AI, that's the jobs tax on Democrats, right? And then they're also decentralizing overseas,

and they're opening offices in other countries because they need the talent there, right?

So all three groups, Red America, Blue America, and Tech America, are all fighting each other.

And I think what happens is, Blue America takes like the West Coast states and Canada and the

Great Lakes and so on. Red America takes like the Latin America, right? Red America pivots too.

I do think about what you said earlier, Bekele, Millay, Hernando, DeSoto, like the understanding

of American is actually going to change because it'll be like Democrat American and Republican

American and the Republican Americans are going to lean like Bekele is much closer to DeSantis

than Elizabeth Warren, right? So the term American puts Elizabeth Warren and DeSantis

in the same group and Bekele in the out group, right? Yeah, it's interesting.

But the actual correct grouping of conservative or libertarian or whatever you want, right? Latin

American has the Texas Miami Sun Belt is kind of region, grouping with Bekele and Millay

and Hernando DeSoto. And that feels like the actual ideological grouping, whereas the cold and

rainy Northwest and so on, that goes to the other side, right? All right, Bology, now that we

understand all of that madness, what are the smartest people in the world doing about it?

I would say so I think you can take an eye of the hurricane strategy and the eye of the hurricane

strategy would be go to Texas, go to Florida, right? And then you can also go to like many Americans

have ancestry in Europe, like they're Polish American, you can get a Polish passport, right?

So you can take an eye of the hurricane strategy or you can get as far away as possible,

liquidate, emigrate, accelerate. And I think actually location is much more important than

allocation. I think you want to get to, Dali also thinks this, I think you want to get to a place

where you trust the people around you and there's like a community there. And I think that's what

you should do. And do you have, you've talked about ascending and descending locations? Do you have

like a rough swag of where in the world is on the way up? Where in the world is on the way down?

I think within the US, I'd say Texas Miami are on the way up relatively, right? Like you can

actually build things there. So that's there. I think El Salvador's really interesting. It's a startup

state. I think, you know, Southeast Asia, India are going up. I think Eastern Europe obviously

it's got the Ukraine war there. But if that dies down, like I think the vice-grad states,

Poland, Hungary are doing quite well. I would have said Dubai and, you know, the Gulf, but of course

this Iran war has blown that up for a while, right? So your firm is just closed off.

And so the tricky part is there's no guaranteed safe haven. You know, you have to be like nimble

and agile. But those are places that I think one would think about. Certainly those places that

were off the map in the 20th century are getting on the map in the 21st. Okay, I got to jump.

Let's talk about biology. Thank you. Thank you so much, man. It was an absolute pleasure.

Appreciate it. Okay. Take care. Bye-bye.

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