#62 | What's a superpower?

The resilience of world powers and the hype of crypto.

There is a lot of hype around crypto. Simultaneously, there is an underappreciation of traditional institutions' reach and resilience. This, I fear, is a mistake. As we head into 2022, I think the former crypto community should interact with the latter and plan to make institutional changes from within, not without.

Recently, over a Heineken Zero, my most politically plugged-in friend told me that he expected the big challenge for the British government (and the US, for that matter) over the next decade to be the rise of China. 

A more assertive China is a certainty. It means a somewhat scared (and comparably weaker) rest of the world. In the same conversation, I said I thought the more significant challenge was the disrupting influence of crypto. I thought crypto is, under the guise of geeky unsophistication, ripping the smartest out of 'traditional' industry, in a kind of gold-rush, and toward a truly global untaxed market, beyond the reach of any particular state. 

I was wrong. While I think there is and will continue to be a brain drain to a utopian crypto world (for that matter, to Portugal), on further reflection, we're some way away from it. The wholesale replacement of the global monetary system that I was indicating might happen, which would be very destabilising, is not as close as many of these Techbro's hope (me included). The co-founder of Coinbase, Fred Ersham, has estimated we're ~10% towards a global replacement of crypto and the financial system; I feel all of the work will be in the last 10% (as with most things). In contrast, he thinks we're 1% or less towards a new type of politics governed by crypto. 

Industrialised states' abilities (however poorly orchestrated) still have more 'real' influence on us than many of us recognise: their ability to either print money, disseminate effective propaganda, start wars, or enforce lockdowns remains unprecedented. No coin is even close to this industrial-scale power over people; no coin has orchestrated an uprising, political revolution, or fought a war. This control is, perhaps, the remit of DAO's. Yet, today they are essentially non-violent, and I wonder how they will fair when challenged by state governments. Likely, they will turn increasingly anonymous and undertake 'Anonymous' style gorilla cyber-warfare, which, while influential, is not easy for the masses to rally around.

In contrast, the rise of China is more significant as a short term destabilising influence, even though it's a long-time coming. But this destabilising influence is not so much from outward aggression but a rebalancing of the world powers. A recovery, as it were. This is a Sino-centric view but is true over the long term. We somehow forget the striking truth that, in the 15th and 16th centuries, China accounted for 25% to 30% of the global GDP. This fell below 5% under Mao and during the revolution in the last century. Today China's GDP comprises 17% of the world economy (on par with the US). Since the 1989 collapse of the USSR, America has been a lonely superpower; this changed in the last two decades. China, in China’s eyes, in reclaiming her place in the world.

So, through the lens of GDP, China is not developing but has redeveloped as a world superpower. China, in its current arrangement, albeit with the addition of Taiwan and Vietnam within its borders, is ~4,000 years old. 

A wonderful example of this history is China's use of the lessons of Confucius. Confucianism is one of China's pillars of thought; it's an organising system (per Wikipedia: "Variously described as tradition, a philosophy, a religion, a humanistic or rationalistic religion, a way of governing, or simply a way of life"), written in 500 BCE. Confucius' teachings include "What the superior man seeks is in himself; what the small man seeks is in others.", and "In a country well governed, poverty is something to be ashamed of." They are all beautiful. 

This long-term’ism is uniquely Chinese and should not be underestimated. No other country, nor politician, regularly defers to lessons written in pre-Roman times to decide foreign policy. To impress the point further, no one in British politics has the confidence to draw on the lessons of history in the same way. Moreover, Sun Tsu (who you'll know if only from business strategy), also from the fifth century BC, remains a pillar of the Chinese military strategy. History repeats and the Chinese know it.

By contrast, Satoshi's Bitcoin white paper was published in 2009; it's a recent development on the world stage. (Nevertheless, it's achieved a lot in 12 years).

With a rich and long history in mind, China has the remarkable ability to think on longer timeframes than any other country or political movement. For example, the Opium Wars of the mid-nineteenth century are largely forgotten British, but for the Chinese, they remain a recent embarrassment. Moreover, China's leaders have repeatedly said they are willing to wait for 100 years for Taiwan because this is not long in their countries history. I wonder if people in crypto will have the same patience.

I am not saying that crypto is not disruptive. It is, and I'm personally very exposed to it being triumphant. Rather, more disruptive and powerful forces are still present on the world stage: These are essentially centralised and non-crypto. In the UK, amongst our generation (and maybe older, but definitely younger), there is a systemic under-appreciation of the influence of politics on our lives.

The core failure of democracies is their existential dislocation from reality and their loss of public confidence. This failure does not mean the failing institutions have disappeared, however. They are now disrespected, rightly, but unhelpfully. It means that the most brilliant people in society underestimate their reach, leaving the complex problems (the solving of world hunger) and world power to a generation that can't (or won't) use Siri. This is dangerous.

Live well, 

H 

My week in books 

I'm resuming this section this year as it's fun. The Ascent of Money by Niall Ferguson: He blazes through history from the dawn of writing (which was, actually, the dawn of money, as that's what people were writing about) through the creation of currency, debt, the bubble's of the Tulips, South Sea, and the banking innovations from Venice, Amsterdam, and London. Written in '08, and revised a pre-Covid, Ferguson was right about the crash he published amidst (just as the government bailed out Northern Rock). Today, we live in an unthinkably interconnected financial system, which remains vulnerable to our human instincts, and, being debt-laden and automated, is brittle. I'd love to read his views on our economic prospects following the pandemic.