I found a very detailed and well argumented opinion piece on X that struck really hard on this topic: https://x.com/BetterCallMedhi/status/2027625247068065864
Here's the plain text in case you don't want to go to X:
>"I spent time in Shenzhen last year and when I saw Merz come back from China saying Germans need to work more I immediately knew what broke his brain because I lived the exact same cognitive shock
my first week in Huaqiangbei I burned through 4 prototype iterations of a motor controller board for less than a thousand bucks total, back home a friend was working on something similar and spent over 12 thousand for a single revision that took almost two months to arrive
when you live that contrast in your own hands with your own project something permanently shifts in how you see the world and it goes way deeper than speed & cost
what Shenzhen actually built is a collective learning organism, imagine 20 PCB fabs 15 injection mold shops 30 component distributors and a hundred firmware freelancers all within a 2km radius, looks insanely redundant from the outside until you realize redundancy is actually information density in disguise
I watched this firsthand with an injection mold supplier I was working with, this guy had seen a hundred founders iterate similar thermal designs over 6 months so he proactively modified his tooling before I even opened my mouth, he knew what I needed before I knew what I needed, the intelligence lives in the relationships between the nodes and it compounds daily
the west thinks about manufacturing as a cost center you optimize by centralizing…
China accidentally built a distributed neural network of manufacturing intelligence where knowledge diffuses horizontally across thousands of agents faster than any single western company can process internally
so when Merz comes back and says we need to work a bit more I think he saw the problem but COMPLETELY misdiagnosed the solution, telling Germans to work harder is like telling a horse to gallop faster when the other side built a combustion engine
the gap is ARCHITECTURAL
it’s ecosystem density, you need a custom connector in Shenzhen you walk 200 meters, in Munich you send an email and wait 3 weeks
it’s iteration speed, parallel search vs sequential optimization at the system level, it’s risk tolerance, Chinese founders ship something broken on Monday fix it Tuesday ship again Wednesday while European companies are still in the approval phase for the pilot program of the feasibility study…
and Merz only saw the surface, what he missed is the tier 2 cities like Hefei Chengdu Wuhan replicating the Shenzhen model at scale right now
BYD going from irrelevant to outselling every european automaker combined in roughly 5 years, Huawei building its own 7nm chip under maximum sanctions when every analyst said it was physically impossible & behind all of that a government that treats advanced manufacturing as an existential national priority while europe debates whether AI needs another ethics committee
I think what we’re watching is the most asymmetric economic competition in modern history and most western leaders are still framing it as a productivity problem when it’s actually an ontological one
Europe & America are optimizing variables that China stopped tracking years ago meanwhile China is compounding on dimensions the west has no framework to even measure Merz at least had the courage to name it out loud and I respect that genuinely but working a bit more inside a broken architecture just means you arrive at the wrong destination slightly faster
Europe’s answer to China is always a committee, a regulation, a 5 year strategic plan and a press conference
China’s answer to anything is ship it tomorrow and figure out the rest next week
one side is trying to predict the future the other side is building it live and adjusting in real time, that asymmetry alone tells you everything about who wins this century "
> Europe’s answer to China is always a committee, a regulation, a 5 year strategic plan and a press conference
> China’s answer to anything is ship it tomorrow and figure out the rest next week
Yes, god knows we'd never see the Chinese delivering 5 year strategic plans, and they're notably committee-averse.
A large part of China's success is they've been intentional about what they're doing - they've _had_ a strategy, whereas every time we consider that in the West, we're told that's a loser's bet and we need to just let the market do its thing.
It's not the 5-year plans that are driving China and most of the Chinese economy is untouched by the 5-year plans.
Is there realistically a path to the west learning any of these lessons without going through WW3?
It’s not like any of this is news. My newspaper of choice has been telling me about how fast china moves, in vivid detail, since at least 2018 - others probably knew much earlier than I did. I watched a graphic documentary on YouTube about Shenzhen in 2019 that gave me all of the same information in this tweet, minus the accomplishments that have happened since then.
My own eyes have seen how their consumer goods have transformed in a very short time. Maybe other Americans don’t notice because the key categories (tech, cars) have so much protectionism. I’m not sure about the Europeans.
The west is better at coming up with excuses and red tape than actually solving problems, it seems.
> Is there realistically a path to the west learning any of these lessons without going through WW3?
> The west is better at coming up with excuses and red tape than actually solving problems, it seems.
Most of the west still has this paterno-colonialist view of the world, we're too complacent, too sure of ourselves, it never changed, just look at how Trump talks about Iran, he is completely clueless about the history of this region of the world, they'd nuke themselves before accepting the unconditional surrender he asked for... It was the same with China: "let's move all our industries there, they are too dumb to figure anything out and they'll will be our cheap labor forever", well no, they're just as smart as us and as soon as they reached the threshold necessary to provide education to the mass they also reached our technological level.
It mostly is over for the west as we know it, demographically, politically, industrially, soon militarily, people who don't see it are straight up blind or historically illiterate, we're in a end of the Portuguese or British empire situation.
> they'd nuke themselves before accepting the unconditional surrender he asked for
To me it's a bit more complicated than that. Unconditional surrender can be achieved ... with boots on the ground all over Iran on a penetration level last seen in WW2. If you think Iran's government is as simple to decapitate as Iraq, think again.
Then you get the unconditional surrender of a government. Is the average Iranian amenable to tolerate this situation and get its terms dictated by the US? Nope, they're not the Germans in '45. You'll get decades of insurgency; if you think ISIS as a consequence of the Iraq Invasion was bad, look forward to even worse.
At the end of the day, Trump always chickens out. Look forward to the end of the American bombings the second the new leader gets him on the phone. The Israelis that's another thing.
Only fundamentalist Iranians would resist like that. The regime is on very shaky ground in Iran. The avg Iranian would absolutely have a US led peace.
> with boots on the ground all over Iran on a penetration level last seen in WW2.
It's four times larger than Iraq, with a much tougher terrain and they've been setting up militarily independent regions for the last 40 years specifically in case this would happen. The current operation at week 1 has already a worse public approval than the Vietnam war after 5 years of american dying in ground operations.
I'd love if they went in because it would precipitate the end the US empire by a good decade
>The current operation at week 1 has already a worse public approval than the Vietnam war after 5 years of american dying in ground operations.
Do you have a source for this? Numbers I find online vary wildly.
Edit: I found Al Jazeera was the one saying what you said, but I can't classify them as objective and accurate in this case, sorry.
If the war with Iran is indeed that unpopular we'll see at the midterms.
You can count Al Jazeera as objective and accurate, they have no interest in Iran's regime ruining the country anymore. Qatar just intercepted a bunch of Iranian missiles.
>Europe & America are optimizing variables that China stopped tracking years ago
Net income?
>looks insanely redundant from the outside until you realize redundancy is actually information density in disguise
Everyone knows redundancy costs money today in exchange for security tomorrow. Presumably, Chinese executives are earning more by keeping redundancy, whereas executives in Europe and the US earn more by removing redundancy.
How does China incentivize its executives to spend money on redundancy? I have to imagine it's some type of top down system that fights against personal interests to advance the interests of the tribe (obviously at the expense of personal liberties).
Doesn't necessarily have to be top down. It could be cultural, the quarter-by-quarter market economics incentivises "money today" (just look at all the disasters caused by poor maintenance) but cultural norms of long-term thinking could drive prioritisation of "security tomorrow". Also, a sense of personal duty and honor instead of accumulating money being the sole arbiter of social status.
It's not redundancy, it's capitalism.
There is a large number of competing and overlapping suppliers because they're all competing for business and none have gained market dominance.
The US and most of the west is largely in a post-capitalistic market, where competition is no longer necessary because monopoly/duopoly status has been reached and segment leaders can simply use their capital to prevent challengers instead of competing on product/service quality, and margins can be widened and quality can decrease because there's no other option.
To me, it seems the solution is to make it possible again for smaller more agile players to compete against bloated and stagnating established companies. The large legacy companies are preventing innovation to protect their domain instead of innovating to keep up.
> segment leaders can simply use their capital to prevent challengers instead of competing on product/service quality
This is done through regulations. If you are the market leader, you have the resources to comply with new bureaucracy (that you lobby for through standards organisations) and you don't really want to do much risky new development so ossifying your product is fine. That makes it really hard for new competitors to enter the sector.
Standards and regulations are simply one tool, and not even the most common one. In the US auto market for example, standards besides FMVSS (and IHS testing practically speaking) are purely optional. You can read FMVSS for free and compliance is self-certified. Emissions regs are slightly tighter, but not a hurdle for EVs.
And outside automotive there's plenty of leaders that don't dominate based on regulations. Google search doesn't dominate based on regulations. Spotify doesn't dominate because they enshrined themselves in copyright law.
It's also done through acquisitions, anticompetitive practices, exporting externalities, and exploiting consumer information asymmetries.
Some Hackers news folks like to downvote legitimately good comments like yours.
I agree, China has more capitalism than Europe (despite calling themselves officially "communist"), and soon it might have more capitalism than US and Canada as well, and this is the main reason why they are succeeding. China currently has much less grift than Europe.
>Net income?
Whose income? The automotive engineers being mass layoffed?
It’s one of those ironies in power structures, how a ‘communist’ society can act as turbo capitalist one and visa versa. It’s a mistake to think that just because things are one way at the top they’re the same way all the way down the power structure. Even with heavy corruption there are competing corrupt entities which can lead to a healthy competition of governance as an emergent behavior. Dysfunction at one level efficiencies at another. Corruption is self corrupting so it’s difficult to maintain at all levels.
In my view much of the ‘corruption’ in the west takes the form of very legal financialization, this massively rewards consolidation as the high debt to equity ratios means low interest rates are paramount and combining two entities allows one to act as insurance for the other lowering the risk component of the interest rate allowing the entity to out compete the remaining entities. Once reaching a certain size the company becomes too big to fail and the risk component merges with the US government. Since the US government is very receptive to donations these companies are in effect able to form an oligarchy. Compare this to China where companies are subordinate to the politicians.
I think the West overestimates the deleterious effects of corruption of our competitors and underestimates our own systemic (and legalized) corruption.
> How does China incentivize its executives to spend money on redundancy?
IMHO, China has two parallel hierarchies of status - one in the ruling party, other in private sector. So the ruling party can maintain the capitalist competition, and dictate overall industrial policy, which fuels the innovation.
In the West, the rich people owning capital captured the political class, so there is only one status hierarchy now - of capitalists. This hierarchy ossifies and becomes increasingly resistant to competition - why invest into something new when it will most likely cause your individual wealth to decrease?
I think this manifests as the wealthy class increasingly speculating on the rising price of assets and extracting rents from them, rather investing in productive infrastructure. So the neoliberalism (capitalism) is in a sort of tragedy of commons, where wealthy individuals benefit more from this financialization rather than actual production.
The West avoided this in the past by having strong unions and middle class controlling the policy through democracy, which balanced the accumulation of wealth. If China can in the future avoid this (or other) trap, where the status elite ossifies and prevents investment in the interest of whole society, remains to be seen.
> China accidentally built a distributed neural network of manufacturing intelligence where knowledge diffuses horizontally across thousands of agents
I find it difficult to take statements like this seriously.
China has built an incredibly dense manufacturing zone. They've done so by manufacturing more cheaply than other countries do, a key element of which is paying workers less than any European country would be able to do. The rest of what's being described is just what falls into place once you've created that dense, cheap in demand manufacturing zone.
> a key element of which is paying workers less than any European country would be able to do
Not true. Manufacturing labor costs are higher in China than in Eastern Europe. For electronics industry I mean, not sweatshops for clothes and sneakers and aliexpress knicknacks. China stopped being the place to go for cheap labor a while ago. You go there for the expertise.
Not only for electronics, for metallurgy too.
"distributed neural network" is just AI-bro speak, most likely generated by an LLM.
So I would just ignore that whole comment.
What you said is the truth.
Cheap, efficient, fast manufacturing process. I am a software dev, I happen to have worked with Chinese software APIs related to manufacturing and logictics. Move fast and ship broken stuff on monday, and forget to fix it - that is the reality, but somehow people expect they maintain some level of quality now.
Just try working with products like TikTok, their APIs and documentation, the endless headache you will get will show you how they do itterate, but quality is still only barely a factor.
I've worked in the automotive industry, as an embedded dev, some years ago.
The software used by the automotive industry, mostly German-written, is absolutely terrible.
Funnily enough, I've worked with some Chinese mobility startups, and I'd say it's exactly the same. Not worse, not better either.
100% agree. I am whitnessimg this on a daily basis working for a german company that develops both hard and software for indistrial machines.
Looking back, people had the exact same kinds of reactions (regarded as cheap trash => cutting edge) to the Japanese electronics industry 40 years ago, with the eact same takes (overstated rationalizations focussing on process, organization, culture; I could probably find like 20 different books discussing those in excruciating detail in a minute).
But the simplest explanation is just basic economics and nothing else (growth being fueled by cost difference, mostly from cheap labor, and to a far smaller extend network effects).
I predict Chinese growth slowing down exactly the same way other countries did as wage gaps get smaller.
This is more like inefficiency in sheeps clothing. Being able to iterate that quickly and cheaply relies on spare capacity and people making salaries 10-25% of what Germans get.
8 years ago, a new unskilled factory worker in china made the equivalent of 700-800€ hourly, with free food and accommodation (this cause issues in rural areas but this isn't the subject).
I assume salaries have gone up soon since, but even if they stagnated, what's the entry-level pay for unskilled factory work in Germany? Just to be sure it's more than 21k.
It’s not that much higher, actually. I just looked at some unskilled production line job offers, and looks like they start at 15-18€ per hour. Scale that to full time, and it’s less than 30k€/year - and of course without the free food and accommodation that you mentioned.
Sorry, don't know why I put hourly (phone autocorrect probably), it was monthly, sorry
Source for this? That sounds insane.
I assume they meant 7-8/hour.
>people making salaries 10-25% of what Germans get.
The likes of Huawei pay their engineers six figure salaries plus tonnes of perks. You're crazy if you think skilled Chinese engineers make only 15% of those in Germany. All their engineers would emigrate abroad if that were the case and they wouldn't be making domestic CPUs and AI accelerators.
> All their engineers would emigrate abroad if that were the case and they wouldn't be making domestic CPUs and AI accelerators.
Maybe, though nationalism may play a role here, especially if they believe themselves to be the underdogs. Not everybody only optimizes for money.
>Not everybody only optimizes for money
Yeah but it's bad faith argument to say they work for peanuts. This is western colonial mindset to assume China's success is due to poverty wages. You can't build a semiconductor industry on that.
Source?
>Here's the plain text in case you don't want to go to X
Nitter to the rescue!
https://xcancel.com/BetterCallMedhi/status/20276252470680658...
Meanwhile our top VCs continue to invest in SaaS, AI (new SaaS), and crypto (ponzi returns) because I guess the only thing that matters is widening the wealth gap and enjoying the yacht life.
I work in VC and make early stage investments primarily into industrial or other physical industries. It often feels like an uphill battle trying to get people to take interest in this stuff.
My most recent company sources from China because the US infrastructure can’t supply what we need. This is a company that will be worth billions when it scales up and the US literally cannot supply it because our factories are so ancient.
It's also that the west collectively convinced themselves that the economy could be built on high value knowledge work and services and manufacturing will be handled by someone else. Of course people would rather live near some offices, or maybe a workshop than a heavy industrial site...
The transition of my country from a socialist to a western capitalist system included a mass closure of heavy industry and what remains is dying a slow death of high energy costs. I remember when a coal mine closed there were all those marvelous ideas how the area would transition to high tech programming jobs; the thing that actually saved the area was a fuse manufacturing plant.
Where is this, Poland?
Unlikely. Manufacturing in Poland is booming, not a slow death as GP said. Maybe Romania or Bulgaria.
Thanks.
This diffusion requires a different attitude towards IPR. Western countries prioritize protection of past investments (or dometes just the first to stumble through a gate or file first).
This is brutal truth
Truth that not many are ready or want to hear.
This is an excellent analysis of the issue.