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BERMAN AND THIEL ON THE LIMITS OF If you're enjoying this piece,


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MAIN February 09, 2019
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Russell Berman and Peter Thiel are hosting a Stanford class help you in the long term.
ABOUT
ARCHIVE on “Sovereignity and the Limits of Globalization and
PRINCIPLES Technology”. Matt Clifford of Entrepreneur First is hosting a
reading group where we discuss the syllabus. These are my
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notes.

Special thanks to Will, Matt, Alvin, Tom, Will and Daniel whose
reflections I'm summarizing here and to Jenny Brennan who
shared the links.

In the first week, we read “The End of History?”, an essay by


Francis Fukuyama predicting the inevitable victory of Western
liberal democracy as the best way to run a country, “Has The
West Lost It?” a short book by Kishore Mahbubani describing
how the West failed to play its pocket Aces and what it can still
do to rise. Stephen R. Platt's “How Britain's First Mission to
China Went Wrong” followed, detailing a failed British
diplomatic trip to China during the time of the Opium Wars.
Finally, Norman Angell's “The Great Illusion” taught us how
attacking other countries for territory cannot, at this time in
history, increase the wealth of the attacker.

Why this is important to study

There are several questions we as a group were interested in:

• How does Peter Thiel answer these themes and relate


them to investing?

• Does liberal democracy still work? Is it preferable?

• Is globalization helpful? What should the strategy of the


West be?

• Is technology to blame and what can it do to help?

Bias

The group was strongly left-leaning and capitalist with positive


attitudes towards technology, entrepreneurship and personal
choice.

My goal is not to present all the different angles in which the


books were right or wrong, I will leave that to political analysts.
I'm trying to synthesize a simpler framework in which the texts
fit.

Western Liberal Democracy has worked really well

After the end of the Cold War, the Western countries had won.
Their citizens were proud and residents flocked in to
experience growth and success.

For the capitalist, liberal democracies offer a safe haven to


take risks with strong rule of law and clear and predictable
taxation. These principles favor wealthy elites, but tend to
work well for everyone in times of high productivity growth
when there are returns to share.

The common interpretation of Fukuyama was that this triumph

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Berman and Thiel on the Limits of Globalization: Week 1 — PETERIS ... http://www.peteriserins.com/posts/2019/2/9/berman-and-thiel-on-the-limi...

is a direct byproduct of the Western liberal democracy, or at


least that this dominant position can somehow be used to
“convert” the remaining world powers.

In fact the victories stemmed more from the West's timely


MAIN scientific and technological advances. Other countries did well
not to import Western liberal democracy, instead focusing on
ABOUT importing technology.
ARCHIVE
But when productivity growth falls low, democracy fails to
PRINCIPLES
deliver
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UK's recent productivity slump reflects the tensions in the


economy which have led it to shoot itself in the foot. When the
pie gets smaller, we focus on how it's allocated. Brexit hopes
were all about dividing that pie better: less for Europe, more
for the NHS; less for EU immigrants, more for the British
worker; less for the globetrotting cosmopolitans, more for UK
lifers.

When globalization goes unchecked, democracy fails to


deliver

Much like ahead of the Opium Wars, the West is experiencing


a trade deficit with China. A failure to reallocate steel industry
workers among other groups has led to systemic
unemployment despite increasing overall prosperity. Does this
call for better management of globalization? Or a complete
reversal?

And when money is thrown away “governing the world”,


democracy fails to deliver

Mahbubani's critique of the US was that it misused its role as


the economic leader to attempt moral leadership of the world.
This had grave consequences not only in stirring religious
movements and setting a bad precedent for future leaders, but
significant economic opportunity cost.

Trump

For extra credit, see if you can link Trump's campaign thesis
with the above 3 points. There is already a strong self-
awareness of these issues in American politics albeit with a
weak understanding of how to fix them.

A new model

The West has watched with admiration how a number of


different Asian models have succeeded. At their core - an
emphasis on prosperity, “good governance” and *predictable
Rule of Law. Create lots of wealth, distribute it well and don't
obsess too much about freedoms or rotating representative
government.

(*Predictable Rule of Law is my loose description of a legal


system where there is always a way to make space for your
commercial activities. In Switzerland, you can choose the right
Canton. In China, you have guanxi)

The risk of ignoring prosperity

The path for the West seems to call for following these models
a little more: stepping back on global affairs, refocusing on
technology and productivity growth, improving distribution of

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Berman and Thiel on the Limits of Globalization: Week 1 — PETERIS ... http://www.peteriserins.com/posts/2019/2/9/berman-and-thiel-on-the-limi...

wealth while retaining the freedoms and values that are core to
Western society (Mahbubani).

Countries that fail to achieve prosperity, have to gamble for far


more extreme outcomes. Russia has not been able to match
MAIN the controlled economic success of China, nor inspire a
generation of entrepreneurs like Western liberal democracies.
ABOUT Its last hope is to pray for a Goldilocks moment in AI military
ARCHIVE development that could let it shine once more on the world
PRINCIPLES stage.
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Democracy still works

As China is stepping on to the world stage, it's inevitably trying


to shift from a copy model to foster organic technological
innovation. It remains to be seen if its current approach can
sufficiently inspire Western-educated Chinese entrepreneurs
to bet their chips on a country where their wealth may be at
risk.

In this important sense, the Singaporean model feels more


sustainable.

But we also need to reject the notion that democracy has


somehow failed. Even the calls for Brexit and Trump reflect the
informational uncertainty we have about different outcomes
and could be long-term net positive as shocks to the system.

My hypothesis here - that democracy is facing a crisis in


decision-making. The move from print to digital has shifted the
media's ability to give the public what they want. In analogy to
the US fast food crisis, by giving us news that we want in order
to remain profitable, publications have given up their crucial
role in informing the public about political outcomes. Not a
single economic model of Brexit implications was widely
explored and the markets came to a very different conclusion
than the voting crowds. That doesn't feel right.

We touched on many other topics like loyalty, military action,


size of the ideal state that I will expand on in the coming
weeks.

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