Why Think Global?

Speaker

I've got sunshine on a cloudy day When it's cold outside, I've got the month of May. Everybody say! I guess you say. What can make me feel this way? It's my girl, my girl, I'm talking about my girl, my girl, I've got sunshine on a cloudy day. It's time for That Was The Week. That Was The Week is usually a Friday show, sometimes a Saturday, not though a Sunday. And the reason for it is I've been rather global this week. I was just in Manila in the Philippines at a conference with Maria Ressa and the Rappler gang. So I'm just back and I couldn't resist doing a show. And as it happens, Keith is not acting global. He's thinking global. That's the title of this week's That Was The Week newsletter. Why think global? China, ships and airplanes. And he blames me for this. He says that I wasn't allowing him to talk about nation states, but he's defiantly going ahead anyway. Why is it my fault, Keith? No, I'm not blaming you, Andrew. I'm just acknowledging that, you know, the discussion of nation states isn't one you normally welcome. I don't mind talking about nation states. I just think you use it as a term to describe any kind of government you don't like. I really describe it for small thinking. It seems to me that just as institutions, nation states, which are, you know, historically been the biggest thing we've ever known, are now too small to be able to govern. The non-national elements of human life are so all-encompassing that a nation state is an inappropriate control or regulation point because it hasn't got the ability to deal with all the variables. So I think one of the issues for me is I don't know how you use the term. So is China a nation state, even though it's really more of an empire and many different nations? Is Russia a nation state? Is America a nation state? Everything is a nation state that is formally recognized by the UN.

Speaker

So your piece this week addresses this issue of globalization and de-globalization and shall we say de-de-globalization. And it works off an interesting piece from Noah Smith suggesting that the next phase of globalization is going to be, and I'm quoting him here, it's a very Silicon Valley kind of word, awesome. What's the debate, Keith, on globalization? What are most people thinking these days? Well, there isn't a simple answer to that because there is at least two major lines of thought. And it goes right down to the meaning of the word. Globalization is used by many people, including, for example, Trump, as a pejorative. That it represents people thinking beyond their country in a way that puts their country second. And it's often associated with bigotry like anti-Semitism where globalization equals external control by unknown actors like George Soros, for example. So there's a pejorative use that combines bigotry with nationalism and a hatred of tech, big tech and capitalism in general. And free markets, essentially, free market capitalism, because markets, in contrast to the physical reality of passports and territory and seas and land, the markets don't necessarily acknowledge those kind of geographical boundaries. Right. And then there's a more positive use of the word, which is the human race becoming where progress is focused on things that represent global change. The Internet being a great example, cross-border money flows, travel, airplanes, the ability to FaceTime people all over the world, global structures which are broken through any kind of constraints that history and geography may previously have given to the local experience of a human being. Human beings can now experience things way beyond their local sense. And then in the middle, there's the challenge, which is, well, if we are more and more global, how does democracy survive? Because democracy's unit is a nation state, elections and national or local. So that gives rise to all kinds of questions about what does democracy look like the more global we become. And I think all of those issues lead to there being many points of view. And people find it hard to disambiguate economics of globalization, the politics of globalization, the social implications of globalization and the military implications of globalization in like a four layer cake. And to me, they're all related, but they're different.

Speaker

So we live in the age or we did live in the age of globalization from maybe the 1970s through to the beginning of the, certainly the first couple of decades of the 21st century. Why do you think, and this is debatable, but there's some truth to it. Why is globalization stalled? Is it simply because of a populist nationalism, whether it's a Trump or a Modi or the Chinese or even a Joe Biden? Assuming that economics is really ultimately a zero sum game. Yeah, I think what happens, and we've seen it for the last 150 years, is that globalization stalls when the self-interest of great powers becomes to fight with its peers. And when that happens, national interest gets to dominate politics in a stronger way. The root of that is economic failure. So as your economic situation deteriorates, even if only relatively, and you see rivals challenging you, you tend to become, at the political layer, much more introspective, you know, one nationist. And the whole MAGA thing, Make America Great Again, implies that it's no longer great. And that idea that it's no longer great comes from economic underpinnings. There are realities of the globalized world where some, maybe not nation states, I'm not keen on that word, some states or some parts of states do well, others don't. I mean, you can think of Brexit, for example. Parts of the UK have done very badly out of the reaction to globalization, whereas other parts of the world doesn't seem to have been impacted. So there are winners and losers, Keith. Not everyone is a winner in globalization, are they? No. In fact, you know, if you divide globalization into two types, a kind of a political class top-down style, which the EU parliament is a good example of, when elites get together and decide to create institutions at a higher level of abstraction, you could argue that Brexit happened because of the ordinary people's negative reaction to being governed from too far above by an alien, you know, not representative institution. So ordinary people experience globalization negatively, but they also experience economic decline negatively, which fuels nationalism as well. And both things are true at the same time. And the only real way to prevent deglobalization is self-confidence in people. And self-confidence in people is super hard if economics isn't making it possible. You're originally from a working class part of England, Scarborough. I don't know the numbers, but I'm guessing most people in Scarborough voted against the EU. They voted in favor of Brexit. Were they voting as nationalists or were they voting as globalizers? Because, of course, on the one hand, as you suggested, they're voting against the top-down bureaucracy or technocracy of the EU. On the other hand, they were, in theory at least, voting for the idea of Britain going it alone and becoming the Singapore of Europe, which is a very globalist idea. Yeah, I think they were mainly mixing up several different things at the same time. I think it'd be very hard to find people that only had one answer to that question. I do think that there was a kind of a somewhat democratic sense of resistance to the EU parliament. I also think there was some anti-immigrant sentiment, not in everyone, but certainly in some people. I also think that there was almost no optimism about Britain as a global player outside the EU. It was a much more introspective decision. And I would say that what I describe as bottoms-up globalization, led by innovation and technology, almost nobody believes in. I think I'm quite rare. Well, what about Smith? The reason I don't always like talking about nation-states on our show is because it's supposed to be a show about technology and this week in technology rather than this week in politics. But what does Smith say? Why is the next phase of globalization going to be awesome? Is he suggesting that de-globalization is a myth? No, he starts with a good idea. And that is that globalization is permanent, but takes different forms from time to time. And he looks at the specifics of the current world with the demographic rise of India, Nigeria, Indonesia, parts of Asia, and the shift in general of value and money from America to Asia. Right. And he begins his piece. And the piece is called The Next Phase of Globalization is Going to be Awesome in Noah's Opinion. And I'm quoting him. The G20 summit in New Delhi felt like the dawn of a new era in both global economics and geopolitics. So do you agree with him? I mean, aren't these things just marketing events? Well, they are, but marketing is the superficial expression of strategy. So underneath marketing, once you unpeel it, each nation has a strategy. And, you know, Biden right now is desperately trying to befriend India to stop China being India's best friend. And China and India are at loggerheads over borders, but are together in brick. And if you look at the expansion of the bricks from six to 12 countries, you start to see a different world beginning to take shape. Smith makes the point that, therefore, this isn't really a story of the retreat into nations, the decoupling of the world, the carving up of the world. What it actually is about is the reintegration of the world around a new center of gravity. And what is this center of gravity? You know, he's not super specific, but the implication is that China and India are a big part of it. But China and India are enemies and they offer very different political and economic systems. If you call it, he says he makes the point that the focus of industrial globalization is shifting from China, from China to India, Southeast Asia, Japan, South Korea, that there's an opportunity for the US and Europe to invest in those markets. But that's where the center of gravity do. And this new wave of globalization, he says, will create opportunities for resource exporters like Brazil and South Africa to sell materials not only to China, but to others. China won't vanish behind an Iron Curtain. It will play its own important role in the wave of globalization, investing in and exporting to the next crop of developing countries. So he's really focused on the rise of the much larger developing countries as a place to invest and to export to. That's his definition of new globalization. It is fairly forward thinking. He may even, from a timing point, you'd be saying this a little bit early, but he's probably directionally correct. So there's a recalibration of power in the world from North America and Europe to East Asia. But that's still a world of nation states, the Japanese, the Koreans, people in Singapore, China, of course. No one's talking about internationalism here. No one's talking about pulling the borders down. So what is this has to do with nation state? Well, so if you look at the history of nation states, it's a history from absolute independence through to absolute interdependence. So globalization is the word we use for the interdependence of nation states. It doesn't mean nation states don't exist. It doesn't even mean they shouldn't exist. But it means they're less and less relevant all by themselves. They're only relevant through their relationships to others and increasingly so. So the world GDP, the proportion made up by cross-border values, is just grows and grows and grows. So it's a more subtle discussion. I personally define internationalism as something a little bit different. It's a longer term word that talks about as nation states become more and more irrelevant, democracy will rely on global institutions that are accountable, existing as well as local. But I mean, you do a bit of a Steve Gilmore here and you quote John Lennon's Imagine, imagine all the people living for today. Imagine there's no countries. But what kind of institutions are these? The United Nations and those sort of internationalist institutions. Firstly, they're very much top down. And secondly, they seem archaic in many ways, often corrupt and useless and irrelevant. They never do anything. One of the few things I agree with Donald Trump on is that the United Nations is useless and it's captured. Always has been. So what's an example of... So I'm giving you your little time to imagine. What is a concrete example of the kind of institution that will prosper in the post nation state world? To be honest, I think there's only one that is both in existence and has enough of a history to assess it, which is the global institution that manages the Internet. It's called ICANN. And if you look at ICANN structures, it was initiated by Esther Dyson and others in the US Department of State as the US span out control of the Internet to this global organization that had no single nation state behind it. And they created something called a multi-stakeholder global organization where nation states are one of the stakeholders. But so are all the people that run the domain name system. So are all the people that do business in the domain name system. And so as individuals who use the Internet. And it's a policymaking body. It's not a regulatory body, but it does make policy and it manages change globally through discussion and voting. And it's kind of interesting. I mean, I would put the kind of more than interesting. But it's not convincing, Keith, I have to say. I mean, if all you can come up with in imagining a post nation state world is ICANN, then you can continue listening to John Lennon. Well, I wasn't really answering the question. What can I imagine? I thought you were asking me. Even if you use ICANN. If you ask me what I can imagine, I think what Brexit tells us, and it's not the only example, is that people want local control. You know, there's a strong desire in people not to be governed by alien, external alien bodies, especially top down ones. So local control is pretty big. The stuff that Gary Tan is doing right now in San Francisco to challenge the San Francisco authorities is a great example of the desire for local control. But there's also, from a human point of view, the need to plan a good future. And increasingly, plans have to be global encounter. So we need to create institutions which can make decisions beyond and above a nation state. Yeah, I have to admit, I'm not in any way convinced by this. If you look at the United States, for example, all the challenges are internal investment, making the US more competitive in the global market. But we shall see. Let's move on. Let's talk some more concrete stuff, Keith. In addition to thinking global, China, chips and airplanes. What about your essays of the week? What is interesting about this week in tech? A lot, I would say. There's a lot of talk about Apple launching a 12 terabyte, $60 a month cloud storage service. And Apple today, the largest amount of cloud storage you can buy from is two terabytes, which costs, I think, $10 a month. Now, it isn't just an issue of terabytes. It's not like bigger. It's also, if I tell you that my entire life's work of video, audio, writing fits in six terabytes, but it doesn't fit in two. And you're not typical. I mean, you do more video and more content than most people. And you manage it well. Most people just lose it. Now, the other thing is they announced three-dimensional video on the new iPhone using two cameras instead of one in landscape mode. And they also announced lossless raw video. So, we're getting to the point where the files created are super big. And everyone's going to want to use them, because what could be better than a 3D video of your kids on the beach to look at later where you can see the whole thing? So, I think what Apple is doing is doubling down on its leadership in technology to further grow its already very impressive cloud. So, who's going to be, who is threatened by this? I mean, one company that comes to mind is Vimeo. I spend quite a lot of money to store all my videos on Vimeo, but it would make more sense for me to store them on a $60 Apple iCloud. Does this mean that we have a looming clash between Apple and Google? The Google numbers were out this week, and their cloud services are doing way better than anything else in the company. Well, except for search. Yeah, but search is in decline and iCloud is not. So, that's the coming business for Google. Yeah. I think Apple and Google are direct competitors here. Absolutely for sure. Facebook isn't really a player. Even though it has the technology, no one would think of Facebook as the place to store their live stuff. And really, Microsoft isn't either. They've got OneDrive, and they have a cloud, and they're capable of doing it. I just think people don't think of Microsoft as a trusted place either. Dropbox and Box.net are both still big. Yeah, I mean, Dropbox would be directly threatened with this, wouldn't they? Yeah, I would have thought so. Although, they're clever, Dropbox. They're building a lot of additional services into Dropbox. Little by little, they've got a range of features that are close to Apple's, including AI soon. How could AI be integrated into this? I assume all sorts of interesting AI applications, which could be integrated with your video and your photos. Yeah, I think lots of different ways. But the simple and obvious one is, show me everything I've ever written about WhatsApp or said. AI, given access to files, will be very, very good at retrieval. Yeah, that's interesting. And in that sense, then, it represents the personalization of search, which is, again, a direct threat to Google's previously dominant business model. Yeah, exactly. So that's a big one. Huawei, by the way, it is worth noting that three things about China. Huawei launched a new phone. It's not allowed to use ARM chips anymore. And it turns out China has now built its own mobile chip, which is like Apple's, a system on a chip. So it's more than just a CPU. And the Mate 60, the phone it launched, is world class. And it's 100% Chinese. Yeah, which I mean, is interesting and in some ways exciting. But doesn't that undermine your argument about globalization? I mean, what we're seeing are two rival separate markets, Chinese and an American market. Well, actually, my argument uses this as a reason to be aware of nationalism, because the product of nationalism is that the strong competitor will beat you. And China is not beating the U.S. yet, not even close. But it's being forced to try. And as it is forced to try, it will ultimately succeed because it has the resources. Today, they launched a 750 mile an hour fast train between Shanghai and Beijing that does the trip in two and a half hours, which is faster than an airplane. And meanwhile, in America, I've just finished reading a really interesting new book by David Leonhardt on the death of the American dream. And he brings up a lot of the train stuff. Meanwhile, in America, you can't go by. It takes you more than a day to travel between San Francisco and L.A. And even the East Coast, the accelerator is incredibly slow compared to that. Well, we'll come back to China, I'm sure. The reality, though, Keith, is politics and government, they're not going away. Another of your pieces this week is on Musk and Zuckerberg and Gates and others in closed Senate session about AI. That's just the reality, isn't it? Well, it's interesting because the Senate and Congress in general are super reluctant to get involved in AI because they don't really know how to. And the companies are all super aggressively wanting the government to get involved so that their work becomes approved, if you will. Gives them cover. It gives them cover. So you've got this interesting thing where people are begging for regulation. Now, Bill Gurley did a great talk this week. I'm going to make a video of the week next week. He did a great talk where he talked about the correlation between regulation and how much money you pay lobbyists. And it's direct. So when Elizabeth Warren goes on a journey of wanting regulation, guess who her biggest donors are? Phone companies. Why? Because they want to influence her thinking. But that attitude means that no one's everywhere. You're falling into the Trump rabbit hole of believing the deep state. There's always some interest behind. You still can believe in stuff. I mean, I don't know enough about Warren to know how dependent she is on telco money. But I think she probably believes it. There's a lot of interesting people. I had Simon Johnson on the show, co-author of Power and Progress, an acclaimed book. He teaches at MIT. You cite him in my interview in the newsletter. There's a lot of really interesting work being done in this area, Keith. Yeah, and it's inevitable because the question of the future world we want to live in is forced on us by history. It's not a question we voluntarily ask ourselves. We ask it because we see all this potential conflict and real conflict. And we see all this economic competition. We, in America at least, people see themselves as former winners. Now they're less sure they're going to be a future winner. So there's insecurity. So these questions are forced onto the agenda of history by what's happening in the world. And there's no avoiding them. So I think Simon is a man of his time. And there'll be more of them. Fellow Yorkshiremen, Keith. You Yorkshire guys are taking the world over. We've got to be careful. We're not even nationalists. We're Yorkshire-ists. Yeah, well, maybe Yorkshire... Well, they've got a cricket team. Maybe they'll have their own government one day. The one case that you... We touched on it last week. You didn't have any links. This week you do have a link on the Google antitrust case. What do you make of it? Well, the attempt is an attempt to accuse Google of, through its search monopoly, acting in an anti-competitive manner in all kinds of other things. The search monopoly is a function of excellence. It's because Google search was and remains good. The misuse of the monopoly is often targeted advertising. But in advertising, Google has many competitors now. It owns about a third, I think, to a half of the total revenue from digital advertising on the internet, including mobile. And it used to be more like 90%. So Google's share is declining. So I think this lawsuit will fail and will cost a lot of money to prove Google to be in the clear. If it doesn't fail, then the implication is Google will be forced to break up. If you look at the breakup of the telcos, when the telcos were broken up, the total market share of the big five was about 50%. Today, it's 80% after the breakup. So regulation and breakup have signally failed to change economics. Are you Borkian in your distaste for antitrust? Do you believe there's ever been a good reason for an antitrust case? Because you seem very hard-line on this. I don't quite understand why. Well, I'm very against large companies crushing competition unfairly. So in that sense, you would think I would be pro-antitrust. However, I think the best antitrust is new competitors doing better than the... Can you give me a case where you think antitrust works, where you would be supportive of it?