Knock yourself out..... Part 2

There is nothing to fear.

Made in China 2025 isn’t a threat.  Nor is it a back handed plan to rule the world “with Chinese characteristics”.  The Press simply want a story.  But truth of the matter is….it is also supplying a demand.   A demand for a scapegoat.  Something to allow America to feel better about itself.  To better explain away the surely felt (wrong or right) decline of America as an Empire.  Both inside and outside this country. 

Lazy intellectualism?  Of course.

Hint of truth?  Absolutely.

The Rise of China, while simply taken for granted in Europe and elsewhere (and considered a fait accompli in Australia), is looked upon with fear and apprehension in America.    Perhaps America is behind the curve.  While the rest of the world has little to lose, America does, albeit in its own sense of prestige. 

Europe and Africa, etc all see the Rise of China as inevitable.   In a way it’s just common sense.  

America has a hard time excepting this.

Americans simply want a reason for feeling why they do.

“Why am I still making the same salary I made a decade ago?”

“Why isn’t life just…..easier?”

American Society needs something to grasp onto.

The Press gives us China.

Made in China 2025 is simply code for “Tossing America into the Dustbin and off the Throne by 2025” speak.

Right?

Once again, to quote that great 21^st Century American Philosopher, Chris Rock…..

“Slow down!”

What if?

What if China passes America as the largest economy in the world tomorrow?

And even Trump turns into the pussy both Obama and Clinton were?

And China is suddenly by the numbers the most bad ass economy out there?  With its own supply of everything it needs?  And is no longer dependent upon America, or Europe or ANYONE for 

ANYTHING?

Then what?

China’s power will still be exaggerated.

I’ve written countless times about this.

The real power of an economy is its ability to keep its most talented citizens from leaving the country for greener pastures.   The real power of an economy is also its ability to create an environment conducive not just for entrepreneurs but for risk taking.   Which leads to innovation.

China has plenty of fantastic entrepreneurs, many of whom with no choice, simply because China’s economy just can’t absorb everyone.   And it has plenty of risk taking also.  But the environment in China simply isn’t as attractive for innovation as….well, anywhere else. Why is that?

Because if a brilliant engineer had a choice, he’d rather live in overpriced, pot hole filled San Francisco than anywhere in China.   Simple as that.  Only Chinese innovators choose China.  

America’s reputation for innovation, risk taking etc isn’t the star here.  Rather, its reputation for having an environment conducive to attracting the best is what one would call America’s core advantage.

Want to meet the best minds in nanotechnology?  Don’t go to Shanghai. 

The environment for creating and collaborating fantastic innovative products.  For taking incredible ideas and implementing them in the marketplace still runs through America.   Not China’s well meaning, superbly financed, centralized industrial policy decision making process.

Disagree?

I give you Shanghai Automotive and Tesla.

A long time ago I worked for GM in Shanghai.  Our JV partner was SAIC.  Shanghai Automotive.  上汽.   They had a representative in our office.   A retired senior official from 上汽 also had a nice consulting package to work for us.   We rarely saw him in the office, though.

People were all wondering when SAIC was going to start taking advantage of its relationship with us and begin to build cars for the American market.  A direct competitor!  It didn’t help that whenever we had meetings with them “their side” would inevitable break into local Shanghai dialect to avoid "our side" from understanding them.

SAIC had every advantage in the world.  Easy access to financing and a world class partner.   The road to success in China ran through them.

And here we are today, nearly twenty years later, with still not one damn car from SAIC in the North American market.   Why?   Because engineering skills and free money just don’t matter if you don’t know how to build a car others beyond  “your world” will like.

One could fairly argue Shanghai Automotive has simply squandered its advantages.   Access to GM’s engineering expertise and assembly line know how.   A whole generation of Chinese engineers learning how to design.  Endless access to free money. 

And how have they used these advantages?  By selling into India.  That’s it.   Kind of an underperformer, don’t you think?

But what did Coppola say about the travails involved filming Apocalypse Now?

“We had too much money.”

How can one have a sense of urgency, a driven by fear of failure mentality if everything you have is given to you by the government?

Now I give you Tesla.

I’m not even sure Elon Musk is an American citizen but I know he’s an immigrant.   Elon Musk could never have made it in China.   (First ya gotta speak Chinese Boy)  

His design ideas would’ve been stolen long ago.  His choice of which suppliers to use not entirely his.  And how would he have even gotten the financing?   Even if he had somehow gotten the money, everyone knows it would’ve come from some arm of the Chinese government.

This is a startup that didn’t get its first car even built until 2007.  In the process laying off 30% of its workforce.   Unlike, Shanghai Automotive, it didn’t have government sport, nor free access to technology and engineering expertise granted to it courtesy of the US government.  Tesla, like 99% of all companies in America (and the West) was on its own. 

上汽 is still demonstrably larger than Tesla, and still sells more cars, and quite possibly always will.  It’s the bigger company.   A captive market helps with all that.

But it was Tesla in 2015 that obtained the highest score ever in an automotive review from America’s Consumer Reports. It scored a perfect score (103 out of 100). 

Consumer Reports meanwhile has never tested a car from SAIC.  Because SAIC isn’t good enough to sell in America.  Simple as that.  

Meanwhile today’s Tesla vehicles aren’t as good, and reviews aren’t as great, but for some reason I just don’t think that’s gonna be an insurmountable problem for a company like this.   A company continuously under the microscope like Tesla, hiring and firing, always searching for money, with no government support or free access to technology and engineering is a company that if it hasn’t failed by now, will probably only get better.

Now I want to bring up Space X.  Again.

A few times now I’ve written about China’s quest for the Moon, along with its inevitable and unhappy comparison with Space X.

China’s space program really took off in 2003 with its first astronaut put into space.  Since then China has made a lot of progress with various space missions, a spacewalk, and the building of a space station.  But that is really what NASA does too, right?  China’s space budget is around $6 billion annually.  (So we think)

But honestly speaking, nobody really pays attention to that stuff.  The question on everyone’s mind is simple:  when will the Chinese walk on the moon?  And with all the progress China has made with space technology and exploration, one cannot be blamed for thinking along the lines of

“Isn’t it about time?”

China plans to put a man on the Moon around 2036.  Which is a hell of a long time from 1969.   As I write this, the fourth man to walk on the moon, Alan Bean, just died.  From 1969-1972, twelve people have walked on the moon, all Americans.  Now only four are alive.    And they are all old men.

Why must China wait 33 years from the first Astronaut going up into Space until the first moon walk by a Chinese?  Isn’t that kind of a long time?

America’s first man into space, Alan Shepherd, went into space in 1961.  We only waited 8 years until the first moon walk.   So I think the above is a fair question.

Maybe China is simply guilty of its own success, thus raising everyone’s expectations perhaps a bit too quickly. 

Or maybe China’s system is just too slow and bureaucratic.  (And of course devoid of competition.)

Enter Space X.

Their first launch was in 2008.  Now look what they’ve done.  Reusable rockets.  Vertical landings.

And in 2017 Space X, a mere private company had 18 launches compared to China’s 19.  Space X is so successful, it has basically forced the “China equivalent” of Space X, ULA, into near bankruptcy.    And while China’s Space Program has that six billion dollar budget, Space X until recently hovered around one billion.   Granted, China’s Space Budget covers more projects.

Now Space X has a rocket, the Falcon Heavy, that is a full damn decade ahead of China’s Long March 9.

Oh, China plans to have one as well.  They are simply waiting on “government approval”.   (I will not editorialize.)

About that man on the moon?  If Space X really has that as on objective (or Blue Origin), does anyone really think it will take them until 2036 to do it?  Eighteen years from now folks, we may be as a civilization closer to Mars than the Moon.  

In essence a gap has developed between Space X and China’s Space Program.  And the gap is set to widen.  If only because the real race to the Moon (or Mars) will be between Space X and Blue Origin.  The Chinese Government will have a lot of explaining to do when two young upstart outfits so badly outperform it on a public stage.  Not to me, nor you.  But to the Chinese People.

China’s Made in 2025 campaign is only a natural outgrowth of a nation hellbent on growing and becoming stronger on its own terms.  A fair aspiration for any nation.  But it should not be made a scapegoat for the problems America has today.  But truth of the matter is, America needs a rival.  It needs something to focus its attention. America had Russia.  Now Russia is a laughingstock.   An overgrown Banana Republic, with an aircraft carrier that smokes so badly one does not need a satellite or submarine to find it.  And yet, Russia has played its cards so well, that it now has a semi permanent presence in the Middle East for the first time in nearly 40 years.   This will be part of Obama’s legacy. 

China is no Banana Republic folks.  It is well financed, and focused.  But as one can see with 上汽 and the China Space Program, innovation can’t be given, or stolen.  It needs to be organic. Home grown, with lots of immigrants.   With an existing community of open collaboration.  China can buy all the startups in Silicon Valley it wants.  Knock  yourself out.

But if you ain’t got the environment in place to attract the best and brightest, Made in China 2025 is only a well intentioned publicity campaign aimed at self reliance.  Nothing more.