We’re calling it, this is the China century. The west is too behind, and it won’t have the material time to catch up before China’s impending population collapse happens.

We won’t go more far out than that because the geopolitical possibilities are vast (sadly most revolving around potential conflicts), but we can just call it how it is on the pure technological side: anyone who thinks they can compete with China on the built environment is either deluding themself, or needs to have a very, very good answer as to why.

It feels a bit of a taboo thing to say, especially in the midst of the new techno-nationalism renaissance both in the US and in Europe. While we admire the sentiment of most “American Dynamism” or “Resiliency” campaigns we sadly feel like they are either wishful thinking and reality-detached, or concealing the actual scale of the challenge. These initiatives remain important if not mandatory for the west, as we believe are our investments in real world decentralization, but we make them fully knowing where we can win and where we can’t.

I’ve grown up reading and hearing that China would eventually become the place, that I should learn Mandarin, potentially study there, and so on. It always kept on feeling distant, and I think that it still does for a lot of people. Today, we think we are at the real inflection point when it is now clear that it’s happening. It might even have already happened.

The lead that China has built on materials supply chain and processing, looked by someone with no agenda, would declare them just based on that a winner for all of the built world (and more, as we build virtual worlds on top of real hardware) for the next foreseeable future.

The lead they have built on most non-tech objects is self-evident, but what most might still not believe is their leap on extremely high-tech, high-precision sectors. Well, tracing the path and trend here is way too easy.
Steel and batteries are already gone, as are drones and EVs. Robotics is a non-starter in the west at this point.

Next are chips, chip-making equipment, and similarly extremely high-tech stuff.

The talent numbers make it all also extremely clear.

Space and defence seem areas where the west could still be at some level of even playing field, but the full supply chains for most components are still Chinese.

AI is the obvious outlier here, with most of the progress relentlessly driven by US companies and capital. But, we’ve seen how fast China has been able to close previous gaps, and the talent warchest it has can probably close this one fairly fast (have you recently seen pictures of most american AI teams? That helps to rationalize it). Yet, if there’s one area that the west can really push for world domination, it is indeed AI.

Crying doom is easy, and figuring out a path is hard. Sadly, we don’t particularly have the second part figured out yet other than continuing to invest at the bleeding edge of innovation in the creative ingenuity of amazing founders.

When we say that China won the century, it doesn’t mean that “it’s over” for the west, but it means that continuing to operate as if that’s not the case will be detrimental to a whole lot of founders and investors. 

The S6 Expressway from Chengdu Airport to the city centre is an open-air muscle-flexing of the Chinese car industry.

In the span of two kilometers, a stretch of Blade Runner-aesthetic store windows including Denza (BYD), Exeed, iCar and Luxeed (Chery), Li Auto, Arcfox (BAIC), Mengshi (Dongfeng), Lingpao (Leap motors), Ji Yue (Geely/Baidu), XPeng, Zeekr (Geely), Roewe, AITO (Seres/Huawei), and a dozen other brands most Western consumers have never heard of.

Here and there, one Ferrari or Tesla store on smaller plots with deeper setbacks. Not quite prime real estate.

While German car makers’ sales in China are plummeting and brands like Tesla are in free fall, the usual reaction to anyone visiting modern China is either technological voyeurism (“it’s so over”) or some delusional version of “It’s all Potëmkin villages”, remembering the wooden town façades that the Russian marshal would set up to make the countryside seem more urban.

Our Potëmkin complex towards China could’ve been easily debunked by just trusting what the numbers were telling us.

So that Mr. Deng’s “hide our strength, bide our time”, became “ignore their strength, waste our time” on the Western side. And after believing that liberal democracies achieved the end of history (I’m now convinced that Fukuyama was an immense psyop to convince an entire technoeconomic system to just sit down and chill), the West is observing entire industries redshifting away like distant galaxies, compounding growth on top of massive supply chain integrations, resource cornering, and data moats built on a decade plus of real-world deployments such as in batteries and robotics.

So much for Musk laughing at BYD’s car in 2011. So much for an entire flawed anthropology of the future the West has believed for way too long.

• Nick Denton: Our New Chinese Overlords. Nick Denton is back and what a banger of a podcast episode this is. It features a conversation with someone that has woken up to the realities of the world, and someone who is still stuck in the past (you can tell I didn’t particularly care for the interviewer, so I’d recommend spending the $5 for the single episode only - you can also reach out if you want to listen to it together:).

• @Daveg’s thread on why China has already won, and while the US won with “Software is eating the world”, China is winning by eating manufacturing. Europe is in the cuck chair most of the time.

• America Is Missing The New Labor Economy – Robotics Part 1: Not from this week, but a perfect read on what China winning robotics means for the US.

• WSJ on China’s humanoid robots: the race is on between China and the US for humanoids. You already know where we have our chips, but Figure continues to hype their humanoid in the BMW factory.

• The Model is the Product: Extremely interesting read. A shift in AI development signals that the model itself is now the main product, pushing AI firms to rethink their strategies as the application layer faces potential disruption; as training and model architecture become increasingly intertwined, the focus will likely move towards building robust training capabilities rather than merely wrapping existing models, prompting a reevaluation of investment strategies in the tech landscape. “At this stage, working only on applications is like "fighting the next wars with last war generals". I'm afraid we're at the point where many in the west are not even aware the last war is over.”

• Vertical AI: Beware What You Wrap: The evolving landscape of vertical AI and software illustrates a critical shift where businesses must integrate deeply with systems of record to remain competitive, as the commoditization of intelligence threatens standalone AI solutions; in this game, being a 'wrapper' is no longer enough, only those who can seamlessly blend AI with comprehensive data workflows will thrive.

• On the Biology of a Large Language Model: Anthropic released some pretty epic papers. The first one showcases how advanced circuit tracing reveals complex reasoning patterns, including multi-step logic and planning mechanisms, that could reshape our understanding of AI's cognitive processes and enhance their interpretability, safety, and application across diverse fields. The second one instead tries to link together concepts ("features") inside a model into computational "circuits".

• The case against conversational interfaces: I’ve always been a bit afraid of saying this, but it’s great that there are others who do! Conversational interfaces are more than just tech fads; while they can't replace the efficiency of existing data transfer methods like keyboard shortcuts, they can enhance human-computer interactions by acting as an additional layer, potentially making our workflows as seamless as passing the butter at breakfast.

• Paralysed man stands again after receiving ‘reprogrammed’ stem cells: A groundbreaking trial using induced pluripotent stem cells has enabled a paralysed man to stand independently and another to regain some movement, hinting at a future where spinal cord injuries could be treated more effectively and restoring mobility might be as common as a trip to the doctor.

• Embryo research, what time limit should we set?: The New York Times highlights the fascinating yet controversial journey of human embryo research, revealing how recent breakthroughs in culturing embryos could pave the way for groundbreaking solutions to prevent miscarriages and developmental disorders, all while stirring up the ethical pot.

• Hong Kong set to fund Chinese start-ups’ ‘jaw-dropping’ innovations: Hong Kong's capital markets are gearing up to unleash a wave of groundbreaking innovations from Chinese start-ups, thanks to new listing reforms and a push for long-term investments, suggesting that the next big tech breakthroughs are just around the corner.

• DeepMind spinout Isomorphic Labs raises $600m from Thrive Capital: Demis Hassabis’ Isomorphic Labs has raised $600m from OpenAI and Stripe-backer Thrive Capital, as it looks to advance its AI-designed drug candidates to clinical trials by the end of the year.

• Should human life be optimized?: Orchid is at the forefront of a genetic revolution that allows parents to screen embryos for a range of conditions and traits, from genetic disorders to potential intelligence, raising ethical questions about what it means to create life in an era where parents might select embryos like choosing a car.

• Digest high quality book summary in your preferred way: An AI knowledge agent, it helps interact with books and other content in a completely new way. 

• Mureka: epic new music creation tool.

• Iliane’s news: homemade news-reading agent that creates a daily brief of the most important things in the world.

• Elon financial engineering his way to a super small QSB tax bill? xAI acquires X

• Why DePIN matters, and how to make it work: A16Z finally mainstreaming Decentralized Physical Infrastructure Networks. Wish we saw more investable companies in this theme.

• The Great Liquidity Shift by @ttunguz: 2024 saw a staggering 71% of exit dollars flowing from secondary sales rather than traditional IPOs or M&A, signaling a fundamental shift in liquidity strategies that could redefine how investors and employees capitalize on their stakes, making secondaries a permanent fixture that mirrors private equity's approach. We very much agree. Secondaries are structural and not a fad.

• The Average College Student Is Illiterate: A tenured professor laments the alarming decline in college students' reading and writing skills, likening their lack of engagement to being phone-addicted zombies, which raises urgent concerns about the future of education and the intellectual capacity of the workforce. Scary.

• Larry Fink’s 2025 Chairman’s Letter to Investors: Larry calls for the democratization of markets, not that many people have liked it.

• LIVE FROM VARDA: Delian Asparouhov, Founders Fund & Varda: Delian Asparouhov of Varda dives into the complexities of space regulations and the evolving relationship between tech and defense, highlighting the significance of the new 'Space Club' and the critical role of VC in shaping the future of aerospace.