Here are some slices from an epic podcast with Balaji Srinivasan and Lex Fridman: How to Fix Government, Twitter, Science, and the FDA.
The US dollar — people have seen those graphs where it’s inflating. So it just loses value over time. Most the time it’s denied that it’s losing any value. The most highbrow way of defending it is, the US dollar trades off temporary short-term price stability for long-term depreciation. Bitcoin makes the opposite trade-off, in theory at least. Long-term appreciation at the expense of short-term price instability.
Ignore the Bitcoin reference for a moment because most government circles emotionally want to see Bitcoin go to zero. Think of the deeper truth that is reflected in the military force structure.
DoD planning trades off long-term force structure decline for short-term predictability in terms of weapon systems requirements and costs. Even though oversight complains about a handful of program cancellations over the last couple decades, the real problem is a lack of volatility. More things should die, more things should be started, and more things unexpectedly scale. That is the essence of an antifragile system, where stress makes the system stronger.
If a system is only strong under predictable conditions, it will die. DoD is built upon predictability. That has been short term stable, but only because DoD hasn’t been in a peer conflict.
Here’s a crucial part of the kind of dynamism at the heart of markets, which has in times past been referred to as creative destruction:
Think about a factory. You have this grandchild or great grandchild that inherits a factory. Most the time it’s just cranking out widgets and the great grandson is cashing checks. They have been selected as legitimate heir because the founder passes it down to his son and grandson and great grandson. Legitimacy is there. They’ve got title. They can show I own this factory. They can cash the checks. There are professional managers there.
Everything seems fine until one day that factory has to go from making widgets to making masks for Covid or something else. It has to change directions to do something it hasn’t done before. That capability for invention and reinvention is not present anymore. These people have inherited something that they could not build from scratch. Because they could not build it from scratch, they can’t even maintain it. This is an important point. The ability to build from scratch is so important because if some part breaks and you don’t know why it was there, can you even maintain it? No, you can’t.
So in 2009 Mother Jones had a story that said that the U.S military had forgotten how to make some kinds of nuclear weapons because there’s a part where all the guys who knew how to make it had like aged out or left.
Again, think of this in terms of DoD. The systems was virtually rebuilt in WWII and the years after. These program managers were more like founders, they build an institution up that had been relatively small before.
But today, leadership in DoD and program managers are usually not founders of the programs they administer. They are legitimate caretakers. We’ve discussed here the tenure problem of program managers. But even for Senate confirmed positions, leaders are chosen for legitimacy rather than their ability to build. Between 1980 and 1992, the number of political appointees who came from congressional staff rose from 8 percent to 35 percent. I wonder what that figure is today.
Certainly this founder vs. inheritance issue is a key problem in the dynamism of military force structure today, and perhaps why some folks say that change requires intense public pressure of an act of congress.
OK, I’ll round you out today with some China scare:
China ships things all around the world. It probably has one of the most active fleets out there in terms of it’s commercial shipping and in terms of building ships. Here’s a quote: China’s Merchant shipbuilding industry is the world’s largest building more than 23 million gross tons of shipping in 2020. U.S yards built a mere 70,000 tons the same year, though they typically average somewhere in the 200 thousand. That is a 100x to 300x ratio just in shipbuilding.
Pretty much everything else you can find in the physical world is like that. We’re not talking 2x. They can put together a subway station in nine hours with prefab and the US takes three years.
The reason the US won against Nazi Germany in a serious fight is they had this giant manufacturing plant that was overseas and they just out produced. They supplied the Soviets also with lend-lease and the Soviets talked about how they would not have won the war without the Americans. People are like, “Oh the Russians fought the Germans.” No, the Russians armed by Americans fought the Germans.
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