How China disrupted Red America and the internet disrupted Blue America

Western media rarely portrays wealthy non-Western countries because it can be depressing for people in the West who are seeing their own living standards decline. They prefer escapism and superhero movies. This reflects a larger shift in global power. In the 1980s, clocks might have featured cities like New York, London, and Tokyo. In the future, that trio could become Miami, Dubai, and Singapore.

A key framework for understanding the current moment is that different parts of America have been disrupted by different forces. The internet and China are seen as two "barbarian powers" growing on either side of the American empire of the early 2000s.

China disrupted Red America and the Internet disrupted Blue America. This is only set to go further in the next 10 years because the Internet is doing AI and crypto, so you're going to take over all media and all money. China is doing robots and drones, so you're going to take over all manufacturing and all military because China has already won the war.

The dependence on China for parts means the US cannot effectively fight a war with them. The closest historical parallel to what is happening now is the fall of the USSR. With a major shift expected around 2024-2025, it is important for individuals to think strategically about where on Earth they want to be located.

The great rebalancing of the global economy

The idea of Western decline can be understood as a great rebalancing back to a historical norm. For thousands of years, the global economy's center of mass was in Eurasia. This explains why historical figures like Marco Polo and Columbus sought out China and India. Throughout this period, there was a rough military and economic parity across the continent.

The Industrial Revolution caused a dramatic shift, pulling the economic center far to the West. This culminated around 1950, after World War I and II left much of the world devastated. With Japan nuked, Russia and China communist, India socialist, and Europe in ruins, the world experienced peak Americanization and centralization. All institutions founded in this post-war order, like the UN and World Bank, are based on this anomalous power balance.

This 1950s era is often mistakenly seen as the way things are supposed to be, especially in the American consciousness. It was a time when a person without a high school education could support a family, largely because potential competitors in places like Poland, China, or India were suffering under communism or socialism. Since the fall of the Soviet Union in 1991, these nations have re-entered the global capitalist economy, causing the world's economic center to rocket back towards Asia.

This rebalancing is reflected in charts showing the G7 nations' declining share of global GDP while the BRICS nations' share rises, driven by China and India. The West is experiencing a decline in relative terms. This doesn't mean it's going out of business, much like IBM has declined relative to Microsoft and Google but still operates. However, this relative decline may be followed by a decline in absolute terms.

The West is in denial about the economic rise of the East

A major shift, or "flippening," has occurred in the world economy. The East is rising rapidly, but Western understanding of this change is out of date. This is because these economic trends are moving extremely fast. If you're not constantly monitoring places like Asia, Dubai, and Riyadh, your perception will be wrong.

It's like a fast moving object. If a ball is just rolling very slowly, then you can look at it, look away, look back, and it's basically in the same location. But if it's being thrown really fast, if you look at it and you think it's here and then you look back, it's over there. It's moving much faster.

Western media reinforces this outdated view by not portraying the rise of the East. An exception is the film "Crazy Rich Asians," which shows a rich, non-Western country. For the most part, media avoids this topic because it can be depressing for Western audiences who are seeing their own living standards decline. They prefer escapism and superhero movies instead of seeing how much places like Dubai and Southeast Asia have improved. The West is still largely in denial about its changing status in the world, particularly in relation to the rise of China and India.

Australia, however, is an exception and is less in denial. This is partly because its economy is deeply connected to Asia, particularly through exporting resources to China. This has created good blue-collar jobs, preventing the kind of dissatisfaction seen in deindustrialized America. Australia also lacks the illusion of being the world's undisputed number one power. The Anglo-American world may well continue in Australia and New Zealand, which are somewhat "air gapped" from the decline happening in the UK, Canada, and America.

Millionaire migration patterns support this trend. The UK is now projected to lose 16,500 millionaires, while Australia, Singapore, and the UAE continue to attract them. This signals a shift in global financial centers. London, once the financial hub for Europe, the Middle East, and Africa (EMEA), is being replaced by Dubai. The traditional centers of New York, London, and Tokyo may soon be eclipsed by Miami, Dubai, and Singapore.

How economic disruption fueled the rise of woke media

The world is reorganizing vertically along time zones rather than horizontally along latitudes. Balaji explains that for internet-based work, being in the same time zone makes locations like Sweden and Cape Town functionally closer than Sweden and Moscow. This shifts how societies are organized.

While large-scale trends, or 'exponentials,' shape society, individuals can sometimes reverse them. For example, Chinese investment in the US was growing exponentially until Trump took office and it fell off a cliff. Conversely, an individual like Sam Altman can start a new exponential trend, as he did with AI.

Balaji points to two major exponentials that converged around 2010. First, China surpassed US manufacturing, disrupting Red America. Second, the internet's rise caused the advertising revenue of print media to collapse, disrupting Blue America. This created a four-way conflict, not just a two-party one, between China, Red America, Blue America, and the Internet.

Blue America's media institutions, facing economic decline, reacted with a 'techlash' against the internet and by embracing 'wokeness.' Balaji argues this was a strategic decision. He points to data showing the New York Times began heavily using terms like 'white privilege' and 'toxic masculinity' around 2013, which coincided with a rise in their stock price after a long slump. Woke language generated traffic.

They basically destroyed essentially trillions of dollars in the social fabric to make a few billion in ad revenue.

The four-front conflict shaping America's future

A conflict map can be drawn for modern America. Blue America is in conflict with the Internet and Red America. Meanwhile, Red America is in conflict with Blue America and China. This creates several distinct battlefronts. The trade war is Red America versus China. The conflict between Red and Blue America is personified by Trump and Wokeness. The tech lash represents Blue America's conflict with the Internet.

These conflicts are rooted in threats to each group's power base. The Internet threatens Blue America's strongholds of media and money. China threatens Red America's strongholds of manufacturing and military. This trend is accelerating. The Internet is developing AI and crypto, which will further disrupt all media and money. China is developing robots and drones, which will disrupt all manufacturing and military. For example, AI will generate video and text, while crypto and smart contracts will absorb stocks, bonds, and even contract law.

Red America's primary response has been protectionism, like Trump's tariffs. This policy is unlikely to work because it's based on flawed assumptions. It assumes other countries need the U.S. market, but China has intentionally diversified its trade partners. In 2015, only about 16% of its revenue came from North America. A significant drop would still be a manageable loss. Furthermore, the U.S. has also applied tariffs to neutral countries like Vietnam, pushing them into China's camp. This approach reflects a kind of magical thinking that a simple policy change can restore the economy of 1945 without any real sacrifice.

The concept of putting a 45% tariff or 49% or whatever it is to encourage domestic U.S. manufacturing is roughly like me saying, I'm going to increase the price of your iPhone by 45%. Now you have an incentive to build Apple.

A more rational industrial policy would be needed for true import substitution. This would involve meticulously mapping the entire supply chain, identifying critical foreign suppliers, grouping domestic customers, and then strategically establishing a new domestic supplier. This is a complex process that cannot happen overnight and requires a deep understanding of the actual economy, perhaps by analyzing tax data to see how businesses are interconnected.

The US military's manufacturing dependency on China

There is a critical vulnerability in the US military's supply chain: it is heavily dependent on Chinese manufacturing. This dependency isn't just for high-end components; China is dominant in producing low-end and mid-level parts like screws, nuts, and bolts that are essential for military hardware.

Even when the US military uses a US-based supplier, that supplier's own manufacturer is often located in China. This gives China the ability to disrupt the entire supply chain at will. For example, parts for US Tomahawk missiles are reportedly made in China. This dependency undermines any military posturing against China.

You can't fight a war with China because they make all the parts.

Tariffs are a flawed strategy for boosting domestic production

Intelligent, detailed, and nuanced supply chain analysis does not generate exciting media headlines. Thumping your fist and announcing a 49% tariff on another country, however, gets attention. But this approach is flawed. Instead of simply taxing imports, a more effective strategy is for domestic companies to collectively support the creation of a local supplier. For example, if ten domestic customers rely on an overseas vendor, they can crowdfund a domestic alternative and then shift their business to it. This requires organization and effort, as building is inherently difficult.

Simply taxing those 10 guys so they stop buying from the foreigner is just, it's magical thinking. Building is hard, right? Banning is easy, taxing is easy.

Tariffs are also massively capital-destructive. A modern supply chain is complex, resembling how a website pulls data from various sources to load a page. If each of those data packets were taxed, the entire website would slow down or break. Similarly, taxing every component in a product's supply chain completely destroys profit margins. It is a self-defeating measure that could wipe out what remains of US manufacturing capacity.

You couldn't come up with a more certain way of completely destroying US Manufacturing capacity that remains.

The core problem with the tariff strategy is that it doesn't address the real issue. It fails to reduce the barriers to domestic production. A better approach would have been to cut regulations, which would have cost nothing and wouldn't have angered allies. Instead, America pursued a futile trade war based on the mistaken belief that its market was indispensable and that other countries would absorb the costs.

America pivots from offense to defense against China and the internet

Journalists are becoming increasingly frantic about AI, crypto, and bitcoin. Many media companies now have unions that are actively trying to stop the use of AI in their production. This reflects a broader trend where "blue America" feels threatened because AI and crypto take away their control over media and money. In parallel, "red America" feels threatened by China taking over control of manufacturing and the military.

The reaction to these threats is not self-improvement but a defensive posture. There has been a huge mental shift. For decades, Americans thought of the world as their market to expand into. Now, many see the world as their competition, believing they can no longer win a fair fight in global techno-capitalism.

As a rough analogy, James Naismith invented the game of basketball, right? But it turns out the guys who invented it are not necessarily the best at it. African Americans, Serbians, Eastern Europeans are very, very good at basketball. And in the same way Americans invented the game of global techno capitalism.

America created the system of global free trade, but now other countries like China and India can compete and often win. In response, America is trying to silo itself off from the game it created. However, the game of global techno-capitalism will continue without America.

A historical parallel can be drawn with Europe in 1900. It was the center of the world, with America and Russia as rising powers on the periphery. After Europe destroyed itself, the American capitalists and Russian communists split the continent. A similar dynamic may be unfolding now. America was the center of the world in the early 2000s, with China and the internet as the rising "barbarian powers." By 2035 or 2040, American politics could polarize dramatically, with Democrats siding with Chinese communists and Republicans becoming bitcoin maximalists. Evidence for this alignment is already appearing, such as California Governor Gavin Newsom meeting with Xi Jinping and offering to be China's "long term, stable and strong partner." This is driven by a simple dynamic: red America's enemy is China, while blue America's enemy is the internet.

The Democratic party's strategic alignment with China

A key difference between American political parties is their primary affiliation: Republicans care about the nation, while Democrats care about the state. Republicans are seen as wanting to be part of a tight-knit cultural group, whereas Democrats are comfortable as administrators of a multi-ethnic state, identifying more with the government itself. This has led Democrats to align with China, which is contending to be the most powerful state. For instance, it was noted that Tim Walz suggested China could be a moral authority to broker peace between Iran and Israel, and Gavin Newsom proposed California defy US tariffs to make a separate deal with China for cheap goods. This reflects a willingness to become a junior partner to a more powerful state.

Ted Kennedy reached out to the Soviets and said, if you help me beat Reagan, then I'll help you. In return, the Soviet leader would lend the Democratic Party a hand. The difference is now the Chinese Communists are the senior partner in that relationship, and the American Democrats are the junior partner.

This political shift is driven by a shrinking economic pie, which tends to increase conflict and division. The polarization is measurable. Data shows that in the 1950s, Democrats and Republicans often voted for the same bills, but now they are completely separate. This ideological split is also visible on social media, where the two groups have moved even further apart over the last several years, leading to a kind of 'blue secession' online.

The digital secession of red and blue America

America is experiencing a spiritual, moral, and digital secession. The blue and red factions have separated onto different platforms. Blues are on Bluesky, Mastodon, Threads, and TikTok, while reds use X, Truth Social, and Gab. They are no longer talking to each other. This divide extends to personal relationships, with only 4% of marriages occurring between Democrats and Republicans. This signals a tribal split, akin to the Sunni versus Shiite divide. America is no longer one nation with differing opinions, but two distinct tribes.

Both sides define core concepts in partisan terms. Democrats identify democracy with voting for their party, while Republicans identify America with red America. This leads to mutual confusion when the other side receives significant support. It's similar to the situation in Korea, where loyalty is to either North or South, not a unified Korea. America now consists of a blue America and a red America, each with completely different, "air-gapped value systems" that are pulling further apart.

Things happen in the cloud first and they're printed out in the land.

This digital separation could lead to a physical split. When asked if this division is a result of debt problems or the cause of them, Balaji explains that the one thing holding the two sides together is trade. The US reserve currency has allowed the government to print money, creating an artificial prosperity that papers over these profound divisions.

The American empire was funded by dollar inflation as global taxation

The United States' economic role has transformed over the last century. It began as a major exporter of goods, which established the dollar as a global currency. Over time, the US shifted from a manufacturing power to a financial one, outsourcing production. Now, even its financial and media influence is being outsourced to crypto and the internet, with every piece of the American empire going to either China or the internet.

The business model of this American empire can be summarized in five words: "dollar inflation is global taxation." Many Americans believe they are paying for the rest of the world, but the reality is the reverse. The world is being taxed to pay for American consumption. For example, a worker in Vietnam produces shoes and sends them to the US, receiving only database entries, or printed dollars, in return. The US can do this because it sits at the hub of the global system.

The world is being taxed to pay for American profligacy... Somebody in Vietnam is grinding away to send these shoes over, right? These Nikes, what do they get in return? They get database entries, they get printed dollars, right? So the US is producing nothing in return for those shoes.

This system worked when the American empire was at its peak. The US military guarded sea lanes, and the State Department made diplomatic deals with over 190 countries. It was the center of finance, diplomacy, and culture, with the UN in New York, companies listing on US stock exchanges, and leaders training at US universities. This dominance was monetized through dollar inflation.

However, both major US political parties are now dismantling this system. Democrats, by implementing sanctions against countries like Russia, have accelerated global de-dollarization. Republicans, with tariffs and restrictions on visas, are also harming the model. They mistakenly believe America's strength is purely physical and domestic, failing to understand that the high standard of living depends on the ability to trade digital currency for physical goods.

Republicans have the conception that there's like adamantium under the Appalachians. Like they think that the advantage of America somehow inheres in like physical America... But they're wrong about that, that there's no way the US could support its current standard of living if it was mark to market. Like if it was not able to trade database entries for physical goods.

If the US loses its status as the global reserve currency, this revenue stream of global taxation will be cut off, and living standards could drop by 50% to 99%.

The American empire was funded by dollar inflation as a global tax

The US Federal Reserve has the unique power to create money, essentially by pushing a button. To illustrate the scale, Balaji notes that a trillion dollars is an almost incalculable amount of money, equivalent to selling a thousand-dollar product to a billion people. Yet the Fed has created this sum multiple times.

Imagine if you made iPhones for and you sold them for a thousand bucks to a billion Chinese people. That's what a trillion dollars is. It's a lot of money. But that's just a trillion dollars in revenue. A trillion dollars in profit. Maybe you're making 99 bucks a thousand. It's hard to sell something for $1,000 to a billion people. ... And they just pushed a button to get this.

This money printing functions as a form of global taxation. The inflation is spread over billions of people worldwide who hold and use dollars, not just the 330 million Americans. This global tax base has supported American living standards. However, recent US administrations are destroying this business model. By cutting off trade flows, talent flows, and potentially taxing remittances, the US is reducing its global tax base by more than 95%. This will inevitably lead to a significant drop in living standards for Americans.

This is happening as the American empire, which was camouflaged for decades, is collapsing. The empire was not an accident. Balaji points to the book Tomorrow the World, which details how America consciously chose to become an empire around 1940. With Britain on the ropes and France having fallen, US leaders feared the Nazis would become the dominant world power and cut off trade.

If we don't become an empire, the Nazis will. They'll cut off our trade from Europe, right? And then later the Soviets will. So they're like, actually, we have to become an empire, and we have to do it better than the other guys did.

Balaji argues that this empire, which lasted roughly 85 years, deserves praise for its achievements between 1940 and 1991. On balance, democratic capitalism was preferable to the alternatives of Nazism and communism, as evidenced by the prosperity of West Germany, South Korea, and Hong Kong compared to their counterparts. After the Soviet Union fell in 1991, the lack of an external enemy led Democrats and Republicans to fight each other. This period also saw the legalization of commercial traffic on the internet, which was previously restricted to academic and military use.

The messy transition from a centralized to a decentralized world

After the fall of the Soviet Union in 1991, several major trends kicked into high gear. While the tech industry boomed, producing companies like Google and innovations like Bitcoin, political polarization in the United States intensified. At the same time, China began its rapid economic ascent. These factors, including the end of the Fairness Doctrine, are part of a larger historical shift.

The year 1950 represents what was likely the most centralized period in human history. Technologies of the era, like mass media and mass production, favored massive choke points on power. However, the invention of the transistor began a long trend toward decentralization. This trend has given us the personal computer, the internet, the smartphone, and cryptocurrency.

We are now reverting to a world with many different centers of power, similar to the 1700s and 1800s. This transition back to a multifarious world is proving to be messy. American political slogans like "build back better" or "make America great again" suggest a return to a golden age, but they fail to prepare citizens for a reality of decline. As Balaji notes, nobody wants to accept a story where they lose.

To navigate this, one must adopt a realist or investor mindset, seeing the world as it is, not as one wishes it to be. This is about preparation, which involves not just financial allocation but also physical location. Unlike the 2008 financial crisis, which could be navigated through trading, the coming era requires more fundamental decisions.

I think you need to figure out where you want to be on the surface of the earth.

Self, tribe, world and the fragmentation of identity

There are two primary forms of investment: financial capital and investment in one's family. Balaji suggests a framework for thinking about this called "self, tribe, world." First, you must take care of yourself, because without your health, nothing else is possible. Next is the tribe, which is your circle of concern including family, friends, your company, and community. Finally, there is the world, which encompasses everyone else.

This framework extends beyond the idea of the sovereign individual to the "sovereign collective." After cryptocurrency, which is about capital allocation, comes the crypto community, which is about identity. The community you choose to be a part of becomes a core part of who you are. The fall of the Soviet Union provides a historical example of this identity shift. People had to decide who they were after no longer being "Soviet." They became Russian, Estonian, a mathematician who emigrated, or a Catholic. This was a decentralization of identity.

A similar fragmentation of identity is likely to happen in America. A key line from the film Civil War captures this idea: "What kind of American are you?" The future will likely involve many hyphenated identities, such as tech-American or Catholic-American. This represents a reversal of the traditional American motto "E pluribus unum" (out of many, one). The new reality is "E unum pluribus" (out of one, many), where a single identity splinters into multiple ones.

The empire long united must divide, long divided, must unite. That's just the cycle of history.

This cyclical nature of history, as described in an addition to the Chinese epic Romance of the Three Kingdoms, suggests that such fragmentation is a natural process.

Unification as software versus hardware

The concept of unity is central to the identity of many nations, which is reflected in their names: the United States, the European Union, the United Arab Emirates, and the United Kingdom. Similarly, Russia is a federation and the formal name for India is the Indian Union. Historically, figures like Garibaldi and Bismarck worked to unify Italy and Germany, respectively. Creating these unified states was a non-trivial achievement, which is why it's so prominent in their names.

This drive for unification can be viewed through the lens of left versus right ideologies. At an emergent level, the left is fundamentally about building scale. It seeks to homogenize large groups of people so they can trade with each other, marry each other, and fight together as a single entity. It's not merely about sharing and caring, but about creating a large-scale "meta-organism."

This isn't a new phenomenon. Historically, people have unified under broader identities like Christian, Muslim, Italian, or French, superseding smaller, regional identities. Even Genghis Khan used a common religion to unify his empire. In this sense, the left unifies at the level of "software"—ideas, laws, and beliefs. The right, in contrast, unifies at the level of "hardware"—genetics, culture, language, and land. This creates a fundamental tension, as reproduction is much slower than conversion. It's a conflict between the cloud and the land, software and hardware. While Balaji identifies more with the "cloud" side, he stresses the importance of understanding both perspectives.

Super bitcoinization is the hidden consequence of U.S. debt

When you view dollar inflation as a form of global taxation, you realize the United States cannot afford to lose its number one position in the world. A decline to number two would mean losing its reserve currency status, causing a collapse in its living standards. The country's massive debt would suddenly become due in a currency it cannot print.

The debt becomes something that you have to pay in something other than something you can print.

This debt represents real-world commitments, not just abstract numbers. These are the unfunded liabilities, such as healthcare promises to seniors through Medicare and Medicaid. Balaji states that the true figure, including all these commitments, is enormous.

The true number from the 2024 financial statement of the U.S. government is $175 trillion, including Medicare, Medicaid, Social Security and so on.

These promises are for tangible things. They require real wheelchairs, medical procedures, guns for military partners, and food for nutritional assistance programs. These are things the government cannot simply print. Since the U.S. has made commitments it cannot possibly keep, it faces a choice between a sovereign debt crisis or hyperinflation, which are essentially two sides of the same coin.

You can't print health care, you can't print military bills, you can't print food.

While the U.S. is not experiencing hyperinflation, defined as 50% currency devaluation per month, it is experiencing something Balaji calls "super inflation." This is a middle ground, perhaps around 5% inflation per month. This phenomenon is already happening, but it's disguised as "super bitcoinization." The U.S. dollar has devalued against Bitcoin by an average of 10.41% every month for the last 16 years. This rapid change is hard to perceive, like being on a bullet train moving at an immense, yet smooth, velocity. The scale of this shift is invisible because it is happening on the internet, which lacks a physical presence. The defining conflict of the 21st century is not between nations, but between the physical world and the digital world.

If the 20th century was the US versus USSR, the 21st is China versus the Internet.

The US has adopted a zero-sum mentality toward its allies

While there are countless movies about alien invasions or killer robots, there are very few that truly explore what the end of the US dollar would look like. Films that tackle financial crises, such as Margin Call or The Big Short, are always made after the event. The dollar has already dropped significantly, and because the US is so dependent on money printing, it is cannibalizing its allies. Unlike the Cold War, where the US built up allies like West Germany in a win-win scenario, it now seems to want its allies to sacrifice themselves for American living standards.

This reflects a shift to a zero-sum or negative-sum mentality, driven by a loss of empathy. Because the political left may have overused the concept of empathy, the right has come to see any form of it as bad. However, empathy is crucial for good business. To make a deal, you must first think about how the other person wins. A great businessperson focuses on creating a positive-sum game that can be sustained over time.

If you're a great businessman, you say, 'How do they get a win 10 times in a row before I get a win?' You eat best, but you eat last or something like that. You have a positive sum game because you can keep it going.

The imposition of tariffs is a prime example of this lack of empathy. These surprise taxes are due instantly when a shipment arrives at a port. For businesses with thin margins, a sudden 49% tariff can be completely destructive. This policy damaged many pro-American business leaders around the world, who were effectively punished for trusting and trading with America. This has led to a widespread erosion of trust in US institutions.

Why Indians are becoming first-class citizens on the internet

Faith in US institutions has been repeatedly shaken. Corporations like Elon Musk's lost trust in Delaware, Republicans lost confidence in the FBI, and Democrats' trust in the electoral system was challenged. For foreigners, America's reliability in trade has diminished. This erosion of trust gives talented people a strong incentive to look for opportunities outside the US.

Balaji poses a question: why would a top Indian engineer move to the US today? They risk facing hostility from the left for being a capitalist and from parts of the right for being Indian. The world is now their oyster, with alternatives like the UAE, Singapore, El Salvador, and various digital nomad programs. Even Hong Kong is actively recruiting skilled workers.

Meanwhile, India itself has improved radically, a reality often missed by Western media that may cling to outdated images. Balaji notes that Indians see this progress, even if others do not. This leads him to a key distinction: he is moderately bullish on India, but extremely bullish on Indians.

If China's a state, Indians are a network.

In a future framed as 'China versus the Internet', Indians will be a huge part of the Internet. The reason is simple: the internet offers them a level playing field.

Indians are second class citizens in America, but they're first class citizens on the Internet.

In America, their visa can be revoked and they can face prejudice. On the internet, they are peers. They have equal access to global monetary policy through Bitcoin and to fair deals through smart contracts. They are not asking for special treatment, just to be treated as equals. With hundreds of millions of Indians having come online in the last five years, a major collision of cultures is now underway.

Bitcoin represents a system of law above the state

A contrast is drawn between the youth in the UK and India. In the UK, there's a perceived decline in education outcomes and ambition, partly due to an opaque new grading system. This has led to what is described as a "general dumbing down" mixed with a sense of privilege. In contrast, young Indians are seen as ambitious, hardworking, and intelligent. Having grown up with fewer amenities, like hot water or electricity, their lives are constantly improving with access to technologies like 5G and the internet. Cryptocurrency is especially beneficial for them because it treats everyone as equals on a global stage.

The role of the state versus the law differs significantly across cultures, a concept simplified from Francis Fukuyama's work. In Europe, law generally equals the state. In traditional India, it was law above the state. In China, it is state above law. This means the Chinese government isn't limited by its own laws; it has ultimate control.

In China... the government can't limit itself. Like your chair can turn into like a CCP agent if the government wants it to. They just, you know, they have root access over everything. And the written law, it doesn't really matter. ... Sort of like a system administrator of a service.

India's tradition of "law above state" stemmed from kings who believed in Hinduism and were constrained by scripture, fearing consequences in their reincarnation. China, being less spiritual in that way, developed a system where the state has ultimate authority.

This framework extends to the digital world. The Chinese state operates as "state above law." Conversely, the international network and cryptography represent "law above state." Bitcoin is the ultimate example of this. It's a smart contract that governs even governments. No matter how powerful a ruler is, they are constrained by its mathematics.

There's no amount of violence that can solve certain kinds of math problems.

This is why the Chinese state dislikes Bitcoin; it represents a form of freedom it cannot control. For Chinese citizens, however, it offers a way to have money that the government cannot arbitrarily seize.

The evolution from the Constitution to the smart contract

The concept of "the West" is a relatively modern idea that evolved from "Europe and Christendom." The shift expanded the concept geographically to include America and ideologically towards secular, democratic values. The next stage in this evolution is the Internet. It was born from the West, just as the West was born from Europe, but it is its own distinct entity.

This progression can be framed in three stages of governing principles. The first was the common law, which bound the British. The second was the Constitution, which scaled up to govern Americans. The third is the smart contract and Bitcoin, which can scale to the entire world.

A key difference lies in perceived fairness. The US Constitution is a subject of constant debate over human bias and discrimination. In contrast, Bitcoin is an algorithm. It is not seen as biased in places like Africa, Latin America, or India. By automating the judiciary on-chain, the blockchain removes the potential for human bias. This is why billions of dollars are flowing into it.

People feel they'll get a fair shake from the blockchain in a way they won't in America or in China.

The internet is the successor to the American empire

The internet can be seen as version 3.0, a new system that is just beginning as the West is ending. This represents a torch-passing moment, similar to when the American empire took over from the British empire.

The west is ending, but the Internet is just beginning. It's kind of like when the British Empire was ending, the American Empire was booting up and it was clearly a torch passing moment. And the Internet is as American as America was British.

America owes a significant debt to Britain for its language, culture, and laws. It forked the British system, creating a constitution instead of having a king, but the foundation was British. Similarly, the internet inherits many American values but is a new global entity. This historical continuity can be seen in the English Civil War of the 1600s. A left-leaning faction, the Roundheads, established a colony in Massachusetts, while a right-leaning faction, the Cavaliers, settled in Virginia.

That left and right of England came to America in Massachusetts and Virginia. And then 200 years later, they had another civil war in America.

This reveals a pattern of conflict and cooperation between these ideological descendants over centuries. The internet could be the force that finally brings the left and right together again. It embodies libertarian values like capitalism and markets, but also progressive values like equality, global free speech, and representation for every race and religion. While polarization exists, the fundamental drive for maximum scale in markets, audience, and machine learning training creates strong forces to keep the internet global and free. The opposite philosophy is China's Great Firewall, which creates hard digital borders. Only China and crypto truly take the internet seriously by building defensive structures like the firewall and the blockchain. In contrast, the US government is vulnerable online, leading to a future where everything moves to either China or the internet.

An Internet first worldview compares China to Apple and the Internet to Android

Balaji describes his worldview as "Internet first." He sympathizes with both the "America first" supporters, who he believes wanted a fair deal, and the progressives, who saw their comfortable positions, like journalism at Time magazine, disrupted by the internet. An "Internet first" approach is not against any specific country; instead, it treats all people as equals on the internet. It is both a political and a technology strategy, similar to "mobile first" or "AI first."

The central idea is that the internet is the only entity with an economic scale comparable to China. Balaji draws an analogy between this dynamic and the tech world. China is like Apple: vertically integrated, closed, and its software, the party-state, runs only on its specific hardware, the Han Chinese. China itself says its system is not meant to be exported.

What's opposite of Apple? It's Android. It runs on any device. It's messy, it's chaotic, it's free. That's the Internet. So China versus Internet is like Apple versus Android.

The opposite of this closed system is the internet, which is like Android: open, chaotic, and free. Therefore, "Internet first" means freedom. From one perspective, this is a conflict of freedom versus oppression. From another, it's control versus anarchy. The ideal, Balaji suggests, is to find a balance of "ordered liberty" that avoids the extremes of Chinese control and American anarchy.

The changing champions of Western civilization

When considering Western civilization today, it is difficult to identify its champions, as large groups in America and Britain are now fundamentally critical of it. Even those on the right no longer fit the traditional archetypes.

They do not look like the 1950s clean cut American, let alone the proper Brit.

Instead, they might be cursing at people online or firing guns. The archetype of the “posh received pronunciation Brit” is also fading. As Balaji notes, it is not a “virally spreading ideology right now.”

New cohorts, like bitcoiners, may be emerging to form new cultural groups. This cultural perception shift is captured in visual memes, such as one contrasting how Americans see the British (as upper-class) versus how Europeans see them. Balaji also points to the “Liv versus Alex Jones” dynamic as another example.

Everything is downstream of the internet

The internet is only in its spring phase. In 1991, internet usage was practically zero. Today, 99% of communications and transactions are online. However, core institutions like the presidency, currency, military, and universities remain only partially online. Balaji argues that everything happening in the world today—in politics, media, money, and the military—is downstream of the internet. To understand any modern phenomenon, one must first analyze how the internet has changed it.

Peter notes that while central governments have failed to keep up, the electorate is racing ahead with online discussions, enabling populist movements like the UK's Reform Party. Balaji agrees, citing social media's role in events like Brexit, the election and deplatforming of Trump, and the rise of Black Lives Matter. He states, "Twitter elected Trump and then Twitter deplatformed Trump and then X reelected Trump." This influence extends to finance, where the volatility of the internet, seen with GameStop and AMC, is leeching into the physical world's stock markets.

The next phase will involve replacing these core institutions with internet-first versions. AI will be a significant part of this, but it is not a cure-all. AI is probabilistic and makes errors, whereas crypto is deterministic, making them complementary technologies. Even in the modern ChatGPT era, AI requires prompting and verification. This means a human expert is still needed to review AI's output, especially for high-stakes applications like legal contracts or radiological scans where liability is a concern. Balaji explains that AI creates jobs in verification and is best suited for visual tasks that can be quickly checked by eye. For text or code, it requires line-by-line inspection.

AI is not a panacea. It'll help, don't get me wrong. But it is something that, because you have to prompt it and verify it, it doesn't do things end to end, it does things middle to middle.

The USSR's collapse as a model for the future of the US

Political entities like the US and the UK are unlikely to continue in their current form, similar to how the Soviet Union dissolved. The land will remain, but the political entity itself will go bust, leading to renegotiated borders and new passports.

The fall of the USSR is the closest parallel I think within our lifetimes to what is going to happen.

The USSR was a 300 million-person state, an ideological empire, and a global superpower with nuclear weapons. It projected an image of being eternal and denied its potential for failure until its final days. The union was brought down by rising nationalist sentiments, not just from states like Estonia seeking freedom, but also from Russians who felt oppressed by the Soviet system.

An underappreciated factor was a survey revealing that Russians had become a slim 51% majority within the Soviet Union. This loss of clear dominance spurred many Russians to support a breakaway. By forming Russia, they gave up territory but re-established a strong ethnic majority, comprising 76% of the new country's population.

The financial neutron bomb that zeroes out the US dollar

A potential societal collapse is more likely to resemble the messy, tribal Indian partition than an organized civil war. It wouldn't be structured armies fighting, but rather chaotic conflict akin to clashes between groups like BLM and J6. Balaji suggests this kind of unrest is brewing not just in the US, but also in the UK.

He presents a thought experiment to illustrate the effects of a total financial collapse. Imagine an alien viewing humanity, with every person having a digital dashboard showing their financial balances and credentials. If all fiat currency balances, like the US dollar, and all contracts denominated in them suddenly went to zero, society would grind to a halt. The fundamental assumptions people operate on would evaporate, leaving them to question how to get their next meal.

This scenario is described as a "financial neutron bomb."

This is like a financial neutron bomb that just zeros out balances. But the people are still alive. They still got the skills and knowledge in their head and the factories are still around.

In this aftermath, hard assets and alternative currencies would remain. Gold, Bitcoin, and physical infrastructure like Chinese factories would still exist. Weimar Germany, for example, could reboot its economy after hyperinflation because it retained its manufacturing capacity and social cohesion. However, Balaji argues the US today is more comparable to Latin America, where a loss of trust would prevent people from uniting to reboot a new currency.

The collapse of the dollar would be the ultimate betrayal, following a series of institutional failures that have eroded public trust.

Everybody who trusted any US institution got rug pulled. And then if you trust a US bank account, that's like, that's like the final rug pull.

A financial reboot will shift power away from the US

The US dollar's technology stack is not the best. Systems like ACH are slow compared to Europe's SEPA, India's UPI, or China's WeChat. The dollar's main advantage is its legacy status, as everyone is already plugged into it. If the global financial system were to reboot, the US would likely not be put back at the center.

In such a scenario, power would shift to countries with tangible assets like gold, digital gold like Bitcoin, and factories. While a financial collapse would zero out the "points" and destroy the coordination mechanism of money, it would not erase fundamental value. The physical factories and the knowledge of how to operate them would still exist. Eventually, new contracts would be signed in ounces of gold or satoshis.

This would have severe consequences for the United States, which relies heavily on imports and lacks domestic manufacturing. With its currency devalued, the US would have little to trade for foreign goods. This economic turmoil could lead to social unrest, with the tech sector becoming a scapegoat. Balaji predicts that tech workers will be blamed for AI taking jobs and Bitcoin taking money, drawing a parallel to the class-based violence of the 20th century. He warns that over the next 10 years, it will be particularly risky to be an immigrant tech worker in America.

While the exact timing is difficult to predict, Balaji points to current market signals as evidence that this shift is already happening.

These things happen slower than you can believe and then faster than you can imagine.

He highlights spiking bond yields in Western-aligned countries like the US, Germany, and Japan, while China's yields are at all-time lows, suggesting a shift in credit risk perception. Simultaneously, the dollar is falling against other currencies while gold and Bitcoin are spiking. This is a reality you cannot hide from.

Why the West should compete on freedom

Peter observes a drift towards "backdoor socialism" in the UK. He believes the government knows it cannot outright take control of companies, so it uses other means to exert its will. This approach involves controlling companies through regulation, speech control, and taxation to make them do exactly what the government wants.

So I think the form of socialism we have is backdoor socialism where they control the companies through regulation, through speech control, through taxation, through every single way they can to get people to do exactly what they want.

This trend is also seen in society through a demonization of wealth and calls for higher taxes. Peter suggests that the UK, Europe, and the US are on a trajectory similar to China's model of control, but are implementing it poorly. He argues that instead of trying to compete with China on control, which is a weakness for the West, the focus should be on its greatest strength: freedom.

And so why try and compete with them on something we're bad at? What we're good at is freedom. We should compete on freedom. Free markets, deregulation, bitcoin.

For Peter, the only way forward is to become "freedom maximalists." Balaji agrees with the overall sentiment but expresses hesitation about the term "maximalist," which Peter clarifies does not mean he is an anarchist.

Building an internet-first society

Balaji shares a parable to illustrate a point: imagine a group called the "westests" who travel west until they reach California. Instead of being happy, some want to continue west into the Pacific Ocean. When others object, they're accused of being "eastists." This story highlights how any good thing can be taken to an extreme until it becomes harmful. The dose makes the poison. This is why he identifies as an "optimalist," not a "maximalist," because there's an optimal amount of anything.

This principle applies to nations. In the 1980s, the USSR fell partly because it tried to be a terrible copy of America. Now, America is becoming a poor copy of China, implementing internet censorship and tariffs. Instead of copying, the focus should be on what the internet represents: free speech, free markets, and consent. The world can be rebuilt around consent and volunteerism.

This leads to the idea of the Network State, an internet-first society. Balaji describes himself as a "doomer on the old world and an optimist on the new one." The approach is "cloud first, land last, but not land never." It begins with online communities that eventually materialize in the physical world. While many people know their internet neighbors better than their physical ones, the challenge is organizing them in the real world.

Individually alpha is collectively beta. If you have a bunch of guys who all think of themselves as super alpha males, they can't cooperate. And if they can't cooperate, they can't get anything done together. And then that means they're collectively weak.

A key part of the internet-first model is re-establishing cooperation and leadership. The process starts small, perhaps with a co-living house, to establish a zone of civility. From there, it can grow by crowdfunding more territory. Peter notes that he has spent less time online while at the event because he is interacting in person with people who, despite being from different countries, share a common framework derived from Bitcoin.

The future of education is shifting from universities to internet-first communities

Just as the internet and Bitcoin are the decentralized successors to the West, the future of society will shift from a two-party system to a system of a thousand communities. In the future, it will be conventional for an 18-year-old to pick their community or country, not just their college.

This shift represents a return to an older, more effective model of education and work, moving away from a long period of infantilization. Historically, children worked on the family farm, where their parents had a vested interest in their well-being. Balaji refers to this as having a "genetic equity stake."

In the 1800s, Jebediah and Abigail would have 10 kids and they'd all go and work on the farm. But because they had a genetic equity stake, DNA, a 50% equity stake in a sense. They loved the kids, they were not going to work them too hard. By the late 1800s, once you had the Industrial Revolution factories and you had child labor in the factories, the CEOs of those factories didn't have the same love for the kids the parents did. And so they worked them too hard.

Well-intentioned child labor laws led to a prolonged period of adolescence, where people may be in school until their 30s, spending half their life before starting to contribute. The correction is a return to apprenticeships, with modern internships serving a similar role. Kids can now learn valuable skills like coding from home in a safe, supervised environment.

The current K-12 educational model, a remnant of the Prussian system, was designed to stabilize a centralized state, not to help individuals level up as quickly as possible. Internet-first learning will completely transform this. With AI making rote learning obsolete, education will shift towards completing tasks and learning skills on demand. Age becomes irrelevant; a supervised six-year-old can compete with a 26-year-old by submitting work online. Peter noted this is a major shift in how he thinks about his own daughter's future.

I'm not thinking about where she should go to university, I'm thinking about the basic framework of education she should have, which is, I think philosophical, but also what is going to be her community, where should she be? What community should she be located in? What's she going to take from that community?

Building a global coalition for the internet-first generation

When people choose a college, they are often implicitly choosing their community, company, and country. For millions of engineers from India and China, the path was to attend a university like Stanford or MIT, get a work visa with a company, and then pursue a green card for the country. This path was a unified thing, but individuals had to piece it together themselves. It demonstrates that the idea of choosing your country around age 18 has been successfully beta-tested by millions of smart people. This concept could be reimagined as a fully integrated offering, a talent recruitment package that combines college, company, and country.

A new global coalition can be formed from groups that do not align with the major political poles. For example, the Canzuk nations—Canada, Australia, New Zealand, and the UK—represent 140 million people who are neither 'woke' nor 'MAGA'. The MAGA movement, by being strictly American-focused, missed the opportunity to build a global conservative or libertarian union. It is a tiny fraction of the world, leaving a large opening for a different kind of alliance.

This new coalition is for the 'internet first' generation. This includes 'crypto Chinese' who have left communism, 'internet Indians,' and builders from the Midwest, Middle East, Eastern Europe, and Latin America. These individuals are not aligned with the Chinese state, nor are they trying to rebuild the American state. They are internationalist, capitalist, and believe in the decentralized global network. This represents a natural evolution in how people organize.

Britain was a union because it was the United Kingdom of England, Scotland, Wales, and Northern Ireland. Then you had the United States of America. And I think we are going to have the network states of the Internet.

Identifying places of rise and decline in a complex world

The world has become incredibly complex, and for those not professionally engaged in organizing information, the tendency is to tune out. A practical strategy is to identify which locations will be stable and prosperous in the next five to 15 years. Key indicators for these places include a good debt-to-GDP ratio, very low crime, and high social stability.

Places like El Salvador, Dubai, and Singapore are examples. Balaji also suggests India, noting he feels safer in Bangalore than in Los Angeles because it's a society on the rise. He describes India as 'California in reverse' to illustrate the different trajectories.

Everything new in India, it's like an Apple store and the old stuff are the shanty towns...it's improving all the time. And everything new in California is a shanty town. And what's old are these beautiful buildings... You're pointing to the old stuff in India, and that looks bad and the old stuff in California, but the new stuff in India looks much, much better.

This comparison shows a fractal pattern of rise and decline. While both places have good and bad areas, the good is expanding in India while the bad is growing in California. For a person unable to keep up with all the information, identifying these larger trends is a useful way to navigate the future.

Why 'stay and fight' is like fighting a volcano

Ray Dalio discussed the importance of location in an abstract way, suggesting people should assess risks and consider moving. Balaji contrasts this bloodless analysis with the visceral reality of what a bad location can look like, pointing to scenes in San Francisco that resemble the movie Mad Max.

This is literally Mad Max. This is right? Black mirror is the present. It's not like some theoretical future. The dystopian present. All the sci fi Terminator Black mirror assumes that the present was good enough and some tech guys made the future worse, but it's actually the reverse. The political guys have made the future dystopian. And maybe technology can make a better future.

This decay isn't unique to San Francisco; Peter notes similar issues in London, such as stores needing to buzz customers in for security. This leads to the question of why people don't just "stay and fight" for their communities. Balaji offers several counterarguments. First, it would mean fighting other Americans, a destructive tribal conflict. Second, you can't physically fight abstract problems like a sovereign debt crisis.

It's like fighting a volcano. The point is when a volcanic eruption is happening, you get away from the volcano and the people who are stupid enough to try to fight the volcano either die or have their homes destroyed. And if you're smart, you get away from it, you let that thing happen and then maybe you can come back and rebuild.

Third, he questions who would be on his side, as he feels the left is anti-capitalist and parts of the right are anti-immigrant. He points to anti-tech graffiti as evidence. Balaji makes a provocative comparison, suggesting that when activists in San Francisco light self-driving cars on fire, it's a signal to recent immigrants in the tech industry to leave, similar to how cross burnings were used for intimidation in the past. He argues this is a form of resentment from long-time residents toward newcomers, coded as a class issue rather than a racial one.

America's history is one of leaving, not staying to fight

A potential future political movement could emerge from the merging of different political sentiments. As Democrats may become more critical of tech figures and Republicans more anti-capitalist, these trends could combine into a nationalist, socialist movement hostile to tech immigrants. This is one reason to be physically distant from the center of such conflicts.

Instead of fighting internal battles over a sovereign debt crisis, one's energy can be better spent on advancing freedom, space exploration, and life extension. There are no unique natural resources like silicon that tie people to Silicon Valley; the real non-commodity is the community of people. Loyalty lies with those people, not the physical location.

Historically, America was founded by groups who left European wars behind. This act of leaving is not betrayal but rather a smart move with a first-mover advantage. Almost every American ethnic group, besides African Americans and Native Americans, descends from people who chose to leave war, famine, or revolution rather than stay and fight.

The entire history of America is actually those people who didn't stay and fight, they were smart enough to have first mover advantage.

Examples include the Germans who left the 1848 revolutions, the Irish who fled the potato famine, Jews who escaped the Holocaust, and many others who left conflicts in Iran, Vietnam, Korea, and China.