2025 letter | Dan Wang 

Virtues of the weird Silicon Valley. It's increasingly weird, but it still reliably turns “impossible” tech into normal life (like driverless cars). It’s unusually meritocratic (especially for immigrants), forward-looking, fast-moving, youth-admiring, and good at forming dense communities that help founders and builders.

There’s still no better place for a smart, young person to go in the world than Silicon Valley… It adores the youth… My favorite part of Silicon Valley is the cultivation of community… Tech founders are a close-knit group… with organizations that act like internal civic institutions.

Flaws of SV. It can be narrow, socially + culturally thin, herdlike, thin-skinned about dissent (despite the publicized claims of loving contrarian people and takes, I would add), and oddly ignorant about the broader world.

Narrowness of mind is something that makes me uneasy about the tech world… the well-rounded type might struggle to stand out relative to people who are exceptionally talented in a technical domain… Tech titans more obsessively pursue a few ideas… rather than developing a robust model of the world. There’s a general lack of cultural awareness in the Bay Area… Silicon Valley often speaks in strange tongues… Though San Francisco has produced so much wealth, it is a relative underperformer in the national culture.

In particular, AI discourse in SF. Many of the discussions of AI here are warped by “decisive strategic advantage” thinking, where convos collapse into “AI will solve everything” or “AI ends everything,” creating Pascal’s Wager-style reasoning and aggressive shortening of time horizons.

The trouble with these calculations is that they mire us in epistemically tricky terrain. I’m bothered by how quickly the discussions of AI become utopian or apocalyptic. As Sam Altman once said  (and again this is fairly humorous): “AI will be either the best or the worst thing ever.” It’s a Pascal’s Wager, in which we’re sure that the values are infinite, but we don’t know in which direction. It also forces thinking to be obsessively short term. People start losing interest in problems of the next five or ten years, because superintelligence will have already changed everything. The big political and technological questions we need to discuss are only those that matter to the speed of AI development. Furthermore, we must sprint towards a post-superintelligence world even though we have no real idea what it will bring.

The real focus should not be on winning the AGI race but rather “winning the AI future.” That involves much deeper structural foresight, including rebuilding manufacturing capacity and actually diffusing AI through society via hard regulatory and institutional work.

I am not a skeptic of AI. I am a skeptic only of the decisive strategic advantage, which treats awakening the superintelligence as the final goal. Rather than “winning the AI race,” I prefer to say that the US and China need to “win the AI future.” There is no race with a clear end point or a shiny medal for first place. Winning the future is the more appropriately capacious term that incorporates the agenda to build good reasoning models as well as the effort to diffuse it across society. For the US to come ahead on AI, it should build more power, revive its manufacturing base, and figure out how to make companies and workers make use of this technology. Otherwise China might do better when compute is no longer the main bottleneck.

China has deep and powerful tech momentum. Besides for chips and aviation, China has a strong edge in manufacturing, infrastructure, and ferocious competition are generating fast iteration and global leadership (EVs, drones, robotics). The West often misattributes this to only subsidies or theft and does not take it seriously.

1. Western elites expect China to stall by betting that demographics/debt/politics will slow it down, even though advanced tech does not require large populations (Chinese firms keep innovating under pressure: “Technology breakthroughs can occur even in a suffering society.”)

2. They explain China’s success too narrowly, focusing on subsidies or IP theft. They miss the very deep strengths of like infrastructure, industrial ecosystems, and intense domestic competition.

   Probably the most underrated part of the Chinese system is the ferocity of market competition. It’s excusable not to see that, given that the party espouses so much Marxism. I would argue that China embodies both greater capitalist competition and greater capitalist excess than America does today.… Chinese firms have to fight it out in a rough-and-tumble environment… taking Jeff “your margin is my opportunity” Bezos with seriousness.

3. They mistake innovation for invention alone.

   [W]estern elites keep holding on to a distinction between “innovation,” which is mostly the remit of the west, and “scaling,” which they accept that China can do. I want to dissolve that distinction. Chinese workers innovate every day on the factory floor.

   I sometimes hear that the US will save manufacturers through automation. The truth is that Chinese factories tend to be ahead on automation: that’s a big part of the reason that Chinese Tesla workers are more productive than California Tesla workers. China regularly installs as many robots as the rest of the world put together. They are also able to provide greater amounts of training data for AI. We have to be careful not to let automation, like superintelligence, become an excuse for magical thinking rather than doing the hard work of capacity building.

Or, the West takes its own advantages too seriously. Do we really have a durable talent advantage? China has worked to rapidly expand electricity generation across solar/coal/nuclear to ensure that no data center goes without power, while US electrical capacity has barely grown since 2000. Sure, we excel at building datacenters but we but neglect upstream bottlenecks in energy and infrastructure (even our chip edge is questionable with Trump allowing H200s to be sold to China).

One advantage for Beijing is that much of the global AI talent is Chinese… some of these researchers may decide to repatriate… People move for all sorts of reasons, so I’m reluctant to believe that the US has a durable talent advantage.

US vs. China competition will continue to go back and forth in terms of advantages, driven largely by agency and self-inflicted mistakes. Importantly he stresses that the “better system” will be the one that actually delivers for citizens.

Competition will be dynamic because people have agency. The country that is ahead at any given moment will commit mistakes driven by overconfidence, while the country that is behind will feel the crack of the whip to reform. Implosion is always an option. In 2021, Xi Jinping was on top of the world, witnessing the omnishambles of the western pandemic response combined with the political disgrace of January 6. So he proceeded to smack around tech founders and initiate a controlled demolition of the property sector, which are two of the policies most responsible for China’s economic sluggishness today. Now, Beijing is trying to get a grip on its weaknesses. If either the US or China falls too far behind the other, the laggard will sweat to catch up. That drive will mean that competition will go on for years and decades.