The Exchanges

Q and technology can break down these barriers. And I think we'd like to take a step away from that and, and really dive into what's been happening. Like what's the evolution that we're talking about? The supply chain, for example, like I think one of the most interesting ideas you put forth is that this historical evolution of the supply chain. Can you talk a little bit more about that?

A Sure. And there's no reason not to be grandiose. I write books with neologisms and word terms like global civilization. So I'm hardly one to shy away. I aim at the hundred year perspective, but also there is lots of granularity in the argument. I think, you know, it is true that though, when you're in the Valley and you're talking about connectivity, of course, your first instinct is to think about digital connectivity and the internet and your mobile phone. And all of that is true, but the internet is actually the only the newest layer of global infrastructural connectivity. And, you know, the fundamental argument is there is the most, the most powerful force of this century is connectivity. But that connectivity falls into three categories. There's transportation, energy, and communications. And that evolution that you asked about begins in the late 19th century with intercontinental and cross-border highways, And then, of course, railways built by empires such as the British. Even the Ottomans had railways that spanned across the Middle East. And of course, the Russians did, too. That's just transportation. Then came energy. We didn't have international oil and gas pipelines a hundred years ago. Today, we have about two million kilometers of them, right? Not to mention the four million kilometers of railways. And so, on top of transportation, on top of energy, you have commu…

AI assessment note: “that evolution that you asked about begins in the late 19th century”

Q a certain thing, and more importantly, Cities could compete with each other, and it's a form of regulatory arbitrage. It sounds like what you're describing is not dissimilar to that in many ways. The question I have is that the link between the existence of those special zones and the fast growth, has that really been firmly established, or what's the arc of, what's the connection between the two, really?

A First of all, I, I totally agree with Mark's argument, uh, and that's exactly what's happening, is regulatory arbitrage. With one caveat, we used to We call it the race to the bottom. We used to believe that countries would relax all sorts of regulations in order to attract investment of any kind, and that was the kind of 19 seventies and 19 eighties of Asia. But in fact, I, I argue that it's actually a race to the top because this is how countries ascend to the value chain. This is not how they make soccer balls with their hands for the next 50 years. This is how they get jobs, they get investment, they get technology, and they gradually move up the value chain. Sometimes they move up very, very quickly. We used to think of this as a derisive Kind of, uh, you know, sort of trend, but it's actually a very positive trend. And I'll tell you why. And this was one of the hardest areas of data gathering for me to do for this book, but it's all embodied in one map that I have in, in the very early part of the book about these special economic zones. And what it shows is the share of exports of each major country in the world, or even small countries that is derived from the economic activity in those zones. So for example, You know, 50% of the GDP of Central American countries is derived from the manufacturing and textile exports that, uh, are produced in those zones. So if they didn…

AI assessment note: “50% of the GDP of Central American countries is derived from the manufacturing and textile exports”

Q longer captive to a single company. So we're kind of in this in-between place, And the world hasn't quite settled into this place. We're in the middle of this friction. So do you have any thoughts on what's changing, what needs to change there? Because we can't also dismiss the real concerns of people who are moving in these systems and trying to live their lives and make their way.

A Oh yeah. No, to, to the contrary. I think that simply harping nostalgically for that world that never was, is not exactly a constructive solution to this dilemma of, you know, people feeling disrupted by transitions. I think part of the transition and disruption is also the solution to the problems that we found from the previous era, uh, that, that gave us the financial crisis. And then freelancers union, which used to be when I lived in New York, uh, five years ago, I was a member of freelancers union. I was getting my health insurance and so forth. Now it's really growing and growing. Uh, at a massive rate, and they're looking at portable insurance schemes, and workers' rights, and all of these kinds of new types of political arrangements, and negotiations, and social contracts, uh, with their members, uh, with insurance companies, with the state of New York, and so on. So, so these are the solution to this transition. They are the future, and they are also scaling rapidly right now. So the more cities we can have, and there's very good rankings around this. Citigroup and the Economist Intelligence Unit did this research on, Which cities in North America and around the world are doing the most to create ecosystems that allow millennials to, uh, you know, get new skills and, you know, which, which cities have general assembly, you know, which cities have incubators, which cit…

AI assessment note: “they're looking at portable insurance schemes, and workers' rights, and all of these kinds”

Q I want to pause on that idea for a minute. It was eye-opening for me to think about the internet as the one in this continuum versus like this discrete thing that's just randomly layered on top. Why does that distinction matter so much? Why that's important? What the implications of that is?

A We think we live in a world in which the most fundamental layer of human organization is the political state. You know, it's my nation and your nation and the borders between us, states and borders. What happens when you have the volume of infrastructural connectivity between cities and communities so drastically exceed the, the, the, the utility and the length of global borders is that you change the entire nature of the system. And of course, we're not old enough To remember, uh, and, and, you know, only those who are steeped in kind of geopolitical history would think back to the last period of what's called like major systems change from the middle, the middle ages to the modern state system. That was 500 years ago. And once every 500 years, we have this kind of systemic transformation in how human society is organized. And so, you know, we're moving from the world of nations and borders to what I call the world of flow and friction in which infrastructure and supply chains fundamentally matter more than nations and borders, because again, there's so much more infrastructure than there is borders. So instead of thinking about things, stopping at borders, we should think of the only ways in which we slow down, uh, you know, the movement of goods, of people, of resources, of knowledge, of ideas, of technology is through various kinds of frictions. The Great Firewall of China.

AI assessment note: “we're moving from the world of nations and borders to what I call the world of flow and friction”

Q I want to pause on that idea for a minute. It was eye-opening for me to think about the internet as the one in this continuum versus like this discrete thing that's just randomly layered on top. Why does that distinction matter so much? Why that's important? What the implications of that is?

A We think we live in a world in which the most fundamental layer of human organization is the political state. You know, it's my nation and your nation and the borders between us, states and borders. What happens when you have the volume of infrastructural connectivity between cities and communities so drastically exceed the, the, the, the utility and the length of global borders is that you change the entire nature of the system. And of course, we're not old enough To remember, uh, and, and, you know, only those who are steeped in kind of geopolitical history would think back to the last period of what's called like major systems change from the middle, the middle ages to the modern state system. That was 500 years ago. And once every 500 years, we have this kind of systemic transformation in how human society is organized. And so, you know, we're moving from the world of nations and borders to what I call the world of flow and friction in which infrastructure and supply chains fundamentally matter more than nations and borders, because again, there's so much more infrastructure than there is borders. So instead of thinking about things, stopping at borders, we should think of the only ways in which we slow down, uh, you know, the movement of goods, of people, of resources, of knowledge, of ideas, of technology is through various kinds of frictions. The Great Firewall of China.

AI assessment note: “we're moving from the world of nations and borders to what I call the world of flow and friction”

Q longer captive to a single company. So we're kind of in this in-between place, And the world hasn't quite settled into this place. We're in the middle of this friction. So do you have any thoughts on what's changing, what needs to change there? Because we can't also dismiss the real concerns of people who are moving in these systems and trying to live their lives and make their way.

A Oh yeah. No, to, to the contrary. I think that simply harping nostalgically for that world that never was, is not exactly a constructive solution to this dilemma of, you know, people feeling disrupted by transitions. I think part of the transition and disruption is also the solution to the problems that we found from the previous era, uh, that, that gave us the financial crisis. And then freelancers union, which used to be when I lived in New York, uh, five years ago, I was a member of freelancers union. I was getting my health insurance and so forth. Now it's really growing and growing. Uh, at a massive rate, and they're looking at portable insurance schemes, and workers' rights, and all of these kinds of new types of political arrangements, and negotiations, and social contracts, uh, with their members, uh, with insurance companies, with the state of New York, and so on. So, so these are the solution to this transition. They are the future, and they are also scaling rapidly right now. So the more cities we can have, and there's very good rankings around this. Citigroup and the Economist Intelligence Unit did this research on, Which cities in North America and around the world are doing the most to create ecosystems that allow millennials to, uh, you know, get new skills and, you know, which, which cities have general assembly, you know, which cities have incubators, which cit…

AI assessment note: “they're looking at portable insurance schemes, and workers' rights”

Q to have as many redundancies as possible so you can reroute if something breaks, if, you know, whether it's a printer or circuit or, you know, any mass autonomous system, you want to be able to have multiple pathways and ability to reroute on, on demand at It's super fascinating. You just talked about with that example, how does that play out with like, say technology companies and, and applications?

A So, you know, earlier I mentioned a company that most people have never heard of, and yet it's the most powerful builder of energy infrastructure in the world, Transneft. Now the technology companies, the technology infrastructure companies that lay all of these fiber cables, many of, many people haven't heard of Tata Communications and the others that, that build, own, and operate these millions of kilometers of undersea internet cables, and they are the silent agents of digital connectivity around the world. Now, of course, many people have heard of Vodafone. Vodafone is the largest telecom operator in the world, a nominally British company, but really a global telecom superpower. These telecom and technology and kind of, you know, data industry companies invest about, you know, it's estimated that between now and twenty-twenty, let alone all the trillions that have been spent so far, will spend another four trillion dollars just on the physical infrastructure of digital connectivity around the world. That's the internet cables, that's the data centers. That sort of telecoms, relay stations, mobile infrastructure, all of those things all over the world. The point I want to emphasize is this is a physical thing. It's a physical investment. It has this transformative impact on like the nature of the organization of the world, because you can actually touch and feel these things…

AI assessment note: “technology infrastructure companies that lay all of these fiber cables”

Q to have as many redundancies as possible so you can reroute if something breaks, if, you know, whether it's a printer or circuit or, you know, any mass autonomous system, you want to be able to have multiple pathways and ability to reroute on, on demand at It's super fascinating. You just talked about with that example, how does that play out with like, say technology companies and, and applications?

A So, you know, earlier I mentioned a company that most people have never heard of, and yet it's the most powerful builder of energy infrastructure in the world, Transneft. Now the technology companies, the technology infrastructure companies that lay all of these fiber cables, many of, many people haven't heard of Tata Communications and the others that, that build, own, and operate these millions of kilometers of undersea internet cables, and they are the silent agents of digital connectivity around the world. Now, of course, many people have heard of Vodafone. Vodafone is the largest telecom operator in the world, a nominally British company, but really a global telecom superpower. These telecom and technology and kind of, you know, data industry companies invest about, you know, it's estimated that between now and twenty-twenty, let alone all the trillions that have been spent so far, will spend another four trillion dollars just on the physical infrastructure of digital connectivity around the world. That's the internet cables, that's the data centers. That sort of telecoms, relay stations, mobile infrastructure, all of those things all over the world. The point I want to emphasize is this is a physical thing. It's a physical investment. It has this transformative impact on like the nature of the organization of the world, because you can actually touch and feel these things…

AI assessment note: “The point I want to emphasize is this is a physical thing.”

Q take a turn for a moment and talk about smart cities in general. So obviously you're talking about ecosystems and cities, but we're talking about smart cities in the sense of cities that have technology embedded into their very physical fabric. So let's talk about that trend. What are some of the more interesting things that you've seen and how this is playing out with the themes of your book?

A Absolutely. I have this line in the book where I say I've spent much of the last 10 years in places that don't exist, because there's lots of cities that are not on the map yet, and yet there are places where governments are investing in developing new kinds of, you know, modern infrastructure, a special economic zone, supply chain hubs, if you will. Instead of just cities, which are our oldest political unit of organization, we've had cities for 5000 years, we've had modern nations for a couple of hundred years. The city is the organizing unit of humanity, And, you know, and the, the sort of top 300 cities in the world represent most of the world economy. And so, uh, countries around the world are saying, what can we do to get in on this global network, uh, of connected cities that are driving the world economy forward, that dominate supply chains and so forth. They're building these special economic zones and hubs for supply chains. And I noticed that, you know, in, in, uh, 50 years ago, there were only a couple of special economic zones in the world. Today we have 4000 of them.

AI assessment note: “They're building these special economic zones and hubs for supply chains.”

Q take a turn for a moment and talk about smart cities in general. So obviously you're talking about ecosystems and cities, but we're talking about smart cities in the sense of cities that have technology embedded into their very physical fabric. So let's talk about that trend. What are some of the more interesting things that you've seen and how this is playing out with the themes of your book?

A Absolutely. I have this line in the book where I say I've spent much of the last 10 years in places that don't exist, because there's lots of cities that are not on the map yet, and yet there are places where governments are investing in developing new kinds of, you know, modern infrastructure, a special economic zone, supply chain hubs, if you will. Instead of just cities, which are our oldest political unit of organization, we've had cities for 5000 years, we've had modern nations for a couple of hundred years. The city is the organizing unit of humanity, And, you know, and the, the sort of top 300 cities in the world represent most of the world economy. And so, uh, countries around the world are saying, what can we do to get in on this global network, uh, of connected cities that are driving the world economy forward, that dominate supply chains and so forth. They're building these special economic zones and hubs for supply chains. And I noticed that, you know, in, in, uh, 50 years ago, there were only a couple of special economic zones in the world. Today we have 4000 of them.

AI assessment note: “They're building these special economic zones and hubs for supply chains.”