Balaji and Dan Wang: The Engineering State vs Lawyerly State

Balaji Srinivasan (0:00)

Digital borders and physical borders are like the same thing, right? The gray firewall will be seen in some ways as a very far-sighted thing because it is digital hard borders.

Dan Wang (0:11)

I think that the US can very credibly point to these amazing strengths that the US has. I think China can also point to these amazing strengths, namely these drone armadas, which are very powerful.

Balaji Srinivasan (0:22)

Chinese robotics are actually really good. And for the first time, Tech America is actually taking China seriously.

Dan Wang (0:27)

I am going to let no one talk me down from my stance on manufacturing. That's almost everything.

SPEAKER_3 (0:33)

What does it take to industrialize a continent in a single generation? In 1978, Deng Xiaoping kept the communist branding but rewired everything underneath. Special economic zones became Shenzhen. The Eastern Seaboard industrialized. By 2025, China led the world in cars, solar, ships, and advanced manufacturing. That growth is real. But so are the cracks, political purges, a property implosion, youth unemployment, and a wave of entrepreneurs leaving for Singapore, Dubai, and beyond. Meanwhile, America's trillion-dollar tech companies remain unmatched. The question is whether software valuations and financial engineering can sustain a great power, or whether the US needs to rebuild its industrial base to compete. And if it does, who builds it? Previously aired on the Network State Podcast, Balaji Srinivasan speaks with Dan Wang, author of Breakneck, about the engineering state vs. the lawyerly state, and what builders on both sides of the Pacific should understand about what comes next.

Balaji Srinivasan (1:32)

Dan, welcome to the Network State Podcast. And I think, you know, we hung out several years ago in the before COVID times, I think at some Stripe thing, if I recall, that Collison organized something like that. One of these…

Dan Wang (1:47)

For instance, we played a very, my favorite board game together.

Balaji Srinivasan (1:53)

Yeah, what was it? It was one of these things, was it Werewolf? No, what was it?

Dan Wang (1:58)

It was something close. It's called Avalon, in which there are roughly seven of us around the table. Three people are evil. They know who each other are. And the four good people don't in general know who anyone else is. And the aim of the game is for the evil people to assert themselves as good, and for the good people to deduce who the evil people are. I've been playing this for many years now. I played in different cities, and I'm glad to have been able to play it with you in the woods of Northern California.

Balaji Srinivasan (2:30)

That's right. And I think, as I remember, this is the first time I played it, and I was thinking, what if we wrote the state space matrix on a whiteboard, which is either the really smart thing to do, or the really dumb thing to do? And like, Guern got annoyed at that or something, as I vaguely recall. This is like many years ago. Yes, that's right. Yes. But I still think there's something to that. I have to go back and play that, and I feel like you might be able to maybe be bad to write it on the board, and it takes away the mystique of it. But there's something to that, the proselytization. Anyway.

Dan Wang (3:03)

I remember you doing that, and I think I was evil, and I managed to deduce who the Merlin was based on your calculations.

Balaji Srinivasan (3:11)

Yeah, there's something about, there's an underlying data structure behind the thing, some kind of proselytization, sort of like the Monteholl problem in stats, where you actually write out the decision tree, and then you can actually understand it better. At least I wanted to see what would happen. Anyway, maybe it took some of the fun out of it, but it was fun for me, at least, or maybe hopefully for you. Anyway, so we first traveled in some of the same circles, and I liked your book, which we'll get into in a second, so Breakneck, and we'll put it on screen.

And I liked it because, so what's funny is maybe this conversation will be a little different than some of the other ones you've had, because it says a lot of things that I think are, that Americans should understand, but they're super obvious to anybody who's paying attention to Asia. And in fact, I actually think you go easy on the US. I'm much more of a bear, perhaps, on the US than you are. Maybe you pull some bunches in that or what have you. Cause I'm actually, I'm messaging, I'm talking to you right now from Singapore. And so let me see if I can, you know, obviously others have summarized the book, but essentially China is an engineering state, America is a lawyerly state. China actually is on the right in many ways, because Xi is all about the great rejuvenation of the Chinese nation. Even if he's kept the communist symbols, you know, Mao went after the four olds and went after a filial piety and so on and so forth. Xi completely reversed that, where it's really a nationalist conservative, a revival of 5,000 years of history and so on and so forth. And in many ways, when Doug Xiaoping took over in 1978, a rebranding changes the logo, but not the guts. And Doug Xiaoping did a reinterpretation where he kept the logo, but changed the guts completely. It was basically, in my view, a coup, which is funny because neither the Communist Party, nor Democrats, nor Republicans admit the extreme discontinuity between Deng and Mao, because I know I'm butchering the pronunciation, but Hua Guofeng and the Gang of Four were supposed to be the successors to Mao, and Deng managed to take over and shifted it towards the capitalist road even after he'd been purged three times and a son had been thrown through a window. And the famous black cat, white cat, doesn't matter if it catches mice, and the Zhou Gang contract where those villagers, at least that was the idea of it. Maybe that was just a legend, but there's villagers that had a contract to do capitalism and they weren't actually executed unlike everybody else. And that was kind of like held up a hand, Deng Xiaoping held it up and said, okay, capitalism is legal in these regions, the special economic zones. And thus began Shenzhen and the things that are on the Eastern Seaboard. And that's how China modernized and go to capitalism all at once, right? So I may be getting some of that wrong, but was that roughly accurate kind of a quick capsule history? Go ahead.