It’s Time to Shift the Economy Back into Gear

George Gilder

Posted October 16, 2020

George Gilder

The last few months have seen major advances for our COSM architecture for internet security and prosperity. Now under the leadership of former Verizon executive and Attorney General Bill Barr, the Administration is at last beginning to respond to the giant opportunity.

The US government may even come to recognize that our national security is not enhanced by relentlessly undermining our technology sector.

Currently, we are restricting markets of our capital equipment paladins, such as Applied Materials. Thus, barring our chip leader Intel from its fastest growing markets, and attacking as “monopolies” our tech leaders (such as Google and Amazon), which are falling behind competitors in China. After we close everything down, we then fecklessly blame Beijing.

We are harassing allies such as Great Britain that use gear from our fanciful Commerce Department “entities list” — the same list that once focused on nuclear proliferation and bio war and now bans routers, switches, and facial recognition equipment.

Technology depends on communications systems that improve in accordance with Metcalfe’s Law, by the square of the number of compatibly linked devices.

All economies benefit from extending the learning curves of innovations, making everything faster, cheaper, and better with every doubling of total units sold.

A Failed Paradigm

Therefore, Americans who understand telecom and microchips are baffled by the current policy of banning, bilking and barring Huawei — one of the world’s leading users of US chips and architectures, and prime promoter of global Metcalfe advances and learning curves.

Representative of the widespread devastation of supply chains, the US manufacturing star Flex (formerly Flextronics) has lost at least a billion dollars’ worth of business from the Huawei ban. Not to mention Intel, which may eventually lose as much as $11 billion.

The anti-China policy is particularly destructive at a time when China’s use of semiconductors is soaring (expected to reach $103.1 billion this year). That’s a 15.8% increase compared with 2019, according to experts at the current China 2020 integrated circuit exposition in Shanghai.

The result is to weaken the US microchip economy — both design and capital equipment — by estranging it from all the countries and companies currently using Chinese-made gear. Reduced in the process is the dominance of US system architectures, microprocessor instruction sets, capital equipment, software languages, and industry standards.

Delusional is the US’ explanation of “national security” concerns, as if hackers care who makes these systems. Hackers deal with whatever combination of equipment might be deployed. For decades, hackers and spies have been infiltrating US networks, designed and made with US chips and software, and come away with ever more billions of items of private information and government secrets.

The key sign of a failed paradigm is the more you spend on it, the worse the results. By this standard, our vastly expanded spending on internet security is the epitome of a failed paradigm.

The True Cost of Technological Entrepreneurship

The current internet is a gigantic copying machine, with security as a retro-patchwork of costly post-hack fixes. The more users of the net the more vulnerable and hackable it becomes. In this increasingly centralized and governmentally regulated system, each new user constitutes a new “attack vector” for spies and malware.

The answer to the security crisis is not to shut down world trade but to replace the porous pyramids of the current global Internet copying machine.

The only prospect for balking hackers and spies is widespread deployment of new distributed security architectures such as cryptographic blockchains that scale by growing more secure the more users they have.

The irony is that China has been more aggressive than the US in deploying new blockchain architectures. Beijing is currently launching a new digital currency based on a new Chinese blockchain with massive experiments this year, led by Alibaba and Tencent.

Investors must deal with reality — and reality today consists of self-defeating bombast and bellicosity on all sides, from Washington to Beijing.

With 100 million users in the US, TikTok (an ingenious social network owned by Bytedance of China) becomes a symbol of the absurdities of the current commercial and security catfight. It is suing the US government for its attempted TikTok ban under free speech grounds that are entirely unavailable to US companies in China.

Yes, the US is still freer than China in many ways. But not in technological entrepreneurship, where China has three times as many initial public offerings (IPOs) and is opening several new stock exchanges.

Fortunately, Barr has been quietly leading a consortium of US companies in a US response. With executives from such US companies as Intel, Cisco, and ATT, Barr is developing a three-month roadmap aiming for the purchase of Nokia, the flagging Finnish telecom star that currently owns Bell Labs, Lucent, Alcatel, and Siemens.

Today’s Prophecy

A goal is to deploy what we call a new COSM architecture for the internet, 5G wireless, and even world finance. If this goal can be achieved, perhaps we can get telecom gear off the “entities list.” As voice over Internet Protocol (VoIP) Telecom pioneer Daniel Berninger explains, “With Lucent and Bell Labs back in the fold, we no longer will have to be paranoid about Huawei.”

This “internet reboot” is the largest opportunity in world technology. It can provide huge new markets for high tech companies building a new global network from the fragmentary fiasco of the current system. Our COSM can even refocus the US economy on revolutionary new high technology infrastructure and manufacturing rather than on an ever-greater engorgement of financial hypertrophy. The big banks that dominate the US economy are so regulated by government that they scarcely differ from nationalized banks in China. The larger they grow the slower grows the US economy.

In terms of our “master algorithm,” the COSM constitutes the reintegration of the great themes of Information Theory. It takes a low entropy carrier to bear high entropy content and creativity. Pioneered in the mid-20th Century by Claude Shannon at MIT and Bell Labs, the new COSM will join the distributed security of cryptographic blockchain with the creative surprises of an American entrepreneurial and technological revival.

Let’s get our economy back in gear, pursuing knowledge and learning rather than lockdowns and paranoia. The opportunities are huge and we will be at the center of them.


George Gilder
Editor, Gilder's Daily Prophecy

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