--:-- Host: Okay, today I had the pleasure of speaking with Pradyumna Prasad about the book, *Hirohito and the Making of Modern Japan* by Herbert P. Bix. Pradyu is an incredibly smart young guy. He has a blog and a podcast called Bread and Goods, which you can find at breadandgoods.substack.com.
--:-- Just some context: in the last quarter of the conversation, we were discussing our budding blogs and podcasts, and that discussion was recorded before the crazy events of the last week or two happened. But it might give you some interesting window into how we were thinking about these projects of ours before the crazy shit started happening. But yeah, I hope you enjoy and thanks for watching.
--:-- [Start of recorded conversation]
--:-- Host: Cool. Right, today I have the pleasure of speaking with Pradyumna Prasad, who recently graduated high school in Singapore and now he just received an Emergent Ventures grant very recently to continue work on his great podcast and blog. Excellent, excellent. So yeah, you got the Emergent Ventures grant. What are your plans? What are you doing?
--:-- Guest: What I'm going to do with it, at the moment, I'm working on a bunch of stuff on reserve currencies. It has been an obsession of mine for a very long time. So all the reading is going to end up in writing at some point. On the longer term, I want to have a blog where I can answer every single economic history question or economics question I don't know the answer to, and nobody else has the answer to. I can answer it here. So pretty much going to be a mini encyclopedia of questions I'm interested in.
--:-- Host: Excellent, excellent. Okay, yeah, I'm looking forward to it. For the time being, today we're discussing this book you recommended to me, *Hirohito and the Making of Modern Japan* by Herbert P. Bix. To give a little bit of context, let's just say who Hirohito was. He was the Japanese emperor, the third emperor after the Meiji Restoration. He was the first one to see Japan as an international power. He was the first and last one to handle it as an international power. And yeah, Hirohito was the guy responsible for a lot of stuff that happened in East Asia across the mid-20th century.
--:-- Host: Including, by the way, World War II, right? So he was a Japanese emperor during World War II. And there's a big controversy around Hirohito because he was in charge of Japan during the time that Japan invaded China and committed all of the atrocities that we know happened there, including the Rape of Nanking. And he was also the Japanese emperor during World War II, during Pearl Harbor, obviously.
--:-- Host: So the book takes a very critical stance on Hirohito. It claims that Hirohito could have stopped, or at least in many ways dulled these atrocities. He had that authority. The opposite view, which is the conventional view, is that Hirohito was kind of a constitutional monarch, much like a British monarch, and that he didn't really have the authority to intervene in politics. And then to the extent that he did, he did his utmost to lessen the impacts of the war, for example, by surrendering in 1945. So what were your overall impressions of the book, of how well he did defending the thesis that Hirohito should have been tried as a war criminal?
--:-- Guest: Yeah, I think the book sort of goes as a synthesis of these two and says that Hirohito was a constitutional monarch, but he was a constitutional monarch because he chose to be a constitutional monarch. So in theory, on paper, he couldn't do it. It's one of those things where Japanese constitutional law wasn't very well done. For any anocracy, constitutional law isn't well done, and much more so for Japan. But Hirohito could have done something. He did not. He chose to be a constitutional monarch.
--:-- Guest: Anyways, the book was well written towards the end, poorly written towards the start. I think the difference between a collection of events and a biography is a story, and there was no story at the start. So I think that could have been much improved. But I also think that it's very hard to find people who read through original language sources—in this case Japanese, to a very small extent Chinese and English—and then put it into English. I think the author deserves a lot of commendation for that.
--:-- Host: Okay, excellent. Yeah, I agree. The most interesting part about the beginning—and I agree it was pretty dull—was the author talking about how much Hirohito was influenced by his grandfather, Meiji. Meiji was the emperor during the time where Japan rapidly, rapidly, rapidly industrialized, and kind of went from being a semi-colonized power to becoming a colonial power itself, having colonies in Korea and Taiwan under Meiji. So it's very interesting.
--:-- Host: I have friends who think that many of the differences you see between countries can be explained largely by genetic differences. And I think one of the strongest counterarguments to that is just how different Japan has been over the last 150 years, how many different evolutions it's gone through. Whenever you see these stories of rapid industrialization, you can kind of understand how it can happen over many hundreds of years. But how it happens in the case of Japan during the Meiji Restoration so fast, it kind of amazes me. So I know you've been doing a lot of reading on Chinese industrialization as well, as well as industrialization in many other East Asian countries. Can you explain what happened during the Meiji Restoration? Like how did they get everything up and running so fast?
--:-- Guest: Right. The main difference between pre-1868 Japan, which was the world of the Tokugawa Shogunate, and the Meiji era, was that Japan had a lot more centralized power. There was one king running the place instead of feudal lords all over. Japan was a lot more open to the rest of the world. There was the death penalty for Japanese who interacted outside of Japan during the Tokugawa Shogunate. Very, very brutal in today's words.
--:-- Guest: Japan basically did what would be called the Holy Trinity of industrialization. It had open labor markets, government investment, and basically allowed foreign capital to come in. Across East Asia and across parts of Africa, like Botswana, and to a smaller extent, South Africa and Nigeria, the best way to get rich historically for countries when there are already other rich countries is to take all capital from the rich countries, copy their innovations, and use all their knowledge on how to get rich to get rich yourself, and then start to slowly push away on their hegemony. The results of it are somewhat mixed. The US did okay as well. Japan didn't do well. And we're seeing it with China now.
--:-- Host: Is there any particular reason it happened first in Japan as far as these nation-states go?
--:-- Guest: I'm not a very good source on this because I try to avoid the historiography of this. It's full of too many details. Historians haven't done a very good job of it. But my take on it is that it's very much elite dependent. The first is that the Japanese elite didn't have as much of a rent-seeking class as the Chinese elite did. In China, because the country was so big, they invented a whole bureaucracy to administer it. The problem was you end up leaving too much power to the people in between you and the general public. So they ended up being sort of the barriers to modernizing and opening up. But in Japan, that was less so.
--:-- Guest: The second thing is Japan already had a small tradition of worshiping the emperor as god, and it became politically convenient for the shogunate to re-emerge. They actually had a small civil war, and it so happened—and this is just an accident of luck—that the winners of the civil war happened to be the ones who wanted to open up and make Japan great again.
--:-- Guest: The second thing is being a small island nation really makes you see the realities of life much easier. One explanation for why small countries would have better economic policy than large countries is that if you're a small country, the realities of life are very often more in your face. So when Japanese elites saw the American ships coming, they were like, "Whoops, we can't afford to be irrational anymore about it." And they were forced to modernize. Compare that to a lot of East Asia, where they could live in their own alternate reality. For example, Indian kings and the Qing dynasty in China. The Japanese were just forced to deal with reality a lot faster.
--:-- Host: Yeah, yeah, yeah. That makes a lot of sense. I also read on your recommendation Lee Kuan Yew's biography. So this is not the book we're discussing now, but just to tie it with this, it was really interesting to read him go over all the different issues Singapore had to deal with when it got started. The fact that it had hostile neighbors, the fact that basically it was going to lose like 25% of GDP when the British left their naval bases. And there's something about the fact that you're just on an island, open to all the elements basically, that concentrates the mind.
--:-- Guest: Exactly. A very underrated measure of leader competence is how close to reality are you? You see it today. You saw it over the last two years where leaders who were more in touch with reality responded faster to COVID, got better vaccines, tightened up faster, but also opened up faster. So basically, the Japanese elite in the 1860s was a lot more in touch with reality than other countries. So they knew they were forced to open up. And the next part of it was they opened up quick. They got American industries to come set up in Japan.
--:-- Guest: A lot of the history of economic development is also the history of intellectual piracy. They just had what is euphemistically called forced technology transfers so they could learn how to make all the full gas that the Americans had. By around the 1910s and 1920s, they got rich enough to project their power onto the rest of East Asia. By 1905, they fought a war with Russia. Then around the same time, they invaded China and later they made China again. They just didn't deal with the sudden transitions of being a power that is coerced by the Americans to a power coercing other countries.
--:-- Host: There's a way you can view this where, I don't know if you have that kind of transition happen slowly in a country. You can have norms evolve from—I don't know how to put this in a way that's not derogatory—but norms that are very kind of brutish and very much geared towards traditional norms of war, which is you destroy the enemy, you pillage, and you loot. That might make sense if you can loot a village. But when you're talking about the capacity in a modernist war and you can do that to millions of people, that can become extremely brutal.
--:-- Host: It seems like in the West, once industrialization happened, there was enough time for things to simmer down before these countries were introduced to the worst weapons. And you could argue that the World Wars are our counterexample. But even still, on the Western theater, there just weren't the kind of atrocities that you saw the Japanese make in the Pacific theater and in China. So one of the downsides of rapid industrialization is your cultural norms don't catch up to your technology. So you have almost these people who have very traditional norms around war with very modern weapons, and it gets pretty scary.
--:-- Guest: Anagur of Scholar's Stage has a very good essay on honor culture versus respect versus justice. I'm paraphrasing here. But overall, less industrialized societies have strong patriarchal cultures because, for better or worse, it's the men who end up doing the work and they get more of the respect. There's a lot of debate and literature about this, but that's more or less my understanding of it.
--:-- Guest: You're right that the norms don't catch up, but I think you're wrong that even in the West, the norms didn't catch up for a long time. Think of colonialism. Only very, very few people in the House of Commons thought they should impeach Warren Hastings for his atrocities in East India through the East India Company. So it's not only in Japan that norms didn't catch up. It's almost everywhere that norms didn't catch up. Norms take a lot of time to catch up.
--:-- Guest: In Japan, the first thing is that the Japan you see today is mostly artificial in the sense that it is an artifact of the Americans jumping in and putting a gun to the Japanese cabinet and saying, "You better accept the constitution we make." Some parts of the Japanese left really liked it, some parts didn't, but they basically forged a coalition of only people who liked it and people from the old regime who were willing to accept the new reality. So norms can change quick, but when they do, they change with the barrel of a gun, not by some internal organic process.
--:-- Guest: Asking a question of why there was so much atrocity, you are correct in saying that norms didn't change, but I also think that public choice theory is what explains a lot of Japanese war crimes across the entire early 20th century. My entire understanding of the book was that it could have been written by any public choice theorist and would have ended up the same.
--:-- Guest: Let's think of it this way. The Japanese army was powerful historically from the 1860s. They fought a war in 1905. They were always scared the Soviet Union after the reform was going to invade them as historical vengeance, also because it was just a lot better run than Tsarist Russia. The problem was the depression hit, and then the army and navy got mad that their spending was cut. They just kept inventing problems in East Asia for them to have their budget increased. Some part of inventing problems involves lying about them. All large bureaucracies exaggerate their problems. But the army took the more extreme step of creating problems itself. And then they were like, "We created this mess and we need money to solve it, or else you're going to die." And the Japanese government was weak enough to give them money and got drawn into World War II.
--:-- Host: Let me just fill in the details for the audience. In 1931, in Japanese-controlled Manchuria, the Japanese military stages a sort of attack on one of their railroads, if I remember correctly. It's pretty obvious it's staged by the military. It's not even that big of an attack. It doesn't cause major damage, but the military then uses that justification to invade the rest of China without permission from the emperor or the rest of the civilian government.
--:-- Host: So basically what you have—and public choice here comes in—is you have these political factions in Japan who are trying to control Japanese policy, not in the best interest of Japan itself, but because of what is in the best interest of themselves as a faction. In fact, I interviewed Richard Hanania recently on my podcast. As you know, he has a book out called *Public Choice Theory and the Illusion of Grand Strategy* where he makes exactly this point. He argues that the unitary actor model does not apply to nation states because they are very influenced by these sorts of factions and individuals and special interest groups, like the military, and then specifically the Imperial Way faction in Japan.
--:-- Host: There are many examples of this where army officers just killed the prime minister at one point, I think it was 1936. And when they go to trial, they just say, "Yeah, we did this because the emperor and the prime minister wasn't nationalistic enough." And they get very light sentences. So it's called the government by assassination. That's what the government was like at this time.
--:-- Guest: I agree. A few things here. The first thing is that Japan had a very unique constitutional model, as far as it could be called a constitutional model, which is just ad hoc. A big problem in people's understanding of history is that they just don't realize that a lot of times big events are just some guy deciding things. A lot of these things end up exactly as you would expect from some guy who ended up deciding them.
--:-- Guest: The big problem here is that the way the Japanese constitution was designed was that the civilian government, elected by men with property—I don't remember the exact details—they had control only over every part of the government except the military. In most countries, like in the U.S., you have a requirement that all defense secretaries should not have served in the military. Or if they have served, there has to be a five-year or seven-year gap to ensure that you have civilian control on the military.
--:-- Host: Wait, the secretaries can't have served in the military?
--:-- Guest: No, no. You have to have a five-year gap or something. And if you don't meet that gap, you have to get a waiver from Congress.
--:-- Host: Okay, I didn't know that.
--:-- Guest: So that's to maintain civilian control on the military. A lot of countries don't do very well on that. To go on a tangent, Pakistan is one of those places where you have very poor civilian control on the military. So the military just keeps doing stuff, and the government is forced to react to it. In most Western democracies, it's the other way around. The crazy president does something, and the military is like, "Whoops, now we're in this war, and we've got to deal with it."
--:-- Guest: In Japan, the problem was your army ministers were part of the army. They weren't representing the civilian government. They were representing the army. Give an example. It's a funny thing. The Indian ambassador—so in the 1960s, India was having high tensions with China, which ended up in a war in 1962. I think it was V.K. Menon who was India's ambassador to China. V.K. Menon came and told Nehru, "This happened, that happened, Chinese won this and Chinese won that." And Nehru asked him quite annoyed, "Are you our ambassador to them, or are you their ambassador to us?" It's the same problem with the army minister being part of the army. Is he representing the civilian government or the army? Nobody knows. And that led to a sort of elite capture of the civilian government by the army.
--:-- Guest: There's another great book—I forgot the title, but it was discussed on ChinaTalk a lot—that basically explains that the army took control of the entire civilian government, basically said, "You got to prepare for total war. Why? Because we said so." And they reorganized the functions of government a lot to achieve this objective.
--:-- Host: Yeah, yeah. There's a pretty well-known quote about the Pakistani military which can be applied equally as well to Japan in this era: in most countries, the government has a military. In Pakistan—and in this case, Japan—the military has the government.
--:-- Host: That's what's playing into here. The claim of the author is that at various points where the military's power is growing and it's doing more and more audacious things, it's directly contradicting the will of the civilian government. The civilian government says, "Hey, what are you doing? Invading these other parts of China? Stop this." And the military leaders are just like, "Yeah, fuck it. We're going in."
--:-- Host: At this point, Bix—the author—he's like, the emperor has a unique role here because he has such moral authority. The army is claiming—in the U.S., if there is a military coup, assuming the president's not in favor of it, the military is not going to be like, "We're doing this in the name of the president." Whereas in Japan, it was like, "We are the glory of the emperor and the empire. We're going to invade." So Bix is like, "Yeah, you could have just been like, 'This is not in my name.'" And he doesn't do that. He issues these very mild, if at all, condemnations whenever these kinds of things happen. And so they keep escalating and escalating.
--:-- Guest: Yeah, so a few things about that. There's a question in waiting about history: how much of it is contingent on structural forces and how much it is contingent on actual people? Foreign policy is one of the three places of history where things are contingent on actual people. And one of those actual people was Hirohito.
--:-- Guest: The problem with Hirohito was that even as a child, he was very mild mannered. His tutors described him as he wouldn't win any debates, wasn't a very good public speaker. The Japanese government and Japanese state—very different than Japanese government—were very concerned that the public support for the emperor was going down. So they went to England to learn how England did it. The problem was that Hirohito was not the right person for this job because the job demanded something a little closer to what a modern day politician's job demands: a lot of public opinion formation, a lot of dealing with various factions inside, and lying to a lot of people and keeping them quiet. He was just not politically suave enough to do it. That was the clear problem. He didn't understand, even if he understood, he didn't understand clearly the level of impact he had. He had this personal team's mindset of, "It's not worth it." But that's what led to his downfall in the end.
--:-- Host: To what extent was Hirohito responsible for this?
--:-- Guest: My answer is it depends on your definition of responsible. Could he have stopped it? Probably. Could he have lessened it? Definitely. Could he have led to have it have a less stupid direction of the war? One of my biggest beliefs is that the entirety of Japanese military strategy across World War II was completely stupid. They were shooting themselves in the head. I'm going to go on a rant here if that's fine with you.
--:-- Host: Yeah, please do.
--:-- Guest: Okay, so basically Japan was really, really scared of a war with the Soviet Union for obvious reasons. They were the largest neighbor, and they were getting richer and richer under Lenin and Stalin because transformations of agriculture to industry has made every single country richer. The problem was Japan was smaller with fewer people, and obviously they would have lesser ammunition and military power during a war. So Japanese war planning said, "Okay, we're going to plan for a war with the Soviet Union." Naturally, if you're going to plan for a war with the Soviet Union, you should plan for a war with the Soviet Union. You should not plan for a war with China or with the Philippines or America or with Malaya.
--:-- Guest: But what they did in the 1930s was they said, "Oh, we have this—" and public choice problems forced them into entering China. The Japanese army wanted to be relevant. The Japanese Navy wanted to be relevant. They just kept nudging, provoking the Chinese into attacking them. So what the original plan was: we will use our assets in Manchuria to fight the Soviet Union. And we need Manchuria to protect our assets in Korea—a sort of early 20th century version of domino theory. And then they did that.
--:-- Host: I'm sorry, just to interrupt for the audience. Manchuria is this region in China, in the northeast.
--:-- Guest: Yeah, in the northeast of China. Yeah, it's very rich in iron and minerals and so on. The initial plan was that they would use their resources in Manchuria for doing it. Why did they want to use their resources in Manchuria in general? The answer is that Japanese military planners saw this model. The model they built the government—the government did the entire thing including trade policy and everything—was Imperial Germany. The problem was Imperial Germany lost World War I. So they went through this entire self-reflection period: why did they lose World War I? The answer was Imperial Germany really never had the resources to win World War I. They were blockaded by the British and so on.
--:-- Guest: So their answer was, "We're going to get Manchuria and we're going to use it in any future wars so we don't lose it." Finally, if you don't want to lose any future wars, a good way of not losing wars is to not get into ones you can't win. But they didn't do that. They just walked into—I said Japan earlier, my bad. The problem with walking into China in the 1930s is that it's a war that pisses off a lot of people.
--:-- Guest: *Hirohito and the Making of Modern Japan* mentions it. The Americans were quite outraged by it because it was what would be called the "neutral China principle." All colonial powers would be completely fair in using Chinese resources for their own industrialization. A very morally poor thing to say, but that's how morality was back then. The point was this pissed off the Americans and the British and the French. It's useful to have powerful friends, especially when your end goal is world domination.
--:-- Guest: Then the problem is you can't really—China doesn't have much oil, Japan doesn't have much oil, and all that oil was imported from the U.S. All the atrocities in China led to very bad publicity in the U.S. American public opinion on China, especially because the answer historically for government has been "don't piss off the church too much." Japanese governments didn't know about that because they were their version of the church. But the Japanese atrocities in East China led to American missionaries in China going to America and reporting it to the American public. The American public got very outraged by it. By the 1930s, you had this sort of mini movement among the more religious people saying we should not have American resources involved in the Japanese pillage of China. So there was a lot of domestic pressure on the American end trying to stop them.
--:-- Guest: Japan's mistake number two was pissing off the Americans. The problem with pissing off the Americans almost all the time is that almost all of Japanese oil imports came from America. Saudi Arabia wasn't a thing back then. So all of Japanese oil imports came from America. It's like 97% or something like that.
--:-- Host: Yeah, yeah. Almost all, literally. In the high 90s.
--:-- Guest: Yeah. And it sounded like they wanted to make synthetic oil, but that didn't work very well. The history of countries thinking they can make their own oil is kind of funny because Deng Xiaoping almost 30 or 40 years after this thing told his cabinet that China would finance its industrialization because it had some oil plants, and it kind of didn't work out because it took a lot of resources to make oil, which China didn't have. And Japan didn't have it at that point in time.
--:-- Guest: So anyways, that aside, you basically have mistake number two was pissing off the U.S. To what extent was the emperor responsible for this? Here's where I will put my structural hat on and tell you that Hirohito was not prepared to deal with these challenges. The first thing was, no country had ever dealt with total war before in East Asia. Wars used to happen in East Asia, obviously, but there was sort of like the European wars before World War I. You send a few people to fight and you fight it out and you can lose. Well, it sucks. But you never mobilized your entire economy. This was a new type of war which he didn't know of. You could model it, but the guy wasn't that smart. He wasn't the sharpest tool in the shed. He really wasn't prepared to model this sort of war.
--:-- Host: Wasn't the Taiping Rebellion one of the deadliest things in history or something like that?
--:-- Host: It's a civil war, but the difference between a conventional war and a civil war is that in a conventional war, the Taiping Rebellion didn't have much organization. It was just people going and killing each other. There was no ammunition factory that said, this month we're going to make X thousand guns because our soldiers need to fight it.
--:-- Host: Compare that to World War II, where you had a lot of economic planning in the U.S. They successfully managed to say, we have to make these many guns and these many bombs to fight the German and Japanese, right? But that sort of thing was very underdeveloped.
--:-- Host: In a very different aside, a big problem with not having high level manufacturing like America had with automobiles is that in wartime, what is useful is being able to coordinate large amounts of resources to their desired purpose. People make the joke that Amazon and Walmart essentially plan economies, and it's totally off a joke because in World War II when the US needed central planning, it didn't go to the Department of Commerce. It went to Ford and GM and said, we need a five times bigger version of you, we need your managers to run this because you're the only people who know how to. But Japan didn't have that sort of experience.
--:-- Host: The Japanese planning board talks about the biggest problem being that supplies didn't come. And is he responsible for this? In the end, the emperor is responsible, but also because the guy couldn't do it. He didn't have the tools to do it. And the reasons for that are much deeper than Hirohito himself. If you read through the first part of the book, Hirohito didn't have much of an education in economics or science—science to a small extent because it was considered a noble subject—or engineering, right? If you ask him a question that I learned in seventh grade, how do you expect Ireland? He probably wouldn't know it. He wouldn't be able to think to model through those things.
--:-- Host: So the problem was no economy was prepared for a total war because they'd never done it before. But Japan was the first country to say, yeah, let's do it. And they paid the price for it.
--:-- Guest: Yeah, yeah. Okay, so you bring up pissing off America. I think so. We picked this book before the Ukraine thing happened. But people have been making this analogy, so we might as well talk about it. People are making this analogy between Ukraine today, the decision in Ukraine today, and what was happening with China and Japan for World War Two.
--:-- Guest: The idea is that what happened with Japan was they invaded China, they did all these atrocities, they invaded different parts of Indochina. And this was stuff America didn't like. So America embargoed iron, steel, copper, and most importantly, oil exports to Japan. They froze their assets in the US, which basically prevented them from buying oil. And the Japanese war machine required oil. So then basically, Japan decided, we're going to have to invade other parts of Indochina to get this oil. But to do that, we're going to need to invade America's sphere of influence, like places like the Philippines. And to do that, we're probably going to first need to disable America's ability to wage war in the Pacific. And to do that, we're going to bomb Pearl Harbor.
--:-- Guest: So the analogy goes that what we're doing with Russia is similar in the sense that just as Japan invaded China and we responded, the US responded back then, Russia has invaded Ukraine and we're responding very strongly with sanctions now. And maybe Russia feels like it's going to become backed into a corner and therefore it decides to launch a conventional attack against NATO headquarters in Europe or something. And from there you have an all out war. What do you think of this analogy? Do you think it's valid or applicable?
--:-- Guest: Yeah. They'd be very stupid to do that. But historically, Putin's actions have been stupider, so you can't model it into your natural actor model. To what extent does the analogy apply? To a much lesser extent. The first thing is Russia can—okay, actually it does apply, but in a different way. Russia is dependent on the Western world, not in terms of oil—they have a lot of that themselves—but in terms of things like dentist shops in Russia have shut down because the clamps and bits and the sort of stuff you need to do to make fillings are made in Germany and the US. They really depend on these highly specialized, small scale things. And you can't find that outside the West.
--:-- Guest: So, yeah. Are they going to have another war? Are they going to escalate it? Base rate is very low. We're going to go slightly higher than the base rate. Very low with small possibility. So does the analogy apply? Probably not. Japan was a militant country in the sense that you don't see the level of elite capture you had in Japan today in Russia. It just didn't exist back then as it is now. So that's your first problem.
--:-- Guest: The second problem is Russia wants Ukraine, and it knows through historical experience—Putin was your KGB left-wing colonel—he knows what the costs of a protracted level of military tension with the US are. And it's very obvious to anyone watching right now that if the EU decides to rearm and the US continues its current level of armament—I am not predicting a level of armament towards the 1980s—they will overpower Russia in every single margin. So will they do that? I don't think so. But I think the main objective right now for Western policymakers should be to get Putin to save face and back out without pushing him into a corner.
--:-- Guest: Are they going to push him into a corner? I don't think so. It's going to be very bad for people living in Russia now, but so far he's not as stupid as to go and invade Poland or Estonia or literally go to the Netherlands and kill the NATO Secretary General. That would suck a lot because it's World War Three, and I'm stuck in Singapore, sort of halfway between the East and the West. But I doubt the analogy applies because they're not captured enough for the military or the rest of the government to care.
--:-- Host: Yeah. I mean, as far as the stupidity goes, you could continue the metaphor by saying that it was very stupid of Japan. People were saying this back then. I think Hirohito said it himself, right? Which was like, listen, the US has a much higher GDP per capita. It even has a higher population. So the idea that we're going to be able to win a war against them is very stupid. And even if you plan out everything—we're going to have this offensive that in a few months we're going to capture all these islands in the Pacific and we're going to destroy their Pacific fleet—even then, it was just such a daring scheme. I don't know what it would have taken for the whole scheme to work. So I don't think we should underestimate the stupidity of nation states.
--:-- Host: I was doing some work on this last week. Allied GDP was almost always greater than Axis GDP for the entire war, not counting colonies of either. And for the majority of the war, the Allies had GDP twice that of the Axis powers. So they were very stupid. It would be like Denmark going to war with the UK. Maybe you will capture a bit of Scotland, but swear to God, once the UK starts re-arming, there's no way you can quit. Right.
--:-- Host: So, reading this—I was looking at the same numbers earlier today—where at the time, Japan in 1935 had a GDP per capita that was like almost a tenth of the US's. And I was thinking about in the future, like, let's say—
--:-- Guest: It wasn't a tenth actually. I'm not sure where you got your numbers from, but I have a book I hope my colleagues will do, and it's around 40%.
--:-- Host: Yeah, this was 5800 something, Japan was 2007 and something more reasonable. Yeah, okay. That makes sense. But it also had a bigger population, right? So it's a bigger total.
--:-- Guest: Yeah, it's that bad.
--:-- Host: Yeah, yeah. So I was thinking about this with the potential that in the future, if there's a conflict between the US and China, the analogy is like, oh, we have a bigger current military, we spent way more on the military now than China does. But if it has a higher industrial capacity, if it has a higher GDP, maybe in a year or a couple of months of conflict, all the stuff you have so far is kind of useless. It doesn't matter as much as your capacity to produce more stuff, as the US had during World War Two.
--:-- Guest: Yeah, no, I agree. To what extent does that apply? I think the first thing is that in a short term conflict, the US would outmatch China in every single thing. Not because of the US, but it's US plus EU. And if you told somebody in 1922, 100 years later, the EU is disarmed, they would laugh at you. This is historically not the norm for European countries to not spend illogical amounts of their economy on defense, because they fight a lot and now they're fighting a lot again. So it's a conflict-prone continent.
--:-- Guest: The moment you attack the US, you are also more or less attacking, with or without NATO, a lot of countries dependent on the US. So in a short-term context, you would obviously be depending only on American defense because only power ready to wage war in 15 minutes time. But in a 15-month span, no other grouping of countries can match what the West has now, just because the West is technologically superior. So maybe in the time span of 6 months to 12 months, you would see a lot of Chinese advances, but in the time span of 12 months plus, it would be very quick for the West to rearm.
--:-- Guest: The Western sense of complacency about wars—all the wars they fought in the Middle East were very far away. The moment it starts hitting you, the moment you have bombs flying on your head, it becomes a lot more real to people. There's no question that you have a similar scenario. US plus EU GDP is like 31 trillion and China plus Russia is like 40 trillion, maybe? I'm just ballparking numbers here. But China plus Russia GDP is like maybe 30 trillion. I can guarantee you this 40 trillion is a lot more productive than this 30 trillion because a lot of it is just—for all the chaos that the American economy goes through, the chaos makes it more productive. So you're going to have a lot less ghost cities and a lot less corruption on this end of the new Cold War.
--:-- Host: Yeah, I guess one concern is—I don't know how true this is, I just heard from the Zeitgeist—the idea that we don't have the industrial capacity that we used to. So the GDP is higher, but the industrial capacity we've shipped elsewhere. I don't know how true that is.
--:-- Guest: I think that industrial capacity is overrated, please. It's 2022. First thing being, a lot of initial war is going to be very high tech. You've got to have underwater drones. What is an underwater drone? It's exactly what it sounds like. It's an autonomous vehicle that's underwater. It's like you take a drone that can swim. You have a drone and you have a lot of satellites targeted for you and then you bomb them using the satellite imagery, right? Initially in a war, human intelligence is going to be very important. And there have been some pretty embarrassing parts for the US on this. Like in 2015, there was a Chinese hack of the DHS employee database. It was very embarrassing because a lot of CIA in China mysteriously disappeared in the years after that. So, sucks.
--:-- Guest: But I also think that the industrial capacity argument goes like this. America outsourced manufacturing to China. If you have a war with China, they're not going to sell to us and they won't be able to do it. And my answer is this sort of like the story where the two guys are running and there's a bear, and only one guy has to outrun the other. The first thing is, the nice part of being the largest consumer for your largest trading partner is if you cut your taps off, it will hurt you a little, but it's going to hurt them a lot. Where are they going to get the resources to start to re-industrialize again? The Chinese state economy is not known for its efficiency.
--:-- Guest: The second thing is if the West needs to, they could absolutely always re-arm very, very quickly. It will be painful. Your software engineers who spend maybe 40% of the time working will be forced to work in some stupid factory that makes Javelins. But regardless of the annoyance of it, it will happen. Finally, Dan Wang has the best critique of this. He says that chips don't win wars, and he's right about it. Subcomponents win wars, and the US has the nice advantage of being the only and largest ally of Taiwan.
--:-- Guest: The thing with the US is a lot of its economic potential is put into stock by stupid regulations, zoning, nuclear regulations. There's a whole Twitter universe dedicated to exposing them. I'm not going to spend time on those. The thing is, once you get into the—once you have bombs dropping across London, it can be very obvious that these things have to go. So these sort of things are a luxury belief for vested countries. They can believe in it because, yeah, sucks these guys couldn't get a house in New York, but it's not materially harming us in a way that is obvious to us now.
--:-- Guest: I want this to start becoming obvious. No elected leader is going to listen to the people who are currently harming American or British or German industrial capacity. They're going to say, sucks about the pollution, but we've got a war to win. So it's going to rearm very, very quick. And one of the reasons I'm very optimistic about the future is that we have a lot of spare capacity left like this because of stupid rules. And once we start removing those stupid rules, it just rocket takes off. I'm being animated because it is going to be very animated like that.
--:-- Guest: People fundamentally underrate the benefit of liberal-ish democracy, which you can change very quick and not blow up while doing it. A good historical example is that America had a lot of mess-ups early in World War II. During the Phoney War—this sort of lull in the 1930s in Europe—they were sort of fighting but they were sort of like a tailman. This was called the Phoney War for that reason. And the Congress didn't want America to get involved in it because they were isolationists, and there are good reasons. And FDR wanted to. But once it became clear that American interests in Britain were going to be harmed by it, even the most isolationist Congress members changed their mind because of overwhelming public support. So it is going to happen.
--:-- Guest: The thing is, people are right to assume that the US doesn't have industrial capacity, but they're wrong to assume that it will never have industrial capacity.
--:-- Host: Yeah, I hope you're right. I hope you're right. So you brought up earlier that we look at the failures of American military and Western military in the Middle East. But we weren't as seriously invested because it didn't directly threaten us.
--:-- Host: Speaking of the Middle East, look at our occupation in Japan. Japan was a country with 100 million people, it had a very serious and very proper, supremely convinced public that was supremely hardcore about the ideology of the imperial way. And this public, it didn't take that much at all for the Western occupation to be able to put in a liberal democratic constitution and basically turn around the entire trajectory of the country. Whereas countries that are way weaker—Afghanistan has like one thousandth of the GDP of America or something like that—and we can't occupy it. Right? So what was it about Japan, or about our military at the time, that made it such a successful occupation?
--:-- Host: Of course, one major factor is that we had Hirohito, somebody who was viewed almost as a deity, basically surrendering and cooperating. And that counts for a lot. But it also explains why he wasn't tried as a war criminal afterwards. But is there anything else? Why was the occupation in Japan so successful?
--:-- Guest: Okay, I thought a lot about this. There's a great book on this called *Embracing Defeat*, which you should read because it's about the exact thing—Japan after World War II and how the Americans did it. So why was Japan a lot more successful than Afghanistan? The first thing is, stability is sort of like Lindy, you know. Once you have stability under the relatives, stability under the imperial government, they just change the people at the top. You can't really compare it to Afghanistan because there was chaos before, chaos after. You aren't solving the root problems of chaos, it's like you have ethnic tensions.
--:-- Guest: In Japan, there was a lot of stability. People were really tired afterwards. When Hirohito had his surrender address, a concern among the imperial household was that there would be protests outside the palace. The problem was, in their view, that was the optimal end, that people would be angry with them that they were at the end of the war. The thing was, there were no protests. A few people were happy because the war ended. A few people were sad that they lost, but the Japanese public in general had a very, very difficult war. Fun fact, Japanese GDP per capita in 1937 was only achieved back again in 1952. So you can imagine how bad the Japanese public had it. So in some sense, they were much happier under the Americans. I mean, it's not a fun fact. It's an interesting fact. It's quite a sad one.
--:-- Guest: When the war was ending, we had large scale looting of Japanese military supplies because they knew food would be scarce for the next few months. So you had army colonels and majors just stealing food. It was completely lawless for a few months till the American military police came and calmed things down. The American army in Japan was successful because even the Japanese government was like, yeah, we're going to get done with this. We're going to get back to making Japan great again. And that was the most important.
--:-- Guest: Also, very interesting, not fun, but interesting. MacArthur spoke for Japanese. MacArthur, I don't think he addressed the Japanese public ever. That's very rare. If you're an occupying force, they worked through the mechanisms of the previous Japanese government. So also interesting. A lot of Japanese—I think I made this joke on Twitter a while ago. I have a Japanese political family. Our grandfather was a war criminal, not executed because Hirohito asked Mikado not to. Father was a finance minister in the 80s. Current kid is number five in the LDP leadership election. And the answer is the elite of Japan was not changed after the war. It made it really easy, very convenient to continue.
--:-- Guest: They had this mass hallucination that we all know—Tojo made us do it, and the army made us do it—and just continued with the old elite again. It didn't change much. So it is also very interesting that elites don't change after revolution. It is not a well appreciated fact. There's a great paper that basically shows that the Chinese elite in the 1980s when the country reformed was the same as Chinese elite in the 1920s when the country was having economic growth. The same thing with Japan in the 1960s and 70s, the same family connections made them powerful again.
--:-- Guest: The next thing is that America didn't really change another really big part of Japan. Japan was occupied, as in its formal structures were changed. But you would be a little crazy to call it a democracy until like 1990 or something. Bernd Hohr has this great post about East Asian industrialization on Medium, quite popular. One part of it was the Ministry of Industry and MITI—I forgot their full form. And their policies were basically rubber-stamped by the lower house of the Diet. And he's like, there wasn't much difference between those guys and the Soviets up north. So yeah, Japan was a democracy, but it didn't change much.
--:-- Host: Right. Yeah, okay. So the fact that the elite to begin with was open to Western ideas kind of raises the question of where was this elite during the 1930s? Many of them were suppressed. The first Japanese prime minister after World War II—I'm relying on his name again—but he was a left-wing leader. He's basically one of those "we shouldn't have won, we shouldn't have war" types, the Japanese equivalent of the girl offering the flower to the American police guy during the Vietnam War. And those guys were obviously suppressed because it was inconvenient for them. But a lot of the Japanese—also interesting, the Japanese Communist Party welcomed the American occupation. So they were seen as the antithesis of this.
--:-- Guest: Article 9 of the Japanese Constitution, which if you don't know, says that Japan cannot arm again, roughly. It says that the Japanese state gives up war as a means of policy. So that basically gives the new elite a good excuse to stop fighting. But the problem is, where were those people? The ideology is fake. It's just what helped them to get into power. So if fascism helped them get into power, I guarantee you Hideki Tojo would have become Mother Teresa. I don't think many of them really believed in what they did, given that they all switched like six months later after 1945. Very hard to make the case they were idealists. They were just opportunists.
--:-- Host: Yeah, yeah. I'm not sure about that. Maybe this is specific to those elites. But if you look at the actual soldier class, you cannot question that you had just ridiculous levels of devotion.
--:-- Guest: That's true. But the soldier class was sort of collected out of the Japanese elite.
--:-- Host: Yeah, yeah. So I was just thinking about this earlier. One of the ways you can explain where all this nationalistic fervor goes is that it died in the Pacific. All the most nationalistic people were sent out to the front lines and they were just massacred, in some cases literally by their own superiors. There are so many examples where the Japanese generals just send out their useless charges, direct charges with suicide missions basically. I'm not talking about kamikaze, I'm talking about banzai charges. The defense of Okinawa was a great example of that. More people died in that than the atom bombings. 150,000 in Okinawa. Almost half the population of Okinawa.
--:-- Guest: Yeah, yeah. It was very blue too. There's a great quote from one of those famous legends—the guy in one of these Pacific islands, a Japanese soldier who didn't realize that Japan had surrendered. Decades later he's still feeling like random civilians because he doesn't know that Japan has surrendered. They dropped leaflets and newspapers to show him that Japan today is what it looks like, we've surrendered, and he still wouldn't believe it. Eventually they got him back to Japan and later on he wrote a book about it. He's like, the reason I didn't believe Japan could have surrendered is that the motto at the time was that 100 million souls will die for the empire. And so Japan could not have lost the war because if Japan had lost the war, there would be no Japan. There would be no Japanese left.
--:-- Host: But why do you think the elites were cynical? Do you think the elites are generally more cynical when it comes to ideology than the average person?
--:-- Guest: Yeah. It's not like—self-selection for that. To get to the top, you've got to lie and you've got to move with irony and you've got to be within the things of the day. So that's pretty much the main point. The elites knew that they couldn't re-militarize again. It's kind of pointless to re-militarize. So they just basically decided not to do it. But the last 10 minutes is more or less speculation for my part, because I have not read into the elite mechanics of Japan before and after World War II to a good level of detail.
--:-- Host: Right. My kind of prior on elites is not that they're not ideological. I do agree that often their ideology is cynical. But if you look at elites in America, for example, I think many of them are genuinely very—put in all the stuff you can put in the bucket of left wing—but they genuinely believe those things in ways that are even counterproductive to them.
--:-- Guest: No, but it never gets past. Even if there's probably one senator who believes that you should nationalize the oil companies, they never introduce it, they never make the arguments for it. There are people who are ideologically left-wing, they'll just never stay elected for too long. The competitive nature—to whatever extent it's competitive—of American democracy forces you to temper your views. The only way to get ahead is to please the public, but the public is defined ones.
--:-- Host: Yeah, yeah. Okay, so to bring it back to Hirohito. One thing that I found very interesting, very confusing, is how this guy got so much adoration. Physically he was not so imposing. Interpersonally he was not that charismatic. From what it seems like, he just wasn't that communicative. He wasn't like his grandfather Meiji. There's actually a funny picture of him on the internet where you can see him next to MacArthur, the general that was in charge of occupying Japan after the war. MacArthur's like two feet taller than him. He looks like a midget in comparison to MacArthur.
--:-- Host: Yeah, yeah. I don't understand how all these super right-wing militaristic guys, the entire nation really, they're willing to die for the Empire. One of the things that really made him not like Hirohito was when the book talks about how these Japanese soldiers in the last few years of the war knew that Japan was going to lose. The reason that these Japanese soldiers are dying is so that instead of an unconditional surrender, we'll try to show the West that we can basically sustain this kind of war for a long time, even if we're going to lose. And so if we want to avoid this, we won't do an unconditional surrender. And the purpose of that was to make sure that in the conditional surrender, Hirohito is not tried as a war criminal. That's one of the things that these—what was it, more than a—how many, 1.5 million, no, 3 million Japanese died, but 1.5 million Japanese died in the last year of the war. And a lot of them died so that the emperor wouldn't be tried as a war criminal, right?
--:-- Host: Yeah. I don't know, the idea that he could have stopped the war earlier, or at least potentially could have stopped the war earlier, but he didn't. And these people are just dying for him in his name.
--:-- Guest: Yeah, people aren't dying in his name. There's this great—I don't know, you should read the other book, which is *Japan Prepares for Total War*. The thing is, nobody thought the emperor was god, that he was godlike. But it sounded like he was a—it's easier to imagine for Hindus, I guess. He was a god-like figure, he's not god. And they sort of saw him as their model leader, right? The first thing that they were dying—they went into war because the army paid a lot of money. It was a lot better than being declining Japanese firms at the time. Quantity was pretty low, so they didn't have much of a thing to do otherwise.
--:-- Also interesting: the first public health system in Japan was encouraged by the military because they saw all their conscripts being so undernourished and ill that they were like, "Oh, we can't solve this on a military level. We have to have a systemic response to this."
--:-- The second thing is really that—why did they die for the emperor? A lot of them believed it, and so they died for it.
--:-- Host: Why did they believe it for such an unconvincing persona?
--:-- Guest: Because he was not a politician. His persona, his stature, derived from the fact that he was the descendant of the gods. So it's not a charisma thing. In authoritarian systems, people don't derive their power from the consent of the governed. They derive it from something else. In this case, that something else was, "I'm the descendant of the sun goddess."
--:-- Host: Yeah. Doesn't that contradict what you said earlier, where you said the soldiers didn't believe that he was like a literal deity?
--:-- Guest: Yeah, yeah. No, no, no. He didn't believe—okay, see, there's a godlike figure and there's a god. So his sun goddess, her name starts with A, I forgot it. She's the god, but he's a godlike figure.
--:-- Host: Right. So you—
--:-- Guest: No, I mean, I understand that. I guess it kind of feels like semantics to me.
--:-- Host: It wouldn't be semantics. I mean, if it was semantics, they shouldn't have been happy about the surrender. But many of them weren't, right? No, but a large portion of the Japanese public was just, "Meh, okay, fine, move on now." Which, let me put you in very economic terms. There's a reservation price they have for a god, and there's a reservation price they have for a god-like figure. And for the god-like figure, the reservation price was pretty low. It was two years of starvation. Which, for a god, two years? I mean, look at the—they weren't prepared to fight the Americans for very long. If Hirohito was a real god figure, they would have been prepared to fight the Americans and British for much longer.
--:-- Host: Yeah, I guess my point, my original point, is that because they believed him to be a god-like figure, they made many sacrifices for him as an individual person, separate and apart from the sacrifices they made for Japan as a nation.
--:-- Guest: But he was inseparable from Japan as the nation, right?
--:-- Host: Right. Which is another thing you can critique though, right?
--:-- Guest: Yeah, yeah, yeah, too. Yeah, yeah. So to make it clear there, it would be like, they were prepared to make the initial sacrifices first because it was convenient for them to make it. The Japanese economy was really, really bad across the 30s. The second thing was it was sort of like a—how do I put it—not signaling, but quasi-signaling. "I'm willing to fight for the emperor." But when the fighting got bad, like, "Oh, wait, the emperor's not worth that much. It's okay."
--:-- Host: All right. Let's continue talking about what happened after the war. So you probably know much more about the post-war economy in Japan than I do. I actually know close to nothing about it, except for Mancur Olson very famously explained why Japan and Germany had growth rates that were so high after the war and were able to catch up relatively fast. His claim—I mean, bringing back public choice theory—his claim was all these factions that accumulate in democracies were abolished in the war. And so they basically got a fresh start without all this accumulated crutch. And because of that, they had extremely high growth rates. And as you know, in the 1980s, there were fears that Japan's economy would overtake America's. And in fact, if they didn't have a population collapse, who knows what would happen.
--:-- Guest: Yeah. More or less correct. All the interest groups were destroyed. I mean, actually, all the interest groups were destroyed, they were just replaced with better ones. Interest groups are bad, but there are good interest groups and bad interest groups. And the new interest groups in Japan were the bureaucrats who ran the trade industry. I know a little about it, not too much, but there are a few big things here, right?
--:-- One of the problems the Americans saw in Japan was that there were too many—the biggest interest group was these Zaibatsu, the Japanese conglomerates that benefited from the war because it gave demand for their goods. They tried to break them up. And here's where the intersection between that and the new Japanese industrial policy comes. The Americans put sort of an FTC thing where they said, "You're going to get too big, otherwise this commissioner is going to sue you in court, and the court is going to be independent, and the Prime Minister can't drive the judge or whatever." The thing is, the Japanese kept the form of this antitrust law, but just made enough loopholes in it for it to be like, "Yeah, we have antitrust law, and we have a trade commissioner, but nobody enforces it because it's convenient not to."
--:-- And then the Japanese economy changed. They sort of used these previous Zaibatsu. They reformed themselves into Keiretsu, which is probably just a more financialized version of a Zaibatsu. For listeners who don't know, a Zaibatsu was just this huge conglomerate that emerged in Japan over the 1900s that was one of the entities that benefited the most from the war because they were mining industrial ones that required a lot of mining and industry, so they made a lot of money. The Americans tried to break up the Zaibatsu, but like almost all the Zaibatsu still exist today in the form of Keiretsu. And the Keiretsu guys get really mad when you ask them about it because they want to be associated with nice Toyota cars, not the rape of Nanking.
--:-- So the Japanese post-war economy was very much influenced by the fact that the Americans were semi-incompetent at breaking down these Zaibatsu. They just reemerged again. Standard economic growth theory tells you when you have a lot of broken buildings, it's very easy to repair them back to where they were. So that's where a lot of the initial growth came from.
--:-- Host: But then—sorry, maybe you're going there anyways—but there's almost a super compensatory mechanism here where it's like, you damage the thing, get more benefit than you would.
--:-- Guest: Yeah. Yeah. That's true. No, I mean, obviously it is suboptimal. It is obviously worse than not damaging them, but once you damage them, it's not like Bastiat's broken windows thing, right? If you break the windows, it increases consumption and fast gas, but it increases consumption here, but they're going to spend the money on something else and those guys are hurt. I'm like, yeah, that's true. And the same thing over here.
--:-- Host: I'm making the opposite point. The damage, counterfactually speaking in the long term, the damage actually causes a benefit in the long term because you're getting rid of these special interest groups that would have tempered growth for a long time.
--:-- Guest: Yeah, probably. But I mean, yes, but also no, because especially in Japan, they didn't really disappear. I mean, yes, in the sense that the bad ones went and slightly better ones came up, which is true. But that should not be your main explanation, because a lot of Japanese growth in the 50s was just catch-up. They're rebuilding their broken buildings and their bombed cities and burned houses. Partly true, is my scope fact-check rating.
--:-- And the other thing is, Japanese industrial policy was very much a feature of the war. Without the war, you would have had this level of government control of the economy, which led to a higher level of planning. I don't think planning is the right word. It's too many connotations. Basically, they got export-driven growth because of this. You had lots of social capital between the planners and the company executives, and it's really easy for them to say, "Okay, I'll give you a few billion yen. You're going to use this to sell cars in the US. But in three years, if your cars don't sell well enough, you're going to shut down and merge with your rival who will be more successful." So that was one of the drivers of Japanese growth. The Keiretsu and the industrial policy systems existed. So that's one of the parts of growth after the war. And also, having traded with America just makes you better off for the obvious reason that Americans are rich and they buy a lot of your stuff, right?
--:-- Host: Yes. All right, yeah, yeah. Okay, this was a very, very interesting—this is extremely interesting. And yeah, I'm really glad we did this. I hope we do this with more books because this was actually a very good way to—and you happen to know a lot about the intentional topic, so this is very useful. I don't know if you feel—is there anything else we're talking about with the pressure, Japan, and Hirohito?
--:-- Guest: No, nothing else. I'm probably hitting some edge of my knowledge in like one more question, so let's not go there.
--:-- Host: Okay, all right. So we're done with that topic. I guess we can talk about the general thing, which is that we're kind of doing similar things, at least for the time being. I guess you're doing it—I guess we're both doing it part-time. So, what's your age?
--:-- Guest: I'm 18. I turned 18 last October.
--:-- Host: Okay. So how are you structuring your reading, writing, web, podcast?
--:-- Guest: Oh man, oh my God. Okay. Mornings when I travel, I get a lot of my Twitter time done, because Twitter is like my biggest source of things that go on. It's not a good source, but it's my good source. So yeah.
--:-- How I structure my reading? Right now, I think a lot of my reading is I go for deep dives in books. I was doing Japan, so I read *Hirohito*, I read *Ambition Defeat*, I read *Japan's First Total War*, I read Mark Harrison's *The Economics of World War II*. Not a very detailed book, but a very good book in terms of the statistics it gives you. So I'm going to do that, and I like to have my stuff to combine. So learning data visualization in Python, I'm going to do that with a bunch of World War II economic numbers. So I both learn how to use the very difficult matplotlib and all that.
--:-- A lot of my reading is ad hoc. I have this set of PDFs I read, which is a lot of it. I just spend staying on my phone. It's second nature. A lot of my writing is a lot more difficult to structure because first, it requires a level of calm that I usually don't get apart from weekends. So that is much harder.
--:-- And as for your question of how do I get my reading, all the usual sources. The listeners of this podcast will know Marginal Revolution, EconLog. I read a lot of Rohit Krishna, Matt Clifford. I read a lot of—I don't know—LessWrong, E. A. Fowler, to a good extent. But really, a lot of my stuff comes from just going through the bibliographies of books I like to read. So that is where a good—luckily, don't pirate books. Pirating books is bad, but yeah. It's the cheapest way for most people.
--:-- So basically that. What else? I think being in the universe gives me a better sense of ideas. I get to talk to other people. My biggest source of things I should work on is talking to people like you or other people. I also have a lot of time staring at a wall doing nothing because of the nature of my work. That gives me a lot of time to contemplate. Finally, I'm applying to college, so I have to figure out how to make my achievements legible to a college admissions person. A lot of my time goes around doing that.
--:-- Host: Yeah. What are your long-term plans?
--:-- Guest: I know what my long-term plans are. I have a long-term plan, trust me. I'm going for computer science. Go to college. I'll probably—so my next thing is, okay, computer science is a compromise because I want to do CS, I want to do econ-related, econ plus quant-related things. The best end of that in Singapore is computer science plus econ because the government puts a lot of money into computer science and I might as well add econ because it's my interest. So yeah, CS plus econ at NUS is what I'm aiming for. I already got accepted for CS there. I'll be applying to the UK with my—because, okay, let me tell you one thing. For all that I like to criticize America, the British are infinitely worse. So British college courses haven't changed since like 1970 something. In America, you can pick and choose your major. In Singapore, you can do it to a lesser extent. But in Britain, you've had the same courses since 1620, I guess. And the big problem is no courses there. I'm looking for LSE math and econ if I can get in and I find a pot of money somewhere.
--:-- Host: Have you not already with the Immersion Ventures Grant?
--:-- Guest: It's like college in the UK costs like $200,000 Singapore dollars. I regrettably, my wallet is in my pocket. I don't have $200,000 Singapore dollars there. For American listeners, that's like $180,000 USD or something in that range.
--:-- Host: Honestly, I would not be surprised if you were somehow able to—if you managed to come up with a lot of sponsorships and grants, enough to sustain yourself. So if I was more into it, I would do macro econ and make my newsletter pay. It's kind of obvious. Even like $500 a month makes my life super easy. So yeah, but that would be if and when I finish my current—how do I put it—self-imposed military time.
--:-- Guest: What is the topic you're reading about now?
--:-- Host: I'm doing a bunch of—I mean, I'm not a video model. I knew my before, but I'm writing about the US dollar reserve system, like a primer. I talked about it yesterday. It's like, why do countries hold US dollar reserves? And the answer is, they hold US dollar reserves because central banks like to use US dollar reserves for insurance reasons. Like, wait, why do central banks need US dollars for insurance? The answer is, the US dollar is the main currency used in trade. So it is really, really important to have it in case your currency depreciates too much or appreciates too much, and you can sell it and get USD.
--:-- The other reason is that the number one source of financial crises for developing countries in the last few decades has been: we need dollars to pay our dollar debts. We don't have enough dollars. So we're broke. And central banks keep it for that very specific insurance reason of financial crises.
--:-- And next comes the question, well, why can't the renminbi, or what's normally called the RMB, replace this? The answer is nobody uses it for trade. Nobody uses it for trade because you can't use it outside China due to capital controls. So like, wait, till China takes out its capital controls, we can't do it? Yeah, pretty much.
--:-- Next question comes, why can't we use Bitcoin? The answer is you would be very crazy to structure international trade with Bitcoin. It's too volatile. I'm sorry, next month your price doubles and your income doubles, the debt cost doubles. So it's never going to happen. And most importantly, Bitcoin is a risk asset. You can't use it as insurance. When your NASDAQ falls 10%, Bitcoin falls 25%. The US dollar falls like 1.5% or even goes up. So you can't really do that.
--:-- That's like my current writing, because as of 2020 at March, it's going to change as and when I find interesting things to write about.
--:-- Guest: Now, I have a question for you. What is one good thing I should be doing but I'm not doing?
--:-- Host: I don't know what you're doing, so I'm not sure.
--:-- Guest: I told you what I'm doing. I'm just writing about it now.
--:-- Host: Okay. That's all I'm doing. The answer to that question is probably something I should be doing as well. It sounds like you have been on the side, like just doing some computer science, from what I've talked to you separately about. So if you're doing that anyways, yeah, that's fine.
--:-- One thing that I haven't done enough, but when I have done it it's been super useful, is just randomly networking with people over Twitter or something. If I just send them a Calendly link or something, you just learn, "Oh, this person is way more—it's just way more connected than I thought he was. He's just super interesting." That has led to some really, really cool, super fun stuff. I have started doing this like one Zoom call a week with fans on weeks before I'm free, and I make it like five or seven. It's very, very fun. More people should do it. It's my cheat code to life.
--:-- Guest: Yeah, yeah, yeah. And what is one thing I should be doing that I'm not doing?
--:-- Host: I think you should scale this up very much. What is your estimate of your impact via podcast versus writing?
--:-- Guest: Roughly zero both ways.
--:-- Host: By impact, do you mean the audience?
--:-- Guest: Yeah, I mean like, how much—vaguely defined—how do you think your podcast gives you more impact than your writing?
--:-- Host: I mean, I think they're both like zero impact as far as improving the world in some way. No, but impact on you, like a very crude approximation is views, but for time spent, like how much I'm learning and so on. I think writing probably—I'm learning more than I'm doing learning podcasting. I think it depends on the guest.
--:-- Guest: So what did you mean when you said scale it up way more?
--:-- Host: Okay. What would a self-sustaining lunar society podcast look like?
--:-- Guest: Self-sustaining meaning like?
--:-- Host: You could work on this full time without any outside capital. It would have to be way more regular and it would have to be way more broadly appealing.
--:-- Guest: Yeah, that sucks. Because broadly appealing stuff is almost always dumbed down. So like, nobody can do broadly appealing. So yeah, I don't know.
--:-- Host: Right. Just recently discussing this, like Lex Fridman's podcast. Yeah. But he's used to be a good guy. But at least in his whatever his research area is, he must be right. Or at least I'm told so. But yeah, you can clearly see that to reach his million subscribers or whatever—and this is not to just take copium by the spoonful—but there is a little—I mean, by definition, to appeal to the majority of the population, you have to appeal to midwits, right? By definition of what a midwit is. And there are exceptions to this, right? Like, for example, his conversation with Tyler, which actually does appeal to a lot of people and it's not midwitted.
--:-- Guest: That's right. But he started off with a lot of social capital. So you can't compare that.
--:-- Host: No, that's true. That's true. Like, in my case, it's ended up being the case that the money you make—I could start a Patreon or something, but it would be so much less money than just random grants people offer you. Yeah, very nice of them, extremely nice of them. And I'm very grateful for it. And that is orders of magnitude more than I could make if I had a Patreon. You know what I mean?
--:-- Guest: Yeah, no, no, I agree. I think an easier way of this is—I'm going to plug my friend, Chris Cooper, who has this very cool thing called a Learning Public Offering, where you tell people, "I'm going to learn about this. And six months later, I will teach you everything you need to know about this. And I'll have Zoom calls with you. I'll give you an NFT or whatever your preferred model is." And you basically say, "You pay me enough money to cover some part of my expenses now. And six months later, I'll teach you everything you need to know." And if you're popular enough, you'd probably do that. It's like open source should work. Like I said, it doesn't, but it's sort of a model of how these things should work.
--:-- And another easier way is—it's much easier if you do only econ like I do, where I can just have an econ newsletter focusing on normie things like, "Where will industries go next month? And what does that mean for stocks?" And have a better newsletter doing things I like to do. So very—I don't know how to put it.
--:-- The other thing I felt most strongly about—more people should do company-level analyses. So I am, because one, it pays, and two, because it's underrated by econs and overrated by stock people. And I consider you very much more econ than stock person. So yeah, I think it's very, very useful to sort of commercialize it, dumb it down, cross-subsidize your intellectual pursuits by the commercial part.
--:-- Host: Yes. Yes. Yeah. Yeah. I think the thing is, I don't think I want to do the intellectual pursuits thing as a main thing for my career. So it's not—and I don't need a lot of money. It's not like I need to make the rent this month or something. So I think it would just make more sense for me to not worry that much about monetization of this kind of stuff, and then just make my money as a software engineer or whatever else I decide to do, right?
--:-- Guest: Who, yeah. So there's a separate question about having—because I think the much harder question is, how do you actually be a good public intellectual? "Public intellectual" is a kind of cringe word to use, but you know what I mean. How do you actually produce content that's original and interesting, especially when young like us, where you don't have that much life experience or just general knowledge about the world?
--:-- Host: "Public intellectual" is strange, but "thought leader" is worse.
--:-- Guest: Yeah. The first thing is, if you do a bad job, you'll come to know pretty obviously. Every time my mind is bad, it gets like low engagement. People are like, "Yeah, it's man." I'm like, "Oh, that sucks." But you come to know that obviously. The second thing is to have a circle of competence and be graded. So you can be—I have a friend who's—actually, you know who Zoltan Pozsar is? He's a former New York Fed guy who works at—I don't know, FedSquid or Dodge Bank now—where he knows every single thing about Fed plumbing. How do excess reserves get transported? How did the Taper Tantrum happen? Et cetera, et cetera. Every single thing about that. And if you want to be a good public intellectual—public, whatever your placement for that word is—be very good at one thing and draw on your credibility from there.
--:-- It's not very hard. If you're coding, it is very easy to demonstrate you're competent at something. Just build something cool. And people are like, "Oh, this is really interesting. You're a super boy." But if you are writing or speaking, it is much harder. And it is obviously an open problem. But a podcast is one way of demonstrating you're good at it because people whom other people respect say, "Oh, I like talking to you for one hour. We should do this again." I'm like, "Oh, super cool." But you have to basically somehow build a group of work and show it to people. My answer to that is do econ stuff people like, and at some point of time, if possible, monetize it, which only works if your thing is commercially oriented. So I can't do a history of the gold standard. That sucks.
--:-- Host: Yeah, yeah. And even like you, the proof of work thing—I mean, you could say that the proof of work is like the amount of engagement you get. But I've noticed in things I've gotten a lot of engagement on, even when it's on a specific topic—like, for example, some posts on talent that got some attention, right? On spotting talent. And I could tell you that I know less about spotting talent than the median manager at a Best Buy, right. I know close to nothing about finding talent. And you can have blog posts—I'm not saying that they got viral or anything, but they did get like, one of them was on Marginal Revolution. Right. And so that's another thing that kind of makes me skeptical about the value of being a public intellectual in the first place. I actually generally don't know anything about practically identifying talent. But then you can just put out these sort of insight porn things, and you get that good attention. And I don't know what kind of value that's generating for the world, you know what I mean?
--:-- Guest: No, I agree. But I also joke to my friends that among our circle, I'm the best at evaluating talent because all my tutor mutuals end up getting famous. So like, on the object-level issue, it doesn't matter because you're not selling your fish hooks to fish, you're selling it to fishermen. But on the meta level, the thing with writing about these sort of general things is that nobody knows how to do it unless you have 30 years of experience. So don't worry about it. If they liked it, you can do it.
--:-- The second thing is, people are not appreciating your object-level thing on talent. That's okay. Nobody's going to make you the head of McKinsey's recruiting thing. There's a very big difference in knowing something, doing something, and being able to explain it. And like, it's okay. I think your personal talent, or anything you write about—the barbell strategy—the value you provide to people is not the barbell strategy, it is explaining it in ways they can understand. I'm sure they knew it, right?
--:-- Guest: Everyone has the idea that like, this month I'm going to be super fit and next six months I'm going to do nothing. Everybody has those things. But the point is giving it some sort of form and structure.
--:-- Host: Yeah. You know, it's kind of funny on that post particularly because it was just hanging out in my Google Drive. I think I'd written that a few weeks or months ago. It was just almost like a throwaway thing. These things could seem kind of like barbell strategies. And then compared to other posts where I've put in way more effort, it was just literally a throwaway. But then a lot of... Alex [Tabarrok] said something very nice about my blog, but he used that blog post as the thing to retweet to say the nice thing about the blog. So now this random blog post has like 150 likes or something, and it was just a throwaway thing. And these other ones I spent a lot more effort on have like five likes.
--:-- Guest: Yeah, yeah, yeah.
--:-- Host: You know, I applied to a blogger.
--:-- Guest: Yeah, he had a similar point where he just goes through how many subscribers he has on a graph and he's like, you see these big jumps. They're not posts I spent a lot of effort on. They're just posts that happened to get featured on Marginal Revolution.
--:-- Host: Yeah, I know. Yeah. Yeah, you're right. I shouldn't be worrying too much about distribution. The question is, one part of me is like, maybe I could... because every single time I read financial news, I'm like, no, I could improve on this. I could do a 5x better job at explaining this. Because I know a lot of financial journalists and they're like, yeah, the job requires me to dumb things down. I'm like, no, you could do an intelligent one.
--:-- Guest: I'll put it in a different way. When you grow on the internet, your audience shapes you as much as you shape them. It is important not to write too many stupid things that go viral because you will be incentivized to write stupid things that go viral. You have to play that better game of not writing stupid viral things. So I refuse sometimes to write about popular things because I don't want it to go viral. It is more of a liability than an asset because it's going to be stupid. And I'm going to be known as the guy who did this. People say any attention is good attention. I'm like, no, you've got to be known for the right thing. So I don't know how to deal with that. I deal with it by forcing myself to not put stupid things that go viral. Your viral strategy wasn't stupid things that went viral. But I know that you know that you can let stupid things go viral. Don't do it. I've done it myself.
--:-- Host: Yeah. They didn't go viral exactly, but they ended up being a little more popular than my more thoughtful things.
--:-- Guest: So what is your long term plan as far as the intellectual stuff goes? Are you planning on keeping up the blog and podcast?
--:-- Host: Yes, yes, yes. At least for the next two years, at least till August 2023, I will keep doing this. And then it's like, I've been in college then. It depends on the amount of free time I have. I probably keep it because it's my only way of socializing with people. So yeah, it better stay.
--:-- Guest: You have a surprising amount of leeway in U.S. college at least. In my experience, if you want to spend 60 hours a week on your college work, you can. If you want to spend 20 hours, you can. And the difference is not going to be that big. Maybe a smaller gradient. But there are ways to compress the amount of time you have to spend in college. You can work on the other stuff.
--:-- Host: Yeah, that's true. I don't know. I want to go to the UK for the fact that one, you have pretty short terms, a lot more free time. And two, I find it very humiliating to describe my entire life story to get into college. I'm sorry, please just ask me why I do math and then let me in. Right? They're asking you to be cynical. When they ask us those vague questions like, "Oh yeah, tell us what led you to this point in life. Where are you applying here? And why, what is your life story?" The honest answer is you have a lot of great, you have a strong credential and I want that strong credential.
--:-- Guest: Here we go. Yeah, I know. That says I like money and your nicest past if I had to get that. And nobody likes that. And so I don't like the selection effect of selecting for people who can lie. It's not going to end up well.
--:-- Host: Yeah. So on a model level, I refuse to engage in that.
--:-- Guest: Well, did you not apply? Like what did you do for those kinds of questions?
--:-- Host: I'm going to apply this September, so I'll find out. But also, I optimized my life in high school for doing things I like. I was a guy who was in lunch and sitting in a corner with six books, and I read six books a week.
--:-- Guest: I wish I'd done that too. In middle school, my mom was convinced I needed to become an Eagle Scout or become a Boy Scout in order to... Yeah, I know. I pretty much fanned off all those kids. Like, no, I can't play a tuba. I can't play the piano. I probably... of motorcycles please no. Just being incompetent at everything else is a good advantage giving you time.
--:-- Host: Right. Yeah, no. I like what you ended up doing in high school. I ended up doing in college. So if I had to be basically you had like a three or four year... I'm 21, you're 18. So it's a three year advantage on me in terms of this stuff. Which I wish I'd just done earlier.
--:-- Guest: No, that's okay. You have a lot of time. A lot more than longevity works.
--:-- Host: Yes, yes. Let's go for that. I'm not sure if he's taking some kind of drug right now, like metformin or something.
--:-- Guest: Yeah, I'm thinking of that, but it's kind of awkward to justify to a pharmacist. Like, this is a controlled drug. I'm like, yeah, I know. Do you have diabetes? Not exactly. Why do they set a time when he takes it?
--:-- Host: Yeah. So that's okay. My answer is just run a lot and do weights and eat healthy and whatever. Which I think I'm doing to at least some sort of reasonable extent.
--:-- Guest: Yeah, dude, this was really interesting and fun. I mean, if there's a... I'll keep a track on your Twitter and see what you're reading. And if another title comes up that I find interesting, maybe we can do this again.
--:-- Host: Oh, yeah, definitely. I'd love to do it.
--:-- Guest: Awesome, man. Thanks a lot for your time. See you.
--:-- Host: See you. Bye.
--:-- Host: Oh, hey, hold up. I'm sorry. Just to plug your stuff again. So you're on Twitter, your handle, and obviously this will be in the description.
--:-- Guest: Yeah, it's at Pradyu.
--:-- Host: Okay, and then with the P, both P's capital.
--:-- Guest: I mean, it doesn't matter.
--:-- Host: It doesn't. Okay, I didn't know that. And then the Bretton Goods, that's with two T's dot substack.com. And the same name for the Bretton Goods podcast.
--:-- Guest: Yeah. And you've had some pretty notable guests on. Matt Clifford, Bern Hobart. Definitely worth checking out. Highly recommend.
--:-- Host: Thank you so much.
--:-- Guest: Yeah. Awesome, man. Yeah, thanks for your time.
--:-- Host: Thank you. Bye.
