Xi's Choice: Mussolini or McLuhan

Controlling the center of The Center of Everything (“China” in English) makes Xi Jinping the most powerful person on Earth and the world leader of the Mussolini Movement. The danger to us all: Xi has lost his nerve. His panic is the biggest geopolitical crisis since WWII.

Xi’s problem is the Information Cost-Velocity Curve. The ICVC has dominated all human organization since we learned to mumble. On the Curve, information cost is always falling and information velocity is always increasing. Anything that fell off the Curve from the Roman Empire to the first-generation PC and smartphone makers, died.

All organizations, political, social or economic have, for all history, been subsets of the Curve. If the Curve moves, as so famously with the Gutenberg Press of 1440, you either move with it, or you go down. The Gutenberg Press shredded every power structure in Europe. Those countries which resisted paid a fearsome price in people and money. The European Union is to this day divided into two: those countries in its north which adapted to Gutenberg and those in its south which didn’t.

The Curve’s biggest impact is this: the farther we move out on the Curve, the more power is diffused. Our democracies are a direct function of Gutenberg’s putting the printed word in front of people so that they could make up their own minds about things. The telegraph took the next step, the radio the next and so on through the Internet, the Cloud and social media.

Staying out front on the ICVC is the key to growth and prosperity. Why? Because those companies and nations better able to substitute ever-cheaper information for other factor inputs like land, labor and capital gain market share more quickly than those which cannot. That’s how Walmart and Apple did it.

Naturally, every company wants to put as much distance as possible between itself and its competitors on the Curve. All nations—the smart ones anyway—know that Ricardian comparative advantage comes from information-optimization strategies that get them out on the Curve and keep them there.

Over half a century ago, Marshall McLuhan taught us in his two great books, The Gutenberg Galaxy and Understanding Media, that, like gravity, the shape and direction of information governs all structures. Structures cannot defy information gravity and dictate the shape and direction of information.

McLuhan’s Gutenberg lesson for Xi: The Information Cost-Velocity Curve can fast outrun any limitations you place on it. Xi now faces his Gutenberg Moment. And he’s choking.

Xi’s problem: how can The Party defy information gravity and limit the massive shape changers like marginal cost computing on the Cloud that determine outcomes.

McLuhan died 40 years ago this week. He did not live to see the PC age, let alone the Internet or the overwhelming power of marginal cost computing on the Cloud. Nonetheless, in Understanding Media, he said that we would live in a world of “electric-all-at-onceness” (the only way he could express it in 1964) and then laid out logically how we would behave in such a space. He described the world of Facebook and Google perfectly.

Here we are, nearly 57 years later, doing exactly what McLuhan said we would. The amount of shareholder value that has been created is staggering. And the amount wiped out by companies that refused to adjust, like Sears and Kodak, is just as staggering.

Xi’s choice? Dissolve The Party and follow the value curve or keep The Party and force the Center into its Kodak Moment.

Cyberspace is inflating at an enormous rate, much like our early universe. McLuhan would be quite at home here. As is Jack Ma, the Center’s ICVC value creation leader, founder of Alibaba and one of the Center’s richest people. His IPO for Ant, a fintech innovator, was to have been the largest in history. Until Xi panicked and threw The Center off the Curve.

Xi’s big, big problem is that, following the death of Mao Tse Tung in 1976, The Party turned from one really bad Western idea, that of Karl Marx, to another, that of Benito Mussolini.

Mussolini came from southern Europe, the losing side of the Gutenberg revolution. His pre-Gutenberg policy was Party control of the military, information and selected enterprise, leaving the rest to the market. He believed that the Fascist Party could control information gravity, thereby controlling outcomes. Hitler called Mussolini a “political genius” for this kludge: all the control that Stalin got for a fraction of the cost. Mussolini’s system is widely used all over the world today, most notably in The Center and Russia.

McLuhan would have been happy to tell Xi that we are way too far out on the ICVC today for the Mussolini system to hold.

McLuhan would have pointed to a second, massive danger to Xi: the changing nature of time. He would have explained to Xi that time on the ICVC is measured in the half-life of a microprocessor, where a year is about two months. That, he would have told Xi, changes both the nature of your decision-making and the speed with which you must make decisions. “Electric-all-at-onceness” is no joke.

Cyberspace is inflating at an incredible speed. We are already at 3,000 MIPS per dollar of processing power on 31 billion connected devices onto which we download 205 billion apps per year. We know that all three, key measures of the Rate of Cyberspace Inflation, will grow by at least an order of magnitude by 2030.

The diffusion of power in Cyberspace Inflation is already stupefying. Long-existing and once-powerful structures are being dissolved at an ever-faster pace. Whether you are Sears or The Party, you must adapt or die.

This means that the farther The Center’s businesses move out on the ICVC to profit from Cyberspace Inflation, as Jack Ma has urged, the greater the diffusion of power and the sooner The Party’s grip comes to an end.

This is freaking Xi out.

The ICVC is moving too far, too fast for Xi. He panicked. He is desperately trying to reverse information gravity. To preserve Party control, he is forcing The Center back up the ICVC, killing its global competitiveness.

His first big move in The Center’s retreat was slamming Jack Ma by cancelling his Ant IPO. Ant, a fintech microfinance operation with power diffusion on steroids, is way too far out on the ICVC for supreme Party control. Worse, it would have been global, far out of Party reach.

Everything about Ant spelled the end of The Party. Ma had to go.

What is amazing is the number of big private equity operations that didn’t get this and put huge sums into Ant. These include Warburg Pincus LLC, Carlyle Group Inc., Silver Lake Management LLC, Temasek Holdings Pte and GIC Pte. None of them, it appears, have even the first idea of business basics in the information world and thus what Xi’s easy-to-foresee reaction would have been.

So easy to foresee that Publius nailed it four and a half years ago in Xi Jinping Drives China Down. And again in June 2017 in Xi Blows It, in August 2018 in Xi Inflates The Great Firewall, in June 2019 in Xi Fails Again, last April in Virus at the Center of Everything and again in June in Xi Tiks Don’s Tok.

What’s next? Xi will enforce a level playing field worldwide so that no one outside The Great Firewall has ICVC advantages over The Center. He will force all of us back up the Curve.

Tim Higgins reported in The Wall Street Journal that The Party has forced Apple to pull 120,000 apps that don’t meet Social Credit System standards. The NBA was brought to heel when a team General Manager spoke out in support of democracy in Hong Kong. The TikTok attack on the Trump campaign showed that The Party will tolerate no deviation, even from an American president.

One of the more interesting problems is what happened to Disney’s film, Mulan. Like all Disney films, Mulan was submitted to Party censors because The Center is Disney’s biggest market. But Mulan had unique problems. It was filmed in Center-controlled East Turkestan, home of the Center’s Uighur concentration camps. While this satisfied The Party, it brought immediate global condemnation, throwing the Disney brand into the toilet.

Now, raise these four events to the global political stage—already happened with TikTok—and you can see immediately where this is going.

As this conflict between the democratic, free market world that is seeking advantage on the ICVC runs ever faster and more forcefully into the Party’s demands that everyone be rolled back up the Curve and into Party control, the closer we come to a global war.

Is Biden thinking of this?

Update January 7, 2021

The Party is so predictable. Turns out, as Lingling Wei reported in the Wall Street Journal, Jack Ma's Ant was collecting data outside the party's Social Credit System and the leadership went nuts. Ma, no surprise, has "disappeared". As caching moves to the device and the IoT explodes, the Ant Effect will dominate and will inevitably remove China from the center.

Update January 9, 2021

McLuhan would have predicted what Kellen Browning and Taylor Lorenz reported in the New York Times today, that the Trumpistas attempting the coup on January 6 were live-streaming and making money doing it. In effect, every person is now a TV station with an advertising revenue model. Dlive was the broadcast vehicle of choice for several Trumpistas. It has five million active users. For Xi, this is death. Such diffusion of power is, as Xi saw on the 6th, very dangerous for The Party. Ironically, Dlive is owned by Chinese entrepreneur and Jack Ma protégé Justin Sun. And he will be the next Jack Ma if he doesn't shut this thing down. Fast.

Update January 15, 2021

In a stunning turn of events, Li Yuan reported in the New York Times today that The Party has used its Guancha.com and Global Times newspaper to denounce Facebook and Twitter for banning Dumb Don. The Global Times said that Don's ravings are the rights of a citizen. Presumably there are those in The Party who are going crazy right now with such a direct threat to The Party's Social Credit System and its legitimacy from so deep inside the organization.