Hello! Long time no see.
“Securities” is back after three weeks in delightful Japan. Now to work off 8 lbs without relying on Ozempic.
The best minds now need a cyberpunk exit visa
Western governments have doubled down on strategic industries since Covid-19, subsidizing new semiconductor fabs and rare earth metal mines and processors as well as securing pharma manufacturing and other producers of critical goods. The goal is simple: ensure that the physical infrastructure necessary for the success of these industries is under sovereign control by reducing foreign interdependence.
Having the right physical capital though isn’t enough to protect these industries, and so now governments are increasingly turning toward their next challenge: strategic minds. How do governments gain sovereign control over their best brains?
That’s not a new goal for knowledge economies, and traditionally, this has been a mostly positive enterprise for the talent targeted. Outside the wringer that is the U.S. immigration system, America recruits exceptional people from all around the globe with a robust pipeline that’s the envy of the world. China, through the Thousand Talents program, has cultivated a global recruiting effort to identify the next generation of emerging scientists and engineers and offer them prodigious sums to migrate to the mainland. Entrepreneur visas, exceptional talent programs, laboratory funding packages — governments have typically wielded bountiful resources and bureaucratic efficiencies in order to attract and retain the right strategic minds for their economies.
But that positive approach is absolutely not sufficient for the scale of concern around strategic industries these days, and now governments are considering moving beyond carrots to disciplinary sticks to ensure that their best brains stay right where they are.
The Financial Times reported last week that South Korea, fighting back against industrial espionage from China, is intensifying measures to protect the country’s strategic industries. That includes a bold new initiative:
Seoul takes the issue so seriously that it is creating a database of chip engineers working for South Korean companies in order to monitor their travel in and out of the country. The government has also established several new investigatory bodies to combat the leaks, passed legislation to toughen punishments and made it easier to report suspected violations. Those measures appear to be bearing fruit: there were twice as many arrests relating to tech leakage in the first quarter of 2023 as there were during the same period last year.
Chip engineers apparently now sit alongside terrorists, criminal drug lords, and international money launderers as people placed on travel watchlists.
It makes bureaucratic sense for investigators, of course. To track down leaks, they need data on who people are meeting, and one way to do that is to track their whereabouts in order to generate useful correlations.
But pause and consider the much more cyberpunkian and dystopic vision of what these cognitive watchlists imply. A semiconductor researcher spends their life studying the chemistry, physics and electrical engineering required to build the next leading-edge chip node, and rather than being heralded as an economic hero (with the commensurate compensation to match), that researcher is now identified by the authorities as a potential threat to the long-term sovereignty of the nation. The smarter you are, the less freedom you have — and the less privacy you deserve. Strategic minds are a resource for the government to protect, just one more element of protecting strategic industries.
This watchlist doesn’t target sensitive government employees or people working in national laboratories with classified access to federal secrets, who might agree to such on-going surveillance as a normal function of their employment. This sort of watchlist is targeting workers in private industry who have been identified by their companies as critical employees.
When it comes to industrial espionage, travel watchlists are, obviously, a blunt instrument. If you want to leak intellectual property to China, just do it in Mallorca instead of Beijing. Don’t leave a correlation. No government can globally tail all of its engineers and cognitive elite. And so these programs don’t solve the problem, but what they do offer is a veiled threat: you’re being watched. Don’t talk to the wrong people, don’t travel to the wrong places, don’t be caught in the wrong position.
It’s hard to believe the remit of such programs will remain locked to South Korea and a few of its top chip engineers. After all, insider threats can come from nearly anyone who has access to a company’s intellectual property, and so the scale of these programs is guaranteed to expand. Multiply that scale by the number of industries now labeled “strategic”, and pretty much anyone in the modern knowledge economy is suddenly a strategic mind worthy of government monitoring.
Even beyond the obvious privacy violation, there also happen to be second-order effects of such programs that benefit employers. Countering industrial espionage dampens the ability of a talented engineer to depart for a rival firm, whether overseas or domestically. Like non-compete clauses, preventing engineers or anyone else from building their reputation, recruiting at other firms, or simply traveling is a way to ensure that wages stay artificially low against market rates.
As I summarized with two others in a think tank paper at the beginning of the Biden administration for the Foreign Policy Research Institute, the biggest challenge for rebuilding America’s chip industry is the country’s lack of talent, and specifically, how uncompetitive the domestic chip industry is when it comes to salaries and job opportunities compared to adjacent industries like software. Chip engineers need many more years of education compared to software engineers (a PhD is practically a prerequisite), but their specialized skills are needed by only a handful of employers, limiting career opportunities and potential salary growth.
Like all “labor shortages”, the lack of American chip talent is a direct function of economic potential. If chip engineers made $1 million salaries, half of Stanford, MIT and the Ivy League would be studying electrical engineering tomorrow instead of computer science today. A “labor shortage” is a shortage of people willing to work at a certain level of pay and with particular job prospects.
Ironically, travel watchlists and other dubious government talent “management” programs will do the exact opposite of their intended effect. Far from protecting strategic industries and their workforces, they will merely hollow them out. Young people selecting their majors and building their careers will learn that it is better to make money as an Instagram influencer who is able to travel the world than to be a useful and productive member of society paranoid that the government is watching where their mathematical mind is going.
There will be people who will accept such constraints, either because their passion is so great that they can’t imagine professional alternatives or they are economically wedded to their course in life and don’t have a choice. But industrial policy, particularly around labor, is an iterated game. Threatening the strategic workforce with jail doesn’t protect strategic industry: it simply makes the bullshit jobs of the 21st century more attractive.
Lux’s latest quarterly letter: The ∞ frontiers of futureforming
This quarter, Josh Wolfe had a bold and optimistic take on the state of venture, science and technology, (mostly!) eschewing the daily drumbeat of negative headlines.
Futureforming requires not just science, technology and engineering––it also demands a prosocial philosophy. Consider terraforming. It’s a term pregnant with possibility, holding humanity’s hunger to harness the heavens for a newfound home among the stars. It would entail conducting a symphony of orchestrated changes, rendering a barren wasteland into a thriving Eden: finessing the fickle fabric of the atmosphere, blending gasses for breathable air that nurtures not chokes, liberating ice from its slumber to yield serpentine rivers that transform a void into a vital land of verdant life. Romantic, isn’t it? We reject it. Most people don’t want to occupy Death Valley, let alone Mars. Terraforming is for The Leavers & The Fleers — playing god, abandoning our planet to settle another with hopefully better results. Instead, we count ourselves among The Stayers & The Stewards, re-embracing what it means to be members of an incredible community on this Pale Blue Dot. Instead of pursuing utopia, we would be wise to strive for persistent progress, accumulating incremental improvements, endless combinations, adaptation and transformations and on occasion, a few giant steps. That’s where futureforming and terraforming depart. Terraforming is about recreating the paradise of Earth on other worlds, whereas futureforming is about directing us to a better one right here. Think of the future as a place. We want to fund those who want to develop it into a desirable destination. Occupy The Future.
And for those who do love the risks and pessimism, we also have a special appendix on that direction as well, centered on our newly rechristened Lux Riskgaming Initiative.
Three years ago we survived a viral contagion, nearly three months ago a banking contagion (which may still be ongoing). The stimulus from the former contributed to the collapse of the latter. What other contagion candidates could cause chaotic disruption, currently underappreciated or overlooked? Let’s take a look at the future of banking risk, credit risks, concerns that Japanese investors might pull back from global investing, and finally, the rise of militant labor organizing.
- Our scientist-in-residence Sam Arbesman recommends Dwarkesh Patel’s summary of Robert Caro’s magisterial biographical series on Lyndon Johnson. Having read all four, the books are glorious but lengthy, and Patel reduces them to cogent lessons learned. “An interesting thing I’ve noticed in the biographies of great men is that their ancestry includes people of great status and power. But for tragic and random reasons, their family has fallen into poverty and humiliation by the time they are born. So there ends up being this conflict between the station they feel entitled to because of their aristocratic heritage, and the demeaning and conspicuous scarcity they have to face growing up. And the ambition of these men seems to be in large part motivated by the need to resolve this incongruity.”
- Shaq Vayda recommends Kanoko Matsuyama’s story in Bloomberg on why “AI Drug Discovery Is a $50 Billion Opportunity for Big Pharma.” “Bringing a new drug to market has traditionally cost almost $3 billion, and about 90% of experimental medicines fail. So technology that speeds up the process can be a big driver of profits.”
- Having just spent the last few weeks on vacation in Tokyo, Daniel Knowles’s review of why Tokyo is such a pleasant city to live in was a relevant and accurate read. The discussion is adapted from his new book, Carmageddon: How Cars Make Life Worse and What to Do About It.
- Sam enjoyed this summary of a talk on prompt injection by Simon Willison. “I’m sure people here have seen prompt injection before, but just to get everyone up to speed: prompt injection is an attack against applications that have been built on top of AI models.” And “So this is my fundamental problem with trying to use AI to solve this problem: I don’t think we can get to 100%. And if we don’t get to 100%, I don’t think we’ve addressed the problem in a responsible way.”
- Tess Van Stekelenburg recommends the Cradle x Bits in Bio Survey and its executive summary, which is chock full of data and insights on the current state of the TechBio industry. “When it comes to coding, 74% of them learned the ropes by ‘just doing it’, followed by school or formal education (63%), online resources such as videos and blogs (45%) and books/physical media (29%).”
- Sam recommends Alina Valyaeva’s exploration on the reactions to the historical developments of new technologies. “A few months before Alexander Graham Bell unveiled his device, The New York Times published a note accusing Philipp Reis of ‘deliberate malice’ over his telephone-like device. The fear was that if people in America got telephones, they would no longer show up at national celebrations, exhibitions, and concert halls, but would retreat to their rooms and listen ‘to the trembling telephone.’”
- Peter Hébert recommends a crazy story from the oceans, “Orcas have sunk 3 boats in Europe and appear to be teaching others to do the same. But why?” “The spike in aggression towards boats is a recent phenomenon, [Alfredo López Fernandez] said. Researchers think that a traumatic event may have triggered a change in the behavior of one orca, which the rest of the population has learned to imitate.”
- Finally, Sam recommends Susanna Clarke’s popular novel Piranesi, which has also been recommended to me multiple times as well. Also check out a great profile of her in The New Yorker from 2020.
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.