Confucianism and Trade Imbalances

The enlightened dictatorship of money

A hacking culture

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We keep hearing these refrains from China’s foreign ministry that China is a frequent victim of hacking.  The foreign media I read typically repeat this point without examining it.

A new report by a Chinese organization, the Data Center of China Internet (DCCI), illustrates how big a problem this is.  I had some idea this was an issue, but the news was still shocking to read.  The report finds that over 1/3 of mobile apps are tracking data that have nothing to do with the functioning of the app.  13% of apps examined are accessing telephone records, 7.5% are reading text messages, and around 4% are actually making text messages and/or phone calls (all of which have nothing to do with the functioning of the app.)

Chinese programmers simply have no idea about the differences between a legitimate computer program and a virus.  I downloaded some Chinese programs a couple of years ago, before swearing never to do so again, and I am reminded of this fact every time I start up with some messages in Chinese.  Even though I suspect that these messages are probably the extent of the problem, the fact that there is no easy way to delete them makes them more like malware than anything else.

In my last post, I suggested a somewhat confrontational approach to this problem.  After thinking about it further, I wonder if it might be more effective to simply strengthen standards to differentiate ‘badware’ from real software on a very low, operational level.  This would be analogous to my view that financial repression should be dealt with on the lowest levels possible, by strengthening  the accounting practices of individual firms.

Written by Maofucious

March 17, 2013 at 10:58 PM

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Some thoughts on cyber warfare

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As it’s slowly becoming clear that cyber warfare is going to become a decadal foreign policy challenge for the US, I’ve been thinking about what constructive comments I can make about the situation. The US is in a defensive position, which is inherently weak.  Nevertheless, there are some broader political issues involved.

One of the provocative conclusions of a new book by Google’s Eric Smidt, which the Wall Street Journal reviewed in advance, is that this hacking crisis, along with government censorship, may result a fracturing of the internet. It is a plausible conclusion, given that China has almost succeeded in fracturing the world’s capital markets through its accounting glitches.

Much of Chinese and Asian development is predicated on the notion of networks.  They build industrial ecosystems holistically, instead of organically (which is why they’re skeptical of open-market finance.)  Japan, for instance, was really adept at pushing the standards that the entire industry would have to play by.  On a deeper level, politeness itself (which was present in China before the Cultural Revolution) is a form of this standardization.

The big question is, can they adapt to networks that are not within their political control? Is this push for networks really a development model, or just a means for the government to exert its control?  It is a very new question.  For most of China’s history, the only networks that extended beyond China’s borders were based in trade, which is why today we have free trade in goods, but little else.

With these thoughts in mind, I have run across a couple of good ideas.  Going with the working assumption that China will sabotage any Western-originated networks, one solution might be to create networks specifically designed to exclude China.  This is the result of a proposal by Richard Clarke:

There are, nevertheless, significant opportunities to develop international collaborations to reduce the impact of cybercrime. An international cybercrime center could aggressively go after and disconnect computer networks used to steal credit card information and other personal data. The center could have “fly-away teams” of experts who could move to and assist a country with a cybercrime problem. The center could also document the failure of certain countries to assist investigations or successfully prosecute cybercriminals. Senior government leaders then would have to decide what to do about those de facto sanctuaries, beginning with multilateral diplomatic approaches.

I like this idea because unlike some other such voluntary organizations (like the League of Democracies, for instance) nobody would have any reason to suspect that the entrance criteria is different from the ultimate mission.  China would clearly exclude itself from these inspections, and that fact would highlight exactly what it needed to highlight.

A second proposal would entail essentially going on the offense in the information war.  The problems with hacking and state censorship are fundamentally connected (recommended read.)  People here naturally assume that anyone would lie to protect their ‘face,’ and US accusations are simply not going to be believed.  However, a longer-term goal will be to show that not all governments lie.

Once in a blue moon the Heritage Foundation comes out with an eminently reasonable idea, and here Derek Scissors proposes that the US should start publishing Chinese economics statistics.  Why do economic data series amount to anything? Well, remember the uproar that happened when the US started publishing air pollution data for Beijing and Shanghai? The CCP knows they have a genuine vulnerability here.  Economic statistics would multiply this issue by ten.  Chinese statistics are the worst in the world, so I hear, rivaled only by Saudi Arabia, and if independent organizations started using the US-issued statistics over the Chinese ones, it would go a great way towards showing why the US is concerned with free information.  More indirectly, it would also buy some credibility on the hacking issue.

I can’t really tie that one back into networks, but it seems like a good idea.

Written by Maofucious

February 15, 2013 at 1:46 AM

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“Occupy Obama”

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I recently learned a new Chinese word: 屌丝, which translates directly to something like “pubic silk.”  In a way, it’s a more elegant term than it needs to be, since “hair” could be used instead.  Anyway, even though I’m not sure I quite understand the full connotations, it’s clearly an insult – something about people who have no pride, no money, etc.

I then ran into this article about “屌丝” “occupying” Obama’s Google+ page last February (so I’m a little behind on this story…I don’t exactly get paid for this.)  For a short period, the GFW failed and allowed people in China unfiltered access to google+, and Chinese users took the opportunity to post messages on his wall.

“It is everyone’s responsibility to promote the Chinese language.”  These words now appear on US President’s Obama’s google+ page; how do Obama’s fans feel?

“Mr. President, I want to teach you Chinese, so that you can read all these posts.”

“Can such high popularity help you in the next election?” Chinese 屌丝 asked on Obama’s google+ page.

Funny enough, I hadn’t heard anything about this in the Western media. So I decided to check it out.

The comments have been almost uniformly free of the vitriol that often rages on the Internet. And, to the extent that harsh sentiments have been expressed, the criticism has been more often directed at the Chinese government. One user did write that it was disappointing to see how “weak” Obama was on the issue of human rights in China.

Even more surprising is the unusual absence of jingoistic China defenders who commonly rebut pro-democracy, pro-America comments in Chinese internet forums.

As you can see, the comments range from fawning to mischievous to thoughtful. More than a few ask for a Green Card or American citizenship. And, of course, there are a few Americans who resent these Chinese users posting in their native language as opposed to English – or who simply use it as an opportunity for sarcasm.

Although the last commentary seems to be more along the lines of the Chinese coverage, it seems like a real gap on the way internet commentary is perceived.

Written by Maofucious

January 1, 2013 at 4:48 PM

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China schooling the US

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I knew it had to happen someday.  The rough consensus among China-watchers is that the best precedent for China’s rise, at least in the realms of economics and business, is Japan.  One peculiar phase of the Japanese-American relationship was when Harley-Davidson ended up redoing its entire production methodology based on what it had learned from its Japanese rivals (who were willing to help, in order to defuse trade tensions.)  The Japanese Production System might have been inspired by an American consultant (Deming), but American companies never became world-class experts in applying it.

I ran into an article the other day, although minor, that marks the first time I’ve ever heard a similar story about China.  Ford’s China social marketing team was sent to the US to train their counterparts there.  Many people know that the Chinese government controls almost every form of communication.  The word 宣传 sort of shares the meanings of “propaganda” and “marketing;” ‘red envelopes’ are an expected practice at press conferences.  And of course Facebook and other American-based social networking services are blocked.  But focusing on the top-down aspects of this phenomenon neglects that it comes equally from the bottom up. Despite all of the censorship, there really is a vibrant Chinese internet. People simply expect their information to come from sources close to them – another aspect of the Chinese attitudes towards geography I’ve mentioned several times before.

A lot of this seems very different from Japan.  Innovative marketing and Kanban production are very different things, implying very different personality types.  It’s important when making the comparison to Japan to note that there are some deep-seated differences that have nothing to do with Capitalism or Communism.  On the other hand, these examples do both come from the auto industry – an important status symbol in either production or consumption.

Written by Maofucious

December 9, 2012 at 3:26 PM

The hierarchical logic of the Chinese language

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What number is halfway between 1 and 9?  Is it 5, or 3?  I have a graduate degree, and I’ve read The Black Swan, so I’m quite comfortable answering 3.  This also a natural answer for children, traditional peoples, and animals, according to researchers at MIT.  But logarithmic thinking is apparently driven out of people with an intermediate level of education. How could one go about teaching logs without scary multiplication tables and the constant e?  One of the best ways I could think of would be the Chinese language (as an example of fractals in general, but again those can be scary for kids.) For instance, take the pictogram for heart.

This character can be used separately, or in combination with other characters to form ‘words’ (which were not really a concept in Chinese at all until outside contact was established.)

心里

Literally, “inside the heart” = psychology (or just “inside the heart”).  But the character can also be squeezed into portions of other characters, as a “radical.”

情  患  恭  必

So shish kebab (I’ll let you figure out which one that is) your heart = disaster or anguish.  But then there’s chengyu, another level above words consisting, typically, of four characters, generally with some logic to their placement.  For instance:

心上心下

“heart goes up, heart goes down.”  Sometimes, chengyu also have history behind them, something like an inside joke (although the heart character doesn’t lend itself to good examples of this, as far as I know.) So the Chinese language is built around this concept of nested levels, of the type you get by using power laws, very different from the Western logical, grammatical mindset.

Written by Maofucious

November 24, 2012 at 10:47 AM

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The Revolutionary

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So what would the Gang of Four, responsible for the Cultural Revolution, have done after the revolution was finished?  Take up normal government posts?  Write an autobiography?  Retire in peace?

Not according to Sidney Rittenberg, the first American to ever join the Chinese Communist Party. “Go to America” was their unanimous answer.

The American capitalist system seemed so chaotic, yet the government seemed so secure in power.  It was a sort of security the Chinese system lacked, and it was all very fascinating to them.  It’s a mindset so similar to today’s that I just about fell out of my chair when I heard that line at a screening of “The Revolutionary” (with the subject in attendance himself.)

I’ve been writing a lot about the logic of the Chinese system and how it syncs with capitalism.  His experiences were quite surreal to me, not knowing perhaps as much as I should about the history in the earlier 20th century.  It was very interesting to see what aspects of that logic were in force, back when you had to spend six years in prison to demonstrate your loyalty to the government, rather than just try to face down the visa office.

He was very honest and open about the role he played, which wasn’t always positive.  If he had to do it all over, he said, he wouldn’t have joined the Communist party at all.  He says he could have made more of a difference as an English teacher and a foreign expert.

Instead, he dove right into the cultural revolution, somehow becoming a political player in his own right.  He spoke at rallies of tens and hundreds of thousands of people, and played political chess with the top leadership.  Although he’s very well spoken (despite being 92), it’s hard to imagine him leading mass political movements.

“Power hungry” was an adjective he used to describe himself.  It’s sort of what it takes to survive here, then and now.

Written by Maofucious

November 12, 2012 at 11:35 PM

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Mining and weiqi

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I’ve been learning more about the mining industry in China for a project I’m doing at work.  Chinese mining  has created a lot of publicity abroad due to its willingness to overpay for projects around the world with a strategic mineral output.  This publicity has often left out the fact that the industry has been quite stagnant and fragmented domestically, with little investment in technology.  It seems that the government has actually favored overseas acquisition at the expense of domestic development.

Hearing this situation made me think of this paper (pdf) on China’s strategic mindset, as it relates to weiqi, a Chinese version of chess.  (The paper – and Henry Kissinger’s subsequent endorsement in his book – focus on security and warfare, but I’ll be coming back to this argument to show apply it to economics as well).  Weiqi doesn’t end with the capture of a particular piece, but is rather scored at the end by the amount of territory captured, reflecting Sun Zi’s principles of warfare and the importance of geography.

I’ve been learning the game over the last few months, and one of the most difficult parts about it is knowing when to leave something alone.  Players who are much better than me will apparently abandon the most unsupported pieces, while going off to play in some other corner of the board.  The typical progression of the game is therefore to start at the corners, then the sides, and finally move towards the center.  This looks very much like the way China is approaching its natural resources problems.

Written by Maofucious

November 4, 2012 at 5:51 PM

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