Pranav—Why are some countries richer than others?

Why are some countries richer than others? To some extent, economists think the difference lies in ‘total factor productivity’. Richer countries are usually more productive than poorer ones — that is, for a day’s work, their people manage to create a lot more economic value.

Why is that? The traditional assumption is technology. Richer countries have better technology than poorer ones, and that’s why their workers are so much more productive.

But that isn’t all, is it? There are clearly other reasons some societies are more productive than others. Corruption is one: if political patronage can decide how well your business does, then your society is much less productive. After all, if you don’t have connections, you can’t do very much. And if you do, why would you work at all? The government is another. If you have to waste time or resources dealing with pointless bureaucratic nonsense, that time and those resources can’t go into your actual business.

These are problems of resource allocation. See, in an ideal world, our economy that could have created a lot more wealth --- even if, materially, everything else was exactly the same. Imagine an all-powerful God came up to the Indian economy, and started shifting people and resources around, until there was no batter way to arrange them. They would create a utopian world --- one where every job would have the best-suited worker doing it, even if we made no more jobs; where capital went to those that could use it the best, even if there was no extra capital going around; where all resources went to businesses that could use them the best, even if there were no more resources left over; and so on. Suddenly, our economic output would zoom by many multiples of what it is. It would be the perfect economy.

Of course, if there's a God, they aren't a champion of economic efficiency. The perfect economy does not exist. But that doesn't mean all economies are equally imperfect. So, even if the perfect economy is far beyond our reach, it's possible to think of how we could improve the allocative efficiency of an economy.

India has absolutely horrible allocative efficiency. I came across this paper (via Nicholas Decker), which argues that India's economy would be 40-60% bigger if our allocative efficiency matched that of the United States. Our firms struggle to grow and mature in the way businesses can in other countries. All sorts of constraints and regulatory barriers get in our way. In fact, our efficiency went down between 1987 and 1994, even though this was precisely when liberalisation was put underway.

There are apparently a bunch of other papers on this, by the same authors. I'll get to those in the coming days.

Bhuvan—Making sense of Trump's Napoleonic worldview

As I wrote in my previous post, we all engage in sense-making. There has been no other moment in recent history when we needed such a sharp and robust sense of sense-making as we do now. Trump is throwing out all the rules, values, and unspoken agreements that held the post-war world together with Fevicol and duct tape.

He's rewriting all the rules and norms that we all agreed were good. He doesn't care what he breaks or what the price is; all he cares about is doing what he likes and what benefits his circle.

But what does he think is good? What's his worldview?

That's where things get tricky. Donald Trump isn't a man who lends himself to easy descriptions, and one can't jump to lazy conclusions to make sense of him. One moment he says he's going to do something, and exactly 8 minutes later he does the exact opposite.

During one of my doom-scrolling sessions through my podcast feed, I came across Ezra Klein's interview with Fareed Zakaria. Fareed has some interesting ideas about Trump's ideology and worldview.

Unlike many others, Fareed argues that Donald Trump actually has a coherent worldview despite the seemingly random nature of his actions. He says Trump believes that for the entire last 40-50 years, America has been a sucker at the table. Despite being the most prosperous, richest, and most powerful country in the world, the US has been consistently taken advantage of by its allies. Despite its heft, the US hasn't used the leverage it has.

The idea that America has been on the wrong end of this bargain for essentially the entire post-World War period is at the heart of Trump's ideology. The genius of this is that Donald Trump has taken the most powerful country on the planet and turned it into a victim. That's remarkable political alchemy.

The second element of Trump's worldview, as Fareed puts it (quoting Thucydides), is that "the strong do what they can and the weak suffer what they must." Trump thinks that for the longest time, America has refused to exercise its power and leverage. He believes it's time for America to act like the superpower it is—to get what it wants, rewrite the rules, dictate the norms, and set the agenda.

Another element of Trump's worldview that Fareed discusses is his preference for illiberal democracy. Trump and those around him are not fans of liberal democracies. Fareed suggests that one of the reasons Putin invaded Ukraine wasn't because of NATO, but because he feared Ukraine would join Europe and absorb the liberal worldview—which means free speech, multiculturalism, and progressive gender ideology. What Putin fears more than anything is not NATO or the West, but this liberal worldview that Trump (and even Elon Musk) seem to share. This explains Trump's sympathy for Putin.

Trump also believes that just as America needs to have its sphere of influence (articulated in the Monroe Doctrine), so does Russia. He understands that Putin needs control over Ukraine to exercise his sphere of influence, which is why Trump views leaders like Erdogan, Viktor Orbán, and MBS more favorably than most of the American liberal establishment. Fareed uses the example of the 1880s and 1890s when three European monarchs—the German Kaiser, the Austro-Hungarian Emperor, and the Russian Tsar—formed the Three Emperors' League (Dreikaiserbund) to stop the spread of liberalism in Europe.

Trump also appears to admire the 19th century period when there were hundreds of territorial conquests, which became essentially zero after 1945 in the post-World War II era. In a strange, anachronistic way, Trump yearns for this period when the strong could do whatever they wanted and could go to war with anyone to take over territory. This explains his fascination with acquiring Greenland and parts of Canada, and why he's sympathetic to both Xi Jinping's territorial ambitions in the South China Sea and Putin's ambitions regarding Ukraine.

While Fareed doesn't state it outright, it seems Trump fancies himself a modern-day Napoleon who wants to go on a rampage. He can't accept that America, being the most prosperous and powerful country in the world, has been constrained and is not fully using its power.

Tharun—Now get money back if you don't deliver a baby through IVF

Imagine you buy a product, use it, and don't like it. You have the option of returning it.

But with medical expenses, especially something as probabilistic as a baby being born through IVF, do you have the same facility?

Well, yes, now they do. A San Francisco startup, Future Family, launched "Orange Shield," an IVF insurance product with money-back guarantees.

It's simple: You pay 20% upfront, if no baby after two IVF cycles, you can get your money back. And with fertility rates dropping and the age at which people have their first child increasing, this seems like a step in the right direction.

IVF is super expensive, with average costs reaching up to $40,000 (₹33,12,000) for two cycles, depending on where you live. With Orange Shield, protection costs about $3,000 (₹2,48,400) down and $999/month (₹82,717/month) for five months. If treatment doesn't succeed after two rounds, families can file a claim for a refund under their IVF insurance policy.

The policy covers all IVF-related expenses up to $50,000 (₹41,40,000).

For couples tired of spending tens of thousands of dollars with no guarantee of success, this could be super helpful.

Krishna—Is China innovative?

If you landed here on this website, I would make a reasonable assumption that you follow The Daily Brief, and if you do follow it, you would know by now how China is the world’s factory and everything. Now, I wont touch upon that today.

I read this piece from Noah Smith on China’s innovations. Couple of interesting things stood out:

  • Chinese scientists now publish the majority of high-impact papers in fields like chemistry, physics, computer science, materials science, and engineering
  • There are a bunch of interesting things that have been launched out of China like quadcopter drone, personal air taxi, face scan payments and a bunch of other things. But, the thing is most of these products are extremely niche. It’s not something like an Iphone.

But here’s the problem with it.

But even allowing for the incompleteness of this list, I feel like I expected it to be…a little more impressive? Drones are amazing, and are already changing the world, but some of the other items here seem a little bit marginal. Dockless bike-sharing is neat, but I’m not sure how big of a difference it makes in terms of transportation convenience relative to the docked variety. Foldable smartphones are cool, but will you really buy one? Sodium-ion and semi-solid-state battery cars have some advantages, but seem likely to end up as niche products. Facial recognition payment doesn’t really save you much time versus swiping a phone, and it’s a little creepy. A couple of commonly mentioned items, like BYD’s “blade battery”, seemed so incremental that I didn’t even put them on this list.

  • Considering that Chinese scientists are publishing so many papers it seems intriguing that the breakthroughs don’t justify it. There’s a nuance here—the more number of times you are cited in a paper, the better your incentives are.

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