Searching for New Atlantis in China
A whirlwind tour of a world being born
Twin baby girls, Lulu and Nana, were born in Shenzhen, China last month. That's not news, but this is: These two will likely never have to fear HIV infection. Not because a new vaccine was invented, but because they were born immune to the most common forms of the virus.
You might think this would be a reason to celebrate—imagine a world where no one ever contracts HIV again—but instead of champagne popping, a volcano of outrage and disgust erupted upon the girls' birth announcement.
Many are upset because Lulu and Nana are mutants, the world's first genetically edited babies. When they were but day-old embryos, a scientist in Shenzhen altered their DNA to grant them immunity from infection using a new technique called CRISPR/Cas9.
The fact that this happened in China did not go unnoticed in the commentary. The widespread coverage of He Jiankui, the lead researcher, portrays him as a vainglorious fool acting recklessly in a lawless land. In an ominous twist to the story, He has apparently gone missing.
Is Shenzhen a crazy place? Or is it just different? It may be that Jiankui was rash—we in the U.S. are still haunted by the ghost of the thalidomide incident in 1962—but a troubling assumption hides behind all the commentary: namely, that all regulations and moratoriums ought to apply universally and uniformly across the world.
"The most serious thing I've heard is that he didn't do the paperwork right," Harvard geneticist George Church told the journal Science. "I'm sitting in the middle and everyone else is so extreme that it makes me look like his buddy. He's just an acquaintance. But it seems like a bullying situation to me."
Church is the only prominent scientist to defend He, though this is in some ways unsurprising. Church has already received his own notoriety for cloning a wooly mammoth by using the CRISPR technique and for raising the possibility that Neanderthals might make a come back.
When did it become controversial to think different cities might be allowed to have different scientific regulations and rules about consent? Is there just one global bureaucratic empire of science?
* * *
In 2013, Larry Page, then CEO of Google, took to the stage at the Google I/O conference and wondered aloud if old laws and rusty institutions were slowing down the rate of technological progress. His argument was that we were missing discoveries because we couldn't run small-scale experiments with wild technologies like flying cars and drones. "There are many, many exciting and important things you could do that you just can't do because they're illegal or they're not allowed by regulation," he said.
He did not propose to change the laws of San Francisco or Mountain View. No, that was something best left to the stalemates of weeknight zoning committee meetings. Instead, Page proposed something far more radical. He suggested building a new experimental city that would operate by a different set of rules and regulations from the rest of the United States. If only we could "set aside a small part of the world," he said, in which "a few people can try out different things and not everybody has to go."
After Russian meddling in elections and home testing entrepreneur Elizabeth Holmes conning Henry Kissinger and half of Silicon Valley, the spirit of 2018 calls for tighter regulation of tech, not looser. Remembering this experimental city speech by Page, the technology correspondent for the Financial Times recently concluded, "It is hard to imagine any tech executive voicing such an idea today."
Indeed.
Mark Lutter, a young Ph.D. in economics from George Mason University, started a think tank this year dedicated to studying and promoting semi-autonomous jurisdictions—new cities—as a way to raise the standards of living for the worst off in the world, the Center for Innovative Governance Research. In October, he hosted a conference at a hip music venue on Valencia Street in the Mission of San Francisco. I was taken aback when Lutter started confiscating all the attendees' cell phones and putting them in a container. A tech executive of a multi-billion dollar company was going to give a talk and the exec wanted to be sure no one recorded his speech.
This is not an unusual fear. A month later, over beer at a bar in the Financial District, the CEO of another tech company told me when he retired, he wanted to devote his time and wealth to starting new special economic zones that might bloom into new experimental cities one day. He added, "But I'll need to hire bodyguards for me and my wife."
"Why?"
"Because these are dangerous ideas," he shrugged.
When I first moved to San Francisco nearly 10 years ago, I imagined a city full of thousands of Elon Musks. We were going to Mars in a decade. Instead, we have sidewalks covered in human excrement and skies choking with wildfire smoke.
The city of the future is elsewhere. There are competing visions of what that future might be. As far back as 1627, Francis Bacon published a utopian novel, New Atlantis, which envisioned an island city-state distinguished by its zeal for experiment and discovery. My work took me to another such vision: Shenzhen.
* * *
Danielle Strachman, my co-founder at the venture capital fund we run together, is on the edge of tears.
We are standing in front of a kiosk at immigration and customs for entry into Shenzhen from Hong Kong. We are here to raise capital for our fund, 1517, which mainly invests in startups in North America. The trade wars have chilled Chinese investment in the U.S., but not completely.
In addition to passports and visas, you have to give the Chinese authorities at the border your fingerprints, which a computer reads and records when you place your fingers on a glass surface. The sensor for this system isn't very sensitive, however, so you have to move and press and roll your fingertips on the glass until a representation of all five fingers lights up green on the screen.
"Treat it like a game," I say. "Experiment rolling your fingertips."
"That's not helping!" Danielle snaps at me.
Percentages under each finger-image tell you how hot and cold your effort is, and Danielle's have been very cold. The computer can't pick up her prints and she's getting frustrated and angry. To say the Chinese government takes entry into its country seriously is to make a massive understatement. A threatening feeling hangs about the room and you remember the verb disappear can be used in the transitive sense. If you step out of line, these Chinese immigration authorities can disappear you.
Walking into this room involved walking underneath a bank of cameras, all different kinds, all probably recording different aspects of our likenesses and facts about us, including our current body temperature (to expel the sick and feverish before they gain entry). Danielle is scared that if the computer won't read her fingerprints then we're not going to get into Shenzhen to pitch investors and take meetings.
"Try flattening your hand," I say. "Roll them around."
"I can't roll what I don't have!"
Danielle's fingers do look smoother than any I have seen.
Fifty-eight, fifty-nine, sixty—eeeoooeeeooo!—a red sign flashes "unsuccessful" on the screen and the computer resets. After what's probably the twentieth try at this, Danielle is demoralized.
A stream of people flows by us from Hong Kong into the mainland of China.
* * *
In the late 1970s, the Chinese government had come to its senses after decades of immiserating its people (of course, they wouldn't frame it that way). First, Mao's Great Leap Forward had devastated the country—deaths from its resulting famine were in the tens of millions between 1958 and 1962—then the Cultural Revolution that followed ransacked and demolished the soul of what was left. Even more people were purged, displaced, or imprisoned. After Mao died in 1976 and the reformers took power, the mainland they ruled was in ruin. For anyone traveling out of China down the Pearl River Delta, however, it was clear a different set of rules instituted by the British had produced a different outcome.
Hong Kong is an archipelago of rocks, precipitous sea stacks, and barren islands sitting at the foot of a peninsula on the southeastern coast of China. The land has little to offer in the way of natural resources—80 percent of it is too mountainous and rocky to farm. There are no minerals to mine; no oil to drill. Nevertheless, in the span of just 40 years or so, this tiny, hilly territory rose from a small trading backwater to an immense manufacturing and financial powerhouse, a futuristic city-state from whose harbors ship the wealth of nations.
The city is cleaved in two by a harbor full of red-sailed junks, yachts, freighters, and ferries. On one side, the island side, sits Hong Kong city center; on the other, the peninsula Kowloon. On both sides, buildings cluster together, jam-packed. They rise in lush valleys, nooks, and on the angles of green hillsides. It is one of the world's most expensive and densely populated cities. The median apartment—a 430-square-foot shoebox—costs 19 times the median household income (by comparison, it's 9.1 times in San Francisco, which is already notoriously pricey). In the darkness of night, the lights of towering apartments hang densely as though on strings.
Downtown Hong Kong is a labyrinth of footbridges and tunnels. The streets and alleyways bubble with frenetic ambition. Danielle and I delivered one pitch at lunch amid sizzling woks, hot pots, snails, tentacles, crustaceans, sea creatures tangled in noodles, and wicker baskets full of steamed dumplings, after which we were off to our next pitch meeting, dodging double-decker trams in the streets, weaving through pedestrians overflowing off the sidewalks, speed-walking through 15-story shopping malls chilled in a constant bath of cold air conditioning, until we arrived at a hedge fund perched on the 27th floor of a skyscraper with an oddly blurred, opaque view of the city.
Where did this city come from? How did this garden of glass and concrete sprout from a barren rock in such a short time? You might hope to track the traditional historical economic statistics but none were collected for a long time. This is surprising, given the hallowed Chinese bureaucratic traditions—the elites of China have been competing in civil services exams for millennia. What's even more intriguing is that the reason no one tallied anything is because a shy, obstinate man didn't want anyone to collect them.
John James Cowperthwaite was born in Scotland in 1915, but spent most of his life as the financial secretary in Hong Kong for the British government, laying the foundations for what became its economic miracle. He is one of the 20th century's unknown heroes, on par with Norman Borlaug of the Green Revolution in agriculture. Having lifted tens of millions out of poverty, his ideas continue to ripple outward. And he is the only reason no official data on Hong Kong's economy was ever compiled from 1961 to 1971. Cowperthwaite batted away request after request. As he explained it to economist Milton Friedman, he was convinced that "once the data was published there would be pressure to use them for government intervention in the economy."
Intervening in the economy was almost always a no-no under Cowperthwaite's watch. He called his economic philosophy "positive non-interventionism," which was essentially Adam Smith with a twist. The market would generate wealth—letting entrepreneurs and capital free to discover new goods and services—but public funds could be spent on housing and education, provided it was within the bounds of low taxes. From the end of the Second World War to the mid-1970s, the government only required modest deficit spending twice. It was the exact opposite of the economic policies the United Kingdom pursued during the same time period and it is the opposite of what the U.S. pursues now. The results were astonishing. When Cowperthwaite arrived in Hong Kong in 1945, the average income per resident was 30 percent less than that of the average in Britain, its colonial ruler. Today, it is Britain that is the poorer; income per capita is 40 percent greater in Hong Kong.
When Lee Kuan Yew came to power in Singapore, he took the Hong Kong-Cowperthwaite playbook and put it in play with some local adaptations and deviations. Singapore took off. Now we have Crazy Rich Asians.
So when the reformers came to power in China after Mao's death in 1976, they decided to try an experiment in economic development. They had been to Hong Kong and Singapore and had seen cities grow out of bare rock in a single generation. If Cowperthwaite's ideas were that powerful, then they should work on the mainland, too. They wanted to "appropriate capitalism for the good of socialism," as the National People's Congress put it in their legislation. The reformers chose a city to rezone under new rules—light on regulation, light on taxes. It would be a confined laboratory to protect the rest of China. They called it a "special economic zone" but they might as well have called it a Cowperthwaite zone. That city was Shenzhen.
* * *
Danielle and I are eating hot pot in Shenzhen with the two associates of a fund we pitched a few hours before. The table is covered with sliced beef, lettuce, mushrooms, lotus root, white carrots, and pepper sauce. This restaurant is inside a new mall that is part of a new plaza that is on the edge of a new outer ring of this new city. The one thing we kept hearing from everyone we met in Shenzhen is that if you leave for as little as three months and come back, the city will look different, rapidly stretching upward and outward.
"What do young people do for fun on the weekends here?" I ask one of the associates.
He pauses, holding his chopsticks in the air over his bowl, then laughs. "What's a weekend?"
It took us more than three hours to get into the city. It wasn't just Danielle's flat fingertips that held us back. I also brought the wrong paperwork from Hong Kong. We rode a subway from Kowloon to the Chinese border, which took about an hour, and after sitting forever in the equivalent of a socialist DMV to obtain a visa, the system released us into the mainland.
Shenzhen has grown rapidly in the Cowperthwaite style. From its beginning, when it was designated a special economic zone in 1980, the population has rocketed from just 30,000 people to nearly 13 million, as laborers, merchants, entrepreneurs, and others have poured in. During one stretch, its economy grew at the hyperloop speed of 40 percent per year (remember the U.S. is lucky to eek out 3 percent). GDP per capita increased from subsistence levels in 1980 to $26,000 in 2016.
It is not uncommon to meet people working 12 to 14 hours per day in Shenzhen. They call it the "996"—wake up at 9 a.m. and work until 9 p.m., six days a week. The associates we talked to said they all worked so hard because social mobility was real in China. He said they all felt like they were only one generation away from living in destitution and they weren't going back.
"The U.S. competitive edge over China may not be long," Kai-Fu Lee said recently in The New York Times. He is chief executive of Sinovation Ventures, a Beijing VC fund. Another investor adds, "To some degree, it's like looking into the future."
Lee also published a best-selling book in September in which he predicts China will take the lead in the use of deep learning software. His theory data will be a kind of natural resource in the future, and China will have the most; it is the "Saudi Arabia of data," he says. Because China has fewer concerns about privacy, and because of the centralizing tendencies of its government and its monopoly platforms like WeChat, Chinese companies using deep learning will have more data sets to train their algorithms on. That will translate into greater accuracy, faster deployment, and more.
I say this is all overblown. Data moats will go away with training on better simulations. The most exciting algorithms in reinforcement learning rely on fewer data points and examples to learn from. There are diminishing returns beyond terabytes of data.
No, the more impressive know-how China is perfecting is the ability to build experimental cities. Because the West has given up on innovating in governance, in experimenting with new rules in new cities, the end of history is looking less like liberal democracy and more like authoritarian economic dynamism.
"The most interesting thing about city building is city building is extremely rare," Eric Schmidt, Google's former CEO, said recently in an interview with the economist Tyler Cowen. "So we won't really see innovation in cities unless we're willing to exempt from some rules or build completely new cities. You are seeing new cities built in China."
In the U.S., the backlash against tech has driven the dreamers of new cities into anonymity. Patrick Collison of Stripe is the only high-profile CEO to show any curiosity. Otherwise, those who wish to bust the monopoly on regulation seem to want to hide.
On the other hand, last year China announced it was breaking ground on a new city and special economic zone that will be three times the size of New York City. China has perfected the Cowperthwaite playbook while most in the West don't even know who he is.
"The glory of God is to conceal a thing," runs one of Solomon's proverbs, "but the glory of the king is to find it out." Bacon drew on Solomon as an inspiration for his New Atlantis. We have given up the search for such secrets. We do not long for such glory when it comes to social philosophy.
It is not easy to get into China as an outsider. It is difficult to get out, even for capital. "We want to participate in your fund," Danielle and I were told, after a very positive meeting with investors. "But we need to raise money in Hong Kong to do it." China's policy of strong capital controls keeps investment within the Great Firewall.
We took the high-speed rail back to Hong Kong. It took only fifteen minutes at a speed of nearly 200 kilometers per hour. The train had only been in operation for two weeks. Google maps didn't even know it existed when we searched for routes. But that's China. Building, faster, churning, new.
The irrefutable failure of communism led China to embrace capitalism. The irrefutable success of capitalism has led the U.S. to reach for socialist corporatism. From this perspective, it's easy to see who is on the fast track. The survivors of communism are wiser than its latter-day adherents.
