Comment by dzink
9 hours ago
You have to understand how gears shift from there. Trust is essential for business transactions and specifically for long term investments. You can’t make massive leaps in technology or medicine or many other areas without trust (a lot of money on a leap means if you don’t trust the other side or the government to keep conditions stable, you won’t see a return).
Now if you are in a high trust society, you may have a lot of leveraged businesses or governments who have gotten loans or permission to do something based on past trust history. If the trust degrades systematically Investors may want returns faster, or interest rates go up, or partnerships don’t happen. That’s why low trust places don’t grow as fast - trust is the oil for growth engines and lack of it is sand for the same.
Corruption also does a lot of small-profit-for-the-corrupt that leads to massive damage to the overall society via second and third order effects. (example: someone stealing copper cables that stop electricity to entire cities for a while).
> You can’t make massive leaps in technology or medicine or many other areas without trust
The Soviet Union did manage to get massive leaps in some areas (in particular related to armament, but not only) such as
- armament/weapons
- space technology
- mathematics
- physics
> (a lot of money on a leap means if you don’t trust the other side or the government to keep conditions stable, you won’t see a return).
I guess you can immediately see how the Soviet Union "solved" this problem by the fact that you simply couldn't gain a lot of money from your innovation.
The Soviet Union was able to innovate in the areas they chose to sink resources into but innovation was clearly not as widespread as evidenced by their decades of stagnation from the 60s onwards.
They were still innovating in military technology in the 80s but analysis since their collapse analysis that they were at least 20% of GDP on defence, if not as high as 40%.
The West managed to match and surpass Soviet military and scientific advances without sacrificing consumer goods or the economic wellbeing of their people.
I am very sure the west sacrificed a lot of wellbeing because of the vast amount of money spent on war. Peace time was great.
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Innovation is a term inherently tied to products sold at markets in product cycles that change over time. I think you're looking for the term invention.
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I'm not trying to downplay their accomplishments, but how much of their scientific advances from the 40s-60s were due to capturing ex-Nazi tech (and scientists) or stealing from the US via their incredible intelligence efforts?
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Your examples do kind of reinforce the point being made.
Mathematics and (theoretical) physics are capital-light research sectors. Weapons platforms and space technology were state managed (I.e. didn’t require private sector capital financing).
For a while before the US and other democracies left them in the dust.
Mathematics and Physics maybe but not in a way that benefited the broader society overall.
For business it’s almost a simple as adding another factor to your model: the odds of expropriation by the leader and his cronies.
It does not take a very high number to make most capital investments look really bad.
And you compare that (investing in something new), to instead using the capital to bribe your way into the “system”.
Did you meant to write "You *can't* make massive leaps in technology or medicine" instead of *can*?
I have an unusual perspective here.
In my country the politicians are openly very corrupt. (Well, possibly yours too ;)
Recently there has been a lot of improvement to the infrastructure. I realized that what has happened is, a lot of EU funds have been made available for development, and people are lining up to skim a little bit off the top.
How you say, the incentives are aligned, yeah?
I find myself in the odd situation where for each dollar that gets embezzled, a little bit of actual construction happens. That seems like a force you'd want to work with, rather than against.
I mean yeah ideally we'd get rid of corruption, but haha good luck with that. At least now they're fixing the roads.
I am from Brazil, and there is a famous politician there that has the non-official slogan of "Steals but Does". He is Paulo Maluf. "Everyone" knows he is corrupt. But people vote for him anyway, because he get things done, and he doesn't engage in certain kinds of corruption.
That is the problem, how you get corruption to go the way you want?
Lots of politicians see Paulo Maluf, and think they can imitate him, that they will be beloved by the public and steal money somehow and line their own pockets, except those are too self-serving or too incompetent to pull that off properly, so they steal in ways that go against the public.
So for example in one city where I lived, one mayor stole the money from the kids lunch, resulting in hungry kids. Another mayor stole ludicrous amounts of money from garbage collection services, the result is that the city ended with debts in the billions while being a tiny city (it has 100k people, yet has debts bigger than cities with millions of people).
Paulo Maluf meanwhile built lots of useful infrastructure that is still in use. (also hilariously he used to brag a lot using the phrase "Maluf that did it!", one time some comedic journalists went to a bridge opening, and asked him who did the bridge, he replied: "Maluf didn't do this bridge. But he did the two roads the bridge are connecting, so there is no bridge without Maluf!")
In a sense, he is not unlike a high ranked executive or business owners. These people usually demand high pay for their work because of how important their decisions are for the well-being of the company.
Same idea here except that it happens under the table. Elected officials usually get a fixed pay, and often, it is not that high compared to the importance of their work. What Paulo Maluf is proposing is essentially "I am going to pay myself well (through corruption), but I will do what's best for the city".
The copy part sounds a lot like Cargo Culting.
Copying the visible behavior but not doing the actual part that matters.
Also incredibly common in corporate.
I would vote for an infrastructure kleptocrat any day over someone that will actually enforce the insane zoning and code law we have here. A big problem in USA is you can only get many building or infrastructure things done maybe if you have millions to "influence" politicians. The opportunity to have a politician rob me of 10,20% of the construction costs and meanwhile actually be able to build a condo or something on my own property would be amazing.
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I am not sure the incentives are aligned.
those people fixing the roads are incentivized to do the work cheaply so they can skim more “off the top”
And you still need to fight corruption to some level or it will come to a point where there’s more skimming than work being done
>those people fixing the roads are incentivized to do the work cheaply
this incentive exists with or without corruption
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Exactly, sounds inherently unsafe and the work is only done superficially to keep more EU funds coming (like in Hungary).
At some point the process to prevent corruption costs more than the actual corruption. The process to award the contract for the Obamacare website wasn't corrupt, but it cost $700 million and the app didn't even work. In a corrupt system that contract would have gone to a company owned by some official's cousin, and he would have bid $100 million knowing he could pocket 50, but it would have got done because he knows the last thing he needs is an investigation. That's kind of how it works in China.
Depends on how it happens and what your goal is, it starts with a little bit off the top, and ends with it being the prime goal. Somewhere on that gliding scale people get hurt because a bridge collapses because the money went into someone's pockets instead of construction.
Your example isn't corruption. That's just crime. But it does do massive damage.
I’m confused. Corruption isn’t crime? I know white collar crime was controversial 100 years ago, but are we back to arguing whether corruption is crime or not?
Corruption is crime but not all crime is corruption. Stealing copper isn't corruption.
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> Corruption isn’t crime?
Societies have very different opinions which kinds of corruption are perfectly fine, and which kinds are criminal.
> You have to understand how gears shift from there. Trust is essential for business transactions and specifically for long term investments. You can’t make massive leaps in technology or medicine or many other areas without trust (a lot of money on a leap means if you don’t trust the other side or the government to keep conditions stable, you won’t see a return).
I am not quite sure, how exactly you mean "trust". For example there are countries, that I would consider quite corrupt, but that are able to leap ahead. I would say there can be a lot of trust, even in a corrupt system, if the ones making the leap, are part of the corrupt system, and trust that system to continue to "work". But you could say: "Well, then there is trust!"
Ultimately, I think where there is more trust, there is more to destroy, so any betrayal of this trust, causes more damage, than in a low trust environment, where there was not much trust to begin with.
Yeah, exactly. One example of a low-trust society was the US in the decade after 1929.
One of the "innovations" in the bank runs of 1929 was that a farmer or business owner would lose all their savings in the bank, because of the bank run.
However, the loans they owed to that bank were still good, and would get bought by an "investor" for pennies on the dollar. They no longer had their bank account to make their normal loan payments from, yet the full repayments were still due, despite the original bank that made the loan going under and closing its doors.
So many farmers ended up having to sell or foreclose on their farms and then attempt to rent them back from the new owners.
> You can’t make massive leaps in technology or medicine or many other areas without trust.
Incorrect. You can’t do it without cooperation. You can cooperate without trust.
Is this some sort of mathematical model that doesn't play out in reality?
Are we living in the same reality?
Look at how business works in the rich west works. Everything is formalized with contracts, risk is portioned out and offloaded to every party under the sun. You bring in people with licenses and accreditation, 3rd party consultants, etc, etc. All of this work and expense is incurred so that if things go wrong then the parties all have precisely defined ways in which they can (expensively) drag the matter through a courtroom and whatever comes of that will be enforced with state violence.
Contrast with (certain parts of) the far east and eastern europe. The west is the low trust environment.
Your response just proves his point. All of that paperwork, all of those contracts- that assumes you can trust the government to fairly enforce the law.
In a society where corruption rules, you have no reason to spend time and money on any of that because you know you’re one bribe away from it all being kindling for your next bonfire.
So yes, in areas with high corruption they don’t bother. They either just set aside some cash to pay off whatever official they need to if things go sideways, or they hire the local judge’s son to an empty position of power so that they can win anything that goes to “court”. That’s not a sign of high trust, that’s an acknowledgment there’s no point in bothering.
Lawyers in the west are a high status career, because we trust the rule of law. In China, its considered a joke career. What is the point of being a lawyer, when relative position, influence and power within the CCP is the lone factor in winning a case? Big companies all end up with shadow positions that are there just to pay money out to CCP honchos and their kids. Board positions and executive positions go to the CCP.
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In places where you can’t trust courts, you see organized crime fill the gap - goons start enforcing rules for the bad guys and there are no individual good guys big enough to stop an army of well paid goons. With tech enabling every kind of surveillance in the US, that could be a very dangerous combination (bad guys get privacy, while normal people can be ripped out of their homes).
In societies where the government is corrupt, or even where the courts are slow and expensive, people then trust in the individuals becomes more important.
Being able to rely on being able to enforce contracts means you need less trust in people you do business with.
The framing of "low trust" vs "high trust" is useful but another important distinction when conducting business in different jurisdictions is whether *institutions* or *counterparties* are more trustworthy.
If institutions such as courts are trustworthy (in that they will impartially adjudicate contracts and help you enforce their terms) then you are able to work with a wider spectrum of counterparties who you do not yet trust. You just have to document and hedge against the risk via contracts and insurance, as you point out.
If institutions such as courts are absent, corrupt, or otherwise captured then you must ensure that you only interact with counterparties that you can trust or have direct leverage over. Perhaps ones with which you share personal or reputational connections.
Western Europe is a low trust environment compared to the beacons in (cultural) East Asia, like Singapore. I can leave my kid with an iPad in her hand here without fear of it being nicked, like in London.
But business wise, western Europe is still relatively high trust. I suggest you read more about this.
> Western Europe is a low trust environment compared to the beacons in (cultural) East Asia, like Singapore. I can leave my kid with an iPad in her hand here without fear of it being nicked, like in London.
Funny that you take London as an example of Western Europe's low-trust environment, entirely ignoring the fact that the population of London can hardly be called Western European anymore. According to [1] in 2021 only 36,8% of the London population was White British, trend decreasing.
> But business wise, western Europe is still relatively high trust.
Maybe because the population actually working and doing business is still Western European? But that won't last long if current trends and policies continue.
[1] https://en.wikipedia.org/wiki/Demographics_of_London
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As the US transitions into a high corruption / low trust environment, business investment disappears.
Trump tried to solicit bribes from anthropic, retaliated by violating the DoW contracts when they didn’t pay, and then somehow forced Dario to publicly apologize for bringing the matter to light. Do you really think this is how the US will win at AI?
Look at the car industry, where the corruption and coercion started earlier. For some reason, Trump used ICE to illegally detain a bunch of Kia engineers. They announced they’re not going to add more trimlines to their EV lines in the US.
Honda announced they’re canceling planes to build three new model lines in Ohio.
The macro statistics are dire. Pre-Biden, US factory investment was $80B per year. Trump wiped $30B off that number in 2025. Biden got it up to $240B, so Trump “only” wiped out 10-15%, but, because he was starting from a high number, the damage is equivalent to 35% of all factory investment that existed when he last left office!
The rate at which industrial production is fleeing the US is increasing. This year, the loss will probably be greater than the entire 2018 US factory investment base.
There are similar trends happening in tech and academia. There’s not much left once that happens. (Insurance, banking and marketing, mostly.)
> Look at how business works in the rich west works. Everything is formalized with contracts, risk is portioned out and offloaded to every party under the sun.
Sounds like formalized corruption to me.