Friday, March 19, 2010

The "Mountain" has moved

In the classic Kurusawa movie "Ren", a rising warlord patiently watched the action of the dominant warlord of all warlords (WOAW) before he pounced. Finally he saw the opportunity when WOAW moved the bulk of his troops out of his impregnable fortress to attack the patient usurper. He uttered those simple words to his generals: "The Mountain has moved".

It's so zen. Mountains do not move. When they move it means the center of gravity, gravitas, the solidness has become "light" and vulnerable. In the movie the WOAW lost. It had lost its mind, it had lost its strategy, it had lost its "gravity".

This is how I read this article (here) about Applied Materials, the Rolls Royce of semi conductors in Silicon Valley is building in China its largest ever plant, and the largest of such plants with not only cutting edge technology of today, but putting down deep roots in China the platform for tomorrow's technology. This exercise is headed by one of the most important techies in the entire semi conductor business.

I do not argue that US companies should not invest abroad. They should indeed do so. However, what been happening is nothing short of moving the "Mountain". It's hollowing out of the core of what once made USA great.

Applied Materials and many other cutting edge firms are saying by their action they have "seen" the future, and it is in China. This is still a country of limited intellectual and political liberties, right? Yet, they see the future there?

Should that raise several red flags in the US of A? Do we see, hear serious debates and then actions to remedy the situation?

The issue is not really even about China. It is about the US of A. Why has it become what it has become, a place that a firm like Applied Materials no longer sees the company future in the nation's future?

We do know a lot of about some of the structural problems. Many blame China's "slave" labor wages attracting investments.

Relative wages play a part, but only up to a point. Go to MIT, Caltech, Berkeley or Princeton and visit their PhD programs in physics, electrical engineering, math and their cousins and you meet more Asian, particularly Chinese, students than "locals".

The "best and the brightest" young Americans all want to become investment banks and consultants. Money, do we not know, is galactic. Engineering? Physics? Too hard, too boring. No money. Civil Engineering? Who in their right minds want to work on building better roads, airports or dams?

The proverbial message is no longer just on that wall. It is not even a message anymore.

The story of Applied Materials in China is yet another floodgate being lifted. Another dyke widened.

The balance of global power, both soft and hard, is shifting so rapidly away from the US it pains to see the amount of low quality political debates in the main US media, especially on Fox News, where repeated assertions of USA being number 1 has become substitutes for intelligent analyses; that only the Democrats or anyone who is not Republican could fail to see that USA is a country blessed personally by God.

If anyone needs to be reminded how regressive USA can become, just read the latest on textbook changes in Texas as mandated by backward looking Republican stalwarts.

Long gone are the days of traditional Republicanism: fiscally conservative, culturally liberal and enlightened. The Rockefellers were Exhibit A.

Hubris and ignorance are lethal ingredients in all the falls of empires in the past. USA has an oversupply of both right now among its ruling elite in the Congress, in the media and in State politics.

China may have its cyclical comeuppance in another asset bubble that would take the market cap of its stock markets down a few pegs, but the underlying structural change is as amazing as the head in the sands of the Republican Party, the party which should be promoting growth and technology, but now spending its energy on backward looking rhetoric.

The final paragraph of the article is not a journalist trick to overstate in order to impress. Any frequent travelers to China who have talked to the young and the bright could recognize that voice.

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