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Venture capitalist Marc Andreessen posted a manifesto on the a16z website, calling for “techno-optimism” in a frenzied, 5,000-word blog post that somehow manages to re-invent Reaganomics, propose the colonization of outer space and unironically answer a question with the phrase “QED.”

Andreessen’s vision of techno-optimism could seem inspiring: He imagines a Libertarian-esque world where technology solves all of our problems, poverty and climate change are eradicated, and an honest meritocracy reigns supreme. Though Andreessen may call us “Communists and Luddites” for saying so, his dreams are unrealistic, and founded upon a flawed premise that tech exclusively makes the world better.

First, we need to remember the biases that Andreessen brings to the table, mainly that he is absurdly wealthy (worth an estimated $1.35 billion as of September 2022) and that his absurd wealth is largely tied to the investments of his namesake tech venture fund. So, he inherently is going to push for his techno-optimist vision, because the success of tech companies means he gets even more rich. When you have a financial stake in something, you become biased: This is why, as reporters, we can’t buy Netflix stock, then turn around and write an article about why Netflix is going to have a great Q4.

But money can be blinding. Early on in his essay, Andreessen writes, “We believe that there is no material problem – whether created by nature or by technology – that cannot be solved with more technology.” A16z is increasingly investing in defense companies, including Palmer Luckey’s controversial startup Anduril, which manufactures autonomous weapons. Is war the problem these companies are solving? What does “solve” even mean in the context of conflicts like the ongoing war in Israel and Gaza — isn’t the true solution an end to conflict?

Another inconsistency lies in Andreessen’s assertion that “technological innovation in a market system is inherently philanthropic, by a 50:1 ratio.” He references economist William Nordhaus’ claim that those who create technology only retain 2% of its economic value, so the other 98% “flows through to society.”

“Who gets more value from a new technology, the single company that makes it, or the millions or billions of people who use it to improve their lives?” asks Andreessen.

We won’t lie and say that tech startups have not made our lives easier. If we’re out too late and the subway isn’t running, we can take an Uber or Lyft. If we want to buy a book and get it delivered to our doors by the end of the day, we can order it on Amazon. But to deny the negative impacts of these companies is to move through the world with blinders up.

Furthermore, it’s implicit — but not stated in Andreessen’s argument — that these platforms have effectively made large swatches of society renters, and the platforms, the landlords. Perhaps he needs a refresher on the ills of the “rentier economy” and how antithetical it is to innovators and entrepreneurship?

When was the last time Marc Andreessen walked through the streets of San Francisco, where wealthy tech workers pretend that they don’t see the homeless encampments outside of their companies’ HQ?

When was the last time Marc Andreessen talked to a poor person — or an Instacart shopper struggling to make ends meet, for that matter?

Andreessen’s argument is a contemporary rehashing of trickle-down economics, the notorious Reagan-era idea that as rich people get richer, some of that wealth will “trickle down” to the poor. But this theory has been repeatedly debunked. Again: Do Amazon warehouse workers really get their fair share?

At one point, Andreessen makes the case that free markets “prevent monopolies” because the “market naturally disciplines.” As any third-party Amazon seller will tell you — or anyone who’s tried to get Eras Tour tickets — this is a point easily disproved. Andreessen may argue that the U.S. market isn’t truly “free” in the sense that it’s regulated by agencies and the lawmakers who empower those agencies to enforce policy. But the U.S. has had its fair share of stretches of laissez-faire tech oversight, and each has spawned — not stifled — tech giants strongly inclined to crush competition.

Andreessen’s motivations are further crystalized when he makes a list of whom he considers to be his enemies.

In that section, he lists off what he feels has subjugated society to “mass demoralization.” On this list is a mention of the United Nations’ Sustainable Development Goals (SDGs), the 17 objectives that were created to inspire nations to strive toward peace. According to Andreessen, these are the so-called enemies “against technology and life:” environmental sustainability, reduced gender inequalities, the elimination of poverty or hunger, and more good jobs.

How are these 17 goals against technology and life, when technology is already being used to achieve more life — already being used to make clean water, alleviate mass production and generate clean energy? He has a vague, empty way of writing that leaves more questions than answers; it brings forth the idea that he has probably never read the 17 Sustainable Goals, and that instead he is using it as a code word for something else. Then, Andreessen decries ESG stakeholder capitalism, tech ethics, trust and safety, and risk management as enemies to his cause.

What are you really trying to say, Marc? That regulation and accountability are bad? That we should pursue the development of technology at the expense of all else, in hopes that the world will be better if Amazon stock breaks $200 per share?

Andreessen has a coded way of speaking in general, so it’s no wonder that he takes such umbrage with the UN’s goals of supporting those most at risk. He talks about the planet being “dramatically underpopulated” and specifically calls out the way “developed societies” are dwindling in population, a seeming endorsement of one of the core tenets of pronatalism. He wants 50 billion people to be on earth (and then for some of us to colonize outer space), and says the “markets” can generate the money needed to fund social welfare programs. (We must repeat the question: Has this man been to San Francisco lately?) He also mentions that Universal Basic Income “would turn people into zoo animals to be farmed by the state.” (Sam Altman would no doubt disagree.) He wants us to work, to be productive, “to be proud.”

The missing link here is how we can use tech to actually take care of people; how to feed them, clothe them, how to make sure the planet doesn’t reach such high temperatures that we all just melt away. What is missing here is that San Francisco is already the tech hub of the world and is one of the most unequal places in the universe, both socially and economically. What is missing here is that the technological revolution made it easier to hail an Uber or order food delivery, but did nothing about how those drivers and delivery people are being exploited, and how some live in their cars to sustain a decent wage.

There are lines and lines to analyze in his manifesto, but it all goes back to the point that what’s missing here is life: the element of living and all its nuances. He takes an either “you are for technology” or “against it” approach to actually utilizing productivity to help make lives better. He talks about the economic frameworks that life is spun around, without mentioning the intricate ways it actually impacts people.

Plenty of tech giants speak of creating a world they have no grasp on. We watch as Meta founder Mark Zuckerberg “moves fast and breaks things” and then ends up testifying before Congress about election interference. We watch as OpenAI founder Sam Altman draws parallels between himself and Robert Oppenheimer, not stopping to think so much about whether or not it’s a good thing to push the limits of technological innovation at any cost.

Andreessen is a product — and an engineer — of a tech bubble that doesn’t understand the people whom it purports to serve.

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Collaboration announcement comes a day after US tightens rules on chip sales to China

Nvidia and iPhone maker Foxconn have said they will build “artificial intelligence factories” together as the Taiwanese electronics manufacturer seeks to diversify its business.

The announcement comes a day after the US said it was tightening rules on AI chip sales to China, in a blow to Nvidia and other companies selling high-performance semiconductors in the country.

Nvidia co-founder and chief Jensen Huang said on Wednesday that the $1.1tn chip group would set up “AI factories”, or large data centres, with Foxconn to train autonomous vehicles, robotics platforms and large language models.

Huang, wearing his trademark leather jacket, made an appearance at Foxconn’s annual tech day on Wednesday in Taipei. He joined Foxconn chair Young Liu on stage to talk about the “beginning of a new computing revolution”.

Foxconn will use Nvidia’s latest chips and enterprise software to build what it called “a new class of data centres powering a wide range of applications”. Liu did not explain how these data centres would differ from existing rival ones that use Nvidia’s technology.

Foxconn is working to transform from a “manufacturing service company into a platform solution company”, according to Liu, who unveiled an electric cargo van to join the company’s existing fleet of EVs and said its low-earth orbit satellite was ready to launch next month.

Best known as the maker of the iPhone, Foxconn is trying to diversify its revenue base from manufacturing electronics to building the computing infrastructure powering autonomous technology, including vehicles.

It is facing increasing competition in its core business of contract manufacturing. Foxconn’s Chinese rival, Luxshare Precision Industry, has been steadily expanding its business with Apple, becoming an important partner and alternative supplier, including for Apple’s new Vision Pro mixed-reality headset.

Apple chief Tim Cook appeared in Zhejiang province on Wednesday at a Luxshare factory, according to domestic media reports. Cook has been visiting Apple partners and stores in the country, weeks after news emerged that Beijing was banning the company’s devices in several government agencies and state-owned enterprises.

The tie-up comes at a critical time for Nvidia, best known for its graphic processing units, the semiconductors training large AI models such as OpenAI’s ChatGPT. Nvidia is the leading global supplier for AI chipsets.

Washington has tightened restrictions on exports of Nvidia’s GPUs to China to halt the country’s progress in developing AI, which it claims could be harnessed for military use.

The US commerce department on Tuesday extended sweeping export controls first implemented in October last year. Officials said Nvidia would be banned from selling to China its A800 and H800 GPUs, the modified versions of its more powerful chips which are already banned in the country.

Semiconductor-related stocks in Asia sold off after the US expanded the controls, prompting Nvidia to warn the new rules could interfere with new product development.

Hong Kong-listed shares of Lenovo, which relies on Nvidia chips for one of its upcoming products, fell 7 per cent on the news, while Taiwanese chipmaker TSMC dropped 1 per cent and South Korea’s SK Hynix retreated 2 per cent.

The declines followed an almost 5 per cent drop for Nvidia on Tuesday after the chipmaker warned tighter controls “may impact the company’s ability to complete development of products in a timely manner”.

The warning also prompted analysts at Citigroup to cut their target price for Nvidia shares by almost 9 per cent to $575, warning that the new US government restrictions “will make it more difficult for Nvidia to sell to China”. The target price was above the current share value of $446.

Economists point to challenges including Israel-Hamas war and frosty relations with U.S.

SINGAPORE—China’s economy slowed in the third quarter as the drag from a shrinking property sector weighed on growth, but strengthening retail sales suggest it is emerging from a soft patch as stimulus measures start to kick in.

Still, China’s economy is likely to struggle for a while yet, economists say. Real estate remains a major risk, with home sales crumbling and developers China Evergrande Group and Country Garden struggling with heavy debts. Consumer confidence is fragile and the global backdrop is darkening because of war between Israel and Hamas.

Longer term, China faces a daunting list of headwinds, including frosty relations with the U.S.-led West, worsening demographics and a difficult reorienting of its economy toward growth powered by consumption and advanced manufacturing and away from property-driven investment. Economists expect growth to slow in the years ahead as China wrestles with these challenges.

China’s economy expanded 4.9% in the third quarter compared with the same quarter a year earlier, the country’s National Bureau of Statistics said Wednesday. That marked a slowdown from the 6.3% annual rate of growth the economy managed in the second quarter, though that figure was flattered by comparison with the same quarter in 2022 when lockdowns blanketed major cities including Shanghai.

The third-quarter result puts China’s year-to-date growth rate at 5.2%, keeping it on track to meet the government’s goal of expanding around 5% for the year as a whole.

Sheng Laiyun, deputy chief of China’s statistics bureau, told reporters on Wednesday that the country need only record 4.4% growth in the last three months of the year to meet its annual target. “We are confident that we can realize the growth target this year,” he said.

Compared with the previous three months, China’s economy in the third quarter expanded 1.3%, accelerating from the 0.8% pace recorded in the previous quarter, which was roughly half the average pace recorded in the five years before the pandemic.

The lackluster performance of China’s economy contrasts with unexpected vigor in the U.S., where consumer and government spending is keeping the economy motoring even in the teeth of aggressive interest-rate rises by the Federal Reserve. Economists polled by The Wall Street Journal now think it more likely than not that the U.S. economy will avoid recession. That marks a reversal from the beginning of the year, when China’s reopening was expected to fuel global growth and the U.S. was tipped to rapidly lose steam.

The International Monetary Fund, in its latest projections this month, said the U.S. and other countries look poised for a “soft landing,” in which inflation cools without a significant downturn in growth.

The IMF raised its growth forecasts for the U.S. this year and next, while cutting them for China. Turmoil in China’s property sector is hurting consumer confidence and squeezing spending, the fund said, urging the government to consider handouts to households to generate a more robust recovery.

“The Chinese economy seems to have navigated its way past a particularly rough patch thanks to various supportive measures by the government, but a strong rebound is not in the cards,” said Eswar Prasad, a Cornell University economist who once headed the IMF’s China division. “Still, it is a good omen both for the Chinese and world economies that a more significant downturn seems to have been averted.”

Third-quarter growth in China was driven by retail spending, Wednesday’s data showed, which helped offset weakness in exports and a long-running contraction in China’s huge real-estate sector.

Chinese growth fizzled in the spring after an early burst of activity driven by the lifting of strict Covid-19 controls faded. Chinese authorities have unleashed a barrage of stimulus measures in recent weeks aimed at re-energizing wilting consumer spending and arresting the downward spiral in real estate. Interest rates have been slashed and funding dished out to banks to lend to households and businesses, while many cities have scrapped restrictions on home purchases. In some cases, developers have been allowed to offer big discounts to would-be buyers in an effort to unload inventories of unsold apartments.

Some signs suggest the economy is turning a corner. Business surveys point to improving factory output, while domestic travel picked up, albeit modestly, during a recent eight-day holiday. Electricity consumption is rising and cargo shipments are steady, economists at Nomura noted in a note to clients published on Monday. Lending to households and businesses is growing.

On the flip side, inflation was flat in September when compared with a year earlier, suggesting sluggish demand, and exports fell for the fifth straight month last month, though at a slower rate than in August. Home sales and other indicators of housing-market activity remain anemic. Home sales by value fell 3.2% from a year earlier in the first nine months of the year, compared with a 1.5% fall in the January-to-August period, according to Wednesday’s data.

“I think we’re starting to see a weak bottoming out,” said Rory Green, head of Asia research at economics consultancy GlobalData.TSLombard in London. But he said he doesn’t expect much of a pickup in growth soon, akin to an “L-shaped” recovery in which the economy grows slowly for some time.

Many economists anticipate Beijing will keep adding to its range of stimulus measures, perhaps with more interest-rate cuts or additional help for home buyers. But officials have signaled that while they want to stabilize the housing market, they want to avoid reigniting another speculative frenzy in real estate, suggesting an expansive stimulus effort isn’t in the cards.

That means other parts of the economy will need to do the heavy lifting to sustain growth, say economists. Wednesday’s data showed retail sales grew strongly in September, rising 5.5% in September compared with a year earlier and accelerating from the 4.6% rate recorded in August. Industrial production, which has been struggling thanks to weak exports, increased 4.5% from a year earlier in September, matching August’s pace.

Investment in buildings, machinery and other fixed assets slowed, however, underlining the drag from property. Investment rose 3.1% in the January-to-September period, compared with the same nine months in 2022, a weaker pace than the 3.2% expansion over the first eight months of the year.

Unemployment fell to 5% in September, from 5.2% in August. China stopped publishing data for joblessness among young people in June, citing methodology wrinkles officials said they wanted to iron out. But many analysts attributed the decision to official discomfort over how high youth unemployment had risen, with the June data showing about one in five of people aged 16 to 24 were looking for work.

Signs that ‘term premium’ is driving up Treasury yields stir worry and doubt

Investors and Federal Reserve officials scrambling to make sense of surging U.S. Treasury yields have a new obsession: a number that exists only in theory.

Known as the term premium, the number is typically defined as the component of Treasury yields that reflects everything other than investors’ baseline expectations for short-term interest rates set by the Federal Reserve. That could include anything from an increase in the supply of bonds to harder-to-pin down variables such as uncertainty about the long-term inflation outlook.

In recent weeks, debate around the term premium has intensified because some financial models have suggested that it has been rising sharply—driving much of a recent surge in longer-term Treasury yields that has carried the yield on the 10-year note above 4.8% for the first time since 2007.

Treasury yields help dictate interest rates on everything from mortgages to corporate debt, making their rise over the past two years a steady source of anxiety for investors. So far, those worries have proved mostly unfounded, as the economy has shown little signs of buckling under the higher borrowing costs.

Yet the recent evidence of rising term premiums has provided a new source for concern. For some, they suggest that yields are no longer rising because of a strong economy and expectations for higher rates. Instead, the underlying cause could be something harder for the Fed to control and therefore more dangerous.

Still, even economists who created term premium models stress that their outputs are imperfect estimates, making it difficult to gauge whether or not they are a warning. Here’s a look at the current debate.

What is term premium?

Most analysts agree that yields on U.S. government bonds are largely determined by the anticipated path of short-term interest rates.

The rationale: Investors will buy a series of one-month Treasury bills instead of a bond that matures years from now if they think that will produce a better return. If this pushes the longer-dated bond’s yield too high, buyers will emerge so that the yield settles around a consensus for what rates will average over the bond’s lifespan.

Still, other factors almost certainly also influence yields.

According to a traditional understanding of term premium, investors may demand extra yield to buy longer-term bonds due to the possibility that rates could end up higher than they expect right now.

Additionally, yields could be influenced by the supply of government bonds, with a flood of new bonds overwhelming demand and pushing yields higher. Or investors may accept a lower yield—or negative term premium—because they figure that bonds, unlike stocks, should rally if the economy runs into trouble.

Measuring term premium is where things get tricky, because there is no perfect way of knowing what investors think rates will be in the future.

The simplest approach would be to compare Treasury yields to rate forecasts found in surveys. But drawbacks including the infrequency of those surveys mean that the most popular models incorporate other methods.

Among those is the so-called ACM mode, named after the current and former New York Fed economists Tobias Adrian, Richard Crump and Emanuel Moench. It uses yields of different Treasurys to predict future short-term rates by effectively finding patterns in their relationships over decades.

Another model, devised by current Fed economist Don Kim and former Fed economist Jonathan Wright, is a hybrid, arriving at its rate estimate through a combination of both survey forecasts and yield data.

Outputs from both models have long provided fodder for debate, especially in the 2010s when they showed term premiums turning deeply negative. That had puzzled many who had become accustomed to models showing healthy-size premiums—substantially larger than they stand even now.

More recently, though, the models have gained attention because they have shown term premiums surging, with the 10-year premium climbing back into positive territory.

Dallas Fed President Lorie Logan recently suggested that signals from term premium models made her less inclined to raise rates again this year, arguing that rising term premiums, if real, would mean that surging yields aren’t just reflecting stronger growth and a need for tighter monetary policies.

Logan didn’t delve deeply into what specifically is driving up term premiums. But on Wall Street, many have used term premium models to buttress arguments that yields have been rising largely thanks to a growing federal budget deficit.

In recent months, the Treasury Department has both increased its borrowing forecasts and boosted the size of its longer-term debt auctions by more than investors had been expecting.

The anecdotal evidence that yields are climbing due to shifting supply-demand dynamics is compelling, but the models showing rising term premiums are “the measure—that’s where you’re seeing it,” said Blake Gwinn, head of U.S. rates strategy at RBC Capital Markets.

Still, some caution that the term premium models should be treated skeptically. One issue: their reliance on historical patterns that might not apply now.

A feature of the ACM model, for example, is that its estimate of what short-term rates will average over the next 10 years has been much more closely linked to changes in the 2-year Treasury yield than the 10-year Treasury yield.

As a result, when inflation surged in 2021 and the 10-year yield rose much more than the 2-year yield, the model showed essentially no change in interest-rate expectations over the next decade—and therefore a big increase in the term premium.

The same was true in recent weeks, in contrast to last year when the rate forecast jumped along with the 2-year yield.

Term premium models have value but their outputs are “based on past experience,” said Wright, the co-creator of the Kim-Wright model who is now a professor at Johns Hopkins University. “It could be that this time is totally different.”

Some analysts argue that shifting rate expectations are still largely responsible for driving up longer-term yields recently. A resilient economy, they say, is persuading investors that rates—while likely to fall from here—are destined to settle at a higher level than previously anticipated.

Praveen Korapaty, chief interest rates strategist at Goldman Sachs, said he likes to look at term premium models but only along with other types of models that link changes in yields to factors such as economic data and Fed policy surprises.

Those, he said, generally support the idea that yields have climbed because investors are giving “more credence to the Fed’s ‘higher for longer’ message.”