It's becoming clearer and clearer that China's AI open source strategy may end up being seen as one of the greatest strategic masterstrokes of all time. They started with a clear resource and technological disadvantage - mainly due to the US semiconductor export controls - and have managed to change the rules of engagement in such a way that the US's own tech leaders and officials are now publicly siding with China's approach against their own companies. Which is pretty extraordinary. When you can't fight symmetrically, make the adversary's way of fighting obsolete and self-defeating. And the greatest irony in all this is - had the US not done the export controls - there's a decent chance that not only China wouldn't have gone for the open-source approach but the US would have made an enormous amount of money selling compute to them. Now they're getting neither the money nor the containment.

In other words: "please, dear legislators, ban my competition"

Here's an interesting thought experiment: what would the world have been like had the U.S. decided to take towards electricity the approach it's currently taking towards AI? Imagine if, say, the United States in 1890 had declared electricity a matter of national security, classified the designs of Edison’s dynamos and Tesla’s induction motors as export-controlled, integrated its electrical companies directly into the War Department, framed the generator as a strategic weapon rather than a general-purpose technology, and spent the following century building its foreign policy around ensuring that only it, and politically-aligned nations, had access to the light bulb. Batshit insane, right? Well that’s pretty much EXACTLY the posture it’s taking towards AI. Had that happened, it’s painfully obvious we’d ALL have been immeasurably poorer for it, materially and morally. And the United States first and foremost, given that for electricity - as will undoubtedly be the case for AI - the real value didn’t lie in control of the technology but in its widespread diffusion and in what you built on top of it. Think about the U.S.’s “electricity giants”: companies like GE, Whirlpool or RCA didn’t get rich by “owning” electricity - they got rich by selling what electricity made possible into a world that was electrifying as fast as it could. The U.S.’s electrical fortune was built on the world electrifying alongside it, not against it. Does the analogy hold for AI? Yes, surprisingly well. I like Jensen Huang’s recent description of AI (dwarkesh.com/p/jensen-huang) as a "5-layer cake" made of 1) energy, 2) chips, 3) infrastructure, 4) models and lastly 5) applications. The implication of his point is that each layer save for the last one - the application layer - will ultimately be largely commoditized, and as such that’s where the real value lies: in the millions of specific products, services, and industrial processes that get built on top of the other 4 layers. It’s typical network building: the layers underneath eventually become utilities, and utilities are low-margin commodity businesses. It happened with electricity, it happened with phones, it happened with railroads, it happened with the internet itself. The operators of each layer got commoditized over time, while the durable, century-defining fortunes accrued at the top of the stack: GE on top of electricity, Apple on top of the mobile and telecom infrastructure, Amazon and Google on top of the internet. There's no reason to think AI - a general-purpose technology of the same order - will turn out any different. And in fact, we're seeing this happening in real time: take the release of DeepSeek V4 today. What is it if not a commodification of the model layer in Jensen Huang's "5-layer cake"? A frontier-grade model, given away under an MIT license, running on non-Nvidia silicon - and shipped by a lab that explicitly frames it as "AGI belongs to everyone" (xitter.cf/victor207755822/status…). When a product that cost tens of billions of dollars to develop can be downloaded for free and run on commodity hardware, that product is, by definition, a commodity. This means that the whole notion of an "AI race" is now absurd on the face of it: you cannot race for control of a thing that is being given away for free by someone who isn't racing. And doubly absurd because, as we just saw, the economics of general-purpose technologies actively punish "race winners": the value accrues at the application layer, which requires the maximum possible diffusion of everything underneath it. "Winning" by hoarding the model layer is like "winning" electricity by refusing to let people have a generator - you don't capture the value, you prevent it from ever being created. That's the topic of my latest article in which I argue that the whole "AI race" framing isn't just wrong, it's one of the most successful regulatory capture operations in history. Shaped by a handful of US companies - like Palantir, Anthropic and OpenAI - it's a perfect example of an industry convincing the public to cheer for its own enrichment by dressing it up as a civilizational struggle. Link to the article here: open.substack.com/pub/arnaud… Enjoy the read!