Even more so, though, Deepseek does something else if the claims made about it – which appear to be well-founded – are true. It challenges the foundations of modern US capitalism.
US capitalism has three core ideas at its heart. The first is that ownership is king. Protecting whatever is created from replication is the first tenet that it follows. Nothing is more important to it than. Concentrating the power of ownership in the hands of a relatively few people is all US capitalism is about now.
Second, as a result, secrecy prevails. The patent lawyer is the architect of business success in these enterprises – by securing the knowledge of the organisation from attack. Massive barriers to entry for competitors are built and vigorously defended, completely contrary to the ideas of free markets.
Third, the goal is to maintain this situation for as long as possible, allowing for the maximum extraction of profit from the consumer through extortionate rents. The consequence is that US capitalism is frequently bloated with high costs, which only appear reasonable because of the extortionate fees monopolistic rent-seeking entities, protected by vast legal infrastructures, can charge.
In summary, then, big US business is inherently anti-competitive by nature, is monopolistic by choice, and is, in most cases, very likely to be grossly inefficient as a consequence, with the costs being borne by the consumer.
What Deepseek has really done is challenge this model. It is low cost. It is efficient. It has been created in an intensely competitive environment, and to win competitive advantage through widespread adoption, it has opted for an open-source model, which is the complete antithesis of what a US corporation would do. This is profoundly disruptive to the US way of doing business, and because Deepseek apparently works (although it has been so inundated with requests for accounts I have been unable to get on as yet), it is very unlikely that its strategy will fail. US capitalism has, in that case, met its nemesis, and the fact is that when doing so, that nemesis is doing exactly what economists say should happen in free markets when everyone knows it does not at the top of the US capitalist tree, which long ago rejected that idea of free markets and opted for one of exploitation instead.
The fact that this has happened a week after Trump gets to office, supported by Big Tech, cannot be ignored. Maybe the Chinese state has been waiting for this moment. However, Deepseek is not a Chinese state company. It is privately owned, albeit it complies with Chinese state requirements. The suggestion has been made that it is not too good on some questionable moments in recent Chinese history.
The point is that whatever the cause for the timing, the disruption in US capital markets has arisen for very good reasons. If China can develop efficient tech at low prices and put it into widespread use through open-source diversification while maintaining a fee base for access to more advanced searches, then the whole myth on which the next generation of US wealth extraction was being built has been shattered.
Now much of that is overegged of course. But run with it just as a model to think through the logic.
Assume it’s all true. So, what’s the solution? Free markets, right?
Markets that are free – as in possible, not as in without spondoolies – to enter. That new entrant into the market has just solved every problem Spud has identified.
So, when is Spud going to embrace free markets as the solution? He’s not, is he? Because he’s a …..