The DeepSeek AI model challenges US capitalism at its very core – suggesting its whole model of creating value for a few by extracting maximum revenues from people as a result of the abuse of monopoly power might have to end.
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This is the transcript:
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DeepSeek is a Chinese AI company, and it is shattering the model of American capitalism, even as I speak.
The whole of the American economy is now wedded to big tech. Without big tech, there would be very little growth in the US economy. Without big tech, there will be almost no growth at all in US stock markets. With big tech, there is both. And the myth that the American economy is in good shape is largely based upon the idea that the stock market is at record highs, and that's all down to the value of the hype around AI. Artificial intelligence, in other words.
And yet, what we've seen is that a newcomer into the market called DeepSeek. A Chinese company, developed with a tiny amount of money, has produced a model of AI that appears to be better than that has been put forward by ChatGPT, which is the leading model of AI available from US tech companies to people around the world at present. DeepSeek seems to be able to answer questions as well as ChatGPT, and as well as Microsoft's version of AI, and the other various sources that you can find on the web.
It's done it in the most extraordinary way. It has not used the high-tech chips that have been produced by the American company, NVIDIA.
It has not used nearly as much energy to produce its answers as it appears is required to power those NVIDIA chips.
And it has produced it on the basis of large language models, which are much cheaper to generate and produce than those which are being put into place by the likes of OpenAI, who are the owners of ChatGPT.
There is something profoundly disruptive about what DeepSeek is doing as a result. This literally shatters American capitalism at its very core. Let me explain why.
American capitalism is based upon three fundamental ideas. The first is that whatever it invents must be protected from all forms of competition to the greatest degree possible so that the wealth generated by any invention is concentrated in the hands of the fewest possible number of people to benefit them most of all.
You can see the model. It has produced the Tech Bros, as they are called - the massively wealthy people who own the largest tech companies in the USA.
It has also, of course, given returns to those people who they have let invest in their companies. But that wealth is still concentrated amongst a tiny proportion of people in the US.
These companies are all about the concentration of power in the hands of a few in the USA.
They've achieved this through the second characteristic of US capitalism, which is to be as anti-competitive as it is possible to be.
The most important person in many U.S. companies is not an engineer or a salesperson or an inventor. No, it's the patent lawyer, the person who is employed to put in the path of potential competitors the maximum number of impediments that the law can provide to ensure that they cannot copy any element of the business model of the company and therefore pose an effective challenge to it.
These lawyers who protect patents and copyrights to ensure that rents can be charged to the consumers of these companies way in excess of the real value of the products that the company makes because it isn't exposed to proper competition are the fundamental basis on which American capitalism is now built. It is deeply anti-competitive.
This then leads to the third characteristic of US capitalism at present, which is it is grossly inefficient. If you can protect yourself from competition to make vast amounts of money for a few people and to extract extortionate value from consumers, you have no incentive to minimise your costs because why would you need to do so?
You have money coming literally out of your ear holes, and therefore, you might as well spend it. You might as well have that comfort zone of having large numbers of people work for you even if they aren't really required.
You'll still declare an enormous profit.
You will feel like the king of the castle.
You will see the rewards that those grateful employees send your way.
And you will feel good about it if you are the boss of one of these companies.
There is no incentive to be lean, mean, and efficient as a consequence. And that is supposedly what market capitalism should deliver. But in the case of the USA, it absolutely does not.
DeepSeek has shattered all those myths. Not only has it been put together very cheaply, but it has adopted a totally different approach to the market. It has actually made its source software open source. In other words, anybody can access it and use it. This is the absolute opposite of the American model.
Instead of putting legal impediments around somebody who wants to use their software, DeepSeek said, “Have it, use it.” It will still be charging for access to the big language model that it owns and the big answers that people will ask of it, but it's going to do so at a much lower price than US companies are doing for similar inquiries. And it can, of course, afford to do so because it's using much less energy on lower tech.
This virtually shatters the whole investment strategy that has dominated the thinking in the run-up to Trump's election. That has been built around the idea that billions - hundreds of billions - will be invested in AI and that will generate the growth which will keep Trump in office. Well, suppose it won't.
Of course, one has to have a sneaking suspicion that this might also be very carefully timed by the Chinese government to destabilise Trump in the face of potential tariff wars. And I have that sneaking suspicion, so I will put it on the table and say it's there. But DeepSeek does, however, work. I've seen models that have been produced by it, and they are undoubtedly good. In that case, whether or not this is a strategy by the Chinese government, DeepSeek is capable of disrupting serious parts of the US AI market and might even prevent the US getting the worldwide monopoly of this type of activity, which it has in the case of Microsoft and Google and Twitter and so on. Those monopolistic trends. may not be capable of reproduction in AI if DeepSeek and its own Chinese competitors can produce something very different to that which OpenAI, Microsoft, Google, and others were promising at enormous expense.
I have no idea where this is going. I genuinely cannot predict, and I don't think anybody else can.
And this might, of course, also all be a storm in a teacup. That is a possibility.
But let's presume it isn't. Let's presume this is real. If it is, the whole basis on which the Trump appeal to the US market was built is undermined.
But something even deeper than that is true. If American economic power, which is based around AI and its potential, is shattered, Trump's ability to create an isolationist USA, backed up by tariff barriers, is also removed.
DeepSeek is something much more significant than an AI model, whether or not it is good in that role. DeepSeek is challenging US capitalism to its very core. And it's challenging the philosophy of the American right to its very core. And whether or not the Chinese government timed this to undermine those ideologies right now, in the first week or so of Trump's administration, does not matter. Because it's doing it anyway, and this could be very big.
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“DeepSeek seems to be able to answer questions as well as ChatGPT, and as well as Microsoft’s version of AI, and the other various sources that you can find on the web.”
I think AI can be used as a “depoliticisation” device. It’s response when asked about MMT failed to state that private sector banks with their ability to create money can cause high levels of inflation too (house price bubble) just as a badly managed government can do.
Deepseek is being lauded in part because it’s as a “chain of thought” model, which means that when you give it a query, it talks itself through the answer: a simple trick that hugely improves response quality.”
https://www.theguardian.com/commentisfree/2025/jan/28/deepseek-r1-ai-world-chinese-chatbot-tech-world-western
Well it doesn’t always do that successfully as the BBC has pointed out it doesn’t want to engage with a “chain of thought” in regard to the cause of the Tiananmen Square:-
https://www.bbc.co.uk/news/articles/cx2jxvn0r51o
We should be very much aware of the misue of AI and that it can result in GIGO (Garbage in – Garbage out) or indeed depoliticise by omitting information!
Saw a great quote on Reddit:
“Who would have thought chatGPT would have lost it’s job to AI?”
It is also on my Youtube
There are othes of similar type I might share
Might all relationships of all sorts be somewhere on a continuum between the parasitic and the symbiotic?
Might Deepseek have moved relationships relating to knowledge, power, wealth, commerce, the social, and so much more, further from the currently dangerously dominating parasitic pole of the continuum and nearer to the more sustainable, stable and benign symbiotic pole?
If so, might this also move our World nearer to a wholesome survival pole and further from the destructive pole currently actively approached by those with deep, dominating power?
Might a hope of a liveable, secure world lie with those who seek increasing, accessible knowledge?
We will have to see…
An interesting post- a very interesting post!
I note the way in which the U.S. has been sort of blind-sided by the Chinese.
But the U.S. does not help itself in these matters, such is its traditionally low racist opinion of China which it it underestimates but is happy to call it a threat. There will be war of some kind I feel, either trade or the violent variety.
Unlike Britain and Germany and others, China does not bend to the will of U.S. so readily, they have always had their own view – an anathema to the global bully that is America.
Thank you and well said, Richard.
One minor quibble. The most important employee could be the lawyer, as you say. It could also be the lobbyist / regulatory strategist, often a lawyer / law firm or former politician or government official.
Regulations are not always bad for firms. They can serve as barriers to entry / challengers.
Firms can also have regulations extended to include competitors overseas. For example, the draft US Volcker restrictions on proprietary trading numbered not even a hundred pages and targeted US firms and the US market. The final rules became extra-territorial in scope and numbered hundreds of pages after US firm lobbyists had their say.
Accepted, for the next iteration.
Thank you, Richard.
Brussels has now replaced DC as the biggest host of lobbyists. US firms, either as clients, or using their own representatives lead the way.
So I have read in the FT they potentially used what’s called distillation which is taking output from one model to train another. Considering where the data to train the original models is obtained, it’s very poetic indeed.
Richard, you say: “If American economic power, which is based around AI and its potential, is shattered, Trump’s ability to create an isolationist USA, backed up by tariff barriers, is also removed.”
I reckon American economic power has and is based around military might and productive capacity. It’s a war machine. Even the figures on the number of government employees you quoted yesterday emphasises the US focus on military might.
Now AI expertise might still threaten that. Israel has already used AI to target. (Their training data should become evidential!).
When threatened by superior Chinese technology (eg Huawei), the US (and UK) sought to ban it. That’ll happen again with AI.
Meanwhile, superior military might will be used to assert control of trade to protect their/our weaker economies and to plunder. In a sense, Trump’s aggressive stance on claiming territory is consistent.
Rather than compete, the US may well attempt to change the rules of the game, using their military.
“You might as well have that comfort zone of having large numbers of people work for you even if they aren’t really required […] There is no incentive to be lean, mean, and efficient as a consequence.”
The other benefit for monopolies is they can afford to capture the workforce to the point there aren’t free resources to launch a competitor from within their own region (especially when insisting on employees working from their offices).
It should have been on a risk register somewhere that a foreign competitor could emerge despite the export sanctions. Maybe it was dismissed due to exceptionalism.
Interestingly, the comments below the YouTube video of this are almost all positive. It would appear that the troll farms and astro-turfers have also been blind-sided by this.
98% of my Youtube comments are positive – indicated also by the likes
I am actively working on a number of inventions in a diversity of areas, nothing major, just a few useful pieces of kit. However, I honestly do not believe in patents. Early on it was clearly obvious to me that Open-Source would open up product design to valuable collaborative input. For example, this can help the innovator to recognize potential pitfalls and engineer a solution before going into a costly production phase. It can also facilitate the expansion of parameters by suggesting additional uses and beneficial add-ons to your original design. The secrecy required to take a product to patent shuts down all of these potentially positive contributions.
There have been significant technical milestones in the past that have been shut down using the patent system to bully vulnerable inventors into silence. One of the most damaging examples of this was the deliberate suppression of electric car technology in order to protect the profits of predatory Oil Industry giants. Greedy US Pharmaceutical companies have used their bloated global power to steal and ‘patent’ plants that have demonstrated efficacy through generations of use by indigenous people. Monsanto has used GMO manipulation to create key patented food crops that cannot produce viable seeds for future harvests, thus rapidly destroying genetic diversity and establishing a monopoly over our food crops!
In reality the inventor who decides to invest in a patent has not secured legal protection from future infringement unless they have massive cash reserves to back up their patent. If one of the powerful corporations wants to steal your idea they can afford to impoverish you in endless legal battles trying to protect your patent. Even if you eventually win a settlement, the damages they might be ordered to pay will be financially well worth them stealing your design for the profit made in the interim! An unscrupulous entity could buy up your patent just to bury your innovative technology as it risks their exploitative profits elsewhere.
Although some aspects of securing a patent have become more accessible and less costly in the last few decades, it still involves legally defending the three basic principals of all patents: Useful, Unique and Unobvious. However, nothing that is accurately drawn and well described to meet these critical criteria can be patented by anyone else if you place all of this information in the public domain.
I’m not sure if this is still the case but, the Canadian Government used to offer a deal for those who wanted to patent their invention whereby it would be protected by the full might of the Canadian Government, in consideration for them earning a percentage of any profit made. Possibly under the umbrella of UNDP, I would like to see the UN create a ‘Humanity Patent’ that would automatically protect all plants, animals and elements of our natural shared environment from any future patent exploitation by greedy monopoly corporations.
If, ‘for the benefit of humanity’, humble inventors could also register their innovation as a Humanity Patent, to protect their design from corruption or exploitation, by offering a percentage of profit to the UN, this could provide a valuable win, win. Since it is widely accepted that “Necessity is the mother of Invention” I am convinced that the mother-load of vital future innovation will come from the developing world. Deprived communities are so seriously challenged due to persistent poverty and the serious scarcity of resources that they are stimulated to innovate. Internet access and Open Source offer a huge opportunity to such deprived communities to redress ongoing inequality.
I have long believed that, due to modern advances in technology and connectivity, the current patent process has become obsolete. Richard, you are absolutely correct with your observation, DeepSeek has just validated my conviction that the existing model of profit extraction is corrupt, outdated and no longer fit for purpose. My advice to inventors who are working on a project:
1. Do not work in a silo of defensive secrecy, collaborate to maximize the talent, credibility and skills of your production team.
2. Remain open to external scrutiny, including criticism and negative comments, as this can provide the most valuable input.
3. Use whatever funding you have available to design, engineer and build your innovation so that you can take it to market and run with it as hard and as fast as you possibly can. There is no better protection than a well designed product, ordered in the thousands and flying off the shelves at a modest profit!
As for my own meager endeavours, I lack a number of crucial skills including CAD, engineering and business acumen, but I continue to network in search of this vital collaboration in order to offload a few of the ideas that continue to clutter up my brain. For a few of us, the ‘ideas spicot’ can never be turned off in a forever restless mind. This isn’t the amazing opportunity it might at first appear, as I must battle to ‘seed’ my ideas by sharing them with young entrepreneurs. After a recent scare with stage 4 kidney cancer, now thankfully in remission, my greatest concern remains: avoiding having all my ideas and innovations buried with me!
Thanks, and good luck Kim. Much to agree with.
Some of the most important work of Adam Smith was much more pessimistic about the upsides, and the morality of the system he proposed. For example, there is this observation in ‘The Wealth of Nations’, and is quoted here because it is relevant for us, in the context under discussion:
“To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it ………. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising rom the insolent outrage of furious and disappointed monopolists.” (‘Wealth of Nations’ Book IV, Ch.II)
Adam Smith wassn’t just reporting in 1776, or commenting, or even revealing his broad prescience, this is prophecy.
Thanks
DeepSeek immediately raises an important question. What else has China got up its sleeve? Well … what technology would most effectively disrupt the entire tech revolution on which US military and economic power is founded? My answer is quantum computing, which will be able to break all cryptographic security systems. Only this time, they won’t tell us.