Diner as Corporate Foundry, Part 1

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Think of it: a social-political system that facilitates a kind of “Moore’s Law of the Mind”. Just as the Ur-technologist Gordon Moore decades ago conceived of the dynamic behind ever more powerful and physically efficient computing, there are social systems that allow for ever more ramifying innovation, and there are systems that do not. For the global investor and lender, the ability to distinguish one from the other has been and will be important when thinking about capital allocation. The impact is manifold – social, economic, political and geopolitical.

In a recent company blog post, NVIDIA quotes its current CEO and co-founder, Jensen Huang, about his formative work experiences at Denny’s, a US diner-chain:

“’Denny’s has taught me so many lessons,’ Huang said. “I was a dishwasher, I was a busboy, I waited tables,” Huang said. “No one can carry more coffee cups than I can…”

Huang’s enduring attachment to Denny’s proved profound.

In 1993, Huang, along with NVIDIA co-founders Chris Malachowsky and Curtis Priem, met at a Denny’s restaurant to bounce around ideas on developing a computer chip that “would enable realistic 3D graphics on personal computers,” as the NVIDIA blog relates.

And so, a modest breakfast tab culminated into a roughly USD 2.0 trillion market capitalization roughly thirty years later.

NVDIA’s chip-making craft has become indispensable toward the development of large language models technology and artificial intelligence (AI) commercial applications, a burgeoning new field and one scarcely in the public eye just ten years ago.

Three guys meet at a diner…that sounds like an opening line to a joke, rather than a watershed development. In a sense, the sheer informality and open exchange that led to NVIDIA’s formation engenders what someone might describe as – excuse the term – the “American experience”.

It is in that it allows for individual self-expression and initiative, it is an example of “bottom-up” creativity and action, which the US system facilitates. The US emphasis and protection of individual rights, reflected in its constitutional system, encourage innovation and change at the “micro-level”, ensuring a dynamism in place in society.

The investor and market observer Oliver Coste (author of Europe, Tech and War, winner of the 2023 Daniel Strasser Prize from the Academie des Sciences Morales et Politiques) draws an important distinction between the more corporatist approach adopted in Europe and the more flexible, open and “individualistic” one seen in the United States. The consequences have been numerous.

The United States and arch-rival China have far out-paced European competitors in the commercial development of AI. They are set to continue to do so.

Freedom of action means many things. Of course, a system predicated upon individual rights and the prerogatives that ensue is different from one that guarantees social “solidarity”. Coste highlights the brutal effectiveness wrought from layoffs in Silicon Valley, but notes the flexibility US firms have that European competitors do not. And it’s that flexibility that seals the research development edge that US firms enjoy. The journalist Yann Coatanlem cites the work of Coste, and writes:

“Tech is unpredictable, disruptive and volatile. With higher severance costs and longer delays, the costs of adaptation in Europe are about 10 times higher than in the US. After decades of greater agility, American companies have the financial means to invest in AI; European companies simply can’t compare.”

(see Yann Coatanlem, “Why Europe is a Laggard in Tech”, Financial Times, 3/19/24)

That journalist may have heard the approaching footsteps of God, to cite Bismarck, when he wrote that, and indeed may have felt inclined to grasp at the hem of God’s jacket as he passed by. For in that passage, the commentator relates a strategic and telling imbalance, one that has geopolitical effects as well. It seems the US system – with its tawdry commercialism, incomplete social welfare coverage, and outright Philistinism to many – has nevertheless combined human adaptiveness and creativity to yield benefits scarcely conceived of before their advent. No small thing.  We’ll explore more on what the geopolitical consequences for what this system sui generis may be in Part 2.

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