More on Mental Models

One of my favorite blogs on China just got a new name…

… and the author, Andrew Batson, also published a new post. recently. It is of interest in and of itself, but given that I just wrote a post myself about mental models, it makes even more sense to talk about it today.

Andrew’s post is about a simple question: “What should we make of China‚Äôs recent and dramatic policy reversals?”

As he points out, there has been in recent times an abrupt reversal of China’s Covid containment policy, a relaxation on years of restrictions on the real estate sector, a ‘softer’ approach towards internet firms, and while wolves aren’t turning into kittens anytime soon, they don’t seem to be baring their fangs quite as much.

China is clearly adopting a slightly different stance along many different dimensions. Andrew Batson asks why this might be so.

Four key possibilities, he says:

  1. These are short-term political adjustments by Xi, in response to the changing, extremely fluid situation. Pure pragmatism in response to what the situation demands, in other words. But Xi is still Xi, and his ambitions remain intact.
  2. Xi isn’t optimizing for the long term attainment of his most important goals. Being in power for the long term is his goal. And if he can remain in power by changing the type of dictator he needs to be, so be it. Power isn’t the means to an end, it is the end.
  3. The eventual goals remain what they always were – national security and technological self-sufficiency – but he now has a new team that advises him on how to ensure that those goals are met in the long term, but by minimizing short term risks. Essentially the first point, but the cause isn’t Xi himself, it is his new team.
  4. Xi remains a leader in name alone, and the actual decision making is now being done elsewhere. This begs an obvious question, but Andrew Batson doesn’t answer it in this post.

Andrew Batson himself thinks that it is probably some combination of all of the above. He’s not denying the possibility that it is any one of these in isolation, but thinks that some weighted combination of all four is the most likely.

Time to ask oneself some questions:

  1. What probability do you attach to these scenarios yourself? Here’s one possibility: a twenty percent chance of any of the four, and a twenty percent chance for all four combined. How does that grab you?
  2. Me, personally, I’d say a combination of 1 and 3 is the likeliest – maybe 60% put together. Give another twenty percent to pt. 2 and divvy up the remaining 20% between pt. 4 and ‘all of the above’. How does this sound? (Have fun drawing up the Venn diagrams here, by the way!)
  3. If your numbers look different, why do you think this might be? What books, blogs, vidoes, podcasts, tweets and news articles do you have in mind when you make your assessment? What sources do you think I (let alone Andrew Batson!) might be using?
  4. Are our insights actionable? How so? Can we use these assessments to guide our financial decision-making? Can we use these assessments to decide what to read next? Whom to read more of? Whom to read less of? What questions should I be asking ChatGPT basis my assessment?

One short article, but so many questions to think about!