Making Real Stuff in the US (or, Why US Chip Production is Critical to a Democratic Metaverse)

It’s #NFTNYC2022 and at an amazing event last night for the Obsidian Collection sponsored by Lobus I was reminded how so much of the innovation I’ve seen over the course of my career has been intangible - that is, intellectual property, software, digital art and culture, music, etc. Having spent so much time in media I am naturally biased, but it’s certainly been a beautiful renaissance of empowerment and democratization across almost every sector of which I can think. I posted briefly about this last week, but with the increasing focus on the midterms and the overall domestic political climate I woke up this morning needing to revisit.

So here we are again - celebrating an innovation with extraordinary potential for humanity that yet again does not exist in the physical world (of course, that’s kind of the point). But WE DO exist in the physical world, and there’s no better reminder of that fact than the dearth of US semiconductor production. Because literally ALL of the wonderful innovation we’ve been so fortunate to live through over the past few decades relies on a physical product - the semiconductor.

So as I am sitting at Red Rooster last night listening to the inimitable Dre (yes, of Cool & Dre) talk about the NFT’s power to further democratize intellectual property ownership and exploitation and to empower marginalized communities, I couldn’t help but worry about what happens to that movement if the world’s leading democracy (its flaws notwithstanding) loses the ability to power it.

The incredibly thorough analysis about which I posted last week is scary indeed. As Dylan Patel put it, the “trend is terrifying for prospects of American hardware dominance.” In May, 58 semiconductor-adjacent firms raised money in China. 17 firms did so in the US. By region, China is the clear leader in total semiconductor wafer fabrication equipment spend - almost 30% of the worldwide total. The US doesn’t even show up - grouped within North America it accounts for just 7.6%. Dylan thinks that this is largely a political outcome, because countries like China have poured massive subsidies into domestic production while also making it incredibly tax-advantageous and easier from a regulatory perspective. Contrast that with Dylan’s synopsis of US policy: “The US national, state, and local governments have created tax and regulatory policy that makes investing in new manufacturing capacity for semiconductors incredibly difficult.”

Patel goes on to describe how this is not just an issue of fiscal and regulatory policy but one of education spending as well. Not even 20% of US graduate students were in STEM in 2020. And 2/3 of STEM PHD candidates in the US are foreigners.

Policy actions like passing the CHIPS Act have thus far been framed largely as national security issues. But we should also take these actions because not taking them will disproportionately affect marginalized communities and creative expression. They are critical to ensuring that a free and open society (albeit a highly imperfect one) has a voice in deciding what values comprise the culture of the metaverse. NFTs can be empowering because the system in which they exist enables them to be so. We need not go far to see how regimes with different values can repress cultural expression, free speech and free thought.

We’re missing an opportunity for two seemingly disparate political and cultural groups to unite behind policies that support domestic manufacturing: the workers who pride themselves on making real things in the real world with their hands, and the intellectual creative class coding the metaverse and populating it with cultural artifacts.

Precisely because we DO exist in the real world, our ability to shape the real world will necessarily affect our ability to create an open, diverse, and fair metaverse. If we can’t make chips in the US we can’t expect the virtual world they enable to reflect our most cherished values (and of course, if the politicians we elect don’t stand up for those values, it won’t matter much where we build the hardware that powers our metaverse). We may find ourselves as Neo once did, powerless to intervene as he watched his friends get unplugged one by one from a virtual world still grounded very much in the real.