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America Is In Danger Of Losing The Robotics Race

Yesterday we mentioned this article by Andreessen Horowitz partners Martin Casado and Anne Neuberger, sounding the alarm over America slipping in the robotics race versus China. Andreessen Horowitz is arguably Silicon Valley's most influential venture capital firm, and is close to the administration, so it's worth paying attention.

Their argument is devastating in its simplicity. While America congratulates itself on leading in AI software, China has quietly dominated the entire robotics hardware stack. They've surpassed the United States, Japan, and Germany in robot density per capita. Chinese firms like Unitree sell advanced humanoid robots for $5,900—a fraction of Western prices. More troublingly, China now manufactures the precision components, like harmonic reducers, that even German and Japanese robots depend upon. The authors draw the obvious parallel: this is China's "Toyota moment," referring to when Toyota went from a maker of substandard cars to one that beat the American and European giants on quality, and not just on price.

They warn that the robotics race is crucial, because it is "the physical layer of artificial intelligence." AI will change everything, yes, and how will that manifest in practice? Through advanced robotics. That's how AI will be able to do things in the real world—not only, but particularly, in the military field.

The authors focus on harmonic reducers—precision gear systems essential for robotic movement—as a case study in industrial displacement. These components require micron-level precision that historically only Japanese and German firms could achieve. Yet Chinese company Green Harmonic now offers comparable quality at 30-50% lower prices and has captured significant domestic market share. As Casado and Neuberger warn, "In a few years, it will be Chinese companies that are making parts that we cannot replicate—not just at low cost, but at any cost."

Here's where the authors' analysis becomes particularly devastating for free-market fundamentalists. They argue China has created something paradoxical: a state-supported yet fiercely competitive market that out-innovates America's supposedly "free" economy.

The authors identify several Chinese advantages. First, geographic concentration—Shenzhen and Shanghai have become robotics superclusters where suppliers, manufacturers, and customers co-locate, enabling rapid iteration and "combinatorial use cases" impossible in America's dispersed industry. Second, these clusters benefit from "superfast digital infrastructure" including 5G networks and high-definition sensor arrays that create unparalleled data-collection environments. Third, China combines automation with "vast stratum of low-cost, highly-skilled labor" that can rapidly prototype and scale production.

Meanwhile, America labors under what Casado and Neuberger call a "permission-first regulatory regime." They cite specific examples: dockworker unions blocking port automation for years, restrictive regulations on sidewalk delivery robots, and administrative requirements that force startups to "spend time and money dealing with lawyers, permits, and endless regulatory approvals." The result? American construction labor productivity has declined 30% since 1970. Manufacturing productivity has declined for 15 years. Tesla's Gigafactory Nevada, at 90% automation, represents our most advanced facility—yet China operates fully autonomous "dark factories" requiring zero human presence.

The authors' solutions flow logically from their diagnosis. First, they call for shifting from "permission-first to permissionless" innovation—essentially advocating regulatory demolition rather than reform. This isn't libertarian ideology but practical necessity; as they note, "steel sharpens steel," but only if American companies have "freedom to experiment and iterate."

Second, they propose building a "defensible AI robotics stack" through allied coordination. They specifically mention Germany, Japan, and South Korea as essential partners whose robotics capabilities remain viable but face imminent Chinese displacement. The authors warn this "foothold is a wasting asset"—every month we delay, another allied supplier gets acquired or bankrupted by Chinese competition.

Third, though less explicitly stated, they endorse what amounts to industrial policy. They note approvingly that China offers "complete tax deductions on research expenses, generous subsidies, and preferential corporate income tax rates" for robotics companies. While acknowledging China provides less robotics support than for sectors like electric vehicles, they clearly see state support as part of China's winning formula.

Most importantly, they frame this as an existential challenge: "The most crucial challenge of the AI race is coming into view. We need to get in the running." They explicitly compare our current situation to "importing all our critical networking and telecom equipment from Huawei"—a security catastrophe we're sleepwalking toward in robotics.

Casado and Neuberger have essentially written the economic nationalist playbook without realizing it. Their analysis confirms what national conservatives have argued since 2016: market efficiency means nothing without industrial capacity, regulatory freedom means nothing if we've already ceded production to rivals, and software excellence means nothing without hardware sovereignty. Their prescriptions align perfectly with the new right agenda: aggressive deregulation for American producers, strategic tariffs on Chinese imports (implied by their Huawei comparison), direct industrial support for critical sectors, and allied economic blocs against Chinese expansion. They've given us Silicon Valley's permission slip to embrace what President Trump has intuitively understood—that national greatness requires building things, not just coding them.

Policy News You Need To Know

#BigPharma — The September 29 deadline set by the admin for pharmaceutical companies to respond to the administration's request for voluntary pricing reduction demands has passed with mixed results. Only two of seventeen targeted manufacturers have publicly announced commitments, both offering limited concessions rather than the comprehensive most-favored-nation pricing sought, Politico's David Lim reports. Eli Lilly's pledge to raise European prices and Bristol Myers Squibb's direct-to-consumer pricing program fall well short of the administration's goals for immediate relief across Medicare and Medicaid programs. With voluntary compliance proving insufficient, attention now turns to the regulatory mechanisms being prepared as enforcement tools: a "global benchmark" pricing regulation currently under White House review for Medicare Part B drugs and the October 1 implementation of 100% tariffs on imported pharmaceuticals (with carve-outs for domestic manufacturers). Industry experts suggest drug companies may continue offering superficial adjustments—manipulating list prices abroad while maintaining rebates, or creating limited direct-sales programs—that appear cooperative without materially affecting net prices. The coming weeks will reveal whether the administration follows through with regulatory action or accepts these incremental voluntary measures, testing whether the strategy of using threatened regulation to compel industry action can deliver meaningful pricing reform without formal rulemaking.

#Energy — The adm announced a big $625 million investment package today aimed at revitalizing America's coal sector. The program allocates $350 million for plant modernization and reliability improvements, $175 million specifically targeting rural energy affordability, and additional funds for operational enhancements including wastewater management and dual-fuel capabilities. This is being marketed as helping with AI, and it's not wrong, we need all the supply we can get right now. Wright's framing of coal as "critical for America's industrial might" and necessary for steel and cement production is correct. Coal isn't sexy. But it remains an attractive energy source: cheap, flexible, always there.

#Tariffs — Will you look at that? Volvo has announced that its most popular vehicle in America, which heretofore has been manufactured in Sweden and shipped to the US, will now be made in America.

#Shutdown — Hey, have you heard there might be a government shutdown? No, we hadn't either. Anyway, the helpful folks at Brookings have put together an explainer on how a government shutdown works, exactly. (Don't pretend like you don't need a refresher.)

#OBBBA — A new report from Yahoo! Finance is sharply critical of the implementation of "no tax on tips." The article highlights that Las Vegas hospitality workers—a key constituency that was central to the campaign promise—are discovering the policy operates as a $25,000 tax deduction rather than the blanket tax exemption many anticipated. The technical specifications are creating friction: tips remain subject to payroll taxes for Social Security and Medicare, automatic gratuities are excluded, and the benefit phases out at $150,000 for individuals and $300,000 for couples. Local union representatives, including the Culinary Workers Union, are framing this as a "bait and switch," while University of Nevada law professor Francine Lipman characterizes the messaging as "misleading" due to the qualifying conditions. Not good.

#AI — RAND is putting together a whole gigantic book of policy briefs on how to "rethink social and economic policy" in the age of AI. Feel free to check it out, we sure will.

#Decadence — At First Things, Samuel D. James has the temerity to point to the link between Tyler Robinson's heavy use of pornography and his turn to violence.

#Oopsie — Is this policy news? To be honest, no. Is it really funny? Yes. From Fox News's invaluable Bill Melugin: "An anti-ICE protester in Massachusetts forgot to put her car in park while yelling at agents making an arrest of an illegal alien in Upton, MA, and her vehicle went into a lake and sunk, an ICE source tells me." Go ahead, laugh. You know you want to. But wait: there's photos and video at the tweet.