# A Brief Note on the US China Strategy

**Published by:** [Continuations](https://continuations.com/)
**Published on:** 2026-07-10
**URL:** https://continuations.com/a-brief-note-on-the-us-china-strategy

## Content

Gigi and I went to China last year for the launch of The World After Capital there (published by Cheers). This was our second visit, roughly a decade after a big family trip. I also get frequent China updates from entrepreneurs in the USV portfolio who travel there on business. This short post is something I have been saying frequently in discussions and so want to put it here for the record. An important result in game theory is the robustness of a (generous) Tit for Tat strategy. This was first established through simulated tournaments by Robert Axelrod in the 1980s (Anatol Rapoport came up with Tit for Tat). The key insight here is that by cooperating as the default and punishing only on defection you wind up with a lot more cooperation overall. For this result to hold, it is crucial to actually have a credible punishment. A formal result was provided by Drew Fudenberg and Eric Maskin in their famous 1986 paper “The Folk Theorem in Repeated Games with Discounting or with Incomplete Information.” The US China strategy has been the exact opposite of this approach. Instead of cooperating with China by accepting them as a rising superpower and working towards a multipolar world, we have taken a confrontational approach politically. Over the same time period we became completely dependent on China for crucial infrastructure, which dramatically reduced the credibility of any punishment. To visualize this we can look at a simple 2x2 matrix. The optimal approach is on the top right. Our approach was in the bottom left. We are now belatedly trying to rectify this by at least moving towards the bottom right. We are massively behind after decades of neglect, but are seeing some interesting progress. In the USV portfolio we have several companies that provide critical technologies, including Molten (graphite), Electroflow (LFP), and Anthro (electrolyte). In each of these categories China provides 90% or more of the materials used in the US today. I am still hopeful that eventually we can get to a stable multipolar world with cooperating in the top right. Maintaining cooperative relationships in business, science, arts & culture can make meaningful contributions here. So this is the approach I will continue to take personally also: cooperate and prepare.

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