The Rooster That Thought It Made the Sun Rise

When a boom lasts long enough, luck becomes skill, skill becomes theory, and theory becomes mythology.

There is an old mistake that successful people make with unusual consistency: they confuse the world in which they succeeded with the reason they succeeded.

A rooster crows every morning. A few minutes later, the sun rises. This happens again tomorrow, and the day after that. Given enough repetition, the rooster faces an irresistible intellectual temptation: perhaps the relationship is causal.

At first, it merely crows. Eventually, it writes a book about sunrise.

China produced a remarkable number of such books.

In 2015, venture capitalist Xu Xin sat down publicly with Peter Thiel. Their disagreement now reads like a small time capsule from the high noon of China's boom.

Thiel had described China through his framework of pessimism and optimism. One piece of evidence interested him particularly: Chinese households saved an extraordinary share of their income. To him, behavior mattered more than rhetoric. People who genuinely expected tomorrow to be safer and richer would have less reason to prepare so aggressively for misfortune.

Xu disagreed. She pointed to China's entrepreneurial energy, its enormous market, millions of university graduates, engineers, programmers, and the extraordinary appetite for business. Even airport bookstores became evidence: while Western travelers bought novels, Chinese bookstores seemed full of books about entrepreneurship and getting rich.

Then came an especially revealing example. Xu described young couples who spent freely because their parents had already helped them buy housing and furniture. They felt secure, she argued, and therefore consumed rather than saved.

Almost everything she described was real.

That is precisely why the exchange matters.

The mistake was not necessarily seeing things that did not exist. The mistake was observing the products of a boom and treating them as explanations for the boom itself.

Rising property values made families feel wealthy. Expanding businesses created ambitious entrepreneurs. Foreign capital, technology diffusion, urbanization and enormous new consumer markets generated fortunes. Successful investments created famous investors, who then accumulated enough successful cases to construct theories explaining why they had been successful.

The rooster crowed.

The sun rose.

After twenty years, correlation acquired a vocabulary.

It became "cognition." It became management philosophy. It became entrepreneurial spirit. It became investment methodology. At the level of the state, it became evidence of institutional superiority.

This phenomenon was hardly unique to China. Every long boom manufactures philosophers out of its winners.

Buy property near the beginning of a twenty-year housing expansion and eventually you may believe you possess unusual insight into real estate. Build a company while an entirely new technological market is exploding and ordinary execution can begin to look like managerial genius. Manage money during decades of expanding liquidity and eventually beta acquires an autobiography and introduces itself as alpha.

The longer the favorable cycle lasts, the harder the error becomes to detect, because the people making it really are successful. They have the bank accounts, companies and investment returns to prove it. What they cannot easily prove is the counterfactual: how much of that success survives when the surrounding conditions reverse?

That is why 2022 provided such a strange epilogue to the 2015 conversation.

During Shanghai's lockdown, Xu appeared in a residential WeChat group asking to be added to a group purchase for bread and milk. She later confirmed the episode and explained that twelve people were staying in her home, creating unusually high demand for food.

There is no serious point in pretending that a wealthy investor had suddenly become poor. She had not. The more interesting fact was exactly the opposite.

She still had money.

She still had connections.

She still had investments.

Yet money could not by itself make bread move through a city whose ordinary distribution system had been disrupted by administrative controls.

Seven years earlier, consumer confidence had been offered as evidence against Thiel's pessimism. Now one of China's most successful investors was discovering a much simpler distinction: possessing purchasing power and possessing the freedom to use it are not the same thing.

The bread is memorable because it compresses an entire era into one absurd image.

China's boom produced fortunes large enough to make its winners believe they understood the mechanism that had produced them. Entrepreneurs explained entrepreneurship. Investors explained cognition. property owners explained property. Officials explained development. Each group built increasingly sophisticated theories around outcomes generated partly by forces larger than themselves.

Then the environment changed, and some of those theories began failing simultaneously.

This does not mean skill never mattered. Xu Xin did not build a long investment career by randomly throwing darts, just as successful founders do not create companies through luck alone. The point is more uncomfortable: skill and favorable conditions can coexist, and success itself cannot tell you how much came from each.

Only changing conditions begin to reveal the difference.

A sailor's ability is difficult to measure when the wind has blown in the same direction for twenty years.

The same problem applies to governments. Three decades of growth can persuade a political system that it created everything occurring inside its borders. Growth becomes legitimacy; legitimacy becomes proof of competence; competence becomes a theory of history. Eventually the state begins treating the businesses, capital, technology and human ambition that flourished during the boom as products of itself rather than forces with their own origins and incentives.

The danger arrives when the cycle turns.

The property investor discovers that apartments do not appreciate because apartments possess some metaphysical tendency to appreciate. The founder discovers that a rising market had been solving problems his management philosophy supposedly solved. The venture capitalist discovers that an expanding ecosystem had been carrying more portfolios than anyone noticed. The government discovers that ordering an economy to grow is not the same as creating the conditions under which people choose to build.

And the rooster discovers something unbearable.

Morning arrives without asking its permission.

Perhaps the most useful question for anyone who has enjoyed a long period of success is therefore not, "Why was I right?"

It is:

What if I was standing in the right place at the right time?

There is no shame in benefiting from a rising cycle. Almost every great fortune contains some historical luck. The intellectual failure begins when luck is erased from the story, the survivor turns chronology into causality, and yesterday's tailwind is published as tomorrow's universal law.

For twenty years the rooster crowed, and every morning the sun rose behind it.

By the twentieth year, it no longer thought itself lucky.

It thought it understood the sun.