A Conversation with Adam Tooze: How Venture Capital Reached Its Present Moment Through the Eyes of a Macroeconomist

By Xu Muxin

As an economist and historian, Adam Tooze could have been among the first to buy NVIDIA stock, or shorted Evergrande early and profited. But the reality is: his ETF portfolio has remained in a state of slight, persistent loss. "Ridiculous as it sounds, I don't have much to complain about. I'm more fascinated by how economic growth impacts the world and changes the course of history," he told Waves.

Adam Tooze has long studied crises in economic history. While teaching at Cambridge, he wrote The Wages of Destruction: The Making and Breaking of the Nazi Economy. He later became chair of the history department at Yale, where he wrote The Deluge: The Great War, America and the Remaking of the Global Order, examining the global financial system during World War I. He currently teaches at Columbia University as a professor of history and director of the European Institute. In 2018, on the tenth anniversary of the financial crisis, he published Crashed: How a Decade of Financial Crises Changed the World. In 2021, as COVID-19 swept the globe, he released Shutdown: How Covid Shook the World Economy. His research on and warnings about crises have made him a sought-after figure in global decision-making circles — not just at Davos or hedge fund summits, but also at economic advisory meetings in the Biden cabinet.

He coined the concept of "polycrisis" — the idea that crises often compound, and their consequences are not merely additive, requiring policymakers to respond from financial, social, and environmental perspectives simultaneously.

But academic renown clearly isn't enough for him. For Adam Tooze, "reaching as many people as possible" matters more. He's popular in American media, where people describe him as "the guy who can explain what the hell is actually happening in the world."

So this time we spoke with him about topics closer to China and Chinese venture capital — wanting to know what role venture capital plays in the eyes of a macroeconomist, and whether government guidance funds represent the inevitable trend. And Adam had clearly picked up some new observations from his recent visit to China: why we're so fixated on discussing "garbage time of history," and what choices young people fed up with 996 are making.

The following is the conversation between Waves and Adam Tooze —

Waves: From the 2008 financial crisis to the global economic shutdown under COVID-19, you've been researching crises. So in your view, what is the greatest crisis facing the global economy today?

Adam Tooze: Past crises were somewhat like heart attacks — the heart stopping would cause the global economy to collapse. In 2008, the heart was the banking system. During the Cold War and the COVID period, the heart was the US bond market. In the latter two cases, central bank intervention ultimately stabilized things.

The question is what we face next. In my view, it's the overlap of the post-COVID period and a "gear shift." Region by region: Europe, after being hit by the pandemic, is now experiencing an energy crisis, with massive price increases severely damaging consumer and investor confidence. In low-income countries, capital flows haven't recovered and growth prospects are grim. For the two largest economies, China and the US, the core question is whether they can wind down the stimulus policies implemented since 2020. Especially for China — though it intends to move away from a growth strategy centered on construction and urbanization toward one focused on advanced manufacturing — for the world economy, the biggest question mark still comes from China and its future growth.

Waves: Some argue the global economy has moved past the "polycrisis" and "repair" phases into a "normalization" phase. What do you think?

Adam Tooze: That's far too optimistic. My concept of "polycrisis" emphasizes the continuity and long-term extension of crises. The current polycrisis involves three overlapping conditions: structural change, slowing growth, and the persistent effects of previous policies. Whatever we call it, we haven't emerged from the crisis period.

Waves: In recent years, many Chinese companies have been seeking to expand overseas. What challenges do you think these companies face in the process of globalization?

Adam Tooze: I was just discussing this in Singapore with a Chinese expert. She told me that many Chinese companies expanding overseas find that the business environment in any other region of the world can't compare to China's — whether in terms of development speed, ease of doing business, credit availability, or expectations about market scale.

Waves: Let's turn to venture capital. Originating in the US, VC has flourished in China over the past decades and participated in creating many great companies. So I'd like to know: in the eyes of a macroeconomist, what role does venture capital actually play?

Adam Tooze: Venture capital is of course a narrative of spectacular success, and as you say, it's crucial to the technological dynamism of many specific countries. But if you're building ultra-high-voltage power grids, I imagine you'd seek support from the State Grid. So my point is: VC is certainly an important foundation for some technological innovations, and VC creates unicorns. But in terms of macroeconomics, we're talking about the difference between $10 billion and $20 trillion. There's the famous Solow paradox in history: despite significant IT investment during the 1970s and 80s, corresponding productivity gains only materialized much later. So the relationship between venture capital and macroeconomics should be understood as: the former indirectly drives innovation, creates commercial hotspots, and these effects eventually diffuse across entire regions, ultimately achieving economic growth — Shenzhen, for example.

Waves: But unlike the US, Chinese venture capital is currently dominated by state-backed funds and government guidance funds. Do you think venture capital can be non-market-oriented?

Adam Tooze: Large government-established venture funds are quite rare, but I think non-market-oriented venture capital should actually be more common. The pattern of world historical development is that an innovation shouldn't benefit only a handful of lucky individuals who won't attend to the interests of society as a whole. So why should we place the high returns from such high risks outside the institutional framework? In Europe I see many entrepreneurial innovations originating from the public sector. Though the news always celebrates private entrepreneurs, it's often universities or government research funds driving things behind the scenes.

So I think beyond China, we should also have a public portfolio allocation committee to determine what proportion should go to infrastructure, education investment, or betting on some extremely risky unicorns. Of course government investors must realize that not every "unicorn lottery ticket" will win.

Waves: The counterargument is that many non-market-oriented funds are unwilling to take risks, or accept the possibility of investment failure.

Adam Tooze: Public fund managers should take risks more intelligently. Sovereign wealth funds around the world do this, which makes sense, because one major dimension of risk is time — and private investors don't have the virtually unlimited time horizon that public funds possess.

Waves: According to Hurun Research's 2024 Global Unicorn Index, there are 1,453 "unicorn" companies globally, with the US accounting for over 700 and China 340 — not only lagging far behind in total numbers, but also seeing declining new additions. Why is this?

Adam Tooze: In the US case, market sentiment swings generate massive excitement-driven bets. We're in a huge AI wave, and the specific manifestation in America is: any business that can somehow connect itself to AI attracts enormous capital. All American CEOs understand this and are using it to become unicorns or achieve successful IPOs. It's not surprising that America is generating such technological exuberance and bubble again — it has a powerful innovation system in AI, can attract talent from around the world, and promises them wealth. This shows up in unicorn count growth.

But is this an ideal economic model? Will it last? How will it actually affect the trajectory of AI technology? These questions can't be answered now. We can't judge the success or failure of our economic policies by an overexcited capital market. In AI, the US government wants to use policy support to leave China behind, and what the market presents is a massive bubble entirely generated by policy. And the people on Wall Street evaluating these stocks or companies don't care about China — they just want to make their billions. That's the situation. If China looks at these numbers and says "oh no, we're losing," my advice would be: stay calm.

Waves: A Stanford economics professor once expressed this view: if China were a market-oriented economy, its real estate problems would inevitably lead to a financial crisis, but fortunately, China is not. Do you agree?

Adam Tooze: That's a good question, and I largely agree with this professor. The problems in China's real estate sector now, particularly visible in companies like Evergrande, are part of a traditional real estate bubble bursting, combined with the contractionary policies China actively pursued in recent years — "housing is for living in, not speculation," the "three red lines" — which contracted certain market-economy elements. I agree that if real estate problems accumulated, they could lead to collapse. But what we're seeing is this sector shrinking, and this isn't a natural development but an intentional one. The challenge is whether Chinese governments at all levels, including provincial and municipal, have the capacity to control all the spillover effects during this massive slowdown in urbanization and economic transition — and this is undoubtedly the greatest test for Chinese economic policy since reform and opening up. If China passes this test, it will be the most successful economic stabilization operation in the world, because no government has ever been able to consciously stop real estate overexuberance. In Europe and America, real estate bubbles burst on their own.

But like demolishing an old power station, you need to deal with the secondary damage from the building's collapse. Overall, the general direction is good; the balance in between needs adjustment.

Waves: As an expert on financial crises, do you think we need to guard against a financial crisis emerging?

Adam Tooze: Not at present. Given the Chinese government's strong capacity for mediation and balance, there's no reason to fear a heart-attack-style financial crisis. It's hard for outsiders to judge this, but the economic stimulus measures China is currently taking, and the combination of different policies, suggest that those with better information aren't afraid of a crisis breaking out at this point.

Waves: Recently a popular view has circulated on the Chinese internet: from economic logic, when a period of history deviates from economic laws, individuals are powerless to change it, and it inevitably heads toward failure — this is defined as "garbage time of history," during which people are better off lying flat. What do you think? Has there truly been such a thing as garbage time in history?

Adam Tooze: [Laughs] I love this expression, I'm going to borrow it — I'm quite sure America is in garbage time right now. But I understand what you mean. Many Chinese friends have conveyed similar sentiments to me.

We believe the climate crisis will become the next comprehensive crisis. But China's existing social structures and political institutions suggest that, more than any other country in the world, China is most likely to solve this problem. The world needs the Chinese government to continue on its trajectory of addressing the climate crisis, not to "lie flat." This period is not "garbage time," but could become one of the most important periods in history. Individuals may feel disillusioned, frustrated. But look outward: on the streets of every major Chinese city you see many electric vehicles. You may take this for granted, but nowhere else in the world is like this. China is conducting the world's fastest green energy transition, and has already achieved a kind of escape velocity. So this isn't garbage time, but the moment when the green energy transition begins to take off. Garbage time is precisely the precondition that supports, contains, and frames the ongoing revolution.

What may comfort Chinese people is: across the ocean, America is about to elect someone who believes climate science was invented by the Chinese.

Waves: Let me ask something about you. As an economist, how do you invest? What was your most successful investment?

Adam Tooze: [Laughs] I must admit, as an academic, I'm not skilled at many practical aspects of life. But without doubt, my most satisfying investment has been my daughter's education. Beyond that, I'm just an ordinary investor. I have pensions in both the UK and at Columbia University. Personally I've also invested in some higher-risk ETFs, because I don't plan to retire in the next 20 years, so I'm not worried about short-term returns. I don't buy individual stocks, because research shows their long-term returns don't beat index funds. I'm also not optimistic about future returns in private markets.

Ridiculous as this sounds, my investments don't make much money. I often blame myself, because I spend so much time studying the economy — I could have shorted Evergrande, or bought NVIDIA stock before 99% of others, and made far more than index funds. But I didn't do any of that.

I'm fascinated by economic growth and its impact on the world, the way it changes history. I just can't seem to muster the same interest in personal wealth. I actually wish all money-related problems would disappear, so I suppose I don't have much to complain about.

Waves: Finally I'd like to ask: in the era of "polycrisis" that you propose, how should ordinary people position themselves, and for the disappearing middle class, what should they do?

Adam Tooze: You just asked me about my best investment, and my answer was my investment in my daughter's education. "Education" is my answer, especially in an era of rapid AI transformation — education is the only comprehensive answer to personal crisis.

In this, people must pay serious attention to their mental health. Many people can't comprehend what's happening in the external world and internalize it as their own failure. This is not the case. In the 1960s and 70s, feminists advanced the slogan "The personal is political," emphasizing the interconnection between private life and political power structures, and that the former shouldn't be seen merely as private problems but as broader social and political issues.

This morning I was asked a similar question: "Why are more and more Chinese choosing civil service jobs, moving away from big cities." After learning about the "996" work culture, I think people choosing to opt out is a reasonable decision for balancing work and life. Of course from a macroeconomic perspective, this generational choice won't help GDP. But pursuing growth isn't the way to achieve meaning in life.

When we discuss these personal and subjective issues, we shouldn't neglect history's enormous forces either. Looking globally, the pandemic's shock triggered a worldwide mental health crisis. China and South Korea are the two fastest-growing economies in East Asia, but ultra-rapid growth can lead to quite unhappy outcomes — South Korea's experience previews this. In South Korea, people are very unhappy, fertility has dropped to freezing point, men and women are alienated from each other. Whereas in Europe, where I was born, you don't feel much from their policies, but life there is much easier. Many people talk about happiness economics and happiness policy, but for me, turning happiness into an index and then trying to chase it is effort in the wrong direction.

Waves: Regarding happiness indices and personal mental health crises, do you have any books or open courses to recommend?

Adam Tooze: Reading is important, but on this issue, people need even more to talk and interact with other people.