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Jacob Shapiro: Hello, listeners.

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Welcome to another episode
of Geopolitical Cousins.

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Uh, I am Jacob.

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Marco is coming.

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Uh, this was a really great episode.

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We spend a couple minutes welcoming
our new listeners, uh, explaining

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what this podcast is, why you
should continue listening to us

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and share it all with your friends.

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Then we spend most of the podcast
debating tariffs and globalization.

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Uh, Marco takes the
pro-globalization point of view.

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I take the devil's advocate position of
the anti-globalization view, and then at

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the end we debate each other's points.

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Imagine that two people debating two
sides of an issue and then coming

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together and talking about it.

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Um, and then at the very end we talk
about Operation Spider's Web, the

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Ukrainian drone strike on Russia.

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Russia's use of drones in that
conflict and what that means about the

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future of war and power in general.

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Um.

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This.

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I mean, I love always talking to Marco.

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This is my favorite episode
so far of what we've done.

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It feels like we're
really hitting our stride.

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I hope you agree.

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I hope you share this podcast widely
with anybody you think that would

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be interested in listening to it.

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And thank you so much to the people
who write in to give us constructive

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feedback, constructive criticism, uh,
or questions that you want answered.

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Uh, we read everything.

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We try and hit everything,
and we'll continue to do so.

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Or you can email me at
jacob@jacobshapiro.com.

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I make sure that the emails
get to Marco as well.

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And eventually we'll set up an
email address just for the podcast.

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Okay.

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Enough of that.

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Let's get to the show.

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We'll see you at the day.

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Marco, how's it going?

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Marko Papic: It's, it's going great.

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It's going great.

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Um, just very busy.

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Haven't traveled in a
while, so that's good.

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So we're not doing this from the road.

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Jacob Shapiro: Uh, same with me, but the
travel kicks into gear next week for me.

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I don't know when you're
back on the road next, but,

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Marko Papic: uh, like, yeah,
like a week and a half from now.

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Um, but yeah.

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So one, one thing that I thought was
good, we do have a lot of new listeners.

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Um, maybe it's a good opportunity to kind
of restate why you should listen to us.

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I actually, uh, yeah, I went to get a
haircut, you know, and uh, my guy who

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cuts my hair, uh, who is awesome, Jason
Laura out there on Montana Street.

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Shout outs to this is, this is
the hair that he's produced.

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Oh, he's gonna be very mad at
me 'cause I didn't style it.

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Um, so, uh, Lux lab studio over on
Montana Streets in Santa Monica.

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But yeah, so, um, he
was like, Marco, Marco.

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We

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Jacob Shapiro: just, we just, we just
lost all the manly listeners from

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the last episode that we're like, oh,
you're coming to learn about manliness.

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And here we are talking about your hairdo.

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Like, come on,

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Marko Papic: man.

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Yeah.

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My, my hair is done at a place in
Montana Streets that is, uh, if you

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don't, if you don't Santa Monica,
you've just lost all respect for me.

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But, um, so he asks, why would anybody
listen to, you know, like, who's this for?

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And so it's not for our clients.

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So that's, that's the first thing.

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Uh, this is really, we're not
here to give investment advice.

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We're not here to get really deep into
markets, which is what we do for a living.

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Um, but my answer to Jason was
like, well, it's actually for

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you, you're the target audience.

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Uh, it's somebody who's just
casually, you know, like they're

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professional at their own craft.

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They spend a lot of time perfecting
that craft, whatever that may be.

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Maybe you're a hairdresser, maybe
you know, you're an accountant, maybe

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you're a lawyer, maybe you're a doctor,
maybe you're a manufacturing worker.

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This mythical unicorn creature
that America apparently has lost,

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whatever it is that you are, uh,
this podcast is really for you.

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This is not for investors,
which is our normal clients.

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And the purpose of this is really just
to, uh, give you a sense of what we think

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is going on in the world so that we can
inform you so that you don't have to go

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to some, you know, lunatic on YouTube.

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Um, now his answer, his question to me was
like, okay, but what makes you special?

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You know?

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And what makes I think
US special is two things.

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One, we were trained in
the Art of Net assessment.

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Uh, weighing all sorts of, uh,
variables in order to get to an

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answer, uh, on the geopolitical side.

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But the other issue is that for the
most part, we work for investors.

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And the reason that that matters is
because our clients just wanna make money.

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And that washes us away of
biases as much as anything will.

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Because what that means is that we're not
trying to pick who's gonna win or lose or

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who's right or wrong, for the most part,
uh, we're anchored by like, Hey, what's

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gonna happen in the world so that somebody
can make money off of that forecast?

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Now, that sounds very callous
and Glip, and I get it.

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I know it does.

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It really does.

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But the fact that that is what we do
professionally makes us as close to

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objective as it gets, you know, it's as
it is, it's as close as it's gonna get.

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Now, obviously you might say, well,
that's a bias of itself, right?

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You guys are just focused on
how to deliver a future that

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somebody can trade off of.

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Therefore, you are pro investment
ProfIn, world, plural, business world

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and like, yeah, that is correct.

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And if you are an ardent Marxist,
you probably should not listen to us,

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Jacob Shapiro: uh, or where you at, or
you absolutely should because nowhere

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else are you gonna find intelligent.

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Uh, sort of materialistic based, uh,
interpretations of what's going on in

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history, uh, going forward, because
both of us were trained in that world

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too, and probably took the best parts of
that and integrated into our analysis.

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But I think it's not about
bias, it's about accountability.

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Um, the, the, the fact that our feet
are held to the fire if our decisions

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are made wrong with some of our clients,
uh, means that no, we are actually

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held accountable when we're wrong.

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We don't get to just sell our next book
or pretend like the thing that we said

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didn't happen and make the next video.

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It's like, no, like probably if you or I
make a really big mistake, uh, we'll have

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to cancel the next podcast 'cause we'll be
with our clients for the next three weeks.

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Like backing out of the mistake and
understanding, uh, what is coming next.

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I was actually talk my, I was talking
about this with my wife last night

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'cause she said jokingly to me, I
don't understand 90% of the stuff you

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guys are talking about on the podcast.

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And I said, thank you for telling me that.

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'cause then we're actually doing it wrong.

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It is meant for you to understand
it like we are trying to be.

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Entertaining without dumbing shit down.

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So we wanna explain things plainly so that
anybody out there can listen to things.

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And then also we wanna make
it a little bit entertaining.

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A lot of the analysis in this
space can be very dry because

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it's pretending to be objective.

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Whereas you and I are comfortable that
we're objective because we know where our

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money is printed and what's gonna happen.

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We don't need to like put on a tie and
say all this stuff to be objective.

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Um, well that, yeah.

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Jump in.

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That I can tell.

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You wanna jump in?

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Marko Papic: No.

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Hold that thought.

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I think that's also important.

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Uh, I don't wanna be a member of the cfr.

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I couldn't give a shit.

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Yeah, I don't wanna, I don't wanna, uh,
I don't wanna be the under Secretary

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of State for Eurasian affairs.

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You know, that train has passed.

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I work in finance, I work for investors.

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That is my bailiwick.

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And that's where my bread is buttered.

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But it also means that.

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You know, we're not trying to curry
favor with, um, any administration

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or angle for some public sector job
because that would, uh, mean a massive

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pay cut for both of us, like massive.

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Um, so because of that, I think you
should listen to us because, uh, this

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is as close to objective as gonna get.

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I mean, you know, it's as close to
a nihilist, you know, zero Fox given

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analysis on geopolitics as you're
gonna find anywhere out there.

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Um, and it also means that we, you
know, take both sides or three sides

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or multiple sides, uh, and, and keep
their feeds to the fire as well.

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So, um.

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Jacob Shapiro: Yeah.

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And I, and I think that's all nice, and
I agree with all that, and that's how I,

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I put myself to sleep at night, Marco.

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But the real answer to this question,
the real answer to why you should

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listen to us is very, very simple.

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Because you like us and
because you trust us.

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And it took me a long time to get
comfortable with the fact that the

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thing that there was about me that made
people wanna listen to me was that I

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engendered trust, that I made people feel
like I knew what I was talking about,

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and I was addressing their concerns.

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About 90% of what you learn from the
things that you hear on a daily basis,

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you will forget within 24 hours.

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Most of the beautiful pearls of insight
you hear on this podcast, you will not

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remember them, but you will remember
how you felt in the moment that you

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were listening to them and the entire
game here with the guy who's cutting

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your hair or anybody else, the reason
you, you know, you come for the,

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oh, I want the objective analysis.

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I wanna stay on top of things.

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I can say things, but you stay honestly
for some intangible chemistry reason.

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Because you like us and it feels dirty
to say that, but that's honestly it.

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Like that's the difference.

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And the thing that you and I are
trying to do is we are trying to be

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personalities that you can like and
that are entertaining, but maintain

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analytical and intellectual integrity.

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And it's really hard to have both.

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The media ecosystem is littered
with people who are just gonna

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entertain you and tell you stuff
and make you feel particular things.

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And it's also littered with people who
are very, very down in the weeds and

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can tell you probably better than us on
a lot of the things we talk about, like

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all the nuances and things like that.

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But combining those two things being
entertaining, but like analytically.

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Rigorous at the same time.

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Like that is the secret sauce.

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And I think, you know, our, our humor
in making fun of each other and being

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willing to take the other sides of
issues, all of that sort of plays into it.

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But I think that's the real
answer to your, your guy.

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It's, you know, why do, why do you
go to him to get your hair cut?

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Probably 'cause you like him.

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Like, that's, well, actually probably
why you interact with people.

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Marko Papic: Yeah.

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I'll tell you why.

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He's the only guy that, uh, convinced
me that maybe I should not get a

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buzz cut every single time I go.

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It's, it's very funny.

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Uh, which is, which is funny thing
about professionalism sometimes.

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It's not about having the skill
to actually craft a piece of

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art that makes you an artist.

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Sometimes it's being able to
convince your patron that that's

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the art that needed to be made.

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You know?

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And I think that that's, that's like next,
that's like 3D step of professionalism.

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But anyways, uh, enough about
Jason Lara, the best hairdresser

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on Montana Street in Santa Monica.

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And by the way, I. If he's listening
to this, like, you know, like,

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where's I, I need a discount code,
geopolitical cousin, discount code.

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But I think it does concern me that
your wife said that 90% of what we talk

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about, um, she, she didn't understand.

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Because you're right.

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Uh, first of all, your wife,
uh, is, is a professional.

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Uh, she knows her stuff.

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So we need to, I think, um,
I think we need to definitely

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heed that, uh, criticism.

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To that end, we do have a topic today,
uh, that we decided to kind of debate,

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uh, and, and we wanna simplify it.

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I mean, tariffs, we just wanna talk
tariffs, we wanna talk globalization,

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we wanna talk trade, um, and, uh, we
want to talk about it, uh, in a way

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that will be approachable for everyone.

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Yeah.

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So, um, I, I wanna make a case here.

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Um, I, I wanna jump in straight
into this and, and I just wanna say

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that, um, I. There are ways in which
President Trump's policy makes sense.

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There's ways in which it doesn't.

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Um, is it cool if I just
start, uh, my bit here, Jacob?

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Or did you wanna set it up in any way?

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Jacob Shapiro: I'll set it up just
a little bit and we're, we'll come

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00:11:07,230 --> 00:11:08,580
back to Ukraine at the very end then.

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So we'll, we'll move
things around a little bit.

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So the, the bit that we're just gonna
set up is, if you didn't listen to our

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00:11:12,960 --> 00:11:17,730
last episode, we were talking about
sort of the crisis of, of masculinity

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and of social economic issues inside
of the United States in particular.

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And we got an email from a mutual
friend, shout out to Tim, uh, you

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00:11:25,860 --> 00:11:29,490
know, who you are, who is working in
a space where he was actually pushing

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back and saying, you know, I work with.

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You know, a lot of in manufacturing and
industrial construction trades, et cetera.

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And actually they've seen business
pick up to the tune of, in his

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words, the most we've ever seen.

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And so he was kind of pushing back
against some of our views that, you know,

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manufacturing that's like the old game.

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Like you don't necessarily wanna do that.

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Um, and so what we decided to do is
take a step back and Marco's really

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00:11:50,849 --> 00:11:54,900
gonna argue a pro-globalization,
like extend, uh, what he's talking

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00:11:54,900 --> 00:11:57,959
about and talk very simply, you know,
what are tariffs, why are they bad?

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Like, and then, uh, I have the,
I have the, the task of being the

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devil's advocate and pushing back.

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So Marco, I, I thought what we would
do is I might just give you like six

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00:12:06,900 --> 00:12:09,510
or seven minutes and say, all right,
make the case in six or seven minutes.

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I'll have six or seven minutes, and then
we can like, go back and forth, like make

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it almost like a little mini crossfire
type exercise, if that sounds good.

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Marko Papic: Yeah.

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Cool.

260
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No, no problem.

261
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And first of all, I wanna start
off by saying here's, uh, two, two

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00:12:21,750 --> 00:12:23,610
reasons why tariffs do make sense.

263
00:12:24,540 --> 00:12:29,339
So there are two ways in which tariffs
would make sense and um, I definitely

264
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would basically support them.

265
00:12:31,665 --> 00:12:34,605
Uh, first and foremost, foremost,
national security does matter.

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Uh, if you don't have steel, you
don't have a country as President

267
00:12:38,235 --> 00:12:41,175
Trump has famously said so.

268
00:12:41,265 --> 00:12:42,314
Sure, yeah.

269
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There are some industries that
should be geographically located

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within your, uh, country.

271
00:12:50,474 --> 00:12:57,405
Now, the problem with focusing on steel is
that America doesn't import Chinese steel.

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It imports Canadian, Mexican,
Brazilian, and European steel.

273
00:13:03,765 --> 00:13:09,735
So to what extent do you really need
to have a steel mill inside of America?

274
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Can it be in Ontario?

275
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Can it be in, um, you know, Puebla?

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Probably can.

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Um, so I think that what defines as
national security, I. Geographical

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00:13:26,160 --> 00:13:28,020
location for the United States of America.

279
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Like we know what it is for a country
like India that doesn't have power

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00:13:31,080 --> 00:13:37,440
projection, but maybe for the US it would
be okay if those, um, assets were not

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located in its country, but in its allies.

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Nonetheless, I do think that imposing
tariffs on specific sectors that

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are critical to the country's
national security does make sense.

284
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And that's a conversation that
any country can have and can

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00:13:51,300 --> 00:13:52,620
justify to the rest of the world.

286
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Like, Hey, look, we really
consider this a, a priority.

287
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Uh, we want to have some
of this in our country.

288
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The second way that tariffs do make
sense is to enforce fair trade.

289
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And economic theory tells
you that countries that trade

290
00:14:09,630 --> 00:14:13,890
freely with one another should
not have massive imbalances.

291
00:14:15,150 --> 00:14:15,660
Why?

292
00:14:16,530 --> 00:14:20,160
Because if you sell a lot of
things to another country.

293
00:14:20,970 --> 00:14:24,840
That country ends up having
to buy a lot of your product.

294
00:14:25,380 --> 00:14:27,240
Let's say you're really good at bicycles.

295
00:14:27,810 --> 00:14:30,180
We ban cars, okay?

296
00:14:30,360 --> 00:14:35,010
We ban cars, and the number one
export on planet is bicycles.

297
00:14:35,610 --> 00:14:38,970
If you export a lot of bicycles,
everybody's buying your bicycles.

298
00:14:38,970 --> 00:14:40,110
Oh, you got the best bicycles.

299
00:14:40,170 --> 00:14:40,890
This is amazing.

300
00:14:41,340 --> 00:14:44,400
They have to buy your
currency to buy your bicycles.

301
00:14:45,270 --> 00:14:52,350
Your currency rises in its values,
wages in your country rise because

302
00:14:52,350 --> 00:14:56,580
you're making so many bicycles,
and eventually you become quite,

303
00:14:57,780 --> 00:15:01,650
quite expensive, unproductive
and uncompetitive in everything.

304
00:15:01,650 --> 00:15:08,070
But bicycles and other countries start
to kind of export stuff to you because

305
00:15:08,070 --> 00:15:12,600
you've made so many bicycles, so many of
your people are working in bicycle shops.

306
00:15:13,080 --> 00:15:14,580
Your currency has appreciated.

307
00:15:15,180 --> 00:15:19,560
And so if, if globalization was fair.

308
00:15:21,015 --> 00:15:26,595
If everybody had access to free markets,
you shouldn't have the kind of trade

309
00:15:26,595 --> 00:15:28,455
deficit the United States of America has.

310
00:15:28,875 --> 00:15:29,925
That should not exist.

311
00:15:30,435 --> 00:15:36,945
But the reason it is exists is because
major competitors of the us, including

312
00:15:36,945 --> 00:15:42,885
China in particular, have used things like
capital controls, currency manipulation,

313
00:15:43,305 --> 00:15:49,365
not like it sounds so, uh, evil
manipulation of currency, but effectively

314
00:15:49,665 --> 00:15:53,805
the Chinese have made it difficult
for you to buy their financial assets.

315
00:15:54,225 --> 00:15:56,205
If you buy them, you
can't really leave them.

316
00:15:56,235 --> 00:15:59,745
They've, they've made it a little bit
easier to, I mean, a lot easier to be

317
00:15:59,745 --> 00:16:05,325
fair to them, to buy Chinese bonds, but
not to really come in and out of their

318
00:16:05,325 --> 00:16:07,605
economy, to transact in their currency.

319
00:16:07,605 --> 00:16:10,875
They don't wantin to be an international,
you know, reserve currency.

320
00:16:11,415 --> 00:16:16,635
And part of the reason is that they
have not gotten the kind of an effect.

321
00:16:17,280 --> 00:16:21,989
A country with a huge trade surplus
would get IE They've suppressed those

322
00:16:21,989 --> 00:16:23,939
costs that come with competitiveness.

323
00:16:24,900 --> 00:16:29,160
The reason I say this is that I do also
think that tariffs make sense when you

324
00:16:29,160 --> 00:16:36,479
wanna punish a country for, for not
taking on the burdens of competitiveness.

325
00:16:36,630 --> 00:16:41,489
So you can use tariffs to basically
tell China, like, look, we get it.

326
00:16:41,550 --> 00:16:43,079
You are really good at making stuff.

327
00:16:43,349 --> 00:16:48,660
However your currency should have
appreciated, and also you are supporting

328
00:16:48,660 --> 00:16:52,770
certain industries inside your own
country and therefore, you know, like

329
00:16:52,770 --> 00:16:54,359
you don't really need to do that anymore.

330
00:16:54,449 --> 00:17:03,150
It's if, if like, if a really, really less
developed country like Ethiopia decides

331
00:17:03,150 --> 00:17:10,319
to put 800% tariffs on textiles so that
Ethiopia can have some people working

332
00:17:10,319 --> 00:17:14,190
in the garment industry, nobody should.

333
00:17:14,910 --> 00:17:17,610
Say that Ethiopia is using state aid.

334
00:17:17,610 --> 00:17:21,690
I mean, they're just trying to get
some factories in their country and

335
00:17:21,690 --> 00:17:23,130
better the lives of their people.

336
00:17:23,550 --> 00:17:24,540
That makes sense.

337
00:17:25,079 --> 00:17:27,840
But China is no longer a
less developed country.

338
00:17:28,770 --> 00:17:31,980
It is in the middle income kind of range.

339
00:17:32,220 --> 00:17:36,150
We've all, well, I have, I've, I've been
to many cities in China and they look

340
00:17:36,150 --> 00:17:38,310
like spaceships, you know, like, I get it.

341
00:17:38,310 --> 00:17:43,890
They're still interior China still
probably should use industrial policy to,

342
00:17:44,250 --> 00:17:46,020
you know, like help some parts of China.

343
00:17:46,020 --> 00:17:49,710
That's all fine, but it's not
where it was in the nineties.

344
00:17:49,710 --> 00:17:55,710
And so it cannot use these manipulative
tools to remain competitive perhaps

345
00:17:55,710 --> 00:18:00,240
in industries that it should have lost
competitiveness in maybe toaster ovens.

346
00:18:00,540 --> 00:18:05,100
Toys t-shirts should move to
other countries around the

347
00:18:05,100 --> 00:18:07,470
world should move to Vietnam.

348
00:18:07,470 --> 00:18:12,360
Maybe even further down the, the
line, maybe Laos, maybe Cambodia.

349
00:18:12,764 --> 00:18:15,435
Maybe Ethiopia, those are the
next countries that should start

350
00:18:15,435 --> 00:18:18,315
building those low value added goods.

351
00:18:18,495 --> 00:18:23,175
And, uh, and China has, for the
most part, manipulated trade and

352
00:18:23,175 --> 00:18:28,815
its capital account and also its
currency to, to remain competitive.

353
00:18:29,295 --> 00:18:36,465
And that is where I wanna make a case
for globalization In America, there's

354
00:18:36,465 --> 00:18:40,215
this sense that Americans have soured
on globalization, although polling

355
00:18:40,215 --> 00:18:44,475
actually suggests that, uh, support for
globalization has doubled since 2016,

356
00:18:44,504 --> 00:18:45,825
which is something we can come back to.

357
00:18:46,155 --> 00:18:52,395
Americans actually are not as anti-trade
and anti-globalization as President Trump,

358
00:18:52,395 --> 00:18:55,365
but also liberal media often both agree.

359
00:18:55,514 --> 00:18:58,845
There's this, there's this tired
narrative that Americans are like

360
00:18:58,875 --> 00:19:03,675
yearning to be in a sweat shop with
a, like, you know, like just overalls

361
00:19:03,675 --> 00:19:06,135
and like hammers and glistening sweat.

362
00:19:06,195 --> 00:19:09,165
Just a lot of like 1930s imagery.

363
00:19:09,375 --> 00:19:10,215
So there's a lot of that.

364
00:19:11,220 --> 00:19:12,629
First of all, polls don't support that.

365
00:19:12,629 --> 00:19:13,830
So let's park that aside.

366
00:19:14,700 --> 00:19:20,700
But my point is, when you say that
China is manipulating certain things,

367
00:19:20,700 --> 00:19:27,240
or you say there are non tariff barriers
to trade in Europe, um, you're not

368
00:19:27,240 --> 00:19:29,970
saying that the US should stop trading.

369
00:19:31,020 --> 00:19:33,150
You are actually seeing
the opposite thing.

370
00:19:34,230 --> 00:19:38,490
You're actually seeing, you want
more globalization, not less of it.

371
00:19:39,210 --> 00:19:44,580
And this is where a lot of Trump fans,
a lot of Trump supporters who do want

372
00:19:44,580 --> 00:19:51,000
to glisten their biceps in some like
factory floor, you know, just hammering

373
00:19:51,000 --> 00:19:56,580
away at a, at a widget, I'm gonna tell
them that's not what Donald Trump wants.

374
00:19:56,610 --> 00:20:00,810
He actually wants more globalization
because a lot of these reciprocal

375
00:20:00,810 --> 00:20:07,560
tariffs are actually designed to get
other countries to become fair so that

376
00:20:07,560 --> 00:20:10,020
the trade can benefit all countries.

377
00:20:10,379 --> 00:20:14,340
Particularly can benefit them in those
sectors where they're really good at.

378
00:20:15,270 --> 00:20:21,899
Um, and so what I would say is that
I think that the US is going to,

379
00:20:21,899 --> 00:20:26,820
uh, um, what, what basically what
the, the case I'm making here is

380
00:20:26,820 --> 00:20:32,100
that if globalization is actually
unfettered with tariff barriers to

381
00:20:32,100 --> 00:20:37,110
trade with currency manipulation, it
will actually produce very positive

382
00:20:37,110 --> 00:20:38,820
outcomes for pretty much everyone.

383
00:20:38,970 --> 00:20:40,409
It will rise all the boats.

384
00:20:40,860 --> 00:20:45,270
So it's not the globalization failed,
it's that in the early two thousands

385
00:20:46,080 --> 00:20:51,659
and the 1990s, the US didn't, when it
had preponderance of power, it didn't

386
00:20:51,899 --> 00:20:54,060
push other countries to open up fully.

387
00:20:55,139 --> 00:20:56,129
And so that's the irony.

388
00:20:56,669 --> 00:21:01,230
President Trump could both be right, but
the outcome that he's gonna get is not

389
00:21:01,230 --> 00:21:02,730
going to be what his supporters think.

390
00:21:03,149 --> 00:21:07,305
The US will not open up
manufacturing shops for bicycles.

391
00:21:08,955 --> 00:21:14,534
He probably is not going to increase
manufacturing as percent of labor at all.

392
00:21:15,254 --> 00:21:20,264
In fact, if trade is free and fair, the
US is going to export a lot of things that

393
00:21:20,264 --> 00:21:25,905
many of his supporters probably believe
is for quote unquote Girly Men services.

394
00:21:26,205 --> 00:21:31,334
That's what the US has a huge advantage
in and US is going to continue to

395
00:21:31,334 --> 00:21:34,155
crush in exporting its service sector.

396
00:21:34,155 --> 00:21:39,465
That means a lot of software, that means
a lot of, uh, banking, insurance, you

397
00:21:39,465 --> 00:21:43,995
know, entertainment, movies, the NBA
Hollywood, all sorts of things that

398
00:21:44,534 --> 00:21:50,595
the US is good at is actually not the
stuff that, um, his supporters believe

399
00:21:50,595 --> 00:21:52,215
he's gonna bring back to America.

400
00:21:52,245 --> 00:21:58,455
And he's not, because if you actually make
globalization work for the US it will only

401
00:21:58,455 --> 00:22:00,405
accentuate things that the US is good at.

402
00:22:01,215 --> 00:22:05,834
Now why don't I think that the US is going
to be able to, um, become more competitive

403
00:22:06,405 --> 00:22:12,195
in manufacturing and here because I
think there's a lot of things that goes

404
00:22:12,195 --> 00:22:16,875
into being competitive in manufacturing
and it's not just being unfair.

405
00:22:17,595 --> 00:22:21,314
Uh, when I think of Germany and why
Germany is so good at manufacturing,

406
00:22:21,945 --> 00:22:27,794
uh, first and foremost, they have really
good trade schools that educate people

407
00:22:27,794 --> 00:22:30,735
on how to be, uh, manufacturing workers.

408
00:22:31,125 --> 00:22:34,095
But I think there's also a culture,
there's a cultural element where there's

409
00:22:34,095 --> 00:22:41,564
a pride in metallurgical professionalism
in Germany, in other words, working

410
00:22:41,865 --> 00:22:48,435
in a false fogging, you know, factory
is not necessarily seen as a negative.

411
00:22:49,459 --> 00:22:54,524
And, and the reason for that is that
healthcare and education are free.

412
00:22:56,670 --> 00:22:57,060
Now.

413
00:22:57,180 --> 00:23:00,660
Now I know I've lost all of our Republican
listeners, but just hear me out.

414
00:23:01,710 --> 00:23:09,630
If you have a very advanced and high
quality social welfare system going out

415
00:23:09,630 --> 00:23:15,270
and just being a manufacturing worker is
not a bad thing because you don't really

416
00:23:15,270 --> 00:23:16,890
care about where your kids are gonna go.

417
00:23:16,890 --> 00:23:20,040
If they're smart, they're not gonna
end up in a factory right next to you.

418
00:23:20,670 --> 00:23:23,820
If they're smart, they're just gonna go
to a university and it's gonna be free.

419
00:23:24,840 --> 00:23:31,315
So the need to constantly generate high
income in order to deliver outcomes

420
00:23:31,375 --> 00:23:36,150
for your family, that consists with
middle class, it's not really needed

421
00:23:36,300 --> 00:23:40,500
in a society that has extremely
well run social welfare state.

422
00:23:40,500 --> 00:23:45,480
And I do think that that also supports
German, Germany and its ability to

423
00:23:45,480 --> 00:23:49,800
be a manufacturing power because if
you, if you have the ability for your

424
00:23:49,800 --> 00:23:53,160
kids to basically determine their own
future, whether they're gonna be next

425
00:23:53,160 --> 00:23:54,955
to you on an assembly line or not, um.

426
00:23:56,400 --> 00:24:02,370
Based, based on the quality of education
of universities, of healthcare, then

427
00:24:02,370 --> 00:24:05,850
I do think you might choose to go
to an assembly line and work there.

428
00:24:06,210 --> 00:24:09,300
Just, you know, nine to
five shift work and so on.

429
00:24:10,050 --> 00:24:14,040
So I'm not sure if the US can really
compete with that, to be quite frank with

430
00:24:14,040 --> 00:24:18,540
you, I think that just throwing up tariffs
in order to protect your domestic industry

431
00:24:18,540 --> 00:24:23,130
is going to lead to you protecting
your own industry that's gonna work.

432
00:24:23,550 --> 00:24:27,360
You're gonna produce cars that are
crap that nobody in the world wants to

433
00:24:27,510 --> 00:24:32,550
build because you didn't gain advantage
through productivity, through innovation

434
00:24:32,550 --> 00:24:35,130
and to the quality of your labor force.

435
00:24:35,490 --> 00:24:38,670
What you did is you produced a
fake advantage using tariffs.

436
00:24:39,480 --> 00:24:43,920
And so if the US sticks to that
strategy when it comes to cars,

437
00:24:44,610 --> 00:24:45,840
it's going to fall behind.

438
00:24:46,830 --> 00:24:50,040
Uh, economists call this
import substitution, Google

439
00:24:50,040 --> 00:24:51,840
it, read Wikipedia pages on it.

440
00:24:52,290 --> 00:24:53,220
A lot of countries did it.

441
00:24:53,370 --> 00:24:53,880
It failed.

442
00:24:54,254 --> 00:24:56,985
It fails because it leads to
high, lower quality products.

443
00:24:57,645 --> 00:25:01,455
Um, and I think if the US wanted to
become a manufacturing powerhouse,

444
00:25:01,754 --> 00:25:08,625
then it would probably have to create
a lifestyle, a culture that makes

445
00:25:08,625 --> 00:25:11,115
people wanna be assembly line workers.

446
00:25:11,534 --> 00:25:15,195
And, uh, I don't think that just paying
them $60 an hour is gonna do that.

447
00:25:15,915 --> 00:25:21,165
I, I'm not sure that's gonna, that's gonna
be enough because the Germans do that.

448
00:25:21,405 --> 00:25:25,335
Plus they have all sorts of
benefits that are associated with

449
00:25:25,335 --> 00:25:26,985
just being lower middle class.

450
00:25:27,195 --> 00:25:28,485
Your life is amazing.

451
00:25:28,695 --> 00:25:29,415
You're fine.

452
00:25:30,375 --> 00:25:33,585
Um, so anyways, I'm gonna, I think
I'm gonna stop there and I'm gonna

453
00:25:33,610 --> 00:25:35,115
let you cook on the other side.

454
00:25:36,345 --> 00:25:39,525
Jacob Shapiro: Yes, I think you've,
I think you, I thought that my task

455
00:25:39,525 --> 00:25:43,725
was gonna be harder, but I actually
think in listening to you, uh, argue

456
00:25:43,725 --> 00:25:47,835
the pro case for globalization, I
actually understand a lot better why

457
00:25:47,835 --> 00:25:52,575
politically it's hard to make that case
because, um, I thank you for spending

458
00:25:52,575 --> 00:25:55,995
the first half of your justification
praising the virtues of tariffs.

459
00:25:56,085 --> 00:25:59,595
It seems that even an advocate of
globalization can't help but spend

460
00:25:59,595 --> 00:26:04,035
the first part of his argument talking
about actually the inherent virtues

461
00:26:04,035 --> 00:26:06,645
of protectionism and tariffs and the
very things that we're talking about,

462
00:26:06,645 --> 00:26:10,335
which I think points towards why
globalization is actually the wrong way

463
00:26:10,335 --> 00:26:13,455
to think about how the United States
should be engaging with the world.

464
00:26:13,725 --> 00:26:17,565
I think the most important thing
missing from your full throated

465
00:26:17,565 --> 00:26:20,475
defense of globalization is a sense of.

466
00:26:20,510 --> 00:26:21,260
Context.

467
00:26:21,290 --> 00:26:23,120
You sort of got to it at
the end of your remarks.

468
00:26:23,120 --> 00:26:26,720
You talked about when the United States
had a preponderance of power, that it

469
00:26:26,720 --> 00:26:30,800
did not open up markets up sufficiently,
but this is precisely the point.

470
00:26:31,160 --> 00:26:35,270
The United States no longer has a
preponderance of power in the world.

471
00:26:35,270 --> 00:26:38,840
We might argue that the only time that
the United States had a true preponderance

472
00:26:38,840 --> 00:26:41,555
of power was from 1990 to 2001.

473
00:26:42,210 --> 00:26:45,930
During that time period, you can
say safely, there is no communism.

474
00:26:46,200 --> 00:26:49,800
There is no ism, there is no
rival, there is no Jihadism.

475
00:26:49,800 --> 00:26:53,460
There was an 11 year period there
where the United States was the

476
00:26:53,460 --> 00:26:58,860
unquestioned military, uh, political,
economic, cultural power in the world.

477
00:26:58,860 --> 00:27:02,760
And what the United States said went,
if you were Sloan Milovich and your

478
00:27:02,760 --> 00:27:05,730
old stomping grounds, and you went
against what the United States wanted,

479
00:27:05,910 --> 00:27:07,320
you got the shit bombed out of you.

480
00:27:07,320 --> 00:27:10,410
And if a Chinese embassy was bombed
in the course of that sucks to be you.

481
00:27:10,410 --> 00:27:12,870
China, the United States is
doing whatever the fuck it wants.

482
00:27:13,110 --> 00:27:16,620
If there's a genocide inside Rwanda,
if militants are doing weird things

483
00:27:16,620 --> 00:27:20,580
inside of Somalia, um, okay, like the
United States is not like this, the

484
00:27:20,580 --> 00:27:22,080
United States is going to come find you.

485
00:27:22,080 --> 00:27:25,860
If you start talking about nuclear weapons
and you're, you're in the axis of evil.

486
00:27:25,860 --> 00:27:27,810
I mean, that starts to
get outside of 2001.

487
00:27:27,840 --> 00:27:30,600
The United States has this role
where it's gonna push for you.

488
00:27:30,600 --> 00:27:31,800
And in that context.

489
00:27:32,445 --> 00:27:35,955
Globalization makes perfect sense
because you are not afraid of anyone.

490
00:27:36,285 --> 00:27:37,635
There are no competitors.

491
00:27:37,635 --> 00:27:40,575
There is nobody that is coming for
you, nobody that can marshal any

492
00:27:40,575 --> 00:27:42,255
kind of attack on your resources.

493
00:27:42,285 --> 00:27:47,055
And it makes sense to restrict access
to the most closely held intellectual

494
00:27:47,055 --> 00:27:50,745
property, but to diversify the
construction of all the different

495
00:27:50,745 --> 00:27:52,035
widgets that you talked about.

496
00:27:52,215 --> 00:27:55,905
So it's no longer an issue where steel is
coming from or where you're gonna get your

497
00:27:55,905 --> 00:27:58,005
bicycle because the Soviet union's gone.

498
00:27:58,065 --> 00:27:59,925
We're not hiding underneath
our desks anymore.

499
00:27:59,925 --> 00:28:03,285
And there's a billion Chinese people
who wanna make these products for a

500
00:28:03,285 --> 00:28:06,345
fraction of the cost that they could
be made for in the United States.

501
00:28:06,525 --> 00:28:10,245
So let's let the Chinese people and
all the slave labor in the world make

502
00:28:10,245 --> 00:28:12,165
these things for the American consumer.

503
00:28:12,165 --> 00:28:14,505
And the American consumer gets
more money in their pocket.

504
00:28:14,715 --> 00:28:19,725
They get to listen to nineties music and
everything is going fine now since 2001.

505
00:28:20,025 --> 00:28:22,365
That is not the world that the
United States has lived in.

506
00:28:22,725 --> 00:28:26,595
And because the United States is so
generous and magnanimous in its spirit,

507
00:28:26,595 --> 00:28:28,515
it has taken the United States decades.

508
00:28:28,575 --> 00:28:33,705
To wake up to the fact that there are
threats, that the 11 years of the giddy

509
00:28:33,705 --> 00:28:37,215
springtime of the bourgeoisie was not
accepted by the rest of the world.

510
00:28:37,215 --> 00:28:40,215
The end of history was a joke, so it
started with the jihadist and then

511
00:28:40,215 --> 00:28:44,085
Russia decided we want Mother Russia
back, and then Xi Jinping came in

512
00:28:44,085 --> 00:28:45,645
China, you start going down the list.

513
00:28:45,645 --> 00:28:48,795
All of these different challenges to
the United States, and these were not

514
00:28:48,795 --> 00:28:51,045
just ephemeral passing challenges.

515
00:28:51,225 --> 00:28:53,025
These were true existential challenges.

516
00:28:53,700 --> 00:28:56,939
And at this moment, all of these
different actors start taking

517
00:28:56,939 --> 00:28:58,350
advantage of the United States.

518
00:28:58,350 --> 00:29:01,260
The Jihadists did it by taking
advantage of US military power.

519
00:29:01,320 --> 00:29:04,830
They wanted the US to come bomb Iraq
and Afghanistan so that they could

520
00:29:04,830 --> 00:29:08,730
use this as, as an example of how to
spin up, uh, jihadism in their own

521
00:29:08,730 --> 00:29:11,700
region, see the great Satan coming
to bomb us and things like that.

522
00:29:12,120 --> 00:29:17,129
Um, Russia taking advantage of its cheap
energy supplies, getting Europe dependent

523
00:29:17,129 --> 00:29:20,340
on it, pushing into parts of Eastern
Europe, they didn't, knows the west

524
00:29:20,340 --> 00:29:23,490
didn't give a shit about and saying, okay,
we'll take this part of Georgia back and

525
00:29:23,490 --> 00:29:25,200
we'll take this part of Ukraine back.

526
00:29:25,200 --> 00:29:28,620
And nobody was gonna care because
nobody's, nobody was gonna push China.

527
00:29:28,620 --> 00:29:29,939
Slowly but surely.

528
00:29:30,120 --> 00:29:33,540
Not just manufacturing things and making
its population a little bit richer,

529
00:29:33,540 --> 00:29:37,080
but stealing intellectual property and
to your point, propping up domestic

530
00:29:37,080 --> 00:29:40,889
industries, violating all the rules
of the order that it joined, um, that

531
00:29:40,889 --> 00:29:42,840
allowed it to participate in this process.

532
00:29:42,840 --> 00:29:44,490
It was obviously not a good faith effort.

533
00:29:44,820 --> 00:29:49,830
So we have moved now to a more inherently
competitive and multipolar and.

534
00:29:50,080 --> 00:29:53,889
FRAUGHT world where the United States
is under threat, where we have enemies

535
00:29:53,919 --> 00:29:57,760
who want to attack us, and if we have
enemies who want to attack us, it no

536
00:29:57,760 --> 00:30:02,379
longer matters what price you can buy a
bicycle for or how much your iPhone costs.

537
00:30:02,530 --> 00:30:05,560
We need to make sure that the
United States can defend itself.

538
00:30:06,330 --> 00:30:10,590
It is unfortunate that the rest of the
world could not sign on to US ideals,

539
00:30:10,590 --> 00:30:12,000
but that is unfortunately where we are.

540
00:30:12,000 --> 00:30:15,330
And in that moment, it means that
we do have to protect industry in

541
00:30:15,330 --> 00:30:17,790
the United States because we have
to make things here ourselves.

542
00:30:17,820 --> 00:30:21,419
It would be nice if a billion
chin Chinese people would continue

543
00:30:21,419 --> 00:30:23,940
to make things for us, but we've
seen that they can't be trusted.

544
00:30:24,000 --> 00:30:25,710
Look at how they treat
the people in Xinjiang.

545
00:30:25,710 --> 00:30:27,180
Look at what they're doing with Taiwan.

546
00:30:27,180 --> 00:30:28,440
Look at what they did to Hong Kong.

547
00:30:28,770 --> 00:30:32,580
This is not a nation that can be trusted,
so it absolutely behooves us to come back

548
00:30:32,580 --> 00:30:34,169
and breathe, bring these things together.

549
00:30:34,500 --> 00:30:38,250
As for tariffs, tariffs are very
simply a tool in this toolkit.

550
00:30:38,280 --> 00:30:39,540
They are just a simple thing.

551
00:30:39,570 --> 00:30:42,899
They are attacks, and it means that we
don't want to import things from abroad

552
00:30:42,899 --> 00:30:46,080
because if you just leave the consumer to
themselves and there's a cheaper product

553
00:30:46,080 --> 00:30:49,680
on the shelves from China or from Russia
or from somewhere else, they will buy it.

554
00:30:49,680 --> 00:30:53,070
So the tariff means, okay, you're not
gonna buy from those different countries.

555
00:30:53,310 --> 00:30:56,790
We're gonna rebuild industry inside
the United States when we are looking

556
00:30:56,790 --> 00:30:58,620
back for historical context here.

557
00:30:59,190 --> 00:31:01,980
That 10, 11 years of US
dominance is not normal.

558
00:31:02,310 --> 00:31:03,450
We thought it was exceptional.

559
00:31:03,450 --> 00:31:07,530
We thought it would continue on forever,
but most of the history of the 18th, 19th,

560
00:31:07,530 --> 00:31:11,760
and 20th century shows us that actually
you need a form of protectionism in

561
00:31:11,760 --> 00:31:13,650
order to become a great industrial power.

562
00:31:13,890 --> 00:31:16,740
Think of Great Britain from 1760 to 1840.

563
00:31:16,950 --> 00:31:19,110
What was one of the first things
the British government did?

564
00:31:19,110 --> 00:31:22,500
Once it realized that the Industrial
Revolution was upon it, and that it had

565
00:31:23,310 --> 00:31:27,450
fundamental advantages over France and
other countries, it forbade the export

566
00:31:27,450 --> 00:31:31,080
of machinery and other things that were
critical to the industrial revolution

567
00:31:31,080 --> 00:31:34,710
so that it could capitalize on that
opportunity for as long as possible.

568
00:31:35,040 --> 00:31:38,460
What happened in the United States
in the 1890s after the Civil

569
00:31:38,460 --> 00:31:40,200
War and the rise of US industry?

570
00:31:40,470 --> 00:31:44,580
William McKinley, a self-professed
tariff man comes to power and protects

571
00:31:44,820 --> 00:31:49,110
us industry so that it, it can continue
its ascent along global value chain so

572
00:31:49,110 --> 00:31:52,590
that the south can be industrialized
after the war, and that leads.

573
00:31:53,355 --> 00:31:58,695
Two US Victory and World Wars One and
two, US military power was defined not by

574
00:31:58,695 --> 00:32:01,665
the fact that we just woke up one morning
and could make fighter jets, but because

575
00:32:01,665 --> 00:32:06,074
somebody like William McKinley protected
US domestic industry in the 1890s because

576
00:32:06,074 --> 00:32:07,695
he saw the world that was in front of him.

577
00:32:08,054 --> 00:32:09,225
You mentioned Germany today.

578
00:32:09,225 --> 00:32:10,004
Think about Germany.

579
00:32:10,004 --> 00:32:13,665
In the 1930s, we don't talk about this
because it's politically incorrect to

580
00:32:13,665 --> 00:32:17,294
do so, but before Hitler tried to take
over the world, he was actually doing

581
00:32:17,294 --> 00:32:19,274
incredible things for the German economy.

582
00:32:19,574 --> 00:32:23,115
One of the first things that he did
when he became chancellor was erect

583
00:32:23,145 --> 00:32:25,574
tariffs to protect German industry.

584
00:32:25,995 --> 00:32:28,725
Germany was not known as a
manufacturing superpower.

585
00:32:28,725 --> 00:32:31,365
Pre 1930s, the British were
the ones who made things.

586
00:32:31,365 --> 00:32:33,105
The Americans were the
one who made things.

587
00:32:33,105 --> 00:32:37,725
That reputation of German metallurgical
genius and manliness happens

588
00:32:37,725 --> 00:32:42,554
because the Nazis build factories
and incentivize German companies

589
00:32:42,554 --> 00:32:44,625
to build things inside of Germany.

590
00:32:44,925 --> 00:32:45,975
That's where it happens.

591
00:32:45,975 --> 00:32:49,485
And Germany, of course, went off the
deep end in its ideological fervor,

592
00:32:49,635 --> 00:32:51,675
but almost conquered the entire world.

593
00:32:51,675 --> 00:32:55,875
A small country of 50, 60 million people,
whatever it was, because they protected

594
00:32:55,875 --> 00:32:58,395
their industry and because they knew
they needed to protect themselves.

595
00:32:58,605 --> 00:33:03,524
I think also of the United States in
the 1960s and the 1970s, we talk often

596
00:33:03,524 --> 00:33:08,115
about the Vietnam war and social,
uh, dysfunction and rising deficits.

597
00:33:08,115 --> 00:33:11,385
And Lyndon b Johnson, what really
happened in the 1960s and seventies,

598
00:33:11,385 --> 00:33:13,395
the big success case was the space race.

599
00:33:13,815 --> 00:33:17,595
The United States decided that it needed
to win the space race at all costs, and

600
00:33:17,595 --> 00:33:22,004
so it incentivized and protected a US
space industry That literally gave us

601
00:33:22,004 --> 00:33:25,065
most of the technological innovation
that we interact with today because the

602
00:33:25,065 --> 00:33:26,715
United States government supported it.

603
00:33:27,045 --> 00:33:30,825
So I would tell you that as the
person who is speaking pro tariffs

604
00:33:30,825 --> 00:33:34,185
right now, that the main problem
with the Trump administration is that

605
00:33:34,185 --> 00:33:36,135
it is not going nearly far enough.

606
00:33:36,555 --> 00:33:39,285
In fact, it is doing a fairly wimpy and.

607
00:33:40,020 --> 00:33:43,320
Namby-pamby approach to
how tariffs should be done.

608
00:33:43,560 --> 00:33:46,379
And if I was advising President Trump
right now on tariffs, I would say

609
00:33:46,379 --> 00:33:50,580
President Trump, go further and go
further, specifically in these ways.

610
00:33:50,820 --> 00:33:53,010
Number one, don't listen to Elon.

611
00:33:53,310 --> 00:33:57,030
Don't listen to Cousin Marco about how
you need to be fiscally conservative.

612
00:33:57,060 --> 00:33:59,580
You need to spend more, way more.

613
00:33:59,669 --> 00:34:03,600
You need operation warp speed on ship
building and active pharmaceutical

614
00:34:03,600 --> 00:34:08,100
ingredients and bicycles and every other
fucking thing, because we can't afford

615
00:34:08,100 --> 00:34:13,259
to have these things from China and from
India and from these WY Europeans anymore.

616
00:34:13,830 --> 00:34:15,389
God forbid other places in the world.

617
00:34:15,389 --> 00:34:16,650
We need to build this capacity.

618
00:34:16,860 --> 00:34:20,969
We need to pay the American worker
as much as possible that they enjoy

619
00:34:20,969 --> 00:34:22,889
smelting on the floor of that factory.

620
00:34:22,889 --> 00:34:27,029
Maybe it's not 60 an hour, maybe it's
130 an hour, maybe it's 200 an hour.

621
00:34:27,029 --> 00:34:28,110
It's all funny money.

622
00:34:28,319 --> 00:34:29,279
It needs to be spent.

623
00:34:29,580 --> 00:34:32,069
That means also more fiscal stimulus.

624
00:34:32,310 --> 00:34:33,779
Now that doesn't mean ad nauseum.

625
00:34:33,779 --> 00:34:34,710
If you put people.

626
00:34:35,310 --> 00:34:36,150
On the tit forever.

627
00:34:36,150 --> 00:34:37,320
They'll probably stay there forever.

628
00:34:37,320 --> 00:34:41,159
But maybe we say for the next five to
10 years, while we are in an economic

629
00:34:41,340 --> 00:34:45,179
conflict for the existential future of
our country, we will have a universal

630
00:34:45,179 --> 00:34:48,870
basic income for the next eight
years so that every person can live.

631
00:34:48,870 --> 00:34:51,270
As we go through some of
these disruptions, tariffs,

632
00:34:51,300 --> 00:34:52,170
we need more of them.

633
00:34:52,350 --> 00:34:55,650
They need to be higher, they need to
be tighter, they need to be enforced

634
00:34:55,650 --> 00:34:58,500
incredibly strictly, because we
can't have people get around them.

635
00:34:58,770 --> 00:35:03,030
No, Mr. Nvidia, CEO, you don't get to
come to Saudi Arabia and whisper sweet

636
00:35:03,030 --> 00:35:06,240
nothings into President Trump's ear
and get around some of these things and

637
00:35:06,240 --> 00:35:08,070
export your chips to China in the future.

638
00:35:08,250 --> 00:35:09,330
Absolutely not.

639
00:35:09,510 --> 00:35:10,980
Tariffs are ironclad.

640
00:35:10,980 --> 00:35:14,460
There is a great wall of America that
we will erect so that these products

641
00:35:14,610 --> 00:35:16,380
do not get inside of the United States.

642
00:35:16,530 --> 00:35:18,870
Here's the one that's really
difficult for you, Mr. Trump, and

643
00:35:18,870 --> 00:35:23,280
it was, uh, articulated by Steve
Bannon just yesterday in a podcast,

644
00:35:23,700 --> 00:35:24,930
you wanna balance the deficit.

645
00:35:24,930 --> 00:35:26,310
You want to pay for some of these things.

646
00:35:26,310 --> 00:35:28,380
Yes, tariffs will pay for
these things in the long run.

647
00:35:28,380 --> 00:35:30,900
You know what you have to do
first, you have to tax the rich.

648
00:35:31,575 --> 00:35:33,975
And I know you don't wanna do
that, but this is an existential

649
00:35:33,975 --> 00:35:34,935
battle for our future.

650
00:35:34,935 --> 00:35:38,654
And if the working man is sacrificing
his ideals of what his future was

651
00:35:38,654 --> 00:35:41,565
going to be by going and smelting on
the factory floor, then the rich are

652
00:35:41,565 --> 00:35:42,855
gonna have to pay for some of this.

653
00:35:42,915 --> 00:35:46,695
Now, 1890s, William McKinley,
there was no income tax.

654
00:35:46,785 --> 00:35:50,325
So maybe we can get to a world in
which the income tax also goes away,

655
00:35:50,325 --> 00:35:52,815
in which all these other tariffs
and things like that pay for that.

656
00:35:53,055 --> 00:35:57,165
So alongside that temporary universal
income, maybe there should be a temporary

657
00:35:57,165 --> 00:36:02,115
income tax that is set at the 60 to 70%
level that sunsets in 10 years time.

658
00:36:02,175 --> 00:36:05,535
And then we have no income tax in this
country that we are building towards a

659
00:36:05,535 --> 00:36:09,555
better future in this country where we
make things in this country in conjunction

660
00:36:09,555 --> 00:36:13,275
with our allies and those countries
that wanna do us harm can no longer do.

661
00:36:13,275 --> 00:36:13,605
So.

662
00:36:13,904 --> 00:36:16,815
Last but not least, the
problem of universities.

663
00:36:17,549 --> 00:36:21,660
There should be government dispensation
to pay for any American student

664
00:36:21,660 --> 00:36:25,350
who wants to go to a university,
who wants to participate in either

665
00:36:25,350 --> 00:36:29,460
energy, artificial intelligence,
biotech, or any of the trades.

666
00:36:29,580 --> 00:36:32,279
If you want to go to school for
any of things, any of those things

667
00:36:32,279 --> 00:36:34,710
in the United States, not only
will you incur no debt, the United

668
00:36:34,710 --> 00:36:36,480
States government will pay for you.

669
00:36:36,779 --> 00:36:38,520
That is what the United
States government should do.

670
00:36:38,759 --> 00:36:42,330
If you want to go study comparative
literature and all sorts of

671
00:36:42,330 --> 00:36:43,710
other fun things, that's fine.

672
00:36:43,710 --> 00:36:46,319
You're gonna have to pay double for
the privilege of doing those things.

673
00:36:46,319 --> 00:36:48,210
This is not a liberal arts
world that we're living in.

674
00:36:48,210 --> 00:36:51,690
We're living in a real multipolar
geopolitical world in general.

675
00:36:51,779 --> 00:36:54,540
And Marco, I'll close my
statement with just this.

676
00:36:54,750 --> 00:36:56,520
I know the data says globalization.

677
00:36:56,700 --> 00:36:59,460
The data also said that the Boston
Celtics, when they played the New

678
00:36:59,460 --> 00:37:03,299
York Knicks, should just continue to
hoist up threes and try and isolate

679
00:37:03,299 --> 00:37:06,569
Jalen Brunson over and over and
over again, because eventually the

680
00:37:06,569 --> 00:37:08,190
data was gonna bend in their way.

681
00:37:08,460 --> 00:37:11,165
But that I. That is playing with the lead.

682
00:37:11,194 --> 00:37:13,325
And the United States cannot do that.

683
00:37:13,325 --> 00:37:16,115
If the United States is gonna move
forward as the most powerful country

684
00:37:16,115 --> 00:37:19,895
in the world, if America is going to
be great again, it has to keep pushing.

685
00:37:20,075 --> 00:37:25,025
Don't be the Boston Celtics and the
first two games of the Eastern Conference

686
00:37:25,025 --> 00:37:29,435
semifinals instead, think of the Oklahoma
City Thunder, or of the Denver Nuggets,

687
00:37:29,435 --> 00:37:33,365
or any of these other teams that continue
to grind, innovate, push, push, push.

688
00:37:33,365 --> 00:37:36,995
'cause if you just think you're gonna
continue to hoist up threes and get

689
00:37:36,995 --> 00:37:40,535
slave labor to build your fancy things
in other countries abroad, you're

690
00:37:40,535 --> 00:37:41,855
gonna be in for a rude awakening.

691
00:37:42,065 --> 00:37:46,025
When China says, actually
this is the Gulf of Beijing.

692
00:37:46,535 --> 00:37:46,835
Ah, mic drop.

693
00:37:48,005 --> 00:37:48,545
Bam.

694
00:37:48,545 --> 00:37:49,025
I did it.

695
00:37:49,535 --> 00:37:50,045
Do you like it?

696
00:37:50,045 --> 00:37:50,075
Okay.

697
00:37:50,075 --> 00:37:50,734
I feel dirty.

698
00:37:52,895 --> 00:37:54,904
Marko Papic: Well, I mean, first of all,
the reason it's not mic drop because

699
00:37:54,904 --> 00:37:57,035
it, uh, avoids basic mathematics.

700
00:37:58,444 --> 00:38:00,755
Jacob Shapiro: Oh, you, you wouldn't
let things like basic mathematics

701
00:38:00,755 --> 00:38:01,714
get in the way here, would you?

702
00:38:02,525 --> 00:38:02,734
Marko Papic: Yeah.

703
00:38:02,734 --> 00:38:06,154
So, so the funny thing about
tariffs is that if you want

704
00:38:06,154 --> 00:38:07,625
tariffs to actually raise revenue.

705
00:38:08,520 --> 00:38:12,210
You have to have Divo
levels of pro-globalization.

706
00:38:16,290 --> 00:38:21,299
So if you want tariffs to pay
for anything, you have to be more

707
00:38:21,299 --> 00:38:24,779
pro-globalization than a Davos man.

708
00:38:24,900 --> 00:38:25,740
Mm-hmm.

709
00:38:25,980 --> 00:38:28,080
Otherwise they will raise no revenue.

710
00:38:29,545 --> 00:38:30,035
Jacob Shapiro: Exactly.

711
00:38:30,299 --> 00:38:30,540
Right.

712
00:38:30,540 --> 00:38:33,210
Which is why President Trump
is not going far enough.

713
00:38:33,240 --> 00:38:35,970
If you unrealistically think that
tariffs today are gonna pay for

714
00:38:35,970 --> 00:38:37,410
these things, it's not going to work.

715
00:38:38,100 --> 00:38:39,930
If you're gonna have the, the
tariffs, you're also gonna have

716
00:38:39,930 --> 00:38:44,610
to find ways in the short run to,
uh, account for the shortfalls

717
00:38:44,610 --> 00:38:44,819
Marko Papic: that Right.

718
00:38:44,935 --> 00:38:45,055
Right.

719
00:38:45,390 --> 00:38:46,740
Well, no, but, but they will never work.

720
00:38:46,740 --> 00:38:47,100
Right.

721
00:38:47,100 --> 00:38:52,200
Because like, again, if the purpose
of tariffs is to move production

722
00:38:52,259 --> 00:38:57,900
of widgets and bicycles to the US,
tariffs will not raise revenue.

723
00:39:00,135 --> 00:39:01,995
They will move production to the us.

724
00:39:02,505 --> 00:39:03,015
Jacob Shapiro: Exactly.

725
00:39:03,015 --> 00:39:05,805
And then once that production is
moved to the United States and we

726
00:39:05,805 --> 00:39:09,795
are growing, uh, at the top line and
productivity is booming and everybody

727
00:39:09,795 --> 00:39:12,675
wants our products and there's gonna
be paying all sorts of other things,

728
00:39:12,675 --> 00:39:15,315
the case that's, well then there are
all other sorts of ways to do this.

729
00:39:15,405 --> 00:39:15,615
Yeah.

730
00:39:15,795 --> 00:39:16,665
Marko Papic: And then that doesn't happen.

731
00:39:17,980 --> 00:39:18,280
Why not?

732
00:39:18,830 --> 00:39:23,175
Because you moved things to
the US because you protected

733
00:39:23,235 --> 00:39:25,095
the price level of your goods.

734
00:39:25,125 --> 00:39:26,955
You didn't actually
improve them in quality.

735
00:39:28,215 --> 00:39:31,035
And so nobody actually
will want your goods.

736
00:39:31,365 --> 00:39:35,655
And the US is 20% of global
GDP, which is a lot, but there's

737
00:39:35,745 --> 00:39:37,695
80% of the rest of the world.

738
00:39:38,535 --> 00:39:42,075
And the only way that the US
can win in that world is if

739
00:39:42,165 --> 00:39:46,335
everybody else also launches a
trade war against everybody else.

740
00:39:46,365 --> 00:39:46,455
Mm-hmm.

741
00:39:46,695 --> 00:39:51,495
Maybe, maybe, maybe in that world,
the US market being the largest market

742
00:39:51,495 --> 00:39:54,225
in the world, will still produce
enough competition domestically

743
00:39:54,225 --> 00:39:56,085
to produce the best bicycles.

744
00:39:57,585 --> 00:39:59,235
It requires a lot of maybes.

745
00:39:59,535 --> 00:40:03,075
So in other words, this is
where the tariff thing doesn't

746
00:40:03,525 --> 00:40:04,665
mathematically make sense.

747
00:40:04,665 --> 00:40:08,384
First of all, if you want to raise
revenue for the country, then you

748
00:40:08,384 --> 00:40:12,675
have to continue trading, and that's
where the 10% across the board tariff

749
00:40:13,305 --> 00:40:14,685
that nobody talks about anymore.

750
00:40:15,585 --> 00:40:15,675
Jacob Shapiro: Mm-hmm.

751
00:40:16,005 --> 00:40:16,215
Yeah,

752
00:40:16,605 --> 00:40:17,680
Marko Papic: we've all forgotten it.

753
00:40:18,285 --> 00:40:21,915
But the 10% across the board tariff that
President Trump also imposed on April

754
00:40:21,915 --> 00:40:29,415
2nd is low enough to, well, for most
goods, it's low enough to allow trades

755
00:40:29,415 --> 00:40:35,355
to continue, but that also means that as
that trade continues, you can actually

756
00:40:35,355 --> 00:40:37,905
raise revenue by taring that trade.

757
00:40:38,685 --> 00:40:43,095
If you impose a 40 or 30% tariff
on goods, goods will not come in.

758
00:40:43,095 --> 00:40:44,265
You will not raise any revenue.

759
00:40:44,265 --> 00:40:47,265
You cannot impose a tax on a transaction.

760
00:40:47,265 --> 00:40:48,045
That doesn't happen.

761
00:40:48,990 --> 00:40:54,120
So I think that that's where some
tariffs can make a difference

762
00:40:54,120 --> 00:40:55,200
from a revenue perspective.

763
00:40:55,680 --> 00:40:59,040
But protecting industry, the problem
with protective industry, protecting

764
00:40:59,040 --> 00:41:03,930
industry is that your domestic competitors
then don't have any incentive to

765
00:41:03,930 --> 00:41:05,070
compete with the rest of the world.

766
00:41:06,240 --> 00:41:11,040
So if somebody abroad creates
a better bicycle than you, you

767
00:41:11,040 --> 00:41:12,330
will never get that bicycle.

768
00:41:12,360 --> 00:41:17,490
And by the way, this, this has happened a
lot in American history, for example, why

769
00:41:17,490 --> 00:41:21,960
do American car companies and our friend
Tim, actually agreed with me on this one.

770
00:41:21,960 --> 00:41:26,160
So, uh, this, this whole debate here
was prompted by one of our listeners

771
00:41:26,160 --> 00:41:28,560
who said, Hey, some good things
are happening in manufacturing.

772
00:41:29,070 --> 00:41:33,510
But when I countered that tariffs
would eventually lead to a complete

773
00:41:33,510 --> 00:41:36,450
destruction of American car
industry, he did not really disagree.

774
00:41:37,530 --> 00:41:42,720
One of the reasons that American car
companies produce absolutely terrible

775
00:41:42,750 --> 00:41:47,190
vehicles that nobody in the rest
of the world wants to drive Facts.

776
00:41:48,270 --> 00:41:54,000
The reason is that they, they, they've
just overproduced pickup trucks because

777
00:41:54,000 --> 00:41:58,859
throughout the history of the US there's
been ebbs and flows in protectionism of

778
00:41:58,859 --> 00:42:02,250
the car industry, and the car companies
became quite uncompetitive globally.

779
00:42:03,540 --> 00:42:05,910
They're also perfectly fine
with the domestic market.

780
00:42:06,480 --> 00:42:09,779
The domestic market, as far as
they're concerned, is big enough.

781
00:42:10,709 --> 00:42:14,609
Trucks, pickup trucks have higher
profit margins than sedans, and so they

782
00:42:14,609 --> 00:42:16,770
just became a pickup truck company.

783
00:42:16,770 --> 00:42:18,180
They cannot build a sedan.

784
00:42:19,020 --> 00:42:23,669
American car companies have lost the
ability, the technological ability

785
00:42:23,669 --> 00:42:26,939
to build a sedan, and that's what
happens when you become overly

786
00:42:27,000 --> 00:42:28,830
indexed to a particular marketplace.

787
00:42:29,009 --> 00:42:30,870
Another example of this
is washing machines.

788
00:42:31,470 --> 00:42:35,759
When I first used moved to the US
in 2000 and uh, six, I was like

789
00:42:35,759 --> 00:42:39,149
frustrated by this obsession with
top loading washing machines.

790
00:42:39,149 --> 00:42:40,379
I was like, this is idiotic.

791
00:42:41,250 --> 00:42:41,549
Why?

792
00:42:41,549 --> 00:42:44,339
Because side loading, washing
machines are more efficient.

793
00:42:44,370 --> 00:42:46,109
They wash clothes much better.

794
00:42:46,589 --> 00:42:50,670
You're not just sitting there in
that shitty water and uh, and they're

795
00:42:50,670 --> 00:42:52,410
just like better pieces of equipment.

796
00:42:52,410 --> 00:42:53,279
And then what happened?

797
00:42:53,279 --> 00:42:56,759
Lo and behold, today you can't even buy
a top loading washing machine and lights.

798
00:42:56,759 --> 00:42:57,420
You look for one.

799
00:42:57,930 --> 00:42:58,830
This is technology.

800
00:42:58,830 --> 00:43:02,970
We in Europe, in Europe had in the
sixties, Americans were just like,

801
00:43:02,970 --> 00:43:06,540
nah, we like top loading 'cause
I don't wanna bend or whatever.

802
00:43:07,020 --> 00:43:11,250
The point is, if you become overly
focused on your own domestic

803
00:43:11,250 --> 00:43:13,049
market, you can miss innovation.

804
00:43:13,049 --> 00:43:14,100
It can just pass you by.

805
00:43:14,160 --> 00:43:14,970
That's what Terrace would do.

806
00:43:15,000 --> 00:43:17,370
Now, a couple of things that
I would disagree as well.

807
00:43:17,879 --> 00:43:22,950
The main premise, your main premise,
but also of those who think that

808
00:43:22,950 --> 00:43:26,910
this moment is gone is this idea
that if something doesn't work and

809
00:43:26,910 --> 00:43:28,230
you keep doing it, you're an idiot.

810
00:43:28,230 --> 00:43:28,470
Right?

811
00:43:28,470 --> 00:43:30,450
Like the Boston Celtics
with the three pointers.

812
00:43:31,410 --> 00:43:34,890
So from 1990 to 2001, US
had preponderance of power.

813
00:43:35,220 --> 00:43:35,910
It missed it.

814
00:43:35,910 --> 00:43:36,420
It's over.

815
00:43:36,420 --> 00:43:37,379
That moment is gone.

816
00:43:38,430 --> 00:43:41,669
That's a really, really interesting
argument, Jacob, that it's not just

817
00:43:41,669 --> 00:43:44,970
Stephen Bannon who would argue it,
it's also many on the left and may

818
00:43:45,000 --> 00:43:48,899
many establishment and centrist
say, look, we missed the moment.

819
00:43:49,740 --> 00:43:54,480
I think that us still has something going
for it that is really powerful in trade

820
00:43:54,480 --> 00:43:56,430
negotiations and its access to its market.

821
00:43:56,745 --> 00:43:57,165
Mm-hmm.

822
00:43:58,325 --> 00:44:00,750
Because it's the largest
market in the world still.

823
00:44:01,259 --> 00:44:05,580
And so, no, I do think that the world
can still be improved in terms of

824
00:44:05,580 --> 00:44:10,890
efficiency of trade, uh, but again, not
necessarily for American manufacturing.

825
00:44:11,069 --> 00:44:16,049
This is where I do disagree with your,
your counter, with our friend Tim.

826
00:44:16,055 --> 00:44:19,649
Definitely with Steven Bannon
not for American manufacturing.

827
00:44:19,680 --> 00:44:21,359
I don't think that's
where the advantage is.

828
00:44:21,359 --> 00:44:23,939
I think the advantage is in services,
but here's why I don't care.

829
00:44:24,180 --> 00:44:28,799
Your example of United Kingdom, uh,
in the early 19th century preventing

830
00:44:29,430 --> 00:44:31,410
export of industrial machinery.

831
00:44:31,410 --> 00:44:31,830
I love it.

832
00:44:31,890 --> 00:44:32,759
Deep reference.

833
00:44:32,759 --> 00:44:35,085
I. Also, it didn't work at all.

834
00:44:36,040 --> 00:44:36,540
Jacob Shapiro: No, it didn't.

835
00:44:36,540 --> 00:44:36,859
It never worked.

836
00:44:36,859 --> 00:44:36,861
No.

837
00:44:36,915 --> 00:44:37,665
What do you mean it didn't work?

838
00:44:37,669 --> 00:44:38,504
No, it didn't work.

839
00:44:39,165 --> 00:44:39,794
It did work.

840
00:44:40,065 --> 00:44:40,299
No, it didn't.

841
00:44:40,305 --> 00:44:42,194
They won, they won the
Industrial Revolution.

842
00:44:42,765 --> 00:44:44,475
Marko Papic: Uh, no they didn't.

843
00:44:45,165 --> 00:44:47,475
Sure they did mean they didn't.

844
00:44:47,475 --> 00:44:47,984
The Industrial Revolution spread.

845
00:44:47,984 --> 00:44:49,575
In fact, British, the United, yes,

846
00:44:49,605 --> 00:44:50,384
Jacob Shapiro: it spread, it spread

847
00:44:50,384 --> 00:44:55,274
Marko Papic: more slowly as a result by
1871 No, but, but 1871 Germany Unified

848
00:44:55,274 --> 00:44:57,075
by 1890, it was basically Oh, yeah.

849
00:44:57,495 --> 00:44:58,125
Jacob Shapiro: Out producing.

850
00:44:58,904 --> 00:44:59,774
But that, so, but that
wasn't the time period.

851
00:44:59,774 --> 00:45:03,254
I was talking, I was talking
about from 1760 to about 1840.

852
00:45:03,464 --> 00:45:06,884
Like that was the, and really British
protectionism really starts to kick

853
00:45:06,884 --> 00:45:10,095
in at the end of that cycle because
they realize things are pushing on and

854
00:45:10,095 --> 00:45:14,220
they want to extend the window of the
empire as long as possible, but Right.

855
00:45:14,220 --> 00:45:17,745
But it starts, the power starts with
being able to manufacture things in your

856
00:45:17,745 --> 00:45:19,095
own country better than everyone else.

857
00:45:19,095 --> 00:45:21,794
And that's what allows you to defeat
Napoleon and blah, blah, blah.

858
00:45:22,455 --> 00:45:22,850
Marko Papic: No, no, no.

859
00:45:22,855 --> 00:45:25,964
But this, this is after Napoleon, right?

860
00:45:26,654 --> 00:45:26,865
Sure.

861
00:45:26,870 --> 00:45:30,674
Like, and I mean, like, like other
countries start industrializing.

862
00:45:30,735 --> 00:45:32,400
And they started industrializing.

863
00:45:32,400 --> 00:45:32,560
Yeah,

864
00:45:32,715 --> 00:45:33,105
Jacob Shapiro: I hear you.

865
00:45:33,105 --> 00:45:36,435
The, the, the point I was making
there in my, and again, like this is

866
00:45:36,435 --> 00:45:38,565
the devil's advocate, Jake, I'm gonna
take, I'm gonna take off my devil

867
00:45:38,565 --> 00:45:39,855
devil's advocate hat here in a second.

868
00:45:39,855 --> 00:45:43,545
But the, the point of the argument
was that, uh, the British Empire

869
00:45:43,545 --> 00:45:46,875
does not exist if Great Britain
is not at the forefront of

870
00:45:46,875 --> 00:45:49,425
manufacturing from 1760 to 1840.

871
00:45:49,425 --> 00:45:50,085
So I agree with that.

872
00:45:50,115 --> 00:45:54,885
Having a domestic manufacturing capacity
is what allowed it to become an empire.

873
00:45:54,885 --> 00:45:58,845
And so you can't put a price tag
on building that capacity at home.

874
00:45:58,845 --> 00:46:01,365
Does the math say you shouldn't have
done that and done free trade and

875
00:46:01,365 --> 00:46:03,165
traded with Napoleon and everybody else?

876
00:46:03,495 --> 00:46:04,035
Sure.

877
00:46:04,035 --> 00:46:08,235
But when the chips were down and you had
existential wars for your survival, boy

878
00:46:08,235 --> 00:46:11,475
was it nice that you made all the shit
quicker and more efficiently, uh, more

879
00:46:11,475 --> 00:46:14,385
efficiently and better than everyone
else, even if the math didn't work.

880
00:46:14,595 --> 00:46:17,865
Marko Papic: So my point was just
that industrialization did spread

881
00:46:18,225 --> 00:46:23,145
and the biggest risk, the biggest
risks of preventing technology from

882
00:46:23,145 --> 00:46:26,775
going outside of your country is that
you create necessity that produces.

883
00:46:27,195 --> 00:46:28,995
Even greater innovation
in the rest of the world.

884
00:46:29,595 --> 00:46:32,355
And we've seen that that
was really the reason UK

885
00:46:32,535 --> 00:46:34,125
industrialized in the first place.

886
00:46:35,055 --> 00:46:37,634
It was the fact that the United
Kingdom had an energy crisis,

887
00:46:38,025 --> 00:46:40,125
had lost access to trees.

888
00:46:40,634 --> 00:46:43,215
It deforested its own island.

889
00:46:43,845 --> 00:46:47,475
And what happened was coal and
then moving coal like necessities,

890
00:46:47,535 --> 00:46:48,375
the mother of invention.

891
00:46:48,375 --> 00:46:50,205
And so that's one of the problems.

892
00:46:50,210 --> 00:46:50,600
Mm-hmm.

893
00:46:50,685 --> 00:46:54,855
The second issue is that
we are not in 1820 or 1840.

894
00:46:54,855 --> 00:46:56,145
We're in 2025.

895
00:46:56,625 --> 00:47:02,445
The example of, uh, McKinley leading to
America industrial power in the Second

896
00:47:02,445 --> 00:47:05,325
World War is a stretch, my friend.

897
00:47:06,315 --> 00:47:07,680
No, that's not how it happened.

898
00:47:08,320 --> 00:47:11,715
McKinley did not lay the seeds
for industrial prowess of

899
00:47:11,715 --> 00:47:12,975
America in the Second World War.

900
00:47:13,180 --> 00:47:16,935
The, the reason that happened is that the
US went on war footing on a war economy.

901
00:47:16,935 --> 00:47:25,095
So I agree with the idea that
you should retain some baseline.

902
00:47:25,950 --> 00:47:30,480
Industrial capacity and
industrial capability, right?

903
00:47:30,540 --> 00:47:32,490
So I, I don't disagree with that at all.

904
00:47:32,940 --> 00:47:37,470
However, when, when war starts,
you go into a war footing economy.

905
00:47:37,470 --> 00:47:41,790
You don't have to be producing crappy
cars that nobody in the world wants.

906
00:47:42,150 --> 00:47:46,710
You just have to have the ability to
produce cars if shit hits the fan.

907
00:47:46,920 --> 00:47:48,960
And that's what's happening in every
of these conflicts, by the way.

908
00:47:49,440 --> 00:47:52,290
But, but more than that, I'm not
sure that the next war is gonna be

909
00:47:52,290 --> 00:47:54,810
about tanks and aircraft carriers.

910
00:47:54,810 --> 00:47:57,540
We're seeing what's, what's
happening in Ukraine versus Russia

911
00:47:58,140 --> 00:47:59,820
is a very interesting example.

912
00:47:59,850 --> 00:48:04,920
Uh, I encourage our, uh, viewers
to watch YouTube clips of the

913
00:48:04,920 --> 00:48:06,660
drone conflict that's going on.

914
00:48:07,170 --> 00:48:09,060
It's a lot of small innovation.

915
00:48:09,660 --> 00:48:12,240
Um, I, I quite frankly,
I mean, look at Ukraine.

916
00:48:12,240 --> 00:48:13,410
Ukraine, uh, Ukraine.

917
00:48:13,560 --> 00:48:16,560
Listen, Ukraine was definitely an
industrialized economy for sure.

918
00:48:17,310 --> 00:48:23,310
The hake region in particular
in the east, um, you know, even

919
00:48:23,310 --> 00:48:24,900
dunes with some of the mining.

920
00:48:24,900 --> 00:48:28,590
But like, the reality is that,
you know, we're not gonna, like

921
00:48:28,980 --> 00:48:30,630
nobody was buying Ukrainian cars.

922
00:48:31,920 --> 00:48:35,820
Ukraine had some baseline level
of industrial competency and it

923
00:48:35,820 --> 00:48:37,440
ratcheted that up in a conflict.

924
00:48:37,500 --> 00:48:41,250
But most of the innovation happening
on that battleground is not what

925
00:48:41,255 --> 00:48:45,360
it, it doesn't involve glistening
sweat on an assembly line.

926
00:48:47,160 --> 00:48:51,480
It involves small electronic innovation.

927
00:48:51,570 --> 00:48:55,050
And so the drone, uh, innovation is
actually what's winning that war.

928
00:48:55,050 --> 00:48:58,740
So I'm not so sure that, you
know, you, you need to basically

929
00:48:58,740 --> 00:49:03,090
like reassure absolutely every
single piece of manufacturing.

930
00:49:03,090 --> 00:49:04,530
You just have to leave some baseline.

931
00:49:05,040 --> 00:49:06,180
Um, but yeah.

932
00:49:06,240 --> 00:49:11,820
Uh, one thing that I will say is
that, uh, where the critics of

933
00:49:11,820 --> 00:49:16,140
globalization are right, is that those
early deals from 1990 to 2001, were.

934
00:49:16,575 --> 00:49:17,895
We're onerous for the US.

935
00:49:17,895 --> 00:49:21,855
And one thing I wanna say about that is
that there's two ways to think about it.

936
00:49:22,904 --> 00:49:28,515
One is that a hegemon will always
negotiate generously, right?

937
00:49:28,575 --> 00:49:30,765
So that's, that's where
we talk about naivete.

938
00:49:31,455 --> 00:49:35,024
Naivete of the Clinton administration
of the Bush Senior and Bush,

939
00:49:35,024 --> 00:49:37,484
Jr. They were naive, right?

940
00:49:37,484 --> 00:49:38,174
Supposedly.

941
00:49:38,265 --> 00:49:38,384
Mm-hmm.

942
00:49:38,625 --> 00:49:42,105
Well, not necessarily, they were
running a hegemon in the greatest

943
00:49:42,105 --> 00:49:43,274
power in of the country, in the world.

944
00:49:43,274 --> 00:49:44,339
So they were going to negotiate.

945
00:49:44,339 --> 00:49:44,595
They, they were

946
00:49:44,595 --> 00:49:47,444
Jacob Shapiro: idealistic and they
should have been like we were all

947
00:49:47,444 --> 00:49:48,794
idealistic at that time period.

948
00:49:48,915 --> 00:49:49,484
Marko Papic: That, that's true.

949
00:49:49,484 --> 00:49:52,035
But you are also, you are also
the, you are also in charge.

950
00:49:52,035 --> 00:49:56,055
So some country comes to you and says,
we want access to the American market,

951
00:49:56,085 --> 00:49:57,404
but we're gonna protect our own.

952
00:49:57,674 --> 00:49:59,865
You're like, eh, it's fine.

953
00:50:00,915 --> 00:50:02,714
Just abide by our rules.

954
00:50:03,015 --> 00:50:08,085
So you negotiate generously and they get
a lot of flack for that from the Stephen

955
00:50:08,085 --> 00:50:09,495
Bannons and the anti-globalization.

956
00:50:09,495 --> 00:50:09,915
It's fine.

957
00:50:09,915 --> 00:50:11,265
Like they should get flack for that.

958
00:50:11,745 --> 00:50:14,055
But here's what America didn't have to do.

959
00:50:14,775 --> 00:50:17,595
I understand why America negotiated
generously with the rest of

960
00:50:17,595 --> 00:50:21,705
the world, but here's where
the actual ideology comes from.

961
00:50:23,355 --> 00:50:29,565
It was when America didn't redistribute
the gains of globalization domestically.

962
00:50:30,405 --> 00:50:35,115
This entire narrative that this is
somebody else's fault that America

963
00:50:35,115 --> 00:50:37,365
was taking for a ride is ideological.

964
00:50:38,505 --> 00:50:42,315
And I'm sad that you had to sit through
49 minutes to get to the crux of this,

965
00:50:42,315 --> 00:50:44,325
but this is the crux, my friends.

966
00:50:44,955 --> 00:50:46,155
Yes, you too, Steven.

967
00:50:46,305 --> 00:50:49,275
Oh, now you're calling for
taxes and they're wealthy.

968
00:50:49,365 --> 00:50:50,325
Okay, buddy.

969
00:50:50,445 --> 00:50:53,955
Now that most of it's probably in
some Swiss private bank, shut up.

970
00:50:54,555 --> 00:50:57,675
I'll tell you what the problem
was and where the ideology was.

971
00:50:58,845 --> 00:51:04,515
The ideology was not that like America let
China take it for a ride and was naive.

972
00:51:04,515 --> 00:51:04,845
No, no, no, no.

973
00:51:06,600 --> 00:51:11,340
Don't sit here and pretend to me that
American corporates didn't like absolutely

974
00:51:11,340 --> 00:51:14,370
bathe in profits thanks to globalization.

975
00:51:15,240 --> 00:51:18,660
Don't tell me that this did not
increase American GDP massively, or the

976
00:51:18,660 --> 00:51:20,550
America didn't profit the most it did.

977
00:51:20,610 --> 00:51:27,900
We can quantify, prove on any, any
metric that the only country that

978
00:51:27,900 --> 00:51:33,720
crushed that period of supposed
American Navy TE was America.

979
00:51:34,230 --> 00:51:36,660
America absolutely crushed
the rest of the world.

980
00:51:36,690 --> 00:51:42,930
I witnessed with my own eyes,
Jacob Shapiro, a line in Ahman

981
00:51:42,930 --> 00:51:45,360
Jordan for McDonald's in 1994.

982
00:51:45,360 --> 00:51:47,070
That was three days long.

983
00:51:48,000 --> 00:51:52,860
The line to eat a cheeseburger was
not three hours long, three days long.

984
00:51:53,340 --> 00:51:57,480
I witnessed the opening of first
McDonald's in Belgrade, Yugoslavia.

985
00:51:58,110 --> 00:52:01,500
I was there for this, and it
was American corporations that

986
00:52:01,530 --> 00:52:07,110
absolutely bathed themselves in
cash thanks to the supposed naivete.

987
00:52:07,650 --> 00:52:11,310
So the real question that American
public should ask themselves is

988
00:52:11,310 --> 00:52:15,600
not, is not like, how much did
Germany take us for a ride or China?

989
00:52:16,170 --> 00:52:17,790
Or why weren't we mean to them?

990
00:52:17,790 --> 00:52:22,950
The real question is, why didn't we
redistribute the gains of globalization?

991
00:52:22,950 --> 00:52:26,850
Why isn't my education in this
country high quality and free?

992
00:52:28,260 --> 00:52:31,560
Why isn't my healthcare like affordable?

993
00:52:32,160 --> 00:52:37,560
You know, because, because that's
the real problem when people

994
00:52:37,560 --> 00:52:39,960
have lost faith in globalization.

995
00:52:39,960 --> 00:52:42,660
You know, like Scott Besant, the
Treasury Secretary, I think, or maybe

996
00:52:42,660 --> 00:52:46,890
it was Howard Lutnick, said, look, um,
the American dream is not cheap goods.

997
00:52:47,850 --> 00:52:48,210
Alright?

998
00:52:48,570 --> 00:52:48,810
Okay.

999
00:52:48,810 --> 00:52:49,470
I get that.

1000
00:52:50,070 --> 00:52:51,000
I agree with you.

1001
00:52:51,390 --> 00:52:52,980
I see what he's saying.

1002
00:52:52,980 --> 00:52:55,650
Like if goods were a little bit
more expensive, that's fine.

1003
00:52:55,950 --> 00:53:00,870
But the American dream Dream does
mean equality of opportunity and

1004
00:53:00,870 --> 00:53:06,270
there was a whole lot of profits
and money made off of globalization

1005
00:53:06,360 --> 00:53:11,910
in America that never, ever got
redistributed to the rest of Americans.

1006
00:53:12,480 --> 00:53:15,810
And that is the fundamental
problem with the us.

1007
00:53:15,810 --> 00:53:19,560
It's not globalization, it's not other
countries taking America for a ride.

1008
00:53:19,920 --> 00:53:23,070
It's not naivete on the
geopolitical foreign policy front.

1009
00:53:23,100 --> 00:53:29,640
It's just a fact that fundamentally the
ideology here was less fair capitalism

1010
00:53:29,640 --> 00:53:33,000
of steroids, where corporates will
make the profits and then, you know,

1011
00:53:33,210 --> 00:53:35,070
we'll just stay with shareholders.

1012
00:53:36,750 --> 00:53:40,830
And if that had been addressed,
had that been addressed, Americas

1013
00:53:40,830 --> 00:53:45,120
would be perfectly fine with their
non-manufacturing low middle class jobs

1014
00:53:45,120 --> 00:53:48,990
because they would have public spaces
to go to that are nice and green.

1015
00:53:49,635 --> 00:53:56,205
It would have their kids going to
cheap public universities, and they

1016
00:53:56,205 --> 00:53:59,770
would have probably much better access
to healthcare than they have now.

1017
00:54:00,540 --> 00:54:02,490
Jacob Shapiro: See, I told
you the Marxist would like us.

1018
00:54:02,490 --> 00:54:05,430
We got talk, got to talking about
redistributing American wealth.

1019
00:54:05,490 --> 00:54:07,770
And I think in some ways, the original
sin of what you're talking about,

1020
00:54:07,770 --> 00:54:10,740
the opportunity to do this, and this
actually cuts with the auto companies,

1021
00:54:11,100 --> 00:54:15,900
is 2008 and the way that companies were
bailed out in the context of the 2008

1022
00:54:15,900 --> 00:54:17,640
financial crisis by the US government.

1023
00:54:17,640 --> 00:54:20,940
Some companies that were bailed out,
whether it was automakers or whether

1024
00:54:20,940 --> 00:54:23,670
it was, you know, a IG or some of these
other, like they should have failed.

1025
00:54:24,000 --> 00:54:25,920
And the US government wasn't
willing to let them fail.

1026
00:54:25,920 --> 00:54:28,230
It wanted the party to keep going.

1027
00:54:28,230 --> 00:54:32,070
And in some sense, I think since
2008, the party has kept going even

1028
00:54:32,070 --> 00:54:36,750
though at that moment, I think you
can forgive Bush Clinton, even second

1029
00:54:36,750 --> 00:54:40,590
bush, you know, for, for indulging
in idealism during that period.

1030
00:54:40,590 --> 00:54:45,000
But by 2008, the writing was on the
wall and most mainstream American

1031
00:54:45,000 --> 00:54:47,730
politicians on both sides of the
aisle wanted to keep playing.

1032
00:54:47,730 --> 00:54:49,140
Like the game was still going.

1033
00:54:49,260 --> 00:54:52,530
And now the position is where we're now
I'm gonna officially take off my, you

1034
00:54:52,530 --> 00:54:55,050
know, I, I was doing devil's advocate,
full throated defense for Terrace.

1035
00:54:55,050 --> 00:54:56,940
That is surprise not what I think.

1036
00:54:56,970 --> 00:54:58,890
Um, it's actually fun to argue
something that you don't.

1037
00:54:59,505 --> 00:55:00,075
I actually believe him.

1038
00:55:00,075 --> 00:55:03,134
But there are a couple of things I
wanna say, um, to, to what you said.

1039
00:55:03,435 --> 00:55:07,634
The first was that, um, I think you're
e exactly right, that you actually,

1040
00:55:07,694 --> 00:55:12,765
no matter how hard I tried, I cannot
defend tariffs or protectionism with

1041
00:55:12,765 --> 00:55:16,005
math in the sense that I can't say
that it's going to make America richer.

1042
00:55:16,485 --> 00:55:20,715
Um, I actually pulled some studies about,
uh, president Trump's 2018 steel and

1043
00:55:20,715 --> 00:55:23,835
aluminum tariffs doing some work for a,
a client on something related to this.

1044
00:55:23,835 --> 00:55:28,665
And if you look at the impact of the
2008 steel aluminum, uh, 2018 steel

1045
00:55:28,995 --> 00:55:32,355
and aluminum tariffs, which Trump just
doubled down on here in the past week

1046
00:55:32,355 --> 00:55:37,215
or two, uh, basically they reduced
employment in the steel and aluminum

1047
00:55:37,215 --> 00:55:38,670
industries in the United States.

1048
00:55:38,930 --> 00:55:40,069
Prices rose.

1049
00:55:40,530 --> 00:55:44,490
Production rose a couple percentage
point, and imports also fell because the

1050
00:55:44,490 --> 00:55:48,210
prices for these inputs were higher and
put bigger strains on American companies.

1051
00:55:48,540 --> 00:55:51,270
So actually in this case, it's an
example of how tariffs actually does.

1052
00:55:51,270 --> 00:55:54,330
None of the things that you want them
to do, they don't even give you the

1053
00:55:54,330 --> 00:55:56,970
thing that you think you're gonna
get and you're still also poisoning

1054
00:55:56,970 --> 00:55:58,140
the well with trust in general.

1055
00:55:58,410 --> 00:56:01,530
It's why I say if you're going to
make a defense, uh, an argument that

1056
00:56:01,530 --> 00:56:05,250
defends tariffs or protectionism in
general, you have to move the goalposts.

1057
00:56:05,430 --> 00:56:08,190
You have to say, this is not
about economic growth right now.

1058
00:56:08,220 --> 00:56:11,400
This is about a battle for our lives and
this is where your comments about the war

1059
00:56:11,400 --> 00:56:13,650
footing thing acts your Very interesting.

1060
00:56:13,890 --> 00:56:17,610
Do you know when the first income tax
was charged in the United States when

1061
00:56:17,610 --> 00:56:20,880
the federal government first levied
an income tax on the US population

1062
00:56:21,475 --> 00:56:22,115
Marko Papic: 1917.

1063
00:56:23,444 --> 00:56:24,734
Jacob Shapiro: 1862.

1064
00:56:25,035 --> 00:56:29,145
In the context of the Civil War, the, the
North Levies of Federal income tax, it

1065
00:56:29,145 --> 00:56:31,305
gets repealed after the Civil War ends.

1066
00:56:31,544 --> 00:56:34,694
When McKinley is president,
there is no income tax.

1067
00:56:34,694 --> 00:56:34,964
Of course.

1068
00:56:34,964 --> 00:56:35,024
Yeah.

1069
00:56:35,024 --> 00:56:40,455
So from roughly 1873 to 1913 with
the 16th Amendment, 1913, no income.

1070
00:56:41,145 --> 00:56:43,065
There's no income tax
in the United States.

1071
00:56:43,125 --> 00:56:47,355
And of course, shortly thereafter, you
get World War I and the United States,

1072
00:56:47,355 --> 00:56:48,855
to your point, is on a war footing.

1073
00:56:48,855 --> 00:56:51,345
So I take your point that, you know,
I'm, I'm really stretching there.

1074
00:56:51,345 --> 00:56:55,005
I'm doing a lot of downward facing
dog, uh, getting from William McKinley

1075
00:56:55,005 --> 00:56:56,655
all the way to, to World War ii.

1076
00:56:56,955 --> 00:57:02,235
But that said, uh, Woodrow Wilson flips
the switch on the war footing, and he

1077
00:57:02,235 --> 00:57:04,785
has an economy that can respond to it.

1078
00:57:04,995 --> 00:57:07,575
And I think this is the one real
kernel of truth, because I think if

1079
00:57:07,575 --> 00:57:11,145
you were going to be, if you were
gonna flip the switch today, you and I

1080
00:57:11,145 --> 00:57:12,615
don't know how to manufacture things.

1081
00:57:12,615 --> 00:57:14,925
And most people in this country
don't know how to manufacture things.

1082
00:57:14,925 --> 00:57:20,145
Whereas our rivals like China will
out manufacture us in a second flat.

1083
00:57:20,235 --> 00:57:21,885
We can't build an
aircraft carrier quickly.

1084
00:57:21,885 --> 00:57:25,335
They'll build a thousand drones that'll
knock out the one, you know, the carriers

1085
00:57:25,335 --> 00:57:27,225
that we have in, that's five seconds.

1086
00:57:27,225 --> 00:57:28,485
So like, I think there's this What?

1087
00:57:28,785 --> 00:57:29,235
Yeah, go ahead.

1088
00:57:29,565 --> 00:57:33,945
Marko Papic: But what you just said
is important because the fact that

1089
00:57:33,945 --> 00:57:36,675
they're gonna build a thousand drones
to our aircraft carrier is not a

1090
00:57:36,855 --> 00:57:39,705
function of industrial metallurgical.

1091
00:57:40,200 --> 00:57:41,070
Capabilities.

1092
00:57:41,640 --> 00:57:46,770
It's the fact that war itself has
changed away from those very expensive

1093
00:57:46,770 --> 00:57:51,720
platforms that require you to
manufacture an assembly line tanks.

1094
00:57:51,810 --> 00:57:55,980
Remember when we all debated whether
Ukraine should receive Maine battle tanks?

1095
00:57:56,400 --> 00:57:59,430
When was the last time anybody
talked about Maine battle tanks

1096
00:57:59,580 --> 00:58:01,440
as critical to Ukrainian security?

1097
00:58:01,920 --> 00:58:03,450
Like that ended with 2022.

1098
00:58:03,450 --> 00:58:07,590
By the way, all of those tanks have been
destroyed by the Russians, just like all

1099
00:58:07,590 --> 00:58:08,850
the Russian tanks have been destroyed.

1100
00:58:08,850 --> 00:58:13,890
So the, the, the, the features of war
have also changed, and I would say that

1101
00:58:13,890 --> 00:58:19,050
the United States of America possesses
actually sufficient industrial capacity.

1102
00:58:19,110 --> 00:58:22,140
It is one of the largest producers
of aircraft in the world.

1103
00:58:22,140 --> 00:58:26,280
I think you will continue to
need aircraft, and I don't think

1104
00:58:26,280 --> 00:58:29,190
tanks and really even ships.

1105
00:58:29,400 --> 00:58:31,020
I mean, submarines are very important.

1106
00:58:31,020 --> 00:58:34,500
And again, the United States does
possess the ability to build the best

1107
00:58:34,500 --> 00:58:36,120
submarines in the world, more or less.

1108
00:58:36,975 --> 00:58:39,315
Maybe not the diesel kind that
are maybe cheaper and even

1109
00:58:39,315 --> 00:58:40,725
quieter, but fine, whatever.

1110
00:58:41,535 --> 00:58:43,485
But it's really the
drones that are happening.

1111
00:58:43,485 --> 00:58:46,575
And so that's where I would also
go further and say like trying to

1112
00:58:46,575 --> 00:58:52,605
preserve late 19th century, early 20th
century industrial capacity is not

1113
00:58:52,605 --> 00:58:54,495
going to matter for the 21st century.

1114
00:58:55,815 --> 00:58:57,975
Jacob Shapiro: Yeah, I take your
point there, but, and, and this goes

1115
00:58:57,975 --> 00:58:59,505
back to again, you can't defend.

1116
00:59:00,705 --> 00:59:04,334
Protectionist policies and tariffs as
if you're trying to get something back.

1117
00:59:04,334 --> 00:59:07,154
You have to say, this capacity
doesn't exist anymore and we

1118
00:59:07,154 --> 00:59:08,504
have to build this capacity here.

1119
00:59:08,685 --> 00:59:10,484
You're exactly right On, on drones.

1120
00:59:10,484 --> 00:59:13,995
And actually, um, this is something
that China's experiencing itself,

1121
00:59:13,995 --> 00:59:17,115
like some of the scuttlebutt I've
heard is that Chinese manufacturing

1122
00:59:17,115 --> 00:59:18,705
laborers are losing their jobs.

1123
00:59:18,705 --> 00:59:22,004
Not to Vietnam or to Ethiopia
or anybody else robots, but to.

1124
00:59:22,240 --> 00:59:23,050
To robots.

1125
00:59:23,050 --> 00:59:24,460
It's happening in China itself.

1126
00:59:24,880 --> 00:59:25,120
Of course.

1127
00:59:25,120 --> 00:59:25,124
And you know what?

1128
00:59:25,124 --> 00:59:27,130
Of course China's ahead on robots too.

1129
00:59:27,580 --> 00:59:29,950
It is, and this is the point where I would
push back against you, like when it comes

1130
00:59:29,950 --> 00:59:34,750
to where things are made in the world,
they are made in China, whether it's

1131
00:59:34,750 --> 00:59:38,560
active pharmaceutical ingredients, whether
it's increasingly sort of the lower end

1132
00:59:38,560 --> 00:59:41,200
chips that you need for semiconductors,
whether it's the stuff that goes

1133
00:59:41,200 --> 00:59:44,950
into the robot that gets created, all
of these things are made in China.

1134
00:59:45,130 --> 00:59:46,840
They are not made in the United States.

1135
00:59:46,900 --> 00:59:49,660
And the real problem for the United
States, this is why I was asking you

1136
00:59:49,660 --> 00:59:52,540
that trivia question about income taxes,
because I didn't know this myself.

1137
00:59:52,750 --> 00:59:57,340
Basically, since 1913, the
US has been on a war footing.

1138
00:59:57,670 --> 01:00:01,930
We never turned the switch off from the
war footing, and we kept on taxing the

1139
01:00:01,930 --> 01:00:04,570
population and doing all these other
things as if we were on a war footing.

1140
01:00:04,570 --> 01:00:07,570
And yes, it hid behind the
rising complexity of government

1141
01:00:07,570 --> 01:00:10,180
and the Great Depression and
the new deal, yada, yada, yada.

1142
01:00:10,390 --> 01:00:14,830
But fundamentally, we have been
spending to maintain our lifestyle.

1143
01:00:15,170 --> 01:00:17,750
That's what globalization,
um, actually maintains.

1144
01:00:17,750 --> 01:00:18,950
And this is why I'm with you.

1145
01:00:19,009 --> 01:00:20,359
I like my lifestyle.

1146
01:00:20,390 --> 01:00:23,630
I like that I'm wearing a silly
shirt with flamingos on it that

1147
01:00:23,630 --> 01:00:27,589
was made in Vietnam that I could
buy for $15 because it was on sale.

1148
01:00:27,650 --> 01:00:29,750
I don't wanna have to go
make this shirt myself.

1149
01:00:29,750 --> 01:00:30,980
It's really, really fun.

1150
01:00:31,310 --> 01:00:34,640
But if you're going to like, make this
argument that we have to make things

1151
01:00:34,640 --> 01:00:38,750
inside of the United States, then what
you're really telling the US population

1152
01:00:38,750 --> 01:00:40,700
is your lifestyle is gonna suck.

1153
01:00:40,700 --> 01:00:43,040
And this is something that Trump
has said a couple times, right?

1154
01:00:43,040 --> 01:00:45,799
He said a couple times your
kid, maybe your kid shouldn't

1155
01:00:45,799 --> 01:00:47,390
have four or five dolls.

1156
01:00:47,509 --> 01:00:47,960
That's right.

1157
01:00:48,020 --> 01:00:48,410
May, may.

1158
01:00:48,440 --> 01:00:50,960
Maybe, maybe you guys need to
tighten the belts a little bit.

1159
01:00:50,960 --> 01:00:53,795
Leave aside hypocrisy of that
and, and everything else.

1160
01:00:53,845 --> 01:00:54,795
Quiet a dial quickly.

1161
01:00:54,930 --> 01:00:55,799
Marko Papic: Yeah, he

1162
01:00:55,799 --> 01:00:56,730
Jacob Shapiro: quieted down quickly.

1163
01:00:56,730 --> 01:00:59,819
But that the, the thing is that like
that's the case that you have to make.

1164
01:00:59,819 --> 01:01:02,160
That's the, if you're defending all
of this, you are making the case

1165
01:01:02,160 --> 01:01:05,910
that you're gonna sacrifice your
lifestyle, which is absolutely upheld by

1166
01:01:05,910 --> 01:01:10,589
globalization in order to have defensive
capacity to fight future battles.

1167
01:01:10,589 --> 01:01:13,020
Well, just, and you can have, have one
or the other, but you can't have both.

1168
01:01:13,259 --> 01:01:13,410
Okay.

1169
01:01:13,500 --> 01:01:13,710
Go.

1170
01:01:13,950 --> 01:01:16,140
Marko Papic: Well, I'm not sure
you, you have to have one or the

1171
01:01:16,140 --> 01:01:19,230
other People in the 1930s had both.

1172
01:01:20,129 --> 01:01:21,330
Again, that's what I mean.

1173
01:01:21,330 --> 01:01:24,720
Like, when the war starts,
you get on war footing.

1174
01:01:25,440 --> 01:01:28,680
You need to retain some
minimum level of capacity.

1175
01:01:29,129 --> 01:01:29,669
Yes.

1176
01:01:29,730 --> 01:01:33,120
That's where I said steal
an aluminum tariffs fine.

1177
01:01:33,419 --> 01:01:36,149
I mean, your point is like,
no, not even fine on that.

1178
01:01:36,149 --> 01:01:42,149
But like, let's look, you can protect
certain industries in order to retain the

1179
01:01:42,149 --> 01:01:45,899
ability, because once the war starts, the
question is can you expand the capacity

1180
01:01:45,899 --> 01:01:49,500
quickly and what America has proven
in the past that yes, it can, it can.

1181
01:01:49,920 --> 01:01:54,000
It can ramp up industrial
capacity in the 1940s.

1182
01:01:54,000 --> 01:01:56,700
The example was with aircraft,
of course, started churning

1183
01:01:56,700 --> 01:01:58,110
out crazy steam with tanks.

1184
01:01:58,620 --> 01:02:00,930
I have no doubt that it
can do that again, but

1185
01:02:00,930 --> 01:02:03,029
Jacob Shapiro: really
that was a long time ago.

1186
01:02:03,029 --> 01:02:04,290
And we don't make things anymore.

1187
01:02:05,250 --> 01:02:09,067
Marko Papic: Uh, we make, uh, the most
sophisticated, the United States of

1188
01:02:09,067 --> 01:02:13,980
America makes the most sophisticated
aerospace aircraft out of anyone.

1189
01:02:14,190 --> 01:02:15,035
Like that's already there.

1190
01:02:15,035 --> 01:02:15,195
Yeah.

1191
01:02:15,195 --> 01:02:18,390
Jacob Shapiro: We can't, we can't make any
of that stuff without importing a lot of

1192
01:02:18,390 --> 01:02:19,795
the inputs that go into these products.

1193
01:02:19,795 --> 01:02:19,915
Okay.

1194
01:02:19,915 --> 01:02:22,830
So that's, we design some of these things
and we've had lots of innovation, but like

1195
01:02:22,830 --> 01:02:26,100
we can't do that vertically integrated
in the United States if we had to.

1196
01:02:26,220 --> 01:02:26,640
No way.

1197
01:02:26,640 --> 01:02:26,759
I, uh,

1198
01:02:28,140 --> 01:02:28,500
Marko Papic: yeah.

1199
01:02:28,500 --> 01:02:29,009
I mean like here.

1200
01:02:29,009 --> 01:02:29,490
No way.

1201
01:02:29,490 --> 01:02:31,290
Jacob Shapiro: There's no way
China, with China go look up

1202
01:02:31,290 --> 01:02:32,190
and down the supply chain.

1203
01:02:32,190 --> 01:02:32,880
We don't do same.

1204
01:02:33,090 --> 01:02:34,710
Marko Papic: But again,
same with China, right?

1205
01:02:34,710 --> 01:02:39,450
They can't produce their main airliner
without engines that are produced abroad.

1206
01:02:39,450 --> 01:02:39,509
I.

1207
01:02:40,870 --> 01:02:41,290
Jacob Shapiro: Engine.

1208
01:02:41,310 --> 01:02:41,430
Yeah.

1209
01:02:41,430 --> 01:02:44,730
Like engines, they're, I bet you
within five to 10 years they will.

1210
01:02:45,270 --> 01:02:45,750
Marko Papic: Okay, fine.

1211
01:02:45,750 --> 01:02:48,030
Jacob Shapiro: Well, well, look, they,
they're, they're on the war footing.

1212
01:02:48,030 --> 01:02:50,670
They are looking at all these things
happening and saying, we need to

1213
01:02:50,670 --> 01:02:52,050
be self-sufficient on these things.

1214
01:02:52,050 --> 01:02:54,840
Whereas this government is
actually not using tariffs.

1215
01:02:54,900 --> 01:02:57,240
The way that I'm talking about, like
your point about tariffs with steel

1216
01:02:57,240 --> 01:03:00,180
and aluminum, like you can't just say,
oh, people aren't treating this right.

1217
01:03:00,180 --> 01:03:01,980
We're gonna do tariffs so
that we get treated fairly.

1218
01:03:01,980 --> 01:03:05,100
No, the, the thing to say is we need to
make steel and aluminum in this country.

1219
01:03:05,160 --> 01:03:08,100
There is no price we won't pay, and
tariffs is a part of that strategy,

1220
01:03:08,100 --> 01:03:10,980
but then there's also a whole host of
other things we're gonna have to do

1221
01:03:11,250 --> 01:03:15,000
in order to rebuild that industry and
retrain workers or robots or whoever

1222
01:03:15,000 --> 01:03:18,180
it is that is gonna be making the steel
and aluminum like, okay, operation

1223
01:03:18,180 --> 01:03:19,590
warp speed for steel and aluminum.

1224
01:03:19,800 --> 01:03:23,970
You're actually exactly right that the
Trump administration is acting very much

1225
01:03:23,970 --> 01:03:28,950
in a globalist mindset, like a tariff, a
very limited tariff on a very narrow like

1226
01:03:28,950 --> 01:03:31,080
band of products that is globalization.

1227
01:03:31,080 --> 01:03:34,110
You're saying you have a trade dispute
that you wanna solve so that everybody

1228
01:03:34,110 --> 01:03:35,520
can go back to trading things.

1229
01:03:35,730 --> 01:03:39,240
Marko Papic: United States of America and
Europe can absolutely produce aircraft.

1230
01:03:40,470 --> 01:03:44,370
Absolutely that Will it
require some pieces of, uh,

1231
01:03:44,400 --> 01:03:47,580
electronics from Italy or Canada?

1232
01:03:47,580 --> 01:03:48,029
Yes.

1233
01:03:48,029 --> 01:03:48,600
That's fine.

1234
01:03:49,020 --> 01:03:49,350
Right.

1235
01:03:49,350 --> 01:03:50,100
Like, it's fine.

1236
01:03:50,400 --> 01:03:57,540
The supply chains don't require
Chinese products for ASML's, highly

1237
01:03:57,600 --> 01:03:59,129
advanced lithographic machines.

1238
01:03:59,129 --> 01:04:00,660
Like they don't mm-hmm.

1239
01:04:00,930 --> 01:04:03,960
China requires lithographic
machines themselves.

1240
01:04:03,990 --> 01:04:04,109
Yeah.

1241
01:04:04,115 --> 01:04:06,450
Jacob Shapiro: They're, they're doing
a good job of getting by on their

1242
01:04:06,450 --> 01:04:07,825
own and also like huawe Absolutely.

1243
01:04:07,825 --> 01:04:09,346
With all it's chip design and
stuff like that, but that's fine.

1244
01:04:09,350 --> 01:04:09,569
But like

1245
01:04:09,569 --> 01:04:10,230
Marko Papic: they're competitor.

1246
01:04:10,230 --> 01:04:10,920
They're gonna get there.

1247
01:04:10,920 --> 01:04:12,930
Look, I'm not saying that
China's not gonna get there.

1248
01:04:12,930 --> 01:04:15,810
I'm just saying that United States
of America can absolutely pro produce

1249
01:04:15,810 --> 01:04:20,549
an aircraft without China and it can
absolutely like find those alternatives.

1250
01:04:20,925 --> 01:04:22,905
Again, war footing means, hold on.

1251
01:04:23,145 --> 01:04:24,015
What kind of aircraft?

1252
01:04:24,255 --> 01:04:25,875
Like a 7 37 or like an

1253
01:04:26,445 --> 01:04:29,145
Jacob Shapiro: F 16 fighter jet with all
the computer systems that go into it.

1254
01:04:29,145 --> 01:04:29,325
Yeah,

1255
01:04:29,325 --> 01:04:29,955
Marko Papic: absolutely.

1256
01:04:29,955 --> 01:04:30,495
Absolutely.

1257
01:04:30,495 --> 01:04:31,875
That's why they suck.

1258
01:04:31,875 --> 01:04:33,855
These are like touch
screen made in Vietnam.

1259
01:04:33,855 --> 01:04:34,035
That's why

1260
01:04:34,035 --> 01:04:34,335
Jacob Shapiro: they suck.

1261
01:04:34,695 --> 01:04:36,435
Marko Papic: No, listen, look,
look, look, look, look, look.

1262
01:04:36,495 --> 01:04:40,005
War footing means whatever you don't
have in your supply chain, you set

1263
01:04:40,005 --> 01:04:41,205
up a factory and you produce it.

1264
01:04:42,105 --> 01:04:46,455
And the question is, do you wanna live
on war footing or do you wanna like

1265
01:04:46,665 --> 01:04:48,375
be on war footing when there's a war?

1266
01:04:49,960 --> 01:04:50,380
Mm-hmm.

1267
01:04:50,465 --> 01:04:51,915
And so that's, that's the question.

1268
01:04:52,005 --> 01:04:55,575
And my question is, and my answer to
that question is like, look, United

1269
01:04:55,575 --> 01:04:59,355
States and uh, American China are
not gonna go to the kind of war where

1270
01:04:59,355 --> 01:05:01,065
you're gonna need to churn out tanks.

1271
01:05:02,325 --> 01:05:05,655
That's not gonna really be the kind
of war it's gonna be over Taiwan.

1272
01:05:06,420 --> 01:05:09,000
United States has enough,
uh, industrial capacity.

1273
01:05:09,000 --> 01:05:11,670
I mean, the United States just
propped up Ukraine against a

1274
01:05:11,670 --> 01:05:14,910
neighbor that doesn't even have a
water between Russia and Ukraine.

1275
01:05:16,350 --> 01:05:17,580
There's no, there's no water.

1276
01:05:17,730 --> 01:05:22,230
The Russians walked into Ukraine, and
yet, somehow, magically, our supposed

1277
01:05:22,230 --> 01:05:28,830
terrible industry that's on the dying
gasp helped arrest the attack by the

1278
01:05:28,830 --> 01:05:32,640
largest mechanized force in human history.

1279
01:05:32,700 --> 01:05:33,270
I, Russian, I'll

1280
01:05:33,270 --> 01:05:34,260
Jacob Shapiro: push back there again too.

1281
01:05:34,260 --> 01:05:36,810
We were, we were using up all the stock
that we didn't use in the Cold War.

1282
01:05:36,810 --> 01:05:38,325
Doesn't matter, we imagine
we were gonna use forever.

1283
01:05:38,355 --> 01:05:38,645
What?

1284
01:05:38,645 --> 01:05:39,600
Like, we're not making that stuff.

1285
01:05:39,600 --> 01:05:42,480
Like we started using, we started sending
them different things because we ran out

1286
01:05:42,480 --> 01:05:43,560
of the stuff that they needed before.

1287
01:05:43,560 --> 01:05:44,850
Marko Papic: Well, then why
didn't they come back with more?

1288
01:05:44,850 --> 01:05:45,300
Thanks.

1289
01:05:46,140 --> 01:05:48,030
I mean, this is like,
I'm sorry, I'm sorry.

1290
01:05:48,030 --> 01:05:52,470
I'm giving an actual empirical example
where the American industry did succeed

1291
01:05:52,470 --> 01:05:55,080
in arresting, and you're telling
me it's not gonna work next time.

1292
01:05:55,080 --> 01:05:55,680
Like, why

1293
01:05:56,160 --> 01:05:58,530
Jacob Shapiro: American industry
did not manufacture those

1294
01:05:58,530 --> 01:05:59,310
things when you needed them.

1295
01:05:59,310 --> 01:05:59,370
The

1296
01:05:59,755 --> 01:06:01,380
Marko Papic: Javelins did not
get manufactured by American

1297
01:06:01,380 --> 01:06:01,800
Jacob Shapiro: industry.

1298
01:06:01,800 --> 01:06:04,770
Ja, yes, yes, the Javelins, but most
of the stuff they sent was stuff that

1299
01:06:04,770 --> 01:06:08,040
was sitting in a warehouse somewhere
that they, they found use for.

1300
01:06:08,250 --> 01:06:10,860
And when they, when they wanted
to spin up more capacity for that,

1301
01:06:10,860 --> 01:06:12,090
they had a lot of trouble doing.

1302
01:06:12,090 --> 01:06:13,530
Marko Papic: They had a lot
of trouble until they didn't,

1303
01:06:13,530 --> 01:06:15,090
and now they refilled stocks.

1304
01:06:15,300 --> 01:06:18,960
I've been listening to this, uh,
nonsense bullshit that javelin stocks

1305
01:06:18,960 --> 01:06:22,395
are out for the past three years
from National securities hawks, and

1306
01:06:22,395 --> 01:06:24,390
yet China has not invaded Taiwan.

1307
01:06:26,130 --> 01:06:27,630
Well agree with, you know, like,
so, so, no, I agree with that.

1308
01:06:27,630 --> 01:06:30,150
Again, all of this can be
ramped up very quickly.

1309
01:06:30,150 --> 01:06:31,050
That's my point.

1310
01:06:31,050 --> 01:06:34,230
And the capacity innovation is
there and actually doesn't require

1311
01:06:34,230 --> 01:06:38,585
that much glistening sweat on the
manufacturing line to do the, the,

1312
01:06:38,760 --> 01:06:40,950
the empirical example is Ukraine.

1313
01:06:41,745 --> 01:06:43,275
That is the empirical example.

1314
01:06:43,275 --> 01:06:44,355
We cannot avoid it.

1315
01:06:44,475 --> 01:06:47,955
We're not gonna be fighting a war with
like tanks going up against one another.

1316
01:06:47,955 --> 01:06:51,195
It's gonna be drones, it's gonna
be anti-aircraft, uh, missiles.

1317
01:06:51,195 --> 01:06:52,935
It's going to be anti-tank missiles.

1318
01:06:53,205 --> 01:06:54,705
It's going to be a lot of fighter jets.

1319
01:06:54,705 --> 01:06:57,435
And Aax and the US
absolutely crushes that.

1320
01:06:57,465 --> 01:06:59,745
Now it is falling behind
on many other things.

1321
01:06:59,745 --> 01:07:02,445
Uh, an America drone costs $30 million.

1322
01:07:02,445 --> 01:07:04,634
A Ukrainian one costs $4,000.

1323
01:07:04,935 --> 01:07:06,884
Hey, get a hint, right?

1324
01:07:06,884 --> 01:07:10,605
Innovate in that lab, but that
doesn't require huge manufacturing.

1325
01:07:10,634 --> 01:07:15,225
The other issue, the other issue is
you, if Americans decide that they

1326
01:07:15,225 --> 01:07:18,855
want to live in war footing, then
Americans have decided to democracy.

1327
01:07:19,305 --> 01:07:23,265
But the problem is that this
insidious argument that it, that

1328
01:07:23,265 --> 01:07:24,585
the war fighting is already there.

1329
01:07:25,695 --> 01:07:31,335
United States of America has enough
nuclear weapons to turn China into

1330
01:07:31,545 --> 01:07:35,265
parking lots, like 12,000 times over.

1331
01:07:36,839 --> 01:07:39,375
There isn't going to be a total
war between China and the us.

1332
01:07:39,404 --> 01:07:40,350
It's not gonna happen.

1333
01:07:40,470 --> 01:07:42,270
We are not in a world of total wars.

1334
01:07:42,690 --> 01:07:44,520
We're gonna be in a world of proxy wars.

1335
01:07:44,520 --> 01:07:49,290
And yeah, like the US has industrial
capacity to clearly protect its vassal

1336
01:07:49,290 --> 01:07:51,750
states, as we've seen in Ukraine.

1337
01:07:53,279 --> 01:07:56,130
So what it really comes down to
is do Americans wanna live this?

1338
01:07:56,130 --> 01:07:57,660
And this is where the polling comes back.

1339
01:07:57,660 --> 01:07:59,580
Like this is where
domestic politics comes in.

1340
01:08:00,029 --> 01:08:01,230
And yes, you're right.

1341
01:08:01,380 --> 01:08:04,200
The Americans don't want because
they're not, what's the word?

1342
01:08:04,410 --> 01:08:05,279
Wait, I'm looking for it.

1343
01:08:05,279 --> 01:08:05,790
What's the word?

1344
01:08:05,880 --> 01:08:06,690
Insane.

1345
01:08:07,710 --> 01:08:09,660
The American public is not insane.

1346
01:08:10,290 --> 01:08:12,509
Why would you live on a war footing?

1347
01:08:12,630 --> 01:08:14,160
Because China is going to do what?

1348
01:08:14,160 --> 01:08:16,649
Invade Washington State and Oregon.

1349
01:08:17,309 --> 01:08:17,729
No.

1350
01:08:18,600 --> 01:08:22,710
And this is all just wool being
pulled over people's eyes.

1351
01:08:22,740 --> 01:08:25,800
This entire competition with
China, so that you don't

1352
01:08:25,800 --> 01:08:27,059
have to redistribute wealth.

1353
01:08:27,090 --> 01:08:29,220
That is my, that is basically my view.

1354
01:08:29,760 --> 01:08:31,859
Jacob Shapiro: Well, you, you know that
I agree with that, that part of what

1355
01:08:31,859 --> 01:08:34,890
you're talking about, and I'm, I'm playing
devil's advocate here still a little bit,

1356
01:08:34,890 --> 01:08:36,540
but I, I do wanna push back on one thing.

1357
01:08:36,540 --> 01:08:38,910
One thing I actually do think
is, I do think the US is to some

1358
01:08:38,910 --> 01:08:40,590
extent, already on a war footing.

1359
01:08:40,950 --> 01:08:45,420
The, the budget for fiscal, for
fiscal year 2025 for DOD is gonna

1360
01:08:45,420 --> 01:08:49,560
be, what was it, a 1.9 trillion?

1361
01:08:50,310 --> 01:08:50,520
Yeah.

1362
01:08:50,640 --> 01:08:56,220
1.9 trillion as I'm Googling
it, um, in, in 2024, it's, it's

1363
01:08:56,220 --> 01:08:57,870
meant a trillion on defense.

1364
01:08:58,080 --> 01:09:02,880
Like that's more than what the next
10, 15 other countries combined.

1365
01:09:02,880 --> 01:09:05,340
I love that trope, but then I also
wanna take it back to McKinley.

1366
01:09:05,340 --> 01:09:08,819
If you look back to 1890, when the
US became the world's most productive

1367
01:09:08,819 --> 01:09:13,470
economy, um, the United States, its
army was less than 30,000 troops.

1368
01:09:13,649 --> 01:09:14,160
But wait, hold it.

1369
01:09:14,880 --> 01:09:17,670
It's maybe had fewer than 10,000 men
in it, like it wasn't spending on

1370
01:09:17,670 --> 01:09:19,050
the military like it is right now.

1371
01:09:19,050 --> 01:09:20,609
Marko Papic: Well, but the
distances were different.

1372
01:09:20,609 --> 01:09:22,140
But look, look, look, look,
look, look, first of all.

1373
01:09:22,904 --> 01:09:24,285
Absolute numbers never matter.

1374
01:09:24,285 --> 01:09:25,904
We have to look at this percent of GDP.

1375
01:09:26,444 --> 01:09:30,375
And even with the increase in spending
now, uh, you know, the US was spending

1376
01:09:30,375 --> 01:09:33,345
in terms of percent of GDP, I mean,
I'm looking at a chart here from

1377
01:09:33,345 --> 01:09:38,835
World Bank, you know, it was a 6% of
GDP on military in 1960 went down,

1378
01:09:39,015 --> 01:09:44,385
uh, after Vietnam War to a steady
state, steady state of three to 4%.

1379
01:09:45,165 --> 01:09:45,345
Jacob Shapiro: Mm-hmm.

1380
01:09:45,795 --> 01:09:47,835
Marko Papic: We are now at 2.5%.

1381
01:09:48,194 --> 01:09:52,845
With this increase, we might
kiss 2.8, we're still less than

1382
01:09:52,845 --> 01:09:56,385
3% of GDP spending on military.

1383
01:09:56,775 --> 01:10:02,895
So now that is about 12%, I think
11 or 12% of all taxes raised.

1384
01:10:04,455 --> 01:10:08,265
So I'm not saying that this isn't little,
but it's still less than it was before.

1385
01:10:08,265 --> 01:10:11,595
So when you say that the US is on
war footing and you connected that

1386
01:10:11,595 --> 01:10:15,375
to taxation, and then you said
like, I understand government has

1387
01:10:15,375 --> 01:10:17,445
gotten more complex and all that.

1388
01:10:18,330 --> 01:10:19,980
I kind of think that's what it is.

1389
01:10:19,980 --> 01:10:22,440
I mean, social welfare costs a lot,

1390
01:10:24,660 --> 01:10:25,019
right?

1391
01:10:25,320 --> 01:10:27,599
Social security in the US costs a lot.

1392
01:10:27,780 --> 01:10:31,590
Europeans by the way, is percent of
GDP, their governments are even bigger,

1393
01:10:33,900 --> 01:10:35,130
so they tax even more.

1394
01:10:35,130 --> 01:10:38,370
So I'm not sure we would say that
that's a war footing, but like two point

1395
01:10:38,370 --> 01:10:41,760
half percent, 3% spending on defense.

1396
01:10:41,849 --> 01:10:43,080
Like is that too much?

1397
01:10:43,920 --> 01:10:44,070
Jacob Shapiro: Yeah.

1398
01:10:44,070 --> 01:10:47,219
No, I, I agree you, you picked a hole in
a very weak part of my, my argument there.

1399
01:10:47,219 --> 01:10:48,299
I knew that was weak going in.

1400
01:10:48,450 --> 01:10:51,089
But this is actually, there is
a, a kernel in here though that

1401
01:10:51,089 --> 01:10:52,139
I want to push back against you.

1402
01:10:52,139 --> 01:10:55,049
And this actually goes back to the
point you made in the last episode about

1403
01:10:55,049 --> 01:10:59,339
the big beautiful tax bill, which is,
you know, CBO put out a revised, um,

1404
01:10:59,490 --> 01:11:02,910
a revised study of, of the estimates,
and you've talked about how it was less

1405
01:11:02,910 --> 01:11:04,349
than maybe the market was expecting.

1406
01:11:04,559 --> 01:11:05,250
But if you look.

1407
01:11:05,445 --> 01:11:07,185
There's two things I
want to bring up here.

1408
01:11:07,190 --> 01:11:10,035
The, the thing that made me think
about it is if you look at the spending

1409
01:11:10,035 --> 01:11:14,025
increases for defense and the border
over the next three years, you're

1410
01:11:14,025 --> 01:11:17,535
also, you're actually spending, you're
getting big increases on that side.

1411
01:11:18,195 --> 01:11:23,505
Increases bigger than the cuts on
things like Medicaid to the bottom side.

1412
01:11:23,505 --> 01:11:26,295
So you're actually cutting Medicaid,
uh, but you're actually paying, paying

1413
01:11:26,295 --> 01:11:29,535
for increasing defense spending over
this, over this time horizon, which is

1414
01:11:29,535 --> 01:11:30,885
like exactly what I'm talking about.

1415
01:11:30,885 --> 01:11:31,665
That's a war footing.

1416
01:11:31,665 --> 01:11:34,935
Like add in the cost of the Afghanistan
war, add in the cost of the Iraq war,

1417
01:11:34,935 --> 01:11:36,165
add in the cost of all these things.

1418
01:11:36,165 --> 01:11:39,585
What if you had those trillions of
dollars just to pay down the deficit, let

1419
01:11:39,585 --> 01:11:42,436
alone fix the American education system,
fixed, blah, blah, blah, blah, blah.

1420
01:11:42,441 --> 01:11:43,155
So that's 0.1.

1421
01:11:43,365 --> 01:11:45,795
The second point, and this I thought
was interesting 'cause you've talked

1422
01:11:45,795 --> 01:11:49,305
about how you know the market was ready
for worse with the big, beautiful bill.

1423
01:11:50,130 --> 01:11:55,350
Um, the, the spending in this
bill is front loaded to 2028.

1424
01:11:55,620 --> 01:12:00,600
The cuts only really kick in in 2030 when
Mr. Trump is not going to be there, and

1425
01:12:00,600 --> 01:12:05,550
it actually increases the budget deficit
by almost a percent every single year

1426
01:12:05,550 --> 01:12:08,460
going out to 2029 before it drops down.

1427
01:12:08,460 --> 01:12:10,470
So I think there's actually,
president Trump is actually

1428
01:12:10,470 --> 01:12:11,370
telegraphing to you here.

1429
01:12:11,670 --> 01:12:14,760
I'm not gonna be here to deal
with this problem by 29 or 2030.

1430
01:12:14,760 --> 01:12:18,300
Somebody else is gonna have to pass
the next bill, and maybe they won't.

1431
01:12:18,300 --> 01:12:21,180
To your point, maybe politics will change
by then, but I also think when you're

1432
01:12:21,180 --> 01:12:24,780
looking at like where that spending is
coming, that Trump is pushing all these

1433
01:12:24,780 --> 01:12:28,260
different things now, I think that it
makes sense to increase spending actually,

1434
01:12:28,530 --> 01:12:33,570
but not to increase defense spending and
decrease the spending on social things.

1435
01:12:33,750 --> 01:12:37,800
Like if you're actually going to protect
the United States of America protectionism

1436
01:12:37,980 --> 01:12:41,430
and the things you're gonna tear up, you
have to make the United States better, not

1437
01:12:41,430 --> 01:12:45,090
just like give some money to DOD and then
cut the things that are gonna make, you

1438
01:12:45,090 --> 01:12:46,950
know, literally more people die anyway.

1439
01:12:47,010 --> 01:12:47,220
End.

1440
01:12:49,500 --> 01:12:53,910
Marko Papic: You know, I think this
debate was really useful, right?

1441
01:12:54,000 --> 01:12:59,310
Because when you debate, you
kind of, it's like boiling down.

1442
01:12:59,340 --> 01:13:03,060
It's like distilling a piece
of liquor down to the highest

1443
01:13:03,060 --> 01:13:04,320
concentration of alcohol.

1444
01:13:05,520 --> 01:13:14,220
And basically what we've, I think narrowed
it down to is this President Trump is

1445
01:13:14,220 --> 01:13:16,830
actually a devo pro-globalization guy.

1446
01:13:17,760 --> 01:13:20,640
Effectively, he's not going far enough.

1447
01:13:22,050 --> 01:13:25,320
But in order to go far enough,
you have to convince yourself

1448
01:13:25,350 --> 01:13:26,790
that you are in war footing.

1449
01:13:27,960 --> 01:13:32,460
Because we both agree that once you are in
war footing, then you ramp up everything

1450
01:13:32,460 --> 01:13:36,810
and you cannot have some component in an
F 22 that was manufactured in Vietnam.

1451
01:13:38,520 --> 01:13:38,850
Right?

1452
01:13:39,300 --> 01:13:40,560
That's, that's what we're saying.

1453
01:13:42,630 --> 01:13:45,390
But in order for that to happen,
you have to convince yourself that

1454
01:13:45,390 --> 01:13:46,560
the war with China is imminent.

1455
01:13:48,509 --> 01:13:52,379
And that, and then I would, I would
say a couple of things on that.

1456
01:13:53,580 --> 01:13:58,410
Number one, a war with China will
most likely never be a total war.

1457
01:13:58,799 --> 01:13:59,820
They're very far away.

1458
01:14:00,960 --> 01:14:02,250
We have nuclear weapons.

1459
01:14:03,240 --> 01:14:05,549
This is a different world
than we were in the forties.

1460
01:14:05,580 --> 01:14:08,190
So, you know, like,
let's keep that in mind.

1461
01:14:08,910 --> 01:14:09,179
Number

1462
01:14:09,179 --> 01:14:09,480
Jacob Shapiro: two.

1463
01:14:09,480 --> 01:14:10,589
Or, or, or in the fifties.

1464
01:14:10,589 --> 01:14:13,889
Like we, we fought a war with China once,
it's called the Korean War, but like,

1465
01:14:13,889 --> 01:14:15,509
that was really the first US China war.

1466
01:14:15,839 --> 01:14:16,049
Marko Papic: Right.

1467
01:14:16,049 --> 01:14:17,849
But they didn't have nuclear weapons.

1468
01:14:18,210 --> 01:14:18,540
Jacob Shapiro: Correct.

1469
01:14:18,540 --> 01:14:20,040
They didn't, they didn't
even have an air force then.

1470
01:14:20,040 --> 01:14:21,120
And they fought us to a stalemate.

1471
01:14:21,120 --> 01:14:22,170
So imagine what happens now.

1472
01:14:22,589 --> 01:14:22,889
Marko Papic: No, no.

1473
01:14:22,889 --> 01:14:26,665
But, but, but to the point that like,
mutual assured destruction was not mm-hmm.

1474
01:14:26,879 --> 01:14:28,200
A constraint on the conflict.

1475
01:14:28,799 --> 01:14:28,980
Correct.

1476
01:14:28,980 --> 01:14:31,530
The, the other thing that I, that I
would wanna point out is, the second

1477
01:14:31,530 --> 01:14:35,040
thing I would point out is that when
we do have proxy wars, America is

1478
01:14:35,040 --> 01:14:36,599
more than capable of fighting it.

1479
01:14:37,650 --> 01:14:40,530
So Ukraine is a great example of this.

1480
01:14:41,040 --> 01:14:41,219
Jacob Shapiro: And

1481
01:14:41,219 --> 01:14:41,610
Marko Papic: so I, uh,

1482
01:14:41,610 --> 01:14:43,830
Jacob Shapiro: Yemen, Yemen
not a good example of this now.

1483
01:14:44,549 --> 01:14:44,879
Marko Papic: Okay.

1484
01:14:44,879 --> 01:14:45,870
But like, you know.

1485
01:14:46,710 --> 01:14:47,730
God bless the Houthis.

1486
01:14:47,730 --> 01:14:52,140
They are a different breed,
obviously, and you can't, you know,

1487
01:14:52,830 --> 01:14:54,240
they're just not gonna be defeated.

1488
01:14:54,330 --> 01:14:58,590
Um, but the point is, like if you
wanna arm somebody, like yeah, us

1489
01:14:58,590 --> 01:15:00,330
has the cap capacity to do that.

1490
01:15:00,900 --> 01:15:04,860
Um, and I'm not sure that the US requires
to be on a war voting to do that.

1491
01:15:05,070 --> 01:15:09,660
But more fundamentally, the question
is, is that a solution to this problem

1492
01:15:09,660 --> 01:15:14,519
instead of changing the lifestyle of
human beings in America dramatically,

1493
01:15:14,910 --> 01:15:23,730
isn't the alternative to use both
threats sticks and carrots with

1494
01:15:23,730 --> 01:15:28,019
China to ensure that the spheres of
influence are clearly delineated?

1495
01:15:28,320 --> 01:15:32,910
Like that's what it's, and it's
actually what Hack said, you know,

1496
01:15:32,910 --> 01:15:38,430
like Secretary of State Hackett, who
I said I wasn't gonna le learn his

1497
01:15:38,430 --> 01:15:41,220
name because I called him Kendall.

1498
01:15:42,315 --> 01:15:44,865
Because I did not think he was
gonna get confirmed, but God

1499
01:15:44,865 --> 01:15:46,095
bless him, he did get confirmed.

1500
01:15:46,095 --> 01:15:50,985
And his speech at s Shangrila dialogue,
which everybody says was extremely

1501
01:15:51,255 --> 01:15:53,115
aggressive, I mean on on many ways.

1502
01:15:53,115 --> 01:15:56,895
He was on the other hand, he
was saying to everybody there,

1503
01:15:56,895 --> 01:15:58,245
Hey, you guys need to step up.

1504
01:15:58,570 --> 01:16:04,545
Like, you know, and that's, and that's
a way in which China, those are the

1505
01:16:04,545 --> 01:16:08,835
sticks that can be used against China
sticks that can be used against China

1506
01:16:08,835 --> 01:16:12,465
is making sure that Malaysia pays
for its own defense as an example.

1507
01:16:13,215 --> 01:16:14,205
And it doesn't require, but to your point,

1508
01:16:14,205 --> 01:16:16,755
Jacob Shapiro: like, like today,
president Trump, we're recording on

1509
01:16:16,755 --> 01:16:20,085
June 5th, Thursday, June 5th, Trump
finally got his phone call with Xi

1510
01:16:20,085 --> 01:16:23,475
Jinping and he's bending over backwards
to have more calls with Xi Jinping.

1511
01:16:23,505 --> 01:16:25,755
I bet you he doesn't give a
shit what Hegseth is doing.

1512
01:16:25,875 --> 01:16:29,115
All President Trump wants to do
is make a deal with Xi Jinping

1513
01:16:29,115 --> 01:16:30,435
and get back to business.

1514
01:16:30,435 --> 01:16:31,185
Like I don't think he.

1515
01:16:36,135 --> 01:16:38,235
No, I I'm not saying it's necessarily
a problem, I'm just saying there's

1516
01:16:38,235 --> 01:16:40,575
a disconnect between like, hegseth
is saying one thing, but the, I

1517
01:16:40,575 --> 01:16:42,675
don't think the White House is,
I don't So is on the same page

1518
01:16:43,305 --> 01:16:43,517
Marko Papic: think no, I, I disagree.

1519
01:16:43,522 --> 01:16:43,950
Don't think disagree.

1520
01:16:44,625 --> 01:16:45,345
No, I disagree.

1521
01:16:45,345 --> 01:16:48,225
I think the foundation of
power is material wealth.

1522
01:16:50,625 --> 01:16:51,105
That's it.

1523
01:16:52,035 --> 01:16:52,515
That's it.

1524
01:16:52,755 --> 01:16:55,545
And not manufacturing and not
glistening men with sweat.

1525
01:16:55,575 --> 01:16:55,995
No.

1526
01:16:56,445 --> 01:16:56,925
You know what?

1527
01:16:56,955 --> 01:17:00,975
You can just get Jacob and Marco
into a factory if shit hits the fan.

1528
01:17:01,425 --> 01:17:05,055
So, no, sorry guys, you know,
who have duly on your trucks

1529
01:17:05,055 --> 01:17:08,775
and who desire some sort of a
confrontation with China every day?

1530
01:17:08,805 --> 01:17:11,265
No, it's material wealth.

1531
01:17:11,625 --> 01:17:12,375
That's what it is.

1532
01:17:12,375 --> 01:17:13,845
It's just, it's wealth.

1533
01:17:14,025 --> 01:17:15,765
You gotta be wealthy to be powerful.

1534
01:17:15,765 --> 01:17:21,285
So what that means is getting a deal
with China that allows American companies

1535
01:17:21,285 --> 01:17:27,075
to make a lot of money in China is the
foundation of material wealth and is not.

1536
01:17:27,840 --> 01:17:32,010
Incompatible with Hack said, telling
Southeast Asian economies and countries

1537
01:17:32,010 --> 01:17:35,970
that are around China, Hey, you guys need
to step up and you need to defend yourself

1538
01:17:36,240 --> 01:17:41,130
because the two things will both make
the US more capable of countering China.

1539
01:17:41,130 --> 01:17:45,990
Yes, trading with China absolutely
is necessary because look,

1540
01:17:46,620 --> 01:17:49,500
and this is something, this
is literally for Jason, right?

1541
01:17:50,430 --> 01:17:52,980
We started off talking
about my hair guy, Jason.

1542
01:17:54,570 --> 01:17:58,650
The fundamental fact is that
a Boeing aircraft is 1980s.

1543
01:17:58,650 --> 01:17:59,580
Technology, you know?

1544
01:17:59,730 --> 01:17:59,820
Mm-hmm.

1545
01:18:00,210 --> 01:18:01,620
Like 1990s maybe.

1546
01:18:02,760 --> 01:18:06,660
Selling that to China does
nothing to dent American security.

1547
01:18:06,660 --> 01:18:07,950
In fact, it enhances it.

1548
01:18:08,790 --> 01:18:13,140
The only way for Boeing to pivot to
making innovative drones, because

1549
01:18:13,140 --> 01:18:14,370
it doesn't do that right now.

1550
01:18:15,030 --> 01:18:17,820
The only way for them to do that
is to invest in r and d. To do

1551
01:18:17,820 --> 01:18:19,170
that, you need to sell aircraft.

1552
01:18:20,070 --> 01:18:25,410
Selling a piece of 1980s technology
to China does nothing to hurt America.

1553
01:18:25,470 --> 01:18:26,490
It just makes money.

1554
01:18:27,075 --> 01:18:30,675
Then Boeing can take that money and
he can divert some of it into r and

1555
01:18:30,675 --> 01:18:35,535
d so he can build drones that one day
might be used against the Chinese.

1556
01:18:35,805 --> 01:18:36,375
Oh my God.

1557
01:18:36,405 --> 01:18:36,974
Look at that.

1558
01:18:37,485 --> 01:18:39,014
And that is what's necessary.

1559
01:18:39,405 --> 01:18:43,394
Um, so I actually think that making a
deal with China by President Trump is

1560
01:18:43,394 --> 01:18:47,325
the appropriate, is the appropriate
way to handle the Chinese threat.

1561
01:18:47,809 --> 01:18:48,099
Yeah,

1562
01:18:48,099 --> 01:18:48,380
Jacob Shapiro: yeah, yeah.

1563
01:18:48,385 --> 01:18:50,625
I just, if there isn't, I think
the horses, I think the horse

1564
01:18:50,625 --> 01:18:52,394
already bolted the barn door there.

1565
01:18:52,605 --> 01:18:55,275
Um, the, the thing that he says, I
mean, you're right about what he said

1566
01:18:55,275 --> 01:18:58,845
at Shangrila, but before that he said
that war with China was maybe imminent.

1567
01:18:59,085 --> 01:19:01,755
So he's, he's talking outta
both sides of his mouth there.

1568
01:19:01,755 --> 01:19:03,375
Um, so, so, so there's that thing.

1569
01:19:03,375 --> 01:19:05,985
And then also you might have seen
that it sounds like China's about to

1570
01:19:05,985 --> 01:19:08,835
announce that they're gonna purchase,
uh, all their aircraft, or at least

1571
01:19:08,835 --> 01:19:10,875
most of their future orders from Airbus.

1572
01:19:11,055 --> 01:19:12,317
Airbus No, for not going.

1573
01:19:13,065 --> 01:19:14,295
I predict that's gonna be part
of a shift towards Europe.

1574
01:19:14,565 --> 01:19:14,900
Yes, you did.

1575
01:19:15,075 --> 01:19:16,394
Marko Papic: I predicted
that six months ago.

1576
01:19:16,394 --> 01:19:18,165
And I mean, like, no, no,
but look, look, look, look.

1577
01:19:18,405 --> 01:19:20,625
That is the trade negotiations.

1578
01:19:22,155 --> 01:19:24,585
That is like, that's China
negotiating with America.

1579
01:19:25,545 --> 01:19:27,495
But you know what's interesting
about what they just said there?

1580
01:19:28,605 --> 01:19:31,485
They effectively committed that
they're not going to imminently

1581
01:19:32,085 --> 01:19:33,705
try to reunify with Taiwan.

1582
01:19:35,115 --> 01:19:35,805
Jacob Shapiro: Yeah, of course not.

1583
01:19:36,105 --> 01:19:37,545
Well, yeah, you and I are the same here.

1584
01:19:37,965 --> 01:19:38,955
Next time we should do a debate.

1585
01:19:39,615 --> 01:19:42,255
Maybe next time I'll have to do the
devil's advocate for China's going to

1586
01:19:42,255 --> 01:19:45,615
invade Taiwan and then I'll really want
to take a bath after we do a podcast.

1587
01:19:45,705 --> 01:19:49,035
Marko Papic: But No, but listen, but
listen, like this is where everything

1588
01:19:49,035 --> 01:19:53,955
breaks down though, because I think our
debate boiled down the case for onerous

1589
01:19:53,955 --> 01:19:56,235
tariffs to reshore everything to America.

1590
01:19:57,435 --> 01:19:57,735
Right?

1591
01:19:57,795 --> 01:20:01,485
Be because those will not raise
any revenue if you put a 50%

1592
01:20:01,485 --> 01:20:04,335
tariff and then that good cannot be
imported 'cause it's too expensive,

1593
01:20:04,335 --> 01:20:05,355
you're not gonna raise money.

1594
01:20:05,355 --> 01:20:05,655
Right?

1595
01:20:05,865 --> 01:20:07,155
People understand this concept.

1596
01:20:07,695 --> 01:20:11,685
So the only case for
tariffs is war footing.

1597
01:20:12,615 --> 01:20:16,395
But war footing requires
China to be mean and evil.

1598
01:20:17,250 --> 01:20:22,050
If China is pivoting away from US
aircraft to European aircraft, then

1599
01:20:22,050 --> 01:20:27,540
China is not about to invade anyone
because they would attacking Taiwan

1600
01:20:27,540 --> 01:20:32,280
would usher in a bipolar world where
the world would be divided to sphere, to

1601
01:20:32,280 --> 01:20:33,809
spheres where they just can't compete.

1602
01:20:35,190 --> 01:20:39,150
And usually people will say, yet, you
know, they, China can't compete yet.

1603
01:20:39,180 --> 01:20:43,710
I don't think that China in the
next 20 years can compete against

1604
01:20:43,710 --> 01:20:47,010
the United West because they have
no real allies other than, you

1605
01:20:47,010 --> 01:20:49,380
know, maybe Russia and maybe Iran.

1606
01:20:49,380 --> 01:20:50,430
Like, that's just not enough.

1607
01:20:51,090 --> 01:20:55,889
And so everything breaks apart, like
the, the deglobalization argument

1608
01:20:56,639 --> 01:21:02,940
breaks apart because China is just
not an imminent threat to anybody.

1609
01:21:03,870 --> 01:21:06,510
Jacob Shapiro: And it, it breaks down
even more because if what you want is

1610
01:21:06,510 --> 01:21:10,139
to have nicer things and for life to
continue to become more comfortable.

1611
01:21:10,530 --> 01:21:11,880
You also need China.

1612
01:21:11,910 --> 01:21:14,190
If you want to buy your kid
as many gifts as possible.

1613
01:21:14,190 --> 01:21:18,000
If your daughter has an ear infection and
you need children's ibuprofen for like,

1614
01:21:18,030 --> 01:21:20,580
you start going down the list of things
that you need China for and the things

1615
01:21:20,580 --> 01:21:22,530
that would no longer be on the shelves.

1616
01:21:22,769 --> 01:21:25,920
If you didn't have trade with
China, like to your point, it

1617
01:21:25,920 --> 01:21:27,210
would be really, really bad.

1618
01:21:27,210 --> 01:21:30,000
So if you want, like that's sort of,
I think what China's big strength is.

1619
01:21:30,000 --> 01:21:32,250
Like maybe they don't have the material
wealth that you're talking about, but

1620
01:21:32,250 --> 01:21:34,920
I think what they can have, and this
is what Belt and Road really is, is

1621
01:21:35,160 --> 01:21:37,260
hey, uh, have good relations with us.

1622
01:21:37,380 --> 01:21:38,670
Say Taiwan is not a country.

1623
01:21:38,850 --> 01:21:42,750
We'll build you a port or we'll build
you some highways or we'll build

1624
01:21:42,750 --> 01:21:44,430
some factories inside of Indonesia.

1625
01:21:44,430 --> 01:21:47,490
Okay, we'll agree to your terms,
whatever else, we will make things better

1626
01:21:47,490 --> 01:21:49,170
for you and make things really nice.

1627
01:21:49,170 --> 01:21:51,150
Whereas the United States
is not doing that anymore.

1628
01:21:51,210 --> 01:21:53,100
The United States is
turning away from that path.

1629
01:21:53,100 --> 01:21:53,160
Yeah.

1630
01:21:53,160 --> 01:21:55,800
So I think like that's the
inherent, it's weird to think that

1631
01:21:55,830 --> 01:21:58,769
China is now doing that because
that used to be the US playbook.

1632
01:22:01,050 --> 01:22:02,040
Marko Papic: The US is doing that.

1633
01:22:02,250 --> 01:22:04,080
It's building highways
on a, on a different way.

1634
01:22:04,080 --> 01:22:08,160
I guess you could argue that the ai,
you know, uh, cloud infrastructure and

1635
01:22:08,160 --> 01:22:12,840
so on would be the equivalent of that
just in a, in a digital tech space.

1636
01:22:12,840 --> 01:22:13,080
But

1637
01:22:13,230 --> 01:22:15,360
Jacob Shapiro: yeah, but the Chinese
are better at all that stuff.

1638
01:22:15,365 --> 01:22:21,540
Like Huawe is, uh, like for the telecoms
5G networks, all that stuff, China's

1639
01:22:21,540 --> 01:22:22,620
already care like they won then.

1640
01:22:22,620 --> 01:22:22,980
Uh, that,

1641
01:22:24,300 --> 01:22:25,920
Marko Papic: that was, that
was something six years ago.

1642
01:22:25,920 --> 01:22:27,390
And by the way, that's actually great.

1643
01:22:27,510 --> 01:22:33,180
I haven't heard anyone mention Huawei
5G in like three years because, you

1644
01:22:33,180 --> 01:22:36,840
know, one of the things we really
need to stop doing is listening to

1645
01:22:36,840 --> 01:22:39,870
anyone who has like two stars on their
shoulder when it comes to technology.

1646
01:22:40,620 --> 01:22:43,860
Well, yeah, that's true because I can't
tell you how many times Jacob, I had

1647
01:22:43,860 --> 01:22:50,580
somebody come to my office, um, former,
general, or some such nonsense, and tell

1648
01:22:50,580 --> 01:22:54,990
me how Chinese lead in 5G technology
was going to end humanity as we know it.

1649
01:22:54,990 --> 01:22:56,550
And yet here we are in 2025.

1650
01:22:57,105 --> 01:22:57,825
It doesn't matter.

1651
01:22:57,825 --> 01:22:58,305
You know why?

1652
01:22:58,305 --> 01:22:59,745
'cause there's like six G coming.

1653
01:23:00,644 --> 01:23:02,055
Jacob Shapiro: Well, no, but
the thing is, here we are, uh,

1654
01:23:02,265 --> 01:23:03,315
like that was always stupid.

1655
01:23:03,315 --> 01:23:06,705
But here we are in 2025, Huawei is
not dead despite the first Trump

1656
01:23:06,705 --> 01:23:08,175
administration's attempts to kill it.

1657
01:23:08,565 --> 01:23:11,535
And despite us companies saying,
oh, we're gonna start building the

1658
01:23:11,535 --> 01:23:14,745
switches and the things that go
inside the towers that actually make,

1659
01:23:14,745 --> 01:23:18,465
'cause we, all of that comes from
China, South Korea, Taiwan, and Japan.

1660
01:23:18,465 --> 01:23:20,925
Like, that's, those are the
ones that, those are eSuite.

1661
01:23:21,075 --> 01:23:21,345
Yeah.

1662
01:23:21,345 --> 01:23:23,175
But yeah, but they get input some parks.

1663
01:23:23,175 --> 01:23:26,085
But yes, Nokia and Ericsson also
have a, a sort of toehold here.

1664
01:23:26,355 --> 01:23:29,894
But like, you know, in, in 20 18,
20 19, the Trump administration was

1665
01:23:29,894 --> 01:23:32,445
talking about working with American
companies to build that supply

1666
01:23:32,445 --> 01:23:33,675
chain inside the United States.

1667
01:23:33,855 --> 01:23:36,495
As far as I know, and if any
listeners or experts in telecoms,

1668
01:23:36,495 --> 01:23:37,245
feel free to correct me.

1669
01:23:37,245 --> 01:23:39,434
As far as I know, we, it's still zero.

1670
01:23:39,795 --> 01:23:44,265
We still import the switches and the
antennae and all that other crap from

1671
01:23:44,265 --> 01:23:48,585
South Korea, or which, which just had a
really consequential election from Taiwan,

1672
01:23:48,585 --> 01:23:49,995
from China, from all these other places.

1673
01:23:49,995 --> 01:23:50,430
Marko Papic: Well, and that's fine.

1674
01:23:50,640 --> 01:23:51,550
Again, like.

1675
01:23:52,815 --> 01:23:53,655
Jacob Shapiro: It's, it's fine.

1676
01:23:53,655 --> 01:23:54,435
It's fine to your point.

1677
01:23:54,520 --> 01:23:57,105
As long as, as long as everybody's
friends and as long as she and,

1678
01:23:57,315 --> 01:23:59,505
and Trump are having chocolate
cake, then, then it's good.

1679
01:23:59,805 --> 01:24:02,985
Marko Papic: But this is how
the world is different from 20,

1680
01:24:03,135 --> 01:24:06,105
from 1945 in a way, or, or 1840.

1681
01:24:06,375 --> 01:24:08,985
There is more integration
of a lot of this stuff.

1682
01:24:08,985 --> 01:24:10,335
It's, it's gotten really deep.

1683
01:24:10,815 --> 01:24:13,065
Uh, but my point is different twofold.

1684
01:24:13,065 --> 01:24:16,665
First of all, the Huawei survival of
Huawei is a company that innovates

1685
01:24:16,665 --> 01:24:18,045
and now builds cars and stuff.

1686
01:24:18,435 --> 01:24:22,305
Is a great example of what happens
when you use Productionism.

1687
01:24:22,365 --> 01:24:25,515
It doesn't work, especially, I
mean, you, it it works against the

1688
01:24:25,515 --> 01:24:26,985
country that hasn't industrialized.

1689
01:24:26,985 --> 01:24:29,655
Like if you put tariffs on
Ethiopia, like that would suck.

1690
01:24:29,655 --> 01:24:32,175
It would be mean, you
know, but it would work.

1691
01:24:32,685 --> 01:24:32,835
Jacob Shapiro: Yeah.

1692
01:24:32,835 --> 01:24:33,885
Or even Mexico,

1693
01:24:34,455 --> 01:24:35,685
Marko Papic: or maybe even Mexico.

1694
01:24:35,685 --> 01:24:35,985
Yes.

1695
01:24:35,985 --> 01:24:37,395
Like Mexico is not, if US decided

1696
01:24:37,395 --> 01:24:39,885
Jacob Shapiro: to tariff
Mexico like very, very bad.

1697
01:24:40,280 --> 01:24:41,940
Marko Papic: But if you did it
to South Korea would be bad for

1698
01:24:41,940 --> 01:24:42,140
Jacob Shapiro: me too.

1699
01:24:42,150 --> 01:24:44,325
Marko Papic: Korea, if you did
it to South Korea, it would be

1700
01:24:44,325 --> 01:24:46,785
the best thing that ever happened
to South Korea and it's history.

1701
01:24:47,295 --> 01:24:47,775
Jacob Shapiro: Yes.

1702
01:24:48,015 --> 01:24:48,345
Marko Papic: Right.

1703
01:24:48,345 --> 01:24:50,295
And that's, and that's the, the issue.

1704
01:24:50,295 --> 01:24:51,855
And that was what Nvidia.

1705
01:24:52,410 --> 01:24:56,730
CEO is saying like, Hey, we need
to ensure that there is monopoly

1706
01:24:56,730 --> 01:24:58,920
of American chip infrastructure.

1707
01:24:59,880 --> 01:25:00,450
That's his point.

1708
01:25:00,450 --> 01:25:02,400
Now, obviously he's the CEO of Nvidia.

1709
01:25:02,519 --> 01:25:03,420
He is biased.

1710
01:25:03,420 --> 01:25:04,620
He wants to sell chips China.

1711
01:25:04,620 --> 01:25:05,220
I get that.

1712
01:25:05,490 --> 01:25:06,240
But he's not wrong.

1713
01:25:06,570 --> 01:25:11,460
He's not wrong because these, like
you are taring a country that can use

1714
01:25:11,460 --> 01:25:13,110
necessity as a tool of innovation.

1715
01:25:13,260 --> 01:25:18,000
The second point that the Huawei
5G nonsense shows is that our

1716
01:25:18,030 --> 01:25:23,250
government officials who can
barely reissue me a passport on a

1717
01:25:23,490 --> 01:25:30,090
acceptable timeline, don't know what's
coming on the technological side.

1718
01:25:30,330 --> 01:25:34,320
Okay, let's, you know as somebody
who works for the Pentagon, you

1719
01:25:34,320 --> 01:25:37,410
know, who makes like as much
an an analyst on Wall Street?

1720
01:25:37,559 --> 01:25:41,010
Okay, no offense guys,
sorry, but like, you suck.

1721
01:25:41,880 --> 01:25:44,130
You don't know what's coming
on the, you don't fuck.

1722
01:25:44,160 --> 01:25:45,000
Like, no way.

1723
01:25:45,360 --> 01:25:47,340
I can't tell you, Jacob, how many.

1724
01:25:48,225 --> 01:25:52,545
Generals I had to listen to in my
line of work who are telling me

1725
01:25:52,545 --> 01:25:54,765
how important 5G infrastructure is.

1726
01:25:54,885 --> 01:25:56,265
Get outta here, please.

1727
01:25:56,385 --> 01:25:57,345
Like, relax.

1728
01:25:57,345 --> 01:25:59,565
You know, we're gonna survive
somehow magically with

1729
01:25:59,565 --> 01:26:01,695
Huawei, I guess, spying on us.

1730
01:26:01,785 --> 01:26:03,615
No, you don't know what's coming.

1731
01:26:03,615 --> 01:26:03,675
No.

1732
01:26:03,885 --> 01:26:04,905
You don't know what's coming.

1733
01:26:04,905 --> 01:26:06,615
And often you are absolutely wrong.

1734
01:26:07,065 --> 01:26:09,315
And so you obsess about this nonsense.

1735
01:26:09,705 --> 01:26:12,975
And then what comes out that
nobody saw was like, oh, drone

1736
01:26:12,975 --> 01:26:14,235
technology really matters.

1737
01:26:14,235 --> 01:26:15,135
Like, oh, thanks.

1738
01:26:15,165 --> 01:26:19,185
You know, US produces, I think
it's called MQ nine Reaper.

1739
01:26:20,055 --> 01:26:21,405
It's $30 million.

1740
01:26:21,465 --> 01:26:22,755
$30 million.

1741
01:26:23,160 --> 01:26:27,225
You know what the most
advanced drone today is?

1742
01:26:29,205 --> 01:26:29,355
What?

1743
01:26:29,385 --> 01:26:34,065
It's a Russian drone that's con
remote controlled with a fiber

1744
01:26:34,155 --> 01:26:37,095
optic cable tethered to it.

1745
01:26:38,055 --> 01:26:40,845
It's like those cars we used to
have, you know when mom bought

1746
01:26:40,845 --> 01:26:42,465
you remote controlled cars?

1747
01:26:42,525 --> 01:26:43,030
Yeah, of course.

1748
01:26:43,030 --> 01:26:43,150
Yeah.

1749
01:26:43,155 --> 01:26:45,675
But she didn't spend enough money
on the really cool ones that

1750
01:26:45,675 --> 01:26:46,845
actually had remote control.

1751
01:26:46,845 --> 01:26:48,315
She bought you the one with a line.

1752
01:26:49,875 --> 01:26:53,145
The most advanced drone today
doesn't even use radio signals.

1753
01:26:54,015 --> 01:26:57,195
It uses a tether so they can
avoid jamming technology, you

1754
01:26:57,195 --> 01:26:58,845
know, and it doesn't use ai.

1755
01:26:59,265 --> 01:27:00,975
I relax with the AI thing.

1756
01:27:01,005 --> 01:27:03,555
Like the problem with
ai, it's a great example.

1757
01:27:03,555 --> 01:27:07,125
It's gonna be the next 5G, Huawei, it's
gonna be the next where we're gonna like

1758
01:27:07,125 --> 01:27:08,595
be like, this wasn't that important.

1759
01:27:08,595 --> 01:27:08,985
Why?

1760
01:27:10,365 --> 01:27:14,265
Because the elegance of your LLM
model is not going to determine.

1761
01:27:14,655 --> 01:27:18,915
Whether your swarm of drones
knows how to be automated.

1762
01:27:19,215 --> 01:27:22,724
In other words, there's gonna
be some baseline level of AI

1763
01:27:22,724 --> 01:27:26,625
capability that will be sufficient
and that everybody already has.

1764
01:27:27,345 --> 01:27:29,264
Jacob Shapiro: Yeah, I, I don't
want, don't throw the baby

1765
01:27:29,264 --> 01:27:30,705
out with the Huawei water.

1766
01:27:30,735 --> 01:27:31,755
'cause there's just one thing I wanna say.

1767
01:27:31,755 --> 01:27:33,195
'cause we alluded to this
a little bit earlier.

1768
01:27:33,224 --> 01:27:33,735
You're right.

1769
01:27:33,735 --> 01:27:37,125
The people who, and generals like
British Intelligence HQ is putting

1770
01:27:37,125 --> 01:27:38,715
out huge reports about this.

1771
01:27:38,715 --> 01:27:41,835
This notion that the Chinese were gonna
be able to spy on us and destroy all the

1772
01:27:41,835 --> 01:27:43,724
ships and all the infra like nonsense.

1773
01:27:43,724 --> 01:27:47,655
But we talked about it earlier when we
talked about in China, manufacturing

1774
01:27:47,655 --> 01:27:51,405
workers are reportedly losing jobs
because they're being replaced by robots.

1775
01:27:51,764 --> 01:27:55,485
That can only happen because they
have good 5G infrastructure, because

1776
01:27:55,485 --> 01:27:59,175
you need the low latency, high speeds
of those types of networks on the

1777
01:27:59,175 --> 01:28:00,405
factory floor and things like that.

1778
01:28:00,405 --> 01:28:00,764
In order to do.

1779
01:28:02,830 --> 01:28:04,995
Like you could buy from Ericsson,
but I'm saying there's a difference

1780
01:28:04,995 --> 01:28:08,175
between Chinese factories are already
doing that and adopting it in mass and

1781
01:28:08,175 --> 01:28:09,855
thinking about the next generation.

1782
01:28:09,855 --> 01:28:13,275
Whereas US factories, and maybe we
go back to Tim and ask him this, my

1783
01:28:13,275 --> 01:28:16,335
impression of seeing US factories or
even factories in Mexico and things like

1784
01:28:16,335 --> 01:28:18,105
that is, we're not even close to that.

1785
01:28:18,105 --> 01:28:20,385
We're still debating about whether
we should do some of those things.

1786
01:28:20,385 --> 01:28:20,446
No, no.

1787
01:28:20,451 --> 01:28:23,325
So there is like a kernel of
importance in the adoption of some

1788
01:28:23,325 --> 01:28:24,735
of these things and productivity.

1789
01:28:24,915 --> 01:28:27,405
Marko Papic: China has installed
the most robots in the world.

1790
01:28:27,465 --> 01:28:28,695
Yes, that is a fact.

1791
01:28:29,445 --> 01:28:30,195
However, you need

1792
01:28:30,195 --> 01:28:31,425
Jacob Shapiro: Huawei 5G to do that.

1793
01:28:31,755 --> 01:28:34,455
Marko Papic: But Japan and
Germany are also global

1794
01:28:34,455 --> 01:28:35,895
leaders in industrial robotics.

1795
01:28:36,015 --> 01:28:37,095
So the West is fine.

1796
01:28:39,045 --> 01:28:39,765
And, and,

1797
01:28:40,185 --> 01:28:40,395
Jacob Shapiro: and

1798
01:28:40,395 --> 01:28:40,635
Marko Papic: there's, if

1799
01:28:40,875 --> 01:28:43,965
Jacob Shapiro: Germany and Japan will
share with us, uh, chancellor Mer says

1800
01:28:43,965 --> 01:28:46,605
that he can't trust the United States
anymore, and Japan was the one that gave

1801
01:28:46,605 --> 01:28:48,105
the middle finger after liberation day.

1802
01:28:48,105 --> 01:28:50,535
So again, things I wouldn't
take for granted based on,

1803
01:28:50,595 --> 01:28:52,740
Marko Papic: they'll sell
a robot to, to the look.

1804
01:28:52,875 --> 01:28:55,905
Look, all I'm saying, all I'm saying
is that, uh, I think that this

1805
01:28:55,905 --> 01:28:59,325
is just, every single time China
innovates something, it's like, oh

1806
01:28:59,325 --> 01:29:01,245
my God, they're gonna defeat us and.

1807
01:29:02,025 --> 01:29:04,035
Eh, you know, like it's okay.

1808
01:29:04,095 --> 01:29:05,085
Like look, lemme do this.

1809
01:29:05,085 --> 01:29:05,745
They're innovating.

1810
01:29:06,345 --> 01:29:11,955
I, I think, I think the case here is that,
um, it comes down to threat perception.

1811
01:29:13,275 --> 01:29:19,275
You know, and I once had a two star
general tell me that China's lead in

1812
01:29:19,275 --> 01:29:22,065
payment systems was cider coming for us.

1813
01:29:23,175 --> 01:29:23,985
And I was like, really?

1814
01:29:23,985 --> 01:29:24,345
Bro?

1815
01:29:24,375 --> 01:29:26,475
FinTech his national security, relax.

1816
01:29:26,475 --> 01:29:29,385
I mean, number one, yes, we
should probably not use physical

1817
01:29:29,385 --> 01:29:32,445
checks in this country anymore
'cause that's kind of medieval.

1818
01:29:33,045 --> 01:29:37,125
But no, the fact that they use QFR codes
to pay for everything, like, I don't know.

1819
01:29:37,965 --> 01:29:39,885
I sleep well at night because of that.

1820
01:29:39,885 --> 01:29:40,665
Call me naive.

1821
01:29:41,955 --> 01:29:44,775
And that, and it, and this comes
down to a very simple point.

1822
01:29:45,195 --> 01:29:46,155
Very simple point.

1823
01:29:47,205 --> 01:29:49,245
It really comes down to
threat perception of China.

1824
01:29:50,145 --> 01:29:51,555
Everything really comes down to that.

1825
01:29:52,155 --> 01:29:55,905
To what extent do you think China's
gonna knock on the door in your

1826
01:29:55,905 --> 01:29:59,200
country, in your home, in your
Orleans or Kansas or wherever you are?

1827
01:30:00,645 --> 01:30:02,325
Force you to teach your kids Mandarin.

1828
01:30:02,325 --> 01:30:08,445
And I think that that is as far from
a, a potential future as anything.

1829
01:30:08,625 --> 01:30:14,205
'cause we have nuclear weapons
and no one's going to fight

1830
01:30:14,205 --> 01:30:16,455
the great Power War with those.

1831
01:30:16,605 --> 01:30:17,055
So

1832
01:30:17,085 --> 01:30:19,245
Jacob Shapiro: as I've joked many
times, and I hope the Chinese Communist

1833
01:30:19,245 --> 01:30:22,905
Party is gonna listen at some point,
uh, not only am I not afraid of that,

1834
01:30:23,145 --> 01:30:26,385
I would welcome them and please build
us some ports and some other nice

1835
01:30:26,385 --> 01:30:27,945
infrastructure down here in the south.

1836
01:30:27,945 --> 01:30:29,775
'cause we desperately need it
because nobody in the United

1837
01:30:29,775 --> 01:30:30,645
States is building this shit.

1838
01:30:30,645 --> 01:30:33,555
Anyway, um, we have 20 minutes left
Marco, and I think this is actually a

1839
01:30:33,555 --> 01:30:36,255
good segue to something that we should
talk about before we get outta here,

1840
01:30:36,255 --> 01:30:39,765
which we've danced around it in sort of
everything we've talked about here today.

1841
01:30:40,065 --> 01:30:43,275
But I think we should talk about
Operation Spiderweb for 10, 15 minutes

1842
01:30:43,275 --> 01:30:44,625
and give it, let's give it its own do.

1843
01:30:44,925 --> 01:30:46,695
Um, unless you've been
living under a rock.

1844
01:30:47,055 --> 01:30:52,545
Um, so over last weekend, again recording
here, June 5th, um, Ukraine conducted.

1845
01:30:53,295 --> 01:30:57,705
Uh, what it called, operation Spider's
Web, a drone attack on at least

1846
01:30:57,705 --> 01:31:02,175
five different air bases all over
Russia from Siberia or, you know,

1847
01:31:02,175 --> 01:31:05,445
that far away towards the Pacific
side, all the way to around Moscow.

1848
01:31:05,835 --> 01:31:08,025
Um, the details are of course,
a little bit shady, but it looks

1849
01:31:08,025 --> 01:31:09,465
like over a hundred drones.

1850
01:31:09,465 --> 01:31:12,675
And to your point, these drones
costing about $600 a pop.

1851
01:31:13,335 --> 01:31:16,785
Uh, basically taking out, and this
is where the, the numbers are a

1852
01:31:16,785 --> 01:31:20,925
little bit, um, a little bit shady,
but let's say taking out one third

1853
01:31:21,405 --> 01:31:23,295
of Russia's strategic bomber fleet.

1854
01:31:23,655 --> 01:31:28,035
Just by using drones, uh, to bomb Russian
air bases some of these bombers that

1855
01:31:28,035 --> 01:31:32,085
were, you know, uh, running bombs against
Ukraine, uh, and engaging in long range

1856
01:31:32,085 --> 01:31:35,325
strikes in Ukraine against Ukrainian
infrastructure and things like that.

1857
01:31:35,595 --> 01:31:37,395
Um, Ukraine has made a
really big deal of it.

1858
01:31:37,425 --> 01:31:40,605
Uh, president Zelensky said it took
18 months to plan the operation.

1859
01:31:40,605 --> 01:31:44,415
He's, uh, he's today given out medals and
awards to the guys who were behind it.

1860
01:31:44,805 --> 01:31:46,575
Um, but for me, I, I sort of.

1861
01:31:46,775 --> 01:31:50,945
Sat up in my chair because now it's, this
is not the first example we have of this.

1862
01:31:50,974 --> 01:31:53,884
I, I thought, I mean, I'm not the first
to make this connection, but there's

1863
01:31:53,945 --> 01:31:57,424
Israel's assault on Hezbollah with
the pagers, hijacking, international

1864
01:31:57,424 --> 01:32:00,304
supply chains, putting explosives
into those pagers, sending them

1865
01:32:00,304 --> 01:32:01,594
to the people you wanna blow up.

1866
01:32:02,045 --> 01:32:05,735
Um, the Houthis, who, despite
President Trump's best efforts, are

1867
01:32:05,735 --> 01:32:08,915
just sitting there continuing to
bomb whatever the heck they want

1868
01:32:08,915 --> 01:32:12,875
because the US Navy and Air Force with
all of its capability can't bring.

1869
01:32:12,920 --> 01:32:16,490
A bunch of like non-state Yemeni
militants chewing cot in the

1870
01:32:16,490 --> 01:32:17,990
middle of the desert to heal.

1871
01:32:18,230 --> 01:32:19,130
Like kind of remarkable.

1872
01:32:19,130 --> 01:32:21,650
But here you have Ukraine,
which has been on the ropes.

1873
01:32:21,830 --> 01:32:23,240
Things have not been looking good.

1874
01:32:23,450 --> 01:32:26,630
Russia's gonna out grind them and
out suffer them and slowly take

1875
01:32:26,630 --> 01:32:29,330
land in the east and then make,
you know, some kind of frozen peace

1876
01:32:29,330 --> 01:32:30,710
agreement based on whatever they want.

1877
01:32:30,860 --> 01:32:34,130
Here's Ukraine striking back
and saying, okay, Russia like.

1878
01:32:34,765 --> 01:32:38,755
For the price of $600 times, roughly
a hundred, we're gonna wipe out a

1879
01:32:38,755 --> 01:32:40,105
third of your strategic bombers.

1880
01:32:40,105 --> 01:32:42,955
You wanna keep dancing or do
you wanna meet us in Istanbul?

1881
01:32:43,225 --> 01:32:47,365
Um, it, to me, it like opens up a question
about rethinking the balance of power

1882
01:32:47,365 --> 01:32:49,495
from a military perspective in the world.

1883
01:32:49,675 --> 01:32:53,185
Is this bad news for conventional
powers like the United States and China

1884
01:32:53,185 --> 01:32:55,045
versus good news for smaller powers?

1885
01:32:55,285 --> 01:32:59,365
If you want to get real dystopian,
what happens when Mexican drug cartels

1886
01:32:59,365 --> 01:33:03,385
and other non-state actors are able
to use drones in this particular way?

1887
01:33:03,385 --> 01:33:06,415
And then you've got, you know, let's,
let's use Mexico as an example.

1888
01:33:06,415 --> 01:33:06,955
Let's say if.

1889
01:33:06,955 --> 01:33:09,380
You know, the Mexican government
trying to bring the cartels to heal,

1890
01:33:09,380 --> 01:33:12,620
and the cartels are like, uh, what
if we bomb the Mexican Air Force?

1891
01:33:12,830 --> 01:33:15,530
Or what if we take out all of your
conventional military capability?

1892
01:33:15,530 --> 01:33:17,750
You want to keep messing with us
in the things that we're doing.

1893
01:33:17,750 --> 01:33:19,700
Like we can do this all
day with these drones.

1894
01:33:19,700 --> 01:33:23,389
So I, for me, it was like, I need
to really like rethink the military

1895
01:33:23,389 --> 01:33:24,470
balance of power in the world.

1896
01:33:24,500 --> 01:33:25,730
Uh, am I overstating it?

1897
01:33:25,730 --> 01:33:30,230
Did you have a similar thought or are
you a little more, uh, tell me I'm sensa

1898
01:33:30,230 --> 01:33:32,960
sensationalist is what I'm hoping you're
gonna tell me rather than that I'm Right.

1899
01:33:35,420 --> 01:33:35,840
Marko Papic: Um,

1900
01:33:38,510 --> 01:33:40,639
I mean, we can get very
dystopian about this, right?

1901
01:33:40,910 --> 01:33:45,860
Um, so as I said earlier, you
know, like this, uh, fiber optic

1902
01:33:45,860 --> 01:33:50,059
cable tethered to a drone, it
allows the drone to avoid jamming.

1903
01:33:50,660 --> 01:33:54,080
So Russians have basically, and these
drones are now completely crushing it.

1904
01:33:54,139 --> 01:33:55,550
Uh, I'm gonna send you a couple of links.

1905
01:33:55,550 --> 01:33:58,370
Jacob, if, in case you
wanna put 'em in the links,

1906
01:33:58,820 --> 01:33:59,090
Jacob Shapiro: please

1907
01:33:59,360 --> 01:34:00,170
Marko Papic: if we can do that.

1908
01:34:00,170 --> 01:34:06,050
There's one, it's a 50 minute interview
with an entrepreneur in Russia.

1909
01:34:06,720 --> 01:34:09,210
Who is producing Russian drones.

1910
01:34:09,930 --> 01:34:11,160
Uh, and it's fascinating.

1911
01:34:11,280 --> 01:34:12,300
He's very objective.

1912
01:34:12,510 --> 01:34:14,340
He gives Ukrainians lots of props.

1913
01:34:14,430 --> 01:34:16,590
He works for the Russian state.

1914
01:34:16,590 --> 01:34:21,300
I mean, the Russian state is his customer,
but he is, uh, is uh, is a very kind of

1915
01:34:21,300 --> 01:34:22,920
objective, matter of fact kind of dude.

1916
01:34:23,430 --> 01:34:26,700
Uh, he describes different drones
and, and he takes a lot of pleasure

1917
01:34:26,700 --> 01:34:28,170
in making fun of American drones.

1918
01:34:28,170 --> 01:34:29,490
I thought that was really hilarious.

1919
01:34:29,849 --> 01:34:33,120
Um, but he says Ukrainians are
actually better than Russian.

1920
01:34:33,210 --> 01:34:34,019
So that was interesting.

1921
01:34:34,680 --> 01:34:34,769
Mm-hmm.

1922
01:34:34,830 --> 01:34:39,120
And then I'll send, uh, also a YouTube
link on those fiber optic drones and,

1923
01:34:39,120 --> 01:34:41,309
and shows their lethal lethality.

1924
01:34:42,120 --> 01:34:49,710
Um, I think that we are at a threshold
of potential over the next 30 years where

1925
01:34:49,800 --> 01:34:52,680
all of this technology could very well

1926
01:34:54,960 --> 01:34:59,580
undermine the very sinus that
hold nation states together.

1927
01:35:01,740 --> 01:35:06,480
The reason, you know, earlier in this
podcast you talked about how we're

1928
01:35:06,480 --> 01:35:11,099
still on war footing because we have
taxation, which is, which is like,

1929
01:35:11,639 --> 01:35:14,400
which is a stretch, but like, meh.

1930
01:35:15,540 --> 01:35:20,730
Not that, you know, um, the
famous sociologist, Charles Tilley

1931
01:35:23,219 --> 01:35:29,309
famously said that war makes
states and states make war.

1932
01:35:30,299 --> 01:35:30,540
Jacob Shapiro: Hmm.

1933
01:35:31,110 --> 01:35:34,769
Marko Papic: In other words, we
have nation states because of war.

1934
01:35:35,940 --> 01:35:40,259
Like if we didn't, maybe we would all
just live in like cantons or parishes,

1935
01:35:40,589 --> 01:35:42,210
is that what we call them in Louisiana?

1936
01:35:42,690 --> 01:35:43,230
Jacob Shapiro: It is.

1937
01:35:43,290 --> 01:35:43,500
Yeah.

1938
01:35:43,530 --> 01:35:43,740
Very

1939
01:35:43,740 --> 01:35:43,860
Marko Papic: good.

1940
01:35:43,860 --> 01:35:44,160
Right.

1941
01:35:44,490 --> 01:35:46,469
Maybe, maybe that will be enough.

1942
01:35:46,559 --> 01:35:51,990
And so one of the reasons that states
have to tax you, like, not like the main

1943
01:35:51,990 --> 01:35:56,760
reason, but like one of them, the reason
we do it at that level, at a super high,

1944
01:35:57,120 --> 01:36:04,230
large level, continental size level in
America's case is not because providing

1945
01:36:04,230 --> 01:36:08,400
education and healthcare makes sense
at a federal level of a continent.

1946
01:36:10,170 --> 01:36:15,480
But because defending your, you at
your, in your house from the threats

1947
01:36:15,510 --> 01:36:17,219
does make sense at a continent level.

1948
01:36:17,219 --> 01:36:18,510
Like size matters.

1949
01:36:19,290 --> 01:36:23,309
But what's happening with technology
is that size doesn't and scale may not

1950
01:36:23,309 --> 01:36:28,170
matter, you know, and the fact that
the Ukrainians put a bunch of cheap

1951
01:36:28,170 --> 01:36:32,790
drones into a truck, drove them across
the border all the way to East Asia,

1952
01:36:35,010 --> 01:36:38,490
a, according to news reports,
they attacked a military

1953
01:36:38,490 --> 01:36:41,490
base of Russia in East Asia.

1954
01:36:42,495 --> 01:36:44,535
Closer to Tokyo than it is to Kiev.

1955
01:36:45,705 --> 01:36:50,415
So the fact that they're able to do
this undermines the very TA taxes

1956
01:36:50,415 --> 01:36:54,855
we pay so that our country produces
aircraft carriers to like defend us.

1957
01:36:56,445 --> 01:36:57,465
Because they can't.

1958
01:36:58,305 --> 01:36:59,025
Because you're right.

1959
01:36:59,055 --> 01:37:02,655
It's not just, I mean, it's not just
the conflict with like the cartels.

1960
01:37:02,985 --> 01:37:04,095
It's really everything.

1961
01:37:04,095 --> 01:37:06,555
Drones are getting very cheap, very good.

1962
01:37:07,485 --> 01:37:08,565
You can't jam them.

1963
01:37:09,224 --> 01:37:10,965
An operator can use a fiber optic.

1964
01:37:11,115 --> 01:37:15,555
These things, the cables look like
a string of hair and the camera at

1965
01:37:15,555 --> 01:37:18,375
the end of that drone has 4K HD.

1966
01:37:18,735 --> 01:37:19,335
Jacob.

1967
01:37:20,144 --> 01:37:23,205
You can go on YouTube and watch
videos that are really grizzly

1968
01:37:23,205 --> 01:37:25,005
because you see a lot of detail.

1969
01:37:25,005 --> 01:37:25,095
Mm-hmm.

1970
01:37:25,335 --> 01:37:26,205
Before they kill someone.

1971
01:37:27,210 --> 01:37:32,355
So you can have a very small drone that's
operated with a string of hair line,

1972
01:37:32,865 --> 01:37:36,315
you know, holding it 60 kilometer range.

1973
01:37:36,345 --> 01:37:37,665
Crazy stuff.

1974
01:37:38,535 --> 01:37:39,585
It's a lot a line.

1975
01:37:39,930 --> 01:37:44,610
But the point is, uh, yeah, I
mean this undermines the very

1976
01:37:44,610 --> 01:37:48,450
notion that governments can't
provide a level of security.

1977
01:37:48,480 --> 01:37:50,040
And so what does it mean for warfare?

1978
01:37:51,720 --> 01:37:55,530
It means that all this nonsense there
we're gonna need steel and glistening

1979
01:37:55,530 --> 01:38:04,950
sweat of manly men banging hammers to
produce tanks and howitzers ammunitions,

1980
01:38:04,980 --> 01:38:08,820
you know, like, eh, I'm not sure that's
where the wars are going in the future.

1981
01:38:09,450 --> 01:38:14,880
And the fact is, America provided
Ukraine with Javelins, which were pretty

1982
01:38:14,880 --> 01:38:20,280
cheap themselves, that arrested that
initial military mechanized attack.

1983
01:38:20,280 --> 01:38:24,269
But since then, it's kind of been
up to Ukrainians themselves and

1984
01:38:24,269 --> 01:38:26,550
their, their ability to innovate.

1985
01:38:26,550 --> 01:38:29,160
Now, patriot missiles are also important.

1986
01:38:29,160 --> 01:38:33,750
Obviously that's where America has
helped immensely, uh, in allowing

1987
01:38:34,019 --> 01:38:35,430
Ukraine to defend its airspace.

1988
01:38:35,849 --> 01:38:36,990
But my point is that.

1989
01:38:37,769 --> 01:38:41,309
You're gonna need some anti-aircraft
weapon systems, you're gonna need

1990
01:38:41,309 --> 01:38:42,780
some satellite command and control.

1991
01:38:42,780 --> 01:38:43,890
That's where starlink comes in.

1992
01:38:43,890 --> 01:38:43,980
Mm-hmm.

1993
01:38:44,220 --> 01:38:45,840
You can't use these drones without that.

1994
01:38:46,620 --> 01:38:51,210
But then like, not even, you can even fly
these drones tethered with a fiber optic

1995
01:38:51,210 --> 01:38:55,860
cable and you're gonna get smaller and
they're gonna get more and more lethal.

1996
01:38:56,309 --> 01:38:59,160
And if you wanna assassinate
somebody, it's gonna be like

1997
01:38:59,160 --> 01:39:01,290
that little probe in, in dune

1998
01:39:03,360 --> 01:39:06,840
that our hero Charlemagne had to fight.

1999
01:39:07,680 --> 01:39:08,040
Right.

2000
01:39:08,850 --> 01:39:12,540
Um, so like, I think, I think it's
very interesting what's happening.

2001
01:39:12,540 --> 01:39:16,920
It's, it's basically war is getting
less technologically sophisticated in

2002
01:39:16,920 --> 01:39:19,440
some ways, and I find that fascinating.

2003
01:39:19,440 --> 01:39:22,920
I find it fascinating that we
always think that everything is

2004
01:39:22,920 --> 01:39:24,840
gonna get super, super advanced.

2005
01:39:25,440 --> 01:39:27,300
And if you allow me to
cook on just one point.

2006
01:39:28,019 --> 01:39:28,140
Yeah.

2007
01:39:28,200 --> 01:39:30,210
When I was a kid, I liked computer games.

2008
01:39:31,305 --> 01:39:32,115
In the nineties.

2009
01:39:32,205 --> 01:39:32,595
Right.

2010
01:39:32,595 --> 01:39:36,015
And I, I imagine I would often sit
there and imagine, oh my God, I can't

2011
01:39:36,015 --> 01:39:38,265
wait for 2025 when I'm in my forties.

2012
01:39:38,625 --> 01:39:41,505
I bet the graphics and the
computers like, I'll be able to

2013
01:39:41,505 --> 01:39:45,375
play Madden like as a quarterback,
like, you know, inside the game.

2014
01:39:46,005 --> 01:39:46,125
Yeah.

2015
01:39:46,185 --> 01:39:48,855
And instead, computer games
have actually gone the other

2016
01:39:48,855 --> 01:39:50,595
way because of the, the phone.

2017
01:39:51,405 --> 01:39:51,495
Mm-hmm.

2018
01:39:51,795 --> 01:39:57,315
So when I see what my children are playing
graphics of Roblox is absolutely terrible.

2019
01:39:57,705 --> 01:40:01,365
And many, many games that have been
very successful, like Angry Birds are

2020
01:40:01,365 --> 01:40:05,865
being like, they're just like Prince of
Persia from the nineties for God's sakes.

2021
01:40:06,330 --> 01:40:11,595
And so I think we're all sitting here
and we're thinking we're gonna need

2022
01:40:11,595 --> 01:40:15,915
AI robots to fight these huge wars,
and they're gonna be devastating.

2023
01:40:17,025 --> 01:40:20,655
And Russians have turned the tide of
the war because they connected the

2024
01:40:20,655 --> 01:40:23,565
drone with a cable to a remote control.

2025
01:40:24,195 --> 01:40:24,555
Jacob Shapiro: Ukraine?

2026
01:40:25,280 --> 01:40:25,665
Marko Papic: No, no.

2027
01:40:25,665 --> 01:40:26,175
Russians.

2028
01:40:26,265 --> 01:40:26,745
Russians.

2029
01:40:26,775 --> 01:40:27,345
Russians.

2030
01:40:27,405 --> 01:40:29,025
Uh, so, so.

2031
01:40:29,880 --> 01:40:33,150
The Russians are making gains in
Ukraine because of this tethered drone.

2032
01:40:33,150 --> 01:40:35,130
So that was a, that was actually
very, oh, I see what you're saying.

2033
01:40:35,185 --> 01:40:35,265
Sorry.

2034
01:40:35,270 --> 01:40:35,280
Sorry.

2035
01:40:35,280 --> 01:40:39,090
But your point, your point is you
to be, to go back to your point,

2036
01:40:39,360 --> 01:40:44,700
he also put $600 drones in a truck
and drove it and released them.

2037
01:40:44,700 --> 01:40:47,940
You know, like, this isn't like, and
then, and you know, the media, the

2038
01:40:47,940 --> 01:40:53,850
journalists obsessed about, apparently
some of them had AI in like capabilities.

2039
01:40:53,880 --> 01:40:56,880
'cause they, once they lost control,
they knew what an aircraft looked like,

2040
01:40:56,880 --> 01:40:58,470
and then they autonomously went to it.

2041
01:40:58,470 --> 01:40:59,310
Like, gimme a break.

2042
01:40:59,310 --> 01:41:00,690
Like, relax again.

2043
01:41:01,170 --> 01:41:02,730
No, this wasn't an AI attack.

2044
01:41:02,730 --> 01:41:07,920
You're gonna, you're gonna need some low
level baseline coding to make that happen.

2045
01:41:08,700 --> 01:41:12,210
The future of warfare is not gonna
be who has the most elegant ai.

2046
01:41:12,210 --> 01:41:15,960
It's just not the future of war may
very well be that you can't have a war.

2047
01:41:18,099 --> 01:41:20,219
Jacob Shapiro: Maybe I'm, I'm
reminded of, um, you know, the

2048
01:41:20,219 --> 01:41:23,490
Civil War, the u the American Civil
War is like my nerdy obsession.

2049
01:41:23,490 --> 01:41:26,280
And, um, of course, like I've, I
can't count the number of times I've

2050
01:41:26,280 --> 01:41:29,639
watched Ken Burns, uh, documentary
mostly so I could watch Shelby Foote

2051
01:41:29,639 --> 01:41:31,290
pontificate about, uh, the Civil War.

2052
01:41:31,589 --> 01:41:35,370
But, um, one of the reasons the casualty
figures in US Civil War battles was,

2053
01:41:35,370 --> 01:41:39,120
were so high, um, was because in the
words of Shelby Foot, the tactics

2054
01:41:39,120 --> 01:41:40,469
had not caught up with the weapons.

2055
01:41:40,950 --> 01:41:44,969
I think we're in that situation right
now, like the tactics are just beginning

2056
01:41:44,969 --> 01:41:49,320
to sort of, uh, reach what, oh, we
have these weapons, we can do what with

2057
01:41:49,440 --> 01:41:51,959
this technology against these targets.

2058
01:41:52,290 --> 01:41:54,719
Um, and I think it's fascinating to
watch Russia and Ukraine, 'cause it's

2059
01:41:54,719 --> 01:41:58,440
literally a laboratory in real time, to
your point about what war is probably

2060
01:41:58,440 --> 01:42:00,209
going to look like in the future.

2061
01:42:00,209 --> 01:42:01,740
And it doesn't look like World War iii.

2062
01:42:01,740 --> 01:42:05,129
And you know, ironically, like in the
example I just gave, like actually

2063
01:42:05,129 --> 01:42:08,190
casualty numbers were higher because
the weapons were so deadly and the

2064
01:42:08,190 --> 01:42:10,919
tactics were just marched towards
each other and shoot at each other.

2065
01:42:10,919 --> 01:42:11,549
So you had like.

2066
01:42:11,570 --> 01:42:14,719
Tens of thousands of people dying
in battles that didn't need to.

2067
01:42:14,719 --> 01:42:18,440
To your point, if you have these
really, really precise things, like,

2068
01:42:19,070 --> 01:42:21,590
I mean like, let's say we're 10
years in the future, you have some

2069
01:42:21,590 --> 01:42:22,910
of these really precise drones.

2070
01:42:22,910 --> 01:42:26,059
Like, can you just assassinate
Putin before things even get going?

2071
01:42:26,360 --> 01:42:29,210
And like, and this like, I mean,
that's the sort of world that it seems

2072
01:42:29,210 --> 01:42:31,639
like we're heading towards, and maybe
they'll be some kind of counterbalance

2073
01:42:31,639 --> 01:42:33,139
or antione defense technology.

2074
01:42:33,139 --> 01:42:33,650
I don't know.

2075
01:42:33,650 --> 01:42:37,639
But like, um, yeah, it's, it's changing
the way I think about like military,

2076
01:42:37,759 --> 01:42:41,120
you know, back to our geopolitical
power index, like we might have to

2077
01:42:41,120 --> 01:42:44,389
revisit the whole index just because we
need to rethink like what conventional

2078
01:42:44,389 --> 01:42:46,160
military power means on that scale.

2079
01:42:46,759 --> 01:42:50,870
Marko Papic: Well, I mean, watch that you,
uh, YouTube clip of the scene where the

2080
01:42:50,870 --> 01:42:54,259
hunter seeker tries to kill prad in Dune.

2081
01:42:54,485 --> 01:42:54,905
Mm-hmm.

2082
01:42:55,005 --> 01:42:56,480
By the way, dune is fascinating.

2083
01:42:56,540 --> 01:42:59,000
You know, um, I read the books
when I was a kid and everything.

2084
01:42:59,719 --> 01:43:02,929
No, we, I mean, we can, we can go off
another, uh, 30 minutes on this, but.

2085
01:43:03,629 --> 01:43:04,110
The whole point.

2086
01:43:04,110 --> 01:43:04,815
Well, Margo, I,

2087
01:43:04,820 --> 01:43:05,820
Jacob Shapiro: I don't know if
you know this, I'll, I'll put

2088
01:43:05,820 --> 01:43:06,690
this in the show notes too.

2089
01:43:06,690 --> 01:43:10,200
Back when I was still with George at
GPF, uh, once a year, I commandeered the

2090
01:43:10,200 --> 01:43:12,660
website to do April Fools, uh, pieces.

2091
01:43:12,870 --> 01:43:15,360
And there is on the internet, I'll,
I'll, we'll put it in the show notes.

2092
01:43:15,360 --> 01:43:18,809
There's a 15 page geopolitics of
Dune from yours, truly that it

2093
01:43:18,809 --> 01:43:20,639
was released on April Fools 2019.

2094
01:43:20,639 --> 01:43:21,179
It's great.

2095
01:43:21,179 --> 01:43:25,019
I had our graphics team create like
really intense geographic maps of

2096
01:43:25,290 --> 01:43:29,129
Calahan and Arki and of, um, har
uh, where are the harken's from?

2097
01:43:29,309 --> 01:43:31,440
Uh, GS Prime?

2098
01:43:32,099 --> 01:43:33,540
No, uh, it, it's giddy Prime.

2099
01:43:33,540 --> 01:43:33,660
Yeah.

2100
01:43:33,660 --> 01:43:34,139
Anyway, sorry.

2101
01:43:34,144 --> 01:43:34,775
Gi Yeah, go ahead.

2102
01:43:35,394 --> 01:43:38,790
Marko Papic: Uh, okay, so, uh, no,
I was just gonna say, uh, I mean

2103
01:43:38,790 --> 01:43:42,179
the whole premise of that, uh, show
is that all these great houses have

2104
01:43:42,179 --> 01:43:45,450
nuclear weapons, but they choose
not to use them because obviously

2105
01:43:45,450 --> 01:43:47,099
it's mutual for assure destruction.

2106
01:43:47,700 --> 01:43:50,339
But technology has gotten
so advanced in warfare.

2107
01:43:50,339 --> 01:43:54,570
They have to use basically
combat, like hand to hand combat.

2108
01:43:55,259 --> 01:43:55,349
Yeah.

2109
01:43:55,349 --> 01:43:59,099
And I think that, um, you know, I,
I do think that there's potential.

2110
01:43:59,970 --> 01:44:04,260
For war to become so precise, as you
say, where you can basically use a

2111
01:44:04,260 --> 01:44:06,750
hunter seeker drone to take out a leader.

2112
01:44:08,070 --> 01:44:08,790
That's number one.

2113
01:44:08,790 --> 01:44:17,220
And number two, I think that providing
large mechanized military platforms like

2114
01:44:17,220 --> 01:44:23,010
nuclear submarines, aircraft carriers,
tanks, aircraft becomes less relevant.

2115
01:44:23,070 --> 01:44:25,050
And if it becomes less relevant,

2116
01:44:27,180 --> 01:44:28,620
states become less relevant.

2117
01:44:29,100 --> 01:44:30,900
But that's like a 30, 50 year.

2118
01:44:30,900 --> 01:44:33,000
I mean, that will require
a whole podcast for itself.

2119
01:44:33,360 --> 01:44:38,130
I just do think that since Industrial
Revolution, revolution was created since

2120
01:44:38,130 --> 01:44:41,895
Industrial Revolution, everything's
been about scale, Jacob, everything,

2121
01:44:42,675 --> 01:44:47,820
and by, by everything, I don't mean
just like producing industrial goods for

2122
01:44:47,820 --> 01:44:52,830
war, but also producing educated human
beings that can follow order in a war.

2123
01:44:53,580 --> 01:44:53,730
Mm-hmm.

2124
01:44:54,120 --> 01:44:58,920
They can work in a factory like
mass Education, healthcare.

2125
01:44:59,490 --> 01:45:02,370
Everything's been about
the median outcome.

2126
01:45:02,549 --> 01:45:03,540
Median outcome.

2127
01:45:04,049 --> 01:45:07,379
Let's educate human
beings in a median way.

2128
01:45:07,379 --> 01:45:09,389
So if you're extremely
talented, who cares?

2129
01:45:09,389 --> 01:45:11,429
Like you're just gonna get
educated at a certain level.

2130
01:45:11,730 --> 01:45:12,959
Nothing is customized to you.

2131
01:45:12,959 --> 01:45:14,070
Oh, you have a headache, Jacob?

2132
01:45:14,610 --> 01:45:15,240
That's cool.

2133
01:45:15,570 --> 01:45:16,349
Take an aspirin.

2134
01:45:16,769 --> 01:45:19,500
Oh, by the way, if Marco has a
headache, he should take an aspirin too.

2135
01:45:19,500 --> 01:45:22,320
It's a median outcome in most results.

2136
01:45:22,320 --> 01:45:24,660
Most people fall into this median curve.

2137
01:45:25,349 --> 01:45:27,750
That's what, that's the world we created.

2138
01:45:27,900 --> 01:45:30,660
Since there's no customization, right?

2139
01:45:30,660 --> 01:45:32,070
There's no art there.

2140
01:45:32,070 --> 01:45:36,870
There's no artisan like guilds producing
things to your custom specifications.

2141
01:45:37,349 --> 01:45:41,490
And I think that the world we're coming
into with drones, with ai, with machine,

2142
01:45:41,549 --> 01:45:47,730
with 3D, 3D, printing with, with new
sources of energy, you know, wow.

2143
01:45:47,790 --> 01:45:49,139
Put some solar panels on your roof.

2144
01:45:49,169 --> 01:45:52,019
You don't need the median
provider of, of energy.

2145
01:45:52,980 --> 01:45:56,339
I think that where we're headed
is a much different world,

2146
01:45:56,339 --> 01:45:57,540
and in that different world.

2147
01:45:58,005 --> 01:46:03,375
The number one outdated technology
that we may need to discard is actually

2148
01:46:03,375 --> 01:46:08,055
the nation state, which is interesting
because I'm not a libertarian,

2149
01:46:08,265 --> 01:46:09,645
let me tell you this right now.

2150
01:46:10,305 --> 01:46:11,835
But that is where this is headed.

2151
01:46:12,075 --> 01:46:17,205
Like po potentially all these
technologies make it less likely that

2152
01:46:17,205 --> 01:46:23,385
you need to tax and collect resources
at a continental level to have these

2153
01:46:23,385 --> 01:46:25,485
continental wars against one another.

2154
01:46:26,895 --> 01:46:28,905
Jacob Shapiro: It all comes
back to looking like the 1890s.

2155
01:46:28,935 --> 01:46:30,945
Uh, we could go on forever, but
one of those clients that we were

2156
01:46:30,945 --> 01:46:33,675
talking about in the first 10
minutes, uh, gets to see me in my

2157
01:46:33,675 --> 01:46:35,295
flamingo shirt in three minutes time.

2158
01:46:35,295 --> 01:46:38,445
So I think we will leave it there,
uh, and leave it to next week.

2159
01:46:38,505 --> 01:46:39,765
Uh, dude, this was so good.

2160
01:46:40,245 --> 01:46:40,935
We're getting better.