WEBVTT - Facebook Co-Founder Chris Hughes Talks Meta Earnings & FTC

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>The earnings just around the corner as well. Meta set

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<v Speaker 2>to report earnings after the closing ballance. The industry faces

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<v Speaker 2>continued regulatory pressure. Facebook co founder Chris Hughes, arguing in

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<v Speaker 2>the US as a history of striking a balance between

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<v Speaker 2>free markets and state capitalism, writes in quote, we organize

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<v Speaker 2>many of our markets for the common good, choosing to

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<v Speaker 2>cultivate them rather than plan them outright. The work is

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<v Speaker 2>a craft, not unlike the work of a sculptor or painter.

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<v Speaker 2>Chris is the author of the new book Market Crafters,

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<v Speaker 2>and he joins us now for more. Chris Camrnic good

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<v Speaker 2>to see you, Thanks for having me. Let's start big

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<v Speaker 2>and then we can get some meta anks.

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<v Speaker 3>Let's do it.

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<v Speaker 2>A secret source of the US economy, how would you

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<v Speaker 2>describe it?

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<v Speaker 4>It's the dance between the private sector and the government.

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<v Speaker 4>So I make the case that policymakers have often harnessed

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<v Speaker 4>and guided markets toward public goals in order to make

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<v Speaker 4>Americans richer, say for their lives, more economically stable. And

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<v Speaker 4>there's a hidden history of US doing this from the

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<v Speaker 4>nineteen thirties all the way to present. It's a republican

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<v Speaker 4>project as much as it's a democratic project, and we're

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<v Speaker 4>going to have to pull out some of the lessons

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<v Speaker 4>from that if we're going to rebuild on the other

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<v Speaker 4>side of the chaos.

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<v Speaker 2>It's happening right now, so talk about the casts. So

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<v Speaker 2>we're doing a good job of it right now.

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<v Speaker 1>Yeah.

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<v Speaker 4>I mean, someone said this is more like market crashing

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<v Speaker 4>than market crafting, and.

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<v Speaker 3>That seemed apt to me. No. I mean, this administration

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<v Speaker 3>is at.

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<v Speaker 4>Best impulsive and at worst completely disorganized. The way to

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<v Speaker 4>do this in the right way would be to say

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<v Speaker 4>we have a mission like bringing back manufacturing jobs or

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<v Speaker 4>even the auto industry. Then you'd create trade policy tariffs

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<v Speaker 4>that would be targeted not on avocados and cars, but targeted.

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<v Speaker 3>You do it in collaboration with allies, and.

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<v Speaker 4>You'd pair it with industrial policy investments to make sure

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<v Speaker 4>that those plans can get online quickly and that they

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<v Speaker 4>can do it cheaply. And there is a recipe for

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<v Speaker 4>crafting a particular market along those lines.

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<v Speaker 3>This is just chaos. Use to use the word.

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<v Speaker 4>Where the tariffs are, whether they're on this week or

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<v Speaker 4>last week, and people are trying to figure it out.

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<v Speaker 1>Taking a step back though further, there is this feeling

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<v Speaker 1>about what the engine of US exceptionalism has been and

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<v Speaker 1>it's been in the world that you co founded with

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<v Speaker 1>respect to Facebook, which is big tech, and this idea

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<v Speaker 1>that the technological expertise that has been cultivated in the

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<v Speaker 1>United States has been superior and has been the reason

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<v Speaker 1>why so many people have wanted to invest here. Do

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<v Speaker 1>you see that unable to continue in this certain sort

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<v Speaker 1>of less predictable moment, or do you see that as

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<v Speaker 1>continuing to chug along in a healthy way that does

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<v Speaker 1>lead to some sort of evolution.

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<v Speaker 3>It is certainly on shaky ground, that's for sure. I

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<v Speaker 3>think the story of.

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<v Speaker 4>American technical leadership is also one where we see private

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<v Speaker 4>sector innovation as a critical engine of growth, paired with

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<v Speaker 4>public sector decisions.

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<v Speaker 3>So I'll give a crisp example.

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<v Speaker 4>We've all been talking about semiconductors and chips for the

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<v Speaker 4>last few years, and that's been incredibly important in bringing

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<v Speaker 4>back advanced semiconductor manufacturing in the United States. However, the

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<v Speaker 4>real story of how to support the high tech industry

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<v Speaker 4>in the US starts more in the nineteen eighties with

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<v Speaker 4>Reagan era industrial policy. At that point, Japan's share of

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<v Speaker 4>global semiconductor production was increasing quickly, and there was a man,

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<v Speaker 4>Robert Nois, the co founder of Intel, who teamed up

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<v Speaker 4>with other semiconductor producers to go to Washington say, hey,

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<v Speaker 4>we have a national security problem on our hands. The

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<v Speaker 4>Department of Defense agreed, so did White House in Congress,

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<v Speaker 4>and they came together to first do a structured trade

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<v Speaker 4>policy on Japan to prevent them dumping in the market,

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<v Speaker 4>and then secondly make a big public investment in semiconductor production.

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<v Speaker 4>So at this moment when we could have lost that

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<v Speaker 4>technical lead, an early important moment, we invested and it worked.

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<v Speaker 4>A few years later, the United States retook its share

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<v Speaker 4>of global semiconductor manufacturing. So what I'm trying to say

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<v Speaker 4>is it's not just a coincidence that we have these

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<v Speaker 4>high tech companies now. And it's yes, it's partially because

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<v Speaker 4>DARPA funded the Internet and this the lights are powered

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<v Speaker 4>by the government, but it's actually something even more explicit

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<v Speaker 4>product of market craft, and that should give us lessons

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<v Speaker 4>for how we can do it in the future.

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<v Speaker 1>You said that the US is at risk of losing

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<v Speaker 1>some of that tech dominance. What makes you feel that

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<v Speaker 1>about the structure of current tech companies, in particular Meta.

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<v Speaker 1>That makes you get the sense that maybe they're losing

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<v Speaker 1>some of that innovation or some of that structure that

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<v Speaker 1>allows them to lead.

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<v Speaker 4>It's less that I think that the tech companies are

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<v Speaker 4>losing innovation and more that you have to have public

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<v Speaker 4>policy to be fundamentally stable to encourage companies all across

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<v Speaker 4>the supply chain to invest.

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<v Speaker 3>And I think that's truly what's at risk now.

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<v Speaker 4>I mean, you've seen virtually all the measures of investor

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<v Speaker 4>confidence go down, consumer sentiment goes down, Inflation expectations are up,

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<v Speaker 4>equity markets are down, I mean all, and there's a

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<v Speaker 4>real fear that the FED won't be able to lower.

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<v Speaker 3>If inflation stays high.

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<v Speaker 4>So I think all of those storm clouds on the

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<v Speaker 4>horizon are not just bad macroeconomically, but bad for our

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<v Speaker 4>our technical companies and our leaders. It certainly makes it

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<v Speaker 4>a much more challenging environment for them.

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<v Speaker 3>To succeed in.

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<v Speaker 2>If you're a sculptor, you'd be breaking metsa up right.

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<v Speaker 4>I wrote a piece six years ago arguing that Meta

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<v Speaker 4>had abused its power and that it had illegally acquired

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<v Speaker 4>WhatsApp and Instagram in order to consolidate its power. You

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<v Speaker 4>have TC under Trump filed too on that same rationale.

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<v Speaker 4>Several years ago. The Biden administration reorganized the case and

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<v Speaker 4>continued to prosecute it. And as you know now, I mean,

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<v Speaker 4>the case is ongoing in Washington with exactly these questions.

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<v Speaker 2>What is it about it that you think is illegal?

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<v Speaker 4>The decision now over a decade ago, to say Instagram

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<v Speaker 4>is challenging our monopoly, our power in the social media landscape,

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<v Speaker 4>particularly with photos and WhatsApp, later with messaging, and then

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<v Speaker 4>to acquire those rivals and then do things like purposefully

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<v Speaker 4>slow investment development, as the Instagram co founder testified just

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<v Speaker 4>last week, that is against the law to acquire competitors,

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<v Speaker 4>either to shut them down or to consolidate a monopolistic position.

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<v Speaker 3>It's quite clear now. The question is is what do

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<v Speaker 3>you do now?

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<v Speaker 4>That was a long time ago, and so you know,

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<v Speaker 4>in my view, I think it's important that you know,

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<v Speaker 4>Facebook has to comply with the law despite making a

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<v Speaker 4>decision years ago that was illegal.

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<v Speaker 3>And then the question will come to what is the appropriate.

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<v Speaker 4>Remedy in twenty twenty five, and we need to know

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<v Speaker 4>more from the case to figure that out.

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<v Speaker 1>Is it incoherent to call some of the big tech

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<v Speaker 1>companies in the US national champions and to try to

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<v Speaker 1>hope that they're successful while trying to break them up

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<v Speaker 1>and change their business model with elimination of revenues from

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<v Speaker 1>places like China.

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<v Speaker 4>I understand why you say that it seems on the

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<v Speaker 4>surface like they might be in conflict, but actually what

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<v Speaker 4>I chart in my research is a long story of saying,

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<v Speaker 4>wait a second, we want leading industries in the United States.

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<v Speaker 3>So we were talking a lot about tech.

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<v Speaker 4>But you can do it in fu finance, you can

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<v Speaker 4>do it in energy. You can do it a whole

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<v Speaker 4>range of markets. And in order to do that you

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<v Speaker 4>need to use a few different tools simultaneously. One of

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<v Speaker 4>them might be public investment, like in the IRA for

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<v Speaker 4>climate or in the semiconductor example that we were talking

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<v Speaker 4>about earlier. Another might be procurement, another might be reserve buffering,

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<v Speaker 4>and then another might be competition policy. So these things

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<v Speaker 4>can work in concert as long as you have a

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<v Speaker 4>clear mission, what is government trying to do, and if

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<v Speaker 4>that's to spur in this moment AI research and development

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<v Speaker 4>so that we can lead the world and take on

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<v Speaker 4>China and be at the frontier that could be a

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<v Speaker 4>very In fact, I think that would be a very

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<v Speaker 4>smart mission to pursue.

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<v Speaker 3>But it has to be crisp and clear, and then you.

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<v Speaker 4>Can organize the institutions of American democracy to pursue that,

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<v Speaker 4>and sometimes that might mean public investment and competition policy.

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<v Speaker 1>At the same time, this overlaps with the idea of

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<v Speaker 1>tariffs as well, and the idea that it was a

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<v Speaker 1>bipartisan effort to have specific tariffs on certain products going

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<v Speaker 1>to China that were national security concerns are just outright

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<v Speaker 1>bans of certain types of chips being sold to China.

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<v Speaker 1>Do you think that that is the appropriate policy in

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<v Speaker 1>terms of limiting the amount of information or do you

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<v Speaker 1>think that, as someone who's worked in the tech industry,

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<v Speaker 1>the more cooperation open and transfer of information, the more

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<v Speaker 1>innovation and the more people can kind of get ahead.

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<v Speaker 4>I don't think it quite works that simply. I think

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<v Speaker 4>we have to be clear about what the goal is.

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<v Speaker 3>Is the goal.

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<v Speaker 4>Bringing back jobs in particular manufacturing industries, or is the

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<v Speaker 4>goal onshoing semiconductor manufacturing for national security concerns, or is

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<v Speaker 4>it just a broader goal of technical innovation and leadership,

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<v Speaker 4>Like with the investment in INNAI and depending on what

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<v Speaker 4>the goal is targeted, tariffs can have a place. I mean,

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<v Speaker 4>we saw this on Let's just use the example of

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<v Speaker 4>climate policy.

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<v Speaker 3>Bidenomics has gotten a bad.

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<v Speaker 4>Rep but obviously the IRA brought major investments in climate technology,

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<v Speaker 4>not only from the public sector, but doubling the overall

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<v Speaker 4>amount the private sector is investing as well. And that

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<v Speaker 4>kind of investment I think can transform that industry. So

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<v Speaker 4>there are bipartisan moments where people agree more so on

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<v Speaker 4>semiconductors than on climate, more so on tech oversite and

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<v Speaker 4>some other things, and I think those can be taken

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<v Speaker 4>advantage of. And you know, I charted the hidden history

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<v Speaker 4>of how to do this because.

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<v Speaker 3>We do fail a lot of time.

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<v Speaker 4>You know, government, if it doesn't have a clear mission,

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<v Speaker 4>if it doesn't have an institution charged with getting it

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<v Speaker 4>done and the discretion to bring in the best minds,

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<v Speaker 4>then it fails.

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<v Speaker 3>But when those ingredients are there, it succeeds.

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<v Speaker 2>And that's that's why I wrote the boking first with Chris.

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<v Speaker 2>This was great and hopefully we can do it again

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<v Speaker 2>soon for shore. Thank you, sir, Facebook co founder Chris

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<v Speaker 2>Use that