Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Oddlocks podcast.
Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, there's a lot going on in the world.
Speaker 3: Are we going to start every podcast with that sentence?
Speaker 2: It's sort of a cliche. Now, there's a lot going
Speaker 2: on in the world. I have to say, you know,
Speaker 2: I recently were recording this February twenty fifth. I don't
Speaker 2: know the exact date that's coming out. I recently took
Speaker 2: a vacation and they did a pretty good job, Tracy,
Speaker 2: wouldn't you say like being unplugged, Like I probably sent
Speaker 2: like six or seven tweets. I don't think I responded
Speaker 2: to any emails or what's that message.
Speaker 3: I actually noticed this that the volume of Joe's digital presence, Yeah,
Speaker 3: was way way down and normally listeners. Normally when Joe
Speaker 3: is on vacation and sometimes board, he just starts firing
Speaker 3: off emails saying like, oh, we should do this and
Speaker 3: we should do that. None of those. This time. It
Speaker 3: was a vacation for me too.
Speaker 2: A vacation from your co host. Yeah, I really did
Speaker 2: not do much. And then I have to say, like
Speaker 2: re entry into the world, my thirty five hundred emails
Speaker 2: catching up. Everything that happened in a week in the
Speaker 2: world was a lot this time. And I'll just say
Speaker 2: it's a cliche to say a lot happened, but it
Speaker 2: was like, Okay, I really have some catching up to do.
Speaker 3: It.
Speaker 2: I felt it, and it made the re entry from
Speaker 2: vacation words.
Speaker 3: Well, it's not just the number of things that are happening,
Speaker 3: it's the significance as well. Right, So I imagine one
Speaker 3: of the things you came back to after your week
Speaker 3: off was the idea of a rift, a growing rift
Speaker 3: between the US and Europe. There's all these lingering concerns
Speaker 3: as well about competing with China AI technology. Big themes
Speaker 3: to think about. Now.
Speaker 2: I saw, like scrolling on my phone, I saw like JD.
Speaker 2: Evance has given this big speech in Munich, and I'm like,
Speaker 2: do I want to watch this on the beach? And tuloum,
Speaker 2: I do not want to watch this on the beach.
Speaker 2: And so but now I have to understand how the
Speaker 2: world changes and again from week to week. But big
Speaker 2: things afoot in the world, and how should we make
Speaker 2: sense of these and how should we cut through the
Speaker 2: noise and all that stuff. Anyway, I'm very excited. We
Speaker 2: really do have the two perfect guests to discuss big
Speaker 2: things in the world, like technological changes, especially through the
Speaker 2: geopolitical lens and this ratum the geopolitics of what will
Speaker 2: be the nature of the US's relationship with Europe and
Speaker 2: other countries. We're going to be speaking with Jared Cohen,
Speaker 2: President of Global Affairs and co head of the Goldman
Speaker 2: Sex Global Institute, and George Lee, the other co head
Speaker 2: of the Goldman Sex Global Institute. So Jared and George,
Speaker 2: thank you both for coming on Ovlach joining us in
Speaker 2: the studio.
Speaker 4: Thank you, thank you. As I mentioned you before, I'm
Speaker 4: a longtime listener, first time caller of the pod, so
Speaker 4: thrilled to be on it with you.
Speaker 3: Oh, thank you. I love it when people say that
Speaker 3: on air. I know I have a question just to
Speaker 3: begin with, what is the Goldman Sachs Global Institution.
Speaker 4: Sure, I'll start, George to pitch in. So, the Goldman
Speaker 4: sax Global Institute is a new platform at the firm.
Speaker 4: We formed about two and a half years ago and
Speaker 4: the goal is to promote the firm's thought leadership at
Speaker 4: the intersection of technology change, geopolitics, and markets, and the
Speaker 4: idea is that these factors have become extraordinarily consequential for boards, CEOs,
Speaker 4: investment committees and many of our client types. And so
Speaker 4: this ability to transmit our thinking, be provocative, share a
Speaker 4: worldview is just a great way to engage our clients.
Speaker 4: It's been a lot of fun.
Speaker 5: The other thing that I would add is for some
Speaker 5: of the really kind of big strategic clients, Let's take
Speaker 5: sovereigns as an example, there's a lot of ambitions that
Speaker 5: they have over the next three to five years, and
Speaker 5: what the Institute does is we pull together all the
Speaker 5: expertise that we have at the firm to essentially cover
Speaker 5: their ambitions. So when they say, you know, here's at
Speaker 5: a high level what we want to try to do
Speaker 5: in the AI space, or here's what we want to
Speaker 5: try to do in the Indo Pacific region, our job
Speaker 5: is to be able to respond as a firm, to
Speaker 5: help them think through and define what that looks like
Speaker 5: and then to help them make it happen. And through
Speaker 5: the combination of our banking franchise and our asset management franchise,
Speaker 5: that's what we try to.
Speaker 2: Do Okay, let's just jump right into question. I didn't
Speaker 2: when I was on the beach watch that JD. Van
Speaker 2: speech that he made in Munich, and I know there's
Speaker 2: all this falling out, you know, he's frustrated columns and
Speaker 2: the Financial Times and stuff like that and all these
Speaker 2: big things. What was that all about? What happened there?
Speaker 5: So I was there, great and tell us and there's
Speaker 5: a little bit of it before and after. So I
Speaker 5: was with a number of the European leaders the month before,
Speaker 5: and they were getting ready for the Trump administration to
Speaker 5: come into office and dealing also with the first twenty
Speaker 5: four to forty eight hours. And their biggest concern at
Speaker 5: the time was that a deal would be struck on
Speaker 5: Ukraine above their heads and the Ukrainians heads. Now, I
Speaker 5: think that that was a little bit of a false concern.
Speaker 5: It was more of a reflection of the difficulties they
Speaker 5: thought they'd find in the transatlantic relationship. I think a
Speaker 5: month later, by mid February, they were surprised that a
Speaker 5: deal was actually being cut above their heads, not just
Speaker 5: between the Trump administration and the Russians, but then broker
Speaker 5: by you know, the Gulf as an honest Broker, and
Speaker 5: I think what was interesting about JD. Vance's speech is
Speaker 5: he gave a speech at a security conference and there
Speaker 5: was really nothing to offer on the foreign policy front.
Speaker 5: It was, you know, for all intents and purposes, kind
Speaker 5: of a lecture about free speech. And I think it
Speaker 5: was more of a reset in a negative way of
Speaker 5: the Transatlantic relationship. And I think what I was surprised
Speaker 5: by is that the Europeans were surprised by the speech.
Speaker 5: You know, it would have been very easy, by the way,
Speaker 5: for them to acknowledge that there was no new policy
Speaker 5: set in the speech. He didn't announce anything on Russia, Ukraine,
Speaker 5: he didn't announce anything on the Middle East, he didn't
Speaker 5: announce anything on China. It was just kind of a
Speaker 5: difficult moment in the Transatlantic relationship. I think part of
Speaker 5: the reason the Europeans are experiencing so much consternation over
Speaker 5: this is the lack of economic growth in Europe is
Speaker 5: causing Europe to essentially evaporate geopolitically. They don't have a
Speaker 5: seat at the table on the Middle East, they don't
Speaker 5: have a seat at the table on Ukraine. They're trying
Speaker 5: to figure out what tariffs are coming and how to respond.
Speaker 5: Then they know that lingering on the horizon is a
Speaker 5: confrontation with the US over them having less dependence on
Speaker 5: China for manufacturing markets and other issues, and so they're
Speaker 5: scrambling figuring out what to do. They're having a hard
Speaker 5: time acting collectively, which is making it difficult for them
Speaker 5: to respond in a way that's sufficiently robust to level
Speaker 5: the playing field with the Trump administration.
Speaker 3: You mentioned that you leaders were preparing for the Trump
Speaker 3: administration late last year. What does that look like? How
Speaker 3: do you prepare.
Speaker 5: Well for starters? Most of them weren't around when he
Speaker 5: was president last time. And if you look at who
Speaker 5: is around last time, you had Macron, who Trump doesn't
Speaker 5: particularly like, Zelensky, who Trump doesn't particularly like, in Victor
Speaker 5: Orbon who he does like, and so most of these
Speaker 5: leaders hadn't dealt with Trump before. I think that one
Speaker 5: of the things that they're all surprised by is that
Speaker 5: what they observe and recall from watching the first Trump
Speaker 5: presidency that this feels less like a second term and
Speaker 5: more like a totally separate presidency with a four year
Speaker 5: interregnum in between. And that also shouldn't be surprising because
Speaker 5: he didn't recycle very many of the same people from
Speaker 5: the first time around, the world has completely changed in
Speaker 5: four years. In this time around, he wasn't surprised to win,
Speaker 5: and so he's coming in with a very clear doctrine
Speaker 5: and agenda focus really on reciprocity, so defense spending, trade deficits,
Speaker 5: you know, areas where he feels like there's an imbalance
Speaker 5: and other countries haven't been kind of quote carrying their load.
Speaker 5: He's then taking a transactional approach to address that. And
Speaker 5: there's look, there's a little bit of what we've seen
Speaker 5: you administrations do recently, which is show up with opposite day,
Speaker 5: which is if the previous administration was for it were
Speaker 5: against it. But when you look at the policy in
Speaker 5: the Indo Pacific, that's where you've seen the most consistency.
Speaker 5: You know, you don't yet have kind of a special
Speaker 5: envoy on you know, China and Indo Pacific issues. The
Speaker 5: meetings with the Quads have persisted. The administration did South
Speaker 5: Korea a solid amidst their political turmoil by reinforcing the
Speaker 5: importance of the Japan US South Korea trilateral reinforcement of
Speaker 5: the Quad and even on tariffs, you know, he's launched
Speaker 5: a series of trade investigations into China which will culminate
Speaker 5: in May. Whereas with you know, Canada and Mexico, he's
Speaker 5: come in hot and heavy. With Europe, he's come in
Speaker 5: hot and heavy. In those tariffs look more robust than
Speaker 5: they did in twenty seventeen and twenty eighteen.
Speaker 4: Jared, you you've observed in the past that, well, we
Speaker 4: don't have the same shock and awe from that community
Speaker 4: that we had in twenty sixteen. They're kind of used
Speaker 4: to him stylistically and in his cadence. You know, there
Speaker 4: is a fundamental difference in that it's unclear who in
Speaker 4: the administration is running which pieces of the portfolio. And
Speaker 4: this seems to be more of a Trump forward, you know,
Speaker 4: policy leadership by him himself. Maybe, is that Yeah?
Speaker 5: I think that's right. And by the way, when the
Speaker 5: forty fifth president was in office, there was also not
Speaker 5: a ton of clarity on you know, who was going
Speaker 5: to get fired on the toilet versus you know, who
Speaker 5: was going to end up running a fiefdom. I do
Speaker 5: think what George is referring to is a various stute observation,
Speaker 5: which is the first time around the departments and agencies.
Speaker 5: The heads of the departments and agencies exerted an enormous
Speaker 5: amount of influence, and policy was much more decentralized. Different
Speaker 5: people had different accounts and different agendas that they were pushing,
Speaker 5: and occasionally the President would weigh in and there'd be
Speaker 5: a recalibration. This time around, you don't see that sort
Speaker 5: of strength that the departments and agencies, and policy feels
Speaker 5: much more centralized at the White House, with a sea
Speaker 5: of special envoys for just about every issue that you
Speaker 5: can imagine, and policy seems to be set more by
Speaker 5: the president, with everybody waiting to see what this sort
Speaker 5: of policy mark to market is before they fast follow
Speaker 5: and figure out what their agenda is going to be.
Speaker 2: Use the word Europe evaporating geopolitically, and it hadn't clicked
Speaker 2: to me. This is something we've talked about to the
Speaker 2: sort of what ails Europe, but you know, even within
Speaker 2: the context of this most recent episode, like it hadn't
Speaker 2: clicked to me the sort of elevated role that the
Speaker 2: Gulf States have had in playing intermediary talk about how
Speaker 2: the world, whether it's political leaders or business leaders, are
Speaker 2: like thinking about this reality that what is still you know,
Speaker 2: one of the richest regions on Earth is at this
Speaker 2: moment where like people are asking existential questions about its
Speaker 2: capacity to be a player in anything.
Speaker 5: So look, if you look at the Gulf. I've been
Speaker 5: traveling there for twenty five years, and for most of
Speaker 5: that time, the international system was in a global War
Speaker 5: on terror paradigm, and in that context, the geopolitics were
Speaker 5: driving the economic interest. And when you talk to these leaders,
Speaker 5: they would say we wanted to be the other way
Speaker 5: around that they were stuck in this paradigm, and so
Speaker 5: the most important conversations that were happening at the political
Speaker 5: level were around geopolitics and security. But you had these
Speaker 5: growing sovereign wealth funds that were kind of off to
Speaker 5: the side, and so these were countries that had sovereign
Speaker 5: wealth funds, but geopolitics was front and center. And then
Speaker 5: a series of new leaders showed up in twenty fifteen
Speaker 5: and twenty sixteen in Saudi and Cutter and UAE, and
Speaker 5: they just brought with them a different set of ambitions
Speaker 5: that are born out of a different generation, where they
Speaker 5: wanted to diversify the economies. They wanted to be leaders
Speaker 5: in science and technology, not followers, and they wanted to
Speaker 5: broaden the reach and international influence of each of their
Speaker 5: respective countries, but they were still stuck in a global
Speaker 5: war on terror framework. And then COVID happened, and it
Speaker 5: completely shifted the paradigm towards a great return of great
Speaker 5: power competition and competitive coexistence between the US and China.
Speaker 5: And with all of that geopolitical brush cleared, that was
Speaker 5: the paradigmatic shift where these countries finally had a situation
Speaker 5: where their economic interests could drive the geopolitics. And what
Speaker 5: I would sort of say flippantly, that was the moment
Speaker 5: where they went from being countries with sovereign wealth funds
Speaker 5: to sovereign wealth funds with countries. And you know, but
Speaker 5: another way, you know, they're now leading with strategic capital
Speaker 5: as opposed to being a place where people come to
Speaker 5: for capital. And so it's giving them the right to
Speaker 5: play the chessboard. And we lump the Gulf countries together
Speaker 5: because that's what historically we've done. These are distinct countries
Speaker 5: with unique ambitions, and what they have in common is
Speaker 5: they have a lot of money. After that, each of
Speaker 5: them are after very different things and they're engaged in
Speaker 5: their own degree of competition with each other.
Speaker 3: So Jared mentioned this idea of a slowdown in the
Speaker 3: European economy contributing to all the let's call it existential
Speaker 3: angs that you see right now. And George, I want
Speaker 3: to bring you in here because one thing you often
Speaker 3: hear is this idea that Europe is lagging behind in
Speaker 3: AI and if AI is going to be the next
Speaker 3: big thing, the next big economic driver, that's really a
Speaker 3: problem for them.
Speaker 4: Yep, Tracy's a great question. You know, having been in
Speaker 4: technology for thirty five years and seen my share of
Speaker 4: platform transitions and new technologies arise, this is really the
Speaker 4: first one where world leaders have tagged AI as a
Speaker 4: matter of national destiny really early. It's going to be
Speaker 4: consequential for their economies, their growth, their culture, their defense.
Speaker 4: And so we've seen enormous focus and you know, I'm
Speaker 4: just back. I was recently at the AI Action Summit
Speaker 4: in Paris, which was quite an impressive event and coalesced
Speaker 4: a bunch of investment in within the borders of France's
Speaker 4: something Macron I think is a real leader on and
Speaker 4: some of these European countries are a wellspring of enormous
Speaker 4: intellectual capital think about the grandicles in France, that combination
Speaker 4: of and statistics that they lead in with excellence. You've
Speaker 4: got Cambridge and Oxford and places like that. So there
Speaker 4: is an enormous amount of intellectual capital emerging from Europe
Speaker 4: and there's some really inspiring companies like miss Strawl out
Speaker 4: of France, et cetera. Whether they can marshal the the
Speaker 4: intent and capital to really lead in building the infrastructure
Speaker 4: and they need to support that intellectual capital is the
Speaker 4: big question, and it's why you saw a lot of
Speaker 4: the announcements around the AI Action Summit be about bringing
Speaker 4: capital to France, scaling their lead in atomic energy, which
Speaker 4: is a great energy source for this, and so everyone's
Speaker 4: giving it their best shot. But competing with the energy abundance,
Speaker 4: capital abundance of the Gulf countries or the just natural
Speaker 4: tech leadership of the US, I think it's a hard
Speaker 4: brief for them to compete in the scale that they
Speaker 4: want to, but make no mistake, they have real assets.
Speaker 2: Well, actually, there's a question I want to pose to
Speaker 2: both of you because whether we're talking about you know,
Speaker 2: what is it actually take to say commercialize the intellectual
Speaker 2: capital of Europe or what does it actually take for
Speaker 2: the EU to be a geopolitical power player, so that
Speaker 2: they're not taking a backseat and watching all of these actions,
Speaker 2: all of these conversations take place above their head. There
Speaker 2: is this sense that large European organizations have been very
Speaker 2: good at expanding the number of member countries over time
Speaker 2: that exist, that they grow out, but that the issue
Speaker 2: of like internal depth, single rules, market cohesion has really difficult,
Speaker 2: and the sort of the deepening of these various unions
Speaker 2: that exist on the European continent. And every once in
Speaker 2: a while there will be some leader and you know,
Speaker 2: to come up with one hundred page report. I think
Speaker 2: we talked about recently on the podcast. You know, I
Speaker 2: asked your Mario Dragi issued to big report, and there's
Speaker 2: always some new report about competitiveness or whatever. I'd love
Speaker 2: to hear from both of you whether you think that
Speaker 2: the tides are shifting in Europe in such a way
Speaker 2: that all of these things that sound good on PDFs
Speaker 2: and institutional websites can change the way the nature of
Speaker 2: politics and policy is wrung within the content.
Speaker 5: So look, you're getting at a debate that we certainly
Speaker 5: hear playing out every single day, which is the bearishness
Speaker 5: on Europe overplayed, right. No, nobody's questioning that the lack
Speaker 5: of economic growth, and nobody's fooled by the economic rally
Speaker 5: they've had at the beginning of the year. There's some
Speaker 5: fundamental questions. I won't try to argue the other side
Speaker 5: because I'm quite bearish on it. And I'm quite bearish
Speaker 5: on it because it's not that European leaders don't know
Speaker 5: what they need to do.
Speaker 4: Right.
Speaker 5: So let's take geopolitics and defense, and George, you should
Speaker 5: talk on the AI side and the regulatory side, but
Speaker 5: on defense, right, it's very clear. I mean, what's interesting
Speaker 5: about Vance's speech, which you were talking about before. Privately,
Speaker 5: every European leader said, you know, the US has a
Speaker 5: point on defense spending, they have a point on migration,
Speaker 5: they have a point on regulation, and every European leader
Speaker 5: has an idea for how to fix it, and they
Speaker 5: all like drag eas report. The question is implementation, right.
Speaker 5: So Europe has a number of challenges, one of which
Speaker 5: is you become prime minister if you get the largest
Speaker 5: percentage of the vote, which is usually thirteen, fourteen, fifteen percent,
Speaker 5: or if you're mergency know twenty nine percent with a
Speaker 5: blocking minority from the AfD right. And so if you're
Speaker 5: sitting on top of one of these coalition governments that
Speaker 5: you can barely scrap together in order to do the
Speaker 5: meaningful policy changes that you have to do, you're likely
Speaker 5: going to break the coalition in the process. So you
Speaker 5: have coalition politics getting in the way. That's one issue.
Speaker 5: On defense, three percent of GDP is the new two percent.
Speaker 5: And in a lot of respects what's happened with Ukraine
Speaker 5: and the fact that the Europeans now conclude they can't
Speaker 5: rely on the US for security guarantees, it's made them
Speaker 5: more comfortable with the idea of three percent or as
Speaker 5: you move east to places like poll In five percent.
Speaker 5: The problem again is implementation at a collective level. So
Speaker 5: you know, there's certain countries that are strong on defense
Speaker 5: and certain countries that have medium and small sized defense players.
Speaker 5: So is the answer that if Europe is going to
Speaker 5: get big enough from a defense perspective, you're going to
Speaker 5: have to have cross border mergers and acquisitions and consolidation. Okay, fine,
Speaker 5: who gets the national champion the EU? Yes, it's a
Speaker 5: coalition of countries or a union of countries. These are
Speaker 5: still national governments underneath it, and you're really going to
Speaker 5: tell you a medium sized Central European country that they
Speaker 5: have to give up two of their biggest companies because
Speaker 5: Sweden's going to get bigger on the defense side, when,
Speaker 5: by the way, they're closer to the Russian threat. So
Speaker 5: this is just one example of where it breaks down
Speaker 5: implementation within the EU. You still have zo some politics
Speaker 5: that exist between the national governments, and then that gets
Speaker 5: exacerbated by the point I made earlier about coalition politics.
Speaker 4: Yeah, I'm struck. I've been at a couple of Golden
Speaker 4: Sex gatherings where you bring together CEO level leaders in
Speaker 4: Europe in a couple different countries. I was struck by
Speaker 4: the degree of pessimism and almost resignation about their ability
Speaker 4: to influence policy that provides more of a pro growth
Speaker 4: environment for them. Look, I think that you know, hopefully
Speaker 4: events over take some of this inertia, because the competitive
Speaker 4: impulse for these countries is going to get increasingly important
Speaker 4: and challenging, and so maybe it will mediate some change
Speaker 4: and more collective, more effective collective action. But the business
Speaker 4: leaders are are certainly frustrated, and one of the things
Speaker 4: they reflect on is how Europe's leadership and AI in
Speaker 4: some ways perceptually has been defined by its leadership on
Speaker 4: AI safety. By the way, that's a.
Speaker 2: Worthy and important goal.
Speaker 4: One of my observations in the world of AI they're
Speaker 4: kind of fascinating, is you know, chat GPT emerged in
Speaker 4: November twenty two, and there was an immediate outcry about
Speaker 4: AI safety, existential risk, a lot of headlines, a lot
Speaker 4: of inks, build a lot of time and energy. Fast forward.
Speaker 4: Now we have machines that are one hundred to a
Speaker 4: thousand times more powerful, and it's a much more muted
Speaker 4: dialogue about those risks. Interestingly, but there's frustration in Europe that,
Speaker 4: you know, kind of characteristic focus on privacy, regulatory bounds,
Speaker 4: safety is retarding their progress in something that now has
Speaker 4: really become kind of a commercial, military, and cultural arms
Speaker 4: race across the face of the earth.
Speaker 3: This is what always happens, Joe. The US invents the technology,
Speaker 3: China maybe improves on it, and Europe writes the regulations
Speaker 3: and the thought pieces about it. Jered. Just going back
Speaker 3: to a point that you made about the European response.
Speaker 3: You use that word transactional earlier to describe the Trump
Speaker 3: administration's approach to geopolitics, and funnily enough, we just recorded
Speaker 3: an episode yesterday where we said the exact same thing.
Speaker 3: I guess I'm wondering, do you see any signs that
Speaker 3: the approach is actually working, because so far, when you
Speaker 3: look at the response from EU leaders, it's all about
Speaker 3: increasing their own domestic defense spending. No one seems to
Speaker 3: be taking the bait just yet about you know, well,
Speaker 3: we'll work with Trump and then in return we'll get
Speaker 3: security protection.
Speaker 5: Well, I don't think anyone in Europe believes that that's
Speaker 5: a doable trade, at least in the short term. And
Speaker 5: I think realizing this time around that they were maybe
Speaker 5: naive to last time around is I don't think that
Speaker 5: they look at any bilateral relationship and assign a historic
Speaker 5: premium to it as special. So this nostalgia for the
Speaker 5: transatlantic relationship, which I certainly have, and this feeling that
Speaker 5: certain bilateral relationships are special, which I certainly believe in
Speaker 5: many others certain believe, there's no evidence that they're showing
Speaker 5: up with that as a set of assumptions, and I
Speaker 5: think the Europeans are quickly realizing this. I think, honestly,
Speaker 5: this is a playbook that they're not quite used to.
Speaker 5: It's the same in Canada and Mexico. By the way,
Speaker 5: we haven't talked talked about they don't have a playbook
Speaker 5: for a scenario where they're being threatened with twenty five
Speaker 5: percent tariffs that could lead to double digit unemployment. And
Speaker 5: that's like a serious conversation. So I think everybody's kind
Speaker 5: of gone off script in a sea of democratic countries
Speaker 5: where you're not used to having to go off script
Speaker 5: with each other. And this to sort of another debate
Speaker 5: we talked about how one of the debates that's playing
Speaker 5: out is are we too bearish on Europe? Another debate
Speaker 5: that's playing out is should we maybe relax our skepticism
Speaker 5: about the forward direction of travel in the US China relationship.
Speaker 5: I there also subscribe to the view that I think
Speaker 5: the relationship is going to get worse for longer. So
Speaker 5: the question then is why do things seem slightly calmer
Speaker 5: in that relationship right now? Well, I think if you're hijinping,
Speaker 5: you're watching all the dynamics play out in North America
Speaker 5: between the US, Canada and Mexico and in the transatlantic relationship,
Speaker 5: and you're enjoying an early Q one economic boom and
Speaker 5: tariffs on your country have been sort of punted until
Speaker 5: we get an outcome from these trade investigations, And you're
Speaker 5: thinking to yourself, I don't really need to insert myself
Speaker 5: in this, but the fundamental issues in terms of the
Speaker 5: tension between the US and China, I think persist. It's
Speaker 5: still the case that America's most formidable adversary is also
Speaker 5: its third largest trading partner. It's still the case that
Speaker 5: short term geopl thinking on both sides are coming at
Speaker 5: the expense of medium and long term economic consequences. And
Speaker 5: it's therefore still the case that both countries are capable
Speaker 5: of doing something that's incredibly economically foolish in service of
Speaker 5: some of those short term geopolitical goals. I just don't
Speaker 5: think we're going to see that excite in the short term.
Speaker 5: I think that's much more of a medium term horizon.
Speaker 4: This brings back this interesting intersection set that Jared and
Speaker 4: I operate in technology and geopolitics, because one of the
Speaker 4: key dimensions of the US China relationship is this battle
Speaker 4: for supremacy around AI and I know on your pod
Speaker 4: you've beaten the deep Seak topic to death.
Speaker 2: No, never enough deep sea time.
Speaker 4: Yeah, I just actually think, when you step back from it,
Speaker 4: I think the technology exploits, while impressive, are part of
Speaker 4: a continuum of improvements in AI and not super extraordinary.
Speaker 4: Impressive but not super extraordinary. The greatest provocation of deep
Speaker 4: seek may well be the open source decision under the
Speaker 4: MIT super permissive License. And you know, I'm sort of
Speaker 4: paraphrasing Mark Andresa and no I heard recently talk about this,
Speaker 4: which the irony of a country that we believe to
Speaker 4: be generally more closed in orientation creating the most abundantly
Speaker 4: available open source model in the world.
Speaker 2: While the US an.
Speaker 4: Open society has obviously meta in the open space, but
Speaker 4: by and large hosts research shops that have more closed orientation.
Speaker 4: And so this impact of a Chinese model that is
Speaker 4: freely available, distillable, tunable, very low cost, that's a real
Speaker 4: provocation in this competition and relationship.
Speaker 2: So when deep seek made headlines and it had been
Speaker 2: percolating for a while and then suddenly everyone was talking about.
Speaker 3: It, everyone was a deep Seek bro.
Speaker 2: Yeah, I declared myself as such. For one week I
Speaker 2: switched my default to deep sink. But so here's something
Speaker 2: I always thinking about then like that moment, like you
Speaker 2: had this hit to the stock market and there was
Speaker 2: this where oh, this is, in fact, it's more efficient.
Speaker 2: What's it going to mean for Nvidia demand, et cetera.
Speaker 2: But then the other the bold case from a sort
Speaker 2: of pure market standpoint is, look, this moment established the
Speaker 2: idea of the race. And if you think that we're
Speaker 2: in a quote race, that's not going to mean less spending.
Speaker 2: This is where right, like, this is going to mean
Speaker 2: a lot of spending and we can't lose this, et cetera.
Speaker 2: But then that made me wonder, and you said something
Speaker 2: in the beginning, this idea that government's embraced AI is destiny,
Speaker 2: and I wonder do we have to accept this premise.
Speaker 2: I'm very impressed with AI tools a lot, but when
Speaker 2: you say AI is destiny, or when you compare it
Speaker 2: to who gets the nuclear bomb, you're guaranteed that there's
Speaker 2: just a flood of money. And that's great for private companies.
Speaker 2: Do we ever have to pause here and say, yeah,
Speaker 2: this is a great narrative if you're a private AI company,
Speaker 2: or if you're selling power, or if you're selling chips,
Speaker 2: et cetera. And should we pause and say like, yeah,
Speaker 2: it's quol tech for doing various things. But can we
Speaker 2: question the premise that AI is in fact this destiny
Speaker 2: that a country must win in order to be powerful
Speaker 2: in the future.
Speaker 4: Absolutely, And look, I should stipulate we are two and
Speaker 4: a half years in to this, and so if you
Speaker 4: put that in comparison the public face dimension of generative A,
Speaker 4: if you put that in comparison to other technology shifts,
Speaker 4: we were at a very primordial state in those other
Speaker 4: shifts two and a half years later, and we still
Speaker 4: are now. And so this is moving very fast. It
Speaker 4: feels super consequential, but there's uncertainty we may reach some
Speaker 4: glass ceiling of improvement and the impact of this technology
Speaker 4: to be less profound than we expect. I personally don't
Speaker 4: think that will be the case. I think the ability
Speaker 4: just to think about your own personal use cases the
Speaker 4: way you consume information, you're having a machine interlocutor that
Speaker 4: is helping you understand the world, and it's transmitting a
Speaker 4: notion of culture that's embedded in that machine. And so
Speaker 4: if you think about that from a country perspective, and
Speaker 4: you have your citizens accessing an information source to help
Speaker 4: them understand the world, make sense of the world and
Speaker 4: those values are being so those cultural values embedded in
Speaker 4: that machine are being set in some other part of
Speaker 4: the world. Just that alone is important. Now we can
Speaker 4: debate about whether it is going to be really profound,
Speaker 4: fast moving a canomic impact, or whether it's going to
Speaker 4: be slower. We should talk more about that. And already
Speaker 4: we see evidence that generative AI technology on the backs
Speaker 4: of more traditional forms of AI and machine learning, are
Speaker 4: having a real impact on the way that defense systems work,
Speaker 4: how warfare is being conducted, and the shape of the
Speaker 4: battlefield in the future. So yes, I think it's really
Speaker 4: good to take a deep breath and pause and not
Speaker 4: get over our skis. And yet I believe it's going
Speaker 4: to be very consequential. Evidence of the fact that we
Speaker 4: all might be slightly over our skis is just the
Speaker 4: very deep seek reaction you mentioned in and of itself,
Speaker 4: the reflexivity of markets. This is so much uncertainty today,
Speaker 4: but when there's a possible disruption or interruption, the market
Speaker 4: seems to like self first and ask questions later and
Speaker 4: then recalibrate. We saw that with deep seek. We saw
Speaker 4: that even this week with a sort of I think
Speaker 4: misconstrued remark out of Microsoft and one of the analysts
Speaker 4: someone in the endless community about Microsoft data center leasing activities.
Speaker 4: So the market, it's twitchy it. The market is supporting
Speaker 4: this heavily. People are heavily invested in it, and when
Speaker 4: these moments of uncertain or disruption emerge, it causes very
Speaker 4: significant market ripples.
Speaker 5: One way to think about this question of AI being
Speaker 5: a country's destiny is there's a category of country that
Speaker 5: George and I talk a lot about that we sort
Speaker 5: of describe as geopolitical swing states, right, and these are
Speaker 5: countries that, in a world where the US and China
Speaker 5: are locked in competition and need other countries to gain
Speaker 5: the extra edge, countries that have a differentiated part of
Speaker 5: the supply chain, an abundant amount of flexible capital, and
Speaker 5: are attractive economically for near shoring, offshoring, and friend shoring.
Speaker 5: Are in a position with the right leader where they
Speaker 5: can kind of set an agenda that's independent of Washington
Speaker 5: and Beijing and swing on an issue by issue basis.
Speaker 5: In these countries, rather than the non aligned movement of
Speaker 5: the Cold War, they kind of tend to go itt
Speaker 5: more alone, and they're leaning into this particular paradigm of
Speaker 5: great power competition and their status of geopolitical swing states
Speaker 5: to achieve a certain level of mobility. Right, And so
Speaker 5: not all geopolitical swing states possess an advantage when it
Speaker 5: comes to AI. But the golf countries, which I think
Speaker 5: are quintessential geopolitical swing states, are looking at the attributes
Speaker 5: that they have to make them competitive with AI, which
Speaker 5: is unlimited capital, regulatory environments. They control the ability to
Speaker 5: do massive infrastructure at scale very quickly, and sovereign ambition
Speaker 5: and again the ability to kind of play both sides.
Speaker 5: And they see a once in a generation opportunity to
Speaker 5: differentiate themselves in the AI space and leapfrog generations of
Speaker 5: geopolitical status.
Speaker 3: Right.
Speaker 5: But you're seeing this When I spent a lot of
Speaker 5: years at Google and Alphabet and Saudi Arabia cutter UAE,
Speaker 5: these countries were nowhere on anyone's radar screen. They were
Speaker 5: not relevant technological players, They were not part of the conversation.
Speaker 5: There was no evidence they were ever going to be
Speaker 5: part of the conversation in a favorable way. Now there's
Speaker 5: not a single major deal in the AI space. There's
Speaker 5: not a single a conversation of any real significance that
Speaker 5: doesn't involve one of the three big sovereign countries in
Speaker 5: the Middle East, and Kuwaita is not far behind, as
Speaker 5: they're on the precipice of certain transformations nine months post
Speaker 5: dissolving parliament, and so for them, AI is destiny because
Speaker 5: that destiny is geopolitical mobility.
Speaker 4: And you know, we wrote a companion piece to our
Speaker 4: Geopolitical Swing States thesis around AI swing states, and clearly
Speaker 4: the Gulf is frontally involved in all of that. But
Speaker 4: some others might surprise you. I mean the Netherlands, the
Speaker 4: home of ASML, that makes that extremely strategic and relevant
Speaker 4: in the world. Who would have thought semi conductor capital
Speaker 4: equipment would become so geopolitically relevant. South Korea the home
Speaker 4: of sk Telecom, the biggest provider of high band with
Speaker 4: a memory, which there's going to be extraordinary demand for
Speaker 4: going forward. India with all its APEX, technical talent and
Speaker 4: a huge population, how they deploy and understand AI is
Speaker 4: going to be critical to the world. So the Gulf
Speaker 4: is you know, in the headlines, but there are many
Speaker 4: other nations for whom this is, you know, really important
Speaker 4: to their strategies.
Speaker 3: I want to try to connect, I guess the old
Speaker 3: geopolitics with some of the new stuff that's happening, especially AI.
Speaker 3: Can we talk maybe about subc cables. I've had people
Speaker 3: tweeting at me for the past week saying we need
Speaker 3: to do an episode on subse cable warfare. So consider
Speaker 3: this maybe a preview for something longer that's coming up.
Speaker 2: Yeah, asolutely.
Speaker 5: If you think about two topics that are discussed a lot.
Speaker 5: One topic is trade and the other topic is AI.
Speaker 5: And if you look at global trade, eighty percent of
Speaker 5: it flows above the ocean, and then ninety five percent
Speaker 5: of all data flows on seven hundred and fifty d
Speaker 5: thousand miles of undersea cables that are the equivalent of
Speaker 5: circling the earth thirty times. So what does that actually mean?
Speaker 5: That is ten trillion dollars of daily transactions, that's all
Speaker 5: the instant messages, that's offshore energy, and by the way,
Speaker 5: that's national secrets. And there's one hundred and fifty cable
Speaker 5: breaks on average a year. And that number is going up,
Speaker 5: not just in terms of volume, but in terms of
Speaker 5: geopolitical sensitivity. So just to give you an example from
Speaker 5: you know, let's call it the last six months, right,
Speaker 5: so in November, a Chinese vessel dragged and anchor one
Speaker 5: hundred miles in the Baltic Sea, severing an undersea cable
Speaker 5: that connected Sweden to Lithuania and also Finland to Germany.
Speaker 5: A month later, Russian vessel, as part of the sort
Speaker 5: of Russian ghost fleet, also in the Baltic Sea, did
Speaker 5: the same thing, cutting an undersea cable from Finland to
Speaker 5: Estonia and had to be seized by Finnish authorities. And
Speaker 5: so these things continue to happen. What's interesting is the
Speaker 5: multilateral architecture that was established for repairing undersea cable. It
Speaker 5: predates the tech competition between the US and China. Undersea
Speaker 5: cables you know, started being laid in the eighteen fifties,
Speaker 5: and so the ocean is broken up into different zones.
Speaker 5: So you can have an undersea cable that breaks in
Speaker 5: the South China Sea and the Chinese have the authority
Speaker 5: to bring their repair vessels to repair it. Now, that's
Speaker 5: a very tricky thing when you start worrying about malware
Speaker 5: being thrown undersea cables. It's not the sexiest technology in
Speaker 5: the world, but it's in a lot of respects. I
Speaker 5: think the most one of the most important geopolitical features
Speaker 5: of the AI conversation and the technology conversation. But it's
Speaker 5: heavily dominated by Western players. So there's three companies, you know, Subcommon,
Speaker 5: the us NEC in Japan, and Alcatel in France that
Speaker 5: have eighty seven percent of the market share. And then
Speaker 5: you know, China has a minority player in this. And
Speaker 5: the US has actually been very successful at thwarting China's
Speaker 5: efforts to take control of subse cables, right, So they
Speaker 5: use a combination of incentives, threats, telegraphing potentials, actions to
Speaker 5: ensure that that China doesn't win the bid for some
Speaker 5: of these cables. And it's been quite it's been quite effective.
Speaker 5: The other thing that's interesting is the hyperscalers have increasingly
Speaker 5: been forming these consortiums with the big telecom companies to
Speaker 5: play a role in subse cables. And so Google, for instance,
Speaker 5: is either a hole or part owner of thirty three
Speaker 5: different subse cables. And so I think we're going to
Speaker 5: see more and more breakage. And by the way, it's
Speaker 5: not just state actors, right, So when the Huthi started
Speaker 5: firing missiles into the Red Sea, they hit a commercial
Speaker 5: vessel that sank and it's anchor broke two of the
Speaker 5: subse cables in the Red Seed. Ninety percent of data
Speaker 5: traffic from Europe to Asia carries through fourteen cables in
Speaker 5: the Red Sea. So again this isn't a highly talked
Speaker 5: about space, but when so much of our digital information
Speaker 5: moves under sea, five miles below the surface, in some cases,
Speaker 5: it's a very important theater.
Speaker 4: It's interesting to reflect us the Jared as your guy
Speaker 4: as it comes to subse cables. He knows a lot
Speaker 4: about it, studied it a lot, but to me at
Speaker 4: a high levels are fascinating. That subse cable complex is
Speaker 4: kind of the silk roads of the information you know, economy,
Speaker 4: And so just like the soak roads securing them, the
Speaker 4: interstate transit that occurred, the international transit occurred there like
Speaker 4: the same dynamic as playing out here. These are the
Speaker 4: roads that our economy is traveling today.
Speaker 2: By the way, I just have to say, in the
Speaker 2: year twenty twenty five, the existence of subse cables actually
Speaker 2: still blows my mind. And the fact that the first
Speaker 2: one was laid down in the eighteen fifties. There are
Speaker 2: various things in the past I can't wrap my head around.
Speaker 2: I can't wrap my head around in the Hunting tunnel
Speaker 2: or whatever, how they build a tunnel Brooklyn Bridge. The
Speaker 2: fact that in the eighteen there's a great book, the
Speaker 2: Victorian Internet. The great Book's fantastic about that. It's also
Speaker 2: why the US UK exchange rate is called a cable anyway.
Speaker 2: That always, sorry, that always just blows my mind. I
Speaker 2: have one very random quick question for you, Jared, and
Speaker 2: I know there's a little off topic, but you mentioned it.
Speaker 2: You know, China's gotten little free pass. Trump really seems
Speaker 2: to have it out for Canada, at least with Mexico.
Speaker 2: It's obviously a source of significant drug traffic and there's
Speaker 2: a lot of migration that comes through the southern border.
Speaker 2: What is up with the antipathy for Canada? Which I
Speaker 2: just don't think much about.
Speaker 5: So some of it is interpersonal. He and Justin Trudeau
Speaker 5: never got along particularly well, which is also part of
Speaker 5: why I think Germany might be taking the wrong lesson
Speaker 5: from Prime Minister Trudeau going tomorrow Lago amidst the concerns
Speaker 5: about Trump tariffs and trying to figure things out, only
Speaker 5: to be you know, on the receiving end of even
Speaker 5: harsher treatment. Their view was that means you need to
Speaker 5: show up with a loaded gun and be ready to
Speaker 5: pull the tariff trigger. I think they're underestimating how much
Speaker 5: of this is interpersonal. But I also think it gets
Speaker 5: back to look. I don't claim to be an armchair
Speaker 5: psychologist for the forty seventh president, but I don't think
Speaker 5: he's necessarily hiding this principle of reciprocity. That's a key
Speaker 5: feature of his administration. And if you look at defense
Speaker 5: spending in Canada and you look at the trade deficit
Speaker 5: with Canada, it falls right in Trump's line of site,
Speaker 5: and I think he's if you sort of add the
Speaker 5: context that his starting point is not that there's a
Speaker 5: special relationship between the US and Canada and you're just
Speaker 5: looking at the numbers. I'm not saying it starts to
Speaker 5: make sense, but you're asking me kind of what's up
Speaker 5: with Canada. That's my best guess. What I will say
Speaker 5: also is if you look at the tariffs, I think
Speaker 5: they fall in three categories. I think there's tariffs that
Speaker 5: are based on things we've seen in the past, with
Speaker 5: a lot of detail that they announced that they intend
Speaker 5: to implement and they will implement. Then you have what
Speaker 5: happened with Columbia, where it's clear that the tariffs are
Speaker 5: either something retroactive in response to an action that a
Speaker 5: country took that the administration doesn't like, or they're used
Speaker 5: as a negotiating tactic. But it's this third category, and
Speaker 5: I think the tariffs on Canada and Mexico, which we'll
Speaker 5: find out more about in the next week, fall into
Speaker 5: which is they announced with enough detail that it's clear
Speaker 5: they want to implement them, and they intend to implement them,
Speaker 5: but they go beyond precedent, and the second and third
Speaker 5: order economic implications are not yet understood, nor are the
Speaker 5: responses from the countries that have never found themselves in
Speaker 5: this situation. And so what you don't know is this
Speaker 5: going to be a six month headfake to the market
Speaker 5: that ultimately, you know, ends up getting walked back because
Speaker 5: the economic pain is too much, or is it in
Speaker 5: fact going to get implemented. And I think the market's
Speaker 5: going to have to learn to be a little bit
Speaker 5: patient and whether the volatility, but I think given so
Speaker 5: many countries have never been in this situation before, there's
Speaker 5: a ton of room for miscalculation, right, and miscalculation, you know,
Speaker 5: happens when countries are forced to go off script, and
Speaker 5: that's where you can have unforced errors, and that's where
Speaker 5: you can have unnecessary chaos.
Speaker 3: So on that note, I have a theoretical, I guess,
Speaker 3: big picture type question, and I think given that you
Speaker 3: guys said you're all about connecting geopolitics with technology and markets,
Speaker 3: you are the perfect people to ask this. But markets
Speaker 3: seem to really struggle with geopolitical uncertainty. It's such a
Speaker 3: huge topic. The possibilities are almost endless. You can get
Speaker 3: almost infinite permutations of geopolitical events and situations. It seems
Speaker 3: really hard to price and incorporate into your strategy. How
Speaker 3: do you actually go about doing that? So this conversation
Speaker 3: that we just had, which was great and very interesting,
Speaker 3: if I'm an investment manager, what do I actually do
Speaker 3: with this info?
Speaker 4: Yeah, well, Jarji Jumpins, we have an opportunity to talk
Speaker 4: some of the leading investors in the world around these topics.
Speaker 4: You know, it's funny began to undertake a study to
Speaker 4: try to discern what are the market impacts of you know,
Speaker 4: really profound geopolitical events. First of all, as you know,
Speaker 4: as students of the market, it's very hard to isolate
Speaker 4: any given effect among the panoply of different things that
Speaker 4: drive stock prices and interest rates, et cetera. So we
Speaker 4: struggled with that. The second observation it wasn't really deep
Speaker 4: enough to be publishable or verifiable, is just that markets
Speaker 4: actually wait quite a while for clarity and then act
Speaker 4: as that clarity emerges. And so while I described the
Speaker 4: impulse in the AI world is a little bit sell
Speaker 4: first and ask questions later, in geopolitics it seems to me,
Speaker 4: at least and in jaredmation your world, it's a little
Speaker 4: bit like ask questions first and then sell later. Seems
Speaker 4: to be the dynamic. And Jared, do you agree with that?
Speaker 5: Yeah, I'll make two points on this, and I think
Speaker 5: it depends. It's kind of a tale of two geopolitical stories.
Speaker 5: There's the downside risk part of the story, or the
Speaker 5: downside risk volatility. And what you know, George and I
Speaker 5: always tell clients is when it comes to geopolitics, you
Speaker 5: can't predict what's going to happen on Tuesday or what's
Speaker 5: going to happen on Thursday. And if somebody does that,
Speaker 5: you should kick them out of the room. What you
Speaker 5: can do is say here's the shocks to the system
Speaker 5: that tell you that this thing has gone off script.
Speaker 5: So here's what you should be looking for, and here
Speaker 5: are the key inflection points and the geopolitical time sequence
Speaker 5: that they're likely to happen in. So this happen. This
Speaker 5: occurs a lot in the context of the Middle East
Speaker 5: when people are sort of thinking about, you know, will
Speaker 5: Israel bomb Iran? Like nobody knows, right, but you can
Speaker 5: tell them warning signs that they might look for and
Speaker 5: certain inflection points that increase the likelihood that that might happen.
Speaker 5: So that's the downside risk part. I personally think we
Speaker 5: spend too much time on downside risk volatility.
Speaker 2: There's a more if people listen to geopolitical analysts, they
Speaker 2: would stay uninvested entirely. This is why you got to anyway, Sorry,
Speaker 2: keep going.
Speaker 5: It's just another volatility variable, right, And so let's take
Speaker 5: a more affirmative look at geopolitics. And you know, George
Speaker 5: and I have talked a lot about how geopolitics is
Speaker 5: pushing some pretty attractive economic environments into a situation where
Speaker 5: they're eventually going to trade at a geopolitical premium. So
Speaker 5: let's take India and Japan as an example. So India
Speaker 5: and Japan already very attractive environments for all the reasons
Speaker 5: that I think your listeners understand quite well. But if
Speaker 5: you double click on Japan as an example that geopolitics
Speaker 5: have brought them out of their shell. It used to
Speaker 5: be Japanese investors investing in Japanese companies or Japanese companies
Speaker 5: merging with other Japanese companies. The geopolitics have made them
Speaker 5: much more interconnected around the world. They're also massively increasing
Speaker 5: defense spending relative to what they've done before, which is
Speaker 5: giving them a defense renaissance. They're recognizing that they're going
Speaker 5: to be one of the big beneficiaries of reshoring in
Speaker 5: different parts of the AI value chain and other technology
Speaker 5: value chains, and it's triggering a bunch of reforms in
Speaker 5: how these companies are governed with regards to the value
Speaker 5: that they return to shareholders. So Japan as a result
Speaker 5: of the geopolitics is undergoing a bunch of changes that
Speaker 5: over time are going to create more opportunities for investment.
Speaker 5: So I talk to a lot of strategic investors around
Speaker 5: the world that are pulling money out of Europe and
Speaker 5: they're reallocating the capital towards the US, which they're bullish on,
Speaker 5: but then they're worried they're over allocated towards the US,
Speaker 5: and so where else are they putting capital. They're putting
Speaker 5: capital in places like Japan and India. Why because they
Speaker 5: understand that the geopolitics are making places like Japan and
Speaker 5: India pockets of certainty and predictability amidst a geopolitical moment
Speaker 5: where it feels like there's a lot of uncertainty. But
Speaker 5: if things get worse between the US and China, which
Speaker 5: is the primary reason why you have all this geopolitical volatility,
Speaker 5: it's only going to benefit Japan and India because both
Speaker 5: countries are able to play both sides, and yet the
Speaker 5: US has telegraphed their long term commitment to both. So
Speaker 5: to take as an example with India, US is heavily
Speaker 5: reliant on India for pharmaceutical supply chains. India is highly
Speaker 5: reliant on certain elements from China that they require to
Speaker 5: produce their pharmaceuticals, and they have no interest and are
Speaker 5: not going to diversify from China. So they maintain a
Speaker 5: posture of strategic ambiguity with regards to most of the
Speaker 5: US's ambitions or policies towards China unless it pertains to
Speaker 5: their land disputes with China. And so I think that
Speaker 5: affirmative case for riding the geopolitical volatility towards kind of
Speaker 5: new investment thesis is quite attractive.
Speaker 4: You know, one thing it sharts and remarks around inflection
Speaker 4: points reminds one of the techniques that we use in
Speaker 4: the Golden Sech Global Institute to engage clients is our
Speaker 4: simulations and wargames. We bring together policy makers, corporate leaders,
Speaker 4: and investors. We introduce a scenario, we introduce perturbations to
Speaker 4: that scenario. We ask people to really engage, help make decisions.
Speaker 4: And then at the end of these sessions we get
Speaker 4: to reflect on what we all learned through that game
Speaker 4: turn And that's a place where I've seen investors really
Speaker 4: step back and go like wow, Actually, when you scope
Speaker 4: out and think about all the chain of events we just described,
Speaker 4: I should be more attentive to inflationary impulses or you know,
Speaker 4: allocation across geographies. And so it's actually interesting not to
Speaker 4: get caught up too much in the minutial movements of
Speaker 4: one geopolitic move or not, but then to just scope
Speaker 4: out fifty thousand feet, think about the inflection points, and
Speaker 4: then reason about your portfolio and your investing strategy.
Speaker 3: Can we come play the wargames?
Speaker 2: We want to do a wargames epit.
Speaker 4: That would be gretz a great. It's such a fascinating technique,
Speaker 4: and in an era where we're all a little bit overconferenced,
Speaker 4: the lean forward engaged dimension of wargames with clients really fun.
Speaker 2: We'll make that happen. I hadn't even thought about that.
Speaker 2: With India in the sort of middle between the raw commodities,
Speaker 2: I knew about the role of the supply chain anyway,
Speaker 2: fascinating conversation. We could just keep talking about all this
Speaker 2: stuff for hours. It does feel like I'm not crazy,
Speaker 2: or that we're not crazy, that things are a little
Speaker 2: bit crazier these days, or unprecedented times, interesting times. Jared Cohen,
Speaker 2: George Lee of the Goldman sax Global Institute, thank you
Speaker 2: so much for coming.
Speaker 3: Me from up on.
Speaker 4: Thank you guys. It's great.
Speaker 2: Crazy. I really like that conversation. You know, as I mentioned,
Speaker 2: it always feels, oh, there's a lot going on. These
Speaker 2: are unprecedented times. It's nice to talk to some professionals
Speaker 2: and like, no, you're not going crazy. These are kind
Speaker 2: of unprecedented times.
Speaker 3: It is different right now. Yeah, yes, So two things
Speaker 3: stood out to me from that conversation, and one of
Speaker 3: them is it is truly remarkable just how quickly countries
Speaker 3: are moving at a strategic level when it comes to AI,
Speaker 3: and that everyone seems to agree this is important both
Speaker 3: strategically from a geopolitical perspective for national security, et cetera,
Speaker 3: and also for their respective domestic economies. The second thing
Speaker 3: that I find really interesting, and we've spoke about this before,
Speaker 3: we did that episode with Acquired, but it's the sort
Speaker 3: of intermingling of corporations with political power. So the idea
Speaker 3: that some of the hyper scalers are now in the
Speaker 3: subse cable business too, and subse cables are incredibly important
Speaker 3: to all those strategic AI missions that I just laid out.
Speaker 3: That seems different as well.
Speaker 2: You know what I thought was another interesting thing in
Speaker 2: why it's good to talk to geopolitics people sometimes like
Speaker 2: you and I, when we think about, like, I don't know,
Speaker 2: the last fifteen or twenty years, you know, how do
Speaker 2: we usually segment up we think about the Great Financial Crisis?
Speaker 2: The COVID shock, the recession that happened for about ten
Speaker 2: minutes and twenty and then the boom that turned really hot. Right,
Speaker 2: when you talk to geopolitics people, it's the war on Terror,
Speaker 2: and which never comes up, but the idea of the
Speaker 2: War on Terror being this very significant sort of economic
Speaker 2: story of impairing the economic ambitions for a long time.
Speaker 3: The war on Terror in finance land is the era
Speaker 3: of Greenspan imbalances.
Speaker 2: Yeah right, but the idea of like this was a
Speaker 2: fetter on the economic ambitions of golf states, which are
Speaker 2: now so huge and not really something I think much about.
Speaker 2: And then this idea of COVID, which again we usually
Speaker 2: talk about from a sort of economic standpoint. We've done
Speaker 2: a million episodes on that as marking the sort of
Speaker 2: starting gun of what we now call, you know, great
Speaker 2: power competition and their idea of geopolitical swing states. So
Speaker 2: I like the people coming at it from a different perspective.
Speaker 2: Break up ears of history in a way that's distinct
Speaker 2: from the way econ and market people do.
Speaker 3: Absolutely, and I do want to go into Goldman to
Speaker 3: play those war games. And I've always been curious, like
Speaker 3: no I know how to actually work.
Speaker 4: Well.
Speaker 2: I want to play war games, and I also want
Speaker 2: to do the ones like with the actual board or
Speaker 2: like with the board games, or like they roll the
Speaker 2: dice and it's like, okay, you have a seventy percent
Speaker 2: chance of your amphibious mission actually working. Do you actually
Speaker 2: do that?
Speaker 3: I want to wait, does that mean you're going to
Speaker 3: go to one of those board game clubs with me?
Speaker 2: No, Tracy, I'm not going to know you want to.
Speaker 2: I want to do like a serious one with like researchers.
Speaker 2: I'm not going. I'm sorry, I'm not too cool. That's
Speaker 2: what you're saying, playing like you know, Settlers of Katan
Speaker 2: and all that stuff. And then the one other thing
Speaker 2: that really, I'm sorry, you just angered bunch of our listeners.
Speaker 2: I'm sorry, I love you all.
Speaker 3: Sorry.
Speaker 2: The one other thing that I just think is like
Speaker 2: a stunning word to hear. Jared used the word evaporate
Speaker 2: to talk about the sort of status of Europe, which is,
Speaker 2: you know, one of the richest areas of the world,
Speaker 2: and you know it's Europe, and to hear the word
Speaker 2: like evaporates, like actually, you know, there's no sign that
Speaker 2: the bariss has gotten too far, which he described really
Speaker 2: well due to the nature of the parliamentary dynamics in Europe.
Speaker 3: It's bleak, it is extreme, that kind of word. But
Speaker 3: on the other hand, I think everyone would agree we're
Speaker 3: sort of living in an era of extremes. So here
Speaker 3: we are on that happy note. Shall we leave it there?
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the All Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart.
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Speaker 2: Bennett at Dashbot, and kill Brooks at Kilbrooks. More odd
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