WEBVTT - Goldman's Jared Cohen and George Lee on the Unprecedented Shocks in Geopolitics 0:00:02.480 --> 0:00:16.400 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.000 --> 0:00:21.759 Hello and welcome to another episode of the Oddlocks podcast. 0:00:21.840 --> 0:00:24.279 I'm Jill Wisenthal and I'm Tracy Alloway. 0:00:24.400 --> 0:00:26.520 Tracy, there's a lot going on in the world. 0:00:26.920 --> 0:00:29.760 Are we going to start every podcast with that sentence? 0:00:29.760 --> 0:00:32.000 It's sort of a cliche. Now, there's a lot going 0:00:32.000 --> 0:00:33.680 on in the world. I have to say, you know, 0:00:33.720 --> 0:00:36.720 I recently were recording this February twenty fifth. I don't 0:00:36.760 --> 0:00:38.960 know the exact date that's coming out. I recently took 0:00:39.080 --> 0:00:42.880 a vacation and they did a pretty good job, Tracy, 0:00:42.840 --> 0:00:45.240 wouldn't you say like being unplugged, Like I probably sent 0:00:45.360 --> 0:00:48.320 like six or seven tweets. I don't think I responded 0:00:48.360 --> 0:00:49.920 to any emails or what's that message. 0:00:50.080 --> 0:00:55.400 I actually noticed this that the volume of Joe's digital presence, Yeah, 0:00:55.720 --> 0:00:59.920 was way way down and normally listeners. Normally when Joe 0:01:00.160 --> 0:01:03.480 is on vacation and sometimes board, he just starts firing 0:01:03.520 --> 0:01:05.679 off emails saying like, oh, we should do this and 0:01:05.720 --> 0:01:08.160 we should do that. None of those. This time. It 0:01:08.200 --> 0:01:10.319 was a vacation for me too. 0:01:10.640 --> 0:01:14.280 A vacation from your co host. Yeah, I really did 0:01:14.319 --> 0:01:16.160 not do much. And then I have to say, like 0:01:16.440 --> 0:01:20.720 re entry into the world, my thirty five hundred emails 0:01:21.160 --> 0:01:24.120 catching up. Everything that happened in a week in the 0:01:24.160 --> 0:01:27.560 world was a lot this time. And I'll just say 0:01:28.120 --> 0:01:30.200 it's a cliche to say a lot happened, but it 0:01:30.240 --> 0:01:32.200 was like, Okay, I really have some catching up to do. 0:01:32.240 --> 0:01:32.319 It. 0:01:32.400 --> 0:01:34.320 I felt it, and it made the re entry from 0:01:34.440 --> 0:01:35.160 vacation words. 0:01:35.319 --> 0:01:38.080 Well, it's not just the number of things that are happening, 0:01:38.240 --> 0:01:41.600 it's the significance as well. Right, So I imagine one 0:01:41.640 --> 0:01:44.120 of the things you came back to after your week 0:01:44.160 --> 0:01:47.720 off was the idea of a rift, a growing rift 0:01:47.800 --> 0:01:52.280 between the US and Europe. There's all these lingering concerns 0:01:52.320 --> 0:01:57.920 as well about competing with China AI technology. Big themes 0:01:58.320 --> 0:01:59.480 to think about. Now. 0:01:59.520 --> 0:02:01.600 I saw, like scrolling on my phone, I saw like JD. 0:02:01.680 --> 0:02:03.840 Evance has given this big speech in Munich, and I'm like, 0:02:03.840 --> 0:02:05.720 do I want to watch this on the beach? And tuloum, 0:02:06.280 --> 0:02:08.120 I do not want to watch this on the beach. 0:02:08.160 --> 0:02:11.640 And so but now I have to understand how the 0:02:11.680 --> 0:02:15.600 world changes and again from week to week. But big 0:02:15.639 --> 0:02:18.799 things afoot in the world, and how should we make 0:02:18.919 --> 0:02:20.600 sense of these and how should we cut through the 0:02:20.639 --> 0:02:23.720 noise and all that stuff. Anyway, I'm very excited. We 0:02:23.800 --> 0:02:27.960 really do have the two perfect guests to discuss big 0:02:28.120 --> 0:02:32.000 things in the world, like technological changes, especially through the 0:02:32.000 --> 0:02:35.600 geopolitical lens and this ratum the geopolitics of what will 0:02:35.639 --> 0:02:38.360 be the nature of the US's relationship with Europe and 0:02:38.400 --> 0:02:41.280 other countries. We're going to be speaking with Jared Cohen, 0:02:41.360 --> 0:02:44.240 President of Global Affairs and co head of the Goldman 0:02:44.360 --> 0:02:47.920 Sex Global Institute, and George Lee, the other co head 0:02:48.000 --> 0:02:51.680 of the Goldman Sex Global Institute. So Jared and George, 0:02:51.680 --> 0:02:54.440 thank you both for coming on Ovlach joining us in 0:02:54.440 --> 0:02:54.880 the studio. 0:02:55.080 --> 0:02:57.720 Thank you, thank you. As I mentioned you before, I'm 0:02:57.760 --> 0:03:00.640 a longtime listener, first time caller of the pod, so 0:03:00.720 --> 0:03:01.680 thrilled to be on it with you. 0:03:01.880 --> 0:03:03.920 Oh, thank you. I love it when people say that 0:03:04.000 --> 0:03:06.080 on air. I know I have a question just to 0:03:06.120 --> 0:03:09.519 begin with, what is the Goldman Sachs Global Institution. 0:03:09.840 --> 0:03:12.560 Sure, I'll start, George to pitch in. So, the Goldman 0:03:12.600 --> 0:03:15.240 sax Global Institute is a new platform at the firm. 0:03:15.280 --> 0:03:17.680 We formed about two and a half years ago and 0:03:17.760 --> 0:03:20.600 the goal is to promote the firm's thought leadership at 0:03:20.600 --> 0:03:26.760 the intersection of technology change, geopolitics, and markets, and the 0:03:26.840 --> 0:03:34.119 idea is that these factors have become extraordinarily consequential for boards, CEOs, 0:03:34.440 --> 0:03:38.160 investment committees and many of our client types. And so 0:03:38.240 --> 0:03:42.600 this ability to transmit our thinking, be provocative, share a 0:03:42.640 --> 0:03:45.640 worldview is just a great way to engage our clients. 0:03:45.680 --> 0:03:46.560 It's been a lot of fun. 0:03:47.280 --> 0:03:48.960 The other thing that I would add is for some 0:03:48.960 --> 0:03:51.520 of the really kind of big strategic clients, Let's take 0:03:51.680 --> 0:03:54.160 sovereigns as an example, there's a lot of ambitions that 0:03:54.200 --> 0:03:56.080 they have over the next three to five years, and 0:03:56.120 --> 0:03:58.360 what the Institute does is we pull together all the 0:03:58.400 --> 0:04:01.080 expertise that we have at the firm to essentially cover 0:04:01.120 --> 0:04:03.720 their ambitions. So when they say, you know, here's at 0:04:03.760 --> 0:04:05.040 a high level what we want to try to do 0:04:05.080 --> 0:04:07.400 in the AI space, or here's what we want to 0:04:07.400 --> 0:04:09.760 try to do in the Indo Pacific region, our job 0:04:09.920 --> 0:04:12.240 is to be able to respond as a firm, to 0:04:12.240 --> 0:04:14.360 help them think through and define what that looks like 0:04:14.400 --> 0:04:16.520 and then to help them make it happen. And through 0:04:16.520 --> 0:04:19.520 the combination of our banking franchise and our asset management franchise, 0:04:19.680 --> 0:04:20.440 that's what we try to. 0:04:20.400 --> 0:04:24.679 Do Okay, let's just jump right into question. I didn't 0:04:24.720 --> 0:04:27.240 when I was on the beach watch that JD. Van 0:04:27.320 --> 0:04:29.240 speech that he made in Munich, and I know there's 0:04:29.240 --> 0:04:33.480 all this falling out, you know, he's frustrated columns and 0:04:33.520 --> 0:04:36.680 the Financial Times and stuff like that and all these 0:04:36.680 --> 0:04:39.000 big things. What was that all about? What happened there? 0:04:39.120 --> 0:04:42.440 So I was there, great and tell us and there's 0:04:42.440 --> 0:04:44.680 a little bit of it before and after. So I 0:04:44.720 --> 0:04:47.680 was with a number of the European leaders the month before, 0:04:48.480 --> 0:04:51.080 and they were getting ready for the Trump administration to 0:04:51.120 --> 0:04:53.839 come into office and dealing also with the first twenty 0:04:53.880 --> 0:04:57.000 four to forty eight hours. And their biggest concern at 0:04:57.000 --> 0:04:59.400 the time was that a deal would be struck on 0:04:59.520 --> 0:05:03.680 Ukraine above their heads and the Ukrainians heads. Now, I 0:05:03.720 --> 0:05:06.280 think that that was a little bit of a false concern. 0:05:06.320 --> 0:05:09.760 It was more of a reflection of the difficulties they 0:05:09.800 --> 0:05:13.479 thought they'd find in the transatlantic relationship. I think a 0:05:13.520 --> 0:05:17.680 month later, by mid February, they were surprised that a 0:05:17.720 --> 0:05:21.520 deal was actually being cut above their heads, not just 0:05:21.720 --> 0:05:25.600 between the Trump administration and the Russians, but then broker 0:05:25.760 --> 0:05:29.240 by you know, the Gulf as an honest Broker, and 0:05:29.279 --> 0:05:32.560 I think what was interesting about JD. Vance's speech is 0:05:32.600 --> 0:05:35.800 he gave a speech at a security conference and there 0:05:35.880 --> 0:05:38.640 was really nothing to offer on the foreign policy front. 0:05:39.000 --> 0:05:41.120 It was, you know, for all intents and purposes, kind 0:05:41.120 --> 0:05:44.000 of a lecture about free speech. And I think it 0:05:44.040 --> 0:05:47.719 was more of a reset in a negative way of 0:05:47.760 --> 0:05:50.520 the Transatlantic relationship. And I think what I was surprised 0:05:50.520 --> 0:05:53.560 by is that the Europeans were surprised by the speech. 0:05:54.000 --> 0:05:55.560 You know, it would have been very easy, by the way, 0:05:55.600 --> 0:05:58.719 for them to acknowledge that there was no new policy 0:05:58.720 --> 0:06:01.120 set in the speech. He didn't announce anything on Russia, Ukraine, 0:06:01.120 --> 0:06:03.320 he didn't announce anything on the Middle East, he didn't 0:06:03.320 --> 0:06:05.880 announce anything on China. It was just kind of a 0:06:05.880 --> 0:06:08.640 difficult moment in the Transatlantic relationship. I think part of 0:06:08.640 --> 0:06:11.800 the reason the Europeans are experiencing so much consternation over 0:06:11.839 --> 0:06:14.560 this is the lack of economic growth in Europe is 0:06:14.600 --> 0:06:18.520 causing Europe to essentially evaporate geopolitically. They don't have a 0:06:18.560 --> 0:06:19.960 seat at the table on the Middle East, they don't 0:06:19.960 --> 0:06:22.320 have a seat at the table on Ukraine. They're trying 0:06:22.360 --> 0:06:25.080 to figure out what tariffs are coming and how to respond. 0:06:25.240 --> 0:06:27.960 Then they know that lingering on the horizon is a 0:06:27.960 --> 0:06:31.800 confrontation with the US over them having less dependence on 0:06:31.880 --> 0:06:35.640 China for manufacturing markets and other issues, and so they're 0:06:35.680 --> 0:06:38.239 scrambling figuring out what to do. They're having a hard 0:06:38.279 --> 0:06:41.520 time acting collectively, which is making it difficult for them 0:06:41.560 --> 0:06:44.840 to respond in a way that's sufficiently robust to level 0:06:44.839 --> 0:06:46.400 the playing field with the Trump administration. 0:06:48.080 --> 0:06:51.440 You mentioned that you leaders were preparing for the Trump 0:06:51.520 --> 0:06:55.080 administration late last year. What does that look like? How 0:06:55.080 --> 0:06:56.200 do you prepare. 0:06:56.680 --> 0:06:59.280 Well for starters? Most of them weren't around when he 0:06:59.400 --> 0:07:02.280 was president last time. And if you look at who 0:07:02.320 --> 0:07:04.920 is around last time, you had Macron, who Trump doesn't 0:07:04.920 --> 0:07:07.960 particularly like, Zelensky, who Trump doesn't particularly like, in Victor 0:07:08.080 --> 0:07:10.400 Orbon who he does like, and so most of these 0:07:10.480 --> 0:07:14.280 leaders hadn't dealt with Trump before. I think that one 0:07:14.320 --> 0:07:17.560 of the things that they're all surprised by is that 0:07:18.080 --> 0:07:21.200 what they observe and recall from watching the first Trump 0:07:21.360 --> 0:07:24.200 presidency that this feels less like a second term and 0:07:24.240 --> 0:07:26.760 more like a totally separate presidency with a four year 0:07:26.880 --> 0:07:30.760 interregnum in between. And that also shouldn't be surprising because 0:07:30.760 --> 0:07:33.840 he didn't recycle very many of the same people from 0:07:33.880 --> 0:07:36.480 the first time around, the world has completely changed in 0:07:36.560 --> 0:07:39.080 four years. In this time around, he wasn't surprised to win, 0:07:39.440 --> 0:07:41.760 and so he's coming in with a very clear doctrine 0:07:41.800 --> 0:07:47.000 and agenda focus really on reciprocity, so defense spending, trade deficits, 0:07:47.040 --> 0:07:49.200 you know, areas where he feels like there's an imbalance 0:07:49.480 --> 0:07:52.840 and other countries haven't been kind of quote carrying their load. 0:07:53.280 --> 0:07:56.240 He's then taking a transactional approach to address that. And 0:07:56.280 --> 0:07:59.400 there's look, there's a little bit of what we've seen 0:07:59.800 --> 0:08:03.480 you administrations do recently, which is show up with opposite day, 0:08:03.480 --> 0:08:05.720 which is if the previous administration was for it were 0:08:06.160 --> 0:08:08.520 against it. But when you look at the policy in 0:08:08.560 --> 0:08:12.120 the Indo Pacific, that's where you've seen the most consistency. 0:08:12.440 --> 0:08:15.000 You know, you don't yet have kind of a special 0:08:15.120 --> 0:08:18.920 envoy on you know, China and Indo Pacific issues. The 0:08:18.920 --> 0:08:21.600 meetings with the Quads have persisted. The administration did South 0:08:21.680 --> 0:08:25.480 Korea a solid amidst their political turmoil by reinforcing the 0:08:25.520 --> 0:08:30.160 importance of the Japan US South Korea trilateral reinforcement of 0:08:30.200 --> 0:08:32.720 the Quad and even on tariffs, you know, he's launched 0:08:32.720 --> 0:08:35.640 a series of trade investigations into China which will culminate 0:08:36.080 --> 0:08:39.120 in May. Whereas with you know, Canada and Mexico, he's 0:08:39.160 --> 0:08:41.240 come in hot and heavy. With Europe, he's come in 0:08:41.400 --> 0:08:43.560 hot and heavy. In those tariffs look more robust than 0:08:43.600 --> 0:08:45.360 they did in twenty seventeen and twenty eighteen. 0:08:45.559 --> 0:08:48.720 Jared, you you've observed in the past that, well, we 0:08:48.760 --> 0:08:51.559 don't have the same shock and awe from that community 0:08:51.600 --> 0:08:53.760 that we had in twenty sixteen. They're kind of used 0:08:53.760 --> 0:08:57.360 to him stylistically and in his cadence. You know, there 0:08:57.800 --> 0:09:01.559 is a fundamental difference in that it's unclear who in 0:09:01.600 --> 0:09:04.679 the administration is running which pieces of the portfolio. And 0:09:04.720 --> 0:09:07.440 this seems to be more of a Trump forward, you know, 0:09:07.480 --> 0:09:11.240 policy leadership by him himself. Maybe, is that Yeah? 0:09:11.240 --> 0:09:13.040 I think that's right. And by the way, when the 0:09:13.080 --> 0:09:15.880 forty fifth president was in office, there was also not 0:09:15.960 --> 0:09:18.080 a ton of clarity on you know, who was going 0:09:18.120 --> 0:09:19.960 to get fired on the toilet versus you know, who 0:09:20.000 --> 0:09:22.120 was going to end up running a fiefdom. I do 0:09:22.160 --> 0:09:25.679 think what George is referring to is a various stute observation, 0:09:25.800 --> 0:09:29.640 which is the first time around the departments and agencies. 0:09:29.960 --> 0:09:32.280 The heads of the departments and agencies exerted an enormous 0:09:32.280 --> 0:09:35.720 amount of influence, and policy was much more decentralized. Different 0:09:35.720 --> 0:09:38.680 people had different accounts and different agendas that they were pushing, 0:09:38.679 --> 0:09:41.000 and occasionally the President would weigh in and there'd be 0:09:41.040 --> 0:09:44.440 a recalibration. This time around, you don't see that sort 0:09:44.440 --> 0:09:47.600 of strength that the departments and agencies, and policy feels 0:09:47.679 --> 0:09:50.280 much more centralized at the White House, with a sea 0:09:50.360 --> 0:09:53.320 of special envoys for just about every issue that you 0:09:53.360 --> 0:09:56.800 can imagine, and policy seems to be set more by 0:09:56.840 --> 0:09:59.839 the president, with everybody waiting to see what this sort 0:09:59.880 --> 0:10:02.520 of policy mark to market is before they fast follow 0:10:02.559 --> 0:10:04.559 and figure out what their agenda is going to be. 0:10:21.080 --> 0:10:25.120 Use the word Europe evaporating geopolitically, and it hadn't clicked 0:10:25.120 --> 0:10:28.440 to me. This is something we've talked about to the 0:10:28.559 --> 0:10:31.520 sort of what ails Europe, but you know, even within 0:10:31.600 --> 0:10:34.720 the context of this most recent episode, like it hadn't 0:10:34.840 --> 0:10:38.040 clicked to me the sort of elevated role that the 0:10:38.040 --> 0:10:42.480 Gulf States have had in playing intermediary talk about how 0:10:42.520 --> 0:10:46.800 the world, whether it's political leaders or business leaders, are 0:10:46.840 --> 0:10:49.920 like thinking about this reality that what is still you know, 0:10:49.960 --> 0:10:53.960 one of the richest regions on Earth is at this 0:10:54.160 --> 0:10:57.880 moment where like people are asking existential questions about its 0:10:57.880 --> 0:11:00.000 capacity to be a player in anything. 0:11:00.480 --> 0:11:02.240 So look, if you look at the Gulf. I've been 0:11:02.280 --> 0:11:05.680 traveling there for twenty five years, and for most of 0:11:05.720 --> 0:11:09.000 that time, the international system was in a global War 0:11:09.080 --> 0:11:13.160 on terror paradigm, and in that context, the geopolitics were 0:11:13.200 --> 0:11:16.160 driving the economic interest. And when you talk to these leaders, 0:11:16.160 --> 0:11:17.559 they would say we wanted to be the other way 0:11:17.600 --> 0:11:20.520 around that they were stuck in this paradigm, and so 0:11:20.600 --> 0:11:23.520 the most important conversations that were happening at the political 0:11:23.600 --> 0:11:27.280 level were around geopolitics and security. But you had these 0:11:27.320 --> 0:11:29.280 growing sovereign wealth funds that were kind of off to 0:11:29.320 --> 0:11:32.160 the side, and so these were countries that had sovereign 0:11:32.160 --> 0:11:34.880 wealth funds, but geopolitics was front and center. And then 0:11:35.440 --> 0:11:37.840 a series of new leaders showed up in twenty fifteen 0:11:38.160 --> 0:11:41.959 and twenty sixteen in Saudi and Cutter and UAE, and 0:11:42.000 --> 0:11:45.559 they just brought with them a different set of ambitions 0:11:45.559 --> 0:11:47.880 that are born out of a different generation, where they 0:11:47.920 --> 0:11:50.640 wanted to diversify the economies. They wanted to be leaders 0:11:50.640 --> 0:11:53.720 in science and technology, not followers, and they wanted to 0:11:53.800 --> 0:11:57.320 broaden the reach and international influence of each of their 0:11:57.360 --> 0:12:00.000 respective countries, but they were still stuck in a global 0:12:00.040 --> 0:12:02.840 war on terror framework. And then COVID happened, and it 0:12:02.920 --> 0:12:07.040 completely shifted the paradigm towards a great return of great 0:12:07.080 --> 0:12:10.640 power competition and competitive coexistence between the US and China. 0:12:10.679 --> 0:12:13.800 And with all of that geopolitical brush cleared, that was 0:12:13.880 --> 0:12:17.520 the paradigmatic shift where these countries finally had a situation 0:12:17.559 --> 0:12:20.240 where their economic interests could drive the geopolitics. And what 0:12:20.240 --> 0:12:21.920 I would sort of say flippantly, that was the moment 0:12:21.920 --> 0:12:24.080 where they went from being countries with sovereign wealth funds 0:12:24.200 --> 0:12:26.839 to sovereign wealth funds with countries. And you know, but 0:12:27.000 --> 0:12:30.079 another way, you know, they're now leading with strategic capital 0:12:30.360 --> 0:12:32.480 as opposed to being a place where people come to 0:12:32.960 --> 0:12:35.000 for capital. And so it's giving them the right to 0:12:35.080 --> 0:12:39.200 play the chessboard. And we lump the Gulf countries together 0:12:39.480 --> 0:12:42.240 because that's what historically we've done. These are distinct countries 0:12:42.280 --> 0:12:44.960 with unique ambitions, and what they have in common is 0:12:45.000 --> 0:12:47.959 they have a lot of money. After that, each of 0:12:48.000 --> 0:12:50.640 them are after very different things and they're engaged in 0:12:50.640 --> 0:12:52.880 their own degree of competition with each other. 0:12:53.040 --> 0:12:55.800 So Jared mentioned this idea of a slowdown in the 0:12:55.840 --> 0:13:00.000 European economy contributing to all the let's call it existential 0:13:00.280 --> 0:13:03.520 angs that you see right now. And George, I want 0:13:03.559 --> 0:13:06.800 to bring you in here because one thing you often 0:13:06.880 --> 0:13:09.760 hear is this idea that Europe is lagging behind in 0:13:09.880 --> 0:13:12.439 AI and if AI is going to be the next 0:13:12.480 --> 0:13:16.120 big thing, the next big economic driver, that's really a 0:13:16.200 --> 0:13:17.040 problem for them. 0:13:17.720 --> 0:13:20.080 Yep, Tracy's a great question. You know, having been in 0:13:20.080 --> 0:13:22.880 technology for thirty five years and seen my share of 0:13:22.880 --> 0:13:26.200 platform transitions and new technologies arise, this is really the 0:13:26.240 --> 0:13:30.000 first one where world leaders have tagged AI as a 0:13:30.000 --> 0:13:33.240 matter of national destiny really early. It's going to be 0:13:33.280 --> 0:13:37.720 consequential for their economies, their growth, their culture, their defense. 0:13:37.800 --> 0:13:40.480 And so we've seen enormous focus and you know, I'm 0:13:40.520 --> 0:13:43.080 just back. I was recently at the AI Action Summit 0:13:43.160 --> 0:13:46.640 in Paris, which was quite an impressive event and coalesced 0:13:46.679 --> 0:13:49.120 a bunch of investment in within the borders of France's 0:13:49.120 --> 0:13:52.080 something Macron I think is a real leader on and 0:13:52.320 --> 0:13:55.559 some of these European countries are a wellspring of enormous 0:13:55.600 --> 0:13:59.640 intellectual capital think about the grandicles in France, that combination 0:13:59.720 --> 0:14:03.880 of and statistics that they lead in with excellence. You've 0:14:03.920 --> 0:14:08.360 got Cambridge and Oxford and places like that. So there 0:14:08.440 --> 0:14:11.560 is an enormous amount of intellectual capital emerging from Europe 0:14:11.600 --> 0:14:14.560 and there's some really inspiring companies like miss Strawl out 0:14:14.559 --> 0:14:18.480 of France, et cetera. Whether they can marshal the the 0:14:18.800 --> 0:14:23.120 intent and capital to really lead in building the infrastructure 0:14:23.120 --> 0:14:25.520 and they need to support that intellectual capital is the 0:14:25.520 --> 0:14:27.720 big question, and it's why you saw a lot of 0:14:27.720 --> 0:14:31.240 the announcements around the AI Action Summit be about bringing 0:14:31.280 --> 0:14:34.760 capital to France, scaling their lead in atomic energy, which 0:14:34.800 --> 0:14:37.560 is a great energy source for this, and so everyone's 0:14:37.600 --> 0:14:41.720 giving it their best shot. But competing with the energy abundance, 0:14:41.840 --> 0:14:45.160 capital abundance of the Gulf countries or the just natural 0:14:45.200 --> 0:14:47.600 tech leadership of the US, I think it's a hard 0:14:47.640 --> 0:14:49.960 brief for them to compete in the scale that they 0:14:49.960 --> 0:14:52.600 want to, but make no mistake, they have real assets. 0:14:53.040 --> 0:14:55.320 Well, actually, there's a question I want to pose to 0:14:55.440 --> 0:14:59.240 both of you because whether we're talking about you know, 0:14:59.240 --> 0:15:02.840 what is it actually take to say commercialize the intellectual 0:15:02.880 --> 0:15:06.880 capital of Europe or what does it actually take for 0:15:07.840 --> 0:15:10.840 the EU to be a geopolitical power player, so that 0:15:10.840 --> 0:15:14.040 they're not taking a backseat and watching all of these actions, 0:15:14.320 --> 0:15:17.360 all of these conversations take place above their head. There 0:15:17.400 --> 0:15:21.600 is this sense that large European organizations have been very 0:15:21.600 --> 0:15:25.560 good at expanding the number of member countries over time 0:15:25.720 --> 0:15:28.720 that exist, that they grow out, but that the issue 0:15:28.720 --> 0:15:34.400 of like internal depth, single rules, market cohesion has really difficult, 0:15:34.520 --> 0:15:37.760 and the sort of the deepening of these various unions 0:15:37.800 --> 0:15:40.840 that exist on the European continent. And every once in 0:15:40.880 --> 0:15:42.840 a while there will be some leader and you know, 0:15:43.000 --> 0:15:45.080 to come up with one hundred page report. I think 0:15:45.080 --> 0:15:47.320 we talked about recently on the podcast. You know, I 0:15:47.360 --> 0:15:49.560 asked your Mario Dragi issued to big report, and there's 0:15:49.560 --> 0:15:53.920 always some new report about competitiveness or whatever. I'd love 0:15:53.960 --> 0:15:56.200 to hear from both of you whether you think that 0:15:56.360 --> 0:15:59.680 the tides are shifting in Europe in such a way 0:16:00.200 --> 0:16:03.280 that all of these things that sound good on PDFs 0:16:03.280 --> 0:16:07.720 and institutional websites can change the way the nature of 0:16:07.760 --> 0:16:10.440 politics and policy is wrung within the content. 0:16:10.920 --> 0:16:14.440 So look, you're getting at a debate that we certainly 0:16:14.480 --> 0:16:17.400 hear playing out every single day, which is the bearishness 0:16:17.440 --> 0:16:20.880 on Europe overplayed, right. No, nobody's questioning that the lack 0:16:20.920 --> 0:16:25.040 of economic growth, and nobody's fooled by the economic rally 0:16:24.720 --> 0:16:26.600 they've had at the beginning of the year. There's some 0:16:26.640 --> 0:16:30.280 fundamental questions. I won't try to argue the other side 0:16:30.320 --> 0:16:33.200 because I'm quite bearish on it. And I'm quite bearish 0:16:33.240 --> 0:16:37.040 on it because it's not that European leaders don't know 0:16:37.080 --> 0:16:37.920 what they need to do. 0:16:38.480 --> 0:16:38.600 Right. 0:16:38.640 --> 0:16:41.520 So let's take geopolitics and defense, and George, you should 0:16:41.520 --> 0:16:44.760 talk on the AI side and the regulatory side, but 0:16:44.800 --> 0:16:47.080 on defense, right, it's very clear. I mean, what's interesting 0:16:47.080 --> 0:16:50.200 about Vance's speech, which you were talking about before. Privately, 0:16:50.560 --> 0:16:53.240 every European leader said, you know, the US has a 0:16:53.240 --> 0:16:55.840 point on defense spending, they have a point on migration, 0:16:56.320 --> 0:16:59.280 they have a point on regulation, and every European leader 0:16:59.280 --> 0:17:00.920 has an idea for how to fix it, and they 0:17:00.920 --> 0:17:04.360 all like drag eas report. The question is implementation, right. 0:17:04.440 --> 0:17:07.480 So Europe has a number of challenges, one of which 0:17:07.600 --> 0:17:09.960 is you become prime minister if you get the largest 0:17:09.960 --> 0:17:12.840 percentage of the vote, which is usually thirteen, fourteen, fifteen percent, 0:17:12.920 --> 0:17:15.000 or if you're mergency know twenty nine percent with a 0:17:15.000 --> 0:17:17.840 blocking minority from the AfD right. And so if you're 0:17:18.000 --> 0:17:20.800 sitting on top of one of these coalition governments that 0:17:20.840 --> 0:17:24.280 you can barely scrap together in order to do the 0:17:24.320 --> 0:17:27.480 meaningful policy changes that you have to do, you're likely 0:17:27.520 --> 0:17:29.760 going to break the coalition in the process. So you 0:17:29.800 --> 0:17:33.359 have coalition politics getting in the way. That's one issue. 0:17:33.480 --> 0:17:37.439 On defense, three percent of GDP is the new two percent. 0:17:37.600 --> 0:17:40.360 And in a lot of respects what's happened with Ukraine 0:17:40.440 --> 0:17:43.000 and the fact that the Europeans now conclude they can't 0:17:43.040 --> 0:17:46.359 rely on the US for security guarantees, it's made them 0:17:46.400 --> 0:17:49.119 more comfortable with the idea of three percent or as 0:17:49.160 --> 0:17:51.359 you move east to places like poll In five percent. 0:17:51.760 --> 0:17:54.760 The problem again is implementation at a collective level. So 0:17:55.320 --> 0:17:57.320 you know, there's certain countries that are strong on defense 0:17:57.320 --> 0:18:00.719 and certain countries that have medium and small sized defense players. 0:18:00.720 --> 0:18:02.760 So is the answer that if Europe is going to 0:18:02.760 --> 0:18:04.680 get big enough from a defense perspective, you're going to 0:18:04.760 --> 0:18:09.240 have to have cross border mergers and acquisitions and consolidation. Okay, fine, 0:18:09.240 --> 0:18:12.199 who gets the national champion the EU? Yes, it's a 0:18:12.240 --> 0:18:14.760 coalition of countries or a union of countries. These are 0:18:14.760 --> 0:18:17.240 still national governments underneath it, and you're really going to 0:18:17.280 --> 0:18:20.280 tell you a medium sized Central European country that they 0:18:20.280 --> 0:18:22.639 have to give up two of their biggest companies because 0:18:22.640 --> 0:18:24.920 Sweden's going to get bigger on the defense side, when, 0:18:24.960 --> 0:18:27.159 by the way, they're closer to the Russian threat. So 0:18:27.240 --> 0:18:29.920 this is just one example of where it breaks down 0:18:30.200 --> 0:18:33.560 implementation within the EU. You still have zo some politics 0:18:33.560 --> 0:18:36.440 that exist between the national governments, and then that gets 0:18:36.480 --> 0:18:39.520 exacerbated by the point I made earlier about coalition politics. 0:18:39.720 --> 0:18:42.560 Yeah, I'm struck. I've been at a couple of Golden 0:18:42.600 --> 0:18:45.919 Sex gatherings where you bring together CEO level leaders in 0:18:46.000 --> 0:18:48.520 Europe in a couple different countries. I was struck by 0:18:48.560 --> 0:18:52.800 the degree of pessimism and almost resignation about their ability 0:18:52.840 --> 0:18:55.879 to influence policy that provides more of a pro growth 0:18:56.359 --> 0:18:59.080 environment for them. Look, I think that you know, hopefully 0:18:59.160 --> 0:19:02.440 events over take some of this inertia, because the competitive 0:19:02.440 --> 0:19:06.199 impulse for these countries is going to get increasingly important 0:19:06.240 --> 0:19:09.520 and challenging, and so maybe it will mediate some change 0:19:09.560 --> 0:19:13.080 and more collective, more effective collective action. But the business 0:19:13.119 --> 0:19:16.160 leaders are are certainly frustrated, and one of the things 0:19:16.200 --> 0:19:20.040 they reflect on is how Europe's leadership and AI in 0:19:20.119 --> 0:19:23.119 some ways perceptually has been defined by its leadership on 0:19:23.160 --> 0:19:25.080 AI safety. By the way, that's a. 0:19:25.040 --> 0:19:26.400 Worthy and important goal. 0:19:26.800 --> 0:19:28.800 One of my observations in the world of AI they're 0:19:28.880 --> 0:19:31.800 kind of fascinating, is you know, chat GPT emerged in 0:19:31.840 --> 0:19:34.560 November twenty two, and there was an immediate outcry about 0:19:34.560 --> 0:19:38.000 AI safety, existential risk, a lot of headlines, a lot 0:19:38.000 --> 0:19:40.800 of inks, build a lot of time and energy. Fast forward. 0:19:40.840 --> 0:19:42.440 Now we have machines that are one hundred to a 0:19:42.520 --> 0:19:45.520 thousand times more powerful, and it's a much more muted 0:19:45.560 --> 0:19:50.640 dialogue about those risks. Interestingly, but there's frustration in Europe that, 0:19:50.880 --> 0:19:54.440 you know, kind of characteristic focus on privacy, regulatory bounds, 0:19:54.480 --> 0:19:58.240 safety is retarding their progress in something that now has 0:19:58.280 --> 0:20:02.040 really become kind of a commercial, military, and cultural arms 0:20:02.119 --> 0:20:03.480 race across the face of the earth. 0:20:04.119 --> 0:20:07.800 This is what always happens, Joe. The US invents the technology, 0:20:08.000 --> 0:20:12.240 China maybe improves on it, and Europe writes the regulations 0:20:12.320 --> 0:20:15.480 and the thought pieces about it. Jered. Just going back 0:20:15.520 --> 0:20:18.400 to a point that you made about the European response. 0:20:18.760 --> 0:20:22.320 You use that word transactional earlier to describe the Trump 0:20:22.359 --> 0:20:27.080 administration's approach to geopolitics, and funnily enough, we just recorded 0:20:27.119 --> 0:20:30.000 an episode yesterday where we said the exact same thing. 0:20:30.680 --> 0:20:33.560 I guess I'm wondering, do you see any signs that 0:20:33.600 --> 0:20:38.159 the approach is actually working, because so far, when you 0:20:38.320 --> 0:20:41.240 look at the response from EU leaders, it's all about 0:20:41.800 --> 0:20:45.720 increasing their own domestic defense spending. No one seems to 0:20:45.760 --> 0:20:49.400 be taking the bait just yet about you know, well, 0:20:49.400 --> 0:20:51.800 we'll work with Trump and then in return we'll get 0:20:51.840 --> 0:20:52.800