Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, you know, for years, I've always thought that if
Speaker 1: you want to be like a smart sounding pundit at
Speaker 1: the beginning of the year and someone ask you, like,
Speaker 1: what risks are you thinking about right now, you like
Speaker 1: stroke your chin and look off and you say, I'm
Speaker 1: really worried about like geopolitical risk. And that's always like
Speaker 1: a safe answer anytime any year. Like that always makes
Speaker 1: you sound sophisticated.
Speaker 2: Yes, unexpected geopolitical risks are an evergreen category of punditry.
Speaker 3: This is true.
Speaker 2: There is one specific risk within that category that I
Speaker 2: feel like has come up every year for almost as
Speaker 2: long as I can remember, and that is the risk
Speaker 2: of something happening between China and Taiwan. And I have
Speaker 2: a really embarrassing confession to make, Okay. I wrote my
Speaker 2: dissertation on I wrote it in Beijing, and it must
Speaker 2: have been in like two thousand and five or two
Speaker 2: thousand and six, predicting that China would invade Taiwan before
Speaker 2: the Beijing Olympics. I think that was like two thousand
Speaker 2: and eight or something.
Speaker 1: So when people talk about the risk of China invading
Speaker 1: Taiwan or attempting to formally reunify, this is like twenty
Speaker 1: years people have been talking about this and it keeps not.
Speaker 2: Happening, Yes, and getting it wrong consistently for twenty years,
Speaker 2: or at least I have.
Speaker 1: But it does seem right like for whatever reason. And
Speaker 1: we'll get into it that we are once again in
Speaker 1: a wave of heightened concern. And you know, there are
Speaker 1: two very active wars happening right now currently between Russia
Speaker 1: and Ukraine, the Israel and Hamas war, and so the
Speaker 1: idea of war, unexpected war is on people's minds. And
Speaker 1: then we know that tension has been building in various
Speaker 1: ways Taiwan. There was all of the angst over the
Speaker 1: Nancy Pelosi trip a couple of years ago, for example,
Speaker 1: and the heightened awareness that the world has on semiconductors
Speaker 1: that are manufactured in Taiwan, and sort of a more
Speaker 1: aggressive posture I believe from Xi Jinping and the military
Speaker 1: of more aggressive war games and exercises. So many people
Speaker 1: are concerned about some prospect of a hot conflict in
Speaker 1: the next few years.
Speaker 2: Yeah, you mentioned semiconductors and I feel like this is
Speaker 2: really the key thing, which is in the past two
Speaker 2: or well, I guess four years now, since the outbreak
Speaker 2: of the global pandemic, we have had a sort of
Speaker 2: crash course in the importance of the Taiwanese economy to
Speaker 2: the broader world. And I feel like that's sort of
Speaker 2: done a couple things. So one, it's made everyone a
Speaker 2: lot more nervous about what could happen if that supply
Speaker 2: chain gets disrupted again, although in a very different way.
Speaker 2: And then secondly, maybe it's given a little bit of
Speaker 2: ammunition to China to saber rattle on this issue even more. Right,
Speaker 2: if it threatens something against Taiwan, the whole world now
Speaker 2: knows what's at stake.
Speaker 1: Yeah, that's absolutely right. So this is one of these
Speaker 1: things that is you could feel it building more and
Speaker 1: more people are talking about it. My understanding and what
Speaker 1: I've seen is people say, oh, in DC, everyone is
Speaker 1: like obsessed with this question. I don't feel like that's
Speaker 1: as much the case in New York, but I do
Speaker 1: get the impression that in DC talk of a war
Speaker 1: is very high. And so I think, like, you know,
Speaker 1: we have to do more on this, And I think
Speaker 1: geopolitics in general, thinking back to some of our conversations
Speaker 1: with Zultan et cetera about you know, the sort of
Speaker 1: rearranging world, like, we need to dive into these questions
Speaker 1: a little bit more.
Speaker 4: Yeah.
Speaker 2: Absolutely, And the other reason we need to do it
Speaker 2: is Taiwan is holding an election. In fact, we are
Speaker 2: recording this on January ninth. By the time this episode
Speaker 2: comes out, the election will have been held and so
Speaker 2: we'll know who the winning candidate is. But in the meantime, like,
Speaker 2: there is clearly a big reason to discuss this.
Speaker 5: Yeah.
Speaker 1: Absolutely, Well, I'm very excited. We have two of our
Speaker 1: colleagues here at Bloomberg that we've never had on the
Speaker 1: podcast before, but they are the perfect guests to discuss
Speaker 1: this because they've been doing a lot of work in
Speaker 1: this area. We're going to be speaking with Jennifer Welch,
Speaker 1: chief geoeconomics analyst at Bloomberg Economics, and Gerard De Pippo,
Speaker 1: Senior geoeconomics analyst at Bloomberg Economics. They've both published a
Speaker 1: lot of work on some of these questions related questions
Speaker 1: wargaming the risk the economic stakes involved here, and so
Speaker 1: we're going to start to go down our path of
Speaker 1: understanding this tension better. So, Jennifer and Gerard, thank you
Speaker 1: so much for coming on odd lots.
Speaker 3: Thank you so much for having us.
Speaker 4: Glad to be here.
Speaker 1: I have a sort of very basic, I don't know,
Speaker 1: maybe it's not basic zoom od question. You know, we
Speaker 1: talked to like normal talk to economists who you know,
Speaker 1: they have their recession forecast or forecast of soft landing, whatever,
Speaker 1: and I sort of have some idea of how they
Speaker 1: go about, you know, modeling different scenarios when it comes
Speaker 1: to wargam and modeling the odds of a war or
Speaker 1: modeling how a war might go if one were pursued.
Speaker 1: What do you economics analysts, like, what is the toolkit
Speaker 1: that you have to actually go about modeling the risks
Speaker 1: and the outcomes of a war.
Speaker 3: That's a great question, and let me dry it. I'll
Speaker 3: start off, and then if you want to jump in
Speaker 3: as well, so on the first part of your question
Speaker 3: of how do we estimate the probability of war? To
Speaker 3: be perfectly candid, this is definitely more art than science.
Speaker 3: What we did in the case of our recent project
Speaker 3: on Taiwan and the trajectory we might see in the
Speaker 3: Taiwan Strait was take a look at sort of baseline conditions,
Speaker 3: what are the sort of structures in place there that
Speaker 3: lean towards stability or that lean towards increasing tensions and
Speaker 3: even to the extreme of a crisis or conflict, And
Speaker 3: we examined all those key variables and their trajectory and
Speaker 3: what weight they might have to be candid. This is
Speaker 3: an area of a lot of debate among people who
Speaker 3: focus on the Taiwan Street. You know, to what extent
Speaker 3: does Beijing wield the most agency over it versus Taiwan,
Speaker 3: versus the United States, which has historically been a key
Speaker 3: balancing power in the street. And then from there we
Speaker 3: kind of developed our sense of probabilities. But again, this
Speaker 3: is a really complex and dynamic geopolitical environment. The election
Speaker 3: that Taiwan will be having in advance of this recording
Speaker 3: is an example of how things can really shift at
Speaker 3: quick notice depending on how events like that turn out.
Speaker 3: But overall, we think our sense of what the risks
Speaker 3: of crisis or conflict in the Strait are are meant
Speaker 3: to be, you know, standing the test of time and
Speaker 3: looking out over the next five years. And then in
Speaker 3: terms of how we study what the outcome of a
Speaker 3: war would be were one to happen. This is a
Speaker 3: little bit more of a rigorous process, and there are
Speaker 3: a lot of think tanks, a lot of internal government entities,
Speaker 3: not just in the United States, but Japan, Taiwan, all
Speaker 3: around the world that are increasingly looking at how a
Speaker 3: crosstright conflict could play out, and it often is very
Speaker 3: much focused on the military dynamics. That's historically the origin
Speaker 3: of these war games is testing military tactics and battle
Speaker 3: plans and playing out how different scenarios can produce different
Speaker 3: outcomes depending on sort of what you go into the
Speaker 3: battle with and how different conditions can change those outcomes.
Speaker 3: So for that particular exercise, there's a lot of different
Speaker 3: variations of war games related to Taiwan out there, and
Speaker 3: a lot of them produce a variety of results. It
Speaker 3: really depends on kind of the assumptions going into it on.
Speaker 3: You know, for example, how does the worst start, is
Speaker 3: there any warning of it, how prepared is Taiwan to
Speaker 3: defend itself? Does the US get involved? But what all
Speaker 3: of them point to is a war would be incredibly
Speaker 3: costly at all sides. Most of the war games focus
Speaker 3: on sort of the military and the humanitarian impact of that.
Speaker 3: But we looked at also the economic impact, and what
Speaker 3: we found is especially for China, Taiwan, and the United States,
Speaker 3: but also the global economy, the toll would be quite
Speaker 3: immense were the cross street tensions to erupt into a
Speaker 3: broader conflict.
Speaker 4: Maybe this is obvious, but I think it's worth pointing
Speaker 4: out that we're dealing with something that is mostly beyond
Speaker 4: the historical sample set. So normally, when you're trying to
Speaker 4: model something, you think of what's happened before. You think
Speaker 4: of like Tetlock's book Super Forecasters, where they talk about
Speaker 4: outside in analysis, right, you look at what's happened before
Speaker 4: they might be analogous and say, what are the chances
Speaker 4: that would apply in this case. Of course, there are
Speaker 4: many wars in history, including wars that are happening right now,
Speaker 4: but there aren't that many that involve China, and there
Speaker 4: are none that involve cross rate conflict. And there aren't
Speaker 4: actually that many to involve a major essentially continental power
Speaker 4: seizing an island power, right, And so it actually is
Speaker 4: a quite limited sample set. And what we essentially do
Speaker 4: with think of plausible outcomes and then kind of back
Speaker 4: in relative probabilities at least compared to other outcomes, and
Speaker 4: then say, okay, that tells you, sort of cumulatively, what
Speaker 4: the odds are of these of these scenarios.
Speaker 2: Can you tell us a little bit more about how
Speaker 2: you choose which scenarios to focus on, because obviously you
Speaker 2: can't you can't examine the entirety of possibilities when it
Speaker 2: comes to, to Jared's point, like a relatively unknown and
Speaker 2: unpredictable conflict. But there are clearly some scenarios that are
Speaker 2: seen as more likely than others. And I remember when
Speaker 2: I was working in Hong Kong, we did a big
Speaker 2: piece on the news side of things about, you know,
Speaker 2: this is what a war between China and Taiwan might
Speaker 2: look like. And our source for that was we went
Speaker 2: out and we spoke to geopolitical experts such as yourselves,
Speaker 2: and we tried to get their sense of what the
Speaker 2: most likely scenarios were. But when you guys are doing it,
Speaker 2: who are you talking to, what are you looking at?
Speaker 4: Part of it is a constraint on how you're trying
Speaker 4: to answer the question. So in this case, we're trying
Speaker 4: to model economically what these outcomes are. The range of
Speaker 4: outcomes is more of a gradient. I mean, in a
Speaker 4: technical sense, there could be thousands of outcomes, right, but
Speaker 4: you can't actually model all of that. So what we
Speaker 4: tried to do was decide what are the sort of
Speaker 4: key outcomes that are more or less analogous within themselves
Speaker 4: than try to model that. But I should also say
Speaker 4: we're putting out other pieces on the terminal that are
Speaker 4: actually more detailed and maybe more nuanced than you might
Speaker 4: have seen on the sort of econometric side in the
Speaker 4: big take.
Speaker 3: No, I think this is exactly right to kind of
Speaker 3: underscore the point on some of these scenarios have more
Speaker 3: direct economic implications than others. So, for example, there's a
Speaker 3: lot of different variations of what a major crisis industry
Speaker 3: could look like short of a war. We chose to
Speaker 3: model a blockade because that's the scenario, even though it's
Speaker 3: one of the more unlikely ones for a lot of
Speaker 3: reasons we can get into that would have more direct
Speaker 3: implications for the global economy versus something like a seizure
Speaker 3: of one of Taiwan's outlying islands, where it would be
Speaker 3: incredibly escalatory and risky from a geopolitical perspective, but the
Speaker 3: impact to markets and to the global economy directly might
Speaker 3: be less so because it's not necessarily directly affecting trade.
Speaker 3: But all that to say, you know, in terms of
Speaker 3: what we looked at for the big take in the
Speaker 3: overall exercise was looking across the spectrum of possibilities from
Speaker 3: sort of best case scenario, by which we define that
Speaker 3: as sort of an enduring or stable piece, to absolute
Speaker 3: worst case scenario, by which we define that as an
Speaker 3: all out conflict, including a conflict between the United States
Speaker 3: and China, and then everything in between, the status quo
Speaker 3: kind of being the base case, something slightly worse than that,
Speaker 3: which we define as increased tensions, and there there's a
Speaker 3: lot of variation and what specifically that could look like,
Speaker 3: but the economic implications are probably not all that different
Speaker 3: across those various inter scenarios, and then major crisis short
Speaker 3: of a war. Again, a lot of different variation in there,
Speaker 3: but the one that we think would have the most
Speaker 3: impact on the global economy would be something like a
Speaker 3: blocking that directly interrupts Tree.
Speaker 2: So I should just say both Jared and Jenny have
Speaker 2: mentioned a big take, which is basically a Bloomberg piece
Speaker 2: based on the report that they did for Bloomberg Economics,
Speaker 2: where they're estimating the exact or rough price tag of
Speaker 2: some sort of military action between China and Taiwan. They're
Speaker 2: estimating the price tag at about ten trillion dollars, which
Speaker 2: would be equivalent to ten percent of global GDP, which
Speaker 2: would be more more than the loss from Russia's invasion
Speaker 2: of Ukraine, the COVID pandemic, and the global financial crisis.
Speaker 2: So some pretty big numbers there. But Jenny, I'm curious
Speaker 2: why you say that the blockade is in some respects
Speaker 2: a less likely scenario here, because my impression was that
Speaker 2: that was kind of becoming I don't want to say consensus,
Speaker 2: but like it was certainly a realistic possibility of what
Speaker 2: military action could look like.
Speaker 3: No, that's right, and I think it still remains a
Speaker 3: realistic possibility. I think though, changing military dynamics suggests that
Speaker 3: it is probably one of the tactics that is likely
Speaker 3: lower on Beijing's list of preferred options. And I say
Speaker 3: that because a blockade is technically an act of war,
Speaker 3: would be incredibly risky in terms of tipping into a conflict.
Speaker 3: For example, if China were to put in place a
Speaker 3: true military blockade of Taiwan and Taiwan we're trying to
Speaker 3: challenge that Beijing would be forced to either use military
Speaker 3: force to keep that blockade in place or to have
Speaker 3: to remove it. So it has a really high chance
Speaker 3: of tipping into a conflict, but at the same time,
Speaker 3: it's not guaranteeing an outcome. Right. If Beijing was going
Speaker 3: to risk war, it would seem to make more sense
Speaker 3: to go for the all out amphibious invasion, which has
Speaker 3: the chance of securing control over Taiwan, whereas a blockade
Speaker 3: isn't likely to do that on its own. All that
Speaker 3: being said, most of our understanding of what the Chinese
Speaker 3: military strategy might be for Taiwan and in general how
Speaker 3: amphibious campaigns are carried out, we think that a blockade
Speaker 3: would be likely part of their campaign, part of a
Speaker 3: multi step process. Were they to try and undertake an
Speaker 3: amphibious invasion of Taiwan to try and keep enemy combatants
Speaker 3: from leaving, to try and keep any third part from intervening,
Speaker 3: it would be part of it, but to launch it
Speaker 3: in advance would also give a lot of time in
Speaker 3: warning and the tendency and more recent military campaigns has
Speaker 3: been to try and take advantage of the element of surprise,
Speaker 3: and you lose that with something like a blockade, which
Speaker 3: is a very obvious demonstration of force. But all that
Speaker 3: being said, it could still very much be a realistic possibility.
Speaker 3: Particularly one of the things that we've talked about too
Speaker 3: is it might not take the form of an overt
Speaker 3: campaign or an overt blockade. It could take the form
Speaker 3: of something that looks more like what we call lawfare
Speaker 3: or legal warfare, enacting, for example, a customs regime where
Speaker 3: you're trying to subject all craft that are coming in
Speaker 3: and out of Taiwan to Chinese customs. But you'd still
Speaker 3: need to enforce that in some way, shape or form,
Speaker 3: So it still bears a pretty high risk of tipping
Speaker 3: into something more connect.
Speaker 1: I have a very i don't know, maybe rudimentary question.
Speaker 1: So I'm looking at this wargame scenario that was conducted
Speaker 1: by the Center for a New American Security and in
Speaker 1: their report they have like this map that looks like
Speaker 1: a big risk board and they even have dice, so
Speaker 1: like it's like, let's say, is that really like a
Speaker 1: part of these sort of geoeconomics analyst toolkit to actually
Speaker 1: have these sort of dice games and maps because you
Speaker 1: see them in movies and the general has that stick
Speaker 1: if they push things around. But is that actually like
Speaker 1: a real part of how this is done or is
Speaker 1: that just an affect for the report?
Speaker 4: The war gaming industry is skewed heavily towards actual military scenarios.
Speaker 4: The actual economic war games are quite rare. I mean
Speaker 4: that's growing in part because of Taiwan issue. I have
Speaker 4: played in a number of these, including think tanks and
Speaker 4: in US government. The economic side is typically less sophisticated
Speaker 4: or treated as sort of just an effect or something
Speaker 4: in the background. And I think when you're doing military
Speaker 4: scenarios you can do things like saying, roll the dice.
Speaker 4: If you're fighter jets, take out the other fund.
Speaker 1: They really do that. So there is a serious military
Speaker 1: analyst rolling the dice on a glorified risk board.
Speaker 4: Yes, but it's much with economics. There are far more
Speaker 4: actors involved. And it's not like national decision making is everything,
Speaker 4: because how do you simulate quote the market right? Yeah,
Speaker 4: and or supply chains for that matter. And so the
Speaker 4: body of let's say, economic war gaming literature when it
Speaker 4: comes to Taiwan is much much smaller than the military
Speaker 4: wargaming literature.
Speaker 2: Well, why don't you talk to us about the economic
Speaker 2: modeling aspect of this, because it seems hard enough to
Speaker 2: game out what military action could actually look like, but
Speaker 2: then when you start trying to estimate the cost of
Speaker 2: various types of action, that seems even more complicated. But
Speaker 2: you've put a number on it, ten trillion dollars, So
Speaker 2: how do you actually go about doing that?
Speaker 4: Sure? So, first I want to give credit to our
Speaker 4: outstanding modeling team in Europe, mostly as part of Bloomberg Economics.
Speaker 4: They did most of the actual mathwork which Jenny and
Speaker 4: I were doing was helping to define the scenarios and
Speaker 4: then working with them to come up with essentially like
Speaker 4: scenario inputs that will be relevant to those scenarios that
Speaker 4: would have relevant economic outcomes. And so we already talked
Speaker 4: about how we develop scenarios. When it comes to the
Speaker 4: actual modeling, you know, it's essentially layering on three things.
Speaker 4: The first is a sort of standard wto trade shock
Speaker 4: model which people use for tariffs and other stuff like that.
Speaker 4: We played with tariff rates in some ways to simulate
Speaker 4: the effect of sanctions. These models don't really have a
Speaker 4: sort of sdning the PBOC effect button in them, but
Speaker 4: you can get some of the trade shocks in there.
Speaker 4: There's also a financial model that is layered on top
Speaker 4: of you play with things like the vics and you
Speaker 4: can see how market uncertainty or capital and flows move
Speaker 4: and what the economic outcome or effect is of that.
Speaker 4: But actually, in this case, because we're dealing with Taiwan,
Speaker 4: the most important factor in terms of the cumulative economic
Speaker 4: impact was supply chain impacts. And I know you guys
Speaker 4: have talked a lot about this on the show, the
Speaker 4: importance of Taiwan, seeing particular for advance semiconductors. And what
Speaker 4: we did with that was talk to various industry research
Speaker 4: professional people, including at Bloomberg, who work on these things,
Speaker 4: and using the OECD trade and value added data and
Speaker 4: input output tables, so essentially estimate at the end of
Speaker 4: the day, how much of certain sectors, and these are
Speaker 4: generally high level sector, it's just how the data is presented,
Speaker 4: how much of those would get knocked out if, for example,
Speaker 4: the world did not have access at TSMC's chips. You
Speaker 4: could debate how bad it would be, and in fact
Speaker 4: we got a range of estimates. We took sort of
Speaker 4: something in the middle that is like awful but not
Speaker 4: completely apocalyptic. But I think if you look at the
Speaker 4: bottom of the big take, there's a note explain this
Speaker 4: that essentially we knocked out in the war scenarios something
Speaker 4: like eighty five percent of global electronics production, so things
Speaker 4: like smartphones and all that computer's laptops, and then something
Speaker 4: like sixty two percent of global autos and transport. So
Speaker 4: that's a massive shock, and it's actually doing a lot
Speaker 4: of the work in terms of the simulation of economic impacts.
Speaker 3: Yeah, and just to add to that, shout out to
Speaker 3: you our Bloomberg Intelligence colleagues who helped us better understand
Speaker 3: the role that these chips play in different industries. And
Speaker 3: the point that Jarred noted on what we call the
Speaker 3: golden screw problem of trying to determine you know, a
Speaker 3: chip itself might not cost that much, but it's hard
Speaker 3: sometimes to know for sure how essential it is to
Speaker 3: a particular product. You know, for example, could the car
Speaker 3: be made without that chip? Is there the possibility that
Speaker 3: the manufacturer could substitute for something else, And as Yard noted,
Speaker 3: we worked with our BI colleagues to kind of estimate
Speaker 3: within that range of how essential these chips are. But
Speaker 3: our rough estimate is that chips we know are really
Speaker 3: important to high end products like smartphones and PCs, but
Speaker 3: they also play a really critical role in other major
Speaker 3: industries autos, home electronics, et cetera. And I think there's
Speaker 3: a huge question of not just what happens if those
Speaker 3: products can't get produced, but everything that relies on those products,
Speaker 3: in particular in our more advanced service economies, what that
Speaker 3: means going forward if you can't get new smartphones, if
Speaker 3: you can't get new autos, and if you can't get
Speaker 3: new PC. So I think this is an important figure,
Speaker 3: the ten tillion dollar one and the impact that we're
Speaker 3: estimating to advanced economies, But it is in some ways
Speaker 3: the beginning of the conversation, because there's more work that
Speaker 3: can be done to really refine those numbers and then
Speaker 3: estimate the downstream impact.
Speaker 1: I want to ask a question that actually takes this
Speaker 1: step way back. And you know, as Tracy mentioned in
Speaker 1: the intro, and I didn't know that you wrote a
Speaker 1: thesis almost almost twenty years ago predicting an imminent.
Speaker 2: Now I feel old, old and wrong, sorry, but why now?
Speaker 1: Why are we this seems to go in waves of
Speaker 1: people concerned, why do you like set the stage for
Speaker 1: us of like, why are we at this point again
Speaker 1: where people are seriously running these scenarios and doing the
Speaker 1: math and talking about this and such a high level,
Speaker 1: like what are the conditions that have got this like
Speaker 1: so top of mind, particularly in DC for people who
Speaker 1: think about these things.
Speaker 3: So, I think the first thing I acknowledge is I
Speaker 3: think Tracy was not far off and assessing back in
Speaker 3: the two thousand to two thousand and eight period that
Speaker 3: there was a high risk of a conflict at that
Speaker 3: point in time. The reality is that risk ebbs and flows.
Speaker 3: It's not a particularly necessary or I should not say,
Speaker 3: it's not a particularly or essentially linear process, right. It
Speaker 3: depends on the various factors at play. The two thousand
Speaker 3: to two thousand and eight period was a period of
Speaker 3: really heightened cross street tensions owing to an administration in
Speaker 3: Taiwan that Beijing found to be incredibly problematic and very
Speaker 3: close to crossing its red lines, and there were a
Speaker 3: lot of periods of white knuckling over how, for example,
Speaker 3: Beijing was going to respond to elections back in that
Speaker 3: time period. What I think has evolved since then that
Speaker 3: ads to the level of concern. Are a couple of
Speaker 3: really important drivers of the cross street stability dynamic, and
Speaker 3: the first one is really the military balance, not just
Speaker 3: in this strait, but more broadly so. Since roughly two
Speaker 3: thousand and five to the late twenty tens, China has
Speaker 3: really eclipsed Taiwan militarily. There was a period of time
Speaker 3: where Taiwan still had, even though a smaller force, a
Speaker 3: much more advanced force, and that has really changed in
Speaker 3: recent years with all of China's investments in its military modernization,
Speaker 3: and we see that on a day to day basis
Speaker 3: where China is just overwhelming Taiwanese forces with the amount
Speaker 3: of military planes that's putting into Taiwan's nearby airspace. The
Speaker 3: second piece of that dynamic, though, and arguably one of
Speaker 3: the more impactful ones, is the changing military balance of
Speaker 3: power between the United States and China. US now regards
Speaker 3: China as its pacing challenge, as the military closest to
Speaker 3: matching it, and that's particularly important closer to China, where
Speaker 3: China has a lot of local advantages and obviously for
Speaker 3: Taiwan being you know, just across the street, for China,
Speaker 3: they're right sort of at the center of that. So
Speaker 3: that's an incredibly important shift over the past twenty years
Speaker 3: that I think Kitan's concerned. And then the third part
Speaker 3: is the political dynamics at play Taiwan over the past
Speaker 3: thirty years of becoming a more full fledged democracy. We've
Speaker 3: seen that go in parallel with changing attitudes on the
Speaker 3: island towards its relationship with China and its identity and
Speaker 3: how that relates to that crosstraight relationship. And you look
Speaker 3: at pulling today and the vast majority of Taiwanese identify
Speaker 3: as Taiwanese, not as Chinese, not as Chinese, and Taiwanese Taiwanese.
Speaker 3: And at the same time, support for unification, which was
Speaker 3: never that high but was about twenty percent in the
Speaker 3: nineteen nineties, has dropped to you know, below this year.
Speaker 3: So it's it's an incredibly unpopular idea. The vast majority
Speaker 3: of folks would just prefer the status quo, which is
Speaker 3: de facto separation. And then simultaneous that you have on
Speaker 3: China and the mainland, you know, a growing sense that
Speaker 3: China is a rising power that creates both sort of
Speaker 3: a need and an opportunity to make progress towards these
Speaker 3: historic goals of territorial integrity and unification, which in their
Speaker 3: minds is all leading up to this, you know, national
Speaker 3: rejuvenation of China, and key to that is the idea
Speaker 3: of finally bringing China back together. That's their vision for
Speaker 3: what their end state should look like, and Taiwan is
Speaker 3: one of the most important outstanding elements of that. So
Speaker 3: there's really sort of these divergent forces at play where
Speaker 3: Beijing is becoming much more focused on advancing progress towards
Speaker 3: unification and more concerned about trends in Taiwan which are
Speaker 3: taking the island towards the idea of a very different
Speaker 3: sort of identity than it would share with in a
Speaker 3: unification picture with China.
Speaker 4: I think it's worth mentioning the economic dynamics, which I
Speaker 4: actually think are secondary to the factors Jenny was mentioning.
Speaker 4: But the economics does matter. I think what makes it
Speaker 4: difficult though, is that it doesn't the direction in which
Speaker 4: it matters is not necessarily clear. Right, So when the
Speaker 4: US and China or the PRC itself established diplomatic relations
Speaker 4: in nineteen seventy nine, Chinese GDP was one tenth of
Speaker 4: USGDP right now, it's something like sixty six seventy percent,
Speaker 4: depending on which exchange rates you're using. So you might think, okay,
Speaker 4: so China is much more powerful now, which might make
Speaker 4: it more aggressive, But on the other hand, it has
Speaker 4: more to lose. It's much more integrated into the global economy.
Speaker 4: It is worth keeping in mind, however, that Chinese policy
Speaker 4: Sugi Being's policies very much focused on industrial policy and
Speaker 4: self reliance. In particularly, they're worried about three things. The
Speaker 4: reliance on foreign technologies, which include semiconductors, but it's not
Speaker 4: limited to that, important commodities so things like oil and
Speaker 4: food and other things. And finally, the reliance on the
Speaker 4: US dollar for international finance. And all three of these
Speaker 4: things are Beijing as efforts under way to address with vulnerabilities.
Speaker 4: I'm not saying this is just about Taiwan, but they
Speaker 4: do see themselves as being vulnerable, and there's definitely a
Speaker 4: geopolitical rationale for why they're worried about those things. And
Speaker 4: the more powerful and essentially insulated or robust, let's say
Speaker 4: the Chinese economy and financial sector becomes, you might think
Speaker 4: they might have more confidence or less restraint as that
Speaker 4: single variable is concerned. And then of course there's the
Speaker 4: issue of Taiwan semi conductors, which is kind of like
Speaker 4: in some ways a gun pointing in both directions, right,
Speaker 4: because yes, Taiwan makes most of the advanced semi conductors,
Speaker 4: but those primarily are going into inputs throughout Asia, including China,
Speaker 4: and so you could debate whether it's deterrence or not,
Speaker 4: because it could also mean that that Beijing believes that
Speaker 4: other economies, particularly non US advanced economies, are less likely
Speaker 4: to intervene for those reasons. But it is part of
Speaker 4: the conversation.
Speaker 2: Actually, this reminds me of something I wanted to ask you,
Speaker 2: which is, you know, it's hard enough to model these
Speaker 2: types of economic scenarios because there are so many different
Speaker 2: factors involved, but also one of the things that makes
Speaker 2: it difficult is you're trying to model the response to
Speaker 2: whatever is happening. And so I'm curious, when you're looking
Speaker 2: at something like the cost ten trillion dollars or variations
Speaker 2: of it, depending on you know, the exact nature of
Speaker 2: the action, how much of that cost depends on or
Speaker 2: is affected by either the wes's ability to ramp up
Speaker 2: things like semiconductor manufacturing or China's ability to I guess,
Speaker 2: offset a bunch of resources being diverted to war.
Speaker 4: So we modeled one year shocks. We actually internally were
Speaker 4: looking at and debating doing five year shocks. The five
Speaker 4: year shocks, the confidence intervals get much much wider, and
Speaker 4: it's because you have to make bigger assumptions as to whether,
Speaker 4: for example, TSMC's production can move elsewhere, would private industry
Speaker 4: have the resources and middle of the war, for example,
Speaker 4: to get funding to say, open a fab or whatever
Speaker 4: it's necessary. I think with a one year scenario, it's
Speaker 4: it's it's still you know, speculative, but it's still difficult,
Speaker 4: but it's still it's more plausible, which is that the
Speaker 4: economy in some cases could rely more in existing inventories
Speaker 4: of things. You would be more likely to see an
Speaker 4: immediate shocked production safe for things like autos or electronics.
Speaker 4: But if you're saying, okay, what about five years into this,
Speaker 4: how much of that is back online? Then it gets
Speaker 4: more speculative. But that is part of it. Another part
Speaker 4: that I don't think we modeled directly is sort of
Speaker 4: wartime fiscal impacts. So you could imagine particularly on the
Speaker 4: Chinese side, a lot of expenditures going into you know,
Speaker 4: wartime measures, defense, et cetera. On the other hand, if
Speaker 4: you assume the conflict is let's say a few months
Speaker 4: or six months, depending on what your parameters are, it's
Speaker 4: probably not going to look like World War Two. It's
Speaker 4: not going to be five years of ramping up and
Speaker 4: coming back, in part because what we're talking about in
Speaker 4: each stream case is from a US perspectively, it's mostly
Speaker 4: a naval and air war, and the US defense industrial base,
Speaker 4: at least in my view, doesn't really have the capacity
Speaker 4: to replenish as force as quickly, so it's kind of
Speaker 4: a one and done in a very powerful way. There
Speaker 4: are others, i should say, in DC and think tank
Speaker 4: land that talk about the potential for a long war.
Speaker 4: I find that from a US perspective not all that credible.
Speaker 1: Right now, we are in a period in which there
Speaker 1: is a lot of talk about poor Chinese economic growth. Obviously,
Speaker 1: as your model shows, and just for any common sense,
Speaker 1: a war, how or any version of a war, would
Speaker 1: be incredibly domestically costly at a time when already there's
Speaker 1: concerns about growth and frustration with the Chinese economic model,
Speaker 1: How does that play into Beijing's thinking or Hijinping's thinking
Speaker 1: about doing something at some point, the state of the
Speaker 1: domestic economy and the fact that any activity maybe you
Speaker 1: would potentially reunify China and Taiwan, but would be extremely
Speaker 1: disruptive to all of the factories in China that rely
Speaker 1: on Taiwanese inputs.
Speaker 4: The narrative that some people will propose is that over time,
Speaker 4: if we assume the Chinese economy is weakening substantially, then
Speaker 4: the Chinese leadership will be more inclined to sort of
Speaker 4: pivot to nationalists concerns as a distraction. But it's worth
Speaker 4: noting at least two things. One, I don't think they're
Speaker 4: there yet. I don't think they think they're there yet, right.
Speaker 4: I don't believe Xi Jinping is all that pessimistic about
Speaker 4: Chinese economic growth. Is new Year's speech and other indicator
Speaker 4: suggests that he's still fairly optimistic. You could debate whether
Speaker 4: he ought to be, but I think that's basically right
Speaker 4: in terms of his view. The second is that I
Speaker 4: think we are both quite skeptic of the claim that
Speaker 4: some people make that China might pursue a quote diversionary war,
Speaker 4: and the reason for that is that this would not
Speaker 4: be diversionary, it would be all encompassing, right, And so
Speaker 4: do you really want to bet your house on a distraction?
Speaker 4: And the answer is no. But in the longer run,
Speaker 4: I think there is a credible argument that if the
Speaker 4: Chinese economy is weakening, that the government might pivot to
Speaker 4: other priorities. And in fact, we can observe they're already
Speaker 4: pivoting to national security. Right. There's there's a greater emphasis
Speaker 4: on national security and self sufficiency now in Chinese policy
Speaker 4: than it was say five, certainly ten years ago, and
Speaker 4: so over time it might be the case that it
Speaker 4: changes their relative willingness, but at the end of the day,
Speaker 4: they would know how cataclysmic this could possibly be. And
Speaker 4: our general view, and Jenny might want added to this,
Speaker 4: is that she think probably doesn't have a specific timeline
Speaker 4: in terms of saying, on you know, twenty twenty eight
Speaker 4: we go. It's more the timelines People talk about it
Speaker 4: more about military readiness, which is not the same thing.
Speaker 4: And ultimately, if I had to bet in which ness
Speaker 4: we are if this ever does happen and be based
Speaker 4: on perceived provocations, or crossing of red lines. It wouldn't
Speaker 4: just be sort of a unilateral poof on the blue.
Speaker 3: Yeah. And I think just to add on to that,
Speaker 3: Beijing's stated preference is still for peaceful unification, and I
Speaker 3: think there's reasons to believe that that's true. One I
Speaker 3: think they assess, as Yard was indicating the military readiness issue,
Speaker 3: they haven't reached that milestone yet. And in fact, some
Speaker 3: of the reporting that our news colleagues have done on
Speaker 3: recent purges of senior military leaders, I think reaffirms the
Speaker 3: idea that there might still be concerns about corruption and
Speaker 3: the impact that that could have on readiness and more broadly,
Speaker 3: this would be an incredibly risky and difficult campaign for
Speaker 3: any military to undertake, you know, particularly if there's a
Speaker 3: risk of the United States getting involved. That's no small
Speaker 3: gamble to make, and it's not one that Chinese leaders
Speaker 3: would take lightly. I think to Gerard's point, it's more
Speaker 3: question in their mind, I think of whether or not
Speaker 3: their hand is forced if they would need to take
Speaker 3: that action to prevent Taiwan's permanent separation, which to them
Speaker 3: is it is hard to exaggerate the importance that that
Speaker 3: plays in their calculus and the costs that they would
Speaker 3: be willing to pay to prevent that from happening. I
Speaker 3: think if we were in a world in which they
Speaker 3: felt that that was necessary to take action, even if
Speaker 3: they didn't think they were militarily ready for it, the
Speaker 3: economic considerations would probably not be a driving factor in
Speaker 3: their calculus. I think what would be the overarching priority
Speaker 3: would be preventing that from happening at all costs and
Speaker 3: at all risks. So it really depends on I think
Speaker 3: their perspective of whether or not that's essential, and the
Speaker 3: economic considerations I think are more secondary in that sense.
Speaker 2: So the obvious parallel here would be Russia's invasion of
Speaker 2: Ukraine in the sense that it was something that was,
Speaker 2: you know, at once long discussed, but also very unexpected
Speaker 2: at that particular moment in time, And of course there
Speaker 2: had also been a discussion of why would Russia ever
Speaker 2: do this given the economic costs involved and the risk
Speaker 2: of sanctions and things like that. How has the experience
Speaker 2: of Russia's invasion of Ukraine affected your thinking about Taiwan
Speaker 2: and China if it has.
Speaker 4: It all so, Genny, you can jump in terms of
Speaker 4: the Chinese perspective. But I'll just say kind of a
Speaker 4: more standback perspective based on some of the work I
Speaker 4: was doing previously at CSIS the think tank. One observation
Speaker 4: is that the internal estimates in Russia of how bad
Speaker 4: it was going to be for their economy were actually
Speaker 4: worse than things ended up being. In other words, it
Speaker 4: wasn't the case that Putin was misled in terms of
Speaker 4: the economic pain. He actually thought it was going to
Speaker 4: be worse than it was.
Speaker 5: Wow.
Speaker 4: And yet he still went, so where was the delusion.
Speaker 4: The delusion was on the military side. He thought that
Speaker 4: they were going to roll in the Kiev in two
Speaker 4: weeks or whatever, and then that they could present the
Speaker 4: world with the beta complet and eventually they we could
Speaker 4: dial back the economic sanctions or whatever. I actually think that,
Speaker 4: you know, there are definitely, you know, government versus private
Speaker 4: sector blind spots, but in general, I think a lot
Speaker 4: of people, including investors, might underweight nationalist consideration considerations more
Speaker 4: than they should. And even believing that the Russian economy
Speaker 4: was going to take a massive shock, he still decided
Speaker 4: to roll the dice. And that, to me is is
Speaker 4: not necessarily indicative of what China would do she jimping
Speaker 4: is not Putin. I think Putin is more of a
Speaker 4: gambler in some ways, and probably is has A has
Speaker 4: a less sophisticated apparatus beneath him. But it is telling
Speaker 4: that that could still happen yea.
Speaker 3: And I think, just to add on on Beijing's perspective,
Speaker 3: I think it's a mixed bag. I think, you know,
Speaker 3: on one hand, the fact that the war is approaching
Speaker 3: it's to year anniversary, when from the outset it was
Speaker 3: largely expected that Russia's massive army would be able to
Speaker 3: pretty quickly overwhelm Ukrainian forces, especially with a surprise attack,
Speaker 3: is probably a cautionary tale in terms of how much
Speaker 3: more complicated invasions can be. And Russia's invasion again is
Speaker 3: a land invasion, which is a very different sort of
Speaker 3: operation than an amphibious one. In some ways, the hill
Speaker 3: is much higher to climb with the latter, so I
Speaker 3: think in that respect it's a cautionary tale. On the
Speaker 3: other hand, the war is not yet over, and in
Speaker 3: particularly in this moment in time, where there's a lot
Speaker 3: of questions about whether Western support for Ukraine will be
Speaker 3: sustained and what the end state of the war might
Speaker 3: look like it's not entirely a case closed for Beijing
Speaker 3: in terms of whether or not a conflict is something
Speaker 3: that they can endure. As Gerrard noted, the conflict has
Speaker 3: cost Russia less in terms of international sanctions in a
Speaker 3: probrium than Moscow likely anticipated internally, and they are weathering
Speaker 3: the storm probably better than expected, which might in some
Speaker 3: way provide a little bit of confidence to Beijing, which
Speaker 3: has in many ways more economic advantages than Russia does,
Speaker 3: and might bet on the fact that Western countries might
Speaker 3: be less willing to sanction China to the extent to
Speaker 3: which they've sanctioned Russia.
Speaker 1: And I just have one last quick question. We're running
Speaker 1: out of time here, but what is the consensus on
Speaker 1: what the US would do in some sort of some
Speaker 1: version of an attack? You know, what's the policy? And
Speaker 1: then like, you know, suppose the US didn't really do anything,
Speaker 1: and you think about ramifications. Do you think about variations
Speaker 1: where there's spillovers in which are other partners or other
Speaker 1: friends in the region where we have military bases, I
Speaker 1: don't know, freak out, get anxious, and that it's sort
Speaker 1: of like dominoes in some way depending on the sort
Speaker 1: of confidence that other countries have in the US security umbrella.
Speaker 3: There's a lot of debate about what the United States
Speaker 3: might do, and that's in part due to intentional US
Speaker 3: policy to make that ambiguous we call it strategic ambiguity,
Speaker 3: about whether or not the United States would actually come
Speaker 3: to Taiwan's defense. If we look though at statements President
Speaker 3: Biden has made about how he personally would act in
Speaker 3: that situation, I think that's increased folks sense that the
Speaker 3: United States would get involved in some way. From my perspective,
Speaker 3: I think one Beijing probably has to assume from a
Speaker 3: military planning perspective that they would be dealing with some
Speaker 3: sort of US intervention because that is a risk that
Speaker 3: they can't afford to not calculate, given how important and
Speaker 3: critical it could be to the outcome. The second piece
Speaker 3: is I think it really in large part might depend
Speaker 3: again on variables like is there any warning before an attack,
Speaker 3: what is the duration of the attack, Because it's not
Speaker 3: just a question of intent, but also process in time
Speaker 3: to marshal a reaction to it. You know, there there
Speaker 3: is a process lead out in the Taiwan really Act
Speaker 3: for the President to consult Congress before officially determining what
Speaker 3: to do. And then there's also the tyranny of geography
Speaker 3: when it turns to where US forces are located in
Speaker 3: their ability to respond to a conflict that is so
Speaker 3: close to China, And then to your question about the
Speaker 3: role that other countries in the region might play in
Speaker 3: terms of a conflict, again, I think that's going to
Speaker 3: really depend quite a bit on what Washington does, but
Speaker 3: also on what Beijing does. A lot of the wargames
Speaker 3: that we have looked at have studied the possibility that Beijing,
Speaker 3: in an effort to try and keep the US out
Speaker 3: of the war, might preemptively strike US forces in the region,
Speaker 3: including some of our bases, and that could inadvertently draw
Speaker 3: not just the United States but some of the partners
Speaker 3: that host those bases into a conflict. So a lot
Speaker 3: of this is very much variables at play, and that's
Speaker 3: why these wargames can be a really valuable way of
Speaker 3: studying potential scenarios and their outcomes, because we might not
Speaker 3: be able to predict the future, but we have at
Speaker 3: least a good sense of what the key variables would
Speaker 3: be and what the future could look like depending on
Speaker 3: how those turn out.
Speaker 4: I was going to add in terms of sanctions, So
Speaker 4: this is something in DC that has talked about a
Speaker 4: lot over the past two years, is would the US
Speaker 4: sanctioned China in any degree like it has with Russia?
Speaker 4: And my basic view is that in a conflict, the
Speaker 4: US probably would. People will say, but isn't China so
Speaker 4: much bigger therefore wouldn't be much more painful? Yes, But
Speaker 4: the question there is our US force is directly involved.
Speaker 4: If the US is an active naval and ara war
Speaker 4: with China, I think that the political wherewithal would be there.
Speaker 4: But maybe the more important point, at least in the
Speaker 4: early days is I do not believe the US and
Speaker 4: its allies will sort of preemptively use massive sanctions unless
Speaker 4: they're very confident that a war is imminent and therefore
Speaker 4: that you know, and Beijing would have already planned for that.
Speaker 4: So I actually don't think of sanctions as being a
Speaker 4: very useful media to turn, but in a conflict they
Speaker 4: probably would be used very quickly.
Speaker 2: We are recording this before the Taiwan elections, and by
Speaker 2: the time this episode comes out, we should have a result.
Speaker 2: What are you looking out for? What are the particular
Speaker 2: points or developments that we should be watching.
Speaker 3: I think the key thing on everyone's mind is going
Speaker 3: to be, well, first of all, this is an incredibly
Speaker 3: close race, and there's probably the closest race that we've
Speaker 3: seen actually in several election cycles. So there's a lot
Speaker 3: of questions about what the results on Saturday night are
Speaker 3: going to be. That's obviously the front of folks minds.
Speaker 3: And then I think the second immediate question after that
Speaker 3: is how does Beijing react to it? And already we've
Speaker 3: seen signals from China indicating that elements of their approach
Speaker 3: to Taiwan are very much going to be shaped by
Speaker 3: the election's outcome. There have been some senior officials kind
Speaker 3: of warning and not so subtle terms that this is
Speaker 3: kind of a key election for Taiwanese voters to think
Speaker 3: hard about what choices that they want to make. And then,
Speaker 3: in more specific terms, a lot of connections between China's
Speaker 3: ongoing investigation to taiwan trade practices and measures coming out
Speaker 3: of that that restrict Timanes sex sports that they've signaled
Speaker 3: they'll continue to take in the wake of the election,
Speaker 3: depending on the policies of the new government.
Speaker 1: Jennifer Welchin, Gerard de Pippo. Thank you both so much
Speaker 1: for coming on odd lots fascinating conversation on a topic
Speaker 1: that I definitely think we will be doing more on
Speaker 1: in the opportunity.
Speaker 5: Thank you for having us, Thank you for having us.
Speaker 1: Tracy, I thought that was really fascinating. Well, I'll just
Speaker 1: say I found it really helpful because there is a
Speaker 1: lot of noise about, you know, the risk of some
Speaker 1: sort of invasion or attack or blockade, but actually sort
Speaker 1: of hearing about well, why now, why is there so
Speaker 1: much talk now on how do you even attempt to
Speaker 1: sort of quantify these risks? I thought they were a
Speaker 1: book great at explaining that.
Speaker 2: I learned a lot. The point about Russia actually estimating
Speaker 2: that the economic costs of invading Ukraine were going to
Speaker 2: be higher than they turned out to be. I thought
Speaker 2: that was really really interesting.
Speaker 1: Absolutely, And in fact, Gerard made a really interesting comment
Speaker 1: there that about investors sort of ignoring the nationalist impulse
Speaker 1: right totally, and so this idea that everyone's like, well,
Speaker 1: it wouldn't work. They'd lose a lot of money, they'd
Speaker 1: lose a lot of jobs, they wouldn't be able to
Speaker 1: sell as much oil. Therefore, it makes no sense, and
Speaker 1: I get why, Like that's a classic investor thinking, right,
Speaker 1: that it's like always going to come down to a
Speaker 1: profit and laws, but the idea that no, like actually nationalism,
Speaker 1: the nationalist impulse is a real factor in decision making
Speaker 1: and it's not all sort of strict materialism.
Speaker 5: I think is.
Speaker 1: Probably a good thing in general for investors to appreciate
Speaker 1: about both politics and geopolitics.
Speaker 2: Of course, Like it just seems so obvious to me
Speaker 2: that like, not everyone is ruled by pure economic considerations.
Speaker 2: But on the other hand, there are plenty of them
Speaker 2: at play in the China Taiwan situation. As that ten
Speaker 2: trillion dollar prist tag actually indicates the other thing I learned.
Speaker 2: I'm just looking at the big take that was published
Speaker 2: based on this report. I didn't know that Bloomberg has
Speaker 2: like a Taiwan stress index. I don't know if stress
Speaker 2: is the right way of putting it, but basically to
Speaker 2: see how intense the saber rattling is on this issue
Speaker 2: at any particular moment, and.
Speaker 1: It has it includes measures like exercises that flyovers into
Speaker 1: Taiwanese airspace and stuff like that, so really interesting. Everyone
Speaker 1: should go read that. It's on bloomberg dot Com the
Speaker 1: results of their work. A war over Taiwan is a
Speaker 1: ten trillion dollar risk to the global economy. It's one
Speaker 1: of the cool things about working at Bloomberg is like
Speaker 1: I'm always you know, I sort of pinch myself working
Speaker 1: here because how many different experts and sophisticated people who
Speaker 1: understand this stuff, the bottlers who work on these different
Speaker 1: models went into this, so it's really quite a project,
Speaker 1: I thought. The other interesting thing Gerard made the point
Speaker 1: about a war, were it to happen, would not likely
Speaker 1: be a diversionary war, and the idea, yeah, oh, it's
Speaker 1: not gonna be one of these things where they would
Speaker 1: do it because people morale has banned, the economy is bad,
Speaker 1: so therefore we have to do something that actually it
Speaker 1: would be such an all encompassing well be fair, that
Speaker 1: it can't just be sort of yeah.
Speaker 2: Also Jenny's point about the blockade, so I remember, you
Speaker 2: know two I guess two years ago, now that was
Speaker 2: sort of seen as the foremost possibility that China could
Speaker 2: do something, but it wouldn't do an outright invasion because
Speaker 2: that was so like risky and I guess would up
Speaker 2: the stake. So much. But her point that maybe now
Speaker 2: a blockade is basically seen as having like all the
Speaker 2: downsides of outright military invasion in the sense that it
Speaker 2: could bring Western allies into the conflict, but none of
Speaker 2: the upside because it could be prolonged and you know,
Speaker 2: drawn out, and maybe at this point it's better to
Speaker 2: just do something quickly. That kind of shows how far
Speaker 2: things are. Yeah, that kind of shows how much things
Speaker 2: have changed just in a couple of years. And again
Speaker 2: I suspect a lot of that comes from the Russia
Speaker 2: Ukraine example.
Speaker 1: I want to do more this year for sure on
Speaker 1: the sort of a defense industrial base in the US
Speaker 1: and China. And you know, you see these stories. Of course,
Speaker 1: there was the recent Bloomberg report about how the corruption
Speaker 1: in the Chinese military and these missiles that were fired
Speaker 1: were actually filled with water and or not as advanced
Speaker 1: as thought. But on the other hand, you know, we
Speaker 1: certainly have in the US all kinds of issues with
Speaker 1: our defense procurement and projects that get delayed forever and
Speaker 1: overspending on certain things. So I think this is an
Speaker 1: area of for sure more episodes to come.
Speaker 2: We should start wargaming, Joe. We need to get some dice,
Speaker 2: it started rolling back.
Speaker 1: I did not really realize that it was kind of
Speaker 1: like in the movies and they actually have these dice
Speaker 1: and maps and boats on a map. And yeah, it's
Speaker 1: we need to have.
Speaker 2: Like an Odd Thoughts headquarters where we have a bunch
Speaker 2: of maps. Oh yeah, let's do it with little like
Speaker 2: figurines of various superpowers and we start moving them around
Speaker 2: the board.
Speaker 1: These are the games that you play with your friends
Speaker 1: right in your house in Connecticut, right, all these all
Speaker 1: these sort of gigantic board games.
Speaker 2: Right, sometimes we play board games.
Speaker 4: That's true.
Speaker 2: Shall we leave it there.
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the Odd Loots podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow Jennifer Welch, She's at that Jenny Welch. Gerard de Pippo,
Speaker 1: he's at GDP nineteen eighty five. Follow our producers Carman
Speaker 1: Rodriguez at Carman Arman, dash Ol Bennett at Dashbot and
Speaker 1: kel Brooks at kel Brooks. Thank you to our producer
Speaker 1: Moses on them for our Odd Lots content. Go to
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Speaker 2: And if you enjoy odd Lots, if you think that
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