The New World Order Is Here – Peter Zeihan (YouTube Video Transcript)

(00:00:00) Your YouTube transcript will appear here (00:00:00) America doesn't win the next era because (00:00:02) it's brilliant. It wins because everyone (00:00:05) else is screwed. What's that mean? (00:00:08) Doesn't exactly fit on a bumper sticker, (00:00:10) but yeah, that broadly works. Uh, you (00:00:12) got two big things that are going on. (00:00:13) Uh, number one, in the globalized world, (00:00:16) it's all about who you can access (00:00:18) safely. And in the Western Hemisphere, (00:00:20) we really don't have to worry about any (00:00:22) security threats from a trade point of (00:00:23) view. So, people always talk about, oh, (00:00:25) if the US and China get into a war, (00:00:27) won't that be bad for X, Y, or Z? say I (00:00:29) don't mean to suggest it would be a (00:00:30) piece of cake, but that the Chinese are (00:00:32) dependent on trade and we're not. Uh (00:00:34) it's really that simple. And if we can (00:00:35) nail down Canada and Mexico in a (00:00:38) productive relationship, you know, we (00:00:39) used to call that NAFTA or NAFTA 2. (00:00:41) We're now having second thoughts. Uh (00:00:43) that's half the hard work right there. (00:00:45) Uh in addition, we export food, we (00:00:48) export energy, the Chinese import both, (00:00:50) biggest in the world in fact. Uh and so (00:00:52) maintaining supply chains for us is an (00:00:55) issue of building the industrial plant. (00:00:57) And while you can't just wave a magic (00:01:00) wand and make that happen overnight, (00:01:02) we've done this several times before. (00:01:03) Every country on the planet has. Of (00:01:05) course, we can do it again. It would (00:01:07) just be nice if we started sooner rather (00:01:09) than later. Uh the other piece is that (00:01:11) the Chinese stopped having babies about (00:01:13) 45 years ago, and they're now on the (00:01:15) verge of running out of 50-year-olds, (00:01:17) and there is not an economic model that (00:01:19) humans have yet to dream up that will (00:01:22) work with where they will be (00:01:24) demographically in less than 10 years (00:01:25) time. So, we are living in the (00:01:28) equivalent of like 2006 subprime where (00:01:31) everyone's like all ooh and ah and it's (00:01:33) all about to go tits up. [laughter] (00:01:38) uh appropriately apocalyptic from you uh (00:01:41) to start. Um the stuff about China is is (00:01:46) that a challenge of just geography (00:01:51) uh vyro biome top soil just sort of the (00:01:56) the constitution of where they are is (00:01:58) that that's sort of one of the (00:02:00) fundamental problems. (00:02:01) >> All of that all of that is a legitimate (00:02:04) concern. uh the river where most of them (00:02:06) live on uh the Yellow isn't navigable. (00:02:08) They have never been able to use it for (00:02:09) trade. So, they've never internally (00:02:10) traded among themselves. Uh the one (00:02:13) river they have that is navigable, the (00:02:14) Yang Sea, has always been an (00:02:16) independent, well, I should say always, (00:02:17) but often been a political uh an (00:02:20) independent political entity going back (00:02:22) for 3,000 years of Chinese history. And (00:02:24) down in the south and the tropics where (00:02:25) you've got Hong Kong, you've got (00:02:26) citystates on little enclaves of flat (00:02:28) land that have always looked to the (00:02:29) outside world rather than the Chinese. (00:02:32) Uh the soil sucks. uh the northern part (00:02:35) where 70% of the population lives, it's (00:02:37) lowest soil in a drought zone. So if (00:02:41) anything ever happened to logistics or (00:02:43) distribution, what would go down in (00:02:45) northern China would be what has gone (00:02:47) down in northern China 27 times before (00:02:51) and that's civilizational collapse. If (00:02:53) we were talking about any country that (00:02:55) had fewer people than the Chinese have (00:02:58) always had, you know, that would just be (00:02:59) the end of them. just that there have (00:03:01) always been enough Chinese in the past (00:03:02) to pick up the pieces and move forward (00:03:04) on the other side of the break. But that (00:03:07) requires you having children. And so (00:03:10) this really is an end to the concept of (00:03:13) China and the concept of even the Han (00:03:15) Chinese because we're in a situation now (00:03:17) where where probably they have more (00:03:20) people over age 54 than under. And I'm (00:03:23) sorry that just doesn't work. Uh and (00:03:25) very soon it will be over. That's before (00:03:28) you consider the broader geography of (00:03:30) China versus the rest of the world. You (00:03:32) got the first island chain off the (00:03:33) coast. So the Chinese have never ever (00:03:35) ever been able to be a global commercial (00:03:38) power except when the United States when (00:03:41) it created the global system told (00:03:42) everybody that they couldn't bring guns (00:03:44) to trade talks. And that one decision (00:03:47) that we made allowed the Chinese to play (00:03:50) on the global field in a way that they (00:03:51) just never could until that point. And (00:03:53) so lo and behold, this is the one era of (00:03:55) Chinese history where they're unified (00:03:57) and successful. (00:03:59) >> Tell me more about the guns to the (00:04:02) meetings rule and how that helped. (00:04:04) >> Sure. So before World War II, it's a (00:04:07) good break. Um, we basically had an (00:04:09) imperial system where if you wanted (00:04:11) links to resources and markets and (00:04:14) populations that were outside of your (00:04:16) home country, you had to build a navy (00:04:18) and you went and took it. You built your (00:04:20) empire. And those empires attempted to (00:04:22) not trade with one another if they could (00:04:24) help it. They just traded within their (00:04:26) own network. Uh that model generated (00:04:31) what we like to call history and it led (00:04:34) to World War II when all the empires (00:04:36) crashed and burned at the same time (00:04:37) fighting for dominance. Well, at the end (00:04:40) of World War II, the only navy that was (00:04:42) left that was worthy of the name was the (00:04:44) American Navy. And we had never been a (00:04:47) trading power because we more or less (00:04:48) had a continent to ourselves and we're (00:04:50) still digesting the continent. So we had (00:04:54) this idea that we will use our navy to (00:04:56) protect everyone and we will allow (00:04:58) everyone to trade with anyone else and (00:05:00) we will allow our market to be open to (00:05:02) your goods if if in exchange we get to (00:05:04) write your security policies so we don't (00:05:06) get another conflict like this again. (00:05:08) And so one of the things that people (00:05:10) want to break down the trade (00:05:11) relationships and say that it's unfair (00:05:12) for the United States, what they forget (00:05:14) is it was supposed to be unfair to the (00:05:17) United States from an economic point of (00:05:18) view. We bribed up an alliance. And if (00:05:22) you remember your history, it wasn't (00:05:24) just Britain and Germany and Japan and (00:05:26) Korea and Taiwan and Italy that were (00:05:28) allies during the Cold War. It was (00:05:31) China, too, because it was all about (00:05:33) boxing in the Soviets. And it worked (00:05:36) beautifully. Uh the idea that this (00:05:39) should be reccalibrated in a post cold (00:05:42) war environment, perfectly reasonable, (00:05:44) but if you don't want to pay people to (00:05:47) be on your side, they need another (00:05:50) reason to be on your side. And so what (00:05:53) we're seeing in American politics right (00:05:55) now is this kind of um cognitive (00:05:57) disconnect where we [snorts] still want (00:05:59) everyone to do everything we say, (00:06:02) but we also don't want our market open. (00:06:05) And that is not a viable long-term plan. (00:06:08) >> Okay. So, Chinese demographic collapse. (00:06:11) You've said China will be gone in 10 (00:06:13) years. China as we currently understand (00:06:15) it. Yeah. There'll still be some Han. (00:06:17) Give it 50 years there might not be. (00:06:20) >> Uh so, China very populous. Uh people (00:06:23) would might say, well, if I just look at (00:06:25) the numbers, you said before that (00:06:27) numbers were the solution last time. (00:06:29) There's more numbers now. I'm going to (00:06:31) guess that the issue is that the numbers (00:06:32) are trending in the wrong direction. (00:06:33) that it wasn't a good so bad. So bad. (00:06:36) [laughter] (00:06:37) >> So um (00:06:40) since I talked to you last there there (00:06:42) seems to be this reckoning that's going (00:06:43) on in the statistical community in can (00:06:45) in I said Canada. Where'd that come (00:06:46) from? Sorry you picked me up right after (00:06:49) doing another project in China. Uh the (00:06:52) issue appears to be that um (00:06:56) they now believe the stata stat (00:06:57) statisticians now believe that the local (00:06:59) and regional governments have been lying (00:07:01) about their demographic data for over 25 (00:07:03) years. Uh and so after let me back up um (00:07:07) after Tianaan Square you know 10,000 (00:07:09) people killed by tanks in the in (00:07:11) downtown Beijing the Chinese Communist (00:07:13) Party is like well that was no fun (00:07:15) whatsoever. Let's try to not ever have (00:07:17) to do that again. Uh, one of the ways (00:07:19) we're going to make sure that happens is (00:07:20) we discovered that, you know, there were (00:07:22) kind of two kinds of protesters. You had (00:07:24) the white collar workers that just made (00:07:26) signs and they were really easy to run (00:07:28) over with tanks. And then you had the (00:07:30) ones that were kind of scary that (00:07:32) brought wrenches and guns. So, you had (00:07:34) white collar and you had blue collar. (00:07:36) So, why don't we move our entire economy (00:07:37) from a blue collar economy to a white (00:07:39) collar economy? Problem solved. Because (00:07:42) white collar folks live in high-rise (00:07:43) apartments. You can cut off their water. (00:07:45) You can bolt them into their house. You (00:07:46) know, there's lots of ways you can deal (00:07:48) with white collar protesters. Blue (00:07:50) collar a little different. So, they (00:07:52) started advancing their STEM work. They (00:07:56) started secondary and tertiary education (00:07:58) systems. And, you know, well, this (00:08:00) wasn't a stupid plan. Uh, we can (00:08:03) critique how successful the transition (00:08:05) was and why they were a manufacturing (00:08:07) economy and still are and really weren't (00:08:09) ready for that kind of fast transition. (00:08:11) Different topic. But the thing is when (00:08:14) you go to primary school and secondary (00:08:17) school and tertiary school, the first (00:08:19) time you pay taxes is typically when (00:08:20) you're 21, 22, or 23. So there's a (00:08:24) delayed gratification here, which as (00:08:26) Americans like to say, the Chinese have (00:08:27) no problem with. It's false, but (00:08:30) whatever. So (00:08:32) the first big crop of these new white (00:08:36) collar workers who were supposed to be (00:08:37) working at high paid jobs and paying (00:08:39) lots of taxes that was supposed to (00:08:42) manifest in calendar year 2019 (00:08:45) but then there was co and in China co (00:08:48) lasted a lot longer and they really (00:08:50) didn't get recovery until 2023 maybe (00:08:54) even early in 2024 and so they didn't (00:08:56) get any good data and then when they did (00:08:58) get the data they're like whoa (00:09:00) tax receipts are down. That's the (00:09:02) opposite of what's supposed to be (00:09:03) happening. And when the statistitians in (00:09:06) Shanghai went and looked back at (00:09:08) everything like, okay, here's the (00:09:10) problem. In a first world country, there (00:09:12) are dozens, hundreds of touch points (00:09:14) where the government becomes convinced (00:09:16) that you're a real person. You know, you (00:09:19) your mom goes to neonatal, you're born, (00:09:21) every immunization, metriculation for (00:09:23) every grade level, you pay taxes, you (00:09:26) you get your driver's permit, you get (00:09:28) your driver's license. There's thousands (00:09:30) throughout your lifetimes. The first (00:09:32) three in China, not birth because until (00:09:35) recently, not all Chinese were born in (00:09:36) hospitals. The first one was when you (00:09:38) get a single battery of immunizations at (00:09:40) some point around 6 months old. What (00:09:42) they discovered was that the doctor who (00:09:44) was giving the shots got paid per shot. (00:09:46) So the doctors lied about the number of (00:09:48) shots that they got. [snorts] (00:09:49) The second point is when you enroll in (00:09:52) kindergarten. Well, local governments (00:09:54) get subsidies from the federal system (00:09:56) based on how many students metriculate. (00:09:59) So the local government's lied about (00:10:01) that. The third point is when you pay (00:10:03) pay national taxes for the first time, (00:10:04) which is typically 17, 18, 19, unless (00:10:08) you switch to tertiary education, then (00:10:09) it's 21, 22, 23. So, you get to calendar (00:10:14) year 2024 (00:10:16) and the Chinese realize that the (00:10:19) children that they thought started to be (00:10:21) born in the late 1990s were never born (00:10:25) at all. (00:10:27) And so the question they have and (00:10:29) there's no way to get the data is um did (00:10:33) we overount our population by 100 (00:10:35) million people or did we overount by 300 (00:10:40) million people (00:10:42) or more? (00:10:43) So even according to the official (00:10:45) statistics, China is no longer the most (00:10:47) populous country. That's India. Has been (00:10:48) for a while. Probably has been since (00:10:50) about 2006. The Chinese are now publicly (00:10:54) admitting that their birth rate has been (00:10:56) lower than the United States's since (00:10:58) 1991 (00:11:00) And it looks like it might be (00:11:01) significantly worse than that. So yeah, (00:11:04) 10 years, high confidence. (00:11:07) Wow. Um, since the last time that we (00:11:10) spoke, AI has taken on even more of an (00:11:13) important role. Uh, yeah, I'm aware. I'm (00:11:16) aware. [snorts] like just I think one of (00:11:19) the (00:11:21) it's it's an odd uh it's not happening (00:11:23) and it's good that it is uh sort of (00:11:26) scenarios that happens especially when (00:11:28) it comes to birth rate decline is (00:11:30) whether it's we don't need more people (00:11:31) on the planet we're a scourge on the (00:11:33) earth fragile world hypothesis climate (00:11:36) change in future it doesn't matter in (00:11:38) any case capitalism life's miserable and (00:11:40) I don't want kids or young people to be (00:11:42) born into (00:11:42) >> everyone's trying to shoehorn it into (00:11:44) their existing world view (00:11:45) >> correct yeah yeah the demand for answers (00:11:47) outstrips their supply. So they (00:11:49) repurpose old answers into a new (00:11:51) problem. Um, one thing that I am (00:11:53) interested about is uh some of the (00:11:57) losses in productivity uh being offset (00:12:01) by increases in efficiency enabled (00:12:02) through robotics and AI. China seems to (00:12:05) be pushing pretty hard on this stuff and (00:12:09) not bad at stealing AI technology when (00:12:13) push comes to shove and repurposing it. (00:12:14) I mean honestly it's it's software. It's (00:12:16) really easy to steal. You just need a (00:12:18) jump drive. (00:12:19) >> Yeah. Um (00:12:21) how much could that be a lifeline uh for (00:12:23) somebody like China and then also for (00:12:25) the rest of the world when we think (00:12:26) about demographic decline uh more (00:12:28) broadly? (00:12:29) >> Sure. Well, let's start with the (00:12:30) obvious. Um 80% of applications for AI (00:12:34) that I have seen and the other 20% are (00:12:35) not a different category. They're just (00:12:38) in in flux. But 80% I've seen it's not (00:12:40) about where we have the work shortage. (00:12:42) It's about white collar workers. It's (00:12:44) about making white collar workers either (00:12:45) redundant or more productive. And if (00:12:48) you're into some degree of data (00:12:50) coalation and assessment, uh you're in (00:12:54) real trouble. Uh if you have the brain (00:12:57) power to take the data in front of you (00:12:58) and make something of it, you're (00:13:00) probably fine, at least for now. So (00:13:02) right now, if you're like say a (00:13:03) parallegal, oh god, you're screwed. that (00:13:05) whole job category is going to go away (00:13:06) because your job is basically to (00:13:08) research multiple cases and bring the (00:13:10) information together for someone who (00:13:12) will then take it and do value ad. Your (00:13:15) job is to collate and AI can do that in (00:13:18) seconds. Um once you start doing the (00:13:20) value ad, uh the way my doctor put it is (00:13:23) it's kind of like 8020. It's like 80% of (00:13:25) it's pretty good and 20% of it is really (00:13:26) not. And when you're prescribing (00:13:29) medications, the 20% really matters. (00:13:33) So doctors are fine, but the people who (00:13:38) do the research for them maybe not so (00:13:40) much. That's not where the job shortages (00:13:43) are. The job shortages in the advanced (00:13:44) world, especially in the United States, (00:13:46) are all blue collar. They're welders. (00:13:47) They're electricians. They're not (00:13:49) coders. Uh so it's not that this is a (00:13:52) negative from my point of view. It's (00:13:54) just it's getting a little overhyped. (00:13:56) And most of the people who are doing the (00:13:57) the writing and the panicking about it (00:13:59) are of course white collar workers. Um, (00:14:01) and that colors the discussion. Uh, it (00:14:03) doesn't mean that it will always be like (00:14:05) that, but that's where we are now. And (00:14:08) the pace of improvement, while it's very (00:14:11) noticeable, I would yet I would not yet (00:14:13) call it revolutionary or particularly (00:14:15) impressive. Uh, I mean, I use it, but (00:14:18) I'd like to think I'm pretty good at (00:14:19) that 20%. (00:14:21) >> All right, that's piece one. Uh, piece (00:14:23) two, the Chinese. Um, the Chinese (00:14:26) problem is that they've run out of (00:14:28) people under age 50. And it's people (00:14:30) under age roughly 45 that do the (00:14:32) consuming and have the kits. And there (00:14:33) is no way that a can AI AI can help with (00:14:36) consumption or child rate. (00:14:39) So the robotic systems that the Chinese (00:14:41) are working on, not that they're not (00:14:42) important, but AI only helps to a degree (00:14:46) there. Uh AI is cannot physically move (00:14:48) things. Um it can learn from systems. It (00:14:52) can design systems even to a degree (00:14:53) again 8020. uh but it can't actually (00:14:57) produce. (00:14:59) Artificial intelligence is a completely (00:15:01) different technological suite from (00:15:02) automation. (00:15:05) And even if automation could s solve the (00:15:08) production side of the equation as the (00:15:09) Chinese run out of workers, robots don't (00:15:12) pay taxes. (00:15:13) >> Mhm. (00:15:14) >> And they can't raise kids (00:15:18) and they can't consume product. And so (00:15:21) even if the Chinese could maintain their (00:15:24) production levels without people, (00:15:26) they'd still be dependent on (00:15:28) international trade that they can't (00:15:29) guarantee and on the large asset of the (00:15:31) United States in the long term. Doesn't (00:15:33) change their core problem. (00:15:34) >> Yeah. AI isn't going to be able to fix (00:15:36) the top soil. (00:15:37) >> No. No. I mean, not as we understand it. (00:15:40) >> Yeah. Well, may you give us 50 years. (00:15:42) We'll see. Um (00:15:42) >> Yeah, we'll see. (00:15:44) >> Uh Japan, South Korea, (00:15:46) >> 50 years, that is the right time frame. (00:15:48) I I haven't talked to anyone who's (00:15:51) involved in Silicon Valley at all who (00:15:53) expects us to get general thinking AI (00:15:56) before the 2040s. And based on what's (00:15:59) going on with the large language models, (00:16:01) that date keeps getting moved back. This (00:16:03) is not a technology that's leading us in (00:16:05) that direction. (00:16:06) >> Interesting. the sort of uh (00:16:09) technological progress that typically (00:16:12) you see at this exponential curve with (00:16:14) AI seems to be doing what history does, (00:16:16) crawling and then leaping and then (00:16:17) crawling and then leaping and it makes (00:16:19) it kind of inherently unpredictable. I (00:16:21) don't think many people saw what was (00:16:23) going to happen with LLMs in advance. I (00:16:26) remember reading Nick Boston from Super (00:16:28) Intelligence what a decade ago I think (00:16:29) that came out maybe. Yeah, a decade, (00:16:31) let's call it 10 years ago, something (00:16:32) like that. And uh that was the best (00:16:35) minds on the planet contributing to the (00:16:37) best mind on the planet trying to work (00:16:38) out whether or not. At no point was it (00:16:41) well, you know, these sort of things are (00:16:43) going to predict what you're going to (00:16:44) say next and then if you just scale that (00:16:45) up enough and Nvidia becomes a $3 (00:16:48) trillion company, maybe you'll be f (00:16:50) maybe maybe we're going to get it that (00:16:51) way. Nobody saw it coming. Um, so yeah, (00:16:53) there were some (00:16:54) >> considering considering that you can fit (00:16:56) the entire algorithm set and training (00:16:59) data for chat GPT on a thumb drive (00:17:02) that's about half the size of this. No, (00:17:05) it's like it's like I look at Nvidia's (00:17:07) uh valuation like you know this I mean (00:17:09) great for them but you know this is this (00:17:11) this is the very definition of a bubble. (00:17:14) All it takes is a couple of corporate (00:17:15) thefts and everything that's special (00:17:17) about them goes away. (00:17:19) >> Wow. Yeah. the uh the security must be (00:17:21) intense for that. Okay, so uh Japan, (00:17:24) South Korea, Italy hitting new fertility (00:17:26) lows even more than in the past. (00:17:29) Interesting that this has now sort of (00:17:30) come across into into Europe. When when (00:17:34) will the media and sort of the wider (00:17:35) world accept that birth rates are as big (00:17:38) of a priority as they are? (00:17:40) >> I mean, everything with demographics is (00:17:42) glacial. It takes decades for it to (00:17:44) arrive and so everyone's just like, you (00:17:46) know, hurry up and wait, hurry up and (00:17:47) wait. and then the day it arrives it's (00:17:49) too late because you are now a bloody (00:17:51) smear under the glacier. Um in the case (00:17:53) of Japan we actually have a culture that (00:17:55) saw this coming and they have done a (00:17:57) number of things over the last 30 years (00:17:59) to make it easier to have children to (00:18:01) stay in the workforce longer and so (00:18:03) their birth rate is actually right risen (00:18:05) quite a bit nowhere near replacement (00:18:07) levels. I don't want to oversell it but (00:18:08) it's now higher than not just China and (00:18:10) Japan and Taiwan and Germany and Italy (00:18:12) but also the Netherlands and India and (00:18:16) [laughter] (00:18:16) Thailand. Yeah, India India is aging. Uh (00:18:20) so the the math is going in a different (00:18:21) direction. Um everyone is still sliding (00:18:24) but we're all sliding at a little bit (00:18:25) different rates and you play that out (00:18:26) over decades and it really matters. So (00:18:29) China probably with the data we have (00:18:32) right now is in the worst shape and (00:18:34) after that it's a kind of a three-way (00:18:36) tie between or among Germany, Italy and (00:18:38) Korea most likely. (00:18:41) The fact that this bleeds across into (00:18:43) Europe sort of west is um I don't know (00:18:48) it feels it it definitely feels like (00:18:50) it's coming home to roost in a way. It (00:18:53) it's way less theoretical uh with the (00:18:56) fact that it's it's already spread over (00:18:57) here. (00:18:58) >> Yeah. At at the moment, most people are (00:19:01) when they think about demographics at (00:19:02) all, they think about it in terms of (00:19:04) federal budgets and the baby boomer (00:19:06) retirement and how much it costs to pay (00:19:08) for pensions. And you know, that's (00:19:09) that's part of it, but that's just the (00:19:10) leading edge. Uh the baby boomers are (00:19:13) aging out. The last of them are going to (00:19:16) be retired in 5 years. Uh and in most of (00:19:19) the world, there wasn't an echo (00:19:20) generation like the millennials in the (00:19:22) United States. So, we really are at the (00:19:23) beginning of the end here. (00:19:26) Are we entering a labor shortage that no (00:19:28) one's ready for? Is there is there any (00:19:30) country that can handle demographic (00:19:32) collapse the best better? (00:19:36) The bottom line is if you still have (00:19:38) people in 30 in your 30s uh that you (00:19:40) still have a chance to have kids. So (00:19:42) when I look at countries like say you (00:19:44) know not just the United States but (00:19:45) Germany no excuse me not just the United (00:19:47) States like India or Mexico or Poland or (00:19:51) Brazil you know these are all places (00:19:53) that have not passed that Rubicon just (00:19:56) yet. And so with the way we understand (00:19:58) economic theory and the way that we (00:20:00) understand biology and parenting they (00:20:03) don't require a reinvention. they just (00:20:05) need to encourage their young people to (00:20:08) have kids for some in some way for (00:20:11) whatever reason they want to modify uh (00:20:13) the language. But once you pass that, (00:20:15) once your average age slips past 40 and (00:20:17) especially past 45, there's no longer a (00:20:20) traditional biological path. (00:20:22) >> It's about smoothing the decline, (00:20:24) stretching it out. And a number of (00:20:26) European states have proven to be very (00:20:27) good at that. Japan has proven to be (00:20:29) surprisingly good at that, but it's (00:20:31) still a bit of a starvation diet in the (00:20:33) long run unless you change the economic (00:20:35) model. So whether it's fascism or (00:20:38) socialism or capitalism, everything is (00:20:41) based upon the balance between labor and (00:20:43) capital and supply and demand. That's (00:20:45) how we understand economics, how we have (00:20:47) understood them for a millennia, half a (00:20:49) millennia. [gasps] (00:20:51) If you can come up with something new, (00:20:53) and I'm all ears, then maybe it will (00:20:56) work in a different demographic profile. (00:20:58) Um, at the moment, the leading theory, (00:21:02) and it's it won't work, is of course, (00:21:04) um, modern monetary theory. Uh, that (00:21:07) just shuffles those four factors. It (00:21:10) doesn't really change the math. What (00:21:11) [snorts] the Trump administration seems (00:21:13) to be trying, whether or not they're (00:21:14) doing this consciously or not is a (00:21:16) question, uh is some sort of um metered (00:21:20) demand, a restricted demand model where (00:21:23) your demand is only met if the (00:21:28) government greenlights it and other (00:21:30) people's demand that just doesn't count. (00:21:32) That doesn't factor in. I'm not saying I (00:21:33) think this is a good idea. I'm saying (00:21:35) it's like the only thing that I've seen (00:21:36) in the last decade that might (00:21:39) theoretically apply to a future society. (00:21:46) I I keep on hoping for some sort of (00:21:49) fantastic hopeful (00:21:53) legup, some lifeline that's going to be (00:21:55) thrown. And every time that I do deeper (00:21:57) and deeper research into it, it it just (00:21:59) gets kind of worse. Well, I guess what (00:22:01) I'm interested from a geopolitics (00:22:03) standpoint is how a shrinking workforce (00:22:07) changes the relationship between (00:22:10) countries. We understand sort of what it (00:22:11) does within countries. Um, but how does (00:22:14) that change the geo part of the (00:22:16) geopolitics? (00:22:18) >> Countries that are aging out but haven't (00:22:20) yet crossed that line, they've run out (00:22:23) of consumption but they're not yet a (00:22:25) retirement home. Those countries are (00:22:27) really, really dependent upon exports. (00:22:29) And Korea is probably the poster child (00:22:31) for that. China is very close second. (00:22:35) They need an open globalized world (00:22:38) because they can never consume what they (00:22:40) produce. And so if they're going to have (00:22:41) any income and any long-term tax (00:22:44) capacity, it's going to come from (00:22:45) selling stuff to other countries. thing (00:22:47) is of course (00:22:48) >> the the countries that have the youth (00:22:50) India, Brazil, Indonesia, Turkey haven't (00:22:54) risen in wealth to a level to absorb (00:22:57) global manufacturing capacity. The only (00:23:00) first world country of size that's left (00:23:03) that is still a net consumer is the (00:23:06) United States. And while I can say a lot (00:23:09) of negative things about the Trump (00:23:10) administration, one thing that they (00:23:12) really do understand is the consumer (00:23:14) base of the United States is a tool of (00:23:16) geopolitical power and extending or (00:23:19) denying that to other countries is a (00:23:22) very powerful negotiation tactic. I (00:23:25) mean, we we needed to negotiate a second (00:23:28) round of Bretonwoods, a second round of (00:23:30) globalization. This is one way to do it. (00:23:33) >> Wow. I totally Yeah, that that makes (00:23:35) complete sense. If you have a shrinking (00:23:37) population internally and you don't want (00:23:40) your GDP to just fall through the floor, (00:23:44) you need to get people who do have spare (00:23:46) people, you do have countries that have (00:23:47) spare people to buy your stuff. (00:23:50) >> The alternative is absolutely limitless (00:23:52) mass immigration, which from a cultural (00:23:53) point of view, no one's a real fan of. (00:23:57) >> No. Uh, how much of a solution versus a (00:24:00) crutch is immigration when it comes to (00:24:05) stemming the tide? (00:24:06) >> At this point in time, it's at best a (00:24:09) like a really thin cane. Uh, if you (00:24:11) [laughter] (00:24:12) if if your goal is to use someone else's (00:24:16) young people to pad your demographic so (00:24:18) you don't fade away, you need to start (00:24:20) before you have a problem. And this is (00:24:22) one of the reasons why the settler (00:24:24) societies have always had faster growth (00:24:26) than the rest of the world. So the (00:24:27) Aussies, the Kiwis, the Americans, the (00:24:29) the Canadians, uh this has been less of (00:24:31) a problem for us because none of us are (00:24:33) from where we're living now. And we've (00:24:36) been bringing in waves of people over (00:24:37) and over decade and decade into the (00:24:39) centuries. Um but if you start it today, (00:24:43) so let's let's just take Germany because (00:24:44) the numbers there are really clear and (00:24:45) the Germans are great with numbers. So (00:24:47) we can trust them. You know the Germans (00:24:49) just to hold where they are average age (00:24:51) of like 50 just to hold here already (00:24:54) export dependent just just to not slide (00:24:56) anymore. They need to bring in 2 million (00:24:58) people a year that are under age 25 (00:25:00) forever (00:25:01) in a country that only has 80 million (00:25:03) people. (00:25:04) >> Wow. (00:25:04) >> Fast forward 20 years and the Germans (00:25:07) are less than a third of the population. (00:25:09) >> It's not viable anymore. Had they (00:25:11) started back in the 50s be a different (00:25:14) conversation. (00:25:17) Yeah, that's crazy. I didn't realize the (00:25:19) numbers were that bad. Okay, you (00:25:20) mentioned uh Trump administration there. (00:25:22) What do you make of Mandani's New York (00:25:24) win? Is it remarkable? Is it indicative (00:25:28) of some important trend? (00:25:30) >> No. I mean, (00:25:32) if if there is a trend for Mandani, it's (00:25:34) the same trend for from Trump. These are (00:25:36) two people who never had a real job in (00:25:38) their lives and all of a sudden are now (00:25:40) political leaders. We should not expect (00:25:43) this to go well. (00:25:46) in New York, just like it hasn't exactly (00:25:48) gone well in Washington. (00:25:52) >> I'm I'm interested in whether or not (00:25:55) there is something (00:25:57) remarkable or or unique, noteworthy uh (00:26:01) happening with elections and and (00:26:03) populism and sort of rising nationalism. (00:26:05) You've got uh US election cycle (00:26:08) volatility, a little bit of that. You (00:26:10) got farmer protests in Europe. You (00:26:13) mentioned migration and a ton of people (00:26:16) having problems with that. (00:26:18) >> I wonder whether that could be driving (00:26:19) some political change, not just inside (00:26:22) the US, but I'm I'm interested in what (00:26:24) you think about um those dynamics and (00:26:27) the others impacting how the world at (00:26:29) large generally thinks about populism, (00:26:31) nationalism, (00:26:33) internal politics. (00:26:34) >> Well, a couple broad demographic (00:26:36) thoughts. As a rule, the younger cohort, (00:26:40) 25 and under, tends to be more (00:26:41) politically radicalized, more (00:26:43) classically, excuse me, not classically (00:26:45) liberal, more projoratively liberal, (00:26:48) woke, whatever you want to call it, uh, (00:26:51) and uh, much more in favor of things (00:26:53) like redistributive economic policies (00:26:56) because they don't have anything to (00:26:58) lose. They only have the possibility of (00:27:00) gains. It's it's just it's age math. And (00:27:03) that has been true in every part of the (00:27:05) world throughout the entire modern era. (00:27:07) Nothing's weird there. (00:27:10) Flip it. When you turn 65, your income (00:27:14) goes away. You're now either on a fixed (00:27:16) income or the assets you've accured over (00:27:18) your life, that's all you have. That's (00:27:20) all you will ever have. And so you get a (00:27:23) little crotchety. And so the environment (00:27:26) we're in today in most of the world, the (00:27:30) young cohort is getting smaller and (00:27:32) smaller and smaller and more brittle and (00:27:34) more desperate, whereas the older cohort (00:27:36) is getting larger and larger and larger (00:27:38) and more oified and more unwilling to (00:27:42) make any compromises. (00:27:44) Throw that against a globalization. We (00:27:46) have the time where we're looking (00:27:47) through some of the most radical (00:27:49) economic transformations because of (00:27:51) what's going on with globalization and (00:27:53) deglobalization at least in our lives. (00:27:55) Certainly since the 70s I'm sorry (00:27:57) certainly since the 40s probably since (00:27:59) the 1870s and based on definition maybe (00:28:02) since the 1500s. At the same time we (00:28:05) have our first ever as a species (00:28:07) demographic inversion. Of course it's (00:28:10) going to be a shitow. (00:28:13) Yeah. I wonder whether (00:28:16) I wonder whether the increased (00:28:17) radicalization will have some sort of a (00:28:19) bump when those young people become (00:28:21) slightly older. If their economic uh (00:28:24) situation doesn't improve by as much as (00:28:26) they'd hoped, as much as their previous (00:28:28) generations has hoped, I wonder whether (00:28:30) that will hold on to some of that sort (00:28:33) of progressive radicalization uh or tamp (00:28:36) down (00:28:36) >> be the first time in history if it (00:28:38) happens. (00:28:38) >> Yeah. uh t down the inevitable (00:28:40) trajectory that goes from higher (00:28:42) openness to lower openness, higher sort (00:28:45) of liberal worldview to more (00:28:46) conservative worldview. Um but yeah, I (00:28:50) mean the the prospect that the future is (00:28:52) going to be owned by the people who have (00:28:54) children and the only people who are (00:28:55) having children really fascinating stats (00:28:57) I'm sure that you saw um looking at (00:28:59) where the birth rate decline has come (00:29:03) from if you organize it by political (00:29:05) cohort inside of the US and from 1990 (00:29:07) it's almost exclusively been taken out (00:29:10) of people that are left-leaning. So that (00:29:14) >> no there's a couple problems with that (00:29:16) data point. Um I saw the same study. (00:29:18) Number one, they the way they defined (00:29:21) left lead. Okay. The um the classic (00:29:23) Democratic party in the United States. (00:29:25) There are three clusters to it. You've (00:29:27) got racial minorities, you've got (00:29:30) organized labor, and you have the the (00:29:33) educated coastal elites. The way that (00:29:35) study defined it, it was just that third (00:29:37) group. (00:29:39) [laughter] (00:29:40) >> And interesting, (00:29:41) >> the first two groups tell us something (00:29:43) different. Uh number one, the uh the (00:29:45) middle group, the organized labor, (00:29:47) they're socially conservative, always (00:29:49) have been. And now they're voting that (00:29:52) way. And they really like I would well (00:29:54) really like Trump. Might be a bit of a (00:29:55) stretch, but Trump is not a pro business (00:29:59) guy. He's probably the most anti- (00:30:01) business president US has had in my (00:30:02) lifetime. (00:30:04) And the unions love it. (00:30:06) Then you've got the racial minorities (00:30:08) and blacks and Hispanics and Asians (00:30:11) agree on nothing. Um, Asians tend to be (00:30:15) much better educated, much more wealthy, (00:30:17) not necessarily politically conservative (00:30:18) or liberal, more likely to be (00:30:19) independent. (00:30:22) >> African-Americans tend to have been (00:30:24) locktop into the Democratic party for (00:30:26) quite some time, but they voted for (00:30:28) Trump in the biggest uh percentages (00:30:30) we've ever seen in modern history. and (00:30:33) the Hispanic split right down the middle (00:30:35) this last election. Uh they are (00:30:38) economically (00:30:40) for a degree of redistribution not (00:30:45) anything like uh the coastal elites. Um (00:30:48) they tend to be the most upand cominging (00:30:51) part of the United States. So they're (00:30:53) most likely to shift economically (00:30:54) conservative which doesn't put them in (00:30:56) the Republican party either anymore (00:30:57) because that's not what the Republican (00:30:59) party is today. But at the same time, (00:31:02) they're the most anti-immigration group (00:31:04) we have. They want family reunification (00:31:07) for their family and no one else. (00:31:11) So the Democratic Party has shattered as (00:31:14) an institution. And when people start (00:31:16) talking about conservative or liberal, (00:31:18) you really have to ask what it is (00:31:19) they're how they define those terms (00:31:20) because the way America defines those (00:31:22) terms has changed radically in just the (00:31:24) last 5 years. (00:31:26) >> It is crazy. the the top line of data (00:31:29) that we're seeing at the moment. I'm (00:31:30) seeing more and more graphs from stuff (00:31:32) like our world in data and and like we (00:31:34) got the stats etc. uh being posted on (00:31:37) social media. There's a great great guy (00:31:39) from the FT that's doing a load of stuff (00:31:40) in terms of data visualization. His (00:31:42) stuff's getting shared around a lot. Uh (00:31:44) but there always are nuances and when (00:31:46) you dig into those you find out that the (00:31:48) story might not be the story as is (00:31:50) >> politics has always been messy and now (00:31:52) we're in a time of change so it's really (00:31:54) messy. M uh speaking of Trump, Trump (00:31:56) elevates Saudi Arabia to major non-NATO (00:31:59) ally status. That sounds like the the (00:32:03) most ligious slap on the wrists that I (00:32:07) can think of. Uh but is that a big deal? (00:32:09) Like what US Middle East tensions are (00:32:12) they important? How how much should we (00:32:14) be concerned? [sighs] (00:32:15) >> I'm not going to say they're unimportant (00:32:17) because that would just be rude. But um (00:32:19) the idea that Saudi Arabia is an ally is (00:32:21) a real stretch. And I'm not just saying (00:32:23) that because uh Muhammad bin Salman (00:32:25) ordered the dismemberment and cooking of (00:32:28) a journalist and then used the same (00:32:30) barbecue pit for a diplomatic party for (00:32:32) 300 people later. (00:32:34) >> And they cooked Jamal Kosigible as well. (00:32:36) >> They I mean they didn't eat him. I was (00:32:40) cooked him. (00:32:41) >> Yeah. They [clears throat] dismembered (00:32:42) him. They put him in a giant barbecue (00:32:44) pit. They burned all the evidence. And (00:32:46) then later that day, they held a (00:32:49) diplomatic barbecue event using that (00:32:52) barbecue pit to make sure they could (00:32:53) destroy all the forensic evidence. (00:32:56) >> So there was little little particles of (00:32:58) Jamal Kosigible probably inside of a (00:33:00) little bit of the barbecue. (00:33:02) >> Yeah. Let's just put that to the side (00:33:03) for the moment. (00:33:04) >> Seasoned with journalist. What a [ __ ] (00:33:06) horrendous story. (00:33:08) Uh (00:33:10) the rulers of Saudi Arabia are literally (00:33:14) the house of Saul. It's a family and MBS (00:33:19) is a member of that family and King (00:33:20) Abdella of old was part of that family (00:33:23) and it is this family that created the (00:33:26) global jihadist movement that the world (00:33:28) has had so much heartburn with. It is (00:33:30) this family who their support created (00:33:32) things like al Qaeda and ISIS (00:33:37) and is indirectly at worst responsible (00:33:40) for things like the 9/11 attacks. So the (00:33:42) idea that Saudi Arabia is an ally in any (00:33:47) way requires an immense stretch unless (00:33:53) you go back to the cold war when we (00:33:55) needed Saudi crude to fuel the tanks of (00:33:58) Germany and Italy and Britain and Japan (00:34:00) and Korea and China in order to fuel the (00:34:04) alliance. So if you want to rebuild that (00:34:07) world, (00:34:10) Arab oil to fuel an alliance to fight (00:34:12) whoever, you know, there's a (00:34:14) conversation to be had there on (00:34:15) strategy. (00:34:17) But anything else, uh, this is not a (00:34:19) country that has been our friend for a (00:34:20) very long time. (00:34:22) >> Wow. (00:34:24) What do you make of the future of (00:34:26) energy? EV demand slowing a little bit, (00:34:28) shale production and stuff's going on, (00:34:30) nuclear renaissance. What's the future (00:34:32) of energy look like in your opinion? (00:34:35) uh any country where (00:34:38) EVs are not subsidized, there are no (00:34:39) EVs. So, uh that hopefully would tell (00:34:42) you everything you need to know about (00:34:44) that supply chain. Um that doesn't mean (00:34:46) that all green tech is stupid. Just that (00:34:48) one piece. As for green check large, if (00:34:51) you're in a sunny place, put up solar. (00:34:52) If you're a windy place, put up wind. Uh (00:34:54) you know, I would like to think that (00:34:55) that's not a particularly complicated (00:34:57) conversation. (00:34:58) If you're not in a sunny place, maybe (00:35:02) you shouldn't put up solar. Why people (00:35:06) have trouble with that statement bothers (00:35:09) me. I mean, I I I live at 7,500 ft above (00:35:11) Denver. I get 330 days of sunshine a (00:35:15) day. Of course, I have solar panels on (00:35:17) my roof. But if I lived outside of (00:35:19) Toronto, I would get the solar radiation (00:35:23) per year. Why would I be so stupid as to (00:35:26) put solar panels on my roof in Toronto? (00:35:28) It's like this this idea that the (00:35:30) technology works everywhere is really a (00:35:33) problem. Uh and that goes for the others (00:35:35) too. Natural gas, oil, nuclear, all of (00:35:38) them. Um because if you you have to have (00:35:40) the infrastructure that goes with it and (00:35:42) that infrastructure is there, why would (00:35:43) you burn that power source? Nukes are (00:35:45) getting interesting. Uh the United (00:35:47) States seems to in bits and pieces being (00:35:50) moving on from 1973 finally. It's only (00:35:53) been 51 years to 52 years. (00:35:57) Uh the hope is that the small modulars (00:36:00) will work, but right now we still have (00:36:02) yet to build a prototype. And so until (00:36:05) there is a prototype, I can't tell you (00:36:07) what the supply chain might look like. (00:36:09) But the the sexy nature of it is if you (00:36:13) can fit a nuclear reactor into a 10 20 (00:36:15) foot container unit and just plug it (00:36:18) into a decommissioned coal plant's (00:36:20) transformer network and basically (00:36:23) produce as much power as the old coal (00:36:26) plant did for 5% of the cost of building (00:36:30) a new power plant. Well, that that (00:36:32) sounds great. (00:36:35) If the technology works, let's build it (00:36:37) once and then we'll talk about it. (00:36:40) How far away from that technology are (00:36:41) we? (00:36:42) >> We were supposed to get the prototype (00:36:43) last November and then the company doing (00:36:45) it went belly up. We've had three more (00:36:48) countries, excuse me, three more (00:36:49) companies say that they're working on (00:36:50) it. Uh I have not seen what I consider (00:36:52) to be a reliable time frame for when (00:36:54) their prototype will come online. (00:36:56) >> The labs are involved. People are (00:36:58) working on it. But I'm sorry. (00:37:00) >> Without that is nuclear dominance not as (00:37:02) inevitable. (00:37:04) >> Yeah. nuclear. If you're going to build (00:37:06) a large plant, let's just put the (00:37:07) regulatory and the the nimi concerns to (00:37:10) the side for a moment. From the day that (00:37:12) you put a shovel in the ground and you (00:37:14) have every dollar that you need to get (00:37:15) it set up, you're talking about 4 to 8 (00:37:17) years, probably closer to eight. And (00:37:19) that assumes that the power grid can (00:37:21) take the power. One of the problems we (00:37:23) have in the United States is because the (00:37:26) period from roughly 1985 until roughly (00:37:29) 2020 was a period where we were moving (00:37:31) towards higher and higherend industry (00:37:34) that used more precision labor and more (00:37:37) equipment uh but less smelting and (00:37:41) electrical work. It meant that the (00:37:44) amount of stuff that we were producing (00:37:45) was actually going up in value but the (00:37:47) amount of power that we needed to do it (00:37:48) was going down in value. And as we move (00:37:50) from manufacturing and agriculture to a (00:37:52) services economy, same thing. Power (00:37:54) demand stagnated or dropped until very (00:37:56) very recently, largely because of AI, (00:37:58) but also because of the (00:37:59) re-industrialization effort we're now (00:38:01) going through because of the Chinese (00:38:02) problems and decolonization. So for 35 (00:38:05) years, we really didn't build out the (00:38:06) grid because we didn't need to. Now we (00:38:08) need to. And the biggest thing that is (00:38:11) missing is high voltage long range (00:38:14) transmission lines. Something that's (00:38:16) like 70 kilovolts or higher. The only (00:38:18) part of the country right now that has (00:38:21) spare transmission capacity is this (00:38:24) little triangle from Pittsburgh to St. (00:38:26) Louis to Chicago, uh, Appalachia, coal (00:38:30) country. Because in the ' 60s, '7s, and (00:38:32) ' 80s, we had a [clears throat] number (00:38:33) of administrations who realized, here's (00:38:35) where the coal is. It's cheaper to move (00:38:37) electricity than coal. So, let's burn (00:38:39) the coal locally and send the power out (00:38:41) to the population centers. You basic (00:38:44) math. Uh so the federal government (00:38:46) stepped in and helped push through all (00:38:48) of this development work. And so now (00:38:51) this zone has like quadruple the long (00:38:55) range transmission that they're using. (00:38:56) In some places less than a fifth. (00:38:58) [gasps] Uh it's the only place that (00:39:00) could really build out what we need (00:39:02) quickly. Um everyone else in the country (00:39:05) needs to build those lines before they (00:39:07) think about things like nuclear power. (00:39:09) Because if you build nuclear power, you (00:39:10) might be able to supply your city right (00:39:12) there, but you're not going to be able (00:39:14) to ship it anywhere else. (00:39:16) >> That's in part a regulatory issue, but (00:39:18) it's mostly just hardware. (00:39:20) >> How effective is nuclear when it comes (00:39:22) to the um excess capacity from the grid? (00:39:26) I have a friend who helps to build uh (00:39:29) crypto mining facilities in West Texas (00:39:33) and one of the things that they do which (00:39:35) is supposedly of a massive benefit to (00:39:37) the grid is they are able to turn on and (00:39:40) turn off their requirement for buying (00:39:43) energy. So there is additional energy (00:39:45) that's available on the grid and he (00:39:47) pushes a button or the people that he (00:39:49) builds the plants for push a button and (00:39:51) they go we'll take your cheap energy. (00:39:52) Fantastic. We'll go and mine us some (00:39:54) more Ethereum. Um (00:39:57) how uh how much tolerance how much foot (00:39:59) on foot off gas do you have with nuclear (00:40:02) plants? Do you know? (00:40:04) >> Uh from a technical point of view, you (00:40:07) can go up and down whatever you want. (00:40:09) But going up looks a lot to the nuclear (00:40:12) regulatory commission like a meltdown. (00:40:15) So functionally, no, not at all. So (00:40:18) nuclear is only for base load in the (00:40:20) United States. And I think that's (00:40:22) broadly a good way to look at it. Uh so (00:40:26) for data centers, nuclear is a good (00:40:28) match because data centers churn 24 (00:40:31) hours a day. Nuclear goes 24 hours a (00:40:33) day. Solar and wind for data centers are (00:40:36) some of the stupidest things I've ever (00:40:38) seen people put on paper. Uh because to (00:40:40) make that work, you need to build five (00:40:41) times the solar and wind that you would (00:40:44) need to power the center and then build (00:40:46) a massive at least 24hour duration (00:40:49) battery system. By the way, no one in (00:40:51) the country has more than 10 minutes (00:40:55) and just the cost is just extreme and (00:40:57) even then it wouldn't be stable or (00:40:59) reliable. Uh so nukes, yeah, nukes would (00:41:02) work for that. You mentioned EVs when (00:41:05) they're not subsidized. (00:41:07) No bueno. (00:41:09) What are the underlying d is that (00:41:11) consumer demand? Is that cost? Is that (00:41:14) prohibitive ability to produce? Like (00:41:16) what what are the underlying dynamics? (00:41:17) >> It's electricity. It's really simple. (00:41:20) Electricity is easy to generate. It's (00:41:22) kind of squirrely to transmit and it's (00:41:24) almost impossible to store in an (00:41:26) economically viable manner. You need a (00:41:28) supply chain that is among the most (00:41:30) sophisticated that humanity has ever (00:41:32) produced that produces and processes a (00:41:34) dozen major elements. And in order to (00:41:39) do the transition the United States (00:41:41) under the B administration said that it (00:41:43) wanted to do get to a majority EV (00:41:45) situation in less than 25 years, we (00:41:47) would need every scrap of lithium and (00:41:51) copper and malipium and tantelum (00:41:55) [sighs] and graphite and all the rest (00:41:58) from the entire planet and no one else (00:41:59) could have any at all just to do EVs (00:42:04) just here. So, no, it was always [ __ ] (00:42:07) moronic. (00:42:08) Uh, that (00:42:10) and the cost that's attached to it is (00:42:13) ownorous. So, of course, if you aren't (00:42:16) if you have to pay for it all yourself, (00:42:19) sales are basically dropping to zero. Um (00:42:24) Tesla (00:42:26) Musk talked to good game not viable (00:42:29) economically not viable geop viable (00:42:32) geopolitically and we don't have the (00:42:35) processing materials uh here in the (00:42:37) United States to do it anyway. (00:42:39) >> So that suggests assuming that Elon (00:42:43) isn't (00:42:45) ignorant of this I I have to assume that (00:42:46) he isn't. He tends to do his researcher. (00:42:48) You should think of everything that he (00:42:50) says in that light. But the that the (00:42:53) knowledge that this is the future of the (00:42:55) EV market that in order to be able to (00:42:58) make this work within the US, you need (00:42:59) this absurd volume of rare earth (00:43:02) minerals processed in the right way, (00:43:04) capacity, all the rest of the thing. Not (00:43:06) only did the stars need to align, but (00:43:07) you also need to align a bunch of weird (00:43:09) rocks in one of those rock towers on the (00:43:11) ground. (00:43:13) that is betting the entire future of the (00:43:16) com company on the direction of the (00:43:19) country and (00:43:22) is he basically in your opinion is he (00:43:24) making an assumption that the subsidies (00:43:27) will continue to roll in because that (00:43:28) makes Tesla very (00:43:31) uh (00:43:32) >> it's a nonviable company by any normal (00:43:34) math (00:43:34) >> but if you get continuing support (00:43:37) because there is a push toward green (00:43:39) because EVs are seen as the best way to (00:43:41) help climate change so on and so forth (00:43:43) it it is riding that the EV revolution (00:43:46) is riding off the back of subsidies (00:43:47) coming from any government. Is that the (00:43:49) way to look at it? (00:43:50) >> Uh for for for Tesla at this moment as (00:43:53) we understand physical chemistry. Yes. (00:43:55) Uh there's nothing viable at Tesl there (00:43:56) there's very little that's viable at EV (00:43:59) large anyway even before you consider (00:44:02) the cost of the supporting (00:44:03) infrastructure buildout which is a (00:44:05) couple of trillion dollars on top of (00:44:06) everything else. Uh just the vehicles (00:44:08) don't do what they were have been (00:44:09) advertised to do. uh they're also net (00:44:13) dirtier than gasoline because of the (00:44:16) production cycle on the front end. Now, (00:44:19) if you change the electrical system in a (00:44:22) way that I don't understand today, I (00:44:24) reserve the right to change my mind. If (00:44:26) you move away from lithium as the core (00:44:29) component of battery storage into (00:44:31) something that is less environmentally (00:44:33) damaging its production and more energy (00:44:35) dense and can take the vibrations (00:44:37) better, I reserve the right to change my (00:44:39) mind. But in the last five years, I (00:44:41) haven't even seen a prototype system for (00:44:43) suggested for any of this. The closest I (00:44:47) would say would be the slow motion move (00:44:49) from lithium cobalt batteries to lithium (00:44:52) iron batteries. (00:44:54) That might help with energy storage at (00:44:56) the grid level. Might really make a (00:44:58) difference. But for transport, no. It's (00:45:01) less dense than what we had. (00:45:04) >> Where does the net dirty come from? What (00:45:06) what is the dirty? Well, people always (00:45:08) forget that the electricity comes from (00:45:09) somewhere. And if let's say I I've got (00:45:12) an 11 kilowatt system on my house. If I (00:45:15) had a Tesla and the sun shone for 24 (00:45:19) hours a day at my high altitude noon (00:45:22) peak, took me 2 and 1 half days to (00:45:24) charge the car. (00:45:26) So you're not using solar and wind to (00:45:29) charge your car. You're using fossil (00:45:31) fuels. And so the only potential gain (00:45:33) that you're getting is that an EV engine (00:45:36) is more energy efficient than a gas (00:45:38) engine on a mile per mile basis. But the (00:45:41) cost, the carbon cost of generating the (00:45:44) vehicle in the especially the battery in (00:45:45) the front end is just so much more. Uh (00:45:48) and if you're living in a place that's (00:45:50) predominantly coal and you're driving an (00:45:51) American style sedan, you're over the (00:45:53) long term generating a lot more carbon (00:45:56) than anything before. Now those are some (00:45:58) very broad statements and there are a (00:46:01) thousand exceptions to them based on (00:46:03) local situation. So for example the (00:46:05) Chinese vehicles uh from a weight basis (00:46:08) are less than half that of the American (00:46:10) vehicles. They would never pass our (00:46:11) safety tests but they're smaller and (00:46:14) they kill a lot of people but because (00:46:17) they're so much lighter a lot of what I (00:46:20) just said does not apply to the Chinese (00:46:22) situation. So a Chinese e Chinese EV can (00:46:26) break even on a carbon cost basis within (00:46:29) 10 years maybe (00:46:30) >> but at the price of a few pedestrians. (00:46:34) >> Societies make choices when they start (00:46:36) crafting policy. [laughter] (00:46:40) Okay. Um (00:46:42) what are the what are the other sort of (00:46:45) damages with with regards to production (00:46:47) when it I know I understand about the (00:46:49) the lithium. Uh I I remember Joe had (00:46:52) some guy on his show talking about (00:46:53) cobalt mining and it was [ __ ] (00:46:55) disgusting. It was insane. Um (00:46:57) >> it's disgusting in every sense of the (00:46:59) word. Yeah. Environmentally, chemically, (00:47:02) and socially. (00:47:03) >> Yeah. Um what what else what else is (00:47:05) there going into EVs which are a little (00:47:08) uh byproducts we wouldn't realize? (00:47:09) >> I didn't top off my study for this. A (00:47:11) big one's graphite. Uh graphite is (00:47:13) basically a synthetic form of carbon. (00:47:15) [clears throat] (00:47:15) Uh there is a natural graphite which is (00:47:18) vastly preferred but the chemical (00:47:19) structure is very limited to a few (00:47:21) specific minds. So the cost goes up as (00:47:23) it's more of it's used. There's a (00:47:25) synthetic version. Uh basically you're (00:47:26) using it for the electricity regulating (00:47:29) the electricity flow in a battery. And (00:47:31) if the graphite is not the right kind, (00:47:33) you basically get the electricity (00:47:35) starting to leak out into the battery (00:47:36) itself, which can get a little blammy, (00:47:38) but more likely it's just going to be a (00:47:40) huge efficiency loss. Um, copper, (00:47:43) obviously, anything that uses (00:47:45) electricity is going to use a huge (00:47:46) amount of copper. Lithium, we've already (00:47:48) covered. Cobalt's a mess. Uh, manganese (00:47:52) using a lot of alloys for both copper (00:47:54) and steel. Um, sometimes you're going to (00:47:56) put this in the electrodes as well. (00:47:58) >> There just there's a lot of moving (00:48:00) pieces. Um, and that's one of the (00:48:01) reasons why I'm a little hopeful because (00:48:03) a lot of people are playing with a lot (00:48:04) of different chemistries to see if they (00:48:06) can kind of come up with something (00:48:07) better. We just haven't hit it. (00:48:09) Isn't there a rule in the UK that they (00:48:12) want to go completely (00:48:14) gaspowered vehicle free by 2030? That (00:48:17) there's no more or is that is that (00:48:19) elsewhere? (00:48:19) >> Lots of countries have announced that (00:48:21) either for their cities or for their (00:48:24) countries and unless they're willing to (00:48:26) subsidize it to a huge degree, it's not (00:48:28) going to happen anywhere. Um, that (00:48:30) doesn't necessarily mean that I have a (00:48:32) problem with those goals. I mean, lots (00:48:34) of time, well, you know, let me use the (00:48:36) California example. California gets a (00:48:37) lot of [ __ ] California deserves a lot (00:48:39) of the [ __ ] that they get. But when it (00:48:41) comes to regulation, uh the state (00:48:43) legislature has empowered their (00:48:45) regulatory bodies to create these (00:48:46) regulations to say, you know, we want to (00:48:48) be carbon-f free or we want to on the (00:48:50) grid by this year, we want to have no (00:48:52) non-EVs sold in the state by this year. (00:48:55) And as time moves on, if the technology (00:48:58) is not manifesting, make that policy, (00:49:00) the regulator has the authority without (00:49:03) going back to the state legislature to (00:49:05) move the date or change the mandate. Uh (00:49:08) it's a little bit more intelligent than (00:49:10) most people give California credit for. (00:49:12) And we're going to probably see a lot of (00:49:13) places climbing down. Uh we've seen a (00:49:16) lot of countries in the last couple of (00:49:18) years back away from a lot of what (00:49:21) they've done with EVs because it's just (00:49:22) not working out. (00:49:25) Which country do you think is closest to (00:49:28) being wiped out by energy shortages? (00:49:31) Which one is the most precarious (00:49:35) at scale? The Chinese are the ones in (00:49:37) the in the biggest pickle. Uh they (00:49:39) import about 70% of their oil about (00:49:44) similar number for natural gas and the (00:49:46) major vast majority of that comes (00:49:48) through the straight of Mala probably (00:49:49) were originating in the Middle East. And (00:49:51) so if you ever have a real dust up with (00:49:53) either Japan or the United States or (00:49:55) India, Vietnam or Australia or Sri Lanka (00:49:59) or Pakistan or Roman, that all stops. (00:50:03) It's really easy to cut completely. Um, (00:50:08) for more traditional places, uh, the (00:50:11) Europeans are getting clever. I'm not as (00:50:14) worried about the Europeans as I used to (00:50:15) be, uh, three years ago. (00:50:18) >> There's plenty of reason to be worried. (00:50:20) [snorts] (00:50:21) Uh three years ago when the Ukraine war (00:50:24) started uh the Europeans were in the (00:50:26) situation where they thought that if (00:50:27) they didn't side with the Russians that (00:50:30) the lights were going to go out but in (00:50:32) the three years since they've built a (00:50:34) lot of infrastructure to bring in carbon (00:50:37) energy [clears throat] from other places (00:50:39) and it has been broadly successful. Uh (00:50:42) and so they've backed away from a (00:50:44) political (00:50:46) goal that was questionable economically (00:50:49) and made a very clear strategic decision (00:50:51) that is broadly working out for them. (00:50:53) But they didn't sacrifice all of their (00:50:57) plans. So they realize, you know, maybe (00:51:00) solar and wind does not work in the (00:51:02) world's (00:51:04) least windy, least sunny continent. (00:51:07) [laughter] (00:51:10) But conservation and efficiency are (00:51:13) still very good plans. (00:51:15) >> So you you've seen some change in (00:51:18) mindset and a little bit more realism in (00:51:21) the policy and it's it's showing (00:51:23) benefits. (00:51:25) >> I'm interested in sort of what the (00:51:26) future of the green energy movement (00:51:28) looks like. This sort of green (00:51:30) transition and it's how possible it is (00:51:33) at the current levels of stability and (00:51:35) technology and rollout and instability. (00:51:39) There are no EVs. There are no battery (00:51:41) chassis. There is no solar. There is no (00:51:43) wind. There is no nuclear without (00:51:45) globalization. Too many of the parts, (00:51:48) too many of the materials come from a (00:51:49) different continent. And so if we're not (00:51:51) all doing this together, none of that (00:51:53) happens. And so you should move on. Uh (00:51:56) if you're in the Western Hemisphere (00:51:58) where there is more mining than (00:51:59) consumption, that's probably going to be (00:52:01) a little easier. But for the Eastern (00:52:04) Hemisphere, hard pass. It's just not (00:52:06) going to work. Now again, if you change (00:52:08) the technology on me, I reserve the (00:52:09) right to change my mind. But that's (00:52:11) where we've been for the last 25 years. (00:52:13) >> How much of the Eastern Hemisphere being (00:52:15) card carrying, flag waving, we are going (00:52:18) green people? It seems to be mostly a (00:52:20) western thing in any case. No, (00:52:22) >> for the most part, yeah. (00:52:26) >> How hopeful are you for a green (00:52:28) transition in the west? (00:52:31) If the technology is not ready and if (00:52:33) westerners are not leaving living living (00:52:35) in places where the technology can be (00:52:37) applied in a way that actually drops (00:52:39) your carbon. Putting up a solar panel (00:52:41) doesn't make you green. Putting up a (00:52:42) solar panel that reduces your carbon (00:52:44) footprint that makes you green. And most (00:52:47) people who live in the west don't live (00:52:49) in a place where that is true. (00:52:51) I think that's one of the reasons why uh (00:52:54) there is a lot of criticism in the UK (00:52:57) around the sort of green movement that (00:52:59) we've had a very viciferous government (00:53:01) uh pushing hard toward this as an (00:53:03) outcome that they want and a country (00:53:06) that really doesn't seem to be (00:53:08) particularly well suited for most of the (00:53:10) technologies like I I you mentioned (00:53:13) Toronto's sort of 1/5ifth of the amount (00:53:15) of sun that you got I I have to assume (00:53:17) that the UK is maybe even worse. We have (00:53:19) to go down. We have to go south in order (00:53:21) to get to Toronto if you fly from the (00:53:23) UK. So, we're further up. Um, (00:53:25) >> believe it or not, London actually gets (00:53:27) a little bit more sun than Toronto, but (00:53:29) like just minuscule. Glasgow though. (00:53:31) God, no. (00:53:32) >> Yes. And I was from 3 hours away from (00:53:34) Glasgow. So, yeah. I (00:53:36) >> wind offshore wind in the North Sea is (00:53:39) brilliant. Look at Norway. I mean, (00:53:41) Norway has been subsidizing. I don't (00:53:42) mean to suggest that they're not, but (00:53:44) they get over half of their electricity (00:53:45) from wind now. Now, because of the (00:53:48) dispatchability issue, they're probably (00:53:50) pretty close to peaked on that. They (00:53:52) probably can't do much more. (00:53:53) >> What's dis dispatchability? (00:53:55) >> The availab ability just to flip a (00:53:57) switch and more electricity surges into (00:53:59) the system. You can't do that with green (00:54:01) tech at all. You can do it with (00:54:02) batteries, but batteries are not good (00:54:04) enough to store more than a few minutes (00:54:05) of power on a grid level for most (00:54:08) places. So, the first half for the for (00:54:11) the Danes was easy. The second half, I (00:54:13) have no idea how they're going to do (00:54:14) that. (00:54:15) >> How interesting. (00:54:16) What is uh what's an important mineral? (00:54:19) What's the most important mineral that (00:54:21) no one's paying attention to? (00:54:25) >> I mean, it's really unsexy, but copper, (00:54:28) it's like you want to expand your grid, (00:54:30) you need copper. You want to do more (00:54:32) industry, you need copper. You want to (00:54:33) do anything with green tech, you need (00:54:35) copper, and you need a lot of it. Uh the (00:54:37) United States wants to double the size (00:54:39) of its industrial plant. The United (00:54:41) States, in order to do that, needs to (00:54:42) increase its grid by half. That means we (00:54:44) need to consume about 12 times as much (00:54:46) copper for the next 30 years as we have (00:54:47) for the last 30. (00:54:50) >> Where does that come from? Where where (00:54:51) is most of the copper in the world? (00:54:53) >> The only country in the world that has (00:54:55) what you would consider maybe surge (00:54:57) capacity to increase output on anything (00:55:00) less than a 5year time frame is Chile uh (00:55:01) the outcome the desert. Uh number two is (00:55:04) the United States. Uh number three is (00:55:06) Canada. Number four is Mexico. But (00:55:08) >> is that good for the US then that all of (00:55:10) it? (00:55:11) >> That's great. But that's the ore. Then (00:55:12) you got to turn it into copper metal. (00:55:15) That's China and India. (00:55:17) >> So either way, (00:55:18) >> we can't keep it. We can't keep it (00:55:20) domestically and then convert it over (00:55:21) here. (00:55:22) >> Well, I mean, we could. We've chosen not (00:55:24) to. But um and you know, it's not a new (00:55:27) technology. This dates back to like the (00:55:29) early 1800s. You basically heat it up, (00:55:32) you boil off the sulfur, uh you heat it (00:55:35) up some more, you purify into metal, and (00:55:37) then you turn it into other things. Uh (00:55:38) there's nothing that to stop us from (00:55:40) doing that except for the cost, the (00:55:42) footprint, the pollution. These are real (00:55:44) things and to this point, America has (00:55:47) chosen to just let someone else do it. (00:55:49) >> Isn't it an interesting oraborous thing (00:55:52) that in order to be able to increase the (00:55:54) capacity of the grid to be able to move (00:55:56) to something like nuclear, which would (00:55:58) be a cleaner fuel, you need to do (00:56:00) something which on the front end would (00:56:02) look like pissing out more pollution (00:56:04) into the atmosphere and would cause an (00:56:06) awful lot of protests. Because look at (00:56:07) these big we shouldn't be doing our (00:56:10) copper ore at home. Look at the big (00:56:11) black clouds. It's perspective being (00:56:14) able to see over big timelines is uh is (00:56:17) is (00:56:17) >> one of the many many many and that (00:56:19) assumes it works and the green (00:56:22) technologies that we have right now (00:56:25) don't. So spending $30 trillion or (00:56:28) whatever the most current number is to (00:56:30) achieve net zero in the United States by (00:56:32) 2050 assumes these technologies actually (00:56:35) do what they say they're going to. And (00:56:36) we already know that they don't. We have (00:56:37) plenty of math to prove that. This is (00:56:39) why I'm really big on physical chemistry (00:56:42) because we need to find new ways to do (00:56:43) things. And we don't know what chunks of (00:56:46) the land on the planet we're going to (00:56:48) need access to to make those (00:56:49) technologies work until we've built some (00:56:51) of them. And (00:56:52) >> yeah, this one is based on gadalinium. (00:56:54) This one is based on whatever the [ __ ] (00:56:57) >> Yeah. Until we know the answer to that (00:57:00) question, we don't know how to prepare. (00:57:04) >> How fascinating. What do you think? What (00:57:05) do you think the biggest surprise in (00:57:08) energy is going to be over the next (00:57:10) decade or two, it seems to me, at least (00:57:12) based on what you're saying, the (00:57:14) technology that is promised is not able (00:57:16) to deliver that which it is promising. (00:57:19) Uh, so will the surprise be (00:57:22) disappointment or will the surprise be (00:57:23) an actual surprise? (00:57:25) >> It's going to be one of each. Uh, let me (00:57:27) give you the bad and then the good. Uh, (00:57:29) first [laughter] first the bad. Uh, (00:57:32) we're we're very close and we have been (00:57:34) very close for three years to a (00:57:35) significant break in international (00:57:37) energy markets. Whether it's the Russian (00:57:38) stuff going away or something happening (00:57:40) in the Persian Gulf or something (00:57:41) happening in Malaa or something (00:57:42) happening to China, the (00:57:45) production of vast volumes of crude is (00:57:48) going to fall away. And the consumption (00:57:51) of vast volumes of crude is going to (00:57:53) fall away for demographic and (00:57:54) geopolitical reasons. And I can't tell (00:57:56) you which one's going to happen first. I (00:57:59) can tell you that whichever one does (00:58:00) happen first will then lead to the other (00:58:02) one. And [ __ ] will get real in a lot of (00:58:04) places very, very quickly. uh and for (00:58:07) those of us who still want electricity, (00:58:08) we will then basically have to fight to (00:58:10) get access to the fossil fuels that will (00:58:12) allow us to have it. And that will look (00:58:14) different in every part of the world. (00:58:16) >> Second thing, at some point in the next (00:58:20) decade, our physical chemistry is going (00:58:22) to improve to the point that we have a (00:58:25) new idea that we will then want to apply (00:58:27) whether it's in generation, (00:58:29) transmission, or storage. I don't know, (00:58:30) one of the three, maybe more than one, (00:58:33) that will generate a completely new (00:58:37) arms race in order to access that (00:58:40) technology and apply it. And whoever can (00:58:42) figure that out leaves the old problems (00:58:44) behind. I mean, the petroleum age was a (00:58:47) was a mess. I understand why people (00:58:49) would like to go beyond it. The green (00:58:52) age, if it happens with today's (00:58:53) technologies, would be worse. (00:58:56) But that's not going to stop us from (00:58:58) trying to invent something new. And as (00:59:00) soon as we do, maybe it's a capacitor, (00:59:02) maybe it's a battery, maybe it's power (00:59:04) beaming, I don't know. (00:59:06) >> We start with a completely new set of (00:59:08) goals, needing a completely different (00:59:09) set of materials and different (00:59:11) concentrations, and that changes the (00:59:13) geography of what we are concerned (00:59:14) about. So we might 10 years from now be (00:59:19) more obsessed with Bolivia than we right (00:59:22) now are with Saudi Arabia and Iraq. (00:59:25) [laughter] (00:59:26) All depends upon where the technology (00:59:27) goes. (00:59:27) >> Well, it's interesting. America was (00:59:29) obsessed with Bolivia for a little (00:59:30) while, but for a different type of (00:59:31) substance that they were exporting. (00:59:33) >> Yeah, (00:59:35) >> we're good. (00:59:35) >> Bring back those days. Um, (00:59:38) >> cocaine. Sorry, I just had to say that. (00:59:40) >> That's okay. That's a statement that (00:59:41) needs to be made. Unless it can power an (00:59:42) electric vehicle, in which case, has (00:59:44) anyone tried that? Who knows? Um, (00:59:46) >> I'm sure somebody in New York has. (00:59:48) >> Yeah. Um, global. So this increasing (00:59:52) reliance globally because if you're (00:59:55) going to increase capacity it means that (00:59:56) you need to uh coordinate more and you (01:00:00) need to be more reli I didn't I totally (01:00:02) didn't realize the fact that just (01:00:03) because you have the raw material (01:00:04) doesn't mean that you can process it (01:00:05) where it is it can be sent away and then (01:00:07) come back. So global supply chains are (01:00:09) more important than ever. Been a few (01:00:12) years since we spoke. What's happening (01:00:14) with the state of global supply chains? (01:00:16) I've heard you say that they don't (01:00:18) survive without a global security (01:00:19) guarantor and that that era is over. (01:00:21) >> Yeah. Right now the ore comes from one (01:00:23) place. It's primarily processed in (01:00:25) China. It's sent to a third loca (01:00:27) location to be purified to a degree that (01:00:29) you can then actually use it and then it (01:00:31) gets turned into an intermediate (01:00:33) product. Uh so step one no matter who (01:00:36) you are, no matter where you are, uh (01:00:39) that second that first processing step (01:00:41) that's done in China, that has to be (01:00:42) done somewhere else. uh if we don't get (01:00:45) that right, we don't get to try at (01:00:47) anything else. (01:00:48) >> What about the rest of the global supply (01:00:50) chain? Uh global food systems, other (01:00:52) stuff like that. What what what else has (01:00:54) changed? (01:00:54) >> Uh I've been pleasantly surprised about (01:00:56) global f fuel food systems. Um the (01:01:00) sanctions against the Russians have not (01:01:03) yet uh impacted the fertilizer supply (01:01:07) system. and fertilizer as a category. (01:01:08) There's like 11 different kinds, but (01:01:10) fertilizer as a mass category. Russians (01:01:12) are still the world's largest exporter. (01:01:14) Without that, there is no food (01:01:15) production in Brazil at all. And it (01:01:17) looks pretty dicey in the Middle East, (01:01:19) North Africa, and especially um the (01:01:21) South Asian zone. We haven't had that (01:01:23) problem. Uh in the meantime, the (01:01:26) Americans continue to spin up more and (01:01:27) more nitrogen fertilizer because that's (01:01:29) primarily made from natural gas. and the (01:01:31) Canadians continue to spin up more and (01:01:33) more potachsh fertilizer because they've (01:01:35) got that in Saskatchewan. So, we're (01:01:38) seeing other suppliers come into the (01:01:40) system. Uh they realize that it's a (01:01:44) race. Uh and so far that's working out. (01:01:46) Um long-term still a real problem, but (01:01:49) we're not facing the acute crunch that (01:01:52) we were. [sighs] Uh Trump's tariffs are (01:01:56) pushing manufactured goods for (01:01:58) agriculture the other direction. Um, (01:02:01) basically oversimplifying here, but the (01:02:04) more complicated the se the uh the more (01:02:06) complicated the manufacturing supply (01:02:07) chain happens to be, the more steps (01:02:09) there are, the more players. If you have (01:02:12) a high tariff system, it pushes your (01:02:14) steps out into somewhere else because (01:02:17) otherwise you're paying the tariff every (01:02:19) time something crosses your border. Yep. (01:02:21) >> And so easier to take the handful of the (01:02:23) steps that you do and do them somewhere (01:02:25) else and just pay the tariff once when (01:02:26) the thing comes in finished. for simple (01:02:30) manufactured products that only have a (01:02:31) half dozen steps or so that tends to (01:02:34) come to you because that's easier to (01:02:37) collate. So when it comes to things like (01:02:40) plastics and textiles and furniture, (01:02:44) Trump's tariffs have reshort (01:02:46) manufacturing, but when it comes to (01:02:48) aerospace and computing and electronics (01:02:50) and automotive, it's pushing stuff away. (01:02:54) And agricultural equipment is definitely (01:02:56) in that se second category. So, we're (01:02:58) seeing John Deere, for example, has (01:03:00) already cut more jobs in the last 10 (01:03:02) months than it did in the previous 20 (01:03:04) years. (01:03:06) >> Wow. I did not know that. (01:03:08) >> Yeah, it's it's getting pretty bad in (01:03:09) the Midwest right now. (01:03:12) >> Shipping disruptions. How big of a deal (01:03:15) is that? (01:03:17) >> Yeah. Right now, the Asians realize that (01:03:20) this is where their bread is sputtered (01:03:21) and they're going out of their way to (01:03:22) get along. Uh the Chinese have not (01:03:24) interrupted any uh shipping. And in (01:03:27) fact, they've even leaned on the (01:03:29) Houthies and the Iranians uh to stop (01:03:31) [ __ ] around in the Red Sea because (01:03:33) they realize they're the ones who would (01:03:34) be most screwed if that gets broken. (01:03:36) [sighs and gasps] (01:03:39) >> So far, (01:03:40) >> good news. (01:03:41) >> Yeah. Well, look, you mentioned you (01:03:42) mentioned Russia there. Uh the last time (01:03:45) that we spoke, that was that was sort of (01:03:47) front page news. What is happening with (01:03:50) the Russia Ukraine conflict? Is it (01:03:53) entering a new stage at the moment? (01:03:54) What's going on? (01:03:55) >> Every three months we're in a new stage. (01:03:56) Uh we're in something called the second (01:03:58) revolution in military affairs which is (01:04:00) applying digital technologies to (01:04:02) warfare. Uh the first phase was in the (01:04:04) 1980s and 90s when the United States (01:04:06) started making things like smart bombs (01:04:07) or cruise missiles. Now it's going onto (01:04:10) much cheaper platforms because uh (01:04:12) lowcost semiconductors are ubiquitous (01:04:14) around the world and anyone can make a (01:04:17) drone. And so we've got Ukraine, which (01:04:20) inherited part of the old brain trust (01:04:22) from the Soviet missile and aerospace (01:04:24) things, combined with a country that's (01:04:26) desperate to survive, combined with (01:04:28) these new inputs that they can bring in (01:04:30) from abroad and making thousands of (01:04:31) drones a day. So every 3 months there's (01:04:35) a new page. Uh, first it was (01:04:38) singleperson drones, then it was (01:04:41) jamming, then it was drones with (01:04:42) missiles, then it was water-based (01:04:44) drones, then it was mass drones, then it (01:04:46) was Shahed drones, and it was Shahed (01:04:48) drones that could do a limited amount of (01:04:49) target selection. Now, uh, it's (01:04:52) something called the the Octopus drone, (01:04:53) which the Ukrainians are just starting (01:04:55) to use, which is a drone interceptor. (01:04:57) Uh, it's a new day every day, and I have (01:05:01) no idea how this is going to play. I can (01:05:04) tell you with the technologies that (01:05:05) existed pre-war exactly how this war (01:05:07) would have gone. (01:05:09) >> Those aren't the technologies that are (01:05:10) being used in the war anymore. (01:05:13) Isn't that so so interesting that all of (01:05:16) the dangerous assumptions people had (01:05:18) about modern warfare, all of the (01:05:19) predictability, I mean war war is (01:05:21) unpredictable enough, uh but when you (01:05:24) apply the uh growth curve of technology (01:05:28) to warfare, uh you just end up with I (01:05:32) mean that that weird evolution between (01:05:35) uh offense and defense that we saw (01:05:38) happen. Well, drones have come out and (01:05:41) this is better than using a Hellfire (01:05:44) missile. And then instead of using that, (01:05:46) you get a net and these drones are (01:05:48) defeated by a net. And now the drones (01:05:50) have a little thing on the front that (01:05:51) cuts the net. And now the nets are made (01:05:52) of this material. And now there's an EMP (01:05:54) that blasts them out of the sky. And now (01:05:55) there and the uh pace of innovation with (01:06:01) kinetic consequences (01:06:03) is it's mad. It re it's been absurd. Uh (01:06:07) >> right. But this is why it's called the (01:06:08) revolution in military affairs. Um, if (01:06:12) you go back to roughly 1935, (01:06:18) the technologies we were using then up (01:06:20) until 2022 with the exception of the (01:06:22) introduc introduction of the jet really (01:06:26) hadn't changed. I mean, it was guns, it (01:06:28) was artillery, it was tanks, it was (01:06:30) ships, it was subs, it was helicopters. (01:06:33) The jet was the only one that was (01:06:34) introduced and that was introduced late (01:06:35) in World War II, 1944. (01:06:38) We've had more technological evolutions (01:06:40) in the last 3 years just in Ukraine than (01:06:43) the rest of the world combined has had (01:06:45) since 1960. (01:06:47) >> Wow. (01:06:47) >> And so the rules we don't know. We are (01:06:52) only in the very very early stages of (01:06:55) developing the weapons much less the (01:06:58) doctrine much less being able to play (01:07:00) that against a battlefield. Um and we (01:07:04) are very fortunate in the west that the (01:07:06) Ukrainians will want to partner with us (01:07:08) because they are doing in real time uh (01:07:11) the sort of experimentation that is (01:07:13) costing lives that if we were doing this (01:07:15) in a broader conflict would have already (01:07:18) claimed a million people. (01:07:20) >> Yeah, I was going to say I wonder how (01:07:21) many countries are uh watching Ukraine (01:07:25) and Russia almost like a lab. Yeah, the (01:07:28) last time something at this scale (01:07:30) happened, a major conflict in which (01:07:32) people were watching, it was either the (01:07:34) Crimean War or the American Civil War, (01:07:36) because those were the two conflicts (01:07:38) where industrialized technologies first (01:07:40) really hit the field, whether it was a (01:07:42) Gatling gun or penicellin or the (01:07:45) railway. (01:07:47) And people are watching and thinking, (01:07:48) well, this is a good explainer, uh, a (01:07:52) good, um, sandbox for us to observe what (01:07:55) these new technologies are going to be (01:07:57) like. How how are these (01:07:58) >> say I'm dark? [laughter] (01:08:00) >> Well, look, I mean, yeah, I'm not saying (01:08:02) that Russia and Ukraine is being used as (01:08:04) an experiment for the rest of the world (01:08:06) to watch, but that's what the people who (01:08:08) are not invested in it directly will be (01:08:10) will be thinking, right? Look at this. (01:08:12) Look at look at look at the way that (01:08:13) this goes forward. I that seems to me I (01:08:16) was interested in what the most (01:08:17) dangerous assumption about modern (01:08:18) warfare was, but the uh the the (01:08:22) assumption that it is predictable or (01:08:24) that it follows any of the rules that (01:08:25) have been established in the past seems (01:08:27) to be a pretty [ __ ] good one. (01:08:29) >> Yeah. Now, we still need energy. We need (01:08:31) still still need food. When you're (01:08:32) talking about drones, you need (01:08:33) electricity specifically. So, that adds (01:08:35) another layer of things to it. But yeah, (01:08:38) uh the rules are changing very quickly. (01:08:41) What conflicts are more important than (01:08:44) Ukraine at the moment? (01:08:46) >> At the moment, that's really the only (01:08:49) one that matters because that has the (01:08:50) nuclear question because of the Russians (01:08:52) that deals with the northern European (01:08:53) plane. So, automatically draws in all (01:08:54) the Europeans. It has the issue of (01:08:57) uniting Eurasia under a single power. (01:08:59) So, the Americans get interested. Uh, (01:09:01) and then of course the Chinese are (01:09:02) providing the industrial base that's (01:09:04) necessary for the Russians to carry out (01:09:05) the war in the first place. So, (01:09:06) everyone's involved uh in some way. Uh (01:09:10) it is by far the most critical one out (01:09:12) there. Uh we'll probably have a few new (01:09:14) ones in the next few years. Um whenever (01:09:17) you break the economic model, politics (01:09:19) gets all wonky and security issues (01:09:22) naturally bubble up from that. And (01:09:23) that's before you consider a (01:09:24) technological change. So you know, maybe (01:09:27) we figure out what the next energy (01:09:28) technology is. We have something fresh (01:09:30) to fight over in a world where all of a (01:09:32) sudden oil is not as reliable. It's one (01:09:34) of many ways this could go. M what about (01:09:37) South China Sea stuff that was big deal (01:09:40) for a while. (01:09:41) >> I never found that sexy. Never. It's (01:09:44) just I mean just it's ringed by hostile (01:09:49) countries. Vietnam, Philippines, (01:09:51) Indonesia, Malaysia. Um it's not that (01:09:54) deep so subs don't play a big role. The (01:09:58) energy in it, the reserves are not all (01:10:00) that interesting. And the sand islands (01:10:03) that the Chinese have built are, as the (01:10:06) name suggests, built of sand. And so the (01:10:08) Chinese have already stopped stationing (01:10:10) aircraft on them because the runways (01:10:12) aren't functional. (01:10:14) And if you see this as a naval (01:10:16) projection issue, projecting through an (01:10:19) area rung by ringed by a half a dozen (01:10:21) countries who hate you, you put a few of (01:10:23) the new tomahawks that the United States (01:10:25) is developing that are truck mounted and (01:10:27) you can't do anything with that except (01:10:28) for loose ships. And even if you could (01:10:31) secure it, you have now made it 17th of (01:10:34) the way to the Persian Gulf. Big [ __ ] (01:10:37) deal. Uh the Chinese are boxed in. I (01:10:40) I've never found the South China Sea (01:10:42) interesting. (01:10:42) >> Wow. You I've seen so many uh video (01:10:45) documentaries and stuff talking about (01:10:47) these land grabs that breathless. (01:10:50) >> Yeah. Yeah. This is, you know, it's this (01:10:52) sort of um odd geopolitical red tape (01:10:56) loophole which is permitting China to (01:10:59) expand the size of its country by saying (01:11:01) this is us and this is us and this is us (01:11:03) and it's slowly going to engulf the (01:11:05) entire South China Sea. Uh (01:11:07) >> yeah, when public relations is your (01:11:09) strategic policy, it's not a very good (01:11:11) policy. Uh, if you want to take it (01:11:14) seriously, the Chinese have to conquer (01:11:16) Vietnam first, then we'll talk because (01:11:19) if they don't control the coast, there's (01:11:20) no point in controlling the water. (01:11:25) Surely based on your theory about China (01:11:28) being in a lot of [ __ ] over the next (01:11:32) decade and a metric ton of [ __ ] over the (01:11:34) next 50 years, (01:11:35) >> is there not the potential for them to (01:11:39) do something desperate, whatever that (01:11:41) means, silly, more aggressive, more rule (01:11:44) it out, but there's nothing that they (01:11:46) could do that would fix their underlying (01:11:48) core problems. They can't change their (01:11:50) geography. (01:11:52) They'd have to conquer the entire first (01:11:54) island chain to have a chance to project (01:11:55) beyond. And even then, they're not going (01:11:57) to have a two ocean navy because there's (01:12:00) only one ocean. (01:12:02) Um, they're not going to solve their (01:12:04) demographic problems with the war. The (01:12:06) only country where you could maybe turn (01:12:08) enough people into slaves to round out (01:12:11) your demographic structure would be (01:12:12) India. The Himalayas are in the way (01:12:14) independent of the fact that that would (01:12:16) be really hard. [gasps] (01:12:17) Uh, so there's nowhere they can go. Uh, (01:12:20) the resources aren't within easy reach. (01:12:22) The demographic situation requires Star (01:12:24) Wars style cloning and the strategic (01:12:27) situation can't be solved with a navy (01:12:29) that is anything less than five times (01:12:30) the powerful power of the American Navy. (01:12:32) And they're nowhere close. They have a (01:12:34) lot of ships, but whenever you see like (01:12:36) a tonnage per tonage comparison for a (01:12:37) ship, keep in mind that their ships suck (01:12:39) and are a lot heavier. (01:12:42) So, a 40,000 ton Chinese carrier and a (01:12:46) 40,000 ton American carrier, this one is (01:12:48) an order of magnitude more powerful than (01:12:50) this one. They're slower. They can't (01:12:52) maneuver. They need too much fuel. (01:12:55) >> Uh before you consider things about the (01:12:57) hardware that they might launch, (01:13:00) >> okay, that does not necessarily preclude (01:13:04) them from doing something silly or (01:13:06) something kinetic or aggressive. (01:13:08) >> Exactly. just purely out of desperation (01:13:10) shape the environment on their way out (01:13:12) the door. I can't rule it out. But (01:13:16) generally countries don't die that way. (01:13:18) There has to be something that they (01:13:19) think that they can achieve. (01:13:21) >> The reason that I don't dismiss it (01:13:23) completely (01:13:25) is that um Chairman Xi has basically (01:13:28) gotten rid of all of his adviserss. Uh (01:13:30) his last real one was seven years ago (01:13:32) now. And when you eat nothing but the (01:13:34) propaganda all day, you know, it kind of (01:13:36) messes with your head. I mean, this is a (01:13:38) guy who has written 30,000 pages of (01:13:41) ideological treatises in the last 10 (01:13:43) years. That doesn't leave a lot of time (01:13:45) to govern. And it may be that his mind (01:13:48) is just mush now and that yes, he pulls (01:13:50) the trigger. Uh it's not a very (01:13:52) satisfying explanation, but that's (01:13:54) really the only way I see it happening. (01:13:55) Yeah. Wow. Wow. I It really does sort of (01:13:59) go to show the the issues of intense (01:14:04) isolation. Uh, you know, we've it's one (01:14:06) of the reasons that supposedly Japan has (01:14:09) a particularly unique culture, which is (01:14:11) what happens if nobody's allowed to (01:14:13) leave or enter for half a millennia. And (01:14:16) look at this. It's formed into this (01:14:18) place that's as close to an alien planet (01:14:20) as you can whilst staying on Earth. And (01:14:22) isn't isn't that interesting? Um, but it (01:14:24) also (01:14:26) >> doesn't have the uh corrective (01:14:28) mechanisms for stress testing your (01:14:31) ideas. If all of the people around you (01:14:33) and all of the country around you (01:14:34) basically is sort of a yes country, like (01:14:37) a yes men, uh (01:14:40) you can end up with some pretty (01:14:42) squirrely ideas that you start (01:14:43) believing. I suppose (01:14:44) >> that's one of the reasons why I really (01:14:46) like countries like the United States or (01:14:48) Germany or Australia uh or Brazil (01:14:51) because the states have as much power as (01:14:53) the national authorities. And so you get (01:14:55) a lot of policy experimentations on (01:14:58) everything from labor policy to tax (01:15:00) policy to culture policy uh throughout (01:15:02) the entire system. And we we make some (01:15:04) bad decisions. No argument. (01:15:06) >> But we also make some good ones and then (01:15:08) we learn from one another. (01:15:10) >> Which which country is quietly becoming (01:15:14) uh a greater power than most people (01:15:16) might realize, do you think? (01:15:18) >> Mexico. If Mexico was located anywhere (01:15:20) else in the world with the industrial (01:15:22) plant that it is, we would already talk (01:15:24) about it as being more powerful than (01:15:25) Germany or France. (01:15:28) >> But wow, (01:15:29) >> all that trade relationship was with the (01:15:30) United States. So excuse everybody's (01:15:32) perspective. (01:15:34) Doesn't mean that they don't have very (01:15:35) real problems. They do. But from as an (01:15:38) industrial power, they're already (01:15:39) massive. (01:15:40) >> What What is their advantage? (01:15:43) >> They're right next to the United States. (01:15:45) So you you've got the technology, you (01:15:47) got the infrastructure, you got the the (01:15:50) consumption base, and they can (01:15:51) complement what they do with what we do. (01:15:54) It's a great relationship. I literally (01:15:56) trickle down. (01:15:58) >> Yeah, (01:15:58) >> that's a little harsh. Mexicans are very (01:16:01) good at what they do, too. But if Mexico (01:16:04) hadn't been to the next next to the (01:16:06) United States, it probably wouldn't have (01:16:07) the trade or economic half that it has. (01:16:10) But if you could take this somehow and (01:16:12) move it somewhere else. Yeah. Massive. (01:16:14) Massive. Wow. Okay. And when it comes to (01:16:18) alliances, (01:16:20) tenuous ones, which is what's the one (01:16:23) that you're concerned about in terms of (01:16:25) fragility? What's what are the or what (01:16:26) are the alliances that you think are (01:16:28) more fragile than they seem? (01:16:29) >> Um, let me give you two. One that's up (01:16:32) and coming and one that I thought we had (01:16:34) solved and now I'm not so sure. So, up (01:16:35) and coming is Vietnam. Uh, huge (01:16:38) population, very young, excellent (01:16:40) educational system. uh 40% of their (01:16:43) college grads are STEM. Uh and they're (01:16:46) now at a higher average technical skill (01:16:49) set for their workforce than the Chinese (01:16:51) are. And they're now trying to catch up (01:16:52) with the industrial workforce or I'm (01:16:54) sorry, with the industrial (01:16:55) infrastructure. Um long-term, they're (01:16:59) absolutely going to be a top five (01:17:00) trading partner for the United States (01:17:01) unless we absolutely muck it up. Uh (01:17:03) they're fascists, so we have to keep (01:17:05) that in mind. Um just because they're (01:17:07) they're good at what we need them to be (01:17:09) good at doesn't mean they're wonderful (01:17:10) people. their government's kind of (01:17:12) goooo. Um the one the other one is (01:17:14) Japan. Now Japan is a country that I (01:17:16) used to be concerned about because it (01:17:18) was another naval power. Uh most of the (01:17:20) resources they need are not local. So (01:17:22) they have to go out and get them. And in (01:17:24) a world where the United States cares (01:17:25) less about globalization, that means (01:17:27) that the Japanese by default have to be (01:17:29) more aggressive. That doesn't mean a (01:17:31) fight is inevitable or much less (01:17:33) imminent, but all of a sudden it is a (01:17:35) possibility. (01:17:37) And the Japanese under Trump won came to (01:17:41) the United States to cut a deal on the (01:17:43) future and basically signed a deal that (01:17:45) was mixed economic and security uh needs (01:17:49) and basically gave in to Trump on (01:17:50) everything they cared about. And so they (01:17:53) thought that if they could sign a deal (01:17:54) with Donald Trump that they were in (01:17:57) because he was the most reactionary, (01:18:00) erratic American president we've ever (01:18:01) had. And they're like, if we can cut a (01:18:03) deal with him, we're good. Reasonable. (01:18:05) Trump 2 comes along, badmouths the deal (01:18:08) that Trump won cut, and all of a sudden (01:18:11) the Japanese are in the wind again. The (01:18:13) difference between eight years ago and (01:18:15) now is now the Japanese have two super (01:18:18) carriers that they didn't have 8 years (01:18:20) ago and all of a sudden they are a naval (01:18:22) superpower and they were already the (01:18:24) second most powerful naval power in the (01:18:27) world. And so now it matters a great (01:18:31) deal if this relationship falls on the (01:18:34) rocks. (01:18:36) So hopeful the Japanese would rather (01:18:38) have a deal than not have one. But (01:18:41) a lot of hard work was done by Trump to (01:18:44) get that deal and it worked and it stuck (01:18:46) and then he burned it. (01:18:47) >> Trump versus Trump. (01:18:48) >> Yeah, (01:18:50) >> Peter, you're great. I love speaking to (01:18:52) you. It's great to get an update, (01:18:53) apocalyptic as it may be. Uh, (01:18:55) >> welcome. (01:18:55) >> Let's bring this one into land. Where (01:18:56) should people go to keep up to date with (01:18:57) everything you've got going on? (01:18:58) >> Uh, zion.com. Zihan.com. (01:19:01) That's where you sign up for the (01:19:02) newsletter and the video logs and the (01:19:03) Patreon system. And there's a new book (01:19:05) in the works. It'll be out and about. (01:19:06) >> Fiction one. Congratulations. (01:19:08) >> Fiction. Yeah. (01:19:10) >> The end of the world fiction hopefully. (01:19:12) >> Awesome. Peter, I appreciate you, mate. (01:19:15) Congratulations. You made it to the end (01:19:17) of an episode. Your brain has not been (01:19:19) completely destroyed by the internet (01:19:21) just yet. Here's another one that you (01:19:24) should watch. (01:19:26) Go on.