Technology, Connected - No China. No Electric Future

Episode Date: December 10, 2025

America has a Technological inferiority complex. China makes over half the world's lithium batteries. They produce 90% of neodymium magnets. They mine 70% of rare earths and process 85%.America makes burgers.This is the story of how China won the Electric Stack—and whether America can catch up.What's the Electric Stack?Everything that moves will eventually run on batteries and electric motors. Cars, buses, ships, planes, robots, drones, tools. The Electric Stack is the supply chain that makes this possible: batteries, magnets, rare earths, processing, manufacturing.China controls it.This isn't just about EVs. It's about who builds the robots, who powers the drones, who controls the energy transition.If it can go electric, it will go electric. And right now, that means it will be made in China.Please enjoy the show.--Other ways to connect with us:⁠Listen to every podcast⁠Follow us on ⁠Instagram⁠Follow us on ⁠X⁠Follow Mark on ⁠LinkedIn⁠Follow Jeremy on ⁠LinkedIn⁠Read our ⁠Substack⁠Email: [e-mail]--Timestamps(00:00) The Electric Stack(02:13) Beginnings: War, The Oil Crisis & Stan Whittingham(03:46) The Song Handycam: Lateral Thinking With Withered Technology(05:06) Tesla, Elon And Handycam Batteries In An EV(06:46) China Buys US Battery Company A-123 At A Carboot Sale(08:40) China, The Olympics And The Serendipity of Battery Technology(11:37) Faraday And The Birth Of Neodymium Magnets(14:26) The 3.5 Inch Neodymium Magnet Alpha Product(16:46) Magnequench(18:16) Drones, Ukraine And The Magnet War Machine(20:16) Politics, Rare Earths And 'The Future's Too Important' T-shirts

Disruptors and Curious Minds, CEOs of the World. Welcome to Thinking on Paper. We're talking about the electric stack. Lithium iron batteries, magnets and electric motors, power electronics, and embedded compute, and how they all fit together to fuel the world. If it can go electric, it's going to go electric. And the electric stack is the foundation of that. And unsurprisingly, China is dominating this market.

Here we go, the electric stack. October 6th, 1973, on Yom Kippur Judaism's holiest day, Egyptian President Anwar Sadat and Syrian President Hassaf al-Assad launched a coordinated surprise attack on Israel. 11 days later on October 17th, King Fasal of Saudi Arabia, a cautious monarch who has resisted using oil as a weapon for years, announced that OPEC would cut oil production by 5% each month until Israel withdrew from occupied territories. More dramatically, Arab oil producers declared a complete embargo on oil shipments to countries supporting Israel, primarily the United States and Netherlands. Oil prices quadrupled practically overnight from $3 to $12 per barrel. Gas stations ran dry. Americans sat in mile long, mile long queues for hours.

Perhaps you remember that, Jeremy. Sometimes fighting over fuel. No, I wasn't at all. President Nixon imposed a national speed limit at 55 miles an hour. Christmas was cancelled. Christmas lights were banned and that led to Exxon. and their corporate lab in New Jersey, getting a 30-year-old British Oxford and Stanford graduate

called Stan Whittington. Wittingham, right? Wittingham. To research, what happens if the oil runs dry and that led him to battery research and that was the beginning of the electric stack? Prices go crazy, right? Everything you just said, three years later on the year of my birth,

1976, Wittingham makes the first lithium-ion battery. And it does something amazing. It explodes. It explodes. It explodes. But it was rechargeable. So it was the first rechargeable lithium battery. Eventually he'd co-share the Nobel Prize for that with two other people. But he's exploded. So what happened? A guy named John Good Enough. The name is great. John Good Enough. John B. Good Enough. John B. Good Enough. John B. Good Enough. John B. Good Enough. He's an Oxford guy, right? Right? So he gets in there. and finds a way to increase the voltage.

He does some things to improve upon what Whittingham did, but it still explodes. And then enter. Explodes less. It explodes less, but it still explodes, right? I love how you approach that you want to get into the science and the physics of this. In my notes, I've just put, John Be Good Enough, changed the ingredients. Oh, perfect.

It's a perfect way to think about it, right? Perfect way to think about it. All right. So there's this instability to this thing that has been invented. enter Akira Yoshino and kind of sprinkle some magic in there. He finds a way to stabilize it and make it a little better. Again, step by step by step by step. Akira Yoshina sells the patent to Sony

and the lithium iron battery was put inside the Sony Handicam, which I remember those Sony Handicam ads. You must remember them. And that was the first alpha product, wasn't it, of the lithium iron rechargeable battery, that now you could film your family. Your Christmases and yeah. Yeah.

Which I remember we'd always set it up and just, you know, yeah, I mean, that's a big part of, a big part of growing up for us. So what do you think about this idea? This quote was great or this philosophy is a really interesting idea. Lateral thinking with withered technology. Yeah, I like that. It's kind of cool. So basically it's like Sony didn't really invent anything new, right, with this.

They took this existing, quote, withered technology. which again, you know, what they developed was was pretty powerful. But again, we haven't, it was the idea that needed the, what, the energy and the action, right? Idea and the energy and action. So Sony applied the energy in action, becomes a product, the handy cam. And now suddenly this insatiable demand for people to need hours of battery life to capture all the moments in their family. Demand explodes. So again, we have this idea of Western research turning into Japanese products. We all remember those Japanese products, Panasonic, Sony, that technological might has shifted over. Because in this essay, he kind of puts Japan in the same bucket as America and the Europe, doesn't he? And it's really, it's not Japan and China. It's really Japan, America and Europe and China doing this other stuff.

And those big Japanese companies that really changed the game of consumer products, that's now being done in China rather than Japan. So let's go from handy. cam to the next step. Somebody got involved. Somebody started putting handicam batteries in a car. Yeah, let's, yeah.

Who's that guy? Let's talk through it. I don't know. Who is that guy? What is that car company? So, you had the rechargeable lithium iron battery. It was in the handicam and Tesla

put them in a car. But the problem was, obviously, that they didn't really work, did they? Not to the level that they wanted. And that, so that caused Tesla to make it better. Well, they go, they go from this bunch of single batteries trying to figure, figure out the power thing altogether to a bunch of batteries together in a pack and tying the batteries into, into, like a collective versus versus a bunch of, you know, tiny cells working

independently. They sometimes still explode, though. And so they were, our friend comes back. Yeah, we are. Well, we have another friend come back. Doesn't doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, doesn't, John V good enough comes back at nearly the age of 90 and, you know, continues to do some tweaks into the battery type. And we're not going to, the essay, like you said, the essay does a great job of talking through the different battery technologies. But he tweaked the chemistry a little bit to, for what's called LFP lithium ion phosphate and kind of reduced some of those explosions, steady discharge, a little safer, lower energy density. And the conductivity was a little bit less than what they wanted. But, but. But those are acceptable because the use was working good enough. It was working John B good enough. The next little beat on this story, there was an American, or U.S. company, I think, A123 was U.S. battery company.

Went bankrupt. That went bankrupt. Again, had solid tech, good patents. China buys it for real cheap and kind of brings the IP home. There was a really interesting inflection point, I think, when there's a company called BYD in China that is, you know, battery maker. I think it was the Olympics and they started deploying these big batteries on buses, right? So they essentially used the Olympics as a way to test battery powered buses. I thought that

was really interesting. And with a bus, there's some forgiveness because it's huge. So the form factor doesn't have to be really small. You basically favor a safe environment versus range, right? Buses don't have to go 8 million miles. They're usually kind of spinning in a nice little loop around the city, right? So I thought that was a really interesting way to test the technology and also probably get paid or have some government help as it's building infrastructure for

the Olympics. Didn't China pretty much fund that whole bus scheme? I think so, yeah. I think so. So, yeah, so he's got these rolling battery labs that they're using the test and prove this technology. The owner of BYD, I thought it was really interesting. Wang, I'm going to butcher this.

Yetming, no, Shwanfu. Shwanfu. Warren Buffett called him Edison, called him Edison plus Jack Welch. I thought that was a pretty powerful statement. Big compliment. It is a big compliment. So then there's a chemistry war. There are people betting on different types of batteries for different reasons. We're not going to go into all the technical pieces of that puzzle.

Again, read the essay if you want to dig in to more of that. But we're talking about NMCs versus LFPs and who made the bet on the right chemistry. Some say BYD did. Some say the other, who's the other company? CATL, I think was the other company. CATL, yeah. Yeah. Is that cattle, huh? The timing of all this is so serendipitous as well.

If the Olympics hadn't been in Beijing, then the Chinese government wouldn't have been perhaps so ready to spend all the money on the batteries for the buses. That coincided. It was just a perfect timing for the technology for the five-year plan of China. it was just amazing timing. And China just got good at batteries, like really, really good at making batteries, cheaply and efficiently.

And what they did, they, I don't know if they flashed their eyes at Germany, but it ended up with BMW. Yeah, there was a quote by what, like, Mr. BMW,

I guess, or whatever that was in there. It was like, okay. His honesty was so good. How the F do we get three million batteries in two years or something crazy like that? So the CIRS.

He had the aha moment, I guess, right? And a businessman and he realized, you know, okay, yeah, they've got a better batteries. How do we get some for it? Because we've got to make some electric cars. BYD makes 17.8% of the world's batteries. CATL or cattle, I'm not sure how you say that one, is 37.9% of the world's batteries, all totaled up to 55, nearly 56% of global battery production. So domination.

Well, last little thought on the battery, as we kind of close, come to the close of the battery story a bit. And again, the depth in Paki's breakdown is tremendous. If you have time, I encourage you to read it. The International Energy Agency had an interesting quote in here. I just mentioned the numbers of 56% of global battery production. So even if all of the U.S. projects that actually come to bear that are in the pipeline today related to battery production, the IEA International Energy Agency said the U.S. isn't likely to win more. more than 15% market share, even if all of those projects come to bear. And we all know every idea that turns into a company doesn't last very long, right? It's so hard to see anything changing

BMW. So what's left of the European car manufacturing industry is using Chinese made batteries in their cars. In 2020, BYD introduced the blade battery, which now are in Tesla's. They're using blade batteries. I've got a question for you on batteries. Do you care where your batteries from? Not really. Does anybody care? People want a car that doesn't break down. People want a drone that stays in the air. People want some people want an electric vacuum cleaner that doesn't just break when it's dust in the hallway. Most people, regardless of what the political media narrative might be about buying your own, don't really care. And I think that if... Do we even think of like batteries in this thing? Like, I mean, it just works.

It just works. We just wanted to work. There's no, I don't see a will on the battery side of it to fight back. We should probably move on to part two of the electric stack. Let me set, let me set the stage, guys. Let me set the stage. We've been, we've been waiting 162 years for magnets to get really good. It starts with a gentleman named Michael Faraday, 1821, builds the first electric motor.

It was pretty cool, pretty revolutionary, but, you know, from a magnet perspective, kind of meh, kind of me. Right? So over the next 162 years, magnets have been getting better. Al Niko magnets, you know, came out in 195. They're in your, if you have a Gibson, they're in your humbuckers, Mark. They're in your humbuckers. They're in my humbuckers. In my, I'm a Gretch.

Oh, you got to Gretsch. There you go. Basically in 195, there's magnets all the way down. Magnets all the way down. So 100 times better than Faraday in 1955. Then in 1983. 1983 was an interesting year. So you have two scientists.

You have one in Japan, one in General Motors, and like so many things in history, a simultaneous innovation happens without the other knowing. So this, you know. Because there's an order to it, Jeremy, the way things happen is the way things happened. Oh, man. All right.

So the Sadie and the one, are we going back to Federico Fajun, dare I say. Well, so, okay. So they, right. So they discover simultaneously a compound that's 360 times stronger than Faraday's original motor, you know, the magnet. This is the breakthrough that makes the electric motor possible, right? Are you talking about the neodymium magnet?

Teasing into that, right? So that thing stepped in with a bunch of different innovations too. But just general casting over the last 162 years, there's been innovations in magnets. Let's talk about these two guys. Masato Sagawa, Sagawa in Sumatoma, Japan, right, on one side. And John Crote from General Motors. All right, so let's talk about Sagawa's idea or his process, right? He uses this centering method of creating this magnet, right?

So you're mixing powders, press them under high pressure, and then you heat them until they kind of come together. And the magnetic strength was pretty good in what he pulled together. and then Crote has another method that's the metal spinning method. You still kind of melt some stuff down, but you spray this, spray what's melted onto a copper wheel. It cools pretty quick into crystals. Then you grind the ribbons and you mix it with a resin and it almost kind of looks like plastic. Sagawa's magnets are stronger, but this injection molding idea is a bit easier to produce, right?

So you've got these. They're more efficient and cheaper. Right. So here's an interesting piece to the podcast. puzzle. So they actually kind of end up working together in a weird way. You get the alpha product first, don't you? The three and a half inch hard disk drive is like the alpha product of the magnets. Yeah, but again, you know, the alpha product is this hard drive. And there was an innovation in, you know, one was like a five and a half inch and kind of the newer one was like the three and a half inch, right? But it was kind of like, hey, the five and a half inch is great. Like we're good. We don't need anything bigger. batter and better, but what led them, Mark, to find that three and a half inch one being a little bit better? What was the inflection point? Do you remember? Remind me. What is it? Finnis Connor, the guy that started Seagate. So in 1985, the inflection point was as these bigger personal

computers were kind of getting down in smaller form factor. Compact, he lands the deal to put his hard drives into compact portable computers. I think this number, this number, is crazy to me. But in the late 80s, he had 1.3 billion in sales. Am I reading that right? Yeah, 1.37 billion in revenue. Or in revenue. Yeah, yeah, yeah, yeah. In the 80s. In the 80s. In United States history. And these alpha products, this inflection point you speak of causes this mass influx of investment and research to make the, in this case, the magnet cheaper and more readily accessible. These neodynamar magnets make drones. possible without them, there would be no drones.

Humanoids are going to be reliant completely. So since I guess there's going to be like 5 billion humanoids in the next 10 years, that's a lot of magnets. And complete domination by China. Rare Earths. So China, quote, mines roughly 70% of global rare earth, processes 85 to 90% of them and produces 90% plus of the world's neodyarmian magnets. China makes at least 50% of the world's electric motor.

We've heard this story before. There's definitely a theme in this. So A.12, 3, American innovation gets sold for pennies on the dollar to the Chinese with the IP and they innovate and they do great things with that technology. So we have Crote and GM and Magnaquench. What a name. Magnaquench. And Magnaquench is building magnets and motors for defense market for cars. And there was a, there are some investment decisions, I think, that GM makes. And this is not a case study on GM, you know, in the 80s, or 80s and 90s, but, you know, there was a point while Magna Quench was going, doing its thing, making batteries for GM cars, Department of Defense. GM starts buying a bunch of things, not little companies, but like gigantic companies, like EDS, Ross Perrault's company, Hughes Motors. They decide to launch GMAC mortgage financing, right? They invest $90 million in an automated factory. And then do you know what hits the fan? The Christmas Massacre, I think, is what they called it. when GM basically had to lay off 74,000 workers, they closed 21 plants and they had $8.5 billion,

they had an $8.5 billion loss in their North American automotive group in 1991. So it's a fire sale. We got to get back to what we do best. We build cars. We don't care about anything else. So allegedly, I don't know there, there wasn't any data to back this up. But when GM was looking to offload everything, Magnaquench was one of those things on the docket.

China was pretty interested in Magnaquench. GM needed somewhere else to sell their cars. They needed relationships. Potentially, the Magna Quench deal was in part to get access to the Chinese market to sell cars. Little did they know the tradeoff was massive related to magnets. At the beginning, I joked that it's magnets all the way down. It is.

There's a sentence in the essay which I think should make some people sit up and pay attention. And thanks to the war in Ukraine, drones are widely recognized as a key piece of the military arsenal of the future. They're only possible because of neomagnets. 90% of the world's magnets, the neo-magnets are made in China. So, yeah, okay, we don't need to go into the military thing, but, you know, the future wars are going to be drone wars and they're going to need magnets and all the magnets are made in China. Then there are the robots. Humanoids use actuators like humans use joints. Tesla's Optimus robot uses a total of 40 electromagnetic mechanical actuators,

28 structural, and then some others for the arm and leg, all of them use neo magnets. She calls it here, Neo China. The story of the research development and commercialization of neomagnets, like the story of the research development and commercialization of lithium iron batteries is an American and Japanese story. And like the lithium, the lithium, ah, the lithium-ion battery story, modern scale and production dominance of neomagnets now belongs to China.

So human noise robots, drones, cars, phones, what else is there? These are the ingredients that build the future of the world when you think about it. Batteries and magnets. And the control is significantly with China related to energy and action. They figured out ways to take an idea, scale it and make it work really, really well. The U.S. did have a company called Mountain Pass that was focused on magnets. It failed, kind of respun up, failed again. Then it became what's called MP Materials, which is, you know, from a U.S. perspective, is getting a lot of attention now, but still it is kind of pale in comparison of what to what China is able to do there. So my question for you, Mark, as we land the plane, my question for you is, what would happen to the U.S. economy if China said F you and stop selling neomags. Well, that's the political hot potato. I mean, the public one is rare earth, but it's all connected, isn't it? You go back to the primary ingredients and the rare earth.

It's why America was dancing around invading Greenland, wasn't it? So I assume the sourcing of the rare earth changes, and you get into a massive trade war and try to battle China with some of the things at America, Nvidia chips, as we've seen. But such is there, man. manufacturing might, that whatever you stop the flow of, they will simply create a probably soon better version than what the America does. So get your politics in order. Get your politics in order. That's a shirt, man. Holy cow. Yeah. If America focus everything on the intelligence part of this, so that in however many years it is, all of these machines that are made in China, made in China with an American brain.

or do we end up with Made in China with a Chinese brain? Or some various degrees of both. I think the future is too important to... That's a T-shirt. The future is too important. The future is too important for... This is going to be a hot take. But the future is too important for nation states, I think.

The future is too important for nation states. The future is too important for me versus you. the future is too important for what I can keep you from doing and what you can keep me from doing. We talked about the coordination problem. Technology has tremendous potential to solve the coordination problem. If humans can get there, you know what together. But there you have it. Yeah, global, if there is no global coordination, it doesn't matter what technology we're speaking about. It can be AI, it can be batteries, it can be electric kites. It doesn't matter. If there's no global communication, if there's no global accord, if there's no global coordination, if there's

no global consensus on what's best for humanity, then yes, there is no solution. And you're right, the future is too important. So sort your politics out. Sort your politics out. Well, this was fun, Mark. I hope you guys have enjoyed it as well. This is, we'll have a part two to figure out the other two pieces of the stack. But I guarantee a little teaser, you're going to see some similar patterns as we move

through the stack. That's all I've got for today. Mark, any closing thoughts? I'm going to see if I can test driver Tesla, Model 3. before next week's show because it's all about the Model 3. Fair enough. Hey, stay curious. Be disruptive.

Keep thinking on paper and learning in public.