The Dispatch Podcast - Balance of Power: China and the United States

Episode Date: October 22, 2021

On today's episode, Sarah and Steve talk with Klon Kitchen, a senior fellow at the American Enterprise Institute and veteran of the intelligence community to discuss the latest news out of China. What do China’s hypersonic missile tests mean for the balance of power between the United States and China? Are we at the start of a new "cold war?" Kitchen answers these questions and more. Show Notes: -“Why China’s Hypersonic Missile Tests Are So Concerning” by Klon Kitchen Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the dispatch podcast. I'm your host, Sarah Isgar, joined by Steve Hayes. And this week, we are talking to Klan Kitchen. He is a senior fellow at the American Enterprise Institute, a former national security advisor to Senator Ben Sass, a 15-year veteran of the intelligence community and the author of the fantastic newsletter, The Kitchen Sink. That's S-Y-N-C. It is fabulous. And this week, we are talking China. let's dive right in you wrote a piece for the dispatch actually and you asked a few questions to yourself that I would like to pose back to you from yourself and perhaps you can catch us up on a little of the news coming out of China in the last week. What does this hypersonic missile test capability mean for the balance of power between the United States and China? Are we now officially in a Cold War and are U.S. companies and technologies assisting China's military rise?

We're just some of the questions you asked. So let's just dive into your thoughts on China. Yeah. So with the recent hypersonic missile test, The reporting is unclear, and so it's a little difficult to assess the actual kind of capabilities impact of all this. There's some sense that there was some novel thing about this approach that the Chinese did, but it's not been made clear what it really is. We can get into more technical details if you like as we talk about it. But I think the best way to understand it

is like from a technical standpoint, this isn't new, but it is important. Right. So this is a capability, but that the United States and Russia and other countries have been pursuing for a while. So not a surprise that the Chinese were doing this. They do seem to have done something peculiar. Again, I don't know what that is. That got our attention. But what I think it illustrates more broadly, and this goes to the Cold War question, is that the U.S. and China are definitely assuming more aggressive postures toward one another, and that one of the implications of that is a technological and military, you know, arms race, for lack of a better word. And hypersonics are attractive because they are, they will help a military overcome missile

defense systems, particularly the way the United States is built theirs. And so it's not really a surprise that China will be pursuing that. If you want to call this a Cold War, I think you can. Cold War is not really a technical term. It's just something that we've used to refer to the, you know, the 46 years or so of confrontation and low-level conflict between the United States and China. But, again, I think the underlying point is that the relationship between the United States has materially changed. For a long time, we made a cosmic bet that if we deepened our economic integration, that that would lead to domestic freedom inside China.

That was a fine bet. That wasn't Polyanish. It was a good thought. But it's proved. and I think to have been a failure. And so we're definitely in something as it regards China. We're definitely moving toward a more confrontational and sustained. The postures between the two nations are more confrontational. And that has all kinds of ripple effects down policy. So to use the old Facebook relationship status, it's complicated. It's complicated.

Okay, real quick, maybe I am. I'm a technical nerd, or maybe I'm actually the opposite. But can you explain real quick? We've talked about supersonic jets and things. And then now this is a hypersonic missile. What is the distinction we're making between the two? Hyper's just cooler than super. Got it. Yes. Okay. Now, okay. So when we talk about hypersonic vehicles, what we're talking about are things that are going typically five times the speed of sound. And there's three kind of platforms or capabilities when we talk about hypersonics. The first one is a hypersonic cruise missile, which is just an air launch.

It's a missile, right? It flies in the atmosphere. It's got an engine. It uses what's called a scramjet engine. And it's just like a cruise missile. It just goes faster, right? The second thing is what we call a fractional orbital bomb or fob. what that does is it's a there's a missile launch it takes the hypersonic vehicle into space

it releases that vehicle and then the vehicle kind of bounces off of the earth's atmosphere until it comes you know essentially above its target and then it enters what's called a terminal trajectory onto its target but the interesting thing there is that because it bounces off of the earth's atmosphere, it's able to kind of go longer distances. All right. The other one is a hypersonic glide vehicle. The difference there is, is it doesn't bounce off the atmosphere. It just re-enters the atmosphere and essentially glides to its target, but is able to maneuver.

So the big difference between all three of these things and, say, an intercontinental ballistic missile is the maneuverability part. So an ICBM essentially has a parabolic or, you know, an up and down trajectory. Hypersonics are able to maneuver. They tend to hide in the atmosphere, which means it's really hard to detect with radar. And their maneuverability makes it much more to intercept. Okay. The weird thing, so those are the three kind of hypersonic things.

The weird thing about what happened with China is recently is maybe they kind of of combined aspects of the the FOB, that fractional orbital piece and a traditional glide vehicle, which from a technical standpoint would be pretty impressive just from like a systems integration perspective. But in terms of actually building new capability, it doesn't really get you much. So it's like a really, really sophisticated mouse trap, but it doesn't necessarily kill the mouse more effectively. So with the way press reporting is on all this right now, it's unclear what happened. It just, it's gotten everybody's attention and people like me are trying to figure it out. And just real quick follow-up, and how do all three of those defeat traditional defense

mechanisms? So when we talk about missile defense, well, number one, the United States is the only one who's really deployed a missile defense system like at the level we have. And at the end of the day, you're trying to shoot a bullet with a bullet, right? So that's really hard. we've gotten better at it, but even our system is, you know, iffy. With an ICBM, because of its kind of fixed trajectories, it's much easier to detect and to kind of predict where it's going to be and then intercept. The maneuverability of hypersonics makes that a billion times harder, right?

Because there's no way to kind of predict where it's moving. And again, because at the most critical phase, it's operating within the Earth's atmosphere, which means it essentially uses the Earth's horizon to hide it from ground-based radar, which is what our system depends on. And then finally, with the FOB system specifically, you could theoretically travel far enough to where all of our missile defense systems are pointed at the North Pole, but this would allow the Chinese potentially at least to launch one of those through the South Pole where we have much less coverage.

Steve, I want to spend the rest of the podcast on this. We'll go into some quantum computing, like, forget China. I've changed my mind. All right. Kind of kidding. You can go. We can have them back. Okay.

Let me, a lot of the headlines about this alleged hypersonic capability related to the ability to deliver nuclear weapons. And those are headlines for a reason. That's really scary. Anytime you're talking about that kind of a. potential leap in nuclear weapons delivery. But these missiles would undoubtedly have significant conventional weapons capabilities and importance as well. Is that right? And if that is, how should we think about the potential use cases in conventional weaponry?

Yeah. So with a lot of these things, and certainly this is the case with hypersonics, it's not that it does anything unique, right? I mean, there's lots of ways that, that a new can be delivered. There's lots of ways that you can blow up things with more traditional means. I think the big takeaway is that China appears to be diversifying the ways it can do this. And this is very much a system tailored to overcome a strategic capability that we have in missile defense. Right. So the fact that they exceed our capability potentially on hypersonics, generally speaking, that's not a good thing just because of

it says about their ability to innovate and, you know, kind of vis-a-vis our abilities. That being said, it's not a category, it's not a categorically change for them. It's that, okay, the depth of their ability to imperil U.S. interests and people is growing. And that's a problem giving that broader political context that I was describing. But, you know, I mean, they've still got nuclear ICBM carrying submarines that can park off our coast and they are hard to find. They've got intercontinental ballistic missiles. So a lot of people, the conversations of ours kind of divided between people are saying,

oh my gosh, this is Sputnik, you know, red lights flashing, everybody kind of run. And the other group, which is kind of a reaction to all that, which says, look, this is no big deal, right? This doesn't categorically change anything. And I, you know, as often as the case, I'm kind of landing in the middle. middle in saying like, no, no, no, it's not novel. It is important. And it's important because of kind of what it implies more broadly. That being said, you know, if they were to continue, they did something. You know, the reporting says that they somehow defied the laws of physics.

And it's hard to assess the import of that, not knowing what that really means. And so they did something that got our attention. And I would love to, I would love to know what that is. Yeah, there's a series of comments from Professor Caitlin Talmadge, Georgetown, Professor of Brookings Institution Fellow. She says China's been engaging both quantitative nuclear expansion, nuclear silos, as well as qualitative improvements. This isn't surprising given their power, more surprising is that it hadn't happened actually. And then this is, I think, the key part. But improvements to China's nuclear arsenal today come against a backer. of worsening relationship with the U.S. and other powers, threatening behavior towards

neighbors, especially Taiwan, and tremendous growth in Chinese conventional forces. And then this is the kicker. China is not gearing up for some kind of bolt from the blue nuclear strike against the U.S., but it looks a lot like China wants to be sure that the U.S. can't use nuclear weapons to coerce China in a conventional crisis or war that China might start or stumble into. Does that get at the context that you're talking about? Yeah, it does. And I'll tell you, so I'm going to give you a scenario, and I want to be clear of what this is, this is me kind of blue-skying thinking. I don't, there's probably problems with this. But I'll give you an example that I think illustrates her point. If China were able to build a hypersonic vehicle, a nuclear capable hypersonic vehicle that could loiter in the Earth's atmosphere, so not leave the atmosphere. but actually kind of circle the earth indefinitely and then be, you know, kind of pushed onto a target when they wanted to.

You could imagine that Beijing decides, okay, we're going to move against Taiwan. But before we do, we're going to launch that vehicle and put it in atmosphere and have it circling. And the U.S. is going to know that it's there, but they won't know where it is at any given time in the atmosphere. And that's just kind of a little bit of a loaded gun like, okay, we're going to make this move now on Taiwan. you're going to have to now factor the fact that we have a deployed nuclear weapon in the airspace that we can use if things really go sideways. Now, again, I'm not saying that's their intent. I'm not even saying that that's the capability they've achieved.

But it's the kind of thing that goes to, I think, the point that the Brookings scholar that you referenced there was making, is that they are, the Beijing is seeking to build its strategic depth and its kind of freedom of movement as it regards the policies. it wants to pursue and preventing the United States from be able to coerce it and compel it into things it doesn't want to do. Yeah, well, and if that scenario that you just laid out were to come to pass, it dramatically changes the U.S. calculus in virtually every respect because, I mean, it is a loaded gun scenario, and you can't, in terms of nuclear diplomacy, make the assumption that China would be bluffing on something like Taiwan. How much, again, a context question here, I mean,

she made reference to, to belligerent moves on Taiwan. We've seen the news on additional silos. We've seen sort of incredibly hostile rhetoric coming from senior Chinese military national security officials, the kind of house rhetoric, I don't think, has quite penetrated here in the U.S. I mean, the things that they are saying are incredibly aggressive, how much, you know, as somebody who spent a lot of time in the intelligence world, how much does the intelligence community pay attention to rhetoric like that, public source information more broadly? And how much should we pay attention to that? Well, I think you always pay attention to it.

It's a matter of how much weight it's given in the assessment, right? So to the degree that it lines up with what you're seeing in other reporting channels, you know, and it's confirmatory, well, then you say, okay, well, we need to listen to them. This makes sense. If it's 180 degrees out from what you're seeing in other reporting channels, then you go, okay, so this is either, you know, some type of a head fake or some type of public relations or public diplomacy effort, not specifically an explanation of capability. And so that's always dependent upon how good your collection posture is, right?

So you have to have kind of an intellectual horizon or point of reference to hold that up against to judge its worth. That's the challenge. Now, the thing that we're facing is our collection posture in China has been degraded significantly over the last decade and a half. I mean, massive. Because why has that happened? Well, we have a couple of things. One, it's just gotten technically harder. Two, I say it got technically harder because in part, one of the things that happened after the Edward Snowden illegal disclosures, the Chinese got a hold of what we were doing and how we were doing it, and they've hardened themselves significantly against it. The other thing is, is that we had a spy in our midst who helped the Chinese obliterate our intelligence

network in China and we're still not recovered from it. So our posture has been hurt significantly. We do have a whole, you know, category of intelligence of people who do psychological assessments on foreign leaders, who listen to what they say, who assess what it indicates from a, from a psychological perspective and what, you know, it's always hard to know how to factor that kind of stuff in, though. So I guess all the bottom line on that is, my general posture on things like this is like when your enemy talks listen and if they're kind enough to tell you their intentions you know take them at their word unless you have good reason not to um i do think that there is a a type of um you know this whole wolf warrior diplomacy thing that they're doing on twitter and more broadly i think i think they are convinced that they they are convinced that they can stand up to the United States in a way that they could not previously. I think there is a growing awareness or sense within the Chinese military of their growing

capability and power. And I think they think that means they don't have to be pushed around. But a lot of, you know, my colleagues at AI, two people who are who know more about this than I ever will, you know, on the one hand, there's senior fellow Oriana Scholar Maestro, who says... China's ascendant. And, you know, they could make a move on Taiwan in the next five to 10 years because they seem, if you look at their reporting, to be concluding that they can do it militarily. They actually think they can actually pull it off. And so that makes them more dangerous. And then on the other side of the spectrum is my other colleague, Hal Brands, who says, no, China's actually a peak. They've already peaked and they're on their inevitable decline. But that makes them more scary right now, too, because they understand their window of opportunities closing and that, you know, they're likely to be more aggressive in the near to midterm because of that.

Not long ago, I saw someone go through a sudden loss and it was a stark reminder of how quickly life can change and why protecting the people you love is so important. Knowing you can take steps to help protect your loved ones and give them that extra layer of security brings real peace of mind. The truth is the consequences of not having life insurance can be serious. That kind of financial strain on top of everything else is why life insurance indeed matters. Ethos is an online platform that makes getting life insurance fast and easy to protect your family's future in minutes, not months. Ethos keeps it simple. It's 100% online, no medical exam, just a few health questions. You can get a quote in as little as 10 minutes,

same-day coverage, and policies starting at about two bucks a day, build monthly, with options up to $3 million in coverage. With a 4.8 out of five-star rating on Trust Pilot and thousands of families already applying through Ethos, it builds trust. Protect your family with life insurance from ethos. Get your free quote at ethos.com slash dispatch. That's ethos.com slash dispatch. Application times may vary. Rates may vary.

Turning a little bit to the domestic side of this, you have Jen Saki, the White House Press Secretary, giving what was an odd statement. I'm going to read the whole thing because I think context is important. I can say and echo what he said, which is generally speaking, we have made clear our concern about the military capabilities that the PRC continues to pursue, and we've been consistent in our approach with China. We welcome stiff competition, but we do not want that competition to veer into conflict, and that is certainly what we convey privately as well.

So the guys and I talked about this on Wednesday, and basically no one could defend, we welcome stiff competition to a potential or current military rival. Can you steal man that a little for us? Can you give us some version of why that might be okay to say? Nope. Nope. That to me is such a... It's one of those things where I immediately want to think,

okay, that was an off-the-cuff remark that she obviously reject or regrets and should have made it. At the same time, she's clearly reading from a notebook of talking point. So somebody thought that was a good point to make. I think it was, I hope that it doesn't actually reflect a broadly held perspective in the Biden administration. But it was unbelievably dumb and makes no sense. So that is part of my next question. Have you seen a shift from the Trump administration to the Biden administration? in terms of their attitude towards China,

either because of a change of administration or a change in facts on the ground and what that has meant for the intel community behind the scenes? So rhetorically, okay, so generally speaking, I think there's been a great deal of continuity between the two administrations as it regards China. And in the early days, it was kind of nice in terms of the political rhetoric coming out of the White House

had become more serious and consistent and reliable. That being said, this far into the administration, I'm not seeing a lot of there there. You know, that's the problem. Like, they're talking about it, and, you know, we're going to do a strategy and we're going to do a review and we're going to engage. But in terms of actual policy implementation, we're not seeing much yet. Now, if I were to give them a little bit of cover, I would say, well, there's been a number of things that have happened that would draw the resources away.

from some of this, whether it be Afghanistan or the ransomware and other cyber events that have occurred. So it's not like these people aren't busy. Nevertheless, I often say, you know, China is the policy that we're either going to get right or we're going to get a lot of things wrong. And so you can't just keep pushing this off and, you know, kind of claiming you're busy. You got to execute. And look, I think there's some indicators that there's some real policy divides between the foreign policy, national security side of the administration and some of the economic side. We've had different parts of the administration kind of negotiating publicly about where they want to see the emphasis and what they want the general approach to be on China. And I

think that confuses things. And it's the kind of thing that they need to get serious about. We've obviously paid a lot of attention collectively to China's cyber capabilities and their ability to kind of wreak havoc. In conversations that I was having before the 2020 election, when we were talking about the potential for electoral mischief, a number of people I talked to said China certainly has the capability to do serious harm to our electoral processes. But we should take some comfort in the fact that they don't think it would be in their interest to meddle in that way, in part because they benefit from our stability to a certain extent, in part because they don't want some kind of cyber intrusion, cyber tax that could be easily attributed to China.

How should we think about our vulnerability with respect to China and cyber right now? So they're imminently capable. And they have a different strategic culture than, say, the Russians. And I think that difference helps us understand a little bit of how they approach things. So, one, we have made significant improvement since 2016 in the security of our electoral systems, the actual boxes and the counting of a, we've done a lot there. That being said, a focused enemy could still screw with that and give us headaches. But I think, I suspect that one of the lessons learned for China and Russia, frankly, is that you don't have to do that, right? You don't have to kind of cross the line of actually changing votes to really screw with the Americans.

You just, there's so many easier ways to undermine American confidence in the legitimacy of the systems themselves. I mean, that's what we're looking at right now, right? that you don't have to actually cross the line of changing bits and bites on any kind of a voting box. Instead, you just keep doing the propaganda efforts and ceding doubt in American electoral legitimacy, and you get all the bang for your buck with much less risk. So that's what I think the general takeaway on what's happened since 2016 is. The Russians, relative to the Chinese, part of their whole strategic culture is to show themselves as not being afraid of the Americans. And so when they go and do these computer network operations, they're typically deliberately loud, right?

They want the people in the house to hear them stomping on the floor so that you're scared and you know they're around and it makes them seem, you know, omnipresent and big. The Chinese typically don't operate that way. They're much more stealthy. They tend to try to build advantage for the sake of leveraging it later. But the underlying reality of it all is, is that in cyber, you know, the American capability is just nuanced and sophisticated and elegant. I mean, our cyber ninses are just amazing. But you don't have to be that elegant to be effective.

And while the Chinese certainly are, they... the key capability that they offer that no one really holds a candle to is just scale. They just have more operators than anybody else. And they're just able to flood the zone in a way that, frankly, we and no one else can. You anticipated my next question. I mean, that, I mean, you're just talking to people who know loads about this more than I do. The one thing that, and this is going back several years that has sort of stuck with me is that they sort of live everywhere. And this is true not only in our government networks and we've seen the results of that,

but also in the private sector. I was having a conversation with someone who worked on cybersecurity for a big bank several years ago. And this person said it used to be the case that we did everything we could to keep the Chinese out. But we crossed a threshold at one point where we recognized that that was a losing battle. We couldn't do that. So now we understand and sort of recognize that they live in our systems. And we try to do everything we can to keep them from extracting information, causing damage while they're inside. Is that the right way to think about that?

That was a couple of years ago. Is that an outdated way of looking at it or is that an app description of where these private sector battles are right now? Yeah. So this is the genesis of what's called zero trust network. It's the idea of like, look, the enemy, the barriers to entry are so low and all of the freedom of movement benefits the enemy, not the defender. And so you were trying to develop networking strategies that are predicated on the notion of, okay, assume I'm compromised. Okay, how do I secure myself then? And, yeah, you know, the Chinese have been a huge part of it.

Now, the reason why it seems like they live everywhere is because they live. live everywhere, right? I mean, they've got, again, just in terms of scale of operations, it's unbelievable. But what that means for us is we can't, we're just not in a position to out-compete them on scale like that. And that's why the United States is tending toward AI-enabled cybersecurity defenses. It's why we're automating a lot of this, threat hunting, threat mitigation, threat removal, that kind of thing. And those are far from, you know, kind of being ready. But it's something that the threat demands of us.

And that's where you're seeing industry lead out, frankly, because they're being hit, as you said. And all of this, it used to be, there used to be a Chinese strategy called the Thousand Grain's of Sand strategy, where the idea was they were going after any in all pieces of data that they could with the understanding that it was all relevant, no matter what it was, and that it could be pulled into a mosaic of intelligence that they could use, you know, at some point in the future. That in the modern sense now is they're going after

highly encrypted information that they can't necessarily crack right now, but still hoovering it up. Based on the presupposition, that future computing capabilities like quantum and other things will allow them to leverage that material in the future. So right now it's get everything you can while you can figure out how to use it later. And so, you know, a lot of people will say, well, why would the Chinese want my, you know, my Equifax score or why would they want my Anthem insurance information? What are they going to do with that? Well, maybe they don't know yet, but I can tell you if you gave me that access, I could do a lot of damage with it. And so that, I think, helps us understand their approach to it. Well, that was maybe the most terrifying thing

we've talked about so far, but let's see if we can't do better. Looking forward about what Xi is really aiming toward, we've seen just this year, quite recently, this private sector crackdown that's been going on in China, which is at least credited in part with driving down some of their GDP growth of late. So we know that that is not simply growing their economy is not the end goal. By the way, amazing morning dispatch this morning. This is Thursday morning that I thought was the best write-up of sort of the big picture China thing.

But it included this last part, which I was like, well, huh. And it said, even after experiencing a 3.5% downturn in 2020, the American economy remains more than 40% larger than China's and more than 500% larger on a per capita basis. and that to me put it again into a stark contrast of ah Xi's point at least in the short term is not to overtake the American economy and so I'm curious therefore that that is scary to me because I understand someone who simply wants to grow their economy I'm not sure I understand then what Xi's doing so this again is another one of those issues where China hands are a little bit

divided. And I'm still wrestling with kind of where I come down on this. So one argument says that she is a true luninous believer who thinks that their economy has transitioned from, you know, the utility of their form of managed capitalism and now is moving toward a more pure form of socialism. And that, you know, the rhetoric surrounding social justice and economic prosperity or economic equity and things like that are now coming into the into play and then if that's the case it becomes uh you know like i'm kind of here for that if that's the case because i think i think it is very likely to stall the economic engine that has fueled the chinese rise uh they have wild income inequality like we talk about income inequality in this country it ain't

nothing compared to what's going on in china well that's true and it and simultaneously that's that system over the last 40 years has moved more people into the middle class than has ever been done ever before in history. So it's one of these weird dynamics, right? But the question is, so if this is the case, if she's a true believer and he's making this pivot toward a more explicitly socialist model and he does begin to kind of put a chokehold on his economy, then the question becomes like, okay, so when everything starts grinding to a halt and that begins to affect his ability to govern, what does he do? Right. Does he do? Does he double down on the revolution, or does it become more pragmatic and kind of open up

the spigot? Okay, so that's one view and kind of the to be seen aspect of that. The other side would be articulated by my colleague Derek Scissors, who says, look, this is a temporary crackdown, and it's all about she reasserting political dominance and making sure everybody understands that it doesn't matter if you're Alibaba, it doesn't matter if you're 10 cent. It doesn't matter if you're the, you know, one of the largest development companies. Evergreen. The point is, thank you, ever grant it, that you cannot be an alternative power center to the government. And I will crack whatever whip I need to to make you understand that. And, you know, so Derek argues that the best way to understand what's going

on is not that there's been some type of significant long-term strategic pivot economically in China, but that this is a temporary political exercise and that once everybody kind of understands their role again, expect Xi to start loosening the reins a little bit again. I don't know which of those is the case. I do think that what China is trying to do is prove the feasibility of a new model of governance that marries up the wealth of their form of economic, well, previously economic capitalism with authoritarianism, the stability and security of authoritarianism, and that technology is the key variable in realizing both of those aims. And that if they can actually prove the viability of that model, I think that could easily become

the chief export along China's Belt and Road initiative. I think there would be a ton of would-be dictatorships signing up for, you know, to be these kind of wealthy techno-totototatarian companies. And I think China would sell that in a box, right? I think they would have, we'll build your networks, we'll give you the boxes that make this all work, and we'll even give you the predatory loans to do it. So I think this is a real serious game. You know, I'm not quite sure how it's all going to play out, but I think it's real. So with our economy is still 40% larger than theirs, we've already seen so many of our American companies react to China as a marketplace

and what that has caused internally to our country. I'm curious if they do continue to grow, which they are, at what point, what is that tipping point? It's probably not just parity. It's probably something pre-parity with our GDP. And do you have any thoughts on what that will look like for us economically? So just to make sure I understand, in terms of if we see U.S. companies continuing to prioritize the Chinese market, what that means for us? And the Chinese GDP grows even larger so that maybe we're only 20% bigger or maybe it's that we're 10% bigger.

Like where is that tipping point where our day-to-day, it's not just that we're complaining that the NBA doesn't care about the Uyghurs. it's that now the NBA doesn't care about the American market at all. Yeah. Well, look, I would say we're already at a point where let's not wait for that moment where that's kind of undeniable and irresistible. I would say, okay, let's just, you know, I said in the piece that I wrote for you guys, tech companies particularly, it's time to choose a flag. I mean, because of the way, and I'm a free market guy, just to be very clear,

and I'm not advocating for, you know, what some people would kind of passingly call industry policy, or industrial policy, I'm simply saying, or industrial policy, I'm simply saying that the way the Chinese government is operating introduces massive distortions into the free market economy. Those distortions not only have an economic implication, they're increasingly having a national security implication. And, you know, we can't keep enabling this. We can't absorb that. At the point where their market actually, you know, let's say, as you said, reduces us from being 40% to 20%. Well, that's a real problem, right?

I mean, like, our economic engine is one of our key capabilities that allows us to operate the way we do globally. And I think the globe, generally speaking, benefits from that. So to the degree that that influence is reduced, I think that's bad for everybody. And it's certainly bad for American interests. Bringing the conversation full circle. I mean, there is, and you made reference to this in your piece, U.S. ton companies have played a role in the growth of Chinese military capabilities.

And not an insignificant role. When you say choose a flag talking to U.S. companies, what does that look like from a policy perspective? What's the mechanism there? Yeah. So this is an active conversation that is difficult to navigate it because we have some first principles that are in play here that we want to be very careful with in terms of free market economics and the freedom of the private sector to pursue some

of these things. At the same time, when I talk about choosing a flag, what my strong preference would be that private center companies recognize both the economic and reputational risk that they're assuming by operating in China. So Chinese cyber and national security law makes it very clear that there is no, there's no keeping any information from the Chinese government. I mean, like actual encryption and virtual private networks and other things that have been used in the past to hide U.S. company data in China, those are all illegal, and they have to become into compliance. And if you're not in compliance, then you're not going to be in the market. And that's just, that's just it. So I like the ideas of shifting some of the

burden to the companies themselves. So, for example, I could imagine a scenario where companies have to self-certify that none of their technologies, talent, or intellectual property is being used by the Chinese government for gross human rights violations or something like that, right? And leaving it ambiguous and not giving them, you know, kind of the discrete ways that that's going to be assessed, just understanding that, look, at any given point, the U.S. intelligence community may assess, you know what? That algorithm you built is now, you know, moving people in Wuhan or in Xinjiang into internment camps. And we're going to hold you responsible for that. So it's just saying it's just putting them on notice in effect, saying we're paying attention. Exactly. Right. And would the

consequences be threatened explicitly or would this be something that would be best on legislatively or is this something that happens kind of out of the public eye? I mean, a part from the reputational interest, which obviously would have to take place in the public eye. I like the idea of an incremental approach with legislation being kind of like the last straw. Like if it's much better for everybody, if we just come to an agreement and industry decides that they're just going to fix this or take it on, right? That being said, you know, so long as they think that money's falling out of the sky in China, they've got real challenges. And some companies are indifferent and they drive me crazy. Others, they make good, they make legitimate points.

You know, they could say like, look, you know, even if my CEO decides they're going to get out of China, their board is going to be frustrated about the fiduciary, you know, implications of that choice, and they won't be around long enough to actually implement it. That's not entirely wrong, right? That's, that's true. And that's where maybe we can provide and where I try to provide a little bit of that context for people to start justifying those decisions. So a lot of these companies are looking for U.S. government legislative action so they can point and say, look, I don't have a choice.

So maybe we need to create that, right? But if we do that, we need to be very careful about that. Look, we're just moving into a place where all the easy decisions have been made and the only stuff that's left is hard. And I get that. I'm not indifferent to it. but I also don't think we can ignore it just because it's hard. And that's, it seems to me, again, with somebody without tremendous expertise in this

area, it seems to me like that's the stage that we're at right now, where we're just choosing not to have these conversations, more or less. They're difficult conversations. We'd rather put them off. I mean, it's, you know, it's like anything in your day-to-day life. I've got to make a difficult decision. I've got to have a difficult conversation. I'm just going to wait until tomorrow to do it.

I'm going to wait until next week to do it. And then you wake up and you look and the problem has gotten considerably worse because you haven't taken that step at a time when you can do some planning, some thinking about it. And that's where she's actually been one of our biggest helps, right? His aggression and some of the things that he has done over the last couple of years are kind of forcing the issue in D.C. And so in that sense, you know, yay. All right. That's a happy way to end Yeah, we're going to leave the China discussion at

Yay with like its own emoji It should be at least. Clon saying yay All right, but most important question for last Who is better at their job? Ethan Hunt or James Bond Both of them are completely fake And nowhere close to reality I mean, I think just for longevity

You gotta go with Bond yeah that's and i'm a daniel craig fan i like i don't know him personally i don't know what he's like as a as a person but in terms of bond i thought his bond is the best bond with sean connery a very close second do you have a favorite fictionalized intel movie tv show or book that you recommend i hate them all i mean just that well they're just not they're there's it's you know anytime company you didn't like the book the company did you read that one i haven't i haven't read the company I just, any time I read or see somebody opening or using a cell phone at CIA headquarters, I'm immediately just like, okay, yeah.

Right, right. This was my problem with House of Cards. I was in two or three episodes and just thought none of this is anything like Washington. Of course, that was, you know, five years ago or whatever, when it became, it started to look more and more like Washington. By the way, just full disclosure, I had, I just looked up on my phone, Ethan Hunt. I don't know who that was. I did know James. I knew James Bond. I mean, do me credit for that. Well, what most people don't know is that Washington's a lot more like Veep than it is House of Cards.

I still haven't seen Veep. I need to do that. So thereby I'm going to assume that Washington is a lot like Homeland, the Washington Intel community. That was really realistic. No. They got they got some things closer to right. But it's, you know, what? Intel, generally speaking, is kind of a long, boring process, right? It's just, it's rigorous, and it's, I've once heard somebody say, Intel is like putting together a puzzle that's just a, that's all black, with no lights on, and you're missing a piece.

That's pretty good, actually. I watch that movie. Yeah, all right. Thank you so much for joining us, Klan. This was really helpful and only a little. depressing slash terrifying. Thanks, guys. With Amex Platinum, access to exclusive Amex pre-sale tickets can score you a spot trackside.

So being a fan for life turns into the trip of a lifetime. That's the powerful backing of Amex. Pre-sale tickets for future events subject to availability and varied by race. Turns and conditions apply. Learn more at amex.ca.ca.