The Pomp Podcast - #692 The US-China Gray War w/ Jacob Helberg

Episode Date: October 18, 2021

Jacob Helberg is a senior adviser at the Stanford University Center on Geopolitics and Technology and an adjunct fellow at the Center for Strategic and International Studies (CSIS). Jacob is also the author of Wires of War, a fantastic book on technology policy, China, and U.S. national security. In this conversation, we discuss US-China relations, technology, national security, Gray Wars, and why the US must start taking this much more seriously. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Jacob Helberg is a senior advisor at the Stanford University Center on Geopolitics and Technology and an adjunct fellow at the Center for Strategic and International Studies. Jacob is also the author of Wires of War, a fantastic book on technology, policy, China, and U.S. national security. In this conversation, we discuss US-China relations, technology, national security, gray wars, and why the US must start taking this much, much more seriously. I really enjoyed this conversation with Jacob, and I hope you do as well. Before we get into this episode, I want to

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with Circle. Go check them out at Circle.com. Again, whether you're trying to use that Circle account or their suite of platform API services, or you're interested in USDC, the fastest growing regulated stable coin in the world, you can go learn all about it at Circle.com. Circle.com. All right, let's get this episode with Jacob. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion.

This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Jacob here. thanks so much for doing this. Thanks for having me. Absolutely. Let's just jump right into your background. I know you spent some time at Google and were around Project Dragonfly, which involved and kind of educated you on a whole bunch of stuff that you went on to, you know, become an expert on and eventually write a book. But what exactly was that background and what was Project Dragonfly? So the main work that I did at Google really focused on helping the company navigate what its internal global news product rules were for the dozens of different news products at Google, as well as for search policy. Project Dragonfly is a now defunct effort that was planned for Google

to re-enter China's search market. And it's a project that I worked on for a pretty short period before the the intercept had leaked that the that the project was underway and eventually uh the project that got uh terminated but um basically it was interest entering that whole space was fascinating because back in 2016 when i started the tech industry was still wrapping its mind around how do we address this new emerging challenge of tech companies being caught in the crosshairs of geopolitics in the context of new emerging issues like foreign interference uh state-backed actors using commercial products in nefarious ways um as well as you know in conjunction we were on in the us seeing issues like foreign interference

and obviously through project dragonfly we're seeing other issues like for example um foreign autocratic governments banning American, you know, uh, content platforms, uh, and, and all the various issues that went into trying to, uh, uh, get back into a market that fundamentally didn't want us there. And so, um, it, it, it was, you know, a really interesting formative experience. Ultimately seeing this cross industry trend, uh, made me, you know, uh, enshrined in me a number of deep held convictions about, you know, a lot of risks on the horizon for democracy and for a lot of the different values that we hold dear as Americans and as a society. And that's why I decided to write a book because a lot of these, a lot of these issues transcend a single

company and are really about the country and our government and the tech industry as a whole. So there's so many different ways we could take this conversation just with how many different examples are at play right now. There's the United States versus other countries and then just other countries versus each other. But what I want to first start with is this idea of the gray zone and then eventually kind of a gray war. So first, let's just start with the gray zone. What exactly does that mean? So gray zone conflict is a military concept that refers to geopolitical conflicts that are taking place underneath the conventional threshold of war. So typically, historians and military experts define war as loss of life and physical destruction.

And here, you know, we have seen over time that war is a spectrum. It's not always binary. You know, some famous thinkers have said that war is politics by other means. And so it's interesting because with the advent of modern day technologies, governments can actually engage in political warfare in ways that are very, very impactful and very effective, but in ways that don't always materialize in loss of life or physical destruction. And so that's why, you know, one of the things that I did when I was working on the book was asking myself, what do you call a paradigm when a predominant pervasive feature of international politics is gray zone conflict? And ultimately, that's why I decided to refer to it as the gray war. And so when you think about that, what is probably one of the best examples you could think of of how this actually plays out in kind of the real world of international politics? So one of the best examples, two examples that I talk about are the book basically discusses two fronts to this great war.

There is what I call the front end software layer of the Internet, and it's the front end side of the war, which is the domain space where Russia, Saudi Arabia, Iran and China are primarily involved with. That includes the publication of content. It's what you see on the surface of your screen. That has a lot of players because software is very cheap and there is a low barrier to entry. And then there is the backend hardware piece of the war, which is basically where the stakes are the highest. The two biggest players on the backend are the US and China. Those are the only two players that have the engineering wherewithal to be serious players in the hardware space. And when I say hardware, I'm really referring to the physical internet infrastructure that basically runs the backbone of all of our devices from semiconductors to

submarine internet cables to satellites. If you control the physical infrastructure of the internet, you can basically have control over everything that runs on top of it. Now for our country, we have a political system that differentiates the public sector and the private sector. So our government can't legally just go around snooping on every company's intellectual property, on everyone's communications. And when there are excesses that occur, we have a system when they can be litigated in an open press, taken to an independent judiciary, so forth and so forth. In China, you have a system where you don't have that distinction between public and private. So whatever a Chinese company does, like Huawei, for example,

which is a real world example, what Huawei does, the Chinese government has a backdoor into. And that is why it's such a big risk because, and that is why the US government banned the use of Huawei because, uh, any, any type of communication or service or, uh, information that runs on top of Huawei, the Chinese government would be able to have access to, which is a massive cybersecurity risk, obviously. So when we think of let's take Huawei, uh, being, uh, the example you just described, uh, it would make a ton of sense if I'm sending emails or texting or making phone calls or, or some sorts of, uh, sensitive communication, uh, upsetting files, you know, you can just kind of go down the whole list of all the things that we really wouldn't want anyone

else to be able to see. And if that is, in fact, compromised, then they would have access to it. And so, OK, let's ban that. But if we go to what many people would consider more of an elementary example and maybe one that they don't see as much risk in something like a tick tock, what is the concern around a platform where, you know, people hopefully aren't sending classified documents or sending, you know, private sensitive information and doing communications in that way? It's more of a public platform. Does that also fit within the same kind of framework? I think it does. And the reason is that the problem with TikTok really isn't the data that people are entering in TikTok. It's not the, there's very little

intelligence value to the content that streams on TikTok. Where the cybersecurity risk comes in with TikTok is that the data on people's phones that is not on the TikTok app that the app collects. So, you know, I mean, you could just imagine like your address book, your location data, everything that you're copying and pasting on your phone, which for a lot of people, a lot of people copy and paste their email and password. All of the, all of those data points could potentially be collected by the TikTok app. And so that's really where it's not so much about the thing happening in the app it's more so that if they get the app onto the device then all of a sudden they can compromise other areas or other data points exactly exactly and and really um

there is uh and obviously once tiktok has the data the chinese government can have the data which is kind of the thrust of the issue and that's actually why the indian government banned tiktok along with uh several other hundreds of chinese applications so you also have this other framework that I find fascinating. You call it the usability destructiveness paradox of modern warfare. Describe what this is and kind of how you look at this as almost like the new weapons of war in kind of the modern time. Yeah. So an interesting paradigm. So one of the reasons that we have seen gray zone conflict take center stage in international politics is because there is an inverse relationship between the practical usability of a weapon and its degree

of physical destructiveness. To take an extreme example, if a country only has high-yield nuclear weapons, the only policy choices it has at its disposal to engage in commonplace political warfare is either not doing anything or total annihilation. And that is not very practically usable on a day-to-day basis. So what a lot of countries have been doing instead is resorting to much more usable types of weapons that don't cause as much physical destruction, but that are more usable like cyber weapons. And so it's interesting because the less physically destructive a weapon is, the more usable it becomes. And that's why, you know, as the internet starts to touch upon more and more areas of our lives, the degree, the potency of cyber weapons has gone up

substantially, and that's why they're becoming so much more usable. So when you think about that idea of usability, many times people will think of cyber warfare as, I don't know, the North Korean government is sitting there trying to hack banks or hack into cryptocurrency exchanges, you know, things that while they are not physical destruction in terms of them killing somebody or physically hurting them, it's pretty clear that there's a line around this is wrong, right? There's stealing, there's theft, there's kind of I'm breaking into something that I'm not supposed to be in. But I think also there's a bunch of examples that you've got in terms of things that maybe are more kind of, you know, in the gray area, right, if you will. So are there any that you could share that fit less in the framework of like good versus bad and more so where, OK, people are doing this. It's not physical harm. It is very usable, but it's probably not something that we actually want to encourage. Yeah, I mean, the theft of intellectual property is, you know, it's not, it's massive, it's in the hundreds of billions. And, you know, the Keith Alexander, the former head of cybercom referred it to it as the greatest transfer of wealth in human history. um so that's i mean that's definitely an example where they're not technically breaking into

corporate offices but they're hacking into a lot of their servers and their databases and stealing a lot of uh valuable information that basically makes it possible for chinese companies to save dozens of billions of dollars in very expensive research and development which that they no longer have to do because they get a lot of the r&d by stealing it from their competitors um so that's one example i mean obviously uh what a lot of the uh state-sponsored news outlets like russia today sputnik or uh the global times you know these chinese news outlets uh or you know china daily are doing with respect to coordinated information operations is also something it's less financially costly than IP theft, but it's still nefarious in nature. And it's has very, very little physical

destruction properties to it. So I mean, I would say those two examples are obviously in line with what you were referring to. Yeah, what's fascinating to me is this idea of ideas, both can be offensive and defensive weapons. And so if I can steal your IP, I think people pretty much understand how that plays out. And that would be bad for the country or the company that's losing the IP and then the country or company that is gaining it. But I also think this idea around the media and almost ideas are weapons, right? If I can basically go ahead, I can take an idea that I want to be popularized or I want to really kind of inseminate it into the conversation. I want to drive it. The best, probably most egregious example that people have at least

heard of is all around kind of political intervention. Right. So the the bots, they're going ahead and they're somehow injecting this in the conversation. But what you're talking about is not somebody went and created a bot farm on one of the social platforms and, you know, you know, try to kind of accelerate a conversation. You're talking about just literally a media company saying, hey, we just wrote an article. And here's what I think that you should you should be thinking about. Right. Literally, we're programming your mind with our media content, which I don't think a lot of people see that as a potential threat because they just haven't seen it be used in a super nefarious way where it's obvious to them yeah i so i it's um two um there are two

really uh different types of um uh threats in cyberspace that i have found that have really caught my attention that i describe in the book the first is in the information operation space uh it's interesting because a lot of these foreign autocratic governments are using technology to basically uh in ways that fundamentally change our traditional definition of speech censorship so an example of that is some of these uh outlets will basically say for example you you have you know, an article about crypto, a topic about crypto. And it's an area of crypto that hasn't been covered a lot by, you know, traditional mainstream news outlets. You could envision a scenario where all of a sudden you have Chinese propaganda outlets that start publishing

hundreds of articles related to that specific topic and using those specific keywords to basically drown out the content published by everyone else. And so it's interesting because what happens is these outlets aren't banning other people's content, but they're kind of overwhelming the platforms that where content gets surfaced to basically swap out every other viewpoint. And it's kind of like it's censorship by other means, because it's basically designed to suppress, to promote one narrative and suppress the viewpoints of everyone else. And I find that fascinating because in an analog world, censorship was all about blocking and banning information. It was about whether information was in or out. But in a world of

infinity feeds, censorship is also about whether information is up or down. And that's a very different new event. And the last point that I would add is, with respect to the hardware piece of this, another interesting paradigm shift has to do with national sovereignty. If you have a scenario where China controls the internet infrastructure of your country, and if it is able to have and know all the dirty secrets of your politicians, your journalists, your judges, that basically gives them the ability to pull levers of power over your country in a way that is very erosive to the sovereignty of your country. And so, you know, one of the conclusions that I come to in my book is that if political control is no longer just determined by boots

on the ground, it's determined by the wires in the ground. Yeah. The idea of this like new form of speech censorship is fascinating to me, right? So like you described, it used to be in or out, now it's up or down. It's much harder to identify up or down than it is in or out, right? You either know, hey, I can talk or I can't talk in the old system. Now you see, you know, everything from shadow banning and some of these kind of nomenclatures that we've used to describe it to simply just, you know what, I post something, Jacob posts something, and I just happen to get a little bit more distribution than right. Like, is that a line to draw? And in my mind, immediately jumps to like, who should actually oversee that? Is that something that, uh, we

should literally have, uh, rules around that feels like that could be overreaching, but at the same time, that is definitely happening. And the platforms are trying to identify, you know, what content does Jacob want, right? What content does pop want? How do I give them more of what they want uh but at the same time i can't check if they're actually doing that there's no verification there's no way to it to ensure it so how do you think um would almost be maybe not an ideal scenario but like just moving us more towards a world where people would worry less about this idea of like up and down and have more confidence in uh understanding who's actually being you know censored if you will uh or not yeah um so i'm so happy you asked because this

is an issue that I spent a lot of time thinking about. And, you know, I discussed quite a bit about in my book, but I think that fundamentally, I mean, one of the things that we want to do as a country is we want to speak freely and, you know, we believe in free speech. And so we need to figure out a way to walk a fine line between, you know, not having rules that stifle speech, but at the same time, because we want to protect free speech, we want to prevent foreign dictatorships from suppressing, you know, things that everyday people say, you know, in the US. And so I think the, you know, where I have landed on this question is, at the end of the day, the fundamental problem here isn't really so much about what state

sponsored news outlets are saying, it doesn't, it's almost irrelevant what it is that they're saying, you know, it's not about their viewpoints or their ideas. But it's more about the pattern of behavior it's about if they are you know all of a sudden publishing 300 articles in the span of 24 hours and you know they have like 500 twitter accounts that are immediately artificially amplifying those articles to you know get um you know twitter's algorithms uh to to to get twitter's algorithms to artificially uprank certain pieces of content it's if they engage in that kind of cross-platform um artificial coordination that i think is nefarious behavior that should be prevented and so i think the solution is uh fundamentally a solution about

uh keeping and i mean we know who's doing this there's all you know the the world is only so big there's only so many you know there's like three or four governments that have the type of engineering sophistication capable of carrying this out so then the question is how do you once you know who's doing it how do you reverse engineer from there uh being able to have good intelligence to monitor what they're doing so that you can identify it and take action on it and i've been very supportive of the idea of the government having an intel analysis unit that basically gathers intelligence from the public sector based on what we know for example from the Internet Research Agency and from other state-sponsored news outlets, as well as data

collected by private companies. Specific data points, not broad data points, because obviously that would run into privacy restrictions. Say, for example, the Internet Research Agency is operating in St. Petersburg. This Intel analysis unit would be able to say, we would like to have the details about the Twitter accounts related to the IP address that is specifically linked to the Internet Research Agency, so that it's very targeted and narrow in scope. And if you do that, you basically remove the issue of tech companies having to make these decisions that are fundamentally about, you know, basically about national security. And you have a much more legitimate, you know, public sector body that weighs in on this.

And you're really focused on behavior. You're not focused on content. Because a lot of the times people get frustrated when they feel like they're getting penalized for having different ideas or different viewpoints. And obviously, that's fundamentally not what what the objective should be. The objective should be to encourage different ideas and different viewpoints. So do you think the United States should be engaged in this as well? Like, should the U.S. basically not only understand what other folks are doing? Historically, we've definitely had a role in placing stories in foreign newspapers and especially around, you know, kind of combat zones.

And, you know, you can call it propaganda. You can call it education. You can drop, you know, pamphlets on the ground. I mean, there's all kinds of stuff that is, I think, fairly non-controversial that's publicly known. But what you're talking about is like a very sophisticated version of that that also is very hard to identify for the average person. Now, one of the issues is that some of the countries where we may be interested in doing it were actually blocked from via firewalls and things like that. Other countries we do have access to. So how much of this is like, oh, we should be defensive. We should identify this. We should do our best to kind of mitigate this risk and stay more on the defensive side versus actually if everyone's going to do it, then actually, given that it is not a harmful from a physical standpoint activity, the U.S. should be engaging this on an offensive way as well.

Well, you know, one of the things, one of the reasons that I refer to the Gray War as the Gray War is because in a war, it's not enough to just be defensive. In order to win, you have to go on offense. And so I'm actually very much in favor of offensive measures. I think that the difference, what makes us morally superior to authoritarian governments is that we actually don't have to lie. We can just make facts more widely known about concentration camps in China, about corruption in russia about a lot of the hypocrisy going on in these dictatorships that is completely true and you know that obviously uh these uh governments have gone through tremendous

lengths to try to mask and suppress and you know prevent people from um uh investigating and so we you know can simply tell the truth and make it the truth more widely known about what's going on in these places. It is a really good point about the fact that is it, you know, in some ways a sophisticated intelligence operation if you simply are spreading facts, right? And again, it brings up the question of who determines what the facts are and how do we disseminate that and who's checking the fact checkers and all that type of information. But it is a very, very interesting point. I want to go to this other idea that you have in the book is around control is power and infrastructure is control. And you alluded to it a little bit earlier in terms of

the sovereignty of some of these countries. What we've seen is, let's use China as the example, they have spent an enormous amount of money, time and energy going around and investing in countries that are not developed to build out infrastructure. I think, you know, there's a number of African countries that are probably pretty good examples to point to. How do you think about this in terms of, one, the U.S. looking at that as a risk? Again, definitely in like this gray zone type scenario where it's not a direct threat to the United States, but could be a strategic challenge. And then also, too, should the U.S. be engaging in that type of stuff as well, where we're basically playing chess and OK, you got that country, we'll take

this one and and kind of playing that game. Well, one of the reasons that China is so involved in Africa, for example, is because they need raw materials in order to produce manufactured finished products because because of a whole host of different macroeconomic reasons they've become the factory floor of the world um in in order to in order for those factories to make finished goods they need a lot of the raw material inputs uh to make those goods and so for them it's a major foreign policy imperative to work with countries that are net exporters of raw materials in order to make sure that they get access to the mines and, you know, to a lot of these resources on, you know, economically beneficial terms. And so what the first thing that we can do,

if we want to reverse and contain that is reshoring factories outside of China. If you do that, you're basically throwing a wrench and you're kind of defunding indirectly a lot of their operations in Africa because they're using their trade surplus money to basically fund a lot of these projects. So that's number one. And number two, one of the things that they're doing is these projects are not really political philanthropy. They're gaining quickly a reputation for being debt traps because they basically go into a country they say you know great we're gonna fund a road and you know a port uh on with you know low interest rates but uh in through on terms that are so predatory that the host government eventually defaults on it and then

the chinese government just seizes ownership over the port and the road and they just own it So it's very neocolonial in a lot of ways. And a lot of these countries are also very sensitive to those types of practices because they've had because of the legacy of colonialism. So I think that there is actually a very, very potentially important role that the U.S. can play to counter a lot of the activities that China has in Latin America and in Africa and in other parts of East Asia. So you also talk in the book about how China subsidized Huawei and put tens of billions of dollars into this. The U.S. in some way is subsidizing, you know, SpaceX or you can go down the line. There's a bunch of companies, some are defense related, some of them are maybe indirectly defense related. Is there a belief that maybe the U.S. government should actually be doing more to kind of economically help or fund a lot of the innovation and a lot of the technology companies? It seems like we've got kind of an abrasive political environment right now where it's cool to beat up on the big tech companies and point and yell and scream at them. And maybe some of that's warranted. Maybe it's not.

But definitely doesn't feel like the U.S. government is looking at the chessboard saying, oh, look at all these great technology companies we have. How do we use them in this game? Like, how do you think about that? Yeah. And I mean, you're right that one of the issues that I talk about in the book is the rift that we've seen emerge over the last few years between Silicon Valley and Washington, D.C. And I think that's the whole antitrust debate. I think it stands on people get really heated and it's very in vogue right now to want to break up big tech companies and to say that these companies are monopolistic. But when you really dig into the data, you know, and when you really ask yourself dispassionately, what is the evidence that these companies are engaging in monopolistic behavior? I think the data is very, very shaky at best. One example is in 2019 and in 2020, there has been over 10,000 venture capital deals that amount to around $139 billion, which is not exactly the sign of a market that lacks competition. competition. I mean, if you have 10,000 VC deals, that means that you have a lot of companies,

new companies that are entering the market and competing in that market and getting really, really high valuations for it. So clearly there are a lot of market participants that aren't afraid of competing with Google and Amazon. I mean, Shopify took on Amazon and went from being in six years went from being valued at $1 billion to $180 billion. It's clearly possible to compete with Amazon. I don't know that I buy the whole anti-monopoly debate. That's on the supply side of the market. On the demand side of the market, a lot of the antitrust legal doctrine was based on price gouging. And a lot of these services like Amazon and, you know, a number of other services, uh, Google or Facebook, all of these services are free. So when you ask yourself,

what is the consumer harm? What is the harm that's being caused to consumers? Um, I don't really, I have a hard time putting my finger on what the answer to that question is. Um, so I, I mean, I think a lot of the antitrust debate and the people making the case to break up tech companies, so much of it, their argument so often just boils down to a profound discomfort with the size of these companies and the bigness of these companies. And the idea that, you know, at the end of the day, big is bad and Apple is $2 trillion and there's got to be something fishy about that. I mean, from my vantage point, if Apple's not doing anything illegal and if a lot of other companies are, you know, competing and, uh, various parts of, uh, various segments of

Apple's business, who cares if they're $2 trillion or $4 trillion? Um, you know, to me, it's not, we shouldn't be putting, uh, an artificial ceiling on how big an American company is allowed to get. Well, I think it also, it falls in line with this idea that in some way, uh, from a societal standpoint, we've started to condemn success, right? And so if you're rich, if you're big, you must have done something wrong to get there. And sure, some people have or some companies have, but that doesn't mean everyone has. And so, you know, being kind of intellectually honest about what are the rules that people break the rules going after them is a good thing because that allows you to enforce the rules. But people who didn't break the rules doesn't necessarily mean

that you should just invent new rules to to condemn that success. One of the other things you talk about in the book, which I'm personally fascinated with, is the coronavirus really opened our eyes to how much the United States has kind of run around the world looking for efficiency. And I had Chamath Palapatiya on the podcast in, I think it was like April of 2020. And his main talking point was, we have aggressively gone after this idea of efficiency and therefore we gave up the resilience of our economy, of our supply chains, et cetera. And I think that the way that you articulated in the book is, look, in order to moving forward, be more resilient, to be able to present, prevent any sort of espionage or foreign interference in supply chains and manufacturing

and a number of different goods or industrialization, we have to bring those manufacturing jobs back. Now, my question is less about like, should we do that or not? I'm sure there are some people who will definitely debate, oh, maybe we can still get away with not having the industrial kind of jobs and businesses here. I think that we need to. I think you agree. But how much of this is driven by employing humans versus getting into more of a technological advancement? So things around 3D manufacturing and robotics, right? It feels like there's almost a disconnect between the cost of doing this internationally is why we've gone after the efficiency and the low cost labor. But if we bring it back, I don't know if we can pay American wages to actually get

the same work done. We have to almost be forced into like more of a technological revolution from an industrialization standpoint. Is that how you see it? Yeah, absolutely. So, I mean, I think that one of the things that the pandemic has really brought to the forefront is it's made us realize just the incredible extent to which we are so reliant on China for our supply chains. I mean, they make everything from windows to ventilators to, um, you know, shoes to, uh, you know, so many parts of the iPhone production are made at Foxconn, uh, in Shenzhen. And so I think it's caused a lot of us to ask ourselves, do we really, is it, is it the right thing and the right answer for the country for us to basically potentially be held at gunpoint and, you know, reliant and dependent

on, uh, a government that's antagonistic to everything we stand for. And that could put one day just completely close us off, cut us off. And, you know, um, um, I mean, hold us economically hostage. Imagine a scenario where if they told Apple, you know what our relationship with the U S is going South very fast. You guys need to find somewhere else to make your iPhones. And by the way, the shortage in phones in the global marketplace of phones, we're going to fill the void in demand with our domestic made Xiaomi cell phones. It would be absolutely catastrophic event macroeconomically for the US. And so I think the answer to addressing that basically means that as a country, we have to think about what are, you know, in the book,

I talk about three buckets of goods. There is the types of products that aren't important for national security, and we don't care where it comes from. And then there's the type of products that's so vitally important that it has to be made in the United States. And then probably a category of products that is important enough that it can be made in China, but can be made in some sort of allied space in a group of countries that we generally trust. And I think that is going to be an action item for our whole public policymaking community and our technology community to figure out how to divvy up this universe of products. I think that you're right that with respect to job creation, I mean, at the end of the day, our number one imperative economically would be to

basically have a supply chain system that is as efficient as possible, but also doesn't tilt so far on the pendulum towards efficiency, that it basically has no resilience. And so if that means that we have supply chain segments located in the United States that use a lot of 3D printing and don't use a lot of humans, that's fine. I mean, that is good for American companies and for American jobs, because that will guarantee American companies have a reliable supply chain where they can make products in a reliable way for American consumers. The last example that I'd like to give is right now there's a power shortage in China. So China threatened Australia last year, dared to question the origins of the coronavirus pandemic and the lab leak theory. China responded

by banning australian coal it china imports a lot of australian coal and as a result as a result of that ban which you know took place because the chinese government was very intransigent uh towards the australian government uh now a lot of factories in china are facing a power shortage which is causing a lot of global disruptions in supply chains so you're seeing a lot of random shortages a lot of shortages in in very random baskets of goods and so that is a classic example of what happens and you rely on your on your supply chains on you rely for your supply chains on a government that is erratic and unpredictable and at the end of the day has no tolerance for thoughts and ideas and and, you know, investigative inquiry. And so when you think about something like

Bitcoin, right, Bitcoin mining obviously was recently just banned in China. They essentially kicked it out. It's a little bit different than this Australian coal where they just kind of cut it off and said, hey, we're not going to bring it from your country. When you have a decentralized system, it's not so much that by kicking them out of your country, you are hurting another country. You're just kind of opting out of it. I'd like it very similar to kind of North Korea saying, hey, we're not going to participate in the Internet. Right. OK, well, that kind of didn't work out so well for North Korea, but everyone else is free to choose whether they want to participate or not. How do you see that type of decision playing into this whole idea of

kind of a gray war and more of these technologies that don't necessarily have anything to do with causing physical harm? But it feels like there's no decision right now that's being made between the United States and China that isn't have an eye on like the strategic importance and whether it helps or hurts uh each country in this uh you know again somewhat indirect but yet direct conflict well it's interesting because i think for a long time throughout the 20 times i think the world looked at china in awe when they were saying it's so futuristic you know they are so they're leapfrogging with uh electronic financial payments and they're using all this these qr code systems and, you know, they have these incredible, you know, street camera system and they have all

these bells and whistles, you know, these technological bells and whistles and our country feels so archaic by comparison. And I think fast forward a few years, now you're seeing, you know, the true colors of a lot of these projects and the fact that a lot of these projects that really pushed technology onto people in China were designed to de-anonymize the Chinese internet. So if you are a dissident or if you are a Chinese blogger and you're blogging things that are critical about the Chinese Communist Party or Xi Jinping, very quickly, the Chinese state police would be able to locate where you are because they can triangulate information from your cell phone with your ip address with you know what you look like based

on facial recognition on cctv cameras your financial transaction history and so the interest and but that whole paradigm of um state-based you know internet surveillance and the de-anonymization of the internet is very much based on centralizing control of uh the internet in the hands of the state. And so with Bitcoin and blockchain technology, you have an interesting paradigm because here you're actually seeing this is a technology that fundamentally is based on decentralization. And obviously it's antithetical to everything that the Chinese government has been working towards. And so that's why they banned it because, you know, they only like technology as long as it's operates off of centralization, as long as the Chinese government

can control it. And if they can't control it, they will be extremely abrasive to it. So what you saw with Bitcoin and with cryptocurrencies in general was basically that a validation of the basic idea that the Chinese government is much more attached to centralization than it is to technology. Yeah. And it makes sense, right? If you have essentially planned authoritarian regime, you probably aren't going to like things that may return some freedom or sovereignty to individuals, right? And the control ends up being really important. But before we wrap up, I want to talk about this idea of just like why people should care. Right. And I always kind of zoom out for a second. I say to myself,

OK, you and I, we're in the technology industry. We think about these things. I think there's probably an element of it's intellectually stimulating for us. There's repercussions that we see out kind of play out in front of us, even in the companies that we work at, we work with or we invest in. But for the average American, why should they care? And do they care? Maybe is even a good question as well, you know, given where we are today. Well, I think fundamentally people should care because what's at stake in the gray war between the U S and China is about people's way of life. It's about their money and their political liberties. When you think about Hollywood or the NBA or anyone, any segments of our society

that has dared to speak out in solidarity of protesters in Hong Kong and that had to make humiliating public apologies because those viewpoints offended the CCP. That's pretty scary. The last thing we need as a country is if you like democracy and you like being able to speak freely, you don't want to live in a world where the CCP writes the rules of the road. And it's about your money, because obviously, we've seen 66,000 factories closed down between 2000 and 2010, hundreds of billions of dollars in intellectual property theft. The economic fallout from gray zone warfare is very, very real in terms of the net impact that it's having on jobs.

And so people should absolutely care about the US not only recognizing that this battle as taking place, but wanting the U.S. government to have a strategy so that the U.S. can come out of the other side on this in a winning posture. And so when you think about this gray war, are there things that people at home, kind of the average American can do to participate, to help, to pitch in, to support everything from maybe spreading the word to actually doing some sort of action? How do you talk to them about what they can do to participate? I think the biggest things that they could do is engage in the public debate and encourage their members of Congress to support specific pieces of legislation. I've been very vocal and supportive about the country needing what's referred to in Washington as an outbound CFIUS framework.

So just for a little bit of background and context, we have a framework, a legal framework called CFIUS, which is basically a framework that allows the U.S. government to review on grounds of national security any investments, foreign investments inbound into the United States. So the U.S. government has the ability to say, you know what, we're not going to allow China to buy the World Trade Center, for example, on grounds of national security, or we're not going to allow them to buy. Imagine they want to buy Apple for whatever reason. We're going to say you're not allowed to do that because that poses national security risks. Back in the mid 2000s, I think it was I can't remember which country of the Persian Gulf was. It might have been the UAE that was thinking about buying five ports in the northeastern part of the country. And the U.S. government blocked it on grounds of national security. And so the question today is, does it make sense and do we need a similar framework for outbound American investments into foreign countries? Are there situations where it poses a national security risk when you have American companies making massive investments into certain other countries?

And I would argue that China is ground zero for the use case where the answer to that is overwhelmingly yes. When you have American pension funds that's using pension fund money to your money that people are working hard and to save for retirement, to put that money to work to build up China's economy, which China can then freeze or potentially do things that could jeopardize Americans' access to that money, I think is nuts. And it makes no sense. It, you know, it's completely, it's not at all part of, you know, where this bilateral relationship is going. And so it makes a lot of sense for the U.S. government to be able to review these types of investments on grounds of national security. When you look at those investments, are there specific things that you're like, we definitely should question or even prevent people from making like very, very specific things that are maybe non-controversial in terms of like why they would be bad? um so with respect to things that we should definitely prevent i think at this point we should definitely prevent um and or at least scrutinize very closely uh the ability of american companies to build out more factories in china i think the last thing we need as a country is to increase any further than you know than where we already are our economic reliance on china i think

we should aggressively encourage countries to diversify elsewhere. The Japanese government actually implemented a very interesting idea on this front of paying its companies to leave China to take their factories and supply chains and basically pack up bags and go elsewhere. And I think that's a really interesting idea that we should look at. And with respects to types of investments that probably don't jeopardize national security, I mean, I think things like apparel and clothing and like, for example, Nike makes a lot of stuff in China. I don't know that, look, if they cut us off from Nike, that would be not great and obviously a problem, but it's not going to fundamentally undermine our economic stability

in the same way that if Apple is cut off. Yeah. It's fascinating to me when you start look at the economic incentives and how you can not only say, hey, we want to use the economic incentives to get you to do something, also to not do something. And then when you start to think about it in terms of how corporates are making certain types of investments, can you get them to invest in certain areas? Well, we think about it all the time. Oh, hey, I want you to invest in this city or this state. What country you invest in becomes kind of a whole different conversation. But also, I think that it's really fascinating to start to think about what are the technologies that would be needed to kind of reshort, right, to build up that industrialization

back in the United States. And it feels like right now, there's a lot of conversations around jobs. And that's always a great kind of political soapbox to stand on is I'm going to bring jobs, I'm going to bring jobs. But the long term tailwinds, and kind of macro forces are actually that technology will be deflationary, right? And you'll actually get kind of a force that acts against more job creation in some way. And so it'll just be interesting to kind of watch this play out. Um, my, my last question for you is just as we move forward, are there specific milestones or developments that you're looking for either good or bad? Uh, so something that would happen that you would say, Hey, this is a massive red flag. We should really, uh, kind of,

um, bring attention to this or things that would be positive developments in your eyes. Well, I think positive developments. Um, I think one of the things that's really exciting to me is seeing the degree of excitement and activity that we're seeing in the venture capital space with respect to investing really big dollars on truly transformational technologies. We're seeing a lot of capital being directed at the space industry, for example, which I find really exciting because obviously, to a lot of observers, it really feels like we're a new space race with China. We're also seeing a lot of capital going into a lot of deep technology companies like AI, manufacturing, the future of manufacturing. And so all of that I find

really exciting because these are very talented entrepreneurs that are solving incredibly hard engineering problems that could potentially make it possible for us as a country to keep our edge you know, from a, you know, innovation, you know, competition standpoint. The thing that's really, really concerning, and to me, the really big red flag on the horizon is whether or not China ends up moving to invade Taiwan in the next few years. Obviously, the Minister of Defense of Taiwan seems to think that there's a chance that they might try to carry out an invasion by 2025. And I find that very concerning because that basically means that we could potentially be 24 months away from an invasion of Taiwan, which would be

huge, a very significant geopolitical event that we're not prepared for at all. So I think that is definitely something that I'm keeping a close eye on. All right. You suckered me into one more question. Afghanistan obviously has been a top of mind for a lot of people from a geopolitical standpoint. And it feels a little bit like there's this conversation that has now come up, which is America used to say, hey, we'll stand with you. We'll stand with our allies. We won't leave any Americans behind. And given the way that the situation in Afghanistan played out, I think there's questions now in terms of how committed is America to those allies. Do you think that plays into maybe a little bit increase of the posturing of China and the Taiwan situation? Well, I know that China is certainly trying to exploit Afghanistan for its purposes. So it's trying to use Afghanistan to basically further reinforce this narrative that America is an irreversible decline. Look at how chaotic Afghanistan was. It's a country that's in retreat. It's trying to humiliate the United States by getting the Taliban to give the Chinese government access to the Bagram base, which was obviously the military crown jewel of Afghanistan that the United States had for 20 years. So it really is. I mean, with the pullout from Afghanistan, what you're basically seeing is the end of the war on terror and the emergence of the Great War.

It's no longer about fighting terrorists. It's about, you know, the Chinese are going in to get access to rare earths in Afghanistan. the justification for having such an abrupt pullout was, you know, we made this really big strategic move that was chaotic. But, you know, the reason that we're doing that is to focus on the Indo-Pacific. That was the justification from the White House. And it's, you know, it's certainly obviously I don't think anyone, even including in the White House, wanted things to go down the way that they did in Afghanistan. But at least you would say, great, we're going to focus on the Indo-Pacific. So now I think the White House is under a lot, a lot of pressure to follow through with not owning two major foreign policy failures. It needs to actually

deliver in the Indo-Pacific. And it's going to be pressed really hard on how it handles Taiwan, because that will ultimately be the big Indo-Pacific test. And so, you know, they're in a very unenviable position because they have to make a really hard policy decision about how to handle Taiwan. I mean, that is a really difficult problem. And I think at the end of the day, if Taiwan falls,

that's going to be a really big geopolitical blow that I don't think the White House wants to own. I tend to agree with you, my friend. All right. The book is The Wires of War, Technology and the Global Struggle for Power. Where can people go find this? Amazon, I'm assuming. Amazon works great. Barnes and Nobles or Amazon. Awesome. And then where can people find you on Twitter or online? At Jacob Hallberg on Twitter.

Awesome. I don't want to speak too soon, but I think that this book specifically in the way that it's written and in some of the topics that you touch on is likely to kick off a conversation. in terms of just some very important issues. And frankly, I don't know if there's right answers as much as it is. We need to have the conversation and then we'll figure it out as we go. So I appreciate taking the time and the effort to write it. And I hope that everyone goes and reads it. But we will definitely have to do this again as the situation unfolds. And hopefully the next time we have a conversation, we've moved in the right direction, not the wrong one. Yeah, that sounds great. And thanks a lot for having me. It was a fun conversation. Thank you.