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- [00:00]
A
Earlier this year, we ran an essay contest on economic security. We gave entrance two prompts. What's the economic security equivalent to the Fed's 2% inflation target? The KPI policymakers should actually be steering by. And where would you put, I don't know, $50 billion to get the most economic security for your buck? We ended up with a literal four way tie for first place with each judge giving different essay top marks. You heard from Pharrell Gregory earlier about how to spend rare earth money on a previous podcast. And for this episode, we'll be spotlighting the three others who proposed the who went into the framework question. So joining us today, Jahara Matasek, a lieutenant colonel in the Air Force and fellow at the US Naval War College, Naveen Krishnan at the Belfair center and an intel officer in the Navy Reserve, as well as Guy Ward Jackson, senior policy analyst at the Tony Blair Institute in London. No one is speaking for the Air Force, Navy, Harvard Naval War College, Tony Blair Institute, or Department of War. I guess I'm speaking for China Talk. Welcome to the podcast, everyone, and congratulations.
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B
Great to be here.
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C
Great to be here.
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D
Thank you.
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A
All right, I think, Jahara, as the senior member of this team, you're going to have to step up first. Why don't you give the pitch on your framework?
- [01:26]
D
Yeah. So I was looking at this obviously at a pretty high level in terms of what can we do to get China out of the entire industrial base cycle. And when I say the entire industrial base cycle, I'm talking like the first step would be getting them out of the mines, getting them out of the business of crushing and milling ore, the separation and refining, like the metallization of that refined metals on actual usable metal. And then finally the fifth step of like the alloying and the manufacturing of this into products that then go into the industrial base. And when I say the industrial base, obviously I mean making things for the military, but also things that are important inputs for the US Economy from, you know, chips and circuit breakers and pretty much everything in between. Because so much of the US Economy and military is dependent on various metals and minerals and alloys that basically go through China at a certain point, if not all through China. And so I decided to basically think about what can we do to China proof the US Economy by trying to invest in certain things to get us out of that whole sort of downward cycle. Because the Chinese have done a lot of things over the last few years to economically coerce the US by putting export controls on graphite, germanium and gallium Again, these are really important inputs across the entire industrial base.
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A
So, so Jhara, you came up with these KPIs of minimum viable capacity and maximum credible coercion costs. How did you come across them? And why don't you explain what they mean to you?
- [03:21]
D
Yeah, so what it meant to me was I was thinking through a couple of the KPIs that it would take to start, to start executing this and to measure it. And so the first KPI came up with sort of the time to reconstitute production. And then the second more important thing, which kind of became apparent after I wrote the essay during the Iran war, was the surge capacity. The US industrial base was basically optimized for peacetime efficiency. And when you're optimized for peacetime efficiency in a wartime crisis, you don't have the people or the machines or the capital to actually double triple production like the US government and the US military wants. And so that's another sort of KPI sort of. I started walking, walking through and then the third one was choke point concentration. That's the, that, that's the KPI again gets us back to like how can we figure out ways to get China out of the entire mine to missile process, if you will. And that sort of is the choke point issue, right? Because if it's not, you know, partly controlled or all controlled by China, then there's times that Russia's involved in it. There's times that unstable countries like the DRC are part of it. It's like what can you do at a minimum to try and onshore this, this like material or process or mineral to the United States or at least friend shore it through Canada, Europeans, Australia, etc. The fourth KPI was sort of looking through so what is the sub tier supplier liquidity. And a lot of people don't realize that once you get past the big primes of Boeing and Lockheed Martin, a lot of the tier 2, tier 3, et cetera, firms that make that, the ball bearing or that ship or that, that alloy for that missile or for that weapon system, they really are, are usually MA and PA firms that are producing this input. And a lot of times that's the only company that's making that input. So if anything happens to them, they go out of business or you know, they're not able to buy stuff anymore or they don't have the capital, they just got out of business. And this has been happening for a long time. And then the fifth one I thought was sort of, sort of working through what sort of stockpiles can the industrial base actually feasibly do? And again, thinking through, you know, who's going to pay for that? Because again, this is all very capital intensive. And so that kind of then took me to like that $50 billion again where we start looking through the first pillar was sort of like what can we do to shore up the energetics, like for munitions for example. Because a lot you don't realize again there's only one or two factories that can make the explosives and the energetics to make a lot of, of missiles work in the US and so I basically have $15 billion. And again the paper, I go down like the rabbit hole on that. The other really important thing which the US government sort of made some progress in this is the midstream. It's the midstream processing to get the magnets, because every motor needs magnets. And for the longest time China control that entire process. And so you probably heard that big MP materials deal that came out over a year ago that was working through, hey, now we can actually try to source and do everything again from the mind of the missile to get like the magnets we need. So every motor that goes with the industrial base comes from the US Pillar three is kind of whatever he alluded to was getting the industrial finance worked out for like the tier 2, tier 3 companies because they just don't have the capital that Boeing and Lockheed Martin has. So again providing them grants and loans and credits for doing the right thing to build in like that search capacity. And then like the final pillar for me was like the machining. Again the US over the last 30 years was getting out of the business of, of machining tools and equipment, things like that. And again it all sort of just slowly went over to Asia, especially being concentrate in China. A lot of that again needs to start coming back to the US because a lot of those tools and machines are the only like machines and tools that can actually make certain inputs for the industrial base. And so when you look at that, that requires a 50 billion investment minimum across those four pillars. And so the broader point of this again is this helps China proof the economy in a much cheaper way. And my hope is it moves the needle on this discussion because it doesn't need to be that expensive. But you have to start making these small investments now, otherwise it will cost way more than $50 billion in the medium and long term because you're just having to throw money at people to solve a problem after a crisis has already hit.
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B
Great.
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A
All right, now on to Naveen, why don't you walk us through how you conceptualize the problem.
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B
Yeah. Similar to Jahara, also decided to look at that dual use mandate of specifically looking at choke points in mobilization or the elasticity of surge. The way I arrived at this, this dilemma was really informed by my time working in Congress. So last last year was on the China Commission working as an analyst. And that was at the time when terrorists were quite a novel instrument, when those high tariffs were shocking. Now I think we're, we forget how quickly we adapted things, but it was quite a shocking summer to say the least. And I just realized there was all these discussions around just massive money sloshing around, right? People throwing out wild numbers for like almost these Christmas tree like sets of desires, right? You have people saying, oh like here's all these minerals you want, here's all these parts of the supply chain and here's all these parts of healthcare. And there wasn't really any sort of rhyme or reason. It was kind of like what someone woke up that day because they read the Wikipedia article and like a new vulnerability. And that was just where they wanted money to go towards. And so really felt I wanted to focus on two particular frameworks that worked in parallel. I think the main distinction about the Fed's mandate is that when you give one, you sort of lose on the other when it comes to, let's say, inflation, unemployment. So I zoned in specifically on choke point exposure and mobilization elasticity from an offense and defense point of view. So for defense, if I look at the choke point exposure index in my particular metric I developed, it tells you basically what percent of US GDP that's like particularly critical, whether it's defense, minerals, parts of the health care system, etc. Is downstream of an adversary's product. And there's a particular goal of 2% there. So I view that as like defense, whereas the complement that is offense, which I would say is mobilization elasticity and that is to track your responsiveness to a crisis. So measuring if your industrial base can physically achieve, in my case I say 50% surge output within that 180 day period without some sort of economically ruinous price hike depending on the industry. And so in that particular give and take metric is something that we need at least as decision makers in the United States, given that what looks like now industrial policy is kind of like a wish list, right? It's kind of like on a given day, here's like a pet project for like a new particular critical need. But those have to fit into a pretty Broad picture and given the way we've historically done funding for various defense needs, whether through R and D or other projects, we haven't had to look at how they interplay or interlock into a system. And so I found that sort of offense defense parallel of CEI for critical exposure index and mobilization elasticity to build a pretty good balance.
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A
And Guy.
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C
Yeah, I mean it's worth, it's worth starting by saying I had a lot of fun with this because I do a lot of European focused kind of economic security policy. And you know, when you put on your, on your, on your essay prize, you know, publication that we had sort of between 30 and 50 billion to play with, I was like, this is great. You know, like I can think with the US hat on. And if this was in Europe, if this was a European country, it would be, you know, probably significantly less.
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A
I mean it literally is significantly less. Right. Like you see the numbers around, you know, critical mineral spending is like, oh, $100 million here, $100 million there.
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C
Exactly. And so yeah, the kind of broad concept of my, my proposal is taken from the idea of nuclear latency. So essentially, you know, your South Korea's, your Japans, who obviously fall under the US nuclear umbrella, they don't have themselves, they don't have atomic bombs, but they have a strategic, broadly they have a strategic approach which basically means that they have the, theoretically have the industrial capacity and technical capability to be able to build an atomic bomb within sort of roughly six to nine months. So I basically take that concept and obviously the idea behind that concept is, you know, the kind of catchphrase of like you don't, you don't necessarily need a bomb, but you, you need the capacity to build one. And I take that concept and I sort of apply it to economic security in quite a sort of conceptual way. And I think the reason, sort of applying it to the kind of U.S. context, I think at the moment it sometimes seems like US economic security policy sort of falls between two extremes. So it's either kind of the very offensive toolkit thinking kind of chip export controls or it's quite heavy handed industrial strategy for what I describe in the piece as kind of tier one economic security priorities. So that's your kind of your fabs, your chips, acts where yes, there's probably going to be some misallocation of capital, but the priority is basically so high that you need to do it. My argument is that there is a massive kind of tier two that sits in the middle of essentially things which are massive economically important and important from a national security externality point of view. And these are basically industrial bottlenecks, but not necessarily areas that would fall in the kind of tier one priority list. And so that's the kind of, I suppose like the problem space that I'm sort of thinking about with the proposal. And my proposal is an economic security latency fund of the order of about 30 to 40 billion dollars. And broadly the idea of that fund is you have somewhere between 5, 10 to maybe 15 priority areas which kind of sit in this like tier 2, neither want to be left to the market nor they kind of tier 1 chipsack level areas of priority. And you basically use that money to fund both latent capacity and then the ability to kind of have surge capacity in a non peacetime scenario. There's a few kind of subset essentially recommendations that fall under this. So the first is, you know, you would need a kind of, I outlined some examples of the types of like toolkits you would need to be able to have that kind of, you know, what, what would the fund actually be paying for, especially during the kind of peacetime latency sort of period before kind of surge capacity. And that would be things like, you know, pre crisis purchases contracts which basically, you know, incentivize some level of production overproduction so that you can stockpile. It would be things like being able to rapidly build modular facilities for kind of certain areas that you've identified. The kind of second aspect of that. So that's the kind of toolkit, the second aspect is prioritization. And this is where I don't go into as much detail and frankly there would be a lot more kind of thinking that would need to be done. But that's basically okay. You have kind of your five to 10 to 15 areas that you define as kind of tier two economic security kind of priorities. And you need basically some level of prioritization of that. Even the US that obviously has kind of fiscal firepower cannot basically do everything. And actually I think this gets to a point that both Jhara's and Naveen's essays also kind of come to, which is, you know, there has to be an element of prioritisation. I use the example of subsea cables and subsea cable repairs where essentially you do need some kind of, I argue you need some kind of overproduction capacity in terms of kind of vessels and kind of talent, individuals and capability to ensure that if you were say in a kind of Indo Pacific conflict or whatever the example was, you would be able to rapidly repair subsea Cables. I also basically make a sub argument there that there is a kind of deterrent effect of this. So in other words, by having that capacity to surge, you actually dampen the incentive for your adversary to basically cut off that choke point in the first place. And then the final thing is thresholds. So you would need clearly defined thresholds for when you go from kind of latent capacity to surge capacity. And I think obviously that would vary depending on what the sector is you're looking at. So that's the kind of summary outline, as I said. I mean far less sophisticated than Naveen and Jara's but I think getting to some of the kind of, some of the underlying themes being very similar which are I think there needs to be kind of more rigor in what we think about economic security and more sense of prioritization. As I said, even the US needs to be able to prioritize. I mean, as I said, I do a lot of kind of European work. And it's even more the case that you need to prioritize because frankly there's less capital and less physical firepower. And I think they've got a. The final sort of broad point is this idea that like, you know, the economic security toolkit can't just be, you know, either offensive or heavy handed industrial strategy. There have to be kind of gray areas in the middle. And this idea that basically speed, speed is sovereignty, which I also think actually comes across in all the assets as well.
- [17:51]
A
All right, yeah, jump in, Jahara. This is free reign.
- [17:56]
D
Yeah, well, so what I liked about what Naveen and Guy were getting at, and that's something that I think is a theme across all three of our papers is, is the ideal ways of striving towards industrial like resilience but also sort of industrial resilience overall. And the reason why this is again really important and a really tough discussion to have is because this is going to cost money, a lot of money. And that's again, I think the tough, you know, like the tough discussion why I think with Guy Naveen talking about like the ruthless prioritization of what do we need to do now but what needs to be done in the mean the long term because we have to start slowly filling these gaps. But oh, by the way, it's going to cost us a lot because you're basically paying people to build capacity but not actually produce anything. And again it's easy to say, hey, we'll just build a bunch of factories and in wartime we'll, you know, we'll turn them on and spin them up. Okay, well, what are you going to do about getting the human capital that is trained and able to produce and do whatever you want to do in those factories? That costs money. You may have to pay people to keep factories, you know, idle factories essentially warm because you need that manpower in a crisis. So you're basically paying people to essentially do nothing but keep the machines warm. And I think that's, that's the uncomfortable sort of political aspect of everything that we're getting at that we didn't really address, I think in our three papers because unfortunately this wasn't a contest on how to convince policymakers to actually pass this. But that's the, I think the toughest conversation we have to have is like, are we willing to say it's going to cost us all this money to have this capacity and this endurance and wartime? And here's the bill. And oh, by the way, this isn't just a upfront investment. We have to now pay each additional year this insurance. Right. It's an insurance. We're basically paying for insurance here. In the long term, it will eventually, you know, in theory pay for itself because you're developing industrial sovereignty and you're, you're making, you know, you know, your country more independent and you know, capable of, of, of not being economically coerced. But again, to Guy's point about the undersea cable cutting, you know, repairing a cable that's been cut by an adversary and China and Russia have been doing it a lot either accidentally or, or, you know, as, as acts of signaling, it's not that actually hard. It takes about 16 to 24 hours to actually like repair that cable. The problem is it does require a lot of unique metals. And more importantly, there's, there's not that many ships in the world that can actually go out and fix these things. So the, you know, depending where it gets cut, it's going to take a week or two weeks to get a cable repair ship out to that location to actually repair it. Once it gets there, it's 16ish, the 24 hours actually fix it. And, and then again, to guys point, if you do this enough, you eventually have deterred an adversary through this insurance program of, hey, we're going to have like 10 times as many sea cable like repair ships than we actually need. But again, that, that sort of, you know, signals an adversary. Don't waste your time doing this because it's going to be just a very minor inconvenience. And that's the exact same thing that's going on with the US right now in terms of buying icebreaker ships, the US Defense industrial base can' these things we just don't have the people or the know how. So guess what? We're having to buy them from Finland. Do we really need icebreaker ships per se to do current operations in the Arctic? Not really because we're not doing that much. But by buying a bunch from another country, we're basically investing in their industrial base, but also signaling to adversaries we will be able to operate up there. If you want to make an issue out of this or you know, if there's a, a geopolitical hot point. Right.
- [21:55]
B
So one thing I like that you're talking about Jahara that people use a lot was like we all explicitly called out autarky being really unrealistic. Like that was I think a pretty like key thing I found in essays of where especially the more you dig into it it's like, yeah, sorry, you're not going to under undo and just like magically resolve like the decades of globalization that have occurred since the 90s that support literally all of our countries. And so I think hyper prioritization is the key point. And I found that that's why I actually opted for more of the the two framework. Like the two dual mandates of like, okay, like what are kind of the overall targets we should be going for? So kind of like a 2% here on CEI, maybe like a surge capacity of, of X days for critical goods and then, then you can kind of build your basket of goods around that. Because I agree with Guy that actually what you're going for is speed. Like this idea of independence is like okay, nice. That's like, nice to say you really are not going to achieve that across every industry. But it's more like you're achieving this resilience in case of a crisis. Can you actively respond just more like, okay, if there's some sort of crisis, are you able to sustain operations either tactically or like economically long enough to either achieve a resolution for to like have to get back to some sort of normalcy or to sort of take care of the immediate threat. But the idea that you're going to like permanently have enough capacity on every single critical thing forever like into into Memoriam is just really not like I don't see the numbers shaking out. So I agree it's kind of more almost like do you have the immune system to undergo the like particular pathogen, but you're not going to like survive a pathogen every single day into perpetuity we're not building like a new immune system. Right. So I think that's when I sort of thought of it like that I'm like okay, let's like parse out some industries like kind of defense, energy, health care. You can argue even the health care thing is not. Well that depends. But that's the main thing I came across with. Like we really cannot have an omni cause like autarkic model of like everyone putting it on their wish list. So it's like really hyper ruthless prioritization. It's interesting to see where that goes just because I don't know what that discussion is like kind of across the pond, but at least in the US we tend to focus on like minerals tend to get a lot of shine light especially more like the production line of just like munitions. Like those tend to be the biggest things. But curious to see like kind of what other what are the bubbles will kind of emerge as these like wish list items as part of this like really broad base.
- [24:25]
C
Yeah, I mean just to kind of hop in there. Just a couple of things I think. I mean first Naveen, to your point on like how is this kind of being perceived on the other side of the pond? I think even more so. There's a prioritization problem in that I think, you know, especially in continental Europe, I think on the kind of, you know, you know there are clearly much more kind of dependencies and in that sense the US is in a sort of more privileged position. But I think that a lot of the conversations in Europe tend to kind of fall to the kind of, you know, we need to build sovereign AI models or we need to have like autarky in like cloud or you know, we need to have you know, de risk ourselves from, you know, from, from the US and China, etc. And I think that obviously for the Europe like that is even more infeasible. And so I think the question of prioritization is even more stark. The other thing I was going to say, I mean this to your point Jhara, about like this is going to the political point of like this is going to cost a lot is I think that sometimes there is a political incentive to kind of sell economic security policies or kind of resilience policies or even kind of frankly sometimes defense spending in Europe's case as things which will have massive spillover effects and therefore are really important for growth. And there is this kind of argument of like well no, because if we invest in you know, whatever it is, this is going to be, you know, it's going to have dual use effects, it's going to have spillover effects. And you know, it's going to be great for jobs and it's going to be great for growth. And I think obviously there are some examples where that probably is true. And I'm sure there are examples of kind of US policies where there have been spillover effects as well as building resilience. But in reality there are some things which don't and aren't dual use and don't really have spillover effects, but you probably need to spend money on. And that is a harder political sell, I think. But often I think it gets packaged as, you know, defense policy as growth policy, which I think is a difficult. You know, sometimes I think that that is tried. That is, that is sort of shoehorned in, in a way that, you know, isn't, isn't always the case because, because
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A
what Jhar is advocating for of like, okay, we just set up like 20 missile lines, production lines, when we only need one. I mean, it's almost like anti growth, right? Because like you have people who could be doing like economically productive things, but instead they're just there, as you said, like keeping the, keeping the machines warm. And yeah, it's an insurance policy, but like, you have to pay for insurance and like no one likes to pay for insurance.
- [27:02]
B
Yeah, that was interesting to me. So like, obviously I'd love to have 20 lines, but I was like, okay, we don't even have like three also, it's like if we had 20 lines, like, I feel we would just be running all 20 because like even now, like these, I mean, post all of recent, like every single calendar year, the past like two or three with like, we're just continually draining munitions. But one thing I really liked on that, that front of like this flex room of like sort of production lines on standby as opposed to just on like the line stuff on standby. I did think it was an interesting like, view of like, okay, there needs to be some sort of standby capacity. So I also have that iteration in like surge capacity, which is a separate. Can you actually sort of surge? So we both, I remember we both, I noticed we both decided to address you need some level of flexibility in the system. I don't know what that will look like, frankly, if it's like adult lines or more like you sort of will pull resources from elsewhere and like reproduce. But I just hard when I look back at like the World War II mobilization and you read these stories of like all of Ford Just like retrofitting their factories. I'm like, they're just like making tanks the next day. Like, I just, I really have a hard time wrapping my head around like doing that, especially for things we're talking about now because a lot of that is so niche in production and the raw materials are not even there. Like the TNT is like hardly even in existence in the United States. So yeah, I do think about what that would look like, the surge, because I kind of focus on the metrics, like mechanically. Yeah. Curious if Johar, I know you have your hand raised if you, you, if you thought about like kind of what that full spectrum of like surge room looks like.
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D
Yeah, I, I think it's important to actually give some concrete numbers to this because you know, it's easy to talk in the abstract. So I think like a really example and Davine actually mentioned in his article as well, artillery production I think is a perfect sort of case study of how far behind the power curve the United States is, but also European allies when it comes to something that we've been able to do since World War I. And yet here we are 100 years later and we still can't do it as fast as we think we thought we could. And the example would be when Russia invaded Ukraine, the United States was producing about 14,000 artillery shells a month. Obviously when the war kicked off, you know, eventually the US And NATO allies started shipping artillery shells to Ukraine, you know, in defense of Ukraine against Russian aggression. Over the first year or so of the invasion of Ukraine, Congress and the U.S. army said it's unacceptable that we're only able to build 14,000 shells a month. We need to increase that to 100,000 shells a month. And why is that important? At the height of, of the, of the Russian Ukraine war, Russia on some days was shooting 60, 60 to 70, 000 artillery shells in a day. Now, fast forward four years after the war. As of February 2026, we've thrown $6 billion at U. S. Artillery shell production. And we're, we did. We have still have not met the mark of 100,000amonth. The US is only making about 50,000 artillery shells a month. So we've had almost four years to try and search something from 14,000 to 100,000. And we can't do it in a time that I would argue is, is, is relevant for the speed of warfare. That is what I think is a sort of a concrete sort of. We're already trying to do this and we can't even do it. And again like to Naveen's point, it's because there's just not that much propellant, energetics, there's not that much like machining tools and factories that can do this and the people that like the trained, qualified people to actually do this. Because again, this isn't like a thing that you can zoom, call your way into making artillery shell. This is, I think just one of the easiest things to get into when it says, hey, we need to be able to do this in a time that matters. And, and since we're talking about, about, you know, a dumb munition like artillery shells, now we can start looking at Patriot missiles, which, you know, during the Iran war, from what certain estimates exist out there, the US and coalition allies expended about 1700-2000 Patriot missiles in about 39 days. Why is that really staggering, the fact that in less than five weeks of war, the US and its allies expended three years worth of Patriot production? These are the interceptors to shoot down the drones and the missiles. That is unsustainable. Now a contract dropped this last month to surge that production, but they're not going to be able to double or triple this anytime soon. Maybe by 2030, the US and its allies will be able to produce 1800-2000 Patriot missiles a year. But that's, that's, that's years away. And these are the tough, tough conversations that people didn't realize that when you get into sort of a near pure fight and also sort of bad doctrine and assumptions when it comes to shooting things down. Because apparently when the Ukrainians were helping out with air defense in the Middle east during the Iran war, they were shocked and horrified to see certain militaries firing eight Patriot missiles against one Iranian drone. Why is it unsustainable? Patriot missile, depending on, you know, on the brakes of the cost is about three or four million dollars a shot. And yet these drones were costing what, less than, you know, $30,000. That's unsustainable economically. And of course there's been other videos have been posted online of 11 to 13 interceptor missiles being shot against one Iranian missile. Again, these interceptor missiles, depending on the variant type, can cost as little as 3 million to 15 million doll. Average Iranian missile maybe cost half a million dollars. So that's also the other important reason why we have to have this debate discussion is that this is economically unsustainable. If we also don't have a better approach to making these interceptor missiles and making them way cheaper and finding sort of alternative ways like to shoot things down again doesn't bankrupt you?
- [33:15]
C
I just wanted to hop in on that on a, on a point, on, on kind of surge capacity and I think tied into some stuff on kind of frontier, frontier innovation. And I think that we've been speaking to some like robotics companies at the frontier in kind of the UK and Europe and the US And I think one point that comes up which I think is important is that basically adoption of the next generation of industrial automation is going to be super important. And I'm not saying this will apply to all industries where the US needs search capacity, but I think that obviously the US has offshored a lot of the kind of dirty middle layers of its industrial ecosystem. And I think a point that comes up, I think quite a lot from my conversations is that we now have, there is now a window because of frontier innovation in industrial automation where you actually, you can reshore some of that capability and you can have surge capacity at a cheaper cost in a way that 20 years ago you probably couldn't have had. And I think there is, you know, if you can basically, you know, tie the kind of frontier of innovation in industrial robotics and have, you know, widespread adoption in the US and make sure that that is a priority, I think that could possibly help with some of the trade offs when it comes to costs and also basically the ability to have surge capacity in areas where the US currently doesn't. So I think sort of tying the kind of frontier innovation to the kind of broader adoption and industrial base I think will be super important for the US in the next 10 years.
- [35:02]
A
I have a provocation for you guys. So all three of you put the focus on this idea of like time to reconstitute or like time to like, you know, have America get its shit together. So the thing isn't, you know, the squeeze isn't as painful. You know, this is like a defense, like a defense forward framework. I'm curious why you guys didn't prioritize something like the amount of pain that it takes for the adversary to, you know, inflict the thing or just do more prioritization on the, you know, type of like, you know, offensive versions, you know, the, the defend forward version of economic security.
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B
When you say defend forward, like did you mean focusing on the, like how would it cost the adversary and whether or not we can increase that cost for them basically, so they don't.
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A
Yeah, I think that was.
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B
Yeah, maybe this is a hot take.
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D
Or maybe.
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A
Are there other like, or are there other frameworks besides like time to reconstitute that you guys can consider it and threw out. Yeah, sorry.
- [36:12]
B
I think maybe this is like a bit of a hot take. I just thought if I think about a weakness of like US Security policy, we're broadly decision makers. I think that given our economy just being like broadly consumption space, it's like not heavily resource dependent, like not heavily a research exporter compared to like let's say Russia for example. It's not a hydrocarbon market. It's not purely an export driven economy. Like we are services. Like we are far more, let's say vulnerable to the types of shocks. I think and I think generally speaking, like I view that as a pretty large strategic concern of like economic shock and turmoil to a US policy decision maker as opposed to let's say someone in Beijing. I mean that's what happens when you like live in a democracy. You need to make decisions that have to deal with economies writ large. And I just view if I look at like the list of United States adversaries, I view their like the economic shock relative to their like domestic, let's say concern as being a minimal concern relative to that of the United States. So that, that is more ideological. It's not connected to you know, technical issues related to our paper. But I just think of that's like the actual something that we rightfully like will have to deal to a greater extent to adversaries given that we operate in a more like largely prosperous, like interconnected economy and we have to take economic pain to a greater concern than that adversaries.
- [37:36]
C
I yeah, to jump in on that, I think it is really good question, Jordan. I mean my answer would be, I mean, you know, again, I mean sitting outside the U.S. so maybe, maybe bias. But I think, you know, I do think the Last sort of 8 to 10 years on the offensive side, I think the US has squeezed a lot of its choke points and I think that part of the problem is that China has spent the last 10, whatever years de risking from some of those choke points. Obviously not all of them. And you cover a lot of this on your other episodes. But I think that by squeezing a lot of those choke points and by focusing a lot on the offensive side, I think that there's been sort of missed the fact. I mean I think it came to fruition, you know, when Trump went head to head with China and it was proven that, you know, by having the critical minerals card, China had escalation dominance. And my argument would be that that wasn't necessarily just because China had the ultimate Trump offensive economic security card. It was because they'd managed to de risk from some of the, the US as choke points over the course of, you know, 10, 15 years. So I do think that there is, I do, I mean, and the other thing I would say as well, which I, I briefly mentioned in my, in my essay, is I think, I think squeezing offensive tools is politically easier because to the point that Jahara made at the beginning, like telling that your electorate that you're going to spend, you know, x amount of money on something that has no direct impact on them unless there was a crisis. And by the way, it's very hard to prove that it has impact in a crisis because no one, you know, the irony is you don't know when it's worked to some extent when it's successful, but you do know when it's failed because you have a kind of COVID like situation. And I think that it's politically easier to squeeze choke points in an offensive way and actually harder to sell to a US electorate where, you know, you're spending more on debt than on defense, that you need to be kind of building your resilience and defensive tools. So I think there's a political side
- [39:44]
A
to it as well.
- [39:44]
C
I would say,
- [39:47]
D
and bring this back to Jordan's question, the fact that we didn't address that, that aspect of how to go on the offensive. I wanted to actually mention I actually had written an article that it's under review. I think it's going to come out in RUSI later this year where I talk about this also just can't be a, a U.S. or a Canadian or a European solution. There actually needs to be sort of a NATO industrial type of commons because as much as we want to all have industrial sovereignty, the US and, and all of NATO, everyone has certain niche things they're really good at. And trying to just go again towards sort of some domestic autarky is a waste of money and time, especially if another country can do it way cheaper and they have the ability in the know how to actually scale this up. And so the article that I hopefully will be coming out in RUSI later I talk about we need to get past this idea of NATO interoperability because it only exists on paper. I would contend it stops after 5, 5, 6 rounds for guns and 7, 6, 2 rounds for guns. Everything else after that, everyone's kind of doing their own. We all say we're NATO interoperable and everyone makes a piece of the F35. But that is such a sort of brittle approach to the industrial base. And there needs to be sort of a proper NATO approach to the transatlantic defense industrial base that says, hey, here is an actual proper interoperability approach to our industrial bases. If it requires like sort of like a digital passport so that we all know how to make a certain alloy or part in a gun or a part of a munition and it's interchangeable and you don't have to go through all the recertification and re qualification issues and that. So that fixes this, the defensive aspect of the industrial base for the US and allies. And then when you go on the offensive aspect, I was working through this idea called a counter coercion leverage model. And that's that to me I think is how you get, that's how you actually help the US and allies China proof their economies and their industrial base is because you essentially have to share industrial intelligence to say here are the spots where we actually have a choke point over the Chinese and the Chinese don't know this. And the next time that China tries to leverage us in some type of trade deal or economic coercion or turning off the, the flow of gallium and graphite, which again China controls essentially 100% of the world's like supply of those two critical like materials, we can then counter to China. Cool, you can do that, but we're going to turn off X, Y and Z to your country. And are you sure you want to do that? Because we can cause you pain too. And that's like the bargaining point of this that needs to be also discussed is again, how can we counter coerce as an alliance, you have to do as an alliance because China knows how to pick off allies one by one on certain points because of the economic leverage that China has. And if you can do that now, you've also essentially China proofed your economy without having to spend tens or hundreds of billions of dollars, you know, doing that. So I think that's another type of insurance approach you can take to this alongside also understanding that if you do this, and I think we, there's, there are some examples of this, of where the US has turned off like, like the flow of, of Nvidia chips to China. So we have small little test cases of this. But if you could do it at scale now, you actually reach sort of a economic coercion parody with China and other adversaries so that these tools can't be, can't be used anymore. And again, industrial base does not get disrupted by sort of geopolitical events and other crises.
- [43:50]
C
If, if I could open with a, with a, with my, my European UK hat. I mean, I, I totally, I, I, you know, I, I totally agree with Jara. Like in theory, I think that, you know, sitting on the other side of the pond, like, I, I think on the alliance perspective, you know, I do think that the US has, has eroded some of its kind of easier wins when it comes to kind of defensive resilience and economic security equity policy through alliances in that, you know. Yeah. Again, sitting in these conversations in, in, you know, Brussels in Europe, like. And Naveen, I know you're there as well at the moment, but like, you know, the conversation is basically all about right now in Europe is like, is, you know, how do we de. Risk from, from the U.S. how, you know, we know we're not going to be able to do this in every part of the stack, but like, how can we build our own choke points? How can we ensure that we have like, like a stake at the table? How can we ensure we have, you know, national winners that sit at future points of, you know, future technology stacks or whatever or whatever it is. And I think that the problem with, you know, I think ultimately there's a lot of low hanging fruit for the US when it comes to, yeah, when it comes to things like critical minerals and you know, partnering with Canada and Europe, etc. Another example is quantum. I know, Jordan, you did a, a podcast on that recently. I mean, you know, the US Is in a position in quantum where it's basically, there's no doubt it's got the leading quantum hardware companies, but it doesn't really have the component companies, it doesn't have the cryogenics, it doesn't have, you know, the advanced lasers, etc. And actually a lot of, you know, Europe does not lead on the hardware side, but they do lead on the component side. And I, you know, I've had conversations with both people in kind of of Europe and the US about, you know, is that could there be a, a pack silica equivalent for quantum. And you know, Europe is, look, sitting here when they're thinking about that, they're thinking, you know, how can we build leverage in the quantum supply chain so that we can, you know, play tough at the table with the US they're not thinking like, how can we, you know, how can we generally, they're not thinking, you know, how can we work together? And I think that mindset shift that has, you know, has been generated in the last kind of eight years is going to be a tough one to pull back. And I Do think it has, you know, I think the US obviously is a very strong position a lot of things, but I do think it will have long term consequences for the kind of defensive resilience side of economic security for the US and the low hanging fruit that can come from the alliance side.
- [46:25]
B
Yeah, I mean that's, that's something when you crunch the numbers. Like if you look at any particular, like I focus a lot on like let's say the defense second healthcare particularly people focus on minerals. Like any way you cut it. Like you pretty much need allies. That's the only way to accommodate surge capacity within any particular. Like in my particular paper I looked at okay, like what in my mind are tolerable levels of price increases where your economy doesn't like fully collapse and there's no way the numbers crunch without allies in the mix. Like shipbuilding is a great example. It's like I think we're at like 0.05% if we're being generous of global class. Seem like South Korea and Japan get us like a lot closer to China. So yeah, that's unfortunate. Just development at least on the, the transatlantic side there's like more hesitancy of trying to figure out how you diversify from everyone. Like not only China but the US ET are at large. If I'm just looking at from the American point of view, the one benefit is you do have a lot of pools to draw from. Like you have your Asian partners. An attempt to grow like economic sort of like resource relationship in Latin America. I'm more doubtful on that. But you also have like, you have a lot of pools to draw from. So like it's a bit messy but hopefully if you're trying to make the best of a situation is you try and piece together where you can find certain pieces of the puzzle and this like broad bucket of allies. So then build a kind of collage of various parts of the the chain that work best. I do think to Guy's point of just like greater concern when it comes to at least like American reliability or like what looks like. What that particular relationship looks like is that it might just end up making the relationship be more focused to existing like defense partnerships for example. Like it could just be like okay, like the bucket that makes the most sense or there's like more work that's getting done is more just like NATO because there tends to be more of a situation around NATO as opposed to like these other technologies that don't live in a comfortable bucket that are not just defense coded because it's very easy for like the Dow or like defense orgs to kind of take on ownership of that. So curious if you guys have any thoughts on when we look at the critical, critical areas there are things that aren't neatly defense right like that just don't neatly fit into an owner. Like it's at least the United States, not for every country. A bit easier to kind of like shake coins in the Pentagon and like have something like come out that can pay for a particular pet project. But that funding looks a lot more different when you leave defense and you go out into healthcare. Energy for example is like kind of across the board. So that's something I think about is like the most difficult thing is okay have these metrics but like outside defense there's not neat stakeholders. Like it's a lot neater to just have different countries and their militaries kind of look at sourcing. But I don't know if folks had thoughts on, on that of the problem gets a lot messier when we leave particularly munitions and weapon systems and you look at like raw materials like automated manufacturing, healthcare, etc.
- [49:08]
C
Yeah, I mean one thing to add to that is I think the fact that I suppose a lot of what we've sort of discussed in our essays is kind of in a way like the examples of whether it's munitions or subsea cables, these are quite sort of traditional areas. And one thing that I think is also applies to the UK and Europe as well is I think quite often kind of the question of economic security and choke points inevitably, because this is where the bias is, tends to be quite sort of not backward looking but looking at existing production lines or existing technology stacks and thinking okay, where do we have vulnerability, where do we have resilience, where do we have leverage? But I think that there is also when it comes from a state capacity standpoint, the US and the west and Europe also need kind of future facing economic security state capacity in the sense of you need people who are trying to figure out okay, what's the next big bottleneck going to be? What are the next iterations of the AI stack that are going to be super relevant whether that's the future of inference compute. And Nvidia loses its monopoly because there's more specialized versions of compute that are being built by other companies as one example. So I think having state capacity that is future facing is I think also really like basically a very important like aspect of this. And it's easy, as I said, I think it's easy to. It's easy to be retroactive as well. And I think it's also easy to think like oh, you know, we're so reliant on XYZ, how do we miss that 20 years ago? Let's correct for it. Rather than also thinking how do we avoid an equivalent thing happening, happening to something that we haven't even thought about in 20 years time.
- [51:08]
A
Another thing I feel like you guys over under indexed on a little bit is I don't know, buying your way out of these problems through research and novel technologies. I mean Johara, you brought up the drone Patriot energetic stuff. I don't know, maybe there's just like a better, cheaper solution out there and we can throw some, you know, scientists and engineers on it. Any thoughts on how to conceptualize like just like, you know, science your way through these problems?
- [51:39]
B
Yeah, I think for me when I first took that, I just view, maybe I'm more fundamentalist as my bias. I just think when I look at the current defense apparatus like since Ukraine and to current day is like the biggest problems the United States has, for lack of better words, aren't the sexy ones. It's like real basic stuff, technologies that we already have. Whether it's like this munitions issues in the sheer volume. Like if I just, I focus on in the Pacific. So like we'll just use that as a historical example. There's a lot of writing, it's very rich of literature and you know, like kind of armchair experts that say, you know, the United States is basically becoming what the Japanese Imperial Navy was, which was like an over indexation on exquisite systems to compensate for like a lack of resource industrial might in the United States just being like okay, we're just gonna like fully produce more steel than the rest of every other power in World War II combined. Basically that's like the industrial might versus just like exquisite stature. And so when I look at like the Indo Pacific is like just my particular specialty. The issues I see are one of volume. And when it comes to innovation, maybe there can be some particular something to be said for the types of let's say warfare or skills that'll be used in operational and tactical sense are a bit novel ish when it comes to like drones or like this particular, that particular tech. But my point is the new tech is still volume oriented. Like the new innovative things. Whether it's like okay, things are automatic or things are, you know, asymmetric defense AI. And all these new techs enable asymmetric defense that still relies on sheer volume. So like I just see volume as the biggest constraining factor, the one caveat is yes, you do have some efficiencies in production of like the automation of like dark factories that remove some level of human capital. Need the ability to just like let's say in critical mineral like refine at a much higher percentage. Like you can get like, you know, 20% of like synthesized gallium out of a sample as opposed to something a lot smaller. But my point is like a lot of that you still need a production line to run. You still have to have the existing facility. So I view the indexation on higher tech, novel R and D and new solutions as a nice to have. But the need to have is literally volume and something to work. It's almost like what you're suggesting, Jordan. It's kind of like caffeine. Like okay, it's really nice to have a stimulant to go a little faster. But you need food. You need food. You'll starve to death with Red Bull. You need fat and carbs. So that's kind of like the way I would characterize the U.S. capacity is like we are so far away from like needing caffeine is like we are holed up and there's like there's no water or bread. Like that's the way I, Jhara, as
- [54:19]
A
the, as the resident enlisted, you know,
- [54:24]
D
are full time officer.
- [54:26]
A
Okay, excuse me, I apologize. As, as the, as the full time member of the military, I need to hear your take on the CENTCOM energy drink consumption. What is, what should we take from that?
- [54:39]
D
Oh, you mean the RIP Its which you could still find RIP Its which for the audience that has. Hasn't deployed to the Middle East, a RIP it is sort of a knockoff Red Bull that exists the last 10, 15 years and for a period of time when I got back to my Iraq and Afghanistan, you could actually find RIP Its at your local Dollar Tree store. I don't know if they have those in Europe, the guy or Naveen, but that's where you pay a dollar for something that's really low quality and cheap. So yeah, the, the wars in the Middle east for the last 20 years basically ran on. On RIP ITS. That was our, our cheap energy drink. Whoever won that contract like the ripit company made off pretty well.
- [55:26]
A
But didn't.
- [55:27]
D
I actually wanted to because of what, of what Naveen was saying about the. Oh man, you threw me up, Jordan, with that RIP it thing. What was Naveen talking about? I just dropped it.
- [55:37]
B
Basically. Basically it's like do we think that like R and D and the frontier and novel tech can alleviate like we're coming at it from volume industrial scale. But history has shown that research has like yielded innovative results. But I was sort of doubting that, that potential.
- [55:53]
D
Yeah, yeah. So what I wanted to say to that is it's kind of like Matt Damon in the Martian movie, right? Where he's like, I'm gonna have to science the shit out of this.
- [56:03]
A
Right?
- [56:04]
D
That's what I think Jordan was trying to allude to is can we just find a way to like science our way out of this? And in the long term, yes. In the short term, no. But I would actually argue current policies right now in the long term are also a no. Because over the last year and a half or so, the US government has pulled a lot of grants and funding to a lot of the universities and institutes that work on trying to do the material science, the material engineering. How can we 3D print things that we didn't think was possible to 3D print with different materials? You know, there's all these things that we should be able to science our way around, you know, again, like recycling e waste, you know, things like that. But if you don't put in the R and D money now, again, it's going to end up costing you way more in the long term. And again, that opens you up to another point of coercion for an adversary. So at least from my perspective, the biggest problem is we are not investing in the science and tech. You need to overcome these sort of industrial based hurdles in the long term because that's where you really get the cost savings and the economic efficiency. Right. At the end of the day, like I know the US seems to have like a sort of a blank check to do whatever it wants to do. And you know, and deficits and debts don't matter, but at some point it does matter. And you need to have that economic efficiency. And if you haven't invested in the universities and the research and the grants to, you know, find designs and new materials that are cheaper, more effective, more efficient, you are going to be, you know, a prisoner to sort of contemporary economic coercion. And you won't be able to make weapon systems, tech or quantum or AI work as efficiently or effective as an adversary. And again, over time, you know, you start losing your comparative advantage because an adversary is able to do things at scale, way cheaper, faster and more effectively.
- [58:05]
C
Yeah, I mean, one thing I would quickly like, say, I mean, I think it's a really interesting question of like, like, you know, it in A sense like, you know, the classic thing of like China, China, you know, goes to market share and sort of over producers and the US focus on the frontier. And obviously that applies to lots of things, you know, including, you know, AI versus, you know, the China's open source ecosystem is like just one example of that. But I, but I think that like, I suppose what I would say is back to the, I think it does apply back to the alliance to kind of point which is that, that you know, in the end I think that the US kind of the US's political economy is better optimized for kind of leading at that frontier and like taking that approach. China's is better built for allowing inefficiencies to exist and kind of like letting those happen. Anyway, to the kind of discussions we've sort of all had in our essays. And I think that, you know, to some extent, I do think by eroding some of those alliances, or at least like going somewhere and eroding them and therefore, you know, reducing your ability to kind of build resilience through, through cooperation, the US has in a sense undermined its own kind of, in a way, its own comparative advantage, its own playbook which is generally less good at mass, but great at leading at the frontier. Maybe sort of in addition.
- [59:25]
B
Yeah, like on, on that particular point, just because you brought up the China example, since I look a lot more on AI spending now, that's kind of actually the flip problem is what China sees in the AI race. So there's like this, at least in Chinese media, they're constantly citing the total capex spend by like hyperscalers on data centers, like 40 billion, like every day there's all these billions coming out. And they view that as like, oh my God, America has a Manhattan Project of like resources going after a problem. So I would say to your point, Jordan, it depends on the threat. Like, so when I look at cyber, like bio kind of cbrn, that kind of frontier risk, a certain amounts of things when it comes to artificial intelligence, I do feel like, yeah, for lack of better phrasing from Jahara, you can science the shit out of it. I buy that. I buy that there are novel things that are coming forward, whether it's a mythos type capability to where R and D yields like disproportionate output. I just think about, okay, what are like, for this particular prompt you're answering, what are the weaknesses of US industrial strategy? What is something I'm worried about? It's not, it's actually the numbers game. It's like the very boring threats that people have been looking at when we were warring with like spears and stones, which is like a sheer volume number of can you field enough to sustain yourself to, like, till the threat subsides? And so I think when it comes to that, it's a manufacturing problem. And R and D can deliver outside results. You can automate things, you can get efficiency to manufacturing, but not if you're going from zero. Like, again, it's like, maybe caffeine, okay, takes you from like 80% efficiency to 90, but you can't be from like zero to 80. You still have to have the capacity to start with. And I view R and D is that kind of accelerant that can aid in manufacturing efficiency, but it's not a replacement for like zero manufacturing altogether.
- [61:11]
C
Yeah, I think that's, I think that's really interesting. I mean, I think it maybe also goes back to the point I was making earlier about the fact that, you know, building, you know, if we're saying, you know, there's, there's like, quote unquote sexy and unsexy economic security questions, some is kind of frontier. And, you know, to your point, the kind of bread and butter stuff is the stuff that the US struggles with. I mean, this is like pure speculation, but I do wonder whether, because I also see this in the UK and Europe, like, if you are a democratic country, it is harder to sell to. You know, it's much easier to kind of say that you're spending money on some DARPA advanced R and D project and for that to be kind of accepted as a norm than to say, yeah, we're spending all this money on. Just in case there's a supply chain shock when you have the electorate thinking that there's a cost of living crisis, etc.
- [62:06]
A
Etc.
- [62:07]
C
So I think maybe there is also a structural issue that, you know, the US has and also arguably other kind of Western democracies, which is actually like doing this more kind of, you know, doing. And I actually see in the UK definitely as well, because we've, you know, offshored a lot of the, you know, all of our kind of industrial base, basically, and there is no political incentive basically to. To sit there and say we have to spend like all this money that we otherwise would spend on the NHS on rebuilding this capacity because it's essential for these reasons.
- [62:42]
B
Yeah, I think to that point, I think one reoccurring theme is at least depending on the industry, there's no way you solve the problem without some sort of allied distribution Scale of trying to make the best of a situation currently. Because I remember on your point of the UK issue, the Economist had a great article where everyone in the United States for the past let's say three years has been obsessed with, okay, we're gonna have this industrial revolution. And we do see a lot of money at least coming to reshoring of certain capacities. But it's extremely slow. And there's a funny graph of like, people who support this versus who's actually going to like, do this particular role. And it's like, you see that, you know, a shocking. A few amount of percent of Americans, like really, when it push comes to shove, are actually like pivoting towards these particular industries. Granted, it takes a few years for like the job, jobs to be there, to then have training, to then have people that like, go into those particular roles. But to me, it's like you're making a. You're like trying to like, race from A to B with all these zigzags. And the straight line is literally like, okay, we have countries that actually have decent levels of like, industrial scale that like, we have decent relations with. We should try and look at our particular exquisite goods and their particular volume and think of a particular distribution scale. But I don't know if, Jahara, you had your thoughts on that.
- [64:03]
D
I mean, it takes me back to the artillery example, because at the start of the war, Russia was making about a million to 2 million shells a year. And guess what? Four years into the war, they're now making over 7 million artillery shells a year. So part of this, I think, is also just like a political willpower. Like, if we needed to, to match Russian production, we would, but we don't because it's just sort of seen as like, it's a priority, but it's not one of those top five, like, priorities. And a lot of this stuff has to be treated as a priority. But again, that's the ruthless prioritization issue. And that's the politics of this is like, yeah, we can throw $6 billion at making more artillery shells, but if there isn't sort of, you know, accountability and leadership and sort of follow through on this, it just sort of, you know, it meanders. And they're like, oh, yeah, we can't make as much artillery as we thought we would because we can't get the propellant. There's only one or two factories that make it in the U.S. we're trying to convince them to hire more people and to, you know, get more materials to make this stuff. But we haven't really figured out how, you know, the mechanism to fund this. You know, that usually ends up just being sort of like the dumbest reason why things don't happen is like government says, can you do this? And prep sector says, yeah, we can do this. And then a few months later, like, have you done it? Like, no, because you haven't given us any money or a long term contract to incentivize us to do this. So yeah, we're gonna do it, but we don't have the money to do it. So there is sort of like that say, do gap. That happens a lot because the money flows, but it's not as much money as you thought it was going to be. Or oh yeah, the cost of these materials. Even though we signed a contract to produce this many artillery shells at a per unit price. Yeah. Unfortunately, because you wanted us to surge the supply chains for this now led to, you know, the price of stuff going up double or triple. And now I can't actually to afford to deliver this to you, so we need to renegotiate the contract. Or you can just say the contract's been canceled because I can't do it. Well, guess what, you're also kind of out of luck because there's nobody that can really do this. And I think that's the other sort of tough, sort of, sort of modern acquisition contracting programmatic issue is the fact there's not enough flex in the system to sort of adapt to the reality of like a company may have given you a quote and it may seem corrupt that now the price has gone up and they're not able to deliver as many and it's going to take even longer than they thought because of these weird little bottlenecks. And so, you know, for anyone that is, is listening and wants to get rich, I think in the coming years, if you can focus your company or your little, you know, little startup on industrial intelligence, on how to identify and figure out every little bottleneck, I think that'll make you really rich. I wish I could do that, but I'm stuck in the Air Force for four more years. So whoever wants to hire me, Guy or Naveen, you guys look really smart and also Jordan as well.
- [67:02]
B
Yeah, it's my mba. My MBA coming up. But on, on your point of, of that particular will, okay, like, I think that works for like, let's say 30 of our problems of like sheer will. Like if I think about, okay, if push comes to shove and like literally it was like there was a bomb and destroy the planet Earth. And we need to produce like X particular shells. Like we would just find a way through like sheer levels of like political will and every turning every stone to make it happen. But you can only.
- [67:28]
D
It's a World War II model, right? Right, it's the World War II model.
- [67:31]
B
But I think you can only purchase, you can only get so far with that. Like there's some, at least with the particular toolkits on, like let's see, look at robotics or drones or certain parts and actuators and you get to a certain level of like, like gallium and like certain things that like you physically cannot will. I mean you could have you know like every, every person themselves descend from the heavens and like literally have magic turn. But there's certain things that can't be willed within like a six month timeline is. So I just think that that that is tempting like that is true for a decent bit. Like if you have one, like a few particular things. Like a lot of it is honestly just like poor vendor management of like a lot of my time as a consultant. The Dow or DOD actually has a pretty weak set of teeth around contractors because like at the end of the day they have to like unless you're doing like a kind of defense production, wartime seizure of assets and factories, like you actually can't compel to level. You can think you can. But even then I still think that's like 30 of the bucket. There's still 7% of stuff where like we are not producing X upteenth more ships than like what we do. Like the shipyards are there and like you can build a shipyard in maybe a few months if you literally have like, you know, powers that be. But I'm just curious if either Guy or Hugh I have thoughts on. Like there's some things we physically can't spend our way out of without having like years of capex built into these capacities.
- [68:52]
D
Yeah. I think the best example again to put concrete numbers to this in the US it takes about 26 to 29 years to open a mine. And when I say open a mine, I'm saying you identify place in the hills that look like, have, have minerals in it. And in about 26 to 29 years you'll finally be getting stuff out of there at a usable output. So that's almost three decades now you think, okay, well it's again, it's the bureaucrats, it's the, it's the laws, the regulations. Okay, let's then go look at other countries the fastest you can do it. Is 16 years. So even if you throw all the rules out the book, it still takes you about 16 years to get usable amounts of, of minerals out of that mount out of that mine. Because you can't again, that's an advance point. You can't just throw money at it and do it overnight. It's not going to happen. And even if you could will your way that 30%. Okay, cool. Now it's going to take 10 or 12 years to get any usable metals or minerals out of that mine. And I think that is sort of, I think like the bigger picture problem we're speaking to is there are just these industrial processes that take time. You cannot like unless you take every human on the planet to say you're going to dig that hole to get, to get the metal out. It's not going to happen in a time that is useful for a crisis.
- [70:07]
C
I mean I think that this is definitely like, you know, there's obviously, there's obviously a few factors that go into considering what is a priority, what is an economic security priority. And that might be strategic importance, but I do think an under discussed one is often feasibility is often feasibility. And I think that even for the US which as we know is in a much better position than lots of other kind of western and governments when it comes to kind of fiscal firepower, I do think even the US will have, and this again goes to the point in kind of the allied French drawing question of even the US sometimes doesn't have the feasibility. I mean the other thing I was going to say as well, and it's such an obvious point, but I do think is very important is to the question of prioritization. Economic security priorities are just so distorted by political incentives. And I think that sometimes I think that the US and yeah, by the way this also 100% applies to Europe and the UK as well. Sometimes I think the US is protective about the wrong things and not protective about what should be the right things. I mean to give an example, and I realize it's subjective, but I think that for example when, when Nippon Steel was, was trying to, you know, I think it was you know, trying to acquire a part of U S Steel back under Biden. And I'm pretty sure, I mean, you know, you guys will know better than me, but I'm pretty sure basically cfius under some kind of some level of pressure, it seemed basically blocked the acquisition. And I think like I remember just thinking at the time like that was a good example of like a bad thing that was done in the name of economic security because it sounded, you know, it was politically popular and it kind of sounded like something, you know, we're protecting U.S. steel from, from, you know, protecting our national security interests. And by the way, similar rhetoric in other instances happens in the UK as well. And I think that actually was a prime example of a no brainer in that, you know, U.S. steel could have really done with the injection of cash and could have really done with the injection of R and D capacity that Nippon was, was, was basically going to provide and done it in a way which wouldn't have required the US to basically spend money. So I think, you know, and as I said, I definitely see this in, in Europe and the UK as well. But I think, you know, the, you know, I think, I do think one of the fundamental problems with economic security as, you know, a discipline but also as, as, as an aspect of state capacity is it's, it's, it's so easily, so easily distorted by, by, by short term political priorities. And you know, to Jahara's point that you just made, you know, the, the long term, long termism is therefore very difficult to, to have like you know, in this, like in within economic security state capacity.
- [73:09]
A
Any concluding thoughts? What? Do you want to leave the kids out there?
- [73:14]
B
Why don't we leave the kids out there? Yeah, I can, I can go with mine maybe wrong go on the horn if people have concluding thoughts. I just think when you dig into numbers, it's just that there's really no way to go about that. This particular puzzle of just your capacity, economic security, supply chain reshore and whatever like buzz word you want to use. Without a system of global part like there's really no way those numbers crunch in a way that makes sense. And so I think for the United States, if I just look at this adversarial threats globally, my, my potential views on, on China, people might have other bigger buckets, but that's really where I put my attention. The core conclusion is like if I look at what are the assets in the US Bucket, obviously volumes in the adversary bucket, it's like okay, we have alliances to some extent. Hopefully moving forward you have an inclusion of exquisite R and D, exquisite capacities. Those are the strengths you have to leverage. And so when you're trying to solve for the volume to look at what you have, which is actually the fact that South Korea and Japan build a lot of ships, something that we can do. And so I think any particular view of economic security has to really embrace that. And if you're not Looking at that particular. As part of your solution, that's really in denial of the way the numbers are crunching. And so that's my, my takeaway is that, you know, economic security is really more of an umbrella of like, global industrial strategy. I think obviously nations have industrial strategy that address certain national elements, but you have to really think about them along distributed supply chains. Because even to the mine example, like, I would argue that, you know, which is not uncommon, that the actual minds themselves are not the limiting factors, like there's plenty of mines or minerals that we need in Australia, Canada, et cetera. It's really refining that is like the bottleneck there. And in that case, that's going to be a particular distributed chain. So I think wherever we, whatever list we make, whatever we decide on as the critical sectors, you'll have to just come up with a pretty sophisticated ally chain that meets the needs. And the US has the benefit of having a lot of different types of groups, whether you can draw from the eu, we can draw from Indo Pacific partners elsewhere in the world. And so that's where I hope industrial policy moves. But that'll obviously have to overcome these domestic challenges.
- [75:38]
C
I'm happy to go next, although I have to say I feel like, yeah, final messages for the kids. I, I feel like I am one of, possibly one of the kids. So maybe, maybe rich coming from me. But yeah, I, I, my, my final take on a takeaway is, you know, I mean, very, very crudely. You know, I think economic security is three things, and I think the third is sometimes, sometimes left out. The first is kind of leverage. And, you know, obviously it's less sort of discussion of this conversation, but, you know, where do you have choke points and the kind of offensive side to your point, Jordan? The second is resilience. And I think that's where, you know, most of this conversation is focused. And that surge capacity and that's all the things we've discussed. And, and I suppose my final takeaway point is, and I think, you know, this applies more so to Europe and the uk but I do also think applies to the US and sometimes maybe they forget that it does, which is that the third aspect is, is, is restraint. And this goes to something that Chris Miller has, you know, written about, which is like opportunity costs, you know, the difficult questions often in economic securities. Where, where are you deciding, you know, where are you deciding not to spend money? There are lots of really important things. And, you know, to, you know, I mean, the way I frame it in my essay is, you know, there's tier one, there's tier two, there's tier three priorities. And you know, figuring out where you show restraint is I think almost as hard, if not harder than, than pulling levers.
- [77:08]
D
And I'd say for the, for the kids out there, this is education and educational reform. The west collectively has forgotten how to make the stuff that allows you to make the stuff. And so I feel bad telling this, but if you wanted to get that art history major degree or something in literature, there's not going to be a job for you in the coming years. So look for a school that has sort of some type of mining engineering degree, how to make alloys, material science, industrial engineering, manufacturing aspects. Because this is, is the missing middle that the last three decades the US and the west basically abandoned because the Chinese were willing to do it for pennies on the dollar. So we didn't bother doing it anymore. Well, guess what, now we have to do it again and it's unsexy. And again you can't zoom call your way to these parts to make the stuff that makes the stuff. So at least from my perspective, you know, again I'm saying this, a 42 year old with you know, a political science degree that I'm telling the kids, don't waste your time getting a political science degree because it's worthless now and you need to again focus on knowing how to make stuff to make the stuff. So that's my old man, you know, shaking at the sky.
- [78:32]
B
Hopefully Jordan has a more like pick me up note to end us on something.
- [78:36]
A
No man, I think we all just yearn for the minds. I think that's really what it is. I guess the answer it's just more people underground is going to get us there. All right, let's call it. Congratulations again and looking forward to recording the oh my God, look how economic secure, economically secure we are show in three years time.
- [79:03]
D
More like 30 years. But yes, Jordan, I appreciate your help. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web like restoring a vintage motorcycle from a 50 page restoration block. Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it, ready to make anything online make sense. There's no place like Chrome. Check responses set up required compatibility and availability various 18.
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