A (3:33)

Taking a step back from chips, when you're thinking about doing the sort of playbook that you guys ran to promote domestic manufacturing or shape the market in some way, what's the holistic way to think of it and how did sort of what aspects of chips worked for and against you as you're trying to put government money behind and industrially?

B (4:00)

Yes. Well, I think first of all, I think it's important to say that everything's a trade off. If you're going to put money into chips, if you're going to put whatever, adding the ITC and our subsidies, $100 billion into the semiconductor industry, that's $100 billion you're not putting somewhere else. And so I think you have to frame it in the regard that we can't do everything, so we have to be focused on what we do. I laid out this approach in one of our substacks on factory settings around something has to be critical, like that critical part in the industry for national defense, for people's health, for enabling technologies of the future, like that criticality of the industry, it also has to be compromised in a way that is going to cause us pain. And so what we're seeing right now in terms of using economic tools, weaponizing economic tools, rarer semiconductors go down the list. There are specific choke points that are really potentially negative for a national and economic security perspective. And you have to be able to figure out that your effort, your subsidization or your tax incentives or whatever it is can make a difference. And that gets to the nature and structure of the industry, that gets to the supply, demand dynamics of the industry, and that gets to cost and other aspects and whether some subsidy over some period of time can actually shift the fundamental nature of the industry. Those things are not going to be true across the board for all industries. And therefore you need to think about all those aspects when you're designing industrial policy. I think for chips it's clearly critical, right? It is an enabling technology for just about everything we're doing right now. I mean, we can just look at the newspaper articles every day about memory shortages and the need for TSMC to make more chips. That is going to be ultimately the chokehold when it comes to AI. So it's clearly critical, it's clearly compromised because up until a couple of years ago we had 0% of any leading edge logic or memory being produced in this country. Now for the first time in over a decade we have that. And it's clearly or in our minds you can change it. It's changeable because most of the semiconductor industry.

A (6:34)

Is not labor.

B (6:35)

It's highly automated at this point. And so the cost differentials are much more focused on the front end construction as opposed to the back end operations. And if you can correct the cost differentials on the front end, there's a way to make that sustainable over time. And so those are the aspects in my mind that make sense for particularly leading edge semiconductors and I think can be applied elsewhere.

C (6:57)

Yeah, I think, you know, this is obviously the big kind of analytic, analytical project at the moment is to figure out what are the industries where there is this strong compelling national security case for intervention. And then once you decide an intervention is necessary, it makes sense. I think our experience with chips suggests pretty strongly that you have to study that industry closely to then understand the tools and the approach that are going to make sense to try to onshore that or work with allies and partners or whatnot to create a more resilience pledgement.

A (7:37)

So yeah, let's talk about the sequencing a little bit, right, because we have this bill and in the bill it's like it was a little bit in advanced packaging and there's some money for rmd, but it's basically like, all right, executive branch, figure it out. We think this is important and here's a number that we came to and we're going to go from there. Seems like the wrong sequencing. I don't know.

C (8:04)

I don't know. You know, you need a mix of, you need a mix of kind of purpose and direction and discretion. And so we, you know, our side, there are two sides of chips. There was 11 billion for R&D and 39 billion for manufacturing incentives. So our part of it was this. 39 billion for manufacturing.

A (8:22)

Yeah, we don't talk about that all during it.

C (8:24)

Yeah, so. So, you know, like, you know, for us it was basically a blank slate. There was this one $2 billion carve out for per mature technologies. But we wanted to spend more than 2 billion anyway. So it wasn't a binding constraint on us. It was kind of a, it was kind of a floor rather than a ceiling. And so, you know, that put us in a position of saying what is it that we want to try to achieve with these Funds. What do we think we can try to achieve? I will say that early on in program implementation, you know, when you're just building a team, you're racing against the clock to get your funding announcement out the door so you can take in applications. There's a kind of baked in narrative that things are moving too slowly and you're trying to move things as quickly as possible. It took a fair amount of discipline for us to say in those early days. We need to invest the time and resources to really articulate a vision. We ended up doing that through a document that we called our Vision for Success. Dan Kim was on a couple of weeks ago, and so he talked about that document as well. And that was really our stake in the ground to say, like, okay, we have a lot of discretion. We get it. We want to hold ourselves accountable to achieving some things, and we're going to be clear about what those things are. And we did a whole bunch of work to figure out what that was going to be. And, you know, that ended up being a really important disciplining mechanism, not just externally, but internally, because it really created the framework whereby we would measure our own success against the objectives we had laid out.

B (10:01)

Yeah, I think. And you said that you're not sure it was the right sequencing. I actually think it was the right sequencing. I think identifying the big issue that could potentially move a needle for the country, that is semiconductors broadly, and then enabling us to be able to dig in with the right expertise, with the people who are actually going to execute it and implement it, to think about how different approaches are going to be accomplished is the right way. Because I think if you legislate something with too much detail, you're going to miss the nature of execution and implementation that is so important here. And that effort we put into the Vision for Success that Mike just talked about, the way that we thought through program design incentives, what kinds of companies we wanted to approach, who we wanted to go out and draw in, and how we set up the whole process. I think we were quite lucky, actually, to have that flexibility to design it from the ground up.

C (11:10)

I do think, at least in my mind, at least. I'd be curious to have you agree with this. You can kind of go too far in the direction of discretion. Like, for us, we knew it was chips. Right? You could imagine a world in which with all of these vulnerabilities and all these choke points, we take a huge pot of money and just give it to these activists and say, use this to advance economic and national security. And there are a lot of benefits in that, because you can imagine a robust, flexible executive that's making dynamic decisions, addressing problems as they emerge and moving quickly. I personally think with chips, like, we had a huge benefit from the fact that we had a bipartisan law with a clear, overarching objective that we could then define those specifics. But it allowed us to build a team that was really centered on that objective, like, get the expertise for the industry we were focused on, build the kind of internal expertise and know how. And also, I think, you know, kind of in the broader kind of political scene got us, you know, gave us a kind of clear measuring stick that would be measured against.

A (12:22)

Yeah, I mean, it's a. It's a really interesting question, because where I was, the sort of backdrop of my question was actually, like, the. The sort of origins and legislation around the CHIPS act was like, this random confluence of, like, this intellectual effort, plus, like, Covid. And, you know, it happened to be a moment, and there were enough things so, like, you just happened to get this money, like, and, you know, you. You run 20, 18 through 2022, 30 times the chips act happens maybe like, two or three.

C (12:52)

Right.

A (12:53)

But. But the question of the, like, okay, what if you guys had, you know, what was it, like, $85 billion in total and $85 billion to do American economic security? Like, would we be more economically secure today if that was the mandate that you guys had?

C (13:12)

As opposed to chips, as opposed to.

A (13:14)

As opposed to, okay, we're just gonna get. We're just gonna get all this. All this money for chips.

C (13:19)

I. I personally think there's a lot of value in Congress identifying, like, some key target areas and then telling the executive, you have a lot of discretion to figure out how you're gonna. How you're gonna do that. You can spend a lot of wheels trying to identify.

A (13:36)

Well, because the IRA is kind of like a counterexample. Right.

C (13:39)

There's a counter example, except that, you know, ira, unlike chips, is like one pot of money in a tax credit that is kind of doing the same thing.

A (13:49)

Yeah.

C (13:49)

IRA is an assortment of different tax credits and programs, each of which have a different objective. And I think a challenge with the IRA is some of those objectives are targeted at different things, and how they all work together into a coherent strategy is. It's tougher than when you just have that one specific goal and kind of a few tools that you have to mobilize towards that.

B (14:11)

But why do you say IRA is a counterexample?

A (14:13)

Maybe it's not A counter example, I think like the counter example is actually like no one would ever get $100 billion to do economic security, right? So like the sort of happy medium of where you have an executive branch that has the sort of trust in Congress to actually do things that don't get kind of like earmarked away into, I wouldn't say oblivion, but not the strategic version of the thing. Kind of has to be Congress signing off on a particular industry.

B (14:46)

I probably haven't thought enough about this. I think the CHIPS act, for an industry that's basically going to be a trillion dollar industry, was very appropriate. Take rare earths and critical minerals. Today, I think it's hard to just have to wait for Congress to figure out this is an issue, pass legislation to be able to do that. So I think there's some combination and I don't think the right answer is here's $100 billion, figure out what to do with it. I think it's CHIPS is important. We're going to do something very focused there and here's $10 billion to figure out things that are going to become critical. When you think about the whole rare earths industry, sees our 17 different elements that overall that whole market is like 5 to 6 billion dollars. So we can solve the rare earth issue. Because it's five to six billion dollars, you can't solve a trillion dollar industry issue. And so I think there's some mindset that might also be true. You know, you could take APIs, you take pharmaceuticals. Like there's, there's different choke points across the system that I think we need to be able to be a bit more nimble to address. And then there's like these big things that take massive amounts of time, effort and money.

A (16:06)

Interesting. So the change is, it's just like there's kind of two buckets of like giant industries where the amount of money you need is going to need to have direct appropriation. And then like, hey, wouldn't it be nice if we had an office that would like, look at this and had some pot of money and ability to issue debt or whatever, 10 other tools you want that are just an order of magnitude smaller and then maybe we don't have to stress out about it?

C (16:30)

Yeah, that's the idea. I like it. I like it.

A (16:36)

He stole it from you.

C (16:38)

No, no, he didn't. I was. I also think there's an element of this where there's a question of like, what kind of state capacity you need to dug up. Right. Like, I could imagine for something like pharmaceuticals, APIs saying, you know, it makes sense to have a dedicated program for this because it is like such a specialized market with so much technical expertise, whereas something like critical minerals maybe a little more straightforward. Right. In terms of what you're trying to achieve and the. How the industry is structured and all that. Totally agree.

B (17:11)

Totally agree.

A (17:13)

When it comes to this idea of, like, discretion and Congress trusting you, we're in a different world today, I think. You know, I remember you guys being very focused on, like, transparency. And we want to make this fair. We want to be sure that everyone is, like, feeling like they're getting a fair shake. And now we're living in a world where we have relatives of presidents and cabinet members who are on boards of companies that are getting government money.

C (17:45)

So.

A (17:47)

It feels kind of quaint in retrospect, how business is something you are so focused on. But my worry with this smaller stuff where you need to be more nimble and discretionary, is that we're going to enter some backlash to the moment we're in now where there just won't be any appetite or trust for the sort.

B (18:09)

Of thing that all gets to governance and how you set things up and the ability for politics to intervene and preferences to intervene in a way that's not constructive. I'll say. I think the good news about chips, it was set up in a way that really, I think from our team felt pretty protected from any of the politics. And that's partially how it was set up. That's partially how Gina Raimondo approached it. And also, by the way, neither of us are political hires. We were all not political appointees. We had an office made up of many of the people I hired. My team were Republicans. I think it just depends on how you set these things up, whether it's purely transactional. Wheeler Dealer. That's one approach. Or in a structure, and there's many approaches that might be more institutional. Then you can set something up a la to DFC or something along those lines where it's insulated a bit and it's more trustworthy in that regard, and you can create some of that transparency. So you're right, you might have a backlash. But I would caution us against that because I think we'll miss something really important.

A (19:25)

Could do the short version of that, Mike?

C (19:27)

Well, I would say I do think that on balance, I would urge simple tax credits and these things that are very straightforward invitation of really good tools. And I think there's probably just another bar you have to clear in order to decide when it makes sense to do the discretionary stuff because the potential for politicization and abuse of that discretionary stuff is real. Like there's no question. And so the question is, you know, what tool makes sense for what circumstance? I think in the, you know, for us, the semiconductor industry was such a distinctive industry. The scale was so dramatic, it was so concentrated that creating the hub in the government that was engaging dynamically with the industry to form partnerships and scale up investment and make specific commitments that we felt were important for national security, all those things I think proved really valuable. I think there are other circumstances where discretion can be helpful. I think on rare earths discretion right now is probably helpful to extent. Just because it's such an emergency, then it doesn't feel like it makes sense to just throw a tax credit out there and see what happens. Right. But you know, that's kind of because our policies created the emergency. Right. And so I think there is a version of a longer term, more stable industrial strategy that identifies a set of priorities, has a baseline of, you know, kind of market based incentives, tax credits or whatnot, and then you kind of sprinkle in the discretion on the key areas where it feels like it really makes sense.

B (21:11)

I think the challenge with that, I mean, I broadly agree with that, but I think the challenge with that is tax credits only go so far and they're really predominantly, I mean, I guess you could structure demand side tax credit as well. I mean, just one tool. The challenge is one tool. And particularly when you think about rare earth, I mean some of the things Trump administration has done on rare earths, I think are very credible, particularly when it comes to the demand side of the equation and providing price floors and a certain amount of demand. We did not have that. Like one of the things that we really lacked in the CHIPS act was any kind of demand incentives. And so we were forced to fully rely on the bully pulpit of just engaging with Apple and Nvidia and AMD and Broadcom, et cetera, and saying like this is in your interest, like you need to be helping us so that we can help you to drive more supply development. Because it's only going to happen in an aggressive way if there's real demand signals. Now there's real demand signals to me, and that wasn't true four, four years ago. And so I think that's right. Like, I mean I prefer the tax credit any day, but it's a very equal spread across the board incentive. But you, you miss a lot of things. You miss a number of tools and then you miss the ability that we really took to another degree being able to push companies to do more. Right. You have a tax credit, companies, you're going to know what they're going to do with our money. We are able to say, no, we don't. We need to do that. We need you to do another fab. We need you to bring this technology here. We need to shift your INV levels in this way. And that allowed us to be much more like proactive about some of the things we wanted or drawing advanced packaging facilities here, which was not on the table for the first year or so.

C (22:52)

The other thing, just from an institutional standpoint is Treasury Office of Tax Policy. Fantastic institution within the government. I work very closely with them in my role before chips, but they're never going to be like the hub of energy in the government to like make an industry succeed. Right. They play a different role. They write regulations to make sure that the objectives of Congress are being met and that there's, you know, but that credits aren't right for abuse and there aren't loopholes and all this. That's not what we did. Like, what we did is we built a group of people, I think 180 people at its peak, that woke up every day and thought, how can we make the semiconductor industry successful in the United States? And kind of what tools we have at our disposal to do so much to pick up on.

A (23:42)

I'm very thankful that your, your child was 2 years old and not a 25 year old, you know, hotshot semiconductor hedge fund.

B (23:52)

But I think the, I have smaller kills.

A (23:59)

But, you know, the, the sort of, the institutional question is a really interesting one. And you alluded to the dfc, the Fed, another thing, I guess. Oh, we're politicizing that one too now. But like the, the idea that you could have, you know, something like a, no, want to call it a sovereign wealth fund, but just like some chunk of the government whose job it is to not let China have economic leverage over the US or to do everything you can to kind of minimize that. And they have some pot of money and tools over, over a period. Seems like a bipartisan thing.

C (24:38)

There's a lot to kind of disentangle in that. I do think having some chunk of the government that focuses on this is really important. You know, even the Trump administration, they ended up taking on the CHIPS office and putting it inside what they called an investment accelerator. Right there is this notion that what we built could be the foundation for something more durable that isn't just about semiconductors that is, that is broader. And I think having a permanent institution that is pulling people from the private sector and public sector to focus on the set of problems that develops kind of methodologies and rigor and expertise around it hugely would be really important and.

A (25:20)

Valuable because we have like this like, you know, did the digital service, like they have these little like happy rotational programs for software engineers, like why not industry analysts?

C (25:31)

And it doesn't have to be rotational. Just be like they're in charge of the money and whatever set of money. Now I think then there are two kind of questions downstream that, that are worth pulling apart. One is how much discretion do they have over what industries are getting money? Or is Congress kind of taking, you know, setting the, the objectives, you know, setting these are the industries that matter and then kind of putting it into the office to. Or does the office have more discretion? So I think that's one. And then the second is these questions of kind of independence from political interference and you know, what the right mix. So I think we found that we created systems and kind of structures within our operation to kind of keep politics out of it to the extent that we could. But that was not legislated. Right. That was like a question of establishing processes and norms. And I think there's a set of questions around that as well.

B (26:33)

I go a little bit back and forth on this because I do think that like the special nature of what we had was the ability to attract the talent that we attracted. And you know, most of those people have now left not not only because the administration shifted, because most of them weren't necessarily partisan people, but just they.

A (26:54)

Couldn'T do math fast enough. Great.

B (26:57)

No, but I, I think they, they.

A (26:59)

You know, they obviously should have had better talent. Come on, like where their interview process is great.

B (27:05)

They came from the private sector and wanted to go back to the private sector in that aspect. So you, you mentioned the rotational aspect, which I think is, would be great. But the thing that I get nervous about, about setting up like a separate institution and I'm balanced. I think that would be beneficial. I think is how do you sustain really talented private sector people, not only financial and investment type people, but semiconductor or industry people and be able to bring them in and do that in a dynamic way where people want to be there and they want to come there and they feel that coming there will be a furtherance of their career and not taking them backwards. And so I, there's not that many examples in government. I mean, the Fed is, it's very Difficult to set up another fed. I think that's going to be really difficult. And then. So you say, all right, well, when you have. Maybe the right answer is when you have something big, then you just do it again and you just figure it out. You set out to. I wish I would like there to be a centralized sort of function, but there's some doubts about whether that is excellent or just good.

C (28:17)

I think the counter that, I mean, my sense is, yes, a lot of people we work with left. They're hiring people. I mentioned a lot of them pretty good. The counter is that this set of issues is going to be like. Is going to be at the forefront of national security competition with China, kind of name your phrase. And so that naturally draws, like, people. People came to us not because. Not just because, you know, they were like, wow, you know, these, you know, we're awesome. Or we love G. Robando. I mean, that was part of that, but part of it was people just want to serve. Yeah. And so I was like that, you know, that will. That piece will continue. So it is just, you know, I've served whatever, 10 years in government and there's this mystery of, like, why do certain agencies thrive and like, have this culture that's awesome. And they. Over time and why do just kind of atrophy?

B (29:05)

I mean, the other thing to that is, you know, one of the things that I think would be great to fix is the fragmentation. Because the aspect for us even of just having to deal with treasury on the tax and even within commerce, you had the export controls, which was separate. And then you start to talk about demand and size. You talk about the DoD, you've got the Department of Energy. How do you create, even at the White House, how do you create something that integrates all of this? I know there's some countries. I know Japan has like a structure that is more focused purely on economic security and combining all these things and breaking down those barriers. I think it'd be really great if you could have some of those barriers broken down and bring. Bring some cross functional discipline.

C (29:49)

Yeah.

A (29:50)

Because like, you have the. There's. There's two pieces of this. One is the, like, okay, here is the Chinese or like, economic escalation ladder. Here is the universe of typhoons that could ruin the American economy. Let's map all that out. Let's have playbooks and dollar amounts and sort of GDP and labor estimates for all of the contingencies that we could see over the next five, 10 years. And then you can give the executive branch or give Congress, a very well thought out menu of here's what we think the problems are, here's how much it would cost to fix this. Here are the five tools. And this is independent and not coming from the chemicals industry or a rare earth miner or a semiconductor manufacturing firm, but actually something that's working on behalf of the American people. Now, is that a job that is exciting enough to bring the best and the brightest to do this, or do you need the ability to also say, hey, we're solving this theory. We have all this money to deploy to do more than just the analytical side?

C (30:48)

No, you need the money side for the best of 100%. You need the money side for the best of my. I mean, the analytical side, you know, it kind of exists like ITA at Commerce has a lot of that, a.

A (30:59)

Lot of great folks, but they had two people on. Right.

C (31:02)

You could.

A (31:03)

So it was.

C (31:03)

You could. Yeah. I guess what I'm saying is that you could definitely imagine a more robust version of that. But my sense is to truly attract a broad range of people who say like this, people want to make a difference.

A (31:16)

You wanted the thinking people want to.

C (31:18)

Make a difference and saying, oh, I'm going to like, come up with a plan that Congress may or may not enact. In this day and age when Congress isn't. Doesn't seem to do very much. It's just, it's hard to, to see it. I, I think like, one of the most humbling experiences of doing chips was, was the commitment to mission. I mean, like, people would come in and they just like worked their ass off and they stayed longer than they thought they would and they like really wanted to get the job done and they felt it was important. A lot of people who stayed, you know, continue to stay well under the Trump administration focused on the, you know, the important. Like that all is. Is awesome. It's like truly cool to see. But people show up when there's like really something to do. Yeah, I think that's important.

A (32:02)

But it's still. That's like, okay, then you have a little so like sovereign wealth fund thing and you can make, you know, you pitch to the investment committee or something. Right. There's.

B (32:11)

But you have, you have to have capital.

A (32:12)

Yeah, the money's gotta be there.

C (32:14)

If the money's not. If there's money there, but there's this. But then it's a question of how it's gonna be deployed. That's a big job. That's different there. Yeah, you need the money there to build the state capacity I would say. And so it's a job of us kind of outside of government to like figure out the right thing for Congress on a bipartisan basis to.

B (32:33)

And I don't, I don't call it a sovereign wealth. I mean, you use the term sovereign wealth fund. I mean sovereign wealth fund. In my mind, a sovereign wealth fund is taking surpluses that a country has and trying to invest them for the benefit of enhancing returns to the government. This is more of, I don't know what the right word would be, investment bank or investment firm or whatever, where you're actually trying to influence these industries in a more targeted way. I think it's great. The thing that I struggle with the most, and Mike as well, I think is what we did over those two and a half years. It's hard to look back and say, oh, that that's repeatable. It's not easy to replicate and repeat and say, here's the playbook, just go execute on this. It feels like a one off. And I believe strongly that for us as a country to be successful long term, it can't be a one off. It has to be repeatable. So I want to really believe that we can create a separate entity like this and attract the best and the brightest so that we can repeat it. That's something I struggle with a lot of.

A (33:37)

And this is why I want to come back to the corruption piece is because I think part of the one off thing was that there was a team that was above repute and that there were the pressures that you faced were none of the sort of like really gross ones we see today or really have seen across American history when it comes to the government spending lots and lots of money to do things. So I am worried that what we've seen over the past year and are going to continue to see over the next three years is going to kind of poison the well for this sort of work, which I think all of us agree needs to happen because, you know, people just won't trust it.

C (34:14)

Yeah, I think.

B (34:16)

Look, hold it, Mike Handle.

C (34:19)

I guess it's like, you know, there are many respects in which what is happening in the world right now is going to make it harder to do this kind of work going forward. This is. That's one of them. Yeah, I certainly think that's one of them is if you begin to question the kind of integrity of these things, it makes it harder to sustain the political will going forward or you just choose different tools like tax credits or whatnot. So I think that's a Big piece of it. But there are others. I mean, like I, you know, the whole French horn discussion.

A (34:55)

Right.

C (34:56)

It's like we, we have kind of have spoken throughout the Biden administration about the importance of allies and partners, and we're going to work in concert with allies and partners. And, and I think here's a moment right now in the wake of Carney's speech and this kind of recommend with what is happening in the world right now with our traditional allies and partners, thinking through new frameworks to create durable kind of strategic economic connectivity is really important. So anyways, there's probably a longer list than that, but I think it is an important thing to raise.

A (35:29)

Yeah, and it's, it's so frustrating watching the critical minerals work because it is clear they have really good people doing really smart stuff and that's like 90% of the stuff. And then you just get a story or two and you're like, what the fuck? Like, and I think the, the, the, you know, stopping a negative is not going to be something that is going to resonate with the American people or with the public. I mean, it's just like, okay, we have a critical minerals reserve. Like, is that going to get headlines or clicks? No, it's going to be the fact that someone silo is on the board.

C (36:09)

But there's a flip side that's more hopeful on that, which is the folks who are doing this work now and are in the trenches trying to figure out what the right tools are to apply the right situation and running into the same constraints on state capacity, or maybe blowing through the same constraints on state capacity where we didn't do whatever they are. You know, maybe over time you, you develop a group of technocrats, kind of capable technocrats who can inform this work constructively going forward.

B (36:35)

But I, I'm more positive on the critical minerals rarer stuff. I mean, I, I feel like there's multiple things going on. Well, I mean, getting stuff done in government is hard, right. For all the reasons we just discussed. And so being able to like break through some of the log jams, push things through and have availability of multiple tools is something that in the rare earth situation is sort of happening. There's multiple efforts going on. There's multiple tools being employed across the board. I might not agree with all of them, but broadly speaking, being able to put those tools out there and use them aggressively, I think the strategic reserve and trying to bring countries together to think through that issue broadly, those, I mean, those things fit together. You're right. Like a negative can erase all of those good things, things. But hopefully that's a sample of something that you might be able to do with, as I mentioned earlier, a smaller industry because it's a problem that's solvable, takes a little bit of time, but it's totally solvable monetarily, dollar wise. Even if we had to subsidize it forever because of the size of it, that would not be true of many of the other places where I think there's real choke points.

A (37:46)

Well, let's talk about doing things that lawyers get upset about. I don't know, Mike, how did you feel if you knew what you knew now about how far.

B (37:59)

Administration could push.

A (38:00)

Things without having big blood back, like, what would it do?

C (38:04)

Yeah, look, I think we tried to do as good a job as we could of thinking about risk holistically. Right. And that's true when it came to like individual deals. Right. You know, intel is a risky deal, but there's a lot of risk in not doing a deal with intel as well because they play such a, you know, critical role in the ecosystem and broader portfolio. But it's also true when it comes to like questions of process. And you know, one of the things I used to always say to the team as we were thinking through kind of processes we would use to get something done is the biggest risk of this whole thing is we don't get it done right, that we're going to run out of clock and we're not going to have gotten our deals done. And, and you know, the country is going to be worse off for it. And so we need to think flexibly and dynamically about all these things. I think we did a pretty good job of that. I think there are areas looking back on it where it's like really worth thinking about could we have done, you know, been more risk taking or kind of prioritize efficiency over, you know, some of the kind of risk avoidance.

B (39:16)

Where would you, where would you take more risk?

C (39:18)

Well, we just, I just in factory settings, like I think the, with factory settings, big plug. We've got a new, we've had a new, a new substack where we're talking about some of this stuff. But we talked about how hard it was to get our deals done. And this is like for listeners, we reached term sheets with our applicants which were the basic economic terms of the deal, how much money you're going to get over what milestones, et cetera. And then we had to turn those term sheets into final award documentations and turning those term sheets into final awards meant diving into a bunch of nitty gritty legal details. And each individual thing, when you go through those details, there's like a real trade off and you understand why the government cares about this particular issue. You know, if the government gets sued because of something the company did, should the government be protected? If the company tries to sell a project or sell itself, should the government have some ability to reassess the deal that was based on, you know, doing a deal with that company? If the company breaks the law, if it, you know, violates export controls, violates sanctions, or all these things accumulate to create a huge amount of friction in getting the deal done. Each individual thing I think we thought about very rigorously and we made a lot of trade offs along the way. It's not like we weren't trying to be flexible and dynamic. But that's an area where you talk about sustainability. I look at that and I say like, well, you know, I would definitely advise a team going in to do this again to put all that stuff on a list and maybe just decide that like, hey, you know, we don't, we don't care about all of them. We, you know, we're going to cut 25% or 50% of this off and that means that we're going to be accepting risks in terms of the structure of these deals, but it's going to make it much more manageable to try to get the dog fishing line.

B (41:15)

Yeah, I agree, I agree with that. I mean, I think about whether we, and the thing that keeps up being on my mind is the, this demand side of the equation and how, how could we have pushed Nvidia, amd, Apple, Broadcom, Qualcomm, et cetera, harder to help us push these companies to do more, faster, et cetera, and to set up an environment that could happen even quicker, particularly with some of TSMC's competitors. And I don't know whether we could have done more because we didn't have the actual tools. So it was more about the bully pulpit.

A (41:54)

Was there ever a thought to go back to Congress on that side?

B (41:58)

I guess I don't, I don't remember. I mean getting, getting new appropriation for demand incentives and particularly giving money to some of these largest trillion dollar companies in the world is, is a difficult thing. We, you know, we structured some things where we agreed we could pay for some, you know, porting costs so that we can try to incent some of these companies to dual source or to, you know, ship some of their efforts from TSMC to an intel or to do something like that. But it was all sort of cajoling as a. And could we have pushed that harder? I don't. I don't know. I don't know. We didn't have the tools. So it's just a matter of now this administration is bringing, like, every tool to bear in a very transactional way. If you don't do this, I'm not going to do. You know, that wouldn't have been an approach we would have been comfortable with. But between where we were and here, there's probably quite a bit of space in between.

A (42:53)

Yeah. Instead of asking for daycare, threatening to get CEOs fired would have been interesting. It is track.

C (43:04)

It's this question of norms. Right. Like, when it comes to how you interact, how you interface with industry. And like, it would have been fun. I remember, like, at one point we had a conversation where we, where it was like one of the companies we were dealing with, like, we knew they had something going early on with bis, and it's like you could cross those two things pretty easily and make it much easier to extract the investment of the company that you were looking to achieve. And there was just this sense, I mean, I think it was probably like I think Leslie said or general counsel said, like, we don't, we don't do that. Like, that's not. And we were sitting there being like, that seems right. Like, because once you start going down that path of, like, the government is just going to exercise its power in this place over here to get what.

A (43:51)

It wants, then you get donations for the East. That's how it all comes together. Right?

C (43:55)

Yeah, that, that, that felt like. But at the same time, I do think that, like, maybe we were a little too precious, you know, like, that's like an interesting question in terms of, in terms of what the right balance is there. Because at the end of the day, you're trying to get these companies to do things that are important for national.

B (44:14)

Security, but that's the one place you could say, oh, well, why don't. You could have tried to get TSMC to do more fabs. That to me is a total red herring. I think, for example, on tsmc, our major effort was to say, we got to get them to build three fabs. Why three? Because the way they construct their fabs, once you build the third, it's almost guaranteed that they're going to build the four. And once you have four fabs, you just got to. You're going to build six because you want that mega fab. You want that scale. And so our view was we don't want to spend the extra money to get another, another fab. If we can get them to do three, the rest is going to take care of itself. Now, you know, the fact that they're doing, saying they're doing more now because, you know, they've, we've moved demand from a trillion dollars in 2030 to a trillion dollars in 2026. It doesn't really mean anything to me. It's not like that was, in my mind that was going to happen. And so the other thing that you could ask yourself is, could we have pushed these companies harder to do more? And I think we pushed these companies really hard and I think we got them to do a lot of things. There's the public stuff, that's the big numbers and the specific fabs, and then there's the things in the background that people don't focus on or don't even know about that have to do with, you know, moving certain technologies. Here we're agreeing to do some things in their agreements on the supply chain or the upstream or the downstream that is going to strengthen the supply chain very significantly that we were able to push for and get in our agreements. And I feel very good about that.

A (45:46)

Yeah, I guess that, you know, if we're going to use TSMC as an example, like there is a world in which a president can, like, you know, instead of being happy with a 500 billion dollar number on a piece of paper says if these fabs aren't best built by this date, you guys aren't getting, you know, this, this, that and the other.

B (46:05)

And that's, that's what we had.

C (46:06)

Well, we did that with our money. That was the milestones. But within the bounds of the program, as opposed to saying, you know, if they're not built by the state, then some license is going to be compromised or some, you know.

A (46:17)

Yeah, so I guess it's, it's some. Yeah, it comes back to the sort of independence like leverage thing because you know, you can, you're saying you, you say you're pushing them pretty hard. Like you were, you were mentioning earlier sort of World War II industrial policy analogies. Like if you, if the war was starting right, or if you had, you know, 90% confidence it was going to start in two years and you needed TSMC to move half of its company to America in the next six months. Like there are other levers that the US Government could do to try to make that happen, which are different than tax incentives. Right?

C (46:57)

Yeah, yeah. Although I, you know, just from my, my kind of amateur historian reading on, on the question of how World War II played out, my sense is that we want. Yeah, my, my sense is that it was a full mobilization.

A (47:22)

Yeah.

C (47:22)

Huge build of estate capacity, but the tools we use were pretty straightforward. Yeah, it was, it was like we're going to use the power of the government's customer and we're going to use the power of the government as a financer on the supply side. And you know, and it, in the meantime, there was massive kind of political mobilization on the industry side.

A (47:45)

Yeah.

C (47:45)

To kind of win the political narrative coming out of the war, to lay the foundation for the type of post war economic system that the, the business community wanted. Right, interesting. So, so, you know, you don't, you don't read that, you don't read that history and get the sense of like, oh, here are a bunch of executives who are afraid of the government because they think that if we take the wrong step here or interests are going to be compromised over there. You get the sense of the government having its interests, industry having its interests, ultimately working incredibly collaboratively to get it done, but with a huge amount of friction and tension and politicking along the way.

A (48:32)

I guess what I was trying to, I wonder to what extent the difference is with these like, allied countries who are small, who can be bullied, where you have an enormous amount of leverage. And you were talking earlier about not coloring in, coloring outside the lines with doing stuff with colleagues at BIS or sort of, you know, fussing around with the executive branch. And I think one of the lessons of the Trump administration of the past year is that like, executive branch is so freaking powerful and the amount of leverage America has over other countries around the world is really remarkable.

B (49:09)

And so.

A (49:12)

Maybe it's better to just keep that Pandora in the box because then you get kind of really dark outcomes of some of the sort that you're seeing now. But I don't know, I feel like however much the CHIPS act success, the CHIP ACT has, they're, you know, striking the fear of God into these people in a way that, you know, some nice subsidies.

B (49:36)

Did.

A (49:37)

A different, a different dynamic could have been unlocked.

C (49:40)

Look, I think it's, I think it's a worthwhile discussion that this kind of intersection of the diplomatic and the industrial activities and how those two things played. I think our experience was that kind of, we had our own lives with industry. You know, I would say these companies are massive kind of power centers. You know, if you talk about the Major Korean chip companies or Taiwanese or within their own countries. Right. So they are not the government. They kind of have their own interests and their own kind of geopolitical positioning. But in the backdrop of all that, of course, I think was always the, the, the strategic relationships between the countries. And those mostly, I think for us were separate threads, but they were mostly kind of swimming in the same direction. You know, like as we were doing our Samsung deal, Biden was doing his summit in at Camp Davis with Korea and Japan.

A (50:42)

Yeah.

C (50:43)

And like creating these new, I mean, you would know more about this in a look, but creating these new strategic dynamics in Asia that were pulling allies closer. And we always felt that our thing fit into that. I'm sure Koreans always felt that rthing fit into that. It was kind of part of it. And we were kind of had our lane with our lane of it, which was dealing with Samsung and SK Hynix to secure the investments that we needed.

A (51:09)

I guess maybe it's a question of like looming crisis trend lines. We don't like or like. All right, you know, we, we have six months to like prepare her world.

C (51:24)

Although I do think as a kind of political question is how do we create the sense of crisis before it happens. Sure. So that we're actually prepared, you know, But.

A (51:35)

All right, I'll do my preschool joke. Just like blink twice if it was all Susan Rice. I'm gonna flirt on the same. Okay. That's all I need to know. What else should we talk about? Oh, the, the dynamic of like, I think you said this on another Show, Todd. Doing 10 times the deals that KKR would do in a year, in like 18 months.

B (52:04)

I don't know.

A (52:05)

What do you lose with that pace? What do you gain with that pace? What are the, what are some of the trade offs there?

B (52:13)

I mean, I think you lose sleep, honestly. You know, look, when you're, when you're doing deals at kkr, you're out trying to hustle around, trying to find the right deals to create here. The deals in way are coming to us. So it's not perfect sort of comparable. It's just, it's more in the sense of to get. Once you have an agreed deal to get them to an end agreement, a final, documented sign on the bottom line. Agreement is hard. I mean, Mike just talked a little bit about that. That's also true in the commercial world. In the commercial world, the boundaries are sort of already set. Like KKR has done hundreds of deals in its history and they've got hundreds of agreements with companies so you only have certain amount of room to go back and forth. So that was a challenge for us is that period of trying to get multiple deals done in a very short period of time. It also creates sort of excitement and team dynamic and a culture of like, we're just gonna do this, and we're gonna get it done. That, I think, is very energizing. So I think, you know, the advantage of just having it all there. Everybody's working, everybody's trying to get it all done. Doing it, I think, was. Was very positive.

C (53:31)

Yeah. I think there's also a kind of question under your question, which is the. We often talk about process as the thing that is getting in the way of the objective. But to what extent can process, even if. If it might create, you know, make it take a little bit more time, does it actually end up serving the objective? One thing we've kind of hashed about in retrospect and a little bit at the time, but mostly in retrospect, is this wonky thing, chips, you know, or money kind of functions mostly as grants. It's basically free money. Companies keep it to help offset the costs with Asia so that they invest here. But legally, it was a grant. It was something called other transaction authority. And that meant that we had much more flexibility than we would have had in the grant context to design the program as we. As we saw fit. One thing we could have done is just come out of the gates and started doing deals. We put out a notice of funding opportunity. We created a structured evaluation criteria and application process timelines, et cetera, built the team around that. And what that meant is that we weren't out of the gate just saying, going to intel, going to tsmc, saying, all right, what's the deal going to be right now? We also used that time where we drafted those funding opportunity to build our team and, like, build up the capacity and all that. But it. There's no question, like, the decision to create that structured process cost us time. At the same time, I think it had a lot of benefits. You know, it put us on footing with industry where, you know, they knew the. They knew how we were thinking about things. They knew what our objectives were from our vision for success. It kind of grounded those negotiations in the sense of fairness and rigor. And ultimately, I think mutual kind of credibility and respect certainly creates some measure of political protection, of sense of like, hey, we laid out a process. We did the thing we said we were going to do along the lines we said we would do it. All of that is Good. But it takes more time. So I think that's a trade off. In retrospect, I think there are people on a team who think would think I'm crazy. Like, you know, like, oh, we should have just been out there doing deals faster. And I get it. But I also think that our sense, we've talked about this, our sense is that, like, it was probably good to bake in a little bit of process, to kind of slow our roll a little bit so that we, you know, didn't go out quickly and do something that we kind of regretted, you know, later.

B (56:10)

I think. I think that's right. I believe strongly in that. I mean, I think if your goal is just to get a deal done with TSMC and Intel than just go get a deal done with TSMC and Intel. But our goal was broader than that. Advanced packaging is a perfect example. I really think that if we didn't lay out a process and really then go after that and recognize what the issues were in advanced packaging, we wouldn't have gotten Amkor to invest here. SK would have been a question to Mark. And those deals are going to be critical to the future. And in fact, we haven't talked to that and we're not knowledgeable about the R D side of things. But one of the things that I think right now as a country, we're focused on a lot of these choke points, what I would call more defensive, like, oh my God, there's an issue in critical minerals, we gotta address it. Or semiconductors, they have 0% bleeding edge here, et cetera. I'm sure the next one will be batteries OR drones or APIs or whatever it might be. But what we should also be focused on is the enabling technologies going forward. And advanced packaging is one of those things. That industry is changing dramatically. You know, obviously TSMC broadly owns it now, but it is evolving. And the US can be like that major hub for what I think is the next generation of morsel as an example. And that's true in a lot of different materials and substrates and places where we should be investing more on the, on the R and D front in more offensive way, like. So a lot of what we've talked about today is how to use industrial policy to plug these choke points. It's also about how to use industrial policy to think about what is going to be the enabling of the future. Is it going to be humanoid robots? And that whole supply chain, which basically doesn't exist today, can be potentially created in the US and be a fundamental critical advantage to us over time. But we'd have to focus on that and figure out what it's going to take to get there.

A (58:00)

Yeah, I mean, it's interesting that offensive versus defensive split because the defensive ones, I do feel confident that if you set up a fed for it and you give them $50 billion, they'll like 80, 20 their way there because they are manageable, tangible things and okay, we can put the money to solve this and that problem and the technology's already there. Right. But the offensive stuff, I mean, there are pieces that America has that we would presumably want to keep, like global dollarization and serve TSMC and Intel and Samsung being ahead of where SMIC is. But the other stuff, as you said, it's almost like I really not sure I trust the government with kind of picking what the next industry is going to be or I mean the answer is like the NSF and NIH need to do their jobs well. I mean, it's a much more amorphous thing of like how to get R and D. Right.

C (58:55)

It's more amorphous thing and definitely kind of extends a little further from our direct experience. But I think that when you start thinking about the offensive side of things, you also shouldn't expand outside of what you might traditionally think of as industrial policy or expand your concept of what industrial policy is, whatever, because it is about technology leadership and it is about dollar dominance and you know, our university system allies and partners, you know, whatever that you want to think about. It's, it's like a broader thing of this game, this, this, this broader geopolitical game where we have these, you know, pretty significant vulnerabilities that have emerged vis a vis China. And they're going to continue to try to build on that. Right? They're going to continue to invest and look for, create more vulnerabilities or shore up their own. And we have to kind of do the same.

B (59:53)

But those vulnerabilities emerged because they took a more offensive approach. And I think. And so like the fact that they identify the electric vehicle supply chain as a critical supply chain, particularly for the enabling technology for EVs such as batteries, which are critical for drones and robotics and et cetera, that's positioned and. Well, what I'm saying is we need some, I mean, obviously there's a lot of venture capital, we have so many great benefits in this country of deep financial markets, deep venture capital innovation, like a lot of phenomenal design. But there is a role in those places for government to incent and encourage some of that activity.

C (60:38)

Earlier, we are just so far behind on the manufacturing side that when I think about manufacturing activity like immediately I go to defensive. And yes, maybe they're in that context to say maybe there's some areas where we can look to carve out our own sources of leverage. That's why my kind of head ends up going towards these other things that say, you know, it's not just about manufacturing. But I think I, I think it's all agree with what you're saying.

A (61:03)

Well, this is like maybe the fundamental question of the 21st century is like, can you R and D your way out of needing manufacturing scale? And I think that's like very much an open question.

B (61:15)

Yeah, I mean you are indeed your way out of manufacturing scale. Why don't, I mean the whole AI revolution is going to disrupt so many industries, including manufacturing, that we should be and I think are trying to take advantage and have a lot of the skill set to be able to do that. I mean that in and of itself. Maybe this isn't really answering your question, but when I've looked at some of these supply chains. So take for example printed circuit boards. So printed circuit boards, we could not fund like the Chips act because they're not semiconductor, we cannot fund them. But if you look at downstream from the chip, all these chips have to land on a printed circuit board. At least 60% of those boards are manufactured in China. And as AI has gotten more deep and compelling, the complexity of those printed circuit boards, the multi layered nature of them have gotten more important and they could become a choke point in these data centers. But the challenge is right now it's almost impossible to figure out how to meet those costs competitively in the US even with like reasonable subsidies. But can you redesign the manufacturing process? Can you not only automate but really rethink it? Are there other tools? And I think that can take a very significant amount of the cost out. So if we're able to figure some of those things out, I think we can be much more competitive in manufacturing at scale.

A (62:40)

And I get these pitches in my inbox all the time of like some startup that like is trying to solve this rare earth thing with like a new manufacturing technology so we don't have to like dig the next hole in.

C (62:52)

The ground and sounds like you have an interesting inbox.

A (62:57)

You know, I get, do they want.

C (62:58)

To come on the show? Is that, is that the idea or.

A (63:00)

Yeah, well, because they want the Congress to be like, oh, give us, it's a hustle. But the, the, the question is like okay. You're sitting here in your Fed, you know, your fed for your, you know, resilient American resiliency fund. Like how much money are you spending on this stuff and how much money are you spending on the, you know, the mine in, in Montana? And it's.

C (63:25)

Right.

A (63:26)

And I, I guess whatever, you will have to make some expected value calculation on that. But I think like, if. What would history tell us? I mean, yeah, we don't need like guano anymore. Right. Like you can. Maybe it's the sort of thing where like, if the demand gets tight enough, then like enough scientists and money and energy will be there to solve these things. But the problem is there isn't money for this stuff because it's so cheap.

C (63:51)

Yeah. And also, what are the. I would say a couple things. One is also creating in terms of the demand, creating incentives or structures whereby demand isn't just being driven to China. Right. Whereas like that, that is naturally being pushed towards, if not just the United States, a broader ecosystem of countries outside of China. And then in terms of what we do, I think we do have to get comfortable if we're going to do this on a broader scale because it's foundational to our competition with China. We have to get comfortable with the notion that not every bet we take is going to pay off. And that's true on the company level. That could also be true on the industry level. It could be that we say, yeah, we're doing all these rare earth deals. I have issues with how we got into the rare earth thing and why it's a crisis and the management of child relationship. But it is a crisis now. And so we should do those deals. And should we also be doing deals that make those deals? Looked at in retrospect? Yes. Right. We should be doing the deals that like leapfrog and create, you know, magnets where that rare. What, you know, whatever the technology is. Because that is like a path to. And that's okay. Like it's okay to, to have some bets pay off, some don't. As long as overall we are orienting ourselves strategically to like deal with a really significant problem in terms of our.

B (65:23)

I think that's not an easy mindset of culture to shift. Right. That whole Solyndra mindset. I mean, Solyndra, I don't know how many times we heard that term just all the time.

A (65:33)

And it wasn't even correct. It was like, we can't have another.

B (65:37)

Solyndra is code for being really risk averse and you can't like government money Is there because the private market is not able to fill that hole and therefore you're taking more risk by its nature than the private markets. Some things are going to fail. And we do need to figure out how we get a culture that's comfortable, government culture and a government oversight approach that's comfortable with that. Because everybody. I want to ban the word solendo from government. I think it's a bad word and I think it drives risk aversion and it doesn't allow people to take really good risks that are going to. Obviously that same fund, that same LPO that was doing Solyndra was doing Tesla. And the overall basis that that fund did.

A (66:23)

Okay.

B (66:23)

And if you put some upside sharing or some equity in there like it would have done, you know, phenomenally.

A (66:29)

I'm just trying to think, would I rather have had Tesla busted Ben and not have. So they were overdue. They also made me really nauseous. I don't know. Every time I get an Uber that's a Tesla, like I have to cancel it.

C (66:44)

Too quiet. Too quiet for you? No, no, no.

A (66:46)

The handling is like, is very like, it accelerates too fast. A weak stomach. I wanted to come back to the chips act deal making side of things. You mentioned AI tooling. How much of it? This seems like a very not automatable AI supported thing. I'm curious to what. What percentage of the work today do you think you could.

C (67:17)

I would say very little. I mean you just to give a sense like we have reading these books about World War II and it'll be like, oh, there was this big challenge. So they spun up a bureaucracy of 25,000 people to solve it. And you know, our team was 180 people managing $39 billion. Ultimately a pretty lean organization. So you know, I think, I think in the, once you get the deals done, there's a whole post award phase.

A (67:52)

Yeah, the monitoring feels.

C (67:54)

The monitoring phase. And there, I think if, if we were there now and we don't have very, you know, we did, you know, we did maybe a couple of months of Post award right after we got deals and we got some cash out the door. But like truly that ongoing monitoring, when I don't have the direct experience, but that feels like an area where maybe there's some, some opportunity but, and maybe in you know, due diligence or whatnot. But, but, but overwhelming.

B (68:24)

You're saying where can you embed AI.

C (68:26)

In the operations of the government?

A (68:27)

Well, I'm just thinking like in. There's a whole universe of, you know, investment like the percentage of the junior investment banker job that AI can do now is growing over time. But I guess the bigger point is it feels like there's something actually very human about the way you guys set it up where you actually need to deeply understand the individuals on the other side of the table representing the companies and that company.

B (68:56)

I think that's really important. I mean, ultimately, and maybe this is what we're compromising right now, like building that trust between private sector and government. What people were nervous about was, we trust you. We don't know who's going to be in your seat in a year, let alone five years or 10 years. And if we're going to do industrial policy well, we need the private sector and the public sector to trust each other in the way Mike described it from World War II. I mean, people are collaborating and working, trusting relationships, but competitive and trying to, going out for their own interests, et cetera. I think we created that dynamic. You can't build that dynamic other than on a human, on a human level. So I, I don't know that there's a replacement for that.

C (69:39)

I also, I made some really shitty decks that probably would look that now my decks now should. I'm. I was just like a big text on page guy.

B (69:52)

Okay. You know, well, Mike was better than I was.

A (69:58)

My, My wife refuses to download the clog for Excel. She's like, this is, this is not. I can't, I can't do this. Well, well, I, well, well, I think her.

C (70:09)

What is she doing with her?

A (70:10)

She's in P. For a long time I was trying to sell it. Like, don't you want to just try it out? Well, I think the point was like, I need to. If I don't build the model, I don't know what the numbers are. And working backward doesn't force you to do the thinking to like actually have your assumptions to like actually put the assumptions that you have in your brain on a piece.

C (70:30)

Yeah, I'd look at it, Todd. When we, when we got our jobs, the first few months, in addition to, or kind of as we were putting together vision for success, as we were thinking through how the process went, what the application was going to look like, all of a sudden the nofo, building the team, we did a lot of engagement and we just had probably 15 different calls with, in the finance industry, bankers, private equity equity analysts, just like asking about the industry. Cool thing about these jobs is everyone will talk to you. Right. You know, the, you know, so. And then our initial early engagements with the cus companies initial early engagements with the customers. And that was just like, it's just crash course. It's just like absorbing as much as you possibly can. And it's, you know, there's, there's no way to replicate that through just like reading. It's about hearing over, at least for me personally, how I learn hearing things over time and then developing little intuitions about what's going to work, what's not going to work, what's important and developing those relationships and then developing.

B (71:33)

I would go to investor conferences And I'd do one on ones. I'd be with, you know, 15 investors in the course of a day. I want one on one. And I just hear their views on the industry and what they thought was going to happen and they would, you know, give them a little sense of how we were approaching things. And there's a long term benefit of that. I mean, I think it was really beneficial to us at Chips, where there are many times we brought a group of investors to DC and sat around a table with Gina Raimondo and us and chatted about like, what do you, what do you guys see China doing here? What, what do you, how do you. A lot of these hedge funds, they got eyes on the ground in China trying to figure out like what, who's doing what, how many EUV machines are actually there. And you can learn a lot.

C (72:14)

And if you're interested or if a company is like, you know, get a lot of happy talk from companies. So, you know, Todd, being at a conference and you know, we like maybe talk that night and be like, there's a lot of skepticism here about X company being able to do that thing, it was like, okay, well that's maybe right or wrong, but that's like a helpful data point to have this same with the customers.

B (72:34)

I mean, once the customers realized like we were credible people who were really trying to do the right thing, who were broadly. I mean, if you look at the Venn diagram of our interest versus their interest, it was almost overlapping, right? I mean they needed more supply. We ended up with really collaborative discussions, gave us a lot of information and knowledge, allowed us to really understand what was going on and allowed us to push harder. Like, why don't you try this, why don't you try that? So that's what, I mean, if there was a separate national investment bank or whatever you want to call it, like that advantage of building those relationships and having that credibility, I think would be really valuable. And that's something that I don't think many People out there focus on, in terms of that kind of, you know, work that we ended up doing.

C (73:17)

But I'm guessing the folks from the end working on rare earths have developed that. Yeah, you know, they probably know the ecosystem well, they're not, you know, they're. I bet they're doing it all. Yeah, so.

A (73:26)

So, you know, an interesting contrast is you two did not come at this with deep sector experience, having worked in the chips industry for 30 years or what have you. I mean, and you added people in the team who did have that, but the leadership was not, you know, that was not where you guys came from on the R and D side. It was different.

B (73:48)

There.

A (73:48)

There were leaders that did have those, you know, 25, 30 years living. Living in the, you know, living and swimming in the squirrel. I guess I'm just. You don't have to talk about them. But from your perspective, what were the sort of advantages and disadvantages of coming at this, not having, you know, spent 20 years in intel or investing in chip stocks?

C (74:11)

Well, disadvantages were very clear, which was that we had to learn a lot in a very short period of time and develop credibility to be real. And to octaverse. I had a very explicit conversation with Secretary Ramono about this when, when she offered me the job because, you know, I wanted to be fully clear with her. I do not have a background in some of the doctor industry that seems like maybe it could be relevant for the role. So like, you know, and what she said at the time was, she said, look, I, for this role, Director, I want someone who knows how to get something done in government that is its own thing, that is a craft in its own way. And, you know, you'll figure out what you need to figure out and we will build the team. And to build that team, you needed a whole bunch of stuff. One of them was commercial financial expertise, and then another was the industry expertise. And that was ended up being the kind of project and I think really importantly in. In the building of the tm, you know, that was a building wide, administration wide effort to get those people in. Right. So like Todd as chief investment officer, Donna Dubinsky had been a very successful Silicon Valley entrepreneur who had been recruiting people for months and months at the Commerce Department and handed us a list of people saying, I think you should hire these people. Many of them did end up being on the team. We, in the early days of the program, we would have these monthly meetings in the West Wing with Brian Deese and Jake Sullivan, and the first topic on the list would always Be team. And we would say, like, you know, if there was a person who was a target, we would lean on them to help us be like, hey, Jake, can you take your phone right now and text this person? Don't take us off that kind of thing. And they would. I think that. And Raimondo, like, one of her many talents is talent attraction. And to her, like, tremendous credit because a lot of people in government do this. She's obsessed with getting good talent in, and if you've identified someone, she's obsessed with closing them. And so there was never a time where it was like, hey, you know, secretary, I need you to take 15 minutes with this person to close the deal. Can you do that every time she would do it, you know, and so that all came together to, I think, build this, like, pretty awesome group of people that had the expertise that we needed.

A (76:46)

Okay, so sorry. So for you, Zai, from your perspective, the upside was you can't be a semiconductor expert and know how to get things done in government. You could, but that person did not exist. That person didn't exist.

B (76:58)

You know, I, I, I, maybe they did.

C (77:01)

Maybe they would have done a better job. I would say whatever. I was the first.

B (77:05)

I don't know that it's relevant to whether you have semiconductor experience or not. I think the point is, we talked about it earlier. The, the whole, the deck is stacked against you.

C (77:12)

I believe this.

B (77:13)

I believe right now, the way government is set up, the deck is stacked against you. To be able to get these big things done in a very compressed period of time, particularly in a way where you're starting up from scratch and you've got, you know, two years, two and a half years to get, get things, get a team built, get a process built, get a system built, and get money, you know, committed. And starting to get it out the door like that is a herculean task. Even outside of government, if you put it in government, I feel like the deck is stacked. And part of what factory settings is all about is how do we unstack the deck in a way so that these things can become easier to do in government. And so to me, the critical thing from a leadership perspective is to be able to just not only know how to get things done in government, which is part of the thing, but just like a maniacal focus on project management, prioritization, pushing things forward, operations, breaking down barriers, operations, process, et cetera. That is the thing. And if you happen to also be a semiconductor expert, great. It's not like there's no semiconductor Experts that don't have some of those skill sets, but the thing is the process. And then separately you can find the semiconductor expertise. I'm never going to be a pure semiconductor expert, but we've learned enough to be able to have credibility. And that's the lesson in private equity. In effect, over my career in private equity, I did retail deals, I did chemical deals, I did financial services deals. And the good news is that you learn what makes a good investment and what questions to ask and you're a curious person. And who do I need to go find the answer from? And how do I network people and bring people onto the team or contract consultants or figure out the answer to this question that I know I need the answer to, but I'm never going to be smart enough to get to it. That's the trick.

C (79:06)

And by the way, the semiconductor expertise. Well, I guess a couple things. One is in terms of this mix of talents and different. Like my successor, woman named Manell McKay, she came from the industry 25 years executive in the industry and then stayed for close to a year, maybe nine months after I left as the director of the program in the Trump administration. So she had that industry expert experience and then a couple of years of the government experience working on our team, did unbelievable work and then led the team. So there are different profiles. I think particularly in that startup phase, it was having that government execution capability was probably, probably really important. The other thing I would say is the semiconductor expertise that we needed did not just come from the industry. One of the most valued experts when it came to specific technologies came from the intelligence community. Just deep, specific intelligence knowledge of how different technologies would be used in different national contexts. And just every deal we did, it would be like talk to him to understand why is this important, et cetera.

B (80:21)

We also had an investor who had been doing semiconductor investment. Didn't ever went was a man never was in a semiconductor fab, you know, manufacturing engineering. But you know, he had a whole different network of people. And I think that's. That was what I think gave us a lot of benefits, was just having this broad network across different parts of the economy.

A (80:42)

Yeah, I do like how Frank walked in. I remember I talked to him like a month later. He's like, why are all these people here? We should just do five deals. I can write them up now. Anyways, let's do a chemicals detour first.

B (80:56)

Chemicals detour.

A (80:57)

Oh boy, has it been decades? It's far from. Chris Miller was texting me the other day. Chemicals is an industry, is an industry no one in the policy world understands. China's crazy crushing it and it's probably on the cusp of major transformation and R and D driven by AI. But the traditional petrochemicals are being crushed by China. BSDF music production, premium players are non existent but the Americas, America's starting to be more viable due to low natural gas prices.

B (81:31)

You know. Well he's talking about a very specific part of the chemical industry, petrochemicals in he's like massive capacity. Like you know when you think about the chemicals industry for the semiconductor industry which is all upstream that is not solely but significantly like these very small specialty chemicals like Photos and EST for example. That, that's a whole.

A (81:55)

Yeah.

B (81:55)

Different. The way to think about those is, is very very different.

C (81:58)

Okay we did, we, we struggled a little bit with those because they didn't get the investment tax credit. So it was really about to the extent we could incentivize them doing that directly. Although those were mostly smaller deals that didn't get done while we were there and are still sitting there but then hoping that you'd create enough of a demand signal by operation at the major fabs that they would just want to co locate over time.

A (82:25)

Todd, when we talk about the sort of giant sophisticated doing industrial policy and the giant sophisticated industries versus the small kind of sad ones. You know when you're, when you're thinking about the sort of people you had across the table from you when you're sitting down with, with intel and TSMC and Micron, I mean these are like, these are, these are high flying industries that have like very strong competition dynamics. Like the execution risk has a very different profile than like a mine that hasn't existed for a while and we don't even know if it, you know it was something that worked. What's your sense of the sort of like from a management perspective this is something in private equity you're always thinking about like how did, how, how did that factor in for the chips act stuff and how would that have to factor in, in doing the long tail of these types of industrial policy issues?

B (83:20)

I think it factored in very significantly. I mean my, maybe the first conversation we had, I don't know one of them very early conversations we had, certainly one of the very early conversations I had with Secretary Raimondo was like we've got the world's most sophisticated people across the table from us who have unlimited resources, who can hire the most sophisticated advisors and lawyers, et cetera. Like we need to be, we need to face off against that in a highly credible way. And so that yields how you hire it yields. I mean, this is something that Mike and I talked a lot about upfront is how do you structure the team? There's lots of different ways you can structure the team. And we ultimately chose to structure the team more like typical investment firm. We have these small teams that are facing off against intel and another team against TSMC and another against Samsung, et cetera. On really deeply getting to know them. It relates to the kinds of advisors. Whole nother topic in government of how you bring contractors and others in, which is crazy. But I was very focused on making sure we had an advisor by our side that if they were going to talk to Goldman Sachs and trying to like, tell us why we were wrong, we, we had someone like that on, on our side. And so like a lot of the upfront design, this is why when we talked very early in this conversation about, you know, what should, should the legislation give a lot of flexibility or, you know, hem you in. I think that flexibility allowed us to step back and say in this industry, with this set of, you know, applicants and customers, et cetera, what do we need and how do we structure the team and how do we hire the people and how do we create a process that makes sure that we're. It also created some design things. I've written about some of these things. But, you know, some of our upside sharing, which is a form of equity, was done not only to protect taxpayers and be able to bring more equity in if, you know, these companies did way better than they expected, but also to make sure, like, we were aligning information asymmetries in that regard so that there was no incentive to tell us the numbers were either too high or too low or whatever. There was an incentive to give us the real numbers. And so we tried to structure our overall program to limit information asymmetries and to be able to sit across the table from these highly sophisticated companies and be sophisticated ourselves.

A (85:43)

Yeah, I mean, I guess thinking about the small sat firms and the small sat companies, one of the big tools private equity firms have is when they take something, take something over, they can also bring in new management. Right. And, you know, as we're starting to do more of these equity deals, like, is there, is there a universe where, okay, maybe we need, really need this company to succeed, but we don't trust the person running it, but they are the only one with the capital or what have you? I mean, you know, maybe we, we don't have to do the intel analogy right now. But I'm just, I'm like, what is. You know, when the leadership, when you need a firm to do something, but the leadership you don't think will be able to get you there? Like what?

C (86:32)

There's a question of legal authority, right? Like, does your deal give you the authority to change management? Most of these deals would not, sure. But then there are informal. Obviously their tweets can or whatever. But look, I, What I would say is it feels. And there are precedents of like the auto bailout. Right. Where they changed management because they thought it was. To me, I would say it's a very, very high bar. Very, very high bar.

B (87:04)

Extremely.

C (87:05)

I would not say it's like never, never. But you as a government should have a very, very high degree of humility that you know enough to decide who is best to manage this company. And it doesn't mean it could never happen or that strategic, you know, the kind of national interest may never, never be high enough or you would feel like you have to do it and have enough sense of how to do it. But it's a high bar.

B (87:34)

Yeah, I think it's. I won't say never, but I think it is the absolute, absolute, absolute exception. I mean, with chips, we, on average, we're Giving these companies 10% of the cost of a project. I don't think in any of those situations we should have had any. Right.

A (87:53)

Yeah, but this is the difference with our small $5 million, when you start.

B (87:58)

To $5 billion, significant equity, which is a whole other topic. Should you own direct equity in these companies, companies versus like a form of warrant or upside sharing or something that gives, you know, that is more taxpayer protective versus like picking a winner or loser and actually owning and sitting, you know, not sitting on a board or having like real voting rights. Like, I think you get into this very slippery slope because I don't think government as a matter of course should be in the business of business in that way. Yeah, I think it should be trying to figure out what is lacking from the. What is lacking from the market that the private sector is not willing for whatever externality or other reason to fill. And then how do government funds or government tools, this broader tool set, which I think is really important, how do you use those tools to help to incent and shape the market? I mean, we had so many debates about TSMC and Intel and Samsung and you know, ultimately it's obvious that TSMC today is by far the market leader. And you could say, let's put all the money into TSMC because they're going to get us there. You could say we shouldn't give any money to TSMC because you know they're a Taiwanese company. We should be really trying to support our own. At the end of the day our conclusion was like we need TSMC to be successful. Like that is going to be critical. They have the know how they can help us build an ecosystem. And it's not a healthy market if you only have one player who can really serve the market. And so we should be encouraging the other two because there's only two, Samsung and Intel and giving them every possibility of succeeding and then letting the market sort itself out. To me that is a much healthier environment where you're creating the ground rules and the sort of set of incentives and enabling these companies to effectively compete and letting the market function.

A (89:54)

Well, let's do like just like emotional relationship to all this stuff. Now a year out, I mean do you drive past the TSMC fab with like pride? Is this like your first trip you're gonna take your one month old life?

C (90:09)

I have not been back to northern Phoenix.

B (90:12)

I have.

C (90:12)

I mean you have.

B (90:13)

I mean like I, I mean just as an aside before, before like talking.

C (90:17)

We talk about my emotions before I.

A (90:20)

Talk about my emotions.

B (90:22)

It's when you think about the transformational potential of some of this, it is mind bending. Like if you go to Phoenix and you see the pieces of the puzzle that are getting into place. It's tsmc, it's intel, it's amcor, it's the supply chain, it's asu, it's the local and county governments and all of the sort of innovation ecosystem that's developing around it. You can literally say, I mean it's not for sure it's going to happen but you can look in 10 years and say this is going to be the equivalent of Hsinchu. That's incredible. When you think about what could happen in upstate New York, obviously Micron just broke ground a few weeks ago. That's a benefit of memory. In terms of the scale that comes along with that and the ongoing investment, you can see that being totally transformed. It's going to take a decade or more, but it is pretty exciting to think about planting some of those seeds or in Taylor, Texas that are potentially really transformational. So I think a lot about that. I'm really excited about that. Sorry.

C (91:28)

Yeah, I think coming out was, I think we felt a huge amount of pride. It was like we got our deals done and we, we were catalyzing the Investment. And it really was on a trajectory, but at no point in the process until like maybe a month before did that seem self evident. Right. It was really like, it was really a grind. And so the release of saying, like, okay, we think we've done our part, we can pass baton and, and, and run that, you know, that, that I think we feel like really, really good about. There was then definitely this period of kind of this, this organization and this program that I'd spent two and a half years just kind of obsessing over every day and not knowing what would happen to it. And there were a few months where it was like, you know, it might be a statement in a speech or these different signals that you would get about the future of the program. And that was, you know, I didn't have like the emotional distance to treat any of that with, like a sense of removal. That was like. I just felt like I was like, attached. And then on top of that, you know, Doge came in and ended up laying off, you know, maybe 40, 50 people, something like that. And, you know, those are your friends and colleagues who joined the team because they, because they believed in the mission and just awesome public servants. And so from just from a human perspective, that, that was, that was really tough. Over time, I think that what you're seeing is the program stabilize, investment tax credit expanded. So like massive reinvestment in the program, kind of broadly speaking, overall, which by.

B (93:13)

The way, I think is like a little understood thing out there, like investment tax credit expanded by 10% in the big beautiful bill. That is more money than we had to invest. And so for anyone to say, you know, we got more with less is less, like, yeah, that's great.

C (93:34)

No, just the actual. And they also haven't done any tariffs on chips. Right. So the actual strategy has been increased supply side ETFs thus far. And, you know, I think we'll have to see the investment trends over time. But, you know, there has been, I think, a measure of continuity and I think that's, you know, that's a really good thing and to the administration's credit because this is hugely important for national security. And so now, you know, increasingly over time, one becomes just citizen like everyone else, you know, paying attention to this part of the world, but paying attention to all the other parts of the world that are, you know, that, that are going to all those turmoils.

B (94:12)

And I would, I would say for me, a little bit different because Mike left on January 17th. 17th, and I agreed to stay till March 1st. And so those six or seven weeks were challenging and they were, you know, I'd never been through a transition. The day before I was meant to leave, the order came down to basically lay off all probationary employees, which for us was almost everybody because it was a two year probation. And anybody from the private sector who came was basically before their two years. So for the last like 24 to 48 hours of my time, time, you know, trying to fight to save as many people as we could and ultimately saved a good chunk. Not, you know, no more than a third or so. But that was, you know, to leave on that basis to feel like, particularly on ships where most of these people came and gave up careers in the semiconductor industry and the private sector and to feel like you were, you know, vilified and trying to like, game the system. Am I going to be fired? Should I take the fork? Should I do that? Like, it was a really difficult first part of that environment just when I was leaving. So when I left I was a bit shell shocked. It was a tough, tough time. And then all the rest, I think is, as Mike said, is my same experience. What did I say I was going to make a song about? Oh, well, we have.

A (95:41)

We're going to do like the Skyler sisters, but TSMC and Talon, so that's rep. Thank you. Suno, you gotta sponsor us already. Like, come on, no one's making content like this. All right, Todd, Mike, thank you so much for making America's chip industry great again and being a part of Cheng.

C (96:04)

Thank you. Thank you very much.

B (96:05)

Thank you.

C (96:05)

Jordan. Hi, I'm Intel.

D (96:07)

I'm building fabs in Ohio, in Arizona, in New York. 300 billion reasons why America should work. We've lost the edge to Asia. It's a nationalist grace. But give us those subsidized and we'll win the chip making race. Building to a crescendo. We're the only ones who etch it. Etch it right here on US soil. Give us the chip chips act money or the hold on tech world will spoil. Taiwan's too close to China. It's a geopolitical trap. So write that check to intel, folks. We'll fill the gap. And I'm Samsung in Texas, we will build the largest fab the world has seen. $17 billion. Imagine what that means. You see, speak of America first. But supply chains don't care. We're Korean. Yes, but global. And the future's built to share. From Seoul to Austin, Texas, our technology flows free. You need us, we need you. This isn't our dependency while intel talks of patriotism, we bring capital and speed. This partnerships act is in charity. It's partnership we need.

C (97:47)

To crescendo.

B (97:49)

T S, M C here.

C (97:52)

Okay, okay.

B (97:53)

You want the best? You want the smallest three in the number two? I'm already shipping Apple chips while they're.

C (97:59)

Still in the queue. Intel's building future fabs. I'm building now.

B (98:02)

Samsung's playing catch up, but I made the vow.

C (98:05)

Speeding up 90% of advanced chips. Yeah, that's me. That's TSMC. You want reshore and fine.

B (98:12)

But you need my technology.

C (98:14)

Give me Arizona, give me billions. I'll transfer the know how. Without me, your independence is a paper tiger.

A (98:20)

Kapow.

C (98:21)

Slowly.

D (98:22)

Intense. I'm not asking to be American. I'm offering you access. The chips act. Money. Just the price of your success. The committee hero.

C (98:40)

All three chaotic counterpoint.

B (98:42)

One day more styling.

D (98:43)

Oh, American Joe.

C (98:46)

Stability.

D (98:47)

Actual world. Orientations have been noted. Funding decisions will be announced eventually.