← GoodFellows: Conversations on Economics, History & Geopolitics
GoodFellows: Conversations on Economics, History & Geopolitics
The Plane Truth: Playing Chicken with China, Trump Goes Gulf-ing, Tensions in South Asia
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- [00:00]
John Cochran
Foreign.
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Bill Whelan
It's Wednesday, May 14, 2025. And welcome back to Goodfellows, a Hoover Institution broadcast examining social, economic, political and geopolitical concerns. I'm Bill Whelan, I'm a Hoover Distinguished Policy Fellow. I'll be your moderator today. And joining me, as per usual, are our three Goodfellows. So welcome back to the show. Well, he's devout Protestant, but if the new Pope can somehow engineer a artisan. Artisan. An Arsenal, excuse me, Football championship, he might convert. We welcome back the distinguished historian, Sir Neil Ferguson.
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Sir Neil Ferguson
Very good to be back. Very good to be back. But my, my father would turn in his grave. Not even Arsenal's winning the Premiership is worth a mass.
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Lieutenant General H.R. McMaster
They're kind of the same, man. I, I gotta tell you, like, I'm Catholic. I went to an Episcopal high school. It's, that's the same thing. Henry VIII wanted a divorce, man, there's.
- [00:58]
Sir Neil Ferguson
A whole episode of Goodfellas. We could have over the. On the Reformation. We could do it now. Or we could. Yeah, we could. Stick to topic.
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Bill Whelan
We'll get to topic in a minute. Also joining us today, born and raised in Chicago, like the Pope, he is not the Bishop of Rome. Here in Goodfellows, he is our high priest of monetary policy. We welcome back the economist John Cochran.
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John Cochran
And sadly, the Pope is a White Sox fan. Ah, ah. The devil wins.
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Bill Whelan
And our third Goodfellow, we've already heard from him. Last but not least, he is born and raised in Philadelphia, where the Pope did his undergraduate studies at Villanova. We welcome back former presidential National Security Advisor and Goodfellows Resident optimist, Lieutenant General H.R. mcMaster.
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Lieutenant General H.R. McMaster
Hey, go Wildcats. And you know what? They didn't make the tournament this year. I think they're going all the way next year. Thanks to. Thanks to the Pope.
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Bill Whelan
Thanks to the Pope. Okay, on with the show, gentlemen. Let's begin with China. The news, of course, that the U.S. china had conversation about tariffs in Geneva. And out of that came an agreement, a 90 day pause in their respective tariffs. John Cochran, I turned to you to begin this conversation. What do you think happens after 90 days? I call this truce or dare, by the way, the question being, do you think the truce will hold? Or. Or dare we see something worse happen? So tell us what happens after 90 days, John.
- [02:13]
John Cochran
Oh, who knows? You live in Trumpland here. I think it's pretty clear that the 145% tariffs are not going to come back. Some degree of sanity has prevailed within the Trump administration. Or maybe they will claim at the end of it this was all four dimensional chess to get to whatever outcome we get to. I would agree with you. Now, we haven't quite won yet. We still have very high bilateral tariffs between us and China. We're only going to shoot a couple of rounds into the common boat rather than blow it up with a bazooka. But nonetheless, that's better than nothing.
- [02:50]
Sir Neil Ferguson
This has been a game of chicken because at one point in April, the two superpowers were heading straight for one another for an economic collision. The US started it. Escalating tariffs in a series of steps to the eye watering levels we saw until Sunday, north of 100%. In effect, the US imposed what amounted to a trade embargo on China. The Chinese did not take the first step. They retaliated all the way up, step for step. And as in all games of chicken, the key is who blinks, who swerves. And I think there's no question that the United States blinked because it was the United States that first indicated that it wanted to talk. Xi Jinping didn't pick up the phone. Then Treasury Secretary Scott Bessant said that these tariffs were unsustainable. And so when a meeting was agreed in Switzerland, it really was at the US initiative. And the only question was who was going to go first. The US clearly went first and offered a bigger cut in tariffs than I'd expected. The Chinese immediately said, yep, we'll do that too. And that's how the game of chicken works. The, the escalation came from the US side and then it was the US that had to de escalate. Bit like the grand old Duke of York who had 10,000 men and marched them up to the top of the hill and then marched them down again. That's essentially what President Trump. Why did he do that? Because it was explained to him after the tariffs had reached these sky high levels that the impact on the US economy and particularly on voters in his base, on truck drivers, for example, on longshoremen, would be devastating. And we could already see the disruption happening at the Port of Los Angeles. And so it was explained to him that this ultimately would be very self harming if it continued. Credit I think to Secretary Bessant for bringing about a secret meeting in Washington three weeks ago that set in motion the detente or the de escalation. I think he's emerged as almost a prime ministerial figure in the last few weeks, but there's no getting away from the fact that this was a game of chicken that President Trump started and he was the one who blinked or Swerved.
- [05:40]
John Cochran
Can I just emphasize, you don't win if you get to put in big tariffs on them and they don't get to put in big tariffs on you. So it's like the game of chicken in which just the question is both cars are going to get destroyed.
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Sir Neil Ferguson
Well, not necessarily. That's one outcome. One outcome is when they both get destroyed, and that's why it's such a good thing for game theory. But there's also the outcome where they both swerve and then there's the outcome where one swerves and the other doesn't.
- [06:08]
John Cochran
I'm just emphasizing, you know, unlike sort of military games of chicken where there isn't a state where you won because you got to put in big tariffs and they blinked and they backed down and didn't put big tariffs on you. We're just hurting ourselves.
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Sir Neil Ferguson
Maybe HR can comment on this. I think there is an analogy here because there is a resemblance to Cold War nuclear brinkmanship. And in. In the Cold War game of chicken, obviously it was nuclear escalation and there was this problem of mad mutually assured destruction. I think what we've seen here is that there was mutually assured economic destruction in the case of a trade war, and it would have been disastrous for both sides if the tariffs had continued at this kind of level. But am I right to think of this as, by analogy, like the games of chicken that occurred, for example, in the Cold War in 1962 over Cuba?
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Lieutenant General H.R. McMaster
Yeah, I think to a certain extent that is a useful analogy. But also I would say even a broader Cold War analogy where you're going to see, I think, the world kind of hardening into various blocks, blocks associated with really China's status mercantilist model that is incompatible, I think, with our free market economies. Sorry, John, but then also this is only the beginning. So John's right. This is only the beginning. Right. Because I think what you're going to see now are a lot this effort to accelerate bilateral trade agreements. A lot of those bilateral trade agreements will be about China and the need to improve the resilience of critical supply chains such that China doesn't have coercive power over our economies or to address other. I know John hates this phrase, unfair trade and economic practices by China associated with overcapacity and dumping and efforts to. To dominate in advanced manufacturing, such that they have this dual circulation economy where we're dependent on them, but they are insulated from any kind of financial or economic consequences of their aggression in the South China Sea or vis a vis Taiwan. I think this is important. So the nature of these bilateral agreements and I'd love to hear what both of you think about this. I think there are going to be sectoral tariffs coming up now. You know, pharmaceuticals, copper, you know, I mean, if you fill in the blank in terms of, you know, what, what are the critical commodities and, and goods that China has a grip on that, that we will want to, to source, you know, have alternative sources for, you know, and, and you know, I don't know if you, you've seen the, the reporting, the new book out on, on how Apple made China, you know, and, and I really think that, you know, it's time for us to recognize that over dependence on China, whether it's for, you know, manufacturing like, like Apple or whether it's on, you know, on supply chains that are critical, such as, you know, rare earths and other really critical minerals and so forth, or goods like batteries that, that we have to diversify our supply chains and not be beholden to a hostile state.
- [09:16]
John Cochran
Do we want to go and have the.
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Lieutenant General H.R. McMaster
This is our. Hey, we have to do this periodically, I guess.
- [09:20]
John Cochran
But yeah, you know, I'll just take one of this outburst. Their mercantilist approach is incompatible with our free markets. You know, suppose Whole Foods in Palo Alto decides that what they want to do is they want to, you know, charge you for arugula, but they want to build up a stock of US treasury bills rather than, you know, go out and buy stuff with it. Okay, so the arugula is still on sale. How are you hurt? How are we hurt by their mercantilist? How are we incapable of going on with an open free market society? Because China decides that they want to be mercantilist. I don't see how it hurts us at all. That's just one of the of the 10 things you said there.
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Sir Neil Ferguson
Can I act as the sort of arbiter here? Because I think there is a middle ground. I think HR is right that there are certain strategic areas where dependence or heavy reliance on China has created real vulnerabilities. That's very obvious when it comes to our defense industrial base that was greatly eroded in the last 20 years. But it's also true with respect to technology. And I think it probably did make sense to de risk that was what the last administration talks about. But to decouple altogether from China has been shown to be impossible. We've just run the experiment and when we tried to do it, that was in effect what the very high tariffs did. It revealed the extent to which the US economy is heavily reliant on goods manufactured in China for a whole bunch of things. Shoes, apparel, dolls. We heard all about those because they made it into the discourse. But it's actually an amazing range of different household goods that are imported from China. And you can't imagine decoupling without enormous disruption. And it was the warning to the President by the chief executives of Target and Walmart that there would be empty shelves or high prices that I think helped change the direction of travel. So I think we've got to pull back from decoupling. That doesn't look practical in any timeframe or at an acceptable cost. And it doesn't seem very obvious why we need to have dolls manufactured in, say, Vietnam as opposed to China. But I think HR has a point that there was a real strategic problem that developed in the last 20 years. And I think he's also right that China never abided by its World Trade Organization commitments. And I think it was partly folly on the part of the west not to make those enforced. And we essentially allowed them not to stick to those commitments. And as a result, the strategy made in China 2025, which was a deliberate industrial policy to give China leadership in batteries and solar cells and electric vehicles, was executed with incredible success. There's just no getting away from that. And that certainly wasn't free market economics. John of the Chicago Variety. So I think there's a way of reconciling your positions. And in a way, we've arrived at it because we ran the experiments of decoupling, and after just a few weeks, it was clear that it wasn't sustainable.
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Lieutenant General H.R. McMaster
This is our periodic struggle session. This is a struggle session we're having.
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John Cochran
Well, obviously. So me buying a bicycle from China does not help them to invade Taiwan, but let's even, even get the national security ones. So you mentioned rare earths. Well, I looked. I found the number 0.1% of rare earths get used by the military in the U.S. there are many other supplies of rare earths. It's a long war. You can stockpile some rare earth. You can. There are other sources that'll get you through a crisis. We've seen how effective sanctions are on many other countries. There's lots of ways to get around them. So even rare earths, there's no reason why the batteries that go into my bicycle have to be made in the US in order to win a war over Taiwan. Second, why did China take over these things? Was it massive subsidies? No, it's because it's Impossible to get anything done in the US. Good luck starting a rare earth mine 10 years just to get the environmental assessment. So China did not take over these industries because they subsidized them nefariously and did their free market system. China took those over because we shot ourselves in the foot on being able to get anything done and the wto. So here's one way of putting the question. There have been winners and losers. How much has the US economy overall been hurt by, by trade with China? Let's turn back the clock and suppose we could keep China desperately Middle Ages poor, make it North Korea for the last 30 years instead of letting it rise and have no trade of US with China. How much do you think US income per capita would be higher as a result? I think that's perfectly clear. It would be tremendously lower as a result. China's mercantilism, China's not following the WTO rules and so forth. It would be better still if they had. But we are nonetheless better off for the trade in China. So all this economic aggression and destroying the American economy by selling us cheap stuff, it just doesn't hold up.
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Sir Neil Ferguson
John, what I was saying, I didn't mention rare earths, was that there were a whole range of goods that the Chinese were producing that it was a mistake for us to buy. Remember until quite recently, really before HR's time as National Security Advisor, the US military was routinely installing Chinese components, including semiconductors in its hardware. And so there was a problem there. It's clear that there was a threat to critical infrastructure in the United States that was only going to get worse if Chinese goods, Chinese products were incorporated into our, our system. So there had to be some decoupling.
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Bill Whelan
This is easy.
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John Cochran
So military contractors must buy stuff from US suppliers, not Chinese, at higher prices. That goes into the defense budget. And then an industry comes up. You don't need to stop the chips that go into my kids game boys from being produced in China in order to make sure that military contractors buy US made or properly certified chips. This is just an enormous thing being done for a tiny effect.
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Lieutenant General H.R. McMaster
Well, I mean the other example I would give is really beyond the military one even, even cranes at ports for example, you know, have been compromised with threats from you know, the really hardware related threats and then, and that you know, that could, you know, maybe disrupt our economy, disrupt military deployments. The other is fifth generation communications hardware. You know, this is Huawei where you know, the model has been that the CCP entices you with the kind of promise of short Term profits, steals your intellectual property, subsidizes, picks a winner like Huawei, $60 billion of subsidies that we know of, then produces those goods at artificially low prices. They sell that hardware at a loss so they can gain control of communications infrastructure and use that for, for, you know, for various purposes, but to indebt countries to establish long term relationships, advance their geopolitical agenda, but then also to, to gain a tremendous surveillance and intelligence collection capability. So I mean, you know, John, I mean, I think, I think you're right. Like, you know, who cares if you're, if you're a Barbie doll or whether whatever's made in in or your bicycle. But, but the, you know, China is deliberately trying to create dependencies. They're trying to essentially decouple on their own terms with this effort to create the dual circulation economy, deliberately create dependencies that give them coercive power over our economy. And of course, we learned from the rending of the economic relationship with Russia that that's a really bad idea. I mean, Germany's dependence on cheap Russian natural gas, for example, gave Russia considerable course of power. So I think what we, we have to do is do it sensible, you know, and, and, and, and you know, and protect ourselves from that kind of coercion.
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Sir Neil Ferguson
So now, John, I have a question for you. Should there be free trade in automobiles which would of course allow China to get a really quite large market share of electric vehicles, given that there's a, a very cheap relative to the competition and now comparable in quality. So as a free trader, would you let Chinese EVs come into the US market? Currently they're excluded by tariffs.
- [18:11]
John Cochran
Absolutely. China turns out can produce EVs at much lower cost than the US thanks to all those wonderful subsidies that the US does. I mean, thank you, HR. You want to accuse China of being evil because they subsidize. You want to look at what the U.S. does? We're like 100 to 150,000 bucks for hev. Absolutely. And would you, Neal, say that it was terrible for the US to let Datsun and Toyota into the US market, undermining Ford, GM and Chrysler, the American stalwarts who were producing this wonderful stuff in the 1950s? Absolutely. You want free trade now? HR made a national security claim. Do you really think that there are secret ships in Huawei equipment that are reporting everything back to the Chinese Communist Party and that if you buy their cranes you are unable to detect this and so you simply can't buy the crane because of, you said gain control there has to be some secret backdoor in every chip sold by China that they can flip off a sudden. Is that actually a reality? This is an honest question. Because, you know, classified stuff more than.
- [19:16]
Lieutenant General H.R. McMaster
I would say that it is reality. And I would. You know, there is quite a bit in the public domain about this. I mean, go back to the Super Micro incident, for example, which we, I mean, only some of that's been released public publicly. So I mean, there is a concerted effort at espionage. Look at the vault attacks that have just been revealed. China is developing the ability to cripple our infrastructure, cripple our transportation infrastructure, cripple our communications infrastructure. And I know this might sound overly alarmist to you, but I think that this is an effort to provide them not only with coercive power over us, but maybe even a first strike nuclear capability. Because when you look at what they're doing from a cyber espionage perspective, and then combine that with the 400% increase in their nuclear forces, combine that with what the object has been of much of their surveillance. You know, the balloon. You know, the reason the balloon flew over the Midwest and exited over Norfolk should be kind of obvious in terms of what communications intelligence they were trying to collect that can't be collected from low earth orbit, for example, or by other means.
- [20:26]
John Cochran
So tariffs on balloons aren't going to stop that. So if you have a espionage shoot.
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Lieutenant General H.R. McMaster
Down the balloon, you shoot down the balloon.
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Bill Whelan
Yeah, guys, I got to step in here. We, we have only so much time today and we have Frank Dakota, our colleague is on next week. So we'll talk more about China then.
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John Cochran
This will be fun. To be continued, guys.
- [20:43]
Bill Whelan
John, you really have to be more passionate about this. Okay? Bring a little more fire.
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Lieutenant General H.R. McMaster
I love this if you let.
- [20:48]
Sir Neil Ferguson
But it's just one last point, Bill. There's one last point that has to be made. We know from what Tesla is doing that every Tesla is gathering information from its cars. It's all the data gathered by Tesla. And obviously byd, the Chinese EV company will do the same. And so the problem about having a fleet of Chinese made electric vehicles in the United States is perfectly obvious because in time of crisis these, these things would not be, this would not be autonomous.
- [21:19]
John Cochran
Per vehicle for that national security privilege. And so, okay, HR, you don't get 10 aircraft carriers. I mean, at some point you got to have some cost benefit and some, you know, meet the threat with where, you know, let's look at the chips in the cars, let's examine them. Let's not just because we are heading into an extraordinarily expensive American impoverishing cold war security war, trade war with China. And there's a history of a little bit of paranoia in the US about such things. And I just want to make sure we're clear headed about what we're doing, what the threat is, what the long run goal is, and not just going in down one of these alleys again.
- [22:00]
Bill Whelan
All right, to be continued. Let us now segue to President Trump's first trip overseas in his second term. He goes golfing, golfing with a U and not an O. Would you like to talk about the fact that the president is coming back with what he calls a palace in the sky? This is a Boeing 747, courtesy of the Qatari royal family that will be tricked out as Air Force One, then one day end up in the Trump library. Would you like to talk about the Trump family's rather disturbing dealings in the Middle east and the overlap between US Policy and family money making? Neil, pick any of those or all of those if you like.
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Sir Neil Ferguson
Well, let me try and weave them all together. I think it's getting harder and harder to discern a strategic concept in the second Trump term. In the Middle east in the first Trump term, there was a remarkable strategic concept and it produced the Abraham Accords. It was one of the most successful parts of the first Trump term foreign policy. But here it's harder and harder to discern where it's going. For a time, we, I think, assumed that the United States would support Israel as it tried to finish off the job it started last year with Iran. You'll remember Iran attacked Israel twice. The attacks were highly unsuccessful. And then Israel attacked Iran highly successfully exposed. Its air defenses are very weak. And I think I was waiting for the job to be finished with airstrikes against Iran's nuclear facilities. That is all now apparently on hold. Suddenly, Prime Minister Netanyahu looks isolated. President Trump is talking about resuscitating the Iran nuclear deal in some form. And it gets more confusing. We launched long overdue strikes against the Houthis to try to stop their rampant piracy and disruption of the sea lanes, and then called it off when it turned out to be a little harder than perhaps had been expected. So I struggle to see the strategic concept there. The president is going from one stop to another doing deals. And it gets harder and harder to find where the line's drawn between the United States government and the Trump Organization in ways that I think ultimately will get the president into trouble later in his term. He's giving his Political enemies, a great deal of material to work with. And it's obviously indefensible to accept as lavish a gift as the Qataris are offering. When you think about what else the Qataris are doing. One last question. Is it right for the President's emissary, Steve Witkoff, to negotiate directly with Hamas? All of this has left me feeling rather disillusioned about the direction of the second Trump terms foreign policy. Not only have we seen a bungled game of chicken with China, but now it seems to me that our entire Middle Eastern strategy is unraveling.
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Lieutenant General H.R. McMaster
Hey, I agree with Neil's observations here, except that I would say what is encouraging to me is that President Trump is engaged in the Middle east at all. Right. Because one of the concerns that I had is that he tended to regard the Middle east mainly as kind of a mess to be avoided. And I think with these engagements with the Saudis, the Qataris and the Emiratis that he will see that this is an arena of competition, a geostrategic arena of competition important to the United States because it's relevant to the broader competitions with China and Russia. And you have problems that originate in the Middle east, don't stay in the Middle east, especially the problem of jihadist terrorism, for example. So also the free flow of commerce, the effect that disruption would have on the global economy, his agenda for energy security, his desire to drive oil prices down, but not so far down that it disrupts the US Investment in the US Energy export and the US Energy industry overall. So hey, I'm just glad he's not disengaging. I guess the big question is going to be will this type of diplomacy, this assumption. And John, I'd like to hear what you think about this. I think the assumption is that economic integration and commerce in the region can overcome ideological and geopolitical competitions that have created so much violence and suffering in the Middle East. And I think that that's the premise that kind of underlines a lot of what that is at the foundation of a lot of what President Trump is doing. So I mean, I'm skeptical about that. You see this with even the relief of sanctions on Syria, based, I think, on what will turn out to be a forlorn hope that Al Shara, the former Jelani leader of Syria, is no longer a jihadist terrorist and is going to be inclusive and bring a degree of stability to Syria. But I think that's really going to be the test of this kind of swing through the Middle East. And what it does reveal, which I think again is this assumption that commerce, economic integration can overcome the furies of the Middle East.
- [27:40]
John Cochran
Well, there's no one more dedicated to the proposition that commerce can help overcome passions than I witness our discussions about China. But I think you're right. That was actually a not very well heralded element of the first Abraham Accords. Even the part involving Israel and the Palestinians. Before October 7th, there was sort of a plan. Why don't we let them get rich first and then we can talk about having a country as a. Yeah, this.
- [28:07]
Lieutenant General H.R. McMaster
Is, this is the Jared Kushner plan that was revealed, I think. Was it in Oman? I can't remember. You know, I get, I think it was in, in Oman.
- [28:14]
John Cochran
Yeah. It was heavy on, on government investment as the way to get rich as opposed to just let them get rich. But certainly that, that was a, a very good idea. Let me comment on the sort of economic aspect of the other part. The 747 is an interesting story. Of course, if you're worried about buying cranes from China, I don't know that the presidential seven, the presidential 747 is one where I might have a little worry about just where the electronic components come from. But it's also a story. Why aren't we building our own? Why is it taking Boeing 10 years to outfit a 30 year old plane for the President when it took them one year to to produce B29 bombers from scratch in World War II? Now that's partly a story of the bloke that has happened in America's military contracting. Compare SpaceX versus NASA's ability to produce a rocket. Boeing is really falling apart on its ability to actually build stuff. But partly it's what happens when you have lots and lots of rules and security rules. So why is Boeing having such trouble? Well, everybody who screws in so much as a bolt on that plane has to have special national security clearance. Guess what? There aren't a lot of qualified aircraft mechanics. There aren't enough, period, because Boeing fired most of them. But there aren't enough who have also the special security clearance. So it takes a long time to make that thing. Another point I noticed is Trump is out there not just making money for himself, but trying to get investment into America from the Saudis, which is very nice. But I would like to ask, where are the Saudis supposed to get dollars to make investments in America? Well, they have to sell stuff like oil for dollars. Fine. Which they sell to, you know, other countries who then have to sell goods and services to America to get dollars if you want investment in the US you have to let people sell us stuff, trade deficits, finance capital account surpluses. So it is kind of interesting how those things don't seem to add up. And last yet, the connection of family and family wealth with American diplomacy is one of the worrying things. I would start with issuing crypto in your own name for the billions of.
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Bill Whelan
Dollars.
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John Cochran
We'Ve all kind of, everyone's kind of looked. There's so much else going on that nobody's paying attention to it. But I think Neil is right. If the economy tanks and the Democrats take over the House, you can be sure that this will be something they're really going to go after Trump for.
- [30:54]
Lieutenant General H.R. McMaster
You know, or the new, or the new social club in, in Washington that you can join for half a million dollars. And, you know, I mean, I just remember when I would fly like through Shannon, Ireland, oftentimes when I was traveling as a national security advisor. And, and I'll tell you that the, the director of that airport was fantastic guy. He would always give me this really awesome bottle of whiskey when I came through, and it would always almost bring a tear to my eye every time I would just turn it over to the government, you know, because you can either buy it, which I couldn't afford on a government style, or you give it away. I mean, you know, I mean, you can't take gifts like this because the expectation is, of course you're going to be beholden. I mean, this is to our ally, right? You know, a friend in Ireland. And Gutter, of course, you know, Gutter has a mixed record, right, of playing it both ways. And, and so, yeah, I think this is a really, a really bad idea. Right? We don't, we don't need the plane. Thank you so much. I appreciate the gesture. You know, here's a, here's a, a White House mug. We give the worst gifts, by the way. Americans get terrible gifts. I would use my own money to buy like sets of, sets of glasses with the founders on it to give because, I mean, you would have, like the Vietnamese would come in with all this great, you know, all this great swag, you know, and then you're like, well, I have this, I have this pen for you. You know.
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John Cochran
Didn'T Obama give the queen, like a CD collection of his own speeches or something at the start?
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Bill Whelan
Let me ask, let me ask a very quick but naive question. We have only a couple of minutes left to the segment. What is Qatar's end game here? So they're giving the president to 747. They pump a lot of money into American universities. They, they help Hamas, they underwrite Al Jazeera. What, what is Qatar doing here?
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Lieutenant General H.R. McMaster
Well, Qatar wants to be bigger than they are, right? They're, they're an economic power, but they're a tiny country. They're a tiny country sandwiched between Saudi Arabia, which hasn't been friendly to them, and Iran, you know, which has territorial disputes and, and disputes over, over, over gas reserves in the Gulf with them. So we've been the big dog. We're the big dog on the front porch. But also what they do is they want to play a big geostrategic game and to do it mainly by exporting an Islamist ideology through, you know, the, the Muslim Brotherhood. And they want to be seen as, you know, even more than Saudi Arabia, the defender, you know, of, of Islam. They do this through Al Jazeera, you know, their news outlet and news outlet, which has gotten better. But you know, really in the, in the early 2000s turned you know, killing Americans from extreme into mainstream, you know, based on their advocacy for jihadist terrorist organizations. And, and the, the, you know, the trope of the Zionist crusader experience, you know, conspiracy and, and you know, quick cut images from, you know, from the west bank to what was happening in Iraq and so forth. So I just think, you know, they've always played it both ways, right? And you know, hosting Taliban, which they would say was at our request, you know, but, but allowing them to stay in these five star hotels and fundraise their same thing with, with Hamas and then working with Turkey in large measure to fund a lot of these Islamist organizations, including the Muslim Brotherhood, you know, which is kind of the gateway. It's a gateway to jihadist terrorism. So hey, you know, I, I've written a little bit about this in the last couple books, but Gutter, like the Pakistanis, you know, are very adept at playing it both ways. And, and so you got to be clear eyed about it with them. And, and will, will Sheikh Tamim, will he be, you know, will he start to see the light? Well, you know, maybe, but this is one of these situations where, you know, you don't want to trust unless you can verify, you know, the, the changes in behavior.
- [34:33]
Bill Whelan
All right, gentlemen, our final theater we're going to look at. We haven't discussed as much in the five years we've been doing this show, and that would be India and Pakistan who recently engaged in hostilities. They lobbed missiles and drones in each other's directions. Vice President Vance, Secretary of State Rubio got involved, they talked to the two countries and they agreed to a ceasefire. But one, we believe it's a very shaky ceasefire. So let's talk about what is at stake here. The world obviously holds its breath when these two get violent because they both have nuclear arms. What I'm interested is also the kind of behind the scenes politics here. Neil, we talk about Cold War two. Is this lining up as a proxy the United States on one side, which would be India, and China on the other side, which would be Pakistan?
- [35:13]
Sir Neil Ferguson
Well, Bill, I think the interesting thing is that that's what didn't happen. Suggesting that our Cold War is probably moving into a phase of detente, something I've been advocating for some time, not only over trade, but over geopolitics too. The near war, or small war, began with a terrorist attack in Kashmir. The Indians retaliated against targets not only in Kashmir, but in Pakistan. Blaming the terrorist attack, at least in part on the Pakistani government, Pakistan then shot back. Things escalated rapidly. It wasn't nearly as big a war as the 1971 war between India and Pakistan, but it was one of those echoes of the 1970s that I keep picking up from this administration. And as in 1971, the US government didn't want the war to escalate. But actually the critical variable was that neither did China. China was very lukewarm in its commentary on the conflict and really didn't show any sign of wanting Pakistan to ramp it up. So that was probably as important as the US intervention. It's clear that something came through to Washington and HR may have thoughts on this that got people pretty worried as things were escalating. I mean, there were dogfights going on in the air between jet planes, and it turned out that the Chinese made planes that the Pakistanis were using performed pretty well. We don't know for sure that they shot down European made jets that the Indians had, but it seems like at least one went down at any event. Whatever it was that triggered the intervention, it seems to have been a diplomatic win for the Trump administration. And one should recognize that Secretary Rubio, with some help from Vice President Vance, played an important part in getting both sides to step back. And as far as I can see, the worst of the crisis is now over.
- [37:28]
Lieutenant General H.R. McMaster
HR Yeah, I think it was certainly a cause for grave concern.
- [37:33]
John Cochran
Right.
- [37:33]
Lieutenant General H.R. McMaster
These are two nuclear armed powers which have, you know, have, have fought, you know, multiple wars against each other. It seemed like the situation could escalate, as Neil mentioned, with these sort of dog fights that occurred. Really not over one another's territory, but long range air to air engagements as well as some of the, the missile strikes and that the retaliatory strikes that India had taken. So I think it was a diplomatic win for the Trump administration. It showed how effective diplomacy can be. And then of course, as you indicated, Bill, with the question, I think what you're seeing is kind of a geostrategic shift though, in South Asia with Pakistan essentially becoming a client state of China's. And really what had driven our kind of love hate relationship with Pakistan changing because we really don't have, you know, the, the interest in Afghanistan that we had when we were still in Afghanistan. And so Pakistan can't kind of play it both ways with us anymore the way it used to. And so I think there is kind of a hardening now. India is the most reluctant of partners because India is kind of schizophrenic between a fear of abandonment, you know, by, by the United States and the fear of entanglement with the United States. And they have a legacy relationship with Russia that I think they're very reluctant and will remain reluctant to change because they don't think we're super reliable after the withdrawal from Afghanistan. And they need Russia, you know, as some kind of a hedge against China, who also remember, you know, just a couple years ago was bludgeoning Indian soldiers to death on the Himalayan frontier. So I think it's important to view this ongoing competition hostility between Pakistan and India from the perspective of each of them and to understand how that hostility now fits in to big geo strategic shifts involving China, Russia, India, Pakistan and the United States and our interests.
- [39:40]
Bill Whelan
John, India is very much on the radar screen of our director, Condoleezza Rice. She took a delegation to New Delhi a couple years ago. We have here at Hoover Initiative she launched it's the Huntington Program on strengthening US India relations. I know you have some thoughts here, but in addition to what you're about to say, do you buy into the concept of the Indian century?
- [39:59]
John Cochran
India could have a wonderful century if it would simply let out, get out of the way and let itself grow. You know, the puzzle is why the last century wasn't the India century and why China, a communist dictatorship that I have no more love for them than HR does. Why did they grow like crazy whereas a democracy is still stuck in over regulated license? Raj, to a great extent question I wanted to ask HR and Neil was in this conflict, isn't this a sign that a few nuclear weapons aren't a terrible thing? It limits the conventional War you have, you know, this was a flare up, but the US and the Soviet Union had flare ups too, around the world. But always stepping one step back from the brink. This did not turn into a full scale war. And surely the fact that you're dealing with a nuclear armed counterparty had something to do with it. Now you have to have some belief that there's sanity on the other side. The ideal is where India and Pakistan simply limit themselves to the parade of funny walks on the border. If you haven't seen it, just a bit little hilarious, the funny walks they do on each other's border every day, but occasional small things that then get defused. And also, why does US and China step back? We don't want them escalating because both US and China understand that a nuke going off when one of these things would be a terrible thing. Much worse than if they were to go at some conventional war on the other side of the world. Which also, you know, back to China a little bit to some extent. Is Xi Jinping Lenin or is he Brezhnev a risk averse old man who doesn't want to stir things up or someone willing to have war for a worldwide revolution? Certainly in this case they did not want to encourage Pakistan to go crazy on it. So a few nukes may not be a terrible thing. Now granted, by threatening something that is absolutely awful should it happen, but it was a stabilizing force in the Cold War.
- [42:04]
Sir Neil Ferguson
I, I think first of all, John, that you need to update your Indian economic data because Indian growth has been one of the big stories over the last 10 years.
- [42:16]
John Cochran
Liberalization in the 1990s was great. I'm sorry, I didn't mean to indicate.
- [42:20]
Sir Neil Ferguson
You kind of made it sound as if they were still stuck in that old model, but they've really broken free of it. And it, and it is really one of the bright spots on the global economic landscape and that that's part of what's happening, that the imbalance between India and Pakistan, which is already considerable demographically, is becoming enormous economically because as India forges ahead technologically, Pakistan is still kind of stuck in a semi failed state economy. So that's part of what we're seeing here. The imbalance is enormous. But I think that the problem about having lots of nuclear armed powers in the world is that while you might say, well look, this creates a sort of mutual assured destruction at the local level as well as at the global level, that's true until it's not true. And the more of these nuclear dyads there are and there clearly could be more in the next 10 or 20 years. As the regime of non proliferation breaks the down, the higher the probability that at some point somebody is going to use a nuclear weapon. And this was always the problem about Pakistan becoming a nuclear power. It's, it's not only that Pakistan became a nuclear power, it then became a source of nuclear technology. HR knows all about that because he saw the consequences of its, of its technology transfers.
- [43:39]
Lieutenant General H.R. McMaster
Yeah, this is, this is the AQ network.
- [43:43]
John Cochran
I don't want to apply that to the Iranians, but thank you for expanding on that. India has had a remarkable opening and liberalization. They have a long way to go though. So India, my numbers may be a little bit old. GDP per capita is around 5,000, China's around 20,000, US is around 80,000. So they've been growing, but albeit from a very low level and they have a very long way to go as far as trade liberalization, openness, ability to run things in the country, lots of internal dysfunction. I want to see India has that potential. I want to see them do under a democratic state what China did and grow up first to be 20,000 and then let's make it 40 and 60,000. That potential is there and it would be wonderful if they can let it happen.
- [44:26]
Bill Whelan
Let me ask and ask a question gentlemen. Do you see the truce holding or do you see a renewal of tit for tat strikes or do you see an all out war breaking out?
- [44:34]
Lieutenant General H.R. McMaster
HR hey. Well, you know, Pakistan since maybe 1948 has been using terrorist organizations as an arm of its foreign policy. It has never held back on that. And, and I think that they've created these groups for that specific purpose. This is Lashkai, Lashkari Taiba and, and its offshoots which were probably responsible for this mass murder, this brutal mass murder of, of, of, of, of, of young Hindu men in, in, in Kashmir. I think the current army leadership, which is what you really have to really consider in Pakistan remains hostile and remains prone to using these groups. General Munir, the head of the Pakistani army said the week before the attack in Kashmir, Kashmir is the jugular vein, you know, of, of, of India which you know, which seemed to, to foreshadow the attacks that occurred. And so I think what you're going to see are continued efforts to, of each country destabilize the other and impose costs on the other. You know, there are allegations that, that India is supporting, you know, Balak separatist groups in Pakistan. And certainly the, the evidence I think will become clearer in, in the next weeks, maybe even of, of, of the Pakistani army's complicity in, in the attacks in Kashmir, just like we saw after the horrific Mumbai, Mumbai attacks of 2008. But yeah, I mean, I, it's, I mean, this is not a problem set that's going to go away. It's a problem set that we're going to get to continue, I think, to monitor and then stay engaged with. And as you saw, American diplomacy still can be indispensable in diffusing these kind of crises.
- [46:21]
John Cochran
John From Pakistan to India to Qatar to US Companies, everybody likes to play both sides of the game when it's in a world that's unclear and not well led.
- [46:35]
Bill Whelan
Yeah, Neil, the theme today seems to be former British problems.
- [46:40]
Sir Neil Ferguson
Well, if you rule the world, you can be blamed for almost every problem. And as Britain largely ruled the world in the 19th and early 20th century, it's, it's fashionable to say that everything is a legacy of British imperialism from Middle east to the Pakistan India problem. But of course, you don't need to study too much history of the period before the rise of the British Empire to see that many of the conflicts we talk about today predate British power. And the British try to deal with them the way we try to deal with them, sometimes more successfully and sometimes less so.
- [47:15]
Bill Whelan
Okay, do you see an off ramp here or do you think they're going to renew hostilities?
- [47:18]
Sir Neil Ferguson
Well, I think that there won't be an escalation. I think the hostilities are a sort of permanent feature in the sense that both governments play these cards regularly. We get these crises fairly frequently because they, they play well domestically. And the Modi government, Narendra Modi's government in India, which has been more economically successful than any post independence government, also relies heavily on a kind of Hindu nationalism for its political success. And Modi could be seen just a few days ago with Indian troops whipping up their patriotic fervor. There's a similar game that can be played by the Pakistanis. So I think this is a very good example of the primacy of domestic politics in foreign policy. Neither side wants too big a war because they don't want the casualties that they saw, not to mention the economic disruption of 1971. But I think we've probably seen peak conflict this year, but it'll be back at some point.
- [48:20]
Lieutenant General H.R. McMaster
And you know, this is, this is also, you know, Hussein Haqqani's observation, I think it was, who said, you know, most countries have an army, but in Pakistan the army has a country and, and one of the ways that the army maintains its kind of grip on power is they see, you know, a hostile Indian behind every tree and, and want to perpetuate the kind of animosity in the conflict. It's not a coincidence. I think whenever you see diplomatic progress between the Prime Minister of Pakistan is kind of powerless, you know, and, and the Indian Prime Minister, what you then quickly get soon after that is a terrorist attack, you know, which kind of torpedoes any sort of progress at further economic integration, for example.
- [49:03]
Bill Whelan
All right gentlemen, onto the lightning round. Earlier today I was waiting, waiting to get on the Stanford Marguerite shuttle. And as the shuttle approached, so too did our colleague Stephen Kotkin. And I quickly got distracted by Kotkin. Kotkin and I had an interesting conversation on the ride over to Hoover and what we were talking about was a story in the Stanford Review about Chinese espionage on the Stanford campus. The Chinese like to target in particular Stanford STEM students. Now Dr. Kotkin's position was kind of a. Eh, this is not really that much of a story. It's been going on. I'd like to get your gentleman thoughts on what is going on here in terms of Chinese espionage and campuses. Is it something unique or is it just once again another aspect of Cold War 2o.
- [49:47]
Sir Neil Ferguson
I'm shocked, shocked that the Chinese could be carrying out espionage at a major UN research university in the United States.
- [49:55]
Lieutenant General H.R. McMaster
Well, I mean gambling, Gambling in the back.
- [49:58]
Bill Whelan
Gambling in Casablanca.
- [49:59]
Lieutenant General H.R. McMaster
On what ground?
- [49:59]
John Cochran
I'm shocked, shocked to find that gambling is going on in here. You're winning, sir. Oh, thank you very much.
- [50:07]
Sir Neil Ferguson
This is like the least exciting breaking news. It's been going on at the University of California. I remember having conversations about that more than six years ago. Of course it's happened at Harvard and indeed some faculty got implicated there. And this goes back to the beginning of our conversation on this episode of Goodfellows. The Chinese are, have been engaged in Cold War type activities in the United States for many years and of course they targeted Stanford. Why wouldn't you? It's the. Probably the, the leading STEM research university in the world.
- [50:47]
Bill Whelan
John.
- [50:48]
John Cochran
So I read the article with interest and I also spoke to the reporter a bit. Universities. The article didn't say anything about what actually might have been stolen. Universities are not repositories of great secrets. We are here to give away intellectual property for free. That's what we do. Every lab at Stanford is hurried in trying to publish their results to the open world as fast as humanly possible to get there before the other Lab publishes it. There are certainly no secrets in my office at Hoover. All I want is for anybody to pay attention to the research I write. Now. I guess the Chinese aren't in there yet. I think this is an example of the paranoia. Yeah, they're around and they're for domestic political control and to keep tabs on what's going on. But much intelligence gathering just consists of reading the newspapers of foreign countries. Now there are labs and there are things at Stanford that are doing classified research and I would presume have some sort of controls on it. But I would be much more outraged if I had some concrete idea of what horrible secrets they are slipping away, which was not mentioned at all in the article. In an institution that is there to give away everything we learn as fast as humanly possible.
- [52:14]
Lieutenant General H.R. McMaster
Hey, well, this article, it's the tip of the iceberg. There's been extremely deep penetration of a lot of the research that goes on in US Universities across the country of PLA scientists and MSS agents. There are huge efforts ongoing to extract as much sensitive technology that has military applications and then apply it to developing a differential advantage, to building a differential advantage for the People's Liberation Army. I don't think that US universities and certainly government funded research from the Department of Energy, the Department of Defense should bring into it scientists from hostile military organizations. The other aspect of this though, John and Neil, that I think needs further development is the degree to which the MSS is the Ministry for State Security and certain front organizations that they develop, like the Chinese Scholars and Students association, are here to keep tabs on Chinese students. And I think every provost in every university should do everything in their power to protect their students from coercion by a foreign hostile state. And there have been so many incidents of this, and this is in the public record of, of a Chinese student saying something positive about, you know, Tibet and, and Tibet's need for relative independence or autonomy or, or, or for Taiwan's democracy or, or God forbid, criticism of the Chinese Communist Party, which is engaged in cultural genocide, among other things, and then their parents getting a knock on the door back in, in, back in China. So I think that, you know, there's a lot of work to be done here. Fortunately, there are some private sector solutions to this that can help universities do the due diligence. That can work, you know, in a tactful way with universities. The University of California has done this. Many other universities have not done it. And I think it's irresponsible. You know, years ago, I think 2018, maybe 2019, Hoover did a really good study of how to protect the research enterprise from state based espionage. Right. And it doesn't argue that universities should become the FBI, but it argues that university officials should just be responsible and make sure that they're not being penetrated by a foreign intelligence service. So I think there's a lot of work to be done here, John, and the situation is much worse than you think. And in 2019 or 2020 we had our first tech track two dialogue. We brought together senior civilian officials, senior government officials and CEOs of companies, tech entrepreneurs to talk about really the challenge associated with the competition with China. Mainly to kick off that conference we had a Stanford senior brief, his senior thesis on Chinese espionage in Silicon Valley. It was jaw dropping and it was jaw dropping mainly because of the utterance, you know, the degree of utter complacency, negligence. So you know, I think I would disagree with you, John. I think there's a lot of work to be done. The ccp, the MSS are all over many US universities and we should protect our students at the very least and protect the technology that's critical to defense at the very least, you know, from that kind of penetration.
- [55:52]
John Cochran
And there we agree, you know, protect our students I think is very important. Protect actual secrets, actual military stuff. It's important. But let's not get paranoid. And where this is going is increasingly places just won't have Chinese students, they won't hire Chinese or Chinese American, even faculty. It's just, oh no, can't have China all a bunch of spies. And that's a tragedy. Bringing Chinese students to America is one of the best ways of getting American ideas back to China, China and you know, simply cutting it all off in some sort of paranoia about they'll discover the secrets of the anthropology Department, I think is, is, is, is a danger.
- [56:33]
Lieutenant General H.R. McMaster
I agree, I agree. And some people, some people will say hey, you know, we'll try to kind of raise the, the Asia hate issue and so forth. But you know, actually I think, you know, what's racist is, is to conclude that Chinese students or, or Chinese American students would be sympathetic to, to the Chinese Communist Party and what it's doing, you know, so I think you're right. We want to maximize positive interactions with, with the Chinese people, with Chinese students, with Chinese scholars. But, but we do so in a way that is cognizant of, of the threats that's posed by the party and the party's efforts, you know, to use those interactions to advance its agenda at our expense.
- [57:13]
John Cochran
And like you said, if there's burglars around, the first thing you do is you lock the door.
- [57:18]
Lieutenant General H.R. McMaster
Yeah, right.
- [57:18]
Bill Whelan
All right, let me squeeze in one final question. According to New York Magazine, college students are using AI to take notes, draft essays and brainstorm at an alarming pace. They talked to a student, she said, quote, college is just how well I can use chat GGP at this point. And she adds she used it to paste a chapter from her Genocide A Mass atrocity textbook into ChatGPT. You all are college professors. You are teaching or have taught at the college level. What, if anything can be done to harness AI at this point?
- [57:46]
Sir Neil Ferguson
This is a massive threat to the functioning not only of universities but of schools. Most professors don't realize the extent to which assignments are now being done entirely with chat GPT. They don't read the books, they don't think and they don't write the essays. And the essay which you just quoted, which I think was from New York magazine, is a very good explanation exposive just how rampant this is. Of course there are good uses for AI tools, but taking your children out of the educational process isn't one of them. And so there has to be a drastic change in the way that we do things at universities and in high schools. That means that assessment of student performance can no longer be based on assignments that they can take home on doing their laptop laptops. That's just chat GPT material that you're going to get back. We're going to get have to go back to pen and paper examinations without devices in the room and probably some VIVA type oral exams too. The institutions that do this first will be able to save their students. Those that lag behind are going to create an educational disaster on a par with COVID maybe worse.
- [59:05]
Lieutenant General H.R. McMaster
Hr Yeah, I agree with Neil. What I was worried about is the atrophy of certain skills, especially the ability to read and think and synthesize and impose order on a broad range of sources to ask the right question and then to conduct effective research to answer the question on its own terms. And I mean all those skills I think are at risk. And I think what we need, and I haven't really thought enough about this, but you know, we need certain guidelines for the use of this, this tremendous capability, right, of large language models and the ability to access information in new ways maybe to help you improve analytical skills rather than have them atrophy. And I just don't know. I haven't thought enough about it, but I think maybe there should be some kind of a guideline for students and to convince them, hey, it's in your own interest in terms of your development of your own intellectual ability, your analytical skills to follow these guidelines.
- [60:06]
John Cochran
I think this is great. It's a tumultuous time. There was a wonderful story today, and I won't get the details right, but Professor I think was at Columbia at nyu, figured out how to chatgpt AI proof his assignments. The students were up in arms requesting extra time. Oh, I can't possibly do this. What do you mean? I can't use AI. Unfair and so forth. We see a big generational divide. This is fantastic. Young people have learned to use AI in a way that most of us old fogies are still pretty bad at. And clearly the labor market of the next 10 years is going to be really skewed to people who can use AI but use it to produce good stuff, who know how to do chat, you know the right prompts for the chat, who know how to edit it when it's done, who know how to integrate the various AI systems, know which one is good for what. So that is the skill they're going to need now. They're going to need the human skills on top of those skills. So I think Neil had essentially, what has to happen. Old fogies like us are going to have to figure out a different pedagogy for getting those human skills on top of the AI, the human knowledge that has to filter the AI. Just as you know when calculators come in, you need human skills. When you put in two plus two and it says 5,000, 220, you have to have some sense that something was wrong there. Our evaluations, our pedagogy, how we do it, how we get that human skill is going to have to change. And maybe this new generation will know how to change all that when it comes. But our colleges are producing the labor force of the future, which will be AI enhanced in the way that all of us are not.
- [61:52]
Bill Whelan
All right, gentlemen, we'll leave it there. Good, spirited conversation. Thank you very much. That's it for this episode of Goodfellas. But fear not, we will be back with a new episode. Will come out around the end of May, and our guest will be our colleague, Frank Decoder. Talking about China. So probably picking up where we left off on some of the topics today. To make sure you don't miss Goodfellows, subscribe to the show on whatever platform you're watching or listening right now if you want to keep up with what Sir, Neil, John and HR are doing and they all are on social media. They have X accounts. You should also go to the Hoover Institution website, which is hoover.org and sign up for the Hoover Daily Report, which comes your inbox. Weekdays, anytime Neil, John and HR are in the news or doing something here at Hoover, you'll find out about it. On behalf of the Goodfellows, Sir Neil FERGUSON, John Cochran, Lt. Gen. H. Ron McMaster, thanks for joining us today. Hope you enjoyed the show. Till next time, take care. We'll see you soon.
- [62:42]
John Cochran
If you enjoyed this show and are interested in listening to more content featuring HR McMaster, subscribe to Battlegrounds, also available at hoover.org battlegrounds.