Odd Lots: Jared Cohen and George Lee on the Unprecedented Shocks in Geopolitics

Bloomberg's Odd Lots podcast, hosted by Joe Weisenthal and Tracy Alloway, delves into the intricate intersections of finance, markets, and global economics. In the February 27, 2025 episode, Weisenthal and Alloway welcome Jared Cohen and George Lee from the Goldman Sachs Global Institute to explore the seismic shifts in geopolitics and their far-reaching implications.

1. Introduction to the Episode

The hosts kick off the episode by acknowledging the tumultuous state of global affairs. After a shared vacation experience, Joe Weisenthal sets the stage for an in-depth discussion on how recent geopolitical events are reshaping the world's economic and technological landscapes.

2. Overview of Goldman Sachs Global Institute

Timestamp: 05:03

Tracy Alloway: "What is the Goldman Sachs Global Institute?"

George Lee explains that the institute, formed two and a half years prior, serves as a platform to integrate the firm's thought leadership at the nexus of technology change, geopolitics, and markets. Its mission is to engage with clients by sharing a provocative worldview on these critical factors.

Jared Cohen adds, emphasizing the institute's role in assisting strategic clients, including sovereign nations, to navigate their ambitions in areas like AI and the Indo-Pacific region by leveraging Goldman Sachs' comprehensive expertise.

3. Analysis of Recent Geopolitical Shocks

a. J.D. Vance's Munich Speech and Its Impact

Timestamp: 06:37

Joe Weisenthal references a notable event: J.D. Vance's speech in Munich. Jared Cohen provides context, explaining that Vance's address marked a significant moment in transatlantic relations. The speech, lacking concrete foreign policy announcements, was perceived as a "reset in a negative way" for U.S.-Europe relations. Cohen notes the surprise among European leaders, who expected more substantial policy directions on critical issues like Russia, Ukraine, the Middle East, and China.

4. The Growing Rift between the US and Europe

Timestamp: 03:33 - 12:18

Tracy Alloway and Jared Cohen discuss the deteriorating relationship between the U.S. and Europe. Cohen highlights that European leaders, unaccustomed to Trump's direct and transactional approach, are struggling to maintain cohesive and robust responses to U.S. policies. He states:

"The Europeans are scrambling, figuring out what to do. They're having a hard time acting collectively, which is making it difficult for them to respond in a way that's sufficiently robust to level the playing field with the Trump administration."
(07:57)

5. European Economic Challenges and AI Competitiveness

Timestamp: 16:23

George Lee addresses Europe's lag in the AI race, despite its rich intellectual capital. He points to initiatives like the AI Action Summit in Paris, where countries like France are attempting to scale their AI capabilities. However, Lee notes the challenge Europe faces in marshaling intent and capital to support technological infrastructure, especially when competing against the energy abundance and capital resources of Gulf countries and the tech leadership of the U.S.

6. The Strategic Role of Gulf States in Geopolitics and AI

Timestamp: 16:23 - 34:50

Jared Cohen and George Lee elaborate on the rising geopolitical influence of Gulf states. Cohen explains that countries like Saudi Arabia, Qatar, and the UAE are transitioning from being regions with significant sovereign wealth funds to becoming proactive geopolitical players leveraging their capital for strategic advantage in AI and other technologies.

"They're now leading with strategic capital as opposed to being a place where people come to for capital. And so it's giving them the right to play the chessboard."
(32:23)

George Lee complements this by highlighting other nations like the Netherlands, South Korea, and India, which are also positioning themselves as critical players in the AI landscape through strategic investments and technological advancements.

7. The Significance of Subsea Cables in Geopolitics and AI

Timestamp: 37:09 - 40:22

The conversation shifts to the often-overlooked topic of subsea cables, vital for global data transmission. Jared Cohen underscores their importance by noting that 95% of all data flows through approximately 750,000 miles of undersea cables. Recent incidents, such as deliberate cable cuts by Chinese and Russian vessels, highlight the increasing geopolitical sensitivity surrounding these infrastructures.

"These are still national governments underneath it. And you're really going to tell a medium-sized central European country that they have to give up two of their biggest companies..."
(29:22)

George Lee likens subsea cables to the modern-day Silk Roads, emphasizing their critical role in the global economy and the strategic maneuvers by major powers to control these conduits.

8. Investment Strategies Amid Geopolitical Uncertainty

Timestamp: 44:18 - 50:40

When addressing how investors should navigate geopolitical volatility, Jared Cohen advocates for distinguishing between downside risks and affirmative investment opportunities arising from geopolitical shifts. He highlights countries like Japan and India as emerging investment havens due to their proactive strategies and resilience amid U.S.-China tensions.

"Geopolitics is pushing some pretty attractive economic environments into a situation where they're eventually going to trade at a geopolitical premium."
(46:49)

George Lee adds that simulations and war games conducted by the Global Institute help policymakers and investors anticipate inflection points, enabling more strategic portfolio adjustments rather than reactive moves based on immediate geopolitical events.

9. Conclusion and Final Insights

In wrapping up, the hosts and guests reflect on the unprecedented nature of current geopolitical and technological shifts. Tracy Alloway underscores the rapid strategic movements by nations in the AI domain and the intertwining of corporate power with political influence, particularly through entities like subsea cable operators.

Joe Weisenthal muses on the evolving nature of geopolitical eras, comparing the current landscape to past significant periods like the war on terror and the COVID-19 pandemic, emphasizing how these broader geopolitical narratives differ from traditional economic and market-focused analyses.

Notable Quotes:

1. Jared Cohen:

   "The only other thing that I would add is for some of the really kind of big strategic clients... through the combination of our banking franchise and our asset management franchise, that's what we try to do."
   (05:08)

2. George Lee:

   "This is really the first one where world leaders have tagged AI as a matter of national destiny really early. It's going to be consequential for their economies, their growth, their culture, their defense."
   (16:47)

3. Jared Cohen:

   "The Europeans are scrambling, figuring out what to do. They're having a hard time acting collectively..."
   (07:57)

4. Jared Cohen:

   "Geopolitics is pushing some pretty attractive economic environments into a situation where they're eventually going to trade at a geopolitical premium."
   (46:49)

Final Thoughts

This episode of Odd Lots provides a comprehensive analysis of the shifting geopolitical landscape, emphasizing the strategic importance of AI, the rising influence of Gulf states, and the critical role of infrastructure like subsea cables. Jared Cohen and George Lee offer invaluable insights into how these changes are not only redefining global power dynamics but also creating new opportunities and challenges for investors worldwide.

For more in-depth discussions and expert analyses, tune into future episodes of Odd Lots and stay informed about the forces shaping our global economy.