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The Realignment
567 | Sam D'Amico & Noah Smith: Why Electricity Is Eating the World - How the Electric Tech Stack Will Dominate the 21st Century
00:54:24
Sam D'Amico, Founder & CEO of Impulse Labs, and Noah Smith, author of the Noahpinion Substack, join The Realignment. Marshall, Noah, and Sam discuss how the "Electric Tech Stack," a combination of advances in batteries, motors, power electronics, and computing, will reshape everything from kitchen appliances to warfare. They argue that electricity will increasingly "eat" the world, that China has seized the lead in the race to electrification, and make the case for a serious industrial policy.
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- [00:00]
A
Marshall here. Welcome back to the realignment. Hey everyone. Welcome back to the show. For today's episode, I'm joined by Impulse Labs founder Sam d' Amico and no Opinion Substack writer Noah Smith. They're here to argue that we're already in the middle of the next industrial transformation driven by what they call the electric tech stack. The electric tech stack is a combination of advances in batteries, motors, power, electronics and computing, plus hardware. This new electric tech stack is reshaping everything from Sam's companies kitchen appliances to warfare. They argue that electricity will, quote, eat the world the same way that technology and software ate the world in the 2010s and discuss why China has seized the lead in the race to build the new electric tech stack, the case for industrial policy and the cultural and political challenges of scaling this new technology and set of industries at home. Hope you all enjoy the conversation. Noah Smith and Sam d', Amico, welcome to the realignment.
- [01:02]
B
Hey, it's great to be here.
- [01:04]
C
Great to finally meet you in person or over the virtual.
- [01:07]
A
Person over the virtual. Close enough. So Noah, you've been on the podcast plenty of times. Folks probably know you from your substack. No opinion. But Sam, you are new to the show and I'd love for you to. We're going to get into the weeds of the new electricity stack as you two talk about. We're going to get into EVs, future of war, all the great things there. But I'd like to kick off by you just sort of establishing your credibility by talking about your company, Impulse.
- [01:35]
C
Yeah, so my background is in consumer electronics. Honestly, if you go back in time and looked at what I was working on 10 years ago, it'd be like smart glasses. So Google Glass, Oculus, all their stuff. I've been really excited about making other spaces as kind of like advanced, as like where we've seen kind of consumer technology go. And that led me very quickly to the appliance space, which prior to this, like, I don't. I never ran a restaurant, never did any of our stuff. But now I'm doing stoves and people accuse me of being a stove guy on Twitter. But what do we do exactly? So we build the highest performance stove in the market. It's like three times more powerful than any other stove. It's got super great precision features, like you can go set an exact temperature and hold it. It's all really cool. You can boil cold water super quickly, like 10 cups of water you need for Mac and cheese or whatever. It's like A minute and a half. And this is significantly higher performance than anything else in the market. It's like three, four times more powerful than a gas stove. Maybe like it's order of magnitude like 10 times faster at getting stuff to temperature. And it's software defined and software controlled, which like we'll obviously be talking about later, you know, later on the podcast in other ways. But then the second thing is it's powered by a battery. So you put a medium sized lithium ion battery inside a stove. Kind of makes no sense. Stove gets hot. Batteries don't like getting hot. But this gives us way more power than everyone else can get. So you can have a higher form stove, but it also means when you install one of these, you install a battery in everyone's house. And that really is a big deal because if you can get a battery in everyone's house now, the grid can be flexible. Like basically you can choose to get energy whenever it's convenient and you can use it whenever you want. And it kind of frees us from the old energy paradigm of like a power plant must spin up for me to flip the light switch. That now finally goes away. And we can control that whole story now again with software. So we're doing that. You can buy the stove on our website, impulse labs.com, it'll ship. We're shipping them every day now. So it's actually real. And a bunch of people have posted on Reddit about getting one and stuff like that. So this is actually starting to happen after four years, four years of a company. But what we've gotten really excited about since then is how do we get this technology at actual scale, actual planetary scale. And that's not by me selling more stoves, even though that is one way to do it. Because when you want to sell appliances, you got to sell them with credibility. Like people like their gas stoves, people like their brands, like, like people want to buy Sub Zero or Wolf or things like that. So we're actually partnering with most major device manufacturers, including appliance companies, to embed the core power electronics and battery technology we've developed for Impulse into all of their products as well. And so you'll actually start seeing this year brands rolling out with devices powered by Impulse. And that's where we get the real scale. That's where we get to hundreds of thousands and millions of units and start filling the demand of the appliance. And if you're just 55 million appliances sold every year in the United States. So we've really hit that inflection point recently where we're starting to actually partner across the industry. And that's really the beginning because ultimately we picked in the space because it's kind of like the most staid space that's like not seen a lot of innovation in 50 plus years. People love their gas stoves. I don't really want to take their gas stoves away from them. But ultimately there is an opportunity that this has hit a plateau and we can put a lot more innovative technology in a drive performance and then make the grid way more resilient to boot. Open up new opportunities to use more energy, like for data centers and other things like that and more. And also just like you can cook your dinner better and just keeping it really simple. But we want to basically expand from there to being the company where if you've got any device with the power cord that's bigger than like your phone or a laptop, you can power it by impulse. And now suddenly you are in charge of your energy use. Not like the grid.
- [05:31]
A
I gotta say before I throw it to Noah to bring him into this conversation, I love how you as a founder who's working in this hard tech space, have an actual product that you're shipping. Because I first came across the hard tech space, you kind of notice when you interview founders, they are so good at telling the story side of things. So the grid, the battery, the drone, great power competition, China, but there's just not an actual thing attached to that. And I was talking to some folks about a founder who will be unnamed in this space, who's sort of been going around Silicon Valley like talking about the idea of their company and got a lot of interest. But the joke was it's year four of people talking about this thing with their big thing. Someone goes, you know, if it could plug in by this time next year, maybe I'll be excited. So I'm excited to chat with someone who has something you could physically plug in and we could do something with Noah. So great to see you. I'd love to hear about what you as like an econ blogger who's writing across tech and policy and politics and econ and everything like that. What is your interest in Sam's work and this overall space we're thinking about here?
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B
Okay, well, first disclosure, I invested a bunch in Sam's company, so, you know, I am not a neutral observer.
- [06:44]
C
Disclosure, I know as landlord, also true circular economy.
- [06:49]
B
When Sam was just starting out, he needed more cash flow for his, you know, business. And I was like, well, you have this. This unused unit in this building you bought. I'll just take that so you can have more cash flow. And so it was part of the investment relationship. So we're all, you know, it's very. We're all in bed with the mafia of impulse. And anyway, so after.
- [07:11]
C
All.
- [07:11]
B
Right, all right, so that aside. So I want to just disclose that. But the reason I invested and the reason I was interested in it, besides the fact that I thought, like, this technology will work, you know, as a physics major, I understand the basic physics of it. And so I thought that's a really cool product idea. I think there's this. I have this thesis that there's this great technological shift underway. Everybody knows about AI and that technological shift. And, you know, some people know about biotech, too. But I think there's a third huge technological shift that is the shift to doing a lot more things with electricity. And so the very short version of this is that there are two ways you can make something move as a human, other than, you know, pushing it with your hand or hitching it to a horse or something. There's two ways you can make things move. The first way is by burning something and having that release of energy from a controlled explosion. Turn a wheel and turn some gears. All right? That's the first way you can do it. The second way, that's combustion. The second way you can get energy out is to basically push electrons through a wire, okay, through a piece of metal, and that's electricity. And so, of course, you can sync those two up. You can have combustion that generates electricity. But essentially, in terms of how we use energy, those two ways of getting energy coexisted for the entire 20th century. So in the 19th century, all we could do is combustion. We didn't really understand electricity until the very end of it. And then around the, you know, late 1800s, early 1900s, early 20th century, we got electricity for a lot of things. And so. But we had this dichotomy because combustion was able to release lots of energy all at once and to push really hard to make a car go or a jet or something like that. Whereas electricity, you know, had much less power, and you couldn't carry as much of it because you couldn't carry around, like gasoline or kerosene or something. But it offered very fine control. So you could. You could run a light very easily with that. You could. You could run your little independent workstations in a. In a modern factory, which increased productivity a lot. Or you could run electricity through a computer or through all these appliances. And so it was very controllable. It just wasn't as powerful. You couldn't release energy as quickly with it. And so this uneasy coexistence lasted for about a century, the 20th century. We had electricity for things where you needed fine control, you had combustion where you needed things with quick release of energy. And that brings us to the 90s and the 2000s in which there were essentially three key inventions. And actually it was Sam who told me what these three key inventions were. So I'm getting these things I got from Sam, basically. And those were really good batteries that could store much more energy and cycle many times and release power very quickly. Lithium, you know, batteries with lithium in them, basically. And then the second thing was really good permanent magnets. So you could make a very powerful motor. So you could use, you know, instead of having to like charge a piece of iron up, you know, iron's a soup of electrons that'll lose its, its magnetism quickly. But these permanent magnets have crystal structures where you can essentially keep the, keep the, the magnetic moments aligned for a long time for you physics heads out there. And so then we found how to use permanent magnets. And that made your motors much more powerful, much more torquey. Right, Much stronger. You could have a very power. That's why Tesla can accelerate so fast. And then the third thing was, is these power electronics. That's what Sam really taught me about. These basically new materials allowed you to manage electricity at much higher levels of.
- [10:34]
C
Power on the same and with much faster control. So, like you can actually switch the. It's almost like a switch that got faster because like you could always, like you can always do like the Frankenstein style switch where it's like, oh, yeah, let's like, you know, join the wires, get a lot of power. But now you can do that with literally electrical control and there's no big spark. And like you can switch thousands of watts with essentially a chip, basically.
- [10:57]
B
Right? So those three things were invented in the late 90s and then early 2000s, basically, and then, and then developed and they have really changed the game. And I think Tesla was sort of the first way that we saw this happen. When we saw Tesla be able to drive for about as long as a gasoline powered car and yet accelerate much faster, and it's much more energy efficient. And so we saw this happen and that is going to happen for a lot of different things. And for me, actually the moment was not Tesla. For me, the moment was during the protests of 2020 when Trump sent federal agents to Portland and they battled these like anarchist protesters. And then the protesters brought these electric powered leaf blowers and blew tear gas back in the face of the federal agents. And I was thinking, you couldn't do this with a gas leaf blower. People think that fossil fuels have much higher energy density than batteries. And if you just look at the fuel of the fossil fuel, that's true. But if you count, when you're measuring density, if you count the extraction machinery, the engines, the combustion chamber, all those gears, whatever required to extract the energy from fossil fuels, actually batteries often have a higher energy density than fossil fuels in many cases. And so they were able to bring these light little leaf blowers with a ton of energy in them to blow smoke back in the faces of these federal agents. And I looked at that and I thought, the world has changed, okay? So I thought, wow, the world really changed. Electricity is just much more powerful. And of course then we saw Ukraine war and all these drones and these SPV drones, these little toys with enough power from a battery to go blow up all the soldiers on the battlefield or even tanks, you know, with these tiny little toys from China. You know, you put a, you add explosives to them, but it's basically a toy. And so because it's the battery and the motor that makes this happen, it's these new inventions. And so then, you know, I looked at Sam's company and I, and he's doing appliances, I thought, wow, this is just everything. Electricity is beating combustion across a variety of fronts. Where it used to be that only combustion could run things because only combustion could provide the necessary power and energy density. Now electricity is starting to take over with the invention of batteries, motors and power electronics.
- [13:05]
A
Sam, I heard you and Noah on a different podcast. I think it was Econ 102, which Noah hosts with Eric Torenberg. You, just as a side note, noted that you think that electricity is going to be eating the world, which is a reference to Marc Andreessen's famous 2011 software is eating the world piece. For the non tech and business folks who listen to the show, who increasingly are going to find their, their work intersecting with this electrification moment. Even though the space is getting unhelpfully partisan, I think it'd be really helpful for you to actually just build out the electricity is eating the world argument in the context of Software is eating the world. And just quick context on this for those who haven't read the essay, I'll link it. The whole point of Software is eating the world is after the 2008 financial crisis, people are still down on tech. They were still dealing with the aftermath of the dot com bubble in 2000. So software is the end of the world. As Marc Andreessen's very excellent essay originally published in the Wall Street Journal, really arguing here is why this transition to mobile and to cloud computing, this is going to be this defining reality and some of the companies he references, but the overall trends really define Silicon Valley for the next 10 years until 2020, when he really writes time to build, kind of taking us into that next era which we're focused on now. But just given this framework of, hey, we're sitting here now, here's why you should think over the next decade, the lens of electrification, I'd love for you to build that out here.
- [14:31]
C
Yeah. And I think, I think you laid out kind of the software in the world thesis really well. But like, ultimately it's like software then proceeded to eat the world. I think it's like a very well agreed upon thing. Like the big tech companies are now in D.C. meeting with lobbyists or meeting with policymakers and not necessarily lobbyists and like are the upper echelons of our leadership. And in some sense it used to be this kind of like cute California backwater situation versus no, the main characters are in the software industry basically, for better or worse.
- [15:04]
A
There's one bit of the argument you just reminded me of that should have been very clear. The key thing that no one really contests about software rating the world is that at a certain point in the 2010s, every company essentially became a software company in a certain sense. I think most companies who operate in these spaces did not think of themselves as tech companies in the Facebook 2004 sense. But by the end of the 2010s, because software became so central to everything that we did, everything became a software company. So maybe we're at this point where electrification could be everything.
- [15:34]
C
Yeah, and I think that's actually, that's I can throw at Disney as a good example is like in the 2010s, Disney was making big investments in interactive media and all sorts of. But you can look at like today and it's like the content they're putting out, they are a mobile app company in some sense in terms of like the primary like way you consume Star wars or whatever is now it's kind of funny, is like obviously Hollywood, you know, go back to the history of Hollywood, like ILM and all sorts of stuff that is, you know, historically there's always been tech company elements such as the special effects Industry within the, within, within the entertainment industry. But it's, it's really gone to the point now where it's like it is fully defined. So let's start with electricity. So I'll keep it really, really blunt to start. Electricity is eating the world because it's the only form of energy that is controllable by software. And for the same reason software is eating the world. Software will use energy and control energy in the ways that work naturally, which is inexorably electricity. And what this means is we're basically seeing a new category or new sets of categories of devices. Electric cars are probably the best example that are in and of themselves a software defined product. They are like you think of like Tesla. And it's not just the fact that your Tesla gets updates. It's the fact that everything from like pressing the accelerator to the wheels turning is defined by software that runs on the device. And that is a like transformative moment versus kind of how things worked in the past. Which is in some sense an extrapolation of like old school factories of like the Lowell Mill sort of era where like there was a mechanical coupling from a water wheel all the way through to an individual factory workstation. And now we're at the point of the abstraction layers between parts of our world are now increasingly software in between a decision being made and an actuation happening. It's all happening through electricity and software. And so taking a step back to why and how this kind of goes back to what Noah said, there's like three or four key technologies. I think I can argue there are four versus three. So I'll dispute this that have come to define our current era. And they all really matured over the 90s. As Noah said, it's, it's batteries that were good enough, power electronics that were good enough, compute that was good enough, and electromagnetics, including motors that were good enough. We're now at the perfect storm of like in some sense we've crossed the trough of disillusionment. We've like tried. We had the Cambrian Explosion of new ideas in the space. People tried a ton of stuff in the 2000s. We had climate tech 1.0. We had this all be some sort of cultural moment. And now we're at the point where the performance is just so much better than other ways of deploying energy that we're now having to go and reevaluate. Like, is this a culture war discussion or is it just a. This is the futures technology stack discussion? And that is something that is obviously hard to communicate to policymakers when, like, when like this has all been brought up in terms of, in terms of culture work. Because it's like, hey, one of the ways we can fight climate change is like we force people to use electric vehicles or whatever. But maybe the best way to get people to transition to these new technologies is for them to just be preposterously better. And we don't have to go make some like woke or anti woke argument in any, like, in the thunderdome of policy. We can just talk about this from an engineering standpoint of like, okay, an alien spaceship crashed and gave you this magical technology. Now it actually humans worked on this hardcore for 40, 50 years. Would you use the alien spaceships magically better technology or not? I think the answer is yes. And that's kind of the point. Now. What is happening here is effectively, as Noah said, these technologies are just fundamentally higher performance on a bunch of different metrics. You can make a more compact system that can deliver higher power effectively. Whether that's like turning a wheel, whether that's blowing leaves, whether that's being able to make a drone that actually flies level at all. And that's an example that I think really is worth kind of talking about. It's like, why is the Ukraine war, the first war where FPV drones kind of came to define the battlefield, like, are responsible for like 70% of all casualties or something crazy, have basically prevented traditional logistics from like staying above ground. We're like, we're seeing unmanned ground robots delivering supplies and evacuating the wounded versus vans and trucks and like armored vehicles because those will get hit. We're seeing roads getting modified with tents to prevent these things from happening. We're seeing cages on tanks with like, additional armor that was like, essentially we've altered our fighting forces to accommodate for this, this new threat. And why is it possible at all? Well, it's because we got really good at making high performance batteries and motors in the 2000s. It's also because we got really good with compact compute that could keep a, like a, keep a drone level. Again in the 2000s. We figured out how to do chip fabrication to make gyroscopes and accelerometers that were literally the size of like, smaller than my, my, my, my pinky fingernail. All of those things kind of hit this perfect storm again in the 2000s, but like, way too late to see an impact in the war in Afghanistan, the war in Iraq, et cetera, where we got to basically use again, the pinnacle of the old school technology stack like the Cold War, that the Cold War really mastered, like, basically like we got diesel engines in our Abrams tanks. It's got hydraulics to power all the actuation services. It's got like amazing ability to keep the barrel level and all stuff. There's all of this really advanced technology that kind of was in like the combustion technology tree in kind of the fighting forces of the 90s and 2000. And we got really, really good at it. Now, even back then, you can start seeing these improvements in guided weapons and laser guiding and all sorts of stuff. But the point now is toys have gotten to the point where they have succeeded. They have exceeded the performance of multimillion dollar weapon systems, whether we like it or not, effectively. And it's entirely downstream of the fact that these four key technologies have gotten commodified to the point that they can fit into us.
- [22:04]
A
And Noah, something I'd love to hear here. We could bring in the geopolitics and the economic side of the story here. The key part of this story, and this is also why this gets frustrating, is this, this is another category where if we're looking at this like electricity tech stack, China has actually been doing a little more than well when it comes to these different things. Tesla's really under assault when it comes to BYD and like global competition and EVs. I'd love for you to bring the China side of the story in.
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B
Right. So I think China has collectively, as much as a country can be said to realize things, China has collectively realized the importance of the electric tech stack. It is becoming what some people have called the first electrostate, electrifying everything they can and building out batteries and electric vehicles and things like that, drones as fast as they can. And Sam can talk more about this, but one of the key thing that they realized was that because there is this small suite of core technologies that really applies to so many different things and is replacing so many different things. You could make just a few assembly lines, just a few companies that could do all these different things. So you can make phones, you can make all consumer electronics, TVs, whatever you want. You can make electric cars, you can make drones, you can make factory robots, you can make other battery powered factory machinery. You can make all these things. Pardon?
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C
You can make stoves.
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B
You can make stoves. I don't know if China started to make stoves yet, but they definitely will. And so at that point you make all. So if electricity is eating the world, and then you have some companies like BYD that can make all the core electrical technologies, then those companies can compete in all the different hardware sectors at once. Whereas before, a company that made TVs wouldn't naturally be a company that made cars. Right? So like RCA and Ford were not in competition with each other in the 1950s or 60s. Right. Because it was just totally different things that you had to make or. Yeah, like, like what, what, what's like.
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C
A Xiaomi and Tesla are today. Right, exactly.
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B
Xiaomi is a phone company and they're competing with Tesla on cars. And so one reason Chinese manufacturing. So, so China, Chinese manufacturing always had substantial advantages from, you know, network effects, from having all these suppliers, from cost, from the government doing various things to facilitate cheap manufacturing, and from just a concentration of engineering talent in the country. But since the pandemic, a new thing has happened. China's gotten another massive manufacturing advantage from mastering the electric tech stack. Because China makes the motors and the magnets that form the motors. China makes the batteries and you know, China can make power electronics, although we do that too. But China makes the motors and the batteries. They make all that. Right? And they are winning the electric tech stack. And because of that they are winning manufacturing to a degree that they couldn't have won before the pandemic. Right? They were, they were doing well before the pandemic. They were, they were, you know, doing lots of stuff, but they were having trouble winning in like robotics, they were having trouble winning in aviation, they were having trouble winning in autos. You know, they couldn't, China couldn't make a good car. And. But in the age of combustion, China never made a good car. Geely, who buys that? Like only, you know, some poor countries that can't buy anything else. So then China never managed to make good cars or aviation or stuff like that, or really robots. They bought a German robotics company, but it wasn't great. Now they can make all those things and they will dominate in all those segments because of the electric tech stack. And so we have to compete in this. We have no choice. If we want to be a leading technological power, we can't just let China do all those things. So yeah, of course that's going to involve some tariffs, but tariffs alone won't do much. You know, we've got to also do industrial policy for. And I realize I'm talking my book here because I've invested in Sam's company, I've invested in a couple other companies, so I'm talking my book. But for national security reasons, we must make sure that we can compete in the electric tech Stack. If we let culture wars convince us that the electric tech stack is fantasy, we're doomed. Where a second rate has been of a, of a great power. Okay, so if J.D. vance and these guys think that like it's all about climate and green tech and, and they think this, if they allow themselves to believe that fantasy and to, to attack the electric tech stack based on stupid Twitter culture war grounds, we're sunk as a major power because this, this stuff is for real.
- [26:36]
A
So here's a, a question I'd love to talk about the, the Chinese market. So I remember I was listening to an A16Z podcast episode from 2019 where Connie Chan, who was a partner the GP then back then, and she just gave this really helpful men for how China got so advanced with mobile because in the 2000s the Chinese just basically skipped the desktop era and went straight to mobile. So that led to the proliferation of everything apps. So why does WePay, WeChat, all these things are built on top of each other. And in America that just never evolved because things just sort of didn't happen as quote logically. So we have Twitter and then we have a Facebook app, and then they're not all built in one single actual app because our system didn't evolve that way. And that was just because they just skipped that whole desktop norm, that way of approaching things. So I'm wondering if there is something about the fact, and this goes to the point you already made, Noah, if there was something about the fact that the Chinese combustion industry was just so unsuccessful they had no choice but to go all in on this, which just gives a sustainable advantage in the same way they have a sustainable advantage. And not that because of the great firewall, we're competing with WePay or WeChat. But there is just an underlying dynamic there when something like this happens. I'd love to hear your thoughts on that, Sam.
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C
Yeah, so I mean, so full disclosure, I've probably gone to China more than the. More than most U.S. residents who are.
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A
Actually still residents United States, not hard to do.
- [27:59]
C
I've started going to China in 2013 and like actually when you go to China in 2013, you, you get picked up by a taxi and like, and like there wasn't any sort of, like there's WeChat and all sorts of stuff, but like their translation apps were crap. You should use Google Translate, you know, sort of stuff. And you had to pay in cash typically. And you get picked up by a Volkswagen that was built at a Volkswagen factory by like maybe it was a partially state owned thing, but it was basically, it was a vw, designed that vehicle and built the vehicle. And then like I think the going back after the pandemic, I came back in 2023. Every car was electric in Shenzhen. Like the streets are quiet, but like you're picked up by a made in China BYD Han. Typically if you press the button on de, which is like their Uber, and that transition was like a slowly then all at once sort of thing, you see kind of in a technological hockey stick sort of transition. It is absolutely unreal and crazy that the level of being able to just jump from hey, we've got like older model VW is being made by VW for the Shanghai taxi market to no, these are made in China BYD vehicles. And all the parts underneath are all byd. Like you can tear the thing down and like the relays inside are made by byd. The battery cells are made by like all this stuff. And actually that's, that's something too where like going to, I've talked to byd, like going to their showroom and they have a showroom at their headquarters and you walk in and you see every device they can make. By the way, they're all pretty much dependent on these four things. So. So pretty much batteries, electric motors, power electronics and compute. You can see everything from AI server racks to smartphones to like desktop PCs to electric cars to humanoid robots to drones to monorails. You can see all of that in their showroom. And they are able to make all of these things with basically the same four foundational technologies. And they can ramp these things to like hundreds of thousands or if not millions of units a year relatively straightforwardly with a team of incredibly agile engineers that can kind of hop from project to project and take those learnings from different programs. And so this has actually been a bigger story, which is how China has kind of built companies around being able to deploy kind of like integrated suite of these four technologies. Because again, it's like relatively narrow kernel of scope that you can grow into these other, these bigger use cases. Like the same technology inside a unitree robot possibly made by these guys, I'm not 100% sure could go into a DJI drone, again, possibly made at some of the same factories. And so you're able to actually take a lot of the same talent, same learning and same software across kind of these spaces that used to be almost like you need a different kind of engineer to work on the Concorde versus working on a car. Increasingly, we're starting to see everything from aerospace and defense to toys having the same set of talent that can be pulled because they're using the same fundamental technologies. So that has been happening. Another example, this is me kind of rewinding the clock like 10 years. Chinese manufacturers are different than the US in a bunch of key ways. And it's really important to understand how they're different. So the first thing is you typically get an engineering team that knows how to build the products when you go and sign one of them up. So if you go work with, if you go work with. I'm not going to use Foxconn. Foxconn is Taiwanese heads up. So like if you go work with Gore Tech, which is who makes a number of the VR headsets for a number of the major brands including Meta, they're based in Qingdao, you may have heard them from the beer. But basically if you go work with them, you get a bunch of engineers that worked on like 10 different VR headset programs and or 10 different drone programs if you want to work on drones with them. And they will be available for you to actually push your design through and be at the factory kind of making sure that stuff is like, you know, really tuned in and you're able to actually do an integrated design from ideation to part sourcing to manufacturing. Like you're able to actually prototype and develop products through the production process in real time. And that's not something that really is available in the United States. In the United States it's like you're building something complicated like your Tesla. There's a lot of talk of vertical integration. Like Elon is like the king of vertical integration because there is no option other than to do that himself. He has to go pull those resources in. So you see these companies that have gotten good at the electric tech stack and they have the engineers in house, super tied in with their supply chains, their processes, et cetera, and they're able to take customers, say consumer electronics companies, folks like me building stoves, what have you, they can take them and those customers can be high level, almost like a product manager type role and push through extremely complicated designs with extremely complicated bleeding edge processes, parts and etc. And actually deliver stuff expediently in two, three years. That is not something that exists in the United States today. That ecosystem just does not exist. And that also means that like you can have a base of consumer demand from smartphones, from VR headsets, from, I don't know, stove, whatever, and then you could go pivot it to Defense if you wanted to. Because again, what are they using in Ukraine but not consumer electronics? Effectively just reformat it. And so that's a, that's a big story. There's a second part of it which is they've all for historically, for past 10 plus years, kind of taking after Foxconn, building their own robots is. You have enough demand, you can actually build the automation equipment yourself. And so most of these companies have like their own automation teams building robots to help them improve their processes. China is not about cheap labor anymore. China is about like building stuff at scale with the modern electric tech stack and having a lot of kind of economies of scale around it and economies of like having your engineers be living at the factory around it. We don't do that in the United States. We basically segregated our intellectual elite in the coast in these places that don't build housing from real America, where they actually build stuff in the Midwest and stuff like that. So like, these are things that are going to be hard truths to tell both the right and the left about that. Like we are not in a position to compete because ultimately the game is there are these four key technologies. They work best together. You need to build companies that are integrated, about mastering them and pushing them, you know, forward in one place. And we've put our AI nerds and our factory workers in different states.
- [34:36]
A
Something I'd be curious to hear from you. I know I've heard you talk about this in a previous podcast with Sam. How should we think about the question of whether we let Chinese EVs or any of these products into American markets, given the broader sort of national resilience and national security concerns? Because the reason why I'm generically in favor of banning Chinese EVs from the American market, even if they are superior products, as at the end of the day, this is also the argument that sort of saved the American auto industry. Not just the jobs in 2008, 2009, but also just the fact that in World War II, where did we build those? Sherman tank factory. So when they were converted auto plants, just if we flooded America with Chinese EVs and the world continues in the direction that you two are supposing it will, that would just wreck whole structural critical industries in our country. And I don't see an alternative separate from a ban. But if you don't, if you oppose the ban, I'd love to hear like what an alternative framework would be given this dynamic.
- [35:45]
C
So I oppose the ban for one reason. In the near term, it's. It's Very near term argument, it allows you to do this and not address the problem. You can, because the number of people, the percentage of the United States that goes to China and has these experience I just described is approximately zero. And that's for tourism. The percentage of Americans that have been inside a modern Chinese factory post pandemic, that's like a bigger zero. So effectively the people who know this stuff, and I actually even argue that this is, this is me speaking to some of my friends who might listen to this podcast. You have to figure out how to go before you can tweet. Because effectively the problem is I think people don't know what China's been up to. And like, you can literally learn it. You can go visit these places and go tour. But I think a good chunk of the folks thinking about this stuff from the policy side are not in a position to go tour A BYD plan to go understand how consumer electronics are actually produced at scale to run a consumer electronics program and understand the way of working that knowledge is firewall to use a sense. And some of it's firewalled by kind of like, you know, if you're, if you're in certain policy spheres, maybe you don't want to, maybe you want to go to geopolitically sensitive places. Maybe you know, there's, there's sort of free speech norms and stuff like that. But ultimately it's also just the fact that like, just only a certain number of people work in the spaces. Like say they're running around working spaces. I do. And like, not a lot of them like to talk about it because they're like Tim Cook or something like that. Now if I was, if I was to advise policymakers for like, hey, if I was doing a diplomatic visit to China or something like that, I would be like, if I was a Midwestern congressman, I'd be like, let's go to BYD's plant and get a tour because we want to see. And they probably love the host you by the way. Like, like, I think London Braden SF went and got some tours of Shenzhen factories and stuff like that. I don't think there was a big lot of hubbub made about it. But like, I do think that's an opportunity that people need to be doing because this is, we're in the midst of a fundamental step change. This is like when Oliver Perry's ship showed up in Japan and Japan was like, oh crap, we gotta, we gotta adjust what our foreign policy approaches. I'm probably misquoting this versus our resident we have Noah but like you get the. You get. But basically you get the. You get or yeah, common repair or whatever. But basically. Basically the. Basically the point though is like we're in this sort of Sputnik moment and it's a slow burning Sputnik moment because we've already got all these key technologies on short. They're just controlled by one dude. He's like a very special dude, but like one guy who's doing all this stuff. It's Elon. But with the exception of Elon, there is no. And Elon is vertically integrated. He doesn't share. He's not byd. He's. Yeah, he's Elon. And so there is no current entrant to the space that is going to basically sustain the demand for the new electric tech stack and onshore the production that they have then, they have then been able to drum up and potentially also share that technology with industry incumbents, folks with amazing distribution in our markets, et cetera. I have not yet seen that company form yet with maybe one exception, which is what I'm working with. But you see the, you see, but that is a glaring missing piece to where the United States stands today in this market.
- [39:10]
A
No, I'd love to hear your perspective. I mean, I guess my immediate response maybe like the, the compromises we could sort of do what we did with the Japanese, with the auto industry where we let BYD cars in, but like they have to be built in America if they're sold in the American market so that the infrastructure is still there. But I'd love that. That's sort of my like middle ground there. But I know, I think that's fair game.
- [39:28]
C
But like the cars will be better. And I think we need to. Basically I think we need the jump scare. We need the Sputnik. We need Sputnik to fly over the United States. Like that's the. And I think, I think the issue is absent that I think people are going to find it really easy to make excuses for the next five or ten years when, when that then it's going to be too late basically.
- [39:49]
A
What's your perspective?
- [39:50]
B
No, my perspective is that in the. If this were 20 years ago, having Chinese car companies just make their factories here would be the obvious solution, right? Which we did this with Japan, which is not our enemy at all, but our friend. And Japanese automakers put all their factories in like Alabama, Tennessee, Kentucky, places like that. It worked really, really well. Those cars became more American made by value than Fords or GMs. And so it really provided a huge boost to American manufacturing, created these auto manufacturing clusters and at the same time it taught Americans Japanese manufacturing techniques, which was incredibly valuable. And now Ford factories and GM factories are pretty good because they learned these manufacturing systems from Japan, which had gotten the idea from them from actually Americans even further back. So it was this exchange, repeat, back and forth exchange of technology between the US and Japan in the 20th century was incredibly powerful and important and underappreciated. But anyway, could we do this with China? Well, the problem is spying. The problem is if we do this, trying to put spy chips in all the cars and then China can see where all the cars are and maybe even crash your car and kill you. The answer to what you do about that depends on how good we are at catching those spy chips and you know, backdoors and all those things, how good our security is. And I don't know the answer to that. So in this case we have to make policy based on a technical question that I don't know the answer to. How easily would it be for China to basically press a button and crash everybody's car on the road and kill us all? Or like see where everybody's going, including all the top military people and all these things? That's a real worry. You can't just hand wave that away, but maybe you can technology it away. Maybe we can be very good at catching that stuff and making sure that that doesn't happen. So I don't really know.
- [41:39]
C
I have expertise here actually in the opposite direction which I can share afterwards. So I can.
- [41:43]
B
Okay, so that, yeah, that's important. And, but, but I think that China massively subsidizes all the things it produces, especially the electric tech. Okay, they don't. They, they pay people to build the stuff, they offer guaranteed cheap bank loans to anyone building the stuff. And they make sure that other things like electricity are easily and cheaply available. In addition, that allow that reduce companies costs, costs and then they, you know, they have truly massive subsidies. We can't hope to match those subsidies. So we must use tariffs, okay? We must use tariffs no matter what so that this electric tech stack exists in America. Tariffs. And we can also use non tariff barriers. We can do regulations that basically shut out those, those products. At the same time, I think Sam is right that the competitive threat is important. We need to take this competition seriously. And if it's just a couple of bloggers and people on podcasts saying oh my God, China's taking over this stuff, the J.D. vance of the world aren't going to believe us. The world isn't going to realize how good this stuff is. So I think that the obvious solution is simply let China make the cars here and sell them to Americans here. And then the good thing about having those factories in America is if we had a war with China, we're like, oh, your factory? No, our factory. We should nationalize them.
- [43:04]
C
That's what the Germans did to Ford.
- [43:06]
B
The Nazis did that to us. Like, you know, like, they. They nationalized Ford, right? Pardon?
- [43:14]
C
Is that Opal now?
- [43:15]
B
Yeah, yeah, that's gm. That's gm.
- [43:17]
C
Gm.
- [43:17]
B
Yeah, yeah, they national that. But that same thing. And it was funny because, you know, like, Ford got all this for building all these factories in. In. In. Not in Germany, you know, and people like, you're a Nazi. And then. And then later they just got nationalized. And of course, Tesla factories in China would all be nationalized immediately in the event of war. So we can do that to Chinese factories too. So I think letting Chinese factory China build its factories here is probably the best solution. We just have to worry about that spying and like, you know, sabotage and things like that. But that, what that does is it means that we have the clustering here. So then we have demand here. That creates demand for suppliers, you know, people who make motors. Disclosure, I'm also invested in a motor company. And then people who make batteries. I would like to be invested in a battery company, but I'm not. Anyway, so all these, these things, we would create this whole electric tech stack in America because we'd have the final demand here. Even the Chinese factories would add to that. So that would be a good outcome if we can stop the spying and sabotage.
- [44:16]
C
And for reference, like, I've had conversations with Chinese manufacturers who are like, oh, you want to build this United States? And we can get around the tariffs will not get around, like, solve the problem. They are amenable to this. And so, and because keep in mind, like, this is something where I think people misread how China works from, like, How China Works Twitter edition. And so, like, the average Chinese entrepreneur is excited to basically, basically have like, multiple countries, you know, like exit multiple countries buckets more than they would want to admit publicly, if that makes any sense. And so being able to. Being able to hedge risks, domestic politics, risks that they might have is something that's like, obviously in their general interest. I won't go into specifics on why and who and all that other stuff, but it's like, it is definitely something that you can. You can feel when you're there. The other piece of this is how can you avoid like, cybersecurity concerns at factories? So, so I was at Meta. Well, it was actually Oculus back then, but basically Oculus was setting up their factory. Once they became part of Facebook in 2014, 2015, 2016, we ended up actually deploying our own secure computers at the factory, running our own software to manage our devices. And basically all of the kind of like, secure chain of trust stuff was managed by us in a way where we had full observability and we had our own people with eyeballs on the thing the whole time. This is solvable on the technology standpoint without having kind of like, you don't have to go up to. There's like a party commissar overseeing this sort of stuff. But like, these are. These are things that are solved technologically. Apple is a great example of this as well. They fabricate the chips in here at tsmc. That is where the root of trust is generated and it's in the hardware. Security comes from that. And so before the iPhone, parts of the iPhone hit China to be assembled into an iPhone, it is already secure from a hardware standpoint, from being able to, you know, be being able to be changed. And this is good for Apple because it means that they can't get, like, they can't be geopolitically pressured and make decisions that are bad for their business or like, things that would cause either the Chinese or the Americans to lose trust in the iPhone, for instance. And so, and so there are technological ways to address these things that aren't like, adversarial, if that makes any sense. You can almost like just. And they actually usually dovetail with like, privacy bona fides and other things like that, to be clear, versus like, hey, even if Huawei telecom equipment was made in the United States, could you.
- [46:49]
A
Could you.
- [46:50]
C
Could you vet it as. As a thing? You know, that's probably a very spicy question to ask. I would say us probably would be hesitant in those cases, but for other types of devices, I think there's actually a, like, more like. I wouldn't call it a mathematical proof, but like, more in kind of the like, objectively provable domain that you've actually. You've actually solved like kind of like the root of trust situation and this comes down. And so, so this is well understood because. Not because of a geopolitical risk, but because of a business intelligence risk. You don't want, like Huawei copying iPhones latest technology, kind of stuff like that. And so I I'm actually optimistic that we're gonna be able to figure this out in a way that's like, not a problem, but it is a hard technological problem that requires care.
- [47:37]
A
So I guess the final question for you both, I'll throw to Noah first and then to let you close this out, Sam. Okay, great. What do we do? Because what's interesting about this category is it's a mix of private sector, right? It's an individual consumer level thing. So someone could like buy an impulse still, but they're like, so motivated. Like, unlike most of these different issues, there's actually something that you as an individual listener could definitely do here. But then it all goes up to the company level, goes up to like the government investment research, industrial policy, tariffs. Like, what do we need to do? And what actual timeline are we operating on when it comes to this? So Noah first, then Sam, take us out.
- [48:15]
B
So what we need to do, we need to do a industrial policy. We need to understand the electric tech stack as a thing. And then we need to have industrial policies that encourage the creation of the electric tech stack as fast as possible in America that will involve protection barriers, but that is only the very tip of the iceberg of what it will involve. It will involve things like what Biden called the inflation Reduction act, you know, subsidies to build a bunch of batteries. It will involve subsidies to develop rare earth mining and refining in the United States, critical minerals. That gets called. And the construction of motors with those magnets from those rare earths. And power electronics too. It will involve those things. It will involve probably some other things too, like, you know, clustering policy to have like, like Austin or the Central Valley in California could be these special economic zones where essentially if you make these products, you get zero tax, things like that. And. And then there's a bunch of other things we need to do, like workforce training that are good for manufacturing in general. There's a lot of, like, little policies we need to do manufacturing extension services. That's really important. But I think the first step is just to have people understand the importance of the electric tech stack as a transformative force in our physical world and in our technological world. Something that can't be waved away by thinking of it as a climate thing. Something that can't be waved away at all. Something that is absolutely crucial to owning this century. The electric tech stack is one of the core technologies, along with AI and maybe biotech, that is going to make this century. And we have to compete. We don't have a choice. We can't just call it climate stuff, wave it away and destroy it. That's what we need to realize first and foremost. And then we need to think about crafting a very integrated comprehensive industrial policy to make it happen here.
- [50:11]
A
Take us out.
- [50:12]
C
Sam I'll take this as an entrepreneur, which is like I've been seeking out because I believe in this thesis strongly. I've been seeking out kind of where in our existing markets there is a ton of demand for the electric tech stack that is not yet rocks that have not yet been turned over basically. And basically by looking at the existing appliance market as probably one of the first rocks that has just been kind of ignored. Like Elon hasn't gotten to this. It's kind of Elon hasn't gotten to this yet, to say this more bluntly. And the point though is there is enough demand for this to pull all of these capabilities onshore literally today. And, and we can, we can, we can dovetail that with demand from the military for advanced drones. We can dovetail that with some of these new technological incubations we can be doing. The data center boom needs a lot of the electrotechnics power electronics for these servers needs compute. So we've got all of the demand in front of us just like plainly sitting there. Making it obvious that this is what it is is the first step. The second step is and as Noah said, understanding the electric tech stack. The second step is making sure that the financing ecosystem is ready. Whether that's federal, whether that's LPs telling GPS of venture funds. Yes, this is in thesis today just like AI is whether it's like state and local municipalities not throwing a hissy fit when someone builds a battery factory, not them throwing a hissy fit when someone builds an electronics factory. Because we basically started over regulating the built world. Obviously I live in San Francisco. We're like the kings of blocking housing and factories and all this other stuff. We have a whole industrial district that's sitting empty that used to build warships and we need to start taking this very seriously because ultimately what China's really good at is Shenzhen has some of the best engineers in the world and some of the best factories in the world and they're co located next to each other currently in the United States. It's like let's look at Northern California. Can you afford to live in San Francisco as a factory worker? Unless you get some deed restricted subsidized housing, the answer is objectively no. And if someone tried to build workforce housing for their factory in San Francisco or the Bay Area, they would get a bunch of neighbors with signs protesting us. And so we've basically turned off our industrial engine in the 1970s in this sort of, like, oil crisis, post growth population bomb, don't have kids either, like, mindset. Honestly, it's like, you know, and by the way, we can blame the left for all that. In many cases, though, Reagan did sign ceqa, so there's a little bit of blame to go around. But the point, though, is we turned all this stuff off right before the electric tech stack was figured out. We basically said, like, the built world has been built, take it or leave it. Let's, like, restrict housing construction, let's stop growing San Francisco, let's stop doing factories near where people live, et cetera. And then boom. Like, within 10 years of all of those growth controls getting turned off or growth controls being turned on and like us saying no more nuclear power, all that stuff, we finally got kind of the Infinity Stones and, like, the thanos of being able to harvest, harness the electric technology stack, they finally became real in the 90s, and then 20. We had about 20 years of them being woke, and now it's like, now it's like they're just powerful and awesome and this is where the future is. And so we need to kind of like, wrestle ourselves out of the past tropes around the space, realize we've now literally got the Infinity Stones and we got to pick them up, otherwise other people are going to do it. So I don't want to give corny comic book analogies or anything like that, but ultimately, there are four key technologies that will define the 21st century. We invented all of them, and we currently don't produce enough of them, and we need to fix that.
- [54:15]
A
Excellent place to end. Sam and Noah, thank you for joining me on the realignment.
- [54:21]
C
Thank you.
- [54:22]
B
Frozen, Great to be here. Thanks for having us on.