David Abraham (3:14)

Jacob?

Jacob Goldstein (3:15)

I'm Jacob Goldstein, and this is what's yous Problem? My guest today is David Abraham. He's the author of the book the Elements of Power, Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. David started out as a commodities trader back in the aughts, and then he went to Asia to do research and got interested in rare earths back in 2010. The fundamental problem David is addressing is this. What should the US do about China's chokehold on the rare earth supply chain? As you'll hear, he thinks the current US strategy could wind up costing billions of dollars without solving the problem. And he has a big idea for what we should do instead. Before we get to the interview, I should say the thing people always say about rare earth elements. They're not actually that rare in the sense that they're found in many parts of the world. There are 17 rare earth elements. And the reason they're called rare earths is that they're found in very small amounts mixed in with other elements. So it takes a lot of work and a lot of know how to mine and refine them. If you go back in history, you see that the US dominated production of rare earths through the 1970s. After that, things started to shift to China. To start, I asked David how that happened.

David Abraham (4:39)

So they start producing these materials because they needed hard currency. It was the 1980s, early 1990s, they were able to mine this stuff up and send it out. And at the time they're making Christmas lights and T shirts, they're not thinking about larger developed products, if you will, but they slowly start to realize as their ambitions start to increase, that they want to be able to make cars. And they see these materials as really critical to the manufacture of these, of these products. So what they start to do over time is start to develop those industries, because in the west, people don't want to dig up. They don't want to dig up earth. No one wants a mine in their backyard. People don't want processing. And for the most part, people who graduate college or high school want to be going into more comfortable jobs. And so the Chinese raise their hand and basically say, hey, listen, we'll do this work. We need the money, and we're starting to see that these materials are critical to the products that we want to make in the future. So over successive five year plans, which is how Beijing looks at its economy and how it wants to go forward, it starts to figure out that they want to develop these materials at the heart of a high tech society that is slowly starting to go from military to green technologies to high technologies. And, and they want to make everything within their country. So it was a slow process and it wasn't something that China woke up and, and was secretly doing. These plans were out there for, for the world to see. And it was fine when people were thinking, okay, well I just got my iPhone, I don't really have to worry about things. They didn't think about where the material was because people were thinking, just like it's a grape or wheat, as long as the, the market can supply it, then we're fine. It wasn't until people started to wake up and realize, wow, these materials are very important to the world that we really have to understand where the supplies are coming from. So it seems to be more of a wake up call now.

Jacob Goldstein (6:46)

I mean, you said something interesting there, like the market will supply it. Right. Which was the basic worldview of most people, most elites say, in the U.S. certainly at the end of the 20th and the beginning of the 21st centuries. Right. Like a belief in trade and in markets. And in many ways it was justified. I know it's an unpopular view now, largely, but, or at least less popular than it was. But it did work pretty well in many ways. Right. Like we did get more and more stuff. The world was getting more efficient. Manufactured goods did get cheaper and better. So in many ways it did work. And China, over that time, through the 20th century, into the 21st century, went up the value chain.

David Abraham (7:34)

Right.

Jacob Goldstein (7:34)

As you say, they started out just mining and sending the raw minerals out. And then they started refining, right. Then they started manufacturing the basic components. And now we're to the point where clearly they are making the best electric vehicles, say. And the only reason we don't have them here is because of tariffs.

David Abraham (7:51)

Right.

Jacob Goldstein (7:52)

Because we've kind of moved away from the free trade beliefs that we had. So as you say, there was this wake up call that you mentioned and there's this very clear moment when that happened. Right. It's not some gradual thing. It's in 2010, and there was this territorial dispute between China and Japan over some islands. That kind of a classic territorial dispute. These are our islands. No, these are our islands. And the upshot for our story Is that China stops sending, what, rare earths basically to Japan. And as it happens, you happen to be in Japan working at that moment. So what was the effect of that on the Japanese market and what was it like for you as an observer?

David Abraham (8:40)

I was based in their Ministry of Economy, Trade and Industry. So I was one of the of two foreigners, the other being a translator. And so it was a fascinating experience to be there because Japan relied on these materials. They had this just in time manufacturing that the materials just had to arrive. Japan has refined them in ways at that time China could not do, upgrade them, put them into an optical drive that they would send back to China to put into a computer. And so what happened was Japan's manufacturing lines stopped, slowed down, and Japan was woken up to, wow, we have a reliance on China for materials and China may not be a strong supplier.

Jacob Goldstein (9:23)

Huh. So suddenly Japan is like, oh, all these things that we make, cars, speakers, you know, components, high end components that go into electronics that are ultimately assembled elsewhere. All of a sudden we can't make those things now because China stopped sending us rare earths.

David Abraham (9:41)

And these are such small things. Their value is so low, you wouldn't think much about it. It's just like yeasted for bread. If you don't have yeast, then you can't make bread. And so these materials didn't have a lot of value. Japan didn't think much about the supply lines. And then lo and behold, they're stuck. And so what happened really over the month, the two months, is that China started seeing that, hey, they're not getting their equipment from Japan to be able to make their computers. And so really the fact that one country makes these and has, as some people say, a chokehold is a challenge for those who are depending. But there are some reciprocal relationships.

Jacob Goldstein (10:25)

Yeah, I mean, that's in a way part of the happy story of trade. Right. Is it is an interdependent relationship. Right. And China's like, oh, we're not sending the rarest to Japan now. Japan's not sending the components to us that we need to put into the finished product that we're going to export. So they, their leverage is limited, perhaps in that way.

David Abraham (10:44)

Exactly. And that was the case in 2010. Now what's happened over time is that China has gotten really good at everything, so that they're making cars that Ford is saying is far stronger than the cars that we can make. And so when you have a country that can produce end to end within its borders, that set of interdependencies where you have leverage becomes less so. And so over those 15 years from 2010, when we were, you know, talking about Japan, China's ability to produce in areas that used to be Japan's strengths has now increased and they're less reliant externally.

Jacob Goldstein (11:32)

And so therefore they can use rare earths more effectively as a choke point, as a piece of leverage in their negotiations with certainly the US they're more

David Abraham (11:44)

a formidable partner than previously, for sure.

Jacob Goldstein (11:50)

So you're in Japan in 2010, you see this, and is that what makes you decide to write this book? You were early, you were into rare earths before. It was cool

David Abraham (12:04)

in 2010, my career before that, I been in commodity trading, which is mostly oil, gas, coal, big ticket items. And then I had worked in the US Government and working on international trade issues and, and so everything kind of came together while I was in Japan. And I was fascinated that the economy of one country or at least certain supply lines could shut down because of materials that people never heard anything about. And so I wanted to understand is the world is becoming more reliant on green technologies and everyone starts to have a smartphone in their hands. Remind you, back in 2010, not everyone had them and there were technology you couldn't make now Skype calls or video calls around the world. And so technology was spreading around. And the question is, what happens when we become a high tech and green society? We're going to be dependent on materials that people have not thought much about, almost like the switch to internal combustion engines, reliant on oil and gas. And if we don't get the systems right, we're going to be in a situation where one country can really dictate because they're focused on the material supply. And lo and behold, the moment that I had anticipated when I started writing about these papers in 2011, 2012, has now arrived. We're stuck thinking about, oh, no, how do we supply these materials? And in many cases we're already behind and we have to think differently. Then where are these materials?

Jacob Goldstein (13:46)

So you write this book in 2015. Not that much happens in the world. I hope it was well received and people told you they liked it or whatever. But it's not like everybody in Congress is like, oh my God, we got to deal with this. Right? The sort of status quo seems to persist for a decade after you write the book. It seems like really until last year, until 2025, right? There is again, as in 2010, there is this very specific moment, and that comes in April when President Trump announces these very High tariffs on China. And was it the next day, China's like, okay, if you're going to do that, we're not going to let you buy rare earths or the stuff made with rare earths. Is that about what happened? And then we're like, oh, my God, that's very. That's a very good comeback. China.

David Abraham (14:36)

That's what's happening at the high visible level. I think you had something back in 2020 that got people more interested and where the stuff come from. And that's Covid. And so at that time, people were concerned about masks. And then people were realizing it takes a while to get material or things to the United States. And if there is a challenge, then, then what do we do? And there was a boat stuck in a canal at one point.

Jacob Goldstein (15:06)

People talked more generally about just in time delivery and, and lean manufacturing. Right. This idea that you're so optimized, you don't have any inventory on hand, that that can be more costly than it appears when there's any kind of disruption. Right. So people started thinking differently, perhaps about. About supply chains at that time.

David Abraham (15:25)

And so there was. There was started to be some smarter people who are connecting the dots. So back in, if I go back to 2018, Congress, I was invited to speak in Congress three times on this subject on a wide variety of minerals. There just weren't people focused in that. But starting in 2020, that's when there were smart people starting to get involved in some way identifying this as a challenge. And at that time, I had been in the space for 10 years and talking about it, and I was like, I was wondering what was, where it was going to go. But some of those initiatives started to bear fruit. There are a number of smart people who've been in the space since that time. And so there were starting to be questions asked. Where are we getting our critical minerals? Where are rare earths coming from? And you're right that the real public display of oh, no rare earths was when we started a trade war that we may have not fully appreciated the ramifications and the connections that we might have sparked.

Jacob Goldstein (16:37)

So what was it like for you that there was just one day last April when China said they were going to limit our access to rare earths and things made with rare earths in retaliation for the high tariffs that President Trump had had suggested? Like, what was your day like that day?

David Abraham (16:56)

My first thought was this. This is not good.

Jacob Goldstein (16:59)

Yeah.

David Abraham (17:00)

And that there becomes this confidence that we have in the US that we can do things fast. And my concern was, we're going to have this confidence that we can do things fast in this space. And my day was trying to explain to people what these materials were and why they were important, because I don't think people fully understand that, and I don't think people fully understand that today that what we are good at is the development of technology, the development of AI. What we are not good at is the fastening of minerals to metals or powders and then turning that into a product.

Jacob Goldstein (17:49)

When I was reading your book, I thought of, what does it say on the back of the iPhone? Is it designed in California, made in China?

David Abraham (17:58)

Yeah. What's fascinating about Apple right now is there are a lot of companies that in the US Are in production, and they're concerned about supplies of rare earths. Apple faces no such restrictions because they're producing in. In China. So there's. What we have to understand is that there's. In 2011, if we flash back when Japan didn't have access to rare earths, two. Two things happened. One, people in Japan said, how do we make products without these rare earths? Which makes sense. But counterintuitively, a lot of Japanese companies went into China because they said, we got to be where the materials are.

Jacob Goldstein (18:37)

Right. If there's. If there's an export restriction, one way of getting around it is move the factory to the country where the stuff is to begin with.

David Abraham (18:45)

Right. So that. I mean, that's a complete solution that we have. We can. We can bank our economy that China will continue to export products to us that we can label as, you know, Apple or whatever, but we're totally reliant on them for the production.

Jacob Goldstein (19:03)

So what is the state of play now with respect to China and the US and rare earths?

David Abraham (19:10)

So China has, over the past year, put on a number of restrictions. They put on some licensing restrictions. Then the government later in the year basically said, hey, we're going to start to ask for an application for any rare earth that is mined in our country or is using our technology. What we've noticed is there are two things. One is it's important to separate the material and the product. So the material is a rare earth powder. The product is a magnet that goes into a motor. And what we've seen is that China has allowed the export of magnets, which goes into motors, but has been less willing to export the materials. And that's important because what. What the administration elsewhere wants to do is to develop the industries that rely on the materials, and those aren't coming Out.

Jacob Goldstein (20:06)

The strategy from China's point of view is, yes, you can buy the magnets that you need, but you cannot buy the raw materials. And the reason they are doing that is because they don't want us to develop the industry to build the magnets. They want to keep a lock on that. Is that the inference?

David Abraham (20:23)

They have said from 2010, since when I've been in space, we want to use Chinese resources for Chinese products. Why should we go through the environmental challenges? Why do we have to do anything just to export that so another country can benefit?

Jacob Goldstein (20:39)

Yeah. I mean, that's the classic kind of mercantilist thing, Right. Like, why should we cut down trees in New England just to send them to England to be made into ships, Right?

David Abraham (20:50)

Yes. So it's an argument that's been used from the US from natural gas industries through lumber. It's not uncommon. Yeah.

Jacob Goldstein (21:00)

And just to be clear, this dispute and what China has done with rarers over the past year, like, has it had a clear effect on for manufacturers? I mean, in military domains elsewhere, is there stuff that is not being made now or that is more expensive now or that is performing worse now because of this trade dispute and China's kind

David Abraham (21:22)

of use of rare earths, People are scrambling for material. They're paying higher prices for material. So they don't. Yes, there are supply lines that get slowed down. It's not like companies really want to come. Come out and say, hey, you know, we're not going to make X, Y or Z because of we're not able to get the material. They don't necessarily want to. But you do hear leaders of automobile manufacturers saying, hey, we're not being able to produce. And it's not just here, India, Japan, there are a number of places where the material is not getting out. What the challenge is we don't fully appreciate is that that material that we need in the US is turned into a magnet that's then sent to the U.S. we don't always get the raw material. So whether the US is restricted or Japan is restricted, our supply lines are impacted. And so there's too much of a focus. What I feel is like, oh, well, the US has to do X, Y or Z. The US has to make sure material can get that. It's necessary for manufacturers to get to this economy, to get to the country. But it does not matter how it gets to us as long as it does so.

Jacob Goldstein (22:37)

I mean, so does that mean it's not like the US has to have an end to end domestic economy where you Go from rare earths in the ground to whatever the finished product is. We just need to have reliably good relationships with a set of countries where all those things happen. Like is it is the short version. All those things need to be able to happen without China.

David Abraham (22:58)

All those things need to be able to happen with the reliable system. Let me take the oil market now. Yes, we don't need to produce all of the oil for the US economy, but what we do need to do is to produce enough so that we're not reliant or beholden on one one country to squeeze the market. And that's the same with most commodities. You don't have to be to be able to produce everything that you need. You just have to be able to make sure that the economy can get what it needs. And so Japan's in a situation where they're never going to be able to mine themselves to self sufficiency because they don't have the resources. So they have to work with other partners and that works. But reliance on yourself is an expensive proposition. What we haven't talked about, and I think what is there's this preconceived notion is that, oh, if we produce it in the US then it's going to be cost competitive. And the answer to that is no, it's not going to be cost competitive. Our situation right now is we're trying to make rare earths in this country that are going to be more expensive than what can come out of China.

Jacob Goldstein (24:15)

We'll be back in just a minute. Hey, it's Jacob and I want to tell you that I am hosting a new show called Business History. It's about the incredible innovations and massive failures and unbelievable characters in the history of business. And I hope, I think the show provides insights about how business works today. At the end of today's episode of what's yous Problem, we're going to play you a clip from Business History. It's the story behind the video game company Atari and their surprising early hire of a young hippie named Steve Jobs. The show's called Business History. You can listen to it wherever you're listening right now. And we'll play that clip at the end of today's episode.

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Jacob Goldstein (27:35)

what is the key choke point? Is it magnets? What percent of these kind of special magnets are produced in China?

David Abraham (27:42)

Now the challenge. So you've got more than 80, 90%. So the challenge is not like this is one magnet. It's that there's such a diversity of magnets and to be able to meet the spec of individual producers is the real challenge. And so that you can produce the the US could need 2,000 tons. It could produce 3,000 tons. And it's still not meet the needs. Right, because you're not producing at the right spec, the right consistency. So it's not. That's the real issue, because you don't want that missile to fail because the magnet got too high and all of a sudden the missile is not going to its attendant target. That's the challenge.

Jacob Goldstein (28:34)

You've also talked about the human capital piece, the education, knowledge, industrial knowledge piece. It seems like that is one where China is in good shape and the US is in bad shape, frankly.

David Abraham (28:50)

When I was in some small cities in China, 300,000, a million, there would be these conferences discussing rare earths, and I would go into an event and I was there. There are a few foreigners and then a thousand, fifteen hundred people in the industry, academics, industry officials, people who worked in the companies, and they're toiling in rare earths every day. Some are refining, some are producing. They're figuring out how to, how to commercialize products. Back in 2013, we could not have a conference of that size. There would be 10, 15 people there, max. There wasn't the industry there.

Jacob Goldstein (29:35)

I mean, even on a more general level, you've compared the number of universities in China focused on mining and refining with the number even of students in the US studying it, right?

David Abraham (29:51)

Yeah, there's just a handful of people, a handful of universities in the US studying, and they're just starting up. Many of them we just don't have. You didn't have the interest in mining and you didn't have the studies because we stopped. It's something we stopped doing 20 years ago. So we have a missing generation. And in China, that's when they just started.

Jacob Goldstein (30:12)

Yeah.

David Abraham (30:13)

And, and so you, when you don't have the industry, you lose the capacity to innovate because you just have to get to the basics. Right. And we might have some in. We definitely have some incredibly smart people who are learning, but it's all of a sudden taking, you know, amazing basketball players and saying, hey, you know what? It's time to play cricket. There's going to be some learning that has to get done, and that's going to take time.

Jacob Goldstein (30:40)

So setting aside what you think we should do, like, not the normative, like, what do you think is going to happen in the US and in the world beyond China? What do you think it's going to look like in, I don't know, what, five years, 10 years? With respect to rare earths, the question

David Abraham (30:57)

is, what gets rolled? What are countries going to be able to do? Are they going to be able to focus on and what are they willing to do? Because the US it seems to have four different options that are things that it could do. We continue doing what we're doing. We pick a few national champions. Just like Japan realized back in 2010, 2011, we realized, wow, this is really hard. We're not going to solve the problem. We still rely on China. Number two, there's a big deal with China. All of a sudden, just like the 1980s when we allowed Japan and Korea to come over. Car manufacturers, we say, hey, we're never going to catch up with China and China can invest in our country and let's do some big happy day deal with China. Number three, we get serious and realize that we need to focus on an entire supply line, that we need to focus on creating an EV market, that we need to start to create demand. And we realize that it's going to take five or 10 years for us to be able to start competing more regularly with the current level of China. Or 4. We spend ridiculous amounts of money, billions and billions of dollars.

Jacob Goldstein (32:15)

Yeah.

David Abraham (32:16)

Without a strategy that will enable us to declare victory, because we're spending on production of materials that will be stockpiled, that will be warehoused, that won't have a market because we focus so much on producing these minerals. But we're not. Our defense system isn't stronger. Our industrial base is smaller.

Jacob Goldstein (32:43)

So clearly, from the way you frame those options, you think option three is what the US should do. Right. Don't start by thinking about rare earths, but start with what we want to produce in this country. And you say that that's EVs, electric vehicles. And I'm curious why. Why is it that you think we should build our rare earth strategy around electric vehicles?

David Abraham (33:06)

I'd argue it's the key to most of our industrial strength in the future. And the reason is, is it's because it's the largest consumer of battery materials. It's the largest consumer of magnet materials. So we want a great robotics industry. We need a dynamic battery industry. We need a dynamic magnet industry. We want to have drones. Great. Same thing. So if you don't have the base industry, then you're undermining all the other industries or you're making them reliant on innovation in countries that you can trade with. And that is why EVs are so critical. And you can say, all right, well, we need them because they are a green product and we need to save the planet. Great. I think there's a reasonable argument to put it mildly there. But I would argue that we need a strong defense. You need EVs. You want to have a strong robotics industry, you need EVs. Otherwise you're creating niche industries. It's the same thing. We complain about Department of defense paying $10,000 for a screw. They need a specialty screw. So what we need to do is make these materials, make the batteries, make the magnets, turn them into commodities so that they're coming out and they're produced at a cheap rate within this country. So we've got a dynamic system.

Jacob Goldstein (34:40)

Do you think that's going to happen?

David Abraham (34:43)

I would like that to happen.

Jacob Goldstein (34:45)

Doesn't feel likely to me.

David Abraham (34:47)

I feel there's an overriding sense in that American ingenuity can turn around and produce materials that we can all of a sudden jump ahead. As if country that all of a sudden decided not to put in landlines and went to fully mobile back in 2010, they're like, oh, well, we can just jump ahead. We don't need to invest in all of those, all those wasteful, wasteful phone lines. But this is hard science. This is where you're mixing acids and heats and we need to focus on building those people so that we can have more breakthroughs. Because China's not sitting back. This is something that's constantly innovating. And China, Japan, all of these countries are figuring out how can we make a better product and we don't have that fighting force in the material world that we once had.

Jacob Goldstein (35:47)

We'll be back in a minute with the lightning round.

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Jacob Goldstein (38:37)

we are going to finish with the lightning round. I want to talk to you about your other job. Besides being rare earths expert, you run a company called Outpost. You were the founder and CEO of

David Abraham (38:53)

Outpost, which is a co founder and CEO. Back in 2015 when the book was coming out, I was living in Bali and seeing that people were starting to work remotely. So my partner and I set up a network of properties that allowed people to work remotely. It was the dawn of the digital nomad era and that was our focus.

Jacob Goldstein (39:15)

Do you still run that company?

David Abraham (39:18)

I still run that company on a day to day. Not like I did.

Jacob Goldstein (39:23)

So is it right there's two places in Bali and one in Sri Lanka that the company owns, runs.

David Abraham (39:31)

Correct. Those are branded properties. Correct.

Jacob Goldstein (39:34)

And people typically from Europe and the US who are traveling around the world, working on their laptops, pay to live and work there. Is that basically the idea?

David Abraham (39:45)

Well, when we started in 2015, people were coders, marketers, people who could be away from others, people who had their own businesses. And then what we've seen since COVID is a more professional set. So it could be anyone who's working remotely. You never Know where someone is behind their screen. And so we've seen this change and what used to be dominated by the us, the uk, all of a sudden more people started to travel. You saw people from Mexico, Brazil, China, Russia, elsewhere starting to fill up the spaces. And so what we've seen is a general trend that's changed.

Jacob Goldstein (40:27)

And so just very basically, what is the business?

David Abraham (40:30)

Just so it's clear, we provide spaces for people to live, work and connect with others and the places they go, company's full outpost.

Jacob Goldstein (40:39)

And what do people not understand about life as a digital nomad?

David Abraham (40:46)

That when you can have everything that you think you want, you can have cheap food, you can meet people all the time. There's always something stimulating about being in a foreign country. That alone isn't going to give you the direction you need for your life. It's not going to make you continuously happy. It's the connections that you get along the way and being able to be able to build something that you're proud of, whether they're friendships or family relationships or businesses. It's the impact you have on others, not the freedom and the self improvement that you have by being outside of your own culture.

Jacob Goldstein (41:26)

So you're saying being a digital nomad is not as fun as it looks on Instagram?

David Abraham (41:31)

It is as fun as it looks on Instagram and in some cases more fun. But a lifestyle where you're uninhibited and you're not building and you're just soaking up services over time, there's less meaning there. So it's a great way to spend time. Don't get me wrong, it's not saying, hey, don't spend the lifestyle, but if you're spending three, four years and you're not building along the way, then you've kind of looked back and you're paused. But for periods of time, it's a wonderful experience. You can get out of your shell, you can be challenged by things that you didn't, you know, by the, by the language, by the food, by the situations that you would find yourselves in, that you wouldn't be in your own country. And it gives you a chance to reflect on some of the certitudes that you. There are certain things that you believed, your core beliefs, because you lived a certain way, that you wouldn't be challenged until you're in a different country. And so as someone who's lived overseas for a long, long period of time, and that's what I love about that.

Jacob Goldstein (42:34)

Yeah. Although, I mean, I guess it depends, it seems like if you go and live somewhere with a bunch of other digital nomads, there is less of that than if you're like going and staying with a family of people who live there or just going, living in an apartment and hanging out with people who live there. Right. It seems like living in a digital nomad house would reduce the foreignness of the situation.

David Abraham (42:59)

It does. It does. What I would say is that you want to be able to mix them both because you need that system and that routine. And especially when you're in a foreign country, everything is new, so you're going to forget your 9 to 5. And when you're having a job, you have to continue that, that routine. So the spaces that we offer give that routine to people and that consistency and that they're meeting other people so they feel comfortable where they are. And then from there, my hope is that people branch out and start to really get absorbed because there's too much and increasingly too much similarities in everywhere we go. You can get your Starbucks and you start to see the culture of the U.S. whether it's tipping or the service culture, it starts to spread out. And when you're using the same online travel agents so you have the same experiences in other places and you think everything's the same, you really have to break out and start meeting people, start learning a language, start going outside the realm. And I think that's when you start to get rewarded.

Jacob Goldstein (44:08)

Thank you for your time.

David Abraham (44:10)

I appreciate it. Thank you very much.

Jacob Goldstein (44:19)

David Abraham is the author of the book the Elements of Power. He's also the founder and CEO of Outpost. Today's show was produced by Gabriel Hunter Chang. It was edited by Lydia Jean Cott and engineered by Sarah Brugiere. You can email us at Problem Pushkin fm. I'm Jacob Goldstein and we'll be back next week with another episode of what's yous Problem? I'm Jacob Goldstein and right now we're going to play you a clip of a new show that I co host. The show's called Business History. My co host is Robert Smith and this clip is from an episode we did about how Nolan Bushnell, a stoner turned entrepreneur, created the video game company Atari and hired a young, inexperienced Steve Jobs. I really hope you like the clip and if you want to hear more, you can find Business History wherever you're listening to this show right now. This like 19 year old hippie kid walks in and he says he won't leave until they give him a job. And the receptionist calls the head engineer and, and she Goes, yeah, we got a hippie kid in the lobby, says he won't leave until we hire him. Should we call the cops or let him in? And the engineer says, bring him in.

Robert Smith (45:37)

It's 1970s in Silicon Valley, and this guy wanders in, and he is. Whenever you tell a story like this, you know who it is. It's Steve Jobs.

Jacob Goldstein (45:45)

It's Steve Jobs. So fun. It's so delightful and perfectly. Steve Jobs is very good at his job.

David Abraham (45:53)

Yes.

Jacob Goldstein (45:53)

And very unpleasant to work with. Completely unsurprising. He tells Bushnell that, like, everybody's soldering wrong, right? They're actually putting together the hardware. Soldering the hardware.

Robert Smith (46:02)

He's probably right.

Jacob Goldstein (46:03)

And Bushnell's like, yeah, he was right. He keeps calling his manager a dumb shit. Probably was, but not kind, not necessary. Bushnell winds up putting Jobs on the night shift, partly so he won't bother so many people, and partly because he knew that Jobs liked to hang out at night with his buddy Steve Wozniak, who was a great engineer. It would be great to have hanging around Atari. And in fact, Jobs and Wozniak helped to make Breakout. Great Atari game. Remember Breakout?

Robert Smith (46:32)

Yes, of course. You're trying to knock down the bricks in a wall.

Jacob Goldstein (46:34)

There are still games like that where you got a little paddle at the

Robert Smith (46:36)

bottom, and there's a moment when it goes through the wall and then goes,

Jacob Goldstein (46:41)

so good. So Jobs worked at Atari for a little while and then decided he wanted to go off to India to find his guru. Perfect. Asked Atari to pay for the trip. Nobody ever said he lacked moxie. And wound up making a deal with Atari where they'd pay him to go. Part of the way there was. They had exported some games to Germany, and there was some kind of problem with the games in Germany. And they're like, we'll send you to Germany to fix the games, and then you can get the rest of the way to India. And, you know, the Germans said Jobs was terrible to work with, but he fixed the games. I was thinking about, like, the link between Atari and Jobs and what did he learn there? And it felt like maybe a little over determined. But I do think, you know, clearly he had this profound sense of aesthetics and of delight. Right. Like, think of the Macintosh, right? This breakthrough Apple machine in the 80s. It was round, and instead of squares, it was rounded, and it cost them more money. But it was beautiful and it was fun, and you were engaged with it like a game.

Robert Smith (47:38)

It almost looked a little bit like an arcade game with the curves.

Jacob Goldstein (47:41)

Yeah.

Robert Smith (47:41)

But More than that, I think that especially at Silicon Valley, at the time when they were dealing in actual silicon, right? If you're making chips for somebody, you're thinking about the future and the computers. You're not thinking about the psychology of the customer, because the customer was another electronics company, right? And so Atari and the strength of it was really the first time where they're just like, how will a regular human being who has no training whatsoever interact with technology?

Jacob Goldstein (48:06)

Yeah. So Atari now, mid-70s, they're selling all the machines they can make. They need more space. And so they rent an abandoned roller rink, and they turn it into this office slash, video game factory.

Robert Smith (48:22)

I'd been 10 years older, I would have loved to have worked in a roller rink. Video game factory. Yes.

Jacob Goldstein (48:27)

Everybody smoked weed.

Robert Smith (48:28)

Yeah.

Jacob Goldstein (48:28)

There was a hot tub. There was a pool party where everybody ended up naked in the pool. Bushnell himself looked back on it later and said, if that isn't a horror show for any HR person today, I don't know what is.

Chase for Business Advertiser (48:47)

And, Doug, there's nowhere I wouldn't go to help someone customize and save on car insurance with Liberty Mutual, even if it means sitting front row at a comedy show.

David Abraham (48:56)

Hey, everyone. Check out this guy and his bird. What is this, your first date? Oh, no. We help people customize and save on car insurance with Liberty Mutual together. We're married. Me to a human, him to a bird.

Jacob Goldstein (49:06)

Yeah, the bird looks out of your league.

Chase for Business Advertiser (49:08)

Anyways, only pay for what you need@libertymutual.com Liberty.

David Abraham (49:12)

Liberty. Liberty. Liberty.

iHeart Podcast Announcer (49:14)

This is an iHeart podcast. Guaranteed Human.