The Illusion of Decoupling

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All right, listeners, cousins, back at it. Uh, I cut Marco off 'cause he was starting to make basketball jokes. Marco, I'm in, I'm in Milwaukee. You are in, you are in Phoenix. Uh, what does that have to do with basketball?

For David Portnoy. Now, Mr. Portnoy, if you're listening and you want to bring both of us to the Barstool Geopolitics network, like we are both gonna talk, but you will not. Well, first of all, you'll not divide my loyalties,

Once you reach a certain level of, um, excellence, you know, like, and Ryan SLO is excellent, and so he bounced.

They drink more per capita in Wisconsin than anywhere else in the United States. I felt like I should join in. So I'm having a beer with you this evening too, mark.

But the thing that probably everybody wants to talk about, I'll try and set us up here while Marco, so we've got fireworks in the US China trade relationship. We've got some other things we want to get to in the episode today, but we should talk about them. Um, it began, well it depends what, where, where you think it begins.

Sort of depends because there was this ruling, uh, last week, um, the sort of fi for the, the Department of Commerce, um, had this new 50% rule that entities that are owned 50% by a foreign government or some. Entity that is on an entity list that would trigger a bunch of, uh, different export controls. That at least is what people are pointed to as the reason for China reacting pretty disproportionately and announcing a bunch of export controls on rare earth elements.

Um, this is the part in the conversation where we have to remind listeners that rare earth elements are not rare. They are just incredibly costly and pollutive to mine effectively, and China doesn't care about any of that. They got rid of all the regulations and they have become the real center, um, of a lot of these different, of mining and processing and refining a lot of these different rare earths.

A lot of these are minerals and resources whose names I can't even pronounce, but I know that they're incredibly important, um, in semiconductors, um, in electricity management devices like capacitors. I mean, there's all sorts of things that they're absolutely mission critical for, and which China controls massive amounts of the supply chain for, um, and China. It's not. It's not necessarily banning the exports of lots of these different minerals.

What it's doing though, is it's gonna make Chinese companies and Chinese exporters, um, have to apply for approval to continue exporting in the future. I thought one of the interesting things too is it's not just, you know, the heavy rare earth elements and the li uh, the graphite and the, and all that other stuff.

They're also, they also put at least, you know, quote unquote restrictions, um, on any technologies that lead to the assembly, maintenance, repair, and upgrading of production line for rare earth mining. So I think they're, they're. They're looking there and saying, okay, these other countries in the world want to do this. They want to take some of this processing and refining back. We're not gonna let you do that either.

'cause we have cornered the market on this and we're the ones that have all the technology and the refining, processing and capacity as well. Um, there's also, and this is just in the last couple of days, like everybody's focusing on the rare earth. Um, but I dunno if you saw this, Marco. There's also a return to these tit for tat port fees that ocean shipping firms are gonna be charging on each other.

This was something that both the United States and China announced earlier in the year when President Trump was talking about 240% tariffs. They were supposed to kick in later. Were they gonna get kicked in at all? It appears that they're being kicked in. Um, now both China and the United States tried to, to tried to assuage investors and say, eh, like it's not gonna be that big of a deal. But China also said it has started to collect charges on us owned, operated, built or flagged vessels.

And the United States has similar restrictions in place at its different ports. I talk to different folks in the shipping industry. They don't even really know what the rules are at this point and how they're gonna be enforced. Um, China also added some, um, some subsidiaries of a South Korean ship building company, um, on its sanctions list for engaging with the United States, which is an interesting thing. Um, and before I turn it over to you to, to let you. Uh, give us a take on this.

I did just want to quote the President of the United States. Um, by the way, Scott Besson said that President Trump and Xi Jinping will still meet in a couple of weeks, and that he thinks these things can be deescalated. So, um, that, that to me probably says short-term deal, but we won't step on the punchline. But here is, here's what the president of the United States had to say, uh, when he was asked about Beijing pursuing these new curbs on rare earth element exports.

Quote, we have the ultimate export. We have import and we have export. We import from China, massive amounts, and, you know, maybe we'll have to stop doing that. But I don't know exactly what it is. Neither do you. Neither does anybody. End quote. I also loved the next line in the Bloomberg article that had this quote, it was unclear what exports the president was referring to. Marco, what is going on in the US China relationship?

What Chinese entities are aligned with the military and the Communist party. They needed to see direct ownership link. The Biden administration broadened the connection massively, too, massively, I would say, because, you know, if you sell toilet paper to the Chinese, like people's liberation army, you are effectively like part of the military industrial complex. So that's, that's Joe Biden, uh, and, and, uh, um, and his administration's fault.

But what bi, what Trump has done is he ha he's continued the Joe Biden line and then he's closed the loophole where whereas many of these Chinese companies would create a subsidiary, they would create another company, own a piece of it, and then have that subsidiary just buy the chips. And so, uh, on October 2nd, the Trump administration tried to close that loophole with what's called a 50% rule. You know, um, if various list.

Entities of the Chinese government that Chinese government has some sort of relationship with is they control effectively over 50%. You're not supposed to do these trips. You're not, you know. Um, so the first foray this time around was again, launched by the us. Uh, your, your assessment is correct that, that October 2nd was important, but then you also said that China reacted disproportionately, and I would actually argue that it reacted extremely proportionately.

These are export controls, they're not export bans and all legitimate businesses have nothing to worry about. It was almost verbatim. Something like that. Yeah. In other words, like, hey look, I mean the US is imposing export controls where they want to go purchase order by purchase order and approve each one. Well, we want to have that sort of les over your heads too.

We're not saying that you are not gonna get the rare earth from China and everyone listening to this, just to be clear, none of this is about banning. Like America will still sell semiconductors, but it has to go to companies in China that are allowed to buy it. And China simply saying, we're not banning rare earths. But similarly we're going to say to Lockheed Martin, like, Hey, dual use technology. You are building missiles that one day might kill Chinese.

We're not gonna sell you rare earths, but we'll sell it to Nvidia. You know? Um, and so I think that that's an important point. I think this is extremely proportionate. As is the shipping fees that you also mentioned. China's saying to the US we're just gonna do tit for tat. So, um, I think that that's something to understand. I don't think there is a real shift in Chinese thinking here.

I think that they're just finally starting to say to America, like, look, we are gonna start restricting access to rare earths. If you restrict access to semiconductors, um, on tariffs on tariffs, we're not gonna follow you. We're not gonna keep ratcheting tariffs. And they actually said that after April, they, they came out and said it's nonsense to keep increasing tariffs. They made a joke like Beijing made a joke about this. Like, this is, yeah,

I think there's two tracks in American, uh, foreign policy right now. There's a sort of a bureaucratic inertia, and if you think about how bureaucracy works, just like a lever, just like a toggle, and the toggle is like from one to 10, one being like, let's be nice to China, 10 being, you know, time to fuel up the nukes in nuke China. And so obviously since 2017, Donald Trump himself moved the toggle from one to six. And then interestingly, Joe Biden moved it from six to eight. Mm-hmm.

You know, and so that's just the default setting of the bureaucracy. And that bureaucracy continues to initiate Section 3 0 1 investigations in China, uh, which take months to get done. There's a, there's a bureaucratic and technocratic process in these investigations. There's serious people who get paid good money, who are well educated, who are working on all these, oh, you know, we need to close the loophole because of these subsidiaries. Let's do that.

And that's, that's one layer of the cake. And then there's the icing, which is very orange and very, very like profoundly awesome. And that's Donald Trump. And he does not have any, I think, awareness of what his own bureaucracy is doing on those other layers. And so when China retaliates against something that, you know, the United States of America did, like his administration did, he's like, whoa, Xi Jinping made a mistake, but well, no, he's just reacting to what your government is doing.

And then he realizes it, and then he calms down 24 hours later, he probably has a snicker bar, right? Like the famous Snicker commercial. And he says, oh, okay, I see what happened here. And as of course, Donald Trump said a couple of months ago, or maybe even a couple of weeks ago, look, American chip companies will sell chips to China. They want to sell chips to China. He wants them to sell chips to China so they can continue to have a monopoly.

And so I think that where this is headed is Donald Trump who wants to deal with China and understands that there are downsides to some of these export controls in a genuine way, not in sort of a silly, Donald Trump just wants to make a deal way, but there's actual downside to. Effectively helping China develop its own chip industry. You know, that's what America is doing.

And I would say that this is where the TikTok deal is also important, because speaking to people with contexts in China itself, what I've been told from my onshore context is that the TikTok deal actually allowed a creation of, you know, it wasn't that relevant as a deal. Like nobody's really like sitting here like wondering where TikTok is going. But what it did is it created C news and connectivity at very top. And so there's finally.

Channels of communication, whereas there weren't really in April when President Trump just went on a tariff tirade after the, after the TikTok deal was settled, even though the deal itself was not that important. The mechanism to get the deal done means that people in power in both China and us have a way to text each other, have a way to call each other, have a way to be like, yo, why are you restricting rare earths? Well, because you guys just a week earlier restricted semiconductors.

No, we didn't. Yeah, you did. What about this? Oh no, no, that's just standard stuff we're doing. 'cause you guys arrivals, well, well, you know, now we're gonna respond. And then you have that conversation and it's not just two megaphones shouting into the ether. So, um, I think that's the background of this story. And I, I don't think we're gonna end up with a hundred percent tariffs on, on toys for Christmas.

You're right that the Biden administration was much tougher and much more, much more surgical on Beijing, and you might remember the Biden administration, one of their last gasp acts was the semiconductor restriction plan. It was basically, some countries have no restrictions, some have some level of restriction. Then there's the, the ultimate level of restriction and China was gonna be on that list.

The Trump administration threw that plan out months ago now, saying we, we are gonna have something that we're gonna put in its place. We still don't know what that thing is in its place. And in the meantime, we've had, for example, Nvidia. Uh, lobby again, some of the restrictions that it was dealing with and then the Trump administration saying that it was gonna take a cut of exports going to China, which is also an interesting, um, sort of part of this.

There's also like, I don't know if this is still true, but when China first started making noise about this and they've been doing this for years, like these export controls and some of these different elements and mineral resources, yes, it is that they want to be able to control this with the west and control the processing. But China, again, I'll just remind our listeners, is a country of a billion people and the Chinese government doesn't always know what its own companies are doing.

So part of the process of getting Chinese companies to apply for approval to export these things, yes, it was to create a lever with the west, but it was also for the Chinese government to figure out what the fuck they had going on. 'cause they didn't even know what kind of levers they were pulling. I think they, they have a better sense of those levers now. Yes. But I wouldn't be surprised if there's like a little bit of that in there. There's also, and, and, oh yeah, go ahead. Before.

No, no, no, no. Please, please. Finish, finish, finish. Well, the, the last thing I just wanna say is, you know, I, I, I talked to a guy who's, who's in the rare earth refining processing space and who was trying, um, to basically bring that to the United States. And I was asking him, well, I, I texted him today and I was like, you must be having an interesting week. And he said, yeah, I am having an interesting week. And I asked him, is it anything more than talk?

And his answer was basically like, not really. Like people are freaking out. They're saying lots of things in public, but the shift from, hey, this is a problem to no, we're actually going to spend the money to have CapEx to refine and process these things and countries that are, that are the United States are friendly to the United States. Like I don't think we're exactly there there yet. And he expects some kind of short term deal as well.

All and all of which is to say, and I think you and I have both been on this from different angles from the very beginning, which is Trump's instinct, I think is to make a deal with China. Much to the chagrin of Peter Navarro and the other China Hawks that he has in his administration. And people like Jameson Greer and Scott Besson are cool with that.

And I think if Trump, if it was up to Trump, like he would announce some deal and there would be a grand US China bargain and everything would be fine. The flip side of that is that some of the things that his government is doing and some of the things that he says right, is the exact opposite, which is full decoupling. Like there's not gonna be any future in the US China relationship. These are geopolitical rivals. And I don't even think Trump, like there's no consistency with him.

And I think the Chinese have at least realized that. And so they have to punch the bully in the mouth when the bully comes at them with something like the 50% rule. But they also ultimately have economic problems of their own.

And if they can have a short-term deal whose provisions they won't live up to, like, so for, for any investors or folks who have companies, you should behave as if there is no deal because I'll, I'll put my neck out there and say in five years it doesn't matter, like the US and China are decoupling. Like it doesn't matter if we have some kind of short-term deal or whatever else is happening. But anyway, just. Go from there.

So first of all, I think, uh, the onshore narrative in China, like if you were to spend some time reading op-eds in Mandarin in China, which I don't, but I'm told what they are is effectively there's no urgency for anything. There is no urgency to even punch the bully in the mouth, although I agree with you. They did. They, they finally kind of did something, but there's no urgency. And that's why the comments on Saturday were so conciliatory. They were like, Hey guys, this isn't export bans.

We're not banning export of rare Earth. Relax. The issue is they do want a deal. And the reason is that the onshore commentary, if you were reading like the equivalent of a New York Times op-ed in China, the consensus in China is the United States of America is gonna collapse into a black hole of Civil War demographic decline, racial tensions, and. Complete collapse. Yeah. Late stage

You don't put Tulsi Gabbard as the head of your, you know, um, national security if you are a national security hawk. He's not. He is mercantilist. And I actually think where we disagree a little bit is I actually think that his approach is the more optimal approach. In a multipolar world, it doesn't pay to decouple.

And I think the big risk for the US is that by restricting export of American technology, often a couple of generations late, you will incentivize China to become very good at its own technology. Alternative technologies that you have no pre you have no input into. But anyways, what I wanna like really emphasize here is that I think that the Chinese are perfectly fine. They understand that this is a limited window where maybe they have somebody who's a little bit different from what's coming.

You know, whether it's JD Vance or a OC, I can see a world in which whoever inherits the presidency after President Trump is much tougher on China and, and adopt the Jake Sullivan Joe Biden approach. Uh, but they're cool with that because they just don't really think they're in a rush, uh, because America's collapsing. And that narrative of American collapse is almost like a really good thing for the world. It means that China's not gonna do something stupid.

Um, and if I was advising President Xi, I would say that that narrative is, you know, while very pleasing to read, I'm sure in those New York Times equivalent op-eds in China, you're kind of reading what's very pleasing to you. You know, it's sort of like a liberal reading, a guardian oped, you know?

So, I, I, I don't know that they're thinking that it's gonna be civil war and carnage in the streets. My interpretation of. Intelligentsia in China has always just been more, yeah. Like this is late stage capitalism. Okay. Like Marx was a little bit later than he should have been, but like, eventually this system is going to, is not going to work in the long term. And meanwhile, like we have socialism with Chinese characteristics and, and everything, it, it seems a little more. So I think it's

And my real disagreement is I think that decoupling is impossible. You know, and let me, and let me explain why I say that. Um, the one, our, our, our actual example of decoupling. In a modern industrial world and equals one, our sample size is one, and that's the Cold War. And I really, really, really want to emphasize how a historical and idiosyncratic and pat dependent the Cold War was in 1945.

I know I've said this before on our podcast, but I just wanna emphasize in 1945, the world was destroyed. Like it was destroyed. You know, it looked like Gaza. It did it, it, it, it looked better

Like if you got hit with a nuke, you were lucky. You know, you escaped the firebombing. China would have, and China

And so what I'm getting at is that when the Cold War starts, you have large parts of the planet are tabula rasa completely, completely erased, which is a fancy way of saying blank plate. And so you can craft a material reality. An industrial world that truly is decoupled. 'cause you're starting with large swaths of the planet completely unintegrated or destroyed. And so if the Soviets want to have their technological zone that's clearly decoupled from the us, they can and vice versa.

Now notice that that's how Cold War started. That was the starting conditions of the Cold War World War I. However, and World War II started in a completely different world. They actually started in a globalized world. So my favorite historian, Margaret McMillan, you know, she wrote all these books about First World War. She really talks about this in a great way. Like when World War I starts, there are literally.

Munitions companies that are like building sea mines that are like 30% owned by a German conglomerate. Yeah. And 40% owned by British. So the board meets when the war starts and the board is like high fiving the Germans and the Brits are high fiving, holy shit, we're going to war.

Oh, but they didn't. No, they knew. They knew from mid 1890s. Everybody knew that Germany and Austria would go to war with France, Russia, and the UK in some combination shape or form. Everybody knew everybody was looking forward to it and yet they couldn't disentangle this technological reality. And now that's a world where I actually think I can see maybe an argument being made. Yeah. But technology back then was difficult to entangle. What are you talking about?

Our levers, our tools, our components were huge widgets and you know, giant things they rotate to. Today, it's so much more difficult to disentangle when the components are like rare earth you don't even know how to pronounce and neither do I. Lemme be very clear. And so I would say that the problem for the world today is that we had 25 years. If not 35 years of genuine peace and prosperity in a unipolar global system that America designed, they became deeply intertwined.

And so full decoupling is probably never going to happen. However, however, I do believe that there will be the technological decoupling in certain ways, but that's nothing to fear. I mean, I grew up in communist Yugoslavia, Jacob, you grew up in, you know, a pillar of liberty and freedom in America.

And I see a lot of, I hear a lot of investment banks and commentators talking about how that will cause the world to go on two different No, it won't. All it will do is it will lead to entrepreneurs building systems that can read both technological, um, both, both technological, uh. Pillars, which is exactly what happened with phones. You know, Nokia came up with a tri ban phone that did work in both Japan and North America. And Europe. And yes, there were VHS players.

There were literally, they could flip between Pal Secum and NTSC. Like, yeah, that's how old I am. I know that stuff. So the point is, somebody's gonna figure this out, just like we had in early desktop computers. You know, you are on the MAC system, I'm on the Microsoft system. Eventually, yes, you could read the files from one system to another, and now we're seamlessly integrated. So I think that we are overstating the decoupling massively.

I don't think the decoupling is really what we should be thinking about. I think if World War II starts Jacob, it's gonna start with both countries being very deeply integrated, and I think Donald Trump, to his credit, has figured that out. I think he has figured out that it's very difficult to completely decouple, and that not only is it difficult, it's stupid.

It means that American companies cannot make money off of China, the second largest economy in the world, which is objectively a mistake.

Marco, you're giving him way. Way too much credit that he's something, his gut,

And Donald Trump loves to talk about him all the time. And he imposed tariffs across the board. And when he imposed tariffs across the board, which. Good for the US economy in that pre-World war I world that you're talking about. By the way, I hope you don't turn into the Norman angle of, of globalization, like the great illusion. Yeah. That because like you're, you're That's right. You're flirting with it a little bit.

Um, when, when William McKinley did that, the United States was making something like 30% of the manufactured products that were in the world. And the Brits had another 20% Right. The Chinese and the Japanese weren't doing any of that. The Japanese were just starting to rev up. The Chinese were a morass. India was getting dominated, um, you know, by a couple thousand British soldiers and everything else. You flip that to today.

China wins, China wins on ships, it wins on, you know, active pharmaceutical ingredients. I guess we're not gonna have Tylenol in this country anymore. But if you did want Tylenol for, you're a kid with an ear infection, like probably the API is coming either from India or China. Agricultural, machinery, fertile. Like you start going down the list of things the United States is, but doesn't that prove my point? But doesn't that prove my point? It does, it does. It does prove your point today.

And I think they are deeply interconnected and I think any person who wants to fight a trade war with China and then is the one who is responsible for what happens afterwards.

Like maybe, you know, president Trump, the first administration was a little bit more muscular and he loves to go after China on the campaign, Trump, but when he's the one sitting in the White House and he's looking at the inflation numbers and he's looking at all the things that cannot be manufactured in the United States.

All the things, by the way that he pushed to be manufactured in the United States during his first term, in which we are no closer to manufacturing in the United States than we were in the first term. I think you're

Mm-hmm. Of course you should let China build BYD factories. And Donald Trump had the balls to say that in front of a crowd full of potential manufacturing blue collar laborers who are not gonna work in there because of automation. But this isn't, this isn't about whether Donald Trump is right or not. I just never took him seriously when he's aggressive on China, because I take him seriously that he wants to make this deal because of everything you just said.

And you laid out a plethora of evidence why it's really difficult to decouple, and that's what we should be focusing on.

I would say most of the bureaucracy is aligned against President Trump. And Yes, public, yes, public opinion is aligned against President Trump. And, and the interesting thing about Trump is he rode what you're talking like, I, I agree with you that that's what he wants to do, but also part of the reason he got elected the first time was because he talked about China. In a way that was way more serious than anybody else did. So he is got the Santi China thing.

And the other thing, and I'll, I'll let you cook in a second. I just wanna say, I think we actually do agree, and I laid out that case. The only thing I wanna say back to you is I completely agree with you that it is irrational and asinine and crazy to, for the United States to try and decouple from China, it would be disastrous. That does not mean it won't happen. Well let, it's totally irrational. It does not make any sense.

But this is where geopolitics falls off the rails because sometimes actors do irrational things for reasons that are hard for rational cousins to divine

I'm not saying that we are in a world where, I'm just saying like World War War III will start maybe 10 years from now, we will remain connected with China.

So yeah, war can still happen, but it will happen at a very high level of economic integration 'cause it's just so difficult to disentangle. Namely 'cause your own allies steal market share from you by trading with the enemy. That's the whole point. Like it's difficult. And that's what Trump tried to do. And quite frankly, he's given up because the rest of the world is like, no, sorry, we're gonna trade with China now.

Yeah. You know, like Europe is imposing tariffs in China, but they're gonna make a deal separate from the US Now there's a BYD factory coming into Spain. And what did they ask? They asked for IP boom. Yeah,

Listen, at some level, it's very simple. And I've said this before on this podcast, France, in Netherlands, they're gonna tell America, listen, bro, world War II starts, we're dying with you in the trenches against the Chinese. But until that moment, you know Emma Manuel has to sell them air buses and I gotta sell them A SML machines. Why? 'cause we need the money to develop cruise. Miss sells with which to help you fight the Chinese. Are you gonna give us that money?

Are you going to buy air buses instead of Boeings so that France has enough money to become a, to remain a viable ally? No. Jd,

So, uh, the national intelligence defense community, all of course against China, I mean, they know what butters their bread and it, it ain't world peace buddy.

But I do disagree with you on the people. And I have a chart that maybe we can put in the show notes. But it shows something fascinating, Jacob. It's one of the most fascinating charts. It's an ipso poll done with, I think the Chicago Council, and it shows that in 2016, about 30% of Americans, 30% Republicans, 40% of Democrats agreed with a statement that trade leads to jobs in America. Hmm. So your point is correct.

In 2016, voters wanted a trade war with China because they felt that the trade was unfair. And President Trump beat Hillary Clinton as a result of it. I really believe that. And he delivered it. He satiated the demand that the American public had in 2016. But since then, you know what the current level is, Republican sup, Republican support is at about 65%. Democratic is 75%, and I would say that it's thanks to Donald Trump. Donald Trump delivered what the median voter wanted in 2016.

What he and his administration seems to be unaware of. Is that they should be patting themselves on the back for what they delivered in 2017 and 18 instead of tripling down on policy that nobody in this country wants. And I have, I have so much data, I have a cornucopia of charts, Jacob, that proves my points, tariffs and trade are the least important political issue in the United States of America. You know, behind like abortion. Nobody cares about this stuff.

And he's completely over indexing on it, not knowing that what he should be doing is claiming victory for delivering fair trade. Because clearly American voters are now far more, they've doubled their support for globalization. That's, that's surprising. No,

And the same was true and over the course of the first Trump administration and the Biden administration, um, that changed where both youths on both sides now distrust each other at the same level that the old guys from the Cold War do. So I, I think you're right that you can point to data that shows that, um, about globalization. But I think you can also point to data that the average median voter in the United States is animated by a deep set fear of China.

And then if you like, give them policies and they have to fight between the, like their supportive globalization or whatever else, um, or even their like, you know, cheap products at the Dollar General versus let's stick it to China. Like for some, the fear thing will pop up and for some the other thing will pop up. And I think the fear will, I think for vast

It will do so at a very high level of economic integration. Yeah. Because nobody, like, you're right. Like clearly, clearly, clearly sentiment towards China has soured, but that sentiment towards China as an enemy, as a, as a rival economic sentiment toward, towards globalization is extremely high and nobody wants tariffs.

So. The way I square those two views together is that, yeah, like I think Americans have become much more anti-Chinese, but no, they don't want to pay more for their Christmas toys as a result of it. And by the way, they're right, the wisdom, and I know this is where we always disagree. In this particular case, I would say the median voter is right. The median voter understands that buying a toy from China does not fuel the Chinese Communist Party in its military machine.

Oh yeah, it does, does not, you know, I

No, absolutely not. Absolutely not. And I think we need a, a, a because, you know, I think, I think we're gonna stay in a multipolar world order for the next 50 years. Uh, maybe 20 years, maybe something in between. And I think that the biggest geopolitical story of the next 50 years, uh, or 20 years is not gonna be China, US tensions. I think it's gonna be dissolution of Russia. And the process by which it's rotting carcass is pulled sunder across Eurasia by various other powers. You know?

So I think that what's gonna be very interesting is that us may be in a very good position, but for the, all the different reasons than a lot of people think. I think that, uh, the weakness of Russia, I mean, you know, like if the Ottoman Empire was the Eastern question and the Sikh man of Europe. Dominated European and global geopolitics for a hundred years. It was really the weakness of Ottoman Empire. Can you imagine what the weakness of a country, the size of Russia.

Will mean for geopolitics, but I think we should spend a whole podcast just on that. I know, I know. There's other things we wanna talk about. Well, no, I don't. World War ii, well, I shouldn't call

I might see some Dodgers in the hotel and if I see Freddy Freeman or if I find out what room he is gonna be in, I'm gonna prank his room because he should have never left the Atlanta Braves. And I'm really, really butt hurt that he decided to go to Los Angeles for the dollars. That was not very nice. Freddy, I had literally just bought your jersey after you won us the World Series. I'm really Freddy, dude.

So, uh, let's talk about Gen Z. I'm not gonna be able to set you up quite as well as I, I could set you up, um, for China. But, um, you know, we talked, I think in our last episode or episode before you, we've had protests in Morocco. We've had protests in Indonesia. We've had a government change in Nepal. Um, in the last two weeks, add two more, basically coups to the list. So last week we add Peru to the list. Uh, president Dina Boar, uh, was taken out by Congress.

Peru is, no, I don't know if you can exactly call it a coup. There were some Gen Z protests two to three weeks ago, uh, which was, do you know what, what drove the protests in Peru, Marco? I did not until I, until I started researching this. But do you know why the, the youth were so upset, um, in Peru and why they hit the streets? I don't think so.

No. There, there was a reform being proposed that would've forced self-employed workers to contribute to pension funds, um, and Peru, at least according to the OECD, aside from the fact that like the young kids don't want to be contributing to pension funds, um, they have the fifth highest proportion of young people in the world who neither study nor work. And there's even an acronym for this. They're called neats, not in education, employment, or training. Yep. I know that.

I guess they're just not, yes. I didn't know that. There's 1.5 million of them in Peru. So you had all these protests a couple of weeks ago. Um, and Congress basically removed the Peruvian president, um, Peru, not a stranger to these things. There was, was it 22 or 23? I forget, a couple years ago. Like Peru literally went through three presidents. Yep. In the span of a month. It was incredible.

Uh, Peru also like lots of different rare Earths and copper and all sorts of other things that Chinese are building up port infrastructure there. Like it's a, it's an important one. And then this week, I mean, nobody really cares about this, but. Uh, Madagascar had a proper military coup. Uh, they had weeks of Gen Z protests around the country. Um, and then, um, you know, the president was basically toppled, I guess earlier today. I mean, he's fled the country. The military has taken over.

There's a special committee, everything else that goes along, um, with a military coup.

Um, so that's at least, uh, you know, the, the two things that have happened in the last two weeks, but you said you wanted to cook on, on Gen Z. So I'll step aside and let you cook for a second.

You had Hong Kong protests, which were deeply violent. Mm-hmm.

The narrative about what was going on in Hong Kong was deeply, deeply anti-Chinese. And there was this view that the Hong Kong police was cracking down a protests like first and foremost, foremost, you can go back and look at this. Two people died in those protests. One fell off a parking garage. I think the other one died of a heart attack. Please fact, check me on that.

Okay. And the Hong Kong police was being assaulted by students who were wearing body armor and wielding like, you know, machine tools. If you attack a bunch of ice officers in like Chicago wearing body armor and a hammer, you're getting shot to death. And so it was very funny to me as somebody who lived in countries where there's actual protests, all these western commentators talking about how, you know, Chinese Allied Hong Kong police was cracking down on students.

I was like, guys, if you had the same protest in the US, there'll be like a thousand students dead. You're gonna be kidding me. So why do I bring this up? I bring this up because the Chile example of launching countrywide protests because of a small increase, shows you that Gen Z has a very short fuse. Remember when like Spanish millennials. Camped in Madrid because youth unemployment was like 80%. So millennials, we clearly don't have a short fuse. We put up with a lot.

Gen Z has a short fuse, number one and two is much more violent. And that I don't need Madagascar in Nepal to teach me that. Hong Kong taught me that, like kids in Hong Kong. And so why do I mention this? I mentioned this because I think the two generations are just much more different. You know, I think that, uh, millennials kind of came of age, entered the labor force in a lot of the world after the great financial crisis. There was a lot of insecurity. There was a lot of sense.

So like, oh, you better shut up and enjoy that internship. That doesn't pay you anything. You're lucky, you know, like, and, and most of us did that. And part of the reason also is that most millennials also grew up in the middle of this globalized American hegemony world where like, you know, if you just worked hard enough, you were going to do better than your parents. I mean, that was the narrative that still worked. We were the generation that realized that that's not necessarily true.

Gen Z is coming behind us and saying like, you guys are suckers and you are weak. And we played a whole lot of Fortnite, buddy. You know? Yeah.

And now a lot of critics are gonna say, and I, I, I actually, it's funny Jacob, it's amazing that you wanted to talk about this topic last week. 'cause I've been talking about it to clients all week. You totally nailed it. And I just finished a great conversation with a client just before this call and they said to me, but aren't you afraid that Gen Z's anti-democratic?

You know, because there's all these surveys that say that they're anti-democratic and like, look, I'm actually not that concerned about that. They see that democracy doesn't really work in many, many ways, and they see that it's, it can be corrupted, it can be paid for. I mean, look, I mean, Donald Trump won on this platform as well. Like democracy is not working for you. Like you need to vote for someone who's anti-establishment.

It doesn't mean that Gen Z is going to replace democracy with fascism or communism. It doesn't mean that at all. It just means that there are certain things in our democracy and democracy in Madagascar, certainly in democracy in Hong Kong or Chile, and certainly in my home country where I was born in Serbia, where its students have been protesting for like 18 months as well, even before all these other protests. I think Gen Z is connected. They see what the rest of the world looks like.

They see what countries without corruption look like, and they, they just, you know, they're kind of, A lot of these regimes are victims of their own success. They haven't delivered aside from. Maybe economic growth. They haven't delivered on governance of quality of life. And that, and Gen Z, just unlike millennials, unlike millennials, gen Z, are not gonna put up tents and occupy anything. They're gonna burn it. And I respect them for that.

Uh, that this was like, not, like you were not gonna be guaranteed something that was better than your parents' generations. And I think, I think millennials have had to cope with that because they grew up with this idea about the world and the world that they're inheriting is actually very different. And the people that taught them that world are these boomers who won't step aside and keep on doing all these things.

The world that, you know, we talked about this last time, I think you're right, that like Gen Z grew up in a world that was fundamentally not optimistic, um, in a world where all of this was native to them. Um, and, and where like this is all just sort of, I, I don't know, like maybe in the same way that millennials are better with technology because we grow up with computers, even if they were shitty computers with Ms Dos and things like that. Like we at least know how computers work.

Like we understand the basics. So if you give us a new cell phone, like, okay, like it'll take us a couple hours, but we'll figure it out. Whereas a Boomer, like once you take away a Boomer's phone, like it's gonna take them months if they're ever gonna actually learn like the new phone architecture again. Maybe Multipolarity is something that the Gen Zs learn. I, I don't know. But um.

I think one thing, I, I had a, I had a, um, a loss or a, a graduate student from Nepal on my podcast a couple weeks ago. And I was asking her, and she, she participated in the Gen Z protest in Nepal, and I was asking her perspective and why she participated. And one of the things that she alluded to was, look, because we're also interconnected, we see what's going on in other countries, we see that in other countries, things work and people have nice things.

So like, you know, we already know like that we're not gonna have better than our parents' generations. We saw what happened to the millennials, them believing that nonsense. And we also see that people in at least other countries, like things are better over there, so why can't we have those things and we're gonna go out and protest.

And there is a part of this also where, I dunno if you've seen those stats about, um, you know, gen Z and reading and like their knowledge of like history or anything that came before them. It's, it's just they're reading at shockingly low rates. So maybe they, maybe they lack a requisite level of fear about what it means to go and burn something in the streets, but. I don't know. I'm, let's, let's, I'm grasping at straws there.

Yeah. And I also think that, um, you know, it just, it's travel has become cheap as well, and I think a lot of younger people have also managed to travel. And, and I know for a fact, like if you are from Serbia and you're in your twenties, you've probably traveled to Europe. It's not that expensive to do that. You have a phone and you can go to Croatia, which is next door. You can like drive to it.

They basically speak the same language and you're like, well, this place is better run than this place. Like, why? What's the difference? Oh, okay. Yeah. They, they, they at least made an effort to clean up their governance to get into the EU as an example. You know, and I think that, um, a lot of these regimes are also victims of their success.

I mean, in Serbia's case, I made this point before, I think in many ways, um, you know, IC and the people in power have managed to stabilize geopolitics of Serbia. It's actually one of the best performing economies in Europe. Um, but the problem with that is that you've got, you've delivered jobs to the young people. You've let them travel. They all got enough money for an iPhone. But you can't then have governance of the 1980s or seventies.

You know, you can't just have these patron, you just gotta clean that up. I mean, that's just like, you've created a problem for yourself, but actually delivering stability, um, and also by delivering, um, economic growth. So I do think that that interconnectedness, I think is an, is an important issue. Although I would say that millennials were also similarly interconnected. I mean, we were, even in our youth, we were able to see what's going on in the rest of the world.

And again, that goes and speaks to the Occupy Wall Street movement, which started in Spain. Like that whole Occupy movement began in southern Europe. Spain spread to other countries, ended up in us. And again, just to clarify, the difference between millennials and Gen Z. Gen Z are willing to take it to the streets in a much more aggressive way than millennials were.

And I think partly the reason is that if you are in your early twenties and you talk to someone in their early forties, you would say, what did your peaceful protest get you? What did Occupy Wall Street actually do? You know? And um, and, and then the final thing I would just say is like, are they really ahistorical? Do they not know the danger of this, or are they just young people?

And they were, in many ways, these were quite violent protests. I mean, Charlotte de Gold like fled France to an army base in Germany where he was just hiding for like two days. The Prime Minister of France didn't know where he was.

So one of the ways that you dealt with those protests is that you just, uh, use Ian policies to satiate the public.

You know, sometimes what happens is just political evolution and, and one of the interesting conversations I just had with a client, they were asking me about what's going on in France and Japan. Mm-hmm. And I would say that partly millennials and Gen Z, let's move away from protests. But I think millennials and Gen Z, you know, they're just incapable of really connecting with some of these political parties that have been left over.

Uh, you know, and, uh, there's this idea, there's this idea that, um, voters vote for their economic interest. We know that's not the case, right? So what's the matter with Kansas? Great book. Um, if you wanna, it's, it's very liberal critique of conservative politics of Kansas. So if you're conservative, you're not gonna like it. Um, I think it's a well, uh, research book by a journalist, uh, Thomas Frank, who basically argues that people in Kansas vote against their economic interests. Mm-hmm.

And then, um, the book that kind of answers what is why people do that is Alexander Schussler, who's a political scientist who wrote the book, A Logic of Expressive Choice. And that book is a far, far more complicated book to go through, but it's actually very good. Anyone who wants to kind of think about politics should read it.

In that book, Schuler makes a very controversial argument that goes against decades of rational choice theory and says that nobody votes because of some sort of a rational reason. Mm-hmm. Mathematically, mathematically, you have a higher probability of being hit by a bus on your way to the polls than impacting the vote. So why do you vote? That's the puzzle to him. Why do we even do it? Why do we even take the time out of our day to go vote?

And his argument is that you vote for the same reason you choose Pepsi over Coke or Coke over Pepsi. It's because it says something about you. And he uses really interesting data and, uh, you know, analogies to the marketing industry. For example, Pepsi tried for years, for decades to use the taste test as a reason to get people to, to, to drink Pepsi over Coca-Cola. They would do these commercials, I think back in the seventies.

I'm not even sure when, but like long time ago, they would say like, no, not 10 people agreed that Pepsi tastes better than Coke, you know, in a blind test. And then once they decided to just do some silhouette of a person dancing to hip hop and call it the Pepsi generation. Dare Sales went up, well St

Similarly, the reason that Donald Trump does well is 'cause yes, he's authentic, but he also understands branding and he hits his own brand. And I think one of the things that Gen Z and millennials just don't understand is the brand, like Christian Democratic Union and a social Democratic party of Germany. Holy crap, those are old ass brands. The Democratic Party and the Republican Party

Listen guys, material constraints will force them to do. Probably what's the right thing to do, but new brands are not necessarily a bad thing. Fort Seit is kind of an old brand that was taken over by Georgia Maloney, and by the way, the brand is kind of fascist.

No, it is just that People got sick of these old brands and somebody else came in and Manu Macron effectively did this in France, which by the way was a two party state. Whatever you wanna say, they have a very sim, similar electoral system.

Anybody who thinks that first pass the post in the United States of America will prevent the emergence of a third party, should look at what happened in the United Kingdom with the Brexit party, what's happening in the United Kingdom today with a complete collapse of the Tories and what happened in France with the emergence of this third party in France. The rebels. The rebels were centrist. Now he did appeal to a lot of older people, which is kind of weird, but let's leave that as a side.

Of course, he's the member of the establishment. He preserves their prerogatives. That makes sense. All I'm saying is that we should not necessarily fear the emergence of these new brands. I think it's healthy and it's the only way to ultimately get buy-in. Democratically, at the end of the day, who gives a fuck Pepsi or Coke? It gives you caffeine in a sugar rush. And don't be fooled by these new anti-establishment politicians.

'cause in many ways they'll just do the same things but appeal to the younger people. And that's how democracy kind of works. It works in in those, you know, like in a way in which new generations get a voice and without changing the place in a dramatic fashion, that obviously would introduce political volatility and violence.

Earlier today, the United States hit another, um, Venezuelan ship, killed six Venezuelan drug traffickers in the Caribbean. Um, and Marco, maybe we should posit that what's going on is that this is what happens when you have an excess of cocaine in the global international trade system. Uh, cocaine production rose 53%, uh, from 22 to 23, 20 4% the year before that.

Um, I'm gonna quote here, a US official who was anonymous, anonymously, quote in New York Times, quote, we're seeing production at levels that Pablo Escobar dreamed about. You go to Coca Field and it's like standing in a cornfield in Iowa, you can't see the end. And there are tons of interest articles here about Colombian towns and villages that are literally dying, uh, because the, the cartels are not showing up anymore because they have too much cocaine.

They're literally just throwing cocaine everywhere they possibly can because the price has gone from something like $20 a bushel to $7 a bushel, which maybe some of our American farmers can believe it. So maybe there's just too much cocaine out there, Marco, I don't know. So you're saying that the targeting of these, uh, boats reflects

Like there is some growth in North America, but it seems like, you know, uh, Southeast Asia, east Asia, like Europe, that's where you're getting most of the cocaine. Um, consumption growth. We just need to get cocaine to those markets and it's so cheap that whatever, if they blow up a couple cargoes in the middle of the Caribbean, that's fine. Like the United States isn't gonna be able to blow all of it up. So let's just send as much cocaine as we possibly can out there.

That's, that's my working theory.

And now the US Columbia relationship continues to unravel, like very quietly, I think one of the most significant breakdowns in US foreign policy. Yeah. Like that was the most important US security partner in South America. And between, God, it feels so long ago that Trump was tweeting at Petro about illegal migration, and then they've signed onto Belton Road, um, everything else. Oh, I, I'm sorry. One other statistic about cocaine. That was incredible. I was doing research.

They think that this, this will be the year that cocaine produces more revenue for the Colombian economy than oil. Like insane. Right.

And I think part of Trump's protectionism and part of the, the glorification of hard labor and industrial work again, which we, you know, we talked about that months ago about how strange it was that we're glorifying that now. Part of that is. Okay. Like the more you globalize, like yes we all get cheap widgets and all these other things, but like people actually like the people who were making the things, their lives are destroyed and these governments are not taking care of those people.

And so you have political movements that are rising that service those people who are, you know, out there in the streets and protesting and making their voices heard with votes. So there, there's something in there too about the lower you drive the cost of these things, the more you're affecting the producers and that some of the politics that we're seeing is about trying to help the producers. I don't know, I'd have to put some more meat on that bone, but,