America doesn't win the next era because it's brilliant. It wins because everyone else is screwed. What's that mean? Doesn't exactly fit on a bumper sticker, but yeah, that broadly works.
You got two big things that are going on. Number one, in the globalized world, it's all about who you can access safely. And in the Western Hemisphere, we really don't have to worry about any security threats from a trade point of view. So people always talk about, oh, if you ask China to get into a war, won't that be bad for X, Y, or Z?
I don't mean to suggest it would be a piece of cake, but the Chinese are dependent on trade and we're not. It's really that simple. And if we can nail down Canada and Mexico in a productive relationship, you know, we used to call that NAFTA or NAFTA too. We're having second thoughts.
That's half the hard work right there. In addition, we export food. We export energy. The Chinese import both, biggest in the world, in fact.
And so maintaining supply chains for us is an issue of building the industrial plant. And while you can't just wave a magic wand and make that happen overnight, we've done this several times before every country in the planet has. Of course, we can do it again. It would just be nice if we started sooner rather than later.
The other piece is that the Chinese stopped having babies about 45 years ago. And they're now on the verge of running out of 50 year olds. And there is not an economic model that humans have yet to dream up that will work with where they will be demographically in less than 10 years time. So we are living in the equivalent of like 2006 subprime where everyone's like, Oh, and it's all about to go tits up.
Appropriately apocalyptic from you to start. The stuff about China is, is that a challenge of just geography, viral, biome, topsoil, just sort of the constitution of where they are, is that that's sort of one of the fundamental problems? All of that, all of that is legitimate concerns. The river where most of them live on the yellow is it an advocate.
Well, they've never been able to use it for trade. So they've never internally traded among themselves. The one river they have that is navigable, the Yangtze has always been an independent Polish, but often been a political, independent political entity going back for 3000 years of Chinese history. And down in the south and the tropics where you've got Hong Kong, you've got city, states and little enclaves of flat land that have always looked at the outside world rather than the Chinese.
The soil sucks. The northern part where 70% of the population lives, it's low S soil in a drought zone. So if anything ever happened to the districts or distribution, what would go down in northern China would be what has gone down in northern China 27 times before and that civilization collapsed. If we were talking about any country that had fewer people than the Chinese have always had, you know, that would just be the end of them.
Just that there have always been enough Chinese in the past to pick up the pieces and move forward on the other side of the break. But that requires you having children. And so this really is an end to the concept of China and the concept of even the Han Chinese because we're in a situation now where probably they have more people over age 454 than under. And I'm sorry, that just doesn't work.
And very soon it will be over. That's before you consider the broader geography of China versus the rest of the world. You got the first island chain off the coast. So the Chinese have never ever ever been able to be a global commercial power except when the United States when it created the global system told everybody that they couldn't bring guns to trade talks and that one decision that we made allowed the Chinese to play on the global field in a way that they just never could until that point.
And so lo and behold, this is the one era of Chinese history where the unified and successful. Tell me more about the guns to the meetings rule and how that helped. Sure. So before World War II, it's a good break.
We basically had an imperial system where if you wanted links to resources and markets and populations that were outside of your home country, you had to build a Navy and you went and took it, you built your empire. And those empires attempted to not trade with one another if they could help it. They just traded within their own network. That model generated what we like to call history and it led to World War II when all the empires crashed and burned at the same time fighting for dominance.
Well, at the end of World War II, the only Navy that was left that was worth of the name was the American Navy. And we had never been a trading power because we more or less had a continent to ourselves and we're still digesting the continent. So we had this idea that we will use our Navy to protect everyone and we will allow everyone to trade with anyone else and we will allow our market to be open to your goods if in exchange we get to write your security policies so we don't get another conflict like this again. And so one of the things that people want to break down the trade relationships and say that it's unfair for the United States, what they forget is it was supposed to be unfair to the United States.
From an economic point of view, we bribed up an alliance. And if you remember your history, it wasn't as Britain and Germany and Japan and Korea and Taiwan and Italy that were allies during the Cold War. It was China too because it was all about boxing in the Soviets and it worked beautifully. The idea that this should be recalibrated in a post-Cold War environment, perfectly reasonable, but if you don't want to pay people to be on your side, they need another reason to be on your side.
And so what we're seeing in American politics right now is this kind of cognitive disconnect where we still want everyone to do everything we say, but we also don't want our market open and that is not a viable long-term plan. Okay, so Chinese demographic collapse, you've said China will be gone in 10 years. China as we currently understand it, I will still be some Han, 50 years that might not be. So China, very populous people might say, well, if I just look at the numbers, as you said before, that numbers were the solution last time.
There's more numbers now. I'm going to guess that the issue is that the numbers are trending in the wrong direction, that it wasn't. So bad, so bad. So since I talked to you last, there seems to be this reckoning that's going on in the system, you can't get to get a candidate where that comes from.
Sorry, you pick me up right after doing another project in China. The issue appears to be that they now believe the statisticians now believe that the local and regional governments have been lying about their demographic data for over 25 years. And so after coming back up, after Tiananmen Square, you know, 10,000 people killed by tanks in downtown Beijing. The Chinese Chinese Party is like, well, that was no fun whatsoever.
Let's try to not ever have to do that again. One of the ways we're going to make sure that happens is we discovered that, you know, there were kind of two kinds of protesters. You had the white collar workers that just made signs and they were really easy to run over with tanks. And then you had the ones that were kind of scary that brought wrenches and dunks.
So you had white collar and you had blue collar. So why don't we move our entire economy from the blue collar economy to a white collar economy? Problem solved because white collar folks live in high-rise apartments, you can cut off their water, you can bolt them into their house. Now, there's lots of ways you can deal with white collar protesters.
Blue collar, different. So they started advancing their STEM work. They started secondary and tertiary education systems, you know, what was a stupid plan? We can critique how successful the transition was and why they were manufacturing economy in still are and really weren't ready for that kind of fast transition, different topic.
But the thing is, when you go to primary school and secondary school and tertiary school, the first time you pay taxes, it's typically when you're 21, 22, 23. So there's a delayed gratification here, which as Americans like to say, the Chinese have no problem with false, but whatever. So the first big crop of these new white collar workers who were supposed to work in high-paid jobs and paying lots of taxes, that was supposed to manifest in calendar year 2019. But then there's COVID and in China, COVID lasted a lot longer and they really didn't get recovery until 2023, maybe even early in 2024.
And so they didn't get any good data. And then when they did get the data, like, whoa, tax receipts are down. That's the opposite of what's supposed to happen. And when the statisticians in Shanghai went and looked back at everything like, okay, here's the problem.
In a first world of country, there are dozens, hundreds of touch points where the government becomes convinced that you're a real person. You know, your mom goes to neonatal, you're born, every immunization, matriculation for every grade level, you pay taxes, you get your drivers from it, your driver's license, there's thousands throughout your lifetimes. The first three in China, not birth, is until recently not all Chinese were born in hospitals. The first one was when you get a single battery of immunizations at some point around six months old.
What they discovered was that the doctor who was getting the shots got paid per shot. So the doctors lied about the number of shots that they got. The second point is when you enroll in kindergarten, while local governments get subsidies from the federal system based on how many students matriculate. So the local government lied about that.
The third point is when you pay national taxes for the first time, which is typically 171819, unless you put a tertiary education, then it's 2123. So you get to calendar 2024 and the Chinese realize that the children that they thought started to be born in the late 1990s were never born at all. And so the question they have and there's no way to get the data is, did we over count our population by a hundred million people? Or did we over count by 300 million people?
Or more? So even according to the official statistics, China is no longer the most populous country that India has been for a while, probably has been since about 2006. The Chinese are now publicly admitting that their birth rate has been lower than the United States since 1991. And it looks like it might be significantly worse than that.
So yeah, 10 years. High confidence. Wow. Since the last time that we spoke, AI has taken on even more of an important role.
Yeah, I'm aware. I'm aware. Like just I think one of the it's an odd. It's not happening and it's good that it is sort of scenarios that happens, especially when it comes to birth rate decline is whether it's we don't need more people on the planet.
It's where it's going on the earth fragile world hypothesis climate change in future. It doesn't matter in any case, capitalism like miserable and I don't want kids or young people to be born in everyone's trying to shoehorn it into their existing world. Correct. Yeah.
Yeah. Yeah. The demand for answers that's applies. So they repurpose old answers into a new problem.
One thing that I am interested about is some of the losses in productivity being offset by increases in efficiency enabled through robotics and AI. China seems to be pushing pretty hard on this stuff and not bad at stealing AI technology when pushing up to shove and repurposing it. I mean, honestly, it's software. It's really easy to steal.
You just need to jump drive. Yeah. How much could that be a lifeline for somebody like China and then also for the rest of the world when we think about demographic decline more broadly? Sure.
Well, let's start with the obvious 80% of applications for AI that I have seen and the other 20% are not a different category. They're just in flux, but 80% of it's not about where we have the work shortage. It's about white collar workers, but making white collar workers either redundant or more productive. And if you're into some degree of data correlation and assessment, you're in real trouble.
If you have the brain power to take the data in front of you and make something of it, you're probably fine at least for now. So right now, if you're like, say, a parallel, go, go, go, go, go, go, go, go, go, go, go, go, go, go. That whole job category is going to go away because your job is basically to research multiple cases and bring the information together for someone who will then take it and do value add. Your job is to collate and AI can do that in seconds.
Once you start doing the value add, by the way, my doctor put it, it's like 80% of it's pretty good. 20% of it is really not. And when you're prescribing medications, the 20% really matters. So doctors are fine, but the people who do the research for them, maybe not so much.
That's not where the job shortages are. The job shortages in the advanced world, especially in the United States are all blue collar for welders or electricians. They're not coders. So it's not that this is a negative from my point of view.
It's just it's getting a little overhyped and most of the people who are doing the writing and panicking about it are of course white collar workers and that colors the discussion. It doesn't mean that it will always be like that. But that's where we are now. And the pace of improvement while it's very noticeable, I would not yet call it revolutionary or particularly impressive.
I use it, but I'd like to think I'm pretty good at that 20%. All right, that's piece one piece to the Chinese. The Chinese problem is that they've run out of people under age 50 and it's people under age roughly 45 that do the consuming and have the kids and there is no way that AI can help with consumption or child. So the robotic systems that the Chinese are working on, not that they're not important, but AI only helps to a degree there.
AI is cannot physically move things. It can learn from systems. It can design systems even to a degree again, 80, 20, but it can't actually produce artificial intelligence as a completely different technological suite from automation. And even if automation could solve the production side of the equation is the Chinese are out of workers robots don't pay taxes and they can't raise kids and they can't consume product.
And so even if the Chinese could maintain their production levels without people, they'd still be dependent on international trade that they can't guarantee and on the largest of the United States in the long term doesn't change the core problem. AI isn't going to be able to fix the top soil. No, no, I mean, I was going to understand it. Yeah, well, I mean, give us 50 years.
We'll see. Yeah, we'll see. Japan South Korea 50 years. 50 years.
That is the right time frame. I haven't talked to anyone who's involved in Silicon Valley at all who expects us to get general thinking AI before the 2040s and based on what's going on with the large language models that keeps getting moved back. This is not a technology that's leading us in that direction. Interesting the sort of a technological progress that typically you see at this exponential curve with AI seems to be doing what history does crawling and then leaping and then crawling and then leaping and it.
It makes it kind of inherently unpredictable. I don't think many people saw what was going to happen with LMS in advance. I remember reading Nick was from Super Intelligence what a decade ago. I think that came out maybe.
Yeah, it's cool. It's anything like that. And that was the best minds on the planet contributing to the best mind on the planet trying to work out whether or not at no point was it? Well, you know, these sort of things are going to predict what you're going to say next.
And then if you just scale that up enough and Nvidia becomes a $3 trillion company, maybe you'll be fine. Maybe we're going to get it that way. Nobody saw it coming. So, yeah, considering considering that you can fit the entire algorithm set and training data for chat GPT on a thumb drive.
But it's about half the size of this. No, it's like, look at Nvidia's valuation. Like, you know, this is great for them. But, you know, this is this is the very definition of a bubble.
All it takes is a couple of corporate thefts and everything that's special about them goes away. Wow. Yeah. The security must be intense with that.
Okay. So Japan, South Korea, Italy hitting new fertility lows even more than in the past. Interesting that this is now sort of coming across into into Europe. When when will the media and sort of the wider world accept that birth rates are as big of a priority as they are?
I mean, everything with demographics is glacial. It takes decades for it to arrive. And so everyone's just like, you know, hurry up and wait, hurry up and wait. And then the day it arrives, it's too late because you were now a bloody smear into the glacier.
In the case of Japan, we actually have a culture that saw this coming and they have done a number of things over the last 30 years to make it easier to have children to stay in the workforce longer. And so their birth rate is actually risen quite a bit, nowhere near replacement levels. I don't want to oversell it. But it's now higher than not just China and Japan and Taiwan and Germany, Italy, but also the Netherlands and India and Thailand.
India is aging. So the math is going in a different direction. Everyone is still sliding, but we're all sliding at a little bit different rates and you play that out over decades and it really matters. So China probably with the data we have right now is in the worst shape.
And after that, it's kind of a three way tie between or among Germany, Italy and Korea, most likely. The fact that this bleeds across into Europe, sort of West West is, I know it feels, it definitely feels like it's coming home to roost in a way. It's way less theoretical with the fact that it's already spread over here. At the moment, most people are when they think about demographics at all, they think about it in terms of federal budgets and the baby boomer retirement and how much it costs to pay for pensions.
And that's part of it. That's just a leading edge. The baby boomers are aging out. The last of them are going to be retired in five years.
And in most of the world, there wasn't an echo generation like the millennials in the United States. So we really are at the beginning of the end here. Are we entering a labor shortage that no one's ready for? Is there any country that can handle demographic collapse the best, better?
The bottom line is if you still have people in your 30s, you still have a chance to have kids. So when I look at countries like say, not just the United States, but Germany, not just the United States, like India or Mexico or Poland or Brazil, you know, these are all places that have not passed that Rubicon just yet. And so with the way we understand economic theory and the way that we understand biology and parenting, they don't require a reinvention. They just need to encourage their young people to have kids for some in some way, for whatever reason, they want to modify the language.
But once you pass that, once your average age slips past 40 and especially past 45, there's no longer a traditional biological path. It's about smoothing the decline, stretching it out. And a number of European states have proven to be very good at that. Japan has proven to be surprisingly good at that, but it's still a bit of a starvation diet in the long run unless you change the economic model.
So whether it's fascism or socialism or capitalism, everything is based upon the balance between labor and capital and supply and that's how we understand that. And that's how we have understood them for millennia, have millennia. If you can come up with something new and I'm all yours, then maybe it will work in a different demographic profile. At the moment, the leading theory and its work is of course, modern monetary theory that just shuffles those four factors.
It doesn't really change the math. What the Trump administration seems to be trying, whether or not they're doing this consciously or not is a question is some sort of metered at demand. A restricted demand model where your demand is only met if the government green lights it and other people's demand. That just doesn't count.
That doesn't factor it. I'm not saying I think this is a good idea. I'm saying it's like the only thing that I've seen in the last decade that might theoretically apply to a future society. In other news, this episode is brought to you by our piece of strength.
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Check out. I keep on hoping for some sort of fantastic hopeful leg up some lifeline that's going to be thrown. And every time that I do deeper and deeper research into it, it just gets kind of worse. I guess what I'm interested in from a geopolitics standpoint is how a shrinking workforce changes the relationship between countries.
We understand sort of what it does within countries, but how does that change the geo part of the geopolitics? Countries that are aging out but haven't yet crossed that line. They've run out of consumption, but they're not yet a retirement home. Those countries are really, really dependent on exports and Korea's probably the poster child for that China is very close second.
They need an open globalized world because they can never consume what they produce. And so if they're going to have any income in any long term tax capacity, it's going to come from selling stuff to other countries. The countries that have the youth India, Brazil, Indonesia, Turkey haven't risen in wealth to a level to absorb global manufacturing capacity. The only first world country of size that's left that is still a net consumer is the United States.
And while I can say a lot of negative things about the Trump administration, one thing that they really do understand is the consumer base of the United States is a tool of geopolitical power and extending or denying that to other countries is a very powerful negotiation tactic. I mean, we needed to negotiate a second round of bread and what's a second round of globalization. This is one way to do it. Wow.
I totally, yeah, that makes complete sense. If you have a shrinking population internally and you don't want your GDP to just fall through the floor, you need to get people who do have spare people. You do have countries that have spare people to buy yourself. The alternative is absolutely limitless mass immigration, which from a cultural point of view, no one's real famous.
No. How much of a solution versus a crutch is immigration when it comes to stemming the tide? At this point in time, it's at best like a really thin cane. If your goal is to use someone else's young people to pad your demographics so you don't fade away, you need to start before you have a problem.
And this is one of the reasons why the settler societies have always had faster growth in the rest of the world. The Aussies, the Kiwis, the Americans, the Canadians, this has been a less of a problem for us because none of us are from where we're living now. And we've been bringing in waves of people over an over decade, a decade into the centuries. But if you started today, so let's just take Germany because the numbers there are really clear in the Germans are great with numbers so we can trust them.
The Germans, just to hold where they are, average age is like 50, just a whole here, already export depend, just to not slide anymore. They need to bring in 2 million people a year that are under age 25 forever in a country that only has any million people. Wow. In fact, for 20 years and the Germans are less than a third of the population.
It's not viable anymore. How they started back in the 50s be a different conversation. Yeah, that's crazy. I didn't realize the numbers were that bad.
Okay, you mentioned Trump administration there. What do you make of Mungdani's New York win? Is it remarkable? Is it indicative of some important trend?
No, I mean, if there is a trend from Mungdani, it's the same trend from Trump. These are two people who never had a real job in their lives. And all of a sudden, are now political leaders. We should not expect this to go well in New York just like it hasn't exactly gone well in Washington.
I'm interested in whether or not there is something remarkable or unique, noteworthy happening with elections and populism and sort of rising nationalism. You've got US election cycle volatility, a little bit of that. You've got a pharma protests in Europe. You mentioned migration and a ton of people having problems with that.
I wonder whether that could be driving some political change, not just inside the US, but I'm interested in what you think about those dynamics and the others impacting how the world at large generally thinks about populism, nationalism, internal politics. Well, a couple of broad demographic thoughts. As a rule, the younger cohort, 25 under 10 to be more politically radicalized, more classically, not classically liberal, more pejoratively liberal, woke, whatever you want to call it. And much more in favor of things like redistributive economic policies because they don't have anything to lose.
They only have the possibility of games. It's age math. And that has been true in every part of the world throughout the entire modern era. Nothing's weird there.
Flip it. When you turn 65, your income goes away. You're now either on a fixed income or the assets you've accrued over your life. That's all you have.
That's all you will ever have. And so you get a little crutchety. And so the environment we're in today, in most of the world, the young cohort is getting smaller and smaller and smaller and more brittle and more desperate, whereas the older cohort is getting larger and larger and larger and more ossified and more unwilling to make any compromises for that against the globalization. We have the time where we're looking through some of the most radical economic transformations because of what's going on with globalization and de-globalization, at least in our lives, certainly since the 70s.
I'm sorry, certainly since the 40s, probably since the 1870s and based on definition, maybe since the 1500s. At the same time, we have our first ever as a species demographic inversion. Of course, it's going to be a shit show. Mm-hmm.
Yeah. I wonder whether the increased radicalization will have some sort of a bump when those young people become slightly older. If the economic situation doesn't improve by as much as they'd hoped, as much as their previous generation says, I wonder whether that will hold on to some of that sort of progressive radicalization or timetowns. It would be the first time in history that happens.
Yeah. Time down the inevitable trajectory that goes from higher openness to lower openness, higher sort of liberal worldview to more conservative worldview. But yeah, I mean, the prospect of the future is going to be owned by the people who have children and the only people who are having children. Really fascinating stats.
I'm sure that you saw looking at where the birth rate decline has come from if you organize it by political cohort inside of the US. And from 1990, it's almost exclusively been taken out of people that are left leaning. So that... There's a couple problems with that data point.
I saw the same study. Number one, the way they defined left-leat... Okay, the classic Democrat party in the United States, there are three clusters to it. You've got racial minorities, you've got organized labor, and you have the educated coastal elites.
The way that study defined it, it was just that third group. Interesting. The first two groups tell us something different. Number one, the middle group, the organized labor, they're socially conservative, always have been, and now they're voting that way.
And they really like Trump might be a bit of a stretch. But Trump is not a pro-business guy. He's probably the most anti-business president US has had in my lifetime. And you love it.
Then you've got the racial minorities, and blacks and Hispanics and Asians agree on nothing. Asians tend to be much better educated, much more wealthy, not necessarily politically conservative or liberal, likely to be independent. African Americans tend to have been lockstop into the Democratic Party for quite some time, but they voted for Trump in the biggest percentages we've ever seen in modern history. And the Hispanics split right down the middle of this last election.
They are economically for a degree of redistribution, not anything like the coastal elites. They tend to be the most up and coming part of the United States. So they're most likely to shift economically conservative, which doesn't put them in the Republican Party either anymore, because that's not what the Republican Party is today. But at the same time, they're the most anti-immigration group we have.
They want family reunification for their family and no one else. So the Democratic Party has shattered as an institution. And when people start talking about conservative or liberal, you really have to ask what it is. How they define those terms, because the way America defines those terms has changed radically in just the last five years.
It is crazy. The top line of data that we're seeing at the moment, I'm seeing more and more graphs from stuff like our welding data and we've got the stats, etc. being posted on social media. There's a great guy from the FT that's doing a lot of stuff in terms of data visualization, his stuff's getting shad around a lot.
But they're always on nuances. And when you dig into those, you find out that the story might not be the story. Politics has always been messy, and now we're in a time of change, so it's really messy. Speaking of Trump, Trump elevates Saudi Arabia to major non-NATO ally status.
That sounds like the most litigious slap on the wrists that I can think of. But is that a big deal? What US Middle East tensions are the important? How much are we concerned?
I'm not going to say they're unimportant, because that would just be rude. But the idea that Saudi Arabia is an ally is a real stretch. And I'm not just saying that because Mohammed bin Salman ordered the dismemberment and cooking of the journalist and then used the same barbecue pit for a diplomatic party for 300 people later. They cut Jamal Khashoggi as well.
They didn't eat him. They just remembered him. They put him in a giant barbecue pit. They burned all the evidence.
And then later that day, they held a diplomatic barbecue event using that barbecue pit to make sure they could destroy all the forensic evidence. So there's little little particles of Jamal Khashoggi probably inside of a little bit of barbecue. Yeah, let's just put that to the side. Seasoned with journalists.
What a fucking horrendous story. The rulers of Saudi Arabia are literally the house of Sahu. It's a family and MBS is a member of that family and King Abdullah. It was part of that family.
And it is this family that created the global jihadist movement that the world has had so much heartburn with. It is this family who their support created things like Al-Qaeda and ISIS. And is indirectly at worst responsible for things like the 9-11 attacks. So the idea that Saudi Arabia is an ally in any way requires an immense stretch.
Unless you go back to the Cold War when we needed Saudi crude to fuel the tanks of Germany and Italy and Britain and Japan and China in order to fuel the alliance. So if you want to rebuild that world Arab oil to fuel an alliance to fight, whoever, you know, there's a conversation to be had there on strategy. But anything else, this is not a country that has been our friend for a very long time. Wow.
What do you make of the future of energy? Evie, demand slowing a little bit, shale production and stuff's going on nuclear renaissance. What's the future of energy look like in your opinion? Any country where EVs are not subsidized or no EVs.
So that hopefully would tell you everything you need to know about that supply chain. That doesn't mean that all green tech is stupid, just that one piece. As for green tech, we're large. If you're in a sunny place, put up solar.
If you're in a windy place, put up wind. I would like to think that's not particularly complicated conversation. If you're not in a sunny place, maybe you shouldn't put up solar. Why people have trouble with that statement bothers me.
I live at 7,500 feet above Denver. I get 330 days of sunshine a day. Of course, I have solar panels on my roof. But if I lived outside of Toronto, I would get one fifth solar radiation per year.
Why would I be so stupid as to put solar panels on my roof in Toronto? This idea that the technology works everywhere is really a problem. And that goes for the others to make natural gas oil nuclear, all of them. Because if you have to have the infrastructure that goes with it, and if infrastructure is there, why would you bring that power source?
Nukes are getting interesting. The United States seems to in bits and pieces being moving on from 1973, finally. It's only been 51 years, 52 years. The hope is that the small modulars will work.
But right now we still have yet to build a prototype. And so until there is a prototype, I can't tell you what the supply chain might look like. But the sexy nature of it is if you can fit a nuclear reactor into a 10-20-foot container unit and just plug it into a decommissioned coal plants transformer network, and basically produces much power as the old coal plant did for 5% of the cost of building a new power plant, well, that sounds great if the technology works. Let's build it once, and then we'll talk about it.
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That's l-i-v-e-m-o-m-e-n-t-o-s.com-modemistem. A check out. How far away from that technology, are we? We were supposed to get the prototype last November, and then the company went belly up.
We've had three more countries, and two or three more companies say that they're working on it. I have not seen what I consider to be a reliable timeframe for when the prototype will come on one. The bill has already evolved. People are working on it, but...
Without that is nuclear dominance not as inevitable. Nuclear, if you're going to build a large plant, let's just put the regulatory and the nimby concerns to the side for a moment. From the day that you put a shovel on the ground and you have every dollar that you need to get it set up, you're talking about 48 years, probably closer to 8, and that assumes that the power grid can take power. One of the problems we have in the United States is because the period from roughly 1985 until roughly 2020, it was a period where we were moving towards higher and higher-end industry that used more precision labor and more equipment, but less smelting and electrical work.
It meant that the amount of stuff that we were producing was actually going up in value, but the amount of power that we needed to do was going down in value. As we moved from manufacturing and agriculture to a service economy, same thing, power demand stagnated or dropped, until very, very recently, largely because of AI, but also because of the reindustrialization effort we're now going through, because of the Chinese problems of equalization. For 35 years, we really didn't build up the grid, because we didn't need to. Now, we need to.
And the biggest thing that is missing is high voltage, long range transmission line, something that's like 70 kilovolts or higher. The only part of the country right now that has spare transmission capacity is this little triangle from Pittsburgh to St. Louis to Chicago, Appalachia, coal country. Because in the 67s and 80s, we had a number of administrations who realized, here's where coal is, it's cheaper to move electricity than coal, so it's burned the coal locally and send the power out to the population centers, basic math.
So the federal government stepped in and helped push through all of this development work. And so now this zone has quadruple, the long range transmission that they're using, in some places less than a fifth. It's the only place that could really build out what we need quickly. Everywhere else in the country needs to build those lines before they think about things like nuclear power, because if you build nuclear power, you might be able to supply your city right there, but you're not going to be able to ship it anywhere else.
That's in part a regulatory issue, but it's mostly just hardware. How effective is nuclear when it comes to the excess capacity from the grid? I have a friend who helps to build crypto mining facilities in West Texas. And one of the things that they do, which is supposedly of a massive benefit to the grid, is they are able to turn on and turn off their requirement for buying energy.
So there is additional energy that's available on the grid, and he pushes a button, or he builds the plans for a push button, and they go, we'll take a cheap energy, fantastic, we'll go and mine it some more Ethereum. How much tolerance, how much on foot off gas do you have with nuclear plants? Do you know? From a technical point of view, you can go up and down whatever you want, but going up looks a lot to the Nuclear Regulatory Commission, like a meltdown.
So functionally, no, not at all. So nuclear is only for base load in the United States, and I think that's broadly a good way to look at it. So for data centers, nuclear is a good match because data centers churn 24 hours a day, nuclear goes 24 hours a day, solar and wind for data centers are some of the stupidest things I've ever seen people put on paper, because to make that work, you need to build five times a solar and wind that you would need to power the center, and then build a massive at least 24 hour duration battery system, by the way, no one in the country has more than 10 minutes. And just the cost is just extreme, and even then it wouldn't be stable or reliable.
So nukes, yeah, you should work for that. You mentioned EVs when they're not subsidized. No bueno. What are the underlying dynamics that consume and demand?
Is that cost? Is that prohibitive ability to produce that? What are the underlying dynamics? It's electricity.
It's really simple. Electricity is easy to generate. It's kind of squirrely to transmit, and it's almost impossible to store in an economically viable manner. You need a supply chain that is one of the most sophisticated that humanity has ever produced, that produces and processes, that doesn't major elements, and in order to do the transition, the United States under the Biden administration said that it wanted to do a majority EV situation in less than 25 years.
We would need every scrap of lithium and copper and millibium and tantalum and graphite and all the rest from the entire planet, and no one else could have any at all just to do EVs just here. So no, it was always fucking ironic. That, and the cost that's attached to it, is onerous. So of course, if you have to pay for it all yourself, sales are basically dropping to zero.
Tesla, Musk, talked a good game. Not viable economically. Not viable, but geopolitically. And we don't have the processing materials here in the United States to do it anyway.
So that suggests, assuming that Elon isn't ignorant of this, I have to assume that he isn't. He tends to give us a marketer. You should think of everything that he says in that light. The knowledge that this is or the future of the EV market, that in order to be able to make this work within the US, you need this absurd volume of rare earth minerals processed in the right way, capacity, all the rest of the thing.
Not only do the stars need to align, but you also need to align a bunch of weird rocks in one of those rock towers on the ground. That is betting the entire future of the company on the direction of the country. And is he basically, in your opinion, is he making an assumption that the subsidies will continue to roll in? Because that makes Tesla very...
It's non-viable company by any normal math. But if you get continuing support, because there is a push toward green, because EVs are seen as the best way to help climate change, so on and so forth, the EV revolution is riding off the back of subsidies coming from any government. Is that the way to look at it? For Tesla at this moment, as we understand, for chemistry, yes, there's nothing viable at Tesla.
There's very little that's viable at EV large anyway, even before you consider the cost of supporting infrastructure build out, which is a couple of trillion dollars on top of everything else. Just the vehicles don't do what they have been advertised to do. They're also net dirtier than gasoline because of the production cycle on the front end. Now, if you change the electrical system in a way that I don't understand today, I reserve the right to change my mind.
If you move away from the lithium, as the core component of battery storage into something that is less environmentally damaging its production and more energy dense and can take the vibrations better, I reserve the right to change my mind. But in the last five years, I haven't even seen a prototype system for... suggested for any of this, the closest I would say would be the slow-motion move from lithium cobalt batteries to lithium-iron batteries. That might help with energy storage at the grid level.
It might really make a difference. But for transport, no. It's less dense than what we had. Where does the net dirty come from?
What is the dirty? Well, people always forget that the electricity comes from somewhere. And if, let's say, I've got an 11 kilowatt system on my house. If I had a Tesla and the sun shone for 24 hours a day at my high altitude noon peak, let me two and a half days charge them.
So you're not using solar and wind to charge your car. You're using fossil fuels. And so the only potential gain that you're getting is that an EV engine is more energy efficient than a gas engine on a mile per mile basis. But the carbon cost of generating the vehicle and the battery and the front end is just so much more.
And if you're living in a place that's predominantly coal and you drive in an American style sedan, you're over the long term, generating a lot more carbon than anything before. Now, those are some very broad statements and there are a thousand exceptions to them based on local situations. So, for example, the Chinese vehicles from a weight basis are less than half that of the American vehicles. They would never pass our safety tests, but they're smaller and they kill a lot of people.
But because there's so much lighter, a lot of what I just said does not apply to the Chinese situation. So Chinese EV can break even on a carbon cost basis within 10 years maybe. But at the price of a few pedestrians. Societies make choices when they start crafting cars.
Okay. What are the other sort of damages with regards to production? I understand about the lithium. I remember Joe had some guy on his show talking about cobalt mining and it's fucking disgusting.
It's insane. It's disgusting in every sense of the word. Yeah. Environmentally, chemically and socially.
Yeah. What else is going into EVs which are a little bi-product that you wouldn't realize? I didn't top off my study for this. I think one's graphite.
Graphite is basically a synthetic form of carbon. There is a natural graphite which is vastly preferred, but the chemical structure is very limited to a specific mine. So, Costco's up as it's more of its used. There's a synthetic version.
Basically, you're using it for the electric. You're regulating the electricity flow in a battery. And if the graphite is not the right kind, you basically get the electricity starting to leak out into the battery itself, which can get a little blammy, but more likely it's just going to be a huge efficiency loss. Copper, obviously.
Anything that uses electricity is going to use a huge amount of copper. We've already covered cobalt, mess, manganese, using a lot of alloys for both copper and steel. Sometimes you're going to put this in the electrodes as well. There's a lot of moving pieces.
And that's one of the reasons why I'm a little hopeful because a lot of people are playing with a lot of different chemistries. You think that it's better to just kind of hit it. Isn't there a rule in the UK that they want to go completely gas-powered vehicle free by 2030? That there's no more or is that elsewhere?
Lots of countries have announced that either for their cities or for their countries, and unless they're willing to subsidize it to a huge degree, it's not going to happen anywhere. That doesn't necessarily mean that I have a problem with those goals. I mean, lots of time. Let me use a California example.
California is a lot of shit. California deserves a lot of the shit that they get. But when it comes to regulation, the state legislature has empowered their regulatory bodies to create these regulations to say, we want to be carbon free or we want to be on the grid by this year. We want to have no non-EVs sold in the state by this year.
And as time moves on, if the technology is not manifesting, make that policy, the regulator has the authority, without going back to the state legislature, to move the day to change the mandate. It's a little bit more intelligent than most people give California credit for. And we're going to probably see a lot of places climbing down. We've seen a lot of countries in the last couple of years back away from a lot of what they've done with EVs because it's just not working out.
Which country do you think is closest to being wiped out by energy shortages? Which one is the most precarious? At scale, the Chinese one's in the biggest pickle. They imported 70% of their oil, about similar number for natural gas, and the vast majority of that comes through the Strait of Malacca probably were originating in the Middle East.
And so if you ever have a real dust up with either Japan or the United States or India, Vietnam or Australia or Sri Lanka or Pakistan or Oman, that'll stop. It's really easy to cut completely. For more traditional places, the Europeans are getting clever. I'm not as worried about the Europeans as I used to be.
There's plenty of reason to be worried. Three years ago when the Ukrainians were started, the Europeans were in the situation where they thought that if they did inside with the Russians, the lights were going to go out. But in the three years since they've built a lot of infrastructure to bring in carbon energy from other places. And it has been broadly successful.
And so they've backed away from a political goal that was questionable economically and made a very clear strategic decision that is broadly working out for them. But they didn't sacrifice all of their plans. So they realize, you know, maybe solar and wind does not work in the world's least windy, least sunken comment. But conservation and efficiency are still very good plans.
So you've seen some change in mindset and a little bit more realism and policy and it's showing benefits. Before we continue getting mobile data while traveling is still way harder than it should be, public Wi-Fi is sketchy, roaming charges are the worst and buying SIM cards in a foreign language. After a 12-hour flight is about as fun as playing with a dead moth, which is where, Saly comes in. It's an app that gives you instant access to ECIM data planned in over 190 countries so that you can get online the moment that you land no more, fumbling around with physical sims, no more talking to a human to set it up, no more holding your phone in the air like Simba.
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I'm interested in sort of what the future of the green energy movement looks like, this sort of green transition and it's how possible it is at the current levels of stability and technology and rollout and instability. There are no EVs, there are no battery chassis, there is no solar, there is no wind, there is no nuclear without globalization. Too many of the parts, too many of the materials come from a different continent. And so if we're not all doing this together, none of that happens.
And so you should move on. If you're in the Western Hemisphere where there is more mining than consumption, that's probably going to be a little easier. But for the Eastern Hemisphere, hard pass is just not going to work. Now, again, if you change the technology, I reserve to change my mind, but that's where we've been for the last 25 years.
How much of the Eastern Hemisphere being card-carrying flag-waving, we are going green people, it seems to be mostly a Western thing in any case now. For the most part, yeah. How hopeful are you for a green transition in the West? If the technology is not ready, and if Westerners are not living in places where the technology can be applied in a way that actually drops your carbon, putting up a solar panel doesn't make you green.
Putting up a solar panel that reduces your carbon footprint, that makes you green. And most people who live in the West don't live in a place where that is true. I think that's one of the reasons why there is a lot of criticism in the UK around the sort of green movement that we've had a very vociferous government pushing hard toward this as an outcome that they want. And a country that really doesn't seem to be particularly well-suited for most of the technologies.
You mentioned Toronto's sort of one-fifth of the amount of sun that you have to assume that the UK is maybe even worse. We have to go south in order to get to Toronto if you fly from the UK, we're further up. Believe it or not, London actually gets a little bit more sun than Toronto, but like just for the school. Glasgow, though, God, no.
Yeah, and I was from three hours away from Glasgow. Now, wind offshore wind in the North Sea is brilliant. Look at Norway. Norway has been subsidized, you know, I don't understand why they get over half of their electricity from wind now.
Because of the dispatchability issue. They're probably pretty close to peak on that. They probably can't do much more. What's dispatchability?
The ability just to flip a switch and more electricity surges into the system. You can't do that with green tech at all. You can do it with batteries, but batteries are not good enough to store more than a few minutes of power on a grid level for most places. So the first half for the Danes was easy.
The second half, I have no idea how they're going to do that. How interesting. What's an important mineral? What's the most important mineral that no one's paying attention to?
I mean, it's really unsexy, but copper. You want to expand your grid, you need copper. You want to do more industry, you need copper. You want to do anything with green tech, you need copper.
You need a lot of it. The United States wants to double the size of its industrial plant. The United States in order to do that needs to increase its grid by half. That means we need to consume about 12 times as much copper for the next 30 years as we have for the last 30 years.
Why does that come from? Where is most of the copper in the world? The only country in the world that has what you consider maybe surge capacity to increase output on anything less than a five-year time frame is Chile, the out of Canada Desert. Number two is the United States.
Number three is Canada, number four is Mexico. But it's good to the US then. That's great. But that's the ore.
Then you got to turn it into copper metal. That's China, India. So you can't keep it domestically and then convert it over here. Well, I mean, we could.
We've chosen not to. But it's not a new technology. It's back to early 1800s. You basically heated up, you boil off the sulfur, you heat it up some more, you purify into metal, and then you turn it into other things.
There's nothing that to stop us from doing that, except for the cost, the footprint, the pollution. These are real things. And to this point, America's chosen to just let someone else do it. Isn't an interesting or a borus thing that in order to be able to increase the capacity of the grid, to be able to move to something like nuclear, which would be cleaner fuel, you need to do something which on the front end would look like pissing out more pollution into the atmosphere and would cause an awful lot of protests.
Because look at these big, we shouldn't be doing our copper ore at home. Look at the big black clouds. It's a perspective. Being able to see over big timelines is a ton of the many, many, many, and that assumes it works.
And the green technology that we have right now don't. So spending $30 trillion or whatever the most current number is that you're in the United States by 2050 assumes these technologies actually do what they say they're going to, and we already know that they don't. We have plenty of math to prove that. This is why I'm really big on physical chemistry, because we need to find new ways to do things.
And we don't know what chunks of land on the planet we're going to need access to make those technologies work until we've built some of the phone. Yeah, but this one is based on gadolinium. This one is based on whatever the fuck. Yeah.
Until we know the answer to that question, we don't know how to prepare. How fascinating. What do you think the biggest surprise in energy is going to be over the next decade or two? It seems to me, at least, at least, at least, based on the most of the world.
It seems to me, at least based on what you're saying, the technology that is promised is not able to deliver that, which it is promising. So will the surprise be disappointment or will the surprise be an actual surprise? It's going to be one of each. Let me be the bad and then the good first of all.
First of all, we're very close. We have been very close for three years to a significant break in international energy markets, whether it's the Russian stuff going away or something happening in the Persian call or something happening in Malacca or something happening in China. The production of vast volumes of crude is going to fall away. And the consumption of vast volumes of crude is going to fall away for demographic and geopolitical reasons.
And I can't tell you which one's going to have at first. I can tell you which everyone does have at first. We'll then lead to the other one and show it. We'll get real in a lot of places very, very quickly.
And for those of us who still want electricity, we will then basically have to fight to get access to the fossil fuels that will allow us to have it and that will look different in every part of the world. Second thing, at some point in the next decade, our physical chemistry is going to improve to the point that we have a new idea that we will then want to apply, whether it's in generation, transmission, or storage. I don't know. One of the three.
Maybe another one. That will generate a completely new arms race in order to access that technology and apply it. And whoever can figure that out leaves the old problems behind. I mean, the petroleum age was a mess.
I understand why people would like to go beyond it. But that's not going to stop us from trying to invent something new. And as soon as we do, maybe it's a caster, maybe it's a battery, maybe it's power peeming. I don't know.
We start with a completely new set of goals, needing a completely different set of materials and different concentrations, and that changes the geography of what we are concerned about. So we might, 10 years from now, be more obsessed with Bolivia than we right now are with the audio, what the technology goes. Well, it's interesting. America was obsessed with Bolivia for a little while, but for a different type of substance that they were exporting.
Climate does that. That's a statement that needs to be made unless it can power an electric vehicle, in which case, has anyone tried that? Who knows? I'm sure some of you in New York has.
This increasing reliance globally, because if you're going to increase the past eight means that you need to coordinate more, and you need to be more, I totally didn't realize the fact that just because you have the raw material doesn't mean that you can process it where it is, it can be sent away and then come back. So global supply chains are more important than ever. I've been a few years since we spoke. What's happening with the state of global supply chains?
I've heard you say that they don't survive without a global security guarantor and that that year is over. Right now the work comes from one place. It's primarily processed in China. It's sent to a third location to be purified to a degree that you can then actually use it, and then it gets turned into an intermediate product.
So step one, no matter who you are, no matter where you are, that first processing set that's done in China, that has to be done somewhere else. If we don't get that right, we don't get to try it, anything else. What about the rest of the global supply chain? Global food systems, stuff like that.
What else has changed? I've been pleasantly surprised about global fuel fuel systems. The sanctions against the Russians have not yet impacted the fertilizer supply system and fertilizer as a category, as a level of different kinds. But fertilizer as a mass category, Russians are still the world's largest exporter.
Without that, there is no food production result at all. And it looks pretty dicey in the Middle East, North Africa, and especially the South Asian zone. We haven't had that problem. In the meantime, the Americans continue to spin up more and more nitrogen fertilizer because that's primarily made for natural gas.
And if Canadians continue to spin up more and more potash fertilizer because they've got that in Saskatchewan. So we're seeing other suppliers come into the system. They realize that it's a race. And so far, that's working out.
Long-term, still real problem, but we're not facing the acute crunch that we were. Trump's tariffs are pushing manufactured goods for agriculture the other direction. Basically, oversimplifying here, but the more complicated the manufacturing supply chain happens to be, the more steps there are, the more players. If you have a high tariff system, it pushes your steps out and to somewhere else.
Because otherwise, you're paying the tariff every time something crosses your border. It's easier to take the handful of the steps that you do and do them somewhere else and just pay the tariff once when the thing comes in finished. For simple manufacturing products, it only has half a dozen steps or so. That tends to come to you because that's easier to collate.
So when it comes to things like plastics and textiles and furniture, Trump's tariffs have re-short manufacturing. But when it comes to aerospace and computing and electronics and automotive, it's pushing stuff away. And agriculture equipment is definitely in that second category. So we're seeing John Deere, for example, has already cut more jobs in the last ten months than it did in the previous 20 years.
Wow, I did not know that. It's getting pretty bad in the Midwest right now. Shipping disruptions? How big of a deal is that?
Lucky. Right now, the Asians realize that this is where the bread is buttered and they're going out of their way to get along. The Chinese have not interrupted any shipping. In fact, they've even leaned on the Houthis and the Iranians to stop fucking around in the Red Sea.
Because they realize they're the ones that would be most screwed, if that gets broken. So far. You mentioned Russia there. The last time that we spoke, that was sort of front page news.
What is happening with the Russia Ukraine conflict? Is it entering a new stage at the moment? Every three months we're in a new stage. We're in something called the Second Revolution in Military Affairs, which is applying digital technologies to warfare.
The first phase was in the 1980s and 90s when the United States started making things like smart phones and cruise missiles. Now it's going on a much cheaper platform because low-cost semiconductors are ubiquitous around the world and anyone can make a drone. And so we've got Ukraine, which inherited part of the old brain trust from the Soviet missile and aerospace things, combined with a country that's desperate to survive. Combined with these new inputs, they can bring in from abroad and making thousands of drones a day.
So every three months, there's a new page. First, it was single person drones. Then it was jamming. Then it was drones with missiles.
Then it was water-based drones. Then it was mass drones. Then it was she-drones. Then it was she-drones that could do a limited amount of target selection.
Now it's something called the Octopus drone, which Ukraine is just starting to use, which is a drone interceptor. It's a new day, every day. And I have no idea how this is going to play. I can tell you with the technologies that existed pre-war, exactly how this war would have gone.
Those aren't the technologies that are being used in the war anymore. It's not so interesting that all of the dangerous assumptions people had about modern warfare, all of the predictable- I mean, war is unpredictable enough. But when you apply the growth curve of technology to warfare, you just end up with- I mean, that weird evolution between offense and defense that we saw have- well, drones have come out and this is better than using a Hell-Fi missile. And then instead of using that, you get a net and these drones are defeated by a net.
And now the drones have a little thing on the front, the cuts are net and now the nets are made of this material, and now there's an EMP that blasts them out of the sky. And now the pace of innovation with kinetic consequences is- it's not- it's been absurd. This is why it's called the Revolution in Military Affairs. If you go back to roughly 1935, the technologies we were using them up until 2022, with the exception of the introduction of the jet, really hadn't changed.
It was guns, it was artillery, it was tanks, it was ships, it was subs, it was helicopters. The jet was the only one that was introduced, and that was introduced late in World War II, 1944. We've had more technological evolutions in the last three years just in Ukraine than the rest of the world combined has since 1960. Wow.
And so the rules we don't know, we are only in the very, very early stages of developing the weapons, much less the doctrine, much less the play that against the battlefield. And we are very fortunate in the West that the Ukrainians will want to partner with us, because they are doing it real-time, the sort of experimentation that is costing lives. That if we were doing this in a broader conflict, we would have already claimed a million people. Yeah, I was going to say, I wonder how many countries are watching Ukraine and Russia, almost like a lab.
Yeah, but the last time something at this scale happened, major conflicts in which people were watching, it was either the Crimean War or the American Civil War, because those were the two conflicts where industrialised technologies first really hit the field, whether it was a Gatling gun or a penicillin or the railway. And people are watching and thinking, well, this is a good explainer, a good sandbox for us to observe what these new technologies are going to be like. How are these- Say I'm dark. I mean, I'm not saying that Russia and Ukraine is being used as an experiment for the rest of the world to watch, but that's what the people who are not invested in it directly will be thinking, right?
Look at this. Look at the way that this goes forward. That seems to me, I was interested in what the most dangerous assumption about modern warfare was, but the assumption that it is predictable or that it follows any of the rules that have been established in the past seems to be a pretty fucking good one. Yeah, we still need energy, we need so many food when you're talking about drones and electricity specifically, so that adds another layer of things to it.