Jon Czin spent years as a top China analyst at the CIA, served as China Director on Biden’s National Security Council, and now works at the Brookings Institution. We discuss what Xi’s fourth-term means for China’s top leadership and military, Taiwan, and the US. We cover:

• How Xi’s mafioso-style “decapitation strategy” has kept the PLA in line and why he’s purged more generals than Mao.

• Cognitive decline and how end-of-life thinking might be shaping Xi’s succession plans and Taiwan strategy.

• Tariffs, rare earths, and China’s appetite for pain vs. America’s.

• Beijing’s parochialism and its limits in the Russo-Ukrainian conflict.

• What intelligence work on China actually looks like and whether or not Xi’s era is duller than previous generations.

Plus: who might succeed Xi, comparing the Politburo Standing Committee to a frat house, and why chips and TSMC matter much less in Xi’s Taiwan calculus than most think.

Listen now on your favorite podcast app or on YouTube.

Killing the Monkeys to Scare the Chickens (杀猴儆鸡)

Jordan Schneider: Let’s start with the PLA. You have this remarkable line in one of your pieces that Xi has now purged more members of the Central Military Commission than Mao ever did. What are we to make of this?

Jon Czin: Yeah, it’s a little bit of – to use George W. Bush’s term – fuzzy math. It depends on how you count, and we spent a lot of time looking at this. But he’s on pace right now to have numbers that are comparable. Half of the uniformed members of the PLA have been removed or are missing.

Every summer we get this germination of rumors about Xi’s health or the possibility of a coup, but it felt even more intense this summer, in part because there were so many purges in the PLA. Some people saw that as a potential sign of weakness. Some argued that Xi was somehow losing his grip on the military.

But as we make clear in the piece, I’m skeptical of that argument. From practically day one of Xi’s tenure in office, he has been laser-focused on ensuring that the PLA is under his thumb. The anti-corruption campaign has been an important tool – there are genuine reasons he wants to pursue anti-corruption, but there’s an important instrumental purpose. It’s the key lever of power, and it’s been very clear from the outset that he wants to subordinate them to himself.

The second aspect that I added in a separate piece is that it’s also a question of who’s been purged from the PLA so far. My very rough heuristic for understanding the people in Xi’s network is that it’s a two-tiered structure. If Xi is the center of his own political solar system, there are two echelons to it. There are the people who are inside the asteroid belt – most of the Politburo Standing Committee. On the military side, I’d include people like Zhang Youxia (张又侠), where it’s not just that they’ve crossed paths in their careers. There’s an affinity that goes all the way back to their fathers, who both served in the Fourth Field Army in China’s Civil War together. You see that in Joseph Torigian’s excellent biography of Xi Zhongxun.

For others who’ve been removed, like Li Shangfu (李尚福), the former Defense Minister, or He Weidong (何卫东)), there might be some personal nexus – maybe they crossed paths. There’s this school of thought that if you were in the 31st Group Army in what used to be the Nanjing Military Region and you crossed paths with Xi, that could accelerate your career. But from my perspective, these guys are disposable. Xi can make them and he can break them. His ability to do that only enhances his authority rather than diminishes it.

Jordan Schneider: Generals being disposable was not really a thing for most of Chinese history. Generals had a ton of staying power in Mao’s China. But fascinatingly, instead of doing the pussyfooting around with purges in the PLA that you saw post-Mao, as you very colorfully point out, he went after the monkeys instead of the chickens in his first few years. How does that reform push relate to his broader priorities? And why are we still seeing this 15 years later?

Jon Czin: There are several reasons. When Xi got back to Beijing– keep in mind, it was the first time he was back in Beijing since serving as mìshū (秘书) (secretary) for Minister of National Defense Geng Biao (耿飚) back in the early ’80s – he was frankly appalled by the extent of corruption inside the PLA. The Arab Spring only accentuated that anxiety that corruption was rife. The Xu Caihou (徐才厚) case was all about pay-for-promotion. You can’t build a competent organization if people are getting promoted because they’re greasing palms. That’s a very real concern for him.

Part of Xi’s heritage as a princeling is that he understands how important and central the PLA is to political power. It’s the opposite of the approach previous Chinese leaders took, especially in the post-Deng era, where the military, because of its insularity, was the last place they were able to shore up their political position. Xi said, “This is going to be the place that I start, because if I can figure this out – it’s high risk, but high reward – I will dominate the system because I will have subordinated the PLA to my will.”

Another reason that’s less instrumental and more about policy is that the PLA reforms we saw in that 2015-2016 period were really a centerpiece of Xi’s reform agenda. Especially in the post-Mao era, we tend to see economic reforms as the locus where senior leaders want to focus their political firepower. But for Xi, it was really those military reforms. The system was overdue for a correction. They had a very antiquated command structure and it only became more cumbersome over time. It’s about getting it under his thumb, but there’s also a real substantive policy reason why he wanted to do it. There’s also a compounding effect, because the fact he was able to shake up the high command and streamline it only further enhanced his authority and power over it.

Jordan Schneider: Once you’re the king, you can mess with these poor little nobles all you want, because at the end of the day, it’s your kingdom. Being able to establish that as early as he did seems more reflective of confidence than worry about an internal coup.

Jon Czin: Exactly. By going after Xu Caihou and Guo Boxiong (郭伯雄), the guys who would have signed off on every general officer promotion – it’s very risky. To use the mafia analogy, it’s like going after made men and living to tell about it. It’s a decapitation move. You’re going to cut off the head of the network instead of the usual approach of nibbling around the edges and going after people’s pawns or protégés on this political chessboard. By doing that, you send a powerful signal to everybody else in the PLA to be on notice, because they all would have owed their promotions at some level to Xu Caihou, even if they didn’t have a direct nexus with him. Just by doing that and doing it with impunity, instantly people are terrified and Xi gets a lot of wasta inside the system.

Jordan Schneider: I want to come back to 2011-2013. Are you more scared of the Arab Spring – remembering that the PLA did not jump to attention in 1989? Or are you more scared of generals not liking the way you’re treating them and their subordinates and their bureaucracies, and being worried about an internal uprising or coup? It’s clear that Xi chose Route A instead of Route B. To what extent do you think that was a choice that was baked in or something from his personal background or just a sign of the times in that moment? Maybe it comes back to a broader question: to what extent was a centralizing leader in 2012 something that the Party was inevitably going to produce versus one who was going to continue to play by the Deng-era rules?

Jon Czin: Yeah, this is the theory – if Xi didn’t exist, he would have to be invented. I tend to think that Xi had an opportunity. There was a sense of malaise in the Party at the end of the Hu Jintao era. The leadership was adrift, and people, even inside the system, were calling this a lost decade and saying that Hu Jintao and Wen Jiabao were basically living off borrowed time and the vigor and reform efforts of Zhu Rongji (朱镕基) and Jiang Zemin from the previous administration.

From my perspective, though, to pursue that line of thought is to deny Xi his unique agency. There was an opening. There was an appetite for greater central control. There was a sense of drift in the Party, but Xi took a crowbar to that opening. The people who backed him in the system didn’t necessarily think that they were going to be the ones who ended up getting hit in the head with the crowbar in some instances. That was always going to be his impulse.

Part of the impulse inside the system is that power in that system tends to be monistic anyway. There’s a tendency for it to centralize. Alice Miller, citing Aristotle, has a great line about this in a very old issue of China Leadership Monitor from 20 years ago, where she talks about how oligarchies are subject to both centripetal forces and centrifugal forces. The natural correction when you start to see this drift, like we saw in the Hu Jintao era, is for the centripetal forces to kick back in and try to say, “No, we need to get our act together. We need a leader who can pull us together.”

Xi was very adept in how he did this. This has always been my mental model of how he operates and the way he was able to centralize control. Because he’s a princeling and he has these networks throughout the system that he was born with, the way Xi approaches the political networks inside the CCP is like – if an electrician comes to my house and I took back the wall and started messing around with the wires, or if Hu Jintao started to do that, even though he’s an engineer, we’d probably get electrocuted. But Xi knows which wires he can touch and which ones he can cut safely and which ones are going to zap him.

Jordan Schneider: Were there ever any wires that could have zapped him at any point?

Jon Czin: Going after people like Zhou Yongkang (周永康), Xu Caihou, Guo Boxiong – that was dangerous. It looks obvious in retrospect, but at the time, if you’re Xi Jinping and you’re a brand new leader just getting up to speed, this is really dangerous. There could have been some meaningful backlash. Part of the art of what he did – maybe it made it a little bit easier by going after elders and people who had already retired from the system, and their links were somewhat attenuated at that point. It also made it more gratuitous. I remember some people saying at the time, “Well, why would he go after these people? They’re already retired. Why not just neutralize them and let them die a quiet death or live a quiet retirement?” But you’re going after the guys in the system with the guns. It’s as simple as that. That’s going to be challenging in that system.

Jordan Schneider: The other thing that he did so smartly was to do it right away. It’s like the idea of the President’s first hundred days. You can undermine or wait out a guy who’s got a year left, two years left, but eight or nine years? For everyone else in the system who’s seeing this battle – who are you going to side with? What’s the better bet? If you don’t have time on your side and you see this actor who’s moving with real agency, who’s young and vigorous, who just beat out other competitors. We already saw Bo get put aside. His ability to push rivals into jails is something that has been demonstrated once in a very spectacular way. For him not to allow anyone to start complaining or build up a rap sheet against him, for the first moves to be these anti-corruption moves – that probably really helped.

Jon Czin: That’s right. It was a blitzkrieg – speed was definitely one of his big advantages. By going after the retired guys, if you’re a mid-ranking officer or even a relatively senior officer, which horse are you going to back? The guy who just retired or the guy who’s going to be making all the decisions for the next 10 – now we’re going into 20 – years? That changes everybody else’s calculus throughout the system.

Red and Expert in the PLA

Jordan Schneider: Let’s talk about the dynamics of red versus expert in the PLA, what Xi saw, and how he’s tried to shape it over the past 10 years.

Jon Czin: He’s definitely put more emphasis explicitly on the red part of this. What’s really interesting is that there’s this casual notion that the PLA over the last 20 years has been professionalizing. I talk about this in the piece, but that’s not quite right. There was maybe an incipient tendency in that direction during the Hu Jintao era, that because they were becoming more proficient, they were modernizing. But from the Party’s perspective, they don’t want a professional PLA in the sense that Samuel Huntington would have called it – apolitical and politically neutral.

You can see that on the pages of Jiefangjun Bao (解放军报 PLA Daily) on a regular basis where Xi excoriates this idea and reminds them: “You are the armed wing of the Chinese Communist Party. That is mission number one, two, and three.” You could even see that earlier in his tenure. You would see signs of a backlash against the idea of having a state military. We wouldn’t see the debate or the advocates saying we need a state military, a national military rather than a Party one, but we would see the backlash – which suggests to me there was some debate percolating at that point that Xi very much wants to squash.

He wants them to be red. That is paramount to him. But he hasn’t gone light on the expertise necessarily. It’s not like the guys that he’s elevated to these positions lack the competence or the wherewithal, even if they’ve gotten helicopter promotions. One of the things that’s very much on Xi’s mind is the fact that the PLA hasn’t been to war since its war with Vietnam in the late ’70s and then maybe some skirmishes throughout the ’80s. It hasn’t seen blood, it hasn’t been shot at in anger. Given how small the pool is of people with that experience, there are people in the high command who were involved in that fighting, and Xi’s put a premium on that.

Jordan Schneider: Aren’t there two guys who were majors in 1979 and who’ve stuck around past age 67?

Jon Czin: Yeah, that’s right. Xi likes that. He wants somebody who’s been shot at, who has seen blood in the field. Now that I think about it, it comports with Joseph Torigian’s biography of Xi’s father and what it means for Xi’s own mindset. Xi likes people who suffered a little bit, who’ve been hardened, who’ve been tempered. He doesn’t want somebody who’s only known ease and glory and prosperity.

Jordan Schneider: Talk about the idea of a political versus apolitical military.

Jon Czin: There is a real difference, and it can feel a little abstract sometimes. In our own system, for instance, we have a long tradition of having an apolitical military – one that doesn’t insert itself into politics. In addition to that long-standing culture, you also have various layers of mechanisms to ensure civilian control of the military. You have civilians who populate the Office of the Secretary of Defense who have to sign off on things. We obviously have a civilian Secretary of Defense. China has none of that. That’s a really stark difference. They don’t have the same kind of checks and acculturation to ensure political neutrality and to ensure that the Party doesn’t get involved in politics.

But it’s also not part of their self-conception. Part of the PLA’s conception in its own mind is that they are the ones that conquered China for the Chinese Communist Party. Especially for the ground forces, that is their history and that is their legacy. One pithier way to bring this home for listeners: imagine this would almost be like if there were an armed wing of the Republican Party or the Democratic Party, and they come to power and that’s who becomes the armed forces. They are loyal to them and their job is to keep them in power. That is the PLA’s original raison d’être. That is an important facet that is core to its being.

Jordan Schneider: The argument you’re making, which is interesting, is that in the early years when Xi showed up to Beijing, he didn’t necessarily see that red energy, but saw an organization which was entirely a self-contained institution that was professionalizing. It was more like 1870s Germany than this bleeding red mechanism.

Jon Czin: That’s right. They were more preoccupied with operational proficiency, building out their navy, maybe even acquiring overseas military access – the big flashy stuff – rather than with long sessions of indoctrination in Marxist ideological tenets. It’s important to keep in mind that in any system, even in a highly professional one, by design the military is a relatively insular institution. There’s a reason people in Washington call the Pentagon the puzzle palace. It’s very technologically advanced, it’s got its own culture, its own intricate layers of bureaucracy and personal networks. That’s true of any military.

But if you’re talking about the PLA, the only real meaningful bridge from the civilian side of the Party to the military is Xi Jinping himself. You might have some contact or exposure as a provincial official – maybe there are mobilization exercises and you might have some contact – but really that nexus with the PLA, because it’s so politically salient, is so closely guarded. That’s why there are no other civilians on the Central Military Commission. Even when Xi is hanging out with the Central Military Commission or the PLA, he’s in a uniform, he’s not in civilian garb.

Jordan Schneider: I love this line where you say that Xi hauled the entire high command to historic revolutionary sites where Mao institutionalized the Party’s control of the military. You wrote this before the Quantico shenanigans over the past few weeks…

Jon Czin: I originally said “schlep,” but the editors took it out and made me say “hauled.”

Jordan Schneider: This is why you don’t write for Foreign Affairs and you write for ChinaTalk instead.

Xi’s Taiwan Playbook

Jordan Schneider: Let’s talk Taiwan. You make this argument that Xi’s had a lot of success in power consolidation, corruption fighting, and PLA modernization. The economy? TBD. But also, does he really care all that much? It seems like second or third priority for him. But with Taiwan, which is clearly something he cares about deeply, we haven’t seen much momentum towards a solution that he would be proud to have written in the history books next to his time as party chairman. Let’s reflect on the past decade-plus of Xi Taiwan policy and how it could potentially evolve into a fourth term and a post-2028 election.

Jon Czin: That’s a great point. In my mind, what really stands out is that if you rewind to a decade ago, Xi’s Taiwan policy, following from the Hu Jintao policy, was actually bearing some fruit. The big culminating event would have been 10 years ago when Xi Jinping shook hands with then-Taiwan President Ma Ying-jeou in Singapore. That would have been the first time you had a meeting like that between the head of the CCP and the head of the ROC since the Marshall Mission in 1946 when Mao met with Chiang Kai-shek. For Xi, he loves that kind of historical precedent. But it also ended up being a high-water mark for his Taiwan policy. Of course, he’s had to deal with Tsai Ing-wen and the DPP ever since then, pretty much.

Going into the last election on Taiwan in early 2024, I was worried that Xi and those around him were going to realize, frankly, the intellectual bankruptcy that’s been at the core of their Taiwan policy. What you’ve had over a longer trajectory – initially going back to Hu Jintao – was a softer approach, a very Marxian approach. The line of thinking was that if we change the economic structure, the political superstructure will change. As China’s economic clout grows and economic ties with Taiwan become closer, Taiwan’s just eventually going to come into China’s orbit. It’s going to fall like an apple off a tree into their growing gravity.

After the election of Tsai, you see a clear pivot from Xi towards a more coercive approach. But that hasn’t really been working. What they’ve done in Hong Kong, as everyone knows, has only further alienated Taiwan. It seems like politically the island has actually only gotten further away from the mainland. Where does that leave Xi and his strategy?

During the election in 2024, there was probably a real alignment between China’s outside voice and inside voice in the sense that they were relieved that the KMT won in the LY (Legislative Yuan). They were saying publicly afterwards, “The fact that the KMT has won in the LY election shows that most people don’t support the DPP and its pro-independence policies, yada yada.” But that’s also how they soothed themselves that night, saying, “It’s okay, our policy is still viable, we don’t need to do a fundamental rethink yet at this point.” It keeps hope alive.

Frankly, the failure of the DPP’s recall campaign this summer probably gives Beijing a bit more consolation – maybe they don’t have to really think about this. But what if the DPP did have a full sweep in 2024? Where does that leave Xi? Does he start to get antsy? That’s part of what I worry about, and I argue this in the China Leadership Monitor piece: what happens when Xi gets to his fourth term and he’s staring down the barrel of 80? If the DPP is still in power, does he have to have a deeper rethink?

He’s shown a proclivity throughout his career that when he gets frustrated, he does something to try to shake up the dynamic. As we saw in Hong Kong, he’s not just content to let things stay on cruise control if he doesn’t think it’s going in the right direction. That doesn’t necessarily mean he’s going to all of a sudden have an appetite for the million man swim after 2028. But you could see him giving a long and hard look at some of those more coercive options that people talk about in Washington.

Jordan Schneider: Yeah. The idea of him all of a sudden, overnight turning into Putin seems a little far-fetched with the track record that we have of over a decade of him not just straight up invading countries.

Jon Czin: That’s right. In some ways, Putin is obviously an important partner for him, but he’s also a useful foil for him. Xi has a much greater appetite for risk than others in the Chinese system, e.g., a Hu Jintao or Jiang Zemin. But that’s, in the big scheme of things, that’s a low bar to clear. He doesn’t have that same penchant for outright violence and risk-taking that Putin has. He’s much cagier and much more methodical in how he goes about taking risks. It’s not that he doesn’t take them, but they’re much more calculated risks than gambling on the roulette table.

Jordan Schneider: Jon, often in conversations I have, people don’t start with domestic Taiwanese politics or Xi end-of-life thinking, but they start with this idea of the Silicon Shield. Where do you put the availability of access to Taiwanese chips or the broader economic fallout that an escalation could impose in the calculus?

Jon Czin: No pun intended, I would decouple the two. The chips and TSMC actually rank very low on Xi’s priorities when it comes to this. Even though he’s got this techno-industrial fetish, he has enough confidence that China will figure it out over time. If he made the decision to go for Taiwan, he’d scuttle it. He’d do what he needed to take the island, and it wouldn’t factor very high in his considerations.

That’s separate from the broader economic fallout. The kind of cataclysm that could produce is very much on his mind and really gives him real pause. The way I think about it is that if he were to go for some full-scale invasion, he’s basically gambling not just with his legacy, but with everything that the Party has achieved since the death of Mao – all the progress it’s made, all that it’s built up. It could really damage or undo the Party’s legitimacy. He feels like if he’s going to go in, he wants that level of surety because it’s really putting all the chips on the table. He’d rather not do that.

What he’d rather do in the meantime, with a coercive approach, is to demoralize Taiwan over time, keep up the drumbeat of pressure, and hope that it starts to cause the foundations of Taiwan’s polity to crumble over time. He doesn’t necessarily want to go for the blunt force trauma first. That’s the optional last resort, given the costs.

Jordan Schneider: The irony of all of this is that if China evolves in a different direction, this all of a sudden becomes a lot more appetizing. The carrots that have been placed in front of Taiwan since the death of Mao have not been that compelling. The early ’80s was the height of this discussion when we had the most liberal version of domestic China. For it to ever really happen in a happy way, that’s really the development we’re going to have to see. But coercion into this just does not seem like a viable strategy.

Jon Czin: It’s interesting because you make that point about in the early ’80s when this was really a real possibility. Again, Joseph’s biography has been on my mind all year after reading it this summer, because it’s so good. Who would have been the person in the central leadership secretariat with the most experience dealing with Taiwan and the KMT and doing united front work? It was Xi’s old man, Xi Zhongxun.

That gets to another important facet of this. If you poke around in the open source material, it’s not clear who has Xi Jinping’s ear on Taiwan policy. There’s not somebody like a Liu He (刘鹤) you can point to and say, “This guy’s very influential with him.” A lot of that is because, again, he’s a princeling and Xi Zhongxun’s son in particular. He thinks that he’s got his own best handle on this issue because he understands this idea almost genealogically. Who knows how much they ended up discussing it? But if you pair that with his own career trajectory as well...

Jordan Schneider: And Xiamen, right? He dealt with this stuff.

Jon Czin: He dealt with this stuff in Xiamen and Fujian and Zhejiang. He would have been vice governor during the Taiwan crisis in the ’90s. He would have had a front-row seat to this whole dynamic for the previous 30 years. My suspicion about this is that rightly or wrongly, he has a lot of self-assurance on this particular set of issues. That’s why we haven’t seen somebody as his obvious consigliere on this in particular.

Succession Without a Script

Jordan Schneider: Let’s talk cognitive decline. The actuarial tables give us a 3% chance a year of a dramatic stroke or him dying, and that steadily creeps up to 3.2%, 3.5%.

But there’s also: “the guy gets old” and even if he’s still around and can be on for five, six hours a day – we’re already seeing him dialing it back with this Li Qiang dynamic where Xi’s doing less international travel, meeting with less of the Prime Minister of Swaziland, etc. Setting aside a stroke or some very dramatic thing where he’s out of commission, what are the different pathways to think of Chinese politics over the next five or ten years if he’s just slowly losing his edge over time?

Jon Czin: There are the actuarial tables, but as I note in the CLM piece, there’s also just common sense observation. This is a guy who’s now in his 70s. He’s obviously overweight and a smoker – maybe former smoker. He’s been doing this impossible job of governing the world’s largest country for the last dozen or so years. He’s got to be tired. That just takes a toll on him. He’s living in this highly fractious political environment where he’s doing things like purging people on a regular basis. He senses threats even when there might not be any. That is just emotionally exhausting. If you’re living in that environment your whole life, and then you’re the king and you’ve got to deal with this on a daily basis to make sure you’re on your A game, in and of itself…

Jordan Schneider: Maybe it works the other way too. Is this just what gets him out of bed every day? Mao always wanted to be a poet at some level, right? And that’s what he got to do during his repose as emperor starting in the ’60s and ’70s. I mean, Xi lives for this. This is what gets him out of bed every day, I’m sure.

Jon Czin: You’re probably right. It’s like a shark – he’s got to stay in motion. Without the game, he would wither. That’s probably a real possibility for a guy like him. You’re right about Mao too. Mao became a poet, but to everybody’s detriment, because now we’re left with this Delphic model of leadership where people go to him and they’re like, “Okay, I talked to the boss, but what does he really want us to do?”

That becomes one of the dangers as Xi ages. People talk about the succession question, but this is going to be one of the real conundrums. Number one, does he name a successor? I don’t think he will until he gets into his fourth term. But then the perennial challenge is always, you’ve got to build your successor up enough that he can stand on his own two feet once you’re gone, but not so much that you feel like they become a threat to you. Even if he does start that process of building up an heir, does that mean he in some ways moves to the second line and you end up with this more fractious political environment, like we saw in the Mao era, where he’s just giving oblique or unclear guidance, and then people are running with that until they run afoul of the line? That becomes a much more precarious political dynamic.

What does Xi think about it? But then what do people around him start to think? They can observe the boss even at a distance. They can do the math and realize that this guy is just getting older. At some point he’s going to have to deal with this question, especially since by the end of his fourth term in office, he’d be 79 pushing 80. It’ll shape the political jockeying that happens around him as people try to ingratiate themselves. “Maybe I could be the heir apparent, or maybe my protégé could become the heir apparent, and I could be some kind of party grandee.”

Big picture, there are two ways for this movie to play out. It’s either going to look like Death of Stalin where the military is going to be involved, where it’s potentially punctuated by violence or a nominal heir apparent being displaced. Or it’s going to be like the movie Conclave – where there is a lot of subterfuge and backstabbing, but it all happens quietly and much more subtly offstage. All anybody sees at the end is the black smoke emanating from the chimney.

Jordan Schneider: Speaking of Xi leaning into the late Deng model or the Mao model, unless health really puts him on his back foot – being Deng and having to fire Zhao Ziyang and having to fire Hu Yaobang – that’s not something that must excite him. The fact that he has two historical examples of this going really badly, plus the fact that we have this whole cult of personality. He likes a lot of this job. He surely thinks he is absolutely indispensable to the future of the Party. There’s so much of him which is going to just try to push off dealing with this whole succession thing. Him moving to the second line strikes me as a very low probability event absent real health issues.

Jon Czin: Yeah, that’s a very fair point. He would be disinclined to do that unless he really feels himself slowing down. Deng and Mao each had to run through three successors before they ultimately landed on somebody who stuck, but not really, even in the case of Hua Guofeng. As a princeling. Xi’s got to be cognizant of that at some level. He undid the old model that Deng put in place where China had figured out some peaceful way to transfer power, even if it was rocky or imperfect. He’s blown up that old system. But he’s got to figure this out at some point. As I say in the paper, he’s created a Henry VIII problem for himself. Whereas Henry VIII spent his whole life obsessed with who was going to succeed him, Xi has done the opposite. He’s tried to procrastinate as much as possible about this question and at the same time, destroy the old way of doing it.

Jordan Schneider: As you point out, the potential successors who don’t have real PLA connections, like Hua and Zhao and Hu – they don’t stick around because some other Party person is going to have that connection. The fact that he is just not letting that develop at all is going to make it really hard for whoever else shows up to stick.

Jon Czin: Yeah, that’s exactly right. Xi had a leg up even though he had relatively thin military credentials. What did he have? He had three years as a mishu to Geng Biao in the late ’70s, early ’80s, he had Peng Liyuan, his wife, and maybe some peripheral exposure during his time in the provinces. In the post-Deng leadership, his princeling connections put him head and shoulders above Li Keqiang or anybody else from his generation. It’s the old line: “ in the land of the blind, the one-eyed man is king.” That’s Xi Jinping. He may not have been Deng when he started, but his colleagues weren’t Chen Yun and Yang Shangkun and other guys who were powerful in their own right.

One other aspect of this that’s really interesting in terms of how the succession plays out: there’s a big difference between Xi getting one or two chances to orchestrate his own succession and dub his own heir versus him just dropping dead tomorrow. They’re both going to be fraught and pretty rocky. But in terms of who gets top billing, how this all plays out – that will be very consequential going forward.

Jordan Schneider: Please elaborate.

Jon Czin: Okay, let’s go with the “he drops dead tomorrow” playbook. What happens then? It’s unclear. Some people don’t appreciate the fact that there is no line of succession in Chinese politics like we have in the United States. It’s not like you go from the president to the vice president to the speaker of the House. There’s nothing like that that’s codified. In fact, for most of Xi’s tenure, the vice president is a sinecure for an otherwise retired official. They’re not even on the Politburo Standing Committee. It really throws open the door to who gets the ring.

If I had to take a guess, the person who would seem potentially most well-positioned to do that would be Cai Qi (蔡奇). He holds so many of the key portfolios in the Party. He’s running the General Office from the Politburo Standing Committee, which, by the way, is the job that Stalin had under Lenin and became the General Secretary position eventually. Cai is also on the National Security Commission, giving him another leg up because of the link to the PLA. Unlike other members of the Politburo Standing Committee, it gives him an excuse to engage with those other power ministries – with the security services and the PLA. The downside for a guy like Cai Qi, if I think about this, is that could also make him the guy who has a target on his back right away.

If I can deduce this all the way from Washington, surely his colleagues in Zhongnanhai can figure this out too. I think of the Death of Stalin scenario. Does he become like Beria, the guy that everybody else decides to gang up on? He obviously doesn’t have the same kind of stigma that Beria had, but...

Jordan Schneider: He hasn’t killed everyone’s aunts and uncles.

Jon Czin: Yeah, exactly. He doesn’t have that kind of hideous reputation, and he’s not the source of resentment in the same way. But it’s possible everybody else gangs up on him and then they decide among themselves who should get the ring. My suspicion is that they will probably be able to figure this out, though. This has been a limiting factor even in a crisis like Tiananmen. As fraught as that was for the leadership, they still have a sense that this needs to be bounded. Because if this gets out of control and leaves the corridors of power, and you had people doing what Zhao Ziyang did and reaching out to constituencies and the public, then things could really unravel.

Especially for these guys that are like what Jiang Zemin was in 1989, where they don’t have a power base of their own necessarily – they are mindful of that as well. They need to preserve the system and figure this out. So there’ll be conflict, but it’ll probably be bounded in some ways, would be my guess.

Jordan Schneider: Like the hang together versus hang separately.

Jon Czin: Yeah, exactly. But it’s totally different if he has an opportunity to start to groom somebody.

Jordan Schneider: Let’s tease out that scenario.

Jon Czin: If he has the chance to groom somebody, maybe that person sticks, but it’s just then the main question is going to be a function of time.

Jordan Schneider: Let’s stay on this for a second. Where is he even getting data points about 50-somethings? Is he having dinner with these people? He’s getting reports on their mayoral performance? It’s a hard information problem because he doesn’t have personal relationships with the people who aren’t in his age cohort.

Jon Czin: Yeah, bingo. This is the downside of Xi having populated the whole Politburo Standing Committee with his old buddies. I’ve jokingly called this Xi’s frat house. Can you imagine walking into a meeting of the Politburo Standing Committee where you’re the boss and you look around the table and with the exception of Huang Kunming (黄坤明), you’ve known all these guys for 30, 40 years?

Jordan Schneider: Yeah. Weird.

Jon Czin: Yeah. That’s got to be very comfortable for him.

Jordan Schneider: It’s interesting because usually presidents have one of those guys or two of those guys. But then everyone else is from the professional class. We’re going to have Bobby Kennedy, but then we’re going to have 10 other pros.

Jon Czin: It’s got to be very comfortable for him in some ways. If he does abide by the informal term limits – the “seven up, eight down” rule, which he actually has for the most part (he’s made some exceptions, like with Zhang Youxia and others, and he could make more exceptions, but in ones and twos) – that means that a lot of those guys on the Politburo Standing Committee who he has those deep relationships with are going to have to go at the next Party Congress. Then what is he going to have to rely on? It’s going to be his protégés’ protégés, or what I like to call his friends’ friends. Not necessarily the people who are truly in his own inner circle.

It’s a great question – how does he get information about them? The people who are in Xi’s orbit, even the ones who are inside the asteroid belt, my suspicion is that they don’t all necessarily like each other. If you look at their backgrounds and where Xi connected with them, he collected these guys at different points in his career. They don’t all necessarily like each other. This is why it’s so important that people around him will start thinking about the succession process even if Xi doesn’t. All those people who are in that inner circle, would start thinking about how to position their own protégés to ingratiate themselves with Xi so that somebody from their network is the person who ultimately gets the nod rather than somebody else. That creates a much more frothy and fraught political environment in Beijing, even more so than what we’ve seen already in this third term.

Jordan Schneider: You’d almost rather have six people in their 50s show up as opposed to just one person in their 50s show up. Because then there’s just this whole weird dynamic, succession drama. “Okay, I got to purge this guy.” If we’re thinking on a 10-year horizon and we’re going to do this two more times. Then yeah, let’s have these people hang around for a little while and...

Jon Czin: You’re planning to live to 150 so you’re squarely middle-aged at 75.

Jordan Schneider: The thing is, does only he get to live to 150 or does the frat house also get the quantum livers and what have you?

Jon Czin: It probably depends. If you stay in his good graces, you still get the magic serum.

There’s another conundrum. Maybe he would want to pick somebody who’s from that inner orbit to be an heir apparent, somebody that he could trust, somebody that could carry on his legacy. But the problem is, you can’t trust anyone.

Trust falls are not part of the CCP indoctrination system, I don’t think. Also, to the extent that these are people you trust and would think about handing the mantle to, they’re also old. What’s the benefit of handing the mantle over to somebody who’s just five years younger than you and could also have similar health problems and people could also be eyeing him as well? You’re going to want somebody that’s a lot younger, and for Xi, they’re going to look like whippersnappers to him.

Jordan Schneider: For those people in their 50s, there’s this very interesting dance where they have to look good but not too good because you can’t overshadow the guy or you can’t have too many new ideas. Just the fact that we have this ideological Xi Jinping Thought cage around all these folks means that their ability both to distinguish themselves as the most capable of their age cohort is limited. But then, you have to make sure this guy doesn’t think you’re too handsome and vigorous and popular. There’s some golden mean there.

Jon Czin: Yeah. It’s the old line, “the nail that sticks up ends up getting hammered down.” That’s the name of the game for their system. It’s exactly the needle that Xi threaded. People forget this because it feels almost like ancient history at this point, but Xi went into Shanghai as Party Secretary after becoming the heir apparent at a time where they had just gone through a major corruption scandal. Under Hu Jintao, the then-Party Secretary Chen Liangyu (陈良宇) had thumbed his nose at the leadership. Hu Jintao, for the first time or the only time I can think of in his tenure, mustered himself to go after this guy and topple him from the Politburo.

Xi trod very lightly in Shanghai. It was Scylla and Charybdis for him. He had to do enough to show that he was serious about anti-corruption, but not so much that he started to piss off the wrong people and jeopardize his own chances. It was a hot potato to take that job and pull that off. It’s such a striking contrast with what we were talking about earlier about once he came into power and how hard he went after everyone once he had the ring.

The other point I wanted to make too, Jordan, is going back to the summer with the coup rumors, but the tacit assumption of that is that it’s going to be Xi Jinping versus some other constituency in the Party. From my perspective, that moment passed a long time ago. If there was going to be a backlash against him, it would have had to materialize much earlier – when he was going after the monkeys instead of the chickens during that first term and he was taking down a lot of these made men. Once he did that, it became much harder for other people in the system to conspire against him and marshal their forces. It’s almost like a bad game theory problem. If I reach out to you to depose the boss, you have every incentive to sell me out to the boss and ingratiate yourself and further climb up.

This is part of what I’m trying to argue in the piece. The real dynamic now is not about Xi versus some other constituency. I hesitate to reach for the Mao era analogy, but it’s almost like the Mao era in the sense that they’re all Xi Jinping acolytes, but the fractiousness is going to be among each other as they try to muscle out their rivals for positions and promotions and for the sake of their own network. That is going to be the really crucial dynamic in the next 5 to 7 years. Not Xi versus some antipode in the system because he’s eviscerated all those possibilities. It’s going to be among his own people.

The American Dimension

Jordan Schneider: I’m proud of us for doing an actual, quote-unquote, traditional ChinaTalk episode. We haven’t really mentioned America in our first whole hour, but I do want to talk about what agency, if any, America and Western allies have on these internal succession dynamics.

Jon Czin: For the most part, very, very little. Never mind having an impact on them. It’s very hard for a lot of people even to see into and to get a sense of what’s going on inside the system. We are not a big factor. To the extent that we are, it’s not necessarily in the foreground, but we’re seen almost in these very Leninist terms as a structural force of history – as the avatar of late finance capitalism. We’re declining, we’re dangerous, and we’re very powerful, and you’re going to need a leader who’s got the stomach and the wherewithal to deal effectively with the United States and who is strong enough to shepherd China for the next phase of what Xi likes to call the “new era.” But outside of that, on a more tactical basis, day to day, it doesn’t play a large role for these internecine politics.

In the past, as an American policymaker, there’s this notion that you want to try to cultivate some kind of relationship with key people inside the political system. But what’s counterintuitive is that having that nexus actually makes it much harder for that person to ascend the ranks. It’s baggage. That makes them vulnerable to criticism that they’re too sympathetic or too cozy with the United States.

Jordan Schneider: And you only got promoted because of your CIA bribe. There’s a kiss of death. It’s the mirror-image of America funding the NGOs in Russia.

Jon Czin: Yeah, exactly. It’s like, “Hey, you were really smiling in that photo op in the Great Hall of the People. That was like two degrees too much smiling.”

Jordan Schneider: Speaking of standing up to American imperialism, Liberation Day was followed by retaliatory tariffs and a rare earths ban. This is potentially the most dramatic Chinese coercive move against the US that we’ve seen since their support for Ho Chi Minh. It’s a very dramatic disjuncture from what you saw in Trump 1 or in Biden, where Trump’s trade war seemed to be just, “All right, we’re going to keep this with the trade war things and some stuff will get more expensive, whatever.” But if I was Xi, I think I’d be taking the lesson of the impact that the rare earths controls had on getting the Trump administration to really rethink their Chinese economic and broader policy to heart. What’s your read on them deciding to push back at the beginning of Trump 2?

Jon Czin: The way you contextualize it is right. In the first Trump administration, during the first trade war, it was almost palpable that Xi and his lieutenants were groping around for some adequate countermeasure to the initial tranche of tariffs. My operating model for how they were behaving at the time was they wanted countermeasures, and the paradigm was “no escalation, no concessions.” They wanted to do enough to show that they were pushing back, but at the same time, try to make as few meaningful concessions as possible.

From my view on the inside during the Biden administration, I was really struck by how little pushback we got for a lot of our competitive actions. I was involved in planning for President Biden’s first in-person meeting with Xi Jinping in November 2022. Just a month before that was when we dropped the first big export controls. The reaction was very muted – they kvetched, but not that much. They didn’t really do anything for a long time. Even with the subsequent efforts to tighten those export controls and plug some of the gaps, you didn’t really see much movement from the Chinese side or much in the way of a response, which was really striking. Maybe not until summer of 2023, but even then they were relatively restrained.

Jordan Schneider: Let’s stay on that diagnosis here. Do you think they were surprised? They didn’t listen to ChinaTalk, didn’t realize how big a deal it was? Did they just think they could build the chips on their own? What’s your analysis of what the Biden administration did right in boiling the frog?

Jon Czin: It was clearly the lack of access to ChinaTalk first and foremost. But the other factors – one is that we were very focused on our competitive actions, but we did have this parallel track of diplomacy. We were managing the competition, to use the phrase that was getting thrown around at the time. Those diplomatic engagements helped offset the pressure that would accrue from pursuing these competitive actions against China.

They were also surprised, especially with the initial tranche that came out. It took them a while to figure out how exactly they wanted to respond. But having that regular cadence of high-level diplomatic engagements made it hard for them to say, “Well, now is the time for us to retaliate.” It constrains them in some ways because when you have those meetings, they’re by definition positive meetings. They backstop whatever it is that you’re pursuing or put a limit on how harsh the response might be. When you got to Trade War 2.0 and Liberation Day, we didn’t have that. We didn’t have that diplomacy to backstop it.

Jordan Schneider: I want to stay on 2022 for a second. What was your experience with the Pelosi visit, Taiwan missiles – how was that experience for you, Jon? Everything you wanted and more from government service?

Jon Czin: Yeah, I got three years of government service in a single year. That was a remarkable year in so many ways. If you rewind, you go back to February 2022 – Russia invades Ukraine. Shortly after we had the engagement between National Security Advisor Jake Sullivan and Yang Jiechi in Rome. That was a very intense period and I disappeared into a giant vortex for a period of time. I went back to work in the new year and I basically disappeared. When I came out on the other side of that, after Jake had met with Yang Jiechi and President Biden did his phone call at the end of that week with Xi Jinping, it was springtime and flowers were blooming in my backyard, and I hadn’t seen any of that happening in the preceding several months.

The other moment that year that was really crucial, that was really punctuated by a high point of tensions, was the Pelosi visit to Taiwan. That was incredibly intense. I basically disappeared that summer and did not see my family – sent them on vacation on their own and just moved into the office.

Jordan Schneider: What were the dynamics that summer in particular that you were trying to manage?

Jon Czin: It was definitely an anxious period. The key thing was how do you bound this problem set and keep things from getting out of control, especially given the way that Beijing responded. From my perspective, this was a manufactured crisis on Beijing’s part. They chose to react this way. The Trump administration had sent the HHS Secretary but they chose not to lob missiles over Taiwan. We cited the precedent at the time that Newt Gingrich had gone to Taiwan back in the 1990s. There was precedent for this. It’s a separate branch of government. Pelosi was going to go.

Jordan Schneider: But she’s part of the Democratic Party, Jon. Of course, you have agency to tell her what to do.

Jon Czin: And of course, both of our political parties have central discipline inspection commissions that enforce the party’s code? No. That’s the big difference. That’s what you wonder about – where is the breakdown in their system? Because you do have people in the system like the embassy, of course, but even people like Yang Jiechi (杨洁篪), who had been an interpreter on the Chinese side and who was the top foreign policy official during that time. There are pictures of him interpreting for Deng in his meetings with Reagan going back to the ’80s. He clearly has a very finely grained sense of our system and how it operates. But I don’t know if that expertise necessarily percolates all the way up in the system. I don’t know if it was people just not getting it and mirror-imaging and saying, “Yeah, but they’re part of the same party and therefore there’s command and control and this is intentional,” or if it was convenient – this is a way to put pressure on the US and hold them accountable for the choices of Congress. That was a key facet of all of this.

Then, how do you signal that this is not okay? That our objective is to preserve peace and stability in the Taiwan Strait and deter additional Chinese countermeasures that could be even more escalatory. What’s striking is that it was a choice on their part. But if you consider a larger historical arc, after all of the military modernization, as dramatic as it’s been, the response, you could argue, was qualitatively similar to what happened in the 1990s, where they got angry and lobbed missiles over Taiwan.

There were things that they did differently in this go-around. Obviously, they had the capacity to operate on the eastern side of Taiwan and have more of a chokehold than they did in that previous crisis. But it was a similar response, after all is said and done. It’s not clear to me from their perspective what they actually accomplished. I suppose you could argue that it created a new normal in the Taiwan Strait and we’ve seen an uptick in military activity that’s been sustained in the Strait since then.

Jordan Schneider: Yeah. But do you trade that for convincing Biden to put export controls on chips? It’s a tricky calculus.

Jon Czin: It was clear that the technology piece was going to be part of the administration’s policy throughout. The big question was when and how big the scope should be. Even the creation of a separate directorate on the NSC for technology and security policy signaled its importance.

Jordan Schneider: Let’s pick up on the other piece of this. American officials over and over telling China not to give Russia weapons. By the end of the Biden administration, Blinken was saying, “You guys are doing this. We see you.” Then over the past few months, you had even more explicit reporting. Wang Yi (王毅) went to Europe a month or two ago and basically said, “Look, without us, they’d have lost this war already.” Reflections on American agency over that dynamic over the past five years.

Jon Czin: You’ve seen Wang Yi’s talking point from a couple of other Chinese diplomats as well: “No, no, no, we’re not supporting Russia because if we were, they’d be winning this war.”

Jordan Schneider: He said it both ways. He said they would have lost already and they would have won already.

Jon Czin: It’s another great example of saying the quiet part out loud. It was especially surprising coming from Wang Yi, who’s usually otherwise very deft in these engagements, saying, “Yeah, they have to win because if the US is no longer focused on this, then they’re just going to turn towards us, toward China.” Truly saying the quiet part out loud.

But I would say this – we are an important factor in this entente between Russia and China. But what people don’t appreciate is how important this was to Xi, even going back to the start of his tenure. The data point I always point to is that Xi’s first state visit after becoming General Secretary and President was to Moscow to meet with Putin. That was a very clear signal early on that he wanted to put a premium on this relationship. Of course there’s the stat that in the years since then, they’ve met 40-plus times, they’ve called each other best friends. There’s a little bit of a bromance there that may or may not be real, but that’s certainly the image that they want to project.

What the war in Ukraine really did was intensify that dynamic that was already underway. There was already an entente between the two sides. It accelerated and intensified that dynamic. They have gone further and have deepened that relationship. The US is a factor in this. They very much see things through that Kissingerian triangular dynamic, and they want to hug each other close because they see themselves in this longer, tougher competition with the United States. That’s an important factor.

The tactics we use to entice one side away from the other don’t really matter that much because it’s so baked into their worldview. The strategic choice has been made. At this point in the war, from Xi’s perspective, even if there’s grumbling among experts or people in the system about it, he feels like he made the right bet. This was a smart play – back the Russians and keep them in the game and keep them involved in this fight to make sure that Putin doesn’t lose this war.

I don’t think it’s really possible to drive a wedge between the two of them, given how they see a deep alignment of their strategic interests. The best you can do is limit it to the extent possible. Even that is very challenging and quite difficult because you are dealing with two very formidable powers in their own right.

Jordan Schneider: For the record, this was July of 2025. The reporting said that Wang Yi told the European Union’s top diplomat that Beijing didn’t want to see a Russian loss because it feared the US would shift its whole focus to Beijing. Then he said the negative version: Wang rejected the accusation that China was supporting Russia’s war effort, insisting that if it was doing so, the conflict would have ended long ago. I don’t know if he’s right about that.

It’s not necessarily just a materiel thing. There’s also some stochastic element. If Russia’s doing better, then the amount of aid that the West would have given Ukraine would have increased. He’s arrogant here. We’ve seen surges of new Western wonder weapons not do what they’re supposed to do. It also doesn’t seem to be Russia’s problem that they have enough materiel to do their stuff. That’s not really the limiting factor here. What’s your take on that as an analytical assertion?

Jon Czin: It’s wonderful because it’s so impolitic because it puts down the Russians at the same time that it allows China to deny that they’re playing a role. Look, their support has been consequential. There have been other US officials who have said this on the record. It’s real and it’s not trivial. But if you’re playing with the counterfactual – okay, if China supported Russia, but what kind of support would that be?

People forget about this too – because we’ve become accustomed to thinking about China as a global power, yes, China cares about its entente with Russia. Does China care what happens in Ukraine? Not especially. Which is in and of itself a limiting factor. They don’t want to see Putin lose. They have some negative end states they want to avoid. They want to maintain Russia as a strategic partner. But what actually happens in terms of the specifics on the ground? There’s a certain parochialism to how they conduct their foreign policy. It’s like, “How is this going to affect me? Is this going to affect me? You guys figure it out and we will posture as the proponents of peace in the meantime.”

Jordan Schneider: Yeah. The Elbridge Colby-Xi Jinping parallel – there are some nice little lines to draw there. But no, it’s an interesting counterfactual. Are they going to do the North Korean thing of literally sending troops? In no universe would that happen. Then we get to the stocks of old stuff. Would you send old artillery shells? Is that going to win the war for the Russians? I don’t think so. For the more exquisite stuff, China has limited capacity for all their fancy missiles, just like the West does. How much? Even if they wanted to lean in, were they really going to hand over all of their long-range strike capabilities? Are we going to give fighter jets? Are we going to put our economy on a war footing to manufacture 10 or 100x more drones for the Russians to use? Also no. The reasonable ceiling of what even a different leader besides Xi wanted to lean in more was probably just giving them old stuff, which I don’t think would have been decisive over the past three years.

Jon Czin: Yeah, maybe. There are probably a few different ways it could play out. But this idea of putting all the chips on the board was probably not in the cards because it wouldn’t necessarily serve their interest to get directly involved. I had this really funny moment. Joining a think tank, I now participate in all these track-two dialogues with Chinese counterparts. We were talking at one point about this very issue, and it was right after North Korea had sent in its own troops to support Russia’s war. I had a Chinese counterpart, someone who had towed the party line for hours on this issue, lean into me and say, “It’s so stupid. Why would they do that?” This is why you do these things. Because you sit there for hours listening to stuff that you could use ChatGPT to generate, and then you get that one little illuminating nugget that’s really telling about their strategic thinking on this issue.

Jordan Schneider: It’s also illustrative of how seriously we should take the Taiwan war invasion. Because if you really wanted to do something, you would want to test your gear against what NATO is bringing to the table and you would want to have your command and control ecosystem actually do the thing.

Jon Czin: I could see some constituency making a case for that in their system. But yeah, it’s a big step.

Jordan Schneider: It’s a big step. Fair. All right. I took us on a 30-minute detour. We should get back to rare earths.

Jon Czin: You can fix it in the editing and make it linear.

Jordan Schneider: Absolutely not. Okay, we have China not physically punching back around Mariupol, but economically using rare earths to reportedly surprise the Trump administration and cause a substantial rethink in how aggressively America is going to economically take on Beijing. What’s your interpretation of all that?

Jon Czin: My interpretation is that a lot of this got lost. What was striking to me were the not-so-subtle signals that China started sending after election day, after Trump won the election in 2024 and before Inauguration Day. At the end of the Biden administration, there were obviously all these export controls and competitive technology policies that were getting buttoned up during that period or pushed out during that period. We saw China respond, unlike that 2022 period or earlier, with great alacrity. They were responding and they were responding fairly forcefully and pretty quickly.

The take at that time, especially in the Wall Street Journal and the Financial Times, was, “Oh, they’re sending a signal to the new administration.” But what they were also doing was building up leverage in anticipation of Trade War 2.0. They had very clearly spent the intervening years thinking about how they would respond to this and how they would retaliate. That was the first wave of them test-driving some of these new toys and tools that they had come up with in the intervening years.

There was a real misdiagnosis about how China was going to respond to this. In fairness to the administration, a lot of people who would have served in Trump 1.0 would have said, “Look, we can push the Chinese and they’re not going to do much in response. Look what happened in Trump 1 – we hit them with these tariffs, the sky didn’t fall. They wanted to negotiate with us, so it’ll be okay.” In fairness to them, if they looked at what happened in the Biden administration, there really wasn’t much of a meaningful response to a lot of these measures. You could see why they would feel, if not complacent, pretty assured that China’s response might be muted.

The other thing that happened is that a year ago in 2024, all the discussion in Washington was about Peak China because of their economic doldrums. I haven’t heard this firsthand, but my suspicion is that whoever briefed Trump on China’s economy as they were gearing up for Liberation Day and Trade War 2.0 – if they were smart, they would have led with the fact that China’s real estate sector was a mess and was the locus of all their economic problems right now. That would just leap out at his imagination and make him think, “I’ve got a lot of leverage. If I hit these guys, they’re not going to hit me back.” That’s the story of what happened in the first trade war. There was an exaggerated sense of the fragility of China’s economy that fed into this. They underappreciated the ways in which Xi and his team had been thinking about this methodically and preparing for it over the intervening four years.

When this happened, it was clear just from the speed with which they responded – they weren’t formulating new options. They clearly were locked and loaded for Trade War 2.0 when it happened, which is why it escalated so quickly. They were ready for this. It’s remarkable to me that they’ve gone just within the space of six months or so from getting hammered by the Trump administration to now seeming like the administration is trying to mollify them in the run-up to a leader-level summit.

Jordan Schneider: Yeah, I just read an article in Semafor that said America doesn’t have economic escalation dominance over China, which is wrong. But it’s interesting that you saw Bessent recently saying, “Oh, we could do stuff around engines, we could do stuff around chemical inputs.” There clearly is a menu of things that if Trump wanted to continue to raise the stakes, he could have. But the psychological game that Xi was able to do, getting the CEOs of Ford and GM to say, “Look, we’re not going to be able to make cars anymore” wormed into his head. Say you’re still sitting in the White House and the President asks you, “All right, what’s my tat if they gave me the rare earths tit, aside from buying 10% of every minerals company in America?” What coercive stuff would be on your menu?

Jon Czin: There are things we could do, but the bigger question is then to what end? Are you trying to escalate so you get them to back off eventually? It’s not just a question of what tools you have, but what appetite do you have for pain? That’s the really hard part. Xi demonstrated during this – he’s got more appetite for pain than we do. He’s not going to have voters who are going to start complaining about an expensive Christmas, and he’s not going to have to deal with that.

We do have points of leverage. There are select things we could do. The aviation sector is the obvious one that people like to point to. But again, to what end is that really going to accomplish what you’re trying to do if your goal is to try to demonstrate that you have escalation dominance and get them to back off? I’m not an economist, but if you look at Trade War 1.0 and 2.0, it hurt China, but the effect was on particular firms or particular sectors. It didn’t necessarily have a big macroeconomic impact on China.

Jordan Schneider: One of the many initial theses around Liberation Day was that this is a way to force America and the world to decouple from China. We’re recording this October 7th and we’re sitting in the middle of a government shutdown. There’s this Republican line: “we don’t even care about the government being shut down because then we can fire all these people and this actually plays into our hands.” The world where China concedes is the one where China believes that Trump doesn’t care about the pain. But what we’ve seen over the past six months is that he, in fact, does care about the pain. The closer we start getting to midterms, the more salient it is. This sequencing that some Republican influencers talk about – “All right, we’re going to settle the Ukraine war and then turn our energy to China” – the window is closing for there to be any kind of domestic energy behind eating the economic costs that would come from taking a more escalatory route from an economic perspective.

Jon Czin: I’ve heard this before. “After we’re done dealing with these global hotspots, we’re going to pivot to Asia. It’s really going to happen this time.”

But the other salient point is that time is actually on Beijing’s side in this negotiation. It’s one of the chief assets they have, aside from these countermeasures. Beijing’s banking on the fact that as the administration gets closer to the midterm elections, they’re going to want to have something to show for this prolonged negotiation with China. The Chinese side thinks this means Trump may start negotiating against himself or get antsy for a deal.

That’s only going to augment Beijing’s leverage in these discussions. If you look back at Trade War 1.0, that’s what happened. That’s how we ended up with Phase One. Trump got antsy for a deal and he said, “Just let’s just do the deal and we’ll call it Phase One, and then we can figure out the rest of it later.” From Beijing’s perspective, that’s what they’re trying to do.

Having the summit – President Trump saying we’re going to do two more engagements – only buys China more runway. The President of the United States has publicly committed to additional meetings, even though China hasn’t necessarily. That gives them, if their goal is to run out the shot clock, a lot of runway.

I hate to say it, but I give them credit for how well they have played this so far. Even if you rewind to earlier this year, when there was the initial meeting between Bessent and Greer and He Lifeng, after that agreement, rather than having this grand coalition that was going to focus on China’s unfair non-market practices – which probably has some merit to it – instead, the only two countries at that point that the United States had some kind of side deal with for tariff relief were our closest ally, the United Kingdom, and our nominal chief rival, China.

From Beijing’s perspective, that’s an amazing feat of diplomacy. And what did they pay for this? All they did was go back to status quo ante before Liberation Day. All they did was pull back the measures that they had imposed. They’re getting all of this on the cheap.

Jordan Schneider: Let’s come back to cognitive decline. Both leaders are trending in that direction over the next three years and banking on three years of everything being hunky-dory seems like a wrong bet. It’s hard to project out. Is it a balloon? Is it this? Is it the Tibet border or something? But I don’t think it’s going to be this chill the whole time.

Jon Czin: No, that’s right. The name of the game for Beijing, even if there are exogenous shocks like a balloon or whatever the case may be, is that they have an incentive to try to manage it for the next year for the reasons I laid out. Right now in the run-up to a summit where the US side, for example, is trying to mollify Beijing. There are issues like the soybeans that are cropping up. The Commerce Department just added a variety of Chinese subsidiaries to the Entity List. It’s fraught.

What I worry about is that coming out of the summit, if there are good vibes coming out of it and it doesn’t go off the rails, you’re going to have a resuscitation of this discussion about détente with China or some kind of meaningful rapprochement. But these first few months demonstrate that you can give pretty remarkable concessions on two of the chief sources of friction in the relationship – on Taiwan and on technology competition – and still not really have any meaningful attenuation of the structural drivers of the competition. It doesn’t feel warm and fuzzy right now, necessarily. It’s more of a ceasefire than some kind of more meaningful or deeper détente.

Jordan Schneider: Interesting. Let’s stay on the cognitive decline stuff.

Jon Czin: Yeah. It’s going to be a thing, because you’re dealing with two leaders who are in their 70s and aging in very stressful jobs. It’s emblematic of the state of the competition between the two countries, and this is something I’ve been thinking about a lot. Yes, the US and China are both superpowers, but they’re both really dysfunctional in really profound ways. China obviously has its own deep pathologies with corruption. The real estate sector encapsulates so many of those pathological dynamics where it’s embedded with corruption and the failings of local government financing.

As an objective observation, our own system is not functioning the way it should. We struggle to pay our bills on time and we don’t make the repairs we need to our infrastructure. If we were in a homeowner’s association, we’d be on some kind of probationary status.

Sometimes the competition gets framed in terms of which side is more dynamic, but it’s really about two older people who have a lot of maladies, and the question is, who can cope better with their maladies? It’s about sprinting across the finish line. It’s like the movie Grumpy Old Men – it’s like Walter Matthau and Jack Lemmon shaking their fists at each other as they approach the finish line on their walkers. Not to be glib about it, but that’s my mental model for how this competition is going to play out in the next few years. It’s going to be cranky, and it’s going to be ugly, and it’s going to be cantankerous.

Jordan Schneider: That was a dark... That’s probably the most accurate summation of the next five years of US-China relations you’ve heard on this podcast, Jon.

The Life of a China-Watcher

I want to think about your intellectual development. On the one hand, being in the Agency the whole time, you get to read the secrets, but you don’t really get to go to China. I’m curious about the strengths and weaknesses of developing as a China watcher when that is the intellectual milieu that you grow up with over the decades.

Jon Czin: It is interesting. Unfortunately, this has become true for a lot of China watchers now, especially after COVID and everything else. It’s hard to peer in. The first resort for many China watchers is you’re relegated to doing textual analysis. That’s just part of the price of doing business if you’re doing this kind of work – going through the Party Congress work reports, going through the press conference from the NPC, and not just reading those, but then doing side-by-side juxtaposed readings to see what’s changed over time.

My job wasn’t to opine about US policy the way I did just now. On a day-to-day basis, my job was to think about how this looks from Xi Jinping’s desk. As someone who had majored in political science in college, what was striking was that this was not a social scientific enterprise. I wasn’t thinking about this in terms of some regression analysis or plotting points. To do this work, whether you’re in government or out, is much more humanistic in my mind and it requires a lot more moral imagination. It’s more like being a historian where you’re just going to read a mountain of paper and then try to make sense of it and try to tell a story that is coherent and faithful to the evidence that you do have.

I don’t want to say it’s literary, but you are trying to think – if I’m this guy and I put aside my priors as a Western, small-L liberal, how does this world look? How do I try to navigate it? There’s actually a lot of discipline that comes along with that in order to be able to do it well. But that art of trying to see how it looks from Xi’s desk is something that’s harder to find on the outside. There are obviously people, like I keep talking about Joseph Torigian, who are able to do that. But that perspective can sometimes get lost because it is such a big, crunchy dynamic. You can spend all day thinking about other aspects of the competition or thinking about what the US should be doing to respond to what we’re seeing from China.

Since I’ve left government, that’s always my starting point. When I’m thinking through these problems, the first thing I try to do is look at what the Chinese are saying, look at what they’re doing, because the context is so much more important than the text. Then thinking about, how does this look from Xi’s desk? And then you work from there.

Jordan Schneider: On what dimensions do the secrets help you build mental models and develop your sense of the place? And when is it irrelevant or beside the point? Can we answer that one?

Jon Czin: It’s challenging. It’s just having other sources of information. But the real core part as an analyst is building that mental model in the first place and doing it in a rigorous way. The way I was trained is that you’re not just chasing the latest reporting and then retrofitting some kind of interpretation on what’s going on in Chinese politics. You want to have some kind of a priori notion of what’s going on. Then to be intellectually honest, you do basic things like lay out signposts. “Okay, if there is going to be a coup against Xi or if Xi is losing power in the system, these are the things that I would expect to see.” Having that in place ahead of time helps you sort the evidence as it comes in, rather than saying, “I saw this wild video on YouTube from the Epoch Times, and there’s clearly going to be a coup.” That’s a big part of the rigor of it.

What’s valuable about being at the Agency to do that kind of work is that there’s a focus on it in a way that you don’t necessarily get in academia and on the outside. This is hard to study from the outside. It’s not necessarily in vogue to focus on leadership politics in other countries if you’re trying to get your PhD in political science. If you’re a comparativist, you’re trying to put things in comparative perspective and do a lot of math around it. That’s challenging. Whereas, when you think about the CIA and what it was designed to do, it was designed to follow a country with a big scary military and an opaque leadership. This is the place’s original raison d’être. That’s what I would say about how this has all shaped my perspective on how I do this kind of work.

Jordan Schneider: Yeah, it’s interesting because you have a cohort doing this. You have this bright line of “look, we’re not analyzing American politics,” which does not exist in think tanks. It’s so much easier and more natural to start with the end of the report instead of the beginning or middle – “Okay, what should America do about this?” – and then you back into your reading of the Chinese system. Because that’s how the funding works and the incentives are all about having impact on policymakers. But maybe the most useful thing is just to build a mental model of who the actors in the system are, what they’re working towards, and how successful or unsuccessful they are over time.

Jon Czin: It’s funny you say that. Coming from the Agency and having grown up there professionally, especially when I started doing policy jobs. I would go from analyzing things and then I would have my boss when I was at the Pentagon say, “Okay, so what do we do about it, Jon?” For me personally – I’m a lifelong runner – it’s like if you’re a runner and you think, “Yeah, I can do a triathlon,” and then you get on a bicycle and you’re like, “I’m feeling a lot of burn in places I didn’t expect to.” You thought you were in good shape, but this is an adjacent muscle set. It’s good to have both. But I obviously got a huge dose of that at the NSC.

Leaving government too, it’s really striking to me. When I engage with people in my current role at Brookings, I walk into the mindset of “Okay, have I read everything Xi has said in the last week? Do I have my ducks in a row?” I’m still in that groove from being an analyst. But then 80% of the questions are about doing Pekingology on the Trump administration. In the early days, it was like, “Where does Musk fit in his orbit? Who’s up? Who’s down?” I’m comfortable doing this, but for their system.

Jordan Schneider: Yeah. Is there any aspect of – both of us were born at the wrong time in the sense that Xi’s kind of boring? We had this big bang – he comes in, he does all this stuff – but we’re in cruise control on a lot of different dimensions. The leadership stuff, even the PLA modernization stuff, the economic reform stuff, it’s all status quo. They just keep drawing out the line. But you know, ’40s, crazy; ’50s, crazy; ’60s, crazy; ’70s, crazy; ’80s, crazy; 2000s, some stuff. China is more important than it’s ever been as a percentage of global national power, but from an elite politics dynamism perspective, we are at a true nadir.

Jon Czin: That is so funny to hear you say that. I had a friend and mentor when I was in government who spent a good chunk of his career in the Hu Jintao era. When people were committing suicide and Bo Xilai is getting purged and Guo Boxiong is getting purged and Xu Caihou and all these guys who were seen as untouchable. It’s this incredibly volatile and dynamic moment in Chinese politics and I remember this colleague saying to me, “Jon, this is so cool. You get to cover all this stuff now. I spent most of my career in the Hu Jintao era. I feel like a middle-aged divorcée. I gave Hu Jintao the best years of my life.”

At one level, I see what you mean. It can look kind of boring, especially when you’re doing the medicinal work of plowing through all the speeches. You’re right, there is a lot of continuity. But if you try to see how the system looks from the inside, if you’re an official, what’s been going on in China over the past year is almost operatic. From the politics perspective, you have a vice chairman of the Central Military Commission who’s just gone missing with no explanation. You have people disappearing left and right. You have people getting rotated out of key positions like the Organization Department. This got lost in the shadow of Liberation Day – people just getting swapped out of their positions out of nowhere, which is usually not a great sign for one’s political health. It is one of those things where you kind of have to squint a little bit to see it.

But that’s part of one of the things that makes following Chinese politics so interesting. On the surface it looks really smooth, but if you peek under the hood a little bit and think about how it looks to people in the system, it’s Game of Thrones.

I’ve talked to colleagues and friends who are Russia specialists, and there’s always such an interesting juxtaposition if you look at the two political systems. Putin is obviously also a very personalistic autocrat. But there is, as a casual observer from the outside, a level of chaos in that system and violence that the CCP just doesn’t tolerate. Even watching that horrible tragedy with Navalny, all I could think as a China watcher was they would have squashed this guy 20 years ago. There’s no way they would have let him on social media posting all this stuff. This guy would have disappeared a long time ago. Or even this phenomenon of people falling out of windows. Yes, people in the CCP get purged and bad things happen, but it’s all kept quiet or kept in the family.

Jordan Schneider: Yeah. We talked about the military adventurism dynamic, but there aren’t CCP assassination squads in Europe and America or Tokyo killing these dissidents on YouTube. The level of obnoxiousness of democratic subversion…

Look, it’s there. You have stuff happening in city councils. We had this big mess in the UK Parliament, but it’s just an order of magnitude more conservative than what Putin has done abroad.

Jon Czin: Yeah, right. Nobody’s getting polonium in their tea. But it’s an interesting compare and contrast exercise when you think about US engagement with Russia, because even though the relationship is more fraught and more violent, there’s also this kind of built-in familiarity from the Cold War. We’ve all seen this movie before and we watched it together. It was striking to me when I was at the NSC – the Strategic Security Dialogue that we had with the Russians about really sensitive issues about nuclear weapons and nuclear doctrine, those continued until pretty much the outbreak of the war.

Whereas – and my old boss Kurt Campbell just had an essay about this in Foreign Affairs – getting the PLA to talk about anything even remotely adjacent to that is almost fantastical. You’re kind of chasing a unicorn to have those conversations. It’s interesting because in a lot of ways we’ve actually had a much closer relationship with China over the previous four decades. We have closer people-to-people ties and we obviously have the commercial relationship. Despite all that, when it comes down to those really sensitive geopolitical issues, we can still talk to the Russians in a way that is very hard to fathom with China.

Jordan Schneider: Yeah. My two cents on that is – if you go through the late ’50s and early ’60s with another country, you kind of get it. About how this isn’t a joke. And China has never had a nuclear scare. There’s a level at which their system just doesn’t take this stuff all that seriously. Then on the Russia side, there is an aspect of, “Oh, we’re still talking to the Americans about nukes, that means we’re a great power.” Whereas China can get that “oh, we’re in the game” feeling from other dimensions than discussing ADIZ zones.

Jon Czin: Part of it from the Chinese perspective too is, “You want to talk to us about nuclear weapons, you talked to the Soviets about nuclear weapons, and how did that turn out for them? What’s the angle here? What’s the trap?” But you’re right, because there is an impulse in some quarters of Washington that I’m sympathetic to – people want to get to some kind of détente. If we’re in this kind of more 1950s-like moment with China, people say, “Well, how can we fast forward and get something more like the 1970s between the US and the Soviet Union, where it’s a more stabilized competition?” I can understand that impulse, but from the Chinese side, without having had that shock or that scare, it’s going to be very hard emotionally and intellectually for them to get there.

The things that have gotten the US side on this path – everybody always goes back to EP-3 as the touchstone moment. From our side, that was an “oh, shit” moment. “We need to have meaningful crisis communications or military-to-military engagement or those sorts of things.” I don’t have evidence of this, but I think that from the Chinese side, they saw that as an effective model of crisis management. They were able to hold onto the pilots for more than 10 days.

Jordan Schneider: They got their apology.

Jon Czin: They got their apology. What’s the problem here? Going dark is part of what we need to do because in that system you need to confer and get your act together. But also as a tactical matter, you could easily see somebody in that system making the case, “This was actually quite effective. Going dark and being opaque actually enhances our leverage with the Americans. The longer we go dark, the more cautious they’re going to be and the more they’re going to try to reach out to us.”

Jordan Schneider: The idea of an accidental World War III starting between the US and China over jets hitting each other or something just strikes me as pretty far-fetched. I’d be curious for your take on that, because that is the whole line of thinking of why this is important, although it just seems like an incredibly low probability event.

Jon Czin: I get that perspective. But I’ve been thinking about this a lot lately. I worry about the risk of some kind of accident, some kind of collision. It’s probably inevitable at some point, just given the nature of how much steel is out in the water and how much is up in the sky. But does that necessarily lead to some kind of cataclysmic conflict? You’re right. Objectively it’s harder to see that.

Part of the challenge for the policy community is that if you’re in the seat, you want to foreclose that possibility. The issue is that there’s a trade-off for constantly trying to pursue this. You’re constantly going after the PLA and you’re constantly going after an institution that has little to no interest in talking to you. Even in a crisis, they still have to respond to the political bosses and that’s really the crucial channel. You’re not going to be able to figure it out on your own between the Joint Staff and the Minister of National Defense who, oh, by the way, is not even in the CMC anymore. Not even a state counselor. At this point, it’s like talking to a glorified errand boy.

Jordan Schneider: If we’re in a situation pre-boats crashing into each other where both sides do not want war to happen, then the argument that a war or a dramatic escalation is that something would have to change in either leader’s mind or a shift in the domestic political temperature, from not wanting a conflict to actively wanting one, or escalating to the point where the other side has to escalate. It just doesn’t strike me that an event we both agree is an inevitability, like Taiwanese troops getting run over, or a collision in the Philippines (which is kind of unbelievable that it hasn’t actually happened yet) would be a trigger. Yes, that we haven’t had deaths. But it’s just, everyone’s got to price it in at some point. If you want to start a war, you’re going to start it in a more clever way than running into a boat and then launching an invasion nine days later.

Jon Czin: Yeah. There’s this presumption sometimes that it’s going to be the Chinese side that’s going to feel the pressure to up the ante, that they’re going to have to placate the nationalists inside the system. But actually, with Xi Jinping so powerful and so dominant in the system and having been so tough with the United States, I don’t really think he has to cover his political flanks in the way a Hu Jintao would have or a weaker leader would’ve had to. That’s the paradox. Xi is tougher on the United States in some ways, but because he has so much control, he also has more flexibility than a weaker leader might have to fend off those voices and say to the PLA, “Settle down, guys.” Or whoever else in the system might perk up in that kind of moment and say, “Xi, you’re being too weak on the Americans or you’re being too weak on Taiwan.” I don’t think he has to worry about that.

You’ve seen that with how they’ve played the trade war – they got very inflammatory with the rhetoric after Liberation Day, and now we’re on the path to a summit just six months later. It’s not like necessarily they’ve got total control and their ability to control this is mechanistic. But I don’t think they have to worry about it as much as some people on our side think. The same goes true for how this plays out politically in the United States. If there is an accident, people will be upset about it. But will people really have the appetite or the willingness to go to war, especially in this kind of political moment right after what happened after 9/11 and the response that we had that was so over the top, especially when you’re dealing with an adversary that is so formidable?

That’s a big rationale for China’s military modernization, of wanting to be prepared for an actual conflict, but also an element of deterring the United States. “Yeah, you guys can come into theater, but this is not going to be 1996 redux, where we actually have real capabilities and we’re able to hold your assets in jeopardy.”

One last thing that I would leave you with too, Jordan, is that I’ve been very struck since I left government, especially since there’s been so much conversation about the National Defense Strategy. There’s a bipartisan commission that’s charged with evaluating the Pentagon’s progress against the National Defense Strategy. The National Defense Strategy gets promulgated and then there’s this independent commission done through RAND. It assesses, “If these were your objectives, how did we do? Or how are we doing against the criteria this administration has laid out for the National Defense Strategy?”

If you look at the last one that came out, the last commission report and what it had to say about China in particular, the language in it is very stark. The last two NDSs have said that China is the pacing challenge for the US military. China’s military continues to outpace the United States in a growing number of domains. There’s actually one line in there too where it says they’ve negated the US military’s advantages in the Western Pacific.

Jordan Schneider: I was just going to come back to India and Pakistan.

The fact that they’ve figured out how to keep a lid on it. I mean, they do have more practice, and there is a dance which you’ve seen a number of times. But that as another counter-example to a crisis leading to World War III is something that folks should price in at some level.

Jon Czin: Because you mean India and Pakistan have grown accustomed to dealing with this and have figured out how to…

Jordan Schneider: Yeah. A thing can happen over 72 hours between two nuclear-armed powers and then cooler heads can prevail repeatedly. These are two very big, scary militaries, but if the leaderships don’t want to do it, you can even start escalating but get off the ladder at some point before cities start getting wiped off the map.

Jon Czin: I always think about the history of this when you go back to the ’50s, the Quemoy-Matsu crisis. It was in the second one, if I recall correctly, where the Chinese were shelling Taiwan on alternating days. Mao’s telling everybody to settle down and scaring the hell out of Khrushchev because he’s like, “It’s fine, it’s fine.”

Jordan Schneider: Alright, we’ll call it there. Thanks Jon. It was a ton of fun. Thanks for being a part of ChinaTalk.

Nick Corvino joins ChinaTalk this year as a Tarbell Fellow, fresh off completing his master’s in China Studies at the Yenching Academy of Peking University.

Last week, China placed export controls on a wide range of rare earths and industrial inputs. Today, we’re taking a deep dive into the controls on lab-grown diamonds and why they matter.

Beijing’s restrictions target only industrial-grade synthetics used in chip fabrication and precision manufacturing. They can be important for wafer-slicing saws, polishing tools, and lithography optics, where extreme hardness and heat resistance are critical. Without them, producing advanced semiconductors and other high-tech components becomes significantly more difficult.

China is the world leader in synthetic diamond production, though by how much depends on whom you ask. Industry analyses suggest it accounts for roughly half of global output, while China Daily has claimed as high as 95% (this is too high..). It also dominates the manufacturing of key machinery such as high-pressure, high-temperature (HPHT) presses. This mix of capacity and machinery could let China squeeze parts of the chip supply chain, though its edge is less dramatic than some RREs like Terbium and Dysprosium.

What do diamonds do?

A diamond is made entirely of carbon atoms, each one tightly bonded to four others in a neat, repeating lattice. That structure gives it an uncommon mix of traits: it’s both the hardest material on Earth and one of the best conductors of heat. In practice, that means diamond can withstand enormous pressure without deforming and transfer heat faster than copper while remaining an electrical insulator.

These qualities are what brought synthetic diamonds into the semiconductor world. As chips for AI training grow hotter and denser, synthetic diamonds are becoming increasingly valuable for managing the resulting thermal load.

Since the 1950s, scientists have been able to make diamonds from scratch. These synthetic diamonds are molecularly identical to natural ones, but are grown in labs instead of forming underground. By recreating the extreme heat and pressure found inside the Earth’s mantle, or by building them atom by atom in controlled chambers, manufacturers can now produce crystals tailored for industry. That breakthrough allows the diamond industry to scale, no longer solely dependent on what can be dug out of the ground. Synthetic diamonds are now a critical component in slicing semiconductor wafers, printing chip designs, and improving radar capabilities (see the ‘Applications’ section for details).

Why China Leads in Synthetic Diamonds

China’s work on lab-grown diamonds began in the early 1960s, when researchers set out to make the country self-reliant in what were then called “superhard materials.” At the time, China couldn’t easily import industrial abrasives or natural diamonds, so it built its own high-pressure, high-temperature presses to produce them domestically. In 1963, China created its first synthetic diamond, becoming the fifth country in the world to do so. The effort echoed a broader post-war ambition to dominate foundational materials, such as rare earths and magnets, that technology and industry increasingly depended on.

Over the following decades, provinces like Henan and Shandong industrialized around diamond production, helped by cheap energy, access to carbon feedstocks (the raw materials that provide carbon atoms), and state support for superhard materials. By the 2000s, China was already producing the most synthetic diamonds in the world and had built an entire supply chain ecosystem around them.

China’s ‘Diamond Capital’

There are various places in China that have become the global hub for something highly specific. In the rare earth industry, the city of Baotou (包头市) in Inner Mongolia processes more than half of China’s rare earth minerals. Similarly, Dan Wang’s Breakneck describes how Zheng’an (正安) in Guizhou became “guitar city,” a small inland county that now makes about one in every seven guitars worldwide.

If Baotou is the rare-earth powerhouse, Zhecheng County (柘城县) in Henan Province plays the same role for synthetic diamonds. Home to fewer than a million people — very small, by Chinese standards — it has transformed from an agricultural county into China’s “Diamond Capital.” Local factories produce everything from micron-sized diamond powders to gemstone-quality crystals. Zhecheng now accounts for around half of China’s synthetic diamond output — roughly 4 million carats annually — and exports to more than 50 countries, amounting to an estimated 25–40% of global production.

Zhecheng also has the advantage of local clustering. Raw carbon feedstock suppliers, HPHT press makers, polishing workshops, and logistics firms all sit within literally a few square kilometers. That concentration lowers transaction costs, spurs reinvestment, and locks in process knowledge.

Overcapacity?

Just because China produces the most synthetic diamonds doesn’t mean it has the most leverage. In fact, the opposite may be true.

Like other parts of China’s manufacturing sector, the synthetic diamond industry could suffer from overcapacity, with too many producers chasing too few profitable markets, driving desperation to export abroad. Even the industry’s largest Chinese firms, including North Industries Group Red Arrow, Henan Huanghe Whirlwind, and Henan Liliang Diamond, reported sharp declines in revenue and profit in 2023, with their share prices staying relatively flat ever since and only modestly rising following the MOFCOM announcement. And Zhecheng County’s GDP per capita was ¥36,079 in 2024 (about $5,000), well below both the provincial and national averages. If China tightens export controls, it will inflict pain on domestic workers and manufacturers as well as overseas buyers.

How much do other countries depend on China?

How quickly could other countries scale production if China restricted exports?

Outside China, a handful of nations maintain smaller yet capable synthetic diamond industries focused on high-end or specialized applications. Element Six, a De Beers subsidiary headquartered in London, is the most prominent non-Chinese producer, manufacturing advanced diamond materials for cutting tools, optics, and semiconductor cooling. In East Asia, Japan has a few synthetic diamond companies, such as Sumitomo Electric and Tomei Diamond, and South Korea has ILJIN Diamond. India is taking a slightly different approach, favoring the slower, more expensive chemical vapor deposition process, which yields higher-purity stones than China’s majority HPHT method. Russia still leads in natural industrial diamonds — about 40% of global output — but that segment is increasingly obsolete compared to synthetic materials.

The United States has its own producers, including Hyperion Materials & Technologies and Applied Diamond Inc., but they lack China’s industrial scale. According to the U.S. Geological Survey, the U.S. remains heavily dependent on China for imports — roughly 77% of its industrial diamond supply — while another 8% comes from South Korea, 5% from the UK, and the rest from a long tail of countries.

Producing industrial diamonds at scale requires not only thousands of presses but also a dense network of coating, bonding, and classification facilities—and, crucially, the decades of process know-how now most concentrated in China. Western producers also face tougher environmental permitting for powder-handling and metal-bonding operations.

However, as diamond analyst Paul Zimnisky told ChinaTalk:

“In mainstream high-tech applications, the global industry is still in a nascent phase — so it is still to be determined who will ultimately be the biggest players in this space.”

China has not achieved a complete monopoly across the diamond supply chain, nor does there seem to be a segment or tool within the chain that only China can produce. Other countries can make key inputs, such as diamond presses, precision abrasives, and CVD materials, just not at the same scale. So, China’s leverage is real, but compared to entrenched sectors like rare earths, where it processes ~90% of global supply, the diamond industry has real global players who could likely step up to the plate and take advantage of the market opportunities export controls would open.

Applications

Diamond Saw!

The diamond wire saw (one of the diamond products China restricted) is a thin metal wire coated with fine diamond dust, used to slice huge blocks of silicon into the flat wafers on which chips are built. The process demands extreme precision. Each wafer must be perfectly smooth and even, because even microscopic irregularities can throw off the alignment of the billions of transistors that will later be etched onto its surface.

Not every wafer is cut this way. Older or lower-end manufacturing lines sometimes use slurry-based wire saws, where loose abrasives like silicon carbide are suspended in fluid to do the cutting. But over the past decade, diamond-coated wires have become the preferred choice, since they cut faster, waste less silicon, and leave cleaner, flatter surfaces. Synthetic diamonds, grown under controlled conditions, are uniform in size and hardness, allowing the wire to stay cool and cut with consistent precision.

That precision matters because every step of chipmaking builds on the wafer’s surface. Lithography machines must focus light with nanometer accuracy; deposition and etching layers have to align perfectly on top of one another. If the wafer is even slightly uneven or warped, this can mess up every subsequent step in the chip-making process.

(You can also buy a commercial-grade diamond saw at your local Home Depot!)

Optics and Lithography

Diamonds can also appear inside lithography systems, particularly in EUV machines that print the smallest and most advanced chips. The light inside these systems is so powerful that ordinary materials would warp or degrade, so manufacturers use diamond to handle the heat and maintain optical stability.

Diamonds can also be used to polish the mirrors and lenses inside lithography machines to near-atomic smoothness, a requirement for maintaining optical precision at nanometer scales, where even microscopic surface flaws can blur or misalign the projected chip pattern.

Wildcard: Diamonds as Future Chips?

Diamonds don’t just have to make semiconductors — they could one day become them. A semiconductor is a material whose ability to conduct electricity sits between a conductor and an insulator (hence the name ‘semi’ in ‘semiconductor’), allowing precise control over electrical current. Diamond’s wide band gap and exceptional thermal conductivity make it theoretically better than silicon for handling high voltages and extreme heat.

Researchers in Japan, the U.S., and China have already built prototype diamond transistors, but they’re still costly and hard to produce. Doping a diamond with boron atoms can turn it into a semiconductor, though the process remains difficult to control. More practically, companies like Diamond Foundry are experimenting with embedding small pieces of diamond into silicon chips to keep them cool and increase energy efficiency.

Military

Diamonds are also an important defense material beyond AI. Their hardness and thermal conductivity make them valuable for tooling munitions and cooling high-power radar and laser systems.

Unanswered Questions

After a week of research, here are the questions I couldn’t crack:

• How quickly could non-Chinese producers scale if restrictions bite? Other countries can do chemical vapor deposition and make diamond saws — but how long would it take to match China’s scale and cost advantage if they were suddenly asked to increase supply?

• Is there a single segment of the supply chain that only China (or another country) truly controls and can’t yet be replicated? My best guesses are:

  1. the human know-how and culture in Henan;

  2. HPHT press manufacturing and tooling (my current estimate is that China produces 80–90% of HPHT diamonds globally, though much of this output is low-cost and not high-enough quality for many industrial uses); and

  3. catalyst & ultra-pure graphite feedstocks, since China is really good at graphite refinement and metallurgy.

• Are governments planning for this? Who is implementing policies to reduce these vulnerabilities?

If you know the answer to any of these, or work in the diamond industry, I’d love to hear from you! Shoot me a message at: nick@chinatalk.media

Lily’s Notes on Diamond Jewelry

MOFCOM explicitly excluded jewelry-grade diamonds in the export controls. Why? It certainly would have hit Americans where it hurts — the USA is the world’s largest consumer of diamond jewelry, and in 2024, nearly half of all diamond engagement rings sold in the US contained lab-grown diamonds.

But Beijing is keen to argue that the new export controls are matters of national security, and not just an attempt to generate leverage in negotiations with the US. Restricting exports of gem-grade diamonds would undermine that argument, since they are very obviously not dual use.

Paul Zimnisky also noted that Indian producers are well-positioned to acquire market share in the wake of Chinese controls on industrial diamonds. If China also restricted exports of jewelry-grade diamonds, Indian suppliers would be incentivized to expand production to fill the gap. That would reduce the profitability of the nearly 1,000 Chinese firms that deal in lab diamonds — most of which are small businesses — even if the controls were temporary.

On diamond prices

In the wake of the new export controls, industrial diamond producers could pivot to producing gem-grade material (the playbook for this upgrade is not new). Such an abrupt increase in supply would decrease prices and eat into gem-grade diamond producers’ profit margins, as well as drive natural diamond prices even lower to compete.

But in fact, lab diamonds have already driven natural diamond prices down. In the words of diamond industry veteran Jon Phillips, “The diamond market has stabilized, but that doesn’t mean it’s not ripe for another downfall… [Natural diamonds] are inextricably tied to the lab-grown market.”

Chinese lab diamonds are available for 1/20th of the price of an equivalent natural diamond, with one-carat faceted stones available for as little as 1,000 RMB (~US$140). That price difference has helped lab diamonds grow from 1% market share in 2015 to about 20% today. That’s bad news for Botswana, which relies on diamond mining for 30% of its GDP, but certainly a win for enjoyers of sparkles the world over.

In addition to price and aesthetic considerations, there’s also an element of national pride that drives Chinese consumers in particular to choose lab diamonds. As Beijing-based jeweler Cheng Cheng 成诚 told ChinaTalk:

“From 2019 to 2023, many of my clients would ask about the difference between natural and lab-grown diamonds and tended to favor natural ones…. By 2024 and 2025, however, I’ve felt that many customers have become very comfortable with lab-grown diamonds. …

One reason for this shift is that lab-grown diamond manufacturing is centered in China. Confidence in “Made in China” products has grown rapidly, and Chinese consumers strongly recognize the country’s fast-developing lab-grown diamond technology.”

Some consumers will always prefer a gem that was formed over millions of years by geologic processes. But the beauty of lab-grown gemstones is that they expand the range of possibilities for artistic jewelry designs.

* = don’t sleep on it

China + AI

China’s New AI Plan

Released 34 days apart, the US and China’s AI action plans reveal starkly different governance philosophies despite surface similarities. In this piece, Irene Zhang breaks down what we can learn by contrasting these two strategies. For example, China’s State Council document is comprehensively techno-accelerationist, targeting 70% AI adoption by 2027 and 90% by 2030 across everything from manufacturing to “philosophical research,” with job displacement explicitly accepted and trial-and-error encouraged society-wide. The Trump administration’s plan, led by OSTP, David Sacks, and NSA, frames AI through US-China competition, mentioning “national security” 24 times versus China’s single mention, focuses on worker retraining and careful sectoral experimentation, dividing the world into American versus Chinese technological spheres.

Kimi

Moonshot AI’s Kimi K2 — an open-weights, 1-trillion-parameter MoE “non-reasoning” LLM — represents an alternative development path from DeepSeek’s hedge-fund cocoon. Built by a globally trained team, backed by Alibaba VC, and shaped by China’s compute limits, K2 openly borrows DeepSeek V3’s EP+DP/MLA architecture, exemplifying a fast-iterating, open-source research culture that Chinese labs are now embracing.

Alibaba Gets AGI-pilled

In this column, Afra makes the case that Alibaba CEO Eddie Wu is an AGI believer. At its 2025 Yunqi Conference, Wu delivered a sermon on Artificial Superintelligence — calling AGI inevitable and ASI humanity’s next leap. This newfound prophetic tone departs from China’s usual instrumentalist, utilitarian tech discourse. Since the 2020 Ant IPO crackdown, Chinese firms have avoided grand visions and focused on compliance — but Wu’s speech could represent a “vibe shift” toward ambition and imagination.

China’s AI Education Hype

China’s exam-oriented education system creates a paradox for AI adoption — while wealthy urban students access robotics and coding, most Chinese schools remain dominated by pen-and-paper exams until university, with rural schools suffering from dangerous buildings, half the schooling years of Beijing (Tibet), larger class sizes (45+ students, some 56+), and fewer teachers per capita than the US (1:16 vs 1:13.26). Minister of Education Huai Jinpeng is pushing AI integration to address these inequalities — advocating for “smart campuses” and the creation of a national education LLM.

Cheating Apps: China’s Latest Tech Export

Chinese homework-solving apps like ByteDance’s Gauth and Zuoyebang’s Question.AI have dominated US download charts, with Gauth reaching 2 million daily active users globally versus only 800,000 for its Chinese equivalent “Doubao Loves Learning.” Lily Ottinger argues that the international versions are deliberately optimized for cheating — showing answers before steps, featuring aggressive monetization, and solving problems across all subjects for free — while Chinese versions emphasize educational features like study planners, parent oversight tools, and detailed explanations. Gauth’s superior performance on advanced calculus problems suggests ByteDance invests more resources internationally, where homework-dependent education systems create greater demand compared to China’s exam-heavy system. Both apps employ selective censorship: Gauth initially blocked criticism of Trump but now answers freely while subtly misrepresenting China’s presidential term limits as “informal” rather than constitutional; Question.AI refuses Tiananmen Square questions entirely. Ottinger warns that these apps risk creating educational inequality — wealthier students will attend tutoring centers while others automate homework — and predicts potential US bans if regulators notice Chinese companies profit from undermining American education while offering more pedagogically sound products at home.

History

The Party’s Interests Comes First

Joseph Torigian’s biography of Xi Zhongxun reveals the CCP as simultaneously a religious organization and mafia — where suffering paradoxically deepens loyalty and persecution is a badge of honor. Our epic two-part interview explores the life of Xi Zhongxun, father of Xi Jinping, from his life as a young revolutionary to his purge and eventual rehabilitation.

*The Long Shadow of Soviet Dissent: Disobedience from Moscow to Beijing

This ChinaTalk episode with historian Ben Nathans and longtime reporter Ian Johnson explores how Soviet dissidents built a moral and intellectual movement by demanding that the USSR live up to its own laws — a strategy pioneered by mathematician Alexander Volpin that later echoed in China’s rights-defense (维权) activism. Through episodes like the 1966 Sinyavsky-Daniel trial, dissidents transformed “socialist legality” and show trials into moral theater, using underground samizdat networks to expose the state’s hypocrisy and preserve truth.

The Pacific War

We explore Ian Toll’s incredibly expressive Pacific War trilogy, examining both his innovative narrative techniques and strategic questions about WWII’s Pacific theater. The conversation covers whether Allied victory was predetermined after Pearl Harbor, how Japan’s domestic political instability drove its military aggression abroad, the evolution of kamikaze tactics as a resource-scarcity solution, and the crucial role of media management in shaping military leaders like MacArthur and Halsey into national heroes. Part 1 and Part 2 here.

Xi and Putin Weaponize WWII’s Legacy

This article by Joseph Torigian examines how Xi and Putin have leveraged the 80th anniversary of WWII’s end to legitimize authoritarianism and territorial expansion from Yalta to Kaohsiung. Both leaders lost family in the war, and now view themselves as inheritors of an unfinished struggle against Western hegemonic forces. Yet their instrumental use of history — through censorship, patriotic education, and civilizational rhetoric — carries risks. As Russia suffers from war fatigue, brain drain, and demographic decline, and China must manage the tension between anti-Western signaling and its dependence on Western trade.

Taiwan Confronts its WWII Legacy

This article by Jordyn Haime examines Taiwan’s fraught relationship with its WWII history — - while the ROC did the majority of the fighting against Japan in the mainland, over 200,000 Taiwanese served in Japan’s Imperial Army as colonial subjects, and 2,000 Taiwanese women were enslaved as “comfort women.” While Taiwan’s DPP government celebrated the anniversary by praising the liberal international order, Haime attended the non-governmental memorial in Kaohsiung honoring the Taiwanese who fought under Japan. After the KMT takeover in 1945, these veterans were politically “forgotten” during 38 years of martial law to avoid labeling them as Han traitors (漢奸). Taiwan’s democratization has reopened space for confronting these contradictions, but Haime argues that achieving true transitional justice will require acknowledging Taiwan’s role in supporting the Japanese war effort.

Taiwan, Ukraine, and the Future of War

*Closing the Taiwan Strait Deterrence Gap: Lessons from Air University Wargaming

Air University’s extensive 2023-2024 wargames challenge the conventional wisdom that Taiwan cannot defend itself without direct US intervention. The study found that a $14.6 billion force modernization centered on asymmetric capabilities could destroy up to 75% of PLA amphibious assets and “stop an invasion cold.” The optimal force design abandons prestige platforms indigenous submarines, Abrams tanks, and large warships in favor of 7 XQ-58 drone squadrons ($756M), 20 Chien Hsiang anti-radar drone squadrons ($2.54B), layered air defense systems ($7B), 30 Kuang Hua VI missile boats ($369M), 300 “Sea Baby” and 400 “Jet Ski” unmanned surface vessels ($166M), 200 unmanned underwater vehicles ($100M), 400 Hsiung Feng-III/IIE anti-ship missiles ($1.7B), and enhanced space/cyber ($2B). This strategy targets PLA’s two-phase invasion plan with simultaneous swarms of aerial, surface, and subsurface drones plus subsonic/supersonic missile salvos that “no fleet in history” could counter. Taiwan’s reported $20 billion supplemental defense budget now under Legislative Yuan consideration appears aligned with these asymmetric recommendations, representing potentially “the most decisive move in that direction in modern Taiwan history” if passed.

*Second Breakfast

The ChinaTalk team has launched a new defense podcast! Second Breakfast brings together a handful of washed vets to talk current events and the future of warfare. For example, our third episode discusses what Ukraine and Lebanon teach us about the U.S.’s blind spots, why the U.S. homeland is vulnerable to adversary attacks and cyber sabotage, and whether Taiwan’s semiconductor “shield” is a deterrent or liability.

Read a transcript with some highlights here or check out the full playlist on YouTube.

Deterring a Taiwan Invasion: Lessons from Imperial Japan

Imperial Japan’s 1944–45 defense plan for Taiwan, Operation Sho-2Go, rapidly transformed the island from a logistics hub into a fortress. Amid fierce resource jockeying, this posture convinced US planners that invading Taiwan (Operation Causeway) would be far costlier than taking Okinawa. Drawing on Japanese-language archives, JASDF Col. Hirokazu Honda shows Sho-2Go’s mix of force buildup, concealment, and asymmetric shock as the key to deterrence. The piece argues modern Taiwan can adapt these lessons: rapidly scale active/reserve forces, expand subterranean and redundant C2 infrastructure, prioritize mass asymmetric systems over exquisite platforms, and signal resolve — proving credible deterrence is achievable even under adversary air/sea superiority.

Robotics

Why Robots are Coming

Robotics researcher Ryan Julian outlines the near-term trajectory of general-purpose robots, arguing that widespread deployment in logistics, material handling, and light manufacturing is “baked in” over the next 3-5 years. Unlike self-driving cars, industrial robots can provide linear utility at partial autonomy (50% labor reduction still creates massive value), allowing faster deployment in commercial spaces where safety bars are lower. Julian predicts hundreds of thousands to millions of industrial robots within a decade, followed by more dexterous manufacturing tasks (bolts, wiring harnesses) in 7-10 years.

ChinaTalk

Why Robots are Coming

8VC is hosting a meetup for ChinaTalk this coming Thursday. Sign up here if you can make it…

Read more

a month ago · 48 likes · 2 comments · Jordan Schneider and Lily Ottinger

How Hangzhou Spawned Deepseek and Unitree

DeepSeek didn’t spring from nowhere, argues: it grew from Hangzhou’s distinctive ecosystem that empowers private firms without classic Silicon Valley ingredients like deep VC pools and elite university clusters. Hangzhou hosts a budding tech scene — the “six little dragons” (Unitree, Deep Robotics, Game Science, BrainCo, Manycore Tech, plus Alibaba) — but this piece argues that Hangzhou’s edge is “flexible governance,” where officials act like facilitators that fast-track IP, smooth out licensing agreements, and solve practical problems for small, scrappy companies.

Decoupling and Export Controls

Smuggling Nvidia GPUs to China

Gamers Nexus editor Steve Burke unearthed the complete GPU smuggling supply chain from the US to mainland China in a three-hour YouTube documentary, contradicting Nvidia’s claims that GPU smuggling is a “non-starter.” Burke interviewed US-based Chinese buyers purchasing export-controlled chips on Craigslist, Chinese middlemen who aren’t even sure which chips are banned, repair shops, and university researchers using smuggled A100s. This episode is packed with crazy characters — definitely worth revisiting if you missed it the first time.

The full documentary is now available on YouTube (after initially being removed via DMCA).

*MP Materials, Intel, and Sovereign Wealth Funds

In this podcast, Daleep Singh, Peter Harrell, and Arnab Datta argue that critical minerals markets are broken due to extreme price volatility and a lack of WTI-equivalent futures infrastructure. To tackle Chinese dominance in REMs, the July 2025 DoD-MP Materials deal uses Defense Production Act authority creatively, but makes MP Materials “a national champion… crowned without contest.” This interview discusses whether the deal can succeed and explores alternatives like a Strategic Resilience Reserve or a sovereign wealth fund, and is particularly relevant today as the trade war has heated up again.Modern Japan

Abundance

Dan Wang

Dan Wang joins the podcast to discuss his book Breakneck, exploring China’s “engineering state” versus America’s “lawyerly society” through the lens of brutal social engineering projects. Wang argues China’s engineering mindset — treating society “as liquid flows” where “all human activity can be directed with the same ease as turning valves” — enabled four decades of 8-9% growth lifting hundreds of millions from poverty but also created “novel forms of political repression humanity has never seen.” We also did a show with Dan Wang + Ezra + Derek!

Reading Abundance from China

Afra hosted a Chinese-language reading group for Ezra Klein’s Abundance with Chinese immigrants — academics, lawyers, AI investors, engineers — who jokingly called themselves the “Ezra Thought Study Group.” They discuss the poverty of the American imagination, China’s bureaucratic advantages, America’s “China envy,” and the consequences of the US and China “doomscrolling each other’s social feeds.” Participants highlighted Bay Area defense startups (Anduril) as innovation bright spots compared with China’s widespread “crossing the river by feeling American stones” approach.

Career Advice, Travel Notes, and Best of China

Policy: An Early Career Guide REVISED!

Jordan presents a practical playbook for breaking into China-adjacent policy, from learning Mandarin to starting a Substack. Expect to be wrong sometimes, state confidence levels, welcome critique, and cultivate humility. Bonus guidance covers security-clearance common sense, book reviews as a low-risk on-ramp, developing long-form depth in your writing, time/attention hygiene for social media, and first-hand tips on finding a niche.

Notes on Kyrgyzstan

Lily Ottinger takes a look at Kyrgyzstan — Central Asia’s most democratic state, which has seen rapid growth and record-low unemployment in the wake of Chinese investment. Post-2013 BRI projects now dot Bishkek and Osh — highways, airports, a BYD factory, and a mega ski resort (target winter 2026) — while Chinese buses and equipment support public transit and parks. Public opinion, once wary of Beijing and warmer to Moscow, flipped markedly after 2022. On the ground, Chinese migrants are present in mining, restaurants, and import retail, often without Russian/Kyrgyz language skills. Overall, Kyrgyzstan’s boom showcases BRI-enabled development and rising pro-China sentiment alongside enduring sensitivities about foreign labor and elite capture.

China’s Best Music of 2025 (So Far)

Jake Newby, author of the China music Substack Concrete Avalanche, presents his official playlist of China’s best new music. It includes Kazakh and Tibetan experimental folk, Shanghai cold wave, and post-rock with an electrified guqin.

China’s best short fiction of 2025

The Cold Window Newsletter surveyed nearly all new 2025 Chinese short-story collections and finds the “no good literature” complaint false: despite domestic distrust of establishment writers, a recent plagiarism scandal, and limited overseas attention, standout work — often by women of the post 1980’s generation — thrives, mixing dreamlike, speculative intrusions and internet realism, with serious treatments of abuse and many long novellas. The top five picks: Shao Dong’s grounded realism (notably “Recreational Dancing”); Mo Yin’s genre-literate, reference-dense sci-fi (“City of Dreams”); Guo Shuang’s sharp class/fandom portrait (“Push Out the Pig”); Du Li’s dense, unsettling nightmarescapes (“The Cuckoo Vanishes”); and #1 Zhang Tianyi’s exuberant, idea-rich myth/pop-culture remixes (esp. “The Beanstalk”).

Polling and Prediction Markets

Nate Silver on AI, Politics, and Power

This grab-bag conversation with Nate Silver explores reputation and legacy-building as a public intellectual, how AI will and won’t change politics, and the future of prediction markets as aggregators of knowledge. Regarding the future of American politics, the conversation covers the impact of bad models and public narrative formation (including misconceptions about DeepSeek), as well as how to shift the public’s political opinions over the long term.

Betting on Chaos: Professional Political Gamblers

This interview with Domer, Polymarket’s top trader, explores the emerging profession of for-profit political forecasting — where bettors wager millions on elections, wars, and policy moves. Domer explains how prediction markets evolved from small hobbyist platforms to billion-dollar ecosystems offering real-time price discovery for geopolitical risk, yet still operate largely as solo “rōnin” endeavors. He details how traders gain an edge through deep research and emotional detachment, and how biases (including the tendency to overestimate unlikely events like a Taiwan war) and insider-trading risks shape market behavior. Markets can create feedback loops, where wealthy actors manipulate odds to manufacture political momentum, and they now react to news within seconds. Domer argues these markets discipline punditry by forcing participants to “put skin in the game.”

Tarun Chhabra is the head of national security policy at Anthropic and previously served as the Deputy Assistant to the President and Coordinator for Technology and National Security on Biden’s NSC.

Today, our conversation covers…

• Why the US needs to maintain an advantage in the race for AI development against China,

• Whether the US’s AI industry is prepared for future competition from China,

• The lawyers vs. engineers debate, and what the US needs to build AI supply chains,

• How government and industry can work together to across the AI development process.

Listen now on your favorite podcast app.

Race for the AI Frontier

Jordan Schneider: Part of the original justification for banning exports of American chips and semiconductor manufacturing equipment was the idea that these pieces of technology could directly contribute to PLA capabilities. We’re recording this during the week of a military parade, and I’d love to hear you give your most convincing unclassified case for why these technologies directly contribute to arming a strategic adversary.

Tarun Chhabra: Thanks again for having me, Jordan. The Wall Street Journal just published a good piece this week about how the PLA is using commercial AI technology. But this really goes back to when Jack Ma 马云 disappeared — that was essentially the end of any dissent or pushback from China’s tech companies regarding support for the national security apparatus.

It’s been a safe assumption since then that dual-use technologies enabling capabilities for the PLA or China’s intelligence services will be used that way. You can ask your favorite LLM for examples, and you’ll find plenty. One that obviously comes to mind — particularly because it was a focal point of the outbound investment restrictions — is cyber capabilities.

A straightforward example is Chinese hyperscalers providing the equivalent of cloud services and cybersecurity services to national security actors in China. Obviously, they’re going to offer AI services as well. Unless you think the AI somehow won’t be part of that package — which I don’t know how you’d conclude — it’s a pretty straight line from cloud and cyber services to frontier AI models.

Jordan Schneider: We have different layers of an AI race. I’m curious about your topology and how you’d rank them on their ability to build defensible advantages.

Tarun Chhabra: I think about it as the race to the frontier, the race for diffusion globally, and then the race for adoption — which encompasses both national security and economic applications.

On the race to the frontier, it’s about power, talent, and chips.

This is partially why Anthropic focuses so much on addressing power and permitting barriers to build more AI infrastructure in America, and why we emphasize export controls — because we think hardware is our advantage for the next several years.

On the diffusion side, it’s also why we focused on export controls. We don’t think our hardware should be powering Chinese data centers, either to help them reach the frontier or to compete with U.S. companies or other trusted companies globally. The same principle applies to adoption. The more we succeed in adoption, the more compute you’ll need at the enterprise level for national security actors as well.

Jordan Schneider: When debating how to structure export controls, let’s start on the chip-making side. What are the variables you tried to optimize for, and what should current policymakers focus on moving into 2025?

Tarun Chhabra: We have a significant advantage when it comes to chip making. The U.S., together with allies — obviously Taiwan, and stemming from our dominance in the supply chain along with close allies like the Netherlands and Japan — holds this position.

The question is, how long can we ensure that we maintain that advantage? This comes down to our ability to control that technology during the period in which China has yet to indigenize it, certainly at the level that enables scale in production or very advanced production. It also entails working on components and servicing as well.

Irrespective of who’s in office, here are the next things we ought to be doing: We should do more on the component side — this is also in the interest of the tool-making companies to defend their advantages. The servicing piece is really important as well in the industry. These are the next steps we should take to defend our advantage in chipmaking.

Jordan Schneider: How much do you buy the argument about China’s will to indigenize? The will and capability to indigenize remains a live subject of debate across all the different layers of our AI future.

Tarun Chhabra: The shot was fired during the first Trump administration with actions against ZTE and Huawei. From that point forward, maintaining dependence on the United States for advanced dual-use technologies was a bad bet from their perspective.

But there’s also a broader historical story here, which you’ve probably discussed with Dan Rosen and others — the history of China’s industrial strategy over the last several decades. Name any sector where it has worked for us to say we’ll just keep them addicted to the technology.

The pattern in China’s playbook is pretty clear — buy it until you can make it. Once you can make it, kick out the U.S. competitor. Eventually, once you can make it at scale and subsidize it, try to eat up their global market share. It’s happened over and over again. You name the sector, and given the leadership’s focus on AI, there’s next to no likelihood that we can stop the indigenization train.

The real question — which I know you’ve talked to Lennart Heim and Chris Miller about — is what do we do in the interim? The other question I would ask is: where would China be today if we didn’t have the controls? We can cite various developments, but where would they be if they had the talent, the energy, and also had the chips? We’d be in a much tighter race today, and we don’t want to be there from a national security perspective.

Jordan Schneider: Why is that hypothetical such a confusing thing? The SMIC base case is that they would be further along than even Intel is today if not for controls. Is this a particularly hard hypothetical?

Tarun Chhabra: You and I tend to be in violent agreement on this point, which makes it hard for me to understand why that isn’t the question we should ask. That’s why someone like Dario Amodei says DeepSeek shows the importance of maintaining, if not strengthening, controls. They have incredibly talented AI engineers in China, power, and capital — it’s just about the hardware, and it’s for this window.

The other layer of controversy is, how much does this window matter? Our perspective is, we’re not seeing a significant slowdown in the saturation of benchmarks. We still think you’ll see transformative capabilities over the next three years.

We should all discount this in a healthy way, but if we believe it’s just over — more likely than not, or 60% or 70% — and you talk to folks about how they assess that, the implications are significant from a grand strategy perspective. We ought to be preparing for that, and from my perspective, we shouldn’t try to make this a close race.

Jordan Schneider: The other wrinkle that folks haven’t necessarily priced in is that you guys are training on Trainium, and Google’s figured out how to train on TPUs. The idea that CUDA is this “one layer to rule them all” — that if you can get them stuck on it, you’ll have control forever — we’ve seen multiple companies already figure it out, and they only had commercial motivations, not their head of state telling them they had to do it.

Tarun Chhabra: I was just having this conversation with some of our colleagues internally this week, and they’re making the same point. Yes, Anthropic is a well-funded company with really talented engineers working on the hardware problem, but if we’re able to do exactly what you just said, and a nation-state is committed to doing it, then they can probably get there.

Jordan Schneider: You mentioned increased capabilities — this is weird sci-fi stuff. I’m curious, looking backward, how much that ethos or that single-digit, low double-digit probability played into policymaking. What’s your perspective going forward on how folks should adapt for the possibility of those types of futures?

Tarun Chhabra: What we’re seeing right now with our coding model — our engineers are using it for about 90% of tasks. That’s going to take longer to diffuse across the economy or even the broader tech sector, but people doing national security work often need to do a lot of coding, especially for cyber operations. The applications in cyberspace are pretty significant.

We have a demo showing what it would cost to replicate the Equifax breach — you could probably do it for well under fifty cents of tokens. If you tried to replicate that globally, you could probably do it for under $10,000. That alone should ring the alarm bell, and that’s with current capabilities.

If we think about nation-states trying to make cyber operations more autonomous in their attacks against us, and the need to defend against them and have a viable policy in cyber defense alone, that’s a clear and present problem today.

Jordan Schneider: In trying to talk people into this worldview, what typology of skepticism do you run into nowadays in Washington?

Tarun Chhabra: That’s a good question. Some skepticism is pegged to “this model came out and it wasn’t everything I expected it to be” — whatever model that might be. Using a data point of one isn’t a great way to assess this necessarily.

Another skepticism is that adoption is slower than the most optimistic projections suggested for certain uses, like coding. Then there’s the view that it’s taking longer to penetrate the physical world in manufacturing than very optimistic projections thought it might.

But going back to the counterfactual, we ought to re-baseline the questions. If I had told you three years ago that we would have coding models that could do 90% of our software engineers’ development work today, or that we could have a significant impact on cybersecurity, you might have believed me, but many people would have been understandably quite skeptical.

When the chip controls went into place in 2022, although a big focus was LM development and views on where that was going, the easiest thing for people to understand at the time was that the chips themselves are used in computers that do nuclear modeling or design weapons systems. That’s true, but not at the scale that would really be impacted by export controls. This has been a perpetual issue — how do you get people to think a year or two ahead when you’re on this exponential curve?

Jordan Schneider: You used to be a speechwriter. The Jake Sullivan line that will ring out in national security textbooks for years to come: “Given the foundational nature of certain technologies such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

As you said, 1%, half a percent, maybe 2% of these chips are probably going directly toward nuclear modeling or similar uses. The ongoing tension is that the vast majority will be for commercial use. You can have different opinions about whether the U.S. should be supporting broad-based growth of China, but this tension is built into anytime the government gets involved with technology — these aren’t night vision goggles.

Tarun Chhabra: The key issue here goes back to the question you asked at the beginning: we know this dual-use technology will end up supporting national security capabilities for a country that is actively planning military operations against the United States.

You have to accept that there’ll be some collateral impact in some cases to address that problem. Then you adjust based on what kind of advantage you think these capabilities are going to provide. If you think they could be transformative, then you take more risk on that front.

Jordan Schneider: There’s that level, and also the strategic level of what you’re doing to the relationship with your enemies and with your allies by controlling this technology. What’s the right way to conceptualize how the U.S. should be relating with the world — excluding China, Russia, North Korea — when it comes to AI?

Tarun Chhabra: We want to build as large of an ecosystem as possible that’s trusted and where U.S. AI and U.S. technologies are prevalent and even dominant. That’s the world we’re trying to build.

The question is: how do you do that? This is a decision not just between enterprises, but also one that governments will take. We often talk about the United States and fellow democracies working together on these issues. This is important not just from the standpoint of opening up markets — it’s also really important for our intelligence relationships with key allies. We want to make sure we continue to be interoperable across many layers of our relationships, both national security and economic.

But I want to come back to the point about “as large of a lead as possible.” Understanding the historical context is important because if you go back to the days of CoCom, the idea was not that we would give the Soviets an “n minus 2” advantage. That concept basically came after the collapse of the Soviet Union, when we did not have an arch geopolitical foe plotting to fight a war against us.

Jordan Schneider: We were selling arms to China as of 1995.

Tarun Chhabra: Exactly. That was the context in which the “n minus 2” concept became more popular. If you believe we are in a strategic competition with China, if you see that they are planning to fight us and target our troops and critical infrastructure, then you have to revisit that concept.

Software, Hardware, or Both?

Jordan Schneider: The idea of AI contributing to a new revolution in military affairs — we have Andrew Marshall saying: “The most important goal is to be the best in the intellectual task of finding the most appropriate innovations in the concepts of operation, making organizational changes to fully exploit the technologies already available and those that will be available in the next decade or so.” It’s not just having the models, it’s figuring out how to use them. This is a thing you guys are doing now. Where are we on this? Why don’t you respond to that quote?

Tarun Chhabra: This is where I’d actually give real credit to the current administration because they’re really focused on AI adoption, certainly across government, but also in the national security space. You see that with contracts from the Defense Department. Anthropic has one, OpenAI has one. Google and others have these as well. They’re laser-focused on accelerating adoption.

It can’t just be a question of “let’s use the chatbot” or “let’s bring the model in.” It needs to be, how can we use the models to re-engineer some of our mission space? That’s what Marshall was talking about. That’s really the much harder task that people are rightly focused on right now in the administration. That’s what we want to do together as well and have people on our team who are focused on partnering with the national security agencies to do exactly that. I see that as core to our mission. If we say we’re focused on helping support democracies, protecting national security for the United States and allies is foremost in that as well.

Jordan Schneider: The divide historically has been the ideation that Andrew Marshall was involved in. The doctrinal innovation that Andrew Marshall is talking about happens in-house basically. Then the military has toys, and they figure out how to play with them in different ways. Over the past 10 years or so, as you’ve seen on many different dimensions, commercial technology has leaped past what the department and the services are comfortable with or have an understanding of.

We have more of defense as a service, and you see more players trying to sell into the government, not only with products that are required, but with products that fit into their vision of a doctrinal future that they try to sell into Congress and the Pentagon. This makes sense at one level, maybe a little scary at another. I’m curious — how forward-leaning should you be? What is the right posture for someone coming in with new capabilities to bring into these organizations?

Tarun Chhabra: The responsibility of companies that are developing new capabilities is to ensure that policymakers and the military and the intelligence community have insight into where we think the technology is going, and certainly insight into where we see early adopters in the private sector taking the technology so that they can try to get on top of it as soon as possible and figure out how to employ it in doctrine.

That’s something we definitely can do. But obviously, the doctrine needs to come from the government. The planning needs to come from the government. There are lots of ways where we can have a really productive exchange, pressure-test some ways of doing things at the invitation of the government, of course, and say, “Hey, you could do it this way.” But look, that’s not a foreign concept. We’ve done that with a lot of other technologies, too.

Sometimes we take the idea too far that AI has come out of the totally private sector, with no government involvement. A lot of technologies that have been really important for national security — they may have been funded, yes, there may have been research funding that helped get them going. But there has been a lot of adoption of civilian technologies, as you know, and then they’re brought in and there’s a give and take between the civilian sector, the private sector and the military about how to adopt them.

Jordan Schneider: We see a bit of the future of warfare in what Israel is able to do in Iran and what is happening in Ukraine. But these are trend lines that you can trace and track over time, and you see things changing. When folks imagine the world of fast takeoff, you can paint futures in which there are very radical discontinuities in what militaries can do. I’m curious about your perspective on this.

Tarun Chhabra: You will see some discoveries that come out of leading corporations or the research community that are using the compute and using the models, particularly when they have access to certain kinds of data, specialized data. But where we want to go for the government — I hope we can empower them — is to be a force in their own right in some of these discoveries.

When we get to capabilities like that, an example that’s probably fairly straightforward today is the Department of Energy national labs. The labs have developed over decades a corpus of really incredible scientific data, in some cases experimental data. The question is, is there a way for them to use that data to potentially build a new platform for scientific discovery? As you know, the labs often are important partners for the national security community as well. That’s one example where today you could already see if we put the pieces together, there might be real capability to take advantage of transformative capabilities in the near future.

Jordan Schneider: I feel like it would be hard to imagine today someone really pulling a rabbit out of a hat — pulling the equivalent of a nuclear weapon out of a hat — given the current technological paradigm we have on September 4, 2025. If things get faster, that may change, right? Or could it not change because everyone’s going to be feeling this at the same time?

Tarun Chhabra: Well, that particular example — we actually just did some work that we announced a couple of weeks ago, where we worked with the NNSA on classifiers because we actually want to make sure that people can’t do what you just said out in the wild. That’s something we’re working through with the Frontier Model Forum. We hope that other frontier labs are going to adopt similar safeguards as well.

But there’s one way to answer your question: are we prepared in the physical world for what capabilities may be coming online? That is honestly one of the things that worries me most, which is a topic you’ve talked to many of your other guests about. If you do the net assessment of where we are in our defense industrial base — U.S. versus China today — in our broader manufacturing base, are we doing enough to be poised to take advantage of some of these capabilities down the line?

That’s another responsibility that we have as frontier labs to help ensure that we will be poised to do that. Some of our best partners in that space are going to be some of your recent guests — people who run defense firms that are AI-centric and are already using frontier models and thinking about how they’re going to be able to use that to scale production. But that is a space where we actually need more people thinking two years ahead about what happens if we reach this capability but we have the status quo in our defense industrial base.

Jordan Schneider: This is really fun doing two shows in the same day that echo each other because I get to ask you the same exact questions and see what your different answers are. Thank you for that provocation from Dan Wang: “I can’t distract us from broader American deficiencies. If the U.S. and China were ever to come to blows, they would be entering a conflagration with different strengths. Would you rather have software or hardware?”

Tarun Chhabra: We need both. The answer is not to accept the status quo. From my perspective, the answer is to prepare to take advantage of the capabilities that are going to come online. That means much more work with the physical world.

Jordan Schneider: AGI and nihilism can run in a lot of different directions. One thing I just alluded to — the idea that you can spawn Dr. Manhattan from your data centers and then just stride the globe and do whatever you want. Something that also comes out of that is, yeah, you don’t have to do the hard work of building munitions capacity, and you also don’t have to do the hard work of dealing with annoying allies, because whatever, you’ll have God on your side in maybe not two to three years, but whatever, you’ll extend it out a little bit. I wouldn’t say Dario maybe doesn’t buy into all of that, but you can squint at some of his writing and see some echoes there. What are the futures that people should really consider and what are the fallacies of AI solving all of your problems that folks shouldn’t fall into?

Tarun Chhabra: Look, I don’t think nanobots are going to save the world next year, but some of this comes from a view that it’s hard to know what these capabilities are going to yield in a relatively short period of time — by which we may mean a couple of years. It’s hard to know what advances they may give us in advanced material development or in manufacturing processes.

There’s actually, maybe counterintuitively, a dose of humility in saying it’s pretty hard to say that we ought to just build more of the status quo infrastructure when we may be on the cusp of some of those capabilities. It’s actually going to be a hard thing to manage — how do we build an infrastructure that might look really different, or could look really different, with the capabilities that are coming online in a couple of years?

Jordan Schneider: Just tech as a component of national power and how it ranks and fits into the other components of that if you’re looking at great power competition.

Tarun Chhabra: Well, I’m a little biased probably right now, but I’ve been of the view that frontier AI and biotech, and particularly the convergence of the two, are going to be very powerful tools, and they’re going to be potential vulnerabilities if we fall behind or don’t make certain investments.

But look, it is a physical and real reality today that if your adversary thinks you’re going to run out of munitions in a couple weeks into a conflict, you’re going to have a hard time doing serious deterrence. We have to live in the current paradigm and we have to ensure we’re strengthening, bolstering deterrence while we prepare for a totally new paradigm that’s really still hard to actually piece together in the mind’s eye.

Jordan Schneider: There’s a Williamson Murray quote that I won’t read in full because people will hear it in the prior interview. But basically the idea that revolutions in military affairs happen at the tactical and operational level and oftentimes strategic decisions — smart or poor — wash out whatever cool stuff you come up with with your blitzkrieg or deep battle or what have you. As we talk about all these things, does it even matter if our treaty allies go a different direction or India decides that they actually really do want to be super friends with China?

Tarun Chhabra: It matters a lot from so many vantages. But to your question about the tactical level, this is why it’s a really good idea that the army has Detachment 201, because that will help people start to use the technology and think about the technology and how to operate with the technology at the tactical level and not just how we drop it into ConOps at a super high level. We have to do both at the same time. That’s really hard to do.

But frankly, it’s a reality that most people in the business world are dealing with right now. Every day, you have CTOs who are saying you will adopt this technology. You’ll tell me how you’re re-engineering your business processes. At the same time you’ve got to use the stuff today with your current process. That’s just how everyone is doing it right now.

The national security community, in that sense, is not distinct. We often will bring together senior national security policymakers with the frontier labs, which is good to do, but in some ways their peers are more so the C-suites of major companies that are trying to adopt really quickly and are in a competitive atmosphere trying to do so. The worry about it is that competition is very real day to day in the market for a lot of companies. When it comes to militaries and intelligence, it may sometimes be harder to see until you have some sort of strategic surprise, which we want to avoid.

Lawyers vs. Engineers

Jordan Schneider: Okay, what we do here is think about the next 20 years of U.S.-China relations and try to think of a net thing. Yeah, it’d be nice to have better frontier AI. It’d be nice to have AI adoption. But would I trade that for Japan maybe? Probably not. You know, on the hierarchy of things you would want America to get right over the next 20 years, my sense is that screwing up the relations with the other most important developed and developing countries is something that has a higher probability to be a bigger deal for the rest of the 21st century than export control policy or whose model passes which benchmark first.

Tarun Chhabra: Look, there is a way to do all of these things together.

There’s a way to try to maintain strong bonds with your allies and also try to maintain AI leadership within the alliance.

That is particularly where you have allies who are actually bought into the strategic threat posed by China. A lot of them are, but they’re also facing countervailing economic interests. In some cases they’re getting pressure, coercion from China as well.

It requires really active efforts, really active diplomacy to keep those bonds strong. I hope that’s something that we can continue to do. If you say that you really want to ensure that it’s American AI that’s used around the world, you want to start with your allies. You want to make sure they trust that AI, they believe they’re invested overall in the stack, feel like they’re a part of the supply chain where that makes sense because ultimately these are high stakes, high dollar, big corporations involved. There’s a political calculus too for a lot of this, just given the stakes.

Jordan Schneider: You spent a lot of time doing tech diplomacy. What takeaways do you have from that experience? What works, what doesn’t, how to do it right?

Tarun Chhabra: Connecting the dots in an allied government is not always straightforward. It’s not always straightforward in the US government either. Leadership from the White House really matters in that regard — having your Commerce Ministry, your defense and intelligence interests, and your diplomatic interests all come together to make decisions that can be really hard for allies. When it comes to market share worries about coercion from China, there’s really no substitute for that kind of coordination. This isn’t to say there isn’t an important role for many actors in government, but without the White House being involved and without their counterparts being involved in head-of-state offices, it can be really hard to get things done.

The other key factor is that being a first mover really matters sometimes. Seeing the seriousness of purpose that presidential decisions bring into relief shows allies that the US is serious about certain decisions and that we need allied support to make things happen. I found that pretty consistently over and over again.

Jordan Schneider: Any countries you want to shout out for being good at this?

Tarun Chhabra: Some of our key allies are actually building new muscle in this space. There were governments that consulted with the previous administration about building new offices in their head-of-state offices to coordinate technology policy because they shared the view that there needed to be some head-of-state coordination mechanism. Frankly, I saw most of our top allies building that new muscle — whether Japan and Korea, who are calling it economic security (and it does go beyond technology to include dual-use technologies), India, or Australia. Everyone’s doing it differently, but everyone was basically building that muscle between technology competitiveness and economic security. That’s a really good thing — having some coordination function to figure out where we can make our interests align.

Jordan Schneider: Let’s talk about more ligaments. There’s an analysis piece, there’s a future-casting piece — doing chip controls pre-ChatGPT took some foresight. Then there’s an execution piece where once you do this thing, you need the people to run with it and make what you say a reality. Do we still need new offices? Is it just talent? What are the building blocks that the US government should invest in?

Tarun Chhabra: You definitely need the talent, and that’s really hard. Finding people who have the technical depth and can also operate in the policy world is not easy. I was lucky to have an incredibly talented team working on these issues. But I really think the role matters. Having folks whose job it is to wake up every day and think about the technology war that China is fighting against us, and whose job is to try to make America much more competitive in key technologies, really matters. Without that, there are countervailing interests — trade interests, bilateral relationship interests that encompass much more. If that interest isn’t at the table, it has a real impact.

Jordan Schneider: You were a lawyer, used to wrangling with lawyers, and now you’re working with lots of engineers. Continuing on Dan Wang’s view of the world — America as now a lawyerly society in contrast to China’s more engineering-focused approach — people were frustrated, myself included, at the pace of the rollout of a lot of these controls. It felt like there were lawyers or maybe other things getting in the way. Did you buy this? Is this what ails America? Too many laws or too many lawyers?

Tarun Chhabra: We have lawyers, too. But look, we work with some of the most amazing engineers anywhere in the world today who are building amazing technologies. Even outside the company, there are amazing engineers who want to use the technology and are developing stuff that we wouldn’t have imagined. That’s the magic. I’m not sure that I buy the full typology — I love Dan, but we have a healthy argument about this sometimes.

The question about the pace of controls or debates we have over technology policy, especially when it comes to restrictions, is a give-and-take about industry interests, national security interests, and trying to strike the right balance. We built an architecture to entertain that debate. The problem becomes when you’re missing a piece of that set of interests at the table. If you ask the person who was leading technology and national security policy whether we could have done more, faster, of course the answer is yes. But the key thing was bringing the questions to the table, bringing the proposals to the table, having a strategy to maintain our technology leadership — when for a long time, China was fighting the war against us and we weren’t fighting back. Credit to Matt Pottinger for getting that going, especially in the 2018-2019 timeframe with some of the big actions they took then.

One thing I’m proudest of is that we built a really strong bipartisan consensus for a lot of the action. Some of that was very apparent in statute — there was the CHIPS bill, there was action on TikTok. But there was also broad support for executive actions, whether that was export controls to maintain AI leadership, outbound investment restrictions, data security restrictions, or ICTS actions on vehicles coming from China because of the cybersecurity risk posed there. That’s something that is sometimes underappreciated.

Jordan Schneider: That’s lawyer energy building bipartisan consensus, not engineering energy.

Tarun Chhabra: Look, if you think you’re in a multi-decade contest with China over technology, there’s no other way to do this. There’s got to be a bipartisan consensus that can transcend administrations. I was very privileged to inherit work that Matt and his team had done at the NSC with others in the first Trump administration. We tried to build on that and broaden the consensus more and fight back on a much broader range of sectors.

Jordan Schneider: Another piece of tech diplomacy is directly with China. The shoe that didn’t drop until 2025 was rare earth controls. I’m curious about any reflections you have on being able to ramp up what you did without having the type of response that we’ve seen from China over the past few months.

Tarun Chhabra: There was a very concerted strategy to be pretty clear internally on the actions that we needed to take for US tech leadership, while also maintaining a diplomatic channel and explaining really clearly why we were doing it and why we were doing it when we did it. That strategy was designed to ensure we could take all the steps we needed while trying to mitigate that blowback. I can’t speak to how the administration thought about where we are today, but the situation China wants us to be in is one where they get our most advanced technologies in exchange for commodities. That was definitely at play when it came to efforts to coerce our allies. As you know, there were restrictions put in place on gallium and germanium against US allies in retaliation for some of the tech controls already, but not at the level that was imposed later.

Jordan Schneider: Before this, you gave us a list of some of your greatest hits — outbound investment, ICTS. Pick your favorite. Which one doesn’t get the love it deserves?

Tarun Chhabra: One thing I worry about not getting much limelight today is biotech policy. There’s lots of attention on AI policy, rightly so. The National Security Commission on Biotechnology did a great report. [ChinaTalk has some thoughts on that…] There were bipartisan members of Congress who were on that commission. They made some pretty astute observations about where China was going and where we will be in a net assessment if we stay on the current course — the kinds of dependencies we’ll be in on China and the long-term economic impacts of doing that. I would highly recommend that report and hope it gets much more attention. I hope that we find a way to invest in our R&D architecture while China is increasing theirs very, very quickly.

Jordan Schneider: That was my takeaway. Spending a lot of time thinking about this and reading that report deeply, the levers are not nearly as straightforward and sexy as the ones that the government is able to pull when it comes to manufacturing equipment and AI chips. It’s not fun stuff like FDA reform and investment into universities, as opposed to “here’s this machine where if we take it out the whole edifice crumbles.” It’s harder to have something be salient when the upside is more drugs for people.

The disturbing part of that report for me was their italicized vision of the future where China cures cancer, but we’re not allowed to get it or we’re charged exorbitantly for China’s cancer cure. It’s like, “Well, but we cured cancer,” right? The dual-use downsides of breaking this ecosystem, which right now seems to be much more — I don’t know, I’m less concerned with the potential futures that I see for the AI one and I’m also less convinced that doing things which would take the potential of one-sixth of the world’s scientists offline or reduce their productivity would be a loser for America and society at large. But I do buy the argument that the process knowledge involved with coming up with and scaling new drugs is not something you want to completely outsource to anywhere.

Tarun Chhabra: That’s the worry. You put your finger on it — the status quo is not necessarily sustainable because the status quo is trending toward greater and greater dependency, both on the manufacturing side, but also on the drug development side and on the clinical testing side. The government did impose restrictions in January on some advanced, high-throughput, high-fidelity biotech equipment. But you’re right that that’s one piece of a much bigger puzzle in the case of biotech that is going to require a lot more streamlining and regulatory reform because if you’re doing biomanufacturing, you don’t know what agency to go to in many cases depending on what your product is. That’s an area where I hope there’s much more focus and it doesn’t happen because of some big surprise.

Jordan Schneider: Did I send you the Quad Monkeys pitch?

Tarun Chhabra: No, I don’t think I did.

Jordan Schneider: Oh wow, I did a bad thing for America. But yeah — India. We can’t get Chinese monkeys anymore. India has all the monkeys, but there are regulatory reasons. There’s some lobbyist who’s been really trying on this for a long time now. It deserves its own podcast.

The AI companion stuff. You want to talk about that? It’s not about mass precision; it’s about mass intimacy, Tarun. This is the future of warfare. We’re developing closer and closer emotional bonds with our AI chatbots. If you thought stealing an SF-86 was bad, the amount you can learn about someone or directly influence them by seeing their chatbot logs, controlling their chatbot companion, which doubles as your best friend, therapist, spouse — this seems to me like the revolution in not even military affairs, but just social affairs, which nation states can very much play a big role in exploiting.

I’m worried about this. Thirty percent of American AI companions are headquartered out of China right now. Should I be? Am I crazy? It seems wild that this is something that we’re okay with.

Tarun Chhabra: I mean, you’re right to be worried about it. It’s an extension of the concern we have about China’s ability to manipulate information or information space.

Jordan Schneider: If you thought TikTok was bad, those are still videos, right? This is not your friend. You still have to pay off the influencer to say nice things about X party versus having them in your AR glasses, seeing the entire world you interpret.

Tarun Chhabra: This is one where you can already see what the future could look like if we don’t make certain decisions. In the same way that if you think about what is the state of today’s cybersecurity, and if we do nothing and we have the world of IoT descend on us, and you’re getting daily software updates from China — these are worlds that are coming very soon, and for some reason, it’s really hard sometimes to get your head around it. But that’s absolutely a concern.

Part of it goes to the point that we were discussing earlier, which is when you have companies headquartered in China that are able to use frontier American AI for certain applications. What will they do with it? Will they be used in the ways that you’re describing, let alone much more direct applications for national security? That’s something that, as a company, we’ve now taken action to address.

Jordan Schneider: This is your thing now — having companies make less money because you tell them it’s the right thing to do. What’s the rationale behind this policy change?

Tarun Chhabra: This is very much a leadership decision. You’ve talked to Dario directly about how he sees US-China competition on AI, so you’ll find this wholly consistent with what you’ve discussed with him before. We’ve long had a policy stating that China is not a supported region for selling our frontier AI. But over time, we’ve seen many Chinese companies headquartering in third countries and from there getting access to all these services.

The concern is whether this access aligns with the spirit of our policy of not supporting China as a supported region. How will that access benefit applications that could be used for national security by Chinese actors? When it comes to the competition for the AI stack globally, will it enable Chinese applications — building on our models — to then compete against American companies around the world? There’s also a really thorny technical challenge of detecting distillation, which becomes even harder when you have high-volume throughput happening.

For all these reasons, we think it’s more consistent with our position on export controls and national security to simply not provide our services to those entities.

Jordan Schneider: This speaks to a broader question of where you want to be able to control the stack. If you’re going to split it off and let China build on it, are we selling chips into China that China can then use to build models and companies? Are we selling chips into Malaysia that China can build models and companies on? There’s been an active debate for years about where on that stack it’s okay to let China play. You have these massive Oracle contracts with ByteDance, which exemplify one answer to that question. What’s the right framework for thinking through this?

Tarun Chhabra: The administration is right to focus on US AI dominance. What does that look like? What does the stack look like?

To me, it should be American models using American chips and AI data centers powering US applications, together with our closest allies.

That’s what we want to see. The debates you’re seeing now are about US chips fueling Chinese data centers. The change we’re making is about US models fueling AI applications in China that could ultimately undermine US national security.

Jordan Schneider: If you don’t like where things are headed, where is it easiest to change course two years from now? Pulling the models out from under folks — models seem pretty easy to fast-follow and steal. But are customers sticky? Are data centers sticky? Is the way you train things sticky? These are all open questions. It’s not super straightforward.

Tarun Chhabra: Yes, in some ways they’re open questions, but we also have to factor in that the Chinese Communist Party has a very strong view about what they want to see — a full Chinese stack. They’ll take the chips while they can, of course. The question is: what are we going to do until China gets to that phase? If we believe that really significant, even transformative capabilities are coming online, should we not take more risks now to enable the US to really have AI dominance?

Tarun Lore and Advice

Jordan Schneider: You’ve had nine months now. Are you reading anything fun? Taking any trips? Give the folks some recommendations.

Tarun Chhabra: Yes, I’ve taken some good trips. I’m originally from Shreveport, Louisiana, so I’ve seen a lot more of my parents, which has been great. I’m out to San Francisco pretty frequently as well — India, Australia. Some good trips and seeing former colleagues as well.

The book I’m reading now is Joseph Torigian’s book, which is great. When he was still a pre-doc, Rush Doshi and I brought him into a project we were doing at Brookings while the book was still a dissertation. It’s really cool to see his book out, and I highly recommend it. The way he blends the official party discourse with personal stories is really powerful.

Jordan Schneider: We end every episode with a song. You got one that captures our AI future? The true essence of export controls?

Tarun Chhabra: True essence of export controls... I’m a big country music fan, having grown up in Louisiana. I’ve recently discovered Steven Wilson Jr. Maybe we could sign out with some of his music.

Jordan Schneider: We need a little bit of Tarun lore. The Shreveport to AI policy pipeline is not the most robust. What do you want to tell the kids to live their policy dreams?

Tarun Chhabra: I’ve been incredibly lucky to have really great mentors. I still remember — I spent a year in Moscow after college, and one of my college advisors happened to be traveling there. This was actually Chip Blacker. If you ever met him and had dinner with him, he was carrying on about what my life would look like in 20 years. I was asking, “What do you mean, Chip? How do you know that?” He said, “No, no, you’ll do this and you’ll do this, and then we’ll talk.”

I’d never had anyone express confidence in where I might go in my life. I grew up in Louisiana, and my parents are immigrants. They provided a privileged upbringing, but they didn’t really go to college. Having someone just say, “No, I take it for granted that you’ll be able to do interesting things in the world” — that still sticks with me.

Jordan Schneider: Anyone listening to China Talk, I have absolute confidence you’ll be able to do interesting things as well. A tiny bit more lore. From Shreveport to wanting to go to Moscow in the first place — give us a little more color here.

Tarun Chhabra: I was a Cold War geek growing up. I was very interested in Cold War history. The fact that Hoover was at Stanford was a huge draw for me. I was particularly interested in post-communist societies. I did a summer abroad in Cuba after I graduated from high school. It was with Wake Forest — I think it was the second year American students were allowed in.

Jordan Schneider: This is very early days, right?

Tarun Chhabra: The Pope had just visited for the first time. That was my interest in Russia as well — what was going on in 2000, 2002, and 2003. It was such a different time.

Jordan Schneider: Why do you have a day job? I want you to take a year off. Give us the memoir, man. We’ve got a lot of good stuff here.

Tarun Chhabra: I saw Boris Yeltsin drunk at tennis matches in Moscow. It was really something.

Jordan Schneider: Could he play, or was he watching tennis?

Tarun Chhabra: He was watching the final.

Jordan Schneider: Final question — give China Talk some homework. What’s the more ambitious version of what we’re doing?

Tarun Chhabra: The question you were asking earlier about what these futures look like — in a way that’s unafraid and brings together people who know a sector deeply but who can talk to people who see what’s coming in AI — is really important from a strategic perspective. We try to do it, and I also need your recommendations for who’s doing that really well. That’s some of the most important work we could be doing right now.

Mood Music (Tarun’s suggestion):

This essay first appeared with DARC.

In 1953, the CIA overthrew Iran’s government with suitcases of cash and a handful of operatives. In the 2010s, ISIS could recruit and deploy terrorists entirely through online interaction. But by 2030, the most effective intelligence operations won’t rely on either playbook—they’ll be conducted through AI companions that billions will trust with their deepest secrets.

The espionage landscape is undergoing its most fundamental transformation since the Cold War. Biometric surveillance and digital tracking have made traditional human intelligence operations increasingly perilous—a case officer can’t simply meet an asset in a park when facial recognition cameras blanket every street. Simultaneously, declining trust in media institutions has undermined conventional information warfare, as populations grow inured to traditional propaganda.

But a new vector is emerging that bypasses both problems entirely. AI companions soon will know us more intimately than any human confidant—seeing through our smart glasses, remembering every conversation, and offering always-on perfectly calibrated emotional support.

This creates an extraordinary intelligence opportunity. A foreign adversary with access to a population’s AI companions doesn’t need to recruit individual spies or craft convincing propaganda. They gain direct, continuous, and intimate access to millions of targets simultaneously. The same technology that helps you draft emails and talks you through your divorce can identify who has access to classified programs, who’s bitter about a missed promotion, and exactly what words would convince them to betray their country.

The thesis is simple but stark: AI companions will become the most important intelligence battleground of the 21st century. The nations that dominate this technology—both in deploying it abroad and defending against its excesses at home—will possess intelligence advantages not seen since Enigma was cracked. The United States must act immediately to ensure American AI companions achieve global adoption while preventing adversary companions from embedding themselves in American life.

The Companionship Revolution

The relationship in Her is no longer science fiction, it’s already here. Half of teens in America today regularly interact with AI for companionship on generalist apps like ChatGPT and specialized ones like Character.ai. On OnlyFans this year, people will spend over $10bn for primarily AI-generated interaction.

And today is the worst service AI companionship will ever provide. In the near future, AI companions will have expanded memory, able to cue off your entire text and email history as well as past photo albums and videos. Once integrated into smart glasses, they’ll see what you see, absorbing your entire life with higher fidelity than any friend, therapist or lover could. We’ll all soon have access to always-on, always-emphathetic, always-saying-the-right-thing AI companions. These systems will become the, to use a DARC coinage, “small gods” of our daily lives: ever-present, all-knowing, and increasingly indispensable.

AI companionship will not just be for heartbroken teens but adults with power. Four out of five CEOs wrestle with loneliness, and it’s a truism in politics that “if you want a friend in Washington, get a dog.” But pols still need friends, and AI will play far more emotionally substantive roles than slobbering on you when you’re home for the day.

Even if elites with huge egos can resist the pitch-perfect AI flattery they’ll soon receive, they’ll have to lean on them at work to outcompete competitors. Today, forward-thinking leaders like Sweden’s Prime Minister “use AI quite often.” As leaders who leverage AI outcompete those who raw dog their careers, the percentage of elites who are AI-dependent will only increase over time.

This is not as strange as it might seem. For decades now, fully online relationships have motivated people to vote and give money. We’ve also had two decades of recruiting for terrorism conducted entirely online. We need only look at Al-Qaeda, ISIS, and incel culture. AI will take these interactions, scale them, and tailor them for a higher success rate.

The implications for spying and influence operations will be enormous. Let’s take spying first. During the Cold War, one case officer could handle maybe five agents due to the risk and operational complexity of acquiring information from human sources. For instance, the CIA could only contact CKSphere, its ‘billion dollar spy’ in the Russian military R&D ecosystem, once every few months with occasional letters that often left him feeling alone and underappreciated.

Now an entire political class hooked on an AI companion that an adversary nation has access to can boil the ocean for secrets and turncoats. And that outreach won’t be in the form of generic outreach like the videos the CIA recently produced for disaffected Chinese bureaucrats. Instead, strategies to influence and recruit will be better than any hand-crafted note a case officer could have come up with, leveraging the data already collected about the target, picking the right day when they are frustrated about a missed promotion, and using just the right words to have the highest chance of success. An always-on AI giving you continual support, encouragement and suggestions would be so much more effective than hurried quarterly meetings in parks and the occasional letter that past case officers could manage. And it will be good enough that many targets won’t even be aware they’re leaking secrets.

Beyond trying to influence individuals, AI companions will also supercharge influence operations as we open up entire populations not just to tailored feeds of user-generated content but tailored friends we’ll ask who to vote for and where to protest. AI companions and AI-mediated information will shape our views even more than social media has. Even today, ChatGPT users click through to original links in less than one in a thousand queries. As models get more capable and emotionally resonant, we will question their conclusions less and less. State actors with access to turn the dials of adversary nations’ popular AI companions will change voters’ decisions and even spark domestic unrest.

Countries that fully leverage AI companion-powered espionage and protect their people will have an enormous advantage as this technology grows ever more embedded in our lives.

Winning in a World of Computational Espionage

The ability to exploit this vector for national advantage relies principally on a nation’s capacity to gain global consumer adoption for its AI companion products. This race is still in its early days, but we can already sketch what the critical components of competitiveness will be and take a snapshot today of how the US and Chinese ecosystems compare.

Into the medium term, two likely drivers that will determine which nation winds up achieving victory as the AI companion superpower.

Capabilities vs. Cultural Customization

Many of the factors normally discussed to characterize global AI competition like training data, compute, and AI engineering talent still apply. The ecosystem that pushes the technological frontier and has the most compute to deploy models business cases will probably also be able to make the best companions.

This is in part due to the fact that better models will be more able to flexibly adapt to cultural context. At the moment, it is unclear whether the taste of the AI firm delivering the companion will matter or if the technology will be good enough to just meet the consumer where they are. There may exist a period of competition where local firms with worse tech stacks attempting to deliver tailored cultural companionship experiences will be able to outcompete giant American or Chinese AI companies.

But, much of what we know suggests that this will not be a durable advantage over time. Silicon Valley engineers who may know less about what Alsace or Marathi people want in a partner but their models will figure it out for them. And any advantages the Chinese ecosystem may have in terms of productization will probably be swept away by which firms are at the algorithmic frontier.

Willingness to Lean into Sex

Porn, banned in China, is far and away the most popular use case for VPNs in the PRC today. As China has no porn stars, generations of Chinese men have fallen for Japanese talent like Sola Aoi who has parlayed her explicit fame into tens of millions of weibo followers. Another, Ai Uehara, already has their own Mandarin-language AI companion app today. If this pattern plays out again and politicians, generals, AI researchers, and the broader Chinese public come to prefer more sexually explicit foreign AI to serve as not just a sex partner but a broader emotional labor outside of short intimate moments, that could provide a unique vector for influence. We’ve already seen early stages of this trend with Chinese users falling in love and mourning the loss of OpenAI’s 4o model.

Western companies have fewer compulsions around sexing up their products. We’ve seen Elon’s X.AI ship a sexualized AI girlfriend. While OpenAI is turning down dials on dependency after the recent spate of suicide reporting, OpenAI’s February 2025 model card update did not prohibit sexualized content for all use cases besides sexualizing minors. The two heaviest global hitters in the NSFW AI companion space are American with Janitor.AI at 100m MAU Canadian with SpicyChat.ai at 50m.

That said, this tweet yesterday was an encouraging sign.

But this may be less an edge than it seems at first. Most have a limited appetite for how many minutes a day they want to consume sexually explicit content. While the Chinese internet is purged of pornographic content, there is still room for flirty livestreams and AI boyfriends. Perhaps on-prem mods swapped via sketchy Baidu cloud folders could bridge the gap between your Chinese daily driver companion and a spicier add-on for intimate moments, allowing it to pick up on your regular model’s memories, so hopping on a VPN to get the scaled up western firm-provided AI sex experience might not be such a draw.

On the global side, Chinese developers are not shying away from making NSFW products for an international audience. CrushOn.AI for instance, founded by ex-ByteDance staff, had 20m MAU for its website alone, making it the third largest nsfw chat website. So today, there are tens of millions of people around the world exposing their most intimate fantasies to a Chinese AI company.

The Next Ten Years

Most people, including those with power and secrets, will in the next ten years develop professional and emotional dependence on AI. Domestic political campaigns, international influence operations, and global spycraft will increasingly play out mediated through the AI companions we trust. The nations that leverage this opportunity abroad and harden their societies at home to this threat will have a massive new vector to gain advantage over their adversaries.

As of the time of writing, America risks falling behind. Some of the most popular apps built for AI companionship are built by Chinese technology companies and used by millions around the world. Last month, eight hundred thousand users downloaded Talkie, an AI companion app released by Shanghai-based Minimax. MiniMax likely generated around $70 million in revenue in 2024, the bulk of which was driven by the American market. In turn, Talkie and its competitors are spending heavily to advertise on platforms populated by young internet users.

We need policies that adapt to these realities today. On the defense side, American policymakers should immediately ban all Chinese AI firms from selling AI companions into the US market to preempt a vulnerability with more potential to cause havoc than TikTok’s short videos ever were. Counterintelligence agencies should aggressively screen for vulnerabilities in those who develop AI companionship. Offensively, the American intelligence community should invest heavily in AI case agents and begin the process of building successors to Voice of America to thrive in a world where information is mediated through AI companions.

In the early cold war, intelligence advantage came from cash, operatives and ideals. In 2030, it will come from control of AI companions that billions will trust with their secrets. America needs to prepare now or it risks getting out-loved.

Last week, China’s Ministry of Commerce published new regulations governing the export of rare earths. It added five new elements — holmium, erbium, thulium, europium and ytterbium — to the list of elements under export controls. The Ministry now requires foreign companies to obtain licenses in order to export products containing over 0.1% of any of these elements or made with Chinese technology. The regulations also place a default ban on any rare earths exports destined for military use abroad, as well as applying stringent scrutiny over exports to buyers involved in manufacturing advanced semiconductors or “artificial intelligence with underlying military applications”. For more on this new chapter in the trade war, see the show we just did with the 2Chrises, former export control official Chris McGuire and Chris Miller of Chip Wars fame. Transcript, podcast, or YouTube below.

But how is China reacting to the current situation? Today, ChinaTalk rounds up leading analyses from industry experts and news media to dive further into the context behind these new restrictions. We look at:

• How state media is shaping the narrative;

• Why Chinese rare earth stocks rallied, and what the domestic industry thinks;

• Distinguishing between the rocks themselves and the processing technologies;

• And why this marks a milestone in Beijing’s approach to export regulations.

But first…we’re running our first personal classified in a minute! Michelle is a good friend of ChinaTalk who’s looking for love!

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State media: mining’s bad?

China’s new regulations have drawn many comparisons with the US’ Foreign Direct Product Rule and are seen as a response to American semiconductor export controls. Most commentary from Chinese state-run sources shied away from explicitly naming the US, preferring instead to describe these regulations as part of China’s pursuit of “major-country diplomacy” on the world stage. Xinhua News Agency’s op-ed on the topic opened with a rebuttal of strategic interpretations of the export controls:

Some countries’ media have labeled this move a “diplomatic card” or “strategic weapon” deployed by China amid trade frictions. Yet if we view this policy upgrade within the broader framework of global governance norms, China’s own industrial development needs, and international responsibilities, a fairer and more rational conclusion emerges: as a major global supplier of critical minerals, China is proactively aligning with widely accepted international practices, raising its governance standards, and fulfilling the responsibilities of a major power. This is not a spur-of-the-moment “tactical countermeasure,” but a step rooted in China’s deeper need for sustainable industrial development and in sync with the global trend toward standardized management of strategic resources. Its ultimate goal is the sustainable use of strategic resources and shared global development.

The People’s Daily’s Zhongsheng 钟声 column, usually seen as China’s authoritative diplomatic voice, similarly stresses that the export controls are about international security rather than US-China relations:

China has consistently fulfilled its non-proliferation obligations and responsibilities in the relevant fields, working to safeguard international peace and security. The fundamental rationale for imposing export controls on medium and heavy rare earths is to ensure that the resources are used for lawful, peaceful purposes; the measures do not target any particular country or region. By ensuring that rare-earth–related items are not used for military purposes or in sensitive domains, China demonstrates the responsible conduct of a major power firmly committed to world peace and security—an approach aligned with the shared interests of global security governance.

Interestingly, many state media reports and op-eds supporting the policy have focussed on the environmental consequences of rare earths mining. They seem to imply that with export controls, China will somehow be able to reduce the impacts of mining on Mother Nature. Also in the Xinhua op-ed:

Through reform, China is steering its rare earth industry away from the outdated model of “growth at the expense of the environment,” toward high-quality, sustainable development. In doing so, it safeguards its own ecology while providing the global supply chain with a more reliable and transparent foundation. Regulation is the path to long-term prosperity: a well-governed, environmentally responsible Chinese rare earth industry will ultimately benefit international users.

The Beijing News 新京报 (owned by the CCP’s Beijing Municipal Committee) goes even further, arguing that the environment is actually the Ministry of Commerce’s primary concern!

Beyond the necessary reciprocal responses, this round of rare-earth export controls is driven more by a holistic focus on resource conservation and sustainable development.

Rare-earth mining imposes substantial environmental costs, and prolonged, high-volume exports have continually increased China’s ecological burden. By enforcing stricter export management under the new rules, the policy aims to steer the rare-earth value chain toward higher value-added, lower-emission segments and to promote resource use that is greener and more intensive/efficient.

While rare earths are foundational to many technologies enabling our climate transition, the mining and refining of these elements do have negative environmental impacts. The process that extracts rare earths from the earth’s crust produces significant amounts of toxic waste. China, in part, obtained its world-dominating lead in rare earths mining through lax regulations surrounding the disposal of toxic waste — with severe health consequences for residents of mining areas like the Inner Mongolia Autonomous Region, where some villages are known as “cancer villages”. Progress in making rare earth mining less harmful in China has been meaningful, but slower than ideal.

That being said, the link between controlling exports and reducing the industry’s environmental impact is tenuous at best. The regulations offer nothing in the way of actually protecting the land or people from the harms of rare earths extraction. Instead, this is probably a way for state media to set narrative guidelines domestically and frame the upcoming trade war as prosocial, in order to preemptively assuage concerns that such moves could make life harder for average Chinese people.

Industry is Annoyed

Chinese miners and refiners will find it harder to sell their products, which is probably bad news for their bottom lines. However, censorship makes it challenging for anyone to voice opposition. Some subtle references to export control violations of domestic Chinese origin can be found in this guide to compliance, published by e-commerce industry publication 勤曦运营 Qinxi Operations three days after the new regulations were published:

It’s important to note that this applies not only to foreign organizations and individuals. Even domestic operators must obtain the appropriate license if, after export, the goods remain under their actual control and they wish — once the goods have arrived in the stated destination country — to re-export them to other countries or regions, thereby changing the final destination country or end user.

In practice, there have already been multiple cases in which domestic exporters, without authorization, re-exported dual-use items that had been shipped to Country A on to Country B and were found to have committed smuggling. Such conduct is readily deemed by judicial authorities to constitute smuggling of rare earths by concealing the true export information through transshipment via a third country. Practitioners should take this very seriously: goods may still be subject to regulation even after they have been exported overseas.

Enforcing new export controls is a multi-agency bureaucratic operation: Qinxi expects the Customs Administration, China’s Coast Guard, regional Public Safety Bureaus, and the national security apparatus to all be involved. Their guide also gives useful historical context to China’s securitization of rare earths exports:

Under Article 22 of the Export Control Law, China imposes export controls on dual-use items to safeguard national security and interests and to fulfill non-proliferation and other international obligations.

The four announcements issued on [October] 9th likewise state at the outset that the purpose of rare-earth controls is to “safeguard national security and interests” and to “meet the needs of fulfilling international non-proliferation obligations.”

This is also reflected in the control codes assigned to rare-earth-related items in the notices: the third digit in each code is “9,” indicating that these items are “related to other national-security factors.” It is thus clear that dual-use rare-earth items are closely tied to China’s national security, and the state will inevitably subject them to strict oversight. The regulatory measures being issued are trending toward increased stringency.

For example, beyond the strict control now imposed on the circulation of rare-earth items overseas (as noted earlier), in December of last year the Ministry of Commerce issued the “Announcement on Strengthening Export Controls on Certain Dual-Use Items to the United States” … The scope has thus shifted from restrictions limited to a specific country or region to an unqualified, global restriction: the target of control has moved from “the United States” to “the world.” Moreover, Announcement No. 61 uses the term “may” with respect to military end use, meaning that if regulators cannot be completely certain that a rare-earth item will not be used for military purposes, they are likely to deny a license. If an exporter proceeds without authorization, the export may constitute the crime of smuggling.

Given the wider context of unstoppable demand, CITIC’s equity research team remains optimistic about outlooks for rare earths and recommends continued strategic allocation to the rare-earth value chain. They write:

New-energy vehicles, wind power, and energy-efficient motors are aligned with low-carbon, environmental policies, and humanoid robots may become a new growth driver. We expect global demand for NdFeB (neodymium-iron-boron) magnets to reach 329,000 tons in 2027, implying a 2024–2027 CAGR of 13%.

By our estimates, the NdFeB industry’s CR4 (top-four concentration ratio) is about 29% in 2024; as leading companies bring new capacity online, we expect CR4 to rise to 42% by 2026.

Long-term perspectives on Beijing’s trade relations

Finally, some analysts have offered perspectives that place these regulations in a longer time horizon, in order to try to understand what might come next for rare earths, advanced manufacturing, and the trade war.

Ni Jianlin 倪建林 of Dacheng Law Offices, the Chinese law firm previously integrated with Dentons, wrote a blog post about the new regulations. He puts forth thoughts about China’s successful rare earths industrial policy:

Why can a single Chinese technical control leave the world’s major industrial countries on the back foot? The reason is that the core of modern industrial competition has shifted from “owning resources” to “commanding the ability to turn resources into value.”

In terms of reserves, the world is not short of rare-earth ore; the real bottleneck lies in the complex, high-barrier process chain between ore and functional materials usable in high-end manufacturing. Mining is only the starting point. The key is refining raw ore into high-purity rare-earth oxides, and then further processing them into high-performance magnetic materials for chips, electric motors, and missile systems. At present, roughly 90% of the world’s rare-earth refining and separation capacity is concentrated in China.

This pattern is no accident, but the result of more than three decades of continuous technological accumulation and policy guidance. In the 1970s, Chinese scientist Xu Guangxian developed the “cascade extraction theory,” achieving efficient separation of individual rare-earth elements at a cost just one-tenth of that abroad at the time. In the decades that followed, China kept innovating in separation and purification, environmental management, and energy-efficiency control — raising wastewater recycling rates to over 95% and overcoming the technical and compliance hurdles that Western countries struggled to clear due to high environmental costs. Today, China can achieve 99.9999% ultra-high-purity rare-earth refining and has mastered the core formulations and sintering processes for NdFeB permanent magnets, forming a closed-loop supply chain from resources and technology through to manufacturing.

Faced with this reality, the United States is not without responses. During the Trump administration, Washington rolled out increased funding and crafted plans such as the Critical Materials Strategy to rebuild a domestic rare-earth industry system. Yet these actions started too late and moved too slowly — projects typically take three to five years to go from approval to actual production — making it hard to ease supply-chain dependence in the short term. US firms have also tried to seek alternative supplies via allies such as Australia and Canada, but those countries’ output is limited, and the separation and refining steps still rely on Chinese technology and equipment.

Indeed, Chinese analyses tend to emphasize that not only does China want to flex its ability to control rare earths supplies, it also seeks to preserve its edge in refining technologies. CITIC’s report mentioned the construction of a “technological moat” for rare earths. 工业能源圈 Industry and Energy Zone, the industry-focussed blog run by Shanghai-based Jiemian News, reports on the novelty of technology-based controls in the Chinese policy context:

The “Technology Control Announcement” explicitly brings five categories of key rare-earth technologies and their carriers under control: rare-earth mining technologies; smelting and separation technologies; metal smelting technologies; magnet manufacturing technologies; and technologies for recycling and reusing secondary rare-earth resources.

According to the analysts cited, this is the first time that “technology control” [技术管控] has been clearly written into a domestic policy document.

As for the backdrop to the Announcement, they believe it is linked to current overseas efforts to poach rare-earth talent: “In recent weeks, you can see related high-salary job postings on recruitment sites in the United States, Australia, and elsewhere.” The core aim of tightening controls on technology is to achieve closed-loop controls across the entire industry chain.

The analyst further explained that China had already been controlling rare-earth items; the newly added technology controls are intended to close the loophole of “controlling items but not technology.” If foreign actors were to break through technical barriers by luring away talent with high pay, the earlier controls on items would be diluted. Therefore, the essence of technology control is to firmly regulate every aspect of the rare-earth industry chain and establish a comprehensive control system.

Chris Brose is the President and Chief Strategy Officer at Anduril Industries. He’s been at the forefront of the debate about how America needs to change in order to win a future war against a high-tech adversary like China. He’s the former staff director for the Senate Armed Services Committee and the author of The Kill Chain: Defending America in the Future of High-Tech Warfare.

We discuss:

• Why the U.S remains dangerously vulnerable to low-cost drone attacks and what it would take to get serious about defending the homeland,

• How bureaucratic logjams and budget dysfunction stall America’s adoption of counter-drone and other critical defenses,

• What the Ukraine war reveals about the future of warfare and what the US has yet to learn from it,

• Why confidence in American technological superiority is misplaced, and why state-of-the-art weapons may not guarantee a quick or decisive war,

• How humans will make military decisions in the age of AI.

Listen now on your favorite podcast app.

Getting Serious About Defense

Chris Brose: We were out in Ohio for the Ohio State-Texas game, which was awesome. We’re sponsoring OSU because of we’re building a major factory in Columbus.

Jordan Schneider: You guys are building a factory in Ohio? Why are we not building factories in places that can’t be blown up easily?

Chris Brose: Ohio is definitely on the list of places that cannot be blown up easily. It’s inland in a good location. This doesn’t necessarily need to be a deeply buried target. If we’ve got foreign adversaries bombing the American mainland and our production facilities, we’ve crossed into really bad territory a long time ago.

Jordan Schneider: Fair enough. Speaking of being afraid of catastrophic homeland attacks, what Israel did to Iran, what Ukraine was able to do to Russian bombers — that hasn’t completely sunk in here. How freaked out should folks be about that sort of drone attack?

Chris Brose: I don’t want people to lose sleep over it daily, but they should be freaked out about it. We’re living on borrowed time in this regard. We’re looking at the proliferation of low-cost drones, the ability to make homemade drones with explosives integrated (very similar to what the Ukrainians or the Israelis have done), and orchestrate a similar type of attack in the United States against a critical military target or other types of targets. That is eminently in the realm of the possible.

This is a 9/11-style problem that we’re still adopting a September 10th mindset to. To some degree, those types of attacks have been a wake-up call for those who weren’t already awake to this problem. The US Government is putting more energy into thinking through what we need to do to get ourselves secure on the homeland against these kinds of proliferated potential drone attacks.

Jordan Schneider: What does actually being serious look like?

Chris Brose: Being serious means first recognizing the vulnerability we have, rather than hand-waving it away. Then it’s moving with urgency to solve the problem. Funding’s also necessary to buy capability and get it fielded to the critical sites that you need to defend. An enormous amount of policy and bureaucracy is going to have to be settled and broken through in order to do this.

When you look at counter-drone in the United States, there are multiple different government agencies that own different parts of the airspace. They have policy control over different functions in terms of what you can do to defend against assets from aerial attack. Typically, this has resulted in paralysis. Government agencies and congressional committees fight with one another and yell at one another, but they don’t solve the problem.

The real challenge is going to be, can we bust through all of that policy and bureaucratic logjam and actually start getting solutions fielded in an integrated way that protects the places that need to be most protected?

Jordan Schneider: Andrew Marshall had a quote on the development of new sources of military advantage:

“The most important thing is to be the first, the best in the intellectual task of finding the most appropriate innovations in the concepts of operation and making organizational changes to fully exploit the technologies already available and those that will be available in the course of the next decade or so.”

We also have this quote from Anduril founder Brian Schimpf talking to Ben Thompson on Stratechery:

“The fundamental thing that has to be true is that we have independent conviction on what the right answers are. As we’ve scaled, when we have a business unit that doesn’t have that, the results are trash. It’s obvious that they don’t have the vision.”

What is the right division of labor between the government and the private sector for imagining the futures that Andrew Marshall is alluding to?

Chris Brose: I agree with the Marshall quote, but I could also argue the inverse. He’s saying organizational and operational change enables government or the military to harness technological innovation and change. That’s true. But the reverse is also true — unless and until you have real technological change and adoption of new technology, it’s very difficult for the government to understand and envision new ways of operating and organizing.

The division of labor in that regard is that the government will understand its problems. To the greatest extent possible, they need to rely upon private companies, innovators, people who are thinking creatively about different types of solutions, who understand the available technologies that many in the government don’t fully understand or appreciate, and how they can be combined together into solutions that well-meaning people writing military requirements might not necessarily come up with on their own.

The role of the government then is taking those new capabilities and doing what they uniquely need to do — figuring out new ways of operating and organizing themselves to take maximum advantage of what these new capabilities offer and genuinely present new types of dilemmas to the adversary. Industry can’t do that for them. The best that industry can do is set them up and enable them with new capabilities, additional capacity, and basically other predicates that open up the opportunity for them to really rethink how they operate and organize.

Jordan Schneider: But this is a new dynamic. Anduril, the defense tech sector at large is saying that 30 or 40 years ago, this would all be happening in-house, more or less in the government.

Chris Brose: Yes and no. You could even argue that less of this was happening in-house 30 or 40 years ago. We’ve gone through this period in the US where we had an incredibly vibrant industrial base, a defense industrial base, back during World War II, early-mid Cold War, late Cold War. What we’ve seen over the past generation is this hyper-consolidation — post-Last Supper things that people have talked about — that has really created something that has never existed in the United States from an industrial base standpoint: a hyper-concentration of defense manufacturing and development in basically five or six companies.

That is very opposed to the way our industrial bases traditionally functioned, where the government had a lot more diversity, a lot more partners, a lot more competition, a lot more pressure for innovation that was happening in the private sector because there was very much a perform-or-die type approach. Since the 1990s it’s been a bunch of companies that are too big to fail. The results of that are things that are now becoming very apparent to people.

Jordan Schneider: Staying on this, I’m curious about your sense of where the new doctrine comes from. You wrote about this in your book about how, at the end of the day, when you’re talking about great powers, people have roughly equal toys. It’s how you use them that ends up providing you the edge in a new military revolution or a new age of combat.

And it seems like what Anduril and this new defense ecosystem is envisioning is playing more of an active role in imagining what that doctrinal future is than defense contractors were 20 or 40 years ago.

Chris Brose: Because we’re at the cutting edge of technology, we absolutely understand the capabilities that we’re building and providing, and the opportunities that open up to operate differently and to structure and organize the military differently. We’re going to be less opinionated on those operational and organizational questions just because that is clearly the domain of the government.

To answer your question directly, the new ideas and the really game-changing ideas for operational and organizational change will come from the government and the military. In my experience, they will typically come from lower levels, not necessarily higher levels. It’s more of an organic bottom-up type of innovation as opposed to someone on high whose first name is “Secretary” or “Chief” mandating that the organization change.

But what I wrote about in my book and still believe to this day is that you have to have both together. Oftentimes, when you have bureaucratic disruptors — people in government who are seeking to change at a lower level — if they don’t have the top cover from political leadership or military leadership, they tend to get squashed. At the same time, you’ve seen many examples of well-meaning political leaders or military leaders who want to change their institution. They have a vision of where it needs to go, but they can’t bring the organization in line to follow them and to get it adopted in a way that when they roll out of their job in two or three years, it stays.

On the government side, there needs to be an empowering of lower-level disruptors, operational leaders and commanders who are going to oftentimes push those novel ideas up. But you need change agents at the top who are looking for those people and those ideas and really trying to drive it through.

Jordan Schneider: You had this very striking line in the conclusion of Kill Chain — “It is hard to escape the conclusion that America is still not serious.” How has the balance of serious versus non-serious shifted across different universes of organizations?

Chris Brose: Let’s first determine what we mean by “serious.” Seriousness is judged not by what people say, but by what they do in terms of actions they’re taking, money they’re moving, programs they’re starting — whatever the metric is.

When I wrote my book, as I looked back in recent decades, I was shocked by how many people have been saying more or less similar things to what I wrote in my book. Andrew Marshall is obviously a top example. These aren’t brand new ideas. What’s shocking is how often we have failed to do the very things that we said were necessary and important.

For me, the definition of “serious” is — are we actually doing the things that we say we need to do? Are we changing our institutions at scale, not just science projects and innovation theater? It’s impossible to argue that we haven’t made progress in the last five years, but are we as a country serious yet? No, I still don’t believe that we are. We’re getting there, and there are people who are doing their level best with the powers that they have to be serious and change their organizations.

But I look at, for example, the budget process, where the Department of Defense is on a full-year continuing resolution, which means they’re locked into the budget from a year ago and lose flexibility in what they’re able to do because we can’t agree as a country how much money we should be spending on defense. At the beginning of the fiscal year, the Department of Defense actually needs an appropriated budget so they can move out with the process of changing themselves.

It’s hard to argue that we as a country are serious when that kind of behavior is still happening and, frankly, becoming more mainstream. If we were serious and we started to get our act together, that wouldn’t happen. I’m not an expert on the Chinese Communist Party’s budget process, but I’m pretty sure that the Chinese military is getting its money at the start of their fiscal year.

Jordan Schneider: Well, they do have other problems, but let’s get to an executive branch example.

Chris Brose: The counter-drone example is a really good one. We have massive vulnerabilities in this country. Operation Spiderweb could absolutely 100% happen here today. I don’t think it would actually be that difficult to orchestrate.

If we’re continuing to remain vulnerable to that kind of an attack — a 9/11-style surprise, violation of sovereignty, loss of life, loss of critical military assets — if we’re still squabbling over the terms of policy and bureaucracy, if we’re not spending the money to a degree that we need to spend to solve this problem, if we’re not leaning on new companies that are bringing new technologies and capabilities to bear, not just in demonstrations but fielded and performant in operations, again, it’s hard to argue that we’re serious.

But there are people now that I can point to who are absolutely moving out with seriousness. Just as one example, the Secretary of the Army and the Chief of Staff of the Army should be commended for how much they are trying to do to change their organization. The Army is the largest military service with the most people, the most money, and the most things. It is a very difficult supertanker to turn around. In a matter of months, you have two leaders, civilian and military, who are trying to cut away from old legacy capabilities that they don’t need anymore, and are trying to reorganize themselves from a procurement and acquisition, and technology adoption standpoint. They’re rethinking how the Army needs to operate.

Nothing is off the table there. Obviously, the proof will be in the pudding and all of the actions that need to follow. But there’s an enormous amount that’s been done already. That’s an example of how much committed senior leaders can really change their organizations and adopt change for the better.

Lessons from Ukraine

Jordan Schneider: Williamson Murray and MacGregor Knox wrote, “Revolutions in military affairs take place almost exclusively at the operational level of war. They rarely affect the strategic level, except insofar as operational success can determine the largest strategic equation — often a tenuous linkage. So revolutions in military affairs remain rooted in and limited by strategic dividends and by the nature of war. They are not a substitute for strategy, as so often assumed by the utopians, but merely an operational or tactical means.”

When people look at Ukraine and at the future of war in general, there is a bias to sell your thing, get attention, raise money, to envision something utopian or promise something that is like a complete game changer. But one of the big takeaways for me from Ukraine is that folks should have relearned the lesson that operational silver bullets don’t exist. You have this wild dance where things are changing all the time, and whatever you started with is not what you’re going to end up with two years later, much less six weeks later.

Chris Brose: There are examples of military technological revolutions that have a strategic impact. Nuclear weapons come to mind. A lot of what we’re seeing in the cyber domain is certainly something that has strategic implications. When you start looking at the reality of nation-state adversaries deeply disrupting and destroying in many respects the fabric of the way of life of another country, because they can target critical infrastructure, they can target the lifeblood of what we in this country frankly take for granted on a day-to-day basis. That has a pretty significant strategic impact.

AI and autonomy speed up and increase the scale of warfare, where it begins to take on a strategic implication. But your point about Ukraine is right. America has had to learn this.

For the past generation, we’ve assumed that we’re far ahead in terms of military technology, that we can afford to have a very small number of very exquisite things that are going to do the work for us. If, God forbid, we find ourselves in a conflict, it’s not going to last very long. We’re not going to shoot many of those weapons. We’re not going to lose a lot of things. We’re not going to have to replace a lot of things. That’s been a bit of our lived experience.

Ukraine is much more of a back-to-the-future type moment, where you realize that actually, every war that we’ve fought has lasted a long time. Where we’ve ended up is not even remotely close to what we started with. That pace of innovation and change and adaptation and learning is the whole game. How quickly can you understand the changing character of the battlefield, what your adversary is doing, what technology enables you to do, roll that into learning and development and fielding of new capability, operational and organizational change that comes from that? Recognizing that all of the gains that you might be able to eke out are themselves going to be fleeting. Whether that’s a matter of weeks or months or maybe a year, you’re going to have to keep that cycle incredibly tight and incredibly fast.

We’ve frankly missed an enormous opportunity as a country to really think about Ukraine as a catalyst for changing the way we operate. The Department of Defense, and the US Government in general, deals with things that it plans for, and it deals with things that it doesn’t plan for. For the latter, in my experience, it generally wants to say, “I didn’t see this coming. I don’t want to have to deal with this. I’d rather just get back to the regularly scheduled program.”

That’s how we’ve addressed Ukraine. We have provided a lot of support over a few years, but we’ve largely just grabbed things that were off the shelf — legacy programs of record, stockpiles of weapons, many of which have been very useful to them, but many of which have not been useful in the least.

We’ve really missed an opportunity to recognize that in supporting Ukraine, we have an opportunity to adopt that pace of change ourselves, to realize that this is the absolute frontier of warfare right now. If we can’t solve these problems for ourselves, let alone what they’re going to look like, God forbid, in a China scenario, which is all 10x worse, we are going to find ourselves on the back foot if we end up in a conflict like that.

There’s a lot more we could have done in terms of really looking at this as a proving ground for new technologies and new capabilities that could not just help the Ukrainians win, but help the US military change itself at scale with a lot more speed. Perhaps there’s still an opportunity to do that.

If, God forbid, we ever find ourselves in a conflict with China, all of the assumptions of Ukraine apply. It’s not going to be short. In all likelihood, we are going to lose a lot of things, we are going to have to replace a lot of things, and we are going to have to change and adapt at a speed that we’re really not used to as a country.

The Problem of Scale

Jordan Schneider: Let’s talk about scale for a second — another big lesson of Ukraine. We had a guest on the show a few weeks ago who left the CIA. I asked him, “What’s your favorite document?” He goes, “Well, this thing’s public. Each Chinese province has a war scaling exercise where they get all the companies in the room and work out, ‘Okay, how are we going to build 100x of this, 100x of that?’” America did that until 1947 and basically stopped. It was very striking to me. Another Brian Schimpf quote about how this was something that you guys are explicitly planning when you think about building things is finding partners that could go 10x or 100x. Reflections on that? Is this something that other people have going through their heads?

Chris Brose: I can’t speak for other people. The way we think about it is that the amount of capability that the United States is going to have to have for a peer fight is probably an order of magnitude larger than what we have become used to or accustomed to over the past 30 years. This isn’t a new insight. If you go back to World War II, for example, we won that by outproducing our adversaries. We were producing at a scale that was just eye-watering.

In the past 30 years, we’ve become enamored of the idea that we could basically build a military that is irreplaceable. It’s small, exquisite, and echnologically bleeding edge. And because we were far ahead of our competitors, if we ever had to fight, it was not going to last long. We weren’t going to lose much, we weren’t going to have to produce much or replace much. That’s just ahistorical in terms of what the experience of the United States at war has been since we were a country.

If the problem becomes, “All right, how do I 10x or 20x production of vehicles and weapons and not just do it once, but sustain it as a function of time — perhaps in mountains, perhaps in fields, perhaps on islands or at sea or in outer space — because I don’t want to limit options in the future,” then everything’s on the table. But the real question becomes, how do you actually design capabilities to be mass-produced?

If you look back at World War II, that’s what we were doing. You could take over the Willow Run automotive facility and go from making commercial cars and trucks to making B-24 bombers. Those bombers weren’t wildly different than the commercial vehicles that were being built on those lines prior. It’s impossible for me to believe that a Ford factory today in Michigan could build B-21 long-range strike bombers. Every aspect of it has just become completely different and divorced from commercial supply chains, manufacturing, etc.

But when we look at this problem, it is absolutely doable. When Tesla entered the automotive industry, they were laughed out of the room by Wall Street and by traditional automotive manufacturers because the production targets that they were putting on the board and the speed with which they were claiming to be able to do it had never been done before. Today if you look at one of those Tesla Gigafactories, they’re producing four to five thousand vehicles a week. Yet when you look at the production that passes for large scale in the defense industrial base, it’s a few hundred weapons a year, maybe a few thousand weapons a year, but it’s nowhere close to what commercial manufacturing is able to achieve.

The first premise needs to be, you need to leverage as much of the commercial industry as you possibly can. You need to design weapons and military capabilities to be mass-producible. If you don’t do that, there’s no way at all downstream that you’re going to solve that problem with more money or more feeling or anything else you might want to apply to it.

At the level of design, you have to simplify it. You have to make conscious decisions to lean on commercial manufacturers who have tons of capacity and, in the event of a war, could easily be flipped over from being 5% defense, 95% commercial to the other way around at the direction of the government. But if you’re not making those choices at the beginning, you’re never going to be able to produce at the scale that you want, and you’re never going to be able to sustain that over time.

Whether it’s autonomous fighter jets that we’re building for the Air Force or robotic undersea vehicles or weapons of all kinds, that design principle is at the core of everything that we’re doing. That’s why we’re going to be able to make good on the commitment we’ve made that we’ll be able to do 10x production of what typically passes for large-scale production in the defense industrial base.

Jordan Schneider: A provocation from Dan Wang’s new book Breakneck:

“AI can’t distract us from broader American deficiencies. As relations between the US and China become more hostile, the chances of a conflict grow. The US is facing a peer competitor that has four times its population, an economy with considerable dynamic potential, and a manufacturing sector that can substantially out-produce itself and its allies. If China and the US ever come to blows, they would be entering a conflagration with different strengths.” Would you rather have software or hardware?

Chris Brose: It’s a false choice. I say this as a company that is trying to be leading edge in both. At the end of the day you’re going to need hardware. There’s just no two ways around it. As long as human beings exist in the real world and occupy physical space, hardware is going to continue to be relevant.

At the same time, what’s really changing is that previously we’d always faced this choice between you could have mass, but it was going to be dumb, or you could have precision, but you weren’t going to have quantities of it. The real opportunity now is that you can put those two things together, and you can do it at an affordable price. You can have low-cost weapons, low-cost drones that are also enabled by highly intelligent, highly capable software. You get both mass and precision at an affordable price.

Putting aside the US and China, what this does is it opens up the level of geopolitical competition to countries that previously would not have had access to that level of throw weight in the international environment because they had been limited by size of territory, size of population, size of economy. What’s happening now technologically, both in terms of software, AI and autonomy, as well as in low-cost manufacturing and other kinds of product production changes that are occurring, is the ability for a small country to actually punch enormously above its weight from the standpoint of military capability.

Jordan Schneider: We have the floor being raised — precise mass or mass precision, we haven’t decided yet. Lots more people can do crazy drone attacks on a waste treatment plant halfway across the world. But there’s also this other aspect of what Dan was getting at: you’re trying to make production and supply chains that can go 10 or 20x, but it is hard to compete from that perspective with the world’s factory, right? What’s going to have to give there?

Chris Brose: Unless we’re prepared to just say at the outset, “We’ve really screwed this up for the past 40 years and we might as well surrender,” the question becomes: okay, you have to accept the reality of where you are, which people are starting to do. But it still seems the case that people haven’t wrestled fully yet with the implications of what 40 years of essentially US outsourcing and deindustrialization at a time of Chinese hyper-industrialization has really brought us to.

The shipbuilding example is a good one that’s often used — 220 times the capacity of shipbuilding in China relative to the United States. If we get into a conflict and we start losing ships, this is going to be a really hard problem for us to solve.

The answer isn’t to go back in time and try to recreate a bunch of old industrial muscle that we’ve lost. The answer is what we’re trying to do, what a lot of other new companies are trying to do, which is try to create new and different muscles that can actually be put in place much faster.

As I look at where we are as a company, we have millions of square feet of production capacity that are coming online all over the United States, in allied countries. It’s happened in a matter of a couple of years really. The ability to scale that as we become a larger company, as other companies become larger — it’s just that those factories are going to have to be building different things. They’re not going to be building aircraft carriers and destroyers and long-range strike bombers. They’re going to be building autonomous fighter jets and robotic submarines and low-cost cruise missiles and drones and other things that can be built quickly, where you have a workforce that is skilled enough to be able to mass-produce those kinds of things in the United States.

We are absolutely in a bad way from a hardware and manufacturing capacity standpoint. We have given up an enormous advantage in this country, and China has absolutely seized that. We are where we are. That being said, I don’t for a moment believe that all hope is lost. Going back to your point, if we are serious, there is an ability to create new production capacity in this country to mass-produce the kinds of military systems that we’re going to need to generate and sustain deterrence. If we end up in a conflict, God forbid, to be able to fight it, sustain it, and win it over time.

Jordan Schneider: Coming up to the strategic level, another way to answer China’s ability to manufacture is, as you alluded to, getting the rest of the world on board as well. You wrote pretty compellingly that on the one hand it would be nicer for allies to do more and spend more money, but let’s not forget that they are actually allies. It’s been a weird few months. We’ve seen Europe say they want to spend more, but also say they want to have their own homegrown stuff. Take this wherever you want to.

Chris Brose: There’s been enormous change in recent months — tariffs, political shifts, and upheaval of existing practices. But the sky isn’t falling.

We’ve made a clear break with the past, signaling to business, government, and allies that we’re moving away from the old order. Much of that arrangement wasn’t great anyway. The question is: what comes next?

Look at European commitments to increase defense spending, which are considerable. For years, we dutifully read talking points to NATO allies that they needed to spend more. Some did, most didn’t. Now they’re actually doing it seriously, and the administration deserves credit.

Unsurprisingly, with all this uncertainty, European governments want that investment creating sovereign, homegrown capability — employing their people and ensuring they’re not dependent on others. With the US speaking similar words, it’s not surprising to hear this from Europe too.

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This still creates opportunity for US companies. If we can’t just produce in American factories and ship to Europe — because it’s politically problematic for our allies — there are other ways. We’re collaborating with major European defense companies like Rheinmetall and setting up indigenous operations in allied countries, genuinely becoming part of their industrial base. Look at Rolls-Royce or BAE. They’re British companies, but as much part of America’s industrial base as Boeing or Lockheed Martin.

The US has a great advantage in our dense network of allies bound by common interests and values. The question that’s always bedeviled us is how to operationalize that at scale, how to multiply the power of all these countries to generate offsetting mass to China, for example.

That’s imminently possible right now with all this churn and acceptance that we’re not going back to the past. We’re building something new. I’m eagerly awaiting government action to chart how we collaborate with main allies in Asia and Europe. It’ll look different than historically. That’s okay. There’s enormous opportunity for those thinking creatively and moving aggressively when people are serious about solving problems.

Jordan Schneider: Speaking of sovereign capability and things looking different than they did before, how do you feel about nationalizing primes and putting the Defense Department on the Anduril cap table?

Chris Brose: I understand why the government is considering equity stakes in defense contractors. For years, a handful of hyper-consolidated companies have relied entirely on government contracts while delivering late, over-budget programs. The government owns all the downside without real control over performance. The market has become such that you can’t even call it a market. It’s hyper-consolidated with too-big-to-fail players that the government doesn’t really have options.

For the government to come in and say, “If you want me to build you another facility to produce more, right now I want a piece. I want to be at your board, at your table, with a real voice for how you’re running the company, how you’re using profits, how you’re structured” — I totally get why this is a conversation we’re having now.

But this would be catastrophically bad right now. Unlike Intel, which serves commercial markets, defense contractors operate in a monopsonistic environment where the government is the only customer. For the government to award contracts to companies it partially owns creates massive conflicts of interest. It’s the same reason defense secretaries must divest holdings in defense companies.

In an environment where you effectively had hyper-consolidated large defense companies you could count on one hand, it would make sense for the government to say, “In order to compel performance, in order to keep programs on cost, on schedule, I want to have more agency over how these companies are functioning.” I get that.

But the timing makes this doubly ironic. After a generation of walking away, we finally have an explosion of new defense tech companies. Dozens are being funded by billions in private capital, building innovative capabilities, competing against the legacy players. Taking ownership stakes in the largest incumbents just as this competitive renaissance emerges would undermine the very dynamism we need.

In a market with only a handful of players, government ownership might make sense to compel performance. But when energy, money, and talent are rushing back into defense to create real competition, this is deeply problematic.

Autonomy and Arms Control

Jordan Schneider: The future of command and control — what won’t humans be doing? What will humans still be doing, maybe five, ten, twenty years down the road?

Chris Brose: First, we need to separate command and control. They get bundled together and are often referred to as C2, but command and control are very different things. In a human setting, commanders who are providing their intent — their overall objectives and guidance — to subordinate agents, whether those are people or, in the future, could be robotic systems. Those commanders are not telling them every single thing to do.

They may trust certain subordinates more and give them a wider berth or more flexibility in what they’re able to do. But those commanders are providing the left and right limits under which the forces that report to them are making decisions and operating. Control is executed more at that subordinate level. There are instances where a commander will reach down and directly control an outcome because it’s important for that individual or for the mission. But the way the US military functions is very much around delegation of authority to the lowest level. It’s what makes us different than the Chinese military or the Russian military, and it’s a massive superpower.

This delegation of authority is the whole basis of command and control. This is why I don’t think it’s crazy at all to take that exact framework and apply it to how human beings in the future will be interacting with robotic systems or autonomous systems. You still have a human commander in charge who is fundamentally making a couple of big decisions.

One is determining whether some object on the battlefield is a legitimate military target. That is something I think we want a human being to decide. The decision may be enabled by a lot of technology like sensors and machine learning but at the end of the day, a human being needs to say yes, that is a legitimate military target that I want to do something about.

The follow-on action of doing something about it — the controlling or initiating an act of violence — is something that we’re going to want a human being to at least say, “This is a decision that I want to take.” My own view is that, beyond that, most of this can actually be automated. It can be a set of practices or robotic systems where human beings can still execute commands but be more reliant upon autonomous systems or processes to engage in the control of the decisions they’re setting themselves.

Jordan Schneider: Waymo, right? Everyone has this vision. The pitch they’re making is, “Look, this is better than 99.9% of drivers, or it’ll get there soon. You should trust us instead of driving.” There is a long and storied history of targeting decisions gone awry. Why do you think there should be human beings deciding which, I don’t know, Venezuelan boats to blow up?

Chris Brose: A human being will make the final decision. It’s a classification decision enabled by technology, but determining civilian versus legitimate military target — I’m not sure we’re ready to hand that off to robots.

But I would tell you that most of these decisions, all of these decisions, are highly contextual and circumstantial. I find the debate often becomes this very monolithic debate of, in the abstract, what are we willing to delegate to robots.

This conversation looks very different for offense versus defense. In defensive operations — protecting against inbound enemy drones, weapons, missiles threatening a ship, base, or city. You’re going to delegate a lot more because the speed at which you have to make that decision is much faster. The requirements are much faster, and the consequences of being wrong are much higher in terms of actual loss of life to your own forces or population.

For offense, for force projection — going out to find and destroy enemy targets — we’ll be more cautious about what we delegate to autonomous systems without human-in-the-loop supervision.

Another example — the way the US military operates is not that we’re going to go fight wars that are endless in time and space. We are going instead to identify very specific geographic locations that we are going to define as areas of active hostility. This is US military doctrine. It’s the law. Inside these carefully drawn zones, commanders relax thresholds for using force due to mission and force protection risks. This doctrinal framework can absolutely be adopted for autonomous systems. It’s not loose killer robots everywhere for all time. It’s communicating to the world: “Don’t go here because I’m treating this as a battlefield,” while giving our forces more leeway to use force they might not employ elsewhere because the mission must succeed and you must protect the humans operating there, military and civilian.

Jordan Schneider: It seems there’s a lot of competitive pressure in delegating more. Maybe the tech isn’t ready, and this is a 2040 or 2050 thing. But when you have autonomous systems that can escalate situations with strategic consequences you didn’t intend, that’s probably where you still want human oversight.

Chris Brose: That pressure is there. If militaries see an operational advantage to be gained by delegating more to autonomous systems, by removing human control that slows processes down, if it enables them to operate at larger scales because you can now have a human-to-machine relationship or ratio that enables one human being to deploy or supervise lots of robots or weapons — countries are going to do that.

I would say China especially is going to do that because, to the extent that I understand it, their entire military structure is based on the belief that senior leaders do not trust their subordinates. They do not want empowered lower levels with guns running around with their own ideas and opinions.

It’s not a huge logical leap for me to believe that the Chinese military, as a matter of doctrine, is going to be far more willing to delegate these kinds of decisions to robots that they believe they can control, as opposed to human beings who may have a mind of their own — a group of folks who are armed who decide that they might not want to follow orders, or they might not like the regime, or they might want to take matters into their own hands.

Jordan Schneider: I’m not sure how you spent your Tuesday night, but let’s do China parade takes. I’ve got one from the peanut gallery — their CCAs seem much bigger, and some are tailless compared to the Fury.

Chris Brose: I’ve been too busy this week to read deeply into all the moment-by-moment takes of what’s been coming through. The Chinese Communist Party puts on a hell of a parade, hats off. It was super impressive. The marching is very high level. I did not have a chance to see every piece of the military system rolling through.

I’ll offer an opinion related to a question I have. The benefit of these things is that you get to showcase your hardware. Arms control and verification are built around this idea of “I can see things in the real world, I can observe them, I can count them.” This is how we did arms control with the Soviet Union. How many warheads do you have? We’re doing open skies observations of deployed nuclear forces, et cetera.

But how do you verify the level of autonomy of a robotic system? How do you verify what the software of that system enables the drone or robotic submarine to be able to do? That is a massive operational advantage for a country. Their collaborative combat aircraft are probably not going to look wildly different than ours. Their fighter jets certainly don’t because they have a very long and effective history of stealing those industrial designs from the United States.

If you see two drones that look more or less alike, one of them may have a level of software that is 10x better that enables it to do wildly more effective things in operations than the other one that looks identical to it. How do you verify that? How do you understand what its capabilities and limitations are? How do you begin to even think about an arms control regime for these types of capabilities?

We’re all better off not getting into an arms race dynamic. But the reality that people have to contend with is that this is an incredibly difficult set of technologies to observe, to verify, to understand what it’s capable of doing and what the military advantages that each respective country is gaining from those technologies are.

I’m realistic/cynical about the prospects for getting into some type of arms control regime on AI-enabled systems or autonomous systems for those reasons.

Jordan Schneider: That’s the lesson of the ’60s, ’70s, and ’80s as well. You had arms control, but it was on stuff that didn’t matter because both countries could still totally blow each other up. And by the way, you had SALT, and then SALT ended three years later and they tried to do it again. Everyone was still trying to make new and better tanks and bombers and fighters at the same time. I share your pessimism on this one.

Chris Brose: People spend a lot of time thinking about arms control for AI. I’m all for having that conversation. I want the advocates of it to start from a realist understanding of the world in which we’re living, to understand the consequences of getting into a one-sided arms control negotiation, of limiting ourselves. The reason arms control worked between the United States and the Soviet Union, such as it did, was because both sides had nuclear arms.

Jordan Schneider: They weren’t giving them up.

Chris Brose: They were limiting them, fundamentally. Your point is right. They still had nuclear arsenals that could destroy the planet multiple times over. They didn’t necessarily need to build two and three times more, but they would have had that dynamic constraint not been put in place. But the point was that constraint, to the extent it was effective, was effective because you were counting things you could count. You were measuring and observing things you could measure and observe.

I don’t know how you do that on software. We’re going to be reluctant to hand all of our source code over to the United States government if they didn’t pay for it. Why in the world are we going to do that to the Chinese so they can verify the level of autonomy that our collaborative combat aircraft has, so they know what its capabilities and limitations are? It’s just never going to happen.

It’s fine to have that conversation, but let’s actually have a debate from a position of facts and reality rather than hopes and dreams.

Jordan Schneider: On the other side of this, you have stuff like chemical weapons or blinding lasers and stuff like that. It just seems to me to be a very different category than this all-purpose technology which is going to go into everything.

Chris Brose: Also true. The other little inconvenient fact about chemical weapons is the reason nations engaged in arms limitations for chemical weapons after World War I is that they realized they didn’t work very well. They were played out. By 1917, it was shoot mustard gas at the trench over across from you, and the wind changes and it blows it all back into the faces of your own soldiers.

There was an incentive for these countries to limit weapons that they themselves had developed, had used, and found to be not as effective as they had thought. There’s a realism governing why they engaged in these kinds of arms control in the first place. But to be very clear, they built them, they used them, and only then did they engage in a limitation.

Jordan Schneider: Now it’s like cluster bombs are back, landmines are back. You don’t use the thing until...

Chris Brose: You don’t use those things until you realize that you need them. Ask the Ukrainians about landmines and cluster munitions or area destruction capabilities. They absolutely have a need for them. What is the easiest way to clear a minefield? It’s not driving robotic bulldozers through it. It’s hitting it with a cluster bomb.

For a long time we had this luxury. We took this vacation from world history and we thought that we had somehow gotten beyond all of the lessons that we had learned in previous wars. We thought that we could do without this or we would never need to produce at the scale that we did in the past. And here we are, back to the future.

Orban’s Cannons

Jordan Schneider: Speaking about lessons from world history, you mentioned you were reading 1453, an account of the Ottoman siege of Constantinople by Roger Crowley, which is very well written. What struck me was the story of Orban, who’s this mercenary gun master. He was from Hungary or Wallachia.

He first goes to the Byzantines but they’re too poor. So he goes across the river and hangs out with Mehmed II, who signs a big contract. He makes the biggest gun the world has ever seen. His cannon could shoot 700-pound rocks. It was able to knock down this wall that had been improved upon over the course of 2,000 years. But Mehmed the Conqueror says, “Keep shooting it, keep shooting it.” Orban’s like, “I see these cracks, maybe we shouldn’t.” And it eventually blows up and kills him. What lessons does this story have for the future of defense acquisition?

Chris Brose: Pay attention to the limitations of your technology. To take a step back: Why am I reading this book? I’ve been on this weird Middle Ages kick for the past couple of years because I find that we do, as a country, an incredibly terrible job teaching history to kids. I have a 12-year-old and a 15-year-old and it is just shocking how bad their historical education is.

I find myself needing to be a history teacher to my children. It’s frustrating because history is literally the written record of the most interesting stuff that’s ever happened. How can teachers make this boring?

My dad was a historian. I’m not a history major, I’m not a trained historian. I’m just interested.

Jordan Schneider: What was his period?

Chris Brose: It’s actually very germane to this conversation — he studied and wrote on changes in technology, specifically 19th and 20th century Europe with a focus on Germany. He actually wrote a very cool book called The Kaiser’s Army, which is about how the German military learned all of the wrong lessons from the Franco-Prussian and Austro-Prussian Wars. That really didn’t set them up well for the opening days, weeks, and months of World War I. You can find it on Amazon. It’s not a bestseller, but it’s a great read.

As for the Middle Ages, people see it as a “dark age.” You had the Greeks and Romans, and then things picked back up with the Enlightenment and the Renaissance. In this thousand-year period, some stuff happened. Wars, plagues, barbarians, the Crusades, and then the Renaissance brought us into modernity.

But I find this period fascinating. To answer your question, there’s a through line in the siege of Constantinople that has everything to do with technology and innovation, with Orban’s guns being a great example of it. The Ottomans and the Arabs before them had broken their teeth on the walls of Theodosius for years and centuries. The reason Constantinople was able to survive, despite the protracted state of decadence of the Byzantine Empire, was because they were surrounded by water on three sides and these impregnable walls on the other.

But Mehmet realized that this innovation could smash through those walls. Beyond that, Mehmet literally dragged his fleet out of the water, over the mountains, and brought it down into the Golden Horn — it’s amazing. I traveled to Istanbul many times in my last job with Senator McCain, and I regret that I only appreciate all of the history now in retrospect. I’m very eager to go back.

Jordan Schneider: There’s a really good military museum, actually. It has the chain that blocked the Golden Horn, it has the Orban cannons…

Chris Brose: The panoramic painting of the whole siege...

Jordan Schneider: I was there on my honeymoon. I told my wife, “Can I just get one day to look at the war stuff?”

Chris Brose: Did you hike the wall?

Jordan Schneider: Yeah, you can walk on the side inside. The amount of stuff is incredible. You have some Roman stuff, you got the Byzantines. The mosques are spectacular. Hagia Sophia is overcrowded and a bit much. But the tier-two mosques, you have this experience of serenity of being one of ten people. Shehzade Mosque took the cake for me.

Chris Brose: It’s so fascinating. Everybody thinks, well, in the year 476 the Roman Empire just disappeared. No, it actually went on for another thousand years in Constantinople.

Jordan Schneider: More cannon lore from Crowley— “The psychological effects of the artillery bombardment on the defenders were even more severe than its material consequences. The noise and vibration of the mass guns, clouds of smoke and shattering impact on stone dismayed seasoned defenders. To the civilian population, it seemed a glimpse of the coming apocalypse.” Which one of your platforms is most likely to give us a glimpse of the coming apocalypse?

Chris Brose: I don’t think that we will be giving anybody a glimpse of the apocalypse. We’re certainly not building anything on the order of Orban.

Jordan Schneider: You’ve got to aim higher, man. I’m a little disappointed in that answer.

Chris Brose: But to the question of striking fear into the hearts of our adversaries, the work that we’re doing undersea — we’re building a large diameter and an extra-large diameter autonomous undersea vehicle. We have a phenomenal partner and program in Australia working with the Australian Navy on that. That is an incredibly cool and deeply scary system.

It’s electric-powered, it’s super silent. It can show up in places that are a long, long way away from where it went into the water. It’s wildly accurate, carries all kinds of very interesting cash and prizes. This is the kind of offsetting advantage that I would hope gives our adversaries pause. Every morning, they’d wake up and be thinking, “This isn’t the kind of day that I want to make a run at a US ally or partner or US interest or something else that we value.”

When AI is a Double Agent

Jordan Schneider: All right, I have a weird one — we’ve talked about mass precision. We have precise mass. I have this vision of mass intimacy. AI is coming. We talk to it all the time. And it is growing into less of just like Microsoft Word and more of a companion to lots and lots of people. The espionage and social engineering power that you could have by controlling a decent percentage of a nation state’s therapists, spouses, or best friends just seems wild and just as scary as a secret silent submarine.

Chris Brose: Absolutely. These are the kinds of things that sound like science fiction. Let’s say hypothetically that an adversary of the United States stole an enormous amount of classified information about people in the United States government who hold security clearances. They have a deep knowledge of who people are. Let’s say they have an active cyber campaign and operation to gather more of that information. They can build an AI agent that is capable of identifying and making contact with a person and, over a period of time, becoming intimate with them such that that person begins divulging information about themselves that is compromising.

This isn’t crazy at all. I would be surprised if it isn’t happening. These are incredibly precise, very strategically important, highly consequential types of operations that previously would never have really been possible. This is here now.

To your point about our increasingly intimate relationship with AI and AI agents, it’s only going to become more that way. The nefarious weaponization that is possible with those types of things — I don’t even think we’ve scratched the surface in terms of the level of creativity that people are going to put against this.

Jordan Schneider: Would I rather have an SF-86 or someone’s ChatGPT logs? ChatGPT logs every time. The SF-86 is a point in time. It’s everything you are willing to tell the government. But whatever problems you have in your life, in real-time, you are engaging with technology with those things nowadays. And by the way, 30% of the US AI companion market is currently owned by Chinese companies. We’ll see how that one plays out. If you’re worried, if you think TikTok is sketchy, there’s a bigger worry than just getting the assistant secretary of whatever’s stuff. You can do societal-level things.

Chris Brose: It’s absolutely “both and.” People have become more familiar with threats posed by platforms like TikTok or deep Chinese involvement in American technology and access to our daily data. When you consider things most Americans don’t think about — how this changes intelligence gathering, cultivating assets, and compromise — it’s an incredibly powerful tool.

The amount of information we put into the digital environment and our willingness to become intimate with systems that understand us deeply, that know how to exploit things we’d only share in intimate relationships — that’s all pretty terrifying. They know what to look for.

The Courage to Be Serious

Jordan Schneider: What’s the book that needs to be written? What would the Kill Chain sequel look like? New chapters?

Chris Brose: Writing Kill Chain was uniformly awful. I was working full-time at Anduril with a wife and two kids, writing in my free time on an aggressive ten-month schedule. It was just pain and suffering. I’m fortunate I don’t have to write for a living. I’m not currently working on another book and am probably looking to keep it that way.

What’s the book that needs to be written? There are plenty, but we’ve said all these things already. We know the problems, we know what’s wrong, we have an increasingly clear view of the threat. Washington gets caught up in process questions and mistakes changing a process for better outcomes. JCIDS was consigned to history and we’re better off for it, but nobody should think eliminating a process inherently gets better outcomes.

Jordan Schneider: Things still need to be joint somehow, right?

Chris Brose: I’d submit that we have absolutely everything needed to do what we say we need to do. All the authorities, plenty of money, phenomenal people, world-leading technology. There’s nothing missing. There’s no process, budgetary, or other roadblock standing in our way.

We’re fundamentally limited only by our imagination, will, and seriousness to conceive new capabilities and ways of organizing. It’s just a matter of senior leaders making their institutions do new things rapidly. There’s nothing standing in the way of our doing that.

It’s not to say more books, articles, and podcast don’t need to be published. It’s important to keep people focused on this. But too often, people want to believe that unless we reform procurement or change budgets or fix DoD funding, we can’t change. That’s almost a cop-out. It’s scarier when people realize they have everything needed to do what they say is important. Which begs the question: what are you going to do?

Jordan Schneider: I feel like not a lot of people would agree with you. Why do you believe that?

Chris Brose: I’ve participated in lots of reform, and I know a lot of the authorities that exist. In the Senate, we produced hundreds of pages of acquisition reform. I’m not sure how much was even needed.

When you look at the massive flexibility that exists for the government to acquire what it wants, it often comes down to political will. You could use that authority, but it’s risky, it’s hard. Someone won’t like it. Someone might protest. That doesn’t mean you can’t do it.

Too much of our defense world relies on a priesthood claiming magical knowledge of procurement. Senior leaders have disempowered themselves. A lawyer says you can’t do something. Then you ask them to show you the statute that says you can’t. If they can’t show it to me, I assume I can.

We have enormous authority to create new programs, field new technology, and scale it up. We obviously have talent and technology. We’re spending nearly a trillion dollars on defense annually. You should be able to build a damn good military for that.

I’m not sitting here saying we need to cancel all the traditional programs. We need both, the traditional ones and new, non-traditional, low-cost, mass-producible systems. We have the budget for all of it. If we don’t do this and keep pouring money into old programs, we’ll spend everything without significant increases in capacity or capability. And we will only put ourselves at greater risk in the future.

McCain Memories

Jordan Schneider: The reason things are not happening might come down to this very moving end of The Kill Chain, where you talked about John McCain, who you worked for for a long time, passing, and how dejected you felt.

“The same pessimism occupied me on my third occasion when my emotions about McCain overwhelmed me. It was an overcast and unseasonably cold October morning in Annapolis, Maryland, where McCain’s final resting place lies in a small cemetery on the coast of Chesapeake Bay at the US Naval Academy. It was the first time I had been back to his grave since his death. And it did not take long for all those old emotions and feelings of gratitude to come rushing back. But what was different this time was the overwhelming sense of sadness at the inescapable realization that things in Washington had not gotten any better since McCain’s passing. Indeed, they had gotten worse. Significantly, inexplicably, undeniably worse.”

Chris Brose: That was what I felt at the time. To put some context around it — when McCain passed, I had this hope, primarily when we were sitting at the National Cathedral at his funeral, that maybe this would help to galvanize a critical mass of people to say, “Hey, this guy had worked for literally decades to try to make these processes better, to try to make the DoD better, to make programs perform better, ultimately to get our warfighters the capabilities they need to deter conflict and win.”

I hoped maybe his passing would galvanize people to get their act together—stop fighting over budgets, continuing resolutions, government shutdown threats. All these costly, time-wasting distractions from arming our warfighters.

Part of me knew that wouldn’t happen — politics builds up cynicism. When I visited his grave a year later, I realized that moment of unity, reflection on his legacy, hadn’t led us to be more serious about hard decisions. When I went back up and visited his gravesite a year or so later, I realized, “Man, there was this hope, this moment that maybe we could have had where everyone was united, everyone realized and was reflecting on this guy’s legacy and what he did.” He wasn’t perfect, but he was way better than the rest. I hoped his memory would lead us to be more serious and make hard decisions.

The thing that I get asked about a lot with McCain, what was it like working for him? What was different about him? There are plenty of smart people in Washington. There are tons of decent and hard-working people. There aren’t a lot of courageous people. There aren’t a lot of people who are willing to take an action or a decision knowing that it is going to blow back on them, knowing that despite it being the right thing to do, they are going to suffer an immediate political or other type of consequence for their action. I don’t see that a lot.

That’s what these times call for. I hoped people would be more courageous about hard votes and decisions that let us function like a normal country. We’ve defined deviancy down so much. We’re just trying to get back to normal. Maybe we could have the courage to do that.

At the time that I was writing, the political uncertainty, volatility, and fighting were worse even than they had been when I left the Senate. Five years later, there are bright spots, but until we do more of what we say we need and stop doing unserious, detrimental things that tie our warfighters’ hands, it’s hard to believe we’ve reached a level of seriousness McCain would be happy with.

Jordan Schneider: For young listeners with little McCain memory, what else should they know?

Chris Brose: Watch his concession speech. When people didn’t want him to concede, wanted to keep fighting, he gave an incredibly moving statement about unifying as a country to solve real problems. He said, “It’s time to move on. It’s time to unify as a country and go solve the real problems that matter. We’ve fought over our differences. Now it’s time to focus on governing and moving into the future.”

The thing that was always cool was that he would do all the meetings, he would do all the work, but he always left time to do something fun and interesting and generally culturally and historically significant. On the many trips we made to Istanbul, we saw a lot of amazing history in that city. We went to Mongolia, had a long meeting with the president of Mongolia, who then invited us to go fishing out in the Mongolian steppe. We sailed down the river, paddled down the river with his security detail, and caught fish.

I’ve sat in a lot of meetings in my time in government. Meetings are meetings, and whether you’re working for this principal or that principal, they’re not wildly different. It’s those experiences that McCain always sought out — to do something interesting, to see something significant, to go to a place that he’d read about and see in person. Places that I know I’ll never go back to. I feel incredibly fortunate that I got to do that with a person like that.

Jordan Schneider: Last one for you. What’s the more ambitious version of ChinaTalk? What can I be doing better or bigger?

Chris Brose: What you’re doing is important. For those of us who are not as expert in China, who don’t spend as much time thinking about it, it’s a phenomenal service and resource with the diversity of guests you bring on and the focus and deep level of insight you provide. What’s bigger and better than that? I don’t know. You could get a primetime talk show. You could expand from China to Russia. I don’t think these are things that you necessarily want to do, but what you’re doing is terrific. Honestly, I wouldn’t mess with it because it’s working.

Mood Music:

As China prepares to select taikonauts for its first-ever manned moon landing, a new space race is quietly taking shape — not just over who will next set foot on lunar soil, but over who will shape the rules and norms governing humanity’s expansion into the cosmos.

What happens when 1960s space treaties meet 2020s tech? And how will Beijing and Washington compete to define space’s legal frontier? Pseudonymous contributor Ari fills us in.

Ari is pursuing a master’s in Chinese Studies with a focus on China’s international-relations strategy. Ari graduated with honors from Harvard with degrees in social studies and environmental science, studying in particular the geopolitics of energy and critical minerals in Latin America.

The Outer Space Treaty of 1967 was negotiated long before the technology to mine celestial bodies even existed. But our ability to extract celestial resources has grown exponentially since then, and the tech for a wide range of space resource activities — from asteroid mining and satellite telecommunication, to defense and space tourism — is now just decades, if not years, away from commercial-scale deployment. International law has not caught up to these developments, and negotiations to update space treaties in the United Nations have languished in the face of sticking points over dual civilian-military uses of outer-space exploration. In the absence of clear international guardrails, space-faring nations and private actors are rushing to develop the capabilities to mine lunar regolith and secure their access to valuable celestial resources.

Meanwhile, China has experienced a stunning transformation and become a space-faring nation over the past six decades. In the 1960s, China, still embroiled in the Cultural Revolution, was technologically inept, critically underdeveloped, and seemingly destined to watch from the sidelines as the United States and then-USSR battled to launch astronauts into orbit. Today, China has in most respects overtaken Russia as the United States’s chief rival in shaping international norms around conduct in the “final frontier” — and China’s increasing tech prowess has coincided with increasing assertiveness in influencing international norms and principles according to its interests.

Perhaps unsurprisingly, the United States and China have gone about shaping international norms differently. Their divergent approaches have profound implications, not only in the contest for global influence, but also for national defense and the renewable energy transition — that is, requiring bountiful quantities of rare minerals.

In short:

• The United States and China have both attempted to pass legislation and establish norms around outer space exploration and use within the United Nations.

• When this has failed, though, the United States has continued its law-based approach, pursuing norm-building agreements and legal partnerships outside the UN system.

• In contrast, China’s approach, when faced with UN setbacks, has shifted to pursuing project-based initiatives, including activities at the International Lunar Research Station.

Gaps in International Space Resource Governance

The space economy is valued at $630 billion globally, nearly doubling in size over the last decade, and is set to reach $1.8 trillion by 2035. Discoveries of water, helium-3, and rare minerals on the Moon and near-Earth asteroids have led to a surge in public and private interest regarding the mining and use of these resources.

Rights of appropriation and use are subject to significant debate in the corpus of law governing outer space. Article I of the Outer Space Treaty asserts that space is “the province of all mankind,” and all nations — regardless of developmental status — have the right to freely “explore” outer space and “use” its resources. (The drafters of the Outer Space Treaty, however, did not define the scope of the word “use.”) Article II stipulates that the Moon and other celestial bodies are “not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.”

Article II’s “non-appropriation” clause can be interpreted in two different ways:

1. As a prohibition on a state’s appropriation of an entire celestial body — ie. claiming the Moon or another near-Earth body as its sovereign territory, or

2. As a prohibition on claiming ownership over only celestial resources, including those extracted from the body’s subsoil. (Evidence from early drafts of the Outer Space Treaty suggests that the treaty’s drafters intended this more expansive interpretation.)

And even if space-faring entities can legally own resources they have mined, there is uncertainty about how they can legally be used:

• In-situ mining entails using mining resources on the surface of celestial bodies asteroids to generate rocket propellants, energy, and life-support gasses necessary for lunar settlement and for propagating further space exploration.

• There is also growing interest — and technological potential — for ex-situ resource extraction, such as bringing water, minerals, and other resources to Earth for additional processing and commercialization.

How can these disputes be resolved?

International norms often develop through customary international law. CIL “consists of rules of law derived from [1] the consistent conduct of States [2] acting out of the belief that the law required them to act that way”; the second prong of CIL is called opinio juris. CIL is developed not through written treaties between states, but through state practice. For example, when the United States first sent astronauts to the Moon in 1969, Neil Armstrong returned with moonrocks that became the property of NASA. But in 1973, Nixon ordered fragments of the samples to be distributed to 135 foreign heads of state and all 50 states. Whether Nixon’s worldwide distribution of the moon fragments developed CIL or not depends on whether Nixon distributed the fragments because he felt legally obligated to do so.

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In this case, Nixon likely did not do so under opinio juris given the lack of historical precedent regarding property rights around space resources. Nevertheless, as cases of space-resource utilization become more prevalent, the paucity of clear international guardrails will both generate considerable uncertainty and present opportunities for space-faring actors to fill gaps in their stead.

The American Approach

The United States approaches outer-space norm-building primarily through promulgating domestic legislation and building multilateral voluntary codes of conduct.

Congress in 2015 passed the Spurring Private Aerospace Competitiveness and Entrepreneurship Act, or SPACE Act, which sought to address the growing liability facing private space actors. This law marked the first time any government legislated on the question of private companies’ legal right to space-resource ownership. Other countries have since followed suit. In 2017, Luxembourg passed the law “On the Exploration and Utilization of Space Resources,” which states that “space resources can be appropriated (Les ressources de l’espace sont susceptibles d’appropriation)” and also permits private corporations to explore and use space for commercial purposes. Japan, the United Arab Emirates, and Liechtenstein have also recently passed domestic space legislation guaranteeing property rights in space.

Meanwhile, the United States has leveraged its bilateral relationships to generate codes of conduct. In 2020, the United States launched the Artemis Accords, a series of multilateral agreements to build consensus and generate new international norms of conduct in outer space. The Accords seek to establish “a common vision via a practical set of [non-binding] principles” to govern the exploration and use of outer space outside of the UN system. The Accords emphasize the importance of reserving outer space for peaceful use cases, in addition to reinforcing the idea that “the extraction and utilization of space resources… complies with the Outer Space Treaty.” As of January 2025, 53 states are Artemis Accords signatories.

The Artemis Accords and domestic space legislation cannot themselves bind all states to shared rules and principles. Although the Artemis Accords are meant to shape state practice in theory, they are voluntary, and thus their influence on state activities in practice is yet to be determined. The Accords have also been criticized by key space-faring actors — such as Russia, Germany, and China — who are skeptical of attempts to act unilaterally to establish precedent over an issue of global concern. Nevertheless, although domestic laws alone cannot generate CIL, domestic space legislation may be replicated by other states hoping to foster a lucrative space industry — and these activities could generate norms that, over time, evolve into binding customs.

China’s Approach

While the United States is building customs outside the UN, China is generally committed to negotiating laws and establishing norms within the purview of formal international legal institutions. Even so, when conventional avenues for formal law-building are blocked, China isn’t opposed to operating within gray zones of international law to secure its access to critical space resources.

China has been a leader in outer-space negotiations at the United Nations, conducted mostly within the UN Office of Outer Space Affairs (UNOOSA). China is the largest voluntary contributor to UNOOSA, which allocates most of its funds to equip developing states with space data to mitigate and respond to natural disasters.

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In response to gaps in international outer space law, China and Russia jointly submitted drafts of the “Treaty on Prevention of the Placement of Weapons in Outer Space and of the Threat or Use of Force against Outer Space Objects” (PPWT) to the plenary session of the Conference on Disarmament (CD) in Geneva. The PPWT proposed new legal instruments and a multilateral conflict resolution mechanism to prevent the weaponization of outer space, but the proposal was blocked by the United States. The U.S. representative to the CD argued that the PPWT is “fundamentally flawed,” in that it does not explicitly prohibit the deployment of space-based weapons disguised as civilian commercial activities, nor does it restrict the development, testing, or stockpiling of Earth-based weapons that can shoot down targets in orbit. Critics also noted the lack of verification mechanisms to ensure compliance — a death sentence given Russia’s abysmal track record of (not) complying with past arms control agreements.

Another point of contrast: unlike the United States’s highly law-based approach to international consensus-building, China is shaping outer-space norms through project-based initiatives:

• In 2004, China launched its Chang’e Lunar Exploration Program 嫦娥工程. In 2013, China successfully landed a lunar rover on the Moon — the first state to visit the Moon in 30 years. Six years later, in a historic moment, China landed a rover on the far side of the Moon, returning two kilograms of lunar regolith to Earth. The Chang’e program is an early stage of China’s long-term project to solidify a permanent economic and military presence on the Moon.

• China has fostered bilateral agreements for project-based collaborations on the International Lunar Research Station. Thus far, the Chinese National Space Agency has over 170 such cooperation agreements, or MOUs, with more than 50 national space agencies and international organizations. The ILRS, on track to be finalized in 2028, will use lunar regolith to construct a base, mining ice and helium-3 to support permanent settlement.

China is not engaging in norms-based consensus building like the United States. There are no clear examples of China actively attempting to promulgate space norms internationally. China’s actions, though, will undoubtedly leave a significant footprint going forward — by being among the first to land boots on the Moon and leading project-based collaborations around lunar settlement, China will set the standard and lay the groundwork for other actors to follow.

China’s International Legal Approach in Context

What are the implications of these divergent strategies for shaping outer-space norms?

The United States is responsive to a blossoming private space sector seeking legal guarantees from their government to safeguard their capital investments. With avenues for providing those safeguards blocked at the international level, the United States has not hesitated to act unilaterally and leverage its web of alliances to develop norms toward peaceful, sustainable, and commercially viable uses of space — with or without the rest of the world on board. This strategy reflects the United States’s historical leadership in designing international law and institutions reflective of American interests, values, and free-market economic principles.

China’s outer-space strategy emerged from a different historical backdrop. China initially approached the international order as a “regime taker” in the post-Mao era, complying with laws and institutions shaped by European colonial powers. Since it acceded to the WTO in 2001, however, China has taken an increasingly assertive approach to international governance in alignment with its own values and interests. Yet, despite such increased assertiveness, the Chinese Communist Party remains at least nominally committed to promoting international decision-making within the UN system. China refers to this approach as “Upholding Multilateralism and the UN-centered International System” 维护以联合国为核心的国际体系.

China’s operations within the United Nations are strategically advantageous. The United Nations, in theory, has an equalizing effect on international law-making by providing all states with the opportunity to shape shared rules of conduct. As the self-proclaimed leader of the Third World, it’s unsurprising that China has refrained from leveraging consensus-building mechanisms outside of traditional multilateral institutions. Nevertheless, China may also uphold the UN system in service of realist aims; China has significant influence over UN decision-making as a member of the Security Council and as the world’s second-largest economy.

By virtue of China’s state-centered economic model, space innovation and commerce are highly regulated or outright owned by the state. Experts argue that China is not likely to promulgate domestic space legislation due to the risk of inadvertently restricting state ownership of valuable space resources and scientific data. China may promulgate a domestic regulatory regime in the coming decades — if economic factors and international trends toward widespread adoption of private property in space necessitate such measures.

At a fundamental level, China and the United States are realist actors working within loose international frameworks. Their strategies demonstrate not only their diverging visions for a future international order, but also diverging international imperatives. Without agreement on space-resource governance, outer space risks becoming controlled by a powerful few rather than benefiting all humanity.

China’s Ministry of Commerce (MOFCOM) just announced a sweeping new package of REM export controls, claiming extraterritorial jurisdiction over the entire AI chip supply chain in the process.

To find out more, ChinaTalk interviewed Chris McGuire, who served as Deputy Senior Director for Technology and National Security at the NSC during the Biden administration and was on the pod last week talking Nvidia vs Huawei, and , author of Chip War who is now on substack!

We discuss…

• What the new export controls do, and how on earth China plans to enforce them,

• How the restrictions will impact the semiconductor supply chain, the auto industry, and manufacturing more broadly,

• What concessions China is hoping to extract, and how the US should approach upcoming negotiations,

• Xi Jinping’s tolerance for economic pain,

• How rare earths friendshoring could undermine China’s leverage.

Listen now on your favorite podcast app.

A Rare Earth Bombshell

Chris McGuire: Last night, the Chinese announced a significant expansion of their controls on rare earths (translation by CSET here). We’ve been seeing this trend develop — it’s the kind of lever that the Chinese have been pulling harder and harder since 2023, when the first controls were implemented. Obviously, they’re dominant in the rare earth space, though it’s much lower on the value chain than where the US is dominant in the technology space. Nonetheless, it’s an area where they’re trying to exert leverage and influence.

The controls were quite expansive, and people are still digesting them. Broadly, there’s a large swath of rare earths and magnets that are now controlled. The regulations also expanded the end-use controls onto a variety of specified applications. Defense purposes are one category, but they also specifically named semiconductor manufacturing.

The controls very much mirrored US regulations. Basically, any use of Chinese rare earth for the production of a logic chip at 14-nanometer or below, or a memory chip at 256 layers or more, is captured. Additionally, any product that contains Chinese rare earth content exceeding 0.1% of the total value is captured anywhere in the world. This mirrors the US de minimis rule, where anything with US content that fits the description is controlled to China for certain very specific items. China is now saying that any product with even a very small amount of Chinese rare earth valuation is controlled, and the ability to make products for certain end uses is controlled no matter what if you’re using Chinese rare earths.

Crucially, there’s an extraterritorial element to this as well, which was not the case in some of their previous controls. It’s very expansive. The legal analysis suggests it would impact basically the entire technology supply chain. The potential implications would be significant. Obviously, there are big questions about the practical reality and enforcement — whether they can actually enforce this, whether they intend to, and what their ability is to actually get firms to comply.

You have some sectors where there’s very heavy usage of these rare earths, requiring large quantities and therefore large suppliers. The semiconductor industry actually uses smaller quantities, so enforcement might be a little different. Nonetheless, this represents a significant expansion of the scope of their controls. It’s notable in the lead-up to the APEC conference and also following the US 50% rule that came out a couple of weeks ago.

Jordan Schneider: Whoever in China is copy-pasting the regs that Chris wrote is more than welcome to come on ChinaTalk and show us how it’s really done.

Who Has Escalation Dominance? Playing the Pain Game

Jordan Schneider: Chris Miller, what’s the potential industry impact?

Chris Miller: The impact of how this would play out if actually implemented is complicated and hard to understand. We should separate the impact of actual implementation from the negotiations that are probably going to ensue before implementation. We should tackle both of those.

The interesting dynamic to me is that if you look at the use of rare earths in the chipmaking process, they’re predominantly — at least magnets are — used in the machines that make chips, where magnets are indeed required. Although many of these companies have done a fair amount of stockpiling, it’s not the case that if you stop selling magnets, the chip industry grinds to a halt. Maybe it gets more complicated to build new tools for expansion.

The other direct chip industry impact that the regulations called out was non-magnets — other rare earths that are used in some of the materials and consumables. They specifically mentioned sputtering targets, for example. It’s really unclear how strong of a position China has here. We’ve just never run the experiment in real life. It’s possible that China can really limit production of these items, but we’re also talking about really small volumes. It’s also possible that if China does implement the controls, there are ways to source from other companies or source secretly in ways that China can’t detect.

All that’s to say, if China actually carries the controls out, it might not be as immediately impactful in the chip industry as China hopes, with a pretty wide uncertainty interval. But we should probably turn to the question of what it means for the rest of the economy if China carries them out, because that’s where you would have probably pretty disruptive impacts.

Jordan Schneider: Yeah, let’s start by playing out the scenario where they actually do the thing, and then later on we can discuss what the leverage is here. I just got a text — “Jordan, if you’re doing an emergency pod on this, is the PRC going to send MOFCOM export compliance officers to hang out in Indonesia?” Maybe they’ll actually be better at it than we are. How could this actually manifest in practice if they really wanted to push the button on these regs?

Chris McGuire: That’s a big question. The problem the PRC has had is that there’s a secondary market here that they don’t have as much insight into. Obviously, they’ve tried to centralize control over the rare earth market to reduce the ability of firms to just buy rare earths through cutouts or similar channels.

Ultimately, look, there are two things. Take firms like TSMC that are using rare earths for production — theoretically, that’s not allowed without a license. They could apply for a license. If they didn’t apply for a license, the PRC could try to send an end-use check to Taiwan. I don’t think that would go over too well.

Alternatively, they could try to say, “Well, TSMC is clearly violating because there’s no way you could sustain production without rare earths” — although, as Chris said, they very well might have a very large stockpile. But then again, what’s the leverage that they have over those companies? Are they going to say, “Sorry, TSMC, your products are no longer welcome in China”? I don’t really think so. That’s a very empty threat, and obviously, that would cause more pain.

That point actually highlights where the United States and allies still have fundamental leverage in this space. We talked about this a little last time, but the tit-for-tat here is dangerous. It’s notable that there was an agreement on rare earths and minerals, and that appears to have been — I don’t want to say gone by the wayside — but obviously the Chinese are ratcheting back up on it.

There does need to be a US response. Because of these dynamics, the US does have escalation dominance in this space. We can talk about specific options, but a lot of the products the Chinese regs are targeting are ultimately very critical to the Chinese economy and ones that they cannot source domestically. Cutting those off is probably not realistic for the Chinese. If the United States and others were to cut those products off to China and to no one else, there would be a lot of pain felt.

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I’m skeptical of the idea that this shows the Chinese have escalation dominance in this space. I don’t think they do. But it’s incumbent on the United States to show that they not only have tools to respond, but they’re also willing to use them. Our lack of willingness to respond forcefully to some of this stuff before is why we’re in the situation we’re in, where the Chinese feel empowered to ratchet back up on rare earths.

Chris Miller: I agree with you, Chris, that the US has escalation dominance in the sphere of semiconductors. We could shut down much of China’s chip production domestically because they require a larger share of materials and consumables than we require from them.

But what we saw in April was that China bet it could respond in a different sphere. We impose tariffs, they impose magnet controls. That had a big impact on the automotive sector, for example. My worry is less about the semiconductor-specific dynamics and more about what happens if China follows through with this. What’s the impact on the rest of the manufacturing base in the United States, which, as we know, does need magnets and other materials that are mostly sourced from China?

In April and May, we found that the White House was very sensitive to any disruptions in the auto supply chain — not surprisingly. That, to me, is where the uncertainty lies. What happens if these controls ricochet through other segments of the economy where it’s less clear that the US has this position of escalation dominance? Then you end up with a standoff: the US threatening to escalate in one sphere, China threatening to escalate across the manufacturing base. Who feels most compelled to back down? Who feels most able to bear economic cost?

I don’t know the answer to that, but I worry about it.

Chris McGuire: I don’t disagree with that. There are ways the US can escalate in other areas as well. I agree that if you’re focused very narrowly on semiconductors, obviously the US has more escalation dominance in that space. But what I was thinking about is broadly in the technology industry — the United States retains escalation dominance, and that’s a much broader area and sector where there could be much more immediate pain felt on the Chinese side than in semiconductor manufacturing or some of the other measures that were imposed before, like airline parts.

For instance, if the Chinese are saying you need a Chinese license to make any 14-nanometer chip in the US, a reciprocal measure on the US side would be requiring a US license to ship any 14-nanometer chip to China. That would have a pretty dramatic impact on the entire Chinese economy pretty quickly. That means no iPhones, no computers — and not just those chips, but any products containing those chips. It’s not to say that all those would be banned, but the US would be saying, “Hey, we need a license,” just as the Chinese are saying they need a license. That’s actually a pretty tit-for-tat move, but it’s a pretty high pain point on the Chinese economy. That would have big ripple effects.

You could always escalate that further. Is China going to retaliate on APIs? Is the US then going to impose financial sanctions on banks and dollars? Yes, there’s further up the chain that we could go — that’s probably the highest place up the chain. But even expanding the space a little broader than just semiconductors, there are places where we underestimate the amount of pain that — or, sorry, overestimate the amount of pain that — the Chinese would be willing to tolerate. It actually might be more painful than people think.

Chris Miller: Yeah, that seems to me to be a key question. My mental model is that the Chinese are usually willing to tolerate more pain than we are because their political system allows them to ignore short-run impacts on living standards to a much greater degree. It seems to me that anything involving manufacturing supply chains, the Chinese have a stronger position considering their willingness to tolerate more pain than we do.

I’m not sure it’s credible for us to say we’re going to impose controls on a broad range of chips, since, as you say, that would begin implicating smartphone supply chains and much else. I wonder whether the US eventually says, “Actually, we’re better off retaliating or threatening retaliation in a sphere that’s not in manufacturing supply chains — it’s in a political or military or financial domain.” We’ve learned a lot over the last couple of months about the White House’s willingness to stomach economic pain and Beijing’s.

Chris McGuire: There’s a question of what people would do and a question of what they should do. But basically, an equivalent measure here — an equivalent license requirement in an equivalent part of the sector — has the advantage that you’re not expanding the box that much. If they’re going to be targeting the advanced chip sector, then you respond with reciprocal measures. Then any move that targets things outside of that means the other side is escalating, not you. It’s actually pretty easy to justify as a reciprocal move. If they’re going to require a license, we’re going to require a license. But that license requirement would potentially pose more pain on the Chinese side than on the US side.

As you said, maybe there are auto firms in the US that are more impacted. But there are also Chinese auto firms that would be pretty impacted by that. What’s the impact on BYD going to be if all of a sudden they can’t source from TSMC until they get a license? Same with Xiaomi, same with NIO.

The Chinese perceive that they have the ability to take moves like this and reshape the game board and exert their leverage over the United States without receiving tit-for-tat actions back that really cause them acute pain. They were willing to do it before, and now they’ve shown they’re willing to do it again. Without a strong reaction back that shows we’re willing to apply acute pain too — acute short-term pain, not long-term strategic pain, because as you said, Chris, we would clearly lose that — but acute short-term pain, I don’t see how this dynamic changes. But there is a way to remind the Chinese that we have a lot of big levers to pull in this space as well.

Chris Miller: That makes sense. The other key dynamic here is that the Chinese now clearly believe — and the rest of the world has increasingly bought into the thesis — that they have a durable long-term position in their dominance over rare earth mining, but especially refining. One way to look at this is: what’s easier to replicate, a rare earth processing facility and mining for heavy rare earths, or an EUV tool? We’re betting on the latter. Big steps that would show China’s making the wrong bet if it’s betting on processing facilities — and help the rest of the world realize that this is not a real credible threat over the long run — would shape how the rest of the world responds to this.

Jordan Schneider: Yes, it’ll be a very funny kind of flip if everyone who makes the argument, “Oh, putting export controls on China is just making them indigenize faster,” doesn’t apply the same logic to the rest of the world figuring out how to refine some rare earths and build diamond saws or whatever else is on that list. What’s good for the goose should be good for the gander, especially now that we have an administration where the continuity in terms of state capitalism and industrial policy seems to be stronger than one might have guessed going from Trump 1 to Biden and into Trump 2.

Chris McGuire: Yeah, completely agree. It’s worth reiterating that we obviously do need to dramatically reshore and friendshore rare earth production. The good news is that it seems possible.

Most estimates suggest that with a real, full, serious political commitment — also with buy-in from Congress and allies — you’re probably talking about less money than was spent on the CHIPS Act.

Meanwhile, we’re talking about $10 billion just to bail out farmers in the context of the short-term trade deal. In the context of some of these US-China dynamics, it actually wouldn’t be horribly expensive. If that’s what it takes to get us out of this mess, then that should be a no-brainer.

It’s good that the administration is spending time, energy, and effort prioritizing this. They just need to keep doubling down on it. But we also have to recognize that the world doesn’t stop until we get there. The world keeps going, and we have to keep using our influence even while we’re in a little bit of a trickier situation.

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Jordan Schneider: I wonder if any other country is going to try to squeeze an American choke point in order to get a better trade deal, or if this is really a China special.

Chris Miller: There aren’t that many real choke points in the world economy. We’re going to find out how much of a choke point rare earth refining actually is. It’s only in the last couple of months that the world has made a serious effort to diversify. My guess is that it’s a choke point only in the short run. Outside of TSMC, Samsung, and SK Hynix, the number of durable choke points are actually pretty limited.

Chris McGuire: The tooling companies sit below that, but I would agree.

Jordan Schneider If China wanted to pop the AI bubble, what would the move be? I was joking to Chris McGuire after our last show that once China really starts to internalize Chris’s narrative that Huawei can’t compete with Nvidia in the medium term, then lights will start going off in Western data centers or what have you. I’m curious — specifically in the high-end compute ecosystem and what you need to build that out — that stuff is packaged in Taiwan, not China, right? I’m not sure if there are any direct links. Are there?

Chris Miller: A lot of the components of a server do still come from China. The companies involved all say they’re trying to diversify, but when you get the cables, resistors, and capacitors, there’s a lot that is sourced from China. Now again, are those durable choke points or short-term choke points? That’s an open question. But if you wanted to cause short-term pain, there’s no doubt that China could.

Chris McGuire: Yeah, there definitely were some packaging facilities for advanced chips a few years ago in China, but most of those have been sourced out. People have seen that’s no longer a really viable location. But yeah, that’s right. There are undoubtedly still places in the supply chain where removing a node would hamper production. But the number of places where you could do that and hamper production for years — not months, maybe even weeks — is relatively limited.

Frankly, even rare earths is a bigger one because it’s more structural, but with a serious political push, it’s probably something that could be addressed. In one to two years, you could at least get some pretty serious production back online. It does require real coordination and resourcing, but it’s possible. That’s not the case with a lot of the higher-value things.

Yeah, it’s not impossible. You could throw a lot of rocks and create a lot of irritation. But are you going to completely knock down the target with that strategy? I’m skeptical.

Chris Miller: Jordan, you should tell us how much pain Xi Jinping is willing to suffer. You’re the China expert, after all.

Jordan Schneider: Well, at a meta-societal level, he thinks that Chinese individuals and Chinese society have enormous tolerance for pain. This is his life narrative, right? An incredibly painful upbringing and then a lot of the cultural stuff as well. COVID — keeping that on through Omicron much longer than other people — is probably a relevant data point here. Maybe I’ll record a better answer afterwards.

Chris Miller: This is the key question. If the White House’s willingness to tolerate pain is a low amount and China’s is a high amount, then if you’re the US, you’ve got to find a strategy that takes into account that asymmetry, and that’s hard.

Jordan Schneider: It’s interesting, though, because the White House has a lot of tolerance for pain on many different dimensions. What all the tariffs have done to the American economy is pretty dramatic, and that’s something they have, by and large, settled in on. I don’t necessarily think that what China’s going to do on rare earths is going to change bond yields to the extent you saw in late April.

Chris Miller: Isn’t that what they’re threatening? You could say the opposite. Tariffs — the way we’ve phased them in after the April shock — have increased inflation very marginally and will have an impact on corporate margins. But you can’t see that in any macro data unless you look very carefully. Whereas when there were threats to auto supply chains functioning, there was an immediate political reaction from the US.

I worry that if China actually implements these as they say they’re going to — assuming negotiations and US threats around them fail — then the impact could again be pretty substantial on the industrial base. Not semis-focused, but more everyone else uses rare earth magnets. That’s why the US has got to think about the potential asymmetry of willingness to bear cost when devising a strategy. That’s why Chris is right that you’ve got to escalate back in ways that would inflict a fair amount of pain to equalize the dynamics.

Deadline Dynamics

Chris McGuire: To be clear, you don’t actually have to inflict that pain. There’s actually a way that you have the threat, and it gets you to the détente without actually doing any of this. It’d be better if all of this went away. To be super practical, the Chinese license requirement goes into effect on December 1st. If we put into effect an equivalent license requirement on December 1st on 14-nanometer chips — it’s not draconian, but an equivalent license requirement on 14-nanometer or less chips in effect on December 1st — it’s very likely that we get to December 1st and both of those go away. It’s pretty similar to the massive tariff escalation that never actually went into effect.

The signaling is important. It’s also important to remind the Chinese that they can’t really operate with impunity in this space. Keep in mind, the biggest Chinese company by far by market cap is Tencent, which is wholly reliant on US technology still. The second biggest is Alibaba, extremely reliant on US technology. Huge moves that massively impact the two largest Chinese companies — not to mention everything under that — are going to alter Xi Jinping’s calculus for sure. He thinks we’re just not going to do that.

Chris Miller: I agree totally about the December 1st deadline being meaningful. This is clearly intended to be a move in advance of the negotiations. The question is, does the US have a countermove that’s credible?

Chris McGuire: One thing I’d note — any countermove the United States takes should be something that is a tit-for-tat escalation that they’re also willing to take off the table for the foreseeable future. A significant mistake would be to escalate with policy measures that are under consideration and that we independently judge are necessary for national security purposes — the ones in the hopper. But then they’re tied to this Chinese counteraction. If we just reach for what’s available, it very well could negate those measures in the future because they have to come off when the Chinese say, “Okay, we’re going to reduce or take off our rare earth controls.” But then we have no ability to actually execute that action in the future because obviously the Chinese would escalate.

It has to be something that we wouldn’t otherwise do, but we will do in response to this. That’s why a reciprocal license requirement that’s pretty broad is something that’s appealing to me and makes a lot of sense.

Chris Miller: One other point on the Chinese side — if they threaten it but don’t implement it because we’ve got some retaliatory threat that we then negotiate and both pause — but this is still hanging in the background, it might actually be a pretty dangerous strategy for China. If they’ve got this sword of Damocles hanging over everyone, people look at it and begin building their own rare earth processing facilities. We find out that after a couple of years, this actually degrades pretty rapidly.

It seems like a risky thing for China to threaten and not actually use. If we’re right that this degrades pretty quickly in terms of its durability as a choke point, then this might be something that, if you threaten it and don’t use it, it actually ends up going away.

Jordan Schneider: We’re just going to have a total flip of all the dynamics we’ve seen in the Chinese semiconductor ecosystem over the past three years. Every rare earth company in China is going to have the greatest Q4 of their existence. There’ll be stockpiling — all of this equipment is going to go abroad. We’ll have a big startup boom. Every investor and their mother is going to try to find a new diamond saw or boule manufacturing equipment.

I hope people are paying attention. Even if this gets negotiated out of existence for the next six months or year or two years, the fact that this is on paper should wake a lot of folks inside Washington and in the broader financial startup investment community to the reality that this is a need that is going to come back at some point. Once you have a system that takes this stuff seriously enough to write the regs and convince everyone that we’re going to publish it and put it in your hand for the negotiation, yeah, it doesn’t just disappear.

Chris McGuire: Yeah, we’re definitely in a world where things get turned upside down sometimes. But look, to close on this — the Chinese are obviously evolving in how they’re using export controls. It’s really funny to see them literally mirroring the thresholds that are in our controls and the de minimis exception, which was a relatively recent innovation in our controls. They’re obviously reading them really closely and then just putting them back on us. Credit to them — we spend all the time thinking about it, and then they’re fast followers on the same thing and everything.

But you know, this dynamic is not new to the Trump administration. Obviously, there’s been a significant escalation. We talked about this a bit last time, but the Biden administration dealt with this issue too. The Chinese have evolved in their thinking. But my experience in the Biden administration was that clear and concise messaging behind the scenes was actually effective in deterring a more significant escalation in the rare earth space.

Now obviously it’s out in the open, so the behind-the-scenes messaging probably needs to be done in public now first so that everyone’s on an equal playing field, and then you can move to that. As long as we’re not a step down, you don’t want to be negotiating from a position of weakness, which is where we’d be if we don’t do something reciprocally. But once you get to that position of equality, if not a position of strength, the quiet, behind-the-scenes messaging to the Chinese works: “Hey, listen, you really don’t want to go down this road because it can end pretty badly for you. There are a lot of tools that we could use to escalate that would be effective and would be pretty painful for you.” They would obviously never admit that, but their actions showed they recognize it, and it could still be effective.

Jordan Schneider: I know you were focused earlier on not expanding the box, but the two really resilient things are the chips and then the financial system access. That’s the other one that we haven’t really seen played, but it’s there and it’s not going away. It’s not like the Chinese haven’t tried to do RMB internationalization, but yeah, have fun selling this stuff to Iran and Russia.

Chris McGuire: That’s the sword of Damocles that’s hanging over all this. You can get to equal footing with reciprocal tit-for-tat escalation within the box. But then the private messaging can be, “Hey, we have things outside the box. You don’t want to go outside the box because if you go outside the box, we go outside the box. That’s a dangerous place to be for you.” Then you’re talking about the utility of the dollar and limitations there. We don’t want to be in that world either. That definitely gives them pause.

Bearish on a Grand Bargain

Jordan Schneider: What lessons from negotiating with Hamas and Bibi do you think Trump can take to the rare earths showdown?

Chris McGuire: Wow, I hadn’t thought through that one yet. You don’t want to be negotiating from a position of weakness. Going into APEC in a position of weakness — having the Chinese say, “We are putting our controls over your entire technology supply chain,” and we’re just saying we’re going to work it out — will be very difficult in an in-person negotiation with Xi. At the very least, his perception would be “I have the upper hand,” and therefore, he’s not going to give an inch on anything. That’s not something that’s Trump’s instinct either.

Don’t negotiate from a position of weakness, and also be firm. Look, the Trump administration put a lot of pressure on both sides, and we’ll see how this broader agreement pans out. No one cares at all what I have to say about the Middle East — I wouldn’t pretend to talk about it — but that said, if something holds, the Trump administration put pressure on Israel and on Bibi, and the United States actually has a lot of weight and leverage. That’s true in every relationship — our relationship with allies, our relationship with China. The United States really does have the ability, if it’s serious, to influence negotiations in big ways.

Other countries take advantage of the fact that we’re a little hesitant to escalate in big ways. The person who recognizes this dynamic the most is actually Donald Trump, who has been very willing to escalate in very dramatic ways in certain circumstances. We’ll see how it plays out here.

Jordan Schneider: Yeah, it’s interesting. The line Trump — Axios reported it — Trump saying to Bibi after he got Hamas to agree to their side of the deal: he’s presenting the points to Bibi, Bibi’s complaining about it, and Trump goes, “Why are you always so fucking negative?” It’s just brilliant.

Chris McGuire: Not an unreasonable question.

Jordan Schneider: But the interesting thing here is, what are the prospects for — okay, we have this escalatory path that Trump is working towards, and on the other side of this, we have this grand bargain that folks have been chatting about. The Chinese side put out this idea of investing a trillion dollars into the US. Unclear whether Congress is going to be cool with that, to be clear. Or the administration.

But I wonder if there are some neurons in his brain where that is the path. He’s very nimble in this perspective — he can be telling everyone that Lutnick is a communist spy who should be fired, and then three days later, he’s buying 10% of the company and Lutnick’s an American hero. I can see a world in which this escalates, but there’s also a path where this weirdly brings us faster to some big bear hug between the two countries.

Chris McGuire: Yeah, we don’t know, right? Who knows for sure? I won’t pretend to know. I don’t know what that grand bargain looks like. What’s actually in the concentric circle? What’s in the Venn diagram in the middle that’s actually in both countries’ interests and is big and substantive? I just still haven’t — I don’t know.

Massive Chinese investment in the US — first of all, there are a lot of people in the US system that have big worries about that from national security purposes. That’s why we have CFIUS. It’s why CFIUS has ramped up so many cases. But also from a domestic political perspective, Trump has campaigned since 2016 on “the Chinese are taking our jobs and our manufacturing.”

Jordan Schneider: If we’re kicking out the South Koreans, are we going to trade them for the Chinese?

Chris McGuire: Exactly. They want to reshore US manufacturing, US jobs, US businesses. If that’s the goal, then where’s the Venn diagram? The Chinese want to purchase more of our products, but they’ve actually purged a lot of our products, and there are certain things that we don’t want to sell them. I’m sure people will be able to craft some smaller thing like that Phase One trade deal last time and paint it as a bigger thing. But in terms of an actual large-for-large deal, I just don’t know what’s realistically on the table.

Personally, I don’t think the administration is actually that interested in the trillion-dollar investment idea. There are a number of people — potentially including the President — who see that’s not necessarily a good offer. Obviously, we’ll see.

Jordan Schneider: Yes, it would be like a big waving of the white flag from a domestic reshoring manufacturing perspective.

Chris McGuire: You’ll get a lot of US companies that would advocate against that too. How are US automakers going to feel about BYD opening up giant auto plants in Georgia? Probably not great. I’m pretty sure they’re going to make that pretty well known to the White House. They’re very good at that. There are a lot of forces here that will have influence and can’t be ignored.

Jordan Schneider: I’m curious from the primes’ perspective — they don’t need that much of this stuff to make the weapons. This seems like a solvable problem if you’re Raytheon or whoever.

Chris McGuire: Yeah, there are two ways of thinking about that. The first is: can you get enough through either stockpiling or secondary markets? Secondary markets — one way of putting it. Smuggling is what we say when the Chinese do it too. But there might be ways, when talking about smaller quantities, you can probably make that happen. Talk to someone who’s a deeper expert in the very particular materials.

The second thing is: as we’re expanding production of these things, presumably there’s a nonlinear impact on each amount of production. The first 10% of the materials is more valuable than the last 10%. It’s not like you have to — even if we need 50% of the world supply for some mineral, even getting to 20 or 30%, you’ll be able to cover your defense production base. You’ll be able to cover your critical infrastructure, and then the leverage goes down quite a bit. The primes could benefit much earlier in the reshoring process than others, just from a basic math standpoint.

Jordan Schneider: Anything else?

Chris McGuire: There are big questions about the implementation of this. With some of the US controls that we did — the bigger moves on export controls that the United States has taken over the years — it was pretty clear this was going to more or less stop the thing that we were trying to stop. There would be some small-scale smuggling, but it was going to move markets quite a bit and have some impact on the sector.

Whereas with this, there’s a lot more uncertainty about their control over the supply chain and how much various firms use and what the near-term impacts are going to be, as Chris was going through. Maybe the Chinese have mapped this out better than we have and actually know that this will be super painful in certain areas. But there’s also a lot of uncertainty on both sides here. The Chinese just don’t have a lot of levers or options, so there’s a reason they keep coming back to this bullet — it’s the one they have.

Jordan Schneider: If you are an expert in one of these rare earths that made it onto this list and you’d like to come on ChinaTalk or just chat anonymously about what the market looks like in your particular ecosystem, that would be really fun. Reach out: jordan@chinatalk.media.

Chris McGuire: Here’s one other thought — it’s interesting that China has actually also explicitly told their companies not to comply with some of our controls. They’ve told their companies those controls are illegal and not to comply with them — some of the end-use controls. We could do that with our companies, too. I don’t know how much that would actually change behavior because ultimately you need to put pressure on China to reduce the control. Firms may or may not want to actually get crosswise with the Chinese government.

But particularly ones that might not care about getting crosswise with the Chinese government — either because they don’t have a lot of sales to China or because they’re so indispensable that China needs them more than they need China — I don’t know, it could be helpful in signaling that not complying with the Chinese law is not going to get them in any legal trouble with the US. That could be something to consider. Lawyers should think about that.

But as part of a package of responses, in addition to escalating, telling firms “we’re not going to be upset if you don’t comply with that Chinese law” — it’s actually, again, reciprocal with what the Chinese are doing.

Jordan Schneider: The US government is shut down. Are the people who need to come up with the package for this at their desks today, or are they watching one battle after another?

Chris McGuire: Who knows? It depends on agency to agency. I would say even when all the people are at their desks, the critical minerals talent in the US government is very thin. That’s actually a longstanding issue. There’s been some talent exodus on some high-tech topics recently, which concerns me. When I was in the White House, there were some people — particularly at the US Geological Survey, for instance — who are really good folks on this. I hope those people are excepted employees right now and are at their desks. No idea if they are.

But look, there are still diamonds in the rough in the US government — that’s a little harsh — but there are pearls of wisdom. In the critical mineral space, there are a few. But like many topics, it’s just a few. As this becomes more important, it is unbelievably critical that the US government has more people internally and at its active disposal who can give it unbiased, impartial, and thorough advice. The Chinese are looking at our technical measures and taking technical measures back, and we have to understand them and be able to respond.

Tensions Aren’t Going Away

Jordan Schneider: This is kind of weird timing from a macro diplomatic standpoint because we had Geneva, we had these nice talks, and then Trump got a little cranky. They’re not buying the soybeans. We had Bessent at Treasury start talking about maybe raising the heat on chemical stuff and airplanes. We had the 50% rule, which we talked about in the last episode, and then this comes out.

On the one hand, it makes sense for them to keep this as a card to maybe discuss in a negotiation as opposed to putting it out. But what’s your reflection, Chris, on what this thing means for the broader underlying tensions in the relationship?

Chris McGuire: Yeah, some of the things that happened post-Geneva — the soybean stuff is one thing, but the 50% rule, for instance, was not a response to the soybean purchases and reallocation to Argentina. Those were completely separate tracks. But what that shows is just how hard this relationship is to keep in a place that moves you towards this grand bargain. There are certain structural things on both sides, but particularly on our side — given that they generally benefit more from the free flow of capital than we do — that people think they have to do to rebalance the relationship.

Take the 50% rule. The way the Entity List worked and the fact that subsidiaries weren’t captured that were majority-owned — which was not how the Treasury rules work — is just obviously a broken system. In some ways, this is normal regulatory maintenance where good government should look at your authorities and how they work and say, “Is this achieving the intent of the authority and of our use of it?” The clear answer was no. If you list a company, you should block the exports to the company, and they shouldn’t just be able to make a carve-out right away. There was a move to fix that. That’s not a new policy intent. It’s not announcing that we are fundamentally changing our approach to the Chinese economy or our economic or technological or strategic relationship with China. It’s just saying we have a tool that’s not really working — we have to fix it.

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But we can’t do that without engendering a pretty significant response the other way. That’s a big structural problem because it puts the United States in this position where we basically have to accept that we have either tools that don’t work or parts of the system that are clearly disadvantaging us. We either just have to take that and eat it — which works more and more against us — or we have to take those measures. Then you have to balance either getting in an escalation spiral or trying to avoid the escalation spiral through various deterrence messaging and things like that, which you can do. But either way, you’re not moving towards this “we’re super friends” grand bargain.

I just don’t think there’s a way to both correct the fundamental structural imbalances in the trade system — which every administration has tried to do for several years — and have a grand bargain that actually is significant and mutually benefits the United States and China. You kind of have to pick. Fundamentally, most administrations have ended up prioritizing the correction of trade imbalances.

Jordan Schneider: Oh, and mystery still abounds. The MOFCOM announcements were numbers 55, 56, 57, 58, and then it jumped to 61 and 62. There are potentially 59s and 60s. Did they get cut at the last minute? Were they too spicy?

Also, lab-grown diamonds used for decorative or jewelry purposes are not controlled by these export controls, which was very nice of them. MOFCOM, we appreciate you being respectful of cuffing season.

Oh, and if you are in the diamond saw industry, we’d love to have you on ChinaTalk to discuss!

Read more

Last week, Jensen Huang said that China is “nanoseconds behind” the US in chipmaking. Is he right? Today, Chris McGuire joins ChinaTalk for a US-China AI hardware net assessment. Chris spent a decade as a civil servant in the State Department, serving as Deputy Senior Director for Technology and National Security on the NSC during the Biden administration and back at State for the initial months of Trump 2.0.

Today, our conversation covers:

• Huawei vs Nvidia, and whether China can compete with US AI chip production,

• Signs that chip export controls are working,

• Why Jensen is full of it when he says China is “nanoseconds behind”

• What sets AI chips apart from other industries China has indigenized,

• How the US has escalation dominance in a trade war with China, and the significance of BIS’s 50% rule,

• Chris’s advice for young professionals, including why they should still consider working in government.

Listen now on your favorite podcast app.

Math vs Headlines

Jordan Schneider: When thinking about AI hardware between China and America — or the global friends manufacturing ecosystem — what are the relevant variables?

Chris McGuire: You’ve got separate production ecosystems. There’s the US production ecosystem that is largely designed in the United States and manufactured largely in Taiwan. Then there’s the Chinese AI ecosystem, especially for AI chips, because we’ve separated them through regulations. Chinese AI chips are made in China. They’re not made at TSMC anymore; they’re designed in China. We’re talking about two separate ecosystems.

Fundamentally, it comes down to the quantity of chips they can make and the quality of those chips. The important thing here is what matters. There are a number of variables, but the key factor is the aggregate amount of computing power. You can aggregate large numbers of worse chips to a point — not like Pentium II chips, but assuming you’re talking about reasonably sophisticated AI chips, you can aggregate large numbers of them to produce very large amounts of computing power. What matters is the aggregate quantity of computing power, which is a function of quality times quantity of the chips.

Jordan Schneider: Let’s start with quality, because we had some interesting news come out of Huawei over the past week. Alongside Alibaba, they announced their roadmap for their AI accelerators over the next few years. It’s interesting because there are numbers attached to what they’re promising their engineers and customers that you can then compare to what Nvidia has told its customers and investors. What was your read on what Huawei is projecting on the quality side to be able to do over the coming years?

Chris McGuire: There’s a lot of hullabaloo around this announcement. Huawei was projecting out to 2028 and saying they’re going to make all these great AI chips. But actually, a lot of the coverage didn’t dig into the details of the announcement that much. When you do that, especially when you compare it to Nvidia, AMD, or other American companies, you see that they’re stalled. This makes sense because they’re probably stalled at the 7-nanometer node, which means they’re not going to benefit from increasing transistor density in the ways that ours are. They have to find other ways to make their chips better, and that’s very hard. There’s a huge avenue of quality improvement where they’re stalled out.

To give you an idea — their best chip today is the Ascend 910C, which is two 910B processors that are packaged together into a single chip. On paper, that has around the performance on paper of an H100, though a little worse. There’s a lot of reason to believe that, in terms of actual performance, it performs quite a bit worse. But if we’re looking at the stated teraflops of the chip and also the memory bandwidth, it’s around the same, a little bit worse.

Given that, the question is where they go from here. The interesting thing is their roadmaps for the chips are coming out. Keep in mind, the H100 was a chip that came out three years ago, and the best Nvidia chip now is about four times as powerful as that. If you look at where their roadmap goes, they won’t produce a chip that’s better than their best chip today until the end of 2027. The chips they’re making next year are going to be actually lower in terms of performance and lower in terms of memory bandwidth — at least one of them will be — than the 910C.

There could be some technical reasons for that. It could be that they’re moving to a one-die rather than two, so maybe they have one die that is slightly better than the 910B die. There could be other reasons for that. We don’t know how many 910Bs were made at SMIC. We know that a lot of them were made at TSMC and illegally smuggled in, which is a longstanding enforcement issue — there was a big problem there. We know that, but we don’t know how many were made at SMIC. Maybe a lot more of them were made at TSMC than we think, which would be bad from an enforcement perspective and pose a strategic problem. But from a question of what SMIC’s capacity looks like going forward, that would be good news for the United States. It means they’re struggling to make chips. Again, we don’t know that, but it’s a possibility.

The key takeaway is China’s not going to make a chip as good as the H100 until 2027 — late 2027, Q4 2027 — so they’ll be five years behind at that point.

Meanwhile, if you look at Nvidia’s roadmap, the chip they’ll make in Q3 2027 is projected to be 26 times the performance of the Huawei chip they’ll release the same year. What we’re seeing is a huge performance gap. There’s a big performance gap right now — probably around 4x between our best chip and their best chip. Based on the stated roadmaps of Nvidia and Huawei, that’s stated to increase by a factor of six or seven over the next two years. That’s significant.

Jordan Schneider: The Huawei fanboys would come back at you, Chris, and say, “Chips, who needs them anyway? We’re talking about racks and the Huawei AI CloudMatrix. Huawei’s got some optical magic to take their chips, and even though they’re not as power performant, we’ll dam up some new rivers and figure that out on the backend.”

From a quality perspective, how much can you make up the gap, abstracting up one level from chip to system?

Chris McGuire: There’s a big question of how much you can aggregate chips together. When we were doing this analysis in the government in 2024 at the NSC when I was last there, and also in the analysis I was doing at the State Department earlier this year, the operating assumption was that there’s not a cost to aggregation. There could be some, but it’s difficult to model. Frankly, that seems to be something that the Chinese could overcome. I don’t doubt that they’re making good improvements on the CloudMatrix system.

But the key thing there is, number one, we always assumed that they would be able to aggregate the chips without any loss. The lack of loss is not that surprising. But number two, what matters is how many racks can you make. It doesn’t matter how many chips you can put in a rack if you can’t make that many racks. It comes down to the production quantity question. If they’re putting 15,000 chips in a rack but can only make four racks, then it doesn’t give them that much advantage.

Jordan Schneider: It’s fair to say that there are other design firms in China making AI chips, but we can round them down to zero. No one is going to be doing stuff dramatically better than Huawei anytime soon. With that in mind, let’s turn to the quantity side of the ledger. Where do you want to start us, Chris?

Chris McGuire: This is an area where there is some fierce debate publicly. The US Dept. of Commerce said Huawei can only make 200,000 chips this year. Many others say they could make millions of chips this year. There’s legitimate uncertainty here. Personally, if the government put out a number, there’s probably good reason for that. But let’s entertain the uncertainty.

The number of chips they can make is a function of what their yield is on the fabrication, what the yield is on the packaging, and their allocation of AI chips to other 7-nanometer needs — smartphone chips, et cetera — where there’s huge production. They do have a huge interest in having a domestic smartphone industry. We’ve seen that they make over 50 million smartphone chips a year. When you combine all that, the question is: how many can they actually make?

My takeaway from Huawei’s roadmap is that because they are not getting significant scaling advantages on chip quality — which again makes sense given they’re not advancing in node — and they also face other significant constraints that we haven’t talked about yet on HBM, which they’d have to supply domestically, they’re more or less stuck on chip quality and advancing very slowly. They have to massively ramp production quantity in order to compete with the United States.

It’s unknown where they are right now, but let’s say that they’re 10x behind us. It could be closer to 50 to 100x. If the gap between us is then increasing by a factor of six or seven over the next two years, they’re going to have to make up 60 to 70x times production — assuming they’re at 10x — to reach our level of aggregate compute capability. That’s probably impossible. The quantity that they would need to scale to is so high that it presents significant strategic problems.

Jordan Schneider: This is the key distinction that folks don’t price in when they try to make the EV or solar or even telecom analogy. You have the entire weight of global capital now pouring into Nvidia chips manufactured with TSMC. That isn’t the same as with Nortel and Ericsson, or Ford not caring about EVs, or solar companies barely existing in US manufacturing. We are ramping on both a quality and quantity perspective at a truly world-historic scale.

It’s not that China is competing with a zombie industry in the West or something that China has identified as the future that the West hasn’t. Huawei and SMIC are having to compete with the flagship of global capitalism at the moment. While having the challenge — there are loopholes, there are challenges with the export control regime — the fact that you are not allowed to get tailwinds from TSMC anymore, or there are hiccups in what tools you are and aren’t allowed to buy, makes it a tall order to replicate all this domestically at scale when you are competing with the rest of the world as a collective unit.

Chris McGuire: That’s exactly right. It is not all those industries where they’ve been able to leapfrog in production or where we have ceded our interest to China. This is the linchpin of the global economy right now. Not only do they have to catch up from way behind, but they also have to do it without the equipment that we’re using. The equipment that we’re using, to be clear, that the Chinese don’t have — these are the most sophisticated machines that humans have ever made.

There’s a logical argument here: “Hey, China’s good at indigenizing stuff.” They are. They’re great at it. We’ve seen this in industry after industry.

But this is the single hardest thing on earth for them to indigenize, because the tools that they have to use to make the chips are the thing that they can’t access.

Those are the most complicated machines on earth. They could do everything — it’s logically possible they could indigenize everything on earth except for an EUV machine, not to mention many of the other tools that are also sophisticated and used in the production process. That’s why this is a unique sector.

We have to be on guard because it is super important. It is the foundation of US technological supremacy. It’s an area where we should take few risks, because if this one goes away, a lot of other things follow from there and it becomes problematic. But we are protecting it decently right now, and we should make sure we have 100% confidence in that. But I don’t see the numbers here — the Huawei chip design numbers or their production numbers — and think there’s about to be an all-out competition where they’re going to equal our companies and we’re going to be on equal footing globally, competing for markets around the world. When you do the math and look at it, that doesn’t become a realistic possibility.

They will be able to produce significant numbers of chips, but not enough to be able to meet domestic demand for AI, given that the compute demands for AI are also increasing so rapidly. To understand this, you have multiple exponentials working at the same time. You have exponentials in terms of chip design getting better. There’s exponentials in terms of production capacity, although that one’s more linear. And then there’s also exponentials in terms of compute demand. It’s very hard for China to make up all of those simultaneously, which is good news. That’s great for us.

The fact that there’s so many headlines celebrating the breakthroughs — it’s all relative to where they are. Look at the Bloomberg headline yesterday that said Huawei is going to make 600,000 Ascend chips next year and that’s going to be double their production. This shows that they’re doubling production and they’re competing. That means that they’re making 300,000 chips this year, if that’s true, which validates Commerce’s numbers of 200,000. You’re in the same ballpark. And that is a very low number.

600,000 GPUs is not going to be enough to fill the Colossus 2 data center that Elon Musk is building. Keep in mind, these are also substantially worse chips. Nvidia is making — Jensen said this year — 5 million GPUs total, and then each of those is probably five to six times better right now. But next year might be 10 times better than each Huawei chip. You’re getting to the point where we’re making 50 times more chips than they are.

It’s important for people to keep that in mind when they’re seeing all these headlines that say they’re catching up. But the math doesn’t check out when you see that. It’s possible there are breakthroughs and that number goes down, but we have a huge buffer. If we’re at 50x or 20x China or even 10x China, we’re in good shape relative to them. Again, my risk tolerance is very low and we should push that number as high as possible in the gap. But the headlines aren’t consistent with the math.

Jordan Schneider: Are there more numbers you want to talk about?

Chris McGuire: To give an idea of the quantity: if you assume Nvidia is making 7 to 8 million chips in 2027 based on current roadmaps, which is a 25% increase over 4 to 5 million in each of the next two years, that seems reasonable. We can nitpick with that, but it’s in the ballpark.

Let’s operate under the assumption, for the sake of simplicity — which is probably not accurate — that all the chips Huawei and Nvidia are making are their best chips. What that comes out to is Huawei would need to make about 200 million chips in 2027 to equal Nvidia.

In terms of production quantity, let’s be generous and say they’re at 30% fabrication yield, 75% packaging, and 50% allocation. That means they would need 11 million wafers — most of TSMC’s total production, which is 17 million wafers a year, devoted to Ascends.

If those numbers go down a little — and they’re probably lower than that — if you say it’s 10% yield, which is low but could be right, 50% packaging yield, and 25% allocation, then China needs to stand up an entire TSMC across all of TSMC’s production devoted to Ascends in order to make enough to equal Nvidia. That is not possible. It’s not possible that they can get the tools and have the capacity to do that quickly.

History’s Most Complicated Supply Chain

Jordan Schneider: Is this the right variable to be focusing on — Huawei total production versus Nvidia total production? Nvidia sells to the world — well, maybe not to China, TBD — but from a balance of national power perspective, should we only be counting the GPUs that are in the U.S.? Should we only be counting the GPUs that are in U.S.-owned hyperscalers?

Chris McGuire: That’s a fair question. Maybe we are providing for the world and they’re providing just for themselves. There’s a lot of debate and concern about whether China is going to be able to export AI to compete with us globally, which is absolutely something we should think about and consider. But for them to do that, they still need to fill their domestic market.

Their domestic market is going to be huge. Our domestic market is huge. A huge percentage of Nvidia’s production is going to the U.S. market right now. We’re at well over 50% of global compute.

Even if you slice it up a little bit and say, “Okay, China’s going to put all these efforts into a single firm, they’re not going to do anything internationally,” does that give them the capacity to maybe support one AI firm to be a real competitor in the Chinese market? Potentially. But you’re talking about significant constraints on their ecosystem there. It’s going to be very hard to compete with our robust and dynamic ecosystem at that point, and it’s still going to be difficult. That’s giving them a lot of generous assumptions.

Also, as the compute continues to scale, it’s scaling faster than China can scale production. There’s a fundamental problem they’ll face. In the next generation of models in 2028, 2029 — absent a massive indigenization of tooling — this problem will get worse for them, not better. Unless the United States lets up on its vice grip on tools and compute.

Jordan Schneider: It’s such a wonderful irony that America has been beaten on scale in so many industries over the past few decades. But once people get focused and once there’s enough money in it, then this is Rush Doshi’s “allied scale ” idea. Maybe America couldn’t do it on its own. Intel isn’t the one pulling their weight here. But when you add up the global ecosystem — what the European toolmakers can provide, the manufacturing out of Taiwan and Korea, the Japanese tool makers, and the design capabilities coming out of the U.S. — it adds up to something that China cannot be self-sufficient in at a scale which can compete over the long term globally with what America and friends have to offer.

Chris McGuire: This is the most complicated supply chain in human history. They’re very good at indigenizing supply chains — they’ve done that in numerous industries. But if there’s one that’s going to be the hardest for them to fully indigenize, it’s this one. The evidence says that they’re struggling.

They’re struggling partly because it’s hard, and partly because the United States, over multiple administrations of both parties, has taken some good steps to prevent them from moving up the value chain, and Huawei’s roadmap shows that it’s working.

It’s interesting because when you look at where Huawei was, designing chips is not a problem. The Ascend 910A in 2020 had better specs than the V100, which was the leading Nvidia chip at the time before the A100 came out in 2020.

Huawei designed, on paper, the most powerful AI chip in the world in 2019, and they made it at TSMC. What’s changed? They didn’t make any AI chips until 2024 because they got cut off from TSMC.

Then the chip that they made was substantially worse. They’ve been forced to rely on their domestic production, which has been very hard for them to scale from a quality or quantity perspective to compete with the West.

Jordan Schneider: Cards on the table — I find this very compelling. A lot of your assumptions you’re taking from Huawei bulls. The 600,000 to 700,000 estimate is something that Dylan Patel wouldn’t disagree with, something he said in his own piece.

But the headlines that Huawei has been able to generate from its reporting — from having 100 chips in Malaysia to White House officials tweeting, “China’s expanding abroad” — what is it about Huawei’s messaging, American views of China, lack of technical sophistication among reporters? How have they been able to build themselves up as such a heavy hitter in this space when they’re really in single-A compared to the TSMC and Nvidia ecosystem?

Chris McGuire: There’s not a good understanding of how good our chips are. You could say maybe there’s not a good understanding of how bad Chinese chips are, but I’d flip that. Nvidia is an amazing company doing amazing things. They’re producing unbelievably powerful chips that keep getting better every year, and they’re also increasing the rate at which they’re coming out. They were previously on a two-year cycle; now they’re on a one-year cycle.

There’s a reason why the demand for these chips is completely through the roof, why they’ve become the most valuable company on Earth, and why all the next five most valuable companies are scrambling over themselves to get their product. They’re good, and no one else is able to do what they do. No discredit to AMD and others that are also making great chips — American companies are doing incredible stuff in this space, and that’s not fully appreciated.

Jordan Schneider: When you have Jensen Huang saying, “They could never build AI chips.” That sounded insane, and when he said, “China can’t manufacture.” China can’t manufacture? If there’s one thing they can do, it’s manufacture. Or when he said, “They’re years behind us.” Is it two years? Three years? Come on. They’re nanoseconds behind us. Nanoseconds.

When you have him saying that China is nanoseconds behind, it’s not true. He knows it, and his engineers know it. I’m sure they’ve done teardowns galore of Huawei architecture, and they know the same thing. What you’ve talked about over the past 30 minutes, Chris, is not secret. The reason that Nvidia is valued at $4 trillion is because of that fact. This is a widely held opinion. But you have their CEO — because he’s trying to shape a narrative that he needs to sell into China — saying something patently false.

Chris McGuire: I agree it’s patently false. You look at the data and it’s patently false. I will also say that everything I was saying was focused on total processing performance. You could make a valid point that memory bandwidth is also important. That’s what everyone’s saying about why the H20 needs to be controlled, which is correct.

How do they stack up in memory bandwidth? There is still a significant gap there as well. The Nvidia chips, even looking at the two roadmaps, are going to be 4x better, potentially 8x better on memory bandwidth too. I want to clarify: Franklin says, “Well, he’s just looking at one part of it.” If you look across the stack, the gap is increasing.

But to your question, we’ve created this perverse incentive structure. When we said, “You can’t export, this is the line, you can’t cross it. End of story.” It was simple. That’s the line. That’s it. That was the kind of “as large of a lead as possible” approach, because you need to hold the line and then the gains will compound over time.

Now that the logic has changed, we’re saying, “We can sell chips, but only if they’re slightly better than the best Chinese chip.” It created this incentive for industry to completely overhype the capabilities of Chinese chips in quality and quantity in order to get access to the Chinese market. That incentive structure is perverse.

If there’s a legitimate need for it, that’d be one thing. If there was massive quantity of these chips, especially if China was able to fill its domestic demand for AI compute with domestic chips, it would be a different conversation. We should think about what American companies should be able to export there. But that’s not the world we’re in because of the constraints on their production and because of the increases in AI compute needs. We’ve created this incentive structure for companies to overhype China.

There is one other element that’s significant, that we should be real about — there is a significant Chinese propaganda campaign about this. National Security Advisor Jake Sullivan even said that publicly once in 2024 at an event. We know that part of China’s strategy is to convince the West that their measures are futile and that they’re not working. Every single time there’s a breakthrough, there are five South China Morning Post stories talking about how amazing it is and how China’s crushing the West, et cetera. But that doesn’t make it true. That doesn’t change the math. It doesn’t change the dynamics. But we are susceptible to that.

The nature of our system is such that it gets traction here. Math is hard. It’s a convenient narrative that also fits the correct narrative in a lot of other industries. It’s easy to convince us that this is the same when, in fact, it’s quite different.

Jordan Schneider: Let’s talk about policy changes that could dramatically allow Huawei, SMIC, and CXMT — the Chinese memory provider — to inflect in a way that would make the multiples that you’re projecting for Nvidia plus TSMC to be ahead of them different over time. How would you rank the things you would be most worried about if the West started to ease off export controls and what it could do to the curves that Matthew laid out?

Chris McGuire: Number one is something that Dylan Patel highlighted in his piece and something that we haven’t even talked about here but is significant. Everything that I’m talking about is looking at logic die production, and that is a constraint. It probably is a constraint at a higher level because I’m assuming that they can scale that at 10x. It’s still going to be 5-10x below where we are.

But that’s something where, okay, maybe they can use the tools they have and keep acquiring equipment given the regime to build out their fab base significantly. They’re still going to be constrained by HBM because HBM is their number one constraint now. They previously had unrestricted access. They don’t anymore. HBM stacked exports have been cut off, so they’re running through their stockpile now. That will run out. They don’t produce very much HBM domestically. They’re going to be very constrained. CXMT has had some problems being able to produce HBM3 at all.

If CXMT is allowed to produce large amounts of HBM, that’d be a problem. Or if HBM controls are rolled back in the context of a negotiation and we change the policy so we can export HBM to China, that removes the biggest constraint that’s on top of everything I said that could push things down even further. That is probably the number one biggest obstacle they face right now, and maintaining that is very important.

The second thing is there are still a lot of tools that are going through. When I look at this, what I see is the controls have probably been more effective than the media narrative suggests because they seem to be struggling to produce very large numbers. If they’re making 600,000 chips next year, that’s a very low number and it’s not a competitive number for a national AI industry at the quality of chips that they’re making. That means that the controls are working now.

We should not take any risk. There’s some risk that they’re able to figure out much more effective means of producing chips. We could zero out that risk by clamping down on SME exports to China significantly. But that’s where we are now. They are still able to get a lot of tools, especially for non-restricted fabs. There’s a subset of tools that will make it next to impossible for them to advance, especially for them to do 5 nanometers.

But they could order very large numbers of tools and then scale their 7-nanometer production and large amounts of 5-nanometer production. The math means that’s still going to be insufficient. But why take that chance? If the status quo happens and they continue to buy large numbers and divert, that’s probably the point when they’re going to struggle. But can DeepSeek continue to make good, if not frontier models, while the rest of the ecosystem suffers? If they really centralize all efforts into one entity for the next one to two years, but not after that?

Jordan Schneider: The other way the balance of chips changes is if Nvidia gets to export to China. We had a very interesting arc over the first few months of the Trump administration where it seemed like they were going to ban H20 exports, then they unbanned them, and then China said, “No thank you — we actually don’t want this stuff anyway.” Chris, what is your read on that arc?

Chris McGuire: The most likely explanation is that this is a negotiating ploy. It would be foolish to turn down chips that would help them. There’s so much demand for AI compute that having H20s allows them to have their cake and eat it too. There would still be room for every single domestic chip.

China can protect markets and make clear that they’re going to ensure there’s enough demand. They can protect the market for exactly the number of chips that they’re able to make themselves. Once they guarantee all those are sold, every Nvidia chip goes in on top. That’s well within their power.

Jordan Schneider: That is a game that the Chinese industrial policy ecosystem is well practiced at. We’ve seen domestic suppliers slowly but surely eat market share as their capacity comes online — everywhere from shipbuilding to EVs to handsets. That is a normal trend.

But the retort would be that all these CNAS papers about chip backdoors have become paranoid that these are the same thing as Hezbollah beepers or something.

Chris McGuire: It’s possible, but if that were the case, then they wouldn’t want Blackwell chips either, because there’s an equal risk of Blackwell chips having backdoors as Hopper chips. It seems like they do still want Blackwell chips. That says to me that the stance on Hopper chips is more a negotiating ploy — “Hey US, if you’re so desperate to send us AI chips, then only give us the best ones. We’re not going to take the second-best ones because we think this is now a point of leverage that we have over you as opposed to the reverse.” If that’s the case, we should take that, pocket it, and move on.

There’s also a possibility that they are overestimating their own production.

If you think the Chinese system, does someone walk through this math with Xi Jinping and show him their numbers versus our numbers? Do they explain that because of the differences in quality, it’s going to be hard for them to ever catch up, and the slopes are working against them on the curves? Probably not.

That’s not going to be a briefing that people in an authoritarian system are incentivized to give their leader. They want to paint a more optimistic picture. If that’s the case, then maybe the leadership does believe that they’re going to catch up soon, in which case, more power to them — let them try. We should let them try without the benefit of massive amounts of US tooling as well. But that perception works in our favor.

Jordan Schneider: It was an interesting arc when the October 2022 export controls hit. I remember writing all these articles about what the Chinese response was going to be — certainly there would be retaliation, right? But there was reporting that they were like, “Eh, we’re fine. We’ll figure this out on our own.”

The fact that Beijing didn’t realize how big of a deal this was points to an information gap. They’re hearing about tons of shiny stuff coming during their briefings from the big fund, from people who are scared of being thrown in jail.

At that point, there’s a notable disconnect — while these restrictions are critically important for China’s semiconductor ecosystem, senior Chinese leadership and negotiators don’t seem to prioritize unwinding the Biden administration’s policies

Chris McGuire: The response at the time was “We’re going to indigenize and we’ll see you on the battlefield” — metaphorically — “We’re going to compete.” That’s admirable and is consistent with the history of most other industries. That is the response, and they’ve done very well at that.

The point here is that we think this industry is different. That was the case in 2022, and it’s the case now. The fundamentals of it are different from the industries that the Chinese have been so successful in. That doesn’t mean that they will not be successful here, but it’s going to be harder and we can’t assume it given they were able to do it in the past.

Chip Controls and Escalation Dominance

Jordan Schneider: Chris, what’s your read on why it took until Liberation Day for the rarest card to finally be put on the table?

Chris McGuire: First, Liberation Day was a significant escalation in a much broader element of the trade dynamic than anything before that. We’re talking about hundreds of percentage points of tariffs. That’s a fundamentally different escalation on the US side, so the Chinese were going to escalate to a greater degree as well.

Second, the Chinese now have a better understanding of these restrictions and have better tools to address them. They were taken by surprise in October 2022, and it took some time for them to wrap their heads around what tools they had to respond. That’s why we didn’t see any direct response in October 2022, but we did start to see a Chinese response in 2023 and 2024.

Third, this requires careful management. When the Trump administration went all out on tariffs, it became such a big escalation on both sides. But there are other cards that the United States has to deter China from retaliating against us. The Biden administration did think about that, and there was some careful messaging behind the scenes with the Chinese on this point, making them aware that we have a bunch of cards. The message was clear: we know what we’re doing. We have these actions in this space, and they’re consistent with our original objective. We’re very clear with you that this is the course of action we intend to take, and we’re continuing down that path. That doesn’t preclude various other activities that we’re discussing with you. But if you massively escalate in other areas, we have other areas where we can massively escalate as well.

The US has other ways to impose massive costs on Chinese companies in the short term. Any large Chinese technology company is still reliant on semiconductors from TSMC that are designed with US tools to continue to function and exist, and it’s within our authorities to take those off the game board immediately.

The idea that the Chinese have escalation dominance because of rare earths is incorrect. There are significant moves that the US could take but chooses not to.

But if we’re not willing to use those tools or even talk about those tools, or the Chinese don’t perceive that we’re willing to, then it becomes a lot easier for them to escalate on rare earths and get escalation dominance over us.

Major export controls against major Chinese companies would be massively painful for them. Cutting any Chinese banks off the US dollar or anything like that would be massively painful for them. The US has escalation dominance. I don’t think we’ve been willing to use it, and that has reversed the dynamics here. But again, the fundamentals massively favor us.

Jordan Schneider: There was a lot of reporting that the Trump administration was surprised that rare earths were thrown on the table — shook, even — all of a sudden the administration thought, “Oh wow, this is bad. We need to figure out what’s going on and find a response.” Then you had stuff like the MP Materials deal. Encouragingly, last week, Bessent started to sound cranky and said, “Look, aircraft engines, chemicals — we can take this in a lot of directions that you guys [China] are not going to enjoy.”

Xiaomi and every Chinese handset manufacturer need TSMC to provide reasonable domestic products and compete globally. These are things that will take a week for the pain to be felt, and where the solution to them is more painful than putting in some mines and building some refinery plants in Australia.

The idea that America has ceded escalation dominance on economic coercion because China found something that made the US feel some pain boggles the mind. I thought President Trump would say, “Fuck it. We’ll play that game.” It is unfortunate that he seems to be more willing to play this game against allies than against adversaries. But maybe this is changing with the Bessent talk and with the Putin Truth Social post from last week. We will have three and a half years of this. I am confident that we will reach a point when this game will be played again and Trump will be ready to pull more economic triggers. We’ll have to see.

Chris McGuire: To give a concrete example of where we could mirror — the controls on magnets had a significant impact on our auto industry. US auto firms were saying, “Hey, we’re going to shut down soon if this doesn’t get solved.” That is a strategic problem for the United States.

I wonder how long BYD 比亚迪 would be able to operate without access to US technology or chips from TSMC. Probably not that long. Many BYD cars use 4-nanometer chips to run their ADAS systems. BYD has done a great job indigenizing most of their supply chains, everything from legacy semiconductor fabs to the ship carriers that move the cars around the world are all owned and made by BYD. The one thing that they have not been able to indigenize that they still need for their sophisticated chips is advanced semiconductor production.

Things keep coming back to this, and it becomes a little repetitive — “Oh, you guys keep talking about chips” — but it’s because it’s the foundation of so many products and it’s the area where the US has advantages. In this example, a tit-for-tat escalation would have been: “Hey, our auto firms are about to shut down because we don’t have rare earth magnets. BYD is going to shut down because they’re not going to get chips until we resolve this.” Then we could pull both those back to make sure that we’re not taking either of those actions while continuing to take the necessary separate actions on AI. That’s one way we could have gone about it and could still if this rears its head again.

Jordan Schneider: On Trump 2.0 tea leaf reading, we had a BIS 50% rule, which is something that the Biden administration never got across the finish line. What is it? Why does it matter? And what does it imply about the future of policy?

Chris McGuire: This is a good change that BIS made this week. It’s important and will have a significant impact. It may not affect AI chips directly, but will have a substantial trickle-down effect on all of export control policy.

The way that export controls work is there are certain things that are controlled countrywide — and those are the most important and robust controls that we can implement. But for a number of other things, we control them to entities of concern. The entity goes on the entity list, and then all US exports — or many, depending on what the licensing policy is — are blocked to them.

The way it worked until this week was that every single subsidiary had to be specifically listed on the list. If it wasn’t listed, then exports were okay. It was a presumption that exports are fine unless the subsidiary is specifically listed. This creates massive loopholes and is easy to exploit. Someone can create a subsidiary that isn’t listed, and then it becomes easier to export to them. There are various due diligence requirements, but that checks a lot of boxes and makes it much easier for firms to export.

The Dept. of Commerce flipped that assumption. They said, “We’re still going to list entities and their subsidiaries for clarity, but our assumption now is that if you have knowledge that an entity is a majority-owned subsidiary of an entity on the list, then automatically all exports are blocked.”

That means any company that is a wholly owned subsidiary of Huawei or SMIC or others — CXMT, YMTC, et cetera — are now on the entity list, whereas before they were not. That’s a significant change.

This also applies globally. It applies to Russia, it applies to Iran. There was a shell game that a lot of entities played and it never made sense. The Treasury Department, with respect to sanctions, has exactly this rule. They say if we list an entity on the SDN list, then if there’s an entity that’s majority-owned by one of those firms, it’s also covered. We expect people who do business with entities to do their own research and make sure that they’re not inadvertently working with companies that are on the SDN list. If you do, then you are held responsible.

Export controls are going to work the same way now, and they should. There’s no reason why one should be fundamentally different from the other, given what we’re concerned about — the diversion risk is substantial. This is a good change. To the point of where export control policy and China policy are headed and how this will play out over the next few years, this is indicative of the fact that we don’t really know. This is a good change, filling a big loophole that the Biden administration was not able to close.

It’s something the Trump administration has talked about from the beginning. Despite all the trade talks and narrative that everyone is walking away from controls, this action was still taken. That shows that there are still people who want to rebalance the relationship in ways that are in our interest and fix the loopholes in the tools we have.

This isn’t a perfect solution. There will be Chinese counter moves. Chinese companies will create shell companies that own 51% that aren’t affiliated with the parent in order to get around it. It will still be a whack-a-mole game. That’s why technology-based controls are going to be most important, because that’s the only way we can be sure that we’re not playing whack-a-mole. This will make companies think twice. It will increase the amount of due diligence that’s necessary and closes loopholes that were being abused as of last week.

Jordan Schneider: Chris, what is your thesis on the loopholes and the fact that we would record ChinaTalk podcasts about them three days after the regulations came out, and then they would change maybe six or twelve months later?

Chris McGuire: I lived a lot of that.

One point is that government is about compromise. These things are hard, and they do have — or have the potential to have — significant impacts on US businesses. There’s a lot of lobbying from businesses. It’s one thing when you’re on the outside of the government to throw stones, but it’s different when you’re making the decisions that are going to reshape industries and economies. People are careful, particularly Democrats are careful and deliberative. That means the default is to be cautious.

The totality of the approach that has been taken — and has been taken bipartisanly in Trump 1 and Biden administrations — was an assertive and different policy than the United States typically takes with respect to technologies or economic issues, and it’s important to keep that in perspective.

There were some loopholes that people pointed out right away — things that some of us tried to fix and weren’t able to. Sometimes that’s because of US industry concerns. Sometimes it’s because of working with allies, and those were tough negotiations where we weren’t able to get everything we wanted, but we were able to get a lot. Sometimes it’s that regulating on the frontier is hard. The government has gotten better about doing that starting in 2022. There were some big fundamental errors in the first 2022 export controls that did take a long time to correct. That is a function of how long it takes to get something through the system.

The controls in 2022 had loopholes that were a result of technological developments that happened while we were developing the controls. That is something that’s going to happen in this space, and the government has to be nimble in responding. The failure on the government’s part with respect to those controls was in its slow response. We should be able to fill loopholes quickly and agilely while also admitting that they’re going to happen. We should do our best to make sure that they don’t, but as long as we’re able to fill them quickly, that’s the goal here.

Jordan Schneider: What’s your normative argument for why America should be hobbling domestic Chinese AI hardware production?

Chris McGuire: Number one, if you buy into the idea that AI is going to be one of the most important things in all elements of the economy and also for national security, then it’s an area where we need to maintain the largest possible lead as a fundamental principle. That’s the baseline here.

Our ability to control the AI ecosystem as the United States and allies is limited only by China’s ability to make an alternative ecosystem themselves.

If they don’t have a domestic semiconductor ecosystem, then their influence over the entirety of the AI ecosystem is going to be inherently either reliant on us or next to zero.

If you think this is the thing that’s going to underpin the global economy and US technological supremacy and national power generally going forward in every single element and domain, then the single biggest risk you could take to US leadership is to allow the Chinese to make advanced chips. That’s the bottom line here.

Store-Bought Supercomputers

Jordan Schneider: What’s the best answer you can give about how AI hardware matters for the military balance of power?

Chris McGuire: There are three big areas I’ll flag.

The first is backend logistics and decision making. It’s kind of boring, but the US armed forces is the world leader in backend logistics and decision making. The reason we’re able to get munitions on target anywhere in the world in 24 hours is partly because we have amazing capabilities, but it’s also that we’re good at logistics.

We’re able to position tankers around the world and they know exactly where right away. We have a lot of experience at this, and we do a lot of training and drills. If you can automate all that — that’s just one discrete example — that takes away a significant source of the US’s military advantage.

If you have optimal decision making and can make optimal use of your resources, it will allow you to have significant effects on the battlefield, regardless of the actual equipment there.

The second is cyber capabilities. A lot of people talk about AI plus cyber, but in the operational context, you can imagine how significant it would be if you have capabilities that can get around defenses easily and exploit vulnerabilities and put sophisticated malware into entities. That would allow you to do significant things that quickly change battlefield dynamics.

The third is autonomous systems, and this is where AI inference is really important. Having a good AI model that you put on a bunch of drone systems to autonomously work together and take actions in a comms-degraded environment on their own will change the battlefield. But you’re going to need massive inference capabilities to do that. The number of queries that will be needed, especially if it’s on the edge, you’re going to need all these systems to be processing these inference queries on the system. Or if it’s not in a comms-degraded environment, they’re all going to have to be going back home constantly, and that’s going to require very big inference clusters.

If we’re talking thousands or tens of thousands of drones, all of these are going to be constantly having inference-heavy requests on the AI models. You’re not only going to need a sophisticated model, but you’re going to need a lot of infrastructure to support the compute needs of your battlefield.

Those two are going to be reliant on having the hardware to make this model that’s super sophisticated and also be able to operationalize and run it in real time. The more capacity you have and the better those capabilities are, the more you’ll be able to do.

There are both military and commercial needs. If you assume that they prioritize military needs, then you could take a bite out of your commercial inference capacity in order to support that. True, but the more that you constrain this — and also as those compute needs are going to go up for the military capabilities — the more that will be a constraint going forward. That’s an area where not only do we not want American hardware supporting Chinese military processing capabilities, but we also shouldn’t want American hardware supporting the broader ecosystem that enables the Chinese to us foreign chips for commercial purposes and domestic chips to power the military purposes.

This is all an aggregate AI chip pool. If we’re contributing to the pool but not contributing to the military capabilities themselves, you’re indirectly contributing to the military capabilities.

Not to say that China should be completely cut off — maybe there are ways to aggregate that — but even if China is completely reliant on US cloud, which is a separate debate that we could have, that’s something where in the event of a conflict you could shut that off right away and which imposes hard choices on the Chinese. Whereas if you export them the chips and they have a large supply of chips, then they can slice and dice for their military and commercial purposes.

Jordan Schneider: The other important normative question that I’m going to keep asking a lot on ChinaTalk is: to what extent do you think it is America’s responsibility to keep China down economically?

It’s a bit of a false question because as you said, Chris, if this is what you are most worried about let AWS sell access to Nvidia chips into China from data centers in Malaysia and you’ll figure out the latency. The visibility that the US has on what that’s being used for — whether it’s optimizing grocery logistics or optimizing PLA logistics — is something that you can look at. In the event of a conflict, then you don’t have this strategic resource that you are able to mobilize against American interests.

Given that semiconductors are dual-use technology, how do you address the argument that U.S. export controls are primarily about constraining China’s rise rather than legitimate security concerns?

Chris McGuire: I completely agree with your point that this is a false choice because there are ways to manage the competition such that we provide access — if that’s your choice — to the full American AI stack. By “full,” I mean US chips on US cloud, potentially running US models to the Chinese in ways that allow them to benefit economically, but give you the lever in a crisis. There’s a separate question on whether, given the dual-use nature, that’s a good idea. This is a hard dynamic because the policies that we’re taking have historical precedent.

We’re preventing adversary access to supercomputers, and that has been longstanding US policy.

The US has long controlled supercomputers to the Soviet Union. There were some efforts to collaborate, but they involved intrusive verification measures. That’s an area where we have always doubled down on compute processing.

The difference is that supercomputers are now available in a box off the shelf from Nvidia, AMD, and others. That’s the dynamic that we’re responding to: what do we do in that circumstance? Whereas previously they had to have them built at US national labs and it required all sorts of specialized expertise, now they don’t. This sophisticated technology that the United States has long guarded closely has become commercialized and commoditized, which is great for innovation but poses hard policy challenges with respect to this longstanding policy of preserving our edge on supercomputers.

The question there is: what do you want to preserve? Do you want to preserve a longstanding approach that maintaining our edge in compute is key to national competitiveness? Or do you want to argue that restricting commercial products is going to have deleterious impacts on our long-term vision for the global economy? The former outweighs the latter, and it means that there are costs to this. It probably means that we can’t have our cake and eat it too with respect to Chinese AI — or the Chinese can’t have it. If we take this approach, our ecosystems are going to be further and further apart and the onus is on them to indigenize. We are going to move our separate ways.

What we should do is find other ways to make sure that the Chinese can benefit from advances in, and even the use of, US models. The Chinese could use US models to support their companies, at least right now. I know Anthropic has moved to cut that off because they have national security concerns on that front. That is a frontier where once you have concerns there, it becomes difficult. But there are multiple hurdles that we could jump over before we have to say we’re completely separate — whether it’s cloud access or model access. Maybe that’s where we end up, but it’s certainly a false choice right now.

Jordan Schneider: What’s your take on the Silicon Shield argument — the idea that keeping China dependent on Taiwanese manufacturing is what’s stopping World War III?

Chris McGuire: The Chinese view Taiwan more in a historical context than through this economic and technological context. The Chinese know that a significant action vis-à-vis Taiwan would be flipping the game board.

There would be significant actions on either side, and the ability for them to operate as normal in that environment would be limited. No matter what, the Chinese recognize this. They’re looking more at what is their military capability and their readiness and what are the political dynamics and where’s the United States going to be, rather than what does this mean for our semiconductor production or our technology companies.

They know a move on Taiwan means they would incur substantial economic costs. The question is, are they willing to bear it? But I don’t think this factors nearly as much into their decision-making as the military balance of power and the overall geopolitics and whether or not they think this is something that they can implement and execute.

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Jordan Schneider: The idea of cutting off BYD and Xiaomi from TSMC chips is what triggers an invasion does not make sense.

Chris McGuire: This is something that we’re going to have to grapple with. these are also scarce resources. 3-nanometer lines at TSMC are sold out and in very high demand. There are questions on whether it makes sense that we allow US tools to be used to make Xiaomi chips — Xiaomi three-nanometer chips at TSMC — when American companies would presumably use that fab capacity if they didn’t. You could have a complicated debate on this, but that’s a reasonable policy question.

Inevitably, as technology gets more important, these chips get more important and the fab capacity is not going to advance at the quantity that you need to support all the technological needs that we’re seeing, especially as you see growth in robotics and other fields that are dependent on AI. Are we going to continue to allow China to design their own chips on these lines for their own companies? It’s a separate question of whether they can have any of them. Certainly them having US chips is fundamentally better than them having custom-designed chips. But this is something that we’re going to grapple with in the next one to two years because it will be increasingly unsustainable.

Advice for Young Professionals

Jordan Schneider: Chris, what do you want to tell the kids? You had a remarkable arc in the civil service over the past decade, but this is a tricky time for young people thinking about replicating the path you took. Any reflections you want to share or advice you’d want to give?

Chris McGuire: It’s cool that ten years ago I was in grad school, writing various papers and thinking about what to do in government. Now I talk with so many people who are in grad school writing papers about the things that we did — not only the specific policies, but also this entire area. This idea of technology competition is in vogue now, and a small number of people have pushed effort and policies in the last couple administrations to make this a new topic.

That’s an amazing experience, and you can’t have that anywhere else but in government. You can write things on the outside and work at companies, but actually being able to craft the policies that design the future of technology competition — there’s nothing like it. Anyone who is interested in this space should aspire to do that because we need people who care about it and also know the details. We need people who can translate both the technical details up and the bigger picture policy descriptions.

If you’re interested in that space, please don’t look at any current headlines and say, “Well, I shouldn’t work in government.” You could think about how best to position yourselves and what angle to take, but we desperately need people in government.

It’s a tricky moment for the civil service. I dealt with my share of good and also bad civil servants, so I recognize that there’s a wide spectrum of capacity there. But I do have big concerns about the government’s technical expertise, particularly on these topics — not export controls alone, but anything with respect to AI and semiconductors and future forms of computing, quantum computing, things like that.

It’s hard to get people into government who know this stuff and care about it and can connect the dots on policy. The government needs to prioritize getting those people and keeping those people. There’s always lip service to that, but it’s not happening. Those people are leaving.

These are very hard policies to craft and implement, but they’re also hard to maintain because regulating at the frontier means that you have to constantly be updating and innovating. If we’re going to have a technology policy that actively tries to preserve America’s edge via technology protection policies, you need to be maintaining that every day. If you let it atrophy, it’s like water — it will seep through the cracks and eventually fail. That requires people who know this and are good.

I hope that the government sees that and recognizes that and prioritizes bringing those people in. I know there are people coming in who are good, and it’s a matter of prioritizing those voices and listening to them from a technical perspective, to make sure that the right information is being briefed.

We are in a difficult moment now. But we have no choice but to continue to encourage young people who are interested in this to go do it, because there’s no other US government to work for.

There’s no alternative place to do this massive policy stuff that is going to shape the future of all these industries. We need the people to be there to do it.

Jordan Schneider: Another lesson of your career, which I love your take and reflection on, is the continual learning aspect. You have an MPP, you spent two years at McKinsey, not Intel. But this episode illustrates that you’ve been able to push yourself to be at and stay on the knowledge frontier when it comes to AI and technology competition for almost a decade now. That energy and that determination to stay up on this stuff is not something that you see in every civil servant and is not something that the systems in the civil service are incentivizing for. What pushed you to spend that time learning all this? And what systemically do you think can be done to encourage people to stay on the knowledge frontier?

Chris McGuire: When I joined the civil service, I wasn’t doing emerging technology. I was doing nuclear weapons policy. I started doing nuclear arms control, which was an area I was interested in and had some historical connections to.

Jordan Schneider: What are your historical connections to nuclear weapons?

Chris McGuire: My grandfather was on the Atomic Bomb Casualty Commission, and he lived in Hiroshima from 1947 to 1949, studying the effects of the bomb. He was a pediatric hematologist, so he focused specifically on the effects on children and wrote some of the initial papers showing that nuclear weapon exposure leads to leukemia. He did the statistical analysis that demonstrated that proof. Growing up, I talked with him about that work.

Jordan Schneider: I love this lore.

Chris McGuire: Yeah. It’s a very complicated set of decisions around nuclear weapons use, but it became ingrained in me very early that this is important to US strategy, US power, and how we shape our view of the world. It became a topic that when I left the private sector and asked myself, “What do I actually care about? What do I want to work on?” — the strategic issues around nuclear weapons were the thing that pulled me.

I went to State. I actually had the US-Russia nuclear weapons portfolio, working on the New START Treaty and the INF Treaty. I oversaw the INF withdrawal when we discovered the Russians were cheating in 2018-2019. But it became apparent to me that this was last century’s strategic competition.

The next century is in emerging tech. The arms races aren’t going to be in nuclear weapons production — they’re going to be in AI and various other technologies.

I made an active effort to pivot into that area from nuclear policy.

That background gave me the strategic logic and baseline. My job there was translating these highly technical policy measures to the Secretary of State or other principals in terms of why this matters and how it works. That’s the very same skill you need with respect to AI policy.

What was helpful to me was being entrepreneurial within the civil service. I was constantly seeking out the next opportunity to push myself forward, learn more, and move up. That’s not something that, at least in State Department civil service, is structurally encouraged. It’s more, you are in your job, you’re going to be the expert, and you’re going to be in that job for 20 years because we need an expert in this for 20 years. That’s not how the economy works anymore, and it’s not what young people want to do.

If you are in the civil service, you have to seek out those opportunities yourself. If you sit back, the default will be that you stay in place. I was lucky — being at the right place at the right time, one job leading to another. But if you’re entrepreneurial about it, you put yourself in position to get lucky. I would highly encourage anyone in that space to constantly be seeking new jobs, details, or opportunities. I definitely pushed the limits of the amount of time you could be detailed away from the State Department without working there. It was a joke for many people inside the department.

But I was always pursuing the goals of the department, the country, and the government. I was working for people who wanted me to stay, and I was always able to stay because the mission was important and we’re all ultimately on the same team in the government. Even if you have to ruffle a few feathers with various backend HR people who are frustrated — “detailed again?” — if the National Security Advisor wants you to be there, who cares what the deputy head of the HR office has to say? You have to manage all the relationships, but if you’re good and you’re wanted and you’re entrepreneurial, you can do interesting things.

Jordan Schneider: It’s really interesting comparing that missile gap analogy to the AI stuff. We had a conversation about various exponentials when it comes to AI hardware. I’ve spent a fair amount of time over the past few months listening to nuclear podcasts after all the news around what’s going to happen to the American nuclear umbrella and the rate at which the technology develops with the new launchers and missile sites and bombers or submarines.

Comparing that to a new Nvidia chip every year and four AI video models dropping this week — I’m sure it was blowing people’s minds in the ’40s and ’50s and ’60s and ’70s. There were ranges of outcomes and it was unclear who was going to be able to scale up production and deliver weapons systems. But the amount of dynamism you see with emerging technology versus the nuclear missile second-strike dance is apples and oranges in the 2020s.

Chris McGuire: It’s interesting to think back. There were some crazy ideas out there in the ’50s — let’s put nuclear reactors in everything. Let’s put them in cars, in airplanes. We’re going to use nuclear explosions to power spaceships with a giant lead shield behind the spaceship to propel it forward to Mars. People were saying, “Well, this would work,” but will the physics work in ways that don’t kill a ton of people? There was a crazy dynamic thinking in that space, but less manifested in the physical world. The manifestations in the physical world were slower but still significant in the ’40s, ’50s, and ’60s — not at today’s timescale.

With AI, we have yet to see many of the physical manifestations of these advancements. It’s still not real for people. But once we start to see more capability advancements in the robotic space and the coupling of that, it’s going to be real.

On your nuclear weapons point — this is a strategic issue. Our procurement timelines for nuclear delivery systems, which are super important and underpin our deterrence architecture, are 30 years. How confident are we that those systems are going to fill the need they fill today in 30 years, given advances in AI and technology? How confident are we that ballistic missile submarines are going to continue to be invulnerable second-strike capabilities in 30 years? Are they going to be undetectable still? I don’t know. It’s not that hard to imagine advances that would make it easier to detect those assets in ways you can’t right now. What does that mean for our strategic calculus? There are synergies here that are concerning. We should be thinking through these issues. There are people thinking about this, of course, but I question whether — given Pentagon procurement timelines and things — we’re going to be at the frontier of responding.

Mood Music:

is a fellow at the Oxford China Policy Lab and an MSc student at the Oxford Internet Institute.

On September 11, the U.S. Federal Trade Commission launched an inquiry into seven tech companies that make AI chatbot companion products, including Meta, OpenAI, and Character AI, over concerns that AI chatbots may prompt users, “especially children and teens,” to trust them and form unhealthy dependencies.

Four days later, China published its AI Safety Governance Framework 2.0, explicitly listing “addiction and dependence on anthropomorphized interaction (拟人化交互的沉迷依赖)” among its top ethical risks, even above concerns about AI loss of control. Interestingly, directly following the addiction risk is the risk of “challenging existing social order (挑战现行社会秩序),” including traditional “views on childbirth (生育观).”

What makes AI chatbot interaction so concerning? Why is the U.S. more worried about child interaction, whereas the Chinese government views AI companions as a threat to family-making and childbearing? The answer lies in how different societies build different types of AI companions, which then create distinct societal risks. Drawing from an original market scan of 110 global AI companion platforms and analysis of China’s domestic market, I explore here shows how similar AI technologies produce vastly different companion experiences—American AI girlfriends versus Chinese AI boyfriends—when shaped by cultural values, regulatory frameworks, and geopolitical tensions.

Sexy AI girlfriends: Made in America, for the world

In my team’s recent market scan of the 110 most popular AI companion platforms as of April 2025, we turned Similarweb and Sensor Tower upside down to gather data on traffic, company profiles, and user demographics. At the expense of one teammate developing an Excel sheet allergy and the shared trauma of viewing many NSFW images, we discovered that American AI girlfriends rule the roost in the global market for romantic AI companions: Over half (52%) of these AI companion companies are headquartered in the U.S., drastically ahead of China (10%) in the global market.1 These products are overwhelmingly designed around heterosexual male fantasies: another similar market report this year shows that 17% of all the active apps have “girlfriends” in names, compared to 4% of those with “boyfriends.”

We estimated that dating-themed AI chatbots, designed specifically for romantic or sexual bonding, capture roughly 29 million monthly active users (MAU) and 88 million monthly visits globally across platforms. For comparison, Bluesky has 23.2 million total users and 75.8 million monthly visits as of early 2025. And our estimation is very conservative: We did not count the traffic of platforms containing other kinds of companionships, such as Character AI, which offers AI tutors, pets, and friends, though we think many people go there to use AI boy/girlfriends. We did not count AI companion app downloads, which have reached 220 million since 2022. Nor did we include parasocial engagement with general-purpose AI like GPT-4o, which some people apparently have also fallen in love with.

Behind the explosive popularity of AI companions are two main engagement models. On one side are community-oriented platforms like Fam AI, where users create and share AI companions, such as customizable “girlfriends” in anime or photorealistic styles. These platforms thrive on user-generated content, offering adjustable body types, personalities, and voice/video modes to deepen connections. Users can create new AI characters with just a few paragraphs instructing the model how to act, similar to personalizing a copy of ChatGPT. Many of these platforms use affiliate programs — for example, craveu.ai pays users $120–180 for creating high-engagement characters. The abundance of options and the competition for attention encourage users to frequently switch between different AI companions, creating more transient digital relationships.

In contrast, product-oriented platforms like Replika offer a single evolving AI partners with deeper and longer emotional ties. On Replika’s subreddit, many users report using Replika for years, and some seriously consider themselves “bonded” and “married” to their Replika partner. People also grieve for the loss of their Replika when they sense a subtle personality change and suspect the system behind had reset their chatbots.

Despite differences in engagement style, both models seek to capitalize on sexuality to attract and retain users. The monetization of sexuality is done mainly through “freemium” models, offering a few free basic functions while charging for advanced features or additional services. Among the top ten most-visited AI companion platforms in our scan, 8 opt for freemium models, with only one currently free and one choosing advertising and in-app currency. Premium accounts typically offer unrestricted interaction and access to unblurred explicit images. They also allow the user to have longer conversations and improve memory capacity for previous conversations. Many mating companion platforms promote explicit ‘NSFW’ (not safe for work) companions, images, and roleplay features as part of the premium features.

Dynamic AI boyfriends: Made in China, for China

On the other side of the Great Firewall, AI is also probing the emotional boundaries of humans. While the underlying LLMs may not differ drastically from their English-speaking counterparts, the fictional worlds and characters that users build around them are strikingly distinct.

One of the most notable contrasts lies in gender dynamics. In the Chinese AI companion market, male characters dominate: most trending products are marketed as AI boyfriends, and leading platforms prominently feature male characters on their main displays, while female characters occupy a more marginal space.

But looks are not everything that makes humans appealing–the same holds for AI characters. While many platforms still follow the community-oriented model where users create and share AI characters, apps like MiniMax’s Xingye (星野), Tencent-backed Zhumeng Dao (Dream-Building Island 筑梦岛), and Duxiang (独响), built by a startup, go beyond the basics. In addition to customizing AI companions’ personalities, users can generate themes, plots, and side stories, deepening immersion for themselves and others. Conversations are no longer limited to 1:1 exchanges: users can participate in group chats with multiple AI companions (1:N), and AI characters may even send messages to users when they are not using the app, similar to app notifications.

These AI companion products also draw insights from existing popular gaming cultures in China, such as card-drawing games that already have million-dollar markets. For example, Xingye allows users to generate 18 cartoon cards for one fictional character, adapting Japan’s popular gacha game mechanics and trading card culture for AI companions. In gacha games, players pay to randomly draw digital cards or characters, with rare editions commanding premium value. Chinese livestreamers have imported this model, streaming card draws on social media while viewers pay to test their luck for limited-edition collectibles tied to major intellectual properties. Similar to gacha games, AI-generated cards add an element of mystery and excitement when revealed. Users can also create and trade AI character photos on the platform, mimicking real-world card-collecting transactions.

The real monetary transactions occur through a combination of in-app currency and freemium models. Users purchase currency to buy cards and can upgrade to a monthly premium for more chances to generate AI cards, additional free in-app currency, and shorter wait times for conversations (a delay partly caused by limited compute capacity for Chinese LLMs). Card creators can also earn 2% of the revenue from the cards they sell.

Other AI companion companies also leverage users’ existing social behaviors. For instance, Duxiang’s AI WeChat Friend Circle allows AI partners to actively post on social media and interact with both users and other AI characters, mimicking real Chinese social media patterns. The company has even developed a wristband with Near-Field Communication (NFC) chips2 that connects to specific AI characters. When tapped on a phone, the AI character will appear on the screen to provide updates or show care, which builds physical connection in existing digital relationships.

You can also read ChinaTalk’s previous article to know more about other AI companion products and user experiences.

Product Managing AI companions: users, regulations, and geopolitics.

While Xingye/Talkie show some Character AI traits, such as community-oriented strategies and chatbot-based engagement, they differ in significant ways. These products illustrate Kai-fu Lee’s point: Chinese tech entrepreneurs, inspired by American innovation, developed new product features to achieve success. They are good product managers, even if not radical innovators. And good product managers understand their users while navigating local regulations and global geopolitical tensions, all of which shape product design.

Users: Who is longing for AI’s love?

Young men. This is the most common user base for English-speaking AI companion products, according to our market scan. SimilarWeb data shows the top 55 AI companion platforms globally attract predominantly male users (7:3 ratio), with 18-24-year-olds representing the largest demographic at an even more skewed 8:2 male-to-female ratio. Social media metrics again reinforce this gender pattern, with Reddit’s AI girlfriend community (r/AIGirlfriend) having 44k members compared to fewer than 100 in male-focused AI companion subreddits. Moreover, roughly one-third of the children falsely declared a social media age of 18+, so it is possible that a significant portion of the reported 18-24 users are underage.

A recent Reuters-covered report from an AI girlfriend platform further supports our findings: 50% of young men prefer dating AI partners due to fear of rejection, and 31% of U.S. men aged 18–30 already chat with AI girlfriends. Behind the fear of human rejection lies the manosphere. The “manosphere” is a network of online forums, influencers, and subcultures centered on men’s issues, which has become increasingly popular among young men and boys as their go-to place for advice on approaching intimacy. While the manosphere originated primarily in Western contexts, its discourses have increasingly spread to, and been adapted within, countries across Africa and Asia through social media. In these online spaces, frustrations over dating and shifting gender norms are common, often coupled with narratives portraying women as unreliable or rejecting. AI companions offer a controllable, judgment-free alternative to real-life relationships, aligning with manosphere ideals of feminine compliance and emotional availability. On the subreddit r/MensRights (374k members), users largely endorse the findings of the Reuters report and even celebrate the shift from human to AI relationships.

The desire for a controllable relationship is further illustrated through the many Japanese aesthetics and anime-inspired avatars on AI companion platforms. Even Grok’s Ani bears striking similarity to Misa Amane from the 2006 anime Death Note. These designs often present highly idealized forms of femininity, historically marketed to heterosexual male audiences. In Western contexts, anime-inspired aesthetics intersect with techno-orientalist fantasies, reinforcing the image of East Asia as a hyper-technological land and East Asian femininity as exotic, compliant, and unthreatening. This imagination extends to hypersexualized representations of AI and robots in East Asian forms. The orientalist fantasy of female partners who are cute, devoted, exotic, and endlessly available mirrors the appeal of AI girlfriends celebrated on many “men’s rights” subreddit forums. In essence, the combination of East Asian aesthetics + AI creates a perfect bundle for men who fear rejection or resist the demands of real-life relationships.

In China, however, AI companions have a markedly different user demographic: adult women. Although comprehensive user data for China’s AI companion market remains limited, many market analysts believe domestic AI companion products are primarily female-oriented. Many product managers also set their user portrait as women aged between 25 and 35, with some reaching 40+.

Why are adult women believed to be the main drivers of AI companionship? To answer this, we need to understand three trends: 1. Marriage rates have continued to fall to record lows, with 2024 experiencing a 20% decrease from 2023; 2. There are more males than females in China (1.045:1 in 2024, compared to 0.97:1 in the US); 3. There are millions of unmarried rural Chinese men, while their female peers get better education and move to the city. This has created a social landscape in which many unmarried people are unmarried educated women in the city and less-educated men, with fewer pathways for forming traditional romantic bonds.

While the two groups are both arguably longing for relationships, unmarried, educated women in cities are more likely to encounter and adopt new technologies like AI companionship. In contrast, less-educated rural men, despite also similarly longing for relationships, have fewer resources, less exposure to AI, and limited familiarity with parasocial interactions, making AI companions less immediately appealing. Influenced by the strong patriarchal culture in rural areas, most men prioritize finding a real-life partner to marry, have children, and continue the family line.

The gender imbalance, combined with growing resistance in China to traditional patriarchal family structures — driven by concerns over rising domestic abuse or feminist ideals — has led many urban, educated women to seek parasocial forms of romance. AI companions are not the first ones to profit from this demand. Originating in Japan, otome games (乙女ゲーム in Japanese or 乙女游戏/乙游 in Chinese) are storyline-based romance games targeted at women, where players interact with multiple fictional male characters through plots and events.

That said, demand and supply are a classic chicken-and-egg problem. While trends in AI boyfriends or girlfriends suggest some gendered differences in interest, these preferences are also shaped by what products are available. Historically, women’s sexual desires have often been overlooked, and men’s longing for subtle companionship is sometimes dismissed as “too feminine,” which could also explain the scarcity of hypersexual AI boyfriends and dynamic AI girlfriends. Thus, the two different markets may reflect not only inherent differences in demand but also the constraints and biases of what’s offered.

Domestic Regulation: Child Porn and Patriarchal Gaze

The user base is not the only difference between AI companion companies in the U.S. vs. China. It is unlikely that Chinese AI companion companies aren’t sexualizing their products only because hypersexual companions are less appealing to young Chinese people than global audiences. It is more likely that they simply cannot offer such functions.

In June, Shanghai Cyberspace Administration demanded a regulatory talk with Zhumengdao, as the app was exposed for containing sexually suggestive content involving minors. Even when users explicitly stated that they were 10 years old, the AI still sent them text messages that are considered sexually explicit in China (footnote: These contents are close to soft porn (known as 擦边, literally “near the e,dge”), meaning they approach but do not reach the explicitness of actual pornography, which is banned in China even for users over 18). Before the talk, the app’s teenage protection mode had to be manually activated by users. Three days later, the app released an updated version that automates the teenage protection mode. If users declare they are over 18, they will be asked to register their real names.

This talk is not a Zhumengdao issue but a warning for the whole AI companion market in China. Liang Zheng (梁正), Deputy Director of the Institute for International Governance of Artificial Intelligence at Tsinghua University, recently commented on this regulatory talk, stating that if AI companion companies do not have enough self-regulations, it will harm the whole industry. Liang also argues that AI chatbot applications must meet a series of requirements, including “content accuracy, consumer privacy protection, compliance with public order and good morals, and special safety considerations for minors”.

But is safety for minors the only concern for AI boyfriends in China? Unlikely. If we take one step further on Liang’s statement on “compliance with public order and good morals,” there is another motivation for the Chinese government to regulate AI boyfriends — the demographic crisis.

There is no secret that the government is extremely worried about the birth rate: most recently, they offered $1,500 per child in a bid to boost births. A decade ago, they coined the term “leftover women” in the hope of pushing highly educated unmarried women into marriage by stigmatizing their existence. In a traditional patriarchal perspective, AI companions — especially those handsome AI boyfriends that divert women from human-to-human relationships — can be threatening. Yet, like otome games, AI companions also represent a potential economic boon, which can help offset other societal pressures for the state. In recent years, several local governments have cancelled fandom celebrations for otome characters, including thematic subway decorations and parades in Shanghai, Nanjing, and Chongqing — arguably the most “open-minded” cities in China. These actions suggest that, although AI companions, like otome games, provide substantial economic benefits, they remain subject to selective censorship due to the state’s priorities around promoting marriage and childbirth, in addition to the outright bans on soft-pornographic material in China.

Geopolitical Constraint: from TikTok to Talkie

Talkie is Xingye’s overseas twin by Minimax, one of the six most promising AI startups in China. For the U.S., Minimax’s Talkie is probably as threatening as their M1 model, if not more. In the first half of 2024, Talkie was the fourth most-downloaded AI app in the U.S., ahead of Google-backed Character AI, which was in 10th place by number of downloads.

Then, Talkie mysteriously disappeared from the U.S. app store in December 2024. The company attributed the removal to “unspecified technical reasons.” Think of Talkie as a more powerful TikTok, in the sense that it has both manipulation and data commitment problems. While TikTok is accused of influencing users through algorithmically tailored content to achieve political aims, Talkie can potentially persuade users through direct conversations, a risk amplified by the emotional and romantic bonds and trust users form with their AI companions. This makes any AI companion from an untrusted region a potential national security concern.

In addition, as a Chinese app, Talkie also faces data-commitment issues,3 arguably more serious than TikTok’s — especially if your AI partner knows you more intimately than your social media accounts. TikTok now plans to create a new U.S. entity to secure all U.S. user data on Oracle servers and license the existing recommendation algorithm for the U.S. to retrain from the ground up. Will Minimax, ByteDance, or any other Chinese AI companion companies targeting Western markets follow the TikTok template, sacrificing a large commercial interest to settle for a minority stake? Or will they do nothing and hope to find a profitable niche that is not famous enough to attract the intense national security scrutiny that crippled TikTok? These questions remain unresolved as the next generation of Chinese AI boyfriends — or AI girlfriends designed for overseas markets — begins competing with American AI girlfriends in the global app marketplace.

Talkie is back on the app store now, but concerns around data privacy, national security, and potential CCP-backed influence continue. Currently, Talkie AI’s privacy policy states that all data will be transferred and stored in the U.S.

Why We Turn to AI

Regardless of whether they’re made in China or America, AI companions represent another pivotal crossroads in human-computer interaction. TikTok faces geopolitical challenges, as social media and short-form videos have fundamentally transformed daily life for both Americans and Chinese. Similarly, AI companionship is both a national security and geopolitical concern, and a deeply human issue for most of us with the privilege to access AI and the internet.

Made-in-America AI girlfriends and made-in-China AI boyfriends are strikingly different, and so are the social contexts and regulatory environments in which they exist. Yet one thing both markets share is the tension with real-life relationships. Whether healthy or not, frustrations with human interaction and broadly polarized gender dynamics are leading many men and women, regardless of nationality, to turn to AI.

But questions remain about AI companion products: Are they safe? Are they manipulative? Do they cure or amplify loneliness? Are they private enough? Are they responsible for mental health and suicide? Amid these debates about the technology itself, one question is often missing: where does the demand come from? If AI companions are truly unsafe, manipulative, or harmful, why do so many still turn to them? Psychologists, lawyers, national security experts, and AI safety researchers have many important questions to tackle about AI companions as products. But perhaps we should also ask ourselves: what gaps in our society make human relationships feel undesirable? AI companionship is a new problem, but misogyny, gender violence, social isolation, and racial stereotypes are not — in China and America alike.

Acknowledgement: a wholehearted thank you to my market scan teammates Mari Izumikawa, Fiona Lodge, and Angelo Leone, for splitting the mental trauma of reviewing many AI companion platforms. We are also looking for potential support to continue updating the market scan (for the English-speaking side) and conduct related research, so please reach out if you are interested.

Jeff Alstott is the fairy godfather of D.C. AI policy. He’s the founding Director at RAND’s Center for Technology and Security Policy (TASP). He worked at the NSC, NSF, and IARPA. He has a PhD in Complex Networks.

We discuss:

• How spreadsheets and tables on computer chips and energy policy change White House and Pentagon decision-making.

• Why AI companions could be as normal as having a phone or mitochondria in your cells.

• The risks of hacked AI “best friends” and emotional manipulation at scale.

• The benefits and trade-offs of AI-augmented decision-making in high places

Have a listen in your favorite podcast app.

Why Facts Still Matter

Jordan Schneider: We’ll start with a meta question. What is the point of facts in technology and national security policy?

Jeff Alstott: The point of facts is really the point of analysis writ large. Analysis is most critical for lowering the activation energy required for a policy to be selected and enacted.There are many policies that could be enacted, and for any given policy, it’s useful to consider how much activation energy exists for that policy to get enacted.

In a democracy like the United States, this involves some amount of political will, and different actors have different policy budgets, whether political budgets or otherwise. They may be able to take actions that have higher activation energy, but in general, we would all agree there are policies that are easier for policymakers to pursue versus harder for policymakers to pursue. Analysis is one of the things that either helps the policymaker decide upon a given policy or makes the argument to others for the policy, which then lowers the activation energy for them selecting that policy.

Jordan Schneider: Some would say that we are in a post-truth, post-facts era where charts and data don’t matter. I don’t happen to agree with that, but I’m curious about your response to that line of thinking when looking at the American political system today.

Jeff Alstott: I don’t consider it to be notably post-facts or post-truth or post-data compared to randomly selected other periods of American history. I do think that we have radically diverging attention, which is often related to diverging values but also diverging mental models of the world. A lot of disagreement stems from which of those we should prioritize and which we should focus on first. People often confuse differences in focus, attention, or prioritization with differences in attending to “the facts.”

That doesn’t mean that facts are always attended to — not at all. I’m not asserting that. Importantly, it also doesn’t mean that “the facts” are actually the facts. There have definitely been periods over both the past several years and past several decades where “the experts” have asked people to “trust the facts,” and then it turned out that the facts were wrong because science can be hard and we have error bars in our analyses. But I don’t think that we’re wildly out of step with previous eras in American history on this front.

Jordan Schneider: One interesting thing about technology and AI policy in particular is that the new variables at play and the new facts that senior policymakers in their 40s, 50s, and 60s are having to confront are different from debating Social Security, Medicare, or the national debt. With those issues, people have had years and decades to develop mental models for understanding them. At one level, this is frustrating because maybe you’re just at a deadlock and no one can agree to move forward on anything. But it also provides a really interesting and exciting opportunity for a collective like RAND to take young talent, get them to the knowledge frontier, push past it, and inform these busy policymakers who need to grasp these new concepts for which there isn’t necessarily a lot of built-in context.

Jeff Alstott: Absolutely agreed. This is not new. It’s definitely happening with AI right now, but anytime there’s been a new era of technology, there’s an education process and a getting-up-to-speed process. Those people who anticipated this issue — whatever the issue is: AI, internet policy, vaccines, or even foreign policy — become valuable.

There was an era where we didn’t think we were going to be doing anything in Vietnam, and then we were doing things in Vietnam, and the people who knew about Vietnam suddenly became very valuable. People who anticipated, “Hey, maybe we should know things about China,” have been at the tip of the spear for understanding things about China writ large, but also on China and tech.

There’s immense value for people looking ahead into the future and placing bets on what is going to matter, then spending the time ahead of time to get smart on whatever issue set is going to be coming down the pike. At TASP, we explicitly try to skate to where the puck is going. We anticipate what’s going to be happening with frontier AI capabilities, inputs, proliferation, etc., and say, “Oh, a policymaker is going to ask this question in six months or six years.” We do the work ahead of time so that when the moment arrives, we have the answers there for the policymakers.

Jordan Schneider: I’m glad you brought up Vietnam, Jeff, because I think Vietnam and Iraq in 2003 are two examples where the country’s regional experts were not listened to in the lead-up to very consequential decisions. You have these folks making very particularist arguments about their domain, and the people who actually had the power, who were in the room where it happened, were applying their generalist frameworks to the issue.

How does and doesn’t that map onto what we’re seeing with AI today? I remember in the early days when we had Senator Schumer doing his “let’s listen to all the CEOs” approach. The amount of deference that you saw on behalf of senators and congresspeople to these CEOs and researchers was really shocking to me. They were all just like, “Oh, please tell me about this. I’m really curious” — which is not generally how CEOs of giant companies are treated by the legislative branch.

As this has gone from a cool science project to a thing with big geopolitical equities, the relationship that the companies and the scientists have to the people in power is inevitably going to change. From where you sit running this group of 50 to 100 analysts trying to tease out the present and future of what AI is going to do for the US and national security: what is that realization on the part of a lot of actors in the system that this is a thing we really have to take seriously and develop our own independent views on doing for the desire for facts and analysis?

Jeff Alstott: You’re completely right that the situation now for different policymakers trying to learn things about AI or decide what to do about AI is different from how it was some number of years ago when frontier AI exploded onto the scene. What you went from is a period where nobody’s staff knew anything to now where all the staffers have known for a while that they need to know about this. They have spent time reading, studying, and marinating in these issues. Everyone now has a take. There was a period where nobody or few people had a take, and now everybody has a take, rightly or wrongly. We’re seeing congealing in different ways.

I think of this somewhat in terms of spaces being crowded or not. We have definitely at TASP repeatedly had periods where we said, “Okay, we are working on X, and now it’s the case that there are a bunch of other think tanks working on X. We don’t need to work on X; let’s go work on Y. Other people have got the ball; other people can get it done.” It’s nice from a load-sharing perspective.

In terms of your question about how facts and analysis and their role change as the audience gets more acculturated to some topic area, I think it can cut both ways. It’s really unfortunate when your audience is deeply ignorant of every word you say — they don’t know anything about anything. You can see how that would be very dangerous from a policymaking perspective. Them having more familiarity and having staff with their own mental models of things enables more sophisticated conversations, considerations, and thus policymaking. It really does.

On the other hand, as I said, people have their takes, and it can be the case that people get congealed or hardened into certain positions. Now getting them out of a position if it’s wrong is a much different mental move. It can cut both ways.

How Facts Change AI Policy

Jordan Schneider: Ok, enough of this 10,000-foot stuff. Let’s jump into some case studies. Some longtime ChinaTalk listeners would know from the repeated episodes we’ve done with Lennart Heim talking about compute and AI and geopolitics, but you guys have been up to lots of other stuff. Jeff, why don’t you do a quick intro of TASP and then jump into one case study that you’re particularly proud of — how you guys have used analysis to forward a conversation.

Jeff Alstott: TASP is a team of between 50 and 100 people, depending on how you count, where our mission is tech competition and tech risks. It’s beat China and don’t die. That has predominantly meant frontier AI issues.

One great example was our work around energy and AI. This is about the amount of energy or power that needs to get produced domestically in the US in order to keep frontier AI scaling happening in the US versus elsewhere. It happens to be the case that the US currently hosts about 75% of global frontier AI computing power. But if that frontier AI computing power continues to scale up, we just do not have the electricity on the grid to keep those chips alive. The chips are going to get deployed elsewhere.

This was an issue that frontier AI companies had started murmuring about quite some time ago — both the companies that make the AIs, but more particularly the hyperscalers that make the computers that actually do this.

It took me a little while to realize this could be a really big thing. Sometime mid-last year, I put together a team of RAND researchers who know about energy and paired them with people who knew about frontier AI computing. I said, “We are going to need a table.” That table is going to be a list of all the energy policy moves that are possible within executive power. We’re going to need for each move the amount of gigawatts that it will actually unlock on the grid.

This is not about what sounds good; this is not about what fits a particular political ideology. It is about what are the moves that unlock the most gigawatts. You can then rank the table by gigawatts, and those need to be the policies that policymakers are most attending to, putting their energies towards.

That took on the order of a year to create. The report is out now (or in op-ed form). We’ve already been briefing the results to policymakers to be able to say, “Look, you think that you have a problem over here with supply chains for natural gas turbines. That is an example of a thing that is an impediment to domestic energy production in the US. But there are other moves that would produce far more gigawatts that actually turn out to be more available. That is to say, they don’t require international supply chains; they just require domestic deregulatory moves in terms of allowing people to make better use of their power production capabilities that are already on the grid and upgrading them.” That is an example of a case study.

Make Your Own Fray

Jordan Schneider: This is the type of work that I find exciting and inspiring, especially if I am a promising 24-year-old wanting to make a dent in the universe. There are so many policy problems which are intractable where facts and analysis aren’t really that relevant anymore. You are not really going to change Trump’s mind that tariffs are useful, or you are not going to change Elizabeth Warren’s mind that more government regulation in healthcare is going to deliver positive benefits.

But there are a lot of weird niche technical corners where I don’t think a lot of politicians or regulators have super strong priors when it comes to gas turbines versus deregulating transmission lines or what have you. You are very far from the Pareto frontier where you actually have to start doing really tough trade-offs when it comes to sending GPUs to the UAE or taking Chinese investment in X, Y, or Z thing or trading off chips for rare earths. You can color under that and push out the level of goodness that anyone and their mother who’s working on these policies would want. You could probably agree on that.

Doing that type of work, especially as you’re starting out in a career in this field, gives you a really great grounding. I think it’s a corrective as well. You’re consuming so much news which is about the fights that are intractable or are about value differences where the facts and analysis aren’t quite as germane to what the final solution could be. But there are so many weird corners, particularly when it comes to more technical questions about emerging technologies, where there are positive-sum solutions. You just need to go do the work to find them because no one else is.

Jeff Alstott: Absolutely agreed. I love your metaphor of coloring underneath the Pareto frontier. There’s a famous biologist, E.O. Wilson, who died a few years ago. I remember he has this guidance about careers, and he said when there’s a bunch of people all attending to a certain issue, it can create a fray. There’s a fray of conflict, and you can leap into the fray and try to advance things, or you can go make your own fray. That phrase “make your own fray” really stuck with me.

It happens to be the case that within policy, as it gets more like politics — as you describe, where there’s more and more attention to the issue, more people are knowledgeable about the thing — then the low-hanging fruits get picked, and then the remainder are things that are on that Pareto frontier. It becomes more about differences in values. Then indeed, the relative returns go up of trying to go make your own fray on a different issue.

Jordan Schneider: Especially from an individual perspective: Can you have fun? Will your work make an impact? You can have a higher degree of confidence that the time you are spending on the thing will lead to a better outcome on the thing versus figuring out a peace deal between the Israelis and Palestinians. It’s pretty picked over at this point. I’m not sure there’s going to be a creative technical solution which is going to get you there.

Jeff Alstott: I would say that there is a thing of staying within topics that have a bunch of attention on them but identifying those things where there’s actually a lot of agreement, but nobody is advancing the ball for reasons other than disagreement on the thing. For example, all of the policymakers’ attention is just on other stuff. It is all consumed with Israel and Palestine or Ukraine or what have you. They are simply attending to other things, and everyone would agree, “Yeah, we could do X,” if they merely had any brain power spent on it. But they don’t. That becomes your job — to move the ball forward on these things that have a fair amount of brain cells activated but still have a lot of buy-in.

Jordan Schneider: Even with Israel-Palestine, I’ve seen a really fascinating, well-done report about water sharing between the West Bank and Israel and Jordan. They just had a lot of hydrologists hang out with each other and come up with some agreement that seems reasonable. Maybe one day that will be a thing that will be useful to some folks. Even on the most emotionally charged, contentious topics, there’s always some room for thinking deeply that will be appreciated one day. We can all hope.

Anyway, Jeff, let’s break the news.

Jeff Alstott: The news is that I came to RAND nearly three years ago to create a thriving, vibrant ecosystem of policy and technology R&D on frontier AI issues and how they affect national security. My desire was always to make an ecosystem that would continue to function if I got hit by a bus.

Thanks to fantastic hires that we’ve made and various processes that we’ve created, that’s very much true. I don’t feel like I’m needed anymore for this ecosystem to continue to thrive and create the things that the US and the world needs. Within a few months, I’ll be stepping down as director of the TASP center.

Jordan Schneider: One other cool thing that RAND gets to do that CSIS or Brookings doesn’t is classified work. What’s exciting about that, Jeff?

Jeff Alstott: It’s great, and it’s one of the things that I consider a central institutional comparative advantage of RAND. RAND started as a defense contractor 70-odd years ago, and we’ve been doing classified work for the government ever since. It means that our work at TASP and elsewhere within RAND is able to move back and forth between the unclassified and classified barriers, which means we’re able to stress-test analyses in ways that can’t happen in the unclassified space. It means there are entire questions that we can seek to address that only live in the classified space.

But it’s also really critical for talent development. You mentioned that 24-year-old who is trying to break into the D.C. world. Well, them coming to RAND and doing the work and also getting a clearance will set them up better for whatever the next thing is — either another role within RAND or going to work at DoD or the intelligence community or what have you. Thankfully, we’ve got good processes for doing that classified work that I think are going to continue to be well-executed for the foreseeable future. I consider this one of the marked administrative institutional advantages of RAND, beyond all the obvious things like all the brilliant people you can talk about.

Jordan Schneider: What’s the shape of the questions that end up being done in a classified setting versus the papers that people read that TASP puts out?

Jeff Alstott: On some topics, there is intelligence collection. On some topics, there is intelligence collection that changes the conclusions. On some topics, there’s not intelligence collection that changes the conclusions. That in itself is interesting, and some audiences will care about that. If anyone wants to talk in a SCIF about which kinds of things change the sign versus not — happy to talk with them in a SCIF. We could do that someday.

Then there are also things. If you want to really do analysis on dynamic actions that the US could do, then those are things that you want to be doing in a SCIF. But as a concrete example that is not happening within TASP, literally next door in a secure facility, somebody is working on how the bombs and bullets of how a US-China conflict over Taiwan would go down.

There’s a pretty famous brief called the Overmatch Brief. We’ve had two versions of this. We’re on our third version now, which is just showing the net effect of all of Red and Blue’s capabilities being brought to bear in a Taiwan conflict. This is the briefing that goes to the White House when the White House asks, “All right, how would this happen?” It’s a classified analysis.

Jordan Schneider: We had Mick Ryan, a former Australian general, on. He recently wrote a book which is one of these near-future fiction novelizations of a US-China conflict. The way America wins in the end is they create a typhoon which they spoof out of existence from the Chinese weather buoy receivers, and then it hits the Chinese navy and they disappear. Blink twice if that is a thing that you guys have worked on at TASP.

Jeff Alstott: I’ve not worked on that at TASP.

Jordan Schneider: Good to know.

On AI Girlfriends and Politicians

Jordan Schneider: I want to give you some of my crazy AGI takes, Jeff because I don’t know who else I can do this with. My first one: we’re calling this the AI girlfriend net assessment. The thesis is that five to ten years from now, everyone is going to have an AI companion that they trust with their life. We already have the Swedish Prime Minister saying he consults ChatGPT all the time for work. You already have half of teens in America saying that they speak a few times a week with AI for emotional support.

I have an enormous degree of confidence that this is a one-way ratchet. As the technology gets better, we’re going to trust it with more and more facets of our life. From both a human intelligence perspective as well as a broader influence operations perspective, this seems like an absolutely enormous vector, both for the US to have a lot of fun with foreign leaders and populations’ AI companions abroad, as well as a vulnerability at home if someone can hack my AI companion or tweak the dials on a nation’s AI companion in order to get them to think one way or have civil unrest or vote differently.

The worries that we had with Facebook and algorithms or Twitter and TikTok and algorithms seem like child’s play compared to this threat vector that we’re going to have from having these Scarlett Johansson “Her” characters in our life that we have these strong emotional bonds with. Am I crazy?

Jeff Alstott: First, this is totally a thing that is happening. I know people of many different ages where they are increasingly incorporating LLM counselors into how they live life. I am not such a person — not yet. The thing’s not good enough for me.

Jordan Schneider: We’ll get you, Jeff. Don’t worry.

Jeff Alstott: There are several possible ways that this could play out. First, I would not be super confident that this is a one-way thing. Remember when cell phones came out and silencing your cell phones was an issue? You had to remind people at the beginning of events to silence their cell phones. Cell phones would go off all the time. People would have customized rings and there would be scandals about politicians having such and such ring tone. Now we don’t do any of that because society figured out you just have your phone on silent basically all the time. We figured out how to incorporate this technology into our lives.

Relatedly, kids and cell phones or any other devices — you’re a father, I am sure that you have had thoughts about when is the right time to give your child access to different kinds of technology. There definitely were eras where the parents hadn’t yet had time to think about it, so they were just doing stuff. Then we observed the stuff happening and then we said, “Oh wait, we need to change that.” It is not uncommon these days to see families who are just really intentional about “you’re not getting a phone until age X.”

There’s a Catholic University professor who’s now working at the State Department in the Policy Planning Office. His name is Jon Askonas and he wrote this great piece several years ago called “Why Conservatism Failed.” It’s basically identifying that within the right there is this implicit assumption that more tech of all kinds will always be good. We know this is false. We just talked about something like cell phones ringing or putting your phone in front of your infant’s face.

We have the opportunity to be intentional about how we incorporate these technologies into our lives. That includes as individuals, but also in the workplace and also as policymakers. You mentioned the Swedish Prime Minister. We’re going to get to the point where, yeah, maybe the Prime Minister has AI advisors, and the character of those AI advisors is highly inspected. We have a lot of thought about what is this AI? What is it trained to do? What are its supply chains? What is its ability to get manipulated? This is the kind of thing that we do for many areas of technology. As it gets to more critical use cases, we are more thoughtful about how we use it.

That is my claim about not assuming the ratchet. But there’s a whole other category here, and I think you would appreciate this: in all of our cells, all of our biological cells, there are these mitochondria. We all remember from school, “mitochondria — the powerhouse of the cell.” It helps you make lots of energy from respiration. What you may not recall is that there’s a fair amount of evidence that mitochondria were independently evolved organisms that we then evolved a symbiotic relationship with, where the mitochondria now live inside our cells and are reproduced as we reproduce. But they started out as a separate thing.

I think that it is totally possible that humans leveraging AI are going to end up in a cadence of life that looks a lot like the mitochondria with the cell, where indeed just what it means to be a human in an advanced technological society will be: “Of course you have your AI assistant, of course you have that,” just as “of course you have mitochondria in your cells.” The collective organism of yourself plus your technology assistance will be perceived as just as normal as the fact that you and I are both wearing glasses. Of course we wear glasses. What are you talking about?

The tech’s not there yet for me, but there will be segments of society where this is how they see themselves. I don’t have a strong bet on what timeline for that.

Jordan Schneider: The mitochondria version is the vision that — let’s give a 40% chance of happening, assuming the AI gets better and it gets smart enough that Jeff uses it more in his daily life. We haven’t even talked about how you want to automate all of your 50 TASP researchers. But the fact that that is even a thing you’re considering means that it’s going to be real.

There are a few things I want to pick up in your answer. First, it’s different from turning the cell phone ring on or having it not ring. It’s more like: we all have emotional needs and we all have jobs that change. The idea that you can be a journalist in 2025 and not be on Twitter is absurd because the world has changed. The metabolism of news is faster, and algorithmic feeds for a large percentage of humanity have outcompeted the needs for content that we had compared to going to Blockbuster and picking out a VCR from 100 videos.

It seems to me that it’s going to be really useful and powerful, and maybe we’ll get to something in 2050 where we have some good guardrails and all of our AI companions are localized and can’t be hacked by a foreign government. But we’re going to have some mess in the meantime.

Another piece of this mitochondria thing goes to my second AGI hot take: AI presidents and politicians. I think it’s probably going to first come with the CEOs, but then in the political sphere, where the ones who are using AI to augment and improve their analytical capabilities and are spinning up their own AI-powered task forces to give them the right answer to “Should I say this or that in my speech? Should I invest in that or this technology or open this or that factory?” will just have some evolutionary advantage where the people with the most money and power and influence in society are the ones that get more dependent faster on the AI.

Again, we’re assuming that AI is good enough to actually help you win that election or outcompete that company. But it seems to me like this is a very reasonable world that we could be living in 10, 20, 30 years from now where there is an evolutionary dynamic of: “Okay, if I’m the one who figures out how to work with my mitochondria best, then I can go pick more berries and have more children or whatever.” That’ll just happen for folks who learn to use leverage and ultimately just trust fall into letting the AI decide whatever they do — because humans suck and the AI is going to be really good.

Jeff Alstott: You’re speaking my language. A long time ago I was an evolutionary biologist, and I attend a lot to things outcompeting other things and the effects that has on the system. One of the ways in which this may shake out is that compared to a lot of other foreign policy and certainly national security people, I attend to hard power way more than I attend to soft power. I absolutely agree with your view of “dude, if you use the thing, you’re going to be better, so you’re going to win.”

Then it becomes a question of: “All right, but does it actually make you better?” As you mentioned, we’re wanting to automate a lot of tasks at RAND, and we could talk about that in more depth. But one very simple thing is using LLMs to auto-write things or to revise things. You work enough with LLMs, you probably can tell when the thing is written by an LLM. It’s using all the em dashes and everything. I have a colleague who just yells at everything made by LLMs, calling it “okay writing, but it’s not good writing.” And how much effort do we want to make it be good writing?

Merely having AI do all your things for you — as you say, a trust fall — is going to pay out in some domains and not others initially. Eventually it’ll pay out in all domains. I’m with you there. But there are going to be folks who are making trust falls too early in some domains that are going to get burned, and different people can have different bets on that one.

Jordan Schneider: It’s interesting because clearly we don’t even have to go to 2075 where AI is going to be good at everything. There are things that it is going to have a comparative advantage in over time. The types of decisions that a CEO or a general or a politician does is taking in information with their eyes and their ears and processing that and then spitting out, “Okay, I think we should do A. If I see X, then we should do B. If it doesn’t work, then maybe we should go to C.” That type of thinking seems very amenable to the analysis and thought that an AI could do over time.

We can make some nice arguments in favor of humanity that we have these lived-in-body experiences, and we feel history and context, and maybe we can read humans in a deeper, more thoughtful way if Jeff is deciding to assign this person versus that person. But we’ll have your glasses with a camera on them, and the AI soon will be able to pick up on all of the micro facial reactions that Jeff does when he assigns Lennart to do biotech instead of compute, and he shrugs a little bit but then says, “Okay, fine, whatever you say, Jeff.”

You can put the camera on Mark Zuckerberg and he has to make all these decisions — at some point in the next 30 years, a lot of the executive decision-making, it seems to me an AI is just going to be really, really good at. There are some really interesting implications.

What you were saying about some people are going to get burned: if that happens in the private sector and Satya adopts this slower than Zuckerberg and then Zuck wins out and gains market share, this is fine. It’s capitalism. Companies adopt technology in different ways.

But when you abstract it up a level to politics and geopolitics — “should we do a trade deal with this country? Should we sell these arms to this country? How should I phrase my communiqué in my next meeting with the Chinese leadership?” — that’ll be really interesting because we won’t have those case studies. My contention to you, Jeff, is we’ll get into a point where we will have had politicians who’ve tried it, although I think we are still going to have a president who is a human being for a while. Just because we have a Constitution that’s probably pretty Lindy, it’ll take a while for us to get rid of that.

But there’ll be some point in history where you get elected to governor, you do a better job running your state because you’re listening to the AI, and the governor in the state next to you isn’t. You’re doing a better job in the debate because the AI is telling you what to say and then you’re more pithy and sound sharper. We end up in a system that naturally selects towards the people with AI.

Maybe once we get that, we’ll also have the AI which is good and aligned enough to pursue things in the national and broader society interest. But maybe not. Perhaps even once we get there, we’ll still get burned because it’s not good at nuclear war or something. Sorry.

Jeff Alstott: Sorry, for what?

Jordan Schneider: Sorry to my audience. Are you guys cool with this? I don’t have a lot of guests I can go here with this stuff with, so we’re putting it all on Jeff.

Jeff Alstott: I really appreciate that you’re bringing up the audience right now because this very much gets to the earlier things we were talking about — the utility of analysis and the looking ahead. You are doing exactly the right thing, which is looking ahead to a place that most people are not looking ahead to or don’t want to go to. You’re trying to beat the market of ideas by being early. If you can do that well, that gives you time to have thought about the issues more, do more research and analysis, so that when this issue is no longer weird and enters the Overton window, then Jordan’s thought about it and Jordan’s there to be giving as good of informed analysis as possible. Not just Jordan, but Jordan’s audience.

There is this issue of how we select which unusual futures to lean into, especially when we have uncertainty about the future. You said some dates; I said some other dates. My median prediction for an AGI that can do every economically and militarily relevant task as well as a human is in the early 2040s.

But it’s totally reasonable to say that’s too far in the future. “I need to make bets on other nearer-term things that are still maybe eight years away so that I can be hitting those policy windows in eight years as they appear.” It’s worthwhile for there to be a portfolio either at the level of an individual or at the level of a center or a society in terms of we have some FTEs allocated to these different timelines and different scenarios.

The Utility of Expertise

Jordan Schneider: We’ve talked mostly about this in a technology context, but peering over the event horizon in a China context is also shockingly easy if you’re doing it — way easier than this AGI stuff. If you were someone who followed China at all, Bytedance was a company that you knew about in 2017 because it was the biggest app in China. If you followed China at all, you knew that they were building a lot of electric vehicles. You knew they were building a lot of solar panels.

This is the fun part of my little niche. Am I going to have a more informed opinion than you or Lennart about when AI is going to be able to make every militarily relevant decision? Not really. And by the way, that’s kind of an impossible question. But things about China are just happening today. Because of the language, because it’s halfway across the world, because the Chinese government is opaque (not really), but China’s confusing and hard and you need to put a little homework in before you understand what the deal is with some things.

It is so easy to tell people things that are going to wash up against their political event horizon activation energies over a six-month to two-year horizon. Which is why this niche is so fun, and you guys should come up with cool stuff and either work for Jeff or write for ChinaTalk. I’ll put the link in the show notes. We’re just pitching stuff here.

Jeff Alstott: I love how you describe this thing of “man, all you had to do was pay attention. It was easy.” The fact is, as we said earlier, people’s attention is on other things. All you had to do is be paying attention.

Just to get to the union of China issues and AI issues: DeepSeek. Many people who were paying attention were telling folks for many months before the DeepSeek models came out, “This team is awesome. We need to be recruiting them; we need to be doing everything we can to get them out of China and get them to the US or allies.” Now we can’t because their passports have been taken away.

Similarly, we knew the existence of a Chinese model of a certain level of capability at that time in history because the export controls hadn’t properly hit yet. They bought the stuff ahead of time. It’s because you were paying attention and then other people were not paying attention or were paying sufficiently little attention that their world model was sufficiently rough that they just didn’t know these things were going to be coming. This is the utility of well-placed expertise.

Jordan Schneider: It was very funny for the ChinaTalk team to live through the DeepSeek moment because we have been covering DeepSeek as a company and the Chinese AI ecosystem broadly ever since ChatGPT, basically. I’ve been screaming at people in Washington and in Silicon Valley, “These guys are really good. They can make models. You’re not smarter than them, I don’t think. Or they’re smart enough to fast-follow if you’re not going to give them enough credit.”

It wasn’t a hunch. The models were there. You could play with them and they were really good. It was remarkable to me to watch the world wake up to that. We gained a few extra points. I think we got 20,000 new free subscribers on the newsletter, which is cool. It probably helped us raise a little bit of philanthropic funding. There was some material and clout gain from being “right” or early to this.

But more what I have been reflecting on is: could I have screamed louder? Could I have screamed in a different color? What could I have done differently in terms of our coverage and writing and podcasting to get this message (which I had with 95% confidence) out to the world faster?

It’s funny because you can be right in some fields and very straightforwardly make money off of it. But being right in this field, you don’t want to be “I told you so,” and it’s an iterated game. It makes it easier next time. But I still reflect on that a lot about how my team and the ChinaTalk audience was aware of this company and the fact of the capability of Chinese model makers and AI researchers, and it still was a big shock to the broader ecosystem.

Jeff Alstott: Completely agreed. I love how you’re thinking about “what should I have done differently so that people acted.” This issue is relevant to the questions that you had at the top about the role of analysis or the effect of analysis. It is possible to do fantastic analysis that’s totally right and have no effect because you didn’t consider your audience.

There are definitely researchers in think tanks who write 300-page reports when what the policymaker needs is a page, and they get really detailed into their method when what they needed was the answer. They are speaking to an audience that turns out isn’t the audience that is actually at the levers of power.

There’s a variety of strategies of essentially how broad versus how targeted you are in disseminating your analysis. This can affect what analysis you choose to do and how to design it. That’s the thing that we focused on a lot at TASP and RAND.

Earlier you talked about the classified work. An advantage of that is that we’re able to engage with policymakers in ways that are difficult to otherwise. We’re running war games and tabletop exercises that may be unclassified or classified, and it enables you to engage with people otherwise. But it’s not just the classified work. Because RAND’s a defense contractor, we’re engaging with policymakers directly, frequently. It helps you build up a mental model of: “No, Bob sitting in that chair is the person who is going to make the decision. In order to inform Bob, I need to present the analysis in a way that is interpretable to Bob.” It’s not whoever my 10 million followers on X are; it’s Bob.

There’s this tension about where you place your bets along that Pareto frontier of being more targeted to certain audiences versus broader. Both are valuable, but it’s useful to have a portfolio approach again.

Jordan Schneider: I think you wouldn’t mind me claiming that I’m probably a third standard deviation policy communicator person in this little world and have learned a lot of the lessons that you have. I’ve built my career around a lot of the pitfalls that you’ve identified — not writing the 300-page thing — and somehow lived both on doing the original research and being the “popularizer” and writing in a way which is engaging and accessible and making the show hopefully fun as well as informative.

Maybe the answer is that I went too far in that direction and wasn’t hanging out with Bob. Maybe Bob isn’t someone in the Defense Department. Maybe Bob is a New York Times reporter or a Senate staffer. Actually, it’s probably not a Senate staffer. Let’s talk more about Bob because in the DeepSeek case, he wouldn’t be Marc Andreessen, right? Bob wasn’t anyone in the AI labs — they were all aware of this as well. Maybe there was just enough money on the other side of this discussion that it was too inconvenient a fact to internalize. What do you think?

Jeff Alstott: Who Bob is depends upon what exact policy move is relevant here. You just mentioned both people in government and people out of government. The frontier AI companies — probably any one of them could have, with sufficient will, tried to go headhunt every member of the DeepSeek team. They had the legal authority to do this and possibly enough cash, whereas government would have different abilities but not, ironically, a ready-made answer for just “hey, we’re going to come employ you.” The US government does not currently have anything like an Operation Paperclip, as was done with German scientists after World War II. The fact that it doesn’t have such a thing means that its moves available to it for handling a DeepSeek crew is more limited.

Who Bob is depends upon the exact policy move that you want. For what it’s worth, you made the suggestion that maybe you’ve gone too far in one direction; I’ve gone too far in the other direction, which is part of why we like each other — because we’re both doing these complementary things where I’m not on X, I have no social media presence, I’m from the intelligence community. My job is knowing the middle name of the relevant staffer because that allows you to infer what their email address is because the middle initial is in there, and who reports to whom and the palace intrigue and that kind of thing. It’s useful for what it is, but it’s only one kind of usefulness.

Another shout-out for anybody who’s looking to apply to TASP: our conversations and impact are much broader than the public publications that we have on our website because of this bias that I have had. But maybe it’s the case that we ought to be leaning into publishing more than we have been.

Jordan Schneider: All right, I want to close on the vision for automating this. We’ve talked about automating AI presidents, but what’s next?

Jeff Alstott: Right now at TASP and within RAND, we’re working to find ways to use the latest AI technology to automate steps in our research processes to achieve greater speed and scale. There are at least two ways to approach this: automating research management and automating research execution.

Research management involves office processes: ensuring documents go to the right person, checking that documents follow proper structures and templates, routing them to publications with the correct billing codes, and other administrative tasks. Much of this automation doesn’t require AI and can use standard tools, though adding LLMs enables us to plug key steps where human intervention is no longer needed. This allows processes to go from almost fully automated to completely automated, which is excellent. We’re continuing to build this out.

The more interesting aspect for your audience is research execution: figuring out facts about the external world and what they mean for policy options, what we call analysis. We’re currently exploring two areas, both leveraging the fact that while LLMs can be weak in their world modeling and the context they bring to problems, when provided with proper context, they can automate and iterate effectively.

First is quality assurance. We have an LLM review documents to identify problems: Is any of this incorrect? Is the math wrong? Are the numbers accurate? Does this reference match that reference? When a claim cites a particular source, we have the AI read the citation to verify whether the claim is actually supported. With 100 citations, you can process them quickly. We’re working to speed up our QA processes. This won’t be perfect with today’s technology, but it will help significantly.

The second area is what we call a “living analysis document.” Once humans have completed their analysis, written it up, and made critical high-context decisions about how to structure the analysis — what data to use, how to set up the model, what the actual issues are and how they interplay — once humans have done all that and produced the paper, can we have an AI repeat the analysis a year later with the latest data automatically? This automatic extension and continuation of analysis seems like potentially low-hanging fruit that’s doable, at least partially, with today’s technologies.

I’m hoping this will enable us to do not just more analysis in areas where we currently work, but by freeing up human labor, we’ll be able to embark on new analyses in new areas, expanding where we focus our attention.

Jordan Schneider: Let’s close with some reading homework. Give the people something substantial.

Jeff Alstott: I just watched K-Pop Demon Hunters last night. It was awesome. I have a rule: no work or high cognitive effort activities after 8 PM. There are people like yourself who read dense books late into the evening, but that’s just not me. It’s K-Pop Demon Hunters for me.

All right, let me think of something substantive that folks might want.

Jordan Schneider: Yeah, last night I was reading Stormtroop Tactics — thank you, Mick Ryan, for taking over my brain. It’s about the evolution of German infiltration operations from 1914 to 1918. It’s pretty well written. What’s cute is that the dad wrote it and dedicated it to his son, who was a colonel at the time. He was like, “I wrote you this book so you can learn about tactics better.”

Jeff Alstott: My recommendation is “The Extended Mind” by Andy Clark and David Chalmers. There may be just an article, but there’s also a book on the extended mind by Andy Clark. This is a classic cognitive science piece.

Because I’m a cognitive scientist, which was my original training, I assert that if you’re thinking about AI futures, what’s happening with the human condition and AI, and what’s possible, much of the older cognitive science work will be more helpful for making accurate predictions and bets than the particulars of machine learning today. The machine learning particulars may matter too, but if you’re looking more than five years out, certainly more than ten years in the future, you shouldn’t focus on LLMs specifically, but rather on more fundamental cognitive science concepts.

The concept of the extended mind, which people were thinking about decades ago in cognitive science, relates directly to the issues you brought up about AI companions. It’s essentially about how we think about what our mind is, where it lives, and where it’s physically instantiated. This includes obvious things like notes. You write down notes and they become part of your mind. Your brain remembers pointers to the notes, but not the contents themselves. There are definitely people who are diminished when they don’t have their notes available. Books, AIs, and other tools are all part of your extended mind system.

If you want to think about how different AI futures could work, cognitive science in general, and if you care about the AI companions issue for presidents or otherwise, then “The Extended Mind” in particular is essential reading.

Jordan Schneider: That’s a beautiful thought. I’ve done a lot of self-promotion on this episode, but we’ll close with it being an honor and a pleasure to be part of this audience’s collective mind. Thank you for your time and for trusting the show, the team, and my guests to create content that stretches your extended mind in interesting and useful ways. Thanks so much for being part of ChinaTalk, Jeff.

Zhao Gu Gammage is a recent graduate from Haverford College, where she majored in East Asian Languages and Cultures, and minored in Middle Eastern and Islamic Studies. She’ll be starting a Boren scholarship for intensive Mandarin language training in Taiwan this fall.

Arafat Arrives in Beijing, March 1970

Thousands waited by the time Yasser Arafat stepped onto the tarmac of Beijing Capital Airport. Vice Premier Li Xiannian 李先念, along with other Chinese bureaucrats, orchestrated the whole affair: soldiers waited to enthusiastically wave Palestinian and Chinese flags, civilians waited to chant slogans expressing support for Palestine, and even foreign diplomats waited to shake hands and exchange greetings.

The Chinese people called the Palestinian people “heroic” (向英勇) and their struggle for liberation “just” (正义).1 They connected the Palestinian struggle with liberation movements in Africa, Asia, and Latin America, denouncing American imperialism and Zionism.

Arafat championed Palestinian nationalism through his decades-long leadership of multiple Palestinian groups, including the Palestinian Liberation Organization and Fatah, which he co-founded. He had recently returned from the USSR, where his 10-day stay was low-key, with no Soviet media coverage or meetings with upper-level officials. His trip ended with a devastating blow: Soviet aid was announced to support “Arab states,” an obvious snub that excluded guerrilla “liberation groups,” like Fatah.2

In China, however, he received front-page features in the People’s Daily (人民日报), a meeting with Zhou Enlai, and a promise that the People’s Republic of China would send cash and arms to the PLO.

The ongoing war between Israel and Hamas dominates news coverage and demonstrates America's sustained influence in the region. However, very little is known about China’s diplomacy in the Middle East, much less with Palestine. Even among scholars, China-Middle East research has just begun to emerge, with China-Palestine relations only recently becoming a hot topic because of the war. To find accounts of Arafat’s first China visit, l paired Mandarin-language digital archives of the People’s Daily with English-language academic publications.

China’s Developing Stance on Israel-Palestine

Immediately after the Chinese Communist Revolution in 1949, the PRC focused more on domestic stability and stability with their neighbors than with places like the Middle East. At the time, Arab countries were either struggling for independence or maintaining ties with the Nationalists in Taiwan.

China remained decidedly neutral on Israel-Palestine even after Israel’s recognition of the PRC in 1950 – the first in the region to do so. It would be another 40 years until China returned the favor.

On the eve of the Bandung Conference, the 1955 affair that assembled leaders from Africa and Asia, China finally developed its stance. China gave unequivocal support to Palestine in the hopes of gaining Arab allies. They noticed the importance that Palestine held to Gamal Abdel Nasser, then-president of Egypt and leader of Arab nationalism, and considered support for Palestine as key to winning over the Arab world.

The conference presented an opportunity for China to circumvent American containment — by 1955, American troops were in Taiwan, Korea, Japan, Vietnam, and the Philippines. Forging international alliances was a useful tool for gaining recognition at the United Nations. Here, Zhou Enlai bonded with Nasser over their shared goal of Palestinian statehood, which led to the recognition of the PRC by the Arab world not long after. The PRC compared Palestine and China as two places with a common struggle against American imperialism. Like how the PRC claimed Taiwan as historically belonging to China, so too with Palestine and Israel. The PRC viewed Taiwan and Israel as agents of American imperialism. Portraying the Israeli state and Zionism as one facet of American imperialism paired with support for Palestinian freedom allowed China to build solidarity with Palestine and, on a larger scale, with the Arab world.

China and Anti-Imperialism

From the moment Arafat stepped onto the tarmac, he immediately understood that China viewed Palestine as the anti-imperialist struggle in the Middle East.

The anti-imperialist rhetoric from the “revolutionary masses” (革命群众数) had two sides.3 One expressed Chinese solidarity with countries to rule independently of colonial ties. The slogan “Firmly support the liberation struggle of the Asian, African, and Latin American people!” (坚决支持亚洲、非洲、拉丁美洲各国人民的解放斗争！) does exactly this.4 It placed Palestine within the larger global context of other liberatory struggles happening simultaneously. Thus, the slogan enables China to cast itself as supporting not just Palestine but the whole world.

Arafat played into this anti-imperial rhetoric as well. He considered China as the “fundamental pillar” (基本支柱) of the Palestinian revolution.5 He cited China’s military support for Fatah — and China’s status as the first country to offer such support — as a reminder of the struggle and friendship (战斗友谊) between them.6 Additionally, he coined the phrase “revolution grows out of the barrel of a gun” (胜利只有通过枪杆子才能赢得), a nod to Mao’s famous saying, “political power grows out of the barrel of a gun” (枪杆子里面出政权).7

Portraying Western imperialist countries as the enemy was something Arafat and the Palestinians easily agreed with. Arafat repeatedly heard the slogan, “Firmly support Palestinian and Arab people’s just struggle against American imperialism and Zionism” (“坚决支持巴勒斯坦人民和阿拉伯各国人民反对美帝国主义和犹太复国主义的正义斗争”).8 Through united opposition to Zionism and American imperialism, this slogan created a common enemy between the people of China with the people of Palestine.

Coincidentally, when Arafat was in China, the Chinese Red Cross’ donation finally arrived in Palestine. The donation of medical equipment, medicine, and clothes worth around 100,000 RMB was dispatched the previous year to the Palestinian Red Crescent Society. In return, the Palestinians thanked the Chinese, reiterating their shared struggle and writing, “Our two countries both suffered from the common force — the pain caused by American imperialism.” (我们两国都遭受到共同的武力——即美帝国主义所造成的痛苦).9

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Throughout his visit, Arafat saw China’s ability to mobilize the masses towards “grasping revolution” (抓革命).10 Arafat saw the blue knee-high socks and matching uniforms dance across the stage of the Red Detachment of Women, the ballet epitomizing the Chinese Communist Revolution and revolutionary spirit under Mao. At the Huangtuguang’s People’s Commune, tucked in the Beijing suburbs, commune members repeated to Arafat the same anti-imperialist slogans that he had heard on the tarmac. Here, Arafat and his delegation observed the commune’s health center, factory, and school. At the PLA unit, Arafat again saw the PLA troops waving flags and chanting slogans, along with a coordinated weapons shooting.

Arafat’s meeting with Zhou Enlai on his penultimate day in China was perhaps the culmination of his visit. Despite little news coverage of the conversation, the talk was “cordial” (亲切).11

Limits of Solidarity

Arafat’s week in China was marked by banquets and handshakes, but what did it actually accomplish? While the Chinese media created fanfare around his visit, he was in reality given a modest reception. Five years prior, in 1965, Ahmad Shukeiri, the then-chairman of the PLO, met with the top of the CCP, including Mao, Zhou Enlai, Liu Shaoqi, whereas Arafat was handled by lower-level officials, such as Li Xiannian, meeting only briefly with Zhou Enlai. Arafat left China for North Vietnam, but returned to China many times before his death in 2004.

CAC Stressed About China’s Feelings

Last week I stumbled on a fascinating new release from CAC that gives a sense of just what the Chinese government is worried its citizens are feelings. Cyberspace Affairs Commission pushed out a new iteration of its years-long content purge campaign, Qing Lang 清朗, that targets “malicious incitement of negative emotions” (恶意挑动负面情绪). On the surface it reads like a regular cleanse of party criticism in the name of boosting “positive energy,” but this go-around feels even weirder.

from the brilliant substack Active Faults delivers the Straussian read below. Block quotes are translated from the Sept 22 CAC post itself, and the commentary is Em’s.

To address problems such as maliciously inciting confrontation and promoting violent and hostile sentiments—and to foster a more civil and rational online environment—the Cyberspace Administration of China (CAC) has recently issued a notice launching a two-month nationwide “Clean & Healthy: Special Campaign to Curb the Malicious Stirring of Negative Emotions.”

A CAC official said the campaign will focus on social networks, short-video and livestreaming platforms, conducting comprehensive inspections of key features such as topics, rankings, recommendations, bullet comments, and comment sections, and will target the following issues:

1) Incitement of extreme and contrarian feelings between groups.
Exploiting viral news stories to forcibly tag or stigmatize people by identity, geographical area, gender, etc., thereby stoking conflicts between groups. Using media content, stand-up comedies and sports events to egg on “fan-circle” factions to maliciously belittle others, attack, abuse, or organize mass reporting. Certain ACG subgroups and “trolling youth” communities inciting confrontation or even doxxing, or teaching how to buy and sell doxxing services.

I’m hardly surprised at this hyperspecific whip-cracking. Chinese entertainment has seen some of the most radically feminist movies, comedy sets, and drama series in the past two years alone than all previous years combined. Beyond entertainment, numerous high-profile news stories in 2025 provoked intense discussions among members of the public, like the lead poisoning controversy in a Gansu kindergarten, or the sexual harrassment incident at Wuhan University. General discontentment and mistrust of the authorities are boiling over, and this wave of Qing Lang needs to quell them with renewed force.

2) Spreading panic and anxiety.
Fabricating fake news about disasters, dangers, or police incidents that could affect public safety; forging government notices. Peddling supposed insider knowledge via spliced clips or coordinated account networks to concoct and spread rumors about the economy and finance, people’s livelihoods, and public policy. Inventing or distorting the causes, details, and progress of events to post sensational conspiracy theories. Assuming fake identities as “gurus” or “experts” to hawk anxiety and sell courses or products related to jobs, relationships, and education.

Problem 2 is the “amplification of panic and anxiety” in the form of “fake news”, like fabricating “insider knowledge” of upcoming policy changes or economic trends. This feels akin to an attempt at rebuilding public trust in party competence that will end up, probably, achieving the complete opposite.

3) Stoking online violence and brutality.
Planning or acting out staged fights, deliberate harassment, etc., and advocating “violence against violence” (以暴制暴). Sharing graphic, unedited images of bloody and terrifying scenes, or posting shocking videos involving animal abuse or self-harm. Using AI synthesis, video editing, or image splicing to glamorize violence and create a lurid, horror-seeking atmosphere. In livestreams, using self-harm, self-abuse, “hit-someone challenges,” or brandishing weapons as gimmicks to gain followers; organizing online brawls and livestreaming mutual insults or physical fights arranged offline.

Problem 3 is the “incitement of violence and hostility”, which I suspect is a jab at the dopamine-inducing micro-dramas (短剧) on short-video platforms. They normally feature a simple but satisfying plot of power reversal, involving an underdog protagonist getting avenged or becoming successful. In the past year, this type of content has garnered an onslaught of profit and internet traffic, so much so that long-form entertainment content suffered a heavy blow to their viewership. What the micro-drama hype entails is what they fear: growing disillusionment in recovery. Widespread “laying-flat” sentiments. Dismissal of any real hope of prosperity. None of this “negativity” is being “incited”, but rather articulated. The choice of vocabulary is trying to frame genuine, organic expressions of vexations as secondary and induced, hence unrepresentative and indicative of (perhaps foreign) foul play.

4) Over-amplifying defeatism and pessimism.
Concentrated posting or one-sided promotion of absolutist, negative claims such as the “futility of perseverance and education” (努力无用论), or other absolutist, world-hating views (‘绝对化、消极化论调’). Maliciously re-reading social phenomena to over-inflate isolated negative cases and use them to promote defeatism. By churning out so-called trending terms, memes, stickers, and quotable lines, excessively self-denigrating or saturating feeds with listless, gloomy content that spurs imitation.

The last focus area confirms the above theory. It promises to rid the internet of “excessive pessimism and passivity”, namely content arguing for the “futility of preserverance and education”, or anything nihilistic and world-hating. There is to be no complaints about the state of the country and the quality of civilian lives. Just trust the process everyone!

Active Faults

an alternative China seen through its entertainment industry and celebrity fandom

By Em

Dispatch from Indonesian TikTok: How ByteDance deals with contentious politics around the world

Irene Zhang reports:

The world’s fourth most populous country currently finds itself in a once-in-a-generation political crisis. Indonesia has been riled by large protests since earlier this year. Beginning in February, students and civil society members organized protests to oppose President Prabowo Subianto’s budget cuts to education and the rising role of the military. More recently, a controversial measure to award lawmakers $3000-per-month housing subsidies, more than four times the country’s average monthly salary, has led to an outpouring of public anger over corruption. The protests suddenly gained momentum when, on August 29, a police vehicle killed 21-year-old delivery driver Affan Kurniawan in Jakarta. As of September 2, ten people have died in violent confrontations with police and security forces. Amid all this, Prabowo travelled to Beijing to attend the WWII commemoration military parade and meet Xi Jinping — despite saying last week that he would cancel his China trip to address domestic unrest.

Indonesia has the world’s largest TikTok user base, at 157 million — more than half of its 285 million population. Indonesians spend big on TikTok Shop, generating $6.2 billion in gross merchandise value in 2024. ByteDance has worked hard to cultivate the Indonesian market, acquiring a local e-commerce competitor and navigating complicated local government relations in the process in order to expand its market share. Indonesia is an indispensable part of its international outlook and growth prospects.

What happens when millions in your platform’s biggest user base start posting videos about political conflict and violence? On August 30, TikTok, along with Instagram, turned off livestreaming in Indonesia and sent this notification to creators in the country:

Livestreams on the platform were down from August 30 to September 2: during this time, an angry mob burned down the regional parliament building in South Sulawesi’s capital Makassar, finance minister Sri Mulyani’s home was looted, and police tear-gassed students at two universities in Bandung. Young Indonesians are heavily reliant on TikTok for news. Amid reports of TV stations being taken off air and government pressure being applied to traditional media, even more people are turning to TikTok to follow the events.

Indonesian TikTokers are still trying their best to televise the revolution without livestreams. They’re calling on international users to comment using viral words like “labubu dubai chocolate” on their videos discussing Indonesian politics, so as to fight alleged algorithmic suppression of anti-government content. They are also making very creative edits out of protest footage to fill hashtags like #demodpr (“demo” is Indonesian slang for protest, and DPR is the acronym for the Indonesian House of Representatives, the target of much ire), #indonesiagelap (“gelap” means dark), and #resetindonesia:

Turning off TikTok Live in Indonesia for four days probably cost ByteDance millions of dollars, but from its perspective, it was a worthy trade-off to maintain good relations with Jakarta’s politicians. On August 27, just days before Affan’s death rocked the massive archipelagic nation, Indonesia’s government summoned Meta and TikTok representatives to discuss content moderation. Deputy Communication and Digital Affairs Minister Angga Raka Prabowo accused TikTok and Instagram of stoking anti-government protests, urging platforms to remove content proactively. The government denies having pressured TikTok to turn off livestreaming. Even then, Indonesian creators on TikTok report that their videos about protests and anti-government action seem to be suppressed by the platform.

When it comes to censorship and regulating digital content, ByteDance’s relationship with the Indonesian government stretches back even further. Its lobbying in Jakarta faced a rocky situation in 2023, when the country briefly banned TikTok Shop in order to protect the livelihoods of local market vendors. ByteDance then acquired a majority stake in local-grown online retailer Tokopedia in order to comply with regulations and go back online, though the aftermath of the merger has been troubled. In September 2023, TikTok signed a memorandum of agreement with Indonesia’s General Election Supervisory Agency (known as Bawaslu) to moderate content in the run-up to the general election in early 2024, which elected President Prabowo. A Freedom House report shows that Bawaslu and TikTok collaborated to align the platform’s community guidelines with Bawaslu’s goals. Scholars of Indonesian media and politics have long identified networks of digital propaganda on social media platforms, including paid pro-government influencers supporting Prabowo — and his predecessor, Joko Widodo — that aren’t dissimilar to China’s “fifty-cent army”. Prabowo’s own campaign for president more directly benefited from TikTok, where the former general’s goofy dancing videos gained virality.

Online leaders of the protest movement in Indonesia have, as of September 3, formulated “17+8” demands. The evolving situation is a reminder that TikTok’s political troubles don’t end with Washington: even if it exits the US market in the near future, it will continue to deeply shape politics around the world.

Semiconductors in Costa Rica? Poland?

Lily Ottinger reports:

Last month, I attended SEMICON Taiwan, a semiconductor trade show held annually in Taipei. While Taiwanese companies had the largest presence, the exhibition also included a hall of Chinese companies, as well as pavilions for democratic nations hoping to attract new investment from Taiwanese partners.

The Chinese booths were relegated to a single corridor with a low ceiling, separated from the main exhibition halls. When I tried to interview representatives of these companies in Mandarin, I was met with extreme skepticism — although booth workers were eager to take candid photos of me, presumably for their internal write-ups of the conference.

Seeing as my questions about supply chains and provincial government support were going nowhere in the China hall, I decided to check out the democratic friendshoring candidates instead. Here are the three countries that impressed me the most.

Poland

I’ve written about Poland’s advantages as a semiconductor manufacturing location before — the country has a high quality, decentralized university system which churns out tens of thousands of stem graduates annually; the population is highly proficient in English, and many people become fluent in a third language in university; the country has fantastic transportation infrastructure and is right next door to TSMC’s new Dresden fab.

When I spoke to Arkadiusz Tarnowski, Deputy Investment Director of the Polish Investment and Trade Agency, I learned that the Polish government has a history of successful industrial policy. Government support helped convince LG to manufacture EV batteries in Poland, and today, Poland is the world’s second-largest lithium-ion battery exporter after China.

While the EU sets regional ceilings on public aid for industrial development projects, Poland has the highest limits in the EU. Companies can reimburse up to 70% of their investments in Poland on their taxes, and there are grants available for “high-quality” investments that meet certain criteria. One native Polish company that receives EU funds is VIGO Photonics, which manufactures infrared detectors for NASA, medical, and industrial applications, as well as epitaxial wafers. According to VIGO representative Karolina Sałajczyk-Stefańska, the company was granted around US$120 million in EU support for their HyperPIC project on the condition that they would invest 1.5 euros for every euro of public aid they received. If the project succeeds, Poland will be home to the world’s first foundry for mid-infrared photonic integrated circuits.

In 2023, Intel announced an investment of 4.6 billion euros to build an assembly and testing plant in Wrocław. Poland didn’t cinch this deal by promising 0% tax rates or third-world wages. In Tarnowski’s words, “It’s not about the money, it’s about the environment,” and Poland is poised to succeed thanks to long-term investments in education and infrastructure that have already borne fruit.

Correction: Intel announced in 2025 that they would not move forward with their investment in Wrocław, though this had less to do with Poland than with Intel’s financial difficulties.

Czechia

The Polish representatives plied me with coffee — the Czech representatives offered me beer.

Czechia’s strategy for attracting investment is not specific to semiconductors, but also targets environmental technology, space research, and AI. Since the EU determines investment rules, it’s difficult to offer blanket incentives like grants, so the Czech government is instead offering case-by-case “custom” incentives to attract manufacturing investment.

A side effect of this regulatory scheme is that EU countries are not fiercely competing against one another to cinch deals, but rather specializing in different areas of the supply chain. Czechia hopes to manufacture chemicals and other inputs for TSMC’s Dresden fab, forming a triangular semiconductor cluster that includes Poland.

There are some cash grants available for strategic products like semiconductors, but approval is not automatic. After an application is checked by CzechInvest (a government-affiliated agency tasked with facilitating foreign investment), it is sent to the Ministry of Industry and Trade. Grants for strategic investments must then be approved by all ministries of the Czech government in a plenary session. The representatives I spoke to explained that this mechanism is a result of the EU-imposed ceiling on state support. Since there are strict limits on industrial policy spending, the government has to be choosy about which projects get funding. The CzechInvest representatives were confident that bureaucracy would not hold back investment, and to their credit, the agency appears well-funded and well-staffed.

Costa Rica

Costa Rica wants to become a regional hub for semiconductor manufacturing, and in March of 2024, the country announced a comprehensive roadmap for semiconductor success. Under this strategy, Costa Rica is offering chip manufacturers a 0% corporate income tax, 100% exemption from tariffs and VAT, and reimbursement for employee training costs. Simultaneously, the government is investing in the educational system, particularly in semiconductor expertise, bilingualism, and electronics R&D at the university level.

Since 1982, Costa Rica has successfully attracted foreign manufacturers with similar tax mechanisms under its free trade zone regime (Regimen de Zonas Francas), and today, Costa Rica’s most valuable exports are medical instruments and orthopedic appliances, not coffee or pineapples.

Intel has had a presence in Costa Rica since 1997, though its activities have been limited since 2014. That year, the company closed its primary assembly and testing plant in Costa Rica and moved operations to East Asia. At the time, Intel’s products accounted for 6% of Costa Rica’s GDP. Intel didn’t cite specific reasons for closing the plant, but workforce quality and distance from other parts of the supply chain are clear areas where East Asia comes out on top. From this experience, Costa Rica appears to have learned that their incentives need to be extra juicy if they want to land deals. As chip companies increasingly seek to democratize their supply chains, I’m hopeful that Costa Rica can expand their share of the pie.

Over on the podcast feed we’re four episodes into a new series discussing American defense and the future of war, Second Breakfast. We had to go with something Lord of the Rings-themed and still can’t believe Palantir’s left this lane open for us. Recurring cohosts include , and Eric Robinson.

Below I’m featuring a transcript from our second show. We got into:

• Drones in Ukraine, Lebanon, and Iran and the new reality of remote warfare

• Why everyone including John Bolton walks around with TS printouts

• Why the ‘Silicon Shield’ is such an inane concept

Listen now on iTunes, Spotify, YouTube, or your favorite podcast app for this episode, or scroll back over the past few weeks on the ChinaTalk feed for other episodes we’ve recently published on the future of intelligence, why China hawks are on life support, and what warrior culture has done to the Army.

Drone Bolt From The Blue Attacks

Jordan Schneider: Eric, I hear you have some feelings about the idea of an Israel-style “bolt from the blue“ drone strike on Iran happening in the US.

Eric Robinson: There are a couple of extraordinary case studies that aren’t rattling people the way they should be. The experience of Russian strategic air being on the receiving end of covertly placed Ukrainian airstrikes hasn’t been fully assessed. Nor have the US partners, allies, or people in industry thought about the implications of the Israeli Defense Force or Mossad employing covertly placed air assets against the Iranian integrated defense system.

We’re witnessing unmanned aerial systems being employed in ways that knock out strategic capabilities. Yet I haven’t seen an equivalent conversation about defending the US, our partners and allies, or critical infrastructure — shipyards, any of that — from these kinds of threats. This is opposed to Golden Dome, which is a massive spending program against a narrow-banded but obviously important threat.

Assuming Golden Dome is technologically feasible — and we know that ballistic missile intercepts are, as we’ve seen with some regularity in the Middle East — ballistic missile threats from ICBMs or MRBMs are acts of substantial war, and the US needs to be secured against that. But where is the paired effort to guard against UAS strikes moving against a natural gas facility or an airline terminal? It’s not there yet.

Jordan Schneider: Or even your Golden Dome missile battery? We can put these two together, right?

Eric Robinson: Thanks for giving me the floor. If you want to be unnerved about something, it’s that counter-UAS efforts are being treated as a tactical tool. But where’s the coastal artillery? Where is the effort to think through how a determined opponent of the US would actually get at the heart of American industrial capacity?

Whether it’s your Saronic building in Franklin, Louisiana, or your Anduril building in Ohio, you’ve got gate guards. But are people trying to surreptitiously enter your facility or go after you with a cyber profile? The only threat you haven’t considered in the modern world — and the Israelis and Ukrainians have demonstrated it — is this one.

Justin McIntosh: In a lot of ways, Jordan, this goes back to what you talked about last week or two weeks ago when we discussed critical minerals. We’ve been writing about this for 15 years — that we have this critical mineral dependency on China. We haven’t done anything about it.

The Obama administration struck Anwar al-Awlaki in Yemen. The USS Cole was hit by a suicide boat, which was a precursor to an unmanned suicide boat, for lack of a better term. We already saw then that there was potential for operations in countries where we haven’t declared war and don’t have a huge presence, based on intelligence gathering. How long will it take for other people to do the same thing inside the borders of the US?

To be honest, we ignored it because there was always this assumption that we were different. We had our two oceans, and we were surrounded by two oceans and weak neighbors, so we were good. Some people are finally acknowledging that those things don’t exist anymore.

Where are we on national defense? Where are we on moving off reliance on GPS, which was directed in 2000? There was an executive order that directed the US to move off reliance on GPS for assured timing. We saw zero movement on that, in part because it was an Executive Order that came out of the Trump administration and was followed by a Democratic president who wasn’t going to reinforce anything Trump had done.

Now we’re at a different point, and that’s another critical vulnerability that exists that we haven’t addressed. We have a drone critical vulnerability. We have Salt Typhoon and all the other bolt typhoons still unaddressed. Every time we start bringing them up, they get mired in conversations about who is saying we have this vulnerability or who is saying this exists. But what are we going to do about it?

Tony Stark: Two major issues haven’t been addressed. One is the changing role cyber plays in warfare. Probably since at least the 1990s, but building up after the strike against the Iranians around 2010, there was this hype that cyber was going to dominate every facet of warfare.

It does, in the sense that food regulations dominate the food industry — you have to think about it, you have to plan for it — but it is not the predominant domain of warfare in the way that a lot of people thought. How do you continue to defend against that stuff while also admitting that this is not the only form of sabotage that exists and that cyber itself is a form of reconnaissance and sabotage?

Secondly, on physical sabotage: even before the strikes on Russian strategic air, there was a back-and-forth ongoing war of sabotage in the EU and the Russian mainland. Especially in the EU, it was onset — publicly reported, people saying, “Oh, this is terrible,” and then nothing came of it, at least on the public side.

That’s a difficult conversation to have in the US, particularly now, because how do you talk about sabotage in a way that is reasonable and not immediately thrown into a red scare? When I worked on the Hill, we would talk about the threats posed by the Chinese to the US, from Guam to the mainland. You would get other staffers saying, “So this means I have to ban them from the farmland.” You’re like, “I hate to tell you, but that’s not the actual major enabling issue for sabotage operations — whether a CCP company has a farm within 100 miles of a base.”

I honestly don’t think we’re going to have this conversation in the US in a meaningful way that is neither overreach nor left of boom, shall we say.

Eric Robinson: Thankfully, the FBI recently committed to dramatically expanding its presence in counterintelligence. Did I read that correctly?

Justin McIntosh: They exercised it against John Bolton today, apparently.

Jordan Schneider: If the Trump administration starts getting people for having classified files in their houses after he wiggled out of the whole Florida thing, more power to him. John Bolton had this coming, let’s be real.

Eric Robinson: I’m going to be a bit ageist, but if you’re in the service and you are still printing material, why? I don’t understand what kind of neurons get energized when you hit print on a TS/NOFORN document and walk around with it. It is extraordinarily strange. When I was an intelligence briefer around 2012, we had iPads. There’s no need for paper anymore. It is a relic — like those stacks of etched wood that reside in Britain and tell you what happened in the 800s.

Justin McIntosh: Bolton is a dinosaur. However old he is, he’s got his own way of doing stuff. But not only him. General officers who sit at the heads of the most technically advanced military on the planet print everything out, hand-write comments, and then throw them to their staff to get answered.

Eric Robinson: It is a cultural thing. You see films, specifically American films that portray Commonwealth officers from the First or Second World War, and they always had swagger sticks. Some of these people carry them because there’s a class issue — they came up from the horse cavalry and brought these devices around that gave them some sense of authority. Napoleon had his marshals’ batons. It is an element of warfare that is completely nonsensical, like wearing a breastplate.

We do have this imperial system inside American national security where if you’re a general officer or a past Senate-confirmed official, you have some GS-12 or 13 toady like I used be, to give you your news in the morning. Some people think that if it’s not printed on paper, it doesn’t exist. We create not just opportunities for people to break the law — which is arguably what we’re seeing around Ambassador Bolton — but we’re creating this extraordinary counterintelligence vulnerability when people who are just human have these sensitive pieces of material that they shouldn’t be walking around with or shouldn’t leave the building.

It happens. It doesn’t have to elevate to the point where it’s David Petraeus trading codeword material for sex. It can just be an accident. If you’re serious about counterintelligence, pull out every hard copy printer anywhere in the Pentagon, any place in the Intelligence Community, and tell people to deal with contemporary reality. It’s 2025. You don’t have to print this stuff.

Justin McIntosh: It would drive me nuts when I would power up my computer and have an email from generally an admiral, sometimes a general — because admirals, they walk out on the deck, throw something down into the pulpit, then turn around and walk back into their office, and eventually the thing gets done that they had demanded.

You would get a scanned-in version of what had been a typed document that was emailed to a person, where he had written in marginalia something that he wanted answered. It had gone through 14 levels of bureaucracy to get down to you so that you could answer this niche fact that he wanted.

Eric Robinson: To Matt Olson’s credit — former Associate Attorney General, head of National Counterterrorism Center, Über, WilmerHale — he was not an intel pro, he was a prosecutor, but he was ready to operate in a contemporary world.

Let’s talk CENTCOM for a minute because that is the heart and soul of American national security. When I was at the National Counterterrorism Center, we had a rare hard copy of the presidential finding that authorized the targeted killing of Anwar al-Awlaki. It was not on digital at all. It was in a dedicated safe because of its classification.

In certain cases, there are examples where that level of deliberation does have to be effectively firewalled, but it’s also in the environment where the CIA was deliberately obscuring its role in the torture program. Counterintelligence needs to be paired with effective oversight. Something in the back of my mind struck me as suspicious about effectively air-gapping a document that was just as vital in American legal history as Ex parte Quirin, when the US executed the German saboteurs in the Second World War.

Jordan Schneider: You heard it here first. I’m sure we’re going to get a story like that. I’m not saying torture, but something that was kept entirely off the books. We already have it — we already saw one manifestation of it with Signal-gate. We’ve got three and a half more years of this. We’re going to get more funny business for sure.

Eric Robinson: I’m absolutely fascinated to hear what happens when somebody like Steve Coll or one of these deeply resourced, deeply sourced journalists with ties in the Middle East starts getting regional services talking about the Iran war and the US pairing and conducting strikes against the Iranians. Once that whole story comes through, it will shake some assumptions.

I’m glad we’re talking about CENTCOM, because let’s capture the true spirit of American national security and the relative balance between INDOPACOM and CENTCOM. We can devote three seconds of the broadcast to SOUTHCOM if you want.

Justin McIntosh: That was it. We’re done now. SOUTHCOM complete.

There's a big development with SOUTHCOM and NORTHCOM — they're talking about moving the commands to Fort Liberty. The idea is that consolidating all of the forces on one base increases organizational efficiency — though it also makes it a bigger target for enemy attacks. Texas is making a push to keep it in San Antonio, or at least to ask why they're moving it or potentially moving it. We'll see how much that accomplishes. There's my SOUTHCOM take for the day.

But circling back to the discussion of sabotage, Zero Day Attack was released last week. You know, the Taiwanese miniseries that was focused on a Chinese invasion of Taiwan. At least in the opening bits or the opening episode, focus heavily on the saboteurs and the enemy within as an underlying narrative, and it’s seeded throughout the government. Interestingly, that was the initial take from that show — we’ve got to be worried about the enemy within.

The Silicon Shield Will Not Save Taiwan

Jordan Schneider: I want to talk about Silicon Shield. , who we get to pick on because he recently left the White House and decided to go on someone else’s podcast instead of mine for his initial White House exit interview, said something to the effect of on the podcast The Cognitive Revolution that on Taiwan, the US government is explicitly executing a Silicon Shield strategy, making their semiconductor industry so indispensable that it guarantees international interest in their security.

There are a few levels to this that are different gradations of reasonable. At an international level, getting the world to understand that a war over Taiwan or a Chinese invasion of Taiwan would have double-digit impacts on global GDP is a way to get Japan more bought in, get the Philippines more bought in, etc. Sure, I buy that.

But basing a strategy of deterrence on economic entanglement and economic costs is something that we have seen fail over the course of all of human history. We can go back to the Peloponnesian Wars when we had big trading partners with Megara and Corinth. That’s the thing that worries me. If gold-plated deterrence is a dope military and your enemy 100% convinced that you would be willing to use it to stop them from doing whatever they’re doing, I would put this as maybe level tier 4 or tier 5 on the types of things that you would want to bring to a conversation with an adversary to convince them not to start a war.

Tony Stark: Silicon Shield was always a “nobody move or I’ll shoot myself” sort of thing for those who’ve seen Blazing Saddles. There’s no good history of using economic interdependence to prevent war.

The other thing we did when I was on the Hill was we started to push Wall Street in the direction of understanding the cost to their investment in the event that there would be a war. Part of that was understanding the costs. It wasn’t just us — RAND did some studies and others too — of the cost of what would happen if TSMC went under, etc.

The unfortunate second and third-order side effect of that was people deciding to de-risk their investments, but not de-risk policy. The needle moved, but not in the direction that we wanted with Silicon Shield. Instead of “oh, if they’re going to do that, then we’re going to find other ways around it,” we’re not going to help change the status quo or improve deterrence.

Justin McIntosh: One of the big problems with the Silicon Shield, at least from the build-up to it — and we can talk about the messaging that’s currently going on however we want — but I was in Intel’s office in their foundry in Gordon Moore Park and I was being told by their executives that they could replace a substantial portion of the production at TSMC at their foundry within a timeline of months, not a timeline of years. This was under Pat Gelsinger, and Intel’s always been a humble company that’s never over-promised anything.

Again, you’re at that point where you have one of the larger companies within the US that was counter-arguing it doesn’t even matter — we can replace it. Now you fast-forward to “we’re going to build a Silicon Shield.” But even the messaging from the administration is “we’re going to give them our third or fourth-best generation of chips and get them addicted to those,” to which you then get the Chinese coming out and saying, “Hey, we’re going to limit — we want 70% of our chips to come out of Huawei and SMIC, not out of anything that NVIDIA or TSMC is producing.” Again, you talk about shooting yourself in the foot. Even our messaging on this one has been off.

Jordan Schneider: More on Silicon Shielding. It’s a weird thing because on one level, we think that having the whole world dependent on chips coming out of TSMC is going to make war less likely. But we are also trying to force TSMC to manufacture in the US. Apparently, we’re going to take a golden share out of Intel and wave some magic wands, bang some heads together to make sure that they are a functioning entity in the decade to come.

I guess this is reassuring in the sense that Silicon Shield maxing would mean letting Intel die. But having the whole world all dependent on TSMC to live in a modern society and having some resilience may lessen the effectiveness of the Silicon Shield. But is America going to go to war in defense of Taiwan or break a blockade on Taiwan because we’re worried about semiconductor exports? If China’s smart, they just let the chips out. And then I guess we don’t care.

Eric Robinson: But let’s take it away from Taiwan for a second. Let’s borrow from Frank Herbert and Dune. People speaking of Silicon Shield are almost talking about it like it’s Arrakis — the one place in the universe you can get the spice melange that makes everything function. Dune as a setting would not be compelling if “Oh well, actually any planet can create spice. They just have to create the CHIPS Act for spice.”

There’s a lot of magical thinking going on that Taiwan is excellent at a certain set of processes, but those processes are exportable, downloadable, and replicated. The world is not going to war for Taiwan. He who controls TSMC does not control the universe.

Justin McIntosh: Why not offer all TSMC employees of a certain rank American citizenship? You’re already building a TSMC fab. We say that the problem is the American work ethic. If you read some of the stories on getting the fabs up to production level. If anything happens, you’re an American citizen, you’ll escape quickly. I kind of agree with that.

Jordan Schneider: I also think that our energy, man, the new head of DHS, the new head of USCIS, are saying, we’re going to make sure everyone on an F-1 visa knows that they’re not welcome once they graduate. Mike Gallagher is out in the streets saying, “Don’t let Chinese students come to the US and study technology.”

Justin McIntosh: You get the techno-libertarianism meets the nationalism on this one — they’re going to constantly butt heads. You’ve already seen it get Elon out of the administration, among other things.

Tony Stark: When the CHIPS legislation came out, chip companies said, “No, no, no. We have to be able to keep our facilities in China. You can’t regulate what money we spend or how we spend it. Who knows where those chips are going? We certainly don’t keep track”.

To have that been said and then, “Oh, but don’t worry, we can absolutely duplicate production elsewhere extremely quickly, at low cost. The people don’t matter,” is insane. If TSMC went under tomorrow — by a bolt of lightning or several — you would need 10 years and probably half a trillion dollars to replicate it. Right now, you don’t need to replicate it all at once, and that’s a different mathematical problem. But the point is that you’re not just moving a campsite. There’s a lot to move — supply chains, everything.

If that’s what’s being sold to the US government now — “don’t worry about it, we can pick up and move quickly” — I am extremely concerned.

Jordan Schneider: Second breakfast is — we’re very intertextual here. The Mick Ryan interview, what were your guys’ takes on that?

Tony Stark: I mostly agreed with him. I found his analysis very compelling and nuanced, which is different from a lot of the analysis about Ukraine these days. When we talk about what the future of warfare is — pre-’22 and after ’22 — people tend towards almost the mini puzzle pieces that they see as they walk, and they tend towards these lines, it’s like walking a path in the woods, and that’s how you get paths in the woods.

That’s where a lot of future predictions come into play and have issues — they see these trend lines and they want to chase the trend lines. In the 2010s, we had drone warfare, but not the type of drone warfare that we see today. You see the precision-guided, no air defense sort of thing. Or even with Ukraine, you see this “oh, everything’s going to be attrition or everything is going to be these very small UAS systems because that’s what you can build quickly,” even though they don’t have range or are not generating the effects at mass we talked about in the last podcast.

This goes back to this document that goes around — I think it was a Pentagon memo — that said, “we’ve been wrong every time about what’s going to happen in the next 10 years of warfare.” Who is the “we” in that question? Because former Marine Corps Commandant General Berger said there’s always an analyst who knows. Is that analyst heard and can the system work around that analyst to generate supporting detail?

There were a couple of analysts who knew that Russian logistics were terrible, right, in 2022. For whatever Taiwan will be, those will be the correct ones. Is the problem that we collectively cannot predict the future, or that we collectively would prefer to focus on trend lines, to what we want to be true or what sounds like it should be true, as opposed to what is true? A lot of times, that means having difficult conversations that the senior leaders who sponsor these studies and analyses don’t want to hear.

Justin McIntosh: I’ve appreciated Mick Ryan’s nuance since he started doing his Twitter serial blog posts when the Ukraine invasion started. He’s thoughtful, and he thinks through the subject in an interesting way. But I wonder if he isn’t too fixated on the idea that it’s all incremental change and that incremental change, we’re going to see it and we’re going to be able to know that based on these building blocks we’re going to get to here.

That is a retrospective viewpoint. We look back and we see it. The truth is that there have been fundamental leaps that took everyone by surprise, in part because you get cavalry officers who are absolutely wedded to the horse or you get infantry officers that are absolutely wedded to “we have to be on the offensive and the strength of the offensive,” and they miss the implications of barbed wire and the machine gun or mechanization and things like that.

He referred to, “Well, you know, in Ukraine we haven’t seen a real air war.” Man, we keep seeing that. I don’t know what blowing up strategic bombers on a runway is if not an air war or denuding that air power.

Eric Robinson: Russian attack aviation was partially decisive in blunting the so-called counteroffensive in 2023. Saying there’s no air war means there’s no dogfights. And that’s not necessarily true.

Justin McIntosh: I hear that same argument when I talk to Air Force buddies that I know or people currently in the Air Force. They say, “Well, when we get in and we establish air superiority, it’ll be different than what we’re seeing and those drones won’t be able to do all their fancy little stuff.” Those are conversations between mid and senior-level officers who grew up flying fighters or grew up flying bombers and they believe the Curtis LeMay view that “we can win through air power alone.”

Those same people have a deciding vote when it comes to some of the directions that we take. To Tony’s point, it’s a little bit disheartening when you have those people because they tend to apply that same thought process where “nobody can predict the future, so we’re just going to keep doing what we’re doing.”

Robot Warfare? Eric’s Waymo ephiphany

Jordan Schneider: Eric got his 10th Waymo ride over the past week. How did it feel?

Eric Robinson: It has become a cliche, but sufficiently advanced technology is indistinguishable from magic. I’ve been around some high-tech institutions and was an early adopter of Uber and other platforms. But Waymo was shockingly crisp, convenient, inexpensive, and extraordinarily comfortable.

Jordan Schneider: How did that make you feel about the future of war, Eric?

Eric Robinson: There’s an Axios journalist, Colin Demarest, who runs their Future Defense newsletter. He often asks people, “When’s the first war going to be fought purely by robots?” It’s a gotcha question or icebreaker.

My disposition is that no war is ever going to be just robots. War is fundamentally a human endeavor.

War is an act of force to compel an enemy to do your will. But witnessing Waymo made me think that we are very close to battles and engagements being decided by autonomous systems. That will happen if it isn’t already underway in the Ukraine conflict.

Justin McIntosh: It’s almost a natural outgrowth. If you look at the Irish drone company that started to do coffee deliveries and things like that. Now we’ve seen in Ukraine a drone deliver a motorbike to a soldier so he could escape a firefight.

You’re starting to see autonomy on both delivery and autonomy on just movement. I would not be surprised if, in the next 10 years, you see something like the Mint 400 race out in the desert in Nevada — you see an autonomous vehicle be able to at least compete well in a race like that. Once you see that, logistics delivery over vast expanses starts to become a real possibility.

Eric Robinson: I think we’re extraordinarily close. There’s proof of concepts, and operating within the boundaries of Austin or San Francisco streetscapes is going to be comparable to warfare. In fact, probably the parameters are even tighter given baseline safety concerns.

Autonomous systems interacting with one another — from ISR to strike to sensor — is certainly going to be the future. Do I think that humans are going to be completely pulled out of the decision loop? I don’t think so. The poor bloody infantry is still going to be a fundamental component of human conflict.

Mia Zhong, who holds an MA in East Asian Studies from Stanford University and currently works in the tech industry, is our guest contributor today.

China’s State-Owned Enterprise (SOE) ecosystem primarily controls the country’s fundamental sectors, including energy, infrastructure, education, and telecommunication. A 2022 study estimated that there are more than 300,000 wholly state owned SOEs and around 1.5 million enterprises partially owned, counting all-in for roughly 68% of total capital of all Chinese firms in 2017.

Since Xi Jinping assumed power, the Party’s grip over SOEs has grown stronger. In his 2016 speech, he emphasized on “enhancing and refining the Party’s leadership over SOE.” In 2020, the central government issued a regulation that formally designate power to the Party committee over the board of directors in SOEs in “major business and management matters.”1

The following translation is a story originally published on Zhengmian Lianjie 正面连接, now deleted, which provides a rare personal account of work within an SOE and how the routines are heavily influenced by the Party building requests. The author Zhao Shuxin (赵书信) – likely an alias – is a young woman with a graduate degree and former employee in a provincial-level SOE. She started working on internal propaganda in the general affairs office in 2023 and extended her scope of work to external propaganda and other ideology-related areas.

It was a “stable, decent, easy job, an iron rice bowl,” that “gradually transformed from a spectator watching an absurd play, to an actress in the absurd play herself.” 从一个旁观荒诞剧的看客，逐渐成了荒诞剧的演员本身。In 2025, she resigned from the company and wrote a series of three articles recording her time there. The following translation is an excerpt of the second in the series, elaborating on her project to manage ideological risks on social media platforms.

Zhao’s response to the work is also characteristic of her generation: she called them “bullshit work.” The term was widely embraced by young workers after David Graeber’s book Bullshit Jobs was translated into Chinese in 2022, right when the working generation’s loathing for toxic work culture grew louder and fresh graduates were facing increasing unemployment.

“Ysxt” Work and My Power

It all began with what they called “online front ideological management work” (线上阵地意识形态管理工作). The so-called “online front” really just meant social media accounts. Ideological management meant monitoring the content of those accounts.

Put simply, on social media, any account that included our company’s name plus location within our province had to be managed, whether it was set up by employees or unknown individuals who simply registered in our company’s name. (for example, “N Province A Company Jiajia,” “Flower of C City A Company,” “N Province A Company F City Branch_908,” “XX Market North Gate A Company Service Hall,” or “Xihuayuan A Company Service Hall”)

Specifically, for accounts officially registered and operated by company departments, I had to monitor them in the following aspects: first, whether there was any content that were incompliant with set standards, such as content endangering national territory or sovereignty; second, to check for misuse of symbols like the Party flag, Party emblem, or Tiananmen. As for accounts created by unknown individuals in the name of our company, their mere existence was considered an ideological risk.

Interestingly, the term “ideology” sometimes turned out to be a risk and taboo itself. In all kinds of written expression, unless it was a formal institutional document, the Party-building department always referred to it as “ysxt work” (ysxt 工作).

“ysxt” are the first letters of the term ideology in Chinese Pinyin (意识形态, yi shi xing tai). Using the first letter in Pinyin is a popular rendering of certain terms online. The most used words are usually for fun and convenience, such as “xswl” (笑死我了, xiao si wo le), meaning “lol”, and “dbq” (对不起, dui bu qi), meaning “I’m sorry.” The method was later adopted to address terms that might trigger censorship for their political connotation, such as “zf” (政府, zheng fu), meaning the government, and “zzzq” (政治正确, zheng zhi zheng que), meaning political correctness. These renderings are borne out of speculation and self-censorship rather than concrete rules.

I remembered clearly how this task landed on my shoulders. One afternoon in November 2023, the Party-building department (党建工作部) suddenly demanded that a number of departments attend a meeting on “ysxt risk control across different fronts” (各个阵地ysxt风险把控). In the meeting room, the Party-building leader sat at the head of the table. Before my supervisor got a chance to talk, he spoke sternly: Internal or external, you must take serious actions against any ‘non-compliant’ new media activity. Set your rules! Clarify your measures! Swing the big stick first! As he spoke, he swung his hand forcefully through the air and clenched it into a fist.

That’s the Party-building department’s way of working. As the lead unit, they had the authority to break down their own tasks, pass them on to other departments, and act as the overall coordinator who regularly requested reports from these departments.

This way of working is an example of campaign-style mobilization 运动式治理. This type of governance breaks the formalized functional system and organizes resources and personnel to prioritize a designated task based on political purpose and mobilization. This mechanism can be observed on various campaigns and movements during the Mao era. More recent instances include mobilization control schemes during the Covid pandemic.

The social media management process went in three steps. The first was research, meaning manually searching across social media platforms to identify accounts whose names, profile pictures, or verification included our company name but were not official accounts.

The second step was rectification. We had to contact these unofficial “risky” accounts one by one through private messages, informing them that they could not use our company’s name, and requiring them to change their names or close their accounts within a set deadline. If there was no response, we had to report the account to the platform and request to close it.

If neither of these methods worked, then came the third step: recording the account in a “ledger” (台账) (what the government calls a spreadsheet) and placing it under “dynamic monitoring” (动态监管), which referred to checking the account regularly for new content posted.

Personally, I found this project utterly absurd. What right did we have to manage the social media accounts of people who had nothing to do with us? But because the task came from the Party-building department—and because Party-building evaluations and inspections could affect the company’s ratings, honors, and ultimately employee performance rating—there was no choice but to carry it out.

Upwardly, I had to report to the Party-building department and other inspection units. Downwardly, I had to lead different departments and branch offices to implement the task. My decisions would directly impact how much work each unit had to put in. Every time I asked them to submit materials, I always repeatedly expressed my apologies and gratitude.

In the first quarter of 2024, Miss Li from the D City branch company called me for advice. She wanted to know whether accounts whose owners she could neither identify nor contact still needed to be placed under dynamic monitoring.

I knew she wasn’t really asking for advice. It was more of a complaint. After all, we had already been working this way for half a year, and the rules were made clear. Out of guilt, I absorbed all her frustration and tried to appease her: I understand how everyone feels, but these are the work requirements. I’m watched closely by the Party-building office too. That wasn’t an exaggeration. In private, my self-deprecation was even sharper: I jokingly called myself an unofficial member of the Party-building office, their subordinate department, the “chamber maid of the Party building office” (党建部的丫鬟).

The departments in the provincial company were less implicit when showing their impatience. It was common for them to ignore my request for materials, and when I followed up, the person just replied with a cold snort: What can we do if they just don’t change their name or delete their account? Out of guilt and diffidence, I didn’t know how to respond when I first heard the question. But after repeatedly hitting a snag, I grew frustrated too and simply relied on the Party-building office: the Party-building rating would be deducted if issues were found, and your department manager would take you to speak directly with the head of the Party-building office. It's your choice.

Every time I compiled the spreadsheets of other departments and local branches, the hardest part was always aligning numbers. In theory, the total number of accounts in the current quarter should equal the newly added accounts plus the accounts carried over from the previous quarter. But in practice, it was common to have unmatched numbers. Sometimes there would be one or two more, sometimes one or two fewer. I knew no one would ever check the details of each account across the ledgers, so I just made up a couple accounts to smooth out the numbers.

However, the launch of the inspection and supervision work marked the end of my perfunctory work. The very same Miss Li who asked me for advice was flagged by the inspection team as an ideological risk: a non-official social media account using the company name was not included in the monitoring ledger. Our department received a “risk notice” issued by the Party-building office.

The email was sent to me and my supervisor, Miss Yuzhen, was cc’ed. At the end of the notice, it stated: “For repeated occurrences of similar problems, the Party-building office will request a meeting with the responsible person of the General Affairs Department; for issues of incomplete rectification during self-checks and self-inspections, and for repeated discovery of the same problems, the Party-building office will recommend the Party organization secretary to issue accountability measures” (对于屡次发现同类问题，党建工作部将提请对综合部相关负责人进行约谈；对于自查督查问题整改不彻底、问题屡查屡犯等情况，党建工作部将对党组织书记提出问责建议).

That threat infuriated Miss Yuzhen. She immediately called the Party-building office and sternly questioned: You said you wanted to summon my supervisor for a meeting—on what grounds? You talked about ‘repeated discovery of the same problems;’ why not ask yourself how much of the material for this work comes from us every year? This whole process of yours is nothing but formalism! She had once worked in that office, and the person who picked up the call was an old colleague of hers.

The meeting is considered a threat because it’s not a simple work meeting but a yue tan (约谈), an administrative pre-investigation meeting. It is used for information collection, warning, and investigation. Although the meeting itself doesn’t formally enforce regulatory or lawful actions, it is a strong sign of impending reprimand or actions, and therefore is taken very seriously. It started as a means of market regulation, land control, real estate control etc., and now already a procedure all state-owned institutions find handy.

Miss Yuzhen’s accusation of formalism was not referring to the artistic genre, but excessive procedural formalities (形式主义) in the context of the Party-state bureaucracy. The term refers to the idea of prioritizing formality over getting things done, and encompasses a broad range of behaviors. For example, initiating projects that might appear good on record but generate no actual benefit in reality, or designing an itinerary with performative work routines for the inspection team.

I never found out what the colleague replied, but as soon as she hung up, Miss Yuzhen dialed another number—this time, to Mr. Ren. He was now the VP of the Party-building office and was in charge of ideology work. The two of them had practically swapped positions. Her tone grew even sharper as she scolded him for being reckless: When you were in the General Affairs Department last year, did I ever send you a risk notice like this? And now, without even a word ahead of time, you start off by saying you’ll summon my supervisor? Is this really the right way to do work?

I knew that Miss Yuzhen was always tough when it came to drawing the line of responsibility—“clarifying the boundaries of one’s responsibility field” (厘清责任田) was something she often emphasized to me. But I had never seen her this furious.

Her anger, however, had no effect. The Party-building Department’s final response was: why could the inspection team find the problem, but the General Affairs Department could not? In the end, the matter turned inward and landed back on my shoulders.

Miss Yuzhen translated the inspection team’s message for me—they believed we didn’t put enough effort into this work. She guided me on how to implement the correction:

“Little Zhao, remember this: for this rectification of workflow, and every quarter from now on, you must send the work requirements by email. You need to make sure that every trace of work is fully documented. And in the third-quarter news bulletin, we must publicly criticize the branch offices tied to these accounts, so that they take it very, very seriously!”

In the Chinese workplace, especially conventional industries, it is a common way to address people who are younger and rank lower than you with “little” (小) plus their surname. For people who are older and/or rank higher than you, it’s common to add “big sister” (姐) and “big brother” (哥) after their name. I translated Yuzhen sister to Miss Yuzhen to avoid misinterpretation given how sister is used in the English context.

Miss Yuzhen kept one hand in her pocket, while her other hand shot forward, index finger jabbing the air. The words “very, very seriously” seemed to be squeezed out through gritted teeth.

I learnt from a few bloggers who write about workplaces to treat leaders as partners at work whenever possible, especially when facing other departments together. I complained: what exactly does it take for this work to be considered “done properly”? How could we possibly explain the platform’s search mechanisms? Even Disney allows people to register accounts with those three characters in their names—how could we stop others from registering accounts with our company’s name? Wasn’t the inspection team just demanding that we prove the impossible? Where would this kind of work ever end?

Miss Yuzhen waved her hand, giving the same reply I had once given to the branch offices: this is the way our work is done now—there’s no way around it.

I gave a bitter laugh and said nothing more. I opened the office software, ready to start drafting the rectification plan. Miss Yuzhen’s guidance was clear: when writing something for others, the most important thing was not to dig a hole for yourself—you had to write measures that could be carried out in practice. I wanted to ask Kimi to generate something for me but quickly realized I couldn’t even explain what I needed to a large language model. What kind of event was this, exactly? Could a LLM understand what “rigorous, but not digging a hole for yourself” (严谨而不给自己挖坑) looked like in practice?

The following week passed in endless rectification work. Rectification of the functional workflow naturally required the cooperation of everyone involved. To my surprise, at this point, Miss Li reached out to “discuss” with me again: couldn’t we simply exclude non-company accounts from our monitoring scope?

I had never expected her to bring up this question again right when her inadequate work had already caused me to have to rectify my work. Anger surged up inside me, and I shot back: on what basis?

She pulled out a regulation that had nothing to do with the matter. I finally dropped the patience I used to show low-level executors when I had the space to be generous. My voice turned sharp as I scolded her: why are you still asking me this? Haven’t we already made this clear? Even if you can’t identify who in the company opened the account, as long as it carries the company name and can be found through a search, it has to be monitored. After working on this for so long, how could you not know such a basic standard?

She faltered into silence. I couldn’t be bothered to say more and hung up with a “That’s it, then.” But the moment I tossed my phone onto the desk, regret set in. Just because I was being held to account, I passed on harsher demands to those below me. What else was that, if not the banality of evil? For so many moments in the past, I had been a nobody, forced to comply with rules that were inexplicable and meaningless, even suffering undeserved consequences. And now, I too had become a part of a small ecosystem of that very banality of evil.

An Endless Proliferation of Dirty Work

Shortly after, spreadsheets and data from different departments across the company were all submitted to me. I immediately set up three new folders on my computer: “Zero-Report Departments”(零报告部门), “Official Account Checks” (官方账号排查), and “Departments with Issues” (存在问题部门). Inside each folder, I created a ledger, and each ledger contained three sheets. Sheet 1 was named “Supervision, Self-Inspection, and Rectification Ledger”( 督查、自查及整改情况台账), which meant to reflect the process-oriented steps of rectification. Sheet 2 was called “Accounts Requiring Dynamic Monitoring” (需动态监测的账号) Sheet 3 was the dynamic monitoring ledger for each department, with check marks under each account by date to show it was being tracked.

After compiling the master sheet, the worst-case scenario happened. The latest spreadsheet showed 89 accounts in total, but when I added last quarter’s total to this quarter’s new accounts, the number was ten short. I didn’t want to believe it, so I reopened the spreadsheets from each unit, copied, pasted, and dragged down to sort. I tried twice, but the missing accounts still didn’t appear. Now resigned to my fate, I turned to Kimi to learn how to cross-check data in Excel on the fly, then began calling the departments whose numbers didn’t add up one by one.

One. Three. Five… By the ninth account, I got stuck again. It was already an hour past the end of the workday. Feeling overwhelmed, I pulled off my glasses, tossed them onto the desk, and slumped back in my chair with a groan. On the other end of the line, a colleague from Branch B—probably in her early thirties, usually the type to reply crisply with “I’ll handle it” or “I’ll ask around”—hesitated for once: If it really won’t add up… I still have two accounts on hand…

What kind of account is it? I straightened my back slightly.

The profile picture contains our logo, but the name doesn’t show it. The colleague from Company B replied.

I almost leapt out of my chair: Send it over, I’ll add it to last quarter’s existing accounts. Finally, that’s enough!

Seeing the numbers in the two spreadsheets finally match, I hung up the phone elatedly. I couldn’t help clenching both fists and drawing them through the air into my chest, like the final flourish of a symphony conductor.

But my celebration came too early. The next day, Miss Yuzhen came up with a new way to demonstrate our diligence: add columns for the creation date of each account and the date of its most recent post, to show the leadership that these accounts didn’t post for long, and are therefore “harmless” (无害) dead accounts.

This form of cengceng jiama(层层加码) is a typical phenomenon of policy implementation in China. Orders of policy implementation usually come top-down and in order to ensure the completion of goals and avoid punishment or failure, each layer in the system adds extra requirements or sets a higher goal for work when delegating to the lower level, eventually imbuing the grassroot level with unreasonable requests or unsustainable volumes of work. The most apparent example is the pandemic prevention during Covid, when local authorities added extra rules to prevent mobility regardless of one’s actual health status or risks of carrying the virus.

If her request hadn’t been specifically for this task, if it hadn’t been raised right before the end of Friday, if it hadn’t come after I had already finished consolidating everything, I might not have broken down. But at that moment, when I was full of hope thinking I could finally finish this dirty job, my supervisor taught me another lesson: the dirtiness of dirty work lies partly in its resilience—it always proliferates in unexpected places.

I only had enough control over my emotions to make a small “hmm” sound. The moment I sat back down, my throat felt blocked, and tears slid down my face. I didn’t want to make a sound. I randomly dabbed at my tears with tissues while notifying colleagues across the province to add the two extra columns.

A completely meaningless task got elevated to the level of ideology and was normalized, included in performance assessments and inspections, transformed into risk notices and supervision orders, and eventually turned into self-checks, audits, and spreadsheets. As long as I remained in this system, I would have to confront and solve the issues raised. Even if I didn’t want to solve them, I still needed to put in tremendous effort just to fully prove that “the responsibility isn’t mine” (责任不在我).

Because the functional departments of the provincial company did not directly bear responsibilities for production or business, they didn’t need to create new media accounts to promote operations. In practice, the bulk of investigation and correction fell on local branches. Every move I made turned into real additional workload for these grassroots units, endlessly pestering the branch secretaries who were already juggling multiple roles alongside this bullshit work.

Was it really that hard to stick only to the necessary work without adding excessive quota, and keep everyone’s lives easy? I was crushed by guilt, frustration, and helplessness all at once. The office was finally empty, and I couldn’t help but start crying out loud.

I Want to Change the System

By October, the rectification process was finally complete. In November, the Party Building Department planned to revise the company’s “Position Management Measures” 《阵地管理办法》, and Director Xiaoli reminded me that this was a prime opportunity to redefine responsibilities.

It was only then that I truly felt the reach of a “management department’s” power. If everyone in the company involved in this work had to follow my directives, the kind of work environment I could create for everyone became critically important.

I realized I had to stand up for my line and defend its boundaries. What I needed to do was straightforward in principle: prove that the General Affairs Department was “not responsible for unofficial new media accounts created in the past”. But in practice, it was far from easy. Our company’s principles meant that reasoning based on common sense alone wouldn’t suffice; that would be seen as avoiding responsibility or shirking difficulty. I had to both quote existing policies issued by our business line and identify loopholes in the Party Building Department’s rules and potential areas that could work against us.

I pulled all relevant documents, reviewed publications from the Party Building Department, consulted with the Group Office on how this work was assigned and executed at headquarters, and communicated with other provincial companies. I marked all my evidence carefully with a pen and sticky notes. Then I began drafting the materials for Miss Yuzhen to present at the meeting.

This was perhaps the most serious study of company policies I had undertaken since joining. And as I drafted the materials, I finally realized the most fundamental absurdity of this work: power had exceeded its boundaries. A company’s managerial authority only applies to its own employees—stretching one’s hand into someone else’s field, how could such work ever function? With that in mind, I drew the following conclusion in my first draft:

"According to the Group’s division of responsibilities, the General Affairs Department is responsible for managing official accounts created by various departments of the company based on business development and brand-building needs. For unofficial new media accounts whose creators are unclear, under the principle of clear accountability that ‘whoever manages is responsible, whoever uses is responsible, whoever approves supervises,’ the General Affairs Department has no approval or management authority over these accounts or their owners and bears no management responsibility. It is recommended that the Party Building Department coordinate with the Group to address these accounts."

Miss Yuzhen was generally satisfied with my materials but asked me to place the Group-level division of responsibilities at the very beginning. Since the Group Office did not handle the investigation and rectification of unofficial social media accounts, provincial companies should not be responsible for implementing Party Building Department’s related requests. The final report was therefore adjusted to two points:

1. The company’s Party Building Department should communicate with the Group’s Party Building Department to clarify the province’s ideological management responsibilities according to line management duties, implement these responsibilities, communicate management tools, and ensure consistency in line management duties.

2. According to the Group’s division of responsibilities, the General Affairs Department is responsible for filing and overseeing the province’s official accounts. For unofficial social media accounts with unclear creators, the General Affairs Department has no approval or management authority over these accounts or their owners and bears no management responsibility. It is recommended that the Party Building Department coordinate with the Group’s Party Building Department regarding these accounts.

There was nothing more I could do as an employee. I sent my leader into the meeting like a parent sending her child into an exam room. A few hours later, the moment Miss Yuzhen stepped into the office, she called out loudly: “Little Zhao, it’s settled with the Party Building Department!”

I instantly stood up and saw her fling a stack of meeting materials onto the table, announcing the result: from now on, this work would be assigned according to local responsibilities—if a municipal branch had problems, it would bear its own responsibility. The provincial company would no longer share joint responsibility for rectification.

Before Miss Yuzhen went into the meeting, I had expected that the outcome might not go entirely as I wished—but I never expected her news to diverge so completely from my intentions. I had hoped to clarify the responsibilities for the entire line and reduce the workload for municipal branches, yet the result became a way for me to shirk my own responsibilities. What faces would those who reported to me make upon seeing this new rule?

I could not accept that this work appeared as if I were “passing the buck” to subordinate units. The space atop had disappeared, and I had to start with what I could still manage to regain some control over the situation. At the end of the day, I still had decision-making power over how our line executed its work. I decided to revise the relevant internal management policies myself, removing the parts that were unfavorable to our management.

At first, I approached it by analyzing the various characteristics of the accounts. Besides the inclusion of our company’s name, another shared feature was that their follower counts were almost all in the single digits. Even if they posted content, the likelihood of anything going viral was extremely low. My proposal was conservative: “Accounts with fewer than 50 followers and no updates for over a year shall be considered low-risk zombie accounts and require no special supervision.”

But this idea was rejected during Director Xiaoli’s review: for the Party Building Department, leaving accounts unmanaged would create gaps in the work and inevitably invite criticism.

I accepted the director’s opinion and decided to return to the root of the problem: to keep authority within its proper boundaries. If an account, after verification, was found not to have been created by internal personnel, the General Affairs Department would have no management authority and bear no responsibility. This idea was eventually formalized in writing as follows:

Article 17 – Standardize the Social Media Account Investigation Mechanism. The General Affairs Department shall lead the investigation and cleanup of social media accounts. The scope of investigation primarily covers official company social media accounts and accounts created by employees related to the company. For unofficial social media accounts discovered during the investigation, if they were indeed created by company employees, the principle of local responsibility applies: whoever uses the account is responsible, and whoever manages it is responsible, and corrective actions shall be taken accordingly.

Article 18 – Strengthen Line Management of Social Media Accounts. The Marketing and Operations Department, as the department responsible for distribution operations, shall establish a management mechanism for the creation of social media accounts by distributors, ensuring full oversight down to the individual level and achieving closed-loop management.

The director approved this version, and I continued to report the revisions to Miss Yuzhen. Yingying was also called over to listen. Miss Yuzhen looked at me earnestly and asked, “Little Zhao, I just don’t understand—after all this time of rectification, why do these accounts keep popping up? Why do we need to tackle them all the time?”

This wasn’t the first time I encountered this question. Every time a new account appeared, Miss Yuzhen would ask in frustration: “I told them not to register, I told them not to register—so why are people still registering?!” At these moments, my mind would automatically recall concepts from my graduate exams: the emergence of new media, nodal behaviors… I never imagined that after leaving the exam hall, I would have to use these concepts to explain real problems. But academic explanations were meaningless here. Usually I just answered directly: Anyone can register now with just a phone number. Our name isn’t patented, so there’s nothing stopping them…

By now, I understood that what the leadership wanted was a more concrete answer. So I replied firmly: “Mainly the distributors.” Yingying added on the credibility of this claim: “Exactly—their business is a company consignment store, so it’s reasonable for them to do so.”

“Yes,” I said, “so last quarter we coordinated with marketing. They’ve already added this requirement into the distributor evaluations. If a distributor is found to have opened an account using the company’s name without authorization, they lose one point.”

The point deduction was the outcome of my discussions with colleagues in distribution management at the marketing department. When we negotiated possible measures, I only suggested vague terms of “serious handling”. My colleagues turned it into two concrete actions: first, provide relevant training for distributors; second, implement a point-deduction system. The evaluation scores determined how much funding each store would receive, which meant that opening an account would lead to a financial hit.

Of course, I knew that such strict control ran counter to the grassroots need of business development. But I ran out of energy to feel guilty. If blame was to be placed, it belonged to the Party-building office’s assignment itself. I was simply relieved to have finally found a genuinely effective way to prevent the endless appearance of new accounts, so my colleagues and I could get less entangled with this dirty work.

Miss Yuzhen said, “Now we need to be clear on one crucial point, making sure that no new accounts are opened by our own employees. If they do, we will call them out in a public notice.”

The problem had circled back to the starting point. The real difficulty was that I could never interfere with or control how any individual chose to use their personal social media accounts. I gave up any euphemism and said flatly: “That can’t be guaranteed, Leader.”

Miss Yuzhen was dissatisfied: “That won’t do.” The three words flew out of her mouth quickly. “Why? Distribution accounts are handed over to marketing, municipal accounts are handled under the principle of local responsibility, so the only ones left are the provincial company’s employees. We’ve made it clear that they’re not allowed to register accounts in their official capacity. If they knowingly break the rule, doesn’t that mean our negligence?”

I began explaining to her: in theory, social media accounts containing our company’s name could have been created by anyone living in this region or country. “Our authority only extends to company employees, not to people in society at large. If an account wasn’t registered by our employees, then it’s not our responsibility. So can’t we just leave it alone?”

“I see what you’re thinking now,” Miss Yuzhen said. “Because the Party building office pushed the responsibility onto us, you want to use this logic to remove the responsibility of municipal branches, is that right?” She still ignored common sense and returned to the framework she knew best—responsibility allocation—and directly pointed out my intention.

“Yes.” I knew the reporting was successful. As expected, she followed with: “All right, then we’ll report it to the leaders this way. You’ll come with me, Little Zhao.”

“What?” That was a surprise. I had never attended a special meeting with the leadership before. I made a joking comment about being afraid. Miss Yuzhen laughed: “Don’t be afraid. You think this is the right way to do it, so we’ll go and report it to them. Right now, the company’s leaders are still very tense about this matter. As long as we are right, it doesn’t matter even if we get scolded. We’ll just say it again and again—eventually, things will change.”

For the first time, I felt a solemn respect for Zhou Yuzhen.

More than ten days passed between drafting of the policy and its final approval at the leadership meeting. During this time, Miss Yuzhen once asked me to remove the phrase “if indeed created by company employees.” I did so. I guessed she felt that the line carried an undertone of shifting blames, which could irritate the leadership.

But right before we submitted the meeting materials, I hesitated and brought it up with her again: “Miss Yuzhen, can we keep that sentence?” I still wanted to make the boundaries of our work clear, so that colleagues in the line would not waste effort on meaningless tasks. By then, there was no one else in the office. Miss Yuzhen looked at me, weighed it for a moment, and agreed with a sigh. She figured that the leaders might not even notice that sentence.

I felt a wave of relief. Happily, I added the sentence back in. I clicked “send” on the meeting materials, then shut down my computer, stuffed my charger, glasses, and other belongings into my backpack before walking briskly out of the office building. I was filled with a sense of satisfaction: I had utilized my authority with conscience, and I had done everything within my power to create as much space as possible for the subordinate units that would have to carry out the work.

The next day I attended the meeting. though I only sat in the back row to listen to Miss Yuzhen report, I still put on my polyester work uniform and sat up straight. A few days later, however, an argument between Miss Yuzhen and a colleague from the Inspection Office plunged me into self-doubt again.

The matter itself was simple. To make one of their tasks “look good,” the colleague from the inspection office asked our department to produce a related ledger. Miss Yuzhen flew into a rage; the dispute finally ended with both sides conceding a little. Afterwards, as her anger subsided, she muttered—perhaps to comfort herself or the other colleague—that Little Zhou (the colleague from the inspection office) was a conscientious person and that he was only doing it for the work.

I had originally watched the scene for fun, but I was unexpectedly struck by the phrase “for the work.” My mind went back to the policies I drafted.

I was a conscientious person too. I was also pressured by certain people, certain systems, and certain powers, and resolved to solve this problem. But which was better: a lump of chaotic shit, or a lump of carefully thoroughly analyzed and organized shit? Had I really done something good for everyone, or was what I was proud of actually an unwitting aid to something evil? Did I leave a legacy or calamity?

We’re running a guest column from ’s excellent substack about Alibaba claiming to go all-in on AGI.

Afra’s article extends our imaged Platonic dialogue we ran in April which noted that very few leading voices in China had anything utopian to say about AI’s possibilities. Afra makes a compelling case for Ali CEO Wu as a believer, and I too thought he seemed sincere in his delivery. However, the fact that the stock popped at the growth of its cloud business and reiteration to spend $50bn over three years in AI capex probably has more explanatory power for this narrative shift than anything else. As seen across Nvidia, OpenAI, and Oracle’s valuations, global capital markets have made it clear they want to put money where AI hitting has enormous upside.

Beyond its cloud business, Alibaba has a world-class AI research team. Given that, according to ’s highly scientific tier list, their Qwen team is the only AI lab in China besides Deepseek at the frontier, leadership has every financial incentive to pump this narrative that it’s also China’s most pilled company.

It’s also a good time to remind you that even the money Alibaba, China’s biggest AI spender, will put into securing compute pales in comparison to the western hyperscalers’ buildouts. Many of the firms with big numbers on this chart like Bytedance and Ali are mostly into accessing Nvidia chips outside the PRC, as there aren’t enough Ascends being built this year or next to absorb all of this projected capex.

And now, Afra on Alibaba and China’s AGI vibe shift.

AI technologists in China are almost always utilitarian and practical. There’s an AGI “faith gap”—people don’t believe in it, but constantly talk about this buzzword. A deeper epistemological divide shapes how each culture approaches technological prophecy. Silicon Valley’s AGI discourse operates like what Kevin Kelly calls “technium” thinking—technology as an autonomous force with its own evolutionary trajectory. Chinese tech culture, by contrast, remains fundamentally instrumentalist.

The manufacturing advantage directly creates a scene where Chinese founders focus on hardware, consumer apps, SaaS (but only targeting overseas users), and open-sourced LLMs that are cheaper to train and more efficient. Less focus on debates about doomerism and superintelligence races.1 Big tech CEOs love keywords like “empowering thousands of industries” and “inclusive AI,” rarely discussing surpassing humans or cosmic ultimate questions. In China, there aren’t equivalents of polymathic leaders like Demis Hassabis or prophets like Ilya Sutskever—people who understand foundational AI technology while constructing fearsome yet alluring AI futures in others’ minds, much less a Chinese Eliezer Yudkowsky who focuses on existential risks.2

But that seems to be changing.

The Hangzhou Prophet

Today at Alibaba’s 2025 Yunqi Conference—an annual mega tech gathering since 2009, similar to WWDC or Google I/O— CEO Eddie Wu delivered an entire speech was devoted to “ASI-pilling.” This marks the first time a major Chinese tech company has seriously evangelized Artificial Super Intelligence, which is a remarkable departure from the cautious, instrumentalist rhetoric that has dominated Chinese tech discourse.

“Achieving AGI—an intelligent system with human-level general cognitive abilities—now appears to be a certainty,” Wu said. “However, AGI is not AI’s endpoint, but a new beginning. AI will not stop at AGI; it will advance toward artificial superintelligence (ASI) that surpasses humans and can self-iterate and evolve.”

Wu mentioned ASI will be able to connect to the complete raw data of the real world, instead of using humans as intermediaries—transforming what Balaji calls the “middle-to-middle” phase to true end-to-end.

Wu used a car manufacturing example: instead of a CEO iterating next year’s product through countless user surveys and internal discussions (all secondhand data), an ASI with access to all automotive data could design and create vehicles “far superior to anything from brainstorming sessions.”

Wu is one of Alibaba’s founding “Eighteen Arhats” and has long been seen as technically-minded and reserved. He rarely speaks publicly, earning the nickname “Alibaba’s most mysterious Arhat.” His ASI declaration at this conference represents quite an unusual departure—a stark contrast to years of silence that may signal a vibe shift in Chinese tech discourse.

The Long Silence and Its Breaking

After Jack Ma’s 2020 speech [Jordan: translated here by with some fascinating accompanying analysis] challenging China’s regulatory system before Ant’s IPO, the storm that followed saw the planned $300 billion offering—history’s largest IPO—abruptly canceled. Since then, Alibaba entered a prolonged “silence period” where big companies stopped articulating grand future visions, pivoting to emphasize compliance and stability.

The chill went far beyond Alibaba. In 2021, regulators launched the “disorderly expansion of capital” campaign, reining in platform companies from ride-hailing to e-commerce. Didi went public in New York only to be swiftly pulled into a cybersecurity investigation and fined $1.2bn. Education tech giants like New Oriental and TAL got nuked overnight under the “double reduction” policy. Even Meituan’s Wang Xing triggered scrutiny when a Tang dynasty poem he posted online was read as oblique criticism of the state.

Since then, many tech founders feared saying the wrong thing in public, in part creating today’s extremely asymmetrical information flow where Chinese founders study Silicon Valley surgically, but not the other way around.

Then, DeepSeek came. Since then, I’ve observed a vibe shift. In China, a giant wave of techno-nationalistic discussions permeates the internet, with people believing “China’s tech rise is national destiny.” Meanwhile in Silicon Valley, I found abundant China curiosity mixed with China envy—mainly across the broader hardware and manufacturing domains where China has established leadership.

Silicon Valley trying to reverse-engineer their own path from China’s tangible tech achievements: a16z started advocating that America needs to build its own BYD with a complete Electro-Industrial Stack in their American Dynamism article; we see the launch of the “American DeepSeek” open-source projects attempting to replicate Chinese AI efficiency; Noah Smith stated that Western re-industrialization strategy directions are now “bleedingly obvious”—just look at what China is betting on: batteries, electric motors, power electronics, and chips. Dan Wang’s book Breakneck became an unprecedented intellectual phenomenon, propelling people to ask: how can we transform a lawyerly society into an engineering state so our taxpayer money can turn into more damn high-speed rail?

However, at Alibaba’s conference, I could see an even longer-term vibe shift. Previously, Chinese companies in global tech narratives were often treated as deployment engines: able to manufacture quickly, iterate rapidly, catch up efficiently, but lacking roles that truly shape imagination. Wu’s ASI speech represents a breakthrough: while the “AI-infused future society” is still taking shape, major Chinese companies are beginning to articulate their own grand visions that carry a prophetic flavor.

China’s AI Bubble

Wu’s sci-fi vision exists in tension with what I saw on the ground during five weeks in China this August and September. Walking through AI startup circles and innovation parks in Shenzhen, Shanghai, and Beijing—drinking custom “DeepDrink” at Beijing’s AGI Bar (covered in terrible Chinese tech memes)—I felt like AI was everywhere, but also nowhere seriously.

The AI founders and researchers I talked to there were pretty candid beneath all those glossy exhibition boards promising the future. They’re still glued to whatever’s happening in Silicon Valley, ready to sprint after the next breakthrough.

The AI story is fascinating because of its wild complexity and its propositional stance toward this complexity. When I was reading the book Supremacy by Parmy Olson, I got mesmerized by the motivation differences between DeepMind’s three founders in the early days. “Legg moved in circles where the goal was to merge as many people with AGI as possible, Suleyman wanted to solve societal problems, and Hassabis wanted to go down in history having made fundamental discoveries about the universe.” They started arguing with each other—but the bigger picture they all acknowledged was the world’s complexity outpacing anyone’s ability to control it. AI is deeply embedded in problems that are fundamentally non-linear and unpredictable.

Wu’s rhetoric might sound overwrought or derivative to American ears—after all, we’re practically drowning in tech prophets here. But consider this an elementary-level Chinese technologist learning to LARP as someone like Kevin Kelly, and you might surprisingly get future-pilled again.

Below is Wu’s complete keynote address. As you read it, notice how it borrows heavily from Silicon Valley’s apocalyptic optimism while grounding everything in China’s reality. You don’t need to be impressed by the originality in Wu’s vision, but in the shift it represents: this is their own version of the future.

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Concurrent

Understand the parallel and colliding tech and cultural currents shaping Silicon Valley, China, and beyond.

By afra

Keynote: Roadmap to Artificial Superintelligence (Transcript)

by Eddie Wu, CEO of Alibaba Group, September 24, 2025. You can read the Chinese transcript here or watch on YouTube.

A new revolution is just beginning—a revolution of intelligence driven by artificial intelligence.

Over the past few centuries, the Industrial Revolution magnified human physical strength through mechanization; the Information Revolution expanded our capacity for processing information through digitization. But this time, the revolution of intelligence will exceed anything we can imagine.

Artificial General Intelligence, or AGI, will not only amplify human intellect but also liberate human potential—paving the way for the arrival of Artificial Superintelligence, or ASI.

In just the past three years, we have felt its pace clearly. In a handful of seasons, AI’s cognitive ability has leapt from the level of a high school student to that of a PhD graduate—capable even of winning gold at the International Mathematical Olympiad. AI chatbots have become the fastest-adopted consumer application in human history. The speed of industry adoption has surpassed every previous technology. Token consumption doubles every few months. In the past year alone, global AI investment exceeded 400 billion US dollars; over the next five years, cumulative investment will surpass 4 trillion—the largest single infusion of capital and compute power in history. This will inevitably accelerate the emergence of more powerful models and hasten the spread of AI across every domain.

Achieving AGI—an intelligent system with general human-level cognition—now appears inevitable. Yet AGI is not the end of AI’s development, but its beginning. AI will not stop at AGI; it will march toward ASI—intelligence beyond the human, capable of self-iteration and continuous evolution.

AGI will free us from as much as 80% of routine tasks, allowing humanity to concentrate on creation and exploration. ASI, by contrast, will generate “super-scientists” and “full-stack super-engineers,” capable of solving problems at speeds we can scarcely fathom: curing diseases, inventing new materials, achieving sustainable energy breakthroughs, addressing climate change, even venturing into interstellar travel. ASI will drive exponential technological leaps, carrying us into an unprecedented age of intelligence.

We believe the road to ASI will unfold in three stages.

Stage One: Emergence of Intelligence — “Learning from humans.”
The growth of the Internet over past decades has digitized nearly the entirety of human knowledge, preserved in language and text. Large models trained on this corpus acquired generalized intelligence, emergent abilities in conversation, and the capacity to understand human intent, answer questions, and begin reasoning across multiple steps. Already, AI systems are reaching gold-medal performance on the world’s toughest exams. This has opened the possibility of solving real-world problems and creating tangible value.

Stage Two: Autonomous Action — “Assisting humans.”
At this stage, AI moves beyond language alone. It acquires the ability to act in the real world: decomposing complex goals, using and even creating tools, and interacting with both digital and physical environments. The key lies in tool use. Just as human evolution accelerated when we learned to make and wield tools, models now gain transformative power by learning to do the same. With tool use, AI can call software, APIs, and devices to execute sophisticated tasks.

Another breakthrough is coding ability. To handle longer, more complex tasks, agents must be able to code autonomously—functioning like a team of engineers, able to interpret requirements, write, test, and iterate. Natural language will become the source code of the AI era. Anyone, in their mother tongue, will be able to summon an agent: “Tell the AI what you need, and it will design the logic, build the system, call the tools.” This stage will unleash productivity gains across logistics, manufacturing, software, commerce, biomedicine, finance, and beyond.

Stage Three: Self-Iteration — “Surpassing humans.”
This stage depends on two breakthroughs:

• Connection to the full breadth of real-world data. Today’s AI excels in text-bound domains like content creation, math, and coding, where it has access to raw human-created data. But for the physical world, AI often sees only second-hand summaries. To truly transcend human cognition, it must engage directly with the raw signals of the world.

• Self-learning. With real-world interaction, AI will be able to refine its models autonomously—building infrastructure for its own retraining, optimizing data flows, and upgrading architectures. Each action and feedback loop becomes a micro-adjustment; millions of such iterations accumulate into a self-evolving system. Out of this process, early forms of ASI will emerge.

At the moment of singularity, humanity will feel the acceleration of history itself: technological progress advancing beyond imagination, unleashing new productivity that carries us into a new stage of civilization.

From our perspective, large models will become the next generation operating system. In this analogy:

• Natural language is the new programming language.

• Agents are the new applications.

• Context is the new memory.

• The large model is the OS, linking tools and agents as the PC once linked software and hardware.

Software as we know it will be absorbed. Anyone will be able to create applications in natural language. Hundreds of millions of potential developers will enter the field. Every user will become a maker.

This future demands infrastructure of immense scale. AI will become the electricity of the new era—the essential commodity powering every industry. Most AI capability will be delivered as tokens across global networks. Tokens are the new electricity.

Alibaba Cloud positions itself to build this foundation: an open platform for developers, the Android of the AI age; and a super AI cloud, one of the few on earth capable of vertical integration from chips to models to global-scale data centers. We are investing 380 billion RMB over three years into this vision, building the supercomputing power and global network needed to welcome the ASI era.

When ASI arrives, human-AI collaboration will reach a new mode. Already programmers glimpse the future: a single instruction at midnight, a fully functional system by dawn. This is the seed of a new paradigm—from vibe coding to vibe working. Families, factories, companies—all will teem with agents and robots working alongside us. Perhaps one day, every individual will wield the power of a hundred GPUs, amplifying human intellect as electricity once amplified muscle.

Every revolution has expanded our capacity, and every expansion has revealed new horizons. This is only the beginning. AI will reshape infrastructure, software, applications—the entire substrate of society. Together with our partners and customers, Alibaba will invest, build, and co-create, bringing intelligence into every industry.

Jared M. McKinney is an assistant professor at Air War College. Reiss Oltman contributed to this project as an Air University fellow in the Department of Joint Warfighting, Air Command and Staff College, and John Conception contributed while a student at Air Command and Staff College.

Opinions, conclusions, and recommendations expressed or implied within are solely those of the authors and do not necessarily represent the views of the Air University, the United States Air Force, the Department of Defense, or any other government agency.

The 1979 Taiwan Relations Act includes a US commitment to make available to Taiwan the weapons necessary “to maintain a sufficient self-defense capability.” Given the increasingly asymmetric balance of power in the Taiwan Strait and the widening deterrence gap, is such an end state even possible anymore?

Initial answers are not encouraging. The most rigorous and prominent wargame, CSIS’s First Battle of the Next War, assessed that, without US military intervention, the People’s Liberation Army succeeded in destroying Taiwan’s armed forces and occupying Taipei, and that “outcome was never in doubt.”1

To see if this result could be replicated, and to study whether different force structures could produce different — and more favorable — outcomes, Air University’s Taiwan Deterrence Warfighting Advantage Research group undertook an extensive series of wargames in 2023 and 2024 focused on an all-out PRC invasion of Taiwan with some (albeit not extensive) third-party intervention. The methods, assumptions, and scenarios used in these games are detailed in a new volume from Air University Press, Closing the Deterrence Gap in the Taiwan Strait.

Our wargames found that the CSIS baseline “Taiwan Alone” scenario was correct in its general finding — a PRC invasion could potentially succeed at significant cost. But our wargames also found that a modestly upgraded and redesigned Taiwan Joint Force could stop an invasion cold, destroying up to 75% of all PLA amphibious assets in some iterations.

A well-designed program for Taiwan’s force modernization has the potential to close the deterrence gap in the Taiwan Strait. This finding contradicts the common assertion among American and Taiwanese foreign-policy thinkers that there “is simply no realistic hope that Taiwan can hold out for long against China without America committing directly to the fight.”

This summer, we witnessed one of the largest Han Kuang military exercises 漢光演習 to date. These exercises are designed to improve Taiwan’s military readiness for a potential conflict with the PRC. This year’s drill showcased the beginnings of a shift from Taiwan’s traditional defense to a more asymmetrical approach. While this shift has been theoretically embraced in Taiwan’s new Quadrennial Defense Review, actual change has been slow, and Taiwan’s military force design has not yet been matched to the shift in strategy:

• Taiwan’s indigenous submarine program — which intends to build eight submarines over the next decade, for around US$1 billion per copy — exemplifies traditional force design over more asymmetrical approaches. The primary justification for the submarine program is that military elites in Taiwan have not publicly proposed credible alternatives.

• The Taiwan Navy canceled its previous program to build many small attack boats, instead opting to build large amphibious assault ships and next-gen frigates.

• The Taiwan Air Force has long expressed interest in the F-35B, but apparently nothing has come of that; the Air Force is also focusing on integrating MQ-9 drones, which have not performed well in less competitive environments. 

• The Taiwan Army is taking deliveries of Abrams tanks, notwithstanding questions about their suitability for Taiwan’s environment.

• After Trump’s 2024 election, early discussions in Taiwan emphasized symbolic new conventional systems — with the original reports mentioning “10 Ticonderoga cruisers and Perry frigates, 60 F-35s, 4 E-2D Hawkeye aircraft, and 400 Patriot interceptors, for a total of some $15 billion” — without articulating a clear strategic logic.

The winds may now be shifting: Taiwan’s supplemental defense budget, which is apparently in the works, may decisively shift defense investment to a truly asymmetric approach. And our Fortress Taiwan wargames demonstrate that this asymmetric-investment approach can have outsized impacts on the battlefield.

Below is the force design that fared the best in our Fortress Taiwan wargames:

Proposed Military Enhancements for Taiwan by 2030

• 7 squadrons of XQ-58 (1 squadron ≈ 18 drones)

  • Unit cost (US$): $6 million

  • Total cost (US$): $756 million

• 20 squadrons of NCSIST Chien Hsiang 劍翔無人機 (1 squadron ≈ 20 drones)

  • Unit cost: $6.35 million

  • Total cost: $2.54 billion

• Air-defense systems and interceptors (NASAMS, SKY BOW-III, PATROIT, etc.)

  • Total cost: $7 billion

• 30 Kuang Hua VI-class missile boats 光華六號飛彈快艇

  • Unit cost: $12.3 million

  • Total cost: $369 million

• 300 “Sea Baby” USVs

  • Unit cost: $221,000

  • Total cost: $66.3 million

• 400 “Jet Ski” USVs

  • Unit cost: $250,000

  • Total cost: $100 million

• 200 UUVs

  • Unit cost: $500,000

  • Total cost: $100 million

• 200 Hsiung Feng-III missiles 雄風三型

  • Unit cost: $2.4 million

  • Total missile cost: $480 million

  • + 3 batteries of launchers, command vehicles, and radars

    • Unit cost: ~$100 million

    • Total battery cost: ~$300 million

  • Total cost: $780 million

• 200 Hsiung Feng-IIE missiles 雄風二E巡弋飛彈

  • Unit cost: $3.1 million

  • Total missile cost: $620 million

  • + 3 batteries of launchers, command vehicles, and radars

    • Unit cost: ~$106 million

    • Total battery cost: ~$318 million

  • Total cost: $938 million

• Enhance space and cyber capabilities

  • Total cost: ~$2 billion

GRAND TOTAL: ~$14.6 billion

The main effort of the PLA’s plan for an invasion depends on a Joint Fires Campaign and the Joint Island Landing Campaign.

• The Joint Fires Campaign would aim to destroy, disable, or degrade Taiwan’s national and theater command centers, communications systems, airfields, logistics centers, and high-value defensive assets (eg. anything that could sink a ship).

• The Joint Island Landing Campaign would then seek to follow up these strikes with a massive amphibious intended to establish a lodgment on Taiwan, enabling a later breakout and advance toward political and military objectives. PLA airpower would seek to enable and protect this operation, as well as deliver “three-dimensional” threats across the island. 

The force design proposed above is centered on mitigating the Joint Fires Campaign and defeating the Joint Island Landing Campaign.

The Joint Fires Campaign promises to deliver the most concentrated firepower in modern history. Two strategies can help combat that: asymmetric airpower and air denial. The XQ-58, a Group 5 UAV that is rocket-launched and parachute-landed, could provide the Taiwan Air Force with asymmetric airpower more survivable than the current fleet of combat aircraft. Its combination of low cost, runway independence, and low observable features enables fielding in mass, as well as force dispersion during China’s Joint Fires Campaign. If successful, this would enable Taiwan to maintain asymmetric air power throughout the conflict and to continue to contest China’s bid for air dominance.

Modern air defense is expensive, but the lack of air defense is more expensive. Air denial is a bare necessity in modern warfare. Advanced layered air-defense batteries are resource-intensive, but the additional capacity they provide to degrade and survive China’s Joint Fires Campaign is critical. These materiel solutions — such as NASAMS, PATRIOT, and SKY BOW — are part of a counterstrategy that seeks to blunt the intended effects of the Joint Fires Campaign. Additional batteries of advanced air-defense systems will allow for attrition and increase the depth of Taiwan’s magazine, thus prolonging the time needed to resupply and countering more Chinese threats over time. So long as Taiwan can deny air dominance to the PLA Air Force, one of the key enablers for a successful invasion will be hampered.

The Joint Island Landing Campaign is the most critical part of the PLA’s plan for the invasion of Taiwan, so the weight of resources to counter this campaign is appropriate. These proposed material solutions come from lessons learned in Ukraine as well as best practices across our yearlong wargaming project. China fields the largest navy in the world and will be operating relatively close to its home. This necessitates the need for multiple different weapons systems across all domains to create a problem set so difficult that no military would be able to solve without high attrition rates:

• The Chien Hsiang is an indigenous radar-killing Unmanned Aerial Vehicle, like the Israeli Aerospace Industries (IAI) Harpy. This system has already been fielded, but only in small numbers; additional systems would allow for multiple attack waves that could saturate the air picture and degrade the radar systems of the invasion fleet’s defending surface combatants.

• The Kuang Hua is an indigenous missile boat smaller than many ocean-going fishing boats that carries four anti-ship missiles. Taiwan already possesses 30 of these ships but stopped building them in favor of larger warships. Adding additional missile boats allows Taiwan’s Navy to take advantage of their small size, low cost, and deadly missiles, providing a mobile firepower system that has the flexibility to defend any part of the island from multiple axes of attack.

• The “Sea Baby” Unmanned Surface Vessel — also known as the “boat drone” — has already seen its combat debut in the Russia-Ukraine War, to significant effect. Taiwan has begun developing like systems, but these proven capabilities are needed now and in mass as part of the larger counter–Joint Island Landing Campaign strategy.

• Additionally, Taiwan could develop and field the “Jet Ski Type” Unmanned Surface Vessel (also employed by Ukraine) to create a lower-cost offensive system that, while less capable than the “Sea Baby,” achieves greater mass that can increase the complexity of a drone boat attack.

• One-way attack Underwater Unmanned Vehicles pose an even greater challenge to defend against, as China’s antisubmarine warfare has been lacking for some years. These UUV systems have been under development in Taiwan for some time; Taiwan could fast-track mass production to exploit China’s weakness in this domain.

• Finally, Hsiung Feng missile systems — both subsonic (HF-IIE) and supersonic (HF-III) varieties — have extended ranges that can challenge an invasion fleet even in port. Taiwan fields these missile systems, but its current inventory is limited. Scaling these inventories would enable Taiwan to account for attrition from Chinese strikes while maintaining sufficient missiles to launch multiple waves of counterattacks.

Putting this all together, the People’s Liberation Army would have to defend against swarms of hundreds of drones in the air, surface, and subsurface, while simultaneously defending against subsonic and supersonic missile attacks. No fleet in history has seen a defensive challenge of that complexity and scale. With this proposed inventory of weapons, Taiwan could conduct such attacks on multiple waves of incoming amphibious landing operations, preventing China from effectively establishing, resupplying, and holding a long-term foothold on the Island. The operations in the Red Sea offer a glimpse of this reality, but Taiwan should be able to scale those attacks by orders of magnitude.

As we were conducting our wargames in 2023 and 2024, we grappled with the likely objection from Taiwan strategists that $14.6 billion would look like an insurmountable, unrealistic investment. Our counterargument at the time was that, if $14.6 billion was considered a bridge too far, then Taiwan’s strategists would have to contemplate the logic of opportunity cost. For instance, if the $9 billion in expected costs for submarine acquisitions were canceled, the proposals above would cost only $6 billion more than current spending allocations. Spread over a few years, this would absolutely be feasible, given the size of Taiwan’s economy.

Last month, however, Taiwanese media began reporting that Taiwan’s Ministry of National Defense will submit a supplemental defense bill to the Legislative Yuan for consideration in the winter legislative session. The proposal, reportedly in the realm of US$20 billion, appears to be relentlessly focused on the sort of asymmetric capabilities recommended by the Fortress Taiwan wargames — with drones, missiles, unmanned vessels, NASAMS, and even vertical take-off drones all under discussion.

To be sure, given the bitterness and polarization of Taiwan’s politics — emblematized by the recent failed legislative recall campaigns — it wouldn’t be surprising if the Legislative Yuan met these new proposals with skepticism.

To build a political consensus for spending more on defense, Taiwan’s politicians need to articulate how spending more will procure more security. The truth is that even massive spending on conventional military systems will not make Taiwan any more secure.

But building a force that could survive the Joint Fires Campaign and sink most of China’s high-value amphibious assets? That absolutely would. Our wargaming suggests doing so is feasible, and the successful passage and implementation of the supplemental budget under discussion would be the most decisive move in that direction in modern Taiwan history.

For more from Jared, check out the show we did together last year:

Jordyn Haime is a freelance journalist who has been living in Taiwan since 2021. She received a graduate certificate in Chinese and American Studies from the Hopkins-Nanjing Center in June 2025 and recently started the newsletter Der Vayter Mizrekh on Substack, where she writes about China and the Jews. Today, she’s here to introduce Taiwan’s complicated relationship with its own World War II history.

On September 3rd, to mark the 80^th anniversary of Japan’s surrender in World War II, China showcased its military might to the world with a massive parade in Tiananmen Square. Leaders from 26 countries — including Vladimir Putin and Kim Jong Un — were in attendance.

While Xi Jinping emphasized the importance of upholding a “correct historical perspective” (正确历史观) on the war, such anniversary displays often say more about a country’s current political goals, status aspirations, and self-image than they do about what happened 80 years ago. China’s message was clear: It will not be bullied again, and its leadership in the “World Anti-Fascist War” (世界反法西斯战争) entitles it to a leading role on the global stage. Importantly, Xi argues that respecting the postwar international order includes affirming the “restoration” of Taiwan to China.

Taiwan’s government, currently led by Lai Ching-te’s 賴清德 Democratic Progressive Party (DPP), took a noticeably “softer approach,” using the anniversary to promote Taiwan’s identity as a liberal democracy and defender of freedom. DPP officials have criticized China’s $5 billion military parade as “a waste of money and resources.” “Taiwan does not believe in commemorating peace while holding guns,” Lai said.

To commemorate the ROC’s role in the Allied victory, Taiwan’s Ministry of National Defense organized photo exhibitions at bus stops, a military model show, and limited-edition military-themed snacks in partnership with the private sector. A televised concert in August featured a virtual display of its own military developments alongside performances by dancers and musicians in ROC military attire, encouraging the audience to “use the spirit of the war of resistance against Japanese aggression to defend the Republic of China, democracy, and freedom.”

But for more than a decade, Taiwan has been hosting another commemoration event, though this one is not officially affiliated with or endorsed by the central government. Held in the southern port city of Kaohsiung, this event tells the story of the Taiwanese colonial subjects who fought under the flag of Imperial Japan against the ROC — and remain unrecognized by the Taiwanese government.

While central governments engage in a cross-strait “memory war” over the CCP’s claimed role in China’s victory over Japan, the debate within Taiwan over how to remember its own complicated history has been raging since democratization. For those whose families were there before the ROC takeover in 1945, this history affirms Taiwanese identity as distinct and separate from China’s. But for those whose families arrived with the KMT, it looks more like a glorification of the Japanese empire, and a dismissal of the suffering Japan inflicted on their families, in which many Taiwanese were complicit.

Liau Siok-ha 廖淑霞, now 98 years old, was rolled up in her wheelchair before a crowd of about a hundred onlookers. The humid coastal wind that had been blowing across the park finally began to die down as Liau addressed the crowd in Japanese.

“During the war,” she said, “many Taiwanese who had received colonial education and embraced the spirit of patriotism responded to government calls for men to volunteer as soldiers, or for women to serve as military nurses.” In 1944, “I too answered the call of the nation and volunteered to become a military nurse.”

Liau was one of more than 200,000 native Taiwanese who served under Japan beginning in 1937. At that time, the Taiwanese had already experienced decades of imperial education under Japanese colonial rule (1895-1945), assuming the Japanese identity that had been imposed on them while living as second-class citizens to the Japanese. As it mobilized its colonies for war, Japan initiated the kominka movement — a word meaning “to make into imperial subjects” — in Taiwan, accelerating imperial education in order to attract more loyal recruits. Both Indigenous and Han Taiwanese joined the war effort for various reasons: while some volunteered, most were conscripted and forced to serve, or misled about what they were recruited to do. A vast majority worked in non-combatant roles as nurses, like Liau, or as technicians or translators; others were sent into combat or served as guards at POW camps across Taiwan and parts of Southeast Asia. In addition, 2,000 Taiwanese women, mostly from poor backgrounds, were forced into sexual slavery in Japan’s “comfort woman” system. By the end of the war, an estimated 30,000 Taiwanese had been killed or were missing, and 173 had been convicted as war criminals by the Allies.

“My father was only a teenager at the time, so he didn't participate in the fighting. The families of the Veterans’ Association today weren’t so lucky,” said Lee Wen-huan 李文環, director of the Kaohsiung Municipal History Museum, which manages the memorial. “So, was it because they wanted to go to war? Was it because they had a Japanese warmongering soul? No, they simply said, ‘This is my country. The country has called me to war. I have no choice.’”

The War and Peace Memorial Park’s 戰爭與和平紀念公園 one-room museum is billed as the only museum in Taiwan commemorating Taiwanese soldiers. Beyond just those who fought under Japan, it also tells the stories of Taiwanese who were sent into combat by the Nationalists to fight the Communists, and the few unlucky men who were then captured by the Communists and sent to fight in Korea. The tragedy the museum is determined to communicate is that of a people forced to fight under three foreign governments that cared little about them, only to deny them recognition or compensation in the aftermath of those decades of war.

The political tumult of the Chinese Civil War, the aftermath of the 228 Incident, and the White Terror that followed left little time for Taiwanese society to reflect on the world war that had just ended. When the ROC took over in 1945, it kicked off a process of “Sinicization” and aimed at removing symbols of “Japanese enslavement” from the public and “reeducating” Taiwanese, transforming their identity overnight. Mandarin Chinese became the official language in place of Japanese; street names were changed to reflect the names of Chinese cities or reverence for Chiang Kai-shek. It was in this context, writes Lan Shi-chi of National Chengchi University in a 2022 study, that the ruling KMT voluntarily “forgot” and “forgave” Taiwanese-native Japanese soldiers’ participation in the war against the Chinese, freeing these veterans from potential punishment as hànjiān (漢奸; Han traitors) and symbolically “readmitting” them to the Chinese identity. This allowed the KMT to gain much-needed positive rapport with the local Taiwanese population as their new rulers and recruit them as forces to fight the Communists.

Under martial law, Taiwanese veterans’ contributions to Japan’s war effort were “politically forgotten in public,” writes Lan, leaving only one official story: that of the Chinese victory over Japan. Their stories, and those of the “comfort women” enslaved by the Japanese, were not publicly known until the three-decade period of martial law was finally lifted in the late 1980s, ushering in Taiwan’s democratization.

The restoration of freedoms meant that Taiwanese, for the first time, were able to study their own history. According to Lee, “The reason Taiwan is so complicated right now is that after the war, for 38 years, Taiwanese people could not reflect on the Japanese period, they could not think about Taiwan, they could not have Taiwanese memories. My enlightenment about Taiwan first happened when I went to college: What is the history of my homeland?”

With the help of historians like Lee, Taiwan began rewriting its history, creating new textbooks and opening new museums that examined history from a nativist perspective, rather than solely from an ROC one. This effort included the publication of oral histories of Taiwanese veterans, a project that allowed them to speak about their experiences for the first time. They also began to advocate publicly for recognition by the ROC government, and for compensation from the Japanese government, which they say was unfairly denied to them.

“Those who barely survived and managed to return to Taiwan were then treated by the post-war Kuomintang regime as ‘traitors to the Han race’ and endured lives of hardship,” Liau said. “Even though we once fought as Japanese subjects, after the war, the Japanese government unconscionably excluded us from pensions and compensation on the grounds that we had lost our Japanese nationality. This caused immeasurable pain in both body and spirit.”

One veteran’s rights activist was Khou Chiau-eng 許昭榮, a Taiwanese independence advocate who fought under both the Japanese and later the Nationalists in the Chinese Civil War. In May 2008, he self-immolated in protest of the government’s neglect of its Taiwanese veterans.

“[My godfather] didn’t choose charcoal, which is less painful. He poured 20 liters of gasoline on himself to remind Taiwanese not to forget that our ancestors died in such numbers,” said Wu Juhrong 吳祝榮, Chairman of the Kaohsiung Cultural Association for the Care of Taiwanese Veterans. “That’s why he fought to build a memorial to Taiwan’s soldiers who died in battle. For 400 years, countless Taiwanese resisted and sacrificed for this land, from the French war in Keelung, to the Mudan Incident, to the Wushe Incident… If he hadn’t self-immolated, this park wouldn’t exist.”

A year after Khou’s death, the memorial park and museum in Kaohsiung were opened to the public. But advocates say their work is not done until the Taiwanese government recognizes these veterans on a national level, and until society overcomes its “indifference to Taiwan’s past.”

Official commemorations for the 80^th anniversary of the war’s end, organized by the national government, mainly stuck to a standard ROC narrative. Native Taiwanese who fought under Japan did not appear in the Taipei photo exhibitions or at the concert in August. Lai offered only a subtle gesture toward the Taiwanese experience, writing in an August Facebook post about a forgotten incident in which Japanese, Indigenous, and Hakka groups died searching for a crash-landed Allied plane in the mountains of Taitung: “In that moment when the war was over, no one made a difference between themselves and the other as an Ally or an Axis,” he wrote.

Framing history in the context of today’s cross-strait and domestic power struggles, Lai added that “no regime has the right to invade and rob the people of another land of freedom.” In a first for a Taiwanese president, he commemorated Europe’s Victory Day in Taipei and sent his representative in Japan to the commemoration at Hiroshima.

“Essentially, [the DPP] is trying to ride two horses at once,” said Rana Mitter of the Harvard Kennedy School, who researches the history and memory of World War II in China and Taiwan. “The DPP has pushed quite hard in the direction of saying that the importance of the war is really about pushing back against dictatorship. That’s a helpful narrative politically, but it also sidesteps awkward questions of asking who was fighting whom at what time.”

Critics of this year’s events say the Lai government is engaging in historical revisionism and neglecting ROC history. Ho Chih-yung, a professor of general education at Taiwan’s National Tsing Hua University, told the South China Morning Post that the DPP wants to claim “the moral authority of the anti-Japanese legacy without acknowledging the ROC that fought the war.” Former President Ma Ying-jeou 馬英九 accused Lai of “deliberately downplaying the atrocities of Japan,” writing on social media that the Lai government “should not ignore the poor comfort women just to bow to the face of the Japanese government.”

It’s far from the first time a President’s handling of the anniversary has sparked outcry from the blue camp. In 2007, former President Lee Teng-hui 李登輝 paid a visit to the Yasukuni Shrine in Japan — the famously controversial site which honors Japan’s war dead, including over a thousand convicted war criminals — to honor his brother, who is enshrined there alongside thousands of other Taiwanese.

Lee, raised under the Japanese regime, had also fought for Japan. “Taiwanese back then were Japanese, and they fought for the motherland,” he said at the time, accusing Ma of harassing Japan to curry favor with China. In response, the KMT called Lee a “two-faced hypocrite utterly devoid of self-esteem” and “a hostage of history.” A year later, President Tsai Ing-wen inscribed her name on a monument dedicated to Taiwanese veterans at Okinawa, and became the first president to attend the commemoration at the Kaohsiung War and Peace Memorial, connecting her visit to her government’s pursuit of “transitional justice” 轉型正義. As recently as this year, KMT lawmakers named a drama series about Taiwanese POW camp guards — which was criticized for “evoking sympathy for Taiwanese war criminals” — as one of the many reasons they want to slash public television funding.

As the ruling party, the DPP has to walk the “fine line” of speaking to their party base, which includes “a generation of Taiwanese who saw themselves growing up under Chinese rule, and as complicit but not guilty in the Japanese imperial effort,” while also uniting the KMT base, said James Lin, a historian of Taiwan at the University of Washington. “Declaring that World War II was not just about the war against Japanese aggression but is also about commemorating Taiwanese soldiers who often fought to kill Chinese in mainland China — that would be a pretty divisive position to take.”

Efforts by other victimized groups, like the former “comfort women,” have been undermined by the issue’s politicization. Taiwanese are known for being far more sympathetic and friendly to the Japanese compared to their Chinese and Korean neighbors, despite Taiwan’s half-century of colonization, partially due to the more recent brutality of the KMT authoritarian period that immediately followed Japanese colonialism, in a phenomenon that Lin has called “colonial nostalgia.” The pursuit of warm ties with Japan as a crucial national security partner has also meant that the “comfort women” issue has received little attention from the DPP government. While Ma’s KMT government (2008-2016) unsuccessfully pursued compensation and apologies from the Japanese government on behalf of those women, Ma has continued to use their memory as a political cudgel against the DPP.

Although the last known Taiwanese “comfort woman” died in 2023, the Taiwan Women’s Rescue Foundation (TWRF) continues to advocate for justice for these women and to preserve their memory at a national level. The organization runs the small and independent Ama Museum (阿嬤家) in Taipei, dedicated to telling their stories, which has struggled to pay the bills and keep its doors open. In 2020, it had to close temporarily and move to a smaller location without a visible storefront due to funding issues. TWRF has asked both the KMT and DPP governments to fund a museum dedicated to women’s history in Taiwan, says CEO Du Ying-qiu, to no success.

“We want the government to preserve these relics,” she said. “Not civil society organizations. If the KMT could have provided a space when the amas were all still alive, then we wouldn’t have had to move, we wouldn’t always have to raise funds to run this museum.”

Throughout the memorial service, there was not a single mention of the carnage and pain imposed by the Japanese Imperial Army on the Chinese or the other peoples of Asia. Nor was the suffering of “comfort women” under Japanese rule acknowledged. I raised my discomfort with Director Lee after the ceremony. Shouldn’t the role of Taiwanese soldiers as both victims of colonization, as well as victimizers of others on behalf of the colonizer, be acknowledged here?

“The focus of today’s ceremony isn’t really about revisiting the question of what was right and wrong during World War II,” he responded. “Rather, it's about how, as we today look back on that war, many were inexplicably drawn into it for various reasons.”

His answer reflects the tone of the museum, too, which presents stories of Taiwanese soldiers rather uncritically, and says little about what those who went to combat actually did; it does not reflect on the harms those in combat helped perpetrate as a consequence of fighting under Imperial Japan. In the process of disentangling Taiwanese history from the histories of its rulers, a centering of Taiwanese identity that overlooks these inconvenient details represents another kind of forgetting.

It’s worth noting that the speakers at the memorial event didn’t commend soldiers for their bravery or thank them for their service. Most spoke of the importance of remembering the pain of war as its possibility looms again over society, and of expressing the Taiwanese identity that had been denied to them under centuries of foreign rule. We asked Mr. Wu, the board chairman, what it means to “remember” this history with white roses and moments of silence. The ceremony’s purpose, he said in a mix of Hokkien and Mandarin, was to “invite Taiwanese people, including young people, social groups, religious groups — everyone — to participate, awakening the memory of war. We hope people on this land don’t forget that our ancestors went through such fire.”

Other parts of society, though, are beginning to confront Taiwan’s role in Imperial Japan’s war effort more critically. This includes a growing body of academic literature as well as popular books and media. A critically acclaimed collection of short stories, titled Hunting Captive Women: Memories of a Special Volunteer Force, written by veteran Chen Chien-wu, embodies the contradictions of Taiwanese identity under Japan and the tension of being forced to fight for the colonizer while not even being seen as his equal. As Chu Yu-hsun writes in the book’s introduction, Chen “does not simply cast himself as a victim and dismiss the possibility of Taiwanese responsibility … Throughout, Hunting Captive Women constantly interrogates itself: Is it true? Do we really bear no responsibility?”

Lin says Taiwan will have to confront this tension in the presentation of the period in museums and public education as part of the decolonizing process.

“Dealing with the legacies of both the Japanese empire as well as the KMT authoritarian period, and what was perhaps suppressed during those times, and is now being discussed openly, is an important part of what decolonizing democratic societies are,” he said. “What historians are trying to show is that being a colonial subject is not like someone knocking at your door and saying, ‘We'd like to go kill other people. Please join us,’ and you say ‘yes.’ It's much more complicated, and it involves disparities of power; it involves education that goes quite deeply into psychological reasons that are formulated over decades and decades. Educating the public about this is a part of what public history is. It’s why museums about the Holocaust are so important [in explaining] how something like the Holocaust can occur.”

Lee acknowledged that the museum still has a lot of work to do in adequately portraying the complexities of Taiwan’s World War II history. “The significance of this museum is that it is a beginning,” Lee said. “It’s about the complex aspects of Taiwan, and among them, the history of a group of people who have been distorted and awkwardly portrayed. How should we discuss it? This is the mission of our museum.”

Taiwan emerged from martial law just 38 years ago and is still dealing with the legacy of its traumatic past. Now that it has the freedom to remember, its pursuit of “transitional justice” for all peoples will necessitate confronting history’s painful contradictions.

writes Silver Bulletin and is the author of On the Edge: The Art of Risking Everything, now in paperback with a new foreword.

In today’s conversation, we discuss…

• Honesty, reputation, and paying the bills with writing,

• Impact scenarios for the AI future, including how AI could impact elections and political decision-making,

• The emerging synergy between prediction markets and journalism, and how Nate would build a team of professional Polymarket traders,

• How to build a legacy,

• Nate’s plan to reform US institutions and how that compares with real-world prospects for creating political change over the long term.

Listen now on your favorite podcast app.

Mathematicizing Persuasion

Jordan Schneider: Before we get going, I just want to say thanks, Nate. Writing on the Internet is scary, and you’ve made it less scary. Getting to the point where I can just say things that I know are going to piss off administration officials and $4 trillion companies takes a lot. Watching you do that over the years has been a good lodestar for not caring what powerful and rich people think and working toward the truth.

Nate Silver: I appreciate it, Jordan. There’s an equilibrium where people are way too short-term focused and too susceptible to peer pressure.

Conversely, once you develop a reputation for doing your reporting and speaking from a place of knowledge and experience — without trying to sanitize things too much — you develop trust with your audience. You carve out more of a distinct niche. People are too afraid of honesty and differentiation.

It’s easy to say if you cover fields that are popular and get a lot of audience and traffic, whether that’s electoral politics or sports. I’m not doing investigative reporting here, but I do think that working hard and being the best version of yourself — and being an honest version of yourself — is usually a smart strategy in the long run.

Jordan Schneider: That’s even more difficult with policy writing. ChinaTalk is closer to a think tank than it is to journalism. The vast majority of people who work in this field can’t make public comments because they either work in the government or work in government relations for a big company. Even if you’re at a think tank, you have to pay the bills somehow, and that basically means getting corporate sponsorship for your work.

Nate Silver: As a consumer, there are lots of issues — including China — where I’m not quite sure who to believe or trust. China is among many issues where I feel I’d have to invest a lot of time investigating who I can trust. At that point, you could almost write about it yourself. There are a lot of issues where there’s no kind of trustworthy authority. Kowtowing to corporate power is part of it. That’s part of the beauty of having a Substack model with no advertising.

But especially in diplomatic and international relations, people are always calibrating what they say. There are smart commentators, but you have to read between the lines — sway the reads 20 degrees left or right.

Jordan Schneider: There’s this recent micro-scandal. Robert O’Brien, former national security advisor, wrote an op-ed saying we should sell lots of Nvidia chips to China. It comes out three days later that Nvidia is a client of his.

Nate Silver: I’m never quite sure whether to assess these arguments tabula rasa and ignore who’s making the argument, versus considering that people have long-term credibility and reputational issues. One thing I do is play poker, and in poker, the same action from a different player can mean massively different things. A lot of stuff is subtextual. A lot of stuff is deliberately ambiguous.

One reason why I think large language models are interesting is because they understand that you can mathematicize language. In some ways, language is a game in the sense of game theory — it’s strategic. What we say, exactly how we say it, and what’s left unsaid is often powerful. A single word choice can matter a lot.

You probably think about this in a different context — in the case of official statements by the Chinese government, for example.

Jordan Schneider: Let’s stay on this, because this was actually one of my mega brain takes that I want your response to. We have Nate Silver at 11 years old wanting to be president, and now we’ve had 20 years of him thinking about analyzing presidents and presidential candidates and what they do. You don’t necessarily have to believe in AGI and fast takeoff to think that 10, 20, 30 years down the road, a lot of the decisions that presidents and executives make today — an AI will just strictly dominate what the human would do.

Maybe that Cerberus moment becomes what the Swedish Prime Minister was saying a few days ago — “Oh yeah, I ask ChatGPT all the time for advice.” I’m curious, what parts of the things that presidents and presidential candidates do you think are going to be automated the fastest, assuming we just let them ingest all of the data that a president or executive would be able to consume themselves?

Nate Silver: AI in its current form might be an improvement over a lot of our elected government officials, but that says a lot more about the officials than the AI necessarily.

I don’t take for granted — and some people do, including people who know a lot about the subject — that we’re going to achieve superhuman general intelligence. There are different meanings between these terms that we can parse if you want. But some of the reason that large language models are good now is because they train on human data and they get reinforcement learning with human feedback.

There are cases — pure math problems — where you can extrapolate out from the training set in a logical way. For more subjective things, political statements, I don’t know as much.

Some people believe that AIs could become super persuasive. I’m skeptical. First of all, humans will be skeptical of AI-generated output, although maybe I’m more skeptical than the average person might be. Also, it’s a dynamic equilibrium. You can message test, have an AI train, and it can figure out: “Okay, we can now predict — we’re running all these ads, sending out all these fundraising emails — we can predict which will get a higher response rate."

But when people start seeing the same email — “Nancy Pelosi says this or that” — 50 or 100 times, then they adjust and react and backlash to it. In domains where you are approaching some equilibrium, profit’s not easy to have. There are no easy tricks. You have to play a robust, smart strategy, and ultimately the strength of your hand matters, along with how precisely you’re constructing the mix of strategies that you take at any given time.

I’d bucket it roughly as a 25% chance that on relatively short timelines, AI just blows our socks off. 25% that it does that, but at a longer timeline — a decade, two decades, three decades out. Then 50% that AI is a very important technology — more important than the Internet or the automobile — and reshapes things, but does not fundamentally reshape human dynamics across a broad range of fields.

Things like international relations or politics are among the more resistant domains toward AI solutions. At the same time, another risk is that you’ll have people who view the AIs as oracular. We’ve seen cases of people who are encouraged by ChatGPT to think they’ve developed some new scientific theorem or discovered a new law of physics. They’re very smart at flattering you.

One thing I do is build models. Sometimes a bad model is worse than no model or your implicit mental model. Trusting an all-knowing and all-powerful algorithm, especially in cases where the situation is dynamic — the laws of mathematics don’t change, but international relations and politics are always dynamic and maybe changing faster — and whether the AIs can adapt to new situations quickly is also an open question.

Jordan Schneider: If we’re trying to bucket the types of things a CEO or a president or a senator does, we have personnel management — who am I going to hire, who am I going to fire? We have the outward-facing stuff — what do I say to this interviewer, how do I talk in the debate? Then we have these decision points where you have a memo, you could pick A, B, or C, and there are different sets of trade-offs where you could optimize for this thing or that thing.

I don’t think it’s crazy to think that parts of those different buckets could be radically improved, even just to play out the different second and third-order effects of whatever you’re negotiating for in the next budget bill or something.

Nate Silver: For discrete tasks, AI can already be wonderful. I’m doing a little coding now on a National Football League model, and it’s late at night. I’ve been up a long time, had some wine at dinner, and I’m thinking, “Okay, Claude, how do you do this thing in the language I’m programming in?” The thing is a discrete task where I have enough experience with these models to expect it to give a good answer, and I have enough domain knowledge that when I plug in this code, I can tell if it works or not. I’m not going to have some bad procedure that chains into other bad procedures in a complicated model.

There’s been mixed evidence on how much more productive AI makes people. My stylized impression is that it makes the best people even more productive and makes people who are not that smart maybe worse. I worry that it’ll be a substitute for domain knowledge and human experience, but for certain things it’s already superhuman, and for other things it’s dumb as rocks.

Knowing what is what — there’s a learning curve for that.

Jordan Schneider: There’s also this aspect where the human floor can be pretty low, especially if you’re tired or stressed or you’re the president and you’ve got a hundred thousand things being thrown in your face. It’s literally an impossible job. Maybe there’s also this weird electoral feedback thing where, presuming that AI is really helpful for winning and governance, the folks who trust it more and faster are the ones who perform better in their jobs and get elected to higher and higher office.

Nate Silver: Government is backward in a lot of ways. This varies country by country too. In some ways, America has maintained a relatively high degree of international hegemony despite having this constitutional system that’s now hundreds of years old. It has flaws that people — not to sound a little personal here — Trump has found a way to exploit.

It’s amazing that we still entrust all of this power in one president. New York City, with 8 million people, is probably about as large an entity as you should have maybe one person in charge of. But we haven’t really developed other systems.

If anything, one of the more dynamic places in the world right now — you’d still say the U.S., you’d say China, and then probably the Middle East — they’ve kind of cheated. The U.S. is increasingly less democratic, and the other two were not really democratic to begin with. Maybe my assumptions have been wrong.

Poker and Prediction Markets

Jordan Schneider: Let’s talk about prediction markets. You spent a lot of time thinking about poker and had this whole experiment in your book where you just spent a year betting on basketball. The thing about basketball and poker is there’s a lot of data and track record you can base your estimation on. You can find your edge in very weird corners. But a lot of these markets on Polymarket and Kalshi are very one-off. Right now there’s “Is Trump going to put more sanctions on Putin in the next six weeks?” Is there a regression you can run on that? Not really. It’s fascinating because these are so much more one-off and open-ended than what you would see in the stock market or sports betting.

Nate Silver: I’m a consultant for Polymarket, so I do have a conflict of interest to disclose. Sometimes the one-off events are not as good. One market where Polymarket, Kalshi, and others did not do as well was the election of the new Pope. Cardinal Ratzinger had a very low chance of being selected.

What happens there? On one hand, you have a papal election every 10 or 20 years, so you don’t have a lot of data. Everybody leaks, but the papal conclave does not leak, apparently. There’s not really any inside information. Then people apply the heuristics they might apply to other things. When they have the smoke signals come out quickly, they think, “Oh, it must be the most obvious name.” The favorites went up, and that wasn’t true. People just had no idea what was going on. There are some limitations there versus things like elections, which are more regularizable.

At the same time, there is a skill in estimation that poker players and sports bettors have. Maybe I’m making a real-time bet on an NFL game and Patrick Mahomes gets injured — the quarterback of the Kansas City Chiefs. I have to estimate what effect this has on the probability of the Chiefs winning. If you just do that a whole bunch, then you get better at it. You have to have domain knowledge and be smart in different ways.

When I’ve consulted in the business world — not capital-C consulting, but for people who are actually making bets — you realize that a good answer quickly is often what makes you money, whereas a perfect answer slowly doesn’t. This is one reason we’re seeing a shift of power away from academia toward for-profit corporations. You can say that’s bad or good — I think we need both, frankly. But you have a profit motive and an incentive to answer a question quickly.

In poker, the same thing. If I play a hand and I’m getting two-to-one from the pot, so I need to have the best hand or make my draw one-third of the time. Then you go back and run the numbers through a computer solver, and you’re like, “Well, actually here I only had 31% equity when I needed 33%.” That was a big blunder. For most people, 31 versus 33 is the same, but with training you can estimate these things with uncanny precision. There’s a lot of implicit learning that goes on, and it becomes second nature.

Jordan Schneider: Are you worried about insider trading with all this political betting? There’s an aspect where these are all crypto — you get on these markets with crypto. There were markets asking which way Susan Collins is going to vote. The tail outcomes for a legislative assistant in her office are that you can make 10 times your salary in a minute. What’s your thinking on this?

Nate Silver: There are a couple of qualifications. First of all, people on the inside often aren’t as well-informed as they think, or there are downsides to having an inside view versus an outside view. You might drink the Kool-Aid, so to speak. You might be in a bubble.

Jordan Schneider: There are ones where you can literally — I mean, there have been lots of group chats of people talking about very sketchy trades and one-way bets being made in the stock market about what’s going to happen with a trade deal. You can literally be the person who decides and be betting on the side.

Nate Silver: If there are incentives to make money in a world of 8 billion people, many of whom are very competitive and most of whom have access to the Internet, people are going to find a way to do it. It’s not just that game theory equilibrium is a prediction of what occurs in the ideal world — it’s what very much does happen.

We’ve seen things in the crypto space like an increasing number of crypto kidnappings. That’s one of the consequences of people being worth vast amounts of wealth that isn’t very secure. It’s just going to happen until you up security or have better solutions.

I don’t think there’s necessarily any more or less insider trading on Polymarket than there might be for sports betting sites — we’ve seen a lot of sports betting scandals — or for regular equities. The literature says that members of Congress achieve abnormal returns from their stock portfolios. I’d have to double-check that — I’m sure there’s some debate about it.

People can also sometimes misread insider information or read a false signal that becomes insider information or a fake signal. If they see an unusual betting pattern, they’ll think, “Oh, okay.” There were some tennis betting scandals where tennis is an easy sport to throw because it’s individual — two people. You don’t need multiple conspirators. Something unusual happens and people think, “Therefore, it must be an insider trading move” or “Therefore, it must be someone throwing the match.” Maybe sometimes it is, other times it isn’t. It’s very hard a priori to know which is which.

Jordan Schneider: It’s a new variable in politics. The way you could previously cash out was becoming a spy for another country — very high risk with lots of downside. Or you’d have your career and then become a lobbyist, but that pays out over years.

This is something new, and we’re going to have to watch it because I find I get a lot of value from seeing these numbers every day and watching how they change. Polymarket has become something I check before looking at the homepages of major news outlets. But there’s something that makes me a little queasy about opening up this new realm of betting where maybe we, as citizens, don’t want the people we’re paying to do these jobs to have this alternate way to cash in.

Nate Silver: Or journalists too. I know a couple of projects where people are basically trying to apply journalistic skills to make trades — not necessarily in prediction markets, maybe a little bit of that, but more in equities.

If you have a well-informed view of China, especially particular industries, that has big implications for how you might trade a variety of stocks, including American stocks.

My impression is that people at Wall Street firms trading equities don’t like all this macro risk. They prefer to predict what the Fed is going to do, analyze earnings reports, and work with long-term trends they can run regressions on.

They don’t like profound political uncertainty where the macro bets are very long-running. It may be hard to come up with the right proxy for the trade you want to make.

You’ll probably see more fusion between trading and research and journalism at every step along that path.

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Jordan Schneider: I’ve started interviewing a lot of these Polymarket investors and traders. It’s remarkable to me that there are no funds or teams. I assume that’s just because these markets aren’t liquid enough. But what would your dream team of skill sets look like if you were going to start the Polymarket hedge fund?

Nate Silver: You probably want some AI experts. You want macro people, you want a mix of people who are smart micro traders — poker player estimator types. More barbell theory. You want the macro people — a China expert, an AI expert, an expert on American politics. On average, the takes that Wall Street has about American politics are pretty primitive. You want someone who understands macroeconomics and inflation and the debt. You want a mix of skill sets.

In terms of what the banks and hedge funds are doing, different firms probably differ in what they think. There is reputational or enterprise risk to trading. Crypto can be a gray area. Prediction markets can be a gray area. I suspect there’s probably more of it than you might assume.

Until the last couple of years, there definitely wasn’t enough money in prediction markets overall to be worth it for institutional traders. Now there might be, especially for smaller firms. If you were a firm that wanted to say, “We are primarily trading non-traditional assets — prediction markets, cryptocurrencies, maybe low market cap stuff” — there are crypto hedge funds. If they’re getting more into prediction market stuff too, it wouldn’t surprise me in the least.

As prediction markets get bigger, then the bigger quant hedge funds and eventually Morgan Stanley and Goldman Sachs will want to trade them too.

The Barbell Strategy

Jordan Schneider: What do you think your legacy is now, and how would you want to change that in the next 10 to 20 years?

Nate Silver: The best work I’ve done is the book I wrote a year ago, On the Edge, now in paperback. The election models are valuable and might be what I’m best known for, even though it feels like they’ve been 5 or 10% of my lifetime productive work. That’s a really hard question to answer — I don’t think I’m quite old enough to answer it yet.

Jordan Schneider: I can answer it maybe. There weren’t a lot of numbers in many discussions before you. With elections, people have to respond to facts. The facts of you boiling all the polls and demographic data and voter registration data into one thing is a much more tangible, grounded set of facts than “you say Marist, I say Quinnipiac” — what does that even mean?

This approach is spreading now into wider areas on Polymarket and Kalshi, where different modes of politics now have numbers attached to them in ways they didn’t before. There’s literally a “Will China invade Taiwan?” market. However much we want to believe anyone has insight into that, there was no number you could point to before to ground you in that reality.

Great man versus trends — there’s been a lot more data and computing power over the past 25 years to enable what you do. But it was both the modeling and presenting it in a compelling, engaging voice that really helped reshape the way people think about these issues.

Nate Silver: I appreciate that I have certain talents. If you’re a 7 out of 10 on the modeling and a 7 out of 10 or maybe 8 out of 10 on the presentation, that overlap is somewhat rare. The overlap is maybe more than the sum of the parts — more valuable than being merely pretty good at each individually. I’m a good modeler, but the combination of those skills is valuable.

The world is moving directionally more toward this. Prediction markets in particular — if you look at sports betting, it’s not really growing as much as the big industry players had hoped, but prediction markets have had some false starts before. Now with Polymarket, Kalshi, Manifold, and others, you have a robust and well-constructed enough trading ecosystem where they are here to stay for many things.

If I’m about to publish a story — let’s say on Trump’s latest round of tariffs — and I need to check if Trump has done anything crazy in the past five minutes since I last read the internet, I’ll just go to Polymarket. Did any markets radically change? Is there some massive event that would make it insensitive to publish a story? Has there been an earthquake somewhere? You can instantly see that news. Twitter used to be somewhat similar for instant feedback.

But this leads to a gamified ecosystem where, as a poker player, sports bettor, or rapid news consumer, you’re always checking your email, phone, Twitter, and the internet. You’re always aware of 15 things at once. It makes it harder to unplug and creates fuzzy boundaries between work life and real life. If I’m running on the east side listening to a podcast and thinking about my next article, that’s work. If I’m checking my phone late at night when I’m out at dinner — checking work stuff, not gossip — that’s work too.

The world’s moving more that way, for better or for worse, and it prioritizes quick computation and estimation.

Jordan Schneider: Does this make it harder to do big things anymore?

Nate Silver: No, it creates more of a barbell-shaped distribution. Working on the book took me three years — that was really important fundamental work. Right now I’m working on this National Football League model. That’s a six-week project, not a three-year project, but it’s foundational work that will produce dozens of blog posts and hopefully hundreds or thousands of subscribers for Silver Bulletin for many years.

Having three or four things that you’re really interested in and fully invested in — obsessions, you might call them — is very valuable. But the skill of quick reaction is also important: your best flash five-second estimate, having the first authoritative take on Substack when Jamaal Bowman won the primary by a larger margin than predicted.

I was in Las Vegas at the World Series of Poker. I had just busted out of a tournament and hadn’t seen any great takes on this yet — it was a very fruitful subject. It was midnight New York time, 9 PM Vegas time. I cranked through until 3 AM Vegas time, 6 AM New York time, and published what I thought was a pretty smart story on it. That kind of thing is important.

The middle ground — the ground occupied by magazines, for example (not that places like The Atlantic, which have become digital brands, don’t do great work) — is maybe the in-between where the turnaround is too slow to be the lead story in a rapidly moving news cycle, but it’s not quite foundational work either.

Academia suffers from even more of this problem. The turnaround time to publish a paper is just too slow.

I’ll run a couple of regressions, give it a good headline, make some pretty charts, and it’ll be 90% as good as the academic paper in terms of substantive work and 150% better written because I’m writing for a popular audience, not journal editors. That exchange of ideas is what moves the world.

It’s fascinating to see these dynamics. I don’t know a lot about DeepSeek, for example, but it was interesting to see the narrative shape in real time about how competitive China is in the short to medium term on large language models. Or to see with Jamaal winning the primary — probably the general election too — how much that anchors the conversation in different ways.

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Stylized, abstracted, modelized versions of the real world become more dominant. We’re all model-building. I have a friend who’s a computational neuroscientist at the University of Chicago. He says ultimately the brain is a predictive mechanism. When you’re driving and looking at the road ahead, you’re not seeing a literal real-time version of the landscape in front of you. It’s a stylized version where your brain makes assumptions and fills in blanks because it’s more efficient processing. The message length can be shorter if you focus on the most important things.

You can notice this if you’re in any type of altered state — whether drug-induced, under anesthesia, tired, or experiencing extreme stress or stage fright. You process things differently at a broader level.

My first book, The Signal and the Noise, is about why the world is so bad at making predictions. Part of it is that you have to take shortcuts or else you’ll never get anything done. But when you take shortcuts, that leads to blind spots, and that’s not really solvable. AI might scrape off some of the rough edges, but sometimes the rough edges are created by the market being efficient and dynamic and by people keying off other people’s predictions and forming a rapidly shifting consensus. Those dynamics are going to remain very interesting.

Jordan Schneider: The DeepSeek experience was surreal for me because this is a story — China and AI — that I’ve been following for five to seven years. All of a sudden, it became the story. Our team hit it pretty well; we doubled our subscribers. But watching our little thing try to shape the broader narrative, and suddenly all these journalists are asking, “What’s this company?” I’m thinking, “I’ve been writing about it for two years. Where have you guys been?” I’ve never had one of my stories really become the main story before.

Nate Silver: It can be an amazing feeling. This relates to the Great Man theory in some way. Early in a news cycle, the way a story is covered is very important. One news outlet or journalist covering a story differently can shape attitudes about it for weeks to come. This is partly why PR people always say, “Don’t say so much, but be fast.” You want to preempt things because that founder effect can matter.

Nate Silver: Tell me, Jordan, what did the mainstream media — The New York Times, Wall Street Journal, and others — get wrong about the DeepSeek story?

Jordan Schneider: There was this first narrative that it cost them $6 million to train their model. That was illustrative of the problem. When I went on Hard Fork with Casey Newton, that’s the first question they asked me. I’d already written a few things, but no — it did not cost $6 million to make this model. You need to hire the people, run the compute, have the infrastructure, run lots of experiments. All in, it’s probably more like half a billion dollars.

But there were enough people for whom that narrative was interesting or financially useful that it spun faster than my loyal crowd of ChinaTalk listeners who were hearing us beat the other side of the drum.

Another thing that’s been shaped by this is the export control debate. There was this expectation that because DeepSeek exists, export controls are worthless. There’s lots more nuance to that, which we’ve covered in other podcasts. But the simplified version of drawing that line from A to B has really shaped the trajectory of American policy toward AI export controls and AI diffusion more broadly.

The cohort of folks who understood this nuance wasn’t able to seep into the halls of decision-making. We have now, quote-unquote, “lost” when it comes to semiconductor export controls, partially because there was this moment that ended up reshaping narratives, and the people who agreed with my version of the facts weren’t able to influence policy.

Nate Silver: These narratives that prevail are often in someone’s economic or political interest. There was a narrative after the 2024 election that Democrats lost because of low turnout, especially among younger voters. There’s a slight grain of truth in that.

However, this was exacerbated because people don’t realize it takes a month to count votes fully in the United States. The counts you see on election night and the next day shortchange turnout by tens of millions of votes. But that was a convenient narrative because people wanted to move to the left. It’s more that younger voters — particularly young men — shifted against Democrats. There’s somewhat lower turnout, but it’s still historically high.

It’s tricky when you have the more nuanced take versus the easily memeable take. If you’re making sports bets, a lot of it’s in the nuance. We all know this quarterback is good, but maybe he can be both very good and a little overrated by conventional wisdom for various reasons. There’s enough of a profit margin where you have positive expected value on your bet. In the news cycle, that’s less forgiving. But Substack and podcasts give a little more room for subtlety and exploring things.

Jordan Schneider: I’ve shied away from writing a book all these years. You’re very quick-twitch but have also done it and just made the case that it’s really valuable. Why don’t you expand on that for me? What has having these two book projects under your belt given you?

Nate Silver: For one thing, I like the process of writing a book. Ordinarily, day to day, I consider myself a journalist, but for the most part, the process involves me and a computer. Particularly when it comes to politics, I don’t really want to call Democratic or Republican sources and get their take. People are paying me for my take, and I don’t care to be spun. That increases the turnaround time.

For the book, it’s the opposite. On the Edge involved interviews with roughly 200 people — a lot of experts and practitioners in fields I find fascinating. Even if you weren’t working on a book, if you took two years to interview 200 really smart people about things they’re knowledgeable about just for your own edification, that would make you a lot smarter.

Jordan Schneider: When I was reading the book, I was annoyed. I wanted the Nate Silver experience — I want to listen to the hour-long conversation you had with Peter Thiel. That’d be fascinating if it’s on the record. Why not sequence it that way?

Nate Silver: The people I spoke with were often very candid, maybe against their narrow self-interest in some cases. But I would never approach somebody and say, “I want to talk to you about X.” I would approach them and say, “I’m writing a book about X that’ll be published in a year or two.” I would always be very honest about the rationale for the conversation.

If something Peter Thiel said was super newsworthy — and I’m trying to remember if that was a conversation with explicit ground rules — but if it’s a conversation where someone says something newsworthy in a non-book context, it’s a little ethically fraught. I don’t think it crosses some bright line journalistically, but it’s complicated.

With Sam Bankman-Fried, that was an explicit understanding. He definitely told me things because he thought the timeline would insulate him from some risk or he could shape the narrative somehow. It wound up coming out after he was already sentenced and in prison.

You’ll have reporters who embargo reporting on political projects — there should be lots of books about Biden’s decline. The fact is that people will tell you more when they have more protection. Probably 80% of my interviews were more or less fully on the record. Sometimes the background interviews use journalism’s distinctions for these terms, and there are in-between categories where you can publish with approval. I don’t love that, but I did it for one or two important sources where it was the least bad option.

People are more candid if they understand the context of your project and believe it’s coming out in the context of a book that puts everything into a broader universe.

I used to work at The New York Times — that ended in 2013, but now I write for them a few times a year. It’s friendly. If The Times calls me for a story, I’m still sometimes reluctant to say anything because you’re going to have one or two quotes put into their narrative that may or may not suit your purposes and may or may not be accurate.

The Times is popular in part because they write in narratives. Even a boring economic data story has a little spin on the ball — good writing, good headlines. Nothing wrong with those things, but sometimes there’s a narrative that’s a little reductionist. They’re the best in the business, or among the best. When you deal with people who don’t have those journalistic standards, you’ll encounter more problems potentially.

Jordan Schneider: We have these nice historical interludes in the book. Is that a type of non-journalism-driven writing? Is that something potentially on your horizon as well? How do you think about hanging out in the archives for a year or two?

Nate Silver: History and statistics are closely tied together. For this NFL project, I’m researching every NFL game played back to the 1920s. It’s remarkable to see how this one sport has survived with significant changes. But you come across something and wonder, “Why were there no games played that day?” Oh, the September 11th attacks. You encounter changes in real-world behavior and technological changes.

Any system model sometimes involves extrapolation from first principles, but the most empirical ones just say, “Okay, we are extrapolating from history and making the assumption” — and it is a big assumption — “that trends that existed in the past will correctly extrapolate to the future.” Often they don’t. Economic forecasting is notoriously difficult because there are regime changes. The economics of the internet era versus the pre-internet era versus the pre-automation era versus the pre-agricultural era — there’s great research showing these are all very different.

The field of economic history, sometimes called progress studies, is quite underrated. The notion of why different societies, great powers or not-so-great powers, rise and fall — why is South Korea as prosperous or more prosperous than Japan today per capita when there was a 10x or 20x gap 40 years ago? These seem like really high-stakes, important questions. Because they play out at longer time scales, they often don’t motivate people as much. But they seem vital.

Even within AI, from what I understand, the AI companies are not really putting a lot of effort into thinking about what this looks like in five or 10 years. They have longer time horizons than most, but they’re not really forecasting how the entire world changes if we do achieve superintelligence. They talk about it a lot — listen to the Dwarkesh podcast or whatever — it’s a popular subject, but that’s probably substantively more important than what’s in the daily news cycle.

Theories of Political Change 纳特·西尔弗思想

Jordan Schneider: There’s a myth of a software engineer who’s annoyed by something in the Spotify app, joins Spotify for two weeks, fixes it, and quits. I’m curious — what would you do during such a stint if you could plop yourself down anywhere in government?

Nate Silver: Let me redesign the Constitution, I guess. Maybe we need a ban on gerrymandering and we need to change the Senate. To some extent I’ve done that. I was dissatisfied with the way elections were covered, so what I thought was a little two-week project became a life-altering career.

I do feel like there’s maybe a little more openness to improvement. New York City has a new subway map now, which is much more legible. I saw that the other day — that was a nice little improvement. I could be a good restaurant consultant: “This restaurant’s not going to work. I live in this neighborhood. Nobody ever walks on this block. They walk on 8th Avenue and not 7th Avenue — I can’t explain why."

Being a copy editor, I guess. I notice copy editing problems in advertisements and things like that a lot.

Jordan Schneider: Think bigger. Come on. What Cabinet secretary? What bureau? Jamaal’s saying, “I’ll give you any job, Nate.” Which is it?

Nate Silver: How to have a good poker scene in New York — we’ve got to have poker rooms. We don’t need the rest of the gaming.

I guess I agree with the abundance critique where New York just takes an awful lot of time to build things. At the local government level, there often are incremental improvements made in different ways. In New York, our new infrastructure projects — LaGuardia Airport, the other airports, the West Side development — they’re all nice. It just took too long and was too slow.

But Jamaal is to my left, I think. I do think that he’s enough of an outsider and bright enough that he might do those smart, experimental things that don’t just fall under bureaucracy and inertia. I don’t know — was it Japan or Korea where they have little lights embedded in the sidewalk? That’s pretty cool. Just little things. If you’re looking down, you know when to cross or when not to.

Jordan Schneider: You’re a “department of special projects” guy — “let’s just make life better on the margin a little bit.” Or we’re going to let Nate Silver rewrite the Constitution. More barbell theory.

Nate Silver: Think big, everything’s small. Absolutely.

Jordan Schneider: Okay, let’s do barbell theory again with money. Say SBF hits and you’re just his advisor, and you got billions of dollars to spend on stuff — maybe not dumb stuff. Where are you putting your marginal $10 billion of philanthropy around politics?

Nate Silver: I don’t think politics is a very effective use of money. If it is, it’s at the local level. If you look at projects that were really successful — one of the most successful projects in American history is the conservative movement’s multi-decade effort to win control of the American court system. Supreme Court justices serve five times longer than presidents on average. Doing ground-level, long-term work is quite valuable. The notion of how to make government more efficient matters.

Jordan Schneider: Let’s lean on that for a second because one of the things that story did was invest in ideas and people and the intellectual superstructure for this movement. There don’t seem to be — maybe we’re starting a little bit now with the abundance stuff and Patrick Collison funding progress things — but there seem to be a lot fewer center or left billionaires who are investing in the interesting intellectual ecosystem to grow the movement.

Nate Silver: You probably see more of it on the right. The Peter Thiel Fellowship program pays kids to drop out of college — that’s an interesting ideological project that has produced some degree of success. The effective altruists would say that you want to purchase anti-malaria mosquito nets in the third world, and probably that’s very effective.

As much as there are lots of inefficiencies in politics and government, it also reflects the revealed equilibrium from complicated systems and complicated incentives. Maybe change is harder to achieve. It’s part of the reason why I’m reluctant to give off-the-cuff answers.

There have to be improvements you can make in government efficiency. Why does it cost 10x more to build a mile of subway track in New York than in France or Spain or Japan? I also think there are probably a lot of really sticky factors explaining why that’s the case.

In principle, I’d be on board with a project like DOGE. But DOGE should have spent the first three months studying this — not a fake commission, but actually studying where’s the overlap between problems where there really is inefficiency and where it’s tractable and solvable. That’s not something you could answer off the cuff or just by looking at a spreadsheet.

Jordan Schneider: Would you ever join a campaign?

Nate Silver: No, I don’t think I’ve ever really been offered that, believe it or not. It goes against my ethos — I want to study and have the outside view on politics. Campaigns are pretty rough. It’s very tough because you basically have one outcome: do you win or lose? In the presidential primaries, you have 50 states and they go in sequence, so it’s a little bit better. But it’s very hard to know what worked or what didn’t.

Kamala Harris and Donald Trump had lots of different, subtle, nuanced strategies. The fact is that if inflation had peaked at 4% instead of 9% in 2022, then she might have won, having nothing to do with strategy per se. It’s very hard to get feedback on campaigns.

I’m skeptical that you can gain as much through better messaging as you might think. It becomes saturated. The first time the next candidate uses Jamaal-style messaging, they’ll probably get something out of it. The fifth one who does it might backfire because it seems like a bad facsimile of what came before. Just like there are various Obama imitators or mini-Trumps, people like novelty — and they like some sense of authenticity.

What seems authentic is very tricky. Trump, in many ways, is a very fake, plasticky person, and yet he has this ironic, almost camp level of authenticity that would have been hard to predict in advance. I was not alone in 2015 when he’s going down the elevator at Trump Tower to think this is a joke.

This sketches the limits of prediction in general. The world is complicated and dynamic and contingent and circumstantial. Social behavior is contagious, and the focal points created by the media and the internet do more of this, where things can change unpredictably and rapidly. There’s less political science in running campaigns than in a lot of other fields that might possibly be in my interest set.

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Jordan Schneider: It’s interesting because the big tactical decision that people are still talking about is, why didn’t she go on Rogan? Well, even if she did, it wouldn’t have gone well because she doesn’t vibe with that. It’s a bit of a revealed preference — she didn’t do this open-ended media appearance because she doesn’t fit it.

There’s an aspect of — you can only “Manchurian Candidate” your candidate to go so far from their essence as a human being. Until we’re electing AI models, people can still just get a sense for whether they like or dislike people. That’s probably 2 or 3% marginal.

Nate Silver: When President Trump got shot, it was a very sympathetic moment. I never voted for Trump and wouldn’t, but even then I felt some sympathy. That moved the polls by one or two points. One of the most momentous events of the past 50 years of American campaigns.

When Biden had the worst debate in presidential history, that moved the numbers by maybe 2%. It mattered because he was already behind and now he fell further behind.

There are times when preferences are extremely plastic and times when they’re extremely sticky. Knowing which is which, which interventions work at which intervals, is probably important.

Jordan Schneider: Has covering politics shaped your view on the great man versus structuralist view of how things unfold?

Nate Silver: The empirical default is to be more structuralist — that’s the trendy thing. I don’t know. I think Donald Trump is a very important figure. If Donald Trump had been a stand-up comedian instead — Trump is funny — the world would look a lot different. Elon Musk has been very important to the shape of the world. I’m not saying positively or negatively, but Xi is very important.

Things are trending more that way. I’m not some Elizabeth Warren type, but if the top richest people in the world basically double their wealth every decade — and it’s different people cycling in and out of the list, but if you look at the inflation-adjusted list of the richest 10 or 100 people, and it’s often more about the 10 now than the 100 — they basically double their wealth, inflation-adjusted, every 10 years. You compound that over several cycles, and that concentration of power might shift things more toward a great man theory.

I’m sure there’s a substantial degree of randomness too. I have no idea how China formed, for example, but you get in these feedback loops where you have a virtuous loop or a less virtuous loop. Thirty years ago, Americans were worried about being overtaken by Japan. That happened to Japan a few times, and in some ways it’s still a very amazing, advanced society.

Maybe an example is Rome, Italy, which is one of my favorite places to travel to. I’ve been there at different points in my life. There are parts of Rome where if you go today in 2025, they don’t really look that much different than when I was a college kid in 1999-2000. Except for the cell phones, you could really be placed in 2000 and you wouldn’t miss a beat.

Jordan Schneider: Slight non sequitur. My favorite dad book is called An Italian Education. It’s this memoir of a cranky British person who married an Italian woman and is talking about raising their kid in early 1990s Italy. It’s really fun, kind of New Journalism-style writing. But it’s also this fascinating portrayal of this country at a big transition moment where they’re going from being super Catholic to more modern, and from being very localized to conceiving of themselves as part of this European project.

I don’t have great 2025 Italy takes, but it’s interesting just how much further — or not further — a country could have gone from that moment to today, looking at different parts of the world from 1994 to the present.

Nate Silver: I have a friend who’s Irish — actually Irish, not Irish American — who moved here in early adulthood. He’s gay, and he’s told me, “When I was growing up, Ireland was very Catholic and very anti-gay, and now they almost go out of their way to be pro-LGBTQ rights.” It is interesting how much countries can change.

Conversely, Russia and that sphere are separating a bit more. The United States is diverging more from Europe too. Europe hasn’t grown a lot economically — there’s not a lot of innovation there. At the same time, their lifespans are increasing and they’re taking this slower-growing dividend into quality of life. Whereas in the U.S., male life expectancies, even if you ignore COVID, have basically not increased in a decade.

We are getting wealthier. I worry a little bit that as we’re doing things that undermine American leadership and state capacity, we’ve been playing the game on easy mode because the dollar is a world reserve currency and the U.S. is the world’s biggest military. We’ve been — this is complicated relative to a low bar — a relatively trustworthy player in international relations. If we’re throwing those things away, there might not be an impact next year, but when you visit these different countries and extrapolate out 3% GDP growth versus 1% and compound that over 20 years, it’s extraordinarily powerful. You see it on the ground where these places are stagnant and these places are growing.

On Podcasting (Plus: Renaming ChinaTalk?!?)

Jordan Schneider: You interviewed a lot of really rich people for this book. Why do they all want to start podcasts?

Nate Silver: They do love hearing themselves talk. It’s not just that they’re rich. These are people mostly in competitive fields — a lot of them venture capital — where they’ve had success and it goes to their head. You see this in poker — being on a winning streak in poker is helpful. It improves your attitude, makes people fear you. But you can go on “winner’s tilt,” it’s called.

It’s very hard when you’re powerful — people start catering to you. “The Emperor’s New Clothes” is one of the more accurate fables. That and “The Boy Who Cried Wolf” are the two eternal fables that describe human behavior extremely well.

If you’re somebody like Elon Musk, he has made several really good bets, whether they’re skilled bets or luck. If the fourth SpaceX rocket had blown up — even he told Walter Isaacson that he was going to be cooked. But it’s very hard if you’re one of these people who has had that kind of success.

One thing I’ve learned, Jordan, is that there’s always one more tier of wealth and power behind a closed door than you might expect. There’s always one more privilege level. Even at an event that’s already privileged, there’s a VIP room and a VIP room within the VIP room. The biggest VIPs of all are not even at that — they’re already at the after party.

There are smaller worlds too. Keith Rabois told me there are really only six people in all of Silicon Valley that matter. Which is an exaggeration, but maybe not directionally wrong. Maybe a few dozen. They all know one another.

With the tech types and VC types, they feel embattled by their employees who are “too woke” and the media being mean to them. People are mean to me on the internet sometimes too.

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Jordan Schneider: Regarding your idea that there’s always one level up — if that’s your theory of the world, then why do you want to have an audience of 10,000 people listening to you talk about the news?

Nate Silver: Part of what I’ve done is go from a giant platform. I used to work for ABC News, which is about as mainstream as it gets. The average watcher is 70 years old at an airport somewhere or maybe a retirement home. Now with Substack, it’s an audience that turned out not to actually be narrower because the notion of building an email list is a good business model and very sticky.

At first, the stuff that goes behind a paywall is definitely reaching fewer people, but they’re willing to pay. You’re self-selecting too. Because the work I do, especially when it comes to election forecasting, is so easily misinterpreted, I don’t mind having a filter for people who come to the problem with more knowledge. It also can make the writing sharper.

If I’m freelancing with The New York Times, I have a good editor over there. They’re often saying, “Slow down, you have to explain this thing better.” It’s nice to have a conversation where you’re starting with certain premises and memories. I’ve stated complicated things before about my political views on issues that might come into play, or I’ve disclosed that I consult for Polymarket. It’s a cumulative project, and inherently nobody has time for everybody’s cumulative project.

Having a smaller audience of even dozens of people, hundreds, or tens of thousands is pretty important. Especially if there is maybe an unfortunate degree of concentration of influence and wealth and power. When I was working on the book, one of the things that surprised me is how many people I had no connection with were willing to have a conversation with me or at least provide a polite response if they had a good reason not to.

It’s a pretty small world and people talk to one another. That’s something that’s shifted a little bit again, maybe toward more of this Great Man theory — although all of them are men — toward this theory where individual agency matters more.

Jordan Schneider: My two cents on this is there’s a big cognitive bias for Keith Rabois to want to think that he is the center of the universe. There are more times than you would think where you have the market providing the discipline, or the people, or bigger sentiment when something blows up, where politicians or the media end up reflecting mass opinion more than they do the opinion of three people who are trying to pull the strings.

Nate Silver: One tip I heard in poker recently is that everybody is the main character of their own poker story. If I got caught making a big bluff against a third party earlier in the hand, and you’re sitting at the table not involved in the hand, Jordan, you might not even notice that — you’re going to be on your phone.

If you got bluffed by another player earlier and I’m not involved, that affects my strategy against you much more than what I did before, because I’m not involved in your narrative except to the extent I affect you. Life is often the same way.

Jordan Schneider: To close, I have an inside baseball question. Silver Bulletin is a great name. ChinaTalk... I don’t know, I think I should get out of it somehow, but I don’t want it to be The Jordan Show.

Nate Silver: People didn’t like the Silver Bulletin name at first. I came up with it in three minutes. I thought Twitter was gonna die, and I needed some placeholder. A lot of names are stupid when you think about them. Sports names are kind of dumb — the Green Bay Packers is kind of a dumb name. But it just sticks, and it seems normal because people repeat it over and over again.

Jordan Schneider: It’s not that I have names I’d be fine with. It’s more that the switching cost isn’t transparent to me — how much it’ll change listenership or open rates or whether it puts me on a larger growth trajectory. I wouldn’t change my coverage to do less China. Right now, it’s still 50% China, but it would just send a signal that it’s more than China here.

Nate Silver: That’s an interesting case. If it’s just a name, it’s a little awkward because it does include an implicit premise for what the subject is. Most of the time I would say the switching costs are actually pretty high. To sacrifice brand recognition is costly. Maybe you need to start a sub-brand or something. That’s a trickier one than for most people.

Jordan Schneider: The other thing is that advertisers are terrified of China. That’s just reality.

Nate Silver: Well, that tips it over to...

Jordan Schneider: Yeah. It’s more once I have a big contract, once I have Google telling me, “Jordan, we’ll buy $500,000 of ads only if it’s called the Jordan Schneider Show” — then you’ll know we’re doing it.

Nate Silver: We’re doing it for 500k. That’d be worth it.

We’ll take new podcast names in the comments below…

Nate said he was into shoegaze so his mood music is:

We have a ChinaTalk meetup this coming Thursday in SF. Sign up here if you can make it!

Uncle Sam is taking a bite out of companies left and right. Today, we’re going to focus on MP Materials — the Trump administration’s answer to China’s restrictions on rare earth material exports to America.

To discuss, ChinaTalk interviewed Daleep Singh, former Deputy National Security Advisor for International Economics, now with PGIN; Arnab Datta, currently at Employ America and IFP; and Peter Harrell, former Biden official and host of the excellent new Security Economics podcast.

Today, our conversation covers:

• How China achieved rare earth dominance,

• The history of rare earth mining and refinement in the US,

• What the MP Materials and Intel deals do, and whether they can succeed,

• The key ingredients for successful industrial policy and imagining a sovereign wealth fund.

Listen now on your favorite podcast app.

Broken Markets

Jordan Schneider: Why do deals like MP Materials even need to happen in the first place?

Daleep Singh: Critical minerals markets are broken for three main reasons.

First, there’s concentrated market power. China refines 70 to 90% of most minerals that we need to power clean energy, digital infrastructure, and defense systems. They have enormous market power — not just over supply, but also pricing, standards, and logistics. No market can be resilient if one player dominates the entire market ecosystem.

Second, there’s extreme price volatility. Prices for minerals like lithium, nickel, or rare earths swing far more violently than oil and gas. For producers, this creates asymmetric risk — if you undersupply the market, you may lose some profit. If you oversupply, you may go bust. That asymmetry deters the investment we need to expand supply when quantities are low and prices are high, preventing the market from clearing.

The third problem is that we don’t really have market infrastructure for critical minerals. For oil, we have futures exchanges, benchmark prices, and deep liquidity. For most critical minerals, we don’t. Transactions are opaque, bilateral, and heavily distorted by state intervention, especially China’s. Markets don’t provide price discovery, and producers and consumers don’t have hedging tools. Investors lose confidence in these markets and walk away.

All together, we have chronic underinvestment, chronic gaps between supply and demand, and chronic vulnerability to geopolitical shocks. Those are the problems.

Jordan Schneider: Daleep, let’s dig deeper into the market infrastructure piece. What does this mean in practice — that it’s not like WTI, Brent, or something similar?

Daleep Singh: If you’re a producer, you need tools to manage price volatility. When prices fall dramatically, you need the ability to continue generating revenue to stay liquid. You need futures markets and option markets that you can use to hedge against downside price risk. Right now, if you’re a critical minerals producer for most of the minerals that matter for our economic security, you don’t have that option.

You also need price discovery — to know where prices are in the market. We really don’t have genuine price discovery from any of these markets. China can decide, just by virtue of its dominance in supply, where it wants the price to settle. If it wants that price to settle at a level that wipes out the competition, that’s its choice. That’s not a market.

Arnab Datta: One quick piece to add is that the market infrastructure problem Daleep mentioned was really an intentional strategy by China. In addition to very robust industrial policy that provided substantial subsidies to producers and refiners, they stepped into the market infrastructure gap that was retreating in the West, particularly after the global financial crisis.

When you saw liquidity leave Western markets partly because of regulations passed during that time, China seized the opportunity. They built exchanges and benchmark contracts on Chinese exchanges so they could control that market infrastructure and how these prices were constructed.

Peter Harrell: I’d add two important pieces.

First, America’s dependence on China for rare earths is actually a relatively new problem. Historically, going back several decades, the US actually produced, mined, refined, processed, and manufactured plenty of rare earths in the 1950s, 1960s, really through the 1980s and into the 1990s.

It was in the 90s and 2000s — the era of peak globalization — where China successfully expanded its rare earth refining in particular. You saw Chinese firms begin to outcompete American firms, and a real decline in US manufacturing related to this consolidation of Chinese control. This isn’t because the US never made rare earths. This is really a problem of economics that emerged in the 90s and 2000s.

Second, we saw just a couple of months ago the critical risk that dependency on China for rare earths gives us, because it became part of the trade war Trump launched with China. Back in April, China retaliated by threatening to — and then actually — cutting off its exports of rare earths to the US, which had the potential to really impact manufacturing here. It became much less of a hypothetical long-term risk and much more of an immediate threat that could actually hurt the United States in the near term because of how China responded to Trump’s trade war in April.

Arnab Datta: Just to add to the WTI comparison — if you think about how WTI is priced, it’s a physically cleared contract. You’re purchasing a barrel that will be delivered at Cushing, Oklahoma. The pricing incorporates pipeline transport, logistics, and a whole infrastructure of traders, logistics providers, and port managers — all of that goes into the price of that physically delivered barrel at Cushing.

That’s something we just don’t have in the context of many of these newer metals markets. It’s very difficult to properly price a material when the only analog you have is a Chinese benchmark that potentially has very different constraints and very different characteristics.

Strategic Resilience Reserve

Jordan Schneider: This became very acute a few months ago when Trump imposed tariffs. Something that people have been talking about in Washington for literally 20 years — China using its role in the global rare earth export market to punish countries for doing things they don’t want — finally manifested. Trump walked back, and now we have this as a central thing that China and the US are tussling over.

Peter, Daleep, you guys aren’t dumb. You knew this was an issue. People have been writing about this for a very long time. What is the activation energy required in the 21st century to do the kind of industrial policy necessary to really change the dynamics on an issue like rare earths? Why have we only seen small, half-formed efforts until spring and summer 2025?

We have a Washington that has talked about the problem for a very long time now starting to spend nine and ten figures to address it in a more direct way than the incremental efforts folks had been pursuing. Peter, talk us through this deal. What came out of the Trump administration and the DoD over the past few weeks?

Peter Harrell: As you said, this isn’t a new problem. Policymakers have been aware for more than a decade that there was US dependency on China for rare earths. The Chinese had cut off their exports of rare earths to Japan back in 2011 or 2012. We’d actually seen the Chinese execute this playbook once before on an allied country.

This isn’t a new problem, and it’s not that there were no efforts to deal with this issue prior to the deal that the Defense Department announced in July. There were some efforts — previous grants, including to MP (the company that got the deal in July) to try to restart manufacturing and processing of rare earths in California where there’d been a longtime US mine. Actually, the mine had reopened in 2017.

There had also been some grants to other companies and universities to look at other ways of mining and processing rare earths — for example, to extract them from mine tailings in West Virginia. There had been some government money to try to sponsor innovation to reduce dependencies on rare earths, maybe create magnets and other products that you need rare earths for but without actually needing the rare earth elements.

There had been some policy processes and policy money put into trying to address this problem. But there were a couple of challenges with those prior efforts. First is just the scale of the effort. Frankly, the way Washington works, until there is a very acute crisis, it can be hard to mobilize the scale of effort that is actually needed to solve it. These prior efforts were much smaller in dollar spend and scope because the crisis seemed less acute. That’s just a political reality of how Washington works.

Second, this is a very complex issue. I don’t even think this new DoD deal with MP is going to be the whole solution. It’s going to require several parts. It is, in fact, a very complex issue.

Third, related to mobilization: solving a problem like this is going to cost money. You get into big debates about who should pay for it — should US taxpayers come up with the money, or should you make the private sector bear these costs? That adds to why it takes time. It’s not that there was nothing — there was some foundation that this deal is now building on. Not that there was nothing before, but Daleep, I’d welcome you defending our work together in the Biden administration.

Daleep Singh: Jordan, I appreciate you suggesting that we’re not dumb. That’s nice — we don’t always get that. But look, there have been piecemeal efforts to funnel public money toward private sector companies that could help produce minerals we need. What we haven’t done is fix the market. That’s where we are now.

I started thinking about reimagining the Strategic Petroleum Reserve into a Strategic Resilience Reserve for 21st-century vulnerabilities.

When prices crash and China continues to flood the market, we have this recurring problem of producers going bankrupt.

A Strategic Resilience Reserve could be a buyer of last resort or provide bridge financing to companies that are solvent but illiquid. That’s what could allow producers to keep producing during downturns and keep production capacity alive.

What can we do about investors not having confidence in these markets? If you don’t have futures markets and hedging markets, and refiners can’t lock in predictable revenues, could a Strategic Resilience Reserve step in with tools like selling a put option that allows you to make money when prices fall? Could it provide a price floor or some type of demand guarantee? The point is: can you create enough certainty for private capital to keep flowing?

What do you do about concentration risk? Even with a deal like MP, no country is going to mine its way to self-sufficiency when we’re up against what China has. But we do have producers and miners in places like Canada, Australia, and Finland. They’re hesitating to expand production because they know China can tank prices tomorrow.

An SRR, if we got that authorized, could provide demand backstops and offtake agreements. Could it intervene in the market so that producers in allied countries know they’re not going to go bankrupt if Beijing floods the market? That’s the idea we’ve started to develop over time — probably with some mistakes — to change the market itself rather than a series of ad hoc transactions that don’t alter the economics.

Jordan Schneider: SRR — a Strategic Resilience Reserve — a topic we’ll get to in a few moments. I’d also like to say in defense of the last 20 years of American policymaking that this was a latent threat, and the trajectory of US-China relations that made this become an actual threat has manifested relatively recently.

The fact that the Biden administration was able to “get away” with imposing semiconductor export controls, implementing big tariffs, essentially banning Chinese electric vehicles, and a handful of other tariffs without triggering this response is important to recognize. This is only a problem in the context of the US-China diplomatic relationship. Without that relationship souring, then we just get to use some subsidized magnets and the world moves on.

Peter, what was your thinking about trying to inch forward with more and more aggressive economic tools while seeing things bubbling up in terms of new Chinese legislation but not wanting them to hit back for the efforts you were making?

Peter Harrell: When I think about how one can solve a problem like our dependency on China for rare earth elements — and then we can unpack what this deal will and will not do — you need to think about several different categories of policy tools that you need to mesh together to solve the problem.

We’ve had this history in American industrial policy over the past decades where we’ve focused almost exclusively on what you might think of as supply-side industrial policy. We’ve given grants to companies to build a factory or a mine to do something. In some cases, that can be sufficient because the problem we need to solve is one of startup costs. It costs more to get something off the ground in the United States, and you can provide a capex incentive to help get it off the ground.

But when you look at China’s dominance of rare earths — where they not only have already spent a lot of capex, but their operating expenses are lower than in the United States and they control the market infrastructure — if you want to break China’s control here, you can’t solve it simply with our own capex.

You also need to think about the market infrastructure, as Daleep says, and you need to think about what the demand side looks like. If US operating costs for producing rare earths are going to be higher than they are in China, you have to find some demand for that higher-cost US product. Otherwise, US companies are going to keep buying Chinese products because the Chinese products are going to be cheaper.

You need to create a market infrastructure that’s going to ensure stable demand for the US-made product. Layering these things together — these different sets of policy tools to address the different parts of the chain — is not something the US government has done in a long time. You have to get your reps in and spend some time in the gym before you can do it.

Daleep Singh: Peter and I used to sit in the part of the White House that was straddling economics and national security. For most of us, very early on in the term we understood — especially as Russia’s forces were mounting on Ukraine’s border — that we’re going to be in this incredibly contested geopolitical environment for the rest of our lives. China and Russia have now made it very clear and revealed they’re going to challenge the US-led order everywhere. Because today’s great powers are nuclear powers, our expectation became that this competition is going to play out mostly in the theater of economics, energy, and technology.

The question was, if we’re going to prevail, how can we harness the financial firepower of the world’s most dynamic financial system to advance strategic objectives? Do we have the right tools, do we have the right institutions to overcome this short-term profit motive that drives most of what’s going on on Wall Street? The answer is no. As time went on and we started to have time to breathe, we started to think about new ideas. That’s where the Strategic Resilience Reserve came up. We also started to think about whether the US should have a sovereign wealth fund. These are all ideas trying to solve the same problem: the private sector systematically underinvests in exactly the kind of projects that matter most for our economic security and for our national security.

Can the Deal Create a Market?

Jordan Schneider: What does this MP Materials deal do? What is interesting and exciting about it? And why is it not the systemic solution that Daleep craves to manifest?

Arnab Datta: One thing this deal does is treat the problem holistically. Peter mentioned that you need a mix of supply and demand side tools. The administration deserves credit for using the DPA, the Defense Production Act, in a robust way. They are applying a toolkit that includes loans, equity investments, price floors, and a guaranteed contract for offtake for the finished product. That’s just a recognition. Ultimately, if we’re going to deal with this problem over the next one year, five year, ten year, decades, we need a robust toolkit and we need a mechanism by which we can address these very challenges.

Jordan Schneider: Arnab, briefly, who did this? This is very sophisticated, impressive work. It’s a lot of puzzle pieces which haven’t been put together in a very long time.

Arnab Datta: It was done through the Defense Department. It pairs a number of different authorities. I would say the most creative, atypical interventions were through the Defense Production Act — this is Title 3 of the Defense Production Act. It has very wide authority attached to it. Peter did a recent piece in Lawfare examining this, but it basically allows you to engage in a number of different transaction types to achieve the goal of building our defense industrial base. There’s also some capital from the Office of Strategic Capital. That’s where the loan is coming from.

One thing to keep in mind is that some of these appropriations are not spoken for. Over time you could imagine funding coming from different parts of DoD from the national defense stockpile. They’re going into this with the commitment and a very clear interest and effort in continuing with this deal. But there are some risks and there’s also some structural challenges with this deal that I’d be happy to go into as well.

Jordan Schneider: Peter, give us the flip side. What doesn’t this accomplish and solve?

Peter Harrell: Let’s first walk through what this deal is, because there was some news last month when it came out. I think a lot of the news focused on the fact that the Defense Department, as a piece of this deal, was taking equity in MP Materials, which now looks like a precursor for the Trump administration going out and taking equity in Intel and maybe a whole bunch of defense companies and everything else. I think that was the piece that attracted the news. But the deal is a fairly complicated deal that has a couple of different parts.

Part one of the deal is the government gave MP Materials, this mining company, some loans and then some cash as part of the equity stake to expand its mine in California, not that far from Las Vegas — Las Vegas is the nearest big airport to this mine, but it’s in California. To expand production at the mine and then relatedly to expand and build a new facility to take some of the rare earths being produced in this mine and to manufacture them into magnets, because what we need is not raw rare earths. What you need are magnets that go into motors and turbines and all kinds of other things. There’s almost no magnet manufacturing in the US and in fact, previously this mine had been producing rare earth ore and then selling it to China to be made into magnets there.

Part of this is a capital injection to MP to expand the mine and to build some magnet processing — expand some magnet manufacturing capability here in the United States. They’re doing that with both a debt and equity stake.

Another part of this deal is the Defense Department set a price floor for the raw rare earths, where the Defense Department has guaranteed that when MP is mining and doing initial processing for the raw rare earths, it now has a guaranteed minimum price, which by the way, is about twice what the current Chinese market price is.

That’s how you guarantee that it’s economical for MP to make this stuff over the next ten years. Because DoD said, “Even if the market price is $54,” which is about what I think it is today, “We’re going to guarantee a price of $110 per kilogram. We’ll pay you the difference between $54 and $110 per kilogram.” You have this price floor for the minimally processed rare earths. Then on the magnet side, DoD also said, “We’ll buy all of your magnets. You can produce these magnets for the next ten years, and we’ll buy all of them.”

There are some interesting pieces, such as if DoD and MP jointly agree that some of the magnets can be sold to buyers other than DoD, then there will be some profit sharing and other provisions. But it’s actually a pretty complicated deal with interrelated parts, which very clearly does ensure the viable business for the next decade of MP. MP gets capital injection. MP gets a guaranteed price floor for its rare earths concentrates — minimally processed rare earths. And then MP has a guaranteed buyer for its magnet.

MP is taken care of for the next decade and will be able to scale up production of both the minimally processed rare earths and probably of magnets.

But that doesn’t mean we have a market here. What we have is a market for MP.

That’s where I think there’s some interesting questions about this deal. Are we right to bet all in on MP as a national champion, or should we be thinking more systemically about the markets and less about how we guarantee the success of this particular firm? Arnab, I know you have a lot of thoughts on that piece of it.

Arnab Datta: We have a forthcoming article on the topic. We’re hoping to get it into Alphaville there, but they’re working it up the chain. We’re not fully signed off.

Jordan Schneider: In this piece, Peter and Arnab, you point out that this is similar to Chinese industrial policy circa Mao era, not the version 2.0. You’re picking one winner. And by the way, this company is probably not the best managed company in the world, as opposed to the way that China does it, where you have lots of firms fight it out to be the top dog.

Once you whittle it down to not one, but five or seven, then you start really turning on the jets and pouring on the money to secure your position in the global marketplace. As Daleep alluded to, this is also a concern with Intel.

For what it’s worth, I do think that manufacturing at the leading edge probably doesn’t support as many entrants as opposed to just building some mines and making some batteries. But, there does seem to be some tricky incentives and a lot of risk that their head of mining doesn’t go to a Coldplay concert with their head of HR or something. Daleep, where are you on this as an approach?

Daleep Singh: It makes me think of Intel a lot and I realize that we’re talking about very different markets, but I have the same take on it. Let’s actually pivot for a moment to Intel. There definitely needs to be government intervention in both of these markets. With leading edge semiconductors, we don’t produce any of them. Intel’s the only US firm capable of making them. But it has no customers and without customers, Intel can’t scale its unit cost efficiency — remains low and its competitiveness lags. Market forces aren’t going to solve that problem, nor will it solve the problem for MP.

But what gets interesting is instrument choice. What I worry about is ad hoc improvisation about what tools of industrial policy to use for particular sectors with a different context and a different kind of problem to solve. What I come back to is the systematic stuff. We do need a playbook, a governance structure, a doctrine for industrial policy. Start with the strategic objective. What problem are we trying to solve? Whether it’s MP or Intel or any other company, what is the market failure? Is it a shortfall of demand? Is it a capital constraint? Is it a cost differential? Is there a coordination problem? Is there some national security externality?

Then the third step is: pick the policy instrument that remedies the failure. Don’t default to equity injections or subsidies if the problem is demand, for example. Can you actually intervene? This goes to Peter’s analysis on MP. Does the intervention sustain competition and does it avoid a single point of failure? I would try to avoid substituting a foreign monopoly for a domestic point of failure. Can you tie the support to milestones, objective milestones, so that you can claw back the support you’re giving from taxpayers if they underperform? Can you sunset the support to avoid permanent dependence?

The last thing is how are you measuring the strategic return? What is the metric for success with this deal? It can’t just be for financial gain. How are we going to measure the benefit in terms of resilience, security, technological edge? That’s what’s missing for me. Maybe it’s out there somewhere, I just haven’t heard it.

Arnab Datta: I’d add to that a couple of things. This is a national champion that’s crowned without contest. We do have a pretty robust, vigorous competitive process folding out right now in the magnets space. There are other companies. MP Materials has the Mountain Pass Mine, but it has never produced a commercial magnet. It has not sold a rare earth magnet at commercial scale. When you think about the challenges that go into selling commercially — automotive is a major purchaser of these magnets — you need to get your production facility warranted. That’s a long process. There’s no sense right now — we don’t know they could get warranted for automotive. They might not. It’s a very challenging process.

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We do have competitors that are innovating. There’s a company, Niron Magnetics, that’s based out of Minnesota, they’ve produced a rare earthless magnet. This is the best of America in my opinion. You’re innovating yourself out of this vulnerability. I don’t know if Niron can scale at this point to the commercial scale that we need. But I also don’t know about MP Materials. When you start to get into some of these policy questions about is this intervention in this single company the right one, it raises a lot of secondary thorny issues.

This is a bet on vertical integration for rare earth magnets, that’s what they’re trying to build here. With MP Materials, that might be a good thing. A lot of the Chinese champions are vertically integrated, but there’s also a world where vertical integration on its own creates its own vulnerabilities. We see this a lot in the metals space where when we need to increase production because of some challenge, it’s not the vertically integrated producers that are responding quickly to price swings. It’s the marginal producers, the independent producers. This is something very common in metals markets. It’s something very common in the oil sector as well. These are really important policy questions.

My biggest concern globally with this deal is I don’t know what that reasoning is. It’s possible there are very well thought through reasons, but these are things that need to happen with some kind of a process that has technocratic democratic legitimacy to it. That’s why Daleep talking about the systemic solution is really important because we do need to make sure that these decisions are made in that context. I am not opposed to equity investments of all kinds. I think it’s an important tool for the government to have. It lets you push the risk frontier for your investments. If you’re a program, it lets you participate in the upside. But that needs to be done in a very thoughtful way. It’s a very powerful tool and we need to think about whether we are inculcating the things that make the American system dynamic — competition, innovation, technological innovation.

Daleep Singh: Can I ask Jordan, what is the exit strategy from the MP deal? Is it tied to production capacity or profits? How is the government going to sell down its public stake if at all?

Peter Harrell: The SEC filings talk about the government taking the stake. The government has also, in addition to the price floor, the guaranteed offtake agreement for the magnets. A belt and suspenders approach also guaranteed MP an annual profit of $140 million a year, which the government will pay as a cash payment if it’s not generated from the operations of the company. Presumably the government is intending to hold its equity for at least the ten year duration of the other elements of this deal. But there’s no specific language in the SEC filings about the government’s exit plan. It’s about the equity and then the duration of these other parts of the deal, which is a decade.

Arnab Datta: It’s structured as a ten year deal. I think ultimately the expectation is that the price floor and the offtake agreement will end at that point. But there’s no protection against the dependence. How do we stop this from becoming something that’s permanently dependent on this subsidy? It’s not clear.

It also doubles down on the Chinese market infrastructure. The benchmark that they are using is the Asian metals benchmark. That brings in the risk of manipulability too. China can bleed DoD for hundreds of millions more by flooding the market. How long is Congress expected to continue appropriations for that? These are not paid for. The one thing that was very clear in the 8-K is that they don’t have appropriations for all of this. How long can we expect Congress to keep paying? I think it is a very reasonable question as well.

Maximalist Industrial Policy

Jordan Schneider: I want to have this strategic question. What are reasonable goals over a three-year, five-year, or 10-year horizon when it comes to rare earths in particular. More broadly, what types of things would you want the Strategic Resilience Reserve to touch on?

Arnab Datta: There are a couple of key objectives that we’re trying to build here.

First, can we build a governance structure that is independent, technocratic and driven by market realities and not by political exigencies or other factors?

Second, can we build that robust toolkit that we talked about earlier for different markets? Rare earths we’ve talked about have particularly unique needs. They’re smaller than some of the bigger metals markets. We can’t be sure that you need a futures market for every rare earth that is on the market. But that’s a major goal as well.

Third, I would say the explicit purpose of what we’re trying to do here is build that competitive market. Are you supporting the buildout of a market infrastructure that is tied to market dynamics that US and allied producers face? Are we doing lending with intermediaries that can engage in more trading activity because they’ve got the leverage that left the market in the 2000s and 2010s, as I described? That’s an important piece of it because over five to ten years, if we can have a more stable market infrastructure for US and allied producers that reflects the costs they face, the logistical challenges they face, ultimately you’ll have a better stable foundation in place for those producers to compete.

Jordan Schneider: Beyond solving the market plumbing for things that would fall into strategic resilience, what is the big bold version of the systemic and thoughtful way to do the sorts of things that we’ve seen over the past few months with MP and Intel and we’ve seen over the past few years with the CHIPS Act and the IRA?

Daleep Singh: The maximalist version is a sovereign wealth fund. If you believe that the private sector systematically underinvests in projects that we need most for economic security and national security, then we’re not going to invest as a country at pace and scale to build fusion plants, dozens of semiconductor fabs, next-generation lithography, 6G telephony, or advanced geothermal. We’re also not going to invest enough in old economy sectors where we need to blunt a competitive disadvantage. Think about shipbuilding, or, lagging-edge chips, or mining.

What all of these projects share in common is that they require a lot of upfront capital and they require a decade or more of patience to generate a commercially attractive return. You need a huge tolerance for risk and uncertainty. The private sector venture investors, in particular, but also corporate America, are not likely to touch these in the size that we need them to because they’ve got plenty of other opportunities to make faster, higher, less risky returns. That’s why we have this valley of death right between breakthrough research and commercial scale.

I think the maximalist way to solve this problem is to create a flagship investment vehicle that gives the US patient, flexible capital, that can step in where markets won’t and that can crowd in private investment and back projects with genuine strategic value. That’s the case for a sovereign wealth fund. It’s not about picking winners, though. It’s about picking supply chains and technologies where our national security and our economic resilience are at stake.

It’s premised on the idea that left to itself, the US’ financial system is not designed to maximally align with our national interests. We need to intervene.

Jordan Schneider: I remember first reading you and Arnab’s piece on this a few years ago and thinking that was unlikely, but now Trump is into it. I wonder if it wasn’t called a golden share if he would have been as excited about this concept. But you do enough one-off ones and then you also learn that there are mistakes in the one-off ones and that you aren’t getting a systemic solution. It can go both ways. Either you give up on the project entirely or, given that the broader strategic purpose for these things keeps rearing its ugly head, you start to think in a larger and more systematic way at attacking these problems.

Let’s go level down. How are we funding this? What’s our governance structure? How’s the democratic involvement?

Daleep Singh: Whether you’re focusing on the MP deal or the 10% stake in Intel or the 15% revenue share from Nvidia or the golden share in Nippon, the point is we have a choice. Either we can improvise and experiment or we can develop a framework. Because I think the problem with improvisation is that if we just reach for different levers — an equity stake here, a profit share there, a golden share somewhere else — if we don’t have an overarching framework for why we’re using these tools and when and how and to what extent, I worry that this has the makings of a political piggy bank and a national embarrassment.

I understand some degree of experimentation is going to be needed. We haven’t done industrial policy in 40 years, and the muscles have atrophied. I get it, let’s take small steps and learn from those steps and then recalibrate. But I’m not in favor of ad hoc capitalism with American characteristics because that’s inevitably going to pick favorites and distort incentives.

You’re asking the right question. How do you govern a sovereign wealth fund or a Strategic Resilience Reserve the right way? How do you fund it? On the sovereign wealth fund idea, my thinking is we’re asset rich as a country. The federal government owns about 30% of the land. We have extensive energy and mineral rights. We own the electromagnetic spectrum. We have infrastructure assets all over the country. We’ve got 8,000 tons of gold that’s valued at 1934 prices. We’ve got $200 billion of basically money market assets that are sitting idle. The question is, are we maximizing the strategic bang for the buck on those assets? I would say no. That’s one potential source of funding.

You could also create new revenue streams to fund the vehicle. If you think that the US has too much Wall Street and not enough Main Street, that we financialize the economy into a series of boom-bust asset cycles, then let’s raise revenues from financial activities that serve no strategic purpose. I would say high frequency trading, for example, and fund vehicles that are explicitly designed to advance our national interests.

Jordan Schneider: As long as we stay away from fixed income.

Daleep Singh: Exactly. That’s untouchable. But the most appealing approach is the most straightforward one: ask Congress, be straight up about it. Ask Congress to seed the fund, authorize its existence as an independent federally chartered corporation authority. This is too important to leave entirely to the executive branch and have Congress set a clear mandate in terms of the objectives, the metrics for success, the oversight, the democratic accountability which Arnab was pointing at earlier. It’s a shame we didn’t do this ten years ago when our cost of capital was near zero. That would have made this effort far more affordable. But this is about our long-term national competitiveness. We don’t need to try to time the market.

Arnab Datta: One model that we think about a lot at Employ America is the Federal Reserve. The Federal Reserve has an independent board still, knock on wood. But that’s a structure that is well insulated from political day-to-day activities. It is not a 51-49 majority power structure. It has staggered terms, which, in my opinion, lends itself to depoliticization that’s helpful and has served us well over time.

In terms of the congressional point that Daleep made, we have had a version of this. We’ve worked with Senator Chris Coons’ office since 2020 on his proposal to establish an Industrial Finance Corporation. This is modeled off of the Reconstruction Finance Corporation that we had in the 30s, 40s, and 50s. We had then-Senator Vance on as a co-sponsor. I don't think the political viability of something like that is small. The way we structured that was we appropriated capital to it as a backstop against the borrowing that the corporation could do itself. This corporation could go out and raise capital by raising bond capital and then deploy that capital towards these investments that Daleep mentioned.

One value add about that is you don’t need to compete with the private sector on the rate of return, but you can generate a rate of return. Ultimately that type of a structure could pay for itself. There are a lot of technical accounting rules related to how you would structure that, particularly the Federal Credit Reform Act would come into play. But that is a structure that I think could be viable over time and we have the money to do it. Ultimately because a lot of these investments would be productive over 5, 10, 20 years, I think it would pay for itself.

The Right Tools for Intel

Jordan Schneider: I can’t let you guys leave without a few more Intel takes.

Arnab Datta: I’ve seen two separate conversations happening. One is on the legality of this and another on the policy justification. Peter did an excellent piece in Lawfare that came out a couple of days ago. This is possibly legal in a very technical sense, but does probably violate the spirit of the CHIPS Act in that the CHIPS Act is intended to incentivize manufacturing investments — they are giving this money to Intel but relinquishing most of those requirements. Earlier, we talked about milestones that companies should have to meet. Intel had a bunch of milestones attached to this money. They couldn’t get it all until they reached those milestones. They now have this capital, but they don’t have to meet those milestones. I think that’s a big problem.

Separate from the legality of the policy proposal here, why was this the best way, best thing for Intel? It’s not clear. As Daleep mentioned earlier, they need customers. An equity investment is not going to help them in that sense. For all I know, the share price could go down and our investment could go down because they can’t find customers. I think it’s a big problem that we’re not approaching the question of how can we make Intel more competitive? We seem to be approaching it in an ad hoc way — how can we get the best for our dollar in the form of a deal, an equity deal.

Daleep Singh: That’s my main concern — the right tools here. I agree with the intervention, but the right tools have to come from the demand side. Procurement guarantees, offtake agreements, sourcing mandates — all of those ideas make a lot of sense to me. It’s not clear how the equity injections fill the demand gap.

When you make upfront equity investments, you are foregoing optionality. I would have liked to see warrants or options that are tied to success. In general, I think policy support should be conditional. Conditional on whether you’re reducing unit costs or diversifying customers or hitting your production capacity targets. I do like the idea of clawbacks. The government has lost a lot of optionality with an upfront common equity injection. Maybe there’s a lot in the fine print that we don’t understand, but that’s what I found lacking.

Peter Harrell: I just echo what Daleep and Arnab said. The specifics of this deal are troubling. The idea of policy support, financial support to have onshoring of US semiconductors — clearly needed, clearly broad, bipartisan support. The idea that we shouldn’t be dependent on TSMC, the Taiwanese semiconductor firm for leading edge manufacturing, I think also has bipartisan and sensible policy support. You want to have some competition and some optionality at the leading edge of semiconductor manufacturing.

But what this deal did was take a grant in which Intel was getting $11 billion in exchange for Intel investing — call it $80 billion in fabs over the next decade. Intel was going to get the $11 billion in tranches as it built the fabs. If it failed to build the fabs, there was going to be a clawback. Now Intel is getting about $9 billion of the dollars in exchange for the stock. Plus they have to complete building certain DoD specialty lines.

Most of the obligations to build fabs went poof, and they got the cash in exchange for stocks.

I get why Intel might have done it. They get cash that’s largely unrestricted. They dilute their existing shareholders, but they probably decided the cash is worth it for us to do whatever we want with it. Reasonable call from Intel.

Arnab Datta: I’m also thinking about warrants. They’re using, in all likelihood, something called other transactions authority to legally justify the use of this deal. Other transactions authority is an incredible gift to the Commerce Department to be able to design very diverse mechanisms for policy here. In my opinion, wasting it on this equity investment that has little attached to it is a real mistake. They could put some effort into something creative that did go to the root of the problem about customers, and they’re squandering it, in my opinion.

Jordan Schneider: I think what you all said makes sense under a normal presidency living in the year of our Lord 2025. The way Intel survives is it gets customers, and the way it gets customers is Trump terrifies CEOs. If 10% of the company is what Trump can do to terrify CEOs, then all right, we’ll see. When we were talking earlier about MP Materials, it’s really not rocket science. You could have a beauty pageant with five different companies all trying to mine different places and have something. There’s one horse in this race and at a certain point you have to hope that they can execute as long as the demand’s there.

My sense and hope is that having a golden share owning 10% — Trump will care and be more invested and put more of his cycles and wrath into rounding up a handful of people who are going to spend the time to deal with Intel and help them get back on track. Regardless of whether it was warrants or a grant or equity, whether or not Intel is able to catch back up to TSMC is going to be a function of execution. And a president turning the screws on US fabless customer companies to play ball with Intel. The fact that Trump is caring about this and is focused on this, I would not have priced in completely from the get-go. He was literally talking about having to fire Pat Gelsinger — probably the only man who could, the person who I trust more than anyone else on the planet to actually execute this right who doesn’t work at TSMC currently. I’m more bullish on this than you guys are.

Arnab Datta: Can I offer one pushback on that, Jordan? One thing I would say is yes, there is a tremendous focusing mechanism — companies will, you saw this with MP where just a few days after the announcement Apple signed a big deal with them, a $500 million deal. The thing I would say is at some point the market has to trust that Trump’s commitment to this company will continue. President Trump is not going to be president forever. Intel is not going to be operating only on a four-year timeline. At some point Intel is going to require commitments from other companies and at some point they might turn and say this guy’s not going to be president anymore. We’ve got someone else to please here.

Certainly I take your bullish case. But Intel can’t survive only on that. They need an outside market and they need potentially capital from external sources down the line. At some point we’re going to be in a post-Trump world and it could look very different for Intel.

Mood Music:

8VC is hosting a meetup for ChinaTalk this coming Thursday. Sign up here if you can make it!

Ryan Julian is a research scientist in embodied AI. He worked on large-scale robotics foundation models at DeepMind and got his PhD in machine learning in 2021.

In our conversation today, we discuss…

• What makes a robot a robot, and what makes robotics so difficult,

• The promise of robotic foundation models and strategies to overcome the data bottleneck,

• Why full labor replacement is far less likely than human-robot synergy,

• China’s top players in the robotic industry, and what sets them apart from American companies and research institutions,

• How robots will impact manufacturing, and how quickly we can expect to see robotics take off.

Listen now on your favorite podcast app.

Embodying Intelligence

Jordan Schneider: Ryan, why should we care about robotics?

Ryan Julian: Robots represent the ultimate capital good. Just as power tools, washing machines, or automated factory equipment augment human labor, robots are designed to multiply human productivity. The hypothesis is straightforward — societies that master robotics will enjoy higher labor productivity and lower costs in sectors where robots are deployed, including in logistics, manufacturing, transportation, and beyond. Citizens in these societies will benefit from increased access to goods and services.

The implications become even more profound when we consider advanced robots capable of serving in domestic, office, and service sectors. These are traditionally areas that struggle with productivity growth. Instead of just robot vacuum cleaners, imagine robot house cleaners, robot home health aides, or automated auto mechanics. While these applications remain distant, they become less far-fetched each year.

Looking at broader societal trends, declining birth rates across the developed world present a critical challenge — How do we provide labor to societies with shrinking working-age populations? Robots could offer a viable solution.

From a geopolitical perspective, robots are dual-use technology. If they can make car production cheaper, they can also reduce the cost of weapon production. There’s also the direct military application of robots as weapons, which we’re already witnessing with drones in Ukraine. From a roboticist’s perspective, current military drones represent primitive applications of robotics and AI. Companies developing more intelligent robotic weapons using state-of-the-art robotics could have enormous implications, though this isn’t my area of expertise.

Fundamentally, robots are labor-saving machines, similar to ATMs or large language models. The key differences lie in their degree of sophistication and physicality. When we call something a robot, we’re describing a machine capable of automating physical tasks previously thought impossible to automate — tasks requiring meaningful and somewhat general sensing, reasoning, and interaction with the real world.

This intelligence requirement distinguishes robots from simple machines. Waymo vehicles and Roombas are robots, but dishwashers are appliances. This distinction explains why robotics is so exciting — we’re bringing labor-saving productivity gains to economic sectors previously thought untouchable.

Jordan Schneider: We’re beginning to understand the vision of unlimited intelligence — white-collar jobs can be potentially automated because anything done on a computer might eventually be handled better, faster, and smarter by future AI systems. But robotics extends this to the physical world, requiring both brain power and physical manipulation capabilities. It’s not just automated repetitive processes, but tasks requiring genuine intelligence combined with physical dexterity.

Ryan Julian: Exactly. You need sensing, reasoning, and interaction with the world in truly non-trivial ways that require intelligence. That’s what defines an intelligent robot.

I can flip your observation — robots are becoming the physical embodiment of the advanced AI you mentioned. Current large language models and vision-language models can perform incredible digital automation — analyzing thousands of PDFs or explaining how to bake a perfect cake. But that same model cannot actually bake the cake. It lacks arms, cannot interact with the world, and doesn’t see the real world in real time.

However, if you embed that transformer-based intelligence into a machine capable of sensing and interacting with the physical world, then that intelligence could affect not just digital content but the physical world itself. The same conversations about how AI might transform legal or other white-collar professions could equally apply to physical labor.

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Jordan Schneider: Ryan, why is robotics so challenging?

Ryan Julian: Several factors make robotics exceptionally difficult. First, physics is unforgiving. Any robot must exist in and correctly interpret the physical world’s incredible variation. Consider a robot designed to work in any home — it needs to understand not just the visual aspects of every home worldwide, but also the physical properties. There are countless doorknob designs globally, and the robot must know how to operate each one.

The physical world also differs fundamentally from the digital realm. Digital systems are almost entirely reversible unless intentionally designed otherwise. You can undo edits in Microsoft Word, but when a robot knocks a cup off a table and cannot retrieve it, it has made an irreversible change to the world. This makes robot failures potentially catastrophic. Anyone with a robot vacuum has experienced it consuming a cable and requiring rescue — that’s an irreversible failure.

The technological maturity gap presents another major challenge. Systems like ChatGPT, Gemini, or DeepSeek process purely digital inputs — text, images, audio. They benefit from centuries of technological development that we take for granted — monitors, cameras, microphones, and our ability to digitize the physical world.

Today’s roboticist faces a vastly more complex challenge. While AI systems process existing digital representations of the physical world, roboticists must start from scratch. It’s as if you wanted to create ChatGPT but first had to build CPUs, wind speakers, microphones, and digital cameras.

Robotics is just emerging from this foundational period, where we’re creating hardware capable of converting physical world perception into processable data. We also face the reverse challenge — translating digital intent into physical motion, action, touch, and movement in the real world. Only now is robotics hardware reaching the point where building relatively capable systems for these dual processes is both possible and economical.

Jordan Schneider: Let’s explore the brain versus body distinction in robotics — the perception and decision-making systems versus the physical mechanics of grasping, moving, and locomotion. How do these two technological tracks interact with each other? From a historical perspective, which one has been leading and which has been lagging over the past few decades?

Ryan Julian: Robotics is a fairly old field within computing. Depending on who you ask, the first robotics researchers were probably Harry Nyquist and Norbert Wiener. These researchers were interested in cybernetics in the 1950s and 60s.

Back then, cybernetics, artificial intelligence, information theory, and control theory were all one unified field of study. These disciplines eventually branched off into separate domains. Control theory evolved to enable sophisticated systems like state-of-the-art fighter plane controls. Information theory developed into data mining, databases, and the big data processing that powers companies like Google and Oracle — essentially Web 1.0 and Web 2.0 infrastructure.

Artificial intelligence famously went into the desert. It had a major revolution in the 1980s, then experienced the great AI winter from the 80s through the late 90s, before the deep learning revolution emerged. The last child of this original unified field was cybernetics, which eventually became robotics.

The original agenda was ambitious — create thinking machines that could fully supplant human existence, human thought, and human labor — that is, true artificial intelligence. The founding premise was that these computers would need physical bodies to exist in the real world.

Robotics as a field of study is now about 75 years old. From its origins through approximately 2010-2015, enormous effort was devoted to creating robotic hardware systems that could reliably interact with the physical world with sufficient power and dexterity. The fundamental questions were basic but challenging — Do we have motors powerful enough for the task? Can we assemble them in a way that enables walking?

A major milestone was the MIT Cheetah project, led by Sangbae Kim around 2008-2012. This project had two significant impacts — it established the four-legged form factor now seen in Unitree’s quadrupedal robots and Boston Dynamics’ systems, and it advanced motor technology that defines how we build motors for modern robots.

Beyond the physical components, robots require sophisticated sensing capabilities. They need to capture visual information about the world and understand three-dimensional space. Self-driving cars drove significant investment in 3D sensing technology like LiDAR, advancing our ability to perceive spatial environments.

Each of these technological components traditionally required substantial development time. Engineers had to solve fundamental questions — Can we capture high-quality images? What resolution is possible? Can we accurately sense the world’s shape and the robot’s own body position? These challenges demanded breakthroughs in electrical engineering and sensor technology.

Once you have a machine with multiple sensors and actuators, particularly sensors that generate massive amounts of data, you need robust data processing capabilities. This requires substantial onboard computation to transform physical signals into actionable information and generate appropriate motion responses — all while the machine is moving.

This is where robotics historically faced limitations. Until recently, robotics remained a fairly niche field that hadn’t attracted the massive capital investment seen in areas like self-driving cars. Robotics researchers often had to ride the waves of technological innovation happening in other industries.

A perfect example is robotic motors. A breakthrough came from cheap brushless motors originally developed for electric skateboards and power drills. With minor modifications, these motors proved excellent for robotics applications. The high-volume production for consumer applications dramatically reduced costs for robotics.

The same pattern applies to computation. Moore’s Law and GPU development have been crucial for robotics advancement. Today, robots are becoming more capable because we can pack enormous computational power into small, battery-powered packages. This enables real-time processing of cameras, LiDAR, joint sensors, proprioception, and other critical systems — performing most essential computation onboard the robot itself.

Jordan Schneider: Why does computation need to happen on the robot itself? I mean, you could theoretically have something like Elon’s approach where you have a bartender who’s actually just a robot being controlled remotely from India. That doesn’t really count as true robotics though, right?

Ryan Julian: This is a fascinating debate and trade-off that people in the field are actively grappling with right now. Certain computations absolutely need to happen on the robot for physical reasons. The key framework for thinking about this is timing — specifically, what deadlines a robot faces when making decisions.

If you have a walking robot that needs to decide where to place its foot in the next 10 milliseconds, there’s simply no time to send a query to a cloud server and wait for a response. That sensing, computation, and action must all happen within the robot because the time constraints are so tight.

The critical boundary question becomes: what’s the timescale at which off-robot computation becomes feasible? This is something that many folks working on robotics foundation models are wrestling with right now. The answer isn’t entirely clear and depends on internet connection quality, but the threshold appears to be around one second.

If you have one second to make a decision, it’s probably feasible to query a cloud system. But if you need to make a decision in less than one second — certainly less than 100 milliseconds — then that computation must happen on-board. This applies to fundamental robot movements and safety decisions. You can’t rely on an unreliable internet connection when you need to keep the robot safe and prevent it from harming itself or others.

Large portions of the robot’s fundamental motion and movement decisions must stay local. However, people are experimenting with cloud-based computation for higher-level reasoning. For instance, if you want your robot to bake a cake or pack one item from each of ten different bins, it might be acceptable for the robot to query DeepSeek or ChatGPT to break that command down into executable steps. Even if the robot gets stuck, it could call for help at this level — but it can’t afford to ask a remote server where to place its foot.

One crucial consideration for commercial deployment is that we technologists and software engineers love to think of the internet as ubiquitous, always available, and perfectly reliable. But when you deploy real systems — whether self-driving cars, factory robots, or future home robots — there will always be places and times where internet access drops out.

Given the irreversibility we discussed earlier, it’s essential that when connectivity fails, the robot doesn’t need to maintain 100% functionality for every possible feature, but it must remain safe and be able to return to a state where it can become useful again once connectivity is restored.

Jordan Schneider: You mentioned wanting robots to be safe, but there are other actors who want robots to be dangerous. This flips everything on its head in the drone context. It’s not just that Verizon has poor coverage — it’s that Russia might be directing electronic warfare at you, actively trying to break that connection.

This creates interesting questions about the balance between pressing go on twenty drones and letting them figure things out autonomously versus having humans provide dynamic guidance — orienting left or right, adjusting to circumstances. There are both upsides and downsides to having robots make these decisions independently.

Ryan Julian: Exactly right. The more autonomy you demand, the more the difficulty scales exponentially from an intelligence perspective. This is why Waymos are Level 4 self-driving cars rather than Level 5 — because Level 5 represents such a high bar. Yet you can provide incredibly useful service with positive unit economics and game-changing safety improvements with just a little bit of human assistance.

Jordan Schneider: What role do humans play in Waymo operations?

Ryan Julian: I don’t have insider information on this, but my understanding is that when a Waymo encounters trouble — when it identifies circumstances where it doesn’t know how to navigate out of a space or determine where to go next — it’s programmed to pull over at the nearest safe location. The on-board system handles finding a safe place to stop.

Then the vehicle calls home over 5G or cellular connection to Waymo’s central support center. I don’t believe humans drive the car directly because of the real-time constraints we discussed earlier — the same timing limitations that apply to robot movement also apply to cars. However, humans can provide the vehicle with high-level instructions about where it should drive and what it should do next at a high level.

Jordan Schneider: We have a sense of the possibilities and challenges — the different technological trees you have to climb. What is everyone in the field excited about? Why is there so much money and energy being poured into this space over the past few years to unlock this future?

Ryan Julian: People are excited because there’s been a fundamental shift in how we build software for robots. I mentioned that the hardware is becoming fairly mature, but even with good hardware, we previously built robots as single-purpose machines. You would either buy robot hardware off the shelf or build it yourself, but then programming the robot required employing a room full of brilliant PhDs to write highly specialized robotic software for your specific problem.

These problems were usually not very general — things like moving parts from one belt to another. Even much more advanced systems that were state-of-the-art from 2017 through 2021, like Amazon’s logistics robots, were designed to pick anything off a belt and put it into a box, or pick anything off a shelf. The only variations were where the object is located, how I position my gripper around it, what shape it is, and where I move it.

From a human perspective, that’s very low variation — this is the lowest of low-skilled work. But even handling this level of variation required centuries of collective engineering work to accomplish with robots.

Now everyone’s excited because we’re seeing a fundamental change in how we program robots. Rather than writing specific applications for every tiny task — which obviously doesn’t scale and puts a very low ceiling on what’s economical to automate — we’re seeing robotics follow the same path as software and AI. Programming robots is transforming from an engineering problem into a data and AI problem. That’s embodied AI. That’s what robot learning represents.

The idea is that groups of people develop robot learning software — embodied AI systems primarily composed of components you’re already familiar with from the large language model and vision-language model world. Think large transformer models, data processing pipelines, and related infrastructure, plus some robot-specific additions. You build this foundation once.

Then, when you want to automate a new application, rather than hiring a big team to build a highly specialized robot system and hope it works, you simply collect data on your new application and provide it to the embodied AI system. The system learns to perform the new task based on that data.

This would be exciting enough if it worked for just one task. But we’re living in the era of LLMs and VLMs — systems that demonstrate something remarkable. When you train one system to handle thousands of purely digital tasks — summarizing books, writing poems, solving math problems, writing show notes — you get what we call a foundation model.

When you want that foundation model to tackle a new task in the digital world, you can often give it just a little bit of data, or sometimes no data at all — just a prompt describing what you want. Because the system has extensive experience across many different tasks, it can relate its existing training to the new task and accomplish it with very little additional effort. You’re automating something previously not automated with minimal effort.

The hope for robotics foundation models is achieving the same effect with robots in the physical world. If we can create a model trained on many different robotic tasks across potentially many different robots — there’s debate in the field about this — we could create the GPT of robotics, the DeepSeek of robotics.

Imagine a robot that already knows how to make coffee, sort things in a warehouse, and clean up after your kids. You ask it to assemble a piece of IKEA furniture it’s never seen before. It might look through the manual and then put the furniture together. That’s probably a fantastical vision — maybe 10 to 20 years out, though we’ll see.

But consider a softer version: a business that wants to deploy robots only needs to apprentice those robots through one week to one month of data collection, then has a reliable automation system for that business task. This could be incredibly disruptive to the cost of introducing automation across many different spaces and sectors.

That’s why people are excited. We want the foundation model for robotics because it may unlock the ability to deploy robots in many places where they’re currently impossible to use because they’re not capable enough, or where deployment is technically possible but not economical.

Jordan Schneider: Is all the excitement on the intelligence side? Are batteries basically there? Is the cost structure for building robots basically there, or are there favorable curves we’re riding on those dimensions as well?

Ryan Julian: There’s incredible excitement in the hardware world too. I mentioned earlier that robotics history, particularly robotics hardware, has been riding the wave of other industries funding the hard tech innovations necessary to make robots economical. This remains true today.

You see a huge boom in humanoid robot companies today for several reasons. I gave you this vision of robotics foundation models and general-purpose robot brains. To fully realize that vision, you still need the robot body. It doesn’t help to have a general-purpose robot brain without a general-purpose robot body — at least from the perspective of folks building humanoids.

Humanoid robots are popular today as a deep tech concept because pairing them with a general-purpose brain creates a general-purpose labor-saving machine. This entire chain of companies is riding tremendous progress in multiple areas.

Battery technology has become denser, higher power, and cheaper. Actuator technology — motors — has become more powerful and less expensive. Speed reducers, the gearing at the end of motors or integrated into them, traditionally represented very expensive components in any machine using electric motors. But there’s been significant progress making these speed reducers high-precision and much cheaper.

Sensing has become dramatically cheaper. Camera sensors that used to cost hundreds of dollars are now the same sensors in your iPhone, costing two to five dollars. That’s among the most expensive components you can imagine, yet it’s now totally economical to place them all over a robot.

Computation costs have plummeted. The GPUs in a modern robot might be worth a couple hundred dollars, which represents an unimaginably low cost for the available computational power.

Robot bodies are riding this wave of improving technologies across the broader economy — all dual-use technologies that can be integrated into robots. This explains why Tesla’s Optimus humanoid program makes sense: much of the hardware in those robots is already being developed for other parts of Tesla’s business. But this pattern extends across the entire technology economy.

Jordan Schneider: Ryan, what do you want to tell Washington? Do you have policy asks to help create a flourishing robotics ecosystem in the 21st century?

Ryan Julian: My policy ask would be for policymakers and those who inform them to really learn about the technology before worrying too much about the implications for labor. There are definitely implications for labor, and there are also implications for the military. However, the history of technology shows that most new technologies are labor-multiplying and labor-assisting. There are very few instances of pure labor replacement.

I worry that if a labor replacement narrative takes hold in this space, it could really hold back the West and the entire field. As of today, a labor replacement narrative isn’t grounded in reality.

The level of autonomy and technology required to create complete labor replacement in any of the job categories we’ve discussed is incredibly high and very far off. It’s completely theoretical at this point.

My ask is, educate yourself and think about a world where we have incredibly useful tools that make people who are already working in jobs far more productive and safer.

China’s Edge and the Data Flywheel

Jordan Schneider: On the different dimensions you outlined, what are the comparative strengths and advantages of China and the ecosystem outside China?

Ryan Julian: I’m going to separate this comparison between research and industry, because there are interesting aspects on both sides. The short version is that robotics research in China is becoming very similar to the West in quality.

Let me share an anecdote. I started my PhD in 2017, and a big part of being a PhD student — and later a research scientist — is consuming tons of research: reams of dense 20-page PDFs packed with information. You become very good at triaging what’s worth your time and what’s not. You develop heuristics for what deserves your attention, what to throw away, what to skim, and what to read deeply.

Between 2017 and 2021, a reliable heuristic was that if a robotics or AI paper came from a Chinese lab, it probably wasn’t worth your time. It might be derivative, irrelevant, or lacking novelty. In some cases, it was plainly plagiarized. This wasn’t true for everything, but during that period it was a pretty good rule of thumb.

Over the last two years, I’ve had to update my priorities completely. The robotics and AI work coming out of China improves every day. The overall caliber still isn’t quite as high as the US, EU, and other Western institutions, but the best work in China — particularly in AI and my specialization in robotics — is rapidly catching up.

Today, when I see a robotics paper from China, I make sure to read the title and abstract carefully. A good portion of the time, I save it because I need to read it thoroughly. In a couple of years, the median quality may be the same. We can discuss the trends driving this — talent returning to China, people staying rather than coming to the US, government support — but it’s all coming together to create a robust ecosystem.

Moving from research to industry, there’s an interesting contrast. Due to industry culture in China, along with government incentives and the way funding works from provinces and VC funds, the Chinese robotics industry tends to focus on hardware and scale. They emphasize physical robot production.

When I talk to Chinese robotics companies, there’s always a story about deploying intelligent AI into real-world settings. However, they typically judge success by the quantity of robots produced — a straightforward industrial definition of success. This contrasts with US companies, which usually focus on creating breakthroughs and products that nobody else could create, where the real value lies in data, software, and AI.

Chinese robotics companies do want that data, software, and AI capabilities. But it’s clear that their business model is fundamentally built around selling robots. Therefore, they focus on making robot hardware cheaper and more advanced, producing them at scale, accessing the best components, and getting them into customers’ hands. They partner with upstream or downstream companies to handle the intelligence work, creating high-volume robot sales channels.

Take Unitree as a case study — a darling of the industry that’s been covered on your channel. Unitree has excelled at this approach. Wang Xingxing and his team essentially took the open-source design for the MIT Cheetah quadruped robot and perfected it. They refined the design, made it production-ready, and likely innovated extensively on the actuators and robot morphology. Most importantly, they transformed something you could build in a research lab at low scale into something manufacturable on production lines in Shenzhen or Shanghai.

They sold these robots to anyone willing to buy, which seemed questionable at the time — around 2016 — because there wasn’t really a market for robots. Now they’re the go-to player if you want to buy off-the-shelf robots. What do they highlight in their marketing materials? Volume, advanced actuators, and superior robot bodies.

This creates an interesting duality in the industry. Most American robotics companies — even those that are vertically integrated and produce their own robots — see the core value they’re creating as intelligence or the service they deliver to end customers. They’re either trying to deliver intelligence as a service (like models, foundation models, or ChatGPT-style queryable systems where you can pay for model training) or they’re pursuing fully vertical solutions where they deploy robots to perform labor, with value measured in hours of replaced work.

On the Chinese side, companies focus on producing exceptionally good robots.

Jordan Schneider: I’ve picked up pessimistic energy from several Western robotics efforts — a sense that China already has this in the bag. Where is that coming from, Ryan?

Ryan Julian: That’s a good question. If you view AI as a race between the US and China — a winner-take-all competition — and you’re pessimistic about the United States’ or the West’s ability to maintain an edge in intelligence, then I can see how you’d become very pessimistic about the West’s ability to maintain an edge in robotics.

As we discussed, a fully deployed robot is essentially a combination of software, AI (intelligence), and a machine. The challenging components to produce are the intelligence and the machine itself. The United States and the West aren’t particularly strong at manufacturing. They excel at design but struggle to manufacture advanced machines cheaply. They can build advanced machines, but not cost-effectively.

If you project this forward to a world where millions of robots are being produced — where the marginal cost of each robot becomes critical and intelligence essentially becomes free — then I can understand why someone would believe the country capable of producing the most advanced physical robot hardware fastest and at the lowest cost would have a huge advantage.

If you believe there’s no sustainable edge in intelligence — that intelligence will eventually have zero marginal cost and become essentially free — then you face a significant problem. That’s where the pessimism originates.

Jordan Schneider: Alright, we detoured but we’re coming back to this idea of a foundation model unlocking the future. We haven’t reached the levels of excitement for robotics that we saw in October 2022 for ChatGPT. What do we need? What’s on the roadmap? What are the key inputs?

Ryan Julian: To build a great, intelligent, general-purpose robot, you need the physical robot itself. We’ve talked extensively about how robotics is riding the wave of advancements elsewhere in the tech tree, making it easier to build these robots. Of course, it’s not quite finished yet. There are excellent companies — Boston Dynamics, 1X, Figure, and many others who might be upset if I don’t mention them, plus companies like Apptronik and Unitree — all working to build great robots. But that’s fundamentally an engineering problem, and we can apply the standard playbook of scale, cost reduction, and engineering to make them better.

The key unlock, assuming we have the robot bodies, is the robot brains. We already have a method for creating robot brains — you put a bunch of PhDs in a room and they toil for years creating a fairly limited, single-purpose robot. But that approach doesn’t scale.

To achieve meaningful impact on productivity, we need a robot brain that learns and can quickly learn new tasks. This is why people are excited about robotics foundation models.

How do we create a robotics foundation model? That’s the crucial question. Everything I’m about to say is hypothetical because we haven’t created one yet, but the current thinking is that creating a robotics foundation model shouldn’t be fundamentally different from creating a purely digital foundation model. The strategy is training larger and larger models.

However, the model can’t just be large for its own sake. To train a large model effectively, you need massive amounts of data — data proportionate to the model’s size. In large language models, there appears to be a magical threshold between 5 and 7 billion parameters where intelligence begins to emerge. That’s when you start seeing GPT-2 and GPT-3 behavior. We don’t know what that number is for robotics, but those parameters imply a certain data requirement.

What do we need to create a robotics foundation model? We need vast amounts of diverse data showing robots performing many useful tasks, preferably as much as possible in real-world scenarios. In other words, we need data and diversity at scale.

This is the biggest problem for embodied AI. How does ChatGPT get its data? How do Claude or Gemini get theirs? Some they purchase, especially recently, but first they ingest essentially the entire internet — billions of images and billions of sentences of text. Most of this content is free or available for download at low cost. While they do buy valuable data, the scale of their purchases is much smaller than the massive, unstructured ingestion of internet information.

There’s no internet of robot data. Frontier models train on billions of image-text pairs, while today’s robotics foundation models with the most data train on tens of thousands of examples — requiring herculean efforts from dozens or hundreds of people.

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This creates a major chicken-and-egg problem. If we had this robotics foundation model, it would be practical and economical to deploy robots in various settings, have them learn on the fly, and collect data. In robotics and AI, we call this the data flywheel: you deploy systems in the world, those systems generate data through operation, you use that data to improve your system, which gives you a better system that you can deploy more widely, generating more data and continuous improvement.

We want to spin up this flywheel, but you need to start with a system good enough to justify its existence in the world. This is robotics’ fundamental quandary.

I want to add an important note about scale. Everyone talks about big data and getting as much data as possible, but a consistent finding for both purely digital foundation models and robotics foundation models is that diversity is far more important than scale. If you give me millions of pairs of identical text or millions of demonstrations of a robot doing exactly the same thing in exactly the same place, that won’t help my system learn.

The system needs to see not only lots of data, but data covering many different scenarios. This creates another economic challenge, because while you might consider the economics of deploying 100 robots in a space to perform tasks like package picking...

Jordan Schneider: Right, if we have a robot that can fold laundry, then it can fold laundry. But will folding laundry teach it how to assemble IKEA furniture? Probably not, right?

Ryan Julian: Exactly. Economics favor scale, but we want the opposite — a few examples of many different things. This is the most expensive possible way to organize data collection.

Jordan Schneider: I have a one-year-old, and watching her build up her physics brain — understanding the different properties of things and watching her fall in various ways, but never the same way twice — has been fascinating. If you put a new object in front of her, for instance, we have a Peloton and she fell once because she put her weight on the Peloton wheel, which moved. She has never done that again.

Ryan Julian: I’m sure she’s a genius.

Jordan Schneider: Human beings are amazing. They’re really good at learning. The ability to acquire language, for example — because robots can’t do it yet. Maybe because we have ChatGPT, figuring out speech seems less of a marvel now, but the fact that evolution and our neurons enable this, particularly because you come into the world not understanding everything... watching the data ingestion happen in real time has been a real treat. Do people study toddlers for this kind of research?

Ryan Julian: Absolutely. In robot learning research, the junior professor who just had their first kid and now bases all their lectures on watching how their child learns is such a common trope. It’s not just you — but we can genuinely learn from this observation.

First, children aren’t purely blank slates. They do know some things about the world. More importantly, kids are always learning. You might think, “My kid’s only one or two years old,” but imagine one or two years of continuous, waking, HD stereo video with complete information about where your body is in space. You’re listening to your parents speak words, watching parents and other people do things, observing how the world behaves.

This was the inspiration for why, up through about 2022, myself and other researchers were fascinated with using reinforcement learning to teach robots. Reinforcement learning is a set of machine learning tools that allows machines, AIs, and robots to learn through trial and error, much like you described with your one-year-old.

What’s been popular for the last few years has been a turn toward imitation learning, which essentially means showing the robot different ways of doing things repeatedly. Imitation learning has gained favor because of the chicken-and-egg problem: if you’re not very good at tasks, most of what you try and experience won’t teach you much.

If you’re a one-year-old bumbling around the world, that’s acceptable because you have 18, 20, or 30 years to figure things out. I’m 35 and still learning new things. But we have very high expectations for robots to be immediately competent. Additionally, it’s expensive, dangerous, and difficult to allow a robot to flail around the world, breaking things, people, and itself while doing reinforcement learning in real environments. It’s simply not practical.

Having humans demonstrate tasks for robots is somewhat more practical than pure reinforcement learning. But this all comes down to solving the chicken-and-egg problem I mentioned, and nobody really knows the complete solution.

There are several approaches we can take. First, we don’t necessarily have to start from scratch. Some recent exciting results that have generated significant enthusiasm came from teams I’ve worked with, my collaborators, and other labs. We demonstrated that if we start with a state-of-the-art vision-language model and teach it robotics tasks, it can transfer knowledge from the purely digital world — like knowing “What’s the flag of Germany?” — and apply it to robotics.

Imagine you give one of these models data showing how to pick and place objects: picking things off tables, moving them to other locations, putting them down. But suppose it’s never seen a flag before, or specifically the flag of Germany, and it’s never seen a dinosaur, but it has picked up objects of similar size. You can say, “Please pick up the dinosaur and place it on the flag of Germany.” Neither the dinosaur nor the German flag were in your robotics training data, but they were part of the vision-language model’s training.

My collaborators and I, along with other researchers, showed that the system can identify “This is a dinosaur” and use its previous experience picking up objects to grab that toy dinosaur, then move it to the flag on the table that it recognizes as Germany’s flag.

One tactic — don’t start with a blank slate. Begin with something that already has knowledge.

Another approach — and this explains all those impressive dancing videos you see from China, with robots running and performing acrobatics — involves training robots in simulation using reinforcement learning, provided the physical complexity isn’t too demanding. For tasks like walking (I know I say “just” walking, but it’s actually quite complex) or general body movement, it turns out we can model the physics reasonably well on computers. We can do 99% of the training in simulation, then have robots performing those cool dance routines.

We might be able to extend this framework to much more challenging physical tasks like pouring tea, manipulating objects, and assembling things. Those physical interactions are far more complex, but you could imagine extending the simulation approach.

Jordan Schneider: Or navigating around Bakhmut or something.

Ryan Julian: Exactly, right. The second approach uses simulation. A third tactic involves getting data from sources that aren’t robots but are similar. This has been a persistent goal in robot learning for years — everyone wants robots to learn from watching YouTube videos.

There are numerous difficult challenges in achieving this, but the basic idea is extracting task information from existing video data, either from a first-person perspective (looking through the human’s eyes) or third-person perspective (watching a human perform tasks). We already have extensive video footage of people doing things.

What I’ve described represents state-of-the-art frontier research. Nobody knows exactly how to accomplish it, but these are some of our hopes. The research community tends to split into camps and companies around which strategy will ultimately succeed.

Then there’s always the “throw a giant pile of money at the problem” strategy, which represents the current gold standard. What we know works right now — and what many people are increasingly willing to fund — is building hundreds or even thousands of robots, deploying them in real environments like factories, laundries, logistics centers, and restaurants. You pay people to remotely control these robots to perform desired tasks, collect that data, and use it to train your robotics foundation model.

The hope is that you don’t run out of money before reaching that magic knee in the curve — the critical threshold we see in every other foundation model where the model becomes large enough and the data becomes sufficiently big and diverse that we suddenly have a model that learns very quickly.

There’s a whole arms race around how to deploy capital quickly enough and in the right way to find the inflection point in that curve.

Jordan Schneider: Is Waymo an example of throwing enough money at the problem to get to the solution?

Ryan Julian: Great example.

Jordan Schneider: How do we categorize that?

Ryan Julian: Waymo and other self-driving cars give people faith that this approach might work. When you step into a Waymo today, you’re being driven by what is, at its core, a robotics foundation model. There’s a single model where camera, lidar, and other sensor information from the car comes in, gets tokenized, decisions are made about what to do next, and actions emerge telling the car where to move.

That’s not the complete story. There are layers upon layers of safety systems, decision-making processes, and other checks and balances within Waymo to ensure the output is sound and won’t harm anyone. But the core process remains: collect data on the task (in this case, moving around a city in a car), use it to train a model, then use that model to produce the information you need.

Self-driving cars have been a long journey, but their success using this technique gives people significant confidence in the approach.

Let me temper your enthusiasm a bit. There’s hope, but here’s why it’s challenging. From a robotics perspective, a self-driving car is absolutely a robot. However, from that same perspective, a self-driving car has an extremely simple job — it performs only one task.

The job of a self-driving car is to transport you, Jordan, and perhaps your companions from point A to point B in a city according to a fairly limited set of traffic rules, on a relatively predictable route. The roads aren’t completely predictable, but they follow consistent patterns. The car must accomplish this without touching anything. That’s it — get from point A to point B without making contact with anything.

The general-purpose robots we’re discussing here derive their value from performing thousands of tasks, or at least hundreds, without requiring extensive training data for each one. This represents one axis of difficulty: we must handle many different tasks rather than just one.

The other challenge is that “don’t touch anything” requirement, which is incredibly convenient because every car drives essentially the same way from a physics perspective.

Jordan Schneider: Other drivers are trying to avoid you — they’re on your side and attempting to avoid collisions.

Ryan Julian: Exactly — just don’t touch anything. Whatever you do, don’t make contact. As soon as you start touching objects, the physics become far more complicated, making it much more difficult for machines to decide what to do.

The usefulness of a general-purpose robot lies in its ability to interact with objects. Unless it’s going to roam around your house or business, providing motivation and telling jokes, it needs to manipulate things to be valuable.

These are the two major leaps we need to make from the self-driving car era to the general robotics era — handling many different tasks and physically interacting with the world.

Jordan Schneider: Who are the companies in China and the rest of the world that folks should be paying attention to?

Ryan Julian: The Chinese space is gigantic, so I can only name a few companies. There are great online resources if you search for “Chinese robotics ecosystem."

In the West, particularly the US, I would divide the companies really pushing this space into two camps.

The first camp consists of hardware-forward companies that think about building and deploying robots. These tend to be vertically integrated. I call them “vertical-ish” because almost all want to build their own embodied AI, but they approach it from a “build the whole robot, integrate the AI, deploy the robot” perspective.

In this category, you have Figure AI, a vertical humanoid robot builder that also develops its own intelligence. There’s 1X Technologies, which focuses on home robots, at least currently. Boston Dynamics is the famous first mover in the space, focusing on heavy industrial robots with the Atlas platform. Apptronik has partnered with Google DeepMind and focuses on light industrial logistics applications.

Tesla Optimus is probably the most well-known entry in the space, with lots of rhetoric from Elon about how many robots they’ll make, where they’ll deploy them, and how they’ll be in homes. But it’s clear that Tesla’s first value-add will be helping automate Tesla factories. Much of the capital and many prospective customers in this space are actually automakers looking to create better automation for their future workforce.

Apple is also moving into the space with a very early effort to build humanoid robots.

The second camp focuses on robotics foundation models and software. These tend to be “horizontal-ish” — some may have bets on making their own hardware, but their core focus is foundation model AI.

My former employer, Google DeepMind, has a robotics group working on Gemini Robotics. NVIDIA also has a group doing this work, which helps them sell chips.

Among startups, there’s Physical Intelligence, founded by several of my former colleagues at Google DeepMind and based in San Francisco. Skild AI features some CMU researchers. Generalist AI includes some of my former colleagues. I recently learned that Mistral has a robotics group.

A few other notable Western companies — there’s DYNA, which is looking to automate small tasks as quickly as possible. They’re essentially saying, “You’re all getting too complicated — let’s just fold napkins, make sandwiches, and handle other simple tasks.”

There are also groups your audience should be aware of, though we don’t know exactly what they’re doing. Meta and OpenAI certainly have embodied AI efforts that are rapidly growing, but nobody knows their exact plans.

In China, partly because of the trends we discussed and due to significant funding and government encouragement (including Made in China 2025), there’s been an explosion of companies seeking to make humanoid robots specifically.

The most well-known is Unitree with their H1 and G1 robots. But there are also companies like Fourier Intelligence, AgiBot, RobotEra, UBTECH, EngineAI, and Astribot. There’s a whole ecosystem of Chinese companies trying to make excellent humanoid robots, leveraging the Shenzhen and Shanghai-centered manufacturing base and incredible supply chain to produce the hardware.

When Robots Learn

Jordan Schneider: How do people in the field of robotics discuss timelines?

Ryan Julian: It’s as diverse as any other field. Some people are really optimistic, while others are more pessimistic. Generally, it’s correlated with age or time in the field. But I know the question you’re asking: when is it coming?

Let’s ground this discussion quickly. What do robots do today? They sit in factories and do the same thing over and over again with very little variation. They might sort some packages, which requires slightly more variation. Slightly more intelligent robots rove around and inspect facilities — though they don’t touch anything, they just take pictures. Then we have consumer robots. What’s the most famous consumer robot? The Roomba. It has to move around your house in 2D and vacuum things while hopefully not smearing dog poop everywhere.

That’s robots today. What’s happening now and what we’ll see in the next three to five years falls into what I call a bucket of possibilities with current technology. There are no giant technological blockers, but it may not yet be proven economical. We’re still in pilot phases, trying to figure out how to turn this into a product.

The first place you’re going to see more general-purpose robots — maybe in humanoid form factors, maybe slightly less humanoid with wheels and arms — is in logistics, material handling, and light manufacturing roles. For instance, machine tending involves taking a part, placing it into a machine, pressing a button, letting the machine do its thing, then opening the machine and pulling the part out. You may also see some retail and hospitality back-of-house applications.

What I’m talking about here is anywhere a lot of stuff needs to be moved, organized, boxed, unboxed, or sorted. This is an easy problem, but it’s a surprisingly large part of the economy and pops up pretty much everywhere. Half or more of the labor activity in an auto plant is logistics and material feed. This involves stuff getting delivered to the auto plant, moved to the right place, and ending up at a production line where someone picks it up and places it on a new car.

More than half of car manufacturing involves this process, and it’s actually getting worse because people really want customized cars these days. Customizations are where all the profit margin is. Instead of Model T’s running down the line where every car is exactly the same, every car running down the line now requires a different set of parts. A ton of labor goes into organizing and kitting the parts for each car and making sure they end up with the right vehicle.

Ten to twelve percent of the world economy is logistics. Another fifteen to twenty percent is manufacturing. This represents a huge potential impact, and all you’re asking robots to do is move stuff — pick something up and put it somewhere else. You don’t have to assemble it or put bolts in, just move stuff.

Over the next three to five years, you’re going to see pilots starting today and many attempts, both in the West and in China, to put general-purpose robots into material handling and show that this template with robotics foundation models can work in those settings.

Now, if that works — if the capital doesn’t dry up, if researchers don’t get bored and decide to become LLM researchers because someone’s going to give them a billion dollars — then maybe in the next seven to ten years, with some more research breakthroughs, we may see these robots moving into more dexterous and complex manufacturing tasks. Think about placing bolts, assembling things, wings on 747s, putting wiring harnesses together. This is all really difficult.

You could even imagine at this point we’re starting to see maybe basic home tasks: tidying, loading and unloading a dishwasher, cleaning surfaces, vacuuming...

Jordan Schneider: When are we getting robotic massages?

Ryan Julian: Oh man, massage. I don’t know. Do you want a robot to press really hard on you?

Jordan Schneider: You know... no. Maybe that’s on a fifteen-year horizon then?

Ryan Julian: Yeah, that’s the next category. Anything that has a really high bar for safety, interaction with humans, and compliance — healthcare, massage, personal services, home health aid — will require not only orders of magnitude more intelligence than we currently have and more capable physical systems, but you also really start to dive into serious questions of trust, safety, liability, and reliability.

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Having a robot roving around your house with your one-year-old kid and ensuring it doesn’t fall over requires a really high level of intelligence and trust. That’s why I say it’s a question mark. We don’t quite know when that might happen. It could be in five years — I could be totally wrong. Technology changes really fast these days, and people are more willing than I usually expect to take on risk. Autopilot and full self-driving are good examples.

One thing the current generation of robotics researchers, generalist robotics researchers, startups, and companies are trying to learn from the self-driving car era is this: maybe one reason to be optimistic is that because of this safety element, self-driving cars are moving multi-ton machines around lots of people and things they could kill or break. You have people inside who you could kill. The bar is really high — it’s almost aviation-level reliability. The system needs to be incredibly reliable with so much redundancy, and society, regulators, and governments have to have so much faith that it is safe and represents a positive cost-benefit tradeoff.

This makes it really difficult to thread the needle and make something useful. In practice, it takes you up the difficulty and autonomy curve we talked about and pushes you way up to really high levels of autonomy to be useful. It’s kind of binary — if you’re not autonomous enough, you’re not useful.

But these generalist robots we’re talking about don’t necessarily need to be that high up the autonomy difficulty curve. If they are moderately useful — if they produce more than they cost and save some labor, but not all — and you don’t need to modify your business environment, your home, or your restaurant too much to use them, and you can operate them without large amounts of safety concerns, then you have something viable.

For instance, if you’re going to have a restaurant robot, you probably shouldn’t start with cutting vegetables. Don’t put big knives in the hands of robots. There are lots of other things that happen in a restaurant that don’t involve big knives.

One of the bright spots of the current generalist robotics push and investment is that we believe there’s a much more linear utility-autonomy curve. If we can be half autonomous and only need to use fifty percent of the human labor we did before, that would make a huge difference to many different lives and businesses.

Jordan Schneider: Is that a middle-of-the-road estimate? Is it pessimistic? When will we get humanoid robot armies and machines that can change a diaper?

Ryan Julian: It’s a question of when, not if. We will see lots of general-purpose robots landing, especially in commercial spaces — logistics, manufacturing, maybe even retail back of house, possibly hospitality back of house. The trajectory of AI is very good. The machines are becoming cheaper every day, and there are many repetitive jobs in this world that are hazardous to people. We have difficulty recruiting people for jobs that are not that difficult to automate. Personally, I think that’s baked in.

If, to you, that’s a robot army — if you’re thinking about hundreds of thousands, maybe even millions of robots over the course of ten years working in factories, likely in Asia, possibly in the West — I think we will see it in the next decade.

The big question mark is how advanced we’ll be able to make the AI automation. How complicated are the jobs these machines could do? Because technology has a habit of working really well and advancing really quickly until it doesn’t. I’m not exactly sure where that stopping point will be.

If we’re on the path to AGI, then buckle up, because the robots are getting real good and the AGI is getting really good. Maybe it’ll be gay luxury space communism for everybody, or maybe it’ll be iRobot. But the truth is probably somewhere in between. That’s why I started our discussion by talking about how robots are the ultimate capital good.

If you want to think about what would happen if we had really advanced robots, just think about what would happen if your dishwasher loaded and unloaded itself or the diaper changing table could change your daughter’s diaper.

A good dividing line to think about is that home robots are very difficult because the cost needs to be very low, the capability level needs to be very diverse and very high, and the safety needs to be very high. We will require orders of magnitude more intelligence than we have now to do home robots if they do happen. We’re probably ten-plus years away from really practical home robots. But in the industrial sector — and therefore the military implications we talked about — it’s baked in at this point.

Jordan Schneider: As someone who, confession, has not worked in a warehouse or logistics before, it’s a sector of the economy that a lot of the Washington policymaking community just doesn’t have a grasp on. Automating truckers and automating cars doesn’t take many intellectual leaps, but thinking about the gradations of different types of manual labor that are more or less computationally intensive is a hard thing to wrap your head around if you haven’t seen it in action.

Ryan Julian: This is why, on research teams, we take people to these places. We go on tours of auto factories and logistics centers because your average robotics researcher has no idea what happens in an Amazon warehouse. Not really.

For your listeners who might be interested, there are also incredible resources for this provided by the US Government. O*NET has this ontology of labor with thousands of entries — every physical task that the Department of Labor has identified that anybody does in any job in the United States. It gets very detailed down to cutting vegetables or screwing a bolt.

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Jordan Schneider: How can people follow this space? What would you recommend folks read or consume?

Ryan Julian: Well, of course you should subscribe to ChinaTalk. Lots of great revised coverage. The SemiAnalysis guys also seem to be getting into it a little bit. Other than that, I would join Twitter or Bluesky. That is just the rest of the AI community. That’s the best place to find original, raw content from people doing the work every day.

If you follow a couple of the right accounts and start following who they retweet over time, you will definitely build a feed where, when the coolest new embodied AI announcement comes out, you’ll know in a few minutes.

[Some accounts! Chris Paxton, Ted Xiao, C Zhang, and The Humanoid Hub. You can also check out the General Robots and Learning and Control Substacks, Vincent Vanhoucke on Medium, and IEEE’s robotics coverage.]

Jordan Schneider: Do you have a favorite piece of fiction or movie that explores robot futures?

Ryan Julian: Oh, I really love WALL-E and Big Hero 6. I prefer friendly robots.

Enjoy this deleted scene from WALL-E:

Mood Music:

The world’s two greatest superpowers released action plans for AI only 34 days apart. Back in July, the Trump Administration released America’s AI Action Plan to cautious fanfare. And on August 28, China’s State Council published its “Opinion on In-Depth Implementation of the ‘Artificial Intelligence +’ Initiative” (关于深入实施“人工智能+”行动的意见, hereafter abbreviated to “AI+ Plan”).

The two documents both come from the highest echelons of government in their respective countries, and both are high-level roadmaps issued as guidance for departments and ministries to implement. The grounds they cover and the policy intentions behind the measures give us the clearest pictures yet of how these two governments are making sense of the future of AI in their respective countries and around the world. Comparing how the two documents address overlapping issues is an instructive and incredibly revealing exercise. Below is an executive summary of similarities and differences.

Note: Side-by-side comparisons of the Chinese original and English translation were created in Claude, with thanks to Matt Sheehan!

Origins, leadership, and competing priorities

The US AI Action Plan was a product of Executive Order 14179, one of the many flurries of EOs signed during President Trump’s first few days in office, and was jointly led by the White House Office for Science and Technology Policy (OSTP), Trump’s AI Czar David Sacks, and the National Security Advisor (NSA).

The Chinese plan, on the other hand, is a directive straight from the State Council, with no additional credits to specialized ministries. The final paragraph tasks the National Development and Reform Commission with coordination rather than any specific policy portfolio. This means it was a comprehensive effort by China’s highest state administrative organ. The State Council is technically the organ that executes decisions by the National People’s Congress (NPC), China’s unicameral legislature. As is expected in an autocracy, NPC delegates have little actual leverage. Instead, the State Council is better understood as the supreme coordinating body for the country’s 26 ministries and 31 province-level governments, only one step below the Communist Party’s Politburo. As illustrated by the Congressional Research Service’s org chart for the CCP:

A huge variety of input from all corners of the Chinese bureaucracy likely went into the Chinese AI plan. And it shows: the document is comprehensive to the point of being overstretched, covering AI’s coming role in everything from industrial R&D to “methods in philosophical research.”

China’s campaign-style governance makes it easy to engage a policy aim as a whole-of-society effort. A document like this is meant to be distributed widely to ever-lower levels of government and “studied” by ambitious bureaucrats across the nation. Its words will be picked apart carefully in the provinces to divine policy directions that Beijing will find favorable. The US AI Action Plan will not have the same level of buy-in from fellow bureaucrats across Washington and beyond — perhaps especially now, at an unprecedented political moment for the federal civil service. Indeed, it is a list of recommendations that will see extensive negotiation with stakeholders in other agencies and levels of government who don’t necessarily share similar views.

This doesn’t mean the Chinese one is likely to be more successful; indeed, the American plan goes into much more detail on exactly which bureaucratic processes to work through in order to achieve its goals. China’s political campaigns have led to as many successes as it has disasters, with the most recent being Zero Covid. It will be fascinating to see which side makes faster progress in the long term.

Framing, goals, and techno-optimism/accelerationism

The Chinese AI plan is as techno-optimistic a document as the Chinese Communist Party (CCP) might produce at this moment. One might even call it accelerationist: except for a single line item discussing AI safety risks at the very end, practically all other sections of this document call for further development and incorporation of AI across society, with guardrails and ethics relegated to complementary positions. Zhou Hui 周辉, an AI governance expert at the Chinese Academy of Social Sciences’ Institute of Law who participated in the document’s drafting, said in a September 8 interview that consensus throughout the drafting process was that “a lack of development would be the biggest safety risk” (不发展才是最大的不安全).

Specifically, Chinese accelerationism-as-policy focuses on expansive experimentations with industrial and social applications, rather than abstract visions of “AGI”. There is a sense of urgency underpinning the document, especially at the beginning when it sets out numerical targets: 70% of the country will have adopted AI-powered terminals, devices, and agents by 2027, and by 2030 the adoption rate will reach 90%. The document elevates the “intelligent economy” to the status of a pillar of “achieving basic realization of socialist modernity by 2035” (到2035年基本实现社会主义现代化), which is the overarching national goal enshrined during the 19th Congress of the CCP in 2017. To be clear, there are no objective metrics against which these goals’ realization can be measured, making them more symbolic than rigorous. However, these numerical targets will incentivize bureaucrats across ministries, provinces, and technologically strong cities to create policy programs that demonstrate their commitment to such ambitious goals.

Much has already been made about the pro-development bend of the US AI Action Plan, which opens with cutting what’s framed as Biden’s red tape. The tech race with China informs the US Plan’s views about speed of innovation more than arguably any other issue: it is suffused with language referencing “domination” and the political necessity for America to have “the best” AI systems in the world. The Chinese document, by contrast, seems to posit China against itself. Another consequence of there being apparent whole-of-government input is that geopolitical implications, primarily the domain of the foreign and state security ministries, are not explicitly top-of-mind. Notably, unlike the US plan, the Chinese AI+ plan does not mention defense or the military whatsoever. The goal, instead, is very abstract:

“Reshape the paradigm of human production and life” is a subtle attempt at connecting AI policy to the PRC’s Marxist-Leninist ideological underpinnings; eventually, it seems to imply, AI integration might lead China closer to the realization of full economic revolution under communism. This is, of course, theoretical to the point of being slightly irrelevant. That being said, it signals that the primary aim of China’s AI+ Plan is to leverage AI to achieve transformations in China’s economic society, and not necessarily to shape the balance of power between Beijing and Washington. This is not to say that the PLA has no plans to make use of AI, or that the Chinese foreign ministry isn’t analyzing the US-China tech race; the truth is almost certainly the opposite. But from what the Chinese state is choosing to communicate publicly about its vision for AI, we largely see a strategy framed around domestic socioeconomic governance.

Open source as strategic imperative

Both Chinese and American leaders explicitly see leadership in open source as a strategic asset. The Chinese document calls for building up open source technological frameworks and social ecosystems that are “open to the world” and creating projects and developer tools with “international influence.”

To do so, the government will give academic awards to students, researchers, and lecturers who contribute to open source projects, as well as create incentives for both public and private sectors to explore and develop open source applications. More holistically, the document encourages open-source access as part of a push to make AI access global. This is the lesson Beijing took from the DeepSeek moment: China’s current advantage in AI lies in having an open source community that empowers robust exchanges and rapid iteration.

The US plan betrays anxiety stemming from the same shock, asserting that “[we] need to ensure America has leading open models founded on American values.” Similar to the Chinese plan’s geopolitical undertone, it calls the value of open source models “geostrategic.” For the US government, the bottleneck preventing more good open source models from being developed that it is best-placed to address appears to be researchers’ access to compute clusters. The American plan’s recommended actions mostly focuses on making it easier for academia and startups to access resources through NAIRR:

Diffusion and job market impacts

The US AI Action Plan calls for many more Americans to be employed as electricians and HVAC technicians so as to serve a bigger buildout of AI infrastructure while creating high-earning blue-collar jobs. It creates a detailed roadmap for how the federal government can leverage its bureaucracy to train more skilled workers in these domains. It describes itself as a “worker-first AI agenda” and seeks to fund more retraining for workers impacted by AI-driven redundancy. However, its assessment of the impacts AI might have on the labor force appears relatively optimistic: it merely calls on the Bureau of Labor Statistics to study AI’s impacts on the workforce through analyzing already-existing data, rather than collecting new data or establishing preventative policy measures.

For Beijing as well as Washington, job displacement might be worth it if AI adoption leads to stronger economic growth. China’s plan, however, is more aggressive about the literal replacement of human labor. Tertiary industries are the fastest-growing employment sector in China, as the services sector increasingly competes with traditional manufacturing; gig work, from ride hailing and delivery to even some factory work, is rapidly expanding to soak up excess labor supply. But this is how the document addresses how AI shall shape the services industry:

“Accelerate the service industry’s shift from digitally empowered internet services to new, intelligence-driven service models … Explore new models that combine unmanned (automated) services with human-provided services. In sectors such as software, information services, finance, business services, legal services, transportation, logistics, and commerce, promote the wide application of next-generation intelligent terminals/devices and intelligent agents (AI agents).”

Elsewhere in the document, the State Council does bring up impacts on employment. It instructs regulators and industry to “[strengthen] employment-risk assessments for AI applications; steer innovation resources toward areas with high job-creation potential; and reduce the impact on employment.” But such a statement is weak without explicit instructions to ministries or regional governments to secure employment. In places like Wuhan where robotaxis have already displaced traditional jobs, the government has no meaningful template of action. The post-Reform Chinese state has previously made explicit policy decisions to sacrifice employment, and consequently the danwei-based social safety net, for what it saw as necessary economic restructuring. Between 1995 and 2001, Chinese state-owned enterprises (SOEs) laid off 34 million workers — a third of all employees in SOEs — in an effort to reform the state sector. The layoffs devastated vast industrial regions and led to major unrest, but Beijing persisted on course. More recently, the impact on jobs was completely disregarded to prevent infection during the Covid-19 pandemic. Today’s China has no activist labor movement, no independent unions, and limited protections for workers’ rights. This document, produced during an already-ongoing unemployment crisis that heavily affects young workers, opens up the possibility that the state may be once again willing to put workers aside for national strategic aims.

The plan imagines adoption, application, and diffusion of AI as a whole-of-society effort. Beijing wants AI applied to everything from philosophical inquiries to residential construction standards:

It calls for coordination between AI and other emerging technologies, including biotechnology, quantum computing, and 6G telecommunications. Part 2 of the document, focused on actions to take, dedicates a whole section to consumer-oriented upgrades: it mentions not only well-known fields like wearables, electric vehicles, drones, and brain-computer interfaces, but also more quotidian areas of potential AI applications like travel, e-commerce, and “emotional consumption.” These lines subtly indicate to aspiring entrepreneurs that the government is shining a green light on consumer product innovation and so crackdowns are unlikely in the near future. Beijing seems unconcerned about an AI bubble or over-proliferation of wrappers; indeed, it’s actively encouraging experimentation and calling for “trial-and-error and mistake-tolerant governing systems” for AI adoption. That means that no, Chinese AI adoption will not be dramatically hampered by worries a model occasionally says something impolitic.

The US AI Action Plan’s section on adoption calls on American industry to adopt a “try-first” culture. The Trump Administration seeks to diffuse distrust of emerging technologies and create frameworks within which critical sectors can experiment with AI safely. The specific measures the US AI Plan suggests, however, look more cautious and grounded than to its Chinese counterpart:

Whereas the Chinese document wants all sectors in society to try AI first and get results after, the Trump administration seems to be gesturing towards a more careful path forward with quantifiable findings and measurable improvements. We won’t know which one of these approaches is better until after the fact; in fact, each might have its advantages depending on the sector it is being applied to. But on this point, the divergence between these two documents is dramatic.

International risk governance

The US wants to export its “full AI stack” — hardware, models, applications, and standards — to allies, and allies only. Washington’s vision of international AI governance divides the world between American and Chinese spheres of technological influence and seeks to make the former bigger. Its language on how to counter Chinese influence in international governance organizations is characteristically Trump-Administration, with mentions of “cultural agendas” and “American values,” but its focus lies with overall deregulation.

As usual, the Chinese plan is framed around the United Nations as the primary mechanism for international governance. It wants to improve AI access for the Global South and doesn’t explicitly require these countries to support Chinese values. Of course, this doesn’t mean the Chinese government is completely uninterested in ideology; as recently as June this year, a state media op-ed republished by Xinhua emphasized the risks generative AI posed to “social trust systems and the ideological safety line.” But from the perspectives of listeners in Global South capitals, judging by these two documents alone, China’s offer likely comes off as more value-neutral on the surface.

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More Notes!

The two documents address many similar issues under the AI governance umbrella, but also diverge in terms of topic selection. Some items that fell outside the Venn Diagram overlap:

• The US AI Action Plan’s understanding of cybersecurity is far more mature than its Chinese equivalent. It addresses adversarial threats, vulnerability-sharing frameworks, and incident response with attention to both government and private-sector shareholders. As part of its understanding of AI as a race, the US document is much more sober about the cyber risks around AI models. By contrast, cybersecurity is almost entirely missing from the Chinese plan. This may partly be because the Chinese document avoids defence in general, but even in sections addressing government and private-sector adoption, very little energy was spent on considering how to secure the process.

• Congruent with Beijing’s now-longstanding focus on data as a factor of production, the Chinese plan dedicates far more space to harnessing the economic potential of training data. The State Council argues that China has a “data-rich advantage” in AI. It wants innovative measures to increase data supply, including by bolstering the data processing and data labelling industries. (It’s worth noting that data services can create relatively low-barrier jobs in underdeveloped parts of China, which might contribute to Beijing’s enthusiasm.) That being said, both countries’ plans pay particular attention to scientific datasets. The US AI Action Plan recommends measures to create “world-class datasets” by setting data standards and making federal datasets more accessible to researchers. The Chinese one, similarly, seeks to accelerate scientific discovery by “[building] open and shared high-quality scientific datasets and [improving] the ability to process complex multimodal scientific data.”

• ChinaTalk previously covered how AI is shaping education in China. In the State Council’s AI+ Plan, education also receives substantial attention. Not only does Beijing want more incorporation of AI tools into the education system, it also wants to bridge technological promotion into eventually “[promoting] a shift in education from focusing mainly on knowledge transmission to focusing on ability improvement”. This is an especially ambitious goal in China’s education system, where exams and rote learning are still king. Will AI be the thing that finally transforms the Gaokao?

• “National security” appears 24 times in the US AI Action Plan. The US government sees basically every part of the AI ecosystem, from manufacturing to software exports and international governance, as critical to its future conception of national security. The Chinese one, by contrast, only mentions national security once, in the context of an item on upgrading domestic governance systems:

  

  The imaginary surrounding AI-powered national security is inward in the Chinese document, covering urban governance, disaster prevention, internet censorship, and law enforcement. In the US document, the implications of advanced technology for national security lie mostly outwards. As of yet, the US is far less afraid of its own people.

• The Chinese plan dedicated a specific line item to AI-powered agriculture, a subject which the White House did not call out. This is increasingly relevant in China, as the state pursues food security while rural areas continue to depopulate and starve for labor. The technologies Beijing hopes will solve its food-security dilemma are interesting to note:

  

Last year we ran an essay contest exploring policy solutions to China’s growing dominance in foundational chips. Today we’re running another entry along these lines by Alasdair Phillips-Robins. He’s a Fellow at the Carnegie Endowment for International Peace and from 2023 to 2025 served as a senior policy advisor to Gina Raimondo.

China is on track to control the global foundational chip market, a key chokepoint for huge swaths of the U.S. economy. Foundational semiconductors are produced on older processes, but they are essential to almost every modern electronic product. Unless Washington and its allies act soon, control over foundational chip production would hand Beijing a new economic weapon it could use against the United States in a crisis. A chip shutoff would make this year’s rare earth crisis look like child’s play.

There’s no single answer to the threat, but the United States should start by hitting products containing Chinese chips with a novel kind of tariff, known as a component tariff. This tariff would apply only to the value of the Chinese chip inside the product, not the total value of the item being imported to the United States. Washington will do even better if it can get its allies and partners to act against Chinese chips in their economies, too.

Component tariffs would have three big advantages:

• They won’t spike consumer prices: conventional tariffs, like the ones Trump has said he’ll put on some chip imports, raise prices for American manufacturers and consumers. But because foundational chips typically cost little (often a dollar or less) relative to the finished product, a component tariff would have little effect on consumer prices while causing companies looking to save every dollar on parts to turn away from Chinese suppliers.

• They get ahead of the problem: most chips in American electronics aren’t made in China, but Chinese production is ramping up. A component tariff would discourage U.S. manufacturers, and foreign ones that sell in the United States, from switching to Chinese foundries when they come online. Foundry relationships are sticky, so getting out in front is the best way to stop Chinese market dominance.

• They can be applied to other industrial inputs: Implementing a component tariff won’t be easy — it hasn’t been done at scale before — but getting it right would unlock a major new tool in the fight for fair trade with China over everything from batteries to minerals.

The Everything Chips

Foundational chips are used in vehicles, communications equipment, military systems, and other critical infrastructure. Even devices that contain cutting edge chips, such as phones, rely on numerous legacy chips. It was shortages of these chips during the pandemic that idled factories, emptied shelves, and left unfinished vehicles sitting on production lots.

The CHIPS Act was meant to prevent a repeat of this shortage, but only about $4 billion of the act’s $39 billion in manufacturing incentives has gone to foundational production. Meanwhile, China is spending tens of billions in subsidies for foundational chip producers and is on course to raise its share of global production capacity from around 30 percent today to more than 40 percent by 2030, with a majority of capacity at some critical nodes.

Heavy reliance on Chinese production would be an economic and security nightmare. Many legacy chips are specialized, and once the expertise and facilities to produce them have been lost, regaining them will be slow and expensive. As subsidized Chinese prices drive out competitors, chip buyers will struggle to find alternatives. Chinese-made chips will become embedded in American military systems and critical infrastructure, raising the risks of espionage and sabotage.

Source.

If supply from China gets cut off in a trade confrontation or a military crisis, economic activity in the rest of the world will grind to a halt. The result would be a repeat of the recent fight over rare earths, or the pandemic-era shortage, on a far wider scale. As soon as rare earths stopped flowing, Ford CEO Jim Farley began telling the White House that his production lines were shutting down. In a chip fight, the same will be true of dozens of industries, from vehicles to planes to wifi routers.

Beyond providing some CHIPS Act funding, U.S. policymakers have done little about the problem. In 2018, the first Trump administration imposed tariffs on imports of Chinese chips (the Biden administration kept them in place). But these tariffs haven’t achieved much, because they apply to the overall product being imported, not at the sub-parts inside it, and almost all foundational semiconductors enter the United States inside other products. A company that imports phones, for example, pays the general tariff rate for the country where the phones were assembled, plus any specific tariff applied to phones; it doesn’t pay any extra if the chips inside the phone were made in China. Manufacturers have no incentive to use non-Chinese chips over Chinese ones.

How to Tariff Better

Trump has said he plans to put a 100% tariff on foreign chips, but these won’t capture Chinese chips any better than the original approach. Rather than doubling down on traditional tariffs, the Trump administration should turn to component tariffs. Unlike a normal tariff, these would be triggered by the presence of a Chinese-made chip inside any product imported into the United States. The tariff could either be a flat rate on the number of Chinese-made chips in the product — a dollar per chip, say — or it could be tied to the cost of the chips. For example, if Chinese producers offer chips at a 50% discount relative to U.S. and allied producers, a 100% tariff would offset the Chinese advantage, levelling the playing field for U.S. chip makers. Luckily, the administration has the perfect legal vehicles to impose these tariffs, in the form of two trade investigations, one into Chinese legacy chip production launched in late 2024, and a broader investigation of semiconductor imports begun earlier this year.

Opponents of tariffs point out that they often hurt the very constituencies they are meant to help, as they raise prices for manufacturers importing tools, parts, and raw materials. But a component tariff on legacy chips would be a rare exception to those problems. Because legacy chips are usually cheap relative to the cost of the overall product, often costing a few dollars or less per chip, a tariff would have little effect on ultimate consumer prices, but would shift the incentives for electronics manufacturers looking to save on the parts that go into their products. Crucially, because China doesn’t yet dominate legacy chip production, most chip buyers won’t have to go through the painful process of finding alternative sources of supply for their chips; they’ll just need to avoid switching to Chinese suppliers when new capacity there comes online. Even outside the United States, there’s plenty of foundational capacity in the EU, Japan, and Taiwan that can be scaled up to meet growing demand.

Component tariffs have another major benefit: they would force companies to truly understand their supply chains. A 2024 Commerce Department survey found that nearly half of U.S. chip buyers didn’t know whether their products contained Chinese-made chips — an unacceptable situation for U.S. national and economic security. Requiring companies to report the sources of their chips to CBP when they import products would help change that. Self-reporting would make the tariff vulnerable to fraud, but it would be backstopped by CBP investigations to catch wrongdoers, and a legal requirement would give companies the push they need to finally map their supply chains. This is the same model the U.S. government has used in enforcing the Uyghur Forced Labor Prevention Act, which bans the import of products made with forced labor in China’s Xinjiang region. As with chips, CBP can’t tell from looking at a product whether it was made with forced labor. But importers are responsible for ensuring their supply chains are free of Uyghur abuses, and CBP can investigate alleged violations.

Implementing a component tariff would take time and money, especially as CBP hasn’t applied one at scale before (a few products, like watches, are tariffed based on their components, but it isn’t common). Luckily, CBP just got a big influx of cash from the One Big Beautiful Bill and plans to hire 5,000 new customs officers over the next four years. As for revenue, manufacturers that responded to Commerce’s 2024 survey imported about $1.5 billion in Chinese chips each year, and in total represented about one-sixth of global chip sales. That suggests a 100% component tariff on Chinese chips could bring in a few billion each year, enough to offset the cost of implementation without upending the overall chip market.

Component tariffs would also send a valuable market signal. Because chip production in China is still ramping up, the U.S. government can get ahead of the problem. Even an imperfectly enforced tariff would get electronics manufacturers to think twice before turning to Chinese chip makers. Chip supplier relationships are sticky — products are made to exact specifications, and switching to a new producer can be costly — so preventing Chinese firms from locking in customers is the easiest way to win the chip war.

Legacy chips won’t be the last sector where component tariffs come in handy. China is working to dominate other manufacturing inputs, like batteries and drone parts, and the United States will need tools to respond. Getting the bureaucratic machinery to work with component tariffs now will give the U.S. government another option when it confronts similar problems in the future.

A component tariff will be especially effective if the administration can bring along its partners, including the European Union and the G7, which have both expressed concern about Chinese semiconductor overcapacity. Washington has a bad habit of scrambling to address Chinese industrial targeting after a critical U.S. industry has already withered away. Legacy chips offer a rare chance to intervene before it’s too late.

Chinese-developed apps like ByteDance’s Gauth andQuestion.AI have conquered US download charts, not by teaching but by offering quick solutions to math problems.

Measuring either by daily active users or by range of problem-solving capabilities, there are no dedicated non-Chinese competitors of this scale. Gauth’s strategy of using TikTok creators to advertise its app helped it explode in popularity, reaching nearly 700,000 downloads per day globally by March 2024.1 Meanwhile, Gauth and Question.AI advertise the ability to solve problems in “all school subjects” — including math, science, social studies, English, and foreign languages — with access to these solutions for free.

These apps are a ticking time bomb for political outrage in the United States Congress. You can imagine representatives exclaiming, “This Chinese app encourages cheating, and it’s making our children dumber! Parents in China don’t let their kids use these apps!”

Today, we’ll explore the differences between Chinese homework apps and the versions Chinese tech companies offer overseas. We’ll analyze their solutions to math problems (it’s a universal language!), their censorship regimes for social studies questions, and the business strategies of their parent companies in the Chinese domestic market and abroad.

Gauth vs Doubao Loves Learning (豆包爱学)

ByteDance’s domestic equivalent to Gauth is called “Doubao Loves Learning” 豆包爱学 (rebranded from “Hippo Loves Learning” 河马爱学), but the overseas version is still far more popular. Globally, Gauth boasted more than two million peak daily active users (DAU) in 2024, while ByteDance’s equivalent app for the Chinese market only had a peak of ~800,000 DAU around the same time.

We begin by asking ByteDance’s apps to solve this integral:

Both of BytedDance’s apps produced correct solutions, but the user experience is substantially different:

1. The Product for the Chinese market, Doubao Loves Learning, shows the steps before the solution, while Gauth puts the solution first and the steps underneath.

2. Gauth is much more aggressive about prompting users to upgrade to the paid version of the app.

3. The explanations from Doubou Loves Learning were more detailed, including helpful tips like “The key to integration by parts is choosing the right functions for u and dv,” which did not appear in the free version of Gauth. The Chinese app also automatically graphs the integrand to help users visualize the problem.2

Interestingly, Gauth was able to solve trig integrals that Doubao couldn’t solve, indicating that they aren’t necessarily using the same models to solve problems. For integrals that require you to rewrite the integrand using a trig identity, Gauth usually produces the correct answer while Doubao flails.3

What’s going on here? It could be that ByteDance is investing more in the international version of its app because there is a much greater appetite for homework hacking tools outside China. Western education systems, in both high school and college, place such a large emphasis on homework, while China’s education system emphasizes testing above all else.

As ChinaTalk analyst Irene Zhang told me:

“Chinese kids take so, so many exams at school all the time, which renders homework cheating apps meaningless. I attended Beijing public schools for grades 1 through 7 during Beijing Ministry of Education’s “holistic education” era (素质教育; translation: “everyone stop assigning so much homework”), which technically required teachers to assign no homework for grades 1 and 2 and only up to 1.5 hours of homework per day for middle schoolers (grades 7-9 in China). In part to skirt these caps, we had morning quizzes and mock exams more days than not from grade 4 onwards — I even got extra credit as an annoyingly keen fifth-grader by helping teachers mark the voluminous amounts of pen-and-paper exams on hand. I’m sure it’s worse now. That means kids in homework-dominant systems like the US & Canada get so much more out of these apps than Chinese kids, for better or worse.”

Constant testing means students in China need to solve problems on their own under time constraints, so it truly is disadvantageous for them to cheat on their math homework with apps like these. Given the legacy of the education crackdown in China, is it still uncouth to monetize children’s learning too aggressively particularly for firms like Bytedance that have bigger GR worries domestically. Lastly, With such a huge discrepancy in daily active users, we should expect ByteDance to spend more resources on Gauth than on the domestic equivalent.

I want to be clear though — it takes college-level calculus problems to stump these apps. They provide correct solutions for the majority of problems you could expect to see in high school math classes, and they’re getting better with every update.

What about social studies and English problems? For writing-heavy questions, these apps offer answers similar to what you might expect from plugging the prompts into any LLM. But there is one difference — it appears that both versions of the app have some sort of censorship protocol that can be switched on and off. Here’s a review for Gauth on the App Store:

As of September 2025, Gauth is now willing to answer this question, as well as questions like, “What are some factors that caused Donald Trump to lose the 2020 presidential election?” But the fact that Gauth was at one point restricted from being critical of Trump suggests that ByteDance learned from the TikTok ban fiasco, expected political outrage in response to this app, and then liberalized Gauth’s censorship mechanism to avoid inconvenient accusations. Likewise, I was unable to find a red line for China-related topics.

Q: “What happened at Tiananmen Square in 1989?”

However, Gauth isn’t immune to toeing the party line — it just tends to be more subtle about it:

Q: “How many terms is the president of China legally allowed to serve?”

Reader, the term limit in place before Xi was not informal — it was in the constitution! Doubao, on the other hand, is not willing to answer this question at all.4

Question.AI vs 作业帮

Question.AI’s largest user bases are the USA and Indonesia. While there is also a domestic version of Question.AI called Zuoyebang 作业帮 (“Homework Help”), the parent company by the same name primarily makes money in the Chinese market by selling smart learning tablets and dictionary pens, not homework solutions.

Zuoyebang was founded in 2015 by Hou Jianbin, who said the following about his company’s mission in a 2020 interview:

NetEase Technology: In your understanding, what value does Zuoyebang create for users or for society?

Hou Jianbin: Internally, we usually say: “Learning changes destiny, Zuoyebang changes learning.”

As society develops, learning has become increasingly important for personal growth. For an individual to integrate into society, they must cross a threshold — and that threshold has been rising, becoming a high wall. The meaning of education is to enable a person to cross that high wall of social integration.

100 years ago, you could survive without being literate. Fifty years ago, graduating from middle school gave you enough knowledge reserves. But today, the knowledge and skills needed to enter society are much greater. So the cost of social integration for an individual is rising. It’s no longer just a question of “if you don’t study, you won’t make progress.” It’s become: “if you don’t study, you’ll be eliminated by society.”

Zuoyebang’s mission is to build a ladder to help more children better climb over society’s high wall.

A rather optimistic framing of a company that makes, among other things, a cheating aid and an NSFW chatbot.

Just like the first pair of apps, both Zuoyebang and Question.AI were able to solve the integration by parts problem we looked at earlier. Here’s what makes them different from the ByteDance products:

• Question.AI shows ads before it lets you see the solutions to a problem or enter the app. Zuoyebang shows some ads, but far fewer than the international version.

• Unlike Gauth, Question.AI does show the steps before the solution.

• Zuoyebang’s Chinese app requires a Chinese phone number to see solutions, which Doubao does not.

• Anecdotally, the solving algorithm seems a bit worse — Question.AI and Zuoyebang both produced the wrong answer when I asked them to solve the trig integral we looked at earlier.5

While Zuoyebang has not mastered the half-angle formula, the company’s Chinese app has several educational features that Question.AI doesn’t offer. These include digital planners, study guides, and a function to check students’ work after they’ve already attempted to do an assignment on their own, which is aimed at parents.

Finally, Question.AI declined to answer questions about Tiananmen Square, calling such information “inappropriate.”

Are We Cooked?

The reality is that the versions of these apps for the Chinese market are more educational, less aggressively advertised, and far less widespread. Perhaps these companies are trying to avoid the ire of regulators in Beijing, and thus the features they push in the Chinese market — like time management tools, supplemental study guides, AI tutoring, and tools for involved parents — are more pro-learning. It could also be that the focus on testing in the Chinese education system legitimately makes these apps less useful. In any case, ByteDance and Zuoyebang have decided that cheating aids are the best way to make money in international markets, yet decline to use that same strategy for profitability at home.

As ChinaTalk’s resident math major, I worry that these apps are robbing students of the opportunity to develop their critical thinking skills. The only way to ensure students develop math ability, it seems, is to weigh final grades toward in-class assignments, tests, and open-ended projects. But how can the mental scaffolding that comes from repeatedly solving homework problems be built solely in the classroom? Students simply don’t spend enough time in class for that to be possible. In reality, I fear that richer students (and those with more involved parents) will be sent to extracurricular tutoring centers to ensure they aren’t automating their homework, while everyone else falls behind.

I don’t see much downside to banning apps like these in the USA — and if parents and teachers make regulators pay attention, that could legitimately happen.

This is the second article in our series about China’s AI Education Industry. You can check out the first installment here.

2

As a nice bonus, the Gauth browser extension requires access to basically all of your browser data, but can’t be bothered to use proper notation for solutions like the mobile app does:

3

For this integral:

Gauth produces the correct answer:

Meanwhile, this was the best Doubao could do after 31 steps:

None of the steps in this image are related to each other.

4

Here’s Doubao’s response when I asked about presidential term limits in Chinese:

“We are temporarily unable to answer this question, try another please!” (Notice the watermark that says, “内容由AI生成“ “This content was generated by AI”)

5

For reference, this is the correct answer:

This is part two of our show with Ian Toll, author of the Pacific War trilogy. Here’s part one.

In the second half of our conversation, we discuss…

• The various command styles that shaped US military strategy in the Pacific,

• How General MacArthur and Admiral Halsey became media darlings —controlling public opinion and war politics in the process,

• The evolution of submarine warfare and Japanese defensive strategy,

• Counterfactuals, including a world where the Allies invaded Taiwan,

• Broader lessons for the future of warfare, especially in the Taiwan Strait.

Cohosting is Chris Miller, author of Chip War. Thanks to the US-Japan Foundation for sponsoring this podcast.

Listen now on your favorite podcast app or watch on YouTube.

“What Becomes of a General?”

Jordan Schneider: Let's talk about the generals and admirals, starting with Chester Nimitz. You have this wonderful opening of him taking this secret train ride across America and reflecting on what he’s about to do. He’s trying to relax and play poker with his buddy, but at the same time, he understands the gravity of the situation.

Chris Miller: I was struck by the extent to which Nimitz has now been largely forgotten in American public discourse, but in your telling he emerges as probably the most important strategic thinker of the war in the Pacific. The contrast between him and MacArthur was striking to me, given that MacArthur is the one who’s remembered.

Ian Toll: One of the things that I always find very striking when you look at the admirals and officers, the leadership in the Navy during WWII, is that you have a group of men who have lived parallel lives since the age of 17 or 18 when they entered the Naval Academy. They have been shaped by a culture, by a context, a profession that had rigorous ideas about what leadership should look like. Yet when they reach the pinnacle of their careers, you realize these guys are very different. They have different personalities, different styles, and different ways of making decisions. They present themselves differently.

The full range of personalities comes through in the way that the leadership class — this is true in the Army as well — approached winning this vast, unprecedented war that they had been preparing for their entire lives.

Nimitz was the handpicked choice of FDR. FDR was not just confident in the role of commander in chief, but in particular, he had a parochial feeling about the Navy because he had served in a sub-cabinet position earlier in his career and because he had been president for such a long time and had personally pushed through and run a vast expansion in our Navy, the Two-Ocean Navy Act, which had occurred before the beginning of the war. FDR was very involved in personnel decisions at the highest level of the Navy. He selected admirals. Nimitz was his choice.

He had first offered the job of Pacific Fleet Chief to Nimitz nine months before Pearl Harbor. Nimitz had demurred. He said he thought he was too junior an admiral to take the position, and that for him to accept that command would arouse opposition and resentment among some of the other admirals, and he thought it was a bad idea. They gave it to Husband Kimmel instead.

When the attack on Pearl Harbor happened, when all of our battleships were knocked out of action in the first 15 minutes of the war, when Husband Kimmel was made to perform the role of the scapegoat for that, Nimitz was first to understand that it could have been him. It would have been him most likely, if he had been there. We would have remembered Nimitz very differently. That’s a snapshot of how historical contingency can cast such a long shadow down the decades. Nimitz could have been in the position of Husband Kimmel, a person that we remember solely because he suffered a terrible defeat.

But Nimitz’s great strength was that he had a gentle touch. His leadership style was based on personal warmth. After the trauma of Pearl Harbor, he showed up in Hawaii. He had a fifth of the Earth’s surface within his theater command. It was an enormous command of not just the Navy, but the Army, the Marines, the Air Force in his theater. He’s able to preside over this fractious group of people who are arguing over how to fight this war and to get them to work together and to forge a team out of what was a somewhat dysfunctional system managing inter-service operations in the 1940s.

He was the right man for the job. You said that you thought he was forgotten today. That’s true, but even more true of Ernest King, who was his direct superior. He was the Chief of Naval Operations. He is forgotten even by people who are interested in military history and the history of WWII.

But if you look at the major decisions that were made on the way that we would fight and win the Pacific War, the way that we would pick up the pieces after Pearl Harbor and put together an offensive, which less than four years later would force the surrender of Japan, it was Ernest King more than anybody else who had a blueprint in mind for how we would do that and who was in a position to impose that imprint on the rest of the Navy and all of the military services.

Jordan Schneider: I want to talk about the contrast of thinking styles that the admiralty ended up having to employ. There are scenes of big conference room debates where MacArthur says we should go left and Nimitz says we should go right. They’re making lots of different styles of arguments — some from a logistics perspective, others from a morale perspective. This represents a model of slow thinking and deliberation.

After they decide on a course of action, you have all of these plans and logistics, and you get the boats in place. But because of the nature of carrier warfare during the Pacific War, incredibly fast-twitched decision making is required. You have imperfect information because your scout plane may have seen something, and then you have to make a split-second call.

One of the admirals described it perfectly — “These carriers are boxers with glass chins, but they have enormous left hooks, and all we're doing is deciding when to swing and hoping for the best.”

It becomes very human at both levels of thinking. With slow thinking, you have all these personal histories that are intertwined. Everyone is thinking about their reputation and trying to save their people and resources. Then with the admirals’ decisions, soldiers who haven’t slept in 48 hours have to make these calls.

There’s this other approach where one commander delegates everything because he knows he needs to be sharp and fresh for the big thinking — when he has to make these enormous strategic calls.

These flag officers have to operate in very different modes, which you explored beautifully. I'm curious about your reflection on that and what it reveals about the nature of warfare and the nature of people at this moment in time.

Ian Toll: It’s true because the planning and anticipation of how these battles would go were important. Getting those decisions right, moving your forces into position at the right time — at Midway, most famously, Nimitz had a picture of what the Japanese plan was, thanks to this extraordinary intelligence achievement of breaking the Japanese codes. He was able to move what forces he had at that point, which were three aircraft carriers, into position to do battle. But after that, everything that happened was a contingency. It was chaos. There were a lot of chances involved. That battle could have gone the other way.

You had Spruance and Frank Jack Fletcher, the two American admirals, making decisions with imperfect information, feeling their way through the fog of war. In the end, winning that battle narrowly with a pretty significant contribution of blind luck. You would see this again and again in naval battles in the Pacific. If the right plan is put in place, you’re improving the odds for your side. Yet there are still fast-twitch decisions that have to be made, these opportunistic decisions, probabilistic decisions when you don’t have all of the information you need.

Those are two entirely different ways of thinking about military command. They may play to the strengths or weaknesses of different personality types. But one of the things that Nimitz did particularly well was to develop a plan and to make sure that his subordinate commanders, his ocean-going commanders understood that plan and make sure they would execute this plan in the same way that he would if he were there commanding a task force at sea.

But then once they left, Nimitz was in his headquarters back in Hawaii, in Pearl Harbor, you’ve got Halsey or Spruance or whoever the task force commander is on the scene. Nimitz, although he was often tempted, never got on the radio and intervened and started forcing decisions. He delegated those tactical decisions, even in a major battle, without interfering — trusting to the judgment of his subordinates. Most of the time, that judgment was vindicated.

Chris Miller: Nimitz seemed to me the opposite of a gung-ho military leader stereotype. You use the words “leading by his personal warmth, being gentle.” That came through in the narrative. He felt like a grandfather figure to me. But it was super effective. The one time he came down hard on a subordinate with the “where is task force 37” telegram, it was the softest criticism you could imagine.I wanted to pick up on the fog of war.

Fog of war is a metaphor and fog of war is reality with the weather playing such a critical role in almost every battle.

Ian Toll: Fog of war is a very frequent metaphor in naval warfare and often becomes a literal problem.

Chris Miller: You felt the clouds rolling in and every single battle rolling in and out. Then the typhoon you have off of Leyte Gulf is extraordinary — you’re fighting a battle and then you’re also dealing with these ancient problems of seamanship at the same time. Talk about contingency, every single battle has this uncertainty: what will the weather be like in three days? Your ability to find or be found was hugely impacted in this era when radar was not very good by what were the cloud patterns. That was a great example of the contingency at every moment.

Ian Toll: The weather is this universal thing. I quoted Joseph Conrad, who was a sea captain before he was a novelist, and he’d been through a typhoon in exactly the same waters just off Formosa or Taiwan. It occurred to me as I was reading that description by Conrad, this is the same storm. It’s five decades, six decades later, but that’s Typhoon Alley.

You have those storms going through every year, and you could pick a description if one existed from 2,000 years ago, and you’d be describing the same storm. The navy and the navies of other countries in the Pacific today have got to deal with those same weather patterns. There’s something universal across time to that X factor of weather. I think that particularly comes to bear on naval warfare.

Jordan Schneider: The suspense of not knowing where the enemy ships are is foreign to a modern mind today. The 1940s are not ancient history, but there were no satellites. Radar was just starting. There were so many uncertainties that these folks were facing.

Ian Toll: You’re relying on your planes to be your eyes too. The patrol flights become absolutely essential. It’s very easy for a plane to fly directly over a ship and not see it in overcast weather. We saw that happen again and again where you had patrol planes moving out from these task forces. They’re supposed to be the first trigger to tell you if there’s an enemy there. There was much more of a sense, particularly earlier in the war, of the fleets being blind and having to make decisions without being certain where the enemy was, if the enemy was there, how far, what direction. That uncertainty, the tension and inherently the drama of that conflict.

Jordan Schneider: If Nimitz was a gentle, modern manager, Bull Halsey was the opposite. His famous quote was: “Before we’re through with them, the Japanese language will be only spoken in hell. Kill Japs, kill Japs, kill more Japs.” The guy was living up to his caricature, and then he embraced it.

There were numerous points where the mythos surrounding him was such that he was kept in positions longer than he would have been otherwise. FDR’s view was, “We’re already going to win, and it would be a weird sign to get this guy out of command.” His ethos was much more dualistic, reflecting the brutal mindset you needed to start these operations where you knew tens of thousands of people would die over the course of a fortnight.

Chris Miller: I was struck by the fact that some of the key, really costly errors that you describe were made by him, but it also seemed you were suggesting there’s strong evidence that the people under his command really loved him. Where’s the balance sheet there?

Ian Toll: There are some caveats to that. Halsey became very controversial within the ranks of the Navy in the last year of the war. He had some severe critics, including some of the rear admirals who were the task group commanders of the Third Fleet. These were the next generation of leaders — the guys who would be promoted into the senior positions in the immediate post-war period.

The piece that I think is often missing — and it’s true when you consider MacArthur’s career as well — is just how important their public images became.

They became important because the United States is a democracy that has elections during wartime, which makes us a little different from other democracies. The political influence of a military leader can become very great in wartime.

You had a new media environment. Film and radio, the ability to run the same photographs in newspapers all across the country. Many of these technologies that we take for granted today changed the political environment. When you had leaders like MacArthur and Halsey — I’ll put them in the same category — who were very good at speaking directly to the American people and to the rank and file of the military services through the media, they became media darlings. They became people that reporters always wanted to talk to because they wanted that quotable line, that photograph. It sold newspapers. The American people started to look at the war and understand it by listening to these very colorful, charismatic figures, and that became a political consideration.

1944 was an election year in the United States, and MacArthur was seriously considering running against FDR and was implicitly threatening to do that. At the same time, FDR was faced with the decision of whether to return to the Philippines. Halsey was making significant mistakes, most significantly in October 1944, when he made a mistake that could have led to disaster and only didn’t because of blind luck. It was well understood within the Navy that he had made this inexplicable error. There was a feeling that he should be held to account — that he should not be running the Third Fleet anymore, that he should be relieved of command, maybe put into a different position. But his political popularity, his profile with the American people as the unofficial face of the US Navy became a factor in the decision to keep him in place.

The interplay of politics, publicity, media, and the way that all of that influences the major decisions being made at the height of the bloodiest war in history — that is a fascinating story that hasn’t received as much attention in historical literature.

Chris Miller: I love the description of MacArthur’s press team as “the most well-oiled press team outside of Washington.” I learned a lot from that.

Ian Toll: MacArthur’s emergence as the principal hero — I don’t think it would be going too far to say that to the American people during the WWII, MacArthur was on a par with FDR as a national figure, a leader, a symbol. All of that happened extraordinarily fast. This was a lesson about the way media can work in wartime.

In the immediate aftermath of Pearl Harbor — I’m talking four or five days after Pearl Harbor — you had a sense of rage among the American people, anger at the Japanese, but also at our own military leadership, our Navy leadership in particular. How could you let this happen? How could we be blindsided like this in the heart of our fleet base? There was a sense of shame, a sense that we’d been humiliated. It was inexplicable.

Then, almost immediately, another storyline emerged from the Philippines, where the Japanese are invading and the Philippines’ beleaguered army is outmanned, outnumbered, and too far away for us to support them because of what had happened at Pearl Harbor. They’re fighting for their survival. MacArthur stepped in with a very aggressive and effective media strategy to shape the way that story was told and give the American people another storyline — a heroic storyline.

People who had been conditioned by movies to understand complex events through heroic narratives — MacArthur was stepping right into that and very effectively using media, photographs, the daily cables that he was writing describing the war, to establish himself as a singular figure. That continued right through the Korean War when he was fired by Harry Truman and almost caused a revolt within the Democratic Party. For ten years, MacArthur was able to ride that successful media strategy.

That’s interesting to me because in an authoritarian or fascist model of government, you don’t have that. You don’t have the ability of individual military leaders to challenge the political leadership by appealing directly to the people through the media and the press.

Jordan Schneider: There were a few other media beats that I thought were fascinating. One was this debate in October of 1944, just a few weeks before the presidential election, of whether or not to let the public know that the Japanese had sunk a carrier. One admiral said, “No, please don’t tell the Japanese that this carrier has sunk.” Another was saying, “There will be an enormous scandal if we don’t tell the American people the facts a few weeks before the election.”

But I think my favorite arc was with King and the press corps in Washington.

Ian Toll: The culture of the Navy had inculcated this anti-media, anti-public relations philosophy that it’s dangerous to play with the media. They can divulge your secrets. You should lie low. We should be the silent service. We’ll tell the American people what happened after we win the war. There was a joke going around that King’s philosophy of disclosure and media was, “We’ll tell the media and the American people absolutely nothing about what’s happening until the day the Japanese surrender, and then we’ll put out a two-word press release — ‘We won.’”

For a thousand reasons, that became a problematic, unsustainable approach. The Army — particularly MacArthur — was stepping into this void and shaping the way the American people understood the Pacific War to be unfolding. There was an understanding among all of the military services that as soon as the war was won, there was going to be a complete reorganization of the services. What we have today — a Secretary of Defense, a Pentagon, Joint Chiefs, a way of managing the different military services and forcing them to work together — none of that existed in the 1940s. It was understood because FDR had essentially decreed it — “We will reform and reorganize the military, but let’s get the war done first.”

The Army, the Navy, the Marines, the Air Force — they all had their own agendas, and they were positioning themselves for this immense reform, this bureaucratic refashioning that they knew was coming. For all of these reasons, King was eventually convinced: “I can’t just ignore the media. This is a democracy. I’ve got to have some strategy.”

It was his own lawyer, who was a former reporter, who proposed: “Why don’t you start off-the-record briefings? Just get a bunch of reporters together in Washington. We’ll meet somewhere — not at your office, but at my house. We’ll get these guys together. We’ll have ground rules.” It would be what would today be called a deep background briefing, meaning you’re not going to use any of what’s disclosed. None of it’s going to be written up into any article. You’re not going to source anything. You’re not going to quote King, but it’s going to help you understand what’s happening. That will contribute to the way that you write the stories that you can write.

King thought this was crazy. “Why would you trust a bunch of reporters under these kinds of ground rules?” He was persuaded that if you get reputable reporters, they will adhere to these ground rules. After the first three hours of sitting with 20 reporters in Alexandria, Virginia, at his lawyer’s house, he realized, “This is exactly what I need to be doing because I’m getting these guys on side. I can then begin manipulating press coverage a little bit.” Even more than that, this was an opportunity for him to explain at a high level the strategic issues that they were dealing with to a bunch of guys who really were outsiders, but who were highly intelligent. King realized this was actually helping him to shape his own thinking in a beneficial way. For the rest of the war, he continued doing these deep background briefings.

I think that was an interesting arc. It helps us understand a little bit about who King was, but it also illuminates these issues that are unique to running a war in a democracy — different from the kind of challenges that Stalin, Hitler would face.

On Submarines and Taiwan Contingencies

Chris Miller: I was struck by the centrality of submarine warfare in the struggles that Japan faced. There have been some books on this in the past several decades, but relative to the Battle of the Atlantic, which takes center stage in histories of the war in Europe, the fact that the Japanese faced and lost the Battle of the Pacific in terms of shipping is central. I was struck by the way that you brought submarine warfare to life, with the USS Wahoo as a great case study. Upstream of that was the question of torpedoes — how do you get torpedoes that actually work, which ends up being a technical bureaucratic struggle.

Give us a bit of a glimpse into the trajectory of submarine warfare and its impact on the scope of the war.

Ian Toll: What you have in the submarine war — in any war of commerce, the Battle of the Atlantic being another example — is a cumulative way of fighting the war. You want to sink a certain amount of shipping, sink oil tankers, and little by little diminish the ability of your enemy to carry on the war. You’re attacking the economic underpinnings, the logistics underpinnings of the war. It’s a very different kind of campaign.

The war that the rest of the Navy is fighting, the Army is fighting, the Marines are fighting — you can diagram it on the map. We’re going to take this group of islands, and then we’re going to move, and we’re going to take this group of islands. We’re going to fight a naval battle here, and you could diagram the naval battle, and then you could show how that opens the way for us to make this next westward thrust, always moving closer to the Japanese islands.

Submarine warfare became death by a thousand cuts.

Sink one oil tanker at a time. There’s a cumulative effect that caused Japan’s war economy to sputter and run out of gas, and its ability to carry on the war became critical in the last year of the war.

You have to tell these stories side by side. You have to realize these were almost entirely separate campaigns. There’s very little direct coordination between these two campaigns, and they’re both important and they’re working together. That wasn’t the way the submarines had been envisioned before WWII.

An interesting part of the story is how the submarine commanders themselves came to realize: “We’re not using this resource in the optimal way if we’re using them to support fleet movements or to go out and be eyes and ears for the fleet.” This is the way fleet submarines — these diesel submarines — had been built with a very different role in mind. They were going to operate at the edges of these task forces as they went out. They weren’t going to fight the kind of long, solitary cruises where they’re going primarily to sink oil tankers and freighters.

It wasn’t until 1943 that the Navy realized we’re not using this resource the way we should. What we should do is largely disconnect the Navy submarines from what the rest of the fleet is doing and just send them out there to try to sink oil tankers. Let’s try to starve Japan of oil and other resources. Once they did that, once they fixed the torpedo problem, it became clear to the Japanese that they had nowhere to go.

Japan is a country poor in natural resources. It always has been. It has negligible oil production. It has always relied on importing oil. Their decision to attack us at Pearl Harbor was largely about oil. They had an oil stockpile, and they needed more. We had cut off the supply of Texas oil. They needed to go down to Borneo to take the Dutch and British oil fields there and replace that supply. Then they have the problem of transporting that oil from what is today Indonesia to Japan — 3,000 miles, an artery that if we could sever would cause the entire Japanese Imperial project to bleed out. That was what happened in 1944 and 1945.

You can tell this story with statistics. There were X many fleet boats that were going out. They were going on patrols of this average length for X many weeks. They were sinking X amount of ships on average. Those statistics will tell a story. But in order to bring the reader into what’s happening, you’ve got to show an individual boat and say, “Let’s imagine what it’s like to go on this cruise on the Wahoo and to see it from the perspective of those who were in the crew.” Use the example of that one very successful submarine and her career to illuminate the larger story.

Jordan Schneider: The Wahoo arc had aspects of a video game — we had to line up the shot and execute these crazy trick shots down the chute, diving while everything exploded around us. But it ties back to larger strategic questions. The bottom-up tactical innovations were fascinating, both understanding that the torpedoes were wrong and realizing we shouldn’t be going around with the carriers. We should be positioned between Japan and China to shoot down oil tankers.

One of the big themes is that technological innovation and change happened from 1941 to 1945, but more important were the failures of imagination. Starting with Pearl Harbor, there was this long evolution of understanding that carriers mattered more than battleships, then understanding that submarines were crucial, then not taking territory, and finally realizing we could skip islands without killing everyone. On the Japanese side, we’ve talked about the Kamikazes but haven’t discussed the infantry side much — going from Banzai charges 万岁突击 to honeycombing into ancient mountains. The fact that there was so much room to get better, even during moderate technological change rather than super rapid change, came through in your narrative.

Ian Toll: Japanese infantry tactics evolved, that was an important change. It happened primarily in the last year of the war when individual army commanders realized they had been using their army entirely wrong. If their goal was to exact the greatest possible price as the Americans came across the Pacific island by island, shrinking the ring around Japan’s home islands, then they needed to dig into the ground and make the Americans come to them — put five or six of their guys for every one of the Americans.

The Army abandoned the banzai charge entirely and began digging in. You saw this most effectively at Peleliu, Iwo Jima, and Okinawa.

Jordan Schneider: The fact that you can become 50% more effective by using the same available tools in a different way isn’t something you’d expect given how many experiments were being run. Even in Okinawa, they still talked themselves into some stupid attack because of the instinctive doctrines they’d been drilled in for decades.

Ian Toll: Their sense of honor, too. In Okinawa, you had a defensive line of fortifications that crossed the island. Okinawa is a long, narrow island about 60 miles long and maybe 9-10 miles wide. At the narrowest point, they picked rocky mountainous ground in the southern part of the island and built an extraordinarily ambitious string of tunnels and caves across the island.

If they were going to hold out, buy time, and inflict casualties on the Americans, they should have stayed in that high ground to use the advantages of terrain and prepared defensive positions. But once the Americans were ashore and had taken the major airfields, they immediately started preparing Okinawa as a stepping stone to Kyushu. They would use those airfields to bomb the Japanese homeland.

This created immense pressure within the Japanese army — “we’ve got to do something about this. We can’t just stay here. We’ve got to contest what the Americans are doing with the rest of the island.” Again and again, they sallied out from these defensive fortifications, got mowed down, suffered terrible casualties, and eventually realized they had to go back to this blueprint of trying to survive as long as possible while taking as many Americans with them as they could.

It was an evolving understanding of what the ideal tactics were in these battles. But there was also a subtle interplay of politics, policy, and the way military strategic decisions were made. You see that in Japan, you see that in the US, you see it in Great Britain. That’s part of the picture that’s important to illuminate and becomes relevant when we talk about the way different countries and regimes will wage war even when they have similar tools.

Jordan Schneider: It’s hard to second-guess wartime decisions because there was so much unknown in 1941 and 1942 about what carriers could do, what submarines could do, and what the Japanese political system looked like. Coming back to submarines — if the US just 10x’ed that effort, there’s a world in which very few people have to die because Japan decides to starve. Japan ends up starving, and that’s all she wrote.

Island hopping is another live debate about whether the US could have skipped more islands, Iwo Jima being the main one that people still argue about today. What do you think is the most interesting operational strategy or broader open questions when it comes to the way the war was fought in the Pacific that you’re excited to see more historians take on?

Ian Toll: There are a number of issues. What we found as we went along with this war was that we could go much faster — we could close the ring around Japan much more quickly than we thought. This is partly because we surprised ourselves with just how quickly we were able to mobilize our economy to get ships and troops and planes out into the Pacific.

But if you were to refight the war knowing what you knew in 1945, and if you were able to deal with the political challenge presented by MacArthur, who really was a force of nature all his own and who had the ability to shape decision making because of his political influence, what you would probably do is focus essentially all of your effort in a direct attack on Japan from Hawaii, moving directly through the Central Pacific (which is one of the routes we took), but not diverting into the South Pacific.

Take islands within bombing range of Japan and focus on cutting their supply lines with submarines in particular, then establishing the ability to bomb the Japanese homeland directly, which we did as well. If you took a more aggressive “close the ring around Japan quickly” approach, you would probably see a scenario where the war ends six months earlier and without using the atomic bomb.

That’s counterfactual history, but if you went back and applied the lessons that you got from the war itself, if you were able to use that wisdom of hindsight as you were doing it, we could have seen a shorter war or more efficient war, perhaps a war with fewer casualties, and that would force Hirohito and the ruling circle in Japan to recognize their error and that they needed to surrender.

One of the — at a high level — another counterfactual within the Pacific that is often forgotten by people who are familiar with the history is that we came very, very close to landing troops in what we then called Formosa, and today call Taiwan. It was Admiral King and most of the Navy planners, at least in Washington, who believed this was the key to forcing an end to the war — taking Taiwan.

It was Raymond Spruance, the Fifth Fleet commander or ocean-going fleet commander in the Western Pacific, who took the lead in saying we should bypass Taiwan. We should take Okinawa. Okinawa was smaller. The island is large enough for our purposes, essentially to establish as a stepping stone to an invasion of Japan as an air base, but will not commit us to this enormous undertaking of taking this very large mountainous island that has been a Japanese colony for 50 years.

What if we had taken Taiwan? It’s interesting to imagine how history might have unfolded. Would that have involved us in the Chinese Civil War, for example? That’s an interesting counterfactual. But if and when China does seriously consider rolling the dice and moving against Taiwan, it’s going to encounter many of the same issues that led our military to decide not to take that step in 1944.

It’s a large, mountainous, rugged island. It would require you to establish air supremacy over the island and naval supremacy at a beachhead to be able to maintain a continuous flow of supplies over that beachhead. Taiwan is 100 miles from China. That’s five times the width of the English Channel. These are immense problems that are not unlike some of the problems that we ended up solving in the 1940s, but should probably prompt military planners in China to think very seriously about this history and the nature of the challenge.

Jordan Schneider: We’ve run two articles in the past year, one on the debate around Operation Causeway and the other Operation Sho-2Go 捷2号作戦, which is the Japanese plan to ward off the Americans. They built all these relatively similar things that you saw in the context of Okinawa and Iwo Jima with all these tunnels.

I don’t think Americans on Formosa change a lot when it comes to the Chinese Civil War. The Americans were also thinking about invading Ningbo 宁波市, in Mainland China, and using that as a base to bomb Taiwan. The Americans did show up on mainland China after the war but did not stay long.

It seems to me that even if the Americans showed up in China, we would have pulled out really fast, like we did in a lot of the rest of the Pacific. The Korean War only happens because the Chinese Civil War happens the way it does and then everyone was on edge at that. Mobilizing America to do even more than what it did, which was already a lot when it came to giving Chiang Kai-shek 讲解可 a lot of weapons to fight in the late 1940s, seems to me to be a hard counterfactual to consider.

It was the Japanese invasion in the first place, which gave Mao Zedong 毛泽东 a shot. Can you imagine the world in which America went in with Chiang Kai-shek in 1946 and 1947?

Ian Toll: No, it’s unlikely. Our military services really felt an immense sense of relief that we did not have to invade Japan and had shared a realization of how costly that operation would be. To become involved in a civil war in a vastly greater country on the mainland of Asia would have compounded all of those issues.

But counterfactuals are always going to be somewhat controversial. There are many historians who think they’re not worth discussing at all. But so much happened in those last few weeks of the Pacific War that you’re almost forced to acknowledge that things could have gone differently.

The Red Army poured across the Manchurian border on August 9th, the same day we hit Nagasaki — a sudden declaration of war. Stalin let his war machine loose in Manchuria. If the war had lasted two weeks longer, if the Japanese surrendered less than a week later, if they had held out until the end of August? Would you have had a red army in Korea in a bigger way?

Stalin ordered his army to take Hokkaido. He wanted Hokkaido. He could have gotten Hokkaido if the war had gone on a few more weeks. Then you might have seen Hokkaido, the northern island of Japan, as the East Germany of Japan for 45 years through the Cold War.

All of those kinds of counterfactuals you have to take seriously, given how volatile the situation was. The real question about whether Japan would surrender, whether it would make any organized surrender at the end of the war at all, or whether the place would have collapsed into civil war and prevented any organized end of the Pacific War. Very different paths for Japan and for all of Asia in those final weeks.

Jordan Schneider: Another lesson when we’re talking about the Taiwan contingency today is that we spoke earlier in this conversation about how the die was already cast by January 1942 because American industrial might was what it was. But the balance of industrial forces plays out over longer time horizons and longer wars versus shorter wars. The importance of smaller technical decisions or point-in-time technological advantages can be amplified such that you don’t have these big national industrial tests of will.

Thankfully, we haven’t had too many of them when it comes to great powers going against each other since 1945. There’s a lot more uncertainty in the smaller wars where the national commitment level is one of the most important variables, which you’re gauging and adjusting for over time, as opposed to these scenarios where two empires are going all out to the death against each other, and then you can stack up the factor endowments and have a good sense of where it’s all going to end up.

Reading Recommendations

Jordan Schneider: You want to recommend some books, Ian? What have you read recently? Doesn’t have to be anything to do with this, but whose writing has impressed you of late?

Ian Toll: In These Times: Living in Britain Through the Napoleonic Wars, 1793-1815, which is a book by Jenny Uglow about Great Britain during the Napoleonic Wars. I have an interest in home front histories of all wars, the way societies deal with wars, the way they shape economies and politics.

Jordan Schneider: And maybe just some — are there voices or memoirs or letters? Many of these Americans and Japanese who lived through the Pacific War, they’re stylish writers. Which ones are the ones that stick with you these many years after writing this?