Pod Insights Summation with Auren Hoffman Fmr. German Defense Minister Karl-Theodor zu Guttenberg on NATO, nuclear energy, and how to disagree without blood About this episode Karl-Theodor zu Guttenberg became Germany's youngest Minister of Defense in history, and previously served as Minister of Economics and Technology. He is the chairman and founder of Spitzberg Partners, an investment and advisory firm, a bestselling author, and co-founder of Open Minds Media, where he produces films and podcasts. He co-hosts one of Germany's most popular podcasts. In this episode of Summation, KT and Auren discuss: Why Germany's defense spending hovered at 1% of GDP for decade...
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Auren Hoffman? Hello fellow data nerds. My guest today is Karl Theodor Zu Gutenberg. He is the chairman and founder of Spitzberg Partners, an advisory firm. He's also the co-founder of Open Minds Media. He's also the former German Minister of Economics and Technology. And later, he was Germany's youngest Minister of Defense. KT, welcome to Sumation.
0:20 Speaker 01 Thank you, Aron. Great to be with you. And you're reaching me in Berlin right now, where we try to manage pure madness in Europe right now.
0:29 Auren Hoffman? Now, okay, now, speaking of Europe, okay, you were Minister of Defense. Germany was spending like roughly 1% of GDP on defense. Now that has like gone up quite a bit. We're seeing all the European countries, or at least many of them, start to move in a different direction. Like, what took it so long?
0:47 Speaker 01 Well, we've been in REM sleep for many, many years. When I was in office, defense spending hovered just about 1% of GDP. And well below, at that time, NATO's 2% mark that had been set. And it wasn't a secret to anyone in Berlin or Brussels that we've been complacent for quite a while. And the uncomfortable truth is, Aron, that Germany only moves on security when reality becomes very painful. And that obviously happened with the war in Ukraine. That is all in connection with the threat we are facing from Russia, not only regarding Ukraine, but also the eastern flank of NATO.
1:30 Speaker 01 And has now reached a new level with what's going on in the Middle East. So it's for decades, Berlin enjoyed the luxury of American security guarantees, of Russian gas and of Chinese demand. And we're just convinced that this, it was more or less like a three-legged stool. And two of these legs are gone, and one is wobbling. And this is where we are right now. So it needed, actually, a couple of shock moments that Germany
2:10 Speaker 01 Finally understood just relying on American security is not a good idea any longer. And then, of course, you have a reelected, highly self-confident president in the United States, who made it quite clear that even two percent would not be enough any longer and that the Europeans have to take care of themselves. So the combination of this president, who actually only reiterated a demand that we have heard before from other presidents, but in a much nicer tonality. And so we didn't react really, also played a role and led to that combination of outside threats and a demand within NATO.
2:52 Speaker 01 Having said all this, Orin, NATO is at risk of falling apart right now. And that is not due to what the Europeans are doing right now. That has its root cause in the White House.
3:02 Auren Hoffman? Like Germany is now growing its defense system without, in some ways, the burden of all this legacy stuff, because it never invested in a way maybe it should have. That could be a bug, but also could be a feature. Maybe it could start investing in newer things, investing in things that are a little bit more modern. What should Germany be investing in now?
3:27 Speaker 01 Well, if you start from near zero readiness, good news is you can skip straight through to the 21st century. And instead of just nostalgically clinging to 1980s, which more or less is where we have been stuck for way too long. So Germany needs a force that is not smaller, but much more deployable, which is interconnected with the allies, which is interoperable, which is one of those buzzwords of today. And certainly digitally and with the use of AI and new technologies at a level where we haven't been so far.
4:10 Speaker 01 So that means prioritizing a couple of things. When it comes to the threat from the East, especially from Russia, we need air and
4:20 Speaker 01 The defense that lives up to today's expectations. We need cyber capacities, space capabilities. And Europe has a lot to offer here, but it's all it's it's it's it's all disconnected. And and the problem is a lot of the European nations think that they need the fully fledged spectrum. And instead of aligning and instead of having this, the interoperability that is would actually make Europe way more efficient than it is right now. So this is, so these are just a few tools. What's definitely needed is that we need to, that we need to find ways to bring in whatever AI has to offer. We have to live up here to to certain expectations.
5:05 Speaker 01 We have usually phrased when it came to the US, not but not to us. And and these, it's quite a bit of homework and it's definitely not cheap.
5:14 Auren Hoffman? You know, we we see, I think the company is called Rheinmetall, the the the defense company in Germany has now surpassed Volkswagen in market value. Is this, is this like, is this a permanent reorientation towards security? Or is it just like a temporary mood swing?
5:33 Speaker 01 So you've probably picked the worst of all examples by mentioning Volkswagen. Because it's not, it's not that Volkswagen is any longer a reflection of its former strength. And so surpassing Volkswagen at the very moment is is is not that much of a, let's say, of an effort. However, it's it's, there is a paradigm shift taking place. Germany has understood that this, that industrial sector is one that needs to be expanded. That it also offers a lot of dual use opportunities.
6:11 Speaker 01 And it could be linked then, which is quite interesting, to our extremely strong SME sector, which is way stronger than, for instance, the one in the US. And you know that we have manufacturing skills and and and industrial elements. Others are quite envy of when they, when they look at. Germany, and this is being reshifted right now, being put into new positions and and and it's a new, for us, a pretty new sector of our industry. We've had Rheinmetall for many, many decades, of course, but they're going through the roof of right now. However, having said all that,
6:50 Speaker 01 Rheinmetall as such is not the solution. It needs to be linked to, to, to a thriving startup culture in this field as well. It needs to be linked, as I've said, to, to so-called old industry, but especially when it comes to the supply chains and other things. And, but this is only one, one part of it. It's, you can have many companies, but as long as you don't put the necessary procurement reforms in place and, and, and, and create a mixture of long-term strategies, but also short and midterm strategic approaches, nothing will fall into place. And, and, and that's exactly
7:32 Speaker 01 the, the challenge we are facing right now. However, the pressure from, from outside is actually forcing us to do so. And, and, and I'm quite surprised that the, let's say, traditionally complacent Germany, especially when it came to, to, to ramping up our military efforts, is finally taking steps I wouldn't have expected before. So driven by necessity, of course, not really driven by choice, but, but it's high time and it's, it's, it's actually happening.
8:06 Auren Hoffman? The German economy has been flat for at least the last few years and it's been pretty low performing for, for quite a while. What is the reason behind this?
8:18 Speaker 01 That's a good one, Orin. So we've been extremely successful in combining, let's say,
8:28 Speaker 01 a couple of things that were a pain in the neck and, or are to a certain extent, to us, a couple of disadvantages. So we have, we do have a mature industrial economy as a Just said before, but that was is is is is being confronted by high energy costs, slow digitalization and a demographic curve, which is quite concerning. And and at the same time, a a policy culture that only does reforms at gunpoint. And this combined with then the loss of cheap Russian gas, the nuclear exit, which was probably the biggest idiocy of the last couple of of of of decades.
9:12 Speaker 01 And and a very hesitant litigation prone energy transition have eroded our competitiveness. And this is, let's say, the base case we're talking about. However, as I've said before, not only in the light of what we are facing right now with the with the military threat coming from different corners of this world and and NATO being hollower and hollower. We've come to to a moment where not only Germany, but Germany as as the the third largest economy in the world and certainly Europe's largest economy has live up to has to live up now to to um to certain goals where we've been not only in REM sleep, as I've said before,
9:55 Speaker 01 but you you definitely know the fairy tale of Sleeping Beauty, right? So it's I usually use that analogy. So Germany has been Sleeping Beauty for about three or four decades. And suddenly, and and from an erotic point of view, this is not probably the most attractive idea to be kissed awake by a Donald, by a Vladimir and by a Jim Ping. And what happens if you kiss awake a Sleeping Beauty that was in sleep for thirty years? You stink out of your mouth, your hair is greasy and and you're not as attractive as you should be. So what's taking place right now is that this Sleeping Beauty is has actually to prep up and has to has to do its homework faster than ever.
10:41 Speaker 01 And it's happening. So that's the good news. It's um it there is more effort put in place than I've witnessed over.
10:50 Speaker 01 Over many, many years and both of us are not the youngest any any longer. This is so that's just a footnote on that. And and Germany also becomes more and more attractive or in in for investors, especially for US investors. So I've I've I've I've rarely sensed as much interest in investing in all these fields I have just mentioned, where we need reforms in Germany right now. And it's being accompanied by by programs and and co financing. Structures that are quite new as well and or brand new even. So there's there's something happening.
11:29 Auren Hoffman? It seems like when I think of Germany twenty years ago or and and before, I think of car manufacturing autos, you know, Mercedes, BMW, Porsche, you know, these these amazing, these these great companies. Today, all those companies seem like way less good than they once were. They're just like, the cars are fine, they're not as exciting as they once were, they're not as they're they're not as innovative. Their market share in terms of like almost every category isn't as high. The quality isn't as good compared to all the other competitors. In fact, like Ford has like amazing, like Ford's quality has gone up like dramatically. Whereas, you know, some of these German companies, they're fine, but they haven't gone up at the same pace
12:13 Auren Hoffman? as some of the other companies have gone up. That was like the pride and joy of the German economy. Why is that not, why are they not innovating? Why is BYD a better, why is Tesla amazing? But we don't see anything similar in the in the German stack.
12:27 Speaker 01 Well, that's an interesting, it's an interesting point of view. I I would be very careful to to put everything in the same basket here. So for instance, BMW is still a way better car than any American car, if I may be that blunt. It's from a technological point.
12:44 Auren Hoffman? I feel like there's no way that that's true. Like, like, this is like, I, I, yeah, it's like, they like break, like, they break down all the time. They're like, they're not, they're not, they're not the car it once was, you know, it's just like, like a Tesla is so much better or.
12:58 Speaker 01 So what I would distinguish is, for instance, we've mentioned Volkswagen before. Volkswagen is struggling without a question. When it comes to BMW and Mercedes Benz, honestly, I don't see an American competitor, especially at the high level of these cars that would come close. Tesla is an interesting mid-level car with a, with, with a supreme, um, let's say, e-vehicle capacity. But I, for, I, I'd rather sit in, in, in a BMW or Mercedes also when it comes to the sheer comfort of the car than in those hard cushioned seats of a Tesla, where it's still, the material is dangling and where the, let's say, the, the software is great, but the car is such as at a different level.
13:43 Speaker 01 We might disagree on that.
13:44 Auren Hoffman? Okay, yeah, I totally disagree. I bought a Mercedes for my wife, uh, a year ago, and it's been in the shop three times, um, on a new, right off the lot. These cars are just, they're, they're just less, they're just less reliable than they once were.
13:58 Speaker 01 So as you know, I lived in the US for 11 years and until not that long ago, and my Ford was in the garage or in the shop quite often as well. So it's, so we all, so, plus, what's probably also fair to say is the pressure that comes from Chinese cars is also hitting the US. Um, and the only reaction in the US is more or less to, to, to close down the market and, um, and to ban them. So this is something we both feel in our so-called Western, um, industrial, um, democracies and, and, but you, you've, you have a point. So the sheer reliance on our, let's say.
14:40 Speaker 01 Romantically pampered old industries. So this is the car industry as one of the backbones. There are so many, there are so many companies within the supply chain as well being so more or less tightly or almost exclusively linked to that industrial sector. Chemical industry, which is, yes, still highly innovative, but it's, it's, and, and, and, and some of the manufacturing things. The sheer reliance on those things cannot be enough. And our problem always was that we are highly innovative. We are still world champions, ahead of the US when it comes to, and, and clearly ahead of the US. When it comes to the patents, we are actually developing in, in, in, in Germany.
15:24 Speaker 01 However, from patent to growth stage and from growth stage to a world success story. We never come to the same level the US has to offer. Why is that? Because the German mindset is extremely risk averse. It's almost an obsession. So because we are just dead afraid of failing. We are, it's, it's, it's not, it's, it's, it's not by coincidence that the term schadenfreude doesn't exist in Eng- in English. You use the term schadenfreude, which is to take pleasure if someone fails. And it's a German term. And so psychologically, we approach things differently. We are afraid of failing.
16:04 Speaker 01 We are not putting enough money into growth stage companies as you do in the US. Even if it's a shitty idea, you just give them as much money as they need. And they could come to a level where we are behind them. So we rely on old structures. We rely on a couple of, on, on, on things where we say, okay, this has been traditionally successful. And it should be in these highly paced times as well, which is a miscalculation. So again, coming back to what I've said before, even that is changing now. So it has been understood that there has to, we need a different risk-taking attitude. We need to, to put more money into, into new technologies.
16:46 Speaker 01 And again, there's not a lack of, of wisdom or of creativity and of innovative skills in Germany. There's a lack of bringing it on to the next success level. And this is where we are, where we are struggling, or where we used to struggle. And I hope that it's getting better now.
17:03 Auren Hoffman? But like twenty years ago, we had a decent amount of German nuclear power. Um, and then over
17:10 Speaker 01 The best in the world.
17:11 Auren Hoffman? It was kind of like post Fukushima, all pretty much all of it kind of got phased out over time. It seems like everyone believes today it was a mistake. I still don't understand like how it happened. Was it some sort of environmental thing? Was it a Russian op to get the gas in like? How like what happened there? Like what's if we kind of go back in time? And how do we prevent things like that from happening in the future?
17:36 Speaker 01 I was two weeks out of office when the chancellor Angela Merkel actually took that decision. And I almost fainted when I when when I heard that. It's so so we've had that. We've had that earthquake and tsunami Fukushima. And let's put it that way. The probability of a tsunami in the Baltic Sea is quite limited. So that was certainly not the reason. It was also not a longstanding conviction by the chancellor who was still fiercely defending the necessity of nuclear power until shortly before that. So the true reason is, and that's something a lot of people don't know.
18:19 Speaker 01 It was it was internal domestic politics. So two weeks from after that, after Fukushima happened. Um, there was there was a state election in Baden-Württemberg, a southwestern state in Germany, where the most promising candidate was a candidate from the Green Party. So and as you know, the Greens are strictly opposing nuclear energy for for it's one of their founding myths. And her strategy was that she said, well, we might be successful in that state election. If we take Fukushima as the the tipping point to finally abolish nuclear power.
19:04 Speaker 01 The irony of the story is the then running green candidate was up until a few months ago, the longest standing prime minister of a German state. So the green one, of course, because the people said, what the heck's going on here? So they exactly saw that this strategy was just made up for electoral reasons. But the decision went through the Bundestag and it was then pushed through. And led to what we call today euphemistically, the energy transition. Although it's not even a euphemism, it was a energy transition towards renewable energies, which as such is a good idea.
19:43 Speaker 01 But you have nothing to bridge that timeframe in between or the time span in between. And so up until today, we don't have the necessary grids for serving all these renewable efforts. Of course, we lack Texas style sunshine or Norwegian waterfalls to get into a hydro power or other things. So it's all about wind, solar and a couple of other things that might be interesting. And also other other energy sources that are still needed are conflicted in a ideological energy warfare we have in this country. And so there, again, a couple of things are changing now.
20:27 Speaker 01 There is more and more talks about getting into small nuclear reactors as well. It's it's still not happening and it might still take a while. There is a necessity to go back to a larger amount of gas power plants. It's and and and the mix of, let's say, fossil options and and renewable options. And yes, the overall goal is to be at zero emissions in 2045. But this is a high ramp and or a high goal or high bar to reach. And and and this is something where we have to get rid of all these ideologies now. So it's a wonderful goal to become more renewable.
21:09 Speaker 01 Germany is leading in this field when it comes to the to the technology as such, but it is not. Leading in substituting nuclear power in a way that it is fully efficient.
21:19 Auren Hoffman? Classically, us uneducated Americans, we kind of lump all Western Europeans into one kind of monolith sometimes. And but if you think of like France, France did not fall into this trap, like they still invested in nuclear, they still have a very high percentage of their power coming from nuclear. Why, why did it like, it was kind of like we're Ted in Germany, but not in France?
21:46 Speaker 01 Because in in that field, the French were, for a change, more pragmatic. And and and and did understand that that road would lead to nowhere. Did it help France to actually somehow smoothen its its very rocky economic path they had they they had created over over over the last years? No, it didn't. France is in a pretty dire state economically and also and also internally. And when it comes to its politics, our policy options, I'm I'm quite quite concerned about what's going to happen next year when Macron will be out of office, because we might see a very far right leaning government also in in France,
22:31 Speaker 01 or at least led by extremes, whether it's from the left or the far right. And so Germany, that's the irony of the whole story. Germany needed to import power emerging from nuclear plants from France, but also from the Czech Republic, which is our eastern border. And at the same time, we created over capacities because we didn't have the grid system any longer with our renewables, which we then had to sell to, or actually to give to for free to our southern neighbors like Austria and others, and had to buy back which whatever would come from them via hydropower and other things. So this is something even even
23:15 Speaker 01 very normal person who is not that interested in politics immediately understands. And and so this is why I call our move out of out of nuclear power a sheer idiocy.
23:28 Auren Hoffman? Okay, so question, since you served under her, was Merkel the worst German chancellor since World War Two?
23:38 Speaker 01 No. And but she was also not what the Americans actually tried to see in her. The the last leader of the free world. Utter BS, I'm sorry, this is and and she didn't. She didn't want to see herself this way. And so that was highly overstretched and overtaxed. So one has to be fair. She steered Germany through the euro crisis very sophisticatedly. The the global financial crisis and and also through parts of other crises Europe Europe had been hit with.
24:15 Speaker 01 But that only worked with a style which I once deemed as the art of being Machiavelli. So which follows a couple of principles. The first principle is to hesitate vigorously. And the second principle is to keep all options open, but to do it decisively. The third principle is to build a wall of complexity where you could make your one hundred seventy degree turns behind the wall of complexity, whilst all the journalists and the public and others are standing in front of the of of of the wall. And it has to be one hundred and seventy degree, because if you do one hundred and eighty degree turns every second time, you land on the same spot. Then it would be too obvious and leaves you room to maneuver.
24:58 Speaker 01 So she could change her opinion more or less on a daily basis without anyone noticing behind that wall of complexity. She was a very analytical mind, as we and still is, as we all know. So she could deal with these complexities. So I'm not saying that in a defeatistic way and not with the with with the aim of downgrading her. This is a style of doing politics. It's a very ad hoc driven political attitude. Do I tick differently entirely? So it was not easy to work with her because she would be that kind of, OK, why would I care about what happens three months from now? If the next day is the most important thing? I was always driven by what could I do for the next generation?
25:41 Speaker 01 And and and what happens maybe in a year from now, scenario planning, such things. This is something which just didn't come close to her mind and probably also has a lot to do with her upbringing. And this is what explains Angela Merkel probably better than other things. It's um, it's, it's, she was a brilliant autocracy decision maker on one hand, but not interested in long-term strategies. And so that led to the situation.
26:10 Auren Hoffman? Like kind of a great tactician in a way, right?
26:13 Speaker 01 Yeah, tactician, not a strategist, right? It's um, yeah, a tactician, definitely. And, and, and in, in, in that respect, the outcome was then that you barely saw a single reform within these sixteen years of staying in power. But also that style probably kept her in power. So that's the, that's, that's the flip side of it.
26:35 Auren Hoffman? But if you, if you look at like, she started in, what, two thousand, uh, you know,
26:40 Speaker 01 Five.
26:40 Auren Hoffman? Five-ish or something like that. And she ended in two thousand twenty-one, so sixteen, sixteen years timeframe. Um, you know, two thousand and five, I mean, Germany really in some ways, top of the world, economy's humming, everything's going great. So like, you really saw that decline happen over those sixteen years. Like, you have to blame it on somebody, right? Or, or is it just, just there were, it was inevitable that that was going to happen?
27:05 Speaker 01 No, yeah, you certainly can, uh, can put some blame on any government that was in power then. And, and as, as opposed to the US system, you do know that the German system is not, there, there's not a single party leading a government. So we need to, we need to form coalitions. And within these sixteen years, we have seen very different coalitions. And so one was with the liberals, which are, is, is not comparable to the American liberals. The, the, the liberals in Germany are very pro-business and pro-enterprise. And, um, and, and then the other one was the social democrats, which is more comparable to the American democrats. And so you would have to change the scope again and again
27:47 Speaker 01 to also towards a smaller coalition partner, because otherwise you don't come to conclusions, compromises and decisions. But I, I don't want to use this as, this is as an excuse. I think within these sixteen years, we have seen way too little necessary reforms. And she profited from one big reform, which she didn't impose. It was the reason why her predecessor had to leave office. That was Gerhard Schröder, who actually launched
28:13 Speaker 01 In in his last half year, and he actually called for early elections to get the approval for his reforms, and that was labor market reforms at a time when actually the, and this is a little correction of what you have just before, when the, when the economy was going south dramatically, and she profited then from, from Schröder's reforms, and then the economy picked up again within her first few years. And then again, it became slower, and that has had a lot to do with the, with global developments and all the things we are facing right now, but also with the unwillingness to do the necessary things.
28:52 Auren Hoffman? What, outside of Germany, what European countries are you super bullish on?
28:58 Speaker 01 I'm bullish on the Nordics. So Denmark, I think Finland is, is, is a highly interesting place. So is to some extent Sweden and Norway. Also, the smaller Baltic states, especially Estonia is interesting. However, they are under high threat now to be maybe the next target of Vladimir Putin. And, and then in the last few years, Greece has developed quite properly. It's, so it was, it was the, it was the stepchild for, for many, for many years. And then with the new government and, and led by a conservative player, as
29:39 Speaker 01 opposed, for instance, Denmark made these huge step led by a social democrats. So it's, you cannot really tie it to the ideological background, but it just needs leadership. And so a few of the, of, of the European countries are doing well. Italy is doing much better than many expected them to do. It's, and the tradition, and, and I'm bullish, currently bullish when it comes to Germany, because Germany is finally acting and, and also willing to lead within Europe, which was where we always have been extremely historically hesitant after, of course, especially the horrible, horrible experiences of the last century. But everyone was waiting for Germany to, to lead more from the front. And, and
30:24 Speaker 01 that is taking place right now. So if I had to invest right now, I would look at Germany, and especially these, the, the decision to lift the debt brake and, and to finally.
30:37 Speaker 01 Use money we actually don't have, but to to to use it as a lever for significant big investments in our infrastructure, in our defense and other things is a big opportunity.
30:50 Auren Hoffman? For some reason, it seems that there isn't as much pride in Europe, in like, in some of like, the super tech companies that are there. These like, if you think of like ASML, which is just like an amazing company doing these like incredible things in in the Netherlands. It doesn't seem like there's as much pride of that that you would have in, let's say, a TSMC if you were in Taiwan or something like that, which would be like the kind of the equivalent kind of company there. Am I wrong about that? And if so, if not, why is that the case?
31:28 Speaker 01 It's our mentality, I think. And and it's it's it's part of a mentality that I actually do like. So the opposite is, and you know, I'm invested in in in a few American companies, but also around the globe, is so the pride in something which, for instance, is not even existing any longer, is a bit more prevalent in the US, for instance. It's it helps to launch an idea and to bring it to a certain level. But but Europeans are way more hesitant to talk, let's say, boldly about things that still could go sideways
32:10 Speaker 01 or even south. And brings me back to the point where which I which I which I mentioned before about of a fear of failure. And and of course, ASML is a globally relevant company. And without ASML, the whole AI industry in the US would be at at risk. It's which, by the way, creates extremely interesting choke points now also for Europeans when it comes to how to confront a extortion attempt coming from the White House. So it's not any longer that we are talking about banning or putting tariffs on Kentucky whiskey or Harley Davidson. It's more About letting Donald Trump know this in without ASML, without our gas turbines, which are way better than the ones from General Electric,
32:55 Speaker 01 without our data from old industry, which is could also be used or needs to be used for for excelling AI efforts. You might be doomed because your whole economy is more or less mainly driven by the AI efforts right now. So that's a point where where, let's say, Europeans would step up, but not with that pride of we are so exceptional. And this and it sometimes is, and you have a point there, is something where I would like to see a bit more self-confidence. Because if you have global champions, talk about them and and and and let the world know how brilliant this company or that invention or this thing is.
33:40 Speaker 01 But here we are very often victims of our own shyness and and and and we could be bolder in that regard. So this is something where which I always admired by US friends, who would just be prouder of things where others in Europe would say, well, let's wait and see. But just to wait and see is not a success story.
34:04 Auren Hoffman? To it's to me, it's just interesting. Like if I had gone back to, you know, two thousand and seven, kind of let's say, peak EU
34:14 Auren Hoffman? in terms of like economic potential and and and kind of looked back, I would have never kind of expected things to play out the way they did. Like if you if you just think of the the total market cap of Germany, all the German companies in stock market, all the all the French companies in stock market, all the Italian companies. If you just add them all up, all of them together are still less than one US company, like less than Nvidia, which seems to me that is like kind of insane and crazy that something like that could happen. How how can Europe like change or or does it need to change? Is it okay if we if every if there's lots of, you know, smaller companies together or?
34:57 Speaker 01 No, it's not, Orin. And you're pointing at something which is certainly the Achilles heel of the European idea.
35:10 Speaker 01 Although the general European idea is wonderful to say we have twenty seven or twenty eight minus one member states that are willing to cooperate and to create its own single market that is capable of taking up the challenge to confront competitiveness from the US and from China and from India and from other places. So on paper, Europe is, the EU is still representing four hundred fifty million people, way more than in the US. Way more than the US. Our added GDP is eighteen trillion dollars. It's, so it is an enormous amount on paper.
35:49 Speaker 01 However, having said that, there are still too many national differences and vanities and and and and very often the unwillingness to get rid of things that have created duplications and and so on and so on. So, and there's another problem linked to that, that if you want to take a European decision to step up and to step forward in in many fields, you need to decide on the European top level with the principle of unanimity. So if anyone vetoes a certain idea, the idea is off the table. And and so the system is actually eating its best ideas. And and so here something has to change.
36:34 Speaker 01 And I do think that this is actually taking place right now as well, driven, again, we've talked about it before, by the sheer necessity of ramping up our military efforts. Because here again, and this is one of those unanimous decision making fields, if anyone and one player that has has stood out, that stood out for the last few years was Hungary with Viktor Orban. If he just says, no, I'm not interested in a European defence shield or air defence shield, I'm not interested in a new AI effort.
37:15 Speaker 01 You have to find alternatives and the alternative would be, and this is not an entirely new idea, to say, well, then let's act differently. Let's not wait until all twenty seven have agreed and decades have passed. Let's just build coalitions of the willing. Let's start a coalition around the topic. May it be on defense, may it be on quantum, may it be on AI, may it be on on space, on whatever. And if twelve join the group, it's twelve. If it's fifteen or seventeen, it's let it be seventeen and it's not twenty seven and all the others could then join whenever they're ready, mentally ready or also substantially ready to do so. So one success story where it has worked already is the euro.
37:57 Speaker 01 So our currency, it's not it's it's not held by twenty seven member states, it's twenty one, it started with eleven. And and and to be honest, it is a success story. And so this is something which is gaining grounds right now. And this is another reason why I'm quite bullish when it comes to looking at Europe. Yes, we are in, we are exposed to threats right now. But these threats lead to a recalibration of the European system, of our mindset, and and there is no way to escape back to nostalgia any longer. It's it's it has to happen now.
38:33 Auren Hoffman? To me, it seems like in Europe, you have like these super talented people. Education system is is still one of the best in the world. And whenever I see like a German move to San Francisco, like I want to invest in that person, usually immediately, a French person moving to San Francisco, like a a huge portion of my investments are in in in people who who came from France. But I would never invest in an American moving to Berlin. Like I I just like, for me, that would be almost like they're going the opposite direction. Like, that would just be crazy to think that that would be like literally the worst person I could think of to invest in.
39:14 Speaker 01 Ah, some, some do in the meantime, or it's a, it's a good point. However, this, what's happening right now is that, and probably also due to the erratic policies in, in DC right now. A lot of American innovators and, and, and startup founders. Were on the verge of going international, who had just decided to go international. Move their, not only their headquarters. Or move a certain portion of their business in the meantime to Germany. Because they say this is, this is, it, it, it is a stable.
39:55 Speaker 01 It is a huge European market. We could, we could drive from there. The workforce is actually excellent. And we are getting more and more support from a more flexible political environment. So that is happening right. It has a lot to do, of course, with the, with the instability and insecurity also in the US. It might just be the only factor that drives them to do so. But, um, but there is, there, there are a couple of good options now to invest or co-invest. And it may be just a subsidiary or even a moving headquarter from the US. And this is something I've done now a few times. I wouldn't have done it two or three years ago. I'm with you there. It's, um, but I think at the current moment, it's an interesting, it's, it's an interesting investment case.
40:39 Auren Hoffman? Haven't seen it. Um, what I have seen is, um, and we've invested in quite a few companies. Whether the German founders or French founders or, um, uh, Dutch founders, et cetera. And they are, they're, they're, they're decided to stay where they are. Well, let's say they're in Sweden, wherever they are. But the company they form almost always nowadays in the tech world is a Delaware C corp. They're not forming like a GBA or some of these other kind of companies like they're out there. They're forming kind of like, it, it almost becomes the standard. Are you going on Stripe Atlas or something like that? They're forming, even though all the employees might be in Europe.
41:21 Auren Hoffman? The company itself, um, even, even without any employees is, is an American. Like it, it seems like more and more that maybe because they want to attract American capital. Or just it's easier, the laws are easier, or it's easier to go public, or it's easier to sell the company eventually. And so they can capture more value or there's less regulation, but it does seem like there's more happening that way.
41:44 Speaker 01 Main point is less regulation, less bureaucracy in the US. It's not any longer that you would attract American investors. Because attracting American investors in Europe is currently not that hard. There's a lot of interest actually taking place. So that's certainly one way. The other is, so this is, you're right about certain sectors. But there is a growing number of sectors where a European company that would actually put its headquarters or would be listed in Delaware has to face the risk of being declared a company
42:24 Speaker 01 that is of essential national security interest for the United States. And out of whatever reasons. And you do know that this argument has been broadened and widened quite significantly. And that would cut you off the European market and some other significant markets around the globe. And that is not happening, not at that level and not at that extraordinary level in Europe. And that's one of the reasons why I said there are a couple of Americans now who would still like to explore the global market rather moving to Europe than staying in the US and being constrained over there because of the things I've just mentioned.
43:07 Speaker 01 That's not true for all the sectors, but in some sectors it becomes interesting. It's worthwhile looking at them. And I think it's not the worst and intellectually the most limited move you could take.
43:24 Auren Hoffman? Is the simple thing that a company like Germany needs to do is just have a little bit more flexibility on the labor? Like, is that the simple way to make things better? Or what's the simplest way it could start improving?
43:39 Speaker 01 It is the simplest answer, but the hardest way. Let's put it that way.
43:44 Auren Hoffman? Okay.
43:45 Speaker 01 So to push that through with our monolithic union structures we still have with our...
43:54 Speaker 01 Legal fundamentals, it's um so labor to make labor laws more flexible is an enormous task. So it's but but there are many things that are it's it's it's so labor laws, of course, play a significant role to make also the European, the German investment case more more attractive. But but there are many other things. So you have to you need cheaper energy, which is we've talked about that before. It's that is a that is a huge barrier for many to come to to come to Europe. And and you need in many other fields much less bureaucracy and and and and a way to and a way to somehow promote people who may have
44:38 Speaker 01 failed once with their first company. But this is the thing I love about America. In the US, if you have failed, you're seen if you don't fail on a weekly basis, of course. But if you fail once or twice because you have you have waged something, something, you're seen as someone who has gained experience. In in Europe, you're very often seen as someone who is not worthwhile investing any longer in. And which, of course, is utterly stupid. And and and that is that is the mindset thing we've been we've been discussing before already.
45:13 Auren Hoffman? Few times I've I've invested in German, German, actual German companies, it was pretty easy to invest in them on the way in. The hard part was when they had an exit and getting my money out. Was I had to do like all these weird notaries that I didn't understand. And it was just like it was it was this like Kafkaesque process. You would do something and then you had to get the stamp. But the only way to get the stamp was to get this other weird stamp there. And it just took for it it really, it really got me down on the whole process of just like the fact that it took all these hours of time to navigate it. I may maybe I could have hired like a Sherpa to have helped me or something like that. But it was it was a real like whereas like an American was
45:58 Auren Hoffman? just so it just boom, you you get the wire. It's easy, you know.
46:01 Speaker 01 Yeah, you get the wire, you get the approval for building a factory quite quickly, which also takes ages in Europe. So these are things where homework.
46:11 Auren Hoffman? We have our own problems with building factories in the US, too. Yes.
46:15 Speaker 01 No, honestly, and I said, you have your own problems with very distinct, different bureaucracy. So it's, it's, so having lived on both sides of the Atlantic, it's that there are a lot of things where I would say we are actually in heaven in Europe when it comes to this and that. But there are other, as all the topics we have discussed before, I think, or in many of these topics, the US has an advantage. And we've talked about the military, we've talked about bureaucracy and the military and other things. Come on. So the bureaucracy is somehow connected to, to the Pentagon is also just mind boggling.
46:50 Auren Hoffman? Yeah, it's terrible.
46:52 Speaker 01 And, and, and, and old industry getting the big contracts and other things. So we are dealing with a lot of, a lot of similar problems. But as you have mentioned, Franz Kafka, it's, it's not by coincidence that he wrote in German.
47:07 Auren Hoffman? Now, you co-host a very, very successful podcast with a man who's basically your ideological opposite, right? What, what is, and, and you guys do it in a very reasonable way. And you seem to like one another, even though you don't agree on any many topics. What is that kind of like, essentially, you're kind of teaching people to disagree in a good way? Like, what has that kind of taught you about how to change people's minds?
47:39 Speaker 01 Well, so the, let's say, the, the, the initial point for it was when I moved back to Germany four years ago from the US. I was, one of the reasons why I asked if I moved back was that I was just appalled by the, the fragmentation and the polarization in the US. And I thought it might be better in, in, in, in Europe and Germany, only to realize that we are on the same pathway there. And, and, and a lot had to do with a growing amount of disrespect and not accepting any longer a differing opinion. And, and, and a culture of dialogue, which wouldn't deserve the term dialogue any longer.
48:22 Speaker 01 And and I thought, is there is there something where I could where I could just create or set a counterpoint to that? And and and of course, was when the podcast culture was already was already on the on the uprise, also in in in Europe, that I thought about the the most interesting combination would be to have, let's call it strange bad fires, right? So to to to have a conversation with someone who superficially could not be further away from you. So ideologically, with his background or her background, with
49:02 Speaker 01 everything has to be as counterintuitive as as anyhow possible. So I made a list of people and and and also together with my team in my in my media company. And we always came back to one guy who was said, okay, he's he's absolutely ideal. He is a former communist. He is the most, let's say, prominent, far-left wing figure in Germany. He is witty, he is humorous, he comes from the former G D R. So he was the the last leader of the S E D in the G D R. So he has seen a different world than the one I've seen. So my background
49:44 Speaker 01 is cliche, old aristocratic family, Conservative Party, name it, whatever. So so this was two just two planets. And and then reached out to him because I always liked him. And when I was in politics, I always had a lot of respect for people where I utterly disagreed with, but where I said, okay, at least they're straight with their opinion and and not just shifting shifting whenever the wind blows a little harder. And so we always somehow respected each other. So and I offered him the idea, and he's already in his in his seventies, but he's still extremely popular, still in the Bundestag, in the parliament, and or in parliament. And and and I offered him the idea of a podcast, and he didn't even know what a podcast is.
50:27 Speaker 01 And but he found the idea of of a microphone quite interesting, as this is something he he obviously likes. And then I said that let's call the whole thing. His name is Gregor Gysi, Gysi Against Gutenberg. And but let's see the against as a provocation and try to have a respectful, a decent, a humorous, an anecdotal conversation with each other on topics where we might even be able to learn from each other. And and then we made two dummies and and we figured out with the second dummy had already a bottle of wine between us. And and and and we figured out we liked each other. And and in the meantime, we are friends
51:12 Speaker 01 and and enjoy each other's company. And it went from the rooftop. It's so in the meantime, we have sold our live shows across across Germany. And and and and the nice thing about it is, and it gives me, it gives me hope, because there is a demand in the population to have a different way of addressing people and and of addressing difficult topics, of of of finding ways to communicate with each other. And and in our shows, there are people sitting from age eighteen to eighty-eight, from all angles of the political spectrum. And and it works. And we're having a blast. We're having a lot of fun.
51:54 Speaker 01 And and the same tonality is part of two other podcasts I'm doing in the meantime, and of the films we are making, and of the books we are publishing. And at the beginning, everyone said, forget it, KT. There is no one's interested in that kind of messaging. Everyone wants to see the other one being crashed against the wall. Everyone wants to see blood. Everyone wants to see shrill noises, noise. And and and I said, no, I think the opposite is true. And at least there is a big market for that, and there is.
52:23 Auren Hoffman? Love to see more of that in the US. There's a couple of shows. There's this one called Breaking Points, where you had this kind of like someone a little bit more on the right or on the left and they have a conversation. It's like a very super popular YouTube show in the in the US. I'd love to see more of that all around the world. It does seem like something people are craving for.
52:44 Speaker 01 I think so too. And let's, Orin, honestly, let's, we can try to set it up. We have our experiences now.
52:49 Auren Hoffman? Yeah, let's do it. Okay.
52:51 Speaker 01 Let's, let's, let's call it Strange Bedfellows and, and, and we'll find the people. And, and so it's, it's, it's not hard to do. It's, you need a bit of patience and I think it's probably a little harder in the US because it's so polarized in, in, in the US right now. But I sense a lot of people who are actually asking for something different. And, and it has to be entertaining. That's the, that's the important thing. You need people that are capable. It needs to be fun. It needs to be, it's so, people need to learn something, but they also want to be entertained. And it could work. Let's, let's pick it up. And this is, it's not even, that's not even a very expensive investment. And we both have our networks over there. We could give it a try.
53:35 Auren Hoffman? Okay, let's do it. I love it. Okay. Now you're, I mean, you're, you're building a, you're also building a media business, which has become super successful as well. Is that one of the big learnings? Like, okay, it's got to be fun and, and, and, and people have to learn? Or what are the big learnings about how to build a media business today?
53:57 Speaker 01 Well, you have to assume three things. It's, so attention is scarce, as we know. Trust is even scarcer. And distribution is everything. So it's, and, and the way you do, the way you do it. So the old model, print and a bit of TV and some banner ads is gone. It's, and, and so today you need to build an ecosystem and you need to build an ecosystem where the people have the, the impression they belong to something. It's not that they are, that they are eager for content. It's that kind of belonging, which Which is, which is, I think, the way more powerful message and which is certainly something which on mainly in the fringes right now
54:40 Speaker 01 is being driven by the so-called content creators. It's um but I do think that this is also a very successful method to to to be played out in the center and um and and without necessarily being the most polarizing character in the world. It's um and and this is something we've tried out at at the very beginning at the beginning, step by step, and not by just really investing millions and millions and say, here we are. And project by project and and and and all the new ways of communicating. And at the same time, if you are, for instance, in filmmaking or
55:21 Speaker 01 it's today with this eight-second attention span of many people who only watch TikTok videos and and other things. It's of course hard to to drive someone into a sixty-minute documentary or even ninety-minute documentary. So then you have to produce higher quality. So you have a documentary has to have the at least the aim to to come to a style of David Attenborough. It's um and and and so this is the bit more expensive part then when it comes to filmmaking. The higher quality you don't need much money for in in podcasts and and and how to, for instance, do a newsletter or it's um
56:00 Speaker 01 or in life events, it's all about the character. And um and I think that is a model that that that can fly and we've shown so far that we are a little speedboat. It's uh we're just a couple handful of people and we reach millions as opposed to others who are still have in their newsrooms two, four hundred, five hundred people sitting and um and who are just very slow colossuses. It's um so that's. That's the secret behind it, which is not a big secret, but it's something which can work. Yeah.
56:31 Auren Hoffman? You and I have been friends for about fourteen years and during that time I really marvelled at the way you kind of build and maintain friendships. Like, how do you manage it? Like, is there like some sort of, are you keeping your mind? Are you, you're just so good at it. Is there some sort of secret we could learn from?
56:46 Speaker 01 The secret is to, to, not to, to never have an agenda with someone you like. Um, and not to see him or her as part of a network. That is being created by itself if you just take someone seriously. And that is maybe very unglamorous, it's, um, but it is, I think that's the true human investment you can give. And, and, and that is something that always pays back and, and, and it's, that is something that creates loyalty. It's, and it's not that the way of, so, and to be there if someone is in, not in, in, in, in, in his most successful moment of his life or her life.
57:29 Speaker 01 And, um, and just to pick up the phone and, and, and so it may sound simplistic. And it is, it is hard, it needs some organisation, but it's not an organisation driven by the sheer expectation of getting something back. It's organising something which I think is a better way to live. And because it's something which always helps yourself. And, um, and so that is maybe for me, the very naive sounding, um, way to approach things. And it has played out and it has created, yes, by itself, a global network. But, um, with people where I'm just happy to see them, as I'm happy to see you on the screen right now.
58:13 Speaker 01 It's, um, and, and, and, and both of us know what we don't do today in this podcast. We have, we trust each other in a way that we can talk about things others would be very hesitant to talk about. And, um, and this is, this is how you, how you build up things in a proper way.
58:29 Auren Hoffman? Okay, two last questions we ask all of our guests. First one is, what conspiracy theory do you believe?
58:34 Speaker 01 Because we've been, in Germany, we've been overwhelmed with conspiracy theories over the last centuries, and especially again over the last few years. I'm extremely hesitant to jump into conspiracy theories. However, let's put it that way.
58:52 Speaker 01 I think a lot of people underestimate how much of history is made by unintended consequences and miscommunication rather than by grand plans. So that is the opposite of a conspiracy theory, but in that way, already my own conspiracy theory. So this is the way I would put it.
59:13 Auren Hoffman? That's awesome. I love it. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?
59:19 Speaker 01 Oh, I have a good one there, especially from a European perspective. It's the sentence, "Don't rock the boat." I think that has probably done more damage than anything else to Europe and even than many of its famous radicals. And in politics, in business, in technology, in avoiding short-term conflict often just guarantees a larger-scale crisis at a later point. And Germany is certainly a poster child, a poster boy of that very behavior. So if the facts have changed, rocking the boat is not reckless. It's, and it's, in my opinion, it's responsible leadership.
1:00:04 Auren Hoffman? It might even be necessary, right?
1:00:07 Speaker 01 Exactly. And so the bad advice, truly bad advice, is wait a bit longer, maybe the problem will solve itself. It never really does. And it just ends up a bigger bill.
1:00:20 Auren Hoffman? You can't just keep kicking the can down the road, right?
1:00:22 Speaker 01 No, or even as we do it, kicking the can up the road and it keeps falling down to your feet.
1:00:29 Auren Hoffman? Oh, this has been awesome. Thank you KT Zungutuber for joining us on Summation. I really value our long friendship and I appreciate you coming on. This has been really awesome.
1:00:41 Speaker 01 I enjoyed it, Orin, and I'm very much looking forward to our next meeting in person and not on the screen.
1:00:47 Auren Hoffman? Definitely, in person, for sure.
1:00:49 Speaker 01 Take care.
1:00:49 Auren Hoffman? One more thing before we go. I read a blog called Summation. It's the same as this podcast. The blog is about non-obvious idea sharing on business, talent, data, longevity, and random contrarian takes. If you like the conversations on this show, you'll probably like the blog. It's free. New content comes out twice a month. You could subscribe at orin.substack.com. That's orin.substack.com.
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