The Ukraine Crisis Explained — with Niall Ferguson

Niall Ferguson, a historian and the Milbank Family Senior Fellow at Stanford University’s Hoover Institution, joins Scott to discuss the implications of Russia’s attack on Ukraine. We hear what the West needs to do, why Putin is doing this, and what American news outlets get wrong about the war. Scott opens with his thoughts on money washing. Related Reading: Wash Algebra of Happiness: it’s a matter of perspective. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:48Speaker 01

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• 1:18Scott Galloway?

  Episode 148. Stevie Nicks was born in 1948. It only thunders when it's raining. She may be a great artist, but she's a shitty meteorologist. Go, go, go!

• 1:39Scott Galloway?

  Welcome to the 148th episode of the Prop G Pod. In today's episode, we speak with one of our favorite Prop G guests, Neil Ferguson. Neil is a Millbank family senior fellow at Stanford University's Hoover Institution, and that rolls right off the tongue, as well as an opinion columnist at Bloomberg, and author of 16 books, including his latest, Doom: The Politics of Catastrophe. Neil discusses what he's been paying attention to as it relates to the current Geopolitical crisis, including the state of play, how the West can help Ukraine, and what President Biden needs to do to avoid a foreign policy disaster. I think the world of Neil. I find him, A, it's, it's nice to bond over your heritage.

• 2:20Scott Galloway?

  He's a true Scot, first generation. I'm a, the son of a Scot, and we bonded over that. He's also, I, I just love a guy who's been able to study history and then apply it to a business. He has this fantastic organization called Green Mantle that advises very powerful organizations around how history and geopolitics impacts their business. And just find him a clear blue flame thinker. I also think he's courageous. He's not, I would describe him as a centrist, but he's not afraid to say, you know, piss off everybody, which is I find increasingly what centrists do, is he just, he just anger everyone. Anyways, love speaking to Neil and find that he's always got just kind of chock full of insight. Okay, what's happening?

• 3:04Scott Galloway?

  A lot around kleptocrats, Russian oligarchs, and money washing. And what do we mean by that? What we mean is the conversion of corrupt, if not illegal oligarch money into Kensington Flats and Premier League football clubs, which has proved London, or has rendered London, the playground for this type of money washing. Playground's probably not the right word, the epicenter, whatever. Anyways, the sources of this money are kleptocratic regimes, as in governments that operate like, literally operate like organized crime syndicates, extracting wealth from the resources and hard work of the people they rule or supposedly represent, or, I don't know, abuse in my view. The whole notion is that corruption lets billions

• 3:48Scott Galloway?

  leak from the legitimate economy into the pockets of the elite patrons of money washing, and then they try and get it out. A common feature, which creates a downward spiral in that nation itself, because they create value that does not get reinvested in their own economy, and kind of stunting growth, and the economy never really goes anywhere. A common feature of kleptocracies is that they are unappealing places to spend money. It's interesting, if you really think about what's going on here, it's that the creative class is such an important part of the economy. I reverse engineer this trend to, in terms of what's important, and what is so underrated in terms of the importance to an economy, is the artisan class.

• 4:31Scott Galloway?

  And that is people who decide, I'm gonna do wax sculptures of 1950s cars, or I am going to do whatever's required to produce a play, or my love is making the best pasta in the world and bringing it together in this environment that's a collective for a couple hours called a restaurant. And that whoever is best at that attracts capital, attracts wealth, and attracts the most powerful people with the most options, want to go there a lot and even live there. And while New York, San Francisco, Shanghai, Paris, London, all offer incredible business environments,

• 5:11Scott Galloway?

  what they also offer is that they're incredibly culturally deep, rich, robust places where people want to spend their money. I think that there's a lot of places that are a great place to make your money, maybe, especially if you're part of this oligarch class or you have sort of regulatory capture. But ultimately, the economies that I think are more enduring have both. They have a way to make money, and they also are fantastic places to spend money. And what are these places? Well, they're a great place to kind of make money. And when I say make, I mean steal in this instance. I would argue that oligarchs are really a function of, they have incredibly high EQ, and that is they pick the right person to back, i.e. a dictator and autocrat, and that person rewards them with wealth

• 5:54Scott Galloway?

  that has effectively been usurped or stolen from the people. Money laundering is done in secret because it requires hiding the source of money. Money washing, on the other hand, hides in plain sight, because that's the point, its appearances. And where do money washers look to put their money? In any jurisdiction with strong property rights, ample luxury goods, and a willingness to overlook the origins of this money. Specifically, London grad.

• 6:22Scott Galloway?

  Money washing has three key components. Removal, as in getting kleptocash out of the kleptocracy. Two, enjoyment, where the washer converts dead money into a luxury lifestyle. And then three, finally, elitism, as an entry into the elite cultural and political circles of the adopted country. The key principle of washing is, of course, removal. You've got to get the money out of Russia, or Iran, or Kuwait, or Venezuela, into the West, the American-European financial system. Buying Western assets versus just shifting money into Western accounts looks more like legitimate business activity. And in addition, the purchase or investment can earn a return and garner, again, see above, that Western prestige.

• 7:06Scott Galloway?

  It's no accident that London became the epicenter for Russian oligarchs and other money washers. Political leaders in Britain have welcomed this type of asset buying for decades. In 1994, the country introduced the so-called Golden Visa, which essentially granted citizenship to those who invested £2 million into UK bonds. That program shut down only just this year, and the UK's Home Secretary said she wants to stop, open quote, "corrupt elites who threaten our national security and push dirty money around our cities." So London may arguably be the money-washing capital of the world, if you will, but it's not the only city. Not the only city, but a long shot. Money washers have taken stakes in everything from aluminum producers to big tech companies

• 7:51Scott Galloway?

  here in the US. Russian oligarch Mikhail Fridman, I don't know if I got that right, Mikhail, Mikhail, anyways, Mr. Fridman's Letter One holds £25 billion in Western telecoms and oil companies. In 2016, Letter One invested £200 million in Uber. The Saudis are prominent Valley investors as well. Sports teams are also a very common target. Roman Abramovich's ownership of Chelsea FC, the soccer team in London. Is probably the highest profile example of Russians owning or investing in soccer teams. It's getting a lot of attention, but it's just one example. Three out of four clubs in last year's Champions League semifinals were owned by oil sheiks or Russian oligarchs. Oligarchs also love US real estate.

• 8:35Scott Galloway?

  Those skinny Manhattan ultra-high rises that have sprung up in the past decade are a response to the influx of foreign money into the city. The condos inside are known as the world's most expensive safety deposit boxes. I would describe them as the $10 million Bitcoin, if you will. In America, some laundromats offer better evasion services than others. For example, Florida has no income tax and allows you to keep your home when you file for bankruptcy. Get this, nearly a third of US houses purchased by Russians in the past six years were located in the Sunshine State. Okay, so what's happening here? The global money-washing industry is thriving throughout the US and Europe, and kleptocash

• 9:18Scott Galloway?

  has seeped into almost every corner of our economies. This has profound consequences for us and for the exploited citizens of the kleptocracies themselves. Both the US and the UK have laws in draft that would begin to push back on money-washing. But until Russian bombs started falling on Kiev, the legislation wasn't moving. The US Enablers Act has been in committee for six months. Perhaps the notion of a great power trying to crush a 40-million-person country will inspire us to take a harder look at our own money-washing machine and the real costs of those yachts. Regulatory capture by Russians in the West elevates capitalism over democracy, and that has implications beyond foreign influence.

• 10:03Scott Galloway?

  Each football club and villa purchased by oligarchs moves us down the path to cronyism and our own oligarchy.

• 10:12Scott Galloway?

  This is simple. Capitalism doesn't endure without democracy. And democracy, I don't think endures without capitalism. But when capitalism starts to ride herd on democracy, you end up with overrun. You end up where the idolatry of the dollar makes us blind to our democratic ideals and leads to very bad places where effectively, anyone with money, regardless of how they got that money, can weaponize government, can overrun legitimate democratic values. And we have decided, we have decided that the dollar, the dollar is greater than freedoms, greater than liberties, greater than the rule of law, and greater than democracy. It is an ugly path to hell.

• 10:52Scott Galloway?

  And capitalism, literally, this is one of the ways that capitalism will collapse on itself. If we always look the other way, because it will give us a slight sugar high by letting capital into our economy. It is a short-term strategy that will come back to haunt us, both morally and economically. I don't want to be too righteous, because it happens in the US, and specifically, it happens at the highest levels. For example, Rick Scott, the Republican senator from my state, Florida, recently proposed, get this, halving, cutting in half, the budget of the IRS, the oversight agency that helped uncover the largest case of medical fraud in history.

• 11:33Scott Galloway?

  The guilty firm CEO, comrade Rick Scott. Stay with us. We'll be right back for a conversation with Neil Ferguson. Support for the show comes from Nutriful, the number one dermatologist-recommended hair growth supplement brand used by over 1.5 million people. With age comes knowledge, patience, and for some, hair loss. Didn't say it was all good things. And for those who want to do something about it, there's Nutriful. Nutriful has formulas built for men at different life stages. They have Nutriful Men for Guys Age 18 to 49, plus the new Nutriful Men 50 and Older. That's the first product of its kind specifically for men over 50. You can now address the key root causes of thinning wherever you are in life.

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• 14:09Scott Galloway?

  Welcome back. Here's our conversation with Neil Ferguson, the Millbake Family Senior Fellow at Stanford University's Hoover Institution. Neil, where does this podcast find you?

• 14:19Speaker 02

  I am in my office at the Hoover Institution on the Stanford campus on a beautiful sunny morning.

• 14:27Scott Galloway?

  So the world is definitely coming to you, or at least in terms of domain expertise. I appreciate you being here. You joined this esteemed group of now two people. The other, my colleague, Aswath Damodaran, who are now repeat guests. But you're literally the first person I thought of when all this started unfolding. So it's been a few weeks since Russia invaded Ukraine. In your recent piece for the Daily Mail, you wrote that, quote, "The return of the brutal Russian bear has shattered the illusion that peace in Europe was a free lunch paid for by Americans and cooked on Russian gas." That's good. That's good, Neil. So let's start there. Can you walk us through this illusion?

• 15:05Speaker 02

  Well, it goes back a long way. I mean, almost to my earliest childhood. In the late 60s, Willebrandt was the German chancellor, West German chancellor, I should say. And he believed in something called Ostpolitik, an eastern policy. And then along came another German phrase, "Wandel durch Handel," change through trade. And the German bet was that if you traded, engaged economically with Russia, over time, you would get into a stable relationship of peaceful coexistence. It was part of détente. It was really the European component of détente. And it lasted a long time. I mean, if you think about it,

• 15:47Speaker 02

  successive German chancellors increased German and European dependence on Russian gas and oil. In many ways, oil's just as important, more important from the point of view of Russian revenue, until we reached the era of Angela Merkel, a 16-year chancellorship in which the relationship really grew close to the point of dependence. That's all gone. That went more or less within days of the Russian invasion. It's been a huge sea change in European and especially in German politics.

• 16:22Scott Galloway?

  But is it, was that still the right strategy? That capitalism, if you will, created connective tissue that as a result has created more wounds? I mean, when Khrushchev tried to go into Cuba, the oligarchs or the wealthy weren't parting in St. Bart's, and now they are, and they may not be able to. Wasn't that the right strategy? That is going to create more collateral damage for the oligarchs and eventually Putin?

• 16:48Speaker 02

  Well, let's take a step back and ask whether economic integration is the way to achieve peace. This is an old idea. Back in the mid 19th century, people like John Bright and Richard Cobden, British liberals, argued that free trade would lead to peace. And it was as simple as that. Once people were exchanging goods with one another, not to mention services, the probability of war would go down. And this idea has a tremendous tendency to come back from the dead. It dies periodically. It died in 1914, for example, when Britain and Germany went to war despite massive amounts of economic integration.

• 17:29Speaker 02

  But the idea is like one of those movie characters in Fatal Attraction. You can't quite kill. And so it came back relatively recently. I think in Tom Friedman's golden arch is theory of peace, that if two countries each had McDonald's, they wouldn't go to war with one another. Of course, that then went out the window when the US was bombing Serbia. So this idea has a long lifespan. It has a particularly interesting life when the US decides to apply it to China. By bringing China into the global trading system, especially after 2001, when China is admitted to the World Trade Organization,

• 18:12Speaker 02

  the American political elite places this huge bet on what I call Chi America, China plus America.

• 18:19Speaker 02

  But yet again, it turns out, and we just never learn, but yet again, it turns out that even if you do a lot of trade and investment, that kind of thing with a great power, that doesn't actually stop geopolitical calculations taking precedence over the economic rationality. And it's the same with the Russian story. If Russia was just being run as a business and Putin was just the capo di capi of oligarchs, then there would never have been an invasion of Ukraine. Because you could have said with extremely high confidence, as I think I did, that if the invasion happened, there would be huge economic adverse consequences

• 18:59Speaker 02

  for Russia. But Russia's not just a huge business run by oligarchs. And in fact, the oligarchs turn out to be quite powerless. Putin's decision to invade, like China's decision to pursue the takeover of Taiwan, these decisions have nothing to do with straightforward economic calculations of comparative advantage. And no amount of trade with a rival great power is going to prevent it bidding to challenge the power of the incumbent when it feels the time is right.

• 19:35Scott Galloway?

  So Robert McNamara, former Secretary of Defense during the Vietnam conflict, said that in order to defeat an enemy, you really have to understand and empathize with them. Let's, let's assume that Putin and the people that advise him aren't stupid and they're not crazy. Help us understand, and if you can, put it in a historical context, simply put, why? Why did they do this? Why did they do it now?

• 19:59Speaker 02

  Well, first of all, I think we should dispense with the idea that he's gone crazy. Americans are always doing this when they're confronted with an aggressive authoritarian leader. They're, they're always just begging for their shrink to come in and help analyze the mad behavior. It was the same, I remember with Saddam Hussein. What Putin's doing represents in his own mind the reassertion of Russia's traditional dominance of the territory that we call Ukraine. His rejection of the legitimacy of an independent Ukrainian nation-state that leans towards the West,

• 20:42Speaker 02

  that aspires to be not only in the North Atlantic Treaty Organisation, but in the European Union. For Putin, this would be a huge historical affront. Because Ukraine has been a part of the Russian Empire, in his mind, since the early 18th century, since the time of Peter the Great. Now, many people wrongly think that Putin's trying to resurrect the Soviet Union. This is not the case. In fact, he's been quite critical of the Soviet Union for allowing there to be a Soviet republic called Ukraine with some notional degree of autonomy. Notional, because in practice it never had any autonomy. Putin's not looking back to the time of Stalin.

• 21:26Speaker 02

  He's looking back to the time of Peter the Great and Catherine the Great. His vision is essentially a Tsarist vision in which you are restoring the Russian Empire to its former 18th and 19th century greatness. Now, that might not quite be enough for your listeners, who might say, "But that's just a kind of historical fantasy." So let's drill a little deeper. Where were things going in Ukraine since 2014? In 2014, there was a revolution in Kyiv that led to the overthrow of a corrupt president by the name of Yanukovych, who was basically in Putin's pocket, more or less.

• 22:11Speaker 02

  When he took the possibility of negotiations with the European Union off the table in 2014, there was a full-blown revolution. A bunch of people got killed and he had to flee, guess where, right? And the Russian government looked at the situation and said, oh, no, not another of those revolutions that the CIA is always trying to cause in our hood. Let's send the boys in. So Putin launched a remarkably swift operation. He annexed Crimea, the peninsula that juts out into the Black Sea, and then he took de facto control of two cities on the eastern border that Ukraine has with Russia, Donetsk and Luhansk. What did we do?

• 22:56Speaker 02

  We said, oh, that's terrible. You mustn't do stuff like that. And we imposed sanctions, really quite modest sanctions, that nobody expected to change the outcome. So since 2014, he's controlled those parts of Ukrainian territory, and we've done nothing meaningful to stop that. The problem for Putin was that the situation was not a sustainable one. It's pretty hard to run Crimea if it's just disconnected from Ukrainian infrastructure, and you don't really have easy access to it from Russia. And as for Donetsk and Luhansk, they were basket case economies.

• 23:35Speaker 02

  Not surprisingly, people don't opt to live under Russian-sponsored separatists if they have an alternative. So Putin's status quo was not satisfactory, especially as, to his horror, the Ukrainians had elected a politician, Volodymyr Zelensky, who seemed quite intent on figuring out how Ukraine could be a successful democracy, integrated into the West. And that, I think, is the best answer I can give to the question. For Putin, you could not wait much longer, because with every passing year, Ukraine moved further towards the West in its political orientation. By the way, Ukraine was getting supplied with arms from the West every year, though

• 24:20Speaker 02

  we dialed those back in the year before the conflict for reasons that I'm happy to go into. But with every passing year, the Ukrainian military was also getting better, to the point that Putin started to worry that the Ukrainians might at some point try to recapture Donetsk and Luhansk. So that's the background to all of this. He's not gone nuts. He's not kind of climbing the walls, chewing the carpets or any of those things. He's just made a rational calculation that he can prevent this bid for Ukrainian western-oriented independence. And what he got wrong, well, were two things. One, the Ukrainians fought much harder than he expected and have inflicted extraordinarily heavy casualties on his invading force.

• 25:04Speaker 02

  And two, the sanctions that the West has imposed this time are on a far, far larger scale than anything he saw in 2014.

• 25:11Scott Galloway?

  So you wrote in the same Daily Mail piece that there's three things the West should do immediately to aid Zelensky. Outline those three things.

• 25:19Speaker 02

  Well, first of all, it's very clear to me that we have to step up the arms supply because we are giving them mainly relatively small-scale weaponry, very effective, but it's not the big stuff. So things like Javelins and Stingers, great for taking out tanks and low-flying planes. But for the high-altitude stuff and missile defense, really, the Ukrainians don't have anything like what they need. They don't have enough planes either. So we need to actually give them more hardware because despite what you may see on Twitter or on Instagram, the Ukrainians are losing the war.

• 26:03Speaker 02

  Despite what you may read in American newspapers, you don't win wars by having your cities obliterated by missiles and artillery. The Ukrainian position is much more militarily vulnerable than people realize. They're going to lose Mariupol pretty soon if it hasn't already happened as we speak. And then the Russians are going to turn their attention to Ukrainian forces in the east, near the Donbass area. I think they will quite quickly be able to defeat those forces. And then they move to the coast again and turn to Mykolaiv and Odessa. So we've got to make sure the Ukrainians don't lose, which they may in the coming weeks. I'm a relative pessimist about the military position.

• 26:49Speaker 02

  Not because I am a great armchair general, I talk to people who are actual soldiers, who've actually seen what the Russians did in Syria. So I'm basing my analysis, not on my own nonexistent military experience, but on the military experience of people who know this stuff. So we have to do that. The second thing we have to do is we have to get the Europeans to stop buying Russian oil, because a billion dollars a day flow to Vladimir Putin's Russia through the sale of oil to the Europeans. And if you cut that off, then you really do hurt the Russian economy in a way that would impact Russia's ability to continue making this war. And the third thing we have to do, Scott, is we have to use the power that the United

• 27:33Speaker 02

  States has, the diplomatic power it has, to force a ceasefire on the two sides. Because if this war continues, not only will tens of thousands of people die, not only will millions more people lose their homes, but I believe if we let the war continue, there's a non-trivial chance that Putin will be able to present it as a victory. And our strategy seems to be to let the war keep going. That's why there's no real diplomatic effort from Washington to broker a ceasefire. I think this is deeply misconceived, and will have all kinds of unintended consequences.

• 28:11Scott Galloway?

  What diplomatic power could we bring to bear to try and force talks to result in some sort of a stand down, if you will, or a ceasefire?

• 28:20Speaker 02

  Well, if we leave it to the Turks or the Israelis, there's not going to be a ceasefire, much less a peace. The US has leverage over both parties. We are the ones primarily supplying the Ukrainians with their weapons.

• 28:38Speaker 02

  And we are the ones who led the sanctions that have been imposed on Russia. The Russians clearly need sanctions relief as part of any deal, and nobody can offer that other than us. If we're not in the room, then the negotiations aren't going to go anywhere, because the thing that the Russians care most about isn't going to be discussable. So I think the US has leverage, and I think the incentive is, to me, very clear to stop the war. Now, before it takes a turn for the worse, the Ukrainians don't have anything like the capabilities the Russians have. Sure, the Russians have done terribly. Everybody recognizes that they've suffered astonishingly high casualties for a war that is not yet four weeks old. It's actually quite staggering how badly they've done. But that doesn't

• 29:23Speaker 02

  mean they lose the war. It just means they've lost a bunch of soldiers. They have more. They may even be able to call in the Belarusians, who are, I understand, on the point of sending troops into Ukraine. And they have missiles and spare tanks and a whole lot of hardware that the Ukrainians don't have. So I think from a US point of view, it's a kind of cynical realpolitik to say, oh, let this war rip, let it go. It's hurting Putin, it's bleeding Russia dry, and maybe he'll get overthrown. That, by the way, is what people in Washington are thinking. But the probability of the Russians completely losing the war and Putin being overthrown is low single digits, in my view.

• 30:08Scott Galloway?

  But let's talk, or let's unpack the term win. And that is, my understanding is, it's much easier to invade a nation than to occupy it. And while we may not be good at invading or occupying, we are good at arming an insurgency. And so let's assume the Russians get control of the major cities, they can make communications efforts. Doesn't life just get really, really awful for them for the next 10 or 20 years? It just feels as if my limited base of knowledge of history is, we just don't learn. And aren't they about to enter into, I mean, what does winning look like here for them?

• 30:44Speaker 02

  Well, I think, first of all, it's true that you could imagine an insurgency, even if Ukraine's formal defenses were defeated, that the Ukrainian people would keep fighting. They have historical form in that respect. They carried on fighting against Soviet forces long after 1945. Because they had no great love for Stalin's regime, he had, after all, inflicted a massive man-made famine on Ukraine in the early 1930s. But the key question is, what does victory look like for Putin? I don't think Putin expected so much resistance. I think he planned a quite swift takeover of Kyiv, the capital,

• 31:27Speaker 02

  and to depose Zelensky and install a puppet president. That all went up in smoke in the space of just a few days when it became clear that the Russians were facing a real and formidable enemy. But Plan B has clearly been to destroy significant amounts of Ukrainian infrastructure. Remember, destruction of Ukraine is good from Putin's point of view. It reduces the potential viability of Ukraine as an independent state. And I don't think he, in any sense, is going to attempt the annexation of the whole country, even if that was ever a part of Plan A.

• 32:08Speaker 02

  I think what he wants is an additional session of territory along the Black Sea coast, a so-called land bridge from Crimea, and perhaps some more real estate around Donetsk and Luhansk to take over the whole of those administrative areas, the oblasts, because they don't control them all. And then I think he settles and says, okay, the most important things, which the Ukrainians, by the way, have already conceded, have been achieved. You are not going to join NATO, off the table. And you are going to be a neutral country. There'll be some security guarantees, but they certainly won't resemble the NATO Article V protection. You will have limits on your military capability. These are the things that Putin will definitely regard as major victories.

• 32:52Speaker 02

  Oh, and yes, I'd like a little bit more real estate. Thank you very much. And now you can have your ruined country back. Good luck attracting foreign investors. That, I think, is Putin's game plan. And I think he can achieve that with a relatively few more weeks of fighting, unless we get very lucky. What does getting lucky look like? Suppose there's significant civil disobedience and military mutiny in Belarus. The Belarusians refuse to fight, sabotage the railway lines. Suppose that happens. That would be a win from the US standpoint. Or suppose there turns out to be meaningful opposition in Moscow that we haven't yet seen, but is there just below the surface.

• 33:37Speaker 02

  The US strategy is predicated on the economic strain of the war leading to Putin's fall from power. That is clearly what we're aiming at. That's why we've called him a war criminal. You don't do that if you want to negotiate with people. By the way, you probably teach this in your classes on negotiation. Calling someone a war criminal isn't a good basis for a negotiation. So we clearly think that we can impose enough costs on him through our weaponry and impose enough costs on him through our sanctions that he's actually going to fall from power. I think the probability of that is low, but it's not zero. Maybe we get lucky and maybe Francis Fukuyama is right and the good guys win and it's 1989 all over again.

• 34:20Speaker 02

  Maybe, but I wouldn't like to bet the lives of tens of thousands of Ukrainians on that outcome. It just seems like too long a shot to me, especially when Putin has a decent chance of being able to say, I've won, I've got what I wanted, the war's over. And I think he will do that, maybe three, four weeks from now, because I don't think he can sustain this. And he knows that. He definitely can't sustain a prolonged occupation of Ukraine and I don't think he's trying for that.

• 34:49Scott Galloway?

  So, look, I'd like to think that the West are a moral people and that the death and destruction that's occurring in Ukraine weighs on everyone and is a real motivation to try and do what we can to get the tanks out and stop this conflict. Having said that, a very cynical, unemotional view.

• 35:13Scott Galloway?

  Isn't every day, isn't Putin ceding advantage to the West? Because the way I look at this, Neil, is that this thing has been, the great ferocious Russian army has been diminished from a perception standpoint. There is, for the first time, a purpose with NATO, which was near brain death, as far as I could tell. Republicans and Democrats are even getting along for the first time. It feels as if, while there's tremendous costs being borne by the Ukrainian people, that every day this continues, geopolitical advantage perception is ceded from Russia

• 35:57Scott Galloway?

  to the West, which, quite frankly, just reduces our incentive to really take a cost to solve this. Quite frankly, isn't the West winning right now, every day?

• 36:07Speaker 02

  Well, that's the kind of argument that's clearly being made in Washington. That is what members of the administration think. And that, I think, is precisely why we're not trying to bring about a ceasefire, not even lifting a finger. On the contrary, what we're trying to do is keep the Ukrainians in the war by sending them more stingers and javelins, and now some drones. So I think the whole calculation that says, hey, we'll bleed Russia dry, just like in Afghanistan in the 1980s, has two things wrong with it.

• 36:43Speaker 02

  It took 10 years for the Soviet invasion of Afghanistan to lead to so much loss of life and indeed of prestige that the Soviets withdrew in 89. And of course, that was the same year the Berlin Wall came down. This war is not going to last ten years. If that's the analogy that we're planning to to have a Ukrainian version of the Mujahideen, it's the wrong analogy. Because this war will be over in ten weeks. And the problem is, as I said, that it could be over as a Pyrrhic victory, but a victory nonetheless for Putin. Yeah, he's taken heavy casualties, but he's he's achieved already, given that the Ukrainians

• 37:27Speaker 02

  have conceded the NATO point, a part of what he set out to achieve. The other thing, though, Scott, is the unintended consequences of any extended conflict, especially when it's in Eastern Europe. History has a bit of a problem with that part of the world. It has been, over the last hundred and fifty years, probably the bloodiest territory on earth, in terms of the sheer number of premature deaths caused by organized lethal violence. And the longer the war lasts, the harder it gets to stop. Do you think the people who've lost relatives in Ukraine, whether in Mariupol or Kharkiv, are in the mood to settle?

• 38:11Speaker 02

  On the contrary, the Ukrainian position is hardening. It seems like they don't really want to give the Russians any territory, including even Donetsk and Luhansk and Crimea. So the danger of letting the war run is that it keeps going and gets harder to stop with every passing day of civilian deaths. The other problem is that it can escalate in ways that we're all aware of, given that we're talking here about a nuclear armed power, Russia, the power actually with the most nuclear missiles on the planet. I don't think Putin intends to use those because he knows that that would, in fact, expose Russia to meaningful military action from the West.

• 38:55Speaker 02

  But he can threaten in ways that seem to work. Remember, we were going to lend the Ukrainians some MiG fighter jets from Poland, and then that was abandoned as an idea. Why? Because he'd rattled the nuclear saber. So I think letting this war run is riskier than people in Washington think, quite apart from its being immoral. I mean, I'll leave that aside because this is foreign policy and we don't want to get too emotional about it. But but of course, if you just let it run, then a lot of people are are going to die.

• 39:31Scott Galloway?

  Yeah, it really is the epicenter of the land of unintended consequences. I love that Trotsky quote that you may not be interested in war, but war is interested in you.

• 39:39Speaker 02

  Oh, yes. A lot of investors found that out in the last few weeks. It's very hard to persuade people that this was going to happen, Scott. I did a piece for Bloomberg on January the 2nd saying war is coming. That was the first line. And yet, right down until the Russian invasion began, people were completely mispricing Russian assets, completely mispricing the ruble. It was amazing.

• 40:00Scott Galloway?

  Do you think we should have a no-fly zone or try and implement one?

• 40:02Speaker 02

  No, that's a bad idea. Because if you do that, you're basically taking NATO into the war. Because a no-fly zone means at least potentially shooting down Russian planes. And that would escalate in ways that we would, potentially, we would regret. So I don't think that's a good idea.

• 40:23Scott Galloway?

  What do you think China's role in this? Speculate what you think China's going to do here, because it feels like they're the kind of a pretty powerful swing vote, if you will.

• 40:30Speaker 02

  Well, China's not a swing vote. China's on Russia's side, just to be clear.

• 40:35Scott Galloway?

  But haven't they sort of checked back a little bit based on the fact, again, this is just sophomoric perception, that they've checked back a little bit because they're worried they might be on the losing side of this?

• 40:45Speaker 02

  Well, it hasn't gone quite as Putin said it would, clearly, when he met with Xi Jinping on the eve of the Beijing Winter Olympics. On the other hand, at that meeting, Xi and Putin affirmed their undying friendship and said there were no limits on the bromance. So there's a lot of skin in the game here. This would not have happened, the invasion would not have gone ahead, without a green light from Xi Jinping. Because in this Cold War, and we're in Cold War II, China's the senior partner and Russia's the junior one. It's the sort of inverse of Cold War I, where Russia or the Soviet Union was the senior partner, and China, after 1949, was the junior partner.

• 41:29Speaker 02

  In Cold War I, the war, the hot war, happens in Asia, in Korea, and the Chinese do the fighting for Stalin. In Cold War II, the war happens in Europe, in Ukraine, and it's the Russians who do the fighting. But we delude ourselves if we think there's some possibility that Xi Jinping will intervene to broker peace or persuade Putin to pull back. That's like amazingly naive of us. In truth, Xi has been behind Putin and backed Putin for years. It's been a very close relationship. And Xi Jinping cannot afford for Russia to lose and be humiliated. This would be an enormous setback for him personally, as well as for China strategically.

• 42:13Speaker 02

  So I think you should disregard things that are said by Chinese diplomats for Western consumption and just look at what the Chinese say to themselves. And what they say is, here go the Americans trying to use their financial muscle to bring about regime change in Russia. And the way they're playing this is the way they'll play it when we make our legitimate bid, in their minds legitimate bid, to bring Taiwan under the control of the Chinese Communist Party. So I think the US is regarding what's going on in Ukraine as a subplot of Cold War II and has very deliberately said to China, hey, look, if you support the Russians, we'll do secondary sanctions on your companies.

• 42:57Speaker 02

  We've been explicit about that. But the Chinese are not going to fold in the face of a threat like that. They're sitting thinking, okay, now we know the American playbook. They don't want to fight, but they love financial sanctions because that's their superpower. Look what they just did to the Russian Central Bank. Man, all those foreign exchange reserves were just basically frozen. The Chinese are currently thinking, how do we defend ourselves against that when it's showtime in Taiwan? So there's no swing vote here. In Cold War II, China is the senior partner, Russia the junior partner, and they are figuring out what all this implies for the Chinese bids to take Taiwan under the control of Beijing.

• 43:41Speaker 02

  We'll be right back.

• 43:45Scott Galloway?

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• 44:51Speaker 03

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• 45:01Speaker 04

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• 45:23Scott Galloway?

  So I went to your conference, Neil, and I think it's the first conference in a couple of years where I actually hung around for the content. And I've determined that your superpower is your ability to link history with markets.

• 45:37Scott Galloway?

  When you see what's going on here, what are you advising your clients around? And no one knows, so I just want to throw that out. But none of us have a crystal ball under the markets. But what are you speculating that this event's impact will be on the markets?

• 45:52Speaker 02

  Well, the first part of the year was easy. It was almost as easy as the big short of 2007, when you could see how the US subprime mortgage market was going to cause a cascade of failure through the financial system. In fact, I said to John Paulson the other night, isn't this big short too? Because it was so easy to see that you just needed to be short the ruble, short spur bank, short Russian assets and long oil. So January, February were straightforward. And those were the things that the Green Mantle team kept saying to clients. Eighty percent probability he invades. That's a high probability. We had high conviction.

• 46:35Speaker 02

  And the market implications were really obvious. All Russian assets were crazily overpriced on the eve of the war because people couldn't quite imagine tanks rolling down the highway towards Kiev until they were rolling down the highway. Now it's harder because clearly there are a set of scenarios, which I regard as wishful thinking, in which somehow Ukraine wins the war. I'm reading articles by Max Boot and Elliot Cohen saying Ukraine is winning. The defeat leads to a political upheaval in Russia and Putin falls from power. I just don't attach a high probability to any of that. It's not 0%, but it's low single digits.

• 47:20Speaker 02

  So what's likely to happen? Well, I think what's likely to happen is that the war will grind on for several more weeks until Putin has achieved greater territorial control, especially in the south.

• 47:31Speaker 02

  I think that the Europeans will come under mounting pressure to impose energy sanctions on Russia. So that's bullish for oil. I could certainly see further upward moves in oil. And I think right now markets generally are a bit complacent about the inflation shock, which has come on top of an already significant inflation problem. The Fed is behind the curve. I think Jay Powell realized that when he suddenly started talking about fifty basis points again. And so my sense is that the risk on mood of last week was based on a rather naive reading of where this is all going.

• 48:14Speaker 02

  I sense, therefore, that one should be quite defensive, thinking about the potentially bad outcome. Bad outcome one, Russia wins, further destruction, higher oil prices, further refugees. And then also scenario two, Chinese get quite combative about our threats of secondary sanctions. And so the US-China relationship gets more strained. These are two developments which I think have quite high probability at the moment. So those are the thoughts that I have.

• 48:50Scott Galloway?

  You don't think it's priced in? You don't think it's time to go long Russian bonds at the ruble or go long Chinese stocks that have been just absolutely hammered? Do you think there's more pain?

• 49:01Speaker 02

  I would be very wary of those trades, especially long Russian anything right now, given that the sanctions regime makes that really difficult. You know, I'm reminded of Venezuela. Oh, we used to love talking about regime change in Venezuela. Chavez was dying and this was great because there was going to be regime change in Venezuela. And here we are. Maduro turned out to be worse. Venezuela has done to itself what Russia is doing to Ukraine, caused a massive destruction of capital and exodus of people. And I wouldn't buy any assets expecting that I'd found the dip. Sometimes the dip can be very dippy in a crisis like this.

• 49:42Speaker 02

  So I'm no, not of the view that things are about to to turn uh turn bullish. And I think it would be a great mistake to get into that Russian market right now when there's so much uncertainty still about the military outcome. But the time to buy is when and if we see cracks in Russia's war making ability and political stability. I'll give you a couple of little raised glimpses of sunshine that made me think again about my pessimism. Evidence of sabotage of railroads from Belarus into Ukraine. Belarus is much less under control than Russia.

• 50:25Speaker 02

  And Lukashenko is not enthused about where he's been taken by Putin. Second thing was something very funny the other day. Putin was doing the speech from the football stadium in Moscow. And it got interrupted on Russian state television, just when he was getting to the good bit about Russia's historic mission. Funny that. And the argument that there was a technical problem struck me as suspect. So there are some little signs of of meaningful trouble there. And if I saw more of those enough to make me think he can't fight much longer, he's gonna have to settle, maybe he's even in trouble. That would be the moment that I would change my position and I'd change it fast.

• 51:10Speaker 02

  But right now, I'm not there.

• 51:13Scott Galloway?

  And what role, and the last question, when you look historically, what role can citizens play in a nation like the United States that finds itself observing but still very influential?

• 51:25Speaker 02

  There are two roles we can play. One that I've been playing, which is to try to help get meaningful assistance to the Ukrainian government. One of the more exciting developments has been helping get Starlink hardware into Ukraine so the Ukrainian communications don't go down. The Russians tried to take out Ukrainian communications by shooting down, blowing up their TV towers. But Ukraine is still online and the Ukrainian government is still online, thanks partly to a lot of Starlink hardware that got delivered. So you can help with stuff like that. The Ukrainians need more than they're currently getting in the form of hardware to keep this fight going. And we want them to keep fighting.

• 52:08Speaker 02

  I do not want Zelensky to die. I do not want Ukraine to be defeated. I do not want to see Putin proclaiming victory, have a pyrrhic victory. So that's part one. The other thing we can do is try to persuade our government that the strategy they're pursuing is flawed and that they should prioritize ending the war while Zelensky's still standing and Ukraine can claim moral victory. You and I have Scottish roots and it's always the case that playing against England, Scotland, either lose or at most they draw. But the draw is the moral victory. I've always regarded nil-nil as a win. And this is the kind of thing that Zelensky tomorrow can clearly claim.

• 52:49Speaker 02

  He can claim moral victory even although half his country is ruined and Mariupol is a charnel house. We've got to give him that. The current policy of letting the war continue, I think, risks taking away that moral victory from Zelensky and his people. And so lobby your congress person, lobby your senators and representatives, because congress has quite a lot of power over this right now. And I do think minds can be changed in Washington and this, in my view, misconceived strategy can be abandoned in the nick of time.

• 53:27Scott Galloway?

  Neil Ferguson is the Milbank Family Senior Fellow at Stanford University's Hoover Institution and a Senior Faculty Fellow at the Belfer Center for Science and International Affairs at Harvard. He's also an entrepreneur. He's the founder and managing director of Green Mantle, an advisory firm, and a co-founding board member of Walla, a Latin American bank. He joins us from his office in Stanford. Neil, I can't imagine how busy you are and how many people want your insights. So appreciate your time today. Thanks, Scott. It's been a pleasure.

• 54:05Scott Galloway?

  Algebra of happiness. Are you blessed? Or are you, did you overcome things? Are you a function of your context? What is your perspective? Because it's a matter of perspective. Until the age of 40, I was very fond of telling people that I had been raised by a single immigrant mother who lived and died a secretary. Our household income was never over $40,000. I was a pilgrim kid. I'm still proud of that. But I would position it as, you know, check my shit out. I came, I overcame these, you know, these incredible disadvantages because, you know, I'm just so fucking awesome. And then, as I got older and you sort of obtained the ability, hopefully, to take the lens back and have a little bit more perspective, I realized that being born

• 54:49Scott Galloway?

  a white heterosexual male in 1964, which gave me entree into the University of California for free, much less entree, when the acceptance rate was 76%, not 12% as we stand here today, that having one parent who is irrationally passionate about my well-being, to be born in America, where grit, opportunity collide for economic security and for liberty and freedom and the opportunity to be the person you want to be, to come into my professional years as the processing power and the internet were exploding, that I might not be 99.9, but I was kind of the 99th percentile in terms of blessings.

• 55:33Scott Galloway?

  And what I find this war in Ukraine, again, just reminds us of is so much of our success and our failure is not our fault. If you were born a male in Germany in 1920, you were gonna die. If you were born in Russia, a male or a female on the Western Front in that time period, you were gonna die. And likely, if you look at your life right now, if you're listening to this podcast, if you really look at a historical context about where you were born and what you were born into, chances are you're in the 90th percentile at least, if not the 99th. And this is a big theme through my life that

• 56:18Scott Galloway?

  really has helped, and I wish I'd learned it much earlier. And that is, when success hits you, when you hit accomplishments, be humble and grateful, because a lot of that success is not your fault. And at the same time, when things are tough, when you screw up or bad things happen, also be in a position to forgive yourself, because that too is not entirely your fault. There are, and this goes back to a little bit to Stoicism, you wanna, you wanna focus your emotional bandwidth, and just generally your bandwidth on the things you can control. And so much of this is out of our control. But there is, if you're listening to this podcast, look at where you were born, look at the circumstances into

• 57:03Scott Galloway?

  which you were born. And I'm gonna bet, if you pull the camera back, you know, a lot of this blessing is not your fault, and that we all need, or we should, and I find it healthy, to recognize just how, just how blessed we are through no fault of our own. Our producers are Caroline Shagrin and Drew Burrows. Claire Miller is our associate producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you next week on Monday and Thursday. And one quick reminder before we sign off, we answer your questions about the business trends, big tech career pivots, and whatever else is on your mind on the pod every Monday. If you'd like to submit a question,

• 57:48Scott Galloway?

  please visit officehours.proffgmedia.com.

• 57:52Speaker 05

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• 58:22Speaker 06

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