America and the Trade Status Quo, Tariffs and What May Come Next, A Chance to Build in Tech and Beyond

Talking through the evolution of the modern trade landscape, the implications of tariffs under a new U. S. administration, and Ben’s article on Monday, A Chance to Build. Topics include: the realities that are prompting change, China’s growth in hardware and software, TSMC and Trump, the future for Waymo, and more.

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

• 0:04Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:15Ben Thompson?

  I don't know. I don't know, Andrew. I don't know how I'm doing. I literally just walked off a plane, 30 minutes from plane to hotel room.

• 0:22Andrew Sharp?

  Yeah.

• 0:23Ben Thompson?

  So I could record this podcast. But you know what? I was just getting up to grab something while we were starting to record. I knocked my, I left my headphones on, knocked my coffee off my desk.

• 0:33Andrew Sharp?

  Mm hmm.

• 0:34Ben Thompson?

  Sounds like a bad sign.

• 0:36Andrew Sharp?

  I mean, it definitely, it literally sounded like a bad sign because it all happened off screen and there was an expletive involved on your friend.

• 0:44Ben Thompson?

  Hey, this is a clean, this is a family friendly podcast.

• 0:47Andrew Sharp?

  Family friendly, absolutely.

• 0:48Ben Thompson?

  The coffee flew off the desk and landed directly upside down without the top coming off. And so only a small amount spilled out. I, I, that's a good sign. We gotta push forward. We gotta make it happen. Yeah.

• 1:03Andrew Sharp?

  Absolutely. A good omen for the remainder of the podcast. As Ben shakes off the cobwebs after a 13 hour flight. Here we are. It's great to be here and we're going to be talking through Monday's Strategery article, A Chance to Build, which was all about the implications of potential tariffs for both US tech companies and the world in general. I have 10 questions for you, Ben. Question number one, there has been a lot of talk about tariffs and tech over the past several weeks. Was there any aspect of that conversation that prompted you to write this article now? Is there something that you think people are getting wrong as they model what tariffs might look like?

• 1:47Ben Thompson?

  Well, I actually had pushed back on that. I don't think there's been that much talk in tech about tariffs and sort of the implications. And I think that's, I think it's interesting for a few reasons. I mean, I think just in general, terror, you know, globalization, which, you know, was also what this article was about. It's very much a tech story. I mean, there's a tech enablement story, which is things like containment. Or the 747 or international communications, all of which made this new world order sort of possible. And there's also, I think, an underappreciated aspect to which tech drove globalization. Like I opened up with the story of Fairchild Semiconductors or a predecessor to Intel.

• 2:30Ben Thompson?

  Like very early, within a number of years, realizing we cannot do test and assembly economically. Like this, the way chips used to be made, you would actually manufacture the chip itself. But then to attach it to the substrate, you actually had people with microscopes like attaching wires like one by one. And, um, and it's interesting because you always talk about chips in this story that, oh, this is, you know, or I do anyway. This led to software, led to the venture capital industry because you designed a chip once, it's a lot of work. You set up the manufacturing process, but then it's like a zero marginal cost product. And that's the case today where stuff is very highly automated.

• 3:10Ben Thompson?

  One of the reasons that like TSMC can be persuaded to open fabs in America is because there's not that much labor involved in the actual process today. But back then, that wasn't the case. And so very early chip, you know, the first one, Fairchild Semiconductor went to Hong Kong. Texas Instruments went to Taiwan and then Fairchild extended into Singapore. And there's a bit where tech's been sort of cheating from the very beginning. And building up this worldwide global network primarily centered in Asia to make the economics of tech possible. And, you know, that has long running sort of implications.

• 3:51Ben Thompson?

  The biggest of which is it's hard to tell the honest story of tech without including Asia. And, and people, some people got grumpy. I kept referring to Asia like, oh, there's lots, Asia's very large, lots of different countries. Um, number one, yes, I know. I live there. Familiar with it. Yeah.

• 4:11Ben Thompson?

  But it is complicated because some of it is a China story. Some of it is just sort of an Asia story generally. But this is a sort of a big deal for tech, both historically and also sort of going forward. That's all number one. Number two is the name of the article, A Chance to Build, is obviously a reference to Marc Andreessen's It's Time to Build. The article he wrote sort of a couple of years ago, exhorting folks to like, we can't do anything in America.

• 4:40Andrew Sharp?

  Honestly, it was a phenomenal article. I remember early days of COVID and thinking to myself, yeah, it has been a really long time since America was actually building things.

• 4:51Ben Thompson?

  Right. And well, and you know, there is, you know, people are talking about like a vibe shift or whatever. And this is, this has been happening in tech even before the election. Like, there's just been a lot of energy and things like, particularly down in the Los Angeles area, you know, surrounding SpaceX, you have a lot of SpaceX folks that are now spinning out and starting their own things. There's a lot of national security companies, like Anduril is obviously a headline example. But there's a bunch of sort of national defense oriented military startups that are coming up. We've talked about it on this podcast, you know, you've referenced that, that, you know, the talks I've had with Gregory Allen about these sorts of areas. Like, these, this is something that has been happening.

• 5:30Ben Thompson?

  And there's just, I think, I think it's a good thing that's happening. But this is sort of a, like, let's take a sober look, like, there's a lot of challenges that are going to be entailed in this. And I do think changes need to be made. And I hope folks will push through and make stuff happen. But it's, you know, it's, it's going to be a hard road. And, and I think from a strategic perspective, like, I just try to say what's going on in the context of hoping folks push beyond that and then sort of do more. And then there was actually a tie in to sort of coincidentally, the interview I did this week with Bern Hobart, where he wrote this new book called Boom. And what was so interesting about this book, it was like about bubbles. And I, and before I read the book, I assumed

• 6:15Ben Thompson?

  it was going to be like a, a extension of Carlota Perez's Technological Revolutions, where she sort of made the economic case for the, the positive outcome of certain bubbles.

• 6:26Andrew Sharp?

  Bubbles, yeah.

• 6:26Ben Thompson?

  Is all this sort of built out, right? And what was interesting about his book is it wasn't really sort of like a technocratic treatise, like I expected. It was like a call to action. It like very explicitly invoked, almost like the religious metaphysical aspect of bubbles and why that's important. And to me, it's a very good sort of compliment to. There's gonna like, it's, it, this is gonna be a tough thing to do, but I think it's a necessary thing. And just sort of, I wanted to lay out the lay of the land. And that's sort of the context. The, the Trump election, the fact that tariffs are coming, we don't know what they're gonna look like. This is all context for this, but also there's an aspect of the

• 7:08Ben Thompson?

  last few months of this sort of general vibe shift and people wanting to do it. And that's what I was sort of hoping to tap into.

• 7:16Andrew Sharp?

  Yeah, it's funny. I have not read Bern Hobart's book, but that sort of spiritual sense, that's what I took from Andreessen's essay three or four years ago. It's like, this spirit seems to have been absent from American life over the last several decades, and I would like it to come back. Um, number two on my list here of questions. Can you explain to people what was agreed upon in Bretton Woods, New Hampshire in 1944? It's an aspect of US foreign policy and just the structure of the entire world that I wasn't familiar with until reading about it a couple of years ago. So can you give people a Cliff Notes of what the world used to look like?

• 7:57Ben Thompson?

  Yeah, I mean, I want to tread carefully because I'm not an economic historian necessarily, but I do think just the, by and large, after World War One, you had this economic chaos where you had these countries that were destroyed by the war. You had other countries that were not, and you had, you know,

• 8:18Andrew Sharp?

  Currency disputes, trade disputes.

• 8:21Ben Thompson?

  Yeah, you had to restart the world's economy. Everyone's like depreciating their currency to make their, their competitive. And just, there was a real strong sense that we don't want to make the same mistakes after World War Two. And particularly amongst the US. I think the US, and this is sort of my read on this situation. I'm not sure, I'm sure I could find some historian to agree with me, but my view of history of the end stages of World War Two was a lot of US foreign policy was predicated on Europe, we're sick of this. We've had, we've had to bail you out twice. It's not going to happen again. And there were a lot of things that happened. I think that was the goal. That was the focus is we're not going to have war,

• 9:07Ben Thompson?

  particularly war in Europe ever again. And you do, as sort of a testament, you see vestiges of this in foreign policy today. Part of this was like the EU, for example, very much a creation, an American creation. Obviously, there were Europeans that pushed for it and wanted it, but the US absolutely was facilitating it and pushing for it. In part because the, this idea that economic union is going to make it particularly between France and Germany is going to ensure that they won't go to war in the, in the future. Particularly, and it started like the, the European Union came, whatever the European, I can't remember what it was called, with like a steel arrangement where they basically worked together to produce steel. Steel is really important for war.

• 9:49Ben Thompson?

  And if France and Germany are dependent on each other to make steel, it's going to be very hard for France and Germany to go to war. Right? And so, so that there's just this general, like there's a lot of decisions that went into this and Bretton Woods was absolutely part of this. And basically the agreement was, at that time, you know, almost everyone was like out of gold. Like, and the US had a ton of it. In part because the US made everyone, like particularly the UK, pay for all their stuff. Now, this is a whole complicated, uh, controversial area. To what extent did the UK have to pay? And the USSR did not have to pay. And what drove those decisions and things along those lines? But the, the net result was the US basically had all the world's gold. And you're just asking for the same sort of chaos after World War I.

• 10:34Ben Thompson?

  So the US basically imposed this order, which is everyone's currencies is going to be fixed to the US. And the US is backed by gold. And so by extension, everyone else is backed by the US gold, like, like via the US dollar. And this was, and it worked. It worked in the sense of maintaining stability. It worked in the US sort of opening up their consumer market to.

• 11:01Ben Thompson?

  Particularly European and Japanese sort of producers.

• 11:05Andrew Sharp?

  Right.

• 11:06Ben Thompson?

  So one of the, one of the, you know, who had this huge cost advantage, right? They're, they had, because they had nothing. So they had cheap labor. They obviously had the longstanding sort of capabilities that, you know, it was all destroyed in the war, but they had the ability to sort of make stuff and it really worked. Like, like all the, you know, the, the extent to which traditionally our closest allies, particularly from a military perspective, ended up being West Germany and Japan is actually pretty amazing.

• 11:33Andrew Sharp?

  Yeah, absolutely.

• 11:34Ben Thompson?

  So a lot of this stuff deserves a lot of critique. And in 2024, there's a lot of things to criticize, but it's really important to have the context of why these decisions were made, why they were and sort of how they worked out. And so under this system, basically the US, this was the establishment of the US dollar as reserve currency. People point to that as when Bretton Woods fell apart. But actually, no, it actually started before because that's when all the currencies were linked to the US dollar. And the US dollar was nominally backed by gold. So when Bretton Woods fell apart in 1971, what fell apart was the linking to gold.

• 12:13Ben Thompson?

  Uh, but it was already established that the US dollar is sort of the, the, that's the trading currency of the world. And what that enabled was you had the situation where countries made stuff. They sold it to the US market. Again, the US not destroyed by war, huge and growing population. You know, very wealthy, even back then would buy all your sort of stuff. So then these countries have all these extra dollars. And in like a normal, like classical economics thing, what would happen is the, the, the US would sort of depreciate. The currency would depreciate because you have this misbalance of, of this, this sort of account misbalance.

• 12:54Ben Thompson?

  But that wasn't allowed. Bretton Woods didn't allow the US currency to depreciate relative to these other countries. So they had all these dollars that were really valuable and you had dollars in more valuable than they should be, that they converted just to US treasuries. And so the US got all the. And so the US could start running deficits. And this, you got into a state, now technically, the limitation of running deficits was you had to have gold to back it up.

• 13:19Andrew Sharp?

  Right.

• 13:19Ben Thompson?

  And, and so the US gets in the sixties, we're paying for the Vietnam War. You have the huge expansion under Lyndon Johnson of like sort of the, the social welfare, you know, bits, Medicaid and, and all the, the pieces that came with that. And the problem is that this story that the US dollar is backed by gold stopped sort of being credible. Because there was just so many dollars out in the world and, and, you know, they're, they're multiplying. And so basically the, the abandonment of Bretton Woods was abandoning the gold pack. And that triggered things like inflation, that triggered things like, um, currencies could start moving against each other more.

• 13:59Ben Thompson?

  There was a depreciation that happened to an extent, but that, this overall system persisted. You had established this general trading system that was mediated in dollars. You had this cycle going on and you had this bit where to keep the whole thing working, it, you needed security.

• 14:17Andrew Sharp?

  I was gonna say, that's the key component. Everybody was willing to participate.

• 14:21Ben Thompson?

  We'll take care of the security, right? I mean, this kind of ties into like the, the criticism of NATO. Like it, on a, on a narrow objective level, yeah, it's nuts. The US pays basically all of NATO and none of these countries pay anything. You forget that the US was very okay with that for a long time. Cause they didn't want these European countries militarizing and fighting with each other. And so there's a bit, we will pay for the security. But by the way, we're not really paying for securities.

• 14:49Andrew Sharp?

  All over the world, you're paying for the security.

• 14:51Ben Thompson?

  We're paying for the security with debt. The debt is which is your, the dollars that you have acquired by manufacturing stuff and selling it into our market. And so it's this sort of like circular bit and, and so again, it worked.

• 15:06Andrew Sharp?

  I was gonna say, there is room for criticism with the structure that emerged, but at the same time, there has been a time of relative peace over the last 70, 75 years that is borderline unprecedented.

• 15:19Ben Thompson?

  Peaceful, yeah, in world history. Yeah, it's important to keep in mind, like, like it, it, it did work.

• 15:24Andrew Sharp?

  Right.

• 15:25Ben Thompson?

  The problem.

• 15:28Ben Thompson?

  Sorry, am I jumping?

• 15:29Andrew Sharp?

  No.

• 15:29Ben Thompson?

  Oh, sorry. I'm about to go to question three.

• 15:31Andrew Sharp?

  The question three. In terms of where we are now, you wrote on Monday, "The big loser in the post-World War II reconfiguration I described above was the American worker." "Yes, we have all of those service jobs, but what we have much less of are traditional manufacturing jobs." "What happened to chips in the 1960s happened to manufacturing of all kinds over the ensuing decades." And then downstream from that comment, you mentioned a conversation between Steve Jobs and President Obama in 2010, where Jobs told Obama that Apple needs 30,000 engineers to manufacture products in America. So, to put this in tech terms,

• 16:13Andrew Sharp?

  how does Apple's manufacturing experience relate to where we are today?

• 16:19Ben Thompson?

  So, the problem is, US manufacturing was just fundamentally non-competitive.

• 16:25Andrew Sharp?

  Mm-hmm.

• 16:26Ben Thompson?

  Like, just purely from-

• 16:27Andrew Sharp?

  From a wage perspective?

• 16:28Ben Thompson?

  Yeah, from a wage perspective. And, again, we think about it in terms of China today. It wasn't competitive with the Germans. It wasn't competitive with the Japanese. Like, now, they got richer and then nominally became more competitive, but then you just had it moving on to sort of other countries. And, you know, the problem is that, so you have this cycle going on of the US basically printing dollars, particularly post-Bretton Woods, like, once it was completely unlinked from gold. And there's these charts you see of this massive growth in the US in employment in areas like government jobs, in areas like healthcare, and, sort of, the service sector broadly. Those are two really big categories. And it's like a direct replacement for all these manufacturing jobs.

• 17:12Ben Thompson?

  So, you had this money being printed and cycled in the economy. So, it's not like people were getting poorer. In fact, the US consumer is as rich as ever. The US consumer still powers the world. And by the way, those social programs help with this.

• 17:23Andrew Sharp?

  Mm-hmm.

• 17:23Ben Thompson?

  Like, people aren't afraid to spend because there is a fallback. Like, if you lose all your money, there is Medicaid. If you get old and didn't save anything, there is Social Security. Now, I'm not saying that's like an amazing life, per se. But it does exist in a way that it does not exist in a place like China. Like in a lot of these places that are they're criticized for the consumer market not spending sufficiently and saving too much. Part of that is a lack of a social safety net. So people say, oh, China needs to institute a better social safety net. It's like, well, number one, is that going to be credible? But then number two, it just ties into this system. The US has leaned and it's not the way people think about things.

• 18:04Ben Thompson?

  It is a certain, I don't want to say communist, but more, the US is more socialist in this aspect than is appreciated. It's kind of like how the NFL is the socialist sports league. Like every like, and it does make for a better product because any team can win. And the Kansas City Chiefs or the Green Bay Packers can be not just as big, but some of the biggest franchises in the sport, despite being in small towns. Versus we talked last time about the NBA, the Lakers are just, they have the most fans. They have the biggest RSN deal. They have all these advantages that it's just, it's just a hard thing to sort of deal with. This is an aspect of the US because of the socialization of the safety net in the context of this market and the, the

• 18:48Ben Thompson?

  charge that was given to the Federal Reserve in particular of maintaining full employment. And so you have this sort of system going on that just doesn't make the manufacturing viable. And it does cycle into these other jobs and you're buying cheap stuff from places that have lower labor advantages. The problem is those places with lower labor advantages, like in China, you start manufacturing in China in like, you know, the, the eighties. And they're really bad at it, but they're cheap. But the problem is that a lot of this like comparative advantage analysis is kind of static in time. And there's a bit where you move down a learning curve.

• 19:27Andrew Sharp?

  Yeah.

• 19:27Ben Thompson?

  Like you, you lose the learning curve and China has gotten better and better at manufacturing. And today, the Chinese worker is not cheap. They don't have really a labor advantage.

• 19:38Andrew Sharp?

  Not cheap and more skilled than American workers. If you're trying to manufacture iPhones in 2024.

• 19:43Ben Thompson?

  Exactly. So you, you, you build up this capability. You have this. Density of manufacturing, you have this ability, you, you, again, it starts with doing stuff like, like what connecting little wires on chips. But you, you develop skilled workforces, you develop engineers. Why do those develop? Because there's jobs, because there's opportu- that, that's the opportunity sort of in your economy. And so the reason I brought up that conversation with Steve Jobs and President Obama is it's so striking to me how. I think Jobs was a little self-serving and honestly Obama comes across as pretty naive. In not understanding why are there no engineers?

• 20:24Ben Thompson?

  And, and this idea that, oh, if we could just train up some engineers, Apple's gonna move their manufacturing back is to, is, is completely backwards. If there were jobs, if there were opportunities to do that, the engineers would materialize.

• 20:38Andrew Sharp?

  Right.

• 20:38Ben Thompson?

  And the, the reality is there isn't because the manufacturing of an iPhone and those production engineer jobs that Jobs was talking about. Those are downstream, the iPhone starts production in 2007. That is downstream of two, two and a half decades worth of developing expertise and capability in China. And not developing that expertise and capability in the US. And again, the other thing about an iPhone is it is very labor intensive. Like the final bits are taking all the pieces and putting them together. And actually for a long time, for the first half of the iPhone trajectory, China captured a very small part of the value of an iPhone.

• 21:19Ben Thompson?

  So number one, Apple captured the most, they do all the design, they get the profit margin, all those sorts of things. And by the way, this is an important factor. Economically speaking, this has worked out very well for the US, okay? We make the most money from all this sort of stuff. That's the advantage of being on top.

• 21:34Andrew Sharp?

  We being American companies or American consumers that are able to purchase iPhones at a reasonable price?

• 21:41Ben Thompson?

  Or American co- the American economy generally. The American companies make the most money, the American consumer gets stuff way cheaper than they might have otherwise. It's just all win-win for America. The other big winners are in the early iPhone were all these other Western economies where, I think I've talked about this before, but China, because they had, China was actually, because China came up in a free trade world, relatively speaking, they're also kind of warped in their economy. And they, the comparative advantage for them was cheap labor. And so all of their expertise has been in these sorts of areas. Even once the labor got expensive, they developed so much capability, so much density. They do so many different pieces. It's all right next to each other.

• 22:26Ben Thompson?

  You can go to Shenzhen and in like 100 square miles, there's basically every manufacturer of anything you could possibly need to make anything you would want to. It's incredible. And, and so they, they developed all this. But meanwhile, you had manufacturers in Germany, for example, or you had manufacturers in the Netherlands, or you had manufacturers in Japan, or South Korea, or Taiwan, who were not competitive on a labor advantage. So they focused more on capital intensive sorts of things. Yeah, and IP. So you have things like jet turbine blades. China still struggles to make stuff like that, right? Chips, China struggles to make stuff like that.

• 23:05Ben Thompson?

  This is all capital intensive, IP intensive, tacit knowledge sort of intensive capabilities that these other countries focused on because they couldn't compete on the labor stuff. In China was actually quite an open economy during this time. And every marginal factory owner, opening a new factory, am I going to buy a bunch of capital equipment and do high-end stuff? No, I'm going to figure out what I can do with, with a bunch of workers and, and plugging into this sort of network. And so, so you, so for the iPhone, you actually ended up that the US captured the most. Taiwan captured a fair bit because of the chip. You had, uh, uh, there's a, there's a, I, I wrote once about

• 23:46Ben Thompson?

  the relative market cap of this company called Largan Precision that made like lenses for the iPhone, compared to Foxconn, which manufactured the phone. And everyone knows about Foxconn. They employ like millions of people in China. There, there's like a million people that make iPhones. And they weren't worth that much more. It was actually very comparable to Largan Precision, which just made lenses. It's a tiny little company in Taiwan because the differentiation IP drove that. The challenge is, and that China is presenting particularly in the last few years, China's share of the iPhone's gone up a lot of the value because they are moving up the chain in terms of the capabilities of doing the components of the iPhone.

• 24:25Andrew Sharp?

  Right. I mean, China, to its credit, throughout this multi-decade evolution, China has learned to move up the chain in terms of what they're producing. They've learned from some of the Western companies that have been manufacturing there, and they're indigenizing various aspects of these industries and can now produce them itself.

• 24:46Ben Thompson?

  Yeah, well, the other thing that that is underrated, I think, is the Great Firewall. So one of the ways where the US continued to dominate is they moved up into software. And so if you have a high-cost labor force, but that cost is going into R and D, and like you don't need, like, yes, you have operational workers that are maintaining the servers so Google and Facebook can run. But by and large, the way the cost works is all the cost of the labor goes into developing the product, and then the product is sort of served to everyone. This is the whole zero marginal cost aspect that I talk about. This is a great place for the US to play because the labor costs don't hurt them that much, and the relative richness and the ability to pay more is here.

• 25:32Ben Thompson?

  For manufacturing stuff, it's paying less that is an advantage. In the US, when it comes to software and the leverageability of software, paying more is the advantage. And so you at, the US doesn't just sort of have this that slots into this new economic system, it's a magnet. Anyone that wants to make money, you know, particularly if you're in tech, get to the US. And this, you know, there's other discussions about sort of dynamism and entrepreneurship and things along those lines. But if you're just a really solid computer engineer, where would you want to work? Of course, you want to go work in the US. You're just going to make a, you know, way more money sort of doing it. And so, and the internet comes along, and the internet, there's, there's no, there's

• 26:15Ben Thompson?

  no tariffs, there's no borders, it's just the internet. It's, it's, it's a complete. Completely different thing and the US just completely dominates the internet. The US dominates the internet to a far greater extent than any country has dominated anything. And then we, you know, we, we've talked a lot about that with one exception, which is China. And the reason is China, for political reasons, wanted to keep US tech companies out of China. They didn't want the free flow of information. So they build this great firewall, which was mocked endlessly, by the way. You know, like Bill Clinton talking about, oh, you're trying to nail Jello to a wall. Good luck with that.

• 26:49Andrew Sharp?

  Joke's on you, Bill.

• 26:51Ben Thompson?

  Yeah. I mean, all this stuff, all this stuff started under Clinton. Uh, and then the Bush and Obama administration, it was just a continuous threat. There was no real revisiting any of this thinking, frankly, until Trump. And, and, and so that's just sort of what, one, one category there. And, and China builds this great firewall and the economic implications of that were actually pretty profound. And I would make the case, the great firewall is one of the single best arguments against free trade orthodoxy. China has benefited tremendously economically. We set aside all the political angles.

• 27:30Andrew Sharp?

  Right.

• 27:30Ben Thompson?

  The great firewall is one of the single most important things China did for their long-term economic outcomes. And the reason is by building the great firewall, they created a market independent of US tech companies. And so they developed their own tech giants. And you develop tech giants, there's lots of capabilities you get around that. And they had a market opportunity for quality engineers and quality building sort of things. And so now where that's starting to pay off is you have like, say, Chinese electric vehicles. And, and, and the way that China, the electric vehicles are built are different. They're like platforms. They're closer to computers and then software goes on top. You can be a Xiaomi and you can contract with an auto manufacturer.

• 28:15Ben Thompson?

  You make the design, you do all the software, all the tech, another company builds it. Huawei does the same thing. They have three different companies they work with because they have three different lines of autos and it's it's and so it's actually

• 28:28Andrew Sharp?

  Well, it's a it's a crucial distinction from traditional cars, which America has dominated. America and Germany and Japan have dominated for 100 years because there are, you know, 150 components that go into making a car or whatever the actual number is.

• 28:44Ben Thompson?

  No, there's like 30,000.

• 28:45Andrew Sharp?

  Okay, bad estimate by me, but there are. The point is, there are lots of components that go into making a car.

• 28:53Ben Thompson?

  Just multiple orders of magnitude wrong. That's amazing.

• 28:55Andrew Sharp?

  Well, it's more like learning how to make chips, making like traditional auto auto manufacturing, whereas the EVs are simpler and China has been able to excel, frankly, without any of the world noticing. This sort of emerged out of nowhere a couple of years ago, and they are now a powerhouse. And it would have been harder to do that with traditional cars.

• 29:19Ben Thompson?

  Well, the big thing, though, is is is in the long run, the the sort of profitable trade for tech was Asia made the hardware, we make the software, and there's more margin in software, and that's where the differentiation is driven. The tech is commoditized. And you saw this happen with computers. Like, computers used to be made in the US. And then they they sort of and that they're not made in the US anymore. They are, you know, and and you see this, you saw this happen to lots of lots of industries where they would hand off the OEM to an Asian manufacturer. The Asian manufacturer would ladder up into being an ODM, where they would design the whole thing, and then the the other entities are sort

• 30:03Ben Thompson?

  of slapping their logo on it, doing the selling and marketing. In hard goods, this has been a disaster for a lot of these companies. They're now completely beholden to their Asian suppliers. They're losing pricing power. And they're losing sort of and they're susceptible to competition where, you know, their supplier could start selling their own thing. And what are they gonna do? Because like, they're they're sort of stuck.

• 30:24Andrew Sharp?

  I mean, that's literally happening with a lot of Chinese companies in a lot of different industries right now, like I mean, there were technology transfers that were part of it. There's IP theft. Okay.

• 30:34Ben Thompson?

  But set aside the technology thing. It's really bad if you don't have technology. Cause then it's just, it's just the, whatever it is, like the, the hard good. When you get to technology, the US maintained its position because the software was highly differentiated. And it was like a network effects and all the things that we talk about with software. The problem is that when it comes to something like cars, China, because of the gray firewall, developed massive software expertise. Now they can ladder up, not just to an ODM, but all the way to the full product. Where it's a hardware product with differentiated software on it that can go out into the world. So, so they, they have, they have the whole stack.

• 31:16Ben Thompson?

  And, and the challenge in this whole trade is it's easier to go up the stack than it is to go down. And the US by and large has really kind of, again, we got into this system for a good reason. The reasons for which we got into this system succeeded. But the reality is we're now 50 years behind a different eight ball. We were worried about one eight ball, now there's another eight ball. And the US, you think about the, the possibilities in the worst case scenario, say a war with China. And yes, there's a bit where if we have to, like, we didn't have all the manufacturing capability we needed before World War II.

• 31:58Ben Thompson?

  World War II in particular is an interesting one because the US didn't know how to make any planes or, or ships or any of this sort of stuff. And so people point to that and say, look, we wrapped up then, we can do it again. The US didn't know how to make cars.

• 32:11Andrew Sharp?

  I was gonna say.

• 32:11Ben Thompson?

  Who was the biggest?

• 32:12Andrew Sharp?

  We had a lot of manufacturing at that point and we just repurposed it.

• 32:16Ben Thompson?

  No, Ford became, Ford became a plane maker, right? Like, like, like, and so the concern, what is probably underappreciated is this whole chain, this whole learning curve of expertise. And this gets into just the, the broader overall challenge, which is it's not economically rational to change it. Right? Like, like, like the, the.

• 32:41Ben Thompson?

  It works very well the way it is, until it doesn't, in which case you're, everyone's just sort of, kind of screwed.

• 32:48Andrew Sharp?

  Well, yeah, I mean, I, I had a question on here. Would any of this be worth considering if not for the threat of war with China and Xi Jinping? Is there a quick answer there?

• 32:58Ben Thompson?

  Well, no, there's not a quick answer, in some respects, because it, it just, this starts to stray far beyond sort of tech.

• 33:04Andrew Sharp?

  Yeah.

• 33:05Ben Thompson?

  I think the question, and this gets at sort of our, our general sort of political moment, i- is this sort of, yes, we've constructed a world where everyone is actually super rich, and everyone's also very unhappy. And, you know, is this the sort of economy that, are we missing something when we just measure GDP per, per person, particularly in the context of inflation and things along those lines? Is there something to, this sounds so cliche, like the dignity of work, or actually making things, and all those sorts of pieces?

• 33:41Andrew Sharp?

  I was gonna say, yeah, no, the national spirit, the national identity. I mean, you talked about the system, the Bretton Woods structure, being a win for America, a win for American consumers, American companies. Um, globalization was obviously a win for China, a win for a lot of workers in China. I mean, the, the collective wealth has skyrocketed over the last 40 years. By the same token, it, it is an unmitigated loss for American workers, you know, and like, the narrative here was all rooted in language about democracy and freedom and unifying the world.

• 34:20Ben Thompson?

  People will come back just to be steel man this, and they'll say, actually, people are making more money than ever, which to an extent is true, and yet, something seems to be missing, right? The interesting thing about this system that I think people miss, people are like, well, globalization's been going on for, forever, for hundreds of years, trade's always been a thing. The way it used to work, or, you know, like, the industrial revolution, sort of colonial, sort of era, was, countries would go out and they would get raw materials, they'd bring them back to the home country to manufacture them, value add, and then they would sell them. To the whole world, right? And so, so, but the key thing is going out, getting the raw stuff, bringing it in, value adding at home, and then sort of, sort of selling outwards.

• 35:00Ben Thompson?

  What's marked the last 50 years of globalization has actually been the opposite. It's been the moving out of the value add and what stays home is like the design and the marketing. And it's just been this entire sort of virtualization of the economy. And part of this, by the way, one of the big shifts, particularly since Bretton Woods went away and the gold standard went away, is the US financial sector's massive growth as a portion of the economy as measured by GDP.

• 35:29Andrew Sharp?

  Mm hmm.

• 35:30Ben Thompson?

  And it makes sense. What we just described is this massive sort of financial arrangement where these dollars are just moving around in a cycle. They're sort of pushed out into the US economy via, via all these programs and these jobs. And then they use it to buy stuff that goes to these other countries and they buy our debt and the federal military. Like, like the US, it's all financialization and software. Like, that is really the US's and all that stuff sits on top. And so we collect all the benefits, but

• 35:58Andrew Sharp?

  But the we is getting smaller. That's part of the problem is like these policies amount to an upward transfer of wealth in America. And had people known that that's what it was going to look like 40 years ago, they would have been massively unpopular. And again, it was sort of laundered with language about unifying the world and democratizing all sorts of countries. You know, it's going to help China liberalize. That hasn't worked. But, and that's why it's controversial today. So as we look at what's possible now, Trump has proposed 60% tariffs on products from China. He's also floated a 15 to 20% tariff

• 36:43Andrew Sharp?

  on all imported goods. And these proposals are understandably controversial. They come with some clear potential downsides. But I can tell you in this article, were equally intrigued by the upside here. So what are the opportunities for people who want to build? What's the chance to build as we look ahead?

• 37:06Ben Thompson?

  Well, I, I don't know how I feel about this. The reality is the likely case scenario, I mean, this, this Oh wait, there's people on one side of the tariff discussion that are really annoying because they view the world as completely static and it never changes. They're like, oh, this price is going to be passed through consumers, you're going to pay more. And it's like, yes, that's true, but the world is dynamic and stuff will change.

• 37:27Andrew Sharp?

  Economies are pretty adaptive also, yeah.

• 37:30Ben Thompson?

  Yeah, well, like where are, is there a distinguished, is there China-specific tariffs or a general tariff? The China-specific tariff, all it's going to do is just drive manufacturing to places like Thailand and Vietnam, which by the way, has been happening to a massive scale ever since sort of the Trump tariff started six, seven years ago.

• 37:48Andrew Sharp?

  Chinese companies themselves are doing that. They're redirecting like solar panels to Vietnam and selling that way.

• 37:55Ben Thompson?

  Well, yeah, so there's, there is an aspect of sort of cheating the system where just moving stuff elsewhere, relabeling it and then importing it. But there's been real genuine shifts in like factories to an extent, which by the way is sort of reestablished China's labor advantage to a certain extent because work is much cheaper than it used to be because a lot of factories have actually left. And work's getting much more expensive in places like Vietnam and Thailand. And I just like, on the ground in Taiwan, I talk to people and there's a lot of this happening for sure. And China's share of imports to the US has gone down quite a bit in sort of the last, last six, seven years, where places like Vietnam and Thailand and, and stuff like that has gone up. So a tariff on sort of one country will impact that one country, but it's not going to change this fundamental dynamic.

• 38:39Andrew Sharp?

  And bring it all on shore, yeah.

• 38:41Ben Thompson?

  A blanket tariff is very different. A blanket tariff does attack the core of the system itself. And it will, if persisted with, fundamentally restructure aspects of the economy. The problem is, this is, this will be very painful. Like, we're talking about 50, or no, we're talking about 70 to 80 years of the way this system has been developed. To undo that will be tremendously painful. It will take years. Is there going to be sort of the political will to make that happen? Eh, not so sure about that, right? So are we just gonna get some of the pain and sort of know the benefit?

• 39:22Andrew Sharp?

  Well, let me drill down. When you say pain, are you envisioning higher prices for, let's say, tech hardware or tech software in turn?

• 39:31Ben Thompson?

  Yeah, those like stuff, stuff will be more expensive and the capability of making this is not in the US and it even with if there was, it's still much more expensive. And so you're like the, again, if you're just putting tariffs on China, it's going to be somewhat blunted for the US consumer because stuff will just move around. If you're doing a blanket tariff on the world, that will actually be more likely to drive more manufacturing in the US, but it will take longer and it's still going to be sort of pretty expensive. And by the way, I'm not sure what the employment benefits are going to be. One reason why this is a moment in time to do this is the increase in automation and the fact it's like we talk about with chips. Chips are just super highly automated, including testing and assembly. And so it's much more viable to make chips in the US now than it was the whole process

• 40:16Ben Thompson?

  of making chips than it was sort of 40, 50 years ago. I mean, even Intel, which still always made chips in the US, they do all their assembly in like Malaysia, right? Because that's like downstream from all this because it didn't make economic sense to sort of, sort of do it here. And so this would take a really long time. At the same time, there is this desire, we need to build stuff. And there is this need for whether it be national security. And there is this idea of software defined sort of manufacturing where, where, you know, if you have a, if you have a company like Waymo that's building this amazing software and capability, they need the cars to do this and, and those cars should be modular. You should assume the software exists.

• 40:59Ben Thompson?

  You should be able to have sleeper cars or two person cars or vans or whatever. And like, like, I feel like there's, there is a new opportunity to make new things.

• 41:06Andrew Sharp?

  Yeah.

• 41:08Ben Thompson?

  That is obviously the Chinese one to seize in many respects. But the chance to build is, look, we'll see how this works out. But if there was ever, if you ever wanted to go for it, maybe you feel inspired right now because of the spirit. Something's gonna happen with tariffs. Like, this is the chance. Like, I don't know if it's going to work. I actually, I'm, I don't know if any of this will work without a war. Right? Like, the war resets every, like, it.

• 41:36Andrew Sharp?

  Well, and that's why I included the question about China and Xi. It's like, is it worth pursuing any of this if not for national security risks? And the national security risks precisely are that we don't have the ability to produce in a number of critical industries that Americans have come to rely on. And if supply chains around the world are cut off, America is going to really, really suffer in the course of any sort of prolonged global conflict. That's why the impulse to bring manufacturing and incentivize manufacturing to come onshore makes sense to me. The idea, and I thought your article was enlightening for me

• 42:21Andrew Sharp?

  because I hadn't fully grasped how automated some of the onshore manufacturing would be. So the idea that we're suddenly gonna be like China was in 2007 and 2008 and, you know, hiring 700,000 factory workers with 30,000 engineers to oversee those factories. Like, that seems like more of a fantasy that's unlikely to actually be a reality at any point over the next 10 or 20 years.

• 42:50Ben Thompson?

  There's a big fly in the ointment here, which is China's much further down the road and sort of automating all this sort of stuff than we are. Because that's part of the learning curve, right? Like, you know, there was this, there's a story about when Elon Musk was building sort of the, I think it was the three, Tesla three, to make it all work, it had to be highly automated. But it was a disaster because they overly automated it at the beginning. And he came back and was like, one of the big lessons learned was, no, we have to start out figuring out how to make the car and then you automate it sort of over time. Can you just jump straight to automation? Not so, not so clear, that's possible. And the other sort of pushback, and I'm pushing back on myself and pushing back on you, is, well, we need to do this for national security reasons.

• 43:36Ben Thompson?

  Or maybe we need to not do it for national security reasons because as long as we are enmeshed, maybe the system still works. The goal of the system was to stop war because companies were economically enmeshed. And that's the biggest reason to think there wouldn't be

• 43:52Andrew Sharp?

  Maybe.

• 43:54Ben Thompson?

  The problem is, this was the argument people made in like 1910.

• 43:58Andrew Sharp?

  Right.

• 43:59Ben Thompson?

  The reason there will not be war is because Europe is too economically enmeshed. And that didn't turn out too well.

• 44:06Andrew Sharp?

  You wrote in your article, Americans typically make the mistake of viewing the United States as the only agent of change in the world. And that would be my response to that particular talking point is, I mean, Xi has been pretty clear about his intentions to eventually take Taiwan. He literally told that to President Biden a year ago. And like, China has been in the midst of an enormous military build out. So that's why I feel crazy when other people say the tariffs are crazy. Like, clearly, this is worth exploring and worth exploring the best ways to bring manufacturing on shore. But speaking of Taiwan, that was another question I had on the list here. Trump has said we should put tariffs on chips from

• 44:50Andrew Sharp?

  Taiwan and that the CHIPS Act was a mistake. He was roundly mocked for that suggestion. But what do you think of it? I mean, is Trump crazy?

• 45:00Ben Thompson?

  Well, there's a broader thing about, you know, complain about Taiwan stealing our chips and, you know, Taiwan acting like the mafia and holding us up. I think the stealing chips thing's not fair. The US voluntarily pushed that out, US companies did. And that's kind of on us. Taiwan using it as a lever to hold us up? Trump's right. I mean, like, you go back to when Taiwan opened up to bring in Texas Instruments back in the day, this was part of their thinking is we need to get plugged into US supply chains so that the US feels compelled to defend us relative to China. You fast forward to today, absolutely,

• 45:42Ben Thompson?

  Taiwan's entire defense strategy is by and large predicated on we have TSMC and the US has to defend us. Like, like, the, I'm sorry, I live in Taiwan. I don't see the commitment and the approach to we're

• 45:57Ben Thompson?

  Investment in our, in our own defense. So there's no internal urgency. Be a porcupine, not that I, not that, not that I perceive. And there's a lot of sense that, you know, um, and so Trump, you know, there's some things Trump says that are really rude and also totally correct. And I think there's an aspect of, yeah, Taiwan sees itself as economically indispensable to the US. And they are correct. And they also see that as a reason the US will defend them. And that is correct. And they probably don't invest enough in, in having a culture and a military and buying the right sort of weapons. And the discipline to defend themselves. And I think that's also correct. And, and that's, this is all a big problem. Right. It's a, it's a big problem for everyone.

• 46:42Ben Thompson?

  And, and the reality is the US does have this dependency on this place that China has its sights on for reasons outside of economics. This is the big orthogonal problem. If China just wanted Taiwan, because they also want chips, there's a deal to be cut. China wants Taiwan independent of chips. That makes it a little more complicated. We're, because we're, we're negotiating on different planes here. And so when it comes to sort of the CHIPS Act, I mean, what Trump, I think, got right about the tariff idea is that taps into demand. You need to change the demand structure. Intel's problem is no one wants to buy chips from them because they can just buy it from TSMC. And, and the, the challenge when you're, when you're, a chip is expensive,

• 47:25Ben Thompson?

  but it's a small portion of the overall cost of an item. It's like, you know, you take like an Nvidia system that goes for hundreds of thousands of dollars or millions of dollars. Like, I think it's like a $3 million for like a whole rack system or something like that. The, the actual like graphic or the card chip to whatever is like $30,000, $35,000. The actual chip in there, yeah, TSMC charges a lot for that, but it's not relatively speaking, you know, it's in the thousands of dollars sort, sort of order or whatever it might be. And you're not going to risk the whole system not working because you're on like an untested new manufacturer process XYZ. When you could just go to TSMC is sitting right there. You're confident they're going to build it correctly and sort of do it.

• 48:07Ben Thompson?

  The right way. And so this is number one, like anyone that wants to go with Intel, they have this calculation in their head, which is even if Intel is cheaper or slightly faster, is that worth risking our entire product to go there? And this applies, you know, it's so, so Trump's right, you have to address demand. The problem is if a TSMC chip was 10% more expensive or 20% more expensive, would that change people's choices? Not sure. I, I, I'm kind of skeptical. I also don't like the Chips Act. I don't like just giving money. What I wanted is guaranteed purchases based on certain, so you will buy chips from Intel if they do XYZ. You will buy chips from TSMC if they do XYZ, but it's in the same broad category

• 48:52Ben Thompson?

  as what Trump is talking about in terms of putting tariffs on it because it's about demand. The key here is demand instead of the Chips Act just gives money to the supply side. And it gives money, you know, and the problem is it has all this strings attached, but the strings aren't relevant to, to like the issue. And so you have the problem, this perverse outcome of the Chips Act, where companies are promised money, but it takes them forever to get it because they have to qualify all these sorts of things that has nothing to do with the actual issue at play. And the actual issue at play is like, can you actually make these and build a market? And you get the money regardless. So I don't know. The Chips Act is, the spirit is right.

• 49:34Ben Thompson?

  You do, to undo 50, 60 years, you do need, I think, some aspect of industrial policy. You do need the government doing things that are uneconomical, relatively speaking, if you want to change structure. I don't think the implementation was the best it could be.

• 49:50Andrew Sharp?

  Was TSMC the beneficiary of Taiwan industrial policies in terms of getting off the ground and becoming this powerhouse?

• 49:58Ben Thompson?

  Yeah. So Taiwan was, uh, the government was an investor in them early on. Philips is also another one. Philips is actually influenced is very underrated. ASML is a spin out from Philips. Uh, Philips was a major investor. And I think licensed the initial technology that TSMC used to them. A very underrated company, actually. Uh, they, they've had their fingers in, in a lot of stuff. But, um, the big thing, the, the Taiwan currency is, uh,

• 50:25Andrew Sharp?

  Interesting.

• 50:26Ben Thompson?

  I don't think it, I don't think it trades at a fair value. Let's put it that way. Uh, and you do have a very weird economy in Taiwan, living there. Anything produced in Taiwan's shockingly cheap. Wages are super low. All imports are massively expensive. That's because the currency is too low. Uh, and that is a huge advantage for TSMC. They get paid in dollars and they pay their employees in NT. And, um, and so, and the, and this is kind of the, this is the, a bit of the Taiwan holdup, which is they're always flirting with being identified as a currency manipulator and at the, when it gets down to it, they get let off the hook, sort of again and again, because of this China sort of aspect, now

• 51:07Ben Thompson?

  because of this chip aspect. Um, and, and yeah, so I think, um, Trump is directionally, I think more right than he got credit for with this overall discussion.

• 51:18Andrew Sharp?

  To the extent that he's saying, look, the market needs to be involved.

• 51:22Ben Thompson?

  No, to the extent he's saying like, like, like Taiwan is, is, is, uh, playing us a little bit like a middle ear. But, but again, but this is, this is the same thing. The same thing with NATO. It's the same thing with a lot of this trade stuff. That's why it's important to go back to the 1940s, the 1950s and say, yes, all that is true, but it all happened for a good reason. It happened and it, and that reason was successful. The goal was to tie the world together and the goal was to, maybe not explicitly, but if you thought through it, that the US manufacturing was going to be sacrificed for the goal of sort of world peace. And that has by and large, that by and large, again, for, for 70, 80 years held up.

• 52:05Andrew Sharp?

  Right. Bretton Woods emerged after World War II or near the end of World War II. And, um, now unfortunately, World War III is not impossible. Uh, so two final questions. We're not going to make it through the 10 questions here, but I did want to read two emails. Liberty, a couple of weeks ago, responded to our Trump and tech episode by saying, I really like the idea of special economic zones in the US where it's much easier to build stuff. I hope you keep talking about this concept and help inject it into the zeitgeist. So in the spirit of a chance to build, that was my favorite part of the Trump and tech episode also. Can you expound on what you'd like to see and why something like a special economic zone would be necessary in the US?

• 52:50Ben Thompson?

  Yeah, I mean, again, I'm pretty far afield of like how this would actually work out. But what I would sort of envision is just sort of areas. And again, I think figure out the balance of federalism and what rights states have versus the federal government is going to be, maybe there's some states can opt into this or whatever it might be. Again, I think Congress probably have to authorize it, but the, the, the, I'm a little skeptical of all the Doge stuff and the reforming of the federal government, all these sorts of things. There's, it's all so complex and, and loss, gazillion losses are going to happen. And yes, there's been these Supreme Court rulings that theoretically make a lot of this regulation not constitutional, but you have to, you have to prosecute it one by one.

• 53:34Ben Thompson?

  And there's a rule of law aspect. There's lots of companies and industries that have built up around this and maybe there will, this can be taken care of. I'm skeptical it can be taken care of quickly and without a lot of pain and the sort of a lot of waste, just waste of effort and energy. I, I, I think we just need to, we need to build our way out. We need to skyrocket. We have these new technologies coming online that we can leverage hopefully to do sort of amazing new things. And you can solve the debt by paying it off and like, you know, trimming what you're spending. But like personally, I give people this advice, like you're not going to save your way to being rich. You're gonna, you're going to be rich by making money, making more money.

• 54:18Andrew Sharp?

  You can, however, you can make twice as much money if you are creative with the way you structure your tax profile. So that's always one other approach.

• 54:29Ben Thompson?

  Well, that speaks to the, that does speak to the regulatory issue. Like that should, there should not be such a burgeoning industry in managing taxes.

• 54:38Ben Thompson?

  Burgeoning, it's already massive, what am I talking about? The, so, wha- what I want is this concept where you could basically have, have areas that you could just cut through all the regulatory red tape. It's just sort of, uh, you know, and ideally, there's a way, again, I don't know how this would work constitutionally or whatever, where you can also preempt all the local regulations. Mm-hmm. And it's like, yeah, and there's a very streamlined, straightforward, you just have to, you know, do these couple of things and then you can sort of build whatever you want. And I, ideally, there's a federalist, federalism positive bit this, where these zones do so well and grow so much and are, become so rich, then other areas that didn't opt into it

• 55:20Ben Thompson?

  or weren't a part of it realize, holy cow, we're sort of missing out. Yeah. You know, I think you do have federalist aspects that still exist in America. We talked about in the context of self-driving cars, it's great that different localities have different laws and you can sort of see what works and what doesn't. This is a huge strength of America, but the federalist aspect has been diminished because of the massive growth in the federal government and federal regulations. So at a minimum, if we can have a place where there's no federal regulations, the federal regulations are dramatically diminished or hugely streamlined, so that, oh wait, that's not the barrier, the only barrier is local stuff. And then you can have actual competition between states to see who actually can build

• 56:02Ben Thompson?

  mass, these, these high-growth sort of areas. But you have to get the, that, that's one of the challenge, the issues with just federal regulation in general is, is it levels the playing field. But leveling the playing field can be really destructive in terms of experimentation and finding out what's possible and sort of new sorts of things. And so, this is a similar thing, like, the spirit of Doge is something I'm absolutely in favor with. I'm not sure. The parts of it that are focused on reducing regulation, also great.

• 56:35Andrew Sharp?

  Yeah.

• 56:36Ben Thompson?

  But I really would like to see this ability to have distinct areas with different regulatory regimes. Both because I think that's going to be the fastest, most efficient way to get growth. Because it'll be easier to do, but also to have this competitive aspect where you see, holy cow, that's doing really well.

• 56:55Andrew Sharp?

  Mm hmm.

• 56:56Ben Thompson?

  We're not doing really well. We need to match that. I think that is something that that's an additional aspect to this that I think would be very beneficial.

• 57:04Andrew Sharp?

  Yes. Well, two thoughts. One, I have no idea. My working assumption is that this Doge aspect of the second Trump administration seems to be, or could be, a superficial sort of title for Musk and Vivek. And I don't know exactly how real any of it's going to be and what a difference any of it will make.

• 57:26Ben Thompson?

  Uh, right.

• 57:27Andrew Sharp?

  But also.

• 57:27Ben Thompson?

  I'm happy with Elon, Elon building rockets and, uh, and, and building electric cars.

• 57:31Andrew Sharp?

  He's doing enough. Absolutely. I would say he's doing enough. Um, I, it occurs to me, though, hearing you lay that out, and particularly the state to state differences. Texas is a good example of a, a special-ish economic zone relative to a state like California.

• 57:49Ben Thompson?

  Yeah. No, I mean, the, the killer example is, do you know where the most solar is, the most renewable energy?

• 57:55Andrew Sharp?

  I was gonna bring up the solar. Yeah, exactly.

• 57:57Ben Thompson?

  Yeah.

• 57:57Andrew Sharp?

  It's getting built out in a, in a state that isn't known for solar energy, but it, it has fewer regulations, um, and that sometimes is enough.

• 58:07Ben Thompson?

  Yep. No, a, a, absolutely. It has its own power grid, which has, again, has pluses and minuses, but it has like, you can do this crazy arbitration stuff with solar and batteries and that sort of thing. And it, it's, stuff happens. Like, like, like, a bias, we need a bias towards stuff happening. And, you know, the, this is, I think, a, a good point that, that Bern Hobart made in our interview, like. The weakness of the sort of technocratic structural approach, which again, Strategi slots right in with, right? I'm all about sort of looking at the structural things and how stuff flows and all that. There is a tangibility to this is what we're gonna do and we're gonna

• 58:48Ben Thompson?

  go do it. And, and you can see the thing that was done. And the, to the extent there's a spirit of doing stuff, that is, again, that's what I'm optimistic about more than anything. I mentioned this in the interview with Burn, but that whole European Innovation Report, the Draghi Report, Draghi Report, was kind of depressing because on one hand, it identified a lot of issues and it was good to identify those issues. But immediately, the what do we do about it? We need industrial policy. We need subsidies. It's like the government has to solve this issue. And this is maybe what this is distinguishing cultural trait

• 59:31Ben Thompson?

  that drives maybe our European listeners to the wall, that makes me a true blue, red-blooded American, is no, I need government out of the way. I need people inspired to do stuff. And, and there's a, this is the part that hopefully is being reignited and that we need to not lose, is the feeling that you can just go do stuff. This is the beauty of the internet. And the worry with the rise of big tech companies and the controlling of information and distribution is do we still have that you could just go do stuff, right? In the 2023, I could just go start a newsletter. I could just do it. And no

• 1:00:15Ben Thompson?

  one could stop me. And today, when you, it's hard to share links, can you, can anyone go do that? That's kind of like, it's kind of a bummer, right? You can, but it's just way, much more difficult. And we need more areas where you could just go do stuff. And

• 1:00:31Ben Thompson?

  Ideally, those areas are in the physical world because we've just fallen so far behind. We're so deficient and it's just really not a good place to be.

• 1:00:39Andrew Sharp?

  Right.

• 1:00:40Ben Thompson?

  And I say this as someone whose life is totally virtual and online.

• 1:00:44Ben Thompson?

  This is the critique of Andreessen. It's like, yeah, Mark, how much money are you investing into hardware companies? Huh? It's like, uh, it's a, yeah, fair point.

• 1:00:53Andrew Sharp?

  Well, and you asked, you asked ChatGPT to generate an image based on your life and what it knows about you. And it generated, I don't even think it generated a human. It's like a really great look at, uh, what it.

• 1:01:05Ben Thompson?

  It was like this ethereal being with like, yeah, with like, like equations. Yeah. I mean, it does.

• 1:01:10Andrew Sharp?

  People can go to your Twitter. I saw that you tweeted that out. So check it out if you're curious.

• 1:01:15Ben Thompson?

  Well, I mean, and also it's like, it's like a soulless person with like a computer in some, could be any city in the world.

• 1:01:22Andrew Sharp?

  Some generic apartment building.

• 1:01:24Ben Thompson?

  Anytime I talk about like globalization or the internet, like I'm just the biggest hypocrite ever because I am like peak 2024 globalist, virtual. We just talked about, I walked off a plane 30 minutes ago. I'm recording with you halfway around the world.

• 1:01:43Andrew Sharp?

  I know. You're on theme for today's podcast. I love it. Transcontinental bend.

• 1:01:48Ben Thompson?

  Yeah, but, but, uh, I think it's more trans, transcontinental is like over the continent, right? More transpacific or trans, transocean.

• 1:01:55Andrew Sharp?

  I don't know. I just know that cars have 30,000 components and not 150 components. So I've got that going for me.

• 1:02:05Ben Thompson?

  Well, one thing about the car thing is like Musk builds har, has built hardware companies, which is, you know, no one's done. Like it's just, and they built them in the U.S. Tesla's super integrated. Like, like, uh, one reason they got to work is they, they just did a bunch of the components themselves. They go to the supply chain. This is what it is. It's not cheap enough. It's not quote, whatever. We'll just do it ourselves. And that's by the way, they basically created the category. And we've talked about this. When you're early into a category, you do the, it's much more highly integrated. And that's definitely the case with Tesla. But down the road, things become modular and specialized. You're doing sort of XYZ. That's the natural role from the world as organized today is China.

• 1:02:49Ben Thompson?

  If someone wants to build something, to me, it's the modular manufacturing company. What is the, and this is where I brought Waymo before. Tesla's going now to this sort of this world of autonomy. And in that vision, they're doing it all. And it makes sense for them that that is sort of the aspiration. But there's another vision where you have Uber doing the hailing and Waymo providing the software and other companies doing the sort of depots. And someone has to make the cars and they should be highly modular because it's all sort of software defined. And that modularity should be extendable to sort of lots of things. Like who's going to make the modular manufacturing company? The modular manufacturing today is basically China.

• 1:03:32Andrew Sharp?

  Right.

• 1:03:32Ben Thompson?

  Can someone build that in America? Again, I don't know. I don't know. But if you're ever going to do it, I guess now's the time to try.

• 1:03:41Andrew Sharp?

  Well, and if we're talking about the future of EVs and China, as far as all that's concerned, the Biden administration, I should note, has already imposed a hundred percent tariff on EVs made in China. And the Commerce Department has proposed a rule to ban all Chinese software in automobiles. And that ban would take effect in, I believe, 2027. All of which is a nice segue to the final note here. Anonymous writes, hey, guys, I have on good authority that Google and Waymo had a deal with the Biden Harris administration, where they would buy a ton of China EVs without tariffs after Harris was elected. It's hard to say how invested Google was with Harris, but Trump's election is a big blow for Waymo.

• 1:04:26Andrew Sharp?

  So I include this at the end without any comment on the veracity of the claim there, except to say that the Biden administration has included carve outs in the past for various other green technologies, solar energy components being one example. But Waymo came up in your article on Monday. So do you have any quick thoughts on the way out on Waymo? And how that company fits into the future here?

• 1:04:49Ben Thompson?

  I mean, the tariffs on Chinese cars was a massive load of Waymo. Like that was their, you know, and again, it's the, it's the natural, to my point, the natural fit for what they're doing. Their Gen six car was was Zeeker made by Gili. And it was a transport, it was a car built for transportation. It wasn't built to be a car. Now they're pivoting to, you know, working with Hyundai. And it's again, another adaptation of a passenger car. It's just, it's just not as ideal. And to ramp up into this dedicated cars with hardware built in, which would dramatically reduce their costs. But they're not at scale yet. The scaling bit's going to be difficult.

• 1:05:29Ben Thompson?

  If they could ride along on the Chinese EV train and they could already be tapped into an ecosystem that's at scale and is building sorts of things, that would help them a lot. And the, and they're not going to be allowed to do that. And I, I, I don't know about this, this report. It certainly, I think, does make some sense. But yeah, the, for just from a analyzing markets perspective, the fact that they're losing access to Chinese EV manufacturers is a blow to Waymo and their ability to scale. You know, it's just going to take longer.

• 1:06:04Andrew Sharp?

  It exemplifies the point that you made in the article where there will be some pain for American companies. But there are also possibilities for American tech companies and the American economy writ broadly.

• 1:06:17Ben Thompson?

  Part of the problem though, and this is the Biden hair sort of thing, like why, why did they eliminate Musk in the first place? It was basically because they just to, as a sop to autoworker unions, like Tesla's not unionized. And that really bothers the US automaker unions. And like, I mean, the, the US automakers, are they gonna, they're stuck in a certain paradigm, which is they're integrated sort of the, the, the brand and the actual assembly. You know, you contrast that to again, like the Xiaomi example where that's been separated. Xiaomi integrates the technology and the brand. And then they get the sort of the, the car from someone else.

• 1:06:59Ben Thompson?

  These other companies, they build the car and have the brand and then they just sort of like slap some software on. It's just a. These are computers on wheels. They're different paradigms.

• 1:07:10Andrew Sharp?

  Yep.

• 1:07:10Ben Thompson?

  And is it wise to be beholden to them for political reasons? But is it wise to be beholden to them for manufacturing reasons? Like, are these even? Can we even actually deliver a Waymo future without a fresh start? Like, can any existing automaker actually fill that void? Is is an open question.

• 1:07:29Andrew Sharp?

  Well, in a Waymo future that is partly reliant on a hostile foreign power is not viable, frankly.

• 1:07:39Ben Thompson?

  Yeah, having a bunch of Chinese, having a bunch of Chinese-made cars with cameras and stuff on American roads.

• 1:07:45Andrew Sharp?

  The US government has already spoken on that issue. So, bad news for Waymo, but good news for the audience. We are coming back next week. A lot of really fun mailbag questions have come in for the Thanksgiving mailbag.

• 1:08:00Ben Thompson?

  Yes, Thanksgiving, not very tech-heavy.

• 1:08:03Andrew Sharp?

  Yeah, it's not going to be purely non-tech. We've gotten a lot of non-tech questions, so we're not going to be able to hit all of the non-tech questions, but it'll be about half and half and it'll be a good time. I'm already excited for it. But Ben, for now, you have earned a nap. You made it through an hour plus after a 13-hour flight. You didn't spill the coffee. It was a good omen and enjoy yourself this weekend and we will come back next week.

• 1:08:30Ben Thompson?

  Sounds good. Talk to you later.