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Whiplash
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Andrew Keen
Everybody, it is late in the afternoon, West Coast time on Friday, April the 11th. Probably won't run this show or at least put it out on RSS and our Substacks until tomorrow, Saturday, April the 12th. It was... It is a That Was The Week show, a summary of tech news and economics news. We missed it last week. I was away in Europe. So we haven't done a show, Keith, for a couple of weeks.
Wow. Well, we've got an AI replica. You're putting me out of work, Keith. You're making me redundant. But I was going to say, I've been away a couple of weeks. Not much has happened in the last couple of weeks, has it?
Well, Andrew, as you well know, Lots has happened.
Words and timings
Well,Andrew,asyouwellknow,Lotshashappened.
Andrew Keen
Yeah, and your editorial this week is entitled Whiplash. The world isn't ending, but the West is. So has the West ended in the last couple of weeks since I spent a nice week in south of France and Barcelona, Keith?
Well... We're going to have to put on our professorial hats to have this conversation. If we can do that, then absolutely, yes, the West has ended. If by the West we're referring to the post-Second World War settlement, political and economic structures that...
Blah, blah, blah. Yeah, well, certainly something's... changed. In your editorial, you suggest that there is a kind of end of the West, or at least Western economic domination. And you use this really, really powerful image from 2000 and 2024, these two images. Not everyone, of course, will be watching this. Some will be listening. So describe these images and why they're so important, this, the image of the world from 2000 and then from 2024, Keith.
Yeah, so this is from a very good website called Visual Capitalist. And it depicts the impact of US and Chinese share of world trade between those two years, 2000 and 2024. And it does it by sizing some bubbles with flags inside them and coloring the world in the color of the flag that represents the strongest trading partner for the region. And in the first, the world is mostly blue. Apart from China and parts of Africa, the US dominates as the trading partner everywhere.
Yeah, there's a little bit of, I don't quite know why, the Gulf. But most of the world is blue. It's astonishingly blue. But by 2024, it's turned almost universally red, with the exception of Western Europe and North America.
So China's exports and imports to the world now dwarf the U.S.'s. And so it's a picture of what on this show we always call relative U.S. decline because, of course, U.S. GDP has kept rising. But it's a shrinking portion of world GDP.
So yes, as you say, the next phase of the global order will be made up of the same players but playing different roles. China will be more central, Asia in general, the West less so. Although you do have an interesting other piece from the New York Times about Globalization is collapsing, brace yourselves, by historian Tara Zara, who talks about a similar thing happening after World War I. So this has happened before, and the West has survived. You know,
it's super interesting that, and the penny only dropped for me as I was doing this, but why was there globalization before World War I? Well, actually, the word globalization prior to World War I really meant the British Empire. it was another word for the global footprint of the British Empire. Of course, there was also smaller empires out of France and even Germany and Belgium and so on. But the British Empire was the only truly global thing that you could talk about globalization through. And in the period since World War II, globalization really is another word for American power. So the idea, the word kind of, implies that everybody's playing but actually globalization is the word used when there's a single dominant player in the whole globe. So the truth is there isn't really ever been true globalization. It's just a word for the dominance of one player.
So it's a euphemism for American domination. So I don't want to turn this into another debate about Trump because that's all we ever talk about. It seems not you and I, but most people. And of course, now I'm going to ask the Trump question. In your view, do these terrorists make any economic sense?
I actually think they do, but I don't support them, let's say that. But if you're asking, do they make sense? If your only job in life is to slow down the relative decline of the United States vis-a-vis the rest of the world measured by trade, I actually think it makes a lot of sense. What doesn't make sense is how he's doing it. But the idea of... getting other countries to remove tariffs, and if they don't, you'll place tariffs, is not stupid.
Yeah, you're always a little more tolerant of Trump than some other people, which I don't necessarily mean in a critical way. One of the pieces you have is from Tom Friedman of the New York Times, who's often wrong. He argues that
we misunderstand China. Why is perhaps rather than the real story here in America, why is the real story China, according to people like Friedman? You've always been a China optimist, Keith.
Well, I've spent a lot of time in China and I've done business deals with the government in China. So I would like to think that my My experience allows me to have a point of view based on real engagement, although I will say, since the Xi government, I have not been in China, so my view's probably a little bit out of date. I think Friedman was triggered by a visit, a little bit like me. He went to China, and most of this article is him describing what he saw, which blew his mind in terms of the rate and scale of modernization and the use of wealth to, if you like, build up Chinese infrastructure to a level that's beyond American. And he came back and said, okay, these people are not the people I thought I would see when I went to China. I didn't see Communist Party members with guns on every corner policing the population. What I saw was wealth and abundance. And then he takes it from there.
So I want to turn this into a broad conversation, a referendum on Trump. This is supposed to be a show on tech. In your view, there's a lot of stuff in this week's newsletter, a lot of interesting pieces. One in particular... from Spyglass about Trump throwing Apple under the tariff bus. Tech, big tech in particular, has had a brutal couple of weeks, almost uniquely brutal, it would seem, certainly in the last few years. Is Trump gunning for big tech here, or are they just the unintended victims of this drive-by shooting?
Unintended victims, for sure. Apple is a great example. Apple, quite rightly, took advantage of world markets to create supply chains for its iPhones and other products that included manufacturing in Asia, not just China, actually, but India, Vietnam, other places, and assembling some stuff in the US, but mostly not. And by doing that, is able to deliver an iPhone to us at the somewhat, a cheap price, as it now looks, of about $1,000. If they didn't do that and they repatriated everything, you're looking at $3,000 to $5,000 as the price of an iPhone. So globalization by companies is productivity. It's another word for productivity. And when Trump puts duties and tariffs on China, They include Apple because a lot of its products come out of there. If you ever buy an iPhone, it's often shipped by a DHL or whoever from Shanghai. So the true global market is big tech's canvas. And if a nation state, any nation state starts acting like a nation state against global markets, domestic companies are going to suffer as well.
Another interesting piece about a US-made iPhone is pure fantasy from Nick here from Pixel Envy. Is that true? Is it conceivable that Apple will just have to retreat and set up soup-to-nuts factories in Oklahoma or California where the iPhone is manufactured?
Well, I think it's myth because the preconditions for doing that would be that you can manufacture everything in an iPhone here. Think about the three nanometer and now two nanometer semiconductors that TSMC build for Apple. There's no possible scientific way to build them in the United States. They're built in Taiwan mostly. So it is a fantasy. And if it was to be attempted, it would take hundreds of billions of dollars and probably one to two decades to get to the starting point.
That's another interesting piece. I may have sent it or may not. I'm not sure you include it in this week's newsletter, but I think it's very relevant. From Alex Kantrowitz, his Substack newsletter is always excellent. He writes about big tech's three underappreciated risks given our post-Liberation Day world. What are, in your view, the risks to big tech here? Because, I mean, apart from Apple, Apple's a hardware firm, and there was an interesting piece in the New York Times suggesting that Apple, in some sense, has had it coming. It's not a company that has appeared strong in the last few months. They haven't had a hit product for several years now. But how is this going to impact on Companies like Google and Facebook and the other big tech companies who mostly are in the services business actually creating physical products and not making iPhones. I mean, Google does a little bit, but it's not a particularly important product in their lineup.
Yeah. Well, obviously the hardware guys are most affected. Intel. being one of them, Nvidia is very affected, Apple, Samsung will be very affected. The software guys may think they're invulnerable, but if you look at how the money flows with let's say Google search and advertising, a lot of it is domestically generated and goes to Ireland where it's placed for tax reasons. Ireland has the most rapid rising GDP in the whole world because of that. And of course, none of that goes to the Irish people. It's all sitting in bank accounts for big tech. It isn't inconceivable that there could be tariffs on services
Right, and as we speak, Ursula von der Leyen, the European Commission, told the FT that she wants a balanced deal in terms of the new tariff arrangement with Trump's America. But she warns, and I mean, this is not some spontaneous remark, it must have been carefully thought through, that they could hit US services in retaliation. So it would be big tech companies like Facebook that would suffer from this.
Yeah, look, everyone suffers if there's friction in economics. Economics, another way of thinking of economics is it's the pie of all the wealth in the world. And that pie is made up of lots of cross-border flows. And if those cross-border flows become full of friction due to tariffs, and not to mention economic consequences that means that prices go up and so on, it generally is bad for everyone. And so the argument I'm making in the editorial is Trump's prepared, Trump knows this, he's not, much as it appears to be different, he's not an idiot. He knows that what's going to happen here is that the pie will shrink massively, by the way, hence the recession word that's been bandied a lot around this week. And however, the American portion of it might grow because his primary goal is to slow down America's decline. It's an act of a weak nation to do this. And the goal of the weak nation is to protect itself from further decline. And in that sense, it's it's both rational and tragic at the same time.
But human history is rational and tragic, perhaps. It's a reflection of that. Kantrowitz talks in his piece about a big tech tariff, which we touched on. He also talks about one of the other consequences of a tariff world is a retreat from US AI models. Any truth in that? How is this going to affect this growing AI race between China and the United States?
Well, actually, the one bright spot in the US, you know, big picture is AI. And I see absolutely no prospect of American AI slowing down in the rest of the world, none at all, because it's It's good and it can be delivered cheaply in many, many ways. We talked about it being like water seeping into places that nothing else can. So I see no prospect of slowing down. I do think there are Chinese competitors. There really isn't a good European competitor or anywhere else for that matter. So I think it's an American game to lose, and it's going to be very valuable, possibly worth trillions of dollars.
Yeah. By the way, that was my last week's headline when you weren't here, was I sneaked in the birth of the first multi-trillion dollar AI company, OpenAI, who raised $40 billion at a valuation of $300.
Pure AI company. I mean, obviously, Apple certainly isn't AI. I mean, Google is now increasingly an AI company. That's a multi-trillion dollar company. And the third area, which I was interested in what Kantrowitz observed, was weakening global intellectual property protection. Is this trade war between the US and China primarily, is it going to encourage piracy? Is it going to mean that intellectual property around the world will be somehow weakened?
Do you think, though, in our age where everything is exaggerated, where we seem to be hysterical about everything on a daily or hourly basis, will historians look back at these two weeks in April and think this was as significant as COVID in the first week of COVID or the Great Recession of 2009?
I think it's more significant than that. I think the comparison should be the Bretton Woods Agreement that replaced the pound as the currency of world trade and the end of Bretton Woods that got rid of the gold as backing for the dollar. I think this is the week where around the world, treasuries started selling dollars because they no longer trust it. And America as the unambiguous world leader on whose shoulders economics and politics and military alliances sit is really no more. The UN and the World Bank and the IMF that were all formed under American leadership after World War II are no longer American institutions even at all. So we've now got a multi-polar or another better word I think is a fragmented world with different power groups seeking to look after themselves.
Yeah, Keith, there was an interesting piece by Gillian Ted in the FT on this. She's always been a very intelligent commentator entitled Trump Tests the American Attitude to Pain. We're all experiencing pain in the last couple of weeks. We're all significantly poorer. What's your personal response to this? You must have lost a lot of money in the last couple of weeks.
Good point. Let me just check. I haven't been looking. I have lost... several million dollars no i'm i'm actually up today i i yeah but not today but that i've lost about 10 of my portfolio which in in the big picture if that's
what's the atmosphere there in palo alto with all your your your wealthy vc friends are they all experiencing the pain i mean i think more of referring to the kind of pain that will be a consequence of the inflation and scarcities of this tariff age. But do you think that the wealthy elites of the coast, California and New York, are they actually caring about this? My own personal feeling is I would actually sacrifice 15 or 20% of my wealth to see Trump humiliated, but maybe that's my own peculiar attitude to things.
if American strength vis-a-vis the rest of the world improves and the long-term prospect is better for you. Because that's how it's seen in the Valley.
The Valley has a Pax Americana right now, which is almost every player has become pro-American with a capital A and sees... the role of America in the world economy as a key measure of success. I don't. I don't. I see the GDP of the world as the main measure of success. And any given nation goes up or down. I wouldn't really analyze the whole world according to that. It would be global GDP. And I think global GDP is going to shrink because of what Trump is doing. So that's bad. And I blame Trump for it. But I also think he's acting rationally from the point of view of a single nation state.
Yeah, I think he's confused himself with America. And I think one of the problems is that because of his own sort of, I don't know what you would call it, a state of narcissism, he somehow transferred his own personal narcissism to the United States. So United States can never do anything wrong.
Earlier this year, we did a number of shows about the shift in Silicon Valley from Biden to Trump, Marc Andreessen, Musk, of course, Sachs, and all the rest of the... the Trumposphere that went over to the Republicans in the election. Suddenly guys like Andreessen have gone quiet. Some of the other more outspoken people, wealthy people in tech and business have been critical of terrorists. What's your sense of what people like Andreessen are thinking right now. I mean, he must have lost significant, not that these people even care about the money. I mean, even Musk himself has been very, very critical of this tariff policy and particularly of Navarro. Yeah, he called Navarro thick as a brick or something, wasn't it? And then he apologized to bricks after.
I think he's pro-American dynamism, which means, yes, he's almost certainly pro-tariff. And, you know, that is becoming a consensus that America is being screwed. which is only true if you ignore the last 80 years. For the last 80 years, America has been a supporter of free trade. Why? Because it was selling mostly to the rest of the world.
But from Andreessen's point of view, given that he's a tech investor, I mean, maybe American car companies or manufacturers are being screwed, but not American tech companies.
Well, there's a pretty strong argument that American tech comes in being screwed in Europe by regulation mainly and fines. And I think Andreessen definitely believes that. I think I agree with him as well. But I think if you ask who is against Trump, it really isn't the ideologues of big tech. Who's against Trump is the middle class leader you know, teachers, doctors, it's the, it's the college educated middle class who like to travel and, you know, benefit from GDP growth. I think the working class are with him. And I think the Pax Americana Silicon Valley elite are with him. So the people who are not with him are the traditional college educated middle class, especially between 30 years old and probably 50 years old.
And what about the, not necessarily the working place, the wrong way to describe them, but the Silicon Valley workers, the programmers, the engineers, what's your sense of how they're responding to this?
Mostly apolitical and mostly focused on AI than Trump, I would say. I'd say the discussion about AI in the Valley For every Trump conversation, there's 20 AI conversations.
Well, speaking of AI conversations, you were kind enough to make my interview with Keech Hagee of the Wall Street Journal on Sam Altman's superpower. Hagee's new book, The Optimist, Sam Altman, Open AI and the Race to Invent the Future, is out in May, but she's been making headlines. She had a couple of pieces in the Wall Street Journal. I'm not sure if you had the opportunity to look at this, but for her... Altman's superpower, his ability to sell. He's a salesman, which doesn't make him much different from most of the other legendary figures in Silicon Valley. Is that fake?
I wonder if, given Musk's criticism now of Navarro, whether the Musk-Altman disagreement will be healed. Keith Hagee is very, very good on that division, by the way, for people who are interested in why Musk and Altman loathe Tharja so much, particularly Musk. It's worth looking at and reading her book and her pieces.
Nice. So what do you think? I think Altman, by the way, countersued Trump today. Sorry, Musk today. So I think the chances of them making peace are getting more and more remote.
Yeah, that's not going to happen. And I mean, it's not just a personal vendetta. I mean, the two companies are... xai given what happened i mean all the other stuff that we've talked about over the last few weeks what does this mean in terms of xai keith does musk have insights to trigger what he did xai um launched and its acquisition of course of x now x is being aggressively uh sued or regulated by the Europeans in the last few days. So, you know, he's become such a controversial figure, Mark.
Yeah, he then Grok or XAI launched an API this week, which means now that you can use them as easily as you can use OpenAI if you're a developer. OpenAI launched, um, giving the chatbot a memory of all the conversations it ever had with you. So now you can assume it has context for everything you've ever said to it. OpenAI is, again, very, very far ahead of everyone else.
You've always been very bullish on OpenAI. Meanwhile...
Words and timings
You'vealwaysbeenverybullishonOpenAI.Meanwhile...
Andrew Keen
Your startup of the week is the defense tech startup, ARX Robotics. which has raised some money. Is this new tariff world, this tariff, Trump's aggressive tariff policy, is this going to help these defense companies? I mean, as we have more and more militarization, more threats of not just economic war, but actually real war, is it coincidental that the defense startup sector is so strong?
Well, this is notable because it's a German company at the beginning of a period of German rearmament. German rearmament is one of those scary phrases you really don't want to say out loud, but that's what's happening. And this company is selling to European, mainly armies, including the Ukrainian. And this is an AI robot that plays the role of a land-based drone. which again is another scary idea, right? And it's being built in the UK. So there is a lot in this startup that typifies what's new about the world order as we know it today, where Europe is gonna have to start building its own weapons.
Yeah, was it? Lenin, you're the Lenin expert, but Lenin famously said, sometimes things don't change in world history for years or decades, and then sometimes you have a decade of change in a week or two. It would seem as if these last couple of weeks have been, in that sense, earth-shattering. Maybe I should go away to Europe more often, or maybe if we want to keep the world we have, I should stay at home. How was Europe, by the way? It was very European. Northern Spain and southern France, nothing changes there. Certainly no big tech. It's going to be interesting to see how this plays out. Keith, we will cover it as it unfolds. Finally, your post of the week. It's just two images in green and blue of a woman really with that.
If you show the animated version, she's going left and then right as it turns green and then red and then green again. And it's meant to illustrate the whiplash title of this week's news.
But if I do it enough times, you can see the green and the red. Exactly. So finally, Keith, you're an investor. You have an investment startup. What advice would you give people? Should they be buying gold? Should they be selling? Should they be ignoring this news?
So, you know, most big tech is resiliently global. And no matter what nation states do, it's going to keep growing. Are they the most vulnerable or the most secure here? I think they're the most secure because they won't shrink down to their domestic market. But in a world of tariffs, most things will. So China's domestic market is the biggest in the world. So it's the least hit if you're mainly selling domestically. America is quite big and is hit relatively less as well if it's mainly selling domestically. But most countries are hit big time if they're mainly selling to their home consumers. There are many, many companies that are inherently global who will not be shrunk down.
Yeah, we will see. I mean, I brought this up before. Your startup of the week is ARX Robotics, a German defense company. I mean, if... Von der Leyen and the other Europeans really do aggressively go after big tech at some point. And this is a final comment, Keith. It's an ongoing conversation with you and I. But at some point, the Europeans have the resources to develop their own AI companies, their own search engines, their own e-commerce platforms. In 10, 15 years, there's no reason why the Europeans can't have their own tech sectors. It may not be as good as Google or OpenAI, but it will be good enough for Europe.
I mean, there was an interesting piece in the FT this week about the one European car company that's not affected by this is the French company Citroen. Their cars are perfectly good. They just have never tried to import to the United States, so they're not affected by this. There's no reason why the Europeans couldn't develop an equivalent of Citroen for Big Tech.
Well, we shall see. I think Lenin was right, certainly in terms of this week, Keith. This was the last couple of weeks there, weeks where world history has been dramatically changed. Nothing will ever appear the same, but we will be back in a week. I'm not going back to Europe, so hopefully next week things will be less dramatic. Have a great week, and we will talk again in a week's time. Keep well, Keith. Don't lose too much money.