Geopolitical Analyst Reveals China’s Rise in Tech Innovation | Ansgar Baums
China has a very dynamic, very anarchic, almost, ..., innovation tech system where lots of small players, lots of, you know, unknown players rise quickly because they have great solutions. Think we, we gave China an incentive to become smarter. .... And they actually used it very productively. And that's a, that's an irony. Today's guest in the Guten Tag podcast is Ansgar Baums, a leading expert in geopolitical risk management and technology. And co-author of Tech Cold War, a book Exploring the Global Battle for Technological Dominance.
What do you think we often misunderstand about China's technological advancement? I think we just gave China what it lacked before, which is a necessity to actually. Work in a constrained environment and get better with fewer resources. What is the tech Cold War? What is different than the previous Cold War that we had? We thought digital technologies are global by nature. It's their nature. They want to be global.
They cannot be constrained by states or by nations borders. Um, they want to be global. This is what technology wants. If we are that powerful and that great.
Why is life so miserable right now for many people in the us? That's the big contradiction. What is your biggest prediction for the next years? One prediction I'd make is that. We want thank one of our sponsors for supporting this podcast. Wundertax is a platform that makes your tax declaration in Germany easy. Try it out for free and only submit.
If you're fully satisfied, visit gutentag.wundertax.de and give it a try. Now, without further ado, let's start with the conversation. Ansgar Baums, welcome to the show. Thank you very much for the invite.
Thanks for being here. I know now that you had a very nice Winter break. Yeah.
Awesome. I went to Oman, ..., one of my favorite countries, so highly recommended. One of the best options you have in winter to get away from the snow and the cold. Cool. Ansgar, in the.
Tech Cold War you talk about how countries compete over technology recently the Chinese company DeepSeek created a powerful AI. That's cheaper, faster, more efficient, better results, which is better than some of the U. S. big A. I. companies such as like OpenAI. What do you think we often misunderstand about China's technological advancement? So first, I think lots of open questions to write and AI is moving very, very quickly. So any, any benchmark, any results are very like preliminary and surely there will be overtaken by other solutions. But it surely the deepseek case clearly showed that China is very competitive in that space.
And this, despite all the efforts that went into trying to control, limit the access of Chinese companies to high end semiconductor chips over the last year, so the Biden administration spent a lot of time and money in trying to restrict this access, like the controls on NVIDIA chips, et cetera, pp, um, and still China is performing very well. And I think that came as a surprise to many. Because I think we tend to underestimate the dynamics in China with regard to tech innovation.
So there's this kind of caricature of China that many have in their heads when they talk about China and tech, which is this kind of idea of, you know, in China, ..., President Xi controls everything and nothing happens without the CCP, and it's basically all state directed and state owned enterprise, SOEs are the main players, and it's all very, like, control command economics happening in China. I think the reality is more nuanced.
And China has a very dynamic, very anarchic, almost, ..., innovation tech system, where lots of small players, lots of, you know, unknown players rise quickly because they have great solutions. So it's in the end a very vibrant ecosystem, and I think we tend to underestimate it. And for me, particularly interesting is the effects of controls like on NVIDIA chips on the innovation ecosystem. So my, my key message is innovation is basically response to a shortage to a need to necessity.
And in the end, we created an artificial. Necessity for China to become more efficient in a I simply because they like access to the most powerful chips, right? So what do you do? You need to get smart work with the limits set to you with regard to resources. And that's the main driver behind innovation, actually, right? The limitations, the boundaries, exactly. Boundaries are important for innovation. If you have limitless resources. Yeah you know that's easy if you face these limits you really get smart and work harder and i think we just gave china what it lacked before which is a necessity to actually work in a constrained environment and get better with fewer resources and if you look where.
AI was going prior to deep seek. We had this kind of almost like kids playing with cards on who has, you know, which car has the most horsepower's kind of game. Oh, I invested that billion in AI data centers and I invested even more. It was all about throwing more resources at at the system without really, getting smart about how to do more with less. And in that regard, I think we gave China an incentive to become smarter and they actually used it very proactively and that's a that's an irony My theory was that because in the spectrum of. Tech investment and tech innovation united states or the us or i mean all the western world is always playing the vc game venture capital game so you put more money so you can add so you can create the next unicorns and you can sell them.
And then you make your profits. So when they, these companies were making big investments in AI, they were, the companies, they don't use the money for optimizing that you use it for to spend. I mean, when I had been working in startups here in Berlin and we had the 2013, 2014, the big, how's it called a big, ..., golden era of VC money, you
would have like crazy, Thursday parties, summer parties, free pizza every, every day, yoga lessons and everything, and never thinking about optimizing, it's about just like showing investors that you're using the money so you can inflate the value more and more. I don't know if that's what happened with, US AI companies. Inflate your value, spend as much as you can, the more data warehouse you build, the more valuable you become. Yeah, I think there's a, there's a truth to it.
I mean, I don't mind pizza parties and yoga sessions, so it sounds awesome. But, ..., um, yeah, I think the, the problem is when you, when you benchmark innovation, ..., with inputs, right? So the more money you spend, the better you are. Yeah, that's kind of crazy.
And I think we, we had that fallacy. ..., in AI for some time, right, who spent more was the cooler company, um, without really thinking about the how else to benchmark. And I think we, yeah, everybody, I think, learned a lesson, um, and I hope that sharpens the minds on focusing on the stuff that's really important, which is finding use cases that, ..., really sell and appeal to
customers and solve their problems. So I think that has been overdue, um, but it's kind of interesting how easy we fall for that input benchmark fallacy still. The VC driven innovation ecosystem has been very successful, right? So, ..., but it has flaws. And I think this input benchmark is one of them.
Do you think that, China made that move strategically after President Trump together with other big tech companies prepared this fund? Big fund of I think was like how much was it like five hundred billion dollars for yeah yeah yeah do you think that was intentionally release after that was announced I guess so there was some I mean timing was very conspicuous right so it was right after a week after a couple of days after stargate was announced um but nevertheless I mean on the other side I I wouldn't bet that, you know, everything in China happens according to a master plan, right? Hey, li Fonda, sorry to interrupt this amazing conversation, but I need a little bit of help. If you're watching this on YouTube, you can probably see the subscribe button. If you do, it would mean the world to us. If you can subscribe, that's the best way to support the show because when you do, I can show it to potential guests and potential brands and stuff like that.
And it really helps to grow the show in so many ways. Have cooler conversations, cooler guests, and it just helps in everything so, so much so. If you don't mind. Thank you so much. Now let's get back to the conversation.
So again, I think the system is very anarchical there. And it doesn't mean that everything that's released and comes out is, is on the full control of the CCP, according to what happens in the US. I think China is much more, let's say, dynamic and also like focused on their own needs than, than just, ..., ..., You know, shaping everything they do according to what's happening in DC. It's a little bit of a narcissistic view on, on China, right? China is not, not, ..., always reacting to what's happening elsewhere.
It's also has its own causes and its own drivers for innovation. And the guy who, who was behind DeepSeek, I mean, barely anyone knew it. And he wasn't, he wasn't a well known entity in Beijing either. So I guess there were as many people surprised in China by the rise of deep seek as there were elsewhere. This is, um, something that opens the topic about the tech cold war. And I would like you to explain with your own words and based on what you have written in the world and the, in the book, what is, what is the tech cold war? What is different than the previous cold war that we had? Okay.
Let me maybe start first with a general observation on the relationship between technology and geopolitics. So after 1990. Basically, the timeframe in which Silicon Valley and the IT stack that we use today, like the internet was invented, ..., is the post cold war era, right, where everybody is basically this end of history hypothesis, which I think still holds some truth, like we, we internalized it that much that we basically thought we can clearly separate. economics from security. And we can separate economics from governments.
So there was Silicon Valley was never keen to get involved in politics, right? DC was not a place where you'd find the cool guys from Silicon Valley. They were keen to keep a distance and they were thinking like, in the end, government's a little bit boring. We don't probably don't need them anymore.
So we are global. ..., we're much more, we are much smarter than government. So we do everything with governance instead of government, etc.... That was the, the, the paradigm of the, of the 1990s. And as this, and, you know, Charles Krauthammer called it the unipolar moment where you only basically had one, one show in town, which was the US, which dominated geopolitics and it dominated global tech. And I think there was this major misunderstanding of the relationship then between technology and geopolitics.
We thought digital technologies are global by nature. It's their nature. They want to be global. They cannot be constrained by state or by nation spores.
They want to be global. This is what technology wants. And I think we mistook this. We mistook unipolarism for globalism. And as the unipolar moment You know is is fading and we're entering a world where geopolitics is back and where you have basically a second major power china rising we see that the geopolitical metastructure which looks bipolar is actually shaping technology on a very fundamental level so i think we will see the end of the global it stack as we know it within the next.
Decade and we see the rise of a second Chinese independent it stack that means the it stack is following where geopolitics is leading right and that's a very different if that's true. I think the the playing field for tech companies and any company was employing tech is changing fundamentally you know have to make a decision do you want to be a one stack. Serving the total addressable market, ..., within the on one side of the, of the, of the geopolitical fault line, or do you want to be a two stack company who plays on both sides? And this is in a nutshell. I think that's the major strategic decisions were, you know, discussed right now in many boards in tech companies across the globe.
Can you explain what do you mean by stack? Basically, like, you know, If you think about it, it kind of makes sense to think of it in layers, and it starts on basically on the ground with connectivity, like cables, um, and compute power. So compute architecture, semiconductors, and then you layer on top connectivity, um, operating system and point devices, um, And then at the top platforms and applications and these stacks are, I mean, they're highly dynamic. They differ widely across where exactly you look at. But in the end, it means, um, the stack has, um, the layers of the stack are connected with each other and this connectivity between the layers provides you functionality.
So, for example, if you trigger a QR code with your iPhone with a camera, that's an endpoint device where you basically take a picture of a QR code and that, that picture then triggers, um, a process that, ..., uses compute power from semiconductors and connects it with other services, and then that triggers a service that you can use like banking or whatever, you send money somewhere. So, you basically employ the whole IT stack, connectivity, compute power, whatever, .... With this application on the top of it. Okay, but that's like in the computer science, the principle of, um, ..., of the different layers of computing basically, right?
And in terms of geopolitics, how do you translate to your policies? Because you were saying the Chinese stack or the one stack company. What do you mean by that? Yeah. So if you think about it, the I. T. stack from a Chinese perspective, I
think the last 10 years have shown that the U. S. is very keen to leverage its control over most of the technologies employed in this IT stack. So, for example, it's the control of controls on semiconductors, but also data localization requirements.
And and the like, ..., to basically slow down the growth of China. So China is vulnerable to this pressure and China tries to minimize these dependencies. Um, for example, when Huawei was cut off from the Android operating system, it basically meant that Like 30 percent of Huawei's business were at risk, right? It was a huge blow to this company.
And from their perspective, it was keen. It was key to develop alternatives. Did they do? They developed Harmony OS, which is now an independent operating system for mobile phones and other connected devices. And that basically means Harmony OS. HarmonyOS is a key part of what I would call a Chinese IT stack and you can go through layer by layer and see how China is developing alternatives to existing Western technologies, which are dependent on Western IP held by Western companies, which can be, um, um, Used as leverage against chinese company so and this drivers is ongoing it's happening and on all levels of the stack independently so we have like for example in china we have that.
We chat is the biggest application where you can do everything right they don't depend on any other payment provider from western countries they don't depend on messaging services the. Depend only on the things that they have built by themselves. Yeah. Um, you mentioned also here, um, ..., market denial or market
access denial in your book. Is that what it a little bit? What plays a role in that? And that pushes that, for example, China has its own. Stack in this case or market access denial is one tool basically, you know, prohibiting companies to, to access a market where you want to grow a local competitor.
For example, this is where market access denial is important vice versa. The U. S. is using market access to denial for companies like Huawei or recent case the question of TikTok. Um, for, for, for different reasons. Um, however, um, there are also other.
Strategic tools that you employ, right? So China, for example, is investing massively right now in becoming less dependent on Western chip technologies. And that's not only about the companies who are actually producing chips like TSMC, but it's fundamentally also about the compute architecture, which right now is dominant. You know, Western companies dominate that space. We have the X 86 architecture, which is your classical PC chip, whatever.
And then you have the arm chips for your mobile devices. And China doesn't want to be dependent on these chip architectures in the future. So what we see right now is a major investments by China in something that's called the RISC-V compute architecture, which is kind of a Competitor to arm chips also embraced by Western companies, but for China, it's not merely about, you know, avoiding licensee fees to to arm, but it's literally about independence and minimizing vulnerability. So China is very interested in pushing RISC-V, ..., into into most devices to be to be less dependent.
Interesting. There's also this thing that when, ..., China entered, um, world trade, um, world trade organization. All trade organization. That was the, was the first time it was giving access to trade with other countries, especially with the US and they started to, uh, Violate IPS like intellectual property.
But you mentioned in the book that China was not the first one to do that. Germany has done it in the past and the U. S. has done in the past. Yeah, sure. So, I mean, historically, um, the biggest enemy of intellectual properties are fast growing nations, right? So, if you want to catch up on tech development, you basically don't care that much about IP, right? And when Germany was developing quickly to an industrial powerhouse and Great Britain was leading.
German companies were known for being IP violators. I mean, they copied everything, put their hands on. Same with the U.
S. The U. S. was a, you know, major, major violator of intellectual property in the beginning of the, of the 19th century because they had to catch up, right? And this is what, what fast developing nations usually do. So that's not an, I don't want to, you know, excuse China for that, but it's just historical pattern that, that we need to be aware of. Um, The opening up China and China becoming part of the WTO, um, of course. Is a major driver of the debate in the US today by saying, we thought we can integrate China in the existing post Cold War global system that we have established and WTO was a major part of it.
So we believe in free trade and we expect China to become more like us. That was the fundamental hypothesis of Bill Clinton and all the others saying, you know, if we open up China and they will become integrated in global trade, they will adopt it. Yeah. basically liberal democracy as a governance model in the long run.
Um, progress might be slow and there might be setbacks, but the trajectory was clear, right? Yeah. That was the fundamental belief. And China became much more prosperous very quickly, but they didn't become like us, right? And that I think is the, was one of the major contributors of this rethinking of, Hey, what are we actually doing here with China? They're coming, becoming powerful. Way too fast and they don't change and they don't accept our global roots, but they want to establish their own hemisphere of influence And they don't want to become a liberal democracy.
So we were basically wrong That's the main message with which Trump actually did his main his first campaign and he is very successful By pointing out that you know from his perspective He's not a liberal The U. S. was betrayed and China was, was using the liberal trade order to cheat and to become more powerful. And this is a fundamental shift in, in, in thinking that has led to an erosion in the commitment to the free trade order in the U. S. that
we now see on full display, right? It's, ..., it's now, ..., Very clear that the US is no longer the champion of free trade globally. And you can tell, right, if there is no no one there who is who's ready and willing to enforce these rules. Lots of people feel actually lots of countries feel free to actually cut some corners and cheat. And this is why the WTO in headquarters in Geneva is now a rather gloomy place because people feel like, okay, this This, you know, this order has come to an end, and we are entering a world where free trade is a dirty word, where protectionism, ..., is now raining again, all, um, justified by national
security concerns, and this is, I think, the tough new world that we're just entering, and Europe in particular is very ill equipped to actually adapt, because it's In the end, the EU was a project based on the idea of free trade. It's basically the DNA of the, of the EU, and it's, it's very difficult to, to, to modify your DNA. Yeah. That's inside. So are we entering to an end of globalism of globalization, or what does that mean for For the rest of the world yeah i think i mean the global globalization as as we knew it at least since 1990 i think that has certainly come to an end um it doesn't mean that you know doesn't mean a full reversal of everything of it but it will certainly take a very different shape and what we see if you look at the empirical data of how companies are are doing business.
We have to acknowledge that, you know, a large part of globalization was, was actually, actually intra company trade. So companies setting up shop in different parts of the world, leveraging differences in labor force costs, etc, pp. And then, you know, sending stuff around the globe as part of their intra company operations. And then at some point they sell it to customers, right? This was like 40 percent of all global trade was actually.
Intra company trade and as companies now face all these geopolitical risks like, Oh, I cannot, you know, export my stuff to this country because the U. S. has just implemented new controls or, you know, there's a major disruption and it's too risky to ship stuff around, you know, the Suez, whatever companies change their intra company patterns and start to adapt more to what they perceive as geopolitical risks and try to minimize them. And that basically leads to a pattern where you have companies, um, changing the structure to be more aligned with the geopolitical fault lines.
So you organize your trade more in the reach in the geopolitical blocks that are emerging. So you try to, um, do more in the U. S. If you want to sell in the U. S. Because of the fact of tariffs, tariffs, for example, You put more assets close to the U. S. or in, in aligned countries. By the way, this is why the whole Canada and Mexico stuff is so toxic to companies because they thought they're, they're, they're secure if they put, you know, manufacturing in Mexico that they could serve the US market, which seems to be dubious. Um, but we see this, this realignment, right? And if, for example, if you want to, as a Western company, if you want to continue to sell in China, many companies are actually doubling down in China. They're saying like, I want to say I cannot afford to lose the Chinese market.
And if there are all these restrictions, I need to put more assets into China. So I will develop products in China for China. And these products are becoming more Chinese because you need to adhere to Chinese standards. You need to adhere to Chinese tastes. And you basically start developing specific products in China for China.
In the future based on this Chinese IT stack. So you will use Chinese apps to sell your stuff. You will use a separated IT infrastructure to set up your company in China because you don't want to export data anymore, which becomes more difficult. And you used. Chinese semiconductors because there might be an encryption requirement that's, ..., that's, ..., basically forces you to, to use a specific Chinese trusted platform modules or the like.
So means, ..., companies are adapting their. Operations and how they look like and how they govern themselves according to this geopolitical fault lines. I think that's the new, the new globalization we see. So it doesn't mean that everything happens in one country, but it just means that the value chains are becoming more attuned to these geopolitical fault lines. I mean, that's why, for example, the German auto industry, put factories in China to serve the Chinese market, which is one of the biggest one, right? , and that fact that now China has also a very big and emerging auto industry has also, ..., outperformed the German cars.
Yeah. So. Certainly lots of things happening, right? So China, the relationship between Chinese local partners of German car manufacturers has changed, right? So if you look at the latest announcements, you see that Volkswagen is partnering with with Chinese small companies like Xpeng before the Chinese partner was there to distribute and to scale the global product that Volkswagen was selling in China.
And now we have basically The Chinese partner taking the lead in development and Volkswagen is there to add scale and production have to it. So the relationship with regard to who's actually innovating and who is who's driving technologies has changed radically. That's one trend that's happening. And then you have this additional complexity of, um, Cars are now computers on wheels, right? And all the restrictions currently implemented in China on, ..., secure, so called secure and controllable technology, that's a term in Chinese tech regulation, basically means, um, you have to use Chinese encryption, um, you have to store your data on Chinese servers, you cannot export, um, um, Data anymore to your headquarters, ..., metadata, whatever,
So you basically have a situation where you cannot sell your global stock car anymore without any effort to localize in, in China. And that basically means the cost envelope of selling a car in China has, has, has become much bigger. And that means that the money you earn in China. You have to invest more in China to stay competitive, and that means you cannot subsidize your global operations, which are more costly with the money you have made in China, right? So Volkswagen closing down, ..., manufacturing here in Germany, um, I, I think it's pretty clear that one of the reasons is that China also needs to invest more, ..., Volkswagen needs to invest more in China to stay competitive
there, so they cannot You know, sent back that much cash as in the past. So you can see that even the corporate financing streams are also localizing and basically also becoming bipolar in a nutshell. You could argue that companies become as the world becomes more bipolar in geopolitical terms. Companies also become bipolar to stay in China. And to maintain your rest of world operations, your company structure, your finance structure, your product development, your IP development, everything also becomes kind of bipolar and you have this new strange kind of companies emerging, which have two separate entities under one roof.
So basically, if you say Volkswagen, basically you have the German one that runs across the world, except China. In China, you have the Chinese. Volkswagen, basically. It even, it even goes all the way up to marketing, right? So Audi just launched a new brand in China, right? So Audi got rid of the four circles logo, a new brand and logo in China. And do you know why was maybe like misinterpreted the logo there means something else in there's a little bit of a problem that. You know, Audi was the favorite car of the, of, of, ..., communist
party, ..., caters in the past. So it had this kind of, it's no longer cool. It was the, you know, the kind of the, of the old apparatchiks. Okay. And they had difficulties in competing in brand recognition with the new cool BYD and others.
So they decided to, to actually abandon a well known brand to become more fashionable, which is quite radical. Lots of people criticize it. I'm not a marketing expert. I can't.
I can't tell I can only say, like, even on the marketing level, you see a bipolarization, but, for example, in in terms of, for example, like global global companies and Germany, I mean, Germany's Power biggest engine is the car industry by growing in china but staying in china the money stays in china the technology stays in china what benefits brings that to the german entity in the german state maybe nothing or or is there still an advantage to grow in the chinese market. Well, I mean, companies try to protect their market access, right? So they will fight on all levels in order to somewhat, ..., make, make operations profitable and someone benefit from, from what you actually do in China and maybe transfer, you know, knowledge and, and, ..., and the like access to, to key technologies like batteries, ..., participating in a Chinese innovation ecosystem to benefit from it. This is what companies is.
Attempt to do, but of course, um, you know, it just got much more difficult to be profitable on both sides of the stack. So the benefits for companies in general, I mean, lower margins, definitely, and also lower tax incomes for German government rights. That's, ..., that's the thing, like a bipolar world is less efficient. Then a unipolar world and companies can tell and probably government, ..., can tell at some point as well. It's interesting that, you know, just again, I always try to come back to technology history because I think there's a lot to learn. And I think IT is not that special that you cannot compare it to other waves of general purpose technologies in the past.
So we have one example in the book about a Ford operations during the second world war. So Ford company had a German subsidiary based in my hometown Cologne. And when declaration of war 41, um, Fort continued to operate in Germany under a shell organization, which was put in a trustee ship, very complicated legal stuff.
But in the end, it became a bipolar company with Fort U. S. producing for the U. S. Army and you had for Germany. Guess what they did. Produced for the German Army. So 40 percent of all German Wehrmacht trucks employed in against the Soviet Union and Operation Barbarossa were actually Ford trucks, which is absolutely crazy. If you think about it.
Yeah, this shows how radically pragmatic companies are when it comes to, you know, protecting their market access after Second World War. Both Parts merged again and went along, right? ..., and no one was keen talking about it. It all came out in the 2000s when there was the, you might remember the discussion about forced labor, um, compensation. And they were so forth put in a commission and they found out all this stuff and they published a report, which is online.
You can read it. So it was this kind of late reckoning with the, with corporate history and, and how, how, you know, how big the difference can be between. Patriotism on the one side and how corporations feel they have to protect their market access. So it's a quite dark chapter of corporate history, but I think it serves as a reminder that the world looks very differently when you are a corporate manager and you try to protect your market access, right? Yeah, there's their corporations.
They see no. They see no borders they see no flags they seem to measure their stuff on market opportunities basically same thing with coca cola during the second world war same thing they have to separate it and it was like a lack of supply on some of the ingredients that they needed and then the person in charge of coca cola germany continue operations and came up with fanta. Yeah something similar there um how but how how did china did it so fast and how did the nation that was like in let's say completely in poverty. Like with no innovation back then how after i don't know so.
Less than a century has become one of the biggest superpowers in the world. Yeah. I mean, it's, it's one of the, and technologically also, um, yeah. Yeah.
Yeah. It's one of the big stories of our lifetime, right? We've seen basically the rise of China out of from poverty to, to, to world power. I mean, historically again, long duree, ..., I'd argue a weak China, Wasn't,
..., was, wasn't an anomaly, right? ..., China was always, ..., not only a country, it was a, ..., a culture and one that, you know, states, you know, maintained their, their nationhood throughout centuries and China being weakened, being much weaker than, than, than, than the Western countries was basically. You know, if you look at it long term, it's a short moment in time, um, and I think we're now getting back basically to the geopolitical normal. It's, it's, you know, it sounds strange, but in the end, you know, the assumption that China would always be technologically behind the West is kind of bizarre when you look at it from a historical perspective. China was for centuries far ahead. And they'd say like, yeah, that's, that's who we are. That's the normal.
And you know, the dense was basically, that was the exemption. And now we're getting back to where we actually should be. And this is the Chinese perspective.
And you cannot really blame them for, for that perspective. So we always be right. Been right. Basic, basic thing like this. The centuries of humiliation are over and we're claiming our rightful, you know, spot at the table.
So, um, And here we are. Yeah. I mean, I, I think also a lot. I mean, I was reading some of the quotes from word, um, from Churchill during the first world war and how he was referring towards the, towards, um, South Asia and also, um, mainland China. With this kind of disdain on when he was referring to them as we are superior, they are inferior. And I don't know if this kind of mentality was prevalent for so many years that people and other nations really underestimated what a Chinese culture is and what the Chinese are capable of.
Yeah, I mean, ..., I mean, ..., Churchill had some problems with, ..., with racism, I'd argue typically for his time. So it was a rather, ..., you know, it wasn't the exemption.
He was the normal, um, at least he reckoned that, you know, it's best to let China sleep because when China awakens, it's going to be a giant, right? That's, you know, at least he had this insight. Um, so I think, I mean, in the end, that's the, the kind of interesting times that we live in, right? That we see this kind of, ..., dramatic, ..., development. Um, lots of problems there for us to adapt. Um, lots of problems to integrate a big new power like China in the world order. We don't, I think we don't, we lack an idea of how to, it's actually going to work out this bipolarity without, you know, falling into what Kevin Ellison called the, ..., The to kill this trap so this idea that
you if you have a a global hegemon status quo power was dominant is challenged by a quickly rising nation the risk of war is very high. So it goes back to of course the. The wars between Athens and Sparta, ..., classical Greece, where, you know, in the first page, it's a great book, actually.
And, ..., he has this very key, you know, immediate observation right at the first page of his book is saying it was the, it was the rise of Athens. And the fear in Sparta triggered that made war inevitable. That's a quote from this first page. And basically, that's in a nutshell. It's the rise of one nation, but it's also the fear that it triggers in dominant power that leads to a high risk of war.
And I think this is the situation that we're in right now. And the question is, is it inevitable? Or is there a way of actually manage the rise of China without, you know, starting World War Three? And, ..., I think that's the, the challenge of our time and how to find a way to, you know, to make it work. I mean, it was also similar with Germany, ..., in the First World War.
It was, you know, ..., the Great Britain was the, um, the major power. Then you had Germany, a rising industrial power that wanted to militarize, who wanted to come to the table and say, I also want my piece of the cake in this whole imperialistic, ..., world. And that created all of the tensions.
And then you have the First World War, where everyone wanted to test who had the best warfare technology. Just to, I mean, you know, there's a lot of, let's say, a new, I think, a new nuance to, to looking at, at the outbreak of the First World War, like with new research coming out, book Sleepwalkers, very important there. I think, arguably, you could argue, like, yeah, I mean, there were some truth to, to what, you know, the German policymakers actually thought, like, you know, what's this all about? There's a British Empire and we're not supposed to grow anymore? Why? I mean, what's the, what's the normative reason for just, you know, you've been here first, yes, but, you know, that. It doesn't mean that we are, that we, we, we, we shouldn't grow anymore.
So we want to claim our, our share. Yeah. And. It led to a catastrophic outcome.
Yeah, we basically destroyed Europe. And we, you could argue that the whole 20th century was basically a nightmare triggered by what happened in 1914. Now, question now is what can we learn from 1914 episode in order to avoid similar mistakes today? And Kevin Rudd, the former Australian Prime Minister, um, has written a great book.
Um, about the rise of China and he basically says, we need to distinguish three levels in the relationship between the US and China. One is, um, about red lines. There are parts that are really where we have overlapping, ..., interest, a conflict, and we need to manage them very, very carefully.
These are the hot topics like Taiwan status, independence of Taiwan. This is one bucket. The second bucket is basically economic competition. So write the full blown out like you know we want to be best in AI and you know we claim the market and we grow companies and etc. That's basically competition between great powers that's the second bucket and the third bucket is global corporation because I mean, The planet is burning, right? We have global issues like climate change. We have global pandemics, ..., and we need to cooperate at some level
for the sake of humanity, right? So it's a very odd timing for waging a great power competition when actually that the planet is burning and we, you know, we cannot cooperate on anything anymore. That's the real problem. So how do we make sure that we can separate all three levels and be able to compete with each other? Be able to manage our red lines to avoid a hot conflict as well as cooperate on global issues where we have mutual, you know, interests and benefits of actually doing so, and I think we're still like far from actually having an idea on how to do all three things at the same time without, you know, blowing up the planet. And this is, I think, the major challenge we're facing right now. And the problem that I see and yeah, When I spent, you know, a couple of months in DC to write the book, I was a little bit disappointed how few thoughts are actually spent on coming up with an idea of how we could actually live together and do all three things, rather than focusing on, you know, Very tactical engagements with like how, how can we optimize export controls and how can we, you know, get Huawei out of our networks is it would be, you know, these are very tactical questions. But the bigger question is, what do we actually want from China? What do we really want China to do? Other than, you know, not being there is not an option.
China is, you know, you need to deal with China and you need to acknowledge that, you know, China will not go away. So what do you actually want to propose to China that is acceptable to them, but also serves our interest? And this is, I think, where we now actually taking, you know, ..., we're not making even progress. We're basically going, going back to a much darker this place where, you know, the trump vision off international relations, basically, you know, one attempt to strong arm nations after another without any clear vision of what's actually the what's the end goal? What do you actually want? Yeah, it's just about who screams louder at the moment. Exactly.
It's, um, You know, I see a lot of discussion about what happened in Munich security conference last week and about all the other stuff that Trump has done. And there are people who say like, Oh, there's actually a wake up call for the Europeans. They should invest more in defense or this is an important topic with Greenland.
The ice is melting in the Arctic and we need to discuss, you know, security when, when these shipping lanes are opening up and the natural resources set by P. And so this is all justified or I'd say like, yeah. Seriously, yes, I see some important topics somewhat woven into that, but what's completely lacking Is a forward looking strategy that makes sense and actually answers this one questions. What do you actually want? How do you want to design a world, ..., that incorporates China
and that's completely unanswered. So I have, I have not much patience for this kind o uh......, attempts to, to, to justify or rationalize what's currently happening. ..., from my perspective, it's a, it's a wild, it's a wild question. You know chaotic non strategic bullying primarily interesting i mean that's that's that's the thing about bullies right they they tend to you know. First go after their friends before they actually confront the real challenger.
So this whole strong arming of Mexico and Canada and Europe. This is kind of, you know, these are your best allies in the world. Why are you starting? Yeah, starting to confront them rather than focusing on the real questions here. It's kind of bizarre what we see right now.
Yeah, I mean, yeah. True it doesn't it doesn't really make sense is attacking first the ones that were supposed to be the friends i and i wonder um it is i mean where which which role plays europe here i mean europe is now recognized for the major innovator of regulations. Has now come up with regulations for a i despite not having any relevant a i company that i know at the moment. A little bit underwhelming i agree. Is it, is, is there a, a place in the table for Europe or is it for Europe at risk that China becomes, ..., an even bigger, ..., tech power?
What is the best outcome for the people living here so first, I think it's important to recognize that in a, in the great power game and its impact on the IT stack. Europe will not be a third power between the US and China. We simply lack the resources and the heft to create an independent third stack. I saw some, a paper launched by a group that's arguing it's time to build a Eurostack. So you can Google it, Eurostack, and you'll find the papers. I find that really underwhelming as, as an approach on how to compete.
I don't think we have any of the assets we would need in the corporate space to build a third stack. And it would be a highly inefficient. Enterprise that would basically restrict our time and would would would you know shrink it even further for european companies to grow basically means you you you try to become less dependent on others but you would also cut access to markets for european companies mean already gdpr has made it a bit harder for some companies absolutely absolutely. So I think that's kind of, it's completely unrealistic. It's a, it's a p uh, ...,...t kind of sounds cool politically and you can sell it probably right now, but from a technology perspective.
And if you look at what, where we need comp European companies, which means, you know, conquering global markets, a Eurostack is an, is an absolute disaster. So it's kind of unrealistic. So I think, you know, for, for the better or worse, um, Europe is part of the, um, Western IT stack, and I think we should focus on the role that Europe is supposed to play in that stack. So that's number one. Number two, if you think about it, how to manage vulnerabilities and how to make sure that we are not bullied and that we are not pressured.
And this, you know, commitment to the Western IT stack is not used against us. As I said, the second one is you try to build up. A system of codependence or interdependence where it becomes clear to everyone that we are so integrated and so linked to each other that if you hurt us, you will hurt yourself and I think this idea of we need to build more assets in Europe stuff that's so cool that no US company can afford not to use it.
Then you have assets that protect you from being bullied, right? So I always say like, what's the best insurance company for Germany? I guess that 40 percent of all U. S. companies use SAP, right? That's a great asset to have. So the problem is there's not much other than SAP right now, right? So the goal I think must be, um, To to be more competitive and to develop cooler tech stuff that is basically conquering, ..., us markets that should be ambition other than rather than trying to build your own euro stack that's, you know, on cloud infrastructure.
For example, we are totally depending on the US like Amazon Web Services or Google cloud or Microsoft cloud. Also, all of them are. We're totally depending on. On United States technology and I think China has its own one the cloud space in China is completely different is a but there's no really big or at least that I know a big player from Europe that is a big cloud player so for example when we had this whole issues with GDPR and when it was introduced for a company was very critical like where do you put your. Data centers oh amazon doesn't have one yet in in germany and it was like a big discussion then they put one in frankfurt okay at least now you can put it in frankfurt but it was a big dependency for europe to depend that this companies will comply to the regulations um, yeah, so I mean, that's a complex topic.
So first of all, I think, um, you know, you basically employ technology of U. S. Companies, not of the U. S. As such. Now, I always say, like, let's differentiate between what U. S. Government wants and what U. S. Companies want who actually serve global clients. So, as I said, Companies can be radically pragmatic and if German customers, you know, are unhappy with the current cloud offering and are vocal about it, um, companies like Amazon or AWS in that case and Microsoft and Google will change and they have done so we have now, we have local compute clusters of all the big hyperscalers in Europe so you can basically make sure that your data doesn't leave Germany or Europe, whatever, ..., we now have even like further Going projects like the Delos cloud where you basically have, you know, majority ownership of this cloud is with German companies and not with with Microsoft anymore.
So very far going commitments of these US companies to be able to be compliant to GDPR and to do what their customers want from them. And that's the most important thing, right? If if a big client in Germany says like, Hey, Okay. Google or Microsoft. I do not feel comfortable with sharing my data globally.
I want to have to localize. Well, you know, they will make a move. So this is how how companies work. And that's not necessarily what is dreamed up in D. C. But this is what how companies react to market realities.
That's, I think, a good thing. And what's not to like about it, right? I think these commitments, ..., if, if, ..., these companies invest a lot, billions of year of building these data centers, they have skin in the game, right? And we integrate them here in the economy. So that's great. That's number one. Number two is if you then, you know, think about how can we compete in Europe? I think it's kind of boring to think of.
Let's, let's copy, okay. The cloud and do exactly the same, but with, you know, European companies, and maybe we add a little bit of open source here because it's cool, whatever that doesn't make you competitive. This is not how IT works. If you want to, you know, gain market share, you need to invest in the next technologies. You need to not replicate, but you need to to become better and build on top of what's already there.
This is what I find kind of underwhelming. If you look at this, Eurostack proposal is kind of let's rebuild, you know, the internet again, but with European companies, it's just like, you know, as any VC, would they invest in a company in a setup like that? No, because they want to see the next thing that, you know, creates real value and lets you grow quickly. This is how to think about it. So I think the, the European approach to, to all of this is way too static and to, to bureaucratic almost like, ..., you know, it's,
..., that's not how technology works. Well, that's the stamp now for Europe, bureaucracy and regulation. What are your thoughts? I mean, ..., I want to, I want to get into that topic. ..., what are your thoughts on the visit from JD Vance? Yeah, it's, I think it was important. So I heard verses like, ah, you know, it's just a provocation and shouldn't, you know, carrot. I think, ..., this is not true. It's actually quite significant.
I think this, this, ..., speech will live in infamy because it's, ..., has been really radical. If you think it through and look, read through it. Um, a couple of things are really important.
One, um, I think we see something that I would call as an, as a populist international movement that he's addressing there. So in the end, he's appealing to his fellow right wing populists in Germany and in Europe and elsewhere. And he's basically telling. The German chancellor and the German minister of defense, like you don't, you don't have democracy anymore because you have the BrandtMauer against the AFD and, ..., this is not how it's supposed to be.
And you're no longer democratic or whatever. That's basically an interference in, in, in, in domestic policies of a partner country, which. Would have been, you know, absolutely unthinkable just 10 years ago. It's a major breach of, of international Sovereignty.
Sovereign, Sovereignty. Sovereignty, attack on sovereignty. And it's a disregard of how we actually work together as partners. Right. And he spoke as a representative of government. He wasn't any random dude.
I mean, I comment a lot on us politics. Um, I'm a private citizen, right? Yeah, that's, that's fine. But, ..., he, he's a government representative and this has been quite a, a breach of, of more than just diplomatic niceties. This has been quite, quite a thing.
And it, ..., you know, you, you can ask yourself, like, what, what's the, what's the ultimate, um, consequence. Of this interference in domestic policies.
How are you supposed to react as a German government to that? It's quite, it's quite a stink. And it's quite, I think it's significant because it erodes a lot of the trust and the foundations that the transatlantic relations have actually been built on. That's number one. That's called into question. Number two, if you think about the proposals now put forward with regard to Ukraine and Russia, basically an opening move by the Trump administration. Hey, let's sit down bilaterally and we will figure out with the Ukraine, you know, ..., we don't even give, you know, give a damn what the Ukrainians
and Europeans think about it. That's a second major concern because in the end, um, And there's even the, let's say, the perspective of involving China in a settlement to, to secure a frozen conflict settlement, whatever it looks like, basically inviting China into playing a major role in Europe. I mean, it's kind of crazy stuff, right? Yeah. It seems to be a real, I, I saw some comments on this, that this might actually be a good idea, whatever. It's, it's, it's hard to, to, to actually compute what, what's happening there.
Overall, I think, again, the main problem is. There's a kernel of truth in all this stuff. That's the problem, right? Of course, Europe has not spent enough on defense. Of course, Um, there is a need to come to, let's say, to break the stalemate and to come to the table, ..., with regard to Ukraine. ..., the war should end, right? And that's all true, but the solutions offered here are so toxic and are so, um, corrosive. With regards to, to transatlantic relations and the order that we have all benefited from after 1990.
And there is no alternative vision, as I said before. I mean, what, what, what are you actually proposing as an alternative? Is it really spheres of interest where you like divide like the world and say like, Hey, Russia, you can have Eastern Europe to whatever you want. And, and we as United States care about Panama and, and Greenland and China. I don't know.
Is this really the world that we want to enter? Um, I think that's a debate that we need to have. And ideally, we would have that first, ..., as close allies before we actually, you know, the U. S. goes over the heads of Europe, ..., and affected countries
and is trying to, you know, do a deal that's been dropping everyone else once. I don't know where I read that it was bad to be an enemy of the United States, but it's worse to be their friend. I don't know.
It's, ..., I'd say, um, the relationship has always been You know, we have different interests and that's fine. Um, we had converging interests over the last decades, which was great. Um, now interest seems to diverge, but I'm actually not quite sure why the U. S. is so, or the Trump administration, so bullying is so much focusing on bullying in Europe. I mean, literally, if you look at the problems that the US has, and it has many, Europe is not really one of them.
I mean, this is kind of, show me why Europe is, is a problem to the US. We are a force multiplier. If you want to replicate the assets, the military assets that you employ, pretty cheaply in Europe, I mean, from the hospitals to the, I mean, you know, basically you have access to a whole world region based in your, you know, on your allied structure in Europe. You need to, to build a lot of, you know, Plane carriers or whatever to replicate that kind of stuff, right? So it doesn't make sense to, to alienate Europe. And that's what I, what I really think there is no logic behind this and there is no vision behind it. It's just the bullying of someone who's, you know, first picking the weakest in the, in the, in the kindergarten to actually bully.
And that's not a very smart. Strategy and I'm not, you know, I'm not apologizing like European lazy and spending, you know, not, not spending enough on, on defense, but it, I just don't see the rational behind it. And that's what's worrying me. The sentiment in the U S is generally in a nutshell, it's basically, so, you know, If we are that powerful and that great, why is life so miserable right now for many people in the US? That's the big contradiction. Like, if you look at global GDP or if you look at share of, you know, global population, the US has done tremendously well over the last decades.
I mean, the big losers is Europe, not the US, right? The GDP share of the US is stable despite the growth of India and China. I mean, imagine that. That's, that's absolutely true.
Fantastic. And still people in the U S are really, really not happy with, with where the economy and, and, and the society is going. So there's a lot of discontent here, but it's just hard to see why, you know, their closest allies are actually the culprits. That's what I don't get. And I don't, I don't actually see. So I, I, I sense that, you know, all this discontent is somewhat projected.
But I say, you know, the U. S. is still the strongest power. And if I would have to bet money on China or the U. S., I would always bet on the U. S. But the dysfunction of the political system has become, has come to a point where people are actually ready to destroy government.
This is what Musk is currently doing. Yeah. Um, to basically destroy. Without having a clear vision of how to replace to destroy your allied structure to destroy your own government structures to destroy the status quo without any idea of what's actually better other than, you know, a couple of, let's say, libertarian radicals who think that, you know, a world without government ruled by some tech, whatever bros actually a vision that's, that's something we should follow up on.
But it's, ..., it's quite, um, yeah, it's, we're in a stage where. Destruction is seen as, um, preferable to the status quo, even if you do not, cannot really tell where this destruction is actually leading to. And that's worrying. I mean, it's a quite radical, ..., position to take, but I think we have to acknowledge that people feel that miserable that they're actually at this point to, to say yes to this, this proposition. I have a thought on the relations with United States, Europe, and now sitting together with Russia, but not putting Europe in the conversation in the table.
And do you think it may be because the major support from United States to Europe was after the um, After the second world war to contain communism to expanding further and further in Europe so there was this big support from United States to Germany to West Germany and to the countries in Europe to contain communism now. Can you communism is just some ideas that some people have but it's not a real threat for the United States now that they think now. They don't have, they don't need this buffer of contention to communism. They only need to have an understanding with Putin and then they don't need Europe as this buffer zone.
Well, I say, you know, how important was communism then really as a geopolitical force. I'm a materialist. I'd say communism was a, was a layover over s
2025-03-22 11:49
