Strategic Costs of US Global Success

- I'm thinking about why there's a sense of crisis now when American power is so vast across every single dimension and there's never been a power in recorded history like America. So believe it or not, I'm gonna explain to you why the problem is our success and why success is usually a much bigger problem than anything else. It's a little counterintuitive, but we succeeded beyond our wildest dreams and as a result, we're in trouble. That's gonna be the main point of today's whatever you wanna call it, performance, failure. Good choose there, dude. Okay, here we go. So let's imagine that you fell asleep in 1975. Of course you weren't there in 1975, I was, but let's imagine you fell asleep. And you had a really good long rest and you woke up in 2025. So you had a nice 50-year rest. And what would you have noticed if you were an analyst of geopolitics and international affairs? What, if anything, had changed in those 50 years when you were asleep? Well, when you went to sleep in 75, American power was at a low ebb. We lost the war in Vietnam. We had the Watergate scandal and a president resigned. We had the oil shock in 1973, which ripped the country apart. Also, our international standing was really low as a result of all of this, and there was a lot of talk of the end of America or American decline. And if you woke up 50 years later, you'd be saying, "Wow, this country is unbelievably powerful and successful." The GDP is still 25% of the global economy, as it has been since 1880, 150 years of 25% of global GDP, with 5% of the population. You'd say, "Oh my God, it's, the US is an energy superpower again," which it wasn't in 1975. That was part of our problem, but which we had been for most of our history prior to that, and here we are again an energy superpower. A military superpower, we lost that war in Vietnam, and we've lost war subsequently, and yet we're still 50% of global military. That's right. 5% of global population, 25% of global GDP, and 50% of global military. We're also, besides an energy, military, and economic superpower, we are also, yes, and science, tech, and innovation superpower. And we, we are at Stanford University, Silicon Valley being a spinoff of Stanford University, and it's just awesome what goes on on this campus in these laboratories. Awesome. Yeah. Blows you away, innovation, tech superpower. Across the board. Yeah. We're also a cultural superpower. We got people speaking our language and imitating our culture without coercion across the globe. Yes, anti-Americanism is the most powerful ideology in the world in some ways. Again, as Secretary of State said, because nobody likes anybody who's too powerful. So if you go to an American embassy abroad, anyone, pick one, you go to it, there are two things that are always true. One, there's an anti-American demonstration outside, and they got a lot of legitimate grievances. And the other, the longest line for visas you've ever seen. Yeah. So here we are. Who would have thought it in 75? Pretty impressive. So is America in decline? That's gotta be the funniest question of the day. Just ridiculous. Yeah. Okay. Anyway, facts are interesting. Really interesting. Measure of power is really interesting. We could go on. All right. Let's do some more. 75 to 2025. If you were alive in 75, you would have seen America and its allies, the maritime powers based on limited government, trade and navies in a struggle to the death with a giant landmass, Eurasian power, which was autocratic, repressed its own people, and banged around abroad the same way it treated its own people at home. Yes, in 75, that was the Soviet Union, and China was a subordinate version of that in 75. And today, China is the version of that, and Russia is the subordinate version. Well, if you study history, that wouldn't surprise you that China was the top dog, and Russia was now the vassal almost of China. Back then, the Soviet Union was at the height of power, and China was more like the junior partner there. But a struggle against a landmass, autocratic, different system, Eurasian-based power, ancient empire, ancient civilization, against the maritime power and alliances of the United States. That looks really the same to me, despite the fact that Russia and China have changed places, very similar. So that looks, the geopolitics hasn't changed that much. Yes, Iran flipped from one side to the other. Yes, in 75, Iran was our puppet, was the United States partner under the Shah, and after the 79 Islamic Revolution, Iran flipped. We'll see how long that lasts. It's lasted so far this much time in global history, a pinch. 79 till today, we'll see if it lasts any longer. Maybe Iran flips back the other way, but in any case, Iran is less consequential. It fits into this Eurasian, land-based, autocratic, ancient civilization power, a raid against United States and its maritime power model and friends. Okay. So if I'm waking up in 2025 after that long rest, I'm looking at a world that looks really similar to the one that I fell asleep in, except that American power is vaster. As vast as it was in 75, it's even vaster now. So that wouldn't necessarily be what you would be thinking or what you'd be hearing. Some of you are, are really smart, and yet you still, you still read the news. It's astonishing to me that you do that, not just because of the time waste, but because of the, the detox that's necessary for you to understand the world after absorbing all those lies and falsehoods. For example, did you hear about the peace treaty that President Trump signed President Trump presided over that was signed between Armenia and Azerbaijan? Yeah. No treaty was signed. It didn't happen. They signed nothing. You can go read the document. Nothing was signed. It, it was a photo op. And you fell for it. No more. Stop. No more. Don't do that. Be smarter. Don't use your phone to gather information. It's disinformation. Okay. That's gonna be a point we get to now. So I'm waking up in the world and it doesn't look that different to me, so what, if anything, is different? From 75 when I fell asleep. I'll give you a couple of things. One, everything is interconnected. In 1975, nothing was interconnected. Now, I'm in trouble at home. There's danger at home because my refrigerator is conducting surveillance on me. And somebody your age or half your age can hack into my refrigerator just for fun. And my refrigerator is now a point of vulnerability because it's called a smart refrigerator. It's just unbelievable that some kid I've never met in a basement in some country whose language I don't know can conduct surveillance on me through my refrigerator. That was not true in 1975. It's astonishing that everything is interconnected. It's a point of tremendous power and empowerment, but also tremendous vulnerability. The other thing is that everything is dual use. Everything is dual use. What does that mean, dual use? Wasn't true in 75. In 75, there was this thing called the military industrial complex, and it was a place. It was laboratories and weapons facilities. Neil, are you able to monetize this yet or not? Neil Ferguson, who is one of, one of the biggest, one of the biggest stars at the Hoover Institution, evidently can't get into his office, he's locked out, so he's sitting here in the chair. Neil gives Scotland a good name. In 75, Scottish football was a thing. That's another thing that's not the same. You Highlanders. Okay. So now everything is dual use. What does that mean? Well, back in 75, there was this military industrial complex, and they were laboratories. So if some Soviet scientist came here to study on a academic exchange, and they got, went to Caltech, which is where I would have gone in 75 if I were a Soviet scientist or MIT, there were laboratories there that they wouldn't let them into because they were off limits, military industrial complex, and then there were factories in Southern California elsewhere that they also couldn't visit. They were kind of behind barbed wire, these huge facilities. And so you could keep them out. It wasn't easy. Sometimes people on the inside turned and became spies. Of course, they couldn't download everything and, and send it, you know, in a, on a little thumb drive to somebody else. But nonetheless, there was some spies, but, but it was secure, more or less. But now, this is the military industrial complex. It's software. Everything that's for you, for consumers, for ordinary people is also military applications, dual use. How do you keep your adversaries out of this? You can't. You can't keep them out of this. So everything is dual use. There is no military industrial complex that's separated, and that's a big, big problem now in 2025 that you didn't have in 75. Everything is connected. Everything is dual use. Good luck. Good luck. Yeah. So you're just messing around making an app to deliver food, and it turns out that some of the stuff you're working on can be used by a military to locate people, to kill people as soon as you locate them using this. Yeah. Yeah. That's right. That's right. You know how the Israelis were able to kill all the Iranians that they killed who were in the regime? You know how they did that? The kids of the Iranian officials have Facebook pages and TikTok accounts. And those kids were posting images of the family's house, sometimes with the address, sometimes the wife or the spouse was also using Facebook or other social media to talk to their friends. And so the Israelis could follow the kids all the way to the house and then kill them in the bedroom, kill the nuclear scientist or the Islamic Revolutionary Guard figure, yeah, because the kids were on social media. And then when the Israelis wanted to kill those 20 people at that meeting, that high level meeting where they killed 20 people, the Israelis called a meeting. Israel got on the phone and called everybody and said there was a meeting called by the Supreme Leader. "You gotta come. "And they all came and there were 20 of them and only 19 showed up and the Israelis waited until the 20th came in the room and then they bombed the room. Yeah, eh, that's right. Everything is connected. Everything is dual use. It's not your 1975 world. So it's not geopolitics that's changed. Geopolitics is very similar. It's this Eurasian landmass autocratic regime that claims to be an ancient civilization, an ancient empire that's mad. It's mad because who said that Condoleezza Rice is in charge of the world? Who said that 80 years ago the Americans should build a world order? This upstart America, which is barely 250 years old, and we're China, or we're Russia, and we're a thousand years old, or 2,000, or 5,000 years old. I mean, who are these people, these upstarts, who decided that they're in charge? We're an ancient civilization. We're better. Okay. So the geopolitical stuff, similar, despite some differences, but this stuff, very, very different. Very, very different. Yep. And so you ... Go figure this out now. Go deal with this. Go deal with your adversary when your refrigerator is conducting surveillance on you. And when you have a phone and the Israelis can kill you only because you have a phone, otherwise you would be untouchable. Yeah. That's one, huh? Yep. Yeah, this is your problem now. It's not my problem anymore. I'm too old. I'm finished. That's why I'm between all of the big personalities and speakers. Yeah, I'm done. But it's your world now. We screwed up, me and Neil. Scott and ... Well, Josh is also young. He's ... We don't know what he's gonna be when he grows up. Josh is next generation. He's, he's the hope for the future. Scott, I think you and, you and I are more, are closer in generation, although you still are younger in spirit and physically and mentally. Yeah. All right, here we go. So now what else? Okay, well, there's this other thing that's different, and that's we shipped all of our manufacturing capability to China, and they turned out to be really good at this. So, for example, the world is water, the world is an ocean, and, and we don't have any shipbuilding capability. Yeah, that's good, right? That's really good. That was clever. Who thought of that? Let's eliminate our shipbuilding. Yeah, I know it wasn't you, like I said. It's your problem now. It was people of my generation that thought of this. Let's have the Chinese do have all the shipbuilding capability. Okay, let's have some of our allies also build ships, but let's put them in theater. Like in South Korea and Japan where they're within reach of Chinese missiles. That's really clever, right? Yeah. Who thought of that? Geniuses. Geniuses. It's like when you go to a reception and there's only one table, and there's 10,000 people in the line at the reception trying to get the food because there's only one table. That's called a bottleneck. Only engineers can create bottlenecks like that, right? Instead of 20 tables where there's no line, yeah. So we did that. And so all the manufacturing was evacuated to China and they turned out to be very good at this and still are. And so if you want things, some things, it's okay if you don't make them. Like, for example, some of those ... I don't wanna say it. I've just realized I might insult people here. Maybe your father or mother owns the company. You gotta be careful. You just forget where you are sometimes. Okay, let's get back on track here. So there's really important stuff like shipbuilding that we can't do that's a problem. And so what might be the answer to that? So there are tremendous differences from 75 to 2025, huge differences, but they're not the differences that you think. All right. How we doing for time here? We're getting close to questions, it looks like. Is that correct? All right. I'm really just warming up. As you can tell. Yeah, can you believe I do this for a living? I know. I don't, I, I don't do it that well, but it's better than what I did when I was your age. I worked in an embroidery factory. My father was a night manager at an embroidery factory and I worked there every weekend. Those ... Now they're, they sell for a fortune. Those Romanian embroidered shirts that you buy at the airport are duty free. Yeah. Back then they were cheap. But then, you know, globalization, it makes everything more expensive. I know. That's another paradox. Let's try to get back on track here. We're losing our momentum. I had you for a second. So I'm thinking about the world, and I'm thinking about what happened. I'm thinking about why there's a sense of crisis now when American power is so vast across every single dimension, and there's never been a power in recorded history like America. There's never been this much power any single country ever in this many dimensions, ever, ever, ever. And yet we feel that we're in crisis, that there's world disorder. Sure, there's the interconnectivity, that's destabilizing. There's the dual use technology stuff, which is related, that's destabilizing. Yeah, China makes all the most important things like ships that we used to make, that's also destabilizing. But still, we are vastly superior to China in almost all ways, and yet we feel China's an amazing story, don't get me wrong, tremendous success, impressive beyond words but we feel like we're under duress, like we're going down, like the world is getting out of ... So what happened? Well, pretty simple what happened. Again, we succeeded beyond our wildest dreams. The goal of the US-led order, founded 80 years ago, of which Secretary Rice has gotta be the epitome, one of the best examples, was that not only America would succeed, but that others would succeed, that we would create an open, voluntary, international order that was based on opportunity for others to succeed if they wanted to join our world order. So not just America would grow, but everybody would grow. Certainly, the Soviet Union was contained and friends or satellites as we called them properly of the Soviet Union were on the receiving end of this rather than invited onto the inside. But the idea was that those countries that were not communists, that were anti-communist, could join this, voluntarily be part of it and share in the success, and it worked. Back when George Schultz, as the Treasury Secretary under Richard Nixon, founded the G5, which became the G7, in response to the oil shock of 73, they had their first meetings, 73, 74, 75 when they formalized it and eventually became the G7. At its height, the G7 was more than 60%, close to 75% of global GDP, just seven countries. Today, the G7 is well under 40% of global GDP. Is it because the G7 is in decline? No. All those countries are still rich. In fact, they're richer now than they were when they were nearly well, at least two thirds of the global economy. And now they're closer to one third. They're still above one third, but they're closer to one third than they are to two thirds or three quarters. And they're all still really rich and they're richer than they were before. But the reason they're now under 40% is because other places got richer. That was the plan. That was the goal. That was the point of the US-led international order. Well, as countries get richer, as they succeed, guess what? They wanna have a say. They don't wanna just be on the receiving end of your world order. They wanna shape it. Whether they're Brazil or South Africa or India, or yes, China, or Indonesia, or Mexico, if you help them grow, and if they succeed through their own hard work and ingenuity in your US-led order, they want to have more power, more say, more votes, more impact, which is completely logical, and we weren't ready for that. Not only were we unready for our success when we became less than 40% of global GDP with our G7 allies ... Remember, America's not in decline. America's still 25% of global GDP. Europe is 17% of global GDP, with 7% of the world population. US, 5%, 25%, 50% of global military. Europe, 7% people, 17% economy, and 50% of global social spending. Yeah. 7% of the world is almost 50. It's about 45%, 46% of global social sp- So they're living large, but they're a smaller percentage of the global GDP. Europe was 30% of global GDP not that long ago. You wanna talk about decline? That's what you're looking at. European decline, lack of competitiveness, et cetera. Okay. My point being is that we succeeded beyond our wildest dreams. We weren't ready for the success. Not only were we not ready to manage the new expectations of these successful countries, but in addition, we decided that, hey, the Soviet Union fell. Let's move from containment to enlargement. That famous speech by the Clinton National Security Advisor, Anthony Lake, in 1993, enlargement from containment to enlargement. It's a singular moment. Forget about all the great stuff that's Samuel Huntington was writing in foreign affairs about needing to match capabilities with commitments, and if your commitments exceed your capabilities, you're gonna be in trouble. Let's just go for the whole world. We had most of the world before, the Soviet Union collapse. Let's now do the whole thing. Let's pull the whole thing into the American-led order. After all, how can we exclude anybody? Our order is so amazing. It succeeded. Let's, let's open it to everybody. And so this is what we did after 93 to Russia, to China, not to Iran. We didn't manage that one. North Korea, another tough one, but Russia and China, we gave it a shot. And it was gonna work because, look, we did it in South Korea. We did it in Taiwan, right? We did it first in Japan and West Germany. Former enemies, and look, they became our partners. So sure, this was gonna work. We were gonna pull them into the global economy, make them market economy partners with us, and therefore they would have a stake in the system, and they would evolve in our direction politically, maybe not all the way, but part of the way, and therefore, enlargement. The whole world was our oyster. We succeeded, let's go for the whole shebang, the planet. Okay. And it didn't work. It didn't work because Russia and China are not West Germany and Japan, South Korea, and Taiwan. They are instead these autocratic land-based powers that have a different history, a different self-conception, a different trajectory, and they weren't coming our way. And so we became victims of our own success, not being able to manage the success even as we tried to extend the success to the whole planet. And not everybody thought that was gonna work, but it was the consensus view. Let's try it. Let's see what happens. And so we admitted countries into ... For while Russia was the G8, it got admitted to the G7, it was part of the G8. And of course, China got admitted into the WTO, despite everyone knowing that they did not qualify based upon the criteria of admission, we suspended all the rules and let them in. And, and now we think that Xi Jinping has changed China's trajectory. So Deng Xiaoping's slogan was hide and bide. Hide what you're doing and bide your time. That was the slogan. We all repeated it, hide and bide. And we say, Xi Jinping changed that. He's no longer hiding or biding. Okay. But what are you hiding and biting? It's the same trajectory. One is hiding and biting and the other's not hiding and not biting, but the trajectory didn't change, did it? I mean, what's the point of hiding? I If you say hide and bite, you hide, we're gonna hide that we're transforming ourselves politically to become more like the West. That wasn't what they were hiding. That wasn't what they were hiding. Hide and bide. So the China trajectory changed only in our side. Not on their side. Yeah. Otherwise you don't say hide and Biden. You just say let it rip. Which is what they're doing now. God bless. They've been doing what they've been saying. Okay. So let me conclude this and we'll see if we can do some questions. So now we're in a situation that's very confusing. Again, if you're on your phone with the newsfeed and all that kind of stuff, it could be unbelievably confusing. But let's hope that after this lecture you don't ever do that again. But maybe you will. But the point being is where is this going? Can this 80 year experiment that got too big for its bridges, where is it going? Is there a new equilibrium coming down the road? And how might we shape that new equilibrium? How might we get to a better place where we restabilize some version of an international order that's open and voluntary based on cooperation and win-win, where there are some adversaries as there always will be, but they are contained and there's no hot war between the superpowers. Because Cold War is terrible except hot war is a lot worse. And the whole point of Cold War is it's not hot war. So it's a really good thing because hot war is really bad. Okay. So how do we imagine this new trajectory, this new equilibrium, this new version of where we're gonna be, and how do we shape that as the people in this room who are gonna do the shaping? So that is the big question in front of your generation, and maybe the generation after you, or you may solve it in the meantime. It's not gonna be a new equilibrium now. What's happening now is not a version of a new equilibrium emerging. It's gonna take a lot of hard work just as it was in the 40s to put this thing together. Remember, you have this massive destructive war against Hitler and Imperial Japan, and they become your allies and friends and partners in a new world war. Think about that. The, the, yesterday they were Nazis and war criminals in Japan, and today they're your allies and friends. It's astonishing that flip. Not everybody benefited from that 80-year US-led order, and there were a lot of problems and downsides with it, including proxy wars. You can ask the people in Vietnam about the American-led order. You can ask the people in the Congo or the people in Afghanistan. Lot of downsides to Cold War and that American-lead order. But a lot of upsides as well. What's it gonna look like? Who's gonna shape it? What can be done now? What's more long-term? What are the trends? Those are the questions that should be uppermost in your mind. And as I said, not me. I'm not answering that, but you're gonna answer that. All right, let's do Q&A if there's any questions.