Even with China’s rise, America’s best days are ahead

Danny Crichton:

Hey, it's Danny Crichton, and this is the Riskgaming Podcast by Lux Capital. There's a global race for supremacy between the United States and China, a race that is now universally acknowledged in the capitals of both nations. The question that is up for debate these days, though, is who is ahead? Will China's juggernaut economy and industrial overcapacity lead to the Middle Kingdom's dominance in the century ahead?

Or will America's openness to innovation sustain its power far to the future? Joining me to talk about this and more is Dmitri Alperovitch, founder of CrowdStrike and the author, alongside Garrett Graff, of World on the Brink: How America Can Beat China in the Race for the 21st Century. Dmitri takes a distinctly optimistic view of the United States in its role today, arguing that too many people underestimate the powerful qualities that make America great.

We talk about his book World on the Brink and what he dubs the Five I's that must be protected for America to succeed. We then talk about defense policy, procurement reform, software, and the lessons we can learn from Russia's war on Ukraine. Just like in war, we cover a lot of ground. So let's dive in with Dmitri. Well, Dmitri, welcome to the show.

Dmitri Alperovitch:

Thanks for having me.

Danny Crichton:

So you recently, with your co-author, wrote a book called World on the Brink: How America Can Beat China in the Race for the 21st Century, and I thought it was a very fascinating book. And one of the things that contradicted my own personal views is you have this sort of very optimistic take on America's chances in the 21st century that Pax Americana of the 20th century is not over.

But in fact, we have a set of institutions, a focus on innovation, all these sort of key ingredients that is going to help this country succeed going forward over the next couple of decades. Maybe give a little bit of a précis on both the purpose of the book, but specifically around this, your sort of optimistic take of the future because, as most of the Riskgaming Podcast folks know, I tend to be a little bit more on the negative, cynical side.

Dmitri Alperovitch:

Yeah. Well, Danny, thanks for having me on. And yes, the book, despite the title World on the Brink, certainly raises alarm bells about what potentially can come, but is also an incredibly optimistic book. And I think it can only be written in such an optimistic fashion by an immigrant to this country like myself. And I do tend to see that immigrants tend to be much more optimistic and positive about America than native-born Americans, in part because we have seen the other side, and we can tell you that the grass is not greener.

Does this country have numerous problems? Of course. Has it always had numerous problems since its founding? Absolutely. And yet, we have some special magic here that allows us to overcome these challenges and get stronger and stronger as we go. And with all of our problems, with all of our challenges, I can tell you there is no country quite like America, as strong as America, as innovative as America, as powerful as America. And we have to recognize that.

So the book... premise of the book is really that we're in a new Cold War with China, a Cold War that is remarkably similar to the first Cold War and that the regional flashpoint that used to be West Berlin for much of the first half of the Cold War, the first Cold War, is now Taiwan. And I believe that Xi Jinping is intent on taking Taiwan in his lifetime. The man has just turned 71, so potentially, the next decade or so of his life, or at least hold on power, is very, very dangerous as China's building capabilities to actually execute this invasion, right.

And we know from the revelations of the US intelligence community that Xi Jinping has given the order for the People's Liberation Army, the Chinese military, to be ready to invade Taiwan by 2027. Now, I don't actually think that this will happen in 2027. I think that's more of a symbolic political deadline. Not even clear that they're going to meet it because as we know, just because you give any government agency in the US or China a deadline, you can almost be certain that they will miss it.

But somewhere after '27, maybe in '28, maybe '29, '30, I think the chances of a potential invasion are very, very high. But we can avoid it. And when people push back on my argument that [inaudible 00:04:11] Cold War, I'm always surprised for a few reasons. One, we kind of have a pretty good track record of winning Cold Wars, so we shouldn't shy away from-

Danny Crichton:

Yes.

Dmitri Alperovitch:

... doing that, right. And by the way, I would prefer a Cold War to a hot one. But secondly, in my opinion, China is so much weaker than the Soviet Union ever was, and we beat them. So this should be a piece of cake. Let me tell you why. I actually have two chapters in the book. One says they're weaker than we think, and China has enormous challenges, economic challenges, demographic challenges has the challenges of geography. It's completely contained by the United States and its allies within East China Sea and South China Sea. It has border disputes with almost every one of its neighbors.

It is surrounded by people that are viewing China more and more in an antagonistic fashion as it's expanding across South China Sea and encroaching on other people's territory. But the other chapter is really that we are stronger than we think, and I want to talk a little bit about this because I think it's not covered. And I put together this framework, a little bit tongue in cheek. I call it the Five I's Framework, a nod, of course, to the Five Eyes as it's called, the alliance of the US, Canada, Australia, UK, and New Zealand, the strongest, most powerful intelligence-sharing alliance in history.

But mine are the actual I's, and the I's are innovation, investment, influence, ideas, and immigration that I think make this a super special place. First of all, from an innovation perspective. This one is so easy to make. You're in venture capital, you know that the best companies to invest in are here in America. It doesn't mean that we have complete exclusivity that there're no great companies in Europe or elsewhere, but the vast majority of them are here in this country and so much capital is going there for this reason. We also have the best universities despite all the challenges and we've seen problems on college campuses in the past year and so forth.

But when people around the world, including by the way people like Xi Jinping's daughter, want to study and learn, where do they go? They go to the universities here in the United States, not to Chinese universities, not to universities in other parts of the world. They want to come here, and I think that'll remain the case for the foreseeable future. Second is investment. The amount of dollars that we have that are available for founders is just absolutely unprecedented, right. I don't have to tell you that you're in the venture capital, but just to give you a few statistics. We have over 10,000 banks and credit unions in this country that can finance businesses.

We have thousands of venture capital firms, private equity, family offices, private credit firms. So if you are creating a startup and you're trying to raise money, there is absolutely no better place on earth where you have the better... best chance to raise that money. I know that from first hand, having founded CrowdStrike. We raised $1.1 billion through our IPO. I just couldn't have done this anywhere else. And that's a huge, huge, huge advantage. It's an advantage in part because we have a single market here. In the course of my career in technology, I, of course, have not just focused on selling the United States focused on selling our technologies around the world.

And I've seen over the course of my career, both in my own companies but also now sitting on the boards and investing numerous companies trying to go into Europe and fail miserably and try to rebuild Europe multiple times. And the reason is that they treat it as the United States. They think it's just the United States of Europe, and they tend to gravitate towards the UK. So they say in a board meeting, "We've just hired a team in London, so we now have Europe." Well, no, you don't have Europe.

Danny Crichton:

Right. Right.

Dmitri Alperovitch:

You barely have the UK, right. Because it's so different from Spain, it's so different from Germany, so different from Italy, so different from the Nordics. The culture is different, the language, in many cases, different. The channel and the go-to-market strategy is different and the European companies has succeed in that market literally have a different approach, like 28-country approach to Europe because that's what often you need to actually succeed, which is very expensive, very difficult to pull off. Whereas in the United States, if you want to sell in Seattle or you want to sell in Alabama or in California, it's the exact same approach, right. It is a huge advantage. And that's why many companies, whether you go to Israel or other places where they have a robust startup ecosystem, where do they go as soon as they get traction, as soon as they get product market fit?

They come to the United States because it's much easier to expand here at less cost and become a much larger company. So huge advantage that no one else has. Influence. US Dollar is the most powerful currency in the world by far. That is not changing despite all of the things you might see out there about BRICS. They don't have a currency despite the fact that Chinese renminbi is getting more coverage, et cetera. When you look at foreign reserves, and people have often in the last decade or so have pointed to the chart of the US dollar, since 2000, their share of foreign reserves [inaudible 00:09:14] US dollar is falling from about a high of 70% to about 60%, maybe slightly lower, and saying, "Look, the US dollars influence is waning."

By the way, 60% of foreign reserves is still a huge number, but what that chart doesn't show and why it's misleading, I talk about this in the book, is that if you actually extend the timeframe and go back to 1990, you know what the foreign reserve was? It was 60%. There was an artificial inflation to 70 in that 1990s period because what happened in 1990s? You had the introduction of the euro. So all the money that was in the Deutsche Marks and French francs and Italian Lira was temporarily moved to the dollars, waiting for the introduction of the euro. And then, once the euro was introduced, it tapered off back to its stable level where it has basically been for much of modern history.

So US dollar is not going anywhere, an incredibly huge advantage for the United States. US military, by far the strongest military on the planet, truly with global reach. Despite all of the consternations about the Chinese military and the fact that they have more ships than us, they don't have a blue-water Navy, they don't have 11 aircraft carriers, they don't have power projection capabilities anywhere in the world beyond their region. Certainly, we see Russia struggling in Ukraine. The alliances that we have are absolutely not just unmatched in current environment but historically unmatched.

I was actually at a dinner recently where there was discussion about whether what Russia and China have today is an alliance because while they're certainly getting closer together, they don't have a mutual defense treaty. They're hacking each other left and right. In fact, the number one prosecution, the number one caseload of prosecutions in Russia for espionage, is people being accused of spying for China. So much for friends, right. And someone made an argument to me that actually really resonated with me, and they said, "They are allies. This is an alliance." And it's actually what the US has with NATO and other partners. That's not an alliance.

It's something that's much stronger than alliance because, historically, alliances have been temporary. The countries have come together and fallen apart to confront a common enemy, and then as soon as that enemy is defeated or something changes, they reorient and potentially create an alliance with their former enemies. That's been the case throughout human history basically. But what the United States has created with NATO and other partnerships with Japan, with Korea, with Australia, and others is something that's so much stronger, right. NATO survived its primary adversary. The Soviet Union fell apart, and yet NATO continued, became in fact stronger and expanded. So we don't appreciate how important that is and how unprecedented in historical terms this truly is.

We have the power of ideas, the marketplace of ideas, our constitution, our government framework that not just allows for dissent and civil disagreement but really makes it an expected way to actually hash out the best ideas. We don't always take the right paths, but we autocorrect, and the system allows for that, right. We make mistakes like Iraq, and yet when it turns into a disaster, there is a political backlash against that, and we're able to reform our system through that ability to vote people out, which you don't have an authoritarian systems. Yes, authoritarian systems like what China has and Putin has in Russia have advantages in that a dictator can make a decision, and it just happens. You don't have to get consensus. You don't have to water it down with compromises.

It's very, very fast. But it only works if you have a really, really smart guy at the top and only temporarily because eventually either they make mistakes because they don't tend to listen to others, and people tend to surround themselves with yes men that don't give them other opinions or they start worrying about their succession. And instead of picking the smartest possible person to succeed them, they pick someone who's going to protect them, protect their legacy, protect their family, and you see the country sort of atrophying over time because the contest of ideas does not happen in that leadership system. And finally, immigration, right. This is, I know, a dirty word now, but immigration is really the lifeblood of this country. It has been since it's founding.

If we didn't have immigration, we would have an economic decline in stagnation because our population would be roughly what it was back in the 1970s. You look at the top companies on the planet, which are all American companies, companies like Microsoft and Google and Nvidia and Tesla, Apple, they're all, all either founded by immigrants or sons of immigrants or currently run by immigrants today. So Amazon as well. Jeff Bezos is a stepson of a Cuban immigrant, right. So you have an unbelievable contribution that immigrants make at the very top of our economic sphere. But really in daily life, I was able to create a company that is incredibly valuable today as well.

The other power of immigration, particularly when we are able to attract people from our adversaries like Russia, China, Iran, and so forth, is that not only does it help us, it actually weakens them, right. The brain drain that it creates, and I really love the quote I use it in the book from Scott Galloway, a professor at NYU who says, "Every year there's a draft for human capital, and every year the US gets the top picks." So I'll stop there, but hopefully, I've convinced you that we have incredible strengths.

Danny Crichton:

Let me walk from the beginning. So let's just talk about the Cold War aspect, and we'll get into the other parts you just were talking about. Obviously, there's a huge debate of whether we're in Cold War 2.0. Is this a different type of Cold War? And I generally have this view of, look, you grew up in the Soviet Union. It was a command-control economy. It was not able to produce the goods and services that needed for its own people.

It was not able to produce the weapons to compete with the United States, particularly under the Reagan administration, and this sort of economy sort of dissembled and led to the opening up in the 90s and sort of the collapse and rebirth of the Russian Federation. Pivot over to China, you're looking at one of the country... world's largest manufacturers. The biggest concern is that they export too much.

They have too many goods. They have an overcapacity problem. Everyone is taking solar panels and EVs at low prices because there's no one to buy them anymore. How do you sort of compare and contrast, just given your personal and also some of the professional work you've been doing, how you would approach the Soviet Union and the kind of differentiated approach you take to China today given that different quality in the economy?

Dmitri Alperovitch:

When people try to challenge me that this is not a Cold War or very different from the first Cold War, they use this economic argument that you just have made, and there's certainly differences on the economic front between the Soviet Union and China, no question about it. I think there are fewer differences than most people believe because they have forgotten that we, of course, start out with the knowledge that the Cold War ended the way it did. But in the 1970s, if you were ask people who's winning the Cold War, you would've gotten very different answer, right.

That United States bogged down in Vietnam, economy not in great shape, huge inflation, people really feeling terrible about the political situation with Watergate and Soviet Union going gangbusters because the oil prices were so high after the Arab embargo swimming in money, right. So you have to look at different periods of the Cold War to actually appreciate what was truly going on. But even if you set that aside for the moment, there's like a dozen reasons for how the conflicts are similar. You have a global competition for supremacy that's playing out in every single corner of the world.

In the military sphere, in the diplomatic sphere, in the economic sphere, in the geostrategic sphere between the United States and China, just like we had between the Soviet Union and America. We have preparations for war. If you go to Hawaii, Pearl Harbor, the headquarters of Indo-Pacific command, they preparing for war. You just had a strategy that was released by the head of the Navy, basically said that we have to be ready to fight war with China. And the strategy is how do we become ready to fight war with China by 2027? China is, of course, preparing for war as well. We have an arms race, a conventional one, a nuclear one.

We have a space race. We're going to the moon again before the Chinese get there. Maybe to Mars after. We have a scramble for military bases in the region to help defend Taiwan from the Chinese perspective to build partnerships with countries like Cambodia and Pakistan, Burma, and so forth. You have economic conflicts. You have a spy war that exceeds anything that we had seen during the first Cold War. You have a tech war that's even more acute than we had in the first Cold War. You have Taiwan being that regional flash point that I talked about. You have an ideological struggle.

It may not be quite communism versus capitalism, although that's certainly a segment of it, but you certainly have authoritarians versus democracy playing out in a confrontation between the West and authoritarian regimes like Russia, North Korea, Iran, and China. It's hard to say, "Okay, we're going to look at that laundry list of comparisons that are identical" and just say, "Well, this economic connection is really what makes this not a Cold War." I just don't buy that argument fundamentally.

But even on the economic front, yes, China has been able to establish a lead in certain technologies in manufacturing, particularly in green energy and solar batteries, EVs. They're leading the world in telecommunications, through subsidies, through IP theft, and some innovation as well. They've established those leadership positions. They don't have a leadership position in semiconductor production. They're very far behind in part because of our export control. They don't have a leadership position in most weapons systems.

The most advanced weapons systems, whether it's advanced fighters whether it's advanced aircraft carriers, are in America. They're catching up, but they're still far behind on things like submarines, for example, which, of course, are really crucial to enable battle in the Pacific. They're far behind in really advanced missile guidance systems. They're catching up in some areas. Hypersonics, they're arguably ahead of us a little bit, but in many other cases, they're far behind.

So we shouldn't... There are challenging adversaries. There's no question about it. This is not going to be a cakewalk, but they have a lot of fundamental issues both in their economy. You mentioned over capacity. That's not a good thing because they're so reliant on export markets, which are increasingly becoming less and less accessible to them, not just because of this Cold War that's playing out and the United States is increasingly interested in protectionist measures, at least vis-à-vis China in terms of tariffs, in terms of export controls.

But the rest of the world is doing that for their own economic advantage, right. You just have the European Union institute tariffs on Chinese EVs, but not just European Union. You had Brazil, you had India, you had Turkey, you have Indonesia looking at tariffs, countries that traditionally people thought were actually kind of friendly with China, right. But they're saying, "Wait a second. You're over capacity is destroying my industrial base, and I'm not going to let you do that." So foreign direct investment in China is down 20% year over year. These are not great statistics. They've got a lot of fundamental problems in their economy.

Danny Crichton:

So obviously went through the five I's, and each of these very positive. I agree with many of... Obviously immigration, particularly from the Silicon Valley lens, is very, very strong. Innovation ideas, investment, influence. One of the questions though I had, which is not one of your I's, was institutions. And I think when you look at the US in the last couple of years, the big concern has been around how strong are our institutions, how adaptable are they to new situations.

And even if we were to focus on a specific topic you're talking about in this book, US Defense rebuilding the Pacific fleet, we're mired in Congress, we're mired in defense planning about rebuilding the Pacific fleet, about deploying enough resources. I believe, as [inaudible 00:20:46] we're recording the show, there's not an aircraft carrier in the Pacific because we've redeployed them to the Middle East.

And so when you think about matching needs with sort of material and equipment and people building new types of innovative technologies and actually getting them into service, that institutional breakdown has been the biggest concern in our world for a long time. How do you sort of get there and rebuild that going forward?

Dmitri Alperovitch:

This is why I think the Cold War framing is so important because it allows you to focus and allows you to prioritize. And arguably, as broken as our politics is today, the only thing you can get an agreement on, bipartisan agreement on, is China. Because intuitively, whether people call it in DC a Cold War or not they know it, and they're focused on it.

When head of Naval operations comes out and says, "We need a Navy that's prepared to fight a war with China by 2027." It's not even front-page story, right. People kind of focusing on the details of that plan, which is great. But the headline of, "We're preparing to fight a war with China," I feel just people are like, "Eh, yeah, of course."

Danny Crichton:

Right. Yes.

Dmitri Alperovitch:

It's kind of a big statement. Imagine if the statement came out says, "We're preparing to fight." The army would come out and say, "We're prepared to fight a war with Russia by 2027." Oh my God. That would be like front-page news, and everyone would be like, "What? What? We're fighting war with Russia," even though we're obviously trying to help Ukraine in land war with Russia right now. So that's a really, really big deal that's creating focus. Not enough of it. And I argue in the book we need to do more. We need to do faster. We need to reform the defense industrial base. We need to reform how we procure systems.

I believe we need to move to a fixed-price model away from cost-plus model that encourages defense contractors to build the most expensive systems possible with artisanal designs that are not applicable to mass production. That is a huge issue. You see some bright spots. You have DIU. This Defense Innovation Unit within DoD that's doing some of the more innovative procurement with Silicon Valley startups. You have this Replicator program, which is really critical for the Indo-Pacific, a set of unmanned capabilities that could be used to potentially sink the Chinese fleet as it's coming across the strait.

You just had an appropriation that people focused on, rightly so. It was debated and passed by Congress in April for Ukraine, $60 billion. But you also, in that bill, had $14 billion allocated for the Indo-Pacific for both our own forces for Taiwan and other parts of the region. So you do have money being spent, a lot of money actually. Yes, we should be spending it smarter. We should be spending it faster. We should be spending it on more interesting capabilities and really saying we would love to have icebreakers, right. There's a lot of consternation that we are behind Russia on icebreakers, but is that really the most critical thing?

I'd rather have another aircraft carrier than an icebreaker because we're not going to be fighting China in the Arctic anytime soon. So prioritization is what we don't do well. We still try to have a military that is capable of fighting any adversary in any corner of the world at any time. And when you're facing a challenging adversary like China, you may no longer be able to afford that strategy. You need to rely more on allies. You need to push allies to do more, particularly if you're going to be focused on the Indo-Pacific. I spent a lot of time in Europe, and I tell Europeans, "Look, whether you think this war is likely or not, you probably will not dispute that there's at least call it 5% chance that we might be at war with China over the next 10 years."

It would be prudent to say that it's at least that. I would argue it's a lot higher, but let's say it's 5%. Well, imagine the implications for Europe of United States fighting in an Indo-Pacific. Everything that is at all applicable, particularly not just munitions but logistic systems and Intelligence, Surveillance and Reconnaissance systems, they are all moving to Asia. "So Europe, you're going to be emptied out of a lot of United States capabilities if there is a fight in the Pacific, and you may want to think about the implications of that for you in terms of being able to contain Russia if it tries to do something adventurous vis-à-vis NATO because we're going to be occupied and you need to step up.

Your economy is almost as large as ours, just about equal, and you're not spending enough. You're not building the right systems. You can't fight without us. And that's a huge problem because we may not be able to be there for you because we're occupied." So we need to have hard conversations with allies about what types of capabilities they need, not just how much they should be spending. I'll tell you quick anecdote. I go to this Munich Security Conference every year, which is this confab of defense officials and senior leaders every year in Munich. And this year, the topic du jour in all the conversations was the 2% plan and how many NATO members are now reaching the 2% goals of their GDP being spent on defense.

And one outlier's Germany and Germany is pushing back and saying, "We can't really do this, et cetera." And I was in one conversation where you had German members talking about this, and you had one really forward leaning person saying, "We need to do 2%. We have to do 2%." And then he stops and says, "But you know what we are not having discussion about is what do we need to spend that 2% on or that increase to 2%." And he says, "What I really think we should spend it on is we should replicate Starshield, the system that SpaceX put together for America because that's an American system. We need our own."

And I'm thinking, "Oh, you're going to increase your spending finally, and you're going to use it to replicate our capabilities that you absolutely do not need to replicate because we will make it available for you. Are you kidding me?" And you're not doing that for defensive purposes. You're doing it for industrial policy and job creation and ego because you want to have your own space constellations. So we need to have really hard conversations, not just what are you spending, but what are you actually it on.

Danny Crichton:

Let me ask you. We've talked a lot about hardware, right, but you're a software entrepreneur, co-founder CrowdStrike, software has been sort of the kryptonite, I think, for the Defense Department, Pentagon, particularly around procurement cloud services.

It's gotten a little bit better, maybe over the last couple of years, but obviously, once we've moved beyond land, sea, air, we're going into cyberspace, and cyberspace and war is certainly one that I think we're all very focused on in the US-China competition. How would you assess today our prognosis, both in terms of offensive and defensive capabilities within the cyberspace?

Dmitri Alperovitch:

It's a great question. On offense, we're the best out there. Very few are even close to us, and most of them are actually our allies. China, Russia good, but kind of another level below us. On defense, we're still the best in the world, but that doesn't mean a whole lot because the rest of the world really sucks, and we do as well. And, of course, we have a huge underbelly of risk because much of our critical infrastructure is owned by private sector. Much of it is owned by utilities that don't have ability to spend much on security.

Electric utilities, water utilities typically are often at least owned by municipalities that get their revenue from taxation or set rates so they can allocate only a certain amount to spend on this, often don't even have security teams, or if they do, it's like one guy or gal that wears many hats. So you have a lot of challenges that we have for sure. We have the best companies in cyber, I would argue. So the technologies are there, but it's expensive to do. You need the right people, you need the right frameworks, you need the right amount of funding, and that's not available everywhere.

We are very vulnerable. But I'll say something very contrarian, and the Ukrainian war has humbled me quite a bit on this issue. And people have been screaming about, "Cyber 9/11, Cyber Pearl Harbor, it's coming in any moment. And the next conflict, all of our water and energy, all of that will be down." And I go to Ukraine, and I watch them rebuild networks like that. Within hours, a network that's completely destroyed by wiper malware is up and running. I see them work around kinetic strikes against their infrastructure and figure out how to MacGyver it and put it back online or how to work around it with generators and bottle the water.

It's not just that they're Ukrainians, and they've had some experience doing this stuff for many years, even before the full-scale invasion. But humans, in general, are adaptive, and they survive, right. We're like cockroaches. You can't extinguish us. Even when things get really, really tough, we figure out a way to work around it, and I think it can get really bad, but temporarily we'll figure out a way to work around it. And particularly with cyber, it's really hard to have permanent effects because, at the end of the day, you can always disconnect. You can always replace your equipment, and then you're backing up and running.

We have this week as we're recording the pager and walkie-talkie situation taking place in Lebanon and incredible success, presumably by Israel, to have accomplished this. But will it be long-lasting? It will probably have some psychological effects, but eventually, they'll figure out some other way to communicate, right. Eventually, they'll find a trusted source from which they can buy things. Maybe it'll get compromised again. Who knows? But it'll be much, much harder to replicate. So cyber is... does not even have the kinetic effects in terms of permanence. Usually, you use cyber not to achieve an effect all on its own, but to combine with something else to really achieve strategic objectives.

Danny Crichton:

We recently had on the podcast Nick Reese, who was sort of the inaugural director for emerging technologies at the Department of Homeland Security. And one of the things he really emphasized at the department was public-private partnerships that, to your point, private industry owns most of the critical infrastructure in the United States. And if you want to protect that, the US government can't really do it on its own.

It has to work in tandem with industry. Through your Silverado Policy Accelerator all your different initiatives with the book, you straddle that line, public-private, quite a lot. Do you think that's sort of a robust model for securing the United States? Is it working? Are companies engaged? Is the government doing the right stuff on its side, or is there more work to be done?

Dmitri Alperovitch:

There's more work to be done. And I'm going to use the R-word regulation. The voluntary model takes some-

Danny Crichton:

You're the second. And Nick said the same thing. He's like-

Dmitri Alperovitch:

Okay.

Danny Crichton:

"... I'm going to use the R-word. Actually, I'm not going to use the R-word." I'm like, "We can say the word..." I know it could be anathema. Yes.

Dmitri Alperovitch:

It is anathema, but the reality is more and more people on both sides of the aisle are coming to the realization that the voluntary model will work only so well, and it'll work with people that want to do well. It will not work with people that don't care, right. And for those, you need other incentives, i.e., regulation, to actually get them to a highest standard. It's not enough on its own.

And the regulations have to be smart and outcome-driven versus a prescriptive checklist because that becomes a compliance exercise. And as my friend, the founding member of the security team at Google, Heather Adkins, says, "Compliance is a death of security." And I completely agree with that, and we don't want to turn this into a TSA-style take your shoes off, put your keys on the... through the metal detector situation.

Danny Crichton:

Let me pivot the conversation because we mentioned Ukraine for a little bit, and we were talking earlier about prioritization. When you think about the different conflicts going around in the United States, we have a potential conflict with China, which we've emphasized throughout this show. We have an active conflict in Ukraine and active conflict in the Middle East between Israel and Hamas, Israel and Hezbollah, and potentially more.

You have conflicts that are sort of brewing in Latin America, many active conflicts in Africa, on and on and on and on and on. To what degree do we have to actually stack rank these? To what degree that fighting one helps us fight in other places because it's training and getting materials in place and kind of lubricating the supply chains to actually make them work? What do you sort of propose, given what we've seen over the last couple of years?

Dmitri Alperovitch:

Well, we're not actually fighting in most of these, right. We're a little bit involved in Middle East. We still have counter-ISIS campaign, of course, going on, and then we're trying unsuccessfully largely to reopen the Red Sea. But other than that, we're not fighting Ukraine. We're not fighting in some of these other conflicts. So we need to be very focused. I argue in the book, that's probably the biggest challenge we have, is that we try to do it all and, as a result, we don't do any of it well. And focus is all about saying no.

The world isn't perfect, and we don't have the resources to make it perfect. I mean, we should try to focus on making America perfect. That's a big enough task as it is much less the world. Sometimes, we have to accept that there'll be really bad regimes out there, really bad situations. People will not be free, but we can be going fighting to liberate the people of Yemen or Burma or name your conflict zone, right. American people are not going to sign up for that. That's not in international interest to waste our blood and treasure on every conflict around the world.

We need to focus on where's American strategic interest and where are we going to double down our chips because this is really, really important to us, first and foremost, right. And everywhere else. I'm not arguing for isolationism, and let's pull back from every other corner of the world. This is not a let's do Asia and forget about Ukraine, forget about Middle East. But we have to kind of ration and think about how much can we do there. Can we ask our allies to step in some more for certain capabilities that only we can provide? Fine. Let's figure out a way to do so. But for other cases, let's get others to step up.

Danny Crichton:

When you... You're part of this new vanguard, I think, of Silicon Valley execs who are getting much more involved in the national security space. When you look back a couple of years ago to Project Maven, huge controversy at Google to integrate and work with the Pentagon. Now, there seems to be sort of a complete 180. Most large tech companies work with the federal government, with the defense department in some cases in kinetic operations, in some cases not.

There's a whole group of startups that are going in here. Y Combinator with Ares has a cruise missile in its own batch this summer. Where are we in that transition? Do you see broad engagement in your social circles? Are people still holding back? Is there a good pipeline to get into these sorts of discussions if folks are interested in doing so?

Dmitri Alperovitch:

I've been in the tech industry for over 25 years, and I can tell you in every company I've ever worked in and founded getting DoD as a customer, getting other intelligence, community law enforcement agencies as customers has always been welcomed. My God, that would be fantastic if we can work with them, right. So I think people over-indexed on a few protesters for really just a few years in the late 2000s. That was an aberration. That was not the trend.

And I think what you have going now is a resumption to the mean, maybe people getting more involved than in some of the recent years. Although but you go back to 9/11, I remember that time very well, lots and lots of people were saying, "I'm going to start companies that are going to be focused on national security." That's when Palantir got started, of course, and many, many others. So I think you're seeing a similar situation here. Then, I think it was more driven of, "What can I do to help?" And the shock of 9/11.

Now, it's, I think, much more driven by opportunity because you have the ability to bring a lot of consumer technologies into the military or consumer-like technologies. The military seems more amenable to explore and experiment. And you're seeing, of course, the evolution of the battlefield in the areas of autonomy and EW. I do think it's not unlike what we saw back 23 years ago.

Danny Crichton:

Another direction for you. Obviously, we're in the middle of US presidential election. Lots of stuff going on both sides. Let's say you're entering the White House on either side, doesn't really matter, what's sort of the first hundred days you would recommend to whoever the president-elect is on what they should be doing in terms of foreign policy, defense, national security, and its relationship to technology and all the different facets that you connect with in your career?

Dmitri Alperovitch:

I think goes back down to focus. My advice would be, let's adopt the Cold War II label because that's what it is. And it has sort of a unifying and focus appeal that if we're in a Cold War, well, we can't lose it. We don't want to lose it. Let's win it. And then let's look at everything that we're doing across US government, national security and say, "How does it help us with that or detract from that?"

A lot of the things that detract from it, we'll have to figure out how to transition out of or find someone else who can do it. Not everything, because this is not the only thing that's important, but it is the main thing, right. And the main thing about the main thing is to keep it the main thing. And that focus needs to be applied across our defense procurement, across our intelligence collection priorities. Lots and lots of other things.

Again, we're not going to stop caring about the Iranian Nuclear Program, North Korean proliferation issues, Russia and Ukraine. You can't just give up on all of that, but you may have to balance the resources and say, "More needs to go to the Indo-Pacific because it is such a, I believe, existential threat to American leadership and our ability to preserve American superpower in the century."

Danny Crichton:

I know we're running out of time, but let me direct to one final topic, which is sort of around defense innovation. And I asked earlier a little bit of one of the challenges that America faces is we have this sort of incumbency advantage for a lot of technologies in the Defense Department.

We're focused on aircraft carriers, not drones, and maybe we need to project hard power using an aircraft carrier. But in the way that our procurement systems work, that huge carrier contract tens of billions of dollars it's just always going to have a star in the light of every person, the Pentagon in Capitol Hill, in Congress, whatever the case may be, versus that $100,000 drone.

And then you continue on to software and to new systems and new types of technologies. How do we get more innovation, more ways of conducting war? How do you update tactics and field manuals to include that? And it basically move us forward with all these new technologies that we've been inventing the last 20 years in Silicon Valley.

Dmitri Alperovitch:

Danny, I love that question, and I find myself in a very interesting situation because I spend so much time with the Ukrainians. I cover the conflict and great depth on my own podcast, Geopolitics, and some of the evolutionary tactics and weapon systems. And I find that you have two ends of the spectrum, which are both wrong. You have the DoD end of the spectrum that you're absolutely right. It's too slow to innovate and bring some of these technologies to the combat forces. But you also have the Silicon Valley end of the spectrum that thinks that everything that has come before is obsolete.

And anything that's not cool, autonomous, AI-enabled, and unmanned doesn't need to exist. I'm exaggerating a little bit on both sides because there's a little bit more gray. But generally speaking, I think you have people that are falling into one or two of these buckets, and I'm squarely in the middle. You bring up aircraft carriers. Aircraft carriers are existential for us interest. They're the only means we have for power projection across the world. You mentioned drones. Well, if you want to deliver a lot of drones to an area, you're not going to fly them.

They got to be ships on something and that something will be something like an aircraft carrier, right. So the issue is not that we don't have good aircraft carriers, it's that they're way too expensive and we've become enamored with more and more advanced systems, and not saying that this is good enough, right. And let me give you an example, specifically with aircraft carriers. I talk about this in the book. The Nimitz-class aircraft carrier, which is the prior generation to the current Ford one, cost us about $4 billion to procure.

We've bought a lot of them. They're still the best in the world. They're way better than the Chinese carriers, way better and bigger than the UK carrier, the French carrier. They're the gold standard, right. And we didn't say, "Let's just keep buying the Nimitz. No one even has come close to the ability of the Nimitz carrier group to project power." We're like, "No, no, no. We are America. We always want better. Let's go to Ford." And the Ford is $14 billion, three and a half times the price tag. You're not getting three and a half times the value for it.

But because, again, of cost plus contracts [inaudible 00:41:02] wrong incentives in Department of Defense, we keep wanting more. We keep wanting better, and it becomes more expensive. And then you run into the situation really quickly of, well, how many of these Ford-class can you afford at $14 billion? That becomes real money. And you see that across the board. I argue, hypersonics today are not worth procuring. They're too expensive. Some of these missiles, $60 million a pop. How many targets are you going to find me that are worth expending $60 million on? Not many. Can they get through air defenses? Potentially, yes.

But you know what else can get through air defenses? 15 tomahawks that will overwhelm those air defenses and that'll come at $2 million a pop, half the price tag of one hypersonic, which may or may not work. Invest in research, figure out how to drive down the cost. But until you do, this is not worth it, right. And asking that cost-benefit analysis we don't do enough of. The other piece is traditional technologies is still very vital. There's a lot of focus on drone warfare in Ukraine, innovations in EW. Those are really important.

What else is really important are artillery, infantry tactics, armored vehicles, without which this other stuff does not matter at all. This has been a war of artillery since the very beginnings of this conflict. So you need a balance between some of the modern stuff that is changing some of the nature warfare, but also understanding that some of the traditional stuff also matters. And what we're not good at is producing that at mass scale. We've seen the issues with 155 millimeter artillery shells and the production challenges we have in there.

So I want to see Silicon Valley not just focus on the really sexy and advanced stuff but also how do you do the basics. How do you develop explosives? We have one black power production plant in this country. Well, it's great if you're developing new cruise missiles, but you need explosives to that cruise missile. Who's going to be building that? And how do we apply the knowledge that we have in new production technologies that have been pioneered by companies like SpaceX and Tesla and others to that problem, which is not sexy but is actually just as vital?

So we need that balance in the conversation of not everything that has come before is obsolete. Some of it is actually really, really critical. We need to find a way to mass produce it, to make it cheaper. And yes, look at some of the more advanced stuff, but also really understand that what you see in Ukraine is likely not going to be repeated because it's a very specific conflict to adversaries that have certain capabilities and certain limitations, right.

The fact that neither side has achieved air superiority is one reason why they're defaulting to these southern tactics. That probably will not be the United States, given our capabilities in Suppression of Enemy Air Defenses and general air combat skills. So we are not necessarily going to default to some of these MacGyver solutions that the Ukrainians are producing because they're doing it out of necessity, and we're not going to have that necessity. So we need to learn some lessons from the conflict, but we need to not overlearn them.

Danny Crichton:

Well, on that, Dmitri, thank you so much for joining us.

Dmitri Alperovitch:

Thanks for having me.

‍