The Exchanges, every show

Q Is this set up as a special economic zone in the Philippines or can you tell us more about the details beyond, um, sort of the, the legal side that you mentioned?

A Yeah, absolutely. So, um, it, so right now the, there are two phases to the plan. Um, the first phase is, uh, the State Department taking into custody the, the zone. Uh, we, we are, we are referring to it as an economic security zone because, uh, it is a very unique type of arrangement. The State Department has authorities to take in, um, Land and property into custody, sort of how foreign governments gift the State Department counselors and councilates and embassies. It's very unique to, uh, do a gift of 4000 acres, but fortunately there's no statutory limits on how big or small property can be. And so that's phase one. So right now it's actually diplomatic property, um, that is effectively, you know, uh, governed by the same laws as, as our embassies are. Um, phase two will be the long-term development and build out of the land, and so we are gonna spend, ah, we have two years, a two-year window to negotiate the details with our, ah, Filipino counterparts on the investor protections that will apply to the land, the tax, taxation regimes, and, ah, and all of the different, you know, legal safeguards that investors will be able to benefit from, from for the long term, and the goal is within that two-year window, To actually have a long-term framework that will be multi, um, multiple decades.

AI assessment note: “we are referring to it as an economic security zone because, uh, it is”

Q So what's the most surprising or interesting thing you learned so far?

A Well, the amazing thing that I've learned is just the enormous insatiable appetite that the world has for American technology, and just last week we signed a historic deal with the Philippines, 4000 acres, right next to Subic Bay, uh, where we're gonna build a first-of-its-kind AI-native industrial park, and the goal is really to secure inputs that are vital for American and global supply chains. As you know, we are engaged in a massive re-industrialization effort in the US. A lot of those factories depend on so many different inputs that come from all corners of the world, and right now there is a massive over-concentration of those inputs from China, and so the goal is we are walking and chewing gum at the same time. We need to re-industrialize at home while making sure that all the factories that are in Ohio and in Oklahoma and in Virginia actually have all of the inputs and niche Motors and components that they need to keep running and actually being cost competitive. And so we're looking and triaging interest from a number of different companies, um, in order to consider, you know, what the longterm build out is going to look like in the Philippines. And it's very exciting to actually build this out from a first principles and actually create a platform out of it.

AI assessment note: “the amazing thing that I've learned is just the enormous insatiable appetite”

Q these historical theories on why Europe was so dynamic. And I think there's like certain competition that's really good. That was really helpful to it. Obviously you don't want another world war. And so I think because of the world wars, they've kind of like brought everything together, but then, but then somehow it's just totally stagnated. And your mother was, what did she do for the government there earlier?

A Yeah. So she was a web programmer. So she was You know, not really a politician at all. Um, she was a web programmer for, um, the, the, they call them DGs. It's basically like their equivalent of ministries basically for the DG education and culture. Um, she had a very, you know, sort of small, you know, humble job as a programmer there. Um, she was the editor in chief of a magazine in Paris back in the early nineties, but then left the job market for a long time because one of my sister and I were growing up to be a stay at home mom. And so by the time she reentered the workforce, the industry had totally changed. So she actually taught herself how to code, um, at 47, believe it or not, and, uh, and then just became a programmer. And so she was doing that. And I think, you know, like a lot of Europeans, she really wanted to believe in the European projects of the European Union. But I think it's, it's, you know, for people who really remember what Europe was like in the nineties, um, it's really hard to look back at The last 30 years and conclude that Western Europe today is better off than it was 30 years ago.

AI assessment note: “she was a web programmer for, um, the, the, they call them DGs.”

Q not actually rare, but they're called rare earth, and then they're fundamentally mined in a small subset of countries that actually have access to them. Should the US be changing its mining policy around this? Should we be, should Canada? I'm sort of curious how you think about how to address that, because there's a few different ways to approach it. One is just to mine more in certain places.

A China only emerged as a rare earth mining superpower about 10 years ago. It came out, uh, in twenty-fifteen with its Made in China twenty-twenty-five plan, and from that date onwards, we actually saw China's, um, refining activity of rare earth, uh, materials skyrocket. So what happened was they pursued a very aggressive industrial policy to build, uh, refinering capacity in China. Uh, and they started to flood the market, which sunk the price and started to really squeeze refineries located in the West, in, in, uh, Australia and Canada and in the United States. We actually have refineries. Historically, we have had refineries. And, uh, there is a huge refinery in Tennessee. Um, there, there are refineries in Arizona and Georgia. And, um, and so the, The solution to help put the genie back in the bottle is, I think actually the DoD's deal with MP Materials offers a good template, which is you need an anchor buyer and an end customer, and you need a price floor. So you need to agree with the supplier, in this case MP Materials, on a floor for a price, because what happens when these big off-take agreements, um, When, when a western refinery tries to compete with China, is China will artificially sink the price, the global price, depress it, in order to put western alternatives out of business, and then they raise the price again, which is classic monopolistic behavior. Um, we ca…

AI assessment note: “The solution to help put the genie back in the bottle is... a price floor”

Q And you said, I think there's, there's three core pillars, I guess you say, There's principles, partnership, and policy. Like what, what does that mean?

A Yeah, so we started with the declaration in December, and that declaration was really an articulation of our first principles. Principles that we share, you know, what are the, the core, the North Star that we want to work towards, and, um, and the things that are really going to bind us together. And so obviously there's a lot of clauses in there about having a pro-innovation approach to regulation, Um, there's a lot on supply chain security and the, the protection of critical infrastructure. Um, then we want to basically, you know, take that, those principles and say, okay, how do we translate this into action? And so we decided to, uh, set up two work streams, one on policy and one on, on projects. Um, the one on projects are the products that I mentioned earlier, the idea of having, you know, three or four different, Key flagship project projects that, um, we want to productize and roll out to, you know, the rest of the Pax Ilica ecosystem. And then policy workflows are, you know, conversations that we have to have around the protection of an intellectual property, the protection of sensitive technology, critical infrastructure, and the promotion of an AI friendly regulation agenda.

AI assessment note: “we started with the declaration in December, and that declaration was really an articulation”

Q When you think about the 14 countries that are already part of PAC silica or, uh, you know, this as a potential blueprint for others to be involved in American for deployed industrial bases, like, what's the value prop for them?

A So the value prop is, um, one of the amazing things that we're seeing is obviously the AI revolution is leading to huge growth. I mean, despite the volatility in the energy markets, um, You know, the American economy has been proven incredibly resilient, and a big part of that is AI being this incredible, you know, incredibly strong economic force that is already fueling over a third of our economic GDP growth right here in the US. Overseas, we're leading, we're seeing that growth translate to record demands for copper, record demands for cobalt, record demands for, you know, lots of different inputs that go into data centers and, Um, and, you know, record demand for electricians and all the rest. And so the takeaway for a lot of these countries is, um, if they find ways of actually, um, having a bigger part and a bigger stake in that supply chain at different layers, layers that make sense for their companies and their economy, they can actually derive a lot of economic growth from that revolution. Because, you know, the amazing thing about the tech industry, especially when we go through these inflection points, Um, as you guys know, is the pie grows really fast, and so it's really not zero sum, which actually makes it, uh, incredibly conducive to forge very mutually beneficial partnerships because we're not approaching it as, you know, what I gain, someone else loses. It's a…

AI assessment note: “they can actually derive a lot of economic growth from that revolution.”

Q When we last spoke to you on NoPriors, you were just beginning your tenure at the State Department. What has the biggest surprise been? You've been very active since you started.

A Well, I, the biggest surprise is honestly how entrepreneurial, um, it's the, the Trump administration has been, because I think the stereotype for people who work outside of the government is usually really focuses on, you know, this idea that the government is super bureaucratic, and obviously that's not to say that the government is a massive enterprise, um, and lots and lots of, you know, uh, people involved, lots of processes, Um, but the, the really extraordinary thing is we have a president who, you know, also spent most of his life in the private sector and who really likes speed. I mean, you know, the running joke, um, especially, you know, with our current counterparts overseas that deal with the Trump administration is that we like to move in Trump time, um, because, you know, the president, when he likes something, he wants it yesterday. And, and so that part's really been amazing because The appetite to try new things and the appetite for risk and, and to move really, really fast is highly unusual, um, by government standards and really speak for the philosophy that President Trump brings to, uh, brings to bear in the Oval Office. And so that part's really been extraordinary. That combined with the, the really great leadership that we've been able to benefit from at the cabinet level from Secretary Besant, Secretary Lutnik, Secretary Rubio, um, Secretary Burgum, who…

AI assessment note: “the biggest surprise is honestly how entrepreneurial, um, it's the, the Trump administration has been”

Q One last question for you on just, like, what other parts of the economy you focus on. So there's energy, there's obviously intelligence, um, there's sort of inputs and, um, rare earth, uh, magnets and, uh, minerals and, like, what other, Are there other domains where you think competitiveness is like essential from a security perspective or from a strategic perspective?

A Yeah, so I tend to think of, of my work being very supply chain focused is because, um, it allows, it gives me a mental framework for thinking about these issues holistically, um, by looking at the supply chain as a layered pyramid that, uh, includes energy, minerals, uh, component manufacturing, semiconductor manufacturing, data centers, models, and apps. And, and I think, you know, you, you, As a country, we kind of need a strategy that is holistic at the different layers of the supply chain. Um, we're actually in a really good position at most of them. We have abundant energy, although we need to increase our supply. Um, we, we're, our, our biggest exposure points are component manufacturing, semiconductor manufacturing, and minerals, and, you know, there's a lot that we can do to move the needle there. Um, but, but transportation logistics is another Really interesting, um, really interesting area where, um, a policy can actually help play a role, and the Chinese have been masters at, you know, through their Belt and Road Initiative at actually having a supply chain plan that includes a global transportation logistic network to get minerals from Africa back to China, refined in China, exported back everywhere else, And, and I think we need, as you know, we used to do this with the Panama Canal with, you know, these big investments that we used to make in transportation logi…

AI assessment note: “transportation logistics is another Really interesting, um, really interesting area”

Q Oh, it makes sense. Well, Jacob, you worked at Google in the past. Uh, I think it was the US China Economic Security Commission at Brookings. You were at Palantir for a little bit. Yeah. How did these shape your interests right now? I guess, so you're working a lot on AI. Is it, do those, does that kind of lead into that?

A Yeah. So it's interesting because, um, so I worked at Google Right when, you know, tech policy became a thing, um, it really wasn't seen as, uh, a field, you know, uh, uh, uh, uh, an issue worth, you know, a big topic of discussion, um, uh, until about, you know, the mid to late 20 tens, basically. And then, you know, there was just all sorts of tech policy debates that started emerging. Um, and then joining Palantir really, you know, helped me Uh, gave me a window into these two huge trends, you know, the AI revolution and the global rearmament that is taking place around the world, uh, and how technology is changing hard power. And it's really fascinating because it really shows how, um, the asymmetric nature of technology and how you can have, you know, really small, I mean, for a long time, our, our foreign policy debates were dominated by very linear thinking. So people said, you know, Um, China has 1.4 billion people, therefore they will inevitably, you know, become the largest economy because if, you know, you just, if their, um, uh, GDP per capita, you know, rises remotely close to ours, obviously they're gonna overtake us by a lot. But that school of thought had a fundamental flaw, which is it didn't factor in for the asymmetric power of technology. The, it's true that China will catch up to us if you assume that we live in a world where the, the prevailing, uh, econom…

AI assessment note: “joining Palantir really, you know, helped me Uh, gave me a window into these two huge trends”

Q How do you assess China's capabilities in the AI race?

A So, you know, it's interesting because China is, without a doubt, our, our most formidable competitor. They, their superpower is their incredibly deep manufacturing ecosystem. With that being said, our software companies are better by a lot. I mean, it's, we are objectively leading in, in AI, um, and in model development. Um, you know, China has a lot of problems. They, uh, they're at a macroeconomic level. Their economy is really not doing well. Um, they are decelerating at home. You know, their data is really falsified, and they actually tried to hide their books, uh, so much so that they've made it illegal for people within China to ask too many questions or do due diligence on their economic indicators.

AI assessment note: “China is, without a doubt, our, our most formidable competitor.”

Q the U.S., obviously, we have Meta as a champion for open source. In Europe, there's Mistral. But my sense is that, uh, there's a lot of, um, Chinese government involvement in some of these open source models in terms of funding them or promoting them or accelerating them. Uh, what role, if any, do you think the U.S. government should play in our own sort of open source AI ecosystem?

A Well, I think we need to have a strategy to figure out how we promote American, uh, the American stack, um, overseas, and whether that's through open source or, um, or through other models. Um, I mean, the, I would argue, again, reasonable people have different takes on, you know, what happened with DeepSeq. I think the basic building blocks of, um, the, the main takeaways of, of how DeepSeq achieved the performance, uh, its performance was, um, Incremental efficiency gains. Um, they lied about their compute capacity because they have a billion dollar cluster, and they distilled ChatGPT's model weights. So while DeepSeq is open source, I would argue it's not really open source if they stole the model weights from a model that is, um, is closed source. Um, with that being said, it will definitely be an integral part of China's strategy to try to get market share, uh, by, by using the open source ecosystem. And so, In that sense, I think Meta's efforts are very important. Um, but, um, but I think having a holistic approach to make sure that we have the very best models and they're as widely used is super important.

AI assessment note: “we need to have a strategy to figure out how we promote American, uh, the American stack”

Q Good ally. Uh, so, so you get to work closely with some interesting characters. Uh, what's it like working with, with Marco Rubio?

A You know, he has really set an example of professionalism at the department. The department is incredibly well run. We have no leaks. We are a very low drama department. Everyone is heads down, focused on advancing the president's agenda. Um, we have, you know, had an incredibly successful tenure. I mean, the operation in Venezuela was incredibly historic in terms of Regaining influence in our hemisphere. Um, and we are actually raising all of the right and hard questions with Europe, um, which are really overdue. I went to Europe, as you know, I lived in Europe, 18 years, and when my mother worked at the European Commission, believe it or not, and I, I, so I went back to Brussels a few weeks ago, and I told them, you know, um, it, when you really love someone, the, and someone who's sick, The empathetic thing to do is actually tell them that you're worried about them and that they're not doing well. Um, it is not, there's nothing empathetic about self-denial and pretending like everything is completely fine when it's clearly not. And the reality is we are Europe's only ally who cares about them enough to be willing to have those hard, uncomfortable conversations. And so I think that message was generally quite well received. Um, Europe has not grown meaningfully in over a generation, and everyone can see it, and you travel around the world. I, you know, I've certainly talked t…

AI assessment note: “he has really set an example of professionalism at the department.”