Invest Like the Best with Patrick O'Shaughnessy
· Darren Farber
[00:00:00] S1: Dikötter is a well-regarded historian on China, and has a theory on how China is not a superpower just by virtue of how illegitimate and how weak it is, and how tense the plenary in the party is. He has good points. The Chinese equivalent of the Chairman of the Joint Chiefs of Staff has disappeared. He went to kindergarten with Xi Jinping. These guys are close. When you have power and you ascend power in a fundamentally illegitimate structure, who do you trust? The answer is no one. You're constantly worried that someone's going to put a bullet in the back of your head, and then that form of illegitimacy cascades down through the immediate organs of that government to include its military. We've talked about their lack of jointness, the corruption internally within the force, the corruption in the missileer crew. They have turned over their senior military leadership three or four times in the last three years. That is not a high-trust environment. High trust comes through esprit de corps and believing in the mission and legitimacy of what you're doing. That is one of our enormous strengths. But their magazine depth industrially is so enormous, so the calculus becomes — can the magazine depth overcome their institutional weakness? It's a good question, and that's why we as a country are embarking on this enormous effort to industrialize, in order to add magazine depth to the capabilities we have. You wouldn't add magazine depth if you had the maximalist view of nuclear deterrent. You have magazine depth when you believe in the concept of flexible power.
· Patrick O'Shaughnessy
[00:00:00] S0: I talked to Shyam from Palantir about this. He had just come out with his book — I think it was called Mobilize — about this exact thing of increasing magazine depth. I don't think he used those words, but it's what he meant. How would you grade us on that specific thing? What is the state of it today? Are we doing a good job? Who is doing it? How's that going to unfold?
· Darren Farber, Patrick O'Shaughnessy
[00:00:00] S1: We're in a democracy. In a dictatorship, if you don't build magazine depth, and that's your job, you're dead. That mechanism of enforcement is pretty compelling. Here, we balance things like — will it be profitable, will it have duration, and Congress is giving one-year money. There are new efforts to create multi-year contracts for ordnance, which we've never done before. We really need it. We're changing the architecture to allow us to do more to add the magazine depth. We need to go faster for the purposes of filling the deterrence gap, so we can stop small incursions on the margins, especially with the Southeast Asian nations that we have cooperative peacekeeping agreements with — these bilateral agreements where we have to protect them, and they're being violated right now, like the Philippines, for example. So we have to do more there. It's getting better, and compared to anyone else in the West, we're still the best. It's just your adversary has a political structure that allows them to bring people to the precipice. But the illegitimacy of the Chinese — fundamentally an illegitimate power — is also our advantage, and we are making enormous strides in the clandestine services of co-opting that environment. [00:00:00] S0: Say more about that.
· Patrick O'Shaughnessy, Darren Farber
[00:00:00] S0: Say more about that. [00:00:00] S1: Xi doesn't know who's on our side in his standing committee, or on his side. Every day he wakes up with the thought of, "Maybe I need to kill someone off." That is our edge. Our edge is that he is fundamentally illegitimate. The monopoly of power that is communism — their form of Marxism, of communism, is extremely powerful because of the apparatus of an enormous economy to pay off all these kinds of people, but they are illegitimate. Our ability to recruit, retain, and train had really degraded, and we had lost a lot of capability through a series of assets that were caught, but we have rebuilt that in a very meaningful way. I don't think Xi sleeps well at night. [00:00:00] S0: Is that very recent, that change?
· Patrick O'Shaughnessy, Darren Farber
[00:00:00] S0: Is that very recent, that change? [00:00:00] S1: No. These things are built brick by brick. We have these government agencies where everyone goes into work every day, Monday to Sunday, and their job is, "How am I going to infiltrate this illegitimate political structure for the purposes of making it weak?" We have people, they drive their car in, and they have their sack lunch, and this is what they do every day. And ultimately, we break through. Why? Because every Chinese person in the standing committee has a relative somewhere in the United States, however many degrees removed, that owns a small business, that is doing well, is able to say and do what they want, and is able to fundamentally live free. We can't forget what makes us special and that we are the bug-out point for the world. Even for the people in the standing committee that are worried if they're on the outs, they have a plan to get here. We have weaknesses, but we also have enormous strengths, and their weaknesses are also enormous. It doesn't mean that they can't bring us to the precipice. Their mass is so much greater than us — their population size and what they can do industrially. But it is a dictatorship. It is a totalitarian regime. I don't even know how this is up for debate. The thread of that is lost. That's what we're talking about here. They are fundamentally strong and weak at the same time. We can hold both of those in the same vessel. I believe in our lifetime China will fall. I believe in our lifetime Iran will fall.
· Darren Farber, Patrick O'Shaughnessy
[00:00:00] S1: No. These things are built brick by brick. We have these government agencies where everyone goes into work every day, Monday to Sunday, and their job is, "How am I going to infiltrate this illegitimate political structure for the purposes of making it weak?" We have people, they drive their car in, and they have their sack lunch, and this is what they do every day. And ultimately, we break through. Why? Because every Chinese person in the standing committee has a relative somewhere in the United States, however many degrees removed, that owns a small business, that is doing well, is able to say and do what they want, and is able to fundamentally live free. We can't forget what makes us special and that we are the bug-out point for the world. Even for the people in the standing committee that are worried if they're on the outs, they have a plan to get here. We have weaknesses, but we also have enormous strengths, and their weaknesses are also enormous. It doesn't mean that they can't bring us to the precipice. Their mass is so much greater than us — their population size and what they can do industrially. But it is a dictatorship. It is a totalitarian regime. I don't even know how this is up for debate. The thread of that is lost. That's what we're talking about here. They are fundamentally strong and weak at the same time. We can hold both of those in the same vessel. I believe in our lifetime China will fall. I believe in our lifetime Iran will fall. [00:00:00] S0: What does it mean for China to fall? I know what it means for Iran to fall.