Decoder with Nilay Patel
00:41:16 · S5, Nilay Patel
[00:41:16] S5: we keep data secure? When do we actually see ROI? All this talk about AI, but talk doesn't transform businesses. AWS AI cuts through the noise, making AI easier to securely deploy and scale with ready to use agents and the broadest set of AI tools and services you can build, buy, or partner your way. Stop overthinking. Start building. AWS AI is how. [00:41:49] S2: Do you see Tariffs as as mostly protectionist? I was in France earlier this year, and I I took an Uber and it was... I think it was a BYD seal. It's Chinese EV. And, you know, I asked the French Uber driver, how do you like this car? And he's very French, and he literally did the thing. He goes, he's really shit. Like, like, literally said... Like, I almost started clapping because it was, like, amazing. And he's like, if if they would... If the French government would just allow the Chinese government to sell these cars here, these companies would all be dead. In The United States, I think Jim Farley is the CEO of Ford, and he's running around saying the Chinese EVs are superior to American products. And it's the tariffs that protect our markets, protect our manufacturers. Because you could import the cars, you just pay such high tariff if they're economically infeasible. That's just pure protectionism. That goes against what you're saying, which is you need to protect your industry until their products are good enough to compete on the global scale. But we're not doing that with our car makers. We're just protecting them.
00:42:47 · Willy Shih, Nilay Patel
[00:42:47] S3: Yeah. And and there's a cost associated with that. So for example, one of the famous tariffs is a so called chicken tax. Okay. And I I talk about this in the book as well. And the chicken tax was... Resulted from this trade spat where basically what we do is we put tariffs on imported light trucks. Okay? And SUVs, are built on that platform. And it's one of the reasons the Detroit automakers have focused on SUVs and light trucks. That's that's their profit center because there have been tariffs on that and it's only been in the last decade or so where Toyota and Nissan and others have made more light trucks in The US. Okay. And Mexico for that matter. So that's one of the results of that type of tariff distortion. [00:43:37] S2: But but that's a policy victory. Right? Is Toyota, Nissan, and all the other foreign manufacturers are gonna make trucks in The United States? You've gotten some economic benefit and they can compete and maybe all the trucks are gonna get better.
00:43:48 · Willy Shih
[00:43:48] S3: You get some economic benefit, but, you know, one of the reasons the Detroit guys still make so many trucks and SUVs on those platforms is because they're more profitable, which says the price is higher than it might otherwise have been. Okay. But, you know, I do see the benefit of that. Although I had to say, I was walking around the Toyota factory in Georgetown, Kentucky. Okay. I'm walking around with the plant manager. And, I said, you're making sedans here. He says, yep. And, a lot of the Detroit guys have given up making sedans because they can't make any money. And I said, and you're using parts that mostly come from Kentucky and Ohio and Indiana and Alabama and Mississippi and Texas and some from Mexico and Japan, but mostly, you know, mostly domestic content. It's like, yep. And you're using American workers. He said, yep. And, I said, and you're using American made steel. Right? And I'm trying to get out of them. It's like, okay, look, I know American steel costs a lot more than imported steel because I've been in other factories that are still importing steel in spite of the steel tariffs because they still say it's still cheaper in Asia. Okay. But I said, you're using American made steel. I'm trying to get out of them. It's like, how much are paying for steel? Obviously, he's not going to tell me. But he does say, we have a strategic long term relationship with our supplier. Okay. And that tells you a lot, right? Which is, there are ways you can do these things. Okay. You have to work with your suppliers. You have to, you know, give them longer term arrangements, be less transactional, more strategic on things like that. So I mean, I think you can do it. Okay. But it really takes a comprehensive approach. Right? And it takes a more thoughtful approach.
00:45:43 · Nilay Patel
[00:45:43] S2: I understand the rationale for putting tariffs on foreign goods that undercut our markets. Right? You're just going to increase their cost and then maybe the consumer will buy the domestic product, and that's better for our economy. It just hasn't seemed to worked. Right? Like, I don't see Liberation Day as having done anything except generally raise prices on everything. We haven't actually remapped the global economy. And a lot of what you're describing is, well, the system is pretty resilient. The system was pretty resilient to COVID. The system was pretty resilient to an oil tanker getting stuck in the Suez Canal. The system has been pretty resilient to the war in Iran. The system has been pretty resilient to absolutely chaotic tariffs. Maybe some prices have risen, and I'm sure that we're gonna get listeners pointing out that all the prices have risen. It feels like the only thing the system isn't resilient to is the AI industry wanting every scrap of RAM that the whole world can produce. And so now there's not gonna be inexpensive cell phones. Right? Like, what it... What will push the system over the breaking point? Because globalization has seemed generally resilient to a bunch of people who kind of want it to be over.
00:46:48 · Willy Shih, S5, Nilay Patel
[00:46:48] S3: I think what you're highlighting is it's really the power of the market. In the case of closing the Strait Of Hormuz, you know, Brent Brent and North Sea crude prices didn't go to a $150 a barrel like I was afraid they would, and a lot of people were afraid they were because the market adjusted. Right? We applied a lot of tariffs on Liberation Day. The first response was circumvention, okay, or front running. Okay. The next response was tariff engineering. Okay. And the next response has been... It's like, let me move production to Vietnam and... Or let me move production to Viet... Mexico. Okay. And I'll find a way around that. Now, eventually, when you, close down all those things, then prices eventually have to rise. Now in the case of memory chips, that's a different problem because the demand, you know, far outstripped the capacity. You know, I used to always buy memory cards on Black Friday. Forget that this year. You know? It's like that... It's that... I'm just glad I stocked up on a previous Black Friday. Okay. [00:47:53] S5: But here... If you want if you [00:47:54] S2: wanna know my prediction for when the AI industry will will meet its true political end, it's when Grand Theft Auto six comes out and everyone goes out to buy a PS five, and they realize it's more expensive now at the end of its life cycle than it was at the beginning because the price of memory has skyrocketed.
00:47:54 · Nilay Patel, Willy Shih
[00:47:54] S2: wanna know my prediction for when the AI industry will will meet its true political end, it's when Grand Theft Auto six comes out and everyone goes out to buy a PS five, and they realize it's more expensive now at the end of its life cycle than it was at the beginning because the price of memory has skyrocketed. [00:48:11] S3: Yeah. No kidding. Right? And we're we're talking about huge amounts. But, you know, that's the same thing. We're in a phase where we see all these tactical actions from, you know, taken by the government, okay, very transactional, very tactical, without necessarily understanding the interconnections and the... All the complex interconnections and interdependencies. But you see some... Some of those things. You may have noticed, for example, the administration temporarily suspended the Jones Act, right? I don't know if you remember that. Why do they temporarily suspend the Jones Act? Because oil refineries on the East Coast Of The US couldn't get their oil from Texas cheap because there were no domestic supertankers. Right? Because, you know, the Jones Act requires to move stuff from Texas to New Jersey. You have to have a US owned, US crude, US built, a very large crude carrier. There aren't any. Right? Because we don't build those in The US. Right? So, you know, that's why it's cheaper to bring oil from Algeria to New Jersey than it is to bring it from Texas.