The Geopolitical Shift Nobody Sees Coming | Dmitri Alperovitch

Imagine Taiwan gets taken over. Those people can't escape or don't want to escape and are an employee of China or die, God forbid, whatever. And you now have very expensive warehouses that have been built with taxpayer dollars.

Dmitry Alperovitch is a renowned Russian-American cybersecurity expert, tech entrepreneur, co-founder of CrowdStrike, and geopolitical strategist now leading the Silverado Policy Accelerator think tank and the Alperovitch Institute at Johns Hopkins SAIS. Focusing on great power competition, digital security, and authoring World on the Brink while hosting the Geopolitics Decanted podcast. Born in Russia, he's a prominent voice advising governments, CEOs, and the public on cyber threats, known for accurately predicting the Ukraine invasion.

Part of the reason why you now have these amazing companies out of China, like Huawei and others, that are literally leaders in their respective fields, Most of these cases, it was built on stolen IP that was given to them by their government to the detriment of American companies. And I coined a phrase back in 2011 when I started stumbling upon all of this, that there are only two types of companies: those that know that they've been hacked and those that don't yet know. But they've all been hacked. And I also said at the time that this is the greatest transfer of wealth in history.

What's up, guys? Welcome to the show. This episode is extremely interesting and different than a lot of other episodes we've done before. Here I'm interviewing Dmitri Alperovitch. He's the author of World on the Brink, which goes deep on the conflict between the US and China and goes into Taiwan and chips and how everything actually is really important to focus on right now. And there's a lot that I learned in this episode that you can too. He also founded CrowdStrike. Which if you guys aren't familiar, it's a huge company. It's on the New York Stock Exchange, $120 billion market cap. Very impressive story. Not only do we go through his story as a founder and how he built an amazing business, but we learned a ton about geopolitics that I didn't know much about until now, which has really opened my mind. So I hope you enjoy the episode and I hope you learn a lot. All right, Dmitry, thank you so much for joining me today. I was actually really excited to talk to you because you've built something incredible. Something— I mean, your company is very well known. I think when I checked the stock market, it's over a $120 billion market cap, which to me is mind-blowing as an entrepreneur to see something that you create turn into something so much bigger than you can imagine. But for those of you who aren't familiar with you or your business, can you just kind of give us a 30,000-foot view, uh, on yourself?

Sure. Well, first of all, thank you for having me. Great to be with you. Uh, so I've been actually in technology and cybersecurity industry literally my entire life. I started a company with my dad when I was still in high school, and it was an encryption company. So that's what got me really interested in cybersecurity very early on in my career. And after that, I went to Georgia Tech and studied computer science and then got a master's actually in cybersecurity and went to work for a startup right out of college and worked in the industry for the next 10 years and then got the bug to start my own company and, uh, founded CrowdStrike, which is now one of the largest cybersecurity companies in the world, public company, um, that helps basically protect companies large and small against bad guys, be it nation states, be it criminal groups that are trying to break in and do, do a lot of harm to them.

Yeah. So you started that company and did you have any idea what it was going to turn into when you started it?

So you certainly had hopes that it would be big, and I started when I was an executive at another very large company called McAfee. Doesn't exist anymore, but at the time was one of the biggest cybersecurity companies, and I started because I was seeing the problem that McAfee and other existing players weren't solving, which was the emergence of these nation-state actors, China, Russia, Iran, North Korea, they're breaking into companies, and it required a different way of solving the problem, leveraging AI, leveraging cloud, sort of a different type of cybersecurity methodology to address this threat. And we hope when we started that we would one day replace McAfee or Symantec. But at the time, McAfee had an $8 billion market cap. So it was different times, market was a lot smaller. So you kind of had hopes that maybe one day you could be that big, you know? Uh, but, uh, certainly, um, nothing of the likes that you see now.

What was it like being— you said you're an executive at McAfee?

Yeah.

What was it like working there? I know there was a lot of, uh, stories about the founder, and I think I've watched some videos about, you know, crazy things.

Well, I was there about 3, 4 years, and, uh, that was long after the John McAfee era. He started the company in the '80s, he left in the mid-'90s. I joined in 2008, so he was long, long gone, had nothing to do with the company. So at that time, it was a Big public company, enterprise-focused. It was a fun time. There was a lot of building. Of course, it was also 2008 and, you know, the whole world was crashing around you. And the company I was at, it was actually sold to McAfee. So I got there through an acquisition.

So you were part of a startup that got sold to McAfee and that's how you ended up joining?

Yeah, well, the real story is I was part of a startup out of college that got sold to another public company that got sold to McAfee. And then we actually sold McAfee to Intel. A huge company. And that was when I said, you know what, I'm done. Time to start my own thing.

So were you in the business side of it or the technical side of the companies? Because, you know, going through several acquisitions, you could learn a ton about how, you know, financial arbitrage and how it works.

Were you involved? Yeah. So I was doing— really, when you join at a startup, you're doing a little bit of everything. I joined on the technical side, but very quickly was very involved with sales, very involved with— I was at one point a GM of our cloud business. So starting literally a startup within a company from scratch and doing everything from sales, marketing, finance, pricing, you name it, and building the technology along the way. So you learn a little bit of everything and get involved in acquisitions, obviously, and buying companies and helping sell the company and so forth.

Well, it's kind of like a superpower to have a technical background and also understand sales and marketing. That's very rare. Was that a big strength of yours?

Yeah, you know, when I joined this first startup, it was called CypherTrust out of college, I'll never forget it. At the first all-hands meetings I attended, the CEO said, "Everyone here," the whole company was about 250 people, "Everyone here is in sales." Yeah. "I don't care what your job title is. If you're not selling, you're buying," right? So that was a great way to think about things as a young kid just out of college that, whatever you're doing, if you're not helping close a deal or keep an existing customer happy, you should reevaluate your priorities. And that stuck with me throughout my entire career. And, you know, particularly now as an investor, it's really important to appreciate that best technology doesn't always win. And it's the best go-to-market that is really hard to get right, takes a lot of effort. And understanding that is crucial for any founder.

Yeah, I was on the opposite end of the spectrum. I was really good at go-to-market and really bad at technology. We had a big blowup when we first launched the company, and then of course the tech followed along. But you're very, you're very right about that. That's actually a really interesting point that everyone in the company should be focused on sales or revenue. Is that something that you brought into your business as well? And like that philosophy?

Absolutely. Absolutely. And to be honest with you, even as an investor today, One of my litmus tests when, you know, I get pitched by a founder is, have you ever sold anything in your life? That's a great litmus test. I don't care if it's a lemonade stand or, you know, in college you had to hustle or whatever. But if you haven't done it, if you haven't put yourself out there, you haven't been rejected. Yeah. You know, you don't really know what it's like. And too many tech founders don't have that skill and aren't successful even if they're building the very best thing that you can possibly imagine.

It's so true. I was fortunate that before I got into tech, I would actually import products from China and I would sell them in person at music festivals or at state fairs or at, you know, marathons. We'd set up booths and we'd have to, you know, get rejected all day. But you got really good at understanding how to convince people to buy your products. And then when you went online, it was way easier to figure out how to make advertising work and marketing work. But I totally agree. That's probably a great litmus test.

And by the way, messaging and getting the messaging right. In technology in particular, but really all types of businesses is so hard. And particularly as a founder and particularly as a technical founder, you have so much pride in everything that you do and reducing it to the essence of what you do is so hard. And often that essence is actually not even about the product, but about the problem you're solving. And it's so difficult to get right. I mean, even at CrowdStrike, it took us years to get to a very simple message, which ended up being, we stop breaches. Which is actually nothing about the product at all and how it does things. But that was the essence of why would someone buy us. It's because they have the peace of mind that we would stop the breach and they would be safe. But initially, we're like, we're cloud-based, we're doing this, we're doing that. And it's like, people get lost. But you're proud of that. You're like, of course we have to include it. That's so important. And everyone can say they stop breaches, but you have to explain why. And actually, you don't. And simplification is the hardest thing you can possibly do.

That's great advice because you're so proud of what you built. You're in the weeds. You're talking about why it's better than everything else.

The rest of the world doesn't care.

Yeah. Especially if you're working with enterprise clients and you're working with someone that works in an organization, you just have to capture their attention. Right. So that's actually really interesting advice. So when you guys started the business, how many founders were there?

There were myself and my co-founder.

There's just two of you as founders?

Yeah, we had a third guy that was our CFO, but it was basically the two of us that started it. Wow.

And Was— what were the early years like? Was it what you expected or were there like, you know, lots of ups and downs? What was kind of the early days of the startup like when you started it?

Well, not just the early days, but every day, you know, it was the highest of the highs and the lowest of the lows. I mean, there were always challenges, whether it's competitive challenges, whether it's, you know, you're trying to land someone and they take another job or someone's trying to leave and you got to save them. Or an issue with a customer, whatever it may be. So it's never a straight line. People sort of look at what the company's become now and the fact that we did it, you know, the time from starting to go in public was 8 years and like, oh, that's super fast. Every day was a huge fight, existential crises along the way. And it just all is very, very difficult, you know. Starting a company is an amazing experience, but it's not for the faint of heart. It's not for a person that, you know, wants to have a life-work balance. Such thing doesn't exist, as you know. Yeah. You're always on, you're always working, you're always traveling. So it's fun and incredibly rewarding, but it's also really, really hard.

When you're dealing with so many things and people and problems and all the noise, How do you identify the things that matter that you want to focus on for the day?

Yeah. Well, you want to try to get, I think, as much done as possible. So, but prioritization of what matters right now. Is this a big deal that you need to help close? Is there an issue with a product that is impacting retention or whatever it may be? You got to dive into it first. But, you know, you typically have a long to-do list and you're jumping from one thing to the other. And, you know, I've learned over the course of my career to be great at multitasking. Like, I never come in and I'm like, this is the one thing I'm going to do today. Now there's going to be 50 because that's just the way life is.

So what is— can you talk me through what a typical day— maybe not now, but when you're in the thick of it, what did a typical day look like? You know, for example, when you wake up and there's a ton of things to do, it's like, well, where do you start? Like, how did you have any routines or habits?

You know, you know, you have an assistant that you really organize your day. So, you know, at that point I have actually very little to say about what I'm going to do. It's like, okay, my morning call is with this prospect that got set up 3 weeks ago that I'm going to need to close. Then I have a meeting with my engineering team, try to solve some problems. And there's a, you know, team meeting somewhere or whatever it may be. So just you go from one thing to the other and try to solve problems along the way.

Yeah. Do you have any personal like habits or routines that would kind of you know, help you get through stressful times or things that you do, any kind of morning routine?

Yeah, I think I'm generally pretty good at handling stress. Um, and I love being busy and doing different things. You know, I do get bored easily. So if it's like, if I'm just doing one thing, that's like the worst.

Yeah.

Right? So I, I wanna be like, okay, I just spent 3 hours with the engineer solving some really great problems. I wanna be on a sales call with a customer just to have a complete, sort of mind switch of I'm now focused on something else. I want to jump into a marketing discussion about how we're going to participate this conference, where our messaging is going to be, what are we going to demo, right? So just jumping from one thing to the other to try to solve different problems from across the company. It's a lot of fun.

Yeah. Do you have any leadership philosophy or like, you know, for example, when you're starting a business and you want to bring on amazing people, amazing people can go work anywhere. And if you don't have a big company, you either have to give them a big piece of it or, or create a big vision. How did you recruit great people to your company? What was your philosophy as a leader to get amazing people?

Absolutely. I think that was the most important thing that I did, which was the recruiting. And I had set a very high bar for everyone I would hire. I wanted to be— to have the best people I could possibly imagine in every field that we were hiring for. And that actually led to something at the time back in 2011 when we started the company was actually fairly unique, which is a completely distributed company. And our board hated it. Like in every board meeting, they would be like, where's your center of gravity? Where's your headquarters? And we were just completely distributed. The first people I hired, the first 10 people were in 5 states and 2 countries.

This was when in 2011?

2011.

Wow.

This is before Zoom. Before there was like really good, you know, Slack didn't exist, all that stuff. And we actually, we started the company on Skype that worked for about a week until it didn't. And we went through like a ton of teleconference software. Thank God Zoom came out when it did because I'm not sure the company would have survived. Wow. But, you know, at one point, 70% of the company was completely distributed. That we had offices and, you know, Distribute is not remote. And I want to make that very clear. What I wanted to do was find the very best talent and not be limited by geography. Yeah, right. So if you've got an amazing guy or gal that lives in Lakehouse in Michigan, nowhere near a big city, I still want you. Yeah. And I want to make sure I can make it work for you. So it's about the flexibility of the work environment. But then if you got someone in New York that has a small apartment, couple of kids, and needs to get out of the house to be productive and work in an office, give them that opportunity, right? So it's about having that flexibility, obviously within reason. You're not gonna open up an office for one person. There has to be enough people in that area. But office or at home, there's no, you know, discrimination, whatever it is that we need to do to make you happy to be here and be productive, that's what we need to do. And that led you to basically the world is your oyster in terms of hiring. Within Reason, we didn't hire in China, we didn't hire in Russia, the places where, you know, we had adversaries that were trying to break into our companies. But, you know, in Western countries, we would hire basically anywhere. And make it work, and that gave us an enormous advantage of finding people that we would have never been able to hire if we were just localized to one specific location. But, you know, as the saying goes, A players hire A players, right? B players hire C players. So having just a really, really high bar for everyone that we would hire was absolutely vital. My rule of thumb is I want to hire everyone who is smarter than me. Right, so I can learn from them. And that I think gave us an enormous advantage early on.

Do you still feel positively about companies that work either remote or no, not in one? Like, would you do it again? Would you have a—

100%. And, you know, now as an investor and a board member in a bunch of companies, I tell people all the time, if you— if your culture can handle it, and it's hard to pivot to this later on, if you didn't build it from that way from the get-go, it's very, very difficult. But one of the reasons why I was really, really passionate about this and was really pushing back against our board who wanted the traditional company with a headquarters, everyone located together. A lot of venture capitalists really think that unless everyone's in one room near a whiteboard, a company can't be successful. But the reason I wanted to do it that way, aside from just wanting to hire the best people, is that having been acquired a bunch of times in my career and by companies that were in other cities. So when I started my career at CypherTrust was based in Atlanta. We got acquired by a company that was based in Minneapolis and had offices in California and Florida. And then McAfee had an office in Santa Clara. Intel was in California as well, but really obviously globally distributed. And what I found is that because these companies were really centered around their headquarters, unless you were in the headquarters, you were missing out, right? I was in Atlanta and ended up having to fly to, to our headquarters almost every other week just to make sure I'm in the meetings.

Yeah.

Even though you have teleconferencing, but people just make decisions at lunchtime. Yeah. You know, around the water cooler and you feel like you're in Siberia if you're not there.

Yeah.

And it was important to show face and that's really hard to do. It doesn't scale. It's not productive. And because we thought that, you know, what we had potential to do here is build a big company that would grow not just organically but inorganically through acquisitions as well. I wanted to have a distributed culture from the get-go that would make it very easy to assimilate other companies that would eventually buy, which we did because everyone's remote, right? So you don't feel like, you know, if you're not in HQ, you're really missing out. And that was really, really important for us early on. And it proved its weight in gold down the road.

How did you realize that? Was it because you were part of companies that got acquired?

Yeah, because I experienced it myself that this really sucks.

Yeah.

That if I'm not there, I'm not really as effective. I'm not as plugged in. I don't always know what's going on. And it's a horrible feeling. That's why a lot of people leave after an acquisition is because they just feel so disconnected. Right. There's even talk in the office like, Oh, in Santa Clara, they do this.

Right.

It's they. Yeah. It's not us.

It's not us.

Right? It's us versus them, and different offices would do this against each other. And we— not only did we try to hire people wherever they are, but we actually started enforcing it at some point because we noticed that, oh my God, you know, we hired this great guy in Seattle, and then he hired all his friends, which is great, which is what we want him to do, but now you have this cluster of people in Seattle and it becomes like us versus Seattle if someone else is in New York. Yeah. And it's like, okay, we got to like try to break this up and bring more people into that team that are specifically not in Seattle so that they have to integrate other people because we literally found this. Oh, they went to lunch and decided on this. Yeah. Didn't think of like, let's have a call with everyone else who's remote.

Yeah.

Because they had enough of a quorum in Seattle to do this. It's like, okay, we got to push the team to hire in other locations so that they wouldn't even think of doing this.

Right.

Because enough people are outside of that local area. And you want to do this across all teams, not just engineering, not just technical teams, but obviously sales is always really distributed, but, you know, HR, finance, all these functions, if you push them to be distributed, then you have really distributed culture as a company.

And how do you instill operational practices across a large company, especially back in the day when there wasn't tools like we have today? Like, I don't know if Jira existed and Slack integration.

Not Slack, but Jira.

But not at the level it exists now, I feel. So how do you instill a good operational system across a distributed company?

So it takes more effort. So on one hand, you get the benefit of it's easier to scale. You can hire all these amazing people. On the other hand, you take some of the productivity hit from that. Now, you hope that you compensate for it with the talent that you get. And then the other thing that is really important, and again, I come back to this, distributed is not remote, right? And it's really, really important to get people together once a quarter. Not the whole company, you know, we did a few all-hands in person and then it got very, very expensive very quickly once you get to a couple hundred people flying into one place. But what we did is we said every team, particularly technical teams, but really most teams, We need to meet every quarter in person. And one thing that I pushed for is with the CFO is like, let's just give them a budget, whatever we think is reasonable for a team all-hands budget. And then let them decide where they go and how they do it. And it became actually a very interesting competition between teams of who can go to the coolest place.

Wow.

How do we, you know, we've got this budget for, I don't know, $15,000 for, you know, 6, 7 people. Let's go to Hawaii. But to make that dollar stretch, like, we're flying through 3 connections, we're staying at some motel, but we don't care because we're in Hawaii, right? And it's an incredible experience even though you're not like wasting a ton of money. And, you know, initially there was resistance of like, we can't have people going to Hawaii. I'm like, why not? Like, you know, the budget is a budget. If we think that we can afford it within this budget, I don't care if they're on the moon, right? As long as they get there in time and are productive at an offsite and have a little bit of fun along the way, makes them even happier, right? And it became something that people would look forward to of like, oh my God, we're having an offsite in Portugal. We're having an offsite in Hawaii. But it's actually at a very reasonable cost because they themselves— the company is not trying to figure out how to make the budget fit. The team decides.

Yeah. We do something similar. I mean, we have probably 80 people that work in the Philippines, and they get together once a quarter. I've never been there for that get-together, but some of our other executive team members have been, and it's always like an amazing— I'm jealous I haven't been there, but I could see the culture that gets built from doing things like that.

I totally—

sounds really cool to be able to allow people to make a decision on where they want to go and how they want to do it and fit it in a budget.

That's right. And then, you know, obviously when you do that offsite, you have to look at what happened last quarter, what are the highlights, what are the lowlights, how we're going to correct. Some of these mistakes going forward? What is the plan for next quarter? How do we allocate the responsibilities? How do we make sure we work together with the touchpoints? So you help them figure that out. And you can't really do that over Zoom. You have to bring people together. So, but if you do it in small enough teams, it becomes a way to build culture from the bottom up.

Do you— were you guys some of the first people to build a company in that way? That was, you know, so early on.

I think so. I, you know, we didn't do a lot of investigations of what else, uh, you know, was being done out there. Uh, but you know, this was long before COVID obviously. This was long before Zoom, so it was pretty unheard of. And I know that every time we talked to investors as we're raising various rounds, they're like, what? Like, you have people all over the place? Even the entire executive team is distributed? How does that work? Like, yeah, people were really surprised.

Yeah, for sure. At what point did you know, like, okay, we're on to something really great here in the, in the company's history.

So it took 4 or 5 years for, uh, I mean, I knew from the get-go that this would be very successful, uh, and there was clearly demand for the product. And, uh, we started selling services initially to help people that have been breached while we were building the product. And this is actually one of the lessons I learned the hard way is don't be stealth for too long.

Yeah.

And we actually were the worst form of a stealth company because we were stealth in the sense that no one knew what we were doing, but we were in the front pages of newspapers all the time talking about the breaches we were uncovering and investigations we were doing. So people knew that we existed and no one knew what we were working on, which is this technology to help stop breaches. But because the public piece of the company was the services business of responding to an intrusion and helping to clean it up and figure out what happened and then intelligence around it to attribute the threat actors, people thought that we were services business.

Right.

So when a couple years after the founding, we launched the technology, people thought that either we pivoted and the competitors actually used it against us. So like, oh, these are services guys.

Yeah.

They just decided to build a technology. Well, no though. Whole company was a technology company with a little bit of a services division.

Yeah.

And then it took us a few years to kind of undo our reputation of even with customers thinking, oh, we're just services, we don't have a technology, we are not a product company. And it took a lot of effort to, a lot of changing messaging to be like, and actually de-emphasize some of the other stuff we were doing to make sure that people knew we're a product company, We've always been a product company. That's our DNA. Yeah. So it was one of the hard lessons of don't stay stealth too long. And really, I tell founders all the time now, people have such huge pride and ownership of the idea that they come up with and they think, I got to be so secretive about it because God forbid a competitor finds out. Yeah, they're going to beat me to it. And guess what? If you had that idea, 1,000 people around the world had the exact same idea, right? Ideas are a dime a dozen. What differentiates you is the execution. And sure enough, like literally within a couple of years of our founding, we had dozens of competitors popping out of nowhere trying to do basically what we were doing. Yeah, right. So being stealth didn't help us one bit. Actually hurt us.

Yeah.

And that's— that secrecy was, was quite counterproductive.

Yeah. We, funny enough, went through a similar situation. Not that they were stealth. My company, Zendrop, we, you know, we have a platform with, you know, over 4 million Shopify merchants have signed up and it's very much has the reputation of being a platform for beginners. But our core is that we service large e-commerce merchants and we have a very, you know, we have a private agent program, but all the big merchants just see us as the beginner platform. So trying to change that narrative is a hard thing to do.

Very hard.

And it's like you might as well start telling your narrative from the start. I could see how that would be really helpful. So was there any kind of thing early on in the, the foundation of the company, like, you know, a large breach that you guys saved or something that happened that was like a total game changer?

Yeah, it— there was one moment, and I have to get a little bit technical here to describe it. Basically, when we're facing this problem that people really hadn't encountered before of nation-state intrusions, right? Before kind of 2010, 2011, people thought that the biggest problem they had in cyberspace was criminal groups.

Yeah.

Who were just trying to steal your money, trying to steal your bank account, your credit card, and either as a consumer or as a business. And when China comes along and is breaking into companies to steal their intellectual property, their trade secrets. It's a very different beast in two ways. One, you're dealing obviously with a much more sophisticated actor that has incredible resources, thousands of people, and enormous budgets. But even more importantly than that, their approach to breaking into organizations is very different from a criminal group. A criminal group, basically doesn't care about who the victim is, right? As long as they can monetize their take. I don't care if I break into you or your buddy, whoever is easiest and fastest, right? So the old adage and the old approach in cybersecurity had always been you don't have to outrun the bear. You just have to outrun the guy right next to you.

Yeah.

Right? Because if their security is less than yours and your bar's high enough, you didn't have to be perfect. They're gonna move on to someone else because it's just not worth the effort.

Right.

And with the nation-state actors, that paradigm was broken completely because if the bear really wants you, it doesn't matter who else is running, right? And if there is some pain formula the Chinese are trying to steal that only your company has, it doesn't actually matter that your competitors have a really shitty cybersecurity program. What they want is what you have, not what they do, they have. So when we started the company and I was thinking of like, how do you actually approach this threat where the persistence is the challenge that, you know, with cybercriminal, you stop their first attack.

Yeah.

Attack, you know, they kind of move on. They're like, this is too hard. I'm not gonna waste my time trying to find other ways. With a nation-state intrusion, they stop the first thing, they don't stop. Yeah. They're like, how do I go around the back? How do I go through the window? Because I really need you And I was given an order. And you know, a lot of these guys are military guys. You're given an order by your officer to break into this company. Like it's not acceptable to be like, "Sir, that was kind of hard. I decided not to do it." Right. In any military, that's not something that's gonna be accepted. So to do that, we said you have to get full visibility into what's going on. You have to basically take a security camera approach equivalent in this technology to record everything that's happening from an execution perspective across the network, across all these machines, send it to the cloud where we can analyze it with both people and technology and basically assume that someone has been hacked and find the attackers as quickly as possible before they achieve their objectives and eject them out because the assumption is they're going to get through. They're going to find some way they can bribe someone. They can— They can find an insider, they can find a zero-day they've never even heard of, which is, you know, an unknown vulnerability. And that was the way to approach the nation-state problem. And that's what we built and were very successful in the early days against that problem. But of course, the market was not just companies that were facing nation-state threats. The market was bigger than that, including all the people that were dealing with cybercrime. And they just wanted an easy button of just stop this threat.

Yeah.

And we knew that we would eventually build that capability in. You know, again, our vision was we would one day replace McAfee. We would start with a problem that they weren't solving, the nation-state problem, and then build other things. And the assumption we made, which was a correct one, is that we're going to solve the hardest one first.

Yeah.

And then the other stuff would be easy down the road. And also having come out of McAfee, I had a little bit of a blind spot because I knew how attached people were to this technology. It was one of the largest cybersecurity companies in the world. As the old saying about IBM goes, it was about McAfee as well. No one ever gets fired for buying us because of the brand. Even if they knew it sucked, even if they knew it was slow and it was ineffective, they would still buy it. Yeah. So what we wanted to do from the beginning to make the sale easier is not replace them, but be additive and say, you know, McAfee is not protecting you against nation-state threats. You really care about your IP being stolen? Buy us in addition to that. And knowing that one day, 3, 4 years from now, we'll come back and say, by the way, we do everything that they do now.

Yeah.

Just remove them. You don't need them anymore. Well, there was another company, competitor that came along that decided to attack the cybercrime problem head-on and basically build a better antivirus using AI and machine learning and something that we had on our roadmap from the beginning but thought that A, we didn't need to rush into it because it would be such a hard sale to convince people that McAfee was no longer effective and that we as this new startup were actually worthy of replacing them completely. And this company decided, you know what, we're gonna raise hundreds of millions of dollars and we're gonna spend them on a huge go-to-market campaign to convince the world that the old antivirus like McAfee and Symantec no longer works and that the new model is machine learning and AI. And they did that and they had this unbelievable tour, what they called it, around the world. They had airport ads, all kinds of things. And we, to be honest, we kind of laughed at them early on of like, this is never going to work. People are very skeptical. They're very entrenched in their thinking about this. It will take a decade before they decide that, you know, to move on from their legacy technologies. And we were actually surprised by their success. And oftentimes, we'd go into a customer pitching them just we're additive to McAfee. And we're going to do a better job on this nation-state problem than McAfee. And they would tell us, we already bought your competitor and we replaced McAfee because they say they do it all.

Yeah.

And it's easy. And we're like, you replaced McAfee? Like, you know, I thought that was like in 10 years maybe you'd replace McAfee. You did this today? Like, yeah. And it's working great. And this was around 2014, 2015. So kind of 4 or 5 years into the company. And we realized, okay, this has become an existential problem where these guys are doing what we originally wanted to do. They're doing it now. They're spending a ton of money on go-to-market and sales. They don't do a good job on the nation-state threat, but their marketing is good enough that people are like, ah, I'm just gonna try it out. It's AI magic. It's gonna work. And we had a crash program where we stopped the whole roadmap of the company for a year and said, we're going to build what they did. We always had the plans to do so, but now we accelerate it. And then we came out the following year with now a comprehensive solution that could fully replace the antivirus that did the nation-state thing. And then we crushed them.

Well, I mean, if people believe you can solve the nation-state problem, then it's like, well, if they could do that, they could probably do this way better than anyone else.

Correct. And then we knew we had the product-market fit. We dramatically ramped up sales hiring. Hired hundreds of salespeople, and that's when it went like this.

So the existential threat led you to pivoting to focus on something that made your company grow really quick.

Correct. I mean, and again, like you said, pivoting, like that was always in the plans. We just brought it forward significantly. But yes, you know, realistically, that competitor probably dramatically accelerated our IPO timeline.

Yeah. In the moment.

Didn't really have to sell.

Yeah.

And we were the ones that stuck, stuck around and became public.

So I want to talk a little bit about the nation-state kind of objectives. When you say they want to steal a company's IP, are you saying there's groups within the Chinese government that want to go and take technology from American companies and they'll do whatever they could to do that? Like, how does that—

Absolutely right. And they've been doing it for 25 years. And not just China, but Russia, North Korea, Iran. And these are parts of intelligence agencies. So they have their basically equivalents of CIA and some of the other intelligence agencies, NSA, in China, in Russia. And they have that mission. You know, in our system, what CIA and NSA does is they go out and steal secrets from countries to help us understand their intentions, to help us secure our country. And our adversaries, they do that as well. But they also say, you know what? Our objective is actually to help our domestic sector. And we are gonna break into foreign competitors of our domestic companies and steal whatever they've got and give it to our domestic companies because we want them to win, right? We're gonna steal price lists, we're gonna steal their customer data, we're gonna steal their source code, we're gonna steal their, you know, car designs, whatever it may be. And we're gonna give it wholesale to our national champions. Wow. To make them compete.

Wow.

And this is part of the reason why you now have these amazing companies out of China like Huawei and others that are literally leaders in, in their respective fields. In most of these cases, it was built on stolen IP. Yeah. That was given to them by their government and to the detriment of American companies. And I coined a phrase back in 2011 when I started stumbling upon all of this, that there are only two types of companies. Those that know that they've been hacked and those that don't yet know.

Yeah.

But they've all been hacked. And I also said at the time that this is the greatest transfer of wealth in history. Literally trillions of dollars of incredibly valuable intellectual property and trade secrets are being sucked out of our country and our allies as well and moving over to China to help their industry. And at the time, I remember after one of my investigations, I was still at McAfee before starting CrowdStrike. I was in the Situation Room of the White House briefing National Security Council members on the latest hack that I investigated from China, where they're breaking into yet another major company, major industry, stealing everything they've got and getting really frustrated that they were sort of sitting around the table taking notes of like, yeah, that's sort of interesting. And I'm like, you know, guys, are we going to do anything about it? This is like unbelievable. This is economic warfare.

Yeah.

That is being waged against our country. And the senior person literally looks at me and says, "Dmitri, don't be so naive. As long as they keep stealing, they can't innovate." And I was like, "What?" First of all, that's incredibly myopic. It is ahistorical because throughout history, some of the greatest companies have been built on, and industries have been built on theft and then innovated. Down the road. Steve Jobs famously said, "Good artists copy, great artists steal." Yeah. Right? The textile industry in the United States in the 1800s was almost wholesale imported from Great Britain and then crushed Great Britain.

Yeah.

And we became the textile capital of the world until, you know, Asia came along a century later. You know, you look at national security matters, the Russians, of course, the Soviets stole the, atomic bomb secrets from the Manhattan Project. Wow. But then they actually designed the hydrogen bomb all on their own before the United States did. Wow. Yeah. So of course, when you're stealing, it is helpful to you. It does not prevent innovation. You know which routes not to take, which R&D paths have already been tried and proven to fail. You can build upon the work of someone else.

Yeah.

And get much further. And that's exactly what the Chinese were doing. And in addition to kind of stealing the fundamentals of the technology, they were stealing also the go-to-market secrets. Of like, this is the price list of this company. Let's undercut them. Or they're negotiating, this is their bid on this project. You know, one of the hacks I investigated was into Western oil industry where they were hacking into all these oil companies, looking at their bidding for exploration projects and undercutting them around the world.

That's crazy.

So like, of course that's gonna be incredibly helpful to them. Of course they're gonna succeed at that. And sure enough, you know, here we are, I guess 14, 15 years later and they're becoming the dominant player in automotive sector, in telecommunications, in energy. And a lot of that was built on theft. But now they're no longer just stealing. They're still stealing, but now— Now they're innovating. —they're innovating as well. And you look at their electric cars, they're objectively better than anyone else's in the world. A lot of that foundation built on theft, but improved since then. And the government was unwilling to do anything about it.

If you look at that at a macro level over long term, that can be the difference between the global leaders.

Absolutely. And you know, this is why I wrote this book, World on the Brink, about the fact that we're in a cold war with China. We have been in this cold war for decades without realizing it. The Chinese knew. Yeah. And part of it has been this economic warfare that they've been waging against us to the detriment of our companies to help their own.

So how did you go, how did you get into the political side of this? What was the moment where you're like, I want to step up and really learn more about the politics and—

Yeah, well, not politics, geopolitics. So I'm not in, you know, bipartisan politics, but— Right. I've always been interested in this. And in fact, in college, I, even though I was sort of a tech nerd focusing on cyber and computer science, I got really passionate about international affairs, took a ton of courses, almost double majored, but wanted to actually graduate. So didn't quite complete that, all the requirements. But That was always a passion of mine. And then really in 2010 and 2011, when I started doing these investigations into all these nation-state activities, and I was literally the first person to start doing that in public, highlighting that, wait a second, it's not just cyber criminals, it's not just some guy in a basement hacking your grandmother, it is Chinese military, Russian intelligence services, Iranian IRGC, Revolutionary Guard, they're hacking into our private sector companies. Stealing everything that's not bolted down. And the reason they're doing that is to advance their country's strategic priorities, right? Economic and national security. Right. So another phrase I coined at the time is that we don't actually have a cyber problem. We have a China, Russia, Iran, and North Korea problem. Geopolitics is at the heart of this. And by the way, today we still have a China, Russia, Iran, and North Korea problem, not because other countries don't have cyber capabilities, But I don't worry a lot about what Singaporean military will do to us because we have a good relationship and they know better, right, than to use it offensively against us. But the 4 primary geopolitical foes that we've got— China, Russia, Iran, North Korea— are also the ones that are going to use cyber in this asymmetric way to harm us. So that was when my 2 worlds were brought together again, my passions of international affairs and cybersecurity. And it also, I think, was incredibly valuable for me because cyber in many ways is sort of a canary in the coal mine where it gives you insight into another country's capabilities and intentions long before it becomes apparent in any other way. So because what I was seeing in cyber from all these different actors, I was sort of trying to, you know, sort of stomp on the table and scream like, We got to do something about this. This is much bigger than, oh, they broke into Google and accessed some information. Right. There's a national security impact to this that down the road will be incredibly harmful to this nation. And that's, that's when—

So that's, that's— is that why you wrote your book? Because you realize this, you were talking to people in the government and people were kind of, yeah, we get it, but not— you said, hey, I need to consolidate all this into a—

well, the book. So I ended up retiring from CrowdStrike after we took the company public in 2020. And because I spent literally the last decade fighting every day Chinese, other countries as well, but China by far the most active country, Chinese intrusions into all these companies around the world, I became very passionate about the fact that this is a new Cold War. Cyber is just one of the battlefields that they're fighting us on, but there's obviously military, campaign, particularly around Taiwan that they're very interested in, South China Sea. There's all these investments that they're doing around the world, opening up ports in Latin America and Europe and Africa, mines in Africa, et cetera. So there was a— there needed to be concerted effort to confront China and develop a strategy for the Cold War. So I opened up a think tank after leaving CrowdStrike called Silverado Policy Accelerator. To work full-time on these policy issues to try to move government policy along on all elements, not just cyber, vis-à-vis this Cold War with China. And then I ended up having a little bit of a detour in late 2021 because I was born in Russia, I was an immigrant to this country, but still kept my close eye on what was going on there. And late 2021, I started noticing something very different happening on the borders of Ukraine. With the Russian military buildup and rhetoric coming out of Moscow. And I made a prediction, very public prediction on Twitter, as X was called then, wrote a very long thread that got retweeted like 15, 20 million times that I believe that Vladimir Putin will invade Ukraine before the end of this winter. This was like in mid-December of 2021, about 3 months before the war. And here are all the reasons why. And was really one of the first people in public to say that. And I started writing this book on China on February 24th, 2022, the day of the invasion, because even though I made that prediction 3 months earlier, even though I became completely convinced at that time this was going to happen, when the war began, was actually began on February, the night of February 23rd Eastern Time. And I was communicating with people in Ukraine. I was getting some of the early videos of missile strikes and the troops coming across the border. It was still a huge hit of like, you know, when you know something's coming, but it happens and you're like, oh my God, I can't believe this actually happened. You know, I knew this would happen. Yeah, it's still a shock to your system. And I sort of spent the day reflecting, well, one, following closely what was happening, but also reflecting on my prediction, what I got right, what I got wrong, and sort of decided to write systematically the causes of the war, why I became so convinced that this was taking place, and narrowed it down to basically 5 reasons why Putin wanted to invade Ukraine, why he did it at the time that he did. And I look back at the list and I said, oh my God, this is the exact same list that I can apply to Xi Jinping and his desire to take Taiwan. Yeah. Now, it's not happening immediately. Unlike with Ukraine, we only had a few months of really warning and conviction that this was going to take place. Taiwan is a longer-term objective. We've got some years before I think he's capable of doing it and he wants to go for it. But that is going to be a much bigger deal than even the war in Ukraine. And that's what motivated me to write this book as sort of an alarm bell of this is coming. This is why I believe he wants to do it. This is a strategy to deter him. Yeah, it is a comprehensive strategy that's looking at the economic dimension, the military dimension, the diplomatic dimension of how do we make sure that we remain a global superpower, that we don't cede our place to China. We remain the greatest economy in the world, the innovation engine of the world. We have the greatest military that can deter any action against Taiwan and why Taiwan is even important, right? So the book is actually the context of the book is this Cold War with China. It's the threat to Taiwan, but it's about AI, it's about chips, it's about cyber, it's about critical minerals, all the different— it's about military capabilities. It's about all the things you actually need to win this Cold War.

And most people think about Taiwan, they're like, oh, it's just like, who cares if they take Taiwan? What are just some of the highlighted reasons?

Yeah. So really the right way to think about Taiwan is first and foremost as an absolutely critical cog in the global economy today. Right. So oftentimes you hear it, read in the media statements that Taiwan produces 95% of all advanced chips roughly. And that's absolutely true. TSMC, Taiwan Semiconductor, is essentially today has a monopoly on production of advanced chips. So why is that?

Just, just, just curious, why aren't other countries producing chips like Taiwan does?

So other countries are producing chips. The advanced chips are the ones that really lend themselves to a monopoly, right? So, you know, you go back 25 years or so, you had maybe, you know, half a dozen, maybe 10 companies are producing chips at the leading edge, the most advanced chips. 5 years ago, you had 3. It was Intel, Samsung, and TSMC. Today it's one, it's TSMC, and the others are falling further and further behind trying to desperately catch up. And the reason is that to be at the advanced level requires enormous capital expenditures every single year, right? The cost of a new fab, for example, is $20 billion. Wow. And you have to keep building them over and over again. So it requires enormous cash outlays, which requires a huge customer base to keep financing. And most people can't keep up on that treadmill. Right. And that's why many companies— so AMD, you know, in the '90s was a producer of advanced chips. They were designing them and then producing them. And the early 2000s said, you know, we're just going to get out of this production game. We can't keep up. Yeah. It's much better margins for us to invest in just the design. We're going to sell off the production business. And you know what? TSMC now produces their chips. And the unique thing about TSMC, when Morris Chang started the company in the 1980s, is he saw something And actually he would tell you these days that it was more luck than anything because he knew that he couldn't compete with established players like Intel in designing chips and manufacture them. And he said, you know, I think there's gonna be big market for companies that just wanna do design and want someone else to do the manufacturing. And I'm gonna be the ones, the one company that just manufactures for everyone else. Doesn't compete with anyone. And the more customers I have, the better economies of scale I have. The more cash I have to reinvest and get better and better. And that's exactly what he did. And for the first 10 years, it was really, really hard because there were almost no companies. But you know who was one of his first customers was? Who's that? NVIDIA. Oh, wow. Right? NVIDIA comes along, Jensen Huang, Jason Huang, and he says, I need to manufacture GPUs for games. I think gaming is gonna be, this is before AI, gaming's gonna be a big market. And I'm not gonna build a fab. I don't have the cash for that. I don't have the expertise for that. Hey Morris, would you manufacture my chips? And then others came along and then it became sort of this self-licking ice cream cone where they got bigger and bigger and now really have this big monopoly. But I think the market itself lends itself to someone winning it like that because of the enormous costs that are required to keep up with it. And all the others like Intel and AMD back in the day and so forth, they weren't manufacturing chips just for themselves. Yeah. Right? And that's not enough of a demand to keep reinvesting, right? So you have to have, you know, a foundry is what it's called to manufacture third-party chips. So Taiwan basically has a lock on advanced chips. And what are advanced chips? So these are your AI chips, right? Pretty important these days. These are chips that go into your phone for the processing memory, the baseband controller talks to the cell tower. These are your chips in the cloud. That are running your workloads. These are chips in your computers, in your laptops and so forth. And that's essentially it for advanced chips, a few other minor purposes. But then there's this whole world of all the other chips in the world. They're in your microwave, in your refrigerator, in your cars, thousands of them in each of those devices, right? In your weapon systems. They're not advanced. They're what's called foundational chips. They're advanced chips. People typically, and it's kind of fuzzy line, but people basically say that anything below 18 nanometers, and then that typically traditionally has referred to the distance between transistors within the chip on a silicon. So it keeps shrinking. That's how you put more and more transistors onto that silicon. So 18 nanometers? Below 18 nanometers is where kind of—

Just for context, how small is that?

Yeah, so today, like, the most advanced chips are at 2 to 3 nanometers. They're about to come up with 2-nanometer chips. It's about a 1/20th of the width of a human hair. Wow. So really, really difficult stuff to do, right? And— but the foundational chips are— is everything 18 and above. And actually, a lot of the world is actually foundational chips. So even if you look at this phone, I mentioned it has 3 advanced chips in it, the Apple chip that runs it, the memory from a company called Micron, usually baseband control from Qualcomm. There's about 150, 160 other chips that are foundational on this phone that control the power and the battery, that control the Wi-Fi, the accelerometer, the GPS, the screen, you know, all those things that actually make it a phone. Yeah. And these are all foundational chips. And Taiwan produces 40% of all those chips. Wow. So what percentage of the advanced chips? 95%. Wow. So they basically have a monopoly, close to monopoly on advanced, but also 40% of all chips, period, are in Taiwan. So if Taiwan were to go dark in the event of conflict, you have a global depression. Yeah. Economic depression right off the bat. Right. Estimates are 5% GDP contraction. A lot of leverage they have. So, and in a conflict, nothing gets exported. And by the way, Even if you think about sort of the very best-case scenario for China, you know, you have a one-day war. It won't be a one-day war, but just, you know, for the sake of argument, you have a one-day war where the Chinese target the power systems in Taiwan, the electricity, to, you know, kind of neutralize their air defenses and, you know, power to the military, and the Taiwanese just surrender. They won't. But like, just for the sake of argument, we have a one-day conflict. Power goes out and then it's over. Well, when that power goes out for one day, the generators kick in at TSMC fabs. They can't run. They don't have enough power to run for one day. Power goes out and the entire production line of all the chips has to be thrown out. Wow. It takes about 9 months to make a single chip. Wow. So basically for a year, that whole supply of chip is gone. And that's like if it's a one-day conflict. And that's if, you know, those fabs aren't being damaged, the people aren't killed. Right. So just like a huge power outage like that, absolutely devastating to global economy. And by the way, in addition to chips, you know, we talk about TSMC. There's another company called UMC in Taiwan that manufactures foundational chips. So it's not just TSMC. And then in addition to that, you have a huge microelectronics industry in Taiwan that's doing packaging and assembly of these microelectronic boards that go into various things. So it's not just the chip itself. There's a huge industry around it that the world is highly, highly dependent on. So that's one reason why Taiwan is important. The second reason is really geopolitical. So if you look at the map of Taiwan and China, the standard map, this huge landmass that is China, one of the largest countries on Earth, and this tiny speck of land, an island off its shore, that's Taiwan, you might say, well, I can see why it matters to them. Why does it matter to the rest of the world? Yep. And the right way to look at it, and I actually have this map in my book, is if you rotate the map sort of in Google Earth like 90 degrees, put China on top and take their perspective of looking out at the Indo-Pacific and also take the appreciation of their history, which is that for much of human history, China was the world's most powerful country. Most populous, most richest. And they only lost that mantle to Great Britain during the Industrial Revolution. Oh, wow. A few hundred years ago. Right. Right. And then obviously to the United States. And to them, that is a complete aberration. And in fact, you know, part of why that happened, not the only reason, part of it, and from their perspective, the whole part, is these Opium Wars that Western colonial powers waged against China, the unequal treaties that they forced on them to give up Hong Kong, give up Macau, all the things that happened in the 1800s. So the Chinese talk about a century of humiliation that they suffered. Wow. At the hands of Western powers. And it is ingrained in their ideology that we're now reversing all that and reemerging to our rightful place as the world's preeminent superpower, right? So think about it in that context of their thinking. And then also think about What is at the root of Chinese power today? Well, it's their economy and their economy and the entire nation is highly dependent on two things. It's dependent on imports of raw materials, energy and food. Yep. That they don't produce enough domestically, mostly coming in through maritime sea lanes. And it's obviously dependent on exports of manufactured goods to the whole world. Right. That is also leaving Chinese ports on ships going to the rest of the world. And for that to be safe and secure, you need to secure your sea-based lines of communications, your supply chains, just as the United States did 150 years ago, 120 years ago when we became, started to emerge as a global economic superpower. We realized we're not just trading within the states of the United States. We want to trade with the rest of the world. And we need to build a blue water Navy. Teddy Roosevelt built the White Fleet that went around the world that sort of established to the world that America has arrived. And we have global interests and we're going to establish coal stations around the world and secure those trade routes for American goods and American imports from the rest of the world. And China sees that and says, we want to do the same thing. It's literally the blueprint, right? But here's the problem we have. When we look at this map, to our left, to our, to our east, we see Korea, the Korean Peninsula, half of which is South Korea, with 28,000 American troops on there, with Air Force bases, naval bases, some radar installations as well. Yeah. Further down in the arc, we see the Japanese islands, the headquarters of U.S. Naval 7th Fleet, Marine Expeditionary Forces in Okinawa. Highly capable allied Japanese Self-Defense Forces. On the other side in South China Sea, we're enclosed in part by the Philippines, where for the first time in 30 years, you have 9 American military bases on that island. Yeah. Bringing in long-range missile systems that can range China, bring in Marines there that are enclosing us. And then at the very center of the so-called first island chain is Taiwan. That is the cork that keeps us bottled up really at the intersection of East China Sea and South China Sea. So for our ships to be able to go out and deliver goods or import goods from other places, they typically have to go through these naval passages that are controlled by the US Navy. Right. And our allies. Yeah. And as a country that believes that it's going to reemerge as the world's primary superpower, that is completely unacceptable. Right. And something that presents a mortal threat to them. So that containment that they're in is a huge problem for them. And by the way, the other problem that they face is that really in modern day to project naval power, you need submarines, right? Surface ships are becoming very, very vulnerable, very easily identifiable. And China has a problem that all the waters around its shore, both in East China Sea and South China Sea, are very, very shallow. So it's very easy to track submarines as they leave Chinese ports. And go through South China Sea. In Taiwan Strait, for example, the depth of the waters is only 300 feet. Okay. Trivial to, to track a submarine that's in there. But on the other side of Taiwan, on the western side— sorry, on the eastern side, on the other side of the first island chain, the depth of waters is 12,000 feet. Ah. And it goes down even further from there. The Pacific is the world's deepest ocean. So if you take Taiwan, not only do you escape from this containment you're in, But if you build naval bases and submarine bases on the eastern shore of Taiwan, you now have an opportunity to project power across the Western Pacific and now turn the table on the United States where they can now interject our supply routes to Japan, to Korea, to the Philippines, and push us out of that region all the way to Hawaii. Wow. And become the regional hegemon. Wow. And that becomes a very attractive proposition for them. And that is why even if Taiwan had no chips, even if you didn't care about the people in Taiwan and their democracy and all of that, it is an incredibly strategic resource for not just the United States, but other countries in the region. The Japanese prime minister this very week said in a publication in Japan something that's obvious, but no Japanese prime minister actually explicitly said before, that Taiwan security is Japan security effectively because they're so close. Yeah. And that if Taiwan falls to China, Japan's security becomes critically compromised and that if China invades, Japan would have to go to war with China. Wow. And in response, a consulate, Chinese consulate in Japan said she should be beheaded. Wow. And refused to apologize. Wow. So— Wow. And this is— so this is why Taiwan is not just about chips. People kind of reduce it to chips and chips are important for all the reasons we've discussed. But it's also vitally important to US national security if you don't want to enable China to become the regional hegemon in Asia, which, by the way, is a place where you have 40% of the world's GDP, most of the supply chains, most of the economic growth, really, really vital for our economic security first and foremost. But then China, of course, won't stop there. If they become a hegemon in Asia, they want to become the world's preeminent superpower. Right. And they're already. In Latin America, in the Caribbean, in Africa. Right. Imagine what they can do once they have this base from which to use as a platform for expansion.

The chips are a tremendous amount of leverage.

They're a tremendous amount of leverage, but it's not just about chips. It's not just about the chips. And my point is that in 1950, long before transistors were invented, General Douglas MacArthur said Taiwan, Formosa as it was called at the time, is an unsinkable aircraft carrier. It is vital to US national security. 1950, right? So 75 years ago, it was vital to US national security. It's even more vital today because at the time, of course, you already had the Red China, but it was nowhere near as powerful as it is today with the unbelievable military transformation it has undergone since then. It is even more important. And that is why Taiwan is essential. So that is extremely interesting.

Makes a whole lot of sense. I am curious, though. So there's kind of two components. There's the chips, which is a lot of leverage, right? If you, if you shut that down, that can have a whole economic collapse. And then there's the kind of military side of it where they can, you know, go undetectable, spread to the rest of the world. Why wouldn't the United States in the meantime be— I mean, you said it costs $20 billion a year or something like that to build the fabs. Why wouldn't we start building the chips in the US and spend a little relative to our national debt? It's not that much money. Why wouldn't we start moving that manufacturing here in the meantime?

So as you might imagine, you're not the first person to ask that question. And about 5 years ago, people started to get really serious about this issue, and particularly after the war of Ukraine, more and more people started waking up to the fact that, well, if Russia invaded Ukraine, China might really go after Taiwan. So in 2022, Congress passed the CHIPS Act where they allocated $52 billion plus about $25 billion in tax incentives, but $52 billion in direct subsidies to industry to help build an ecosystem for our chips production. And unfortunately, what they did is, as government often does, is they peanut butter it across all these companies, Intel and Micron. TSMC got some, Samsung got some. So the biggest award I think was to Intel for $9 billion. Yeah. Again, remember the cost of a single fab is $20 billion. So you're peanut buttering it versus doing what China does or Taiwan did in the 1980s. It's like one national champion. Yeah. All wood behind one arrow. We're going to do whatever it takes to make them successful. So that was one problem. The second problem is it took them 3 years, the Biden administration, to distribute this money. I was with the CEO of Intel, Pat Gelsinger, at the time. I want to say 2 and a half years ago at an event. And this was a year and a half into after the passage of the CHIPS Act. And he was telling me, listen, if they don't give me this money next quarter, I'm done. Like, I desperately need this money. And he didn't get that quarter. He didn't get it until a year and a half later. Yeah. And guess what? Intel is in dire straits today as a company. Right. So we waited too long. And by the way, on top of that, the Biden administration decided to also implement social policy as part of these grants. So it's like, well, you're not only going to build a fab, you're going to use union labor, you're going to build kindergartens, you're going to do all this stuff right there. Yeah. You know, so that was a huge problem as well. But the other issue is like the talent base is just not here. Yeah. The cost of labor in Taiwan, a fraction what it is here. Right. So in a fab, there's, you know, a number of people that are involved in running a fab. Putting it together, obviously constructing it. The most important people for running a fab is these process engineers that are basically, think of them as chefs that figure out the recipe for how to make this chip that takes 9 months to make, 1,200 different steps, how to mix these chemicals together, how to make sure you do this thing first and that thing, whatever. And not only make it, but make it with high yield. So to make a fab economical, you need to be in the high 90s, 98, 99%, 97% maybe of yield, which means that 97, 98% of the chips you make are good. And the others are trash, right? And remember, like 9 months, all these steps, there'll be some—

90%, you're out of business kind of thing.

90%, you're losing money. Absolutely. Because you're investing enormous CapEx into this thing. It's a very small margin of error. So you have to be— incredibly good at optimizing that process, ironing all the kinks out of this process. Really, really smart process engineers that are setting this up, continually optimizing it. Yeah. When you start, you typically start low and then you work your way up and try and do it as quickly as possible for every new process that gets developed. Virtually all these process engineers are in Taiwan. Yeah. The average salary of these people, guess what it is?

$100,000 a year. $45,000. Oh my God.

And these are like PhDs. Top, yeah, I know. So find me a PhD process engineer in the United States that's willing to take $45,000 a year. Yeah, it's impossible. Right? So you already have a huge disparity. So what's happening is, particularly with TSMC, which is setting up labs, fabs in Arizona and potentially Texas and Ohio, the administration wants them to do that, is they're building these fabs and they're not building them anywhere near as many not only is what they already have in Taiwan, which is enormous capacity, but they're building more in Taiwan. So they're going to build 7 fabs in Arizona over the next decade or so. They're going to build 10 in Taiwan at the very same time. Right. So you're always going to have more capacity in Taiwan. But also the fabs that they're building are being set up by process engineers from Taiwan that may come over, help set it up, but go back home. Right. And troubleshoot things remotely when they can or travel here. But, you know, imagine Taiwan gets taken over. Those people, you know, can't escape or don't want to escape and are an employee of China or die, whatever. And you now have very expensive warehouses that have been built with taxpayer dollars. Wow. Right. So, you know, we want to, you know, obviously have some self-sufficiency and we're going to have some, you know, the Trump administration has invested, has taken equity in Intel. Is trying to help them out because they're in such dire straits. But we're not, not going to be able to reach anywhere close to the production capacity of Taiwan. Right. So when the CHIPS Act was introduced in 2022, we had about 10% of the world's chips production in the US, and that would have gone to zero without the CHIPS Act. Wow. If everything works absolutely brilliantly about the CHIPS Act, and it already hasn't, Right. Far from it. But if everything had worked brilliantly, the best estimates were that we would get to about 18% of the world's market share from 10 to 18. Wow. Right. Taiwan has 40 and 95% of advance. Right. So there is just no way in the foreseeable future you're even going to catch up. Yeah. And it's going to take a decade. Yeah. Right. China may invade long before that. Yeah.

And with the rise of AI, you're going to need a higher demand for these advanced chips. I'd imagine because there's more data centers, there's more processing power.

Well, there's not enough of them. Yeah. And then does this—

are there any implications from quantum computing for these types of things?

No. And look, you know, quantum computing right now is kind of a fad. Yeah. You know, it's not real. I mean, if you look at the market, there's quantum computers, but nothing truly usable at scale. Yeah. And who knows? It may take decades before we get anything. So right now it's about both the advanced chips for AI, for your phones, for your cloud computers. Right. But also all the other chips. Right. So in 2021, you may recall coming out of COVID we had a shortage of chips because of two things. There was a rise in demand for microelectronics, people sitting at home buying all this stuff. And then there were a couple of natural disasters, some fires and other things in Asia that shut down production in a few fabs, in a few fabs. Right. Right. And we had this huge shortage of chips. And you literally had factories in Detroit shut down because they couldn't buy chips for the cars. You had new construction that couldn't get finished because you couldn't— get appliances into those homes. And that was just for a couple of quarters. Yeah. Right. That's dangerous. And it wasn't like it went to zero. It was just diminished supply. Right. Right. So that gave us just a tiny sliver of a preview of what could happen if Taiwan went offline. Wow.

So I'm curious, for you personally, you had to realize like, hey, if I become this whistleblower in this industry or in this world and I start becoming a thought leader and 20 million people are retweeting my tweets. Like, I'm a target by these other countries.

Like, they don't like me. Yeah. Is it dangerous to be you? Well, look, Russia sanctioned me in the first year of the war in Ukraine. So, you know, sanctioned, meaning you're not allowed to go there. I'm not allowed to go there. All my assets, which I have none in Russia, could have been seized. I had no assets there. So it's a little bit different being sanctioned by the United States.

How do you know that you got sanctioned?

So I actually found out from Twitter because they don't notify you, but they published a list of people that have been sanctioned on their Ministry of Foreign Affairs website. Yeah. Some people just tweeted, oh, Dmitry's on the list along with others. You know, General Petraeus is on it, a bunch of congresspeople, various cabinet officials. So it was an honor to be on the list. Yeah. So you get sanctioned.

But I mean, is it, is it fearful to be, you know, a leader in this space? Like, do you— are you scared of these other countries at all?

Well, you take precautions, but, you know, you, you live in the United States and, you know, I obviously don't go travel to Russia. You're not going to China. I'm not going to China. So, you know, I, I'm thoughtful about where I go.

Yeah. Do you think these other countries have people in our country that are intelligent you know, like, like a version of the CIA that are here as well? Or is it all cyber?

No, no, of course. So, I mean, they all have consulates, embassies that— and part of the personnel there is not just diplomatic but intelligence, right? Yeah. They're mostly collecting intelligence, but sometimes they intimidate people. You know, there have been FBI indictments just in the last couple of years of a police station that the Chinese opened up in New York City, a Chinese police station to basically intimidate the local Chinese diaspora, push people to come home by threatening their families domestically in New York City. Wow. In the largest city in America. Wow. Chinese police station here in Florida. There were FBI indictments of or reports of people affiliated with the Russian government trying to track down defectors from Russian intelligence services that were living here. Under anonymous names to try to kill them. Wow. So, you know, this is, this is serious. Yeah.

So what do we do as a country and what are you going to do to help the country moving forward?

Well, the biggest thing I'm trying to do right now is with this book, World on the Brink, to try to educate the public on the threat of China. Right. That this is as much of a— in fact, probably a bigger problem than the Soviet Union was during the first Cold War. The stakes are way bigger. They're way more powerful than the Soviet Union was, at least economically. And the stakes are even bigger because, you know, we didn't really have significant land disputes with the United States. The biggest one that's sort of akin to Taiwan was West Berlin, right? That they want to take West Berlin. It was surrounded by East Germany. That's why the Berlin Wall went up, right? Because you had all these people escaping. But As I write in the book, the Berlin Wall actually helped to stabilize that conflict because before the Berlin Wall went up, there was an incredibly tense period where we thought that the Soviets were going to invade West Berlin. We're going to go to war with them. President Kennedy at the time went on national television talking about the prospect of nuclear war coming and that people should be— if you remember the duck and cover drills from those times that you can find on YouTube. That really emerged from that period where people were building fallout shelters because they thought we were going to go to nuclear war with Russia. It wasn't because of Cuban Missile Crisis, which only lasted 13 days. Yeah, it's not enough to build a nuclear fallout shelter in 13 days. But the Cuban Missile Crisis came a year later, actually as an outgrowth of the crisis. But once the Berlin Wall went up, the crisis really stabilized because Kennedy even said when he was alerted to the fact that they started building the wall in August of 1962, he said, Thank God, right? 25 years later, President Reagan says, Mr. Gorbachev, tear down this wall. Kennedy said, thank God if they're building a wall, they're not invading. Right. Just to avoid a nuclear war. Terrible for East Berliners that are contained there. But, you know, nuclear war is more important. Avoiding it is more important. Of course. And even with West Berlin, the Soviets didn't have this ideological or strategic need for it. Right. It was much more about symbolism of this outpost of Western capitalism inside East Germany, but far away from Moscow, far away from the Soviet Union. Nothing like Taiwan. Right. And it wasn't the chips manufacturing powerhouse. It didn't have— the stakes were not nearly as high. The stakes were nearly not as high. And they didn't have, you know, claims on other lands that were super strategic to the United States and vice versa. Now things are way more dangerous because Taiwan is super important to China, super important to the United States and the world. And we are, I believe, on a path towards war. So we have to do whatever it takes to deter this conflict, right? When you think about the potential outcomes here, there are three. China invades and wins and takes Taiwan, disaster for us and the region and so forth. China invades and loses, doesn't take Taiwan, still enormous disaster, still global depression, still enormous casualties that we would suffer in a war with China, which, by the way, is a nuclear power. We have never in our history fought a nuclear power. Yeah, we would hope it would stay conventional. Yeah, but there's no guarantees. Right. So just unbelievably dangerous prospect. And the third outcome is they're deterred. They never invade. That is the Goldilocks scenario. If you remember WarGames, that movie from the 1980s, the best move is not to play. That's what we need to hope for. And for that to happen, we need to have a comprehensive strategy of how do we confront China in every area, whether it's economic, military, cyber, and work on containing them just like we did with the Soviet Union, preventing them from becoming a regional hegemon, preventing them from having a lot of leverage over us in things like critical minerals. Yeah. Last month they announced a complete export ban on rare earths to us and the whole world, which are critical for magnet production, which you need in jet engines and— Oh, wow. —warplanes and EVs, lots of things. Now, there was a truce that was established between Trump and Xi in South Korea some weeks later where they resumed that export control, but they showed to the whole world— Yeah. —the leverage that they have. Yeah. We need to get off that crack of critical minerals coming from China as soon as possible. We need to— by the way, same thing with our pharmaceuticals. So many of our drugs and precursors for those drugs manufactured in China. Right. Huge problem. Yeah. Right. They're increasingly becoming, after Taiwan, the second largest producer of chips. Wow. So we can't let them gain leverage on us there. Right. You know, it's bad enough to be reliant on Taiwan for chip production. Imagine being reliant on China. Right. Right. You're not going to manufacture a single weapon system. Right. Because they're not going to let you. Right. Right. So we need to do all of that decoupling and build resiliency in our supply chains. We need to make sure that China remains dependent on us for advanced chips, for AI technologies, so we need to win the AI race, for example, and we need to make sure that the hard power, the military power, will remain the most powerful naval force and air force in that region to deter conflict.

It's like a giant game of chess with 1,000 pieces on each side. Exactly right.

And you know how you win a chess game? I'm actually a very avid chess player. You don't win it by you know, having your opponent make a mistake and lose a queen or something. I mean, you can win that way, but at a high degree of player playing, that doesn't happen, right? Good players don't, don't make dumb mistakes like that. You win by making sure your opponent never has any good moves to play. Yeah, you completely contain them where any move they make, their position is going to be much, much worse. Yeah, that's how, you know, at the grandmaster level, yeah, they play. And that's what we need to do. We need to counter them in every single area and make sure that they can't make a move that doesn't make their situation worse.

Do you think China has an advantage due to the fact that they have the same president in office for a long time versus we're flip-flopping every 4 years and or every 8 years in a good scenario, changing things, going back and forth like that has to create massive inefficiency as a nation.

It does. So in the short term, there's no question that's a huge advantage for them. There's one strategy. We have a new national security strategy every 4 years. Is it really strategy if you keep changing dramatically, you know, when a new president gets elected? So that is an issue. In the long term, I think the democracy has a huge advantage because we can learn from our mistakes. We can pivot, right? We spent two decades fighting these forever wars in the Middle East. You know, we, we pulled out and said enough is enough. If you have a dictator that's personally invested in us, like what you're seeing right now with Putin in Ukraine, they're not going to pivot. They're just going to keep doubling down on a losing hand. And keep destroying the country's resources. So having a change of government where someone comes in and not only is not personally invested in the mistakes of the past, but may have actually run against it, is when you have an opportunity to change course, have the people say, you know what, that didn't work, let's try something else. That doesn't happen in dictatorial countries. Right. So in the short term, you get a lot of efficiencies. In the long term, you have stagnation. Yeah. And that's actually what's happening in China today. Xi Jinping has made a huge, huge mistake, in my opinion, because he threw out of the window the old strategy that was sent by the great Chinese leader Deng Xiaoping, who came into office after Mao, basically, and really is the modern father of the rise of China in the 1980s and the economy that it has today. Really has to do with Deng Xiaoping. He's the one that established the agreement with Carter to open up China and have Western companies go in and trade with China. And he had a saying in the 1980s that sort of the guidance to the Chinese people, he said, "Hide your strength, bide your time." Now, unfortunately for the whole world, in particular the United States, no one bothered asking. It was well known that he said that. No one bothered asking is, "Who are you hiding your strength from?" Right. "And what are you buying your time for?" Yeah. We're like, "We're not going to pay attention to that." Yeah. "They want our money. They want our money. They want our investment. They're going to produce cheap goods for us." Yeah, love it. Yeah, let's do it all. And Xi Jinping comes into office in 2012 and says no, no more. Show off your strength and hide— and waste no time. I mean, he didn't say that, but that's in fact what he's doing. Yeah, right. He's become belligerent. He is accelerating this timeline on Taiwan. Taiwan always mattered to China since Mao. They wanted to take it, but it was always sort of this distant goal of "one day we're gonna get it." Yeah. "Doesn't have to be now." Right. "Doesn't even have to be under my watch." Yeah. "We'll just make steady progress. We don't wanna anger anyone prematurely." We're not yet that powerful. Yeah. Xi Jinping, I believe, wants to do it on his watch. The man is in his 70s, right? In 2032, when his probably fourth term ends, he'll be 79. In the Chinese system, they don't tend to elect their leaders into their 80s, unlike ours. Yeah. So he may very well think that that might be the end date for his rule. And who knows, by that time, health concerns— he doesn't look like the healthiest guy in the world. Lots of things can come about. So I actually think that if he's going to go, he might very well go before 2032, which is not that far away. Yeah, right. And he is accelerating everything from military developments, building capabilities that he needs for invasion, to a huge focus on self-sufficiency, making sure that we become as addicted as possible Yeah. To the goods from China so that he deters us from intervening in case he invades. So, but I think he's done it too prematurely. China would have been much better off waiting another couple of decades, becoming the world's biggest power unequivocally. Yeah. They're still not that today. And then taking Taiwan, deterring the United States from invading would have been much easier. Yeah. We've been complacent. We wouldn't have mobilized the country the way we're trying to do right now to fight this threat. But he was impatient. And dictators are like that where, you know, they, they want things now. They want a legacy of it. I mean, presidents want that, too. But, you know, there's more constraints in a democracy from doing that.

It's got to be such an interesting balance to manage a relationship as the president of the United States managing relationship with the president of China. It's got to be such an interesting dynamic because, you know, like, we're friends with some of our competitors in business, but the stakes aren't that high. I mean, there's money on the line, but there's a lot of other competitors. Now it's like, this is about, you know, being the world power. How do you be friends but also be working behind each other's backs? How does that relationship play out?

Well, I don't think you befriend— they're an enemy, right? You can have respect for them, grudging respect. You can figure out a few things that you can work on them together. But most of the things you're not going to be able to work with them because China is very good at making you pay for everything. You know, President Biden used to say, you know, we want to work with China on climate change. Well, China had no interest in working with you on climate change unless you gave them concessions on things like Taiwan and other things they cared about. Yeah. Which we weren't going to do. So like, just don't even bother. Yeah, they're going to do what they're going to do if it's in their self-interest. And if it's in their self-interest, you don't have to convince them to do it. Right. It's in their self-interest already. Yeah. So like, don't try to bribe them with other things to make them do what they already need to do. Right. And just treat them like we treated the Soviet Union. It's an adversarial relationship. We need to contain them. We're still going to talk to them. Yeah. And, you know, we developed arms control treaties with the Soviet Union in the 1970s. Cold War didn't end. Yeah. We didn't think that they were suddenly friendly to us and we needed to bribe them. Yeah, it was like, you don't want an arms race, we don't want an arms race. Let's figure out a way to make the world a little bit safer. You know, we can try to propose some of those things to China. Right now they're completely uninterested. So, you know, I wouldn't waste a lot of my time on it. It's like, if you want it, come talk to us. You have my phone number. Yeah, but let's not bend over backwards. Yeah, try to please you. And the Chinese are very, very good and making us beg for— beg them for things that they should already be wanting to do. Yeah, right. We need to flip that dynamic entirely. They should be begging us. We are the world's preeminent superpower today. Yeah, we have the world's greatest economy, 25% bigger than China's on a GDP to GDP basis. We have this incredible alliance network. They should be afraid of us. They should be begging us for things, not the other way around. Yeah. And it's quite incredible that we often find ourselves in this position. Yeah.

It's just crazy that one human being can make a decision that puts the world on, on a brink, right?

Well, look, you know, one human being made a decision in 2022 to invade Ukraine with huge ramifications, not just for the region but the world. And one human being in China can make another decision that would be even greater in terms of its profound ramifications.

Well, I think it's incredible what you've done in your career, but I think it's even much cooler that you're now focused on things that can help our country thrive and help— I mean, at the end of the day, save lives and make life better for people here and avoid a catastrophic war.

Yeah. War with China. You know, just think about this one statistic, right? If one aircraft carrier is sunk, it's about 5,000 sailors. That will, that will die as a result of that, right? And China has missiles, the DF-22 ballistic missiles, that can— were specifically built as carrier-killing missiles. That, God forbid, one event would be the deadliest day in American military history. Wow. You know, before that, the deadliest day was basically D-Day. 2,000 Americans died. Really? Yeah, that was the deadliest day. Yeah. Wow. They're deadly battles over multiple days— Gettysburg, etc. But like on one day, wow, you know, 2,000 Americans died. Wow. One aircraft carrier is 5,000. Wow. So incredible stakes here. Yeah. Um, you know, I don't want a war with China or anyone else. But unfortunately, the way you deter wars is by being willing and ready to fight them and having capability to win them outright. Yeah. And we have to make sure that China knows that if they even think about going for Taiwan, they're going to get crushed. Yeah. And the stakes for them are actually very, very high. This is the one big difference between Ukraine and Taiwan, because the Ukraine project is all about Putin. No one in Russia really cares about Ukraine or cared about it. He could end it tomorrow if he wanted to, on terms that no one really is even going to care about, right? It's all an ego project for him, but it's not an existential one, right? His rule and power will be perfectly secure regardless what happens to Ukraine. That is not the case for Xi. The outcome Overtime one for China is binary. You either take it or you don't. And if you don't, it's probably the end of him. It's probably the end of the Chinese Communist Party rule in China. Huge stakes. Yeah. So before he goes, he needs to have a great deal of certainty that he can do this, that he can win. And the more uncertainty we can introduce in his mind, the better off we are. And the answer here is delay, delay, delay. Buy us more time. Right. Get through his rule, because maybe whoever comes next is not going to be as obsessed with this and is going to be willing to wait. Uh, I also believe passionately that China is on a decline. Their power has peaked. Their demographics are declining. Their economy is on very shaky grounds. It is an economy completely dependent on exports in the world that is becoming more protectionist— tariffs going up, not just in this country, but really everywhere in the world. It is highly dependent on raw materials. It's got enormous, enormous issues, and it's going to be very, very difficult to manage them going forward. And we have unbelievable strengths, surrounded by two oceans, the most innovative economy in the world. If we win the AI race, it's basically game over because the AI is going to be transformative to everything. And we have— talking back about chips, the choke point on AI, which is compute, right? You cannot build any AI models without massive amounts of NVIDIA chips or Google TPU chips and Amazon chips. And China has none of them. Yeah. Their chips are nowhere near as good. And by the way, the few that they have from Huawei were manufactured for them by TSMC. TSMC had to pay a huge fine. For letting them do that. They will not be getting any more chips from TSMC. We can absolutely have a stranglehold on their ability to procure compute and build any good AI models. They'll still have some chips and they'll build some models, but the gap between our model and their models can keep increasing massively. Yeah. And they'll fall far behind, which is going to be transformative not just to our economy and their economy, but to the way we fight wars. Militaries are the ones that adopt these technologies first, right? Yeah. So trivia question for you. What do you think was the most transformative technology in the last 100 years that most affected warfare technology? Not a weapon system, like fundamental technology and not nuclear, just maybe nuclear weapons aside. The internet? No. Was it electricity? Oh, yeah. And not because we're shooting lasers at each other. Right. But because it completely transformed logistics. Ability to plan, to fight at nighttime, to move people, to move resources. Like, all of that has completely revolutionized warfare, right? And AI has absolutely, absolutely has the potential to do that to the way we fight. It's not just about autonomy and drones sort of finding targets on their own. Yes, that will all happen. Yeah. But it goes to much more fundamental ways in which we organize, which we do logistics. Yeah. You know, there's a saying in the military that Wars are not won with weapons, they're won with logistics. Those that have the best logistics are the ones that win wars. So the way that AI can completely transform all of that, enormous potential. If we are the ones that corner this resource and not China, unbelievable advantages to us. And it all comes down to chips.

Yeah. Yeah. It's a very interesting— I learned so much and I appreciate you sharing all this. I'm definitely going to spend time reading your entire book after this.

And World on the Brink: How America Can Beat China in the Race for the 21st Century.

Yeah, really, really appreciate your time.

This was amazing. Thanks for having me. All right.