Episode 283

The Juice Is Already Killing Us

Jacob and Rob dive into the shifting mood in U.S. markets, as post-"Liberation Day" volatility gives way to a more constrained and uncertain fiscal landscape. They unpack the massive implications of the Trump administration’s budget bill, surging yields, and declining investor confidence. The conversation then pivots to Chinese biotech, where Jacob raises the alarm about America’s declining edge in R&D, regulation, and talent retention. What follows is a sobering look at cultural skepticism, institutional decay, and whether the U.S. still believes in scientific progress. It’s glum, sharp, and deeply thoughtful. They promise to be more cheerful next time.

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Timestamps:

(00:00) - Introduction and Episode Overview

(00:38) - Current State of the US Market

(02:32) - US Fiscal Policy and Economic Outlook

(05:58) - Comparing US and Chinese Economic Strategies

(16:41 The Future of US and Chinese Biotech

(33:05) - Challenges in Biotech and Med Tech

(33:46) - China's Capital Allocation Advantage

(34:43) - Impact Capital and Social Investing in the US

(36:37) - Historical Context of US Social Welfare

(39:31) - US Biotech Industry's Unique Position

(41:24) - Immigration and Talent in US Research

(45:04) - Public Perception of Science and Progress

(50:37) - China's Rise and US Decline: A Balanced View

(52:13) - Local Resistance to Tech Development in the US

(57:36) - Concluding Thoughts on US-China Relations

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Jacob Shapiro Site: jacobshapiro.com

Jacob Twitter: x.com/JacobShap

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The Jacob Shapiro Show is produced and edited by Audiographies LLC. More information at audiographies.com

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Jacob Shapiro is a speaker, consultant, author, and researcher covering global politics and affairs, economics, markets, technology, history, and culture. He speaks to audiences of all sizes around the world, helps global multinationals make strategic decisions about political risks and opportunities, and works directly with investors to grow and protect their assets in today’s volatile global environment. His insights help audiences across industries like finance, agriculture, and energy make sense of the world.

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This podcast uses the following third-party services for analysis:

Podtrac - https://analytics.podtrac.com/privacy-policy-gdrp
Transcript
Jacob Shapiro:

Hello listeners.

Jacob Shapiro:

Welcome to another episode of the Jacob Shapiro podcast.

Jacob Shapiro:

Rob and I are back at it for our biweekly chats.

Jacob Shapiro:

Uh, we talk about things happening in the US market and honestly, we, uh,

Jacob Shapiro:

we were pretty, pretty glum today.

Jacob Shapiro:

We talked about Chinese biotech and bear cases for the United

Jacob Shapiro:

States and some disturbing cultural changes, uh, in the United States.

Jacob Shapiro:

Anyway, so we promise we'll be more upbeat next time, but, uh, this is definitely

Jacob Shapiro:

indulging in some more dystopian thoughts, so we hope you enjoy it.

Jacob Shapiro:

Email me, uh, jacob@jacobspi.com.

Jacob Shapiro:

If you have any questions, comments, concerns, you know the drill.

Jacob Shapiro:

Cheers and see you out there.

Jacob Shapiro:

All right.

Jacob Shapiro:

It is Wednesday, May 21st.

Jacob Shapiro:

Rob, it's been a minute since we got together.

Jacob Shapiro:

Uh, we're on our every other week cadence.

Jacob Shapiro:

Um, I don't know if you feel this way, and by saying this,

Jacob Shapiro:

maybe I'm gonna jinx ourselves.

Jacob Shapiro:

I feel like the last couple of weeks, the world has been a little bit quieter.

Jacob Shapiro:

Do, do you have that sense or am I just, uh, have I just gotten numb

Jacob Shapiro:

to the, the pace of volatility and events that we're experiencing?

Rob Larity:

Well, compared to what came before, I certainly hope so.

Rob Larity:

Otherwise, we'd all have a heart attack.

Jacob Shapiro:

No, it, it, it feel, I mean, it, it sort of feels like

Jacob Shapiro:

there was liberation day and then there was like a swell of volatility.

Jacob Shapiro:

And then the Trump administration met constraints head on in the form of

Jacob Shapiro:

treasury yields and a declining dollar.

Jacob Shapiro:

And, uh, you know, Scott Besson getting the president's ear and I, I won't

Jacob Shapiro:

say that things have been stable since then, but, you know, walked back from

Jacob Shapiro:

the biggest tariff threats like sort of normal level market discourse rather

Jacob Shapiro:

than, you know, what we were talking about even six weeks ago, like six weeks ago.

Jacob Shapiro:

I was having people like Chase on the podcast, you know, talking about is,

Jacob Shapiro:

are there great depression scenarios that we need to be worrying about?

Jacob Shapiro:

And now it's like we're talking about, oh, like we've got a big beautiful

Jacob Shapiro:

budget bill, which, uh, is gonna, I had the numbers in front of me here, uh,

Jacob Shapiro:

how much it might increase the deficit.

Jacob Shapiro:

Um.

Jacob Shapiro:

White House Council of Economic Advisors projects that the bill would boost GDP by

Jacob Shapiro:

4.2 to 5.2%, but, um, sort of independent budget analysis, if you're talking

Jacob Shapiro:

about the Joint Committee on taxation projects, they think it increases the

Jacob Shapiro:

deficit by 3.8 trillion through 2034.

Jacob Shapiro:

Penn Wharton budget model calls for a $3.3 trillion increase.

Jacob Shapiro:

Uh, Moody's is expecting a $4 trillion increase over the next decade and

Jacob Shapiro:

downgraded US credit ratings last Friday.

Jacob Shapiro:

Um.

Jacob Shapiro:

Markets.

Jacob Shapiro:

Markets are not particularly, uh, I don't know what the word is, sanguine,

Jacob Shapiro:

optimistic treasury yields are going up again, dollar index going down

Jacob Shapiro:

again relative to where we were.

Jacob Shapiro:

Um, so why, why don't we start with the US itself and with the bill?

Jacob Shapiro:

Because we've gone from, you know, Elon Musk at Center Stage and

Jacob Shapiro:

fiscal conservatism and Liberation Day two actually, like we're

Jacob Shapiro:

negotiating on all the tariffs and there's no fiscal conservatism.

Jacob Shapiro:

And Elon Musk has been put out to pasture and is talking about not donating

Jacob Shapiro:

money to political causes anymore.

Jacob Shapiro:

Um, so it, sure, it sure feels like constraints got here and now it's gonna

Jacob Shapiro:

be more normal trade policy and profligate deficit spending, which is pretty

Jacob Shapiro:

much on brand for every US government.

Jacob Shapiro:

Going back to Eisenhower, um, do you think that's the right way to assess the lay

Jacob Shapiro:

of the land or am I being too reductive?

Rob Larity:

Um, I think it is.

Rob Larity:

Uh, I mean, it's funny how these things work because like we often

Rob Larity:

talk about things being overbought or oversold when we talk about markets.

Rob Larity:

You can really feel that in the narrative, like what you said about

Rob Larity:

things quieting down, like that is expressed in charts too, where like

Rob Larity:

now we're clearing the hyperventilating levels of a few weeks ago.

Rob Larity:

Constraints are kicking in, they're dialing down the temperature.

Rob Larity:

Um, so yeah, I think there's, there's definitely an element of this, but

Rob Larity:

also sticking with that sort of charts, uh, comparison, the uptrend

Rob Larity:

remains intact, as we would say.

Rob Larity:

So a lot of these fundamental things that you talk about, um,

Rob Larity:

fiscal deficits blowing out, uh, all of that is continuing.

Rob Larity:

'cause that's the path of least resistance.

Rob Larity:

Um, so there may be constraints around doing things quickly or doing things in

Rob Larity:

an extreme way, but the path of least resistance is still holding for now.

Rob Larity:

Um, and you can see that in the price of the dollar.

Rob Larity:

You can see it in yields like, we've had a, a rebound in risk assets.

Rob Larity:

Basically clearing the oversold levels.

Rob Larity:

Like now we're back to a level where I would expect to

Rob Larity:

start seeing declines again.

Rob Larity:

Um, honestly.

Rob Larity:

So we will see if that happens.

Rob Larity:

But um, yeah, it's definitely sort of a, a, a calm within the storm moment.

Rob Larity:

And it's, it's funny that you mentioned scent, 'cause I've been reading this

Rob Larity:

biography of Zoe Unla, who's the, uh, was the right hand man of, of Mao

Rob Larity:

and this is sort of the unauthorized biography that was written by, uh, a

Rob Larity:

member of the inner circle of the CCP.

Rob Larity:

It was banned in China when it came out in like 2000.

Rob Larity:

But I was thinking about Bessant because much like Zoe and Lai, he bessant

Rob Larity:

has to be sort of a, a, a calming and moderating force within an egomaniac,

Rob Larity:

uh, you know, sort of dictating policies, not necessarily based on, uh.

Rob Larity:

Rational thought.

Rob Larity:

So it's a, it's a tough position to be in.

Jacob Shapiro:

It is, uh, I mean, Joe and LA is like maybe one of the most

Jacob Shapiro:

remarkable statesmen of the 20th century.

Jacob Shapiro:

Um, I, I wouldn't put him in the same category as Scott Best.

Jacob Shapiro:

I think like, like Joe and LA is like orders of magnitude or

Jacob Shapiro:

like standards of deviation.

Jacob Shapiro:

Uh, standards of deviation is more impressive to me as, as

Jacob Shapiro:

a statesman than Scott Besant.

Jacob Shapiro:

But May, but maybe I'm selling Scott Besant.

Jacob Shapiro:

Um, too short.

Jacob Shapiro:

I don't know.

Jacob Shapiro:

Um, we'll see

Rob Larity:

if he rises to the occasion.

Jacob Shapiro:

Yeah.

Jacob Shapiro:

And if, and if Maoism is, is what is on, uh, on tap for, uh, for the US government.

Jacob Shapiro:

Um, h how are, how are you digesting this budget?

Jacob Shapiro:

Bill and I, I know like it's, it's still not completely through.

Jacob Shapiro:

Um, it looks like it's probably gonna get through, but I mean, you know,

Jacob Shapiro:

you, you look at budget specialists and people who analyze the budget,

Jacob Shapiro:

literally that's all they do for a living.

Jacob Shapiro:

You know, here's one from the conservative Manhattan in institute.

Jacob Shapiro:

So the Manhattan Institute actually knew some people who used to work there.

Jacob Shapiro:

I don't think there are anymore.

Jacob Shapiro:

But, you know, generally fiscal conservatives or sort of

Jacob Shapiro:

typical small c conservatives.

Jacob Shapiro:

Um, and one of their budget specialists said, you know, this tax bill will

Jacob Shapiro:

cost more than the 27 tax cuts more than the pandemic cares act,

Jacob Shapiro:

more than Biden stimulus and the inflation reduction Act combined.

Jacob Shapiro:

Um, so like when you start to put that together, like, does that just

Jacob Shapiro:

mean we're gonna juice the economy and things are gonna be like.

Jacob Shapiro:

Pedal to the metal for the United States in terms of growth, but you

Jacob Shapiro:

know, we're just creating that much bigger of a bug that's gonna splash

Jacob Shapiro:

into the windshield down the road.

Jacob Shapiro:

I'm also really struck at the sort of inverse, not inverse,

Jacob Shapiro:

like the opposite way that China seems to be approaching this.

Jacob Shapiro:

Because for, you know, if you, the thing with China, if, if you read the tea

Jacob Shapiro:

leaves, there's always some interest rate that's being cut or some way that

Jacob Shapiro:

they're trying to stimulate the economy.

Jacob Shapiro:

But I was looking at, um, Shanghai macro strategist, he's one of my favorite

Jacob Shapiro:

follows on X and he was talking about how it seems like Beijing is actually doubling

Jacob Shapiro:

down on its commitment to austerity.

Jacob Shapiro:

Like talking about, you know, different initiatives to take the lead in

Jacob Shapiro:

living frugal lives for normal people on banning trips and re revising

Jacob Shapiro:

regulations for party officials.

Jacob Shapiro:

Um, you know, all these different things that might actually increase deflationary

Jacob Shapiro:

trends and which in the long run might make China look more responsible than

Jacob Shapiro:

other countries like China's the.

Jacob Shapiro:

Uh, bond yields, 30 year government bond yields are going down, whereas Japan's

Jacob Shapiro:

are surging to like record highs or not record highs, like 30, 40 year highs.

Jacob Shapiro:

Um, I don't know, like, how, how are you in, like, I'm not surprised

Jacob Shapiro:

that the Trump administration has discarded fiscal, uh, conservatism.

Jacob Shapiro:

Like I, one of the points I made for the last 12 months has been, I don't buy it.

Jacob Shapiro:

Like they're gonna blow out the deficit and they'll blow it

Jacob Shapiro:

out, probably even bigger than they did the first time around.

Jacob Shapiro:

Um, but man, the, the scale at which people are talking about this bill

Jacob Shapiro:

blowing out the deficit, I mean the, the scale of it even surprises me

Jacob Shapiro:

and I was expecting this, so I, I don't know how you feel about that.

Rob Larity:

Um, yeah, I think really one of the main misunderstandings, sort of

Rob Larity:

in the financial community or, or people who are following this stuff is this

Rob Larity:

notion of having the pedal to the metal.

Rob Larity:

Um, I think, you know, that is sort of reflective of a macro

Rob Larity:

environment of 10 years ago.

Rob Larity:

And, and we've talked about this in the last few conversations, but if you go

Rob Larity:

to the Trump first term, he was coming into office against a backdrop where

Rob Larity:

we needed some sexiness, we needed some irresponsibility, we needed,

Rob Larity:

um, a shot in the arm, so to speak.

Rob Larity:

And that's because we were kind of operating against a deflationary backdrop.

Rob Larity:

We needed, um, some kind of stimulus to, to drive that

Rob Larity:

pedal to the metal a little bit.

Rob Larity:

And it, it had some effect.

Rob Larity:

Um, like that, you know, it was a, it was a mixed data bag, you, you could say,

Rob Larity:

but it wasn't disastrous by any means.

Rob Larity:

What, um, you know, the first 2017 tax cuts and that did, you know,

Rob Larity:

and, and again, it reminds me of the late sixties, early seventies

Rob Larity:

and the Nixon administration coming in and sort of recognizing, oh,

Rob Larity:

you know, there are problems.

Rob Larity:

And then at the first sign of trouble turning back to sort of the fiscal

Rob Larity:

spigot and thinking, okay, well.

Rob Larity:

It's too early to deal with the issues.

Rob Larity:

So we're gonna go back to what has worked in the past.

Rob Larity:

And the problem is things work in the past until they create the circumstances

Rob Larity:

in which they no longer work.

Rob Larity:

And that's the situation where we are now, which is, if you look

Rob Larity:

at this bill, um, primarily we're talking about tax cuts, um, as the

Rob Larity:

source of these gaping deficits.

Rob Larity:

And that's a supply side stimulus.

Rob Larity:

So if you want, you know, always there's this fiction that tax cuts will pay for

Rob Larity:

themselves, which is never true, but sometimes they do stimulate the economy.

Rob Larity:

And the problem in this case is you can't use supply side stimulus, um,

Rob Larity:

in a situation where uncertainty and worry and um, sort of forward

Rob Larity:

projections are the problem.

Rob Larity:

Like you need demand side stimulus typically to give

Rob Larity:

people the confidence to invest.

Rob Larity:

And there's no new major demand side programs here.

Rob Larity:

They've walked back some of the more, um, you know, drastic cuts that they

Rob Larity:

had proposed to some things like the solar tax credit, utility scale,

Rob Larity:

solar, you know, things like that, that have been very popular in, in a lot

Rob Larity:

of states and, and real job drivers.

Rob Larity:

Um, but there's nothing particularly new.

Rob Larity:

We're mostly talking about, uh, supply side stimulus here.

Rob Larity:

And I just think there's, there's almost no circumstance in which

Rob Larity:

that has a huge positive impact and certainly not enough to offset what

Rob Larity:

we're seeing in markets today, which is 30 year US treasury yield approaching

Rob Larity:

a new high mortgage rates over 7%.

Rob Larity:

Um, those are huge factors that in all likelihood are gonna outweigh.

Rob Larity:

And then some, any of the potential kind of pedal to the metal effects.

Rob Larity:

Mm-hmm.

Rob Larity:

Like you, you're pedal to the metal, but you're driving into a brick wall.

Jacob Shapiro:

How far away is the brick wall?

Jacob Shapiro:

Is it two years away?

Jacob Shapiro:

Is it five years away?

Jacob Shapiro:

Is it 10 years away?

Jacob Shapiro:

Like, if, if you're trying to think about how to like position yourself

Jacob Shapiro:

accordingly, or if, if you're thinking about sort of the very, I'm

Jacob Shapiro:

thinking about the short term here.

Jacob Shapiro:

Like, okay, like yield's above 5%, that's a big psychological number and something

Jacob Shapiro:

that the media can really hang a hat on because, oh, now they're above 5%.

Jacob Shapiro:

But you know, if you look at historical relative terms,

Jacob Shapiro:

five percent's not that much.

Jacob Shapiro:

7% mortgage not that much, especially when you're going back

Jacob Shapiro:

like 30, 40 year time horizon.

Jacob Shapiro:

And I, I agree with you and I, and we'll get into this a little bit later.

Jacob Shapiro:

I wanna talk about, I. Private equity and biotech and, and some other things

Jacob Shapiro:

that are on the tops of our minds.

Jacob Shapiro:

But I, I feel like you could get a scenario where maybe pedal to the metal

Jacob Shapiro:

is the wrong thing, but you're, you're sort of juicing the economy like with like

Jacob Shapiro:

a, with a steroid shot, like the economy is sick, but give it a steroid shot and

Jacob Shapiro:

for the next two years, it could be, it be, it could be growing like gangbusters

Jacob Shapiro:

and this notion that you're gonna outgrow all the problems might seem clear until

Jacob Shapiro:

all of a sudden everything like to, to reference, um, uh, that reference we

Jacob Shapiro:

had a couple weeks ago, like, the music will stop and the music will stop very

Jacob Shapiro:

quickly and some big player will realize at first, and then everybody will pile in.

Jacob Shapiro:

So I'm, I'm just trying to get a sense from your brain.

Jacob Shapiro:

I know I'm asking you an impossible question, like, how long can we do this?

Jacob Shapiro:

Can we do this for five years?

Jacob Shapiro:

Can we do this for 15 years?

Jacob Shapiro:

Because you don't wanna miss like.

Jacob Shapiro:

The, the, the juice era.

Jacob Shapiro:

Like if, if you're going long home runs, like you don't wanna, you

Jacob Shapiro:

don't wanna like get out of the home run market right before Sammy Sosa

Jacob Shapiro:

and Mark McGuire are squaring off.

Jacob Shapiro:

Right.

Jacob Shapiro:

And right after You wanna do it after when they have the new rules.

Rob Larity:

Yeah.

Rob Larity:

The juice era is already over.

Rob Larity:

And I can say that with some confidence because gold prices are hitting new highs.

Rob Larity:

Bitcoin is hitting new highs.

Rob Larity:

Yields are like, Mr. Market is telling us, hey, the juice is already killing us.

Rob Larity:

Um, and that's really important because it would be one thing if this was,

Rob Larity:

oh, just kick the can down the road.

Rob Larity:

Like there's no more road according to these markets.

Rob Larity:

And that's why intermarket analysis is so important.

Rob Larity:

Like you have to be very precise.

Rob Larity:

Like, what is the question here?

Rob Larity:

Is it, at what point does the US reach sort of an unsustainable escape

Rob Larity:

velocity on the debt accumulation?

Rob Larity:

Mm-hmm.

Rob Larity:

Like, that's a complicated question.

Rob Larity:

'cause at some point they could just.

Rob Larity:

Paying interest rates or intervene like this, it's not a linear sort of thing.

Rob Larity:

So there's the macro question, which arguably like on the current

Rob Larity:

trajectory, you know, interest rates or I'm sorry, interest payments

Rob Larity:

are already approaching or have exceeded a trillion dollars a year.

Rob Larity:

Yeah.

Rob Larity:

So we're in, like, we are in the danger zone.

Rob Larity:

Um, and that's having a real income statement effect.

Rob Larity:

Like, like this is one of the, one of the problems here in, in the

Rob Larity:

analogy of sort of the juice, is there's balance sheet effects and

Rob Larity:

there's income statement effects.

Rob Larity:

So yes, historically speaking rates where they are today are not particularly

Rob Larity:

high relative to, you know, heights they've reached like in the mid nineties,

Rob Larity:

1994, like, you know, it's sort of more normal on that very long-term horizon.

Rob Larity:

But the difference that is that the balance sheet is completely different,

Rob Larity:

the balance sheet is super leveraged.

Rob Larity:

When you're looking at the public sector, and you know, in many cases the, the

Rob Larity:

corporate sector too, not households.

Rob Larity:

Households are okay.

Rob Larity:

Corporate sector and especially government are not.

Rob Larity:

Okay.

Rob Larity:

And this is where you have the, the juice analogy, like immediately hits the, the

Rob Larity:

wall because, you know, that has an income statement effect that's very rapid because

Rob Larity:

you're refinancing into those rates.

Rob Larity:

You're, you're servicing that debt on that bloated liability

Rob Larity:

side of your balance sheet.

Rob Larity:

And, and that has effects in just like how the money's flowing around.

Rob Larity:

So I think there's, there's already a macro issue there.

Rob Larity:

And, um, you know, the markets are telling us what, how the markets are

Rob Larity:

interpreting it, at least the bond markets and the currency markets, which are,

Rob Larity:

you know, dwarf the, the equity markets.

Rob Larity:

Um.

Rob Larity:

And, and the other thing is like, what are companies saying?

Rob Larity:

So are companies looking at this bill and saying, oh yeah, like let's go, let's go

Rob Larity:

ramp up CapEx, let's go, you know, raise our, like, no, no, it's the opposite.

Rob Larity:

You know, we just had Q1 earning season, which ended, you know,

Rob Larity:

10 days ago, two weeks ago, depending, and that was a disaster.

Rob Larity:

Um, lots and lots of companies withdrawing their guidance, pulling in the horns,

Rob Larity:

talking about sort of macro uncertainty.

Rob Larity:

Um, you know, uh, that is, that is not a sign that normalcy is here or

Rob Larity:

that that level of confidence that you need for investment to, to drive

Rob Larity:

again is, is necessarily coming.

Jacob Shapiro:

Mm-hmm.

Jacob Shapiro:

Anything else you wanna say about, uh, like US markets before

Jacob Shapiro:

we turn to a different topic?

Jacob Shapiro:

No,

Rob Larity:

I don't think so.

Rob Larity:

Okay.

Jacob Shapiro:

Um.

Jacob Shapiro:

Not that they're, you know, a nice rosy, uh, optimistic point

Jacob Shapiro:

of view from us on that score.

Jacob Shapiro:

Cool.

Jacob Shapiro:

Um, l let's turn to, um, um, l let, let's turn to biotech and

Jacob Shapiro:

in particular Chinese biotech.

Jacob Shapiro:

This is gonna be one of those conversations listeners where Rob and

Jacob Shapiro:

I are at the very beginning stages of talking about something and he and I

Jacob Shapiro:

have not had a chance to actually talk about this, and our schedules are crazy.

Jacob Shapiro:

So, Rob, I just wanna talk to you as if like, I wasn't actually talking to you

Jacob Shapiro:

on a podcast and we'll put it out anyway.

Jacob Shapiro:

'cause I know this is something you've been thinking about and it's

Jacob Shapiro:

something I've been thinking about.

Jacob Shapiro:

And I think it actually does connect with exactly what you

Jacob Shapiro:

just said, which is, you know, are American companies investing more?

Jacob Shapiro:

Are the circumstances that led to American growth and American outperformance,

Jacob Shapiro:

whether it's in semiconductors or biotech, in some of these, in some of

Jacob Shapiro:

these areas, are those fundamentals gone and have they actually shifted to

Jacob Shapiro:

other places in the world, namely China?

Jacob Shapiro:

Um.

Jacob Shapiro:

When you start sort of looking, you know, last 40, 50 years, the United States

Jacob Shapiro:

has really been the king of biotech.

Jacob Shapiro:

I don't think that that's a, a crazy sort of assertion to make.

Jacob Shapiro:

Um, but if you start looking sort of closer the last 10 to 15

Jacob Shapiro:

years, like China's flashing all the right signals, and some of

Jacob Shapiro:

that is for popular consumption.

Jacob Shapiro:

Like so many people like to, you know, flaunt this idea that, uh, you

Jacob Shapiro:

know, China has more, has doubled its clinical trial activity and it's

Jacob Shapiro:

doubled the number of articles that it's published in various journals.

Jacob Shapiro:

Like I know I, I, I'm not trying to throw shade at journals, but like I for

Jacob Shapiro:

instance, knew people at a Russian think tank who decided they wanted to get more

Jacob Shapiro:

articles into foreign affairs journals to make their university look better.

Jacob Shapiro:

So they were just doing things to try and get as many articles as they could

Jacob Shapiro:

possibly get published in these journals.

Jacob Shapiro:

So like there, there is some level, um, of sort of, um, emptiness to those

Jacob Shapiro:

things, but at the same time, like, um, there's sort of a couple different.

Jacob Shapiro:

Things that supported the US biotech industry, or at least

Jacob Shapiro:

the way that I understand it.

Jacob Shapiro:

Um, there was funding for research and for universities in particular

Jacob Shapiro:

and that public-private partnership and the US government really

Jacob Shapiro:

putting its foot forward there.

Jacob Shapiro:

I mean, you had, you had US presidents, I believe it was Lyndon Johnson, I think

Jacob Shapiro:

it was Lyndon Johnson, I forget which president said we're gonna cure cancer.

Jacob Shapiro:

I mean, you, you had that sort of.

Jacob Shapiro:

Shoot for the moon type of thinking in the United States and you had dollars

Jacob Shapiro:

that went to those sorts of things.

Jacob Shapiro:

Um, you've had a low interest rate environment and lots of

Jacob Shapiro:

venture capital and startup funding really since post 2008.

Jacob Shapiro:

And biotech is the perfect place for that.

Jacob Shapiro:

'cause you gotta do a lot of expensive research and hire a lot, hire a lot

Jacob Shapiro:

of expensive people, and you don't know if the technology's gonna work.

Jacob Shapiro:

Um, so in a low or zero interest rate environment or in an environment where

Jacob Shapiro:

a pandemic coming and you're doing operation warp speed, yeah, there's

Jacob Shapiro:

probably a lot of money out there for r and d for us biotech companies.

Jacob Shapiro:

But that's starting to go away.

Jacob Shapiro:

And we can talk, you can go down that rabbit hole too.

Jacob Shapiro:

I mean, this is something we talk about a lot at Bespoke.

Jacob Shapiro:

There was an FT article this week about, you know, US universities like Harvard

Jacob Shapiro:

and Yale exploring discounted secondary market sales of private equity stakes.

Jacob Shapiro:

I'd love to know how many of those are like shiny biotech startups that

Jacob Shapiro:

didn't actually pan out, I don't think we'll ever actually know.

Jacob Shapiro:

Um, so there's that.

Jacob Shapiro:

And then.

Jacob Shapiro:

Attracting top tier talent from abroad.

Jacob Shapiro:

This really like started around COVID and the things that the Trump administration

Jacob Shapiro:

has done in the first five months of this year have exacerbated it.

Jacob Shapiro:

Um, the United States, like US universities are still at the top.

Jacob Shapiro:

But there's fewer and fewer positions.

Jacob Shapiro:

Um, there's less and less optimism that the United States is a place where you

Jacob Shapiro:

can make a career in this sense, not just for very, very smart foreigners,

Jacob Shapiro:

but for us scientists themselves.

Jacob Shapiro:

Like anecdotally, I have friends who were in this space who suddenly the money is

Jacob Shapiro:

drying up and they're looking towards, well, could I tolerate living in China?

Jacob Shapiro:

Could I move to Europe?

Jacob Shapiro:

Like what are some of the, uh, changes I'm willing to make in my life in order

Jacob Shapiro:

to participate in top tier research?

Jacob Shapiro:

Because it doesn't look like it's gonna be happening in the

Jacob Shapiro:

United States going forward.

Jacob Shapiro:

And here, like China is singing a very different tune.

Jacob Shapiro:

'cause yes, they're talking about austerity at a top level, but the

Jacob Shapiro:

government has said very clearly, no, biotech is one of the commanding heights

Jacob Shapiro:

of the sort of tech economy going forward.

Jacob Shapiro:

They have multiple five-year plans and spending plans and, you know, different

Jacob Shapiro:

hubs that they want to create within China that are gonna be hubs that expand this.

Jacob Shapiro:

Um, people talk about China's demographics as being a negative, but

Jacob Shapiro:

when you have a bunch of old people and not a great healthcare system and

Jacob Shapiro:

you need social stability, probably a good idea to throw as much money as

Jacob Shapiro:

possible as you could at this industry.

Jacob Shapiro:

And you're gonna have way more data and way more old, old people to

Jacob Shapiro:

treat, uh, than you necessarily will in some other parts of the world.

Jacob Shapiro:

Um, and in, and China has also become just like it has in every single

Jacob Shapiro:

manufacturing supply chain in the world.

Jacob Shapiro:

Like they produce a lot of the precursors, like they have gotten

Jacob Shapiro:

involved in biotech in an incredible way.

Jacob Shapiro:

Just in terms of like the things that are, you know, like the ibuprofen that

Jacob Shapiro:

I'm gonna g that I give my daughter when she has an ear infection, that's

Jacob Shapiro:

probably some of the ingredients are sourced from China or India.

Jacob Shapiro:

Um, and you start going down the list of medications and things

Jacob Shapiro:

like that, that's all there.

Jacob Shapiro:

And there's been this huge growth in, in Chinese biotech in general.

Jacob Shapiro:

So I'm rambling a little bit, but I'm trying to, to connect what we were,

Jacob Shapiro:

what we were talking about before.

Jacob Shapiro:

And here's China, which everybody says demographics sucked, uh, sucks.

Jacob Shapiro:

Structural problems.

Jacob Shapiro:

Real estate bubble that's never gonna be fixed.

Jacob Shapiro:

Everything else.

Jacob Shapiro:

And yet, like burgeoning biotech industry, it doesn't take long to go

Jacob Shapiro:

find McKinsey 50 page decks about what the opportunity set is, or US government

Jacob Shapiro:

reports about how China is stealing the, uh, the cutting edge here and that the

Jacob Shapiro:

United States government needs to get back on track immediately, which the

Jacob Shapiro:

United States government is not doing.

Jacob Shapiro:

So.

Jacob Shapiro:

Um, I, I rambled a little bit, but that, that's the setup.

Jacob Shapiro:

Let's talk about it.

Rob Larity:

No, no, not a ramble.

Rob Larity:

I mean, there's so many different interlocking issues.

Rob Larity:

I think you covered a lot of them really well.

Rob Larity:

Um, where to begin, I think just to, to start with first principles,

Rob Larity:

like, let's not get outta, you know, get out of proportion here.

Rob Larity:

Um, the US is a biotech juggernaut and that's not gonna change overnight.

Rob Larity:

Um, like yes, obviously the NIH is a major factor in that.

Rob Larity:

There's tons of stuff going on with the FDA, with the NIH itself, but the

Rob Larity:

sheer amount of wealth that is in the US that is financing, um, innovation

Rob Larity:

and research is just beyond compare.

Rob Larity:

Even China can't touch it can't even come close right now.

Rob Larity:

Um, so the US has enormous strengths.

Rob Larity:

Like if you look at something like the Ark Institute, which is financed by.

Rob Larity:

Um, Patrick Collison, tech entrepreneur, like that sort of thing is where the

Rob Larity:

US is going to continue to shine.

Rob Larity:

And when you look at sort of where still the most interesting cutting

Rob Larity:

edge stuff is happening, predominantly it's still in the US so let's not,

Rob Larity:

you know, just make sure we're not being doom and gloom about the US.

Rob Larity:

'cause relatively things are still good, but it's similar to the

Rob Larity:

Multipolarity thesis where the US is going to be a very powerful force

Rob Larity:

in this area as well, but they're not gonna be the only force anymore.

Rob Larity:

And, um, you know, you mentioned sort of China's property bubble, the treadmill

Rob Larity:

to hill all of these things and yet at the same time, look at what they're doing

Rob Larity:

in batteries and EVs and grid technology and biotech and, and all of this stuff.

Rob Larity:

But those are two parts of the same coin, or two sides of

Rob Larity:

the same coin, I should say.

Rob Larity:

Um.

Rob Larity:

Sort of this kind of, uh, the Chinese model, which is really based on to

Rob Larity:

some extent guiding and commandeering state priorities around capital

Rob Larity:

allocation results in stuff like, you know, cattle and BYD and you know,

Rob Larity:

the, the supply chains getting built to support companies like that and

Rob Larity:

biotech and, and all this sort of stuff.

Rob Larity:

But it also means you have treadmill to hill, you know, ghost, uh, cities in

Rob Larity:

the middle of nowhere and, and capital misallocation just on huge scale.

Rob Larity:

So it's always a race, like how much value can they create with the good

Rob Larity:

stuff versus how much do they throw down a hole with the bad stuff.

Rob Larity:

Um, and it's just the nature of the system.

Rob Larity:

So that's kind of working as intended.

Rob Larity:

And I think just like China has caught up and, and in many ways

Rob Larity:

surpassed, depending on which specific area you're talking about.

Rob Larity:

Surpass the US in, in a lot of these areas, like biotech, they're a player.

Rob Larity:

Like that's, that's clear.

Rob Larity:

And that is the most interesting thing because it wasn't very long

Rob Larity:

ago that they were just nothing like Chinese biotech was a joke.

Rob Larity:

Nothing was happening.

Rob Larity:

Like I think it was only like two years ago.

Rob Larity:

Um, you know, uh, which was the leading C-C-C-D-M-O provider

Rob Larity:

to us and European biotechs.

Rob Larity:

They got cut out, uh, from the bios secure act from providing this to, to

Rob Larity:

us customers providing their services.

Rob Larity:

And it was viewed as like, oh my God, these guys are gonna

Rob Larity:

be just completely destroyed.

Rob Larity:

Mm-hmm.

Rob Larity:

Since then, you know, it's sort of, I mean, it's too early to say 'cause uh,

Rob Larity:

they're not as far along in the recovery period as Huawei, but it has been sort

Rob Larity:

of a Huawei kind of scenario where I. They're, they're probably gonna be fine.

Rob Larity:

And, and guess what?

Rob Larity:

Now they really dominate the burgeoning Chinese scene.

Rob Larity:

So this has happened very fast, and we do have to keep it in proportion, but we also

Rob Larity:

have to recognize that this is for real.

Rob Larity:

It's not just marketing and, and it's not, um, it's not a flash in the pan.

Rob Larity:

Like very clearly they've put in place some of the fundamentals

Rob Larity:

to do this at scale, as you say.

Rob Larity:

Like if you have, if you're gonna have this industry because it's so tied to

Rob Larity:

sort of local regulatory, uh, apparatus, you need to have scale to sell into.

Rob Larity:

Like you can't, it's very difficult to export these kind of innovations

Rob Larity:

unless you have some sort of deal.

Rob Larity:

So like Australia does a lot of early stage biotech research because they

Rob Larity:

have a favorable sort of, um, pathway to get FDA approval and stuff like that.

Rob Larity:

But that's more the exception than the rules.

Rob Larity:

So usually you need a big market.

Rob Larity:

Um, to do this, Europe, China, United States for the most part, and China,

Rob Larity:

you know, they've planted their marker.

Rob Larity:

So, you know, I think they're here to say, how do you, how do you

Rob Larity:

get positive exposure to that?

Rob Larity:

Like, we have a lot of different things around this, you know, that we're doing,

Rob Larity:

but that's more of a bottom up question.

Rob Larity:

But certainly as a theme, I, I think it's, I think it's pretty legit.

Jacob Shapiro:

Yeah.

Jacob Shapiro:

I want to give you some stats because I, I think you're right in terms

Jacob Shapiro:

of a snapshot of today, the United States is still the juggernaut.

Jacob Shapiro:

This is sort of the, in the same vein as, as the conversation

Jacob Shapiro:

with Multipolarity, but.

Jacob Shapiro:

When I look at the data, and this is like, you know, I've started

Jacob Shapiro:

my deep dive into this this week.

Jacob Shapiro:

So maybe three weeks from now I'll be here saying, eh, like, uh, this data, I,

Jacob Shapiro:

I found some other data that's better.

Jacob Shapiro:

But, but here's just a couple of data points that like, really I sort of sat

Jacob Shapiro:

up in my chair when I read some of these.

Jacob Shapiro:

Um, if you look at share of clinical trials based on a company's headquarters

Jacob Shapiro:

in 2013, China accounted for less than 5% globally as of 2023, almost 30%.

Jacob Shapiro:

And the United States has declined from sort of between 37, 38 down to 34.

Jacob Shapiro:

If you look at global, um, shares of biotechnology, venture

Jacob Shapiro:

capital raised the United States.

Jacob Shapiro:

That's declined from about 70% of global share to 60% from China.

Jacob Shapiro:

It went to basically five to almost 20%.

Jacob Shapiro:

Um, when you look at, um, STEM PhD graduates in 2000, US universities

Jacob Shapiro:

awarded more than twice as many STEM doctoral degrees as Chinese universities.

Jacob Shapiro:

Uh, in 2019, uh, China awarded almost 50,000 STEM PhD degrees.

Jacob Shapiro:

United States 33,000.

Jacob Shapiro:

So getting lapped there in general.

Jacob Shapiro:

Um, up to this, uh, these next stats are from CSIS up to 90% of the most widely

Jacob Shapiro:

used medications in the United States, including ibuprofen and acetaminophen.

Jacob Shapiro:

So your Tylenol are imported from China as Chinese investments have surged in

Jacob Shapiro:

the biotech space in the last 10, 20 years, federal funding for biotech is

Jacob Shapiro:

actually flat in the US since the 1960s.

Jacob Shapiro:

And the regulatory environment has gotten even more sort of complicated.

Jacob Shapiro:

There was a bio survey, um, that surveyed 124 different biopharma companies

Jacob Shapiro:

inside of the United States, and they found that 79% of them, so 79% of 124

Jacob Shapiro:

US biopharma companies had contracts with China contract manufacturing

Jacob Shapiro:

organizations or contract development and manufacturing organizations.

Jacob Shapiro:

And that's so important because it's not like you can just

Jacob Shapiro:

switch that to the United States.

Jacob Shapiro:

I recall the conversation we had with, uh, Tomas.

Jacob Shapiro:

Uh.

Jacob Shapiro:

Uh, on the podcast that, uh, well, I guess that was the beginning of

Jacob Shapiro:

the year, so many episodes ago.

Jacob Shapiro:

But one of the questions, uh, we asked Tomas was, Hey, if, if we could wave a

Jacob Shapiro:

magic wand and there were no regulatory problems and there was operation warp

Jacob Shapiro:

speed from the US government, how fast would it take you to spin up US refining

Jacob Shapiro:

capacity for some of the rare earths and other minerals that you're looking at?

Jacob Shapiro:

And he said, without hesitation, eh, like seven years is probably a good estimate.

Jacob Shapiro:

Maybe that's a little conservative, but seven years, a good estimate.

Jacob Shapiro:

Um, bio found that it would take a lot of these biopharma

Jacob Shapiro:

companies that they surveyed up to eight years to change partners.

Jacob Shapiro:

So even if you want to pass something like the Bio Secure Act, or if you want, if

Jacob Shapiro:

the Trump administration considers other things to try and move, um, dependents

Jacob Shapiro:

away from some of these, you know, Chinese contract manufacturing organizations,

Jacob Shapiro:

uh, okay, you're gonna need seven to eight years to build either the domestic

Jacob Shapiro:

capacity or the nearshoring capacity to do some of these sorts of things.

Jacob Shapiro:

So I totally grant that the like.

Jacob Shapiro:

Snapshot today, the United States is still the juggernaut,

Jacob Shapiro:

but Arrow is pointing down.

Jacob Shapiro:

And for China, the arrow is pointing up.

Jacob Shapiro:

And even though they don't have the same level of experience of turning

Jacob Shapiro:

cool science into products, and even though they don't have a history of

Jacob Shapiro:

venture capital and all these different things like creating products that make

Jacob Shapiro:

profitable companies in general, as with so many of the things that we talking

Jacob Shapiro:

about, they are the one making things.

Jacob Shapiro:

They are the ones that make the things that go into the

Jacob Shapiro:

things that make the products.

Jacob Shapiro:

And if you get into a real decoupling sort of scenario, like, okay, like they can't

Jacob Shapiro:

do the high-end stuff, but we can't do any of the high-end stuff without them either.

Jacob Shapiro:

And they are pushing really, really hard on the science and trying to get smart.

Jacob Shapiro:

So maybe it'll take a long time, but I don't know, like the, the

Jacob Shapiro:

arrow seems to be pointing up to me.

Jacob Shapiro:

Um, am I, is is that too doom and gloom?

Jacob Shapiro:

Because you said not to go doom and gloom and I'm looking at the

Jacob Shapiro:

data and I'm like, I don't know.

Jacob Shapiro:

First look looks pretty gloomy to me.

Rob Larity:

China has a lot of advantages.

Rob Larity:

Um.

Rob Larity:

One of the best books to read on this subject of venture capital and biotech

Rob Larity:

is Bill Jane Way's, um, doing capitalism in the, in the financial economy, or

Rob Larity:

I forget what it's called, something like that Bill Jane Way's book.

Rob Larity:

And in it he points out, you know, he was traditionally a software VC and he pointed

Rob Larity:

out the difficulty of VC in biotech is you know exactly what your market is like.

Rob Larity:

You can literally say, okay, there's 482,000 people with

Rob Larity:

this disease every year.

Rob Larity:

That's we can sell to immediately if we can get this right,

Rob Larity:

which is very different.

Rob Larity:

But at the same time, getting the science to work, getting a product that

Rob Larity:

actually can get through, you know, the gauntlet of, of clinical trials and

Rob Larity:

all of that is so long and so expensive that even though you kind of de-risk

Rob Larity:

the market size like the TAM issue.

Rob Larity:

Um, like with very few exceptions, there's, there's very few like really

Rob Larity:

successful recurring biotech VCs.

Rob Larity:

Like who's the Andreessen Horowitz of biotech?

Rob Larity:

Like, you know, I'm sure there's some firms that have had success, but it's

Rob Larity:

very difficult to do and I bring that up because when you think about discount

Rob Larity:

rates, when you think about time horizon, and this is one of the issues when we talk

Rob Larity:

about uncertainty and why what Trump is doing, getting this back to the macro is

Rob Larity:

not gonna fix a lot of these problems.

Rob Larity:

The problem in many ways is discount rate and uncertainty.

Rob Larity:

You're not gonna go build a factory if you don't know what the hell the

Rob Larity:

policy is gonna be five years from now.

Rob Larity:

You're not gonna invest in a biotech firm.

Rob Larity:

And we see this on the ground up 'cause we get a lot of visibility into early

Rob Larity:

stage biotech and med tech companies.

Rob Larity:

And they're suffering because people are looking at what's happening at the

Rob Larity:

FDA and they're saying, what the hell is the, is the length of the pipeline here?

Rob Larity:

Is this gonna take four years or is it gonna take seven years?

Rob Larity:

Is it gonna cost $30 million to get to phase two, or is it gonna cost

Rob Larity:

$70 million to get to phase two?

Rob Larity:

And there's so much uncertainty around that.

Rob Larity:

At the same time that the 30 year treasury yields is making new highs, it just

Rob Larity:

strangles private capital allocation.

Rob Larity:

I mean this is going back to Cain's, like this is classic, you know, stuff here.

Rob Larity:

And I say that because, you know, China does have, the Chinese capital allocation

Rob Larity:

model does have a, a real advantage there because it's not market driven.

Rob Larity:

In many cases it can be driven by political dick to, it can

Rob Larity:

be driven by other factors.

Rob Larity:

And this is getting to one of the, like, I don't want to be all doom and gloom.

Rob Larity:

I, I think that's a reason to be very bullish on China and what they can do.

Rob Larity:

And let's be clear like this is not a competition.

Rob Larity:

The more good stuff that comes out of this industry, the

Rob Larity:

more humanity just does well.

Rob Larity:

So it's not, you know, bombs or semiconductors or missiles or something.

Rob Larity:

Like, let's just keep that in perspective.

Rob Larity:

So we want everyone to win here.

Rob Larity:

Um, it's not gonna make the US suffer If, you know Chinese, uh, elderly

Rob Larity:

people get cured of Alzheimer's, like that's just a win-win for everybody.

Rob Larity:

But, you know, I think there's reasons to be very bullish on,

Rob Larity:

on the Chinese opportunity.

Rob Larity:

I wouldn't say doom and gloom for the US 'cause I, I, I do wanna speak to

Rob Larity:

that, but one of the sort of hidden advantages of the US is I think, sort

Rob Larity:

of the growing influence of impact capital and sort of social investing.

Rob Larity:

And, and this is something I've really come to appreciate more since we've been

Rob Larity:

doing the, you know, work with bespoke and, and seeing how people are doing this

Rob Larity:

at large scale is, that's sort of another way of, of the Chinese model in some ways.

Rob Larity:

Like it's not financially driven only it can have.

Rob Larity:

You know, quote unquote political motives and, you know, social motives, o other

Rob Larity:

reasons to invest in these ventures.

Rob Larity:

Like I just was speaking with someone, um, this morning I had coffee, uh, with

Rob Larity:

a guy who's involved in a, in a biotech startup, and they're doing a gene editing

Rob Larity:

thing for congenital heart failure.

Rob Larity:

And, um, they're in the process of raising, you know, 30 or $40 million

Rob Larity:

from a daf, a donor-advised fund and, and doing it through a grant process.

Rob Larity:

Um, that's a huge, when I, we talk about the pools of wealth and what people

Rob Larity:

invest in and why that's a huge sort of un under-recognized and strength

Rob Larity:

of the US that is probably gonna get bigger, uh, in the next few years.

Rob Larity:

That said, it's not that big relative to the existing mechanisms

Rob Larity:

and all those other problems about uncertainty and VC throttling

Rob Larity:

back that is gonna outweigh that.

Rob Larity:

It's just a way of saying like, the US isn't totally screwed in any way.

Rob Larity:

It's just relative, you know, getting to the Multipolarity thesis,

Rob Larity:

China is going to continue rising.

Rob Larity:

They have these unique advantages and the US does have major problems

Rob Larity:

even though, you know, a lot of those strengths still are there.

Rob Larity:

Um,

Jacob Shapiro:

yeah, I'm, I'm struck when you say that about, and I don't know if

Jacob Shapiro:

I'm just making everything comport to my thesis here 'cause I'm in danger of

Jacob Shapiro:

doing that, but when you think about.

Jacob Shapiro:

Even the notion of tariffs and of protectionist US policy and

Jacob Shapiro:

of the overtones and current US policy to the early 19 hundreds.

Jacob Shapiro:

I mean, even in what you just said, in the early 19 hundreds, there was a real

Jacob Shapiro:

movement in the United States towards social welfare that was privately funded.

Jacob Shapiro:

The government was not the one that was actually funding

Jacob Shapiro:

all these sorts of things.

Jacob Shapiro:

It really isn't until World War I that the size of the US

Jacob Shapiro:

government increases markedly.

Jacob Shapiro:

And so you had, um, you know, this real movement in the United States,

Jacob Shapiro:

whether it was making factories safer or in educating children or like, or in

Jacob Shapiro:

basic hygiene, things like that, where you had, and you know, there was also

Jacob Shapiro:

the, the temperance side of this too, making people drink less, which, uh,

Jacob Shapiro:

maybe went, went a little bit too far.

Jacob Shapiro:

Um, or not, but may, maybe we have some temperance radicals

Jacob Shapiro:

listening to the podcast.

Jacob Shapiro:

I don't wanna, I don't wanna assume anything.

Jacob Shapiro:

Um.

Jacob Shapiro:

But you know, you're talking like that, that sort of notion is very antiquated.

Jacob Shapiro:

Like we live in a world where like, like you said, it's too

Jacob Shapiro:

small to make a huge difference.

Jacob Shapiro:

And many of the amazing changes that have happened inside of the

Jacob Shapiro:

United States happened because the United States government, for

Jacob Shapiro:

better or for worse, we can agree or disagree from a policy perspective on

Jacob Shapiro:

whether it's the right thing or not.

Jacob Shapiro:

But since World War I, the US government has basically just gotten

Jacob Shapiro:

bigger and bigger and bigger and has taken on more and more and more.

Jacob Shapiro:

And that has come with certain problems, but it's also come on, unleashing

Jacob Shapiro:

capital and focus on a national scale.

Jacob Shapiro:

Not according to dicta, like you said, as as in a dictatorship.

Jacob Shapiro:

But you know, in certain moments, yes.

Jacob Shapiro:

Like semiconductors is a story there too.

Jacob Shapiro:

And I hate being the cynical one in our conversation, but you say that

Jacob Shapiro:

this is gonna be better for the world.

Jacob Shapiro:

Uh.

Jacob Shapiro:

Yeah, maybe overall, but not necessarily for the United States.

Jacob Shapiro:

If China cures Alzheimer's and China and the United States are in a great

Jacob Shapiro:

grand geopolitical battle, um, and, uh, we can't, and the United States

Jacob Shapiro:

cannot replicate what China does.

Jacob Shapiro:

I mean, China's gonna use that against the United States like we already saw,

Jacob Shapiro:

like in COVID vaccine diplomacy and the hoarding of PPE and how really

Jacob Shapiro:

geopolitically nasty things got about a relatively minor, uh, pandemic.

Jacob Shapiro:

In the grand scheme of things, when you look at other pandemics and the mortality

Jacob Shapiro:

rate and things like that, like cynically, like I, I think we're imagining a world

Jacob Shapiro:

in which if the United States is not at the center here and there are other

Jacob Shapiro:

centers that are doing so much better, um, yeah, I mean, I, I guess maybe you'll

Jacob Shapiro:

tell me that the technology will diffuse and it'll, it'll go around everywhere.

Jacob Shapiro:

But the cynic in me sort of sees, well, no, like if China's at the

Jacob Shapiro:

center of these things, um, today, then like life relatively in

Jacob Shapiro:

the United States will be worse.

Jacob Shapiro:

It's, it's not a foregone conclusion that, that that technology will diffuse.

Rob Larity:

Well, from my perspective, if you said to me that the world is gonna get

Rob Larity:

a cure for Alzheimer's, but the Chinese are gonna be the only ones to develop

Rob Larity:

it, I would want to live in that world.

Rob Larity:

Um, but let me, let me give like a bear case on the US 'cause I can, I can argue

Rob Larity:

a bear case and this is how I see it.

Rob Larity:

I don't necessarily believe this, but this is how I would lay it out, which is

Rob Larity:

that you take sort of an exceptionalist view of the US biotech industry over

Rob Larity:

the last, you know, 40, 50 years and say, okay, this is like, you know,

Rob Larity:

the New York jazz scene in the 1950s.

Rob Larity:

Like the right places, the right people just happen to be together.

Rob Larity:

You know, this, this is Renaissance Florence.

Rob Larity:

Like something happens, some like, 'cause if you look at the rest of the

Rob Larity:

world, biotech is something that doesn't really happen almost on anywhere else.

Rob Larity:

Even Europe, which is extraordinarily rich and successful in so many levels like.

Rob Larity:

The level of biotech research that they're doing, really like at the edge of

Rob Larity:

what's happening is, is not remotely in proportion to their level of development.

Rob Larity:

So there's something kind of weird about biotech, and I suspect maybe there's

Rob Larity:

something about sort of these, like the equilibrium for private capital

Rob Larity:

to do this, it's just not there.

Rob Larity:

So you need some weird mixture of like the right people in the right place and

Rob Larity:

the right sort of financing structures.

Rob Larity:

And I guess my bear case would be like, you know, is that the case?

Rob Larity:

Is this renaissance Florence?

Rob Larity:

Because if Florence goes down, you can't just replicate that.

Rob Larity:

Like if the magic sauce is lost, like that could just be a, a net loss.

Rob Larity:

It's not just like, oh, these people will go do this somewhere else, or this

Rob Larity:

activity will happen in India, or you know, whatever, Turkey or something like,

Rob Larity:

maybe it just doesn't happen anymore.

Rob Larity:

And, and to support that, like, just an anecdote.

Rob Larity:

So, you know, I'm originally was in Cambridge for all so many years,

Rob Larity:

and most of my friends are somehow related to scientific research.

Rob Larity:

And Juliet is obviously, as you know, um, so I see a lot of people in, in that area.

Rob Larity:

And, um, the, the thing that strikes me is a how dependent, truly cutting

Rob Larity:

edge research is on immigrants.

Rob Larity:

Um, that is a huge factor.

Rob Larity:

Like if you look at the top labs at Harvard for instance, they are

Rob Larity:

60, 70% non-US born researchers.

Rob Larity:

Um, so the US has been this enormous magnet for talent and

Rob Larity:

that is really under threat.

Rob Larity:

Um, you know, some of my, my closest friends, just to give one anecdote,

Rob Larity:

so I'm really good friends with a Brazilian couple, young Brazilian couple.

Rob Larity:

They're both scientists.

Rob Larity:

They come from Sao Paulo.

Rob Larity:

They've been here for like seven or eight years, uh, on a green

Rob Larity:

card, which they got recently.

Rob Larity:

One is the head of a lab, one works at a private biotech company.

Rob Larity:

Both of them are, they just had to go back to Brazil.

Rob Larity:

They were terrified they wouldn't be allowed back into the country.

Rob Larity:

Um, they're both like reporting that everyone they know is just,

Rob Larity:

they don't know what to do.

Rob Larity:

Um, they're, they're feeling whether it's justified or not, there's an impression

Rob Larity:

that they're gonna be kicked outta the country, that they're gonna be hunted.

Rob Larity:

Like there's some issue that's gonna emerge because

Rob Larity:

there's so much stress around.

Rob Larity:

We, we take this for granted.

Rob Larity:

As you know, American citizens.

Rob Larity:

There's so much stress around the process of getting your green card, doing the

Rob Larity:

application, going through the process.

Rob Larity:

Trying to get it through.

Rob Larity:

Don't, don't screw something up, like the stressful levels are through the roof.

Rob Larity:

Uh, one of their friends from Brazil went back to Brazil last year to go work,

Rob Larity:

uh, in a lab in, in, in Port Alegre.

Rob Larity:

And that was weird.

Rob Larity:

Like he just, he just went back to Brazil and I don't know, like

Rob Larity:

maybe they'll stay long term.

Rob Larity:

They've, they've kind of put down roots, but at the margin it's gonna be more

Rob Larity:

difficult to attract that talent if that's the zeitgeist around what's going on.

Rob Larity:

And people see that we're gutting the public institutions that stand behind

Rob Larity:

a lot of the kind of basic research.

Rob Larity:

'cause you know, we have to remember too, it, it's sort of like government

Rob Larity:

and, and the bureaucracies, or I'm sorry, government and private industry

Rob Larity:

where people go back and forth.

Rob Larity:

Like people will come here to do research and then they'll hop to.

Rob Larity:

A biotech private sector job like that happens a lot because most people,

Rob Larity:

especially if they don't, if they're coming from abroad, they're not usually

Rob Larity:

coming from a private sector background.

Rob Larity:

'cause there are no biotechs abroad.

Rob Larity:

It's, you know, they're, they're, they've just been educated and

Rob Larity:

now they're looking for, you know, they're gonna continue in the ac in

Rob Larity:

the academic, you know, uh, role.

Rob Larity:

But that is really, like, that's a bottleneck that's dependent on grants and

Rob Larity:

labs and universities and, you know, all of this stuff that we're talking about.

Rob Larity:

So, you know, it's easy to underestimate how much, if that bottleneck gets

Rob Larity:

squeezed, that you're ultimately squeezing the flow of people also to the private

Rob Larity:

sector and to, you know, the big biotechs in Kendall Square and, and all of that.

Rob Larity:

Like, it's just very fragile.

Rob Larity:

I think that that would be my, my bear case is that it's much

Rob Larity:

more fragile than we think.

Rob Larity:

It's much more of a like.

Rob Larity:

Unique combination of ingredients and we've like spoiled the, the souffle and

Rob Larity:

now it's just gonna collapse and you can't get it back in remotely the same,

Rob Larity:

you know, fashion that it once was.

Jacob Shapiro:

Well, and, and I don't know how much this actually

Jacob Shapiro:

matters, but you know, there used to be a belief in scientific progress.

Jacob Shapiro:

Like these things were seen by society as fundamentally apolitical

Jacob Shapiro:

and as fundamentally virtuous, and they're not seen that way anymore.

Jacob Shapiro:

I mean, we're having real conversations in 2025, the year of our Lord, about

Jacob Shapiro:

measles outbreaks in the United States.

Jacob Shapiro:

You know, I'm, I'm sorry if there are listeners who, who are on the

Jacob Shapiro:

anti-vax thing, but I like, it's one of the few things I, I don't

Jacob Shapiro:

have a whole lot of patience for.

Jacob Shapiro:

Like, we have a fix to this problem.

Jacob Shapiro:

It was fixed.

Jacob Shapiro:

It's a vaccine like I have children.

Jacob Shapiro:

You wanna risk that your kids are gonna get measles.

Jacob Shapiro:

Like this is not some experimental thing.

Jacob Shapiro:

Like we had it.

Jacob Shapiro:

And like even stuff like that is getting demonized.

Jacob Shapiro:

And that's before you get to, okay, we've got all these new types of

Jacob Shapiro:

technologies that we need a whole new regulatory apparatus to even comprehend

Jacob Shapiro:

the things that we're capable of.

Jacob Shapiro:

And.

Jacob Shapiro:

Things that could be very dangerous if they're not handled correctly.

Jacob Shapiro:

Like the speed at which we can do things doesn't mean we should necessarily do them

Jacob Shapiro:

like we should totally have very serious conversations about what this looks like.

Jacob Shapiro:

Uh, but the point just being like in that fragile renaissance Florence metaphor that

Jacob Shapiro:

you're talking about, like there was a time when US society believed in progress

Jacob Shapiro:

and believed in science, and the majority felt good about that and felt good about

Jacob Shapiro:

the United States being the cutting edge.

Jacob Shapiro:

I don't get the sense that that's true anymore.

Jacob Shapiro:

I saw a map about for, for measles vaccination rates in the country,

Jacob Shapiro:

and I was absolutely gobsmacked, um, at the, at the high levels

Jacob Shapiro:

of like unvaccinated rates.

Jacob Shapiro:

Um, for something, for something like measles.

Jacob Shapiro:

So like maybe the, the system doesn't care about what.

Jacob Shapiro:

The rank and file think, but I gotta think that if you have a society that is

Jacob Shapiro:

beginning to show signs of fundamentally doubting the very thing that underpins the

Jacob Shapiro:

advances in the first place, um, I mean maybe that will express itself in a lack

Jacob Shapiro:

of political will to protect this funding.

Jacob Shapiro:

Maybe it does just make it so that foreign researchers are like,

Jacob Shapiro:

well, why would I want to go there?

Jacob Shapiro:

Like, China's the one that has a five point plan that says, we wanna do

Jacob Shapiro:

the absolute cutting edge stuff and we will stop at nothing to make sure

Jacob Shapiro:

that the cutting edge happens here.

Jacob Shapiro:

We'll give you all the tools and all the, the hubs and all of the, everything else

Jacob Shapiro:

just like solve these problems because this is what the future of the planet and

Jacob Shapiro:

of the nation like completely requires.

Jacob Shapiro:

And you couldn't be farther from that in the current US regulatory environment.

Rob Larity:

Well, to tie this into something else that we've talked about in

Rob Larity:

recent months, um, scientists are experts.

Rob Larity:

They're authority figures by definition.

Rob Larity:

'cause they have a secret knowledge.

Rob Larity:

And you know, I kind of made my thesis earlier that.

Rob Larity:

I think a lot of what's happening in the US is really a cultural thing.

Rob Larity:

And we've talked about this many times in the sense of like, it is an

Rob Larity:

anti-authoritarian and anti expert, anyone who, who is perceived to be

Rob Larity:

sort of part of the hierarchy of, uh, authorities and people, you know, elites,

Rob Larity:

they're being torn down 'cause it's a, it's a populous kind of movement.

Rob Larity:

And you can see that like Renaissance Florence only worked and those superstar

Rob Larity:

artists, you know, fancy pants elites, they only got to do what they did because

Rob Larity:

the public was financing the churches that were paying them to paint stuff.

Jacob Shapiro:

Mm-hmm.

Rob Larity:

And you know, same thing for like, you know, mid 16 hundreds

Rob Larity:

Dutch culture, like people really valued what those guys were doing

Rob Larity:

and they were buying what they were doing and that's why it could exist.

Rob Larity:

And, you know, to transport that to today.

Rob Larity:

The public doesn't support, you know, these, these structures doesn't

Rob Larity:

support these, these forms of elites.

Rob Larity:

And you can see that in the gutting of public funding.

Rob Larity:

It's gonna be very difficult to, to maintain that.

Rob Larity:

And that's why, like China is one thing, but I think Europe has an

Rob Larity:

extraordinary opportunity here just because it's more, it's more

Rob Larity:

accessible to most of these people.

Rob Larity:

Like realistically speaking, my Brazilian friends, if they didn't go to Cambridge,

Rob Larity:

they would not be going to China.

Rob Larity:

'cause it's just too weird.

Rob Larity:

It's too like, out of their experience.

Rob Larity:

Um, it's not like China is its own civilization, whereas like

Rob Larity:

coming here to Paris, you know, that's a much easier leap.

Rob Larity:

And I haven't had a chance to really dig into this, but one of the things that's

Rob Larity:

like top on my list is I know the EU has announced some, some significant funding

Rob Larity:

behind, like trying to attract scientists.

Rob Larity:

From abroad and, and, um, like really lean into this.

Rob Larity:

And I don't know if it's, if it's of any size or whatever,

Rob Larity:

but they'd be stupid not to.

Rob Larity:

Um, and, and you know, just thinking, putting this back into the framework

Rob Larity:

of like populism and anti, anti elites, like as I said before,

Rob Larity:

Europe is still pretty in favor of people who know what they're doing.

Rob Larity:

Uh, you know, uh, right wing movements left aside.

Rob Larity:

Like those people aren't running these nations yet.

Rob Larity:

Whereas the US is really struggling with that for reasons we've talked about.

Rob Larity:

And I think that's gonna be a core problem for the US in supporting the sciences.

Rob Larity:

Um, and, and these, these sorts of like research oriented technology

Rob Larity:

development ventures, because to get the people you need to have the

Rob Larity:

structures in place and you need to have the, the general acknowledgement

Rob Larity:

that like, this is a good thing.

Rob Larity:

We like these people.

Rob Larity:

This is good for society to have this.

Rob Larity:

And that's just really lacking, uh, as you point out in, in a

Rob Larity:

way that it wasn't 20 years ago.

Jacob Shapiro:

Yeah.

Jacob Shapiro:

Well, maybe two things to, to close out on.

Jacob Shapiro:

There was a, I dunno if you saw this op-ed by Kyle Chan in the New

Jacob Shapiro:

York Times, which was really good.

Jacob Shapiro:

Um, and it was about China sort of dominating things like high-end

Jacob Shapiro:

manufacturing cars, chips, MRI machines, commercial jets.

Jacob Shapiro:

He makes the very spicy take that the battle for AI supremacy, if we continue

Jacob Shapiro:

on the current trajectory, will not be fought between the United States and

Jacob Shapiro:

China, but between high tech, Chinese cities like Shenzhen and Hong Jo.

Jacob Shapiro:

Like it's not, it's not about us versus China.

Jacob Shapiro:

It's actually probably about like Chinese provinces and cities and

Jacob Shapiro:

like development hubs themselves.

Jacob Shapiro:

Um, and Kaiser quo, who's somebody that I really respect, um, Seneca podcast, if tho

Jacob Shapiro:

for those of you who haven't sort of, uh, discovered him, wrote, not a rejoinder,

Jacob Shapiro:

but actually sort of a meaningful engagement with Kyle Chan's piece.

Jacob Shapiro:

And I, he had a really great corrective.

Jacob Shapiro:

He, um, I. I'll actually read something that he, he said here, he doesn't, he, he

Jacob Shapiro:

says he doesn't, uh, dispute that China's poised to dominate in many of these areas,

Jacob Shapiro:

but he cautions against overstating the coherence or inevitability of China's rise

Jacob Shapiro:

or the permanence of America's decline.

Jacob Shapiro:

Um, he doesn't say this out of patriotic sentiment or triumph as nostalgia.

Jacob Shapiro:

Rather, he believes that his historical outcomes are rarely

Jacob Shapiro:

as clean as the Chinese century versus the American century.

Jacob Shapiro:

And much will hinge on whether either country can summon the political will

Jacob Shapiro:

and institutional capacity, um, to adapt to the scale of the China, uh, to

Jacob Shapiro:

the, uh, to the scale of the challenge.

Jacob Shapiro:

China is formidable, but not infallible.

Jacob Shapiro:

The United States is reeling but not terminal.

Jacob Shapiro:

I thought that was like a really good way of encapsulating some of these things.

Jacob Shapiro:

On the flip side of this, there was an article in the Wall Street Journal this

Jacob Shapiro:

week about, um, a bunch of data centers that were gonna go up in West Virginia

Jacob Shapiro:

actually about a, a law that the West Virginia legislation was trying to pass.

Jacob Shapiro:

Uh, to allow the use of natural gas and coal to power

Jacob Shapiro:

AI projects in West Virginia.

Jacob Shapiro:

And we are talking Podunk, West Virginia, some of the most impoverished

Jacob Shapiro:

places in the entire country.

Jacob Shapiro:

This is coal country.

Jacob Shapiro:

It got left behind.

Jacob Shapiro:

Nobody took care of them.

Jacob Shapiro:

Uh, it's absolutely, it's a beautiful part of the country.

Jacob Shapiro:

I've spent a lot of time actually like hiking and traveling

Jacob Shapiro:

in this part of the country.

Jacob Shapiro:

'cause um, I had some family like in this, in this neck of the woods, no longer.

Jacob Shapiro:

But, you know, I've spent time in this part of the country, even though it's

Jacob Shapiro:

beautiful, it's poor, it's impoverished.

Jacob Shapiro:

And the Wall Street Journal article was all about how the locals are saying,

Jacob Shapiro:

actually, we don't want any of that.

Jacob Shapiro:

We don't want any data centers built anywhere near here.

Jacob Shapiro:

And on the one hand I'm like, okay, I get it.

Jacob Shapiro:

You don't wanna ruin the pristine, you know, rivers and the hiking and

Jacob Shapiro:

the mountains and things like that.

Jacob Shapiro:

But on the other hand, you guys are poor.

Jacob Shapiro:

Your GDP per capita relative to the national average, terrible,

Jacob Shapiro:

your life expense, life expectancy relative to the national average.

Jacob Shapiro:

Terrible.

Jacob Shapiro:

And you don't want the shiny tech money that's coming in and has discovered

Jacob Shapiro:

this beautiful part of the country.

Jacob Shapiro:

It is like, ah, we finally have something we can use all

Jacob Shapiro:

this coal and natural gas for.

Jacob Shapiro:

Why don't you guys become the center of an AI renaissance inside the United States

Jacob Shapiro:

And the the poor impoverished residents are telling the Wall Street Journal.

Jacob Shapiro:

No way.

Jacob Shapiro:

Get off my lawn.

Jacob Shapiro:

I don't want this money.

Jacob Shapiro:

I want my poverty.

Jacob Shapiro:

Uh, along with, you know, being able to hear the crickets, which I get it.

Jacob Shapiro:

I want to hear the crickets too.

Jacob Shapiro:

I talked on the last podcast about how depressing it is that we killed

Jacob Shapiro:

all the fireflies in New Orleans as we were trying to wipe out malaria.

Jacob Shapiro:

Like, I get it.

Jacob Shapiro:

But you can sort of have both.

Jacob Shapiro:

And I, I'm, I'm like a little bit tongue in cheek, but my point is just, you

Jacob Shapiro:

know, it's not the biotech example, but this is an impoverished area that has

Jacob Shapiro:

a resource that could be critical to a boom in an industry that is going from

Jacob Shapiro:

strength to strength, AI and data centers and information economy and everything.

Jacob Shapiro:

And it's like, nah, actually we're good.

Jacob Shapiro:

We're good with where we're at.

Jacob Shapiro:

Like, I, I, I feel like I see that mentality.

Jacob Shapiro:

Everywhere in the United States economy, in the United States culture, in the,

Jacob Shapiro:

you know, the, the gravity that the past has make America great again.

Jacob Shapiro:

Let's go back to the way that things were before.

Jacob Shapiro:

Like, I don't know, like there, there is just something in that, that I

Jacob Shapiro:

have a hard time engaging with and which makes, when, which is starting

Jacob Shapiro:

to color some of these deeper dives into things like AI and biotech.

Jacob Shapiro:

Um, in the current context, which it's not the fault of the current administration.

Jacob Shapiro:

The current administration is just, I think, a reflection

Jacob Shapiro:

of this cultural change.

Jacob Shapiro:

And with its disjointed policy is accelerating some of these trends.

Jacob Shapiro:

Um, but it's, it's hard to be optimistic in some areas about the United States

Jacob Shapiro:

when this is the cultural push.

Jacob Shapiro:

Am am I being, I don't know.

Jacob Shapiro:

Is that too much?

Jacob Shapiro:

I, I'm, I guess I'm feeling glum today.

Rob Larity:

No, I think it, it hits, hits it on the head, frankly.

Rob Larity:

'cause and tying this into China, um, I think it's a matter of coherence.

Rob Larity:

Like when I think about what we're really doing.

Rob Larity:

For clients or from an investment standpoint.

Rob Larity:

So much of it is trying to find where in the world is there the coherence

Rob Larity:

of action and the uni unity of action to, to do big things and to build

Rob Larity:

things and, and to develop and to grow.

Rob Larity:

And that's, that's rare.

Rob Larity:

And, and in the United States, I think in many ways that's now

Rob Larity:

breaking down in many places.

Rob Larity:

Like NIMBY is a form of lack of coherence.

Rob Larity:

It's atomization of interests that will not work together, even

Rob Larity:

though it's probably in the greater good to build that data center.

Rob Larity:

You have friction.

Rob Larity:

And, and this is not to look at China with rose tinted glasses because

Rob Larity:

you know, the normal state of China is one of high friction and lack

Rob Larity:

of coherence and warring states.

Rob Larity:

And one of the things I worry about is like, if Xi Jinping dies tomorrow of a

Rob Larity:

heart attack, I. What the hell happens?

Rob Larity:

Do you enter something like, just look, one of the things that terrifies me, and I

Rob Larity:

don't think anyone's really talking about this, I haven't seen it, are these stories

Rob Larity:

of, um, I dunno if you've seen this, but uh, Chinese local governments are

Rob Larity:

kidnapping executives who come from other states and, and like basically holding,

Rob Larity:

like blackmailing them, holding them ransom 'cause they're so cash strapped.

Rob Larity:

That is a major red flag to me.

Rob Larity:

And maybe it's just, it's anecdotal.

Rob Larity:

Maybe it's not big, but that's the sort of thing you should be looking at if

Rob Larity:

you want to make the bear case on China is that without the sort of coherence

Rob Larity:

of 10% growth, which was driven by the factor, you know, the treadmill, the hill

Rob Larity:

factors that we've talked about, does that coherence break down into atomization

Rob Larity:

and they just can't get anything done.

Rob Larity:

Um, there's no real sign of that yet, but that's the risk on the Chinese side.

Rob Larity:

And it's not a. Tail risk.

Rob Larity:

It's a real, like significant, like that's the bear case and

Rob Larity:

it's worth taking very seriously.

Rob Larity:

Um, and in the US you have the bear case that you pointed out, which I

Rob Larity:

think paralysis, inability to build.

Rob Larity:

Like that's why software has been so successful and everything else has

Rob Larity:

not because software you can just spin up a server and you know, AWS

Rob Larity:

la la land and no one can stop you.

Rob Larity:

Um, it's a lot harder to do that with physical things out in, out in space.

Rob Larity:

Um, so he, God that's like pretty negative on both places.

Jacob Shapiro:

It is, it is negative on both places, which actually underscores.

Jacob Shapiro:

I, I had a question at an event I did a couple weeks ago where somebody asked

Jacob Shapiro:

me, who wins in the US China trade war?

Jacob Shapiro:

And we've said this on the podcast a couple different times and had guests

Jacob Shapiro:

who brought data to back this up.

Jacob Shapiro:

Nobody wins.

Jacob Shapiro:

There are no winners in what's happening right now.

Jacob Shapiro:

So instead of focusing on the things that could actually make life better,

Jacob Shapiro:

we are now focusing on recreating things so that we can have national,

Jacob Shapiro:

um, you know, self-sufficiency in some areas, and we're using these different

Jacob Shapiro:

things as leverage against each other and thinking about what this means

Jacob Shapiro:

from a national power perspective.

Jacob Shapiro:

You can see this in how, I mean, look at how the tech community in the United

Jacob Shapiro:

States has basically just morphed into a defense tech play and has allied

Jacob Shapiro:

itself with, um, you know, uh, with a really defense oriented, like, protect

Jacob Shapiro:

oriented environment, rather than pushing the boundaries of what's new.

Jacob Shapiro:

Um, I think you can sort of see that all over the place.

Jacob Shapiro:

And the, and the depressing thing of what you're saying is, well, what if in

Jacob Shapiro:

fighting each other and in the great power competition, there can be no florences.

Jacob Shapiro:

There can't be a Florence anywhere if everybody is thinking is watching

Jacob Shapiro:

their back and thinking about how some other country is, is gonna attack them.

Jacob Shapiro:

Um, and I think that was one of the nice things about Kaiser's rejoinder

Jacob Shapiro:

to that Kyle, that Kyle Chan article reminding us that, okay, like we're

Jacob Shapiro:

sitting here in the United States.

Jacob Shapiro:

I know West Virginia, I've been to West Virginia.

Jacob Shapiro:

I can read that Wall Street Journal article and make

Jacob Shapiro:

the jokes that I just made.

Jacob Shapiro:

I bet there's a Chinese version of me who can do the same thing in China and can,

Jacob Shapiro:

you know, think about, oh, well we got these grand plans, but I can't, I mean,

Jacob Shapiro:

China had a real problem in getting people to take vaccines around COVID-19, right?

Jacob Shapiro:

Like, so I'm talking about vaccine hesitancy here.

Jacob Shapiro:

Just because, uh, there's a dictatorship in China doesn't mean that the

Jacob Shapiro:

average Chinese person wants to take a vaccine any more than a American

Jacob Shapiro:

citizen wants to take a vaccine.

Jacob Shapiro:

So, um, yeah, I don't know.

Jacob Shapiro:

Maybe you should tell your Brazilian friends to go back to Brazil.

Jacob Shapiro:

That comes with its own, uh, problems.

Jacob Shapiro:

So,

Rob Larity:

well, I guess that that's the bear case to everything that we're doing.

Rob Larity:

I, I've been reading some books about, so, uh.

Rob Larity:

This book by Eric Klein, I just read 1177 bc. Did you ever, did you hear about him?

Rob Larity:

No, no.

Rob Larity:

He wrote one called 1177 BC and then one called after 1177 bc But this is about

Rob Larity:

the collapse of the Bronze Age, uh, civilizations and sort of what happened.

Rob Larity:

And, you know, they used to call it the, the original Dark Age.

Rob Larity:

Basically there was climate problems, mass migration that destabilized societies,

Rob Larity:

which led to warfare and agricultural, you know, problems, which led to costs.

Rob Larity:

And the takeaway in his book after 1177 BC is just like, nobody won.

Rob Larity:

Like, yeah, there were like, the Venetians did relatively better and

Rob Larity:

the Creon did relatively better, in part because they were more mobile

Rob Larity:

and sort of how they could do things, which is a separate discussion, but

Rob Larity:

like, it just sucked for everybody.

Rob Larity:

Everyone did absolutely worse off than they would've otherwise.

Rob Larity:

And that's like the negative scenario of what could potentially be in our future.

Rob Larity:

Like, I hope not.

Rob Larity:

I hope we're in a situation where we're arguing over who gets all

Rob Larity:

the new Alzheimer's treatments and they won't share with each other.

Rob Larity:

But it's not unthinkable to think like, yeah, maybe just no one wins.

Rob Larity:

And it's just, you know, God going into a dark place with this.

Rob Larity:

Yep.

Rob Larity:

With this one.

Rob Larity:

But

Jacob Shapiro:

our podcast title, it sucks for everybody.

Jacob Shapiro:

Nice chatting with all of you.

Jacob Shapiro:

We will see you in two weeks with our latest and greatest.

Jacob Shapiro:

Yeah.

Jacob Shapiro:

Anyway.

Jacob Shapiro:

Um, well, no, it's, it's important to think about the, it's important

Jacob Shapiro:

to think about the downside.

Jacob Shapiro:

Okay, well Rob, I, let's commit to each other that we'll

Jacob Shapiro:

come back here in two weeks.

Jacob Shapiro:

Uh, and let's try and argue the opposite, or let's see if there's any optimism

Jacob Shapiro:

that we can find at some of these things.

Jacob Shapiro:

'cause I think that that's the other thing about the volatility spiral

Jacob Shapiro:

it, uh, I said this actually on another podcast yesterday that I did.

Jacob Shapiro:

Somebody asked me what, uh, what I've been focusing on right now in

Jacob Shapiro:

my honest answer was I haven't felt like I could focus for three months.

Jacob Shapiro:

Um, it used to be that, okay, I spent the first couple hours of

Jacob Shapiro:

my day getting on top of, okay, here's what's going on in the world.

Jacob Shapiro:

And, you know, I'd pour myself a cup of coffee, maybe two, and by 10 o'clock I'd

Jacob Shapiro:

be like, okay, like I have a pretty good, my finger's on the pulse of the world.

Jacob Shapiro:

I can go do some deep research.

Jacob Shapiro:

I haven't been able to do that for three months because just keeping your finger

Jacob Shapiro:

on the pulse of what's going on, like is a five to seven hour job now, where it used

Jacob Shapiro:

to be a two to three hour job for somebody who does this for a living and has been

Jacob Shapiro:

doing it for a living for like 10 years.

Jacob Shapiro:

Um.

Jacob Shapiro:

Which makes it harder to like stay focused on the things that are optimistic.

Jacob Shapiro:

'cause you're not thinking about the bigger trends.

Jacob Shapiro:

You're just having to deal with all of this.

Jacob Shapiro:

Um, and, and it's not just, it's not new things.

Jacob Shapiro:

It's like, okay, one day it's this, then it's 180 degree turn, then oh, another

Jacob Shapiro:

360 turn then oh, 90 degree angle.

Jacob Shapiro:

Let's go this direction.

Jacob Shapiro:

And it's sort of the same thing over and over again.

Jacob Shapiro:

And the trend lines just kind of stays, uh, stays in the same place.

Jacob Shapiro:

So anyway,

Rob Larity:

well, the last time we were in a volatility cycle, I think

Rob Larity:

people said some of the same things about these new motor cars zipping

Rob Larity:

around at these unheard speeds.

Rob Larity:

And, you know, my God, I can't even keep up with the news and war

Rob Larity:

here and terrorist bombings there.

Rob Larity:

And, you know, there's some element of of that that always happens

Rob Larity:

in these things like volatility spirals are also very good.

Rob Larity:

I think that's the hardest thing is like, it's, it is so easy to

Rob Larity:

say the doom and gloom and, oh, 1177 BC and everyone's screwed.

Rob Larity:

Like there's an equally and probably more valid in terms of probability

Rob Larity:

scenario, which is the future's so bright, I gotta wear shades.

Rob Larity:

And like the volatility spiral swings both ways and it'll be both at the same time.

Rob Larity:

There's gonna be countries that are gonna be absolutely demolished by

Rob Larity:

all this stuff going on, and we're already seeing so much of this.

Rob Larity:

And at the same time, there's gonna be such incredible things coming out of this.

Rob Larity:

I, I think, and you can see some of that too, like it's, it's hard

Rob Larity:

to have a nuanced and complex view of the world, but, and that doesn't

Rob Larity:

make for good podcast listening 'cause people just want kind of a

Rob Larity:

relatively straightforward narrative.

Rob Larity:

But both those things can happen simultaneously and you know,

Rob Larity:

that's, that's the reality of it.

Rob Larity:

So yeah, we can talk about the future.

Rob Larity:

So bright, I gotta wear shades.

Rob Larity:

Side of things next time, just to even it out, but

Jacob Shapiro:

alright, well, I'll hold you to it.

Jacob Shapiro:

We'll go from there.

Jacob Shapiro:

Thank you so much for listening to the Jacob Shapiro podcast.

Jacob Shapiro:

Uh, this show is produced and edited by Jacob Mian, and it's

Jacob Shapiro:

in, in many ways, the Jacob Show.

Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

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Jacob Shapiro:

Jacob Shap.

Jacob Shapiro:

That's Jacob, SHAP.

Jacob Shapiro:

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Jacob Shapiro:

Um, see you out there.

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The Jacob Shapiro Podcast
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