Dan Sullivan [00:00:00]:
So Japan recognized about 30 years ago that they were running out of people, especially working people, and they came up with a strategy that from now on we move our factories to where our customers are. And so for the last 30 years, Japan has been building factories mainly across the US south and Southwest. In a century, they became the number one economy in the the world. And one of the big reasons was tariffs. The US Protected its as they started manufacturing, they put tariffs on products coming from the outside. We have the tariffs if you want to move stuff into the United States, but if you didn't, all the tariffs will be counted as external tax money now. And that will pay for the US Government rather than individual Americans, companies and individuals paying the income tax. And everything drops down, down.
Dan Sullivan [00:00:54]:
So what you have is a thriving economy. Hi everybody, it's Leanne Sullivan here and I'm here with Mike Koenix. And this is the next episode of Capability Amplifier. And boy did we amplify the capabilities today. Mike, we're talking about the high stakes gamble that the United States in the person of Donald Trump and Elon Musk are making about how the world is going to be basically organized for maybe next 50 to 100 years. It's been neat being ringside in this whole high stakes gamble, Mike.
Mike Koenigs [00:01:44]:
Yes, and this began with a little side comment Dan made, which is the Japanese are investing a trillion dollars in the United States. I was like, really? I didn't know that. And then from there we talked about the power of tariffs, the history of tariffs, and why they're actually advantageous and why they got brought up in the first place. So this is a show about the high stakes gambling game of making a lot of noise, creating deep audits and how we can create a less expensive government that's more effective and what it takes to be a world leader right now. And I think you can apply a lot of this thinking to your own business and your life as well. So I'm positive you're going to enjoy this episode as much as Dan and I had making it. All right, Dan, so we were having a conversation at the last Free Zone event and then we went right to 100k with Joe Polish and we were talking about the trillion dollar investments that Japan is making in the United States. I'm like, what the heck are you talking about? Why would they do that? And then that extended into this conversation about tariffs.
Mike Koenigs [00:02:58]:
So let's talk about tariffs, Japan and investment into the US from the outside of the US and what's going to be happening over the next four Years.
Dan Sullivan [00:03:10]:
Yeah, well, I, I've been really interested in tariffs for quite a long time. Generally, the US became the number one economic system in the world. Actually, by 1900, the US was already, they had gone from, you know, in a little bit more than 100 years. If you go back to when the Constitution was ratified and you know, Washington was the first president, the U.S. had about, you know, had about 3 million people in the colonies that, that became states and, you know, and it was largely agricultural commercial country that really didn't have much manufacturing, most mostly agricultural. And in a century, they became the number one economy in the, the world. And one of the big reasons was tariffs. They, the U.S.
Dan Sullivan [00:04:14]:
protected its. As they started manufacturing, they, they, they put tariffs on products coming from the outside. And that went right up into the. It was still going around the time of, before the First World War. First World War and then First World War was just. Everything got thrown out of whack because it was, it was the biggest war up until that time. And you had almost martial law in the United States. And, and, and then it went back to the mid, mid period between the two wars, which was actually just one war with the ceasefire for about 20 years.
Dan Sullivan [00:05:02]:
And, and then you had the second war, which was the most destructive event in human history. And the US Got to the end of the war and they were just number one in everything. Military was the biggest, really, except for the attack on Pearl Harbor. There was no damage to the United States during the Second World War. And they had this conference in New Hampshire at Bretton woods in 1944. So, July first week of July 1944, and the US had one concern. They could see already that the Soviet Union was going to be a problem, and they just did not want to fight a war against the Soviet Union. It would have been a land war in Europe.
Dan Sullivan [00:05:55]:
And they couldn't win that war because the US is essentially a maritime country. It's not a, it's not a, it's not a land war country. And, and so they came up with the Bretton woods agreement, which basically created one of the most remarkable weird worlds in human history where the US Just decided they had so much money and they lent this money. They had the Marshall Plan, which anybody wanted to borrow from the United States and to rebuild their economies. They could manufacture anything they wanted and they could sell it into the United States and there'd be no tariffs. And this is the first time in, since the US had been a country when there were no tariffs. Okay? So they went, you know, and gradually they just out prosperity the Soviet Union into extinction. And all these countries got built up, a lot of them.
Dan Sullivan [00:06:57]:
You know, they weren't even countries when this began. And the Soviet union collapses in 1992 and the rest of the world just goes on as if nothing happened. I remember at the time I said this is the largest empire in the history of the world. And they just collapsed. And there's nothing in any of the papers, there's nothing about this because they had this sweet deal with the United States that you could build anything you wanted and sell it into the United States largest economy. And there were no tariffs. Okay, but that didn't mean the other countries didn't have tariffs. Japan had tariffs, France had tariffs.
Dan Sullivan [00:07:38]:
Everybody had tariffs. And the United States has no tariffs. So it's easy for everybody else to sell stuff into the United States, but it's not easy for the United States to sell other stuff into the other countries. And so the corporations, American corporations say well, we'll just send our factories to these other countries and then we'll will do, you know, they'll produce the products and we'll sell them and there's no tariffs on, on our, our products. But meanwhile every, the United, they're not reciprocating with the United States. So you'll notice that a word has come into existence over the last month and they're called reciprocal tariffs. And it's simply a tit for tat that if you, you have a tariff, we'll have a tariff, okay. It won't be on the same thing, but we'll look at for example, Canada.
Dan Sullivan [00:08:38]:
You can't sell dairy products into Canada. The United States can't sell dairy products, but they can sell any number of dairy products into the United States. So the United States says, well, we'll find some way of putting a tariff on something that you make that equals the tariffs that we're paying for. So it's not. First of all I like to make first point is the US Always had tariffs. They always protected industries, especially when you have a new industry you always protect. And other countries always did this too. It's just that after the Second World War, the United States committed an unnatural act from an economic standpoint.
Dan Sullivan [00:09:19]:
They didn't charge tariffs. And the big reason is they wanted to rebuild this world around the Soviet Union. It wasn't for money, it was for security. We just want to do that. So that's just a little background. Any, any thoughts about what I'm saying here?
Mike Koenigs [00:09:34]:
Well, I think the, the question that I think I want to dig into in a little while is, you know, when you paint it like that, it makes a lot of sense and it strengthened the whole world. And ultimately, when I read into it, I know your history. We made the world a better place while we policed the world and prevented the Soviets from doing bad things. And now we've got different kinds of threats. We certainly have been moving inward and we're doing a completely different. The, the mindset of America has changed and we're not policing, we're not protecting, we're pulling out of NATO and, and it seems like most international organizations and, and also the nature of warfare is going to absolutely change, which I think factors into that. We didn't really talk about it, but now China makes. I was just watching a Peter Zion video.
Mike Koenigs [00:10:44]:
And China makes the majority of all drone technology worldwide. And we're in a. In an environment where aircraft carriers are going to matter less and so are traditional submarine technologies. It's not a matter so much of who can spend the most will have the most power. At least that's the impression I'm under. You may have a completely different point of view. So I'm way over answering your question as usual, but I'm thinking about this from the historical perspective and then I'm trying to get iterate out to what does it matter now and how have things changed? So let's talk about the contrast, perhaps.
Dan Sullivan [00:11:26]:
Well, I just wanted to keep it on the economic basis before we do what the military implication is. Okay, yeah, yeah, let's do that. Basically that the job of the no tariff world was to prevent the Soviet Union. And I would consider the Soviet Union collapsing as having finished the job that Jackson. But nobody wanted to look at what the economic basis was for the agreement that did it in the United States. And this didn't everybody blames us on Trump, but it actually started with Bill Clinton. Bill Clinton actually said, hey, you guys, you know, we're doing this, but you're doing this to us. And then Bush came along, same thing.
Dan Sullivan [00:12:15]:
Obama came along, same thing. And Trump was saying we're not getting their attention. The big thing with Donald Trump is he has a way of getting people's attention.
Mike Koenigs [00:12:30]:
Yes, he does.
Dan Sullivan [00:12:32]:
And the way he does, I mean, I can see it in Canada because I live in Toronto. And he just said, well, we're just going to put 25% tariff on everything. And all of a sudden he got their attention. The Prime Minister flew down to, you know, flew down to Florida to meet with him at Mar a Lago and he didn't impress the president. So he said, maybe you're not a real country and maybe you're not a prime minister. Maybe you're just a governor. And that got his attention. And he quit.
Dan Sullivan [00:13:01]:
He basically quit. He resigned. So that, that's tension. He did the same thing with Mexico. And so the big thing is that it has to be reciprocal. His whole notion, it has to be reciprocal. You drop your tariffs, we drop our tariffs. You put your tariffs on, we put our tariffs on.
Dan Sullivan [00:13:19]:
Except if you don't want to pay the tariff, move your factories to the United States. Okay? If you want to move your factory, the United States, hire American workers, pay American taxes in the United States, there's no tariff. But if you want to continue producing, shipping your product in the United States, we're going to put a 25% tariff. So this is just one of three strategies that he's putting together. This is my take on it.
Mike Koenigs [00:13:48]:
Well, when you put it that way, that makes perfect logical sense. It seems like a fantastic opening salvo. And you can't bring someone to the table unless there's something to come to the table for. And he certainly is. What he did with the Prime Minister of Canada was. Well, it was astonishingly fast. Everything happened so quickly. It certainly did with Mexico, too.
Mike Koenigs [00:14:25]:
So that all makes sense. So let's tie this to.
Dan Sullivan [00:14:31]:
Okay, so now I want to tell you, I want to come back to your Japan example.
Mike Koenigs [00:14:36]:
That's exactly right. And I've got some AIs doing a bunch of research in the background right now on the whole Japan thing. So. Yeah, let's, let's hear your perspective on that.
Dan Sullivan [00:14:46]:
Yeah, so Japan recognized about 30 years ago that they were running out of people, especially working people, and they came up with a strategy that from now on, we move our factories to where our customers are. Okay. And so for the last 30 years, Japan has been building factories mainly across the US south and Southwest. Okay? The car companies, Nissan and, you know, all the, all the Japanese car companies and you know, their electronics companies, they're mainly the main factories as far as anything that gets purchased in the United States is actually, is actually produced in the United States, actually manufactured in the United States. And that's good. That, that's, that's good deal. The US really likes that because it was very hard to sell things into Japan. Okay.
Dan Sullivan [00:15:43]:
They had, they had the tariffs and everything. So they, they've been very accommodating. The one country that's been very accommodating to the United States has been Japan, because They have a history of what happens if you really get into a war with the United States. They actually have some experience with that.
Mike Koenigs [00:16:02]:
Yeah.
Dan Sullivan [00:16:03]:
And they. So the whole thing is that this is going to be the deal going forward with Trump. He'll say you pay a tariff or you move your factory to the United States. And quite frankly, this has a lot of implications to it because in the United States, there's two types of states. There's union states and non union states. And when the people from the other countries are building their factories in the United States, they say cost us this much if we're in a union state. Cost us this much if we're in a nonunion. So all this manufacturing in that is coming into red states, not blue states.
Dan Sullivan [00:16:45]:
So this is the second part of it. There's a real implication here.
Mike Koenigs [00:16:52]:
This is good. So I'm going to support what you said and I'm going to show you something so you see what went on. And I'll introduce a new character here. AI is our additional character in our show. But we have this, by the way, is ChatGPT01 Pro, which was just released as of now about a week ago with something called deep research. So I just gave it a little prompt. Dan and I are doing a podcast about how Japan is investing $ trillion US economy and the power of tariffs, how this will improve the economy. Give me 10 great question and counterpoints I can ask Dan.
Mike Koenigs [00:17:24]:
So it asked me some clarifying questions which that is really, really good. The kind of clarifying questions it asks are great and usually I just say just do all because I get a lot of really good stuff from that. But then it did its research and it not only provided a significant report. I'll scroll through it really fast. You can see the volume of data it got. This is like what would be two to three days for a really good researcher to produce. Complete with citations to everywhere it found. And it probably went through I don't know how many sources, but a lot.
Mike Koenigs [00:18:08]:
But just to support what you're saying about what's going on. So it's going from 783 billion to roughly 1 trillion. High level talks. Okay. It's to address this large trade surplus in America, 68.5 billion annually. And of course, as you said, to avert potential US tariffs. Precisely what you said. So then they talk about the industries and sectors which are energy, liquefied, natural gas, steel, auto tech, clean energy and defense.
Mike Koenigs [00:18:45]:
But then they talk about the economic impact and just what you were saying a moment ago about who it's affecting. Well, Japanese already employ close to a million US Workers, so. And there they are, auto, steel mills, tech. So from a political. It should create hundreds of thousands of additional jobs. Yeah, Yep. And as you said, assembly workers, engineers and managers. But again, the deeper this goes, I was glancing at it as you were describing this, and it's like, first of all, yep, you're well researched as usual, but the, the detail that this thing produces is so profound.
Mike Koenigs [00:19:30]:
So quickly, I'm just blown away.
Dan Sullivan [00:19:32]:
Yeah, yeah. So that's the second part of the, the second part of the. So you have the tariffs and the reciprocal tariffs, and then you have, you have a choice. You can choice with your factories. The, you have a choice where you want to move your factory. And generally speaking, unionized states, the cost of workers is much higher than it is. Cost of living is much higher in the, in, in the red, in the blue states. The blue states are.
Dan Sullivan [00:20:04]:
So you want to move it to red states. Well, this has tremendous domestic political implications for the United States. It means all the growth will be in basically Republican states. No, no, not in the blue states. The third part of it is just after the election and just before the inauguration, Trump says, we have a department. We have a department of government, which is called the Internal Revenue Service. We're now going to establish another department which was called the External Revenue Service. Okay.
Dan Sullivan [00:20:46]:
And he says that basically what we want is we want to use our trade relations with other countries in the world to provide the money for financing the U.S. government. And we do, we want to, if possible, we'd like to eliminate income tax, but if not possible, we'll drop it down, down to flat tax, something like 15% corporate. 15, 15 U.S. so there you have the three things we have. The tariffs we have if you want to move stuff into the United States, but if you didn't, all the tariffs will be counted as external tax tax money now, and that'll pay for the US Government rather than individual Americans, companies and individuals paying the income tax, and everything drops down. So what you have is a thriving economy on the one hand, because a lot of people are moving their manufacturing into the United States. But on the other hand, we've dropped tax levels.
Dan Sullivan [00:21:51]:
So Americans have a lot of money to spend and we ramp up. The US Economy goes into warp drive.
Mike Koenigs [00:21:59]:
Okay, so the arguments I've heard against triple weight. Okay, that's really interesting. I wouldn't have thought about it through that lens either. So the arguments that I've heard against tariffs is that ultimately the American will pay more. So what do you say about that? And then the second thing that I had heard before is that, and I'm going to cite the, the, the instance I looked this up, but I'd heard it a couple times before, that trade deficits like the one with us has demand are not simply the result of unfair trade practices. They reflect deeper economic factors such as national savings and investment rates. So I can kind of guess what I think you'll say. But what would you say to the cost to consumers and businesses that ultimately it bounces back to us?
Dan Sullivan [00:23:01]:
Well, if you drop taxes, you have more money, you have more disposable income. So they're, they're taking a look at the, you know, that in the worst possible situation, there's no change. But in the best possible situation, you know, the, there's a significant freeing up of. And that's straight across the board. And then it becomes a problem that if the Federals. Federal. Drop their tax rate down, but the states like New York and California don't, then there's another. You're killing the, you're killing the blue party in the United States.
Mike Koenigs [00:23:37]:
Yeah.
Dan Sullivan [00:23:37]:
And this is why, if you notice that most of the shouting and the outcry against there, it's all coming from the Democratic side. And the reason is that he's, he's, you know, he's cutting off their air supply.
Mike Koenigs [00:23:52]:
Yeah. It's brilliant. It really is brilliant.
Dan Sullivan [00:23:56]:
I'm just saying, I think that there's a well thought out logic of logic about, I mean, it's risky. Obviously it's risky. And yeah, timing is everything on what he's doing. Now the other, the other aspect of it is going after the government itself with the Elon Musk, what he's doing with Doge, you know.
Mike Koenigs [00:24:18]:
Yes.
Dan Sullivan [00:24:19]:
Which if it comes off, is going to be a remark because the cost of government is going to go down in the United States as opposed to the other countries. The cost of government itself. I mean, he's just finding my, I mean, he came across $3.2 trillion in the Treasury Department where checks have been sent, but they can't figure out where the checks went. Now I find million. You know, I'm at a point as an entrepreneur where I find million impressive. Billion I find really impressive. I tell you, Brilliant. Really good.
Mike Koenigs [00:24:56]:
You know, it's like that's a bit of a whoopsie.
Dan Sullivan [00:25:01]:
But three point. This is one part now, I'm sure, I'm sure stock. Some of it was legitimate spending. But if he were to just Bring the cost of government down by 2.5% per year over about a 10, 10 year period. You know, things that'll add up, things are getting really expensive. Yeah. And somebody said he's going to go to Fort Knox to see if the gold is actually.
Mike Koenigs [00:25:31]:
Yeah, still there. Yeah, I saw that. That was pretty funny.
Dan Sullivan [00:25:35]:
Yeah. So my, my sense on it, I'm just looking at it. And part of the reason is that he's only got four years. Right. He's like a brand new president, but he's only got four years. You know, I mean, he had those four. And I can see already that the, his opponents, the Democrats mainly, are saying, geez, if we'd only let him win in 2020, he'd be gone by now.
Mike Koenigs [00:26:02]:
Yeah, yeah.
Dan Sullivan [00:26:02]:
But instead, in strategic coach terms, he gave him four years to do experience transformers. And he came up, he said, geez, you know, not everybody who said they like me in Washington actually likes me. I didn't know that when I went there. You know, they play by different rules in Washington. And he had four years to think out, maybe he would play by different rules, you know.
Mike Koenigs [00:26:26]:
Right on.
Dan Sullivan [00:26:27]:
Well, that's my sense about it. But here's another thing on the European front and NATO, you brought up NATO. Yes, NATO's been getting the protection, but they haven't been paying for it. The only country that has consistently paid its bills is Great Britain. They're the only country of all the European countries who paid. And he said, you know, it's not our problem, it's your problem. And you know, a lot of you countries, you can't even put together a good marching band, you know, I mean, you guys, you know, you guys really haven't paid Canada's, you know, since Trudeau came out, it's been about half they've been paying, but it's been going into social programs. They've, instead of betting the money to do their part with defense, it's been going into social programs.
Dan Sullivan [00:27:21]:
And they're all left wing social programs. They're all left wing, you know, and so he's saying, you know, it's your choice, you know, you have our protection and it costs 2% of your GDP. Those are the rules. And if you don't, then you can take money out of your social programs and pay for the military because you're going to have to, you know, because, you know, the, it's a, your world is becoming a more dangerous part of the world. And you know, you know, we're 3,000 miles away. You know, it's not like it's next door, you know. Yeah, yeah. So.
Dan Sullivan [00:28:00]:
So anyway, I think there's some high level chess going on and how they're thinking about this.
Mike Koenigs [00:28:10]:
It's quite brilliant. So I have two thoughts. One of them is it just goes to show multi generational entitlement is very, very dangerous and making assumptions that what you have belongs to you and that this gift is entitled to you. That's trust funds. I don't see how they end well. Most children I know who are in trust funds are not very functional members of society. I can think of very few examples of that not being the case, but it knocks the entrepreneur right out of you. But the second that I wanted to know is okay, we use Japan as an example.
Mike Koenigs [00:28:50]:
If you were going to guess or what do you know or believe will be some other countries that may follow suit? I mean would it be Canada, would it be Mexico? But what other countries would invest heavily in the US because the tariffs are of danger and, or they see a tremendous economic, political and military reason for that.
Dan Sullivan [00:29:23]:
Yeah, I think the main one would be sort of South Korea would. South Korea would do it. I think India would do it. India would do it. Yeah. And, and probably the, and these are high level. I mean you have to think that these are high level technological. Most countries, you know, I mean the European would do it.
Dan Sullivan [00:29:55]:
I think you're going to get to the point where the UK is going to do. And my sense is the UK now is balancing on a fence line between is there a future with continental Europe or is there a future with United States? Primarily the United States. And I think that's what's going on in Great Britain right now. Brexit was the first thing where they detached themselves, you know, sort of legislatively they've detached themselves from Europe. But now I think it's going to be economic that they're going to, they have to make a choice. My sense in the end that they'll, they'll go with the states common culture. I mean, you know, British, you know, basic, you know, basic legislative and legal structure is very, very similar cultural, the same language makes a big difference and everything like that. But the, the one insight that Trump came to, and I think it's been going on for about 30 years, I think he's been throwing it.
Dan Sullivan [00:31:03]:
The number one weapon that the United States has is the US Economy.
Mike Koenigs [00:31:10]:
Yes.
Dan Sullivan [00:31:12]:
That we can use our economy as a weapon. We don't have to threaten you with the military will just threaten you with our, with our economy. And the other Thing and this is insight that I've gained from talking to Peter Zion. I had some conversations with Peter. We had him as a free zone. You know, the free zone. He was a free zone. And I saw him at Genius Network and I said, is it your thought that the end of the Eastern hemisphere as the driving force in history is we're coming to an end of the Eastern hemisphere and then now it's going to be the Western hemisphere.
Dan Sullivan [00:31:54]:
Okay. And he said, yeah, he says, I think that's developing. Certainly the Western hemisphere keeps getting more important. Western being north and South America. And he says the Eastern hemisphere of Europe, you know, the Europe's. It's kind of finished. It's. I remember talking to one of the British members of Strategic Coach and he says, what would you say the attitude of the United States people, people in the United States, what do you think their attitude is towards Europe? And I said, it's kind of.
Dan Sullivan [00:32:32]:
They see Europe as a bigger Disney World with probably more castle. Well, they have a lot more castles and probably a lot better restaurants. They just don't take them seriously.
Mike Koenigs [00:32:48]:
I'll agree with the castles. I don't think I'll agree with the restaurants even.
Dan Sullivan [00:32:52]:
But yeah, there's a lot of bright new chefs in the United States, I think.
Mike Koenigs [00:32:58]:
Yeah, yeah, I, yeah, the best.
Dan Sullivan [00:33:01]:
You just don't. We just don't take them seriously, you know, you wouldn't take them seriously. I mean, culturally. When's the last time the Europe has been producing world class art, world class literature, you know, world class music? Have they been, you know, I don't really know. They're scientists. Do they have Israel? Israel has created more Nobel Prize prize winning scientists in the last 50 years than the continent of Europe. You know, and there, there are 7, 7 million people and everything. Like, I, I just don't take them seriously.
Dan Sullivan [00:33:40]:
And I don't even go to the continent anymore. I used to, we used to go to London and we'd, you know, we traveled to Vienna, we traveled to Amsterdam, we traveled to. I like Italy just because I like the Italians and I just like, just like they're having fun. You know, who does around people having fun? But I think their time in history is over. And I think that's on a psychological, intellectual and emotional level. Not, not so much educate, economic, not so much military. It's just that I think that the moo is gone. It's gone.
Mike Koenigs [00:34:18]:
You know, I'm gonna, I'm gonna echo something because I did this is a little test, but I was just at another event this week in San Diego. And today I attended an Abundance360 Peter at a big, big group. And I was in a couple side groups and all of them were filled with Europeans. So I looked through the names and I don't know exact. Well, I know why, at least from a couple people, because in both groups I said, this is so interesting. This is the first time I know of where I've seen so many Europeans. And I looked at the names, it was clearly a bunch of Europeans. And the fact that two breakout groups, in both instances, everyone was a European.
Mike Koenigs [00:35:06]:
So I said, why are you here and what caused you to join? And they said, a Brit said this, a Turk said this, an Indian guy. And then the second group, it was an Italian and another Brit. And I can't remember where the other person was from, but they all said, we feel like we're so behind, especially in AI and longevity. And I think when I listen to you right now, you know, I've developed a number because we've been spending so much time in Spain. I've developed a lot of relationships with Spanish entrepreneurs. And that's what they say is there's just no innovation going on. Our innovation comes from copying Americans. And we can be three to five years behind and even two years behind in AI.
Mike Koenigs [00:36:02]:
And that's what it takes to be relevant. And I know a multi billionaire over in Spain, and I asked him, so how did you make most of your money and besides real estate? He says, I knocked off American companies. I could be three to five years behind, and then I sold them to foreign entities. And that's how he made his money. So when I listen to you right now, I just had a bunch of dots get connected, because I do think that when you look at the gaps that AI are going to create as well, and if we can draw in through this is kind of a reverse tariff, is to bring the business and the investment in. And then if we can figure out a way to hasten migration into the US and draw top talent and speed that process, then that's the unstoppable combination.
Dan Sullivan [00:37:06]:
Yeah, well, I think the thing. This is another conversation I had with Peter Zion and I said, I said, I got a sense that the greatest fear of the rest of the world outside the United States is that the United States is just about ready to go into warp drive and they don't really care. The US just here. And one of the things is you keep an eye on this because Elon is involved, that when the US goes into outer space, there's not going to be any United nations, huh?
Mike Koenigs [00:37:49]:
Yeah.
Dan Sullivan [00:37:54]:
I mean, look at, I mean just the power that he has with Starlink.
Mike Koenigs [00:38:00]:
Yeah.
Dan Sullivan [00:38:01]:
And SpaceX. I mean the two of them are, I mean, the greatest inventions. One because, I mean the Starlink because of the, you know, because of the SpaceX. I think the deal that, you know, the, if you're looking at deals, because if you're dealing with Trump, it's a, there's a deal in there somewhere. And I think the, the deal with Elon, besides, he gets to really learn how to run an entire government with AI, you know, which I think is a big deal. You know, I think, I think that's really an important thing. But I think that he gets the entire Mars, the Mars trip paid for by the U.S. well, he might just find the money in his savings, you know, you know, but I think, you know, he wants, he wants to walk on Mars, you know, and you know, you know, he says, then daddy will love me.
Dan Sullivan [00:39:06]:
Yeah, but. Yeah, that's a motivated man, you know.
Mike Koenigs [00:39:13]:
He, he really is. I'll give you two, two things that you reminded me of. And, and you and I have talked about this before. I've stayed connected with the launch director of SpaceX for years and we chatter back and forth regularly about what's going on and whenever I see a rocket going past. We saw one in Phoenix the other night and I texted the timing good on that.
Dan Sullivan [00:39:38]:
You know, it was amazing how we had to work just for our, you know, our free zone party to have the rocket launch.
Mike Koenigs [00:39:49]:
Said that you, I'm glad you, you arranged that with Kiko and, and, and Elon because that when they say yes to Dan, they say yes to Dan. It was great. And I'm like, is that one of yours? He goes, yes, it is. So, but anyway, you know, what Elon's doing and why it ties into this is he's about to obliterate the, the entire distribution of the Internet, at least for carriers because T Mobile is about to activate and they have, they have their Beta in service. So now your phone actually talks to Starlink satellites for low volume data, sms, et cetera. So that means you'll be connected all the time, anywhere in the world, no matter what. And the level of extortion that's gone on with Internet carriers over the years and phone carriers is just unprecedented. That business has been gutted for years, but also the multiplier effect of all of these companies because every Tesla that's been on the road has been training a robot army and just as of.
Dan Sullivan [00:41:01]:
The time we're recording this, just explain that. I'm not quite sure what you mean by that.
Mike Koenigs [00:41:06]:
Okay, so every single Tesla is a gigantic data acquisition device. It's filled with cameras and it pays attention to the movement of people and traffic. And if you think about it, they've mapped out the fastest way for anything to get anywhere all at once in all the US and in many places in the world now. And have amassed massive volumes of data and can predict how humans and objects move around on highways, streets and sidewalks, et cetera. So the way robots are being trained is not only with that externalized data, but also they're effectively sucking down the behavioral patterns of every athlete, every dancer. And, you know, AI can intuit, it can basically now synthesize data. So in the past, the way AIs had to be trained is you'd have to effectively teach it by feeding it books and information. But now, like we quote, unquote, think, at least we think we do, humans do, but we'll make up an idea and that can become something new.
Mike Koenigs [00:42:25]:
But the AIs are capable of doing that at breakneck speeds. And now they're creating synthetic data to train themselves faster based upon this. It's fast learning. So if you think about what all of Elon's companies. So we got Starlink, which covers data the world. And what did he do? He managed to figure out a way to use government money to build rocket ships. And while he was launching stuff for other people and charging for payload, he was putting Starlinks up all over the world en masse. And now there's so many, he can provide data to anyone in the world.
Mike Koenigs [00:43:11]:
What did he do? Also, if you can't pay in US dollars, you pay in crypto. So now you've got that side of it. He built and bought, right now, as far as I know, he has more supercomputers than anyone else. And they just released the new version of Grok, which is trained on Twitter data. So that's some more data that they're training on, which is conversations, real time news and information. And they figured out how to filter out the garbage, at least mostly. So now the effect that they have between human motion data, car data, when you just start thinking about connecting all these dots. The advantage that Elon Musk has, Tesla is not a car company.
Mike Koenigs [00:44:01]:
And people are constantly giving them grief. They just haven't seen anything. There's so much momentum and science and technology there, and every one of those cars is a massive AI supercomputer. That doesn't have to be connected to the grid all the time in order to provide full self driving capabilities. That is exceptionally profound. It is a very, very complicated robot. It just has wheels.
Dan Sullivan [00:44:33]:
Yeah, yeah. Well, you know, you, you're more in touch with the world that provides this kind of information. I go back to my main basic theory is that the, the last couple of centuries of geopolitical history has been essentially a reaction to the U.S. declaration of Independence in the Constitution, that launching in, in a brand new part of the world that nobody knew existed from a European standpoint or from a nation standpoint, there's this huge continent and nobody knew it existed. And, and then the North, North, North America is far more important than South America. And this new country got started by a whole bunch of really bright people. It was a startup country. They put, they put together an operating system which was called the U.S.
Dan Sullivan [00:45:38]:
constitution. And it's very, very durable. You know, it's typewritten. It was 23 pages since 1789 and 200 and you know, 240 years later it's 27 pages. They've added four pages. It's a very durable operating system and the whole world is responding to this because it's life, liberty and the pursuit of happiness for people. And the rest of the world can't do this. It's only one country that can, can really do it.
Dan Sullivan [00:46:16]:
I mean, I live in another country. I've lived, you know, I've lived in, this is my 53rd year in Canada and there, there isn't that freedom in Canada, a nice country? You know, the there, you know, it looks nice and everything else, but there just isn't the dynamism here. Yeah, yep, dynamism here. And one of the things, because I was bankrupt twice in my entrepreneurial, you know, journey. And I said, you know the difference. Somebody once said, well, why do you live here? And I said, I like this city. You know, it's a nice city and it's comfortable city. We got a nice, you know, we got nice, you know, a lot of nice things about the country.
Dan Sullivan [00:47:03]:
I'm a forest season guy, so I do like the seasons and everything else. And you know, it's not far from the States. You can get to the States really quickly. And they said, what would you, what can you give me a reason why, you know, it'd be better to live and you why United States is better than Canada? I said, yeah, I went bankrupt twice and took seven years to get a credit card back. Yeah, I couldn't get a credit card. If it had been the United States and I'd gone back back bankrupt on Monday, I would have had three credit cards by Friday. That's the big difference between the good. Because the US doesn't want you, want you out of the game.
Dan Sullivan [00:47:46]:
America just does not want anybody out of the game. Canada doesn't want there to be a game.
Mike Koenigs [00:47:53]:
Yeah. Isn't that the truth?
Dan Sullivan [00:47:58]:
Yeah. So anyway, what do you think of putting your what Elon's doing together? What will it Trump's doing? Because there's two really unusual individuals that you have who are, are collaborating. What do you think about that? Well, and, and I think both of them are, are goodwilled about this of why they're doing it. As far as America and American citizens are concerned. I think they're very, very good willed about it.
Mike Koenigs [00:48:33]:
Yeah. I. Here's what, I'll tell you what I'm really, really happy and positive about. And the thing that gives me a little bit of pause so what makes me really, really happy is and this really circles back to what you said earlier. Imagine if you could get better services for 20% of the price and that would come from your government. That would be profound. Okay. Even at half price.
Mike Koenigs [00:49:07]:
Okay. So if we paid half as much taxes and got better services with accountability and transparency, I love that. And I also look at Elon and I've said this for a long time and I still think I'm right. He will for sure be the first trillionaire. And every time someone's said anything, I bought the first Tesla Roadster because a I wanted the car and it was great. I don't remember if you remember the selling line that got me to buy it were two words. Floor it. That's what they told me to do.
Mike Koenigs [00:49:52]:
And 0 to 60 in 3.7 seconds. I was like I'm going to buy it. And I came home and I said Vivian, I really want this car. And she goes, I think you should buy it. That was $125,000 car. Then when 125 grand was a lot to me. Still is a lot of money. Right.
Mike Koenigs [00:50:11]:
And then I bought the first model S and then I bought the first Starlink. I bought everything they've ever made. And I look at his business acumen and his ability to foresee the future and see non obvious things and continue to apply first principles. Thinking inside his organizations is profound. What does the US government need and what does this country need that and then what's the only way to make it happen without dropping an anvil in church? Which is what I think Donald Trump is. There's no way to make this stuff happen. Just like in the beginning of this podcast, you talked about how you get Canada's attention. You do what you did.
Mike Koenigs [00:50:50]:
How do you get Mexico's attention? You do what he did. It all seems to make sense. So you've got the brain and you've got the voice. What gives me pause is the speed that it's happening and the amount of breakage and what the long term implications are. So here's my little mini counterpoint. And just because I'm saying it, doesn't mean it's true. But it's a little tiny example. So Vivian's done a lot of work on the ground in a lot of bad countries, and most notably Uganda and India.
Mike Koenigs [00:51:32]:
And she's literally returning from India in about an hour. So she's been there for a couple weeks. And she spent a bunch of time in USAID offices where she said, without it, these people would be dead. And she said something really interesting. She said, what I don't think a lot of people realize is they've been the first line to great espionage for a long time. Meaning if you want to know what's going on, you got to get on the ground. And the people who are on the ground know what's going on, and they get invited in because they're providing aid. Now, it turns out there may be a high probability that there was tons of fraud associated with it, and there's going to be a lot of people who will have nothing really fast.
Mike Koenigs [00:52:17]:
And I think there's going to be diplomatic consequences that might not have been taken into account. And that does scare me because I think having a strong America is great. And when they say, when America gets a cold, the world gets a flu, what I hope is that our growth doesn't come at the cost of everyone else. Because, you know, if there's a. I liken it to this. If there's an apocalypse tomorrow and you got to have everything but no one else was around, it wouldn't be a fun party. What makes for a fun party is when you got a lot of people there and there's plenty to go around. And so I hope it doesn't come at the cost of very, very complex things that have been wound up over a long period of time.
Mike Koenigs [00:53:11]:
So that's my long winded answer for you.
Dan Sullivan [00:53:14]:
Yeah, I think the reason why. Well, first of all, I think the. They haven't canceled the USAID programs. What they've said is this is no longer the correct vehicle for delivering it and it'll back into the State Department. Rubio is a terrific. So my sense is that the programs will continue, they just will not go through that organizational framework. That's my observation of what's going to happen. And first of all, it's a lot easier with AI to tell whether the money was actually delivered to where it's supposed to go.
Dan Sullivan [00:54:01]:
And what he's introducing for the first time is an audit of a national government. It's the first time in history that you had the technological means to actually do an audit on an entire government. Every single check that's written now can be detected, it can be observed, it can be checked up. So when was it that you wanted to have an audit of the U.S. government? Well, maybe 100 years ago, but we haven't had an audit for 100 years. And there was easy, undetectable money that is undermining the very, very future of the country. So I think that's the reason why they have to do that.
Mike Koenigs [00:54:40]:
Every person, every business needs a regular audit.
Dan Sullivan [00:54:45]:
I mean, there's 50 different checkups on Mike and his career that's been observed because you're a private sector company and we're detected everywhere. But why shouldn't the federal government be, you know, observed and measured and detected in the same way? So I think that's the big thing and it's just coinciding at the right time in history that this new capability with, you know, geniuses who, who know how to apply it, I think it, I think it's the sigma. We're getting some of the significant, of the greatest genius in the United States since the country was created. I think, I think I, I completely agree.
Mike Koenigs [00:55:31]:
And the fact that it's happening so quickly, I mean, if it'd be like if you get to walk in and suddenly it got better for half the price, you're not going to have a lot of people screaming about it, that's for sure. And I think that's the, the proof's in the pudding. So right now it's, it's a matter of how much time it's going to take to make the sausage.
Dan Sullivan [00:56:00]:
Yeah, the other race, I think the reason why it's happening so fast is because there's, it's basically not a four year period, it's a two year period because you have the midterm elections in six, 2026. Okay. And so what Trump has done, he said the only way that the Democrats can respond right now because they don't have The Senate, they don't have the House, they don't have the Supreme Court and they don't have the White House. So we got, but two years from now that could change. Okay. And that could get stopped legislatively. So what he's done, he's, he's moved ahead very, very fast. The, that the only power that the Democrats had is the court system where they have elected, you know, they have elected an appointed Democratic judges and they're countersuing all the moves that Trump's making.
Dan Sullivan [00:56:57]:
Yeah, there's something that they don't quite know as well as he has, but everything, every time a suit is made, like of district judge or, you know, district judges that they, they have, all those cases will go to the Supreme Court within 18 months and the Supreme Court will rule on them. And everybody says it's unconstitutional what he's doing, but I said it's not unconstitutional until the, the U.S. supreme Court says it's unconscious. So he wants all these court cases totally established before the midterm elections. Has to do it really fast. Yeah, he's just going to grind and grind and grind and grind. And they, their only defense is the judges making these, what should be local decisions, but they're saying they're national decisions and Supreme Court is there and that happens to be in the, on this type of matter. The, the court would go with Trump.
Dan Sullivan [00:58:03]:
So he's, I mean, the guy had casinos, you know, I mean, he knows, he knows about gambling, you know.
Mike Koenigs [00:58:11]:
Yeah, yeah, yeah, yep. That's in guesses.
Dan Sullivan [00:58:15]:
Yeah. Best. So anyway, that's, I, I think I'm very, very interested in the things that you're putting together about Elon because my, my sense is that he's the Edison of our time, you know, he's. Yes. Yeah, he's got that type of mind. And we're fortunate, I think, that we have someone like that who is being given a really important government job to do a complete audit on the US Government and put in place now things that things can be observed and measured accurately from now on. I think this is a remarkable transformation that's going on right now.
Mike Koenigs [00:59:02]:
Yeah. And, and I think some of the. Maybe I'll, I'll wrap up my, my follow up to this, which is, you know, how I follow this, this show, the all in podcast. And one of the founders of that show is David Sox Sachs, who is the czar of AI.
Dan Sullivan [00:59:24]:
I really enjoy him.
Mike Koenigs [00:59:25]:
Yeah, he, he's, I think he's a really brilliant guy in, in a way. When I listened, started listening to that show years ago because I've gone to all their physic, their physical live events too. And I followed the, the other members. So one's David Friedberg and, and Chamath Palaptaya. One of them came from Facebook, one of them came from Google and the other guy is, has been. He's also been in Silicon Valley. They're all friends with Elon, they know the culture there and they have been cultivating these relationships and, and the all but Sacks Sachs has been a hardcore Republican. The other three would.
Mike Koenigs [01:00:09]:
You'd call them Silicon Valley Democrats. And along with Mark, Mark Andreessen, who I think I sent you the Hoover interview with him and he really explained this shift in culture and why and what the Democratic deal was for many years, which is, you know, we're going to effectively protect you and your brand as long as you stay on our side. And eventually the promise was broken and, and part of it was, you know, it's just the collapse. You know, they may. They talk about DEI being one of these. That's not the big reason. It's just a matter of the. A lot of promises weren't kept and eventually they saw the disaster.
Mike Koenigs [01:00:54]:
And I think what Elon and Trump did is they sided with the smartest, richest people in the world who know how to run really good innovative businesses. And they're approaching the United States as an innovative business. And the threat that they all agree on is if we lose the war with AI that's when our military upside is lost, our economic upside, our currency upside potentially. There's a lot at stake that are all coupled to our ability to rapidly innovate and protect life, liberty and pursuit of happiness. All of these things. It is tied and I don't know anyone who better understands both the how, the who and the what better than the team in place. And that's why I continue to be cautiously optimistic. But you know, I've been voting with my wallet with all the people in organizations for a long time and also betting my own future on the brains behind it.
Mike Koenigs [01:02:15]:
So I feel like we've got an aligned team who's thinking the right way. Yep. So again, I think we'll see what we all hope and pray is that the intentions are are there as well. But you know, I guess you like to talk about history and that's what if. When I think about Dan, Dan studies history and that includes history of behaviors, people performance and the fundamental operating system which is the United States of America. All of them seem to be in line with one another. So I'm, I'm excited.
Dan Sullivan [01:02:52]:
Yeah. I mean, we all enjoy movies that are high stakes, but this, this is better than the movies.
Mike Koenigs [01:03:01]:
This is a high stakes film. You are right. You just gave me a great idea for the next episode. All right.
Dan Sullivan [01:03:09]:
I mean, this is always supposed to happen in movies.
Mike Koenigs [01:03:16]:
This is awesome. Well, what do you say we wrap up this episode?
Dan Sullivan [01:03:20]:
This was very enjoyable. I think it was also. I think it was deep. I think it was expansive and I think gives a great framework, both from your understanding of where the technology is going and my sense of how the economics are. And, you know, just the structure of government is involved in this. But, you know, if you think of the US Government, it's not the. It's not actually on a per capita basis, it's not the biggest government in the world. There, there's actually Canada has a bigger government in relationship to its population than the US does.
Dan Sullivan [01:04:05]:
But the, the thing about it, a government that is really reasonably expensive and effective at the same time, that, that that's worth working for.
Mike Koenigs [01:04:18]:
I agree. That's a great way to end. What I am really happy about is when you said the Japanese trillion dollar investment in the United States, I was like, I want to know a lot more about that. Let's not talk about. We saved it for a show.
Dan Sullivan [01:04:36]:
Yeah. Great.
Mike Koenigs [01:04:37]:
So good job. All right, well, we'll end this and just say this is capability amplifier. We always enjoy some spending time with you. Thanks for listening. Thanks for watching. We'll see you in the next episode. It'll be great.
