Trump Slump, Capitalism vs. Communism, and Old Man Yells at Claude

- It's Wednesday, July 8th, 2026, and welcome back to GoodFellows, a Hoover Institution broadcast examining history, economics, and geopolitics. I'm Bill Whalen. I'm a distinguished policy fellow here at the Hoover Institution. I'll be your moderator today. And guess what? The GoodFellows are here with me in person. And who are the GoodFellows? Of course, they are the historian Sir Niall Ferguson, the economist John Cochrane, and former presidential national security advisor, Lieutenant General H.R. McMaster. Niall, John, and H.R. are Hoover Senior Fellows. So we are filming this on the campus of Stanford University. Those are the Stanford Foothills behind us. And we are sitting in the middle of a bunch of tech and AI and where a lot of smart stuff is going on, right?

- So they tell us.

- Except for us.

- Absolutely. I mean, it's a vibrant place. I mean, and it really restores your confidence in America being here because it is really a place where you see kind of advanced technology combined with unbridled entrepreneurship.

- Okay. Well, speaking of restoring confidence, let's talk about our confidence right now in the American President, Donald J. Trump. Gentlemen, it's now 534 days since President Trump began his second term, 118 days until America's midterm elections, 853 days until the 2028 presidential election, 927 days, not that anybody is counting, but 927 days--

- Do you have a dashboard for this stuff? Like every morning you check how many days to go?

- Trump's job approval. I checked it last night. It's in the mid to upper 30s, which is the same where it was when he left office in January 2021. Question, gentlemen, why is he struggling? So H.R, is it simply foreign policy? The Iran circus continues. The ceasefire is apparently not a ceasefire. John, is it the economy? Sir Niall, is it a lack of friends in DC? We've seen that Republicans in Congress have started to turn on him. And the Supreme Court, the supposed rubber stamp 6-3 Supreme Court has bucked him on matters like birthright citizenship, mail-in voting, the ability, John, to fire Federal Reserve governors, if you will. And the idea of Trump's base deserting him. Headline the other day, "Gen Z bros are ditching their MAGA hats." Subhead, "The young men are souring on Trump over Iran, Israel, Epstein, and the economy." Sir Niall Ferguson, I turn to you, as the international man of history. Let's put this in different terms than Austin Power in the International Man of Mystery, quite simply, has Donald Trump lost his mojo?

- No, baby. His mojo's just fine, I think Austin would reply. Look, this is a second term. And in some ways, the bottom line is it's politics as usual. It's difficult for a president to retain his mojo, his popularity at this stage in the presidency. And it's very hard to find a second term president who isn't in some measure in the doldrums by this stage. There are exceptions to the rule. Ronald Reagan managed to recover from the Iran-Contra scandal, and end his second term on a popularity high, but that's the exception. Most second term presidents go downhill, and sooner or later, they're called lame ducks. Now for 10 years, we've been told repeatedly that President Trump posed a mortal threat to the republic, that he was going to establish an empire or dictatorship. And it's just not happened. On the contrary, the checks and balances the founders devised have checked and balanced just as they were supposed to. President Trump has all kinds of imperial impulses, but in fact, it's business as usual in American politics. The incumbent party, the president's party, looking to do pretty poorly in November at the midterm elections. And he couldn't even get the Supreme Court to do his bidding, surprise, surprise, when you appoint a justice for life, they vote their conscience, not their politics. So I think this is a perfect illustration of a theme I've stressed throughout the last decade. This isn't really a huge disruptive event in American political history. The Constitution works, so chill.

- H.R?

- Hey, I just agree with that. I mean, there was an op-ed in the FT this week, you know, declaring the end of American democracy. I mean, enough of this. It is working, you know? And so I think that to answer, to get to your question, Bill, like what's going on with Trump? I mean, part of it is kind of the outlandish kind of behavior and statements. Again, doubling down on Greenland, you know, which is the equivalent of, I want sharks with laser beams. You know, I mean, so, I mean, okay, I mean, you know, but it has real consequences, you know? And so it's been, I think, a kind of a manifestation or a consequence of not having a decision-making process that allows the president to clarify his objectives. Because a lot of what President Trump wants to achieve is good, right? Greenland is relevant to Arctic security, to missile defense. Okay, that's good. But how do we go about it? And that process isn't in place to help him understand what he has an idea. Well, why don't we just take it? Well, we could do that, Mr. President, but maybe there's some other ways, you know, to get, I mean, to get to that objective. So I think a lot of it has to do with, at times the unserious, you know, communications, the inconsistent, and at times bombastic, you know, sort of communications efforts. A lot of times, you know, when we would discuss, you know, big speeches, like he just went to the NATO summit, I would say, okay, well, you know, you could say that, you know, and some people in your political base, they might want to hear you say that, but here's how that's going to be taken in Europe and here are going to be the consequences relevant to your agenda, you know, on burden sharing or whatever it is. So I think the lack of that process, I mean, not to blame, I mean, of course he's responsible, but I think it's inconsistency on seriousness of the communications effort a lot of times.

- Can I just jump in to issue an apology to our colleague, Steve Kotkin, who's not here, but who last year we debated with on a historian's panel. And he said the problem with the Trump presidency is lack of process. And I disagreed with him, but I actually think it's turned out to be a key criticism. The lack of process led to decisions, I think you can hear particularly of the decision to go to war against Iran that had foreseeable consequences, but they turned out to be quite adverse consequences. So I think you're right, H.R. The president is an extraordinary communicator. He's a very unconventional communicator, unlike previous presidents. This causes many brains to fry and heads to explode. But it's not really the Tweets or Truths that are the problem, the problem is that decisions often get taken somewhat impulsively and they don't get put through the kind of process that you presided over as national security advisor in the first term.

- Kind of like fire the fricking laser beam, right? I mean, you want to place that in context of really what he's trying to achieve.

- Although we don't want to imply he's president evil. President evil is not, that's not what we think.

- No, it's not what we think.

- You know, John, if you have enough relatives in your family, there's inevitably one relative who you're glad you see just once a year at Thanksgiving or Christmas. But I think one of the challenges with Trump presidency is his campaigns are sort of like that Thanksgiving or Christmas visit, but then he gets elected and now he's in your in-law seat for the next four years. And you get tired of this after awhile.

- Let me pile on in agreeing with you in slightly different ways. I mean, the lack of process, it isn't like this guy with process is going to change how it does. That's his style, his impulsive decisions, he doesn't want the process.

- Which is why I was only there for 13 months.

- Yeah. And you did, I read the book. You put in process, and I actually, that helps him a lot while you were doing it.

- That was the intention. It was the intention.

- But I think, and Niall's right, this is perfectly normal, but not inevitable. Lame duckery after losing midterm elections is perfectly normal. But Trump had an opportunity to score such successes that he would not have been a lame duck. And going out losing a war is not great in American politics. I think we can date the beginning of Biden's slide by losing a war in Afghanistan, a disaster that everybody keeps not paying attention to in today's world. Americans like a winner. If you're going to start a war, go win it. And his notion that pulling back because of gas prices was going to enhance him politically, I think, was entirely wrong. If you start a war and then you pull back because of gas prices, you look weak and nobody likes a loser. But similarly, the domestic circus, Trump's doing amazingly good stuff on domestic economic policy and amazingly stupid stuff, which is, you know, the stupid stuff is hurting him. I think, you know, what's clearly going to happen is probably lose the midterms. The investigations start. The scale of the moneymaking, which was revealed last last week, billions of dollars in honest graft, as the saying goes, probably not illegal, but certainly smelly. Congress will go nuts about this having already lost their chance on two previous impeachments. I don't think the American people will pay much attention whatsoever. They won't look good for it. And we kind of go around that circle. You mentioned the court though. The court is looking great. And I hope we come back to the court because I see I'm running out of my time already. But the decisions they just released are very interesting. It's one of the most functional institutions. But I just want to push back on the idea, it's all about does Trump get his way. The court is looking decades ahead. They have the same frame of mind as the Founders and they're thinking about the structure of American government, what counts for President Trump, what counts for President Newsom, what counts for President AOC after him. And which my final closing though is we may turn around and missile Trump two or three years from now.

- But John, you're suggesting that the war is the problem here. I think Liberation Day is the problem. If I'm looking at where things went off the rail for Trump to since got trouble, Niall, I think it's Liberation Day.

- Well, here's where I'm going to kind of break the consensus. I look back over the period since his second inauguration, and I have been wrong about two big things. I though that the consequences of the Liberation Day terrorists would be much worse than they have turned out to be. And I also though that the consequences of the war in Iran, the closure of the Strait of Hormuz, would be much worse than they have been. So on the two key issues where Trump obviously took great risk, I was much too pessimistic about what the economic and political consequences would be. The economic consequences have been far, far less than almost anybody expected. I mean, let's just think about what he did. Way back in April last year, we saw the US effective average tariff rate go back to where it had been in the 1930s. Now that ought to have had very adverse effects for the economy and for the stock market. There was a temporary selloff on the stock market, but it was very short-lived. And then the rally continued. Same story with the war against Iran. When it became clear the Strait of Hormuz was closed, I and others expected the price of oil to go far higher than it did. You would hear numbers like $150 a barrel for Brent. We didn't get close to that. And so one of the puzzles for me, and I think a lot about this, is why have I been wrong about the downside of President Trump's big risks? And I think there are two answers to this question that I've come to. Number one, I think I underestimate the president. I have a tendency to think when he takes a big risk that it's going to go horribly wrong. And in reality, Trump's distinctive feature is his amazing risk appetite. He takes a lot of risk. And by and large, those risks pay off. Not always, but on net, President Trump is a serial winner. Winner in business, winner in reality TV, winner in politics. Second thing is, and John, you may want to comment on this, the US economy is such a powerhouse that it can just blast through the risks that President Trump takes and the things that go wrong, the tariffs, the closure of the Strait. I think the US economy is so much more powerful than its competitors that it's just worth pausing to reflect on that. Look at the 10-year performance of US equities versus European equities or Chinese equities or any other equity market. The stock market has been far more successful in the Trump era than in any other part of the world. And the same is true of US growth compared particularly with European growth. I spend a lot of my time in Europe these days. I saw Mario Draghi, the former Italian President and the former the Italian Prime Minister and the former President of the European Central Bank. He wrote a whole report two years ago about why Europe is failing relative to the United States. So I think we all have to temper our pessimism. President Trump is a risk taker and he's riding an economic powerhouse.

- Yeah, I forgot to mention the economy didn't, except supposed to be my job.

- That is your job.

- And but because Niall is right. The facts are the economy is trundling along, as it always does. But trundling along on a growth trend that the rest of the world can't seem to match. Now, why? I think some of it is the inherent strength, but that inherent strength is hard won every day. Our regulators have too much regulation, but we know how to get around it, just like the Europeans. I think to some extent, the good Trump and the bad Trump are balancing. The tariffs are damaging to the US economy, but they're sand in the gears. They're not a bomb on the economy. On the other hand, the deregulation effort and some of the tax reforms have pushed the economy up. So to some extent, you're seeing a balance between the two. But you're right. It trundles along and makes due. Throw in tariffs and everybody runs to Washington and gets exemptions from tariffs. I kind of hold my nose at the crony capitalism, but that kind of is how we get around and get business done anyway. The interesting thing is the economic story, the narrative, the, oh, it's unaffordable, life is terrible. It's strange that that story has been so strong while the economy itself, you know, 4% unemployment, GDP growth continuing along. Yes, inflation, but wages are going up, as well as prices. But there is that pessimistic storyline that, I'm not a social historian, so I don't understand where that's coming.

- But John, that's the disconnect, isn't it? I mean, the economy's performing enviably from the vantage point of just about any other part of the world, but the voters are disgruntled. Affordability is their number one preoccupation. And it's true, inflation is well above the fed target. But the other thing that's striking to me is the lack of consumer confidence in the survey data. So I think if you look at the polling, what you're seeing is public dissatisfaction that doesn't really map onto the economic realities. This is the paradox of Trump. No good deed goes unpunished. President Trump has presided over a 10-year boom interrupted by the Biden interregnum. And the voters have got what they voted for. They voted for really strict immigration control and they got it. They voted for a different energy policy from what the Democrats were offering, and they got that too. President Trump, in the first hundred days of his second term, delivered, I've often said it on this show, on just about every one of his campaign pledges. Something that hasn't really been seen since Franklin Roosevelt was president in the beginning of his long presidency. And yet the voters, having got what they voted for, shrug their shoulders and say "affordability." They're disgruntled. And that is, I think, the great puzzle of Trump's second term. He ought to be more popular given the strength of the US economy, but no good deed goes unpunished.

- What he can't escape though, he can't really get out of the politics of subtraction and doubling down on really what he thinks his base wants to hear. I mean, if you look at his agenda, right? Which is, you know, deregulation, fostering economic growth, you know, border security and energy security, a strong defense, I mean, you know, who's going to argue with that, right? It's all positive. But the way he goes about it, always having to kind of disparage the people who've come before him, the other party, I mean, it's just, he just becomes his own worst enemy. And I agree that he will take a risky decision. I remember one time bringing to him a high risk decision that had a real short time horizon. And he just said to me, "Hey, is it the right thing to do?" I said, "Yes." And the agency I went back to couldn't believe that that decision was made that quickly. But what he has a hard time doing is hanging on to that decision, especially when people get in his ear and tell him, "Hey, this is affecting your popularity. This alienating your base. This is making you look weak." They know all the ways people who have a different agenda from his. This is what we've seen play out in trade to a certain extent, but we've seen it play out in the war in Iran in particular.

- Yeah, there's a certain amount of populist handout too. You know, we'll try to give money to farmers because they're unhappy. Banning corporate ownership, corporations bidding for houses, you know, that kind of silly stuff. It hurts the economy and it doesn't send the clear message that you're hoping for of economic vitality.

- Just one quick final thing though too. So he will make a risky, tough decision. He has a hard time hanging onto it. But then he won't sign up for a really bad deal. So what is happening I think with China, in terms of confronting China, on a whole range of unfair trade and economic practices, and economic aggression where they just--

- Here we go.

- No, they just passed a new law. They just passed a new law, John, that said, "Hey, if you, if you're a company that adheres to US sanctions on China, we're going to arrest your employees in the country." I mean, so it's ratcheting up. There are even more restrictions on heavy rare earths and magnets that are really putting a big constraint on industrial production in Japan and in the United States. So this trade truce, it's not happening, right? So, but he won't continue in pursuit of a big deal with China at the expense of the United States. I think the same thing's playing out with Iran. You know, that he signed, this MOU was terrible as we were talking about last time, in my view. But now that he's confronted with the reality of what this MOU really means and sees the intransigence of the Iranians and their permanent hostility, right? I mean, it's back to, you know, it's back to the military option.

- He can pivot back, back, back again much more quickly than people who are more, who have more process. That's a good point.

- Final note on Trump. I'm a recovering speechwriter, a speech writer in a past life. So when I watched the president give a speech on the ball as he did on July 4th, I listened to the words. I'm fascinated by how the speech is constructed. I'm trying to figure how many times he goes off, off the script, which he does a lot. But one thing in that speech, which I caught, which I'd like to get you guys' thoughts on. 118 days until the midterm election, and repeatedly in that speech, he talked about capitalism versus communism.

- America will never be a communist country. Won't happen.

- Is worth the socialism. Is this going to be the debate between now and the election, gentlemen, capitalism versus socialism?

- Well, I think the Democrats would be in a much stronger position going into the midterms if they weren't associated more and more in the public mind with the Democratic socialists, with Zohran Mamdani, the mayor of New York, and with other leftists. I think the more the Democrats are seen to be a radical left progressive party rather than a center left party, the worse it gets for candidates in most of the country where democratic socialism isn't what people want. And so I think the president is shrewd to press on this issue, because I think if you look at the country as a whole, democratic socialism isn't popular. So this, I think, is a big mistake by the Democrats, and it's a puzzling one. You'd have thought in a kind of thermostatic model of American politics that the more outrageous the President was as a Republican, the more Democrats would reoccupy the center ground. And you get--

- Bill Clinton.

- The return of Clintonism. And that's not what's happening. It's much more like 1972 where they've decided to go full progressive. They had McGovern as the candidate then. It was a complete train wreck. I think the summer--

- 49 out of 50 states.

- Right, like the big, one of the biggest landslides in American political history. Now, I don't think there's going to be that big a response, but it feels to me as if the Democrats are in danger of throwing away the advantages that they have going into these midterms. There's a world in which they would have a good shot at the Senate, but it's not, I think, going to happen precisely because of these mistakes they're making and Trump is capitalizing on.

- But I think that to say the Democrats are a unified party. Who's, the joke? I don't believe in a coherent party. I'm a Democrat.

- Will Rogers.

- Will Rogers, thank you. Quote. You know, this points to one of the structural problems right now that who is the Democratic Party? There's plenty of centrist Democrats saying, "No, we got to stop." There's a group of Democratic Congress people saying, you know, "No, we abjure this stuff. We want to occupy the center. They're writing op-eds. We got to get rid of this stuff." But the way our current primary system works, it appeals to the very... It's the way that small extreme parts of a party can take over that party. So it's not a conscious decision by well-meaning centrist Democrats who want to win national elections and govern. That's not how this decision is being made, which is, you know, one of the weaknesses. And to the Supreme Court, the recent decision allowing more campaign contributions may actually help a lot here because that's a... The parties have gotten weak. The party no longer decides, "Hey, I think H.R, you make a great candidate." No, it's the small number of extreme primary voters who show up who make that decision, which is why then the final ballot looks so crazy.

- So just on that point, Yuval Levin, who we had on, how long ago? Four years ago maybe? He was brilliant. He has recent essay about bringing back factions that you need to have these debates within the party tent, with factions, you know, between like the retrenchment camp and the Republican Party and the, you know, the reasoned, you know, internationalist camp, for example, in the area of foreign policy.

- Right. Next question, gentlemen. If Donald Trump needs a win, where does he get the win? Is he going to get a win here at home or is he going to win abroad?

- Cuba is the obvious near-term foreign policy win. I think that's the low-hanging fruit at this point. Hard to see really how Cuba's communist regime doesn't crumble under the economic pressure. I think the big worry for President Trump has to be the unforeseen loss though. And let's not forget the stock market is being propelled ever higher by an AI CapEx boom, an artificial intelligence capital expenditure boom, that if history tells us anything, is going to peak at some point. Remember also that the Fed is like--

- 1998.

- Right. We've seen these movies before going all the way back to the railroads in the 19th century. The Fed has a great new chair, Kevin Warsh, our former colleague here at Hoover. Godspeed, good luck. But he's inheriting an inflation problem that's going to make it more likely that the Fed raises rates than cuts rates. And so although President Trump's likely to get a win in foreign policy, like second term presidents usually get wins in foreign policy, just keep your eyes on the economy because there's no guarantee the powerhouse keeps on going all the way to the end of Trump's second term. It may not.

- H.R.?

- I think there are two wild cards to take a look at it. I agree with Cuba. And I think another win, I mean, could be the war with Iran, but it could also is could be very complicated and messy. I think what's likely to happen is a continuing escalation of that campaign. The RGC leadership just was meeting the Houthis again. I think they'll try to do some degree of horizontal escalation as Khamenei's body is arriving in Iraq, you know, with Al-Hashd al-Shaabi militias in Iraq. The Houthis could try to shut down shipping of the Red Sea at the same time and stretch our military further at a time when we're likely to have to try to, you know, force the Strait open with military force. And of course, Gulf infrastructure could be at risk at that point as well. So that's a wild card. I think Putin is increasingly desperate. I mean, just yesterday, fired almost 400 projectiles at Ukraine. It's because Ukraine's hurting them really badly. And so where is Trump going to break here, you know, in full support of the Europeans maybe after the summit. But what does Putin have in mind? I don't trust Erdogan, you know, and the Turkish government, the AKP-led government. They've been in President Trump's year about the Middle East. So I think the Middle East, the Ukraine war, it's unclear how that's going to evolve between now and November. But I agree. I think the big opportunities are in the Western hemisphere with Cuba in particular.

- Well, your question was about Trump's political future and his, and what happens at home. So that needs big wins. That doesn't just mean, "Oh, I, I got a couple pawns in striking distance. You know, the chessboard looks a little better than the normal sort of operation of international policy." And that's, you know, we've said this before, US has, under Trump, has made some spectacular foreign policy achievements that the, our opponents are back on their five-yard line, but you don't really get any points until you cross the goal line. So having a change of regime of one of our enemies, actually winning a war, having it been Venezuela, Iran, those would've been the kind of win that generates domestic and foreign political support. Everybody loves a winner. You rally around. And Trump was an amazing politician. And I say that with, that's a term I use with reverence. He knew how to get people and force people to be on his side. But as you start to be perceived as a loser, you see it now. The Republicans are kind of peeling away. Europe is kind of peeling away. So an actual win would have made a big difference. So a change of regime somewhere. That's why if Cuba could be an actual change of regime visible to Americans, not, you know, we got rid of one bad guy and put in a different bad guy who kind of sells us oil instead of selling it to China, Venezuela doesn't count as that kind of political victory. And Ukraine, the Ukrainians, despite our scandalous lack of support, might just win this thing. So, you know, a take sealing of Crimea, a Russian collapse, contain, but beware the wounded bear. You know, I think Putin might strike out at NATO and try to test whether we actually have that cohesion. But an actual, you know, something that looks like a win in Ukraine would be a tremendous piece of news for Trump. As well as avoiding eventually, you know, all expansions die, not of old age, something happens, a some sort of financial thing could happen. So Trump's got to hope that he's lucky on that end.

- Right. I vote, by the way, for a live GoodFellow show at Havana if it opens up.

- I'm in. Yeah.

- All right, gentlemen, let's move on to the B block of the show. And join us International Olympic Committee. I don't know if you saw what they did yesterday, but they decided that in 2028, Russian Olympic athletes can compete for their country. So in the eyes of the IOC, who cares about what happened to Ukraine?

- Well, sports and politics are too intertwined. I've always disliked the nationalism that the Olympics seems to bring out. So I would just have encouraged them all to stay away from it. We'll see in 2028 if there is a Russia and what it looks like. Maybe it will be greater Ukraine by that point.

- I think it's just worth saying, it's grotesque to relax these sanctions at a time when, as H.R. just pointed out, the war in Ukraine is escalating, particularly the air war. So there's no justification for changing the treatment of Russian athletes. If it was right to exclude them at the beginning of this conflict, it's crazy to lift that ban when the war is raging and the Ukrainian casualties from ballistic missile strikes aim directly at residential centers, as long as those are going on, war crimes are being committed.

- I'd like to add, there's a military point here. Ukraine is doing remarkably at hitting Russian infrastructure, hitting Russian military infrastructure, supply lines. Russia is sending missiles to apartment houses in Kyiv. Is this because they don't have intelligence? I mean, or just because their strategy is to try to terrorize a civilian population?

- Answer B is the correct answer.

- So they could be doing the effective things that the Ukrainians are doing, and they choose not to.

- Terror bombing of civilians, no question.

- And of course you have limited air defense assets. And so Ukraine has been prioritizing protection of critical infrastructure, military capabilities. And so where they're vulnerable are in these residential areas. I'm sure they're trying to, that's why Zelenskyy is requesting more air defense capabilities, really just to pack three interceptor rounds--

- Is that worth turning a quarter?

- You know, it's hard to say. I mean, I think that it really depends on the degree to which Putin may be convinced that he cannot continue the war at an acceptable cost and risk. So you've seen him in recent days in military uniform going around to probably what are staged, you know, like maybe Hollywood set type situations where he's seen given directions, you know, and saying that they're winning and so forth. But you know, I think the Russian people increasingly see beyond that because they can't get fuel. They're getting in fist fights in fuel lines, you know? And of course the casualties are mounting. As John alluded to, the strikes on Crimea are effective, effective in large measure because they've shifted, again, these finite air defense resources towards St. Petersburg and Moscow uncovered Crimea. And if you look at the logistics routes that come through Crimea, those are also critical to sustaining any kind of offensive operations in Zaporizhzhia in the South. So what he's doubling down is in Donetsk and Luhansk. But they're just impaling themselves on these defenses and taking more and more casualties. They're taking the equivalent of casualties of the Vietnam, the US casualties in the Vietnam War every three months.

- So that is, there's an interesting paradox that Russia being so big, which used to be its advantage, now means your air defenses are spread out and you put them here and the Ukrainians can go get something else. But there is, with a larger historical perspective you guys have, so it looks like Crimea is maybe cut off and eventually collapse. In Russia itself, fuel, you mentioned, is a problem. As an economist, I'll note, it's partly because they include price controls. If they just let the price of gas go up, it would go to where it's needed. But people can't get gas. The economy is falling apart. I think you put it as a Putin decision. When is it that the general's under Putin say, "We've had it with this guy." And when is it that the army collapses? You've taught me a lot about morale, about serving under somebody you trust. I've read some number that the average new recruit sent into battle lasts 25 minutes on the front. They all understand who they are being led by and how competent they are. Read some beginnings of some surrenders. When does the collapse happen?

- Well, let's remember that people talked about the Iranian economy collapsing and the Iranian army collapsing this year. That was part of the hope of Operation Economic Fury. Guess what? Repressive regimes are extremely good at withstanding economic pressure. And the Russian economy's not collapsing, just to inject a correction--

- No, you're exactly right.

- It's slowed down, but given the fact that Russia's an oil exporting economy, it's still in a remarkably strong fiscal position. The problems are very much focused in the petroleum gasoline sector, and that's what the Iranians are pressing on, trying to undermine popular support, particularly in the Russian heartland, for Putin. But the idea that Putin's going to be removed from power seems like the big question. Who does it? Who dares? Anybody who shows the slightest sign of disloyalty within the Russian elite has a way of falling out of a 20-story building. At some point, maybe Putin's the one who falls out that window. I think this war goes on until that moment is reached, and nobody knows when the breaking point is for the Russian elite and who is going to have the nerve to challenge Putin. It's a mafia regime, and mafia careers tend to end one way. That's what we all have to hope for, a mafia-like end for Vladimir Putin. I suspect that's the only way this will stop.

- But these are very unpredictable events, as is the possibility of military collapse when the soldiers in the front just say, "No, we've had enough." And I'm not forecasting it. It's just a possibility out there that I'd like to keep attuned to.

- So, you know, the Russians are fighting for different motivations, I think. They're motivated mainly by the SVR/GRU guy behind them with a pistol who are going to shoot them in the head if they break ranks and try to escape. They've had huge numbers of desertions. Real combat power, real combat effectiveness comes from units we've talked before that are cohesive, that fear letting one another down when they fear any enemy bullet, believe in their cause, but believe in and fight for one another. The way they're generating these units and throwing them in, in an army that already doesn't have, you know, the most beautiful word in the English language is "sergeant." They don't have sergeants, you know, who lead soldiers, which really are the essential element of close combat effectiveness. So they're already a huge disadvantage, but they're just keep throwing them into it. You know, the French army mutiny, I think, is an analogy, 1917. After the Nivelle offensive, Nivelle, "Always be afraid when a general says, 'I have the solution'" which is what Navel said in 1917. Impaled the French Army on German defenses, the French Army mutinies, and Petain, who's later becomes a traitor, but Petain comes in, cobbles the army back together. So there could be a moment like that where the army breaks.

- Or the German collapse in 1918.

- Well, yeah. Where after a long, that's right. With entry of the US, that was infusion of the US.

- The Russian collapse in 1917-18 is important here. After Putin wants to resurrect imperial Russia, let's just remember how imperial Russia ended. This is not the Red Army under Stalin. It's a more fragile army. And I agree with the point you made earlier, H.R. These casualty numbers are truly flabbergasting. And it's quite extraordinary that the war machine can keep on running when they're losing men on this extraordinary scale. Something's got to give. It's either Putin's leadership, or as John says, the cohesion of the Russian army. And we'll watch and hope that those things happen soon.

- And we'll hope he doesn't strike out at Estonia as a way of saying we need someone else to force an end to this.

- Well, and see, this is the ploy, right? I mean, when is President Trump going to disabuse him of the notion, which I think he will, that he's not going to make concessions to Putin such that the US signs up for terms for a ceasefire in Ukraine that are unacceptable to the Ukrainians and unacceptable to the Europeans. What keeps Putin's hope alive is the belief that not only can he maybe, you know, get to some kind of a, at least declare some kind of a victory in Ukraine, but that he can collapse NATO and collapse the transatlantic relationship. Once he's disabused of that, then he's really going to be in a corner. So I hope that that occurs here pretty soon, because he already is expanding the war significantly. These drone incursions, they're acts of war, you know? I mean, they're floating barges, you know, of these host fleets and launching UASs on mineral systems, European countries. They're cutting undersea cables, they're blowing up warehouses, they put bombs on DHL aircraft, you know, they put out a hit on the CEO of Rheinmetall. I mean, what else do you have to do? And of course, laying claimed to, you know, territory in Estonia, the nuclear saber rattling, you know, so I think it's time to confront him. And, you know, Kotkin's old essay, we should, you know, maybe, you know, point our viewers to this again of what could follow Putin, you know? And I think that's still the best work out there of, okay, what follows maybe Putin?

- And this is appropriate since we're sitting here in the hub of technology. Bernie Sanders is at it again, and he too is in the New York Times, and he is writing about artificial intelligence, and Bernie has an idea. Bernie is going to introduce what he calls the American AI Sovereign Wealth Fund Act. And what this would do in his words, it would, quote, "Create a sovereign wealth fund through a one-time 50% tax, not on the profits of OpenAI, Athropic, xAI and other companies, but paid with something far more valuable" John Cochrane than that, "stock."

- Well, this is an idea that Trump and Sanders share. Because Trump likes owning, the government owning stock.

- Only 5% though, not 50%.

- Now let me point out the federal government already owns 21% of every corporation in the country. Why? We have corporate income tax. And so, you know, it's essentially they're getting that dividend. So the difference between explicit stock and taxes is voting rights. And when you're a significant shareholder, even 5%, you have significant pressure. So we've seen this before, the history of governments having equity stakes in companies. And immediately what they do is, "Oh, oh, you can't close down that plant. Oh, no, you can't fire those workers. Oh, we need free daycare over here," And so on and so forth. So on the good idea, bad idea scorecard I'll go with the Javier Milei, government ownership of stock with voting rights is a terrible idea.

- Good idea, bad idea, or wretched idea?

- Yeah, wretched. I think it's like everything that Bernie comes up with. It's sort of, by definition, the opposite of what we should do. For me, the interesting thing about Bernie Sanders is that he represents the progressive wing of the Democratic Party, the Democratic socialist wing. We forget how close he came to being a nominee. He had to really be kind of cheated out of, the nomination by the DNC. And that progressive wing now has a new and fresher face in Zohran Mamdani. If Mamdani had been born in the United States, and not in Kampala, Uganda, there's no doubt in my mind that the media and the progressive wing of the party would be hoping that he would make a presidential run. And that's what it seems to me is so reminiscent of 1972. The left-wing energy is propelling the Democrats towards a progressive candidate who will lose and lose handedly because it's just not where most of the country is. So, I mean, the more we hear from Bernie, the more you know that there's still fuel in the tank of this progressive wave.

- Let me just... So government ownership of stock is actually fairly conservative compared to government take over everything. I mean, it presumes there still is a stock market after Bernie's done. So he's kind of the right wing of the Democratic Party at this point. It's also, short of the stock, I'm sad to see the AI companies, everything runs at, at 10x speed now, they're running to Washington to get regulatory protection running to Washington to get all sorts of favors which is, you know, the other side of socialism, crony capitalism, call it whatever you want. And, you know, that's under the Trump administration.

- But it says H.R. is Bernie went down the tax route. Where is he going to go down the route of AI is going to take away our jobs or AI is going to junk us all up with deep fakes?

- Right. Well, you know, I think even he may recognize that we have to be at the forefront of this, you know, really kind of, you know, revolutionary change that can, is going to affect so many different sectors, right? I mean, now that we're seeing, you know, physical AI, AI applied to, you know, different, you know, particular industries, I think it holds just tremendous promise. And I think what you're not seeing that's going on below the surface in the Trump administration is the effect of some really major reforms in procurement and contracting for the Department of Defense. And what you're seeing is the mobilization of a lot of capital. I mean, I think our biggest advantage relative to Europe is our capital markets and the ability to get behind, you know, important ideas like new manufacturing techniques and alternatives to, you know, to commodities that are under the control of the CCP, you know, and redesigning components and, you know, we have this big constraint, for example, on Patriot missiles, but what you're seeing is additive manufacturing for the first time being used for many of these major components. So I think this is kind of a lagging indicator. Like we haven't seen yet really how all of this energy behind solving some of these critical security vulnerabilities is going to deliver. And there have been big reforms in Washington, reforms that people had said for many years, oh, it's impossible to reform the process. Those reforms are actually happening.

- I just, when you say we have to stay at the forefront, I just want to clarify, you mean the United States, not the United States government. Because I see one of the big dangers is the rush to, "Oh, we need to regulate AI. We need to have AI safety." Which is kind of like telling the Wright brothers, "I need to see the Boeing 737 maintenance manual before you guys take off down that hill."

- I'd love to hear you guys on the anthropic thing. Like the suspension of it, you know, and then, so what is it?

- I think this, well, I think some of what they're doing is getting ahead of what will happen when President Newsom starts regulating AI. There's already actually a California executive order on regulating on what to do about AI, which includes such wonderful things as, you guessed it, we need worker cooperatives in place of capitalism in order to protect the jobs. You know, this jobs thing has not happened. It's one more vague, horrible thing in the future. So I think there's a big danger of, in the name of safety, in the name of who knows what, of shutting this thing down, sort of the way we shut down nuclear power for a generation in the name of safety.

- I mean, I think that there is a serious issue here, and I don't think we can any longer buy the notion, the techno-optimist notion, that there just shouldn't be any regulation at all. When Mythos was unveiled, that was the Anthropic model with vast cyber capabilities, it was the Treasury Secretary Scott Bessent, who heard the alarm bell going off. And he suddenly understood that if this model were widely available, there would be cyber attacks on an unprecedented scale on the US financial system. And that's not a fantasy science fiction fear, that's a legitimate concern.

- It's what the Iranians tried to do in 2007.

- Right, and Anthropic had boasted that the model's real superpower was its capacity to hack operating systems and software. So I think it was quite right for Secretary Bessent to sound the alarm and say, "We need to slow this process down. No, you can't just release this model." And when they produced their soft version, Fable, and it turned out to have ways in which it could be reconfigured for this kind of misuse, once again, I think the Treasury Secretary and others in the administration will write to say, "Whoa, slow down." So I think we now moved on from the idea that all regulation of AI is bad. There should be none. That's not realistic. And we're now going to take, I hope, the kind of sensible prudential approach to regulation that doesn't slow things down, but does avoid the kind of disaster. And John, you'd agree, I think, the disaster of a massive attack on a second tier bank that withdraws everybody's money from their accounts. We can't have something like that happen. It would be very destabilizing to the financial system. I think that this is, my take on the Anthropic case, it was right to do something. The frontier models can't be allowed simply to run amok, to be released to the public when they have these potentially destructive uses.

- I want regulation to be within the capacity of the regulators and to say, "Oh, we will foresee the dangers and you must submit everything to us" sets in place the kind of thing that we did with nuclear power and kills it forever.

- By the way, I don't think that's what's happening. I mean, I don't think that the analogy with the regulation of nuclear energy is what we're seeing at the moment, because I think everybody in the administration is very mindful of that danger.

- Oh, Absolutely. So yeah, you know, I'm all for regulation, the way we regulated airplanes. Problem happens, we see it, we adapt. I think the danger is all encompassing--

- And you make the change across the whole fleet, which is the equivalent of patching to eliminate those zero-day vulnerabilities.

- Regulators will not see ahead of time what's coming. And to put in place a freedom, what most people want is, "Oh, we need to have regulation, so you must submit every model for prior review by the government." That would be a disaster. The first thing they're going to ask is, "Oh, who won the 2020 election? Oh, you can't release this model."

- I think that a lot of the sequencing, you know, for models like this, if they're going to identify these, you know, these vulnerabilities to be able to be used on the defense at first. You are seeing kind of some rehiring going on in government in this area in the cyber infrastructure security agency. There's new leadership there. I mean, it is... I think we're going to see a major cyber attack against the United States. I mean, in the pretty near future, the next couple years because of these capabilities. And I think what's going to be really important is to have the defenses in place, you know, the layered compartmentalized kind of defenses. But, but also, you know, you're going to have to have like a really important recovery capability. You just have to recognize that there's no way to defend against all this, right? And so you're going to get hit and you're going to have some damage in some area. So you've got to create redundancies and ability to recover your operations very quickly.

- Yeah, and hobbling US AI companies because we're worried about cyber attacks, China's only six months behind us. So, you know, there's plenty of places that can develop all sorts of dangerous AI. In some sense, you want to know what the dangers are so you can be aware of that.

- So we've talked about AI being under attack through taxation, we've talked about regulation. What about an image problem? Should AI care about its image problem?

- It has an image problem, and I think it's not surprising because after all, Sam Altman of OpenAI raised money, vast quantities of money, with the following pitch, our technology is so awesome that best case, everybody's going to be unemployed, and worst case, there will be human extinction. Now this turned out to be a great pitch to investors. Voters, not so enthusiastic about it. And when you look at the polling, it's striking how much anti-AI sentiment there now is, including amongst Republican voters. A great deal of local resistance to data centers being built. This has become a really significant issue ahead of the midterms. So yeah, I think AI does have an image problem. And I don't think enough thought was given to this when the hundreds of millions of dollars were being raised with apocalyptic pitches.

- How do they turn that around then? Or does it really matter?

- Well, I think the way it should be turned around is by showing the public the benefits of artificial intelligence. This was always Demis Hassabis' view at DeepMind. That was why he favored AlphaFold. Let's make breakthroughs in medical science. That way it's an easy sell. Very few people would be against a cure for cancer if AI can deliver that kind of medical scientific breakthrough. The problems I think can be dated from OpenAI's rush to produce a consumer product, ChatGPT. What was the principle use case for ChatGPT? Cheating in college. That's been its main use, so that all assignments in this university and every other university are being produced with large language models. So that was the fork in the road. I think people need to be reminded of the incredible force multiplying effects on scientific research of artificial intelligence. And that brings us closer to major breakthroughs in medical science that wouldn't be possible otherwise. That's the way to sell AI to a skeptical public.

- I would add that you know, when the mechanical looms were brought into in England in the 1810s, people were skeptical of them. When Walmart and A&P took over retailing, oh, no, the mom-and-pop store. So new innovations have always been disruptive. And for that reason always--

- The automotive revolution and the cavalry. You know, a lot of people don't want to let go of the horse.

- And then the drones did the same to the tanks. Oh, sorry.

- No, no.

- The vastly overselling what AI might and might not do in the short run, I think, was from the AI companies who were trying to raise money was part of it. You know, we keep talking about all the jobs. GDP is trundling along. Productivity is trundling along. Unemployment's exactly 4.2%. You cannot see AI in any current statistic. This is still all vague what might happen in the future sort of stuff, which has never happened in the 500 innovations of similar type that we've seen before. The last thing I'll say is I think actually the cheating thing is great.

- Cheating is great. Oh, that's not the headline--

- That's our headline for the show.

- I'll tell you why. Because the challenge is, you know, our federal government wanted to retrain people to be coders. That, you know, if you ever want retraining ideas, remind them that it was only five years ago you wanted to retrain everyone to be coders. Now the one job that's going away. You need a new generation that knows how to use AI productively, and what better way to induce them to learn how to use AI in novel and creative ways and say, "Hey, here's how you cheat on your exams."

- I deplore this. I deplore this from the bottom of my heart. This is a wrong take, viewers.

- John would change the motto of the United States Military Academy from "Duty, Honor, Country" to just "Duty, Country."

- There is an upside of this.

- I shall not lie, cheat, or steal.

- Students are learning to use AI in creative ways. And that is, you know, the key to the job market in the next 20 years is he or she who knows how to use AI in creative productivity enhancing ways is going to do great.

- Just to enter a dissent. The problem is that if people are using AI at early ages in high school or in university, they do not learn to think. They can delegate the whole process, the research, "Summarize the readings for me so I don't have to read them." The thinking, "Hey, give me an essay framework," and then the writing. That all gets delegated right now to large language models. If we allow that to be the norm of our universities, we'll produce a generation of people who don't have cognitive capability. So this is a big risk, and it's why at the University of Austin, I've been pushing very hard to get away from assignments that can be done on ChatGPT to classroom testing, to oral examinations, to handwritten exams. We've got to preserve the system of learning that equips people once they graduate to use large language models in an intelligent way. But they've got to learn first. They have to learn to think. They have to learn to write. Otherwise, I don't think there's anything to be said for what what you're proposing. I think it'll actually have negative things.

- I was having fun, and I think you're exactly right because we're already seeing a catastrophic decline in college students' ability to read long, complicated texts. And you have to be able to read AI slop and edit it and understand what's wrong with it. So it actually raises the bar on those kind of cognitive abilities, which students are not learning. So what it just means is that the professors need to learn how to teach in different ways. So you're not going to, the take home test is gone, forget it.

- Absolutely. That's over.

- And we'll also have to start teaching handwriting because there's no way you can currently read a blue book written by a current student.

- I can offer lessons. I've used one of these successfully for many years. Maybe I should do some online course.

- Oh, I could do it thanks to Sister St. Ignatius. My cursive is very good. And all my research assistants now know how to read cursive because all my notes back to them was, I've been writing, you know, they actually have a lot of fun with it, you know, but for them it was like reading cuneiform. So they're like, what is that?

- This is such a dad conversation, isn't it?

- Gentlemen, this is where H.R. suffers because we're going to talk about soccer.

- Football.

- Football.

- Just to be clear.

- H.R., 20 days until the Eagles report to training camp.

- All right, all right.

- Sir Niall, you're our local soccer head on this show. Question, is the Trump card mightier than the red card? The controversy, of course, that President Trump calls up the head of FIFA and says, "Take away the red card from the American players so we can play in the game." FIFA goes along with the show. Are you calling a red card, a yellow card, or no foul?

- Well, President Trump should not have done that for two reasons. One, there really isn't any process for overturning a one match suspension for a red card. And other players in the tournament had already had to pay that penalty. So that was a clear breach of the rules. And rules matter in sport. And it was a mistake of Mr. Infantino to agree to do it. But the second reason that it was a mistake was that the Belgian team, which up until that point, had been slothful at best, came alive and were very clearly intent on teaching the United States a lesson in football, which they duly did. They made, I'm afraid, the US team look like amateurs. So it was a double mistake. And if the president would've done better to have kept quiet on that issue and let the game go ahead without the controversy, that just seemed to inspire the Belgians.

- Maybe somebody from Herbert Hoover's family should have contacted the Belgians and said, "You know what? You owe us."

- And of course what Bill's referring to is that Herbert Hoover saved millions of people from starvation in the wake of World War I and World War II.

- I assume now you're on board with England with your beloved Scotland out of the way. John, I'm assuming that you're maybe on board with Argentina since you're a Javier Milei fan. H.R., I assume you're rooting for this thing to end.

- There's no harder thing for a Scotsman. There's no harder thing for Scotsman than to see his son wearing an England shirt. I'm having to deal with that right now.

- As a fan of the beautiful sport, what is the matchup you would like to see? And as a historian, what is the matchup with the most interesting historical overtones? Would that be France Baracoa, England-Argentina?

- Well, it's 60 years since England won the World Cup, right? And I think even a Scotsman has to hope that England make it to the final. That would be fantastic. And I think having seen England play a fantastic game in Mexico against very formidable odds in the Azteca, you kind of want them to go all the way. That for me would be a great ending to this World Cup. I suspect they'd meet France. I think France are the best team in the tournament. And it'll be very hard to beat that French side. But yeah, Agincourt, that's what I'm looking for. American Agincourt.

- would Javier Milei dare call FIFA and ask for a red car to be revoked?

- No, he's a free marketer, libertarian.

- Did you see the Milei tweet after Argentina's miraculous comeback?

- No, what is it?

- The only left that works is Messi's implicitly left foot.

- That is brilliant. Well, I'm not the only one with soccer on my brain, so is the New York Times, which recently wrote a piece about their New York City mayor Zohran Mamdani and how he, quote, sees the world through soccer. And here's what they wrote. "For Mr. Mamdani, the sport sits firmly within the democratic socialist ideals that animate his morality and is representative of his political identity: One where notions of nationality are fluid, conforming neither to borders nor labels." Sir Niall, are we in fact being inundated with socialism while we're watching?

- This is one of the dumbest theses the New York Times has ever published in a competitive field. So let me just set things straight, Times. Now number one, there are a few things more capitalistic than the game of association football. It is a money-driven sport, and the best clubs are the ones with the most money. That's why Arsenal won the Premier League, best financially run firm in the English Premier League. As for nationalism, the World Cup is an orgy of national sentiment. That's the whole point of it. It's that one thing in the world where you can express chauvinistic, jingoistic, patriotic sentiment with no real downside. So we've kind of replaced war, in most parts of the world, with football. And that's the, I think, the safest expression of nationalism anybody's ever come up with. So if this is really what Mamdani thinks, he is doubly wrong. It's capitalist and it's nationalist, and we love it.

- John.

- And it shows that there is one business that runs profitably in the United Kingdom. So you're capable of it.

- Premier League really is one of the--

- And some of the clubs are owned by Americans.

- It's about the only part of the UK economy that really works, you're right, John.

- But H.R., how many of your friends back in Philadelphia are thinking stupid communist sport?

- All my cousins, for sure, you know? I mean, I just want to see, I always see a team fielded under the banner of soft-headed cosmopolitanism and see how they do.

- Yeah. Yeah, exactly. The globalist do live on.

- We'll be back next week with another episode of GoodFellows. And we have a very special guest for you. I'm not going to tell you who it is, but I'll give you a couple of hints. A, he has been on the show before. And B, it's not so much him being in a visit as it is a house call. So stay tuned and see who it is. On behalf of the GoodFellows, Sir Niall Ferguson, John Cochrane, H.R. McMaster, all of us here at the Hoover Institution, hope you enjoyed the conversation. Till next time, take care. Thanks again for watching.

- And it's not Dr. Evil.

- Dun-dun-dun. ♪ The word is on the street ♪ ♪ That the fire in your heart is out ♪ ♪ I'm sure you've heard it all before ♪ ♪ but you never really had a doubt ♪ ♪ I don't believe that anybody ♪ ♪ feels the way I do about you now ♪