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Introduction
All right, Drew, welcome to Hard Lessons. Really excited to have you here and dive into all things geopolitics. Actually, I can’t think of a better person to have right now on the show and unpack what’s going on in the world. There’s so much going on geopolitically right now—wars, rising nationalism, shifting alliances.
Three Front Converging on Every Executive
So I’m curious, what is top of mind right now for executives that is really kind of getting air coverage?
Well, thank you. Thank you very much for having me. I think right now you’re seeing really three different fronts all converge that are tectonic in their own right, but when you put them all together, the combination just becomes overwhelming.
First, you have the fact that we are in the midst of probably the biggest economic experiment or reversal in our lifetime, which is the US really reversing 40 years of globalization and now putting up trade barriers, leveraging the strength of the US economy and access to the US market in a way that is a massive reversal for everyone across sectors. And you’ve seen the biggest jump in tariffs in almost a hundred years as a result of that.
Two, you have this supply security crisis, which is unfolding in real time in the Middle East—now with the disruption and the contested access that is happening over the Strait of Hormuz, and already being felt extensively in Europe and Southeast and broader Asia, but also now starting to find its way onto our shores, right? As anybody here has been filled up with gas over the last couple of weeks, you’ve seen that already, and we’re going to continue to see that. And then lastly, is this revolution that’s happening on AI at a pace which I think is taking everybody back. In the gains that are happening on productivity, what we’re able to do with our technology now is just you know, making us all rethink what is the art of the possible and just what that’s doing to organizations, what that’s doing for individual contributors, what that means for the economy as a whole, for productivity as a whole, for GDP as a whole, and the questions that all happen with that. So if you’re leading an organization today, you’re facing all three of those in orchestration or lack of orchestration all at the same time.
Cyclical or Systemic?
Hey Drew, I’m curious: cyclical or systemic? Go through those three. Which ones do you think are natural cycles and new administration we can kind of revert, versus you can’t put the genie back in the bottle?
Not to sound extreme, I would say all three are quite systemic. On the economic side of the house, what you’ve seen from Trump I through Biden and now into Trump II is a continuity really of trade barriers. I think when we frame out why the US is doing what the US is doing, the trap is viewing it solely as a Trump problem versus the core drivers of what has brought us to today to do that, whether that be the great power competition on both sides of the Pacific, whether that be rising nationalism, populism, whatever you want to call it. The middle American feeling like you know, they’ve really had their feet taken out from under them, or a battle over strategic sectors more broadly, these are all core drivers that are continuing the continuity of this economic moment. I think this is a phenomenon we’re seeing happen globally. Certainly the US being the most disruptive kind of bull in the China shop, no pun intended.
On Iran, I think what you see there is contested access over a fundamental choke point. And there’s so many different reasons that are around Iran right now, but I think if you see what’s happening over the competition of over global choke points as a whole, that’s happening in multiple theaters. I would find it a difficult parallel to find what the cycle would look like in terms of the ups and downs or the sides of that circle, right? A lot of people also thought that we weren’t going to see nation states competing or certainly kinetic warfare like what we’ve seen with Russia and Ukraine, and certainly not extending for this period of time. And I think we’ve really moved into a new environment now where great power competition and nation state kinetic conflict, and perpetual contested access that has really escalating economic consequences when we look at how integrated as a global economy we are at any of the other previous historical parallels.
And then on the last point, on the technology front with AI, I think this is the one that you could argue is the most—the closest to cyclical versus systemic. But the scale and the parabolic nature of how—it’s not a step function versus, “Okay, we all get the next step up in technology, and therefore we all integrate.” Now we’ve gone from, you know, sticks and stones to steel. Okay, got it. Now we’re there. This is a technology that, because it continues to unlock more technology advancements in medicine, in productivity, in R&D, in defense capabilities, it’s keeping a step change ahead of everyone else, unlocks a step change ahead of everyone else—not just in AI, but in multiple domains at the same time. So, where we go from here in our ability to—I say “we,” the US’s ability to maintain the momentum, I think is going to determine how systemic it is versus kind of getting a halt in progress based on things like compute capacity buildouts. But when I look at the aggregate of all three, I think this is quite systemic.
Obviously you sit in a geopolitical seat. I view AI as the most systemic, and the other stuff as cyclical. Like, go back in history and you can find plenty of examples of nationalism, globalization, you know, closed borders, open borders. You can find plenty of examples of supply chains getting disrupted by war and by, you know, tit-for-tat fighting. And nowhere in history have we ever seen technology actually replace intelligence and labor. But what I would take away from that is from our seats of expertise, we both see it as everything systemic. And that’s a “holy shit” moment where all of a sudden you’ve got this trifecta perhaps of three systemic shifts happening, and I don’t know who’s looking out after our interest.
Can Corporations Be Stewards of Society?
So I’m curious from your seat, can corporations be the new stewards of society? Do we need to somehow get the agenda back to the elected leaders to say, “Guys, we need your help here. We’ve got some major changes happening.” And the everyday employee, everyday CEO, everyday consumer has no idea what’s actually happening.
I think the systemic nature on the AI front, I view just as you outlined—the replacement factor that we are already seeing—I think that emphasizes the systemic nature on the economic side. Because the core drivers that have brought up higher trade barriers and, you know, whether it’s nationalism, populism, driving the motivations that we see right now, I see that accelerating those.
So to the question you ended with, though, I think without a doubt, the relationship between company and the governments that they coincide with—is changing. Whether that be technology, industrials, any of the critical sectors right now where the companies are being called upon to partner with nation, to advance what is being framed as shared interest, that is speeding up, not slowing down. Starlink has certainly been one of the core enablers for the fact that we still see the Ukrainians fighting today. When Quad pushed and Anthropic pushed back on the Department of War, what was a removal for national security purposes is, “Well, now we have meetups and we actually kind of work together, so let’s have the conversation.”
How that relationship unfolds.. I think the companies are too tight at the hip based on reliance on things like workforce partnership, energy partnership, and some of the core leverage points, that I don’t think it would be anything dramatic. But I think we will see more instances of the Starlinks and the Anthropics of the world. And I think we’re going to ask harder questions, too. Like, if we get to a point where SpaceX is massively successful, and suddenly the US government is reliant on SpaceX for mineral access from meteor mining in deep space, how does that change the relationship? I can see that escalating. But I don’t think it will be—I don’t think it will be sudden. I think we will see kind of the little flare-ups, and then all of a sudden we will look back and go, “Woah, how did we get here?”
What’s Left When AI Takes the Work
Well, and I love your meteorite point. There’s something much more terrestrial, which is Jamie Dimon saying, “Just because I can fire everyone doesn’t mean I should.” And he’s basically saying, “Look, it’s bad long-term policy. It’s not being long-term greedy for me to reduce my workforce significantly overnight, because those are ultimately the consumers that are buying my credit cards and banking with me. And so that’s not a good thing.” The other, I guess, more practical way of viewing it is the street rewards you for quarterly earnings, so why not dribble it out over time as opposed to a one-time non-recurring event? But either way, you see Jamie Dimon at Davos raising his hand and saying, “Just because we can do these things doesn’t mean we should.” And I was very impressed by him saying that publicly, but it does kind of make you go, “Huh, are companies acting with a little more responsibility in certain cases, a little more foresight than maybe sometimes we see in our administration?”
The question in a dime: What does it mean for a company to force it? The one thing I also take away from Jamie Dimon’s comments is just the nature of what still stays in an AI world, which is people. And consulting sees this, banking sees this, law sees this. But if the things that we used to spend time on—if you’re a banker building out, you know, an LBO model, if you’re a consultant, the next, you know, the next PowerPoint deck, what have you—all the paralegal work that goes into preparing for a case, if that is all removed, then what is left? What’s left is the people-to-people dynamic.
When you go through a transaction, you’re going to remember the trust, you’re going to remember the human element. And I also take away from Jamie Dimon’s comment that, because we see that in our industry now, where we’re able to do more with the same amount of time than we ever thought possible. And so the challenges that we have that we’re asked to solve, the demand upon us to deliver and focus on the real core problem, but the demand elevates for the human element that I think we’re going to see more and more of that. And I think it’s almost this—I may be proven wrong on this, but I actually think this technology in aggregate could cause us to reverse back from many of the criticisms of the AI or the the internet-enabled age where we’ve self-isolated in a post-COVID environment, because it almost forces us to become more human.
The Apprenticeship Problem in Professional Services
I agree 100%. And the challenge for professional services, as you know, you’ve grown up through—I think all of us have grown up through professional services—is you hire these students, and you pay them a good salary, and they give you something for it, right? They do the models, they stay up all night and format the PowerPoint decks and all of that. And in exchange, they get their salary and they also learn. So if you take away all of the work product that they would generate in exchange for the early salaries, you’re in this interesting situation where if you’re brought on as a young graduate and your contribution is going to be negotiating deals and building relationships with people, it’s going to take a while for you to learn what the product is, what the business is. Whereas before, you were giving modeling, PowerPoints, Word documents, going to get coffee, booking airline tickets, whatever it is that junior people would do, just to be hanging around the hoop and learning. But if all that remedial stuff is taken care of, what are you actually doing as a recent hire, as a new hire?
I think I agree with you, but I think the one add that I would have is that new hire’s potential to be net additive now with these tools has also gone up. I have them with me on a project, I need to do a lot of research. Well, now that analyst has maybe four, five, six deep prompt windows running at the same time, pushing out capabilities that would have typically taken that analyst maybe a month to do. That even I agree that, you know, their focus on learning the soft skills and these pieces absolutely goes up. But I do think their contribution and the quality of their contribution while spending less time on that also goes up.
So there is that absolutely that focus on learning, and we’re seeing this day in and day out with some of our—some of our dynamics. But we’re also seeing their quality of product increase. And it’s leading to just fascinating dialogues in team rooms and with clients and, “Well, wait a minute. What about this data point that got pulled up from the seventh prompt iteration because we were fighting it with seven, you know, AI personas that were looking at it a different way?” And so I—I’m still hopeful for the contributions. I don’t know that the contributions go down to the point where there’s a, you know, a cycling shadow that’s just learning without contribution. But it’ll be fascinating to see it play out. I mean, there’s so many discussions that are happening just in my industry that I get privy to.
Hiring in the AI Transition
Are you seeing a shift in appetite to hire across your clients—new, freshly minted undergrads, MBAs?—because of AI and because of the uncertainties? Is that expected and hasn’t kicked in yet, or is it TBD?
I think it’s a mixed bag. My team, absolutely hiring, hasn’t changed to active job postings because there’s been no change in trajectory, if anything. We are busier than ever, and we absolutely need it.
Client-wise, I think it’s a mixed bag where you have, you know, if you look on the street and look at what’s happening at the software companies right now, who are really seeing just massive efficiencies. They’re asking, “What does the future workforce look like?” And I think you’re seeing that in many of the—way for manufacturing-intensive industries. Not really. I am seeing it in—not in the corporate environment. I’m seeing this already play out in services, though. If I go—you know, this happened last night, where I left the office at 9:30, didn’t have time to cook dinner before bed, go to order Uber Eats. The default option was having a drone delivery to me. And it said, “Well, you don’t have to tip if you do the delivery.” And I went, “No, I’m going to have the person deliver this one.” But the auto-default was the drone. And made me raise my eyebrow and go, “What?”
Haves, Have-Nots, and the Rise of In-House Geopolitics
Are you seeing with some of the corporates being, you know, especially aggressive? For the companies who do it right, you know, they could be picking up market share, picking up margin. And is that few and far between? Are you seeing it in certain industries or just certain forward-thinking management teams?
I think there’s been a—just the way that there—you know, I know there’s an active debate on this, but just the way that many would say there is a K-shaped economy of haves and have-nots, I think the same thing is happening in the corporate environment, where there are a subset of companies who have the resources, the time, the margin to think and to buy time and to wait out the storm. And that stability has afforded them the ability to have some of that strategic foresight and the resources with government affairs teams, the teams that are building those operating horizons, the teams that are challenging the incumbent operators on, “What is our future supply chain strategy? What is our future growth strategy?” I see a select group doing that aggressively. And their share prices are telling the story that shows that.
And so I would put them in a separate category. But then for what I would describe as everybody else, now you move into a situation where for all of last year it was a firefighter. It was just every day, “What’s the tariff number? What’s the tariff rates? What are we paying on duties versus what we forecasted? How do we get it down as quickly as possible?” The best way to get duty-free treatment right now reliably is going through Mexico underneath what’s called the USMCA, which is basically NAFTA 2.0. But if you play by the rules of USMCA and are USMCA certified, you for the most part get duty-free treatment. Over the last year, we’ve seen the average—I’m going to get the exact numbers wrong, but in aggregate, about 30% of stuff coming in from Mexico was USMCA compliant. Now the number’s above 80%. That tells that story.
Now those companies though are moving into a different mindset where they’re saying, “Okay, this uncertainty that we thought we would feel for a set period of time is not receding. Now we have the tariff moment,” which post-July of this year, we will see tariff rates, I believe, go back up to where they were before the Supreme Court decision. We’re seeing those stay in place, we’re seeing more sectoral tariffs, we’re seeing more export controls, we’re worried about our critical minerals, we’re worried about where Iran is going to hit us. How do we structurally navigate this going forward? I’ve had more conversations in the last three months about building in-house geopolitical teams, and upgrading capabilities in government affairs, and just structurally building the armor to navigate this than the first six years of my career. And I think that that speaks to that. And that’s not in advanced tech, that’s not in semiconductors, that’s not in what I would say is in the in-house category. And I think that evolution—that evolution is underway.
Temporary Volatility, Permanent Barriers
Okay. So if we zoom out for a second, is this a temporary period of volatility, or do you think that, you know, things can go back to normal maybe with the next administration?
The volatility, I think, is temporary. The structural barriers that are being constructed, I think, are more permanent. I think those stay. It is against the interest of whoever comes into office in January of ’29 to—this is just against human nature to give up leverage unless there is a massive concession, or unless the US economy is in a very bad place. Let’s go back to the 1930s for that.
I think the big question for me is, when the volatility stops, when the music stops and the chairs stop moving, what do the trade blocks look like? Where are the regional lines drawn? Where are the new supply chains drawn? Where do you see the trade club lines drawn, and who’s in what club, and what are the barriers in place to cross those clubs? That—where is energy at in by January 2029? Where is the workforce at in 2029? Where is our mineral supply chain at in 2029? I think those are the big question marks. But regardless of red or blue, or something else that enters in 2029, I don’t think that changes. I think we continue to see, unless the train just completely goes off the rails, I don’t think we will see much of a change, because the core drivers of what has brought this environment on all have continuity right now.
The CEO Playbook for Analysis Paralysis
I could see with this trifecta analysis paralysis. What are you advising CEOs? How to put one foot in front of the other and navigate this frankly unprecedented set of challenges? Pick your favorite industry, you know, I’m just curious. How are you advising CEOs to make progress and move forward?
One, I think there’s a clear process that all the leaders that I’ve seen in the last 16, 18 months have all taken, which is: Have the infrastructure, have the resources, have the bandwidth to firefight the stuff that’s in front of your face right now. Because if you drop the ball on that, you’re going to have some very uncomfortable conversations with the street. And get the right weapons and armor to firefight right now, and structure it in a way that doesn’t burn your incumbent teams and your strategic priorities. But if the core thing that brings you stability in this environment is differentiation—”Why are we different from everybody else regardless of the country, regardless of the flag, regardless of the sector?”—then dropping the ball on what makes you differentiated within your sector is like rule one. So firefight, but firefight smart.
Two, is scenario plan for the operating horizons that you will be responsible for. It is very, very tempting for a business right now to just stay in the firefighting mode, but not ask the question of, “Okay, well what does our supply chain organization need to look like? What does our design need to look like? What does our growth plan look like across our margins in the next three, four years that I as a CEO am going to be accountable for?” So have what I would call like your North Star horizons that you are solving for that you’re going to have to navigate no matter what, no matter what you do. And don’t make a bet for one. If you have five in your set, find the stuff you can do today that wins in all five. And that’s hard.
Third, is ask the question of, “What is the best position possible if we were to look at our operating horizons, what we have in our control—what we have under our company X control—and what is the best thing that we can ask for from the governments that we are coinciding within?” What’s the best thing we can do? And ask the question of, “What is the worst possible position that we could go in?” If you define where the maximum upside is across all those horizons, and then you define what the absolute worst is across those horizons, that gives you some semblance of an anchor to be able to make some decisions. ‘Cause you’re like, “Okay, making this next step, regardless of where I’m going to go, is the right one.”
Third, have a world-class organization around your trade controls and compliance function. Because inevitably, we’re talking about a lot of scrutiny whenever a product, a thing, goes across a border. If you don’t have visibility to what the requirements are when things are crossing the border, the duties that you’re being paid, what you forecasted, what you’ve actually paid, the difference between those, when you roll up the results at the end of the quarter, you’re going to be like, “Where did this come from?” And if you’re not tracking what’s changing, then you’re flying blind.
Fourth, have a CEO action-oriented operating forum dedicated to this topic, a geopolitical operating forum, so that you are saying, “What are we seeing? How does it hit the different parts of the business? And what is our response, offense and defense?”
The last one—and this is an uncomfortable one for a lot of companies—you have to have an elevated, connected government affairs team. That is no longer a cost center. Because if your muscle with how you’re engaging and getting information from the external environment isn’t there, under-developed, it’s under-resourced, you can’t travel, okay, it’s kind of there, it’s three levels below the general counsel, what have you, how are you going to make a decision on how you’re going to engage externally? And if those team members don’t have visibility to what’s talked about in the C-suite right now, they’re flying blind when they’re in the external environment. So if they hear something, they may be like, “This might impact us, but we don’t really know.” And if you’ve got two people who are on an island who aren’t supported and nobody really knows how to use them, you’re flying blind.
Three Lessons You Can’t Unsee
Well, final question unless there’s any burning ones. What have you learned in the last year or two at the intersection of geopolitics and business that are just like, you can’t—you can’t unsee it, and it will forever change the way you look at things, or even guide C-suite?
Three lessons. One is that there is an abundance of opportunities in this environment if you look for them. I know the kind of cliché phrase is “fortune favors the bold,” but this environment rewards those who are not paralyzed. And it penalizes those who are. That doesn’t mean you need to completely change your organization. Not at all. And waiting is a strategy, don’t get me wrong. But paralysis is different than waiting. Those are very—one is intentional, the other one is fearful. And I think that holds true.
Two, is that there is such a power in this environment—and we talked a little bit about it—to people, people dynamics. Whether that is with AI, whether that is within your teams when you’re delivering to clients, the demand on the people and the human dynamic in this environment is only going to increase. And I think that the isolationism that we all saw in multiple domains post-COVID is completely turning backwards.
The last one I would say is a more conceptual lesson, but it was a lesson for me, which is that I think we’re in a phase right now where there are just some fundamental questions being asked that don’t have answers yet. What is the right balance between resilience and cost, or resilience and profit? So there’s security versus profit, there’s efficiency or I guess there’s resiliency versus innovation, and there’s a people dynamic that all come into play all at the same time. And I don’t—we don’t have like the right, perfect equilibrium equation to that. I think we’ve been, as people have started to talk about this, I think we’ve been so on one side of the teeter-totter for so long, and seen some amazing things come out of it. But now that there’s such a push to go to the other side, what is the equilibrium? And I think we’re still in the process of discovering that. I don’t know how long it will take us to discover that. But that’s been my other big learning, is that this equilibrium has yet to be found, and I think we’re really just starting to discuss what the other end of the teeter-totter even looks like.
Well, those are some very profound learnings, Drew. Thank you so much for taking the time, being with us today. It was wonderful to have you, and keep fighting the good fight.
Thank you for having me.
That’s it for this episode of Hard Lessons. If you enjoyed the conversation, follow the show on Spotify or Apple Podcasts, and visit sifoundry.com for more on corporate innovation and emerging technology. Hard Lessons is brought to you by Silicon Foundry, trusted advisors to Fortune 500 companies.
