Peace Through Strength: The Good Fellows on Harvard, Europe, Warfare & Niall Gets Busted

Harvard University and the Trump administration do battle over civil rights, funding, and tax status. Europe confronts unpleasant realities as it honors the 80th anniversary of VE Day. And the Pentagon contemplates how new weaponry and technology will change the future of warfare. 

It’s all part of a special “bring your own topic” episode of GoodFellows, which also examines the recent White House national security shakeup; the merits of a June 14 parade to celebrate the US Army’s 250th anniversary (it’s also President Trump’s 79th birthday); and the legacy of legendary “value investor” Warren Buffett as he steps down as Berkshire Hathaway’s CEO. Finally, with Mother’s Day approaching, the fellows reflect on the remarkable women who brought them into the world.

Recorded on May 6, 2025.

Episode Transcript

(00:00):
[MUSIC]

>> Bill Whalen (00:09):
It's Tuesday, May 6, 2025 and welcome back to Goodfellows,
a Hoover Institution broadcast examiningsocial, economic, political and
geopolitical concerns.
I'm Bill Whalen, I'ma Hoover Distinguished Policy Fellow and
I'll be your moderator today.
Most amiable task,because I now get to kick back and
benefit from the collective wisdom ofthree of the brightest individuals I know.
We call them the Goodfellows.
They are the historian,Sir Niall Ferguson, John Cochrane,

(00:32):
AKA the Grumpy Economist.
Grumpy and blog name only,he's actually a delightful gentleman and
former presidential National SecurityAdvisor and our resident optimist, Lt.,
Gen. HR mcMaster.
In addition, there are many distinguishedaccomplishments, Niall, John and
HR are all Hoover senior fellows.
Gentlemen, we're doingsomething different today,
something we haven't done in a while.
It's what we call a BYO show ormore to the point,

(00:55):
a BYOT show, as in bring your own topic.
We've got chase you to come ready andloaded with a matter for conversation.
John Cochrane, I turn to you.
This week is coincides with the 80thanniversary of VE Day in Europe,
Victory in Europe Day andyou have Europe on your mind.

>> John H. Cochrane (01:12):
Yes.
Well, part of that is I want to advertiseI have a book coming out with my co
authors Luis Garcano andKlaus Masoch on how to reform the euro.

>> Bill Whalen (01:21):
Title?

>> John H. Cochrane (01:23):
Crisis Cycle [LAUGH] and the theme is that the Euro is actually
pretty well set up but then a sequenceof crises broke all the rules and
now they need to getthe rules going again.
So I won't give you a book breakdown.
It's just a reason to be on my mind.
It's on my mind, another reason too.
Europe is having an economic reckoningas well as its foreign policy and

(01:45):
military reckoning,which I think HR will talk about.
And how does it deal with trade.
Another reckoning.
But from the Mario Draghireport to many other voices,
it is recognizing that itstopped growing in 2010.
Much of Europe income percapita has not grown.

(02:09):
Some of my favorite parts,namely Italy has gotten worse and
they can kind of see thatEurope produces regulations and
the US produces innovation andthey're energy policy in
particular is causingdeindustrialization pretty fast.
Electricity costs three times in Europewhat it does even in California,

(02:33):
which it's already pretty expensive.
Spain and Portugal had a blackoutowing to poor integration
of renewable stuff with a quicklydiminishing baseload capacity.
So it's beginning to recognize thatit's really shot itself in the foot and
that long run growth matters and itdoesn't have any long run growth anymore.

(02:55):
So I hope Europe is ableto reform itself but
it's hard cuz Brussels existsto issue regulations and
they didn't go from their Articles ofConfederation to their constitution.
So it's not very politically accountable.
So I'll just tee up that question.
I'm sure Niall and HR have other ideas andhow can you affect itself?

(03:15):
I certainly hope it does.

>> H. R. McMaster (03:17):
John, I look forward to reading the book.
But I'm just thinkingas the optimist here.
You've got the crisis in your title,Niall's got the doom book.
I think we need to write somethinga little bit more positive in the future.

>> John H. Cochrane (03:29):
[LAUGH] >> Niall Ferguson
John's book is positive, though Ihaven't yet read it because many people,
if you think back to the founding ofthe euro, said it was doomed to fail.
I remember Marty Feldstein,great Harvard economist,
saying it couldn't work,it wasn't an optimal currency area.

(03:50):
And that view was quite widely shared.
Whereas John's point is it worked.
There is a single currency.
It survived a succession of crises,
of which the worst was the Eurozone crisisthat came after the US financial crisis.
And I think people have stoppeddebating whether it lives or dies.

(04:12):
It's here to stay.
It's a long time since anybody in Europesaid to me, we need to get the lira
back or gee, I missed the deutsche mark orwhat if we could have some francs again?
So I think it is a good news story andit's important for Americans because
the success of the Euro does createa meaningful competitor for the dollar.

(04:34):
It's no longer the only game in townin terms of international transactions.
The volume of euro transactionsis pretty large already.
And I think that the European Centralbank, after a kind of rocky start,
is now regarded as a highly professionalcentral bank with independence
certainly from the European Commission andthe national government.

(04:58):
So John, I guess my question is,do you think of your book
as offering fine tuning to a systemthat has basically worked or
is there still in your mind someexistential threat that could resurface?
I think it's much like the US existential threat.

(05:19):
The Euro was, as you point out,remarkably well set up.
And I learned that from my co authors andfrom studying it.
The central problem of a commoncurrency is that governments might say,
we'll borrow a lot of money and
then when they get in trouble they say,ECB print money and bail us out.
And they thought about this very well.
That that was, I think, one of the centralproblems that Feldstone was worried about.

(05:43):
It was quite well set up with a few littlethings to be figured out later because
you don't do a lot of writing.
The prenuptial on the wedding night[LAUGH] and we'll figure that out later,
honey, was a lot of what they did.
So some of the little pieces were left forlater.
Then, of course, a sequence of crises cameand they did break a lot of the rules.

(06:04):
So it was kind of a patchwork, andthe ECB has really expanded what it does.
It now routinely holds downinterest rates on sovereign debt.
And there's an incentive then forgovernments to borrow and waste it all.
And now you got this huge balance sheetand this promise to bail everybody out.

(06:24):
Kind of the rules thatconstrain things got broken.
We got through the crisis, but afterthe crisis is when you need to reform.
So I think halfway between the twovisions, a bunch of patchwork that kind of
kept things together,a great initial structure.
But now time to put the moralhazard back in the model and

(06:44):
reform, which I think isEurope's larger question.
They called themselves a bigproblem with their energy policies.
Well, time to maybe allow somenuclear power and reform that.
Their immigration policiesare causing a lot of problems.
It's time to reform that andtheir overregulation.

(07:06):
The tragedy really of Europe isa common market should have led to
spectacular growth.
And instead we all kind ofbelieve in trade around here,
except maybe HR [LAUGH] Just me.

>> H. R. McMaster (07:18):
Come on.
[LAUGH]>> John H. Cochrane: We'll get to
the threat, the geostrategic threat thatFrench movies pose, in just a minute.
But I believe in trade.
And yet this opening of the market didnot lead to an explosion of prosperity.
Now there's a lot of barriersstill left in there.
So I think a great set of institutionsthat I heartily endorse, but

(07:40):
that need fixing and reform.
Well, that sounds a lot like the US andwelcome to Europe.

>> Niall Ferguson (07:45):
For you, John, when Larry Kotlikoff and I wrote about
the euro, right at the beginning, right atits launch, we said, nice monetary union.
Pity you don't have a fiscal one, becausethere really wasn't meaningful fiscal
Fiscal integration at that point,that's changed somewhat since then.
But it's still basically notanything like a Federal system.

(08:08):
And most of what goes on in the realm ofthe public sector is done by national
governments, and
there is no real mechanism tocoordinate national fiscal policies.
Is that something that you thinkis an unsustainable discrepancy,
that you've got a monetary union butnothing resembling fiscal union?
Or do you think that's somethingthat's basically stable?

>> John H. Cochrane (08:31):
Well, that was one of the little things that we agreed to brush
over when the Europeans started it.
You do not need fiscal unionto have monetary union.
Europe had a monetary union forcenturies, it was called gold coins,
without fiscal union.
But in that circumstance, nationalgovernments are just like businesses.
And if they can't pay back their debts,they default.

(08:53):
So this is the thing that theyreally kinda papered over.
Are we a monetary unionwithout fiscal union?
Governments default if theycan't pay back their money, and
we have a mechanism to allow default.
And we don't let banks invest insovereign debt and call it risk free.
Or is sovereign debt sacrosanct, we willalways print money to avoid default,

(09:14):
and therefore, we will havea fiscal union to make sure that
governments can alwayspay back their debt?
And we will really enforce debt anddeficit rules so
that they never get introuble in the first place.
They never made up their minds, reallyabout which of those two things it is.

>> Bill Whalen (09:32):
Well, I've been doing a lot of thinking about Europe in 2025
versus Europe in 1945.
And words not said in 1945, H.R., it'stime for Germany to step up its military.

>> H. R. McMaster (09:42):
[LAUGH] >> Bill Whalen
Europe's military role,
the relationship with NATO, and
the threat that is Russia.
Yeah, well, I think this is related to the economic
relationship with the European Union andthe tendency, I think,
to view Europe mainly asan economic competitor.
Or for the Trump administration to reallysee Europe as engaging in unfair trade and

(10:05):
economic practices,
especially with unequal access tomarkets and that sort of thing.
So maybe before we go into defense,if I just ask John,
are you optimistic, about a commonagenda between the EU and the US?
I mean, when you read the Draghi report,it sounds like a lot of Trump's priorities
in terms of unleashing economic growth andderegulation and energy security, or

(10:26):
what the Trump administrationcalls energy dominance.
Are you optimistic about a betterrelationship with the EU after
the initial lecturing at Munich and thestatements about the EU as a competitor?

>> John H. Cochrane (10:41):
Well, that involves as much Trump as it does the EU.
I think there's a natural relationship.
We are the advanced Western democracies,we ought to be getting along.
I do think Europe has someproblems with free speech,
then I think Vance wasgood to point that out.

>> Vice President JD Vance (10:58):
But what German democracy, what no democracy,
American, German, or European,will survive is telling millions of
voters that their thoughts andconcerns, their aspirations,
their pleas for relief are invalid orunworthy of even being considered.

>> John H. Cochrane (11:16):
It has some big problems with assimilation,
which is worth pointing out.
It does protect its internal markets,
which is why Europe is shockinglypoor compared to the US.
Typical, even the advanced Europeancountries are 40% GDP per capita less
than the US, which is too bad cuzthey ought to be along with us.
So the natural place is cooperation.

(11:38):
I, of course, don't believe that peopleshooting themselves in the foot with
subsidies andtariffs does any damage to the US.
Although, it would be lovely to havean open trading system between the US and
Europe andall of us benefit from that together.
Is that gonna come out of either Trump orEurope?
I mean, the Draghi report did sayall sorts of nice things about we're

(12:01):
over-regulated, but it also went intosome of the classic European solutions.
What we need is to borrowlots more money and
throw it down,what I would call, rat holes.
And that was the Biden approach.
But the Trump land, there's a part ofTrump land that seems to say we need to
borrow more money andthrow it down our own rat holes, too.

(12:22):
Which is hopefully not where Europewill go cuz they have the same debt
problems we do.
In fact, if anything, a little bit worse.

>> H. R. McMaster (12:29):
Yeah, I think this connection between the economic
relationship andthe defense relationship with the EU and,
of course, NATO is important.
Because I think what a lot of Americansare frustrated by is the fact that
Europe represents, I think,about 17% of the world's GDP and

(12:50):
about 50% of the world's social spending.
So a lot of Americans have concluded, hey,
we're underwriting European socialprograms by covering their defense bills.
So I think that's the dynamicthat we're seeing play out with,
remember the Signal conversationabout the Houthis, yeah,
I hate to bail out the Europeans again andso forth.

(13:13):
So I'd like to just ask both of you,maybe Sir Niall, our European American.

>> Niall Ferguson (13:19):
[LAUGH] >> H. R. McMaster
how do you see the relationship evolvingfrom a defense perspective as well,
based on this kind of general resentmentamong many of Trump's most strident and
stalwart supporters?
Well, I'll go first with a couple of thoughts.
I guess, I'm an ex-European since Brexit,my British passport-

>> H. R. McMaster (13:40):
You're a knight, man,
you're still a knight.
If you're a knight [CROSSTALK].>> Niall Ferguson: My British passport is
worth no more than my American passportwhen I'm trying to go to Paris.
[LAUGH] >> Niall Ferguson
that there are elements ofthe Trump administration,
not least Vice President JD Vance, whoare really hostile to the European Union.
And I kinda feel like sayingbe careful what you wish for.

(14:03):
Because the more you beat up onthe Europeans, justly, I think,
on the defense issue, the more you risk
contributing to the centrifugalforces that are already at work.
I mean,I think it's good that the Europeans,
mainly under pressure from PresidentTrump, are spending more in defense.
This has been, I think, one ofthe President's great achievements cuz

(14:25):
it was something thateluded other presidents.
But then you look at JD Vance givingencouragement to the alternative of
Deutschland, the far-right party.
And the general attitude of membersof the administration that,
the European Union is basically an enemy,it's basically not our friend.
The trouble is, if you look atthe German situation right now,

(14:49):
where the newly electedGerman chancellor can't,
in fact, get himself througha majority vote in the Bundestag,
an incredible, unprecedented event.
The AfD is polling far ahead of the twomajor parties in his putative coalition.
I'm not sure I really thinkit's in American interest for

(15:11):
the Europeans to go down the populistpath, which I think leads to,
if not the breakup of the EU,then certainly it's paralysis.
It doesn't seem to me to be something thatthe US should want, given that the obvious
principal beneficiary of a very weakEU would be Vladimir Putin, John.

>> John H. Cochrane (15:30):
Let me also push back a little bit.
I think Ferguson got Ferguson's Law wrong,[LAUGH].
France spends 58% of GDP,that's total government spending.
3% of GDP on defense is just couch change.
So this idea that if we spend 1 or2% of GDP to halve their defense that

(15:50):
this is enabling their welfare state,their welfare state's 58% of GDP.
Now, it is true, the welfare state is whathas soaked up A lot of defense spending.
But it's really, the numbers are so vital.
There's plenty of room for
defense money if you just reformyour welfare states slightly.

(16:11):
I do worry.
I think the thing that Niall pickedup on is a big political worry for
Europe, the right.
America had the ability to bring the MAGAright into our political system,
as turbulent and difficult as it may be.
In German,the AFD is treated like complete pariahs,

(16:34):
and they're trying to keepthem out of parliament.
They're trying to keepthem out by legal means.
Marine Le Pen was, they're tryingto keep her out by legal means.
This is the strategy the Democrats triedagainst Trump, and it backfired immensely.
I think that was a lot ofthe reason people voted for Trump.
And I think treating the right ascomplete pariahs that we can't talk to,

(16:58):
we can't allow, we must stop by any means.
Even legal, not voting is dangerousbecause if you're not allowed in
the political system,then you express your views in other ways.
And Europe's been through that before.
So this is politically a dangerous moment.

>> Bill Whalen (17:14):
So I hate to be the bearer of bad tidings, but
we need to shift to another segment.
So since we are talking about militaryobligations, HR, let's go to your topic,
which is the future of warfare and how theTrump administration is approaching it.

>> H. R. McMaster (17:26):
Well, it's tied to the European discussion as well.
And really, I think the loss ofthe consensus that we've been
able to prevent large-scale war,great power war, for 80 years.
Because we've had forwardpositions capable,
joint US forces operating as part ofalliances that communicate to potential

(17:48):
enemies that they can't accomplish theirobjectives through the use of force.
And I think there is this drivetoward retrenchment, toward just
protection of the homeland at the shoresof the Atlantic in the Pacific or
maybe over the Arctic withthe Golden Dome missile defense.

(18:09):
And I'm concerned that this will erodedeterrence further at a critical
moment for Europe, in particular,Europe that now has seen the return of
large-scale warfare for the firsttime since World War II in Ukraine.
So I'm worried overall about kind of theworldview that is driving retrenchment,

(18:30):
the effect that might haveon military capabilities,
especially forward-positioned forces thatare critical for a number of reasons.
I would recommend to our viewers totake a look at Chris Cavoli's testimony.
This is the Supreme Allied CommanderEurope, the European Command commander,
an extraordinary officer who I'vementioned other times on this show.

(18:51):
He gave, I think, very compellingtestimony to the Senate on April 3 about
the importance of European command.
I think paying attention to kind ofthe other combatant commanders and
what they've been saying about effortsto deter conflict, preserve peace,
to counter various forms of aggressionin their theaters is important as well.

(19:11):
I mean the Pacific Command, of course,
is quite busy coping withheightening Chinese actions,
acts of aggression in the South China Seasvis-à-vis the Philippines and Taiwan.
And so, hey, I think the overallpoint it's a heck of a lot cheaper to
prevent a war than to have to fight one.

(19:33):
I would like to see more of that kindof peace through strength philosophy.
But when you look atthe defense budget and
you look at maybe some of the initiativeswithin Department of Defense,
I think they indicate thisimpulse toward retrenchment.
I'm fora lot of what Secretary Hegseth is doing.
I think refocusing our Departmentof Defense on its mission

(19:55):
to be prepared to fight andwin wars is important and long overdue.
Reversing kind of the radical DEIreified philosophies like women,
peace, and security that we're trying tofoist on the US military is important.

(20:15):
But what I'm concerned about is thiskind of impulse toward retrenchment,
potentially cutting off the capacityin some of our armed forces, I think,
which don't have the capacity nowto deter or to respond to conflict.
So I'm concerned about it.
It's worth watching.
It's worth watching the president'sbudget is an opening bid and

(20:38):
to see how that develops.
I'm also kind of optimistic aboutthe ability to reform some of
the procurement systems andto achieve a higher degree of efficiency
in fielding effective weapons systems andequipment and
maybe addressing some ofthe defense industrial base issues.
These are reforms that are longoverdue in the Pentagon.

(21:01):
But I think some of the people who havebeen appointed to those positions,
like the Deputy Secretary of Defense,Steve Feinberg, are very well equipped
to finally make some gains in this area ofprocurement reform and contracting reform.
But what I'd like to do is ask youin terms of the defense budget,

(21:22):
defense spending.
I think what you see is some of thistension between budget hawks and
those who are advocating for peace throughstrength and addressing the bow wave of
deferred modernization and some ofthe capacity issues in our armed forces.
And I mean, how do you see thatplaying out in the administration?
And then also maybe a reminder to ourviewers about how really the defense

(21:43):
budget isn't the problem whenit comes to deficit spending and
the growth of the national debt.

>> Niall Ferguson (21:49):
HR I guess the thing that might connect our conversation with
John to our conversation with you isthe lessons of the war in Ukraine.
I think pretty the Russian invasion.
We probably underestimatedsignificantly the way

(22:09):
that drones would become the dominanttechnology of the battlefield.
And that drones, instead of being big,kind of expensive
pieces of equipment of the sortthat the US was deploying,
say, in Afghanistan andPakistan, would become,

(22:31):
as people in your world like to say,attritable,
like cheap, disposable, butvery, very numerous items.
I'd like you to talk a bit about that.
There is a kind of school of thoughtthat says the war of the future is
basically gonna be unmanned weaponry,not only in the air, but

(22:51):
under the sea, on the surface of the sea.
They were pretty important inthe Black Sea theater of the war.
You're a tank guy.
How do you think aboutthis new technology, and
how dramatically does it alterthe nature of war itself?

>> H. R. McMaster (23:08):
Yeah, I really don't think it changes the nature of war, but
it certainly has shifted dramaticallythe character of warfare.
And I think many of us saw thiscoming right in terms of cheaper,
slow, low-flying drones andthe need to defend against them.
When I had the job of writingkind of requirements or

(23:28):
helping to write requirements forthe future army back in 2015 and
2016, we had an urgent requirement forinvigorating our air defenses and
to ensure that our air defenses werecapable of taking out these low,
slow, small drones andswarm drone capabilities as well.

(23:49):
But we haven't fielded thosesystems quickly enough.
And those systems include the oneis called the IFPC, which
is a integrated air defense system withMultiple capabilities on one platform, but
also electromagnetic warfare, which wedivested ourselves from in the army in
the 2000s because we thought,we'll always have air supremacy.

(24:11):
We'll get the air force and naval aviationto do electronic warfare force, and
of course this is one of the mostimportant drone countermeasures.
Same thing with directed energy systems,
lasers essentially that can shootdown these drones quite effectively.
But what I think you're gonna see, Niall,is this continuous interaction between
offensive and defensive capabilitieslike you always see in war, right?

(24:32):
Machine gun, tank, anti tank,missile, submarine, sonar, bomber,
radar, and so now you have reallythe significant drone capability.
But tens of thousands of dronesare being shot down [LAUGH], destroyed,
because they are attritable, but in theirmanufacturing at massive scale in Ukraine.
But I think what you're gonna see isthe defensive capabilities catching up

(24:56):
to them.
And then what you'll see are moreresilient drones developed that will have
computing power at the edge that willallow them to engage in autonomous target
identification and classification and
maybe even automate your decisions totake human life, I think that's coming.
And with sort of meshcommunication systems and

(25:17):
self healing networks that can makethese swarm drone capabilities
more resilient to electromagnetic warfare,for example.
But this will be a continuous interactionlike there always is in warfare, and
what I think is gonna be the constant,Niall, is what war is really about,
it's about the control of territory,populations and resources.

(25:38):
And I think there's this idea today thatdrones will become like the strategic
bombers were supposed to be in the 1920s,they gonna solve the problem of
future war, we don't need land forces forexample, anymore.
When I think the lesson of Ukraineis kinda the opposite, actually,
it has been the ability to projectpower outward from land that allowed

(26:01):
the Ukrainians to drive the Black Seafleet away from its shores and
sink its flagship and many other vessels.
So I think what we have to do is thinkabout warfare across the domains of
aerospace, maritime, land, cyber, and
the degree to which you have to be ableto project capabilities across all those

(26:22):
domains simultaneously to seize andretain the initiative over your enemy.
Because no matter what the range ofcapabilities are, what you really want to
do is to gain a psychological and temporaladvantage that gives you the initiative
where the enemy is reacting to you,rather than the other way around.
Part of that will be a major effort torestore mobility to the battlefield,

(26:45):
I mean, when you look [LAUGH] at Ukraine,I mean,
it looks like the western fronta little bit, right, in 1915, 1916.
And you see the Russians kindof adapting hoosier tactics or
infiltration tactics like those that wereused in the Ludendorff offensive in 1917.
They're not able to get very far,but that's the only way they

(27:05):
can avoid the firepower of artillery andthe drone capabilities.
In the future, our force is gonnahave to blind our enemies so
that we can retain our freedomof maneuver and action.
But ultimately it's gonna come downto close combat, again, Niall,
I mean, I think this is wherethe US Marine Corps made a mistake.

(27:25):
I mean, they divested themselves ofmobile, protected firepower, reduced
their infantry, and, I think you see inother conflicts, like in Yemen, right.
I mean, what could really defeat theHouthis, really, only if you controlled
that territory could you do it, andyou just can't do that from the air.
So anyway, I think I see big shifts inthe character of warfare, certainly.

(27:48):
But what I think you're gonna do is seesome of these countermeasures catch up and
we have to develop a new range ofcapabilities to restore our freedom of
movement and action in combat.

>> John H. Cochrane (27:58):
Yeah, you asked me to chime in on the economics of it, and
I will,
[COUGH] even 3% of GDP is not that muchmoney compared to everything else we do.
So military budgets, what like 900billion federal budget, seven and a half,
so it's like one eight of federalspending, but federal, state and
local spending in the US is in the 40 to45% of GDP range, so it's actually small.

(28:23):
But I think concentrating on howmuch you spend is not a good idea,
it's, do you get value for your money?
You can spend a lot of moneyon DEI consultants and
you've spent money andthat doesn't get you any tanks [LAUGH].
So getting value for money, I thinkis the most prominent thing, and so
much of what goes in the defensebudget is veterans affairs and

(28:46):
just salaries for people and soforth, it does, you do bring up.
So clearly we wanna avoidthe disasters of the past,
which is getting to the warwith the wrong weapons,
showing up at World War II withbattleships and not aircraft carriers,
showing up with tanks that havegasoline engines and blow up [LAUGH].

(29:10):
And then what that means is muchquicker cycles of development,
I think the P-51 took about a yearfrom idea to flying, and I don't
think you can get from idea to requisitionform in a year anymore in the US.
Clearly the one thing we know rightis that we're gonna show up with all
the wrong stuff, and it will be lovely ifthe wrong stuff didn't cost $10 billion

(29:33):
each, if aircraft carriersare completely uses, the next one, but
you wanna be able to adapt quickly.
So I'm curious,you mentioned that a little bit,
how can you speed up the cyclesof procurement, the learning and
not avoid showing up to the nextmore with the wrong things?
For example, at the end of World War II,we kinda decided, well, nukes,

(29:54):
you mentioned the solveall your problem thing.
The drones are not gonnasolve all our problem,
and that's what we've seen in Ukraine,is this quick adaptation?
Well, they're shutting them down,we'll have fiber optic drones,
they're really good at that, I hopewe're sharing technology with them and
keeping them on our side.
But yeah, so after World War II,nukes will solve all this problem, Korea,

(30:17):
no, and that's the thing I wannaask you a little bit about.
You give a vision of an all out war,war at war, boom, win,
seize the initiative and so forth,but isn't what's likely to happen say
with China, not an all out war with China,which is World War III?
It's kinda like the end ofcivilization if that happens,

(30:38):
isn't it more likely to be a slightlyhot cold war, a protracted period
in which there are small but limitedconflicts because they got nukes and
we got nukes, and are we prepared for thatas well as are we prepared for the will?
And, it's not just the capacity,it's the will to use them, and
that does worry me about America.

(30:59):
We lasted in Iraq despite all yourwonderful efforts, we kinda lost interest
in that in a couple years, we lostinterest in Afghanistan a couple years,
we lost interest inUkraine in a couple years.
So, you paint this picture of a big allout war, kinda like World War II, but
that's not, we're gonna have,it's a long, slightly hotter cold war.

(31:23):
Do we have the mechanisms,the adaptability, the will that,
how are we gonna fight that thing?

>> H. R. McMaster (31:29):
Hey, I think this is a great question, John, and I think what you
do is you prepare for the worst casebecause that's what you wanna prevent.
But as the historian Conrad Crane has[LAUGH] observed, there are two ways to
fight asymmetrically and stupidly, and youhope that your enemy picks stupidly and
plays to your strengths, likeSaddam Hussein did in the 1991 Gulf War.

(31:53):
But what you're seeing are a wholerange of asymmetric strategies and
capabilities being aimed against us,for example, like the Houthis.
In Yemen.
And so what you have to do is, you have tobuild a force that can operate across what
we used to call,the range of combat operations.
And so you have to build into that forcea pretty high degree of flexibility and

(32:15):
adaptability.
Our track record in predictingprecisely the demands of
future war is perfect because it's 0%,right?
And so the historian, Sir Michael Howardhas observed that the key is to not
to be so far off the mark that once thedemands of that war are revealed to you,

(32:35):
that you can't adapt to those demands.
And this is why joint force capabilities,combined arms capabilities,
are extremely important to maintain andto not buy into these assumptions that,
hey, the nature of war haschanged fundamentally.
We fall into this trap over andover again.
I wrote an essay years ago in which Icalled this the Vampire Fallacy, right?

(32:58):
That future war really next time willbe fundamentally different from all
those that have gone before.
It'll be fast, cheap, efficient.
It'll be a war that really falls intothe realm of certainty rather than
uncertainty, andwill mainly be able to fight and
win the war from standoff range, right?
And take essentially the George Costanzaapproach to war, and

(33:19):
just leave on a high note afterwe target a lot of the enemy.
Of course, what war requires isthe consolidation of those gains to get to
sustainable political outcomes.
War is profoundly human.
And so it involves, as you mentioned,the emotions that can unleash
an escalation of the war and a futurecourse of events that you didn't want or

(33:39):
that you didn't anticipate at the outset.
War is uncertain because of thatinteractive nature of the conflict.
The enemy has a say inthe future course of events.
And war is, as you mentioned as well,fundamentally a contest of wills.
And so, if you're to prepare forwar, as George Washington said,
[LAUGH] the most effectualway to prevent wars,

(33:59):
to prepare for it, then you have toprepare for the nature of war, right?
And that's societal preparations,that's military preparations.
And also I think it's preparation inthe area of strategic competence,
which we have lacked.
I mean, I think in many ways the orthodoxyof the revolution in military affairs is

(34:19):
quite similar to what you hear of theconventional wisdom today about the effect
of artificial intelligence andautonomy in future war.
And again, I'm not a Luddite on this but
I think that we have to recognize thatthere are countermeasures, right?
That there are continuities in the natureof war, but that RMA orthodoxy.
I wrote an essay about this when I was atthe National Security National Security

(34:42):
Affairs Fellow at the Hoover Institutionfrom 2002 to 2003.
If anybody's looking for some beachreading for this summer, you can find it.
It's called Crack in the Foundation,Defense Transformation, and
the Underlying Assumption ofDominant Knowledge and Future War.
It's a real page, Turner, but
I think that we're falling intosome of the same traps these days.

>> Bill Whalen (35:03):
Sir Niall Ferguson, I turn to you and
I wanna know what your topic is today.
But first I wanna note that John Cochraneis doing this show from the University
of Austin.
And John is informing me of a mostinteresting characteristic of
the University of Austin's landscape.
John, would you like totell us what that is?

>> John H. Cochrane (35:17):
Yes, as we head into talking about universities,
it is fun that I am visitingthe University of Austin,
which has marble statues of famous people,including our own Sir Niall Ferguson.
I must say a very nice andflattering marble statue.
I hope they make them of visitorscuz I would love to have one too.

>> Niall Ferguson (35:35):
I must correct- >> H. R. McMaster
Is it a nude, John?
It is a bust.
>> [CROSSTALK]>> H. R. McMaster: [LAUGH]

>> John H. Cochrane (35:41):
Its a bust.

>> Niall Ferguson (35:42):
And I remember saying three and
a half years ago when we foundedthe University of Austin.
Higher Education Reform or bust?
I didn't expect to get both,but it is a bust.
And as you say, John,not an unflattering one,
somewhat in the socialist realist style,but
I insisted when it was unveiled thata baseball cap be placed upon it.

(36:07):
I hope that cap hasn't been removedbecause I think there's always a danger
of being seen as somewhatself-important and
I'm always highlyresistant to that tendency.
So if you could put the baseballcap back on, I'd appreciate it.

>> John H. Cochrane (36:23):
I will put a baseball cap back on, and of course, I will
put in a plug for realistic figurative oilpaintings to go along with marble busts.
[LAUGH]>> Niall Ferguson: Well,
it's definitely our aesthetic, but I mustsay the students at the University of
Austin are so reverent that the realsignature art form is the cartoon.
There's a wonderful series ofcartoons being done by one of our

(36:46):
talented undergraduatesmaking rather good fun of us.
And I think that's part of what makesthis new university so distinctive.
There is an atmosphere of fun,irreverence, and
a readiness to say what you think and
not worry about been cancelled orotherwise punished.

(37:08):
And it's in marked contrast, he said, withan effortless segue to the topic du jour,
with the culture at the universitywhere I taught for 12 years, Harvard.
Harvard is in the sightsof President Trump.
You thought he had a game of chicken onwith Xi Jinping and China over trade.
It's not nearly as excitingas the game of chicken

(37:30):
that the administration isnow playing with Harvard.
Which, for those who aren't followingthe story, has taken the form of,
I think now,three letters from the administration to
Harvard University tellingit in no uncertain terms,
that it is likely to lose its tax exemptstatus and certainly will lose really

(37:52):
large amounts of government money inthe form of federal grants for research.
Because, according to the administration,Harvard has not lived up
to its obligations as far aspublic funding is concerned or
tax exempt status is concerned,because it hasn't protected
Jewish students sincethe events of October 7, 2023.

(38:15):
Which were followed by pro Palestinianprotests on the Harvard campus,
some of which clearly did shade over intoanti-Jewish and anti-Semitic behavior.
And there's also a question mark overwhether Harvard has in fact been engaged
in racial discrimination inits admissions and its hiring.
So it's one of those really classicfights between a populist president and

(38:39):
the ultimate elite liberal institution.
And what you're supposed to say,if you're an academic, as we all are, is
how dreadful that the Trump administrationis threatening the sacred principles
of academic freedom by trying to interferein the governance of university,

(39:00):
which is a foundation, a corporationrather, not a government agency.
That's really the debate that'sraging at the moment in academia.
And I'm going to saythat this isn't the time,
I think uncritically,to line up in defense of Harvard.

(39:20):
I do think the administration has fireda bazooka where a scalpel might have been
more effective.
I do think that Harvard's vulnerable tothe kind of action that was taken against,
wait for it, Bob Jones University,not quite as illustrious an institution,
but a university which in the late 70s andearly 80s,
was clearly engaged inracial discrimination.

(39:44):
It had rules against interracialdating on its campus that were
in violation of civil rights legislation.
And Bob Jones Universitylost its tax exempt status,
and that was upheld by the Supreme Court.
I don't think there's any bigdifference between what was going on at
Bob Jones Jones University in the 70s and80s.
And the kind of thing that's beengoing on at Harvard for years,

(40:07):
where candidates forapplication to be undergraduates or for
jobs were discriminated againstif they were white or Asian.
I mean, the evidence that discriminationwas going on at Harvard seems to me pretty
cut and dried.
And I think it's a pity the administrationdidn't just kind of focus on that, because
by firing the bazooka and saying, you gotto change this, you got to change that,

(40:30):
you got to accept this and that, I dothink the administration's overreached.
But does Harvard deserve this,did Harvard have it coming?
I think it did.
And the best piece of evidence is thereport that Harvard itself just published
on the problem of antisemitism on itsown campus, which is a damning document.

(40:50):
So it's not quite a pity,they both can't lose.
I actually really hope thatsomething positive comes of this and
that Harvard can be inducedinto mending its ways,
but I'm just a little doubtful thatthe bazooka was the correct weapon.

>> H. R. McMaster (41:04):
Hey, for John and Niall, how do you see this playing out,
do you think there's gonna bejust continued litigation?
Do you think there'll bea settlement of some kind,
is it going to involve a lotof other universities?
Because, if Harvard loses itstax exempt status, I mean,
you could imagine thatmany others would as well.
Why are some universities under the gunand some aren't, like Dartmouth, for

(41:25):
example, how do you see the Harvard issuein broader context of other universities?

>> Niall Ferguson (41:31):
HL, there's no doubt that Harvard is being made an example of
pour encourage les autres.
This is designed to senda signal to every university,
better be careful with your DEI program.
Because if you carry on with the kindof thing that has been going on right
across the country, I mean, there'snew story just come out today on UCLA

(41:54):
essentially engaging in racialdiscrimination in one of its programs.
And I think the goal here is to make anexample of Harvard with the intention of
making everybody change their ways.
And they've picked on Harvard forthe obvious reason that,
that Harvard's very big,it has a very large endowment.
But more importantly, its reputationin the world is of the ultimate

(42:18):
bastion of liberalism, not to saysupport for the Democratic party.

>> H. R. McMaster (42:23):
Right.

>> Niall Ferguson (42:24):
So one of the things that's really interesting about Harvard is
not only that it had an anti-Semitismproblem in the last 10 years or so, but
it's also hadan anti-conservatism problem.
There are barely any conservativesleft now on the Harvard faculty, and
amongst the students,there are very, very few,
or at least few who willadmit to being conservative.
This is an institution that has beenpoliticized in ways that I think

(42:48):
are highly questionable, quite apartfrom the whole issue of civil rights,
and soyou can see why they've picked Harvard.
I don't suppose there are manyTrump supporters, Trump voters,
MAGA voters,who feel anything other than loathing for
Harvard insofar as theyever think about it.
So that's the game plan,the thing about it is, HR though,

(43:11):
that if you go in as hard as theadministration has with the three letters,
essentially demanding kind of governmentcontrol over what Harvard does.
You allow all the elements in Harvardthat were to blame for all that I've just
described suddenly to repositionthemselves defenders of academic freedom.
And I will make a bet on the show nowwith all of you that within two weeks,

(43:34):
Claudine Gay, the disgraced formerpresident exposed plagiarist and
clear opponent of academic freedom inher time as president will come out
with an op-ed in the New York Times orthe Boston Globe, positioning
herself as a defender of academicfreedom against wicked Donald Trump.
So the worst case scenario for me,HR, is that this all backfires.

(43:57):
And the elements that were to blame fortaking Harvard down this path away
from academic freedom andtowards intolerance and discrimination.
I think those people might actually emergeas heroes, at least in their own minds and
in the minds of many liberals,
as a result of the tacticsthe administration has adopted.

>> John H. Cochrane (44:16):
I think, Nial, put your finger on it.
So racial discrimination is the topicof the lawsuit, but in fact,
the larger problem is that so much ofHarvard and the university system has
turned into highly partisan political,political advocacy.
And that is the job of institutes,centers and so
forth, well, really,do we need to pay for that?

(44:38):
We had a great discussion at our classicalliberalism seminar with Alan Dershowitz
on this topic, who, by the way,was not allowed to speak at Harvard,
he had to go speak at the Chabad House,you know.
And yes, academics are in a highdudgeon free speech, academic freedom.
Wait a minute, I forgot to closedown our microaggression seminar

(44:59):
where I was persecuting some poorpeople for using the wrong pronouns.
And onto free speech, Alan pointed outthere, there is a history to this.
In the 1950s and the post Brown era, a lotof educational institutions in the south,
K-12 and universities wantedto use their academic freedom.
And we get to decide what we teach toteach that slaves were perfectly happy in

(45:22):
the antebellum south.
And of course the war was the warof Northern aggression, and
the federal government said,no, you don't get to do that.
[LAUGH] And in fact, so I think thisis a slippery slope and one worth.
Each point in the slippery slope is worththinking about what you're allowed to do
as a private institution that doesn't takegovernment money is much more generous

(45:42):
than what you get to takegovernment money for.
And that is I think one of the centralissues, even there restaurants are not
allowed to discriminate by race evenif you're completely private and
take no government money.
So that's not,you don't get perfect freedom even there.
And then there's 15 different kinds ofpublic money that go to universities.

(46:03):
There is, we give a lot of money tostudents in the form of grants and loans.
Well, should we be subsidizing youreducation if you choose to have complete
academic freedom and teach politicaladvocacy as part of your teaching?
Well, you may be have the right todo that, as if Hillsdale College,
which doesn't take any money,wants to teach, they can teach what they.

(46:27):
But we don't have to pay forit necessarily, we pay for research.
Should we be paying for research withhefty overheads when that research
has turned into political advocacy forhighly partisan courses?
Tax exemption is another lever,universities, they get to run,
they get to borrow at tax free rates andput it into a hedge fund

(46:48):
that they then earn tax almostuntil recently tax free on.
Well, do you get to be tax exempt,do you get to have donations from wealthy,
from, from wealth people be tax exempt?
That's another lever, and
the appropriate amount of publiccontrol over what you do in return for
different kinds of subsidy actually isnot as clear as just pure academics.

(47:12):
So if you want your pure academic freedom,we can enforce,
we can enforce microaggressionsif that's what pleases us today.
And we can advocate for
eliminating all the Jews in the worldtomorrow if that's what we wanna do, which
is kind of like the position of a lotof people in subsidized part of campus.
Okay, but you can't take public,that's a First Amendment thing.

>> Bill Whalen (47:35):
Niall, you're a product of British higher education,
is this a uniquely American problem or isthere any parallel to this back in the UK?

>> Niall Ferguson (47:43):
Well, it's a good question because Oxford and
Cambridge have certainly shown signs ofwanting to imitate the Ivy League and
to have their own version of of DEI.
It's just that they don't havethe resources of a $50 billion endowment.
As Harvard does to do at scale.

(48:04):
And so you get kind of 10 DEIoffices rather than 100, and
that slowed down the process.
But there are another couple of thingsthat are really important about why it's
not sobad at the elite British institutions.
One is that they're pretty decentralized.
I think, well understood in the US thatthe colleges are really quite powerful.

(48:27):
It's a kind of confederal structure,especially at Oxford.
And that makes it hard for the universityto impose a five year plan for DEI,
especially on the moreconservative colleges.
Secondly, admissions ismeritocratic in a way that would
stagger the Harvard admissions office.
You basically have to do really well,get really good test scores in A-levels.

(48:52):
And there's an exam too andan interview which is guess what?
Handled by the professors andnot by administrators.
And I do think that that's actuallythe most important difference.
And one of the things we're doingat the University of Austin is
purely meritocratic admissions.
Let's see your test scores, that's it.
We don't care about your essayin which you claim that you

(49:13):
deserve a Nobel Peace Prize.
We don't wanna readthe phony AI generated CV.
We just want to see howyou did in your SATs.
And that I think is atthe heart of it all.
If you can have academic freedom plus realmerit based, excellence based decision
making in admissions, in hiring, thenthe university I think can heal itself.

(49:37):
But Harvard has a very long,long way to go.
As do all the major universitiesbefore they remotely resemble
the great universities they once were.

>> Bill Whalen (49:46):
Time to move on.
But Niall, I have to ask before we leave,
what is the ball cap ontop of the Niall Ferguson.
It's not a mag ahead, is it?

>> Niall Ferguson (49:53):
It's not and it wouldn't be.
We're very deliberately non-political.
Universities shouldn't be political.
It shouldn't be a conservativeuniversity or a Democrat university.

>> H. R. McMaster (50:04):
I'll send you a Phillies cap.

>> Niall Ferguson (50:05):
[LAUGH] I would even settle for a Red Sox,
the nearest thing toa baseball team I ever had.
As long as we don't A take ourselves tooseriously and B start being political.
Because I do think that's fatal.
Max Weber, the great German sociologist,said there are two different vocations.
One is politics andthe other is scholarship.

(50:27):
And if you start to merge the two,
you have violated the academicequivalent of a Hippocratic oath.
So John, I mean I hope notice in yourvisit that there's a kind of interesting,
eclectic, heterogeneous quality tothe students that there are students
who are probably willing to wear a MAGAcap, though I haven't seen any lately.

(50:50):
But there are students on the left.
There may even be the odd bluehaired student, look around.
But it seems to me that, that what'sreally striking about the University of
Austin is just the atmosphere in theclassroom, which is so much more free and
fun than the classrooms at the majoruniversities that I'm really encouraged.

(51:10):
There's definitely a market foracademic freedom amongst the Generation Z.
We hear a lot of negativethings about that generation.
What really strikes me is that if youbuild a university with free speech and
academic freedom and meritocracy atits core, then young people love it.
And that's so reassuring.
If they'd all turned up andstarted canceling one another,

(51:31):
that would have been kind of depressing.
But that's not what's happened.

>> Bill Whalen (51:33):
All right, gentlemen, time for the lightning round.
[SOUND]>> Bill Whalen: All right,
our first question.
President Trump has moved Mike Waltzfrom National Security Advisor to
UN Ambassador, calling it a quote,unquote promotion.
And he made Secretary of State Marco Rubiohis interim National Security Advisor for
the next six months or so.

(51:54):
Rubio also the acting administrator forUSAID and
acting Archivist of the National Archivesand Records Administration.
HR, you're a formerTrump National Security Advisor.
Niall, you literally wrote the book andare currently writing another book on
the last gentleman to be both Secretaryof State and National Security Advisor.
I asked the two of you,is this a good idea?

>> H. R. McMaster (52:15):
Well, I don't think it's a good idea if it sticks because
there's just too much work to be doneby Secretary Rubio, as the President's
principal diplomat and he has a reformagenda for the State Department.
And I remember Henry Kissinger telling me,Niall, I'm sure he said this to you.
He said, whatever you do,
do not let foreign policy berun by the State Department.

(52:38):
And of course, the National SecurityAdvisor is the person who's best
positioned because of the capabilities onthe National Security Council staff and
the ability to coordinate and integrateacross all the departments and agencies.
To give the President best analysis andto give the President multiple options so
the President can determinehis own agenda, right?
And so I think that it'simportant obviously as well for

(52:59):
the National Security Council staff andthe National Security Advisor to help
integrate all elements of national power,right?
The other departments don't work forthe State Department, right?
They work for the President.
And if The National Security Advisoris doing his or her job well, right?
They are helping the President with thesensible implementation of his decisions.

>> Niall Ferguson (53:20):
On the lightning round principle, let me just tell you what
Henry Kissinger himself saidabout merging the two positions.
Quote, when I became Secretary of State,I also remained National Security Advisor.
It did not work.

>> John H. Cochrane (53:35):
So can I ask, I'm a little bit skeptical because as I see our
government, we keep havinginstitutions become dysfunctional and
then we just throw moreinstitutions at them.
And your book HR was great on, andwe have at least Defense, State and
National Security Advisor alltrying to make foreign policy and
all bickering with eachother all the time.

(53:57):
In economics, we have treasury,we have the CEA, and
we have now the NEC thatwhen CEA was dysfunctional,
Clinton invented a new one andthrew some more spaghetti at the wall.
Now they all squabble with each other.
We had, in trying to do a budget,
we had first a Treasury Departmentthat didn't work.
We had an OMB under Coolidge.

(54:17):
Well, that's not working,a Budget Control act that didn't work.
We then have an OIRA totry integrate stuff.
How many different offices ofthings with overlapping remits do
you really want in a White House?
Or is it time to just Mariecondo the whole thing and
figure out a much more sensible structure?

>> H. R. McMaster (54:37):
Well, this is the argument that Hedrick Smith makes
in an old book called the Power Gameabout how diffuse government has become.
And again, I think what that does,at least in the near term, John,
is put a premium on the coordination andintegration function of the NEC,
the National Economic Council andthe National Security Council.
I think what's happened is the President,because from his view,

(55:00):
he had a bad experience withthe National Security Council staff and
his impeachment andthe complaints that generated
his impeachment about the Ukrainephone call episode and so forth.
That he sees the National Security Councilstaff as the problem to advance
his agenda when actually it's the bestmechanism to help drive his agenda.

(55:22):
And there's been an effort really acrossnow two Trump administrations to diminish
the role ofthe National Security Council staff.
Now of course,those staffs can be overbearing,
they can over centralize decision making.
But it's important not to do that, right?
It's important for
every one of these organizationsto understand their role, right?
That's when we get into trouble iswhen the heads of these organizations,

(55:46):
these are the secretaries ofsome of the major departments or
the National Security Advisordon't understand his or her role.

>> Bill Whalen (55:54):
All right, gentlemen, on the Trump front, we also have news
reports that the president wants tohave a military parade on June 4th,
14th, which is the 250th anniversaryof the United States Army.
And by the way,is President Trump's 79th birthday.
So I asked the three of you,good idea, bad idea?

>> H. R. McMaster (56:10):
I think it's a fine idea, man, I mean,
it's okay to have a parade, right?
And it's the 250th anniversaryof the United States Army.
What could be a better occasion fora parade than that?
But I do think [LAUGH] that, I mean,I tell the story at war with ourselves.
The president, he loves a parade,he loves a show.
We were in Paris forthe end of World War I,

(56:31):
I think it was no 100th anniversary ofUS entry into the war, I think it was.
And it was a massive parade,the president loved it.
And then he told me, general,I wanna parade like that.
And I'll tell you,I was very happy to pass that on to
Secretary Mattis to havethat be his problem [LAUGH].

>> Niall Ferguson (56:53):
But HR what uniform should President Trump wear?
Since it's customary on suchoccasions in other countries for
the President, even if he's not a militaryuniform, anything in mind for him?

>> H. R. McMaster (57:06):
President Macron was just in his suit.
I think it's just hissuit is fine [COUGH].

>> Niall Ferguson (57:09):
How about papal vestments?
The President's been trying those on,at least with the help of AI.

>> H. R. McMaster (57:16):
Talk about the height of distastefulness, man.
I mean, I can't believe that,really, I mean, geez [LAUGH].
I mean, [LAUGH] just putting like, I mean,
definition of megalomania is thatwhat goes next to that [LAUGH]?

>> Niall Ferguson (57:31):
I'm waiting for the equivalent, the field marshal's uniform.

>> John H. Cochrane (57:35):
So, yeah, Latin American presidents do this.
And Russians had those big hats always andlots and lots of medals.
I'm all for a military parade,
especially with lots of airplanes,to celebrate the, US army.
I was kinda shocked at howlittle celebration there was of
the 200th anniversary of Lexington andConcord, which occurred just a little bit.

(57:59):
There's a good one in Lexington [LAUGH],where my daughter now lives, but
there wasn't one in Palo Alto.

>> H. R. McMaster (58:05):
If you wanna read this book is fantastic, The British are Coming,
Rick Atkinson's.
And now I'm getting into his secondvolume, which just came out.
It's gonna be a Trilogy of the Revolution.
So damn good, so good.

>> John H. Cochrane (58:17):
The people in Lexington reenacted this thing at 5 o'
clock in the Morning,the historically accurate time,
which I thought was really good.
But in Palo Alto,nobody even knew about this.
So that remembering that sort of thing is.
But we are a country that verymuch values the separation of
civilian control from the Army.

(58:38):
So I'm nervous now.
Does having a politician at the headof the parade remind us that
the military is subjectto civilian command?
If so, okay, but wear a suit,[LAUGH] no funny hats and medals,
or is it dangerous to send symbolism oftoo much military and political together?

(59:02):
So I don't know how to do symbolism ofparades, but I'm happy to have one, so
long as it's clear what our symbolism is.

>> Bill Whalen (59:09):
All right, new item, the Oracle of Omaha Warren Buffett is stepping
down as CEO of Berkshire Hathawaya few months shy of his 95th birthday,
though he'll stay on aschairman of the board.
John and Niall, very quickly,your thoughts on Buffett and
the legacy of value investing.
Go first, John.

>> John H. Cochrane (59:24):
Okay and you don't get to ask the questions to
just two of us.
If HR wants to say something,he gets to [LAUGH].

>> H. R. McMaster (59:29):
[LAUGH] That's okay,
I'm still pretty far away from mydegree in economics [CROSSTALK].

>> John H. Cochrane (59:37):
Buffett was remarkable for both skill and luck.
And let's remember, if you pickthe winner at the end of the race,
you're also likely topick a guy with luck.
He was ahead of the game.
So value investing was consideredcarefully academically, and
it does actually work.
It's now called a factor.

(59:58):
But he was way ahead ofthe academics on recognizing that.
Also quality factors andall the things he looks for in a company.
He got a couple of lucky breaks, buyingApple at the right time, buying BYD.
I just learned that he made a lot ofmoney on the Chinese car company,
which is about,inevitably gonna clean America's clock.
They can make stuff that atprices we can't even get on.

(01:00:20):
So, there was some luck,there was some deep knowledge.
And of course, he buys for the long run.
His preferred holding period is infinity.
And that's an important lesson forAmerican investors.
You buy stocks for the dividends,not for short term price appreciation.
He also invented a veryinteresting structure.
Berkshire Hathaway is a company,it's not a mutual fund.

(01:00:43):
And it pays taxes, seeminglyneedlessly on dividends, earnings, but
then it just reinvests it all andlets you take it out when you want to and
pay capital gains taxes on it.
So he invented a veryinteresting structure, and
it's interesting that nobodyelse has copied that structure.
So that one's quite unique.

>> Niall Ferguson (01:01:00):
The passing of his leadership of Berkshire Hathaway
has given me a kind ofprompt to study his career.
I'm a bad investor, I'm almost likethe opposite of Warren Buffett.
I get the timing wrong.
[CROSSTALK] I don't good luck.
I really suck at this.
And so this is a great moment.

(01:01:23):
I was discussing it with Bill Amman justthe other night to actually sit down and
study Buffett's record.
I don't think the Apple purchase orthe BYD investment,
I don't think that was luck.
I think there's an extraordinaryprocess of judgment that he and
Charlie Munger have perfected.
So my resolution is study Buffett andget a bit more Buffety myself.

>> John H. Cochrane (01:01:46):
It's actually not.
The studies I've seen of him isthat it's not stock selection.
He doesn't reliably outperformthe style of buying
value growth companies on certain metrics.
So it's not sort ofthe brilliant insights of him.
He seems to do as well now.
Those styles do very well, andthe discipline of not buying and

(01:02:09):
selling all the time does very well.

>> Bill Whalen (01:02:11):
HR, John was right in shaming me to not including on this.
Any thoughts on Warren Buffet?

>> H. R. McMaster (01:02:16):
No, not really.
I mean, I think you were right toexclude me from that one [LAUGH].

>> Bill Whalen (01:02:22):
I stand vindicated.

>> John H. Cochrane (01:02:23):
Well, you'd invest in tanks if you were in charge, right?

>> H. R. McMaster (01:02:26):
Hey, no, I did, I made like one investment decision in my life,
it was disastrous.
And so I called my friend afterwards, whoactually knows what he's doing about this.
He goes, let me tell you something.
You know, if I'm going to invadea country, I'll call you next time before
you make an investment decision,call me, just call me [LAUGH].

>> John H. Cochrane (01:02:42):
This is interesting for all three of us.
I was a professor of finance formany years, and I don't buy and sell meal.
Every time I get the impulse,I wait for it to go away,
because it's always wrong [LAUGH].

>> Bill Whalen (01:02:55):
All right, gentlemen, final topic, Mother's Day.
This is a sore subject for me, my motherpassed away in my second year in college.
She was only 45-years-old.
And that was 45 years ago, soeach may I think about her, I miss her.
And I become very melancholy atthe thought of how much she missed
out on life.
Not seeing her children reach maturity orwhatever, whatever I reached, not saying,
grandchildren, great grandchildren,and so forth.

(01:03:17):
So I turn to the three of you fora more optimistic note here.
HR why don't you start and either talkabout the mother who brought you into
the world or the remarkable woman withwhom you have raised children, who,
by the way,fed me a very nice steak the other night.

>> H. R. McMaster (01:03:29):
[LAUGH] So, my mom was a fantastic human being, so
I've got this whole thingon my to remind me of her.
Only the best moms get promoted to Mimi,her name was Mimi.
My friends called her the Memes.
She was a force of nature.
She taught public school in Philadelphia,was charismatic.
Her students tested out top in the city,
even though they were from the mostdisadvantaged neighborhoods.

(01:03:51):
She instilled in me kind ofan intellectual curiosity and
a desire to learn from history and toserve and she was fantastic and just Niall
will pretty much appreciate this, I tellthe story and it were with ourselves I was
hosting Henry Kissinger for the first timein my office since my books had arrived.
He had visited a couple times previously,but now my books were arrived and

(01:04:13):
they were in my office andI pulled down the White House years.
And I asked him to sign it andwhen I opened it up there was a note from
my mom who had given me the book inthe early 1990s and then it dawned on me.
It was the anniversary of mymother's death also in May.

(01:04:33):
And so,I told Henry Kissinger about my mom.
He told me about his mother,an extraordinary woman as well, and
we shared a nice moment there, andI think about her all the time.
I'm grateful that my daughtersgot to know her and love her, and
are still inspired by her but she was justa fantastic woman, a great role model.

>> Bill Whalen (01:04:54):
Jonathan.

>> John H. Cochrane (01:04:55):
I wanna celebrate three,
my mother was a alsoa fortune force of nature.
Just an amazing woman, married this crazyhistorian taught herself French and
Italian as they wandered around Europe andand
then really encouraged us to developour own interests and follow.
And when she died hundreds of peoplecame to the funeral cuz she was such a,

(01:05:20):
so kept her intellectual andpersonal life going so well.
My wife who brought up our four kids andreminds me there's something
women can do uniquely that noneof us will ever experience or
really understand,bringing new life into the world.
Her curse has been, she knows howto run everybody's life if they

(01:05:43):
would only listen to her, but she's right.
And my daughter Sally who just gavebirth to our second grandchild.
So I was just out watching thiswonderful process who has also taken on
the responsibilities of motherhoodin ways I could never imagine
that my own children would be able to do.
So a way to go and

(01:06:04):
wonderful to see that new lifebeing brought into the world again.

>> Bill Whalen (01:06:09):
Okay, so Niall, I turn to you, I know part of moving to the UK for
you is to be closer to your mother.

>> Niall Ferguson (01:06:14):
A very, very large part.
My mother's still alive andvery much with it at 87,
it's impossible to overstatehow much I owe her.
And of course, my late father.
She was also a teacher,a physics teacher in

(01:06:37):
a different era in our timesomeone like my mum would
have had many more careeroptions than to be a teacher.
She had a first class degreefrom Glasgow University, but
we were the beneficiaries of herbeing a teacher, not a career woman.

(01:06:57):
My sister and I couldn't havehad a better start in life than
the one my mom gave us because ofher attention, her encouragement,
and also the subtle andvery Scottish pressure.
When I was very young,I came home from school filled
with pride because I hadcome second in the class.

(01:07:21):
They used to rank kids even at a veryearly age in those olden days.
And I said, mom, dad, great news,I came second in the class.
And my mother's comment was,who was first?
And I think that's great parenting becauseI never came second again, thanks, mom.

>> Bill Whalen (01:07:44):
And she was at your investor, correct?

>> Niall Ferguson (01:07:46):
She was indeed, that meant a lot to her.
And indeed, I mean, I joke a little bitabout the absurdity of being knighted,
but it meant an immense amount to her.
And, you know, it's prompted me toadd a thought to our show today.
We haven't mentioned it, but
the 80th anniversary ofvictory in Europe this week.

(01:08:08):
And my mother's one of that generationwho were kids in World War II.
And what's really important and
where I'm lucky is that I've beenable to get my mother through her
long life to communicate some ofthe lessons of her life to my children.

(01:08:28):
The key thing about mothers is that,as grandmothers,
they are like this vital connectivetissue between the generations.
And so, one reason forgoing back was not just for
me to be close to my mothernow that she's quite elderly.
But also for our sons, Ayaan and my sons,to get to know her and learn from her in

(01:08:49):
a way that they just couldn't if it wasjust a case of occasional vacations.
So, yeah, Mother's Day andGrandmother's Day,
it's a really, really important thing.

>> Bill Whalen (01:09:03):
Well, HR we got away from doom and crisis and
we actually ended on a verynice sentimental note.

>> Niall Ferguson (01:09:08):
Wipe away the tears if you can.

>> Bill Whalen (01:09:11):
Gentlemen, thanks for a great conversation, gentlemen,
we will be back very soon witha new episode of Goodfellows.
Our guest will be formerWisconsin Congressman Mike Gallagher, so
I suspect we're going to be talkinga lot about China and national security.
If you worry about missing these shows,there's an easy way to avoid that.
Subscribe to us on your podcastnetwork on you on YouTube.
Also go to the Hoover website, hoover.organd sign up for the Hoover Daily Report,

(01:09:34):
which comes to your inbox weekdays.
It means every time that Niall,John, and HR on the news,
Hoover reports on it for you.
Our three good fellows also are quiteactive on social media, they have X feeds,
we'll follow those too.
On behalf of the Goodfellows, Sir NiallFerguson, HR McMaster and John Cochrane,
thanks for joining us today.
We hope you enjoy the show andwe will see you soon.
Till then, take care, Sol.

>> Presenter (01:09:59):
If you enjoyed this show and are interested in watching more content
featuring HR McMaster, watch Battlegroundsalso available at hoover.org.