March 12, 2026 • 41 mins
Rare earth elements are inside pretty much everything with an on-off switch: Phones, laptops, cars. Even missiles. And China controls the world’s supply of components made from rare earths.
David Abraham is the author of the book “The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age.” David’s problem is this: What should the US do about China's chokehold on the rare earth supply chain?
According to Abraham, the current US strategy could wind up costing billions of dollars without solving the problem. And he has a big idea for what we should do instead.
In this episode, David explains:
- How China quietly built a monopoly on rare earth materials
- Why the 2010 Japan crisis was a preview of today's trade war
- China’s export restriction strategy
- Why the problem goes deeper than billions in spending can solve
- Why electric vehicles are the key to reinvigorating the U.S. rare earth industry
Learn more:
- Find David at his website
- Buy the Elements of Power
- Check out David’s article in the new Republic
Connect with us:
- Follow Jacob Goldstein on LinkedIn, X and Instagram
- Email us at problem@pushkin.fm
- Follow Pushkin on Instagram, LinkedIn or X
- Listen to Jacob’s other show, Business History
To listen to the show early and ad free, sign up for Pushkin+
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Pushkin. Today's show is about rare earth elements, which suddenly
in the past year or so have become very big news.
Rare earths have in fact been a big deal for
decades because you need small amounts of various rare earth
elements for basically anything with an on off switch for laptops, phones,
(00:40):
electric vehicles, drones, missiles. I don't actually know if missiles
have an on off switch, but you do need rare
earth for missiles. And we suddenly started to hear more
about rare earth's last April because the day after President
Trump announced new high tariffs on China, China said, okay, fast,
(01:01):
the way it's going to be, We're gonna make it
very hard for you to buy stuff made with rare earths.
And China can do that because they have choke hold
on the global supply of the essential components made with
rare earths, the magnets and other things that go into
our cars and iPhones and missiles. This raises some very
important questions like how did China get a choke hold
(01:24):
on rare earths, and more urgently, what's the US gonna
do about it? I'm Jacob Goldstein and this is what's
your problem? My guest today is David Abraham. He's the
(01:46):
author of the book The Elements of Power, Gadgets, Guns,
and the Struggle for a Sustainable Future in the Rare
Metal Age. David started out as a commodities trader back
in the aughts, and then he went to Asia to
do research and got interested in rare earth's back in
twenty ten. The fundamental problem David is addressing is this,
(02:08):
what should the US do about China's chokehold on the
rare earth supply chain. As you'll hear, he thinks the
current US strategy could wind up costing billions of dollars
without solving the problem, and he has a big idea
for what we should do instead. Before we get to
the interview, I should say the thing people always say
(02:29):
about rare earth elements. They're not actually that rare in
the sense that they're found in many parts of the world.
There are seventeen rare earth elements, and the reason they're
called rare earths is that they're found in very small
amounts mixed in with other elements. So it takes a
lot of work and a lot to know how to
mine and refine them. If you go back in history,
(02:52):
you see that the US dominated production of rare earth
through the nineteen seventies. After that things started to shift
to China to start. I asked David how that happened.
Speaker 2 (03:04):
So they start producing these materials because they needed hardcore.
See it was the nineteen eighties or early nineteen nineties.
They were able to mine this stuff up and send
it out and at the time they're making Christmas lights
and T shirts. They're not thinking about larger developed products.
Speaker 3 (03:24):
If you will.
Speaker 2 (03:25):
But they slowly start to realize as their ambitions start
to increase that they want to be able to make cars,
and they see these materials as really critical to the
manufacturer of these products. So what they start to do
over time is start to develop those industries. Because in
the West, people don't want to dig up. They don't
(03:46):
want to dig up earth. No one wants to mind
in their backyard. People don't want processing, and for most part,
people who graduate college or high school want to be
going into more comfortable jobs. And so the Chinese raise
their hand and basically say, hey, listen, we'll do this work.
We need the money, and we're starting to see that
these materials are critical to the products that we want
(04:06):
to make in the future. So over success of five
year plans, which is how Beijing looks at its economy
and how it wants to go forward, it starts to
figure out that they want to develop these materials at
the heart of a high tech society that is slowly
starting to go from military to green technologies to high technologies,
(04:29):
and they want to make everything within their country.
Speaker 3 (04:32):
So it was a.
Speaker 2 (04:33):
Slow process, and it wasn't something that China woke up
and was secretly doing. These plans were out there for
the world to see, and it was fine when people
were thinking, Okay, well I just got my iPhone, I
don't really have to worry about things. They didn't think
about where the material was because people were thinking just
like it's a grape or wheat, as long as the
(04:55):
market can supply it, then we're fine. It wasn't until
people started to wake up and realize, wow, these materials
are very important to the world that we really have
to understand where the supplies are coming from.
Speaker 3 (05:09):
So it seems to be a more of a wake
up call. Now.
Speaker 1 (05:11):
I mean, you said something interesting there, like the market
will supply it, right, which was the basic worldview of
most people, most elites, say in the US certainly at
the end of the twentieth and the beginning of the
twenty first centuries, right, like a belief in trade and
(05:32):
in markets, and in many ways it was justified. I know,
it's an unpopular view now largely or at least less
popular than it was. But it did work pretty well
in many ways, right Like we did get more and
more stuff, the world was getting more efficient, manufactured goods
did get cheaper and better. So in many ways it
(05:52):
did work. And China over that time, through the twentieth
century into the twenty first century went up the value chain,
right as you say, they started out just mining and
sending the raw minerals out, and then they started refining.
Right then they started manufacturing the basic components. And now
we're to the point where clearly they are making the
(06:13):
best electric vehicles, say, and the only reason we don't
have them here is because of tariffs, right, because we've
kind of moved away from the free trade beliefs that
we had. So, as you say, there was this wake
up call that you mentioned, and there's this very clear
moment when that happened. Right, it's not some gradual thing.
It's in twenty ten, and there was this territorial dispute
(06:36):
between China and Japan over some islands that kind of
classic territorial dispute. These are our islands, know, these are
our islands. And the upshot for our story is that
China stops sending what rare earth's basically to Japan. And
as it happens, you happen to be in Japan working
(06:58):
at that moment. So what was the effect of that
on the Japanese market and what was it like for
you as an observer.
Speaker 3 (07:06):
I was based in.
Speaker 2 (07:06):
Their Ministry of Economy, Trade and Industry, so I was
one of two foreigners, the other being a translator, and
so it was a fascinating experience to be there because
Japan relied on these materials. They had this just in
time manufacturing that the materials just had to arrive. Japan
has refined them in ways at that time China could
not do upgrade them, put them into an optical drive
(07:29):
that they would send back to China to put into
a computer. And so what happened was Japan's manufacturing lines stopped,
slowed down, and Japan was woken up to wow, we
have a reliance on China for materials, and China may
not be a strong supply huh.
Speaker 1 (07:50):
So suddenly Japan is like, oh, all these things that
we make cars, speakers, you know, components, high end components
that go into electronics that are ultimately assembled elsewhere. All
of a sudden, we can't make those things now because
China stopped sending us rare earths.
Speaker 2 (08:07):
And these are such small things, their value is so
low you wouldn't think much about it. It's just like
yeast did for bread. If you don't have yeast, then
you can't make bread. And so these materials didn't have
a lot of value. Japan didn't think much about the
supply lines, and then lo and behold, they're stuck. And
so what happened really over the month the two months,
(08:30):
is that China started seeing that, hey, they're not getting
their equipment from Japan to be able to make their computers.
And so really the fact that one country makes these
and has, as some people say, a choke hoal, is
it challenge for those who are depending But there are
some reciprocal relationships.
Speaker 1 (08:51):
Yeah, I mean that's in a way part of the
happy story of trade, right is it is an interdependent relationship, right,
and China's like, oh, we're not sending the rarest to Japan. Now,
Japan's not sending the components to us that we need
to put into the finished product that we're going to export.
So their leverage is limited perhaps in that way.
Speaker 2 (09:10):
Exactly, And that was the case in twenty ten. Now
what's happened over time is that China has gotten really
good at everything, so that they're making cars that Ford
is saying is far stronger than the cars that we
can make. So when you have a country that can
(09:31):
produce end to end within its borders, that set of
interdependencies where you have leverage becomes less so and so
over those fifteen years from twenty ten when we were,
you know, talking about Japan, China's ability to produce in
(09:51):
areas that used to be Japan's strengths has now increased,
and they're less reliant externally.
Speaker 1 (09:58):
And so therefore they can use rare earths more effectively
as a choke point as a piece of leverage in
their negotiations with certainly the US.
Speaker 2 (10:10):
They're more formidable partner than previously for sure.
Speaker 1 (10:15):
So you're in Japan and twenty ten you see this
and is that what makes you decide to write this book?
Like you were early, you were into rearsts before it
was cool.
Speaker 3 (10:28):
I was in twenty ten.
Speaker 2 (10:30):
I had, you know, my career before that, I been
in commodity trading, which is mostly oil, gas, coal, big
ticket items. And then I had worked in the US
government and working on international trade issues, and so everything
kind of came together while I was in Japan, and
I was fascinated that the economy of one country, or
(10:53):
at least certain supply lines, could shut down because of
materials that people never heard anything about.
Speaker 3 (11:00):
So I wanted to understand, is.
Speaker 2 (11:03):
The world is becoming more reliant on a green technologies
and everyone starts to have a smartphone in their hands,
reminding you back in twenty ten, not everyone had them
and their technology you couldn't make now skype calls or
video calls around the world, and so technology was going
(11:24):
was spreading around, And the question is what happened when
we become a high tech in green society. We're going
to be dependent on materials that people have not thought
much about, almost like the switch to internal combustion engines,
reliant on oil and gas. And if we don't get
the systems. Right, we're going to be in a situation
where one country can really dictate because they're focused on
(11:48):
the material supply. And lo and behold, the moment that
I had anticipated when I started writing about these papers
in twenty eleven twenty twelve has now arrived. And so
we're stock thinking about, oh, no, how do we supply
these materials? And in many cases we're already behind and
we have to think differently than where are these material goes?
Speaker 1 (12:11):
So you write this book in twenty fifteen, not that
much happens in the world.
Speaker 3 (12:19):
Right.
Speaker 1 (12:20):
I hope it was well received and people told you
they liked it or whatever, But it's not like everybody
in Congress is like, oh my god, we got to
deal with this. Right. The sort of status quote seems
to persist for a decade after you write the book.
It seems like really until last year, until twenty twenty five.
Speaker 3 (12:37):
Right.
Speaker 1 (12:38):
There is again, as in twenty ten, there's this very
specific moment, and that comes in April when President Trump
announces these very high tariffs on China, and was it.
The next day China's like, okay, if you're going to
do that, we're not going to let you buy rare
earth or the stuff made with rare earth? Is that
about what happened? And then we're like, oh my god,
that's very that's a very good comeback China.
Speaker 2 (13:02):
That's what's happening at the high visible level. Yeah, I
think you had something back in twenty twenty that got
people more interested and where the stuff come from, and
that's COVID And so at that time people were concerned
about masks. And then people were realizing it takes a
while to get material or things to the United States,
(13:25):
and if there is a challenge, then what do we do?
Speaker 3 (13:28):
And there was a boat stuck in a canal.
Speaker 1 (13:30):
At one point, people talked more generally about just in
time delivery and lean manufacturing. Right, this idea that you're
so optimized you don't have any inventory on hand, that
that can be more costly than it appears when there's
any kind of disruption. Right, So people started thinking differently,
perhaps about about supply chains at that time.
Speaker 2 (13:51):
And so there was there was started to be some
smarter people who were connecting the dots. So back in
if I go back to twenty eighteen Congress, I was
invited to speak in Congress three times on this subject.
On a wide variety of minerals. There just weren't people
focused in that. But starting in twenty twenty, that's when
(14:12):
there were smart people starting to get involved in some way,
identifying this as a challenge. And at that time I
had been in the space for ten years and talking
about it, and I was like, I was wondering what was.
Speaker 3 (14:24):
Where it was going to go.
Speaker 2 (14:26):
But though some of those initiatives started to bear fruit,
there are a number of you know, smart people who've
been in the space since that time, and so there
were starting to be questions asked, you know, where are
we getting our critical minerals?
Speaker 3 (14:39):
Where are where it is coming from?
Speaker 2 (14:41):
And you're right that the real public display of oh
no rare earth was when we started a trade war
that we may have not fully appreciated the ramifications and
the connections that we might have sparked.
Speaker 1 (15:02):
So what was it like for you that there was
just one day last April when China said they were
going to limit our access to rare earths and things
made with rare earths in retaliation for the high tariffs
that President Trump had suggested, Like, what was your day
like that day?
Speaker 2 (15:22):
My first thought was, this is not good. Yes, and
that there becomes this confidence that we have in the
US that we can do things fast. And my concern was,
we're going to have this confidence that we can do
things fast in this space.
Speaker 3 (15:41):
And my day was.
Speaker 2 (15:43):
Trying to explain to people what these materials were and
why they were important, because I don't think people fully
understand that, and I don't think people fully understand that.
Speaker 3 (15:55):
Today that.
Speaker 2 (15:58):
What we are good at is the development of technology,
the development of AI. What we are not good at
is the fastening of mineral to metals or powarders and
then turning that into a product.
Speaker 1 (16:15):
I was reading your book, I thought of what does
it say on the back of the iPhone? Is it
designed in California? Made in China?
Speaker 3 (16:24):
Yeah.
Speaker 2 (16:24):
What's fascinated about Apple right now is there a lot
of companies that in the US are in production and
they're concerned about supplies of.
Speaker 3 (16:32):
Rare earth.
Speaker 2 (16:33):
Apple faces no such restrictions because they're producing in China.
So there's what we have understand is that there's In
twenty eleven, if we flashed back when Japan didn't have
access to rare earth, two things happened. One people in
Japan said, how do we make products without these rare earths,
(16:54):
which makes sense, but counterintuitively, a lot of Japanese companies
went into China because they said, we got to be
where the materials are.
Speaker 3 (17:02):
Right.
Speaker 1 (17:03):
If there's an export restriction, one way of getting around
it is move the factory to the country where the
stuff is to begin with. Right.
Speaker 2 (17:11):
So that I mean, that's a complete solution that we have.
We can bank our economy that China will continue to
export products to us that we can label as you know,
apple or whatever, but we're totally reliant on them for
the production.
Speaker 1 (17:28):
So what is the state of play now with respect
to China and the US and rare earths.
Speaker 2 (17:35):
So China has over the past year put on a
number of restrictions. They put on some licensing restrictions, and
then the government later in the year basically said, hey, we're.
Speaker 3 (17:49):
Going to start to ask for.
Speaker 2 (17:52):
An application for any rare earth that is mined in
our country or is using our technology. And what we've
noticed is there are two things. One is it's important
to separate the material in the products. So the material
is a rare earth powder. The product is a magnet
that goes into a motor. And what we've seen is
that China has allowed the export of magnets, which goes
(18:16):
into motors, but has been less willing to export the materials.
And that's important because what the administration elsewhere wants to
do is to develop the industries that rely on the materials,
and those aren't coming out.
Speaker 1 (18:31):
The strategy from China's point of view is, yes, you
can buy the magnets that you need, but you cannot
buy the raw materials. And the reason they are doing
that is because they don't want us to develop the
industry to build the magnets. They want to keep a
lock on that. Is that the inference they.
Speaker 2 (18:49):
Have said from twenty ten since when I'm in this space,
we want to use Chinese resources for Chinese products. Why
should we go through the environmental challenges? Why do we
have to do anything just to export that so another
country can benefit.
Speaker 1 (19:05):
Yeah, I mean that's the classic kind of mercantilist thing, right,
like why should we cut down trees in New England
just to send them to England to be made into ships? Right?
Speaker 2 (19:16):
Yes, So it's an argument that's been used from the US,
from the natural gas industries through through lumber.
Speaker 3 (19:23):
It's it's not uncommon.
Speaker 1 (19:25):
Yeah, and just to be clear, this this dispute and
what China has done with rarest over the past year, like,
has it had a clear effect on for manufacturers? I
mean in military domains elsewhere is there stuff that is
not being made now or that is more expensive now,
or that is performing worse now because of this trade
(19:46):
dispute and China's kind of use of rare earths.
Speaker 3 (19:49):
People are scrambling for material.
Speaker 2 (19:50):
They're paying higher prices for material, so they don't Yes,
there are supply lines that get slowed down. It's not
like companies really want to come come out and say, hey,
you know we're not going to make X, Y or
Z because of we're not able to get the material
necessarily want to, but you do hear leaders of automobile
(20:14):
manufacturers saying, hey, we're not being able to produce. And
it's not just here India, Japan. There are a number
of places where the material is not getting out. And
so what the challenge is is we don't fully appreciate
is that that material that we need in the US
is turned into a magna that's then sent to the US.
(20:36):
We don't always get the raw material. So whether the
US is restricted or Japan is restricted, our supply lines
are impacted, and so there's too much of a focus.
What I feel is like, oh, well, the US has
to do X, Y or Z. The US has to
make sure material can get that it's necessary for manufacturers
to get to this economy to get to the country,
(20:58):
But it does not matter how it gets to US
as long as it does.
Speaker 1 (21:03):
So I mean, so does that mean it's not like
the US has to have an end to end domestic
economy where you go from rare earth in the ground
to whatever the finished product is. We just need to
have reliably good relationships with a set of countries where
all those things happen. Like is the short version. All
those things need to be able to happen without China.
Speaker 2 (21:24):
All those things need to be able to happen with
the reliable system. Let me take the oil market. Now, yes,
we don't need to produce all of the oil for
the US economy, but what we need to do is
to produce enough so that we're not reliant or beholden
on one country to squeeze the market. And that's the
(21:45):
same with most commodities. You don't have to be to
be able to produce everything that you need. You just
have to be able to make sure that the economy
can get what it needs. And so Japan's in a
situation where they're never going to be able to mine
themselves to self sufficiency because they don't have the resources.
So they have to work with other partners and that works,
(22:09):
But reliant on yourself is an expensive proposition. What we
haven't talked about, and I think what is There's this
preconceived notion is that, oh, if we produce it in
the US, then it's going to be cost competitive. And
the answer to that is no, it's not going to
be cost competitive. So we're our situation right now is
we're trying to make rare earth in this country that
(22:34):
are going to be more expensive than what can come
out of China.
Speaker 1 (22:41):
We'll be back in just a minute. Hey, it's Jacob
and I want to tell you that I am hosting
a new show called Business History. It's about the incredible
innovations and massive failures and unbelievable characters in the history
(23:01):
of business, and I hope I think the show provides
insights about how business works today. At the end of
today's episode of What's Your Problem, we're going to play
you a clip from Business History. It's the story behind
the video game company Atari and they're surprising early hire
of a young hippie named Steve Jobs. The show's called
Business History. You can listen to it wherever you're listening
(23:23):
right now, and we'll play that clip at the end
of today's episode. What is the key choke point? Is
it magnets? Like what percent of the of the these
kind of special magnets are produced in China? Now?
Speaker 2 (23:38):
The challenge, so you've got more than eighty ninety percent,
So the challenge is is not like this is a
one this is one magnet. Yeah, it's that there's such
a diversity of magnets and to be able to meet
the spec of individual.
Speaker 3 (23:56):
Producers is the real challenge.
Speaker 2 (23:59):
And so that you can produce the US could need
two thousand times, they could produce three thousand times, and
it's still not meet the needs right because you're not
producing at the right spec the right consistency. So it's
not that's the real issue, because you don't want that
missile to fail because the magnet got too hot and
(24:25):
it was and all of a sudden, the missile is
not going to its attendant target. That's the challenge.
Speaker 1 (24:30):
And you've also talked about the human capital piece, the
sort of education knowledge industrial knowledge piece. It seems like
that is one where China is in good shape and
the US is in bad shape.
Speaker 3 (24:43):
Frankly, so, when.
Speaker 2 (24:46):
I was in some small cities in China, you know,
three hundred thousand, a million, there would be these conferences
discussing rare earths. And I would go into an event,
and I was there. There are a few foreigners and
then a thousand, fifteen hundred people in the industry, academics,
(25:07):
industry officials, people who worked in the companies, and they're
toiling in rare earths every day. Some are refining, some
are producing, they're figuring out how to commercialize products. Back
in twenty thirteen, we could not have a conference of
that size. There would be ten fifteen people there. Max
(25:28):
there weren't. There wasn't the industry there.
Speaker 1 (25:31):
I mean, even on a more general level, you've compared
the number of universities in China focused on mining and
refining with the number even of students in the US
studying it.
Speaker 2 (25:45):
Right, they're just a handful of people, a handful of
universities in the US studying and they're just starting up,
many of them. I mean, we just don't have you
didn't have the interest in mining, and you didn't have
the studies because we stopped. It's something we stopped doing
twenty years ago. So I've been a missing generation. And
(26:05):
in China that's when they just started. And so you
when you don't have the industry, you lose the capacity
to innovate because you just have to get to the
basics right. And we might have some We definitely have
some incredibly smart people who are learning, but it's all
of a sudden taking you know, amazing basketball players and saying, hey,
(26:29):
you know what, it's time to play cricket. There's going
to be some learning that has to get done and
that's going to take time.
Speaker 1 (26:36):
So setting aside what you think we should do, like
not the normative, Like what do you think is going
to happen in the US and in the you know,
world beyond China, what do you think it's going to
look like? And I don't know what five years, ten years.
With respect to rare earths.
Speaker 2 (26:53):
The question is is what gets rolled? You know, what
are a country is going to be able to do
or are they going to be able to focus on and
what are they willing to do? Yeah, because the US
it seems to have you know, four different options that
are things that it could do.
Speaker 3 (27:09):
We continue doing what we're doing.
Speaker 2 (27:11):
We pick a few national champions, just like Japan realized
back in twenty ten twenty eleven, we realized, Wow, this
is really hard. We're not going to solve the problem.
We still rely on China. Number Two, there's a big
deal with China. All of a sudden, just like the
nineteen eighties when we allowed Japan and Korea to come
(27:31):
over with car manufacturers, we say, hey, we're never going
to catch up with China, and China can invest in
our country and let's do some big, happy day deal
with China. Number Three, we get serious and realize that
we need to focus on an entire supply line, that
we need to focus on creating an ev market, that
(27:52):
we need to start to create demand, and we realize
that it's going to take five or ten years for
us to be able to start competing more regularly with
the current level of China. Or four, we spend ridiculous
amounts of money, billions and billions of dollars. Yeah, without
a strategy that will enable us to declare victory because
(28:18):
we're spending on production of materials that will be stockpiled,
that will be warehoused, that won't have a market because
we focus so much on producing these minerals. But we're
not Our defense system isn't stronger, our industrial base is smaller.
Speaker 1 (28:38):
So clearly, from the way you frame those options, you
think option three is what the US should do. Right,
don't start by thinking about rare earths, but start with
what we want to produce in this country. And you
say that that's eves electric vehicles, And I'm curious, why,
why is it that you think we should build our
rare earth strategy around electric vehicles.
Speaker 2 (29:02):
I'd argue it's the key to most of our industrial
strength in the future. Is it's because it's the largest
consumer of battery materials, it's the largest consumer of magnet materials.
So we want a great robotics industry. We need a
(29:23):
dynamic battery industry, we need a dynamic magnet industry. We
want to have drones great same thing. So if you
don't have the base industry, then you're undermining all the
other industries or you're making them reliant on innovation in
countries that you can trade with. And that is why
(29:46):
evs are so critical, and you can say you can say,
all right, well we need them to because they are
a green.
Speaker 3 (29:56):
Product and we need to save the planet. Great.
Speaker 2 (30:01):
I think there's a reasonable argument to put it mildly there,
But I would argue that we need a strong defense.
You want to have a strong robotics industry, you need evs,
otherwise you're creating niche industries. It's the same thing we
complain about Department of Defense banking ten thousand dollars for
a screw. They need a specialty screw. So what we
(30:23):
need to do is make these materials, make the batteries,
make the magnets, tournament the commodities so that they're coming
out and they're produced at a cheap rate within this country.
Speaker 3 (30:33):
So we've got a dynamic system.
Speaker 1 (30:35):
Do you think that's going to happen?
Speaker 3 (30:39):
I would like that to happen.
Speaker 1 (30:41):
Doesn't feel likely to me.
Speaker 2 (30:43):
I feel there's an overrating sense in that American ingenuity
can turn around and produce materials that we can all
of a sudden jump ahead, as if country that all
of a sudden decided not to put in landlines and
when to a fully mobile back in twenty ten, They're like, oh, well,
we can just jump ahead.
Speaker 3 (31:02):
We don't need to invest in all of those.
Speaker 2 (31:05):
All those was wasteful phone lines. It this is hard science.
Speaker 3 (31:12):
This is where you're you're you're you're.
Speaker 2 (31:14):
Mixing acids and heats, and we need to focus on
building those people so that we can have more breakthroughs
because China is not sitting back. This is something that's
constantly innovating and China, Japan, all of these countries are
figuring out how can we make a better product, and
we're we don't have that fighting force in the material
(31:36):
world that we once have.
Speaker 1 (31:42):
We'll be back in a minute with the Lightning Ground.
We are going to finish with the Lightning Ground. I
want to talk to you about your other job besides
(32:03):
the rare Earth experts. You run a company called Outposts.
You were the founder and CEO of Outpost, which.
Speaker 3 (32:12):
Is my way for founder and CEO.
Speaker 2 (32:14):
Back in twenty fifteen, when the book was coming out,
I was living in Bali.
Speaker 3 (32:18):
And seeing that people were starting to work remotely.
Speaker 2 (32:21):
So my partner and I set up a network of
properties that allowed people to work remotely. It was the
dawn of the digital nomad Era and that was our focus.
Speaker 1 (32:33):
Are you still do you still run that company?
Speaker 2 (32:36):
I still run that company on a day to day
not like I did.
Speaker 1 (32:41):
So is it right? There's two places in Bali and
one in Sri Lanka that the company owns runs correct.
Speaker 3 (32:50):
Those are our brand and properties. Correct.
Speaker 1 (32:53):
And like people typically from Europe in the US who
are traveling around the world working on their laptops, pay
to live and work there is that basically the idea.
Speaker 2 (33:03):
Well, when we started in twenty fifteen, people were coders, marketers,
people who could be away from others, people who have
their own businesses. And then what we've seen since since
COVID is a more professional set. So it could be
anyone who's who's working remotely. You never know where someone
is behind their screen. And so we've seen this this
(33:25):
this change and what used to be dominated by the
US the UK, all of a sudden, more people started
to travel. You saw people from Mexico, Brazil, Russia, you know,
elsewhere starting to fill up the spaces. And so what
we've seen is a general trend that's changed.
Speaker 1 (33:46):
And so just very basically what is the business Just
so just so it's clear.
Speaker 2 (33:50):
We provide spaces for people to live, work and connect
with others, and the places they go.
Speaker 3 (33:56):
Companies call outpost.
Speaker 1 (33:58):
And what do what do people not understand about life
as a digital nomad.
Speaker 2 (34:05):
That when you can have everything that you think you want,
you can have cheap food, you can meet people all
the time, there's always something stimulating about being in a
foreign country. That alone isn't going to give you the
direction you need for your life. It's not going to
make you continuously happy. It's the connections that you get
(34:26):
along the way and being able to be able to
build something that you're proud of, whether they're friendships or
family relationships or businesses. It's the impact you have on others,
not the freedom and the self improvement that you have
by being outside of your own culture.
Speaker 1 (34:45):
So you're saying being a digital nomad is not as
fun as it looks on Instagram.
Speaker 2 (34:50):
It is as fun as it looks on Instagram, and
in some cases more fun. But a lifestyle where you're
uninhibited and you're not building, and you're just soaking up
services over time, there's less meaning there. So it's a
great way to spend time. Don't get me wrong saying, hey,
don't spend the lifestyle. But if you're spending three four
(35:13):
years and you're not building along the way, then you've
kind of looked back and you and your pause. But
for periods of time, it's a wonderful experience. You can
get out of your shell. You can be challenged by
things that you didn't you know, by the by the language,
by the food, by the situations that you would find
yourself in that you wouldn't be in your own country.
(35:35):
And it gives you a chance to reflect on some
of the certitudes that you There are certain things that
you believed or core beliefs because you lived a certain
way that you.
Speaker 3 (35:44):
Wouldn't be challenged until you're in a different country.
Speaker 2 (35:46):
And so as someone who's lived overseas for a long,
long period of time, and that's what I love about that.
Speaker 1 (35:52):
Yeah, although I mean, I guess it depends. It seems
like if you go and live somewhere with a bunch
of other digital nomads, there is less of that than
if you're like going and staying with the family of
you know, people who live there are just going and
living in an apartment and hanging out with people who
live there. Right, It's seems like living in a Digital
Nomad House would reduce the foreignness of the situation.
Speaker 3 (36:18):
It does, It does. There's what I would say is.
Speaker 2 (36:21):
That you want to be able to mix them both
because you need that system and that routine, and especially
when you're in a foreign country, everything is new, so
you're going to forget your nine to five and when
you're having a job, you have.
Speaker 3 (36:35):
To continue that routine.
Speaker 2 (36:37):
So the spaces that we offer give that routine to
people and that consistency and that they're meeting other people
so they feel comfortable where they are. And then from there,
my hope is that people branch out and start to
really get absorbed because there's too much and increasingly too
much similarities. And everywhere we go you can get your
(36:58):
Starbucks and you start to see the culture of the US,
whether it's tipping.
Speaker 3 (37:04):
Or the service culture. It starts to spread out.
Speaker 2 (37:08):
And when we you're using the same online travel agents,
so you have the same experiences in other places and
you think everything is the same. You really have to
break out and start meeting people, start learning a language,
start going outside the realm, and I think that's when
you start to get rewarded.
Speaker 1 (37:26):
Thank you for your time.
Speaker 3 (37:28):
I appreciate it, thank you very much.
Speaker 1 (37:37):
David Abraham is the author of the book The Elements
of Power. It's also the founder and CEO of Outpost.
Today's show was produced by Gabriel Hunter Cheng. It was
edited by Lyddy Jean Kott and engineered by Sarah Brungeer.
You can email us at Problem at Pushkin dot FM.
I'm Jacob Goldstein and we'll be back next week with
(37:58):
another episode of What's Your Problem. I'm Jacob Goldstein, and
right now we're going to a clip of a new
show that I co host. The show's called Business History.
My co host is Robert Smith, and this clip is
from an episode we did about how Nolan Bushnell, a
(38:20):
stoner turned entrepreneur, created the video game company Atari and
hired a young, inexperienced Steve Jobs. I really hope you
like the clip, and if you want to hear more,
you can find Business History wherever you're listening to this
show right now, this like nineteen year old hippie kid
walks in and he says he won't leave until they
(38:42):
give him a job, and the receptionist calls the head
engineer and she goes, yeah, we got a hippie kid.
In the lobby says he won't leave until we hire him.
Should we call the cops or let him in? And
the engineer says.
Speaker 3 (38:54):
Bring him on in.
Speaker 4 (38:55):
It's nineteen seventy's a Silicon valley, and this guy wanders
in and he is whenever you tell a story like this,
you know who it is.
Speaker 1 (39:02):
It's Steve Jobs. It's Steve Job. So fun, it's so
delightful and perfectly. Steve Jobs is very good at his job, yes,
and very unpleasant to wrqu On. Surprising. He tells Bushnell
that like everybody's soldering wrong, right, they're actually putting together
the hardware, sladering the hardware. He's probably right, and bush
Nell's like, yeah, he was right. He keeps calling his
(39:24):
manager a dumb shit. Probably was not kind, not necessary.
Bushell winds up putting Jobs on the night shift, partly
so he won't bother so many people, and partly because
he knew that Jobs like to hang out at night
with his buddy Steve Wozniak, who was a great engineer,
would be great to have hanging around atari And in fact,
(39:45):
Jobs and Wozniak helped to make Breakout a great a target.
Remember breaking Out of.
Speaker 4 (39:50):
Course you're trying to knock down the bricks in a wall.
Speaker 1 (39:53):
Still games like that, you got a little paddle at
the bottom end. There's a moment when it goes through
the wall and then goes so good. So Jobs worked
at Atari for a little while and then decided he
wanted to go off to India to find his guru.
Perfect asked Atari to pay for the trip. Nobody ever
said he lacked moxie and wound up making a deal
(40:14):
with Atari where they pay him to go part of
the way there. They had exported some games to Germany
and there was some kind of problem with the games
in Germany, and they're like, we'll send you to Germany
to fix the games and then you can get the
rest of the way to India. And you know, the
Germans said Jobs was terrible to work with, but he
fixed the games. I was thinking about like the link
between Atarian Jobs and what did he learn there, and
(40:35):
it felt like maybe a little overdetermined, but I do think,
you know, clearly he had this profound sense of aesthetics
and of delight, right, like think of the Macintosh, right,
this breakthrough Apple machine in the eighties. It was round
and instead of squares. It was rounded, and it cost
them more money, but it was beautiful and it was
fun and you were engaged with it like a game.
Speaker 4 (40:56):
It almost looked a little bit like an arcade game
with the curves. Yeah, but more than that, I think
that especially at Silicon Valley at the time when they
were dealing in actual silicon Right, if you're making chips
for somebody, you're thinking about the future and the computers.
You're not thinking about the psychology of the customer, because
the customer was another electronics company, right, And so Atari
and the strength of it was really the first time
(41:18):
where they're just like, how will a regular human being
who has no training whatsoever interact with technology?
Speaker 1 (41:25):
Yeah? So Atari now mid seventies, they're selling all the
machines they can make. They need more space, and so
they rent an abandoned roller rink and they turn it
into this office slash video game factory. I've been ten
years older.
Speaker 4 (41:42):
I would have loved to have worked in a roller
rink video game factory.
Speaker 1 (41:45):
Yes, everybody smoked weed. Yeah, there was a hot tub.
There was a pool party where everybody ended up naked
in the pool at Bushnell himself looked back on it
later and said if that isn't a horror show for
any HR person today, I don't know what is
Pushkin. Today's show is about rare earth elements, which suddenly
in the past year or so have become very big news.
Rare earths have in fact been a big deal for
decades because you need small amounts of various rare earth
elements for basically anything with an on off switch for laptops, phones,
(00:40):
electric vehicles, drones, missiles. I don't actually know if missiles
have an on off switch, but you do need rare
earth for missiles. And we suddenly started to hear more
about rare earth's last April because the day after President
Trump announced new high tariffs on China, China said, okay, fast,
(01:01):
the way it's going to be, We're gonna make it
very hard for you to buy stuff made with rare earths.
And China can do that because they have choke hold
on the global supply of the essential components made with
rare earths, the magnets and other things that go into
our cars and iPhones and missiles. This raises some very
important questions like how did China get a choke hold
(01:24):
on rare earths, and more urgently, what's the US gonna
do about it? I'm Jacob Goldstein and this is what's
your problem? My guest today is David Abraham. He's the
(01:46):
author of the book The Elements of Power, Gadgets, Guns,
and the Struggle for a Sustainable Future in the Rare
Metal Age. David started out as a commodities trader back
in the aughts, and then he went to Asia to
do research and got interested in rare earth's back in
twenty ten. The fundamental problem David is addressing is this,
(02:08):
what should the US do about China's chokehold on the
rare earth supply chain. As you'll hear, he thinks the
current US strategy could wind up costing billions of dollars
without solving the problem, and he has a big idea
for what we should do instead. Before we get to
the interview, I should say the thing people always say
(02:29):
about rare earth elements. They're not actually that rare in
the sense that they're found in many parts of the world.
There are seventeen rare earth elements, and the reason they're
called rare earths is that they're found in very small
amounts mixed in with other elements. So it takes a
lot of work and a lot to know how to
mine and refine them. If you go back in history,
(02:52):
you see that the US dominated production of rare earth
through the nineteen seventies. After that things started to shift
to China to start. I asked David how that happened.
Speaker 2 (03:04):
So they start producing these materials because they needed hardcore.
See it was the nineteen eighties or early nineteen nineties.
They were able to mine this stuff up and send
it out and at the time they're making Christmas lights
and T shirts. They're not thinking about larger developed products.
Speaker 3 (03:24):
If you will.
Speaker 2 (03:25):
But they slowly start to realize as their ambitions start
to increase that they want to be able to make cars,
and they see these materials as really critical to the
manufacturer of these products. So what they start to do
over time is start to develop those industries. Because in
the West, people don't want to dig up. They don't
(03:46):
want to dig up earth. No one wants to mind
in their backyard. People don't want processing, and for most part,
people who graduate college or high school want to be
going into more comfortable jobs. And so the Chinese raise
their hand and basically say, hey, listen, we'll do this work.
We need the money, and we're starting to see that
these materials are critical to the products that we want
(04:06):
to make in the future. So over success of five
year plans, which is how Beijing looks at its economy
and how it wants to go forward, it starts to
figure out that they want to develop these materials at
the heart of a high tech society that is slowly
starting to go from military to green technologies to high technologies,
(04:29):
and they want to make everything within their country.
Speaker 3 (04:32):
So it was a.
Speaker 2 (04:33):
Slow process, and it wasn't something that China woke up
and was secretly doing. These plans were out there for
the world to see, and it was fine when people
were thinking, Okay, well I just got my iPhone, I
don't really have to worry about things. They didn't think
about where the material was because people were thinking just
like it's a grape or wheat, as long as the
(04:55):
market can supply it, then we're fine. It wasn't until
people started to wake up and realize, wow, these materials
are very important to the world that we really have
to understand where the supplies are coming from.
Speaker 3 (05:09):
So it seems to be a more of a wake
up call. Now.
Speaker 1 (05:11):
I mean, you said something interesting there, like the market
will supply it, right, which was the basic worldview of
most people, most elites, say in the US certainly at
the end of the twentieth and the beginning of the
twenty first centuries, right, like a belief in trade and
(05:32):
in markets, and in many ways it was justified. I know,
it's an unpopular view now largely or at least less
popular than it was. But it did work pretty well
in many ways, right Like we did get more and
more stuff, the world was getting more efficient, manufactured goods
did get cheaper and better. So in many ways it
(05:52):
did work. And China over that time, through the twentieth
century into the twenty first century went up the value chain,
right as you say, they started out just mining and
sending the raw minerals out, and then they started refining.
Right then they started manufacturing the basic components. And now
we're to the point where clearly they are making the
(06:13):
best electric vehicles, say, and the only reason we don't
have them here is because of tariffs, right, because we've
kind of moved away from the free trade beliefs that
we had. So, as you say, there was this wake
up call that you mentioned, and there's this very clear
moment when that happened. Right, it's not some gradual thing.
It's in twenty ten, and there was this territorial dispute
(06:36):
between China and Japan over some islands that kind of
classic territorial dispute. These are our islands, know, these are
our islands. And the upshot for our story is that
China stops sending what rare earth's basically to Japan. And
as it happens, you happen to be in Japan working
(06:58):
at that moment. So what was the effect of that
on the Japanese market and what was it like for
you as an observer.
Speaker 3 (07:06):
I was based in.
Speaker 2 (07:06):
Their Ministry of Economy, Trade and Industry, so I was
one of two foreigners, the other being a translator, and
so it was a fascinating experience to be there because
Japan relied on these materials. They had this just in
time manufacturing that the materials just had to arrive. Japan
has refined them in ways at that time China could
not do upgrade them, put them into an optical drive
(07:29):
that they would send back to China to put into
a computer. And so what happened was Japan's manufacturing lines stopped,
slowed down, and Japan was woken up to wow, we
have a reliance on China for materials, and China may
not be a strong supply huh.
Speaker 1 (07:50):
So suddenly Japan is like, oh, all these things that
we make cars, speakers, you know, components, high end components
that go into electronics that are ultimately assembled elsewhere. All
of a sudden, we can't make those things now because
China stopped sending us rare earths.
Speaker 2 (08:07):
And these are such small things, their value is so
low you wouldn't think much about it. It's just like
yeast did for bread. If you don't have yeast, then
you can't make bread. And so these materials didn't have
a lot of value. Japan didn't think much about the
supply lines, and then lo and behold, they're stuck. And
so what happened really over the month the two months,
(08:30):
is that China started seeing that, hey, they're not getting
their equipment from Japan to be able to make their computers.
And so really the fact that one country makes these
and has, as some people say, a choke hoal, is
it challenge for those who are depending But there are
some reciprocal relationships.
Speaker 1 (08:51):
Yeah, I mean that's in a way part of the
happy story of trade, right is it is an interdependent relationship, right,
and China's like, oh, we're not sending the rarest to Japan. Now,
Japan's not sending the components to us that we need
to put into the finished product that we're going to export.
So their leverage is limited perhaps in that way.
Speaker 2 (09:10):
Exactly, And that was the case in twenty ten. Now
what's happened over time is that China has gotten really
good at everything, so that they're making cars that Ford
is saying is far stronger than the cars that we
can make. So when you have a country that can
(09:31):
produce end to end within its borders, that set of
interdependencies where you have leverage becomes less so and so
over those fifteen years from twenty ten when we were,
you know, talking about Japan, China's ability to produce in
(09:51):
areas that used to be Japan's strengths has now increased,
and they're less reliant externally.
Speaker 1 (09:58):
And so therefore they can use rare earths more effectively
as a choke point as a piece of leverage in
their negotiations with certainly the US.
Speaker 2 (10:10):
They're more formidable partner than previously for sure.
Speaker 1 (10:15):
So you're in Japan and twenty ten you see this
and is that what makes you decide to write this book?
Like you were early, you were into rearsts before it
was cool.
Speaker 3 (10:28):
I was in twenty ten.
Speaker 2 (10:30):
I had, you know, my career before that, I been
in commodity trading, which is mostly oil, gas, coal, big
ticket items. And then I had worked in the US
government and working on international trade issues, and so everything
kind of came together while I was in Japan, and
I was fascinated that the economy of one country, or
(10:53):
at least certain supply lines, could shut down because of
materials that people never heard anything about.
Speaker 3 (11:00):
So I wanted to understand, is.
Speaker 2 (11:03):
The world is becoming more reliant on a green technologies
and everyone starts to have a smartphone in their hands,
reminding you back in twenty ten, not everyone had them
and their technology you couldn't make now skype calls or
video calls around the world, and so technology was going
(11:24):
was spreading around, And the question is what happened when
we become a high tech in green society. We're going
to be dependent on materials that people have not thought
much about, almost like the switch to internal combustion engines,
reliant on oil and gas. And if we don't get
the systems. Right, we're going to be in a situation
where one country can really dictate because they're focused on
(11:48):
the material supply. And lo and behold, the moment that
I had anticipated when I started writing about these papers
in twenty eleven twenty twelve has now arrived. And so
we're stock thinking about, oh, no, how do we supply
these materials? And in many cases we're already behind and
we have to think differently than where are these material goes?
Speaker 1 (12:11):
So you write this book in twenty fifteen, not that
much happens in the world.
Speaker 3 (12:19):
Right.
Speaker 1 (12:20):
I hope it was well received and people told you
they liked it or whatever, But it's not like everybody
in Congress is like, oh my god, we got to
deal with this. Right. The sort of status quote seems
to persist for a decade after you write the book.
It seems like really until last year, until twenty twenty five.
Speaker 3 (12:37):
Right.
Speaker 1 (12:38):
There is again, as in twenty ten, there's this very
specific moment, and that comes in April when President Trump
announces these very high tariffs on China, and was it.
The next day China's like, okay, if you're going to
do that, we're not going to let you buy rare
earth or the stuff made with rare earth? Is that
about what happened? And then we're like, oh my god,
that's very that's a very good comeback China.
Speaker 2 (13:02):
That's what's happening at the high visible level. Yeah, I
think you had something back in twenty twenty that got
people more interested and where the stuff come from, and
that's COVID And so at that time people were concerned
about masks. And then people were realizing it takes a
while to get material or things to the United States,
(13:25):
and if there is a challenge, then what do we do?
Speaker 3 (13:28):
And there was a boat stuck in a canal.
Speaker 1 (13:30):
At one point, people talked more generally about just in
time delivery and lean manufacturing. Right, this idea that you're
so optimized you don't have any inventory on hand, that
that can be more costly than it appears when there's
any kind of disruption. Right, So people started thinking differently,
perhaps about about supply chains at that time.
Speaker 2 (13:51):
And so there was there was started to be some
smarter people who were connecting the dots. So back in
if I go back to twenty eighteen Congress, I was
invited to speak in Congress three times on this subject.
On a wide variety of minerals. There just weren't people
focused in that. But starting in twenty twenty, that's when
(14:12):
there were smart people starting to get involved in some way,
identifying this as a challenge. And at that time I
had been in the space for ten years and talking
about it, and I was like, I was wondering what was.
Speaker 3 (14:24):
Where it was going to go.
Speaker 2 (14:26):
But though some of those initiatives started to bear fruit,
there are a number of you know, smart people who've
been in the space since that time, and so there
were starting to be questions asked, you know, where are
we getting our critical minerals?
Speaker 3 (14:39):
Where are where it is coming from?
Speaker 2 (14:41):
And you're right that the real public display of oh
no rare earth was when we started a trade war
that we may have not fully appreciated the ramifications and
the connections that we might have sparked.
Speaker 1 (15:02):
So what was it like for you that there was
just one day last April when China said they were
going to limit our access to rare earths and things
made with rare earths in retaliation for the high tariffs
that President Trump had suggested, Like, what was your day
like that day?
Speaker 2 (15:22):
My first thought was, this is not good. Yes, and
that there becomes this confidence that we have in the
US that we can do things fast. And my concern was,
we're going to have this confidence that we can do
things fast in this space.
Speaker 3 (15:41):
And my day was.
Speaker 2 (15:43):
Trying to explain to people what these materials were and
why they were important, because I don't think people fully
understand that, and I don't think people fully understand that.
Speaker 3 (15:55):
Today that.
Speaker 2 (15:58):
What we are good at is the development of technology,
the development of AI. What we are not good at
is the fastening of mineral to metals or powarders and
then turning that into a product.
Speaker 1 (16:15):
I was reading your book, I thought of what does
it say on the back of the iPhone? Is it
designed in California? Made in China?
Speaker 3 (16:24):
Yeah.
Speaker 2 (16:24):
What's fascinated about Apple right now is there a lot
of companies that in the US are in production and
they're concerned about supplies of.
Speaker 3 (16:32):
Rare earth.
Speaker 2 (16:33):
Apple faces no such restrictions because they're producing in China.
So there's what we have understand is that there's In
twenty eleven, if we flashed back when Japan didn't have
access to rare earth, two things happened. One people in
Japan said, how do we make products without these rare earths,
(16:54):
which makes sense, but counterintuitively, a lot of Japanese companies
went into China because they said, we got to be
where the materials are.
Speaker 3 (17:02):
Right.
Speaker 1 (17:03):
If there's an export restriction, one way of getting around
it is move the factory to the country where the
stuff is to begin with. Right.
Speaker 2 (17:11):
So that I mean, that's a complete solution that we have.
We can bank our economy that China will continue to
export products to us that we can label as you know,
apple or whatever, but we're totally reliant on them for
the production.
Speaker 1 (17:28):
So what is the state of play now with respect
to China and the US and rare earths.
Speaker 2 (17:35):
So China has over the past year put on a
number of restrictions. They put on some licensing restrictions, and
then the government later in the year basically said, hey, we're.
Speaker 3 (17:49):
Going to start to ask for.
Speaker 2 (17:52):
An application for any rare earth that is mined in
our country or is using our technology. And what we've
noticed is there are two things. One is it's important
to separate the material in the products. So the material
is a rare earth powder. The product is a magnet
that goes into a motor. And what we've seen is
that China has allowed the export of magnets, which goes
(18:16):
into motors, but has been less willing to export the materials.
And that's important because what the administration elsewhere wants to
do is to develop the industries that rely on the materials,
and those aren't coming out.
Speaker 1 (18:31):
The strategy from China's point of view is, yes, you
can buy the magnets that you need, but you cannot
buy the raw materials. And the reason they are doing
that is because they don't want us to develop the
industry to build the magnets. They want to keep a
lock on that. Is that the inference they.
Speaker 2 (18:49):
Have said from twenty ten since when I'm in this space,
we want to use Chinese resources for Chinese products. Why
should we go through the environmental challenges? Why do we
have to do anything just to export that so another
country can benefit.
Speaker 1 (19:05):
Yeah, I mean that's the classic kind of mercantilist thing, right,
like why should we cut down trees in New England
just to send them to England to be made into ships? Right?
Speaker 2 (19:16):
Yes, So it's an argument that's been used from the US,
from the natural gas industries through through lumber.
Speaker 3 (19:23):
It's it's not uncommon.
Speaker 1 (19:25):
Yeah, and just to be clear, this this dispute and
what China has done with rarest over the past year, like,
has it had a clear effect on for manufacturers? I
mean in military domains elsewhere is there stuff that is
not being made now or that is more expensive now,
or that is performing worse now because of this trade
(19:46):
dispute and China's kind of use of rare earths.
Speaker 3 (19:49):
People are scrambling for material.
Speaker 2 (19:50):
They're paying higher prices for material, so they don't Yes,
there are supply lines that get slowed down. It's not
like companies really want to come come out and say, hey,
you know we're not going to make X, Y or
Z because of we're not able to get the material
necessarily want to, but you do hear leaders of automobile
(20:14):
manufacturers saying, hey, we're not being able to produce. And
it's not just here India, Japan. There are a number
of places where the material is not getting out. And
so what the challenge is is we don't fully appreciate
is that that material that we need in the US
is turned into a magna that's then sent to the US.
(20:36):
We don't always get the raw material. So whether the
US is restricted or Japan is restricted, our supply lines
are impacted, and so there's too much of a focus.
What I feel is like, oh, well, the US has
to do X, Y or Z. The US has to
make sure material can get that it's necessary for manufacturers
to get to this economy to get to the country,
(20:58):
But it does not matter how it gets to US
as long as it does.
Speaker 1 (21:03):
So I mean, so does that mean it's not like
the US has to have an end to end domestic
economy where you go from rare earth in the ground
to whatever the finished product is. We just need to
have reliably good relationships with a set of countries where
all those things happen. Like is the short version. All
those things need to be able to happen without China.
Speaker 2 (21:24):
All those things need to be able to happen with
the reliable system. Let me take the oil market. Now, yes,
we don't need to produce all of the oil for
the US economy, but what we need to do is
to produce enough so that we're not reliant or beholden
on one country to squeeze the market. And that's the
(21:45):
same with most commodities. You don't have to be to
be able to produce everything that you need. You just
have to be able to make sure that the economy
can get what it needs. And so Japan's in a
situation where they're never going to be able to mine
themselves to self sufficiency because they don't have the resources.
So they have to work with other partners and that works,
(22:09):
But reliant on yourself is an expensive proposition. What we
haven't talked about, and I think what is There's this
preconceived notion is that, oh, if we produce it in
the US, then it's going to be cost competitive. And
the answer to that is no, it's not going to
be cost competitive. So we're our situation right now is
we're trying to make rare earth in this country that
(22:34):
are going to be more expensive than what can come
out of China.
Speaker 1 (22:41):
We'll be back in just a minute. Hey, it's Jacob
and I want to tell you that I am hosting
a new show called Business History. It's about the incredible
innovations and massive failures and unbelievable characters in the history
(23:01):
of business, and I hope I think the show provides
insights about how business works today. At the end of
today's episode of What's Your Problem, we're going to play
you a clip from Business History. It's the story behind
the video game company Atari and they're surprising early hire
of a young hippie named Steve Jobs. The show's called
Business History. You can listen to it wherever you're listening
(23:23):
right now, and we'll play that clip at the end
of today's episode. What is the key choke point? Is
it magnets? Like what percent of the of the these
kind of special magnets are produced in China? Now?
Speaker 2 (23:38):
The challenge, so you've got more than eighty ninety percent,
So the challenge is is not like this is a
one this is one magnet. Yeah, it's that there's such
a diversity of magnets and to be able to meet
the spec of individual.
Speaker 3 (23:56):
Producers is the real challenge.
Speaker 2 (23:59):
And so that you can produce the US could need
two thousand times, they could produce three thousand times, and
it's still not meet the needs right because you're not
producing at the right spec the right consistency. So it's
not that's the real issue, because you don't want that
missile to fail because the magnet got too hot and
(24:25):
it was and all of a sudden, the missile is
not going to its attendant target. That's the challenge.
Speaker 1 (24:30):
And you've also talked about the human capital piece, the
sort of education knowledge industrial knowledge piece. It seems like
that is one where China is in good shape and
the US is in bad shape.
Speaker 3 (24:43):
Frankly, so, when.
Speaker 2 (24:46):
I was in some small cities in China, you know,
three hundred thousand, a million, there would be these conferences
discussing rare earths. And I would go into an event,
and I was there. There are a few foreigners and
then a thousand, fifteen hundred people in the industry, academics,
(25:07):
industry officials, people who worked in the companies, and they're
toiling in rare earths every day. Some are refining, some
are producing, they're figuring out how to commercialize products. Back
in twenty thirteen, we could not have a conference of
that size. There would be ten fifteen people there. Max
(25:28):
there weren't. There wasn't the industry there.
Speaker 1 (25:31):
I mean, even on a more general level, you've compared
the number of universities in China focused on mining and
refining with the number even of students in the US
studying it.
Speaker 2 (25:45):
Right, they're just a handful of people, a handful of
universities in the US studying and they're just starting up,
many of them. I mean, we just don't have you
didn't have the interest in mining, and you didn't have
the studies because we stopped. It's something we stopped doing
twenty years ago. So I've been a missing generation. And
(26:05):
in China that's when they just started. And so you
when you don't have the industry, you lose the capacity
to innovate because you just have to get to the
basics right. And we might have some We definitely have
some incredibly smart people who are learning, but it's all
of a sudden taking you know, amazing basketball players and saying, hey,
(26:29):
you know what, it's time to play cricket. There's going
to be some learning that has to get done and
that's going to take time.
Speaker 1 (26:36):
So setting aside what you think we should do, like
not the normative, Like what do you think is going
to happen in the US and in the you know,
world beyond China, what do you think it's going to
look like? And I don't know what five years, ten years.
With respect to rare earths.
Speaker 2 (26:53):
The question is is what gets rolled? You know, what
are a country is going to be able to do
or are they going to be able to focus on and
what are they willing to do? Yeah, because the US
it seems to have you know, four different options that
are things that it could do.
Speaker 3 (27:09):
We continue doing what we're doing.
Speaker 2 (27:11):
We pick a few national champions, just like Japan realized
back in twenty ten twenty eleven, we realized, Wow, this
is really hard. We're not going to solve the problem.
We still rely on China. Number Two, there's a big
deal with China. All of a sudden, just like the
nineteen eighties when we allowed Japan and Korea to come
(27:31):
over with car manufacturers, we say, hey, we're never going
to catch up with China, and China can invest in
our country and let's do some big, happy day deal
with China. Number Three, we get serious and realize that
we need to focus on an entire supply line, that
we need to focus on creating an ev market, that
(27:52):
we need to start to create demand, and we realize
that it's going to take five or ten years for
us to be able to start competing more regularly with
the current level of China. Or four, we spend ridiculous
amounts of money, billions and billions of dollars. Yeah, without
a strategy that will enable us to declare victory because
(28:18):
we're spending on production of materials that will be stockpiled,
that will be warehoused, that won't have a market because
we focus so much on producing these minerals. But we're
not Our defense system isn't stronger, our industrial base is smaller.
Speaker 1 (28:38):
So clearly, from the way you frame those options, you
think option three is what the US should do. Right,
don't start by thinking about rare earths, but start with
what we want to produce in this country. And you
say that that's eves electric vehicles, And I'm curious, why,
why is it that you think we should build our
rare earth strategy around electric vehicles.
Speaker 2 (29:02):
I'd argue it's the key to most of our industrial
strength in the future. Is it's because it's the largest
consumer of battery materials, it's the largest consumer of magnet materials.
So we want a great robotics industry. We need a
(29:23):
dynamic battery industry, we need a dynamic magnet industry. We
want to have drones great same thing. So if you
don't have the base industry, then you're undermining all the
other industries or you're making them reliant on innovation in
countries that you can trade with. And that is why
(29:46):
evs are so critical, and you can say you can say,
all right, well we need them to because they are
a green.
Speaker 3 (29:56):
Product and we need to save the planet. Great.
Speaker 2 (30:01):
I think there's a reasonable argument to put it mildly there,
But I would argue that we need a strong defense.
You want to have a strong robotics industry, you need evs,
otherwise you're creating niche industries. It's the same thing we
complain about Department of Defense banking ten thousand dollars for
a screw. They need a specialty screw. So what we
(30:23):
need to do is make these materials, make the batteries,
make the magnets, tournament the commodities so that they're coming
out and they're produced at a cheap rate within this country.
Speaker 3 (30:33):
So we've got a dynamic system.
Speaker 1 (30:35):
Do you think that's going to happen?
Speaker 3 (30:39):
I would like that to happen.
Speaker 1 (30:41):
Doesn't feel likely to me.
Speaker 2 (30:43):
I feel there's an overrating sense in that American ingenuity
can turn around and produce materials that we can all
of a sudden jump ahead, as if country that all
of a sudden decided not to put in landlines and
when to a fully mobile back in twenty ten, They're like, oh, well,
we can just jump ahead.
Speaker 3 (31:02):
We don't need to invest in all of those.
Speaker 2 (31:05):
All those was wasteful phone lines. It this is hard science.
Speaker 3 (31:12):
This is where you're you're you're you're.
Speaker 2 (31:14):
Mixing acids and heats, and we need to focus on
building those people so that we can have more breakthroughs
because China is not sitting back. This is something that's
constantly innovating and China, Japan, all of these countries are
figuring out how can we make a better product, and
we're we don't have that fighting force in the material
(31:36):
world that we once have.
Speaker 1 (31:42):
We'll be back in a minute with the Lightning Ground.
We are going to finish with the Lightning Ground. I
want to talk to you about your other job besides
(32:03):
the rare Earth experts. You run a company called Outposts.
You were the founder and CEO of Outpost, which.
Speaker 3 (32:12):
Is my way for founder and CEO.
Speaker 2 (32:14):
Back in twenty fifteen, when the book was coming out,
I was living in Bali.
Speaker 3 (32:18):
And seeing that people were starting to work remotely.
Speaker 2 (32:21):
So my partner and I set up a network of
properties that allowed people to work remotely. It was the
dawn of the digital nomad Era and that was our focus.
Speaker 1 (32:33):
Are you still do you still run that company?
Speaker 2 (32:36):
I still run that company on a day to day
not like I did.
Speaker 1 (32:41):
So is it right? There's two places in Bali and
one in Sri Lanka that the company owns runs correct.
Speaker 3 (32:50):
Those are our brand and properties. Correct.
Speaker 1 (32:53):
And like people typically from Europe in the US who
are traveling around the world working on their laptops, pay
to live and work there is that basically the idea.
Speaker 2 (33:03):
Well, when we started in twenty fifteen, people were coders, marketers,
people who could be away from others, people who have
their own businesses. And then what we've seen since since
COVID is a more professional set. So it could be
anyone who's who's working remotely. You never know where someone
is behind their screen. And so we've seen this this
(33:25):
this change and what used to be dominated by the
US the UK, all of a sudden, more people started
to travel. You saw people from Mexico, Brazil, Russia, you know,
elsewhere starting to fill up the spaces. And so what
we've seen is a general trend that's changed.
Speaker 1 (33:46):
And so just very basically what is the business Just
so just so it's clear.
Speaker 2 (33:50):
We provide spaces for people to live, work and connect
with others, and the places they go.
Speaker 3 (33:56):
Companies call outpost.
Speaker 1 (33:58):
And what do what do people not understand about life
as a digital nomad.
Speaker 2 (34:05):
That when you can have everything that you think you want,
you can have cheap food, you can meet people all
the time, there's always something stimulating about being in a
foreign country. That alone isn't going to give you the
direction you need for your life. It's not going to
make you continuously happy. It's the connections that you get
(34:26):
along the way and being able to be able to
build something that you're proud of, whether they're friendships or
family relationships or businesses. It's the impact you have on others,
not the freedom and the self improvement that you have
by being outside of your own culture.
Speaker 1 (34:45):
So you're saying being a digital nomad is not as
fun as it looks on Instagram.
Speaker 2 (34:50):
It is as fun as it looks on Instagram, and
in some cases more fun. But a lifestyle where you're
uninhibited and you're not building, and you're just soaking up
services over time, there's less meaning there. So it's a
great way to spend time. Don't get me wrong saying, hey,
don't spend the lifestyle. But if you're spending three four
(35:13):
years and you're not building along the way, then you've
kind of looked back and you and your pause. But
for periods of time, it's a wonderful experience. You can
get out of your shell. You can be challenged by
things that you didn't you know, by the by the language,
by the food, by the situations that you would find
yourself in that you wouldn't be in your own country.
(35:35):
And it gives you a chance to reflect on some
of the certitudes that you There are certain things that
you believed or core beliefs because you lived a certain
way that you.
Speaker 3 (35:44):
Wouldn't be challenged until you're in a different country.
Speaker 2 (35:46):
And so as someone who's lived overseas for a long,
long period of time, and that's what I love about that.
Speaker 1 (35:52):
Yeah, although I mean, I guess it depends. It seems
like if you go and live somewhere with a bunch
of other digital nomads, there is less of that than
if you're like going and staying with the family of
you know, people who live there are just going and
living in an apartment and hanging out with people who
live there. Right, It's seems like living in a Digital
Nomad House would reduce the foreignness of the situation.
Speaker 3 (36:18):
It does, It does. There's what I would say is.
Speaker 2 (36:21):
That you want to be able to mix them both
because you need that system and that routine, and especially
when you're in a foreign country, everything is new, so
you're going to forget your nine to five and when
you're having a job, you have.
Speaker 3 (36:35):
To continue that routine.
Speaker 2 (36:37):
So the spaces that we offer give that routine to
people and that consistency and that they're meeting other people
so they feel comfortable where they are. And then from there,
my hope is that people branch out and start to
really get absorbed because there's too much and increasingly too
much similarities. And everywhere we go you can get your
(36:58):
Starbucks and you start to see the culture of the US,
whether it's tipping.
Speaker 3 (37:04):
Or the service culture. It starts to spread out.
Speaker 2 (37:08):
And when we you're using the same online travel agents,
so you have the same experiences in other places and
you think everything is the same. You really have to
break out and start meeting people, start learning a language,
start going outside the realm, and I think that's when
you start to get rewarded.
Speaker 1 (37:26):
Thank you for your time.
Speaker 3 (37:28):
I appreciate it, thank you very much.
Speaker 1 (37:37):
David Abraham is the author of the book The Elements
of Power. It's also the founder and CEO of Outpost.
Today's show was produced by Gabriel Hunter Cheng. It was
edited by Lyddy Jean Kott and engineered by Sarah Brungeer.
You can email us at Problem at Pushkin dot FM.
I'm Jacob Goldstein and we'll be back next week with
(37:58):
another episode of What's Your Problem. I'm Jacob Goldstein, and
right now we're going to a clip of a new
show that I co host. The show's called Business History.
My co host is Robert Smith, and this clip is
from an episode we did about how Nolan Bushnell, a
(38:20):
stoner turned entrepreneur, created the video game company Atari and
hired a young, inexperienced Steve Jobs. I really hope you
like the clip, and if you want to hear more,
you can find Business History wherever you're listening to this
show right now, this like nineteen year old hippie kid
walks in and he says he won't leave until they
(38:42):
give him a job, and the receptionist calls the head
engineer and she goes, yeah, we got a hippie kid.
In the lobby says he won't leave until we hire him.
Should we call the cops or let him in? And
the engineer says.
Speaker 3 (38:54):
Bring him on in.
Speaker 4 (38:55):
It's nineteen seventy's a Silicon valley, and this guy wanders
in and he is whenever you tell a story like this,
you know who it is.
Speaker 1 (39:02):
It's Steve Jobs. It's Steve Job. So fun, it's so
delightful and perfectly. Steve Jobs is very good at his job, yes,
and very unpleasant to wrqu On. Surprising. He tells Bushnell
that like everybody's soldering wrong, right, they're actually putting together
the hardware, sladering the hardware. He's probably right, and bush
Nell's like, yeah, he was right. He keeps calling his
(39:24):
manager a dumb shit. Probably was not kind, not necessary.
Bushell winds up putting Jobs on the night shift, partly
so he won't bother so many people, and partly because
he knew that Jobs like to hang out at night
with his buddy Steve Wozniak, who was a great engineer,
would be great to have hanging around atari And in fact,
(39:45):
Jobs and Wozniak helped to make Breakout a great a target.
Remember breaking Out of.
Speaker 4 (39:50):
Course you're trying to knock down the bricks in a wall.
Speaker 1 (39:53):
Still games like that, you got a little paddle at
the bottom end. There's a moment when it goes through
the wall and then goes so good. So Jobs worked
at Atari for a little while and then decided he
wanted to go off to India to find his guru.
Perfect asked Atari to pay for the trip. Nobody ever
said he lacked moxie and wound up making a deal
(40:14):
with Atari where they pay him to go part of
the way there. They had exported some games to Germany
and there was some kind of problem with the games
in Germany, and they're like, we'll send you to Germany
to fix the games and then you can get the
rest of the way to India. And you know, the
Germans said Jobs was terrible to work with, but he
fixed the games. I was thinking about like the link
between Atarian Jobs and what did he learn there, and
(40:35):
it felt like maybe a little overdetermined, but I do think,
you know, clearly he had this profound sense of aesthetics
and of delight, right, like think of the Macintosh, right,
this breakthrough Apple machine in the eighties. It was round
and instead of squares. It was rounded, and it cost
them more money, but it was beautiful and it was
fun and you were engaged with it like a game.
Speaker 4 (40:56):
It almost looked a little bit like an arcade game
with the curves. Yeah, but more than that, I think
that especially at Silicon Valley at the time when they
were dealing in actual silicon Right, if you're making chips
for somebody, you're thinking about the future and the computers.
You're not thinking about the psychology of the customer, because
the customer was another electronics company, right, And so Atari
and the strength of it was really the first time
(41:18):
where they're just like, how will a regular human being
who has no training whatsoever interact with technology?
Speaker 1 (41:25):
Yeah? So Atari now mid seventies, they're selling all the
machines they can make. They need more space, and so
they rent an abandoned roller rink and they turn it
into this office slash video game factory. I've been ten
years older.
Speaker 4 (41:42):
I would have loved to have worked in a roller
rink video game factory.
Speaker 1 (41:45):
Yes, everybody smoked weed. Yeah, there was a hot tub.
There was a pool party where everybody ended up naked
in the pool at Bushnell himself looked back on it
later and said if that isn't a horror show for
any HR person today, I don't know what is
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