All right everybody, emergency podcast time. Episode 263 of All-In. We have Emil Michael, the Under Secretary of War for Research and Engineering, working directly for Pete Hegseth. We had to get this out to you on Thursday night because it is an emergency pod. One of my old besties, Emil Michael, is here. Emil and I were part of Team Uber back in the day. He was Travis's right-hand man, some might say fixer. And Emil Michael is now the Under Secretary for War here in the United States, serving his country like our bestie David Sacks. Welcome to the program for the first time, Emil Michael. How you doing, brother?
I'm doing good. I hope it was more than a fixer, but you know—
Raising $20 billion fixer. I mean, you got it done. You got it done. He would give you the hardest things.
Yeah, that's right. Fair enough.
If it was hard, and that's what a fixer is.
An operational axe. That's what they call them.
All right, sure. In Brooklyn, we call them fixers. With us again—
There's that, too. There's that, too. Making it happen. With us again, Chamath Palihapitiya. How are you, brother?
Yeah. Look at that smile. What do you got going on? You got some pokers in the fire.
I'm not going to say in the coming weeks, I think some news is going to drop. That's my prediction. I don't have any—
Are you loving tweet mogging that's been going on this week? So good. So good.
He's looksmaxxing by default, but he's been mogging—
Yeah. So funny. What was your favorite?
The one I sent you this morning that you said. What did you say? So funny.
Are you collecting your losses? Tax harvesting.
What did you say? Oh my god.
Chamath said—oh my god, it was just like, "Yes, I did. Yes, I did."
Someone said something to Chamath. He's dropped in, "Why is everyone so mad at Chamath? All he did was lose billions in retail investors' money by propping up one-page SPACs. It's not like he then told them to enjoy their capital losses or anything. Give the man a break." Chamath's response: "Yes, I did."
All right. Piling on is your Sultan of Science, everybody's favorite. Had some great science that he brought to the show last week. Friedberg, how are you doing?
Oh, yeah. I've been traveling this week. Back at home.
All right. Sacks is out today. He's very busy on Capitol Hill. We'll talk about what he's up to next week.
Let's go. Come on. Let's go. Let's go.
All right. The US and Israel launched a joint attack on Iran on Saturday. Today is day six of Operation Epic Fury. Iran's Supreme Leader Ali Khamenei was killed within hours of the operation. 40 senior officials have also been killed. Death toll so far: about a thousand people, according to reports. Tragically, six US Army Reserve soldiers were killed following a drone strike on a base in Kuwait. A US submarine sank an Iranian ship off the coast of Sri Lanka. This is the first torpedo kill since World War II.
Why we're at war has been a bit of a moving target in the debate. First explanation from Rubio: he said Israel was going to attack and the US had no choice but to participate. Later walked that back. Trump made it clear this is not a regime change effort, but we're doing this to stop terrorism and the development of ICBMs by obviously a pretty crazy group of individuals, and obviously nuclear bombs, which we blew up a couple weeks ago. Trump also mentioned the people of Iran should seize the moment, quote, "and take their country back." Hegseth, believe he's your boss, Emil, said, quote, "This is not a so-called regime change war, but the regime sure did change and the world is better off for it."
So here's an interesting Polymarket right now: US forces enter Iran, this is boots on the ground, by the end of March: 40% chance; by the end of the year: 59% chance. So the idea that we're not going to have boots on the ground, the sharps on Polymarket believe we will. Will the Iranian regime fall by June 30th? 39% chance, according to Polymarket, and by the end of the year, 51% chance. So Emil, I guess there are two questions people really want to know. I'll leave off why we're doing this, I think President Trump has been pretty clear now, but how long is this going to take is the one question, and are we going to have to have boots on the ground? Maybe what is success here?
I think the president talked about this as a weeks-not-months kind of operation, and it's aimed at essentially disarming the regime or the country in such a way that they can't supply Hezbollah, Hamas, Muslim Brotherhood, all the kind of terror groups that get sponsored by weapons and money from Iran, not to mention the nuclear bit. And that's why you see from the reporting they're going after the depots. We went after nuclear sites before. They're a prodigious drone maker, these huge one-way attack drones that can go hundreds and hundreds of miles. Lots of ballistic missiles that are aimed at every country in the Middle East, as you've seen, they've attacked them. So I think that's one. In terms of boots on the ground, there's no scenario where we have some protracted boots on the ground, Afghanistan-Iraq 2-like scenario.
Friedberg, your thoughts on this war. Obviously, a lot of people voted for Trump in order to have the peace dividend that he was in his first term, absolutely the peace president. And now here we are: eight countries have been bombed, and we've had two leaders deposed, and one of those two have been killed. Your thoughts, Friedberg?
I think the president and the administration have probably the biggest meetings of the term coming up in China in April. My estimation, based on the conversations and the comments made by the president before he came into office and since he's been in office, is that finding a grand bargain or a deal with China is probably one of his top priorities. And if you think about the importance of that, is the US going to wade into a giant global conflict led by a US-China rift, or is the US going to find some grand bargain? I think he would probably have a preference for the grand bargain. And that being the case, I think you could look at it in the context of Maduro and the actions in Iran as creating maximal leverage going into those negotiations.
The reason for that, Friedberg?
90% of the oil that comes out of Iran goes to China, and there's been a long developing and developed relationship between Maduro's government and China. And these are big economic drivers, or support the economic driving in China. So creating leverage by having significant influence or damage or destruction to those supply chains for China gives the United States footing to be able to negotiate a better deal for America. I would imagine that the president's intention here isn't to go and decide who should be in charge and drive regime change and end in a multi-year conflict with Iran. But ultimately, if there's some transaction with China that gets everyone out of this and puts the US on a strong footing where American businesses can sell into China, which is very challenging, as everyone knows today, and there's parity, regulatory, economic, and trade parity between the US and China, there's a point of view on what happens with Taiwan and availability of key technologies like semiconductors. I think it could be a win-win, and I think that a deal with China could be the crowning achievement of this administration, particularly going into the midterms. So the timing is right, and I think that's probably a core part of the motivation here.
Chamath, your thoughts on this action and why we're doing it. You've heard obviously the president has his position: we're not doing regime change, it's a secondary effect obviously, but we want to stop those ICBMs and nuclear bombs from being developed and we want to stop terrorism. Additionally, Friedberg says, "Hey, we're framing this great discussion we're going to have with Xi and China, and oil is part of that." Where do you think you stand on all this?
I'll build on both what Emil said and what Friedberg said. I don't think this is about regime change and I don't think it's about a local regional conflict. I think if you take a step back and zoom out, the most important thing that we did in the last 3 months was by taking out Maduro and by taking out the Iranian leadership, we have created enormous leverage, as Friedberg said, with China. Now, why is that important? Because I think all of this centers around that geopolitical discussion.
Last night, something important happened, which is that the official Chinese bureaucracy posted what their GDP targets were, and it was shocking to anybody reading it because what we saw was that they guided to a range of 4.5 to 5%, which if you look at the historical context of that growth is the lowest that it has ever been in about 30 years. So three decades, before they entered the WTO. And the question that one should ask yourself is when a country that's growing at 8, 9, and 10% starts to grow at half that rate yet have double the number of people and double the GDP, what happens? You already have incredibly high domestic unemployment, especially youth unemployment. Does it become more or less chaotic? And I think the historical artifacts of every other country would show that it will become more chaotic. If you have that as a starting point, what is it in China's best interest to do? And I think it becomes obvious that the right thing to do would be to invade Taiwan. Why? Because you start to create a sinkhole that occupies your people, that occupies resources, that can get domestic production up and running, that can start to generate a war machine. And you see the economic impact of war machines in any country during any conflict.
And if I had to guess, just to build on what Emil said, the president saw that, and I think what they did can be summarized in this chart which I sent to Nick. So if your goal is to prevent war with China, which is a massive global conflict, which could be nuclear, which could be cataclysmic, how would you do it? And this chart paints one way to do it. If you look at the conditions inside of the Chinese economy, the most interesting takeaway is that they are enormously dependent on imported oil, so about 20% of their economy. But it's not 20% of their economy because it's 100% of these critical things that create GDP: logistics, transportation, aviation, feedstock inputs. And of that 19%, about a fifth of it comes exclusively from Iran and Venezuela. And now all of that is off the table.
So if you take that and then you see what Steve Witkoff and Jared Kushner and Josh Greenbaum have been doing, which is trying to get a deal done in Russia, and you put all of these things together—because by the way, if you add Russia into that mix, it's about 40% of China's oil—not only do you re-dollarize, not only do you stop the funneling of all of these illicit oil funds to creating chaos all around the world, but you hem in China going into a massive moment at the end of March, beginning of April, where as Friedberg said really astutely, there is the potential for a grand bargain. And I think that secures global safety, and that is a huge thing for America.
Emil, how much does this have to do with China?
My instinct is, and I'm not speaking for the administration on this, is that's a second-order benefit to some of these things. You said eight conflicts—there have not been eight conflicts. We inherited Gaza, we inherited Russia-Ukraine, Venezuela was its own operation, and then you could sort of attach to it the drug boats that were coming out of that as one big operation. And then the Houthis was just Biden was ignoring the Houthis. They were just shooting at our ships. So that was very limited in terms of "stop shooting our ships, we need freedom of the seas," and that wasn't sort of a conflict, so that's something any president should be doing generally. I think Iran being the one material conflict outside of Venezuela, so it's not that many. And how long did Venezuela last? It was one raid.
I guess that's a really important—
This is an important note, I think, for you, Emil, to sort of explain to us. There's a new approach here with regard to these actions, which is no boots on the ground. And you of course have better information than anybody else does. I don't think anybody would have known Venezuela would have gone as well as it did. And so far, listen, we got a long way to go with Iran, this has gone very well as well. So explain to us what you know, and what the president and Hegseth know that we don't, that makes these two operations go so smoothly. What is it then? There's obviously some new technology here in the case of what happened in Venezuela.
Yeah, besides the Discombobulator, what we've got is a very well-trained military. The Global War on Terror was a disaster in so many respects, but the people now who are fighting that are generals now, and so they've learned a lot of lessons. And you compare that to the Chinese military: they don't have a lot of experience. In fact, the decapitation they did in the Chinese military, the one guy they took out was the one guy who had experience in Vietnam. So they don't have conflict experience, and that matters because you understand going in what are the things that could go wrong.
And then you have incredible technology: space, air, land, sea, cyber, all kinds of effects that you could bring together. And so you imagine a hundred guys go into the most fortified compound in Venezuela where the president is, take him and his wife out safely, and are out with no casualties.
I mean, it's just incredible, right?
Yeah. These war games have been on the shelf for a long time. Every scenario has been planned for years ahead of time. Midnight Hammer in Iran was planned years ahead of time in terms of how would you do it if you were going to do it. And then you keep refreshing the tactics, techniques, and procedures, and you're updating them. So we have a very sophisticated way of doing these things to minimize loss of life and maximize success.
Can I ask a question? I don't want to derail this conversation, but is the Discombobulator real? Like, what can you say about the Discombobulator?
I was obsessed with this when I saw it on X. I was like, "What is this thing?" I mean, I need it in my house. Like, I just want to push a button with my kids.
And that's just for when Hellmuth shows up.
Not meant for your kids or if they're behaving badly. No, it's—can't talk about it.
Emil, do you think we would have been able to pull off that mission as successfully as we did 5 years ago, 10 years ago? Has the technology improved that quickly that this is not something that's been possible historically? And how does that change the pacing and the face of war for the next couple of years?
I'd say no. It wasn't only a technology maturation from five years ago. It's the rules of engagement. The rules of engagement that we used to have, if you read about them, some of them were insane. Like in Afghanistan, if the guy had a small gun, you had to have a small gun, and there was this parity in weird ways.
And when you're like, "Well, but is the objective to have a fair fight or an unfair fight?" Well, if you're on our side, you want it to be unfair.
So the rules of engagement were relaxed to be—
Who writes those, Emil? Who sits in an office and says you can't shoot back if a combatant is shooting at you if you aren't matched gun-for-gun?
Yeah, crazy policies that are written into military departments. And that's why when Secretary Hegseth talks about this kind of thing and what was happening with him when he was in Afghanistan, if you ever read his book, and in Iraq, he's like, "The rules of engagement were so punishing that we were at risk all the time because you had to have a legal understanding of what was happening in every minute in the battlefield, as opposed to, 'Well, your job is to take out these guys and protect these guys. Here's your munitions, here are the red lines, and then in the middle of that, go use your judgment. You're a commanding officer, use your judgment on how to win.'" And we've kind of gotten back to that: use your judgment, push responsibility to the field, still have your red lines, but other than that, the objective is the objective. It's more of a Colin Powell approach. It's like, go all in, have a clear objective, come out, use overwhelming force. And we were not doing that for the last four years.
And then going back to the face of war going forward. My understanding is that there have been more drones deployed by the United States this past week than we've done in the history of military activity. Is that right? And how does that really change things going forward here?
It changes it big. The Predator drone was the first big drone program like 10, 15 years ago. It was this big honking drone. And then if you remember, Obama would take out some of these al-Qaeda leaders with drones on their balcony and things like that. President Trump took out Soleimani with a drone near his car. That was the beginning. And then the Russia-Ukraine war happened where it's drone on drone. 70% of the casualties are because of drones. So drone-on-drone warfare, robot-on-robot warfare, those things are the future for sure.
Right. And that's why companies like Anduril—they're making unmanned systems. And this has been something you've specifically been very focused on, and you tweeted today a little bit about a competition. We'll play a little video here. And this LUCAS, Low-Cost Unmanned Combat Attack Systems. It used to take a lot of time, it certainly wasn't startup time to get new product into the channel for our military to use. Explain what program you're running here. Feels like the DARPA Self-Driving Challenge all over again. And what these drones cost. I know there's a company making them for, I think, $35,000. Am I correct?
The small drones like I'm holding right there are way cheaper than that. The LUCAS one-way attack drone, which can go 500, 600, 700 miles at the speed of an airplane, carry a big warhead, those are like $50,000 to $80,000 depending on what kind of equipment you put on it. But we have a Drone Dominance Program, and we basically have to build an arsenal for drones.
Now, are we likely to have a territorial conflict like Russia-Ukraine with Canada and Mexico? No. But we do want to take out drug drones at the border, and long one-way attack drones are important for any kind of major conflict like you're seeing in Iran. But also to protect military bases, for America 250, World Cup, Olympics in '28. There's a lot more uses of drones for surveillance, not just for combat.
There you're showing drones that are sort of human-operated, but how much of this should basically be AI so that it's just some computer vision and, again, back to what you said before, a model understands the rules and the red lines, but otherwise is on task and accomplishes your mission? How much of it is one versus the other?
I believe that a sophisticated drone war is going to be drone swarms controlled by AI to some degree or another, right? To what degree the control matters—like, for example, drones have decoys, they could dazzle, they could put out things. So how do you discriminate what's a drone and how to hit it? You could use AI for that because it's learned how to do automatic target recognition, for example. And then also, could it identify a person, and does that make it safer so it's going after actually someone you want to get and not someone you don't want to get? So there's a lot of uses for AI at the edge, if you will.
In the future here, the Ukrainians and Russians do something called a kill box where they lose comms because it's jammed for this drone, and then it just starts going in a box and looking for the person they're trying to get, and they're starting to use AI to do that.
And China has this ability already probably times some magnitude. Yeah, they have drone swarms because they can force the companies that make them, not just DJI, to interoperate. Interoperating drones called heterogeneous autonomy, right? You take different kinds of drones, and how they communicate with one another and then make sure they're not going after the same target, is a pretty complex thing that they're definitely working on.
And let's talk about the fidelity of these. Obviously, AI is a new technology. It can make mistakes. Anybody who uses it on a day-to-day basis might experience a hallucination. How confident are you in the AI? Ukraine and Russia conflict—they obviously are not going to be as thoughtful maybe as we are in putting this together, they're in a hot war right now. But we as the United States have to be very thoughtful about this. So how confident are you that this isn't going to make a mistake? I think that's the key to a lot of this debate. And when will it be perfect, defined as much better? And I guess this dovetails with the self-driving thoughts: it has to be a magnitude better than a human. So when will this be a magnitude more accurate than when we make a mistake as a military and we kill a civilian?
Yeah, no, it's a good question. I don't know when that moment hits, that FSD moment where it gets kind of better. Certainly not there, and you wouldn't want to take huge risk with that. There's a gradation of when you would use that and what kind of risk you were trying to take or not. If you were trying to take out a drone using AI, using a laser or something, you'd be pretty okay making mistakes because you just missed the drone, with a laser, laser goes off, it's all over. If you were doing something more sophisticated in a densely populated area, you'd take less risk. So we're developing procedures and tactics for each scenario.
And this is part of the debate I had with Anthropic, which is we need AI for things like Golden Dome. Chinese hypersonic missile comes up, you've got 90 seconds before it separates and all kinds of decoys, and you don't know where the actual payload is and you want to hit it from space. And a human doesn't have the reaction time, may not be able to discriminate with their own eyes what they're going after. That's a pretty low-risk thing because it's in space and you're just trying to hit something that's trying to hit you. So I think in the next 10 years, you're going to see a lot of these applications develop AI to one degree or another, so long as we think it's safe and it's not going to make mistakes.
Before we get on to the Anthropic discussion—and we really appreciate you coming here, and my Lord, this has been so informative. So thank you, Emil, for coming here and explaining to the American public and to us what you're working on. It really makes us, I think speak for everybody, really confident in what you're doing. And it's so great that you've left the private sector to do this.
What I would say just very quickly, Emil, is I think that not enough people understand that the American military has had to fight with one hand tied behind their back. Just that little insight that you just gave about Afghanistan to me seems so scary, because the men and women that sign up for the American military, they're doing this to fight on behalf of this country. They deserve a lot more than being sent there and all of a sudden being given this rule book and saying, "Do your best." And it's like, "Oh, wait, you violated 19 rules trying to protect America. Do your job." That's insane.
It's really insane in some cases. My belief is that's what the frustration for those soldiers who were out there in those wars had more than anything. There was the broader frustration, "What are we doing here?" And then the secondary frustration is, "While I'm here, why can't I do my job?"
Yeah. Is there much of a debate internally—and sorry, Jake, before we move forward on this—regarding this idea of full autonomy in military action? I don't want to speak ahead to the Anthropic point, but it was something that the media seemed to say was part of Dario's concern, is that when you press the button and hand over complete autonomy and there's a kill action that you're now giving to a robot or to some autonomous system, do we then kind of have a moral issue at hand? And is that something that's kind of debated or discussed? And is that the right way to think about the framing of what goes on?
I mean, we're not even close to there yet, right? The systems are not—we wouldn't feel that a system that would have sort of real risk for a civilian is ready to launch yet. So we're not even debating that. We're just trying to get basic autonomy in drones, basic autonomy in underwater unmanned vehicles, basic autonomy—you've heard of this collaborative aircraft that fly along with a jetcraft so that it has more firepower, but it's still tethered to what the jet does.
Yeah. So we're just at the very beginning of this stuff. But Golden Dome is a good example of like, yeah, who can oppose that? It's the only way to get at a threat like that. Who could oppose if you have a military base and you have a bunch of soldiers sleeping, that you have a laser that can take down drones autonomously on that? So it's pretty scenario-by-scenario, but we're not having a lot of debate because the Skynet thing is so not a realistic thing at this moment, right?
Except if one thing I did tell the Anthropic guys, I was like, or I'd tell any company, your models are getting stolen by the Chinese. They're going to unguardrail them and use them against us. And then you want our models to be less capable against your models? It's sort of—
They're not going to be thoughtful. In other words, they're going to go for it. And if we just benchmark this against where we were at 10, 15 years ago, there was the WikiLeaks of Collateral Murder, I think they called it, where we tragically had an Apache take out some journalists. And this technology, even applied today, probably would have avoided that in my mind. Like we have enough that when you're targeting not drones, but people on the ground with an Apache, this would have probably avoided that.
Yeah, or the Kuwaiti aircraft hitting an American aircraft, making a mistake because it doesn't have the identification. I mean, it's the same self-driving argument to a degree. Like self-driving could save lives even though it's scary to look at a car without a human behind the wheel, but there's tons of scenarios where it's a way better, safer option, more precise than the alternative.
All right, before we move on to the Dario thing and Anthropic and that brouhaha, there was one piece that we haven't addressed with this interaction, Friedberg, Chamath, which is the Israeli government and their desire to take out this regime. And according to Tucker Carlson and a large contingent of the MAGA base, they feel that we are captured by this group. Does Israel have too much influence over the United States with regard to these actions in the Middle East? This is a big debate within the party, within the Republican Party, within the MAGA constituency: "Hey, number one, we don't want these wars. Number two, is Israel driving this thing to the point of Rubio's quotes that, hey, we're doing this because Israel is going anyway?" I think we should address it here. Not that I have a personal stake in this; I'll give my personal opinion at the end.
I don't think the president is captured by Israel in the least. I think he decides what is in the best interest of the United States. And if Israel can be a part of that, then they're a part of it. And look, let's be clear: they're incredibly capable. And so in something like this, to be able to incorporate the intelligence of Mossad, what you're seeing today in this Operation Epic Fury, we're four days in, Iran has been 90% depleted of all of their munitions. It looks like they're just firing no more missiles out from Iran to anywhere else. There's fleets of drones and planes just waiting. Everybody knew where the Iranians were. It's great that when we make a decision on something that we need to do, we can rely on our allies. I think the opposite question should also be asked: like, what was the UK doing? Why is Spain pontificating? Why was Europe taking the weekend off before they could even issue a statement? Why don't you ask that question?
Yeah, no, it's an equally valid question. Friedberg, do you want to get in on this or no?
No. I'm a Jew. No one's going to care what I have to say. They're either going to say, "This guy's a Jew, we shouldn't listen to him." So let's move on. Go ahead.
Emil, any thoughts on this? I do want to know from Emil though, is this Iron Dome working? This laser in Israel system, is this operational? And if so, is there any success metrics you can share around it?
I think Iron Dome was the first generation of the Israeli air defense thing, and then they're building Iron Beam. And I think it's still early-ish, but yeah, it works. They're a technologically sophisticated country that's very small, that has a reason to invest in these things, and they have a lot of smart people to do them. So I think it's good.
Does it primarily work on rockets? And I guess I just want to understand the logical evolution of this, because in the '80s and '90s, there was a lot of conversation about space-based lasers that could shoot ICBMs out of the sky to avoid global nuclear war, and we could always take out every nuclear warhead delivered on an ICBM. Is that technology feasible? Is there a place in the near future where we could see basically maximal global deterrence using these systems, either ground-based or space-based, to take out hypersonic missiles?
I think the harder but more valuable problem to solve would be the space-based way of doing it, because then you could get at almost any kind of threat that hits space. But you still need a ground layer because there's cruise missiles that could come at you, there's drones, and so on. So we call them multi-layers, like how do you get every kind of weapon at every layer?
Directed energy lasers, as they get more powerful, you could take on a bigger weapon farther away. So those technologies, as they improve, it gets more and more capable. And I think all these defense systems are going to get more and more capable to get more and more of a variety of weapons at farther and farther standoff, which is what you want. You don't want to shoot it when it's right over Tel Aviv. You want to shoot it when it's still over their land, ideally.
Are the laser interceptors in the field today? There's reports that they are.
I think they've demonstrated some of them.
Got it. And is this our technology or Israel's technology? Because President Trump said, "Hey, that's actually our technology." Is there any insight there?
We have collaborations with Israel on some of this stuff. They have their own, we have our own. But they're good at tech, we're good at tech. There's certain ways you get part of our system and part of their system because it's a quickly evolving part of science right now. How do you cohere beams of light to get distance? How do you use high-powered microwave to just drop drones in their tracks? There's lots of different ways to get at some of these things. And yeah, a lot of it's ours, and some of it's theirs.
Yeah. And to the earlier question, I am pro-regime change if it can be done thoughtfully. And obviously, isolating a dictator, that's the best thing you can do. We've done that successfully with Putin, Kim Jong Un, etc. Keep diplomacy up. But if there is a moment in time where you could free the people of Iran after 50 years of being subjugated by these lunatics and dictators, I'm all for it. And I actually trust President Trump to make that decision.
I know this may sound crazy. People think I'm a libtard or something because of the way my besties frame me on this program, which is completely inaccurate. I'm an independent.
I actually am completely independent, just based on my voting, and I'm not on either one of these sides. I am pro-President Trump, and I trust his judgment. I think he has more information than us. I think you have more information. I actually trust you guys to do it thoughtfully, and there obviously was a window here. Israel can have their own motivation, that could be the China motivation, but there's also spreading democracy, which might be the least of people's concerns here, but that's on the top of my list. I would like to see the people of Iran free.
Just to build on your point, Jason, the thing that Emil said before, which I think is important as well, is we have an enormous amount of learnings about what happened in Iraq. We also have a ton of learnings between the Iran-Iraq War and a ton of learnings in '53 when the US and the British deposed Mossadegh, or at least fomented that and put the Shah, and then the Shah was booted out.
If you take those three chapters in Iranian history or that regional history, there's a ton to learn. And to your point, there is a way to affect what we need to do without creating some 20-year forever war. There was an incredible tweet, I don't know if you guys saw this, somebody said, "So every war doesn't have to be three decades and trillions of dollars to your friends in Virginia, Maryland, and DC? Did you guys see that tweet?" It's true. These things can be one and done, in and out.
And if President Trump succeeds here, I just want to also give him some flowers here. The people of Venezuela and the people of Iran being free represent about 5% of the people in the world living under an autocracy, under a dictator. If those both flip back to democracies, he'll have done more for the spread of democracy than any president for many decades, perhaps in our lifetime. This would be incredibly noble. Incredibly noble, incredibly just. And—
Would you in the human rights set want him to get the Nobel then?
Absolutely. Give him all the Nobels. Literally, if you can free people—
All of them. Give him every prize. Give him an Oscar.
Physics, chemistry, he can have everything.
JCal's an independent. When's the last time you voted for a Republican presidential candidate? Just curious.
No, no, I didn't. I would have voted for, if I was of age, I would have voted for—I wouldn't have voted for the Bushes. I voted for the moderates, obviously Clinton and Obama.
Oh, we're playing the would-have, should-have game.
I would have voted for Reagan in—
I would have bought Nvidia at $4.
Well, no. And I didn't vote for Kamala, so I'll leave it at that. But I voted probably—
Why don't you say that you voted for President Trump?
Just say you voted for President Trump. I don't want to complicate things.
But you did, so just say it.
I didn't vote for Kamala, I'll leave it at that. All right.
It's so weird that you'll say you're a moderate, but you won't say that you voted for President Trump.
I am supporting President Trump in about 60-70% of what he does. Let's leave it at that. Three, two... All right, let's talk economic impact of oil and insurance. Oil rose to $84 a barrel Wednesday. Strait of Hormuz basically a standstill at this point. Here's the clip. You can see the traffic slowing down and then, hey, some of the dots are even going away. That could be ships we're taking out.
Unless the strait opens, 3.3 million barrels of daily production would be lost early next week. And then there's insurance companies. They've all cancelled the war risk coverage of vessels in the Gulf effective March 5th. Supertanker traffic dropped 94% within the first 48 hours. Trump said the US would provide political risk insurance for all maritime trade through the Gulf, especially energy. Friedberg, your thoughts on the economic second-order effects that we're starting to experience here and over the next four weeks could be intense and acute.
The modern insurance market emerged specifically to solve the risks of maritime trade. So in the 17th century, Lloyd's of London, which was a coffee shop in London where all the maritime traders would get together and talk about, "Hey, what's the safest route so pirates don't get our ship and so you don't run into weather?" That's where they would kind of have these conversations, and eventually they started underwriting the risks of the shipping routes and giving each other guarantees. They said, "Hey, if you make this route, great, you pay me a certain amount. And if you don't make the route, I'll pay you the lost value." And that's how Lloyd's of London, which is kind of the world's biggest reinsurance market, started.
Today, Lloyd's of London has 78 what are called syndicate members. And these are kind of these pools of reinsurance that underwrite big crazy risks like maritime insurance for folks that are moving oil tankers through the Strait of Hormuz, which the IRGC just announced they're shutting down. When the IRGC announced that they were shutting down the Strait of Hormuz, there's a significant risk of all the mines going in the strait and the ships getting attacked and blown up, so loss of value. The insurance premium spiked initially from a quarter percent, so 0.25% of the value of the ship, to 1.25%. So it went up by like 5x, and so folks had to pay a lot more of the value of their ship in order to continue the routes and get guarantees that they'll make it through. And then all of the markets started to shut down. So once the conflict got heavier, everyone said, "Let's shut this thing down." And that's obviously a massive risk to energy prices globally, which drives inflation and puts US economic security at risk.
And so this is a brilliant move. I would say the US government stepped in with the US International Development Finance Corporation, which was actually, funnily enough, started a couple of years ago, like in 2019 or something like that, as a kind of output of one of the agencies that provided credit from USAID, much-talked-about USAID. And so they're leveraging the credit capacity of this old USAID agency to go out and say to all the shipping companies, "Hey, we'll give you insurance on your routes." And the reason they need it is the shipping companies are levered. They take on debt to buy the ships, and the debtors require that they have insurance or else they're not allowed to take the routes because the debtors are ultimately going to be out the money. And so the shipping companies themselves need to have insurance. And so this provides a market that has now gone away. Very smart.
And ultimately a lot of people are saying this could actually reshore or onshore maritime insurance back to the United States and create an entirely new insurance industry here in the US that has historically been served almost exclusively by European syndicates and European partners. And it actually creates a big economic opportunity as this war dies down for American insurance companies and American brokers to basically be the underwriters and the guarantors of this sort of insurance and create a new industry. So that's a super interesting kind of side story on what's going on here.
