E31: Crowdstrike Co-Founder on Iran, China & Another American Century

So we are in a race with China, AI race with China, right? It's undisputable, right? You know what's another race that we were in with a great power let's say 60 years ago, the space race, right? Imagine during the space race with the Soviet Union we would say, you know what, let's sell our rocket technology to the Soviet Union and yeah maybe we won't sell them the very best rockets but like the second best, that's good enough, right? Insanity. Like if you were to propose that in the 1960s you'd be run out of town as a Soviet spy, right? This is the equivalent. In fact, it's even worse because you know you could argue the Soviets getting to the moon bad but not like existential to our interests. China getting to AGI, what total disaster for us, right? Because that's economic power, that's military power. You're literally helping Americans die with this policy.

Thanks so much for having me.

Well, look, when it comes to the war, let's start with that. I actually think that the rationale that the administration kind of haphazardly, unfortunately, presented for the war did make sense. Now there were a lot of things were proclaimed, but if you listen to the military briefings, if you listen to Admiral Cooper, the head of CENTCOM that's prosecuting this war, if you listen to General Kaine and Pete Hegseth from the Pentagon, they actually have been very, very clear since day one that the objectives are very contained and I think very doable and have been largely done, which is to destroy the Iranian military-industrial base particularly focused on missile production, which had been achieved, and to destroy the navy and tactical objectives around destroying its air defenses. Virtually all of those had been achieved and had been achieved very quickly within the first largely two, two and a half weeks into the war. Now the other things related to the regime change, it's been pretty clear that that was never actually the US objective. It was an objective of Israel's and we let them assassinate Haniyeh but we didn't really do that ourselves and all of the targeting against the regime has been pretty much them not us. We focused on those military objectives as I've outlined before. The Israelis basically have been prosecuting their own war alongside us trying to do regime change and as we know pretty much unsuccessful, although you could argue that regime has actually been changed. It has changed from the Mullahs to the IRGC, the Islamic Revolutionary Guard. I'm not sure that's a positive.

No, and actually if you remember in that first speech he said 'not now, I will tell you when,' which he never did by the way, so we never actually told. And like a lot of them got massacred in January of course so they've learned their lesson going up against the regime. And I never believed in the regime change narrative because look, you have over a million people in the IRGC and the Basij, this militia that cracks down on protesters that have guns. There's no one in the country that has guns anywhere near that amount, right? So, you know, to take on a regime, to have a revolution, you need weapons. And no one has them except, you know, a few minorities like the Kurds and others that we potentially could have armed, but it was just small numbers. So I don't think it was ever doable. And now my point is it's become all about the Strait of Hormuz and can it be reopened in time without destruction of the global economy and our own economy here domestically. And so the answer to who wins or loses in this conflict is still a big question mark because now it's all about those three things. It's Strait of Hormuz, Strait of Hormuz, Strait of Hormuz.

Wow. And by the way, the biggest surprise here is actually oil futures because the spot price for oil is sky high. It's 150 or so, right? And could go even higher. Oil futures are at 100. Even like, you know, two months out. It is remarkable. And I don't think it's sustainable given how much supply destruction has been done, right? Over a billion barrels of oil that have not gone out of the Persian Gulf, production stopped. I mean that is insane that the oil price and frankly the overall markets would be where they are today. And particularly given that the Strait of Hormuz is not reopening I think anytime soon. I think it could reopen in a few weeks, but a few weeks is eternity when it comes to oil supply, right? So, I'm shocked both at the oil markets and the equities markets that they're not reacting stronger to this. And I think they're actually quite underestimating the economic impact of this. This war is not going to go on for months and months and months. This is not World War II. This is not a forever war, but given the destruction of supply that has already taken place, given how long it will take to reopen just even physically because you have to have tankers leave the strait, come back, return and load back up again, right? So, you just have this whole logistics mess that needs to be resolved which will take months and I don't know why the markets aren't taking that into account.

Well, I think the president has already declared this victory about five or six times. So, I've lost count. So, I'm fully confident that we'll declare a victory another 10 times no matter what happens. So, that's not really the question. But look, I think if the strait is open and if the Iranian military infrastructure has been destroyed, and it seems like it has been largely, I think it is a victory. Now, if Iran controls the strait, if it charges a toll for it, I don't think that's a victory. I think that's actually a strategic loss for us. So it all hinges on what is the outcome of the free flow of navigation through the strait. And by the way, most people aren't even appreciating that even if Iran starts charging a toll and many countries will probably pay that toll. Saudi Arabia and UAE probably will not. They will probably sit on their oil. They would gladly see it go up to 200 dollars a barrel and export a portion of it through the pipeline to the Red Sea and still make a killing but not let Iran sit back and establish control of the strait and of course at those prices they can also extract leverage on us to go back in and do something about reopening the straits. So I think that's another thing that the markets are underestimating that even if Iran is charging a toll that will not necessarily open the strait.

You're talking about product market fit to democracy, right? Look, I don't think it's relevant because that's not our objective. In fact, explicitly the administration said we're not about spreading democracy. That's not what Venezuela was about. That's not what this is about. We want a regime there that's friendlier to us. It's not pursuing nuclear weapons. That's really the objective. And I think that's actually a good objective to have because we can't remake the world in our image. We can't have the whole world be Jeffersonian democracies at a point of a gun. That hasn't worked. That's been a total failure. We should not be pursuing that. And to their credit, this administration is not pursuing that.

Let me tell you what I think we should have done. We should have basically said to the Iranians, if you don't reopen the strait instead of a blockade, this is what I would have done. We're going to start seizing your oil tankers and we're going to start selling them. We're going to make money on it, you know, and you won't. And two, if you continuously don't reopen the strait, we're going to start going after your regime. Unlike Israel, we can do a lot more. We have bunker busters they don't have. There's nowhere you can hide. We can kill all of you until we can find someone who doesn't want to die. And that person does exist in Iran, right? So, not all of them want to die. A lot of this regime is very corrupt. And I think we could have with those threats gotten them to reopen the strait. But, you know, the problem with the blockade is that I think Iran can weather the blockade for quite some time because they have oil sitting on tankers outside of the Gulf that they can start selling and still make money, right? So, I would have preferred to start seizing those oil tankers rather than just blockading them.

Well, it's not a permanent thing because guess what? Saudi Arabia, UAE, Iraq have all done that in the last couple of weeks. So you know it takes a while to restart. It's not something you do willy-nilly and it's not something you want to do but you know when push comes to shove you do it. By the way 13 days is still a long time. 13 days with the strait being closed is not something that the US economy is going to take lightly to. So I think we need to be in a much faster pace of thinking about how do we reopen this sooner rather than later.

The fact that we have a ceasefire that both sides have agreed to shows you that neither side is interested at this point in prolonging the war that they see marginal benefit at best in continuing to do fires on the Iranian side or bombing campaigns on the US side. So short of the fact that the Trump administration feels that there's no other choice because Hormuz is not getting reopened, you're probably not going to have resumption of conflict. Hopefully we can come to some sort of understanding and we're going to have talks again next week in Istanbul. So probably 50/50 to be honest right now on where it goes.

Yeah, look, China believes that taking Taiwan and Xi Jinping in particular believes that taking Taiwan is essential to their future. Xi Jinping has said that the rejuvenation of the Chinese nation for which they've set a target of 2049 cannot be achieved without taking Taiwan. And he's also said that this issue of Taiwan has been passed on for too long to future generations. We're not going to do that again. The man is, by the way, in his 70s. So do the math on how long he might be in power and what future generations might mean in terms of timeline. But like any aggressor, Clausewitz had actually a great quote talking about the polling that every single aggressor is peaceful and that they would like to take over their neighbor on a post, right? And that's Xi Jinping. He does not want war over Taiwan if he can get it without that, right? Just like Putin wanted to take Ukraine without war but then exhausted all options and had to resort to it in his mind. So I think that Xi is going to try everything. Somewhere in the 2030s I think he might move on Taiwan. They've been thinking long and hard about this problem for 40 plus years. They've been building capability and accelerating it recently for a military takeover of Taiwan. If they knew for certain that the United States would not intervene in the conflict over Taiwan, they probably would have gone after it long ago because the Taiwanese are so not ready. But as long as there is even a 5% chance that we might intervene, they have to treat it as 100%, right? Because the cost of failure is so extensive for them. So I think they're still on a path and continuing to build capabilities for a military takeover, but it's a last resort option.

It is really hard. This is one of the hardest places you can imagine to invade. We know this because there are two countries in the world that have tried thought seriously about invading Taiwan. China is one, the United States is the other. Because in 1944 when during World War II when Taiwan was occupied by Japan, we put together a plan to actually take over Taiwan, right? Then kick the Japanese out of there. It was called Operation Causeway. It's publicly available. It was put together 2 months after Normandy, right? The greatest amphibious invasion in history. And even that plan called for double the number of forces we used in Normandy, right? And we expected way more casualties than we suffered in the liberation of France. So for us 80, almost 82 years ago this was considered too hard, too costly, too risky. So we bypassed it and we did Okinawa instead. This has only gotten harder since then. So this would be the most sophisticated and complex military operation in history if they ever go for it. So, it's still very hard, but you know, they're as ready as you can expect them to be.

I think it should because Taiwan mattered to us long before even the age of computing before single semiconductor was produced in Taiwan or anywhere else. General Douglas MacArthur called it the unsinkable aircraft carrier because if you look at the geography Taiwan is the cork that keeps China bottled up in East Asia in South China Sea and East China Sea. So if you don't want it to dominate that region, if you want Japan, Korea, Philippines to feel more secure, you need to make sure Taiwan does not fall into its hands. And by the way, China has global aspirations in terms of power projections. So if you don't want them to dominate the Pacific and ultimately have a blue water navy that dominates the world seas, you need to make sure that Taiwan doesn't fall into their hands. But to your point, actually, we don't need a TSMC clone because the TSMC clone is already taking place and it's called TSMC. So, the Trump administration late last year actually through this tariff pressure managed to convince TSMC to double down and invest $250 billion in their facilities in Arizona. And that will basically give us independence in advanced chips here domestically in about five or six years if everything comes to fruition. So, that's already on the way. Now it still will make Taiwan really, really important because remember, use the Iran conflict as an example. People were saying for years Middle East no longer matters because we now have independent oil production. We produce enough oil to sustain ourselves. Well guess what? It's a commodity. The global price still matters. You shut down a Strait of Hormuz prices at the pumps still go up. Energy independence or not. So the same thing is true with chips. And the other problem with chips is that you have advanced chips that you need for AI and smartphones and the like. But you also have the huge number of foundational chips that go into your weapon systems, go into your power supplies, your cars, your refrigerators, pretty much everything you have and we have very little production of that here domestically. So Taiwan is still going to matter for decades to come regardless of what happens in Arizona.

Well, look, let me give you the optimistic view here is if you step back, let's rewind the clock back to the turn of the century, right? At the turn of the century, who were our primary enemies? Well, you had al-Qaeda basically destroyed. You had Iraq, not a Jeffersonian democracy, still a messy country, but no longer a threat to us, right? We had Venezuela with Hugo Chavez coming in in '98 and becoming anti-American, turning that country anti-American. Basically, not solved, not a democracy, but basically much friendlier to our interests and city, more to our tune than ever. You had Iran that's been massively weakened, both its proxies and its military base throughout this conflict. Again, we'll have to see what happens with Hormuz. But even if Hormuz does not reopen quickly, Iran has been weakened hugely and no one can dispute that. You had Syria, now a much friendlier regime there. You have Russia, which is still an unfriendly country, but much, much weaker as a result of its own decisions and the quagmire that they got themselves into in Ukraine. North Korea, President Trump and Kim have a great relationship for whatever reason. They seem to like each other and there's a unique opportunity there to do something. And then the last remaining one is China, right? Which remains a huge problem and growing in its capabilities and we have to get it right because if we don't get China right nothing else matters and if we get China right and we manage to prevent that conflict and prevent them from taking over Taiwan I actually think there's nothing stopping this century from being another American century.

So the first one is traditional deterrence requires hard power and right now the state of our industrial base, military industrial base is just pathetic. I can't think of any other word that would characterize it. Our munition stockpiles have been hugely depleted both because of this conflict in Iran, because of the aid we provide to Ukraine, because of our inability to keep up. So whether it's missiles, whether it's interceptors like Patriot interceptors, SM3s, SM6s for the Navy, huge, huge problems. Our ship building is a total disaster. We can't produce enough ships. So there's a huge effort in this administration to basically revitalize our industrial base because this is a choice. This is not rocket science, right? I've said this recently that if Tesla can produce 500,000 cars in Fremont, California, in California, by the way, of all places, right? We can certainly produce 10,000 Tomahawks, you know, name your number. So that's number one. Number two is we need to reduce our reliance on China in critical choke points that they have particularly rare earths. We saw last year what happened when they basically prevented export of rare earth to us. Rare earth needed for permanent magnets and a bunch of other stuff that goes into F-35s. It goes into cars. It goes into lots of things that we make. So we can't live without rare earth. The good news is that rare earths are basically everywhere including in this country. We have a great mine in Mountain Pass in California. I visited it that extracts a ton of rare earth material out of the ground. The problem is processing and refining. China has captured that market over the last 40 years and then started dumping on the world's markets depressing price driving everyone else out of business. We need to make sure that that doesn't happen with some smart tariff policies, a price floor. And then the third one is we actually need to keep China relying on us so we have leverage over them. And in particular, the one piece where that exists is in chips because this is the one area particularly advanced chips that China has not been able to figure out despite massive amounts of theft, hundreds of billions of dollars poured into it. They've not been able to produce the machines that are necessary to manufacture chips at 3 nanometers, 2 nanometers and below. And as a result, they cannot have the fabs because we're restricting export of that equipment to them that can manufacture chips at that level. I also think that it's vital for us to win the AI race. Of course, AI is going to be essential to the future of war and future economy. And to do that, we need to make sure we don't export our AI chips to China like Nvidia chips and others.

Look, I think it's a mistake and here's my analogy to this, right? So, we're in a race with China, AI race with China, right? It's undisputable, right? You know what's another race that we were in with a great power, let's say, 60 years ago, the space race, right? Imagine during the space race with the Soviet Union, we would say, you know what, let's sell our rocket technology to the Soviet Union. That's how we're gonna win the AI race, right? And yeah, maybe we won't sell them the very best rockets, but like the second best. That's good enough, right? Insanity. Like, if you were to propose that in the 1960s, you'd be run out of town as a Soviet spy, right? This is the equivalent. In fact, it's even worse because, you know, you could argue the Soviets getting to the moon bad, but not like existential to our interests. China getting to AGI, however you want to define it. I prefer actually the runaway intelligence concept or recursive self-improvement first. Total disaster for us, right? Because that's economic power. That's military power. Why would you do anything to enable them to get better? In fact, if you listen to the Chinese AI companies like DeepSeek and others, they're saying the one thing that is constraining our progress is inability to procure chips, the export control that the United States has put on chips. So let's do away with the one thing that is constraining our enemies. Absolute insanity. And the argument that has been used by Jensen Huang, I think very disingenuously on this is let's keep them addicted to the American AI stack. Well, first of all, Nvidia chips is not American AI stack, right? American AI stack is Nvidia chips, American cloud providers, American models. That's the stack. If you want to talk about getting China that stack, that's fine. But not the chips.

Yeah, it's first of all, I don't think that he actually believes that we're in a cold war with China. He's actually publicly said it doesn't actually matter if China gets first to AGI. What? Like you can only say that if you actually don't care about the United States winning the race and he actually says that, right? So, as someone who is an American citizen, Jensen, someone who was born in Taiwan, you know, you're betraying the country of birth, you're betraying the country that's adopted you when you make statements like that. It is absolutely incredible to me that he would say that. And I think that strategically he's also thinking about his business and he's seen that all of his customers, right, all the cloud providers and all the frontier AI models in America are building their own chips, right, TPUs from Google, Inferentia and Trainium from Amazon, Maia from Microsoft and on and on. So let's sell the chips to China, right? That's the strategy I think that he's trying to execute. But it makes no sense for our national security. It is literally surrender. And luckily that the Trump administration has not enabled the very best chips, the Blackwells and the Rubins from going in. Jensen is arguing hard to get rid of all export controls, which would be like total insanity. But there should be policy of no AI chips going to China, period.

Yeah, look, the problem with saying that the H200 chip that we're enabling for export right now is much, much less capable than Blackwell and much less capable than Rubin for sure, but you get enough of them and it doesn't matter, right? You can put them in a cascade together and actually train models and run models and the more you have even the lower-end quality like H200s which by the way a few years ago were the best ones and that's where you saw ChatGPT emerge right on similar chips like that, those are the chips that you can still build incredible models on, right? And combined with what the Chinese are doing with distillation which is basically theft of US models by creating hundreds of thousands of these bot accounts...

Yeah, it's basically theft of US models outputs, right? They're creating these accounts in Claude and ChatGPT and Gemini, hundreds of thousands of them and they're sending millions of queries for various topics and capturing the output and using that to dramatically improve the model. Right? So sort of this post-training aspect that is becoming more and more vital to model creation. So combined with the chips you're giving them even if they're low quality and distillation that's why they're like 12 months behind. Without either of those, they'd be years behind, right? And wouldn't we want them to be years behind, right? Because, by the way, every single AI model that they build, guess where it's going? It's going to the military, right? So, you're literally contributing potentially to the death of Americans, either directly in a conflict with China, which hopefully one day will not happen, but also to the weapon systems they will sell to Iran, they will sell to Russia, they will sell to Venezuela, all sorts of adversaries that we may have to fight one day. You're literally helping Americans die with this policy that Jensen Huang is promoting.

Yeah. So, I was born in Moscow, immigrated as a kid to the United States and was always interested in cybersecurity. My dad and I actually founded back in the 90s an encryption company. It was not a successful CrowdStrike, but was my first kind of bug while I was still in high school at entrepreneurism. And then went to Georgia Tech and was actually the first graduate out of the new then new information security degree now called cybersecurity. Wound up at a company called McAfee that some of you may recall was like the large...

Yeah. Well I didn't know him then. You know this was years after he left the company. But at McAfee I was responsible for running the global threat research organization and investigating all the major cyber attacks that were coming across our global customer base. And in 2010, a very important event took place, which is I got a call from Google, saying that they've had a hack and they wanted to work with us on investigation of it that impacted a lot of McAfee customers. And it ended up being from China. And it was the first time that sort of the world woke up to the fact that China, not just criminals, not just hackers in basement were breaking into companies, stealing intellectual property. And later on we did investigations against Iran and Russia and North Korea really all the major players that were breaking into both government networks and private sector networks. And the idea behind CrowdStrike was that the world has changed and now you're not just dealing with some criminal who doesn't really care about the target, right? Because they're after financial resource. If they can't steal a credit card here, they'll steal it there. And if your security is good enough that's enough of a deterrent for them to say the ROI is not worth it. I'm going to move on to you. Right? So, the old adage of you don't have to outrun the bear, just outrun the guy running next to you worked really, really well up until about the late 2000s, 2010s. And then it broke down completely because if the bear really wants you, it doesn't matter who else is running. And that was a targeted intrusion threat from these nation state attacks. And it required a different philosophy for how you confront it. So we kind of were able to ride that wave of the emergence of nation state threat actors in cyberspace, the emergence of the cloud, the early AI efforts to build a really successful company that now McAfee doesn't exist, Symantec doesn't exist and CrowdStrike is one of the big cybersecurity vendors.

Well, you've seen this over and over again in the last six months or so. Every single Anthropic release in whatever area, stocks in that field just tank because everyone assumes that field is gone. And I think that's just a very unserious way to look at the situation. Some companies will be impacted for sure. I think in cyber it's less true than anywhere else because Methos is fundamentally an offensive tool, right? Methos looks like Anthropic is actually never going to release it. But it is incredibly powerful at finding vulnerabilities.

Yeah. Look, anyone that's predicting that far out in anything, but particularly AI that's moving at literally almost the speed of light here, would be totally foolish. But I do actually worry about jobs. And it's not that the total number of jobs might decline, but clearly, and I don't think anyone is even arguing against this, the jobs will change. Like I think software engineering, the profession that I learned, my bachelor's was in computer science, is basically going away. I don't see in five years many people, maybe a couple percentage points of the existing profession, still coding. It doesn't mean that they won't be doing something else. They might be prompting Claude Code. I mean you look at folks like Anthropic and others, they basically write no code at this point, right? It's all prompts into Claude. And I've been building apps non-stop over the last six months without writing any code. So professions are changing. Some people will be able to adapt easier than others and I think others will not. And by the way, I hear this in the legal profession, right? So many associates, junior partners are being replaced by AI. So there will be a huge amount of disruption. Not everyone is going to make it through that disruption. But will there be other jobs, more economic opportunity created? No doubt that happens with every technology. But in the process, I'm sure when we went from horse and buggy to cars, a lot of the people driving those horses were also like, I'm not going to learn this car thing and I don't want to. And there was a lot of pain along the way.

Everyone should do it. Everyone.