Senior posts on the National Security council and in the department of commerce. Rom 19999, he was serving as the c. E. O. And president of two publicly traded software companies, free markets incorporated and prior to that, was a consultant. He is a graduate of the United States military academy of west int and has a p hmp d from Princeton University and former army officer and is a soldier and statesman and interviewer and a scholar and entrepreneur and it is a real pleasure. We asked david to join us. And slept paper on economic might, National Security and the future of the paper he coauthored. And it has a very important. Deas that we have to discuss and associated economic crisis stronger and even more competitive. And david, you had a unique advantage on the u. S. Economy over the past two decades especially from the 2008 financial crisis when you served as under secretary of treasury and c. E. O. At bridgewater, what motivated you to write this paper to sustain this . Mr. Mccormick thanks for having me and join me on the podcast and im happy to talk about this paper and something i was thinking about for years and came out of my time in the government where i reported the economic and the National Security team and also served in different roles in the white house and treasury and over time as i reflected on some of the changes in the world and some of the design of our government, i started to question whether the United States was set up for success. And just to step back for a minute on that, there were a number of trends that maybe questioned whether america had a strategy of maintaining its economic might and the National Security strategy said that Economic Strategy is and those includes the emergens of a winner takeall that offers advantage and not just arent just economic technology, but National Security benefits. Its the unbelievable interdependence and we see it now in covid and the dependence we have on supply chains around the world in china and the third trend is the challenges presented by cyber space. And those three things were coupled with really the thing that was most on my mind which was the rise of china, is a very significant force in the world and strategic competitor. It became clear to me that while chipe in particular but other countries have a strategy for privacy and leadership in the world and integration of Economic Security and didnt feel like to me that the United States did and that led me to reflect of what i thought the policy ageppeda should be and how the government should be organized to be more organized. In this competition with the status of the economic model and the Chinese Communist parties and exploiting that model, what like is what you try to preserve our competitive advantages but to compensate for some of the weaknesses that the Chinese Communist party is exploiting. Could you say how this plan is framed to build and apply American Economic power as a National Security strategy of these three pillars which are useful and one you mentioned is one we have to innovate and winner take all and then economic state craft is the second pillar and the third emphasizes International Coordination with likeminded countries that have snifment indiscernible] can you give a quick summary of the overall approach . Mr. Mccormick you have seen this as a historian as the history of the United States, various times that they predicted the decline of america and its role in the orlando and power and when i started to think about this question of National Power, there are many dimensions, military power, the value of our power and values, i focused the paper on the economic on of sbrick security and as you said there were three pillars that i thought were most important, one was this notion of innovation and creating winner take all advantages to those who are in the lead, 5g. The implication of 5gmp from a National Security percent perfect tiffer. That is not the only area. There are a number of these technologies which are crucial to economic might that gives enormous National Security. And notion of this tech notion rnoling is not the a what to think about it. Developing innovation policy to ep sure that the United States has the appropriate funding and Sports Technology and although it raises questions which we hope we talk about. The second part of the strategy is closely integrated is the economic statecraft and bringing together the various aspects of our economic policies that touches or National Security, investment policy and export control policy, the policies that affect how we invest and give access to Core Technologies need to be integrated and new technology has been implemented. But those processes are much outdated and need to have a view of how we use those technologies. And the third part as you said is the notion of key alleys in innovation policies and Investment Policies and how we think about export control. This is a game where we are not going to be successful if we isolate ourselves and our ability to be effective is highly dependent on those alliances and those alliances being circles where our most close allies and sharing of the most sensitive things and we have very significant trading relations including china sm the idea is not to stop being a free marketdriven country but how we think about these key factors. What is important and what you convey, this isnt a government problem but a government and private sector problem, we have to Work Together on this. We are here and hoover is here and you are here virtually in the heart of innovation and we have a program that you call the track tracking dialogue and has a venue for industry to come together with government officials and department of defense and has been eyeopening on both sides. On this, the innovation model has changed over the country. Can you comment about why it is important for the private sector to be involved as the government that china sees as valuable because they apply it to their Fusion Program and made in china 2025 program. How do we Work Together better across the public and private sectors to compete . Mr. Mccormick the enormous dinism of our Capital Markets and our companies and the innovation that comes out of there is at the core. The most important thing in many ways is to get out of the way and let those companies do the great things they do and the america cap and u. S. Economy is the beneficiary of that. The private sector is at the core. And what the government can do is make sure that ultimately there is not overregulation that stands in the way of that innovation. It can support immigration with the caveats of protecting on the National Security side. But the the skilled immigrants have been a great source and one and the thing im talking about is uncharacteristic for me and something that i wrestled with as i thought about the world as and not what i thought it i would be. This new generation has disproportionate disadvantage to the white house at the National Level not at the corporate level out nd we see that playing with china in particular that our current model we need not to take away but need to add to it in the following ways. First, im advocating a much more significant increase in r d funding. That is not a new thing. They would advocate the same thing and look at our investment at r d and has declined by about half in the last 50 years. There is an opportunity to bring that level back. But the second thing that that im arguing for is to have Government Support and Government Investment in core Critical Technologies and where the technology is so significant and such Strategic Value where a set of principles can be applied that ensure that it is investing government capital in a way. And these are sectors where ere is heavy subsidies and sectors which give enormous advantage, like ai and the benefits of winning and have a winning that we simply cant ignore the competitive landscape. And i think to do that well, you have to be very premmed. This area opens up all the risks of poll rightization and have to be to free market principles. And there are ways to do that in ways that brings and eases the flow of capital and dynamics. A good example. And Artificial Intelligence where the government takes it and [indiscernible] it makes that investment more attractive for private capital and source for attracting private capital. But the bottom line is, imagine a world on the current course where we could do what we have den doing for the next 10 years, we look back and say there should have been much more we should have done. My colleagues wont let you get off easily on this particular topic of where do you draw the line to make sure we dont create incentives that lead to waste of investments and inefficiencies and so forth and hoover is where milton for many years has hung his hat and distinguished nobody ell laureate and talking about the concerns is this an additional policy. What is mccormick proposing here. Friedman said the government solution to the problem is usually as bad as the problem. Skeptic about what government should do. What are some of the other ways you can which can have government and private sector to Work Together and preserve the free market incentives and guard against the cronyism and bureaucracy . Mr. Mccormick i know that is a question that is both appropriate and one that i wrestled with and i dont have all the answers just to start with. If i go back to 20072008 time frame and i think about my experience then in negotiating through the guidelines with the chinaes and the point im making and i thought about our free market agenda, our Investment Policies and even our innovation policies and i look at the world as has evolved in the last decades but what is true we are in a whole new environment and whole new world. And i think having the wisdom to test ideological thresholds is necessary to be able to be effective and compete in this new world. I turn the question around a little bit and say, there is a world where Technology Leadership is giving outside National Power advantage. On the current course, i think it is indisputeable that Technology Leadership is able to emerge in kine. How do we confront that National Challenge in terms of building our oldville talt without undermining the principles that will made our economy so successful and thats where i come in, recognizing the risk of vernment overreach and the only way i can think about doing that is through some sort of principlebased approach and thinking that would help guide a number of key Decision Makers to make quality decisions. I experienced that to a large disagree in the process and thats not to say the process is perfect and doesnt have significant issues, but that is a process that brings the government together to review investments, corruption and misallocation and so forth. That provides works for a lot of integrity. This process would have a lot more risks. But there are examples where the vernment is huge strategic demands. A long and significant relationship with the government in Silicon Valley and the significant has a lot more and he second is the recent [indiscernible] longterm support has allowed a real break through in commercial state travel which will be great advantage to the United States. I think have every right to press and be concerned, to be skeptical and i think that skepticism will lead to a good thoughtful debate. Imagine nterer lets the alternative. Thats how im wrestling with it. There is a lot of continuity to what you proposed and think back to the darpa fet and spun into the civilian. But what is interesting about the paper, the innovation model, these technologies are developed in the private sector and already vr military and National Security and not to mention implications who are not going to be in a position to provide influence in the future data economy and so forth. And i think that is the key and the safeguards that are put in place. There is an element of conventional wisdom, americans working lean and not that, lies and but below im seeing a lot of cooperation especially in the area of chinese economic aggression and now especially the way china has handled the covid19 crisis and warfare operations against free and open societies and create with the death traps i sense an opportunity now. What would you recommend we do in this area with your proposal in terms of fostering International Cooperation and working with likeminded countries . Mr. Mccormick there is cooperation and collaboration that are operating in the government on a wide range of topics. The first point i make while the recommendations that im making certainly are appropriate in light of some of the issues with china, but thoy it is in response to china. The recommendations that im making are the necessary thing to maintain leadership, privacy in a rapidly changing world and i want to make that point. Im trying to test this in terms of how we should operate. The alliances, but they havent existed win the context of u. S. Government and our allies in a cowherpt way that brings together all the aspects. The export control regime, the investment regime, the cybersecurity initiative, the initiative policies, the r d, these are separate stove pipes with wellmeaning people working their aagenda ave and their brief. My first point is we dont face off to the world and dont operate within our policy regime in an integrated way. Thats one point. The second point and you know this, we have varyying degrees of ajile answeres and there is a subset that we are collaborating with that the most Technology Projects could be easily undertaken if we did so. A perfectly good. And make the combination worthless. So how do you your proposals in your paper and get to implementation . How do you get it done . What are your ideas about how your proposals could be impolicemened effectively . Mr. Mccormick there is probably the whole of the o. M. B. Could be filled with studies to reform the government that vr fallen by the wayside and are in the guts of the history. This is a hard problem and one that is requiring i think some really funnel rethinking. I think the large problem is that there is no single blace for this intersection of National Security and economic might exists and in fact, the people that are in each of these areas are by and large trained to think somewhere in their area. I dont want to overstate this because there is some collaboration. I was on the National Security council and National Economic council. You may give a highfive but those issues were treated separately. And you think about darpa or the office of science and technology or the aagenda after that is taking place in the intelligence world, those puerto rico separate and not integrated. And so the question is is there organizational changes that could bring it to the forefront that could have Budget Authority and Decision Making authority and representative at the appropriate level of government to make fundamental change happen. And my proposals are a range of proposals. I have three designs. The designs are less importance than the preliminary that would have to be achieved. Some with success. And a different problem. But we are fundamental restructuring and and came doing. And much more positive effects. I think something of that significance will be required. Budget authority, Decision Making authority and integration of these different things. You could do it through the National Security council and you could separate the different aspects and give them different sources of responsibility as long as they were integrated. But dramatic change has to happen. The second thing i would say, the second cast of characters need to change somewhat. How many meetings did you sit anywhere you had a number of people about technologies who didnt have depth of technology. That is my experience is that these issues are now evolving and these Emergent Technologies and change, it requires a whole new set of people and break the model. You cant come up through the Civil Service for 20 years, you need to have a new set of experiences. We have to create an incentive structure to get the right people at the table. But that is what is going to be required. That is one of the big findings. You have to make it easier for people to serve the government. Your career, i think is a model of that and the r d and private and National Security and bridge water. I think people who have th