Former Army General Stanley Allen McChrystal shares some insight on how leaders, and society in general, should respond to the current crisis. Due to any individual leader’s lack of expertise in a particular field, establishing a trustworthy network of people and decentralizing leadership on the basis of expertise is the primary strategy that General McChrystal recommends to leaders in dealing with COVID-19. Along with expressing the value of maintaining a humble mindset during these times, McChrystal reminds viewers of the growing presence and on-going dangers of dis-information. General McChrystal also discusses how the U.S.-China relationship may now be evolving and what needs to happen in the 2020 election.
Ryan Morfin: Welcome to Non-Beta Alpha, I’m Ryan Morfin. On today’s episode, we’ll be interviewing General Stanley McChrystal, retired four-star general who led coalition forces in Afghanistan, and was a commanding officer of the Joint Special Operations Command. Today he’s going to talk to us about leadership, he’ll talk to us about the future of the U.S. China relationship, and he’ll talk to us about the 2020 election. This is Non-Beta Alpha.
Speaker 2: I guess I didn’t know. I guess I didn’t know.
Ryan Morfin: General Stanley McChrystal, welcome to the show.
Stanley McChrys…: Thanks for having me, Ryan.
Ryan Morfin: Well, we appreciate you joining us today to talk a little bit about leadership, a little bit about geopolitical risks we have as a country and a little bit about maybe the 2020 election. Why don’t we start with leadership first, you’ve talked about this inverted experience that potential leaders have today and how they may need to be more transparent about what they do, and do not know. Maybe you can talk a little bit about that in your experience about how that builds trust across the organization from the bottom up.
Stanley McChrys…: Absolutely. An interesting dynamic happens when you have rapid change in technology or anything to do with society because … leader, typically we want technical competence, sometimes mastery, and we also want experience, the intuition that grows from the fact that you’ve seen things before. What we have when we have rapid change though, is the expertise, and the mastery is often lacking because the more senior person, the one who’s got experience that is experienced in life, but it’s not specific experience in the technology because they typically have not been involved in that at the user level. They may be aware of it, they may have introduced it in their organization, but they didn’t use that particular equipment or they didn’t use the tactics and processes around that.
So, at first it seems very uncomfortable for the senior leader because you feel as though you’re telling people to do things without the requisite expertise, to really tell them how to do it, but it’s actually a healthy dynamic because the person with experience and wisdom that comes from time is still a good person to lead the organization. But the humility that comes from recognizing the fact that you’re not the expert in everything, because you’re never the expert in everything in an organization, although you may think you are. The humanity that comes from that gives a new rule to junior people, it gives them a new stature, they are the experts in something, they get to teach the boss about something. It creates a very healthy dynamic, and it requires information to flow up if the senior people are interested and have an appetite for that. That makes everything a bit stronger in my view.
Ryan Morfin: Especially today’s world where technology and social media and video contents are all changing, I think people are digesting information differently. Especially as we’re in this new environment with coronavirus where people can’t travel for business, and so I think it’s going to be critical for business owners to find new ways to communicate with their clients. Can you talk a little bit about connectivity? I mean, given that we’re all now living in purchasing products in a digital environment, what does connectivity mean today in today’s world and what do leaders need to think about as they think about how they network going forward?
Stanley McChrys…: Yeah, this is something I’ve given a lot of thought because it’s very interesting. I took part in a Zoom hosted birthday celebration for a young man who was at Yale University when I started teaching and then became an early intern at McChrystal Group and then worked for us for several years before, now he’s got his own startup company. We took part in that, and afterward he wrote my wife and I note of thanks, and he said that, “You all, he was talking about us, have this extraordinary network of people who think they have a close relationship to you, and in fact, they do.”
He was comparing that to people who have a big Rolodex and think that they’ve got this network of people that they’re close to, but reality, those connections are pretty superficial, and he was being overly kind to us. But it made me think about what a real network, a person’s network or a person’s connections are, because many of us have very loose ties to a lot of people, we’ve met them, we could call them, we have false bonhomie when we were at an event, we hug him and say how great it is to see him, but it doesn’t go to the level of real ties or passion, real information that matters, and it doesn’t go to relationships that have to send you to give you deep trust.
I got a friend of mine who has what he calls the 495 Club, and he’s referring to the beltway around Washington D.C. He says, “There are a group of people, if they call me at 2:00 in the morning and ask me to go stand on the shoulder of 495 in golf shoes and in a loincloth, and a light coat of oil, I will do it.” Now, then he says, “It’s a small group, but the reality is there are some people in whom I trust and my relationship is so strong, I won’t question anything they ask me to do.”
So, now I think particularly as we’ve gone to work from home, it’s time for all of us to think about what our connections really are. We say, “Okay, we’ve got our family members that are close and they’re automatic.” And they may or may not be really close, you may not talk to them very much, you may love them but who is it we actually interact with? Who can we go to when we need to make something happen? Who comes to us when they need real information, advice or something to happen? I think that the fact that we are going to the somewhat awkward digital tools that we’ve got in organizations are going to be very interesting ways for us to measure that and to measure how influential someone in an organization is, we’ve got Microsoft Workplace Analytics and other tools where we can actually measure some of that. Then we’ve got our own experience with that.
So, I think we’re going to look at what real networks are, because again, real networks are not just a physical technological ability to connect, it is the fact that we do connect. When a network is actually working, when it’s actually creating energy, the network itself has a power, all its own. The fact that suddenly every part of that network leverages some other part of that network or all of that network at times, giving them much greater influence, power, knowledge, and all those things. So, I think we are going to find increasingly creating those networks, maintaining them, understanding them, is going to be just as essential.
Ryan Morfin: Well, and you really did a great job especially JSOC and then running ISAF, understanding that we were fighting a different type of war and we needed a different type of architecture for management and creating a networked organization. Are other militaries, maybe Russia or China, are they focused on doing similar types of decentralized empowerment or is that something that’s unique because of the war on terrorism and our allies have figured this out? Is this a competitive advantage as well?
Stanley McChrys…: Well, it’s only a competitive advantage to the extent to which we use it, because I think military is particularly because there’s a geo-strategic importance to everything that a military force does, even a small force can create quite an incident or an issue in the world. There’s this constant tendency to want to centralize things, and with the technology now, there’s a constant desire to pull it higher and higher, in the fight on terrorism, there was this constant pull to pull decisions on strikes into the White House. And I understood that because some of them were extraordinarily sensitive, but at the same time, nobody in the White House is going to understand that operation well enough to make a decision on the operational side of it.
What they have to do is try to make a judgment of one, is the operational argument convincing, and can they put it against the context of the geo-strategic and political backdrop? I think that’s happening, that tension is in every country, particularly autocratic countries. So, I don’t think we’ll find that our major force are more decentralized and therefore faster than we are at that thing. So it could be a competitive advantage, but it’s not a competitive advantage unless we nurture it. Because as I say, it’s not in my view, the natural state of things, it has to be forced and understood to be a key attribute we’re looking for.
Ryan Morfin: How do you think the future warfare is going to evolve? It’s going to be more urban, more operational door to door or is it going to go back to industrial revolution type of moving large amounts of people and equipment across different land masses? I mean, do you think it’s changed permanently or is a future in the 21st century where we’ll go back to the 20th century mindset of Cold War strategy.
Stanley McChrys…: Yeah. That’s the multi trillion dollar question. Here’s what I’d say, one, right now we don’t have a clue. The reason I say we don’t have a clue with all those, there’s been conflict in the last few years and there’s been a huge conflict. So we really don’t have any idea of what the impact of truly all out cyber warfare would be, the potential use of weapons of mass destruction of all kinds by either potentially nation states, but more likely groups that would be either in the conflict or adjacent to it and want to affect it in one way or another, the effect of hypervelocity weapons.
This typically happens when you have enough period between major wars, people want to develop new technology and people have theories of how that would work. Then when you get in the war, it’s always a bit different, and right now, I don’t think we have very clear view at all of how much it will be, and then how much the information side, which is influencing your population and other populations around the world is going to play. So I hate to dodge the question that way, but it’s a little bit of blind man’s buff. We’ve got to be boxer stance to be prepared to go in the direction that the war goes.
The one thing I would say is, for the United States, because everybody’s watching us and we spend such a disproportionate amount of money on defense. The next war we’re in will not be the war we’re prepared for. And you say, “Well, wow, we do all this effort to prepare for it.” That’s because any enemy we face will, I think, be rational, the last person to fight our kind of war, Saddam Hussein did it in 1990, when he put his army out in the desert and he led the most advanced army coalition in the world, literally spend six months getting ready in front of a golf ball on a tee and then pound them. No one else is that stupid. So, what they will do is they will look and see what kind of war are we prepared for? What have we built out? What have we trained for? What is our inclination? And then they will fight a different kind of war.
I mean, it’s just rational, and if they’re intelligent, like Al Qaeda was, Al Qaeda basically fought judo against the United States. Osama bin Laden stated strategy was to strike the United States in a way that would inflame us, we would react and in so doing, we would overreact and we would go into the Arab world and we would irritate everyone in the Arab world, we would create resentment and we would bankrupt ourselves in the process. And he got it pretty damn close to right. So, I think we need to think in those terms that what rational opponents are likely to do, and then assume that we can’t by definition, therefore have a perfect preparation.
Ryan Morfin: Yeah [inaudible 00:13:26] counterinsurgency war, and going back to where things are evolving today, I mean, hyper war with hypersonic missiles and AI driven weapons systems, do you think that the pace of decisions is going to evolve to a position where it’s going to be too fast for a chain of command to have to take control of the situation? Is it going to be a domino effect in the future?
Stanley McChrys…: Yeah, actually I do Ryan. We always say that we’ll never put machines in the lethal loop. He will never let machines make the decision to do lethal operations. We go back to some of the older movies like Fail Safe, with a failure of a computer system, almost produces nuclear war, and it does produce nuclear tragedy. But if a hypervelocity missile is coming at U.S. navy warship, there is not going to be time to have a human in the loop on the defense mechanism, there are American weapons systems that being developed some pretty good ones that can reach out pretty far and shoot and even shoot multiple shots to try to engage them. But it’s going to have to be driven by a machine, because the only way it can take in the information, make the decision to fire, do the calculations and execute is going to be faster than having a human in the loop.
That’s disturbing, from the standpoint of one, we hate not being in the loop, and two, if someone was able to bait or spook our system and they could get us to be shooting when we didn’t want to, then you get back to the Fail Safe scenario where you suddenly end up in this fight that you really didn’t want, and you might’ve even caused it unintentionally.
Ryan Morfin: Well, you bring up a great point. Having a cyber attack spook our systems and then kicking off that chain of events that we may not want to happen. At what point in your mindset from a cyber doctrine does some hacker or organized crime or a nation state crossover to a point where they generate actual attack or counter attack in the physical dimension?
Stanley McChrys…: Yeah, Ryan, this is something we haven’t figured doctrine for, because if you go back 30 or 40 years, if a nation struck the United States or any nation, and they did economic damage and whatnot, that would be physical, and it would be determined to be an act of war and it would generate a response. However, if somebody attacks the United States and hits SCADA systems for power or for banking or for things like that, they could do massively more damage to us, and yet it’s in that gray area. We’re not a 110% sure, we think that’s an act of war, that’s just some espionage slash screwing with your enemy. I would argue that what happened in the 2016 election, there’s clearly enough data to show that people trying to influence the American people, not change voting machines, but set it up enough misinformation to affect the election.
I think that runs right on the edge of attacking the sovereignty of the United States and the integrity of what’s important to a democracy, which is the electoral process. Yet we haven’t talked about bombing anybody because it’s hard to know, we can know it is coming from Russia or whatever, but is it the Russian state or is it groups inside it? It’s because that deniability, that ability to cloak it put just enough doubt on it is there, that makes it even more dangerous than the normal?
Ryan Morfin: Now, that’s a great point. Not knowing attribution makes it so difficult to put fingerprints on an attack. Well, one question for you, one thing that’s changed over the last few years is that, there’s been a move towards U.S. space command, and as a new domain space, what are your thoughts on how it was organized and rolled out, and what are your thoughts about the future of a new domain opening up?
Stanley McChrys…: Yeah. I’m not hand over either way, that the thing we have to remember is what the navy does on the seas, what the air force does in the air, what the army does on the ground, are not isolated things, as you know from your experience. And you say, “Well, space, that’s another domain, so we’re going to have a separate force to go fight up in space.” On the one hand, you have the ability to do better training, professional development focus, create expertise in that space force, and you have budgeting capability for Congress to determine its relative importance by focusing resources at it. But if you create silos in the process, like we’ve always struggled with our military, if we create silos that wrestle against each other, then we’ve actually made ourselves weaker because we’ve created gaps and seams.
Space is important because it integrates with all the other parts of how we might fight. So, the same with the others, we spent a tremendous effort in the 80s trying to increase the joint nature of United States military operations. Then in Iraq and Afghanistan, we struggled with some success and a lot of failure at creating that whole of nation gap across outside of military, including other parts of the government. Anything that pulls away on that and even gives the impression that we’ve got separate entities that are going to be able to succeed or fail alone and create cultures that are harder to integrate would be bad. Now that doesn’t have to happen, but that’s the caution I throw out.
Ryan Morfin: That’s a good point. You’re bringing up budgeting of armed forces. So you were the commander of ISAF in Afghanistan and coalition NATO countries, maybe some leadership tips, running a large organization cross-culturally, any takeaways because you grew up in the military and obviously you had force relationships, but now as the ISAF commander, you had to command generals from other countries, any takeaways from that?
Stanley McChrys…: Sure. I had been for the previous, I’d been on the Joint staff before, so I had some experience with it, but then I was five years in special operations. So when I took ISAF, first time I was formerly in a NATO command and a lot of people warned me and they said, “Well, you’re not going to like [inaudible 00:20:29] coalition, you’re going to like NATO because nobody wants to work, nobody wants to fight, et cetera, et cetera. That really wasn’t what I found, what I found, we had 46 nations in the coalition, NATO nations and obviously many others. They generally wanted to contribute to the cause as best they could.
Now, what I had to understand and I try to communicate to people is, first, many of those countries have completely different capabilities in terms of equipment, training and whatnot. So you can’t put them next to American units, we are incredibly well funded, we’ve been at war show many times since World War II, there’s a lot of operational experience. That’s not true of many of the partners we had, doesn’t make them bad people, it’s something you have to understand. People used to say, “Well, the only people fighting in Afghanistan are Americans.” Because we had the biggest force, but actually the per capita casualty rates, the highest was Estonia. And you say, “I didn’t even know Estonians were there.” Yeah, they were there and they were fighting and they were dying.
So, it was important to remind people also the level of experience … we had a German force that was in the North of Afghanistan and great people. They got in a fire fight one day and lost four guys, and we sent American medevac in to get them under fire, and the Germans were deeply appreciative because the medevac went in and got shot up in the process, but didn’t back off and pulled their comrades out. But I went up to see the company, the Germany company who lost these four soldiers that afternoon, and they were deeply impacted by it. Now, losing four comrades is always impactful, but they were deeply impacted. Then as we talked through it, I learned that this was the first four German soldiers killed in combat since World War II.
So none of these soldiers had experienced that, none of their fathers had experienced that, maybe their grandfathers had. Then you go now, wait a minute, of course. If you are willing to have some empathy for your partners, don’t start by saying, they’re suck because they’re not me. You say they’ve got different frame of reference, different political limitations. We had military units in Afghanistan led by Lieutenant Colonel who would get called by the president or prime minister of their country about once a week. Imagine the pressure of that. So, when I put all of that into context, then suddenly I go, the first thing is if you’re trying to build coalition, build a coalition, treat people like you want to be treated, develop empathy, try to make them fit. Don’t start with the idea that everybody’s got to be the same because we want to be the same, it’s just not, at the end it’s a fool’s errand.
Ryan Morfin: Well, that’s, I think, great advice for anybody who’s doing a JV or working on industry wide project as well. So, one other question that I think is going to be a hot topic going forward, is the just geopolitically, is the Arctic, and there’s been a lot of things moving in the last two years. I don’t think the media has really been paying attention, Russian Special Forces, just did an exercise over the Arctic, and there’s a lot of submarines hanging around there. What are your thoughts about the geopolitical importance of that?
Stanley McChrys…: Well, it’s funny, most people of my age, think of the Arctic one way, but it ain’t that way anymore. Global warming has changed it, there is navigability in the Arctic so that it is a different location, has different geopolitical import. Also, there’s technological ability to operate there in a way that we couldn’t before. We used to think of the Arctic as this frozen place and Soviet bombers and missiles would fly over the Arctic but other than that, it was not that important. I think it’s now a hugely important, and so I think we need to step back and say, “All right, what parts of the world in terms of resourcing, in terms of navigation, transportation are going to matter?” We can’t seed any of these to anybody.
I’m not saying the United States has to go and rule an area, but we can’t give away freedom of access or movement or trade or interaction with local nations anywhere. We can’t give it away under threat of force, and we shouldn’t give it away simply because we’re looking at the other way and the Chinese are investing in Africa and South America, that sort of thing. It’s not a global chess game that has to be a war, but it is a global competition. Think what large corporations you’ve got to do, and we have got to, in the United States in my opinion, get a much more coherent economic manufacturing policy that underwrites that because our competitors are doing that.
Ryan Morfin: Well, you bring up … I wasn’t going to go there, but you brought up a good point about global competition and Africa. I mean, AFRICOM stood up, I don’t know, almost a decade ago, but I probably … it’s right to assume there’s more deployments into Africa. It’s becoming more competitive environment. What are your thoughts about Africa in the next 20 to 50 years as either a place for conflict or a place for economic opportunity?
Stanley McChrys…: Yeah, I think it’s both. I looked at projections for Nigeria, I think they’re going to have 750 million people at 2050. If the cost of the price of oil continues to stay low, and I think there’s a natural cap on the price of oil now, simply because of technology to get it has improved so much. So a place like Nigeria has got an existential question front of it. How do you run that kind of country with an oil based economy and limits with that many people? That applies to across, particularly Southern Sahara. I think Africa has got huge potential, it’s got a population that is getting increasingly educated, getting increasingly focused. They had decades and decades of pretty weak governance. Some of that is improving pretty significantly, so that will change the dynamic, but they still got a ton of challenges.
Some of the challenges are things like terrorism and particularly up near the Sahara Mali and things like that. These have to be dealt with, but those, I don’t think are existential threats. Boko Haram, again, they’re problems, but they really are symptoms of larger problems of governance and economics. I worry more about a couple of potential. I think COVID-19 could hit Africa south of Sahara incredibly hard. I think that if we have a depression like economic downturn and there’s potential if that’s the way this is going to play out, it will hit up developed companies hard, it will hit those with less even harder, and so there will be the potential to have all kinds of famine and challenges and the unrest that will come with that. Then you’ve got literally predatory actions by nations like China in there.
Now, I’m not saying that China is irrational, I actually think they’re fairly strategic. They have a view that you need to be engaged around the world because it’s a long term game. You’ve got to do the investments, you’ve got to build relationships. They’re better at parts of that than other parts of that. But we are still in the postcolonial era hangover. So there’s still resentment to parts of the West for the perception of that. But we have got to get off in my opinion, we’ve got to get off the fence and we’ve got to get in these areas and we’ve got to understand that we need a deep relationship, we need influence, we need trade, we need all of those things over time because you can’t afford not to be there.
Ryan Morfin: Yeah. Now, it’s one of the fastest growing parts of the world and very gifted for natural resources, so I do think it’s going to be a center of influence in the next 50 years. Going back to something you just mentioned though, with COVID in Africa. I mean, someone, I was talking to a doctor, I said, “Look, it could be worse given the current situation.” He said, “What are you talking about?” I said, “Well, this could be Ebora everywhere.” Then he’s like, “Okay, you’re right, this could be worse.” So, as people are moving into the urbanization in Africa, the potential for more dangerous types of viruses to go global, I mean, we saw how fast it’s got out of Wuhan and all over the world. How do you think the government’s preparedness is going to have to change for pandemic posture going forward?
Stanley McChrys…: Yeah, I think every government and I’m talking about local as well, are going to have to be much more wired to responding to threats, not just the pandemic but wider threats that are viral in nature [inaudible 00:30:11] have to share information to make decision making. There’s a great quote by Italian diplomat or not diplomat, bureaucrat, referring to the challenge that Northern Italy had, and he said, “The virus was faster than our bureaucracy.” So I think the first thing we have to change is how we respond decision-making and coordination wise, get any emerging threats, and that’s economic threat that’s pandemic and whatnot.
The second thing is we have to not think about it as a local problem. Not a local problem where we are and not a local problem where the pandemic emerges from or eventually goes to. Something like a pandemic and actually in an economic depression around the world, there’s no place that doesn’t matter to every other place. If people are dying in droves in Africa, there is going to be an attempted migration, Europe would feel first, but it would be painful like we saw a few years ago, there would be movement of infected people, there would be beyond the humanitarian crisis, there would be a stoppage of supply chain of critical resources. There would be all kinds of things that impact everybody. So, nobody can afford to say, “Well, it doesn’t matter that much because it’s happening over there.”
Also, for a virus like COVID-19, you’re never defeated anywhere until you’re defeated everywhere, because it comes back unless you have a vaccine, in which case you can protect populations, but the reality is as long as populations have vulnerability, as long as the embers exist anywhere like polio, it can show up and it can become deadly. I think we need to start thinking more globally about it. We need to start thinking about how do you deal with this kind of problem on a global basis. I think that it’s true of our economic challenges as well, and I don’t think international structures are strong enough to deal with those as effectively as they’re going to have to be going forward.
Ryan Morfin: It’s a great quote by the Italian politician. I wrote that one down. It’s funny, it’s true unfortunately. So moving over to China though, so you said they’re very strategic and they’re good at some things and not as well poised at others, but they have figured out this concept of economic warfare, in my opinion, there’s military and civil fusion. And right now, I mean, the state of play, I’d love to hear your perspective, is the defense industrial complex healthy in this country? Does it need to evolve? What does it need to evolve to? How do we, as Americans start to wrap our minds around what we’re dealing with in terms of a competitor that is hyper focused on certain results, which would put us in the backseat of the car, if you will?
Stanley McChrys…: Yeah. Now, Ryan it’s great point. I’m going to expand the definition of military industrial complex to include a lot more things than most people think. We tend to think of building weapons or something like that. It’s really our industrial capacity to feed ourselves, to build what we needed and all the different parts of it. I think that as we try to allow capitalism to do what capitalism wants to do, which is to produce the most efficient turn of resources, to produce the best outcome, and as we got global in many corporations, people start making decisions for rational capitalist regions.
They have something built in China because it’s a little bit less expensive and the supply chain can bring it somewhere, but that is not taking into account the reality that the supply chain can be interrupted or you might be giving away technology to another nation that then is going to become much more critical. Because most of our corporations and even some privately held ones, take an extremely short term view, quarterly or annually, it makes us very, very vulnerable. So, China takes a longer term view, they’re still young coming out of the communist era. They take a much longer term view, they’ve got an ability to do that because they’re essentially like a privately held company. You’ve got an autocratic leadership that can drive it, but it gives them the ability to push.
Now, we always argued that communism and socialism didn’t work because centralized economies weren’t efficient enough, not responsive enough, and there’s some truth to that. They can’t be as nimbly opportunistic at the lower level, and we need to try to keep that, but at the same time, we need a much stronger American understanding of what it is we’re trying to do, a military industrial policy that says, “Okay, we can’t have a supply chain for penicillin entirely dependent upon China as it is right now. We can’t stand that, and therefore we’ve got to force the shaping and in the near term, sometimes that costs money, sometimes that makes things slightly less competitive. Sometimes you are subsidizing certain industries. “Okay, so what?”
Our military, I mean, our civilian aviation industry got a huge boost because World War II we built so many military aircraft, and then during the Cold War, we did, that it became this machine that could also develop and produce commercial aircraft very well. So, I think we’re going to have to get a much more coherent and sometimes more controlling national policy.
Ryan Morfin: Yeah. Now I think we’re going to need a new game plan or a new playbook to defeat communism in the 21st century, because they’ve adapted, right? Like a virus, they’ve brought in some parts of capitalism and fused it with their old system, and we’ve got a new model to compete with. Would you say that we’ve entered into a new period of like Cold War 2.0 with China from a technological standpoint? I mean, where does that go? How do we adapt different type of [inaudible 00:36:44]
Stanley McChrys…: Yeah, I think we have, it’s probably more, we use Cold War, it’s probably more like the multi-polar competition of the 19th century among the big European powers, in those days they were fighting for empires trying to build those up an economic power. I think it’s closer to that, but it’s absolutely competition, it is not war if we consider that physical, but it’s going to be very aggressive competition. I think that we need to understand it that way. I think it’s China, I think it’s Russia, but on any given day, one of our … someone who we might consider more of an ally, might find in their interest not to be on that side and we need to be open to that.
Ryan Morfin: I’m just curious, have you read or are you familiar with that book that the PLA put out called Unrestricted Warfare? Could you maybe talk a little bit about that and what the military’s view is to … I mean, when you guys picked that up and you’re like, “Well, that’s a playbook that we can’t abide by.”
Stanley McChrys…: Well, Unrestricted Warfare basically admits that when you’re in a war, you’re going to do everything you can, and it’s going to use every part of national capacity to do that. So you look at economic warfare, you look at cyber warfare and you put all of that in there. We have heretofore such that warfare follows rules of war, and we try to operate in a certain way, but the competition hasn’t, the competition in the last 20, 30 years to information warfare, economic challenges and all. If you amp that up, which I think there’s every likelihood that it will be amped up, you get closer that we’re on restricted warfares.
The other thing that jumps out from that book, if you read it, is the confidence within the Chinese military professionals, that given a few years they can take on the United States easily. If we look at what they’ve done on just basic things, they’ve already raised using existing weapons. They’ve already raised the stakes so that the American fleet can’t go off and contain China like we once did. We could get off the coast and we could say, “Do the wrong thing and we will strike you.” They now can strike back to the point where it’s not a realistic possibility. Now, they can’t reach out as far as they might because we’re there and we’ve got allies in the region, but they are pushing all the time.
So, I think we’ve got to understand, they’ve got a lot more confidence about the future than we probably ascribe. It is hard for us to get out of our minds, was it early 1972 when President Nixon or 71, when he went to China, we’re still locked in thinking that they’re that plus a bit more and they are miles different from that.
Ryan Morfin: Well, and it’s interesting because to tie it back to your NATO comment about the Germans, I mean, I know the Chinese have been deploying assets, like deep water Naval bases in Pakistan and Djibouti and places like that, horn of Africa, but they really haven’t had a PLA in a land war or a peacekeeping mission that they’ve lost troops and so is going to be a bit of … the confidence is going to get shattered a little bit once they get punched in the face or I mean, is it a hubris you think or it is a reason for us to really buy into the fact that they’re taking this egocentric approach?
Stanley McChrys…: Yeah. I know for a long time America … and in the American military, we convinced ourselves that was the case. You remember when the Chinese went into Vietnam, 1979 and they got a bloody nose from the Vietnamese and we looked and we said, “Look, the Chinese, they got a lot of people and they talk a lot, but they haven’t been in combat like we have, so the difference in experience.” It goes back to what we said earlier in the conversation. I think the future wars can be so different from anything we fought, even in the last 15 years, that that relative experience isn’t going to have the same value, because we’re going to be in such a different kind of conflict. So, if we make ourselves feel better because of that, I think we are doing so at great risk.
Ryan Morfin: Yeah, and I’m worried, the conflict that they want to have with us, isn’t really a military one, it’s more economic and information option, we haven’t woken up to the fact that we’re in it. But you mentioned something about the election earlier and I’d love to maybe tie it back to that. So, in today’s world misinformation, fake news, information operations from competitors coming in to try to cause havoc or chaos, Europe just made a comment and sanctioned China for fake news about the coronavirus. How real is that? Is it happening in the U.S. and how do we combat that as a country?
Stanley McChrys…: Oh, it’s incredibly real, it’s incredibly dangerous. It’s dangerous on many levels, it’s dangerous because people can reach in and do that. But also it’s dangerous because we still don’t have a population that is experienced enough in this, none of us are, to be able to parse that out, to be able to really see it for what it is and understand when an influence operation is affecting us, because they’re at all of us, now in marketing for things like this. I think that this is so much more dangerous than we give it credit for, that we need that to have a stop, everybody have a time of reflection nationally and decide what we’re going to do about it because the people who want to influence make it in the interest of certain people to leverage it.
If you are an opposition party that wants something and you get this influence operation that is going to produce greater political power for you, then, okay, you’re good with that. That can be from any part of the spectrum. The problem is once you corrupt the process and it’s always been challenged, democracy is challenged with that kind of thing. But once you corrupt the process, you’re not sure where it’s going. I think that we’re in that danger right now.
Ryan Morfin: Yeah, no doubt. It’s unusual timing for this virus to be coming out right after a trade war, arm wrestling, right? During an important election year to come out of Wuhan China, it’s just very suspect timing, but what are some of your thoughts about what are going to be the key issues for this upcoming presidential election of 2020?
Stanley McChrys…: Yeah, I think in the United States, this is just a … I’m not a political guy, just my guess. The first thing is, because we’re so polarized at a national level, there’s just this hard wiring of certain parts of the population to vote left or right, and it’s going to be much more visceral and emotional than logical. So I don’t think there’s going to be a big case made to a big group of people in the center who are then going to make a thoughtful decision. I think most people have seen that and said, “Well, I feel this way or I feel that way.” I don’t think that’s good, because the idea of a democracy should be opposing side making an argument, and whoever makes the best argument wins. I think it’s much more emotional and almost tribal right now, and that’s of course dangerous.
I think the things that are going to hit most people biggest will be, one, there’s this tribal sense that certain parts of the population have been getting screwed by other parts for a long time, and again, it’s both sides. There are people on the left and right, who think they’d been getting a bad deal for longer than they should, and so they’re going to be fighting for those kinds of things. I think the economy is going to be a much bigger deal than some people might realize, we’ve had 30 million people put out of work, we are going to be to Depression-era, unemployment in probably the next time they produce statistics. We all can say that, and we can go, “Yeah, Depression-era and unemployment. Whoa, we didn’t live through the Depression.”
We don’t understand what happens when 20 to 25% of America that doesn’t have a job, and therefore probably doesn’t feel tethered to the existence of the American political system, and the economic system. Why would you want the system as it is to continue along if you’re in a place where you don’t have a job and it doesn’t look like you’re going to get one, why wouldn’t you want radical change of any kind? So the fact that we say, “Well, we have great social cohesion in America, because we all believe in the American dream.” That’s assuming people think that they’ve got some part of the American dream available to them. Once you think you don’t then I think that part of the population are free agents. That’s going to be a big deal on this election. Now, the question is how people respond to it.
Typically, if the election is bad, the incumbent is punished, and voted out of office. I’m not sure if that’s an automatic this time, it could be that the country’s in a bad place. So a very simple argument resonates, the argument that you’re getting screwed, support me because I’ll fix that, that becomes much more attractive to all of us in a time of great turmoil. So, I think that is a potential to make the original part of it, the idea that just because the economy’s down, you’re going to vote for the other party, at least question.
Ryan Morfin: That’s a great answer and a great conversation for the country to be having, I’m hoping the sound byte circus of the media doesn’t take it into strange parts when we should be really having really important conversations about economic future. Have you ever thought about throwing your hat in the ring and maybe running either for president or some higher office?
Stanley McChrys…: Yeah. Ryan, you’re kind to ask. Like probably half the population in America, I had people come to me and talk to me and say, “Yeah, you should do this.” It’s funny, my wife Annie, we’ve been married 43 years and I said, “What do you think of that?” She goes, “No.” I said, “No to what?” She said, “No, ain’t happening.” And I said, “Well, what if it’s for the good of the nation?” She goes, “Hey, it wouldn’t be for the good of you.” Then I asked her, “What’s the problem? Don’t you think I’d be a good president?” And she goes, “Oh yeah, you’d be a great president, you’d be a terrible candidate.” I said, “Okay, fair point, I’m probably better to do whatever I can from my vantage point.”
Ryan Morfin: General, I think we’re going to see a new generation of archetype, because it’s going to hopefully be more executive leadership from the military because the military has got such a high trust factor with general population. I think it’s going to be probably entrepreneurs, Mark Cuban just came out and said, he’s going to probably run in 2024. I’ll leave you with maybe one or two final quick questions. What books are you reading right now? What of interest from your strategic mindset?
Stanley McChrys…: Yeah. I’m bifurcated, I love to read history. When I want to relax, I read biographies, I’m reading a great, like 800 page book on Charles de Gaulle, which is an awful lot about Charles de Gaulle, that will be more pages than you need, but I’m also writing a book on risk right now with a couple of people. So I have been reading Radical Uncertainty and a number of other books, Joel Peterson’s new book, Entrepreneurial Leadership, and some others, because I try to keep forcing my mind into what is changing in the world, just like our conversation. If I read just history, I start to think of 1945, and that’s good, it’s relaxing, but I really try to push myself with those newer books as well.
Ryan Morfin: The final question for you would be, what is your view of what’s going to happen in America in the next three to five years? What are some silver linings about America that you are excited about?
Stanley McChrys…: Yeah, it’s interesting because I’m actually optimistic. I know in the conversation, I point out these things. The Depression was pretty horrible, but when we went into the Second World War, we were already a better nation than we had been in 1929. What I mean by that is America had gone through this tempering process and had done the new deal, and a lot of people had gone to CCC camps and done things. So, America was better, and then we went to World War II and we came out stronger, even though 400,000 Americans lost their lives in the effort, because we had bound together. I think what’s going to happen in the United States right now, this is just my guess [inaudible 00:51:10] that we’ve gone through the first phase in this crisis and we all go, “Wow, it’s been bad, but we seem to be getting through it.”
Then it’s going to be like Hurricane Katrina, that the hurricane was bad but the rising waters were going to do the damage, so that’s going to be the economic impact. So, we are going to have an economic tsunami that is going to happen and a lot of things, on the bad side, a lot of people are going to lose jobs, a lot of companies will fail. But the good thing is that, one, we will come out of it, two, it’s going to force a lot of individuals and companies to overcome inertia to make some changes that they need to show it will, it will be a little bit Darwinistic or maybe a lot Darwinistic, but it will pull and push things forward.
Then the last thing is, because this was a equal opportunity pandemic, or has been, I mean, It will hit anybody, it’s old people more than young, but still it’ll hit anybody and devastate areas. Maybe it’ll remind us that we are a society together, and I think that’ll happen. I think we are going to be reminded that we succeed or we fail as a group, and it’s not all about just getting what it is for me, it’s about us getting what really matters, and part of what really matters is having a society we want to live in, where other people have enough.
So I think there’s every likelihood we’re going to go back to some basic American values, we’re going to revisit those and say, “That was what was really important.” I don’t know about most of the people who hear this, but I’ve now spent five or six weeks at home, I live next door to my son and daughter-in-law, so my three granddaughters are in my house every day. Suddenly I realized that’s much more important in many ways, and the close friends I have that I stay connected with, that’s much more important than … I might’ve said they were before, but I’m reminded they are now. And nationally, I think that’s where we’re going to go.
Ryan Morfin: Now, I think that’s right. Maybe this curse is a blessing because I don’t know what other strategies we have as a country to get past this partisan moment. But that might be it, as going through this pandemic will bring us closer together. Well, General McChrystal, thank you so much sir for being on the show, we appreciate your thoughtfulness, your leadership, your book Team of Teams is required reading at my company and I appreciate your intellectual framework and your leadership. Thank you, sir.
Stanley McChrys…: Well, I really appreciate it, Ryan, and thanks so much and have a great weekend.
Ryan Morfin: You too sir. Thank you. Thank you for watching Non-Beta Alpha, and before we go, please remember to subscribe and leave us a review on Apple podcasts and our YouTube channel. This is Non-Beta Alpha. Now, you know.
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Ryan Morfin: Welcome to Non-Beta Alpha. I'm Ryan Morfin. On today's episode, we have Pini Althaus, CEO of USA Rare Earth, talking to us about the supply chain glut in rare earth minerals. This is Non-Beta Alpha.
Ryan Morfin: Pini, Welcome to the show. Thank you for coming on today.
Pini Althaus: Thank you for having me, Ryan. Good to be here.
Ryan Morfin: So you're an investor and a miner in rare earth minerals. Can you share with our listener base, what are rare earth minerals? Why are they important and why is there a geopolitical race going on globally?
Pini Althaus: Yeah, I mean, rare earths are an extremely ubiquitous part of all advanced manufacturing or technology manufacturing today's day and age. Several years ago, I had not heard too much about rare earths myself. I was not that familiar with it and being involved in this sector, in this company, for the past few years has given me an education of course. And I mean, I was sad to hear that 50% of all imports into the United States contain are earth elements and it runs the gamut from consumer electronic devices that we use every day. Our cell phones, our laptops, most communication devices, medical equipment. So there's a tie with COVID, which we can touch on at your discretion. Electric vehicles, defense equipment. So pretty much anything or everything high tech today has a rare earth element or critical minerals contained within them.
Ryan Morfin: And what are some of the names of some of the more important rare earth? I know there's lithium for batteries, but what else is considered in this category, critical?
Pini Althaus: Yeah, so lithium is a separate category to battery material. The rare earths are 17 rare earths. The four, let's call it, key rare earths that we're focused on at our company, the four rare earths that go into the permanent magnets. And these are the magnets that are found, there are a number of them in your back of your cell phone or an iPad. But if you look at an F35 striker jet, you've got about a ton of rare earth magnets in those. And we've got two heavy rare earths and two light rare earths is part of the permanent magnets. You've got dysprosium, ytterbium are the heavies, and then you've got neodymium, praseodymium as the two light rare earths. So those would be key rare earths that are the focus.
Ryan Morfin: And you use these in, I guess, in military applications as well, but historically, where has the United States sourced the rare earth for supply chain?
Pini Althaus: Yeah. And that's the shocking part. We've been securing those materials from China. So China controls the rare earth sector and has done so for the past 30 years or so. And it was a significant misstep on the part of the United States, allowing China to have this control. And actually this wasn't a question of China coming in and doing anything nefarious as far as stealing IP or anything. The US government made a conscious decision about 30 years ago to allow China to come to the United States and acquire the processing capabilities for rare earths. So just as part of some background, you've got the rare earth materials containing various mining projects, but once you extract them, you have to then process them and they go through certain phases before they get to the magnet phase. And China, the thought process was let China do the mining, let China do the processing.
Pini Althaus: We don't need to do that here. And we'll buy the materials from China cheaply and the premier of China at the time, Deng Xiaoping made the comment, he said, "The Middle East has oil. China has rare earths." And unfortunately we weren't smart enough to understand what he was saying. And the Chinese understood that the future of manufacturing is going to revolve around control of the rare earth and critical mineral supply chain. So if you think about it today, Ryan, we cannot build... Forget about consumer electronics and medical equipment. We cannot build the equipment that the US Pentagon or the US armed forces require, whether it's F35 fighter jet, Tomahawk cruise missile, communications equipment, without going to China and obtaining those materials. And it's obvious to all that this should be extremely alarming. We've seen China use this as a weapon, if you will, as far as how it interacts with other countries back in 2010, when there was a dispute between China and Japan on the East China Sea.
Pini Althaus: So China cut off rare earth exports from Japan for 40 days. Japan obviously being a significant user of rare earth elements for their high-tech manufacturing sector, that was stopped after 40 days. But in fact, it was President Obama that first made the United States aware of this, formed a division within the Department of Defense to handle this issue, but not much has happened. And we continue to be relying on China for these materials. And what has been made about trade war with China and whether the trade war is really the impetus for China withholding rare earth exports. And that is a huge misnomer. Whilst China had been talking or implying that they would cut off rare earth exports, the truth of the matter is that China, under it's made in China, 2025 mandate, its belt and road initiatives and others. And you seem to control the critical minerals and rare earth supply chain so that it can continue its dominance as a manufacturer or a global supplier of these materials and finished products.
Pini Althaus: It's the backbone of its economy. And in fact, China has become a net importer of rare earths from different countries like Miramar and others. So with that, they are decreasing the exports to countries like the United States, Japan and others.
Ryan Morfin: And was it ever a risk that the Chinese were going to turn off the exports of rare earth to the US during the trade war? How close were we to that? And was that ever some saber rattling that went down during trade negotiations?
Pini Althaus: Yeah, I think it was saber rattling. I think it would be paramount to an act of war. I can't say with any authority that that would not happen, but it would be probably, aside from war itself, it would be one of the most significant acts of war cutting the United States off from the ability to procure rare earths. But that being said, I mean, if you look at, as an analogy, the oil and gas sector and the reliance of the United States had for many, many years on OPEC countries to supply us with the oil. And we had embargoes and we had price manipulation by OPEC. This is far more significant given the ubiquity of where these rare earths go. And yes, we're always under the threat that China can cut off exports under the guise of a trade war or for any other nefarious reasons.
Pini Althaus: But I think even more importantly, to just as the natural run of the course of things with regards to their business and their desire to maintain themselves as the global leader in manufacturing and exporting of goods, China is in a position now where it actually requires these materials for their own domestic consumption and can legitimately cut off rare earth exports by stating that they need it for manufacturing and that would actually be somewhat correct. So we're in an extremely dangerous position here with this reliance on China. And it wouldn't just be China. If it was another country, it would be similar issues, not to the same extent, but reliance on one country for these materials is dangerous.
Ryan Morfin: And it's been mentioned in the past that in 2010, China flooded the market to really kill all the competitors in the rare earth mining industry. Where was the World Trade Organization during this period? And how did that play out and how does that set the chess board for China to run the tables?
Yeah. So the WTO stepped in when China cut off rare earth exports from Japan, I think it lasted for about 40 days because the US and Japan protested the WTO, and they stepped in and China resumed exports. While I'm not an expert on these trade matters, one thing that I am aware of is that one of the reasons why China had to resume the export of rare earths was it did not legitimately need all the rare earths for domestic consumption. So therefore it was a nefarious act, if you will, to cut off rare earth exports. Now that has changed, which means China have to cut off rare earth exports today, they have a legitimate case to say that they require these materials. There's a shortage of these materials and they require them for their own domestic purposes. It is the backbone of their economy and there's very little we could do about this today, which is why it's becoming an even more urgent issue.
And the US government started stockpiling some of these after that incident. Can you talk a little bit about what DOD and DOE has done to start making sure that there's not a critical supply shortage going forward, and is it enough?
Yeah, again, there is a national defense stock pile, and there are materials still that the United States needs to procure in order to shore up its stockpile. There are magnets, the finished magnet products as well, the United States government needs to stockpile. Again, there's a limited amount that the United States government has. It requires approval from Congress, whether it's in the NDAA or other approvals from Congress, to allocate monies for the national defense stock pile of these materials. That being said, there's no endless supply of these materials. And unfortunately, the apparatus, the way it's set up right now with the US government, it's going to continue to require having a secure supply chain of those materials for many, many years to come. So it's not a question of stockpiling for 10 or 20 years, and then this complacency and saying, we'll kick the can down the road. But keep in mind as well, Ryan, that US government accounts for low single digits of overall rare earth imports into the United States.
We're talking about defense contractors, we're talking about the manufacturing sector. The direct impact this has on the economy, jobs, the automotive sector, and others is significant. So it's not just limited to the United States government. If you look at over the past couple of weeks, the sanctions that China have put on Raytheon, Boeing, Lockheed, et cetera. I mean, the question is where are they going to get those materials? And if we go beyond that, you need rare earths for the 5G network. Now that Huawei has been banned from installing the network, not only in the US but other countries, we have to have the ability to get a secure supply of these materials as well. Which currently, again, trying to control the hundred percent. So it runs across the board, both for government, defense and manufacturing in this country.
Well, and so help me paint a picture for our audience. Does China have all the mines for rare earth, or they're the only ones who started mining it? Or are their mines globally dispersed and nobody's been doing the actual infrastructure to do the mining?
Yeah. So finding rare earth projects or rare earth elements is not the difficult part. It's finding them in significant quantities that makes a project economically viable. And part of that consideration are the environmental rigors that companies in the West have to adhere to. And China, even by their own admission, have had a complete disregard for mining these materials and even for processing these materials. And in fact, just the last week or so, the BBC did an expose on this, 60 Minutes has done an expose on this. But the Chinese have not denied this and have talked about cleaning up their act, but it has an effect on the bottom line for what the costs of mining and processing are if you have no environmental standards to adhere to. So China have exploited those rare earth projects they have, primarily in inner Mongolia, and have brought a number of projects online and quite quickly, and in a significant way, with a complete disregard for the environment.
So it was seen as an environmental no-no in the West for many years. Now, what's happened over the past few years is you're starting to see rare earth projects in different parts of the world sprout up. You've got the Mountain World project in Australia owned by Linus, which is a producer of Nd and Pr, neodymium and praseodymium. So two of the light rare earths. They may have some heavy rare earths coming online at some point in time. And you've got Arafura, which is another company in Australia that we're working with to assist them with their processing so they don't have to send the materials to China for processing. But really these are a drop in the bucket for what the requirements are for the United States. And certainly what the requirements are for allied countries, the EU, et cetera. So there is a race, if you will, worldwide to start bringing projects online. The Chinese are very active in trying to secure assets outside of China.
So in Africa. They have ownership of a project in Greenland. So there is somewhat of a race. The Australian government has stepped in and has started limiting the ability for China to own, or have ownership in, or off takes for the Australian rare earth projects. And that's part of the strategic Alliance between Australia and the US. Canada, similar thing as well. There are a number of projects that are looking to come alive, but these projects are, for the most part, will take many, many years to come online. We have to expedite the process. We have to assist with a [inaudible 00:14:41] supply chain and the domestic rare earth sector, because previously investors have been scared off by things like China flooding the market, which is not a possibility at this point in time, given that China can't actually afford to flood the market. They are already very heavily subsidizing their mine to magnet supply chain there.
This is more now a case of being able to get production from non-Chinese sources so that the United States and allies have a viable, secure supply chain of these materials. And it's a concern worldwide. We speak to governments all over the world, and we're all facing the same issue. Some more than others, especially countries like Japan, that don't have their own rare earth projects there and are reliant on Australia where they've made some investments there. And in the United States, they've made an investment recently in Africa. So there is this race, if you will. And I think we've got a five-year window here to at least stand up a few projects worldwide. Otherwise we've lost this race and we will be dependent on China for many, many years to come. And Ryan, it's a bit of a hypocrisy. If you look at it where you've got materials going through clean, green energy applications, like electric vehicles, wind turbines, et cetera.
That we're sourcing these materials from China, where they've, again by their own admission, has been complete environmental devastation to water bodies around these mines and processing facilities, to the communities. People have been getting sick around these projects yet we're putting these materials into our electric vehicles or wind turbines. It makes no sense at all. And people are starting to wake up to this. And that's why the sector is starting to see a lot of support come out of Congress and bi-partisan support. And in fact, it's one of the only bi-partisan issues right now in Washington. And it's good to see that some things decided to move in the right direction.
And is there a special process? You talk about the expense, is it really difficult to mine these? You have to go through a special chemical process to extract and clean and purify. Is it a lot harder than, say, gold or silver or some of the other, we'll call, more traditional elements?
Yeah. It's all about the processing to some extent. So if you look at MP Materials in California, which used to be Molycorp before they went through their bankruptcy. They are a miner of Cerium and Lanthanum, which are two of the light rare earths, the lower valued light rare earths. Given that they do not currently have processing technology, they are sending those materials to China for processing where China is tariffing those heavily. Linus is also, they're doing their processing work in Malaysia and elsewhere. So it's really about the processing at this stage. One of the things that we've done, after we put out our PDA last year with our upgraded resource, which now includes a significant amount of lithium. We make a decision that, based on the test work that we had done around our processing methodology, that we were not going to send our materials to China. That it's paramount for us to do this work in the United States and in a collaborative effort as well.
We've been asked by some of our investors, "Well, why would you be looking to help other projects with their processing?" And the answer is simple. There's no one project or one company that's going to put China out of business or make a dent, or somehow be able to take care of the overall demand worldwide for rare earths and critical minerals. And it's very important for us to have processing capability in the West. So that was the impetus for us opening up our own rare earth and critical minerals processing facility earlier this year, which we did in Wheatridge, Colorado. And in fact, we've made some significant progress on the method that we're using for this. And we're starting to collaborate with Australian companies, Canadian companies. We're currently talking to a group over in Europe as well, because this has to be a collaborative effort.
How does Europe solve for these problems? Do they have this better under control than the US?
No, they're in a far worse position than we are. The EU commission recently put out a report, I think, a couple of months ago that the requirement for rare earths is going to increase tenfold within a short period of time. Lithium 18 times. They don't really have rare earth projects. Again, there are the Greenland projects, which people have heard in the news recently. Those need to further development work so they don't have rare earth projects ready to come online there. There are a couple of lithium projects that are spread around Europe, but for the most part, Europe is in an even more precarious position. If you look at Germany with the auto manufacturers, you look at the big companies like ThyssenKrupp and others, all these countries and companies are looking for alternatives to China, because we've already seen in the news about China withholding or reducing exports of some of these rare earths that are required for these industries.
And you mentioned earlier the regulatory posture of the US makes it difficult to mine. Is it becoming a more bi-partisan issue that we need to maybe relax some regulation around the mining exercise, to incentivize private sector to come in and start producing this? Or is the Republican party versus the Democratic party on two separate pages of music?
Yeah. Good question, Ryan. I mean traditionally the Republican party is obviously being more pro-mining and in favor of less regulation when it comes to these things. With regards to our project, we're on Texas state land. So we don't trigger federal environmental permitting at this point in time. And obviously Texas being Texas, a mining state and oil and gas state, things are a lot easier in Texas than they are on projects on federal land where the Bureau of Land Management controls the environmental process around that. But the thing is here, and I don't want to step into what other companies are doing, et cetera, but we do need to be reasonable about allowing projects to come online if they're adhering to environmental standards that are acceptable worldwide. And what we do know, is that China is destroying the environment and cities and water bodies around their mines and processing facilities.
We have standards here in the United States, and I think what we need to do is make it easier for companies to mine, while at the same time protecting the environment. And there are ways to do that. And we're definitely seeing buy-in from Congress, from both sides, with regards to looking how we can stand up a secure supply chain. And, obviously under the Obama administration, they had very strict regulations when it comes to mining. And that's changed under the Trump administration. Hopefully what we start to see is some normal middle ground that'll allow other projects to come online.
And typically in these rare earth mines, is it amalgamation of different minerals that are all consolidated together and you have to separate them out? Or do you ever find pure play, Europium, I can't even pronounce some of these. Gadolinium, Cerium. I mean, are they all mixed together and you've got to filter and sift them through, or are they pure play mines?
No, they're generally they have a mix. So they're polymetallic projects. They have a number of different materials. Some projects, you more to what we call the light rare earths like MP in California or Linus in Australia. Our project is actually on the opposite end of the spectrum. We have a very high concentration of heavy rare earths. That being said, we do have to go through a process of separating these materials. But the case of our project where we've got 30 materials. We're not going to produce 30 materials. We're not going to market 30 materials. So what we're doing is we're focusing on the key materials that are marketable, that we need for permanent magnets, lithium as well, and working on the separation and the optimization of those materials in particular. But we're all faced with the same processing challenges and that is something that can't be set.
There's no easy way to do this. There are different technologies that have been used in different parts of the world. So predominantly there's a process called solvent extraction, but it's big, it's bulky, it's not benign. It's a bespoke solution for one particular project. So it doesn't work for feedstock from other projects. What we've done is we're using a processing technology that's actually been around since the 1940s. It was part of the Manhattan Project. It's called continuous ion exchange. In fact, the Chinese use it to increase the purities from 99.99 to four nines, five nines, and even six nines. So for some applications you require higher purity levels. It's a far easier processing method to scale up and to take feedstock from other projects. In fact, we've demonstrated for the Department of Energy that we can take coal waste from Pennsylvania and do high purity separation of rare earths using our processing methods. So it's not a step that can be skipped unless one needs to send it to China for processing, which is not going to help us with our objectives here.
How many other, we'll call it, going concerns on any other businesses that are doing this, that are trying to, I guess, start the development of these mines. Are you guys one of a few or are you one of many? And is it an international or just a US game? Who's leading the charge at going after this?
Yeah, well, I'd say the Australians are leading it outside of China right now. You've got some really good projects in Australia. Again, more skewed toward the light rare earths. There's one more heavy rare earth project in Australia, which is not yet producing. The United States, you've got MP Materials, you've got Ucore in Alaska, you've got the Bear Lodge project in Wyoming, which is also another light rare earth project. So as far as a heavy rare earth project that looks like it will come online in the near term, that would be our project. In Canada there are a couple of projects there as well, and again, more skewed toward the light rare earths. But we really need to get as many of these projects online as possible. Because again, I don't see it as competition. We all have a problem doing supply agreements or offtake agreements for our materials.
In fact, one of the things that we're going to have to consider is looking at potentially scaling up our production, based on the demand that we're already starting to see. And I think other companies would find that as well. So it's all about the economics of the project. You have projects that were economically viable back in 2012 or rare earth prices with 35% or so higher than they are today, and are not necessarily viable today. So that's the challenge as well, economically viable projects. And we've got to get as many of them online as possible. It takes many, many years. I mean, our project has had over $70 million put into it to get to where we are today, and we're close to getting to the production scenario. It all revolves around processing at this point in time.
We'd be very happy to see another couple of projects come online, because this is extremely important for national security and for the economy as well. I mean, if you think about it, Ryan, if you've got a billion dollars of rare earth materials, that translates into a trillion dollars or I should say trillions of dollars of finished product. So you've got a magnet in your phone there that's worth a couple of dollars and the cell phone's a thousand dollars. And electric vehicles and defense applications even more.
Yeah, everyone has one of these iPhones now, and there's tremendous amounts of rare earth on the circuit boards here. And I think people take it for granted that that supply chain is not secure right now. So one question for you, there's talk of this maybe medium term to longterm, but there's talk about mining in space. Do you think that's a feasible option in the longterm, medium term? What are your thoughts on that?
No, that's just ridiculous. I mean, we're trying to find ways to make mining on earth economically viable. I think the cost of going up to space would be more than what our capex will be bringing our entire project into production. I mean, we've got about a 350 to $400 million capex to bring 130 year mine life into production. I'm not an aerospace expert, but I think sending a rocket, building a rocket ship and sending it up, I think maybe on the fuel alone, you could bring a couple of projects into production. So unless we have a fortunate situation or an asteroid lands on earth, and fortunate if it lands somewhere where we don't care, I don't see how that happens. And if it's big enough, it's a problem as well. It's nonsense. And even, options aside of the deep sea mining for rare earths, I mean, you've got all sorts of environmental issues around that as well. I think we need to look at projects that we can bring online, that can be done so in an economic way, that can be done so in an environmentally responsible way.
I mean, one of the things that we've done at our project is we've got in excess of 60% of the materials that have come out around top, will have a clean green energy applicability to them. So we're using the benign processing method. We're going to be using renewable energy on site. In fact, we will likely be putting a solar farm on site as well. We've talked to a couple of companies that have approached us about that, and we'll be a net producer of power for the surrounding area. So there are ways to do it which don't affect the environment. Obviously if there's a project that's situated on a sensitive area, that's a unique situation for that specific project. We've seen it with the Pebble project, which is not a rare earth project. The Pebble project in Alaska where their environmental concerns is we've been recognized by both Republicans and Democrats, but we have to be reasonable about the projects that don't have environmental concerns.
So Pini, in season two, we ask all of our guests a series of six questions. They're usually, yes, no questions, but trying to take a survey of our conversations. And if you want to add a little context to the yes or no, feel free, but here goes the first question. If there was a COVID vaccine available today, would you take it?
Who do you think is going to win the election?
The US election.
Well, I think it looks like Joe Biden's going to win it, but I think what happens, if we go past January six from my understanding is that the house will vote on it and it's one vote per state. But I don't know if I see it getting there at this point in time. I really don't have a crystal ball.
Third question. What type of economic recovery are we in? What type of shape is it taking? A V-shape, W, U, L?
Yeah, I think 2021 is going to be challenging. I think we've been, and rightly so. I mean, we've had no choice as of almost every other country. We've been printing money for the past year because of COVID. And I think we've got to brace ourselves that, at some point in time, the chickens come home to roost. It was a necessary step. People needed it on an individual level. Businesses needed it as well, but I think we've got to do whatever we can to stimulate the economy, give people confidence to go out and work again, employ people. So I think we've got to watch ourselves, especially in 2021. And I have some concerns, but long-term, I think the approach in the United States is a healthy one.
During lockdown this summer and quarantine, was there anything in particular that you accomplished that you're particularly proud of?
Yeah. A great amount of family time, which, if you would've asked me a few years ago if I could sit at home and be at home for six months, I would have told you absolutely not. I wouldn't be able to do it for six days, but it has... I'm sure it's done this with a lot of families as well. It's brought families together. We had a baby actually last year on Thanksgiving. So I was doing a lot of travel at the time and thought I wouldn't get to see my daughter in her first year or couple of years too often. And being home with her every day is actually been just the most amazing experience. So thankful at least for some silver lining in COVID.
Are there any silver linings that you see in the economy going into 2021?
Yeah, I think we've gone through an absolute beating and it looks like we've got the ability to come out of it. And I think that's a testament to how strong the economy was built up in the years preceding COVID. So overall I remain an optimist. I mean, we are a country built on opportunity and going out and making it happen. And we're not a socialist country sitting and waiting for people to send us paychecks or wealth distribution or anything like that. I think the American dream still lives on. I think if you go out and you're willing to work and put your head to it and heart in it, I think we do have the ability to climb out of it. So if we look at what the economy is doing over the past few weeks, it looks like it's starting to rebound. And to me, that's assuring because it could go completely one way as well.
And the last question is, is there anything that you're watching, or listening to, or reading today that has been impactful on your thinking that you'd like to share with our audience?
Yeah, that's a good question. I think it's been more personal stories. The news, I sort of take that in context or with more than a grain of salt. In some cases stay off the news channels for a number of days at a time, it became quite repetitive. But I think on the personal side, talking to friends, my family's all back home in Australia, they've just come out of 110 day lockdown, which we can't relate to that. It's been very trying on them and seeing the fortitude that they've had to come out of that and stay intact. I think the mental health issues that will come out of COVID are going to have a far longer effect than the economic issues. I think we're going to have to focus on mental health issues in this country for a long time to come.
The impact on kids has been significant with regards to lockdown or remote schooling, et cetera. But to see people come through it. I think it's a testament to people in general and to the country and other countries as well, to see got that fortitude and survival instinct to try to get through whatever adversity we can. So hearing the personal stories, the challenges that people have gone through, I think it's made me a lot more aware of things that I have to be thankful for and where we can help out other people as well. I think we have to be united going forward because there are things...
I think one of the things that COVID has shown us is we can get into this complacency and life goes on and we go one day to the next. And all of a sudden we get hit by something that affects everybody equally. I mean, COVID, whilst there were groups of people, whether it was the elderly or people with underlying health conditions, that got hit the worst. I mean, we all got hit in some form or another. So really, this should be something that unites us, not divides us.
Well, Pini, I appreciate you coming on today to talk to us a little bit about the supply chain crimp on rare earth and we'll definitely keep an eye on it and would love to have you back in the future.
Thank you, Ryan. Thanks for having me.
Absolutely. Thank you. Bye-bye. Thanks for watching Non-Beta Alpha. And before we go, please remember to like, and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now you know.
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