Early into Donald Trump’s first term, Eric Schmidt, then-executive chair of Alphabet, helped change America’s lens on the world — though we did not know it at the time. I first heard Schmidt’s pitch that the US and China were in a technological fight to the death at the Halifax International Security Forum in late 2017.
The gist was that China’s Xi Jinping had just released his bold “Made in China” strategy. He had also laid out three national goals on artificial intelligence — to catch up with America by 2020, to make major AI breakthroughs by 2025 and to dominate global AI by 2030. To Schmidt, Xi’s plan was a wake-up call. America was in a technological race for global supremacy that China could win. Here he is delivering that same warning at the Center for a New American Security in November 2017.
I was reminded of Schmidt’s jeremiad this week when China’s DeepSeek delivered what was instantly dubbed a “Sputnik moment” with the release of its stunningly good language learning model. Not only had China made an apparent breakthrough in its targeted year but had done so at a fraction of the cost of its US rivals. Whether this has been overstated by markets and technologists because of the DeepSeek shock value, I am unqualified to say. Every consensus is prone to overcorrection. I do feel confident to point out that DeepSeek’s announcement shook both Silicon Valley and Washington’s defence industrial complex (given how intermeshed the two are nowadays I risk repeating myself). My aim here is not to evaluate open source versus proprietary LLMs, or to project where the US-China race goes from here. I don’t have enough knowledge. It is to point out how remarkably effective Schmidt has been.
Remember that 2017 was the year of peak Silicon Valley notoriety. Companies like Facebook, as Meta was then known, and Google were branded as the new “big tobacco”. There was talk of rewriting monopoly law to break them up. Mainstream Democrats were embracing an EU-style privacy law even stronger than the one being drafted in California. Big tech behemoths were suddenly viewed through the frame of an overhaul of competition law. Then Schmidt repurposed “competition” to mean US-China competition. I am not saying he was motivated simply by the desire to help his Silicon Valley peers. I think he was — and remains — sincere in making the national security case for big tech. He set up a think-tank, the Special Competitive Studies Project, which churns out briefings on US-China competition.
Either way, 2017 was the year that Washington reimagined Silicon Valley’s bad boys as shields against China. Far from regulating big tech, Washington resolved to treat the west coast titans as weapons in democracy’s arsenal. That has been one of the propellants behind the outsized market growth of the Magnificent Seven big tech companies in recent years. The view was that China and the US are in a race to see which could attain artificial general intelligence (AGI) first. The country that prevailed in AI would also triumph in the geopolitical battle. Until Monday, the consensus was that America was in the lead. Now we are not quite so sure.
As Ryan Grim and Waqas Ahmed observed in this smart essay, DeepSeek has also single-handedly revived the case for breaking up the monopolies. Joe Biden’s competition tsar, Lina Khan, was unable to make a big trustbusting breakthrough during her four years in that job. DeepSeek just belatedly restated her claim: “Khan warned that enabling protectionism for tech monopolies wouldn’t just hurt all of us, it would hurt them too,” they wrote.
I would add that the escalating political antics of Elon Musk, Peter Thiel and others has made it far easier to depict big tech leaders as the new robber barons. Once upon a time, people such as Mark Zuckerberg and Schmidt told us that social media would usher in a new global community and dissolve social barriers. They have since flipped 180 degrees. Here are the three goals of the Schmidt think-tanks’s recent defence briefing for Donald Trump’s administration.
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Forge the world’s most dominant fighting force
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Seize and hold the commanding ground in AI and digital warfare
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Resurrect America’s industrial might by building a 21st century arsenal of democracy to secure our technological and military edge.
I am turning this week to Henry Farrell, a DC-based scholar, whose Substack Programmable Mutter is essential reading on these and related questions. Henry, I know you are sceptical of the idea that the US and China are in a race to the AGI finishing line. You see the AI story as a less dramatic process of diffused learning and innovation. I suspect you are in a minority in Washington which has a bias for Manichean battles.
My question to you is two-fold: how big a surprise is it that it was autocratic China that produced the start-up shock — and also that its tool is open source? Second, are the Metas and Alphabets and OpenAIs of today wasting tens of billions of dollars?
Recommended reading
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My column this week looked at Trump’s Dr Strangelove experiment. “Trump is not insane for thinking the Strangelovian approach will work for him. It has done so for his first 78 years,” I write.
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My colleague Katie Martin had an excellent take on why the DeepSeek shock could unravel market bets on an appreciating US dollar in the Trump term. Much of the dollar bullishness was based on the idea of a deep moat around AI stocks, which now looks much shallower.
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Always read David Ignatius. His latest in the Washington Post on Tulsi Gabbard’s manifest lack of qualification to be America’s top spy is on the money. Pete Hegseth somehow squeaked his confirmation for Pentagon; I fear Kash Patel is a shoo-in for the FBI. Democrats’ best chance of blocking a nomination is probably Gabbard. “Even by Trump’s standards, she is a crazy choice,” David writes.
Henry Farrell replies
Ed, there’s an excellent case to be made that Eric Schmidt is the most influential American foreign policy thinker of the early 21st century. However, no one has really explained what he did and how he did it. The people who have written about Schmidt’s influence have mostly focused on possible conflicts of interest, but that seems secondary to me, as you say. He’s clearly less interested in making more money than remaking the world. Over a few years, Schmidt reshaped America’s understanding of national security through talks like the one you heard, and his leadership of the National Security Commission on Artificial Intelligence.
People used to talk a lot about the so-called “Washington Consensus” — the rules of economic neoliberalism that guided the thinking of the World Bank, IMF and other DC based institutions. Now that economic neoliberalism is moribund, I think that there is a New Washington Consensus, which Schmidt has done more than anyone else to shape.
Instead of multilateral institutions, you should now look to the assumptions of the emerging mind-meld between Silicon Valley and national security policymakers, to see how America wants to shape the world. These assumptions can be boiled down to four claims: that competition between the US and China is everything, that AGI is right around the corner, that whoever gets to AGI first is likely to win, and that America’s big advantage is its chokehold over the chips that you need to train powerful AI.
Those who believe these claims, including Biden’s national security adviser Jake Sullivan, and Trump’s deputy national security adviser Matt Pottinger and Anthropic founder Dario Amodei, argue that America should focus on slowing down China’s build-up of AI, by denying it access to specific powerful chips. If America can only get to AGI first, it can build up an overwhelming long-term advantage. One of Trump’s first executive orders talked about examining semiconductor export controls to find and eliminate remaining loopholes.
DeepSeek’s success in building new models is troubling for this perspective, because it suggests that Chinese companies can get at least part of the way out of the chip choke, although people such as Amodei think that America still has an overwhelming advantage, as long as it stays on course.
I’m sceptical myself, both because I don’t believe we’re on the verge of AGI, and because I suspect that it is much harder to control future technologies than national security thinkers such as Sullivan contend. But there is another problem. Dan Wang suggests in his fantastic forthcoming book, Breakneck: China’s Quest to Engineer the Future, that China is focusing on building the physical technologies of the future, such as renewable energy, while America obsesses over virtual possibilities and problems. If AGI turns out to be a bust, and the Trump administration does everything it can to squash renewables, America could find itself in real trouble.
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And now a word from our Swampians . . .
In response to “The winners and losers of Trump 2.0”:
“What is baffling is that corporate America is lapping it all up — for now. If a political party in almost any other country had campaigned on an economically-destabilising approach involving tariffs, inhumanely deporting settled but undocumented migrants and potential military adventures in Panama and Greenland, it would have been accused — rightly — of being bad for business (or, as we say now, ‘anti-growth’).” — Richard Lawes
“Surely the most disturbing development is the ‘warp speed’ at which corporate America has dismantled programmes that encourage and develop minority talent. Did CEOs ever truly believe that helping women and minorities was a positive thing (ethically and for their bottom line) or was it always simply a box ticking exercise? In the long run, I suspect that all Americans will be losers as this angry and vengeful regime undermines decency and turns us against each other and our better selves.” — Chris Millerchip
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