Innovation and American Renewal | A Conversation with Dave McCormick

The thing we can't lose, the goose that continues to lay the golden egg, is the capacity of America to innovate and out innovate the world. Hello, I'm Jeremy Allaire, and this is the Money Movement. I'm very excited today to be joined by Dave McCormick, who is a Senate candidate in Pennsylvania and former public servant in multiple capacities and really a tremendous business leader as well. And it's a great honor to have you on the program. We've got a lot of, I think, great topics to talk about today. Hey, thanks for having me, Jeremy. Good to be with you today. Excellent. So, you know, I think, you know, the show that we do here, obviously with the term the money movement, is anchored in trying to think about transformation in the financial system and the way that the global economic system is changing. And we'll get into that in more detail. But at the heart of is about technology disruption and markets disruption and the like. And so I'm excited to dive into those topics because I know you're quite passionate about all that. But maybe before we do, give us a bit of your journey to where you are literally today, which is, obviously, you're running a campaign here. And I think for people in this industry, we're very keen to hear from political leaders who are passionate about entrepreneurship, technology, and building. But you have a long and distinguished career, and it would be great to just share a little bit of that for the kind of global audience that tunes in. Yeah. Thank you. Well, it's. It's almost gone full circle. I'm sitting here in Pittsburgh, and I was born not far from here. I was born in Washington, Pennsylvania, which is a little bit south of Pittsburgh. And I, My. My dad were teachers, public school teachers, and they. They moved around a bit. And I grew up in Bloomsburg, which is in rural Pennsylvania and not far from Scranton. And, you know, public schools and, you know, my folks had a farm, and I bailed hay and trimmed Christmas trees and as a busboy at the local restaurant. My dad ended up being the college president of Bloomsburg State College, which was a state school in Bloomsburg. And, you know, wrestling got me to West Point. I was a wrestler in high school. I wrestled in college, was the co captain of the team. And you still wrestle today? No, no. Wow. Just wrestle. Six daughters. I got six daughters, so I try to wrestle. Oh, my God. But mostly lose. And I went to West Point at Restorb, and I went to the 82nd Airborne in the army, went to Ranger School, and. And so I had nine years of military Service and then thought I'd be an academic like my. My dad. So I went out and went to graduate school, went to Princeton, and I did a PhD there, where I wrote a dissertation about how to renovate and renew the military at the end of the Cold War so it would be ready for the next generation. And, you know, had a business career that followed about 25 years in business. I ran a technology company, Pittsburgh, a software company called Free Market, which was Internet parts of the B2B transformation. And then Public Service called again. So I went to Washington. I had a chance to work with President Bush. I was the deputy National Security advisor, which was dealing with a lot of the technological innovation at the time. And my friends told me not to, but I took a job in the Treasury Department as the undersecretary of treasury, which is. There's three under secretaries there. Yes. So he's Tarver, who I think, you know, who's serves, is with me at Circle also. I think he had. I don't know if he overlapped the exact same time, but he had one of those jobs. So people said, whatever you do, don't, you know, don't. Don't leave the White House for the treasury in the second term because, you know, there's been no action. Nothing will be happening. And I got there and the financial, global financial crisis started in March of 2007. And I was there through that working with Secretary Paulson. And so I had this sort of, you know, at the moment, I, I was. It's almost like a little bit force gump. Like, I felt like I was in the military during the end of the Cold War and the invasion of Iraq and the Gulf, where I was in part of the first wave of troops. I was in the White House and then the treasury during the financial crisis. And then I went to Bridgewater after I left the administration and spent 12 years there, which we can talk about about six of those. As a CEO, it's a important chapter in my life because, among other things, I became CEO, got fired, and was on the front page of the Wall Street Journal. Fired, came back and became CEO again. And so it was one of these life chapters. You've got your own Steve Jobs story. Many, many. I don't mean to put myself in that category, but it certainly was an important chapter for me. And now I'm running for the Senate in Pennsylvania in part because I just feel like our countries and need of new leadership, and I think we're headed in the wrong direction. And so I'm trying to Find a place in the U. S. Senate, representing Pennsylvania, where I can make a difference. Well, that, that is a tremendous, a tremendous career. And I think, you know, obviously, you know, sets you up for the kind of ongoing leadership that you're pursuing. You know, it's, it's, it's. There's so much I want to talk about. And I think you've been able to kind of be literally in a place where you've got a macro view, right? I mean, literally, you know, that's the bridgewater macro universe and Treasury Department and national security really thinking about the world as a whole. And we're in the midst of pretty dramatic changes in the world. And you know, we all feel that viscerally every day. You just, you know, we sort of see what's happening. And I go around the world a lot. We're building a global company and, and I keep telling people that, you know, the view of the United States has really changed around the world. And people don't look at the United States as a leader in the same way that they did in the past. And that's very noticeable to me. And even like, and we'll come back to this topic later, but even like the role of the dollar in the global economic system is really being questioned. And so we're at this amazing point and then we have technology upheavals that are happening. And so I would love to kind of hear from that macro lens as you're thinking about the United States in particular and the role that. How do we renew the leadership of the United States in the world? And how do we tap, given your background, how do we tap entrepreneurs, technology, innovation to fuel that? Yeah, well, it's such a big question. Let me start by saying, and this isn't for political purposes, I'm just unapologetically pro American. I think by any historical measure, America has really been the greatest country in the history of the world because its system of government, its entrepreneurial spirit, its focus on individual freedom, religious freedom, free enterprise, has lifted the most people out of poverty. It's offered the most individual and religious freedom. It's been a force for good in the world against evil. But it's had a bunch of dark chapters, to be sure. So perfect. But its system is, pardon me, been a true force for good. And so that's my starting point. And these periods of decline which we're experiencing, I agree with you. I think we're in decline economically. Our role in the world or the way we're viewed by others, you know, spiritually On a lot of different levels. But that chapter of decline is the American tradition. It's the story that happens over again. It repeats itself. It happened in the Civil War, it happened World War II, it happened in 1979. I think I'm probably a bit older than you, but 1979, 80% of Americans thought the country was headed in the wrong direction, just like today. And we were economically and we thought we were losing the Cold War and it was a very messy period. So whenever we come out of those periods of decline, the key has been innovation. Innovation has been the long pole in the tent innovation in terms of imagining the future, whether it's the combustion engine or whether it's the Internet or the PC or all sorts of next generation technologies that have taken us into as the leader in the world, which has driven our economic strength, it's driven our productivity, it's driven our military strength and capability. And so the thing we can't lose, the goose that continues to lay the golden egg, is the capacity of America to innovate and out innovate the world. And there's lots of reasons for that that we can get into. And I think if you start to think about America's future as innovation being the long pole in the 10, it, it drives you to a certain set of policy prescriptions and a certain type of leadership. You need to keep America where we wish it to be in terms of leading the world. Yeah, so very aligned on this, on the thinking there. I think, you know, there, there are, you know, obviously there's intense rival rivalries, there's very dramatically different systems of government that, that have, you know, successfully marshaled resources to compete. And, and, and I agree that the, you know, the fundamental liberal enlightenment ideals that fuel the, the, the free markets, free innovation, you know, open entrepreneurship, technology cycles, all this stuff is super profound. And as we look at like today, you know, a lot of the discussion is sort of we have these major technologies like crypto, like AI, you know, these are two that I think are, are highly disruptive, potentially and, but potentially enormous engines of economic activity. And it feels like this is a pivotal moment for these industries. And what do you think the policy prescription needs to be relative to what it's been and going forward? Acknowledging of course that with any major disruptive technology there are obviously risks, but sort of in financial speak, how do you take a risk based approach to thinking about this? So I'd love to hear you talk about and we can get into more details on some dimensions of this. But what does that policy prescription look like from your perspective for things like crypto and AI? Yeah, well, there's sort of a couple underlying building blocks. I think if you look at the history of innovation and in our present moment, where we could really enable and encourage innovation or stifle it. And I think one of the areas that's at the forefront of this is talent and making sure that we continue to be a talent magnet for the world. Because if you think about AI or crypto, one of the key pieces of this is, do we have the smartest people in the world working on these problems? And if America is not a place that welcomes, continues to be the talent magnet, then I think we're gonna. I think we're gonna suffer. So. And we've lost a lot of that in the crypto realm. We've lost a lot of it. And there's a bunch of reasons for that, which I'll touch on. But first and foremost, we're a nation of immigrants, but we're also a. And that's been a strength, but we're also a nation of law. So I've got a very strong set of positions on securing the border and all we need to do there. But that can't come at the expense of reform of our legal immigration system to make sure that when the brightest minds come here, that we welcome them as long as we have to guard against security risk and so forth. But we welcome them as a place where the finest, best thinking on innovation can happen. So that's one I think we need to make sure that we continue to be the talent magnet. And I think the second is the role of government in stifling innovation. And crypto's an area where I know a little bit, not a lot, but the lack of regulatory certainty. I know this is being a CEO of a public company. I was a CEO of Bridgewater, which is privately held. When you have huge regulatory uncertainty, when you have regulators like Gensler in the SEC who is making a very targeted set of attacks on the crypto industry while simultaneously not creating regulatory certainty which allows business people to make investments and understand how to navigate and innovate within the context of those regulatory. I'm not saying we don't need regulation. I'm saying we need clarity. And often less regulation is more. Less regulation is better as relates to innovation. So, you know, I worry about the government either not creating the framework that allows innovators to innovate or overregulating is a possibility in AI, which of course there's certainly risk in AI, but we are so early in the evolution here that I think we need to see how it evolves without being too prescriptive. So that's the. Also related to the government's intervention is the manner in which the government tries to help draw and send private capital into the areas that are going to be most significant for America's future. And so there's an enormous amount, hundreds of billions of dollars of capital that's expended in our national security realm. Unfortunately, or fortunately, these technologies now have huge national security implications. So when there's a technology, say 5G, that's incredibly important for America's future, I think that we should look for ways to encourage private capital to be directed to those areas with the government playing some sort of role in creating and streamlining the desire private capital, because the benefits go beyond the narrow innovation, huge national security implications. So that's the second. And then third, and I'll be brief, is just thinking about the implications of data as an enormous strategic asset in its own right. I can assure you that China thinks about data as a strategic asset. And because of the nature of China's command and control government, it has complete access to data. So people lose individual freedom. But the benefit from the perspective of China is they have control of the data, which is of enormous benefits. So how do we ensure that data remains a strategic asset for alliant states in a way that protects privacy, ensures individual freedom, but also marshals the power that big data brings to America as a sovereign? And I don't think we as a country have done enough thinking about that data as a strategic asset. So those are sort of three. Three reflections. Yeah, those are good. I want to follow up on one of those, which is on the, you know, it's sort of this intersection of this data question and AI and the national security kind of competitiveness issues. And love to get your reactions on, you know, an emerging thesis that is sort of coming out of Silicon Valley, which is, you know, the broad contours are we're sort of entering the age of intelligence. And the age of intelligence is essentially there's effectively a computation, data model training kind of arms race that's going on. And it's a race to achieve autonomous general intelligence. And we're talking about multiple significant orders of magnitude improvements in these intelligent machines. And that, that race, once it's achieved, will become a massive national security issue. Because once you've achieved autonomous general intelligence, it could be very quick to achieve, you know, kind of AI superintelligence which would then, you know, Create a kind of AI that could disarm a military, for example, in one sort of scenario. And the scenarios are really, we talk about protecting our data, but is there a world that you see where the public sector and the private sector need to work together to access the energy resources needed to power the computing needed to train these intelligences? And we may need to even build alliances around the world in geographies for access to energy and the like. And yes, where do you see that national security, economic competitive crossover happening with this proliferation in AI? Yeah, well, listen, I may be out of my depth a bit here, so I'll give you my best response. But do not for a minute think I'm much of an expert on this. But I certainly think the first question is that innovation is going to happen. We are in the midst of something remarkable. And as often is the case with these big innovation moves, we don't know whether it's, we don't know order of magnitude how big these changes will be, but we know they're going to be enormous. This is going to be one of the great waves of innovation and we have to first and foremost make sure it's happening. If you believe nation states are the organizing mechanism in the world at this point, then you got to make sure that that innovation is largely taking place in the United States. And so that you're being a place that is a talent magnet that has regulatory frameworks that allow for this and that the innovation which is going to happen anyway is happening here. So that's sort of a first reflection, second. Absolutely. I think there should be enormous cooperation with government to ensure that as this innovation develops, that there are regulatory frameworks and risk mitigations to make sure those scenarios, those possibilities on the most three men's, those tail risks are mitigated. And third, the, the energy requirements are a dominant driver of what's going to happen. And this is where I don't think we're going to need to be dependent on other parts of the world because we have enormous energy resources here. We just have to get it out of the ground. You know, our fossil fuel capability combined with next generation nuclear, combined with alternative, alternative sources like wind and EVs and so forth, create a plethora of energy resources. I think what the Biden administration has done has been unwise in national security terms because it's essentially tried to raise the price of carbon, which has driven up energy prices and made fossil fuels less accessible. And I think the driver of a lot of the big data energy needs is going to be natural gas. And I'm speaking of this is very much in my wheelhouse because Pennsylvania took the fourth largest natural gas reserves in the world. So we have, you know, Toby Rice is my friend here who's the CEO of eqt, which is the biggest natural gas company in America. We have Saudi Arabia in terms of natural gas capacity. Saudi Arabia pumps about 10 million barrels of oil a day with about that same capacity of natural gas just in Pennsylvania. So we need to unlock that as energy demands and the demands on the grid go up dramatically. And that's going to require that sort of is at the intersection of artificial intelligence, innovation, national security strategy and thinking and energy policy. Those three things I think are going to be interlocked in a way whether we wish them to be or not. Let's be thoughtful in terms of integrating those considerations. They are, yes. And you know, I mean, I'm sure you saw the news that Microsoft is investing in bringing Three Mile island back online. I mean we all grew up remembering that. But I think all around the world there is now also a race to bring the next generation of nuclear online because you know, the actual orders of magnitude increases in, in the kind of compute demand for training these intelligences is actually they're basically everyone is going to be leaning on many sources including natural gas, but also nuclear. Yeah, no, I'm super excited about the nuclear developments with these modular reactors and so forth. The problem, there's multiple problems with this one, it takes a hell of a long time to build them and our energy needs are growing. Second, we've got this not in my backyard thinking I was literally the room with President Bush and Chancellor Merkel when she killed all nuclear in Germany in 2007. And that's proven to be one of the most horrible strategic miscalculations ever because it was very economically damaging for Germany and made Germany dependent on Russia for natural gas. So we've got to accelerate nuclear but unfortunately it's not going to be a near term fix. It's going to be a more multi decade things. It's an interesting, you know, complex issue in that you know, China, you know, has sort of absolute power in their country. And so if they say we want this high speed rail that goes a million miles an hour or whatever, they can just tell the locals like we're building it right. And you know, here imminent domain can be, can be more challenging and, and there's a personal property and individual freedom and these fundamental building blocks of the American tradition. Running up against national security, national economic competitiveness issues and does there need to be some recalibration when it comes to, in this case, you're competing with an incredibly aggressive regime with absolute power to kind of marshal resources and deploy technologies. And in this kind of arms race for the future of frankly the Internet and society at large potentially, does that require a rethink? Yeah, well, it's, you know, it's sort of the existential question I think we face because China is an adversary and poses a threat threat. I mean that expansively economic threat, a threat to America's superpower status and national security threat. And so two things could be true at the same time. This is the way I really think about China. I think in the foreseeable future they pose an enormous threat on this innovation and really taking the leadership position because they have the resources, command and control, the big data and so forth. And yet at the same time, if I had to bet on America's model or China's model, I'm long America every time relative to China over, over a period of time. And there's a reason why OpenAI and Google and, and Anthropic, all these amazing companies and frankly a lot of the great crypto companies are built here. Exactly, exactly. So. So the key is to try to get some of those benefits that you're describing in the Chinese system without losing the essence of what has made America the innovation hotbed. You know, it is this chaotic nature of our system. It is the individual freedom, it is the free enterprise, it is the fact that the government is not allocating the capital for the most part. It's because investors and entrepreneurs feel the freedom to truly invent things that are unimaginable to 99.999% of the population. So what we got to do is I think if we have every right to belong America, if we don't screw it up with stupid immigration policy and so forth. And we need to look at the unique benefits that China has and make sure we're able to compete. And the two that come to mind, and we had a good example of this recently, which was unfortunate in my mind, but like infrastructure. So if you look at, you made the mention of the high speed trains. If you look at America's infrastructure relative to what it needs to be to be the leading innovation country in the world, it's horrifically bad. Now you travel around the world and you realize wait a minute, how could this be right? And there's all sorts of reasons for it. There was President Biden passed an innovation that Congress passed a Infrastructure bill. I took issue with some of that because I thought it had a lot of these subsidies in it, which I'm very opposed to. But we need to invest and invest a lot more in basic infrastructure, broadband, bridges, roads, high speed trains, all those things that we haven't demonstrated as a country of ability or willingness to do that. So that's, I think, one area. And then as we talked about, I think I'm very worried that the rest of the world views. I keep coming back to this. I hate to beat the same drum, but the rest of the world views talent as a strategic asset and is in a war for talent. And we are turning talent away because our dilapidated legal immigration system is not capable of prioritizing in making or offering a pathway to the smartest innovators in the world. And the data on this is irrefutable. Half of the Fortune 500 companies were founded by immigrants or first generation after their parents came. And other countries around the world, China, Canada, Singapore, South Korea, are making it much more accessible to come to their countries for the leading innovators. So I think we got to win that war for talent. I think we got to find ways to invest in the building blocks of an innovation culture, which is like broadband education system and so forth. I know that's easy to say and hard to do, but I do think that's the formula. Appreciate that perspective. I want to maybe change gears to another topic that's closer to home for Circle, but certainly, I think resonates with your work in the Treasury Department and certainly looking at the financial industry broadly, as you did at, at Bridgewater for a long time, which is the role of the dollar, the emergence of digital dollars. You know, our business, as you know, is to issue digital dollars that can function on the Internet and have the, the incredible efficiency and technology that comes from blockchains and what the Internet can do. And so we're trying to make digital dollars an export product for the United States and really compete in a kind of digital currency space race that's going on with other nations and obviously doing that from a private sector led approach. But maybe without reacting to that specifically, just maybe talk about how you think the United States should be approaching dollar competitiveness from a technology perspective, from a policy perspective, from an international perspective. And it's obviously a critical issue. And like I said, when I travel around the world, while yes, the dollar is still the largest trade currency, it's gone down decade after decade after decade. And now we have alternative regimes that are trying to accumulate and move to other, other infrastructures and, and maybe, you know, how can unleashing free markets around this, you know, help drive that forward? Yeah, well, you know, I think, I mean the, the reserve currency status obviously gives America, you know, huge advantages around the world. And while I know that, that America's status as a reserve currency is under some challenge, I think it just, it still comes down to that basic belief, and I don't want to overstate this, but this basic belief, if we still have the largest, most liquid markets in the world, if you had to invest in any country, you had a hundred dollars investing in any country. Not a near term trade, but investing in any country. The reason that America has the reserve currency is because it still remains the place that most investors want for a stable place to hold their assets. I think the evolution of crypto could be very advantageous and reinforcing of that. And one of the things that for a bunch of reasons first, I think it reinforces the basic values that we started this conversation about individual freedom, having the government out of the way and being able to hold assets in your without the need to have financial intermediaries. I think it's reflective of the next wave of innovation. I think it gives America much more confidence. Something I was involved in in the treasury was rooting out financial, you know, financing for terrorism and all sorts of other things. I think the evolution of crypto and blockchain allows us to combat that in a much more thoughtful way while maintaining privacy and privacy protections. So I'm bullish on this evolution being one that is reinforcing of America's leader in innovation, but also of the dollar as the reserve currency. I don't think they work across purposes. I think they could be very much self reinforcing. Yeah. And completely agree. And these are nonpartisan issues, as I like to say. Right. This is the kind of thing like everyone ought to get aligned around those kinds of outcomes. Maybe one related question which I know I've picked up in the context of the presidential campaigns that are ongoing, which is why isn't anybody talking about the national debt? And this gets to the dollar and its reserve currency status, which is full faith and credit is the basis for the dollar. And we had a debt ceiling crisis earlier last year or last year. And you know, they're sort of. Yeah, again from your Bridgewater days as well. From a macro perspective, when you think about sovereign debt and you think about the ability to repay debt, what is the answer? And you know, I think there's, there's sort of fiscal policy Right. But like, ultimately, how, how does the United States ensure that it's got a healthy sovereign debt? Yeah, well, listen, that's a problem. That's a burgeoning problem. I'm trying very, I'm in the middle of a campaign, but I'm trying very hard not to be overly political, Jeremy. So hopefully I'm not. I don't want to make this a campaign thing, but I would say if you looked at the last two, two decades of Republicans and Democrats alike, we've, you know, the, if you look at the charts, it's like the debt. Increasing debt has been a bipartisan issue. I do believe the, the expense side of that has gone up pretty dramatically over the last three and a half years, like $5 trillion of new spending. And we now have a trillion dollars of, of interest payments, which, by the way, begs the question of why we didn't refinance some of that debt when the interest rates were so much lower. The U.S. treasurys and issued new Treasuries that much. So we're not on a sustainable path. When you have an interest payment that's bigger than your defense budget and you're a global superpower, that's not good. Our defense budget's 900 billion and our interest payment is a trillion. So we got to bring it under control. And there are things that I would be wanting to cut on day one which are not things that other people might want to cut. I think a lot of these hundreds of billions of dollars of subsidies, loan forgiveness, these things are. I'm a free markets kind of person. I think we should not be heavily subsidizing all these electric vehicles and solar panels and all these things that are transforming our economy and also hurting traditional manufacturing and fossil fuels and so forth. So that'd be one of the things, I do think we should have a balanced budget amendment. I think that's a level of discipline that's going to be required. And I ultimately think we're going to have to make really tough choices across our spending. So that's the spending side of it. But, you know, a lot of this also has to do with how we grow our economy. To stage the audience. And this is where I believe in a world where the energy demands are quadrupling, I mean, it's amazing globally and given America's both innovation capacity, but also its breadth of natural resources, I do think America's future will be guided by its energy future. And so it goes back to that question you spoke about, the national security and economic implications of the debt all of those things come together with unlocking energy, unlocking innovation, and growing our economy. An economy that's growing. And then. I'm not saying you can grow your way to prosperity. We also have. Well, I mean, you actually can. I mean, historically, right. I mean. Well, but part. A big part of the qu. This is doing that. And there's two pieces to that. There's unlocking the industry. And related to that is a deregulation mindset. I don't mean a mindless deregulation, but what's happened is the compounding effect of bureaucracy and red tape. Whether you're a small business, a dairy farm, or a technology provider on the cutting edge of artificial intelligence or quantum science, the regulatory burden has grown fairly dramatically. And so we've got to reduce regulations, unlock energy, and show more discipline around fiscal spending. Those are all hard things to do. But that's the combination of things that's going to be required. I think about that productivity growth, kind of real economic growth as so fundamental. And you know, I remember well, as you do. Right. The Telecommunications act of 1996 and sort of creating, deregulating telecom and opening up free market competition, the Internet. And there was a big boom. And actually during that period there was a budget surplus. Right. We had done that. And so I think the right policy at the right moment can unlock this. And you have people like Cathie Wood who are arguing that the 2000 and 30s through AI will have average GDP growth of 50% per year. That would get you out of debt pretty quickly. That would get us out of debt quick. Right? Yeah. Well, look, Dave, it's been a great conversation, a lot of topics to cover, and I appreciate the range of that conversation. I think it's really meaningful for people to hear from you as you're thinking about a future leadership role again in the government and really just grateful for the time. Hey, I'm great to be with you. Thanks for having me on today and look forward to touching base again after November 6th. For the next 18 days, it's. It's a. It's a full, full born sprint. But after that, look forward to following up. Jeremy, thank you. Thank you, Dave. All right, have a good day.