Goldman's Jared Cohen and George Lee on the Unprecedented Shocks in Geopolitics

Episode Summary

Executive Summary: Odd Lots hosts Jill and Tracy speak with Goldman Sachs Global Institute co-heads Jared Cohen and George Lee about a world defined by geopolitics, technology, and markets. The conversation centers on Europe’s strategic weakness, U.S.-Europe and U.S.-China tensions, Gulf states’ rise as AI and capital powerhouses, subsea cable vulnerabilities, and how investors should translate geopolitical uncertainty into portfolio decisions.

Main Topics: Transatlantic rift and Europe’s geopolitical weakness (Priority: 5/5): The guests argue Europe is losing influence because of weak growth, fragmented coalition politics, and limited collective action, leaving it sidelined in Ukraine, the Middle East, tariffs, and China policy. Trump administration’s transactional foreign policy (Priority: 5/5): They describe a more centralized, Trump-forward policy style focused on reciprocity, defense spending, trade deficits, and tariffs, with less institutional decentralization than in the first term. Gulf states as geopolitical and AI swing states (Priority: 5/5): Saudi Arabia, Qatar, and the UAE are presented as strategic capital hubs using sovereign wealth, infrastructure, and regulatory control to pursue AI leadership and broader geopolitical mobility. AI as a national-strategic priority (Priority: 5/5): AI is framed as a matter of national destiny across countries, affecting growth, defense, culture, and information control, while Europe risks lagging due to regulatory caution and underinvestment. U.S.-China competition and DeepSeek’s significance (Priority: 4/5): The discussion treats U.S.-China rivalry as likely to worsen over the medium term, with DeepSeek highlighted less for technical novelty than for its open-source, low-cost provocation in the AI race. Subsea cables as critical infrastructure (Priority: 4/5): Undersea cables are described as the hidden backbone of global trade and data, increasingly exposed to sabotage, geopolitics, and hyperscaler ownership, making them central to technology and security. How investors should think about geopolitics (Priority: 4/5): Rather than predicting precise events, investors should identify shocks, inflection points, and countries that gain a geopolitical premium, especially Japan, India, and selected swing states.

Key Arguments: Europe’s problem is not ignorance of what to do; it is implementation, since coalition politics and national rivalries prevent collective action on defense, regulation, and competitiveness. Trump’s current approach is more centralized in the White House and more explicitly driven by reciprocity than in his first term, when agencies had more autonomy. Europe is increasingly absent from major geopolitical arenas—Ukraine, the Middle East, and tariff negotiations—because of weak growth and limited strategic leverage. The Gulf’s combination of capital, sovereign ambition, and infrastructure control makes it uniquely positioned to compete in AI and shape global geopolitics. AI is being treated by many governments as a national destiny issue, even though the technology may still face uncertainty and possible limits on its ultimate impact. DeepSeek matters not just as a model but because open-source availability changes the strategic balance and intensifies the AI race. Subsea cables are a major geopolitical vulnerability because they carry most global data and trade, and breakages or sabotage can have economic and security consequences. For investors, geopolitical risk should be translated into scenarios and inflection points, not day-to-day predictions; some countries may trade at a geopolitical premium because of these shifts.

Data Points: Stock Movers format: 5 minutes or less - Bloomberg promo preceding the Odd Lots episode J.D. Vance speech: Munich security conference - Used as an example of a difficult transatlantic moment Europe's AI summit: AI Action Summit in Paris - Referenced as a major European attempt to mobilize capital and infrastructure Time horizon of geopolitical ambition: 3 to 5 years - Sovereigns’ strategic ambitions discussed by Goldman Sachs Global Institute European growth period: Beginning of the year - Mentioned as a rally that does not resolve structural concerns Defense spending benchmark: 3% of GDP - Described as the new 2% for European defense spending Eastern European defense target: 5% - Mentioned as a more ambitious level for countries closer to Russia, such as Poland DeepSeek launch timing: November 2022 - ChatGPT’s public emergence and the ensuing AI safety debate AI capability comparison: 100 to 1,000 times more powerful - Used to describe how much more capable current systems are versus early ChatGPT-era models Global trade flows: 80% flows above the ocean - Introduced in the subsea cable discussion Global data flows: 95% flows on undersea cables - Used to show the centrality of subsea infrastructure Undersea cable length: 750,000 miles - Estimate of global undersea cable network size Undersea cable reach: 30 times around the earth - Another way of illustrating the scale of the network Daily transactions over cables: $10 trillion - Value of global transactions and information dependent on subsea cables Cable break frequency: 150 breaks per year - Average annual number of subsea cable breaks mentioned Baltic Sea incidents: Two recent cable severing events - One involving a Chinese vessel and one involving a Russian vessel Red Sea data route share: 90% of data traffic from Europe to Asia - Flows through 14 cables in the Red Sea Market share in subsea cable manufacturing: 87% - Combined share held by Subcom, NEC, and Alcatel Google cable ownership: 33 subsea cables - Illustrates hyperscaler participation in cable infrastructure U.S. tariff threat: 25% tariffs - Referenced in relation to Canada and Mexico Potential labor impact: Double-digit unemployment - Cited as a possible consequence of tariffs if implemented U.S.-China trade relationship: Third-largest trading partner - Used to underscore the importance of the bilateral relationship Podcast networking: 24-7 - Odd Lots Discord community reference at the end

Pivotal Quotes: "the world has completely changed in four years" — Jared Cohen: Explaining why the current Trump term feels like a different presidency rather than a simple continuation "Europe is evaporating geopolitically" — Jared Cohen: Describing the continent’s loss of strategic relevance amid weak growth and fragmented politics "we went from being countries with sovereign wealth funds to sovereign wealth funds with countries" — Jared Cohen: Explaining how Gulf states have shifted from passive capital holders to geopolitical actors

Implications: Listeners should read the episode as a map of a more fragmented, multipolar world where AI, infrastructure, and capital control are strategic assets. Europe looks weak, Gulf states look ascendant, and investors may increasingly favor countries with geopolitical flexibility and real implementation capacity.