John Sipher (00:02.838)
This is John Seifer from the Steady State. Today we’re joined by my friend Glenn Chaffetz. He’s the director of the 2430 Group, which is a nonprofit focused on state sponsored espionage against the private sector, and he’s also the publisher of the RED Report. Glenn brings a broad perspective to the subject that we’re going to talk about today. He served at the State Department and at the Arms Control and Disarmament Agency and spent much of his career at the CIA, including three tours as a chief of station.
And before retiring, he became the agency’s first chief of tradecraft in operational technology. He also taught and has written extensively about international politics, intelligence, and foreign policy decision making. Welcome.
Glenn Chafetz (00:46.993)
Glad to be here, John.
John Sipher (00:48.813)
Are you really?
Glenn Chafetz (00:50.779)
Yes. my my heart sores like an eagle. Yeah.
John Sipher (00:51.406)
good. Yeah. We’re friends, so I’m gonna try to get a few shots in on If I hope you that hope that’s okay. But so I want to talk to you about China and I wanna talk to you about corporate espionage and all those other things. But first, if you don’t mind, I wanna chat a little bit about your background. So you did work at the State Department before you came into the CIA and you also worked in ec academia. Can can you talk a little bit about those cultures?
Glenn Chafetz (00:57.543)
Yeah.
Glenn Chafetz (01:13.975)
Yeah.
John Sipher (01:19.756)
You know, you worked at state and CIA. How are they similar? How are they different? What was your experience?
Glenn Chafetz (01:24.517)
Yeah, a great question, especially since you were largely responsible for me leaving the State Department for the CIA. for our listeners, John recruited me out of the State Department when we were overseas in the same place. it’s it’s a ri it’s a great question and it’s and it’s one I’ve actually thought about writing about.
at the risk of upsetting pi people or thrilling people. Yeah, both organizations. they’re they’re similar in many ways and they’re different in many ways. And okay, I I haven’t said anything yet. The the State Department is r really focused bilaterally on the relationship b between the country in which you are posted
John Sipher (01:55.246)
Both organizations.
Glenn Chafetz (02:22.08)
at the embassy so if if you’re if you’re posted to Gazirstan well I’ll use a real example no I can’t use a real example I’m not allowed to do that but on one of my posts I my mother knew what I did and she said I didn’t know we spied on X and I said we don’t we spy with X on on
o other countries and pr and principally it was Russia, China, Iran, and North Korea. And I don’t think many people understand that. That the the the whole focus of the effort of the agency is is really on threats to the United States. And it doesn’t matter
where you are at the time, you’re simply trying to find people who have information about those threats, whether they’re located in in sub-Saharan Africa or Northeastern Europe or where have you. I think that’s one giant difference that most people don’t get. Another one, and I and I think you used it well when you were recruited me out of the State Department, is I I happen to believe that
foreign service officers, State Department officers, are the most underused, exploited talent in the United States government. You have these very educated, very smart, very diligent, dedicated people, and they’re largely stenographers for an ambassador.
And one of the ways that I think that you you really appealed to me to change careers when we were overseas is you said, aren’t you tired of just taking notes for the ambassador? Don’t you want to do things on your own? Don’t you want some autonomy? And I thought, yes, yes I do. And so the the jobs are very different in in that regard, that
Glenn Chafetz (04:42.424)
It when you’re overseas as a State Department officer, you’re you’re largely functioning in support of of an ambassador. And that’s that’s fine. but but it it’s limiting if if you like to go out and do things on your own. So those are just two examples, I think, of the differences in culture.
John Sipher (05:02.871)
But you also worked in the State Department, not in the Foreign Service too. And so I mean, is is that culture differ? Because essentially the people who work overseas and the people who are working back home, those are very different kind of jobs. Does the does the culture different? ‘Cause I’m ’cause culture follows mission, right?
Glenn Chafetz (05:05.904)
Correct. Yeah.
Glenn Chafetz (05:14.786)
Yeah, yeah. Yeah. Yeah, it’s it’s a really good point. So when you’re when you’re at the State Department in Washington, you have you have a a role depending on your job, independent of say the embassies overseas. Whereas at least in the DO, in the Directorate of Operations, in the agency, your job
I think, with with very few exceptions, in headquarters at the agency is to support the field. And it’s it’s a very different mindset and a very different emphasis, I think, between the two organizations. I think there’s a lot more, a lot more importance for the State Department on those jobs at state in Washington, whereas
i i i in the agency. Your job is to support the field. You are a and everybody understands that and everybody wants to get out to the field or should you know as as quickly as possible at least in the DO
John Sipher (06:30.165)
That makes sense. So for a period, I mean you worked overseas, you were a chief of chief of station, you worked in some pretty dicey places, but for a period of time you oversaw espionage tradecraft in the CIA, the sort of skills required to recruit sources and handle sources securely. Well, we won’t discuss specifics. Can you give a sense of how tradecraft has evolved and is evolving? Is it similar to how war fighting and weapons evolve over time? And
What you know, what we’ll get into like what are the challenges for intelligence agencies going forward?
Glenn Chafetz (07:03.822)
Yeah, it’s a it’s a great question. First I have to correct you. I wish I oversaw. the the the t the title was grander than the the actual authority. Yeah, no, I had the I had the great title. yeah, so the the issue was this. i it it it it really came about as a response
John Sipher (07:08.397)
Please.
John Sipher (07:16.897)
Well, but that’s what you want when you retire. You want a grander title so you can get fancier jobs.
Glenn Chafetz (07:33.497)
to the evolution of technology and and the fact that sensors data and algorithms had had really grown in capability s so quickly
and so powerfully over a relatively short time. And so y you just to take a couple of examples, when when you and I both went through training, not to get into specifics, this the scene that everybody sees in all the president’s men, where you know one of w one of the two reporters is is meeting Mark Felt in the parking garage, that’s not too far different.
from from the kind of thing that we would do. You’d meet somebody late at night, in the middle of nowhere, and and you’d you’d have a conversation and nobody would know about it and information would be transferred. And that was great. And that’s really how intelligence had functioned for decades, if not centuries. the the microprocessor
the the the growth in sensors, data storage and algorithms changed all of that. I I don’t want to blame any one company, but it would be Google. no it’s it’s it’s really it’s really tech and it’s and it’s not it’s not fair but the the issue was that in the old days if you didn’t get caught red-handed you didn’t get caught.
and today real really starting in i i would say in the in the early 2000s up through the the 2010s that was no longer true because so much of our lives were recorded and those recordings were stored and they were stored forever and they could be easily recovered and interrogated and analyzed
Glenn Chafetz (09:49.467)
to the to the point where i you could come back from an operational act and never be certain that what you had done
was secret. So so essentially what technology had done was it changed time from from a concern that was in the moment in this parking garage with all the president’s men to forever. And it changed collection from in the place to really everywhere because y you you’re surrounded by technology everywhere. T take a walk in any any city and and look at all the cameras.
that you can even see and identify. And then the last one would be phones and cars. I had one tech executive tell me, again, nothing classified. This is this is commercial surveillance.
John Sipher (10:48.843)
You can talk you can say classified stuff ’cause no one listens to this.
Glenn Chafetz (10:51.012)
Yeah. Yeah, okay. thanks. but yeah, so this is you know, g commercial surveillance d far outstripped government surveillance. And and this rep you know said there’s only four kinds of people who don’t carry a cell phone at any particular time. Infants,
c you know, drug dealers, cops, and intelligence officers, which are you. So so y you were you were damned if you did and damned if you didn’t. So if you didn’t have a cell phone, you had to explain to people that you were really a large ambulatory infant. And if you did have a cell phone, it’s recording everything that you’re doing. I did make one suggestion, only half in jest.
late in my career that all case officers should be issued a a nineteen seventy three GTO or sixty nine Mustang, so ’cause it didn’t have any of the tech that modern cars have on them. But it’s it’s been a real challenge.
John Sipher (12:00.993)
so d what d does that make it impossible to do the business like it was done for decades and centuries, like you mentioned. I mean, if if there’s cameras everywhere and everything’s tracking your time and eventually, you know, quantum computing and stuff may even make it so that, you know, our encryption eventually is broken. How how do you keep something secret? Like that was the advantage. If I met someone in an alley and nobody saw it, that was the end of it. Nobody ever saw it. It was a secret meeting.
That guy doesn’t have to worry about ten years from now anything happening. So what can we d can we spy in the old way anymore?
Glenn Chafetz (12:36.058)
Yeah, y yeah, we can. It’s just a lot harder. it’s it’s it’s a lot more challenging now because as as we all know, I mean you don’t have to be an intelligence officer or a retired intelligence officer to know there’s books written about it. There’s entire industries that depend on
knowing who you are and what you like and what you buy and where you go and what you do and and and and how you pay for it. all all that information about you is is collected and it’s collected for for three reasons. One, to sell you stuff. This is real time bidding for advertising. The second reason and and and it’s a good thing is fraud detection. We’ve all gotten those messages. Hey John or hey Glenn
we see that you you just bought f four four tickets to this to this baseball game in a city that you don’t live in. Is this you? if if if it is, don’t answer. And if it isn’t, let us know and we won’t let the charge go through. the the third one is network efficiency. telecom networks, road networks,
rail networks, information networks, they all depend on knowing who is doing what at a particular time so that we can make the networks efficient. My favorite example of that by the way, a few years back, a a very mischievous person in London filled a wagon or with with a bunch of cell phones, turned on the driving app
And slowly crossed one of the bridges across the Thames. So everybody looking at that app saw this giant red traffic jam across this bridge, which didn’t exist because he was on the sidewalk. But but he was he was making a point about how reliant people are on this tech. If you had looked at the bridge, you would have seen no traffic jam. But but this is the kind of thing they do. And then the fourth the fourth purpose of
Glenn Chafetz (14:51.436)
of all of this commercial of all of this commercial information is is espionage. And and what I work on right now is how the People’s Republic of China is really quite good at at taking all of this information and using it to to acquire not just information, but knowledge, and then use that knowledge for nefarious purposes against the United States and and other countries.
John Sipher (15:21.261)
All right, well so let’s move move to China. But what essentially what you’re saying is high tech stuff is is making the defense more efficient and effective, but it also can be used for offensive purposes, right? So so yeah, yeah. So let’s talk about some of those purposes, right? I wanna about China. Like China offers foreign corporations an access to an enormous market, right? Manufacturing capacity at low cost, but
Glenn Chafetz (15:33.71)
Yeah, yeah. Yeah, it it has yeah.
Glenn Chafetz (15:44.304)
Yeah. Right.
John Sipher (15:48.014)
The problem is, you know, with that access comes demands to share technology, train local workers, all those kind of things. In your present position, you work with corporations that deal with that threat for China. How how do you describe it? Because I I read that book, Apple and China, which I thought was really, really interesting. And it talked about how Apple saw China as the this great place to manufacture things efficiently and cheaper. And it became an incredible, incredible success for them in terms of market and money.
Glenn Chafetz (15:59.163)
Yeah.
John Sipher (16:18.401)
But they’ve also left themselves so that they’re so reliant on China now that they’re really in a tough place. So w as you look at China now, how do you see it both in the as a as a market and a place to be worked with in a a place that’s a a threat to either businesses or American citizens?
Glenn Chafetz (16:37.208)
Yeah, it’s it’s a really difficult question and I think you’ve you’ve hit on several of the of the issues. So I’ve had a number of conversations with with decision makers inside American companies, big companies, small companies, tech, but but others also outside of tech. And and the and the problem is this. So Apple was filled with very smart people, they understood.
that they were losing intellectual property by by making that bargain of both taking advantage of Chinese labor, which was exceptionally low cost, Chinese education, which became you know top of the line over over the time that Apple was in China.
And then the Chinese market, the Chinese consumer market. So you have an exceptionally high number of buyers, you have an exceptionally high number of skilled workers, you have a great level of education in China. Apple knew, of course, there were trade-offs in terms of losing IP, and if you if you draw the curve out.
as Patrick McGee so ablely demonstrated in his book, it ends badly. Right? It ends badly because Huawei and Xiaomi and and all these other companies, they make an equivalent of the iPhone. Maybe it has 85% of the of the quality, but but it’s sold at 40% of the cost. And that’s very difficult for
the Chinese consumer to resist or or third country consumers or American consumers to to resist. The same thing with with now Chinese EVs. They they make them at at such a steep discount to what American and and German and Japanese car companies can manufacture. Now so so again, these
Glenn Chafetz (18:57.582)
These decision makers, these executives, they’re not stupid people, but but their their risk calculus is fr is is front loaded on on what they can see right in front of them. And what they can see right in front of them is I’m making a ton of money. and and the costs that I’m gonna pay for losing IP are down the road and difficult to calculate. Whereas the gains that I’m making are right now and easy to calculate. So
John Sipher (19:26.413)
Quarterly reports, right?
Glenn Chafetz (19:28.472)
Sorry. Quarterly reports. How am I doing? How am I doing this quarter? Exactly. And so and then then they would you know there was a bit of self-delusion there as well. I I heard this statement a lot. we can innovate a lot faster than China can steal. And I said it that that’s a comforting thought. Two two problems or or more. One
John Sipher (19:29.613)
Quarterly reports you make, right? This the for stock market.
Glenn Chafetz (19:57.295)
China can steal faster than you can innovate. I used to steal sa secrets for a living. You can steal faster than than companies can innovate. So that that’s it’s it would be nice, but it’s not true. The the second problem is even if you’re innovating very, very rapidly, you’re still subsidizing your competitors, R and D. Why why would you do that? Right? And then, you know, where does that end? So
John Sipher (20:24.735)
So so what i w if we’re talking about Apple in China, for example, what distinguishes Apple’s experience from classical espionage, right? From that for a gu business versus government? Much of the technological transfer described in the book was was legal, commercially motivated. Does that make it less damaging or h harder for governments to address? Did the government play any role in this, telling Apple like, don’t do this or or were they kept separate?
Glenn Chafetz (20:36.612)
Yeah. Yeah. Yeah.
Glenn Chafetz (20:48.73)
No. No. No, I mean commercial espionage has always been with us. You you you know that as well as as anybody. I mean the Soviets the Soviets did it, but where I think it it was where China’s quite different is w one, this is a this is a whole of government, economy, party, state, company effort. It is a coordinated, intentional
Purposeful effort. I mean Rushdoshi’s has has written about this in the long game. I’ve written about it in in several articles. This a lot of people make the mistake of saying, well, it’s just commerce, it’s not national security. China doesn’t make that distinction. So commerce is national security. Destroying the United States industrial base,
is the war. That’s the fight. And China’s winning. Another difference is that governments spend billions of dollars defending their state secrets. Comp and they’re good at it, generally, and we we all know the exceptions.
they train their people, they have specific facilities for doing this and separate technology. Companies don’t do that. Companies are not
equipped either by training or mindset or investment to take counter espionage seriously. I I don’t know if there’s an MBA program or an undergraduate business program that teaches counterintelligence as part of its core curriculum, but they all should. If you if you
John Sipher (22:47.565)
All right, that’s good idea.
Glenn Chafetz (22:49.7)
We should start that, yeah. The the it it it’s I mean it’s literally trillions of dollars in in lost revenue. And that’s an that’s another problem, is the the the United States government, when it protects its secrets, it doesn’t worry about, hey, how much is this secret worth? It doesn’t put a dollar value on that.
It says this is this is integral to the national security of the United States. We have to protect this secret. Whereas whereas companies, even though it th there’s this great conflict, almost a paradox. So if you if you poll
CEOs of the Fortune 500, they all say that the vast majority of the value of their their company, upwards of ninety percent, is in its intellectual property. But then they can’t tell you how much that intellectual property is worth.
in a dollar value and how much it costs them when they lose it. Nor do they track it, nor do they report it when it’s lost. And so you you get a situation almost akin to a neighborhood where everybody leaves their house open, right? And all their stuff is stolen, but nobody tells anybody else, so nobody improves their locks. That’s what we have with American industry.
John Sipher (24:06.995)
I saw there was an article this week in the New York Times too that it sort of happened with German industry, German Germany, Mercedes and BMW and these guys were s folks like them were selling their cars and making huge money in the Chinese market. And all of a sudden now Ch China’s figured out how to make these things, they’re not buying anymore and and it’s coming back to haunt them. E Vs are being sold all over Europe and nobody’s buying Mercedes anymore in China.
Glenn Chafetz (24:29.914)
Well, in b in part because A, China s stole the Mercedes technology. That was or sometimes they call it, you know, consensual transfer. It it often bleeds into coercion. Like, okay, now you’re here and you’re you’ve invested all this money in China, we want this other tech. And then the the foreign company says, Well well, that was not part of the deal. Okay, well then we’ll shut you down. And so what is the company to do?
and and so China really has the advantage there. I think the other thing is China artificially depresses the wages of its workers, China gives subsidies to its to its companies, it’s got a huge state-owned sector, and even the non-state-owned companies get discounted capital, discounted land, direct subsidies. There’s no way
that a Western company whose government is following the rules of the WTO can can compete with that. not not in the short term anyway. So the the the attack that China is perpetrating is simply putting putting other countries literally out of business.
John Sipher (25:54.734)
So we read a lot about the the Chinese surveillance system and their their you know investment in espionage on on behalf of the state and and and the economy and all those other kind of things. Can you can you just give and you speak to a lot of corporate groups about this? Can you just how would you describe the Chinese surveillance system against their own people, their intelligence system, their security system? wrap those up together for us a little bit.
Glenn Chafetz (26:21.422)
Yeah, again, there’s been a number of leaks out of China that have been, you know, exceptionally helpful and revelatory. China has this entire system of contracting companies that work for the government. and it’s not just one government, it’s not the central government,
you know, in the Forbidden City and and you know, the Eye of Sauron, there’s a bit of that, but it’s but it’s all the provincial governments. They all they all they
The they are all connected to each other in the companies and security and surveillance and business in ways that are very hard for outsiders to understand. The job of the government and the job of the intelligence services is very much to steal tech.
And to provide advantages to Chinese companies so that they can become the might market leaders around the world and anywhere in tech that China cares about. You can look at made in China 2025. It’s all the usual suspects robotics and AI and and computer science and telecom and maritime and aerospace, special materials, EVs, batteries, new new fuels, new energy. China wants to be the
leader in all of those things and and not just wants to be the leader but wants to put foreign competitors out of business. And so the government, the intelligence services, the the regional governments, they all work together to do that. And to do that, they need to have knowledge and they need to maintain the control of the Communist Party of China. And the way they do that is to track both their own people and foreigners and to track them not just
Glenn Chafetz (28:16.91)
not just in China, but also abroad. And now we’ve come f full circle in our conversation, John, to
ubiquitous technical surveillance. Part of the way that occurs abroad is China supplies smart cities, sometimes called safe cities, abroad. And it’s a it’s a Chinese contractor that that sells the technology and it’s Chinese workers who who man the the cameras and the the Wi-Fi collection and and the microphones and the apps.
And the and the and the servers and th these become giant extensions of the PRC surveillance infrastructure worldwide. So people think, well, I’m not going to China. I don’t sell in China. I don’t have to be worried about China surveilling me. But that’s not true.
If if if you create data, that data is is out. It’s out there. And anybody with a credit card can buy it. and China does a bit of that as well. Or it steals it. I mean, we can’t go a week without reading about a data breach that we’ve all been we up essentially every American’s data has been lost to China already at this point.
John Sipher (29:42.933)
And does it include we often read about Huawei and TikTok and these kind of things, and almost so much is written about we think that’s the the cutting edge. Is that the main way that they spy on Americans or is it the stuff you’re talking about?
Glenn Chafetz (29:56.997)
Yeah, I mean it’s all it’s all of it, John. It’s a it’s a it’s a it’s a smorgasbord, it’s a cornucopia. I knew you would I knew you would love that word. it’s a cornucopia of vectors of theft. Right? So you have you have all of the you have all the old ways, right? people spending time at the at the coffee shop or the fitness center where the where the tech expert s spends time.
John Sipher (30:03.629)
Keep going.
Glenn Chafetz (30:26.558)
away away from work. they they insert their people, often proxies, into companies that they care about. They recruit people out of those companies. cyber is a big one. Everybody’s heard about that. They they have an entire
hacking community, hacking for hire of I would estimate hundreds, if not thousands of companies. They have hundreds of thousands of intelligence officers and proxies worldwide. They they insert backdoors in hardware and software and then they have these arrangements that we talked about earlier this trading
you know, opa openly for IP and then and then blending that into coercion. And sometimes they just out and out steal things like the famous case of the of the DuPont seeds that were taken from a from a experimental field in Iowa. I I would I would posit f from all all of this open source data that is the single most successful
intelligence organization in the history of the planet. In part because of technological changes that have permitted that, but in part because th they’ve dedicated themselves to this activity.
John Sipher (32:01.653)
So I wanna put this in a little political spin now, obviously be what we’re seeing in Washington with the Trump administration. I think one of the things that we had that the Chinese didn’t have, and I wanna hear if you think they still don’t have it, is we had a worldwide network of allies. We were working and year after year, decade after decade, we were in all these countries working with their security services, even places Americans wouldn’t think were friendly countries to us were helping us.
Glenn Chafetz (32:18.832)
Yeah.
Yeah.
Glenn Chafetz (32:28.442)
Right. Right.
John Sipher (32:29.471)
in lots of ways. They were worried about the growth of China and Chinese activity. And they were helping us. And so our allied, our our sense, our group of allies that work with us gave us a real heads up heads up, gave us, you know, more than we could get on our own. I think I worry that the Trump administration does not value those things, wants to bully those people, doesn’t believe they’re our friends, and that is changing quite a bit. So I want to ask
If you’re seeing that and believing that too. And then separately I wanna say, does China have intelligence allies around the world that feed it information and help it or or not so much?
Glenn Chafetz (33:06.35)
Yeah, let me take the f second part of that first. in the sense of allies like the United States has, like NATO and has or or had and Australia and Japan and South Korea. No, Ch China doesn’t work that way. but it still gets a lot of what it wants.
via commercial relationships, via investment, via out and out bribery. if if if you can’t make friends, buy them. Right? And and we see that a lot in Latin America and Southeast Asia, in sub-Saharan Africa and the Middle East. so y you y
You can see where China makes arrangements with particular individuals or particular governments or parts of governments or particular companies to provide the support that it wants. I would say, secondly, China does have a very
informal, that is, it’s not treaty bound, it’s it’s not like US Cold War relationships. It is a very informal but very effective network of fellow autocracies.
Who all support each other, and China is the hub for that. birds of a feather flock together, and this is autocratic birds of a feather. So you see China supplying censorship support, surveillance support, information support for dictators around the world.
Glenn Chafetz (35:03.726)
China claims neutrality right now with respect to Iran, but China supports the Iranian regime with intelligence, sanctions invasion, and economic and dual use and even defense articles. China and Russia are quite close right now.
China is supporting Putin and Putin’s oppression and Putin’s war in Ukraine. China supports North Korea. North Korea owes its existence to support from China and Russia without without China and Russia, North Korea would collapse. So so China’s got this worldwide collection of you know to steal a to steal a phrase from
former President Bush, the Axis of Evil, which I which I like more and more as a an apt description of how China and Russia, North Korea and Iran
John Sipher (35:59.021)
Yeah.
Glenn Chafetz (36:05.42)
function. So it allies in the old sense, no, but I don’t think it matters. They don’t need treaty allies. They have these informal arrangements and they work to serve China’s purposes and the purposes of the countries, governments and people and companies they cooperate with. I think yeah.
John Sipher (36:24.129)
But we had allies and we were throwing away. Is that a smart move, you think?
Glenn Chafetz (36:28.954)
Yeah, I just don’t I don’t think it’s terribly productive to alienate friends. I I I think allies provide benefits. I think certainly one one understands the need to spread bur burden sharing, but you don’t throw the baby out with bathwater. and I think
It’s very difficult to persuade for example, countries not to make agreements with China because of China’s economic coercion if if we’re using economic coercion against those those countries as well. So so I think you know you can’t
You you can’t treat everybody the same if if you treat everybody as if they’re a threat, they’ll become a threat. And I think that for the United States, the the real threats are are China one, Russia two, Iran and North Korea, I put them as tied for three. And that’s where our focus should be.
John Sipher (37:44.684)
I don’t want to keep you too long, but I want to talk a little bit about this this sort of new era of AI. So, does technology like AI, you know, we’ve seen you’re telling us that that the technology revolution that’s impacting surveillance has helped the Chinese and made it harder for us to work. But does AI in a way serve as a threat to the Chinese Communist Party? Like all these open models that circulate information and make censorship more difficult and the things. So tell me about AI and
Glenn Chafetz (38:00.038)
Yeah.
Glenn Chafetz (38:05.988)
Yeah. Yeah.
John Sipher (38:13.653)
in China and maybe even go further into what you know, what you think that’s gonna mean for our national security interests.
Glenn Chafetz (38:20.388)
Yeah, I wish I knew. ’cause you know, then I would then I would invest wisely. yeah. Yeah, my my my my glorious government pension. I I it’s a great question and I think China’s really
John Sipher (38:26.719)
Invest your small amount of money.
Glenn Chafetz (38:37.274)
Conflicted about this. On the one hand, it sees great potential in AI. Everybody sees great potential in AI. It has a declining working population. It will soon have a declining overall population. It’s gonna face demographic collapse faster than almost any other country. And so China regards automation and AI as part of that as a technological fix or rescue.
The problem is China has to control the AI, and the problem is as we’ve seen in in a couple of big stories over the last couple weeks, AI is not so eager to be controlled.
And China before AI you know built the great firewall and could control the narrative, certainly inside China, and did a pretty good job about controlling it outside China as well. one of the things that makes me laugh a lot is China says it’s a it’s a democracy. I I think that stretches the the definition of d democracy so elastically that you know to be laughable, but
So China is recognizing that that AI is gonna go off the rails. They haven’t out they haven’t figured out
how not to make it go off the rails. And then AI is going to talk about Tiananmen Square, and it’s going to talk about free and fair elections, and it’s going to talk about the rule of law. And it’s going to talk about Tibet and it’s going to talk about Xinjiang. And it’s going to talk about a lot of things, universal human rights, that China doesn’t want people to talk about, particularly inside the borders of China. So I mean politically I think it’s a it’s certainly at least
Glenn Chafetz (40:24.568)
double-edged sword if not worse than double-edged for for the the Communist Party of China. In terms of intel collection, I mean you were already seeing you’re already seeing that right you know these the distillation the learn the learning that AI models do is learning is information acquisition and some of that learning is not is not what companies want rival companies to have
Now you could say rival companies within the United States or within the Western world, but they’re subject to the legal system. Chinese companies are not. And so this is this is a real problem. But it’s but again, it’s gonna hurt China as well. So China can use AI for for turbocharging, and I’m and I’m understating how big a gain that would be for turbocharging.
hacking cyber intrusions as a means of collection, but it’s also gonna make China extremely vulnerable.
John Sipher (41:31.319)
So I’ll get you out of here, but one more quick question before we move on, because you’ve been very gracious with your time. Let’s talk you’re you’re working now a lot with companies on the issue of commercial espionage and and threats from governments. Does the basic American model place too much responsibility on individual corporations to defend themselves against nation states? Do American executives misunderstand the Chinese system? Is there s should should the US government be doing more? And what should companies be doing differently?
Glenn Chafetz (41:41.124)
Yeah.
Glenn Chafetz (41:59.929)
Yeah, I it’s at that it’s a it’s a it’s a tremendous question and a and I won’t do it justice. Excuse me. Here here’s the problem. The the United States government does a lot on this issue, but the United States government is limited by two factors. One is it doesn’t have the authorities to to do precrime
John Sipher (42:02.581)
Yeah, sorry, those are big questions, I know.
Glenn Chafetz (42:28.888)
essentially, to to do very much on economic espionage. It could certainly do more. it could provide more support to companies. It could it could provide support, legal support for companies who find themselves preyed upon by PRC based actors. It could certainly do more.
But the other problem is there’s six, seven million companies in the United States, something like that, maybe tens of thousands that produce the kind of tech or processes or services or products that the Chinese are are interested in. There’s maybe 10,000, 12,000 FBI special agents to cover that number of.
companies and all of US infrastructure and you know the th the the one of the largest areas of infrastructure on planet earth they don’t have the resources to do that. I mean it would bankrupt the United States to provide the resources necessary for the government to protect all these companies. So the result of all that John is that the companies have to defend themselves.
Again, like like like little governments. This is why I’m I’m making the argument on on a purely economic basis.
Le leave aside the national security basis, which is big. On a purely economic basis, if you want to maximize your revenue and not subsidize the RD of your competitors and get the most profit out of your intellectual property, you need to know what you have. You need to have policies to defend it, and you need to defend it. You have to understand the threat. You have to train your people. You have to become somewhat expert or sufficiently expert in
Glenn Chafetz (44:26.76)
economic espionage, counter-espionage, counterintelligence. And the companies that don’t do that are gonna find that the 90% of their value that is that is represented by IP is gonna is gonna fly out the door and and they’re gonna be overtaken by competitors outside of the United States.
John Sipher (44:48.929)
Well, thanks for your time. But before we leave, can you talk a little bit about what you’re doing in this regard? If you wanna and also some of the writings or what what what should people look for from you? And do you have any projects or anything you’re doing that you want to talk about before we leave?
Glenn Chafetz (44:56.72)
Yeah.
Yeah. Yeah.
Right, yeah, so it’s it’s it’s a it’s a nonpartisan independent nonprofit called 2430 group.
And it’s it’s a collection of former Silicon Valley people and Wall Street people and former agency and State Department and Commerce, military people who are really concerned about this issue of economic espionage and what it means for our economy. And what we do is research and advice, and we provide research on what the risks are, we provide research.
For companies about what they should look for. We provide research about the level of risk that’s present in the system, the methods that different actors use. And then we support those companies. So if they call us, we’ll help them out. We’ll tell them what the best practices are. We’ll inform them of what they can do.
Glenn Chafetz (46:10.798)
And it could be it it doesn’t have to be private sector, it could nonprofit sector, government sector, anybody who has a concern or a need about defending their activities from state sponsored or even not state sponsored espionage, we want to help the good guy.
John Sipher (46:32.215)
That’s twenty four thirty group, is that the name of the
Glenn Chafetz (46:34.362)
Twenty four thirty group.
John Sipher (46:36.429)
Very good. And any other thing, anything you’re working on, a book writing articles? Do you wanna
Glenn Chafetz (46:40.868)
Yeah, I just had a I just had an article came came out in Tomorrow’s Affairs. gr great journal and that is about how Russia and China attack the US health infrastructure.
through cyber and control of supply chain. If you go to the 2430 group website, 2430group.org, you can see our various research projects and our activities and learn what we’re doing and and if that’s interesting then reach out to us and we can help you.
John Sipher (47:18.445)
All right, well thank you for your time. I really appreciate it. It’s good to see your smiling face. I gotta get out your way. It’s it’s kind of miserable and hot and sticky here. So thanks again, Glenn. Appreciate it.
Glenn Chafetz (47:29.018)
Thanks for having me on, John. I appreciate it. Take care.
John Sipher (47:33.531)
And then let me see. I think we gotta wait for this to.