Michael Lucci - Is China Fueling America’s Data Center Backlash?

State Armor founder and CEO Michael Lucci joins Lars to discuss a massive Chinese bot network allegedly targeting America’s debate over AI and data centers. Is China trying to turn Americans against data centers to slow U.S. AI development? 

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SPEAKER_01 0:14

Hey, welcome back to the Laris Larson show. Well, if you hate those massive data centers that seem to be popping up everywhere, it turns out that China may be helping to fuel that backlash. I wanted to talk to Michael Lucci about it, who's founder and CEO of State Armor. Michael, welcome back to the program. How are you?

SPEAKER_00 0:32

I'm doing well. It's great to be on, and it's a very important topic. Who's going to build the technologies we need to win the 21st century?

SPEAKER_01 0:39

Yeah, it is. And China would prefer that China was the builder of or the architect of all that, wouldn't it?

SPEAKER_00 0:46

Yeah, so we're seeing it come out through multiple vectors. Last week, Twitter released a report showing that they had to kick off a bunch of Chinese bots that kept amplifying the fight within America about whether or not to have data centers. But this isn't a one-off. OpenAI, which is actually an artificial intelligence company, previously reported that they caught Chinese corporations spinning up social media campaigns against American data centers on OpenAI's ChatGPT platform. And Chinese state media itself has run dozens of articles talking about how the United States should not build data centers. They give a number of reasons. Most of them are amplifying internal debates that we're having. And this is how they run their influence operations. They try to find, they almost try to find like a scab and pick on it. They try to find something we're disagreeing about, and they try to amplify it. They make it worse and worse and worse. And in this case, they have a very clear strategic objective, which is they want to build the technology infrastructure for AI, and they want us to not build that infrastructure.

SPEAKER_01 1:53

In the same way that Huawei wanted to be dominant when it came to routers nationwide. So China ran around and offered cheap infrastructure, electronic infrastructure, hoping if they could make that kind of entree, that they would basically own that part of the field.

SPEAKER_00 2:11

That's right. And that that's really a perfect example. The FBI reportedly started investigating Huawei in the United States because in places like Nebraska, Huawei was selling their equipment at a massive loss. And so our federal agents said, why would they do that? Well, they're doing it so they could have the espionage impact on our country.

SPEAKER_01 2:30

Well, and and I guess one of the things that bugs me most about that, Michael, and maybe you can speak to this, is that if an American company did that, generically that's antitrust activity. In other words, if somebody came into a marketplace and said, we're going to offer what is being offered by other vendors, but we're going to offer it dramatically below their cost and below our cost. So we're actually going to lose money on this, but we're going to wipe out our competition, that that's the kind of activity that Americans outlaw on a routine basis, don't they?

SPEAKER_00 3:01

That is the antitrust activity we outlaw, but that's also Chinese state policy. I mean, they do that across industries. Uh, think of it like this: rather than bomb our factories that are used to make you know tools of war or otherwise, they will just invest in subsidizing production so that our factories can't compete, whether it's with their cars, with their uh routers, as you're mentioning, with their telecom equipment. I mean, it's happening across sectors. So that they're they're very interested in being the dominant manufacturer, and frankly, right now they are the dominant manufacturer, and they want to do that for a number of reasons. But one of the key reasons, and they call this civil military fusion. All the products that have a civilian and a military use, they want us to build none of them. They want us to be totally dependent upon them, like we became for drones, likely we became for uh 5G Huawei equipment and all these other factors, so that if we ever had to ramp up for a fight with China, we wouldn't be able to.

SPEAKER_01 4:03

Well, and in fact, we're kind of up against that already, are we not?

SPEAKER_00 4:08

Uh unfortunately, so rare earth minerals.

unknown 4:11

Yeah.

SPEAKER_00 4:11

Really important input into uh, you know, smart missiles, into your phone, to computers. They have a strangle neck on those. President Trump launched uh the Pax Silica agreements to get off of their rare earth dependence as quickly as possible, but they have it across other areas. And then here in artificial intelligence, they want to play the same playbook, which is to get us to stop building by sewing up this consent and fight discontent and fighting within the United States. So they want us to not build, and then they want to offer their really cheap models at a much lower price than what our uh what our leading frontier companies provide. So that, and this is happening, so the American technology startups start using those Chinese AI tools. Today, that might look okay. Five years from now, you might find out that you had Chinese intelligence actors putting crazy code into your software that they're going to use at a later date.

SPEAKER_01 5:09

I'm talking to Michael Lucci, who's founder and CEO of State Armor. So if it's illegal for American companies to engage in that kind of antitrust activity, the anti-competitive activity, isn't it equally illegal for the Chinese actors to do it from outside our country? And couldn't we then ban them from the field that way?

SPEAKER_00 5:29

So you're describing exactly what keeps happening. We're seeing it most recently, for example, with routers. One of the Chinese router companies became the dominant manufacturer. Some estimates, including those covered in places like the Wall Street Journal and Congressional Testimony, some estimates said that they had like two-thirds of our home router market because you know, espionage purposes for it. Here's what happens, though, is they ramp up the production and they knock out our producers uh so significantly. And then all of a sudden we say, wait a second, we see what you're doing here. We can't be having that Huawei equipment or those routers or those laser sensors or whatever it is. But then we turn around and we look at our industrial base and we say, Well, they already knocked out our producers. And so we have to stop waiting until they knock out our producers before we react to their aggression.

SPEAKER_01 6:21

Yeah, we've got to we've got to beat them to that. So any other things that my and and here's I guess what bothers me is if you go to Americans and say, if you get to make this decision about your community, about whether or not you want to welcome a data center or not, that's one thing. But if you tell Americans, by the way, you've made the decision that you're going to oppose this data center, but it's really not your opinion. The opinion was put in your head by your ChICOM masters. If you want to make Americans angry, I think that would do it.

SPEAKER_00 6:52

Well, there are a lot of pieces we need to put in to get this right. So there are real concerns of data centers going near certain neighborhoods, being in the wrong place and things like that. And that's all local, you know, local control of communities, and that is a healthy debate. But the idea that we're seeing in a lot of places of shut this down completely. There's a moratorium in the state of New York. Uh, there are moratoriums spreading to other states where we're states are just saying, let's have zero data centers. This is obviously a disaster. I it is a disaster.

SPEAKER_01 7:22

Michael Lucci is founder and CEO of State Armor. Michael, it's always a pleasure to have you on the show. By the way, you may not remember every time that you toss and turn and wake up sleeping too hot, but your body certainly does. And that's why you wake up tired before your day even really starts. And that's why I love sleeping on a ghost bed. Ghost bed is engineered to help reduce the reasons that your sleep gets interrupted. It's designed to relieve pressure, help regulate your temperature, and support your body with cooling technology built into every mattress. And it's made in the United States. With Ghost Bed's 101 night sleep trial, you can try it out at home. Because the real test of a mattress is definitely how you feel the next morning. If you're waking up sore or tired before the day even starts, check out Ghostbed. For a limited time, during Ghostbed's Labor Day sale, they're offering my audience an extra 10% off their lowest prices of the season. Do this. Go to ghostbed.com slash Lars and use promo code Lars. That's Ghostbed.com slash Lars and use promo code Lars. Glad to have you with me. Always glad to get your calls. If you want to dial into the best conversation in talk journalism, it's here every day at 866-A Lars. That's eight six six four three nine five two seven seven and check out our Instagram feed.