WEBVTT 00:00:00.000 --> 00:00:02.439 Welcome to The Deep Dive, the show that takes 00:00:02.439 --> 00:00:04.559 the most expansive and consequential careers 00:00:04.559 --> 00:00:07.160 in modern history and extracts the essential 00:00:07.160 --> 00:00:10.000 policy insights you need to know. Today, we're 00:00:10.000 --> 00:00:12.160 attempting to map the incredible life and legacy 00:00:12.160 --> 00:00:15.000 of George P. Schultz, a man who lived a century 00:00:15.000 --> 00:00:18.539 from 1920 to 2021. And Schultz is one of those 00:00:18.539 --> 00:00:20.679 figures who operated at the absolute highest 00:00:20.679 --> 00:00:24.489 level of government for... Yeah. He influenced 00:00:24.489 --> 00:00:27.190 everything from the international exchange rate 00:00:27.190 --> 00:00:29.289 you rely on every day to the strategic framework 00:00:29.289 --> 00:00:32.509 that basically guided the end of the Cold War. 00:00:32.630 --> 00:00:35.130 That's right. And yet for all that enormous impact, 00:00:35.390 --> 00:00:38.149 he remains, well, maybe one of the most under 00:00:38.149 --> 00:00:40.929 examined statesmen of the entire postwar era. 00:00:40.990 --> 00:00:43.490 I think the reason he's often overlooked is precisely 00:00:43.490 --> 00:00:45.750 because the breadth of his influence is just. 00:00:46.270 --> 00:00:49.329 So staggering. He wasn't simply a political operative. 00:00:49.409 --> 00:00:52.109 No, not at all. He was a serious economist, a 00:00:52.109 --> 00:00:54.429 corporate titan, and a world -class diplomat. 00:00:54.530 --> 00:00:56.789 He worked under two vastly different Republican 00:00:56.789 --> 00:00:59.329 presidents, Richard Nixon and Ronald Reagan. 00:00:59.530 --> 00:01:01.909 And if you want a single metric, just one number 00:01:01.909 --> 00:01:03.829 to understand his unique stature, it's the number 00:01:03.829 --> 00:01:07.170 four. Exactly. George Shultz is one of only two 00:01:07.170 --> 00:01:09.730 people in U .S. history to have held four different 00:01:09.730 --> 00:01:12.969 cabinet -level posts. The other was Elliot Richardson. 00:01:13.900 --> 00:01:16.159 And that speaks not just to longevity in Washington, 00:01:16.299 --> 00:01:18.879 but to a depth of policy knowledge that just 00:01:18.879 --> 00:01:21.239 effortlessly crosses traditional boundaries. 00:01:21.439 --> 00:01:24.920 It does. He mastered labor negotiation, federal 00:01:24.920 --> 00:01:28.040 budgeting, global finance, and of course, high 00:01:28.040 --> 00:01:30.480 stakes foreign policy. So that is the core mission 00:01:30.480 --> 00:01:33.120 for this deep dive. We are unpacking the sources 00:01:33.120 --> 00:01:35.620 that cover the entire arc of his life. We're 00:01:35.620 --> 00:01:38.340 going to examine how his academic beliefs, specifically 00:01:38.340 --> 00:01:40.459 his devotion to the Chicago School of Economics, 00:01:40.659 --> 00:01:43.540 drove massive governmental actions. Actions like, 00:01:43.599 --> 00:01:45.819 you know, the total overhaul of the global financial 00:01:45.819 --> 00:01:48.900 system under Nixon. Then we'll look at his pivotal 00:01:48.900 --> 00:01:51.500 six and a half years as Secretary of State engineering 00:01:51.500 --> 00:01:54.040 the Soviet thaw under Reagan. And we have to 00:01:54.040 --> 00:01:56.319 conclude by addressing the, well, the profoundly 00:01:56.319 --> 00:01:58.799 contradictory chapters of his later years. We 00:01:58.799 --> 00:02:01.879 do. His emergence as a kind of progressive, conservative 00:02:01.879 --> 00:02:05.579 iconoclast, advocating for a carbon tax and drug 00:02:05.579 --> 00:02:08.479 reform, juxtaposed with the embarrassing, deeply 00:02:08.479 --> 00:02:11.219 personal, and ultimately damaging role he played 00:02:11.219 --> 00:02:13.879 in the notorious Fairnose scandal. A scandal 00:02:13.879 --> 00:02:16.139 that pitted him against his own family. Right. 00:02:16.340 --> 00:02:19.759 Exactly. When we are done here, you will walk 00:02:19.759 --> 00:02:22.020 away with a clear understanding of the monumental 00:02:22.020 --> 00:02:25.360 global shifts he engineered and the moral complexities 00:02:25.360 --> 00:02:28.960 that even the most trusted statesmen face. You'll 00:02:28.960 --> 00:02:30.919 understand why a man of such profound historical 00:02:30.919 --> 00:02:34.159 significance can still be susceptible to a Silicon 00:02:34.159 --> 00:02:37.419 Valley fraud. OK, let's unpack this. Let's do 00:02:37.419 --> 00:02:39.460 it. To understand the policy giant, we have to 00:02:39.460 --> 00:02:42.099 start with the discipline foundations. Schultz 00:02:42.099 --> 00:02:44.560 was born in New York City in 1920, grew up in 00:02:44.560 --> 00:02:46.259 Englewood, New Jersey. And the source material 00:02:46.259 --> 00:02:48.479 is very specific here, clarifying a common misconception. 00:02:48.939 --> 00:02:51.360 He was not related to the wealthy Pratt family, 00:02:51.379 --> 00:02:53.639 you know, the one. associated with Standard Oil. 00:02:53.759 --> 00:02:56.560 So he was a self -made academic. Entirely. That's 00:02:56.560 --> 00:02:59.099 a really important distinction because Schultz's 00:02:59.099 --> 00:03:02.599 identity was forged through rigorous intellectual 00:03:02.599 --> 00:03:05.520 discipline and military service, not inherited 00:03:05.520 --> 00:03:08.300 privilege. He was a dedicated student, graduating 00:03:08.300 --> 00:03:11.840 cum laude from Princeton in 1942. With a Bachelor 00:03:11.840 --> 00:03:14.340 of Science in Economics. Yes, and his senior 00:03:14.340 --> 00:03:17.039 thesis... already pointed toward his future career. 00:03:17.300 --> 00:03:19.439 The focus on the agricultural program of the 00:03:19.439 --> 00:03:22.319 Tennessee Valley Authority, the TVA. Exactly. 00:03:22.479 --> 00:03:25.259 So this wasn't just abstract theory for him. 00:03:25.300 --> 00:03:27.319 It was applied economics, public administration. 00:03:27.719 --> 00:03:30.580 He was studying how massive government infrastructure 00:03:30.580 --> 00:03:33.639 and regulatory programs actually impacted local 00:03:33.639 --> 00:03:36.960 economies and rural life. It shows he was always 00:03:36.960 --> 00:03:38.900 concerned with the practical consequences of 00:03:38.900 --> 00:03:42.000 policy. Always. And his education was immediately 00:03:42.000 --> 00:03:44.500 followed by active duty during World War II. 00:03:44.560 --> 00:03:47.000 a period that instilled a kind of structured 00:03:47.000 --> 00:03:49.120 discipline he carried into every single role 00:03:49.120 --> 00:03:51.460 he had later. He served in the U .S. Marine Corps 00:03:51.460 --> 00:03:54.460 from 42 to 45. And he ultimately rose to the 00:03:54.460 --> 00:03:56.659 rank of captain. And this wasn't stateside duty. 00:03:56.759 --> 00:03:59.280 This was serious combat. Oh, absolutely not. 00:03:59.340 --> 00:04:01.539 He was an artillery officer attached to the U 00:04:01.539 --> 00:04:04.419 .S. Army's 81st Infantry Division during the 00:04:04.419 --> 00:04:07.090 really intense Battle of Angwar. Which was part 00:04:07.090 --> 00:04:09.990 of the larger, brutal battle of Peleliu in the 00:04:09.990 --> 00:04:13.129 Palau Islands. It was. And when we discuss his 00:04:13.129 --> 00:04:15.490 later negotiating tactics against the Soviet 00:04:15.490 --> 00:04:19.189 Union, knowing he has this firsthand combat experience, 00:04:19.290 --> 00:04:21.670 it just gives a certain gravity to his diplomatic 00:04:21.670 --> 00:04:24.589 positions. He really understood the stakes. He 00:04:24.589 --> 00:04:27.290 knew what conflict meant and, by extension, the 00:04:27.290 --> 00:04:30.560 value of peace. After the war, he returned to 00:04:30.560 --> 00:04:33.019 high -level academics, earning his Ph .D. in 00:04:33.019 --> 00:04:36.779 industrial economics from MIT in 1949. He taught 00:04:36.779 --> 00:04:40.259 at MIT until 1957. But even during this period, 00:04:40.379 --> 00:04:42.000 the call of public service was already there. 00:04:42.199 --> 00:04:45.600 It was. In 1955, he took a leave of absence to 00:04:45.600 --> 00:04:47.699 serve as a senior staff economist on President 00:04:47.699 --> 00:04:50.360 Dwight D. Eisenhower's Council of Economic Advisors. 00:04:50.540 --> 00:04:52.180 Then we get to what many people call the Chicago 00:04:52.180 --> 00:04:54.329 Connection. And for those who study his career, 00:04:54.509 --> 00:04:56.649 this might be the single most crucial period 00:04:56.649 --> 00:04:59.670 in defining his entire ideology. Absolutely. 00:04:59.730 --> 00:05:02.129 It's fundamental. In 1957, Schultz moved to the 00:05:02.129 --> 00:05:04.230 University of Chicago Graduate School of Business. 00:05:04.490 --> 00:05:07.050 He quickly became a professor there and then 00:05:07.050 --> 00:05:10.750 served as its dean from 1962 to 1968. And the 00:05:10.750 --> 00:05:14.189 timing here is critical. This was the ideological 00:05:14.189 --> 00:05:16.629 epicenter of the Chicago School of Economics. 00:05:17.069 --> 00:05:19.670 It was intellectual ground zero. And the sources 00:05:19.670 --> 00:05:22.310 confirm he was profoundly influenced by the heavy 00:05:22.310 --> 00:05:25.009 hitters of that movement. Particularly Nobel 00:05:25.009 --> 00:05:27.629 laureates Milton Friedman and George Stigler. 00:05:27.730 --> 00:05:30.230 Right. So what did that influence fundamentally 00:05:30.230 --> 00:05:32.970 mean for his worldview? Well, it wasn't just 00:05:32.970 --> 00:05:35.610 a political affiliation for him. It was a foundational 00:05:35.610 --> 00:05:38.959 intellectual framework. It was built on efficiency 00:05:38.959 --> 00:05:42.279 and a deep, deep skepticism of centralized power. 00:05:42.920 --> 00:05:45.560 Friedman and Stigler championed monetarism. Right. 00:05:45.680 --> 00:05:48.120 The idea that control of the money supply is 00:05:48.120 --> 00:05:49.980 the most important lever for economic stability. 00:05:50.279 --> 00:05:52.720 And they fiercely believed in radical transparency 00:05:52.720 --> 00:05:54.920 and the importance of allowing market forces 00:05:54.920 --> 00:05:58.819 to determine outcomes with as little government 00:05:58.819 --> 00:06:00.819 interference as possible. So when Schultz went 00:06:00.819 --> 00:06:02.720 to Washington, he wasn't just another appointee. 00:06:02.720 --> 00:06:04.910 He was an intellectual missionary. Precisely. 00:06:04.930 --> 00:06:07.610 This core conviction meant that when he faced 00:06:07.610 --> 00:06:10.250 labor strikes, budget crises or international 00:06:10.250 --> 00:06:13.610 financial chaos, his default setting was always 00:06:13.610 --> 00:06:16.230 to look for the most efficient market based solution. 00:06:16.470 --> 00:06:19.879 He believed that subsidies, price controls. Fixed 00:06:19.879 --> 00:06:22.160 exchange rates. All forms of heavy state intervention. 00:06:22.560 --> 00:06:25.500 He saw them as inherently inefficient and often 00:06:25.500 --> 00:06:28.579 counterproductive. This belief crystallized in 00:06:28.579 --> 00:06:31.199 Chicago would shape his entire governmental career. 00:06:31.360 --> 00:06:34.240 And most famously, when he oversaw the dismantling 00:06:34.240 --> 00:06:37.240 of the entire postwar global financial architecture. 00:06:37.600 --> 00:06:40.360 OK, so Schultz's rapid ascent to that quadruple 00:06:40.360 --> 00:06:44.040 cabinet status begins in 1969. He accepts President 00:06:44.040 --> 00:06:46.420 Richard Nixon's offer to leave academia. And 00:06:46.420 --> 00:06:48.980 his entry point was as Secretary of Labor, a 00:06:48.980 --> 00:06:51.959 post he held from 1969 to 1970. This was his 00:06:51.959 --> 00:06:54.480 first taste of cabinet -level power, and he immediately 00:06:54.480 --> 00:06:56.899 had to face a massive challenge. A huge one. 00:06:57.040 --> 00:06:59.519 The Longshoremen's Union Strike, which was crippling 00:06:59.519 --> 00:07:01.939 major ports across the country. This was a textbook 00:07:01.939 --> 00:07:04.060 opportunity to apply his academic theory to a 00:07:04.060 --> 00:07:07.519 real -world, high -stakes crisis. Previous administrations, 00:07:07.519 --> 00:07:10.420 like Johnson's, had often resorted to the federal 00:07:10.420 --> 00:07:12.959 government's heaviest hand, the Taft -Hartley 00:07:12.959 --> 00:07:15.750 injunction. Right. Which for our listeners, that's 00:07:15.750 --> 00:07:18.930 something that forces a mandatory 80 day cooling 00:07:18.930 --> 00:07:21.829 off period. It essentially just delays the inevitable 00:07:21.829 --> 00:07:24.490 while the government mediates. But that injunction 00:07:24.490 --> 00:07:27.430 had expired. So the political expectation and 00:07:27.430 --> 00:07:30.170 certainly the media anticipation was for Nixon 00:07:30.170 --> 00:07:32.949 to intervene dramatically. But Schultz did the 00:07:32.949 --> 00:07:35.850 exact opposite. He applied his Chicago school 00:07:35.850 --> 00:07:37.990 theory. He believed that federal intervention 00:07:37.990 --> 00:07:41.189 actually prolonged disputes. He did. He thought 00:07:41.189 --> 00:07:44.029 that if the government stepped in. Neither side 00:07:44.029 --> 00:07:46.189 had sufficient incentive to make the painful 00:07:46.189 --> 00:07:48.529 concessions they needed to make. So the sources 00:07:48.529 --> 00:07:51.410 note he deliberately chose to just let the negotiating 00:07:51.410 --> 00:07:54.029 parties work it out. And he endured the short 00:07:54.029 --> 00:07:56.529 term political pain. And the anecdote confirms 00:07:56.529 --> 00:07:59.290 that this non -interventionist approach actually 00:07:59.290 --> 00:08:02.339 resolved the crisis pretty quickly. It did. It 00:08:02.339 --> 00:08:04.279 seems almost counterintuitive. You know, letting 00:08:04.279 --> 00:08:06.759 the strike run its course actually expedited 00:08:06.759 --> 00:08:09.839 the settlement. It really validated his theory 00:08:09.839 --> 00:08:13.180 that allowing labor and management to find their 00:08:13.180 --> 00:08:16.300 own painful equilibrium is often faster and more 00:08:16.300 --> 00:08:19.240 efficient than federal mediation. However, his 00:08:19.240 --> 00:08:21.980 tenure as labor secretary immediately presents 00:08:21.980 --> 00:08:25.980 this. profound paradox, a major moment of tension 00:08:25.980 --> 00:08:28.120 in his free market career. Yes. We're talking 00:08:28.120 --> 00:08:30.019 about the Philadelphia plan. And this policy 00:08:30.019 --> 00:08:33.320 was decidedly not hands off. It remains a deeply 00:08:33.320 --> 00:08:35.919 significant and I think controversial moment 00:08:35.919 --> 00:08:38.220 in the history of labor and civil rights enforcement. 00:08:38.399 --> 00:08:40.320 It really does. What exactly did the Philadelphia 00:08:40.320 --> 00:08:42.840 plan require? It was a direct federal mandate. 00:08:43.039 --> 00:08:45.700 The plan imposed specific requirements on construction 00:08:45.700 --> 00:08:48.460 unions in Pennsylvania. Unions which had historically 00:08:48.460 --> 00:08:51.080 demonstrated severe discriminatory practices 00:08:51.080 --> 00:08:54.120 against black workers. It required federal contractors 00:08:54.120 --> 00:08:57.480 to set specific goals and timetables for minority 00:08:57.480 --> 00:09:00.259 hiring enforced by a deadline. And the sources 00:09:00.259 --> 00:09:02.820 stress this point. This marked the first use 00:09:02.820 --> 00:09:04.759 of racial quotas or set -asides by the federal 00:09:04.759 --> 00:09:07.059 government. The very first. So this is a huge 00:09:07.059 --> 00:09:09.139 intellectual contradiction for Schultz, isn't 00:09:09.139 --> 00:09:11.820 it? It is. The same man who believed in minimal 00:09:11.820 --> 00:09:14.879 government intervention used the maximum federal 00:09:14.879 --> 00:09:18.500 mandate to enforce integration and correct historical 00:09:18.500 --> 00:09:22.019 discrimination. How do you reconcile that? Well, 00:09:22.019 --> 00:09:24.059 it highlights the political reality he was operating 00:09:24.059 --> 00:09:26.360 in. I think so. He was committed to efficiency, 00:09:26.639 --> 00:09:28.600 but he was also in the Nixon administration, 00:09:28.720 --> 00:09:32.100 which, despite its Southern strategy, was committed 00:09:32.100 --> 00:09:34.820 to finding ways to enforce civil rights compliance 00:09:34.820 --> 00:09:38.039 without massive legislative fights. And Schultz 00:09:38.039 --> 00:09:40.799 saw entrenched union discrimination as a market 00:09:40.799 --> 00:09:43.379 failure. Exactly. A restriction on the supply 00:09:43.379 --> 00:09:46.440 of labor. So by imposing the plan, he was using 00:09:46.440 --> 00:09:48.500 federal power to force the opening of a closed 00:09:48.500 --> 00:09:51.120 market, aligning civil rights goals with a kind 00:09:51.120 --> 00:09:54.379 of forced labor market efficiency. It was a significant, 00:09:54.480 --> 00:09:56.980 if controversial, policy tool that really opened 00:09:56.980 --> 00:09:59.340 the door for many later affirmative action programs. 00:09:59.620 --> 00:10:02.120 After his time at labor, Shultz shifted entirely 00:10:02.120 --> 00:10:04.379 to economic management, which just shows his 00:10:04.379 --> 00:10:08.169 exceptional range. It does. From 1970 to 1972, 00:10:08.549 --> 00:10:11.269 he took on his second post as the first director 00:10:11.269 --> 00:10:13.970 of the newly renamed and reorganized Office of 00:10:13.970 --> 00:10:17.570 Management and Budget, the OMB. And this formalized 00:10:17.570 --> 00:10:19.809 the budgetary process within the executive branch, 00:10:20.049 --> 00:10:22.950 centralizing financial power right under the 00:10:22.950 --> 00:10:25.789 president. Then in 1972, he moved into his third 00:10:25.789 --> 00:10:28.490 post, secretary of the treasurer, where he served 00:10:28.490 --> 00:10:31.610 until 1974. And his time there was marked by 00:10:31.610 --> 00:10:35.250 presiding over, well, One failure in one epoch 00:10:35.250 --> 00:10:38.429 defining success. both stemming from Nixon's 00:10:38.429 --> 00:10:40.509 new economic policy. That's a good way to put 00:10:40.509 --> 00:10:42.649 it. Domestically, he oversaw the lifting of the 00:10:42.649 --> 00:10:44.889 price and wage controls that Nixon had initiated 00:10:44.889 --> 00:10:47.490 earlier. And what was the outcome of his attempt 00:10:47.490 --> 00:10:50.210 to restore the free market there? It was, as 00:10:50.210 --> 00:10:52.169 the sources clearly indicate, a catastrophic 00:10:52.169 --> 00:10:55.210 failure. Really? Yes. Schultz, driven by his 00:10:55.210 --> 00:10:57.210 free market belief, thought removing the controls 00:10:57.210 --> 00:10:59.889 would allow prices to normalize quickly. Instead, 00:11:00.169 --> 00:11:02.490 the sudden release of all this pent -up inflationary 00:11:02.490 --> 00:11:05.269 pressure resulted in a massive surge in prices. 00:11:05.429 --> 00:11:07.779 So the domestic... economic situation just spiraled. 00:11:07.820 --> 00:11:10.679 It did. It led to such high inflation that the 00:11:10.679 --> 00:11:13.379 government was forced to reestablish price freezes 00:11:13.379 --> 00:11:15.779 just five months later. It just goes to show 00:11:15.779 --> 00:11:18.179 you that brutal political reality, you know, 00:11:18.179 --> 00:11:20.820 intellectual conviction doesn't always defeat 00:11:20.820 --> 00:11:23.440 immediate economic pressures like stagflation. 00:11:23.539 --> 00:11:26.240 But the truly global and lasting shift happened 00:11:26.240 --> 00:11:28.580 in the international arena relating to the dollar 00:11:28.580 --> 00:11:32.090 crisis. Right. This is where Schultz really solidifies 00:11:32.090 --> 00:11:34.830 his place as a figure who fundamentally reshaped 00:11:34.830 --> 00:11:37.750 global financial governance. This cannot be overstated. 00:11:37.830 --> 00:11:40.850 No, it can't. Schultz was instrumental in formally 00:11:40.850 --> 00:11:43.769 abolishing the post -war global financial architecture, 00:11:44.009 --> 00:11:46.330 the Bretton Woods system. To understand this, 00:11:46.409 --> 00:11:50.110 we need to talk about the 1971 Nixon shock. OK, 00:11:50.169 --> 00:11:53.309 let's unpack that. Before 1971, under Bretton 00:11:53.309 --> 00:11:55.730 Woods, major world currencies were pegged to 00:11:55.730 --> 00:11:58.409 the U .S. dollar, which in turn was directly 00:11:58.409 --> 00:12:01.450 convertible to gold at a fixed rate of $35 an 00:12:01.450 --> 00:12:04.450 ounce. It provided stability, but what was the 00:12:04.450 --> 00:12:06.690 fatal flaw? Well, the fatal flaw was what's called 00:12:06.690 --> 00:12:08.750 the Triffin dilemma. For the U .S. dollar to 00:12:08.750 --> 00:12:11.090 remain the global reserve currency, the U .S. 00:12:11.090 --> 00:12:13.070 had to supply the world with enough dollars for 00:12:13.070 --> 00:12:15.710 trade and growth. But the more dollars we issued... 00:12:15.929 --> 00:12:18.669 The less confidence the world had that we could 00:12:18.669 --> 00:12:21.129 actually redeem all those dollars for gold. We 00:12:21.129 --> 00:12:24.110 were running huge trade deficits fueled by Vietnam 00:12:24.110 --> 00:12:27.129 War spending and domestic social programs just 00:12:27.129 --> 00:12:29.789 flooding the market with dollars. Confidence 00:12:29.789 --> 00:12:33.929 was collapsing. So when Nixon unilaterally decided 00:12:33.929 --> 00:12:38.649 in August 1971 to suspend the direct convertibility 00:12:38.649 --> 00:12:42.700 of the dollar to gold. the Nixon shock, was a 00:12:42.700 --> 00:12:45.000 desperate measure. A desperate measure to protect 00:12:45.000 --> 00:12:47.940 our remaining gold reserves. And Schultz, alongside 00:12:47.940 --> 00:12:50.000 the future Federal Reserve Chair Paul Volcker, 00:12:50.159 --> 00:12:52.980 supported this bold unilateral move. It effectively 00:12:52.980 --> 00:12:55.539 ended the gold standard. It did, but the global 00:12:55.539 --> 00:12:57.919 financial community was left in total chaos, 00:12:58.179 --> 00:13:00.480 trying to piece together a new system. Schultz 00:13:00.480 --> 00:13:02.559 was the one who presided over the formal abolition 00:13:02.559 --> 00:13:05.779 of the entire Bretton Woods system in 1973 at 00:13:05.779 --> 00:13:08.000 an international monetary conference in Paris. 00:13:08.279 --> 00:13:10.409 What was the consequence of that official? abolition. 00:13:10.570 --> 00:13:12.049 I mean, if the old system was fixed, what was 00:13:12.049 --> 00:13:14.169 the new system Schultz ushered in? He ushered 00:13:14.169 --> 00:13:16.909 in the era of floating currencies. When Schultz 00:13:16.909 --> 00:13:19.210 declared the system formerly dead, all major 00:13:19.210 --> 00:13:21.850 currencies were allowed to float. Their value 00:13:21.850 --> 00:13:24.509 is no longer tied to the dollar or gold, but 00:13:24.509 --> 00:13:27.350 instead determined by supply and demand in foreign 00:13:27.350 --> 00:13:29.529 exchange markets. The ultimate Chicago school 00:13:29.529 --> 00:13:32.490 victory. Absolutely. The government stopped trying 00:13:32.490 --> 00:13:34.570 to fix rates and let the market decide the currency 00:13:34.570 --> 00:13:36.649 value. And it permanently shifted the global 00:13:36.649 --> 00:13:39.240 economy. It did. It constrained the U .S. less, 00:13:39.419 --> 00:13:42.100 making it easier to finance deficits. But it 00:13:42.100 --> 00:13:44.360 also introduced the volatility we now just take 00:13:44.360 --> 00:13:47.179 for granted. Schultz cemented that free market 00:13:47.179 --> 00:13:49.960 ideology right onto the global financial system. 00:13:50.039 --> 00:13:53.019 And to manage the subsequent turbulence, he played 00:13:53.019 --> 00:13:56.019 a crucial role in co -founding the library group. 00:13:56.379 --> 00:14:00.320 Which eventually evolved into the G7. institutionalizing 00:14:00.320 --> 00:14:03.080 regular high -level consultation among the world's 00:14:03.080 --> 00:14:05.659 major industrial economies. They needed a way 00:14:05.659 --> 00:14:08.000 to coordinate economic policy to prevent the 00:14:08.000 --> 00:14:10.679 new floating system from devolving into currency 00:14:10.679 --> 00:14:13.379 wars. It's incredible. He was simultaneously 00:14:13.379 --> 00:14:15.700 dismantling the financial system built for the 00:14:15.700 --> 00:14:18.240 early Cold War and establishing the architecture 00:14:18.240 --> 00:14:20.799 for post -Cold War financial governance. All 00:14:20.799 --> 00:14:23.340 while dealing with domestic inflation and sensitive 00:14:23.340 --> 00:14:26.019 international relations regarding Soviet Jewry. 00:14:26.200 --> 00:14:29.940 And then, in 1974... Just before Nixon resigned, 00:14:30.279 --> 00:14:33.940 Schultz briefly left government service. He began 00:14:33.940 --> 00:14:35.580 an eight -year interlude in the corporate world. 00:14:35.639 --> 00:14:37.679 He did. He became an executive vice president 00:14:37.679 --> 00:14:40.019 and later president and director of the Bechtel 00:14:40.019 --> 00:14:42.580 Group, a massive engineering and services company. 00:14:42.759 --> 00:14:48.379 And this period, from 74 to 82. crucial it establishes 00:14:48.379 --> 00:14:50.740 him as more than just a theoretician he proved 00:14:50.740 --> 00:14:53.539 himself as a real operational leader in the private 00:14:53.539 --> 00:14:56.159 sector he really did under his leadership Bechtel 00:14:56.159 --> 00:14:59.299 received numerous large and very lucrative contracts 00:14:59.299 --> 00:15:01.779 particularly from Saudi Arabia and the success 00:15:01.779 --> 00:15:04.840 was measurable Very. The sources cite that in 00:15:04.840 --> 00:15:06.600 the year just before he returned to government 00:15:06.600 --> 00:15:09.600 service, Bechtel reported a massive 50 percent 00:15:09.600 --> 00:15:11.899 increase in revenue. So this corporate success 00:15:11.899 --> 00:15:14.500 gave him the stature, the executive confidence 00:15:14.500 --> 00:15:17.220 and the practical international experience that 00:15:17.220 --> 00:15:19.399 he would need for his final and most significant 00:15:19.399 --> 00:15:22.320 government role. Exactly. That ultimate role 00:15:22.320 --> 00:15:26.120 began in 1982 when President Ronald Reagan selected 00:15:26.120 --> 00:15:29.559 him as the 60th U .S. Secretary of State, replacing 00:15:29.559 --> 00:15:33.799 the rather volatile. Alexander Haig. His fourth 00:15:33.799 --> 00:15:36.600 and final cabinet post. And the appointment was 00:15:36.600 --> 00:15:39.860 a massive undertaking. It wasn't seamless. Not 00:15:39.860 --> 00:15:42.419 at all. During his confirmation hearings, Schultz 00:15:42.419 --> 00:15:44.879 faced significant conflict of interest questions 00:15:44.879 --> 00:15:47.279 because of his recent high -level role at Bechtel 00:15:47.279 --> 00:15:49.539 and those lucrative international contracts, 00:15:49.740 --> 00:15:52.360 especially in the Middle East. So he had to navigate 00:15:52.360 --> 00:15:54.919 ethical scrutiny related to his business dealings 00:15:54.919 --> 00:15:57.159 and his transition back to government. It's a 00:15:57.159 --> 00:15:59.240 theme that Ironically, it would reappear decades 00:15:59.240 --> 00:16:01.700 later with Theranos, just on a much smaller, 00:16:01.820 --> 00:16:04.700 more embarrassing scale. It is ironic. And despite 00:16:04.700 --> 00:16:07.340 the grilling, and he did briefly lose his temper, 00:16:07.480 --> 00:16:09.779 showing a rare flash of personal heat, he was 00:16:09.779 --> 00:16:11.620 ultimately confirmed unanimously by the Senate. 00:16:11.879 --> 00:16:13.860 What's remarkable about his six and a half year 00:16:13.860 --> 00:16:17.360 tenure is the atmosphere he cultivated. He earned 00:16:17.360 --> 00:16:20.240 deep and unwavering trust from President Reagan. 00:16:20.419 --> 00:16:22.600 And he made it a core mission to rely heavily 00:16:22.600 --> 00:16:25.159 on the career foreign service professionals to 00:16:25.159 --> 00:16:27.720 formulate and implement policy. I think that 00:16:27.720 --> 00:16:30.970 reliance on professionals. rather than politicize 00:16:30.970 --> 00:16:34.350 ideologues, is really key to his success. The 00:16:34.350 --> 00:16:36.330 State Department's official history noted that 00:16:36.330 --> 00:16:38.250 the Foreign Service gave Schultz its complete 00:16:38.250 --> 00:16:41.129 support, making him one of the most popular secretaries 00:16:41.129 --> 00:16:44.129 since the 1950s. And that strong internal support, 00:16:44.330 --> 00:16:46.950 his reputation for intellectual rigor and honesty, 00:16:47.110 --> 00:16:49.509 all of it was absolutely essential because the 00:16:49.509 --> 00:16:52.820 1980s were, well... arguably the most dangerous 00:16:52.820 --> 00:16:54.799 period of the Cold War since the Cuban Missile 00:16:54.799 --> 00:16:57.980 Crisis. His 1993 memoir, Turmoil and Triumph, 00:16:58.120 --> 00:17:00.580 is still one of the most reliable and thorough 00:17:00.580 --> 00:17:03.419 records of this intense decade. It is. So the 00:17:03.419 --> 00:17:05.279 first diplomatic fire he had to put out immediately 00:17:05.279 --> 00:17:07.559 involved strained relations within NATO. Yes, 00:17:07.619 --> 00:17:10.119 the pipeline crisis in 1982. This is a really 00:17:10.119 --> 00:17:12.779 serious rift within the alliance. The Reagan 00:17:12.779 --> 00:17:15.220 administration had imposed sanctions on the technology 00:17:15.220 --> 00:17:17.779 needed to complete a gas pipeline being built 00:17:17.779 --> 00:17:20.500 between West Germany and the Soviet Union. Right. 00:17:20.559 --> 00:17:23.099 This was in response to Poland imposing martial 00:17:23.099 --> 00:17:26.329 law. But the Europeans were furious. Because 00:17:26.329 --> 00:17:28.549 the sanctions damaged their economic interests 00:17:28.549 --> 00:17:31.549 while simultaneously exempting U .S. interests, 00:17:31.750 --> 00:17:34.390 particularly lucrative grain sales to the Soviets. 00:17:34.589 --> 00:17:37.410 It felt like economic unilateralism. It was a 00:17:37.410 --> 00:17:40.569 mess. So Schultz had to devise a resolution that 00:17:40.569 --> 00:17:43.210 satisfied the allies without abandoning the goal 00:17:43.210 --> 00:17:45.829 of pressuring Moscow. This required some genuine 00:17:45.829 --> 00:17:48.069 diplomatic finesse. And he managed to resolve 00:17:48.069 --> 00:17:51.470 it by December of 82. He proposed a classic tradeoff. 00:17:52.009 --> 00:17:54.329 The U .S. agreed to abandon the sanctions on 00:17:54.329 --> 00:17:57.230 the pipeline, conceding the economic point. But 00:17:57.230 --> 00:17:59.430 the Europeans, in turn, agreed to adopt much 00:17:59.430 --> 00:18:01.549 stricter controls on strategic trade with the 00:18:01.549 --> 00:18:03.990 Soviets. So they traded an immediate economic 00:18:03.990 --> 00:18:06.750 irritant for a greater long -term security cooperation. 00:18:07.230 --> 00:18:09.789 Exactly. Preventing technology transfer to the 00:18:09.789 --> 00:18:12.430 Eastern Bloc. It restored unity just in time 00:18:12.430 --> 00:18:14.650 for the next big challenge. Which was the highly 00:18:14.650 --> 00:18:16.829 controversial intermediate range nuclear forces 00:18:16.829 --> 00:18:19.410 deployment, the INF deployment. This deployment 00:18:19.410 --> 00:18:21.569 was perhaps the single most important strategic 00:18:21.569 --> 00:18:25.230 decision of the early 1980s. NATO was operating 00:18:25.230 --> 00:18:28.440 under a dual track decision. Right. If the Soviets 00:18:28.440 --> 00:18:30.839 wouldn't remove their existing SS -20 missiles 00:18:30.839 --> 00:18:33.660 targeting Europe, NATO would proceed with deploying 00:18:33.660 --> 00:18:36.539 its own crews and Pershing 6 -diff missiles in 00:18:36.539 --> 00:18:38.819 European NATO countries. And the Soviets refused 00:18:38.819 --> 00:18:41.579 to negotiate seriously. So when deployment began 00:18:41.579 --> 00:18:45.039 in 1983, it sparked massive anti -nuclear protests 00:18:45.039 --> 00:18:47.759 all across the continent. But despite that intense 00:18:47.759 --> 00:18:50.740 public pressure, Schultz worked tirelessly to 00:18:50.740 --> 00:18:53.079 maintain Allied unity. and the plant's schedule. 00:18:53.339 --> 00:18:56.240 This decision really showed Washington was serious. 00:18:56.579 --> 00:18:58.740 It did, and this all happened against a backdrop 00:18:58.740 --> 00:19:01.859 of truly frightening tension. It followed Reagan's 00:19:01.859 --> 00:19:04.579 SDI announcement, the Star Wars program. The 00:19:04.579 --> 00:19:06.440 Soviet shoot -down of Korean Airlines Flight 00:19:06.440 --> 00:19:11.109 007 and the highly realistic Able Archer 83 exercises. 00:19:11.470 --> 00:19:14.009 And those exercises, which simulated a nuclear 00:19:14.009 --> 00:19:17.190 conflict escalation, were so realistic that intelligence 00:19:17.190 --> 00:19:19.470 sources later confirmed the Soviets genuinely 00:19:19.470 --> 00:19:21.829 feared a preemptive American attack. That is 00:19:21.829 --> 00:19:24.509 the moment of maximum danger. The fear of misunderstanding 00:19:24.509 --> 00:19:27.349 was palpable. So how did Schultz push Reagan 00:19:27.349 --> 00:19:30.559 to move past this peak tension? Well, Schultz, 00:19:30.599 --> 00:19:33.440 recognizing the danger of total noncommunication, 00:19:33.680 --> 00:19:36.579 successfully advocated for establishing a personal 00:19:36.579 --> 00:19:39.119 direct dialogue between President Reagan and 00:19:39.119 --> 00:19:41.660 the new Soviet leader Mikhail Gorbachev, who 00:19:41.660 --> 00:19:43.859 came to power in 85. The strategy was clear. 00:19:44.380 --> 00:19:47.619 pressure the Soviets militarily and economically. 00:19:47.900 --> 00:19:50.539 The shadow of power, as he called it, but couple 00:19:50.539 --> 00:19:53.220 that strength with a sincere commitment to engagement. 00:19:53.460 --> 00:19:55.599 And the major fruit of this sustained dialogue 00:19:55.599 --> 00:19:59.660 was the 1987 Intermediate -Range Nuclear Forces 00:19:59.660 --> 00:20:02.859 Treaty. That treaty was a genuine and monumental 00:20:02.859 --> 00:20:06.480 Cold War milestone. It eliminated an entire class 00:20:06.480 --> 00:20:09.140 of nuclear missiles in Europe, a first in disarmament 00:20:09.140 --> 00:20:11.990 history. Schultz's State Department was instrumental 00:20:11.990 --> 00:20:14.130 in preparing Reagan for those intense negotiating 00:20:14.130 --> 00:20:16.309 sessions. They were able to achieve meaningful 00:20:16.309 --> 00:20:19.009 de -escalation from a position of renewed strength. 00:20:19.210 --> 00:20:22.549 Exactly. And Schultz saw two key events in 1988 00:20:22.549 --> 00:20:24.970 that cemented his belief that the changes occurring 00:20:24.970 --> 00:20:28.190 within the USSR were, in his words, revolutionary 00:20:28.190 --> 00:20:31.470 and irreversible. Signaling the true coming end 00:20:31.470 --> 00:20:33.930 of the Cold War. The first signal was the Soviet 00:20:33.930 --> 00:20:36.150 Union's initial withdrawal from Afghanistan. 00:20:36.970 --> 00:20:39.089 Schultz noted that if the Soviets were willing 00:20:39.089 --> 00:20:42.049 to leave Afghanistan, they were implicitly breaching 00:20:42.049 --> 00:20:44.769 the fundamental principle of the Brezhnev Doctrine. 00:20:44.910 --> 00:20:47.150 For our listeners, can you remind us what the 00:20:47.150 --> 00:20:49.589 Brezhnev Doctrine was? Sure. The doctrine was 00:20:49.589 --> 00:20:52.069 essentially the Soviet foreign policy principle 00:20:52.069 --> 00:20:56.190 established after the 1968 invasion of Czechoslovakia. 00:20:56.450 --> 00:20:59.690 It asserted that the USSR had the right to intervene 00:20:59.690 --> 00:21:02.789 militarily in any communist state to protect 00:21:02.789 --> 00:21:05.009 its communist regime. The never -letting -go 00:21:05.009 --> 00:21:07.849 principle of the Eastern Bloc. Precisely. Afghanistan 00:21:07.849 --> 00:21:10.650 wasn't strictly a bloc member, but it was a Soviet 00:21:10.650 --> 00:21:13.670 client. By allowing them to pull out, Moscow 00:21:13.670 --> 00:21:15.950 was signaling it would no longer pay any price 00:21:15.950 --> 00:21:18.190 to enforce its ideological control over allied 00:21:18.190 --> 00:21:20.490 states. And the second signal was Gorbachev's 00:21:20.490 --> 00:21:23.210 proposed major domestic reforms. Yes, at the 00:21:23.210 --> 00:21:26.329 19th Communist Party Conference. Things like 00:21:26.329 --> 00:21:28.869 freedom of speech provisions, competitive elections, 00:21:29.210 --> 00:21:31.990 judicial independence. And Schultz, the academic, 00:21:32.210 --> 00:21:34.509 recognized these structural political changes 00:21:34.509 --> 00:21:37.769 as profound. He did. He saw they weren't just 00:21:37.769 --> 00:21:40.809 tactical. They aimed to reform the fundamental 00:21:40.809 --> 00:21:43.990 nature of the Soviet state. He correctly analyzed 00:21:43.990 --> 00:21:46.450 that the USSR was on a path from which it simply 00:21:46.450 --> 00:21:49.569 could not return. Now, let's pit it to Latin 00:21:49.569 --> 00:21:53.029 America. Schultz was known for his very hardline 00:21:53.029 --> 00:21:55.670 stance against the Sandinista government in Nicaragua. 00:21:55.910 --> 00:21:58.609 Oh, very much so. He viewed the Sandinista government 00:21:58.609 --> 00:22:01.490 as a grave ideological and strategic threat. 00:22:01.710 --> 00:22:04.690 He called it a very undesirable cancer in the 00:22:04.690 --> 00:22:06.789 area. And his foreign policy philosophy here 00:22:06.789 --> 00:22:10.230 was deeply realist. It often tied back to his 00:22:10.230 --> 00:22:13.109 market -based concept of power, that diplomacy 00:22:13.109 --> 00:22:15.869 requires leverage. Which is perfectly encapsulated 00:22:15.869 --> 00:22:18.690 in his famous quote about negotiations. He stated 00:22:18.690 --> 00:22:21.170 that negotiations are a euphemism for capitulation 00:22:21.170 --> 00:22:24.009 if the shadow of power is not cast across the 00:22:24.009 --> 00:22:26.430 bargaining table. For Schultz, diplomacy without 00:22:26.430 --> 00:22:28.650 credible strength, whether economic sanctions 00:22:28.650 --> 00:22:31.130 or military might, was simply weakness being 00:22:31.130 --> 00:22:33.529 exploited. And this hardened stance is crucial 00:22:33.529 --> 00:22:35.750 context for understanding the Iran -Contra affair, 00:22:35.990 --> 00:22:38.950 where Schultz stood firmly and outspokenly against 00:22:38.950 --> 00:22:41.990 the White House's illegal actions. He did. Schultz 00:22:41.990 --> 00:22:44.450 was one of the few high -ranking officials to 00:22:44.450 --> 00:22:47.430 openly oppose that shadowy, secretive operation 00:22:47.430 --> 00:22:50.829 that involves selling arms to Iran to free hostages 00:22:50.829 --> 00:22:53.549 and then illegally diverting the profits to fund 00:22:53.549 --> 00:22:56.410 the Contra rebels in Nicaragua. What specifically 00:22:56.410 --> 00:22:58.750 was his objection? Well, his objections were 00:22:58.750 --> 00:23:01.819 multifaceted and principled. First, he argued 00:23:01.819 --> 00:23:04.279 it undermined the fundamental U .S. policy against 00:23:04.279 --> 00:23:06.579 negotiating with terrorists. He saw it setting 00:23:06.579 --> 00:23:09.079 a disastrous precedent. And second, he opposed 00:23:09.079 --> 00:23:11.819 the secrecy. The secrecy and the rogue operations 00:23:11.819 --> 00:23:14.500 run by the National Security Council staff people 00:23:14.500 --> 00:23:17.400 like Oliver North because it circumvented legitimate 00:23:17.400 --> 00:23:20.259 diplomatic channels and totally undermined the 00:23:20.259 --> 00:23:22.799 State Department. He maintained a position of 00:23:22.799 --> 00:23:25.359 moral and political clarity against secret arms 00:23:25.359 --> 00:23:28.420 sales. He was a much -needed, if often ignored, 00:23:28.559 --> 00:23:31.319 counterweight within that administration. Finally, 00:23:31.359 --> 00:23:33.519 let's briefly touch on his diplomacy in the Middle 00:23:33.519 --> 00:23:36.819 East and China. Regarding China, he inherited 00:23:36.819 --> 00:23:39.779 the sticky issue of Taiwan arms sales. He did. 00:23:40.099 --> 00:23:43.140 This was a complex diplomatic negotiation that 00:23:43.140 --> 00:23:46.140 culminated in the August 1982 joint communique 00:23:46.140 --> 00:23:49.200 with the People's Republic of China. The U .S. 00:23:49.200 --> 00:23:51.599 agreed to gradually limit its arms sales to Taiwan. 00:23:51.819 --> 00:23:54.779 But only in exchange for China agreeing to seek 00:23:54.779 --> 00:23:57.559 a peaceful solution to the Taiwan question. It 00:23:57.559 --> 00:24:00.539 was a challenging high wire act. trying to maintain 00:24:00.539 --> 00:24:03.799 relations with the PRC while adhering to U .S. 00:24:03.819 --> 00:24:05.960 security obligations to Taiwan. In the Middle 00:24:05.960 --> 00:24:08.420 East, he was thrust into action following the 00:24:08.420 --> 00:24:11.859 devastating 1983 Beirut Marine Barracks bombing. 00:24:12.099 --> 00:24:15.000 He engaged in intense shuttle diplomacy. He negotiated 00:24:15.000 --> 00:24:17.339 an agreement between Israel and Lebanon. And 00:24:17.339 --> 00:24:19.740 despite some severe challenges, including a subsequent 00:24:19.740 --> 00:24:21.960 contravention of the initial settlement by Lebanon, 00:24:22.200 --> 00:24:24.839 he managed to convince Israel to begin a partial 00:24:24.839 --> 00:24:27.980 troop withdrawal in 1985. And he made a major 00:24:27.980 --> 00:24:30.759 final move. the Palestinian conflict toward the 00:24:30.759 --> 00:24:33.660 end of his tenure. Yes. Following six months 00:24:33.660 --> 00:24:35.819 of intense shuttle diplomacy during the First 00:24:35.819 --> 00:24:38.619 Intifada in 1988, Shultz convinced the administration 00:24:38.619 --> 00:24:41.220 to establish a diplomatic dialogue with the Palestine 00:24:41.220 --> 00:24:43.680 Liberation Organization, the PLO. And that was 00:24:43.680 --> 00:24:46.329 a significant strategic shift. It was huge. It 00:24:46.329 --> 00:24:48.910 moved away from previous non -recognition, and 00:24:48.910 --> 00:24:50.930 it was a dialogue that the subsequent administration 00:24:50.930 --> 00:24:54.309 continued. Shultz was always pushing for engagement, 00:24:54.529 --> 00:24:56.990 but only once he felt the U .S. was negotiating 00:24:56.990 --> 00:24:59.589 from a position of strength. Shultz left office 00:24:59.589 --> 00:25:02.970 in 1989 and entered the final, longest phase 00:25:02.970 --> 00:25:06.430 of his career, the elder statesman. He returned 00:25:06.430 --> 00:25:09.109 to Stanford University's Graduate School of Business 00:25:09.109 --> 00:25:11.529 to teach international economics and join the 00:25:11.529 --> 00:25:14.579 prestigious Hoover Institution. But he did not 00:25:14.579 --> 00:25:17.420 retire quietly. No, he became a politically unpredictable, 00:25:18.000 --> 00:25:21.160 iconoclastic voice, often challenging the core 00:25:21.160 --> 00:25:23.200 tenets of the Republican Party he had served 00:25:23.200 --> 00:25:25.740 for decades. While his initial return to public 00:25:25.740 --> 00:25:28.000 life reflected his continued standing within 00:25:28.000 --> 00:25:30.509 the Republican establishment. He was an informal 00:25:30.509 --> 00:25:33.490 advisor for George W. Bush's campaign in 2000. 00:25:33.809 --> 00:25:35.950 And served as a senior member of the Vulcan's 00:25:35.950 --> 00:25:38.589 policy group, working alongside figures like 00:25:38.589 --> 00:25:41.529 Condoleezza Rice, Dick Cheney, and Paul Wolfowitz. 00:25:41.730 --> 00:25:43.710 Right. And our sources suggest he was integral 00:25:43.710 --> 00:25:45.630 to that group. Some analysts even called him 00:25:45.630 --> 00:25:48.130 the father of the Bush doctrine. So what specific 00:25:48.130 --> 00:25:50.670 role did he play in shaping the foreign policy 00:25:50.670 --> 00:25:52.700 thinking of that era? Well, the Bush doctrine 00:25:52.700 --> 00:25:55.259 centered on the idea of preemption and aggressive 00:25:55.259 --> 00:25:58.599 democracy promotion. Shultz had long advocated 00:25:58.599 --> 00:26:01.779 for a robust use of American power, and his expertise 00:26:01.779 --> 00:26:04.160 in dealing with difficult regimes was invaluable 00:26:04.160 --> 00:26:07.660 to the Vulcans. He publicly and forcefully defended 00:26:07.660 --> 00:26:10.720 the 2003 invasion of Iraq. He wrote in support 00:26:10.720 --> 00:26:13.259 of military action months before the war began. 00:26:13.640 --> 00:26:15.900 He did, making the case for intervention alongside 00:26:15.900 --> 00:26:18.819 other establishment figures. So initially he 00:26:18.819 --> 00:26:21.200 was firmly tied to that aggressive foreign policy 00:26:21.200 --> 00:26:24.619 consensus. But then the iconoclast streak emerged. 00:26:25.119 --> 00:26:28.099 It made him a fascinatingly contradictory figure 00:26:28.099 --> 00:26:30.579 in his final years. He started publicly challenging 00:26:30.579 --> 00:26:33.740 long held conservative positions, often surprising 00:26:33.740 --> 00:26:36.380 and sometimes angering his former allies. And 00:26:36.380 --> 00:26:38.599 the most dramatic example of this pivot is his 00:26:38.599 --> 00:26:41.160 comprehensive shift on drug policy. It's a huge 00:26:41.160 --> 00:26:44.650 shift. Schultz, the Cold War hawk, publicly called 00:26:44.650 --> 00:26:47.470 the decades -long war on drugs a total failure. 00:26:47.690 --> 00:26:49.910 Not only did he call it a failure, but in 1998, 00:26:50.150 --> 00:26:52.109 he signed a highly publicized New York Times 00:26:52.109 --> 00:26:54.869 advertisement arguing the global war on drugs 00:26:54.869 --> 00:26:56.890 was causing more social harm through violence, 00:26:56.990 --> 00:26:59.490 corruption, incarceration than drug abuse itself. 00:27:00.059 --> 00:27:02.380 It was a complete rejection of the traditional 00:27:02.380 --> 00:27:05.880 law and order Republican stance. By 2011, he 00:27:05.880 --> 00:27:07.920 formalized this position by joining the Global 00:27:07.920 --> 00:27:11.019 Commission on Drug Policy, advocating for a pivot 00:27:11.019 --> 00:27:13.160 toward a public health and harm reduction approach 00:27:13.160 --> 00:27:15.880 instead of criminalization. He used his expertise 00:27:15.880 --> 00:27:18.160 in public policy and his commitment to efficiency 00:27:18.160 --> 00:27:21.259 straight out of the Chicago school playbook to 00:27:21.259 --> 00:27:24.339 critique the war on drugs as a catastrophic policy 00:27:24.339 --> 00:27:26.980 failure that had wasted trillions of dollars 00:27:26.980 --> 00:27:30.119 for zero measurable return. And he showed a similar 00:27:30.119 --> 00:27:32.640 willingness to discard outdated foreign policy 00:27:32.640 --> 00:27:35.220 dogma specifically regarding Cuba. Right. In 00:27:35.220 --> 00:27:37.240 a 2008 interview, he called the U .S. embargo 00:27:37.240 --> 00:27:40.519 against Cuba ridiculous in the post -Soviet world. 00:27:40.809 --> 00:27:42.769 And think about that perspective. This is the 00:27:42.769 --> 00:27:45.289 man who engineered the end of the Cold War. He 00:27:45.289 --> 00:27:47.630 clearly recognized that the justifications for 00:27:47.630 --> 00:27:50.029 certain policies, like maintaining a Cold War 00:27:50.029 --> 00:27:52.750 era embargo decades after the Soviet Union collapsed, 00:27:52.970 --> 00:27:55.990 had just evaporated. He strongly favored engagement 00:27:55.990 --> 00:27:59.009 over sanctions. This theme of recognizing existential 00:27:59.009 --> 00:28:01.589 risk and finding practical evidence -based solutions 00:28:01.589 --> 00:28:04.670 led him to become a powerful late career advocate 00:28:04.670 --> 00:28:07.319 for nuclear arms control. He maintained that 00:28:07.319 --> 00:28:10.480 nuclear weapons were ones we wouldn't use. He 00:28:10.480 --> 00:28:13.099 saw them primarily as a catastrophic risk factor 00:28:13.099 --> 00:28:15.779 rather than a strategic deterrent. He was intensely 00:28:15.779 --> 00:28:18.559 focused on the danger of nuclear terrorism and 00:28:18.559 --> 00:28:21.319 accidental war. And the pinnacle of this advocacy 00:28:21.319 --> 00:28:24.680 came in 2008. It did. That's when he co -authored 00:28:24.680 --> 00:28:27.140 a truly pivotal op -ed in The Wall Street Journal. 00:28:27.359 --> 00:28:30.119 And who did he write this piece with? He co -offered 00:28:30.119 --> 00:28:33.460 it with three other policy titans, former Secretary 00:28:33.460 --> 00:28:36.240 of Defense William Perry, fellow former Secretary 00:28:36.240 --> 00:28:38.660 of State Henry Kissinger, and former Senator 00:28:38.660 --> 00:28:42.000 Sam Nunn. Four giants of the American security 00:28:42.000 --> 00:28:44.900 establishment, many of whom were considered hawkish, 00:28:45.039 --> 00:28:47.960 united in calling for a world free of nuclear 00:28:47.960 --> 00:28:51.000 weapons. That collaboration just shows the weight 00:28:51.000 --> 00:28:53.339 of their conviction. It was incredibly influential. 00:28:53.640 --> 00:28:56.119 It led directly to the creation of the Nuclear 00:28:56.119 --> 00:28:59.160 Threat Initiative, a global nonprofit dedicated 00:28:59.160 --> 00:29:02.220 to reducing global nuclear and biological threats. 00:29:02.440 --> 00:29:04.859 It showed that regardless of party, experiencing 00:29:04.859 --> 00:29:07.220 the deepest recesses of government can force 00:29:07.220 --> 00:29:09.180 a necessary reckoning with the biggest risk. 00:29:09.259 --> 00:29:12.420 I think so. But perhaps his most profound and 00:29:12.420 --> 00:29:14.980 often politically difficult advocacy in later 00:29:14.980 --> 00:29:18.799 life concerned climate change. He urged conservatives 00:29:18.799 --> 00:29:21.980 to adopt a market -based solution. This is a 00:29:21.980 --> 00:29:24.579 perfect full circle back to his Chicago roots. 00:29:25.140 --> 00:29:27.559 Schultz saw anthropogenic climate change as a 00:29:27.559 --> 00:29:29.980 clear and present risk, but he insisted the solution 00:29:29.980 --> 00:29:32.839 must be economically sound and adhere to free 00:29:32.839 --> 00:29:35.539 market principles. His answer was the revenue 00:29:35.539 --> 00:29:38.059 -neutral carbon tax. Or carbon fee and dividend 00:29:38.059 --> 00:29:40.420 program, as it's often called. Can you break 00:29:40.420 --> 00:29:42.779 down what makes this specific policy proposal 00:29:42.779 --> 00:29:45.940 appealing to a staunch conservative like Schultz? 00:29:46.099 --> 00:29:48.880 The structure is crucial. You impose a fee or 00:29:48.880 --> 00:29:51.559 a tax on carbon dioxide emissions at the source, 00:29:51.740 --> 00:29:55.039 the oil well, the mine or the import point. But 00:29:55.039 --> 00:29:57.920 crucially, the policy is revenue neutral. All 00:29:57.920 --> 00:30:00.059 the funds collected are rebated directly back 00:30:00.059 --> 00:30:02.200 to the American taxpayers. Either through direct 00:30:02.200 --> 00:30:04.859 checks or tax cuts. Exactly. So the goal isn't 00:30:04.859 --> 00:30:07.019 increasing the size of government, but changing 00:30:07.019 --> 00:30:09.599 consumer behavior through pricing signals. It 00:30:09.599 --> 00:30:11.319 appeals to conservatives because it eliminates 00:30:11.319 --> 00:30:13.839 the need for complex, heavy handed regulatory 00:30:13.839 --> 00:30:17.220 mandates. Exactly. The myriad rules. imposed 00:30:17.220 --> 00:30:20.539 by the EPA, for example. It's economically efficient, 00:30:20.720 --> 00:30:23.240 transparent, and it uses the power of the market, 00:30:23.380 --> 00:30:25.680 the pricing mechanism, to solve the problem. 00:30:26.220 --> 00:30:29.220 Schultz argued this plan would benefit all Americans 00:30:29.220 --> 00:30:31.700 by eliminating the need for costly energy subsidies 00:30:31.700 --> 00:30:34.680 while promoting a level playing field for energy 00:30:34.680 --> 00:30:37.200 producers. And he didn't just advocate this theory. 00:30:37.279 --> 00:30:39.279 He made sure it became a conservative political 00:30:39.279 --> 00:30:42.720 proposal. He did. In 2017, he co -founded the 00:30:42.720 --> 00:30:44.900 Climate Leadership Council with other influential 00:30:44.900 --> 00:30:47.390 Republican elder states. like James Baker and 00:30:47.390 --> 00:30:50.789 Henry Paulson. They explicitly urged conservatives 00:30:50.789 --> 00:30:54.190 to adopt this market -based solution. It was 00:30:54.190 --> 00:30:56.410 Schultz leveraging his lifelong conservative 00:30:56.410 --> 00:30:59.369 pro -business credentials to address what had 00:30:59.369 --> 00:31:01.710 become a deeply partisan issue. Arguing that 00:31:01.710 --> 00:31:03.769 climate change policy shouldn't be about ideology, 00:31:04.130 --> 00:31:06.450 but about the most efficient outcome. Exactly. 00:31:06.690 --> 00:31:09.089 Now, we must make a difficult transition. We 00:31:09.089 --> 00:31:11.309 move from the triumphs of global policy, diplomacy, 00:31:11.549 --> 00:31:14.230 and principled progressive conservatism to a 00:31:14.230 --> 00:31:18.130 localized, personal corporate drama that, frankly, 00:31:18.250 --> 00:31:20.569 tarnished his legacy. The Theranos scandal. The 00:31:20.569 --> 00:31:23.210 Theranos scandal. This period feels almost fictional 00:31:23.210 --> 00:31:26.349 given his career trajectory. Schultz, the former 00:31:26.349 --> 00:31:28.410 four -time cabinet member, served on the board 00:31:28.410 --> 00:31:31.890 of directors of Theranos from 2011 to 2015. A 00:31:31.890 --> 00:31:34.589 health technology company notorious for claiming 00:31:34.589 --> 00:31:37.289 revolutionary blood testing technology that was, 00:31:37.390 --> 00:31:40.740 in reality, completely fraudulent. And he didn't 00:31:40.740 --> 00:31:44.000 just quietly sit on the board. He used his immense 00:31:44.000 --> 00:31:47.299 and hard won prestige, the trust earned in the 00:31:47.299 --> 00:31:49.660 White House and the State Department, to aggressively 00:31:49.660 --> 00:31:53.019 promote the founder. Elizabeth Holmes. He publicly 00:31:53.019 --> 00:31:55.880 lauded her at major forums like the Stanford 00:31:55.880 --> 00:31:58.940 Institute for Economic Policy Research. He was 00:31:58.940 --> 00:32:00.880 essentially validating her and her technology 00:32:00.880 --> 00:32:03.200 to the world. He was instrumental in recruiting 00:32:03.200 --> 00:32:05.799 other high profile figures, Kissinger, Perry, 00:32:06.140 --> 00:32:08.400 none to the board, lending the startup an air 00:32:08.400 --> 00:32:10.599 of legitimacy that helped it raise hundreds of 00:32:10.599 --> 00:32:13.259 millions from investors. The tragedy here is 00:32:13.259 --> 00:32:15.720 the irony. the man who championed transparency, 00:32:16.180 --> 00:32:18.680 free markets, and the dismantling of Cold War 00:32:18.680 --> 00:32:21.279 secrecy. Was blinded by the myth of Silicon Valley 00:32:21.279 --> 00:32:23.539 disruption and became the chief validator for 00:32:23.539 --> 00:32:25.940 a massive fraud based on total secrecy and deception. 00:32:26.319 --> 00:32:29.559 And the scandal turned acutely personal because 00:32:29.559 --> 00:32:32.960 of his own family, his grandson, Tyler Schultz. 00:32:32.980 --> 00:32:35.309 Yes. Tyler Schultz, a Stanford biology graduate, 00:32:35.569 --> 00:32:37.950 actually worked at Theranos and quickly realized 00:32:37.950 --> 00:32:40.589 the company's blood testing practices were dangerous 00:32:40.589 --> 00:32:43.650 and fraudulent. He became one of the key whistleblowers. 00:32:43.809 --> 00:32:47.289 And this created an agonizing public family conflict. 00:32:47.569 --> 00:32:50.390 It did. George Schultz, for reasons that may 00:32:50.390 --> 00:32:53.309 have included pride, loyalty to Holmes or simple 00:32:53.309 --> 00:32:56.109 misjudgment, initially refused to believe his 00:32:56.109 --> 00:32:58.849 grandson. The sources indicate he pressured Tyler, 00:32:59.089 --> 00:33:01.650 the scientist, to keep quiet about the dangers 00:33:01.650 --> 00:33:04.230 he observed, placing the reputation of the company 00:33:04.230 --> 00:33:06.410 above the pursuit of truth. It's heartbreaking. 00:33:06.710 --> 00:33:09.269 And this leads to the moment of maximum drama 00:33:09.269 --> 00:33:12.210 and personal betrayal. Tyler eventually contacted 00:33:12.210 --> 00:33:14.450 Wall Street Journal reporter John Kerry Rue to 00:33:14.450 --> 00:33:16.950 expose the fraud. Knowing the expose was coming, 00:33:17.170 --> 00:33:19.650 Theranos attorneys attempted to use the grandfather 00:33:19.650 --> 00:33:22.710 to silence the grandson. Tyler recounted going 00:33:22.710 --> 00:33:25.069 to George Shultz's home to discuss the allegations, 00:33:25.150 --> 00:33:27.650 only to be surprised by the presence of high 00:33:27.650 --> 00:33:29.769 -powered company attorneys. So he's confronting 00:33:29.769 --> 00:33:32.869 his own grandson with company lawyers present. 00:33:33.289 --> 00:33:36.130 At his own house. It's an unbelievable scene. 00:33:36.349 --> 00:33:39.549 They pressured Tyler to sign a document retracting 00:33:39.549 --> 00:33:41.710 his claims. And Tyler recalled his grandfather 00:33:41.710 --> 00:33:44.630 adding personal pressure, saying things like, 00:33:44.670 --> 00:33:47.650 your career would be ruined if Carrie Rue's article 00:33:47.650 --> 00:33:50.170 comes out. It was a moment where corporate loyalty 00:33:50.170 --> 00:33:53.559 just momentarily severed the family tie. Tyler 00:33:53.559 --> 00:33:56.420 courageously refused to sign, but the subsequent 00:33:56.420 --> 00:33:59.380 battle involves staggering personal cost. Tyler 00:33:59.380 --> 00:34:01.900 and his parents spent nearly half a million dollars 00:34:01.900 --> 00:34:04.279 in legal fees fighting Theranos' accusations. 00:34:04.819 --> 00:34:07.119 They had to sell their house to raise the funds 00:34:07.119 --> 00:34:09.699 necessary to defend themselves against the company 00:34:09.699 --> 00:34:12.099 their own patriarch had championed. The sources 00:34:12.099 --> 00:34:14.400 confirm Schultz eventually moved to a non -technical 00:34:14.400 --> 00:34:16.840 board of counselors, which was quietly retired 00:34:16.840 --> 00:34:19.380 in 2016, just before the company shut down in 00:34:19.380 --> 00:34:22.110 2018. But the final necessary chapter of this 00:34:22.110 --> 00:34:25.329 story is the reconciliation. It is a moving moment 00:34:25.329 --> 00:34:27.969 of public humility. In 2019, Schultz released 00:34:27.969 --> 00:34:29.949 a public statement that validated his grandson. 00:34:30.409 --> 00:34:33.170 He praised Tyler for not shrinking from what 00:34:33.170 --> 00:34:35.369 he saw as his responsibility to the truth and 00:34:35.369 --> 00:34:37.670 patient safety, even when he felt personally 00:34:37.670 --> 00:34:39.630 threatened and believed that I had placed allegiance 00:34:39.630 --> 00:34:42.409 to the company over allegiance to higher values 00:34:42.409 --> 00:34:45.030 in our family. That is a remarkable admission 00:34:45.030 --> 00:34:48.090 from a man who had only ever known success and 00:34:48.090 --> 00:34:51.119 high command. a public acknowledgement of his 00:34:51.119 --> 00:34:54.239 lapse in judgment, and a powerful final lesson. 00:34:54.440 --> 00:34:56.699 That the pursuit of truth and patient safety 00:34:56.699 --> 00:34:59.920 must always supersede corporate loyalty or personal 00:34:59.920 --> 00:35:02.820 pride. George Shultz continued his work at the 00:35:02.820 --> 00:35:04.800 Hoover Institution as a distinguished fellow 00:35:04.800 --> 00:35:07.559 until his final days, maintaining his commitment 00:35:07.559 --> 00:35:10.440 to economic and foreign policy thinking. He also 00:35:10.440 --> 00:35:13.000 served on numerous corporate and nonprofit boards. 00:35:13.500 --> 00:35:16.780 Patel, Charles Schwab, Gilead Sciences, reflecting 00:35:16.780 --> 00:35:19.179 his lasting influence across multiple sectors. 00:35:19.420 --> 00:35:22.380 His long, consequential and often dramatic life 00:35:22.380 --> 00:35:25.639 came to an end on February 6th, 2021, at age 00:35:25.639 --> 00:35:28.440 100, at his home in Stanford, California. His 00:35:28.440 --> 00:35:30.460 passing prompted widespread reflection across 00:35:30.460 --> 00:35:33.179 the political spectrum. President Joe Biden's 00:35:33.179 --> 00:35:35.440 reaction really captured the essence of Shultz's 00:35:35.440 --> 00:35:38.369 enduring reputation as a statesman. He said Schultz 00:35:38.369 --> 00:35:41.489 was a gentleman of honor and ideas, dedicated 00:35:41.489 --> 00:35:44.429 to public service and respectful debate. I regret 00:35:44.429 --> 00:35:46.869 that, as president, I will not be able to benefit 00:35:46.869 --> 00:35:49.690 from his wisdom, as have so many of my predecessors. 00:35:49.949 --> 00:35:52.469 He certainly accumulated the honors to match 00:35:52.469 --> 00:35:55.170 his career's extraordinary reach. The Presidential 00:35:55.170 --> 00:35:58.630 Medal of Freedom in 1989, the Seoul Peace Prize 00:35:58.630 --> 00:36:01.929 in 1992, and numerous international honors and 00:36:01.929 --> 00:36:03.909 honorary degrees from universities worldwide. 00:36:04.889 --> 00:36:07.309 He was a force who demonstrated the sheer power 00:36:07.309 --> 00:36:10.590 of expertise and intellectual conviction when 00:36:10.590 --> 00:36:13.449 applied to the machinery of government. So we 00:36:13.449 --> 00:36:15.829 have traced the unparalleled trajectory of George 00:36:15.829 --> 00:36:20.349 Shultz. a decorated WWII Marine, a dean at the 00:36:20.349 --> 00:36:22.730 University of Chicago, deeply influenced by the 00:36:22.730 --> 00:36:25.369 uncompromising tenets of free market philosophy. 00:36:25.630 --> 00:36:27.429 He was the key figure in the Nixon administration 00:36:27.429 --> 00:36:29.690 who simultaneously managed the U .S. economy, 00:36:30.050 --> 00:36:32.349 enforced the first federal racial quotas through 00:36:32.349 --> 00:36:34.989 the Philadelphia Plan, and oversaw the dismantling 00:36:34.989 --> 00:36:36.969 of the Bretton Woods global financial system. 00:36:37.170 --> 00:36:39.269 And then, as Secretary of State under Reagan, 00:36:39.449 --> 00:36:41.929 he used a strategy of strength coupled with engagement 00:36:41.929 --> 00:36:45.039 to engineer the Soviet thaw. What's truly fascinating 00:36:45.039 --> 00:36:47.360 is how his career demonstrates the absolute, 00:36:47.500 --> 00:36:50.519 seamless interconnectedness of global finance 00:36:50.519 --> 00:36:53.260 and diplomacy. He moved between these worlds 00:36:53.260 --> 00:36:55.940 with genuine mastery. Recognizing that economic 00:36:55.940 --> 00:36:58.500 health and security are inseparable. He did. 00:36:58.639 --> 00:37:00.980 And he applied intellectual convictions, whether 00:37:00.980 --> 00:37:03.800 free markets, nuclear control, or a carbon tax 00:37:03.800 --> 00:37:06.719 as instruments of global strategy, often placing 00:37:06.719 --> 00:37:09.380 those beliefs above pure political calculation. 00:37:09.780 --> 00:37:11.780 And that brings us back to the unexpected and 00:37:11.780 --> 00:37:14.360 highly complex advocacy. of his later years. 00:37:14.860 --> 00:37:17.579 Schultz, a lifelong Republican elder statesman, 00:37:17.639 --> 00:37:19.679 the man who helped create the modern conservative 00:37:19.679 --> 00:37:22.500 foreign policy consensus, ended his career by 00:37:22.500 --> 00:37:24.719 strongly advocating for aggressive action on 00:37:24.719 --> 00:37:26.940 climate change. Via a revenue -neutral carbon 00:37:26.940 --> 00:37:29.380 tax and for drug policy reform through a public 00:37:29.380 --> 00:37:31.639 health lens. This raises an important question 00:37:31.639 --> 00:37:34.199 for you, the listener, to carry forward. If a 00:37:34.199 --> 00:37:36.320 statesman with such deeply conservative economic 00:37:36.320 --> 00:37:39.079 and foreign policy roots can champion these causes, 00:37:39.400 --> 00:37:41.960 challenging the anti -tax orthodoxy and the failed 00:37:41.960 --> 00:37:52.900 war on drugs, Shultz's final, iconoclastic years 00:37:52.900 --> 00:37:55.820 suggest that the biggest threats require radical, 00:37:56.079 --> 00:37:58.659 evidence -based solutions, regardless of which 00:37:58.659 --> 00:38:00.619 side of the political aisle typically champions 00:38:00.619 --> 00:38:00.860 them.