Betting On America Part 3 America First Rules System

from PGLIVES

May 3, 2025

By Michael Gibbs

98% of American companies are classified as “small” (less than 500 employees) by the U.S. Department of labor. They provide a majority of the jobs in the U.S. and generate almost 50% of the country’s GDP. Local machine shops, “Mom & Pop” restaurants, farmers, high tech entrepreneurs and people with the dream to invent the next big thing are the lifeblood of America. It is why America is still the destination for people all over the world who believe in freedom and liberty.

But the “rules based system” of economic growth and prosperity has increasingly come to favor huge multi-national corporations with the power and influence to make their own rules, excluding the little guys from this elite system of economics. President Trump is well aware of this huge imbalance and like a football/soccer referee, he is watching the scoreboard, tracking the plays, throwing penalty flags, and flashing yellow/red cards on players (countries) taking cheap hits and gaming the rules based system. He calls these penalties tariffs.

Peggy and I started a company in 2007 during the last great recession. You may remember real estate crashed, the S&P 500 fell 37.56% over the course of the “Great Recession” (December 2007 to June 2009) and the NASDAQ fell 30.95%. People asked us, “are you crazy,” we said, “well what better time to start a new business than when everybody is in a panic” We pointed to Warren Buffet who told people to buy when others are selling and to sell when others are buying. Good advice for today. As Mr. Trump said a few weeks ago, don’t be a “Panican.”

We founded an education company to develop and inspire the next generation of entrepreneurs, kids aged 11 – 15. After 18 years we have graduated over 10,000 young aspiring entrepreneurs from 21 different countries. Many are now adults who have founded their own businesses, or are working for companies like Lucid, Founders Fund, Google, Tesla, Snowflake, Nvidia, Salesforce and many others.

By 2017 we were grossing almost $1M in revenue, with 40% from companies in small little Chinese cities like Hangzhou (8 million), Wuhan (13 million) and Chongqing (32million). What impressed us was how far ahead the Chinese students were in math and science compared to their fellow Americans. The students in Chinese schools were at least two grade levels ahead of the kids in U.S. schools. Also apparent was the near total absence in the Chinese students of creative and innovative thinking, teamwork, and lateral critical analysis skills.

The education system in China was highly structured to achieve programmed results. Individual thinking was not allowed. Each group of students came to us with a “Minder” who sat in the back of the classroom and monitored everything being taught. The students were debriefed at the end of every day to “correct” ideas presented in class not approved by the Chinese Government. Our staff designed a creative strategy to counter Minder attempts to restrict our curriculum. But that’s a story for another day.

Kids born in America who came to our programs, regardless of their culture or heritage, all grew up inventing things in their garage, reselling Michael Jordan branded Nike’s on eBay, writing their own music, and dreamed of being the next Steve Jobs, Elon Musk, Sara Blakely, or Bill Gates. Most of the kids we trained exhibited ZOG, Zest, Optimism and Grit. It never occurred to them that they would not be the next generation of “Idea Makers and World Shakers.” This country’s huge global advantage is our entrepreneurial mindset the foundation of American culture and our worldwide competitiveness. These kids, and I think most normal Americans, believe everybody is welcome, nobody is perfect and anything is possible.

In comparison, the China cultural advantage has been its willingness to break any rule, steal any patent, swipe leading edge intellectual property, and use their market power and military might to back anyone down who dares to complain or object. Let me give you a small personal example of Chinese business tactics.

Our company had a distinct market advantage. We had developed a reputation as the #1 choice of parents to teach their children readiness to compete and thrive in an increasingly dangerous world. We were a skills focused, project based learning environment which challenged teams of “Tweenpreneurs” to invent real world products for Silicon Valley companies like Netflix, Neurosky and Cisco at premier schools like Stanford, Santa Clara and American schools in Zurich, Lima Peru, Hong Kong, Hyderabad India, and Dubai.

Our single biggest customer was a giant multimedia company in Chongqing China. After doing business with them for five years, their U.S. based agent, a guy named Max said, “Mike, Mr. Chu, the CEO, wants to meet you and Peggy over dinner in Palo Alto.” I told Max “we would truly be honored to meet Mr. Chu.” We had hired a fellow by the name of Julian whose father had been a hero in the Chinese nationalist movement of Chaing Kai Shek. Julian was our “China Whisperer.” I asked him why he thought Mr. Chu wanted to meet. Julian said, “I don’t know, but it’s probably not what you think.” “Well,” I said, “let’s find out.”

A dinner was set for 6:30 at an exclusive restaurant in Palo Alto. Mr. Chu and his entourage showed up at 7:45 full of apologies, graciously accepted. Mr. Chu was seated in the center facing east and, interestingly, his daughter was seated immediately to his right. Julian was known to the Chinese company, so I asked him to sit this one out and we replaced him with an American, unknown to Max and Mr. Chu, who spoke fluent Mandarin, She was our ear in the room.

As the three hour dinner marathon progressed, it became clear from their questions and private comments to each other that a subplot unfolding. We were suspicious. It seemed Mr. Chu was sizing us up, like a lion considering its next meal! We must have seemed tasty and easy pickings.

Over egg drop soup and other morsels, Mr. Chu and his daughter were plotting to steal our IP (intellectual capital). And they did! Mr. Chu’s daughter paid a sleazy high tech scammer in Chicago to mirror our website and marketing materials. They copied our curriculum, business cases, surveys, and interactive tools. Then they presented themselves to Stanford and Santa Clara Universities as us and started collecting tuition on their cloned website.

Our customers tipped us off to the scam. We alerted our university partners and stopped the swindle before it caused any damage. The crook in Chicago hired by Mr. Chu and his cronies called me and threatened a lawsuit if we didn’t stop trying to shut down his business. It took several months to wind the whole con down and cost us time and a significant amount of money. In the end their scheme had not much of a chance to succeed. They were stealing our IP v.6, and we were rolling out v.8. Our company secret sauce was the ability to attract CEO’s and other Silicon Vally high tech leaders to mentor and coach the Tweenpreneurs and real life business cases incorporating leading edge technology. Oscar Wild said once; “The fool knows the price of everything and the value of nothing.”

My example of doing business with the Chinese is petite potatoes but repeated 100,000’s of times for small family owned companies like ours, it’s a big deal. Who do we see about the attempt to steal our business, the answer; No One”! If you have done business with China, you learned a few lessons, probably the hard way:

· Yes, doesn’t mean yes

· The deal is never done

· Contracts are mere pieces of paper without force of law.

· They know us better than we know them. We are way too ethnocentric!

· They understand the application of power and respect others who wield power effectively.

· The number one rule in the art of war and business is deception. What they say and do may have nothing to do with what they really want & need.

I mentioned in an earlier blog post that President Trump is very familiar with Chinese business practices and has several tools (hammers?) in his kitbag to change the playing field for American companies big and small. Just a warning, elite economists at Ivy League Schools will complain that President Trump would destroy the world’s economy if he took actions like these:

1. Cut off access by Chinese companies to U.S. courts until they give American companies real access to theirs.

2. Cut off the $800.00 “de minimis” exceptions for Chinese companies like Shein and Temu shipping cheap goods to avoid custom fees. President Obama raised the limit from $200.00 to $800.00 in 2015 and now U.S. Customs processes four million shipments a day. The de minimis exception is exploited by Chinese Triads (Cartels) to sneak drugs into the U.S. The exception ends on May 2.

3. Isolate China by incentivizing large U.S. companies like Apple to move production to other countries like India. Then make trade concessions to those countries.

4. Threaten to modify the terms of U.S. debt held by China. As of 2024, China holds approximately $800B of U.S. public debt. The U.S. could negotiate a special lower “China Rate,” and/or lengthen maturity to three years.

5. Exploit the “weak dollar” to press the advantage the U.S. has on selling American made chips to Chinese car companies and device companies.

6. Place a federal property tax on the 390,000 acres of U.S. land owned by Chinese companies and individuals. Failure to pay the tax would result in confiscation of the land. By the way, the country with the most land in the U.S. is Canada at 12.8M acres. Hello Mr. Carney.

7. Unleash the Securities and Exchange Commission (SEC) to enforce reporting requirements for Chinese companies (ADR’s) listed on American exchanges. The two largest are PDD Holdings (Temu) with a $201B market cap and Alibaba with a $183B market cap. Failure to comply would result in a “delisting” of the company by the SEC.

In this once in a lifetime faceoff between the world’s two most powerful nations who holds the better cards? It’s undeniability high stakes and all the chips are on the table. I would argue that President Trump is playing with “House Money” and America has the better hand. Who will flinch first? Some people say China has time on its side. Maybe so, but their economy is spiraling toward deflation putting enormous pressure on Chinese companies, the people and Mr. Xi. On the other side, Mr. Trump is a one term President. Can he stand pat until the 2026 mid term elections?

Donald Trump is the house and he is dealing the cards. Few leaders have the President’s guts, stamina, and multi-lateral thinking to up the ante on the opponent that only respects power. The house usually wins. President Trump believes the odds are on an America First rules based system for U.S. trade growth and individual Everyday Citizen prosperity. The American people are putting their chips on Mr. Trump!