Latest / The Decision Advantage / The Monthly Briefing: China Updates and Weather Impacts
Transcript
- Brian: Welcome to the Decision Advantage, a fusion intelligence podcast by Fernand Consulting. I'm Brian Leclerc, and today I'm joined by the CEO and founder of Fernand Consulting, Dr. Don Hersey. Don, welcome to the show. Ferndon Consulting: Thanks, Brian. It's great to be here. Brian: So Dawn, we we wanted to have you on the show today to start a new feature here at the Decision Advantage where you actually join us monthly to chat about current events and how they are impacting the world of strategic resilience. but before we dig into all that, we're wondering if you could just, tell us why you're here today and and how's this gonna work? Ferndon Consulting: Thanks, Brian. Why Brian: Mm-hmm. Ferndon Consulting: we're here today. Well, we're here today because there's been a lot of things going on in the world and we're trying to share information as best we can. And I have a lot of people who've been following us on LinkedIn, either or me or other members of our team, just to get some of the updates. And they've been having a little bit of a struggle keeping up because there's so much information. So what we're trying to do is create a predictable referenceable source of just some of the key touch points that we have going on in the world today. Now it it's nothing compared to the things that our our fantastic customers get when they have a subscription and they get those nuance, those specific topics and it's tailored directly to them. This is just more general. But we want to kind of do hitting some of those touch points that we hear a lot of people talk about in the news. And so Ryan and I just We have and we've been talking about a few different things that go on. And some of the other Intel persons on our team, we have these chats on the side. And this originally came from the concept of saying, hey, let's get some of our Intel people together and we'll just have a pow-wow. We're not doing quite that. But what Brian: Hmm. Ferndon Consulting: we're doing is we're taking me, and Brian's decided to throw me under the bus because I'm the best one to throw under the bus for this. yeah, yeah, yeah, Brian. Uh-huh. Brian: Hey, why not, right? Yep. Ferndon Consulting: And what we're going to be doing is I will just be using some of my background and my expertise that comes from years in the Intel world of just working and implications of geopolitics, working. Hey, what on earth is happening with the weather changes in this area? How is it affecting security? talking about just how we've seen logistics, innovative logistics, even from the days of of tracking drug traffickers who have the most innovative logistics. But they're really good at finding ways around things. So we're just basically gonna pull all those together and insights from the other members of our team as we can, and we'll have a monthly update where we can just discuss some, just some of those events, situations, or contexts that are happening around the world that are impacting us here today. Brian: Great, great, yeah. And there's certainly a a million things we could talk about as as you pointed out, there's so much going on and so as you mentioned, you know, there's there's a lot of those resources on our website and on LinkedIn. but Today maybe we can focus on just one or two things and one of the things that we have been talking about, you and I, is China and how President Chi's visit to the United States wasn't really as big of a deal as we thought it might have been, right? Ferndon Consulting: Yeah, and it was really weird. So the first thing we had is, President Xi's coming over. And then we see President Trump go and meet President Xi at the joint base, Andrews, right? So I had to go and look this up and figure out how many times our presidents have actually gone out to meet a visiting dignitary. Brian, do you have any idea how many of times this has happened? Have you no neither did I. Brian: I really don't. It did seem a little odd though. Yeah. Ferndon Consulting: Yes, so it's really weird. And so okay, so I looked it up. And the last one was President Obama greeting the Pope in 2015. The one Brian: Okay. Ferndon Consulting: before that was President Bush greeting the Pope in 2008. And the one before that was soon after World War Two when President Eisenhower met Khrushchev. So the pattern here is either the Pope Brian: Yeah. So what does that mean? Yeah. Ferndon Consulting: or a leader of the world in a bipolar system at the beginning of the bipolarity of a system, which I thought was extremely interesting. Like, wait, why would we do this trend? Or is this going to be an emerging tradition? Maybe, maybe this is going to be a new tradition because I mean, if it's only happened Three times in record, or at least three times that I saw since World War Two, before this, this is this is kinda abnormal. The King of England didn't Brian: Hm. Ferndon Consulting: even get this. Brian: So what what normally happens in those situations? Ferndon Consulting: Well, normally in these situations, they come down, they get off the plane, they get brought over to the White House, and they go through the doors and they they're greeted at the White House by the president and his wife. The president or however it goes. And so they're they're brought in appropriate fashion to the White House. but this this whole thing out at the joint base, that is that is significant. And what impacted me a whole bunch with this one is that how many things did we hear coming out of this? Like how many decisions coming out? Like There wasn't there wasn't much. But China made a big deal of the fact that there was this red carpet treatment. So that was one of those interesting indicators for me. And so I I pulled up some of the things that came out of the summit. And they were like, Taiwan, it wasn't discussed, except for one statement from President Xi where he said, We are expecting the US to not support independence. That was just the only statement from Taiwan. they talked about how they should be working together on super intelligence versus artificial intelligence or whatever we want to call it. it was a discussion of artificial intelligence during this this discussion. China's been doing a lot around the world with artificial intelligence, especially with the global south. And they've been rallying a lot of countries together to work together to improve, enhance, and all the different standards that we'd be looking at for artificial intelligence. So they actually have created quite the team out there, the international team. That was partially discussed or something that came out of it. But They also discussed a little bit more about the the rare earth minerals from what we hear. And that's that's going to be an increasingly interesting topic just because of kind of a couple of the new laws that have been coming out regarding critical minerals, et cetera, et cetera. So I don't know how many Yeah, so we have a Brian: Laws here in the United States. Yeah. Ferndon Consulting: we may not have a shortage of critical minerals in the United States, but a lot of the minerals that we use. For many of our manufacturing processes or some of our technical things, like our data centers are using a lot of materials like coppers and things of that sort that are not all that rare per se. but we have other ones that we don't really mine here in the US, partially because that's so environmentally damaging and economically prohibitive according to US costs. So they they're mined and they're processed in China. Where many entities have become dependent on the Chinese rare earth minerals or the Chinese minerals and the Chinese processing because it is so inexpensive. And so we have a law on the books. It's 10 USC 4872. It's the acquisition of sensitive materials from non-allied foreign nations. It's a prohibition. And the states wherein we're not supposed to be receiving anything include China, North Korea, Russia, and Iran. So those are not supposed to be in the supply chain for critical infrastructure, especially like the defense industrial base or other things of that sort. We're supposed to not have them. We've been granting exceptions. Yes, yes, Brian: It just sounds like we they are right now, yeah. Ferndon Consulting: they've been granting exceptions for years. this actually ties into the executive order that was passed in July. That was executive order one four four one five. And this executive order was our domestic response saying, Hey, these prohibitions, we're not going to be giving any more waivers for the prohibitions because we actually need to start using a more stable and predictable supply chain. That's probably going to be impacting our defense industrial base because a lot of the the minerals and the the materials and metals are literally coming from China or Chinese controlled entities. So though that's some of the interesting things. But again, that was one of the things about which she and President Trump had been discussing. Yeah, so that was a little bit about President Xi and yeah. Brian: Okay, great. So shifting a bit away from China, though it certainly impacts China as well, can we talk about the weather? so I'm I'm not asking you I know. I'm not asking you if it's gonna be sunny this weekend or anything like that, but from a geopolitical implication, can we talk about the weather a bit? You had mentioned it earlier Ferndon Consulting: It Brian: too. Ferndon Consulting: Yeah, I know. And it's kind of funny. So this was actually one of those conversations that you and I were having. And a lot of it came from our recent Nor'easter that we were experiencing and people were not quite expecting it to be as impactful as it was. Yeah, and this has actually been a conversation I'm Brian: A bit early in the season for a nor'easter. Ferndon Consulting: Yes, yes, it is. It's a little early in the season for a northeaster. And also we didn't have hurricanes this season over on the East Coast. And meanwhile, here in the US, we've had El Nino wreaking havoc on the West Coast. so it's it's it's being the weather patterns are a little bit up in the air. So some of the the interesting things more locally that we're seeing, and again, I am not a meteorologist by far, and I'm gonna just mention these so I can get to the the implications for them. Is that we are expecting a very different winter this year. with that very different winter from typical. They're saying that the snowfall throughout the Midwest is going to be way below average. the snowfall for the East Coast and down in the California regions is going to be way above average. and that actually has some really interesting impacts and implications for things like our food supply. one of the things that I had noticed. Earlier and I shared this one on LinkedIn, but we are starting to have a clear global shortage of food. the global shortage of food comes partially because of the Black Sea tensions and fighting between the Russians and the Ukrainians. The land of Ukraine was considered the breadbasket of the Soviet Union. And a lot of the grains coming out of that area, that was what was feeding a lot of Africa and the Middle East, and or it was feeding the places that couldn't grow enough food for themselves. So After Russia and Ukraine started having a fight, that stopped flowing. And then they tried going to other places for food. And they were a lot of places dependent on fertilizer from the Middle East to be able to grow more crops so they could compensate for the shortage of Ukrainian grains, right? And then this year we lost the fertilizer coming out of the Middle East. So why does this all come back to the weather? Well, it's coming back to the weather because it's going to hit us a little bit more here in the US while it's also hitting overseas. So First, I'll talk a little bit about how it's hitting us in the US. So our farmers, one, they have the increased fuel prices for their tractors. They have lost a lot of their support in the harvest season, the planting season, the working season. A lot of farm laborers and a lot of farms are migrant laborers. Some of them may not want to be dealing with a lot of the immigrations and customs concerns. And then on top of that, we were having this weather. Now, again, I'm not a meteorologist, but I'm also not a farmer. But my my little lessons here is when you have a good snowfall, you get a lot of good nitrogen in your soil. You don't need as much fertilizer. So if you add a bad snow year or a low level of snow year with an increase in prices for fertilizer, with an increased prices of gas, and an increased prices for human labor. And now on top of that, we also have the drought going on here in the US. Which we're not the only place that's been having lots of areas that have a drought shortage. And just for situational awareness, because I saw this and I was semi-horrified, I'm just gonna give you a couple of statistics. This is more in the West, so it's not the Midwest, it's the West. So right now, if we're looking at Lake Powell, Lake Powell is currently at 21% of its capacity. We've got Lake Mead. Lake Mead is currently about 20% of its capacity. and then we can talk about the Colorado River. Colorado River, but then we even go into like, the Upper Snake River system. That one is currently at 9%. So across the western half, yeah. Brian: And yeah, so many millions of people out there. Ferndon Consulting: Mm-hmm. Yes, exactly. And so, wait, no, there was another one that was really great. I'd forgotten about this one. Okay, so if we're looking all the way down in Arizona, and we know that there's a lot of a lot of tech companies, a lot of manufacturing, defense industrial stuff, a lot of those really fascinating. wonderful organizations and teams and I love being down in that area. that one is currently at 2%. Brian: Yeah, well that seems like a problem. Ferndon Consulting: So net yeah. So if you're thinking about it, so some parts of the country we have plenty of water, some parts we don't, but we are also starting to layer these these complications. Now we're also adding on like the lower snow year, and I'd be curious to hear from a good farmer or someone who has got far better knowledge than I do, but this this sounds like it could be an increase of food prices. An increase of food prices increases the cost of living, it increases That it decreases societal stabilities, it increases tensions. There's a tie in a lot of research that ties it into increased criminality. It also, if we think about it from a security perspective, when you have an increased cost of living and increased insecurity around you, you have an increased risk of insider threat because people are trying to make a buck in an alternative way. So if they have access to sensitive material. They're more likely to make a hundred bucks and sell off something that they got from their company. So food shortages we may not think about too seriously, but it has some pretty potentially impactful secondary and tertiary effects. And again, that one's tied a lot to the weather. So that was that was one of the patterns of weather that's kind of tied to our nor'easters, but also another one that's gonna be really interesting to see. So let's just look at New England, for example, because that's where we are right now, right? and in New England we are fairly up north. We like to get some good ice. we like cold. Well, we may not like it, but we we get cold, but who would like it? But we're projected to be getting Brian: Yeah, who who likes it? Come on. Yeah. Ferndon Consulting: a whole bunch of like wet and heavy snow this winter. So with all these nor'easters, we're supposed to be getting a lot of sludge and heavy stuff. But that heavy stuff, being that we're so far north, means we're more likely to get ice. Now, ice, if we put the ice on the power lines. And we have the ice out where people are driving, and we have so much ice, like an ice winter is not a good winter at all. And and the heavy snow is that which is really great at knocking down the trees, impacting the power. so now we we think about it, okay. Say we have a good nor'easter that comes through, say this last one actually resulted in a whole bunch of freezing rain, right? Rather than just the rain. How much devastation would we have had from transportation, emergency response? But then also just think the power companies, the power lines, how many trees would have come down, just destroying them all. And if we're expecting a whole bunch more in northeasters this winter, this could be extremely interesting, just to say the least. Because what happens when we lose power? What happens when a lot of places lose power? And then the roads are so icy and people are struggling to keep up with that. How do you get the emergency response out there? How do you get the repair people out there in the ice? It's it's very difficult. And I will also say, too, that a lot of our power companies have arrangements with Canada, and Canadian workers have a history of coming down. Canadian power comes down when we need it. If we do not have very good relations with Canada, how might that be affected? I don't know. And I don't know what arrangements the businesses are making. But it is an important thing to consider, being that we are going into the season. So those are just a couple of things from our nor'easter side. But if we're also looking at Well, let's just look over at the Pacific side. El Nino's been hammering California. California is not doing so great with it. so what are the implications there? I mean, we have some important ports. The ports, when a port's being hammered by storms, this is happening in in our ports, but it's also happening overseas. So some of the ports of China this year, because of the typhoons and stuff, they weren't able to take in or ship out a lot of material that our manufacturers were trying to track or people were trying to import. So it delayed a lot of shipping. so all of these storms, they will delay shipping. This happens also, a lot of it happens in Taiwan during the typhoon season as well. Like there's a a literal buildup of the chips because they can't ship them out. And so there's there's like a glut of them. And then when the typhoon season's over, there's a mass export. But let's just say there's a delay for some reason and they have they keep building up the chips and they still don't go out. Then we end up having a Of a breakdown in our supply because it's been a while. The system can absorb a bit of this, but it can't absorb a lot. So these are a couple of those impacts of the El Nino's and our wonderful nor'easters and the storms in those areas. But there's been a lot of other interesting developments along these lines, too. some of the other things that have changed recently, and this is this is just general change. if we look at the weather patterns out from areas of the Horn of Africa, all the way to say Iran, Afghanistan, Pakistan, that range, they've been having an increased intensity of rainfall. An increased intensity of rainfall means that the water comes down faster and harder, right? What it used to do is it would come down, I'm sorry. Brian: The infrastructure's not prepared for it, right? Ferndon Consulting: And the soil's not ready for it. So they Brian: Yeah. Ferndon Consulting: used to have drizzle. And so if you have Heavy rain that comes down fast on dry land. I mean, look at your garden. Say you forget to water your garden and you have a hot summer, you're I gotta water it, and you just dump water on it hard and fast. It's gonna wash it away, right? So this has been happening a whole bunch throughout the area, so the water's not absorbing into the water table. And this is the reason why there's been a lot of people call it a pretty bad drought all the way from parts of the Horn of Africa all the way up through Iran. It was so bad that I was reading things in the news in December, about a year ago, that Tehran's water supply was so short they might have to relocate the city. so it was just that bad. And they're not the only area that these places have been. So the the water levels are low throughout that region, too. And in that region, we have a couple of key logistical chalk points. the Strait of Hormuz, we know. Right. Babal Mandab and the Red Sea is another one. And there are a few other alleyways through there. But when we have a shortage of water, people have to start finding places where there water. So you've got the the tribes and the herding groups and all the different people who can move to where there's more water, they'll go to where there's more water and more food. So we've got human migration happening. but now you also have conflict on top of it. And so there's been a lot of conflict driving human migration. And some people are also saying that this combination is increasing criminal activity, to include things like the Somali pirates going on out there. It's definitely helping the Houthis have more justification to start attacking ships. Does that all make sense or is that just Brian: No, I I mean I I think it it does and I it sounds like, you know, having this information helps to make some predictive analysis happen, right? It gives all this information Ferndon Consulting: Yeah, it Brian: helps you decide. Ferndon Consulting: Right, because when yeah, and this is this is actually one of the cool things that we've been doing too, is into some of our like our supply chain intelligence. If we're trying to look at a supplier of a a material, right? Say say I'm company A and I'm company A and I contract out to company D and company Q as subcontractors. They're two different companies, but they have the same supplier. Well, that's not gonna help, especially if I and then I can identify whether or not there's a weather pattern or an impact or something like that. But even say if if company D and company Q, they're just even in the same region, even if they're separate supply chains completely, but they're in the same region or being impacted by the same things. They may have the the same limitation or you could call it a risk that one is accepting because it's less resilient if they're having the same impact. That's one of those things that we've been doing with that. And also it's helped a lot with being able to. not just separate the the alternative suppliers and identify better ones, but it has helped us a lot with understanding what's more or less likely to happen. One of the the concerns that I've had moving forward, and this is something I've been keeping track of, I've I actually had a risk game out and I was putting little things on my risk board as to what this was going on here and there just to get a better understanding of the entire situation. But if I'm looking at, I'll just I'll just go back to somewhere like Africa and the Horn of Africa, right? Because that was where they got a lot of the food from Ukraine. And that's one of the places being impacted by drought. But Africa is also a really great source of rare minerals. And a lot of really amazing things are able to come out of the continent. They have a wealth, an absolute wealth of incredible resources there. But we have A bit of a challenge with some of our we mentioned it earlier in the podcast, right? So we have the restriction on say Chinese-owned and Chinese-influenced stuff. So even if I'm buying something from the DR Congo, is it Chinese owned or is it Chinese influenced? Now, as the area becomes poorer or as the area becomes more impacted, or any area in general, they need support. They need to go to an entity who can help them, right? Or they will probably go to an entity who can help them. Who can provide resources, who can provide the water, who can maybe come in and help build up the infrastructure. right now, the most, well, it it appears possibly the most present entity in those areas of Africa who are actively saying, Hey, we'll help you out. Just give us access to your minerals. We'll run a company, we'll do the mine. That's China. So all of this instability is now. increasing the likelihood of decreasing our prospective sourcing of critical minerals indirectly. so that's one of the things that I've been tracking and trying to keep aware of is just where is it more likely that we may end up having this loss of influence or even just a loss of access. Brian: Yeah, it's and pulling all this information together is is the challenge, right? Ferndon Consulting: Yeah, d did I just go a little too far down a few rabbit holes? Brian: No, I I think that's fine. I mean we started on weather, but you know, that's okay. Yeah, I mean it's related. Ferndon Consulting: Well th this but so here's the thing though. The the when right, and so this is this is the challenge. If we don't consider weather in our understanding of our supply chain, we are missing a huge factor. Weather impacts it, not just the logistics, it impacts the potential ownership and control of it. It impacts the the reliability of it, and even influ impacts often like the quality. So weather actually has a huge impact. And I've heard a lot of people saying, weather, don't talk about weather. It's just talking about climate change, or some people get all upset about that, thinking the concept's been too politicized. And we're not talking politics here. We're just talking hard cold, legit facts of patterns. These are patterns. Now they may not be 100%. It's not saying, there's a drought, the Chinese are gonna take over. That's not what I'm saying. It's just saying. There's an increased likelihood that someone will be seeking additional assistance, and there's an increased likelihood that the Chinese would be able to, or another one would be able to provide said assistance. I wouldn't put it past the Russians. I wouldn't put it past the UN. NATO does really great projects as well. Like there are many entities out there who are capable of stepping in and providing assistance. So there are many ways this can go. It's just something that you end up tracking and keeping tabs on. Brian: Alright, well that's that explained a lot about the weather. no, no, that's good. Ferndon Consulting: Sorry, Brian. Brian: but so as as we've been chatting, you know, we we probably wanna wrap up pretty soon, but beyond the weather and and China, you know, so we're gonna be doing this every month, so hopefully we can talk about some of these things, but you often talk about how we can only see the very top of the iceberg and everything else is is below it. So over the next twelve months, w what are some of the big things that you you'll be tracking? Ferndon Consulting: Actually I mentioned a few of them in here. So the whole food situation and potential areas of destabilization. I've got a literal tracker on that one because like I said, I I don't know who's going to step in if there is a need. And that's going to affect many other things. Some of the other areas wherein I've noticed an increasing concern is there have been an increase of cyber and other types of attacks. So even physical attacks of late on our critical infrastructure. And many of these are not being reported. We're we're noticing many leaders kind of still thinking, insurance will pay for it, or thinking they don't need to invest in certain resiliency parameters just because, well, they didn't hear about it from their buddy. But how many people are actually overtly announcing that they've been hacked or that they've had a problem? and then if people are good and they report it like they're supposed to, is the government releasing all of that information? No. But if you actually look into it and dig into it, you'll be seeing a lot more of this. And the thought that the world is going to go back to what it was a year or two ago, that's not the case. This is going to be a very interesting winter. El Nino and Nor'easters aside, but I can completely think, like, think about it this way: say you get a hack in the middle of a Nor'easter. So when the ice is hitting things and the electric power goes down, and you you're trying to struggle. Your people aren't able to get in, you're you're not able to respond as efficiently. And then think of the other ways that that could impact emergency response. who can actually come in to to change out hospitals? There's so many ways this can impact. Brian: Yeah, yeah. All right, well it sounds like we'll have plenty to talk about during our monthly segments. So Ferndon Consulting: yes. It'll be wonderful. Brian: yes. And of course, we would love to hear from our listeners if they have any questions, that Dawn could perhaps answer. But if they want to send us a message at team at Ferndon dot com or they can just comment right here on Podcast and hopefully we can address those questions in the future. Sound good? Yeah, absolutely. Ferndon Consulting: And Brian, if you don't mind, I'll also chime in that they may actually also have a question that is something I can't handle either, or something I can't address. We might be able to find or a great expert who'd be able to address it more efficiently. Brian: Right, and they may already be on the front end team. Ferndon Consulting: They may. Brian: Yeah. All right, well I think that's that's good for the day. So thank you very much for coming on, Don. Ferndon Consulting: Thank you, Brian. It's been a delight to watch your face in this entire experience. Brian: Well thank you. So be sure to listen and subscribe to all of our podcasts. You can find them on YouTube and Apple Podcasts and Spotify. And you can find all those links right on podcast.fernan.com. And I am Brian Leclerc, and this has been another episode of the Decision Advantage. Thanks for tuning in.