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How the World Ran on Empty with Peter Goodman · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Master's in
• 0:11
  Speaker 1: Business with Barry red Holds on Bloomberg Radio.
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  Speaker 2: This week on the podcast another extra special guest. Peter
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  Speaker 2: Goodman is the award winning investigative reporter and economics correspondent
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  Speaker 2: for The New York Times. His latest book, How the
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  Speaker 2: World Ran Out of Everything Inside the Global Supply Chain.
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  Speaker 2: What a fascinating deep dive into how we got here
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  Speaker 2: in terms of why were we unable to get basic
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  Speaker 2: protective equipment during the pandemic? How could we not get
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  Speaker 2: ventilators or even things like face mis and gowns. What
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  Speaker 2: led us to outsourcing everything and not having a backup,
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  Speaker 2: not having an emergency system? How did we break our
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  Speaker 2: resilience leading up to the pandemic? I thought the book
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  Speaker 2: was a great read and very fascinating. I learned a
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  Speaker 2: lot about it, and I think this conversation is fascinating
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  Speaker 2: also if you're at all interested in things like global
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  Speaker 2: supply chains, the role of consultants, and the role of
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  Speaker 2: shareholder primacy in how society operates. Plus all the craziness
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  Speaker 2: that took place during the pandemic is detailed in the
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  Speaker 2: book with great specificity. I think you'll find this conversation fascinating.
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  Speaker 2: With no further ado my discussion with The New York Times.
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  Speaker 1: Peter Goodman, thanks so much, very great to be here.
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  Speaker 2: So I really found the book fascinating. It's such a
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  Speaker 2: fresh in everybody's mind story. But before we get into
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  Speaker 2: the book, let's talk a little bit about your background.
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  Speaker 2: You have really a fascinating career. You start as a
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  Speaker 2: feature writer freelancing in Japan from Southeast Manila and Jakarta.
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  Speaker 2: How on earth did that happen?
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  Speaker 1: Yeah, so you know, I was one of those kids
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  Speaker 1: who got out of college and just I did what
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  Speaker 1: I wanted to do. I liked to write. I had
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  Speaker 1: been sort of a political activist in college, but life
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  Speaker 1: seemed more complicated than it did to my activist friends.
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  Speaker 1: So journalism drew me, and I wanted to go check
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  Speaker 1: out Southeast Asia. So I first stopped in Japan, got
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  Speaker 1: a job writing features for the Japan Times, teaching English
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  Speaker 1: to pay the bills and save up the money to
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  Speaker 1: then move to Manila and then eventually Jakarta. Spent a
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  Speaker 1: lot of time in Cambodia, covered a massacre of pro
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  Speaker 1: democracy demonstrators in East Timor, got kicked out in Indonesia,
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  Speaker 1: came back to the States and ended up in Alaska
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  Speaker 1: at the Anchorage Daily News.
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  Speaker 2: Yeah, I was gonna ask, how do you find your
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  Speaker 2: way from Asia to Anchorage? What was it like reporting
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  Speaker 2: from a small town in Alaska?
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  Speaker 1: Yeah? Yeah, I mean I basically figured out that if
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  Speaker 1: I wanted to do this seriously, I was going to
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  Speaker 1: have to go somewhere to learn journalism. I didn't go
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  Speaker 1: to Jay School, went to a liberal arts college where
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  Speaker 1: we didn't have you know, that sort of paper where
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  Speaker 1: we had beats and structure, And I understood that, you know,
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  Speaker 1: freelancing would take me a certain distance, but if I
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  Speaker 1: wanted to be serious about it, I had to go work,
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  Speaker 1: you know, doing local journalism somewhere and the anchor. I
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  Speaker 1: was lucky enough to be hired by the anchor s
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  Speaker 1: Daily News, which was just a heavyweight shop of talent,
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  Speaker 1: only about you know, sixteen maybe twenty reporters. They had
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  Speaker 1: won the Gold Medal for Public Service Pulitzer a few
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  Speaker 1: years before I got there. They were a finalist the
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  Speaker 1: year before I got there for the excellent Valdese Crush,
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  Speaker 1: And it was just a very talented, creative group of people,
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  Speaker 1: And yes, I ended up in I was living in Palmer,
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  Speaker 1: which is next to Wasilla. Was the local government reporter
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  Speaker 1: where I covered, as you can probably guess, a then
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  Speaker 1: unknown member of the Wascilla City Council named Sarah Palin.
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  Speaker 2: And how did that turn out?
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  Speaker 1: You know it was? It was fascinating. I mean, there's
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  Speaker 1: nothing like having a local beat and having to figure
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  Speaker 1: out who matters, what's the story, How do I go
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  Speaker 1: to a meeting of local government, prepare for whatever issue
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  Speaker 1: seems most interesting, develop sources, build people's trust, figure out
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  Speaker 1: you know, when you get it wrong, how to make
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  Speaker 1: it right. And you know, there's nothing like being in
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  Speaker 1: a place where someone will call you if you get
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  Speaker 1: a fact wrong. I mean, when you're freelancing in Cambodia
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  Speaker 1: writing about Cambodian refugees, you spell somebody's name wrong, nobody's
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  Speaker 1: gonna call you. You mess up a fact like I
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  Speaker 1: once messed up a fact. You know, I misheard somebody
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  Speaker 1: say assessment when they meant cessna, and boy, I thought
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  Speaker 1: I was gonna have to flee the state in embarrassment.
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  Speaker 1: And you learn how to.
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  Speaker 2: Get it right, so you have a knack for being
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  Speaker 2: in the right place at the right time. You were
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  Speaker 2: the Shanghai bureau chief for the Washington Post, really as
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  Speaker 2: China was emerging as a global superpower. Tell tell us
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  Speaker 2: a little bit about your experiences in Shanghai.
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  Speaker 1: Yeah, that was just an incredible story. It was a
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  Speaker 1: story of a lifetime. I mean, it was a moment
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  Speaker 1: where China had become a very significant story in the
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  Speaker 1: American media and imagination and politics. But it was still
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  Speaker 1: before you know, everybody had these giant bureaus, before we
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  Speaker 1: were covering news in this very granular way, so you
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  Speaker 1: had time to really dig into stuff. And you know,
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  Speaker 1: we had two guys in Beijing who were phenomenal, my
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  Speaker 1: two colleagues who did a lot of political stuff, and
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  Speaker 1: I was ostensibly the economic writer. But the truth was
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  Speaker 1: all of her stories were more or less the same,
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  Speaker 1: because everything was an economic and political story combined. And
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  Speaker 1: it was a moment where you could just sort of
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  Speaker 1: point at anything like how did that ballpoint bearing factory
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  Speaker 1: get there? Who owns it? How did the land and
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  Speaker 1: the energy become available? Where are they selling their product,
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  Speaker 1: who's getting a cut of the action. You know, anything
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  Speaker 1: you dug into was a story that would tell you
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  Speaker 1: something about power and the trajectory of the Chinese accounty.
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  Speaker 2: And I'm sure that helped set the stage for all
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  Speaker 2: the things you saw when the world ran out of everything.
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  Speaker 2: We'll circle back to that. You also covered the financial
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  Speaker 2: crisis and recession as the Times New York based economic correspondent. Right,
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  Speaker 2: I have a vivid recollection of my experience during the
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  Speaker 2: financial crisis. Tell us a little bit about your experience
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  Speaker 2: in eight or nine.
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  Speaker 1: Well, you know, it's interesting. I was sort of an
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  Speaker 1: accidental national economic corresponding because I was very happily working
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  Speaker 1: for the Washington Post covering international econ and the Post was,
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  Speaker 1: let us say, not having its best days. And I
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  Speaker 1: had this opportunity to go to the Times and they
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  Speaker 1: offered me the national Economic correspondent. I thought, well, you know,
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  Speaker 1: I'm living in New York at the time. I'm working
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  Speaker 1: in the New York Beer of the Washington Post wasn't
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  Speaker 1: all that keen toly. I loved the Washington Post, but
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  Speaker 1: I thought, well, I better do this sleepy story the
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  Speaker 1: national economy. It's the Fall of two thousand and seven.
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  Speaker 1: Didn't know anything about it. Was surrounded by people who
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  Speaker 1: knew much more about it than I. Ever would The
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  Speaker 1: first story I ever pitched was, you know, it seems
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  Speaker 1: like consumer spending is drying up because housing prices are falling.
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  Speaker 1: That could be signific I keep reading that. You know,
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  Speaker 1: consumer spending is more than two thirds of the American economy.
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  Speaker 1: So I got Mark Zandy to go crunch some data
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  Speaker 1: for me showing where were home equity lines of credit
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  Speaker 1: drying up the fastest and what was their historical relationship
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  Speaker 1: to consumer spending. And I got this crunched for like
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  Speaker 1: every metropolitan area in the United States, and almost it random.
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  Speaker 1: I said, I'm gonna go out to Reno.
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  Speaker 2: I was gonna say four areas stick out in my mind.
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  Speaker 2: Southern Florida, Yeah, Vegas and Reno as two and three
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  Speaker 2: Southern California, right, And I'm trying to remember maybe DC
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  Speaker 2: was the other area that was well, there.
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  Speaker 1: Were a lot, Yes, DC was hit, for sure, there
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  Speaker 1: were parts of New England that were hit, but you
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  Speaker 1: just listed that. But so I sort of randomly so, well,
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  Speaker 1: I'm going out to Reno because if you look at
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  Speaker 1: the ratio of home equity lines of credit to consumer spending,
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  Speaker 1: we've seen this big dry up fast. And within five
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  Speaker 1: minutes of getting off the plane. I had no real
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  Speaker 1: reporting plan. I pulled off the road from the airport,
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  Speaker 1: headed to where I was staying, and there was a
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  Speaker 1: tile shop and I went in, introduced myself and talked
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  Speaker 1: to this guy, Marshall Whittie, who was a salesman who
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  Speaker 1: at that time was about to send the keys back
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  Speaker 1: on his third spec house. His commissions were drying up.
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  Speaker 1: He told me how he had, you know, financed a
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  Speaker 1: trip to Tahiti for his honeymoon on a home equity
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  Speaker 1: line and credit. He used to get a new truck
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  Speaker 1: every year for the variety of color. And suddenly he's
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  Speaker 1: answering this, no, dude, I can't go to the club tonight.
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  Speaker 1: I'm staying home to watch a Netflix And I just
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  Speaker 1: sort of glued myself to this guy for three days.
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  Speaker 1: I met all of his friends, and I went back
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  Speaker 1: to New York and I remember saying to my colleagues
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  Speaker 1: in the newsroom, we are and I used an impolite
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  Speaker 1: word that I will not use on your radio program.
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  Speaker 1: We are, you know, really up a creek here. And
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  Speaker 1: I was like, you know, calm down, you know, let's
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  Speaker 1: take it ease. But that story I sort of just
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  Speaker 1: accidentally fell my way into I saw that this was
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  Speaker 1: going to be really bad. It was not merely a
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  Speaker 1: mild recession. And so every story I did afterwards, I mean,
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  Speaker 1: as I then got into the minutia of how the
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  Speaker 1: mortgage markets work and eventually covered the foreclosure crisis, really
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  Speaker 1: began with that just basic you know, naive, you know question, well,
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  Speaker 1: what's gonna happen when we can't just use our homes
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  Speaker 1: as atm machines anymore? That seems like it'll have implications,
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  Speaker 1: And yes it did.
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  Speaker 2: That reminds me a little bit of the scene from
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  Speaker 2: The Big Short, either the book or the movie, but
• 9:25
  Speaker 2: in the movie it's Steve Carell speaking to a stripper
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  Speaker 2: about the home she bought to fix up, and he said,
• 9:32
  Speaker 2: he goes, wait, you're buying this home as an investment property,
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  Speaker 2: and she's like, I have six homes as an investment property.
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  Speaker 2: And suddenly he realizes, oh, we're in for a world
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  Speaker 2: of trouble. This is much worse than anyone imagine.
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  Speaker 1: It's exactly that. In fact, the guys I was hanging
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  Speaker 1: out with when I said, well, I'll take you out
• 9:50
  Speaker 1: to dinner and drink so we can have a longer conversation.
• 9:53
  Speaker 1: We ended up in a place where there were people
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  Speaker 1: of that profession. It was actually my first expense that
• 10:00
  Speaker 1: I ever recruited as a New York Times writer, and
• 10:02
  Speaker 1: I was embarrassed to submit.
• 10:03
  Speaker 2: Them given because it was so expensive.
• 10:04
  Speaker 1: But it wasn't that it was so expensive. It was
• 10:07
  Speaker 1: what was the name of the place, right, But that's
• 10:10
  Speaker 1: where they wanted to go.
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  Speaker 2: So I love the expression, the expression jingle mail. People
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  Speaker 2: used to put their keys in an envelope and send
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  Speaker 2: it back to the bank, and that's jingle mail.
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  Speaker 1: Actually with this Marsha, would he explain that to me?
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  Speaker 1: I didn't even understand what he might say, Yeah, I'm
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  Speaker 1: sending the keys back, Like what are you talking? What
• 10:25
  Speaker 1: He's like, Well, you know, this home I never expected
• 10:27
  Speaker 1: to deliver. I guess I'm gonna be spending some time here.
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  Speaker 1: I figured i'd be moving uptown, you know, next year.
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  Speaker 1: That's it.
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  Speaker 2: It's amazing And in fact, until the financial crisis, I
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  Speaker 2: don't think anybody ever stopped to find out am I
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  Speaker 2: in a recourse state or a non recourse state? Meaning
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  Speaker 2: am I still on the hook after I lose the house?
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  Speaker 2: Or is the bank limited to just they get the
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  Speaker 2: house and I get to walk away.
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  Speaker 1: I mean, let's face it, we all click agree, read
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  Speaker 1: all the terms to millions of documents a day that
• 10:58
  Speaker 1: we don't even read a sentence, right, right, and suddenly
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  Speaker 1: we're living in the fine print. Oh, there actually are
• 11:05
  Speaker 1: terms that are gonna high here right that people that
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  Speaker 1: we deluded ourselves into believing would never You know, this
• 11:10
  Speaker 1: will never matter because housing prices are going up forever
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  Speaker 1: even now. In Greenspan says that you're a sucker if
• 11:15
  Speaker 1: you don't get a variable rate mortgage. And you know
• 11:18
  Speaker 1: what could happen. Oh, if it doesn't work out, I'll refie,
• 11:21
  Speaker 1: I'll sell. Well, suddenly, you know, we're dealing with all
• 11:24
  Speaker 1: of this ink that was never intended to have effect.
• 11:27
  Speaker 1: That's right.
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  Speaker 2: I'm still to this day amazed that the models never
• 11:32
  Speaker 2: allowed for home prices to fall.
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  Speaker 1: In New York.
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  Speaker 2: I have a vivid recollection of finishing grad school in
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  Speaker 2: eighty nine, and anybody I know who bought a co
• 11:41
  Speaker 2: Opera condo in New York, they were under water for five,
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  Speaker 2: six seven years until till the next leg late late
• 11:49
  Speaker 2: nineties and the booming stock markets started to send real
• 11:52
  Speaker 2: estate prices higher. But you don't have to go that
• 11:55
  Speaker 2: far back in time. Look at the nineteen seventies to
• 11:58
  Speaker 2: see when inflation made it in real term home prices
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  Speaker 2: not go up. And then you know, pre war there
• 12:04
  Speaker 2: were some pretty bad recessions and depressions in the turn
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  Speaker 2: of the century or the twenties and thirties. Obviously, homes
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  Speaker 2: weren't as widespread owned back then as they are now.
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  Speaker 2: And I don't want to spend too much time talking
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  Speaker 2: about the financial crisis. I have to ask you. You've
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  Speaker 2: done multiple trips to some pretty heavy conflict zones Iraq, Cambodias, Dan,
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  Speaker 2: East Timor what's it like being in these areas? Are
• 12:29
  Speaker 2: you embedded with the US military? Are you just walking
• 12:32
  Speaker 2: around hoping no one takes a pot shot up?
• 12:34
  Speaker 1: It depends. I have been embedded in places in Iraq. Actually,
• 12:38
  Speaker 1: I was there at the best possible time to be
• 12:40
  Speaker 1: a journalist, you know, in this period, like the I
• 12:43
  Speaker 1: was there as Bush declared mission accomplished. I was just
• 12:47
  Speaker 1: in my own suv driving from the Kuwait airport up
• 12:51
  Speaker 1: to Bosra with a couple of Washington Post colleagues and
• 12:54
  Speaker 1: then we drove, you know, all the way up to
• 12:56
  Speaker 1: Bagdad and Kircook and actually I'll never forget the car
• 12:58
  Speaker 1: broke down when we put a black market gasoline and
• 13:02
  Speaker 1: at some point I had to call National Car Rental
• 13:04
  Speaker 1: and Kuwait and then get that thing on the back
• 13:07
  Speaker 1: of a flatbed truck through all these laid off truck drivers.
• 13:09
  Speaker 1: I had no business, and we hired somebody for a
• 13:11
  Speaker 1: couple hundred bucks to drive it through the desert. You know,
• 13:14
  Speaker 1: it's always I'm not a thrill seeker by nature. I mean,
• 13:18
  Speaker 1: there are there are people who cover conflict who've spent
• 13:21
  Speaker 1: a lot more time in conflict zones than I ever will,
• 13:23
  Speaker 1: some of whom you know, I fear for their safety
• 13:26
  Speaker 1: because there is I'm just somebody who wants to see
• 13:29
  Speaker 1: what's going on. I'm not like the bravest soul, but
• 13:33
  Speaker 1: but there's nothing like being in a place. And boy,
• 13:37
  Speaker 1: I mean, Iraq after Saddam was just a gold mine
• 13:42
  Speaker 1: for a journalist because there are all these people, many
• 13:44
  Speaker 1: of whom are English speaking, who are dying to tell
• 13:48
  Speaker 1: their stories. Whether it's like how did these trading companies
• 13:51
  Speaker 1: work despite American sanctions. I did a story on smuggling
• 13:55
  Speaker 1: out of the port of Basra, where like in a
• 13:58
  Speaker 1: day I found the guy who like ran a smuggling ring,
• 14:02
  Speaker 1: who took me to the porch, showed me the fake
• 14:04
  Speaker 1: bills of lady like that was absolutely incredible. Cambodia was
• 14:09
  Speaker 1: was an endlessly fascinating of.
• 14:12
  Speaker 2: All these of all these wild overseas stories you've done,
• 14:14
  Speaker 2: what's been your favorite to cover, what's been the most challenging?
• 14:18
  Speaker 1: That's a that's a tough question. I mean, I would
• 14:21
  Speaker 1: say that a rat coverage just felt so vivid and important.
• 14:27
  Speaker 1: And I mean there's nothing like when you get accustomed
• 14:30
  Speaker 1: to doing you know, sort of enterprise or investigative or
• 14:32
  Speaker 1: longer form stuff. There's nothing like being in a place
• 14:35
  Speaker 1: where it's like, no people actually want to know right
• 14:37
  Speaker 1: now what happened to you today? And and stories almost
• 14:42
  Speaker 1: write themselves. I'm gonna go to, you know, an oil
• 14:45
  Speaker 1: refinery that shut down because the looters came and the
• 14:49
  Speaker 1: Haliburton people haven't figured out how to turn it back on,
• 14:52
  Speaker 1: and there are a bunch of Iraqi employees saying, who's
• 14:54
  Speaker 1: gonna pay us? And how come we can't go in there?
• 14:56
  Speaker 1: You know, these sorts of stories are just so vivid
• 14:58
  Speaker 1: and compelling. So I found that, you know, particularly amazing.
• 15:02
  Speaker 1: I mean, my time in China was kind of unbeatable
• 15:05
  Speaker 1: as well. It's just such a fascinating place.
• 15:08
  Speaker 2: Yeah, really fascinating. Let's talk a little bit about some
• 15:12
  Speaker 2: of the background philosophy. Tell us about the lean Taliban
• 15:17
  Speaker 2: and the cult of efficiency.
• 15:18
  Speaker 1: Love it. Yeah, So the lean Taliban refers to the
• 15:24
  Speaker 1: way the people at Mackinsey and Company, the business consultancy,
• 15:29
  Speaker 1: viewed themselves in proselytizing for lean manufacturing or just in
• 15:34
  Speaker 1: time as we know it now. Justin times is a
• 15:36
  Speaker 1: very sensible idea pioneered by Toyota that says, you know,
• 15:39
  Speaker 1: instead of having giant warehouses filled with all kinds of
• 15:42
  Speaker 1: stuff that we may need at some point in the future,
• 15:44
  Speaker 1: but who knows when it's Japan the end of the
• 15:47
  Speaker 1: Second World War, space is limited, capitals limited. Let's have
• 15:50
  Speaker 1: the suppliers bring this stuff we need on the supply
• 15:52
  Speaker 1: chain as we need it. They sort of emulated the
• 15:56
  Speaker 1: way a supermarket deals with milk. You want enough on
• 15:59
  Speaker 1: the show shelf that everybody gets milk. They don't leave
• 16:02
  Speaker 1: unhappy they can't buy it, but not so much that
• 16:04
  Speaker 1: you're spilling it. Well, this is a great idea till
• 16:07
  Speaker 1: business consultancies like McKinsey get hold of it and turn
• 16:09
  Speaker 1: it into this crude imperative to just slash inventory, hand
• 16:13
  Speaker 1: the extra savings to the corporate executives as a reward
• 16:18
  Speaker 1: for being smart enough to hire McKenzie. And I end
• 16:21
  Speaker 1: up digging deep into how this actually works in the
• 16:26
  Speaker 1: decades before the pandemic, and I spent time with this
• 16:30
  Speaker 1: guy in Minnesota who was working at this industrial generator
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  Speaker 1: plan where McKenzie's Lean Taliban show up a bunch of
• 16:39
  Speaker 1: slick suited young people straight out of Ivy League universities,
• 16:42
  Speaker 1: one older guy from the Chicago branch, and they say,
• 16:45
  Speaker 1: you're doing it all wrong. You know, why do you
• 16:47
  Speaker 1: have all these five dollars sheet metal brackets sitting around
• 16:50
  Speaker 1: taking up space in warehouses. Let's go Lean just order
• 16:54
  Speaker 1: them when you need them. And the guy I'm talking
• 16:56
  Speaker 1: he says, well, well, hold on, these are giant and
• 17:00
  Speaker 1: austrial generators that need to be installed by crane. Talk
• 17:03
  Speaker 1: about just in time. If we listen to your advice,
• 17:06
  Speaker 1: we're going to be slow with orders, which is exactly
• 17:08
  Speaker 1: what happens. So now they're spending hundreds of thousands of
• 17:10
  Speaker 1: dollars to expedite delivery of their products. They're losing sales
• 17:16
  Speaker 1: because they're upsetting the contractors. We're waiting for their generators. Also,
• 17:20
  Speaker 1: they can say, look at us being so lean that
• 17:22
  Speaker 1: we don't have five dollars sheet metal.
• 17:24
  Speaker 2: Brackets, and without those brackets you can't complete that generator.
• 17:29
  Speaker 1: Correct.
• 17:29
  Speaker 2: But even worse, when you give people incentives and metrics,
• 17:34
  Speaker 2: no matter how ridiculous they may be, they follow those
• 17:37
  Speaker 2: incentives and they they'll do those metrics to the point
• 17:41
  Speaker 2: where the people running the factory will not take delivery
• 17:46
  Speaker 2: of key components because it'll be sitting on their books
• 17:50
  Speaker 2: on the twenty ninth of the month and it'll screw
• 17:52
  Speaker 2: up their metrics.
• 17:53
  Speaker 1: They leave them.
• 17:54
  Speaker 2: They won't accept it until first until the frost out
• 17:57
  Speaker 2: in the parking list, And that just seems like, No,
• 17:59
  Speaker 2: aren't we supposed to be make products and selling them.
• 18:01
  Speaker 2: This secondary level of metrics seems kind of obsurd.
• 18:04
  Speaker 1: This is central to understanding the product shortages that we've
• 18:08
  Speaker 1: experienced for the last few years in overdoing it on lean.
• 18:13
  Speaker 1: And the ultimate example, the story I tell in the
• 18:15
  Speaker 1: book is I found a railroad engineer out in Idaho's
• 18:19
  Speaker 1: working for Union Pacific. Now the railroads have their own
• 18:23
  Speaker 1: version of the lean Taliban. It's called precision scheduled railroading.
• 18:27
  Speaker 1: Fancy way of saying, let's lay off lots of workers,
• 18:29
  Speaker 1: let's stick to the remaining workers with more jobs. Let's
• 18:32
  Speaker 1: make scheduling really complicated. Let's limit scheduled service, make trains
• 18:37
  Speaker 1: longer than ever. Well, so this railroad engineer is horrified
• 18:40
  Speaker 1: to discover that he's actually pulling freight to the wrong destinations.
• 18:45
  Speaker 1: And this is not by accident. This is because Union
• 18:48
  Speaker 1: Pacific has told Wall Street, we hear you on the
• 18:51
  Speaker 1: need for efficiency and going lean. We're gonna limit dwell time,
• 18:55
  Speaker 1: which is the amount of time that cargo sits in
• 18:58
  Speaker 1: any individual place. And so the guy running Union Pacific's
• 19:03
  Speaker 1: railyard in Nebraska absorbs this mantra and says, well, I
• 19:08
  Speaker 1: don't care where the next train's going. I am attaching
• 19:11
  Speaker 1: as many cars to it as possible. So I have
• 19:13
  Speaker 1: done my job. I have lowered dwell time. Well, the
• 19:17
  Speaker 1: real effect of this is there somebody sitting in southern
• 19:20
  Speaker 1: California waiting for autoparts that are in Oregon because this
• 19:23
  Speaker 1: guy's hauling them to the wrong place. We've lowered dwell time.
• 19:27
  Speaker 1: Wall Street's happy if all you're looking at is some
• 19:29
  Speaker 1: window on an Excel spreadsheet. Oh, the railroad is more
• 19:33
  Speaker 1: efficient than ever if you're the paint manufacturer in California
• 19:37
  Speaker 1: needing a drum of chemicals that's stuck in Washington State,
• 19:40
  Speaker 1: and how you got to tell your customers you're late
• 19:43
  Speaker 1: with the order. That doesn't seem particularly efficient. My takeaway
• 19:46
  Speaker 1: from doing this book is there's a lot of inefficiency
• 19:48
  Speaker 1: in this ruthless efficiency.
• 19:50
  Speaker 2: So I want to I'm glad you brought that up,
• 19:52
  Speaker 2: because I am not a big fan of consultants in general.
• 19:56
  Speaker 2: You have a lot of interesting things to say about
• 19:58
  Speaker 2: McKenzie in the book, who perhaps have not distinguished themselves
• 20:03
  Speaker 2: over the years with many of the things they've contributed
• 20:07
  Speaker 2: to it. It's sort of funny to see a bunch
• 20:10
  Speaker 2: of Ivy League suits who've never run a factory, or
• 20:14
  Speaker 2: who've never run a railroad, or who've never run a
• 20:18
  Speaker 2: retail shop come in and say, no, no, you're doing
• 20:21
  Speaker 2: this all wrong. Here are the metrics that will get
• 20:23
  Speaker 2: you a higher stock price on Wall Street, regardless of
• 20:27
  Speaker 2: the subsequent impact to either your sales, your profits, your
• 20:34
  Speaker 2: other stakeholders, including employees and customers, just a relentless pursuit
• 20:39
  Speaker 2: of how can we get the stock price up regardless.
• 20:42
  Speaker 2: Is that a fair assessment?
• 20:44
  Speaker 1: Yeah, I think that is a fair assessment. And the
• 20:46
  Speaker 1: problem is that that trick works time and again for
• 20:49
  Speaker 1: a while.
• 20:49
  Speaker 2: Anyway, you know, I.
• 20:51
  Speaker 1: Mean you think about slashing inventory right, which on the books.
• 20:54
  Speaker 1: If all you're thinking about is you're in a cubicle
• 20:57
  Speaker 1: and you're analyzing numbers for some publicly traded company, you
• 21:02
  Speaker 1: slash inventory, you've lowered or i'm sorry, you've increased return
• 21:06
  Speaker 1: on asset because inventory is asset, right, So asset is
• 21:09
  Speaker 1: now smaller. Whatever your revenue is is divided by a
• 21:12
  Speaker 1: smaller number. That's a higher measurement. Well as as this
• 21:16
  Speaker 1: London business school, a professor I talked to you for
• 21:18
  Speaker 1: the book put it to me, Yeah, that's really great.
• 21:20
  Speaker 1: But if you can't make a ventilator in the middle
• 21:22
  Speaker 1: of a pandemic because you've managed your inventory so that
• 21:26
  Speaker 1: quarter to quarter you've boosted your return on asset, you
• 21:29
  Speaker 1: don't get to say, well, at least our share price
• 21:31
  Speaker 1: is high.
• 21:33
  Speaker 2: So I remember having a conversation with Duff McDonald, who
• 21:37
  Speaker 2: wrote a book called The Firm about McKenzie and Company
• 21:41
  Speaker 2: and some of the things that McKenzie is responsible for
• 21:49
  Speaker 2: is kind of like shocking, Like it seems whenever there's
• 21:54
  Speaker 2: some financial engineering based disaster and you look into the detail,
• 22:00
  Speaker 2: somewhere in the back of it is some consulting person
• 22:05
  Speaker 2: from McKinsey who says, what would happen if instead of
• 22:08
  Speaker 2: doing it the way you always did it, we focused
• 22:10
  Speaker 2: on these metrics instead, and let's see if that helps
• 22:13
  Speaker 2: get the stock price up. It sounds like lean inventory
• 22:16
  Speaker 2: and just in time delivery is a version of focusing
• 22:21
  Speaker 2: on a secondary characteristic in order to affect the stock
• 22:25
  Speaker 2: price rather than focusing on increasing revenues and doing it
• 22:30
  Speaker 2: more efficiently.
• 22:31
  Speaker 1: Yeah, I mean, let me be clear, just in time
• 22:33
  Speaker 1: is a good idea, and trying to eliminate waste from
• 22:36
  Speaker 1: your supply chain is a good idea. The question is
• 22:38
  Speaker 1: are you doing it in a way that's common sensical
• 22:41
  Speaker 1: or in a way that's purely driven by trying to
• 22:43
  Speaker 1: hit some metric that's some twenty two year old at
• 22:46
  Speaker 1: a Harvard told you. You know, is a good way
• 22:47
  Speaker 1: to say.
• 22:48
  Speaker 2: So let's stay with that. Because you talk about Toyota's
• 22:51
  Speaker 2: role in all of this, right, Toyota. They're on an island.
• 22:55
  Speaker 2: Everything is destroyed post World War two, it would make
• 22:58
  Speaker 2: and they don't have a lot of cap So given
• 23:01
  Speaker 2: those constraints, their version of common sense, rational lean inventory,
• 23:08
  Speaker 2: you know, given their constraints, seems.
• 23:10
  Speaker 1: To be pretty It was highly effective and it worked.
• 23:15
  Speaker 2: Is the implication that when everybody else started implementing this
• 23:19
  Speaker 2: via consultants, they just took it way too far? Is
• 23:23
  Speaker 2: that the thinking?
• 23:24
  Speaker 1: It's that the consultants understand who they're working for. They
• 23:27
  Speaker 1: are working for executives who must get the share price
• 23:31
  Speaker 1: to go up right now, and if they fail to
• 23:34
  Speaker 1: do that, they're going to be looking for their next job.
• 23:37
  Speaker 1: So whether they think it's common sensical or not, in
• 23:39
  Speaker 1: terms of the long run, I mean, look this we
• 23:41
  Speaker 1: learned up close during the financial crisis, right like you.
• 23:44
  Speaker 2: Can radical deregulation turned out to have a cost to it.
• 23:47
  Speaker 1: I mean, you can have spectacular business failures that we
• 23:51
  Speaker 1: can all see that are wildly successful for all the
• 23:55
  Speaker 1: people involved, as long as they get out before the
• 23:57
  Speaker 1: plane crashes. Part of the mixed metaphor. And so if
• 24:02
  Speaker 1: you talk about the role of consultants, it's a question
• 24:05
  Speaker 1: of are you distilling it down to this kind of
• 24:07
  Speaker 1: cultish reverence for just hitting that one metric. I mean
• 24:10
  Speaker 1: even Toyota. Well, first of all, Toyota understood that they
• 24:14
  Speaker 1: needed their suppliers close at hand because you have to
• 24:16
  Speaker 1: be able to replenish the supply so if something goes wrong,
• 24:19
  Speaker 1: they would never have signed up for supply chains across oceans,
• 24:22
  Speaker 1: which is what we get from Mackenzie. Combined with the
• 24:26
  Speaker 1: rise of container shipping and the Internet and all of
• 24:29
  Speaker 1: these things that have made our version of globalization, you know, doable.
• 24:34
  Speaker 1: What's happened is we've eliminated all the margin for trouble.
• 24:37
  Speaker 1: But Mackenzie actually, even Mackenzie realized that we had gone
• 24:42
  Speaker 1: too far in the nineties when they discovered that Toyota
• 24:45
  Speaker 1: factories were telling their suppliers not to replenish enough to
• 24:50
  Speaker 1: fill even the existing space on the assembly line. They said, well,
• 24:54
  Speaker 1: this doesn't make any sense. Even Mackenzie said, look, why
• 24:57
  Speaker 1: have two trips to replenish the same workspace just so
• 25:01
  Speaker 1: you can say on the spreadsheet that you know, you're
• 25:03
  Speaker 1: only holding four bits as opposed to eight. Even Mackenzie
• 25:08
  Speaker 1: recognized that was bananas.
• 25:09
  Speaker 2: But you're coming down the other side of the efficiency
• 25:11
  Speaker 2: curve and all along this stuff. You're giving up long
• 25:16
  Speaker 2: term resiliency in favor of these short term metrics of
• 25:20
  Speaker 2: supposed efficiency. Fair statement, Yeah, I think that's right.
• 25:23
  Speaker 1: Look, you know, take this to real life. Imagine that
• 25:26
  Speaker 1: you told your kid who you're trying to get to
• 25:29
  Speaker 1: brush teeth at the end of the day, I insist
• 25:31
  Speaker 1: that you spend five minutes by the sink. You know, Well,
• 25:34
  Speaker 1: if that's how you do it, your kid's gonna spend
• 25:36
  Speaker 1: five minutes by the sink watching YouTube videos. You know.
• 25:38
  Speaker 1: Common sense is no, I better get involved in knowing
• 25:41
  Speaker 1: what exactly are they doing and what like how's this
• 25:43
  Speaker 1: going to play out? Well, we've effectively let McKenzie write
• 25:46
  Speaker 1: those kinds of rules. And it's not just McKenzie. There's
• 25:49
  Speaker 1: lots of business consultancies. And it's not even just because
• 25:52
  Speaker 1: of the business consultancies. It's that we've handed over our
• 25:56
  Speaker 1: business and societal fate to shareholder interests. So the exclusion
• 26:01
  Speaker 1: of anything resembling common sense.
• 26:02
  Speaker 2: Huh, really interesting. None of this is a new concern.
• 26:07
  Speaker 2: I was fascinated in the book. Henry Ford was concerned
• 26:11
  Speaker 2: about supply chains and resource availability a century ago when
• 26:16
  Speaker 2: he was building the model T How did his concerns
• 26:20
  Speaker 2: about supply chains be so easily forgotten?
• 26:23
  Speaker 1: Yeah, So, Henry Ford, I was fascinated by the story
• 26:26
  Speaker 1: of myself, you know, bonded with Thomas Alva Edison riding
• 26:30
  Speaker 1: a railcar back from a trade show at a hotel
• 26:33
  Speaker 1: on Coney Island. This is you know, in the nineteen teens.
• 26:37
  Speaker 1: Edison is his hero, and they bond over the supply chain.
• 26:42
  Speaker 1: Edison says, yeah, you know, you have all these great creations,
• 26:44
  Speaker 1: but if you can't get the materials you need, these
• 26:47
  Speaker 1: are just ideas. And Ford was obsessed with self sufficiency,
• 26:51
  Speaker 1: I mean to the extent to which he had his
• 26:53
  Speaker 1: own fiascos, you know, trying to become self sufficient rubber. Yeah,
• 26:56
  Speaker 1: this failed venture in Brazil, but you know the scale
• 26:59
  Speaker 1: of his factories, like including the River Rouge factory, which remains,
• 27:03
  Speaker 1: you know, Ford's showcase outside of Detroit. We're all about
• 27:08
  Speaker 1: having soup to nuts, the ability to make a car without,
• 27:12
  Speaker 1: as Ford put it, being pinched by some supplier. He
• 27:16
  Speaker 1: was suspicious of rail in particular, so he bought his
• 27:18
  Speaker 1: own rail and shipping lines. Vertical integration didn't exactly work out,
• 27:23
  Speaker 1: but that concept of let's understand what we're dependent on
• 27:28
  Speaker 1: and how reliable is the supply. I mean, Ford would
• 27:31
  Speaker 1: have been horrified to see what I saw at his
• 27:33
  Speaker 1: River Rouge plant a century later, where I'm actually watching
• 27:37
  Speaker 1: the F one fifty come off the line. This is
• 27:39
  Speaker 1: Ford's most popular vehicle, pickup truck, beautiful vehicle, amazing, you know,
• 27:45
  Speaker 1: orchestrated assembly with some automation. But at the time that
• 27:49
  Speaker 1: I'm watching this in January twenty twenty two, they're taking
• 27:52
  Speaker 1: the cars and parking them in these giant lots in
• 27:55
  Speaker 1: the shadow of Ford's corporate headquarters and across the street
• 27:58
  Speaker 1: from Henry Ford Elementary School because they're dependent upon one
• 28:02
  Speaker 1: supplier for the computer chips happens to be across the
• 28:06
  Speaker 1: ocean on this island that not incidentally is claimed by
• 28:09
  Speaker 1: China that's part of its own territory. I'm talking about Taiwan.
• 28:12
  Speaker 1: And until these computer chips show up, these fifties are
• 28:15
  Speaker 1: just taking up space in a parking lot. I had
• 28:18
  Speaker 1: a harfight.
• 28:18
  Speaker 2: I had a car come off lease, I want to
• 28:20
  Speaker 2: say late twenty one or early twenty two, and I
• 28:24
  Speaker 2: recall going to the dealer and going through a whole
• 28:27
  Speaker 2: floor of cars, and they were divided in half. That
• 28:32
  Speaker 2: half doesn't have the chip for the sunroof, which were
• 28:35
  Speaker 2: allowed to sell. So the sunroof is closed and whenever
• 28:38
  Speaker 2: the chip comes back, comes in, bring the car back
• 28:41
  Speaker 2: and we'll get your sunroof.
• 28:42
  Speaker 1: Work.
• 28:43
  Speaker 2: Those cars they don't have the ABS chip, we're not
• 28:46
  Speaker 2: allowed to sell those.
• 28:47
  Speaker 1: You can't, so you can't.
• 28:48
  Speaker 2: You could drive it, but no ABS.
• 28:50
  Speaker 1: That would be right.
• 28:51
  Speaker 2: Well, you could stop it the way you stopped cars
• 28:53
  Speaker 2: twenty years ago without all the technology. And so wait,
• 28:58
  Speaker 2: I don't understand, why can't you get these chips? And
• 29:01
  Speaker 2: that was an early read into that. So we talked
• 29:05
  Speaker 2: about Tyota and Ford and McKenzie. If we're talking about
• 29:09
  Speaker 2: supply chain and globalization, we have to also talk about
• 29:12
  Speaker 2: the outsourcing to China where you spent a lot of time.
• 29:17
  Speaker 2: And I'm curious about the role of Walmart in moving
• 29:21
  Speaker 2: so much manufacturing capacity to China. Tell us a little
• 29:26
  Speaker 2: bit about Walmart.
• 29:27
  Speaker 1: So Walmart is the ultimate example of how publicly traded
• 29:34
  Speaker 1: companies have undercut costs in the name of gratifying consumers
• 29:40
  Speaker 1: with low prices, and they found in China the ultimate
• 29:45
  Speaker 1: solution to their bottom line. Concerns. I mean, here's this
• 29:48
  Speaker 1: country where there's no labor unions. They're effectively they're banned
• 29:52
  Speaker 1: by the commedist party. You can cut a deal with
• 29:55
  Speaker 1: the commedi'st party official to get hold of space or resources.
• 29:59
  Speaker 1: You're tapping into the world's potentially largest consumer market for
• 30:04
  Speaker 1: you know, just about everything, and China, even before China
• 30:09
  Speaker 1: enters the World Trade Organization in two thousand and one,
• 30:11
  Speaker 1: but especially afterwards, it is the you know, perfect place
• 30:16
  Speaker 1: to make products at scale, increasing sophistication, low costs. And
• 30:22
  Speaker 1: you know, we spent a lot of time now talking
• 30:24
  Speaker 1: about how this supposed you know, export juggernaut intent on
• 30:29
  Speaker 1: killing American living standards has undercut all these manufacturing jobs
• 30:33
  Speaker 1: in the US. I mean it is I'm glad you're
• 30:36
  Speaker 1: putting the focus on companies like Walmart, because it really
• 30:39
  Speaker 1: was American and Western companies in general clamoring for a
• 30:44
  Speaker 1: shot at the Chinese market as a way to satisfy
• 30:47
  Speaker 1: their own conterns for low prices, to make their share
• 30:49
  Speaker 1: prices go.
• 30:50
  Speaker 2: So what about the politicians who do we blame? Is
• 30:53
  Speaker 2: this Bill Clinton? Is this Ronald Reagan who helped set
• 30:57
  Speaker 2: the stage for the hollowing out of American Industrial Center
• 31:02
  Speaker 2: and China's entry into the World Trade Organization.
• 31:06
  Speaker 1: Well, I'm not so sure that it was wrong by
• 31:09
  Speaker 1: the way to let China enter the World Trade Organization,
• 31:12
  Speaker 1: though we could have put more focus on terms for
• 31:15
  Speaker 1: labor and human rights and environmental and environment for sure.
• 31:20
  Speaker 1: You know, I argue in the book that you know,
• 31:23
  Speaker 1: most of our problems, and the problems are significant in
• 31:26
  Speaker 1: terms of the so called China shock. They cost you know,
• 31:28
  Speaker 1: a million direct manufacturing jobs in the decade or so
• 31:30
  Speaker 1: after China enters the w two and two million if
• 31:33
  Speaker 1: you count. You know, the truck drivers who no longer
• 31:36
  Speaker 1: have a factory to deliver to. You know, that's really
• 31:38
  Speaker 1: home cooking, right. I mean other countries. I mean Canada
• 31:42
  Speaker 1: is not you know, seething with anti trade sentiment to
• 31:45
  Speaker 1: the extent that it is in the US, because they
• 31:47
  Speaker 1: have national health care there. We don't have national health care.
• 31:51
  Speaker 1: We don't We have Trade Adjustment Assistance, but it's woefully underfunded.
• 31:54
  Speaker 1: That's a program that's supposed to help people who lose
• 31:56
  Speaker 1: their jobs because the trade deals transition to something else.
• 32:00
  Speaker 1: It's our own political decisions that have left workers effectively
• 32:05
  Speaker 1: abandoned when they lose their jobs, and in terms of
• 32:08
  Speaker 1: the net trade with China has actually been a positive
• 32:11
  Speaker 1: for the American economy. It's a question of how we've
• 32:13
  Speaker 1: distributed the spoils, but in terms of how that all
• 32:16
  Speaker 1: came about. Yeah, I think you got to look at Clinton.
• 32:19
  Speaker 1: Who I mean. I tell the story in the book
• 32:20
  Speaker 1: of How Clinton Runs in ninety two as the answer
• 32:25
  Speaker 1: to George H. W. Bush calls him, calls him out
• 32:28
  Speaker 1: for supposedly coddling the butchers of Beijing, you know, CosIng
• 32:32
  Speaker 1: up to the Chinese Commedist Party. After the Tianneman Square
• 32:35
  Speaker 1: massacre in nineteen eighty nine, Clinton vows that things are
• 32:38
  Speaker 1: going to be different in his own administration. Human rights
• 32:40
  Speaker 1: are going to matter so much, And not even a
• 32:42
  Speaker 1: decade later, he's at the Great Hall of the People,
• 32:45
  Speaker 1: this is across the street from Tenneman Square itself, saluting
• 32:50
  Speaker 1: his host, this is Johnson Men with Hillary by his side,
• 32:54
  Speaker 1: and saluting the great strides that China has made as
• 32:58
  Speaker 1: he's lobbying for this deal that will bring China into
• 33:01
  Speaker 1: the WTO And he even goes to the back of
• 33:03
  Speaker 1: the hall, picks up the baton and conducts the People's
• 33:07
  Speaker 1: Liberation Army orchestra. This is the orchestra for the institution
• 33:12
  Speaker 1: responsible for the Tanneman massacre. Now why does he do
• 33:15
  Speaker 1: this because he comes from Arkansas, this is Walmart's home state.
• 33:20
  Speaker 1: Because the Democratic Party and the Republican Party for that matter,
• 33:23
  Speaker 1: awash in campaign contributions from retailers manufacturers who want a
• 33:28
  Speaker 1: crack at China because it's good for business, and that
• 33:32
  Speaker 1: ultimately drives the equation.
• 33:35
  Speaker 2: During that debate about China entering to the WTO, we
• 33:40
  Speaker 2: heard the phrase democracy tossed around a lot, right, that
• 33:44
  Speaker 2: this will open up China to democracy, that this will
• 33:48
  Speaker 2: improve their environmental regulations, will improve human rights and their
• 33:53
  Speaker 2: label laws. None of that happens.
• 33:55
  Speaker 1: None of this happens. We hear this from Larry Summers,
• 33:58
  Speaker 1: we hear this from Bill Clinton, We hear this from
• 34:00
  Speaker 1: Bob Rubin. What does happen. Bob Ruben gets to go
• 34:04
  Speaker 1: to China with City Group and make you know, as chairman,
• 34:07
  Speaker 1: as chairman, you know, and crack that market and that's
• 34:10
  Speaker 1: good for their share price. Of course, what happens China
• 34:16
  Speaker 1: does become the workshop to the world. Retailers get a
• 34:20
  Speaker 1: crack at this giant market for a time. Although we've
• 34:23
  Speaker 1: never really gotten the market opening. That's right, promises that
• 34:25
  Speaker 1: we got. Share prices do go up because costs come
• 34:29
  Speaker 1: down consumers. You know, if you like the idea of
• 34:31
  Speaker 1: being able to go to Walmart and buy a badminton
• 34:33
  Speaker 1: set for three bucks or whatever, like, you got the bonanza.
• 34:36
  Speaker 1: But we've got a lot of loss manufacturing jobs. We
• 34:39
  Speaker 1: got a real hit to the kind of psyche of
• 34:43
  Speaker 1: American industrial areas. Our politics change not for the better
• 34:47
  Speaker 1: as inequality sinks in and is working people understand that
• 34:50
  Speaker 1: their ability to support their families doesn't seem to matter
• 34:53
  Speaker 1: very much to the people running the economy.
• 34:56
  Speaker 2: In the beginning, it felt like they were inexpensive products
• 35:00
  Speaker 2: from China. Later on that lack of environmental regulations or
• 35:05
  Speaker 2: lack of even basic safety standards kind of cause problems.
• 35:10
  Speaker 2: I don't know about you. I won't buy dog treats
• 35:13
  Speaker 2: or food made in China because you never know what's
• 35:16
  Speaker 2: in them. We had that whole thing with the sheet
• 35:19
  Speaker 2: rock that was mildewed and were problematic.
• 35:23
  Speaker 1: And on and on.
• 35:24
  Speaker 2: Every time it seems that there's a problem with a
• 35:29
  Speaker 2: Chinese product, it's not that the people who are working
• 35:34
  Speaker 2: in the factories are doing anything wrong. It's that they're
• 35:37
  Speaker 2: just allowed to do anything with no sort of regulatory oversight.
• 35:41
  Speaker 2: So you end up with asbestos in sheet RockA you
• 35:43
  Speaker 2: end up with some bed chemical in the dog bones.
• 35:47
  Speaker 2: At what point is the backlash from the lack of
• 35:52
  Speaker 2: a regulatory oversight in China going to actually impact them?
• 35:56
  Speaker 1: Well, I mean it has had some effect, right, I mean,
• 35:59
  Speaker 1: Chinese said since are unhappy about polluted air. I mean
• 36:02
  Speaker 1: there's been a lot of moves to reduce we don't
• 36:05
  Speaker 1: see the progress here yet coal fired electrical plants, or
• 36:08
  Speaker 1: at least move them further away from urban areas in
• 36:12
  Speaker 1: places where the environmental destruction resulting from massive industrialization it's
• 36:16
  Speaker 1: really hit. We've seen protests, we have seen some change there.
• 36:22
  Speaker 1: But ultimately China has been driven by a very successful
• 36:27
  Speaker 1: effort to lift hundreds of millions of people out of poverty,
• 36:30
  Speaker 1: and so for the most part, economic considerations have trumped
• 36:35
  Speaker 1: all other considerations. I mean, the great irony is that
• 36:38
  Speaker 1: the driver of the kind of globalization that I'm writing
• 36:42
  Speaker 1: about in this book, at the center of it is
• 36:44
  Speaker 1: this what I described as a joint venture between the
• 36:46
  Speaker 1: People's Republic of China, this institution forged under a peasant
• 36:51
  Speaker 1: rebellion revolution under a Marxist Leninist terms and Walmart the
• 36:58
  Speaker 1: ultimate retailer from the citadel of Western capitalism. And this
• 37:03
  Speaker 1: joint venture has really propelled us through the decades. And
• 37:07
  Speaker 1: that's what is now changing.
• 37:09
  Speaker 2: So there's some really interesting tidbits in the book. I
• 37:14
  Speaker 2: have to bring up. Between nineteen eighty one and two thousand,
• 37:19
  Speaker 2: American companies reduce their inventories by about two percent a year.
• 37:26
  Speaker 2: By twenty fourteen, that were holding one point two trillion
• 37:30
  Speaker 2: dollars less in inventory than they had been in the eighties.
• 37:33
  Speaker 2: That seems like a giant number.
• 37:36
  Speaker 1: Yeah, it is. Now. Some of that is reflective of
• 37:42
  Speaker 1: more reliable products, right, So some of that is the
• 37:46
  Speaker 1: part of the Toyota production system that doesn't get talked
• 37:49
  Speaker 1: about much, which is, you know, quality improvement. So if
• 37:52
  Speaker 1: your parts don't break as frequently, then you don't need
• 37:55
  Speaker 1: to hold as many that's fine. But we know that
• 37:58
  Speaker 1: every time there's a shock to the system, we run
• 38:01
  Speaker 1: out of stuff. I mean, the pandemic brought that. If
• 38:04
  Speaker 1: you didn't know that before the pandemic, you sure found
• 38:06
  Speaker 1: out about it when we ran out of you know,
• 38:08
  Speaker 1: every single medicine, right, I mean, that's the title of
• 38:10
  Speaker 1: my book. But the first supply chain disruption story I
• 38:13
  Speaker 1: ever wrote was back in nineteen ninety nine when there
• 38:15
  Speaker 1: was an earthquake in Taiwan and we had shortages of
• 38:18
  Speaker 1: chips and other electronics. Then, of course the Fukushimi Fukushima
• 38:22
  Speaker 1: disaster in Japan and twenty eleven and into twenty twelve
• 38:25
  Speaker 1: we had massive shortages of electronics for months after we
• 38:29
  Speaker 1: had floods in Thailand around the same time that knocked
• 38:32
  Speaker 1: hard drive production out of whack. And each time people
• 38:36
  Speaker 1: who pay attention to this stuff, and that's a fairly
• 38:39
  Speaker 1: geeky set of people, would say, I think maybe we've
• 38:41
  Speaker 1: overdone it with justin time. But this equation has been
• 38:46
  Speaker 1: so good for the people running publicly traded companies that
• 38:49
  Speaker 1: any CEO who says, I don't know, maybe we need
• 38:52
  Speaker 1: more of a hedge against trouble, that's an invitation to
• 38:54
  Speaker 1: go out looking for your next job. The CEO says,
• 38:57
  Speaker 1: let's keep going lean. They know that it eventually there
• 39:00
  Speaker 1: will be a come up ins but with any luck,
• 39:03
  Speaker 1: that'll happen after they've moved on, they've sold their they've
• 39:06
  Speaker 1: casted in their options and then they're on you know,
• 39:09
  Speaker 1: some beach and a hammock with a cocktail on their hand.
• 39:11
  Speaker 2: So let's talk about what took place before and after
• 39:15
  Speaker 2: the pandemic, and some of the data in the book
• 39:18
  Speaker 2: is really quite astonishing. Pre pandemic, China made eighty percent
• 39:23
  Speaker 2: of the face mass sold in the US and nine
• 39:27
  Speaker 2: of many basic antibiotics. Yeah, that just seems insane to me.
• 39:32
  Speaker 1: Yeah, in retrospect, it's I mean, it's certainly insane, Like.
• 39:35
  Speaker 2: How can we not make our own antibiotics in the
• 39:38
  Speaker 2: United States.
• 39:39
  Speaker 1: I mean, what makes it insane is we're discussing a
• 39:42
  Speaker 1: period where we're deciding to have a trade war with China, right,
• 39:45
  Speaker 1: I mean, right now, you know, I mean if you
• 39:47
  Speaker 1: have a great relation. I mean, I think if we
• 39:48
  Speaker 1: were saying eighty percent of our face mass made in Canada,
• 39:51
  Speaker 1: I don't think we'd give that any thought because the
• 39:53
  Speaker 1: likelihood that we're going to close the border seems pretty small.
• 39:57
  Speaker 1: But yes, to be going into the pandemic simultaneaneously having
• 40:01
  Speaker 1: this trade war while we're heavily dependent for really significant
• 40:06
  Speaker 1: stuff on this country that you know, happens to be
• 40:08
  Speaker 1: on the other side of the Pacific ocean. Uh, that's
• 40:11
  Speaker 1: a problem.
• 40:11
  Speaker 2: So let's talk a little bit about what this looked
• 40:14
  Speaker 2: like once the world shuts down. By the middle of
• 40:17
  Speaker 2: twenty twenty one, thirteen percent of the world's container shipping
• 40:23
  Speaker 2: fleet they're just stuck in traffic jams at ports. They
• 40:26
  Speaker 2: can't get in or out. Yeah, about a trillion dollars
• 40:29
  Speaker 2: worth of product is just stuck offshore. Tell us about that.
• 40:33
  Speaker 1: Yeah, involuntary warehouses suddenly container ships or involuntary warehouses. You know,
• 40:38
  Speaker 1: I'm tracing in the book the passage of the single
• 40:42
  Speaker 1: ship and container from a factory in China to a
• 40:44
  Speaker 1: warehouse in Mississippi. This is the most important shipment in
• 40:47
  Speaker 1: the history of this startup company based in Mississippi called Glow,
• 40:50
  Speaker 1: run by a guy named Hagen Walker. And Hagen Walker's
• 40:54
  Speaker 1: got this deal with Sesame Street to make these light
• 40:56
  Speaker 1: up bath toys and this is his first order that
• 41:00
  Speaker 1: big enough to fill a forty foot shipping container. And first,
• 41:03
  Speaker 1: you know, the price of moving a container of goods
• 41:06
  Speaker 1: from the west from coastal China to the west coast
• 41:09
  Speaker 1: of the US goes from like twenty five hundred bucks
• 41:13
  Speaker 1: to north of twenty five thousand dollars in the space
• 41:16
  Speaker 1: of a few months, and then by the time he
• 41:18
  Speaker 1: manages to get his stuff on board a ship, there's
• 41:21
  Speaker 1: fifty sixty seventy ships just floating off the twin ports
• 41:25
  Speaker 1: of Los Angeles and Long Beach. These are the two
• 41:27
  Speaker 1: ports that collectively are the gateway for forty percent of
• 41:31
  Speaker 1: all imports reaching the US by container ship, and there's
• 41:34
  Speaker 1: just not enough space on the docks for them to unload,
• 41:36
  Speaker 1: so they're stuck floating for sometimes for weeks.
• 41:39
  Speaker 2: So do we not have enough ports or was it
• 41:42
  Speaker 2: just a shortage of port workers and truck drivers and
• 41:47
  Speaker 2: railroad cars and even shipping containers themselves that led to
• 41:52
  Speaker 2: this problem.
• 41:53
  Speaker 1: It's a little of each of these things all at once.
• 41:56
  Speaker 1: But it's important to understand that the shipping industry is
• 42:00
  Speaker 1: basically an unregulated cartel made up of international companies. They're
• 42:04
  Speaker 1: all foreign companies. They're organized, though there are scores of them,
• 42:08
  Speaker 1: into three alliances, think like airline alliances, like your Star
• 42:11
  Speaker 1: Alliance or your One World or whatever, and these three
• 42:14
  Speaker 1: alliances they control like ninety plus percent of the traffic
• 42:19
  Speaker 1: across the Pacific. So in the same way that you
• 42:22
  Speaker 1: know it's not an accident that you get on your
• 42:24
  Speaker 1: United flight and every seat's taken, and they're looking for
• 42:27
  Speaker 1: volunteers because they're managing inventories so carefully. They want you
• 42:31
  Speaker 1: to be anxious about getting space on that flight, so
• 42:35
  Speaker 1: if you really got to make that trip, you'll pay
• 42:37
  Speaker 1: whatever it costs. They have a similar shipping carriers have
• 42:41
  Speaker 1: that relationship with the people who are dependent upon space
• 42:46
  Speaker 1: on their ships. So you've got limited capacity. And sorry
• 42:51
  Speaker 1: to back up on you, but there was a massive
• 42:54
  Speaker 1: miscalculation by much of international business. As the pandemic begins, right,
• 42:59
  Speaker 1: we get the first shutdowns in China. We then get
• 43:02
  Speaker 1: disruptions in Europe as the pandemic spreads, and we get quarantines,
• 43:08
  Speaker 1: people thrown out of work. Unemployment shoots up to fourteen
• 43:11
  Speaker 1: percent in April of twenty twenty in the US, and
• 43:15
  Speaker 1: people running businesses react to this as if you know, oh,
• 43:19
  Speaker 1: this is familiar. Okay, this is a this is a
• 43:22
  Speaker 1: terrible downturn like the Great Financial Crisis and then the
• 43:25
  Speaker 1: Great Recession. We just need to slash orders for everything
• 43:28
  Speaker 1: because you know, people are out of work, so spending
• 43:31
  Speaker 1: powers drying up. Well, if they had part of it, right, yeah,
• 43:33
  Speaker 1: if we're not going to offices, then there's no need
• 43:35
  Speaker 1: for the sandwich shop on the corner. We're not going
• 43:38
  Speaker 1: to the gym, gyms or shut But guess what we're
• 43:41
  Speaker 1: now stuck at home cooking, you know, twenty seven meals
• 43:44
  Speaker 1: a day for our cooped up children. We need more
• 43:47
  Speaker 1: kitchen appliances. Can't go to the gym. But now we're
• 43:49
  Speaker 1: buying pelotons and sticking them in our basements. We need
• 43:52
  Speaker 1: more of those. A lot of this stuff's made in China,
• 43:55
  Speaker 1: so there's now demand for these container ships to carry
• 43:58
  Speaker 1: them across the ocean, and a lot of the containers
• 44:02
  Speaker 1: have been sent out to places that are bearing face
• 44:05
  Speaker 1: masks and gowns and other ppe, and they're headed to
• 44:10
  Speaker 1: places that don't have that much stuff to send back
• 44:12
  Speaker 1: to China. So there's stacks of containers in West Africa,
• 44:16
  Speaker 1: in parts of Latin America that don't do that much
• 44:18
  Speaker 1: trade with China. Just as China's turning on to make
• 44:21
  Speaker 1: our pelotons and our you know, backyard barbecues and trampolines
• 44:26
  Speaker 1: to entertain our cooped up children, so that shipping price skyrockets,
• 44:31
  Speaker 1: and it turns out we actually need more stuff, including
• 44:34
  Speaker 1: ships than we needed. And at the same time, to
• 44:38
  Speaker 1: your earlier point, we got truck drivers six, so we
• 44:41
  Speaker 1: don't have as much truck drivers, so we don't have
• 44:44
  Speaker 1: as much trucking capacity. Dock workers are six, we don't
• 44:47
  Speaker 1: have as many people to load and unload. Warehouses are
• 44:50
  Speaker 1: now full because we don't have people to move the
• 44:52
  Speaker 1: stuff out of warehouses, so we don't have places to
• 44:54
  Speaker 1: put all these boxes that are coming in, so they're
• 44:56
  Speaker 1: piling up on the docks. The whole system just buckles.
• 45:00
  Speaker 2: It's amazing, and it's so hard to imagine what it
• 45:04
  Speaker 2: was like before because we know how it turned out,
• 45:08
  Speaker 2: and today it feels like, how could any of one
• 45:12
  Speaker 2: have made that miscalculation? And so obvious the demand for
• 45:17
  Speaker 2: goods over services was gonna spike, but at that time,
• 45:21
  Speaker 2: not a lot of people saw that coming, did they.
• 45:24
  Speaker 2: It was a pretty big miscalculation.
• 45:27
  Speaker 1: It was a big miss calculation. But it also goes
• 45:29
  Speaker 1: back to what we were discussing earlier in terms of
• 45:31
  Speaker 1: shareholder primisy. You know, one of the things that Toyota
• 45:34
  Speaker 1: really valued in its own version of justin Time is
• 45:37
  Speaker 1: you have to take care of your suppliers. If things
• 45:40
  Speaker 1: are bad, you don't just say well, you know, we
• 45:44
  Speaker 1: disown you. We don't need any of what you're making.
• 45:46
  Speaker 1: Good luck to you, because then when you do need them,
• 45:48
  Speaker 1: they'll be out of business. Right. But that's effectively what
• 45:51
  Speaker 1: we did with computer chips. You know, why can't you
• 45:55
  Speaker 1: find a car that's got a computer chip because the
• 45:58
  Speaker 1: auto companies, well the auto company made a series of
• 46:00
  Speaker 1: terrible miscalculators. First of all, they didn't understand that they
• 46:04
  Speaker 1: didn't actually matter very much to their ultimate customers. The
• 46:07
  Speaker 1: chip fabricators in Taiwan. They thought, well, you know, we're Ford,
• 46:10
  Speaker 1: we're GM where you know, Nissan, whatever, like they have
• 46:13
  Speaker 1: to take care of us. No they don't. They're taking
• 46:15
  Speaker 1: care of Google and Apple. That's most of their markets.
• 46:18
  Speaker 1: And even those companies can't get chips. So whatever chips
• 46:21
  Speaker 1: they can make, they're going into the iPhone because that's
• 46:24
  Speaker 1: the big customer. Sorry, Ford, you're last in line.
• 46:27
  Speaker 2: Well not quite last, because for small med devices and
• 46:31
  Speaker 2: some real important life saving devices, that's right, could not
• 46:35
  Speaker 2: get manufactured according to your bum correct.
• 46:37
  Speaker 1: But when you tell a chip manufacturer, hey, sorry, we
• 46:41
  Speaker 1: don't need any of what you're making. We'll call you
• 46:43
  Speaker 1: when we do, they turn their fabrication plants offline, and
• 46:48
  Speaker 1: you can't just turn a switch on to get that
• 46:51
  Speaker 1: going again. It takes billions of dollars, it takes lots
• 46:53
  Speaker 1: of materials, it takes months. So once we realize that
• 46:58
  Speaker 1: we've grossly misscal in terms of running the economy, we
• 47:02
  Speaker 1: then have to wait to ramp back up. And that
• 47:05
  Speaker 1: does go uh that that is an indictment of how
• 47:08
  Speaker 1: we've done just in time. We haven't thought about suppliers
• 47:12
  Speaker 1: as you know, partners, they're just suppliers, are just costs
• 47:17
  Speaker 1: to be contained. And the same goes for human beings.
• 47:19
  Speaker 1: You know, you go back to what you were saying
• 47:21
  Speaker 1: about McKenzie earlier. One of the things Mackenzie did in
• 47:23
  Speaker 1: terms of proselytizing for Lean is they turned human beings
• 47:27
  Speaker 1: and human workers into inventory. Oh we don't need you, well,
• 47:31
  Speaker 1: we're just gonna make you flexible. You're you're an independent contractor, now, congratulations.
• 47:36
  Speaker 1: That effectively means we own your time. If you're a
• 47:40
  Speaker 1: warehouse worker or you're a worker in a in a
• 47:44
  Speaker 1: plant that makes something like you know you're engaged in biomanufacturing.
• 47:47
  Speaker 1: If we need you, we need to know that we
• 47:49
  Speaker 1: can tell you a day before that you have to
• 47:51
  Speaker 1: show up for work. So you don't have control of
• 47:53
  Speaker 1: your time. You can't go on vacation, you can't schedule,
• 47:56
  Speaker 1: you know, a doctor's appointment, your tr You don't get
• 48:00
  Speaker 1: paid unless we call you. Well, guess what. The minute
• 48:03
  Speaker 1: unemployment drops to historic standards, people say, you know what,
• 48:07
  Speaker 1: I got other options. I'm gonna pursue them because I
• 48:10
  Speaker 1: don't like being treated like inventory. And you go back
• 48:12
  Speaker 1: to Henry Ford, who understood that. You know, Henry Ford
• 48:16
  Speaker 1: is not a figure to be lionized, right. He was
• 48:17
  Speaker 1: a racist, He was an anti semi He crushed organized labor,
• 48:20
  Speaker 1: but he understood that if you want workers showing up
• 48:25
  Speaker 1: giving there all, you got to pay them. He doubled
• 48:27
  Speaker 1: wages in nineteen fourteen. Some people called them a communist.
• 48:30
  Speaker 1: He said, I'm just a guy who wants to make
• 48:32
  Speaker 1: product reliably, and any business premised on low wage labor
• 48:36
  Speaker 1: is inherently unstable. We broke that connection, so so ultimately
• 48:42
  Speaker 1: we lost. We have these labor shortages, we love to say,
• 48:47
  Speaker 1: but we really we ran out of people willing to
• 48:50
  Speaker 1: continue to sign up for the deal of downgraded jobs.
• 48:53
  Speaker 2: So let's talk a little bit about that because I
• 48:56
  Speaker 2: constantly harp on this point, and I feel like so
• 49:00
  Speaker 2: many people don't understand this. So the decade leading up to,
• 49:06
  Speaker 2: or maybe the two decades leading up to the pandemic
• 49:09
  Speaker 2: post nine to eleven, the Bush administration changes the rules
• 49:14
  Speaker 2: for who can stay in the United States if they're
• 49:16
  Speaker 2: here on an education visa. We reduce the number of
• 49:20
  Speaker 2: legal immigrants who take a lot of jobs that Americans
• 49:23
  Speaker 2: don't want. Then we have the pandemic, and so there's
• 49:26
  Speaker 2: no traffic in or out.
• 49:28
  Speaker 1: I don't know.
• 49:29
  Speaker 2: Arguably it was close to two million people in the
• 49:32
  Speaker 2: US die of COVID. I know the official numbers are
• 49:36
  Speaker 2: a little less than that, but it feels like that's
• 49:40
  Speaker 2: a conservative guess. You have millions of people on disability,
• 49:44
  Speaker 2: millions of people who still have long COVID. All these
• 49:48
  Speaker 2: different factors come together and it creates this massive shortage
• 49:53
  Speaker 2: of workers in the United States. Of course, unemployment is
• 49:56
  Speaker 2: four point something percent. We don't have enough body. How
• 50:00
  Speaker 2: much of this what you're describing as just in time
• 50:03
  Speaker 2: inventory for people, how much of this trace is back
• 50:07
  Speaker 2: to that approach?
• 50:09
  Speaker 1: A lot of it, you know, I mean, I think
• 50:10
  Speaker 1: we heard a lot about how are your stuff's not
• 50:14
  Speaker 1: shown up because aren't enough truck drivers willing to do it,
• 50:16
  Speaker 1: As if these guys just lost their mojo to do
• 50:19
  Speaker 1: their jobs. I actually spent three days riding along with
• 50:23
  Speaker 1: a long haul truck driver from Kansas.
• 50:25
  Speaker 2: Tough gig, isn't it.
• 50:26
  Speaker 1: It's a I mean, look, it's always been a tough gig.
• 50:29
  Speaker 1: But you know, before deregulation under Carter. People love talking
• 50:33
  Speaker 1: about Reagan, but a lot of stuff actually starts with Carter.
• 50:35
  Speaker 1: In the only seventies, the teamsters weren't charged. Okay, here's
• 50:39
  Speaker 1: another institution. Not to be lionized. You know, they have
• 50:41
  Speaker 1: an unsavory history, but they they demonstrate the power of
• 50:46
  Speaker 1: having a union because you know, you're away from your family,
• 50:50
  Speaker 1: you're on the road, you're worried about where to park.
• 50:53
  Speaker 1: You know that was always true, but these guys got
• 50:55
  Speaker 1: paid really well. I mean it was. This was a
• 50:57
  Speaker 1: truly middle class to upper middle class up Now it's
• 51:00
  Speaker 1: basically a working poor job and you're away from your
• 51:04
  Speaker 1: family more than ever. You're really at the mercy of
• 51:09
  Speaker 1: too much competition in that particular industry, where trucking companies
• 51:12
  Speaker 1: are constantly undercutting one of those it's very hard for
• 51:14
  Speaker 1: any of them to make any money because there's so
• 51:16
  Speaker 1: many of them, and so they rely on being able
• 51:19
  Speaker 1: to squeeze labor. And that model works so long as
• 51:23
  Speaker 1: there are huge numbers of people so desperate to do
• 51:26
  Speaker 1: anything that they will sign up for. You know, and
• 51:30
  Speaker 1: going back to our earlier discussion of the mortgage industry
• 51:33
  Speaker 1: before the Great Financial Crisis, there are these predatory schemes
• 51:37
  Speaker 1: reminiscent of subprime in the recruitment of drivers, and a
• 51:41
  Speaker 1: lot of drivers sign off on this pitch that the
• 51:44
  Speaker 1: you know, the allure, the open road, and we're going
• 51:46
  Speaker 1: to pay for your training program. But then you're indentured
• 51:49
  Speaker 1: to the company that paid the training program for six
• 51:52
  Speaker 1: months or sometimes two years, and by the time you
• 51:55
  Speaker 1: figure out this is actually a really bad deal. I'm
• 51:57
  Speaker 1: not getting paid by the hour. I'm getting paid by
• 52:00
  Speaker 1: I load delivered. I'm spending hours an hours just waiting
• 52:03
  Speaker 1: at some port for my container to be available. I'm
• 52:06
  Speaker 1: stuck outside some warehouse that's also sort of employees, waiting
• 52:10
  Speaker 1: for them to unload my freight so I can pick
• 52:12
  Speaker 1: up the next load. I do the math. I'm actually
• 52:14
  Speaker 1: working barely minimum wage, in some cases even below a
• 52:18
  Speaker 1: lot of people quit, and so we have this churn
• 52:21
  Speaker 1: where even a successful trucking company has to replace their
• 52:24
  Speaker 1: entire fleet in the space of a year. In any
• 52:28
  Speaker 1: other industry, that would be a scandal. In trucking, we
• 52:31
  Speaker 1: just accept that that's how it goes well. That breaks
• 52:33
  Speaker 1: down once unemployment drops below five percent. Yeah.
• 52:36
  Speaker 2: One of the fascinating things about the combination of the
• 52:39
  Speaker 2: pandemic and the Cares Act that we're sending people pretty
• 52:44
  Speaker 2: decent sized checks enough that they could live on for
• 52:47
  Speaker 2: a couple of months. The highest level of new business
• 52:51
  Speaker 2: formation in American history twenty twenty one twenty two, it
• 52:55
  Speaker 2: seemed like a lot of people figured out, Hey, I
• 52:58
  Speaker 2: got to find something, and if they're not going to
• 53:00
  Speaker 2: pay me, I'm going to figure it out myself, right,
• 53:02
  Speaker 2: And whether it was creating new apps or just their
• 53:06
  Speaker 2: own little businesses that they were running, it looked like
• 53:09
  Speaker 2: a big swath of Middle America said I don't need
• 53:14
  Speaker 2: one of these high efficient corporate jobs for that sort
• 53:17
  Speaker 2: of headache. I could figure something out myself. How much
• 53:21
  Speaker 2: of the labor shortage has been driven by people just
• 53:25
  Speaker 2: kind of upskilling and saying to corporate America, hey, I
• 53:29
  Speaker 2: think I have a shot at generating as much as
• 53:31
  Speaker 2: you're paying me.
• 53:33
  Speaker 1: I think a lot of it. I mean, certainly in
• 53:34
  Speaker 1: the supply chain. You know, the normalcy that we're accustomed to,
• 53:39
  Speaker 1: where you click your buy button on Amazon and you wait,
• 53:42
  Speaker 1: sometimes just a few hours, and somebody shows up at
• 53:45
  Speaker 1: your door. We're invited not to think about the army
• 53:48
  Speaker 1: of workers behind that. You know, that's based on large
• 53:51
  Speaker 1: numbers of people being so desperate for a job, especially
• 53:55
  Speaker 1: a job if it happens paid to have healthcare, that
• 53:58
  Speaker 1: they're not looking around or anything else, and they're aware
• 54:01
  Speaker 1: that whatever else is out there probably represents a downgrade
• 54:06
  Speaker 1: if they're able to stay in their home and support
• 54:08
  Speaker 1: support their families. I mean, we know that lots of
• 54:10
  Speaker 1: people who are working in places like Walmart warehouses, who
• 54:17
  Speaker 1: are moving packages in giant Amazon fulfillment centers qualify for
• 54:22
  Speaker 1: food steps. I mean, they need a federal subsidy courtesy
• 54:26
  Speaker 1: of us, the taxpayers, just to keep themselves fed so
• 54:28
  Speaker 1: they can do those jobs.
• 54:29
  Speaker 2: Do you remember the mchelpline back in I want to say,
• 54:32
  Speaker 2: twenty twelve, twenty thirteen, I recall a bunch of news
• 54:36
  Speaker 2: articles that McDonald's would hire people and then help them
• 54:40
  Speaker 2: like Walmart get all this aid. And it makes you think, wait,
• 54:44
  Speaker 2: you're spending all this money lobbying to keep the minimum
• 54:46
  Speaker 2: wage low. So if you're a private company, why you
• 54:51
  Speaker 2: asking me the taxpayer to subsidize your employees. I don't
• 54:55
  Speaker 2: care if the burgers there are sense more. Pay your
• 54:57
  Speaker 2: clients a little. And the fascinating thing about that, I
• 55:01
  Speaker 2: have a vivid recollection. I want to say it's twenty
• 55:04
  Speaker 2: fifteen of Amazon announcing we're gonna pay fifteen dollars an
• 55:07
  Speaker 2: hour and scooping up all the best people, and they
• 55:11
  Speaker 2: left places like Walmart scrambling. There was a period where
• 55:14
  Speaker 2: Walmart shelves were empty, the stores were dirty. I think
• 55:17
  Speaker 2: Amazon had enough money that they said, we don't care
• 55:20
  Speaker 2: about a couple of bucks. Let's just this is a
• 55:22
  Speaker 2: resource we're going to capture. We're going to monopolize this resource.
• 55:26
  Speaker 1: Well, so a lot of that was reflective of the
• 55:30
  Speaker 1: fact that you have huge numbers of people who are
• 55:32
  Speaker 1: just so busy doing two jobs, driving vast distances to
• 55:37
  Speaker 1: keep the job they've got, that they don't have time
• 55:39
  Speaker 1: to think about, well, what alternate career could I pursue.
• 55:42
  Speaker 1: That's like thinking about going to the moon. Well, suddenly
• 55:46
  Speaker 1: the pandemic shuts everything down and you are now having
• 55:51
  Speaker 1: to contemplate whether you want to or not some other
• 55:54
  Speaker 1: way to feed your family. That was such a shakeup.
• 55:58
  Speaker 1: At the same time that we do have ergency unemployment
• 56:01
  Speaker 1: benefits that are taking the edge off and allowing people
• 56:04
  Speaker 1: to continue to just spend on their basic needs. And
• 56:07
  Speaker 1: we have unemployment drops so much that suddenly people who
• 56:10
  Speaker 1: are not accustomed to thinking about alternatives, you know what
• 56:12
  Speaker 1: else is out there? Let's check it out. Maybe I
• 56:14
  Speaker 1: will start a small business.
• 56:16
  Speaker 2: You talk about the meat packing industry in the book
• 56:20
  Speaker 2: that also ran into not just shipping problems, but worker problems.
• 56:25
  Speaker 2: What made the meat packing industry so unusually at risk
• 56:31
  Speaker 2: to supply chain problems?
• 56:33
  Speaker 1: Well, it's a perfect example of this. Engineered scarcity is
• 56:38
  Speaker 1: the term that I use where because you know, one
• 56:43
  Speaker 1: of the types of deregulation that we've had that's been
• 56:45
  Speaker 1: so disastrous because we eliminated antitrust enforcement. This goes back
• 56:50
  Speaker 1: to Reagan, continues through every presidential administration on both sides
• 56:55
  Speaker 1: of the aisle until this break under Biden. We've got
• 56:59
  Speaker 1: four companies that are in control of eighty five percent
• 57:02
  Speaker 1: of the meat packing capacity in the United States. I mean,
• 57:06
  Speaker 1: that's a number that's higher than during the Robber Barren era.
• 57:09
  Speaker 1: So guess what they're setting themselves up so that the
• 57:14
  Speaker 1: cattle ranchers in selling their animals have few alternatives, which
• 57:19
  Speaker 1: keeps prices low. On the front end. You know, the
• 57:22
  Speaker 1: people they're paying have no pricing power, so they're getting
• 57:25
  Speaker 1: the animals cheaper. At the other end, where they're distributing
• 57:28
  Speaker 1: to restaurants, to consumers, grocery chains and the like, they
• 57:33
  Speaker 1: are benefiting anytime there's a shock to the system, so
• 57:37
  Speaker 1: they're getting record high retail prices or wholesale prices that
• 57:41
  Speaker 1: are translating into retail prices. At the same time, the
• 57:43
  Speaker 1: cattle ranchers are going out of business because they're getting
• 57:47
  Speaker 1: a smaller slice of the dollar that we're spending on beef.
• 57:53
  Speaker 1: And they're working the system. So they get the Trump
• 57:56
  Speaker 1: administration in the first wave of the pandemic to drop
• 57:59
  Speaker 1: an executive order that says slaughterhouse workers are essential. Workers
• 58:03
  Speaker 1: have to continue showing up even when local public health
• 58:06
  Speaker 1: authorities say, actually, these slaughterhouses they're superspreads. What I discovered
• 58:10
  Speaker 1: in researching the book is at the time that so
• 58:13
  Speaker 1: I tell the story this one woman Tin I who's
• 58:15
  Speaker 1: an immigrant from meandmar who actually dies and the JBA well,
• 58:18
  Speaker 1: she contracts COVID and dies the first wave that she
• 58:21
  Speaker 1: worked at a JBS slaughterhouse outside of Denver at the
• 58:26
  Speaker 1: time that the Trump administration is parroting industry talking points.
• 58:29
  Speaker 1: These people are essential workers. If they don't keep showing
• 58:32
  Speaker 1: up from work, we're not going to be able to
• 58:34
  Speaker 1: get fed. The meat packers are actually sitting on record
• 58:38
  Speaker 1: volumes of frozen meat, and they're boosting their exports, including
• 58:42
  Speaker 1: to places like China. So we essentially sacrifice the lives
• 58:46
  Speaker 1: of these slaughterhouse workers not to feed Americans, to continue
• 58:51
  Speaker 1: to funnel monopoly profits to a handful of companies.
• 58:55
  Speaker 2: So let's talk about those profits. And I want to
• 58:58
  Speaker 2: talk about a data point in the book when when
• 59:00
  Speaker 2: the phrase greedflation first started circulating in mid twenty twenty one,
• 59:05
  Speaker 2: I had a list of fifteen things that were contributing
• 59:09
  Speaker 2: to inflation, and I think I had greedflation was thirteen.
• 59:13
  Speaker 2: I was pretty skeptical of it, and then as time
• 59:16
  Speaker 2: went on, there was more and more data coming out
• 59:18
  Speaker 2: that said, hey, we're seeing record profits, and it looks
• 59:22
  Speaker 2: like a lot of this is a little opportunistic. The
• 59:26
  Speaker 2: data point that you have in the book, by the
• 59:30
  Speaker 2: time inflation is peaking in June of twenty twenty two,
• 59:34
  Speaker 2: more than half of the price increases in US goods
• 59:39
  Speaker 2: were going to increase profits. A mere eight percent found
• 59:44
  Speaker 2: its way out to workers. So it seems like the
• 59:48
  Speaker 2: greedflation narrative turned out to be pretty.
• 59:51
  Speaker 1: Right one hundred percent. And the thing is this was
• 59:54
  Speaker 1: not a surprise to anybody listening to the earnings calls
• 59:57
  Speaker 1: because the executives of companies Kroger, you know, the giant
• 1:00:01
  Speaker 1: supermarket chain publicly well, you know, we're having to shell
• 1:00:05
  Speaker 1: out more. There are all these supply chain disruptions. Our
• 1:00:08
  Speaker 1: prices are going up, so unfortunately our cost off to go. Meanwhile,
• 1:00:11
  Speaker 1: they're telling Wall Street analysts this is fantastic. You know,
• 1:00:15
  Speaker 1: this is the greatest opportunity we've ever had to jack
• 1:00:18
  Speaker 1: up our margins because everyone's rising, lifting their prices, you know, collectively,
• 1:00:24
  Speaker 1: so nobody's gonna point the finger at us.
• 1:00:26
  Speaker 2: Historically, people don't realize this. Historically, stocks have always been
• 1:00:30
  Speaker 2: a great inflation hedge because when prices rise, well, it
• 1:00:35
  Speaker 2: just gets passed along and then profits rise either the
• 1:00:38
  Speaker 2: same or more. And if your stock price is a
• 1:00:42
  Speaker 2: function of your profits, well, guess what, it's a great
• 1:00:46
  Speaker 2: hedge against inflation. It's not gold, it's stocks that are
• 1:00:49
  Speaker 2: the good inflation hedge.
• 1:00:51
  Speaker 1: I mean, the question is, and this is something I
• 1:00:53
  Speaker 1: get into in detail in the book, question is are
• 1:00:56
  Speaker 1: we talking about an industry where it's truly competition or not.
• 1:00:59
  Speaker 1: If there's competition, then you're limited in how much you
• 1:01:02
  Speaker 1: can jack up prices because presumably your competitor will say, well,
• 1:01:05
  Speaker 1: accept a slightly lower margin for greater market share. That's
• 1:01:08
  Speaker 1: actually free market capitalist.
• 1:01:10
  Speaker 2: But it didn't feel like that happened in twenty one
• 1:01:13
  Speaker 2: or twenty two. It kind of felt like, hey, no
• 1:01:17
  Speaker 2: one's going to notice if I make this package a
• 1:01:19
  Speaker 2: little smaller or if we raise it, Like everything is
• 1:01:22
  Speaker 2: just going to get lost in this giant surge of
• 1:01:25
  Speaker 2: prices and who's going to really know?
• 1:01:28
  Speaker 1: But beneath a lot of this, it turns out, is
• 1:01:30
  Speaker 1: market concentration and various forms of collusion. I mean, oh,
• 1:01:35
  Speaker 1: what what a coincidence? Every time one airline lifts their
• 1:01:38
  Speaker 1: fare from New York to LA the other ones go ahead,
• 1:01:42
  Speaker 1: You know how interesting that you know, this just happens
• 1:01:45
  Speaker 1: to be how it works out, you know every single time.
• 1:01:49
  Speaker 1: You know why is that we don't have enough competition
• 1:01:52
  Speaker 1: and there's no transparency in the marketplace. And you know,
• 1:01:56
  Speaker 1: everybody knows that if you walk into the casino thinking
• 1:01:59
  Speaker 1: that you're the smartest, well you're the sucker because there's
• 1:02:02
  Speaker 1: a lot of data operative behind you. And that's the
• 1:02:05
  Speaker 1: world that we're living in. This is this is not
• 1:02:07
  Speaker 1: competition most of the time.
• 1:02:09
  Speaker 2: And we have since learned that a lot of the
• 1:02:12
  Speaker 2: algorithms and software that are being used to set prices
• 1:02:16
  Speaker 2: also contribute to that collusion, most recently with landlords and
• 1:02:21
  Speaker 2: rents that hey, these guys have kind of figured out
• 1:02:24
  Speaker 2: that this algorithm is colluding to drive sure rents higher
• 1:02:29
  Speaker 2: because we have access to all this data and oh,
• 1:02:32
  Speaker 2: we know what those guys are charging, and we know
• 1:02:34
  Speaker 2: what those guys are charging, so we could we could
• 1:02:36
  Speaker 2: bump up to that level. And it's it seems that
• 1:02:39
  Speaker 2: if you're putting software in charge and all the landlords
• 1:02:42
  Speaker 2: are using the same piece of software, hey, that very
• 1:02:45
  Speaker 2: much looks like collusion.
• 1:02:47
  Speaker 1: Yeah, no, that's that's absolutely right. And you know, my
• 1:02:50
  Speaker 1: favorite example of this recently is we just had this
• 1:02:53
  Speaker 1: dock workers strike on the East and Gulf coast of
• 1:02:55
  Speaker 1: the United States, and there were all of these breathless stories,
• 1:02:58
  Speaker 1: but this is such a terror time for the shipping industry.
• 1:03:01
  Speaker 1: You know, they can't move any of this cargo. Well,
• 1:03:04
  Speaker 1: guess what happened after they settled the strike. The stocks
• 1:03:08
  Speaker 1: of the companies that are publicly traded plummeted. Why did
• 1:03:12
  Speaker 1: they plumb it Because anybody who understands the container shipping
• 1:03:16
  Speaker 1: industry gets that engineered scarcity is the name of the game.
• 1:03:21
  Speaker 1: And when there's a shock to the system, if you
• 1:03:24
  Speaker 1: can't move cargo, they're going to jack up freight rates
• 1:03:27
  Speaker 1: globally way in excess of their underlying costs. So the
• 1:03:31
  Speaker 1: market said, oh no, the strike's over, We're back to normal.
• 1:03:36
  Speaker 1: That's my chance to sell off in the same way
• 1:03:39
  Speaker 1: that you know, we've got the hooties in Yemen opening
• 1:03:43
  Speaker 1: fire on vessels headed toward the Suez Canal, effectively shutting
• 1:03:46
  Speaker 1: the canal, making ships that are going from Asia to
• 1:03:49
  Speaker 1: Europe go the long way around Africa. If that, analysts
• 1:03:52
  Speaker 1: tell me that probably increased costs for shipping companies by
• 1:03:55
  Speaker 1: maybe forty percent. I mean diesel costs and you know
• 1:03:59
  Speaker 1: more labor costs. Well, shipping rates are up three and
• 1:04:03
  Speaker 1: four hundred percent. That's fatter margins. So when there's a
• 1:04:07
  Speaker 1: shock to the system, if there's no competition, that gets
• 1:04:11
  Speaker 1: expressed as pricing power, which means we all pay more.
• 1:04:14
  Speaker 2: So since the pandemic, the new administration has focused on
• 1:04:19
  Speaker 2: reindustrializing the United States near shoring or in house shoring
• 1:04:24
  Speaker 2: or whatever you want to call it. What is the
• 1:04:27
  Speaker 2: state of manufacture reshoring is the phrase I was looking for.
• 1:04:32
  Speaker 2: What is the state of bringing manufacturing back to the
• 1:04:37
  Speaker 2: United States? How long will it take before we can
• 1:04:40
  Speaker 2: have a little more resilience built into our own system.
• 1:04:44
  Speaker 1: Well, we're going to get more resilience, you know, over
• 1:04:47
  Speaker 1: the next decade or two. You know, we're the globalization
• 1:04:52
  Speaker 1: is not over, by the way, Like my book is
• 1:04:54
  Speaker 1: not a call for making everything in America. That would
• 1:04:58
  Speaker 1: be extremely expensive, it would be wrenching and disruptive. It
• 1:05:04
  Speaker 1: is a call for greater actual resilience alongside this kind
• 1:05:08
  Speaker 1: of ruthless efficiency. And it's not real efficiency, as we've discussed,
• 1:05:13
  Speaker 1: it's really about catering to these metrics. So you know,
• 1:05:16
  Speaker 1: in strategic industries like semiconductors, medicines and the medicine supply chain,
• 1:05:22
  Speaker 1: electric vehicles, where the Biden administration is now handing out
• 1:05:26
  Speaker 1: tens of billions of dollars in subsidies. We do see
• 1:05:28
  Speaker 1: a real construction movement, and actually it's been interesting to
• 1:05:31
  Speaker 1: see that a lot of the investment is going into
• 1:05:33
  Speaker 1: places that were hit hardest during the so called China Shock.
• 1:05:36
  Speaker 1: North Carolina, Michigan, you know, getting Arizona, Arizona, you know,
• 1:05:41
  Speaker 1: getting a lot of this investment into these emerging, you know,
• 1:05:44
  Speaker 1: future facing industries in other industries, especially where labor costs
• 1:05:50
  Speaker 1: still matter. It's unlikely that this stuff's going to come
• 1:05:54
  Speaker 1: back to the US.
• 1:05:55
  Speaker 2: So we're not making furniture, we're not making clothes here
• 1:05:58
  Speaker 2: really didn't not making.
• 1:05:59
  Speaker 1: Tube socks and the Carolinas again, you know, but instead
• 1:06:02
  Speaker 1: of making it all in China, we'll make them in
• 1:06:05
  Speaker 1: Central America. We'll make them in Mexico, we'll make them
• 1:06:08
  Speaker 1: in India. So there's a hedge against reliance. I mean,
• 1:06:11
  Speaker 1: it's not that we're abandoning China, by the way. I mean,
• 1:06:13
  Speaker 1: China's going to continue to be a very significant center
• 1:06:15
  Speaker 1: of manufacturing. If that there's a sort of portfolio rebounding,
• 1:06:19
  Speaker 1: and I would put it to you this way. We've
• 1:06:21
  Speaker 1: talked a lot about Walmart fifteen years ago. If you
• 1:06:24
  Speaker 1: were if you had a product that you were trying
• 1:06:29
  Speaker 1: to get on the shelves of Walmart Superstore, and you
• 1:06:31
  Speaker 1: flew down to Bentonville, Arkansas to pitch the Walmart buyers
• 1:06:35
  Speaker 1: on your product. You have to go see them. They
• 1:06:37
  Speaker 1: don't come see you. It's like visiting the pope, you know.
• 1:06:39
  Speaker 1: And you get your appointment, and they would ask you
• 1:06:41
  Speaker 1: where are you making this product? And if your answer
• 1:06:43
  Speaker 1: was something other than China, you had a problem because
• 1:06:46
  Speaker 1: they would assume that you couldn't be getting the lowest
• 1:06:48
  Speaker 1: possible price, you weren't making it at the most efficient scale. Well,
• 1:06:51
  Speaker 1: now if you go to Bentonville, you got your product,
• 1:06:55
  Speaker 1: Walmart says where you're making it? And if your answer
• 1:06:57
  Speaker 1: is only China, you have a problem. I want to hear, Well,
• 1:07:00
  Speaker 1: what's your backup plan? You know, we we don't want
• 1:07:03
  Speaker 1: to get stuck waiting for container ships to come in
• 1:07:05
  Speaker 1: to La to serve our customers in you know, Oklahoma City.
• 1:07:10
  Speaker 1: So are you making it in Mexico? Are you looking
• 1:07:13
  Speaker 1: to India. Are you moving some stuff to Vietnam. There's
• 1:07:17
  Speaker 1: gotta be a greater mix, and that that is happening
• 1:07:21
  Speaker 1: to an extent, but I am dubious that it will
• 1:07:24
  Speaker 1: continue to happen the longer away we get from the pandemic,
• 1:07:28
  Speaker 1: for the simple reason that you know you're an incentives guy.
• 1:07:31
  Speaker 1: I'm an incentives guy. The incentives for a publicly traded
• 1:07:35
  Speaker 1: company are still quarter by quarter, lowest possible cost. So
• 1:07:39
  Speaker 1: if you're the CEO of a company and you're saying, well,
• 1:07:43
  Speaker 1: let's spend a little more for redundancy, let's have a
• 1:07:46
  Speaker 1: second factory in Mexico. If you're diluting next quarter's earnings
• 1:07:49
  Speaker 1: or the quarter after that, this is a good chance
• 1:07:51
  Speaker 1: you won't be around to get the praise. Whenever the
• 1:07:55
  Speaker 1: inevitable next shock materializes, that will reveal that that's a
• 1:07:58
  Speaker 1: good strategy.
• 1:07:59
  Speaker 2: So globalization not dead. Resiliency not as important or fundamental
• 1:08:05
  Speaker 2: as we might have been led to believe over the
• 1:08:07
  Speaker 2: past few I.
• 1:08:08
  Speaker 1: Mean, there's certainly a change to the talking points, right
• 1:08:10
  Speaker 1: Mackenzie now talks about justin case instead of just in time.
• 1:08:14
  Speaker 1: But we got a watch to see if these lessons
• 1:08:18
  Speaker 1: will really get learned because the shareholder's interest is still
• 1:08:22
  Speaker 1: with us.
• 1:08:23
  Speaker 2: What are you watching these days or listening to? What's
• 1:08:25
  Speaker 2: keeping you entertained?
• 1:08:26
  Speaker 1: I've been rewatching The Sopranos. Oh really, I haven't watched
• 1:08:29
  Speaker 1: it since it came out.
• 1:08:30
  Speaker 2: How's it hold up?
• 1:08:31
  Speaker 1: It's great. Yeah, it's hilarious. I forgot how funny it is. Oh,
• 1:08:35
  Speaker 1: it was always fat it was always very funny, so
• 1:08:39
  Speaker 1: well acted, obviously, just really well. And I also rewatched
• 1:08:42
  Speaker 1: Succession from the beginning to end.
• 1:08:46
  Speaker 2: I tried a couple of times to watch Succession. I
• 1:08:49
  Speaker 2: liked by the second episode. It's like each one of
• 1:08:52
  Speaker 2: these people and I know everything I've read. The writing
• 1:08:56
  Speaker 2: is great, this is and I just couldn't. I just
• 1:09:01
  Speaker 2: couldn't find myself, you know, interested in anybody. It's like weird,
• 1:09:06
  Speaker 2: you don't like. It's like no character you like.
• 1:09:09
  Speaker 1: As a guy who lived through one of the most
• 1:09:10
  Speaker 1: grotesque mergers of all time, which is AOL purchasing Warner,
• 1:09:15
  Speaker 1: well I wasn't a Time Warner, No, I was. This
• 1:09:17
  Speaker 1: is the the what's left of AOL buying huff Posts
• 1:09:20
  Speaker 1: When I when I had a senior leadership position in
• 1:09:23
  Speaker 1: the newsroom, it was so interesting to see there there's
• 1:09:26
  Speaker 1: a merger in the fourth seaton, in the last season
• 1:09:30
  Speaker 1: in succession, where you've got like the public facing like
• 1:09:34
  Speaker 1: Synergies magic, and meanwhile you got these two characters who
• 1:09:37
  Speaker 1: are like screwed and they're just desperate to consummate this
• 1:09:41
  Speaker 1: deal as a way to kind of wipe away their
• 1:09:44
  Speaker 1: problems and keep the whole Ponzi scheme going. That was
• 1:09:48
  Speaker 1: so true to me in terms of what I lived
• 1:09:50
  Speaker 1: through that I'm willing to You're right, these are not
• 1:09:54
  Speaker 1: sympathetic people.
• 1:09:54
  Speaker 2: But everybody seems to love it.
• 1:09:57
  Speaker 1: It's great show.
• 1:09:58
  Speaker 2: You know what I watched during the pandemic that I
• 1:10:00
  Speaker 2: hadn't seen in real time, and it was just one
• 1:10:04
  Speaker 2: of those things what you never saw this was mad
• 1:10:07
  Speaker 2: Men was sort of your you rewatching Sopranos was me
• 1:10:11
  Speaker 2: watching mad Men for the first time. And even though
• 1:10:15
  Speaker 2: there are some complex characters that have good good sides
• 1:10:19
  Speaker 2: and bad sides, there's still people you root for and
• 1:10:22
  Speaker 2: are empathetic.
• 1:10:23
  Speaker 1: That's true, and.
• 1:10:24
  Speaker 2: I just found it to be mad Men is incredible.
• 1:10:26
  Speaker 2: How did I miss this the first time around?
• 1:10:29
  Speaker 1: Amazing show?
• 1:10:29
  Speaker 2: Yeah, really, all right, let's let's let's go on. Let's
• 1:10:32
  Speaker 2: talk about your mentors who helped shape your fascinating career.
• 1:10:38
  Speaker 1: Well, thanks for that. I had a couple of old
• 1:10:41
  Speaker 1: school newspapers people I sat next to you in the first
• 1:10:44
  Speaker 1: newsroom I ever worked in, which was at the Anchorage
• 1:10:45
  Speaker 1: Daily News in the last year, was a columnist named
• 1:10:48
  Speaker 1: Mike Dugan and a reporter named Shila. To me, they
• 1:10:50
  Speaker 1: were veterans, and I just listened to them working their
• 1:10:53
  Speaker 1: sources on the phone and you know, giving them a
• 1:10:55
  Speaker 1: hard time holding people to account, and I just thought
• 1:10:58
  Speaker 1: it was so thrilling that it really affected how I
• 1:11:04
  Speaker 1: go about it, how dogged they were. When I got
• 1:11:07
  Speaker 1: to the Washington Post, I was lucky enough to spend
• 1:11:09
  Speaker 1: time with Steve Kahl, who's one of the all time greats,
• 1:11:13
  Speaker 1: and every time I would talk to him about a story,
• 1:11:17
  Speaker 1: I would come away with a new understanding of the
• 1:11:20
  Speaker 1: historic significance of whatever it was that I was covering.
• 1:11:24
  Speaker 1: And I've always tried to think about every story is like,
• 1:11:27
  Speaker 1: what does this mean as like a letter to somebody
• 1:11:29
  Speaker 1: in the future, What does this signify that's broader than
• 1:11:32
  Speaker 1: just the thing that I'm writing about that I thought
• 1:11:34
  Speaker 1: the Washington Post in that period was very good.
• 1:11:35
  Speaker 2: At let's talk about books. What are some of your favorites.
• 1:11:39
  Speaker 1: What are you reading right now? I'm reading Isabelle Wilkerson's
• 1:11:43
  Speaker 1: The Warmth of other Suns, which is this fantastic narrative
• 1:11:46
  Speaker 1: history of the black migration from the South to northern cities,
• 1:11:51
  Speaker 1: which is a period that I realized I just don't
• 1:11:54
  Speaker 1: know enough about, but it's just so important.
• 1:11:57
  Speaker 2: Post Civil War, pre World War One.
• 1:11:58
  Speaker 1: That yeah, it's like from World War One into the
• 1:12:02
  Speaker 1: nineteen seventies and it's just so significant in terms of
• 1:12:05
  Speaker 1: affecting the politics and of course race dimensions and class
• 1:12:10
  Speaker 1: and American culture. And it's just a beautifully written book.
• 1:12:16
  Speaker 1: You know. I've always loved Steinbeck. I was very influenced
• 1:12:20
  Speaker 1: early in my career by Norman Mahler's nonfiction. I like
• 1:12:25
  Speaker 1: this idea of like the best work is the reported
• 1:12:28
  Speaker 1: stuff that unfolds like a novel. The Executioners song had
• 1:12:33
  Speaker 1: a great effect on me. Tom Wolfe stuff. I feel
• 1:12:35
  Speaker 1: like I'm just dating myself now.
• 1:12:37
  Speaker 2: But so when you say Tom wolf the right stuff.
• 1:12:41
  Speaker 1: Or is fantastic, Yeah, I like his fiction. I think
• 1:12:45
  Speaker 1: Bonfire of the Vanities is really entertaining, a very insightful
• 1:12:50
  Speaker 1: book in lots of ways. I'm a sucker for Michael Lewis.
• 1:12:52
  Speaker 1: I mean, there's anything he writes, Yeah, the Big short certainly.
• 1:12:56
  Speaker 1: I loved Moneyball, a big baseball fan.
• 1:12:58
  Speaker 2: Yeah, No, Moneyball was one. In fact, it just look
• 1:13:01
  Speaker 2: at his past half dozen works, each one more fascinating,
• 1:13:06
  Speaker 2: and the next the Undoing Project was absolutely fascinating.
• 1:13:09
  Speaker 1: I haven't gotten yet.
• 1:13:10
  Speaker 2: Oh, really about Knoman and Taversky and essentially the invention
• 1:13:15
  Speaker 2: of behavioral finance, which can't by the way, the if
• 1:13:19
  Speaker 2: you read the introduction of the book, you find out
• 1:13:22
  Speaker 2: that after he writes Moneyball, he gets an email from
• 1:13:26
  Speaker 2: Dick Thaylor and Cas Sunstein who said, Hey, everything you're
• 1:13:29
  Speaker 2: talking about was Taversky and Conoman. All of the the
• 1:13:34
  Speaker 2: alternative ways of looking at data dates to them, at
• 1:13:38
  Speaker 2: first in Israel and then in the US. You should
• 1:13:42
  Speaker 2: talk to you should talk to them. Oh and ps
• 1:13:45
  Speaker 2: Amos Tverski, who is no longer with us. His wife
• 1:13:48
  Speaker 2: lives right up the street from you at Berkeley and such,
• 1:13:52
  Speaker 2: and that's what led to that. Really, if you're interested
• 1:13:54
  Speaker 2: in a strong recommendation, our last two questions, what sort
• 1:14:00
  Speaker 2: of advice would you give to a college grad interest
• 1:14:03
  Speaker 2: in a career in journalism, in freelancing, in economics, what
• 1:14:08
  Speaker 2: advice would.
• 1:14:09
  Speaker 1: You give to me? It's real simple. Just write, dude.
• 1:14:13
  Speaker 1: Find something that allows you to just write and write
• 1:14:15
  Speaker 1: and write, because there's just no substitute. You can't develop
• 1:14:18
  Speaker 1: the muscles without doing it. It's as simple as that.
• 1:14:21
  Speaker 1: And writing a deadline is super useful. Covering a beat
• 1:14:25
  Speaker 1: is incredibly useful in terms of helping you develop judgment.
• 1:14:28
  Speaker 1: But whatever you're doing that involves finding stuff out and
• 1:14:32
  Speaker 1: writing will make you better at it. Huh.
• 1:14:34
  Speaker 2: And our final question, what do you know about the
• 1:14:36
  Speaker 2: world of investigative reporting, economics, journalism in general that would
• 1:14:42
  Speaker 2: have been helpful thirty or forty years ago when you
• 1:14:44
  Speaker 2: were first getting started.
• 1:14:48
  Speaker 1: The power of one or two deeply reported cases is
• 1:14:54
  Speaker 1: much greater than the over reporting spreading too thin that
• 1:14:59
  Speaker 1: I think most of us when we're young tend to do.
• 1:15:02
  Speaker 1: We don't have the judgment developed yet to say like,
• 1:15:06
  Speaker 1: I'm gonna stay right here and I'm gonna dig deep
• 1:15:08
  Speaker 1: into this where we're constantly well, what question will my
• 1:15:12
  Speaker 1: editor ask that I won't have an answer to? Therefore
• 1:15:14
  Speaker 1: I have to have to cover the landscape. I have
• 1:15:16
  Speaker 1: to talk to twelve companies would actually be better if you
• 1:15:19
  Speaker 1: spent more time with two carefully selected companies, and and
• 1:15:25
  Speaker 1: that oftentimes the thing that can elevate a story to
• 1:15:30
  Speaker 1: one that people will really remember is like, well, I
• 1:15:32
  Speaker 1: got enough that I could write. I now know the story.
• 1:15:36
  Speaker 1: I've got my data, I've got some quotes. But note
• 1:15:39
  Speaker 1: now I'm gonna go find a character. Now, I'm gonna
• 1:15:41
  Speaker 1: go find a place where the sense of place is
• 1:15:44
  Speaker 1: going to draw a reader through, and it's gonna unfold
• 1:15:47
  Speaker 1: like a story that we might tell somebody who's not
• 1:15:49
  Speaker 1: deciding to think about finance or economics. They just want
• 1:15:52
  Speaker 1: to know something interesting, and all that all that backstory
• 1:15:56
  Speaker 1: that I've developed by doing my reading, by looking at reports,
• 1:15:59
  Speaker 1: by talking to experts and asking questions that might be dumb,
• 1:16:05
  Speaker 1: that's going to come to life now through this great
• 1:16:07
  Speaker 1: example that I've come on Peter.
• 1:16:09
  Speaker 2: Really fascinating stuff. We have been speaking with Peter S.
• 1:16:13
  Speaker 1: Goodman.
• 1:16:14
  Speaker 2: Here's the global economics correspondent for the New York Times
• 1:16:17
  Speaker 2: and the author of the book How the World Ran
• 1:16:20
  Speaker 2: Out of Everything inside the Global Supply Chain. If you
• 1:16:25
  Speaker 2: enjoy this conversation, well, check out any of the other
• 1:16:28
  Speaker 2: five hundred and forty we've done over the past ten
• 1:16:31
  Speaker 2: and a half years. You can find those at iTunes, Spotify, YouTube,
• 1:16:37
  Speaker 2: wherever you find your favorite podcasts, and be sure and
• 1:16:41
  Speaker 2: check out my new podcast, At the Money, short single
• 1:16:45
  Speaker 2: topic conversations with experts about your money, earning it, spending it,
• 1:16:50
  Speaker 2: and most importantly, investing it. At the Money, in the
• 1:16:53
  Speaker 2: Masters and Business feed, or wherever you find your favorite podcasts.
• 1:16:58
  Speaker 2: I would be remiss if I now thank the Crack
• 1:17:00
  Speaker 2: team that helps put these conversations together each week. Nick
• 1:17:03
  Speaker 2: Falco is my audio engineer. Ana Luke is my producer.
• 1:17:07
  Speaker 2: Sean Russo is my researcher. Sage Bauman is the head
• 1:17:11
  Speaker 2: of podcasts here at Bloomberg. I'm Barry Rittolts. You've been
• 1:17:15
  Speaker 2: listening to Masters in Business on Bloomberg Radio.