WEBVTT - How the World Ran on Empty with Peter Goodman 0:00:02.400 --> 0:00:11.119 Bloomberg Audio Studios, podcasts, radio news. This is Master's in 0:00:11.200 --> 0:00:15.200 Business with Barry red Holds on Bloomberg Radio. 0:00:16.280 --> 0:00:19.959 This week on the podcast another extra special guest. Peter 0:00:20.079 --> 0:00:25.279 Goodman is the award winning investigative reporter and economics correspondent 0:00:25.600 --> 0:00:29.040 for The New York Times. His latest book, How the 0:00:29.080 --> 0:00:32.920 World Ran Out of Everything Inside the Global Supply Chain. 0:00:33.320 --> 0:00:37.080 What a fascinating deep dive into how we got here 0:00:37.479 --> 0:00:41.000 in terms of why were we unable to get basic 0:00:41.080 --> 0:00:44.400 protective equipment during the pandemic? How could we not get 0:00:44.640 --> 0:00:48.800 ventilators or even things like face mis and gowns. What 0:00:49.040 --> 0:00:52.800 led us to outsourcing everything and not having a backup, 0:00:52.880 --> 0:00:56.200 not having an emergency system? How did we break our 0:00:56.720 --> 0:01:01.240 resilience leading up to the pandemic? I thought the book 0:01:01.280 --> 0:01:03.720 was a great read and very fascinating. I learned a 0:01:03.760 --> 0:01:08.040 lot about it, and I think this conversation is fascinating 0:01:08.160 --> 0:01:11.959 also if you're at all interested in things like global 0:01:11.959 --> 0:01:16.000 supply chains, the role of consultants, and the role of 0:01:16.040 --> 0:01:22.679 shareholder primacy in how society operates. Plus all the craziness 0:01:22.720 --> 0:01:25.560 that took place during the pandemic is detailed in the 0:01:25.560 --> 0:01:31.440 book with great specificity. I think you'll find this conversation fascinating. 0:01:31.480 --> 0:01:35.000 With no further ado my discussion with The New York Times. 0:01:35.440 --> 0:01:38.520 Peter Goodman, thanks so much, very great to be here. 0:01:38.560 --> 0:01:41.720 So I really found the book fascinating. It's such a 0:01:41.840 --> 0:01:46.039 fresh in everybody's mind story. But before we get into 0:01:46.080 --> 0:01:49.400 the book, let's talk a little bit about your background. 0:01:49.480 --> 0:01:53.360 You have really a fascinating career. You start as a 0:01:53.400 --> 0:01:58.400 feature writer freelancing in Japan from Southeast Manila and Jakarta. 0:01:58.720 --> 0:01:59.920 How on earth did that happen? 0:02:00.120 --> 0:02:02.400 Yeah, so you know, I was one of those kids 0:02:02.440 --> 0:02:04.400 who got out of college and just I did what 0:02:04.480 --> 0:02:07.280 I wanted to do. I liked to write. I had 0:02:07.320 --> 0:02:09.400 been sort of a political activist in college, but life 0:02:09.440 --> 0:02:12.200 seemed more complicated than it did to my activist friends. 0:02:12.200 --> 0:02:15.280 So journalism drew me, and I wanted to go check 0:02:15.320 --> 0:02:19.839 out Southeast Asia. So I first stopped in Japan, got 0:02:19.840 --> 0:02:23.280 a job writing features for the Japan Times, teaching English 0:02:23.320 --> 0:02:25.000 to pay the bills and save up the money to 0:02:25.040 --> 0:02:27.679 then move to Manila and then eventually Jakarta. Spent a 0:02:27.720 --> 0:02:32.600 lot of time in Cambodia, covered a massacre of pro 0:02:32.639 --> 0:02:36.440 democracy demonstrators in East Timor, got kicked out in Indonesia, 0:02:36.520 --> 0:02:38.720 came back to the States and ended up in Alaska 0:02:38.760 --> 0:02:39.840 at the Anchorage Daily News. 0:02:39.919 --> 0:02:41.800 Yeah, I was gonna ask, how do you find your 0:02:41.800 --> 0:02:45.840 way from Asia to Anchorage? What was it like reporting 0:02:45.880 --> 0:02:47.559 from a small town in Alaska? 0:02:47.639 --> 0:02:49.640 Yeah? Yeah, I mean I basically figured out that if 0:02:49.680 --> 0:02:51.400 I wanted to do this seriously, I was going to 0:02:51.480 --> 0:02:54.440 have to go somewhere to learn journalism. I didn't go 0:02:54.480 --> 0:02:56.760 to Jay School, went to a liberal arts college where 0:02:56.800 --> 0:02:59.079 we didn't have you know, that sort of paper where 0:02:59.120 --> 0:03:03.000 we had beats and structure, And I understood that, you know, 0:03:03.040 --> 0:03:05.440 freelancing would take me a certain distance, but if I 0:03:05.440 --> 0:03:07.320 wanted to be serious about it, I had to go work, 0:03:07.600 --> 0:03:10.720 you know, doing local journalism somewhere and the anchor. I 0:03:10.760 --> 0:03:12.320 was lucky enough to be hired by the anchor s 0:03:12.360 --> 0:03:16.000 Daily News, which was just a heavyweight shop of talent, 0:03:16.919 --> 0:03:20.440 only about you know, sixteen maybe twenty reporters. They had 0:03:20.520 --> 0:03:24.200 won the Gold Medal for Public Service Pulitzer a few 0:03:24.280 --> 0:03:26.760 years before I got there. They were a finalist the 0:03:26.840 --> 0:03:29.160 year before I got there for the excellent Valdese Crush, 0:03:29.320 --> 0:03:31.760 And it was just a very talented, creative group of people, 0:03:32.280 --> 0:03:35.200 And yes, I ended up in I was living in Palmer, 0:03:35.240 --> 0:03:38.240 which is next to Wasilla. Was the local government reporter 0:03:38.360 --> 0:03:41.320 where I covered, as you can probably guess, a then 0:03:41.400 --> 0:03:44.440 unknown member of the Wascilla City Council named Sarah Palin. 0:03:46.000 --> 0:03:47.000 And how did that turn out? 0:03:47.560 --> 0:03:50.280 You know it was? It was fascinating. I mean, there's 0:03:50.400 --> 0:03:53.840 nothing like having a local beat and having to figure 0:03:53.880 --> 0:03:56.840 out who matters, what's the story, How do I go 0:03:56.920 --> 0:04:01.400 to a meeting of local government, prepare for whatever issue 0:04:01.400 --> 0:04:05.440 seems most interesting, develop sources, build people's trust, figure out 0:04:05.480 --> 0:04:07.320 you know, when you get it wrong, how to make 0:04:07.360 --> 0:04:11.120 it right. And you know, there's nothing like being in 0:04:11.160 --> 0:04:13.680 a place where someone will call you if you get 0:04:13.720 --> 0:04:16.360 a fact wrong. I mean, when you're freelancing in Cambodia 0:04:16.640 --> 0:04:19.680 writing about Cambodian refugees, you spell somebody's name wrong, nobody's 0:04:19.680 --> 0:04:21.839 gonna call you. You mess up a fact like I 0:04:21.920 --> 0:04:24.880 once messed up a fact. You know, I misheard somebody 0:04:25.520 --> 0:04:29.320 say assessment when they meant cessna, and boy, I thought 0:04:29.360 --> 0:04:31.520 I was gonna have to flee the state in embarrassment. 0:04:31.800 --> 0:04:32.599 And you learn how to. 0:04:32.880 --> 0:04:34.920 Get it right, so you have a knack for being 0:04:34.920 --> 0:04:37.720 in the right place at the right time. You were 0:04:37.720 --> 0:04:41.880 the Shanghai bureau chief for the Washington Post, really as 0:04:42.080 --> 0:04:46.120 China was emerging as a global superpower. Tell tell us 0:04:46.160 --> 0:04:48.120 a little bit about your experiences in Shanghai. 0:04:48.360 --> 0:04:51.280 Yeah, that was just an incredible story. It was a 0:04:51.320 --> 0:04:53.400 story of a lifetime. I mean, it was a moment 0:04:53.600 --> 0:05:00.040 where China had become a very significant story in the 0:05:00.080 --> 0:05:05.960 American media and imagination and politics. But it was still 0:05:06.720 --> 0:05:10.640 before you know, everybody had these giant bureaus, before we 0:05:10.640 --> 0:05:13.160 were covering news in this very granular way, so you 0:05:13.279 --> 0:05:16.599 had time to really dig into stuff. And you know, 0:05:16.680 --> 0:05:19.000 we had two guys in Beijing who were phenomenal, my 0:05:19.040 --> 0:05:21.640 two colleagues who did a lot of political stuff, and 0:05:21.680 --> 0:05:24.560 I was ostensibly the economic writer. But the truth was 0:05:24.600 --> 0:05:26.599 all of her stories were more or less the same, 0:05:26.640 --> 0:05:30.680 because everything was an economic and political story combined. And 0:05:30.680 --> 0:05:32.120 it was a moment where you could just sort of 0:05:32.160 --> 0:05:35.880 point at anything like how did that ballpoint bearing factory 0:05:35.920 --> 0:05:38.320 get there? Who owns it? How did the land and 0:05:38.320 --> 0:05:41.000 the energy become available? Where are they selling their product, 0:05:41.080 --> 0:05:43.720 who's getting a cut of the action. You know, anything 0:05:43.800 --> 0:05:45.839 you dug into was a story that would tell you 0:05:45.880 --> 0:05:49.440 something about power and the trajectory of the Chinese accounty. 0:05:49.640 --> 0:05:52.520 And I'm sure that helped set the stage for all 0:05:52.560 --> 0:05:56.040 the things you saw when the world ran out of everything. 0:05:56.520 --> 0:06:00.560 We'll circle back to that. You also covered the financial 0:06:00.640 --> 0:06:06.160 crisis and recession as the Times New York based economic correspondent. Right, 0:06:06.680 --> 0:06:10.039 I have a vivid recollection of my experience during the 0:06:10.080 --> 0:06:13.000 financial crisis. Tell us a little bit about your experience 0:06:13.000 --> 0:06:14.039 in eight or nine. 0:06:14.080 --> 0:06:17.080 Well, you know, it's interesting. I was sort of an 0:06:17.120 --> 0:06:20.520 accidental national economic corresponding because I was very happily working 0:06:20.520 --> 0:06:25.159 for the Washington Post covering international econ and the Post was, 0:06:26.720 --> 0:06:29.719 let us say, not having its best days. And I 0:06:29.760 --> 0:06:32.640 had this opportunity to go to the Times and they 0:06:32.640 --> 0:06:35.360 offered me the national Economic correspondent. I thought, well, you know, 0:06:35.400 --> 0:06:37.200 I'm living in New York at the time. I'm working 0:06:37.240 --> 0:06:39.040 in the New York Beer of the Washington Post wasn't 0:06:39.040 --> 0:06:41.039 all that keen toly. I loved the Washington Post, but 0:06:41.080 --> 0:06:44.320 I thought, well, I better do this sleepy story the 0:06:44.400 --> 0:06:46.799 national economy. It's the Fall of two thousand and seven. 0:06:47.120 --> 0:06:49.240 Didn't know anything about it. Was surrounded by people who 0:06:49.480 --> 0:06:52.039 knew much more about it than I. Ever would The 0:06:52.080 --> 0:06:54.480 first story I ever pitched was, you know, it seems 0:06:54.520 --> 0:06:58.480 like consumer spending is drying up because housing prices are falling. 0:06:59.000 --> 0:07:01.280 That could be signific I keep reading that. You know, 0:07:01.320 --> 0:07:05.480 consumer spending is more than two thirds of the American economy. 0:07:05.640 --> 0:07:08.799 So I got Mark Zandy to go crunch some data 0:07:08.839 --> 0:07:12.880 for me showing where were home equity lines of credit 0:07:13.040 --> 0:07:16.960 drying up the fastest and what was their historical relationship 0:07:17.200 --> 0:07:19.760 to consumer spending. And I got this crunched for like 0:07:20.160 --> 0:07:23.960 every metropolitan area in the United States, and almost it random. 0:07:24.000 --> 0:07:25.280 I said, I'm gonna go out to Reno. 0:07:25.800 --> 0:07:28.800 I was gonna say four areas stick out in my mind. 0:07:29.640 --> 0:07:35.040 Southern Florida, Yeah, Vegas and Reno as two and three 0:07:36.080 --> 0:07:39.440 Southern California, right, And I'm trying to remember maybe DC 0:07:39.720 --> 0:07:41.400 was the other area that was well, there. 0:07:41.280 --> 0:07:44.160 Were a lot, Yes, DC was hit, for sure, there 0:07:44.160 --> 0:07:45.760 were parts of New England that were hit, but you 0:07:45.880 --> 0:07:48.360 just listed that. But so I sort of randomly so, well, 0:07:48.360 --> 0:07:50.800 I'm going out to Reno because if you look at 0:07:50.800 --> 0:07:53.440 the ratio of home equity lines of credit to consumer spending, 0:07:53.480 --> 0:07:56.720 we've seen this big dry up fast. And within five 0:07:56.760 --> 0:07:58.400 minutes of getting off the plane. I had no real 0:07:58.480 --> 0:08:01.520 reporting plan. I pulled off the road from the airport, 0:08:01.600 --> 0:08:03.360 headed to where I was staying, and there was a 0:08:03.440 --> 0:08:06.960 tile shop and I went in, introduced myself and talked 0:08:06.960 --> 0:08:09.960 to this guy, Marshall Whittie, who was a salesman who 0:08:10.000 --> 0:08:13.040 at that time was about to send the keys back 0:08:13.200 --> 0:08:17.480 on his third spec house. His commissions were drying up. 0:08:17.560 --> 0:08:19.440 He told me how he had, you know, financed a 0:08:19.480 --> 0:08:21.960 trip to Tahiti for his honeymoon on a home equity 0:08:21.960 --> 0:08:23.720 line and credit. He used to get a new truck 0:08:23.760 --> 0:08:26.240 every year for the variety of color. And suddenly he's 0:08:26.240 --> 0:08:28.680 answering this, no, dude, I can't go to the club tonight. 0:08:28.720 --> 0:08:30.680 I'm staying home to watch a Netflix And I just 0:08:30.720 --> 0:08:32.800 sort of glued myself to this guy for three days. 0:08:32.800 --> 0:08:34.839 I met all of his friends, and I went back 0:08:34.880 --> 0:08:36.640 to New York and I remember saying to my colleagues 0:08:36.640 --> 0:08:39.360 in the newsroom, we are and I used an impolite 0:08:39.360 --> 0:08:41.920 word that I will not use on your radio program. 0:08:42.120 --> 0:08:45.480 We are, you know, really up a creek here. And 0:08:45.520 --> 0:08:47.080 I was like, you know, calm down, you know, let's 0:08:47.080 --> 0:08:51.200 take it ease. But that story I sort of just 0:08:51.360 --> 0:08:54.760 accidentally fell my way into I saw that this was 0:08:54.840 --> 0:08:57.880 going to be really bad. It was not merely a 0:08:57.920 --> 0:09:01.640 mild recession. And so every story I did afterwards, I mean, 0:09:01.679 --> 0:09:03.560 as I then got into the minutia of how the 0:09:03.600 --> 0:09:07.440 mortgage markets work and eventually covered the foreclosure crisis, really 0:09:07.520 --> 0:09:12.920 began with that just basic you know, naive, you know question, well, 0:09:12.960 --> 0:09:15.440 what's gonna happen when we can't just use our homes 0:09:15.520 --> 0:09:18.719 as atm machines anymore? That seems like it'll have implications, 0:09:18.720 --> 0:09:19.760 And yes it did. 0:09:20.000 --> 0:09:22.080 That reminds me a little bit of the scene from 0:09:22.080 --> 0:09:24.760 The Big Short, either the book or the movie, but 0:09:25.360 --> 0:09:28.160 in the movie it's Steve Carell speaking to a stripper 0:09:28.280 --> 0:09:32.280 about the home she bought to fix up, and he said, 0:09:32.920 --> 0:09:37.160 he goes, wait, you're buying this home as an investment property, 0:09:37.160 --> 0:09:40.560 and she's like, I have six homes as an investment property. 0:09:40.840 --> 0:09:43.920 And suddenly he realizes, oh, we're in for a world 0:09:43.960 --> 0:09:46.200 of trouble. This is much worse than anyone imagine. 0:09:46.320 --> 0:09:48.920 It's exactly that. In fact, the guys I was hanging 0:09:48.960 --> 0:09:50.560 out with when I said, well, I'll take you out 0:09:50.600 --> 0:09:53.600 to dinner and drink so we can have a longer conversation. 0:09:53.640 --> 0:09:55.600 We ended up in a place where there were people 0:09:56.640 --> 0:10:00.280 of that profession. It was actually my first expense that 0:10:00.320 --> 0:10:02.160 I ever recruited as a New York Times writer, and 0:10:02.200 --> 0:10:03.720 I was embarrassed to submit. 0:10:03.440 --> 0:10:04.920 Them given because it was so expensive. 0:10:04.960 --> 0:10:07.360 But it wasn't that it was so expensive. It was 0:10:07.360 --> 0:10:10.319 what was the name of the place, right, But that's 0:10:10.320 --> 0:10:11.240 where they wanted to go. 0:10:11.320 --> 0:10:14.560 So I love the expression, the expression jingle mail. People 0:10:14.679 --> 0:10:16.680 used to put their keys in an envelope and send 0:10:16.720 --> 0:10:18.920 it back to the bank, and that's jingle mail. 0:10:19.000 --> 0:10:21.160 Actually with this Marsha, would he explain that to me? 0:10:21.160 --> 0:10:22.839 I didn't even understand what he might say, Yeah, I'm 0:10:22.840 --> 0:10:25.160 sending the keys back, Like what are you talking? What 0:10:25.440 --> 0:10:27.680 He's like, Well, you know, this home I never expected 0:10:27.679 --> 0:10:29.760 to deliver. I guess I'm gonna be spending some time here. 0:10:30.080 --> 0:10:32.920 I figured i'd be moving uptown, you know, next year. 0:10:33.120 --> 0:10:33.560 That's it. 0:10:33.840 --> 0:10:37.240 It's amazing And in fact, until the financial crisis, I 0:10:37.280 --> 0:10:40.600 don't think anybody ever stopped to find out am I 0:10:40.679 --> 0:10:44.360 in a recourse state or a non recourse state? Meaning 0:10:44.720 --> 0:10:47.079 am I still on the hook after I lose the house? 0:10:47.320 --> 0:10:50.760 Or is the bank limited to just they get the 0:10:50.760 --> 0:10:51.960 house and I get to walk away. 0:10:52.000 --> 0:10:55.360 I mean, let's face it, we all click agree, read 0:10:55.400 --> 0:10:58.400 all the terms to millions of documents a day that 0:10:58.440 --> 0:11:01.320 we don't even read a sentence, right, right, and suddenly 0:11:01.520 --> 0:11:04.880 we're living in the fine print. Oh, there actually are 0:11:05.120 --> 0:11:08.200 terms that are gonna high here right that people that 0:11:08.240 --> 0:11:10.600 we deluded ourselves into believing would never You know, this 0:11:10.600 --> 0:11:13.040 will never matter because housing prices are going up forever 0:11:13.120 --> 0:11:15.640 even now. In Greenspan says that you're a sucker if 0:11:15.679 --> 0:11:18.160 you don't get a variable rate mortgage. And you know 0:11:18.240 --> 0:11:21.360 what could happen. Oh, if it doesn't work out, I'll refie, 0:11:21.440 --> 0:11:24.640 I'll sell. Well, suddenly, you know, we're dealing with all 0:11:24.679 --> 0:11:27.600 of this ink that was never intended to have effect. 0:11:27.720 --> 0:11:28.160 That's right. 0:11:28.559 --> 0:11:32.680 I'm still to this day amazed that the models never 0:11:32.800 --> 0:11:35.160 allowed for home prices to fall. 0:11:35.640 --> 0:11:36.240 In New York. 0:11:36.280 --> 0:11:38.960 I have a vivid recollection of finishing grad school in 0:11:39.040 --> 0:11:41.720 eighty nine, and anybody I know who bought a co 0:11:41.840 --> 0:11:45.040 Opera condo in New York, they were under water for five, 0:11:45.080 --> 0:11:48.840 six seven years until till the next leg late late 0:11:49.000 --> 0:11:52.240 nineties and the booming stock markets started to send real 0:11:52.360 --> 0:11:55.320 estate prices higher. But you don't have to go that 0:11:55.400 --> 0:11:57.960 far back in time. Look at the nineteen seventies to 0:11:58.000 --> 0:12:01.760 see when inflation made it in real term home prices 0:12:02.360 --> 0:12:04.520 not go up. And then you know, pre war there 0:12:04.520 --> 0:12:08.840 were some pretty bad recessions and depressions in the turn 0:12:08.880 --> 0:12:11.920 of the century or the twenties and thirties. Obviously, homes 0:12:11.920 --> 0:12:14.320 weren't as widespread owned back then as they are now. 0:12:15.679 --> 0:12:17.079 And I don't want to spend too much time talking 0:12:17.080 --> 0:12:19.760 about the financial crisis. I have to ask you. You've 0:12:19.800 --> 0:12:25.640 done multiple trips to some pretty heavy conflict zones Iraq, Cambodias, Dan, 0:12:25.760 --> 0:12:29.199 East Timor what's it like being in these areas? Are 0:12:29.200 --> 0:12:32.160 you embedded with the US military? Are you just walking 0:12:32.200 --> 0:12:33.920 around hoping no one takes a pot shot up? 0:12:34.280 --> 0:12:38.040 It depends. I have been embedded in places in Iraq. Actually, 0:12:38.080 --> 0:12:40.600 I was there at the best possible time to be 0:12:40.640 --> 0:12:43.600 a journalist, you know, in this period, like the I 0:12:43.679 --> 0:12:46.960 was there as Bush declared mission accomplished. I was just 0:12:47.040 --> 0:12:51.320 in my own suv driving from the Kuwait airport up 0:12:51.360 --> 0:12:54.360 to Bosra with a couple of Washington Post colleagues and 0:12:54.400 --> 0:12:56.000 then we drove, you know, all the way up to 0:12:56.000 --> 0:12:58.360 Bagdad and Kircook and actually I'll never forget the car 0:12:58.480 --> 0:13:02.600 broke down when we put a black market gasoline and 0:13:02.679 --> 0:13:04.920 at some point I had to call National Car Rental 0:13:04.920 --> 0:13:07.280 and Kuwait and then get that thing on the back 0:13:07.320 --> 0:13:09.800 of a flatbed truck through all these laid off truck drivers. 0:13:09.800 --> 0:13:11.360 I had no business, and we hired somebody for a 0:13:11.360 --> 0:13:14.440 couple hundred bucks to drive it through the desert. You know, 0:13:14.520 --> 0:13:18.199 it's always I'm not a thrill seeker by nature. I mean, 0:13:18.240 --> 0:13:21.200 there are there are people who cover conflict who've spent 0:13:21.280 --> 0:13:23.680 a lot more time in conflict zones than I ever will, 0:13:23.800 --> 0:13:26.120 some of whom you know, I fear for their safety 0:13:26.160 --> 0:13:29.040 because there is I'm just somebody who wants to see 0:13:29.200 --> 0:13:33.680 what's going on. I'm not like the bravest soul, but 0:13:33.679 --> 0:13:37.760 but there's nothing like being in a place. And boy, 0:13:37.880 --> 0:13:42.439 I mean, Iraq after Saddam was just a gold mine 0:13:42.480 --> 0:13:44.800 for a journalist because there are all these people, many 0:13:44.800 --> 0:13:48.000 of whom are English speaking, who are dying to tell 0:13:48.040 --> 0:13:50.920 their stories. Whether it's like how did these trading companies 0:13:51.040 --> 0:13:55.040 work despite American sanctions. I did a story on smuggling 0:13:55.080 --> 0:13:58.640 out of the port of Basra, where like in a 0:13:58.760 --> 0:14:02.760 day I found the guy who like ran a smuggling ring, 0:14:02.800 --> 0:14:04.480 who took me to the porch, showed me the fake 0:14:04.559 --> 0:14:09.600 bills of lady like that was absolutely incredible. Cambodia was 0:14:09.600 --> 0:14:12.000 was an endlessly fascinating of. 0:14:12.000 --> 0:14:14.439 All these of all these wild overseas stories you've done, 0:14:14.480 --> 0:14:17.280 what's been your favorite to cover, what's been the most challenging? 0:14:18.640 --> 0:14:21.120 That's a that's a tough question. I mean, I would 0:14:21.160 --> 0:14:26.200 say that a rat coverage just felt so vivid and important. 0:14:27.120 --> 0:14:30.360 And I mean there's nothing like when you get accustomed 0:14:30.400 --> 0:14:32.720 to doing you know, sort of enterprise or investigative or 0:14:32.760 --> 0:14:35.520 longer form stuff. There's nothing like being in a place 0:14:35.520 --> 0:14:37.480 where it's like, no people actually want to know right 0:14:37.560 --> 0:14:42.920 now what happened to you today? And and stories almost 0:14:42.960 --> 0:14:45.160 write themselves. I'm gonna go to, you know, an oil 0:14:45.240 --> 0:14:49.240 refinery that shut down because the looters came and the 0:14:49.320 --> 0:14:52.080 Haliburton people haven't figured out how to turn it back on, 0:14:52.280 --> 0:14:54.760 and there are a bunch of Iraqi employees saying, who's 0:14:54.800 --> 0:14:56.760 gonna pay us? And how come we can't go in there? 0:14:56.800 --> 0:14:58.880 You know, these sorts of stories are just so vivid 0:14:58.880 --> 0:15:02.760 and compelling. So I found that, you know, particularly amazing. 0:15:02.800 --> 0:15:05.520 I mean, my time in China was kind of unbeatable 0:15:05.880 --> 0:15:07.960 as well. It's just such a fascinating place. 0:15:08.240 --> 0:15:12.000 Yeah, really fascinating. Let's talk a little bit about some 0:15:12.080 --> 0:15:16.760 of the background philosophy. Tell us about the lean Taliban 0:15:17.240 --> 0:15:18.720 and the cult of efficiency. 0:15:18.920 --> 0:15:24.560 Love it. Yeah, So the lean Taliban refers to the 0:15:24.600 --> 0:15:28.760 way the people at Mackinsey and Company, the business consultancy, 0:15:29.080 --> 0:15:34.200 viewed themselves in proselytizing for lean manufacturing or just in 0:15:34.240 --> 0:15:35.960 time as we know it now. Justin times is a 0:15:36.040 --> 0:15:39.280 very sensible idea pioneered by Toyota that says, you know, 0:15:39.360 --> 0:15:42.000 instead of having giant warehouses filled with all kinds of 0:15:42.000 --> 0:15:44.280 stuff that we may need at some point in the future, 0:15:44.280 --> 0:15:47.040 but who knows when it's Japan the end of the 0:15:47.040 --> 0:15:50.000 Second World War, space is limited, capitals limited. Let's have 0:15:50.040 --> 0:15:52.760 the suppliers bring this stuff we need on the supply 0:15:52.880 --> 0:15:56.000 chain as we need it. They sort of emulated the 0:15:56.040 --> 0:15:59.720 way a supermarket deals with milk. You want enough on 0:15:59.760 --> 0:16:02.720 the show shelf that everybody gets milk. They don't leave 0:16:02.800 --> 0:16:04.920 unhappy they can't buy it, but not so much that 0:16:04.960 --> 0:16:07.160 you're spilling it. Well, this is a great idea till 0:16:07.400 --> 0:16:09.880 business consultancies like McKinsey get hold of it and turn 0:16:09.920 --> 0:16:13.680 it into this crude imperative to just slash inventory, hand 0:16:13.760 --> 0:16:18.880 the extra savings to the corporate executives as a reward 0:16:18.920 --> 0:16:21.600 for being smart enough to hire McKenzie. And I end 0:16:21.720 --> 0:16:26.240 up digging deep into how this actually works in the 0:16:26.360 --> 0:16:30.320 decades before the pandemic, and I spent time with this 0:16:30.400 --> 0:16:35.840 guy in Minnesota who was working at this industrial generator 0:16:35.920 --> 0:16:39.560 plan where McKenzie's Lean Taliban show up a bunch of 0:16:39.640 --> 0:16:42.840 slick suited young people straight out of Ivy League universities, 0:16:42.960 --> 0:16:45.520 one older guy from the Chicago branch, and they say, 0:16:45.760 --> 0:16:47.840 you're doing it all wrong. You know, why do you 0:16:47.880 --> 0:16:50.720 have all these five dollars sheet metal brackets sitting around 0:16:50.720 --> 0:16:54.200 taking up space in warehouses. Let's go Lean just order 0:16:54.240 --> 0:16:56.880 them when you need them. And the guy I'm talking 0:16:56.960 --> 0:16:59.840 he says, well, well, hold on, these are giant and 0:17:00.000 --> 0:17:03.080 austrial generators that need to be installed by crane. Talk 0:17:03.120 --> 0:17:06.040 about just in time. If we listen to your advice, 0:17:06.080 --> 0:17:08.119 we're going to be slow with orders, which is exactly 0:17:08.200 --> 0:17:10.480 what happens. So now they're spending hundreds of thousands of 0:17:10.480 --> 0:17:16.200 dollars to expedite delivery of their products. They're losing sales 0:17:16.320 --> 0:17:20.560 because they're upsetting the contractors. We're waiting for their generators. Also, 0:17:20.680 --> 0:17:22.840 they can say, look at us being so lean that 0:17:22.880 --> 0:17:24.520 we don't have five dollars sheet metal. 0:17:24.280 --> 0:17:29.119 Brackets, and without those brackets you can't complete that generator. 0:17:29.240 --> 0:17:29.600 Correct. 0:17:29.600 --> 0:17:33.719 But even worse, when you give people incentives and metrics, 0:17:34.160 --> 0:17:37.720 no matter how ridiculous they may be, they follow those 0:17:37.720 --> 0:17:41.040 incentives and they they'll do those metrics to the point 0:17:41.080 --> 0:17:46.120 where the people running the factory will not take delivery 0:17:46.200 --> 0:17:49.520 of key components because it'll be sitting on their books 0:17:50.440 --> 0:17:52.640 on the twenty ninth of the month and it'll screw 0:17:52.720 --> 0:17:53.440 up their metrics. 0:17:53.800 --> 0:17:54.560 They leave them. 0:17:54.760 --> 0:17:56.959 They won't accept it until first until the frost out 0:17:57.000 --> 0:17:58.919 in the parking list, And that just seems like, No, 0:17:59.000 --> 0:18:01.359 aren't we supposed to be make products and selling them. 0:18:01.720 --> 0:18:04.760 This secondary level of metrics seems kind of obsurd. 0:18:04.920 --> 0:18:08.880 This is central to understanding the product shortages that we've 0:18:08.960 --> 0:18:12.840 experienced for the last few years in overdoing it on lean. 0:18:13.000 --> 0:18:15.919 And the ultimate example, the story I tell in the 0:18:15.920 --> 0:18:19.800 book is I found a railroad engineer out in Idaho's 0:18:19.840 --> 0:18:23.160 working for Union Pacific. Now the railroads have their own 0:18:23.240 --> 0:18:26.680 version of the lean Taliban. It's called precision scheduled railroading. 0:18:27.000 --> 0:18:29.240 Fancy way of saying, let's lay off lots of workers, 0:18:29.320 --> 0:18:32.120 let's stick to the remaining workers with more jobs. Let's 0:18:32.160 --> 0:18:37.159 make scheduling really complicated. Let's limit scheduled service, make trains 0:18:37.200 --> 0:18:40.320 longer than ever. Well, so this railroad engineer is horrified 0:18:40.320 --> 0:18:45.040 to discover that he's actually pulling freight to the wrong destinations. 0:18:45.359 --> 0:18:48.399 And this is not by accident. This is because Union 0:18:48.440 --> 0:18:51.800 Pacific has told Wall Street, we hear you on the 0:18:51.840 --> 0:18:55.560 need for efficiency and going lean. We're gonna limit dwell time, 0:18:55.680 --> 0:18:58.639 which is the amount of time that cargo sits in 0:18:58.720 --> 0:19:03.000 any individual place. And so the guy running Union Pacific's 0:19:03.080 --> 0:19:08.280 railyard in Nebraska absorbs this mantra and says, well, I 0:19:08.280 --> 0:19:11.080 don't care where the next train's going. I am attaching 0:19:11.080 --> 0:19:13.520 as many cars to it as possible. So I have 0:19:13.640 --> 0:19:17.320 done my job. I have lowered dwell time. Well, the 0:19:17.359 --> 0:19:20.000 real effect of this is there somebody sitting in southern 0:19:20.000 --> 0:19:23.439 California waiting for autoparts that are in Oregon because this 0:19:23.600 --> 0:19:27.520 guy's hauling them to the wrong place. We've lowered dwell time. 0:19:27.600 --> 0:19:29.520 Wall Street's happy if all you're looking at is some 0:19:29.680 --> 0:19:33.159 window on an Excel spreadsheet. Oh, the railroad is more 0:19:33.200 --> 0:19:36.880 efficient than ever if you're the paint manufacturer in California 0:19:37.160 --> 0:19:40.760 needing a drum of chemicals that's stuck in Washington State, 0:19:40.960 --> 0:19:43.040 and how you got to tell your customers you're late 0:19:43.359 --> 0:19:46.600 with the order. That doesn't seem particularly efficient. My takeaway 0:19:46.600 --> 0:19:48.640 from doing this book is there's a lot of inefficiency 0:19:48.680 --> 0:19:50.000 in this ruthless efficiency. 0:19:50.240 --> 0:19:52.080 So I want to I'm glad you brought that up, 0:19:52.160 --> 0:19:55.760 because I am not a big fan of consultants in general. 0:19:56.800 --> 0:19:58.680 You have a lot of interesting things to say about 0:19:58.760 --> 0:20:03.760 McKenzie in the book, who perhaps have not distinguished themselves 0:20:03.800 --> 0:20:07.240 over the years with many of the things they've contributed 0:20:07.280 --> 0:20:10.600 to it. It's sort of funny to see a bunch 0:20:10.640 --> 0:20:14.879 of Ivy League suits who've never run a factory, or 0:20:14.920 --> 0:20:18.159 who've never run a railroad, or who've never run a 0:20:18.240 --> 0:20:20.960 retail shop come in and say, no, no, you're doing 0:20:21.040 --> 0:20:23.880 this all wrong. Here are the metrics that will get 0:20:23.880 --> 0:20:27.919 you a higher stock price on Wall Street, regardless of 0:20:27.960 --> 0:20:33.880 the subsequent impact to either your sales, your profits, your 0:20:34.760 --> 0:20:39.840 other stakeholders, including employees and customers, just a relentless pursuit 0:20:39.880 --> 0:20:42.480 of how can we get the stock price up regardless. 0:20:42.840 --> 0:20:44.119 Is that a fair assessment? 0:20:44.280 --> 0:20:46.199 Yeah, I think that is a fair assessment. And the 0:20:46.280 --> 0:20:49.280 problem is that that trick works time and again for 0:20:49.320 --> 0:20:49.720 a while. 0:20:49.800 --> 0:20:50.760 Anyway, you know, I. 0:20:51.040 --> 0:20:54.720 Mean you think about slashing inventory right, which on the books. 0:20:54.760 --> 0:20:57.159 If all you're thinking about is you're in a cubicle 0:20:57.800 --> 0:21:02.280