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