1 00:00:10,840 --> 00:00:15,240 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:15,320 --> 00:00:20,280 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, I know 3 00:00:20,400 --> 00:00:23,400 Speaker 1: it's early morning time in Hong Kong where you are 4 00:00:23,560 --> 00:00:25,720 Speaker 1: right now. But did you hear the big news while 5 00:00:25,760 --> 00:00:30,800 Speaker 1: you were sleeping? Um? Well, I'm trying to think. I 6 00:00:30,840 --> 00:00:32,800 Speaker 1: guess I didn't. What was the big news while I 7 00:00:32,840 --> 00:00:35,120 Speaker 1: was sleeping? Maybe maybe you saw it before you went 8 00:00:35,120 --> 00:00:37,520 Speaker 1: to bed, just that they freed the ship. Oh yeah, 9 00:00:37,800 --> 00:00:40,360 Speaker 1: so maybe that happened before you fell asleep. It did 10 00:00:40,440 --> 00:00:42,920 Speaker 1: that happen during the working day in Asia? They got 11 00:00:42,960 --> 00:00:45,880 Speaker 1: it floating? Um, and then they got it I guess 12 00:00:46,080 --> 00:00:50,239 Speaker 1: more floating or more free. Yeah, it's good news for 13 00:00:50,360 --> 00:00:57,760 Speaker 1: global supply chains, global factories, retail outlets. Everyone breathing a 14 00:00:57,760 --> 00:01:01,400 Speaker 1: big sigh of relief as the were given ship that 15 00:01:01,520 --> 00:01:05,039 Speaker 1: was stuck in the Suez for six days. As of 16 00:01:05,160 --> 00:01:09,040 Speaker 1: right now we're recording this March New York time, seven 17 00:01:09,040 --> 00:01:11,640 Speaker 1: pm New York time has been Uh, it's been freed. 18 00:01:11,680 --> 00:01:15,800 Speaker 1: It's floating again. The thing that I really loved about, 19 00:01:15,840 --> 00:01:18,600 Speaker 1: you know, this very special week where we were all 20 00:01:18,680 --> 00:01:21,679 Speaker 1: focused on this one container ship that was stuck in 21 00:01:21,760 --> 00:01:25,800 Speaker 1: a Canal was that, first of all, everyone suddenly took 22 00:01:25,800 --> 00:01:30,000 Speaker 1: an interest in global shipping and transport and global trade, 23 00:01:30,040 --> 00:01:34,120 Speaker 1: which is something that usually people don't necessarily think of 24 00:01:34,200 --> 00:01:36,319 Speaker 1: that much, or at least they don't think about how 25 00:01:36,360 --> 00:01:39,360 Speaker 1: stuff actually gets to them. People think about global trade, 26 00:01:39,600 --> 00:01:43,000 Speaker 1: but not necessarily the infrastructure and the industry that kind 27 00:01:43,000 --> 00:01:45,840 Speaker 1: of underpins it. So last week was a really good 28 00:01:45,840 --> 00:01:48,559 Speaker 1: one for everyone to sort of sit back and consider 29 00:01:49,240 --> 00:01:52,560 Speaker 1: how globalization actually works and how the flow of all 30 00:01:52,640 --> 00:01:58,280 Speaker 1: these goods is actually affected. Absolutely. Also, like everyone becomes 31 00:01:58,320 --> 00:02:02,120 Speaker 1: like a container ship expert like overnight. But the good 32 00:02:02,120 --> 00:02:04,240 Speaker 1: news is, like you and I are like kind of 33 00:02:04,360 --> 00:02:07,920 Speaker 1: experts because we've actually talked to one before. Hey, I 34 00:02:07,960 --> 00:02:10,840 Speaker 1: have read two books on shipping, so you know, I 35 00:02:10,840 --> 00:02:13,920 Speaker 1: feel like I'm I'm firmly up there as an expert. 36 00:02:14,440 --> 00:02:18,040 Speaker 1: I'm joking obviously, but fair enough, but I am, you know, 37 00:02:18,200 --> 00:02:21,000 Speaker 1: the next best thing, because we did an episode back 38 00:02:21,000 --> 00:02:24,400 Speaker 1: in January where we talked about container ships, and so 39 00:02:24,440 --> 00:02:28,760 Speaker 1: that turned out to be very, um, very auspicious because 40 00:02:28,760 --> 00:02:30,800 Speaker 1: then I knew like two or three facts that I 41 00:02:30,840 --> 00:02:33,359 Speaker 1: was able to like put in tweets and stuff like that, 42 00:02:33,680 --> 00:02:35,640 Speaker 1: which is, you know, more than I would have otherwise 43 00:02:35,680 --> 00:02:37,800 Speaker 1: been able to. Well, look, it was a great episode, 44 00:02:37,840 --> 00:02:40,799 Speaker 1: and there are multiple issues affecting shipping at the moment. 45 00:02:40,880 --> 00:02:44,960 Speaker 1: So we have the gridlock in traffic because of the 46 00:02:45,000 --> 00:02:48,680 Speaker 1: coronavirus crisis, and also the sort of changes in the 47 00:02:48,720 --> 00:02:52,440 Speaker 1: direction of global trade, so you know, stuff getting really 48 00:02:52,440 --> 00:02:55,080 Speaker 1: snarled between China and the US because lots of people 49 00:02:55,080 --> 00:02:58,280 Speaker 1: in America are just buying more and more things during 50 00:02:58,600 --> 00:03:02,200 Speaker 1: the pandemic. But then we also have a separate issue, 51 00:03:02,560 --> 00:03:07,720 Speaker 1: which is that ships are so freaking big a they 52 00:03:07,760 --> 00:03:11,480 Speaker 1: get stuck in canals and be they also contribute to 53 00:03:11,840 --> 00:03:15,240 Speaker 1: um that global snarling of of shipping traffic instead of 54 00:03:15,240 --> 00:03:19,320 Speaker 1: actually alleviating it. Exactly right. So Beck in January we 55 00:03:19,440 --> 00:03:22,840 Speaker 1: talked about the high cost of shipping these days. We 56 00:03:22,880 --> 00:03:26,040 Speaker 1: spoke with Mark Levinson, who is the author of The Box, 57 00:03:26,320 --> 00:03:28,760 Speaker 1: famous book The Box How the shipping container made the 58 00:03:28,760 --> 00:03:32,080 Speaker 1: world smaller and the world economy bigger, And he said 59 00:03:32,120 --> 00:03:36,800 Speaker 1: something on that episode which was very uspicious or very 60 00:03:36,880 --> 00:03:39,520 Speaker 1: very timely, which was that a big part of the 61 00:03:39,600 --> 00:03:43,480 Speaker 1: problem was that ships are just massive these days and 62 00:03:43,520 --> 00:03:47,440 Speaker 1: that creates its own problems for the logistical system of 63 00:03:47,440 --> 00:03:49,840 Speaker 1: the globe. And then of course, one of the biggest 64 00:03:49,840 --> 00:03:52,880 Speaker 1: ships in the world ended up jamming the Suez and 65 00:03:52,920 --> 00:03:56,200 Speaker 1: that was sort of a freak accident. There was a sandstorm, 66 00:03:56,280 --> 00:03:59,680 Speaker 1: some really great reporting on exactly how it went down. Nonetheless, 67 00:04:00,040 --> 00:04:02,160 Speaker 1: it was sort of an example of what he was 68 00:04:02,200 --> 00:04:06,640 Speaker 1: talking about, which is that these gigantic ships are bigger 69 00:04:06,920 --> 00:04:09,320 Speaker 1: and not you know, the infrastructure for shipping is not 70 00:04:09,760 --> 00:04:13,680 Speaker 1: necessarily optimized for ships these large Yeah, I think that's 71 00:04:13,680 --> 00:04:17,360 Speaker 1: exactly right. So I'm very excited we have Mark back 72 00:04:17,600 --> 00:04:20,720 Speaker 1: on the podcast. Everyone loved the last one, and this 73 00:04:20,800 --> 00:04:24,480 Speaker 1: time we're going to focus just on this question, the 74 00:04:24,600 --> 00:04:27,960 Speaker 1: problem with really big ships. So Mark, thank you for 75 00:04:28,040 --> 00:04:30,960 Speaker 1: coming back on Odd Lots. Hey, Joe, glad to be 76 00:04:31,040 --> 00:04:33,480 Speaker 1: with you. Tracy, good to be with you tonight. So 77 00:04:33,760 --> 00:04:37,480 Speaker 1: the sue is is uh is free again? Um, the 78 00:04:37,560 --> 00:04:41,560 Speaker 1: ever given has been floated. It went down the canal. Nonetheless, 79 00:04:41,600 --> 00:04:45,160 Speaker 1: as you pointed out back in January, large ships are problems. 80 00:04:45,160 --> 00:04:47,800 Speaker 1: So let's just start with the question of when we 81 00:04:47,880 --> 00:04:50,520 Speaker 1: talk about a large ship. I mean, all shipping containers 82 00:04:50,680 --> 00:04:53,000 Speaker 1: ships are large, But when we talk about a large ship, 83 00:04:53,400 --> 00:04:57,480 Speaker 1: what are we really talking about here? Well, shipping guys 84 00:04:57,839 --> 00:05:03,080 Speaker 1: use the term t e u t EU means twenty 85 00:05:03,120 --> 00:05:07,839 Speaker 1: foot equivalent units. UH. The size container you see on 86 00:05:07,880 --> 00:05:09,640 Speaker 1: the back of the truck when you're driving down a 87 00:05:09,720 --> 00:05:14,240 Speaker 1: highway is typically about forty ft. So if you take 88 00:05:14,279 --> 00:05:16,960 Speaker 1: the number of t e u s and divide by two, 89 00:05:17,279 --> 00:05:20,080 Speaker 1: that tells you how many truckloads are on the ship. 90 00:05:20,880 --> 00:05:25,960 Speaker 1: So we're talking here about a vessel that was roughly 91 00:05:26,000 --> 00:05:28,440 Speaker 1: twenty thousand t e u s. In other words, it 92 00:05:28,480 --> 00:05:32,880 Speaker 1: was capable of holding as much cargo as roughly ten 93 00:05:32,920 --> 00:05:36,799 Speaker 1: thousand over the road trucks. This is not the biggest 94 00:05:36,880 --> 00:05:40,159 Speaker 1: vessel out there on the seat. The biggest that are 95 00:05:40,240 --> 00:05:44,479 Speaker 1: afloat now in the container ship line can hold two 96 00:05:44,640 --> 00:05:48,480 Speaker 1: thousand eu s, or as much cargo as twelve thousand trucks. 97 00:05:48,960 --> 00:05:51,240 Speaker 1: So that's a lot of freight on a single vessel. 98 00:05:52,320 --> 00:05:55,960 Speaker 1: So talk to us exactly about the economics driving the 99 00:05:56,000 --> 00:05:59,000 Speaker 1: shift towards bigger ships. So you know, it's not like 100 00:05:59,040 --> 00:06:01,000 Speaker 1: people woke up one day and said they're going to 101 00:06:01,080 --> 00:06:03,400 Speaker 1: build big ships for the sake of it um or 102 00:06:03,440 --> 00:06:06,640 Speaker 1: at least maybe some people did, but not everyone. There 103 00:06:06,680 --> 00:06:11,159 Speaker 1: were supposed to be efficiencies that were targeted. Right the 104 00:06:11,279 --> 00:06:15,599 Speaker 1: first modern container ship voyage was back in nineteen fifty six, 105 00:06:16,600 --> 00:06:19,479 Speaker 1: and the ship that made that trip was called the 106 00:06:19,520 --> 00:06:25,000 Speaker 1: Ideal X and it carried fifty eight containers. Go from 107 00:06:25,040 --> 00:06:28,400 Speaker 1: fifty eight to twelve thousand, and you can see the 108 00:06:28,480 --> 00:06:31,880 Speaker 1: sort of growth that's gone on in this industry. Most 109 00:06:31,920 --> 00:06:36,880 Speaker 1: of that time, ships got bigger, small step by small step, 110 00:06:37,680 --> 00:06:41,880 Speaker 1: okay they they the next generation added a few hundred 111 00:06:41,880 --> 00:06:46,359 Speaker 1: more containers at best, and so ships were getting steadily larger, 112 00:06:46,520 --> 00:06:54,800 Speaker 1: but moderately so. And then in two thousand three, the 113 00:06:54,839 --> 00:06:57,680 Speaker 1: Shipline Merisk, which is based in Denmark, as I think 114 00:06:57,720 --> 00:07:01,719 Speaker 1: everyone knows by now, a decide did a that it 115 00:07:01,760 --> 00:07:04,120 Speaker 1: was in danger of running out of capacity, so it 116 00:07:04,240 --> 00:07:09,039 Speaker 1: needed some big ships and be that it really wanted 117 00:07:09,080 --> 00:07:12,640 Speaker 1: to get a jump on everybody else by having much 118 00:07:12,640 --> 00:07:17,280 Speaker 1: bigger ships, and so it commissioned a series of seven vessels. 119 00:07:19,240 --> 00:07:24,800 Speaker 1: These ships, it turned out, we're six larger than any 120 00:07:24,800 --> 00:07:27,160 Speaker 1: other ships that were on the ocean at that point. 121 00:07:27,840 --> 00:07:30,480 Speaker 1: That's not what had been advertised, but that's what turned 122 00:07:30,520 --> 00:07:33,720 Speaker 1: out to be the case. So they were just hugely 123 00:07:34,040 --> 00:07:37,040 Speaker 1: a large compared to anything else that was at sea 124 00:07:37,320 --> 00:07:39,720 Speaker 1: or in the order books at this point in time. 125 00:07:40,320 --> 00:07:42,760 Speaker 1: Those mask ships, the first was called the MA Marisk 126 00:07:43,560 --> 00:07:48,239 Speaker 1: came online starting in two thousand six. These very large ships. 127 00:07:49,480 --> 00:07:53,000 Speaker 1: M Marsk was capable of carrying about fifteen thousand Eu 128 00:07:53,120 --> 00:07:58,440 Speaker 1: s in other words, truck size containers, and assuming that 129 00:07:58,520 --> 00:08:02,720 Speaker 1: she was full, could do that much much more cheaply 130 00:08:03,040 --> 00:08:07,240 Speaker 1: than any of the other ships being used in the industry. 131 00:08:07,920 --> 00:08:12,080 Speaker 1: And so the competitors looked at this and said, we 132 00:08:12,160 --> 00:08:16,680 Speaker 1: got to do something too. We've got to build ships 133 00:08:16,720 --> 00:08:18,800 Speaker 1: at least as big as the MM Marisk, or we're 134 00:08:18,800 --> 00:08:23,360 Speaker 1: going to have higher costs. And yet they were faced 135 00:08:23,360 --> 00:08:28,040 Speaker 1: with a dilemma, which was if they built higher, bigger ships, 136 00:08:28,320 --> 00:08:31,040 Speaker 1: and everybody else built bigger ships, then there was going 137 00:08:31,080 --> 00:08:33,920 Speaker 1: to be a whole lot of capacity coming onto the market, 138 00:08:34,080 --> 00:08:36,760 Speaker 1: and that was going to cause a problem too. Most 139 00:08:36,800 --> 00:08:39,719 Speaker 1: of the ship lines ended up building bigger ships, and 140 00:08:40,040 --> 00:08:44,840 Speaker 1: you started to see around. You started to see ships 141 00:08:44,840 --> 00:08:49,720 Speaker 1: of seventeen eighteen thousand Eu s going on. And now 142 00:08:50,400 --> 00:08:53,040 Speaker 1: they've been up into the high teams and then into 143 00:08:53,080 --> 00:08:55,760 Speaker 1: the twenties, such as the one that was just stranded 144 00:08:55,760 --> 00:09:01,679 Speaker 1: in the Suez Canal. And now we're talking do they 145 00:09:01,720 --> 00:09:08,640 Speaker 1: save money, Well, they save money on the ocean leg 146 00:09:09,400 --> 00:09:14,040 Speaker 1: of the transport. If the ship is full or close 147 00:09:14,080 --> 00:09:17,960 Speaker 1: to full. For most of the past decade, the ship 148 00:09:18,000 --> 00:09:20,520 Speaker 1: lines had this problem that there wasn't all that much cargo. 149 00:09:20,600 --> 00:09:24,280 Speaker 1: They had really overestimated the growth in international trade, and 150 00:09:24,360 --> 00:09:28,720 Speaker 1: so they were running these enormous ships around the oceans 151 00:09:28,720 --> 00:09:31,560 Speaker 1: half empty, and that was a recipe for losing a 152 00:09:31,559 --> 00:09:35,040 Speaker 1: lot of money. Many ship lines went bust, others were 153 00:09:35,080 --> 00:09:39,959 Speaker 1: forced to merge, and the pandemic kind of bailed out 154 00:09:40,000 --> 00:09:43,920 Speaker 1: the shipping industry. When Americans couldn't take vacations and Europeans 155 00:09:43,920 --> 00:09:46,319 Speaker 1: couldn't take vacations, they couldn't go out to the restaurant, 156 00:09:46,440 --> 00:09:48,480 Speaker 1: they couldn't go to a concert, couldn't go to the theater, 157 00:09:49,200 --> 00:09:53,240 Speaker 1: they started spending their money on stuff, and all of 158 00:09:53,320 --> 00:09:55,880 Speaker 1: a sudden, the ships got full of factories in Asia 159 00:09:55,960 --> 00:09:59,040 Speaker 1: revved up and all this cargo was was filling these 160 00:09:59,120 --> 00:10:19,400 Speaker 1: vessels really for the first time. So going back to 161 00:10:19,880 --> 00:10:23,640 Speaker 1: um the dawn of the really big ships here, I mean, 162 00:10:23,720 --> 00:10:26,120 Speaker 1: it's interesting this sort of I don't know, maybe it's 163 00:10:26,440 --> 00:10:29,160 Speaker 1: it's a game theory because everyone wants to have the 164 00:10:29,240 --> 00:10:31,760 Speaker 1: cheapest shipping and so okay, everyone feels they need to 165 00:10:31,800 --> 00:10:34,400 Speaker 1: compete in larger and larger more efficient ships. On the 166 00:10:34,400 --> 00:10:37,199 Speaker 1: other hand, that creates all this inventory and a problem. 167 00:10:37,200 --> 00:10:41,000 Speaker 1: But I guess, like was it a problem? Is that 168 00:10:41,160 --> 00:10:43,440 Speaker 1: was the thinking back and like saying, like two thousand, 169 00:10:43,800 --> 00:10:48,200 Speaker 1: two thousand six that like, well, globalization just keeps getting bigger, 170 00:10:48,240 --> 00:10:52,000 Speaker 1: world trade keeps growing, There's this big commodities boom going on. 171 00:10:52,280 --> 00:10:56,720 Speaker 1: China is buying stuff voraciously. So essentially, yeah, it creates 172 00:10:56,720 --> 00:10:59,880 Speaker 1: some risks, but ultimately, at least back then, it looked 173 00:10:59,880 --> 00:11:02,520 Speaker 1: like volume would just sort of keep growing forever and 174 00:11:02,559 --> 00:11:05,160 Speaker 1: that would take care of any of the capacity the 175 00:11:05,160 --> 00:11:09,320 Speaker 1: capacity build up. Yes, absolutely, Joe. The expectation was that 176 00:11:09,920 --> 00:11:15,160 Speaker 1: international trade would continue to boom. From the late nighties 177 00:11:15,360 --> 00:11:22,559 Speaker 1: until the two thousand seven eight international trade grew more 178 00:11:22,600 --> 00:11:25,880 Speaker 1: than twice as fast as the world economy, and the 179 00:11:25,960 --> 00:11:28,200 Speaker 1: expectation was that that was going to continue, and that 180 00:11:28,840 --> 00:11:31,160 Speaker 1: there was going to be a need for shipping capacity 181 00:11:31,200 --> 00:11:35,800 Speaker 1: to handle all of these exports from Asia that were 182 00:11:35,840 --> 00:11:41,240 Speaker 1: expected to come. And of course after the financial crisis, 183 00:11:42,280 --> 00:11:45,600 Speaker 1: trade did not pick up as it always had after recession, 184 00:11:46,040 --> 00:11:48,439 Speaker 1: so there were a lot of half empty ships sailing around. 185 00:11:50,240 --> 00:11:53,840 Speaker 1: So one thing I've wondered is if we assumed the 186 00:11:53,880 --> 00:11:57,000 Speaker 1: counter factual, Like, let's say that global trade had boomed, 187 00:11:57,640 --> 00:12:01,640 Speaker 1: would the mega ships be more efficient or would there 188 00:12:01,760 --> 00:12:06,560 Speaker 1: still be issues with, for instance, their flexibility and their 189 00:12:06,600 --> 00:12:11,160 Speaker 1: ability to adapt to changing trade routes, changing demand, and 190 00:12:11,240 --> 00:12:16,199 Speaker 1: things like that. If world trade had continued to boom, 191 00:12:16,240 --> 00:12:18,120 Speaker 1: there would be a couple of things that would be 192 00:12:18,160 --> 00:12:22,120 Speaker 1: different now. One would be that there would not have 193 00:12:22,160 --> 00:12:24,920 Speaker 1: been a ton of container shipping companies going out of business, 194 00:12:25,800 --> 00:12:29,000 Speaker 1: so there would be a lot more competition in the industry. 195 00:12:29,440 --> 00:12:31,360 Speaker 1: Given the number of firms that have gone out of 196 00:12:31,400 --> 00:12:36,240 Speaker 1: business and alliances between the surviving shiplines, there are really 197 00:12:36,320 --> 00:12:40,199 Speaker 1: only three groups that dominate this industry now, so it's 198 00:12:40,240 --> 00:12:43,400 Speaker 1: somewhat of an olegopoly, and that would have been less 199 00:12:43,440 --> 00:12:48,640 Speaker 1: likely to happen had a world trade remained a robust 200 00:12:49,559 --> 00:12:52,920 Speaker 1: The other thing would be that shiplines would have made 201 00:12:53,679 --> 00:12:56,360 Speaker 1: some money, and they might have behaved quite differently from 202 00:12:56,360 --> 00:13:00,360 Speaker 1: from the way that they ended up behaving, but the 203 00:13:00,480 --> 00:13:04,400 Speaker 1: landside problems would not have gone away. What you're pointing 204 00:13:04,480 --> 00:13:09,640 Speaker 1: to is the fact that the ship lines really ordered 205 00:13:09,640 --> 00:13:13,559 Speaker 1: these huge vessels because they thought they were good for themselves. 206 00:13:14,520 --> 00:13:17,280 Speaker 1: They didn't really pay much attention at all to the 207 00:13:17,320 --> 00:13:21,600 Speaker 1: whole goods transport system. They were not asking the question, well, 208 00:13:21,679 --> 00:13:25,480 Speaker 1: what happens when these show up at the container terminal? 209 00:13:26,080 --> 00:13:29,760 Speaker 1: Is the terminal able to handle them? Will the railroads 210 00:13:29,800 --> 00:13:31,679 Speaker 1: be able to get enough trains in and out? Will 211 00:13:31,800 --> 00:13:34,640 Speaker 1: truckers be able to handle all these boxes? Will the 212 00:13:34,679 --> 00:13:37,400 Speaker 1: harbors be deep enough that we can sail these ships in? 213 00:13:37,400 --> 00:13:40,920 Speaker 1: In the first place, those sorts of questions really didn't 214 00:13:40,960 --> 00:13:45,120 Speaker 1: get enough consideration. And I think that even had trade 215 00:13:45,600 --> 00:13:50,120 Speaker 1: remained more robust than it proved to be, these problems 216 00:13:50,120 --> 00:13:54,920 Speaker 1: with the freight transport system would have developed because the 217 00:13:55,320 --> 00:13:57,880 Speaker 1: container ship lines said, here, we've got this thing, which 218 00:13:57,920 --> 00:14:01,120 Speaker 1: is good for us. You guys, you worts, you railroads, 219 00:14:01,720 --> 00:14:05,080 Speaker 1: you truckers, you guys deal with this. So this was 220 00:14:05,160 --> 00:14:07,920 Speaker 1: what you brought up in our last conversation, the sort 221 00:14:07,960 --> 00:14:12,280 Speaker 1: of bottlenecks that have emerged because of the size of 222 00:14:12,280 --> 00:14:15,000 Speaker 1: the ships. So let's go into that a little bit further, 223 00:14:15,760 --> 00:14:20,480 Speaker 1: um a walk through specifically how the size of the 224 00:14:20,520 --> 00:14:23,120 Speaker 1: ships are I don't know if incompatible is the right word, 225 00:14:23,120 --> 00:14:26,120 Speaker 1: but problematic for the ports and the sort of land 226 00:14:26,160 --> 00:14:32,240 Speaker 1: based shipping movement. And why didn't the shipping companies foresee 227 00:14:32,320 --> 00:14:34,680 Speaker 1: this sort of like seemingly obvious thing like if you 228 00:14:34,720 --> 00:14:36,200 Speaker 1: have a plug, you want to make sure it fits 229 00:14:36,200 --> 00:14:38,680 Speaker 1: on the outlet. Why was this sort of not on 230 00:14:38,720 --> 00:14:41,360 Speaker 1: their radar? Well, I went into the second half of 231 00:14:41,360 --> 00:14:44,720 Speaker 1: that first Okay, sure, the shipping lines pretty much took 232 00:14:44,720 --> 00:14:49,440 Speaker 1: the attitude that ports, it's your problem to deal with this. Railroads, 233 00:14:49,480 --> 00:14:51,400 Speaker 1: we're bringing you the cargo. You figure out how to 234 00:14:51,440 --> 00:14:53,920 Speaker 1: get it out of the port. Okay. It was their 235 00:14:53,960 --> 00:14:57,040 Speaker 1: attitude that there in the shipping business and everybody else 236 00:14:57,040 --> 00:15:00,520 Speaker 1: who is part of the logistics system ought to just 237 00:15:00,680 --> 00:15:04,280 Speaker 1: deal with what's best for them. So that's where where 238 00:15:04,280 --> 00:15:10,880 Speaker 1: that went. I think in terms of the challenges posed 239 00:15:10,920 --> 00:15:12,720 Speaker 1: by these very large ships. Let me just give you 240 00:15:12,760 --> 00:15:16,800 Speaker 1: a couple of examples. These mega ships, these ones that 241 00:15:16,880 --> 00:15:23,240 Speaker 1: hold twenty thousand those they are not longer than the 242 00:15:23,280 --> 00:15:29,840 Speaker 1: ships that preceded them to handle all this cargo, they're wider. 243 00:15:30,840 --> 00:15:34,840 Speaker 1: Ships have grown wider. Well, think about how the cargo 244 00:15:34,960 --> 00:15:37,960 Speaker 1: is typically moved on and off a container ship. The 245 00:15:38,040 --> 00:15:42,240 Speaker 1: container ship pulls up to a wharf. There are cranes 246 00:15:42,440 --> 00:15:47,920 Speaker 1: alongside the vessel, and each of these cranes lifts containers 247 00:15:48,040 --> 00:15:51,640 Speaker 1: off the vessel, puts them onto a little carrier that's 248 00:15:52,240 --> 00:15:56,040 Speaker 1: on the ground. The carrier takes the container away, and 249 00:15:56,160 --> 00:16:01,480 Speaker 1: another carrier brings an outbound container that goes onto the ship. Well, 250 00:16:01,680 --> 00:16:05,040 Speaker 1: since the ships are not longer than their predecessors, there's 251 00:16:05,040 --> 00:16:08,560 Speaker 1: no room for additional cranes alongside the ship. But since 252 00:16:08,640 --> 00:16:12,320 Speaker 1: the ships are wider, it takes longer each time a 253 00:16:12,440 --> 00:16:16,560 Speaker 1: crane reaches out with a container and takes the container 254 00:16:16,640 --> 00:16:18,960 Speaker 1: over to the far side of the ship. So it 255 00:16:19,080 --> 00:16:22,840 Speaker 1: takes an additional few seconds to lift the average container 256 00:16:23,240 --> 00:16:26,280 Speaker 1: off the ship, and it takes an additional few seconds 257 00:16:26,400 --> 00:16:30,160 Speaker 1: to put the average container onto the ship. That may 258 00:16:30,240 --> 00:16:34,320 Speaker 1: not sound like much, but you're multiplying these few seconds 259 00:16:34,600 --> 00:16:38,080 Speaker 1: times thousands upon thousands of containers, and all of a sudden, 260 00:16:38,120 --> 00:16:41,200 Speaker 1: you're delaying the vessel. Okay, it's it's stuck in port 261 00:16:41,280 --> 00:16:44,080 Speaker 1: for longer than it wants to be stuck in port 262 00:16:44,640 --> 00:16:49,480 Speaker 1: because they can't get the ship discharged and reloaded in time, 263 00:16:49,920 --> 00:16:55,360 Speaker 1: so the cargo is delayed. There have been a numerous 264 00:16:56,080 --> 00:17:01,520 Speaker 1: examples where ships left China late, late late. At some 265 00:17:01,760 --> 00:17:05,919 Speaker 1: points a thirty or thirty of the vessels leaving China 266 00:17:05,960 --> 00:17:10,800 Speaker 1: have been behind schedule. There have been sailings canceled because 267 00:17:10,960 --> 00:17:13,560 Speaker 1: a ship couldn't complete its sailing in time to do 268 00:17:13,680 --> 00:17:18,520 Speaker 1: the next sailing. And these are a result of the 269 00:17:18,640 --> 00:17:23,480 Speaker 1: difficulty aloading the ships and also of the fact that 270 00:17:23,640 --> 00:17:29,120 Speaker 1: these vessels were built to steam slowly. In previous iterations, 271 00:17:29,320 --> 00:17:33,280 Speaker 1: container ships were able to travel somewhat faster. It was 272 00:17:33,440 --> 00:17:37,359 Speaker 1: decided by the folks who designed these megaships that they 273 00:17:37,400 --> 00:17:42,240 Speaker 1: should steam slowly, in part because that saves money. They 274 00:17:42,359 --> 00:17:46,600 Speaker 1: burn less fuel, certainly less fuel per container, and second, 275 00:17:46,720 --> 00:17:50,760 Speaker 1: they produce less greenhouse gassing missions because the greenhouse gassing 276 00:17:50,800 --> 00:17:54,040 Speaker 1: missions come from burning fuel. So these slow vessels are 277 00:17:54,160 --> 00:17:58,840 Speaker 1: environmentally better and and they don't waste energy. That's all 278 00:17:58,920 --> 00:18:00,560 Speaker 1: well and good, but what it means is that once 279 00:18:00,640 --> 00:18:03,320 Speaker 1: they fall behind schedule, they can't catch up again. They 280 00:18:03,359 --> 00:18:05,879 Speaker 1: can't go faster to make up the time that perhaps 281 00:18:06,000 --> 00:18:08,399 Speaker 1: was lost in port. So there are a couple of 282 00:18:08,480 --> 00:18:14,440 Speaker 1: examples of how these very large ships really have exacerbated 283 00:18:14,480 --> 00:18:17,080 Speaker 1: the problems in supply chains. They have a lot of 284 00:18:17,119 --> 00:18:20,960 Speaker 1: trouble just delivering the goods on time. So you mentioned 285 00:18:21,040 --> 00:18:23,520 Speaker 1: this idea of the ships getting wider, and I suppose 286 00:18:23,600 --> 00:18:26,480 Speaker 1: that's our our queue to talk about the canal. But 287 00:18:27,880 --> 00:18:30,040 Speaker 1: I mean talk to us about how going down the 288 00:18:30,080 --> 00:18:35,439 Speaker 1: Suez Canal usually works, and whether or not that process 289 00:18:35,640 --> 00:18:40,120 Speaker 1: has become more difficult as ships got larger. I don't 290 00:18:40,119 --> 00:18:43,399 Speaker 1: want to pretend that I'm an expert on the hydrology 291 00:18:43,440 --> 00:18:46,400 Speaker 1: of the Suez Canal, because I'm most definitely not here. 292 00:18:47,400 --> 00:18:51,800 Speaker 1: Um the Suez Canal was dredged to make it deeper 293 00:18:51,880 --> 00:18:54,680 Speaker 1: for these very large ships and for other very large ships, 294 00:18:55,320 --> 00:18:59,760 Speaker 1: just as many harbors have been dredged to enable these 295 00:19:00,200 --> 00:19:04,160 Speaker 1: large ships to go through. The vessel that was grounded 296 00:19:04,280 --> 00:19:09,159 Speaker 1: in the Suez Canal, they ever given, required seventeen and 297 00:19:09,240 --> 00:19:12,440 Speaker 1: a half meters of water just about fifty two ft 298 00:19:13,200 --> 00:19:16,280 Speaker 1: between the water line and the bottom of the vessel. Okay, 299 00:19:16,359 --> 00:19:18,520 Speaker 1: so that's a lot of water. They need a very 300 00:19:18,600 --> 00:19:21,840 Speaker 1: deep the ship needs a very deep channel to steam in, 301 00:19:23,359 --> 00:19:26,480 Speaker 1: and if the ship gets forced out of that channel 302 00:19:26,560 --> 00:19:29,800 Speaker 1: for whatever reason, there's a lot of potential for bad 303 00:19:29,880 --> 00:19:32,880 Speaker 1: things to happen. That's true in a harbor. That's also 304 00:19:32,960 --> 00:19:36,959 Speaker 1: true in a canal. The channel is not that wide, 305 00:19:37,080 --> 00:19:41,640 Speaker 1: and sometimes events occur. You do have winds that can 306 00:19:42,119 --> 00:19:46,920 Speaker 1: blow up against the vessel. Remember, a ship like this 307 00:19:47,880 --> 00:19:51,160 Speaker 1: is a quarter mile long. It has nine or ten 308 00:19:51,560 --> 00:19:55,280 Speaker 1: layers of containers stacked on its deck in addition to 309 00:19:55,359 --> 00:20:00,920 Speaker 1: the containers below deck, so ten layers of contained. Each 310 00:20:00,960 --> 00:20:05,080 Speaker 1: container says eight ft high, that's eighty feet above the 311 00:20:05,200 --> 00:20:08,640 Speaker 1: deck and a quarter mile long, and it's like a wall. 312 00:20:10,240 --> 00:20:13,480 Speaker 1: So if there's a really strong gust of wind, it's 313 00:20:13,520 --> 00:20:15,760 Speaker 1: one more source of pressure on the ship. It can 314 00:20:15,960 --> 00:20:19,320 Speaker 1: can push the ship, and container ships have had problems 315 00:20:19,400 --> 00:20:21,960 Speaker 1: with this in the past. I think the size makes 316 00:20:22,640 --> 00:20:26,280 Speaker 1: the situation a little bit worse. This particular container ship 317 00:20:26,760 --> 00:20:30,879 Speaker 1: was actually involved in an accident in Hamburg, Germany, a 318 00:20:30,960 --> 00:20:33,680 Speaker 1: few years ago. The ship's only three years old, so 319 00:20:33,720 --> 00:20:37,880 Speaker 1: a few years ago means too, I believe, when again 320 00:20:37,960 --> 00:20:41,560 Speaker 1: the ship was blown a little bit and it ran 321 00:20:41,680 --> 00:20:46,359 Speaker 1: up against a ferry boat. And accidents happen sometimes. But 322 00:20:47,720 --> 00:20:52,159 Speaker 1: the large size of the vessel of this sum this magnitude, 323 00:20:52,200 --> 00:20:56,440 Speaker 1: and the large amount of containers stacked on the deck, 324 00:20:56,600 --> 00:20:59,880 Speaker 1: I think makes perhaps for a smaller margin of error. 325 00:21:15,400 --> 00:21:18,760 Speaker 1: Zooming back out to this sort of global situation that 326 00:21:18,960 --> 00:21:21,199 Speaker 1: we have right now, and it's ongoing and there's all 327 00:21:21,240 --> 00:21:25,119 Speaker 1: these delays in every retailer. Last quarter, H talked about that, 328 00:21:25,920 --> 00:21:29,320 Speaker 1: how does uh, you know this this phenomenon of super 329 00:21:29,400 --> 00:21:32,199 Speaker 1: large ships creating tension at the ports. Obviously it's been 330 00:21:32,240 --> 00:21:34,919 Speaker 1: going on for a while. But how in this current 331 00:21:35,720 --> 00:21:39,840 Speaker 1: environment are they uh you know, the sort of mismatch 332 00:21:39,920 --> 00:21:43,000 Speaker 1: between the capabilities of the ports, the transportation system, and 333 00:21:43,040 --> 00:21:46,200 Speaker 1: the size of the ships. How is that exacerbating the 334 00:21:46,320 --> 00:21:49,840 Speaker 1: current issues that we're seeing with trade all over the place. Well, 335 00:21:50,280 --> 00:21:54,200 Speaker 1: the problems in the ports, I think tend to slow down. 336 00:21:55,600 --> 00:21:58,239 Speaker 1: Once the ship gets there, it has to unload, right, 337 00:21:58,880 --> 00:22:02,879 Speaker 1: has to discharge its cargo. We've certainly had some complaints 338 00:22:02,920 --> 00:22:07,040 Speaker 1: in the United States that the ships were not waiting 339 00:22:07,200 --> 00:22:11,240 Speaker 1: to be fully loaded. They wanted to get back to China, 340 00:22:11,359 --> 00:22:13,760 Speaker 1: and they wanted to take empty containers with them back 341 00:22:13,800 --> 00:22:17,600 Speaker 1: to China just so there could be more Chinese exports. Um. 342 00:22:17,920 --> 00:22:21,040 Speaker 1: There have been complaints from the US farm sector that 343 00:22:21,560 --> 00:22:27,680 Speaker 1: farm goods that normally moving containers haven't been accommodated. Typically, 344 00:22:28,000 --> 00:22:31,680 Speaker 1: the westbound freight on the Pacific moves at a much 345 00:22:31,840 --> 00:22:35,000 Speaker 1: lower rate because most of the cargo is coming east 346 00:22:35,080 --> 00:22:37,879 Speaker 1: from Asia to the United States, and so these guys 347 00:22:37,920 --> 00:22:43,280 Speaker 1: are looking to send containers of soybeans or of meat 348 00:22:43,359 --> 00:22:47,439 Speaker 1: products or other things to Asia, and they're complaining they 349 00:22:47,480 --> 00:22:52,480 Speaker 1: can't get enough containers because as a result of the 350 00:22:52,600 --> 00:22:54,520 Speaker 1: mess in the ports, the ships just want to get 351 00:22:54,560 --> 00:22:57,400 Speaker 1: out of there and won't wait for the outbound containers. 352 00:22:57,920 --> 00:23:01,720 Speaker 1: So that is one example of the sorts of problems 353 00:23:01,800 --> 00:23:06,119 Speaker 1: that people are seeing when you have an event like 354 00:23:07,080 --> 00:23:12,040 Speaker 1: happened in the Suez Canal. Well, some vessels decided to 355 00:23:12,160 --> 00:23:18,240 Speaker 1: go around Africa to to get between Asia and Europe. 356 00:23:19,000 --> 00:23:21,560 Speaker 1: Well that's a longer trip, Okay, that adds two to 357 00:23:21,640 --> 00:23:25,320 Speaker 1: three weeks to the chip trip between Asian and northern Europe. 358 00:23:26,600 --> 00:23:28,840 Speaker 1: If each trip is going to take a longer period 359 00:23:28,880 --> 00:23:31,000 Speaker 1: of time, that means the vessel can't make as many 360 00:23:31,080 --> 00:23:33,000 Speaker 1: trips over the course of a year, which means it 361 00:23:33,040 --> 00:23:35,280 Speaker 1: can't carry as much cargo over the course of a year. 362 00:23:35,600 --> 00:23:37,159 Speaker 1: And so you can see that there's going to be 363 00:23:37,280 --> 00:23:41,520 Speaker 1: even more pressure for a while, at least on the 364 00:23:41,600 --> 00:23:45,920 Speaker 1: supply chain. So we talked a little bit about this 365 00:23:46,080 --> 00:23:49,359 Speaker 1: in the intro. But one of the great things about 366 00:23:49,760 --> 00:23:53,679 Speaker 1: this whole um chipping drama has been that people are 367 00:23:53,760 --> 00:23:57,280 Speaker 1: talking about these transport issues in a way that they 368 00:23:57,440 --> 00:24:00,920 Speaker 1: don't usually talk about. And you may the point in 369 00:24:01,040 --> 00:24:04,560 Speaker 1: your book that the whole field of economics kind of 370 00:24:05,400 --> 00:24:11,879 Speaker 1: persistently underestimates or ignores the costs embedded in transport, like 371 00:24:11,960 --> 00:24:14,680 Speaker 1: the idea that there might actually be frictions. When people 372 00:24:14,720 --> 00:24:19,879 Speaker 1: talk about competitive advantage, they usually talk about friction lists transactions. Um. 373 00:24:19,960 --> 00:24:22,680 Speaker 1: And I think you even cite the the old example 374 00:24:22,840 --> 00:24:26,560 Speaker 1: of you know, England versus Portugal. The economists who came 375 00:24:26,640 --> 00:24:29,639 Speaker 1: up with that never actually took into account transport costs 376 00:24:29,680 --> 00:24:31,600 Speaker 1: when they said that, you know, it might be cheaper 377 00:24:31,680 --> 00:24:33,680 Speaker 1: for England to do this and for Portugal to do 378 00:24:33,800 --> 00:24:36,000 Speaker 1: this than they can just trade with each other. Do 379 00:24:36,160 --> 00:24:39,359 Speaker 1: you think the situation in global shipping, the fact that 380 00:24:39,520 --> 00:24:43,000 Speaker 1: we were all absolutely fascinated by the ever given for 381 00:24:43,119 --> 00:24:45,520 Speaker 1: the past week, do you think that's going to change 382 00:24:45,600 --> 00:24:48,560 Speaker 1: that at all? Our people going to be more focused 383 00:24:49,280 --> 00:24:53,040 Speaker 1: on the frictions caused by global transport or involved in 384 00:24:53,080 --> 00:24:58,440 Speaker 1: global transport because of these issues. Absolutely. And that's a 385 00:24:58,520 --> 00:25:01,960 Speaker 1: wonderful opportunity to give a shout out to my latest 386 00:25:02,040 --> 00:25:06,159 Speaker 1: book which is called Outside the Box. It talks about 387 00:25:06,480 --> 00:25:12,000 Speaker 1: these problems with supply chains and it explains why businesses 388 00:25:12,040 --> 00:25:16,800 Speaker 1: that built these long supply chains systematically underestimated the risk. Okay, 389 00:25:17,200 --> 00:25:20,960 Speaker 1: they made decisions about where to produce things, typically in Asia, 390 00:25:21,480 --> 00:25:25,199 Speaker 1: by looking at production costs and transport costs, and they 391 00:25:25,240 --> 00:25:28,200 Speaker 1: didn't pencil in the cost if, say the goods don't 392 00:25:28,240 --> 00:25:32,600 Speaker 1: arrive on time, well, that can be a very significant cost. 393 00:25:32,880 --> 00:25:37,440 Speaker 1: And when that happens, then all of the money that 394 00:25:37,520 --> 00:25:40,280 Speaker 1: you saved on production may not turn out to be 395 00:25:40,359 --> 00:25:42,879 Speaker 1: such a great deal. So I think we've seen a 396 00:25:42,960 --> 00:25:48,240 Speaker 1: lot of companies now begin to reassess whether these supply 397 00:25:48,480 --> 00:25:51,800 Speaker 1: chains makes sense constructed as the way they have been. 398 00:25:52,320 --> 00:25:55,360 Speaker 1: We've seen in the United States, which is the place 399 00:25:55,440 --> 00:25:58,000 Speaker 1: where we've got the best data on this, you've seen 400 00:25:58,080 --> 00:26:01,800 Speaker 1: a lot of companies keep more infantor than they used to. Right, 401 00:26:01,920 --> 00:26:04,879 Speaker 1: it used to be that companies didn't want inventory. Everything 402 00:26:05,000 --> 00:26:08,560 Speaker 1: was going to be just in time. Inventory is wasteful. Well, 403 00:26:08,920 --> 00:26:12,680 Speaker 1: inventory is insurance, right. Inventory gives you something to sell 404 00:26:12,720 --> 00:26:15,800 Speaker 1: in case your next delivery doesn't make it on time. So, 405 00:26:15,960 --> 00:26:19,879 Speaker 1: even though there's a cost, firms have been keeping more inventory. 406 00:26:20,520 --> 00:26:23,879 Speaker 1: Firms have been looking at multiple production locations rather than 407 00:26:23,960 --> 00:26:28,760 Speaker 1: having everything made in some big factory. Yes, the big 408 00:26:28,880 --> 00:26:32,000 Speaker 1: factory might give you great economies of scale, but if 409 00:26:32,040 --> 00:26:35,040 Speaker 1: there happens to be a fire at the factory, or 410 00:26:35,119 --> 00:26:38,520 Speaker 1: an earthquake or if there's a transport disruption and route, 411 00:26:39,119 --> 00:26:41,480 Speaker 1: all those economies of scale aren't going to have help 412 00:26:41,600 --> 00:26:46,000 Speaker 1: and and so you really need an alternative source of production. 413 00:26:46,800 --> 00:26:48,840 Speaker 1: And firms have been looking at these things. They've been 414 00:26:48,880 --> 00:26:52,760 Speaker 1: going for redundancy. There's a lot of interest now and resilience. 415 00:26:53,200 --> 00:26:55,800 Speaker 1: It's actually a hard thing for a manufacturer to do, 416 00:26:56,960 --> 00:26:59,000 Speaker 1: but we've been seeing a lot of attention to it. 417 00:26:59,200 --> 00:27:02,240 Speaker 1: And that was even for the forgiven was rounded in 418 00:27:02,280 --> 00:27:07,720 Speaker 1: the suite. Uh. Mark, that was great. That's exactly you've 419 00:27:07,760 --> 00:27:09,920 Speaker 1: filled in a bunch of gaps for us and sort 420 00:27:09,960 --> 00:27:13,040 Speaker 1: of our understanding of this. And really appreciate you coming 421 00:27:13,080 --> 00:27:16,240 Speaker 1: back on oddline. Well, it's been delightful to be with you. 422 00:27:16,800 --> 00:27:19,359 Speaker 1: Thank you very much for having me. Thanks so much, Mark. 423 00:27:19,600 --> 00:27:40,000 Speaker 1: Thanks Mark, that was great. I found that very helpful, Tracy. 424 00:27:40,040 --> 00:27:42,840 Speaker 1: I mean I sort of had some sense that the 425 00:27:43,840 --> 00:27:47,359 Speaker 1: the size of the ships was creating specific problems at 426 00:27:47,400 --> 00:27:51,359 Speaker 1: the ports. But his example about like the crane, you 427 00:27:51,440 --> 00:27:55,000 Speaker 1: can't put more cranes because um not any longer, but 428 00:27:55,040 --> 00:27:56,760 Speaker 1: that they have to reach further into the ship, but 429 00:27:56,880 --> 00:27:59,399 Speaker 1: that takes a few more seconds and that ends up 430 00:27:59,640 --> 00:28:02,320 Speaker 1: like that really started to help like crystallize the issue 431 00:28:02,400 --> 00:28:05,280 Speaker 1: for me. Yeah, the great thing about talking to Marcus 432 00:28:05,359 --> 00:28:10,040 Speaker 1: he brings this fantastic economics perspective to global shipping, which 433 00:28:10,160 --> 00:28:13,600 Speaker 1: I think, um, you know, not everyone does. But also 434 00:28:13,680 --> 00:28:18,280 Speaker 1: the point about how building these massive ships maybe could 435 00:28:18,320 --> 00:28:22,040 Speaker 1: have resulted in more efficiencies at sea had global trade 436 00:28:22,040 --> 00:28:25,119 Speaker 1: actually picked up, but the bottleneck was always going to 437 00:28:25,200 --> 00:28:28,359 Speaker 1: be on the port side when you're loaning and unlaning stuff. 438 00:28:28,800 --> 00:28:31,200 Speaker 1: And the irony there, of course, is that the whole 439 00:28:31,280 --> 00:28:34,760 Speaker 1: reason container shipping was invented was to try to minimize 440 00:28:35,600 --> 00:28:37,800 Speaker 1: costs on the port side. So you used to have, 441 00:28:38,360 --> 00:28:43,320 Speaker 1: you know, hundreds of laborers who would be unloading and 442 00:28:43,400 --> 00:28:45,680 Speaker 1: loading these boxes by hand, and they'd all be sort 443 00:28:45,720 --> 00:28:49,880 Speaker 1: of individually wrapped or everything would be kind of packaged differently, 444 00:28:50,000 --> 00:28:54,080 Speaker 1: and it was really labor intensive, very very expensive. So 445 00:28:54,200 --> 00:28:57,640 Speaker 1: they moved to the standardized container shipping and that was 446 00:28:57,680 --> 00:29:00,160 Speaker 1: supposed to lead to more efficiencies, which it did did, 447 00:29:00,800 --> 00:29:02,760 Speaker 1: but then of course the shipping companies kind of got 448 00:29:02,800 --> 00:29:06,720 Speaker 1: ahead of themselves stacked as many containers as possible, and 449 00:29:06,800 --> 00:29:09,960 Speaker 1: eventually the economy of scale just kind of goes away 450 00:29:10,120 --> 00:29:14,600 Speaker 1: because the ports aren't set up to handle it. Absolutely 451 00:29:14,840 --> 00:29:17,360 Speaker 1: super interesting to think about like this sort of the 452 00:29:17,440 --> 00:29:20,280 Speaker 1: different legs of the system and how economies of scale 453 00:29:20,280 --> 00:29:24,160 Speaker 1: and one part create dis economies of skill elsewhere in 454 00:29:24,200 --> 00:29:28,240 Speaker 1: the systems. And it also again this really helped we 455 00:29:28,400 --> 00:29:33,120 Speaker 1: understand the situations. So like there's so much inbound demand 456 00:29:33,760 --> 00:29:37,040 Speaker 1: for US uh for Chinese goods coming to the US, 457 00:29:37,120 --> 00:29:40,040 Speaker 1: Like we know this, it's voracious. There is some export 458 00:29:40,160 --> 00:29:43,440 Speaker 1: activity obviously, as he mentioned, there's soybeans and a few 459 00:29:43,480 --> 00:29:47,160 Speaker 1: other agricultural goods, so it's not entirely one directional. But 460 00:29:47,280 --> 00:29:51,200 Speaker 1: in this situation in which there is a pretty big 461 00:29:51,280 --> 00:29:54,320 Speaker 1: opportunity cost of not racing back to China and getting 462 00:29:54,360 --> 00:29:57,880 Speaker 1: more goods, and you have the delays already at the 463 00:29:57,960 --> 00:30:00,360 Speaker 1: ports because there's a bunch of ships because of the 464 00:30:00,440 --> 00:30:03,680 Speaker 1: logistical issues, this idea like nobody wants to sit around 465 00:30:03,840 --> 00:30:06,600 Speaker 1: and wait for all the soybeans to like fill up 466 00:30:06,680 --> 00:30:09,720 Speaker 1: maybe a quarter or a third full vessel, so everyone 467 00:30:09,800 --> 00:30:13,800 Speaker 1: just races back. Very clear example of how messed up 468 00:30:13,840 --> 00:30:16,440 Speaker 1: the whole situation is right now. Yeah, absolutely, And I 469 00:30:16,480 --> 00:30:18,640 Speaker 1: guess it gets back to this idea that no one 470 00:30:18,840 --> 00:30:23,120 Speaker 1: expected a global pandemic in this way and people hadn't 471 00:30:23,160 --> 00:30:26,840 Speaker 1: really been building supply chains that would be robust enough 472 00:30:26,920 --> 00:30:29,360 Speaker 1: to take it into account, which is kind of understandable, 473 00:30:29,440 --> 00:30:33,520 Speaker 1: but again, you wonder how much that's going to change. Absolutely, 474 00:30:34,280 --> 00:30:36,000 Speaker 1: we'll see. We'll get him back on in a couple 475 00:30:36,000 --> 00:30:39,720 Speaker 1: of years. Yes, Okay, let's leave it there, let's save 476 00:30:39,760 --> 00:30:42,520 Speaker 1: it there. This has been another episode of the All 477 00:30:42,560 --> 00:30:45,400 Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on 478 00:30:45,560 --> 00:30:49,440 Speaker 1: Twitter at Tracy Alloway, and I'm Joe Wisntal. You can 479 00:30:49,520 --> 00:30:52,840 Speaker 1: follow me on Twitter at the Stalwart and check out 480 00:30:52,880 --> 00:30:56,600 Speaker 1: our guest Mark Levinson's book The Box and the sequel 481 00:30:56,840 --> 00:30:59,920 Speaker 1: Outside the Box, and be sure to follow a producer, 482 00:31:00,120 --> 00:31:03,920 Speaker 1: Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg 483 00:31:04,000 --> 00:31:08,000 Speaker 1: head of podcast, Francesco Levi at Francesca Today, and check 484 00:31:08,040 --> 00:31:10,760 Speaker 1: out all of our podcasts at Bloomberg Onto the handle 485 00:31:11,120 --> 00:31:12,800 Speaker 1: ad Podcasts. Thanks for listening.