Masters in BusinessWhat would YOU like to hear about on Bloomberg? Help make shows like ours even better by taking our Bloomberg audience survey.
Barry Ritholtz speaks with New York Times Global Economic Correspondent Peter Goodman. Prior to the New York Times, Peter began his career as a freelance writer in Southeast Asia before serving as The Washington Post's Asia Economic Correspondent and later Shanghai Bureau Chief. He has since reported from over 36 countries, holds two Gerald Loeb awards and eight prizes from the Society of American Business Editors and Writers. He was also a Pulitzer finalist for his work covering the 2008 financial crisis. On today's episode, Peter breaks down his path as a journalist and the work behind his book How the World Ran Out of Everything: Inside the Global Supply Chain.
Bloomberg Audio Studios, podcasts, radio news. This is Master's in Business with Barry red Holds on Bloomberg Radio.
This week on the podcast another extra special guest. Peter Goodman is the award winning investigative reporter and economics correspondent for The New York Times. His latest book, How the World Ran Out of Everything Inside the Global Supply Chain. What a fascinating deep dive into how we got here in terms of why were we unable to get basic protective equipment during the pandemic? How could we not get ventilators or even things like face mis and gowns. What led us to outsourcing everything and not having a backup, not having an emergency system? How did we break our resilience leading up to the pandemic? I thought the book was a great read and very fascinating. I learned a lot about it, and I think this conversation is fascinating also if you're at all interested in things like global supply chains, the role of consultants, and the role of shareholder primacy in how society operates. Plus all the craziness that took place during the pandemic is detailed in the book with great specificity. I think you'll find this conversation fascinating. With no further ado my discussion with The New York Times.
Peter Goodman, thanks so much, very great to be here.
So I really found the book fascinating. It's such a fresh in everybody's mind story. But before we get into the book, let's talk a little bit about your background. You have really a fascinating career. You start as a feature writer freelancing in Japan from Southeast Manila and Jakarta. How on earth did that happen?
Yeah, so you know, I was one of those kids who got out of college and just I did what I wanted to do. I liked to write. I had been sort of a political activist in college, but life seemed more complicated than it did to my activist friends. So journalism drew me, and I wanted to go check out Southeast Asia. So I first stopped in Japan, got a job writing features for the Japan Times, teaching English to pay the bills and save up the money to then move to Manila and then eventually Jakarta. Spent a lot of time in Cambodia, covered a massacre of pro democracy demonstrators in East Timor, got kicked out in Indonesia, came back to the States and ended up in Alaska at the Anchorage Daily News.
Yeah, I was gonna ask, how do you find your way from Asia to Anchorage? What was it like reporting from a small town in Alaska?
Yeah? Yeah, I mean I basically figured out that if I wanted to do this seriously, I was going to have to go somewhere to learn journalism. I didn't go to Jay School, went to a liberal arts college where we didn't have you know, that sort of paper where we had beats and structure, And I understood that, you know, freelancing would take me a certain distance, but if I wanted to be serious about it, I had to go work, you know, doing local journalism somewhere and the anchor. I was lucky enough to be hired by the anchor s Daily News, which was just a heavyweight shop of talent, only about you know, sixteen maybe twenty reporters. They had won the Gold Medal for Public Service Pulitzer a few years before I got there. They were a finalist the year before I got there for the excellent Valdese Crush, And it was just a very talented, creative group of people, And yes, I ended up in I was living in Palmer, which is next to Wasilla. Was the local government reporter where I covered, as you can probably guess, a then unknown member of the Wascilla City Council named Sarah Palin.
And how did that turn out?
You know it was? It was fascinating. I mean, there's nothing like having a local beat and having to figure out who matters, what's the story, How do I go to a meeting of local government, prepare for whatever issue seems most interesting, develop sources, build people's trust, figure out you know, when you get it wrong, how to make it right. And you know, there's nothing like being in a place where someone will call you if you get a fact wrong. I mean, when you're freelancing in Cambodia writing about Cambodian refugees, you spell somebody's name wrong, nobody's gonna call you. You mess up a fact like I once messed up a fact. You know, I misheard somebody say assessment when they meant cessna, and boy, I thought I was gonna have to flee the state in embarrassment. And you learn how to.
Get it right, so you have a knack for being in the right place at the right time. You were the Shanghai bureau chief for the Washington Post, really as China was emerging as a global superpower. Tell tell us a little bit about your experiences in Shanghai.
Yeah, that was just an incredible story. It was a story of a lifetime. I mean, it was a moment where China had become a very significant story in the American media and imagination and politics. But it was still before you know, everybody had these giant bureaus, before we were covering news in this very granular way, so you had time to really dig into stuff. And you know, we had two guys in Beijing who were phenomenal, my two colleagues who did a lot of political stuff, and I was ostensibly the economic writer. But the truth was all of her stories were more or less the same, because everything was an economic and political story combined. And it was a moment where you could just sort of point at anything like how did that ballpoint bearing factory get there? Who owns it? How did the land and the energy become available? Where are they selling their product, who's getting a cut of the action. You know, anything you dug into was a story that would tell you something about power and the trajectory of the Chinese accounty.
And I'm sure that helped set the stage for all the things you saw when the world ran out of everything. We'll circle back to that. You also covered the financial crisis and recession as the Times New York based economic correspondent. Right, I have a vivid recollection of my experience during the financial crisis. Tell us a little bit about your experience in eight or nine.
Well, you know, it's interesting. I was sort of an accidental national economic corresponding because I was very happily working for the Washington Post covering international econ and the Post was, let us say, not having its best days. And I had this opportunity to go to the Times and they offered me the national Economic correspondent. I thought, well, you know, I'm living in New York at the time. I'm working in the New York Beer of the Washington Post wasn't all that keen toly. I loved the Washington Post, but I thought, well, I better do this sleepy story the national economy. It's the Fall of two thousand and seven. Didn't know anything about it. Was surrounded by people who knew much more about it than I. Ever would The first story I ever pitched was, you know, it seems like consumer spending is drying up because housing prices are falling. That could be signific I keep reading that. You know, consumer spending is more than two thirds of the American economy. So I got Mark Zandy to go crunch some data for me showing where were home equity lines of credit drying up the fastest and what was their historical relationship to consumer spending. And I got this crunched for like every metropolitan area in the United States, and almost it random. I said, I'm gonna go out to Reno.
I was gonna say four areas stick out in my mind. Southern Florida, Yeah, Vegas and Reno as two and three Southern California, right, And I'm trying to remember maybe DC was the other area that was well, there.
Were a lot, Yes, DC was hit, for sure, there were parts of New England that were hit, but you just listed that. But so I sort of randomly so, well, I'm going out to Reno because if you look at the ratio of home equity lines of credit to consumer spending, we've seen this big dry up fast. And within five minutes of getting off the plane. I had no real reporting plan. I pulled off the road from the airport, headed to where I was staying, and there was a tile shop and I went in, introduced myself and talked to this guy, Marshall Whittie, who was a salesman who at that time was about to send the keys back on his third spec house. His commissions were drying up. He told me how he had, you know, financed a trip to Tahiti for his honeymoon on a home equity line and credit. He used to get a new truck every year for the variety of color. And suddenly he's answering this, no, dude, I can't go to the club tonight. I'm staying home to watch a Netflix And I just sort of glued myself to this guy for three days. I met all of his friends, and I went back to New York and I remember saying to my colleagues in the newsroom, we are and I used an impolite word that I will not use on your radio program. We are, you know, really up a creek here. And I was like, you know, calm down, you know, let's take it ease. But that story I sort of just accidentally fell my way into I saw that this was going to be really bad. It was not merely a mild recession. And so every story I did afterwards, I mean, as I then got into the minutia of how the mortgage markets work and eventually covered the foreclosure crisis, really began with that just basic you know, naive, you know question, well, what's gonna happen when we can't just use our homes as atm machines anymore? That seems like it'll have implications, And yes it did.
That reminds me a little bit of the scene from The Big Short, either the book or the movie, but in the movie it's Steve Carell speaking to a stripper about the home she bought to fix up, and he said, he goes, wait, you're buying this home as an investment property, and she's like, I have six homes as an investment property. And suddenly he realizes, oh, we're in for a world of trouble. This is much worse than anyone imagine.
It's exactly that. In fact, the guys I was hanging out with when I said, well, I'll take you out to dinner and drink so we can have a longer conversation. We ended up in a place where there were people of that profession. It was actually my first expense that I ever recruited as a New York Times writer, and I was embarrassed to submit.
Them given because it was so expensive.
But it wasn't that it was so expensive. It was what was the name of the place, right, But that's where they wanted to go.
So I love the expression, the expression jingle mail. People used to put their keys in an envelope and send it back to the bank, and that's jingle mail.
Actually with this Marsha, would he explain that to me? I didn't even understand what he might say, Yeah, I'm sending the keys back, Like what are you talking? What He's like, Well, you know, this home I never expected to deliver. I guess I'm gonna be spending some time here. I figured i'd be moving uptown, you know, next year. That's it.
It's amazing And in fact, until the financial crisis, I don't think anybody ever stopped to find out am I in a recourse state or a non recourse state? Meaning am I still on the hook after I lose the house? Or is the bank limited to just they get the house and I get to walk away.
I mean, let's face it, we all click agree, read all the terms to millions of documents a day that we don't even read a sentence, right, right, and suddenly we're living in the fine print. Oh, there actually are terms that are gonna high here right that people that we deluded ourselves into believing would never You know, this will never matter because housing prices are going up forever even now. In Greenspan says that you're a sucker if you don't get a variable rate mortgage. And you know what could happen. Oh, if it doesn't work out, I'll refie, I'll sell. Well, suddenly, you know, we're dealing with all of this ink that was never intended to have effect. That's right.
I'm still to this day amazed that the models never allowed for home prices to fall.
In New York.
I have a vivid recollection of finishing grad school in eighty nine, and anybody I know who bought a co Opera condo in New York, they were under water for five, six seven years until till the next leg late late nineties and the booming stock markets started to send real estate prices higher. But you don't have to go that far back in time. Look at the nineteen seventies to see when inflation made it in real term home prices not go up. And then you know, pre war there were some pretty bad recessions and depressions in the turn of the century or the twenties and thirties. Obviously, homes weren't as widespread owned back then as they are now. And I don't want to spend too much time talking about the financial crisis. I have to ask you. You've done multiple trips to some pretty heavy conflict zones Iraq, Cambodias, Dan, East Timor what's it like being in these areas? Are you embedded with the US military? Are you just walking around hoping no one takes a pot shot up?
It depends. I have been embedded in places in Iraq. Actually, I was there at the best possible time to be a journalist, you know, in this period, like the I was there as Bush declared mission accomplished. I was just in my own suv driving from the Kuwait airport up to Bosra with a couple of Washington Post colleagues and then we drove, you know, all the way up to Bagdad and Kircook and actually I'll never forget the car broke down when we put a black market gasoline and at some point I had to call National Car Rental and Kuwait and then get that thing on the back of a flatbed truck through all these laid off truck drivers. I had no business, and we hired somebody for a couple hundred bucks to drive it through the desert. You know, it's always I'm not a thrill seeker by nature. I mean, there are there are people who cover conflict who've spent a lot more time in conflict zones than I ever will, some of whom you know, I fear for their safety because there is I'm just somebody who wants to see what's going on. I'm not like the bravest soul, but but there's nothing like being in a place. And boy, I mean, Iraq after Saddam was just a gold mine for a journalist because there are all these people, many of whom are English speaking, who are dying to tell their stories. Whether it's like how did these trading companies work despite American sanctions. I did a story on smuggling out of the port of Basra, where like in a day I found the guy who like ran a smuggling ring, who took me to the porch, showed me the fake bills of lady like that was absolutely incredible. Cambodia was was an endlessly fascinating of.
All these of all these wild overseas stories you've done, what's been your favorite to cover, what's been the most challenging?
That's a that's a tough question. I mean, I would say that a rat coverage just felt so vivid and important. And I mean there's nothing like when you get accustomed to doing you know, sort of enterprise or investigative or longer form stuff. There's nothing like being in a place where it's like, no people actually want to know right now what happened to you today? And and stories almost write themselves. I'm gonna go to, you know, an oil refinery that shut down because the looters came and the Haliburton people haven't figured out how to turn it back on, and there are a bunch of Iraqi employees saying, who's gonna pay us? And how come we can't go in there? You know, these sorts of stories are just so vivid and compelling. So I found that, you know, particularly amazing. I mean, my time in China was kind of unbeatable as well. It's just such a fascinating place.
Yeah, really fascinating. Let's talk a little bit about some of the background philosophy. Tell us about the lean Taliban and the cult of efficiency.
Love it. Yeah, So the lean Taliban refers to the way the people at Mackinsey and Company, the business consultancy, viewed themselves in proselytizing for lean manufacturing or just in time as we know it now. Justin times is a very sensible idea pioneered by Toyota that says, you know, instead of having giant warehouses filled with all kinds of stuff that we may need at some point in the future, but who knows when it's Japan the end of the Second World War, space is limited, capitals limited. Let's have the suppliers bring this stuff we need on the supply chain as we need it. They sort of emulated the way a supermarket deals with milk. You want enough on the show shelf that everybody gets milk. They don't leave unhappy they can't buy it, but not so much that you're spilling it. Well, this is a great idea till business consultancies like McKinsey get hold of it and turn it into this crude imperative to just slash inventory, hand the extra savings to the corporate executives as a reward for being smart enough to hire McKenzie. And I end up digging deep into how this actually works in the decades before the pandemic, and I spent time with this guy in Minnesota who was working at this industrial generator plan where McKenzie's Lean Taliban show up a bunch of slick suited young people straight out of Ivy League universities, one older guy from the Chicago branch, and they say, you're doing it all wrong. You know, why do you have all these five dollars sheet metal brackets sitting around taking up space in warehouses. Let's go Lean just order them when you need them. And the guy I'm talking he says, well, well, hold on, these are giant and austrial generators that need to be installed by crane. Talk about just in time. If we listen to your advice, we're going to be slow with orders, which is exactly what happens. So now they're spending hundreds of thousands of dollars to expedite delivery of their products. They're losing sales because they're upsetting the contractors. We're waiting for their generators. Also, they can say, look at us being so lean that we don't have five dollars sheet metal.
Brackets, and without those brackets you can't complete that generator.
Correct.
But even worse, when you give people incentives and metrics, no matter how ridiculous they may be, they follow those incentives and they they'll do those metrics to the point where the people running the factory will not take delivery of key components because it'll be sitting on their books on the twenty ninth of the month and it'll screw up their metrics.
They leave them.
They won't accept it until first until the frost out in the parking list, And that just seems like, No, aren't we supposed to be make products and selling them. This secondary level of metrics seems kind of obsurd.
This is central to understanding the product shortages that we've experienced for the last few years in overdoing it on lean. And the ultimate example, the story I tell in the book is I found a railroad engineer out in Idaho's working for Union Pacific. Now the railroads have their own version of the lean Taliban. It's called precision scheduled railroading. Fancy way of saying, let's lay off lots of workers, let's stick to the remaining workers with more jobs. Let's make scheduling really complicated. Let's limit scheduled service, make trains longer than ever. Well, so this railroad engineer is horrified to discover that he's actually pulling freight to the wrong destinations. And this is not by accident. This is because Union Pacific has told Wall Street, we hear you on the need for efficiency and going lean. We're gonna limit dwell time, which is the amount of time that cargo sits in any individual place. And so the guy running Union Pacific's railyard in Nebraska absorbs this mantra and says, well, I don't care where the next train's going. I am attaching as many cars to it as possible. So I have done my job. I have lowered dwell time. Well, the real effect of this is there somebody sitting in southern California waiting for autoparts that are in Oregon because this guy's hauling them to the wrong place. We've lowered dwell time. Wall Street's happy if all you're looking at is some window on an Excel spreadsheet. Oh, the railroad is more efficient than ever if you're the paint manufacturer in California needing a drum of chemicals that's stuck in Washington State, and how you got to tell your customers you're late with the order. That doesn't seem particularly efficient. My takeaway from doing this book is there's a lot of inefficiency in this ruthless efficiency.
So I want to I'm glad you brought that up, because I am not a big fan of consultants in general. You have a lot of interesting things to say about McKenzie in the book, who perhaps have not distinguished themselves over the years with many of the things they've contributed to it. It's sort of funny to see a bunch of Ivy League suits who've never run a factory, or who've never run a railroad, or who've never run a retail shop come in and say, no, no, you're doing this all wrong. Here are the metrics that will get you a higher stock price on Wall Street, regardless of the subsequent impact to either your sales, your profits, your other stakeholders, including employees and customers, just a relentless pursuit of how can we get the stock price up regardless. Is that a fair assessment?
Yeah, I think that is a fair assessment. And the problem is that that trick works time and again for a while.
Anyway, you know, I.
Mean you think about slashing inventory right, which on the books. If all you're thinking about is you're in a cubicle and you're analyzing numbers for some publicly traded company, you slash inventory, you've lowered or i'm sorry, you've increased return on asset because inventory is asset, right, So asset is now smaller. Whatever your revenue is is divided by a smaller number. That's a higher measurement. Well as as this London business school, a professor I talked to you for the book put it to me, Yeah, that's really great. But if you can't make a ventilator in the middle of a pandemic because you've managed your inventory so that quarter to quarter you've boosted your return on asset, you don't get to say, well, at least our share price is high.
So I remember having a conversation with Duff McDonald, who wrote a book called The Firm about McKenzie and Company and some of the things that McKenzie is responsible for is kind of like shocking, Like it seems whenever there's some financial engineering based disaster and you look into the detail, somewhere in the back of it is some consulting person from McKinsey who says, what would happen if instead of doing it the way you always did it, we focused on these metrics instead, and let's see if that helps get the stock price up. It sounds like lean inventory and just in time delivery is a version of focusing on a secondary characteristic in order to affect the stock price rather than focusing on increasing revenues and doing it more efficiently.
Yeah, I mean, let me be clear, just in time is a good idea, and trying to eliminate waste from your supply chain is a good idea. The question is are you doing it in a way that's common sensical or in a way that's purely driven by trying to hit some metric that's some twenty two year old at a Harvard told you. You know, is a good way to say.
So let's stay with that. Because you talk about Toyota's role in all of this, right, Toyota. They're on an island. Everything is destroyed post World War two, it would make and they don't have a lot of cap So given those constraints, their version of common sense, rational lean inventory, you know, given their constraints, seems.
To be pretty It was highly effective and it worked.
Is the implication that when everybody else started implementing this via consultants, they just took it way too far? Is that the thinking?
It's that the consultants understand who they're working for. They are working for executives who must get the share price to go up right now, and if they fail to do that, they're going to be looking for their next job. So whether they think it's common sensical or not, in terms of the long run, I mean, look this we learned up close during the financial crisis, right like you.
Can radical deregulation turned out to have a cost to it.
I mean, you can have spectacular business failures that we can all see that are wildly successful for all the people involved, as long as they get out before the plane crashes. Part of the mixed metaphor. And so if you talk about the role of consultants, it's a question of are you distilling it down to this kind of cultish reverence for just hitting that one metric. I mean even Toyota. Well, first of all, Toyota understood that they needed their suppliers close at hand because you have to be able to replenish the supply so if something goes wrong, they would never have signed up for supply chains across oceans, which is what we get from Mackenzie. Combined with the rise of container shipping and the Internet and all of these things that have made our version of globalization, you know, doable. What's happened is we've eliminated all the margin for trouble. But Mackenzie actually, even Mackenzie realized that we had gone too far in the nineties when they discovered that Toyota factories were telling their suppliers not to replenish enough to fill even the existing space on the assembly line. They said, well, this doesn't make any sense. Even Mackenzie said, look, why have two trips to replenish the same workspace just so you can say on the spreadsheet that you know, you're only holding four bits as opposed to eight. Even Mackenzie recognized that was bananas.
But you're coming down the other side of the efficiency curve and all along this stuff. You're giving up long term resiliency in favor of these short term metrics of supposed efficiency. Fair statement, Yeah, I think that's right.
Look, you know, take this to real life. Imagine that you told your kid who you're trying to get to brush teeth at the end of the day, I insist that you spend five minutes by the sink. You know, Well, if that's how you do it, your kid's gonna spend five minutes by the sink watching YouTube videos. You know. Common sense is no, I better get involved in knowing what exactly are they doing and what like how's this going to play out? Well, we've effectively let McKenzie write those kinds of rules. And it's not just McKenzie. There's lots of business consultancies. And it's not even just because of the business consultancies. It's that we've handed over our business and societal fate to shareholder interests. So the exclusion of anything resembling common sense.
Huh, really interesting. None of this is a new concern. I was fascinated in the book. Henry Ford was concerned about supply chains and resource availability a century ago when he was building the model T How did his concerns about supply chains be so easily forgotten?
Yeah, So, Henry Ford, I was fascinated by the story of myself, you know, bonded with Thomas Alva Edison riding a railcar back from a trade show at a hotel on Coney Island. This is you know, in the nineteen teens. Edison is his hero, and they bond over the supply chain. Edison says, yeah, you know, you have all these great creations, but if you can't get the materials you need, these are just ideas. And Ford was obsessed with self sufficiency, I mean to the extent to which he had his own fiascos, you know, trying to become self sufficient rubber. Yeah, this failed venture in Brazil, but you know the scale of his factories, like including the River Rouge factory, which remains, you know, Ford's showcase outside of Detroit. We're all about having soup to nuts, the ability to make a car without, as Ford put it, being pinched by some supplier. He was suspicious of rail in particular, so he bought his own rail and shipping lines. Vertical integration didn't exactly work out, but that concept of let's understand what we're dependent on and how reliable is the supply. I mean, Ford would have been horrified to see what I saw at his River Rouge plant a century later, where I'm actually watching the F one fifty come off the line. This is Ford's most popular vehicle, pickup truck, beautiful vehicle, amazing, you know, orchestrated assembly with some automation. But at the time that I'm watching this in January twenty twenty two, they're taking the cars and parking them in these giant lots in the shadow of Ford's corporate headquarters and across the street from Henry Ford Elementary School because they're dependent upon one supplier for the computer chips happens to be across the ocean on this island that not incidentally is claimed by China that's part of its own territory. I'm talking about Taiwan. And until these computer chips show up, these fifties are just taking up space in a parking lot. I had a harfight.
I had a car come off lease, I want to say late twenty one or early twenty two, and I recall going to the dealer and going through a whole floor of cars, and they were divided in half. That half doesn't have the chip for the sunroof, which were allowed to sell. So the sunroof is closed and whenever the chip comes back, comes in, bring the car back and we'll get your sunroof.
Work.
Those cars they don't have the ABS chip, we're not allowed to sell those.
You can't, so you can't.
You could drive it, but no ABS.
That would be right.
Well, you could stop it the way you stopped cars twenty years ago without all the technology. And so wait, I don't understand, why can't you get these chips? And that was an early read into that. So we talked about Tyota and Ford and McKenzie. If we're talking about supply chain and globalization, we have to also talk about the outsourcing to China where you spent a lot of time. And I'm curious about the role of Walmart in moving so much manufacturing capacity to China. Tell us a little bit about Walmart.
So Walmart is the ultimate example of how publicly traded companies have undercut costs in the name of gratifying consumers with low prices, and they found in China the ultimate solution to their bottom line. Concerns. I mean, here's this country where there's no labor unions. They're effectively they're banned by the commedist party. You can cut a deal with the commedi'st party official to get hold of space or resources. You're tapping into the world's potentially largest consumer market for you know, just about everything, and China, even before China enters the World Trade Organization in two thousand and one, but especially afterwards, it is the you know, perfect place to make products at scale, increasing sophistication, low costs. And you know, we spent a lot of time now talking about how this supposed you know, export juggernaut intent on killing American living standards has undercut all these manufacturing jobs in the US. I mean it is I'm glad you're putting the focus on companies like Walmart, because it really was American and Western companies in general clamoring for a shot at the Chinese market as a way to satisfy their own conterns for low prices, to make their share prices go.
So what about the politicians who do we blame? Is this Bill Clinton? Is this Ronald Reagan who helped set the stage for the hollowing out of American Industrial Center and China's entry into the World Trade Organization.
Well, I'm not so sure that it was wrong by the way to let China enter the World Trade Organization, though we could have put more focus on terms for labor and human rights and environmental and environment for sure. You know, I argue in the book that you know, most of our problems, and the problems are significant in terms of the so called China shock. They cost you know, a million direct manufacturing jobs in the decade or so after China enters the w two and two million if you count. You know, the truck drivers who no longer have a factory to deliver to. You know, that's really home cooking, right. I mean other countries. I mean Canada is not you know, seething with anti trade sentiment to the extent that it is in the US, because they have national health care there. We don't have national health care. We don't We have Trade Adjustment Assistance, but it's woefully underfunded. That's a program that's supposed to help people who lose their jobs because the trade deals transition to something else. It's our own political decisions that have left workers effectively abandoned when they lose their jobs, and in terms of the net trade with China has actually been a positive for the American economy. It's a question of how we've distributed the spoils, but in terms of how that all came about. Yeah, I think you got to look at Clinton. Who I mean. I tell the story in the book of How Clinton Runs in ninety two as the answer to George H. W. Bush calls him, calls him out for supposedly coddling the butchers of Beijing, you know, CosIng up to the Chinese Commedist Party. After the Tianneman Square massacre in nineteen eighty nine, Clinton vows that things are going to be different in his own administration. Human rights are going to matter so much, And not even a decade later, he's at the Great Hall of the People, this is across the street from Tenneman Square itself, saluting his host, this is Johnson Men with Hillary by his side, and saluting the great strides that China has made as he's lobbying for this deal that will bring China into the WTO And he even goes to the back of the hall, picks up the baton and conducts the People's Liberation Army orchestra. This is the orchestra for the institution responsible for the Tanneman massacre. Now why does he do this because he comes from Arkansas, this is Walmart's home state. Because the Democratic Party and the Republican Party for that matter, awash in campaign contributions from retailers manufacturers who want a crack at China because it's good for business, and that ultimately drives the equation.
During that debate about China entering to the WTO, we heard the phrase democracy tossed around a lot, right, that this will open up China to democracy, that this will improve their environmental regulations, will improve human rights and their label laws. None of that happens.
None of this happens. We hear this from Larry Summers, we hear this from Bill Clinton, We hear this from Bob Rubin. What does happen. Bob Ruben gets to go to China with City Group and make you know, as chairman, as chairman, you know, and crack that market and that's good for their share price. Of course, what happens China does become the workshop to the world. Retailers get a crack at this giant market for a time. Although we've never really gotten the market opening. That's right, promises that we got. Share prices do go up because costs come down consumers. You know, if you like the idea of being able to go to Walmart and buy a badminton set for three bucks or whatever, like, you got the bonanza. But we've got a lot of loss manufacturing jobs. We got a real hit to the kind of psyche of American industrial areas. Our politics change not for the better as inequality sinks in and is working people understand that their ability to support their families doesn't seem to matter very much to the people running the economy.
In the beginning, it felt like they were inexpensive products from China. Later on that lack of environmental regulations or lack of even basic safety standards kind of cause problems. I don't know about you. I won't buy dog treats or food made in China because you never know what's in them. We had that whole thing with the sheet rock that was mildewed and were problematic.
And on and on.
Every time it seems that there's a problem with a Chinese product, it's not that the people who are working in the factories are doing anything wrong. It's that they're just allowed to do anything with no sort of regulatory oversight. So you end up with asbestos in sheet RockA you end up with some bed chemical in the dog bones. At what point is the backlash from the lack of a regulatory oversight in China going to actually impact them?
Well, I mean it has had some effect, right, I mean, Chinese said since are unhappy about polluted air. I mean there's been a lot of moves to reduce we don't see the progress here yet coal fired electrical plants, or at least move them further away from urban areas in places where the environmental destruction resulting from massive industrialization it's really hit. We've seen protests, we have seen some change there. But ultimately China has been driven by a very successful effort to lift hundreds of millions of people out of poverty, and so for the most part, economic considerations have trumped all other considerations. I mean, the great irony is that the driver of the kind of globalization that I'm writing about in this book, at the center of it is this what I described as a joint venture between the People's Republic of China, this institution forged under a peasant rebellion revolution under a Marxist Leninist terms and Walmart the ultimate retailer from the citadel of Western capitalism. And this joint venture has really propelled us through the decades. And that's what is now changing.
So there's some really interesting tidbits in the book. I have to bring up. Between nineteen eighty one and two thousand, American companies reduce their inventories by about two percent a year. By twenty fourteen, that were holding one point two trillion dollars less in inventory than they had been in the eighties. That seems like a giant number.
Yeah, it is. Now. Some of that is reflective of more reliable products, right, So some of that is the part of the Toyota production system that doesn't get talked about much, which is, you know, quality improvement. So if your parts don't break as frequently, then you don't need to hold as many that's fine. But we know that every time there's a shock to the system, we run out of stuff. I mean, the pandemic brought that. If you didn't know that before the pandemic, you sure found out about it when we ran out of you know, every single medicine, right, I mean, that's the title of my book. But the first supply chain disruption story I ever wrote was back in nineteen ninety nine when there was an earthquake in Taiwan and we had shortages of chips and other electronics. Then, of course the Fukushimi Fukushima disaster in Japan and twenty eleven and into twenty twelve we had massive shortages of electronics for months after we had floods in Thailand around the same time that knocked hard drive production out of whack. And each time people who pay attention to this stuff, and that's a fairly geeky set of people, would say, I think maybe we've overdone it with justin time. But this equation has been so good for the people running publicly traded companies that any CEO who says, I don't know, maybe we need more of a hedge against trouble, that's an invitation to go out looking for your next job. The CEO says, let's keep going lean. They know that it eventually there will be a come up ins but with any luck, that'll happen after they've moved on, they've sold their they've casted in their options and then they're on you know, some beach and a hammock with a cocktail on their hand.
So let's talk about what took place before and after the pandemic, and some of the data in the book is really quite astonishing. Pre pandemic, China made eighty percent of the face mass sold in the US and nine of many basic antibiotics. Yeah, that just seems insane to me.
Yeah, in retrospect, it's I mean, it's certainly insane, Like.
How can we not make our own antibiotics in the United States.
I mean, what makes it insane is we're discussing a period where we're deciding to have a trade war with China, right, I mean, right now, you know, I mean if you have a great relation. I mean, I think if we were saying eighty percent of our face mass made in Canada, I don't think we'd give that any thought because the likelihood that we're going to close the border seems pretty small. But yes, to be going into the pandemic simultaneaneously having this trade war while we're heavily dependent for really significant stuff on this country that you know, happens to be on the other side of the Pacific ocean. Uh, that's a problem.
So let's talk a little bit about what this looked like once the world shuts down. By the middle of twenty twenty one, thirteen percent of the world's container shipping fleet they're just stuck in traffic jams at ports. They can't get in or out. Yeah, about a trillion dollars worth of product is just stuck offshore. Tell us about that.
Yeah, involuntary warehouses suddenly container ships or involuntary warehouses. You know, I'm tracing in the book the passage of the single ship and container from a factory in China to a warehouse in Mississippi. This is the most important shipment in the history of this startup company based in Mississippi called Glow, run by a guy named Hagen Walker. And Hagen Walker's got this deal with Sesame Street to make these light up bath toys and this is his first order that big enough to fill a forty foot shipping container. And first, you know, the price of moving a container of goods from the west from coastal China to the west coast of the US goes from like twenty five hundred bucks to north of twenty five thousand dollars in the space of a few months, and then by the time he manages to get his stuff on board a ship, there's fifty sixty seventy ships just floating off the twin ports of Los Angeles and Long Beach. These are the two ports that collectively are the gateway for forty percent of all imports reaching the US by container ship, and there's just not enough space on the docks for them to unload, so they're stuck floating for sometimes for weeks.
So do we not have enough ports or was it just a shortage of port workers and truck drivers and railroad cars and even shipping containers themselves that led to this problem.
It's a little of each of these things all at once. But it's important to understand that the shipping industry is basically an unregulated cartel made up of international companies. They're all foreign companies. They're organized, though there are scores of them, into three alliances, think like airline alliances, like your Star Alliance or your One World or whatever, and these three alliances they control like ninety plus percent of the traffic across the Pacific. So in the same way that you know it's not an accident that you get on your United flight and every seat's taken, and they're looking for volunteers because they're managing inventories so carefully. They want you to be anxious about getting space on that flight, so if you really got to make that trip, you'll pay whatever it costs. They have a similar shipping carriers have that relationship with the people who are dependent upon space on their ships. So you've got limited capacity. And sorry to back up on you, but there was a massive miscalculation by much of international business. As the pandemic begins, right, we get the first shutdowns in China. We then get disruptions in Europe as the pandemic spreads, and we get quarantines, people thrown out of work. Unemployment shoots up to fourteen percent in April of twenty twenty in the US, and people running businesses react to this as if you know, oh, this is familiar. Okay, this is a this is a terrible downturn like the Great Financial Crisis and then the Great Recession. We just need to slash orders for everything because you know, people are out of work, so spending powers drying up. Well, if they had part of it, right, yeah, if we're not going to offices, then there's no need for the sandwich shop on the corner. We're not going to the gym, gyms or shut But guess what we're now stuck at home cooking, you know, twenty seven meals a day for our cooped up children. We need more kitchen appliances. Can't go to the gym. But now we're buying pelotons and sticking them in our basements. We need more of those. A lot of this stuff's made in China, so there's now demand for these container ships to carry them across the ocean, and a lot of the containers have been sent out to places that are bearing face masks and gowns and other ppe, and they're headed to places that don't have that much stuff to send back to China. So there's stacks of containers in West Africa, in parts of Latin America that don't do that much trade with China. Just as China's turning on to make our pelotons and our you know, backyard barbecues and trampolines to entertain our cooped up children, so that shipping price skyrockets, and it turns out we actually need more stuff, including ships than we needed. And at the same time, to your earlier point, we got truck drivers six, so we don't have as much truck drivers, so we don't have as much trucking capacity. Dock workers are six, we don't have as many people to load and unload. Warehouses are now full because we don't have people to move the stuff out of warehouses, so we don't have places to put all these boxes that are coming in, so they're piling up on the docks. The whole system just buckles.
It's amazing, and it's so hard to imagine what it was like before because we know how it turned out, and today it feels like, how could any of one have made that miscalculation? And so obvious the demand for goods over services was gonna spike, but at that time, not a lot of people saw that coming, did they. It was a pretty big miscalculation.
It was a big miss calculation. But it also goes back to what we were discussing earlier in terms of shareholder primisy. You know, one of the things that Toyota really valued in its own version of justin Time is you have to take care of your suppliers. If things are bad, you don't just say well, you know, we disown you. We don't need any of what you're making. Good luck to you, because then when you do need them, they'll be out of business. Right. But that's effectively what we did with computer chips. You know, why can't you find a car that's got a computer chip because the auto companies, well the auto company made a series of terrible miscalculators. First of all, they didn't understand that they didn't actually matter very much to their ultimate customers. The chip fabricators in Taiwan. They thought, well, you know, we're Ford, we're GM where you know, Nissan, whatever, like they have to take care of us. No they don't. They're taking care of Google and Apple. That's most of their markets. And even those companies can't get chips. So whatever chips they can make, they're going into the iPhone because that's the big customer. Sorry, Ford, you're last in line.
Well not quite last, because for small med devices and some real important life saving devices, that's right, could not get manufactured according to your bum correct.
But when you tell a chip manufacturer, hey, sorry, we don't need any of what you're making. We'll call you when we do, they turn their fabrication plants offline, and you can't just turn a switch on to get that going again. It takes billions of dollars, it takes lots of materials, it takes months. So once we realize that we've grossly misscal in terms of running the economy, we then have to wait to ramp back up. And that does go uh that that is an indictment of how we've done just in time. We haven't thought about suppliers as you know, partners, they're just suppliers, are just costs to be contained. And the same goes for human beings. You know, you go back to what you were saying about McKenzie earlier. One of the things Mackenzie did in terms of proselytizing for Lean is they turned human beings and human workers into inventory. Oh we don't need you, well, we're just gonna make you flexible. You're you're an independent contractor, now, congratulations. That effectively means we own your time. If you're a warehouse worker or you're a worker in a in a plant that makes something like you know you're engaged in biomanufacturing. If we need you, we need to know that we can tell you a day before that you have to show up for work. So you don't have control of your time. You can't go on vacation, you can't schedule, you know, a doctor's appointment, your tr You don't get paid unless we call you. Well, guess what. The minute unemployment drops to historic standards, people say, you know what, I got other options. I'm gonna pursue them because I don't like being treated like inventory. And you go back to Henry Ford, who understood that. You know, Henry Ford is not a figure to be lionized, right. He was a racist, He was an anti semi He crushed organized labor, but he understood that if you want workers showing up giving there all, you got to pay them. He doubled wages in nineteen fourteen. Some people called them a communist. He said, I'm just a guy who wants to make product reliably, and any business premised on low wage labor is inherently unstable. We broke that connection, so so ultimately we lost. We have these labor shortages, we love to say, but we really we ran out of people willing to continue to sign up for the deal of downgraded jobs.
So let's talk a little bit about that because I constantly harp on this point, and I feel like so many people don't understand this. So the decade leading up to, or maybe the two decades leading up to the pandemic post nine to eleven, the Bush administration changes the rules for who can stay in the United States if they're here on an education visa. We reduce the number of legal immigrants who take a lot of jobs that Americans don't want. Then we have the pandemic, and so there's no traffic in or out.
I don't know.
Arguably it was close to two million people in the US die of COVID. I know the official numbers are a little less than that, but it feels like that's a conservative guess. You have millions of people on disability, millions of people who still have long COVID. All these different factors come together and it creates this massive shortage of workers in the United States. Of course, unemployment is four point something percent. We don't have enough body. How much of this what you're describing as just in time inventory for people, how much of this trace is back to that approach?
A lot of it, you know, I mean, I think we heard a lot about how are your stuff's not shown up because aren't enough truck drivers willing to do it, As if these guys just lost their mojo to do their jobs. I actually spent three days riding along with a long haul truck driver from Kansas.
Tough gig, isn't it.
It's a I mean, look, it's always been a tough gig. But you know, before deregulation under Carter. People love talking about Reagan, but a lot of stuff actually starts with Carter. In the only seventies, the teamsters weren't charged. Okay, here's another institution. Not to be lionized. You know, they have an unsavory history, but they they demonstrate the power of having a union because you know, you're away from your family, you're on the road, you're worried about where to park. You know that was always true, but these guys got paid really well. I mean it was. This was a truly middle class to upper middle class up Now it's basically a working poor job and you're away from your family more than ever. You're really at the mercy of too much competition in that particular industry, where trucking companies are constantly undercutting one of those it's very hard for any of them to make any money because there's so many of them, and so they rely on being able to squeeze labor. And that model works so long as there are huge numbers of people so desperate to do anything that they will sign up for. You know, and going back to our earlier discussion of the mortgage industry before the Great Financial Crisis, there are these predatory schemes reminiscent of subprime in the recruitment of drivers, and a lot of drivers sign off on this pitch that the you know, the allure, the open road, and we're going to pay for your training program. But then you're indentured to the company that paid the training program for six months or sometimes two years, and by the time you figure out this is actually a really bad deal. I'm not getting paid by the hour. I'm getting paid by I load delivered. I'm spending hours an hours just waiting at some port for my container to be available. I'm stuck outside some warehouse that's also sort of employees, waiting for them to unload my freight so I can pick up the next load. I do the math. I'm actually working barely minimum wage, in some cases even below a lot of people quit, and so we have this churn where even a successful trucking company has to replace their entire fleet in the space of a year. In any other industry, that would be a scandal. In trucking, we just accept that that's how it goes well. That breaks down once unemployment drops below five percent. Yeah.
One of the fascinating things about the combination of the pandemic and the Cares Act that we're sending people pretty decent sized checks enough that they could live on for a couple of months. The highest level of new business formation in American history twenty twenty one twenty two, it seemed like a lot of people figured out, Hey, I got to find something, and if they're not going to pay me, I'm going to figure it out myself, right, And whether it was creating new apps or just their own little businesses that they were running, it looked like a big swath of Middle America said I don't need one of these high efficient corporate jobs for that sort of headache. I could figure something out myself. How much of the labor shortage has been driven by people just kind of upskilling and saying to corporate America, hey, I think I have a shot at generating as much as you're paying me.
I think a lot of it. I mean, certainly in the supply chain. You know, the normalcy that we're accustomed to, where you click your buy button on Amazon and you wait, sometimes just a few hours, and somebody shows up at your door. We're invited not to think about the army of workers behind that. You know, that's based on large numbers of people being so desperate for a job, especially a job if it happens paid to have healthcare, that they're not looking around or anything else, and they're aware that whatever else is out there probably represents a downgrade if they're able to stay in their home and support support their families. I mean, we know that lots of people who are working in places like Walmart warehouses, who are moving packages in giant Amazon fulfillment centers qualify for food steps. I mean, they need a federal subsidy courtesy of us, the taxpayers, just to keep themselves fed so they can do those jobs.
Do you remember the mchelpline back in I want to say, twenty twelve, twenty thirteen, I recall a bunch of news articles that McDonald's would hire people and then help them like Walmart get all this aid. And it makes you think, wait, you're spending all this money lobbying to keep the minimum wage low. So if you're a private company, why you asking me the taxpayer to subsidize your employees. I don't care if the burgers there are sense more. Pay your clients a little. And the fascinating thing about that, I have a vivid recollection. I want to say it's twenty fifteen of Amazon announcing we're gonna pay fifteen dollars an hour and scooping up all the best people, and they left places like Walmart scrambling. There was a period where Walmart shelves were empty, the stores were dirty. I think Amazon had enough money that they said, we don't care about a couple of bucks. Let's just this is a resource we're going to capture. We're going to monopolize this resource.
Well, so a lot of that was reflective of the fact that you have huge numbers of people who are just so busy doing two jobs, driving vast distances to keep the job they've got, that they don't have time to think about, well, what alternate career could I pursue. That's like thinking about going to the moon. Well, suddenly the pandemic shuts everything down and you are now having to contemplate whether you want to or not some other way to feed your family. That was such a shakeup. At the same time that we do have ergency unemployment benefits that are taking the edge off and allowing people to continue to just spend on their basic needs. And we have unemployment drops so much that suddenly people who are not accustomed to thinking about alternatives, you know what else is out there? Let's check it out. Maybe I will start a small business.
You talk about the meat packing industry in the book that also ran into not just shipping problems, but worker problems. What made the meat packing industry so unusually at risk to supply chain problems?
Well, it's a perfect example of this. Engineered scarcity is the term that I use where because you know, one of the types of deregulation that we've had that's been so disastrous because we eliminated antitrust enforcement. This goes back to Reagan, continues through every presidential administration on both sides of the aisle until this break under Biden. We've got four companies that are in control of eighty five percent of the meat packing capacity in the United States. I mean, that's a number that's higher than during the Robber Barren era. So guess what they're setting themselves up so that the cattle ranchers in selling their animals have few alternatives, which keeps prices low. On the front end. You know, the people they're paying have no pricing power, so they're getting the animals cheaper. At the other end, where they're distributing to restaurants, to consumers, grocery chains and the like, they are benefiting anytime there's a shock to the system, so they're getting record high retail prices or wholesale prices that are translating into retail prices. At the same time, the cattle ranchers are going out of business because they're getting a smaller slice of the dollar that we're spending on beef. And they're working the system. So they get the Trump administration in the first wave of the pandemic to drop an executive order that says slaughterhouse workers are essential. Workers have to continue showing up even when local public health authorities say, actually, these slaughterhouses they're superspreads. What I discovered in researching the book is at the time that so I tell the story this one woman Tin I who's an immigrant from meandmar who actually dies and the JBA well, she contracts COVID and dies the first wave that she worked at a JBS slaughterhouse outside of Denver at the time that the Trump administration is parroting industry talking points. These people are essential workers. If they don't keep showing up from work, we're not going to be able to get fed. The meat packers are actually sitting on record volumes of frozen meat, and they're boosting their exports, including to places like China. So we essentially sacrifice the lives of these slaughterhouse workers not to feed Americans, to continue to funnel monopoly profits to a handful of companies.
So let's talk about those profits. And I want to talk about a data point in the book when when the phrase greedflation first started circulating in mid twenty twenty one, I had a list of fifteen things that were contributing to inflation, and I think I had greedflation was thirteen. I was pretty skeptical of it, and then as time went on, there was more and more data coming out that said, hey, we're seeing record profits, and it looks like a lot of this is a little opportunistic. The data point that you have in the book, by the time inflation is peaking in June of twenty twenty two, more than half of the price increases in US goods were going to increase profits. A mere eight percent found its way out to workers. So it seems like the greedflation narrative turned out to be pretty.
Right one hundred percent. And the thing is this was not a surprise to anybody listening to the earnings calls because the executives of companies Kroger, you know, the giant supermarket chain publicly well, you know, we're having to shell out more. There are all these supply chain disruptions. Our prices are going up, so unfortunately our cost off to go. Meanwhile, they're telling Wall Street analysts this is fantastic. You know, this is the greatest opportunity we've ever had to jack up our margins because everyone's rising, lifting their prices, you know, collectively, so nobody's gonna point the finger at us.
Historically, people don't realize this. Historically, stocks have always been a great inflation hedge because when prices rise, well, it just gets passed along and then profits rise either the same or more. And if your stock price is a function of your profits, well, guess what, it's a great hedge against inflation. It's not gold, it's stocks that are the good inflation hedge.
I mean, the question is, and this is something I get into in detail in the book, question is are we talking about an industry where it's truly competition or not. If there's competition, then you're limited in how much you can jack up prices because presumably your competitor will say, well, accept a slightly lower margin for greater market share. That's actually free market capitalist.
But it didn't feel like that happened in twenty one or twenty two. It kind of felt like, hey, no one's going to notice if I make this package a little smaller or if we raise it, Like everything is just going to get lost in this giant surge of prices and who's going to really know?
But beneath a lot of this, it turns out, is market concentration and various forms of collusion. I mean, oh, what what a coincidence? Every time one airline lifts their fare from New York to LA the other ones go ahead, You know how interesting that you know, this just happens to be how it works out, you know every single time. You know why is that we don't have enough competition and there's no transparency in the marketplace. And you know, everybody knows that if you walk into the casino thinking that you're the smartest, well you're the sucker because there's a lot of data operative behind you. And that's the world that we're living in. This is this is not competition most of the time.
And we have since learned that a lot of the algorithms and software that are being used to set prices also contribute to that collusion, most recently with landlords and rents that hey, these guys have kind of figured out that this algorithm is colluding to drive sure rents higher because we have access to all this data and oh, we know what those guys are charging, and we know what those guys are charging, so we could we could bump up to that level. And it's it seems that if you're putting software in charge and all the landlords are using the same piece of software, hey, that very much looks like collusion.
Yeah, no, that's that's absolutely right. And you know, my favorite example of this recently is we just had this dock workers strike on the East and Gulf coast of the United States, and there were all of these breathless stories, but this is such a terror time for the shipping industry. You know, they can't move any of this cargo. Well, guess what happened after they settled the strike. The stocks of the companies that are publicly traded plummeted. Why did they plumb it Because anybody who understands the container shipping industry gets that engineered scarcity is the name of the game. And when there's a shock to the system, if you can't move cargo, they're going to jack up freight rates globally way in excess of their underlying costs. So the market said, oh no, the strike's over, We're back to normal. That's my chance to sell off in the same way that you know, we've got the hooties in Yemen opening fire on vessels headed toward the Suez Canal, effectively shutting the canal, making ships that are going from Asia to Europe go the long way around Africa. If that, analysts tell me that probably increased costs for shipping companies by maybe forty percent. I mean diesel costs and you know more labor costs. Well, shipping rates are up three and four hundred percent. That's fatter margins. So when there's a shock to the system, if there's no competition, that gets expressed as pricing power, which means we all pay more.
So since the pandemic, the new administration has focused on reindustrializing the United States near shoring or in house shoring or whatever you want to call it. What is the state of manufacture reshoring is the phrase I was looking for. What is the state of bringing manufacturing back to the United States? How long will it take before we can have a little more resilience built into our own system.
Well, we're going to get more resilience, you know, over the next decade or two. You know, we're the globalization is not over, by the way, Like my book is not a call for making everything in America. That would be extremely expensive, it would be wrenching and disruptive. It is a call for greater actual resilience alongside this kind of ruthless efficiency. And it's not real efficiency, as we've discussed, it's really about catering to these metrics. So you know, in strategic industries like semiconductors, medicines and the medicine supply chain, electric vehicles, where the Biden administration is now handing out tens of billions of dollars in subsidies. We do see a real construction movement, and actually it's been interesting to see that a lot of the investment is going into places that were hit hardest during the so called China Shock. North Carolina, Michigan, you know, getting Arizona, Arizona, you know, getting a lot of this investment into these emerging, you know, future facing industries in other industries, especially where labor costs still matter. It's unlikely that this stuff's going to come back to the US.
So we're not making furniture, we're not making clothes here really didn't not making.
Tube socks and the Carolinas again, you know, but instead of making it all in China, we'll make them in Central America. We'll make them in Mexico, we'll make them in India. So there's a hedge against reliance. I mean, it's not that we're abandoning China, by the way. I mean, China's going to continue to be a very significant center of manufacturing. If that there's a sort of portfolio rebounding, and I would put it to you this way. We've talked a lot about Walmart fifteen years ago. If you were if you had a product that you were trying to get on the shelves of Walmart Superstore, and you flew down to Bentonville, Arkansas to pitch the Walmart buyers on your product. You have to go see them. They don't come see you. It's like visiting the pope, you know. And you get your appointment, and they would ask you where are you making this product? And if your answer was something other than China, you had a problem because they would assume that you couldn't be getting the lowest possible price, you weren't making it at the most efficient scale. Well, now if you go to Bentonville, you got your product, Walmart says where you're making it? And if your answer is only China, you have a problem. I want to hear, Well, what's your backup plan? You know, we we don't want to get stuck waiting for container ships to come in to La to serve our customers in you know, Oklahoma City. So are you making it in Mexico? Are you looking to India. Are you moving some stuff to Vietnam. There's gotta be a greater mix, and that that is happening to an extent, but I am dubious that it will continue to happen the longer away we get from the pandemic, for the simple reason that you know you're an incentives guy. I'm an incentives guy. The incentives for a publicly traded company are still quarter by quarter, lowest possible cost. So if you're the CEO of a company and you're saying, well, let's spend a little more for redundancy, let's have a second factory in Mexico. If you're diluting next quarter's earnings or the quarter after that, this is a good chance you won't be around to get the praise. Whenever the inevitable next shock materializes, that will reveal that that's a good strategy.
So globalization not dead. Resiliency not as important or fundamental as we might have been led to believe over the past few I.
Mean, there's certainly a change to the talking points, right Mackenzie now talks about justin case instead of just in time. But we got a watch to see if these lessons will really get learned because the shareholder's interest is still with us.
What are you watching these days or listening to? What's keeping you entertained?
I've been rewatching The Sopranos. Oh really, I haven't watched it since it came out.
How's it hold up?
It's great. Yeah, it's hilarious. I forgot how funny it is. Oh, it was always fat it was always very funny, so well acted, obviously, just really well. And I also rewatched Succession from the beginning to end.
I tried a couple of times to watch Succession. I liked by the second episode. It's like each one of these people and I know everything I've read. The writing is great, this is and I just couldn't. I just couldn't find myself, you know, interested in anybody. It's like weird, you don't like. It's like no character you like.
As a guy who lived through one of the most grotesque mergers of all time, which is AOL purchasing Warner, well I wasn't a Time Warner, No, I was. This is the the what's left of AOL buying huff Posts When I when I had a senior leadership position in the newsroom, it was so interesting to see there there's a merger in the fourth seaton, in the last season in succession, where you've got like the public facing like Synergies magic, and meanwhile you got these two characters who are like screwed and they're just desperate to consummate this deal as a way to kind of wipe away their problems and keep the whole Ponzi scheme going. That was so true to me in terms of what I lived through that I'm willing to You're right, these are not sympathetic people.
But everybody seems to love it.
It's great show.
You know what I watched during the pandemic that I hadn't seen in real time, and it was just one of those things what you never saw this was mad Men was sort of your you rewatching Sopranos was me watching mad Men for the first time. And even though there are some complex characters that have good good sides and bad sides, there's still people you root for and are empathetic.
That's true, and.
I just found it to be mad Men is incredible. How did I miss this the first time around?
Amazing show?
Yeah, really, all right, let's let's let's go on. Let's talk about your mentors who helped shape your fascinating career.
Well, thanks for that. I had a couple of old school newspapers people I sat next to you in the first newsroom I ever worked in, which was at the Anchorage Daily News in the last year, was a columnist named Mike Dugan and a reporter named Shila. To me, they were veterans, and I just listened to them working their sources on the phone and you know, giving them a hard time holding people to account, and I just thought it was so thrilling that it really affected how I go about it, how dogged they were. When I got to the Washington Post, I was lucky enough to spend time with Steve Kahl, who's one of the all time greats, and every time I would talk to him about a story, I would come away with a new understanding of the historic significance of whatever it was that I was covering. And I've always tried to think about every story is like, what does this mean as like a letter to somebody in the future, What does this signify that's broader than just the thing that I'm writing about that I thought the Washington Post in that period was very good.
At let's talk about books. What are some of your favorites.
What are you reading right now? I'm reading Isabelle Wilkerson's The Warmth of other Suns, which is this fantastic narrative history of the black migration from the South to northern cities, which is a period that I realized I just don't know enough about, but it's just so important.
Post Civil War, pre World War One.
That yeah, it's like from World War One into the nineteen seventies and it's just so significant in terms of affecting the politics and of course race dimensions and class and American culture. And it's just a beautifully written book. You know. I've always loved Steinbeck. I was very influenced early in my career by Norman Mahler's nonfiction. I like this idea of like the best work is the reported stuff that unfolds like a novel. The Executioners song had a great effect on me. Tom Wolfe stuff. I feel like I'm just dating myself now.
But so when you say Tom wolf the right stuff.
Or is fantastic, Yeah, I like his fiction. I think Bonfire of the Vanities is really entertaining, a very insightful book in lots of ways. I'm a sucker for Michael Lewis. I mean, there's anything he writes, Yeah, the Big short certainly. I loved Moneyball, a big baseball fan.
Yeah, No, Moneyball was one. In fact, it just look at his past half dozen works, each one more fascinating, and the next the Undoing Project was absolutely fascinating.
I haven't gotten yet.
Oh, really about Knoman and Taversky and essentially the invention of behavioral finance, which can't by the way, the if you read the introduction of the book, you find out that after he writes Moneyball, he gets an email from Dick Thaylor and Cas Sunstein who said, Hey, everything you're talking about was Taversky and Conoman. All of the the alternative ways of looking at data dates to them, at first in Israel and then in the US. You should talk to you should talk to them. Oh and ps Amos Tverski, who is no longer with us. His wife lives right up the street from you at Berkeley and such, and that's what led to that. Really, if you're interested in a strong recommendation, our last two questions, what sort of advice would you give to a college grad interest in a career in journalism, in freelancing, in economics, what advice would.
You give to me? It's real simple. Just write, dude. Find something that allows you to just write and write and write, because there's just no substitute. You can't develop the muscles without doing it. It's as simple as that. And writing a deadline is super useful. Covering a beat is incredibly useful in terms of helping you develop judgment. But whatever you're doing that involves finding stuff out and writing will make you better at it. Huh.
And our final question, what do you know about the world of investigative reporting, economics, journalism in general that would have been helpful thirty or forty years ago when you were first getting started.
The power of one or two deeply reported cases is much greater than the over reporting spreading too thin that I think most of us when we're young tend to do. We don't have the judgment developed yet to say like, I'm gonna stay right here and I'm gonna dig deep into this where we're constantly well, what question will my editor ask that I won't have an answer to? Therefore I have to have to cover the landscape. I have to talk to twelve companies would actually be better if you spent more time with two carefully selected companies, and and that oftentimes the thing that can elevate a story to one that people will really remember is like, well, I got enough that I could write. I now know the story. I've got my data, I've got some quotes. But note now I'm gonna go find a character. Now, I'm gonna go find a place where the sense of place is going to draw a reader through, and it's gonna unfold like a story that we might tell somebody who's not deciding to think about finance or economics. They just want to know something interesting, and all that all that backstory that I've developed by doing my reading, by looking at reports, by talking to experts and asking questions that might be dumb, that's going to come to life now through this great example that I've come on Peter.
Really fascinating stuff. We have been speaking with Peter S.
Goodman.
Here's the global economics correspondent for the New York Times and the author of the book How the World Ran Out of Everything inside the Global Supply Chain. If you enjoy this conversation, well, check out any of the other five hundred and forty we've done over the past ten and a half years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts, and be sure and check out my new podcast, At the Money, short single topic conversations with experts about your money, earning it, spending it, and most importantly, investing it. At the Money, in the Masters and Business feed, or wherever you find your favorite podcasts. I would be remiss if I now thank the Crack team that helps put these conversations together each week. Nick Falco is my audio engineer. Ana Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts here at Bloomberg. I'm Barry Rittolts. You've been listening to Masters in Business on Bloomberg Radio.
