Deep Dive
Shownotes Transcript
Wait, how did I use this? What's up, everyone? We just go through the bullet points. No, no, no. What was my thing? Yeah, what's up, everybody? Welcome back to the Honest Retreat. What did I say after that? I'm Justin. We got a good one. We got a rollercoaster show today. If you've been enjoying this show, don't forget to...
Rate, subscribe, give a thumbs up, whatever. Oh, that's right. You do have all that shit. Yeah, I used to say that. You forgot. Yeah, I totally forgot. Okay. What's up, everybody? Welcome back to The Honest Drink. I'm Justin. If you've been enjoying this show, don't forget to rate, comment, and subscribe.
All right, today we got an awesome return guest for you. He is the managing director of the China Market Research Group. And if you don't know, they do a lot of research for a lot of huge brands and companies that are thinking about entering China. We talk about China and its economy, its role in the global economy, the market, companies coming in, whether to stay or leave,
What else did we talk about? Anything I'm missing? Climate change. A lot of anxious emotions, and we tie it in all into business and economics. So it's a really, I think, relevant discussion that might be weighing heavy on a lot of people's minds. Certainly, there's a lot in the news and media and headlines about this kind of stuff. So without further ado, please give it up for Ben Cavender. See a living enemy, the right eye, the world in which he
So it's kind of like you enter the jungle. You can make that work. Taobao's your friend. I think you could probably find a pretty good temple selection. Dude, Taobao's everything. Well, the thing now with the image search being so good, it's just phenomenal. It's insane. See something, you can immediately... I've used that function so many times. I'm just taking photos. I'm like, I want that.
It's really funny just how easy life is here in some ways because of technology and then difficult in other ways. Can you do that in Amazon or other platforms? Do they have that? So Google has image recognition now, but it's pretty basic, I would say, versus what you can do here on Tmall or on JD or any of those platforms. I don't think it's been integrated to the same level on Amazon.
Because I feel like I'm so secluded here in China that I don't know how shopping e-commerce is in the West. So I have no idea. It's still so basic. And I think the use of a lot of the services that we take for granted are still... So as I mentioned, I was stuck in the US for a while and I flew back to China through LA. And when I was in LA, I had a very nice friend who allowed me to sort of just
kind of camp in his, he has an Airbnb property there. Cause I didn't want to, I didn't want to be near anybody because I didn't want to test positive right before coming back to China and then get stuck in one of those hospitals. Yeah. Uh, but we did end up, you know, biking, this was in long beach biking to an Italian restaurant that he and his girlfriend really liked to go to. And so we were using their version of, you know, city bikes like we have, and it was just archaic, right? Because they're still married to a specific, uh,
platform that you have to connect them to. You have to park at that platform. Yeah. And they weigh about 5,000 pounds and it's just not like the experience of being able to cruise anywhere you want here on a bike. So that was the first thing I noticed. And then the second thing was we got to the restaurant and they had the QR code on the table. So I got really excited. You're like, I know this. Yeah. I know this. And it was great. It loaded the menu
But then you still had to talk to a physical person to place the order. What? So that kind of defeats the purpose. Exactly. So it's like they had the first step, the load the menu, but they didn't have the order step and they didn't have the payment step. So it was kind of like, well, you know, what are we doing here? You know, great. I didn't have to touch the menu. I guess that's keeping the COVID germs away. But then I'm still, you know, talking to a physical person to do everything. Wow. So, yeah, I'd say the U.S. is still lagging a little bit.
Well, Ben, welcome back to the show, man. It's great to be back, guys. It's been so long. It's been a really, really long time. Cheers. Cheers. Ooh, that's yummy. What is that? Okay. That is nice. Spicy. It's got a very Asian...
label but what's the story there they have some deep-pocketed chinese investors i don't know it's just the labeling no it's not um we just drink it's like yeah we just why do you got to read into everything culturally i know i'm sorry i'm sorry i can't always trying to find an angle it's it's selected and bottled in scotland but um yo ben i'm so glad you're back the first episode we did with you
was a great epic episode. We got a lot of positive feedback from our listeners about that. But it was so long ago. How's life been? Well, first, nothing like a little pressure. Hopefully we get something interesting out of this. But it's great to be back. I think it's been a very strange three years for everybody with everything going on. So I think a lot to talk about. With myself, I can't complain too much, luckily. It's good to be in Shanghai. I think it's good that things are
you know, starting to open up a little bit. I think with the, you know, on the business front, it's been definitely an odd couple of years with, you know, foreign businesses, not sure what to do here. A lot of businesses and,
The service industry certainly really taking a hit and what that might mean for policies maybe opening up a little bit as well. Yeah, well, I definitely want to dive into all that. But when you say you're coming back, you were in the States? Yes. So I spent most of 2020 in the U.S., which was the longest I had been in the U.S. for, I don't know, 15 or 16 years. So it was quite interesting being back there.
Did you have culture shock? I definitely had culture shock. You know, you go from a city with 25 million people to all of a sudden basically being in the woods in New Hampshire. And how long were you living in China before that? I moved to China summer of 2005. Oh, yeah. So you've been here a while. You know, so typically I've gone back to the U.S. for a week at a time or two weeks at a time every year or so. But being there for an extended period is quite interesting and
I think being in the U.S. right now is an interesting period just because things are so polarized there. Are they really, though? Because according to the news and media, it makes us feel that way for sure. I mean, you being on the ground, is it really that way, like in real life, day to day? You know, I think, you know, New Hampshire is quite an interesting microcosm because it's—
The state motto is live free or die, which is a great state motto. I love it. And for the most part, people sort of do stay out of other people's business and kind of let them do their thing. But at the same time, it's got, I'd say, a fairly liberal element and also a fairly conservative element kind of coexisting. And COVID definitely brought a lot of things to a head because you had a big push to get people vaccinated, which I think a lot of people were not happy about. I know the big hospital near us,
It's quite organized, was really quite strict about letting people in as guests or as patients if they hadn't been vaccinated and had mandated that all the hospital staff have a vaccine to work there. And we literally had people with surplus military vehicles and American flags there.
blockading the entrance to the hospital, basically saying... Really? In New Hampshire? In New Hampshire, basically saying... Like militia? Yeah, like militia almost. I mean, we're talking about a small number of people. This was not some great uprising, but it definitely was enough that you had people really taking a stand and saying that this is
you know, impacting our liberty and it's not okay to tell us to do this. Was that scary at all? Or was it kind of like, well, it's not, it's, it's scary in the sense that, you know, everybody has guns, but it's also not scary in the sense that everybody has guns. So, you know, come at me, bro. Are you a gun owner? Uh, I, I, I am. We, you know, I'm very American in that way. I've got, got guns at home. Um, you know, grew up knowing how to shoot them just in case, you know,
Uh, somebody wants to come and give me a vaccine in the night or whatever. Uh, but no, seriously, I, uh, I, I don't think, I don't think it was too scary, but it was, it was really interesting to see, you know, you go into the post office, for example, and you've got some people being very careful, you know, wearing a mask, not touching anything, not stopping to talk and other people just flagrantly saying, yeah, no, I'm not going to do anything to, to, to limit anything. So, um, just a different attitude versus here where I think people have been much more, uh,
responsive to the idea that they kind of have to work together. Yeah. Yeah, that's kind of surreal, right? Living in a place where it's like two polar opposite behaviors have to
coexist together. I don't know. I, I, I imagine like going back to the States and how I would react, but then at the same time, you know, a lot of it I think is just media blowing things out of proportion a little bit, but I really don't know because I haven't been back on the ground there for so long. Oh, I mean, I think it's definitely the case that the media amps everything up to 11, right? They, they make the situation seem a lot worse than it is. Um,
But I mean, the amount of argument that happened in the US over the science, over the policy, over what somebody can tell somebody else to do, definitely was coming through loud and clear. And when I was there, I was there in winter. And so I kind of had this routine where I was working, but I'd try to get some skiing in sometimes. And there was a ski resort kind of close to where I was staying. And I had a lot of interesting conversations on the chairlift with people who were
you know, very careful and, you know, pro-vaccine and wearing masks and people who are adamantly, adamantly against it saying it's all, you know, it's a UN plot, you know, all the crazy tinfoil hat stuff is, you know, unsolicited coming out of people's mouths. Like I wasn't like, hey, what do you think about the vaccine or COVID? They just turn to you. They're just like, you know, isn't it crazy that they're making us do this and this and this, you know, so, so,
I feel almost like it was an opportunity for a lot of people with like serious mental health issues to just let loose. You know, it was, it was quite interesting. Do you, do you feel that you had any extra interesting conversations or adversity towards you being from China, living in China for the past 15 years? Yeah, it's funny. I, I, you know, sometimes I would just not,
say that. Because it's easier than opening up that whole Pandora's box, right? But then some people, yeah, I brought it up and you got very interesting responses. I almost, I actually thought of you guys when I was there. I was like, I need to be doing a podcast on the chairlift because you get such an interesting mix of people. It's like the guy that's, you know, from Massachusetts, he's a contractor who is like, just does a half day of skiing because he's
Nobody is going to tell him where he's got to be somewhere to another guy who owns factories in Asia. And he was like, oh, that's so cool you're in China. Let's get into the nitty-gritty of the supply chain and talk about all that. So you get this really broad range of people basically in the middle of the wilderness. But he has some very strong opinions. And I think some very strong opinions about China and if it was created in a lab. Just so many different theories going on. Yeah, so many different theories. Yeah. Yeah.
So was that always just a temporary visit? Have you ever thought, especially given recent events, to just move back to the States? Like why come back to Shanghai? Yeah. So that trip certainly was meant to be a temporary visit. And I think the ideal scenario that I and I think a lot of my friends –
in the business community would like to have would be the ability to be here part of the year and then somewhere else part of the year. And so going back and forth between the U S and China is very attractive because both economies have a lot going on. The quality of life is good in different ways. Um,
I think right now it's quite hard to do because with the borders the way they are, it's so difficult to go back and forth unless you're kind of committed to the idea that you're not going to be taking any short trips, right? Because who wants to sit through quarantine unless you are getting some value out of going somewhere else? And I think for me, realistically, that's still the plan. I do think there's still a lot of opportunity in China. But at the same time, I've probably given up counting the number of
Yeah.
And I think that's a little bit worrisome because I think you do need to have enough people that are sort of connecting China and the outside world, both economically and culturally. And so when you lose that, it's a real issue. Yeah, that brings me to kind of
if there's anything i want to ask you today is like really the bottom line you know the last time we had you on the show um we we spoke and particularly you spoke and educated us a lot about what's going on in china in terms of the market economy brands and the tone was very bullish on china
and quite positive in terms of what the future is for China and growth and business opportunities and investment, all that. And I don't know, but me, I feel that this year, like there was people's mentalities before the lockdown, like really before 2022,
and then people's mentalities now. And it's clear as day to me, I feel, they are more pessimistic than ever. They are more concerned and anxious in either doing business in China, staying in China, raising a family here, starting any sort of investment. And how much of that is based in fact in terms of what you've researched and how much of that is emotionally, which is totally understandable, right?
Like, where do you stand right now? Like, what's the state of the union here in terms of all of that? Yeah, I think that's a great question. It's a very hard one to answer well or to answer concisely because there are so many different things going on. I think one thing to start with would be
It does matter, I think, what your context is in the sense of where are you from in China. When I talk to Chinese and foreigners in other parts of the country, they don't have nearly the same level of understanding
fatigue that we do sort of with the whole thing. I mean, I think they're very frustrated they haven't been able to travel overseas, but they're not nearly as pessimistic as the Shanghai crowd is because they didn't have to go through that two, three months of when am I getting my rotten vegetables, all that stuff, right? So I think that's definitely colored our perceptions a little bit and made things maybe seem a little bit worse than they are. Now, having said that, I think that
Even before COVID hit, the reality is that it was getting tougher for foreign businesses to be successful here just by virtue of the fact that they were foreign or had a foreign brand that maybe somebody was going to be willing to pay a premium for or be more interested in. I think the Chinese consumer mindset had already started shifting towards that.
you know, we can be proud of Chinese brands. They're doing a good job. They figured out how to do design and branding and all of that. Was it more like nationalism kind of? Yeah, I think, I think that, I think that, you know, nationalism is definitely an element. I think that, you know, people, yeah, they're, they are by and large quite proud of, of China and being Chinese now. And I think that, so I think that's worked in favor of a lot of Chinese brands. Um,
to the detriment of foreign players. And I think the, also the challenge for the foreign brands through COVID has been that if they didn't have a really strong team on the ground here that, that had a lot of latitude to operate, if they were still making, uh,
their big decisions at sort of global HQ level, very difficult to keep up with the market because they couldn't send people here. They really didn't have a good idea what was going on. And so I think that it has frankly been a really tough period for foreign companies. I mean, we've seen it with our business, you know, investment and, you know, research projects and developing strategy and, you know, executing new operational plans really just sort of fell off a cliff, I would say, over the last two years. So, yeah,
I think the opportunities are here, but I think that to take advantage of those opportunities, companies are going to have to be a lot more aggressive and a lot more tactical and sort of thinking about what can they do quickly to change how they're operating their business here. And at the same time, they're operating in an environment where
They might not be the biggest player anymore. I think domestic brands have just really strengthened themselves a lot. It's like, if you look at the sportswear market, for example, Nike might still be the number one player, but, uh,
They have a lot more pressure now coming from groups like ANTA that have gone out and bought. Didn't ANTA skyrocket? Oh, yeah. They did really well coming out of the Olympics. They're like the number one domestic brand. Yeah, they're huge now. They have a, I would say, much stronger retail presence in a lot of lower tier cities.
but with nice stores. They don't look cheap anymore. Because even from their commercial level, like the level of commercials that they do now, it's like when you watch a Nike commercial, you're like, that's a freaking Nike commercial. You know what I mean? Like, Anta has been raising the bar where their commercials are now like, oh, that's good. They've been flexing on people. Yeah, they've been doing good, man. They're flexing. Okay, so maybe we should have started off with this, but...
We have a lot of new listeners since you were on the show. Can we just quickly introduce yourself about what you do, just so people kind of understand the relevancy of what we're talking about? Yeah, sure. Sorry about that. So I work at a company called the China Market Research Group. We got set up in late 2005 or early 2006, primarily because at the time,
There wasn't a lot of really good reliable data in the market about various industries. So if you were a company here and you wanted to understand the consumer market or what was happening within your industry, you didn't really have reliable information. So you had to go and get it somewhere. And then you had to figure out how to synthesize that information into data.
some kind of a market facing strategy that you could use. So that could be your consumer segmentation, your product and pricing strategy, your retail strategy, your marketing, your branding. So that's effectively what we do. And we're sector agnostic. So we work across a lot of different industries with the common theme being that we're always looking at who the customer is and what they want and looking at how companies can effectively manage
sell to those markets. So we're not really management consultants like McKinsey might come into your company and tell you you need to fire these 37 people and restructure your organization into a different matrix or something like that. We don't do that at all. It's really all about the customer market and what they want. So we do a lot of direct research that could be consumer interviews, could be talking to people within the value chain, and then sort of putting those pieces together. And so...
Anything I'm sharing today is kind of a result of a lot of that research that either I've done or that people on my team have done. So that's kind of where my opinions are coming from. Your first customer was Apple, right? That's correct, yeah. Your first client was Apple, right? Yeah, so we've worked with some big brands. We worked with Apple. We do quite a bit of work for Yum China. So Yum would be KFC, Pizza Hut, Taco Bell, Huang Ji Huang. They've got a bunch of different brands here.
And so you kind of, you know, by working with both really big sort of Fortune 500, Fortune 100 type players like that, as well as with startups in different sectors, you get a pretty good understanding of the problems that companies are running into, but also, you know, what the market's looking for as well. I'm curious, you know, with everything that's happened in the last few years, what is the level of appetite that
and perception of the Chinese market for foreign brands? Is it less appealing, the same? You know, I think that, again, it probably depends a little bit on what kind of a presence they have here and what their actual awareness of China is. I think the press about the Chinese economy has been quite negative over the past two years. And I think it's given a lot of companies pause and they're sort of saying now, well, if I come in,
Is there really room to grow or is it both too competitive and no longer strong enough an economy for me to be successful? Can I clarify as a Western press? Western press. Yeah. Western press. Well, but I think that's also even ramped up in the last couple months. Yeah, I think that's true. I think it has been mostly it's, it hasn't just been negative discourse about political decisions here. It really has also been much more forcefully negative about the economic prospects of the country. And to be fair, uh,
There are challenges here right now. The property market is certainly in a precarious position. And I think that's been bad for consumer spending because, you know, that's really where the family wealth is, right? So it has changed discretionary spending a little bit, even if, you know, in reality, people don't have less money in their bank account. They're just, the perception is a little bit more negative. So I think that has had an effect on the market. Having said that,
I do think that there are still really good opportunities here. And actually, one of the things that's happened with the lockdown is it's really exposed weaker players and smaller businesses that maybe weren't set up the right way. And so I think, if anything, now is a good time to be kind of coming in and doing certain things. I spend a lot of time looking at the e-commerce space and working with
foreign brands that maybe want to have a store in Tmall and kind of do that whole thing and it's a very cutthroat market and not easy to do but a lot of the service providers that have been in that space just got crushed during COVID because they they owned a lot of inventory they couldn't sell and expired or it was stuck on a boat somewhere off the coast and they couldn't get it into the port and
But the demand is still fairly strong. We're not talking about a market that's completely collapsed. We're just talking about an e-commerce market that went from close to double-digit growth a year to maybe growing a few percentage points a year. So actually, I think it's a really good time to come in and strike. But if you're a smaller brand, it's hard to justify simply the idea of opening up your wallet and spending what you need to spend.
Yeah, I think it's the risk proposition that a lot of people might not have the appetite for. And the whole kind of game board gets reshuffled, right? And there's almost opportunity in that. Yeah, it's interesting. I was having dinner two days ago, I think now, with a Chinese guy who owns a privately held shipping logistics business. Yeah.
And I think he made $80 million in excess profit in China last year because he was greasing the right palms to be able to buy the container space and then resell it to third parties. So he was buying containers at...
$800 container to the U.S. and reselling them for $22,000, $23,000. Selling them to who? Any brand that was desperate to get their inventory from here to there and willing to pay the price. So, I mean, made a killing. And now container prices to the U.S. are back down to pre-
Supply chain disruption pre-covet levels, but he's not even bothering with the US market because when Russia invaded Ukraine You know Russia had all these sanctions placed on it can't buy products directly from the US So, you know using Apple as an example, you have Chinese buyers now buying Apple products They're going into containers now in China and being cargo shipped to Russia So now his entire business is trying to Russia business Wow
Yeah, that's crazy. There's a whole world and there's a whole like kind of underground world of all this. And this guy, I mean, and you have to know what you're doing, right? This guy knows the right people. He's super opportunistic, but he's just, he's there and he's just, so one year it's all, how do I, you
you know, fleece everybody that's selling stuff to the U.S. It's like arms dealing. It really is. It's arms dealing, but you're dealing containers instead of weapons. Yeah. Right? Yeah, that's crazy. It's a whole other world. You know, you brought up something in what you just said, and it's something, you know, there's a lot of negative speculation. And how much of it is comparing China's economic performance
situation now to what it was in years past where it was just like astonishing, like double digit growth. It was just like unsustainable, but it was so good that compared to it now, it's like, oh, it seems really bad versus how bad is it really compared to if you look at China's situation now compared to most other countries around the world? Do you know what I'm saying? Yeah, no, I totally understand. And I think, yeah, if you compare it to the
the halcyon days of the early 2000s where everything is growing at double digit rates and you know you could you know your business plan could go on a napkin and somebody would give you 15 million dollars to go do something um we're in a very different place now but yeah if you look at most of the rest of the world just getting crushed by um the fed in the u.s raising interest rates you know you look at the inflation problems everybody else is having china's been
you know, somewhat impacted by that, but not nearly to the level that most other countries have been impacted. Overall, the economy is still humming along. They still do have a strong domestic economy that can pretty much soak up all domestic supply of products. So they're in a pretty good place. They're just growing at a much slower rate and they do have systemic risks. So the real estate debt issue and the government debt issue at the local level certainly is a huge problem. I think also,
The powers that be have kind of used this COVID period to also go through a lot of planned adjustment to the economy to get China ready for what's going to happen over the next 20 or 30 years in terms of
putting in the right kind of support for the key industries they want to be winners in, whether that's EVs and energy transition or- Chips. Chips, which they have a long way to go, but how far they've come in the last two years is pretty insane. And so I think they've traded a little bit of sort of top-line growth over the last couple of years, sort of put in place the pieces they need to be able to capture a lot of the economic growth that's coming from those various industries.
high-tech industries. And so if anything, I think China is quite well positioned for that future growth. It just means that in this sort of short time period, we're not getting the kind of GDP growth maybe that people would have been hoping to see. Well, it sounds like you're pretty confident to make the right decisions for future planning. Correct me if I'm wrong. I mean, maybe you're not, but it sounds like you are.
And if you are, do you feel that puts you in the minority within your colleagues and other people who might be in your line of work? I do think that, rightly or wrongly, people do get swayed by the media they read. And I think that if you're a Westerner, a lot of the time you are going to assume that Western media is
Take your pick, whether that's the New York Times or Wall Street Journal or FT or whatever it is. They're beacons of truth. They're beacons of truth. But the reality is that in many cases, they write in a language or a manner of storytelling that you understand, you're familiar with, and you sort of say, okay, well, I'm going to take at face value what they say. But then when you look a little deeper –
a lot of the time, they may not have somebody on the ground here actually doing the research. That person might be in DC or in Hong Kong or somewhere else, and they have no idea what's actually going on in China. So I think that's, I mean, that's a concern right there is I think a lot of very strongly worded pieces get written without a lot of actual primary on the ground research happening. And I think that does color people's opinions. And I think that
Uh, people are also willing to look at the bad things that happen here and sort of ascribe maybe more negative connotations to what has happened than maybe they should. But yeah, from a personal standpoint, it's incredibly wearing what we've gone through. Like I certainly haven't enjoyed it. Uh, you know, I, I think it, it's kind of like a forest fire came through and just burned the forest down and, and,
Yeah, it's been really hard for a lot of people, especially people that maybe had just invested a lot of money and blood, sweat, and tears into businesses right before things got closed. But, you know, the demand is still here. And so I think going forward, there's huge opportunity in that space. It's just that we sort of hit this reset button a little bit. I think one thing that's sort of been interesting to watch, you know, speaking about F&B here through the lockdown is that
You have a much larger group of young Chinese nationals who maybe otherwise would be studying overseas or working overseas who elected to come back here because their family didn't want them to be in the U.S. or the U.K. or wherever it was, who still have these demands for jobs.
new Italian restaurant or whatever it is. And so actually, I think there's still a lot of demand for stuff like that, but the customer base has shifted because nobody is catering to me anymore. Like nobody cares about the white dude in Shanghai who's still resolutely stuck here, right? They're really looking at the local market, what the local market wants. And that's probably the right thing because ultimately the local market's what's going to pay their bills and grow their business. But
But I think it has sort of shifted the dynamic of what's being created and what's available here. And we've observed that over the years. And maybe it got accelerated through this whole process, but...
we've seen this. We've seen the top restaurants start catering to a completely different demographic, even several years ago, where you walk in and what would have been completely foreigner, Caucasian, visually, you know, obvious. Now it's... All local. It's all... Well, it's all... We spoke about this. It's all Asian. You know, it could be me, it could be you, it could be someone who's, you know, a Chinese national, et cetera, et cetera. I am curious, Ben...
How much of these trends, like the ANTA, the company, the local brands being able to produce really high quality things, how much of this is a result of the educational system, the younger generation, the Lingling Ho, the Joling Ho? What are the factors going into some of these trends? Yeah, so I think...
I think there are a few things going on. I think one, you have people who've gone overseas and maybe have gotten tired of, you know, Westerners sort of talking Chinese down, you know, talking down the culture, talking down what the government's doing, you know, small acts of racism, et cetera, et cetera, et cetera. So people kind of saying, well, why do I need that? You know, I can just go home where I'm actually welcome and I can do what I want to do. So I think that's part of it. I do get the sense that
There is an element of the population here that has had a little bit of a chip on their shoulder for a long time. This idea that, you know, Western countries have been kind of, you know, getting China down, et cetera, et cetera. So if we can get a cool product from a Chinese brand, let's do it because, you know, we're supporting our own country and our own innovation and all of that. And, you know, Americans do the same thing. So it's like, you know, you can complain about it all day long, but.
people can buy what they want to buy. And if they want to buy domestic, good for them. Well, and the tastes are changing. What's being produced is not like these traditional Chinese brands. They're making stuff that appeals. Like I would buy it. And quality stuff now. Yeah. And it's like, but, but it's based on international standards. Like what they're producing is like when I was in, I don't know, Paris and some of these places before, just right before the pandemic, I was,
I was shocked at how similar all these cities were, whether you're in Paris or Milan or whatever. It was kind of like there's this notion of an international city and they all look pretty much the same because you look at the branch and you're like, well, shit, it just looks like downtown Shanghai. And I feel like for the people that have grown up in 1990s and 2000, now they're starting to start their own businesses. They are coffee lovers. They have experienced international culture before.
you know, broadly international culture and very similar to every other country in the world that has a little bit of wealth. And now they're making things and then they're creating companies and products serving themselves. Yeah. I mean, I have a good example of that. I have a very good friend here. She is, um, Chinese from Beijing. She, um,
a bakery several years ago. It's become a national chain. She also now has a coffee shop. She does single origin chocolate and coffee from Heineken. I know who you're talking about too. Okay. Friend of a friend, yeah. All right. Yeah, and she's really successful doing what she's doing. We should do some sponsorship stuff. Yeah, let's shout out her Pantry's Best. Yeah, there you go. Yeah, yeah, yeah. Yeah. Yeah.
Yeah, she lives in my building. Oh, awesome. They need to pay us now. I'm joking. I'll get on her to give you guys some cash. Send her to AliPayMe. But that's a great, I mean, that's a perfect example of somebody who's very international, but they're making Chinese stuff for a Chinese audience and they're...
Good at doing it. And the product they're making appeals to foreign audiences, like our buddy, you know, Charles, Charlie's Burgers, right? So the concept may not have been strictly invented in China. Who knows where, like, burgers, you know, pizza, all that stuff was invented. It was somewhere, right? In different influences. And he produces a burger that we would eat,
And at the same time, it's not the conventional burger you would get in the US. Like the flavors are a little bit different. And so Chinese people are creating or people here are creating versions that are
you know, that appeal to people here. And it's no different than someone in Italy or France or Germany or whatever. It's just a little bit stark because, you know, we identify China as this very traditional place. And so everything that's from China looks and feels a certain way. And now they've just stepped up to the world stage and they're producing, you know, international products. Yeah. But sorry, before you jump in, I mean, the industry that I'd really look at would be if you look at the EV space and you look at cars, um,
Chinese EVs all of a sudden are pretty cool. Like if I was in the market for an EV here, I'd probably be buying a Chinese model from a Chinese brand. And China is the biggest producer of EVs in the world. Yeah, they're the biggest producer. Their cars don't look like crap anymore. Some of them are pretty slick, frankly. Very slick, yeah. So I don't need to go buy a Tesla. There are plenty of great domestic options. So if I was...
you know, Ford or whoever it was, I might be looking at what's going on here and be a little worried about what things are going to look like in a decade. Cause I mean, these Chinese brands are not messing around. Well, they're, they've completely dominated the EV space, right? Yeah.
Is that fair to say? 100%. In China, it's very fair to say. And China is the biggest car market in the world. So these are not small players. Yeah, I think that all of this goes hand in hand into something I wanted to bring up. It goes back to, actually, I'm calling back to where you brought up, Eric, even earlier during this podcast.
Because the last time we sat together, one of the topics we talked about was the idea that you have more pride for the Chinese consumers have more pride. So some of the dialogue, whether through marketing or whatever, is getting adapted to this pride, right? And one thing I just wanted to talk about is the acceleration of that. Now that this, you know, it's been about two years almost or something like that since you were on the show, right?
and all the stuff that's been happening in this country, I feel like it's accelerated like 50-fold. Well, I feel like there's two groups. I feel like, yes, the people pre-COVID and everything like that that were already on that track, the population of people, they're still on that track.
But then it's weird because, you know, okay, again, because you made this point, Ben, earlier on the show that like, we're kind of in a bubble in Shanghai. So our mindset and our attitudes and our emotions are differently tainted than let's say other people maybe outside of Shanghai in China. But the people I talked to in Shanghai, locals, I find a lot of them have kind of
don't really have that much pride anymore. They're proud to be Chinese. Shanghai. But then they're like, ugh, I don't know. I'm not... They're not as gung-ho as before because of the lockdown. This is exactly what Ben said before. I think we are in a bubble in Shanghai. Yeah.
And I agree with you, with a lot of local people here, maybe you have a lot more of these type of conversations that you just brought up. - Like people that wouldn't have talked shit about like, let's say Shanghai before, but now are like talking shit all the time. - It's because we went through this very difficult time, you know? And then, but if you think about nationally, you have these like, quote unquote, like key terms like , you know, that you need to implement for the past couple of years,
which is, you know, , the popular stuff, , the Chinese popular stuff, right? So it's like integrating that. Forget about what's popular in the West, what's popular here, you know? And how are we gonna, you know, accentuate that? So these kind of things, you know, what are you seeing? - Yeah, I think it really depends on who you're talking to. So I think that's part of it. I mean, I was having a discussion a couple days ago with a guy who's been pretty successful here
various businesses and he he basically said to me he said um listen in the China that we're going to see going forward if you're somebody who is willing to follow all the rules and accept those rules there's a ton of opportunity to be had in China there are a lot of people who've built businesses by you know taking advantage of situations or you know coloring outside the lines or you know having more liberal policies whereas you have plenty of people who
you know, don't necessarily have a lot of money or a lot of wealth who care much more about, you know, is my lot in life going to be a little bit better next year versus this year? So two very different perspectives on, you know, the idea of coloring outside the lines isn't not necessarily good anywhere really. But the reality is, is that you could do a lot of that here for quite a long time and make a lot of money doing it. And I think a lot of those loopholes now are being closed. And so the big question that everybody's maybe trying to answer is,
As those loopholes close, are we also in parallel with that getting to a business environment where
As there are more rules, things also get easier because they're more straightforward. It's more transparent. You kind of know what to do. Everybody's on an equal playing field. And that's one of those things where it's like a little bit remain to be seen maybe if that's going to happen. And that takes a lot of work to transition towards that. So I honestly don't know the answer. I'm hopeful that maybe we get to a point where things are easier and especially
Especially for smaller businesses, you know, it's easier to get financing from the banks because that's always been a persistent problem here. And that, you know, it does become easier for the average entrepreneur to get something going without having a really good network of investors or access to private equity, you know, whatever it is. I don't think we're going to know that for a couple of years. That's the reality. So.
Okay, going back to, let's say, the small business owner, what would be your advice to someone in terms of they have a small business and they're kind of on the fence of, okay, do I just cut my losses, pack it up and go and start fresh somewhere else? Or do I stick this through? Yeah, I mean, I think my feeling is it probably is a little bit different depending on industry and that might make a difference in my answer. But having said that, I think we've...
On some level, we've come through the dark days here with the lockdowns and some of the negative effects of the COVID economy. So if you've made it this far, probably there's a really good path forward if you're cagey and careful. Hopefully, yeah, hopefully. But I think that to be successful here, businesses really do need to be aggressive and leaning very heavily into...
you know, their marketing strategy and how they're acquiring customers and handling all of that side of the business. And that's,
very hard here just because there's so much competition. So much noise. Yeah, there's a lot of noise. How do you get the right traffic on Douyin or WeChat or whatever it is? You know, it's kind of relevant. It's funny too. Well, it's not funny depending on where you stand, I guess. But in our last episode with you, we were talking about fast food brands. One brand at that time that had just opened was Popeye's.
Popeye's chicken. And we were talking about how they just opened and we were speculating, oh, what's the future? Do you think they're going to do well and survive? Well, Popeye's is closed, right? In Shanghai? No, they've still... No, they've still... I thought they were closing. No, they've got a... They've closed a couple of stores. They've opened others as well. They've got a pretty nice one in the Ba Bai Van area. Okay, so misinformation. I thought... Someone told me they were completely closed. And I've heard rumors that they're going aggressive with a really big...
So they're doubling down, maybe. Yeah, yeah. But who knows? I mean, who knows what the truth is? There's one example to look at. I think Tim Hortons is another interesting one because it's kind of like a, you know...
Sorry to all the Canadians here, but it's sort of like a... They popped up aggressively. It's like a second-rate coffee shop, right? But they've been very aggressive. You're right. They have good private equity financing. They keep opening in really good locations. I've never seen one that's been that busy. So I honestly, I don't know on a per-store basis how they're doing, but they're growing. So...
So there's clearly room for growth here. It's just it's not easy to get it right. Well, so what is the lay of the land right now? Because based on some of the, let's say, LinkedIn articles that have been shared to me, WeChat posts that have been shared to me, a lot of people are of the mindset that foreign brands are just
exiting left and right. And okay, today this foreign brand shut down. And then next week they're like, oh, here goes another one. Another one bites the dust, right? And there's that kind of talk going around. Is that what's happening? Because from you, it sounds like that's not necessarily what's happening. In fact, some brands are doubling down. I think it really depends on the industry you're in. But if you look at, say, personal care products, like a shampoo, for example,
there's still a lot of demand for international brands. And so you can be very successful here because you have a much smaller number of SKUs that you're trying to sell into the market. You're differentiating based off of maybe some IP you have that nobody in the local market has. Um, so I, I think the opportunity here is still good. It just, it really does depend on your industry and then also how much leeway you're going to give to your local team to, um,
differentiate the strategy here. Well, when we look at these industries, so, you know, I'm looking at some of the things that you said last time. We were talking about some of these same things. So you were saying that the pace of innovation is much faster now in China. And it's partly because companies here are not trying to perfect everything. They throw 20 things at the wall. They find a couple are successful. There's experimentation possible with this large population. Now, connecting that with
Companies often do well when the people that found the company build products that they would use themselves. That's like a typical formula. And I feel like, you know, the demographic is moving to a point where people grew up exposed to all of these different products. You know, whatever, cars or F&B, luxury, apparel, etc. So it seems like
If you've got this extremely, you know, high speed innovation, the customer base is here, right? So even after COVID in general, we're still at one point, whatever billion people. It's not like we went down to point, you know, 1.4 million people. So we've got the customer base. You've got more and more people moving into the demographic of wanting these products. And hence, more and more people who understand the tastes and the
and the trends, and then now want to start their business. It seems inevitable that over time in all these industries, the proportion of local players is going to start eating into that foreign mindshare because they are on the ground. They can quickly experiment. They also are customers themselves. And so it's almost going to be impossible to remote control this thing from another country. You've got to be on the ground. You can't get in right now due to COVID. So it,
All these industries over time, if you look at the pie chart, I feel like they're going to just slowly go closer, you know, more and more local brands. However, the market is still huge. So they're different depending on the industry and the niche. Foreign companies should still be able to come in, but they're going to have to be much more strategic in where they're going and what their value proposition is. Oh, yeah. I mean, I think the reality is that excellent is excellent wherever it's from. So if there's like a really good concept from the,
the U S or wherever it is. And, you know, people like it, they can be successful here, but it means they're going to have to be willing to have an operations team in place that understands the Chinese market. They're going to have to be willing to make changes. I mean, if you guys like F and B, like the example I use that I would love to get over here is, um,
Are you familiar with the Hillstone Group? They used to run, they used to call it Houston's in the US. Oh my God, my favorite. So one of my best friends is the son of the founder of Houston's.
Oh my God. And I would love for them to come to China because it's a, it's like a Ruby Tuesdays type of place. No, he would get so angry at you if you said that he would get so angry. I never had Houston's. I don't know. Houston's is like high end, like steakhouse, but everything like all the comfort food and all that stuff, steakhouse, but like,
legit well done. So Ruby Tuesdays. No, it's like, it's like, I have to, I have to just back him up. You know, I have to defend him here. We have like a serious guest here and you're just acting like a fool. Well, it's funny because we wanted to make him angry. We would compare him to them. Wow. What did I miss? Do you know Houston's? Do you know the restaurant? Yeah, yeah, yeah. Houston's. I love Houston's. Really? Yeah. I love Houston's.
Well, we were talking about this. There's nothing about it, but he's calling it Ruby Tuesdays. I'm asking. I'm like, is Houston's like Ruby Tuesdays? So let me explain to you their business model. I'm asking. No, no, no. Just to educate you. It's a higher notch. So basically, they're like a high-end...
contemporary American restaurant, but they're not pretentious. So anybody can go in there and get a good meal. You can go in in shorts? Yeah, you can get, and the service is on point. They will have your water glass filled. The food is good. It's all solid. You got a problem, they will help you out. Sounds delicious. Yeah.
I kind of feel like it's the, this, you might not agree with, it's kind of like the cheesecake factory of steakhouses. That's not a bad way to put it. It's kind of like that. So their business model, just so you understand their business model is a little bit evil, but really smart. So what they basically do is they hire Ivy League graduates to
to train as GMs for their restaurants. And then they move them around every six months, which is really fun when you're in your 20s and you don't want to settle down because you get to go to a new city, like, you know, date new people, whatever. And then you hit 30 or whatever and you want to get married and you don't want to do it anymore. So you quit. So they never have to keep promoting you up the corporate hierarchy.
But meanwhile, they've got smart people running their restaurants. If you just graduated an Ivy League school, why would you want to work at Houston's, though? Because they pay a lot of money. Oh, do they? Yeah. They pay well. They pay very well to the restaurant management. So you can come out of school making $120,000 or something. Wow. So you brought this up because you're saying that you wish that Houston would come here. How did we get on this? Do you have inside information or something?
No, I'm good friends with one of the family members. So wink, wink, you're saying something. Wink, wink. So I've tried for years to convince them that they should come here, but it was an example of that is a Western brand that I think could do well here if they came here. But having said that,
you know, unless Western brands are willing to really sort of localize and figure out the right thing to do. Yeah. It's the future is really going to be, I feel like you guys are really into Houston. I mean, like you're like defensive, Eric, it's,
Anyways, it's like when we answer a question and you just keep asking it like an idiot. Damn, I'm hungry now. The food is good. It's a chain, right? I mean, there's a lot of Houstons or... I don't know. We're talking way too much about Houstons. Well, they call it Hillstone now. It's been rebranded. But yeah, most big cities, you can find one. I feel like I... Have I...
My handler's going to tell me if I've talked enough now. The funny thing is how he knows what he's doing because the way he's asking the question is not a question. He's making an assumption just to rock the boat and kind of irritate everyone. And that's what gets me, right? Is that he does it on purpose and he pretends. He feigns that, oh, I don't know. I don't know about this thing. It's like Ruby Tuesday. And he keeps accentuating the incorrect assumptions. And it's stupid. Yeah.
Can I be honest? I've never eaten at Ruby Tuesdays in my life. I don't even know what it is. I just know it's like a family style restaurant. Anyway. So, okay. So, because maybe I missed something, but I want to get back to, I'm like trying to like nail you down then because like, but I know it's not right. I know it's not right because there's so much to factor in industry, context, timing, you know, the specific company itself within that industry, everything. Yeah.
But the general attitude of investment, whatever industry, I think just new money being poured into China-based opportunities, I feel, and I have good reason to feel this way because I'm overhearing a lot of real-time conversations firsthand. And the feeling I get from a lot of foreign investors is that they just think,
The risk profile, according to them, is just way too high for them to even consider China at this period in time. And surely I can see that. I can understand that for sure. But then, like you say, I also agree that, well, it's precisely at these type of times where you might need to be a little more aggressive and to really build that opportunity for yourself. My personal feeling is...
A lot of these investors, frankly speaking, don't actually understand the
the market here well enough. So they have this perception that, oh, there's, you know, there's no way forward here. They shouldn't be here. And in reality is that there still is an opportunity for them. Um, they just don't know what they're doing. Well, I just feel like they're just more emotionally influenced. Yeah. Yeah. And, and to be fair, if that's the perspective from which they're looking at the market, maybe they shouldn't be here because they won't take the steps they need to take to be successful. Um,
But I think if somebody is considering whether or not there's an opportunity here, I think just in terms of raw potential, absolutely, there is still an opportunity here. And it's not like the door is closed to foreign brands. I mean, if anything, if I was to start a company tomorrow, what I probably would be doing is I would be creating new foreign brands, but creating them from the beginning with
Chinese sourcing, et cetera, et cetera, et cetera, building them to the point in the US or Europe or wherever it is, where I can then justify bringing them back into China as a foreign brand. So I actually think there's a huge opportunity going forward for the sort of circular economy in the sense that you build something successful overseas, you bring it to China and use those sort of those two pillars for growth. But I think if you're talking about traditional businesses that maybe have
you know, a strong customer base in the US or somewhere in Europe or wherever it is. A lot of them just don't understand how to navigate the market here. And so it's seen as too risky for them. Well, okay, let's, I'm going to put myself in the shoes of like, let's say a cynic listening to this conversation right now.
And I don't mean to put you on blast, right? But like, let's say from them, they're like, well, Ben, of course, you're going to have this opinion because you have skin in the game for having this opinion. You're, you know, you're, you're the managing director of the China market research group, right? It directly ties into your, you know, your, your, your interests for people to still be more bullish on the China market.
How much personal skin in the game are you putting outside of the company? Let's say, because I know you're an entrepreneur, you invest in things yourself. Are you putting your money where your mouth is? Yeah. So I think it's a good question. Thank you for putting me on blast. I think first I would say, you know, our business, you know, maybe half of our businesses were
work that we do directly for brands and looking at what their strategy should be. And then maybe 40, 50% is work that we do for private equity, for venture capital. They're looking at making acquisitions. And a lot of that is a, you know, like a go, no-go calculus on do they come here with a brand they own or do they invest in a, you know, a domestic or foreign player here?
And so we're perfectly happy to tell companies that, no, they shouldn't be in China because it's not the right place for them to be. So in that sense, I'm not really that biased, actually. If I think China is bad, I will tell somebody, you don't want to be here. And we've done that many, many, many times because they weren't the right fit or it was clear from a management perspective that they weren't going to take the steps that were needed to be successful here. In terms of my own experience,
outside of China Market Research Group and what I do, I'm actually very bullish on China. So as I mentioned, I do quite a bit of e-commerce work helping brands that are looking at building successful presence here. I think the last two years have been quite difficult just because the supply chain has been so disrupted. But it's very clear that at least within specific verticals, there is huge demand for foreign brands. So
Pet products, huge demand for foreign offerings. Actually, I mean, lockdown actually highlighted that a lot because one of the biggest problems a lot of people in Shanghai had was if they had a pet, they couldn't get pet food. There weren't really a lot of good domestic options they could turn to. And a lot of the foreign stuff was stuck on boats outside of Shanghai or Ningbo, so they couldn't actually get the products. So, yeah.
You know, I'm continuing to invest in that. You know, we talked a little bit about F&B. You know, I'll talk to you more about it off air, but that's something we're also pushing very heavily right now because we do believe that there is still a really good opportunity here. And it might not necessarily be for foreign brands, but it could be foreign investment and domestic brands. It could be, you know, cooperative models for business.
So I think there's still a lot of room for foreign players in the market here, but it's definitely not a market for everybody. There are a lot of big brands that are clearly just completely foundering here and their ships are going to sink because they have no idea what to do. You look at brands like
The Gap, which maybe I talked about them in the last episode, but nothing has improved there since the last time I talked to you. Are they still in China? They're still here, but I mean, it's dark. I haven't seen them. It's dark, dark days. But they're dark globally. Yeah, I mean, they're struggling globally, to be fair. But especially here, if you're not taking the right steps, you just can't compete because domestic players are...
They're very quick in changing what they do. They're willing to take risks. It almost feels like what you're saying, Ben, brands that are culturally agnostic maybe have a higher chance of being accepted as a foreign brand. Yeah, if you're building your brand reputation on high-quality ingredients or this is proven to work, irrespective of what your culture is,
You have a lot of room for growth because you have consumers now getting to the point where they've got discretionary income. They're spending on things that they wouldn't necessarily have spent on before. Like you look at pet food. Actually, this is more of a, you know, bonus, I'd say for domestic brands, but the raw pet food market here is huge. Huge. You know, and five years ago, people would be, you know, giving their pet whatever leftover rice or whatever they had out of their rice cooker. But now it's like, you know, my...
my baby poodle or whatever is, you know, getting this beautiful raw food diet that is nicer than anything I'm eating myself, you know? So it's like the market is really shifted. Definitely better than what Howie's eating. Yeah, definitely better than Howie and his, you know, Ruby Tuesdays over there. Nice. Um,
So, it's crazy because I also have friends outside, not many, but one or two have said to me, and this was during the lockdown, they're like, how do you even have pets in China? Like, don't people just like eat their pets? Like, you know, no, no, literally someone has said that to me. And...
And it would be – as you're talking, because this has nothing to do with anything, but as you're talking, me, inside my head, I'm just thinking like how would you even have this conversation with someone like that about like the pet food market in China? Well, that's the thing. You talk about misconceptions about what's going on here. Like how do you make the investment case to somebody who has the perception that somebody here is eating their pet when the reality is that –
They spoil their pets. They spoil their pets. And to be fair, the change has been very quick, but it's gone from I have discussions with a Chinese person where they're like, oh, you have a cat and your cat is sick. Just get a new cat. To, oh my God, your cat is your baby and you're going to do everything for them, like give them a kidney transplant or whatever it is. So the development curve here is just so quick in terms of what people care about and what they're willing to spend money on.
So I think that's created opportunities. And the question is, is it going to be the foreign brands that realize that and jump on it? You know, it's a wild world. There's a ton of opportunity here. It's just who's willing to take the risk. It's interesting you said about pet food because, I mean, I have a dog and we were researching a lot of different pet foods, brands for the dog to eat. And my wife...
took the initiative to buy a lot of different styles and different types and there's one brand that the dog liked and then there's a lot of trust in and stuff like that and then the brands name those houston's it's a fucked up name ruby tuesdays no no no the brand's name because i remember like my wife saying like this is good like the dog likes this and i look at it i'm like what the fuck it's called bile b-i-l-e yeah
But, like, it's called bile. And I'm like, what the fuck? Of course it is. Do you know what bile means in English? No, because they never cared to check. That's a pet peeve of mine living here in China. It was like, they never cared to check, like, the English translation of things. I mean, that sounds a little bit elitist, but it's just a pet peeve. Because it's so simple. Like, all you have to do is do a little online check and then you would know. Well, I mean, we still have dorky toothpaste here. Oh, God, yeah. That's got to change. That's like...
From our perspective, right? Like, oh, that's got to change. But I haven't seen that toothpaste in a long time. It's still around. No, I'm sure it's still around. No, they have that in Taiwan, too. I remember in my grandma's house, and she had this toothpaste. And I was using the toothpaste, and then it literally has this person in black face with...
teeth. Yeah, black dude with a top hat and like hair on his head. And I was like, hmm, it was just weird. To be fair, I think that was originally like a Colgate Palmolive company or brand. So, wait, wait, so wait, so Colgate, is that an American brand? Yeah, yeah. Interesting. Ooh.
Why do you think he came up with the concept? Yeah, yeah, yeah. Interesting. So, Ben, have you gotten to the point where you help local players at all? Or is it still all foreign players? I'm curious. You know, we do help local players sometimes. The sense I get with local players is they do still, for the most part, tend to be reticent to hire a third party to do that kind of work. It still tends to be very...
like the founder will say. Yeah, internal. Yeah, these are the things we're going to do. We're going to figure this out ourselves. We're not going to rely on an outside expert. And if they do rely on an outside expert, it tends to be the case that they're a bigger company and the manager's going to hire people
Like a name brand.
One thing is, okay, after having this whole discussion with you, like what I'm hearing is basically in layman's terms, like if you want to come into China, you just have to have the stomach for it. And if you don't have the stomach for it, don't bother. Yeah, you have to have the stomach and you have to, you can't be looking at it as a quick win. I mean, I think for too many companies look at the market and it's the same kind of BS calculus of,
They're 1.3 billion people. We get 1% of that market. It's a really big market, blah, blah, blah. But, but, you know, the reality is no, you're going to have real competitors here who are not bad at what they do. They're going to run you over unless you can actually adapt quickly and do something different. But, but if you're able to do that, if you truly are world-class in your approach, then it's a great market to be in because it's big and,
consumers are still very open-minded. They'll buy new brands and new products. You just have to be able to convince them that you're special in some way. Yeah, I think that's kind of the way. I mean, after listening to you and doing some of my own contemplation, I feel like
Maybe that's the way to frame it, you know? You know, so much of the talk has been like, yeah, it's just clamping down. The heyday is over. And it just feels like this kind of resonation of like just picking up your ball and like leaving the court and like, you know, it's been like, oh, it's over. You know, it's not a fair game anymore. So we might as well pack it up and leave. I think also, you know, a lot of the people that you have the negative conversation with
There's somebody that's – they come here from Switzerland. They've been here for like five years, but they speak no Chinese. They really don't really have any understanding of how stuff gets done here. I agree with you. And the point I'm trying to make is like I think it's less of that and more of that the bar has just been continually raised. Yeah.
But I think it's so obvious. Like, who the fuck do you think you are? You go into a place and you just think you can make money. You can print money almost. No, you got to go in there like any other business and have a competitive advantage, offer value to your customers. And it's a great place to do it. Yeah. This idea that, you know, China is like some backwards place that you can show up in and, you know, take advantage of the fact that it's a big market. That's crazy, right? Like, you know,
Chinese people are not idiots. Like they've been doing business for, you know, longer than the U.S. has been a country, right? Like they're masters of commerce. So you can't just expect to show up and be competitive. That's like this totally unreasonable viewpoint. So people just need to get over that.
Okay, well, let's zoom out a little bit and talk about globally, not so China-focused anymore, but kind of globally the state of the world. And I feel like for a lot of lay people such as myself, like a lot of the easy talking points is like, oh, the economy sucks because of Russia and the war in Ukraine and, you know, and China this. And it's like...
And I don't know, the more I listen to other people who kind of know what they're talking about talk, the more I understand that it's actually maybe, there's a lot more factors going in than simply the war in Ukraine with Russia itself.
There's the American monetary policy affecting everything. There's a lot affecting trade and there's a lot of big global players involved that's kind of having an influence over kind of the state of the global economy right now.
What light can you bring to kind of the state of the world? And what are the real factors kind of driving what's happening throughout the global economy? I think if the question is sort of what are the big things that kind of scare me a little bit in terms of what's going to happen over the next year or two, it's very interesting watching monetary policy in the US and the interest rate rises we've seen there and
you know, just how strong the US dollar has continued to be as sort of this sort of safe haven because the amount of pressure we're seeing kind of ratcheting up on emerging markets, economies right now is really, really
But I don't feel like anyone's talking about that. Everyone's pointing to like, oh, Russia. It's because of –
really, really close to a lot of economies just completely imploding in emerging markets because of what this has done to their ability to control their currencies and what that means for their economic growth going forward. And so that's really what has me a little bit worried because if enough of those markets just go into a tailspin, it's going to have a
just a crushing effect on global economics. What kind of markets are we talking about? Are we talking about smaller markets? Are we talking about like Europe, South America? Well, I would say like South America, all of Africa, a lot of Southeast Asia, really in a precarious position right now. And you could see a lot of their economies really just stalling out because of this, because all of a sudden they're going to have a really difficult issue with trade imbalances, being able to do any kind of importing, you know,
You know, I could be totally wrong. I'm not, you know, a trained economist in the sense that I'm not daily looking at, you know, monetary policy on a global basis. But the sense that I get is that that sort of global economic engine really coming from those emerging markets growing is in a very precarious position right now. And you're right, it doesn't get talked about a lot because certainly the Western media has really been sort of hyper-focused on
what's happening within the US, what's happening between Russia and the Ukraine right now. You know, Europe is kind of, the Euro is obviously weakened a lot. The pound is weakened a lot, but those markets are interesting because they, a lot of those markets have sort of had like negative interest rates for the last couple of years. So they have room to sort of change things and still in theory be okay, but I'm much more worried about
you know, the Indonesias of the world or the, you know, the South Africa's or the Nigeria's, et cetera. And, you know, those are big economies that if they go down, it's going to be a problem. Longer term, I think, you know, there's still, you know, globalization is still a real thing. There's still room for growth. It's going to happen. But there is a tough period ahead just because the U.S. has been so aggressive with its monetary policy and
the U.S. dollar is still sort of the de facto reserve currency. What's going to be interesting coming out of this, I think, in the next two years is, does the U.S. dollar maintain that status or do we maybe move beyond that a little bit? Well,
Well, that's what China's making plays. Well, that's what Ray Dalio is alluding to, right? Yeah. A lot of his talks. I think that if you're a U.S. company or you're a U.S.-based investor, you need to be thinking about, okay, 10 years from now, you cannot use the U.S. dollar as the sort of safe haven guarantee that you've been able to use it as for so long. Do you think it would happen that soon where it would lose that much power in 10 years as the world reserve currency? I mean, I think we're at least 10 years out, but I mean, if you're
future-proofing your investments, I'd be thinking very critically now about what you want to be doing. That's all. Well, talking about the future, are you a father? Do you have a kid? I don't yet. Okay, okay. Because if you did, I was going to ask you as a father, because we're on the mindset of we're about to have kids and then all this talk of the future and it's a lot of anxiety, right? What's going to happen, especially us living in China? Everything's very ambiguous right now.
And it's like, I don't know. Like, I just, we don't know. So I don't have a kid yet, but planning ahead for that, I, when I was in the U.S., I took advantage of low interest rates. I bought a farm in Vermont. Nice. Congratulations. I'm ready to-
Not a ton of acreage. We've got, I don't know, maybe like 10 acres, but it's enough. You have livestock? Are you raising livestock on that? No, only because I'm here in China. But you know what? We're ready to go. So as climate change happens, as the global economy crumbles, we can go and we can grow potatoes. We can have a cow. You have like a safe, like...
off the grid to kind of go to. Yeah, so if things get bad, we're good to go. That's awesome. No, no, that's awesome for him, but that's fucking scary for us because if you're telling us that, that means...
Like, you feel shit might go down, and then you're already planning to have, like, an escape room for shit to go down. It's just plan B. Don't over it. I've got my guns, and I've got my cows. Do you have concealed carry? I don't need it in Vermont. Oh, you don't need it? No. It's automatic. Okay.
I've had plenty of discussions about thinking long-term, like what you have done, Ben, of buying some sort of land and preparing my own harvest. You guys are welcome. Come on over. We got space. We might have to join forces. We can work on the harvest together. No problem. You'd be increasing the Asian population. We'll carry our own weight. We'll work the land. Yeah, we'll do it. No problem.
We've got river access. You can float stuff down the river. So you really thought about this? Yeah, I thought long and hard about this. Jesus, that's so scary. That's so scary to learn right now. Are there any parcels nearby that we could get in on? Yeah, it's an up-and-coming area. Is it Vermont, you said? It's in Vermont, but I don't know. Have any of you ever been to Dartmouth? No.
- No. - Yes. Oh wait, hold on. We drove by. - Yes, you drove by. I'm like maybe 30 minutes north of there. So it's a very rural area, but it's actually great because you can get on a plane and be in downtown Manhattan in about an hour and a half. So if you wanna do business-- - What's your village called or town called? - It truly is a village. It has no stoplight, no nothing. It's called Royalton, Vermont. - Okay.
Affordable land? I mean, it's affordable? Very affordable. It depends on how well your other investments are doing. Yeah, it depends on how your other investments are doing. But it's like, look, it's salt of the earth people. These are like generations of farmers. But it's a great spot to be because if you want to go to New York or Boston or Montreal, you can get there quickly. But if you want nobody to bother you, nobody's going to bother you.
You're out there. Okay, last thing I swear. I'm just trying to get into your... You should start charging him. Exactly. Slam your hand down. Say no more. No, no, listen. Because I'm just thinking this isn't just a light decision to make and obviously a lot of planning and a lot of work went into even the process of probably getting this land. So I'm thinking what was going through your head
In terms of like, what was your fear that was like, oh, I need to do this? Like, what was this? What was that doomsday scenario that you were picturing? Like, what did it look like? Well, you know, you look at climate change and, you know, you look at what's happening in China this year and the US this year with drought. So I looked at
maps of the U.S. and if you look at 50 years ahead where the climate is going to be best and literally Vermont and that area is where they're going to have the best climate going forward so from a climate change perspective it was a good bet and
From a quality of life perspective, it was good because you can kind of do your own thing, but you can still be connected to the world if you want to be. And then, you know, I was kind of looking at the U.S. economy. You know, you step back about 12 months now, and it was sort of clear that we were going to have some issues with inflation. And so I was just selfishly taking advantage of very low interest rates before inflation.
Things kind of went crazy. Has it started going crazy there? Yeah. So when we bought, I think the mortgage we took out, interest rates were like 2.7% or something. They are now...
6.3, 6.4%. Damn. So, I mean, it's been a... That's a big difference. It's been a big difference. So every percentage point increase in interest rate is equivalent to like 11 or 12% buying power in terms of the value of the property that you can buy. Of going down, buying power going down. Yeah, yeah. It's not relevant for a podcast, but it's far
was built in 1802 by a local merchant and it was built as a stagecoach inn because they had a, like a stagecoach toll road that, and this was one end of that toll road. Sounds creepy though. These old places, these old colonial places, they're always creepy. It's so, it's funny that you say that because my, um,
my fiance who's American, but as ethnically Chinese, she was like, no Chinese person would ever live in a house like this because it looks haunted. And, you know, I can't show my friends because they'll all say, what are you crazy for living in this house? That's what I'm picturing. That's what I'm picturing. So there's definitely a cultural bias there for, you know, some people liking it and some people saying, no way. But, um, Ben,
I'm so glad you came back. I'm so glad you're still here and we can have this conversation with you face-to-face. It's really good to catch up with you. It's been so long, so much has happened since our last episode. Thank you for coming. No, it's a pleasure to be here. Thanks so much for having me, guys. You always ask great questions and it's nice to sort of, through you, also sort of see...
you know, what people are asking about and what, you know, what's different and what's changing. So I really appreciate having the chance to come on and also to see you in your new studio, which is amazing. Yeah. How do you like it? It's awesome. No, it's, it's, it's really, really quite great. I mean, it just shows how things have been growing and you've got a really very professional setup and, you know, Joe Rogan better watch out. Cheers, Ben. Cheers. Cheers. Cheers. All right. That was Ben Cavender.
All right, folks. I'm Justin. I'm Howie. I'm Eric. All right. Be good. Be well. Peace. Rube Tuesdays.