How the World Ran Out of Everything: Inside the Global Supply Chain with Peter Goodman
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Restrictions apply. See terms at sportsbook.fanduel.com. Gambling problem? Call 1-800-GAMBLER. This is Smart People Podcast. A podcast for smart people, where we talk to smart people, but not necessarily done by smart people. Hello and welcome to Smart People Podcast, conversations that satisfy your curious mind and make you smarter around the dinner table conversation. This is one of those episodes.

Listen, I've been thinking a lot about what do we do here? What's the point? How do we differentiate from other podcasts? I mean, hell, we've talked to a lot of you about that. And I just keep coming back to this fact that I want to cover things that have an impact on our lives, but often we're too busy to go seek out the information and understand it, you know, so you can learn it on your commute, for example, and that's it. And now you're better informed. And should you choose to buy the book and read the book? Great.

Today, we're going to be talking about really the global supply chain that has impacted all of our lives. From the fact that cars were so expensive for three or four years,

and the fact that food is still very expensive and how that relates to the supply chain. Is it companies doing this to us or is it actually the remnants of COVID? Is it greed capitalism? How do we fix it? All things that as both a person and a consumer, I think will help our life choices, which ultimately is the goal of listening to show just to help life choices and fill our curiosity.

fascinating topic in my mind and one that, again, not out there every day. We are talking to Peter S. Goodman about his brand new book, How the World Ran Out of Everything Inside the Global Supply Chain.

Peter's a fascinating guy, character, really enjoyed talking to him. He is the global economics correspondent at the New York Times, long-term journalist. He's written on topics such as the Great Recession. Actually, he did a series that was a Pulitzer Prize finalist. He covered the internet bubble at the Washington Post.

And really, he is an expert at uncovering a lot of the behind the scenes things that impact the average consumer. You know, he's one of those people we need out there traveling all over the world, uncovering the underbelly of consumerism.

If you like this, tell a friend, hit the share button, put it on Twitter or X or whatever, right? Smartpeoplepodcast.com. Reach out to us, smartpeoplepodcast at gmail.com. Here it is, Peter S. Goodman, as we talk about his new book, How the World Ran Out of Everything, Inside the Global Supply Chain. Enjoy. Enjoy.

I have heard so many people complain about prices and always blame it on the supply chain. Most of us are pretty uneducated on what it even is. What is your description or general 101 on what is our global supply chain?

Yeah, I think it's a super important question because, you know, you say this fancy word, global supply chain. It sounds like a bunch of wizards went up to the top of a mountain and meditated on the best way to make and move stuff around the globe. You know, the truth is it's a bunch of overlapping systems that are improvised. Some are regulated. Some aren't regulated. There's market forces in some. There's monopoly power in others. I mean, basically, it's like the messy and kind of miraculous ways of

that we manufacture goods around the globe and then deliver them to your door, to stores, to warehouses. It's how all that stuff gets made and is moved around. And that's,

again, there's a lot of like jury rigged processes in there. There's a lot of stuff that not particularly transparent where even the participants don't entirely know what's going on or who their suppliers are doing business with. It's, it's, it's very complicated. Well,

Would you say that like many things that exist today, it has almost outcomplicated itself? Like, I feel like there's so many industries today where with technology and industrialization and globalization, they kept getting more complex, bigger, bigger, bigger, and to the point where even the people inside it don't really know how we got here or how it even works efficiently. A hundred percent. I mean, I remember doing a story. This is like

20 years ago when I was based in China for the Washington Post and I did an investigation on illegal logging and how illegally harvested wood in places like Indonesia, Myanmar, the Russian Far East, how that was ending up in the Chinese supply chain. I remember I spent some time in areas right alongside the Russian border and

got deep into the nitty gritty of like, here's the supplier, here's the sub supplier, and eventually discovered that IKEA, which is a pretty well-run company that had signed all sorts of sustainable forestry pledges, has bunches of accountants, global accounting firms digging deep into their supply chain to make sure they're in compliance with prohibitions on child labor, environmental regulations. They were not aware of themselves that

that a reputable supplier they were doing business with was tapping a not so reputable supplier that was buying logs from the Russian Far East. And what I discovered was, you know, there were lots of layers to this. So and a lot of this is about inoculating the corporate executives from responsibility. Right. So they get, well, we got this checklist and we hired people.

Pricewaterhouse Coopers to audit our supply chain and everything checked out so that when somebody like me comes along and says, no, actually these logs were improperly harvested. They're going into your pine tables that you're exporting to Europe and North America. They can say, well, you know, that snuck through our process. It's not like that was our own decision to do that. Yes, in the same way that we discovered after the 2008

financial crisis, we had institutions that were too big to fail. We've got lots of operations in the global supply chain that are too big and too complex to understand.

great. I mean, really excellent explanation. And it makes me think of I watched a documentary on clothing was talking. I've got a bunch of kids was talking about kids pajamas and how you can't even find out where they came from, how they were made, what chemicals, I guess. I don't know. Things go into it. And it made me realize, like, is it really that hard for us to put

some kind of checks and balances, some kind of transparency on this? And should we even bother at this point? Well, the question is, how much do you want to pay for that? Um, it, you

look, there's more and more technology that allows us to trace components of the supply chain. You can put RFID chips on, on things. Uh, we can get down to, you know, the level of tracking an individual bale of cotton. If you're worried about, for instance, uh, human rights, uh,

in places like Xinjiang, the region in Western China where the ethnic minority Uyghur people are by many accounts pressed into forced labor. They produce lots of cotton. A lot of that cotton ends up in the global supply chain. There's a good chance that if you're wearing a cotton garment that's sourced from China, you are on some level, uh,

drawing on a supply chain that includes the oppression of the Uyghur people. There's technology we can deal with around that. But the problem is that, and this is the story that I tell again and again in the book,

It's financial interests and specifically shareholder interests that largely dictate what happens in the supply chain. And to the extent to which we care about other things, human rights, labor rights, whether people have the right to organize collectively, whether...

Products are made in a way that's environmentally responsible. Like this is constantly rubbing up against the overwhelming imperative to just make share prices go up, which is traditionally meant just move production to the cheapest places.

I mean, look, you know, why did so many jobs like we're now in a moment where politically we describe the production of jobs to China as as some sort of, you know, Chinese conspiracy to destroy American livelihoods. Like this is something that Western companies did all by themselves for the simple reason that.

that we've been using Chinese labor going all the way back to the construction of the railroads in the American West as a way to undercut domestic labor. We actually recruited Chinese workers, or the railroads did, recruited Chinese workers, brought them to the U.S. to undercut domestic

the possibility of labor agitation by, by native born workers who did not like, you know, sleeping in horrible camps with not enough to eat and the threat of scurvy and danger on the rails. I mean, there's a direct line from that to how Walmart ends up making so much stuff in Chinese factories, because,

in China, Western companies find a place where environmental standards, workplace standards, you can get around them by cutting in some Chinese Communist Party official who's got access to land or resources or whatever. And you're getting rock bottom production in terms of price at massive scale.

And that's good for retailers and it's good for shareholders and it tends generally to be good for consumers. So that's the driving force. And so anytime somebody comes along and they say, well, we should do it differently, right?

You got to ask, you know, are people willing to pay for that? Right. As you're going through that, I'm even going through my own purchasing practices. Right. And there are some things that I just refuse to budge on. I will buy the expensive. I will. For example, we use like EWG verified for a lot of, you know, cosmetics or things, you know, whatever it is, but clothing.

Maybe not as much, right? Amazon essentials got some good stuff. I never really looked at where does their cotton come from? So it's interesting to recognize that I can get on a call like this and talk about, we need transparency and we need to make sure these labor rights exist. But then every single person listening makes purchasing decisions that often will be at odds to those moral beliefs at certain times, I would imagine.

I mean, I say this in the book. I don't put a lot of stock in the idea that consumers are going to save us from vulnerabilities in the supply chain because who are consumers? Like we're busy dealing with our kids. We're worried about our dog. We're late for work. We're not going to save the planet or boost human rights when we're just busy trying to get the best price for our three kids for socks and T-shirts. I just –

fervently don't, I mean, it's healthy to the extent to which people do think about the places their goods are produced and those who want to get into it, you know, power to you. But I just don't believe that will be a substitute for sensible regulation, for labor mobilization, for antitrust enforcement, for a changing of the financial incentives so that

companies are not rewarded for just doing whatever in the immediate term makes their share prices go up, where they take a longer view. And that's going to require that people who actually do that for a living spend some time digging in. I've always had that kind of vantage point as it relates to government. And people talk about government's wasteful and it's too large and all these things. And many of those, true. But in my mind, at least in the US, it's

pretty much one of the only institutions that will take on things that are not necessarily financially rewarding, but potentially, you know, just the good of the people. This would be an example of that. You know, what's, what's kind of the group or the solution that might help streamline or open up transparency around the supply chain?

Well, by the way, it's not just transparency. I mean, I think one of the things that, that I really try to reckon with in the book is that, uh,

There's a lot of monopoly power in the supply chain. And, you know, back to your original point where you're skeptical of this idea that the supply chain upheaval is responsible for rising prices. Yeah, to an extent it was. You know, a lot of stuff got stuck on ships that were queued up off of major ports like L.A. Long Beach, which is the gateway for 40% of all imported goods reaching the United States by container.

Because we had those big traffic jams there, because we didn't have space in warehouses, because there weren't enough truck drivers to move stuff around. For a time, we had product shortages. They're still around in some industries. And that did drive up prices for sure. But we had to reckon with the fact that I'd go deep into the beef industry. I mean, here's this industry. Ooh, let's do it. Let's do it, Peter. There's four companies that control 85% of the slaughterhouse capacity in the United States. That's higher than during the robber baron era.

And there is engineered scarcity in the supply chain. They are intentionally taking slaughterhouse capacity out of the system while, you know, flooding the market with cattle, which tends to lower their own prices for the cattle that they have to buy, right?

Then they limit the slaughterhouse capacity, which limits the ability to actually turn those live cattle into steaks and hamburger, which allows them to charge really high prices at the other end to distributors, restaurants, etc. And so the net effect of that is every time there's a shock to the system, prices go up for them.

While ranchers actually go out of business because they're getting a smaller share of the dollar that we're all spending on beef. That's just one of many examples. I mean, I get deep into the international shipping industry, which is really this unregulated cartel that,

And, you know, again, every time there's a shock to the system, not just the pandemic disruptions as we speak, you know, the Houthi rebels in Yemen are opening fire on on container vessels that are headed toward the Suez Canal. This is a key artery of trade connecting Europe to Asia. As a result of that, ships are going the long way around Africa to get to Europe.

That does involve extra costs for the ships because they're burning more diesel fuel. It's a longer journey. They got to pay crew longer. But I've had analysts tell me the cost increases are maybe 35%, 40%. Prices are up like 400%. Exactly. Because there's only three alliances in the international shipping cartel.

Think like, you know, Airline Alliance, Star Alliance. There's three of them. They got somewhere between 85% and 95% of the traffic on the most lucrative routes. That's West Coast of the U.S. connecting to China and Asia to Europe. So every time there's a shock to the system, they jack up rates and they pad their profit margins. Monopoly power is laced throughout the supply chain. And that explains a lot of price increases.

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Hey there, Ryan Reynolds here. It's a new year, and you know what that means. No, not the diet. Resolutions. A way for us all to try and do a little bit better than we did last year. And my resolution, unlike big wireless, is to not be a raging a**.

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Why don't we just have more competition? Why doesn't somebody just start up a, you know, a new shipping company or a new meat processing company? You know, you got $10 billion. You know, where are we going to get our ships made? If they're not huge, they can't go into the handful of ports where more and more of the trade is concentrated. That's a massive barrier to entry.

And there's only a certain amount of capacity to make chips. And yeah, it requires tens of billions of dollars in capital. Most people don't have that just lying around. I mean, if somebody set up a hamburger stand down the street and they were charging $35 for hamburgers, it would take about five minutes for somebody else to come along and charge a fair price and they'd go out of business. It doesn't work that way in shipping. It doesn't work that way in beef.

Doesn't work that way in a lot of food processing. Doesn't work that way in pharmaceuticals. I mean, we are surrounded. We're just immersed in industries where

you know, the textbook concept of supply and demand that we learn about in high school or college or wherever doesn't apply because when the price goes up, there's no way for new supply to come into the market. That is a major driver of higher prices. And don't take my word for it. I mean, during the worst of the pandemic disruptions,

You had CEOs of major companies like Kroger, the grocery chain, telling their investors on earnings calls, this is great. We got these supply chain shocks. And so everybody understands the prices are going up. And now we can lift our prices far in excess of what our own underlying costs are, which is a fancy way of saying we can pad our profit margins. You know, I know a lot of your book focuses on during the pandemic, the impact

The fragility of the supply chain. And I know you just talked about it, right? A lot of this caused by monopolies. Is this primarily just a move towards efficiency as we've become more technological and global than we just try to be most efficient? Hey, for the last 10 years, we have used this many masks, right? You know, like surgical masks.

So why ship more than this many surgical masks? And then when there's this disruption, eh, few people die, essentially. Well, there are multiple things to unpack here. So you're talking about a concept known as just-in-time. Exactly. Pioneered by Toyota at the end of the Second World War. And it's eminently sensible, right? Toyota...

At the end of the Second World War, it says our capital is constrained. Our country's been devastated by the war. We can't do it the way Henry Ford does it in the United States, where you just make as many cars as you possibly can and figure out how to sell them later. We have to take an approach the way Toyota described it, sort of like the way a supermarket manages milk. You want enough milk on the shelves that nobody leaves angry that they didn't.

Can't buy any milk, but you don't want so much that some of it goes bad and you have to spill it. You want just the right amount to replenish what you're selling. And you want your suppliers to deliver parts and components to your assembly line just as you need them in real time. So you don't have to take up lots of space and money sticking parts and raw materials in giant warehouses. Well, that was a sensible idea. Turns Toyota into the world's most successful auto company worldwide.

Along comes shareholder interest. And I spent a lot of time looking at the role of consulting companies. I focus on McKinsey. And they pick up this idea and they pervert it into this crude imperative of,

for their clients, corporate executives at publicly traded companies to just slash inventory. You know, why waste money sticking parts in warehouses against the inevitable trouble? Just give the savings to yourself through higher executive compensation as a reward for being smart enough to hire McKinsey. Give it to your shareholders in the form of dividends. Buy back your own shares, which will make share prices go up. Everybody will be happy until there is inevitably a shock. And

And the pandemic was merely the biggest. I mean, we'd seen this dynamic. I first wrote about a supply shock back in 1999 when there was an earthquake in Taiwan, which was already a leading center of computer chips. And there were all these shortages and people said maybe we

overdone it. Maybe we shouldn't concentrate all this capacity in this one place. Fukushima, nuclear disaster with the earthquake and the tsunami in Japan in 2011, massive shortages of all sorts of electronic components made there again. People said we've gone too far. And that sets us up for the pandemic because these warnings get disregarded for the simple reason that any

executive at a publicly traded company says, okay, you know, that's right. Let's be more resilient. Let's build extra warehouses. Let's have backup plans. It's basically saying, let's dilute next quarterly earnings in order to strengthen the company long-term. And there's a good chance that person gets fired.

Whereas the executive who says, no, no, let's just stay lean, no warehouses. Let's keep our production centered in China because it's really cheap. Eventually there will be a price to be paid for that strategy because it's

We don't know what the next shock will be, but we know it will happen because that's just part of life. But with any luck, that executive will have cashed their stock options and they'll be lying in a hammock on some beach, you know, hoisting a cocktail. I mean, that is the dynamic that explains where we are. But I also want to push back on something you said, this idea that, you know, we've chased efficiency, right?

We've chased a certain kind of efficiency that turns out to be not all that efficient, except for investors. Like, take a story I tell in my book. So railroads have chased after their own version of just-in-time. They call it precision-scheduled railroading.

which is a way of describing firing lots of rail workers, sticking the existing rail workers with more work, keeping them away from their families for longer. I've spent time in the book with traveling maintenance crews, you know, who miss the births of children, their anniversaries. They can't go see doctors when they need them because they're constantly on the road. And that's been made worse by precision scheduled railroading. They limit rail service.

as a way to increase prices. They make trains longer than ever. So whenever something goes awry, we're more prone to have disastrous accidents. So, okay. So that's what we're doing in the name of efficiency, right? Well,

There's this metric that the railroads have pointed to as a way to please Wall Street. They've said, we're going to lower dwell time. That's the amount of time that cargo sits in any particular place. And in lowering dwell time, we will prove to you, Wall Street, that we get it. You want efficiency and you're willing to pay for it. Well, I spoke to an engineer at Union Pacific.

who was working out in Idaho, who was horrified to discover that he was actually pulling rail cars to the wrong destinations. He's pulling a giant train bound for Oregon. He's carrying drums full of chemicals that are supposed to be going to

Southern California. He's got auto parts that are supposed to be going to Southern California. He's taking them to the wrong place. Not by accident, because somebody running the rail yard in Nebraska says, my mantra is efficiency. I must lower dwell time. I don't care where the next train is going. Wherever it's going, I'm attaching as many cars to it as possible so they sit in my yard for the least amount of time. So on some spreadsheet, it shows that we've lowered dwell time.

That's an example of the investor class getting what it wants through these metrics, while the rest of us are getting the opposite of efficiency. Imagine the guy who's waiting to repair his car in California who's told, oh, I can't get the part. It's sitting on some train. The paint manufacturer who wants to make paint

And the contractor can't get the paint because the manufacturer can't make it because the chemical needed is on some train that has to be routed back from Oregon through Nebraska to head down to Southern California. That's not efficiency. My dad always had this phrase. He'd say it's the bean counters. You know, it's this push towards metrics, right? So if you create the metric and the data is the end all be all without asking, is it the right metric or right data? People will.

work towards that metric as opposed to an overall outcome goal and, and, you know, ultimate mission.

100%. And this is an example of the metrics going cancerous. You know, I'll give you another one. So, I mean, you ask about just-in-time, which really is important. So one of the ways in which consultancies like McKinsey persuaded shareholders, I'm sorry, persuaded companies to take this sensible idea and turn it into something ridiculous. So they said, well, Wall Street wants return on asset. There's a key metric, right? Return on asset.

What is return on asset? How much revenue are you getting for the assets on your balance sheet? Well, inventory...

is an asset. So if you slash inventory, you've lowered the asset value on your books. So you're now taking the same amount of revenue, dividing it by a smaller number, the ratio goes up. So I talked to a guy who was working at this industrial generation plant out in Minnesota who deals with the so-called lean Taliban. That's the McKinsey crew that shows up from the Chicago office. Yeah.

You know, they got religious fervor about this. And they're like, it's a bunch of slick suited young guys right out of Ivy League universities and one older guy from the Chicago office. And they sit down, the people have been running this industrial engine, industrial generation plant for years. And they say, you know, you're doing it wrong. Your warehouse is full of these $5 sheet metal brackets. Knock it off. Lower inventory. They're like,

But our customers are like giant hospitals. We have to install these generators by crane. I mean, if we're short of anything and we're late, talk about just in time, we're going to really upset the customer. We're going to have to pay hundreds of thousands of dollars in emergency delivery charges. We'll have to pay overtime. And that's exactly what happens.

They raise their return on asset by lowering inventory, and then they damage their brand and they miss delivery. As a guy I quote in the book put it to me, if you need a ventilator in the middle of a pandemic and you can't make a ventilator because you don't have the parts, you don't get to say, well, at least our return on asset was high and our share price is high.

I mean, that's an example of the metric being nonsensical. I realize the CEOs or the executives, they're often short. I mean, I think the average tenure is like two to four years or something, right? But the board and investors tend to be more long-term.

They see these impacts. You would imagine that these brands are negatively impacted by doing this and eventually they would smarten up. So take this, this, you know, company making ventilators or really anything when a shock hits the system and they are unable to deliver, then the consumer, whoever that consumer might be saying, fine, screw you. I'm not, I can't trust you. Does that not in and of itself incentivize companies to fix things for the better?

Yeah, that's a great point. I mean, the problem is that the boards are typically handpicked by the executives. They don't present a real check on the process. And they themselves are invested in the stock and they like the short-term movements. And then you have the threat of activist investors. You know, you have people like Bill Ackman, for

running around, threatening to purchase up your shares and throw you out the door if you don't move fast enough to slash costs. I mean, time and again, the operational interests go out the window. And this, by the way, is a really old story. I mean, I tell the story in the book of Henry Ford, who is not someone to be lionized. He was a racist and an anti-Semite and he crushed organized labor. But he knew a thing or two about supply chains.

And he certainly knew how to build a highly successful brand. And he, back in the early days of his company, as he's turning the Model T into this mass consumer product that there's just a fervor over, he gets pushed by some of his early investors, the Dodge brothers, who noticed that he's got like a million dollars in cash on his balance sheet. And they say, we want dividends. And he says, well, I really want to build out my...

biggest factory yet. I want to move forward with, with mass assembly. And they sue him and they win. And he manages to build his, his river Rouge factory nonetheless. But it goes slower. And I argue in the book that you can draw a straight line from that decision to everything that comes after. And I went and visited his river Rouge factory, which was his monument to self-sufficiency and,

outside Detroit. I was there in early 2022 and I thought Henry Ford would be aghast to see what I saw because they were making the F-150 pickup truck, which is Ford's most popular best-selling car.

And they had this highly automated assembly line, all these skilled people. It's kind of incredible to watch. And then they're taking these finished vehicles and they're parking them in parking lots in the shadow of Ford's corporate headquarters and across the street from Henry Ford Elementary School because they don't have the computer chips.

The computer chips are made in Taiwan. They can't get enough of them because Ford, now run by Henry Ford's great grandson, but really working for Wall Street because it's a publicly traded company, had slashed orders for computer chips heading into the pandemic. Now they can't get enough of them. They put themselves in a position where

They are being pinched by their supply chain. And it's a supply chain that's been built by the incentive to limit costs above all else. Henry Ford would truly have been spinning in his grave, would have been horrified to see this. This episode is brought to you by Indeed.

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I remember during that time around, you know, around the pandemic, the craziness in the auto industry with costs. I mean, I remember I hadn't bought a car in a long time, but a friend of mine was like, dude, I just went to a place and they're charging like X percent over MSRP, which I'd never heard of in my life. And everybody everywhere talked about these chips, right?

Was it that people just didn't order the chips? Was it that the places in Taiwan just couldn't make them fast enough? Is it that their workers were scared to be in an assembly line because of COVID? Like what actually happened? Because at the end of the day, the consumers, maybe I'm wrong.

but it feels like the consumers paid that cost. They paid that price. Oh, 100%. Well, you're quite right. So it's a perfect illustration of just-in-time being taken to absurd lengths. So here's what happened. So in the early wave of the pandemic, and this, by the way, also explains why shipping prices go up. So we'll do two birds with one stone here. So in the early part of the pandemic, there's a lot of fear, fabrications,

Factory disruptions first in Central China are disrupted. Then because production is disrupted in China, there's shortages of all sorts of components that are hitting the auto industry in places like Italy, eventually around the world, including here in the States.

And the people running big companies concluded that, okay, we know how this goes. This is a classic recession. People are getting thrown out of work. They're not going to spend money. There's going to be less demand for our products. We're going to slash everything.

slash orders for all sorts of things the shipping companies take their vessels they park them in warm waters in places like Greece oh we're not going to need them because there's not going to be as much stuff moving around electronics companies slash orders for computer chips the computer chip companies in places like Taiwan uh take some of their lines you know offline and then it turns out this was one of the gross miscalculations in the history of capitalism uh

It's true that we stopped going to restaurants.

restaurants are closed. But guess what? Now we're stuck at home cooking 27 meals a day for cooped up school-aged children if we have them. We're not going to offices, but now our bedrooms are offices. So now we need more kitchen equipment. We need gadgets to entertain our kids. We need to stick a computer monitor on that cabinet that we don't usually use in our bedroom. We're not going to the gym, but we're still working out. So now we're buying Pelotons that an

All of this stuff, or a lot of it, is made in China, has to be transported over here. So this swamps the works of the shipping industry. We run out of shipping containers. Suddenly, the cost of moving a container from Shanghai to Los Angeles goes from like $2,000 before the pandemic to $28,000 on the spot market in the space of a few months. And in terms of computer chips...

The auto companies realized and the electronics companies realized, hey, hold on, we messed up. Sorry, computer chip factory, make more.

And they say, well, it doesn't work that way. It takes us months to ramp up. It takes billions of dollars. You know, talk to us in a year. And then the auto companies discover that they've been very arrogant. You know, they they assume we must be really important. I mean, we're Ford and General Motors and, you know, Renault. And and it turns out, no, actually, you're not very important. Apple's important. Google's important.

They buy the lion's share of advanced computer chips, and even they can't get enough chips, but they're first in line. And the auto guys are...

are way in the back of the line because they're, as a gross percentage of the production of computer chips, they're actually fairly small customers and they are not prioritized. So that turns into, you know, like you actually, I moved back to the States after living in London for five years in the summer of 2021. And yeah, called around and discovered that, as you said,

Oh, yes, we have that vehicle. It's $10,000 over MSRP. Okay, I'll buy a used one. Well, actually, the two-year-old model is the same price as the new one. Yes, yes. And this is all because of this computer chip crisis. And it's because, yes, we overdid it with just in time. We didn't think about...

looking after the suppliers. I mean, if you go back to how Toyota did just in time, they were actually less hit because they understood that you had to have your suppliers clustered close to your factories. It couldn't be on the other side of the world. And when times are bad, you have to take care of your suppliers. You have to, you share the burden. Okay, well,

We'll lower our order a little bit, but not so much that you take a production line offline because we're going to need you when we need you. That's not how it works now. Everybody's out for the next quarter.

Wow. That's fascinating because I also imagine the government stimulus that happened, which actually put purchasing power back into the consumer, which is technically the opposite of what happens in a standard recession. That even exacerbated this because now instead of people buying less, they're buying more potentially. Yeah, there's some evidence that that played some role. Yeah. Yes. But, you know, that was a global phenomenon. I mean...

people get very political with that in the U S uh,

There's no question that some demand was stoked by stimulus and expanded unemployment benefits and people bought more stuff than they would have otherwise. But the supply chain was going to get hit in any scenario because we just had no cushion. I mean, we had slashed inventory over 20 years chasing after this lean manufacturing, you know, just-in-time vision. What is the truth behind, like,

massive multiples of increase in food prices. Is that a supply chain issue? Is it warranted or is it again fall into corporate short-termism? It's often engineered scarcity. It's often not enough competition and barriers to entry for potential competitors. So, I mean, you got to look at it sector by sector. Beef is the one I know the best. It's true though about all meat.

There's serious market concentration in terms of eggs. So every time there's some kind of shock, oh, avian flu, that's limiting supply. Usually that's true, but it's usually also true that that's a gift for somebody who's got a hefty market concentration. I'll give you an example. It's not food, but it touches everything. Look at shipping. So

We are speaking just as a dock worker. I was going to ask you that. Let's talk about that. Yeah. You know, East and Gulf Coast ports have been shut down by 45,000 dock workers walking off their jobs, looking for higher wages and assurances that their jobs won't be automated.

And what has happened to the stock prices of shipping carriers? You would think, right, oh, that's really a disruption. They must be so relieved. Now they can load and unload their cargo. So therefore, their stock prices must be rallying. No, it's the reverse. They're plummeting because investors understand that the dock worker strike is actually a massive pricing opportunity for the shipping carriers.

They've been sticking surcharges on cargo as supposed compensation for the disruption of the strike. And they understand that this gives them cover to jack up prices as much as anyone will pay and that anxiety in the marketplace is

I mean, if you're an importer and you're worried about, you know, getting enough stuff on the shelves for the holiday season, you're willing to pay whatever you got to pay to get your container on the ship. So once the disruption's gone, the share price goes down, which is the tell.

that this is an industry where scarcity is a good thing. And every time there's another hit to the capacity to move cargo around, that's a good thing from the standpoint of carriers. And the same goes for, you know, eggs or, you know, infant formula, right? I mean, remember like we ran out of infant formula for a while because there was a factory in Ohio that had a tainted supply and,

Well, you know, it turns out that one factory makes like 40 some odd percent of all the infant formula in the U.S. because we have barriers to imports from Europe. Well, that's supposedly for sanitary reasons. Do we really think the sanitary standards in Western Europe are so different than those in our own country? It's an elimination of competition. Right. I want to go back to the shipping example because it is happening right now. And I want to make sure I understand it. So,

Now that the strike has occurred, the share price goes down. Right. Which what I'm trying to figure out is that seems like it would make sense because the event has happened. There is now less efficiency in the shipping industry. And so investors are worried that there's nobody to load things off the dock.

I'm not going to invest in that company because I'm scared about its future. That's that would seemingly be logical. Yeah, but it's the opposite. Tell me, I don't, I don't, I don't get it yet. Oh, a strike. Okay. So it's going to be harder to move cargo, right? Therefore people who have to move cargo are going to be willing to pay whatever it takes. And the, the ships before the strike, well, this is, this is right now, uh,

ships are coming in from all over the world to ports on the East coast and on the Gulf coast. We're talking Houston, Newark, Charleston, Savannah. These are some of the biggest ports in the U S and they can't pull up to the dock because the dock workers aren't there.

So they can't load or unload. So what do they do? They drop anchor and they just wait for the strike to be over. So now there's something like 40 ships that are just sitting there. They've been turned into floating warehouses off of these major ports. Well, there's somebody in Brazil who wants to export soybeans in containers to Europe.

And they're waiting for the ship that's supposed to have dropped off goods in Newark and then head on down to Brazil to get the soybeans. But that ship is stuck in Newark waiting for the dock workers to unload. So the guy in Brazil who wants to get his soybeans on the ship doesn't have any ship. So he's calling up his broker saying, well, what's it going to cost? I got to get these out. I got a customer in Germany waiting for my soybeans. Well, the price just went up.

So the industry is actually benefiting from that constraint to supply. So now there's a settlement to the strike and ships can move normally again. It's actually more efficient. Is there a settlement to the strike right now? Yeah. Oh, there is. I don't know. Oh, yeah. They settled it last night. Are you serious? Yep. They settled it last night.

Or they suspended it. I see. So the strike, for the time being, is over. Okay. The ships can move again. So investors are like, well, we better sell the stock. Now we can't totally screw that guy in Brazil. We can't rip the face off that guy in Brazil anymore. That guy now has alternatives. There are going to be more ships showing up in Brazil. The price is going to go down. Hmm.

This is perfect. The fact that share prices are actually falling on the news that the strike has been settled tells you that disruption is good for the shipping industry.

That's what I was missing. I didn't know. I mean, I don't follow it that closely. I didn't know it had been settled. So you're saying on the news, it has been going down where you would assume, yes, you would assume they say, hey, we work this out. We're good. Operating is normal. Price kind of rebound. I see. Right. In the same way that the Hooties are.

opening fire on ships that are headed toward the Suez Canal, something they're doing in solidarity with Palestinians in Gaza, you would think, oh, that must be terrible for the shipping industry. Now they have to go the long way around Africa. They can't go through the shortcut of the Suez Canal. They have to burn more diesel fuel. They have to pay crews more. Their costs are going up. Oh, how terrible. Prices are up 400%. Wow.

That's bolstered their share prices. It's built in that when something bad happens, it's, I mean, anything commonsensically bad to those of the rest of us on planet Earth, that's good for the shipping industry because there is no competition. Man. They got us. We're at the mercy of this

lightly regulated international cartel. What's your recommended or one of your recommended solutions here? I mean, it sounds like, as you just mentioned, is it regulation? If so, who's doing that regulation in a global economy? It's antitrust enforcement. Yeah, we need more competition. I mean, markets are not really markets without somebody protecting us against monopoly power. So we need antitrust enforcement. We definitely need

better working conditions and wages for people in the supply chain. We haven't talked about this, but you know, I rode along with a truck driver for three years for, I'm sorry, for three days. I was like, dang, three years. Yeah. It felt like three years. We, you know, we, we, we heard that we ran out of truck drivers. I mean, we ran out of people willing to sign off on the miserable bargain that

driving a truck, it tells it's always been a tough job, but it's been downgraded so much that it's gone from a pretty well-paying job to basically a working poor job. And, you know, back to Henry Ford, like Henry Ford famously raised the wages of his assembly line workers, doubled them 1914. Some people called him a communist. He said, I'm not a communist. I'm a capitalist. I'm trying to make stuff at scale. And,

And any business that's premised on low wage labor is inherently unstable. I want people showing up secure that they can support their families. And I want them in a creative way. I want to be able to push them. And that is,

I have to pay for that privilege. And we need to get back to that sort of thinking. And then to the extent to which we think about place again, I mean, we've been invited to pretend that, you know, a factory in Southern Ohio may as can be in China and it makes no difference as long as there's cheap, you know, container shipping and the internet, we can rely on these just in time supply chain. Well,

We're not abandoning globalization, nor should we, but we should have some common sense. We should think about backup plans and to the extent to which production moves closer to the U.S., you know, to the U.S. in some instances or to Mexico, Central America. We can actually do just in time if stuff is closer at hand. Back to the Toyota example, because you can replenish your stocks more easily. You know, that's healthy as well. If we did those three things, we could get a lot of the vulnerability out of the supply chains.

We touched the surface. So again, in the book, going all this with, as you mentioned, some excellent stories, case studies, examples that help people understand this complex global economy we have. So again, the book is called How the World Ran Out of Everything Inside the Global Supply Chain.

Bestseller on Amazon at the moment, you know, tons of strong reviews, excellent books. So congrats on that. Um, anywhere else, you know, I know you, you're writing for the New York times. What's, what's on your agenda these days. What can people find? Uh, I've been doing a lot of stuff on the dock worker strike. I'm going to be looking at, uh, the implications of the U S China trade war and where, where we, uh, go from there. Uh,

I don't know what I'll be doing, but I'm sure I'll be doing some typing no matter what happens. And will you only be typing in either books in the New York times or do you have a website we can find yet? Uh, Oh, my stuff's on my website, peter s goodman.com. That's a lot of my times work and a lot, a lot of the stuff around the book. Beautiful. We will link to that. Peter, thank you so much for being on the show. Thanks so much for having me, Chris. Really enjoyed it. It's a blast.

Thank you.

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