00:00:00
we're really excited to have claire with
00:00:01
us come on out claire
00:00:03
are you here
00:00:04
right what are we welcome
00:00:07
what will we be talking about today
00:00:10
we're going to be talking about china
00:00:12
you know just as everything has been all
00:00:14
spicy yeah well just again we're trying
00:00:16
to make today about just
00:00:18
easy breezy topics that you know the
00:00:20
most easiest things to manage so we
00:00:23
armaments ukraine let's go to china sure
00:00:27
please welcome claire
00:00:36
[Music]
00:00:48
we are going to actually keep this
00:00:50
pretty apolitical today and maybe talk a
00:00:54
bit about the parts about china that are
00:00:56
less discussed in the highla in the
00:00:59
headlines
00:01:00
and you know jason reached out and he
00:01:02
said he wanted to
00:01:04
really understand what were some some
00:01:05
problems and i wanted to see salt that
00:01:08
we wanted to see salt so i'm a property
00:01:10
developer
00:01:11
i run greater china for heinz we're the
00:01:14
largest private real estate firm in the
00:01:17
world
00:01:18
and we have an incredible greater china
00:01:21
team i know i see these folks in the
00:01:23
front they're like where is she i can't
00:01:25
possibly spot her
00:01:27
in there
00:01:28
so
00:01:31
so
00:01:32
we have a team that is working across
00:01:34
beijing shanghai shenzhen dongguan
00:01:37
and hong kong
00:01:39
and we get to work really across the
00:01:41
real estate spectrum so
00:01:44
we built the greenest skyscraper uh in
00:01:47
in china
00:01:48
we built some of the first international
00:01:51
service departments uh in the country
00:01:54
and are doing some really interesting
00:01:56
innovative projects like in hong kong we
00:01:58
bought a distressed hotel that we're
00:02:01
turning into really a new kind of living
00:02:04
collaborative living that's super
00:02:05
technology enabled
00:02:07
for a young population there where the
00:02:09
average white collar young person it
00:02:11
takes them 20 years of salary to be able
00:02:13
to buy an apartment
00:02:15
so we get to approach these problems
00:02:18
that are not unique to our part of the
00:02:20
world but often the solution is a
00:02:22
combination of east meets west
00:02:26
so back to kind of what's the the
00:02:28
problem well
00:02:30
you know we're sitting right now in
00:02:31
miami a place that is super exciting
00:02:35
thanks to a lot of the things that are
00:02:37
happening right here that have been
00:02:38
hyped by a pretty awesome mayor right
00:02:42
what did he do we got on twitter and he
00:02:44
talked to all of us
00:02:45
about what this city had to offer it had
00:02:48
key ingredients it had universities it
00:02:50
had an upward trajectory it had young
00:02:52
people looking to collaborate and at the
00:02:54
end of the day that's where we want to
00:02:55
be right we want to be sitting together
00:02:56
in awesome spaces like this
00:03:00
exchanging ideas with other interesting
00:03:02
people that's how you do cool stuff
00:03:05
and so as property developers we think
00:03:08
you know how do you create spaces where
00:03:10
people want to be their best right
00:03:13
collaborate with others and build a
00:03:16
better future so that's a lot of jargon
00:03:18
but what does that actually mean back to
00:03:20
the problem well
00:03:22
first these ingredients are pretty clear
00:03:24
i teach a class at stanford on this
00:03:26
called who owns your city and the
00:03:28
students usually pick it up in the first
00:03:29
10 minutes it's
00:03:31
a place that has pretty good
00:03:32
infrastructure
00:03:34
can i get a job can i afford to live
00:03:36
here and is there cool cultural stuff
00:03:39
that keeps it from being too
00:03:41
bland
00:03:43
but then
00:03:45
you know you'd say okay well cities can
00:03:46
learn from each other right you can just
00:03:48
take those ingredients and apply it and
00:03:49
that's what suarez did a great job of
00:03:51
here
00:03:52
but we are living in a time where the
00:03:54
east and west have never been more
00:03:56
divided
00:03:58
right and building a city building
00:03:59
building is really hard it's it's like
00:04:01
the most extreme version of hardware
00:04:04
so as a property developer
00:04:06
we spend our time really thinking about
00:04:09
what are the big macro trends what are
00:04:11
startups focused on where do they want
00:04:15
to be because our spaces need to be
00:04:17
relevant for 50 70 100 years and we
00:04:20
can't pick up our building and move it
00:04:23
somewhere else
00:04:24
and
00:04:25
so you try to take the arbitrage of
00:04:27
what's working in one part of the world
00:04:29
and try to apply that to another and
00:04:31
solve problems and that's where you find
00:04:32
great returns but it's also where you
00:04:34
build places that are going to be
00:04:35
relevant for folks and so you know just
00:04:37
a couple examples
00:04:39
up here behind me
00:04:40
so you know we talked about the living
00:04:42
challenges uh so for folks to be able to
00:04:45
be able to afford a place to buy but the
00:04:48
concept of rental apartments so like
00:04:50
multi-family if anyone lives in a
00:04:52
multi-family building with one landlord
00:04:55
that
00:04:55
isn't totally a thing in greater china
00:04:59
often people are left to rent from an
00:05:01
individual landlord pay a deposit that's
00:05:04
enormous uh cross prohibit you know cost
00:05:06
prohibitive and get you know quality of
00:05:09
of product that that really is not up to
00:05:11
what they would expect and so taking a
00:05:13
very in some ways kind of western
00:05:14
concept and applying it in a place that
00:05:17
technologically is probably about 10 to
00:05:19
15 years ahead in terms of what that
00:05:22
average user is used to okay they're
00:05:25
used to unlocking a door with their
00:05:27
phone their wechat is their id it's the
00:05:29
way they meet new people they can
00:05:31
physically shake hands on wechat to
00:05:33
introduce themselves to a friend it's
00:05:35
where they keep their coupons it's how
00:05:37
they pay their rent it's how they pay
00:05:39
their taxes in some regards right we
00:05:41
don't have that in america
00:05:44
but if you're like me and you live in
00:05:45
greater china you do and so how do you
00:05:47
combine those things together to create
00:05:49
something that doesn't exist you see up
00:05:52
behind me a logistics building
00:05:55
but it's actually six stories high
00:05:57
something we're developing it is a giant
00:06:00
almost like a refrigerator uh but a
00:06:02
high-rise super tech enabled
00:06:05
and that's because you know they've got
00:06:07
a lot of people that building will be
00:06:09
sitting within a 45 minute driving
00:06:11
radius to 45 million people
00:06:14
and yet china only has a quarter
00:06:17
of the cold storage capacity per capita
00:06:20
that the us does
00:06:21
okay it doesn't take a genius to see
00:06:23
that this trajectory is you know lower
00:06:25
left to upper right and so again you're
00:06:27
taking this concept of east meets meets
00:06:29
west building up here
00:06:31
uh just behind me is is in shanghai it's
00:06:34
about a million foot
00:06:35
tower
00:06:36
you have a lot of those here in the
00:06:38
united states big fancy office buildings
00:06:40
you know where people used to go to sit
00:06:42
at their computers and do work
00:06:44
um
00:06:45
but this one is very different from one
00:06:48
that you may have walked into earlier
00:06:50
this week this entire building is on
00:06:52
wechat
00:06:54
you can interact with the building on
00:06:56
wechat you can interact with the
00:06:58
landlord you can interact with your
00:07:00
other tenants
00:07:02
you can have chance encounters or
00:07:05
organize a yoga trip in the afternoon
00:07:08
with the people with the space
00:07:11
using this digital interface so in a way
00:07:14
it's really combining the way we live
00:07:15
right now we live in a physical world
00:07:17
but so much of our idea sharing our
00:07:19
collaboration is happening in the air
00:07:21
right in a digital experience that we
00:07:23
can't see and so it's another
00:07:24
combination of this east meets west and
00:07:26
so
00:07:28
what becomes
00:07:29
a problem and an opportunity the problem
00:07:33
uh when you sit in the middle of this
00:07:35
world like my team has the honor to do
00:07:37
uh is
00:07:39
you see that there are all of these
00:07:40
opportunities for us to be able to share
00:07:43
this really the best of what the west
00:07:46
has to offer with the innovation that's
00:07:48
happening on the ground in china but it
00:07:51
is so hard to talk about
00:07:53
in this very divided world and so we
00:07:56
like to take the positive side and say
00:07:58
you know we're living in this world of
00:07:59
like magic and larry
00:08:01
and how can we make each other
00:08:03
better
00:08:05
so i thought i'd use just a few minutes
00:08:06
and then we'll hang out with the besties
00:08:08
um
00:08:09
to to maybe
00:08:10
share a story that maybe y'all haven't
00:08:14
read so much about so that you get the
00:08:16
benefit of knowing a little bit about
00:08:17
what's happening over there and you can
00:08:19
see an example of where sort of east
00:08:22
meets west and that collaboration can
00:08:24
make us all
00:08:25
better
00:08:26
so
00:08:27
up here as a gentleman you all will
00:08:29
probably recognize stung xiaoping famous
00:08:31
for really the opening up
00:08:33
of china
00:08:35
and
00:08:36
you know he was an experimenter you know
00:08:38
he had this vision of what china could
00:08:40
be
00:08:41
and he saw what the importance of the
00:08:44
physical
00:08:45
world the physical infrastructure what a
00:08:47
role that could play uh in in to enable
00:08:50
the economy to jump further
00:08:53
and so the picture to the other side
00:08:55
is shenzhen
00:08:57
which in 1980
00:08:59
was barely a fishing village it had
00:09:01
about 58 000 people very few
00:09:05
paved roads and deng xiaoping he was
00:09:08
from sichuan so we really understood
00:09:09
what it was like to not be from the big
00:09:10
city
00:09:12
and
00:09:12
so he declared it a special economic
00:09:15
zone special economic zone so jinji
00:09:19
and that meant that it would be this
00:09:21
place to experiment with uh bits of
00:09:23
capitalism with free trade etc
00:09:28
so what is it today well first there's
00:09:30
that same road along progression just a
00:09:32
few years after it was declared a zone
00:09:34
and then up here behind me is what it
00:09:36
looks like now shenzhen is over 12
00:09:39
million people
00:09:41
the average age is 29.
00:09:44
it's really the tech hub
00:09:46
of china
00:09:49
so companies like dji which makes 70 of
00:09:52
the world's drones uh they call this
00:09:55
area home
00:09:56
and uh and just within this area if you
00:09:59
were to go shortly from where this
00:10:00
picture is taken
00:10:02
you'll have two of the world's five
00:10:05
biggest ports
00:10:07
by tonnage okay
00:10:09
so
00:10:10
how do you take that head start and turn
00:10:12
it into something
00:10:13
further well they took a lesson out of
00:10:15
the book of the west
00:10:17
and they created something called the
00:10:20
greater bay area that's like the
00:10:22
yeah yeah okay you guys get it
00:10:25
and so
00:10:26
what is the greater bay area well it is
00:10:28
a collection of nine cities
00:10:31
on the mainland side
00:10:33
uh some of which may be familiar to you
00:10:35
guys so shenzhen as mentioned and
00:10:37
guangzhou guangzhou is about 18 million
00:10:39
people
00:10:40
places like juhai do you all remember
00:10:43
you know several years ago there was
00:10:44
this thing about china building the
00:10:45
longest bridge in the world everyone's
00:10:48
like where is that okay it was in july
00:10:52
and then so nine cities on the china
00:10:53
side and then hong kong
00:10:55
and macau
00:10:57
and together this this area it's about
00:11:00
the size of called west virginia today
00:11:03
has a gdp
00:11:05
that's sitting right around canada and
00:11:07
south korea
00:11:08
okay about 1.7 trillion
00:11:12
in 2017
00:11:14
they declared this great greater bay
00:11:16
area name and and it was there to really
00:11:18
back up a lot of the investment frankly
00:11:20
that it already started
00:11:22
to join these cities together to create
00:11:25
a super region
00:11:27
so within that super region they spent
00:11:29
about 300 billion
00:11:31
to build infrastructure to further
00:11:33
connect it so within just four years
00:11:35
they built 2 000
00:11:37
miles
00:11:38
of speed rail
00:11:40
like high-speed trains
00:11:42
here we have like a little you know one
00:11:44
from here that goes to fort lauderdale
00:11:46
you know texas is going to get one in
00:11:48
the year 2090.
00:11:50
uh
00:11:51
and so
00:11:52
so what does that mean that means that i
00:11:55
can walk out of my office with my
00:11:57
teammates in hong kong which is right
00:11:59
next to that big ferris wheel thing that
00:12:01
everybody recognizes i can take one stop
00:12:04
onto metro in 13 minutes on a speed
00:12:07
train i could be in shenzhen or i could
00:12:10
keep on going
00:12:12
and i could access about 23 000 miles of
00:12:15
high-speed trains
00:12:17
and get to beijing get to you know
00:12:19
further than guangzhou get to western
00:12:21
china it is amazing and it is happening
00:12:25
so quickly and that number will soon be
00:12:27
40 000 as they continue to build but
00:12:30
it's not just
00:12:31
speed trains these are interconnected
00:12:33
nodes with further metro right
00:12:35
with transit-oriented development on top
00:12:38
of the meetings of these trains
00:12:41
so
00:12:43
back to the so what
00:12:45
so we know that if you take
00:12:47
cool people and put them in cool places
00:12:50
and you give them an opportunity to
00:12:51
interact well what can you do so this
00:12:54
area again the size of west virginia now
00:12:56
with
00:12:57
70 million people who are all quite
00:13:00
young
00:13:01
and again back to the ingredients
00:13:05
we talked about what sort of fosters
00:13:06
innovation well they've incentivized
00:13:10
universities to put additional campuses
00:13:11
here and these are the best universities
00:13:14
in china so chinwa fudan etc
00:13:17
they funded further life science
00:13:20
they funded
00:13:22
further tax increment zones to encourage
00:13:25
businesses to come and set up
00:13:28
nodes of activity focused on areas
00:13:31
of excellence so remember we talked
00:13:34
earlier about in 1980
00:13:35
there were 58 000 people
00:13:37
in all of shenzhen
00:13:40
so just between 2010 and 2020
00:13:43
in one
00:13:44
small neighborhood on the western side
00:13:47
of shenzhen they filed 58 000 patents
00:13:53
it's pretty amazing
00:13:55
and that shouldn't be
00:13:56
scary that should be exciting guys this
00:13:59
is where we get
00:14:00
innovation this is how we get better
00:14:02
back to the magic and larry
00:14:05
right
00:14:05
thank you yes you can clap for that
00:14:07
you're glad for that
00:14:08
[Applause]
00:14:12
so
00:14:13
what does that mean for us what does
00:14:15
that mean for folks who are sort of
00:14:17
getting to work in this interstitial
00:14:20
space in between getting to live within
00:14:23
it
00:14:24
uh you know up here you know behind me i
00:14:26
have i i'll clear the visual for you
00:14:29
it's further disconnecting showing these
00:14:31
metro lanes these
00:14:34
trams
00:14:35
buses etc leading to these speed trains
00:14:38
back down here that's hong kong island
00:14:40
and then this takes you
00:14:42
through a bit of the bay area before you
00:14:43
get out
00:14:44
to the rest of of china
00:14:47
well why does it matter it's because
00:14:49
these things layer together
00:14:52
okay so china's e-commerce percentage is
00:14:55
about 25
00:14:56
of their overall retail
00:14:58
here it's about 14
00:15:01
again y'all are smart we can see where
00:15:03
this is going
00:15:04
so you can take some notes on the
00:15:06
preview and see what things and trends
00:15:08
may be coming here in china about
00:15:11
85-ish
00:15:14
their transactions are mobile
00:15:17
here that's barely 30 percent where is
00:15:19
that going how does that work and you
00:15:21
can see what's happening another is you
00:15:23
can look at trends that are just part of
00:15:25
the world there that haven't made it
00:15:27
here
00:15:28
and you sit there and you're like wow
00:15:31
what a chance
00:15:32
to iterate
00:15:34
so the example there again we'll stick
00:15:36
with with shopping and retail is social
00:15:39
shopping so this idea of streaming while
00:15:42
shopping that's layered with a full
00:15:43
experience and imagine what it can do
00:15:46
again if you layer that
00:15:48
on top of this wechat platform we're
00:15:50
just talking about a place where i can
00:15:52
go and i could make a new friend right
00:15:54
now you by looking at you
00:15:56
showing my phone to you putting them
00:15:58
together so we can introduce a product
00:16:00
introduce a lecture a concept together
00:16:03
imagine
00:16:04
what we can do
00:16:06
elon likes wechat he was just talking
00:16:07
about it yesterday
00:16:10
so
00:16:11
the point is
00:16:12
uh that we all have this opportunity
00:16:15
um to really you know again the
00:16:17
headlines can be exciting they can be
00:16:20
crispy but to look beneath them
00:16:25
and to take an opportunity to further
00:16:27
connect with the people
00:16:29
because
00:16:30
again those folks who are hopping on
00:16:32
these
00:16:33
trains for you know probably the
00:16:35
equivalent of about 45 cents right to
00:16:38
get on the public transit here going
00:16:40
around and exchanging ideas
00:16:42
these people most of them are not
00:16:43
politicians
00:16:45
right most of them are not big world
00:16:47
global leaders they're folks who are
00:16:50
trying to
00:16:51
to create something for themselves to
00:16:52
create something for their children to
00:16:54
build a better world right
00:16:57
so we're really all
00:16:59
on the same team
00:17:01
so with that bring the besties out i
00:17:03
guess
00:17:05
try not to get too spicy
00:17:07
all right
00:17:08
center stage for you right here right
00:17:10
there in the middle seat oh baby well
00:17:12
done well done
00:17:13
um be nice guys be nice
00:17:16
of course well uh saks is in here so of
00:17:19
course we'll be nice um that's kind of
00:17:21
by default uh
00:17:23
and meet uh our uh ryan peterson from
00:17:26
flexport
00:17:27
claire uh maybe you guys have ryan
00:17:29
claire ryan
00:17:30
i'm introducing
00:17:33
[Laughter]
00:17:40
what do we as americans
00:17:43
not understand about our rival
00:17:47
and what does our rival
00:17:49
most not understand about us in your
00:17:52
estimation
00:17:53
having
00:17:55
operated in both countries for so long
00:17:57
um
00:17:59
you know the term rival is an an
00:18:00
interesting one obviously i love sports
00:18:02
analogies and came from the track and
00:18:04
field world myself claire was in the
00:18:06
olympics guys
00:18:08
claire was injured claire was like i
00:18:10
used to go running sometimes
00:18:12
kind of fast at the olympics
00:18:16
but you know
00:18:18
your job in the sport is to find
00:18:20
the person who is
00:18:23
better than you in some ways
00:18:26
uh and maybe they're strong where you're
00:18:28
weak you're weak where they're strong
00:18:30
you find each other and you you shore up
00:18:33
together
00:18:35
and i think that is what becomes so
00:18:38
clear when you you know live there when
00:18:41
you live on the other side of the world
00:18:43
um but maybe we're born here or
00:18:46
uh you know i you know i'm a minority so
00:18:48
i've maybe always lived in that
00:18:51
interstitial space personally
00:18:54
or even our team our team is very
00:18:56
representative of modern china we have
00:18:58
people from
00:18:59
nearly every province they're really
00:19:01
across the uh the education
00:19:04
bracket highly trained engineers but who
00:19:06
might be quite young uh to folks in
00:19:08
their their 60s who have really seen
00:19:10
china
00:19:11
evolve and so
00:19:13
i i do think the thing
00:19:14
that can get uh missed is almost that
00:19:17
concept like we talked about that as
00:19:20
rivals you know they're not monoliths
00:19:22
just as america is not a monolith right
00:19:24
and we can take the best of each other
00:19:26
so we're we're best of rivals in a way
00:19:28
there we go
00:19:30
is there a model for the century for
00:19:32
cooperation between the two nations
00:19:34
that's enhancing to both
00:19:37
i think it's happening in enterprise i
00:19:39
really think it is so
00:19:41
when i
00:19:41
look at
00:19:43
again younger people
00:19:45
um the products that they use or the
00:19:48
things that the young tech
00:19:50
uh you know entrepreneurs in china are
00:19:52
working on versus here they're they're
00:19:54
approaching a lot of the same problems
00:19:56
right so on the social side uh uh you
00:19:59
know looking at doing
00:20:01
and what made it so catchy right
00:20:05
what it is for us yeah it's tick-tock
00:20:07
it's tick-tock and back to that one
00:20:09
about you know cheat codes and a preview
00:20:12
uh you know doing
00:20:13
was popular years ago
00:20:15
and uh and so you know i remember first
00:20:18
looking at the at the app and being like
00:20:20
wow this is very
00:20:22
catchy
00:20:23
and there's
00:20:24
effectively no difference between do you
00:20:26
read and write mandarin fluently as well
00:20:28
as speak it or well you will never
00:20:30
confuse me for uh
00:20:34
but you know enough to get by
00:20:37
and so when you do business in china do
00:20:38
you conduct in english or do you conduct
00:20:40
in mandarin yeah so with the team we
00:20:42
work fully across what's appropriate
00:20:44
because we also work in hong kong where
00:20:45
it's cantonese right but all of my
00:20:48
communications that go out to my full
00:20:50
team everything in full team is in
00:20:51
mandarin
00:20:52
we do have a large part of our team that
00:20:54
only functions within mandarin um so
00:20:57
when you're for example like you know
00:20:59
you showed some of these buildings and
00:21:00
the idea that came to me is this is a
00:21:02
massive coordination problem that's
00:21:04
almost impossible in the united states
00:21:06
which is if you have this idea of like
00:21:07
this living breathing monolithic
00:21:09
building that is connected via the
00:21:11
internet
00:21:12
it'd probably be 50 organizations in the
00:21:14
united states that would have to have a
00:21:16
say or want to say
00:21:18
the perception that we get
00:21:20
is
00:21:21
there is a individual that can
00:21:23
effectively make that right decision in
00:21:25
china whether it's at the city level or
00:21:27
at the state level is that how it's
00:21:29
really like like when you guys have
00:21:30
super ambitious ideas
00:21:32
is there one place you go to and then it
00:21:34
just kind of all gets decided
00:21:37
or is it just like here where it's messy
00:21:41
so it's kind of neither actually and and
00:21:44
this is where i think it takes the the
00:21:46
best of both
00:21:48
which is
00:21:49
at a local level so you have you know a
00:21:52
local we have a party secretary you have
00:21:54
a block
00:21:55
leader and and ultimately it goes all
00:21:57
the way up to you know the the big guy
00:21:59
um
00:22:00
but china does this amazing thing they
00:22:02
have a five-year plan they call it the
00:22:04
five-year plan last year was the 14th
00:22:07
five-year plan and it sets kpis and
00:22:09
areas of focus for
00:22:11
the entire country
00:22:13
and those are things around carbon
00:22:15
neutrality education
00:22:18
care for seniors agriculture industry
00:22:21
and it's a lot like you know for you
00:22:23
guys who are running companies setting
00:22:24
goals and how are you going to get there
00:22:26
what's the road map but that filters all
00:22:28
the way down
00:22:29
and so at a local level
00:22:32
those kpis for the local leader
00:22:36
are you know how did you make your
00:22:38
district greener how did you increase
00:22:40
revenue from higher quality services and
00:22:43
technologically advanced companies like
00:22:46
what happens if you don't achieve it
00:22:48
you get fired you get kicked out of the
00:22:50
party like what is the
00:22:52
mechanism of reward yeah or you know
00:22:54
well it's quite high accountability and
00:22:56
so if you perform very well uh within
00:22:59
that system as a leader then you can
00:23:01
move to higher and more advanced posts
00:23:04
to a bigger city
00:23:05
right so yeah so from a block to a
00:23:07
bigger city to a higher you know up to a
00:23:10
uh
00:23:11
higher career stalled out if you don't
00:23:13
hit them but again it gets accelerated
00:23:15
right and so
00:23:17
that creates a very
00:23:20
interesting set of opportunities and so
00:23:22
to put it to maybe a tangible example
00:23:25
uh is so for the things that you know
00:23:27
are really great for communities like
00:23:30
park space or building a building that's
00:23:32
green uh the the last building that i
00:23:35
showed up there is wright sits right on
00:23:37
top of a metro and is next to a natural
00:23:39
history museum
00:23:41
and we needed to work with the local
00:23:44
government to ensure that we were
00:23:45
relating to the area properly creating
00:23:48
like leaving it better than we found it
00:23:50
you know we look at projects where you
00:23:52
can't do the project unless you show
00:23:54
that it's going to be green and additive
00:23:56
or restore historic buildings in the
00:23:59
area
00:24:00
there's a real handshake there that i
00:24:03
firmly believe creates better outcomes i
00:24:05
know our team would say the same thing
00:24:07
claire what what's going to happen with
00:24:09
the capital markets for your business
00:24:11
with evergrande and like some of these
00:24:13
big kind of property developers that
00:24:15
have had major debt problems and have
00:24:17
you seen that already flowing over and
00:24:19
you understand the market very well you
00:24:20
probably are able to navigate this but
00:24:22
the foreign capital and other investors
00:24:24
like might group everybody into the same
00:24:27
block and get scared off sure sure so
00:24:30
certainly we get a lot of questions um
00:24:32
but it's another one where the the
00:24:34
headlines out versus you know inside the
00:24:36
country certainly
00:24:38
um the the built environment the
00:24:40
construction and the real estate
00:24:41
industries if you combine that all
00:24:42
together you've got about 27 of the
00:24:44
economy um if you include the full
00:24:47
integrated stack one of the things in
00:24:49
five-year plan is to
00:24:51
diversify away from from that in a way
00:24:55
but is you know
00:24:57
evergrande and the other developers
00:25:01
the real focus at the local and the
00:25:03
higher level
00:25:04
is to help the regular people
00:25:08
get good on their deposits and
00:25:10
ultimately get the homes that they were
00:25:11
promised so it's very interesting for
00:25:13
developers
00:25:14
uh like us and acquisitions people as
00:25:16
for some of those smaller developers who
00:25:18
got into trouble has there been a
00:25:19
bailout is it is that is that the wrong
00:25:21
word the way that it's been
00:25:22
characterized in the u.s media that the
00:25:24
chinese government had to step in shore
00:25:25
up the balance sheet make sure every
00:25:27
grand wouldn't default on some of their
00:25:29
i think there was a concern that there
00:25:32
would be an entire meltdown of the full
00:25:34
chinese economy which is not what we
00:25:36
feel on the ground and i think if
00:25:38
anything it's created a set of
00:25:40
opportunities to really level set
00:25:42
especially on the living sector
00:25:45
it's really accelerated some policies to
00:25:47
make it easier to to build and to create
00:25:50
rental housing
00:25:52
which creates more access which
00:25:54
therefore
00:25:55
maybe takes away some of the pressure on
00:25:56
the condominium system
00:25:58
um you know they're
00:26:00
for for the debt markets to create a
00:26:03
space that is
00:26:04
uh maybe taking on projects that are
00:26:07
appropriate for the system
00:26:09
a little bit again more diversification
00:26:11
and development in the right places in
00:26:12
the right markets when we look at
00:26:15
the relationship between the united
00:26:17
states and china
00:26:18
we've had three four five hundred
00:26:20
million people come out of abject
00:26:22
poverty on the planet
00:26:24
because of this great engagement i don't
00:26:27
know if that's a term but i'll call it
00:26:28
the great engagement we started using
00:26:30
their factories we started making
00:26:31
iphones there
00:26:33
this has created despite all of the
00:26:36
handwringing about the relationship and
00:26:38
all the various issues on both sides um
00:26:41
a lot less suffering in the world
00:26:43
absolutely and so there is something
00:26:45
that i think we don't recognize
00:26:46
sometimes is that people who are living
00:26:48
for under a dollar a day three or four
00:26:50
500 million of them are now gone um and
00:26:52
and that leaves some areas in africa and
00:26:55
southeast asia that we still need to do
00:26:57
that work
00:26:58
um which paradoxically or ironically it
00:27:00
seems like china is doing in africa
00:27:03
what i'm curious about is what you're
00:27:04
seeing on the ground with their middle
00:27:06
class which to me seems analogous to
00:27:09
what we went through in the 30s 40s and
00:27:11
50s this establishment of a middle class
00:27:13
which then
00:27:14
established you know
00:27:16
education and prosperity for for the
00:27:18
decades to come and specifically for the
00:27:20
boomers and gen x um so so tell us about
00:27:23
that middle class that's emerging we
00:27:25
hear about it yeah
00:27:28
how many of them are there and
00:27:30
qualitatively what do they want from
00:27:32
life yeah well jason
00:27:34
in a word it's incredible right like
00:27:37
again i talk about infrastructure so
00:27:40
much because you you see it up there
00:27:42
right china's only as urbanized as the
00:27:44
us was in about
00:27:46
1950. so we read a lot about these today
00:27:50
today
00:27:51
so we read a lot about these bullet
00:27:53
trains
00:27:54
right and so
00:27:55
that leads this incredible consolidation
00:27:57
of people to cities and younger younger
00:27:59
people to cities it's a demographic
00:28:02
you know spark that maybe gets talked
00:28:04
about a little bit less but also if you
00:28:06
look at the change
00:28:08
that that person you're talking about
00:28:10
has seen in their lifetime
00:28:12
so they went from
00:28:14
a you know rural lifestyle frankly most
00:28:17
of them um and something of a village
00:28:19
setting that had not changed in decades
00:28:21
to this
00:28:22
future world that in many ways can only
00:28:25
be imagined in in movies
00:28:28
and so i think you know i sort of
00:28:30
struggle to put it into terms because he
00:28:32
asks you know what what do they want
00:28:34
what are they looking towards and i'd
00:28:36
say on a you know to use a personal
00:28:38
example right i'm the luckiest girl in
00:28:40
the world i get to live in this amazing
00:28:42
place and work with this incredible team
00:28:45
and you know yet you know my parents you
00:28:48
know graduated in a fully segregated
00:28:50
world
00:28:51
the elder people when they were growing
00:28:54
up were not just slaves they were the
00:28:57
slaves that we talk about on juneteenth
00:28:59
the ones in galveston who walked across
00:29:02
the bridge and followed railroad tracks
00:29:04
to houston texas
00:29:06
right that's amazing
00:29:09
that is amazing
00:29:11
and so i think when a
00:29:15
generation or collection of generations
00:29:17
sees that amount of change what they
00:29:19
want
00:29:21
is first of all they're grateful but
00:29:22
what do they want they want to be able
00:29:23
to build and create and be people
00:29:26
themselves yeah i have a question
00:29:29
japan in the 80s had a moment where
00:29:31
everything came together for that
00:29:33
country
00:29:34
great population growth great economic
00:29:36
growth great systems like kaizen and all
00:29:38
of this other stuff that they would
00:29:39
export and the headlines in the 80s was
00:29:43
japan was taking over the united states
00:29:45
or japan was going to lap the united
00:29:46
states
00:29:48
but really one of the biggest things
00:29:50
that it had working against it was a
00:29:51
demographic wave right and you had
00:29:54
massive negative birth rate that has
00:29:56
really compounded japan's stagnation
00:30:00
china is on the precipice of this
00:30:02
because of this one china policy i think
00:30:03
the the stat that i saw which is
00:30:05
stunning is there's 1.2 billion people
00:30:07
in china
00:30:08
1.4
00:30:10
by 2100 it's going to be around 600
00:30:13
million
00:30:15
if that's true the point is just that
00:30:16
there's just there's a real issue yeah
00:30:19
um is there something in these five-year
00:30:21
plans around how to become sort of more
00:30:24
culturally integrated with the rest of
00:30:25
the world you know meaning how do you
00:30:27
use immigration as an example to
00:30:30
subsidize some of the negative birth
00:30:32
rate
00:30:33
do you teach english more so that you're
00:30:34
more integrated into the world economy
00:30:36
all these things can you just talk about
00:30:37
that
00:30:40
so first i think the
00:30:42
the urbanization trend of folks
00:30:44
consolidating to the cities really can't
00:30:47
be overstated
00:30:48
just in the way that it shifts sort of
00:30:50
how how the country will work and what's
00:30:52
happening on the ground
00:30:54
um you know it's still relatively early
00:30:56
days but when we look at things like
00:30:58
belt and road you know as i walk around
00:31:01
beijing and i compare it to
00:31:04
you know when when we first started
00:31:06
there when we were working with capital
00:31:08
partners there i see a lot more brown
00:31:10
faces
00:31:11
really going to the universities around
00:31:13
beijing now these are still what belt
00:31:15
and road is for folks who maybe haven't
00:31:16
heard the term yeah
00:31:18
yeah so many places you guys can read
00:31:20
about it and before i forget talking
00:31:22
about so sort of just i know everybody
00:31:24
loves recommendations here so if you
00:31:26
haven't read dalia's latest book
00:31:29
on changing world order or there's
00:31:30
actually a great you read it
00:31:33
free burger she read it you know
00:31:36
yeah greenberg talked about it every
00:31:37
podcast for the last 20 so you've got to
00:31:40
read it listen to your besties uh
00:31:42
there's also a very good uh
00:31:44
very good illustration of it as sunrises
00:31:49
but you do do read that because you know
00:31:52
china has been a major participant in
00:31:54
the global south so you know the short
00:31:55
version of felton road
00:31:57
is uh working really across a set of
00:32:00
countries around southeast southeast
00:32:02
asia and africa bringing in
00:32:04
uh infrastructure and kind of what it
00:32:06
sounds like roads uh roads ports
00:32:09
airports
00:32:10
etc really building out this network for
00:32:13
that part of part of the world
00:32:16
but i think what gets sort of bumped
00:32:17
over on that is uh again things like
00:32:20
like this so
00:32:22
folks coming to china to be educated the
00:32:25
number of folks on the african continent
00:32:27
now learning chinese and again i think
00:32:30
this is something that is exciting
00:32:33
at the end of the day
00:32:34
the opportunity to to further exchange
00:32:38
to lift more people
00:32:40
out of poverty to create further
00:32:42
infrastructure and claire i was hoping
00:32:44
you would stay with us and be a bestie
00:32:46
for ryan who's the next speaker would
00:32:48
you be willing to help us interview ryan
00:32:50
i would be honored you're going to
00:32:52
switch seats
00:32:53
no no there we are oh yes switch
00:33:05
so give it up for claire
00:33:07
now ryan congratulations um cnbc
00:33:10
does their top innovator or private
00:33:12
company awards
00:33:13
um every year
00:33:15
and you made it to the top 50 list today
00:33:18
i didn't check which ranking you got but
00:33:20
being on the list in and of itself is a
00:33:22
big win what do they call it disrupters
00:33:23
list uh disruptor 50 and my view of
00:33:26
these list is you should never share any
00:33:27
list about your company unless you're
00:33:29
number one and we were number one this
00:33:31
morning
00:33:33
well done
00:33:36
you truly helped us navigate i think um
00:33:39
the
00:33:40
the uh challenge of us as besties and
00:33:42
the audience understanding supply chain
00:33:44
we appreciate that you've been on the
00:33:45
show twice i think or one just once just
00:33:47
once apart and then here's your second
00:33:49
time and uh
00:33:50
apologies i was uh filming the interview
00:33:52
for that during uh palmer's talk this
00:33:54
morning
00:33:56
you missed nothing yeah i don't know
00:33:57
what i meant
00:33:59
but when uh palmer and i woke up this
00:34:01
morning we're writing our speeches
00:34:02
together and deciding you know what we
00:34:03
were gonna say oh do would you do you
00:34:05
have some feelings
00:34:08
seems to be a theme i mean this is
00:34:09
turning into therapy yeah uh no i don't
00:34:12
have any i don't know many enemies no
00:34:14
enemies i got i just said nice things
00:34:16
about people jkl i got covered i
00:34:17
couldn't think of a single person who do
00:34:19
i want to give this to i was like i like
00:34:20
everybody i don't know
00:34:22
so um tell us he was going to do a talk
00:34:25
right
00:34:26
are you doing a talk for a couple of
00:34:27
minutes well he's going to talk from
00:34:28
there yeah let's hear a little bit about
00:34:29
what we're seeing um so first off what
00:34:31
flexport is is we're a global logistics
00:34:33
platform we help uh businesses of all
00:34:35
sizes ship products all over the world
00:34:37
from anywhere in the world to anywhere
00:34:38
else in the world we do a lot of
00:34:39
business in china um probably about half
00:34:41
of all of our volumes come out of china
00:34:44
i know a landlord if you're looking for
00:34:45
one right
00:34:47
if you need anything
00:34:49
something we'll do some business after
00:34:50
this um
00:34:52
and so we see a lot we're sort of like a
00:34:54
front row
00:34:56
backstage pass to the world economy of
00:34:58
what's really happening and unfolding um
00:34:59
and it's been a crazy few years we
00:35:03
to give you context so flexport started
00:35:06
in um 2013 first revenue was in 2014 we
00:35:09
did 2 million dollars in revenue that
00:35:11
year
00:35:11
we're on track this year to do 5 billion
00:35:14
in revenue so from
00:35:17
uh very exhausting yeah
00:35:19
and um
00:35:22
this time period is i assume it's always
00:35:24
like this in this industry i have only
00:35:26
been in the business for about eight or
00:35:27
ten years here but uh just to take you
00:35:29
through that timeline uh in 2015
00:35:33
there was a port strike on the west
00:35:34
coast and you couldn't import anything
00:35:36
into the united states for like three
00:35:37
months um total pandemonium by the way
00:35:39
that might happen again july first their
00:35:41
contract that they negotiated back then
00:35:43
is up for renewal on july 1st so we
00:35:44
might talk about that uh 2016 there was
00:35:47
so much excess capacity of ocean
00:35:49
shipping oh so many extra ships were
00:35:51
purchased that the price of ocean
00:35:53
freight hit the lowest in all of human
00:35:55
history it was like six hundred dollars
00:35:57
to ship a container this past year was
00:35:58
twenty thousand bucks in 2016.
00:36:01
so we go through these boom and bust
00:36:02
cycles it's an asset business that'll
00:36:04
happen uh 2017 18 and 19 our president
00:36:07
would launch a new tariff war every
00:36:08
couple of months and you couldn't
00:36:10
predict anything uh
00:36:12
2020 a pandemic hits
00:36:14
you couldn't ship anything for a couple
00:36:16
of months out of china where like they
00:36:18
were really hard zero kovid shut down
00:36:20
factory shut down all the purchase
00:36:21
orders everyone thought the great
00:36:22
depression was coming
00:36:24
canceled all the purchase orders then it
00:36:26
turned out the opposite happened it was
00:36:27
this crazy boom
00:36:29
and you couldn't import anything because
00:36:30
the ports were over crowded it went from
00:36:33
in 2019 it took about 50 days to ship a
00:36:36
container from like when the goods are
00:36:38
ready when the factory raises their hand
00:36:40
and says hey come and pick up these
00:36:41
goods
00:36:42
to right now it's about 120 days
00:36:45
so you're doubling more than doubling
00:36:47
the transit time
00:36:48
um
00:36:49
and it is just incredibly hard to
00:36:52
operate in this environment if you're
00:36:53
trying to run a business and so we've
00:36:55
we've had to learn how to navigate
00:36:56
through chaos as flexport it's like we
00:36:59
kind of welcome it at this point um we
00:37:01
found that it's probably it might
00:37:03
actually be good for our business we try
00:37:04
not to talk about that because it's so
00:37:05
bad for our customers and uh has been
00:37:08
hard to fulfill the customer promises
00:37:09
but if you put yourself in the shoes of
00:37:10
those customers so like a direct to
00:37:12
consumer e-commerce business and we ship
00:37:14
for probably 80 or 90 percent of the hot
00:37:16
new ddc brands a lot of ipos recently a
00:37:19
lot of a lot of really cool hot new
00:37:21
brands
00:37:22
they're going through
00:37:24
an almost a perfect storm right now
00:37:27
uh
00:37:28
in in like a really really bad way like
00:37:30
the movie the perfect storm um
00:37:32
because ocean freight rates are sky high
00:37:34
i mentioned this 10 20 000 to ship a
00:37:37
container
00:37:38
rule of thumb long term is like two
00:37:40
grand so
00:37:41
really really elevated cost walmart
00:37:43
announced really high costs this morning
00:37:46
and it's no it's not just small
00:37:47
companies but walmart announced their
00:37:48
costs were through the roof from supply
00:37:50
chain and their stock fell 10 today
00:37:51
wiping off 40 billion dollars of market
00:37:54
cap this morning um so
00:37:56
so it hits companies of all sizes but
00:37:58
these d2c brands got a double whammy
00:38:00
because apple last what it was last year
00:38:02
when they changed their privacy rules
00:38:04
and their customer acquisition models on
00:38:06
instagram
00:38:08
facebook facebook all these things
00:38:09
stopped working and so you at the same
00:38:11
moment your cact stops working you can't
00:38:14
acquire customers your supply chain
00:38:15
costs through the roof
00:38:17
uh and then add to that that consumers
00:38:19
are now starting to come back to
00:38:20
conferences like this
00:38:21
going back to the restaurants and the
00:38:23
clubs and doing the travel
00:38:24
and during the pandemic everybody just
00:38:26
bought
00:38:27
stuff
00:38:28
uh you got to get your dopamine from
00:38:30
somewhere and everybody was just buying
00:38:32
goods so
00:38:34
that uh is like a triple whammy for
00:38:36
these companies i'm incredibly worried
00:38:38
about the whole ddc brand the whole ddc
00:38:41
space the d2c space
00:38:43
physical goods you saw it in like the i
00:38:45
think it was thrashio that just
00:38:46
announced they're laying off 25 percent
00:38:48
of their russia was buying a collection
00:38:51
of those amazon d2c brands putting them
00:38:53
together and trying to have some
00:38:54
economies of scale yeah but when your
00:38:56
supply and demand both get 10xed
00:39:00
in the wrong direction it's game over
00:39:02
it's i don't know if it's game over but
00:39:03
it definitely changes the rules of the
00:39:05
game the reality is look people still
00:39:06
going to buy stuff there are going to be
00:39:08
successful there are going to be some
00:39:09
winners they're going to be brands what
00:39:10
price though at what price well so
00:39:12
you're so you're saying that your thesis
00:39:14
that you're making
00:39:15
the statement that you're making today
00:39:17
is hey we're seeing real significant
00:39:20
risk to d2c companies because of this
00:39:22
confluence of issues right now
00:39:24
and this could be a big threat to a lot
00:39:25
of businesses particularly in an
00:39:27
environment where venture funding is i
00:39:28
think again venture funding oh my gosh
00:39:31
capital markets
00:39:33
public and private investors like you
00:39:34
all will look at this and go hey maybe i
00:39:36
you know put more into saskatchewan he
00:39:38
said it's just easier to not do anything
00:39:39
it might be easier to not do anything so
00:39:41
what does that mean how do you manage
00:39:43
this and
00:39:44
um fundamentally one of the problems
00:39:46
that's that
00:39:47
that comes about in all supply chains
00:39:49
it's been written about um the famous
00:39:51
phd paper from like the 60s or something
00:39:53
called the bullwhip effect and a bull
00:39:55
whip if you like
00:39:56
crack a whip the end of that whip is
00:39:58
moving incredibly fast um
00:40:00
and it's it's a bit like that in supply
00:40:02
chains because you have imperfect
00:40:04
information and so the people doing
00:40:06
demand planning are limiting one system
00:40:09
they're selling goods they're looking at
00:40:10
this data set the people producing stuff
00:40:13
it's on a different system uh how long
00:40:16
is it taking to produce things that's
00:40:17
getting longer the transit time is
00:40:19
getting longer this data is living
00:40:21
across all these different domains and
00:40:22
becoming very very hard for a brand to
00:40:25
make a decision how many goods should we
00:40:26
buy
00:40:27
when should we buy them so how much do
00:40:29
we want to have in stock how do we avoid
00:40:30
being way over stock
00:40:32
and then and what we're seeing right now
00:40:34
is these warehouses are overflowing and
00:40:36
uh people can't so what change is that
00:40:38
like what breaks it open so you know
00:40:39
like in china pinduodua didn't exist in
00:40:42
2015 now 800 million plus right users
00:40:46
but it was technology that broke it open
00:40:49
like what's the breakout moment to solve
00:40:50
this exact problem you're talking yeah i
00:40:51
mean actually china's got one of the
00:40:53
companies to watch is um shane uh
00:40:56
s-h-e-i-n it's this chinese uh kind of
00:40:59
like the new zara
00:41:00
that uh is taking over the world i think
00:41:02
they're gonna do 20 billion dollars in
00:41:04
revenue this year fast fashion fast
00:41:06
fashion they're launching a thousand
00:41:07
skus a day
00:41:09
a thousand new skus a day all like ai
00:41:11
generated and then if people order
00:41:12
enough yeah they produce it and it's
00:41:14
like uh really incredible you're saying
00:41:16
a robot says make these skews
00:41:20
this is where this shirt is from
00:41:22
actually oh wait you're screaming i
00:41:24
can't do that yeah see like i did that
00:41:26
shirt
00:41:28
and it was like it's gonna be a million
00:41:30
i'm gonna be ordering i'm sorry sorry
00:41:31
tell us sorry this shirt so it's
00:41:34
literally a shirt from xi'an but but yes
00:41:37
so if zara so if zara is seeing
00:41:39
something on a runway
00:41:41
determining that that trend will hit and
00:41:43
then they can have it in stores i think
00:41:44
within like eight or nine days something
00:41:46
you know pretty wild uh she ends about
00:41:49
as close to instantaneous as you can get
00:41:52
so very fast moving skews at sort of
00:41:54
hyper speed fashion so they can have
00:41:55
things like pre-columns
00:41:57
like from minority but they're
00:41:59
predicting that this puffy shirt is
00:42:02
going to be like women are going to want
00:42:04
to go for pipes but it's a fly shirt
00:42:07
i agree
00:42:08
and and i think one of the one of the
00:42:09
key things here is is that the transit
00:42:11
time of how long does it take you from
00:42:13
when the thing is made to when it gets
00:42:14
to the customer because if it stretches
00:42:16
out the way it has right now in ocean
00:42:18
freight market where it's taking forever
00:42:19
if that takes three months four months
00:42:21
five months might not be flying six
00:42:23
months all of a sudden you've placed
00:42:24
these orders and then the demand went
00:42:25
away because people started going to
00:42:27
night clubs instead of buying their
00:42:28
gardening equipment and so the tighter
00:42:30
you can make that and it does speak to
00:42:32
spending a little bit more on logistics
00:42:34
where where you know
00:42:36
traditional procurement person in
00:42:38
logistics only thinks about like i'm
00:42:40
just gonna buy the cheapest freight i
00:42:41
can ever buy because they don't
00:42:43
understand that your goods in transit
00:42:45
are just money that's taking a different
00:42:47
form for a period of time
00:42:49
and money has a cost to it and if you're
00:42:52
sitting there in six months that's
00:42:53
already expensive because of you know
00:42:54
you've got to pay interest on that
00:42:55
there's opportunity cost what else could
00:42:57
you do with the money but now that cost
00:42:58
has gotten much worse because by the
00:43:00
time the goods arrive maybe nobody wants
00:43:01
them um you saw that with christmas
00:43:03
where you know you import christmas
00:43:06
that's the classic that you import
00:43:07
christmas stuff and in january it's
00:43:08
worthless what price
00:43:11
do people just find alternate ways
00:43:13
whether it's you establish domestic 3d
00:43:15
printing or you buy a fleet of planes or
00:43:18
like there's got to be a work because
00:43:19
like i saw this image i think maybe you
00:43:21
tweeted it of this entire massive
00:43:24
traffic jam
00:43:25
basically trying to get the ships even
00:43:27
into china because the covet 19
00:43:29
lockdowns are so strict that that's also
00:43:31
exacerbated all of this but and and last
00:43:33
year walmart jimmy announced they're
00:43:35
spending 10 billion verticalizing their
00:43:36
supply chain and building out their own
00:43:38
infrastructure for moving goods you're
00:43:41
seeing a lot of companies do this uh
00:43:43
much easier said than done yeah um
00:43:45
you've seen at least a few of the big
00:43:47
box retailers walmart i want to say home
00:43:49
depot costco number these guys have said
00:43:50
hey we're gonna charge target was the
00:43:52
other one maybe target um amazon of
00:43:54
course yeah go charter their own ships
00:43:56
go solve the problem their own way um
00:43:58
it's really hard to do run these things
00:43:59
at scale and operate it looks good at
00:44:01
the powerpoint slide uh hit you know
00:44:03
when when you have to get down to it
00:44:05
it's really hard so is there a big capex
00:44:06
play here ryan for the next decade
00:44:08
i think um
00:44:10
like a big capital equipment hard asset
00:44:12
play
00:44:13
so
00:44:15
the world's
00:44:16
ocean carriers that's what we call the
00:44:17
people that are on the ships have
00:44:18
actually ordered 25
00:44:21
more ships
00:44:22
increase the fleet by 25 over the next
00:44:24
three years
00:44:25
wow so it could be ugly the other way
00:44:27
real quick you have too many ships and
00:44:29
nobody you know the same is happening in
00:44:31
mining i mean like it's a similar sort
00:44:32
of but anyway ryan ryan said it best the
00:44:35
problem is you can't forecast demand
00:44:36
accurately for these long lead time
00:44:39
categories that are highly capex
00:44:40
intensive so whether it's mining or
00:44:42
whether it's shipping how do you make a
00:44:43
500 million dollar capex decision for a
00:44:46
business
00:44:47
demand cycle that's five years into this
00:44:49
but they're all taken they're all taking
00:44:50
profit hits and saying we have to make
00:44:51
this investment because we need the
00:44:53
security we need the redundancy i mean
00:44:55
walmart did it right they were optimized
00:44:57
to to a team also and then all of a
00:44:59
sudden it's like hey that optimized
00:45:00
system doesn't work look the way that
00:45:01
mining for example deals with this which
00:45:03
is really interesting is they get these
00:45:05
companies to sign up what's called take
00:45:06
or pay agreements
00:45:07
right and so they can actually
00:45:09
smooth out the demand curve five or six
00:45:11
simple consumers take or pay means i'll
00:45:14
do a deal that says okay i'm gonna rip
00:45:15
the lithium out of the ground you take
00:45:17
it or you pay for it i don't care what
00:45:20
you do right but i'm gonna get the
00:45:21
revenue assurance i need to go to wall
00:45:23
street to get the money we've started to
00:45:25
see those signs for the first time so
00:45:26
we've signed three-year contracts
00:45:27
flexport was the first ever to sign a
00:45:28
multi-year contract where we commit we
00:45:30
will pay for this rate whether or not
00:45:32
uh whether or not we ship anything we're
00:45:34
gonna we're gonna pay up front yeah okay
00:45:35
take her pay um
00:45:37
and and you asked a little bit uh air
00:45:39
freight what's gonna happen there well
00:45:40
remember uh 50 of all the world's air
00:45:42
freight flies in the belly of passenger
00:45:44
planes there's way less people traveling
00:45:46
to and from asia than there were is that
00:45:47
right yeah fifty percent of their
00:45:49
freight which is a little scary when you
00:45:50
think about like what's under the belly
00:45:52
of that yeah is that getting scanned uh
00:45:54
it is it is there's there's good
00:45:55
controls on that but uh but you never
00:45:56
know it's always yeah it's just a little
00:45:58
nerve-wracking um so and he seemed to be
00:46:01
not so sure uh
00:46:03
you know you work in any industry long
00:46:05
enough you start to question uh whether
00:46:06
everything's perfect um
00:46:08
so
00:46:09
we've actually uh got 10 passenger
00:46:11
planes that we've leased and we'll keep
00:46:12
doing more that are not flying any
00:46:14
passengers
00:46:15
we're just filling them with freight we
00:46:17
started doing this in the pandemic
00:46:18
there's seats in them flying masks with
00:46:20
other seats at the top there's still
00:46:21
seats and some of them some we've ripped
00:46:23
out the seats like castaway you got the
00:46:25
big plane yeah
00:46:28
if you want to go to asia i've got a 787
00:46:31
just nobody on there could be a private
00:46:33
flight just you but exactly this is why
00:46:35
you've seen the rise of logistics real
00:46:37
estate as a deeply institutional asset
00:46:40
class because that math that you talk
00:46:42
about the algorithms of determining what
00:46:44
is ordered how long will it sit and how
00:46:46
fast do people want it that takes
00:46:48
infrastructure on land to be able to get
00:46:50
it to people and coming back to the
00:46:51
question about assets is there a play
00:46:53
here probably yes because most of wall
00:46:55
street has been trained they've gone to
00:46:57
all the same business schools and
00:46:58
everybody's been trained that like
00:46:59
assets are terrible get them off your
00:47:01
books don't carry them don't this is
00:47:03
what happened with oil and gas you know
00:47:04
going into last year and then everything
00:47:07
and everyone missed it you want to be
00:47:08
asset light it's still the trend and
00:47:10
almost everywhere until somebody like
00:47:12
tsmc comes along and says you know what
00:47:14
you don't want assets intel like fine
00:47:15
we'll build the fabs another 400 billion
00:47:17
dollar company because they're willing
00:47:18
to have assets
00:47:19
on the books but it's a different
00:47:21
investor and now they have the power in
00:47:22
the equation and they can they can get a
00:47:24
better uh share of value
00:47:26
and i believe i've been answering this
00:47:27
question
00:47:28
that's the real estate business the
00:47:29
hardest question for me to answer and i
00:47:31
i know that there's some entrepreneurs
00:47:32
out there who have the same question
00:47:34
anytime someone asked me is flexport a
00:47:36
software company or a logistics company
00:47:38
are you going to own assets or not own
00:47:40
assets yes and you know i think the
00:47:42
correct answer is to ask the investor
00:47:44
which one they'll give you a higher
00:47:45
multiple for and then just say that
00:47:47
um
00:47:49
try to figure out who you're talking to
00:47:50
but it is on some level you know
00:47:53
maybe another answer is like kind of
00:47:54
buddhist dualism like you can't do
00:47:56
logistics without the tech you can't do
00:47:57
the dirt without the list i think you're
00:47:59
bringing up something which is that
00:48:00
today the problem with the capital
00:48:01
markets is actually that it is very
00:48:03
balkanized so meaning you know let's
00:48:05
just say you take a company public like
00:48:07
yours the problem that you'll have in
00:48:09
the public markets is that there are
00:48:11
folks that you'll go to in that room
00:48:13
that understand sas software understand
00:48:15
margin structure of a software business
00:48:17
etc and then there's folks over here who
00:48:19
run the industrials business and folks
00:48:21
over here who run consumer the problem
00:48:23
is those three folks don't talk they
00:48:25
have three completely different
00:48:26
conceptions of what a good business is
00:48:29
and the problem for you will be and i'm
00:48:31
not forecasting this for you to be
00:48:33
correct is that you can get orphaned in
00:48:35
any one of these groups and now all of a
00:48:36
sudden the capital markets could be
00:48:38
totally shut for you this is a very
00:48:40
important point that you're bringing up
00:48:41
the the thing that i think we need to
00:48:43
change is like the capital people that
00:48:45
control the money flows do need to have
00:48:47
a little bit more of an open mind
00:48:49
sure it's true that you'd love a 90
00:48:51
gross margin business but it is also
00:48:53
true in the tsmc case you'd rather have
00:48:55
a business doing 20 on 500 billion
00:48:57
dollars well and if we look you know
00:49:00
we also have some examples of amazon the
00:49:04
market seems to have worked out this
00:49:06
business that's very factory and asset
00:49:08
heavy in delivering goods to us and
00:49:11
you know the cloud business even even
00:49:12
amazon like look amazon got escape
00:49:14
velocity on less than you know a billion
00:49:16
dollars of investor capital the problem
00:49:18
is you know if ryan for example decides
00:49:20
hey i'm going to go and actually
00:49:21
vertically integrate and buy an entire
00:49:23
fleet of ships
00:49:24
that's probably a 10 to 20 billion
00:49:26
dollar capex cycle over 10 years and you
00:49:29
think about replacement costs it may
00:49:31
make a ton of sense actually right i
00:49:33
wonder when amazon is cap expenses for
00:49:36
those servers started to hit
00:49:38
he's thinking about it
00:49:41
but giving the capital markets little
00:49:42
boy in me definitely
00:49:50
you know there's two plays you know
00:49:51
fundamentally your bull whip effect
00:49:53
means the data can't flow and people
00:49:54
can't make decisions optimally because
00:49:56
the data's trapped in multiple places
00:49:58
you don't know how to run an efficient
00:50:00
supply chain because you don't know how
00:50:02
many trucks do i need when the ship
00:50:04
arrives like actually even not even like
00:50:06
long-term demand for forecasting how
00:50:08
many ships but like literally that ship
00:50:09
is going to arrive how many trucks
00:50:11
should i dispatch when should i dispatch
00:50:12
them like there's two ways to solve this
00:50:14
problem one is to own the asset and the
00:50:16
other is to create a data network effect
00:50:18
such that the asset owner benefits
00:50:20
enough from putting it on your platform
00:50:22
your machine learning your op your
00:50:23
algorithms are helping them make more
00:50:25
money from their asset they want to tell
00:50:27
you
00:50:28
or you can invest further down into the
00:50:30
change i mean one of them's a lot
00:50:31
hopefully simpler and don't need to
00:50:33
manage as many people and life is easier
00:50:35
if you can solve the data machine
00:50:36
learning problem sorry we looked at
00:50:38
alibaba and alibaba investing down into
00:50:39
china like there is a middle road of
00:50:41
being able to
00:50:43
tie now so logistics warehouse i mean
00:50:46
wait for them to push goods as stupid as
00:50:48
it sounds you having
00:50:50
purchased a shipping company and putting
00:50:53
it over here to your point claire and
00:50:55
saying here's the little thing we bought
00:50:56
it's a bunch of ships it's his own
00:50:58
balance sheet and then here's the really
00:50:59
great business but we have this little
00:51:00
subsidiary over here is a potential
00:51:02
middle ground it's what makes flexport
00:51:04
fun business there's like a million
00:51:06
strategies and ways to play out and i'm
00:51:07
not a big believer in like predicting
00:51:09
the future and
00:51:10
you know you want to have a vision and
00:51:11
know where you're going but i think be
00:51:13
sort of flexible yeah in that what's in
00:51:15
the name
00:51:16
we talk about our culture
00:51:18
what's the goal of what's the goal of a
00:51:19
company's culture um and elon talked
00:51:22
about the goal of a company the purpose
00:51:24
is like hey we've got to create valuable
00:51:25
products and services for fellow humans
00:51:28
right but the goal of your culture is
00:51:30
how do you maximize your velocity in
00:51:32
that direction and velocity is a really
00:51:33
important word because we forget a lot
00:51:36
like normal people forget that velocity
00:51:38
is different from speed
00:51:39
if you remember your physics velocity
00:51:40
has a direction you got to know where
00:51:42
you're going and sometimes going really
00:51:44
really fast is actually negative
00:51:45
velocity because you're going the wrong
00:51:46
way and so how do you stay agile the
00:51:48
world's going to throw all kinds of
00:51:49
chaos at you be nimble be able to change
00:51:51
like we don't know exactly the strategy
00:51:53
i don't have everything now as we wrap
00:51:55
here um question for both you and claire
00:51:57
um which is
00:51:59
uh china has played before you do your
00:52:01
rap question can i just can i ask him to
00:52:03
can you tell us the audience about what
00:52:05
you did during the uk crisis um oh this
00:52:08
is beautiful it's just just like 30
00:52:10
seconds about you know i didn't go there
00:52:12
like antonio crazy man but um what
00:52:16
so we started this group in 2017 called
00:52:18
flexport.org to do humanitarian relief
00:52:20
shipping uh really at that time the
00:52:22
crisis was syria and trying to help uh
00:52:25
refugees it was really a simple idea
00:52:26
it's like look we got all this stuff
00:52:28
here we know they need stuff at the
00:52:29
refugee camps what if we shipped it
00:52:31
there uh
00:52:32
seemed like a radical idea
00:52:34
we maintain a database of partners so we
00:52:36
have agents that we can operate on
00:52:37
behalf of flexport in over 120 countries
00:52:40
and at that time i simply emailed our
00:52:41
syria partner who was literally based in
00:52:44
aleppo where a lot of this destruction
00:52:45
was happening and i emailed i said hey
00:52:46
we'd like to ship a container to this
00:52:48
refugee camp down there and he was like
00:52:49
sure what's the address where do you
00:52:51
want to ship it and i was like wait it's
00:52:52
that easy like i thought this was like
00:52:54
and i realized you could do that no we
00:52:55
didn't ship in this year because we
00:52:56
didn't know who was going to end up in
00:52:57
so we shipped to refugee camps in turkey
00:52:59
and jordan um so we've been doing this
00:53:00
now for five years shipping to over 50
00:53:03
different countries any kind of anytime
00:53:04
there's a hurricane
00:53:06
uh
00:53:06
earthquakes but uh we're a war um and so
00:53:10
when we saw this happening in ukraine we
00:53:12
immediately kicked into high gear the
00:53:14
flexport.org team has about 12 full-time
00:53:16
people and then we have a model where
00:53:17
employees at flexport can surge onto
00:53:19
that so we've had about 60 people
00:53:21
working on this uh in this case you know
00:53:23
usually we offer pro bono shipping
00:53:25
because we the shipping is expensive we
00:53:26
can't just eat the full cost we are
00:53:28
profitable but not enough to really
00:53:30
solve the world's problems all by
00:53:31
ourselves so we created a gofundme
00:53:35
campaign partnered with ashton kutcher
00:53:37
and mila kunis ashton's an early
00:53:38
investor in flexport
00:53:40
and we raised 25 million bucks
00:53:42
to pay for shipping uh to deliver goods
00:53:46
yeah thank you well and the way you did
00:53:47
it for ashton and all of our investors a
00:53:50
lot of great people
00:53:51
you emailed the besties and said hey um
00:53:53
it's forty four hundred dollars a
00:53:55
container was that the number forty two
00:53:57
or forty four it depends on where it's
00:53:58
coming from ukraine specifically i mean
00:54:00
for example we shipped nine ambulances
00:54:02
from uh gibraltar into ukraine i thought
00:54:05
we wouldn't be able to ship into ukraine
00:54:06
because it's a war zone uh it turns out
00:54:08
most i don't know most but a huge
00:54:10
percentage of european truck drivers are
00:54:11
ukrainian and they were just like stoked
00:54:14
to go and do this uh so i so we
00:54:16
delivered nine ambulances that cost like
00:54:17
around 10 grand yeah it's a bunch of
00:54:19
delivery ambulances i replied back to
00:54:21
him and i said no problem and he said
00:54:22
hey mention on the podcast i said no
00:54:23
problem i donated a 400 container and
00:54:26
then sherman said oh i donated the plane
00:54:29
that 12 containers went on
00:54:31
he did
00:54:32
so was the flex on a flex reflect for it
00:54:36
it was like a multi-layer flex so and
00:54:38
then um it just snowballed and this
00:54:40
hasn't gotten much attention but yuri
00:54:41
milner who's an early flexboard investor
00:54:43
just donated a hundred million dollars
00:54:46
wow wow two yes uh you're really putting
00:54:48
pressure on their side of the street
00:54:58
it is an amazing model where but by the
00:55:00
way over 60 000 people donated a little
00:55:03
bit and i'm almost just as proud of that
00:55:04
it's like people are getting involved
00:55:06
stepping up realizing hey you can do
00:55:07
something.org flexport.org and support
00:55:09
congress
00:55:11
final question for youtube um
00:55:13
we had this great moment where you know
00:55:15
we engaged china we built a bunch of
00:55:17
iphones amazon basics you know whatever
00:55:19
it is naked shoes um and it and it
00:55:22
raised
00:55:23
you know the standard of living for a
00:55:24
lot of people we understand china's
00:55:26
doing this now
00:55:27
and they're doing it in africa and some
00:55:29
other places what are you seeing in
00:55:30
terms of that relationship how china is
00:55:33
looking because towards other countries
00:55:35
to become
00:55:36
uh producers of goods and and they're
00:55:39
kind of now uh becoming incredibly
00:55:41
influential what's their intent and how
00:55:43
is that going claire maybe you can start
00:55:46
that's a big question um but i think
00:55:48
it's it
00:55:51
this is a long term play we're all in
00:55:53
this for a long term right play and
00:55:56
whether you know you take maybe the
00:55:59
spicier view around know resources and
00:56:01
protectionism
00:56:03
uh versus one that's more just around
00:56:05
progress and as we may have an
00:56:07
increasingly vulcanizing east and west
00:56:10
um the ability to they're there to
00:56:12
control the bigger piece of their own
00:56:14
supply chain but the end result as
00:56:16
you're sort of saying is you look at
00:56:18
places like niger right the average
00:56:21
mother there is having six children we
00:56:24
have a very young global south
00:56:26
and the important thing is that they're
00:56:28
fed they're clothed and that they have
00:56:30
an upward trajectory and so that's it
00:56:33
people living in abject poverty will
00:56:35
probably end in our lifetime uh you know
00:56:38
the only places it won't end is in
00:56:39
places with dictators what are you
00:56:41
seeing in terms of the
00:56:42
shipping containers because you must see
00:56:45
shipping containers increasingly leaving
00:56:47
certain
00:56:48
ports
00:56:50
where is china sort of exporting
00:56:51
production to and what are the
00:56:54
up-and-coming production areas you know
00:56:56
there's some really interesting trends
00:56:57
going around around labor costs uh in
00:56:59
china the reason people went there over
00:57:00
the last 40 years to be honest was like
00:57:02
cheap labor uh and but over time they
00:57:04
became quite sophisticated they really
00:57:06
learned how to manufacture things
00:57:07
especially electronics
00:57:08
they're if you want to make electronics
00:57:09
you pretty much have to make them in
00:57:10
shenzhen the greater bay area as she
00:57:12
called it um
00:57:13
so
00:57:14
and that's
00:57:15
but stuff that's just for cheap labor
00:57:17
because that's no longer about cheap
00:57:18
labor this is a whole supply chain
00:57:20
ecosystem of components and other things
00:57:22
but if it's just cheap labor two years
00:57:24
ago mexico became cheaper than china in
00:57:26
labor costs wow which is a huge shift
00:57:29
and
00:57:29
now mexico doesn't have the
00:57:31
manufacturing capacity they don't have
00:57:32
the skill sets they don't but they'll
00:57:34
build it you know and
00:57:35
people will respond to that trend as
00:57:37
long as it takes 120 days to ship stuff
00:57:40
from china to the u.s and we can't get
00:57:42
this sorted out brands are going to
00:57:43
respond to shipping closer to home so
00:57:46
you're that is a trend that you're going
00:57:47
to see more and more of uh if the delays
00:57:50
stay the way they are
00:57:52
i think china's big challenge is
00:57:54
if if they become labor costs too
00:57:56
expensive how do they keep moving up the
00:57:58
value chain and this is what they're
00:57:59
made in a made in china 2025 thing is
00:58:01
it's like we've got to they've got to
00:58:02
make more and more sophisticated
00:58:04
products because it can't just be about
00:58:05
dirt cheap migrate to services yeah and
00:58:08
that that's a huge challenge and
00:58:11
very few if anyone's really done it no
00:58:13
one's at that scale because they're the
00:58:14
biggest country in the world but japan
00:58:16
and korea have kind of done that but not
00:58:18
ten times as well bigger moving to a
00:58:20
services-based economy india with i.t
00:58:22
companies in mind and then they'll
00:58:24
become entitled and want to retire at
00:58:25
55. like europe and oh by the way speech
00:58:28
my favorite answer is someone that um i
00:58:30
think was zuck
00:58:31
although toby from shopify told me he
00:58:33
lifted this line his employees were
00:58:35
asking him about the four day work week
00:58:37
and he was like well you know if i do
00:58:39
think we should do some experimentation
00:58:40
around how many days a week we work so
00:58:42
but we're gonna start with the six day
00:58:43
work week like china does
00:58:45
and then we'll try the four day work
00:58:47
week later ladies and gentlemen please
00:58:49
join me in thanking
00:58:51
thank you i am claire well done
00:58:55
we'll let your winners ride
00:58:58
rain man david
00:59:04
and they've just gone crazy with it
00:59:10
[Music]
00:59:29
it's like this like sexual tension that
00:59:31
they just need to release
00:59:36
your feet
00:59:42
[Music]
00:59:48
i'm going on
00:59:50
[Music]
