All-In with Chamath, Jason, Sacks & Friedberg - E82: All-In Summit: Claire Cormier Thielke on China + Q&A with Flexport's Ryan Petersen

Episode Date: May 24, 2022

This talk was recorded LIVE at the All-In Summit in Miami and included slides. To watch on YouTube, check out our All-In Summit playlist: https://bit.ly/aisytplaylist 0:00 Claire Cormier Thielke's AIS talk: "Tomorrowland: China Placemaking and the Future of Innovation" 17:40 Claire takes Q&A with the Besties + Ryan Petersen: Understanding the China/US rivalry 24:08 How the Evergrande debt situation impacts the greater Chinese real estate industry, China's still-nascent middle class, How China is subsidizing its negative birth rate 34:30 Ryan Petersen breaks down Flexport's business, the tumultuous past few years, and how DTC might be in major trouble 46:34 Asset-heavy play as a hedge against the popular trend of asset-light, velocity vs. speed, Flexport.org's humanitarian relief shipping, China's influence Follow the guests: https://twitter.com/clairethielke https://twitter.com/typesfast Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect

We're really excited to have Claire with us. Come on, I'm Claire. Are you here? All right. What are we? Welcome Claire. What will we be talking about today? We're going to be talking about China.

You know? Just as everything has been all spicy. Well, yeah, well, just again, we're trying to make today about just easy breezy topics, you know, the most easiest things to manage. So we armaments, Ukraine, let's go to China, sure. Please welcome Claire. Hey. And I said we open sources to the hands and they just go crazy. Love you guys, I say, we know you can want.

I'm going crazy. We are going to actually keep this pretty apolitical today. And maybe talk a bit about the parts about China that are less discussed in the headlines. And Jason reached out and he said he wanted to really understand what were some problems. And I wanted to see salt said he wanted to really understand what were some problems. And I wanted to see salt that we wanted to see salt. So I'm a property developer.

I run greater China for Hines for the largest private real estate firm in the world. And we have an incredible greater China team. I know I see this folks in the front, they're like, where is she? I can't possibly spot her in there. So, we have a team that is working across Beijing, Shanghai, Xinjiang, Dongguan, and Hong Kong. And we get to work really across the real estate spectrum. So we built the Greenest skyscraper in China. We built some of the first international service departments in the country. And are doing some really interesting innovative projects like in Hong Kong.

We bought a distressed hotel that we're turning into really a new kind of living, collaborative living that's super technology enabled really a new kind of living, collaborative living that's super technology enabled for a young population there where the average white, color young person, it takes them 20 years of salary to be able to buy an apartment. So we get to approach these problems that are not unique to our part of the world, but often the solution is a combination of East meets West. So back to kind of what's the problem. Well, you know, we're sitting right now in Miami, a place that is super exciting thanks

to a lot of the things that are happening right here that have been hyped by a pretty awesome mayor, right? What did he do? He got on Twitter and he talked to all of us about what this city had to offer. It had key ingredients. It had universities. It had an upward trajectory.

It had young people looking to collaborate. At the end of the day, that's what we want to be, right? We want to be sitting together in awesome spaces like this, exchanging ideas with other interesting people. That's how you do cool stuff. And so as property developers, we think, you know, how do you create spaces where people want to be their best, right? Collaborate with others and build a better future. So that's a lot of jargon. But what does that actually mean back to the problem? Well,

first, these ingredients are pretty clear. I teach a class at Stanford on this called Who Owns Your City, and the students usually pick it up in the first 10 minutes. It's a place that has pretty good infrastructure. Can I get a job? Can I afford to live here? And is there cool cultural stuff that keeps it from being to bland? But then, you know, you'd say, okay, well, cities can learn from each other, right? You can just take those ingredients and apply it, and that's what Suarez did a great job of here. But we are living in a time where the East and West have never been more divided, right? And building a city, building buildings is really hard.

It's like the most extreme version of hardware. So as a property developer, we spend our time really thinking about what are the big macro trends, what are startups focused on, where do they want to be, because our spaces need to be relevant for 50, 70, 100 years, and we can't pick up our building and move it somewhere else. And so you try to take the arbitrage of what's working in one part of the world and try to apply that to another and solve problems. And that's where you find great returns, but it's also where you build places

that are going to be relevant for folks. And so, you know, just a couple examples up here behind me. So, you know, we talked about the living challenges. So for folks to be able to afford a place to buy, but the concept of rental apartments, so like multi-family, if anyone lives in a multi-family building with one landlord, that isn't totally a thing in greater China.

Often people are left to rent from an individual landlord, pay a deposit that's enormous, cost prohibitive, and get quality of product that really is not up to what they would expect. So taking a very, someone's kind of western concept and applying it in a place that technologically is probably about 10 to 15 years ahead in terms of what that average user is used to. Okay? They're used to unlocking a door with their phone. Their WeChat is their ID. It's the way they meet new people.

They can physically shake hands on WeChat to introduce themselves to a friend. It's where they keep their coupons. It's how they pay their rent. It's how they pay their taxes in some regards, right? We don't have that in America. But if you're like me and you live in greater China, you do. And so how do you combine those things together

to create something that doesn't exist? You see up behind me a logistics building, but it's actually six stories high. Something we're developing it is a giant, almost like a refrigerator, but a high rise, super tech enabled. And that's because, you know, there got a lot of people. That building will be sitting within a 45-minute driving radius to 45 million people. And yet China only has a quarter of the cold storage capacity

per capita that the U.S. does. Okay, it doesn't take a genius to see that this trajectory is, you know, lower left to upper right. And so again, you're taking this concept of East meets West. Building up here, just behind me is in Shanghai. It's about a million foot tower. And you have a lot of those here in the United States. Big fancy office buildings, you know,

where people used to go to sit at their computers and do work. But this one is very different from one that you may have walked into earlier this week. This entire building is on WeChat. You can interact with the building on WeChat. You can interact with the landlord. You can interact with your other tenants. You can have chance encounters or organize a yoga trip

in the afternoon with the people, with the space, using this digital interface. So in a way, it's really combining the way we live right now. We live in a physical world, but so much of our idea sharing, our collaboration, is happening in the air, right? In a digital experience that we can't see. And so it's another combination of this East meets West.

And so what becomes a problem and an opportunity, a problem when you sit in the middle of this world, like my team is the honor to do, is you see that there are all of these opportunities for us to be able to share this, really the best of what the West has to offer with the innovation that's happening on the ground in China, but it is so hard to talk about in this very divided world. And so we like to take the positive side and say, you know, we're living in this world

of like magic and Larry. And how can we make each other better. So I thought I'd use just a few minutes and then we'll hang out with the besties to maybe share a story that maybe I'll have it read so much about so that you get the benefit of knowing a little bit about what's happening over there. And you can see an example of where sort of East meets West

and that collaboration can make us all better. So up here is that General Maniala probably recognized Stung Schaubing, you're famous for really the opening up of China. And he was an experimenter. You know, we had this vision of what China could be, and he saw what the importance of the physical world, the physical infrastructure, what a role that could play to enable the economy to jump further. And so the picture to the other side is Shunjin, which in 1980 was barely a fishing village that had about 58,000 people, very few a fishing village that had about 58,000 people, very few paved roads and Deng Xiaoping. He was from Sichuan, so we really understood what it was like to not

be from the big city. And so he declared it a special economic zone, special economic zone, so Jingji to it's you. And that meant that it would be this place to experiment with bits of capitalism, with free trade, et cetera. So what is it today? Well, first, there's that same road along progression just a few years after it was declared a zone. And then up here behind me is what it looks like now.

Shenzhen is over 12 million people. The average age is 29. It's really the tech hub of China. So companies like DJI, which makes 70% of the world's drones, they call this area home. And just within this area, if you were to go shortly from where this picture is taken, you'll have two of the world's five biggest ports by Tonnage. So how do you take that head start and turn it into something further? Well they took a lesson out of the book of the West.

And they created something called the Greater Bay Area. It's like the, yeah, you guys get it. And so, what is the greater bay area? Well, it is a collection of nine cities on the mainland side, some of which may be familiar to you guys, so Shenzhen, as mentioned in Guangzhou, about 18 million people. Places like Ju Hai, you all remember several years ago, there was this thing about China building the longest bridge in the world, everyone's like where is that? Okay, it was in Ju-hai. And then so nine cities on the China side and then Hong Kong and Macau. And together this area, it's about the size of called West Virginia. Today has a GDP that's sitting right around Canada

and South Korea, about 1.7 trillion. In 2017, they declared this great, greater Bay area name and it was there to really back up a lot of the investment, frankly, that it already started to join these cities together to create a super region. So within that super region they spent about 300 billion to build infrastructure to further connect it. So within just four years they built 2,000 miles of speed rail, like high speed trains. Here we have like a little you know one

from here that goes to Fort Lauderdale, you know, Texas is gonna get one in the year 2090. Uh, and so, so what does that mean? That means that I can walk out of my office with my teammates in Hong Kong, which is right next to that big, Ferris wheel thing that everybody recognizes. I can take one stop onto Metro in 13 minutes on a speed train I could be in Shenzhen, or I could keep on going

and I could access about 23,000 miles of high speed trains and get to Beijing, get to further than Guangzhou, get to Western China. It is amazing and it is happening so quickly and that number will soon be 40,000 as they continue to build but it's not just speed trains. These are interconnected nodes with further metro, right, with transit oriented development on top of the meetings of these trains. So back to the so what? So we know that if you take cool people, put them in cool places and you give them an opportunity to interact, well what can you do? So this area, again the size of West Virginia, now with 70 million people who are

all quite young and again back to the ingredients, we talked about what sort of foster innovation, well they've incentivized universities to put additional campuses here and these are the best universities in China, so Chenua, Fudan, etc. they funded further life science, they funded further tax increment zones to encourage businesses to come and set up nodes of activity focused on areas of excellence. So remember we talked early about in 1980, there were 58,000 people in all of Xinjiang. So just between 2010 and 2020 and one small neighborhood on the western side of Shenzhen, they followed 58,000 patents. It's pretty amazing. And that shouldn't be scary, that should be exciting, guys.

This is where we get innovations. This is how we get better back to the magic and Larry, right? Thank you. Yes, you can clap for that. You can clap for that. So what does that mean for us? What does that mean for folks who are sort of getting to work in this interstitial space in between getting to live within it.

Up here behind me, I have, I'll clear the visual for you. It's further just connecting, showing these metro lanes, these trams, buses, et cetera, leading to these speed trains. That down here, that's Hong Kong Island, and then this takes you through a bit of the Bay area before you get out to the rest of China. Well, why does it matter?

It's because these things layer together. Okay, so China's e-commerce percentage is about 25% of their overall retail. Here it's about 14%. Again, all of a smart, we can see where this is going. So you can take some notes on the preview and see what things and trends may be coming here. In China, about 85% of their transactions are mobile. Here that's barely 30%.

Where is that going? How does that work? And you can see what's happening. Another is you can look at trends that are just part of the world there that haven't made it here. And you sit there and you're like, wow, what a chance to iterate. So the example there again will stick with shopping and retail is social shopping. So this idea of streaming while shopping that's layered with a full experience and imagine

what it can do. Again, if you layer that on top of this WeChat platform, we're just talking about a place where I can go and I can make a new friend right now, you, by looking at you, showing my friend and to you, putting them together so we can introduce a product, introduce a lecture, a concept together, and imagine what we can do. Elon likes WeChat. He was just talking about it yesterday. So the point is that we all have this opportunity

to really, again, the headlines can be exciting. They can be crispy, but to look beneath them and to take an opportunity to further connect with the people. Because again, those folks who are hopping on these trains for probably equivalent to about 45 cents to get on the public transit here, going around and exchanging ideas, most of them are not politicians. Most of them are not big world global leaders. They're folks who are trying to create something for themselves,

to create something for their children, to build a better world. So we're really all on the same team. So with that, bring the best things out, I guess. So I now have to get too spicy. All right. Center stage for you. Right here. Right there on the middle seat.

Oh, baby. Well done. Well done. Be nice, guys. Be nice. Of course. Of course. Well, sacks is in here, so of course we'll be nice.

That's kind of by default. And meet Ryan Peterson from Flexport. Claire, maybe you guys have Ryan. I mean, you're seeing you two guys play a Ryan Ryan, Claire. When you'll say it over and. You guys met? We follow each other. So what do we as Americans not understand about our rival? And what does our rival most not understand about us in your estimation having operated in both countries for so long? Yeah, their term rival is an interesting one.

Obviously I love sports analogies and came from the track and field, and world myself. Claire was in the Olympics, guys. Claire was injured. Claire was injured. How do you start going running sometimes? Kind of fast at the Olympics. But you know, your job in the sport is to find the person who is better than you in some ways and maybe they're strong where

you're weak, you're weak, we're they're strong, you find each other and you you shore up together and I think that is what becomes so clear when you you know live there, when you live on the other side of the world, but maybe we're born here or, you know, I'm a minority, so I've maybe always lived in that interstitial space personally, or even our team. Our team is very representative of modern China. We have people from nearly every province, they really across the education bracket,

highly trained engineers, but who might be quite young To folks in their their 60s who have really seen China evolve and so I do think the thing that can get Missed is almost that concept like we talked about that as Quote rivals, you know, they're not monoliths just as America is not a monolith Right and we can take the best of each other. So we're best of rivals in a way. There we go As rivals, they're not monoliths, just as America is not a monolith. And we can take the best of each other. So we're best of rivals in a way. There we go.

What is on the offset? Is there a model for the century for cooperation between the two nations that's enhancing to both? I think it's happening in enterprise. I really think it is. So when I look at, again, younger people, the products that they use or the things that the young tech entrepreneurs in China are working on versus here, they're approaching a lot of the same problems.

So on the social side, looking at Doyun and what made it so catchy, right? What it is for us? It's TikTok. It's TikTok. you know, looking at DoYun and what made it so catchy, right? What it is for us. Yeah. It's TikTok. It's TikTok. And back to that one about, you know, cheat codes and a preview, you know, DoYun was popular years ago.

And so, you know, I remember first looking at the app and being like, wow, this is very catchy. And there's effectively no difference between those. They're viewed to talk to people. You read and write Mandarin fluently, as well as speak it or. Well, you will never confuse me for a long enough or you'll go on the whole concoi also,

but enough to get by. And so when you do business in China, do you conduct an English or do you get to talk to Mandarin? Yes, so with the team, we work fully across what's appropriate because we also work in Hong Kong, where it's Cantonese. But all of my communications that go out to my full team, everything in full team, is in Mandarin.

We do have a large part of our team that only functions within Mandarin. So when you're, for example, you know, you showed some of these buildings. And the idea that came to me is, this is a massive coordination problem that's almost impossible in the United States, which is if you have this idea of like this living breathing monolithic building that is connected via the internet, it probably would be 50

organizations in the United States that would have to have a say or want to say. The perception that we get is there is a individual that can effectively make that right decision in China, whether it's at the city level or at the state level, is that how it's really like? Like when you guys have super ambitious ideas, is there one place you go to and then it just kind of all gets decided? Or is it just like here where it's messy? So it's kind of neither actually actually. And this is where the good takes the best of both, which is at a local level, so you have, you know, a local, we have a party secretary, you have a block leader,

and ultimately goes all the way up to, you know, the big guy. But China does this amazing thing. They have a five-year plan. They call it the five-year plan. Last year was the 14th, five-year plan, and it sets KPIs and areas to focus for the entire country. And those are things around carbon neutrality, education, agriculture seniors, agriculture industry.

And it's a lot like, you know, for you guys who are running companies, setting goals, and how are you going to get there? What's the roadmap? But that filter is all the way down. And so at a local level, those KPIs for the local leader are, you know, how did you make your district greener? How did you increase revenue from higher quality services and technologically advanced companies. What happens if you don't achieve it? You get fired, you get kicked out of the party. What is the mechanism of reward?

Well, it's quite high accountability. So if you perform very well within that system as a leader, then you can move to higher and more advanced posts to a bigger city. So it becomes a... Right, so yeah, so from a block to a bigger city, to a higher, you know, up to a... So your higher, little career is called out if you don't hit them, but it gets accelerated if you can see that. Right, and so that creates a very interesting set of opportunities, and so to put it to maybe a tangible example is, so for the things that are really great for communities,

like Park Space or building a building that's green. The last building that I showed up there sits right on top of a metro and is next to a natural history museum. And we needed to work with the local government to ensure that we were relating to the area properly creating, like leaving it better than we found it. You know, we look at projects where you can't do the project unless you show that it's going to be green and additive

or restore historic buildings in the area. There's a real handshake there that I firmly believe creates better outcomes. I know our team would say the same thing. Claire, what's going to happen with the capital markets for your business with Evergrande and like some of these big kind of property developers that have had major debt problems? And if you've seen that already flowing over and you understand the market very well, you probably are able to navigate this, but the foreign capital and other investors like might group everybody into the same block and get scared off.

Sure, sure. So, certainly we get a lot of questions, but it's another one where the headlines out versus, you know, inside the country, certainly the built environment, the construction and the real estate industries, if you combine that all together, you've got about 27% of the economy. If you include the full integrated stack, one of the things in five-year plan is to diversify away from that in a way. But is, you know, Evergrande and the other developers, the real focus at the local and the higher level is to help the regular people get good on their deposits and ultimately get the homes that they were promised.

So it's very interesting for developers like us and acquisitions people as for some of those smaller developers who got into trouble. Is there a bailout? Is that the wrong word the way that it's been characterized in the U.S. media, that the Chinese government have to step in and shore up the balance sheet and make sure ever-ground wouldn't default on some of their... I think there was a concern that there would be an entire meltdown of the full Chinese economy, which is not what we feel on the ground. And I think if anything, it's created a set of opportunities to really level set, especially on the living sector. It's really accelerated some policies to make it easier to build and to create rental housing, which creates more access, which therefore maybe takes away some of the pressure on the condominium system.

You know, there, for the debt markets, to create a space that is maybe taking on projects that are appropriate for the system a little bit again more diversification and developing the right places in the right markets. When we look at the relationship between the United States and China we've had three, four, five hundred million people come out of abject poverty on the planet because of this great engagement. I don't know if that's a term, but I'll call it the great engagement. We started using their factories, we started making iPhones there. This has created, despite all of the hand-ringing about the relationship and all the various

issues on both sides, a lot less suffering in the world. Absolutely. And so there is something that I think we don't recognize sometimes is that people who are living for under a dollar a day of three or four, 500 million of them are now gone. And that leaves some areas in Africa and Southeast Asia that we still need to do that work, which paradoxically, or ironically, it seems like China is doing in Africa.

What I'm curious about is what you're seeing on the ground with their middle class, which to me seems analogous to what we went through in the 30s, 40s, and 50s, this establishment of a middle class, which then established education and prosperity for the decades to come and specifically for the boomers and Gen X. So tell us about that middle class that's emerging. We hear about it.

Yeah. But how many of them are there? And qualitatively, what do they want from life? Yeah. Well, Jason, in a word, it's incredible, right? Like, again, I talk about infrastructure so much because you see it up there, right? China's only as urbanized as the US was in about 1950.

So we read a lot about this today. Today. Today. So we read a lot about these. Full of trains. Right. And so that leads to this incredible consolidation of people to cities and younger people to cities.

It's a demographic spark that maybe gets talked about a little bit less, but also if you look at the change that that person you're talking about has seen in their lifetime. So they went from a world lifestyle, frankly most of them, and something of a village setting that had not changed in decades to this future world that in many ways can only be imagined in movies. And so I think, you know, I sort of struggle to put it into terms of, you ask, you know, what do they want? Where are they looking towards?

And I'd say to use a personal example, right? I'm the luckiest girl in the world. I get to live in this amazing place and work with this incredible team. And, you know, yet, you know, my parents graduated in a fully segregated world. The elder people, when they were growing up, were not just slaves, they were the slaves that we talk about on June Teeth, the ones in Galveston, who walked across the bridge and followed railroad tracks to Houston, Texas. That's amazing. That is amazing.

So I think when a generation or a collection of generations sees that amount of change, what they want is, first of all, they're grateful, but what do they want? They want to be able to build and create and be people themselves. Yeah. I have a question. Japan in the 80s had a moment where everything came together for that country. Great population growth, great economic growth, great systems

like Kaizen and all of this other stuff that they would export. And the headlines in the 80s was Japan was taking over the United States, or Japan was going to lap the United States. But really one of the biggest things that it had working against it was a demographic wave, right? And you had massive negative birth rate that has really compounded Japan's stagnation. China is on the precipice of this because of this one China policy. I think the the stat that I saw which is stunning is there's 1.2 billion people in China

1.4 by 2100 it's going to be around 600 million. If that's true the point is just that there's just there's a real issue. Yeah. Is there something in these five-year plans around how to become sort of more culturally integrated with the rest of the world? Meaning how do you use immigration as an example to subsidize some of the negative birth rate? Do you teach English more so that you're more integrated into the world economy? All of these things, can you just talk about that? So first I think the urbanization trend of folks consolidating to the cities

really can't be overstated just in the way that it shifts sort of how the country will work and what's happening on the ground. You know it's still relatively early days but when we look at things like belt and road you know as I walk around Beijing and I compare it to, you know, when we first started there or when we were working with capital partners there, I see a lot more brown faces going to the universities around Beijing. Now these are still- It's only what Belt and Road is for folks who maybe haven't heard the term. Yeah, yeah. So many places you guys can read about it and before I forget talking about,

sort of just, I know everybody loves recommendations here. So if you haven't read Dahlia's latest book on changing world order, or there's actually a great, you read it. Free bird. She read it. Free bird. Free bird.

Yeah, she's a great bird. She talked about it every podcast for the last 20 years. So you've got to read it. Listen to your besties. There's also a very good illustration of it. Some rise up to talk about. But do read that, because China's been a major participant in the global South.

So the short version of Belt and Road is working really across a set of countries around Southeast Asia and Africa bringing in infrastructure and kind of what it sounds like. Roads, ports, airports, et cetera, really building out this network for that part of the world. But I think what gets sort of bumped over on that is, again, things like this. So folks coming to China to be educated. The number of folks in the African continent now learning Chinese. And again, I think this is something that is exciting at the end

of the day. The opportunity to further exchange, to lift more people out of poverty, to create further infrastructure. Claire, I was hoping you would stay with us and be a bestie for Ryan, who's the next speaker. Would you be willing to help us interview Ryan? I would be honored. You have a chance to see it. No, no, there we are. Oh, yes, switch seats.

Okay. You'll be the best. Get in and I rubbed up. And you're the guest. I like it, I like it. So give it up for Claire. Now Ryan, congratulations. I like it, I like it. So give it up for Claire. Now Ryan, congratulations.

CNBC does their top innovator or private company awards every year. And you made it to the top 50 list today. I didn't check which ranking you got, but being on the list and it of itself is a big win. What do they call it, disruptors list? Disruptor 50. And my view of these lists is you should never share any list about your company unless your number one and we were number one this morning You truly helped us navigate I think the The challenge of us as besties and the audience understanding supply chain we appreciate that you've been on the show twice I think or just once a

once a part in the years. Second time in the show. Paul Aziz, I was filming the interview for that during a Palmer's talk this morning. You didn't miss nothing. I don't know what I meant. Nothing much happened. But when Palmer and I woke up this morning we're writing our speeches together and deciding you know what we were going to say.

Oh do you have some feelings? I'd like to share with the class. Seems to be a theme, I mean, this is turning into therapy. No, I don't have any enemies, it's such a sad. I got some nice things about people, J.K. I got COVID, I couldn't think of a single person, who do I want to give this to? I was like, I like everybody, I don't know.

So tell us. He was gonna do a talk, right? Are you doing a talk for a couple of minutes? Well, he could have talked from there. Yeah, look, give us a little bit of what we're seeing. So first off, what Flexboard is, is we're a global logistics platform. We help businesses of all sizes, ship products all over the world.

From anywhere in the world to anywhere else in the world, we do a lot of business in China, probably about half of all of our volumes come out of China. I know a landlord, if you're looking for one. Right. If you need to get out there. If you need to ship something, we'll do some business after this. So we see a lot.

We're a front row backstage pass to the world economy of what's really happening and unfolding. And it's been a crazy few years. We, to give you a context, so FlexPort started in 2013. It's first revenue was in 2014. We did $2 million in revenue that year. We're on track this year to do $5 billion in revenue. So from, very exhausting, yeah.

And this time period is, I assume it's always like this in this industry, I have only been in the business for about eight or 10 years here, but just to take you through that timeline, in 2015, there was a port strike on the West Coast, and you couldn't import anything in the United States for like three months, total pandemonium. By the way, that might happen again, July 1st,

they're contracted, they negotiate a back them, is up for renewal on July 1st, so we might talk about that. 2016, there was so much excess capacity of ocean shipping, so many extra ships were purchased that the price of ocean freight hit the lowest in all of human history. It was like $600 to ship a container. This pasture was $20,000. From 2016.

So we go through these boom and bust cycles. It's an asset business that'll happen. 2017, 2018, and 2019, our president would launch a new tariff war every couple of months, and you couldn't predict anything. 2020, a pandemic hits. You couldn't ship anything for a couple of months out of China, where like they were really hard, zero COVID, shutdown, factory, shutdown, all the purchase orders. Everyone thought the great depression was coming. Cancel all the purchase orders. Then it turned out the opposite happened. It was this crazy boom. And you couldn't import anything

because the ports were overcrowded. It went from 2019, it took about 50 days to ship a container from like when the goods are ready, when the factory raises their hands as they come and pick up these goods. To right now, it's about 120 days. So doubling or more than doubling the transit time. And it is just incredibly hard to operate in this environment if you're trying to run a business.

And so we've had to learn how to navigate through chaos as FlexWord. It's like kind of welcome at this point. We found that it might actually be good for our business. We try not to talk about that because it's so bad for our customers. And it's been hard to fulfill the customer promises. But if you put yourself in the shoes of those customers, so like a direct to consumer e-commerce business.

And we shipped for probably 80 or 90% of the hot new DDC brands. A lot of IPOs recently, a lot of really cool hot new brands. They're going through almost a perfect storm right now in a really, really bad way, like the movie The Perfect Storm, because ocean freight rates are sky high. Mentioned this $10,000 to $20,000 to ship a container. Rule of thumb long term is like 2 grand.

So really, really elevated costs. Walmart announced really high costs this morning, and so it's not just small companies, but Walmart announced their costs were through the roof from supply chain and their stock fell 10% today, wiping off $40 billion of market cap this morning. So it hits companies of all sizes, but these D to C brands got a double whammy because Apple last, what they was last year when they changed their privacy rules and their customer acquisition models or an Instagram, Facebook, all these things stopped working. And so at the same moment, your CAC did stops working. You can't acquire customers,

your supply chain costs through the roof. And then add to that, the consumers are now starting to come back to conferences like this, go back to the restaurants and the clubs and do the travel, and during the pandemic everybody just bought stuff. You gotta get your dopamine from somewhere and everybody was just buying goods.

So that is like a triple whammy for these companies. I'm incredibly worried about the whole D to C brand, the whole D to C space. The D to C space? What do you say? You saw it in like the, I think it was Thrasio that just announced they're laying off 25% of their Thrasio was buying a collection of those Amazon D to C

and putting them together and trying to have some economies of scale. But when your supply ender demand both get 10xed in the wrong direction, it's game over. It's, I don't know if it's game over, but it definitely changes the rules of the game. The reality is, look, people are gonna buy stuff. They're gonna be successful,

they're gonna be some winners, they're gonna be brands, it's a virus. That's what price though, what price. Well, so you're saying that your thesis that you're making, the statement that you're making today is, hey, we're seeing real significant risk to D to C companies because of this consequence of issues right now,

and this could be a big threat to a lot of businesses particularly in an environment where venture funding is. I think you can venture funding. Oh my gosh, we're triple store. Capital markets are, we're trying. Capital markets are public and private. Investors like you all will look at this and go, hey maybe I put more into this.

Like he said, it's just easier to not do anything. It might be easier to not do anything. So what does that mean? How do you manage this? And fundamentally one of the problems that comes about in all supply chains, it's been written about the famous PhD paper from the 60s or something called the Bullwhip Effect.

And the Bullwhip crack a whip. The end of that whip is moving incredibly fast. And it's a bit like that in supply chains because you have imperfect information. And so the people do in demand planning are living in one system. They're selling goods. They're looking at this data set. The people producing stuff, so the different system, how long is it taking to produce things

that's getting longer, the transit times getting longer, this data is living across all these different domains and becoming very, very hard for a brand to make a decision how many goods should we buy? When should we buy them? How much do you want to have in stock? How do we avoid being way over stock? And then what we're seeing right now is these warehouses are overflowing and people can't.

So what changes that? Like what breaks it open? So you know, like in China, Penduador didn't exist in 2015. Now 800 million plus users, but it was technology that broke it open. Like what's the breakout moment to solve this exact problem you're talking about?

Yeah, I mean actually China's got one of the companies to watch is Shane, SHEIN, it's this Chinese, kind of like the New Zara that is taken over the world. I think they're gonna do $20 billion in revenue this year. Fast fashion? Fast fashion. They're launching a thousand skews a day. A thousand new skews a day.

All like AI generated and then if people order enough, they produce it and it's like, really incredible. You're saying a robot says, make these skews. This is where this shirt is from. No wait, you're sure I can do that. Yeah, see? Yeah, sure.

And it's going to be a moment. I'm sorry, tell us so wait, sorry. This shirt you bought. So it's literally a shirt from Sian. But yes, so if Zara, so Zara is seeing something on a runway, determining that that trend will hit, and then they can have it in stores, I think within like eight or nine days, something, you know, pretty wild. She ends up bowed us close to instantaneous as you can get.

So very fast moving skews, it's sort of hyper speed fashion, so they can have things like preconditioned. Almost the same day. Like from my narrative, but they're predicting that this puffy shirt is going to be like, women are going to want to go for pie. But it's a fly shirt. It's a fly as well. I agree.

And I think one of the key things here is the transit time of how long is it taking from when the thing is made to when it gets to the customer because if it stretches out the way it has right now in the ocean freight market, it was taking forever. If that takes three months, four months, five months. We're not gonna be flying anymore. Six months, all of a sudden you've placed these orders

and then the demand went away because people started going to nightclubs instead of buying their gardening equipment. And so the tighter you can make that, and it does speak to spending a little bit more on logistics, where traditional procurement person in logistics only thinks about like I'm just going to buy the cheapest freight I can ever buy because they don't understand that your goods in transit are just money that's taken a different form for a period of time.

And money has a cost to it. And if you're sitting there on six months, that's already expensive because you know, you got to pay interest on that. There's opportunity to cost what else could you do with the money, but now that cost has gotten much worse because by the time the goods arrive, maybe nobody wants them.

You saw that with Christmas where, you know, you import Christmas, that's the classic that you import Christmas stuff and in January it's worthless. What price do people just find all the way as whether it's US-Dablished, domestic 3D printing or you buy a fleet of planes or like, there's gotta be a work,

because like I saw this image, I think maybe you tweeted it of of this entire massive traffic jam, basically trying to get the ships even into China because the COVID-19 lockdowns are so strict, but that's also exacerbated all of this. And last year Walmart didn't they announce they're spending $10 billion in verticalizing their supply chain and building out their own infrastructure

for moving goods? You've seen a lot of companies do this, much easier said than done. You've seen at least a few of the big box retailers. Walmart, I want to say Home Depot, Costco, a number of these guys have said, hey, we're going to charge it with the other one. Target, Amazon, of course. Go charge it on Shabs, go solve the problem there on way. It's really hard to do, run these things at scale and operate it.

It looks good at the PowerPoint slide. When you have to get down to it, it's really hard. So there are big CapEx play here, Ryan, for the next decade? I think like a big capital equipment, hard asset play. So the world's ocean carriers, that's what we call the people that own the ships, have actually ordered 25% more ships. They increase the fleet by 25% over the next three years Wow, so it could be ugly the other way real quick You have too many ships and nobody you know the ship on the same time and mining

I mean like it's a similar sort of but anyway Ryan Ryan said it best the problem is you can't forecast demand accurately for these long lead-time categories that are highly cat-backs intensive So it's mining or whether it's chipping how do do you make a $500 million CapEx decision for a business demand cycle that's five years into the thing? But they're all taking profit hits and saying we have to make this investment because we need the security, we need the redundancy. I mean, one more did it, right? They were optimized to a T. And then all of a sudden it's like, hey, that optimized system doesn't work. Look the way that mining for example deals with this, which is really interesting, is they get these companies to sign up what's called Takeer Pay Agreements, right?

And so they can actually smooth out the demand curve 5 or 6. If you can't see them, I'm going to rip the lithium out of the ground. You take it or you pay for it. I don't care what you do, but I'm going to get the revenue assurance I need to go to Wall Street to get the money. We've started to see those signs for the first time. So we've signed three-year contracts. Flexport was the first ever to sign a multi-year contract where we commit, we will pay for this

freight whether or not, whether or not we ship anything, we're going to pay upfront. Yeah, okay, take your pay. And you asked a little bit, air freight, what's going to happen there? We'll remember, 50% of all the world's air freight flies in the belly of passenger planes. There's way less people traveling to and from Asia than there were. Is that right? Yeah, 50% all the world's air freight flies in the belly of passenger planes. There's way less people traveling to and from Asia than there were. Is that right? Yeah, 50% of world's air freight, which is a little scary when you think about like what's under the belly of that car. Yeah, it's not getting scanned. It is. There's good controls on that, but you never know. It's always. Yeah, it's always getting a little nerve wrecking.

So, and it seemed to be not so sure. You know, you work in any industry long enough, you start to question whether everything is perfect. So we've actually got 10 passenger planes that we've leased, and we'll keep doing more that are not flying any passengers. We're just filling them with freight. We started doing this in the pandemic, flying masks. Are there seats at the top?

There's still seats in some of them. Some we've ripped out the seats. It's like castaway. You got the big plane with, yeah, basically, it's all the way. If you want to go to Asia, I've got a 787, just nobody on there could be a private flight just you.

But exactly this is why you've seen the rise of logistics real estate as a deeply institutional asset class, because that math that you talk about, the algorithm is determining what is ordered, how long will it sit, and how fast do people want it? That takes an infrastructure on land to be able to get it to people as well. And coming back to the question about assets, is there a play here? Probably yes because most of Wall Street has been trained. They've gone to all the same

business schools and everybody's been trained that like assets are terrible, get them off your books, don't carry them. This is what happened with oil and gas going into last year. And then everyone missed it. You want to be asset-like. It's still the trend. And almost everywhere, until somebody like TSMC comes along and says, you know what?

You don't want assets until fine. We'll build the fabs, another $400 billion company, because they're willing to have assets on the books. But it's a different investor. And now they have this in the equation. And they can get a better share of value. And I've been answering this question. What a blockade around.

That's the real estate business. The hardest question for me to answer, and I know that there's so much burners out there who have the same question. Anytime someone asks me, is FlexPort a software company or a logistics company? Are you going to own assets or not own assets? Yes.

And I think the correct answer is to ask the investor which one they'll give you a higher multiple for and then just say that. Trying to figure out who you're talking to but it is on some level you know maybe another answer is like kind of Buddhist dualism like you can't do logistics without the tech you can't do the problem with the capital markets is actually that it is very vulcanized. So meaning, let's just say you take a company public like yours. The problem that you'll have in the public markets is that there are folks that you'll go to in that room that understand SaaS software, understand margin structure of a software business, et cetera. And then there's folks over here who

run the industrial's business, and folks over here who run consumer. The problem is those three folks don't talk. They have three completely different conceptions of what a good business is, and the problem for you will be, and I'm not forecasting this for you to be a problem. The reason you're correct. Is that you can get orphaned in any one of these groups,

and now a little sudden the capital markets could be totally shut for you. This is a very important point that you're bringing up. The thing that I think we need to change is the capital people that control the money flows do need to have a little bit more of an open mind. Sure, it's true that you'd love a 90% grossed march in business, but it is also true in the TSMC case, you'd rather have a business doing 20% on $500 billion.

Well, and if we look, you know, Tremoff, we also have some examples of Amazon, the market seems to have worked out this business. That's very factory and asset heavy and delivering goods to us. And the cloud business. Even Amazon, like look, Amazon got a scape philosophy on less than a billion dollars of investor capital. The problem is if Ryan, for example, decides,

hey, I'm gonna go on actually vertically and agree to buy an entire fleet of ships. That's probably a 10 to 20 billion dollar capex cycle over 10 years and you think about replacement costs. It may make a ton of sense actually. I wonder when Amazon is going to do this cap expenses for those servers started to hit.

He's thinking about it. He's thinking about it. I am buying a fleet of ships. But giving the capital market to the soul. A little boy and me definitely wants to do that. You want to own a fleet of ships? You already own a boat. Who does you want to own a fleet market is a little more than me definitely wants to do that. But I hope you do that. You want to own a fleet of ships? You already own a, you have a bunch of planes.

You want to own a fleet of ships, but no, we're not going to do that. I don't think, you know, there's two plays. Fundamentally, your bull whip effect means the data can't flow. And people can't make decisions optimally because the data is trapped in multiple places. You don't know how to run an efficient supply chain

because you don't know how many trucks do I need when the ship arrives. Like actually, even not even like long-term demand for it, forecasting how many ships, but like literally that ship is going to arrive. How many trucks did I dispatch? When should I dispatch them? Like there's two ways to solve this problem. One is to own the asset, and the other is to create a data network effect such that the asset owner benefits enough from putting it on your platform, your machine learning, your algorithms are helping them make more money from their asset.

They want to tell you what's going on. Or you can invest further down into the change. I mean, one of them is a lot, hopefully, simpler and don't need to manage as many people and life is easier if you can solve the data machine learning problem. Wait, look to Ali Baba and Ali Baba investing down into China.

Like, there is a middle road of being able to go to China. So logistics warehouse. I mean, you know way for the to push goods out. As stupid as it sounds, you having purchased a shipping company and putting it over here to your point, Clare, and saying, here's the little thing we bought. It's a bunch of ships. It's its own balance sheet. And then here's the really great business.

But we have this little subsidiary over here. It's a potential middle ground. It's what makes FlexFlex for fun business. There's like a million strategies and ways to play out. And I'm not a big believer in like predicting the future. And you want to have a vision and know where you're going, but I think be sort of flexible. Yeah, in that.

That's in the name. We talk about our culture a lot. What's the goal of a company's culture? And Elon talked about the goal of a company. The purpose is like, hey, we've got to create valuable products and services for fellow humans, right? But the goal of your culture is how do you maximize your velocity in that direction?

And velocities are really important word because we forget, like normal people forget that velocity is different from speed. If you remember your physics, velocity has a direction. You got to know where you're going. And sometimes going really, really fast is actually negative velocity, because you're going the wrong way. And so how do you stay agile? The world's going to throw all kinds of chaos at you, be nimble, be able to change. We don't know exactly the strategy. I don't have everything now.

As we wrap here, question for both of you, and Claire, which is, China has played a lot. Before you do your wrap question, can I just, can I ask him to to can you tell us the audience about what you did during the UK crisis? This is beautiful. It's just like 30 seconds about you know I didn't go there like Antonio crazy man, but um what So we started this group in 2017 called Flexport.org to do humanitarian relief shipping really at that time the crisis was Syria and really at that time the crisis was Syria and trying to help refugees. It was really a simple idea. It's like, look, we got all this stuff here.

We know they need stuff at the refugee camps. What if we shipped it there? Seemed like a radical idea. We maintain a database of partners. So we have agents that we can operate on behalf of Flexport in over 120 countries. And at that time, I simply emailed our Syria partner, who's literally based in Aleppo,

where a lot of this destruction was happening. And I emailed him, I said, hey, we'd like to ship a container to this refugee camp down there. And he was like, sure, what's the address? Where do you want to ship it? And I was like, wait, is that easy? I thought this was like, and then I realized you could do that. And we didn't ship into Syria, because we didn't know who's

going to end up in. So we shipped to refugee camps in Turkey in Jordan. So we've been doing this now for five years, shipping to over 50 different countries. Anytime there's a hurricane, earthquakes, but we're a war. And so when we saw this happening in Ukraine, we immediately kicked into high gear.

The Flexport.org team has about 12 full-time people, and then we have a model where employees at Flexport can surge onto that. So we've had about 60 people working on this. In this case, usually we offer pro bono shipping, because the shipping is expensive. We can't just eat the full cost. We are profitable, but not enough to really

solve the world's problems all by ourselves. So we created a GoFundMe campaign partnered with Ashton Coacher and Mielecunis, Ashton's an early investor in Flexport. And we raised $25 million to pay for shipping, to deliver goods Yeah, thank you. Well, and the way you did it So asking and all of our investors a lot of great people

So you emailed the besties and said hey, it's $4,400 a container Was at the number 42 or 44 it depends on where it's coming from for you Ukraine specifically, I mean for example We shipped nine ambulances from Gibraltar into Ukraine I thought we wouldn't be able to ship into Ukraine because it's a war zone. It turns out most, I don't know, but a huge percentage of European truck drivers

are Ukrainian, and they were just like stoked to go and do this. So we delivered nine ambulances. That cost like around 10 grand. Yeah, so a bunch of delivered nine ambulances. I reply back to him and I said no problem. And he said, hey, mention on the podcast. I said no problem. I donated a $4,400 container. she might say oh I donated the plane that

12 containers went on He did so it was a flex on a black Reflex for it. It was like a multi-layer Flex so and then It just snowballed and this hasn't got much attention But Yuri Milner who's an early flexboard investor, just donated $100 million. Wow. Wow, two.

Yes. You're really putting pressure on their side of the stage. You're so much on the side. I didn't hear the last part. I didn't hear the last part. Keep that. Let's go to the... Let me wrap it.

Everybody does what they can. And it is an amazing model where... By the way, over 60,000 people donated a little bit. And I'm almost as just as proud of that. It's like, people are getting involved. Stiff me up. I'm like, hey, you can play some sort of stuff. Flexport.org. People are there.

Flexport.org. Final question for you, too. We had this great moment where we engage China. We build a bunch of iPhones, Amazon Basics, whatever it is, and they can choose. And it raised the standard of living for a lot of people. We understand China is doing this now. And they're doing it in Africa and some other places.

What are you seeing in terms of that relationship? How China is looking? Because towards other countries to become producers of goods and they're kind of now becoming incredibly influential. What's their intent and how is that going? Claire, maybe you can start. That's a big question. But I think it's, this is a long-term play.

We're all in this for a long-term play. And whether you take maybe the spicier view around your resources and protectionism versus one that's more just around progress. And as we may have an increasingly vulcanizing the East and West, the ability for there to control the bigger piece of their own supply chain.

But the end result, as you're sort of saying, is you look at places like Niger, right? The average mother there is having six children. We have a very young global south. And the important thing is that they're fed, they're clothed, and that they have an upward trajectory. And so that's it. People living in abject poverty will probably end in our lifetime.

The only places it won't end is in places with dictators. What are you seeing in terms of the shipping containers? Because you must see shipping containers increasing, leaving certain ports. Where is China sort of exporting production to? And what are the up and coming production areas? There's some really interesting trends going around labor costs. And China, the reason people went there over the last 40 years, beyond us, was like cheap labor. But over time, they became quite sophisticated.

They really learned how to manufacture things, especially electronics. If you want to make electronics, you pretty much have to make them in Shenzhen, the greater Bay Area, as you call it. So, and that's, but stuff that's just for cheap labor, because that's no longer about cheap labor. This is a whole supply chain ecosystem of components

and other things. If it's just cheap labor, two years ago, Mexico became cheaper than China in labor costs. Wow. It is just cheap labor. Two years ago, Mexico became cheaper than China in labor costs. Wow. It's a huge shift. And now, Mexico doesn't have the manufacturing capacity. They don't have the skill sets.

They don't, but they'll build it. And people will respond to that trend. As long as it takes 120 days to ship stuff from China to the US, and we can't get this sorted out, brands are going to respond to shipping closer to home. So that is a trend that you're going to see more and more of. If the delays stay the way they are, I think China's big challenge is if they become labor cost

too expensive, how do they keep moving up the value chain? And this is what they're made in China 2025 thing is, is like, they've got to make more and more sophisticated products because it can't just be about their cheap, lightweight to services. Yeah, and that's a huge challenge and very few, if anyone's really done it, no one's done it at that scale because they're the biggest country in the world, but Japan and Korea have kind of done that, but not 10 times. India as well, we're moving to a services-based economy, India with IT comes to mind.

And then they'll become entitled and want to retire at 55. Like you're up. And by the way, I'll explain to you my favorite answer. Someone at, I think it was Zuck. Although Toby from Shopify told me he's lifted this line. His employees were asking him about the four-day work week. And he was like, well, you know,

I do think we should do some experimentation around how many days a week we work. So, but we're gonna start with the six-day work week like China does. And then we'll try the four day work week later. Ladies and gentlemen, please join me in making it. Thank you. I am in fact well done. Well, let your winners ride. We open source it to the fans and they've just got crazy

I'm going to be west, I see Queen of Kenwai I'm going to leave What, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, We should all just get a room and just have one big hug or because they're all just just like this like sexual tension But we just need to release some out I'm going on leave!