An Army of Normal Folks - The Law of Unintended Consequences

Episode Date: December 13, 2024

For "Shop Talk", Coach Bill gives a fascinating (and devastating) look at the trade war's unintended effects on the hardwood lumber industry and what it can teach us about our work serving others. Support the show: https://www.normalfolks.us/premiumSee omnystudio.com/listener for privacy information.

Hey everybody, it's Bill Courtney with an Army of Normal, folks, and this is Shop Talk number 31, welcoming to the shop. I love doing that. That's my favorite part of Shop Talk. Do you think it's ever going to get old? What? Do you think it's ever going to get old? Probably, but I'm going to keep doing it.

All right. Until enough people complain. Someone complains all the time, but whatever. I mean, it's my bell. There's the door. Somebody else has come in. You want to get them? I'll handle this one. Another customer somewhere. All right.

Shop talk number 31. We're going to talk about the law of unintended consequences from a very personal thing. And it's a, I think the example I'm gonna use is something that all of you will remember. But I think it has more micro lessons for things we do in our lives. So, right after these brief messages from our generous sponsors, Shop Talk Number 31,

The Law of Unintended Consequences, right after these brief messages from our generous sponsors. You just said that twice in a row. Okay, right after these brief messages from our generous sponsors. How about three times that work for you? All right, insert ad break now. Okay, insert ad break now. Okay. Insert ad break now.

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or wherever you get your podcasts. Hey everybody, I hope you enjoyed those messages from our generous sponsors. That's four times you like that. Thankfully the messages were the same as normal despite you saying it three times. Okay, well those were generous sponsors giving us messages. So there we go. The law of unintended consequences. Okay, everybody remembers the trade wars during Donald Trump's first, what was it, term. Yeah. Well, some people plotted them, some people hated them. Policy decisions

and politicians and everybody vilifying everybody so no surprise there. I was one that hated them and I'm going to tell you why. When President Trump put all the tariffs on China, China of course didn't sit still, they did what's called retaliatory tariffs. So as we started putting tariffs on China. China of course didn't sit still. They did what's called retaliatory tariffs. So as we started putting tariffs on the products that they were sending to the United States of 25 and 50 percent, they returned the favor by putting tariffs of 25 to 50 percent on products that we were shipping from the United States into their country. They retaliated to the trade tariffs with their own tariffs on American

products, thus starting a war, a trade war. Basically putting tariffs on goods going to China and coming from China. We started it. They continued it. They continued it. The idea behind tariffs is, and actually if you just think of the idea, the idea is if we put taxes on products coming into the United States made in other countries, we raise the price, the taxes will raise the cost of those products, thereby making American-made products more competitive or less expensive and sending the public then to buy American-made products rather than products made in other countries, thereby helping our own economy. That is the idea behind tariffs.

Now the counter argument to that is yes, but by doing that, you eliminate competition because let's say China can make a widget and ship it to the United States for $2 and the competing manufacturer that's US based can only make it for $2.35. Well China's manufacturer wins because they're able to make it cheaper. And the consumer wins because now they're able to buy products for the least amount of money possible, thusly stretching their dollar. And that's the idea. What oftentimes is not considered is when you put that tariff on the Chinese product, now the Chinese product, if you put a 25% tariff on a $2 item, now it's 250 and the American manufacturer making that same

product for 230. Well, now maybe you do buy the American product, but the consumer is paying 30 cents or 15% more for the same product because of an artificial tax put on the product coming from China. And some would argue that that extra money is worth supporting the American manufacturer and stopping China from importing goods. Now the other counter argument to all of this, I hope you're following along, is that the only reason China, the Chinese manufacturer, can make that widget for two dollars against the American $2.30 product is because the Chinese government is subsidizing or offering breaks or

aiding somehow the Chinese manufacturer to be able to make the widget for two bugs thereby creating Unfair competition for the American manufacturer who makes the same widget for 230 against a $2 Chinese widget that would have been closer to 230 had the Chinese government not subsidized the manufacturer of that product. It's a complex issue. Lots of arguments. So we had a trade war.

Things got more expensive and tariffs really hurt the Chinese economy, which I think at the onset of all of it was the original purpose anyway, was to strip China of some of its ability to compete, thereby making their economy worse, thereby stripping its government of money, and thereby making it less competitive and not able to build as many warships and planes to go invade Taiwan or whatever. Lots of geopolitical arguments there. As it pertains to me, so back pre-trade war, China was the second largest consumer of hardwood lumber, the products that I produce in my company in the world next to the United States by far. In fact, if

you took all of the other countries outside the United States in the entire world and added every dollar of hardwood lumber they bought together, in some total they were still 20% less than what China alone bought. That's how big of a market China was. And prior to about 1995, it could be argued that tariffs would have been a smart thing for American companies because it's estimated that 94% prior to 1995, 93 or 94% of all the lumber sent to China American lumber sent to China was made into products like furniture and cabinets and

flooring and other things that was then boxed up and shipped back to the United States and they could do that cheaper than manufacturers in the United States could make the same furniture or cabinets or flooring because China was paying you know people three four dollars a day wages when American companies were paying $20 an hour. And so American companies could not compete with that cheap labor in China. And China decimated the American furniture, some of the flooring, some of the cabinet industry, much like the textiles went away in the 80s and 90s in the Carolinas.

So did the furniture companies over in the Carolinas because China was just making stuff so much cheaper. It could be argued that in 1995 and before that the United States should have put tariffs on the products coming back to the United States to allow the American manufacturers to continue to compete because American manufacturers are paying workers comp, they're paying insurance, they're dealing with OSHA, they're doing all of these things to create safe workplace environments for their employees, paying them a living wage. While in China, you've got 14 year olds running around barefoot working for two dollars a day

doing the same work, which is true. I've been there, I have an office there. It's true. Or it was true. But, after 95, this weird thing started happening in China, and it's called the growth of the Chinese middle class. In fact, the Chinese middle class increased annually for about eight years, a number greater than the entire middle class that exists in the United States. People were coming out of rice fields, they were going to work in factories. Once they got to work in factories and made more money, they became entrepreneurial. The Chinese communist government opened up their economy to be more capitalistic and

a lot of people started making a lot of money and what happens when people make money is they want nice things. So this evolution took place that after 1995 into the early 2000s, the lumber that used to be sent from America to China made into products that were then sent back to the United States crushing the furniture industry in the United States. The lumber we sent to China now because of their growing middle class was being made into furniture and flooring and products that stayed in China that was consumed by this growing middle class. So much that by the time the trade war started, 95% of every board of hardwood lumber sent

to China was made into products that stayed in China and was consumed by the middle class. It was too late. Our furniture industry in the United States had already been decimated. The tariffs on our goods were no longer saving any American jobs. And by putting tariffs on products coming in the United States, when the Chinese government retaliated by putting tariffs on American hardwood lumber, it simply locked American hardwood lumber producers out of the second largest market in the world. Now, the Chinese folks, they didn't just say,

oh no, we can't get lumber at a decent price from the United States. I guess we're not going to make wood products anymore. No, they just went to saw mills in Europe. They went saw mills in South Africa. They went saw mills in North Africa. They went saw mills in South America. They went saw mills in Russia. And they just, although they preferred American species, they switched and they started buying lumber from other markets to make their products out of. Once the government figured this out about 18 to 24 months later, the US government figured this out. They were like, holy moly, we've created a horrible thing and the American hardwood

lumber industry is getting decimated by not being able to be in this market. And they worked out with the Chinese government and they relaxed all the tariffs. But by then, that market had already changed. That market had already switched from red oak and white oak from the United States to white oak and beech from Europe. It switched and they changed all their displays and they changed all their marketing materials and they changed everything they were putting into their homes and their buildings. And just because it switched, they were like, are you kidding?

We just spent all this time and effort money and went through all the pain of having to switch from American species to other species. We're not switching back. And so here we are 10 years later, and the American hard lumber industry has gone from a 14 billion dollar industry to this year will do five billion dollars. It has shrunk that much. Now there's other factors at play, but one of the biggest factors is the trade war, the lasting effects of the tariffs. So this shop talk number 31 is about unintended consequences. I think even as a guy who has suffered in his business and his industry as a result of these tariffs, I think the tariffs and the idea behind the tariffs was certainly well intentioned.

We can argue policy and politics all you want, but nobody in the United States said, let's do some tariffs and screw up a couple of American industries. In fact, they were trying to protect them. But because they were ill informed and ignorant of the truth of what the economies of scale on the marketplace was between China the United States are lumber industry they made policy decisions that decimated a a Over hundred year old industry that still is not recovered

That's the truth of covered. That's the truth of the trade wars as it pertains to the American hardwood industry and that is also the lesson of unintended consequences. Even well-intentioned, even some effective in some cases measures, one shoe doesn't always fit, one shoe doesn't fit all And there are a lot of people who've suffered, gone bankrupt and lost their businesses as a result of the unintended consequences of uneducated policy. So why am I telling you this story? Well, when we decide that we're going to become an army of normal folks and engage and use our passion, our discipline in areas of need and be philanthropic, even when we are the most well intentioned, if we don't properly plan and if we don't properly plan, and if we don't properly listen to the very people we seek

to serve, there can be vast, unintended negative consequences. We need to understand that the people who know what they need the most are the people in need themselves. Oftentimes I have seen lately in the last year and a half of doing this really well intentioned people go into areas of need and they make a value decision on what the need is without having first talked to the very people who have the need in the first place and in doing so often do things and put policy and procedures in place that actually have unintended consequences and can negatively affect. So shop talk number 31 is about this. We got to be an army of normal folks, we got to engage, gotta use our passion, discipline, area of need and get involved.

We gotta tilt that rearview mirror 15 degrees to the left and say, why not me? But in doing so, we need to properly plan. We need to think very diligently about the work we're gonna do. And we need to speak to the very people we're seeking to serve to understand from them best what needs are really there and not take our preconceived notions into an area but rather take our brain and our ears and listen and then serve need where need exists based on what the need is from the mouths of the people who we seek to serve in the first place. Poor people are not stupid, they're just poor. We have to listen to them. Hurting people are not stupid, they're just hurting.

We have to listen to them. We have to listen in order to best serve. Otherwise, you might engage in unintended consequences, which is not what any of us want to do okay that's shop talk number 31 if you have any ideas for shop talk number 32 3 4 5 and you want to hear this oh my gosh the clapper came off here we go oh my goodness you want to hear the bell you broke it already I didn't break it it just fell off oh I'm so sad I got to fix that if you want to hear the bell you broke it already. I didn't break it. It just fell off. Oh, I'm so sad

I got to fix that if you want to hear this here There you want to hear that? Send me your ideas current events thoughts Tenants Fundamentals anything if I think I have something to value Something value to add we'll talk about it, but you know I will always respond. Send us ideas.

You can write me anytime at bill at normalfolks.us. I will respond and hopefully I will have something to comment on. Thanks for joining us. Thanks to our producer, Ironlight Labs. I'm Bill Courtney. I'll see you next week. Hey everyone, it's Katie Couric. Well, the election is in the homestretch right in time for a new season of my podcast, Next Question. I'm bringing in some FOKs, friends of Katie's, to help me out like Ezra Klein, Jen Psaki,

Estet Herndon. But we're also going to have some fun thanks to some of my friends like Samantha Bee and Charlamagne, and I'm going to be doing a podcast on the podcast, Next Question. So, I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question.

And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question.

And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast, Next Question. And I'm going to be doing a podcast on the podcast,on. But we're also going to have some fun thanks to some of my friends like Samantha Bee and Charlemagne the God. We're going to take some viewer questions as well. I mean, isn't that what democracy is all about? Check out our new season of Next Question with me, Katie Couric, on the iHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Hey, y'all. I'm Maria Fernanda Diaz. When You're Invisible is my love letter

to the working-class people and immigrants who shaped me. Season 2 shares stories about community and being underestimated. All the greatest changes have happened when a couple of people said, this sucks, let's do something about it. We get paid to serve you, but we're made out of the same things. It's rare to have black male teachers.

Sometimes I am the testament. Listen to When You're Invisible on the iHeartRadio app, Apple podcasts, or wherever you get your podcasts. Had enough of this country? Ever dreamt about starting your own? I planted the flag. This is mine. I own this. It's surprisingly easy.

55 gallons of water, 500 pounds of concrete. Or maybe not. No country willingly gives up their territory. Oh my god. What is that? Bullets. Listen to Escape from Zakistan. That's Escape from Z-A-Q-istan on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.