The Chris Voss Show - The Chris Voss Show Podcast – Outside the Box: How Globalization Changed from Moving Stuff to Spreading Ideas by Marc Levinson

Episode Date: February 17, 2021

Outside the Box: How Globalization Changed from Moving Stuff to Spreading Ideas by Marc Levinson From the acclaimed author of The Box, a new history of globalization that shows us how to navigate its future Globalization has profoundly shaped the world we live in, yet its rise was neither inevitable nor planned. It is also one of the most contentious issues of our time. While it may have made goods less expensive, it has also sent massive flows of money across borders and shaken the global balance of power. Outside the Box offers a fresh and lively history of globalization, showing how it has evolved over two centuries in response to changes in demography, technology, and consumer tastes. Marc Levinson, the acclaimed author of The Box, tells the story of globalization through the people who eliminated barriers and pursued new ways of doing business. He shows how the nature of globalization changed dramatically in the 1980s with the creation of long-distance value chains. This new type of economic relationship shifted manufacturing to Asia, destroying millions of jobs and devastating industrial centers in North America, Europe, and Japan. Levinson describes how improvements in transportation, communications, and computing made international value chains possible, but how globalization was taken too far because of large government subsidies and the systematic misjudgment of risk by businesses. As companies began to account properly for the risks of globalization, cross-border investment fell sharply and foreign trade lagged long before Donald Trump became president and the coronavirus disrupted business around the world. In Outside the Box, Levinson explains that globalization is entering a new era in which moving stuff will matter much less than moving services, information, and ideas. About Marc Levinson Marc Levinson is an economist and historian specializing in business and finance. He was formerly finance and economics editor of The Economist, worked as an economist at a New York bank, and served as senior fellow for international business at the Council on Foreign Relations. For more information, check out his website at www.marclevinson.net.

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. Get ready, get ready, strap yourself in. Keep your hands, arms and legs inside the vehicle at all times. Because you're about to go on a monster education roller coaster with your brain. Now, here's your host, Chris Voss. Hi, folks. This is Voss here from thechrisvossshow.com. The Chris Voss Show.com.

Hey, we're coming here with another great podcast. We certainly appreciate you guys tuning in. And our friends at Clubhouse and the app are live with us as well, bringing us their questions. It's like running a live radio show. But instead of people having to call in, they can just be on Clubhouse. They can hear the show and they can do everything else. Today we have a most excellent guest on the show. You are going to be blown away.

You're going to be educated. You're going to be enlightened. You're going to move to a new plateau in the brains of your life just by listening to what this gentleman has to say and getting his book. Today, we have a great book author on the show. The book is Outside the Box, How Globalization Changed from Moving Stuff to Spreading Ideas. The author is Mark Levinson. He's the author of a multitude of books, and he is an independent historian and economist living in Washington, D.C. He spent many years as an economic journalist, becoming finance and economics editor of The Economist in London. Returning to New York,

he spent a decade at JPMorgan Chase, developing a unique industry economics function, and then initiating the bank's environmental research for investors. He later served as senior fellow for international business at the Council of Foreign Relations. We've actually had Dr. Richard Haas on from there as well. Council of Foreign Relations plug morning, I guess. Mark has written for leading scholarly publications and review books on business and the history of Wall Street Journal, or I'm sorry, the history for the Wall Street Journal on review books and business, et cetera, et cetera. Seven books he's taken and written. Welcome to the show. How are you, Mark? That's a hell of an introduction. I don't know

if I can live up to all those things you say. You have journeyed through life with a mastery of intelligence, history, economy. We're just glad to have you on the show. Well, I'm just a few years out of college and I haven't quite figured out what I want to do with my life yet. Yeah, well, there's still time. So Mark, welcome to the show. Congratulations on your book. Give us your plug so people can find you on the interwebs. I'm Mark Levinson, and I can be found on marklevinson.net. That's Mark with a C. All right.

And then, Mark, so you gave us this book. People can find it on local booksellers, Amazon, any place in the area. There will be a link, of course, on the Chris Voss Show, and you'll be seeing this on probably two other podcasts, book author podcasts and Chris Voss podcast as well. So the name of the book, Outside the Box, what motivated you to want to write this book? And now is this your seventh or eighth book or is the inclusion? This is my seventh book. I've got a lot of interest in international trade. I've written certainly on shipping, my book, The Box, about how the container was important in the development of globalization,

got a lot of attention, but I'm really not a shipping guy. I'm really interested in international trade and the world economy. And there's a lot of very loose talk about globalization now. Globalization really for the past few years has been blamed for every sin you could think of in terms of destroying Western civilization and impoverishing America and all other sorts of things. written about globalization in a serious vein has been pretty technical. It's something that professional economists do with lots of graphs and charts and tables. And so I decided it would be sensible to write a layman's history of globalization that's lively and that's short, and that actually sorts out how what's gone on in the world economy is and isn't different from what has gone on in the past, and then to give some thoughts about where globalization is headed. So that's what I've tried to do here. It's a very different sort of book for me, but I had an interesting time

doing it. And this is a sequel to your original book called The Box, I think, how the shipping container made the world smaller and the world's economy bigger, all from those steel shipping containers you can live in now if you want to buy one and do it. That's right. And the point of the box was that here was this simple innovation, seemingly simple innovation that nobody paid any attention to, the shipping container. And without it, this modern version of globalization wouldn't have been possible. Part of the new book builds on the box. Part of it's quite different.

But one of the things that's happened since I wrote the box and which I discuss at length and outside the box is that the shipping industry has gone mega, as in megalomania. Okay. The big ships have gotten bigger and bigger, all in the name of efficiency, all in the name of economies of scale. This was going to make shipping cheaper. And what these big ships did was totally foul up international supply chains. Oh, wow. Those giant shipping containers you see moving through the sea. Those shipping containers now move on ships, the biggest of which can carry as much freight as 12,000 trucks. Wow. On a single ship. So think about how this actually works in practice.

The ship lines built these because they said, hey, this is more efficient. You can carry so much on a single ship. Well, that's sort of true. But what happens, for example, when that ship gets to port? It sits in port for a long time because it takes a long time to unload it. And what do you do with all these containers coming off? How do you get the trucks into the port to get them out of there and to bring in new containers to ship out? How do you get all these thousands of containers onto trains to get them to their destinations?

And so the net result has been that international freight transportation is slower and less reliable than it was 20 years ago. Really? Holy crap. Global supply chains have been pretty much fouled up. that I write about in the book is that many companies, when they decided to go global, they looked at two things. They looked at production costs, what it actually costs to make something in a factory. And they looked at transportation costs, which because of the containers were low and coming down. And they said, okay, it's cheaper to make this in China or Vietnam or India than it is to make it in the United States or Japan or Europe. They didn't adjust those cost figures for risk. And what we've seen is that these long supply chains have some risks involved. And the big one is that your cargo doesn't get where it's supposed to be

when it's supposed to be there. Okay, you're in the toy business. Half your sales are in the Christmas season. If your ship gets delayed in port or on the ocean, you're going to miss your market. Okay, it's really serious. We've seen other kinds of supply chain problems, earthquakes, fires, strikes, floods, you name it. All of these things can result in a supply chain disruption. And once businesses started figuring in the cost of risk, calculating that along with the cost of production and transportation, a lot of them figured out that some of these global supply chains aren't terrific ideas. That's where we are now. Okay.

So would it be better and more cost-efficient for all of what you outlined to produce locally then? What we've seen is that a lot of businesses chose what seemed to be the lowest cost solution, which was to have one big plant serving them worldwide. Again, economies of scale, you make more and the cost per item is less. And of course, that is cheaper so long as it functions properly. But when it doesn't function properly, your only production location isn't able to deliver. And then you've got a problem. And so I think what we're seeing now is a lot of businesses thinking more about resilience. OK, that doesn't mean that they're closing a factory in China and moving it to the United States.

What it does mean is that instead of making things in one place, they'll make things in two or three places around the world. And one of them might be in the United States or close to the United States. And so if there is a foul up here, whether it's in the port, or the workers go on strike, or the government cracks down, or whatever the problem is, they have options, they have ways to make sure that the goods get delivered on time. That's the direction that globalization has gone in when it comes to goods. So do you, in the book, do you feel that it's not a good thing, or are you giving good advice on the whole aspect of the operations of it from front to back and ways it can be improved? I'm not giving advice to business people, except that they really need to consider risk. What I am pointing out is that this phase of globalization with these long supply chains, that really started in the late 1980s.

Okay, globalization itself probably started in the 1830s or so when there was a huge increase in international trade. But that involves mostly shipping commodities from poor countries to rich countries, right? This idea that you'd actually have from poor countries to rich countries, right? This idea that you'd actually have manufactured goods with long supply chains, you'd make a component here, send it somewhere else for further processing, send it somewhere else for assembly, send that product somewhere else to a customer. That came along in the mid to late 80s. And we had then 20 years at which international trade grew twice as fast as the world economy. Everybody was adopting this model of globalization. What we've seen since the financial crisis, if you can remember back to the financial crisis, sort of 2007, 8, 9. Since then, international trade in goods has actually been growing more slowly than the world economy.

People have come to appreciate these risks. And what we're seeing is that globalization has now having less to do with moving goods around the world in metal boxes and having really more to do with moving services and ideas around the world. Your broadcast here can be seen all over the world or listened to all over the world. Your broadcast here can be seen all over the world or listened to all over the world, right? And that's just a basic example of international trade and services that barely existed a decade ago and is now quite profitable and quite possible. And that's what we're seeing now as the shape of globalization shifts again.

Do you talk in your book about globalization and, like, jobs and American issues like that, that people, there's lots of people that, is globalization good? Is globalization bad? Yes. And I don't think it lends itself to a simple answer. It's good or it's bad. I do point out that one of the reasons that the world went so gung-ho for globalization, starting in the late 80s for this version of globalization with long supply chains is that globalization was basically subsidized in a bunch of different ways okay the ships themselves were subsidized very heavily subsidized both by ship

building our countries and by countries where people own ships. They got big tax breaks, so the cost of transportation was artificially low. Manufacturing was subsidized. Take a look at the magnitude of the subsidies that companies get now for opening a plant. From just flat cash grants to all kinds of preferences to protected markets, we guarantee you that you won't have a competitor in this market if you're open in our country. So that's a subsidy. And then, of course, there were environmental subsidies, right? Because we had cases in which plants in other countries were polluting the air, polluting our air. The pollution blew across the Pacific. But that cost, the cost of that pollution was not part of the cost borne by the manufacturer. Right.

So what you saw from this was really too much globalization. You saw that globalization, which is fundamentally not a bad idea, was taken to extremes in a way that was really actually inefficient economically. When you think about it, you're causing people to manufacture things in a way that wouldn't make sense, except that the government gave them a subsidy to do it. Wow. And people are like, Oh, we got to quit shipping jobs overseas. We got to elect a government that won't do that. And then they're getting government subsidies for all this stuff. That's correct. And it's not like the world was ever subsidy free, but it was a lot less subsidized. These subsidies running in some cases into the billions of dollars for a particular factory or covering 25 or 30% of the cost of building a ship. These are relatively new.

Note to self, get a boat. So how do we resolve this? Or do you pose a resolution in your book as to better ways to improve this sort of system? Well, I think one way that you resolve this is making sure that the companies that are making these decisions, the manufacturers and the retailers, right, because they're the ones who run these long supply chains, they actually have to see the full cost picture. That includes the risks of these global supply chains. So you don't really want to subsidize them.

I mean, if they have a foul up because they've taken the risk of building a supply chain, that should be on them, right? Yes, that's true. And so you don't want to subsidize that sort of thing. You don't want to let one country pollute the air or encourage climate change at the expense of another country. These are things, these are costs that have to be, as economists say, internalized. The companies have to be made to face them. And when they do that, international trade is not going to go away by any stretch. But you'll see international trade that makes sense rather than trade simply because people are getting subsidies and special benefits. Wow, that's amazing.

I didn't even know they were getting all that stuff. That's crazy. So I was seeing the other day, just i don't know why an article flipped across my thing about why a lot of shipping containers are ending up in the ocean because they're falling on ships and stuff and and i've been known on a late night to watch ship crashing ship falling over and like the old boxes go over and videos is that an aspect of your book that you talk about? Maybe the environment will fall out of that, et cetera, et cetera. The shipping containers falling out, not specifically. Well, that's an aspect of the risk. Again, you're assuming in your supply chain, these goods are going to get where they're supposed to be. And for a while in container

shipping, that was true that you could plan on having your product at the dock in Shanghai on Tuesday, and it would be loaded on the ship on Thursday, and it would arrive in Los Angeles two weeks later or two and a half weeks later. These days, it just doesn't work like that. Just to give you an example, I don't know what today's figure is, but in the last couple of years, somewhere around a third of the ships leaving China left late. They were behind schedule. Now, again, if you've got a supply chain, it depends on timely delivery. You've got to get your stuff here now. You don't want a ship that's going to leave late. What happened is that the ship lines built ships to sail more slowly than older ships in order to save energy, right?

The slower sailing ships burn less fuel. They emit less by way of greenhouse gases. But what that means is when your ship leaves China late, it's going to arrive late in Rotterdam or Seattle or wherever it's going because it can't speed up. And so all of a sudden, your supply chain is no longer a precision supply chain. And that gives you another cost if you are a manufacturer or retailer. Yeah, especially if you miss those marks. It's called inventory. Inventory is something you own, but you can't sell, right? And so all that stuff that's on those ships,

the manufacturers have paid for that stuff. They want to get it out to customers so they can get money for it. The more time it spends on the ships, that's money on their account. They're losing money from holding the stuff. So it's really followed up the cost situation for many companies. And with the just-in-time sort of inventory that a lot of people like to have, where you hold as less inventory as you can, so you can just get it out the door as quickly as possible and turn around, that definitely causes complications. So they're basically cutting costs on these ships

so that they don't have to spend a lot of money and they're just letting their vendors or customers take the boot for it. Well, I think about it this way. The ship lines looked at their own cost structure and they said, well, if we build a bigger ship, then the cost to carry one container is going to be lower. And so let's build bigger ships. And they kept doing that. The first container ship had 68 containers on it. So we're 68 now up to the equivalent of 12,000. But they didn't, the ship lines didn't really look when they commissioned these ships at the fact that they're part of a system. Okay.

So being efficient when it's on the ship, well, you need to be efficient in the port, right? They're not so efficient in the port. A lot of ports they can't even go to because the ships are too large. They take too much water. Backfire. And it's not so efficient if you're a railroad or a truck line. I mean, think of how this goes in a port now. There are actually fewer ships coming in because the ships are so much bigger. And so your freight is very lumpy, right? One day you've got one of these giant ships coming in because the ships are so much bigger. And so your freight is very lumpy,

right? One day you've got one of these giant ships coming in, you've got this huge influx of containers. The next day, nothing's doing and your equipment sits idle. And so it's really inefficient. So the guys were in the shipping lines were really looking at their own efficiency and not the efficiency of the whole goods transportation system. I remember. What was that? And they followed things up. I think if you talk to people in the shipping business today, the ship lines, they would tell you that they actually made a mistake

by ordering such big ships. They would have been better off with somewhat smaller ships that had lower theoretical efficiency, but actually were more likely to get where they're going on time and were easier to unload and could call it more ports. So there was somewhat of a mistake here. Was a big mistake like what we saw with coronavirus, not being prepared for a pandemic, where we saw with coronavirus, I think during or before coronavirus, I know there was, with the price of oil changed drastically, and there was like all these ships just out at sea with oil on them

that they couldn't even port or they couldn't even put it into the refineries. It's so much overload. Was that a good example that maybe you cite in your book or talk about? There's an example of what happens markets change when your ship is at sea right and and if your stuff is delayed i mean who wants to buy last year's computer right yeah you want to buy this year's model and every day that your electronics goods are in transit is a day that they're losing value because they're becoming a little bit more old-fashioned. And in industries where things are changing very quickly,

you've seen in, there's an industry called fast fashion that you might be familiar with. And part of fast fashion has been that retailers actually have some clothes made in countries where wages are high because they can just get them delivered real fast. So even though it costs more to make these clothes in Spain than it would to make them in Sri Lanka, they choose to make them in Spain because they can get them right into the stores. They can catch the trend. And the potential for profit is bigger than by just trying to find the cheapest place to make them.

And does it factor when it comes to their losses? Does it factor in better that they would be better to build manufacturing here? Or is it still too costly? I think you're seeing investors ask that question. Okay. Investors are pretty attuned to supply chain risk. And so for companies that have publicly traded stock, people are asking, where are your risks? Are the potential points of failure where something could bring this company down? And what are you doing about it? And executives are needing to answer those questions. Boards of directors are needing to look at those questions. Yeah. And it's interesting too. I remember when I first started seeing they were going to start using the ships that don't need a crew and stuff.

They were going to work on GPS. Have they got those out yet? They're doing some tests on those, I think mainly in Norway. It's going to be a long time before those go across the Pacific. If only because when something goes wrong, you need some people on board to try and get things going right. But they're using those for fairly short voyages in Norway across the fjord or that kind of thing. And of course, you have the pirating issue in some parts of the world. And if you go through the streets of Iran, you've got to worry about what's going on over there.

Yeah. And you'd be surprised. The crews on these giant ships are pretty small. And there are not a lot of people on board these vessels. So labor costs, everybody complains about the labor cost. My goodness. But the labor cost really is not a big deal for most of the ship lines in most cases. There you go. What are some of the other aspects of the book that we haven't touched on? I've really tried to bring globalization into some historical perspective. And I think one of the

interesting things to think about in historical perspective is that from its start back in the 1830s until probably the early 1980s, globalization was something that came from the rich countries. Okay, the rich countries bought commodities from the poor countries and manufactured goods and sold those manufactured goods back to the poor countries. And this was regarded as a great thing by the wealthy economies. And the poor countries regarded it as exploitation. They didn't like globalization. And if you remember the terminology, we used to talk about the less developed countries, the poor countries, the South. These were the countries that felt victimized by the global economy, while the rich countries were prospering from it.

Well, take a look at the political discussion now. Now it's many of the poorer countries that think globalization is the greatest thing going, right? It's opened their way to raising living standards and improving their economies. And who's it that's worried about globalization? It tends to be people in the rich countries. So the international politics of this has really changed 180 degrees over time. It's kind of like we're funny about how we want a healthy environment here in America, so we're just going to ship all the environmental pollution manufacturing we do to another country, and then we're doing the right thing. Well, I think you have seen that, and even more in Europe, where

climate change has been a hot button political issue for a while. And they put some regulations in place that did encourage certain industries to close up. And so now instead of making certain things in Europe, they're likely to be buying them from Asia. Now, for a traditional pollutant, maybe that makes sense because the pollution only falls from the sky somewhere near the plant. But for something like climate change, it doesn't really make any difference where the greenhouse gases are being emitted. It's a worldwide problem. So you feel very self-righteous about having cleaned up your country, right? Your country's emissions are going down because you've got these strict regulations. But instead, you're basically having these emissions take place in some other country that you're importing the goods from. Yeah.

It's always interesting to me when I've looked at our historical nature of the Industrial Revolution, of course, how other developing countries go to it beyond us. And then we're like, you can't burn coal anymore over there, China. And they're like, hey, man, you're way ahead of us. We're like 100 years behind you on burning coal and whatever. And then it's just interesting how this whole thing plays out. With the new administration, I think they're trying to encourage more stuff to go, people to develop plants and do jobs here, bring more jobs back. Do you see different ways that they can accomplish that in different potential methods? Yes, I do. I think that one thing that often gets lost in the discussion is that supply chains can be really complicated. Depending on the type of product, you can have six or seven or eight tiers in a supply chain. And by a tier, I mean that

you've got some company somewhere that makes a rubber gasket, and it sells that rubber gasket to some company in another place that puts that gasket onto a valve, and then it sells that valve to somebody else, right? And it can be several transactions before this actually ends up in a finished product that you can buy. So it's really not realistic in many cases to think about bringing all of this to any one country. That's probably not going to happen. There's some interesting thinking going on about what are the critical pieces that we need to have available. But I think back to where we started, a key issue here isn't necessarily that it be made in the United States, but that it be made in a bunch of different places.

So we don't run into this situation that we had, say, with personal protective equipment in the early days of the pandemic, where it turned out that almost all of it was made in China. And if there had been multiple factories in multiple parts of the world making it, we would have probably been able to get more than we did, even though it might not have been made in the United States. And I guess what they're doing is they're building out the new administration is going to build out some plants by the end of this year. I think they've announced saying so they can make some of the PPE so that we hopefully don't get in some of these pandemic emergency situations again. Well, some of the things you can make here, for sure. Some of these things are kind of complex.

For example, people are concerned about pharmaceuticals. Right. example, people are concerned about pharmaceuticals, right? Well, so it's not just the matter of having a factory that stamps out a pill, right? Or makes a vaccine. You have all these different ingredients that are part of the pharmaceutical, and then you've got a delivery system, right? Which you may have, you may need tubes or bags or syringes or however this is provided to the patient. So it's actually got a lot of different steps, and it's not as simple as saying, hey, let's open a factory here. Yeah. I like the fact that the masks are made in China because China can put the 5G antennas in them where you can call, like, Bill Gates and stuff, and you can be like, hey, Bill, right from your mask.

I mean, I think that's brilliant. I'm just kidding. Those of you who take that seriously, check yourself into a hospital. So what do you think is the number one problem that a lot of people need to fix with the supply chain and all this stuff? What's the number one things that companies need to look for, CEOs need to look at and go, we really need to work on this. This is the biggest issue we have. I think this question of how you assess risk continues to be a big deal. And let me just give you an example of why this is difficult. You probably have insurance, right? You've got insurance probably on your home, on your life, and you get to the end of the year and you say to yourself, hey, I just wasted a bunch of money last year on

insurance because my house didn't burn down, right? Or I didn't die, right? Well, you can think about risk management in a certain sense the same way, okay? In the short term, if you as a, say, corporate CEO, you've decided to make your goods in several different places, and somebody else is making them all in one place in a giant factory with huge economies of scale. In the short term, that person with a giant factory is probably going to have lower costs. Now, if there's a problem, you'll be glad you had three or four plants rather than one. But if there's not a problem, you've got a disadvantage in the market because it's costing you more to protect yourself against risk. And I think that's really a big issue for a lot of companies. You need to be able to take these measures to control risk so that your products are where they need to be.

But if you do too much of that, there's going to be somebody who can undercut you on price so long as there's not an earthquake or a hurricane. And that's what I think a lot of companies face in terms of managing risks. It's been interesting how many products I've seen rise out of Vietnam. And it seems like a lot of manufacturing I've seen, I mean, not a lot, like I'm no, I'm your professional, a professional on this. I'm just an amateur that I watch the news. But it seems like a lot of more goods are being made. A lot more goods are being made than used to be made in Vietnam than China. A lot of companies have moved production out of China to Vietnam, to other places in Southeast

Asia. In part, that's because wages are rising a lot in some parts of China. But it's also that they have been paying attention to the risks. One risk that we haven't talked about is political risk. If you make all of your production in one country, and for some reason that country gets embroiled in a trade dispute with another country. And we don't need to use any names here. But your goods can be held hostage. You estimated costs based on the fact that tariffs were very low. Well, all of a

sudden, now you face tariffs that are very high because your countries are having a trade disagreement. So this is just another risk that companies have to be able to deal with. And I think people had pretty much assumed that this sort of thing wouldn't happen. Tariffs have been falling for decades and decades. And companies just naturally assume that they could make their goods wherever and get them into another country with no fuss or muss. It turns out that that's not always true. Yeah. There's probably a lot of ships that were at sea when those tariffs dropped. So it probably wiped out a lot of margin for them,

if not all the profit. Ships and even here, I mean, for a while, we were talking about tariffs on steel and aluminum coming from Canada. Yeah. Well, now nobody in Canada, Canada had a free trade agreement with the United States. Nobody was expecting that all of a sudden goods from Canada. Yeah. Well, now, nobody in Canada, Canada had a free trade agreement with the United States. Nobody was expecting

that all of a sudden goods from Canada were going to face U.S. tariffs. And boom, they did. Well, you got to watch those Canadians. They're pretty sneaky. They're always saying, so are you all the time.

But that's just an example of the sort of risk that can really come out of left field. I love Canadians. They're wonderful people. They're better people. We're like their drunk brother who's always, we like billy carter we're just one was going around going what's the fight anyway that's my canadian american joke but you're right geopolitical things are definitely a factor and i i kind of wonder where we're going i mean

certainly the the tariffs for the last four or five years were quite extraordinary to watch especially from the factor that americans end up more for stuff, and they don't seem to understand that. But I know I was watching the news of the readout of the call with the new administration with President Xi, and I guess there's a little bit of saber-allying going on where they're concerned about the geopolitical interests of Taiwan and Hong Kong and I think another peninsula and he's like standoff. So are a lot of manufacturers and stuff looking at what's going on? You've got the Uyghur situation.

I think that's the third thing I'm thinking of. The Uyghur situation, that's a concern over there and there could be some more political upheaval over that. Is that things that people need to consider and think about? Yes. And the weaker situation is a good example of the kind of supply chain risk that companies didn't even really think about. That's right. If you're a retailer of shirts, you probably sign a contract with some company in Cambodia or Bangladesh to make the shirts. And maybe where the fabric comes from that they use, you probably didn't look too much behind the fabric, but you may not have known where the cotton came from.

You may not have cared where the cotton came from. That's way back down your supply chain. And all of a sudden, people start paying attention to cotton from one part of China. And your company looks really bad because you're using this cotton that's said to be made, grown and picked with forced labor. And your company is getting plastered in the press with bad clips. And you need to do something about that. So that is an example of supply chain risk. Many companies were totally taken by surprise when this particular issue blew up, but it's not unusual that issues blow up. And when you've got a complicated supply chain, it's pretty difficult for headquarters of the company at the end of the chain,

the one that the consumers know, it's pretty difficult for that company to actually know where all the suppliers are and how all the suppliers do business because there's thousands and thousands of them yeah the the uh that it's really interesting i've seen a lot of people get surprised by that i still think some of that's fleshed out but yeah you don't want to be on the cover of the new york times i think nike i think nike and Martha Stewart are some of the brands. I mean, there's a lot of brands that have been called out sometimes by, you're not really who you say you are or forced labor or something. We employ forced labor here at the house.

We make the kids mow the lawn, and they don't like it. So I think they're striking right now. But it's certainly important and marketable skills. I'm thinking about shipping them off in a shipping container until they turn 18. Is that possible? Is that working? No. So Mark, what are these other aspects of the book we haven't touched on? Well, I do try to have an interesting discussion here of the environment and globalization, because many people are really torn up about that. There are people who will insist that local is environmentally better. And that's not always true. Okay. For example, if you are in a cold part of the world and you keep cattle,

you're going to have to keep those cattle in a heated barn for much of the year okay so that uses a lot of energy right you've got greenhouse gas emissions and and so forth so even though you may be close to your customers it might be actually environmentally better for the customers to get those products from farther away if there's a place where they can be produced in an environmentally sounder manner. So I think this is an area where people are really confused. I've also tried to call in the book attention to really the changing nature of manufacturing, because this is something that people really don't have their heads on straight. Everybody knows that the age of these enormous manufacturing plants

a la Henry Ford is past, but yet somehow they think that dealing with globalization is going to create a lot of production jobs. And that's what you hear, that they want people to find good paying production jobs for people whose education stopped at high school or at community college or something like that. The basic fact is that there are not likely to be a lot of manufacturing production jobs, regardless because of changes in manufacturing. It doesn't mean in any stretch

that manufacturing is a bad thing. I'm not saying that. What I am saying is that more and more of the process of physically producing goods is done by machines. And so there's a lot of manufacturing related work, but most of it is not happening on the factory floor with people who are running stamping presses or assembling products with a screwdriver or a wrench or whatever. That's not the way the world is working anymore. So I think people need to think a bit differently about manufacturing. A huge proportion of the value of manufacturing today is in services related to manufacturing. A huge proportion of the value in manufacturing today is in services

related to manufacturing. You've all opened the box from a certain company that's known as an electronics manufacturer, which says on it, designed in California, made in wherever, right? I don't know.

It's got like a whole list on the side. I'll mention the name. But the point is that this company makes a huge amount of money from its manufacturing process, but it actually doesn't manufacture these things itself. It hires somebody else to do that. It makes a lot of money by designing the products, engineering the products, marketing the products, retailing the products. And those are all things that are related to the manufacturing process, but yet they're not what people think of as

manufacturing. And that's really where the world is headed. Call people's attention to what's going on with electric vehicles. We've had a lot of news lately about EVs. Volkswagen is committed to a dozen varieties of EVs over the next few years. GM is all in for EVs. Ford is all in for EVs. Well, that's great, but EVs have fewer parts than conventional cars on the order of thousands of fewer parts, which means you need many fewer workers to build parts parts of this production process, like designing batteries, right, and making batteries. But on balance, a lot of manufacturing jobs are going to fall away that are in the automobile supply chain. And this is just the nature of technical progress.

Definitely is. We've had a lot of different authors on the show, and there's been several books where we've talked about how, as modern ages have evolved, different industrial points have evolved, and there's been automation that's improved, the cultural things that change, the economic things that change, the mindset of workers that are upset initially or resist the change, and then how they go through it and stuff. Would you speak to, there's a segment of the population that's out there that they don't really understand if there's a net-net of globalization that actually makes life better

for them. A lot of people are like, I want jobs here, but I want to go to Walmart and get really cheap goods. And you're like, wait, you can't have both. So do you want to speak to maybe, is globalization overall good? Is there a net net to it? And I'll save the second question for after that. There's some real benefits to globalization to international trade. And I will name three, one of which people won't like. Okay, globalization really has driven down prices a lot. We have had in goods markets very little inflation or no inflation. If you buy clothes in the United States, they're cheaper than they were 20 years ago.

Okay, so globalization leads to more competition and it forces down prices in that way. Globalization provides enormous consumer choice. It's now hard for younger people to realize that actually it's not that long ago that this time of year, you didn't have raspberries for breakfast, okay? You couldn't get raspberries for breakfast. You waited till raspberry season, right? Now, wherever you are in the world, you can get raspberries from Peru or Chile or California or someplace. And when you want raspberries, there are raspberries. That pertains to a whole lot of things. And so we've got enormous consumer choice that just did not formerly exist. So those are really a couple of the benefits of globalization.

The other benefit that I would point to, and I told you there's one people won't like, is that globalization and international trade force bad businesses out of business. And this is really important. Everybody hates to lose jobs jobs no question about it but one of the things that is bad for an economy is when you've got businesses that are inefficient that don't have modern products that don't have good research and they linger okay they're just taking resources and they're using capital that really ought to go into new kinds of activities. And globalization forces businesses either to modernize or to close up shop. And you want that pressure. You may not want them to be forced to close up shop quite as quickly as has happened in some cases. People need some time to adjust, but you don't want a situation in which the old companies just stay

and keep on doing what they're doing because that's a recipe for no improvement in living standards and for very poor economic growth. You do want companies to feel pressure to improve and to come up with new methods and new products, and globalization helps provide that pressure. There you go. I mean, I think eventually, I mean, there's probably a point of scale where as the developed world all comes basically online, it'd be quicker to get goods from almost everywhere. I mean, it depends on some sourcing fruits and vegetables, but basically once everyone gets kind of up in, I don't know, 10, 20, 30, 40 years. It'll be maybe easier and cheaper to source from everywhere. Well, I think we're seeing that in some parts of manufacturing,

wages are starting not to matter very much. So this whole notion that you're going to globalize because wages are lower somewhere else, if wages are really not a big deal in your production process, what's the point? You may be better off being close to your customers, particularly because you can change gears. If you're making something across the ocean and the needs change, your customers want something different. There's a new fashion. There's a new problem that they want to solve, whatever it is. It's going to take you a good while to get that product across the ocean in a shipping container. But if you've got domestic production, you may be able to supply a new product really quickly.

And that's worth something, right? That's money in the bank for a business. So I think that there's some reasons that businesses may have not to push globalization as they have in the past. Should some of the subsidies that they've offered, those shipmaking companies and people that are doing the shipping storage stuff, should maybe some of that a lot of them come from the governments of China and South Korea, which is where the vessels are made. They regard shipbuilding as a major industry. It employs a lot of people. It uses a lot of steel, which employs people. And so they're basically willing to pay much of the cost of ships.

And this is something that's been negotiated over internationally for many years, but the reality is closing a shipyard is politically painful, and these countries have chosen to keep their shipyards open and subsidize them. So that makes it artificially cheap to transport the goods, and I don't think there's a way around that. This question of subsidies for manufacturers, we've seen that there is almost a competition. Certainly, we have it within the United States, between states, and we have it between countries over who can give the juiciest subsidy, who can attract this company? And it's not just manufacturers. You recall that this little retailer out in Seattle had a competition a year or two ago for a second headquarters, as it called it. And you had cities all over the United States lining up to help subsidize the second headquarters.

What does that mean? Well, it may mean that the company has a cost advantage over other retailers in selling because part of its costs have been paid for by these subsidies. It's really hard to get states, cities, countries to stop doing that kind of stuff. Always point to a town and say, we our factory we got our office complex because of this subsidy and it's been great for our town it's kind of sad we've become a country where we have to bid to get business and jobs and if you don't you're screwed and it's kind of like the it's kind of like selling nfl stadiums or those billionaire nfl owners show up and they're like hey if you give us a bunch of money we we'll put our thing here. Otherwise, we're going down the block.

There's a good analogy. I'm in the wrong business, clearly. I need to get in the stadium business and the shipping business. Note to self. So do you see us further becoming in America a – do we just have to accept the fact that this is the new age of automation? This is the future coming. We've got to just bite the bullet, get through it. Do you see us becoming more of a service industry nation? And maybe our politicians need to be more honest

with us about what's happening, that those old manufacturing 80s type jobs working in the factory are really never coming back. And we need to start maybe seeding some other sort of things that are more white collar or service oriented or just more stuff where you're using your brain instead of your brawn. Well, I think we need to pay attention to a lot of these jobs that are related to manufacturing but don't occur on the factory floor. Do we have enough people who are studying engineering, for example, or the technical design aspects, or the kinds of work that is required to make manufactured goods

but doesn't actually involve physically putting them together? I think we're going to have more of that work in this country if we have the qualified people to do it. So yes, it's manufacturing work, but it's not your father's or your grandfather's manufacturing work. It's a different type of labor. More generally, I think what we're seeing is that international trade as a share in trade in goods, especially manufactured goods, is going to keep on declining as a share in trade in goods, especially manufactured goods, is going to keep on declining as a share of the world economy. It's not declining in absolute terms, at least not yet, but it's becoming less important in the world economy than it was five

or 10 years ago. Trade in services is becoming more important, and I think that's going to increase very much. And this applies to manufacturing too. A typical manufacturing company now might have research and design centers in two or three different countries. Who knows where that product is designed? Okay, between nine and five, maybe it was designed in Arizona. And then after quitting time in Arizona, maybe the design work was picked up in India and somebody there did some more of it. And then it went to France. And this is a much more typical pattern. You really can't identify necessarily what's an American product, a U.S. made product, because it involves these kinds of inputs. And if you think about it, what I just described to you is a form of trade in services.

It may not show up in the trade statistics, but what we're doing is trading industrial inputs, in this case, intellectual inputs, design ideas around the world. And we're seeing more and more of that. There are other kinds of services too. Probably many of the people who are listening today have spent a good part of their pandemic watching Netflix or its competitors. Well, if you're like me, you've seen Japanese TV shows on Netflix and Danish movies and all kinds of other things.

Every time you do that, you've just imported a service. Think about that as engaging in international trade, but that's what services trade is. And services trade is going great guns. And I think we're going to have more of it. So if we come back five years from now and say, what is globalization? I think we're going to have a different concept and we're going to think more about these aspects of moving services around the world and less about the goods. Yes, we'll still have a lot of goods trade, but container ships won't be what define globalization. Would it be better if politicians were more honest with us about that and said, you know, hey, look, here's how things are really working, folks.

We need to get our head around it. I think many politicians understand that. It's hard to deliver when you've got constituents. Their constituents are rightly concerned. They're worried about their jobs. They're worried about their town because a business closed up. And so the question then is, how do you as a politician, how do you help them out? And I think one thing we're seeing, for example, it's very, very encouraging, is that politicians, at least in the United States, are getting concerned about how do you get a broadband service into rural areas? Because if you want to be part of this service-oriented global economy, you need good internet service. You can't do it with a dial-up modem. And people haven't thought about

that as industrial promotion, but that's basically what it is. And if you want to have any hope that the people in these towns will tie into the globalized economy, you've got to provide them with good and cheap communications. That's really brilliant. I think there were some different programs that were supposed to accomplish that. And I read recently they failed incredibly. And hopefully we'll get back to that. But you're right. We've got to, at times like these that we go through, there have been upheaval or recessions, et cetera. Like we saw a lot of technical advances, new ideas.

I mean, social media like Twitter and kind of the revolution of Facebook and other different platforms that, you know, Arab Spring and different social changes that we've had came out of that 2008 sort of quandary of recession. And I know a lot of VCs right now in Silicon Valley are looking at the ideas that are going to come out of the squeezing that we've been through with this pandemic and different ways that we can make things better and improve stuff. But yeah, you're right. We need to, the collective energy, I've been an entrepreneur since I was 18 and being able to get that sort of stuff pumped into some of these communities that are out in desolate areas where they're not getting Wi-Fi,

they're not getting on the internet, we're losing their ability to contribute those ideas and potential businesses. And of course, we end up in situations where we're doing this economic or this political clawback where people are like, well, we need to get back to 1980 when I could build something with my hands. And somehow we've got to get people through that thing, maybe retrain them. We've done,

when we were doing events, there was a robotic event that we go to every year. I forget the name of it off the top of my head, but we got talking about how people can be retrained and they can make really good money running robots. And a lot of people think of automation as, well, the robot's going to steal my job. Well, it turns out there's a lot of work that has to go into programming a robot, maintaining a robot, repairing a robot and things of that nature. And it's actually a really unique skill because not a lot of kids have gone into the technical computer trades. I guess they've gone into video gaming and TikTok trades. So, Mark, it's been wonderful to have you on.

Is there anything we want to touch on before the book before we go out? Chris, I really appreciate you having me on. It's been a lot of fun. It's been an honor to have you on, sir. Give us your plugs so people can find you on the interwebs. I'm Mark Levinson. Again, that's mark with a C dot net. And do you want to plug all your other books?

So we get a shout out for the, all the, all the different books you have or titles. You'll find a lot on the internet about my book, the box, which is still pretty heavily read and is a story of innovation in industry. When I think it's interesting to people for that reason. Outside the Box, as I said, is a new book, and it's the one that takes a look at globalization. I did publish a couple of other books that people may be interested in. One is something called The Great A&P. And this is a story of a company that for about 40 years was the biggest retailer in the world. You may remember the A&P food stores. Your grandmother almost certainly remembers the A&P food stores.

At one point, there were 16,000 of them. And the book is about how the U.S. government and state governments tried to close A&P down because it was selling goods too cheaply and it was hurting ma and pa grocers. Wow. This is a story about this conflict between capitalism and community. We want competition. We want efficiency. We want improvements.

But we also want our local store. And how do we deal with that? So The Great A&P is in a second edition. It's in Amazon. And then I've got a book about the 1973 oil crisis and its aftermath. Oh, wow. Called An Extraordinary Time, in which I argue that the decline in productivity around the world in the 1970s was really associated with the political shift to the right in many countries, including the United States. So you can find all of those things online or in most cases at your local bookstore.

There you guys go. I remember that. I remember that time I grew up watching the cars in California. I don't think that was a hell of a time. So, guys, thank you very much, Mark, for spending some time with us, sharing your wonderful insight on the show. Thanks for being here today. Chris, it's been great fun. Thanks for having me.

Thank you very much, sir. Grab the book. Go out to your local bookstore. You can find that. You go on the Google machine. You say local bookstore. You can pull that up. Be sure to support them.

They are struggling right now, and they need all the help you can get. So support your local bookstore or wherever books are sold outside the box. How Globalization Ch changed from moving stuff to spreading ideas by mark levison check out his other books you can get on his website and on amazon thanks for tuning in go to youtube.com for just chris voss to see the video version of this thing it was really two good looking guys you're gonna have to go check it out it was like two brad pitts being on Go see it at youtube.com forward slash Chris Voss. Go to LinkedIn,

facebook.com forward slash the Chris Voss. There's tons of groups over there you can follow. Goodreads.com forward slash Chris Voss. You can follow what we're reading and reviewing over there. You can see live video broadcasts of this episode that will be going out from the pre-recorded end

on instagram and follow us over there under chris foss and the chris foss show.com be good wear your mask stay safe and we'll see you next time