molson

    7:44PM Apr 12, 2022

    Speakers:

    Razib Khan

    Molson Hart

    Keywords:

    china

    people

    amazon

    chinese

    vietnam

    money

    united states

    supply chain

    country

    walmart

    thinking

    india

    beijing

    vietnamese

    company

    manufacturing

    world

    terms

    debt

    pandemic

    This podcast is brought to you by the Albany Public Library main branch and the generosity of listeners like you. What is a podcast? God daddy, these people talk as much as you do! Razib Khan's Unsupervised Learning.

    Hey everybody. This is Razib Khan with the Unsupervised Learning podcast, and I am here with my friend Molson Hart. Molson, could you introduce yourself?

    What's up Raib? Yeah. So 11 years ago, I founded an educational e commerce focused toy company, which mostly sells on Amazon. I've testified before Congress about Amazon, which was kind of cool. Four years ago, I started a litigation financing company with my brother, which is still running. And I like chess, like thinking about supply chain, I'm looking forward to talking to you, man.

    Yeah. So I mean, supply chain is like, the main reason that I want to talk to you I do talk about, you know, economics every now and then, on this podcast, because I think it's important economics, trade, everything. It's important to our world. The last couple of years, we've had this issue with Corona Virus and the pandemic, and I think people have been thinking a lot more about supply chains. So are you pro Amazon or, or anti Amazon? Or is it whatever is useful for you? I'm just trying to get a sense because I know you use you have a lot of stuff on Amazon, you use Amazon, but then you're also involved in this litigation.

    So I would say that, you know, everyone is pro whatever works best for them. So I'm that, honestly. But when it comes to Amazon, I think it's an amazing, innovative company that could do things slightly different in a way that would be better for the people. We something Okay, so last year, we did, I might be forgetting our numbers, but something like $7 million on Amazon, our toy company. And that was like 93% of our total revenue. So we sell toys and toys are highly concentrated in terms of sales in the United States on Amazon. And so we're kind of like tied to the hip to the company. And they do some like unfortunate stuff. Periodically, they wrongly suspend your products, they increased prices quite a bit, which ended up getting passed to the consumer. They themselves sell counterfeit infringing products, they enable a situation where you have basically you have like, domestic American competition having to face Chinese competition, which in some ways can compete unfairly. I mean, that's kind of the fault of in some ways of like Congress, we don't really have like laws set up in order to set up a level playing field. But so I kind of have like a mixed viewpoint on Amazon. I just tried to be fair.

    Well, I mean, in a way, I think your view is probably the majority view at this point where people understand the limitations of Amazon. On the other hand, it's so convenient, you know, like cheap, convenient, turnkey. And so, you know, you have to kind of be proactive not to use Amazon, sometimes it's a default state. It's like going to Google, you know, when you shop online, I mean, shopping on Amazon is the number one thing. What do you think about the arguments out of curiosity of anti monopolists, like, say, Matt Stoller, and also another, a few people on the right, I mean, I don't know if that's gonna go anywhere, we're worried about Amazon's control over the supply chain, it's kind of like Walmart is a little is a little guy. I mean, I don't understand what's going on in the world.

    So I'm generally in disagreement with those, like, break up Amazon, ideas that people have, because like, I don't really have a good concept of how this would work. And I feel like Amazon is like a pretty well run company, especially for one of its size. And I don't think it's necessarily a good idea to replace a well run companies management with a poorly run organizations management, and that would be like the organization of a regulatory body in the United States or Congress. I don't think Amazon should be broken up. I do think that there are some narrow areas where they raise prices for consumers. And so it's my understanding. I'm not like a legal theorist or anything like that. But that was the kind of old standard for antitrust litigation legislation. I don't know what it would be like, okay, so if a company's too big, that's not a problem, unless they're raising prices for consumers. There are some things that they do that raise prices for consumers. And I think that's a problem and I think just the FTC or the states should just sue them for that. There's no have evidence out there. And besides Washington, DC, no one's really done that. And it's unclear to me why that is maybe because Amazon sends a lot of politicians money, and maybe people are scared. I don't know. So I don't think there's a need to break up Amazon, we just need to do kind of like a few lawsuits using the current laws to get them to effectively reduce prices for consumers.

    Yeah. So basically, what you're saying is, we already have the tools at our disposal, and we just need to use the tools. We don't need to do something totally novel and crazy.

    Yeah, that's actually exactly right. Okay.

    I mean, your your attitude towards Amazon, your relationship is very utilitarian. Which I you know, I think that that's pretty typical. It's not like people are like, you know, I shop at Amazon. And, you know, I mean, do you get a sense? I mean, do you get a sense from people out there? There's like strong brand loyalty? Because there's not right, I mean, Amazon's not a brand. It's just a distribution node, right.

    That's like a super interesting question. I think that Amazon has a brand when it comes to like the dependability of delivery. And generally people think the Amazon has the lowest prices on stuff. I think that brand is weakening over time. And pieces of people increasingly believe like, oh, Amazon is like a Chinese dumpster fire full of unsafe counterfeit product. So they have a brand, but it's kind of like a unique, like, retail or Walmart esque brand, as opposed to like an Apple brand or like a Gucci brand. If that makes sense.

    Yeah. I mean, because like, they sell so many things, but even, you know, back in I mean, there are you know, I remember people in, you know, back in my day, you know, they would shop at Target, not Walmart, because Target has a brand - it has a reputation of being a little bit more upmarket, it's where middle class to upper middle class go. And then Walmart is more lower middle class. I don't think Amazon has any of that, because it's just so like, you'd have I mean, maybe like, I mean, I have Amazon Prime, who has who has Amazon. I mean, I assume everyone has Amazon Prime, but maybe a lot of people don't, maybe a lot of people don't shop online. I mean, it may be it's kind of like online, internet, middle class people that I interact with, and go, do you know anything about those demographics?

    Yeah, so unless you're, like earning not that much money, you're probably an Amazon Prime member. Or if you're not someone in your household is or you're you're sharing a prime account with your friend or something like that. I don't know, off the top of my head. I don't know how many Prime members there are in the United States, but I think it's like over 100 million. So almost everyone who can afford it is an Amazon Prime member. And I think that's one of the reason why there's so many articles about Amazon and stuff like that, because, you know, the articles about the articles I get quoted in where I'm, you know, complaining about Amazon, let's say, are relevant to everyone, because so many people are prime members. So it's not just it's not just like some nitche legal discussion about, you know, what's a monopoly and what's not visa vie, big tech. So

    the Google machine says 112 million Amazon Prime members in 2019. I suspect that that's gone up considerably, just because of COVID 19. And the pandemic and the reliance on delivery. So I mean, 112 million, that's like one out of three Americans. That basically means the majority of households, I'm assuming.

    Yeah, I would think that that's the majority of households for sure. Because, you know, if you have Amazon Prime, your wife will hopefully doesn't have a separate Amazon Prime account. Yeah.

    I mean, what's going on with that? If your spouse has a separate Amazon Prime account, what did they buyin?

    A lot of dildos being sent to my house? I those were fake reviews.

    Yeah. Okay. So. So, you know, I guess the attitude toward Amazon is, it's like, in everything. So it's hard to separate it out as this distinct company. But why do you I mean, I feel like Walmart, for example, became kind of a boogeyman in like, say, the 2010 or 2000 or 2000s. Okay, there was a South Park episode about Walmart, it like comes into a town and like, destroys. Why does Amazon not experienced that quite that pop culture? You know, traction? What do you think? I mean, is my impression wrong? I just feel like Walmart was a big deal when it came to a town and destroyed the downtown. That was a thing. And I don't think people talk about Amazon in that way.

    I suspect I could be wrong, you know. We'll know after the show, but we're saying like the majority of American households are Amazon Prime customers. I don't think the majority of American households buy their groceries at Walmart. So it's maybe it was easier to kind of like demonize Walmart because it's like more of like a rural Midwestern phenomenon. Like, you know, before I my first interaction with Walmart as someone who grew up in Connecticut was not like me shopping at Walmart, it was like me hearing about this, like, huge the hem off company that I sell our toys to. And then, you know, I didn't really see any Walmart's before like, you know, I went to New Jersey. So I don't know it kind of depends on where you live in like Walmart's not very popular in like, in like LA right. It's not very popular in New York. So maybe that was one of the reasons why it was possible to do that. I'm not sure.

    Interesting. Well, um, so Amazon, you said it's like a dumpster? It's basically it's kind of a conduit for Chinese products. You said that right? Yeah. So let's let's talk about China. China's influence on Amazon, China's influence on wholesale. You know, in the last 20 years, we kind of took it for granted. And now we're talking about decoupling. And I've seen you talk about this on social media. How's it going? I mean, are we able to do it, we'll be able to do it is this even like a viable path?

    reminds me that like meme, like how it started : how it's going, and like you could craft the meme where it's like how it started. And you can show like, like a rich, well off American middle class, like everyone working in flour factories, and it's like how it started. It's like us receiving Chinese e packets. So, decoupling from China, I think that it's really hard to do that. It's really challenging. All the supply chains are over there. And we can talk about, like what that kind of means. But I do think it's something that the United States absolutely needs to do. If it wants to continue being, you know, maybe not the number one power in the world. I think that's a foregone conclusion at this point. But, you know, like, next time, there's a pandemic, we got to be able to get masks or ventilators and we got to have chips for our phone. And we should be able to still build planes and maybe weapons and stuff like that. We can't be wholly reliant on a foreign country for those things. So I do think that we need domestic supply chains for the more important goods that our country consumes

    the strategic industries,basically, you mean? Yeah. Like you say this as a person who is kind of a cog in the machine of globalization.

    Oh, yeah. I mean, sure.

    Yeah. I mean, how have you always thought this or was this something that came to you during Corona Virus?

    Um, no, I think I, I always thought about it. But then I always thought that that was something that we need. Basically, after I left China, like, I spent a lot of time in China. And I was like, whoa, okay. This country is like growing fast, very capable. And it like, you know, maybe not a military threat, but it poses some kind of threat to American hegemony. I don't know if I even said that word, right. But um, but then COVID came along, and it was like, wow, this is a crystal clear example of how we actually need to be able to make certain things ourselves, you can't just rely on all that stuff coming from China.

    Well, so. You know, you just mentioned China. Can you tell me when you were in China, where you were in China? Can you tell me a little bit of that experience, but I think a lot of Americans would be fascinated by that.

    Do you want to hear the whole of the first I was telling my inlaws this story last night, and they were just like blown away at how I first went to China?

    Yeah, let's let's talk about let's talk about it. I'm curious.

    So I had, I wanted to be an entrepreneur. I graduated from college, I got fired from a company. And I was like, I don't think I'm corporate. I'm not very good at this type of thing. Or maybe I didn't want to be whatever. So I started a business and it was like, Okay, I had an idea for a product. And I found factory in China. And it just wasn't moving very fast. So I asked like the richest dude, I knew who, who's a billionaire. I had a family friend who was billionaire. So I was like, Hey, how do I do this? Like, you know, I want to make something in China. I want to be successful like you are. And he was like Molson you got to go to China. And this was like, 2010 2011, and I didn't speak Chinese. At that time. It didn't know anything about China. So I told my mom, I was gonna go to China, and she's like, they're gonna cut your organs out. I don't care if this guy's a fucking billionaire. He's like, killing my son. Fuck that guy. But, so basically, I went to China anyway. And I, you know, I flew into Beijing and you know, I got scammed. I lost a lot of money. And it was just like, it was a really difficult time. You can't even imagine how tough it was to just be in China. And it wasn't like in a in a beaten path part of China. I the factory that I selected ended up being like half a kilometer from North Korea. So I was in this

    You Were in Manchuria?

    I was for sure I was in Manchuria. I was in Dandong, which is in is across this across the river from this North Korean city named like Sinuiju I don't speak Korean so I don't know how hey say it . And I learned a lot of hard lessons. So that's kind of been the foundation of, of my international thinking and experience.

    Wait how did you get how'd you get scammed like tell us - tell us that-

    So like, Alright, so I'm like 22-23 years old. I think I'm 23 years old. I arrived in the airport in Beijing. I don't speak Chinese at all. And I know that I need to go. I don't know if 1000 miles from Beijing to Dandong, the border with North Korea. And like, I don't have like a car. I don't have any kind of plan or anything like that. So I like went to one of like the passengers on the plane who spoke English. And I was like, hey, I need to go there. Like how do I go there? And she just kind of looked at me like with their eyes real open, like, Oh, dude, you are fucked. And so So then I got out of the airport and I hailed a cab, it said taxi on the top. And unbeknownst to me, I had booked a private taxi, not like a real cab. And so the private key tax, I was like, Hey, I just bring you to a hotel private taxi brings me to a construction site in the middle of Beijing. And the demands like a large amount of money. For me. It's like 3am. At this point, I haven't slept for a really long time because our flight got delayed for 16 hours as a 13 hour flight spent all that time in the airport drops. So I'm in a construction site. And he's like, Yeah, I want like $50, or whatever it was, it was a significant amount of money in China. And I knew I was getting scammed. And I was like, I don't know who's around me right now. So I just pay it get dropped off at a construction site. Then I go to then I basically walk around this construction site until I find a real cab real cab brings me to a hotel by this time. It's 4am. And I'm like, What's the point of even booking a hotel, it's 4am. So then I'm like, Oh, I'll go save money. So then I fell asleep in the lobby of the hotel. In this Chinese hotel, not like a fancy hotel like a Hanti hotel. It's like 20 $30 Night at the time. Then it's like 6am Wake up. And then I like figure out my way how to get to the Beijing central train station. And I'm just like trying to stay awake, because I haven't really been doing much sleeping and I'm waiting for a train to Pyongyang because the train that takes you to Dandong goes to Pyongyang. And I made it to Dandong, and I met up with my factory there. And then I ended up spending like kinda like wondering like two years in China on and off learn Chinese and whole thing.

    So that's, that's a pretty crazy story. So you went in 2000... in 2010? Was there still some cachet being an American being a white guy at that point? Or were they just kind of jaded?

    Oh, for sure. I'm in 2010-2011 Unless you were like in the Forerunner district of like Shanghai or Beijing or something like that. There was huge cachet to being a white person. And when I when I got on the train, it was like a sleeper set of sleeper car with like six beds on it. And like a single, it was tight. And you know, all the other Chinese people on the train that like came to see me because there was a white guy on the train going to Dandong. And people people would be like, Hey, can I take a photo with you? And then I'd say like, Alright, give me one. RMB and then people would give me one RMB not knowing that I was joking. And you know, people just want photos of me. They would like randomly touch me because my hair was their friend because I had a big nose it was I think, would they pull your nose. No one ever pulled my nose. But if the listeners can't see this, but my nose is pretty pullable, it's pretty big. I could go into the government buildings and Dandong and they'd like roll out like kind of like a fake red carpet. A few years later, I ended up getting shaken down by corrupt cops in Dandong and that's how I ended up leaving that city. But I just learned a lot of like hard, good lessons about life, and about how the way things are done in America isn't the way things are done in the rest of the world. And you know, I'm so happy that I did that stuff. It was great. But it was painful at the same time.

    All right, so what are the this is putting you on the spot? What are the top three things where it's different from America versus the rest of the world?

    Alright, so I'm going to come at it with like kind of a business perspective, because that's mostly what I was doing in China. The first thing is like, in the United States, we have a very strong concept of fairness. Chinese people don't really think that things are fair. They don't assume that things will be fair. There's not that assumption. In America, we have a very strong powerful rule of law, legal tradition. We're going to do things via contracts and whatever the contract says is what's going to be done and stuff like that. Whereas in China, things are driven much more by You know what can be done and relationships. So to put things in perspective, when I got shaken down by corrupt cops, I was thinking like an American. And I was like, I got angry in the police station, it wasn't fair that was being shaken down by corrupt cops, all I needed to do to solve that situation was to just call up my, my factory boss in that city and like, kind of like, basically get him to pay a bribe so that I wouldn't get shaken down by corrupt cops. But I was thinking like an American, I wasn't thinking like a, I wouldn't make that mistake today, I would know kind of wandering the road, when in Rome do as the Romans do, so long as you don't get in trouble with the Foreign Corrupt Practices Act. There all sorts of like major, like, kind of cultural differences in terms of thinking, I know that, like, you know, your podcast talks a lot about like woke ism and stuff like that. And that doesn't exist over there. Like the concept that like, it's kind of, like, you know, in a sense, you could say that Chinese people are, are considerably more racist than Americans. And like, you know, the idea that like black people are,

    they can't be racist, because they're people of color. Racism, race equals power, and only white people have power. But anyways, go on.

    Alright, so um, yeah, so it's just different a whole bunch of different ways. And I learned like a ton from the Chinese, the Chinese are like fast in the way in which they plan Americans like over plan things. They do too many meetings, Chinese just make fast decisions. And if the decision is wrong, they go back. They're like, Oh, that's a botch. We'll fix it. And so it was an amazing learning experience for me. And then, you know, you've even though I'm white, I was still able to learn from those terrible people of color, obviously being sarcastic now,

    yeah, okay. Yeah, I don't want that to be misquoted on some, you know. So, so you learned a lot from the Chinese if it sounds like you have kind of kind of a love hate relationship with maybe the way Chinese do business. Like they they pivot fast, they operate fast, but it's really corrupt.

    Well, the government at that time was quite corrupt. It's my understanding that they've cleaned it up quite a bit since then, I wouldn't really say that Chinese business today is corrupt Chinese businesses, just different from business in the United States. There are some things in American companies do better than Chinese companies, there are some things that Chinese companies do better than American companies. What I tried to do is I just tried to take the best of both worlds, and like roll it into our companies.

    Okay, so Okay, so I mean, you're trying to I mean, this was like, classic globalization talk. But earlier, you know, we were talking about, you know, decoupling. So do you think the issue here is that we are in an era of great power competition, and we just have to accept it, like the neoliberal fantasies of the late 20th century. You know, just kind of this like global free trade zone is gone. Like, I mean, what is your I mean, as someone who works in trade, you know, is engaged in, you're a capitalist, you engage in arbitrage, right?

    Yeah, sure. But I'm a capitalist. I mean, I'm hopefully not hopefully, I mean, we definitely do good things for the world. I mean, we're selling educational toys. We're like improving children's spatial thinking, improving their vocabularies through the stories that come with our plush animals. It's real. But yeah, I'm a capitalist or my company's capitalist. Yeah, I think we're back in great power competition. I think it's possible, you know, kind of like USSR versus United States. We had like satellite nations and stuff like that just seems like we're right back to that, you know, where, you know, maybe one of the ways that we could decouple from China, I do think there are a lot of things that need to be manufactured in China, excuse me, in the United States, like, you know, like the chips and the masks and stuff like that. But maybe some of the lower end stuff we could decouple from China by making those things in Vietnam, even those things in Indonesia and making them in Mexico. And in a sense, those countries maybe become like economic in this new Cold War. client states, you know, China, does it with its allies and North Korea, Cambodia. I don't know Pakistan would be another good example.

    It sounds it sounds like you're just you're you're a realist about these sorts of things. You're a realist. That's, you know, I mean, trying to make money in the world. But I mean, that's how it's always bad, right?

    Yeah. I mean, like, if you're not a realist, and if you're not practical, and if you can't change your mind when the facts change in the long run, you're not going to make any money. So

    what's what's what's been? What's in terms of reality? What's been the biggest surprise to you about COVID-19 and its impact on business?

    The first thing that comes to my mind is I never thought that there would be such like a huge printing of money. Like, I never thought that we wouldn't let bad companies fail. It's just like every, every, every company was saved, so much money went out. Like, it was amazing. That was the number one most impressive thing to me. There was PPP money, there's employee retention credits, there's idle loans, so much money was dumped on businesses of all sizes. It it's just bizarre to me.

    So I mean, you think this is a bad thing? From what I can tell about your tone? What do you think?

    Yeah, I don't think I don't think it's good when we, you know, companies are, you can almost take like an evolutionary perspective, like, you know, species that are not suited for the current environment should go extinct. And, like, I don't think we should be propping up businesses that shouldn't that no longer meet, like current demand. And then going back to what you kind of asked me earlier, something or I forget what it was, but like, you know, part of it was self interest, too. We didn't take any PPP money, which I'm, like, proud of. But like I, we ran our company very conservatively, we were ready for a black swan event, so to speak. And so it was like really frustrating for me to run the business conservatively, not be super indebted. And then watch all the people who were super indebted, who weren't running their businesses conservatively, effectively get bailed out, when a pandemic to me it's not even a Black Swan. I mean, it happens somewhat regularly, if you actually like, look at the history, so that that's the way I feel about it.

    Yeah. And you're not the only one who does that. So I mean, you know, let's, you know, I want to jump back back to globalization and Vietnam, because you said something about Vietnam, I think online about moving the supply chain and like, and what's your experience been Vietnam, and Vietnam in a way is Little China. You know, they're really anti Chinese right now, just because nationalism, but culturally, and in terms of their, you know, human capital inputs, they're not that far from China, they're behind in terms of their development, but it's kind of a controlled experiment, but they're about like, you know, their population is less than 10% of China's I think, so. Tell us about the difference. And like, you know, we're talking like a nation of like, about 100 million, I think. So. It's not a small nation, but still.

    So in like, 2014 2015, for two reasons. We shifted some of our supply chain from China at the time, it was like, basically 100%, China, and we were buying some things in the United States at that time. And going back to being pragmatic I ... I thought that the United States and China were on some sort of collision course. So it made sense to have some of our supply chain outside of China. That was the first reason why we went to Vietnam. The second reason why we went to Vietnam in terms of shifting our supply chain, because I just thought it would be really interesting. And I was, like, internationally oriented. And I was like, Oh, cool. Let's buy things from Vietnam. And so the way we did it is my wife and I, we just like, flew into Ho Chi Minh. And it was like, it's totally different sourcing suppliers in Vietnam versus China. And basically, we found I had a friend of Vietnam who had a friend and I, she and I hopped on the backs of like, two motor scooters, and we went into this industrial park. And we basically like knocked on the door of these factories that were, you know, selling goods that were relevant to what we were doing at the time. And they didn't really take us seriously because we were just like, two kids with backpacks. Wearing shorts. It was kind of like bizarre, but then we started ordering from Vietnam, and we've been ordering from Vietnam since December, Christmas, 2015. Through today, it's different from China in a lot of ways.

    And let's talk about how it's different, like tell me like, I mean, obviously, scale is going to be somewhat different. You know, it's a, I don't wanna say younger, but it's an economy earlier in the pipeline of its development. Like I mean, what are the biggest takeaways upsides downsides?

    You are? Right? It's, it's actually a younger country. Alright, so Chinese supply chain is superior to Vietnamx. So what does that mean? That means if you need like some random part, because you're building headphones or something like that, you're gonna get like, you're gonna have 15 suppliers in China within, you know, driving distance or something like that, right. In Vietnam, that part may need to be imported from China. So supply chain is better in in China than it is in Vietnam. Labor prices in Vietnam are lower than they are in China. However, you know, according to my suppliers who've had factories in China and Vietnam, like people work harder in China than they do in Vietnam, people in Vietnam kind of like want to live a kind of easier life. Not saying that Vietnamese people don't work hard. Not saying people in Vietnam don't work hard. I mean, they're just being compared to maybe some of the hardest working people on the entire planet like Chinese factory workers. Respect for for that. Also, the workers are a little bit less efficient in the sense that they don't have the same skill level as Chinese workers because they just haven't been doing it as long. So those are some pretty major differences. So kind of like lower labor compensates for other issues. And so some things are appropriate to make in Vietnam, and some things are appropriate to make in China. And you kind of just pick and choose and tariffs come into that. And this is a business decision.

    Either the Vietnamese positioning themselves explicitly as an alternative to China to foreign capital.

    Yes, I Well, I've never seen like a document from like, from Vietnam, like I have from India or something like that, where they're like making Vietnam like India and Modi does, like made in India. But yeah, I think that's certainly their, their desire. But as you said, right, less than a 10th of the population of China. So you can't just move like 1.4 billion people's worth of supply chain to 100 million people's worth of supply chain and like, way less area, it just, it doesn't work. I was speaking to my father in law, who I don't do business with, but the he's Taiwanese, he knows a lot about this stuff. And he says, If any country is going to be able to China to replace China has to be India, because you know, the landmass the size of the country, the number of people China is is a force in manufacturing and supply chain, you know, a whole host of ways. You can't just be like, ah, yeah, Vietnam has got this.

    You know, this isn't part of the outline. But you brought up India, I'm curious, like, my understanding of India, just as an outsider never done business, human capital is way lower, it's way less efficient, there's more bureaucracy. It's just not set up for this sort of like labor intensive manufacturing or anything like that. So I mean, that just seems like, I mean, at least for the foreseeable future, that's a non starter like we're stuck with China then.

    Um, so I don't know, I know a lot more about Vietnam, a lot more about China than I do about India. But I know a fair I've never been to India. So I'm basically talking out of my ass at this point. I don't, I think it's India has a completely different way of governing their country, versus China and Vietnam, and it's probably less efficient. Right? democracy is messy. Whatever, the Communist Party of China and Vietnam, however, that works seems to be pretty efficient. There, I think it's unclear to me, but like the human capital in India for kind of like not manufacturing strikes me is extremely high. I'm like blown away by the capability of people in that country to do things like legal work, and in writing, and maybe even software development, which is an area that I have less expertise in. And when it comes to manufacturing, I don't have as much experience there. But definitely my impression is it's significantly lower their human development and manufacturing is significantly lower in India than it is in China. However, I mean, you know, China's human development and manufacturing 20 years ago, also used to suck, or 30 years ago used to be bad. And, you know, there are smart people in any other smart people in China. And I'm feel like they can probably figure it out, and they'll get better over time.

    Well, I mean, you had, you know, I'm just fascinated that you're a guy who like, flew into China in 2010. So you've seen these massive changes? Like, can you feel the Chinese have upskilled? A lot? They've just gotten more aware of things, or I mean, what is your perception of that over the last decade?

    They've certainly gotten more aware of things, but relative to like the Vietnamese or the Indians, their awareness of what thing what what's happening in the United States, is not as large or not as great because I mean, you still have the firewall and you have a huge language barrier, especially China versus India, when it comes to, like, you know, English is really tough for Chinese people to learn English is also tough for Vietnamese people to learn, but the Vietnamese at least have access to Facebook and stuff like that. It's unclear to me how exactly, basically there's a there's a huge tradition of English in India, and it's my understanding, it's also the lingua franca a lot of the time, so it's easier for them to understand what's going outside going on in the outside world.

    Yeah, I mean, there are there are Indian people I knew know who were raised with English as their first language. And their parents aren't even of different ethnicities. They can speak Hindi but because of their schooling and everything like that, they grew up in They grew up in Delhi, they went to an international school and English is their first language. So they're more fluent in it than they are in Hindi. And these are people were born and raised in India, obviously something like that. Never happens in China in the mainland, right?

    Yeah. I've never, ever once heard of that.

    Yeah. So I mean, basically what you're saying is China's this manufacturing behemoth economic superpower, but it's kind of culturally insulated. And that might cause some issues in the long run.

    Or not. I mean, like, like, I don't know, it's kind of it's interesting. It's like, if you're raising children, do you want your kids to watch Modern Disney films? Or would you rather they read I don't know, likeHemingway's and I don't know, something. Like, there are good and bad things. about Chinese culture, there are good things about Chinese culture, things that are better than American culture, to my mind, like, you know, like, for example, in America, we don't really take care of our elders, like Chinese people take care of their elders, Indian people seem to take care of their elders pretty well. And maybe that's not something I'd want my Chinese or Indian kids whatever to be exposed to, I'd want them to take care of their elders. So it's, it's a mixed bag.

    Yeah. Well, let's, let's pivot back to America. Just looking at the notes of of our conversation topics. You have some thoughts. And so I talked to, I talked to Carl Smith, who's an economist about debt crisis and whatnot, recently. And so I want to, I want to know your opinion about this whole, like, we're printing money, we're taking on debt, the government's becoming indebted. And we're kind of just like flooding the zone with liquidity, I guess, in this country. And I asked Carl, if he thought that we were going to face a debt crisis in this decade, and you know, no longer be the world's reserve currency. And he was skeptical, because he's like, where else? Are they gonna put his put their money? Like, you know, and so what do you think about this?

    Yeah, I think he's, he's right, that there is no suitable replacement for the US dollar at this time. And it's my understanding that a lot of the alternative currencies like the euro, or maybe even like the yen, or the RMB, or the Australian Canadian dollar, these these economies are also using fiat currency, and they too can print their own money. So it's like swapping one bad fiat currency for another. And I'm not sure bitcoin is ready for primetime and Bitcoin seems like it's about to get regulated. And Bitcoin isn't also it's bitcoin is not suitable for going to a convenience store and buying a bag of chips, because of the amount of time it takes to for that Bitcoin transaction transaction to clear and how expensive it is to do a Bitcoin transaction. With that said, I think it's it's only a matter of time before the US dollar faces a huge crisis in confidence. And I think our ability to effectively print as much money as we want, without any kind of consequences, besides the small inflation that we've seen so far, is an enormous different, like problem for our nation. And it leads to what I consider bad policies like Iraq, like, you know, I'm not sure we would have gone to Iraq had we had to finance that with like US citizen purchased government bonds, as opposed to, you know, just being able to raise money so easily using US Treasuries, and then a lot of the corporate bailouts that we're seeing in the past like year and a half. We're, you know, that is sustained and made possible by

    the Fed. Yeah. So you're kind of alluding to some things that a lot of listeners will know about, but can you just like give a short like, like just an intro of like, what you're alluding to when it comes to the debt, you know, the debt financed spending that we have in this country? Basically, what you're saying is, we're not the United States citizenry is not paying the taxes for the expenditure that we're doing like these foreign interventions, these foreign wars, the bailouts, everything like that. We're putting it on the credit card, right? That's what you're saying.

    Yeah, that is exactly right. So you know, I'm not the most qualified person to do this. But I can take a stab at just like the autumns razor of how that works. So governments generally, in order to take actions they need money. Money comes from tax revenues. Another place that it comes from is by selling government debt. The United States Federal Reserve, can purchase United States debt and does so with money that they print, and they kind of seem to have an unlimited capacity to purchase this debt. So whenever we need to raise funds, the US government just issues more debt. And we're about to see another raising of the debt ceiling fight in Congress. And so once the debt ceiling is raised, we issue new debt, the Federal Reserve purchases, that debt using money that is effectively printed with the idea that they're creating sustainable, low inflation and jobs. And the cycle continues until basically, we realize that either the debt won't be paid back, or it will be paid back with devalued, inflated US dollars. And what we're seeing right now, with this inflation, the CPI that's coming in at 5%, five and a half percent, and I think is going to continue, and one of the reasons why I think it's going to continue is because I have visibility into where prices are going because we purchase goods overseas and stuff like that. So this inflation is happening, and it may at some point create a crisis in confidence in US debt, because if inflation is at five and a half percent, and you get point 3% on your US debt, when you buy US debt, you're giving the federal government $100. And you're getting 95. back later, which is not a good financial decision.

    Yeah, I mean, sometimes, you know, I think people say that they put money in cash and in, you know, American stuff, just because that's the safest place. But there's a cost for that, right? There's, there's a cost to doing that. And right now, people are willing to absorb that cost. And like, maybe someday they won't be willing to absorb that cost. That's like something I think Americans don't even. They don't, they don't grok like they don't like actually, like understand it deeply, because we've been at the center of the world for so long. So earlier in this conversation, you basically said something to the effect of China will be the number one power in the world just implicitly. Like, I mean, did I hear you, right?

    Yeah, I think that's true.

    And like, you know, a lot of people believe this. But you know, you've worked with China, you've worked with Chinese people. They do have issues with their demographics, with their aging population and other things. So I mean, what do you what do you think about that? They're still not, they're still like, upper middle income country. I mean, there's some areas that are developed, but large areas are still super poor.

    I mean, large areas of the United States are also super poor, especially I think, if you look at it at like a purchasing parity basis, or something like that. Yeah. Your answer is, I don't really know. I mean, a lot of people have been saying that they have demographic issues, and they do have demographic issues. And the United States also has its own demographic issues in a kind of different way. And I guess Xi Jinping is like making a lot of changes in order to encourage the Chinese people to have more kids. And remember, I mean, the Communist Party was pretty successful in getting them to have fewer kids. So maybe they can make another miracle happen. i It's unclear to me. It's such a dynamic, complex situation where Okay, automation is happening. So how many people do you really need? Artificial Intelligence is happening? So how many people really do you need? Maybe you just need the knowledge in order to control these things, in order to be a powerful country. And then I think that Balaji, I don't even know how to say his name Balaji, Balaji, , he said something that was pretty interesting. He's like, you know, the future of like, Inter National conflict isn't like human soldiers versus human soldiers. It's like drones. And we kind of saw like, a little glimpse into the future of that, and that like Azerbaijan versus Armenia War, where it was like drone on drone combat. And so like, how many people do you really need? And like, also worth noting, you know, we have like, a quarter. There's many Chinese actually, as many Americans as they have Chinese, so like, Wait, they're gonna run out of people? It's a little confusing to me.

    I think the issue is, in terms of their demographic curves, you know, they have like more older people to support and fewer in younger people to support them. You know, I'm actually like, basically, you know, I'm old enough to know, and remember when China was going to collapse in the year 2000. So I've kind of started ignoring those, like, you know, predictions of Chinese collapse, because they just seem to happen every year. And sometimes it's frankly hopeful wishing or it's just people just hopeful that China will not be what it looks like. It's gonna be so yeah, I'm kind of with you. It's it seems a little bit of a cope. That's the way I would say it's a little bit of an American cope.

    Yeah, I think so too. I mean, I think I was looking at a tweet the other day of that guy named Gordon Chang who's like, famous for predicting the demise of China every year and it was like March 15 2020. And he tweeted out like half finally you know, China is collapse. lapsing like, you know, like I always said it would. And then like America effectively proceeded to collapse. China managed to navigate the COVID crisis pretty well. So, yeah, I don't know what's gonna happen, but I, I suspect that they'll figure out the their demographic issues. And if you look at like Japan, like Japan is like, pretty solid country, you go there like they do things pretty well. And you know, they don't have they have 1/14 the number of people as China's so maybe China will manage to get

    through it wasn't what do you think about? You know, let's, let's, let's bring it home. What do you think about the United States? What do you think? I mean, you made your life here. And you know, you're you're gonna be a dad soon? I think I can divulge that. Like, do you see yourself growing old in this country? Do you see your family's future in this country? Does this country have a future? Do you believe in it?

    I think the United States absolutely has a future it has a very bright future. But relative like the level of hegemony or like dominance, we had in like the 1990s, where we were just like, 10 times stronger than the next strongest country like that, that is gone. And like, kind of like post World War Two, the West and like Americans have like grown up with this idea that like you can just like you'll be born and things will always be better, and you won't need to move and you won't need to adapt or anything like that. And I think that that is that's passed now. And I think that the fall of the US dollar isn't going to bring down the United States or anything like that. It'll certainly be painful, and it'll bring down Americans cost of living, but it's not going to be the end of the United States. I think we'll figure it out. And then the last thing, I guess, I would say is the I mean, I'm, you know, I care about this country, it's where I was born has given me a tremendous amount. But at the same time, I think you kind of need to be flexible, and and logical about what's best for you and your family. Whether it's moving states, right, like, you know, we used to be in New York, we moved to Texas, or even moving countries. I mean, sometimes you just have to do it kind of like, you know, Jews in Poland, they came to the United States, they weren't thinking like, Oh, we got to stay in Poland, this is, you know, Poland has been good to us or something like that. Not equating our current situation to the holocaust or anything like that. But I'm basically just saying that you need to be flexible about what country is the best place for you to live?

    Yeah. So I guess the last question, I'm gonna ask you the last question, I'm kind of freaked out about just in time supply chains. I think that they're not like super robust. But, you know, I'm not like a specialist in this. I don't work with supply chains. I just, I'm a consumer. So what do you think about some people like me, who are just worried that we're not anti fragile, we don't have a robust system, that we're trying to squeeze too many efficiencies and get get too much cheapness out of the system?

    Um, first, sure, we do not have enough duplicates. I'm not sure if we, for certain supply chains, there's not enough duplication in the system, in order for us to continuously receive goods, no matter what happens. So as an example, if like, someone blew up the Los Angeles port in the United States, that would cause a very major disruption of consumer goods in the United States, because that's the majority of where consumer goods come in from, and they would actually be extremely difficult for places like in Chicago, and the Midwest actually get their goods because that Los Angeles port, believe it or not, is how goods get to Chicago when they're coming from Asia. That's like, that's like one of the most complicated questions in business, which is like, how much do you want to be just in time versus how much inventory Do you want to have? And I struggle with that question myself. And to be honest, I don't know what the right answer is. It depends.

    Yeah, I mean, it probably depends on that. I mean, I'm not worried, for example, about being just in time for stuff from Canada. You know, I trust the Canadian system. I'm not worried that Canada will, quote cut us off ever. But you know, if we have something that we're relying on from Saudi Arabia or China, I think, okay, like there's some non economic considerations there in terms of I guess, it isn't the term political economy that I worry about. And so I think people need to be more conscious of that, you know, whatever we can, we can live on we can live on on rice and bread and other things, but there are certain types of certain class of goods, where I'm thinking like, okay, that makes me if you have a knick knack, you know, from China, whatever, you know, we don't need to be anti fragile against that people will deal but if it's like, you know, silicon It's like chips from Taiwan. That were everyone's relying on just one supplier, because they're the only ones that have everything together. Like, that's a huge vulnerability for the whole world. Even though it's efficient, efficient, the short and medium term, but if there's a shock to that, to that one plant, what if, what if? What if there's a massive earthquake in Taiwain? You know, and people have other things to deal with for like a month, you know, massive earthquake in Taipei, it's on the Pacific Rim. And like the Taiwanese, just like, you know, their manufacturing degrades for like, just a month. Well, I mean, they got to do what they got to do. But then the rest of the world is kind of like just like stuck holding stuck holding the bag. Like, we don't think about these, I think like these. I mean, they're not even Black Swan, because like, you know that it's going to happen, you know, the natural disasters are going to happen in certain locations, right? It's just over over a period of time. And so if that's not part of your model, then why not like, is the system being inefficient? I mean, you were saying, you guys were conservative, and you could like, handle the pandemic. But the other businesses were conservative, but the government bailed them out. So why, why should you? I mean, who's the sucker here? You know?

    Um, yeah, I agree with everything you just said. So they are building a TSMC plant in Arizona, nothing like the amount of TMC, TSMC plants are in Taiwan, I agree that we need to duplicate the supply chain of important goods in the United States. And to your point about inefficiency, like insurance, like like insuring your home against the fire when a fire doesn't happen is inefficient. But most homes carry fire and flood insurance anyway. And I think that we should do something equivalent for the for the important goods in our lives. What was your last question?

    No, I mean, I think I think that was the that was the last question in terms of I just was wondering your opinion about Justin time, and I kind of offered my opinion. I think, you know, you already answered your opinion is like, it depends. You know, it's just you gotta you gotta, you gotta consider like, if it's just in time for a Knick Knack or a non essential, good weed, we need to think of what's essential, what's important, and not think of like the consumer surplus as just like one amorphous mass.

    Yeah, I agree with you completely. It's my myopic to do that.

    All right. Molson. I really appreciate your insights as a business person. You know, people on social media can follow Molson Hart, you know, it's a fun account. And it's a different perspective than someone like me like you know, I don't deal with a deal with entrepreneurialism, well, actually, I do but in a different way in a different way. Not not not in your scale. You know what I'm saying? So it was great talking to you and have a good day man.

    Likewise it was nice to be with you Razib.

    Is this podcast for kids? This is my favorite podcast