Say No to Ferrets: The NAFTA Myth and the Dresden Reality

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Well, Dan, I keep hearing about ferrets in the news and I think there's a lot ofmisleading information out there and I thought we should take some time to clear it up.

(00:07):
So first off ferrets are not rodents.
They're mustelids.
That means that they're related to weasels, otters and other animals that are synonymouswith mischievousness.
Males are called Hobbs.
Females are jills.
A spayed female is a sprite and a neutered male is a gib.
A vasectomized male is a goblet.

(00:27):
Didn't know that.
The name ferret comes from the Latin word ferritus.
You know what ferritus means, Dan?
I don't.
It means little thief.
This is appropriate.
This is appropriate because ferrets are natural-born smugglers.
They hoard random objects like keys, socks, and dignity.

(00:47):
Ferrets were first domesticated initially and initially used for hunting, but they laterbecame useful in industrial applications as electricians.
They would tie wires to their backs and shoot them down tubes through airplanes to helpwire airplanes up.
Though later that was...
that was automated and since the ferret really doesn't serve a purpose and really justshouldn't exist.

(01:10):
think we've all come to this agreement that we just don't need ferrets and let's justleave it at
Advice, the show where we try to make sense of business, investing, and life with justenough experience to get ourselves in trouble.
I'm Sean and he's Dan.
We both started in different careers, Dan in IT, climbing the ranks to Chief TechnologyOfficer in New York, and me in manufacturing, managing production quality across three

(01:35):
countries.
At some point, we both decided we didn't know enough.
So we went back to school for our MBAs.
Me at Columbia Business School and Sean at the University of Houston, downtown.
And after all that, we figured the best way to share what we've learned and what we'restill figuring out is to start a podcast.
So if you like deep dives into decision-making, business strategy, and the occasionalhalf-baked investing theory,

(01:59):
Or just enjoy listening to two guys challenge each other's ideas and occasionally admitwhen we're wrong?
You're in the right place.
Welcome to Unqualified Advice.
Welcome back to Unqualified Advice.
Welcome.
How are you doing today, Dan?
I'm good.
We're getting a quick little breather.

(02:22):
We had like an 85 degree day yesterday, full sun.
I got a little bit of a sunburn on my neck.
It's not feeling like summers are on the corner.
Right before, I think we're supposed to get snow on Easter.
So it's whiplash.
Yeah.
Yeah.
To put a little bit of a timestamp on this, for everybody listening later, we're recordingon Sunday, April 13th, around 9 AM.
we may say some stuff that may be invalidated by the time this comes out or by the timethe conversation is over, the way things are going.

(02:47):
So just, just a little context.
yeah, we've had a little, little break in our heat here too.
we were up in the high eighties and not quite so high eighties now.
but it'll be back.
Yeah.
Yeah.
Well, we had liberation day and then we had what?
Unliberation day?
What do we call this?

(03:08):
we've had liberation day and then a-
I mean, a slow walking back of liberation day.
don't know.
Like I'm still so confused.
I guess not.
Well, everybody's still getting a tariff.

(03:29):
I still say that even the base case right now is that everybody gets backed off to a 10 %tariff is what I kind of feel like, which is still pretty hard in the paint, but not from
the absolutely absurd, insane numbers that were initially published on liberation day.
to bankrupt lots of SMBs and we're going to make unemployment spike.
Like that's how I felt about some of those initial numbers.

(03:51):
Yes.
It's a
Damn it.
You know, the 10 year drops and then guess what?
What is it like 4.88 or something else?
yeah, precisely.
So what, what, what we've basically created is in the minds of the world, the U S is agiant credit risk, essentially with all of this is, is how this is, I'm reading the

(04:17):
numbers in the data, right?
so when you threat default, essentially, and what, what was, was to me just so surprisingabout it is the numbers that were initially put out were just absolutely.
crippling.
don't understand like his, his point of view is, you know, punch them in the face and thenact big and get concessions.

(04:44):
Um, but so far he's acted big and I'm sure there've been calls and he has heard somerumblings of things that he wants to have happen, but also there's not been a lot publicly
stated about what any of the concessions he's, he's receiving are for stepping back fromhis initial, uh, his initial move.
Um,
And, know, maybe the 90 day pause generally overall was to allow that, that to kind of tobrew.

(05:08):
And I think the reaction in the market falling, you know, what was it?
total of 15 % over a couple of days, the S and P, dipped, you know, I think thatinitially, He had to have seen that coming.
Right.
And
Yeah, I think so.

(05:28):
I mean, for as much as people make fun of him and his admin, don't, you know, there's alevel of intelligence that is in there.
you know that this is gonna make the market drop.
Like, that doesn't take a very high bar of intelligence to figure out.
Yes, exactly.

(05:49):
And then the back and forth wavering is truly, it makes it very hard to understand what'sgoing to be going on and how to plan long-term on any of this, right?
well, mean, whether, whether there's a true grownup in the room or not, did they expectthe market to, to tank as hard, as hard as it has.

(06:15):
I don't understand how they wouldn't understand the market was going to tank hard.
And I'm honestly was surprised it didn't tank harder in some ways because yeah, there'sstill some people that were smart enough to say, he's gonna back off of this in pretty
quick that I think kind of held it to where it did.

(06:37):
buying some call options because I was like this, it's all volatility and whiplash, right?
And he really loves making his friends money.
So he's going to like throw in some phone calls and say like, you know, put $8 million ofoptions on the table.
I'm going to spike the ball and then everyone gets rich and well, not everyone, thepeople, those particular people that got the phone calls get rich and then he can go back

(07:01):
to negotiating.
So it's just like take chips off the table as you go.
Mm hmm.
I yeah, so I think.
It's a, it's going to be a good time to, when you see a dip, you know, 10 % put somethingon and then let, let some volatility transpire and then take some stuff off, right?

(07:23):
And do a lot of that this year.
If you want to, uh, uh, follow along, uh, play along at home, so to speak.
Um, you can also get yourself like an unusual whales account and try to see where the.
volume is or the chain, yeah.
yeah, on on the call on the call options.
It looked like there was just a huge bunch of Apple options bought, you know, with the 12within 12 to 24 hours right before the announcement that they were basically going be

(07:52):
exempted from the tariffs.
just like hundreds of millions of dollars, I believe were made on that.
So yeah, so who knows what is definitely a big question in all of this, right?
And is any of the stuff that's going on out here in the, you know, how much of it ischarade and masking for deeper corruption and problems of using these institutions as

(08:24):
playthings to generate
cash and revenue for the insiders.
Do you really think like that, and talking about like starting point and destination A andB has anything to do with grift and corruption, or is it just that the journey from A to B
is so rife with opportunity, but it's like, well, until we get there, we're gonna, we'regonna play ball.

(08:46):
That's an interesting insight.
It's like, because there's part of me that wants to be like, well, I mean, I there's somepart of me that's like, they want to go to the place they say they want to go.
But along the way, let's get some big gulps.
I think it's...

(09:07):
It's definitely so rife with the opportunity, as you say, like, cause we're, well, let'sfirst of, let's, know, before we go into, into the path, let's talk about where is it a to
B that we, we, we think that they want to go Dan.
So we're currently in a, a, a system of, Breton, you know, post Breton woods, really posta little post Breton woods.

(09:29):
Yeah, because the gold.
Bretton Woods was really kind of dissolved with the gold standard by Nixon's.
But we've kind of came into a financialized version of the Bretton Woods system.
great, yeah, think fundamentally it's the same thing, it's just a little tweak.
Yeah, where instead of being backed by gold, it's backed by the, know, USD being theworld's reserve currency.

(09:50):
which in some ways puts even a steeper or like more weight on the basis of Bretton Woods,which is we will keep trade lanes open and if anyone shuts them, we will use our massifier
power against them.
Yes, exactly.
But yeah, so the I think a lot of the intent and spirit of Bretton Woods being maintained,but with a different financialized system where it allows more bubbles to kind of happen

(10:20):
in certain ways and allows allows more, you know, hypothecation, hypothecation of assetswhere you turn, you know, you make this piece of paper suddenly meaningful by saying, this
represents a 10th of a
share of that person's mortgage and we're gonna bundle this with other, you know, sets ofpeople's mortgages and sell them off as a bond.

(10:43):
So you're using the, like the picture I have in my mind right now is Richard Thaler at thecraps table or whatever in the big short with Selena Gomez.
Yeah.
yes, exactly.
Exactly.
So you had, you know, that was basically allowed to develop into, into where we are today.
So that's where we are.
So that's then where, where is B, where's point B that we want to go?

(11:06):
Do you, do you see it that they've from what you understand?
That's a very, thank you for doing that because it's kind of like my previous statementblows up in my face a little bit.
I don't know that the B is completely clear to me.
If I had to guess what's going on inside that brain, wants power and glory for himself inAmerica.

(11:33):
the ways and means are not necessarily compatible with...
what we have to do in order to maintain the Bretton Woods system, which is a lot of globalfinancial aid, bringing people to our way of thought and capitalism and property rights

(11:56):
and human rights and the different things that we very imperfectly try to keep hold of.
And it's for him, it's too much giving.
Mm-hmm.
Mm-hmm.
And for me, I think the giving is what makes it.

(12:21):
I think the giving is what...
break for me, but.
the giving is what allows it to evolve effectively over
Agreed.
Well said.
Well said.
Yes.
Because it's not like as soon as I start, I get my result.
You start and it takes decades.
And we have built this thing and now someone is trying to...
someone on our team is trying to sledgehammer it.

(12:42):
Yes, very much.
Yeah, I've been trying to figure out what that point B is for myself.
know, part of it is we want to bring back manufacturing to America.
You manufacturing in America is...
I should have pulled up this chart.
no, screw that.
Anyway, no, it...
was released and people blame NAFTA for like gutting out manufacturing, but the slopedidn't change.

(13:08):
didn't accelerate or anything.
let's talk let's talk about let's talk about that setup.
So manufacturing America peaked in around 1945.
And since 1950, it's been on a pretty steady decline.
There's a point in time where NAFTA exists, there's a point in time where China enters theWTO and it but the but the slope of the line is pretty consistent.

(13:28):
Pretty 45 degree angle down.
You know why?
What was unique?
about the world's manufacturing base in 1945.
There was none except the United States, because the rest of them had been bombed to shitin World War II.
Dresden was gone.
Japan was gone.

(13:49):
There was nowhere else to manufacture these goods, so they were all naturally going tocome from here.
There was no choice.
Then people started to relocalize and build that manufacturing base up globally.
And of course, it's going to come...
back down to a level and arguably you could say perhaps there are some things that wecould make here that and should make here that we don't.

(14:11):
I would argue.
decision rather than some sort of blanket decision, which is we're dealing in blanketsright now.
Exactly.
So I am so fed up with this, this, this, like, we have this divine right to have theworld's manufacturing here.
Because also, if you want to start making socks, then what are we going to stop making?
What are we going to give up in our economy that's a high, it's high margin, high value adthat we will have to give up in order to have somebody allocated to make socks for us all

(14:40):
day.
not
already, it's at 4 % unemployment.
So it's not like we got extra people and you're trying to kill immigration.
So we definitely don't have extra people.
I mean, in my head, think that some of the population that is for this says, oh, well,there's like this secret unemployed army over here that's all of a sudden gonna wanna come

(15:01):
back and work in these sock factories.
But I just don't personally see it.
or something, right?
I mean, have to, so like, when you look at the disability numbers on, on the Americanpopulace and like, I don't know, I'm not close enough to this data, but like, I can't help
but to think a lot of this is let's just put it under the umbrella term metabolic syndromeand

(15:23):
Is it real?
You know, for there are real disabilities and people need disability.
And then there's another set of people that I feel like is it's not, it's not fair todemonize any of this, but like, there, is there an amount of people that, okay.
This is where this is coming from.
Did you see some, I believe this was released from China, like whether it's CCP directlyor sort of like indirectly propaganda machine, whatever.

(15:51):
was an AI generated little video.
And it's kind of funny of like 300 pound men putting together Teslas and pullingcheeseburgers out from under the Teslas and eating them while holding a drill and like
they're all sweaty and working too hard.
Very dark, dark and funny, but there's some truth to that in our labor force.

(16:13):
Right.
And so like, when I think about this, you know, this dark horse of unemployed blob thatyou kind of mentioned, like people does, I don't even, I have no idea, but I'm like,
that we do have more people that could be in the workforce, like, are we even fit to work?
Like, we have to like bigger.

(16:33):
Like again, this goes back to like, is tariff, these blanket tariffs, do they fix anythingor do like we need to do a little soul searching and ask ourselves like, you know, it's
like someone coming to me for advice and it's like, let's try to get to some fundamentalquestions.
yeah, so here's where I come down on this.
I understand, again, so I'm trying to understand what their end viewpoint is, right?

(16:56):
So clearly, as we need, I don't think that they really want stock factories back.
I don't think that's what they want, I think, but his approach is to come out really bigfirst and with something else in mind that you really want and.
Yeah.
I don't, we don't understand what it is, is he is looking for, I think.

(17:21):
but.
even know where to give?
You don't, you don't.
don't, I don't, I don't think this is an effective strategy particularly.
So that's what I was going say is like, I think we should be saying, okay, we have aproblem where there is a shipyard in China that has made more ships last year than the
United States has produced since 1945, since the end of world war II.

(17:42):
That's a problem.
Yes, that is a fact.
So maybe we need to look at saying, how do we strategically bring, you know, shipbuildingback to the United States in a meaningful way?
How do we, what are the, and that could be a higher value add product too.
you know, these don't have to be low tech things.

(18:03):
They can be higher tech things and done in higher tech ways.
we can build the best one, right?
Like maybe we'll still not build many, but we will be building the best ones.
this keeps coming back for me.
I'm like, this is America, God damn it.
I also think what's important though is, let's talk about some other aspects of this, isthe ability to build them in somewhat mass too, right?

(18:29):
It's not just building a few Ferraris.
We also wanna be building the...
I don't know.
Yeah, yeah, we want to building the F-150.
That's the, yeah, that's a good, perfect example.
Yeah.
know, like a theater set screen in front of the driver and some of them, while others it'sjust like almost a stick shift.
Like we're doing it all, but the chassis, we got it.

(18:52):
because like a big part of what has happened the last couple of weeks, kind of, think,when another radar radar was his reinforcement, and like doubling down on some of the
Jones Act principles, right?
Of saying, where if you are, if you're, if you're coming and dropping off goods at the US,US port and a Chinese made ship, you're gonna have to pay an extra one and a half million

(19:12):
dollars every time that ship drops off and face X, Y, and Z tariffs, and that by X year,you have to have
think it was a American crewed vessels or face to find.
He's basically trying to build up a merchant marine fleet.
If you ask me, it feels like he's trying to build up a merchant marine fleet, which isuseful during when

(19:35):
Kinetic warfare?
Mm hmm.
Yep.
And that's so if I'm taking like that little lesser known thing and thinking about allthese other things he's trying to do, and reshaping the way we're interacting with these
countries, I just, guess my my worry is, is B ultimately kinetic warfare?

(19:57):
Is that what B is that they're trying to prepare people for?
I think there's an argument that the data is murky.
murky enough, I think there's people that have used the data to try to tell a particularstory.
And that story is.
Tariffs and economic warfare lead to kinetic warfare.

(20:19):
so that's scary.
But at the same time, I think there is some of the sanity and all of this is the fact thatshould something happen where we have to fight, we are not in any way prepared to do that.
Because most of that is going to be using our geography to have an industrial base tofight the war.

(20:47):
And it can't just be F-35s.
So as much as that is uncomfortable and like a truth that I think that we all need to likereckon with of, you know, if we are going to maintain any semblance of the Bretton Woods
system and keep open trade open, we also need to back that with smart firepower that isuseful in today's world.

(21:15):
And I think we are way behind the times when, you know, most of the same, the headlinenumber,
is the F-35 is built in all 50 states because you have to appease Congress.
And then it's just this messy plane that like does no thing well, but is one plane thatservices all three branches of main military, right?

(21:37):
It's like, going back to like blankets versus strategy and being tactical, like these arethe kinds of, you know, again, like we just need to go a couple of layers deep.
And I think we've got like some really, you know,
kind of easy questions to answer on how to be more effective with already the money thatwe spend.

(21:58):
have a friend who knows a lot about the F 35 that I don't think we could ever get to sayanything about the F 35, but I think he listens.
If you ever want to come on, you know who you are.
Let us know.
That'd be awesome.
Or just like, we could just talk and not record.
That'd be fun.
Yeah.
to that.

(22:19):
Yeah, that...
It's such a messy system we've built because we're trying to constantly rule by committeeon certain aspects, which I also understand why people say, hey, a stronger central
authority might be more effective.
And I do understand that notion too, right?
I think that mess that we've built leads to some of this that we're seeing now.

(22:44):
Yeah.
Yeah.
A hundred percent.
So then the other thing that gives like the other tack on this, that gives me comfortbecause we've done it over and over and over and over again as a country and society is we
are late to the ball game.
We see stuff come in and we're all like, wow, you know, we're so like protected over here.
We don't really have to deal with it.

(23:05):
And like, you know, Europe can be Europe and et cetera, et cetera, et cetera.
and then things get bad and we're like, well,
guess we got to go clean up everyone else's mess and we whip this machine into action andwe go and that's messy and expensive but since we're the ones that often sweep the floor

(23:28):
it puts us in a different position doesn't it
Yes, I suppose.
But, but I was to say, I was to say it's happened.
It's what's happened twice in the past, right?
Uh, and then not, there's been other times when it hasn't happened or where I would saywe've gone into try to sweep the floor when it wasn't needed.

(23:51):
Uh, I, I don't know.
I hear what you're saying, but also I don't think the world wants us to come in and bethat by and large, right?
There was a time when I think it might've been.
that I think feeds right into this tussle that we're dealing with right now.
If everyone wants to pay $75 for their socks because the trade lanes aren't opened anymoreand there are actual real pirates and half of the container ships get sunk on their

(24:19):
destination and there's no manufacturing base at home to make socks.
If that's the future you want, cool.
not really future I want, though you do make me wonder, there any publicly traded, deepsleep recovery companies?

(24:41):
They might, Yeah.
no.
Yeah.
Pirates.
I mean, I think at a time in history, there probably were, you could, you know, fundprivateer missions, right?
Probably.
So maybe someday.
that have like at least pin names that are famous, well-read people who like just sat intheir little mercantile Brownstone in Amsterdam and made crap tons of money funding

(25:09):
pirates.
I bet there's that person somewhere in history.
There has to be.
I...
I struggle with it because it's like, is our duty here to, you know, enforce the system,but also that it, one thing I think we have to honestly look at is, is how our

(25:34):
financialized system puts us at risk in the future, right?
We've talked on here before about the way it's currently structured.
A lot of our big institutional programs, you know, might run out of money due to changing
demographics essentially decline it like declining growth rate.
system is not necessarily designed to handle certain, population growth rates below acertain level.

(25:59):
Yeah.
So, we, we do need to have some structural changes.
And I think some of those are within this vision that, the current leadership has, but Ithink it's in a very, a new.
I don't know.
I don't think it's probably in the way either you or I would picture.
Um, but I think that there is a little bit of undercurrent and a little bit of thatunderstanding of things.

(26:22):
is a change it's needed.
And I think we all need to come around to that in some way.
And this probably isn't the, again, the right tact and way to approach some of thosenecessary changes.
Um, but you got to, we haven't been addressing it yet.
I don't know.
for you.
So if this is the system that we think is best for humanity, like it raises the floor onhumanity worldwide, which is something I do believe.

(26:48):
I believe.
Mm-hmm.
But people, the broader thought or narrative is that people don't want America acting asthough it has.
therefore, embedded in that statement, whether known or not known, is we no longermaintain open trade.

(27:14):
And therefore, poverty goes up and the rest of it, if we're holding to my theory.
Is it so much that things need to change?
Or there just needs to be enough pain felt worldwide?

(27:35):
such that they realize what this system is and what they gain out of it.
if knowing what they gain is still nebulous, but it is appreciated rather than notappreciated, which I think is where we've been since probably the invasion of Iraq.
I think that's kind of the impetus point for a lot of this sort of distrust and dismaywith our actions in the world.

(28:04):
Mm-hmm.
Could you argue it goes back even to Vietnam?
I think you could make that argument and it would be a cogent sound argument, but I feellike it's more modern than that.
I also wonder how much smooth this is just cyclical right of like we go through theseWell, no
Okay, hold on.

(28:24):
Did you?
I'm gonna mess this up.
just heard.
Sorry, I just created another edit point for you.
There's something like, as soon as.
China got the nuke.
We went to Vietnam the year later.
Hmm
And as soon as...

(28:47):
Iran?
Iran still doesn't have the nuke.
There were three examples of like, that country got the nuke and then that geopoliticalarena was therefore so drastically changed that it caused kinetic warfare.

(29:10):
The nuke didn't cause the warfare.
The country that got the nuke wasn't involved in the war directly, but it changed thebalance of power such that
War erupted.
So there, there was like a proxy fight that happened because of it, essentially.
some of that, that we wanted to have troops in the area, and have an excuse for setting upa base somewhere nearby for,

(29:38):
yeah, yeah.
I'm afraid that that's definitely part of it, right?
Yeah, that's an not surprising correlation, I would say.
I have, I'd not heard, okay.
pretty eloquently laid it out.
And I was like, I, know, another one of those, like, I hear you, you just displayed thedata to me.

(30:00):
I think the argument for correlation is still up for grabs, but it is very worth knowing,right?
When trying, when trying to like prognosticate on the future, which was what he was doing.
So, and that man is really good at it.
So.
one of those, let's pay attention to these past trends that might not be proven yet, butthat do seem to at least somewhat exist, right?

(30:23):
Or.
Yeah, yeah, or things to be yeah, be mindful of like, you know, I think it's a worthyadventure of adventure, a worthy effort to try to keep the nuke out of Iran, because then
the balance of power there changes drastically, right?
How you come to the negotiating table changes drastically there.
And I heard again, I don't remember, I don't remember where I heard this argument, but itwas not illuminated to me until after I heard it of our invasion of Iraq was like one of

(30:51):
the biggest blunders because
Iraq was essentially holding Iran back and keeping them busy and draining the Treasury andthe coffers and the army and so on and so forth.
They would conflict with each other.
But as soon as we went in, it was a power vacuum and it actually gave Iran more power,which is another interesting lens with which to look through when trying to like map out

(31:16):
some of these actions.
So, know, when you think about the tariffs and like trying to
have these countries come and kiss the ring of the president and all these differentthings that are going on.
It's really, it's, I'm running out of words to say, like I'm continually fascinated, ifnot frustrated.
So
Also, what's fascinating to me about this is we're throwing a grenade out there in theroom and we really don't know how things are gonna land.

(31:44):
All of sudden for the first time in forever, South Korea, China, and Japan started workingon some bilateral negotiations around trade.
You think that's Chinese propaganda?
Okay, that's fair, that's fair.
But the idea is out there now, right?

(32:08):
So here's what I'm saying is there are gonna be situations where now there might be somenew interesting alliances and dynamics of power formed in terms of global trade that there
will be unintended consequences that we won't know until another five or 10 years, I'msure, as it takes a long time to...

(32:30):
Restructure certain parts of the supply chain certain things can be moved somewhatquickly, but but they're few and far between I think most most of our complex items the
supply chains are Years to remake in general
Yeah, I I saw again, you know, I'm kind of like repeating some things that I have notfully investigated, but something like the F-150 transmission, you know, the best selling

(32:53):
car in America, the transmission crosses the border like five times or something, beforeit gets inserted into the truck.
It's like tariffs are nonlinear, right?
They are exponential at that rate.
cause it's going to get applied doot-doot-doot-doot.
So, I saw this really interesting chart.

(33:14):
I was from Saturini, and one of his pieces, showing the, basically the compound effect oftariffs.
so on a raw material, if you have a 10 % tariff, the compound effect is basically one toone.
It's about 10%.
No, I'm sorry.
You get, you get about a 12 % tariff.
So it's like one, what would that be a

(33:35):
1.2 X modifier, but on something like an automobile, it's about a two and a half Xmodifier, 2.3 X modifier.
And on a smartphone, it's like 2.9 X somewhere around that because of the way the, well,just like on a, on a 10 % tariff on like a flat across the board, 10 % tariff and like how
that then gets like, because of the complexity and like things moving across borders and,where all the components come from, like you end up getting a much, the more complex, the

(34:04):
the item, the more that basically compound modifier builds up, right?
once you start thinking about it, especially if like, you know, there was some YouTube.
you know, I was saying earlier, it doesn't make sense to have these just massive acrossthe board overarching, overarching, like we're gonna just punch everybody in the mouth

(34:29):
because all you're gonna end up doing is just grinding us into a recession in short order,like within nine months.
Well, and the other thing that I think about, I'm not stating this as a position, it's,yeah, agreed, yeah, right.
a lot of this is still to be backed off of.

(34:49):
I still think this is a little...
deal.
It's like, you want to move into your comparison table?
Yes.
Yeah.
So a while back we were talking about, uh, the idea that, know, the world needs more, uh,Lao Tzu and a little bit less Sun Tzu.
So Lao Tzu, uh, actually Lao Tzu, uh, wrote the Tao Te Ching and Sun Tzu, the art of war.

(35:14):
And as I was kind of to make a comparison of, of the two, like, you know, what fitsinterestingly into this is the art of the deal.
So let me pull up my.
Paris table.
So this is one on strategy, basically how they would approach, you know, tacticalsituations.
I made one for then governance as well.

(35:35):
so when it comes to strategy, Sun Tzu would argue to be calculated and subtle.
Trump, in the art of the deal, would argue to be bold and aggressive.
And Lao Tzu would say, avoid strategy, follow the Tao.
So one thing that Lao Tzu speaks a lot about in the Tao Te Ching is called Wu Wei,basically the way of the water to take non-action and go with the flow for, I think,

(36:02):
a way to think about it very succinctly.
So.
which you could argue that perhaps that is a pacifist or, know, maybe too passive.
And if you need to, you know, determine an outcome and which in some, some ways you mayneed to that, that might not be appropriate, but that's, I don't know.
I don't know where I fall in the three of those.

(36:23):
Um, you know,
I think is where the interesting discussion is.
It's not about assigning yourself to one versus another.
It's knowing when to employ which school of thought.
I guess my analogy is like, they're all imperfect.

(36:48):
So like Douglas MacArthur and George Patton, these are two like highly decorated andcelebrated generals from World War II.
But they were also hard to work with hothead people who just completely bulldozed theirway through things, right?

(37:09):
And we're not necessarily friendly to the bureaucracy that is the United States Army orhighly respectful of generals above them.
There are such things as wartime generals or wartime CEOs, and you need them in thosetimes.
And then there are peacetime generals and peacetime CEOs.
And I think you need them in the right time.

(37:30):
So would it also be that, I mean, in this scenario, I would just be choosing from,
You know, the Sun Tzu versus Lao Tzu sort of model.
But I think there's times to employ one versus the other based on the times.
No.
No, I think that's absolutely true.

(37:51):
I think looking like here at like the Trump's, you know, kind of approach, it's more of a,there's tactical advantage to probably doing that in certain, not even, it's like less
than times.
It's like, uncertain instances.
It's like, it's a tool, a toolkit to bring out when you need it, but it's not likenecessarily a peacetime or wartime.

(38:15):
It's like a.
I don't know.
Yeah, just the information time.
The thing, the thing that did not exist during Sun Tzu or Lao Tzu's time was a vibrant setof, mass media and social media.
And now you have that.
And if you look at, you know, it's like one here for power under Trump is control thenarrative.

(38:41):
Now controlling, I feel like controlling the narrative under a strictly adhered to andcontrolled dynasty is like completely possible from the top.
But in our society, controlling the narrative is more of a nebulous sort of, it's adifferent kind of exercise, but it's a very powerful one if you can attain it.

(39:04):
I mean, it could also be, you know, authoritarian esque, right?
Like controlling the nerve, think Nazi propaganda or yes, that's true.
within a, within a particular, yes, you're right.
and would do it.
He would just be on TV all the time and like say his own thing.
And then we've seen it for years now.

(39:26):
People should just subscribe to his narrative.
is, this is through the lens of not, not of governance, but of like tact of strategicallyapproaching situations is, is this, uh, this analysis of the factor.
So strategy, have Sun Tzu calculated and stretch subtle Trump bold and aggressive Lao Tzuavoid strategy.
the speech reserved for Sun Tzu Trump brash and public.

(39:50):
makes perfect sense.
Lao Tzu silent and minimal power.
Sun Tzu says control the battlefield.
Trump says control the narrative.
Lao Tzu says let go of control.
When it comes to ego, Sun Tzu says it's a useful tool.
Trump says it's the centerpiece.
Lao Tzu said this is an obstacle to peace.

(40:11):
When it comes to action, Sun Tzu says be precise and timely.
Trump says be assertive and opportunistic.
That feels right.
Come to what we're seeing right now.
And Lao Tzu says non-action, or as I've mentioned before, the Wu way, the way of thewater.
when it comes to winning, Sun Tzu says the key is to out maneuver the enemy.

(40:31):
Trump says win big win publicly and Lao Tzu the concept of winning dissolves.
Just to give everybody out listening a quick overview of the, of the, aspects on which, onhow these, on how these, how this table is laid out and how these different minds are
thinking about their strategic approach to again, like an objective, right?

(40:54):
is how, is how I think the, the high points of what these, philosophies would say.
I think the other one that stands out for me,
Under the Trump side is the, is the, um, uh, under action be assertive and opportunistic?
Um, I wonder like being opportunistic.

(41:15):
wonder if, was there anything about the particular timing that Trump's done any of this,or is it just that it's the opportunity just because the, the, the first start of his, of
his term here.
Yeah.
mean, when you, when the voting records move as hard as they did.
You, I mean, the, narrative was that there was a mandate, right?

(41:40):
And basically every single demographic moved toward him.
So yeah, was it the fact that he just came in swinging or like that was the oppositetunistic part?
Like you don't, mandate or not, you don't know how long they last.
Yeah, yeah, I really, wonder what we're gonna be seeing 24 months from

(42:03):
Yeah, totally agreed.
Well midterms are in what is a 16 18 months or something
be interesting to see.
Yeah, that'll be interesting to see how, perhaps a, a more active Congress will change theway some of these things are being handled at the moment.

(42:27):
Cause right now it's pretty much just sitting around.
feels like
How is that different than the last decade?
Pretty much just sitting around and collecting money from call options is my impression ofCongress right now.
while doing hearings.
Yeah.
It's just insider trading left and right across the board.

(42:48):
Yeah, no, we're just pragmatic.
We've, we've seen the data.
I've seen enough of the data to know it's like, it's a significant percentage.
I don't, I don't have, it's not everybody I'm sure, but there's enough of it going on.
Yeah.

(43:09):
yeah.
the narrative that should be controlled.
We should be celebrating the ones that we know are not participating because they havealmost every right to, obviously, the precedent has been set.
There is no punishment for this and they're leaving millions and millions of dollars onthe table by not participating and they're doing it out of ethics and concern for their

(43:31):
roles of leading the public.
We should be celebrating those people.
They never get any airtime.
Pelosi just gets more airtime.
That's true.
Because people are interested in what the bad actor's up to.
Everything is the Hunger Games.
Yeah, it's all entertainment.

(43:53):
Yeah, so the other comparison I put together, let's hop over to that here, is on then whatkind of they would be in terms of how they would approach governance.
So this is a different order, but from in terms of the role of a leader, Lao Tzu.

(44:19):
I would say be passive, subtle behind the scenes.
Sun Tzu from the art of war would say be a strategist and moral disciplinarian.
And Trump would say that be, be the decider in chief and a showman in an ideal society.
Lao Tzu would say the leader is peaceful, mindful and harmony with nature.
Sun Tzu would say they should be ordered secure, united through leadership and Trump,Trump would say prosperous, aggressive and winning.

(44:48):
use of power, Lao Tzu would avoid it.
It's dangerous.
Sun Tzu would say power must be tempered and strategic, the use of it.
And, Trump of course would say power should be seen and flexed.
when it comes to public opinion, Lao Tzu doesn't seek it.
Sun Tzu would keep in mind, keep it in mind for morale and Trump would be obsessed, wouldbe obsessive over it and leverage it.

(45:15):
when it comes to laws and control.
Lao Tzu, minimal laws, light touch.
Sun Tzu, clear rules, well enforced.
Trump, strong top-down control and negotiation.
When comes to leadership style, Lao Tzu would be a servant who doesn't impose.
Sun Tzu, a commander with respect.
And Trump, a boss who dominates the room.

(45:37):
I think there's an interesting question around game theory here too.
Cause if you're leading a government and your leadership style is servant who doesn'timpose, I would not bet on your longevity.
I would not either.
Well, and have to remember Lao Tzu was never, he was a, wait, was he actually the leader?

(46:01):
He was a,
He was like the guy who advised the leader, like the several rulers, if I remembercorrectly, I'm going to come probably come back and edit the section out because I'm sure
I'm brutally wrong.
but he was like, he was, yeah, something like that.

(46:21):
And he, I don't want to screw it up.
I'm not gonna, I'm not gonna go into something.
I don't know.
I remember I read the, I read, I read like a history of the Tao Te Ching and the Tao TeChing.
And it was interesting how he came to kind of
those views.
It was through basically sitting on a lot of courts and just sitting on the side andwriting down what happened through different, like the different leaders tried and failed

(46:41):
at and developed this philosophy eventually.
Does that, so that also makes you wonder about the leader with which he witnessed all ofthis happen, right?
If you're, if you're writing things down in order to try to understand and improve theoutcomes of the people who come and implore the leader, but your sample size of leader is
one or two, that's, that's an interesting thing to keep in mind when studying him.

(47:06):
Well, or also what were the times that he was witnessing, right?
Because it could have been a time of like, was there famine?
Was there war?
What were the other contexts around it?
I'm gonna have to reread that little, it was only a 150 page book.
Anyway, I just thought that was kind an interesting analysis, kind of comparing somedifferent Eastern, famous Eastern minds with what we're currently seeing.

(47:36):
here today and because you know they're kind of three different poles in a way I'd say.
And I think there's, you know, probably a thousand more different, constellations of, of,of people you could, map out in a similar way and have different results to that's not

(47:59):
that there is a set.
This is on where this is another that should be followed.
It's,
constantly changing network of minds at the top.
yeah, the three body problem.
Yeah, thanks for putting this together.
This was like, actually really enjoyed looking at those tables.
That's like a.

(48:19):
Good.
Kind of just an interesting little, I don't know.
I don't know exactly what use that is other than it tickled my fancy.
Well, what else is going on in the world this week, Dan?
Is there anything else we want to, or is there anything else you want to say about tariffsand the current state of the world before we move on?

(48:44):
hat.
There's like an interesting thing going on in the e-commerce world of Mark Cuban is nowpaying attention to us and the plight of the shenanigans that the Chinese sellers are able
to get away with.
Whereas the American sellers very much cannot do any of really any of the things that theChinese sellers do, which is, you know, it just makes the, the,

(49:10):
the opportunity field completely unlevel, right?
So I don't know, I think it's interesting.
When I think about some of the, I've gone back and listened to Marc Andreessen and PeterThiel, like a whole bunch of people who like went in a particular direction and I really
wish I could like hear from any of them right now because it seems like they've all gonedark since liberation day.

(49:31):
Interesting, interesting.
said some stuff the other day.
He had a thread up there that I'll find it.
Yeah, okay, yeah.
where, where was I?
anyway, like one of the things, one of the things, one of the things I remember Andreessensaying was like, you know, we tried to get meetings with Biden and Biden just was like

(49:59):
uninterested in talking to anybody.
And, I think there's an argument to be made where like his people were protecting from,from a lot of public.
There wasn't a lot of Biden left.
So there wasn't a whole lot of time to be meeting with people or something along thoselines.
So was it like a shunning, a shunning of the industry or was it just like protecting thepresident?

(50:21):
All of that doesn't matter.
What matters is people weren't getting meetings with Biden and therefore, certain thingswithin government couldn't, you couldn't project your worries, ambitions, and so forth.
There was no court.
Mm-hmm.
Now we have a much more open court.

(50:43):
it's probably shut off to a particular side, the deeper in the paint other side, but itdoes seem like a court that is actively more actively listening than the previous court.
Let's just, again, leave it there.
Try not to get too political trying to observe.
and now

(51:03):
because there seems to be, know, because the vibe shift or whatever you want to call it,right?
There's been this circle of e-commerce people that I, in particular, I follow on Twitterand, they've been trying to make the case.
and it's finally gaining a little bit of momentum to level, level the playing field alittle bit in terms of, the marketplace that is Amazon.

(51:28):
And, personally,
For someone who, I have not been able to find a way to trust Andy Jassy.
And this move of courting China direct and courting Chinese sellers and so forth, despiteall the black hat tactics and all the skirting of taxes and rules and tariffs and so on,

(51:54):
Amazon has dug their heels in, in terms of trying to court this side of the.
the marketplace to come deeper into their system and to be more advantaged.
I think that this is my tin foil hat thing.
I think that is, you know, some high up executive trying to squeeze out more pennies tothe bottom line and that working.

(52:22):
You get the nod.
Whereas I think Jeff Bezos was a systems thinker and knew how to
use, measure, and court risk in the right ways.
And I think if he were still in charge today, we would see movement on this already.

(52:46):
because he is a systems thinker, basically.
also think he thought, well, yes.
I was thinking about that today.
Like he also like had a vision of a vision in the, in a way that like, if I just getpeople to start buying these things on Amazon, then they'll start looking for other things
on Amazon.
Then whenever time they want something like, me see if I can find an Amazon.

(53:08):
Well, you know what, if we can put it there, they'll buy it there.
Like there's we've talked about this, like, I bought a new walk.
Well, where'd you get that?
Amazon.
I like why, you know, it used to be a bookstore.
Now it's, now it's an everything store, right?
So, and I can get it within a day.
I don't usually need something much quicker than a day or two.
generally speaking, that unless it's groceries, yeah.

(53:32):
So they end up just dominating this, this space that then, you know, now they're tryingto, okay, well, how do we further optimize that?
Well, we, you know, try to get our cogs down and, and get, get the most high margin stuff,the best margins we can.
but it seems to lack the vision of, okay, well,

(53:55):
I don't like what vision is it lacking Sean.
Like in this, in these current times, it feels like they could be running a campaign of,you an American based seller?
Are you a, you know, trying to promote that, these are somehow.
Yeah, exactly.
Well, like, and I was wondering, like in some situation, like if you're a seller who'sprimarily importing things and just selling and not just, then selling them, you know,

(54:22):
through different channels, Amazon being one of them.
to at least be able to say you're an American based seller would be an advantage.
and then, you know, you would make, you'd probably have to also delineate then clearlywhere the products are originally manufactured as well.
I don't, I'm sure they already are.
you have to probably put a country of origin labeling on everything, how that's promotedon the, on the webpage.

(54:45):
I'm not a hundred percent positive.
I don't feel like I see it predominantly.
So it's probably.
looked.
It's definitely there, but I'm someone who goes and fine-tooth combs my own listing, so Iknow where all this stuff is.
Yeah, yeah.
Well, so that's, hey, that's a good comparison.
Like somebody who's just buying stuff, like I'm not necessarily looking for it it doesn'tcatch my eye, right?
They don't put it in a way that, in a place that is probably visible.

(55:08):
as someone who writes these things, people don't read, like not, not, not as someone whowrites these things, as someone who's done customer service for these listings, it's
abundantly clear.
People don't read a goddamn word.
So people don't try.
That's it.
Like that's, that's my jaded, you know, here I am to tell you what, what reality is.

(55:28):
The reality is there's a $40 American made American flag for sale on Amazon and they sellabout $2,000 a month worth of product.
and there's a Chinese made American flag for $20 and they sell over $20,000 of productevery month.
Revealed preferences.
What about a Mexican-made Chinese flag for $30?

(55:53):
I mean, think we, we need to, we should just have a parody Amazon store, like a realAmazon store and we sell real things, but it's like a parody of the marketplace.
Somehow.
I think that could be a fun project.
Everyone's boycotting Amazon and our store just keeps climbing, you know, because
working capital would that take to get started up?

(56:14):
That's the question.
Yeah.
yeah.
I feel so bad for everybody who's working capital just basically doubled while on thewater or potentially, you know, like how the hell does anybody get through that situation?
are,
I think there's going to be a lot of stuff go to landfill because there just won't becash.

(56:37):
And then the other thing is, is, between the Huthys and the tariffs, just millions andmillions and millions of gallons of extra diesel fuel will be burned.
Because the ship will go from China to Vietnam and then America to do somereclassification and that'll add 30 days of travel.

(56:58):
and a whole bunch of carbon footprint and all the boats that are going from China toEurope and serving the European market are all going around the Horn of Africa now.
I was reading this little blog from a person that works in plumbing parts and sourcestoilets.
And so they used to source toilets directly from China.

(57:21):
Now they're starting to source toilets from I think Vietnam or India, but the parts areall now being made in China, but being sent individually to Vietnam where they're then
being assembled.
So they've taken about 10 % of the total value add out of China.
left 90 % of it there saved 60 % on the tariffs, 80 % much more on the tariffs.

(57:41):
a significant portion of those Vietnamese factories are Chinese owned.
The money's still flowing.
Yep.
yes, also true, because China has quite, you know, to, I don't know, in their foresight ornot, I suppose their foresight built up an industrial base by investing in factories
outside of just their own geography, right?
They have, yeah, Apple too.

(58:05):
No, not just the company, I think, in terms of who helped make China what China is today.
I think fundamentally, you kind of have to look at the history of Tim Cook.
I think there's a lot of credit to give that man of what China is today.
Maybe more than Xi.

(58:25):
Maybe that's, you know.
I don't know.
think that's an interesting thing to think about.
not, I'm not saying like I stamped my word on that statement, but I think that's aninteresting, that is a provocative statement that is interesting to think about.
Okay, I'll think about that some this week.
That's interesting.
Hmm, any good books on that topic?
No, just Dratechary, Ben Thompson probably.

(58:47):
Okay.
Fair enough.
Ben's good.
I like his writing.
yeah.
So, so basically we've not changed anything other than as you've pointed out, added somediesel into the process.
We've added some diesel into the process, increased prices and not fundamentally changed ading dang thing.
It's all the same.

(59:09):
That's really depressing.
Yeah.
So, which is to say that, you know, if you perceive that there's a problem in our globalsupply chains, it's pervasive.
And perhaps if you do want to drive that, you know, more manufacturing back to America, itis going to have to be tariffs, you know, across the board where you can't, you know, just

(59:33):
relocate parts of the supply chain.
But also I don't think that makes sense to do on everything as we've said.
So.
I think I got this, I'm stealing this idea and I think I got it from Noah Smith who I'vementioned on the podcast before.
He was saying like, you know, one of the strong points of NAFTA or the renegotiated NAFTAthat I don't remember the acronym for, USMC.

(59:59):
If you were to make that bigger, think of it more like an economic NATO, you know, NATO ismilitaristic, but like an economic NATO.
Instead of bringing all the manufacturing back to the U S under the confines or labelingof national security, right?
Like, do we need socks?
No, but do soldiers need socks?
We do.
So we need to make socks goes the line of thinking, right?

(01:00:25):
why not try to have like a special economic zone of knowing that your complete war timesupply chain is within your circle and balance of power.
Mmm.
And I thought that was, that's the right, I think for now, the way I'm thinking is like,that's the right globalized position for an American led future.

(01:00:54):
So what does that then look like to you?
Or do you know?
I don't completely know, but let's just like, are drones too, do we not have the laborforce for drone manufacturing or something, right?
Or like, we just need so many drones that we need to distribute this supply chain out.

(01:01:15):
Like tariffs would destroy the ability to do this, right?
But like, can we build drones and I don't even know who these right, who the right, youknow, can we make drones in Mexico and Paraguay?
and Canada and the North of the UK and the list goes on.
Whereas like if you had to turn up the dial, the volume dial on these things, again, anational security viewpoint here.

(01:01:47):
Would that be?
them be the right way to go.
Well, so, so if you want to make a drone here, here's, here's an interesting story from,um, back in 2017, uh, craftsmen had offshored their production of a lot of their tools and
they tried to reestablish it.

(01:02:08):
America, American manufacturing base.
They invested 90 million in a 425,000 square foot facility in Fort Worth, and ended upshutting down because they couldn't figure out how to make a wrench locally.
So that's a wrench, a one piece of steel.
Forged steel, right?
Like this.
case hardened, you know, it's, it's, it's a case hardened grade steel where you put it ina furnace and let it sit in there in a carbon rich environment that that makes the outside

(01:02:37):
of it a little harder than the inside.
So you have a nice ductile core.
So you get the good, you know, resilient wrench.
Yeah.
It's not an easy thing to, I mean, we, I've, we have products that we case hardened atwork.
It's not an easy thing to do.
I understand why they couldn't do it at mass.
It's, it's, it's, or, know,

(01:02:58):
What I'm trying to say is to build up these skills is not just a turn of a switch.
we're just going to start making them here.
There's a lot of, it's a people thing.
There's a lot of know-how that is not necessarily well documented.
There's a lot of just cultural knowledge of, having done something for a certain way forso many years that doesn't get translated into every, you know, every, every SWI, every

(01:03:21):
senior to work instruction that when you try to then port that knowledge over somewhereelse gets lost.
And it's a people thing as you point out.
Yeah.
Yeah.
People and the broader supply chain, you got to bring all those things into the factory inorder to make that product.
And that right there is like China's advantage.
Even if I was told when, you know, kind of like poking around Vietnam myself, it was like,well, all the stuff is going to go into China and then from China, it's going to go to

(01:03:48):
Vietnam.
And then the Vietnamese factory is going to do it.
And that's why it's going to be more expensive for you.
I'm like, okay.
He's like, you know, your supply chain is in China.
That's it.
It's all right there.
And that's part of the speed and low cost.
Mm-hmm.
That sounds frustrating.

(01:04:09):
That sounds frustrating.
We'll see, we'll see where it all shakes out.
Maybe we'll, you know, end up with some sort of tariff that like is stomachable for, youknow, for, I say the American people broadly because guess what?
Price is going up.
That is already happening.
Do you have any restrictions on how you can adjust your prices?

(01:04:31):
Pour these on Amazon or any of the outlets.
there are restrictions on a platform.
They are not explicit.
are within held within the algorithm.
They are opaque.
You don't know them until you change the price and then you've lost your buy box and your,your product is now toast.
You will spend four to 18 months trying to get your sales back to where they were.

(01:04:57):
That's lovely.
But Andy Jassy did come out with a headline saying he fully expects his third partysellers to be passing on the extra costs.
So I don't know if they've edited the algorithm or paused a piece of it for whatever.
kind of doubt that they're going to go surgical like that.
But, at least the CEO is saying that yes, I get it.

(01:05:17):
So I'm hoping that like, it's just, you know, the algorithm can't, I hope the algorithmcan't punish that many people.
If everyone raises prices.
at the same.
the same time at about the same rate, right?
I'm gonna, know, my current thinking is like,
Pick a two to 4 % number and you're gonna do it every month going forward until the dustsettles.

(01:05:44):
Wow.
at this point, it just keeps going up.
That actually feels slow on what you would need to do.
but four is kind of your peak.
Otherwise you're going to lose your business.
You'll, you'll, you'll, you're done lights out.
So you, do you have enough?
And if we don't want to talk about this on air, we can not, but like, then do you.

(01:06:06):
Yeah.
So I would think for, to be able to handle that, that, you know, ramping up 4 % a monthfor a period of time.
how many months do have to run that to, get to where you need to hold up?
I don't know.
I haven't done the math yet.
don't know.
I'm going to do it right now.
Because that's not that hard match to do.

(01:06:27):
So you need to get to 125 % tariffs.
on my cogs.
on your cogs.
Oh wow.
So that means you need to get shit.
So that is how many months?
As I said, Dan, I'm gonna calculate that for you real quick.
Calculate that for you real quickly.

(01:06:49):
That's gonna take you about 21 months to actually catch up to those tariffs.
So unless you have 21 months of inventory on hand, that means you're gonna be taking a hitfor several of those months.
That assumes that these tariffs don't settle back down below that number sometimes.
true.
Also true.

(01:07:10):
So I think some of the more sophisticated players and by sophisticated, partly meanwell-balanced sheet companies are just eat like somewhere between eating it and doing
price increases.
I just talked about.
So I'm trying to go like soft and kind and sustained because it's so opaque and unplanned.

(01:07:33):
That all I know is costs are going up.
So I might as well not crush myself.
and my customer all at once.
just maybe this is just like, we're readjusting everyone's mind to the fact that everysingle time they go to buy something prices have gone up.

(01:07:54):
And you have one man to thank for that.
Mm-hmm.
Maybe, maybe a handful.
Him and a few people that have been giving me advice, but...
Yeah, it's true.
But something along those lines, right?
And then the...
the but I think most people are giving advice or else just people there who keeps aroundthat says what he wants them to say.

(01:08:16):
yeah, it's mostly
I think the other thing that I have going on in my head right now is I think, um, theseare the kinds of times that make people scared, especially business owners.
Uh, especially when they're looking at, you know, a tariff bill that used to be, I don'tknow, you know, it depends on the size of business, just like let's play, you know, play
with pretend numbers.

(01:08:36):
And it used to be a million dollars in tariffs per year.
And now it's going to be like $5 million in tariffs per year.
Um, that could be more than your entire take home, right?
That's like a medium sized business, right?
So then it's like, am I working for free or should I just fire everyone and shut it down?

(01:08:57):
you know, there's, there's some, yeah, there's some big, big decisions that come out ofthis as soon as there's any sort of clarity.
so given those sort of like darker outcomes that are completely on the table still.
you know, if everyone, if everyone else is trying to protect their ad spend and like sortof, make their nut smaller so that they can, they think that they can travel more months

(01:09:24):
under this duress.
I'm kind of thinking maybe harden the paint.
I'm going to use, I want to keep my husband up and try to like take more market share.
It might bankrupt me faster, but it also might put me in a better position.
I don't think there's any way to know.
As long as you can be bringing on that market share at break even or better, it works,right?

(01:09:50):
It's just about how, I guess in your situation about how quickly you can get prices up or,cause your cogs aren't going to be going down at your discretion.
So, or at least maybe.
No, they won't.
Yeah, exactly.
It won't be at my discretion.
It's at someone else's.
Yeah.
So I, you know, I always promise to reserve the right to change my thinking, but right nowthat's kind of, that's my feel.

(01:10:16):
of changing your thinking, here's one from corporate land this week.
Um, uh, I was trying to get a meeting with our, our center manager, uh, and for someimportant projects that we have going on, I wasn't able to do so because he got pulled
into a meeting on Wednesday, for our local, basically tariff strategy discussion, him andour supply chain manager and, um, big group of people got pulled down to one of the

(01:10:38):
offices and,
here in Houston called in an area called sugar land.
And they were meeting there all afternoon and they got about two, two hours through themeeting and then halfway through everything changed because Trump just rescinded
everything.
And so the first two hours of their discussion were Nolan void.
But are they?
Are they null and void?
but are they?
Yeah, no.
Yeah.

(01:10:58):
It's like, well, now we have that.
yeah, yeah, exactly.
So it makes it extremely frustrating.
We're, having a real, you know, challenge of thinking about our sourcing strategies.
How much do we buy?
When do we buy?
Why do we buy?

(01:11:20):
I think as much as we can, I think as much as we can, yes, some of our, problem is some ofour lead times are.
If I want to order stainless steel for the grade that we most commonly use at ourfacility, I'd say 10 months is a low end on the lead time for, for, when we were telling
the quantities we typically want to order in, we buy some stuff on the spot market.

(01:11:43):
try to buy, we try to buy what we call mill runs where we'll actually say, this is ourplan demand for 12 months or so, and put in through a distributed order that goes to one
of several mills, across there's a little bit made in the U S
A lot of the sizes we need aren't made in the U S so we have to go to overseas.
So India, China, Italy, Germany.

(01:12:07):
there's one up in the Netherlands I want to say.
We work with suppliers, you know, all over the place.
Yeah.
isn't a euphemism for China in this instance.
exactly.
Yeah.
It's literally like a lot of different mills in a lot of different countries.
Uh, so yeah, we were, you know, we're trying to plan out our orders for a year and whatwe're going to be needing, um, because of the long lead times, we have to be thinking in

(01:12:32):
longer term, longer term durations.
And also what we are thinking is what's the oil market look like for the next 12, 18, 24months.
And it's looking pretty choppy.
it's, it's oil and gas, uh, service industry.
Um,
And probably to some, some degree E and P, exploration production.
So, those being like Chevron Exxon they're doing, they, they, you know, buy the leases toget the higher people to do a geographic surveys.

(01:13:01):
And they hire somebody like us, to come in and do the services of actually drilling thewell along with a driller.
So everything that we do went way up in terms of cogs because it's a lot of steel.
that whole well is built with steel up and down and that's took taking a big, you know,hit on the chin here.

(01:13:22):
so it's making, and we don't know what oil is going to be doing price-wise.
So it's making it very difficult to forecast and say, this is what we should be doing anddevelop a, develop a coherent strategy towards, so there's a lot of uncertainty, is
typically bad for us wanting to go in and invest in.
Let's try to bring up production here or yeah.
Uncertainty is like the worst.

(01:13:43):
Like you give me bad news, I can plan for bad news, right?
If I know the bad news is sticky and real.
But if it's bad news today and good news tomorrow and bad news the next day and good news,then it's your total deer in headlights.
Like how much can I pause?
How much can I lower payroll?
Like the decision matrix starts to get dark pretty quick with the uncertainty.

(01:14:06):
yeah.
So.
know, stock market's not the economy.
No, that's the economy.
Payroll's the economy.
payrolls the economy.
The stock market is a barometer, it's a barometer of the people's opinions about theeconomy.
That's the way I kind of think about it.
heard someone, I think it was Derek Thompson.

(01:14:27):
He's like, you know, the correlation is very high.
It's not, it's not a hundred percent, but it's extremely high.
Like if you get a more than 10 % drop in the stock market, then there is like a 90 pluspercent, chance that there is a recession after, cause it's a prediction machine.
Exactly.
It's a barometer on people's opinions of how things are moving.

(01:14:49):
It's very much, it's very much mood based.
And if people aren't feeling well about the way things are going, they're not savingtheir, you know, they're not saving their money into equities as much.
And that hurts, their growth and their pricing and, they're pulling money out and saying,we're going to pull this out and put it into gold or whatever.

(01:15:11):
yeah.
well not bonds right now, Dan, as you pointed out, the, the 10 year rate in the 2030 yearrate are way up indicating that people are selling.
But I think those sellers are mostly governmental actors, in larger and larger investmentbanks that are basically rerating our credit for the United States effectively and saying,

(01:15:35):
yeah, we viewed that the United States has larger credit risks than they have in the pastand have decided to hold less of our longterm.
investments, at least for the price that they were holding them, the yields that they weregetting them for.
Well said.
Yeah.
Did you read Cittrini's piece about government bond yield histories?

(01:15:56):
No.
He wrote something for his, you know, paid subscribers.
You should check out.
was a pretty interesting piece about the historical accuracy of how government bond movespredict, again, kinetic war.
And it was very effective until 1970 or so.
And then it's broken down a bit.

(01:16:18):
Then it decoupled a bit.
But it was a really interesting thought piece into how
When the rest of the world starts seeing destabilization in a government, they, they, youknow, basically say they're not as credit worthy.
Their, their yields change.
And then for a long time, within 60, 90 days of that happening, kinetic wars tended tobreak out, up to world war one, at least, maybe world war two.

(01:16:46):
so just an interesting, interesting little bit of history on.
the way that these bond yields move are actually kind of important, though it just seemslike a number.
It's an expression of the world's opinion.
if not that the world's opinion is right, but that if a lot of people are thinking thesame thing, there might be something to it.
No smoke without fire as Bola liked to say.

(01:17:09):
Yeah, where's your quarter, right?
I'm going to be Tom Hanks in Saving Private Ryan, man.
That's like my destiny.
Yeah, because you won't have a job otherwise.

(01:17:30):
Okay, well, I think that's enough doomerism for one week.
bright spots on the...
Read anything good, any bright spots you want to highlight before we sign off for theweek?
My bright spot, like I just started, I mean, I read eight pages of it or something.
It's a book called The Maniac and it's historical fiction, but it's about John von Neumannand how like everyone was like scared of his intelligence and his, he was like a polymath,

(01:18:00):
right?
Like anything that he touched, he completely upended and changed.
So I'm excited to spend time with John von Neumann.
Very interesting.
I've been listening to a little.
players, right?
Einstein, Schrodinger, Dirac, like all of them are in there.
von Neumann most known for?

(01:18:22):
Anything in particular?
Game theory, quantum.
probably a lot of other stuff that I'll learn during the process of reading the book.
Yeah.
good.
Very good.
I recently started a book called A Splendid Exchange or how trade shaped the world.

(01:18:45):
It's actually free on Audible if you are interested in adding it to your queue.
I'm only about 10, 20 % of the way through, no, 10, 15 % of the way through, but he'sstarting off going back into Sumerian times and going a little...
giving a little too much detail in certain areas about basically how trade really, reallystarted, like from the accounting of, we can count things now and write down numbers and

(01:19:14):
seal things and put a, you know, you would know that this, this vessel was from a certaintrader because they would put clay on the top and roll their seal over the top of it and
it would dry.
And then, so when you received it a thousand miles away, you could say, this is from theright place.
and some of the,
Exactly.
Some early technologies have developed and ultimately it's supposed to get into the modernsystem and I'm looking forward to that most of all, but it's been fun to think about very

(01:19:43):
old school trade for a while first.
and appreciate how far we've come.
Yeah, exactly.
And also understand how much just a part of the way humans are it is.
The trading of goods is...
the basis of our Yeah, it's cooperation.
We are like our minds are all connected.
And that you know, it's like the going back a few episodes and talking about like aninterconnected consciousness is like it manifests in trade.

(01:20:05):
That's one of the ways that like I view it is like, you know, we, all depend on eachother.
Yeah.
Stock market is a trade of opinions, right?
So.
Yeah.
You might, you might think, you know, Tesla is worth a hundred dollars and I might thinkit's worth $200 and therefore it's like, Hey, let's come to the table and trade because
then we can express our opinions this way.

(01:20:26):
exactly.
And one of us will be happy and one of us will be sad.
Maybe.
Maybe.
I don't know, sometimes I lose and I'm like, I deserve that one.
Yeah, I that one wasn't gonna
Yeah, I didn't talk myself out of it.
Damn it.
Yeah.
Oh, but if you talk yourself out of thing, you'd talk yourself out of everything, you'dnever do anything.

(01:20:49):
So you gotta take a stab once in a while.
Yeah, well, that's what's on my radar and something I would recommend.
But other than that, it's just struggling through the world and going for another week ofwhiplash.
So, well, I hope everybody enjoyed our conversation today.

(01:21:10):
Thanks for tuning in as always to another episode of Unqualified Advice.
We will catch you again next time.
Thanks everyone, see you.

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