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

Jason Calacanis 0:00 We're really excited to have Claire with us. Come on out, Claire. Are you here?

Claire Cormier Thielke 0:04 Hello.

Jason Calacanis 0:04 Great. What are we-

Narrator 0:06 (claps)

Jason Calacanis 0:06 Welcome, Claire. What will we be talking about today?

Claire Cormier Thielke 0:10 We're gonna be talking about China, you know-

Jason Calacanis 0:12 Ah.

Claire Cormier Thielke 0:12 ... just as everything has been all spicy. We'll-

Jason Calacanis 0:15 Yeah. Well- well, just again, we're- we're trying to make today about just easy, breezy topics that, you know, the most easiest things to manage, so we-

Claire Cormier Thielke 0:23 (laughs)

Jason Calacanis 0:24 Armaments, Ukraine, "Let's go to China." "Sure." Uh, please welcome Claire.

Claire Cormier Thielke 0:28 Hey.

Narrator 0:30 (claps)

David Sacks 0:31 What's going on?

Jason Calacanis 0:33 Let your winners ride. Rain Man, David Sa- What's going on? And I said- We open sourced it to the fans, and they've just gone crazy with it. Love you guys. Queen of Kin Wan. Going all in.

Claire Cormier Thielke 0:49 We are going to actually keep this pretty apolitical today, and maybe talk a bit about the parts about China that are less discussed in the Hailan- in the headlines. And, you know, Jason reached out and he said he wanted to- to really understand what were some- some problems, and he wanted to see solved, that we wanted to see solved. So, I'm a property developer. Uh, I run Greater China for Hines. We're the largest private real estate firm in the world. And we have an incredible Greater China team. I know I see there's folks in the front, they're like, "Where is she? I can't possibly spot her in there." Uh, so-

Narrator 1:29 (laughs)

Claire Cormier Thielke 1:30 (laughs) So, we have a team that is working across Beijing, Shanghai, Shenzhen, Dongguan and Hong Kong, and, uh, we get to work really across the real estate spectrum. So, uh, we built the greenest skyscraper, uh, in- in China. Uh, we built some of the first international serviced apartments, uh, in the country, and are doing some really interesting innovative projects. Like in Hong Kong, we bought a distressed hotel that we're turning into really a new kind of living, collaborative living that's super technology enabled, uh, for a young population there, where the average white-collar young person, it takes them 20 years of salary to be able to buy an apartment. So, we get to approach these problems that are not unique to our part of the world, but often the solution is a combination of East meets West. So, back to kinda what's the- the problem. Well, you know, we're sitting right now in Miami, a place that is super exciting thanks to a lot of the things that are happening right here that have been hyped by a pretty awesome mayor, right? What did he do? He got on Twitter and he talked to all of us about what this city had to offer. It had key ingredients. It had universities, it had an upward trajectory, it had young people looking to collaborate. And at the end of the day, that's where we wanna be, right? We wanna be sitting together in awesome spaces like this, uh, exchanging ideas with other interesting people. That's how you do cool stuff. And so as property developers, we think, you know, "How do you create spaces where people want to be their best," right, collaborate with others, and build a better future? So, that's a lot of jargon, but what does that actually mean? Back to the problem. Well, first, these ingredients are pretty clear. I teach a class at Stanford on this called Who Owns Your City, and the students usually pick it up in the first 10 minutes. It's, uh, it's a place that has pretty good infrastructure, uh, uh, can I get a job, can I afford to live here, and is there cool cultural stuff that keeps it from being too bland. Uh, but then, you know, you'd say, "Okay, well, cities can learn from each other," right? You can just take those ingredients and apply it, and that's what Suarez did a- a great job of here. But we are living in a time where the East and West have never been more divided, right? And building a city, building buildings is really hard. It's- it's like the most extreme version of hardware. So, as a property developer, you know, we spend our time really thinking about what are the big macro trends? What are startups focused on? Uh, where do they wanna be? Because our spaces need to be relevant for 50, 70, 100 years, and we can't pick up our building and move it somewhere else. And so you try to take the arbitrage of what's working in one part of the world and try to apply that to another and solve problems, and that's where you find great returns, but it's also where you build places that are gonna be relevant for folks. And so, you know, just a couple examples. Uh, up here behind me. So, you know, we talked about the living challenges, uh, so for folks to be able to- to be able to afford a place to buy, but the concept of rental apartments, so like multifamily, if anyone lives in a multifamily building with one landlord, that isn't totally a thing in greater China. Often, people are left to rent from an individual landlord, pay a deposit that's enormous, uh, cross-prohi- you know, cost prohibitive, and get, you know, quality of- of product that- that really is not up to what they would expect. And so taking a very, in some ways, kind of Western concept and applying it in a place that technologically is probably about 10 to 15 years ahead in terms of what that average user is used to, okay? They're used to unlocking a door with their phone. Their WeChat is their ID. It's the way they meet new people. They can physically shake hands on WeChat to introduce themselves to a friend. It's where they keep their coupons. It's how they pay their rent. It's how they pay their taxes in some regards, right? We don't have that in America. But if you're like me and you live in greater China, you do. And so how do you combine those things together to create something that doesn't exist? Uh, you see up behind me a- a logistics building. Uh, but it's actually six stories high, something we're developing that is a- a giant-... almost like a refrigerator, uh, but a high rise, super tech-enabled. Uh, and that's because, you know, they got a lot of people. That building will be sitting within a 45-minute driving radius to 45 million people. And yet, China only has a quarter of the cold storage capacity per capita that the US does. Okay? It doesn't take a genius to see that this trajectory is, you know, lower left to, to upper right. And so again, you're taking this concept of East meets, meets West. The building up here, uh, just behind me, is, is in Shanghai. It's about a million-foot tower. You have a lot of those here in the United States, big fancy office buildings, you know, where people used to go to sit at their computers and do work. Um, but this one is very different from one that you may have walked into earlier this week. This entire building is on WeChat. You can interact with the building on WeChat. You can interact with the landlord. You can interact with your other tenants. Uh, you can have chance encounters or, uh, organize a yoga trip in the afternoon, uh, with the people, with the space, using this digital interface. So in, in a way, it's really combining the way we live right now. We live in a physical world, but so much of our idea sharing, our collaboration is happening in the air, right? In a digital experience that we can't see. And so it's another combination of this East meets West. And so, what becomes a problem, and an opportunity, but a problem, uh, when you sit in the middle of this world, like my team has the honor to do, uh, is you see that there are all of these opportunities for us to be able to share this, really the best of what the West has to offer, with the innovation that's happening on the ground in China, but it is so hard to talk about in this very divided world. And so we like to take the positive side and say, you know, we're living in this world of, like, Magic and Larry, and how can we make each other better? So, I thought I'd use just a few minutes, and then we'll hang out with the besties, um, to, to maybe share, uh, a story that, that maybe y'all haven't read so much about so that you get the benefit of knowing a little bit about what's happening over there. And you can see an example of where sort of East meets West and that collaboration can make us all better. So up here is a gentleman y'all will probably recognize. It's Deng Xiaoping. You know, famous for really the opening up of China. And, you know, he was an experimenter. You know, he had this vision of what China could be. And he saw what the importance of the physical world, the physical infrastructure, what a role that could play, uh, in, in... to enable the economy to jump further. And so, the picture to the other side is Shenzhen, which, in 1980 was barely a, a fishing village. It had about 58,000 people, very few paved roads. And Deng Xiaoping, he was from Sichuan, so he really understood what it was like to not be from the big city. And so he declared it a special economic zone, special economic zone, so Jingji qiuju. And that meant that it would be this place to experiment with, uh, bits of capitalism, with free trade, et cetera. So what is it today? Well first, there's that same road, a long progression, just a few years after it was declared a zone. And then up here behind me is what it looks like now. Shenzhen is over 12 million people. The average age is 29. Uh, it's really the tech hub of China. Uh, so companies like DJI, which makes 70% of the world's drones. Uh, they call this area home. And, uh, and just within this area, if you were to go shortly from where this picture is taken, you'll have two of the world's five biggest ports by tonnage, okay? So how do you take that head start and turn it into something further? Well, they took a lesson out of the book of the West, and they created something called the Greater Bay Area. It's like the... Yeah, yeah, okay. You guys get it. (laughs) And so, what is the Greater Bay Area? Well, it is a collection of nine cities on the mainland side, uh, some of which may be familiar to you guys. So Shenzhen is mentioned, and Guangzhou. Guangzhou is about 18 million people. Uh, places like Zhuhai. Do y'all remember, you know, several years ago, there was this thing about China building the longest bridge in the world? Everyone's like, "Where is that?" Okay, it was in Zhuhai. Uh, and then, so nine cities on the China side, and then Hong Kong and Macau. And together, this, this area, it's about the size of, call it West Virginia, today has a GDP that's sitting right around Canada and South Korea, okay? About 1.7 trillion. In 2017, they declared this Gre- Greater Bay Area name, and, and it was there to really back up a lot of the investment, frankly, that had already started to join these cities together to create a super region. So within that super region, they spent about 300 billion to build infrastructure to further connect it. So within just four years, they'd built 2,000 miles of speed rail, like high-speed trains. You know, we have like a little, you know, one from here that goes to Fort Lauderdale. You know, Texas is gonna get one in the year 2090.

Narrator 11:50 (laughs)

Claire Cormier Thielke 11:50 Uh, and so, (laughs) so what does that mean? That means that I can walk out of my office with my teammates in Hong Kong, which is right next to that big Ferris wheel thing that everybody recognizes. I can take one stop onto metro. In 13 minutes, on a speed train, I could be in Shenzhen! Or I could keep on going.... and I could access about 23,000 miles of high-speed trains and get to Beijing, get to, you know, further than Guangzhou, get to Western China. It is amazing, and it is happening so quickly. And that number will soon be 40,000 as they continue to build. But it's not just speed trains. These are interconnected nodes with further metro, right? With transit-oriented development on top of the meetings of these trains. So, back to the so what? So, we know that if you take cool people and put them in cool places, and you give them an opportunity to interact, well what can you do? So this area, again, the size of West Virginia, now with 70 million people who are all quite young, and again, back to the ingredients, we talked about what sort of fosters innovation, well, they've incentivized universities to put additional campuses here. And these are the best universities in China, so Tsinghua, Fudan, et cetera. Uh, they funded further life science. They funded, uh, further tax increment zones to encourage businesses to come and set up nodes of activity focused on areas of excellence. So remember, we talked earlier about in 1980, there were 58,000 people in all of Shenzhen. So just between 2010 and 2020, in one small neighborhood on the western side of Shenzhen, they filed 58,000 patents. That's pretty amazing. And that shouldn't be scary. That should be exciting, guys. This is where we get innovation. This is how we get better, back to the magic and Larry, right? (clapping) Thank you, yes. You can clap for that. You can clap for that. So, what does that mean for us? What does that mean for folks who are sort of getting to work in this interstitial space in between getting to live within it? Uh, you know, up here, you know, behind me I have... uh, I'll, I'll clear the visual for you. It's further just connecting showing these metro lanes, these, uh, trams, uh, buses, et cetera, leading to these speed trains. Back down here, that's Hong Kong Island, and then this takes you, uh, through a bit of the Bay Area before you get out to the rest of, of China. Well, why does it matter? It's because these things layer together. Okay? So China's e-commerce percentage is about 25% of their overall retail. Here, it's about 14%. Again, you all are smart. We can see where this is going. So you can take some notes on the preview and see what things and trends may be coming here. In China, about 85-ish percent of their transactions are mobile. Here, that's barely 30%. Where is that going? How does that work? And you can see what's happening. Another is you can look at trends that are just part of the world there that haven't made it here, and you sit there and you're like, "Wow, what a chance to iterate." So, the example there, again we'll stick with, with shopping and, and retail, is social shopping. So this idea of streaming while shopping that's layered with a full experience, and imagine what it can do. And again, if you layer that on top of this WeChat platform we were just talking about, a place where I can go and I could make a new friend right now. You, by looking at you, showing my phone to you, putting 'em together so we can introduce a product, introduce a lecture, a concept together. Imagine what we can do. Elon likes WeChat. He was just talking about it yesterday. So, the point is, uh, that we all have this opportunity, um, to really, you know... again, the headlines can be exciting. They can be crispy. Um, but to look beneath them, and to take an opportunity to further connect with the people. Because again, those folks who are hopping on these trains for, you know, probably the equivalent of about, uh, 45 cents, right? To get on the public transit here. Going around and exchanging ideas, these people, most of them are not politicians, right? Most of them are not big world global leaders. They're folks who are trying to, to create something for themselves, to create something for their children, to build a better world, right? So we're really all on the same team. So with that-

Chamath Palihapitiya 17:02 Okay.

Claire Cormier Thielke 17:02 ... bring the besties out, I guess. (clapping)

Chamath Palihapitiya 17:04 (laughs)

Claire Cormier Thielke 17:05 Try not to get too spicy.

Chamath Palihapitiya 17:07 All right. Center stage for you.

Claire Cormier Thielke 17:09 Right here?

Chamath Palihapitiya 17:10 Right there in the middle seat.

Claire Cormier Thielke 17:12 Oh, baby.

Chamath Palihapitiya 17:12 Well done. Well done. Um-

Claire Cormier Thielke 17:14 Be nice, guys. Be nice.

David Sacks 17:16 (laughs)

Chamath Palihapitiya 17:16 Of course. Of course. Well, uh, Sax is in here so of course we'll be nice.

Claire Cormier Thielke 17:21 (laughs)

Chamath Palihapitiya 17:21 Um, that's kind of by default. Uh, and meet, uh, our, uh, Ryan Peterson from Flexport.

Claire Cormier Thielke 17:27 (laughs) (clapping)

Chamath Palihapitiya 17:27 Claire. Uh, maybe you guys, uh, Ryan, you haven't met Claire. Ryan-

David Sacks 17:30 You're the bestie. I'm his bestie.

Chamath Palihapitiya 17:31 I'm introducing you two guys. Claire, Ryan. Ryan, Claire.

David Sacks 17:32 And then you'll switch over.

Claire Cormier Thielke 17:34 Hi. (laughs)

David Sacks 17:35 Hi. You guys met? Ni hao. Ni hao.

Claire Cormier Thielke 17:37 We follow each other.

Chamath Palihapitiya 17:38 So,

Chamath Palihapitiya 17:40 what do we as Americans not understand about our rival? And what does our rival most not understand about us in your esti- estimation having operated in both countries for so long?

Claire Cormier Thielke 17:58 Hmm. You know, the term rival is an, an interesting one. Obviously I love sports analogies and came from the track and field world myself.

Chamath Palihapitiya 18:06 Claire was in the Olympics, guys.

Claire Cormier Thielke 18:07 (laughs) Claire was injured. Claire was injured, but-

Chamath Palihapitiya 18:10 She's like, "I used to go running sometimes."

Claire Cormier Thielke 18:12 (laughs)

David Sacks 18:12 Kind of fast.

Chamath Palihapitiya 18:14 At the Olympics.

Claire Cormier Thielke 18:16 But, you know, (laughs) your job in the sport is to find the person who is better than you in some ways, uh, and maybe they're strong where you're weak, you're weak where they're strong. You find each other and you, you shore up together.

David Friedberg 18:34 Mm-hmm.

Claire Cormier Thielke 18:35 And I think that is what becomes so clear when you, you know, live there, when you live (laughs) on the other side of the world, um, but maybe were born here. Or, uh, you know, I, I'm a minority, so I've maybe always lived in that interstitial space personally. Uh, or even our team, our team is very representative of modern China. We have people from nearly every province. They're really across the, uh, the education bracket, highly trained engineers, but who might be quite young, uh, to folks in their, their 60s who have really seen China evolve. And so I, I do think the thing that can get, uh, missed is almost that concept like we talked about that as, quote, rivals, you know, they're not monoliths. Just as America is not a monolith, right? And we can take the best of each other.

David Friedberg 19:26 So we're- we're best of rivals in a way.

Claire Cormier Thielke 19:28 There we go. Well said.

David Sacks 19:30 Is there a model for this century for cooperation between the two nations that's enhancing to both?

Claire Cormier Thielke 19:36 Hmm. I think it's happening in enterprise. I really think it is. So when I look at, again, younger people, um, the products that they use or the things that the young tech, uh, you know, entrepreneurs in China are working on versus here, they're, they're approaching a lot of the same problems, right? So on the social side, uh, uh, you know, looking at Douyin and what made it so catchy, right? Uh, uh-

David Friedberg 20:05 Explain what it is for us, yeah.

Claire Cormier Thielke 20:06 It's TikTok. It's TikTok. And back to that one about, you know, cheat codes and, and a preview, uh, you know, Douyin was popular years ago. And, uh, and so, you know, I remember first looking at the, at the app and being like, "Wow, this is very catchy." And there's effectively no difference between Douyin and TikTok. They are the same.

David Friedberg 20:26 So do you, do you read and write Mandarin fluently as well as speak it or?

David Sacks 20:29 (laughs)

Claire Cormier Thielke 20:29 Well, you will never confuse me for a local.

David Friedberg 20:32 Or fluently enough, yeah.

Claire Cormier Thielke 20:34 (more Chinese) . But, you know, enough to get by. (laughs)

David Friedberg 20:37 And so when you do business in China, do you conduct it in English or do you conduct it in, in Mandarin?

Claire Cormier Thielke 20:41 Yeah, so with the team, we work fully across what's appropriate 'cause we also work in Hong Kong where it's Cantonese.

David Friedberg 20:46 Right.

Claire Cormier Thielke 20:47 Um, but all of my communications (laughs) that go out to my full team, everything in full team is in Mandarin. Uh, we do have a large part of our team that only functions within Mandarin, um.

David Friedberg 20:57 So when you're... For example, like, you know, you showed some of these buildings and the idea that came to me is this is a massive coordination problem that's almost impossible in the United States, which is if you had this idea of, like, this living, breathing, monolithic building that is connected via the internet, it'd probably be 50 organizations in the United States that would have to have a say or want a say.

Claire Cormier Thielke 21:18 Mm-hmm.

David Friedberg 21:18 The s- the perception that we get is there is a individual that can effectively make that right decision in China, whether it's at the city level or at the state level. Is that how it's really like? Like, when you guys have super ambitious ideas, is there one place you go to and then it just kind of all gets decided?

Claire Cormier Thielke 21:36 Hmm.

David Friedberg 21:37 Or is it just like here where it's messy?

Claire Cormier Thielke 21:41 (laughs) So it's kinda neither actually. And, and this is where I think it takes the, the best of both, which is at a local level, so you have, you know, a local, we have a party secretary, you have a block leader, and, and ultimately it goes all the way up to, you know, the, the big guy. Um, but China does this amazing thing. They have a five-year plan. They call it the Five-Year Plan. Last year was the 14th Five-Year Plan and it sets KPIs and areas of focus for the entire country, and those are things around carbon neutrality, education-

David Sacks 22:18 Agriculture.

Claire Cormier Thielke 22:18 ... uh, care for seniors, agriculture, industry. And it's a lot like, you know, for you guys who are running companies, setting goals and how are you going to get there, what's the roadmap? But that filters all the way down. And so at a local level, those KPIs for the local leader, uh, are, you know, how did you make your district greener? How did you increase revenue from higher quality services and technologically advanced companies?

David Friedberg 22:45 But does it even count? Like, what happens if you don't achieve it? Like, you get fired, you get kicked out of the party? Like, what is the mechanism of reward-

Claire Cormier Thielke 22:54 Yeah.

David Friedberg 22:54 ... or, you know?

Claire Cormier Thielke 22:55 Well, it's quite high accountability and so if you perform very well, uh, within that system as a leader, then you could move to higher and more advanced posts, to a bigger city.

David Friedberg 23:04 City mayor becomes a...

Claire Cormier Thielke 23:05 Right. So yeah, so from a, from a block to a bigger city to a higher, you know, up to a, a sort of higher agency.

David Sacks 23:12 So your political career stalls out if you don't hit 'em, but it get, it gets accelerated if you exceed them.

Claire Cormier Thielke 23:16 Right. And so that creates a, a very interesting set of opportunities. And so to, to put it to maybe a, a tangible example, uh, is so for the things that, you know, are really great for communities like park space or building a building that's green. Uh, the, the last building that I showed up there is right, uh, sits right on top of a metro and is next to a natural history museum, and we needed to work with the local government to ensure that we were relating to the area properly, creating, like, leaving it better than we found it. Um, you know, we look at projects where you can't do the project unless you show that it's going to be green and additive or restore historic buildings in the area. Um, there's a real handshake there that I firmly believe creates better outcomes. I know our team would say the same thing.

David Sacks 24:07 Yeah.

Ryan Petersen 24:08 Claire, what, what's gonna happen with the capital markets for your business with Evergrande and, like, some of these big kinda property developers that have had d- major debt problems in Phila... Have you seen that already flowing over? And y- you understand the market very well, you s- probably are able to navigate this, but the foreign capital and other investors, like, might group everybody into the same block and get scared off.

Claire Cormier Thielke 24:28 Sure, sure. So certainly, we get a lot of questions.

Ryan Petersen 24:32 Yeah.

Claire Cormier Thielke 24:32 Um, but it's another one where the, the headline's out versus ins- you know, inside the country. Certainly, um, the, the built environment, the construction, and the real estate industries, if you combine that all together, you've got about 27% (laughs) of the economy, um, if you include the full integrated stack. One of the things in five-year plan is to d- diversify away from, from that, in a way. Uh, but is, you know... Evergrande and the other developers, um, the real focus at the local and the higher level is to help the regular people, uh, get good on their deposits and ultimately get the homes that they were promised. So it's very interesting for developers, uh, like us and acquisitions people, as for some of those smaller developers who got into trouble-

David Friedberg 25:19 Has there been a bailout? Is it, is that a, is that the wrong word the way that it's been characterized in the US media, that the Chinese government had to step in to shore up the balance sheet, make sure Evergrande wouldn't default on some of their, their loans?

Claire Cormier Thielke 25:29 I think there was a concern that there would be an entire meltdown of the full Chinese economy, which is not what we feel on the ground. And I think if anything, it's created a set of opportunities to really level set, espe- especially on the living sector. Um, it's really accelerated some policies to make it easier to, to build and to create rental housing, um, which creates more access, which therefore maybe takes away some of the pressure on the condominium system, um, you know, there, uh, for, for the debt markets to create a space that is, uh, maybe taking on projects that are, you know, appropriate for the system, um, a little bit again, more diversification and development in the right places, in the right markets. So...

Jason Calacanis 26:14 When we look at, um, the relationship between the United States and China, we've had three, four, 500 million people come out of abject poverty on the planet because of this great engagement. Uh, I, I don't know if that's a term, but I'll call it the great engagement. We started using their factories. We started making iPhones there. This has created, despite all of the hand-wringing about the relationship, uh, and, and all the various issues on both sides, um, a lot less suffering in the world.

Claire Cormier Thielke 26:43 Absolutely.

Jason Calacanis 26:44 And so there is something that I think we don't recognize sometimes is that people who are living for under a dollar a day, three or four, 500 million of them are now gone. Um, and, and that leaves some areas in Africa and, and Southeast Asia that we still need to do that work, um, which paradoxically or ironically, it seems like China is doing in Africa. What I'm curious about is what you're seeing on the ground with their middle class, which to me seems analogous to what we went through in the '30s, '40s, and '50s, this establishment of a middle class, which then established, you know, um, education and, and prosperity for, for the decades to come, and, and specifically for the Boomers and Gen X. Um, so, so tell us about that middle class that's emerging. We hear about it-

Claire Cormier Thielke 27:27 Yeah.

Jason Calacanis 27:28 ... but how many of them are there, and, and, m- qualitatively, what do they want from life?

Claire Cormier Thielke 27:33 Yeah. Well, Jason, i- in a word, it's incredible, right? Like, again, I, I talk about infrastructure so much because you, you see it up there, right? China's only as urbanized as the US was in about 1950. So we read a lot about these-

David Friedberg 27:49 Today.

Claire Cormier Thielke 27:50 Today. Today. So we read a lot about these-

Ryan Petersen 27:53 Bullet trains and...

Claire Cormier Thielke 27:54 Right. And so that leads to this incredible consolidation of people to cities and younger, younger people to cities. It's a demographic, you know, spark that, that maybe gets talked about a little bit less. But also, if you look at the change that that person you're talking about has seen in their lifetime. So they went from a, you know, rural lifestyle, frankly, most of them-

Jason Calacanis 28:18 A farm.

Claire Cormier Thielke 28:18 ... um, in something of a village setting that had not changed in decades to this future world that, in many ways, can only be imagined in, in movies. And so I think, you know, I, I sort of struggle to put it into terms 'cause he asked, you know, what, what do they want? What are they looking towards? And I'd say on a, you know, to use a personal example, right? I'm the luckiest girl in the world. I get to live in this amazing place and work with this incredible team. And, you know, yet, you know, my parents, you know, graduated in a fully segregated world. The elder people, when they were growing up, were not just slaves. They were the slaves that we talk about on Juneteenth, the ones in Galveston who walked across the bridge and followed railroad tracks to Houston, Texas, right? That's amazing.

Narrator 29:08 (claps)

Claire Cormier Thielke 29:09 That is amazing. And so I think when a generation or a collection of generations sees that amount of change, what they want is... First of all, they're grateful, but what do they want? They wanna be able to build and create and be people.

David Friedberg 29:26 Themselves.

Claire Cormier Thielke 29:27 Yeah.

David Friedberg 29:27 I have a question. Japan in the '80s had a moment where everything came together for that country. Great population growth, great economic growth, great systems like kaizen and all of this other stuff that they would export. And the headlines in the '80s was Japan was taking over the United States, or Japan was gonna lap the United States. But really one of the biggest things that it had working against it was a demographic wave, right? And you had massive negative birth rate that has really compounded Japan's stagnation. China's on the prepcis- precipice of this because of this One-China policy. I think the, the stat that I saw, which is stunning, is there's 1.2 billion people in China. 1.4? By 2100, it's going to be around 600 million.

Chamath Palihapitiya 30:15 If that's true, the point is just like, there's- there's a real issue.

Claire Cormier Thielke 30:18 Yeah.

Chamath Palihapitiya 30:19 Um, is there something in these five-year plans around how to become sort of more culturally integrated with the rest of the world? You know, meaning, how do you use immigration as an example to subsidize some of the negative birth rate? Do you teach English more so that you're more integrated into the world economy? All of these things. Can you just talk about that?

Claire Cormier Thielke 30:38 Mm-hmm. So first, I think the- the urbanization trend of folks consolidating to the cities really can't be overstated. Um, just in the way that it shifts sort of how- how the country will work and what's happening on the ground. Um, you know, it's still relatively early days, but when we look at things like Belt and Road, you know, as I walk around Beijing and I compare it to, you know, when- when we first started there or when we were working with capital partners there, I see a lot more Brown faces-

Chamath Palihapitiya 31:12 Really?

Claire Cormier Thielke 31:12 ... going to the universities around Beijing. Now, these are still-

Chamath Palihapitiya 31:15 Explain what Belt and Road is for folks who maybe haven't heard the term. Yeah.

Claire Cormier Thielke 31:18 Yeah. Yeah. So many places you guys can read about it. And before I forget, talking about sort- sort of just, I know everybody loves recommendations here, so if you haven't read Dalio's latest book on Changing World Order or there's actually a great... (clapping) You read it. (laughs)

David Sacks 31:33 Freebird made us all read it.

Claire Cormier Thielke 31:34 She read it. You- I see.

Ryan Petersen 31:35 Freebird- Freebird made us read it though.

Claire Cormier Thielke 31:36 Yeah, exactly.

Chamath Palihapitiya 31:36 Freebird talked about it every podcast-

Claire Cormier Thielke 31:38 That's true.

Chamath Palihapitiya 31:38 ... for the last 20 as you know.

Claire Cormier Thielke 31:39 So you've gotta read it. Listen to your besties. Uh, there's also a very good, uh, video-

David Sacks 31:44 Very good illustration of it.

Ryan Petersen 31:45 Sunrise and the sunset.

Claire Cormier Thielke 31:46 As you guys have talked about. Um.

Ryan Petersen 31:49 It is.

Claire Cormier Thielke 31:49 But you do- do read that because, you know, China's been a major participant in the global South. So, you know, the short version of Belt and Road is, uh, working really across a- a set of countries around Southeast- Southeast Asia and Africa, bringing in, uh, infrastructure and kind of what it sounds like, roads, uh, roads, ports, airports, um, et cetera, really building out this network for that part of- part of the world. But I think what gets sort of bumped over on that is, uh, again, things like- like this. So folks coming to China to be educated, the number of folks on the African continent now learning Chinese. And again, I think this is something that is exciting at the end of the day. The opportunity to- to further exchange, to lift more people out of poverty, to create further infrastructure and

Chamath Palihapitiya 32:43 Claire, I was hoping you would stay with us and be a bestie for Ryan, who's the next speaker. Would you be willing to help us interview Ryan?

Claire Cormier Thielke 32:50 I would be honored.

Ryan Petersen 32:52 You guys want to switch seats?

Claire Cormier Thielke 32:53 (laughs)

David Sacks 32:53 No, no. Stay where you are.

Ryan Petersen 32:54 Oh, stay where we are.

Chamath Palihapitiya 32:54 Oh yes, switch seats.

Ryan Petersen 32:56 Okay.

Chamath Palihapitiya 32:56 Perfect idea.

Ryan Petersen 32:56 Yeah, you be bestie.

Claire Cormier Thielke 32:57 All right. Get in. I warmed it up for you.

Chamath Palihapitiya 32:59 Now you're bestie and you're the guestie.

Claire Cormier Thielke 33:00 (laughs) (clapping)

Chamath Palihapitiya 33:00 Um, I like it. I like it. Um. Uh, so give it up for Claire. (clapping) Um, now, Ryan, congratulations. Um, CNBC does their top innovator of private company awards, um, every year. And you made it to the top 50 list today. I didn't check which ranking you got, but being on the list in and of itself is a- is a big win. What do they call it? Disruptors list?

Ryan Petersen 33:24 Uh, Disruptor 50. And my view of these lists is you should never share any list about your company unless you're number one. And we were number one this morning, so... (clapping)

Chamath Palihapitiya 33:34 Well done. Um, you truly helped us navigate, I think, um, the- the, uh, challenge of us as besties and the audience understanding supply chain. We appreciate that. You've been on the show twice, I think, or once?

Ryan Petersen 33:47 Just once so far.

Chamath Palihapitiya 33:47 Just once so far and then here, this is your second time on the show.

Ryan Petersen 33:51 And, uh, apologies, I was, uh, filming the interview for that during, uh, Palmer's talk this morning.

Chamath Palihapitiya 33:55 (laughs)

David Sacks 33:55 You didn't miss anything.

Chamath Palihapitiya 33:56 You missed nothing.

Ryan Petersen 33:56 I- I don't know what I missed.

Claire Cormier Thielke 33:58 Nothing much happened. Nothing much happened.

Ryan Petersen 33:59 But when, uh, Palmer and I woke up this morning, we're writing our speeches together and deciding-

Chamath Palihapitiya 34:03 Yes.

Ryan Petersen 34:03 ... you know, what we were gonna say.

Chamath Palihapitiya 34:04 Oh, do- would you- do you have some feelings you'd like to share with the class?

Ryan Petersen 34:07 No, no, I'm just kidding.

Chamath Palihapitiya 34:08 Seems to be a theme. I mean, this is turning into therapy.

Ryan Petersen 34:11 Uh, no, I don't have any enemies.

Chamath Palihapitiya 34:13 I have some emotions.

Ryan Petersen 34:13 I don't have any enemies.

Chamath Palihapitiya 34:14 No enemies list.

Ryan Petersen 34:15 It's- it's sad. I got- I got COVID.

David Sacks 34:15 He just says nice things about people, Jakell.

Ryan Petersen 34:17 I got COVID, I couldn't think of a single person who do I want to give this to. I was like, "I like everybody. I don't know."

David Sacks 34:21 (laughs)

Chamath Palihapitiya 34:22 Um, so, um, tell us-

David Sacks 34:24 He was gonna do a talk, right?

Ryan Petersen 34:26 What's that?

David Sacks 34:26 A- are you doing a talk for a couple minutes?

Chamath Palihapitiya 34:27 Well, he can talk from there. Just give us a little overview.

Ryan Petersen 34:28 Yeah, let me share a little bit about what we're

Ryan Petersen 34:30 seeing. Um, so, uh, first off, what Flexport is, is we're a global logistics platform. We help, uh, businesses of all sizes ship products all over the world from anywhere in the world to anywhere else in the world. We do a lot of business in China. Um, probably about half of all of our volumes, uh, come out of China. Ocean and air freight.

Claire Cormier Thielke 34:44 I know a landlord if you're looking for one, Ryan, just putting it out there. (laughs)

Chamath Palihapitiya 34:49 If you need some trade.

Ryan Petersen 34:49 If you need to ship something, we'll do some business after this. Um, and so we see a lot. We're- we're sort of like a front row backstage pass to the world economy of what's really happening and unfolding. Um, and it's been a crazy few years. We, to give you context, so Flexport started in, um, 2013. Its first revenue was in 2014. We did $2 million in revenue that year. Uh, we're on track this year to do $5 billion in revenue. Uh, so from... (clapping) Uh, very exhausting. Yeah. And, um, this time period is, I assume it's always like this in this industry. I have only been in the business for about eight or 10 years here. But, uh, just to take you through that timeline, uh, in 2015, there was a port strike on the West Coast and you couldn't import anything into the United States for like three months. Um, total pandemonium. By the way, that might happen again July 1st. Their contract that they negotiated back then is up for renewal on July 1st. So we might talk about that. Uh, 2016, there was so much excess capacity of ocean shipping. Oh, so many extra ships were purchased that the price of ocean freight hit the lowest in all of human history. It was like $600 to ship a container. This past year it was 20,000 bucks in 2016.

Chamath Palihapitiya 36:01 Wow.

Ryan Petersen 36:01 So we go through these boom and bust cycles. It's an asset business that'll happen. Uh, 2017, '18 and '19, our president would launch a new tariff war every couple of months and you couldn't predict anything. Uh, 2020, a pandemic hits. You couldn't ship anything for a couple of months outta China, where like they- they were really hard, zero COVID, shut down factories, shut down all the purchase orders. Everyone thought the Great Depression was coming.... canceled all the purchase orders. Then it turned out the opposite happened. It was this crazy boom and you couldn't import anything because the ports were overcrowded. It, it went from... In 2019, it took about 50 days to ship a container from, like, when the goods are ready, when the factory raises their hand and says, "Hey, come and pick up these goods," to right now, it's about 120 days. So you're doubling or more than doubling the transit time, um, and it, it is just incredibly hard to operate in this environment if you're trying to run a business. And so we've, we've had to learn how to navigate through chaos at, as Flexport. It's like we kind of welcome it at this point. Um, we found that it's probably... it might actually be good for our business. We try not to talk about that because it's so bad for our customers and, uh, it's been hard to fulfill the customer promises. But if you put yourself in the shoes of those customers, so like a direct to consumer e-commerce business, and we ship for probably 80 or 90% of the hot new DTC brands, um, a lot of IPOs recently, a lot of, a lot of really cool hot new brands. They're going through a... almost a perfect storm right now, uh, in, in, like, a really, really bad way. Like the movie, The Perfect Storm, um, because ocean freight rates are sky high. I mentioned this, 10, $20,000 to ship a container. Rule of thumb, long term is like two grand. So really, really elevated cost. Walmart announced really high costs this morning. And so it's not just small companies, but Walmart announced their costs were through the roof from supply chain, and their stock fell 10% today, wiping off $40 billion of market cap this morning. Um, so, so it hits companies of all sizes, but these DTC brands got a double whammy because Apple last... I think it was last year when they changed their privacy rules and their customer acquisition models are on Instagram-

David Sacks 38:08 Facebook.

Ryan Petersen 38:08 ... Facebook, all these things stopped working. And so you're... at the same moment your CACT stops working, you can't acquire customers, your supply chain costs-

David Sacks 38:16 Your opex.

Ryan Petersen 38:16 ... are through the roof. Uh, and then add to that that consumers are now starting to come back to conferences like this, going back to the restaurants and the clubs and doing the travel. And during the pandemic, everybody just bought stuff. Uh, you got to get your dopamine from somewhere, and everybody was just buying goods. So that, uh, is like a triple whammy for these companies. I'm incredibly worried about-

David Friedberg 38:39 The whole DTC brands, the whole DTC space.

Ryan Petersen 38:42 The DTC space, just anyone in physical goods.

David Sacks 38:44 By the way, you saw it... You saw it in, like, the... I think it was Thrasio that just announced they're laying off 25% of their employees.

David Friedberg 38:49 Thrasio was buying a collection of those Amazon DTC brands-

David Sacks 38:52 DTC businesses.

David Friedberg 38:52 ... putting them together and trying to have some economies of scale.

Ryan Petersen 38:55 Yeah.

David Friedberg 38:56 But when your supply and your demand both get 10Xed in the wrong direction, it's game over.

Ryan Petersen 39:02 It's... I don't know if it's game over, but it definitely changes the rules of the game. The reality is, look, people still are gonna buy stuff. There are gonna be successful, there are gonna be some winners, there are gonna be brands that survive.

David Friedberg 39:10 At what price though? At what price?

David Sacks 39:12 Well, so you're, so you're saying that... Your thesis that you're making, the statement that you're making today is, hey, we're seeing real significant risk to DTC companies because of this confluence of issues right now. And this could be a big threat to a lot of businesses, particularly in an, in an environment where venture funding is...

Ryan Petersen 39:28 I think you're... Yeah, venture funding, right.

David Sacks 39:30 Oh, my gosh, it's a triple storm.

39:31 Right, right.

Ryan Petersen 39:31 The capital markets are drying up.

David Friedberg 39:32 Capital markets-

David Sacks 39:33 Capital markets, right.

David Friedberg 39:33 ... public and private.

Ryan Petersen 39:34 Investors like you all will look at this and go, "Hey, maybe I'll, you know, put more into SaaS or something."

David Sacks 39:37 Like Keith said, it's just easier to not do anything.

Ryan Petersen 39:40 It might be easier to not do anything. So what does that mean? How do you manage this? And, um, fundamentally, one of the problems that's, that, that comes about in all supply chains, it's been written about, um, the famous PhD paper from like the '60s or something called The Bullwhip Effect. And a bullwhip, if you, you, like, crack a whip, the end of that whip is moving incredibly fast. Um, and it's a, it's a bit like that in supply chains because you have imperfect information. And so the people doing demand planning are living one system, they're selling goods, they're looking at this dataset. The people producing stuff, it's on a different system. Uh, how long is it taking to produce things? That's getting longer. The transit time is getting longer. This data is living across all these different domains and becoming very, very hard for a brand to make a decision, how many goods should we buy? When should we buy them?

David Sacks 40:29 So we're at what-

Ryan Petersen 40:29 How much do we want to have in stock? How do we avoid being way overstock?

David Sacks 40:32 Yeah.

Ryan Petersen 40:32 And then not... And where, where we're seeing right now is these warehouses are overflowing and, uh, people can't-

Claire Cormier Thielke 40:37 So what changes that? Like, what breaks it open? So, you know, like in China, Pinduoduo didn't exist in 2015. Now, 800 million plus, right, users. But it was technology that broke it open. Like, what's the breakout moment to solve this exact problem you're talking about?

Ryan Petersen 40:51 Yeah, I, I mean, actually China's got... One of the companies to watch is, um, SHEIN, uh, S-H-E-I-N. It's this Chinese, uh, kind of like the new Zara that, uh, is taking over the world. I think they're gonna do $20 billion in revenue this year.

David Friedberg 41:05 Fast fashion?

Ryan Petersen 41:06 Fast fashion. They're launching a thousand SKUs a day, a thousand new SKUs a day, all like AI generated. And then if people order enough-

Claire Cormier Thielke 41:13 Yeah.

Ryan Petersen 41:13 ... they produce it. And it's like a really incredible company-

David Sacks 41:16 Wait, you're saying a robot says, "Make these SKUs"?

Claire Cormier Thielke 41:20 This is where this shirt is from, actually.

David Sacks 41:23 No way. Your shirt is fabulous.

41:24 Is that-

Claire Cormier Thielke 41:24 I kid you not.

Ryan Petersen 41:25 Yeah, see?

Claire Cormier Thielke 41:25 Be like, "Yep."

David Friedberg 41:26 AI did that shirt. And it... But now, it's gonna be a million of them ordered after this.

David Sacks 41:31 One second, hold... Hold on. Sorry, sorry. Tell us... So wait, sorry. This shirt, you bought?

Claire Cormier Thielke 41:34 So it's literally a shirt from SHEIN but, but yes. So if Zara... So if Zara is seeing something on a runway, determining that that trend will hit, and then they can have it in stores, I think, within like eight or nine days, something, you know, pretty wild. Uh, SHEIN is about as close to instantaneous as you can get.

David Friedberg 41:52 Wow.

Claire Cormier Thielke 41:52 So very fast moving SKUs at sort of hyper-speed fashions. They can have things-

David Friedberg 41:56 Yeah, but they're kind of like pre-con, you're saying-

Claire Cormier Thielke 41:56 ... almost on the same day.

David Friedberg 41:58 ... like from minority report. They're predicting, right-

Claire Cormier Thielke 42:00 Yes.

David Friedberg 42:00 ... that this puffy shirt is going to be like... (laughs) Women are gonna want to go for pirate shirts, not-

Claire Cormier Thielke 42:04 But it's a fly shirt.

David Friedberg 42:06 It's fly as fuck, I agree.

Ryan Petersen 42:08 And, and I think one of the, one of the key things here is, is the, the transit time of how long does it take you from when the thing is made to when it gets to the customer? Because if it turn... it stretches out the way it has right now in ocean freight market where it's taking forever. If that takes three months, four months, five months-

David Sacks 42:22 Might not be fly no more.

Ryan Petersen 42:23 ... six months. All of a sudden, you've placed these orders and then the demand went away because people started going to nightclubs-

David Friedberg 42:27 Right.

Ryan Petersen 42:27 ... instead of buying their gardening equipment.And so the tighter you can make that, and it does speak to spending a little bit more on logistics, where, where, you know, a t- tr- traditional procurement person in logistics only thinks about like, "I'm just gonna buy the cheapest freight I can ever buy." Because they don't understand that your goods in transit are just money that's taking a different form for a period of time, and money has a cost to it. And if you're sitting there on six months, it's already expensive because of, you know, you gotta pay interest on that. There's opportunity costs. What else could you do with the money? But now that cost has gotten much worse, because by the time the goods arrive, maybe nobody wants them. Um, you saw that with Christmas where, you know, g- you import Christmas... That's the classic thing. You import Christmas stuff, and in January it's worthless. Uh-

David Friedberg 43:09 At what price do people just find alternate ways, whether it's you establish domestic 3D printing, or you buy a fleet of planes, or like there's gotta be a wor- 'Cause like I saw this image, I think maybe you tweeted it, of this entire massive traffic jam basically trying to get the ships even into China because the COVID-19 lockdowns are so strict that that's also exacerbated all of this.

David Sacks 43:32 But, and, and last year Walmart, didn't they announce they're spending $10 billion verticalizing their supply chain and building out their own infrastructure for moving goods?

Ryan Petersen 43:40 I, I th- You're seeing a lot of companies do this. Uh, much easier said than done.

David Sacks 43:44 Yeah.

Ryan Petersen 43:44 Um, you've seen at l- least a few of the big box retailers, Walmart, I wanna say Home Depot, Costco, a number of these guys have said, "Hey, we're gonna charter our own ships."

David Sacks 43:51 Tar- Target was the other one.

Ryan Petersen 43:52 Maybe T- Target. Um, Amazon, of course.

David Sacks 43:55 Yeah.

Ryan Petersen 43:55 G- go charter their own ships, go solve the problem their own way. Um, it's really hard to do, run these things at scale and operate it. It looks good at the PowerPoint slide. Uh, it, you know... When, when, when you have to get down to it, it's really hard.

David Sacks 44:06 So is there a big CapEx play here, Ryan, for the next decade?

Ryan Petersen 44:09 I think, um-

David Sacks 44:10 Like a big capital equipment hard asset play?

Ryan Petersen 44:13 So the world's ocean carriers, that's what we call the people that own the ships, have actually ordered 25% more ships. They increased the fleet by 25% over the next three years.

David Sacks 44:25 Wow.

Ryan Petersen 44:26 So it could be ugly the other way real quick. Uh, you have too many ships and nobody, you know, the ship owners can't make any money.

David Sacks 44:30 The same is happening in mining. I mean, like it's a similar sort of... But anyway.

David Friedberg 44:34 R- Ryan, Ryan said it best. The problem is you can't forecast demand accurately for these long lead time categories that are highly CapEx intensive.

David Sacks 44:41 Totally.

David Friedberg 44:41 So whether it's mining or whether it's shipping, how do you make a $500 million CapEx decision for a business demand cycle that's five years into the future?

David Sacks 44:49 But they're all taking, they're all taking profit hits and saying, "We have to make this investment because we need the security, we need the redundancy." I mean, e- Walmart did it, right? They were optimized to, to a T.

David Friedberg 44:58 Well, so the way, the way-

David Sacks 44:58 And then all of a sudden it's like, hey, that optimized system doesn't work.

David Friedberg 45:01 Look, the way that mining, for example, deals with this, which is really interesting, is they get these companies to sign up what's called take-or-pay agreements. Right? And so they can actually smooth out the demand curve five or six in the future.

David Sacks 45:11 Yeah. Can't do that to consumer, right?

David Friedberg 45:12 Take, take-or-pay means I'll do a deal that says, "Okay, I'm gonna rip the lithium out of the ground. You take it or you pay for it. I don't care what you do-"

David Sacks 45:20 Right, right.

David Friedberg 45:20 "... but I'm gonna get the revenue assurance I need to go to Wall Street to get the money."

Ryan Petersen 45:25 And we've started to see those signed for the first time. So we've signed three-year contracts. Flexport was the first ever to sign a multi-year contract where we commit we will pay for this freight whether or not, uh, whether or not we ship anything. We're gonna-

David Friedberg 45:34 Take or pay.

Ryan Petersen 45:34 We're gonna pay up front. Yeah, okay, take or pay. Um, and, and you asked a little bit, uh, uh, air freight what's gonna happen there? Well, remember, uh, 50% of all the world's air freight flies in the belly of passenger planes, and there's way less people traveling to and from Asia than there were.

David Friedberg 45:47 Is that right?

Ryan Petersen 45:48 Yeah. 50% of the world's air freight, which is a little scary when you think about like what's under the belly of that cargo.

David Friedberg 45:52 Yeah. Is that getting scanned?

Ryan Petersen 45:54 Uh, it is, it is. There's, there's good controls on that.

David Friedberg 45:56 (laughs)

Ryan Petersen 45:56 But, uh, but you never know. It's always-

David Friedberg 45:57 Yes, Jason, it's getting scanned.

Ryan Petersen 45:58 A little nerve-wracking.

David Sacks 45:59 (laughs) .

David Friedberg 46:00 Getting scanned.

Ryan Petersen 46:00 So, and, and in fact-

David Friedberg 46:01 You seem to be not so sure.

Ryan Petersen 46:03 Uh, you know, you work in any industry long enough, you start to question the, whether everything's perfect. Um, so we've actually, uh, got 10 passenger planes that we've leased, and we'll, we'll keep doing more, that are not flying any passengers. We're just filling them with freight. We started doing this in the pandemic, flying-

David Sacks 46:18 Are there seats in them?

Ryan Petersen 46:19 Flying masks.

David Sacks 46:20 Are there seats at the top?

Ryan Petersen 46:21 There's still seats in some of them. Some we've ripped out the seats. Uh-

Claire Cormier Thielke 46:23 It's like Castaway. You know, you got the big plane with-

David Sacks 46:27 Yeah, yeah.

Claire Cormier Thielke 46:27 Yeah, basically just holding stuff.

Ryan Petersen 46:28 If you want to go to Asia, I've got a 787. There's nobody on there. Could be a private flight with just you.

David Sacks 46:34 Absolutely.

Claire Cormier Thielke 46:34 But exactly thi- this is why you've seen the rise of logistics real estate-

David Sacks 46:38 Right.

Claire Cormier Thielke 46:38 ... as a deeply institutional asset class. Because that math that you talk about, the algorithms determining what is ordered, how long will it sit, and how fast do people want it, that takes an infrastructure on land to be able to get it to people as well.

Ryan Petersen 46:51 And, and coming back to the question about assets, is there a play here? Probably yes, because most of Wall Street has been trained, they've gone to all the same business schools and everybody's been trained that like assets are terrible. Get them off your books, don't carry them. Don't-

David Sacks 47:03 This is what happened with oil and gas, you know, going into last year.

David Friedberg 47:06 Asset light market. Asset, asset light was the trend.

David Sacks 47:06 And, and then ev- and everyone missed it.

David Friedberg 47:08 You want to be asset light.

Ryan Petersen 47:09 It's still the trend in, in, in almost everywhere until somebody like TSMC comes along and says, "You know what? You don't want assets, Intel? Like, fine, we'll build the fabs." And now they're a $400 billion company because they're willing to have assets-

David Sacks 47:19 Totally.

Ryan Petersen 47:19 ... on the books.

David Sacks 47:20 Totally.

Ryan Petersen 47:20 But it's a different investor positioning.

David Sacks 47:21 And now they have the power in the equation and they can, they can get a better, uh, share of value.

David Friedberg 47:26 And Bomber says if they put a blockade around it, we're screwed.

Ryan Petersen 47:27 And I've been, you know, I've been answering this question-

David Sacks 47:28 That's, that's the real estate business too.

Ryan Petersen 47:29 The hardest question for me to answer, and I, I'm, I know that there's some entrepreneurs out there who have the same question, anytime someone asks me, "Is Flexport a software company or a logistics company? Are you gonna own assets or not own assets?"

David Friedberg 47:40 Yes.

Ryan Petersen 47:41 And, you know, I think the, the correct answer is to ask the investor which one they'll give you a higher multiple for and then just say that.

Narrator 47:47 (laughs)

David Friedberg 47:48 Right.

Ryan Petersen 47:48 Um, try, trying to figure out who you're talking to, but it is on some level... You know, maybe another answer is like kind of Buddhist dualism. Like you can't do logistics without the tech, you can't do the tech without the logistics.

David Friedberg 47:58 You're, I think you're bringing up something which is that today the problem with the capital markets is actually that it is very Balkanized. So meaning, you know, let's just say you take a company public like yours. The problem that you'll have in the public markets is that there are folks that you'll go to in that room that understand SaaS software, understand margin structure of a software business, et cetera. And then there's folks over here who run the industrials business, and folks over here who run consumer. The problem is those three folks don't talk.

David Sacks 48:25 Yeah.

David Friedberg 48:25 They have three completely different conceptions of what a good business is. And the problem for you will be, and I'm not forecasting this for you to be a problem-

Ryan Petersen 48:33 No, no, you're correct.

David Friedberg 48:33 ... is that you can get orphaned in any one of these groups, and now all of a sudden, the capital markets could be totally shut for you. This is a very important point that you're bringing up. The, the thing that I think we need to change is, like, the capital people that control the money flows do need to have a little bit more of an open mind. Sure, it's true that you'd love a 90% gross margin business, but it is also true in the TSMC case, you'd rather have a business doing 20% on $500 billion. You know what I'm saying?

48:58 Well, and if we look, Chamath, d- Chamath, we also have some examples of Amazon, the market seems to have worked out this business that's very factory and asset heavy in delivering goods to us, and, you know, the cloud business.

49:12 But even as you said, even, even Amazon, like, look, Amazon got escape velocity on less than, you know, a billion dollars of invested capital. The problem is, you know, if Ryan, for example, decides, "Hey, I'm gonna go and actually vertically integrate and buy an entire fleet of ships," that's probably a $10 to $20 billion capex cycle over 10 years, and you think about replacement costs, it may make a ton of sense actually.

49:33 Right. I wonder when Amazon's-

Ryan Petersen 49:34 You gonna do this?

David Friedberg 49:35 ... CAP expenses for those servers started to hit.

Narrator 49:38 (laughs)

Claire Cormier Thielke 49:38 He's thinking about it. He's thinking about it.

Ryan Petersen 49:40 I'll always love you for this. But do you think-

David Friedberg 49:40 Do you think he's going to buy a fleet of ships?

Ryan Petersen 49:41 But do you think the capital markets will show up-

David Friedberg 49:42 The little boy in me definitely wants to do that, but I don't think it's happening. Right. How cool would that be? You wanna own a fleet of ships?

Ryan Petersen 49:46 You already own a bu- you have a bunch of these planes.

David Friedberg 49:47 Who doesn't want to own a fleet of ships? But no, we're not gonna do that. I don't think, um, I, you know, there's two plays. Wh- y- you know, fundamentally your bullwhip effect means the data can't flow and people can't make decisions optimally because the data's trapped in multiple places. You don't know how to run an efficient supply chain because you don't know how many trucks do I need- Demand forecasting.

Ryan Petersen 50:03 ... when the ship arrives. Like, actually, even, not even, like, long-term demand foreca- forecasting how many ships, but, like, literally that ship is gonna arrive, how many trucks should I dispatch? When should I dispatch them? Like, there's two ways to solve this problem. One is to own the asset, and the other is to create a data network effect such that the asset owner benefits enough from putting it on your platform, your machine learning, your op- your algorithms are helping them make more money from their asset. They want to tell you w- what's going on.

Claire Cormier Thielke 50:28 Or you can invest further down into the chain, I mean-

Ryan Petersen 50:31 And both of these are potential plays. One of them is a lot, hopefully simpler and don't need to manage as many people and life is easier if you can solve the data, uh, machine learning problem. Sorry.

Claire Cormier Thielke 50:37 But you look to Alibaba, and Alibaba investing down into China. Like, there is a middle road of being able to go through-

Ryan Petersen 50:43 Investing into who?

Claire Cormier Thielke 50:43 China. So logistics, warehouse-

David Friedberg 50:46 I mean, in a way, Ryan, as, as-

Claire Cormier Thielke 50:46 ... right, for them to push goods out to the market.

David Friedberg 50:48 ... stupid as it sounds, you having purchased a shipping company and putting it over here, to your point, Clare, and saying, "Here's the little thing we bought, it's a bunch of ships, it's its own balance sheet, and then here's the really great business. But we have this little subsidiary over here as a potential middle ground."

Ryan Petersen 51:03 It's what makes Flexport fun business, there's like a million strategies and ways to play out. And I'm, I'm not a big believer in, like, predicting the future and, you know, you want to have a vision and know where you're going, but I think be sort of flexible-

David Friedberg 51:14 Yeah.

Ryan Petersen 51:14 ... in that. Um-

David Friedberg 51:15 It's in the name.

Ryan Petersen 51:16 ... uh, we talk about our culture a lot.

Narrator 51:17 (laughs)

Ryan Petersen 51:18 What's the goal of, what's the goal of a company's culture? Um, and Elon talks about the goal of a company, the purpose is like, hey, we've got to create valuable products and services for fellow humans, right? Uh, but the goal of your culture is how do you maximize your velocity in that direction?

Claire Cormier Thielke 51:32 I have a-

Ryan Petersen 51:33 And, and velocity is a really important word because we forget a lot, like, normal people forget that velocity is different from speed.

David Friedberg 51:39 Yes.

Ryan Petersen 51:39 If you remember your physics, velocity has a direction. You gotta know where you're going. And sometimes going really, really fast is actually negative velocity because you're going the wrong way. And so how do you stay agile? The world's gonna throw all kinds of chaos at you. Be nimble, be able to change, like, uh, w- w- we don't know exactly the strategy. I don't have everything mapped out.

David Friedberg 51:54 As, as we wrap here, um, question for both you and Clare, um, which is, China has big aspect here-

52:01 Wait, before you, before you do your wrap question, can I just, can I ask him to-

52:04 Yeah.

52:04 Can you tell us, the audience, about what you did during the Ukraine crisis? Um-

Ryan Petersen 52:08 Oh, this is beautiful.

David Friedberg 52:09 Um, yeah. It's just, just like 30 seconds about, you know-

Ryan Petersen 52:11 I didn't go there like Antonio, the crazy man, but, um, what-

Narrator 52:14 (laughs)

Ryan Petersen 52:16 So, uh, we started this group in 2017 called flexport.org to do humanitarian relief shipping, uh, really at that time the crisis was Syria and trying to help, uh, refugees. It was really a simple idea. It's like, "Look, we got all this stuff here. We know they need stuff at the refugee camps. What if we shipped it there?" Uh, seemed like a radical idea. I, uh, we, we maintain a database of partners, so we have agents that we can operate on behalf of Flexport in over 120 countries. And at that time, I simply emailed our Syria partner, who's literally based in Aleppo where a lot of this destruction was happening, and I emailed, I said, "Hey, we'd like to ship a container to this refugee camp down there." And he was like, "Sure, what's the address? Where do you want to ship it?" And I was like, "Wait, it's that easy?" Like, I thought this was like... And I realized you could do that. And we didn't ship into Syria because we didn't know who was going to end up in, so we shipped to refugee camps in Turkey and Jordan. Um, so we've been doing this now for five years, shipping to over 50 different countries, any kind of, anytime there's a hurricane, uh, earthquakes, but, uh, or, or war. And so when we saw this happening in Ukraine, we immediately kicked into high gear. Uh, the flexport.org team has about 12 full time people, and then we have a model where employees at Flexport can surge onto that, so we've had about 60 people working on this. Uh, in this case, you know, usually we offer pro bono shipping because we, shipping is expensive. Uh, we can't just eat the full cost. We are profitable, but not enough to really solve the world's problems all by ourself. So we created a GoFundMe campaign partnered with, uh, Ashton Kutcher and Mila Kunis. Ashton's an early investor in Flexport. Uh, and we raised 25 million bucks to pay for shipping, uh, to deliver goods.

Narrator 53:46 (claps)

Ryan Petersen 53:46 Yeah, thank you.

David Friedberg 53:47 Well, and the way you did it-

Ryan Petersen 53:48 And thanks to Ashton and all of our investors. A lot of great people stepped up.

David Friedberg 53:51 You, you emailed the Besties and said, "Hey, um, it's $4,400 a container." Was that the number, 42 or 44?

Ryan Petersen 53:58 Uh, it depends on where it's coming from.

David Friedberg 53:58 For Ukraine specifically.

Ryan Petersen 54:00 I mean, for example, we shipped nine ambulances from, uh, Gibraltar into Ukraine. I thought we wouldn't be able to ship into Ukraine because it, it's a war zone. Uh, it turns out most, I don't know if most, but a huge percentage of European truck drivers are Ukrainian and they were just like stoked to go and do this.

Narrator 54:15 (laughs)

David Friedberg 54:15 So, uh-

Ryan Petersen 54:16 So we delivered nine ambulances. That cost like around 10 grand.

David Friedberg 54:19 Yeah, so punchline of the story-

Ryan Petersen 54:20 We delivered nine ambulances.

David Friedberg 54:20 ... I replied back to him and I said, "No problem." And he said, "Hey, mention it on the podcast." I said, "No problem," and I, I donated a $4,400 container. And then Chamath said, "Oh, I donated the plane that 12 containers went on."

Narrator 54:31 (laughs) (cheers)

Ryan Petersen 54:31 He did.

David Friedberg 54:32 So it was a flex on a flex.

Jason Calacanis 54:34 ... for Flexport.

Narrator 54:35 The modern day-

Jason Calacanis 54:36 It was like a multilayer of flex.

Ryan Petersen 54:38 So, and then, um, it just snowballed and this hasn't gotten much attention, but Yuri Milner, who's an early Flexport investor, just donated $100 million.

Jason Calacanis 54:46 Wow.

Narrator 54:46 Wow.

Ryan Petersen 54:47 To, yes, um-

Claire Cormier Thielke 54:48 You're really putting pressure on their side of this table.

Ryan Petersen 54:50 Look, you just-

Jason Calacanis 54:51 Flexon, Flexon, flex.

Narrator 54:52 I didn't hear the last part. Anyways, keep going.

Jason Calacanis 54:54 Keep going. (laughs) Let's go to the... Well, let, let me, let me wrap.

Ryan Petersen 54:56 Everybody does what they can. Um, and it, it is an amazing model where... But by the way, over 60,000 people donated a little bit. And I'm almost as just as proud of that. It's like people are getting involved.

Jason Calacanis 55:06 Go to Flexport.

Narrator 55:06 Every-

Ryan Petersen 55:06 Stepping up, hey, you can do something...

Jason Calacanis 55:07 Flexport.org.

Ryan Petersen 55:08 Flexport.org, everybody.

Narrator 55:09 People go there and they can support causes.

Ryan Petersen 55:10 Um.

Narrator 55:10 Flexport.org, yeah.

Ryan Petersen 55:11 Fin- final question for you two. Um, we had this great moment where, you know, we engaged China, we built a bunch of iPhones, Amazon Basics, you know, whatever it is, Nike shoes. Um, and it, and it raised, um, you know, the, the standard of living for a lot of people. We understand China's doing this now. And, uh, they're doing it in Africa and some other places. What are you seeing in terms of that relationship, how China is looking? Because towards other countries to become, uh, producers of goods and, and, and they're kind of now becoming incredibly influential. What's their intent and how is that going? Claire, maybe you could start.

Claire Cormier Thielke 55:46 That's a big question. Um, but I think it's, it, uh, this is a long term play. We're all in this for a long term, right? Play. And whether, you know, you take maybe the spicier view around resources and protectionism, uh, versus one that's more just around progress. And as we may have an increasingly vulcanizing East and West, um, the ability to their, for them to control the bigger piece of their own supply chain. But the end result, as you're sort of saying, is you, you look at places like Niger, right? The average, uh, mother there is having six children. You have a very young global south, um, and the important thing is that they're fed, they're clothed, and that they have an upward trajectory. And so that's the outcome.

Jason Calacanis 56:33 People living in abject poverty will probably end in our lifetime. Uh, you know, the only places it won't end is in places with dictators. What are you seeing in terms of the, the shipping containers? 'Cause you must see shipping containers increasingly leaving certain ports. W- where is China sort of exporting production to and, and what are the up and coming production areas?

Ryan Petersen 56:56 Well, you know, there's some really interesting trends going around, around labor costs. Uh, in China, the reason people went there over the last 40 years, to be honest, was like cheap labor. Uh, and, and, but over time, they became quite sophisticated. They really learned how to manufacture things, especially electronics. They're, if you wanna make electronics, you pretty much have to make them in, in Shenzhen. The greater bay area as she called it. Um, so, uh, and that's... But stuff that's just for cheap labor, 'cause that's no longer about cheap labor. This is a whole supply chain ecosystem of components and other things. And if it's just cheap labor, two years ago, Mexico became cheaper than China in labor cost.

Jason Calacanis 57:27 Wow.

Narrator 57:27 Wow.

Ryan Petersen 57:27 It was a huge shift. And now Mexico doesn't have the manufacturing capacity, they don't have the skillsets, they don't... But they'll build it, you know?

Claire Cormier Thielke 57:34 Yeah.

Ryan Petersen 57:34 And, and people will respond to that trend. Uh, as long as it takes 120 days to ship stuff from China to the US and we can't get this sorted out, brands are gonna respond to shipping closer to home. Um, so you're, that is a trend that you're gonna see more and more of, uh, if the delays stay the way they are. Um, I think China's big challenge is if, if they become labor costs too expensive, how do they keep moving up the value chain? And this is what their made in, Made in China 2025 thing is like, we've gotta, they've gotta make more and more sophisticated products because it can't just be about dirt cheap labor.

Narrator 58:06 And eventually migrate to services and...

Ryan Petersen 58:08 Yeah, that, that's a huge challenge. And, uh, very few, if anyone's really done it at... No one's done it at that scale 'cause they're the biggest country in the world, but Japan and Korea have kind of done that. But not 10 times bigger population-

Jason Calacanis 58:19 India as well, moving, moving to a services based economy. India with IT comes to mind. And then they'll become entitled and want to retire at 55 like Europe.

Ryan Petersen 58:26 Totally. And I will, by the way, speaking of China, my favorite answer is someone at, um, I think it was Zuck. Although Toby from Shopify told me he's lifted this line, that his employees were asking him about the four-day work week. And he was like, "Well, you know, I do think we should do some experimentation around how many days a week we work. So, but we're gonna start with the six-day work week like China does." And then we'll try the four-day work week later.

Jason Calacanis 58:48 Ladies and gentlemen, please join me in thanking-

Ryan Petersen 58:51 Thank you.

Jason Calacanis 58:51 ... Ryan and Claire. Well done.

Narrator 58:54 (instrumental music playing) We'll let your winners ride. Rain man David Satterfield. I'm going all in. And I said we open sourced it to the fans and they've just gone crazy with it. Love you Westy. Ice queen of quinoa. I'm going all in. Let your winners ride. Let, let your winners ride. Let your winners ride. Besties are back. Code 13. That is my, uh, dog taking a shit in your driveway, Sax. Oh, man. My happy place. We should all just get a room and just have one big huge orgy 'cause they're all just used to... It's like this like sexual tension that they just need to release somehow. Wet your beak. Wet your beaky, wet your beaky beak. Wet your... (laughs) We need to get merch. Besties are back. I'm going all in. I'm going all in.