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

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We’re really excited to have Claire with us. Come on up Claire. Are you here?

Right. What are we… Welcome Claire. What will we be talking about today?

We’re going to be talking about China, you know, just as everything has been all spicy.

Well, yeah, well, just again, we’re trying to make today about just easy, breezy topics that,

you know, the most easiest things to manage. So we… armaments, Ukraine. Let’s go to China. Sure.

Please welcome Claire.

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 headlines. And, you know, Jason reached out

and he said he wanted to really understand what were some problems. And I wanted to see solved,

that we wanted to see solved. So I’m a property developer. I run Greater China for Heinz. We’re

the largest private real estate firm in the world. And we have an incredible Greater China team. I

know I see this folks in the front. They’re like, where is she? I can’t possibly spot her in there.

So we have a team that is working across Beijing, Shanghai, Shenzhen, Dongguan, and Hong Kong. And

we get to work really across the real estate spectrum. So we built the greenest skyscraper

in China. We built some of the first international service departments

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 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 kind of what’s 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 want to be, right? We want to be sitting together in awesome spaces like this,

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 a place that has pretty good infrastructure. Can I get a job? Can I afford

to live here? And is there cool cultural stuff that keeps it from being too bland? 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 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 like the most extreme version of hardware. So as a property

developer, we spend our time really thinking about what are the big macro trends? What are

startups focused on? Where do they want to 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 going to be relevant for folks. And so, you know, just a couple of examples up here

behind me. So, you know, we talked about the living challenges. So for folks 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, cost prohibitive, and

get quality of product 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? You see up behind

me a logistics building, but it’s actually six stories high. Something we’re developing that is

a giant, almost like a refrigerator, but a high-rise, super tech enabled. And that’s because,

you know, they’ve 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 U.S. does, okay? It doesn’t take a genius to see that this trajectory is, you know,

lower left to upper right. And so again, you’re taking this concept of east meets west.

Building up here, just behind me, 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. 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.

You can have chance encounters or organize a yoga trip in the afternoon with the people,

with the space, using this digital interface. So 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,

the problem, when you sit in the middle of this world, like my team has the honor to do,

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 to maybe share a story 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 you all will probably recognize. This is Deng Xiaoping, famous for

really the opening up of China. And 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 to enable the economy to jump further. And so the picture to the other

side is Shenzhen, which in 1980 was barely 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,

and that meant that it would be this place to experiment with bits of capitalism, free trade,

etc. So what is it today? Well, first, there’s that same road along 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. It’s really the tech hub of China. So companies

like DJI, which makes 70% of the world’s drones, they call this area home. 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. 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. Okay, you guys get it. And so what is the Greater Bay Area? Well, it is a

collection of nine cities on the mainland side, some of which may be familiar to you guys. So

Shenzhen, as mentioned, and Guangzhou. Guangzhou is about 18 million people. 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. 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 called 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 great 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 built 2000 miles of speed rail, like high speed trains. Here we have like a little, you

know, one from here that goes to Fort Lauderdale, you know, Texas is going to get one in the year

  1. 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, 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, etc. They funded further life science. They funded

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. It’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? 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? You know, up here, you know,

behind me, I have, I’ll clear the visual for you. It’s further disconnecting, showing these

metro lanes, these trams, buses, etc., leading to these speed trains. Back down here, that’s Hong

Kong Island. And then this takes you through a bit of the Bay Area before you get out to the rest 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,

y’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 shopping 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. 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 them 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 that we all have this opportunity to really, again, the headlines can be exciting,

they can be crispy, 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 probably the

equivalent of about 45 cents to get on the public transit here, going around and exchanging ideas,

these people, most of them are not politicians. Most of them are not big world global leaders.

They’re folks who are trying to create something for themselves, to create something for their

children, to build a better world. So we’re really all on the same team. So with that,

bring the besties out, I guess. Try not to get too spicy.

All right. Center stage for you. Right here. Right there in the middle seat.

Oh, baby. Well done. Well done. Be nice, guys. Be nice. Of course. Well,

sax is in here, so of course we’ll be nice. That’s kind of by default. And meet our

Ryan Peterson from Flexport. Claire, maybe you guys, Ryan, Claire, Ryan.

I’m introducing you two guys, Claire, Ryan, Ryan, Claire.

And then you’ll switch over. You guys met?

We follow each other. So what do we as Americans

not understand about our rival? And what does our rival most not understand about us,

in your estimation, having operated in both countries for so long?

You know, the term rival is an interesting one. Obviously, I love

sports analogies and came from the track and field world myself.

Claire was in the Olympics, guys. Claire was injured.

She’s like, how do you still go running sometimes?

Kind of fast. At the Olympics.

But, you know, your job in the sport is to find the person who is better than you in some ways,

and maybe they’re strong where you’re weak. You’re weak where they’re strong.

You find each other and you shore up together. And I think that is what becomes so clear when you,

you know, live there, when you live on the other side of the world. But maybe we’re born here,

or, you know, I’m a minority, so I’ve maybe always lived in that interstitial

space personally. Or even our team. Our team is very representative of modern China.

We have people from nearly every province. They’re really across the education bracket,

highly trained engineers, but who might be quite young, to folks in their 60s who have really seen

China evolve. And so I do think the thing that can get 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. So we’re best of rivals in a way.

There we go. Is there a model for the century for cooperation between the two nations that’s

enhancing to both? I think it’s happening in enterprise. I really think it is. So when I

look at, again, younger people, the products that they use or the things that the young tech,

you know, entrepreneurs in China are working on versus here, they’re approaching a lot of

the same problems, right? So on the social side, you know, looking at Douyin and what made it so

catchy, right? Explain what it is for us. It’s TikTok. It’s TikTok. And back to that one about,

you know, cheat codes and a preview. You know, Douyin was popular years ago. And so, you know,

I remember first looking at the app and being like, wow, this is very catchy. And there’s

effectively no difference between Douyin and TikTok. Do you read and write Mandarin fluently

as well as speak it? Well, you will never confuse me for a fukou. But, you know, enough to get by.

And so when you do business in China, do you conduct it in English or do you conduct it

in Mandarin? Yes. So with the team, we work fully across what’s appropriate because we also work in

Hong Kong where it’s Cantonese. But all of my communications that go out to my full team,

everything in full team is in Mandarin. We do have a large part of our team that only functions

within Mandarin. 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 have this idea of like this living, breathing,

monolithic building that is connected via the Internet, it probably would be 50 organizations

in the United States that would have to have a say or want to say. 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?

Or is it just like here where it’s messy? So it’s kind of neither, actually. And this is where I

think it takes 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 ultimately, it goes all the way up to, you

know, the big guy. 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, 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 are, you know, how did you make your

district greener? How did you increase revenue from higher quality services and technologically

advanced companies? What happens if you don’t achieve it? You get fired, you get kicked out

of the party. Like, what is the mechanism of reward? Yeah. Well, it’s quite high accountability.

And so if you perform very well within that system as a leader, then you can move to higher and more

advanced posts to a bigger city. Right. So, yeah. So from a block to a bigger city to a higher,

you know, up to a sort of higher… Your political career stalls out if you don’t hit them,

but it gets accelerated if you exceed them. Right. And so that creates a very interesting set of

opportunities. And so to put it to maybe a tangible example is so for the things that, you know, are

really great for communities like park space or building a building that’s green. The last

building that I showed up there is right, 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. 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. There’s a real handshake there that I firmly

believe creates better outcomes. I know our team would say the same thing.

Claire, what’s going to happen with the capital markets for your business with Evergrande and like

some of these big kind of property developers that have had major debt problems? Have you seen

that already flowing over? And you understand the market very well, you 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. Sure, sure. So certainly we get a lot of questions, but it’s another one

where the headlines out versus inside the country. Certainly the built environment,

the construction and the real estate industries, if you combine that all together, you’ve got about

27% of the economy. If you include the full integrated stack, one of the things in five-year

plan is to diversify away from that in a way. But is Evergrande and the other developers,

the real focus at the local and the higher level is to help the regular people

get good on their deposits and ultimately get the homes that they were promised.

So it’s very interesting for developers like us and acquisitions people as for some of those

smaller developers who got into trouble. Has there been a bailout? Is that the wrong word,

the way that it’s been characterized in the U.S. media that the Chinese government had to step in,

shore up the balance sheet, make sure Evergrande wouldn’t default on some of their loans?

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, especially on the living sector. It’s really accelerated

some policies to make it easier to build and to create rental housing, which creates more access,

which therefore maybe takes away some of the pressure on the condominium system.

You know, for the debt markets to create a space that is maybe taking on projects that are

appropriate for the system, a little bit, again, more diversification and development in the right

places in the right markets. When we look at 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. 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 and all the various issues on both sides,

a lot less suffering in the world. Absolutely. 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. And that leaves some areas in Africa and Southeast Asia

that we still need to do that work, 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 education and

prosperity for the decades to come, and specifically for the boomers and Gen X.

So tell us about that middle class that’s emerging. We hear about it.

How many of them are there? And qualitatively, what do they want from life?

Yeah. Well, Jason, in a word, it’s incredible. Again, I talk about infrastructure so much

because you see it up there, right? China’s only as urbanized as the U.S. was in about 1950.

So we read a lot about these- Today.

Today. Today. So we read a lot about these-

Bullet trains. Right. And so that leads to this

incredible consolidation of people to cities and younger people to cities. It’s a demographic

spark 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 rural

lifestyle, frankly, most of them, and something of a village setting that had not changed in decades

to this future world that in many ways can only be imagined in movies. And so I think, I sort of

struggle to put it into terms because you asked, what do they want? What are they looking towards?

And I’d say, 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 yet, my parents 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. That’s amazing. 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 want to be able to build and create

and be people themselves. Yeah. 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 going to 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 is on the precipice

of this because of this one China policy. I think 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.

If that’s true, the point is just that there’s a real issue. Yeah. Is there something in these

five-year plans around how to become sort of more culturally integrated with the rest of the world?

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?

So first, I think the urbanization trend of folks consolidating to the cities really can’t be

overstated, just in the way that it shifts sort of how the country will work and what’s happening

on the ground. It’s still relatively early days, but when we look at things like Belt and Road,

as I walk around Beijing and I compare it to when we first started there or when we were

working with capital partners there, I see a lot more brown faces going to the universities around

Beijing. Explain what Belt and Road is for folks who maybe haven’t heard the term.

Yeah. So many places you guys can read about it. And before I forget,

talking about sort of just, I know everybody loves recommendations here. So if you haven’t read

Dahlia’s latest book on changing world order, or there’s actually a great… You read it.

Freeberg made us all read it.

She read it. I see.

Freeberg made us read it.

Freeberg talked about it every podcast for the last 20, as you know.

So you’ve got to read it. Listen to your besties. There’s also a very good


A very good illustration of it.

Yeah. Sunrises and sunsets.

That you guys have talked about.

But do read that because China has been a major participant in the global south. So the short

version of Belt and Road is working really across a set of countries around Southeast Asia and

Africa, bringing in infrastructure and kind of what it sounds like, roads, ports, airports,

et cetera, really building out this network for that part of the world.

But I think what gets sort of bumped over on that is, again, things 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 further

exchange, to lift more people out of poverty, to create further infrastructure.

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?

I would be honored.

You want to switch seats?

No, no. There we are. Oh, yes. Switch seats.

Switch seats. Okay.

Yeah, you’d be better.

Switch seats.

Get in. I warmed it up for you.

And you’re the guestie. I like it. I like it.

So give it up for Claire. Now, Ryan, congratulations. CNBC does their top

innovator of private company awards 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 big win.

What do they call it? Disruptor’s list?

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.

All right. Well done.

You truly helped us navigate, I think, the challenge of us as besties and the audience

understanding supply chain. We appreciate that. You’ve been on the show twice, I think, or?

Just once so far.

Just once so far. And then here. This is your second time on the show.

Apologies. I was filming the interview for that during Palmer’s talk this morning.

You didn’t miss anything.

You missed nothing.

I don’t know what I missed.

Nothing much happened.

But when Palmer and I woke up this morning, we were writing our speeches together and

deciding what we were going to say.

Oh, do you have some feelings you’d like to share with the class?

No, no. I’m just kidding.

Seems to be a theme. I mean, this is turning into therapy.

No, I don’t have any enemies.

I have some emotions.

It’s sad. I got COVID.

You just have nice things about people, J.K.

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.

So tell us.

He was going to do a talk, right? Are you doing a talk for a couple of minutes?

Well, he’s going to talk from there.

Let me share a little bit about what we’re seeing.

So first off, what Flexport is, is we’re a global logistics platform.

We help 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.

Probably about half of all of our volumes come out of China.

I know a landlord if you’re looking for one.

Ryan, just put it out there.

We’ll do some business after this.

And so we see a lot.

We’re sort of like a front row backstage pass to the world economy.

Of what’s really happening and unfolding.

And it’s been a crazy few years.

To give you context, so Flexport started in 2013.

First revenue was in 2014.

We did $2 million in revenue that year.

We’re on track this year to do $5 billion in revenue.

So very exhausting.

And this time period is, I assume it’s always like this in this industry.

I have only been in the business for about 8 or 10 years here.

But just to take you through that timeline.

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.

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.

2016, there was so much excess capacity of ocean shipping.

So many extra ships were purchased.

That the price of ocean freight hit the lowest in all of human history.

$600 to ship a container this past year was $20,000 in 2016.

So we go through these boom and bust cycles.

It’s an asset business.

That’ll happen.

2017, 18, and 19, our president would launch a new tariff war every couple of months.

And you couldn’t predict anything.

2020, a pandemic hits.

You couldn’t ship anything for a couple of months out of China.

Where they were really hard.


Shut down factories.

Shut down all the purchase orders.

Everyone thought the Great Depression was coming.

Cancelled 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 went from 2019, it took about 50 days to ship a container.

From 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.

And it is just incredibly hard to operate in this environment.

If you’re trying to run a business.

And so we’ve had to learn how to navigate through chaos as Flexport.

It’s like, we kind of welcome it at this point.

We found that it might actually be good for our business.

We try not to talk about that because it’s so bad for our customers.

And 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.

A lot of IPOs recently.

A lot of really cool, hot new brands.

They’re going through almost a perfect storm right now.

In like a really, really bad way.

Like the movie, The Perfect Storm.

Because ocean freight rates are sky high.

Mention this, $10,000, $20,000 to ship a container.

Rule of thumb, long term is like two grand.

So really, really elevated costs.

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.

So it hits companies of all sizes.

But these DTC brands got a double whammy.

Because Apple, I think it was last year when they changed their privacy rules.

And their customer acquisition models are on Instagram, Facebook.

All these things stopped working.

And so at the same moment you’re cacked, it stops working.

You can’t acquire customers.

Your supply chain costs are through the roof.

And then add to that, the consumers are now starting to come back to conferences like this.

Go back to the restaurants and the clubs and doing the travel.

And during the pandemic, everybody just bought stuff.

You’ve got to get your dopamine from somewhere.

And everybody was just buying goods.

So that is like a triple whammy for these companies.

I’m incredibly worried about the whole DTC brand, the whole DTC space.

The DTC space, just anyone in physical goods.

You saw it in like the, I think it was Thrashio that just announced

they’re laying off 25% of their employees.

Thrashio was buying a collection of those Amazon DTC brands,

putting them together and trying to have some economies of scale.

But when your supply and your demand both get 10x’ed in the wrong direction, it’s game over.

I don’t know if it’s game over, but it definitely changes the rules of the game.

The reality is, look, people are still going to buy stuff.

There are going to be successful.

There are going to be some winners.

There are going to be brands that survive.

At what price though?

At what price?

Well, 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 environment where venture funding is.

I think again, venture funding.

Oh my gosh, it’s a triple storm.

The capital markets are dry.

Capital markets, public and private.

Investors are like, you all will look at this and go,

hey, maybe I put more into SaaS or something.

Like Keith said, it’s just easier to not do anything.

It might be easier to not do anything.

So what does that mean?

How do you manage this?

And fundamentally, one of the problems that comes about in all supply chains,

it’s been written about the famous PhD paper from like the 60s

or something called the bullwhip effect.

And a bullwhip, if you like crack a whip,

the end of that whip is moving incredibly fast.

And it’s a bit like that in supply chains

because you have imperfect information.

And so the people doing demand planning are living in one system.

They’re selling goods.

They’re looking at this data set.

The people producing stuff, it’s on a different system.

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?

So how much do we want to have in stock?

How do we avoid being way over stock?

And then what we’re seeing right now is these warehouses are overflowing

and people can’t.

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?

I mean, actually, China’s got one of the companies to watch is

Shane, S-H-E-I-N.

It’s this Chinese, kind of like the new Zara that is taking over the world.

I think they’re going to do $20 billion in revenue this year.

Fast fashion?

Fast fashion.

They’re launching a thousand SKUs a day.

A thousand new SKUs a day.

All like AI generated.

And then if people are ordering up, they produce it.

And it’s like really incredible.

Wait, you’re saying a robot says, make these SKUs.

This is where this shirt is from, actually.

No way.

You’re a shirt designer.

I kid you not.

Yeah, see?

You’re like, yeah, I did that shirt.

And now it’s going to be a million of them going to be ordered after this.

Hold on, sorry, sorry.

Tell us, so wait, sorry.

This shirt you bought.

So it’s literally a shirt from Shein.

But yes, 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 pretty

wild, Shein’s about as close to instantaneous as you can get.

So very fast moving SKUs.

It’s sort of hyper speed fashion.

So they can have things almost on the same day.

Yeah, but they’re kind of like pre-cons, you’re saying.

Like for minority, but they’re predicting that this puffy shirt is going to be like,

women are going to want to go for pirates.

But it’s a fly shirt.

I agree.

And I think one of the key things here is that 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 stretches out the way it has right now, an ocean freight market,

where it’s taking forever, if that takes three months, four months, five months.

Might not be flying no more.

Six months, all of a sudden you’ve placed these orders.

And then the demand went away because people started going to nightclubs 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 traditional procurement person in logistics only thinks about like,

I’m just going to buy the cheapest freight I can ever buy.

Because they don’t understand that your goods in transit are just money that’s taken a different

form for a period of time.

And money has a cost to it.

And if you’re sitting there on six months, that’s already expensive because you’ve got

to pay interest on that.

There’s opportunity cost.

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.

You saw that with Christmas where, you know, you import Christmas.

That’s the classic that you import Christmas stuff.

And in January, it’s worthless.

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 got to be a work.

Because 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.

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?

You’ve seen a lot of companies do this.

Much easier said than done.


You’ve seen at least a few of the big box retailers, Walmart, I want to say Home Depot,

Costco, a number of these guys have said, hey, we’re going to charter our own ships.

Target was the other one.

Maybe Target, Amazon, of course.


Go charter their own ships, go solve the problem their own way.

It’s really hard to do, run these things at scale and operate it.

It looks good at the PowerPoint slide.

When you have to get down to it, it’s really hard.

So is there a big CapEx play here, Ryan, for the next decade?

I think…

Like a big capital equipment, hard asset play?

So the world’s ocean carriers, that’s what we call the people that own the ships, have

actually ordered 25% more ships, increased the fleet by 25% over the next three years.


So it could be ugly the other way real quick.

You have too many ships and nobody, you know, the ship owners can’t make it.

I mean, it’s a similar sort of…

But anyway.

Ryan said it best.

The problem is you can’t forecast demand accurately for these long leap time categories that are

highly CapEx intensive.

So whether it’s mining or whether it’s chipping, how do you make a $500 million CapEx decision

for a business demand cycle that’s five years into the future?

But 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, Walmart did it, right?

They were optimized to a T.

And then all of a sudden it’s like, hey, that optimized system doesn’t work.

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.

Take or pay means I’ll do a deal that says, okay, I’m going to rip the lithium out of

the ground.

You take it or you pay for it.

I don’t care what you do, but I’m going to get the revenue assurance I need to go to

Wall Street to get the money.

We’ve started to see those signs 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 we ship anything.

Take or pay.

We’re going to pay up front.

Yeah, okay, take or pay.

And you asked a little bit, air freight, what’s going to happen there?

Well, remember, 50% of all the world’s air freight flies in the belly of passenger planes.

There’s way less people traveling to and from Asia than there were.

Is that right?

Yeah, 50% of the world’s air freight, which is a little scary when you think about what’s

under the belly of that.

Yeah, is that getting scanned?

It is, it is.

There’s good controls on that, but you never know.

It’s always a little nerve-wracking.

He seemed to be not so sure.

You work in any industry long enough, you start to question whether everything’s perfect.

So we’ve actually got 10 passenger planes that we’ve leased, and 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.

Are there seats in them?

Flying masks.

Are there seats at the top?

There’s still seats in some of them.

Some we’ve ripped out the seats.

It’s like castaway.

You’ve got the big plane, basically just holding stuff.

If you want to go to Asia, I’ve got a 787.

There’s nobody on there.

It could be a private flight, just you.

But exactly, this is why you’ve seen the rise of logistics real estate as a deeply

institutional asset class, because that math that you talk about, the algorithms of determining

what is ordered, how long will it sit, and how fast do people want it?

That takes infrastructure on land to be able to get it to people as well.

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 assets are


Get them off your books.

Don’t carry them.

This is what happened with oil and gas going into last year.

And everyone missed it.

You want to be asset light.

It’s still the trend, and almost everywhere, until somebody like TSMC comes along and says,

you know what?

You don’t want assets?

Intel, fine, we’ll build the fabs.

And now they’re a $400 billion company, because they’re willing to have assets on the books.

But it’s a different investor position.

Now they have power in the equation, and they can get a better share of value.

The hardest question for me to answer, and 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 going to own assets or not own assets?


And I think the correct answer is to ask the investor which one they’ll give you a higher

multiple for, and then just say that.

Try to figure out who you’re talking to.

But it is, on some level, maybe another answer is kind of Buddhist dualism.

You can’t do logistics without the tech.

You can’t do the tech without the logistics.

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, 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.

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,

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 thing that I think we need to change is 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.

Well, and if we look, 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 the cloud business.

Even Amazon.

Look, Amazon got escape velocity on less than a billion dollars of invested capital.

The problem is, if Ryan, for example, decides,

hey, I’m going to 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.

I wonder when Amazon’s cap expenses for those servers started to hit.

He’s thinking about it.

I’m going to buy a fleet of ships.

But do you think the capital markets will show up?

The little boy in me definitely wants to do that.

You want to own a fleet of ships?

Who doesn’t want to own a fleet of ships?

But no, we’re not going to do that.

There’s two plays.

Fundamentally, your bullwhip effect means the data can’t flow.

And people can’t make decisions optimally because the data is 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 when the ship arrives.

Actually, not even long-term demand forecasting how many ships,

but literally, that ship is going to arrive.

How many trucks should I dispatch?

When should I dispatch them?

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 algorithms are helping them make more money from their asset.

They want to tell you what’s going on.

And both of these are potential plays.

One of them is a lot, hopefully, simpler and don’t need to manage as many people.

Life is easier if you can solve the data machine learning problem.

But you look at Alibaba and Alibaba investing down into China.

There is a middle road of being able to go to China.

So logistics, warehouse.

As stupid as it sounds, you having purchased a shipping company and putting it over here,

to your point, Clara, 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.

There’s a potential middle ground.

It’s what makes Flexport fun business.

There’s like a million strategies and ways to play out.

And I’m not a big believer in predicting the future.

And you want to have a vision and know where you’re going.

But I think be sort of flexible.

Yeah, it’s in the name.

We talk about our culture a lot.

What’s the goal of a company’s culture?

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?

But the goal of your culture is how do you maximize your velocity in that direction?

And velocity is a really important word, because we forget, like normal people forget

that velocity is different from speed.

If you remember your physics, velocity has a direction.

You’ve got to 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 going to throw all kinds of chaos at you.

Be nimble.

Be able to change.

We don’t know exactly the strategy.

I don’t have everything mapped out.

As we wrap here, a question for both you and Claire, which is China has big assets.

Before you do your wrap question, can I just, can I ask him to, can you tell us the audience

about what you did during the UK crisis?

Oh, this is beautiful.

It’s just like 30 seconds about, you know.

I didn’t go there like Antonio, the crazy man.

But what, so we started this group in 2017 called to do humanitarian relief


Really, at that time, the crisis was Syria and trying to help 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?

Seemed like a radical idea.

We maintain a database of partners.

So we have agents that 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, is 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.

So we’ve been doing this now for five years, shipping to over 50 different countries,

any time there’s a hurricane, earthquakes, or a war.

And so when we saw this happening in Ukraine, we immediately kicked into high gear.

The 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.

In this case, usually we offer pro bono shipping because shipping is expensive.

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 Ashton Kutcher and Mila Kunis.

Ashton’s an early investor in Flexport.

And we raised $25 million to pay for shipping to deliver goods.

Yeah, thank you.

And make sure Ashton and all of our investors, a lot of great people stepped up.

You emailed the besties and said, hey, it’s $4,400 a container.

Was that the number, $4,200 or $4,400?

It depends on where it’s coming from.

For Ukraine, specifically.

I mean, for example, we shipped nine ambulances from Gibraltar into Ukraine.

I thought we wouldn’t be able to ship into Ukraine because it’s a war zone.

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.

So we delivered nine ambulances.

That cost like around $10,000.

Yeah, so punchline, I replied back to him and I said, no problem.

And he said, hey, mention on the podcast.

I said, no problem.

And I donated a $4,400 container.

And then Chamath said, oh, I donated the plane that 12 containers went on.

He did.

So it was a flex on a flex for Flexport.

It was like a multi-layer flex.

So and then it just snowballed.

And this hasn’t gotten much attention, but Yuri Milner,

who’s an early Flexport investor, just donated $100 million.


You’re really putting pressure on their side of the stage.

It was a flex on a flex.

I didn’t hear the last part.

Anyway, keep going.

Keep going.

Let’s go to the, well, let me wrap up.

Everybody does what they can.

And 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, stepping up.

They’re like, hey, you can do something.

People go there and support causes.

Final question for you two.

We had this great moment where we engaged China.

We built a bunch of iPhones, Amazon Basics, whatever it is.

Nike shoes.

And it raised the standard of living for a lot of people.

We understand China is doing this now.

And they’re doing it in Africa and some other places.

What are you seeing in terms of that relationship?

How China is looking towards other countries to become

producers of goods.

And they’re kind of now becoming incredibly influential.

What’s their intent?

And how is that going?

Claire, maybe you could start.

That’s a big question.

But I think this is a long-term play.

We’re all in this for a long-term play.

And whether you take maybe the spicier view around resources

and protectionism versus one that’s more just around progress.

And as we may have an increasingly balkanizing East

and West, the ability for there to control the bigger piece

of their own supply chain.

But the end result, as you’re sort of saying,

is you look at places like Niger, right?

The average mother there is having six children.

We have a very young global South.

And the important thing is that they’re fed, they’re clothed,

and that they have an upward trajectory.

And so that’s it.

People living in abject poverty will probably end in our lifetime.

You know, the only places it won’t end is in places with dictators.

What are you seeing in terms of the shipping containers?

Because you must see shipping containers increasingly

leaving certain ports.

Where is China sort of exporting production to?

And what are the up-and-coming production areas?

You know, there’s some really interesting trends

going around around labor costs.

In China, the reason people went there over the last 40 years,

to be honest, was like cheap labor.

But over time, they became quite sophisticated.

They really learned how to manufacture things,

especially electronics.

If you want to make electronics, you pretty much

have to make them in Shenzhen, the Greater Bay Area,

as she called it.

And that’s, but stuff that’s just for cheap labor,

because 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 costs.


Which is a huge shift.

And now Mexico doesn’t have the manufacturing capacity.

They don’t have the skill sets.

They don’t, but they’ll build it, you know.

And people will respond to that trend.

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 going to respond to shipping closer to home.

So that is a trend that you’re going to see more and more of,

if the delays stay the way they are.

I think China’s big challenge is,

if they become labor costs too expensive,

how do they keep moving up the value chain?

And this is what their Made in China 2025 thing is.

It’s like, we’ve got to, they’ve got to make more

and more sophisticated products,

because it can’t just be about dirt cheap labor.

Microwave disturbances.

Yeah, and that’s a huge challenge.

And very few, if anyone’s really done it,

no one’s done it at that scale,

because they’re the biggest country in the world.

But Japan and Korea have kind of done that,

but not 10 times bigger populations.

India as well, 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 you’re up.

And by the way, my favorite answer,

someone at, I think it was Zuck,

although Toby from Shopify told me he’s lifted this line.

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 going to start with the six-day work week,

like China does.

And then we’ll try the four-day work week later.

Ladies and gentlemen, please join me in thanking.

Thank you.

Brian and Claire, well done.

The besties are gone.

We should all just get a room

and just have one big huge orgy

because they’re all just useless.

It’s like this like sexual tension

that they just need to release somehow.

We need to get merch.