Hey, what's up, Toby? We've made it to sick to
episode. I almost 60. I'm getting happy over
a year. No, like episode 30. Happy 30. I know
the halfway point to 60 as you point out the
halfway point. We're on our way. Celebrate. We've
made it. I know we've made it over half a year.
So that's exciting. Love it, man. Today's topic
is supply chains ripped from the headlines lot.
So if there is, if there is one thing that moves
very, very smoothly in our world that humans
actually touch, it is when you manufacture millions
or billions of something. Thinking about that
for a second, like millions of units, that's
beyond a human scale. Like that is such in synchronized
dance. I tried knitting for a very brief time
when I was expecting my first child and my mother
-in -law was like, you can hold water in that
pot to cozy. I was knitting it so damn tight.
There's no world in which I could bust out, you
know, a dozen pair of Nike Flyknits speakers
in any capable amount of time. Today's supply
chains are powerful. Yeah. Well, and they're
super efficient. Right because when you have
when you have to receive a million form factor
iPhone Cages that the motherboard gets put in
and I don't know I don't even know all the pieces
and parts, right? Right, but there's someone's
making the camera. Yeah, and It's not Apple or
maybe they are but they're not making the camera
in the same place where they're assembling the
thing Yeah one of the Things that I've done in
my career as I went through a McDonald's fry
factory Pretty close and what was amazing is
the lack of people. Oh There was a guy driving
a truck and there was literally a guy with a
hose that was they put all the Dump truck dump
the potatoes and a guy with the hose was basically
hosing the potatoes into a little trough and
Then you got to the end and there was fries Like
it was fascinating, but there was literally no
people, but like from a process standpoint, it
was so flipping cool. I bet. Like they had, and
this was, I mean, it was probably a decade ago,
but like they would fry these fries and if they
had too much sugar, they would either be green
or black, right? Because of the sugar, the sugar
content. And they had a little eye and if they
saw something that was out of spec from a color
standpoint, it shot air. To like long enough
with the conveyor belt or yeah, so it came off
the conveyor It was like a little it was like
a little fry waterfall and it if it saw if the
little fry waterfall Had like it was too green.
Yeah, or it had black spots It was like little
air little air guns just shooting the stuff out
and then I think they fed that stuff to the cows
or something anyway, it was but from a from a
process standpoint you literally have you know,
you have a multi -million dollar facility that's
built on multi -million fry boxes sold every
day. It was ridiculously efficient. I think about
that a lot, and then with all the trade stuff
that's going on, it makes me think. McDonald's
fries are still going to be at the factory that's
pretty close to my house. And what happens with
Apple? Obviously they were going to put a tariff
and then they're not. I'm not sure we know what's
going on, nor do other people that are even in
charge, which is fine. They'll figure it out.
Something will happen or won't. But if you think
about those Apple facilities that are in China,
You can't just pick those up and say, Hey, let's,
let's, let's move to Mongolia. No, that's, that's
super interesting that the evolution too. Um,
we were talking a few minutes before we started
about this and just kind of laughing about traditional
supply chains dating back hundreds of years.
Oh yeah. You know, and like the textile business,
one of my favorite examples is Berkshire Hathaway
was not just a holding company. No, they're a
textile company and a terrible one. Yeah, but
what a great name. Sure, it sounds very dignified,
you know. I'm going to go, that's the IZOD holding
company. It doesn't have the same ring, too.
But, you know, so many of our union rights and
labor rules are the byproduct of, I'm thinking
about the triangle shirt factory fires. I think
it was in Chicago. 20s and 30s and millions of
people got trapped because the owners didn't
want them going out and smoking on the fire escapes.
Yeah. Right. And so I hope that's right. Some
some history that will go. Actually, Toby, that
was 1918. And you're peeing off that. I don't
know. Anyway, the idea that there's a there's
a number of reasons why heavy industry, light
industry left the U .S. as we were trying to
recent regulation and try to bring just some
of the rampant damage that comes with heavy industrialization.
We sent it to another planet, also called Asia.
And now all of a sudden we don't have those competencies.
I think about what is our supply chain here?
Our farming now is not 40 acre plots to sustain
a family or two. It's... 500 ,000 acre plots
mass industrialization of corn products so that
we can put in our gas tanks. It's super crazy.
Well, it's interesting you talk about textiles.
When I think textiles, I think original textiles.
I think England. That's where they were in Lancashire
or whatever city they were. And then they move
to the US. to get closer to cotton. Yeah. Right?
I ship it across the sea only to produce goods
and send them back. So you're closer to the source,
raw material, right? Then to your point, labor
gets more expensive in the United States. It's
easy to ship the cotton overseas or have it grown
overseas. So it goes to China. Right? Then it
goes from China to Vietnam and China upgrades
to chips, you know, microchips. And then, you
know, from Vietnam, it's going to go to Malaysia
or somewhere else. But like, I don't see that
coming back the other way. I don't think, you
know, China is going to be like, you know what,
let's be a textile producer. Or the US is going
to be like, you know what, let's get into textiles
or go all the way back to England. Right. Yeah.
The British are saying, we'd like to take back
the brad cloth industry. We have a little island
where we can't grow half the things that are
necessary inputs. No, I think they're too smart
for that. But you're right, Chris. Once the genie's
out of the bottle, once complex supply chains
have let their short, what are the implications
for that? I feel like we're at each of the consumers
backed by trillions of dollars in natural resources,
but otherwise we're coming bankrupt, you know?
Well, I mean, like we are going to follow, like
England's done okay. Right, but but ultimately
our the wealth is gonna get spread out over the
US or over the world. Yeah, like But if you think
about like even cars, right like cars were in
Detroit, right like right US it was Detroit and
then there was obviously, you know, like it was
more global because moving a car is easier is
harder than moving assured but Like even in the
US it went to it went to Japan. Yeah Right, or
it went to where's Like, well, now we have so
much of like Hyundai and Kia coming out of Korea,
right? It keeps growing, right? Because Japanese
also only have so much industry. You hit a maximum,
right? Correct. And then all of a sudden you're
like, we need higher value goods. It's interesting.
What do you think the highest value goods are
that we produce here? It used to be education.
Like we used to be a destination for higher education
and we were producing PhDs and we were keeping
a lot of them and that fed our tech. I think
I think I think I think it's talent you still
think it's talent today, but but but but we import
our talent. That's I mean like like how So like
apples apples, you know engineered in Cupertino
right like You know, you've got Amazon Amazon
web services right like out of out of Seattle
like and it's not to say that there's not a lot
of other Smart people and you know China They
got a lot of people there So they will do just
they will do just fine like the challenge ultimately
is like from a manufacturing standpoint the only
way this stuff comes back is through a major
like a Through a technology shift most mostly
right like trucks trucks have stayed in the u
.s.. But trucks are big yeah, and in the major
markets in the u .s.. And so it makes sense that
they would they would stay here Tesla came here
because electric vehicles were a thing. And it
wasn't government incentives. And then the trading
of green stamps, green credits. I know this,
but that's the heart of the business model, right?
All of their production is creating all these
extra green credits that they can sell to dirty
manufacturers so they'd have... don't have to
clean up their operations. That's, that's been
known since early 2000s. Um, and so, yeah, it's
really interesting, but in the meantime, uh,
I have, I've done work and know folks in the
solar, uh, that long solar supply chain and an
early client would import what I would describe
as dirt, right? But it was silica rich sand.
They would import from almost anywhere in the
world, but they would bring it. civic Northwest
because we have all this hydroelectric, which
makes our, this is so inexpensive. Yep. And most
significant input for turning sand into poly
silica is electricity or cycling gas. You've
got to electrify this. And so they would cart
it, you know, thousands of miles to take it one
step in the supply chain. We take those raw materials
and distribute them thousands of miles to get
it to the next. Yeah. And so this has been a
known thing. And so even though, and this came
out of like the heavy manufacturing long before
we were in the business of solar panels or computer
chips, all this kind of heavy manufacturing was
already in place. Now that's been disassembled
and shuttered and offshored. So turning that
key in the ignition is not as straightforward
as we might want it to be. Well, cuz it's it's
one of those things where it's like, oh, yeah,
let's just do this and you're like Well, let's
you know, if you just think about a phone. Yeah,
like what do you have to do to get a phone? Like
from a supply chain standpoint. Yeah, right.
You've got the chip that's manufactured somewhere
You've got you know, Ram that's probably made
it, you know micron right up the street for me
haven't like well actually funny story So I've
got a buddy that works at micron and they they're
building building a huge fab. Yeah, right And
we're like, where does that stuff go? I mean,
I'm in Boise, Idaho. We're like, we're five hours
away from anything major, and that's Salt Lake
City. And that's not a whole lot to be happy
about. But if you want to go seven hours, you
can be in Portland or Seattle. World's largest.
Ten hours a year in the Bay. I mean, there's
not a whole lot in between us. Anyway, I'm like,
where does this stuff go? One of my other buddies
was like, well, let's put it on a train. Like,
would you put it on a train? Like, that would
be cheap. And my buddy that works at Micron is
like, No, they'll just fly it. And I'm like,
where to China? And he's like, these things are
so small. They'll just put it on a plane and
they'll fly it to Shanghai or wherever that manufacturer
is because their supply chains are that short.
Time is of the essence. That's incredible. And
so I was like, that's crazy. Yeah. So when we
talk microchips, we're not talking the size of
your thumb. No, we're talking like. Very small.
That's a suitcase full of microchips. Well, that
explains everything now, Chris. It was just really
interesting that they're spending billions of
dollars, a couple miles from my house, only for
them to most likely fly the stuff to China to
put into the Chinese manufacturing something
or other. It was, it was just very interesting.
Like you can't like, cause where are you going
to truck it to in the U S? Like, I mean, who,
who's, who's manufacturing this stuff? I mean,
you probably will, but like, yeah. The next step
in the chain though, we're in a world where transportation
is relatively inexpensive now, whether it's whites
or boats or, you know, we've solved fundamental
transportation. I hadn't thought about them actually
flying chips. That makes perfect sense. Yeah.
No, it was really interesting. Now, okay, let's
circle back to process debt and why we have problems
in our businesses. Yeah, why are we talking about
supply chain? Yeah, what is going on? You went
totally off topic. You talk supply chain. I love
supply chain. You do love supply chain. I think
it's interesting in that when humans have the
ability to mass produce something, it is amazing
how efficient we can be. And in our day -to -day
jobs, We don't mass produce that many things.
Almost everything is bespoke. And we don't even
think about our work in that way. Boy, isn't
that true. Back to your potato sorter. Yeah.
Imagine if we had to peel the spuds by hand.
Yeah. Fetch them out of the fry grease with our
bare fingers. That's not a job, but somebody's
got to do it. And then visually sort it. That's
impossible. Yeah. Yeah. But you had the same
output every single time. Yeah. And a human could
do that. A human could easily sit there and do
that. But you had that same, you had the same
input, you had the same output. And oftentimes
in business to be cute, we have the same input,
but we have a different output all the time.
Sometimes on purpose, you want to have an impact
and you know, obviously our our day jobs are
political and, you know, you got to put food
on the table. And so it's a little different.
But I mean, I just think that the contrast is
really interesting when your inputs and your
outputs are always the same. It's amazing what
you can do. But if you're changing both ends,
it's amazing how messy it can be. And that's
why our work can be so frustrating. It's funny
you say that because what that made me think
about, Chris, was the power of the ISO standards
for And yet to your point, everything that we
do as humans, fingers on the keyboard is super
custom. I can't, I can't build a machine that
sends off the emails I need to actively communicate.
We were talking about last week, right? Process
and the importance of effective communication.
I can't do that at mass. Yep. Right. We can spam
people at mass. We hear all these promises. You
know, we get these LinkedIn things depending
on what your channels are. But yeah, that's a
great call out. So the enormous volumes of manufacturing
and supply chains really does assume that we
can do millions of things identically and that's
the desired goal. Well, and I think if businesses
stop trying to be so creative with some of the
standard things that they're always going to
do, Like businesses are always going to do a
QBR. Like you're just going to do them forever.
But why do they have to be Q? And I wrote an
article on this, I don't know, probably three
years ago. It's like, just give your people a
form. Have them fill out the form. Have your
marketing team make the PowerPoint. Give the
PowerPoint to the people for them to edit. And
then you're done. Yep. And then if you do the
same form the next quarter, you know what you
can see? What happened last quarter? Yeah. I'll
tell you, because speaking of textiles at Berkshire
Hathaway, I was at an energy company that was
acquired by one of their subsidiaries. Oh, yeah,
yeah. And the first day after it was official,
everybody got an email that said, reports will
now look like this. It's going to be in this
font. It's going to be in this layout. Thank
you. And think about how big a machine that is,
you know, to be able to sit on whatever it is,
7 .5 gazillion dollars in cash while they're
climbing the market. The reason why they can
do that is everybody understands they're part
of this enormous machine that has to work. Correct.
And imagine like how much mental space that frees
up. Yeah. When you're not trying to figure out
like, is this font too big? Yeah. Is this, do
I have too many bullet points? Like just give
the people a form. Yeah. And give it to your
marketing team. Like maybe we should start this
business, Toby. This is what we should do. QBRs.
QBR. The QBR form factory is something extraordinary.
Processed that killer. The irony, Chris, is that
I would dare say that if you and I jumped in
a time machine and went back to the early days
of GE. you know, 30, 40 years in where they had
some routines and process, maybe about the time
Welsh was starting to come up. I bet the conversations
around QBRs were at least as competent, if not
more sophisticated than we have today. Right.
Because they didn't have PowerPoint to muddy
it up. Oh, yeah. Have the graphics guy do some
cutouts and use his protractor and bring in the
chart. Yeah. You know, it was it was written.
Not the baffled with bullshit that we have today.
Yeah. Well, like what's interesting is like We
you know, I think oftentimes we use PowerPoints
in in lieu of writing because it's easier to
consume Yeah, and much easier to deceive. Yeah,
but not and not not like maybe not even intent
like even not even intentionally but like that's
interest you puts, you know, you have to you
have to clarify something complex on a PowerPoint
in four bullet points, you're going to miss some
things. And you're going to say some stuff and
the assumption, and you're going to have that
communication break. And then all of a sudden
they're going to, you know, they're like, well,
why, why didn't you tell us that? And you're
like, I did on PowerPoint on bullet three. You're
like, that's not how I read it. You're like,
did you not go to the management notes and disclosures
on appendix 37C where I outlined. I gave my Safe
Harbor statement. This may or may not result
in something that actually may happen. That's
right, Safe Harbor. That's funny. All right,
man. We did it again. I love it. Thanks, sir.
Good conversation. I appreciate the reflection
on supply chains. All right, buddy. Have a great
week. See you next week. All right, bye. Bye.