Ryan Petersen
Appearances
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I totally missed that. You're absolutely right. That's another one where I would give Trump an A plus. Nat and I had dinner with POTUS two weeks ago.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Let me tell you what Trump said. So there we go. There was a handful of us at dinner. And then he got up to say a few words at the end. And he reminded me why I was so inclined to vote for him, which is he talked about his uncle. And he talked about how his uncle taught him about the severity of nuclear war.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
and how people don't understand how intense and how destructive it is and the power of these weapons. And he left that speech at the end saying, and this is why I'm so fundamentally against this thing. And it reminded me, to your point, Jason, it is so easy to forget that there's only one existential risk save like aliens coming from the heavens, right?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
There's only one existential risk where all these issues become fringe issues. You know, you mentioned rule of law, border security, foreign direct investment, tariffs. It all goes out the window in a nuclear war. And I was like, I am so glad this guy's in charge because this one issue, he never wavers. And I think there's all kinds of complicated moments that could make this an issue.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And this was where my biggest issue with Biden was, was I did not know who was in control. And I think that Trump in the first 100 days, to your point, I think has completely reinforced that there are no conditions under which he'll go to war. He has time and time again showed, find the off ramp. And I think that that's really healthy for Americans to see.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Jason, you have to pay it. Ryan, correct me if I'm wrong, but you have to pay it. at the dock in order to get the goods released. Is that right?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Sorry, Ryan, do you think that the government, will they view that okay, that kind of hack? If you look at the GDP numbers, one of the craziest things was the inventory pull forward that people did, to your point, like trying to get as much stuff into the United States before April 9th, as an example.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So you don't think, for example... the Department of Commerce will have an issue with the strategy of sending inventory into Mexico. That essentially, you're essentially like, isn't it an arc though? It's a workaround. Like instead of paying the China tariff, now you pay a Mexico tariff, which should be less. Is that the idea?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I do?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
You guys said you're buying me out of this thing and I can get the hell out of here.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I just may.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Let me answer this in a different way. Okay. a lot of those things he's actually doing. I think this is where we are is we're beyond TDS. There's something that comes after it. And I think that the mainstream media has just lost their mind to a degree that they hadn't even lost their mind in Trump one. I'll give you a couple of examples.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Well, one example, by the way, just a shout out to our friend, completely brazen, ridiculous, shitty reporting by the Wall Street Journal last night when they were told that this, you know, this whole Tesla thing was a total farce. They continued to publish it. Okay, fine.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
They communicated that directly to the Wall Street Journal. The Wall Street Journal said, I don't care. I have an ax to grind. Correct. I think that Trump has a strength, which is he shapes these potholes for the mainstream media to fall into. The downside of that, though, is that the mainstream media then doesn't do the other part of the job, which is to tell the things that are important.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So for example, we spent a lot of time breathlessly talking about the MS-13 knuckles of the guy, right? Or then we spent a bunch of time talking about how MSNBC blurred out the names of the placards on the lawn. Okay. But here's the other part where then they get so tilted. Here's what they don't report.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
They didn't report that, for example, when Trump took a shot at Harvard, he also reinforced and strengthened historically black colleges and universities. Totally did not get written. I'll give you another example. This past week, Besant said that the tax bill will allow you to fully deduct all the PPE and all of the incidental costs of building a factory. I heard that.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I immediately went to my wife. She runs a pharma business. This is exactly what she's trying to figure out. And we now are like, how do you build a business case if this actually gets effectuated? The point is that thing would create an absolute economic bonanza if it were to get passed.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
other than people hearing it on this pod or randomly maybe finding it on a direct clip that Besant puts out on X, there has been zero coverage by the mainstream media.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
No, but that's not but like, I don't need to like the thing that I know, but there are many other CEOs that do. They they're controlling trillions of dollars of capital allocation.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I think that she would give you a calculated answer that neither is pro or con.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Aaron, where you are right is My expectation is it's my job to stay informed, okay? As a CEO of my company, I try to stay informed. And you're right. It is hard because sometimes I find myself hunting and pecking to find the things that matter. But I do put a bunch of that responsibility into the lap of the people that are supposed to actually report the facts. They can choose.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
They didn't have to run that article about Elon, which turned out to be total bullshit and horseshit. on the front page of the Wall Street Journal, they could have talked about what Ryan just mentioned as the first article and said, here completely changes your ROIC and ROE calculations for 90% of the S&P 500. That was not the article they chose to write and to publish.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
The information coming at them is- I'm not talking about the information that's presented. I'm talking about the information that's excluded. How do you get the information that's not published and shared broadly?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Again, that's not what I'm talking about. I'm saying glad-handing some high-level prognostication, which nobody ever gets right, is, in my opinion, worthless. What I'm talking about is the details.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So when you talk about something as narrow and specific as excluding PPE or allowing you to double or triple depreciate something in a given calendar year, that is narrow, it's precise, it's specific, it's actionable. And what I'm saying is, if I surveyed the 500 CEO of the S&P 500, dollars to donuts, the overwhelming majority would not have known. And had they...
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
brushed up against that somehow in their normal media consumption to then ask their teams, the odds of that would have been zero as well.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
But I bet you everybody knows about the blurring out of the stupid pictures on the lawn and the MS-13 knuckle tattoos.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
This happens in other countries too. What is this? What is Timu? Is this like a dollar store?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
It's incredible that you have thoroughly prepared for this week, just like always.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
There's communication. Here's the narrow question. I got a bunch of emails from people. And a bunch of them were Amazon sellers. And I don't know, Nick, if you can find it, but I posted their comments and I re-shared them just to kind of highlight the issues that they were going through.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And at the core of it was a feeling by them that Amazon had abandoned them as American purveyors and sellers of goods. And that Amazon, on the margins, had a tendency to help competitors from abroad come stand themselves up and compete and essentially cannibalize on price and margin.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Can we just take a step back and also acknowledge that we are talking about a level of detailed issues that we would never have talked about six months ago, that there was no interest in even bringing this up.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Like if Ryan wanted to bring up the sort of hollowing out of American salesmanship, let's say, if you will, because of like this arbitrage that Amazon does for GMV, that would have been a snooze fest. Except today, it can actually get a lot of awareness.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And Aaron mentioned this, and I've mentioned this before, but like, I think that there are four things that really matter, batteries, AI, pharma APIs, and rare earths. That now is on the agenda. I think the positive way to look at this is the American economy is too complicated.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
If you had waited, Aaron, for a study, for all of the implications, we would have been waiting forever and nothing would have happened. And I think that we've made macro level moves, you're right. And now we are finding what the implications are in course correcting in real time.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And I hope what happens though, is when we find these big thorny issues, I think the Amazon thing is a pretty interesting issue actually about like American competitiveness. Now the question is, do we follow through and get to the root cause of it and fix it?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Wait, wait, wait. I just want to make one point. It's more than that. Okay, final point and then I'll finish. This is the national security of the United States that's at stake. Let's go take your favorite pet issue. China invades Taiwan. And we have to take a side, Jason. Hold on. Let me just finish. And the Chinese say, here are the implications of supporting Taiwan on this.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
A, B, C, and D. You don't get any pharma APIs. You don't get any rare earths. You don't get any batteries. Okay, it'll send life back 50 years. Or let's say China and India get into a fight and we're forced to pick a side, same situation.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
The point is there's all these scenarios that we never even considered us being able to have strategic optionality to make the decision that's morally and ethically right for the United States. And I think that we have learned through this lens, that these are huge issues.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
The thing that the Chinese did that was so brilliant, which we still don't have an answer for, is they have these national champions. And being a national champion allows you, and we'll talk about this in AI, it allows you to blur the lines between the public and private partnership. It allows you to blur the law. It allows you to blur capital. And I'm not saying we have to do that.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
But what I am saying is we need to have our own answer to it. And that was never on the table until April 9th. All right.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
It is the strategy.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
If we're sitting here in nine months and you're saying this and there are no deals, I would say that you're right. What Howard Lutnick said last week, and again, we may have all gotten caught up in the knuckle tattoos and we missed this, but he was very clear. We have a country. A deal is already done. We're convening parliament. It's going to be the first of many.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So for all we know, there's like 30 deals that are waiting in the wings, and the first one will set the tone. And I think that Sachs is right here, which is it's way too early to declare defeat and that it was quote unquote chaos. I think if we're sitting here in nine months and foreign direct investment has shriveled up and domestic investment has shriveled up because there is just no continuity,
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
You have a claim, but that's not where we are now.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Nobody wanted to even initiate the barrel roll, guys. Yeah, listen. We get it. It's like, hey, I don't want anything to change. I think we'll agree to disagree on this.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Yeah, I tend to I tend to believe that's true. I think the customers that we sell into at 8090 are largely large enterprises as well. So not dissimilar to Aaron's customer base. What I would say is that what they are encountering is the trough of disillusionment. And I don't know if, Aaron, you're seeing this as well, but every single CIO ran around
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
signing up some sort of AI product, in large part because their CEO would say to them, hey, what's your AI strategy? And the reason the CEO asked them that is that at some point, somebody on the board said, what are we doing about AI? So that's the bullshit cascade that we went through in the last two years. And I think what has happened now is people have spent billions and billions of dollars.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I think you can see it in the revenue traction of the AI companies. But I think where we are today is that there are some real technical complexities that have not been solved. I'll give you an example. We have a lot of customers in regulated industries, which is to say that if you make a mistake, you will get fined or you will get shut down.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Life sciences, healthcare, financial services are three examples. People still don't seem to appreciate that when you replace software that is deterministic with software that is probabilistic, meaning software that somebody wrote for you, do A, then do B, then do C, with an LLM that can hallucinate, you'll have errors.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So what used to be a throwaway thing, which is quality assurance and QA, right? Unit testing, integration testing, is now the only thing that matters. Why? Because if you're a financial services institution and you're supposed to do KYC and it borks and now all of a sudden you send a wire somewhere in Syria, guess what? You're in trouble.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
If you're a healthcare company and you're supposed to do some clinical diagnosis to send out a drug on time and you don't do that because the model hallucinates, That's a real problem. And I'm guaranteeing you, we have not seen the class action lawsuits that will come when those errors will eventually be made. They're guaranteed to be made. We just don't know the scope and the scale of them.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
So that's why I'm sort of of this posture where I think we've sold in a ton of promise. I think the reality is much more tactical. It's a little bit more banal. I think we're sorting through the exact use cases where you can put guardrails around these error rates where it's okay and tolerable. Like Brian will probably tell you, there's some number of phone calls that just sound totally fakocked
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
But he's okay with that. Because the broader thing is okay.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Sorry, I meant your truck drivers. But my point just is that I think agents are real. But I think that we are far away from that because we're still at the phase of how do you build reliable software in production for an enterprise versus the toy apps that you see on the internet, which is like, let me vibe code something. I think these things are worlds apart still.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
No, it works. It just doesn't work.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Let me say it differently, Sachs. I think we have not yet figured out how to move the budgets from experimentation to mainline production, meaning where large chunks of the US economy are comfortable enough to with the ways in which hallucinations are managed such that they will replace legacy deterministic code with this new probabilistic model-generated code, meaning model-enabled code.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Let's just put it that way.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I mean, it's an open bar, that's for sure. Where do you guys meet up in, like, Redwood City?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Bro, the plane just waits. Just text the pilot and just tell them you're... All right.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I think the question is, what is the dimension? We use Gemini. So for many tasks at 80, 90, we use Gemini. It's incredible. But for most of our co-gen, we use Anthropic, and Claude kicks ass. It's exceptional.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
It depends on task. I agree with that. What Zach said is right. So it's kind of like, what problem are you trying to solve? And then you have to ride this technology wave that is compounding very quickly. All I was just trying to get across is that the error rates have been diminishing, but not nearly as fast as you need for some sectors of the economy. So you can use a model
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
to generate deterministic code, that's great. And as long as you unit test it and integration test it, it'll be fine. But I'm saying, if you're gonna use a model in production, in an environment where if stuff goes wrong, there are consequences, we're not there yet.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
You'll quickly find that when you layer these models on top of each other, the test time compute costs are astronomical. And Aaron's probably dealt with this. It's like I get a bill from AWS, and it's like, oh, wait, hold on a second. I just... per 100,000 this month? What's going on? So you have to get to the bottom of it.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Okay, all of this speaks to this thing that's going to sound totally esoteric, but we all used to shit on QA, right? The least talented engineers were allocated to QA. I think in the world of AI, it'll end up being the most talented. You know, we internally at 8090, we call it improvement engineering and it's a total specialty. It's similar to when I kind of coined the growth team at Facebook.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I feel it's the same kind of moment where improvement engineering is really the skill that translates toy apps and vibe coding into something that's very practical and real. And my team and the leader of this team, he's steeped in things like Japanese kata management from Toyota and quality systems.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And these are all the things that matter when you're trying to just shrink the error rate down to zero so that you can use it in a reliable way. And also to document it so that if people want to question what happened or have, you know, recompense or some way to come back and say, hey, that really harmed me. How do you even do that?
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Like, these are all very complicated issues that will get sorted out. Super, I think, interesting.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Bro, the plane just waits. Just text the pilot and just tell them you're... All right, listen.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
Let me give you my overall grade. And then I'll tell you how I get to that. I think the first 100 days have been a B plus. And here's how I get to that score. There have been two things where I think Trump has, frankly, hit a home run. The first is all of the direct investment and specifically the foreign direct investment into the United States.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I think it's approaching, if not, it has already exceeded a trillion dollars from corporations and organizations and individuals from around the world who have committed to bringing money into the United States. And I think strategically, that's a legacy that will live past him. So I think that's been an A+. The second is we had a very unsafe border situation and he ran on shutting it down.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I'm not talking about the execution of the deportations. I'm just saying getting the illegal crossings to zero and he's done that. So that's been an A plus. I think what's going to be more controversial are these next three things though. In my interpretation, I think the tariffs have been an A
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And I think that the market reaction, the stock market is only down 4% and the interest rate markets are 4.25%. I think those have been an A. Now, the reason I think tariffs have been an A is because it is uncovered, in my opinion, how beholden we are. to a brittle supply chain and specifically to China who is a friend, but who's also an enemy.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
And I think that that's gonna really severely complicate our flexibility and optionality in the future as they do what is in their best interests. Okay, so where have they then not done so well? I think the documents have been frankly a D We were supposed to get the Epstein files. We haven't yet. We were supposed to get the Martin Luther King files. We haven't. We did get the redacted JFK files.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
I don't think that there's been very good communication about why it's taking so long. So I think it's a very small, narrow thing, but I think it had a lot of attention on the way in. I think the communications of the tariffs and the back and forth had been a C. I think the markets were not led in enough of a way where they could absorb the volatility.
All-In with Chamath, Jason, Sacks & Friedberg
Trump's First 100 Days, Tariffs Impact Trade, AI Agents, Amazon Backs Down
But if you take it all in its totality, I would give it a B plus. I think it's been a very productive 100 days. And when you look back, I think in three years, four years, five years. Okay. We've made some important progress.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Nice to see you. Thanks for having me on.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Well, the eye of the storm is supposed to be really calm. I don't feel like we're there right now. We're right in the middle of it. In a word, I would say paralysis, especially hurting small business. Bigger companies tend to have factories in multiple locations. They kind of load balance. They shift production to Vietnam. Even for the same item, they'll have multiple factories.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Small business doesn't have that luxury, and a lot of small businesses are buying from China. It's very hard. They're kind of the back of the line. If you want to go to a new country and say, hey, I need you to produce this good. And they go, sure, how many do you need? You go, I need 500 of them. They tell you to pound sand.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
They've got a long backlog from kind of the Fortune 500 that's setting up mega factories, and they don't really care about taking these small batch production orders out of small business. So those are the ones who are kind of still stuck producing in China right now and struggling to find options.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And then the reason I use the word paralysis is it'd also be sort of crazy to shift your manufacturing – When we know there's this looming new information that's going to come out in two and a half months or so, when they tell us what the new duty rates are, we have a 90-day pause. But in the meantime, you're either too late or too early to move your manufacturing.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Too late, you should have done it by now. And too early, might as well wait two more months and see what the duty rates land at. But people are freaking out. I mean, 145% duty rate. You're going to see a lot of businesses fail, a lot of shortages, frankly. Ocean freight bookings out of China to U.S. trade lane are down 50%. just in the weeks since the tariffs hit.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So that's going to lead to shortages, mass inflation, business failures, unemployment, all sorts of second order effects that we can't even predict.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
There's that. They also didn't have the great lobbyists that Apple and Nvidia and all those other guys had to keep their products. You know, they got exemptions for smartphones for a lot of other categories. So those aren't small businesses don't produce smartphones, right? They're producing furniture and apparel and home goods and these types of things that are hit with these crazy duties.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
As of April 22nd, so the first container ships arrived yesterday that are subject to the new duties out of China. If it left after midnight on April 9th, It's getting hit with 125% duty on top of whatever pre-existing duty existed before. So that's from China. It's 10% for rest of world on top of whatever existed before. And it takes a while to cross the ocean, right?
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So the first ships arrived last night. And then so going forward, presumably all the ships are now subject to this 125% duty rate. And then, yeah, a lot of products already had a 25% duty. The maximum, I think it was syringes. for whatever reason, are at 245%, but that's pretty rare. It's usually most goods are around 150%. Furniture, like a couch, is 179%.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Now, what consumers need to think about, that's applied to the cost of the goods. That doesn't mean prices are going up that much. That's the cost to the company you buy from goes up by, call it 125%. Typically, these companies, if they have a good business, they probably are marking stuff up three times because they got to pay for a lot of overhead.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
They got to pay for their whole team, their marketing, everything else. So, you know, like if they're marking up 3X and they're 100% duty, just a simple math, your price is going up 30%, somewhere around there. So, yeah, it's definitely going to lead to price hikes. Now, the real inflation, like all the inflation modeling that I've seen people talk about is doing that simple math, right?
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
which I'm not that good at math in my head, so somewhere around what I just said. But the real inflation spikes are going to come when there's shortages. Like, ocean freight is down 50%. There's going to be a lot less stuff. Whoever has stuff has cornered the market and can charge whatever they want. And that's where you see kind of like real and kind of crazy hyperinflation.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I don't know if hyperinflation is a technical term. I don't know if we get there. But where you see really high inflation is, hey, you're the only guy that got your furniture in before the tariffs. You charge a lot. The other people didn't bother importing. You know, you can charge whatever price you want if you're that guy.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Yeah, so this depends on the terms of trade. Most trade is done where the importer pays the tariff. Importers pays the duties. U.S. is actually a really interesting thing to cover that I think hasn't gotten enough attention. The United States is one of the few countries, U.S., Canada, and a lot of Western Europe. So it seems to be like a product of Western civilization in some way.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
But these countries allow foreign companies to import goods without registering an entity. Right. It's kind of a weird thing. If you want to import something into China, you've got to go set up a Chinese entity, and then that entity can import goods into China. In the U.S., Chinese companies and any company in the world can just import stuff into our country without creating a local entity.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Now, this creates real problems for enforcement because there's now a huge incentive to lie about the value of your goods, right? If you say you import $100,000 worth of furniture, tell the government it was $10,000, you just cut your duty bill by 90%. And so there's a lot of this fraud now happening. It's escalating like crazy where people just lie.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And then if they get caught, like Customs and Border Protection does not have agents in China to go chase you down. Like you're not those people kind of disappear, create a new shell company, keep going. And I know Scott will love this. Those merchants get to keep their Amazon account forever.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
with all of its product listings and reviews, and now a new shell company keeps importing the goods, keeps selling. So Amazon merchants, 60% of them are these Chinese companies where they import. There's no American company at all. Chinese company imports, sells online on Amazon, gets busted for tariffs, spins up a new shell company, just keeps going.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So that's something I'm surprised that they haven't addressed in all of this. They've kind of taken this 40,000-foot macro view of the tariffs with crazy... kind of general assumptions that we've heard about Penguin Island and everything, but they miss the micro, like, here's the real fraud that's happening. Fix that.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
If they don't change anything and this 145% duty sticks on China, it'll take out like mass bankruptcies. You're talking like 80% of small business that buys from China will just die. Yeah. And millions of employees will go, you know, we'll be unemployed. I mean, it's sort of why I'm like, they obviously have to back off the trade. Like, that can't be that they just do that.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I don't believe that they're that crazy.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I just think the U.S. backs down and China doesn't.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I think so, yeah. There's 145% duty. And people don't have to buy those things. A lot of what we buy from China is kind of discretionary spend. You don't have to buy it. When the price goes way up, you shift your spend to something else. We have customers that buy pizza ovens in China for your backyard. They're really cool products.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
when the price goes up 50% or more, you might just go out and buy pizza from Domino's or something, right? Like, it's literally, there's a substitute there that is made in America that's not taxed. And, you know, you can see shift, spend shift out of these categories really quickly.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So, yeah, I think, I think you're looking at something pretty catastrophic to the, to the point where I don't actually believe that they can hold the line. You know, the classic game of chicken, you got two guys driving right at each other in their cars and first one to sort of loses and, The other guy gets the girl, right? And, like, in this scenario, you can kind of game theory this out.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Like, okay, we're two cars headed straight at each other, China and the U.S. Now, there is a scenario where neither party swerves and they both die. Like, that's a possibility. But now evaluate it from both sides' point of view. China, the Chinese people, the Chinese leadership looks at it and go, hey, this is being done to us. by this foreign imperialist power.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
They'll use whatever language they use, but it's being done to them by the other party. On the U.S. side, all of us look at it and go, this is being done to us by our own leadership. We don't have the same resolve because of just that dynamic. Second, we have way more feedbacks back to our government to put pressure on those, both through elections, through markets, the bond market.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
There's all kinds of things. American people are way softer. The Chinese have suffered much worse. They can bear this grin and bear it. They'll be fine. They've gone through worse in their history, in their recent history even. And so if you just look at those two dynamics, one of these sides is going to budge.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
If neither side budges, I think it's catastrophic for both economies and ultimately for the people of both countries. But if one side is going to be a buzz, it seems like it has to be the United States. Iron willed as Donald Trump may be and may want everyone to think he is, I just think the forces are really strong here.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Yeah, now the question is, does Trump listen to Besson or somebody else? Who knows? I mean, Besson seems like a rational guy who's got a lot of experience in the markets and understands what it means when equities go down and bonds go down at the same time. Like, this isn't normal.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
The U.S. consumer is still king, but that also revolves around the U.S. dollar being strong. It's come down a lot. I think it's down about 6% or so in the last few weeks since all this started. That degrades our consumer purchasing power and therefore companies will look for customers in other markets. But when it comes to supply chain, yeah, there will be a reconfiguration out of China.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
That's an ongoing trend, by the way, for over a decade as the labor cost in China has just gotten higher and higher. Yeah, I remember 10 years ago at a shipping conference, a guy saying that they were shipping thousands of containers a year of used manufacturing equipment from China to Vietnam. to basically lift and shift factories down there because labor cost is so much cheaper.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
We're doing a few things. I created this program. We call it the Marco Polo program, but it's basically to take flexporters from around the company and move them into these new emerging markets. We have about 400 employees in China. We got 50 in Vietnam and then a lot of the other Southeast Asian countries. We only have a handful of folks trying to serve that giant market.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So we're shifting, trying to move talent, create incentives for people, the leadership program to go down there and help us grow in those regions. We're getting a lot more focus on intra-Asia moves. One of the interesting things that's not intuitive at all here is that trade might actually increase from this. The market finds a way.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And so if you put heavy duties on Chinese products, you now created this incentive to move components from China down to Southeast Asia. assemble them, do what's called a substantial transformation. You have to do enough value-added work and add other components that this can now be, say, made in Vietnam, and then you ship it to the US. Well, now you've got two logistics moves.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Your trade has gone up, even though the system is far less efficient. So we're doing a lot of stuff like that, like help people with tariff engineering, help people understand the advisory role of things, like what qualifies as substantial transformation, that stuff. And then the biggest thing you see behind me, I have this model airplane.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Flexport has three 747s dedicated that we fly a lot of Chinese e-commerce goods. And that, we're modeling that business to go down between... go down 60% to 95%. We don't know, but it's going to drop dramatically. So we're reconfiguring our network on that. They've been flying South China to U.S. We've got one of them going to redeploy from South China to Europe.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
We got one that's going to go Vietnam, stop in Korea. We got one that's just going, I mean, we're making deals right now trying to figure out, hey, how do we keep these planes full? We try to be asset light, but we made those deals during COVID when there were no capacity of passenger airplanes available. 50% of the world's air freight flies in the belly of passenger planes.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So when there was no capacity, we went out and signed these long-term deals. So we're sort of, I wouldn't say stuck with it because I would do that deal again 10 times out of 10. It's made a lot of money over its lifetime. But at the moment, we have some assets that are, it's the asset-owning logistics companies that are going to feel the pain here.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
If you don't have any assets, you kind of flow with the tide. But if you have assets, you know, you could be underwater forever.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Maybe, but like, you know, a lot of these analyses forget that trade is not zero-sum, it's positive-sum. By definition, both parties are better off when they do trade. That's why they do it. And so, I mean, if the U.S. backs off here, it's going to lead to recession all over the place. There'll be less consumer demand in other markets. It's like these very complex...
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
systems with second or even the second order effects are hard to model, much less third, fourth order. So it will not be like a graceful transition and, oh, now I'll just sell it to someone else. I mean, you would have sold to them already if you could have, right? So it's going to be kind of ugly. And then the big thing that people are missing here is, let's say they go do a deal right now.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Well, 50% of bookings for the last two weeks, the ocean freight market has gone down by 50%. Some of Scott's buddies, right? They've canceled their orders. Well, if a deal gets done, all of that stuff's going to flow at once, and you won't have enough space on ships. And meantime, the ocean carriers have already started canceling services, moving ships to Southeast Asia.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
moving containers down there, and you're going to wake up. Every week that goes on, this problem is going to compound. But you'll wake up and go, oh, my goodness, trade is back. Maybe not to where it was. Maybe it's down a little bit, but it comes back a lot more than 50% down where it is now. But the ships aren't here. The containers aren't here.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And you're going to get back to these bottleneck situations that we had in COVID where the price of freight goes crazy. So we're sitting here modeling these scenarios. We're like, all right, either it all goes to hell, And you're down 100, you know, the duties stay at 145%. Volumes are way down. We got to make all these contingency plans for that world.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Or the opposite, where the price of freight goes crazy and I can't get anything loaded and we're scrambling. It's like super like long tail effects in both directions. It's very hard to make decisions as a logistics operator right now.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
First off, on the short term, I don't think they can make a deal with China in the short term. I think the deal is, hey, we'll just pause this and give ourselves all some time to sit down and have a nice negotiation, and that might take a year or two.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I mean, it's very difficult for Trump particularly to deal with China because his style is man at the top, head honcho, sit down in the room, yell at each other, say some things. make a deal. He wants to negotiate that deal himself personally, probably. Chinese would never allow that in the Chinese system. They can't risk the leader looking bad and losing face.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So the deal has to be worked out at the lower levels. And then it's a formality when, when president Xi and president Trump come and shake hands. I just think there's a mismatch there. They'll get over that, but like not on a three week timeframe. And I think the nuance, there's so much complexity in the China deal that,
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
that by the time they actually sat down and got on the same page, it would be too late for the types of businesses we're talking about failing. So I would say, but what would the deal look like over time? And what does the deal look like with these other countries? I have a rule in life, like don't argue with someone unless you think you can make their argument better than they can.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I got that from Charlie Munger. It's like a good, healthy rule to make sure you're doing a good job in your debate. And so if you're taking their side and saying kind of steel manning it, what are they looking for here? What are their points? They have a few that I think are valid and that they might be after in some form or another. One might just be, hey, this is negotiating tactic.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And actually, these guys are actually free traders all along and really just want to lower tariffs and trade barriers. And it's, you know, that's what they're after. Doesn't really jive with the rhetoric about bringing jobs home. If free trade is bad, then it's bad, right? So not sure that's the case. But maybe. They will get better terms out of people than they were before, sounds like.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Two is we have a major fiscal problem in this country. $2 trillion deficit, no end in sight. You got to do something to generate more revenue. So tariffs are one way to do that. Not 145%, probably net lowers the amount of trade and the amount of duties collected, but some amount of duties maybe is a reasonable place to, you got to get the revenue somehow for the government. So that's fine.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
That's reasonable. Third is it is a valid point around US not having manufacturing capacity in a national security time of war. Like you're, Your car factories become your tank factories. This is why auto is such an important strategic sector, for example.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And then fourth, and I think really what we'll see them hammer, I think they have a valid point, is on the industrial policies of these countries, both currency. Look at Vietnam. Vietnamese dong has gone down in valuation the last three years. Maybe not the last three weeks, but the last few years.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
At the moment that their manufacturing sector is absolutely booming, and if this was a normal market, their currency would appreciate as so many more dollars flowed in. So there's some probably terms for a deal around currency, setting the reserve currency, setting the U.S. currency exchange rates at a level that we think is healthier.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Subsidies, these countries provide a lot of subsidies for manufacturing, free land, free buildings, cheap credit. There's all kinds of things that they do smartly from their own perspective, I think, but that don't make the level playing field. Environmental regulations that we have that are way higher than theirs. Organized labor repression.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I mean, Korea for many, many years had like a mandatory six-day work week rule. You know, I mean, that would never fly here. China has a six-day work week. I don't think it's mandatory. It's just, like, culturally, they just work harder than us. I don't know if there's something... But these are all, like, fair grounds for going, hey, like... you know, it's not a balanced playing field for us.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And so maybe there's some deal on one or more of those grounds to get them to change some policy or something. But the duty rates itself is one small piece of it, like how much they charge us in duty versus what we charge them. And they've been pretty clear about this, that the administration cares much more about these non-tariff barriers, they would call them.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Definitely Vietnam long. It's incredible what they're doing. They have some real geographic benefits to their river network. 80% of the containers flowing out of Vietnam actually go on a barge floating down the river to the port instead of having to use trucks. That's let them kind of
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
go much faster in scaling because their roads can't really keep up with the demand, the amount of manufacturing boom that's happened there. They've had, I think it's 8% GDP growth last few years in a row. I mean, you only have to do that for so long before you double.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So Vietnam, a lot of the Southeast Asian countries are just benefiting from lower costs of labor and reasonably good policies around industrial stimulus. Who am I short? India still remains a mess. I guess they're probably doing well, but it's just like very complicated to do business there. They don't benefit from logistics network. They don't have inland river network.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So it's more expensive to move stuff. A lot of complexity from a logistics standpoint that falls out of that. Their infrastructure is lagging. But but then again, you know, it's a billion people that are relatively low cost. So maybe I don't know if I'd short it, but we have not seen as much dynamism there as you have in Southeast Asia. Um, Europe seems hard to go long Europe right now.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
They're just over-regulating everything. And, but then again, Flexport, uh, actually Europe is one of my favorite case studies internally because Europe has been our fastest growing market for the last three years in a row. Uh, and we've way outgrown the scale of the market. Hasn't really grown, but we've been growing like 30% annually there, uh,
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And it allows me any other, anytime any other team at Flexport points to market dynamics, I just point to Europe and go markets don't matter. It's all about how you guys execute. So within, within our company, I, we kind of ignore the macro trends and it's all about just having good people that can go find the market. So big from our perspective that like it barely matters if it goes up or down.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So Shopify owns 20% of Flexport. So I follow everything Toby says very closely. He's kind of my boss on some level. They got a board seat. And I actually took his AI memo and put it in a chat GPT and said, rewrite this and pretend the CEO of Flexport wrote it so I can send it to my employees. I haven't hit send on that yet. You do that too, huh? Might send that one out soon.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So if you take like, let's take normal conditions, which we haven't seen in 10 years or something in logistics, but take normal long run average for the last 30 years is like, cost you about $2,000 to ship a container from Asia to the US. So let's just say we go back to that world. The cost of the freight forwarders keep 20%.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
And 80% gets paid to the people that own the ships and the trucks and own the assets. They deserve that, at least that. So, okay, of the 20%, of the $400 the freight forwarder is keeping on this, half of that is going to labor costs of coordinating the shipment, what I call freight email forwarding, to pushing docks, making phone calls. Not the blue-collar guys driving forklifts.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Like, this is the service jobs, desk jobs. We believe we can take about 80% of that cost out in the next two, three years, largely because of AI. And if you asked me that three years ago, I'd be like, eh, stuff's pretty hard to automate. You know, it turns out there's a million edge cases that you can't put into rules engines and you need people that are smart that can do it.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Now we're finding about 1% weekly, the ability to automate about 1% of that work every week. It's kind of crazy. And so we think 80% in the next few years is totally possible. That means you reduce, in a steady state world without craziness, you're reducing the cost of shipping anything by about 8%. So that would be huge for consumers.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Now we might decide to keep all that for my margin and be the highest margin freight forwarder in the world. Our view is much more give it back to the customer, drive more scale. But the correct answer is probably some choice in there. So that's one. Number one, the thing that people care about is price. It can lower the cost.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Two, a lot of these supply chains are about data, data to make good decisions. How many units should I order? When should I order them? Where should I position them? How should I engineer them from a tariff standpoint? These types of things.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
All of that, we're finding huge opportunity to just use AI to like ask questions in natural language, generate reports on the fly, like stuff that you used to take. You'd have some analysts on your team. It would take them three days to generate the report. You get it in an instant.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Obviously, May 2nd is the key for them that their business model, as it stands right now, gets turned upside down. So they have to start paying duties May 2nd or shift their manufacturing. I think you'll see a bit of both. They're going to pay duties. They're going to see what consumers are willing to do. They can still import the goods.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
By the way, they still have a cost of goods sold advantage system. over you and your buddies, because they're just built in China, made to source things cheaper. They have some big advantages there.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Exactly. Their cost is lower already, so exactly. So their cost advantage is still there. They're paying for air freight, where Ralph Lauren's probably paying for ocean freight. So that's much cheaper. But they're not paying for U.S. warehousing, which is much more expensive. Their final mile cost is lower.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
They have less working capital of just products sitting on the warehouse and sitting on the water for months at a time. It's much more just-in-time production. So... I think net like the tariffs will cost having to pay duties will cost, you know, hurt them versus their current model. But I think they still have a big advantage over other kind of companies that they would compete with.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
So probably their sales go down, but but they might their market share might go up. It's hard to say. I think that I don't think it's going to be the death of Timu and Sheen. I think you're going to see that unless there's some other like very possible Trump administration puts in some kind of company specific deal. regulation to kill these guys.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
It's, you know, nothing's outside the range of possibility, but, um, I think you're still, I think they'll still be okay. Probably.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I see a fair number. Certainly all of our customers are up in arms and tweeting about it, posting about it, and all these small brands, they may just not have enough of a voice to Uh, I don't know, man. I think big companies, there's a lot of failure of leadership in general. Like a lot of big companies are, well, they're, they're found a long time ago. The founders have retired.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
You got middle managers who got promoted up to be the CEO. There's a lot of risk here. You know, you go criticize the president and he attacks you publicly. Like you're fired. There's like a lot of downside to criticizing, uh, I'm hard to fire. So, and you know, I'm on some level, I'm not, I'm not the best voice for the administration to listen to because I am selling my own book.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
It is bad for my business, bad for my customers. Like, so, you know, are they going to listen to me on tariffs? Probably not. Like I, I I'm, I'm, I'm, I'm a little too self-interested for you to take me that seriously. Um, but, uh, I think you'll see more and more. JP Morgan put out a statement.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I haven't seen Jamie Dimon say anything, but their chief strategist, whatever that job is, said that this was really, really bad. I think you'll see more. The banks probably weigh in. I don't know that it matters. I feel like the Trump administration knows that this is bad for businesses importing from China. Maybe they want that. So... It's like not clear that this isn't by design.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
It's also my thesis for why Flexport could beat other logistics companies. These companies were the only one founded in the last 40 years in the big global companies. So the founders are mostly retired companies.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
pretty much all retired and these companies aren't managed by, uh, by people with enough skin in the game or, or frankly, like, yeah, they could get fired really easily if they, they're also a little too rational. Logistics is a very rational market. You know, it's all math at the end of the day. Uh, and some of this stuff is you don't have that much math to go by.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
You gotta go off of your instinct and just be like, yo, this is, let me speak up here. I don't need to listen to my committee of managers. Like this is really bad for my customers.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
No, I'm from Bethesda, Maryland, but I was lucky enough to get in as an out-of-state student undergrad.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
Yeah, I'm here in San Francisco.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
I'm trying. I mean, my customers certainly appreciate it. That's why I'm doing more and more. I want them to see that we got their back.
Prof G Markets
Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
All right. Take care, guys.