Tariffs, Trade and the Billion-Dollar Ships: How Container Shipping Shapes Global Trade

WEBVTT
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The largest container ships, when they're fully loaded with cargo,
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they're literally carrying right at about a billion dollars worth of stuff.
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On this episode of Executive Edge, Greg is joined by John McCown,
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a non-resident senior fellow at the Center for Maritime Strategy,
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an internationally recognized expert in container shipping and maritime commerce.
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IBM, which was literally one of the first Cooley international companies,
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One of their early slogans in the 40s was world peace through world create.
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They had the view that, you know, when countries have commerce together,
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it's benefiting both of them.
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John discusses maritime shipping, the impact of tariffs on international trade,
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and key learnings from decades of experience.
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Why doesn't the U.S. have one of the largest shipping companies by fleet capacity?
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It really kind of largely goes back to... Welcome to this episode of the Executive Edge podcast.
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Today, I've got a very special guest. John McCown is with us today.
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John is a non-resident senior fellow at the Center for Maritime Strategy.
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John is an internationally recognized expert in container shipping and maritime
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commerce. He has more than four decades of operating and investment experience in the field.
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Folks, this is a true expert in shipping with us today. These days,
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John is advising, lecturing, and writing extensively about maritime issues,
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and his regular reports on the container shipping sector are widely read and quoted.
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You may have seen John on some major news programs. John, great to have you
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here today. Thanks for joining us. Great to be here, Greg.
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I really appreciate the opportunity to chat about shipping and tariffs and what's
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going on in my world. Excellent.
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Excellent. Yeah, I can't wait to get into the tariffs. But before we do,
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You had such an amazing career.
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I'd like to start at the very beginning. You were in banking.
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I believe you were a corporate loan officer.
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So let's get started there and kind of take us through your career journey and
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some of the experience you've had, because I think our audience is really going to.
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Find you're incredibly credible after coming through this, talking through your career.
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I grew up in Alabama, but my first job out of college was working for a bank in New York.
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I had rationalized that I didn't really know what I wanted to do in the business
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world, but I thought that banking could always be transferable.
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And going to a place like New York would give you the best experience.
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And my simple game plan was to come to New York for a few years and go back to Alabama.
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And that would translate into all sorts of benefits.
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And, you know, I never really left the New York area and enjoyed my banking.
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And that was kind of the foundation.
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I went off to business school and then I spent all of my time since then in the shipping industry.
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What was it that helped you make that move, if you will, from banking into The
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catalyst in between my banking and shipping experience, I was at business school.
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There happened to be an article in Business Week, a cover article about Malcolm McLean.
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And one of our professors came in in the afternoon and held up this magazine
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and said, you ought to read this article.
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We kind of hope to teach you how to be kind of risk-taking entrepreneurs like
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this. And I read the article and I was fascinated by what this gentleman was doing.
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You know, instead of more typical getting a job with an investment bank,
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which is kind of a typical path, somebody going to business school goes from
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commercial banking to an investment banking, I thought I would pursue a summer
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job working at this shipping company.
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And I sought them out. They weren't necessarily looking for a business school
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person, but they were kind of intrigued. And I worked at the company.
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And when I was there, I found out about a small group that worked with this
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entrepreneur, which, you know, what he had done, it fascinated me.
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And I pursued, you know, working with the small group that worked with him after business school.
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And so that was kind of the roundabout way. But, you know, I started in the
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kind of the finance and planning and analysis.
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And so my banking career had laid real benefits in that.
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And, you know, that's really been the career that I've stayed in my whole life.
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And you've mentioned this entrepreneur.
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His name is Malcolm McLean. And I'm going to let you tell the audience who Malcolm McLean is.
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But I believe, you know, he mentored you for 20 years.
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Is that right? Yeah, I ended up working on really a daily basis with him for
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20 years. And that relationship grew and kind of expanded.
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Started my just working on deployments with him and we developed a very close
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professional and personal relationship many years before I was with him around the time I was born.
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He's the gentleman that invented container shipping in 1956.
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And container shipping, of course, moves the large majority of the world's trade.
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When I was with him, it was towards the tail end of his career,
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but he had just bought a company called U.S. Lines.
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That was the cover article in Business Week. And he was already in his late 60s when he did that.
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But U.S. Lines was the largest competitor to a company called Sealand,
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which was the company that he had founded. And Malcolm had many years earlier
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sold Sealand to R.J. Reynolds.
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He wasn't involved, but he had an interest in getting involved in the business.
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So one of the magazines, I think it was Forbes, said it's as if Henry Ford had
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come out of retirement and bought Chrysler, you know, using the analogy for
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what Malcolm did with U.S.
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Lines. And so U.S. Lines was much smaller, but Malcolm proceeded to build it
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up with buying additional companies,
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but mainly with a new shipbuilding program, which at the time was the largest
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shipbuilding contract in history.
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And the ships that he was building were larger by 30% of any vessel afloat.
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So I really, even though that was certainly container shipping had been invented,
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in a book that I later wrote, I referred to what Malcolm did with the econ ships,
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which is what we call these large ships, was really kind of the second container revolution.
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And in some ways, just as powerful as the first, because what it did was,
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you know, container shipping, it's the process of moving goods in a container
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and all of the savings from that.
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But what Malcolm did with the Econ ships was open up the door for the giant scale economies.
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You had had ships that were, you know, more than 1,200 feet long,
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you know, before that, but it was the tankers and other ships.
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Container shipping, the ships were big, but they weren't massive.
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And the Econ ships became the beginning of that crend.
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And that crend is continued in a rather major way. What's amazing to me,
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the econ ships, we knew they were big and there were many people thought they were too big.
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They were 30% larger than any ship afloat.
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Today, the largest container ships in the world are literally more than six
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times the size of the econ ships.
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So that's an indication of what that second container revolution kind of led to. Wow.
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If we can stop here for a second, because I think there's a...
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First, I want to make sure the audience appreciates. So the container ships,
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I think most people know what those are.
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But if you don't, they're the large ships you see with all the boxes stacked
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on them, shipping containers, right?
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People are turning shipping containers into homes and everything these days.
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But that's a massive load coming into a port in...
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As these ships grow, I'm assuming there has to be trickle-on infrastructure
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plays that have to be made, I guess, and investments to be made to unload and
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load these ships, being that much bigger. Is that true? Definitely.
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The container shipping is really the ship itself is really only about a third
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of your cost. It's really, you should think of it as a system.
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And certainly you have to have massive terminals with these giant container
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cranes, specialized cranes.
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So a container ship really is obviously the end of a part of it,
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but it really, it relies on all of these other things with the very regular schedule service.
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And of course, by moving container goods and containers, you're making the whole
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loading and unloading process much more efficient.
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Now, the biggest ships, they use the term TU for 20-foot equivalent unit.
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The largest container ships in the world today are literally over 24,000 TU.
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So 24,000 boxes that are 20 feet long, 8 feet high, 8 feet wide.
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Now, most of the boxes are actually 40s, so, you know, half as many.
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But the point is, you have on any given ship, a large ship, you will have freight
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moved by hundreds of customers going to dozens of different places.
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And therein lies one of the efficiencies of container shipping.
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These ships will always be in a scheduled service, you know,
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where they make a call every week, say, it takes five vessels to have a weekly
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spring from the U.S. to the Far East.
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But those ships will be carrying cargo at all times for different shippers.
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So you have that benefit that kind of accrues to it.
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And, of course, the efficiency in unloading these boxes, rather than unloading
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the individual goods, they then travel inland because they're put on the back
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of a chassis or they're put on a railroad.
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And so, you know, you don't have to reload it.
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The boxes provide security. They also protect the goods.
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With a large container ship today, the largest container ships,
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when they're fully loaded with cargo, they're literally carrying right at about
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a billion dollars worth of stuff.
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You know, roughly the value of each TU is about $53,000.
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So each of these ships is kind of a major kind of economic catalyst,
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you know, when it comes into a quart. Right.
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But the reality is that WorldCrate couldn't exist anywhere near it exists without
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the efficiency of container shipping.
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One of the more amazing statistics, and this underscores how efficient it is,
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if you take the value of the stuff that are moved annually in container ships,
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that's now about $8 trillion.
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You know, a crillion with a T.
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And if you take the entire revenue of the container shipping industry,
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that's going to barely be about 2% or 3% of that. So obviously,
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the industry makes a profit.
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More recently, it's been a pretty good profit.
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So the cost of moving these goods kind of from one part of the world to another,
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in many cases, is a small single-digit percentage.
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So that kind of underscores the whole concept of globalization that people talk about.
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It's driven by the efficiency of being able to move something halfway around
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the world for a fairly modest percentage of the value of that cargo.
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Now, I happen to believe, and it's provable, that the trade that we and all
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countries do collectively benefits that country. It's irrefutable.
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But like any sort of capitalistic initiative, it's disruptive.
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And so there are people that are disrupted, but collectively,
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container shipping and trade is good for the country as a whole. as a whole.
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Yeah, I think it's no exaggeration to say that we wouldn't have the.
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Degree of commerce or in the amount of goods flowing like we do today and these
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amazing supply chains that have been built without container shipping sitting
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right in the middle of it. I couldn't agree more.
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In fact, I'd even take it a step further. It even goes beyond economics because
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the trade that we're engaged in has a way of lessening tension.
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IBM, which was literally one of the first Cooley international companies,
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one of their early slogans in the 40s was world peace through world creed.
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And they had the view that when countries have commerce together,
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it's benefiting both of them. It certainly reduces tensions.
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We certainly have that even with all the tensions that kind of exist between
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China and the U.S. I happen to think, and I think it's almost irrefutable,
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that the level of trade makes those less than they would be.
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You know, most historians will tell you, and it's kind of now pretty acknowledged,
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that the Japanese attack on Pearl Harbor, a major, major catalyst of that was,
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you go back at that time, believe it or not, the U.S.
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Was a major exporter of oil. Japan got most of their oil from the U.S.
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And allies, and when President Roosevelt cut that oil off, you know,
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the Japanese economy only had a certain amount of time that it could last.
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They were almost, historians would say they were presented with something where
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they almost had to upset that, you know, by attacking.
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And, you know, at the same time they attacked Pearl Harbor, they took over Indonesia,
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and that became their gas station.
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So we need to be cognizant of the lessons of history,
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you know, that not only does trade make us reduce tensions, you know,
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to take aggressive stops to, you know, to cut off trade, if it has an impact
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on another country, it can raise tensions.
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But that's, but yeah, it's irrefutable, the economic benefits, I think, of trade.
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Yeah, it's a good history lesson there. we're going to come back to the balance
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of trade and, and, and the tariffs, especially a little bit further in here,
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but I want to keep going. So, so you worked with.
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The person who invented container shipping. I'm sure you learned a ton of great knowledge from him.
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And then you went on to start and build TrailerBridge, right?
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Tell us about TrailerBridge. What was the business model there?
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What service were you performing?
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Well, this was a smaller carrier, much smaller than U.S.
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Lines, but a carrier that we started, Malcolm and I, to move cargo to Puerto
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Rico between the U.S. and Puerto Rico.
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And there's they'll all call the Jones Act, where that creed has to be handled
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by U.S.-owned, U.S.-built vessels.
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And so we spent a couple of years looking at what was the most detracted Jones Act markets.
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We had some ideas that really rotated around making sure that our conveyance
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system worked the best with the inland side in the U.S.,
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because the freight in all of these Jones Act markets tends to have a three
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or four or five hundred mile inland leg before it gets to the port.
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And so we really kind of came up with a unique design.
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We elected to, our vessels were giant barges, which we were able to buy that
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existed, and we expanded them.
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And the biggest ones were actually, think of it as a three-story parking garage,
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about 800 feet long. And so we designed these to move first just 48-foot trailers
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and then 53-foot containers and trailers.
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And we did that because that was the way freight moved, you know, in the domestic market.
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And so we used the term, we kind of backed into the vessel.
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We kind of adapted the vessel to what works with the highway.
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So, and that, of course, was the whole concept of container shipping,
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except what happened with most international container shipping,
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they kind of stopped building,
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expanding the size when they get to 40-foot containers.
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And there are reasons that make sense. But in this particular niche market we
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were in in Puerto Rico, we knew that going with the same size would make the most sense.
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So we started as a startup in a market that frankly wasn't growing very well,
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kind of somewhat flat and, you know, a good year would be, you know,
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one and a half percent growth.
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But because we had basically a better mouse crap.
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You know, moving freight in larger sizes, and also the tub barges gave us certain
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cost economies, We were able to grow and expand,
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and we first enlarged the size of our vessels by cutting them in half and having
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a shipyard prior to that build a 250-foot midbody.
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And so when you cut a vessel in half, it can be you're building the midbody
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and you still have your vessel in service, comes into a shipyard,
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you cut it in half fairly quick, and then you weld it back together.
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So there's a certain cost efficiency time-wise. And then we ended up building
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five new vessels that had some additional benefits.
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And so that was a very exciting period.
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Our company grew and we ended up having about 10 or 12% of the market.
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In 2005, I think we made the cover
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of a magazine called American Shipper because they had done a survey.
00:17:45.792 --> 00:17:49.932
Our company, by the way, went public. And so our numbers were public and people
00:17:49.932 --> 00:17:54.532
could see how we were doing. and many of the big international shipping companies that are public.
00:17:54.990 --> 00:17:59.970
And so they did an article and they were able to conclude that of all the container
00:17:59.970 --> 00:18:05.190
shipping companies in the world, Little Cradle Bridge had the highest ratio
00:18:05.190 --> 00:18:07.310
of operating income to revenue.
00:18:07.310 --> 00:18:12.850
I think we were something in the order of 17%. And I think that came from,
00:18:12.970 --> 00:18:15.870
you know, it was the insight of, you know,
00:18:16.110 --> 00:18:22.130
Malcolm had passed away by this time, but he was certainly very involved in
00:18:22.130 --> 00:18:25.290
helping us design what would make sense.
00:18:25.430 --> 00:18:29.810
And it was really kind of paying attention to the assets and kind of coming
00:18:29.810 --> 00:18:35.090
up with a differentiated model, doing things different. Along the way,
00:18:35.290 --> 00:18:40.110
I came up with a couple of innovative things where I had two patents awarded to me.
00:18:40.330 --> 00:18:45.490
So it was really kind of a classic success story of, you know,
00:18:45.550 --> 00:18:51.410
if you build a better mouse crop and give your customers, you know, value.
00:18:51.710 --> 00:18:55.670
And of course, certainly our competitors didn't welcome what we were doing,
00:18:55.890 --> 00:18:58.830
but it was well received in the marketplace. Well, nice.
00:18:59.030 --> 00:19:05.510
Yeah, to be that kind of operating margin in such an asset-heavy industry is admirable.
00:19:05.770 --> 00:19:09.050
So great. You IPO'd FertileBridge, correct?
00:19:09.390 --> 00:19:13.570
Yes, it was IPO in 1997.
00:19:14.170 --> 00:19:19.230
Great. And then you moved on from there and go to a hedge fund.
00:19:19.882 --> 00:19:26.202
Tell us about that. Tell us what you were doing for the pulsing company seeking alpha.
00:19:26.442 --> 00:19:31.942
The final kind of chapter in Clearer Bridge didn't end the way I had expected it to.
00:19:32.142 --> 00:19:35.662
And it turned out that our competitors, or a couple of them in particular,
00:19:35.962 --> 00:19:40.742
the way they had reacted to what we were doing was to engage in price fixing.
00:19:41.102 --> 00:19:47.542
And so there was a rather massive investigation. We never engaged in price fixing,
00:19:47.602 --> 00:19:51.322
but that kind of changed the market and led to a whole bunch of changes that
00:19:51.322 --> 00:19:56.922
ended up my not being involved with the company for reasons that aren't worth getting into.
00:19:57.502 --> 00:20:03.022
But so I was still wanted to stay active in the field that I knew and,
00:20:03.022 --> 00:20:07.682
you know, thought that I had some insight in terms of, you know,
00:20:07.742 --> 00:20:10.662
the shipping industry, particular and transportation in general.
00:20:10.862 --> 00:20:15.862
And so I approached John Paulson was a classmate of mine at business school.
00:20:16.062 --> 00:20:21.002
And by that time, he had had a highly successful hedge fund, a Paulson company,
00:20:21.442 --> 00:20:28.222
most famously known as his prescient investments related to the housing crisis,
00:20:28.222 --> 00:20:32.362
which he made a lot of money for his investors and also himself.
00:20:32.642 --> 00:20:39.702
And so I approached John with some ideas in terms of investing and shipping, and he liked those.
00:20:39.862 --> 00:20:44.922
And we gave it a test run, and we both liked it. I ended up staying there about five years.
00:20:45.122 --> 00:20:52.402
And that was a great experience. It was energizing, working with an exceptionally bright group of people.
00:20:52.482 --> 00:20:56.502
By that time, most of them younger than I was. That was kind of a
00:20:56.818 --> 00:21:01.378
That was a very interesting switch for me because in my operating career,
00:21:01.378 --> 00:21:05.218
I was quite accustomed to being on the younger side.
00:21:05.398 --> 00:21:11.918
When I took the company public, I was barely 40, and most of my direct reports were older than I was.
00:21:12.418 --> 00:21:16.198
And then you flip the switch, and I went into this hedge fund world,
00:21:16.198 --> 00:21:22.338
and all of a sudden, most of the young people were a generation under me.
00:21:22.538 --> 00:21:28.098
So that was just, it took a little getting used to. I observed to my wife that
00:21:28.098 --> 00:21:31.138
I felt like my middle age had been robbed from me.
00:21:31.278 --> 00:21:37.258
I never really kind of experienced business in kind of that middle sweet spot.
00:21:37.278 --> 00:21:41.178
But that was a great experience, and I enjoyed it.
00:21:41.398 --> 00:21:46.238
And it told me that my knowledge of the industry itself could translate into
00:21:46.238 --> 00:21:47.998
good investment decisions.
00:21:47.998 --> 00:21:53.718
And then that even had me thinking because the Paulson, as big as it was,
00:21:53.978 --> 00:22:00.698
the size investments put many of the companies I knew at a bit of a disadvantage.
00:22:01.358 --> 00:22:05.918
John was, you know, a small investment for John was $100 million in a stock.
00:22:05.918 --> 00:22:11.918
You know, so I left with kind of the notion that I might start my own hedge
00:22:11.918 --> 00:22:17.318
fund, you know, kind of focused on a broader way of smaller cap stocks.
00:22:17.478 --> 00:22:22.098
And in the midst of that, my transport vocation, if you will, is cycling.
00:22:22.338 --> 00:22:26.658
I'm a cyclist and I like to get on my bike most days, if weather permitting.
00:22:26.658 --> 00:22:29.498
I was in a very bad biking accident.
00:22:29.818 --> 00:22:36.538
A car came up behind me and that had me kind of, you know, out of circulation for about six months.
00:22:36.738 --> 00:22:40.578
And that led to me rethinking kind of what I wanted to do.
00:22:40.598 --> 00:22:45.418
And I found myself kind of working on some entrepreneurial projects.
00:22:45.418 --> 00:22:50.418
And that kind of brought me to, you know, what I'm doing these days. Right.
00:22:50.718 --> 00:22:54.718
And you're a, it's a long title, but non-resident senior fellows.
00:22:54.758 --> 00:22:57.398
You're a fellow at the Center for Maritime Strategy.
00:22:57.778 --> 00:23:02.138
What's the mission of that center? And tell us maybe about your role there,
00:23:02.338 --> 00:23:06.358
what you're doing today. Yeah, the Center for Maritime Strategy is a think tank
00:23:06.358 --> 00:23:10.918
affiliated with the Navy, or it's officially part of the Navy League.
00:23:11.138 --> 00:23:15.798
And it was established about three, four, four years ago.
00:23:15.958 --> 00:23:20.598
It's headed up by a four-star retired Admiral, Jamie Fogo.
00:23:20.978 --> 00:23:25.598
Jamie used to head up most of our submarine forces or kind of the.
00:23:26.157 --> 00:23:29.957
European command, and he's now dean of the center.
00:23:30.237 --> 00:23:36.917
And there's got a great group of other fellows that many of whom are experts
00:23:36.917 --> 00:23:40.057
in naval strategy and vessels.
00:23:40.457 --> 00:23:45.297
I was brought on more in terms of the commercial side.
00:23:45.497 --> 00:23:53.177
One of the overlap of merchant marine and military, of course, is things like sea lift.
00:23:53.537 --> 00:23:58.377
And that's become much more important or recognized as more important these
00:23:58.377 --> 00:24:02.957
days, you know, with issues potentially related to China.
00:24:03.237 --> 00:24:09.097
And so there's been kind of a groundswell in the past few years of people in D.C.
00:24:09.457 --> 00:24:14.617
Becoming aware that, you know, our sea lift isn't what it should be.
00:24:14.717 --> 00:24:18.337
Because if you were to get into any sort of national emergency,
00:24:18.337 --> 00:24:21.817
and this has been proven, you know, conflict after conflict,
00:24:21.817 --> 00:24:24.237
even more recently with the Iraq war,
00:24:24.457 --> 00:24:29.717
is that the only merchant marine you can really count on is U.S.
00:24:29.837 --> 00:24:33.397
Flag vessels, you know, and that probably even more so today,
00:24:33.397 --> 00:24:35.997
the pressure that would be put on anybody.
00:24:36.317 --> 00:24:41.497
And so we need to be cognizant of that and just take smart steps.
00:24:41.737 --> 00:24:46.817
So at the center, my writings and research kind of focus on that intersection
00:24:46.817 --> 00:24:50.037
of commercial shipping and sea lift.
00:24:50.597 --> 00:24:55.217
And, you know, and it's, I love doing that work. You know, I also stay busy
00:24:55.217 --> 00:24:58.077
with a couple of reports that I put out.
00:24:58.297 --> 00:25:03.617
I have a monthly report on container volume, kind of a quarterly report on the
00:25:03.617 --> 00:25:08.437
results of the container shipping industry that have become kind of well,
00:25:08.537 --> 00:25:11.277
well received and frequently quoted.
00:25:11.517 --> 00:25:15.697
So I'm kind of, I guess I've kind of become a bit of a, you know,
00:25:15.757 --> 00:25:18.637
I'm well beyond being kind of the young kid.
00:25:18.777 --> 00:25:22.577
I'm kind of on the other side, kind of like, uh, and the, the pundit,
00:25:22.717 --> 00:25:27.537
if you will, the, uh, the, the gray-haired pundit and, uh, you know,
00:25:27.937 --> 00:25:33.077
uh, things related to maritime, but I do enjoy that. I do enjoy that work.
00:25:33.617 --> 00:25:36.977
Well, you know, at this point in your career, John, you know,
00:25:37.097 --> 00:25:42.417
you have crystallized intelligence, which is commonly referred to as wisdom.
00:25:42.417 --> 00:25:47.417
And it's good to have you around to share that because you got to earn your
00:25:47.417 --> 00:25:51.917
way to crystallize intelligence. You don't just wake up with that one day, right?
00:25:52.057 --> 00:25:55.797
When you're younger, you have fluid intelligence and now that wisdom is great.
00:25:55.997 --> 00:26:03.377
So you talked about sort of the threat, if you will, to the US given the commercial.
00:26:03.777 --> 00:26:06.437
And that brought, to think about a post that our friend Howard,
00:26:06.757 --> 00:26:11.537
my colleague Howard Graham And, you know, Howard, I know he put up last week
00:26:11.537 --> 00:26:14.037
and it was from, I think the data was from Alpha Liner.
00:26:14.217 --> 00:26:19.737
I want to make sure I credit that, but it showed the top 10 shipping companies by fleet capacity.
00:26:20.558 --> 00:26:26.718
And it was amazing to Howard and also amazing to me when I saw the post that the U.S.
00:26:26.858 --> 00:26:31.678
Does not have a single fleet in the top 10, right?
00:26:31.818 --> 00:26:36.338
The top three are in Europe. And then looking elsewhere, I see Japan,
00:26:36.558 --> 00:26:41.478
China, Taiwan, South Korea, even Israel's in the top nine.
00:26:42.158 --> 00:26:46.018
So help us understand that. Why doesn't the U.S.
00:26:46.198 --> 00:26:50.258
Have one of the largest shipping companies by fleet capacity?
00:26:50.358 --> 00:26:52.318
And why aren't they on this top 10 list?
00:26:52.778 --> 00:26:57.398
What's your opinion on that? Well, that's a disappointing and kind of unfortunate
00:26:57.398 --> 00:27:02.478
situation that we're in that is very different than when I was started in the industry.
00:27:02.658 --> 00:27:06.038
When I started, the largest container shipping company was SeaLand,
00:27:06.158 --> 00:27:08.458
and most of the ships were U.S. flagged.
00:27:08.738 --> 00:27:12.838
U.S. lines was right up there. You had American President Lines,
00:27:13.098 --> 00:27:15.798
you know, multiple other container shipping companies.
00:27:16.078 --> 00:27:20.438
There's a little bit of the APL, our American President Lines,
00:27:20.558 --> 00:27:22.038
still exists as an entity.
00:27:22.218 --> 00:27:26.238
It's now part of CMA, CGM, the French company.
00:27:26.618 --> 00:27:29.618
And Maersk also has a handful of U.S.
00:27:29.798 --> 00:27:33.978
Flagships. But you're right, that list of foreign carriers, you know,
00:27:34.018 --> 00:27:36.718
is kind of devoid of really any U.S.
00:27:36.998 --> 00:27:45.038
Representation. It really kind of largely goes back to up until the 80s, the U.S.
00:27:45.438 --> 00:27:49.098
Was significantly supporting its maritime industry.
00:27:49.378 --> 00:27:54.338
It was kind of viewed for the reasons I talked about that it was kind of a special
00:27:54.338 --> 00:27:56.718
strategic industry. You needed to have it.
00:27:56.858 --> 00:28:01.098
And so we had programs. We had something called a construction differential
00:28:01.098 --> 00:28:06.718
subsidy program. If you built a ship in the U.S., the government would pay about
00:28:06.718 --> 00:28:09.658
half of the cost, which was meant to equalize the cost.
00:28:09.858 --> 00:28:13.278
If you operated a ship U.S. flag, the government would pay that.
00:28:13.578 --> 00:28:18.158
The largest company at the time, Sealand, actually chose not to get government
00:28:18.158 --> 00:28:22.858
subsidy because they didn't like the constraints they put them on.
00:28:22.958 --> 00:28:28.358
But the other companies got that subsidy and would still even build ships in the U.S.
00:28:28.698 --> 00:28:31.938
We moved away from that during the Reagan administration.
00:28:32.298 --> 00:28:37.218
And it's somewhat understandable, but a lot of it had to do with kind of a view,
00:28:37.378 --> 00:28:38.718
we need to go back to the market.
00:28:38.958 --> 00:28:44.758
And then layered on top of that was a view that that was a little bit too kind of a little world.
00:28:44.898 --> 00:28:50.478
It was a view that, you know, the sea lift that was needed in Central and World War II.
00:28:50.698 --> 00:28:55.758
I mean, it's irrefutable that in the absence of the sea lift capacity,
00:28:55.958 --> 00:29:00.998
the thousands of victory and liberty ships that were built, we could not have
00:29:00.998 --> 00:29:04.838
won the war. We couldn't have projected our force and our strength there.
00:29:05.263 --> 00:29:08.963
But I think in the 80s, there was kind of a view that, you know,
00:29:09.103 --> 00:29:12.103
you don't need as much of that. So we moved away from that.
00:29:12.323 --> 00:29:16.763
The big irony in that was the same time we were moving away from that,
00:29:17.163 --> 00:29:19.363
China, for instance, was embracing it.
00:29:19.663 --> 00:29:24.463
There's a famous writer, intellectual, if you will.
00:29:24.763 --> 00:29:30.663
One historian said he was the most important strategic thinker in America of the 19th century.
00:29:30.963 --> 00:29:36.603
And yet he's somebody most people have never heard of. But Alfred Mayer Fahan,
00:29:36.843 --> 00:29:40.743
he ended up being head of the Naval War College.
00:29:41.043 --> 00:29:45.043
And he wrote a lot. And he wrote a lot about naval strategy.
00:29:45.043 --> 00:29:51.003
But he also saw the strategy, a merchant marine and a navy is going hand in hand.
00:29:51.023 --> 00:29:55.623
And so, you know, he thought that the ability to kind of, it was very important
00:29:55.623 --> 00:30:01.263
to have a navy to control, you know, during a war and a merchant marine during
00:30:01.263 --> 00:30:03.983
peace. And so he saw those as kind of interconnected.
00:30:04.303 --> 00:30:08.583
So really at the same time we moved away from that, China moved towards it,
00:30:08.763 --> 00:30:14.743
you know, and I'm sure, you know, Deng Xiaoping probably read some of Alfred Nayar Thayen's work.
00:30:14.963 --> 00:30:22.503
And so they funded major additional dollars into their shipbuilding industry,
00:30:22.823 --> 00:30:24.403
into their shipping industry.
00:30:25.083 --> 00:30:31.423
You know, just this one company, Costco, is public, but the government owns, you know, 51% of it.
00:30:31.763 --> 00:30:36.003
But since it's been public, I think it's from 2005, you know,
00:30:36.083 --> 00:30:40.843
its financials show over $2 billion of direct government subsidy to that one
00:30:40.843 --> 00:30:43.203
company. So that's how it happened.
00:30:43.423 --> 00:30:45.843
And again, it's not, the U.S. isn't unique.
00:30:46.543 --> 00:30:51.663
Many of the industrialized companies, you know, whether it's Britain or France
00:30:51.663 --> 00:30:56.403
or, you know, even though they're based in, the CMA CGN is based in France.
00:30:57.203 --> 00:31:00.523
You know, very few of their vessels are French flag, you know.
00:31:00.523 --> 00:31:03.663
The other thing that has happened in a big way with shipping,
00:31:03.863 --> 00:31:06.523
because it's a hyper-competitive industry,
00:31:06.803 --> 00:31:11.463
some economists, you know, the shipping broadly have said that shipping industry
00:31:11.463 --> 00:31:17.503
is the most classic example of supply versus demand because you have high fixed
00:31:17.503 --> 00:31:20.363
costs and when you have excess capacity.
00:31:21.063 --> 00:31:22.723
You know, rates drop to the bottom.
00:31:22.723 --> 00:31:25.463
And, you know, when you don't, they shoot up.
00:31:25.663 --> 00:31:31.223
And so that has gravitated towards, you know, costs. You don't want to have
00:31:31.223 --> 00:31:32.623
costs that are out of line.
00:31:33.203 --> 00:31:38.123
And so the large majority of the world's shipping are now flagged in what's
00:31:38.123 --> 00:31:42.223
called flag of convenience states or registries.
00:31:42.223 --> 00:31:46.803
And the big ones being Panama and Liberia and the Marshall Islands.
00:31:46.803 --> 00:31:53.423
And these registries get people to flag there because, one, you pay no income
00:31:53.423 --> 00:31:55.223
taxes, the shipping industry costs.
00:31:55.802 --> 00:32:02.882
Has one of the nicest income tax regimens where you really pay a fixed fee rather
00:32:02.882 --> 00:32:04.482
than economic income tax.
00:32:04.742 --> 00:32:09.342
And they also perhaps are more lax in terms of the crewing.
00:32:09.462 --> 00:32:16.002
And so you ended up with having owners making a rational decision that,
00:32:16.122 --> 00:32:19.822
you know, I can't have my cost out of lock with my competitors.
00:32:20.242 --> 00:32:24.842
And so the U.S. is not alone and not having that.
00:32:25.062 --> 00:32:29.662
But, you know, there are a bunch of initiatives kind of going on now to at least
00:32:29.662 --> 00:32:32.422
get us a little more involved, you know, in shipping.
00:32:32.722 --> 00:32:37.002
Yeah, that was really surprising. So I appreciate the background on that. Very helpful.
00:32:37.262 --> 00:32:43.722
So can I want to move into tariffs and get your perspectives on the tariffs as a shipping expert.
00:32:44.602 --> 00:32:49.422
So I'll just start with, how do you see the tariffs impacting the shipping industry
00:32:49.422 --> 00:32:54.442
and maybe discuss some of the cascading effects that come out of these tariffs?
00:32:54.762 --> 00:32:59.182
Well, let me say at the outset that I'm very negative on tariffs.
00:32:59.462 --> 00:33:03.562
It shouldn't surprise, you know, if I spent my career in an industry and tariffs
00:33:03.562 --> 00:33:07.402
are basically meant to reduce trade.
00:33:07.402 --> 00:33:13.342
And, you know, and during most of my career, they kept on coming down,
00:33:13.782 --> 00:33:19.862
you know, prior to the first Trump administration, we basically lived in a tariff-free world.
00:33:20.162 --> 00:33:23.302
You know, I think the weight average tariff was like one and a half percent.
00:33:23.642 --> 00:33:31.022
I don't think they make any sense. I don't think they, at least my analysis
00:33:31.022 --> 00:33:36.122
of the first Trump administration, they didn't do what their goal was,
00:33:36.162 --> 00:33:38.482
what the goal was to reduce imports.
00:33:38.722 --> 00:33:43.442
And, you know, because I follow the data pretty closely, I saw an initial impact.
00:33:43.442 --> 00:33:49.022
But after about six months, it was hard to tease out an impact in terms of imports.
00:33:49.122 --> 00:33:55.162
On the flip side, those tariffs brought with them countervailing tariffs that
00:33:55.162 --> 00:33:57.102
have impacted our exports.
00:33:57.742 --> 00:34:03.342
And so if you look at volume coming in and out of the U.S., our exports have
00:34:03.342 --> 00:34:09.282
been, since 2016, performing significantly worse than our imports.
00:34:09.342 --> 00:34:15.202
So that's almost the opposite of what you want to have because those less exports,
00:34:15.202 --> 00:34:20.782
those tie into actual jobs in America, whereas the imports, you know,
00:34:20.862 --> 00:34:22.042
that's a consumption thing.
00:34:22.557 --> 00:34:29.097
Secondarily, I think this gets kind of a net to get too deep on the weeds, but the U.S.
00:34:29.297 --> 00:34:32.417
Is the reserve currency of the world, the dollar.
00:34:33.017 --> 00:34:37.537
You know, because of that, almost mathematically, we have people accumulating
00:34:37.537 --> 00:34:41.877
dollars and it's going to be very difficult throughout history.
00:34:42.117 --> 00:34:46.517
Whoever was the reserve currency will operate a trade deficit,
00:34:46.517 --> 00:34:51.517
you know, and you have the foreign exchange markets already kind of adjusting to what's going on.
00:34:51.517 --> 00:34:58.477
So all of this movement, the most tangible impact it will have is twofold,
00:34:58.697 --> 00:35:00.657
and this is the initial impact.
00:35:01.017 --> 00:35:05.237
The ultimate goal is that, you know, it would bring back jobs.
00:35:05.417 --> 00:35:07.697
Let's put that aside for a second.
00:35:08.297 --> 00:35:14.377
The immediate impact is first with less container volume. And going back to
00:35:14.377 --> 00:35:19.157
the numbers, you know, the each month, the containers coming into U.S.
00:35:19.297 --> 00:35:24.457
Ports are about $120 billion worth of stuff.
00:35:24.757 --> 00:35:31.717
If you have a big hit on that, that can't help but have ripple effects.
00:35:31.937 --> 00:35:33.877
Commercial activity will be reduced.
00:35:34.177 --> 00:35:37.037
There are a lot of people that make a lot of living, you know,
00:35:37.237 --> 00:35:40.997
going well beyond the dock workers in terms of offloading that.
00:35:40.997 --> 00:35:45.997
So the first effect will be some amount of reduced commerce,
00:35:45.997 --> 00:35:48.877
which makes the economy grow less.
00:35:49.077 --> 00:35:52.637
And again, you take all the aggregate numbers, you're dealing with a pretty
00:35:52.637 --> 00:35:54.677
big slice of the economy.
00:35:54.877 --> 00:36:00.417
And so right now you're going to see tariffs that are in place right now will
00:36:00.417 --> 00:36:04.837
probably knock down our, my analysis is the second half of this year,
00:36:04.977 --> 00:36:07.277
our volumes can be off about 15%.
00:36:07.277 --> 00:36:11.417
So that's going to have a commercial growth effect.
00:36:11.657 --> 00:36:17.237
The other effect, there's still going to be a lot of boxes coming in with new tariffs.
00:36:17.557 --> 00:36:23.057
And, you know, coal on average 20-25% tariff, where you can calculate how much
00:36:23.057 --> 00:36:25.017
inflation that is bringing in.
00:36:25.177 --> 00:36:29.597
So you're really, I don't know where we're going to be on that spectrum.
00:36:29.597 --> 00:36:36.737
I do know that the initial impact will both be less commercial activity,
00:36:36.957 --> 00:36:39.837
which means a smaller economy, and inflation.
00:36:40.057 --> 00:36:42.977
So what's the word for that? That's stagflation.
00:36:43.277 --> 00:36:50.317
So these tariffs, in my view, are like taking a giant bottle of stagflation
00:36:50.317 --> 00:36:54.157
and pouring it over the economy in terms of the immediate effect.
00:36:54.297 --> 00:36:58.977
Now, I know the ultimate effect is that the hope that it will bring back jobs.
00:36:58.977 --> 00:37:03.417
That's where people don't have as good an understanding as they should.
00:37:03.577 --> 00:37:09.457
We don't, in America, we don't really import many complete products,
00:37:09.657 --> 00:37:12.037
certainly complete products that we could make here.
00:37:12.583 --> 00:37:17.643
The supply chains have gotten so complex. And so, you know, so there was one
00:37:17.643 --> 00:37:23.003
academic whose work I follow very closely, Jason Miller out of Michigan State,
00:37:23.283 --> 00:37:28.723
did a study in terms of, you know, because for instance, there's a 50% tariff on steel.
00:37:28.963 --> 00:37:32.663
And Jason wanted to look at who would be impacted by that.
00:37:32.823 --> 00:37:37.243
And sure enough, he came up with the number of steel jobs that,
00:37:37.383 --> 00:37:41.643
in theory, you know, could produce, you know, making more steel in the U.S.
00:37:41.823 --> 00:37:46.783
But then he also looked at the people that import components that are steel,
00:37:46.963 --> 00:37:51.403
you know, and he came up with something on the order of 15 or 20 to 1.
00:37:51.583 --> 00:37:57.443
You know, in other words, for every one job you added of somebody, you know.
00:37:57.943 --> 00:38:02.303
In Pittsburgh at a blast furnace making more steel, you're losing,
00:38:02.463 --> 00:38:05.943
you know, 15 jobs, you know, out in the hinterland, you know,
00:38:06.023 --> 00:38:08.783
because people all of a sudden you change their costs.
00:38:08.863 --> 00:38:12.503
So I just don't think they're particularly well thought out.
00:38:12.703 --> 00:38:15.603
And so I couldn't be more negative.
00:38:15.903 --> 00:38:22.523
And then on top of that, there's a plan to impose fees on Chinese-built ships.
00:38:23.003 --> 00:38:29.423
And so all of the—and both that in particular will have certain ships simply
00:38:29.423 --> 00:38:34.903
not calling in the U.S. And so I look at the data, the China—you know, right now the U.S.
00:38:35.203 --> 00:38:41.583
Is, say, only about 15 percent of world trade. So the world will be able to adjust and adapt.
00:38:41.803 --> 00:38:45.243
The big loser in this will be will be America.
00:38:45.463 --> 00:38:50.743
You know, we even we as consumers, you know, we are all of a sudden we're losing
00:38:50.743 --> 00:38:52.943
that that element of choice.
00:38:52.943 --> 00:38:57.123
So, you know, when we, you know, you know, the, the, the deficit occurs when,
00:38:57.243 --> 00:39:00.583
when you and I, you know, take our currency and, you know.
00:39:01.063 --> 00:39:05.563
Buy a product that costs a hundred dollars, but, but we don't see,
00:39:05.683 --> 00:39:09.123
we don't see that we're losing a hundred dollars doing that.
00:39:09.323 --> 00:39:12.943
You know, we see we're, my God, we're getting a product, you know,
00:39:13.183 --> 00:39:15.023
that's worth at least a hundred dollars.
00:39:15.383 --> 00:39:18.783
And if you take away that choice, um, you know, we're, we're,
00:39:18.863 --> 00:39:21.723
we're, you know, it's just, that's, it's right. is good.
00:39:21.883 --> 00:39:24.043
When you look at it, it's a cost increase.
00:39:24.323 --> 00:39:28.083
I don't think there's any such thing as a zero-sum game in global trade.
00:39:28.083 --> 00:39:31.823
There's always going to be a mismatch between two countries.
00:39:31.943 --> 00:39:34.403
Sometimes it probably lines up close, but,
00:39:34.927 --> 00:39:38.447
You know, we're a big importer. We export less than we import.
00:39:39.387 --> 00:39:43.447
Those are facts. And that's how the economy's been running.
00:39:43.627 --> 00:39:48.427
But then all of a sudden you increase the price via tariffs with anything coming in.
00:39:48.927 --> 00:39:53.687
And the question then becomes, in my mind, who's going to absorb that?
00:39:53.947 --> 00:39:57.767
There's extra costs there now. Who's going to absorb it? Is it going to be the
00:39:57.767 --> 00:40:03.807
auto company or the electronics device builder, they might absorb some of it.
00:40:03.927 --> 00:40:07.927
I don't think you're going to see too many retailers or too many food and beverage
00:40:07.927 --> 00:40:12.287
companies, CBG companies, if you will, absorb that 100%.
00:40:12.287 --> 00:40:18.167
And I think Goldman Sachs, the latest estimate that I looked at was two thirds
00:40:18.167 --> 00:40:19.747
of it'll end up on the consumer.
00:40:20.447 --> 00:40:26.587
So I suspect in the end, there might be some timing to avoid people being targeted,
00:40:26.887 --> 00:40:29.887
but I think in the end, all of it is going to be paid by us.
00:40:29.987 --> 00:40:34.587
And I think the mental gymnastics that people go through thinking,
00:40:34.847 --> 00:40:37.407
well, maybe it won't be, you know, it's kind of when,
00:40:38.107 --> 00:40:43.307
was the last time you heard somebody say when the federal excise tax on gasoline
00:40:43.307 --> 00:40:47.007
comes up, you know, how many people are sitting back pontificating?
00:40:47.147 --> 00:40:51.907
Well, let me see, maybe will Exxon eat part of that or will the filling station
00:40:51.907 --> 00:40:56.607
operator, you know, we don't go through that sort of silly machinations who
00:40:56.607 --> 00:40:58.647
say, of course we're going to pay for it.
00:40:59.350 --> 00:41:03.190
It even gets worse. In some cases, it becomes a cover.
00:41:03.510 --> 00:41:11.490
I'm a shopper at Costco. I like the value of Costco. I like the fresh fruit and vegetables.
00:41:12.130 --> 00:41:17.350
Right there with you. Yeah, and Costco has a simple model. Their cost plus 15%.
00:41:18.190 --> 00:41:23.750
And so one of the things I love is avocados. And as soon as my avocados,
00:41:23.970 --> 00:41:29.630
six avocados were $7.99. And as soon as there were talk, even just talk of a
00:41:29.630 --> 00:41:32.890
tariff increase in Mexico, they were $8.99.
00:41:33.310 --> 00:41:37.810
And when the talk was it'd be 25%, you know, it got up to like $10.99.
00:41:38.030 --> 00:41:43.510
So Costco was, even before it came into being, they settled back down,
00:41:43.670 --> 00:41:46.950
but they were price adjusting based on the news.
00:41:47.350 --> 00:41:52.630
There were other products. I love these Gride Mingoes, and they were always
00:41:52.630 --> 00:41:58.570
$10.99, and I go in and all of a sudden see they're $18.99, and I look at where
00:41:58.570 --> 00:42:00.330
they're from, and it was Vietnam.
00:42:00.850 --> 00:42:06.010
And so when the so-called reciprocal tariff was announced, you know,
00:42:06.190 --> 00:42:09.570
about something like 45%, they went up immediately.
00:42:09.570 --> 00:42:13.930
You know, they've since settled back down and, you know, but so my point is
00:42:13.930 --> 00:42:19.770
I've seen way too many situations where, and this is particularly the case when
00:42:19.770 --> 00:42:23.290
it's a grammatic push, you know, because right now every retailer,
00:42:23.730 --> 00:42:27.070
you know, not everybody kind of does the math that I do.
00:42:27.070 --> 00:42:31.930
I like to look at the numbers, but in each of those examples,
00:42:31.930 --> 00:42:37.490
I was able to calculate that the Costco kind of pricing on the news not only
00:42:37.490 --> 00:42:41.550
got all of the tariff, but it gave them a little bit something more.
00:42:41.710 --> 00:42:45.030
Now, I think probably because they wanted to end with the pricing they had in 99%.
00:42:46.171 --> 00:42:50.131
But what I've seen when you have a massive change in pricing,
00:42:50.531 --> 00:42:52.051
it kind of becomes cover.
00:42:52.251 --> 00:42:57.091
And so not only is 100% of that going to occur, but more than that.
00:42:57.511 --> 00:43:01.051
And look at what's happening to steel prices right now.
00:43:01.191 --> 00:43:08.571
The tariff of 50%, you're already having domestic steel folks raise their price,
00:43:08.731 --> 00:43:11.411
not necessarily the same way.
00:43:11.431 --> 00:43:18.611
So all of a sudden, it's more than a zero-sum game. You have that inflation
00:43:18.611 --> 00:43:24.071
from the tariff, which I think in the end will be totally passed on to us.
00:43:24.211 --> 00:43:27.051
You're having a little something extra thrown in.
00:43:27.471 --> 00:43:31.791
Right. You're right. It does provide cover. It's a convenient excuse for people to say, hey.
00:43:32.111 --> 00:43:34.931
So, I mean, I think if we net this
00:43:34.931 --> 00:43:39.111
part out, tariffs are going to be inflationary in your opinion, right?
00:43:39.651 --> 00:43:45.051
Yeah. And it remains to be seen what actually gets signed into agreements and
00:43:45.051 --> 00:43:48.371
formal, you know, treaties, if you will, between companies.
00:43:48.691 --> 00:43:52.911
But it's certainly there's nowhere to hide from the cost, I don't think, there.
00:43:53.171 --> 00:43:57.331
So if you were an executive or a supply chain leader.
00:43:58.631 --> 00:44:01.851
You know, given what's going on right now and what you know about shipping,
00:44:02.271 --> 00:44:09.811
do you have any advice or any plays you'd be making to countermand what's coming?
00:44:10.631 --> 00:44:17.391
Well, I think that at first I feel for the many professionals out in the supply
00:44:17.391 --> 00:44:24.971
chain world that, you know, having to wade through this because the complexities and, you know,
00:44:25.111 --> 00:44:29.691
the confusion and kind of the, you know, this is going to happen. No, it's not.
00:44:29.851 --> 00:44:36.251
You know, that by itself messes up the supply chains I'm most familiar with.
00:44:36.251 --> 00:44:40.531
I mean, container shipping, think of it as a rhythmic system.
00:44:40.771 --> 00:44:43.271
Everything is kind of pulsed on a weekly basis.
00:44:43.551 --> 00:44:48.031
And, you know, when it's working the way it should, you can literally set your
00:44:48.031 --> 00:44:52.871
clock by the time that ship's going to arrive and when that load is going to get off.
00:44:52.971 --> 00:44:57.991
And that not only is predictable, but that's where it's at its most efficient.
00:44:58.371 --> 00:45:06.831
Now we're going into this start, stop, change schedule. that by itself leads to congestion.
00:45:07.211 --> 00:45:12.251
And congestion, you know, just becomes a extinguisher of capacity.
00:45:12.551 --> 00:45:16.951
I mean, the supply chain issues that we went through during COVID.
00:45:17.571 --> 00:45:20.691
Yeah, there was a little bit of a spike in volume. Actually,
00:45:20.751 --> 00:45:25.291
on an annual basis, you really couldn't see it. It was less volume growth than we had many years.
00:45:25.471 --> 00:45:29.191
The problem was that that came in fits and starts.
00:45:29.511 --> 00:45:34.491
And the real problem was, for instance, I mean, the epicenter of the supply
00:45:34.491 --> 00:45:41.111
chain mess worldwide was 110 ships waiting at anchor off the coast of Southern California.
00:45:41.111 --> 00:45:48.471
You know, all of a sudden that five-week round trip voyage from China to California
00:45:48.471 --> 00:45:50.711
or Asia to the West Coast,
00:45:50.911 --> 00:45:54.891
you know, if you had a ship sitting for two weeks or three weeks,
00:45:55.051 --> 00:45:57.471
that became a seven-week or eight-week voyage.
00:45:57.471 --> 00:46:00.971
And so you go through the numbers, you see what happens with capacity.
00:46:01.231 --> 00:46:04.931
And of course, that capacity then leads to a spiking.
00:46:05.231 --> 00:46:09.431
And, you know, you had some situations where the spot pricing,
00:46:09.451 --> 00:46:12.291
you know, went up by a factor of five or six.
00:46:12.291 --> 00:46:21.011
And so I guess my advice to anybody in that field is kind of stay focused on
00:46:21.011 --> 00:46:26.291
your business, cry and have things lined up as much as you can.
00:46:26.811 --> 00:46:32.331
Cry and avoid crying to make adjustments because sometimes the adjustment that
00:46:32.331 --> 00:46:36.411
you make will turn out not to be a good one.
00:46:36.411 --> 00:46:39.951
But you know just kind of on focus on on
00:46:39.951 --> 00:46:43.211
on getting getting goods in
00:46:43.211 --> 00:46:49.571
as uh efficiently and and consistently as you can right right yeah there was
00:46:49.571 --> 00:46:54.351
a lot of companies we know uh you know exercise what i'd call a hedge right
00:46:54.351 --> 00:46:59.391
where they brought in and imported more materials up front i think that's why
00:46:59.391 --> 00:47:02.891
we're not seeing the effects maybe of the tariffs it takes a while for that to.
00:47:03.519 --> 00:47:06.959
Make its way through the system right exactly but
00:47:06.959 --> 00:47:09.879
now no you know you can't you can't banks at
00:47:09.879 --> 00:47:15.819
um making sure you know well let me let me order more than i i need just in
00:47:15.819 --> 00:47:20.999
case one doesn't make it you know that kind of contributes to the to the uh
00:47:20.999 --> 00:47:25.299
the congestion issue if you will for sure yeah nothing which creates working
00:47:25.299 --> 00:47:29.299
capital issues and everything else for the business right So, okay.
00:47:29.599 --> 00:47:34.479
Yeah, no, it's very difficult time right now to sort of see things.
00:47:34.599 --> 00:47:36.799
The markets certainly don't like uncertainty.
00:47:37.059 --> 00:47:42.879
I think they've decided to just continue on and see where things shake out because
00:47:42.879 --> 00:47:48.239
the day-to-day market fluctuations we were seeing early on when this was happening
00:47:48.239 --> 00:47:50.439
seemed to have calmed down a bit.
00:47:50.439 --> 00:47:54.659
But, you know, eventually I think there is a risk of stagflation,
00:47:54.799 --> 00:47:59.399
as you mentioned, and it's certainly an inflationary impact for people.
00:47:59.899 --> 00:48:06.959
So, John, I want to shift gears with you here to talk maybe about advice,
00:48:07.159 --> 00:48:08.359
right, for young people.
00:48:08.359 --> 00:48:13.859
If you could go back and talk to a young John McCown, not that you're that old,
00:48:14.019 --> 00:48:17.819
John, I don't want to be offensive here, but, you know, I think you've been
00:48:17.819 --> 00:48:19.119
around the track a while.
00:48:19.119 --> 00:48:24.079
But if you could go back in time in the Wayback Machine and talk to yourself,
00:48:24.199 --> 00:48:25.199
give yourself some advice.
00:48:26.150 --> 00:48:32.150
What would that be? I think in many respects, I kind of followed what my advice
00:48:32.150 --> 00:48:35.350
would have been in terms of starting a very general.
00:48:35.610 --> 00:48:38.710
And that's still my advice to my own kids.
00:48:38.730 --> 00:48:43.250
And when I see young kids that, you know, often don't know what they want to
00:48:43.250 --> 00:48:45.450
do is when you're looking at your career,
00:48:45.890 --> 00:48:49.690
think of it as going from the broad to the narrow, you know,
00:48:49.790 --> 00:48:54.950
kind of think of, you know, particularly like I knew I didn't want to be a banker
00:48:54.950 --> 00:48:59.130
for my life, but I was pretty sure that that experience would be additive.
00:48:59.670 --> 00:49:03.990
And so, you know, do something in a very broad area.
00:49:04.250 --> 00:49:08.670
It doesn't have to be a broad industry, something that will be useful no matter
00:49:08.670 --> 00:49:12.210
what you do. And that by definition often is general.
00:49:13.030 --> 00:49:18.870
I benefited by multiple mentors in my life.
00:49:19.010 --> 00:49:23.050
I had a wonderful mentor in banking for a short few years.
00:49:23.190 --> 00:49:28.930
My greatest mentor was Malcolm McLean, you know, and I still kind of benefit
00:49:28.930 --> 00:49:31.310
from his insight, even, you know,
00:49:31.530 --> 00:49:36.490
something as many times as I worked with Malcolm in terms of doing numbers,
00:49:36.490 --> 00:49:40.770
it would surprise many people to find, but Malcolm was a big believer with a
00:49:40.770 --> 00:49:44.190
yellow pad and a pencil and doing numbers himself,
00:49:44.570 --> 00:49:46.930
you know, going through multiplications.
00:49:46.930 --> 00:49:52.490
And I came to appreciate that this was a way of his kind of literally kind of
00:49:52.490 --> 00:49:55.510
getting inside the numbers. He had a granular understanding.
00:49:55.790 --> 00:50:00.530
He used to, you know, the fundamental of analysis, breaking it down into simple pieces.
00:50:00.790 --> 00:50:05.810
And so Malcolm used to always like to look at something from a shipper perspective.
00:50:06.150 --> 00:50:10.970
You know, if Bristol Myers is moving something from Chicago to Puerto Rico.
00:50:11.510 --> 00:50:14.190
You know, how many miles and kind of look at the numbers.
00:50:14.190 --> 00:50:21.170
So I encourage people to do that because when you do that, you develop more of an insight.
00:50:21.350 --> 00:50:24.070
I'm a big numbers person, and so
00:50:24.070 --> 00:50:28.670
I can't get too far away from a situation without looking at the numbers.
00:50:28.670 --> 00:50:32.950
And I think not as many people do that as much as they should.
00:50:32.950 --> 00:50:36.870
They kind of come up with a view of what they want to do.
00:50:37.030 --> 00:50:43.710
Then they find numbers to support it. And oftentimes it takes a longer time to do it.
00:50:43.810 --> 00:50:48.770
But when you go into something, you know, as much as possible, cry and get the numbers.
00:50:49.110 --> 00:50:53.670
And then I think also always just the other thing that Malcolm was perhaps the
00:50:53.670 --> 00:50:57.090
most observant person I ever had dealings with.
00:50:57.190 --> 00:51:01.690
His eyes were always open. You know, he was, he embodied the concept when he'd
00:51:01.690 --> 00:51:05.850
be at a marine terminal, you know, of kind of management by walking around,
00:51:06.090 --> 00:51:07.850
you know, just kind of taking things in.
00:51:08.507 --> 00:51:13.907
And everybody should do that. When I give presentations to some of the merchant
00:51:13.907 --> 00:51:19.287
marine academies, Kings Point or SUNY Maritime, when I'm talking to these young
00:51:19.287 --> 00:51:23.087
students, I say, look, when you're on a vessel, you know, pay attention.
00:51:23.407 --> 00:51:26.807
You know, learn with the cargo that you're carrying. Where's it going to?
00:51:26.987 --> 00:51:30.307
You know, you have a lot of time on your hands. You can kind of think about this.
00:51:30.307 --> 00:51:34.567
You know, remember that it was Malcolm McLean, you know, as a truck driver,
00:51:34.827 --> 00:51:38.367
you know, when he started that, you know, in the mid thirties,
00:51:38.367 --> 00:51:42.347
he was delivering a load of cotton to Hoboken, New Jersey.
00:51:42.587 --> 00:51:45.227
And that was back in the days of breakable cargo.
00:51:45.487 --> 00:51:50.787
And, you know, because he wouldn't pay the $10 fine to the Irish foreman,
00:51:51.007 --> 00:51:54.667
you know, he didn't, you know, was, was way back in the line.
00:51:54.667 --> 00:51:59.667
But Malcolm had, as he said, I had six hours of watching them manhandle loads
00:51:59.667 --> 00:52:02.647
out of the crook and put in a cargo net.
00:52:02.847 --> 00:52:05.647
And, you know, I started to think there's got to be a better way.
00:52:05.827 --> 00:52:08.587
You know, I mean, that was kind of the genesis of container shipping.
00:52:08.827 --> 00:52:10.827
So always have your eyes open.
00:52:11.527 --> 00:52:17.027
Always, I've benefited immensely, as I said, from mentor relationships and working
00:52:17.027 --> 00:52:23.127
with interesting people that, you know, in a way, two of my bosses were billionaires.
00:52:23.127 --> 00:52:27.767
My current boss at the Center for Maritime is a four-star admiral.
00:52:27.987 --> 00:52:32.447
So I've been blessed to kind of work with very accomplished,
00:52:32.767 --> 00:52:36.467
very, very bright people that, you know, you can't help but learn from.
00:52:36.627 --> 00:52:40.247
So you always want to gravitate towards that.
00:52:40.267 --> 00:52:44.787
So that's kind of my two cents to young people in general.
00:52:45.587 --> 00:52:51.867
Yeah, well, that's great. I think keeping an open mind, right? being able to.
00:52:52.717 --> 00:52:57.637
Take in others' opinions and points of view and to keep your eyes open and watch things, right?
00:52:58.337 --> 00:53:02.677
Yeah, I think it's not just your eyes, but your mind and be open to different
00:53:02.677 --> 00:53:04.817
ideas and say, why is that like that?
00:53:04.977 --> 00:53:09.717
And maybe there is a different way to do this than I'm doing it today, right?
00:53:09.937 --> 00:53:15.357
And yeah, I worked for a VP at GE and he says, ask a million questions, right?
00:53:15.477 --> 00:53:19.457
Because that's the only way you're going to learn. And I think it does benefit
00:53:19.457 --> 00:53:23.277
you to know things right down to the wood, right? Right down to the screws in the floor.
00:53:23.437 --> 00:53:27.537
That's great. Now, in your career, and I might know the answer to this,
00:53:27.677 --> 00:53:29.157
you know, you've had a great career.
00:53:29.477 --> 00:53:33.037
Is there anybody that you'd like to, you know, acknowledge here in this,
00:53:33.177 --> 00:53:37.277
if you will, moment of gratitude that helped you become who you are today?
00:53:37.497 --> 00:53:42.197
Well, all of the people that I referenced, sadly,
00:53:42.377 --> 00:53:45.977
a couple of them aren't still with us but uh yeah malcolm
00:53:45.977 --> 00:53:48.797
had more of a of an impact on me
00:53:48.797 --> 00:53:51.817
than than anybody and i still kind of acknowledge that many
00:53:51.817 --> 00:53:57.797
many ways a book that i wrote i had always tried to encourage malcolm to write
00:53:57.797 --> 00:54:02.677
a book you know get a professional writer and he was in the end he thought that
00:54:02.677 --> 00:54:07.697
was just blowing he didn't like to blow his own horn and um you know when i
00:54:07.697 --> 00:54:10.937
almost had him doing that But after his friend J.B.
00:54:11.037 --> 00:54:16.857
Hunt wrote a book, The Famous Crucking Guy and Malcolm, I thought I had to agree to do it.
00:54:16.957 --> 00:54:19.777
But then in the end, he said, well, John, when I'm when I'm gone,
00:54:19.937 --> 00:54:21.737
maybe you you should write write a book.
00:54:22.237 --> 00:54:26.977
So so I the book that I ended up writing, it kind of started largely as a book
00:54:26.977 --> 00:54:31.137
about Malcolm and they're more ink about him. But it's called Giants of the Sea.
00:54:31.397 --> 00:54:35.957
And it's kind of really a focus on on on nine different entrepreneurs.
00:54:35.957 --> 00:54:38.057
Again, Malcolm kind of at the top of the heap.
00:54:38.257 --> 00:54:44.237
But in many respects, one of the things that I do like, Malcolm is still kind
00:54:44.237 --> 00:54:48.137
of an under-recognized entrepreneur for what I think he did.
00:54:48.797 --> 00:54:52.937
I've often thought that there was something that a couple of think tanks years
00:54:52.937 --> 00:54:56.057
ago put together something called the Human Progress Project.
00:54:56.696 --> 00:55:01.956
And it was meant to kind of identify mankind's greatest advancements and kind
00:55:01.956 --> 00:55:05.176
of charting, you know, the pivotal times in history.
00:55:05.336 --> 00:55:10.436
And related to that, they announced, they said, we're going to announce once
00:55:10.436 --> 00:55:12.976
a week somebody we call a hero of progress.
00:55:13.336 --> 00:55:16.696
And most of these people were dead long ago.
00:55:16.836 --> 00:55:21.656
I mean, it was Johannes Gutenberg, the printing press. It was Jonas Salk.
00:55:21.856 --> 00:55:27.086
It was Louis Pasteur. You know, a lot of people that invented vaccines that,
00:55:27.126 --> 00:55:28.286
you know, kind of save people.
00:55:28.606 --> 00:55:31.786
And their 17th hero of progress was Malcolm McLean.
00:55:31.966 --> 00:55:36.826
In the light up, in the profile, they said, you know, this is the guy that invented container shipping.
00:55:37.366 --> 00:55:40.046
Container shipping is what made WorldCrate possible.
00:55:40.686 --> 00:55:44.186
WorldCrate has pulled, you know, 300 million people out of poverty.
00:55:44.186 --> 00:55:47.606
And it was interesting to me that the 50th hero of Congress,
00:55:47.886 --> 00:55:51.626
which really the only other businessman, was Bill Gates.
00:55:51.906 --> 00:55:56.406
And Bill Gates was more in the area of his philanthropy.
00:55:56.746 --> 00:56:01.946
And so a new friend of mine wrote a book recently that's at the top of the New
00:56:01.946 --> 00:56:05.326
York Times bestseller list, a fellow named Mark Workman.
00:56:05.886 --> 00:56:12.186
And Mark, a great author, but the book that he wrote is entitled The World's Greatest Capitalist.
00:56:12.206 --> 00:56:15.446
And it's the story of Thomas J.
00:56:15.626 --> 00:56:18.026
Watson and the digital revolution.
00:56:18.246 --> 00:56:26.226
And I've chided him in a friendly way that I'm certainly not disagreeing with that,
00:56:26.346 --> 00:56:31.366
but I said Malcolm McLean would be somebody if one were looking,
00:56:31.526 --> 00:56:33.466
you know, who, because if you really start to.
00:56:33.920 --> 00:56:38.380
Think of what has come out of container shipping, you know, and the invention
00:56:38.380 --> 00:56:43.120
of container shipping, you know, between prosperity and people out of poverty.
00:56:43.320 --> 00:56:47.660
And again, I happen to think that I'll stand up in front of any crowd and say
00:56:47.660 --> 00:56:53.220
globalization is great and nobody has benefited more from it than the U.S.
00:56:53.380 --> 00:56:58.520
And anybody that says differently, quite frankly, doesn't know what they're talking about.
00:56:58.520 --> 00:57:04.000
And so, yeah, I think, so I've enjoyed, you know, in some ways,
00:57:04.180 --> 00:57:09.340
I told somebody recently, well, I'm kind of the James Boswell to Malcolm McLean.
00:57:09.520 --> 00:57:13.180
And so, you know, because I clearly, you know, he's the one that did all of
00:57:13.180 --> 00:57:17.820
these things. And I talk so much about him that I recently had one appearance
00:57:17.820 --> 00:57:22.300
where somebody got confused and somehow thought that I invented container shipping.
00:57:22.500 --> 00:57:26.480
Well, I, you know, I hadn't been born when that happened.
00:57:26.480 --> 00:57:31.380
And I certainly am not taking credit for that, but I do like to kind of take
00:57:31.380 --> 00:57:38.040
credit to make people aware of this extraordinary man and what container shipping has done.
00:57:38.160 --> 00:57:45.480
And so that's why I must admit, I take personal what I view as today not only
00:57:45.480 --> 00:57:49.280
is really kind of an all-out attack on the concept of create itself,
00:57:49.800 --> 00:57:53.460
you know, where people are crying to kind of say, well, no, it just wasn't a
00:57:53.460 --> 00:57:55.580
good thing. And it's crazy.
00:57:58.220 --> 00:58:04.020
Right, right. I can certainly understand your perspective and appreciate where
00:58:04.020 --> 00:58:10.220
you're coming from, having had the career you had and continue to have then in this industry.
00:58:10.540 --> 00:58:15.160
So, John, thank you so much for joining us today. I really appreciate it.
00:58:15.300 --> 00:58:18.780
It's been an enlightening discussion. It's great to get your point of views
00:58:18.780 --> 00:58:22.340
and you definitely are a shipping expert. I think you've probably forgotten
00:58:22.340 --> 00:58:26.360
more about shipping and container ships than most of us would ever remember.
00:58:26.420 --> 00:58:28.320
But it's been great having you today.
00:58:28.480 --> 00:58:29.760
I appreciate you taking some time
00:58:29.760 --> 00:58:34.620
to talk with us and our audience on the executive edge. Thank you so much.
00:58:35.460 --> 00:58:40.700
Thank you, Greg. I really enjoyed it. Thank you. All right. You take care, John. Till next time.