Rana Foroohar - Ideas Lab Series - March 29th, 2023

[00:00:07] Rana

We are already in a world in which power supplies can be taken down by hackers. The water supply could be tainted. Industrial espionage, particularly as the Internet of Things has become such a bigger part of our lives in which everything is connected not just us as consumers with our smartphones, but industry, the power grids that we depend on. If these things go down, and there were, say, a war footing or even a natural disaster footing, one could imagine something like this having been of great use during Hurricane Katrina. That to me is very, very realistic.

Now, am I going to want to order, push my button in the Star Trek canteen? I don’t know. Probably not soon, but I’ll tell you, DARPA has got a pretty good track record of turning things that seem science fiction into reality and the Internet and GPS and stealth drone fighters would be good examples. I could go on, but I wouldn’t count them out.

[00:01:12] Intro

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Here’s your host, veteran hedge fund manager, Niels Kaastrup-Larsen.

[00:02:08] Niels

For me, the best part of my podcasting journey has been the opportunity to speak to a huge range of extraordinary people from all around the world. In this series, I have invited one of them, namely, Kevin Coldiron to host a series of in-depth conversations to help uncover and explain new ideas to make you a better investor. In this series, Kevin will be speaking to authors of new books and research papers to better understand the global economy and the dynamics that shape it so that we can all successfully navigate the challenges within it. With that, please welcome Kevin Coldiron.

[00:02:45] Kevin

All right. Thanks, Niels, and welcome, everyone. If we want to find a happy place between autocracy and oligopoly, between the power of big government and large corporations, we will need to find new ways to retire their wealth in place. That line from the book we’re going to talk about today really struck me because I think it summarizes what a lot of us are feeling.

Our guest today is going to take us beyond that feeling and show us how a prosperous, localized economy can be created by talking about people in organizations that are already making it happen. She’s Rana Foroohar, who many of you know from her writing at the FT where she’s a global business columnist and associate editor. She’s also CNN’s global economics analyst. She’s published three books.

The first one was called Makers and Takers: The Rise of Finance and the Fall of American Business. That was shortlisted for the FT’s Book of the Year Award in 2016. Her second book, Don’t Be Evil: How Big Tech Betrayed Its Founding Principles, was the Porchlight Business Book of the Year in 2019. She’s joining us today to talk about her new book which came out last year called Homecoming: The Path to Prosperity in a Post-Global World.

So Rana, thanks so much for taking the time to talk to us today.

[00:04:13] Rana

Oh, Kevin, thanks for having me.

[00:04:15] Kevin

So I think it’s pretty clear, now, that we’ve sort of passed peak globalization, that the West and China are kind of moving in a direction to set up competing economic ecosystems instead of one integrated one. But you obviously saw this coming before a lot of us did. I was just curious, was there a specific aha moment for you or was it just the build-up of things over time that led you to this realization? When did you start thinking and writing this particular book?

[00:04:58] Rana

Well, thanks for the question, and I guess my short answer would be yes and yes. I did have some aha moments and I definitely had a felt experience of this for I would say 15 years or so now. Going back to my days at Time Magazine, I actually wrote about the reindustrialization of the US. I wrote a piece in I think it was 2010 maybe or 2011 about that. Even before that, I wrote a kind of awkwardly titled cover story called Go Glocal. That was like my attempt to blend local and global at the time.

But these were coming from a sense that, wow, following the financial crisis, we really became unmoored, as an economy, from Main Street. I think the financial crisis was a veil that was lifted on that, and the fact that our US economy had become too financialized, too service-oriented, too consumption-oriented, that there needed to really be a better balance between production and consumption. So that was something that I was hip to for a while, and we can go into more detail.

It also comes from the fact that I grew up in the rural Midwest. My dad ran factories, ran a small manufacturing business and I definitely saw the sharp end of the globalization stick over the last few decades. So that also informed my experience. But in terms of aha moments, I’ve had a couple I would say, I would share.

Having traveled a lot in China over the last 20, 25 years or so, I remember arriving from my first trip, second trip and just thinking, wow, I wonder why everybody thinks that this country is going to come seamlessly into the Washington Consensus, because it’s a large, diverse, rich (culturally, socially, economically), country with its own traditions, its own long history, and that was just very clear to me from the get-go. Also, the Chinese have always been very, very open about the fact that they protected certain sectors strategically, that the state and the private sector were not separate by and large, or they were not as separate as they would be in the West.

I remember, in particular, having a conversation once with a head of a Danish wind company that was number one in the market several years ago in China. I was asking the CEO, “How are things going for you?” He said, “Oh, they’re great. I think we’re going to be number four in the next five years.” I was like, “Wait, why is falling from the first slot to the fourth slot a good thing, and also, how do you know so precisely?” He said, “Well, that’s what Beijing’s told us.” I thought, okay, so why are we all pretending that this is really the free market or the same kind of free market that we have in the West?

I should say, I don’t believe that there’s really any perfectly free market out there. So that was one felt experience. The other thing, and I guess this really was the thing that made me want to write this book. I had a conversation actually when I was reporting my first book Makers and Takers with Richard Trumka, the former head of the AFL-CIO. He passed away a couple years ago and we were talking about trade policy in the ’90s.

I was asking what were some of the conversations he was having with the Clinton administration during the signing of NAFTA and in the run-up to China’s accession to the WTO in 2001. He said that a policymaker from the administration had come to talk to him at that time and he said, “Look, some of these deals are really going to kill US labor. What’s the plan?” The policymaker said, “Well, look, we know this is going to be tough for US workers, but don’t worry, eventually, wages are going to rise overseas and things are going to equalize globally. In the meantime, you’re going to get a lot of cheap stuff and consumer prices will go down.” Trumka said, “Hmm, okay, well, how long is that process going to take?”

The policymaker said three to five generations, which, to me, reflects any number of things. One, the hubris of the economics profession that thinks that you can kind of magically and perfectly mathematically model such a complicated transition and also the idea that certain parts of the economy and of the country were really going to be sold out and there was not a national conversation about this at all. I just felt it was really important to look more deeply at those questions.

[00:10:05] Kevin

I think I know the answer. I’m guessing I know the answer. But did you feel writing about this stuff 10, 15 years ago as a kind of voice in the wilderness? Was it frustrating for you to be raising these issues when all the momentum seemed to be going in the other direction?

[00:10:25] Rana

It wasn’t frustrating because I always just believed in the validity of what I was saying and I got a lot of support from people actually on the ground doing business in the real world. In fact, it’s interesting. I’ve always had a lot of business people saying, yeah, I think you’re onto something here and economists who, frankly, not enough of them come out and actually use inductive reasoning and are talking to business people and monitoring the real economy. Too many of them are still in the ivory tower.

So I got a lot of pushback from economists, from laissez-faire policymakers. But yeah, I just felt that this was where the current was headed. I wrote my first piece about deglobalization at the FT five years ago. I remember, it’s funny, people were just like, “What?” But actually, to his great credit, the editor at the time, Lionel Barber, sent around note and said, “Everybody read this. This is important.”

The FT, despite being a very, very I will say neoliberal publication in some ways, is also a very curious and intellectually open place and welcomes contrasting opinions, so I’ve always felt very empowered to write these things.

[00:11:42] Kevin

I want to spend most of the conversation talking not so much about the problems of globalization, but the solutions, because I think that’s the interesting bit of the story that maybe most people aren’t familiar with. That said, one question that I would like to ask that just kind of kept popping up to me as I was reading the book was, if we think about the model that has brought so many people globally out of poverty, including China, but also before China, Japan was a very poor country, then Korea, Taiwan, Vietnam, all these countries have benefited from globalization.

All these people have benefited from globalization, and more importantly, Japan, Korea, Taiwan, these are countries that are not culturally similar to Europe, yet they developed as part of the global economy, they became democracies. In fact, you have a whole chapter on Taiwan as kind of like this great laboratory of new ways to manage democracy which I want to talk about. So my question is, if we move to this new world, does that mean we’re not going to see other countries develop and become sort of integrated and maybe democratic over time?

[00:13:15] Rana

So there’s a lot in that question. Let me try and unpack it. The last point is perhaps one to start with, this notion that as we trade more with other countries, that they will be richer and thus freer. That, I think, has been a very mixed bag, let’s face it. There have certainly been some countries that have become more democratic as they’ve gotten richer. There have been probably equal numbers, and certainly by GDP if you count China’s the main example, that have gone the other direction, have actually become less free as they’ve gotten richer, particularly under this regime, the Xi Jinping regime.

But there are a number of other countries that you can say the same thing about. So I think the idea that free trade is in and of itself an adequate foreign policy is largely being discredited. There are still some folks that are kind of hanging on to that idea in part for the same reason that folks hang on to the shareholder value model. It’s easy. There’s one metric. More trade deals, raise the share price, and everything’s fine. These are easy concepts and we want to believe them, but I think the world is much messier.

You’re absolutely right. Your point is well taken that the last 40 years of global integration have led to more global wealth than ever before. So if you look at the period leading up to the financial crisis between 2003 and 2007, that was the greatest global growth in history actually, that period. It’s worth noting that right in the middle of that is when Tom Friedman wrote The World is Flat, because everybody thought all boats are rising and this is the future, it’s the end of history.

Well, it wasn’t the end of history because one of the problems with the neoliberal model of globalization is that it assumes that capital goods and people are all equally mobile. Capital was certainly mobile, which is why you got tremendous wealth creation. Goods were somewhat mobile. People, much less so. So the ramification was even though you’ve got a lot of global wealth, you also got tremendous growth in inequality and a hollowing out, in particular, certain parts of the industrial parts of the developed world. That, to me, has led to unsustainable politics.

I’m one of the people that believe that more extreme politics on both the right and the left, not only in this country but in many parts of Europe are not just down to racism or white nationalism or sort of identity issues, but are really down to a sense of, gosh, I’m living in a country and I’m paying taxes in a country where policy is being made at the 35,000 foot level, not in my economic interest. So I feel disenfranchised and I become angry. We are not creating launchpads and new ways of servicing the needs of those parts of the population. That’s largely down to the US. That’s not China’s fault.

But I think that it’s been well shown by research like the China shock that came out of Harvard and MIT that David Dorn, David Autor, Gordon Hanson research that there has never been a period in which there has been such an exchange of cheap capital and cheap labor between two countries, the US and China, and that was bound to create imbalances which are actually problematic for both countries, and that it is healthy and normal and natural to move to a little bit more of a regionalization, a little bit more of a localization ,a little bit more of a balance for both countries, a better balance between production and consumption, and that’s where I hope we’re headed.

[00:17:01] Kevin

Okay. Well, let’s talk about some of the areas that you think we can relocalize. I think chapter two in the book is called “The Problem With Big Food” and then you sort of talk about the agricultural system that we have in the US, but also a little bit about Europe and France. I’m just kind of curious personally, did you start with big food because of your own personal experience growing up in a small town in Indiana, that just kind of resonated with you?

[00:17:37] Rana

Well, again, it was a mix of things. Certainly growing up in the middle of literally miles and miles of corn, 99% of which was destined for either cattle feed or processed food with crop sprayers going overhead and creating problems with asthma as a child. Yeah, I would say that that definitely impacted my view of Big Ag. But really, I decided to focus on that because after the pandemic, that was just such an interesting and obvious area where there had been problems.

Remember back to the beginning the pandemic, we were all suddenly locked down, and yet, there’s this bizarre supply and demand mismatch where restaurants are shut but grocery store shelves are empty and farmers are throwing away meat and milk. It just was such a strange dynamic. Efficient market theory would say that supply should have simply gone to other areas of demand, and it didn’t do that. Now, why didn’t do that?

Because the whole system of agriculture, which is just an extreme example of concentration that exists in many industries in the US which has increased over the last 20 years, is owned by about four companies. If you’re talking about grain, it’s about four companies. Meat, it’s about four companies. So incredibly concentrated industry. Now, when you’re a big food company, you follow finance 101. You want to move cost off the balance sheet. You want to really create very siloed, concentrated production lines.

So that led to a system where there was one supply chain for restaurants, another supply chain for grocery stores, and never the twain shall meet. That’s not what efficient markets are supposed to do. They’re supposed to actually adjust in real-time and be much more nimble and flexible. But what I found, and I certainly found this in my first book too, is that the Chicago School efficiency theory way of managing business tends to lead to extreme concentration and extreme “efficiency” (I’ll put that in quotation marks), meaning it’s cheaper, it’s faster, but that’s only the case if nothing is going wrong.

If you have any kind of a supply chain disaster, be it a pandemic or natural disaster like a tsunami or a trade war or any other kind of geopolitical incident which, by the way, are happening more and more frequently; about every three years, there’s a major supply chain disruption, then you’ve got problems. So I started digging into food and the more I dug, the more I found that, gosh, this model has so many negative externalities that come with their own costs.

Obesity in this country, we essentially have a food system that is designed to maximize calories, which it did very well and there were good reasons for that. During the Great Depression and the transition in the earlier part of the 20th century where rural populations were moving into cities, there was a need for farmers to produce a lot more cheap calories. Well, we got there.

We are now producing about three times as many calories as the average American needs, but we’re way short on the healthy foods, produce, fruits, vegetables, sustainably raised foods and meats. We don’t have enough of those because we have incentives that are pulling the system in the wrong direction. So I could go on, but that’s really the reason why I started to look at food.

[00:21:19] Kevin

It’s funny, as you’re saying that for a long time, I ran an investment business and we had quite a big client in Jefferson City. So I would fly into St. Louis, and we would drive to Jefferson City. Jefferson City is the capital of Missouri. That was like a three-hour drive and you were driving through these miles and miles of farms.

We would stop occasionally to get lunch and we couldn’t get any fresh vegetables for lunch. I was like, this is crazy. We’re in the middle of a farm country and there’s no fresh lettuce or fresh tomatoes. So I totally got it when you talked about that. You talk a lot in your chapter about Molly, is it John or Jahn?

[00:22:05] Rana

Yeah, Molly Jahn. J-A-H-N.

[00:22:10] Kevin

J-A-H-N. Yeah. She had this great quote that said we’ve seen abundance as a risk management strategy instead of diversity in crops and varieties which is really what you’ve just said. The goal has been to produce as much calories as possible, and that’s our backup plan. You kind of talk about her career a little bit.

She started off as a researcher and then she eventually ran the agricultural school at the University of Wisconsin and now she’s at DARPA. You say she is working on quote “reinventing the process by which food gets made”. Could you tell us a little bit about what she’s working on and why you think it’s so important that you highlighted it in the book?

[00:22:58] Rana

Yeah, Molly is a wonderful story, a wonderful example of how you can really fix things and make them better. She has a program at DARPA which, by the way, I’m sure many of your listeners know that DARPA is like where geniuses go to come up with the Internet. You don’t get your own program at DARPA unless you’re pretty amazing, which she is.

So Molly actually came from a family of plant breeders, Canadian plant breeders, and so she grew up actually coming up with new varietals. If you go into the grocery store, you’re liable to see some of her squashes and different vegetables that she’s created. As she became a scientist and agronomist and kind of moved into deeper areas of research in this field, she began to really start to see some of these negative externalities, and in particular, the nexus of food, fuel, water, the environment, health issues as being one big problem, not separate problems.

So if you go back to that big food model, that idea of incentivizing the overproduction of three or four cash crops, corn, soybeans, and so on, that’s very hard on the land, because in order to keep making a piece of land produce the same yield over and over again with the same crop, you have to keep using more fertilizers, more chemicals. So that creates issues with the environment, it creates issues with water supplies. Of course, much of our agriculture is going to support cattle, which is a huge problem with global warming. The fuel costs of all this are tremendous.

So she started thinking, gosh, this is dangerous, and it’s also a highly concentrated industry. She was interested in national security issues and started thinking about California, which is where a lot of production of the calories we actually need, healthy fruits and vegetables, are done, but also in a very highly concentrated way. She was like, wow, what if a terrorist attack, for example, took out a few of the major farm production factories and the workforce in California? It would just be really devastating very quickly to the country.

So she started thinking national security implications, she started thinking of the implications for the financial markets, with insurance companies having to underwrite a lot of these disruptions. She thought, well, what would be the silver bullet way of fixing this? She started thinking about decentralization, so kind of the opposite of what we have now. We have a model that sorts for big and cheap, and she thought, all right, how would you create a much more diversified agricultural sector?

Now, there are certain ways that that’s already happening. Community farming is becoming a bigger deal. There are some technological examples of how to make farming local, vertical farming, I looked at that in my book too, but she wanted to go further and it sounds Sci-Fi but it’s actually happening, create almost the sort of system that you have like in Star Trek, where you can literally push a button and constitute your own food supply.

She started looking at microbes and how microbes could be used and manipulated to do just that. She has come up with a soup, a microbial soup, that can be used as a food source as long as you have air and electricity. The idea is to try this out on the military first with the notion of all right, let’s say I’m a Navy SEAL going into some hostile territory and I may have to be in a difficult environment for three months and I have only my battery pack and the air I’m breathing, how can I feed myself?

Well, DARPA is working on creating different kinds of foodstuffs that can be constituted using essentially air, water and electricity. Eventually, the goal is to turn these things into stuff that you and I would actually want to eat, not just survive on, so shakes and power bars and different kinds of foods. But it’s really quite profound because it’s all about decentralization. It’s all about how can I go hyperlocal with something that is strategically important, a real necessity.

That’s something that you’re actually seeing folks in other industries think about. We’re seeing that to a certain extent in the semiconductor supply chain. We’re seeing it in critical minerals, all kinds of things that hey, what do we really need to run a 21stcentury economy and survive as human beings, and how can we make that a little more diverse, a little more resilient, a little more local, and in her case, hyperlocal?

[00:28:11] Kevin

So do you see her work as something… I know you said that eventually, her goal is to make it something that can be used not just for the military but more generally. Is that realistic? I’m just listening to what you’re saying and I’m thinking, well, I can see the military applications, I’m not so sure I could see going into a restaurant and having them just create my own meal specialized for me based on her ingredients. Do you see her vision is as realistic in that sense?

[00:28:51] Rana

What I see as very realistic is this as an emergency solution for a set period of time in a world in which geopolitical events may become a real reality. We are already in a world in which power supplies can be taken down by hackers, the water supply could be tainted. Industrial espionage, particularly as the Internet of Things has become such a bigger part of our lives in which everything is connected not just us as consumers with our smartphones but industry, the power grids that we depend on.

If these things go down and there were say a war footing or even a natural disaster footing, one could imagine something like this having been of great use during Hurricane Katrina. So that to me is very, very realistic. Now, am I going to want to order, push my button in the Star Trek canteen? I don’t know. Probably not soon. But I’ll tell you, DARPA has got a pretty good track record of turning things that seem science fiction into reality. The Internet and GPS and stealth drone fighters would be good examples. I could go on, but I wouldn’t count them out.

[00:30:15] Kevin

You also talk a lot in that chapter about vertical farming, and particularly a company based out just near where I am in South San Francisco. That’s actually happening in real time. I’m seeing some of their products that basically are grown in a warehouse, fresh vegetables showing up in my local supermarket. As you say, right now, vertical farming is cost competitive with a sort of Whole Foods, but there’s no reason to think that longer term, it couldn’t be cost competitive with Safeway, and that solves a number of problems.

[00:30:54] Rana

Yeah. That would be the trend. As you would well know, in technology, as more iteration happens, as there are greater numbers of users, costs go down. So I’ve already seen that happening actually just in the time that I’ve been reporting on these topics over the last few years.

[00:31:15] Kevin

Let’s pivot a little bit and talk about another area where you see opportunity for localization, which is in manufacturing. You have a chapter called “Why Making Things Matter.” It really comes across in your book how passionate you are about manufacturing. I’m guessing some of that is coming from the fact that your dad was an immigrant from Turkey and had a manufacturing business.

You start the chapter on manufacturing with a quote from a Harvard Business School professor, where you say the ability to make things is fundamental to the ability to innovate over the long term. So when you outsource, when you downsize, not only do you lose jobs, but you kind of lose the ecosystem of production and R&D where there’s this kind of virtuous cycle of continuous improvement and ideas. So that’s why it’s important to have manufacturing capability, not just to create quote-unquote “good jobs” but to develop and innovate over time.

You point out that that’s kind of like how Silicon Valley got started with this kind of vertical integration. How do you then resist the natural tendency as the business is successful to specialize, to get bigger, and to kind of break up those pieces of R&D and production?

[00:32:53] Rana

That’s a great question, and again, a lot there. Let me go back maybe and give a little bit of history. I’ve been following manufacturing for a long time, because as you say, I knew it, I grew up in factories. I was always interested in that process. My dad spent a lot of time with the workers in his factories. I think maybe because he came from a country in which the paradigm was different, he really, I think, didn’t have your traditional big company approach to labor. He saw labor as an asset.

This is something that other countries like Germany and Japan had never really lost, Korea, that working with labor to create products and to better understand the process of innovation and incremental innovation in particular was always important. Now, in the last 20 to 40 years, depending on where you want to put the marker, there’s been a tremendous amount of outsourcing just for cheap, and China became the factory of the world.

But in recent years, even going back 15 years or so, there’s been a shift in what made sense to outsource and what made sense to concentrate in that way. So let’s just take a low margin industry like furniture or shoes and apparel. That actually started regionalizing well before the financial crisis, certainly before the trade wars, because a lot of CEOs were thinking, okay, the trade-offs between cheap which was becoming less cheap as wages rose in Asia, energy costs, the complications of bringing things over long periods of time, weeks or months in these far flung supply chains, that just didn’t seem as good anymore as it used to.

Whereas the time to market the ability to create faster production cycles which consumers really want, people have gotten used to having things in stores more quickly and having more variety, that it made sense to do more local. So that was already changing. Then you take the Made in China 2025 plan, which actually came out a year before Trump took office in 2015.

China kind of put down a line in the sand, not for any bad reason, I think it was actually a good reason. They said, look, we are now wealthy enough that we are both a consuming and a producing nation and so it makes sense for us to keep more of our own production at home, for our local markets, and to have a more regionalized supply chain, and we think that is actually going to help us get up the middle market louder, more quickly, and become richer and that going to be good for our economy. So they then started regionalizing.

Then you have the Trump administration coming in, and in particular, Bob Lighthizer, the trade rep, saying, okay, you know what? We’re done with China violating WTO rules. We are going to enforce some of these issues now, and then you get trade sanctions, tariffs. But then you get the Biden administration saying post-pandemic, post-war in Ukraine, wait a minute, we maybe need a little more resiliency here. So a lot of countries start saying, gosh, in things like PPE or energy or food supplies or semiconductors, maybe it doesn’t make sense to have so much concentration.

If you look at just an industry like semis, the idea that 92% of all high-end semiconductors have been, in the last few years, produced in Taiwan, I don’t think that makes a whole lot of sense for anybody. I mean, US, China, Europe, it’s just a very, very fragile system, and if one thing breaks, everybody’s in trouble.

So then you start getting the sense of gosh, resiliency is actually better for the bottom line, and that combination of things and then add in technological innovations like additive manufacturing, which maybe we could talk about, I think you just get a lot of tailwinds towards more diversity in terms of where you’re going to do production and how you’re going to do it.

[00:36:59] Kevin

Yeah. We had Chris Miller on the show, who wrote Chip War. That’s just shocking that basically all the advanced chips in the world are made by one company and they make it using a machine that’s made by a single company in the Netherlands that is just mind bogglingly complex. So, yeah.

As you were talking about that, I’m thinking instead of maybe thinking of this splitting as bad maybe if both say the Chinese ecosystem and the western ecosystem have their own capabilities, maybe everyone relaxes a little bit. It’s not quite confrontational.

[00:37:44] Rana

I really do. I don’t think it’s a bad thing to have more balance. If you go way back (I’ll just get geeky for a minute here, but hey, this is a geeky show).

[00:37:55] Kevin

Thank you.

[00:37:56] Rana

Yeah. No, it’s a compliment. If we go way back to the 1930s when some of the neoliberal ideas were crafted, thinkers back then like John Maynard Keynes, the economist, was worried that say having a single global reserve currency, like the dollar, would actually create imbalances and force one country to do all the consuming and another country to do the production. So these are things that we’ve sort of known about. We made various policy choices for various reasons over the years, but I think the pendulum is actually now shifting back to more of a middle ground.

Now, I don’t want to be pangloss and I’m not saying that this is not going to come with some major, major challenges and some bumps. The world is not flat. The world is bumpy right now. But I do think if we play our cards right, getting to a place of better balance economically will be good for everyone.

[00:38:48] Kevin

I think that’s right. It’s funny, I was preparing this weekend for the interview and looking at some of the stuff you’d written on manufacturing and there was this, I think it was a front-page story in The New York Times about this guy who had a sock manufacturing business where he sourced it in China and then decided no, I’m going to start making them in San Diego. He basically said we’re entering what he thinks is an era of hyperlocalization.

[00:39:17] Rana

Absolutely. That was my friend, Peter Goodman’s piece. He’s actually doing a book on this topic and has been exploring these issues. So yeah, I completely agree. It’s funny. I was outside Boston, I don’t know, a couple of weeks ago. I’ve done a three-part documentary to go along with the book, which is available on the FT’s website, and I was filming the third part and it’s on additive manufacturing.

I saw this amazing company. There’s many of them like this, but this one happened to be called VulcanForms. It came out of MIT, funded by a Palo Alto venture capital group called Eclipse and it basically can manufacture entire production lines for aerospace, automotives, Department of Defense, using additive manufacturing.

[00:40:09] Kevin

Can you explain what additive manufacturing is?

[00:40:13] Rana

Yeah. Additive is what we used to call 3D printing and it was kind of like a quaint thing for hobbyists to do in their basement. Basically, it takes the techniques of printing, inkjet printing, where you’re layering material on one layer at a time, and it translates that to the physical world using materials like metals or plastics, resins. So you can literally spray paint a part, quite a detailed part. Imagine like a three-dimensional snowflake spray painted out of metal. That’s something that you can make in real-time, in the course of minutes or hours in one of these additive factories.

Now, the problem has always been scale. You could do this stuff, but you couldn’t do it at scale. That’s now changing as the technology has evolved. So Vulcan is one of these companies that can now print in a single factory tens of thousands, even hundreds of thousands of parts in hours and days. It can be printing say a jet engine part one day and then shift the very next day and do an electronic component.

It’s almost like if you remember Henry Ford’s Old River Rouge factory where you get steel going in one end and cars going out the other. It’s that kind of vertical integration but across industry at scale being done in a way that’s much more efficient and less carbon-heavy than say carving something out of a hunk of material. You’re using just the material that you need.

The knowledge of how to make the product lives in the software and the material can be printed anywhere. It could be done in Turkey, it could be done in China, and in fact, it is. It could be done where you’re sitting or where I’m sitting. that kind of hyperlocalization, I think, is really going to revolutionize industry.

[00:42:08] Kevin

You talked a little bit about that in the book and you made a point that I hadn’t thought about, a lot of points that I hadn’t thought about. Because I think a lot about macroeconomic issues like inflation, and I guess the prevailing narrative is that localization or deglobalization is going to be inflationary. We lose that kind of specialization.

But when you talk about additive manufacturing, in particular, you had this notion that, hey, if an auto dealership, let’s say, needs a part, instead of waiting for the part, it could print it potentially. So you have a situation where you get potentially efficiencies and maybe even deflationary outcome from the technology of being able to make things local.

[00:43:00] Rana

Oh, 100%. You’ve hit on two really important points. First of all, this idea of being able to kind of get a just-in-case backup just in time, where, okay, gosh, Russia has just invaded Ukraine so what am I going to do? Well, I am going to print some parts. In fact, during the pandemic, respirator parts were 3D printed. There were a lot of ways in which this was used as an emergency stop gap. But the other thing, and this is really profound actually, is the potentially deflationary effect of technology.

I really believe, in fact, my column out this Monday is about this, I think we are at a point in industry and technological innovation in industry that is going to mirror the 2007 moment where you had the iPhone come out and then suddenly you get the app economy and you get all these shifts in the consumer space and consumer behavior. I think we are going to see just a depth of technology integration in industry, which represents 70%, 75% of the world economy, that is going to be very, very new, will be very deflationary, will propel a lot of growth.

The challenge, of course, will be jobs. How many jobs is it going to create? What kind of jobs is it going to create? I’m hopeful that as with the app economy, we got entire new job categories that we wouldn’t have expected. I’m hopeful that that may be the case as well. But I will say that a lot of these factories, you go in and they’re like clean rooms, and they’ve got five people in a 20,000 square foot operation. It’s not your grandfather’s factory. Let’s put it that way.

[00:44:43] Kevin

Yeah, I’ve seen that. I’ve seen examples of 3D printing or additive manufacturing in terms of building houses. There’s other types of jobs that are created. You don’t necessarily have as many people laying bricks, but the machines need to be serviced. It’s not 100% automated. So I agree with you. Hopefully, there will be some higher-quality jobs created as part of that.

Maybe if we could move just in the last few minutes from the physical world to the non-physical world. You have a chapter toward the end of the book called “Digital Power to the People”. In some sense, I was a little surprised to see that chapter in the book because my first reaction is, well, what’s that got to do with a localized economy? You tell the story of Audrey Tang, who’s Taiwan’s digital minister, and it’s quite a moving story. You say there’s probably no place on earth that’s been subject to as much disinformation campaigns as Taiwan, yet emerging from this is this new way to think about data and how it can be used to support democracy.

Actually, Taiwan’s experienced less fragmentation than a lot of democracies. Can you tell us the story of Audrey a little bit and how she’s been able to use data to support democracy, but also why you think that’s part of the localized economy, why that fits in with the narrative of your story?

[00:46:42] Rana

Yeah, that’s a great question. Let me answer that latter question first. So why is data part of this localization story? Well, if you think about, most of the high-growth areas of the economy at this stage are run on data. We are living, like it or not, in the age of surveillance capitalism as Shoshana Zuboff would put it, and data is you might call it the new oil. It is what powers growth for a lot of industries.

It started off as something that the big platform tech companies used as an ad tech function, and that’s still the case. But now, companies of all stripes are collecting our data, using our data, in some cases, to build better products and services that we like. As I said in my second book, I have some issues with how that’s done and how it should be regulated.

But I started with the point of view of gosh, if data is living in all of us and that’s where the wealth is, well, then that’s hyperlocal. That means that where wealth resides is literally within the individual. So let’s start to think, and this kind of came out a little bit of my second book in trying to think of how can we move to a world of data that is not degrading our humanity, our democracy.

I became kind of inspired by certain stories that I saw about how digital activists, one of which is Audrey Tang, who is the digital minister of Taiwan, but others, labor union representatives, nonprofit groups, were finding ways to harness the power of data and the wealth being created and put it back in the hands of the individuals that were actually giving that data. So before I get into Audrey, let me just give you one example to kind of help solidify that.

In the Philippines, fishing is a big industry. The fishermen who are going out to make their catches every day have really good information, like better information than a lot of governments about what’s actually in the sea and how certain fish groups are doing and what the environment looks like in a given water.

So a nonprofit group actually got together and helped these fishermen to pool data and then give it to some environmental groups that are trying to track the health of fish and ocean life. Many of these fishermen are now making as much from actually selling back their data to these environmental groups than they are from their fish. So that’s an example of the power of data. Now, as to Audrey…

[00:49:29] Kevin

Rana, can I ask? Because you had this idea called data unions, is that what you would consider to be an example of a data union?

[00:49:38] Rana

Yeah, it’s one example of this sort of collectivization of data and allowing an authority, be it a nonprofit group or a union perhaps, to help individuals to take back some of the wealth and power. It’s very difficult. If I just decide, gosh, I want to get back all the data wealth that I’ve been giving to any number of platform tech firms, that’s kind of hard. But if I had a union or a collective body of some kind that was helping to monitor how the data is being collected, who’s got it, technology exists to track this now but we haven’t really had an advocate on the side of individuals.

This is one of the problems of surveillance capitalism in general. There tends to be an asymmetry of power where the big companies have a lot of information and the rest of us don’t have that much access to information. But if there were a moderator on our side, and I think unions can play that role, things could be a little different, and that’s happening, by the way. In both California and in Europe, there are groups that are trying to kind of make this happen.

Now, going to your question about Audrey, Audrey is the digital minister of Taiwan. She’s a technologist who’s worked for a number of big brand name companies but is native Taiwanese and wanted to help to create a different kind of system, one that would stand in contrast to China’s state-run surveillance capitalism and use the power of data and technology to really empower individuals.

She’s part of a group called Radical Exchange. It’s a very interesting group. Glen Weyl, the Harvard economist and Microsoft advisor is part of it. There are a number of other artists and scientists and economists that are looking to decentralize technology and allow the wealth from the tech sector to be spread more freely. So Audrey set up a system in Taiwan where individuals could be much more involved at a really granular level in participatory democracy.

So let’s say there is a measure about how we want to have our trash collected on certain days, she created platforms that would allow individuals to weigh in in real-time on that, and that information was collated and then government would use it to actually make better decisions faster which would then build trust in the administration that was doing the governing, which would then create a trend where people wanted to involve themselves more with these digital interfaces, they wanted to vote more often, they wanted to get involved in civic society more often.

I want to say that Taiwan, it’s a more homogenous society, it’s a smaller society, it’s sort of easier to do these things in places like that, or in Scandinavia, or Estonia, which is also very digital. But it provides a model to say, hey, if government shows that it will help individuals access the power of technology and then use the data being given to them for purposes of better governance, that we can maybe create a virtuous circle here, and that’s what she’s been doing.

She’s also using techniques that are algorithmically possible now like quadratic voting where oftentimes, when you’re voting on something within the context of a government, not so much in California because you all have different systems, but at a national level, it’s a binary choice. It tends to not be a more nuanced choice.

But using quadratic voting, you can actually vote on percentages or on kind of a more nuanced approach to, yeah, I want something done with my trash collection; 30% this way, 15% that way, 50% that way. It just opens up the possibility of a lot more nuance in the electoral process, and I think that that’s good for democracy too.

[00:53:44] Kevin

Yeah, it’s interesting because Andrew Yang is a big advocate of changing the voting system, and his intuition is that you’ve got extremes on both sides, but very small extremes, but they tend to be vocal, they dominate the primaries. So the candidates we vote for in the main elections are representative of the tails, not the middle.

I think what Audrey is doing is if you basically allow the middle to get a more direct voice, you probably find outcomes that much more people are happy with. My family lives in a deeply red area and I personally live in a deeply blue area, but when I go back and I talk to my dad’s neighbors, we get along just fine. I think there’s a lot more common ground and maybe this is a way for that to show through.

[00:54:41] Rana

I could not agree more. I had like a five-minute fantasy at one point that I would run for that empty Senate seat in Indiana because I was just like I know these people and they’re not represented by Trump or Chuck Schumer. I think that there is something in between that we are really missing.

[00:55:02] Kevin

Yeah, I appreciated the message. I think you even say that, that longer term, maybe we’ll end up with a purpler country than just red and blue. Perhaps we could just end with an example that you talk about at the end of the book which is happening in Holland right now. I think it’s called the 100 Homes Project. I liked that because it seemed like what they were doing was pulling together various elements that you had talked about earlier in the book and bringing it all together into one project.

I’m not sure if you agree with that characterization or not, but could you kind of explain a little bit about what they’re doing there?

[00:55:52] Rana

Yeah, and this is one example of many around the world. So this is a development that is basically trying to take technology (kind of similar to the story we just spoke about regarding Audrey), and harness people’s data to create a better city in this case. So they’re building what’s known as a 15-minute city. The idea is to put places of work, places where people’s homes are, schools are, hospitals, in a discreet area.

But they’re adding a technological layer where there’ll be a lot of data sharing and a lot of data gathering. People will buy into that obviously, with their full disclosure and knowing what they’re giving up in terms of privacy. In exchange, the data will be used to basically create a smarter city, better infrastructure, better geography in terms of traffic patterns, make the health system and educational system run better.

It’s just an example, again, of giving more choice and more benefits from how their data is used. I think that there’s so many examples of this going on that I find very heartening, you know. We often hear that we’re living in a surveillance world and the horse is out of the barn, but there are so many experiments in decentralization going on right now. So this is just one of many and I’m very heartened by it.

[00:57:25] Kevin

Yeah, I think that’s a great place to end because it’s an optimistic note and the book is very optimistic and it’s not only optimistic, but there’s a lot of detail, interesting stories, interesting characters. It’s called Homecoming: The Path to Prosperity in A Post-Global World. Rana, thanks so much for taking the time to talk about your book and for writing the book, and we really wish you all the best.

[00:57:55] Rana

Oh, thanks, Kevin. Thanks for having me.

[00:57:58] Kevin

With that, I’m going to pass it back over to Niels.

[00:58:02] Niels

Thank you so much Rana and Kevin for a delightful conversation on so many important topics that we are faced with today. Now, as most of you know, I have been talking, myself, about deglobalization for a while and I thought it was fascinating to hear that Rana had this on her radar even five years ago when this for sure was not part of the general narrative.

I also find her point about how extreme the recent decade or two has been in terms of exchanging cheap capital and cheap labor between the US and China very interesting, and what the implications of that have been. Now, big food as a topic was also very important, and to hear how concentrated this industry is in the US is pretty amazing, but also how inefficient the supply chains have become because of this. Finally, the research into decentralization of food production using Star Trek-like technologies and additive manufacturing just blows my mind and I’m sure we will hear much more about this in the future.

That’s it for today. Make sure you go and follow Rana’s and Kevin’s work as well as getting a copy of their books, because as you can tell from today’s conversation, some of these ideas and topics are not being discussed enough on mainstream media. From Kevin and me, thanks so much for listening, and we look forward to being back with you on the next episode. In the meantime, take care of yourself and take care of each other.

[00:59:30] Ending

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