Pablo Escobar was a logistics guy — Ryan Petersen

Summary

Ryan Petersen, founder and CEO of Flexport, joins Ti Morse for a wide-ranging conversation that ties Pablo Escobar’s cartel logistics to a 500-year history of how global trade has been built, fought over, and rerouted. Petersen opens with a story about El Chapo haggling DDP vs FOB incoterms on a recorded call for a kilo of heroin, then pivots into the modern-day equivalent: an alleged $112 billion gap between what Chinese exporters declare to their government and what shows up at US customs. Because the US (along with the UK) is one of the only countries that lets foreign entities import without a domestic presence, Petersen argues there is now an open-season honor system that has turned Amazon into the largest trans-Pacific freight forwarder almost entirely on the back of customs fraud — and he can’t get anyone in DC to care.

The middle of the conversation is a history seminar on the Dutch and British East India Companies — tradeable, for-profit governments that ran India for centuries, bribed their way to monopoly, and ultimately financed themselves by getting 20% of China addicted to opium. Petersen surfaces the Forbes family of Boston (no relation to the magazine, but the family of John Kerry), who controlled roughly 20% of the China opium trade and still own one of the largest private islands in America. He connects Jewish trading networks and Talmudic law on tradeable debt to the bill of lading — the piece of paper that made long-distance trust possible — and notes that 5% of Flexport’s customers still require original paper bills of lading mailed around the world, which is also how DHL’s parcel business was born.

The final third turns to the Strait of Hormuz crisis and the broader test of the post-WWII American naval order. Petersen frames the US Navy’s failure to reopen Hormuz or to stop Houthi attacks in the Bab-el-Mandeb as the breaking of the explicit globalization bargain — freedom of navigation in exchange for alignment with the US. Twenty percent of the world’s oil flows through Hormuz with no alternative route, and helium (30% from Qatar, non-renewable, required for semiconductors and SpaceX rockets) and fertilizer (30-50% from the Middle East) are at risk. Petersen sees this as a localized GDP boost for Texas oil but a “fixed pie” mistake nationally — and a return to an older era where every trading ship carried cannons.

Highlights

”Pablo Escobar Was a Logistics Guy”

“Pablo Escobar also was a logistics guy. The term cartel is really about an alliance… Pablo Escobar’s job was logistics, shipping. And of course, much harder form of logistics than what we have to do because it all had to be underground and illegal.” — Ryan Petersen, 0:11

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yt-dlp --download-sections "*0:11-1:30" "https://www.youtube.com/watch?v=SlHd3-0eXOA" --force-keyframes-at-cuts --merge-output-format mp4 -o "petersen-escobar-logistics.mp4"

”Amazon Is the Number One Freight Forwarder — Because of Fraud”

“Amazon has become the number one freight forwarder… they are now the number one freight forwarding company on the trans-Pacific Asia to the US. And it’s because of, my theory is allegedly, just a huge amount of fraud that’s happening.” — Ryan Petersen, 3:00

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yt-dlp --download-sections "*3:00-4:20" "https://www.youtube.com/watch?v=SlHd3-0eXOA" --force-keyframes-at-cuts --merge-output-format mp4 -o "petersen-amazon-fraud.mp4"

”$112 Billion Gap Between China’s Export Data and US Import Data”

“We pulled this data, the Chinese government publishes their export statistics to the United States and they show 112 billion dollars higher export value than what those same goods show up as when they’re declared to the US government upon import.” — Ryan Petersen, 6:00

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”The Forbes Family Did 20% of the China Opium Trade”

“The Forbes family and the Americans did about 20% of all the opium trading into China. They were based out of Boston… the patriarch of the Forbes family is John Kerry. The family is still very powerful, and people think John Kerry made his money by marrying the ketchup, the Heinz ketchup fortune, but actually no, he had his own fortune long before that.” — Ryan Petersen, 27:51

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yt-dlp --download-sections "*27:51-30:00" "https://www.youtube.com/watch?v=SlHd3-0eXOA" --force-keyframes-at-cuts --merge-output-format mp4 -o "petersen-forbes-opium.mp4"

”Jewish Law Was the Foundation of Capitalism”

“I would actually argue that I’ve seen it argued, it’s not my argument, that Jewish law was the foundation of capitalism… in Roman law you could not trade a debt… Under Jewish law, Talmudic law, you could sell the debt and that’s the foundation of capitalism in many ways.” — Ryan Petersen, 33:00

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yt-dlp --download-sections "*33:00-34:00" "https://www.youtube.com/watch?v=SlHd3-0eXOA" --force-keyframes-at-cuts --merge-output-format mp4 -o "petersen-jewish-law-capitalism.mp4"

”Hormuz Is Different — There’s No Alternative Route”

“Hormuz is different because there’s no alternative route… it’s a cul-de-sac. So there’s no other way to get the oil out. And 20% of the world’s oil flows through Hormuz. So we’ve had this violent wake up call… I saw a gas station here in California that was $9 a gallon yesterday.” — Ryan Petersen, 42:49

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yt-dlp --download-sections "*42:49-44:00" "https://www.youtube.com/watch?v=SlHd3-0eXOA" --force-keyframes-at-cuts --merge-output-format mp4 -o "petersen-hormuz-no-alternative.mp4"

Key Points

Pablo Escobar negotiated Incoterms (0:11) - Cartels are alliances and Escobar ran logistics; El Chapo was recorded haggling DDP vs FOB on heroin
Tariff fraud explosion (3:00) - 35% tariffs created massive incentive to under-declare value; Amazon is now the #1 trans-Pacific freight forwarder
US import honor system (4:29) - The US and UK are the only countries that let foreign entities import without a local LLC or bank account
$112 billion declaration gap (6:00) - Chinese export stats to the US are $112B higher than US import declarations for 2025
Dutch East India Company (9:08) - World’s first joint-stock company, born from Dutch independence from Spanish/Portuguese empire and pirate raids
Trade is older than art (11:26) - Evidence for long-distance trade goes back 40,000 years; first cave paintings ~25,000 years old
Wells Fargo and Amex were freight forwarders (12:59) - Both started moving physical gold; that’s why Wells Fargo’s logo is a stagecoach
The clock enabled longitude (13:30) - Henry the Navigator was the original venture capitalist funding Portuguese exploration tech
1,000x spice markup (15:18) - Spices from the Moluccas marked up 20x to India, then another 20x to Venice — at least 1,000x total
British East India Company ran India (18:00) - For a long time India was just run by a corporation before the British Crown took over
Bribery built monopolies (19:41) - Politicians were given big shares in the company, then the Navy enforced the monopoly
Trade imbalance of silver to China (21:08) - Britain had nothing China wanted; 25% of all American silver went across the Pacific to Manila
Ming Dynasty banned trade (22:45) - Considered a huge tactical blunder ~50 years before Vasco da Gama rounded the Cape
Opium for tea (24:00) - Most British East India Company profits came from opium; Boston Tea Party tea was opium-financed
Forbes family did 20% of opium trade (27:51) - Boston Brahmins, ancestor family of John Kerry, still own a massive private island near Martha’s Vineyard
China has a long memory (30:17) - Petersen’s theory on why Obama wasn’t given stairs off Air Force One — Forbes opium ties
Bill of lading enabled trust trade (30:56) - Paper title transfer let merchants avoid physically shipping gold; Jewish networks had advantage
Jewish law and tradeable debt (33:00) - Roman law forbade selling debt; Talmudic law allowed it — the foundation of capitalism
DHL was born from container speed (36:00) - Containers outran the mail carrying bills of lading; DHL paid couriers to fly with duffel bags of titles
5% of Flexport customers still use paper bills of lading (35:54) - Banks still require them as “secure collateralized payment instruments”
Thai stamp tax tweet got deleted (37:55) - Petersen had to delete a tweet noting that stamp taxes triggered the American Revolution
Ever Given vs Hormuz (39:14) - Ever Given was a week-long meme; Hormuz is structural
Houthis closed the Red Sea since Dec 2023 (41:33) - Container shipping has rerouted around Africa, adding ~3 weeks and ~60% to ocean freight prices
20% of world oil flows through Hormuz (42:49) - No alternative route; California gas already at $9/gallon at some stations
Helium is non-renewable (43:22) - Qatar produces 30% of world helium, critical for semiconductors and SpaceX rockets
Arctic shipping is emerging (48:00) - Climate change could make the Bering Strait the next major chokepoint
The American naval order is being tested (48:38) - A US carrier group couldn’t stop Yemenis from hitting tankers; Hormuz still closed
US oil exports at all-time highs (48:38) - Net beneficiary of the disruption, but Petersen warns it’s “fixed pie” thinking
Russia/Ukraine famine prediction was wrong (51:00) - Petersen publicly predicted famine; Russian grain never stopped and Middle East fertilizer picked up the slack

Mentions

Companies

Flexport (0:00) - Petersen’s freight forwarding company; launched AI translation for trade communication
Amazon (3:00) - Now the #1 trans-Pacific freight forwarder, allegedly due to merchant customs fraud
Dutch East India Company (9:08) - World’s first joint-stock company
British East India Company (18:00) - Effectively governed India for centuries; profits primarily from opium
Wells Fargo (12:59) - Started as a freight forwarder moving gold; stagecoach logo reflects that
American Express (12:59) - Also started as a freight forwarder
DHL (36:00) - Original sharing-economy company; paid travelers to fly bills of lading around the world
Heinz (28:43) - Source of Teresa Heinz Kerry’s ketchup fortune, but not John Kerry’s original wealth
Air India (44:33) - Cut international flights by 10% in response to fuel disruption

Products & Technologies

Incoterms — DDP and FOB (0:11) - 90% of trade is FOB; DDP makes the supplier deliver to your warehouse
Bill of lading (30:56) - Paper title document that enabled long-distance trade without moving gold
Caravel, sextant, clock (13:15) - Portuguese-era trade technologies; clock was essential for longitude
Shipping container (36:00) - Outran the mail and triggered DHL’s founding
Flexport Atlas (48:38) - atlas.flexport.com lets you watch ships transiting the Arctic route

People

Pablo Escobar (0:11) - Colombian cartel boss, framed as a logistics entrepreneur
El Chapo (0:11) - Audio of him negotiating Incoterms on heroin
Vasco da Gama (14:36) - Rounded the Cape of Good Hope in 1498
Henry the Navigator (13:46) - “Original venture capitalist” funding Portuguese exploration
Christopher Columbus (14:36) - Reached Americas just before da Gama reached India
Cristiano Ronaldo (14:03) - Born in Madeira, a Portuguese-discovered island
King George III (37:55) - Stamp tax precedent for the American Revolution
King of Thailand (37:33) - Petersen carefully notes it’s illegal to criticize him
The Sassoons (28:00) - Jewish Baghdadi family that ran opium trade out of Mumbai
The Forbes Family (27:51) - Boston Brahmins; 20% of China opium trade; John Kerry’s family
John Kerry (28:43) - Forbes family patriarch; Obama’s Secretary of State
Barack Obama (29:54) - Famously had no airstairs at Chinese arrival; Petersen’s theory: long memory
AOC (Alexandria Ocasio-Cortez) (40:13) - Used as foil for “fixed pie” economic thinking
Donald Trump (3:00) - Tariffs created the fraud incentive; doesn’t mind Hormuz closure because US benefits
John D. Rockefeller (51:00) - Last time US dominated world energy markets to this extent
Deng Xiaoping (27:00) - Modernized China 150 years after the Opium Wars

Places & Concepts

Strait of Hormuz (39:00) - 20% of world oil, no alternative route
Bab-el-Mandeb / Red Sea / Suez Canal (41:33) - Closed to container shipping by Houthi attacks since Dec 2023
Strait of Malacca, Panama Canal, Gibraltar, Bering Strait (48:00) - Other major maritime chokepoints
Manila / Manila galleon (21:29) - Trade hub where Chinese smuggled around the Ming trade ban
Potosí (21:29) - Bolivian silver mine that supplied most American silver flowing to Asia
Madeira (14:03) - Portuguese-discovered island; deforested for vineyards; means “wood”
Pondicherry / Chennai (Madras) (19:56) - French colony in India taken by British in Napoleonic Wars

Surprising Quotes

“There was this great video, audio recording of El Chapo haggling over a kilo of heroin and like is it DDP or is it FOB?” — Ryan Petersen, 0:11

“We pulled this data, the Chinese government publishes their export statistics to the United States and they show 112 billion dollars higher export value than what those same goods show up as when they’re declared to the US government upon import.” — Ryan Petersen, 6:00

“Wells Fargo and American Express both started as freight forwarding companies because you had to move the gold… that’s why Wells Fargo has a stagecoach logo right?” — Ryan Petersen, 12:59

“The patriarch of the Forbes family is John Kerry. The family is still very powerful, and people think John Kerry made his money by marrying the ketchup, the Heinz ketchup fortune, but actually no, he had his own fortune long before that, the Forbes family.” — Ryan Petersen, 28:43

“Jewish law was the foundation of capitalism… in Roman law you could not trade a debt. So if I owe you money, I owe you money… Under Jewish law, Talmudic law, you could sell the debt and that’s the foundation of capitalism.” — Ryan Petersen, 33:00

“DHL actually formed as the original sharing economy company, where you could be a courier, anybody could sign up to be a courier for DHL and they would buy you a plane ticket wherever you wanted to go, but you had to carry a duffel bag full of bills of lading.” — Ryan Petersen, 36:00

“Helium is not — you think of it for clowns and blimps, but actually the most important uses are producing semiconductors, and SpaceX rockets. Like you can’t do either of those things without helium.” — Ryan Petersen, 43:22

Transcript

Ti Morse: 0:00 Today I have the pleasure of sitting down with Ryan Petersen, the founder and CEO of Flexport. You are one of the experts on global trade, and I think one of the best entrepreneurs of all time and somewhat of a tradesman himself was Pablo Escobar.

Ryan Petersen: 0:11 Oh wow, Pablo, Pablo Escobar’s, first to be clear, evil, terrible human. One of the first entrepreneurs to get into politics though. I think he ran for mayor, did he win? I can’t remember the story. But yeah, Pablo Escobar also was a logistics guy. The kind of this term cartel is really about an alliance. A cartel is an alliance of different companies, different countries in the term in the case of OPEC, for example. But a cartel in the drug context was, he ran the logistics side of this alliance of companies. So you had producers, you had distributors downstream, but Pablo Escobar’s job was logistics, shipping. And of course, much harder form of logistics than what we have to do because it all had to be underground and illegal and crossing borders is hard enough, clearing customs is hard enough, having to do this without being detected by the government and while they’re trying to kill you actively, total nightmare. I was listening to the trial of El Chapo, and there was this great audio recording that I guess the NSA or somebody tapped his phones, they had this audio recording that they played as evidence of him dealing drugs. And they had him negotiating what are called we call it in the industry Incoterms. So Incoterms are like I forget who created this standard, probably the World Trade Organization, it’s the standard terms by which you negotiate where are the goods handed over in a trade transaction. So I negotiate Incoterms, the most probably 90% of trade or so is done on FOB terms, free on board. Meaning it’s I sell it to you at the port. I have cleared customs is the factory’s responsibility, export customs, you take it from there on the inbound. Everything from the origin port onwards is your responsibility. The most famous Incoterm today is called DDP, delivery and duty paid. That means it’s the supplier’s job to deliver all the way to your warehouse. So it’s obviously a big deal because it’s who pays the tariff, who pays the freight, who crosses the border in the case and so there’s this great video, recording, audio recording of El Chapo haggling over a kilo of heroin and like is it DDP or is it FOB? I mean it’s a big deal because now who’s responsible for getting this into the United States? It’s probably like 80% of the cost of this thing is crossing the border, illegally. But actually Incoterms are back in the news because there’s a huge amount of fraud happening right now. With with Trump’s tariffs they’ve created this enormous incentive to cheat and, you know, the markets find a way. They’re going to cheat. People will, especially entrepreneurs whose backs are against the wall and like might lose everything, will often cheat. And that’s what we see, just an enormous amount of fraud happening. In fact, a lot of it is just Chinese merchants just selling on…

Ryan Petersen: 3:00 Amazon. Yeah. And the fraud looks like this. In the old day before pre-tariffs, like it was a couple percent. You didn’t bother. And so you just import it, you pay the duties, you didn’t cheat. I mean there was probably some cheating, but it wasn’t rampant. Now when tariffs have gone to 35, at peak they were like 150% for a few weeks, but right now it’s about 35% on most goods. That’s a big incentive to lie about the value of the goods. Because it’s 35% of whatever you tell the government the value of the goods is. And so people are just lying and they’re saying, ‘Hey, this thing’s 100,000? No, it’s 10,000.’ And now instead of paying 35% tariff, I pay 3.5%, and back where I was before. And that is absolutely rampant right now. In fact, Amazon has become the number one freight forwarder in the people don’t know this actually, I haven’t seen it reported, breaking news here. They are the now the number one freight forwarding company on the trans-Pacific Asia to the US. And it’s because of, my theory is allegedly, I allege, it’s allegedly, just a huge amount of fraud that’s happening where these merchants who sell on Amazon, all these companies with their brand name of like XYZ4750, you know like these crazy names, they’re just lying and they’re undercutting everybody on price because of it. Yeah, there’s always incentive to cheat, whether you’re Escobar or some Chinese merchant.

Ti Morse: 4:21 On the matter of incentives, I think it’s incredibly important to get the incentives right and how did things get this bad?

Ryan Petersen: 4:29 Oh, well, the United States is the only — actually there’s two countries in the world that really allow anybody to import goods into their country almost unrestricted. It’s the United States and the UK. And I don’t know if we — it doesn’t come from British common law. It’s these things evolved separately. We don’t know when it really started in the US. It’s not codified into the statute, but it is we allow it. So what does that mean? In most every other country in the world besides those two, you need to go create a local entity, whether it’s an LLC, a C-corp, or a sole proprietor who’s in the United States could import the goods in their name. In the United States, that’s not required. You can just import stuff into the United States as a foreign company with no domestic presence whatsoever. And then you can just register with CBP and just import the goods, and you’re the importer even though you’re a foreign country company. And therefore, we have no ability to enforce what these people do. It’s an honor system. Like most law depends on consequences if you’re caught. I mean people will still cheat, but at least there’s consequences, it reduces the cheating quite a bit. But if you know nothing can ever happen to me because the United States government doesn’t have jurisdiction, agents — we don’t have trade compliance agents in other countries. So we cannot go after them. We can refer them to the Chinese government for prosecution. That’s the best we can do if they cheat. So it’s open season.

Ryan Petersen: 6:00 Actually, we pulled this data, the Chinese government publishes their export statistics to the United States and they show 112 billion dollars higher export value than what those same goods show up as when they’re declared to the US government upon import. 120 billion… that was for 2025… 112 billion. It’s going to go up further until something is done about this. So, it’s just an insane situation which could be very, very easily fixed. Now it would never go away, but you simply say, hey, you have to be a US entity. It could be a wholly owned foreign entity but you gotta set up an LLC, have a US bank account, go through some kind of KYC process, know your customer, who is this entity, and have consequences if you’re caught cheating. But haven’t been able to get anybody in Washington DC to pay any attention to this issue thus far. They’re all very busy with other things. I think I’ve spent a lot of time in DC lobbying on this issue, lobbying’s kind of a strong word, just talking to Congress, the administration…

Ti Morse: 7:02 Trying to let people know that there’s a problem.

Ryan Petersen: 7:05 Yeah. And everybody kind of smiles and nods, yeah, like, you know, I hear you, like, that definitely sounds bad, and then nothing happens in between. I think I need to reframe my efforts a little bit. It’s actually a good object lesson in persuasion for me, because I’m used to like show people a problem and then you would think that would be enough for them to want to fix the problem.

Ti Morse: 7:19 Well, it’s kind of funny, like, there’s that line of you can’t reason people out of an idea or, you know, belief system that they weren’t reasoned into. And so if you give them facts and evidence and they weren’t reasoned into it in the first place, it doesn’t necessarily change their opinion.

Ryan Petersen: 7:31 Yeah. And there’s something in understanding what their incentives are. What are they trying to do? What do they care that American businesses are being hurt? Not really. Do they care that the US $112 billion at a 35% duty rate, it’s $35 billion for the government, but they don’t care, they have a money printer, so why do they care about that? So what is it that they care about? I don’t know. I’m trying to reframe it. It’s probably about national security. I mean, it is absurd from a national security standpoint too, because you can just import anything into the country. Anything. Fentanyl, bombs. I mean, yeah, sure, like if we catch you, we might come after you, but we’re not going after the people importing fentanyl into the country. They let them go. So, I think if you frame it that way, might help a little bit, being like, look, you can’t let foreign companies just import stuff with no presence. I might be talking to the wrong people. I mean, the IRS also probably presumably cares more about collecting taxes. These companies pay no income tax either, right? Because all that profit is now made offshore, whereas if they imported it and then sold it, there would be a profit recognized in the United States, they’d have to pay income tax. So, I don’t know, this has been a frustration of mine. I’ve been to DC like once a month for the last half year or so trying to get people to pay attention to this issue.

Ti Morse: 9:00 I read a huge amount of like the history of global trade. So let’s just start off on Dutch East India Company, you know, how did this thing get started?

Ryan Petersen: 9:08 Dutch East India Company was the world’s first joint-stock company. And it’s quite an interesting thing because the Dutch were a province of the Spanish, the Hapsburg Spanish Empire. The Netherlands was a province of Spain and you had the Protestant reformation, the revolution, and there was a big war fought, Spanish Inquisition, and they managed to get independence. One of the first things they did was they had these fleets and they started raiding the Spanish and actually it was more the Portuguese Empire, but for a period there, Spain and Portugal had merged through marriage, and so it was one empire and it was trading both the Indies and the Americas for a brief period. And the Dutch during this time started sailing there, raiding, started as pirates, and became very, very profitable. And they ended up basically taking over. And once they took over, you had more of a commercial aspect to this, and an emergence of many different companies that were trading and it became unprofitable, the competition sort of was bad for business.

Ti Morse: 10:25 Drove down the economics.

Ryan Petersen: 10:26 And I forget the exact coordinating mechanism, but a bunch of these merchants got together and they pooled their ships and said, hey, we’re gonna create this stock company and allocate shares to everybody and it’ll have this monopoly on trade in the East Indies, and then it got listed. It was the first listed public company where you could buy these shares that you’d put in became tradeable. And yeah, it was couple hundred years of domination. Of course, the British eventually came and took it over, and the British East India Company took over the business, but that’s kind of the origins of it was some kind of early form of getting together and creating a monopoly, which now would be illegal under antitrust laws.

Ti Morse: 11:10 I think it was a de facto government in effect. It was like a tradeable government.

Ryan Petersen: 11:14 Yeah, especially the British East India Company was absolutely the government that ruled India for couple hundred years.

Ti Morse: 11:20 Do you want to go through kind of the history of the like major superpowers from Dutch to…

Ryan Petersen: 11:26 Oh, you start there. I mean, you go way further back in time, if you can go all the way to the big, trade is as old as, it’s older than art. There’s evidence for long-distance trade going back like 40,000 years and the first cave paintings they think are like 25,000 years old. So you can go way, way back and most empires are built on trade. They said that what Roman legions marched on Egyptian grain, right? And it was a big part of that was that trade of bringing grain from around, Mediterranean. I would say, the Venetians trading throughout the Mediterranean were the dominant power from like call it 1100 till they conquered Constantinople in 1200, 1204.

Ryan Petersen: 12:10 And a lot of actually the crusades were as much about trade as they were about religion, being able to trade with the east and fighting for control over trade because the modern Israel is a — before the Suez Canal it was an incredibly important trade nexus to reach between Asia and the Mediterranean. So the Venetians and they had rivals the Genoese and even Florence which is not even on the water but became really active in banking and trading through all these like merchant fairs that they would have so moving goods, moving money was a — in the old days hundreds of years ago was physical like you had to actually be a logistics company to be a bank.

Ryan Petersen: 12:59 Until not that long ago I mean Wells Fargo and American Express both started as freight forwarding companies because you had to move the gold here in the American West you had to get the gold on stage, that’s why Wells Fargo has a stagecoach logo right? So you had Venice trading with the Muslims and I think the discovery by the Portuguese, the invention of the caravel, a lot of other early technologies — trade is largely been driven by these development of new technology. The quadrant, the sextant, some of these, the clock, the clock is incredibly important for positioning yourself. You can’t do longitude without a clock. You need to know where you are on the world, you need to know what time it is when the sun, that’s how you determine where you are in the world. And so these technology especially Henry the Navigator and the Portuguese sort of like the original venture capitalist was funding this exploration down the coast of Africa. They didn’t know where they were going. I don’t know that they actually expected in the early days of Henry the Navigator to make it around Africa. They just realized that it was quite profitable trading in slaves, discovering new lands. They discovered Madeira. Madeira’s an island, now it’s most famously known as Cristiano Ronaldo’s birthplace, but Madeira was actually this uninhabited island that Madeira means wood, it was heavily forested. Now there’s no trees there, they chopped them all down, but became very very profitable. They set up vineyards there. I mean free land was like unheard of at that time, they hadn’t discovered the Americas yet. So they realized it was profitable, they kept reinvesting those profits, and eventually Vasco da Gama rounded the Cape few years after Columbus discovered the Americas, actually around 1498. 1498 is when they made it around the Cape of Good Hope and made it to India. In the Islamic world had put down the set of iron curtain, you could trade and they were very open to trade with the Venetians.

Ryan Petersen: 15:00 Essentially allied with the Muslim caliphates and the Ottomans, but they couldn’t… they could trade but they couldn’t go beyond. And the main things they wanted from the East were spices. Spices are really good for long-distance trade in that time because they’re very small and very, very valuable.

Ti Morse: 15:16 Because you can like dry them out and they wouldn’t go bad.

Ryan Petersen: 15:18 Yeah, and they weren’t that perishable and just the value-to-weight density ratio is just so high. And so the markup, I think it was at least 1,000x, it might have been 10,000x.

Ti Morse: 15:30 If you bought the spices in India?

Ryan Petersen: 15:32 No, the spices really originate in Indonesia, the Spice Islands called the Moluccas. By the time they got to India they were probably already marked up like 20x or something, and then another 20x, you know, you pretty quickly get to 1,000x or more once you reach Venice. And so there was this huge — people didn’t know that, but they knew for sure, you know, you want to get to the source of these things. And they didn’t even know where they were from. Really had no — it was like a lot of mythology, you didn’t know.

Ti Morse: 16:03 Oh, so the people in, you know, England might have been buying cayenne pepper or something and they were like, “we don’t know, this just appears on the shores.”

Ryan Petersen: 16:12 Yeah, from the East, the magical, mythical East, full of wealth and Aladdin genies or whatever. But so that was driving a lot of the early exploration was to try to get to the source of these spices and other goods. So Vasco da Gama kind of makes this end around around the Iron Curtain of Islam being able to go, and that really opens up the Portuguese Empire and then, as I said earlier, the Dutch eventually take over and then the British. And Venice goes into decline. It took about a hundred years. Actually, it’s one of the things that people miss with these new technologies, new trade routes: there’s a relatively gradual… it’s not instant. You know, people think, “oh, we invented AI and now tomorrow the whole world changes,” like, actually it takes…

Ti Morse: 16:58 There’s a huge amount of inertia.

Ryan Petersen: 16:59 Yeah, there’s some inertia, there’s adoption cycles, there’s, yeah, getting people to actually go that way. I mean Venice continued to prosper, the Golden Age of Venice, I mean, it lasted another 100 years after that. It took a while because in the beginning they were like, “okay, I sent one ship over there, came back with a bunch of spices, but like, it’s 0.1% of the market or something.” Like, it takes time even with an exponential curve for it to have that kind of an impact.

Ti Morse: 17:26 And at the time, like, how long did it take a ship to get from Indonesia to Britain?

Ryan Petersen: 17:32 It might be a year or more. I mean, I think just to India was about a year and probably another six months from there. And you could only go once a year because of the monsoon winds crossing the Indian Ocean, so it’s sort of an annual out and back, maybe three years journey or something like this. The Suez Canal was hugely important for this. It cut off — and that was already in the age of steam — it cut off massive amounts of travel time. Now, when the corporations start to take over from governments — I mean, it’s gone back and forth, right? You had the Dutch East India Company, the English East India Company came in effectively, I think they were sort of reluctant. I’m probably going to get in trouble in India for this.

Ti Morse: 18:09 It’s one way to make our podcast go viral by the way, is to say something that offends Indians and they’ll go totally crazy. I don’t mean to offend. I may have learned my history differently or might be wrong, but I think the East India Company were somewhat the British East India Company were somewhat reluctant conquerors.

Ryan Petersen: 18:16 They came to trade, they were doing a lot of trade. And in some of what they did really kind of created a lot of breakdowns in Indian society. Some of that was through power force protection, through taking sides in local armies. Some of it was trade networks that were developed, displaced current economic powers and political dynamics. But India largely devolved into chaos during this time. And I don’t think they’re unrelated. I think it was probably caused by the English East India Company. And then they realized, hey, this chaos is bad for business. Like there’s civil wars everywhere, it’s like anarchy has formed across the subcontinent. And they ended up feeling that they had to, they felt compelled to one way or the other conquer India and become the government of India, which they were for a long time before the British government effectively took it over and made it truly a colony. For a long time it was just run by a corporation.

Ti Morse: 19:29 Which is a weird thing to think about. One of the more screwed up forms of government you could ever have is an actual corporation running it for profit of people who don’t even live there back in England.

Ryan Petersen: 19:41 Actually, one of the interesting things is how do these corporations become monopolies in the first place? How do they get the government to agree to that? It was largely, I think it was largely through bribery.

Ti Morse: 19:54 Just paying off the right politicians.

Ryan Petersen: 19:56 Yeah, they gave the politicians big shares in the company and created these monopolies so that only the British East India Company was allowed to sail on behalf of Britain. And then the British Navy made sure that the French and others couldn’t trade. The French were there in a big way. In fact, it was only with the Napoleonic wars, some of the Napoleonic wars were fought in India. It was a very global war. But the French had a big settlement in what’s now Chennai, Madras. It was Pondicherry, as it was called at the time, but it was eastern side of India. There was a French colony there that the British took over during the Napoleonic wars. But the British Navy did their best to like box out other competition, competitors, and made sure it was only the East India Company or later the Raj that could trade. But over time, the networks change. The British had a really hard time finding anything, this was especially true in China, but also in India. It was a hard time to find things that these people wanted to buy from Britain. The balance of payments wasn’t looking very good in the beginning.

Ti Morse: 20:56 So was it kind of like the US and China today, where lots of goods flow to the US, but then the empty ship flows back to China?

Ryan Petersen: 21:00 Like that, except that they weren’t accepting the British pound into a money printing like we have now.

Ti Morse: 21:06 So it was like a lack of trust in currency?

Ryan Petersen: 21:08 It was a lack of — well, they had to use hard metal. It wasn’t fiat. It was traded with silver and bullion. And it became a huge drain on — especially China. The Chinese produced lots of things that the British wanted: tea, silk, porcelain.

Ti Morse: 21:27 Probably some other stuff.

Ryan Petersen: 21:29 But those are the big ones. And the British didn’t have anything at scale that they wanted. Like, they had like mechanical clocks that people thought were interesting and stuff, but like, basically the Chinese were pretty self-sufficient. And these guys would show up with like British textiles that weren’t very quality compared to the local stuff, and there was nothing to trade. And so the what they did want was silver. So it was really draining the silver reserves of the Europeans doing this trade. You had to — and where you get silver from, of course mostly from the Americas, from Peru, from Potosí, the mine in Peru, in Bolivia, excuse me. And actually about 25% of all the silver mined in the Americas went across the Pacific, not across the Atlantic. It was sailed via this Manila galleon — sailed to Manila, and Manila, the Philippines, became a trading hub because the Chinese were banned from trade externally. And so they had to sneak out to the Philippines and do their trade with the Europeans there.

Ti Morse: 22:33 Why were they banned from trade?

Ryan Petersen: 22:35 The Ming Dynasty had banned trade. It’s considered a huge tactical blunder. They stopped allowing overseas trade.

Ti Morse: 22:43 What was the logic behind that decision?

Ryan Petersen: 22:45 I think it was mostly government-run operation up until then, naval going, and it was really draining their funds. They weren’t seeing a return from it. They weren’t looking at overseas commerce as a commercial venture. It was largely diplomatic. It was power projection. It was symbolic. They would build these treasure fleets and go sail the world, to show how great China was and get people to kind of bend the knee and do some diplomacy. But it wasn’t profitable at all. And there was a new emperor and he said, ‘Enough of this. We got our own problems here domestically. We’re going to stop that, stop funding it.’ And they actually banned overseas trade during the Ming Dynasty about 60 years or something, 50 years before Vasco da Gama rounded the Cape. I mean, it’s a great alternative history of what would have happened if the Chinese had been there in force with their much larger, more powerful ships than what the Europeans had. So anyways, the Chinese were banned, so they would have to come down to Manila to get to do trade. And so the Spanish sent this galleon every year. Actually, it would come by here in California, it would sail up the coast and then cross over — I forget what — where they would head out to sea, but in California somewhere and head out to sea — trade the silver in Manila.

Ryan Petersen: 24:00 You don’t want to give up all your silver. And so eventually the British figured out that the Chinese did want opium, which came I think from India, from Afghanistan. And that became the main business of the British East India Company, most of the profits. I don’t think the other stuff they were doing was that profitable.

Ti Morse: 24:19 Was like back home Britain aware of the fact that most of the profits from this company were coming from opium trade?

Ryan Petersen: 24:26 Yeah, I think so. Yeah. It radically changed everything because now you didn’t even really need to involve Britain. You’d just go from India to China, make a bunch of money. They would take the Chinese goods of tea and stuff and ship that back. And of course, you know the Tea Party, the original Tea Party, the Boston Tea Party was British East India Company. I think, yeah, the same company, right? Trading this tea from China. But it had been opium exchanged for tea, shipped to Boston, sold here in the United States, or in then the American colonies.

Ti Morse: 24:54 I guess we’ve come full circle back to Pablo Escobar. Now we’re trading — now they’re trading opium but as a government into China. Chinese are still very bitter about this. Rightfully so. It devastated, I think 20 to 30 percent of their population was addicted to opium. Which, if you go to downtown San Francisco, fentanyl’s an opiate, much stronger, but it’s…

Ryan Petersen: 25:10 That’s way less than 30 percent.

Ti Morse: 25:12 Yeah, it’s a small percent. It’s devastating. And I think it was having a similar effect on their people and they tried to ban it and the British sent gunboats in and soldiers and burned down the emperor’s palace in Beijing and conquered the country to enable the trade to continue. So I think still a lot of historical anger over that. In a different timeline where you didn’t have the opium trade in China, do you think that the Chinese like evolution of power changes and it’s kind of different today? Like did we just set back — or you know — the British set back China by, you know, 50 years or something like that?

Ryan Petersen: 25:57 Yeah, maybe 30 or 50 years or something like that. It’s really hard to say. I think that China — the Qing Dynasty was really failing to modernize. But it was possible to happen. I think in some of these cases it’s a question of leadership. And how do you get a strong enough leader to — that’s probably the more interesting counterfactual is what if there had been a great emperor born who could have reformed and modernized the way the Japanese did. The Japanese had similar problems. They tried to keep the foreigners out successfully for a long time. The Americans showed up with gunboats, forced open their markets. They had a huge wake-up call and said, “We need to modernize.” And they sent some of their best and brightest people to the West to learn about industrialization, to learn about the technologies, the structures, the military structures, the economic structures. And it’s called the Meiji Reformation — Meiji something — basically the Meiji Dynasty, they put in these reforms that led to Japan becoming a superpower.

Ryan Petersen: 27:00 Features that take over the whole Pacific, America’s didn’t let that happen, but they became a superpower in almost no time. And so yeah, could that have happened earlier? I mean, I think that’s a little bit of what’s happened since Deng Xiaoping and more modern China has said, hey, we need to learn from the West and adopt these things and go. But it took, right, there’s 100 years or more in there, 150 years from the Opium War to Deng Xiaoping. It could have, yeah, certainly could have happened earlier, but probably more about leadership than it was if opium hadn’t been discovered. I don’t know that opium itself held them back. I mean, the Industrial Revolution was very real. And if you don’t adopt the technologies of the Industrial Revolution, you probably going to fail whether or not you get addicted to opium.

Ti Morse: 27:44 Before we started, you mentioned the Forbes family, not the Forbes family with the magazine, but a different Forbes family. Go into that.

Ryan Petersen: 27:51 Oh yeah, well we were talking about opium, I should have hit it when we were there. So, most of the opium, there were, in the beginning the opium was all traded by the British East India Company, the monopoly that we were talking about. Over time though, they had competition, and the early competition was actually from a couple of families, dynasties. One was called the Sassoons, Jewish family from Baghdad actually, who got pushed out of Baghdad and settled in Mumbai. The Sassoon Docks are still there in Mumbai, you can visit those. But the other big family that got into this was the Forbes family. And it is not, as you said, it’s not related to the magazine, Forbes magazine, it’s unrelated. But the Forbes family were Americans. So Americans did, the Forbes family and the Americans did about 20% of all the opium trading into China. They were based out of Boston. You hear this term Boston Brahmins, a Boston, very wealthy Boston family, there’s probably more than one, but the Forbes family was the big one. And there’s actually a museum, I haven’t been to it yet, it’s on my bucket list next time I’m in Boston, of their old family has their house has been turned into a museum of the China trade. And they were big collectors of Chinese art, antiquities, paintings and the like. And that’s all on display there. But they traded about 20% of the opium. They still are very prominent family in the United States. They own this private island, which you can see on Google Earth. If you go to Google Earth, look at Martha’s Vineyard and then just to the west of Martha’s Vineyard, between Martha’s Vineyard and the mainland, there’s this long skinny island. It’s like probably a third the size of Martha’s Vineyard. I mean, this is a very big private island, maybe the biggest private island in America, that’s just for the Forbes family. And the patriarch of the Forbes family is John Kerry. The family is still very powerful, and people think John Kerry made his money by marrying the ketchup, the Heinz ketchup fortune, but actually no, he had his own fortune long before that, the Forbes family. And I don’t think China took lightly to the fact that Obama made…

Ryan Petersen: 30:00 Secretary of State to negotiate with them because they have a long memory.

Ryan Petersen: 30:04 I’ve never heard this written about, but I don’t think — there was that famous incident where the Chinese did not bring out the red carpet and Obama had trouble getting off of Air Force One because they didn’t bring out like stairs. And my personal conspiracy theory is that they remember the Forbes family trading all this opium into their country, because we would not take kindly either if the cartels that were trading fentanyl into the United States also had a navy and showed up and took over our cities and, you know, started blasting the San Francisco Bay, like we would not be very happy and we’d probably have a long memory for that as well.

Ti Morse: 30:41 I would love to talk about the Jewish trading networks, and before we start recording you were talking about how basically being able to trade on paper notes on trust versus actually hard currency and having to ship silver all over the place was a huge benefit. So tell me about that.

Ryan Petersen: 30:56 Well and, you know, global trade is, it’s a multiplayer game and it’s this complex coordination problem where people have different incentives, information, sitting in different parts of the world. How do you communicate? And of course before the invention of fiat and now digital payments, wire transfers as a simple form of digital payment, you had to move physical goods. And that was physical gold, bullion. That was non-trivial. You’d end up losing things to storms, you know, disasters, pirates, you name it. Your own employees could steal from you. So being able to do trade without having to physically, you know, the goods go one way, the gold going the other way — not having to move the gold the other way is a very big deal if you can avoid it. And one important innovation, the most important innovation in this is called the bill of lading. It’s a piece of paper that allowed to be served as title, and you need to have security that you trust that the person authoring this bill of lading has in fact received payment for the goods. So I can accept the bill of lading on their behalf. That’s very difficult to do, like to do this kind of long-distance trust. And so ethnic minorities like the Jews had a big advantage in that they had these high degrees of trust within their networks. And whether it’s family ties or just community that you would trust each other, and so then if you got a signed document with a seal that you recognize as authentic and not able to be copied, then you could trust that your counterpart has — your trusted member of your network has received payment in Europe for the goods, then you don’t need to ship the gold, you can accept the piece of paper that he has sent you to authenticate that. I mean, now we’re trying to innovate on this with things like blockchain and stablecoin payments and other things, but it’s largely an evolution of this old school system.

Ryan Petersen: 33:00 And I would actually argue that I’ve seen it argued, it’s not my argument, that Jewish law was the foundation of capitalism and even further going further back than that in that in Roman law you could not trade a debt. So if I owe you money, I owe you money. I can’t — you cannot sell what I owe you to someone else and now I owe him money. I only owe you money. It’s like an honor based system, my debt is to you, you can’t sell that debt to someone else. And under Jewish law Talmudic law you could sell the debt and that’s the foundation of capitalism in many ways — like now you can have equities and bonds and you know, but that’s literally a bond, you can sell the bond to somebody else. And similarly with trade like this piece of paper can be sold it can represent this and the Jews largely innovated that. At least I’ve seen that story told.

Ti Morse: 33:58 And there was no other like culture throughout history that did this sort of bond trading?

Ryan Petersen: 34:06 Not to my knowledge where like pieces of paper representing goods — probably probably, but paper is a relatively new innovation. I don’t know that — if the Egyptians had this. And these long distance kind of trust based networks which is incredibly hard. I mean even today it’s very hard, it’s this complex coordination problem trying to get people with different incentives and information and timing to coordinate. It’s what makes Flexport hard and fascinating, the problems that we solve is like I’ve gotta coordinate people on different continents who don’t even speak the same language in some cases although English has largely emerged as the language of trade. Through AI we actually a couple months ago we launched that now people can talk to each other in their native language and the AI just translates it so you can do trade in your own language. But English as an innovation was actually really important for this is like being able to communicate is hard. We have competitors people think I hate on our competitors but I don’t actually. I’m admiring of like one of our competitors was founded in 1890. I mean forget the internet this is like before the telephone they were doing trade on the telegraph like Morse code. It’s kind of interesting like how did they do this how did they figure it out. And at that time like the bill of lading was a real innovation like you didn’t have to transport not only the gold but the goods like you could transport the goods to the port sell the bill of lading so now whoever holds this bill of lading can go to the port and pick up the goods. I didn’t have to move the goods to the market and sell them I could just sell you the piece of paper and you go figure it out from there. That was like a serious innovation 500 years ago. It’s absurd that by the way still how a lot of trade takes place. Something like — our statistic is about 5% of our customers require an original bill of lading.

Ti Morse: 35:54 In like paper form?

Ryan Petersen: 35:56 In paper form and it’s still a part of our stack is like mailing these pieces of paper around the world, it’s absurd. But people require it, some cases their banks require it in order to unlock payment, it’s somehow seen as like secure collateralized payment instrument, it’s absurd, I mean it’s like not very hard to fake a piece of paper. Speaking of competitors, one of our competitors is DHL. Most people know DHL because of their parcel business, that’s why they’re a famous company, but they’re also one of the biggest freight forwarders in the world. And the original DHL business, the parcel business started because with the invention of the shipping container, the shipping container’s very efficient, very fast, and now the containers were outrunning the mail. And the mail was carrying these bills of lading to serve as title for the transfer of the goods. So the containers were showing up at the port and the titles were not there to do a transfer and it’s just like very broken system. So DHL actually formed as the original sharing economy company, where you could be a courier, anybody could sign up to be a courier for DHL and they would buy you a plane ticket wherever you wanted to go, but you had to carry a duffel bag full of bills of lading and then those would be serving as title for container shipping. That was the origin of DHL as a logistics network was actually they didn’t have any planes or parcel network or anything like FedEx and UPS, it was just travelers like stuffing the I mean I don’t know how they answered that it was pre-TSA, like no one was asking, “did you pack your own luggage?” because you’d have to be like “DHL gave me this stuff, I have no idea what’s in there.” But yeah, that is still largely the way trade is going. I was just in our Thailand office a month ago and they were showing me Thailand’s even worse, at by the way it’s illegal to criticize the Thai — this isn’t against the King of Thailand.

Ti Morse: 37:50 Okay.

Ryan Petersen: 37:52 Just to be clear, because that’s illegal, you can go to jail. I’m not criticizing the King of Thailand.

Ti Morse: 37:54 You’re not even criticizing, you’re just noting an observation.

Ryan Petersen: 37:55 Well, I would criticize this one policy they have, which is you have to pay the government a stamp tax. And the stamp for any bill of lading, you have to print this government stamp and put it on there to prove that you’ve paid a, I think it’s two cents, it translates to two US cents, which of course it costs way more to buy the stamp and stamp it on there than it does to do it. And I was with our team looking at this process and it turns out you can buy this digitally and there’s a QR code that you can print on there to prove that you’ve stamped it, so that’s now how we do it, but like the stamp tax is also this is where I got in some trouble, I had to delete my tweet because I was reminding the Thai government that this was the stamp tax is what led to the American Revolution, they put this exact same thing — you had to pay the British King for a stamp to put on your documents. And they thought I, you know, I was saying, “hey this is why we overthrew the King George the III” was a policy like this. I was not meaning to say that they should overthrow the King of Thailand, I’m sure he’s a good guy, he’ve been there for a long time, so I’m not advocating for that.

Ti Morse: 38:56 Love that guy.

Ryan Petersen: 38:58 Just to be clear, I’m a big fan. So we saw a little bit of…

Ti Morse: 39:00 Of, you know, maritime choke points in 2022 was Ever Given, but now we’re seeing it full-fledged, you know, really disrupting trade routes with the Strait of Hormuz. Can you just talk about how like the Strait of Hormuz is impacting things?

Ryan Petersen: 39:14 So Ever Given was that ship that got stuck, that was only for a week, so it was ended up being more humorous than anything, although we had 44 containers on that ship and about 1200 of them stuck afterwards. So as funny as it was for the meme economy, the real economy was pretty pissed off, like those people didn’t see their cargo for a long time. Actually, most of them never got their cargo. They basically went to, they just got paid by the insurance companies. So starting, that wasn’t a big deal. What’s happening now is a very big deal. We’ve been reminded, like reawakened, that physical world matters over the last few years, over the last decade really, but because I think our economy’s become so memefied and digitized and financialized that we’re like on Maslow’s pyramid, we’re like all living like way up here in La-la-land and forgetting that like the physical world down here underlies it all, and then underlying that is like peace and order. Like those are prerequisites for civilization. And we take them way too much for granted.

Ryan Petersen: 40:13 Civilization, trade is like a mechanism for building civilization, because every time two companies, two parties, two people do trade, we exchange something, we’re both made better off or else we wouldn’t do it. And that is the creation of wealth, like new wealth has been created in the world. This is what AOC and everybody gets wrong. It’s like it’s not a fixed pie. Like if I make something, you buy it, we both, I didn’t take anything from you, we’re both made better off.

Ti Morse: 40:39 I think the reason why we have that problem in politics is because capitalism is not a zero-sum game, but politics is. And in order for you to win, someone else has to lose, which means you kind of like overlay your worldview of what you experience onto the other thing, and that’s not how the world actually works.

Ryan Petersen: 40:51 That’s a… yeah, it could be. Hollywood’s like that too. Hollywood, there’s only so much status in the world. You can’t, when someone else becomes a famous movie star, there’s like less views for yourself. But I mean maybe I guess… maybe that’s unfair because it is a form of capitalism, you can make a new movie, you don’t have to steal from anybody else. So I’m not plugged into that scene. But yeah, I think the world has come crashing back to remind us of this, first with COVID, like supply chains, this suddenly humans, the people stopped taking for granted this like invisible magic that takes place, this invisible reliability that is supply chain. It’d be like the operating system became exposed and you’re like, oh, it’s kind of screwed up, like the ports are backed up, I can’t get the things that I want.

Ryan Petersen: 41:33 And then kind of normalized a little bit. Then the big thing that happened was with Israel’s, with October 7th and then Israel’s invasion of Gaza, the Houthis in… they’re this Yemeni really they’re an Iranian proxy terrorist organization that’s taken over the country of Yemen. And Yemen is at the corner at the point where the Red Sea meets the Indian Ocean. It’s called the Bab-el-Mandeb. And it’s the one of the three or four most important maritime choke points in the world that this terrorist organization has taken over. And since December 2023, container shipping has routed around Africa, is not using the Red Sea and the Suez Canal.

Ti Morse: 42:15 And that’s added like a couple months or something?

Ryan Petersen: 42:16 A few weeks. It’s about three weeks longer. In the old days it was a month with — but in the modern container shipping they go so fast, it’s about three weeks longer. That’s been pretty impactful. It probably raised the price of ocean freight about 60%… versus where — it’s hard to say because the markets are moving all the time, but it’s hard to say what the counterfactual would have been, what the price of freight would have been, but I reckon it was 50 to 60% higher ocean freight prices as a result. But like the world goes on, you can go around, there’s an alternative route.

Ryan Petersen: 42:49 Hormuz is different because there’s no alternative route. There’s a pipeline through Saudi Arabia that some amount of oil can go through, by the way it can be blown up too. So let’s see how this evolves. But there’s no alternative route, it’s a dead end, it’s a cul-de-sac. So there’s no other way to get the oil out. And 20% of the world’s oil flows through Hormuz. So we’ve had this violent wake up call. I hate to be the guy always crying Chicken Little saying the sky is falling, but like it feels that way economically. I don’t know, I saw a gas station here in California that was $9 a gallon yesterday.

Ti Morse: 43:21 Wow.

Ryan Petersen: 43:22 Which I’ve been waiting for $10 a gallon all my life to see what happens to the display because there’s no other digit. I don’t know what they’re going to do. I guess like tape or something. But those could be here very soon. We’ll find out. And it’s not just oil, oil, petroleum products, natural gas, these are precursors for a huge amount of other things for plastics, fertilizer. Something like 30 to 50% of the fertilizer in the world, depending on the type of fertilizer, comes out of the Middle East. And helium, Qatar produces 30% of the world’s helium. It’s helium is not — you think of it for clowns and blimps, but actually the most important uses are producing semiconductors, and SpaceX rockets. Like you can’t do either of those things without helium. And so 30% of the world’s helium supply getting taken offline. And we don’t — there’s no — helium is a non-renewable. It comes from radioactive decay. You don’t make more helium. It’s produced when uranium and thorium deposits emit naturally emit helium, through radioactive decay over billions of years. Like it’s not — you can’t make more of it.

Ryan Petersen: 44:33 So this is a huge impact. The economy is so financialized and memified that it seems like life goes on, but I think we’re going to find out over time as this flows through that you’re going to see major shortages. And not just higher prices, but like, you know, India, for example, Air India reduced their international flights by about 10% last week. And I don’t know when we’re going to air this, but that’s likely to continue coming down.

Ryan Petersen: 45:00 If today that it’s coming down by and it’s some of this is like, oh economic right now it’s at price driven economics, but there will be countries that just don’t get to participate because you know Laos just like where are they going to get enough money to buy oil when the price of oil goes up? It’s they’re going to get outbid. And you’re seeing this where tankers are just like rerouting in the middle of the ocean because trades are getting made and countries are stepping up and it might be actually a case where having a very strong national government gives you a big advantage because your government can make deals and call up on the phone and go, yo, I’m buying some oil right now and in ways that private companies don’t have the same level of power and authority to get these deals done.

Ti Morse: 45:43 It’s, yeah, I hate to be the guy like I said crying the sky is falling but I feel that way. I mean I feel like yo we just lost 20% of the world’s oil supply and all these other chemicals. I don’t see how business continues as usual after that. You see that kind of getting resolved quickly or is this just going to be an enduring problem that we have?

Ryan Petersen: 46:06 It’s the question of our time honestly because in the old days I’m glad we started all this talking about history it’s like throughout history if you looked at a trading ship like look at the British the East India merchantman the ship and you’ll notice it has rows of cannons along the side of it. You didn’t just go trade like peacefully you brought cannons to defend yourself from pirates or navies or whatever else you might find. You didn’t know — it was a very dangerous game. And that was largely true is like you mostly traded with your own colonies and your national navy provided protection for your trade routes. And that was true up until basically World War I I guess in the World War II is when the Americans took over this naval order and the new world order that emerged after World War II said we the United States will provide freedom of navigation anyone can sail anywhere they want and do business with anybody they want as long as you ally with us and not the Soviets. I mean it was really like this cold war bargain and we would say actually even went further than that we opened up our markets and let anybody ship goods to the United States you know famously sort of hollowed out our industry and created now Trump as a resistance reaction to that. And so that came though with this promise which was that the United States Navy would protect the shipping routes and the most important aspect of every shipping route is the choke points where there’s no other way around and the big kind of the big five choke points in the world are Hormuz and Suez and Bab al-Mandab are kind of one — Suez and Bab al-Mandab is kind of one but give you call it two. Gibraltar which the English had you know Gibraltar being an English part of the UK is not — it’s because of this right because the English used to provide this maritime supremacy.

Ryan Petersen: 48:00 And then now you have the Panama Canal and the Strait of Malacca. Like, so these are the big important maritime straits as of today. There may be new ones emerging actually. If climate change plays out the way people are predicting, then the Arctic shipping will emerge, and actually America’s presence in Alaska will be — the Bering Strait there will be a huge choke point. Because you can cut about a third of the time from Asia to the East Coast by going over the north, over the Arctic instead of through the Panama Canal.

Ti Morse: 48:30 My understanding is, due to the like ice melt, there’s suddenly now you can like break a ship through, you know, North Russia, whereas you couldn’t previously.

Ryan Petersen: 48:38 You can do it during the summer. And only a couple ships a year go through, container ships a year. But you can do it now. And you can check them on Atlas, plug for Flexport product, atlas.flexport.com. You can see when the ships going through there. Mostly Chinese container ships doing that. And so but that is the explicit promise of globalization as it was built under the American order, is like the Navy will secure the straits, will secure the choke points. And we’ve been tested now since December of ‘23 where we sent an entire carrier group and couldn’t stop the Yemenis from hitting container ships and oil tankers in the Red Sea. And now since March 1st or end of February, been unable to reopen the Strait of Hormuz. And it’s a giant question of does the, okay, so how does oil trade reorder around this? First of all, it’s going to lead to huge energy boom and it is already with US hitting all-time export highs. We were already the biggest exporter in the world of oil and now we’ve hit all-time highs like basically every week since March 1st. So on net, it might be good for American GDP. We’re pumping so much oil and exporting it, become the dominant energy power. I think from Trump’s agenda standpoint, yeah, like people are like, oh, you screwed this up. And like, did he? But not from his — he doesn’t care about this. We don’t buy oil from there. Our trading partners do, our Europeans do.

Ti Morse: 50:32 Is the Strait of Hormuz being closed actually like a benefit to our ability to like export goods?

Ryan Petersen: 50:41 For oil for sure. Yeah, yeah.

Ti Morse: 50:43 Like is that big enough of a benefit to make it make sense to not really worry about it opening up anytime soon?

Ryan Petersen: 50:46 Depends on who you are. I mean, there’s winners and losers, but it’s like hugely beneficial for Texas and the Texas oil economy. And, you know, if you’re a college football fan, the NIL budgets for these Texas football schools are going to go through the roof. So there’s winners and losers.

Ryan Petersen: 51:00 Winners in this, not to make light of it. But, en masse, I mean I think it’s making the same mistake that AOC made, of thinking that it’s a fixed pie and like, okay, maybe America takes a bigger stake of the pie but like, the pie’s gonna shrink. Like if you lose 20% of oil and everything that falls out from that, you’re gonna have a smaller economy worldwide, you’re gonna have a lot of suffering. We’ll see, I made predictions that with Russia’s invasion of Ukraine that you would have, because 50% of the world’s, it’s not 50%, but they’re the biggest grain exporter in the world, Russia and Ukraine. And that coming offline, I thought was gonna lead to massive famine across Africa and I said that publicly and I was wrong, because Russian grain never stopped. And they’re also big exporters of fertilizer. Well the Middle East picked up the slack and started exporting crazy amounts of fertilizer. So the world’s pretty resilient, America produced a lot of food, and so yeah, the economy’s this crazy complex adaptive system that’s hard to predict and it’s more resilient than you expect, but also complex adaptive systems are very, very resilient until they break down and fail. And we’re playing with fire with the Strait of Hormuz. And so I don’t think it’s, I think it’s way too simplistic to say oh look, Texas energy, American energy exports are through the roof, we are dominating the world energy markets to an extent we never have, not since the Rockefeller days. Because of this. From a power projection standpoint maybe if you’re Trump that’s what you care about more than what’s overall like economic output in the world. But I think it’s a kind of a fixed pie mentality that’s like…

Ti Morse: 52:43 That’s right.

Ryan Petersen: 52:44 It’s not great. It’s not great. Not as a business person, like nobody should support this if you’re trying to do business.