Ed Conway on the Hidden Supply Chains That Run the World

0:02Speaker 1:Bloomberg Audio Studios. Podcasts.

0:05Speaker 2:Radio.

0:06Speaker 1:News.

0:08Speaker 2:Part of the point here is to say beneath the surface of everyday objects, and this time, you know, I'm looking at everyday objects, cars, bread and clothes. Beneath the surface, beneath the label, there is this story that is far more fascinating, sometimes disturbing, sometimes bonkers about where stuff actually came from.

0:37Speaker 1:Welcome back to Merrin Talks Money, the podcast in which people who know the markets explain the markets. I am Merrin Somerset Webb, and this week I am speaking with Ed Conway, economics and data editor at Sky News, columnist for The Times and Sunday Times, and author of The Best-Selling Material World. He joins me to discuss his new book, Trade World, a sweeping history of the global networks that connect us and the forces now threatening to pull them apart.

1:02Speaker 1:We talk about how trade in everyday goods from bread and clothing to cars has shaped economies, politics and human history. Why today's supply chains are far more complex than they appear. And what happens when the system we've come to depend on starts to fracture. Ed, welcome to Meron Talks Money.

1:20Speaker 3:Thank you for having me back.

1:22Speaker 1:Right, Ed, this is a story. about trade. And you go through three different things. You go through bread, you go through cloth, and you go through cars. You effectively give us a really well-considered history of trade throughout the ages. But I'm afraid I'm going to hope that the reader will go and take care of a lot of that early stuff themselves. And I want us to really look at where we are now And in your last chapter on cars is where you really talk about modern day trade a lot. And you talk about the fact that we've moved from a world where everything is made locally to a world where everything is made regionally to a world where we think that we have free trade to a world now in which basically the entire world is a giant supply chain. And you compare it to.

2:13Speaker 1:The fungal network beneath us, how do you say it?

2:18Speaker 3:Yes, the mycorrhizal network.

2:19Speaker 1:The mycorrhizal network, thank you, which is beneath us all the time and we don't see it and we don't think about it until it suddenly pops up around us.

2:28Speaker 2:Yeah, and in a way, we're still trying to fathom it. It's only kind of now a biologist starting to realise what, I know this is not a podcast about fungi, but only now are biologists trying to understand the extent to which a tree depends on the fungus beneath the ground and all of these tiny little kind of fungal roots that are connecting with other trees and all of that stuff. All of which is to say, this is kind of a book about supply chains. That's not in the title because I guess the publishers didn't think that was kind of sexy enough.

3:02Speaker 3:But basically, this is.

3:03Speaker 2:About why supply chains are extraordinary and why our understanding of how they actually function... is relatively primitive. Generally speaking, and in this sense, it's a companion piece to material world. Generally speaking, we tend to realise how the world around us is structured, mostly when something goes wrong. So when there's a fire in a factory, or you have the Strait of Hormuz being blocked off, or whatever it might be, or a ship blocking the Suez Canal. And The reason why I've kind of gone back and looked at this is obviously, you know, where are we today? We're in this moment where this is being tested. The global economy is being tested in various different ways. And where geography is returning. I mean, geography never went away. And we've talked about this quite a bit, Maren, haven't we? Geography never went away. Geology never went away. But we're now at this point where everyone's kind of realising, oh, hold on, this stuff actually matters. And, you know, to your point, I mean, in a way, one of the starting points for the book was a few years ago, I went to this factory where And it's a place in Birmingham

4:05Speaker 2:where they make little metal parts that go into the car supply chain. And the car supply chain is an extraordinary kind of structure, an extraordinary creation. You've got 30,000, if not more, parts within a car, most of them being sourced from other companies, and they all get assembled at the car plant at the end. But one of these little parts that I saw being made in this tiny little factory just on the outskirts of Birmingham was a tiny little electrode. And this electrode, they said, goes into the rearview mirror of your car and helps it do the auto dimming function. So if someone flashes their headlights behind you, you don't get blinded in your mirror.

4:43Speaker 2:So it's a tiny little electrode, but without it, you don't get that functionality. And I said to the guys at the factory, how many of these are you making? And they said, we're producing 55 or more percent of the global supply of of this part. And to some extent, the point of this book was to ask the question, how is it that we've got to the point where we have concentrated so much production for something in a single place? And what happens to the world when you start to take that mycorrhizal network apart and things go wrong?

5:17Speaker 2:And to some extent, it seems immensely dysfunctional. But to some extent, that you've got so much production concentrated in a single place or the other example I like to give is when you buy you know we in the UK like our fish fingers or fish sticks as I believe they call them in America when you order up some fish fingers perhaps the fish was caught just off the coast of Scotland but A lot of the time, that fish having been gutted in the boat that catches it, it gets flash frozen, sent to China to be processed 15,000 miles, and then sent back to here for its final stage of production to be put into a box and go to the supermarket. And most people, when they buy the fish fingers, they look at the label and the label says it was caught in the North Sea and packaged in the UK. And you would have no conception about this extraordinary journey that has gone on.

6:08Speaker 3:And so.

6:08Speaker 2:Part of the point here is to say, beneath the surface of everyday objects, and this time, you know, I'm looking at everyday objects, cars, bread, and clothes. Beneath the surface, beneath the label, there is this story that is far more fascinating, sometimes disturbing, sometimes bonkers, about where stuff actually came from. And that backstory then gives you this, I think, a richer sense of the world we inhabit when you're then starting to think, okay, we've got this trade war at the moment. We've got what's happening in Hormuz. How does this kind of impact everything else? And the answer is it impacts it in so many different ways, some of which are kind of scary, but some of which actually have a surprising resilience that you might not have appreciated until you look at the world from the other, you know, from bottom up rather than top down.

6:54Speaker 3:So that's the idea.

6:56Speaker 2:And it's been one of the most fascinating kind of journeys, sets of rabbit holes I've ever gone down. And yeah, I've learned quite a lot through the process.

7:06Speaker 1:I bet. I bet. One of the things that, let me pick up straight away on what you said about resilience. Does this make, or does this underground network make things more resilient or less resilient? It's very taken by chart. Page 340, for those of you who haven't got it yet. Page 340, wonderful chart here. You've got a carmaker, and then you look at the suppliers to said carmaker, and they've got their tier one suppliers, and then they've got tier two suppliers. And then underneath that, you've written lots of tier three suppliers. And this is a great chart because what it does, it plays into exactly what- I drew it originally.

7:39Speaker 2:I drew it and it was so messy that the publisher actually did a slightly tidied up version of it in the book.

7:44Speaker 1:Yeah, we have AI for that stuff. We have AI for that stuff for making your charts. But it's just interesting because you've got your three tier ones and then the way you've drawn the chart, there are six tier twos. Maybe there are loads more than that.

7:56Speaker 3:It's a pyramid.

7:57Speaker 1:And this whole idea that at the bottom- making these little parts, as you say, for mirrors or for lights or a tiny bit of a chip for this or a casing for a chip for that, whatever it is. You've got maybe hundreds of tier three suppliers, because what did you say, something like 30,000 parts per car? And you look at that and you think, well, hang on, when we think about supply chains branching out around the world and we think of being able to get parts made everywhere, in our heads, a bit like investing, you think, well, that's diversification. So we've diversified supply chains and that's a good thing. But actually, it brings in a new element of concentration, which is kind of worrying.

8:36Speaker 2:Yeah, because that part that goes into the rear view mirror, most of them are made in a single factory.

8:43Speaker 3:And if that factory goes down, then you've got a problem.

8:46Speaker 2:During the tsunami in 2011 in Japan, terrible event, obviously, Fukushima happened and all of this awful stuff. But alongside that, there were various car parts supply factories, which no one had ever heard of, making little electrodes and making obscure types of paint, which were affected by it. And all of a sudden, Toyota and everyone else realised, oh, hang on, this actuator we're using to make our electric windows go up and down, the majority of the world's supply comes from a single place, and that single.

9:20Speaker 3:Place has just gone down.

9:21Speaker 2:And the point behind this, which I I don't think has been kind of as well studied as it could be, is that one of the kind of logical forces behind globalization and behind the effort over the past kind of few decades to make stuff as cheap as possible, which is, you know, that's ultimately the story of the economy in the past kind of 50 years or so post Berlin Wall, has been not just to disperse production and to make it so that if you're making, assembling a car here in the UK, many of your parts will come from China and they increasingly do. But to make it so, they increasingly come from a single factory in China, or indeed in Birmingham or somewhere else. And that is a concentration which is unnerving. But I'll tell you what, for me, the most striking thing about that story of the tsunami, and I go into it in depth, it's an interesting natural experiment, isn't it, in when things go wrong. And I think if there was a takeaway from last book i wrote in this book as well it's to say gosh we tend only to learn when these things go wrong when you know or we tend to learn the structure of a supply chain when something goes terribly wrong

10:31Speaker 2:so a fertilizer plant is shut down all of a sudden you realize oh hold on that's where our carbon dioxide is coming from so all of a sudden you can't slaughter pigs and you can't you know have fizzy drinks will become some random fertilizer plant that's been shut down um or you know the in the tsunami, a lot of these plants went down and all of a sudden people couldn't get the shades of paint they wanted, or they couldn't have all of the GPS systems they wanted in their cars. You realise something, you realise this is the way the world works. Wouldn't it be nice to know about that stuff ex ante rather than ex post, or just to have some sniff of it? And that kind of understanding of the world's economy as a sort of map rather than this kind of chain as a web of different dependencies. I wonder if that's one of the you know, useful future areas of study for economics, as well as the fact, back to your point, that globalisation hasn't dispersed, it has concentrated. It's just concentrated lots of individual parts in particular places.

11:30Speaker 1:Big companies have effectively outsourced everything along the way. They've outsourced their stockpiling, they've outsourced inventory control, they've outsourced all these mini manufacturing bits. And with that By doing that, they've outsourced responsibility at the same time, outsourced control and outsourced knowledge of their supply lines because no CEO of a big car company can understand 30,000 separate suppliers.

11:55Speaker 3:Exactly.

11:56Speaker 2:Yeah, it's back to the crazy mycorrhizal network, the most complicated biological system in the world. No one can begin to fathom it, so we don't try. And in the case of cars, you just hope that the person supplying the things to you is actually going to get them to you. And then they in turn, you know, the person who's making the module that goes on your dashboard, they in turn keep an eye on the next person down in the chain. But, you know, talk to someone, an OEM carmaker whose badge goes on the front, although I would say isn't really the maker of the car.

12:26Speaker 2:I mean, that's the interesting thing to me. Talk to them and, you know, they won't necessarily know the mind that things are coming from, even though there's been lots of work that's been supposedly.

12:35Speaker 3:Done on this.

12:36Speaker 2:In practice, no one really knows their supply chain in depth. And whether that's reassuring or not, I don't know. But starting to understand that stuff is pretty important. And I think there's some more of it we could begin to delve beneath the surface so that if something goes wrong in the future, we'd have a better sense of it. But more than anything else, it's interesting. And this is the way the world works. And think about the You mentioned that things have become increasingly outsourced over the course of the past half century. I would say, if you were choosing the top 10 most important trends in the global economy in the last 50 years, the fact that things have been outsourced and increasingly offshored, so the production of something has moved to another country, I would say that is one of the most consequential economic trends we've seen in the last half century. Because if nothing else, that's what's contributed to the China shock. It's what's contributed to the rise of Donald Trump. It contributed to Brexit, the sense that all of these areas of our industrial heartland have been hollowed out and we're not making stuff anymore.

13:46Speaker 2:That is really important. And yet, no one has really written the story, the history of how that actually happened. And so one of the things I've kind of done here is I've gone back to the very first people who began to invent offshoring and went out to Hong Kong. This is garment manufacturers, went out to Hong Kong and said, okay, the stuff that we're currently making in kind of South Carolina, You know, can you do it here in Hong Kong? And we, in this case, Americans and to some extent European kind of clothing manufacturers, went out there to Hong Kong.

14:16Speaker 2:They went out there to Asia. They taught the people making clothes out there how to do it at a standard that was good enough that they could then buy stuff for cheaper and bring it back to America. That was the beginning of something that then led to the offshoring of technology. So, you know, high tech stuff, offshoring of toys, offshoring of car production. And here we are in 2026 talking about the car industry in, to some extent, America, but even more in Europe, facing the single biggest existential crisis it ever has because there is this wave, this tidal wave of cheap cars coming from China. And the truth is, it's not just that they're able to make cars cheaper than we can. It's not just that they have almost all of the battery supply chain for EVs.

15:00Speaker 2:It's that they are also better at making tiny little components that go inside them than we are. They are better at making the car from the bottom up than we are. And that is, I think, one of the biggest stories that is going to hit us. It's not just the job cuts of the car makers. It's the fact that those car makers support a massive industrial base that stretches across all of those countries of good, pretty well-paying jobs.

15:26Speaker 3:If the car companies go.

15:27Speaker 2:Basically, most of your manufacturing sector is gone as well. And I think that is going to be absolutely enormous in the coming years. And we're just only beginning really to see the impact of it now.

15:38Speaker 1:Yeah, because it is one of the things that you talk about in the book is how surprised you were to find that crisscrossed in the UK, there are lots of small, medium and small companies making tiny little parts for the car industry and for other industries as well.

15:52Speaker 3:They make the car.

15:53Speaker 1:Still there making precise little things. that go in cars all over the place.

15:58Speaker 3:Yeah, and they make the car. And that's the point.

15:59Speaker 2:It's the carmaker. Everyone thinks of the OEMs. They think of the badge that goes on the front of the car. They think of the seats that go inside them. This is a distinctive Porsche seat, or this is a distinctive Volvo seat. The seats aren't made by Volvo. They're made by one of three companies, for the most part. There's this kind of triopoly of companies that control the manufacture of car seats all around the world.

16:21Speaker 3:And so, again.

16:23Speaker 2:What looks on the surface, what the label is saying is one thing. What the reality is, is very different. And that is both interesting and tells you something about the structure of the economy around us, but also tells you something more about the vulnerabilities and the opportunities in the coming years.

16:59Speaker 1:And one of the things that you talk about in the early part of the book is the early discussions around trade, free trade. Should you have free trade? Shouldn't you have free trade? How does it work? The development of the theory of comparative advantage, the arguments in Adam Smith's time about all this. And we're slightly beginning to get to the bit where you look around and you say, well, okay, in manufacturing, at least, where is the comparative advantage for the West? which brings us back to one of my favorite Adam Smith quotes that you use at the beginning, defense is of more importance than opulence. It's more important to have a secure nation than it is to have the little luxuries that come from abroad. Because of course, in Smith's time, of course, it was the luxuries that came from abroad, because we'll come onto this in a minute.

17:46Speaker 1:But when the cost of transport is very high, it's only super luxuries that come in from from abroad. So in his day, you were talking about if you're having free trade, what it meant that you were importing luxuries as opposed to grain. We're in a slightly different world now, obviously. But the point remains, if you lose your manufacturing base, then you also effectively lose an awful lot of things. You lose your tax base. You lose your ability to do what, of course, we did in World War II, which was convert every every car manufacturing factory into a weapons factory. You lose all sorts of things when you lose your manufacturing base. Have we got to a point when it is irrevocably lost and it's hard to find anything in the maker world that the West might have a comparative advantage in? Super dangerous.

18:32Speaker 3:It's a really good question.

18:35Speaker 2:I mean, I think the UK is at the vanguard, you know, for better or for worse of this, because we have de-industrialized faster than anyone else and continue to. You know, Since I wrote Material World a few years ago, many of the plants I went to are gone. Many of them have been shut down. They're not there anymore. Fertilizer plants, steel plants, a lot of them are gone.

18:55Speaker 1:And a lot of that is down to high energy prices, which again.

18:57Speaker 2:Is choice-related, policy-related. But it is also a long curve of deindustrialization that goes back many years in the UK. And Well, I mean, so back to your point about Adam Smith, you know, a lot of the debate that was being had back in the kind of, you know, early 19th century about the corn laws. So corn laws, you know, in a sense, it was the kind of Brexit of its day. It was this moment where the UK was having to decide between, you know, are we going to have domestic production of our wheat or are we going to buy them from overseas and it's going to be cheaper? And it is an amazing moment, really.

19:35Speaker 2:And actually, it's kind of a lot of people look back at that period and call that the moment, the birth of free trade. But that debate, actually, in some ways, it's still surprisingly vital because precisely as you say, it was about whether security trumped economics you know and what are we living through at the moment if not exactly the same debate um we've got all of these economic principles about wanting basically to have cheap stuff and you know it's consumer raise the consumer surplus ensure that even if it means kind of having our fish fingers processed in china That is the logical way to make stuff cheaper and people like cheap stuff. And if they have cheap stuff, they can therefore have this kind of surplus and go off and spend it. Is that what matters the most? Or is there some residual reason to basically ignore that in favour of having some form of resilience?

20:28Speaker 2:And that's kind of what Adam Smith, you know, in the case of, you know, the Corn Lords, it was all about, are we growing enough wheat to feed ourselves?

20:37Speaker 1:Do we have food security in the event of difficulties? Yeah.

20:40Speaker 2:And are we going to have enough bread to feed everyone? These days, it may be about other things. It may be more about defence. It may be more about weapons. But nonetheless, it's the same principle. And we're seeing it kind of litigated right now in the UK and in the US. This question, this balancing act between something where if you were being an absolute kind of economic fundamentalist, you would say, it makes no sense to be mining tungsten in the UK, even though we've got, there's a, there's a perfectly good mine down in Devon. You know, it's the second biggest resource of tungsten in the world. Um, it has been out of action for years and years and years because it is just cheaper to buy tungsten from China. But tungsten is really important when it comes to, you know, making weaponry, uh, and tools and all the stuff you, you kind of need if you're going to, to have an industrial economy or indeed a response to it, to war. Um, And so then you run into this other kind of question. Okay, maybe it doesn't make sense to get all of this stuff in China in case things go in the wrong direction in the coming years.

21:44Speaker 2:So maybe we should have our own tungsten. But that means more expensive tungsten. And it means more expensive everything that you want to produce here. It means more expensive fish fingers if you're going to get them processed here. And having that conversation about you know, the fact that things will be more expensive, that we have benefited from decades and decades of disinflation, which has led us into this slightly bonkers world we inhabit right now, where we send fish fingers to the other side of the world, where we order up bread from other countries, where geography seems not to matter. It does mean turning away from that.

22:19Speaker 1:A lot of people would say that it's been this great period of... free trade and globalization and the building up of these supply chains that has also given us a period of flat real wages in the UK. And so there'll come a point when you can't afford to buy the cheap stuff, which of course is a very Freudian way to look at it. You have to pay people good wages if you want them to be able to afford to buy anything. And if you're not manufacturing in the UK, where does the income come from? And obviously, we have a wonderful business in services in the city, whatever you throw at it just keeps rolling, financial services, building businesses, our legal businesses, etc. But in the end, solid economies really need to make stuff.

22:58Speaker 2:I think that matters. And I think it's a really unfashionable argument. And I think it's been quite a lonely argument to have for the last kind of, you know, five years or so. But I think it's an argument that people are seeing the logic of now. But then look at, history of the wars in the 20th century and the fact that, well, you know, if Britain hadn't have tariffs in the early 20th century, we probably would never have had a car industry because America would have just continued, which it did at the start, to just ship in kind of knocked down Fords and sell them to us. And so we wouldn't really have had the car factories. You wouldn't have had Longbridge. You wouldn't have had Trafford Park, all these places. If we didn't have those car factories in World War I and World War II, we probably wouldn't have had the wherewithal to very quickly build the planes and the artillery that we needed and the tanks that we needed to fight a war. And one hopes that we're not going to have to go through the same process all over again. But if you're going to fight a war these days, it kind of depends on your ability to produce artillery. Still, even old-fashioned stuff,

24:04Speaker 2:it depends on your ability to make drones and which is a supply chain, which is kind of a brand new supply chain that China still has extraordinary dominance and depends on your ability to make relatively light batteries that can go into those drones. On all of these fronts, it's not like Europe and America don't have the expertise because actually a lot of the patents for many of these different developments, the original patents, like the patent for the LFP batteries, lithium ferrophosphate batteries that China is so dominant in, Those patents, you know, the invention, the stuff was invented in the US. The patents were owned up until recently by Johnson Matthey of all companies. They own the patent for LFP batteries, which is the battery that goes into pretty much every Chinese electric car these days.

24:50Speaker 2:So it's not like we don't necessarily have the expertise in theory. What we don't necessarily have is industrial scale. And I think that having that expertise in the same way that, you know, you've got these seed banks in Norway that are collecting all of the seeds of how, you know, if there is some apocalypse, here's the stuff that we might need to grow in the future. I wonder if we ought to be kind of thinking consciously about the same thing for innovations of, you know, that have a security focus. But we just don't think in those terms, particularly in the UK. And the reason why a lot of, I've kind of rooted some of this book in in the UK story, and I think the reason the UK is interesting internationally, is because, as I say, if there's any country in the world that has gone gangbusters for both free trade and de-industrialisation, and let's just focus on cheap things, it is Britain.

25:45Speaker 1:Listen, there's an important question around this whole free trade and globalisation business, and I think it is the cost of transport. We talked earlier about how it really was the falling ease and falling price of transporting stuff around the world that makes geography not matter. I mean, there's politics and abolishing tariffs and GATT and most favored nation, all these kinds of things that you write about in the book that are very important to the development of globalized free trade. But it wouldn't work if transport wasn't so cheap. You open the book, for example, talking about airplanes landing in obscure little airports in the UK, pre-addressed packets from sheen and temu and that kind of uh of company to people in the uk and so cheap to fly stuff around the world that you can now fly a five pound dress from from china to the uk and have it delivered insane right but as we move into our new world of geopolitics where possibly the oil price will can maybe rise maybe not who knows it hasn't gotten up nearly as much as people thought it would but nonetheless it's hovering a little higher than

26:52Speaker 1:it was uh pre geopolitical difficulties. And at the same time, you have free passage across the seas begins to be impacted or has been for the last couple of years when these things begin to kick in. And you find that the price of global transport goes up, that that becomes a bit of a headwind. to our underground network, doesn't it?

27:13Speaker 2:I mean, if that happens, that is, it is an enormous deal. In the same way that the slow, mostly invisible reduction in the cost of getting something from this side of the planet to the other is arguably an even greater kind of contributive factor to the world we live in today than the stuff that most people talk about, like tariffs going down and innovation and all the rest of it. It's like the containerization of Bigger ships, freedom of navigation.

27:42Speaker 3:These are the foundation stones.

27:43Speaker 2:For the modern world and help explain why we think, you know, we send stuff routinely off to China to be processed.

27:51Speaker 3:You know, like all the.

27:52Speaker 2:Wool in the world basically goes to China to be processed. So if you're shearing wool here in the UK.

27:57Speaker 1:Oh God, well that's been a shock. I have to interrupt you. I had absolutely no idea about the plastic coating on my jumpers.

28:04Speaker 3:Oh gosh, yes.

28:05Speaker 1:I'm sorry, Liz, this is going to shock you when you get into the textile bit and you find out that your 100% wool jumper is not 100% wool.

28:13Speaker 3:Yeah, I'm sorry to break that to you.

28:15Speaker 2:It's changed my appetite for merino wool jumpers, definitely. Washable merino wool jumpers, when you are brushing your finger along the surface of your washable, 100% supposedly, merino wool jumper, you are actually touching plastic. And that's because they're coated with plastic in order to make them machine washable. And you only ever kind of realize these things when you go down into the sausage factory of how things are actually made, which is what I've tried to do. And that's the case with wool. It's the case with certain types of cotton. Non-iron cotton is actually kind of suffused with formaldehyde. But because the point of this is to say, the label on your clothing, the label on your packet of fish fingers, the label on your car, it tells you very little about the real story of where those things come from, what was done to them on their way to you. And when it comes to clothing, all the label has to say is, A, where was the final stage of production? So where was it cut and sewn?

29:21Speaker 2:Maybe that was Bangladesh, but actually it doesn't tell you where the cotton was picked. It doesn't tell you where it was spun. It doesn't tell you where it was ginned. which most of the time is other countries entirely. And then they have to kind of tell you.

29:36Speaker 3:What it's made of.

29:38Speaker 2:And in the case of wool, they can say it's 100% wool because the fibre is wool and no extra fibres have been added. But there is about 2% coating of polymer on top of those follicles of wool. That means, like I say, when you have a machine washable wool jumper, or indeed any other item of clothing.

29:57Speaker 1:I'm wearing one right now. You're making me touch it. Yeah.

30:00Speaker 3:Well, it's smoother though, Maren. It feels great.

30:03Speaker 2:It's got a nice sheen, and that's partly because of the plastic.

30:07Speaker 3:It's the polymer.

30:08Speaker 1:Sorry.

30:09Speaker 3:Sorry to ruin it for you.

30:10Speaker 1:Ed, what hope? Give me the optimistic version of the next 20 years for the West, say for the UK and Europe, in terms of manufacturing and supply chains.

30:22Speaker 3:Well, I mean, there's a lot of it. I think.

30:23Speaker 2:The thing that I'm struck by, and maybe it's hopeful in a slightly perverse way, but I'm struck when you look at the reality of how trade works by the resilience of this network of middlemen, I call them, people who want to connect supply and demand. I went out to the border of Russia and Georgia a while back because I was trying to work out whether sanctions were working. One of the sanctions was to try to stop nice European cars like Porsches and BMWs and Lamborghinis and things to stop it from going into Russia. The statistics basically said, well, they're not going to Russia anymore because the sanctions are there.

31:02Speaker 2:All the politicians were like, this is great. Sanctions are working.

31:04Speaker 3:They're so good.

31:05Speaker 2:But the cars were going into Azerbaijan and to Georgia and to Kyrgyzstan and to all of these other places. It seemed like that was the end of the story. In reality, of course, as anyone who's got any sense would see from that story, They're going into Russia. It's just they're going in on the sly. And so we went and we watched the process of how Land Rovers and Mercedes G-Wagons and all of these different cars, how they are transported across. And there was this quite Byzantine process of getting the car up to the border. One person did that. Another person put the plates on it, the transit plates on it. Another person took it across the border into Russia. Another person then picked it up from another place in Russia. And what's been created there is thousands of jobs in this grey market whose entire existence is about this primal force in humankind to try to connect supply on one side of the world with demand on the other. Obviously, in this case, we don't like it because it's going against the grain of sanctions, but it is primal. I think that that doesn't go away.

32:11Speaker 2:I think that the fungal network of trade, or whatever you want to call it, the extent to which we are all interwoven with each other means the stakes are much, much, much greater than in any other point in history. There isn't really a precedent for having a world economy arranged in this way. There's lots of history in this book, but there's no precedent for this. So one hopes that as people like Donald Trump, or indeed other people, try and throw trade barriers into the system and realise that they're not working that well, that there's some cognisance that actually that's because the system is far more resilient than you might have thought. And that new strands, new webs kind of grow up and sprout up when you try and sunder another one.

32:56Speaker 1:Well, back to Adam Smith, it's one of the things that makes us human, our constant need to barter and trade, right? And as long as we need to do it, we'll just keep finding a way to do it. Exactly.

33:06Speaker 3:And I think, yeah, that's really important.

33:09Speaker 1:Ed, last question. Did any of this, all these trips, all the traveling you've done, the many companies that you visited, this is great news, by the way, for the world's small cap investors. The more we talk about this kind of thing, the more excited they'll be. They can go and dig out these small companies and invest in them. Did it give you any sense of what your children should study at university?

33:28Speaker 3:Golly.

33:30Speaker 2:Well, I'm kind of thinking about that like everyone else, because AI is the big thing.

33:36Speaker 3:I think, you know, like.

33:37Speaker 2:There's a lot of people right now making a lot of money through crafting beautiful bits of patisserie and selling it covered in sugar.

33:47Speaker 3:You really enjoyed.

33:48Speaker 1:The bakery chapter in your book, didn't you?

33:50Speaker 3:I think it was your favourite. It was very important for me, Maren.

33:53Speaker 1:To go to Paris and to sample all.

33:55Speaker 3:Of the delights.

33:57Speaker 2:So I think that having some sort of a skill that is artisan and human and is immediate... is probably going to be a safer bet than most other careers at the moment. It's a kind of enlivening time, I think, right now, because I think we're all naturally scratching our chins and asking questions about what we do. And I think that's a good thing, because obviously everyone's scared about the AI and then they've got the kind of threats. But I think we are attuned to interact... And to come up with new crazy ideas and products to sell each other. And long may it continue because there won't be a shortage of that in the future.

34:44Speaker 1:Brilliant. Ed, thank you.

34:46Speaker 3:Thank you, you.

34:55Speaker 1:Thanks for listening to this week's Merrin Talks Money. If you like our show, rate, review and subscribe wherever you listen to podcasts. And keep sending your questions or comments to merrinmoney at bloomberg.net. We do like to get them. You can also follow me and John on Twitter or X. I'm at MerrinSW and John is John underscore Stepak. This episode was hosted by me, Merrin Somerset Webb. It was produced by Sam Asadi and Moses Andam. Sound design by Blake Maples. And special thanks to Ed Conway.