@Business published an article subtitled "Inside the Brutal Realities of Supply Chain Hell”—it's getting serious.
This thread provides my (very) simple framework for understanding the key drivers:
By now, you’ve probably heard that global supply chains are in a state of disarray.
Here's a simple breakdown of what’s causing it:
@Business published an article subtitled "Inside the Brutal Realities of Supply Chain Hell”—it's getting serious.
This thread provides my (very) simple framework for understanding the key drivers:
Product delays (good luck getting appliances before 2022), product shortages (see semiconductors), port buildups (fly over LA and you'll see), and rampant freight costs (sorry, retailer margins).
It's pretty bad.
A butterfly flaps its wings in Shenzhen and impacts when I receive my bike in New York. Ok, maybe not quite, but almost...
So to understand the drivers of the crisis, we need a simple framework.
Supply here refers to everything related to manufacturing, production, and transportation.
Demand here refers to everything related to consumption.
I'll walk through each side:
Consumers are flush and not afraid to spend.
Further, lockdowns and restrictions have meant more spending on goods vs. services.
So you have a ton of demand for goods--those goods need to come from somewhere!
The major supply drivers I see here:
(1) Factory shutdowns
(2) Port shutdowns
(3) Flight reductions
(4) Container ship challenges
Hitting each one quickly:
Factories—particularly in Asia—have had a tough time managing and containing outbreaks of COVID.
This leads to delays and bottlenecks in production. If an upstream manufacturer is delayed, that impact cascades downstream and has an extensive impact.
Ports have experienced similar challenges—any have had to shut down or restrict labor to avoid outbreaks.
If ports are closed, products can't flow smoothly through the supply chain.
It's like creating a kink in a hose and watching pressure build.
It's news to most people, but about 50% of air cargo flies on passenger flights.
It's a great revenue stream for passenger airlines.
But with travel—especially international travel—reduced by COVID, there was a significant reduction in air cargo capacity.
The Ever Given clogged the Suez Canal in March, causing a backlog whose impact cascaded through global supply chains.
There aren't enough large container ships to meet all of this demand and containers are in the wrong places at the wrong times.
On one end, a structural surge in demand for goods.
On the other end, a number of significant supply challenges and disclocations.
Demand up, supply down.
For consumers, this means rising prices, as these rising supply chain costs are passed through.
Your holiday shopping may be a whole lot more expensive (and late) this year...
Follow me @SahilBloom for more threads on business and finance.
I also write about these topics in my newsletter. Subscribe! https://t.co/qMB8i60ney
Also, these articles are great:
https://t.co/so8eZM7HvD
https://t.co/BLzkt4qlyS
More from Sahil Bloom
THREAD: With #silversqueeze trending on Twitter, it appears that this week's market spectacle may well be in the silver market.
A perfect moment for a thread on the Hunt Brothers and their alleged attempt to corner the silver market...
1/ First, let's set the stage.
The Hunt Brothers - Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt - were the sons of Texas tycoon H.L. Hunt.
H.L. Hunt had amassed a billion-dollar fortune in the oil industry.
He died in 1974 and left that fortune to his family.
2/ After H.L.'s passing, the Hunt Brothers had taken over the family holdings and successfully managed to expand the Hunt empire.
By the late 1970s, the family's fortune was estimated to be ~$5 billion.
In the financial world, the Hunt name was as good as gold (or silver!).
3/ But the 1970s were a turbulent time in America.
Following the oil crisis of the early 1970s, the U.S. had entered a period of stagflation - a dire macroeconomic condition characterized by high inflation, low growth, and high unemployment.
4/ The Hunt Brothers - particularly Nelson Bunker and William Herbert - believed that the inflationary environment would persist and destroy the value of their family's holdings.
To hedge this risk, they turned to silver.
They began buying the metal at ~$3 per ounce in 1973.
A perfect moment for a thread on the Hunt Brothers and their alleged attempt to corner the silver market...
1/ First, let's set the stage.
The Hunt Brothers - Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt - were the sons of Texas tycoon H.L. Hunt.
H.L. Hunt had amassed a billion-dollar fortune in the oil industry.
He died in 1974 and left that fortune to his family.
2/ After H.L.'s passing, the Hunt Brothers had taken over the family holdings and successfully managed to expand the Hunt empire.
By the late 1970s, the family's fortune was estimated to be ~$5 billion.
In the financial world, the Hunt name was as good as gold (or silver!).
3/ But the 1970s were a turbulent time in America.
Following the oil crisis of the early 1970s, the U.S. had entered a period of stagflation - a dire macroeconomic condition characterized by high inflation, low growth, and high unemployment.
Stagflation 101
— Sahil Bloom (@SahilBloom) September 2, 2020
The term "stagflation" is used frequently in discussions of monetary policy and risks in the post-COVID world.
But what is stagflation and how does it work?
Here's Stagflation 101!
\U0001f447\U0001f447\U0001f447 pic.twitter.com/at4FmaCmkM
4/ The Hunt Brothers - particularly Nelson Bunker and William Herbert - believed that the inflationary environment would persist and destroy the value of their family's holdings.
To hedge this risk, they turned to silver.
They began buying the metal at ~$3 per ounce in 1973.
Lifelong learning is a competitive advantage.
But contrary to what you’ve been told, lifelong learners are built, not born.
THREAD: 20 lifelong learning habits you can start developing today.
Stimulate Dynamically
The mind is a muscle - it needs to be stimulated dynamically to continue to grow.
Don’t rely on one “exercise” - develop a menu of options.
Write, read, listen, watch. Solve puzzles, play games. Enjoy it!
Stimulate dynamically, learn dynamically.
Build Learning Circles
The most powerful learning is communal, not individual.
Build learning circles with other intellectually curious minds.
Engage regularly with no set intention or goal.
Community is everything. Embrace it.
Keep Asking Why
“Why?” is the most useful tool in our learning toolkit.
But somewhere along the line, we are told to stop asking why and just accept “facts” as we are told them.
Reject the norm.
If you want to understand the world, take a cue from our kids - keep asking why!
Adopt a Process Orientation
Prioritize process.
Learn for the sake of learning, not always for a specific goal.
When you prioritize process, you become flexible in where you are headed.
Life is a winding, confusing journey - forward progress is all that matters.
But contrary to what you’ve been told, lifelong learners are built, not born.
THREAD: 20 lifelong learning habits you can start developing today.
Stimulate Dynamically
The mind is a muscle - it needs to be stimulated dynamically to continue to grow.
Don’t rely on one “exercise” - develop a menu of options.
Write, read, listen, watch. Solve puzzles, play games. Enjoy it!
Stimulate dynamically, learn dynamically.
Build Learning Circles
The most powerful learning is communal, not individual.
Build learning circles with other intellectually curious minds.
Engage regularly with no set intention or goal.
Community is everything. Embrace it.
Keep Asking Why
“Why?” is the most useful tool in our learning toolkit.
But somewhere along the line, we are told to stop asking why and just accept “facts” as we are told them.
Reject the norm.
If you want to understand the world, take a cue from our kids - keep asking why!
First principles thinking is a powerful mental model for driving non-linear outcomes. It also requires a willingness to ask difficult, uncomfortable questions.
— Sahil Bloom (@SahilBloom) March 14, 2021
Here are a few to help you get started: pic.twitter.com/KyuAr7IUf7
Adopt a Process Orientation
Prioritize process.
Learn for the sake of learning, not always for a specific goal.
When you prioritize process, you become flexible in where you are headed.
Life is a winding, confusing journey - forward progress is all that matters.
More from Business
This is a GREAT argument to pull up when talking to people about minimum wage. Some others nested below
A large number of new jobs being created are minimum to low wage, so looking for a new job generally won’t increase pay.
Raising minimum wage helps things not directly related.
Helps Infant mortality? Yup.
Lowers Suicide? Yup.
Reduce smoking rates? You bet.
It also boosts the local economy! Minimum to low wage earners spend more % of their money, so an increase means more is spent, often in community!
Low paying jobs are often in sectors which would gain from this. More people spending money in your shop makes your business more money! Now you have more profits and increased labor costs are covered.
"it doesn't affect me if companies pay low wages"
— Dan Price (@DanPriceSeattle) February 11, 2021
In reality, you're paying for it. Over 50% of people on food stamps are actively working. The leading employers are Walmart, McDonald's and Amazon.
As taxpayers, you're subsidizing corporations to pay literal poverty wages.
A large number of new jobs being created are minimum to low wage, so looking for a new job generally won’t increase pay.
Raising minimum wage helps things not directly related.
Helps Infant mortality? Yup.
Lowers Suicide? Yup.
Reduce smoking rates? You bet.
It also boosts the local economy! Minimum to low wage earners spend more % of their money, so an increase means more is spent, often in community!
Low paying jobs are often in sectors which would gain from this. More people spending money in your shop makes your business more money! Now you have more profits and increased labor costs are covered.
