Altana CEO Evan Smith

Auren Hoffman (00:00.59)

Hello, fellow data nerds. My guest today is Evan Smith. Evan is the co-founder and CEO of Altana, a global supply chain management platform. Altana is one of the newest freight tech unicorns out there. They recently raised $200 million in a series C that valued the company over a billion dollars. Evan, welcome to World of DaaS.

Evan Smith (00:19.417)

Thanks for having me. It's good to see you again.

Auren Hoffman (00:21.422)

Very excited. Yeah, great to see you as well. Now you published a manifesto called Globalization 2.0 in 2022, a couple of years ago. Why do you think we're headed to a new phase of globalization now?

Evan Smith (00:37.263)

for a bunch of reasons, the sort of summary is that the side effects and unintended consequences of globalization 1.0, which is like, it 1945, accelerating from the seventies onward, and then really peaking in the nineties and early two thousands, that whole phase of global commerce was really fundamentally motivated by outsourcing.

motivated by free trade and motivated by the sort of financialization of the world economy and dollar hegemony. And so when you look at what's kind of breaking in the world right now, you've got the rise of China and a Thucydides trap where, know, great power competition is back. And that's playing out in the supply chain principally.

You've got climate dislocation, right, where most of the carbon emissions are coming from that base of the supply chain, the raw material extraction, the processing of fossil fuels, the emissions of fossil fuels, land use change. That's playing out in the supply chain. And then

you saw in the COVID shocks and then everything since that this whole, you know, just in time supply chain globally outsourced just in time supply chain is really only efficient under conditions of stability. And, and for reasons one and two, and then subcategories of those things, you know, the world is getting less and less stable. And so therefore the economy, the fabric of the economy, which is the supply chain.

is getting more and more disruptive.

Auren Hoffman (02:26.274)

what's going to happen there is the key thing there is just redundancy. Okay, I need to have like six suppliers in case like one or two of them go offline. Or is the key like on-shoring or near-shoring or what's the key to kind of keep things kind of moving?

Evan Smith (02:40.409)

I mean, the thing we're trying to realize in Altana and enable in Altana is think about it like virtual vertical integration. So it used to be the case that companies would control most of the value chain of the goods that they were making. know, Ford had rubber plantations in Brazil in order to make tires, right? And now that would be crazy. So that whole wave of outsourcing, know, like it would...

Outsource the value chain. You don't need to own and control the whole thing. So I think the future looks like a visible and networked value chain where you know Ford can see all the way upstream they can coordinate they can collaborate In some cases. Yeah, you might want some redundancy of suppliers But in other cases you might want the ability to simply communicate, you know a change in forecast so there's this famous thing in supply chain called the bullwhip effect, you know picture a

a bullwhip cracking, know, with spikes and troughs and spikes and troughs and spikes and troughs. And that's because you can't coordinate supply and demand across multiple tiers of a value chain when you're not actually connected and coordinated and responding to events in real time. So even just the ability to have that active dialogue and that visibility across multiple tiers solves a lot of the problems. And then from a...

Auren Hoffman (04:04.568)

But do you think like we're going to like in the next 10 years will be more globalized, more interdependent or less globalized and less interdependent?

Evan Smith (04:14.496)

Honestly, I think less. I think it's going to stay, like the logic of comparative advantage will persist, right? And I think what's almost certainly likely to happen is that global trade gets more and more oriented around blocks. There's going to be a Western trading block.

with bilateral and some multilateral trade agreements kind of factoring into them. There's going to be a Chinese block.

Auren Hoffman (04:44.495)

And the blocks are based on like alliances or the blocks just based on proximity, like the US, Mexico and Canada are super proximate to one another. So it's easier.

Evan Smith (04:53.805)

It's going to be both, principally on geopolitical dimensions.

Auren Hoffman (04:58.018)

Okay, so the US will, okay, there's a US China rivalry. So maybe it goes to US Vietnam or something like that, which might be more amenable to US working or something, okay.

Evan Smith (05:10.039)

And so you're seeing bilateral trade deals, multilateral trade deals get crafted to, the headlines are around economic resilience, the headlines are around ESG, sustainability, carbon, labor rights. But I think the underlying drivers of those policies are principally geopolitical.

Auren Hoffman (05:32.846)

Now, there's been a lot of, in the past, lot of like opacity in the supply chain. Who's benefited the most from that opacity?

Evan Smith (05:42.605)

Yeah. Middlemen, right? brokers and middlemen in the whole sourcing supply chain world, they benefit from. That's one version of it, but just to give you a narrow but still huge version of it, in the textile and apparel industry, there's this type of business called a textile converter.

Auren Hoffman (05:51.116)

It's like the Mark Rich of the world, like those types of people.

Evan Smith (06:07.661)

and their job is to sit between the mills who make stuff and the brands who don't want to deal with the mills. Just, right.

Auren Hoffman (06:13.85)

So there's all these different mills in Bangladesh or something like that. And then there's the Gap who's making the t-shirts and they're going to help you like negotiate all the things with the mills.

Evan Smith (06:21.335)

Right. So in any market where there's opacity, you've got people who can step in as brokers and there's information arbitrage, there's price arbitrage. So that's one. A lot of middlemen. Lee and Fung, right? That's like one of the biggest middlemen on earth built up around sourcing from Asia. So that's one. think...

There was an early adopter benefit to supply chain opacity in terms of outsourcing. So if you were early in outsourcing, you were able to drive down your prices, your working capital requirements, and you know, through the net.

Auren Hoffman (07:05.174)

And here you're talking about outsourcing of physical goods, not necessarily outsourcing of call centers or something like that.

Evan Smith (07:12.791)

I think it kind of applies to both, right? So there's this sort of the game theory is like you go first and you get it working and then you can reduce your costs relative to your competitors more quickly. You can take more market share and it has this sort of spiral. And that lasted for, call it 20 years. It still has happening in different geographies, right? There's a sort of efficiency seeking benefit.

Auren Hoffman (07:14.432)

Okay, yep.

Evan Smith (07:39.791)

But the thing that underpins that, right, is this opacity and the ability to arbitrage costs. And then the third category of who benefited is honestly just bad actors. So transnational criminal organizations, that's TCOs and government speak. It includes terrorism, it includes the cartels, it includes ransomware hackers. So it's kind of the...

the umbrella term for transnational, meaning not necessarily state-sponsored, but jurisdiction-spanning criminal enterprises. And those certainly have blossomed and flourished in the underbelly of globalization.

Auren Hoffman (08:30.67)

Assuming like, like think of a bad actor that would flourish would be maybe like one that employs child labor or bad labor standards or something like that. Cause it'd be very hard to know if you're like the fourth, fourth tier supplier or something.

Evan Smith (08:39.879)

or human trafficking, right? Totally, yeah. it's human traffickers, narcotics traffickers, it's the, frankly, like the whole money laundering circuit associated with terror finance. opacity benefits those enterprises. And I read something about a year ago that said the scale of transnational crime.

is about 10 % of global GDP.

Auren Hoffman (09:11.79)

That makes sense.

Evan Smith (09:13.005)

Yeah, check us out.

Auren Hoffman (09:14.926)

Now the, the, with the rise of AI, where do you think it hits? Like you would think it would hit countries like the Philippines or India quicker. and maybe, maybe could hurt them, could help them, but maybe hurt them faster because a lot of the things that we outsource to India or the Philippines, whether it be a call center or something like that, or things like maybe AI could do quicker.

than things we outsource to a China or Bangladesh or something where maybe AI is not going to be like making t-shirts anytime soon.

Evan Smith (09:50.703)

I think it's going to be a mixed bag. What we're seeing in the kind of, I'll stick to supply chain, right? So yes, the sort of call center, the low grade sort of customer service stuff, that's clearly going to go with the way of AI.

Auren Hoffman (10:12.716)

Yeah, do you think like the place like the Philippines seems like particularly like they might get hurt really quickly?

Evan Smith (10:18.369)

I think that's likely. Yeah. And then you look at the sort of knowledge work in the West and it's hard to see that not getting meaningfully disrupted. Right. What do you need? What do you need these management consultants for? What do you need these business analysts for? Do you need as many developers as you used to?

Auren Hoffman (10:32.429)

Yep.

Evan Smith (10:45.901)

So I think the productivity gains are going to be profound, but the labor market dislocation is going to be profound as well. And I think it's going to be all over the place. And then what's getting interesting is robotics. I saw a demo two weeks ago that blew my mind. So it's hard to imagine five years from now that there aren't really, really capable

Auren Hoffman (11:06.189)

Yeah.

Evan Smith (11:14.464)

sort of multi-skill learning robots in manufacturing environments that are going to disrupt everything.

Auren Hoffman (11:21.4)

Because therein lies there could be some ways of, if there's something that's very labor intensive or something like that, and that's the reason you moved it to another country, maybe you can move it to the US or something like that if you had robots. Sometimes the problem isn't just the labor, it's the know-how and other types of things, or being near other suppliers.

that are making and you just have to like be transporting things. So these things are hard to, sometimes are very hard to move.

Evan Smith (11:50.969)

Totally.

Evan Smith (11:56.151)

It's often very hard to move. You're tied to skilled labor, you're tied to input constraints, you're tied to logistics constraints. Everyone's trying to move manufacturing to India right now and the ports and rails just don't support it. So you can make stuff, but you can't get things in and out of the country at an efficient enough rate.

Auren Hoffman (12:20.194)

Yeah, and India is a big place, too. It's like the US is a really big place. It's like you kind of really want like a manufacturing hub in like one tiny area of the country so that like it kind of worked back in the day in like the 20s with cars are all like in the Detroit area. All the suppliers were in that area. They all kind of like worked one another. So you kind of want everybody in like, I don't know, in the Alabama basin or something. And you want to just have all the

ports there and all the other like it's spreading out does make it more difficult. Yeah, China's done it.

Evan Smith (12:52.013)

Yeah, China did it. China did it really well with the SEZs, special economic zones. you know, like Chen Zhen, it's a one stop shop and, you know, a few hundred mile radius where all of the consumer electronics, kind of cheap toy stuff was happening. And then it kind of up the value chain into more more advanced electronics.

But it's all there and so you have everything from like circuit boards and batteries to cameras to the injection molding. So the whole drone complex that's built up, like they've got a lead that I can't imagine anybody catching up to.

Auren Hoffman (13:39.63)

One of the problems in the U.S. is that politically you kind of have to spread things out. You got to give this state over here this and this other state. And because you've got a lot of different political masters where like maybe it would make sense to have like a special economic zone in one place and really, really kind of concentrate everything and maybe change the regulations of that place or change the incentives or do could you ever imagine something like that happening in the U.S.?

Evan Smith (14:05.103)

I can imagine, I mean the logic is there. I think it's a no brainer we should be doing that. You know, this is such a special interest economy. Unless there's a big enough special interest that's able to go do that. Maybe it's the commercial aerospace industry in Texas for example and they can go pull something like that off.

Auren Hoffman (14:18.711)

Yeah.

Auren Hoffman (14:23.661)

Yep.

Give us a sense of like China's transition from kind of globalization 1.0 to globalization 2.0.

Evan Smith (14:35.983)

So they've been.

Evan Smith (14:39.995)

everything I'm about to say is not necessarily a values judgment, right? It's not like an us versus them, but just sort of an observation of the behavior. So they've been admitted into like the rules-based, WTO, Western sort of global trade framework.

for about 25 years now and what they've done systematically is not follow the rules and exploit the system to their own benefit from an industrial policy standpoint.

Auren Hoffman (15:17.368)

They've also been very good at just like, whether it be like the WTO or the World Bank, or they've been very good at inserting themselves there, getting policies that are in their best interest, very good at lobbying other countries. I would say probably significantly, they've probably done a significantly better job than the US has over the last 20 years.

Evan Smith (15:39.359)

The US was resting on its laurels, right? And the prevailing kind of political ideology, whether it was neoconservatives or neoliberals, they all read Thomas Friedman and Fukuyama and decided that capitalism and free trade were going to create peaceful democracies all around the world. So.

China took advantage of that mindset. They went on offense and we said, well, you they're sort of misbehaving, but they're small and they're just making toys and cheap stuff. And like, they'll come around because markets will compel democracy and therefore we'll all be in peaceful trade. And obviously that didn't happen and they were playing to win. And now there's a sort of zero sum geopolitical calculus, which is, I think,

Auren Hoffman (16:10.967)

Yeah.

Evan Smith (16:26.719)

updating some economic calculus, right? Like economics is inherently a positive sum game. The more you trade, the more you exchange, the more you specialize, there's more sort of productivity and output of the system. And I think geopolitics is zero sum. You know, it's it's a Hobbesian power struggle. And so China was playing a zero sum game while we were sort of an economically motivated.

Auren Hoffman (16:55.82)

And by the way, like, I mean, it's, if you look at the last, let's say the last 15 years or so, the U S comparatively to most of the world has done incredibly well. Like as a percentage of GDP in the world, it's still roughly the same. It's probably gone up a bit. the, the area that has done the worst over those last 15 years has been Europe. Like they've been completely decimated, as a percentage of GDP 15 years ago, they were roughly the same as the U S.

Now they're not even in like close proximity anymore. It's like, it's like a lesser, more backward place almost like what happened in those 15, like, is it, it, is it, is it really just the rise of the U S or is it just like the demise of Europe? Like what's the, what's the story.

Evan Smith (17:43.031)

I guess both the so within Europe you had you used to have a labor market and a supply chain arbitrage that actually enabled pretty competitive European manufacturing within like European value chains. Right. you had lower cost labor to the east and the south and then higher order manufacturing, higher value manufacturing and output further north you went and

And that became less true over time as the response to the financial crisis and all the market interventions just in sort of normal course of trade, travel, and incomes rising. So that sort of structural value chain advantage to Europe has gone away. They loaded themselves up with debt that they can't work through.

Evan Smith (18:42.127)

the response to the banking crisis in 2008 and 2009, you know, has created sort of a mini Japan where there's just a ton of deflationary pressure from a credit standpoint. And then regulation. you know, I'm not gonna get the quote right, you know, Europeans are the first to regulate in any new technology or any new innovation.

And AI, no exception, right? Right. So, so there's these sort of like technocratic interventions that, you know, are well-intentioned, but just have these pretty consistent negative economic consequences.

Auren Hoffman (19:11.16)

Yeah, and they have high energy prices and other types of things.

Auren Hoffman (19:26.83)

It's an interesting thing where like, bet you every single person in Taiwan like knows everything about TSMC. If you ask just like a random cab driver or something like that, they could probably tell you all these different things about TSMC. I was with my family a few months ago in Amsterdam and we went to the Van Gogh Museum. We had this great tour guide who kind of took us through it and everything. And there's an area of the Van Gogh Museum which says it's sponsored by ASML.

Evan Smith (19:56.558)

Mm-hmm.

Auren Hoffman (19:57.006)

and I was telling my kids about ASML and why it's such an amazing company. The tour guide had never heard of ASML. like it, it like literally had never even heard about it, even though it's like the most important company by far in, in, in the Netherlands. And one of the most important companies outside of, you know, a couple of biotech companies in Europe.

Evan Smith (20:06.35)

Whoa.

Evan Smith (20:15.257)

continental Europe.

Evan Smith (20:19.937)

It's it's ARM and it's ARM and ASML, right? Like what else is there?

Auren Hoffman (20:24.406)

Yeah. Yeah. Yeah, exactly. You know, there's a few other kind of if you want to beat diabetes or something like that, you've got a few good ones, right? Right. So there's a few other kind of very good companies there. Yeah. But like, I was very surprised that this is a woman who had like a PhD, very smart, was a great work. I like really knew her bingo like incredibly well.

Evan Smith (20:33.837)

Yeah, sure, sure, There's some biotech leadership in Europe.

Auren Hoffman (20:49.602)

But yet had like literally never heard about it. So somehow it's just not being like celebrated or being pervaded in, in, in a place like that.

Evan Smith (21:00.163)

And they're all patting each other on the back for being the first to regulate AI.

Auren Hoffman (21:04.31)

Yeah, exactly. Now, you kind of mentioned this, this kind of like there's been, you know, back in the 90s, there was this like end of history, golden arches theory, philosophy that trade would bring peace and democracy. of course, lot of people pick through this thing, but like, what's your estimation of why that didn't work out? Like at the time, I remember

being a young person at the time and hearing about that and it seemed to make a lot of sense, know, 20, 25 plus years ago.

Evan Smith (21:35.535)

Me too. I came out of Yale in 2007 with an econ degree, so like a neoliberal stamp on my back and went out into the world. So why didn't I work out? I think at the highest level, it's what I said earlier. I think I've come to the worldview that geopolitics is inherently a zero-sum game, just relative power struggle.

Auren Hoffman (21:42.37)

Yeah.

Auren Hoffman (22:00.439)

Yep.

Evan Smith (22:01.499)

And economics is a positive sum game. And in the 90s, we sort of got our causality wrong, right? We thought that free trade had created peace. And what had really occurred was that peace through a unipolar, you know, US hegemony and security umbrella.

Auren Hoffman (22:16.398)

He said create a free trade. Yeah. If you have like one, it's the Peter Zahan. Okay, the US was already like patrolling all the seas. We made it really easy to move things. No pirates, no whatever. Then we can have lots of trade.

Evan Smith (22:26.862)

Right.

Evan Smith (22:30.447)

Right. And so, yeah, right. So the US provides a security umbrella. They guarantee the security of the supply chain and of global trade. And then you really saw nation-state conflict, besides the Balkans and a couple of things here and there. Conflict between nation-states for about 13, 15 years was...

was pretty close to zero. And so everyone was in this sort of euphoria, the end of history, and free trade did it, and we're in a system of mutual benefit. That was true of the economy. It just wasn't true of the geopolitics. So I think that's kind of the main thing. And then the other one is, if you're an economist and you're looking at the logic of free trade over the appropriate time frame, it's pretty unassailable.

If you're looking at free trade through the lens of social stability and economic security, we made some pretty big mistakes. So the hollowing out of the industrial base in the West was a major error. And we can talk about the vulnerabilities that it creates, but I think what it's done politically is give rise to the populism.

in the West where there's sort of a working class revolt against the elites and it's deserved, right? was a sort of bipartisan elite issue and, you know, go to Ohio.

Auren Hoffman (24:05.838)

And it was, was, it was, there was both like a neo, like a neoliberalism kind of ethos that pervaded, but do you think there was all, there was at the same time, a little bit of kind of like inside dealing as well where these, yeah, okay. Yeah.

Evan Smith (24:22.191)

100%. Yeah. Yeah. mean, it benefits. Yeah, yeah, yeah. This is not a partisan statement at all. Yep. Through the Obama administration, Obama brought the whole Clinton economic brain trust with him. So yeah, that was the worldview. And then the elites were doing extraordinarily well.

Auren Hoffman (24:27.406)

and obviously bipartisan. is Clintonian and George W. Bushian and you know, yes.

Evan Smith (24:48.851)

So you had about 40 years of inflation adjusted median wage stagnation in the United States. And everybody below the 90th percentile was either flat or declining in terms of their inflation adjusted wages. And everybody above that was soaring. And then the owners of assets and of financial assets or physical assets in that same time period

Auren Hoffman (25:04.888)

Yeah.

Auren Hoffman (25:15.118)

Yeah, if you're in the S &P 500, like, and you had a decent amount of your net worth in the S &P 500, like, that was great.

Evan Smith (25:19.086)

Right.

Right, so if you were in the elite, then that was the best time to be alive. like I said, the side effects and unintended consequences of that globalization are now here with us. And it's in our politics, it's in our geopolitics, it's in our climate.

Auren Hoffman (25:41.39)

Yep. Yeah, it's interesting. And in some ways, the US today is still, you know, in some ways, maybe the most globalized it's ever been. The immigration rate is still like incredibly high in the US. Probably it's a percentage of immigrants in the US. It's about as high as it's ever been, at least in the last 150 years or so.

You know, there's all these other things are still like, it's still a very, very globalized place, but your kind of contention is maybe we'll still be fairly globalized, but just like last globalized in the future.

Evan Smith (26:15.651)

I think it's going to turn into values and geopolitically aligned blocks. And there'll be trade between them. So it's not going to be, you know, strict hermetically sealed economies, but it seems pretty obvious that the world is fracturing.

Auren Hoffman (26:32.236)

And we're seeing this kind of shift, as you mentioned earlier, from these kind of like big multilateral trade deals to much more bilateral or maybe trilateral kind of trade deals based on like the data that you've seen. Is this starting to affect the global supply chains? And so how is it affecting it?

Evan Smith (26:42.009)

Yep.

Evan Smith (26:50.209)

It is, but if you think about supply chains as a supplier selling goods to a buyer and then the logistics connecting them, then things are changing profoundly, meaning refrigerators aren't coming from China, they're not coming from Mexico as they come to the United States. If you think of the supply chain network in terms of the value chains,

So in other words, where do the component parts of the refrigerator come from? Where's the magnets? Where's the heating coil? Where's the heat exchange? And then upstream of that, where does the PVC come from? Where's the aluminum come from? And upstream of that, what are the mines? So what really isn't changing are those value chains, at least not quickly.

What is changing is the country of final assembly in response to these bilateral trade deals. then policymakers are starting to get hip to this and saying, OK, it's not enough to say that there's a, yeah, right, the material content, the value chain of the refrigerator needs to actually have USMCA or non-Chinese content in order to be in this tariff regime.

Auren Hoffman (27:53.462)

It can't just be like made in Mexico. actually like there's all these other kind of downstream things.

Auren Hoffman (28:07.778)

But it's very hard. mean, if you have a, like there are these factories in China, they'll like create like a fake factory in Vietnam. They'll kind of like push all the stuff there. Yeah. It costs more. Now you have to like move it all by, by rail to Vietnam or something. So now, okay, we've increased the cost by 10 % and then we ship it out of there and we just call it Vietnam.

Evan Smith (28:18.169)

Right.

Evan Smith (28:23.191)

Yeah, so what these.

Exactly. what these bilateral and sort of economic security oriented trade deals are doing right now is lengthening the value chains. They're making them longer and more expensive, but they're not fundamentally reshaping the value chains yet. And so this is a big area of policy where if...

policymakers are serious about solving this, they need to be regulating the entire value chain. An example of that is the Weaker Force Labor Prevention Act. So that's where the US Customs and Border Protection Agency now has to stop all goods coming into the United States if they have their upstream origin in the Xinjiang province in China. So it's sort of like guilty until proven innocent. And

That's where they're actually regulating the entire value chain and telling the private sector, you have to prove dispositively that there's no forced labor like Uyghur slave labor associated with these genes, with this automobile, with these pharmaceuticals, with food, gas. So that's, think, the direction of travel on policy is it's going to be a lot more of these value chain style regulations and not merely just, you know, I want my refrigerators made in Mexico.

Auren Hoffman (29:30.574)

Yeah, it's incredibly difficult to do.

Auren Hoffman (29:41.964)

Yeah, it's interesting. There was this great map of like trade of France with other countries, let's say like in the Russian orbit and post the sanctions on Russia. Obviously the trade between France and Russia went down dramatically, but the core correspondingly went up almost the exact same amount with like Armenia, Azerbaijan, Kazakhstan, know, et cetera. And so clearly like

Evan Smith (30:03.736)

Right.

Kazakhstan.

Auren Hoffman (30:10.678)

It's just like moving the goods between different places, but the goods are still moving. Now, maybe it does impose a cost on Russia because now they have to pay 10 % more for those goods or something because it's harder to go, but the goods still get there.

Evan Smith (30:13.678)

So.

Evan Smith (30:26.604)

Yeah.

Yeah, it's pretty obvious that the, you know, the theory that we were going to carve Russia out of the world economy and that their military industrial base would grind to a halt, that didn't work. Right.

Auren Hoffman (30:41.772)

Yeah, it's clearly like these things like not working at all. Like their economy is humming. And it doesn't. Yeah, it feels like it's very, very difficult to do. We live in a very poor world. And there's a lot of people, companies and countries that have incentives to cheat.

Evan Smith (31:01.357)

Yeah, mean, you're singing my tune. mean, so unless you're modeling these products and these business networks as value chains where you can really see those multi-tier connections through all the components, then you're not going to solve these kinds of problems, right? There was a...

there was a drone that got shot down in Ukraine like a week ago. It was made in North Korea and it had United States and French technology in the drone. So, in spite of the sanctions, in spite of the export controls, they're still working their way through the global networks to provide the cameras, the targeting systems, the onboard logic.

Auren Hoffman (31:48.578)

Yeah, exactly. Now this is a data podcast, World of DAS. I'd to ask you some data questions. What type of data sets do think are most relevant to supply chain questions?

Evan Smith (32:02.425)

transactional data sets, right? So you need to see the sender, the receiver, the nature of the goods being transacted. Yeah, yeah, the more the merrier, but fundamentally transactional. it's way less interesting to say that Foxconn is a supplier to Apple than it is to say, last month at these locations, these subsidiaries of Foxconn.

Auren Hoffman (32:09.794)

the skews even and those type of things.

Auren Hoffman (32:21.133)

Yep.

Evan Smith (32:27.607)

sold these goods at these volumes to this subsidiary of Apple, and here was the trade lane, and here was the logistics provider that moved the goods. So we operate on billions of transactional records, purchase orders, commercial invoices, customs declarations, cargo manifest, bills of waiting, and that's the good stuff.

Auren Hoffman (32:47.723)

I mentioned that data is like very, very dirty, right? And every probably supplier has done it in a different way or maybe I'm wrong. Maybe there are some like, is there some sort of like tricks or way of cleaning or normalizing the data?

Evan Smith (32:51.405)

Mm-hmm.

Evan Smith (32:59.671)

No, it's nasty.

Evan Smith (33:05.229)

Yeah, so we started the company six years ago and built our own deep learning driven entity resolution. So like the data cleaning, the normalization, the resolution where you connect the dots across all the data. And in the LLM world, that's all getting supercharged and enhanced. So the short answer is it's very messy stuff. It's in different languages.

Sometimes it's handwritten. We were just talking about goods descriptions. We'll see stuff that says 20 tons of cucumbers or 20 cartons of cucumbers. Call Oren Hoffman when you get to the port and reference this by email to Evan Smith. Then here's Oren's phone number and here's an address for the shipment company to come pick it up. And that's all in the goods description. So imagine in a world of

Auren Hoffman (33:59.116)

Yep. Yeah. Yeah. You don't even know how much is in a carton or how big the cucumbers are. Yeah.

Evan Smith (34:03.926)

Right. Right. you've got to, and everything I said is, you know, in Cyrillic, that's kind of the data wrangling challenge and to do that, the scale of billions of records, you couldn't do this with, with humans. couldn't do it with, traditional, or historical systems for like data cleaning, data management. So it's only in an AI world where you can start to make sense of this stuff at scale.

Auren Hoffman (34:26.862)

Interesting. How do you think about like shit movement data like the AES data and stuff like that? Like is that valuable?

Evan Smith (34:33.465)

To some use cases, yeah, if you want to look at like money laundering, trans shipment, narcotics trafficking, stuff like that. And that's, know, Iran, Russia, how are they exporting their oil products to the world? That's all through trans shipments. You see like a Western vessel or, you know, some international vessel that's not on the bad guy list turn off their transponder, disappear from the map for like a week.

come back on and then you kind of look across the data and you see that the Iranian oil tanker was on its way to go meet it in the middle of the Indian Ocean. there's stuff like that.

Auren Hoffman (35:10.926)

For things that are moving in different ways, obviously you have digital goods that are moving constantly. You've got maybe pipelines that are moving certain types of goods and stuff like that. I imagine those are much more difficult to track.

Evan Smith (35:22.467)

Yeah.

Evan Smith (35:29.977)

You do see in pipelines, you can actually get transaction records. You don't see volume. Yeah, right.

Auren Hoffman (35:34.702)

Yeah, I guess in pipelines, each country takes a piece, right? So if the pipeline goes through four different countries, they all have incentive to monitor it.

Evan Smith (35:43.053)

Yeah, it's hard to make sense of that. then digital transactions, depending on the countries, a lot of Latin America has actually created a, well, they have individually as nations created public databases of their invoices and their value added tax receipts. So basically,

You can go get at that data and build a transactional picture of local economies. Now there's a lot of like fraud and sort of abuse of those systems, but you can see a lot in the digital space there and kind of see inside of the country's economies and not just what they're doing across borders.

Auren Hoffman (36:30.476)

What are some of the more surprising insights that can be uncovered from supply chain data that maybe like contradicts common assumptions about global trade?

Evan Smith (36:42.675)

I'll give you one off the top of my head. I think the common assumption about China is that they're really only making cheap stuff that's not very sophisticated and that the West and the US in particular has this big technology advantage on China. And that is so not true anymore.

Auren Hoffman (37:05.356)

Yeah, they're I mean, they are definitely the most one of the most sophisticated manufacturing powerhouses as sophisticated as Germany, right?

Evan Smith (37:07.787)

You

Evan Smith (37:13.475)

Yeah, they, they, they release, you know, a five year economic plan every five years. And the last one said, we're going to become the world leader in solar and batteries in electric vehicles. And so you go down the list of what they told the world they were going to do. They said, yeah, we're going to become the, the, you know, not just the leading manufacturer of these things, but the leading technology centers on these. And, you know,

Auren Hoffman (37:28.174)

Yeah, you look at BYD, mean, their cars are incredible.

Evan Smith (37:42.883)

basically 95 % of the things came true. And if you look at the latest one, they're saying we're gonna lead the world in AI, we're gonna lead the world in quantum computing, we're gonna lead the world in molecular, or in synthetic biology, right? So all the things that we think only we can do, China is doing, and they're doing it at a scale and with like a public-private partnership, industrial policy model that is producing results. Now I think they're set up structurally for some...

some major turbulence and it's already happening, but they're doing what they said they were gonna do.

Auren Hoffman (38:23.278)

If you're like a US policy maker, like, I mean, and you think of China as a competitor, it's a very good competitor. It's like competing with the New York Yankees or the Kansas City Chiefs or something like that. Like they're very, very smart at what they do. Like, what can we be doing to compete better with them?

Evan Smith (38:50.255)

So I tend to agree with the kind of Silicon Valley argument that we're not going to out centralize China. So if you play the game on top down command and control, state planning, industrial policy, that's tough. So our edge is our innovation.

Auren Hoffman (39:08.758)

Yeah, Chips Act stuff or whatever.

Evan Smith (39:20.639)

our labor market that attracts the best people from all over the world and our political system which is capable of absorbing new facts and circumstances and updating itself, you know, with pain but it happens. So I think we have to lean into those advantages in order to, you know, compete here. Now that said,

especially around economic security. think there are, and I wrestle with this, because I think my personal politics are, if anything, pretty libertarian. And as I've kind of seen these things play out, I've processed it, we do lot of our work in this space. It's hard to have any other response to mercantilism.

which is what the Chinese are engaged in, Then some protective counter response, right? So we've seen what happens when you just sort of don't respond for 25 years, right? Like they subsidize their industries, they build tremendous export capacity, they're dumping goods on the world at an unprecedented scale.

in all these distortions in the trade balance, world economy, the financial markets, everything that ensues. I think, you know, the sort of, wouldn't it be nice if we all just did free trade and, you know, let the market do what it's supposed to do? Doesn't work when you've got somebody that big and that deliberate, you know, exploiting that system. So there does need to be an economic security response. And it's showing up on things like

Auren Hoffman (41:13.614)

But just going back, part of the reason that China is so effective is that they do do what they say they're going to do. They're going to go build a super high speed train. They just go do it and they do it effectively. It's a good train or they build a highway or whatever. In the US's case, if you just think of all the promises that we've made over the last 15 years, the broadband, the Chips Act, all these different things like the

Evan Smith (41:19.641)

Totally.

Auren Hoffman (41:39.778)

whatever high speed train in California, whatever we've promised, like we haven't delivered on, we haven't had for whatever reason, the will or the system in place to get these things done. So how do we actually compete if we can't actually do what we say we're going to do?

Evan Smith (41:57.005)

I think our private sector is the best in the world.

Auren Hoffman (42:01.568)

It's just, yeah, so it's almost a decentralized approach to it, like letting the flowers bloom.

Evan Smith (42:05.685)

It's you got to the flowers bloom, but I think you got to put some guardrails on the market. So I think the US is pretty bad. Right. Right. So think the US is pretty bad at industrial policy, like the Chips Act. You know, what have we seen so far? High speed rail. Right. So that is not our unique and special talent. Right. That's China's unique and special talent.

Auren Hoffman (42:10.54)

Yeah. So these are like trade restrictions or other types of guardrails. Yeah.

Auren Hoffman (42:18.284)

Yeah, yeah, likely, likely is not, is not going to be a very good investment.

Auren Hoffman (42:28.888)

Yeah.

Evan Smith (42:30.851)

I think what we can do is out innovate anybody in the world and we can attract private capital to those innovations. Look at SpaceX, right?

And so it's really about how do you shape the trade and financial market conditions and restrictions, frankly, in a way that advantages that innovation-based economy and protects against the systematic abuse of it.

Auren Hoffman (43:01.534)

What these trade restrictions are interesting is it's probably the most bipartisan issue today in the US is more trade restrictions, anti-China is probably the most bipartisan thing. Where do you think that consensus, sometimes when we've had this type of consensus in America in the past, it hasn't always been a good thing. Maybe the neoliberalism consensus of 20 years ago,

How do you think that manifests itself over the next decade?

Evan Smith (43:37.079)

So a cynical but I think ultimately kind of optimistic worldview that I have is that humans are just fundamentally a tribal species where our ability to cohere in larger and larger groups in pursuit of like basically joint survival strategies depends on having an external threat.

Like so we're kind of hardwired to have an us versus them, good versus evil, competitive dynamic in order to come together as a tribe and into larger and larger groups. and I've said, you know, if aliens showed up and started orbiting earth, you know, the U.S. and China would be best friends working to protect ourselves,

Auren Hoffman (44:23.372)

Yeah, yep.

Evan Smith (44:26.861)

So I think the bipartisan consensus on trade is, it stems from that. So we're now in a geopolitical circumstance where there's a genuine peer competitor. They're trying to build a world order that is fundamentally different than the one that we believe in, right? It's different values, it's different orientation. And that's a zero sum competition. And so,

I think everyone's woken up to that threat and that challenge. And whether it's on the right or the left, they see the border as, and sort of financial markets, the border, industrial policy, economic security policies, as the way to respond. And then obviously there's a rapid effort to try to re-industrialize and frankly like militarize.

Auren Hoffman (45:21.826)

Now, a couple of personal questions. You're from Homer, Alaska, which I think is maybe a four or five hour drive south of Anchorage. What is it like to grow up there? You don't meet as many people from Alaska around here.

Evan Smith (45:37.327)

so, I, I describe Homer as, you know, literally the end of the road. It's as far as you can drive on highway one. You kind of come through the interior of Alaska into Anchorage and then you drive down and it spits you out onto the Bay in Homer. and a lot of the, a lot of the people that showed up there were people who are looking to get away. and so.

Auren Hoffman (45:45.612)

Uh-huh.

Evan Smith (46:04.375)

It had this character of, you know, outsiders, kind of on the libertarian spectrum or the hippie spectrum, and people who were really trying to get away from government, from, you know, from traumas, from whatever it was. So I think there were, you know, maybe a few hundred people that lived there in the late seventies, and then a few thousand people showed up and they're, you know,

Auren Hoffman (46:22.936)

Yeah.

Evan Smith (46:33.091)

20s and 30s and kind of took the town over. So it's got this really vibrant outcast, know, end of the road, quirky vibe. And my experience there was I didn't fit in at all. that town spit me out like an immune response. Ton of conflict with a number of coaches and teachers and principals, not all of them. had some amazing relationships, but you know,

Auren Hoffman (47:00.63)

And what was, is it just like the classic entrepreneur has conflict anywhere or is it more like, what is it about this kind of iconic class place that you had conflict with?

Evan Smith (47:10.703)

I think, so, so the honest answer is, with now that I'm almost 40 and I can kind of look back on it as an adult with a kid, like, think a lot of the adults in that town were, we're just kind of struggling with insecurity and drama and right. And so, and then I was a kid who, you know, was a top athlete, a top student, and I was,

Auren Hoffman (47:30.53)

That's why they moved there in the first place. Yeah.

Evan Smith (47:39.651)

pretty high profile. it was just sort of like, it was very frictionful to grow up there. And so, you know, like I didn't belong there. I left, I got to school out here on the East Coast and I didn't belong there. Even though look, you know, waspy and I looked apart, but.

Auren Hoffman (47:48.546)

Interesting.

Evan Smith (48:06.319)

And then, you know, that's kind of been my life experience. Outsider and insider's clothing. I see Altana the same way. I our business that way. It's like we're...

Auren Hoffman (48:15.892)

Where does it like to spend the winter in Homer, Alaska? Okay, cool.

Evan Smith (48:20.747)

I thought it was awesome. going back now where there's four hours of daylight and the sun's low on the horizon.

that gets pretty oppressive, but you don't know any better as a kid when you grow up in it. So I love the winter. We had snowmobiles and we would be out by ourselves in the woods, getting the snowmobile stuck at like 8 p.m. pre-cell phones. My parents have no idea where we are. We're 10 miles away and we're 10 years old. So the freedom and the of sense of adventure was... Yeah, totally.

Auren Hoffman (48:48.654)

You

Auren Hoffman (48:52.813)

Yeah.

Yeah, it's an outdoorsy place, right? Okay. All right, two more questions we ask all of our guests. What is a conspiracy theory that you believe?

Evan Smith (49:05.165)

Yeah, I don't know if it's a conspiracy theory anymore. It was a conspiracy theory when I believed it. The lab leak. Now it's pretty...

Auren Hoffman (49:11.566)

Yeah, now it's like it's not now everyone believes it. Yeah, now almost be almost conspiracy theory not to believe it right at this point. Yeah. Well, unclear what the what you know, there's still conspiracies around the lab leak like was intentional was a non intentional was all these other types of things. But now most people probably do believe that.

Evan Smith (49:20.537)

pretty fucking obvious what happened but no I was I was convinced

Evan Smith (49:29.199)

Sure, sure.

Evan Smith (49:33.953)

And for what it's worth, I'm in the accidental lab leak. don't think it's a bio weapon, but yeah. but yeah, I was, I was sort of, vocal about that back in March of 2020.

Auren Hoffman (49:36.822)

Yeah, yeah, yeah, yeah, I kind of feel that way too. Yeah.

Auren Hoffman (49:43.074)

Now, what on that one, it was interesting where like at first it was conspiracy theory and you weren't, if you, if you like put it out on the internet, you'd get like our YouTube or something, you'd get like censored. couldn't even say it for a while. Right. And then, and then like just something happened. It was like this, John Stewart kind of meme where he mentioned it somewhere and it was almost like he just said like obvious stuff. He was just saying like,

Evan Smith (49:54.211)

Yeah, you get deplatformed. You're harming public safety.

Auren Hoffman (50:09.486)

And then like all of a sudden it just like broke and then like the New York Times was like all writing about it like the next day.

Evan Smith (50:11.608)

What are you saying? There's an outbreak of delicious chocolatey goodness in Hershey, Pennsylvania. Was it because a bat flew from Texas and like smooched a pangolin and gave rise to a chocolate outbreak?

Auren Hoffman (50:20.225)

Bye.

Auren Hoffman (50:25.762)

Yeah.

Auren Hoffman (50:29.302)

It's interesting because like, historically there's been this kind of role for the court jester who can almost say these truths that no one else is allowed to say. then, and then people then can accept it. And almost that's what the role that he played in that, in that kind of, in that, in that, in that sense.

Evan Smith (50:35.576)

Right.

Evan Smith (50:48.291)

I agree with you. not to get political, but you just, what that sparked in my mind was like, Donald Trump was kind of that with respect to China, right? It was like, it was kind of wild enough, outrageous enough.

Auren Hoffman (50:58.37)

Yeah, yeah, exactly. Like you said, the stuff that like now everyone, everyone believes that, right? But in 2016, it was, was a little bit more heretical. Okay, last question. We ask all of our guests, what conventional wisdom or advice do you think is generally bad advice?

Evan Smith (51:18.01)

You might disagree with me on this one as a seed stage investor and entrepreneur. I think it's bad advice to focus on a narrow problem and try to build a product and business around that.

Auren Hoffman (51:30.03)

Okay, for everybody or just for like a massive company or something like that, yeah.

Evan Smith (51:32.623)

Look, it's probably not for everybody. It's not like a universal thing. But I think unless you're...

Evan Smith (51:52.215)

Unless you're happy to just kind of do something as a services business and solve a narrow problem.

Auren Hoffman (51:57.784)

Just say for like a venture funded kind of company, you don't want it too narrow.

Evan Smith (52:03.117)

Yeah, yeah, let's narrow it to the venture world. So for a venture funded company, the conventional wisdom is, you know, get an MVP on some narrow problem you can solve with a workflow and then grow from there. And I think, you know, both from a technology standpoint, like solving small problems.

in a world of AI is, it's not super defensible. Like I think people solve their own small problems. and I think building for scale requires having a vision for the thing at scale. And it permeates everything from like your data model to your go to market to your capitalization and

Auren Hoffman (52:51.992)

But you do learn things over time, right? Like you're building something, a customer uses it. You're like, actually, I built it the wrong way. like, if you just, if you just try to build like the final product with, with $400 million of capital or something. Yeah.

Evan Smith (52:59.087)

I totally agree with that. Hey, I know it's this isn't like a go into a a hundred percent. This isn't like go into a hole for four years and come up with the magic thing and then do the big reveal. Like you still have to come in contact with reality, but iterate, got to get customer feedback. But if the, if the vision for the thing and if the problem you're trying to solve is, is, super narrow, I just don't think we live in a world anymore where, you know, solving narrow problems is.

it's going to create a lot of value.

Auren Hoffman (53:30.702)

And is it because it's just not big enough or is it because like you feel like if someone like if I solve that narrow problem like am I smart enough to move to the next problem and then the next one and then the next one or? Yeah.

Evan Smith (53:42.287)

There's going to be some percentage of people who do that thing, that's kind of the conventional wisdom. But look at the app store post iPhone. So the early app developers that did a niche thing, OK, great. But then that gets competed away, and now there's a gazillion. So the pace of innovation, the ease of software development, especially in an AI world and everything that's changing, it's like,

Auren Hoffman (54:07.384)

But you said that if you just think of like Stripe or something or Twilio, like they initially solved a very, very narrow problem. And then it's like, kind of like I'll move to like the slightly adjacent problem to that. I moved to the slightly adjacent thing and then like.

Evan Smith (54:21.487)

But I think the Stripe guys kind of make my point where it was like they actually had a vision for a world scale platform. They weren't just like trying to solve a checkout experience.

Auren Hoffman (54:32.536)

Sure. But I don't know that today's Stripe would match the vision. I'm sure it's changed quite a bit. Dramatic. obviously they're like, I think the value of Stripe is that the part of the value was they solved a narrow problem, but they had two of the most extraordinary entrepreneurs who were solving that problem. And then they were very smart about moving to the adjacent things. And yeah, if you didn't have the Colson brothers, then yeah, they would have just ended up with like a cool little company. But because they're so

smart and ambitious and curious people, they're able to kind of move. And Twilio was, I think, similar where they kind of solve something very, very narrow. And the CEO doesn't get as much credit, but he kept like moving to other kind of things that are slightly adjacent, made it easier and easier and easier all the way. And that kind of changed, especially in that world where it moved to mobile, he made it much easier to do that. Plaid was something very similar where they're like solving these very narrow, we these scrapers that are in there and then they...

They kept getting great CEO who's able to really, founding team who's able to kind of move there. yeah, but yes, they are ambitious, but maybe not everyone is like, okay, we're going to Mars like Elon Musk or something.

Evan Smith (55:48.153)

Yeah, look, I, there's a reason it's for wisdom. I like look at, look at Andrew in the defense space. Like the, the, to me, the majority of the big value creating things are going to be, in, in, the tech landscape as it exists today are going to be, highly ambitious from day one open AI. Right. Like

Auren Hoffman (55:50.86)

I guess it depends also your definition of it too. Yeah.

Yeah.

Evan Smith (56:15.503)

The the and and there will be exceptions to this obviously and the whole reason I'm saying it is because it's not conventional wisdom But I

Auren Hoffman (56:22.646)

Yeah, yeah, yeah, it's interesting. But really what you're saying is you got to go raise a lot of money.

Evan Smith (56:27.951)

Or you have to have a real point of view on scale and on solving hard problems that are tough to compete away.

Auren Hoffman (56:40.322)

Yep. Yep. Yeah. It's also makes it easier to attract super talented people because super talented people want to do something really big and really exciting. And sometimes they're just like, well, I don't want to just do this little thing and reduce costs by 10 % or something or whatever. Yeah. All right. This has been amazing. Thank you, Evan Smith, CEO of Altana for joining us on World of Dazs. I follow you on LinkedIn. I know you're not on like X or the most of the other interwebs, but

Evan Smith (56:46.884)

Totally.

Evan Smith (56:56.547)

Right. Right.

Auren Hoffman (57:08.45)

I follow you, I definitely encourage our listeners to engage with you there. This has been a ton of fun.

Evan Smith (57:14.349)

Yeah, Oren, you are and have always been a thought leader and a really amazing convener of discussions, and it's super cool to be able to do this with you.

Auren Hoffman (57:27.648)

Awesome, thank you.