Altana CEO Evan Smith - Supply Chains, China, and Globalization 2.0

Evan Smith 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 $200mm in a Series C round that valued the company at over a billion dollars. In this episode, Evan and Auren discuss: Why "Globalization 2.0" is replacing free tradeHow Russia's economy defied sanctions expectationsThe hidden power of supply chain middlemenChina's transformation from cheap labor to tech leader...

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Auren Hoffman?

  Hello data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Safegraph and GP of Flex Capital. Discover more episodes, get weekly data as a service news at worldofdas.com. That's spelled world of D A A S dot com. 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 $1 billion. Evan, welcome to World of DAS.

• 0:38Speaker 01

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

• 0:41Auren Hoffman?

  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?

• 0:54Speaker 01

  For a bunch of reasons, but the summary is that the side effects and unintended consequences of globalization 1.0, call it 1945, accelerating from the 70s onward, and then really peaking in the 90s and early 2000s. That whole phase of global commerce was motivated by outsourcing, motivated by free trade, and motivated by the 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 the fucidities trap where great power competition is back, and that's playing out in the supply chain principally. You've

• 1:37Speaker 01

  got climate dislocation, 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 globally outsourced just-in-time supply chain is really only efficient under conditions of stability.

• 2:06Speaker 01

  And for reasons one and two, and then subcategories of those things, the world is getting less and less stable. And so therefore, the fabric of the economy, which is the supply chain, is getting more and more disrupted.

• 2:18Auren Hoffman?

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

• 2:31Speaker 01

  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. Ford had rubber plantations in Brazil in order to make tires. And now that would be crazy. That whole wave of outsourcing, outsource the value chain. You don't need to own and control the whole thing. I think the future looks like a visible and networked value chain where 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 a

• 3:14Speaker 01

  change and forecast. So there's this famous thing in supply chain called the bullwhip effect. Picture a bullwhip cracking, you 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.

• 3:43Auren Hoffman?

  Do you think in the next 10 years will be more globalized, more interdependent, or less globalized and less interdependent?

• 3:52Speaker 01

  Honestly, I think less. The logic of comparative advantage will persist. 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.

• 4:15Auren Hoffman?

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

• 4:24Speaker 01

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

• 4:28Auren Hoffman?

  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.

• 4:37Speaker 01

  And so you're seeing bilateral trade deals, multilateral trade deals get crafted. 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.

• 4:55Auren Hoffman?

  There's been a lot of opacity in the supply chain. Who's benefited the most from that opacity?

• 5:02Speaker 01

  Middlemen, brokers and middlemen in the whole sourcing, supply chain world.

• 5:07Auren Hoffman?

  The Mark Rich of the world, those types of people.

• 5:10Speaker 01

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

• 5:26Auren Hoffman?

  So there's all these different mills in Bangladesh, and then there's the Gap who's making the T-shirts, and they're going to help you negotiate all the things with the mills.

• 5:36Speaker 01

  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. Liang Feng, that's one of the biggest middlemen on earth, built up around sourcing from Asia. 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.

• 6:06Auren Hoffman?

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

• 6:13Speaker 01

  I think it kind of applies to both. The game theory is 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 is happening in different geographies. There's a sort of efficiency-seeking benefit. The thing that underpins that is this opacity and the ability to arbitrage costs. And then the third category of who benefited is honestly just bad actors. Transnational criminal organizations, that's what TCOs and kind of government speak. It includes terrorism, it includes the cartels, it includes ransomware hackers.

• 6:55Speaker 01

  So it's the umbrella term for transnational, meaning not necessarily state-sponsored, but jurisdictions-spanning criminal enterprises. Those certainly have blossomed and flourished in the underbelly of globalization.

• 7:11Auren Hoffman?

  Think of a bad actor that would flourish would be one that employs child labor or bad labor standards because it'd be very hard to know if you're like the fourth-tier supplier.

• 7:21Speaker 01

  Totally. Human traffickers, narcotics traffickers, it's the whole money laundering circuit associated with terror finance. Opacity benefits those enterprises. I read something about a year ago that said the scale of transnational crime is about 10% of global GDP.

• 7:42Auren Hoffman?

  That makes sense.

• 7:43Speaker 01

  Yeah, checks out.

• 7:44Auren Hoffman?

  With the rise of AI, you'd think it would hit countries like the Philippines or India quicker. Maybe it 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 China or Bangladesh or something where maybe AI is not going to be like making t-shirts anytime soon.

• 8:12Speaker 01

  I think it's going to be a mixed bag. What we're seeing in the supply chain, the sort of call center, low-grade customer service stuff, that's clearly going to go the way of AI.

• 8:23Auren Hoffman?

  Places like the Philippines in particular, like they might get hurt really quickly.

• 8:27Speaker 01

  I think that's likely. You look at the knowledge work in the West and it's hard to see that not getting meaningfully disrupted. 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? 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,

• 9:05Speaker 01

  really capable multi-skill learning robots in manufacturing environments.

• 9:14Auren Hoffman?

  If there's something that's very labor intensive 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 of being able to make or being near other suppliers. You just have to like be transporting things. So these things are hard to move.

• 9:34Speaker 01

  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.

• 9:54Auren Hoffman?

  And India is a big place, too. The US is a really big place. It's like you kind of really want like a manufacturing hub in one tiny area of the country. You kind of worked back in the day in the twenties with cars. They're all like in the Detroit area. All the suppliers were in that area. They all worked one another. So you kind of want everybody in the Alabama basin or something and you want to just have all the ports there. Spreading out does make it more difficult.

• 10:23Speaker 01

  China did it really well with the SEZs, the Special Economic Zones. Shenzhen, it's a one-stop-shop in a few hundred-mile radius where all of the consumer electronics, cheap toy stuff was happening and then it kind of went up the value chain into more and more advanced electronics. But it's all there. And so you have everything from like circuit boards and batteries to cameras to injection molding, so the whole drone complex that's built up, I can imagine anybody catching up to.

• 10:55Auren Hoffman?

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

• 11:19Speaker 01

  The logic is there. I think it's a no-brainer. We should be doing that. 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.

• 11:31Auren Hoffman?

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

• 11:38Speaker 01

  Everything I'm about to say is not necessarily a values judgment, right? It's not like a us versus them, but just an observation of the behavior. So they've been admitted into the rules-based WTO, Western Global Trade Framework for about 25 years now. What they've done systematically is not follow the rules and exploit the system to their own benefit from an industrial policy standpoint.

• 12:05Auren Hoffman?

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

• 12:21Speaker 01

  The US was resting on its laurels and the prevailing 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. China took advantage of that mindset. They went on offense and we said, well, you know, 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 will all be in peaceful trade. Obviously that didn't happen and they were playing to win. And now there's a zero sum geopolitical calculus, which is updating some economic calculus. Economics is inherently a positive sum game.

• 13:04Speaker 01

  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. It's a Hobbesian power struggle. And so China was playing a zero sum game.

• 13:20Auren Hoffman?

  If you look at the last 15 years or so, the US comparatively to most of the world has done incredibly well as a percentage of GDP in the world. It's still roughly the same. It's probably gone up a bit. The area that has done the worst over those last 15 years has been Europe. They've been completely decimated. As a percentage of GDP 15 years ago, they were roughly the same as the US. Now they're not even in close proximity anymore. It's like a backward place almost. Is it really just the rise of the US or is it the demise of Europe? What's the story?

• 13:56Speaker 01

  I think it's both. Within Europe, you used to have a labor market and a supply chain arbitrage that actually enabled pretty competitive European manufacturing within like European value chains. So 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 that became less true over time as the response to the financial crisis and all the interventions, market interventions, just in sort of normal course of trade, travel and incomes rising. So that structural value chain advantage to Europe has gone away. They loaded themselves up with debt that they can't work through.

• 14:38Speaker 01

  And the response to the banking crisis in 08 and 09 created sort of a mini Japan, ton of deflationary pressure from a credit standpoint. And then regulation, I'm not going to get the quote right, but Europeans are the first to regulate in any new technology or in any new innovation. AI, no exception.

• 14:58Auren Hoffman?

  They have high energy prices.

• 15:00Speaker 01

  So there's these technocratic interventions that are well intentioned, but just have these pretty consistent negative economic consequences.

• 15:09Auren Hoffman?

  It's an interesting thing where I bet you every single person in Taiwan knows everything about TSMC. If you ask 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 took us through it and everything like that. And there's an area of the Van Gogh Museum which says it's sponsored by ASML. And I was telling my kids about ASML and why it's such an amazing company. The tour guide had never heard of ASML, literally had never even heard about it, even though it's the most important company by far in the Netherlands and one of the most

• 15:50Auren Hoffman?

  important companies outside of a couple of biotech companies in Europe.

• 15:55Speaker 01

  It's ARM and ASML. What else is there?

• 15:58Auren Hoffman?

  Yeah, exactly. There's a few other, if you want to beat diabetes or something like that, you've got a few good, there's a few other very good companies there. I was very surprised that this is a woman who had like a PhD, very smart, was a great tour guide, like really knew her Van Gogh incredibly well, but yet had literally never heard about it. So somehow it's just not being celebrated or being pervaded in a place like that.

• 16:24Speaker 01

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

• 16:28Auren Hoffman?

  Exactly. You kind of mentioned this, but back in the 90s, there was this end of history, golden arches philosophy that trade would bring peace and democracy. A lot of people pick through this. What's your estimation of why that didn't work out? I remember being a young person at the time and hearing about that and it seemed to make a lot of sense 20, 25 plus years ago.

• 16:50Speaker 01

  Me too. I came out of Yale in 2007 with an econ degree. So like a neoliberal stamp on my back and went out in the world. So why didn't it work out? I think at the highest level, it's what I said earlier. I've come to the worldview that geopolitics is inherently a zero sum game, just relative power struggle. Economics is a positive sum game. In the 90s, we got our causality wrong. We thought that free trade had created peace. And what had really occurred was that peace through a unipolar US hegemony, security umbrella.

• 17:26Auren Hoffman?

  It's the Peter Zeihan, okay, the US was already patrolling all the seas. We made it really easy to move things. No pirates, no whatever, then we can have lots of trade.

• 17:37Speaker 01

  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 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 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 timeframe, it's pretty unassailable. If you're looking at free trade through the lens of social stability

• 18:20Speaker 01

  and economic security, we made some pretty big mistakes. So the hollowing out of the industrial base in the West was a major error. We can talk about the vulnerabilities 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. It was a bipartisan elite issue.

• 18:48Auren Hoffman?

  There was both like a neoliberalism ethos that pervaded. But do you think there was at the same time, a little bit of inside dealing as well?

• 18:59Speaker 01

  100%.

• 19:00Auren Hoffman?

  And obviously bipartisan. This is Clintonian and George W. Bushian.

• 19:05Speaker 01

  Through the Obama administration, Obama bought the whole Clinton Economic Brain Trust with him and that was the worldview. And then the elites were doing extraordinarily well. You had about 40 years of inflation adjusted median wage stagnation in the United States.

• 19:23Speaker 01

  Everybody below the 90th percentile was either flat or declining in terms of their inflation adjusted wages. And everybody above that was soaring.

• 19:32Auren Hoffman?

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

• 19:38Speaker 01

  So if you were in the elite, that was the best time to be alive. But 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.

• 19:52Auren Hoffman?

  In some ways, the US today is still most globalized it's ever been. The immigration rate is still incredibly high in the US. Probably as a percentage of immigrants in the US is about as high as it's ever been, at least in the last 150 years or so. It's still a very, very globalized place, but your contention is maybe it'll still be fairly globalized, but just like a less globalized in the future.

• 20:15Speaker 01

  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 strict or medically sealed economies, but it seems pretty obvious that the world is fracturing.

• 20:29Auren Hoffman?

  We're seeing this shift, as you mentioned earlier, from these big multilateral trade deals to much more bilateral or maybe trilateral 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?

• 20:45Speaker 01

  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? What really isn't changing are those value chains, at least not quickly.

• 21:27Speaker 01

  What is changing is the country of final assembly in response to these bilateral trade deals. Policymakers are starting to get hip to this.

• 21:36Auren Hoffman?

  It can't just be like made in Mexico. There's all these other downstream things.

• 21:40Speaker 01

  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.

• 21:51Auren Hoffman?

  There are these factories in China that'll create a fake factory in Vietnam. They'll push all the stuff there. Yeah, it costs more now. You have to like move it all 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.

• 22:07Speaker 01

  Exactly. So what these bilateral 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 Uyghur forced labor prevention act. 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 Xinjiang province in China, sort of like guilty until proven innocent. That's where they're actually regulating the entire value chain and telling

• 22:49Speaker 01

  the private sector, you have to prove dispositively that there's no forced labor, like Uyghur slave labor, associated with these jeans, with this automobile, with these pharmaceuticals. That's, I think, the direction of travel on policy is it's going to be a lot more of these value chains regulations and not merely just, I want my refrigerators made in Mexico.

• 23:09Auren Hoffman?

  Yeah, it's interesting. There was this great map of trade of France with other countries in the Russian orbit. Post the sanctions on Russia, obviously, trade between France and Russia went down dramatically, but it correspondingly went up almost the exact same amount with Armenia, Azerbaijan, Kazakhstan, et cetera. It's just moving the goods between different places, but the goods are still moving. And 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. The goods still get there.

• 23:48Speaker 01

  Yeah, it's pretty obvious that 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.

• 23:57Auren Hoffman?

  Clearly, these things not working at all. Their economy humming feels like it's very, very difficult to do. We live in a very porous world and there's a lot of people, companies and countries that have incentives to cheat.

• 24:11Speaker 01

  You're singing my tune. 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. There was a drone that got shot down in Ukraine a week ago. It was made in North Korea and it had United States and French technology in the drone. 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.

• 24:45Auren Hoffman?

  Now, this is a data podcast, I would love to ask you some data questions. What type of data sets you think are most relevant to supply chain questions?

• 24:55Speaker 01

  Transactional data sets. You need to see the sender, the receiver, the nature of the goods being transacted.

• 25:01Auren Hoffman?

  The SKUs even.

• 25:03Speaker 01

  Yeah, the more the merrier, but fundamentally transactional. So 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 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. We operate on billions of transactional records, purchase orders, commercial invoices, customs declarations, cargo manifests, bills of waiting. That's the good stuff.

• 25:35Auren Hoffman?

  I mentioned that data is very, very dirty. Every probably supplier has done it in a different way, or maybe I'm wrong. Is there tricks or way of cleaning or normalizing the data?

• 25:47Speaker 01

  We started the company six years ago and built our own deep learning-driven entity resolutions. The data cleaning, the normalization, the resolution where you connect the dots across all the data. In the LLM world, that's all getting supercharged and enhanced. 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 cartons of cucumbers. Call Orin Hoffman when you get to the port and reference this by email to Evan Smith. Then here's Orin'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.

• 26:27Auren Hoffman?

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

• 26:32Speaker 01

  And everything I said is in Cyrillic. That's the data wrangling challenge. And to do that at the scale of billions of records, you couldn't do this with humans. You 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.

• 26:48Auren Hoffman?

  How do you think about ship movement data, like the AES data? Is that valuable?

• 26:52Speaker 01

  To some use cases, yeah. If you want to look at money laundering, transshipment, narcotics trafficking, stuff like that. Iran, Russia, how are they exporting their oil products to the world? That's all through transshipments. You see a Western vessel or 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 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. So there's stuff like that.

• 27:21Auren Hoffman?

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

• 27:35Speaker 01

  In pipelines, you can actually get transaction records. You don't see volume.

• 27:38Auren Hoffman?

  Yeah, I guess in pipelines, each country takes a piece. If the pipeline goes through four different countries, they'll all have incentive to monitor it.

• 27:45Speaker 01

  It's hard to make sense of that. Digital transactions, depending on the countries, a lot of Latin America has actually 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 to kind of see inside of the country's economies and not just what they're doing across borders.

• 28:16Auren Hoffman?

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

• 28:26Speaker 01

  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. That is so not true anymore.

• 28:41Auren Hoffman?

  They are one of the most sophisticated manufacturing powerhouses, as sophisticated as Germany.

• 28:47Speaker 01

  They release a five-year economic plan every five years, and the last one said, "We're going to become the world leader in solar, in batteries, in electric vehicles."

• 28:57Auren Hoffman?

  Look at BYD. I mean, their cars are incredible.

• 29:00Speaker 01

  And so you go down the list of what they told the world they were going to do. They said, "We're going to become not just the leading manufacturer of these things, but the leading technology centers on these." Basically, 95% of the things came true. And if you look at the latest one, they're saying, "We're going to lead the world in AI. We're going to lead the world in quantum computing. We're going to lead the world in synthetic biology." So all the things that we think only we can do, China is doing, and they're doing it at a scale and with a public-private partnership industrial policy model that is producing results. They're set up structurally for some major turbulence, and it's already happening, but they're doing what they said they were going to do.

• 29:36Auren Hoffman?

  If you're like a US policymaker, 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. They're very, very smart at what they do. What can we be doing to compete better with them?

• 29:54Speaker 01

  I tend to agree with the 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. Our edge is our innovation, 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. With pain, but it happens. I think we have to lean into those advantages in order to compete here. Now that said, especially around economic security...

• 30:37Speaker 01

  I wrestle with this. My personal politics are, if anything, pretty libertarian. And as I've seen these things play out, I've processed it. We do a 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, than some protective counter response. We've seen what happens when you just sort of don't respond for 25 years. They subsidize their industries, they build tremendous export capacity, they're dumping goods on the world at unprecedented scale. And all these distortions in the trade balance, world economy, the financial markets, everything that ensues. Wouldn't it be nice if we all just did free trade and let the market do

• 31:20Speaker 01

  what it's supposed to do? It doesn't work when you've got somebody that big and that deliberate exploiting that system. There does need to be an economic security response.

• 31:29Auren Hoffman?

  Part of the reason that China is so effective is that they do do what they say they're gonna do. They're gonna go build a massive, super high-speed train, they just go do it, and they do it effectively, and 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, whatever, high-speed train in California, whatever we've promised, we haven't delivered on, we haven't had for whatever reason, the will or the system in place to get these things done. How do we actually compete if we can't actually do what we say we're gonna do?

• 32:05Speaker 01

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

• 32:10Auren Hoffman?

  It's almost a decentralized approach to it, letting the flowers bloom.

• 32:14Speaker 01

  You gotta let the flowers bloom, but I think you gotta put some guardrails on the market.

• 32:17Auren Hoffman?

  These are like trade restrictions or other types of guardrails.

• 32:20Speaker 01

  Right. So I think the US is pretty bad at industrial policy, CHIPS Act.

• 32:23Auren Hoffman?

  Likely is not gonna be a very good investment.

• 32:26Speaker 01

  Right. That is not our unique and special talent. That's China's unique and special talent. 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.

• 32:42Speaker 01

  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.

• 32:56Auren Hoffman?

  These trade restrictions are interesting. It is probably the most bipartisan issue today in the US is more trade restrictions. Anti-China is probably the most bipartisan thing. Sometimes when we've had this types 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?

• 33:20Speaker 01

  A cynical, but I think ultimately 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 basically joint survival strategies depends on having an external threat. So we're 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, the US and China would be best friends. So I think the bipartisan consensus on trade stems from that. We're

• 34:01Speaker 01

  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. 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, whether it's on the right or the left, they see 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.

• 34:39Auren Hoffman?

  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.

• 34:52Speaker 01

  I describe Homer as literally the end of the road. It's as far as you can drive on. Highway one, you 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 people that showed up there were people who are looking to get away. It had this character of outsiders, kind of on the libertarian spectrum or the hippie spectrum, and people who are really trying to get away from government, from traumas, from whatever it was. So I think there were maybe a few hundred people that lived there in the late seventies and then a few thousand people showed up in their twenties and thirties and kind of took the town over.

• 35:30Speaker 01

  So it's got this really vibrant, outcast, 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, I had some amazing relationships.

• 35:49Auren Hoffman?

  Is it just like the classic entrepreneur has conflict anywhere? Or what is it about this kind of iconic class place that you had conflict with?

• 35:56Speaker 01

  Now that I'm almost 40 and I kind of look back on it as an adult with a kid, a lot of the adults in that town were just struggling with insecurity and drama and...

• 36:06Auren Hoffman?

  That's why they moved there in the first place?

• 36:08Speaker 01

  Right. And then I was a kid who was top athlete, a top student, and I was pretty high profile. It was very frictionful to grow up there.

• 36:17Auren Hoffman?

  Interesting.

• 36:18Speaker 01

  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 I looked waspy and I looked the part, but it's kind of been my life experience. Outsider and insider's clothing. I see Altana the same way, I see our business that way.

• 36:33Auren Hoffman?

  What is it like to spend the winters in Homer, Alaska?

• 36:38Speaker 01

  I thought it was awesome. Going back now where there's four hours of daylight, the sun's low on the horizon, it gets pretty oppressive. You don't know any better as a kid when you grow up in it. I love the winter. We had snowmobiles and we would be out by ourselves in the woods, getting the snowmobile stuck at like 8:00 PM, pre-cell phones. My parents have no idea where we are, we're 10 miles away and we're 10 years old.

• 37:01Auren Hoffman?

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

• 37:07Speaker 01

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

• 37:14Auren Hoffman?

  Now everyone believes it. Now it must be almost conspiracy theory not to believe it.

• 37:18Speaker 01

  Pretty fucking obvious what happened.

• 37:20Auren Hoffman?

  There's still conspiracies around the lab leak. Was it intentional? Was it not intentional? There's all these other types of things, but now I'd say most people probably do believe that.

• 37:28Speaker 01

  And for what it's worth, I'm in the accidental lab leak. I don't think it's a bioweapon.

• 37:33Auren Hoffman?

  Yeah, I kind of feel that way, too.

• 37:34Speaker 01

  But yeah, I was vocal about that back in March of 2020.

• 37:38Auren Hoffman?

  On that one, it was interesting where at first it was conspiracy theory. If you like put it out on the internet, you'd get like our YouTube or something you'd get like censored. You couldn't even say it for a while.

• 37:49Speaker 01

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

• 37:53Auren Hoffman?

  Just something happened. It was like this Jon Stewart meme where he mentioned it somewhere. He just said obvious stuff. All of a sudden it just like broke and then like the New York Times was writing about it.

• 38:04Speaker 01

  Hey, what do you say? There's an outbreak of delicious chocolatey goodness in Hershey, Pennsylvania. Was it because a bat flew from Texas and smooched a pangolin and gave rise to a chocolate outbreak?

• 38:17Auren Hoffman?

  Historically, there's been this role for the court jester who can almost say these truths that no one else is allowed to say, and then people then can accept it. And almost that's the role that he played in that sense.

• 38:32Speaker 01

  I agree with you. Not to get political, but what that sparked in my mind was Donald Trump was kind of that with respect to China, right?

• 38:39Auren Hoffman?

  Yeah, exactly. Like he said, the stuff that everyone believes that, but in 2016, it 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?

• 38:53Speaker 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.

• 39:03Auren Hoffman?

  For everybody or just for like a massive company or something like that?

• 39:07Speaker 01

  Probably not for everybody. It's not like a universal thing. But unless you're happy to just kind of do something as a services business and solve a narrow problem.

• 39:16Auren Hoffman?

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

• 39:21Speaker 01

  Yeah, let's narrow it to the venture world. So for a venture funded company, the conventional wisdom is get an MVP on some narrow problem you can solve with a workflow and then grow from there. And I think both from a technology standpoint, solving small problems in a world of AI is not super defensible. Like, I think people are going to 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 your data model to your go to market, to your capitalization.

• 39:57Auren Hoffman?

  But you do learn things over time. You're building something, a customer uses it, you're like, oh, actually, I built it the wrong way.

• 40:03Speaker 01

  I totally agree with that. This isn't go into a hole for four years and come up with the magic thing and then do the big reveal. You still have to come in contact with reality. You've got to iterate, you've got to get customer feedback. But if the vision for the thing and if the problem you're trying to solve is super narrow, I just don't think we live in a world anymore where solving narrow problems is going to create a lot of value.

• 40:24Auren Hoffman?

  Is it because it's just not big enough? Or if I solve that narrow problem, am I smart enough to move to the next problem, and then the next one, and then the next one?

• 40:33Speaker 01

  There's going to be some percentage of people who do that thing, and 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, okay, great. But then that gets competed away. And now there's a gazillion. And the pace of innovation, the ease of software development, especially in an AI world and everything that's changing.

• 40:53Auren Hoffman?

  If you just think of Stripe or Twilio, they initially solved a very, very narrow problem. And then it's like, oh, okay, like, I'll move to like the slightly adjacent problem to that. I move to the slightly adjacent thing.

• 41:05Speaker 01

  The Stripe guys make my point. They actually had a vision for a world scale platform. They weren't just trying to solve a checkout experience.

• 41:13Auren Hoffman?

  Sure, but I don't know that today's Stripe would match the vision. I'm sure it's changed quite a bit, dramatic. I mean, obviously, 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 Carlson brothers, then yeah, they would have just ended up with a cool little company. But because they're so smart and ambitious and curious people, they're able to kind of move. Twilio was, I think, similar where they solved something very, very narrow and the CEO doesn't get as much credit, but he kept moving to other things that are slightly adjacent, made it easier and easier and easier all the way. And that changed, especially in that world where it moved to mobile, he made it much

• 41:58Auren Hoffman?

  easier to do that. Plaid was something very similar where they're solving these very narrow, they had these scrapers that are in there. And then they kept like a great CEO founding team who's able to kind of move there. Yes, they're ambitious, but maybe not everyone is like, okay, we're going to Mars like Elon Musk. I guess it depends also your definition of it, too.

• 42:17Speaker 01

  There's a reason it's conventional wisdom. Look at Anduril. To me, the majority of the big value creating things in the tech landscape as it exists today are going to be highly ambitious from day one. OpenAI. And there will be exceptions to this, obviously. And the whole reason I'm saying it is because it's not conventional wisdom.

• 42:35Auren Hoffman?

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

• 42:39Speaker 01

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

• 42:48Auren Hoffman?

  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. All right, this has been amazing. Thank you, Evan Smith, CEO of Altana, for joining us on World of DAS. I follow you on LinkedIn. And I know you're not on X or the most of the other interwebs, but I follow you on LinkedIn. I definitely encourage our listeners to engage you there. This has been a ton of fun.

• 43:17Speaker 01

  You are and have always been a thought leader and a really amazing convener of discussions and super cool to be able to do this with you.

• 43:27Auren Hoffman?

  Awesome. Thank you.

• 43:30Auren Hoffman?

  If you're a super data nerd, go to worldofdas.com. That's D-A-A-S, worldofdas.com and sign up for our weekly Data as a Service Roundup newsletter. Thanks for listening. If you enjoyed the show, consider reading this podcast and leaving a review. For more World of DAS, and DAS is D-A-A-S, you can subscribe on Spotify or Apple Podcasts or anywhere you get your podcasts. And also check out YouTube for videos. You can find me at Twitter at @Auren, that's A-U-R-E-N, Auren, and we'd love to hear from you. World of DAS is brought to you by Safegraph. Safegraph is geospatial data for physical places. Check it out at safegraph.com. And by Flex Capital.

• 44:15Auren Hoffman?

  Flex Capital vests and data companies like those we talk about at World of DAS. Check it out at flexcapital.com.