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Trumps tariff war is causing vast disruption across international trade. Ryan Petersen, founder and CEO of worldwide logistics and shipping platform Flexport, shares a behind-the-scenes look into how global commerce truly functions right now. Petersen also explores how business leaders should meet this moment and understand what tariffs wont change when it comes to global trade. Whether you’re a scrappy startup or well-established organization, Petersen reveals why the current trade crisis could unlock hidden opportunities. We have seemingly entered a new era in global trade. Everyone knew that Donald Trump would focus on tariffs if he got a second term as U.S. president, but few expected the speed, the scale of disruption that we’ve seen, from China to Canada, now Champagne from France. Are there moments in recent weeks where you’ve gone like, what just happened? There are moments every day, it seems like. Flexport’s a platform for global logistics. We help companies ship cargo all over the world. We started as a customs brokerage. That was the first thing we did, was help people figure out how much they owe and make those filings on every shipment they transact. So yeah, we’re in it. We all thought we knew there would be tariffs coming at least on China. Canada caught us by surprise. If they’re going to put tariffs on Canada, then there’s kind of probably no safe haven. The other one that’s really caught me by surpriseI didn’t see coming; it hasn’t actually been officially rolled out. They kind of put it as a proposal, so let’s see if it comes down the pipebut it’s the fees on Chinese-made ships whenever they make a port call in the U.S. It impacts any carrier. That means the companies that operate the ships. If they own a single Chinese ship anywhere in their fleet, or if they have even ordered a ship but it has not yet been delivered from a Chinese shipyard, then they’ll have to pay this fee on all of their ships every time they make a call at a U.S. port. And it’s a very high fee, about $500 on every container that they ship. Among your clients, is there any consistency around how folks are responding and adjusting to the tariffs? Are business leaders angry? Are they frustrated? Are any of them excited? They’re angry and frustrated. I’ve definitely seen both of those sentiments. The frustration is both on the duties impacting their business and on the lack of certainty about what’s next and how to set things up. I think people are resigned and understand that duties are higher from China. If you have an option to produce elsewhere, people have been pursuing that. For a decade or more, because Chinese labor costs are much higher. People are making more money. If you’re just looking for cheap labor, China hasn’t been the go-to spot for a long time. But the tariffs are accelerating that. So last cycle, it was mostly targeted at China, so people felt, “Let me go set up in Vietnam, Malaysia, Cambodia, Mexico, Peru.” We’ve seen it all. Now I think people are a little bit paralyzed. There’s a little bit of paralysis setting in because supply chain decisions tend to be long-term, multi-year. Like you’re setting up a new factory relationship, new logistics network. A lot of people are kind of paralyzed waiting for the other shoe to drop and figure that out. It’s very interesting. Even people who voted for Trump, and then they’re like, oh, “Actually this is hitting my business pretty hard. I’m not sure I like this.” So it’s a mixed bag. There are a lot of business leaders who supported Trump, so that’s why I asked whether there are any folks who are excited about it, but it doesn’t sound like in your world there’s a lot who are excited. Well, nobody really likes to pay more taxes, right? And tariffs are ultimately more taxes. Probably there’s some American manufacturers who feel like, “Hey, okay, good, this is leveling the playing field.” But a lot of them use imported components in their goods. It might impact others more than them. And ultimately that is the game of business. You have to out-compete your competition. If you’re made in America, you’re probably feeling much better about things right now. But the big problem with tariffs is, it is going to be very difficult to really cause change. They’re trying to change the culture and the economic base of the country and move us to start making things again. I think that’s a noble cause, like you should manufacture more in America. But the fundamental problem is that the U.S. dollar is just so strong that even if you put tariffs on, it’s still cheaper to buy stuff from other countries. Unless they weaken the dollar and make it just much more expensive to import from other countries, and make our products cheaper to export to other countries. It’s going to be hard to transform this sort of trade imbalance. Twenty years ago, for every 100 containers that were coming into the country, 80 would go back with goods in them. Today it’s 30, and 70 containers are just going back truly empty. So, if you see these big container ships, you’re near a port, take a look. If it’s sailing outbound, you see all those containers, 70% of them on the way out are just empty containers. That’s a problem, honestly. We should be making more stuff. But I think as long as the dollar is the global reserve currency, and it gives you such purchasing power to go to other countries and buy stuff, then that’s what businesses are going to do. Water flows downhill. Are there any changes yet in how goods are moving around the world that you think are going to persist? Lessons or guidelines to keep in mind? Certainly it’s good to say: What are the things that are going to be true no matter what in the world? So you know people are going to want to produce, they’re going to manufacture their goods wherever they can get the highest quality at the lowest price. That’s going to be true. They’re going to want reliable transit times. They’re going to want low prices on the logistics. They’re going to want lots of choice. So those things are true. So you have to invest in those long-term cycles. There’s always going to be some regression to the mean, so you want to hedge for that. And then you want to understand what’s never happened before that’s now possible because of technology. You want to make sure you’re the one investing in making those things happen. 10% is going to the layer of just the labor of coordination to connect all the dots and make these not the blue collar labor that’s moving the containers, driving them and sailing the ships and whatever. Just the coordination layer is 10%. We estimate 80% of that can be eliminated with technology, largely AI-based, like automation routines. So, if you make everything 8% cheaper, it doesn’t matter what happens. The world’s going to want that. So we know we have to invest in that, regardless. The changes from tariffs and how they’re affecting global trade versus how AI will b impacting global tradeit almost sounds like you feel, in the long run, the technology may have a bigger impact. It will certainly have a big, big impact. It will lower the cost, as I said. It should make things more reliable. There’s a lot of costs to eliminate. For example, we have algorithms now that play Tetris with your cartons and load the containers more full. On average, we can have people eliminate about 10% of their containers, 10 to 14%, depending on how poorly you optimized the stuff before we met you. So, things like that. Better route planning. Technology is way better at this than human beings that just go, okay, let me pick that one. What we have is a database of every ship going everywhere and the cost, and then machine learning will pick you the cheapest one that will get you there on time. So there’s a million ways to make things more reliable, cheaper, and yeah, regardless of what happens with tariffs, everybody’s going to want that.
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Hello and welcome to Modern CEO! Im Stephanie Mehta, CEO and chief content officer of Mansueto Ventures. Each week this newsletter explores inclusive approaches to leadership drawn from conversations with executives and entrepreneurs, and from the pages ofInc.andFast Company. If you received this newsletter from a friend, you cansign up to get it yourselfevery Monday morning. Before there was Apple, Medtronic, or Tesla, there was General Electric (GE). Created in 1892 from the combination of Thomas Edisons Edison General Electric and two other competitors, the American conglomerate was once the most powerful, valuable, and inventive company in the world. At different times during its 130-year run, [GE] had been a leader in technological innovation and entrepreneurial drive, writes Puck cofounder William D. Cohan in his 2022 book Power Failure. The generation and distribution of electricity? GE. The light bulb? GE. The jet engine? GE. The X-ray machine? GE. The worlds first radio broadcast? GE. The first home television sets? GE. The first electric cars? GE. Cohans book goes on to detail the management misstepsmany related to its GE Capital financial services businessthat ultimately led the once mighty company to split into three public companies specializing in aviation, healthcare, and energy. The power behind the name Scott Strazik, CEO of energy spinoff GE Vernova, says he is trying to lead the company by adopting some of the best parts of the GE legacyits ambition and some its best talentwhile embracing the freedoms of being a standalone company. We were very thoughtful about the fact that we needed to have an entrepreneurial edge to everything that we did, he says. That edginess starts with the companys name: Vernova marries ver (short for verdant, or green) with nova, from the Latin word novus, or new. In contrast, the other GE spinoffs, GE HealthCare and GE Aerospace, selected more straightforward names based on the industries they serve. We wanted to choose a name that very clearly said to all of our stakeholders that the world is changing, and we needed to change with it, Strazik says. One of those stakeholder groups is the community of cleantech and energy transition startups, and Strazik is trying to forge partnerships with them. Last year, GE Vernova launched a joint venture with Montana Technologies, the maker of a system that harvests water from the atmosphere, and it invested in Form Energy, which develops energy storage solutions. The greatest value we add for [Form Energy CEO] Mateo Jaramillo isnt going to be the money we invest, Strazik says. It can be the supply-chain team I had at his factory in West Virginia last week or the commercial leader thats meeting with his commercial team this week to help them understand contracting with a different type of customer than theyre used to. Leading power’s next gen Strazik says GE Vernova can help other companies in the energy ecosystem better understand how to build products at scale and how to reach customers effectivelytwo muscles it built as part of the GE empire. But even the vaunted synergies of being part of a conglomerate, such as the ability to share technology or best practices, couldnt always be optimized given that the divisions had such different customers. And Strazik says that as an independent company he no longer has to compete with other huge divisions for capital. GE Vernova sits at the intersection of two big trendsthe demand for more electricity globally, much of it coming from AI data centersand the need to diversify and clean up the way energy is produced. GE Vernovas business includes power (gas, hydro, nuclear), wind (onshore and offshore), and software and systems, which include grid storage and power conversion. We go into that discussion with a responsibility because 25% of the worlds electricity today is powered with our equipment, Strazik says. Whats becoming more pronounced and clear to the world at large is this is going be a game in which all [of the assets in our portfolio] are going to be needed for us to win. By one measure, Straziks effort to recapture the prowess of GE in its heyday is off to a solid startthe companys stock is up about 150% from its first day of trading nearly a year ago, and in that time, it has outperformed the market and siblings GE Healthcare and GE Aerospace. But as GE Vernova approaches its first anniversary, Strazik seems to believe theres even more the company can do to recapture the entrepreneurial spirit of its former parent. I want to look at different partnering models that we can pursue to provide leverage to Vernova and our shareholders, he says. Were progressing, but I have such ambition for the role Vernova can play in the energy ecosystem that were going to ramp up expectations even further in year two. How does your team keep entrepreneurial spirit alive? How has your company worked to retain the entrepreneurial or innovative zeal of your founders or its legacy? Send your responses to me at stephaniemehta@gmail.com. Id love to publish your best answers. Read more: GE, then and now 3 leadership lessons from General Electrics breakup The complicated business legacy of Jack Welch Whats really holding back renewable energy
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Our workplaces are undergoing the next technological revolution, brought on by the warp-speed growth of artificial intelligence (AI). Generative AI is a total game changer for how we work. One day, well look back and wonder how we did our jobs without this technology. But not today. Many of us are still living firmly in the discovery period of AI at work, and were dealing with a big dichotomy. Employees are incredibly curious about how to use AI to make their jobs easier and accelerate their growth, but very few people feel like they know how to do that. The results of a recent Wiley survey of around 2,000 individuals across a range of job roles and industries make this clear. The large majority76%of our respondents reported that they lack confidence in how to use AI at work. A recent Gallup survey reported similar findings, with only 6% of employees saying they feel very comfortable using AI in their roles, while about one-third say they feel very uncomfortable. Employees are stressed out about AI This transition is stressful; virtually all (96%) of those Wiley surveyed said they are experiencing some degree of stress about change at work. More than half reported at least moderate levels of anxiety as they navigate the complexities of AI adoption. This is completely natural for a change of this magnitude. Applications of AI generate emotions around job security and a general fear of this new unknown. Employees will often turn to their supervisor for guidance during times of change at work. But while the majority of respondents in our survey said that their manager is supportive of their efforts to integrate AI, only 34% of managers themselves reported feeling equipped when it comes to incorporating AI at work. This ends up causing more stress and worry for both managers and employees as a result. Getting past emotional barriers AI isnt going anywhere. To be successful at work, we all need to get past emotional barriers and embrace AI. And its not merely just about staying current with industry trends. Its about making jobs easier so that companies can compete in their industry and colleagues can accelerate their careers. Failure to drive access and adoption of AI technology can easily cause companies to lose their competitive edge in the marketplace. Your first priority should be to get everyone to adopt AI in their day-to-day work. In practice, this likely means increasing the availability of tools. Employees cant use AI if they dont have it readily available. But the successful adoption of AI hinges on more than just accessemployees need to know how to use these tools and do so responsibly, with guardrails for their respective roles. Investing in upskilling is crucial in navigating this transition. This requires organizations to take a multifaceted approach that encompasses training, support, communication, and transparency. When people understand both what they are doing and why theyre doing it, theyre more likely to embrace change. Help employees feel comfortable using AI According to our survey, companies can help their employees feel comfortable in using this technology by providing them with three things: Clear expectations around the usage of AIEmployees need to have clear expectations to guide their AI usage given the risks involved. This might require many different steps to manage that risk based on whats best for your organization. One way you can do this is by laying out a risk controls framework that is right-sized for your organization. Its also important for company leaders to model the way and advocate for usage among employees. A clear understanding of organizational strategyMaking an explicit statement about the role AI plays in your organizations strategy can also go a long way. Consider gathering a group of internal subject matter expertswhether that be business, technology, legal, and communications expertsto drive strategy and develop standards for your organizations ethical and responsible use of AI. Training on ways to integrate AIOnce employees are comfortable with the tool, you need to train them to actually use the tool. Manager training and adoption are essential elements since so many people will turn to their direct supervisors for help. This group is extremely crucial in providing motivation and encouragement to their teams. Is AI going to create a once-in-a-generation transformation in the workplace? Probably. Is it overwhelming to a lot of people? Definitely. But if we let ourselves, our teams, and our organizations stay overwhelmed, well never realize all the potential that AI has to offer.
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