Joe Weisenthal says we're '180 degrees backwards' about the economy

Plus trucking, beer, lumber, and McDonald's in Sweden

Good morning fair Modesians. This is the first ever MODES interview… and boy are we starting out strong!

Today I’m featuring a chat with Bloomberg’s Joe Weisenthal. You probably know him as @TheStalwart on Twitter or as the co-host of Bloomberg’s Odd Lots podcast. I know him as the guy who loved blogging at Business Insider so much that he got a feature in The New York Times, a company that famously does not revere blogging.

I was excited when Joe accepted my offer to get on the phone last week and talk about trucking and non-trucking topics. A transcript of our conversation will be split up in two editions.

Beer is bad

Rachel: I wanted to start with something completely unrelated to trucking or freight. You're one of the few people who agreed with my take that beer is bad, it seems. And I just wanted to say thanks for taking the right side on this.

Joe: Wait, wait. What was the thing that I agreed with?

Rachel: So I tweeted that there is no way that anyone actually likes beer, and you retweeted that-

Joe: Yeah, oh my God.

Rachel: And it kind of went viral, which was both good and bad.

Joe: Beer is foul. Beer is foul, and I want it on the record that I agree. My view in general is that I think most alcohol is just really foul. But yeah, beer sucks because it doesn't taste good and it fills you up and makes you feel gross.

The costs of allowing the economy to falter

Rachel: I guess going back to the topic, I feel like you're always one of the first to speak out on what's going to be the driving conversation for the next few weeks. You were one of the first to speak out on lumber. When the yield curve inverted, I think I learned about it through your Twitter feed and through your coverage. And obviously you have the Bloomberg Terminal at your hands, but how generally do you spot these trends so early? And what's your secret behind that?

Joe: Well, it's very flattering to say that I spot them early, because I'm not often sure that I do, but I appreciate your saying it. I feel like I try to take in a broad range of news sources. I try to consume a lot.

But also, I think I have a framework for how I think about these things. Even going back to last year, during the worst of the COVID crisis, it became apparent to me that the essential challenge was how do we maintain economic capacity so that when the lights come back on and we all go back outside and we resume a normal life, we have an economy to use. It's like, "Okay, it's great. Everyone wants to go back out to restaurants, but that doesn't get us very far if the PPP hadn't happened and we had let more restaurants collapse." That seemed like the intuitive thing.

People always talk about, "Well, how are we going to pay for this? How are we going to pay for all this spending?" I've always thought that that was exactly backwards. When you look at everything, what we ended up paying for very severely is the downturns.

And I remember this was very stark in the Eurozone crisis in, say, 2010 and 2011. It seemed like this thing where we're like, "Oh, well. We have to save money. Like posterity. We have to get our books balanced for some reason."

A truck driver in Greece protesting during the Eurozone crisis. More context from the original caption: Truck drivers are demanding the postponement of a law to liberalize their tightly regulated profession — part of major reforms required for Greece to receive rescue loans from European countries and the International Monetary Fund. (AP/Petros Giannakouris)

But the price we pay is a generation of people without work — literally a generation of young people, maybe going 10 years without sustained employment. The societal costs to something that like that are just massive.

People always talk about, "Well, what are we going to do for the children?" And, "Are we worried about all this spending and what that means for them?" But do children want their parents to not have jobs and to not be able to pay for their healthcare and things like that?

So I think I've always just started from this perspective that the way we think about costs in this society are not just wrong, but 180 degrees backwards. So thinking about some of these areas like lumber or semiconductors, which has been one of my obsessions for the last few months, these things have fit into a framework, I guess I would say, that feels very comfortable to me. And what are the prices that we've paid for letting supply side capacity diminish over the last decade?

Rachel: The supply side thing, I think that's really interesting from what we're seeing in trucking right now. In 2018, when I started covering the industry, it was on fire. There were crazy pay increases. There was a lot of demand for truck drivers and there were quite a few publications that were talking about a truck driver shortage. Then there were a lot of truck drivers enter the trucking labor market. And in 2019, we saw a massive increase in trucking bankruptcies. There were hundreds of bankruptcies in 2019 of trucking fleets, including one of the largest trucking bankruptcies ever, at the end of 2019.

And then of course, everything that happened in 2020 contracted the industry even more. And now we're in 2021 and the lights are back on, so to speak. There's now this incredible demand for truck drivers and for trucks.

I feel like the industry would just work better if there were fewer drastic ups and downs and if things were just a little bit more stabilized. But just the way that the labor market works for trucking is that you're paid per mile, it's just a stressful day by day, even hour by hour kind of job.

Joe: I was just going to say, I think these ups and downs, they proved to be extremely costly over the longterm in ways we don't appreciate at the time.

I've been talking to the last few days about the home builder market, which I think has seen similar dynamics. But look, one of the factors is just simply the fact that people who knew how to build homes over the last 10 years left the business because there wasn't that much home building going on.

And they were like, "Well, why am I going to stay here?" And now everyone wants to buy a home and there are multiple models next to it, including lumber. Another one is simply just the lack of people that have any experience in putting together a home and we're paying that price for it now.

An interesting point about labor shortages: Why do we just assume McDonald’s should be able to hire so easily?

Rachel: I'm curious what you think about the conversation when we say there's a blank labor shortage or a blank whatever shortage. For things like fast food workers, for instance, if fast food companies are complaining that they can't hire, many people are now responding like, "Well, did you try raising the wages or anything like that?" I'm curious what your thoughts are around that whole dialogue.

Joe: I would say a few things on the concept of a labor shortage, both of the fast food, low paid realm and more broadly.

So obviously, part of the answer is just higher wages and we know that because there was this great article in, I think it was about a week ago in one of the Pittsburgh business newspapers. You got to check it out.

Basically, there are some companies that are doing well hiring. What's the secret? And it's that one weird trick, they raised wages! So, there is obviously an element of that.

Joe: But I think even deeper, the fascinating thing is we just assume that if a restaurant puts out a help wanted sign and they don't get many applicants that something must be broken, or maybe we did something wrong with policy or maybe UI was too high or something like that.

The deeper question that fascinates me is, why do we assume that restaurants should always be able to hire easily? We just accept that that's how the economy works. That if you put out a help wanted sign for a very low paying job, that you get this flood of applicants and we don't even question it.

If you were doing a tech startup and you would put out a, "We're trying to hire a CTO." You would expect to have a very difficult time hiring a CTO, right? They're not everywhere, highly-talented engineers. I know it's a competitive area. So there are these certain things that we just seem to take for granted as like, "Oh, in a normal economy, you can always hire someone cheap to work at McDonald's or in an Amazon warehouse or something like that."

I get that that's been the case for a long time, but it's still this odd assumption that almost nobody on either side of the UI debate actually challenges like, "Well, why do we just assume this?"

What are the things that we just think of as the laws of nature about how the economy works and why do we assume that that's always true? I think this is very revealing for that.

Rachel: That's really interesting about taking for granted that there's always going to be someone wanting to work for $8 an hour, $10 an hour at McDonald's or some other fast food place. And it is true. We just assume that would always be the case.

Joe: Right. And normally it is the case, except if you go to, I think, in countries where there is much less inequality, I don't think they take these assumptions as much. I think you pay, from what I understand, a lot more for a taxi drive in Tokyo than you do in New York, because other economies haven't stratified their labor market in exactly the same way such that there are people that always just have to take these relatively low-paying jobs.

The end of the yuppie lifestyle. (It’s time to learn how to hang up your own picture frames!)

Rachel: Going back to McDonald's again, my understanding is that the Big Mac in Stockholm, that whole meal is $15 or $16 or something extraordinarily expensive. I’m sure it’s a much better paying job and that the labor costs dials into that. (CORRECTION: As a kindly Twitter user pointed out, Stockholm McDonald’s meals are less expensive than my Swedish pal had led me to believe. They’re more around $10 for the full meal.)

Joe: Right. There's certain expectations of the modern yuppie lifestyle, like being able to get a burrito bowl at Chipotle and being able to take an Uber, et cetera. You see numerous people on Twitter these days complaining about the price of Uber. It has gone up a lot, a lot of people have noticed that.

But there is this weird expectation that the pre-crisis price of things, well, that was the right thing. Now we're in a potentially different regime, and so that must be broken. I don't know why we get that whole impression in the first place.

Rachel: That’s really interesting. There's this really good article by Derek Thompson at The Atlantic, that was talking about how the gig economy has enabled this weird new type of economy where we have servants, essentially. The modern yuppie, they can just outsource all of these things that, frankly, one should be able to do themselves, such as make their own lunch, make their own dinner, hang a frame on their own. (Side note: This is apparently how I actually talk? I say “such as” while speaking?)

Joe: We could go to a world in which people are expected to have to do that, or pay a lot. We haven't had that world in a long time. People who have money, they assume that they can just get childcare whenever they need it, or if they want to go out for the night, that there's a babysitter. Well, there's no iron law of economics that says those things must always be available.

Watch out for next week’s final edition of my chat with Joe. This may be the longest MODES yet, and it didn’t entirely relate to trucking or logistics, so thank you for reading! And thank you to Joe for taking time out of your day to talk to me!

I got some great comments on my last MODES and will respond/include the most interesting remarks in the next edition. Keep the interesting thoughts coming at, or just leave a comment below!