Today, I\u2019m talking with Evan Smith, who is cofounder and CEO of Altana, a company that develops software tools to manage big, messy supply chain networks around the world.<\/p>\n<\/div>\n
We last had Evan on<\/a> in early 2025 to talk about how Trump\u2019s first few waves of tariffs were starting to affect global trade and what patterns Altana was seeing in all that macro-level data about shipping and trade. It was a very alarming and also very illuminating chat; Evan and I got into the existential weeds of international relations and economics almost immediately. It was a great conversation.<\/p>\n<\/div>\n A year and a half later, and everything is somehow even more chaotic than it was the last time Evan and I talked \u2014 and that\u2019s true both about trade and in the business world. And, as you\u2019ll hear, we jumped right back into the weeds yet again.<\/p>\n<\/div>\n Developments in agentic AI have changed what Altana can do, but like every software company, they\u2019ve also changed how Altana can do it. You\u2019ll hear Evan describe how AI is changing how they make software for a very demanding set of clients that manage billions in international trade \u2014 which is causing some big debates about how a software company even runs in 2026.<\/p>\n<\/div>\n Verge<\/em> subscribers, don\u2019t forget you get exclusive access to ad-free Decoder<\/em> wherever you get your podcasts. Head here<\/a>. Not a subscriber? You can sign up here<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n And of course, what they do also needs to change more or less daily. Trade policy is changing rapidly around the world but likely nowhere faster than here in the US. Between the Trump administration\u2019s whack-a-mole tariff policies and war in Iran, it\u2019s very hard to keep up with the current rules.<\/p>\n<\/div>\n That\u2019s where Altana comes in. All that data coming from all around the world gives Evan a really high-level view of what\u2019s actually happening. All those tariffs, for example, were supposed to bring manufacturing jobs back to the United States. So I asked Evan directly: Is that actually happening? Spoiler alert \u2014 you won\u2019t be surprised to hear him say \u201cno.\u201d And while it\u2019s clear the world still relies on global supply chains, the pressure placed on economic chokepoints like the Strait of Hormuz is going to get higher than ever.<\/p>\n<\/div>\n There\u2019s a lot going on in this one \u2014 as you can tell, Evan and I really enjoy talking to each other.<\/p>\n<\/div>\n Okay: Altana CEO Evan Smith. Here we go.<\/p>\n<\/div>\n This interview has been lightly edited for length and clarity.<\/em><\/p>\n<\/div>\n Evan Smith, you\u2019re the co-founder and CEO of Altana. Welcome back to <\/strong>Decoder<\/em><\/strong>.<\/strong><\/p>\n<\/div>\n It\u2019s good to be here again. Thanks for having me.<\/p>\n<\/div>\n I was looking over our <\/strong>last interview<\/strong><\/a> from about a year and a half ago, and boy, we got straight into the existential weeds of what it means to run the global economy and what was changing. People can go back and watch, read, or listen to that interview. It\u2019s very good. I really enjoyed it. <\/strong><\/p>\n<\/div>\n The thing that strikes me about the past year and a half is that some of this stuff was theoretical the last time you were on the show. You founded Altana on the idea that globalization as we knew it \u2014 what you call, \u201cglobalization 1.0\u201d \u2014 was going to come to an end, it was going to get more complicated, and the world needed software to solve it. The rubber has hit the road. It has gotten more complicated. It\u2019s getting more complicated by the day. Even as we speak this week, it is getting more complicated. Even over the last year and a half it feels like it has gone from being a bet to being something very practical now. Is that how you see it?<\/strong><\/p>\n<\/div>\n Completely. One of our investors described Altana as, \u201can index bet on global dislocation.\u201d<\/p>\n<\/div>\n That\u2019s a lot. Can I just ask you maybe a philosophical, emotional question about that? I get a lot of feedback from our audience. You have CEOs on the show and they talk about making bets in this way, and on the ground, it\u2019s chaos. So, I get an index bet on dislocation. That sounds great on CNBC, right?<\/strong><\/p>\n<\/div>\n I understand exactly how that plays to that audience. How do you feel about that approach to the world, especially as a software company that kind of just makes a map for people, and how it plays out for regular people? I think regular people right now are really struggling and they\u2019re really confused. They\u2019re very anxious.<\/strong><\/p>\n<\/div>\n Well, trade touches virtually every part of or most of our lives. So, our mission is to fix globalization, but we\u2019re not retreating from globalization. We\u2019re leaning into it. But we believe that globalization needs to be fixed. It needs to be more trusted, more secure, more fair. That\u2019s a recognition that trade will and should continue across borders. That\u2019s the animating ethos in the company. We work with our customers who in most respects are on the front lines of all this stuff. We work with eight of the 10 biggest logistics providers. We work with the government agencies that have to scramble to enforce these laws. Then, we work with importers and their supply chains to comply with them. And the stakes are huge. Do medical devices get to the hospital? What\u2019s the price of fuel and food?<\/p>\n<\/div>\n So, I couldn\u2019t agree with you more that the dislocation ultimately has the most profound consequences for everyday people, but that\u2019s the point, right? Trade is the lifeblood of growth. This is how we feed ourselves, sustain ourselves, and protect ourselves. So, how do you have both at the same time? How do you have more enforcement and more fracturing as geopolitics play out, but have more trade, more growth, and more economic security? I think Altana is the answer to that question.<\/p>\n<\/div>\n The reason I\u2019m asking is that I\u2019m worried that there\u2019s too many layers of abstraction \u2014 not with you but with everyone. Building solutions for our current world. You<\/strong> just acquired<\/strong><\/a> a company called Cervo AI. Literally as we\u2019re speaking. The press release is dated today.<\/strong><\/p>\n<\/div>\n I\u2019ve had a smile on my face all day, but yeah, it just hit the wire.<\/p>\n<\/div>\n It makes an AI platform to solve customs brokerage, which was not a problem in an earlier version of globalization.<\/strong><\/p>\n<\/div>\n The trade was flowing and products were moving across borders. Now, all the walls are up and everyone has to do more paperwork. And here\u2019s Altana like, \u201cWe see an opportunity. We\u2019re buying an AI platform that literally fills that paperwork at borders.\u201d I look at that and I\u2019m like, \u201cWell, that was very smart.\u201d It feels like the right answer for one problem. It also, to me, feels like the dumbest problem. We\u2019re now having robots fill out forms presumably for other robots to read just to get back to the trade we had before. <\/strong><\/p>\n<\/div>\n I get it. A couple layers of abstraction away, this is the smartest bet. Then, down on the ground, I\u2019m like, \u201cSo, it\u2019s an AI that fills out forms that we didn\u2019t have to fill out before.\u201d The only rational response to that is another AI system on the other side reading the forms. What are we doing here?<\/strong><\/p>\n<\/div>\n Just to be cheeky with you for a moment, we do have our own AI agents and AI systems on one side of the border talking to our AI systems and agents on the other side of the border.<\/p>\n<\/div>\n I don\u2019t think it\u2019s just founder bullshit to say that the future is some version of agentic orchestration of the trade network. That\u2019s a sensible statement whether or not there\u2019s policy volatility out there or not. The technological revolution that enables that is moving at pace, so we\u2019re surfing that wave, we\u2019re applying these technologies, and in some cases, we\u2019re inventing a few. But in order to have global commerce, to have strawberries in the wintertime in the US, you have to somehow solve this border complexity problem. Your notion of if we shot ourselves in the foot is a fair question. You and I talked about this on the last episode, but I think no matter what, the US, Europe, the West, and even China in its own way, is reckoning with new geopolitical and economic security calculus. So, in a world of disequilibrium \u2014 which we\u2019re in \u2014 where you don\u2019t have a hyperpower that can police the entire world, all of the maritime shipping lanes, and the rest of it, there is going to be a whole lot more weight placed on economic and national security. We\u2019re seeing the weaponization of choke points through the supply chain and global logistics network.<\/p>\n<\/div>\n So, it\u2019s not theoretical. It\u2019s happening. We\u2019re all reading the same news. Back to the border and to customs, the question again is, \u201cHow do we have more security and more enforcement at the same time we have vibrant trade and growth?\u201d With all that complexity, I see no other way than to solve it with artificial intelligence.<\/p>\n<\/div>\n I want to come back to that. I did it with you again, we immediately got into the weeds. Like I said, you were on the show about a year and a half ago. If people want to take a deep dive into Altana, I think that episode is a really good one, and I recommend it. It was a lot of fun. But just briefly here, describe what Altana is and what it does for people who need to get caught up.<\/strong><\/p>\n<\/div>\n Altana connects the public and private sectors into a network for managing trade. It\u2019s a shared map of the world at the underpinning. So, everyone sees the same supply chain network and the same set of facts. We actually have a collaboration layer on top of that with AI helping all the parties. That now connects government agencies like US Customs and Border Protection (CBP) with eight of the world\u2019s 10 biggest logistics providers that actually move all these goods around the world. Then, there\u2019s Fortune 1,000 companies and their suppliers.<\/p>\n<\/div>\n Think about it as hooking into a shared view of the world, like Google Maps for the supply chain, and then these parties transacting with each other to manage trade. This is where the Cervo AI acquisition we were just speaking about comes in. Agents are increasingly working alongside humans in those interactions within an organization and between organizations.<\/p>\n<\/div>\n I want to dive into that specifically because I\u2019m really curious about how the data works. I know you have a very unique data model for how people work with Altana. I know you have an entire thesis there. <\/strong><\/p>\n<\/div>\n But I want to ask the <\/strong>Decoder <\/em><\/strong>questions in a bit of a lightning round so we can get there quickly. Last time we spoke, you had about 240 people. I\u2019m assuming you\u2019re growing. How big is Altana now and how are you structured?<\/strong><\/p>\n<\/div>\n I think we\u2019re actually benefiting from some of the AI we\u2019re purveying. So, the company\u2019s just under 300 people. We might have just broken 300 with this acquisition. How are we structured? We are trying to run more of the company through an extended leadership team these days. So, we\u2019re covering an enormous amount of ground. I think we work with nine governments around the world. We have three product lines that serve different government users. We have this logistics vertical. We work with enterprises the world over and their suppliers. It\u2019s incredibly broad and it\u2019s incredibly complex.<\/p>\n<\/div>\n The point of saying all that is because within a 300 person company, the communication and coordination challenges are just massive. One of the things I\u2019m trying to solve is how to get more of the leaders in the company seeing the whole playing field, having the same debates, and synthesizing the information at whole company level and not just their function.<\/p>\n<\/div>\n So, it\u2019s messy and people complain that, \u201cOh, we had this two hour meeting. It was very expensive because we weren\u2019t talking about my thing.\u201d But my instinct is that it\u2019s the least bad way to run the company these days as we gain scale and grow into the ambition of the business where we\u2019re covering so much ground.<\/p>\n<\/div>\n That I think connects directly to my other <\/strong>Decoder<\/em><\/strong> question. The last time you were on the show, you actually told me your process for making decisions was rapidly evolving. You said you had moved from a consensus model in areas where you had a lot of expertise to being really decisive, particularly on product and product management, and that you were going to be more opinionated and faster there while leaving the other stuff behind. That\u2019s kind of what you\u2019re describing at scale now. Is that still the framework? Has it evolved more? How are you making decisions?<\/strong><\/p>\n<\/div>\n That\u2019s definitely stayed true. What\u2019s happened since then is that as of March of last year, we have injected folks into the company that have really, really deep domain expertise in some of the areas we\u2019re working in, such as trade, customs compliance, logistics, and procurement. With the advent of agentic design and agentic coding, one of the things we\u2019re really leaning into is how to get to the right product judgments faster since it took founder-level conviction and synthesis to make some of these big bets before.<\/p>\n<\/div>\n That\u2019s still true, but what\u2019s been really cool over the last six months is that as we\u2019ve brought in these really deep domain experts, we can take traditional product design, product management, and discovery function, and pair it with deep domain expertise to get to the right product judgment so much faster. Then, the execution of that workflow or the build-out of the modeling steps is also much faster in this new way of coding and developing. I would just say that we have to move fast because the world\u2019s changing really fast. That is true, and it\u2019s probably going to stay true. What\u2019s different from a year and a half ago is that you now have this agentic product development life cycle that just gives you so much more velocity and the ability to get to the right place faster.<\/p>\n<\/div>\n Talk about that a little bit more. I\u2019ve talked to CEOs of bigger companies that are much more stable and much older, and there\u2019s an idea that there\u2019s some kind of grand shake-up between what a product manager does, what a designer does, and what an engineer does, and that everyone\u2019s going to get the same skills and maybe that classic trio doesn\u2019t have to exist anymore. The bigger companies have got to manage that pretty carefully. They\u2019re architected around those roles in very specific ways.<\/strong><\/p>\n<\/div>\n I think it\u2019s fair to say Altana is still a startup, right? You\u2019re still operating it a bit like a startup.<\/strong><\/p>\n<\/div>\n It sounds like you don\u2019t have any of that baggage. You can just start over and say, \u201cMy domain experts are now going to be product designers in whatever way that that works.\u201d Are the tools good enough for you to do that as a software CEO, or do you still have the other roles backstopping everything?<\/strong><\/p>\n<\/div>\n Yeah, it\u2019s getting pretty psychedelic. It\u2019s all blending together. My favorite has been watching some of our engineers lean in to design. You\u2019re seeing it in all directions, but there\u2019s definitely a convergence of those functions where a designer can ship code and a product manager can design and prototype. A project manager can ship code and just handle tickets themselves. Engineers can get in on the design game.<\/p>\n<\/div>\n I\u2019d be lying if I said we had the end state fully realized, but this is an active conversation that we\u2019re having out loud with all the stakeholders in the company. These roles are converging, what are the new ways of working, and how are you going to expand your skillset and push into this new horizon? I think almost everybody\u2019s been excited to be along for that ride and try to surf the wave, but it does threaten certain egos. If you\u2019ve come up as a close-to-the-metal engineer, this is threatening. If you\u2019ve come up as a really principled user experience researcher and product designer, this can be threatening. So, just like anything else, change is hard and you got to manage it through a cultural transformation of the organization.<\/p>\n<\/div>\n Altana is not that old. How much transformation are we talking about here?<\/strong><\/p>\n<\/div>\n Plenty. We\u2019re coming up on eight years now. I would say the difference is that we\u2019ve got a team that\u2019s pretty mature for a tech company because of the scale, ambition, and complexity of what we\u2019ve taken on. We tend to hire people later in careers. Obviously, there\u2019s a spectrum, but especially on the engineering side especially, we\u2019ve got some really, really seasoned people. The same is true in commercial. So, it\u2019s not just about how old is the organization. It\u2019s about how long have folks built mastery in these domains.<\/p>\n<\/div>\n I was going to ask you about that. Your clients are not lax customers. They have opinions. As you said, the stakes are very high. You\u2019re not building productivity software, right? How do you manage the stakes of building that software against the pull to re-architect how the software is built? I know you could manage the stakes with the old way. Those old ways are proven and tested. You have a lot of people at your company. It sounds like they know those ways. You\u2019re far less tested with the pull to build companies around new ways of making software. <\/strong><\/p>\n<\/div>\n You\u2019re probably putting your finger on the raw nerve between me and our engineering team. Look, it\u2019s getting incredibly easy to prototype and get an MVP out there. It\u2019s still hard to get highly functional, highly performant, at-scale software deployed with service-level agreements (SLA) that include 99.999 percent uptime for workloads at some of the most important organizations in the world. So, it\u2019s a tension. We certainly haven\u2019t solved it. We\u2019re starting to chip away at the edges of some of these things. I\u2019m sure you\u2019ve heard of and had conversations around harnesses?<\/p>\n<\/div>\n So, putting real scaffolding around the code base and knowing how these systems interact with each other, follow rules, and test themselves. That\u2019s getting better and better, and it\u2019s getting more degrees of freedom to ship quickly, to run those tests, and make sure things aren\u2019t breaking. But it\u2019s not a panacea, and we\u2019re not in the promised land with infinite coding and infinite roadmaps as much as the hype would say otherwise.<\/p>\n<\/div>\n Boy, does the hype say otherwise. There\u2019s the global economy you and I are going to talk about, and there\u2019s the global economy right next to it that is entirely built on some of that hype.<\/strong><\/p>\n<\/div>\n You have a bunch of talented people who know what they\u2019re doing. Then, there\u2019s your customers, and I\u2019m guessing your customers are very conscious of their margins, right? I\u2019m guessing they push you on cost because you\u2019re just an added cost to getting the goods to the end user and selling it for whatever money you\u2019re going to sell it for. <\/strong><\/p>\n<\/div>\n How are you managing your token costs? The idea that you\u2019re going to burn a lot of tokens inside these harnesses to get to some good outcome might increase your costs more than hiring people. This is the dynamic that we\u2019ve heard about so much. I\u2019m guessing your customers are not like, \u201cWait, you cost more money because you\u2019re burning more tokens inside of your harness?\u201d<\/strong><\/p>\n<\/div>\n Well, let\u2019s have the conversation first about internal costs. In my observation, every tech company and everybody in the tech industry is having the same AI conversation at the same time. It\u2019s funny, as soon as I heard it on a podcast, we started internally saying, \u201cYou know, some of these frontier model costs per token are just getting crazy, and what are we going to do to get observability and controls? Should we flip the permissioning model where you have to get permissioned into Claude Fable and not the other way around?\u201d Everyone\u2019s having that conversation at the same time. But it\u2019s like $20, $50 bucks, 1 million tokens. So, the economics are kind of forcing the conversation.<\/p>\n<\/div>\n That being said, we haven\u2019t really seen token spend impact our bottom line in a material way. Sure, has it gone up on the margin? Yes, but I think we\u2019re shipping faster, we\u2019re being more productive, so it\u2019s a no-brainer ROI. It hasn\u2019t even gotten to my consciousness except for, like I said, a few weeks ago with Fable.<\/p>\n<\/div>\n In terms of flowing through cost to customers, we have different sets of products. Some of them are scaling on the dimension of the products under management \u2014 the physical goods under management. So, if you\u2019re on the Altana network, you\u2019re managing your products, their parts, and the value chain networks associated with them. You can share those product passports with your customers, your freight forwarder, or your regulator. So, that\u2019s the network we built. The more products or physical goods that you manage on the Altana network, the more we charge you. That\u2019s one dimension of it. That doesn\u2019t necessarily scale with AI compute. It does in a little way, but not from our pricing standpoint.<\/p>\n<\/div>\n What we\u2019re now reckoning with with this Cervo acquisition and some of our agentic workflows that we built ourselves is having agents do work. Agents can run up a lot of compute. So, that is a gross margin question that you have to manage carefully. Then, you get into pricing dynamics with customers where it\u2019s like, \u201cWell, what\u2019s the value of the work?\u201d Charging for tokens is kind of silly. We\u2019re going towards charging for outcomes and for units of work where there\u2019s some alignment around the value of work. To bring it back to the acquisition we\u2019re announcing, in customs brokerage, you have an existing pricing model where these logistics providers are charging the businesses whose goods they move on a per customs declaration basis. It\u2019s anywhere from $20 on the very low end to $250 on the high end for more complex customs entries. You do that day after day after day, shipment after shipment after shipment, and it kind of runs the cash register.<\/p>\n<\/div>\n With agentic AI being able to do most of that work now, it puts you in some really interesting places, both as Altana and as a global logistics provider to experiment with pricing. Does it make sense to have a $200 per entry pricing model, or can we kind of shift the value creation left and say, \u201cHey global freight forwarder, we are going to help you manage your supply chain network to be more compliant and to be more resilient. We\u2019re going to help orchestrate your supply chain and we\u2019re going to stop billing you transactionally to clear goods across the border?\u201d<\/p>\n<\/div>\n It strikes me with this acquisition, in particular, the governments and people of the world are putting up a lot of trade barriers for a lot of reasons. You have a view of what you might call the path of least resistance. How do I get this object from here to there with the fewest amount of forms? It\u2019s funny because the forms represent one kind of friction, and you can just point the gun at it. You just point the agent at it and overcome the friction. <\/strong><\/p>\n<\/div>\n Do you find that the AI systems are getting more efficient at that? In general, my criticism of AI is that it\u2019s not actually learning. If you fill out the form one time and then you run the agent again, in many ways, it\u2019s starting over from scratch. You\u2019re going to burn all the same tokens again. Maybe the inference will get more efficient, but the compute task itself does not get optimized, even though it\u2019s been repeated so many times. Is efficiency there for you?<\/strong><\/p>\n<\/div>\n Yeah, there is. In the world of LLMs predicting the next token, you\u2019re right. In a world of agents that follow standard operating procedures (SOPs), I think you\u2019re wrong. I\u2019ll narrow it specifically to where I know what I\u2019m talking about, which is this trade, customers, and supply chain world. So, with the Cervo platform \u2014 now part of Altana \u2014 you can say as a logistics provider, \u201cI\u2019m going to create standard operating procedures for every one of my customers and their data pathologies. I\u2019ve got PDFs with these data fields with weird numerical formats. I\u2019ve got Chinese script coming in alongside English script. Here\u2019s how to handle these weird edge cases that would break earlier systems.\u201d<\/p>\n<\/div>\n You can feed the machine a document to distill rules, like standard operating procedures, and to handle that just like a human would follow those rules. They also have the user experience where, as the broker interacts with customs entries and data coming from the supply chain on a customer-by-customer basis, they use a workflow where, as the user modifies something here or there, the platform auto-suggests an update to that standard operating procedure. Then, you can go and key in an SOP from scratch.<\/p>\n<\/div>\n So, it\u2019s learning SOPs, it\u2019s codifying SOPs, and it follows SOPs. Is there la theoretical way that those SOPs could be broken or where there\u2019s a fail case? Surely. But in general, it\u2019s amazing. This is why agentic AI in the general logistics space is having its moment. Every fifth company in Y Combinator is doing something around logistics automation where it\u2019s like, \u201cOh, I can take all these unstructured and semi-structured data inputs and extract information from them, reason about them on a customer, trade lane, or outcome-specific basis, and then orchestrate a workflow.\u201d That just wasn\u2019t technically possible until like January.<\/p>\n<\/div>\n I do love the phrase \u201cdata pathologies.\u201d I like the idea that a company\u2019s structured data is actually diseased in some way, and AI can solve it.<\/strong> It\u2019s very good.<\/strong><\/p>\n<\/div>\n I hear you that I\u2019m wrong. You can build a system around the models that gets more intelligent over time and maybe gets more efficient on a timescale. I\u2019m just asking about literally burning tokens, like using the intelligence of the models. Is that getting more efficient or is it the deterministic systems around it that help the users update these standard operating procedures?<\/strong><\/p>\n<\/div>\n I\u2019m probably the wrong person to be highly opinionated about this, but my co-founder, who is entitled to this opinion, has observed that there\u2019s no real ROI on Fable right now.<\/p>\n<\/div>\n Okay. So the more intelligent model is not helping you out. I\u2019m curious about this because Altana, as a software platform, solves a lot of very bureaucratic challenges as trade barriers go up. <\/strong><\/p>\n<\/div>\n There\u2019s another set of challenges I want to ask you about, which are essentially military challenges. We\u2019ll come to that. But it seems like it\u2019s a bit of a cat and mouse game between the amount of bureaucratic trade barriers we can put up and the amount of software we can deploy at those barriers to overcome them. At some point, the cost curve might bend and the bureaucracy might win.<\/strong><\/p>\n<\/div>\n Well, I\u2019ll tell you our product strategy and our overall thesis on flipping the script. Right now, every time a shipment arrives at the border, it\u2019s as though it\u2019s the first time the government has ever seen that shipment of goods.<\/p>\n<\/div>\n This is an abstract government or our government?<\/strong><\/p>\n<\/div>\n Every government in the world.<\/p>\n<\/div>\n What I\u2019m saying is true. So the customs process has been built up for millennia to scrutinize a shipment, levy the goods, and then let it through the border. It used to be the case that when we were using cuneiform tablets and there were sailboats going up the Tigris or Euphrates River and transporting goods, somebody could look at each of the things in there, issue a levy, and that was it. As container shipping came about and the scale of goods entering at a port just exploded, along with air cargo and that velocity, it became impossible to look at all the shipments and the goods in the shipments.<\/p>\n<\/div>\n So for decades, the whole concept was that we\u2019ll do random sampling, random targeting, and we\u2019ll let the intuition of port officers dictate what they\u2019re going to go look at. After 9\/11, that was no longer okay. A whole new technology and policy framework arose in the post-9\/11 world: risk-based targeting and segmentation. The idea was we\u2019re going to try and pick needles out of the haystack using analytics. Those were pretty crappy with the systems that existed at the time. I\u2019m not going to name names, but one major government I know intimately well has a 0.5 percent targeting hit rate in its customs targeting system. These are rules-based systems where if a container of frozen squid comes in, search it for cocaine. That\u2019s a real example.<\/p>\n<\/div>\n They found cocaine one time<\/a> in a box of frozen squid, and every single shipment of frozen squid thereafter has been opened. Guess how many times they\u2019ve found cocaine in the box?<\/p>\n<\/div>\n I\u2019m going to guess it\u2019s zero.<\/strong><\/p>\n<\/div>\n So, that\u2019s been the state of the art for the last 20 years. Now, our point of view is that with AI, two things are possible. One is that you can continuously monitor and screen everything. You don\u2019t have to selectively target. Two is that as these trade policies are increasingly focused on the goods and their provenance \u2014 I\u2019m sure we\u2019ll get to that conversation, but network shape and supply chain network is the dimension of trade analysis \u2014 it becomes imperative to have a sense of product identity instead of just going transaction by transaction at the border where it\u2019s Groundhog Day and you\u2019ve never seen this [good] before. I would have to reason about whether this is the right customs code or the right duties and whether the Food and Drug Administration got the permit to release these pharmaceuticals or whatever. We ought to just have a library of trusted goods in the same way that we have a register of trusted travelers.<\/p>\n<\/div>\n And that\u2019s what we\u2019re building. So, an Altana Product Passport for the US government is a library of known, continuously monitored, and vetted goods and their production pathways where in one shot you can look at the compliance attributes, their national security dimensions, the safety dimensions, the tariff dimensions of it, and have that all continuously reviewed and monitored. The benefit to the importer is they do it once.<\/p>\n<\/div>\n I remember going through the airport in the early days of trusted traveler programs and thinking that there\u2019s no way in hell I was going to give the government any information about my travel, my personal life, any of that. I don\u2019t have to. Then, you see the benefit of the security and travel facilitation. Well, I think I\u2019ll make that trade. That\u2019s where we\u2019re enabling the private sector to engage with government agencies around the world in a new way. So, we\u2019re doing this now at scale in the United States. We\u2019re doing it at scale in the context of defense procurement. We\u2019re going to be doing this in a pilot context in Europe and I think the UK in the coming months.<\/p>\n<\/div>\n There\u2019s a lot to unpack there. I\u2019m curious about the Product Passports. Again, this strikes me as a solution to an administrative or political problem. The Trump administration particularly wants to move manufacturing out of China and reduce this dependency on China. A lot of companies, big companies, want to move their supply chains to get them out of those risky parts of the world. Maybe they want to clean up the environmental or labor impacts of their supply chains. You provide all that to them. We can vet this, this product is going to show up. Like I said at the top of the conversation, the rubber has really hit the road on all those policy goals.<\/strong><\/p>\n<\/div>\n Are you seeing manufacturing move out of China into the United States? You\u2019ve got these passports. Are you seeing the origins of those passports change in meaningful ways? Do those passports change in meaningful ways?<\/strong><\/p>\n<\/div>\n Yes, although probably not exactly in line with the policy objectives of the administration. Without getting into political commentary, which I\u2019ll mostly skip, I\u2019ll give you some points of view as a reader of the news and of the data, and as an observer of the supply chain network itself through our own platform. One question is if the United States is reducing its dependency on China as a source of manufacturing. I think the answer, controversially, is no.<\/p>\n<\/div>\n So, what\u2019s happened? We see this in our data. We see this in the macro statistics as well. Since these trade barriers, in particular the Liberation Day tariffs and everything since, you\u2019ve seen a proportionate decrease in Chinese exports to the United States with a proportionate increase in US imports from third-party countries like Vietnam, Mexico, Canada, and Malaysia. We can see through our own platform where those input flows of goods are coming from, and the answer is China. So basically, we\u2019ve just rerouted Chinese goods through third-party countries where they\u2019re undergoing some amount of transformation (or not) and are on their way to the same end market destination at a higher cost. We can say that numerically.<\/p>\n<\/div>\n Now, that\u2019s part of the dynamic behind the renegotiation of the United States-Mexico-Canada Agreement (USMCA), for example. I\u2019m sure we\u2019ll talk about that, but this notion of supply chain traceability becoming the buzzword in all of these industrial policy and trade policy initiatives is at the core of it. What\u2019s the actual provenance of the goods? What\u2019s the multi-tier value chain network of the goods? We have to know that if we\u2019re going to have policies that try to reshape the network itself. So, that\u2019s one dimension of the China question.<\/p>\n<\/div>\n I think another one is, have we created more jobs? Have we created more manufacturing in America? There, I think it\u2019s kind of a mixed picture. The Purchasing Managers Index<\/a> (PMI), which is an index of manufacturing output in the United States, went down after the tariffs. So, we were declining as an economy following the big wave of tariffs last year in terms of our manufacturing output. In the last five or six months, that number\u2019s actually trended above 50 percent on a scale of one to 100, but it\u2019s above the neutral level. It\u2019s now actually increasing and it has been increasing. I don\u2019t know that this is true, but one way you might observe that is in the initial shock. You have US manufacturers that are importers of stuff in order to make more stuff. If the input availability of those things is highly disrupted, then so are their supply chains and their output. I know anecdotally from our own customer base, that was absolutely the case.<\/p>\n<\/div>\n So, the first impact of the tariffs was actually negative for US manufacturing. What might be playing out that we should be open-minded about is that as the network adapts to the new tariff environment, you\u2019re seeing a general tilting of the scales in favor of US manufacturing and therefore an increase in the PMI and the rest of it. What might also be playing out is that the AI data center thing is peanut buttering over everything.<\/p>\n<\/div>\n Then, just the last thing on manufacturing is, are we or are we not creating a bunch of manufacturing jobs in America? Again, no political statement here. Just kind of observing the data. On a net basis, the answer is no. So, manufacturing jobs continue to decline. How do you square this increase in manufacturing output that we just talked about with the decline in manufacturing jobs? The answer there must be industrial automation. I think it was always kind of naive to imagine that we\u2019d go back to the assembly lines of the 1920s in America. Is it important to have economic security for a country? Yes. Is it important to have the manufacturing capacity to make very important things on your own soil or with trusted allies? Yes, it is. Are those efforts going to lead to an explosion in blue-collar, well-paying jobs? That is a question that has not been answered.<\/p>\n<\/div>\n I do think we can leave aside the political question of who in the administration sold a very naive vision of what would happen after these tariffs and who didn\u2019t. But on a policy basis, the goal of the tariffs was to increase costs on goods made out of the country. So, we would manufacture them here and it would become economically viable to manufacture things here. <\/strong><\/p>\n<\/div>\n You\u2019re saying basically that has not happened. And if it does happen, those factories will be automated anyway. We had the <\/strong>CEO of Siemens on the show<\/strong><\/a>, which builds factories for people. He said straight up, \u201cYeah, I\u2019m going to put robots in Kansas. That\u2019s the way we\u2019re going to do it if we do it at all.\u201d Are you seeing that kind of explosion of interest? Are you seeing that kind of response? There\u2019s USMCA news literally today that we will come to, and maybe that will shake everything up again. But it\u2019s been a year and a half since Liberation Day, since that whole conversation. Whether or not that actually happened, I think you\u2019re confident in assessing just based on the numbers.<\/strong><\/p>\n<\/div>\n I think at the macro level, it seems clear that manufacturing is generally going up after going down at first. Manufacturing jobs are not, and industrial automation would explain that. I have a front-row seat to a few different industries, just given the work we do, and I\u2019d say there\u2019s evidence of the industrial policy working. I\u2019ll give you one: drones, or autonomy more generally. So, the Chinese control roughly 90 percent of the relevant value chain components for autonomous systems. Even if you have a US startup that\u2019s saying, \u201cHey, we\u2019re making everything here in America,\u201d no, you\u2019re not. You\u2019re assembling component parts to make an air or land-based drone, and you\u2019re saying it\u2019s made in America.<\/p>\n<\/div>\n We had Adam Bry from Skydio <\/strong>on the show<\/strong><\/a> just a few weeks ago. This was legitimately the conversation he and I had. It was, \u201cwhere does it come from?\u201d<\/strong><\/p>\n<\/div>\n We are helping that industry with this question and with that problem statement, but it\u2019s not going to happen overnight. What I will say is that a couple policies actually came together in a coordinated way to create a real US market not just for the end platforms but the components themselves. So, on the one hand, you had a bunch of FCC restrictions and import restrictions generally that said none of the logic or system controls can come from China. They have to be US made and have to have US parts, or at least non-Chinese in the fine print. What that did was effectively turn off the supply chain for these platforms and make everything more expensive.<\/p>\n<\/div>\n To pair alongside that, what they did was they created a large source of demand and revenue. In the Department of War, there\u2019s now this program called Drone Dominance<\/a>, which is billions of dollars of committed capital. So, there\u2019s a strong market signal. Actually, autonomous is playing a role in certifying the value chain. How do you have component parts that are trusted and where there\u2019s real provenance? It\u2019s pretty wild. You\u2019re seeing a little Shenzhen forum in El Segundo with all these defense tech bros who are building autonomous systems. That\u2019s kind of what it takes. You have to shape the market sufficiently to achieve your policy objective. Some of it is like putting up barriers. Some of it is putting up outright bans in this case. Some of it is subsidies and some of it is directed investment.<\/p>\n<\/div>\n That\u2019s the other piece of it. Over the last 15 months, the administration has gotten incredibly aggressive on not just throwing up barriers but actually making offensive moves. So, it\u2019s grants, it\u2019s equity investments, it\u2019s loans with warrants, it\u2019s choosing winners in the private sector and then just plowing capital and procurement into them. We\u2019re in the process of creating a national stockpile of critical minerals and magnets.<\/p>\n<\/div>\n Methods aside, is that the right kind of policy outcome to aim at? Yeah, I think so. We learned over the last year and a half that you don\u2019t have economic security if you don\u2019t control critical minerals. So, you\u2019ve got to do something.<\/p>\n<\/div>\n Let me ask you about that. Again, last time you were on the show, there was the idea that a bunch of warehouses would pop up in Canada and Mexico to import almost complete products from China so we could get them over the border inside the USMCA. I would say it was like a hack. You knew that was going to happen. You could see it beginning to happen.<\/strong><\/p>\n<\/div>\n We could see it happening.<\/p>\n<\/div>\n The other thing along that same line is that in September, the United States ended the de minimis exemption<\/a> for low value imports. So, there used to be a threshold where you didn\u2019t have to pay duties at $800. There was no customs declaration owed. In order to exploit that, you had those Mexican and Canadian distribution centers where containers full of stuff were coming in, but then being drop-shipped one by one across the border to US consumers. So, the same has been true in Europe and the UK, and they too just ended their de minimis exemptions. So, it\u2019s not just the United States adding all this complexity and friction to businesses and end consumers, this happening everywhere.<\/p>\n<\/div>\n Just this week, President Trump <\/strong>announced new tariffs<\/strong><\/a> on Canada. Maybe because he\u2019s mad about wildfire smoke, maybe because he\u2019s mad that Spain won the World Cup. It\u2019s unclear exactly what happened to provoke a new round of tariffs. US Trade Representative Jamieson Greer just did an <\/strong>interview with <\/strong>The New York Times<\/em><\/strong><\/a> and he\u2019s like, \u201cWe\u2019re going to run it back on tariffs. We got smacked down at the Supreme Court, but we take that as an invitation to find a new legal mechanism to do tariffs the way the administration wants, the way that President Trump wants.\u201d <\/strong><\/p>\n<\/div>\n It is unclear to me what legal foundation the new tariffs against Canada are resting on and whether they will be upheld. Just based on what we have been talking about here \u2014 politics and policy outcomes aside \u2014 it feels like the tariffs broadly did not do the things the administration wanted. There are some things that worked better, particularly plowing capital into markets and picking winners and losers, which is not a thing that people generally love when the United States government does it but it has worked in some cases. Yet, we\u2019re going to do tariffs again. <\/strong><\/p>\n<\/div>\n I\u2019m curious for your view on how trade with Canada will change now that we\u2019ve announced some tariffs that may or may not exist, that may or may not get rebated over time. More particularly, with your view of the network, how do you see the network adapting to them?<\/strong><\/p>\n<\/div>\n Here\u2019s my take on Canada.<\/p>\n<\/div>\n The Canadians have not come to the table on renegotiating the trading relationship with the United States. I know that from some of the behind-the-scenes stuff I\u2019m exposed to but also because it\u2019s reported. Whereas, Mexico and the United States have been very constructively working on what will become the new rules of the USMCA, in particular supply chain traceability, which is kind of the linchpin of the United States\u2019 new framework. I\u2019ve got to steer clear of the politics, but the way I see this latest round of Canadian tariffs\u2026 so this is Section 338<\/a>, which I admittedly hadn\u2019t heard of until a couple of days ago.<\/p>\n<\/div>\n With 48 hours to consider it, I actually think 338 has a really strong legal foundation for the specific complaint in this case. So, 338 gives the president the authority to implement counteractive measures when a trading partner is selectively biasing or penalizing US trade relative to other countries. And the Canadians did just that over the last year and a half on autos<\/a>, on dairy products<\/a>, and on alcohol<\/a>. There\u2019s no US alcohol on the same shelves where there\u2019s European alcohol. There\u2019s plenty of legal authority for the claims themselves.<\/p>\n<\/div>\n Where it\u2019s going to get interesting is the remedy. Section 338 says that the remedies have to be proportionate to the damages. So, were the tariffs, the 50 percent across this peanut butter of Canadian imports, proportionate to the three or four industries that were called out? Probably not, butt how long is it going to take to adjudicate that? It\u2019s going to be a long time. In the meantime, everyone\u2019s working to put something new in place for the USMCA since the US opted out of the agreement and now there\u2019s kind of a shock clock to get some new rules. So, I kind of see the whole thing in the context of them trying to force the Canadians to the table around the USMCA renegotiation.<\/p>\n<\/div>\n I can see that in the abstract of, we\u2019re doing geopolitics and having a good time. We\u2019re all playing <\/strong>Risk <\/em><\/strong>together. But from a policy perspective, Liberation Day happened. You\u2019re saying it may or may not have had the numeric effects we wanted it to have. Some other policies had good effects. Then, we ended up paying a lot of rebates because the legal foundation wasn\u2019t solid. Donald Trump and John Roberts are going to be in a fight that\u2019ll be very interesting to legal academics 100 years from now. But right now on the ground, we\u2019re about to have that fight again, and we might rebate all those tariffs again. That happened with the Liberation Day tariffs at higher rates.<\/strong><\/p>\n<\/div>\n It certainly could play out that way.<\/p>\n<\/div>\n You run the software to manage all this administrative and bureaucratic complexity. How do you see the tariff rebates playing out inside your system? Does that tell us anything about how companies and markets might react to this new round of tariffs?<\/strong><\/p>\n<\/div>\n We\u2019re certainly helping our customers with the rebates. We can calculate duties at any point during the time of the then-applicable law and do that over a bunch of complexity, like you said. I think this is the new normal. Again, it\u2019s not just the United States. The Chinese have put in place the mirror image of the United States from an export licensing standpoint. They\u2019re compelling the private sector to get certificates,permits, and permission from the Chinese to take critical minerals, battery technologies, a whole set of things, and they can trace those all the way through the end uses and end markets through a big global network. The Europeans are doing the same thing. The Europeans just gave themselves the legal authority to do a whole lot more from the trade barrier and trade enforcement standpoint as a unified customs authority.<\/p>\n<\/div>\n So, I don\u2019t see the world going any other way than with unilateral behavior where geoeconomics is part and parcel with geopolitics and it\u2019s getting expressed mostly as these trade policies but as economic security more broadly.<\/p>\n<\/div>\n I think that brings us, sort of inexorably, to the next turn, which is the warfare turn. We can see it playing out today in the Strait of Hormuz, right? The United States launch an attack on Iran, Iran shuts down the Strait. We\u2019ve basically brought global shipping in that area to a dead halt. We\u2019re now maybe in a much longer war about who will control the strait and what those tolls will be.<\/strong><\/p>\n<\/div>\n![\"\"](\"https:\/\/platform.theverge.com\/wp-content\/uploads\/sites\/2\/chorus\/uploads\/chorus_asset\/file\/24792604\/The_Verge_Decoder_Tileart.jpg?quality=90&strip=all&crop=0%2C0%2C100%2C100&w=2400\"\/)
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