The Future of Shipping and Logistics in An Autonomous World | Greymatter

We're getting ready to start the second panel. This one is on shipping and logistics. I think it gets covered a little less often and hopefully by the end of this you guys are going to feel this is a very big, interesting space. I personally love it. But before we get going, I'll introduce myself very briefly. So I'm Simon. I've spent 15 plus years kind of the intersection of tech and transportation before it was cool. And the highlights for me are I was a founder at ebay Motors years ago, early board member of Tesla Motors, founding board member and angel investor and car gurus, early advisor at Lyft, board member at Convoy Inuro, and an angel over in Aurora. I love this space. I think it's super fascinating and it feels like this is a very special moment for the space. So why don't you introduce yourselves? Maybe a highlight of your companies, what you guys are doing. I think most people know, but I think hearing it from you guys would be helpful and then we'll dive in after that.

Sounds great. So I'm Christian Ferecki. I'm the vice president of operations for Convoy. We are a company that helps others move their freight around the US So we offer web products and app products to carriers and to shippers to help them move their freight more efficiently around the US we are launching new products like helping customers launch drop and other kinds of freight that are sort of new to the industry as well. So that's one of the highlights that we're releasing just now. I have a background in finance and strategy, but for the last 10 years or so have been in technology and specifically marketplace businesses with Amazon Rover and now with Convoy.

So let me set some context. So the first session was about transportation. The difference I look at is transportation is about moving people from place to place and logistics and shipping is about moving product from place to place. The payload difference is the primary difference. The business models can be the same, the underlying tech can be very similar or the same, but that payload difference has some difference in the dynamics and the timing and how the spaces play out and I think in some interesting ways and hopefully you'll get a sense for that as we kind of talk about it. The other thing I'll say about the industry that is deceiving, this space is unusually big. If you look around the room and at every object in this room, the raw materials or the finished product was moved from somewhere to somewhere else. Right? It is a multi trillion dollar. It is the backbone of all commerce and in many ways it's the backbone of many economies around the world, it is absolutely enormous. It could be long haul, it could be local, it's unusually big. The only thing that's more distinguishing than size is how broken it is. Highly fragmented, underutilized assets. It is broken. I guess it may be a crass way. It's broken in all the right ways, or maybe in a nicer way is there's a lot of opportunity for technology to make a big difference. Difference, right. So let's move into talking a little bit about the vision of the future. So if you look at the fullness of time over the course of maybe a decade or two, not a year or two, if all the technology gets absorbed as expected, and as you guys, you know, the biggest version of your vision, what does the world look like? What happens to retailers, what happens to carriers, what benefits are there to consumers? Just paint the picture of what the world looks like for logistics. Shipping.

Yeah. Today a large portion of the capacity in the trucking market is these small trucking companies. And in fact, more than 50% of the carriers are these owner operators, which is someone who owns and drives the truck. So they're a single person business. You see that today we're able to connect that capacity much better to these larger shippers because of technologies like convoy. And so you're starting to see the rise in those businesses becoming more and more successful. And I think you're going to see that over time play out even more where you have even more decentralization, even more diversity of offerings. Because technology solutions like convoy are going to help them run their businesses and actually solve some of the biggest problems in the industry today, which are flexibility. When there's spikes in peak demand or when shipping facilities have to change their schedules is when you really need that kind of flexibility from that long tail of supply. I think down the road there might be opportunities. Right now that driver is still the differentiator. They can provide that flexibility and they can provide a bit of a differentiated service if they arrive on time, really do a good job. In the future, as we see some of that become a little bit more commoditized with autonomous vehicles, there might be opportunities for consolidation, but I think that's a way out.

How do you view AV trucks with your platform and your business? Do they fit in? Are they a threat? How do you look at that?

We're excited about all of the evolution in technology for trucking, for convoy. Any complexity that gets added into the system is really a benefit for us because we, we can help bring some order to that Complexity. So I think there are a lot of different manufacturers of autonomous vehicles. We're excited to work with all of them. We expect that we're going to see carriers adopting some of that technology and that there will be a wide range of those kinds of vehicles on the road, just like there are a wide range of regular trucks on the road today. And so we'll be working with all of these different companies over time. And I think we'll see that when you go from sort of that single just man versus machine comparison and you start thinking about how can you actually leverage the combination of them, you'll see a lot more power there because people tend to think about it as if it's an either or combination, and it's probably an and combination. Right now a driver can only drive for 11 hours a day. You know, they've got a 14 hour window. You could take that to 17 hours or 20 hours with an autonomous vehicle. And so again, that's just that complexity, that extra leverage that I think we can help companies manage.

The part I think is interesting. I mean, if you look at breaking the cost curve for autonomous vehicles versus not, you could see that taking a lot of share. But ultimately, even if you sell those vehicles or run that as a fleet, you still have to get demand. There seems to be a world where either you vertically integrate and you have all those assets, you run those assets and you essentially run your own marketplace, your demand, or you plug in. And it'll be interesting to see how that plays out if the assets and supply and demand all get aggregated or, or if each one kind of specializes and works together.

Right. And the more that you can aggregate, the better that you can sort of balance everything as well. Because one of the biggest challenges, as I mentioned earlier, is the spikes in the peak. And so what you want to help your shipping customers do, for example, is smooth that out over time and sort of help them plan better and sort of help them with those trade offs that they have today where they're paying significantly higher cost to get reliable supply at a peak time or at a time when if they had only shipped a month earlier, they could be in better shape.

Let's switch gears to kind of societal impact. So if you have an industry this big going under, such changes, those will ripple through to society, right? There's just no way around. And typically I tend to hear two things when big changes happen. One is questioning should it happen. And the second is a focus on kind of the negative immediate impact because that's, you know, you have Line of sight to the problems. I find the first question kind of unimportant and meaningless and maybe even a little bit boring because progress is just going to happen. It's kind of hard to fight. But the second one's kind of interesting. So if you take a look at the impact on lives and on jobs, which I think are the two. How do you think. Not the near term. Everyone talks about the near term over the midterm and long term. What do you think the net impact on society is? And I get it's going to be bumpy and not perfect, but how do you guys think about that?

I think you're going to see, particularly truck driving is the number one job in the country. We think about this question a lot. You really have to think about, as you say, the medium to long term evolution. And so drivers are going to retire and then you're going to have new people coming into the logistics field with a different expectation of what that job is going to be. This has been happening really for decades too. If you think about how technology has impacted the workforce, a great example for convoy is telephones. So there used to be switchboards that used to make all of the connections from person to person. If I wanted to call you, I had to have somebody on the other end make a connection between us. And that's what brokers are doing today. And so that's what we're helping to automate today. And then you started to see more evolution to the actual technology. And I think we're going to start to see that in trucks and things down the line. So I think you're going to see people coming into the logistics field now and in the next 10 years, 20 years, thinking about a combination of not just how do I drive and do manual labor and those kinds of things, but how do I think about piloting or planning or managing a transportation business and kind of putting those skills together.

I agree that we have to take seriously the societal impacts. The question I have is what is the right approach to deal with that? I mean, is it the government regulation lags innovation, it can't lead. Right. So is it our responsibility? Like how? I'm just trying to figure out in the near term there will be some disruptions.

Yeah. When it comes to the society aspect of it, when you think near term, especially something like convoy sort of really helps these small businesses, many of whom are just one person, thrive and really support their families. Technology can also be sort of a gateway to that next stage of the world as well, where someone who Wouldn't have been able to start their own business in another time, can start a business today that in 10 years maybe they'll actually have 10 trucks. And some of them will be autonomous and some of them will be trucks that they drive themselves. But I think there's an opportunity for it to go that way as well. And so in terms of do we have a responsibility? I think there'll be a court of public opinion. Means that you probably always have to take a stance on it and do something positive toward it. But that's one of the reasons we prioritize drivers and their livelihoods and families as well.

Well, let's talk then about regulatory stuff. So what's interesting for me, I spent a lot of times in a lot of companies with kind of acute regulatory pressure. And I'm a bit callous to it. Like, it doesn't make me nervous. But I am finding something very interesting in our world that I didn't expect. So if you look at vehicles, kind of the robo taxis in the car, the passenger vehicle. Right. The regulation you have cities that are letting you do unmanned testing, file for permits you have, states are competing with each other to be more friendly. You've got the federal government with both administrations setting guidelines that are largely favorable. However, for trucking, not so much. As I take a step back and look at it, the messaging I'm getting is the government, will, quote, protect products but not people, or they'll protect jobs but not human safety. And it just feels odd to me. And I guess the question is how you work with more tactically kind of gr. Is that anomaly that just there's a time shift that eventually they'll catch up, or is there something. I mean, I guess you could just say Teamsters. But what is it? It just doesn't make sense to me.

No, I think there's. I think there's a combination of probably history and then the actual implementation of trucking. So the history part of it is that for decades now, we've been regulating trucks and we've been regulating folks, freight and logistics because of issues with ownership of the cargo and liability. And so that that area right now is already really heavily defined in terms of what the rules are, what the regulations are. And so there's, you know, something to catch up to that. But then there's just, frankly, the implementation of it is really difficult because any aspect of freight to put autonomy as part of that transaction. There are so many things that require a human judgment and require troubleshooting on the fly. Everything from the truck shows up at the pickup location and it doesn't have the right PO number to, you know, there's a facility where there's a human who's making a bunch of judgments. This freight isn't ready yet. Everything to. Then they get to the delivery and they're asked to help unload the truck. And so those are all things that are extremely difficult to automate and to think through all those complicating factors. And so I think that aspect of implementation is going to play into it probably even more than the regulatory aspect will.

I mean, for me, I know some folks in the room are working on trucking, like it would be great if we get ahead of it because I think once you get behind, it's really tough in that 10,000 pound threshold that they're sliding into. All the regulation really feels like we're going to be paying a price for that for a long time. So this is a call to arms or anyone who's working at trucking to kind of get organized. All right, so let's switch gears and talk about competition. So it's really hard to talk about logistics and shipping and not really talk about Uber and Amazon. We'll talk more broadly about the rest of the competitors. But my view is that Uber and Amazon are not really tech companies. They're logistics businesses. And you see their skills align with that. They sound like tech companies, but in many ways they're not. I mean, how do you guys deal with that? I know they're looking at the two spaces that Convoy Neur are in. There's no way they're not. And I'm pretty convinced that you guys are also looking at them as well. So how do you think about that in a world where they're, you know, they're formidable.

Yeah, well, in freight, I think the innovation that you're seeing from other companies entering this space is just, it just shows how starved this area has been as compared to like you look at what's happened in travel or communication or finance or other areas where there's just been so much innovation and they've totally transformed those industries. So partially it's just a recognition of that. As we've seen Uber come in, they've approached it a certain way, they've tried a couple different things. They bought a brokerage, kind of build something off of the trick.

Seems really weird to me. Like it feels very antiquated. It feels like it's half a step backwards, especially for that kind of company.

I agree. You know, then you've got Amazon. They Definitely have a strong logistics presence, but it's not the only thing that they're focused on when you think about tech. And so when I think about competing with those companies, I think for Convoy, the differentiators are our focus on freight and transportation, our focus on trucking, and then our focus on technology. Really from the beginning, we created our app and our products, thinking about how should the world work, how should this transaction happen? Not sort of restricted by what we knew to be any limiting factors in the world today. And then we used the technology to fill in those gaps. And so whereas you'll see a lot of companies will have an app that they'll do all of the difficult stuff. They'll match the truck, they'll find the truck, they'll negotiate the price all manually, and then they'll push the job to an app at the end and they'll get some GPS tracking, maybe they'll get a document uploaded. But whereas Convoy has thought about, let's automate those really difficult parts of it. So let's figure out the right match, the exact right truck for the job, which is where you get so much of the benefit, both in terms of the efficiency to our teams and price to the shipper, things like that. And so we focused on automating, really that whole part of the chain, whereas others, I think, are just doing the end. And so there's so much efficiency that's being lost there, which for us, I think we'll continue to have that strong focus on tech and, and trucking really, as sort of our differentiator.

What I find interesting as I think about the space is what is the basis of competition, the core competence that actually matters. And you could look at it scale, ops, maybe tech. And I think it's very easy from the outside to look at scale and assume scale begets winning. I kind of think these are real tech companies that have to be companies that look like on the outer layer, the. The candy coating on the outside looks like tech, but inside, the really scale businesses that are kind of ops companies. Right. At the end of the day, it'll be interesting to see how that plays out. I do think ultimately tech is where the real disruption occurs. And I'm not sure that's their basis of competition.

Right, right.

So the other question I have on the competition side is that different industries have different shape of the winner profile.

Right.

The winner profiles don't look the same. Some you have a dominant player, others you don't. Some space. Some you have a core business that can actually go to Jason C's others you don't. And I'm thinking like an Uber in particular. Right. Uber went from its core business and it's Uber Freight, but many ways. Different customer, different supplying, different demand and different asset and actually different math. Right. I mean it's one schedule mechanic. In these spaces, do you feel like these competitors are going to kind of expand and you feel like they have footing to do that? I'm not sure. Are these winner take most spaces or do you feel like these are spaces where there can be multiple players in.

There's so much that's different between passenger transit and freight that I don't think you get a ton of economies of scale from having the two businesses together like Uber, passenger business and the freight business. Other than being able to share some resources with people and developers, the problems that you're solving are so different. A person has agency. A person can decide whether or not to get into a car. They can help give some direction. The freight doesn't have that same kind of agency. You have to solve a totally different set of problems for that. Plus it's much more complicated. You're planning it for the future. You might have multiple stops. You have to deal with what's unique about each facility that you're delivering to. So I don't necessarily see that you're really gaining anything there. I think focus can help a lot when you're really focused on a particular problem. So. So I think where companies succeed at this is where they break up teams and they have specific teams go focus on problems. What you have to count on there is a benefit from, like I said, people or culture or sharing of some of those kinds of resources. Freight's also just one of those industries that it's so insane how large it is that you could have a ton of players who take a very small percentage and all have incredibly large businesses and are very successful. I just came from a transportation conference in Dallas and it was other brokers talking to each other. They all had the same approach, which was to share information because they didn't quite view each other as competitors. They also saw themselves as having a niche business and becoming really great in that business. And so they wanted to help others become great in their niche business, which I thought was very interesting. There are a few industries that are so large like that that their competitors are actually wanting to sort of help each other because they don't see each other as such strong competition competitors.

Although I would add as a guy who's been known to like network businesses, the network Dynamic in Convoy is self reinforcing. It actually scale begets more scale. So it feels like the kind of business, if there's enough liquidity traction, that it kind of gets bigger on its own. So it feels like this can be one of those businesses that has a dominant dynamic where the broker business that's very manual does not.

Oh, 100%. 100%. I think what you see from traditional brokers is that that's their way that they're thinking about surviving in the future, is that they're all thinking about getting more and more customized. Whereas when you think about a business like Convoy, where we're working toward that national automated liquidity, that's something where it becomes more and more efficient over time. The more that you have the machine learning algorithms thinking about how to get the very best match for your driver to that shipment, that's just going to get more efficient with scale.

Listen, I don't want to run out of time before we open up for questions, so if you guys have some questions, we'd be happy to kind of field those anything. Where is the first place in the world and about how long before AV for logistics, for products and what would be interesting or surprising about that in.

Terms of the where, which is the. Probably depends on the regulatory environments. And who's going to be the most excited about a 25 ton vehicle plowing down the freeway without anybody behind the wheel? You're probably more likely to get it somewhere like China. If not China, I don't know, maybe could be somewhere in South America, could be some other places. So Singapore or Singapore. The way you kind of accelerate something like that in the U.S. is you put some boundaries around it. And so you have something like a checkpoint or something on the freeway where you say autonomy can start here and it has to end here. And then you make it a little more akin to like a rail environment, for example, than a peer trucking environment where you have a person drive it to a certain place and then you know a person's going to take over again toward the finish. And that can help with some of the complication that you get at both the pickup and the drop off facilities of you have that person who has that agency and can solve the problems and make the decisions that you need to make. When things are more complicated versus the.

Freeway time, I think it makes sense. And first and last mile are different. I think generally for the timing standpoint, I think the question asked is, is it full L5 autonomy, all use cases or is it something that's pared down. Right. I think history has shown anything that's really complex gets simplified. Either regulatory technology, business like you will simplify to get it out sooner. That's inevitable.

I mean, we have some of this today. Like we have cruise control on our vehicles, we have lane assist on our vehicles. On the scale of 1 to 10, you know, we're maybe at a 2 and we're going to keep moving along that time frame. And I think I said earlier about 10% of the equipment turns over every year. So we're going to get a little bit better every year. And the least advanced trucks are going to age out. You're going to get new features that are coming. And so new things are going to become available and then become standard and drivers are going to learn to deal with those. Again, that combination of the manual and the machine together is more powerful.

So my question is regarding logistics. There are other aspects of logistics in different types of industries. So yard hustlers, ports, mining, a bunch of other type of logistics. There are thousands of applications. What about these? Do you think Autonomy is going to reach that type of industry too, or that's going to take a long, long time.

So the question is just to make sure I'm getting it right, the question is, how do I think it's going to take a long time for Autonomy to reach the other aspects of logistics that are like at ports and things like that? You see innovation a lot of times flood to where the biggest problems are. And the largest problems are at least if resources are being allocated efficiently. Today, most of the freight that moves on over the road trucks, it's not as much at ports, on boats and things like that. And so I think you're going to see more innovation on over the road trucks. Absolutely. You're going to see it everywhere. I think it's just a matter of exactly when it's going to happen. And I think in that case you're probably are talking about years and not decades. Just the way that today logistics and transportation companies develop niches. Like technology companies are going to develop niches too. And so I think they're going to look to solve particular problems in areas where they have expertise or they've recognized a particular solution that could be better. A lot of times it comes down to better data and better data management. And for convoy and for freight, it's a lot of matching. You could see some of that come up in terms of, of forecasting and predicting and therefore matching different types of transportation companies together. So you have companies today that will match up Companies who ship on boats with companies who ship on trucks. And so they can make those matches a little bit better as well if they can manage data and predict things better. So I think the answer is yes, absolutely. And I think you'll see it in the next couple of years as new companies develop their niches.

The one thing I'd caution this cautionary tale is that, and I think Tesla is teaching the world this is that you can get a little bit cute on kind of applying sophisticated technology to problems that actually don't need it. In their case, fine motor skills. Humans are very, very good at that. Robots are very not good at that. They're very good at gross motor skills and they're expensive and they don't amortize well at low scale, the elegant solution may not be the right solution. I think what's interesting, particularly in these cases, cases are low ASP manual labor, high percentage of total delivery cost. Like if you start looking at that, that's where you disrupt something that is very big and it's very concentrated and applied surgically where it matters most. My concern is once the technology is repeatable or people have failover, they, you know, their, their business doesn't work. The tech is kind of interesting. They fail over use cases that actually aren't a natural thing fit. This is very, very specialized. And I think the good news is all the brain power and all the tech will be applied to the biggest, most pressing problems. But at some point that won't be true. And it might be years from now, but I think we're going to see that same effect. And I think we got to be careful for that. I'm not sure I the big mining, I just don't know how the labor is a big portion of the expense for that massive those Titan vehicles. Maybe it is, maybe I don't understand that world, but it doesn't feel like the. The same as having a delivery guy who makes 20 bucks an hour and do one and a half deliveries or one delivery that seems pressing economically. The other one doesn't seem as pressing economically. But again, I don't know that space.

There might be a safety component to that as well too. Are you.

No, absolutely. Just risk. Okay guys, thank you. Thanks very much. Thanks.