Flexport’s Petersen on Redefining Forwarding

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Hi everyone, and welcome to Bloomberg Intelligence Talking Transport podcast. I'm your host, Lee Klaskow, senior freight transportation logistics analyst at Bloomberg Intelligence. Bloomberg's in-house research arm. Before diving in, a little public service announcement: Your support is instrumental to keep bringing great guests on the podcast like the one we have today. If you haven't already, please do take a moment to follow, rate, and share the Talking Transport podcast. We appreciate your support. I'm very excited to have Ryan Peterson, the founder and CEO of Flexport. Ryan started Flexport back in 2013. He holds an MBA from Columbia Business School and a BA from UC Berkeley. Welcome to Talking Transports Podcast, Ryan.

Yeah, it's great to be on here talking transport. That's my favorite thing to do sometimes.

So yeah, sometimes we get to talk about it more than other times. You know, when there's a big problem in the supply chain, that's when I see you on TV all the time.

It's a— it's one of those times right now, too, actually. All of a sudden, the ocean freight world has gone on fire, turned back on fire.

So, well, before we get into the markets, I want for people that are listening in to learn a little bit about Flexport. Can you just talk about the company?

Yeah. Flexport's a global logistics provider built on a modern technology stack. So we make it easy to ship cargo anywhere in the world and get you visibility control, like where is the cargo? When is it going to arrive? Ship any quantity of goods in any mode of transport. So air, ocean, trucking, rail, clear through customs, get it delivered. The fundamental problem that we solve is goods need to move all around the world and any given asset owner doesn't, can't move those goods door to door. You know, you think about a ship, it goes from port to port, but the container has to go from door to door. And ultimately, we really care about the products inside that container moving from the factory all the way to the consumer stores or into the retail store network. And so you need this coordinating layer that sits on top of all the asset owners. We call this industry freight forwarding.

Right.

I often joke it should be called freight email forwarding because there's a lot of coordination that happens of like, Excel attachments and PDFs and just email unstructured messages. So bringing software to bear on that problem so that you're connecting all the different parties in the chain, finding the best price, best routing, and getting people good visibility, communication, compliance. It's a hard problem to solve.

And you guys help with all modes of transportation, ocean, air, road, rail?

Yeah. And so we've grown to where I think we're the 3rd largest freight provider for ocean freight in the United States. Similar in air, the top 5.

Right.

In top 10 globally for both, for ocean. I think we're a little bit smaller on air freight side. If you were to look at our, you know, all of the freight forwarders in the world, there's, I, we once tried to estimate this. It was like 20,000 different companies. It's sort of, you have a lot of mom-and-pops, a lot of small business doing this. But if you look at the list of the top 100, let's say by volume, There's only one that was founded after 1994 when Netscape was invented, when a web browser came out, and that's Flexport. There's a lot of great companies in this industry, a lot with capabilities and knowledge that we admire and look up to. But from a tech standpoint, it's just hard to kind of reinvent an old legacy business and have it become built on a modern tech stack. So that's been our big advantage being found. We're lucky we're just founded in a more recent period when we can use the cloud, you can use AI, you can use all them. modern tools and build our own software to make it easy for everybody to do this. Yeah.

And you mentioned it's a very fragmented market and the freight forwarders that don't embrace technology, even the legacy players, if they're not embracing technology, in a couple years, it seems like they're going to be left out in the cold.

And that's really accelerating. We've had a lot of breakthroughs with AI in the last few months, just literally in the last few months, the ability to apply OpenAI and other large language models to some of these unstructured data problems and get remarkable results.

Could you talk about what you guys use AI to do and to make your people more productive?

Yeah, well, there's a bunch of different use cases that we've, and some of this we've been doing for a long time where we build our own machine learning models. So for that, for example, pricing, we have, we optimize, we, Pricing that we charge for spot market. It's very volatile and it's hard to stitch together all the rates. And then how much should you, what markup should you apply doing kind of conversion rate optimization? We've actually managed to increase our net revenue per transaction and the conversion rate with the AI, which is like, usually you would think, oh, I'll accept a lower conversion rate if I make more money per transaction. But When they showed me that result, I couldn't even believe it. It was like, no, you can't make the conversion rate go up and make more money. That's not possible. But it did. It does. The more interesting example is in act— and it's related. When you have a container that you need to allocate and which ship should I put this container on? Picking amongst all the world's sailings of what's the best route that will actually get this on time to where the customer's warehouse is, where they're shipping it to.

Yeah.

That's a problem that's, you know, humans can solve that problem. They're reasonably good at it. It's not that hard to pick. But what becomes very difficult is on average, we're getting something like 2,000 containers canceled by our customers each week because they're not necessarily canceled. That's the wrong word. Rescheduled. Their production gets, you know, production is chaotic. And so if the cargo is not ready when they thought it was going to be ready, they have to Cancel the booking they have with you and do it for a week later or whatever. So that's a hard problem because I've already got this ship, this container allocated to this sailing. You cancel on me. I don't want to go back to the carrier, the ocean carrier who owns the ship and cancel the sailing. They don't like that. They lose money if the ship doesn't sail full. And so it was very hard for humans to do this. What software does is it, what the AI does is 10 times a day, It looks at all, every cancellation I have, and it finds another container that was meant to go at a later date and pulls it forward. And now I'm actually helping that customer get there faster and reducing my cancellations, and it's selecting for the cheapest option. So it's improving our transit time, lowering our cancellation to our carrier, and it saved us 2% of our freight costs. So there's all kinds of things like this that machine learning, we've been, building machine learning models for a long time. The large language model AI, we've worked with OpenAI, a company called Adept, which is a— actually, the CEO of Adept used to be the head of engineering for OpenAI. This is a small startup. We're having a lot of success with these, with things like getting statuses for a container from a carrier website. Something that if I don't have an integration, and we don't have integrations with every port terminal in the world. For every ocean carrier in the world, there's hundreds of small carriers. We would have to send a human there to check the status and update it, tell the customer what's happening. We're finding that the AI is actually quite good at going to find that data. Before, we would build web scrapers and the software would, we would just write software and it would be hard-coded, go to this website, look in this corner of the website, grab this status. Return it here. That, those break all the time because the website, slight change to the website and your software breaks. So web scraping is a really good example. We haven't started doing it except in hackathon, but voice agents, and actually OpenAI's just put out their newest model that has a really good voice agent technology. So this is a, it sounds like a human calling you. And in our hackathon, we have it where a human actually in my voice will call a vendor and negotiate cheaper freight rates. It was kind of a dumb idea, but I mean, it was a cute idea for a hackathon. I don't think it's a good business idea. But what I think will actually work is having this human call. You don't need to pretend to be me. It'd be weird if I, the CEO of the company, called and asked you the status of a shipment, but being able to call out there and make a business call and check, hey, what's going on with this shipment? And talk to a human at the— because there's not enough APIs, there's not enough web connectivity, especially at truckers and warehouses. You know, you're waiting for someone to, um, to— you have to call and find out what's going on. And so having voice agents that can call, and I think you're gonna end up in a world where voice agents talk to voice agents on the other side.

Right.

Which will be kind of funny and interesting.

Yeah, I heard a crazy stat the other day. It was something like 25 or 30% of truckers still have a flip phone.

Oh, that's pretty interesting.

Yeah.

That's probably changing pretty fast. We have about 400,000 truck drivers on our mobile app that we can dispatch loads to. So they are, you know, they use Android phones mostly. You'll see a lot of that.

Right. So where do you think AI, so you mentioned the voice, aspect of it and in terms of where AI could go, where do you see AI going beyond that for Flexport and the broader transportation markets?

Yeah, well, if you look at the freight forwarding industry, which is again, this like kind of coordinating layer on top of the asset owners that's moving the cargo between, you know, between many asset owners on a single transaction. If you look at the P&L of a freight forwarder, so like For every $100 in revenue, typically on average across these companies, about $75 to $80 of that is being paid to the asset owners.

Right.

To the trucking companies, the carriers, the ocean carriers, whoever. And then $20 to $25 they get to keep as their, effectively their net revenue. That's their revenue. Within that $25, $10 of it is variable cost operating labor to coordinate the transactions, and you'll get $5 to $10 of sales and general other costs, rent and everything else, and $5 of profit. That's kind of what, how to think about the P&L. Well, of that $10 of operating costs, variable cost, we, our team thinks we can probably in the next 5 years Cut that by 80%. And then you have a choice. Do you, are you going to be 8% cheaper than everybody else or add 8% of profit margin to your, you know, your bottom line? Or, or hey, maybe competitors come along and everybody, just the price of transport goes down 8%. You don't, you don't get to keep it.

Right.

We haven't built our business model on that. We kind of see that as gravy and upside like that. We're, we're not, It's been harder over the last decade to automate processes than I would've expected, but we're having more breakthroughs in the last 3 to 6 months with AI than we, that all of a sudden I'm becoming quite optimistic that we will in fact be able to realize some of those gains. So that's a huge impact. If you can lower the cost of shipping anything internationally by 5 to 10, 5 or 8%, that's massive.

Right. And so Flexport, from my vantage point, I would consider like a technology first. Freight forwarder where you know the other ones are, you know the legacy ones are are are human first. Not being that they treat humans first, but you know they they were before technology came out. Kind of to what you were saying earlier. So I'm assuming you guys have freight brokers. You have people that deal with customs in your organization. How has AI increased their productivity? Can you give us some examples of like like loads per day that that that they've been able to do with AI? Yeah, we do.

We have, and we still believe that this is a relationships-based business at the end of the day.

Sure.

And when I hear relationships-based business, I often think it's kind of a code word for mediocrity. Like, if we do great work for you, you will have a good relationship. It's not like some good old boys club. Like, we've got to be really good at our job, but it does very much matter. that you can pick up the phone and call. I talked about voice agents. We'll never do that towards our customers. Like, you need to call your customer and help them out and solve their problem. They need to be able to call us and have us solve their problem. But yeah, we can make our operators a lot more efficient in the processing of things that we do. On the customs side, we're about double the number of customs entries per month That a traditional freight customs broker was, and that we were a few years ago through automation, not just AI, but just writing good software to make them efficient to process data, optical character recognition. So being able to, because a lot of customs, the data comes in on documents, Excel files, PDFs, whatever we do, ingest that, structure it, hand it off to customs. So building models that can go and extract that data and make the operator very efficient. And then, uh, on the freight forwarding side, I think what we've, what we've, the work that we've done and it's taken us, we really started in earnest on the operator productivity piece in 2019. Before that, almost everything we built was trying to make the user experience amazing of Ship with Flexport.

Right.

Uh, it's really great. I, we didn't spend enough time in hindsight. We should have done it earlier on just like really hardcore focus on productivity. 2019 is when we got really serious about it. It's about 5 years ago. It's been a journey. We built workflow software. So the operator, if you want to ship a container from door to door, there's, we now have it as 108 screens, like a workflow, like with custom web form, how to do it.

Right.

And then software that automates aspects of that process of each of those screens. And then this is where we're seeing the best, some other breakthroughs from AI, from from these large language models is that because we've made the screen so simple, so simple, even I could do it. You know, we probably train you, Lee, in half an hour to become a freight forwarder. It would take you longer than that. But for some of these tasks, they're not that hard. Once it's—

And I'm not that bright, so it takes me longer.

Once it's been made kind of TurboTaxi, like make it simple, you can follow them, follow along. Right. And then it's now simple enough that AI can complete some of the tasks, like those things of like, Where is this container? Track it, track it for me. Get the status or extract the data from this bill of lading or place this booking with this carrier. Those things. If you asked me a couple years ago, I'd be like, yeah, we're not better than everybody else at this yet. We should be. And it's a weakness of ours. Now we're starting to see, okay, this software is making our operators a lot more efficient and higher quality. And most of the inefficiencies in logistics come from bad quality. Like if you make a mistake, And you have to undo it, that'll wipe out any efficiency you gain from people typing really fast for the month.

So you guys are a private company. I'm assuming you're still in growth mode. Some of that growth through organic, some through M&A. You guys made some interesting M&As in the last, I guess, 12 months. Can you talk about that and how those businesses complement the legacy business of Flexport of being a forwarder?

Yeah. So yeah, we started as our, in our very much our roots and is in this freight forwarding world. We acquired 2 companies last year. We acquired Shopify Logistics, which is a fulfillment business, both e-commerce fulfillment. So you're likely, if you're buying on a Shopify site, website, you're likely to have a package delivered by Flexport. You'll see Flexport on the shipping label coming out of our fulfillment centers. And then we also acquired Convoy, which is a trucking brokerage software. platform. And that's where I mentioned we had these 400,000 drivers on a mobile app. That's through an acquisition. We acquired Convoy. And that's allowing us to do full truckload. So shipping domestic in the United States, both of those businesses are just US focused today. And the way to think about how it all ties together is really, well, on the one hand, it's a one-stop shop. Like you can ship anything and now a small part, including small package with the Shopify Logistics acquisition or full truckload. With the Convoy acquisition, and then from factory all the way to customers' doors, as well as into retail stores. So we deliver to all the major big box retailers in a nice automated way so we can store your product in our sites and then distribute it out to the, to your retail network.

In the Shopify fulfillment, do you have like fulfillment centers all over the United States? Is it North America? Is it global?

It's just US for today. We want to take it global. We're focused on really emphasizing the quality, getting that. It wasn't a profitable business when we acquired it, so we're sort of dialing the unit economics and growing it to get it to be profitable. Aim is by the end of the year, and then we'll start taking it global. We do, we have 5 massive fulfillment centers, so that gives us coverage to ship to the US, like 85 or 90% of the US population within 2 days out of one of these sites. They're really massive. I was, they're kind of bloated. They're a little terrifying if you're the guy paying the rent. They're very big. The 1.2 million square foot is the typical of the 5. That's like kind of typical. For context, that's half a mile long. The Pentagon is only 0.2 miles long. So it's like, they're really big.

It's a big building. And are the customers, Like small to medium-sized shippers, or are there retail names that most people would know?

We really run the gamut. So we started with being the best way for small business to ship things. That's my background. I used to run a small business and importing stuff, and I was very frustrated with the freight forwarding and the lack of technology and the fulfillment piece. So that's where we started, but we've really grown up. We work for some of the biggest companies in the world, Fortune 10s that use us for various things. And yeah, really any size company can use something. There's something for everybody between our ocean freight software for managing contracts, customs clearance, fulfillment, trucking. And these things can be purchased separately or, you know, the goal is to make it, the idea is to make them, they work much better when you buy them all together. But that is very much up to the individual customer. How do we create value for you? And we think we can generally create a solution by Combining ocean freight plus customs plus trucking into the fulfillment network, et cetera.

Right. So you are a private company, so your financials are your own, but you mentioned the Shopify business, how you want to bring it to profitability. Do you have any sort of targets for the company as a whole in terms of any financial targets you could share?

Well, definitely aiming to get profitable again. We've been profitable in the past. We're We're all hands on deck. It's a big focus for us right now. And a lot of it's basically through growth. We'll be profitable in 2025, next year.

Okay. So it's about scale.

But that's not automatic. That's through like everybody at Flexport working super hard, doing their job. Some of it's scale, some of it's new technologies that are unlocking some cost savings and revenue improvements. A lot of it, you know, we've got some new products, the Shopify one, We have a great new product that helps companies manage their contracts when they sign directly ocean carrier contracts directly with the ocean carriers. So we have to go grow these new products and new product lines.

So, you know, taking a step back, you know, from the company, you know, you started talking about the freight markets as a whole. Can you talk about what you're seeing in the ocean markets?

Yeah. The ocean market is, it's a boom and bust cycle. And I guess that's the way it's been probably since the invention of the shipping container. You have a long-term secular growth, but it's a, the fundamental problem in ocean freight is that the ships last for 30 years. And so the supply side has to make this projection for 30 years of how many, you know, how many ships they need.

Right.

And just nobody can predict anything more than 18 months in the future is what we're finding out. Actually predicting 3 months in the future is already enough. So it's a boom and bust cycle like anything that's asset heavy. You either have too many ships or not enough, and the price can go crazy. And what's happened, you know, we saw this in COVID where the price of a container went to like $20,000 when there was congestion at the ports and not enough ships to keep up with the consumer demand. That was a consumer demand-led cycle that then created supply crunch as ships got congested at the ports. What we're seeing right now with the Red Sea is a demand side, but the ships having to go around the Cape of Good Hope, around Africa, is really eating into the supply side. So you have a lot of new capacity. The carriers made a lot of money during COVID That's no secret. They bought a lot more ships. So everyone thought there was going to be plenty of excess capacity and the price of ocean freight would be low. Everyone, including me. Then all of a sudden you have these missile strikes in the Red Sea and ships going around. Well, if there's, you might have 20% more ships, but if it takes them 20% longer, you're at no extra capacity. And it's really down to the trade lane level. Do you have enough containers, enough chassis? Those are the trailers that you move. And right now we have a supply crunch. There's not enough capacity. to keep up. The price of freight in the spot market has gone almost— we're looking at $5,000 to $6,000 or more. Contracts, the carriers have imposed what we call peak season surcharge that usually takes place like ahead of Christmas shipping, you know, ahead of the later in the year. They've imposed that now already. So we're getting even the contracted rates that you Their prices are spiking. There's not enough capacity. People are having trouble getting their cargo in. So we'll see. We'll see if this lasts months or through the end of the year. It's very hard to predict.

Yeah. You know, given the longer-term supply issues facing the industry, it doesn't seem like it's long-term sustainable in terms of the pricing.

There's a lot. That's my view too. There's a lot, even with going around the Red Sea, there's a lot of ships have been ordered, will be delivered throughout this year and into next year. And so probably there's a, we're looking at excess capacity for, again, for next year. The long run kind of rule of thumb is it costs a little bit less than $2,000 to ship a container from China to the US. And so right now it's, you're going $5,000, $6,000. And during COVID it was at peak $20,000. And by the way, $5,000 or $6,000 is if you can get loaded, you might have to pay $10,000 to get loaded. So it's really about the margin, right? It's like the average price is lower than that, but If you have one extra container you need to get loaded and you need it now, you're probably paying $10,000.

So do you think the air market is better right now?

The air market is also really interesting right now because of the rise of e-commerce out of, especially out of these Chinese e-commerce providers. They're now somewhere, depending on the week, 30 to 50% of all the air freight is parcels the air freight in the world is parcel volume being flown direct to consumer out of, mostly out of China. And so that's created a huge amount of demand for air capacity. Similar problem, actually the air market's really weird because 50% of all air freight is flown in the belly of passenger planes.

Right.

So in that market, not only do you have the supply and demand, it's hard to predict how many planes you need, but the number of planes that you need is actually not driven by how much cargoes being shipped, but also by how many passengers want to travel. And so that can be, you know, and we've had all of a sudden a resurgence of international travel as people couldn't travel for a couple years during the pandemic. So it's coming. There's a lot of demand for package volume that air freight prices are high this year after being pretty low last year.

Yeah, I get a package from Shein like once a month for my 14-year-old daughter. Not for me, my 14-year-old daughter. So when you're booking capacity on the airside, are you doing it typically through a commercial air fleet or are there like freighter-specific carriers that you also contract with?

There's both. There's both. We work with all the major airlines. And in fact, the major airlines will run their own cargo flights as well. Because if you think about what the benefit of an airline having this broad network is that they can serve on their passenger planes, the small legs out to, you know, take an airline based in, let's say, in Taiwan. And they'll have flights that go all over Asia. That can bring cargo in the belly. These are passenger flights, but then you can bring it all to Taipei and then have a cargo plane connecting or several, many connecting from Taipei out to the international leg. So all of a sudden you get, you can ship anything from any of these countries into the U.S. or into Europe. And so it, uh, you, the cargo line, the cargo flights tend to fly on the big trunk lanes between the big, the Shanghais, Taipei. Seoul, Hong Kong, Singapore, and then passenger planes tends to be to the— you might call it a feeder in the ocean world. That, so we, you know, it'll really depend on where the cargo's going, who's got the best rates and service quality, the best timeliness and capacity available. So it's very much an old, kind of an old school industry. What we can do to make it better is digitize this data about who's flying where. Connect, you know, what are the schedules, being able to track the things, get rates into the system, be faster at quoting, et cetera, getting you uplift. But at the end of the day, you gotta have relationships with all these different vendors. And then ideally you're integrating and getting data connected directly, but not all of the airlines are as modern as, you know, some of them have invested a lot more in tech than others.

Yeah. So, I mean, going back to AI, you know, there's some people question like, Are people just talking about AI to get another turn in their multiples? If you're a company, obviously the benefits are there. Machine learning's been around for a long time, but it seems like there's so much of a focus on it where 5, 6, maybe 5, 6 years ago, maybe even longer than that, 7 years ago, we started talking about blockchain ad nauseam and that didn't really go anywhere.

Yeah.

Do you think this is different? The discussion about AI versus blockchain?

Yeah, I think it's different. The use cases are way more obvious. Some of them are live now. One of the things about AI is about large language models in particular is that their performance can be predicted into the future based on the amount of compute that you are able to apply. And you're going to have emergent phenomenon. It can do things that surprises you, but we know that if you apply a million times more compute, you're going to get way— it's actually quite predictive. It's almost as— this has been explained to me by people much smarter than me who are really deep in the space that there's very few things as predictable in what returns you're going to get from applying more compute than this. It's almost like Newton's laws in terms of how predictable it is. Like, you know that if you apply a million times more compute, you will get way more results, way better results. So I think it's going to keep surprising us and the bottleneck will be compute for a long period of time. Now, what it means for any given company and how do you, what is the competitive advantage, who wins in that space is like, that doesn't make it easy to predict at all. You know, the internet was, you had all these dot-com boom startups. It wasn't obvious at all that Amazon or Google or somebody else would be the winner and just investing in AI.

Yeah.

Could be like investing in the internet. I don't know that you necessarily win by doing it, but certainly need to have a strategy around the internet. If you're in the 2000s and you didn't, your company's probably been disrupted pretty heavily by now.

So disruptions are never a good thing. It seems like there's more and more black swan events over the last 5 years. I'm assuming disruptions are good for your business because shippers need alternatives and they need help. Do you see a surge in volume, not necessarily in rates, but like in volume when we see disruptions?

Not necessarily in volume. That tends to be just driven by the macroeconomy, consumer demand trends. You saw it a lot with COVID where people couldn't go out to restaurants and travel and spend money on services. So they just bought, they shifted consumption, they shifted the dollars, their spend onto goods. So that, I don't really call that disruption. It led to supply chain disruptions because of the economy, the supply side of the economy couldn't keep up with all that demand. But yeah, we are sort of in the volatility business. I'd like to think we're antifragile. Things go wrong and tend to find that's when you tend to need someone to help you solve these problems. If the world's just static and always the same, you could probably actually just contract directly with an ocean carrier and a trucker and a customs broker and just set the network up and forget about it. But in a world that's volatile and always changing and getting disrupted, and this, you know, the Panama Canal is only operating at 2/3 capacity right now because of a drought, a lack of water in the system. The Baltimore Bridge cut off the port to Baltimore for over a month. Like, that's when you need someone with solutions to help you route around it and find alternatives and better prices and stuff. So.

Can you give an example of what you guys did for customers when the Baltimore, when the Francis Scott Key Bridge fell down?

Yeah, well, the first thing, we had containers on that. We still have containers that are on that ship. So we had insurance claims to file was the very first thing we had to do for the customers who were on there.

Right.

The, what we've, we've had, we had about 1,200 containers that were routed to the Port of Baltimore that were going to arrive within 2 weeks of that. So we had to get all new routings for all of those. Immediately inform the customer, hey, you're, you know, it's not gonna arrive in Baltimore. It's not gonna arrive on time. It's gonna be a different time. I have to arrange trucking. It's gonna cost you more. You have to pay for a longer trucking leg. That's not free. So a big part of it's communication, like getting in front of the customer, explaining what's happening. What does this mean for you? What does it mean for your customers? If you have cargo with an ETA, when is it gonna arrive? You need to know that. So a lot of it is around communication. Baltimore is a major port for the Mid-Atlantic region of the US. It's not a major port in the global scheme of things.

Right.

It's nothing like when the Ever Given got stuck in the Suez Canal, that ship that got stuck. We had 45 containers or so on that ship and another several thousand lined up behind it. Or even just now with the Suez getting disrupted, Again, being able to go communicate to everybody what is happening, when is your cargo going to arrive, what does this mean, what is it going to cost, et cetera. These are, it's hard to do without the databases. Like, I don't know how traditional freight forwarders do this. We can in an hour find all the shipments affected and send everybody an email and then have a plan for, you know, a call-down plan to go call everybody and let them know what's happening.

Right. This might be getting too much into the weeds, but what happens to the containers that are stuck on that ship? By the bridge in Baltimore?

It's still TBD. They're going to be stuck in litigation for many years. What fundamentally, you have this rule in maritime law called general average, right? It's ancient law which says that the damage is shared to, if cargo's damaged, it's shared across everybody's, all the customers, all the containers are shared that pro rata. So like, Some of the containers in the front were damaged. There's perishable goods on there that went bad that are damaged. So those people will be made whole by everybody else on the ship. And then it's all going to get tied up in litigation. So, you know, we advise the customer, hey, you should just forget about those containers. We pay you, here's the insurance claim. Just pretend they never, you know, you hopefully they show up. Both of them on, sadly, they were both exports for nonprofits. We have this group called flexport.org that does humanitarian shipping.

Right.

They were, one of them was a playground being shipped to a school in Africa.

Oh goodness.

They got paid in full for the value, so they're shipping another one out there. But I forget the other one was, it was also goods headed to Africa. Forget the exact contents of it, but they're, yeah, you sort of advise them, hey, you know, hopefully we get a free playground out of this in a few years when the, you got an insurance claim. I guess it gets handed over to the insurance company and they'll liquidate it or something. We'll see.

So, you know, you started this company. How did you get into transports? Because a lot of people, they're either born into it or they kind of stumble into it. Uh, how did you get into the freight transportation logistics world?

Um, so I was a, uh, I was a customer of Freight Forwarders. I ran this business. My brother actually ran the business. I worked for him and then eventually became partners in a business with him, uh, and another guy named Michael Kanko. And we, we ran this business. Buying products in Asia, mostly motorcycles and motorsports products and selling them on the internet in the early 2000s. They started in the late '90s when I was still in college and joined them. And so we would import products from China and I was very frustrated. We were a software team, like we built software for the business. So we didn't call ourselves a software company, but we built software. It was pre-Shopify. So we made our own website to sell stuff on the internet. E-commerce checkout solutions, payments, inventory management. And we had software in the early 2000s, my brother wrote this software that could check the rates for shipping a product, a motorcycle to a customer. It would go on the carrier, the trucking carrier's websites and log in as us, as our account, find the cheapest option, check multiple sites, book it, Print the bill of lading, print the shipping label, and a truck would show up and it would, we'd be able to ship it without having to even go onto their website and do anything. And that was in the early 2000s when we tried to do similar stuff with the import side customs, and it was just nowhere. You got nowhere. You couldn't even get a company to help us on the phone almost.

Right.

And so eventually we decided, hey, this is probably, I bet you there's a lot of other companies that have this problem of like customs and Customs is really complicated, clearing, knowing what paperwork you need, what the regulations are. There should be, the original idea was like kind of TurboTax for customs. There should be a simple way to understand what you need to clear customs and get the paperwork handled, and then we'll sell you freight solutions and other stuff. And that's basically been the journey that we started over 10 years ago, my brother and I.

And, you know, how would you describe your kind of your management style? As an entrepreneur and as someone that's leading a business that's growing?

Well, it's evolved a lot. I think in the beginning, early days, I was really growth-oriented and really just tried to hire great people and get out of their way. And I think now I'm much more down in the details and I don't believe in getting out of the way. I'm learning everything that's on, on and try to be a ball of energy showing up at everybody's meetings and reading all the documents and the reports and asking questions and challenging and much more hands-on than I was in the past. And I, you know, Tobi from Shopify is a friend of mine and our big investor, and he, I've heard him say that one of the worst, most pernicious clichés ever was that, or the idea is that that micromanagement is bad is just like a terrible lesson that everybody's been taught. And that actually you need a lot of micromanagement. You should really be involved in what's going on in your company. And I sort of took that to heart and I get good results from it.

So, you know, you mentioned Shopify was an investor. Are you mostly, or most of your investors private equity funds?

Like venture capital funds.

Yeah. So is there a book that you've read about the transportation space or leadership that kind of left a mark on you? that you would recommend to anyone listening to us today?

Oh, too many. I mean, we're very lucky that most of the world's smartest humans who ever lived, well, at least in the last 500 years, like took the time to write down their ideas and you get to read them. So I think that the difference between who you are now and who you'll be in 5 years is almost entirely made up of the books that you read and the podcasts that you listen to. And Yeah, actually one of my best tricks is that if you don't have, no one has enough time to read all the books, and I have one of those bad habits of buying more books than I can read. But if you search YouTube for almost any book author in nonfiction, you'll find an interview with the author in 20 minutes. You could get 80% of the ideas in 20 minutes. You know, you can listen to it on 2x speed if you don't have time. So I do a lot of audiobooks and a lot of listening on YouTube to Smart people. But I do read a ton of books as well. Transportation, the classic is The Box by Mark Clemenson. If you haven't had him on your podcast, you should get him. For management styles, I really like this book called Certain to Win by Chet Richards. And he was an acolyte of John Boyd, who was probably the greatest military strategist of the 20th century of the United States. He was the architect of the Gulf War I strategy. He also designed the F-15 prototypes.

Right.

Like, he's like a true military genius. And Certain to Win is the application of his ideas to business, which is always a very interesting— as a history, I like history a lot. So being able to see like, okay, how do I take lessons from the military who they deal with a lot of complexity, a lot of chaos, a lot of uncertainty that's pretty applicable in global logistics and transportation.

And so being a leader of a company and an entrepreneur, before I let you go, what keeps you up at night related to work?

We keep other people up at night. No, I'm just kidding. That's a military line as well. No, you know what? It's a very hard business because we are very dependent on our vendors to do a good job for our customers. And there's a lot of volatility and getting enough. For example, in the current world, can I get enough space? We did a great job this year of winning business from new customers. And if we can get enough space on the ships, I think we might double the size of our business in one year, which would be crazy. I don't think we can get enough space to serve all the demand that we have. So going around, making sure, going to work with all the vendors. It's a very global business. We have 2,000 employees. We ship cargo to and from 100 countries. So that's kind of hard to be everywhere. I could answer the question literally. What keeps me up at night is having employees in every time zone of the world. But yeah, it's kind of unwieldy. It can feel unwieldy, right? Like, how do you keep a handle on such a big complex organization that's so global, finding out what's happening? We do a lot of document writing in part. It helps with the time zones, but people write monthly business reviews, 6-pagers about their business unit and keeping track of it all. Knowing if everybody's doing a good job and you have the best people empowered, fighting bureaucracy. on their behalf. The hatred of bureaucracy is not enough to make bureaucracy go away. So you have to live in reality, the fact that we do have bureaucracy and some of it's good and some of it's bad, trying to understand how you can break down the friction that our employees face every day so they can do a great job.

All right, great. Thanks, Ryan. And I really appreciate your time today. It was great learning more about Flexport and hearing from you. So thanks again for the time.

Yeah, well, thanks for the opportunity. Big fans of Bloomberg over here, so we appreciate it. Okay.

And hopefully the Talking Transports podcast as well.

Obviously, yes.

Yeah, yeah. Well, I also want to thank everyone for tuning in. If you liked the episode, please subscribe and leave a review. We've lined up a number of great guests for the podcast. Check back to hear conversations with C-suite executives, shippers, regulators, and decision makers within the freight transportation markets. Also, if you have an idea for a future episode, please hit me up on the Bloomberg terminal Or on Twitter @LogisticsLee. Thanks everyone, and take care.

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