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Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Jill Wisenthal and I'm Tracy Alloway.

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Speaker 1: Tracy, it's time to return to our favorite topic of

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Speaker 1: supply chains and.

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Speaker 2: Free There's no escape. No, you can't escape the supply chain. Yes,

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Speaker 2: you're absolutely right. We had I feel like a relatively

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Speaker 2: quiet year in twenty twenty three in terms of disruptions,

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Speaker 2: but towards the end of the year, yes, and now

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Speaker 2: into twenty twenty four, supply chain disruptions are back. They're everywhere,

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Speaker 2: everyone's talking about them.

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Speaker 1: There is indeed a new acute source of supply chain stress,

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Speaker 1: and that, of course, are the attacks from the rebels

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Speaker 1: and Yemen the Hoo, the rebels disrupting trade through the

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Speaker 1: Red Sea. We're beginning to see the return of those

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Speaker 1: maps where this is where the ships were a month ago,

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Speaker 1: and this is what the shipping lanes look like today,

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Speaker 1: not unlike what was it in the Suez two years ago.

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Speaker 1: But yes, supply chain disruptions at least at some level

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Speaker 1: are back.

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Speaker 3: A little bit.

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Speaker 2: Yeah, you know it's bad when people are breaking out

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Speaker 2: the maps with the ships and also the container rate charts.

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Speaker 1: Yes, container rate charts those.

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Speaker 2: Are making the rounds again, so we've seen some container

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Speaker 2: rates start to jump, and we can get more into

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Speaker 2: that in a few minutes. For the record, Joe, yes,

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Speaker 2: I am not shipping anything at the moment, nothing from

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Speaker 2: China to Europe, so I am unaffected by this particular

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Speaker 2: development so far.

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Speaker 1: It's only a matter of time. Also, our listeners should

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Speaker 1: know that every time we're in public and people come

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Speaker 1: to us, one of the first questions they always ask

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Speaker 1: Tracy is usually about that, like do you have any

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Speaker 1: furniture stuck at a container ship somewhere? It's either that

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Speaker 1: or questions about the coal and Tracy's basement yea fifty.

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Speaker 3: Yeah.

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Speaker 2: Sometimes I feel like my life is actually a logistics

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Speaker 2: company and it's just dealing with commodities like coal and

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Speaker 2: lumber and moving furniture.

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Speaker 1: Yeah, and we talked to Brad Jacobs recently and we

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Speaker 1: talked all about your building supply needsphere House.

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Speaker 2: But even before the Red Sea developments, we actually wanted

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Speaker 2: to do another Shipping slash Freight episode because if you

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Speaker 2: remember this time last year, we did quite a few episodes.

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Speaker 2: I think about the coming difficulties challenges blood Bath, who's

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Speaker 2: your preferred noun there coming to freight and shipping, And

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Speaker 2: the idea was that after the big boom during the pandemic,

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Speaker 2: when container rates, trucking rates, basically everything exploded and became very,

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Speaker 2: very profitable, that we were now going to see the

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Speaker 2: sort of downturn. And I think that has come to fruition.

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Speaker 2: I think twenty twenty three was an extremely bad year

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Speaker 2: for a lot of shippers and truckers. But we're going

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Speaker 2: to get into that as well, because in addition to

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Speaker 2: the disruptions, we're at this sort of like weird moment

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Speaker 2: in time where we're waiting to see whether or not

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Speaker 2: there's a recovery.

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Speaker 1: Yeah, you know, it's funny even with out disruptions. As

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Speaker 1: you mentioned, No, One of the first things that we

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Speaker 1: learned when we started getting interested in this topic is

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Speaker 1: that freight trucking in particular is like hyper cyclical. So

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Speaker 1: you had this already pretty crazy cycle for the US

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Speaker 1: economy between twenty twenty and twenty twenty three or maybe now,

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Speaker 1: and it was even crazier for freight. You know, another

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Speaker 1: thing that happened last year or two is we saw

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Speaker 1: the demise to varying degrees of various freight tech companies

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Speaker 1: because like ourselves, we got interested in freight. I think

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Speaker 1: a lot of vcs did, and you see a lot

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Speaker 1: of there must be a way to, like, you know,

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Speaker 1: solve all of these problems with software and AI, and

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Speaker 1: I think a lot of these problems continue to persist.

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Speaker 1: So there's just a lot of freight stuff we got

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Speaker 1: to catch up on.

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Speaker 2: Yep, let's do it. Well.

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Speaker 1: I'm very excited because a multi time guest, I think

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Speaker 1: the first guest we had who talked about trucking, we

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Speaker 1: have them back and in studio we're gonna be speaking

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Speaker 1: with Craig Fuller, founder and CEO of Freightwave. So Craig,

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Speaker 1: thank you so much for coming back on odd lots.

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Speaker 3: Joe Tracy, great to be here again.

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Speaker 1: It really is a lot to talk about. But why

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Speaker 1: don't we start off with the disruptions in the Red Sea.

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Speaker 1: What do you characterize, as you see it, the situation

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Speaker 1: right now?

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Speaker 3: So I think there's the short term, you know, anxiety

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Speaker 3: that exists in terms of the safety of the cruise,

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Speaker 3: the dependability of the global supply chain. Yeah, it's a

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Speaker 3: lot of short term concern, but I think the bigger

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Speaker 3: story is going to play out over the next couple

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Speaker 3: of years. Is we're now reaching a point in history

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Speaker 3: where global trade and global shipping is no longer as

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Speaker 3: dependable or as predictable as it has been really since

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Speaker 3: the post Cold War period. Civilian ships are being fired

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Speaker 3: upon and this is an unusual development that we haven't

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Speaker 3: seen for really many decades. Wow.

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Speaker 2: So walk us through the importance of the Red Sea route, Like,

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Speaker 2: what kind of ships are actually going up and down? Yeah?

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Speaker 2: Where are they going? What are they carrying? My understanding is,

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Speaker 2: you know, there's containers, there's also tankers, so.

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Speaker 3: A lot of oil and gas. Obviously, being in the

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Speaker 3: Middle East, it has a lot of exposure to oil

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Speaker 3: and gas and the derivative products that come out of

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Speaker 3: that portion of the world. But it's also one of

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Speaker 3: the major trade lanes for container flows. And so think

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Speaker 3: of what moves in container. It's largely manufactured in consumer

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Speaker 3: goods that are largely dependent upon containers. A lot of

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Speaker 3: these products are coming from Asia and particularly China into Europe.

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Speaker 3: Some products going to the United States East Coast, but

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Speaker 3: the predominance of the products that move through the Suez

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Speaker 3: in the container freight is largely related to products out

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Speaker 3: of Asia. Going to Europe for European consumption.

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Speaker 2: What other routes are available for that kind of trade.

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Speaker 3: Well, you have to go around South Africa, and so

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Speaker 3: you're really adding thousands of miles of additional distance when

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Speaker 3: you aren't able to cut through the shortcut that is

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Speaker 3: the Suez. I mean, Suez Canal has caught out an

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Speaker 3: enormous amount of distance that geographically the ships have historic

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Speaker 3: had to go around. With the Siuez, it was able

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Speaker 3: to sort of expedite trade flow from Asia and particularly

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Speaker 3: to Europe. We do benefit from it in North America,

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Speaker 3: but a much smaller percent of the freight that we

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Speaker 3: depend on in the United States is dependent upon the Suez.

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Speaker 1: What is the historical role of the US Navy in

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Speaker 1: sort of securing or protecting these some of these routes,

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Speaker 1: and what do we see from US defense officials now

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Speaker 1: the sort of acute moment.

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Speaker 3: You know, there's a lot of conversation in geopolitical circles

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Speaker 3: about whether the Navy's role has changed or shifted or

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Speaker 3: is no longer effective in the role that it was

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Speaker 3: believed to be played for the last really since World

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Speaker 3: War Two. So, if you think about it, the United

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Speaker 3: States has the largest navy in the world. It's also

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Speaker 3: one of the only bluewater navies that can go anywhere

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Speaker 3: to find any place on the planet. And that's really

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Speaker 3: the call of fan.

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Speaker 1: So what does it mean blue water.

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Speaker 3: It means that they can go into deep oceans that

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Speaker 3: can be anywhere. Basically the name there's no place on

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Speaker 3: the on the planet that the Navy and the Marines

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Speaker 3: can't actually reach. And so the whole purpose of that

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Speaker 3: is to protect trade lanes. Yeah, that that is the

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Speaker 3: one of the primary calls of the US Navy is

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Speaker 3: its roles to protect commerce uh and ensure global trade

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Speaker 3: and really the world and China has mostly benefited from that,

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Speaker 3: the US Navy's role of protecting sea from things like

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Speaker 3: pirates and state sponsors that want to attack global trade.

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Speaker 3: And the question now is in a post you know,

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Speaker 3: we're now in this sort of new generation of trade,

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Speaker 3: what does it mean there's a lot more protectionism that

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Speaker 3: happens with US policy and really to be able to

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Speaker 3: defend the you know, the role of the US Navy

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Speaker 3: being able to protect all aspects of it. With geopolitical

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Speaker 3: tensions in East Asia means that we may not have

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Speaker 3: the resources to actually protect all aspects of trade the

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Speaker 3: way that we did at one point in time.

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Speaker 1: Just real quickly, you said this is a sort of novel.

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Speaker 1: I mean pirates and pirate attacks, and you mentioned them.

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Speaker 1: There's somewhat common, they're in the news. But what's different

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Speaker 1: about this is that it's missiles being fired. These are

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Speaker 1: these are It's not pirates, they're not trying to steal

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Speaker 1: the cargo. This is these are military attacks on private corporations.

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Speaker 3: These are military techniques. Techniques we've seen helicopters actually land

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Speaker 3: on tops of ships and actually take take cruise hostage.

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Speaker 3: By the way, a helicopter it looks like a squat.

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Speaker 3: You probably have seen the video of floating around where

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Speaker 3: it looks like a swat video where they're flying in

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Speaker 3: and they're basically taking over a ship through use of

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Speaker 3: a helicopter. We're seeing situations where as you mentioned, they're

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Speaker 3: using missile technology, military grade technologies, which is an unusual development.

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Speaker 3: And then with the proliferation of drones, you now have

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Speaker 3: a low cost way to actually avoid some of the

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Speaker 3: defenses that are set up to protect these ships that

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Speaker 3: they're able to reach them without obstruction, and I think

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Speaker 3: that has changed the game is now terrorist. And look,

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Speaker 3: we can argue whether these are truly state sponsored or not,

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Speaker 3: but at the end of the day, they have access

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Speaker 3: to military grade technology and they are using this to

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Speaker 3: attack civilian vessels and their goal is to disrupt global trade.

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Speaker 2: This was going to be my next question, which is,

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Speaker 2: you know, even if the Navy said, like, yes, absolutely,

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Speaker 2: we're going to go in, We're going to protect all

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Speaker 2: the ships, Like, how much can they actually do in

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Speaker 2: the face of that kind of threat, which you know

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Speaker 2: has new technology that they're clearly using, but is also

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Speaker 2: very very flexible in terms of what it can do.

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Speaker 3: I think the question is at what cost? Yeah, because

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Speaker 3: I think the US has the capabilities to largely defend

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Speaker 3: every ship or the ships that we have decided to defend,

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Speaker 3: But at what cost. I when you're looking at a missile,

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Speaker 3: you know, anti missile technol these a million dollars, We're

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Speaker 3: firing these these defense missiles off at a million dollars apiece,

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Speaker 3: and you're fighting a drone that cost a couple of

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Speaker 3: thousand dollars. I mean, at some point there is a

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Speaker 3: mass attacks on US consumers and the US economy for

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Speaker 3: US to do this, And the question is for what

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Speaker 3: is our appetite to continue to fund this type of

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Speaker 3: defense technology when the United States is not the primary

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Speaker 3: beneficiary of that type of trade.

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Speaker 2: And on a similar note, I'm always curious about the

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Speaker 2: decision making process to you know, not go through a

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Speaker 2: certain route. So MASK said it wasn't going to go

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Speaker 2: through the Red Sea anymore after dismissile was fired. What

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Speaker 2: are the factors that go into making that type of decision.

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Speaker 2: And then if the Navy were to say, you know,

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Speaker 2: tomorrow that we're going to escort all of these ships,

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Speaker 2: would that completely address their concerns? Would they be like, Okay, yes,

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Speaker 2: we're going to resume this route.

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Speaker 3: You know, it's a great question because I don't know

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Speaker 3: that the US with all of our other geopolitical commitments,

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Speaker 3: particularly around China and what's happened around Taiwan. I mean,

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Speaker 3: the Chinese want our navies in the Middle East. That's

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Speaker 3: where they want them because they enables them to have

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Speaker 3: an enormous amount of power over East Asia. They want

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Speaker 3: us moving our assets and being distracted in the Middle East,

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Speaker 3: so they actually win geopolitically in terms of their power

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Speaker 3: over the region by moving forcing us to be distracted

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Speaker 3: in the Middle East. But I don't know that we

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Speaker 3: have all the resources to defend every single ship from

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Speaker 3: these attacks. And ultimately, what the container lines have to

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Speaker 3: really think about is what's the cost of a ship.

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Speaker 3: You're talking hundreds of millions of dollars? What's the cost

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Speaker 3: of a cargo again measured in probably billions of dollars

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Speaker 3: when we took a look at a twenty thousand TEU ship.

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Speaker 3: And then you have the insurance companies which are saying, hey,

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Speaker 3: we're not going to ensure these ships that go through

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Speaker 3: these channels, and that means that ultimately Marisk and others

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Speaker 3: have to look at alternative routes. They will obviously protect

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Speaker 3: their crews. The cruise do understand that, you know, the

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Speaker 3: nature of their jobs is on occasion they put themselves

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Speaker 3: in harm's way. And we've seen that with you know,

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Speaker 3: the movie with Tom Hanks plays.

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Speaker 2: As the Captain Phillips.

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Speaker 3: Captain Phillips, you know, it was a true story. So

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Speaker 3: these things do happen with pirates. But we're talking about

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Speaker 3: military grade technology and we're talking about an escalation, and

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Speaker 3: because of it, I think the insurance companies have said, hey,

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Speaker 3: we're not willing to ensure these ships that go through

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Speaker 3: these contested channels, and I think they container lines also

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Speaker 3: don't want to put their crews at risk. They don't

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Speaker 3: want to put their you know, substantial investments at risk,

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Speaker 3: and also politically and optically putting cruise in harm's way

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Speaker 3: if something were catastrophic to happen would be very I

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Speaker 3: think demonstrative to these brands and these these organizations that

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Speaker 3: really want to stay out of the spotlight.

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Speaker 2: So Joe mentioned the maps of the ships, and again,

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Speaker 2: you know something's going on in the world when when

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Speaker 2: people start breaking out those maps showing the ships diverting.

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Speaker 2: But I thought it was interesting. So if you look

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Speaker 2: at a map of the Red Sea, the container ships

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Speaker 2: are moving, but they're still tankers. What are the decisions

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Speaker 2: being made by the tankers that are different to the

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Speaker 2: container lines.

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Speaker 3: The tankers have been largely unobstructed, So a lot of

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Speaker 3: the attacks that we've seen have actually been on civilian

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Speaker 3: container vessels and other types of cargo vessels, not on

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Speaker 3: bulk tankers. And a lot of that has to do

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Speaker 3: with the economic interests of the different countries that are

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Speaker 3: in the region. You know, these are countries that largely

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Speaker 3: depend on oil and gas exports and the derivative commodities

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Speaker 3: that come out of those to fund their economies. I

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Speaker 3: don't think that it's in their interest to do that.

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Speaker 3: And then also China is dependent upon energy supplies from

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Speaker 3: the Middle East, and you know, I don't think that

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Speaker 3: the rebels want to invite the Chinese into this conflict,

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Speaker 3: and that would certainly do it if they felt like

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Speaker 3: their energy supplies, which they are to deed upon, we're obstructed.

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Speaker 3: So I think what we're seeing is this is largely

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Speaker 3: a container story, and it's really the West that is

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Speaker 3: consuming these products, mostly Europe, but certainly the United States

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Speaker 3: to a degree, and I think that's where we're seeing

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Speaker 3: a lot of the pressure.

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Speaker 2: I think it's like they've enacted sanctions on Europe.

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Speaker 3: Well, they're certainly obstructing it. And you could argue their

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Speaker 3: acting sanctions because their goal is to obstruct trade and

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Speaker 3: to cut off the flow of product and really create

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Speaker 3: pain on consumers and businesses that depend upon these containers.

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Speaker 1: There's so many directions we could take this conversation in

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Speaker 1: so many questions, but you know, I find this framing

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Speaker 1: to be very interesting that you know, arguably we don't

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Speaker 1: we is in the US don't get a ton of

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Speaker 1: benefit from the resources that we invest in patrolling those

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Speaker 1: that a lot of the benefit goes to China. China

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Speaker 1: benefits in theory by the sort of distraction to the

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Speaker 1: US Navy pulling assets out of East Asia and towards

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Speaker 1: the Middle East. China itself obviously has expanded it's navy

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Speaker 1: quite a bit in recent years, and the estimates it's

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Speaker 1: going to continue to do so. Do people at some

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Speaker 1: point is the expectation that China itself will play a

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Speaker 1: more active role in patrolling the region or is that

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Speaker 1: in the US interest for China to grow, you know,

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Speaker 1: sort of police more parts of the world.

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Speaker 3: It's a great question, and I think it's one that's

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Speaker 3: probably on the minds of folks that playing these war

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Speaker 3: games that it is out is why, you know, one

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Speaker 3: of the big questions is if China is a big loser,

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Speaker 3: and you could argue why it would lose is that

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Speaker 3: if global trade gets obstructed, particularly manufacture goods, which China's

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Speaker 3: economy is largely dependent upon, if it gets obstructed, then

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Speaker 3: China may be the biggest loser in this. And the

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Speaker 3: question is why are they standing down when you talk

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Speaker 3: to military experts that are far more versed in this

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Speaker 3: topic than I am. What they have told me is

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Speaker 3: that China wants the United States to be focused in

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Speaker 3: terms of military focus on the Middle East and get

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Speaker 3: stuck there, if you will, pulling its attention away from Asia.

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Speaker 3: So you know, if you look at the Chinese construct

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Speaker 3: and look at she she has. You know, for years,

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Speaker 3: China was focused on economic growth at all cost, and

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Speaker 3: they were willing to sort of put all of their

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Speaker 3: other interests beside to allow their economy to thrive and

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Speaker 3: ultimately provide some level of prosperity to their people. We

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Speaker 3: have seen in the last really the last five years,

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Speaker 3: that's no longer the case, and the orientation of China

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Speaker 3: is more politically driven and more power driven, and it

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Speaker 3: suggests that China's goal is to create enough havoc on

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Speaker 3: the United States and its allies that we are sort

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Speaker 3: of forced into these situations. And there's a playbook for this.

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Speaker 3: I mean mean, we've seen some of the world's conflicts

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Speaker 3: of the last hundred years have been caused by American

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Speaker 3: allies and going out to protect its allies getting involved

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Speaker 3: in these military conflicts that really don't directly impact our

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Speaker 3: goal strategic goals, and so it is an interesting play

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Speaker 3: and it's an interesting card. I think the question is

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Speaker 3: why does this impact China most importantly? And I think

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Speaker 3: from a supply chain question, supply chain professionals are focused

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Speaker 3: on mitigating risk. These are jobs that are all in

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Speaker 3: risk management. That's ultimately what a supply chain professional does.

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Speaker 3: It thinks about cost and it thinks about risk management.

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Speaker 3: And for the last couple of years, they had been

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Speaker 3: fending off an enormous amount of risks in their supply chain.

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Speaker 3: And as Tracy mentioned in twenty twenty three, we sort

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Speaker 3: of had a level of room to breathe because all

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Speaker 3: of those COVID related disruptions were largely dissipated. We're now

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Speaker 3: in a sort of a new generation of issues that

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Speaker 3: are quite different than what we saw during COVID. And now,

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Speaker 3: as a supply chain professional that's already dealing with questions

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Speaker 3: about China's orientation to its economy, to its commitment to manufacturing,

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Speaker 3: to its commitment to exports, the question then becomes, I

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Speaker 3: now have to calculate this geopolitical risk or military risk

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Speaker 3: that did not exist before. I used to as a

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Speaker 3: professional be able to depend on trade out of China

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Speaker 3: that was unobstructed to if I have dependencies in Europe

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Speaker 3: or have customers in Europe, I could largely depend on

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Speaker 3: the su AS as a dependable trade lane, knowing that

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Speaker 3: it was not going to get obstructed. And now I

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Speaker 3: have new sets of risks that exist that did not

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Speaker 3: exist before. I mean, the reality is the ships can

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Speaker 3: go around South Africa. They can make it. It adds time,

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Speaker 3: we're talking, you know, a couple of weeks potentially, it

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Speaker 3: adds a lot of cost to it. But there are

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Speaker 3: ways that products can still flow, but it increases the

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Speaker 3: cost to do so and increases the lead times required.

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Speaker 3: And I think supply chain professionals are going to start

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Speaker 3: making different calculations of where the source products that they

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Speaker 3: don't have to contend with that issue.

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Speaker 2: So one of the things that came out of the

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Speaker 2: pandemic related supply chain disruptions was this idea of reshoring,

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Speaker 2: building more resilient supply chains. Everyone was going to sort

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Speaker 2: of reach their operations to make sure that they didn't

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Speaker 2: have to worry about the types of disruptions or congestions

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Speaker 2: that we had between twenty twenty and call it twenty

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Speaker 2: twenty two. So I guess my first question is one,

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Speaker 2: did that actually happen? And then secondly, given this new

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Speaker 2: bout of disruption, this new geopolitical risk, as you put it,

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Speaker 2: are we going to see the same types of decisions

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Speaker 2: being made the idea that well, we really need to

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Speaker 2: think of alternatives to sourcing things from China or transporting

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Speaker 2: things along that route.

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Speaker 3: It is happening, but let's just keep in mind. Moving

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Speaker 3: a supply chain is not an overnight decision. This stuff

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Speaker 3: takes decades, potentially more advanced products which have more advanced dependabilities.

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Speaker 3: Because I can't just uproot my supply chain. I have

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Speaker 3: to think about my supplier supply chains. If I have

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Speaker 3: machinery or equipment that is very specialized, I have to

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Speaker 3: think about all the technicians that can support that equipment.

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Speaker 3: So I can't just uproot my supply chain. It has

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Speaker 3: to be a gradual process. But we have seen that

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Speaker 3: take place. Some of this is supported by government funding

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Speaker 3: with the Inflation Reduction Act and the Build Back Better

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Speaker 3: Plan by Biden. Is actually encouraging domestic manufacturing, probably most

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Speaker 3: obvious in the semiconductor area and in the electric vehicle area.

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Speaker 3: We're seeing substantial amount of industrial expansion in those parts

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Speaker 3: of the economy, and so we are seeing the early

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Speaker 3: stages of domestic remanufacturing and near shoring, and so it

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Speaker 3: is certainly happening across all aspects and all product classes.

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Speaker 3: And the reason is that China. You know, even when

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Speaker 3: Donald Trump was attacking global trade, most supply chain professionals

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Speaker 3: took that as at tax. They thought of it as

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Speaker 3: an economic I'll pay the tax, it's still cheaper. I

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Speaker 3: don't have to make tough decisions. The US and China

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Speaker 3: are never going to sever trade ties. But what we've

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Speaker 3: seen is when she shut down his economy during COVID,

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Speaker 3: the late stages of COVID, that really changed the calculus

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Speaker 3: for Western decision makers that realize that China was no

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Speaker 3: longer going to do things to promote exports at all

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Speaker 3: costs and was willing to do things that could destroy

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Speaker 3: parts of its economy just to gain and maintain control.

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Speaker 3: And I think that calculation scared a lot of executives.

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Speaker 3: And then you look at the geopolitical tensions with Russia

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Speaker 3: and the Ukraine, and you look at the fact that

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Speaker 3: there is seems to be an inevitable course to some

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Speaker 3: level of conflict between the China the United States related

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Speaker 3: to Taiwan. It's obvious that supply chains can no longer

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Speaker 3: look at China as a absolute, dependable source of products.

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Speaker 3: This is one but a continuation of a process. We

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Speaker 3: talk about the Suez disruptions and the geopolitical issues that

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Speaker 3: exist there. This is just another reason for supply chain

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Speaker 3: professionals to get a wake up call because we're seeing

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Speaker 3: to take place in the Middle East and it's quite effective. Yeah,

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Speaker 3: this could easily take place in other parts of the world,

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Speaker 3: which is probably the bigger concern is what happens when

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Speaker 3: this breaks out in the Strait of Malaca or other

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Speaker 3: parts of the globe where it's not just Europe it's

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Speaker 3: being impacted, but it's also trade in the United States.

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Speaker 1: I want to pivot a little bit. So the last

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Speaker 1: time we spoke to was in May of last year.

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Speaker 1: You and your colleague got Rachel Premak the title of

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Speaker 1: that episode. We're in the midst of trucking Bloodbath two

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Speaker 1: point zero. Sometimes we do episodes about something at the

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Speaker 1: bottom and then it bounce is Sometimes we do something

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Speaker 1: at the top of the falls that one I think

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Speaker 1: was very well timed and I think vindicated. But what

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Speaker 1: happened with the of the year in free and then

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Speaker 1: where are we in the cycle on now?

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Speaker 3: So I think you've done at least ten episodes related

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Speaker 3: to some level of the side.

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Speaker 1: So somewhere we're going to get one right.

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Speaker 3: So no, But what's amazing about this is I've known

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Speaker 3: you guys since twenty twenty. Yeah, I think we've gone

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Speaker 3: through at least three cycles since times it's so crazy

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Speaker 3: and so it is, this is why we keep.

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Speaker 1: Coming back, because the line is always moving in some direction.

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Speaker 3: Is the most volatile and fragmented market we're talking trucking

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Speaker 3: specifically on the planet, and because of its fragmentation and

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Speaker 3: the fact that there are no bears to entry, it

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Speaker 3: suffers from this really violent boom and bus cycle that

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Speaker 3: got incredibly exaggerated during COVID. So if we go back

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Speaker 3: to where we were a couple of years ago, when

438
00:23:41,920 --> 00:23:44,680
Speaker 3: we first started talking in twenty twenty and twenty twenty one,

439
00:23:44,760 --> 00:23:46,680
Speaker 3: is the market was sort of at the super peak.

440
00:23:46,760 --> 00:23:50,200
Speaker 3: There was massive supply chain disruptions caused by a lock

441
00:23:50,200 --> 00:23:53,520
Speaker 3: of capacity, driver issues and so forth. Now we're in

442
00:23:53,560 --> 00:23:57,480
Speaker 3: twenty twenty three, we've sort of hit the bottom, and

443
00:23:57,520 --> 00:24:00,760
Speaker 3: I would argue that the worst is our in the

444
00:24:00,800 --> 00:24:04,679
Speaker 3: market for trucking, and we are not necessarily on our

445
00:24:04,720 --> 00:24:07,520
Speaker 3: way back. But I don't think we're going to see

446
00:24:07,520 --> 00:24:10,600
Speaker 3: things get worse as it relates to the trucking industry.

447
00:24:10,800 --> 00:24:12,760
Speaker 2: Wait, I think Joe is being a little bit modest

448
00:24:12,800 --> 00:24:15,120
Speaker 2: because at the beginning of twenty twenty three, we did

449
00:24:15,160 --> 00:24:17,320
Speaker 2: have a couple episodes and I think we did publish

450
00:24:17,400 --> 00:24:20,400
Speaker 2: a couple articles as well about how bad the year

451
00:24:20,960 --> 00:24:24,960
Speaker 2: could be for the trucking and also the shipping industry.

452
00:24:25,000 --> 00:24:28,720
Speaker 2: And it did turn out to be an absolute terrible,

453
00:24:29,119 --> 00:24:31,399
Speaker 2: no good, horrible year or whatever the title of that

454
00:24:31,480 --> 00:24:34,480
Speaker 2: movie was. But can you maybe put some numbers around

455
00:24:34,480 --> 00:24:37,560
Speaker 2: it for us, like how bad did things actually get

456
00:24:37,640 --> 00:24:38,200
Speaker 2: last year?

457
00:24:38,600 --> 00:24:42,280
Speaker 3: So it's an interesting conversation because think about the listeners

458
00:24:42,280 --> 00:24:46,680
Speaker 3: to odds mostly focused on macro stories for the economy.

459
00:24:46,880 --> 00:24:49,159
Speaker 3: When they're listening to freight stories and they're hearing me

460
00:24:49,200 --> 00:24:51,480
Speaker 3: talk about a freight recession or the blood bath, they

461
00:24:51,560 --> 00:24:55,080
Speaker 3: oftentimes assume that that means that the broader economy is struggling.

462
00:24:55,240 --> 00:24:57,320
Speaker 2: Yeah, I think the big question was whether or not

463
00:24:57,359 --> 00:25:01,520
Speaker 2: that indicates the consumer demand isn't there.

464
00:25:00,800 --> 00:25:03,240
Speaker 3: Sort of making interesting things? Is we now have we

465
00:25:03,400 --> 00:25:06,959
Speaker 3: bookended twenty twenty three, we're able to actually look at

466
00:25:07,359 --> 00:25:10,720
Speaker 3: the entire year in sort of context, and what we've

467
00:25:10,720 --> 00:25:13,360
Speaker 3: seen is that actually twenty twenty three was a good

468
00:25:13,440 --> 00:25:17,040
Speaker 3: year related to freight volumes. It actually if you took

469
00:25:17,080 --> 00:25:19,600
Speaker 3: out the COVID extremes of two thousand, sort of late

470
00:25:19,640 --> 00:25:22,840
Speaker 3: twenty twenty twenty and twenty one, and even parts of

471
00:25:22,880 --> 00:25:26,560
Speaker 3: twenty two, what you've seen in the freight market is

472
00:25:26,600 --> 00:25:28,920
Speaker 3: that the twenty three was actually a really solid year.

473
00:25:29,080 --> 00:25:32,520
Speaker 3: It continued to build momentum in terms of volume throughout

474
00:25:32,560 --> 00:25:36,239
Speaker 3: the year. But it seems like we're contradicting ourselves in

475
00:25:36,240 --> 00:25:38,359
Speaker 3: the sense that we're talking about how bad it was

476
00:25:38,359 --> 00:25:41,240
Speaker 3: in twenty three, but we're talking about a relatively strong

477
00:25:41,280 --> 00:25:45,240
Speaker 3: consumer and a relatively strong freight market. But the reason

478
00:25:45,320 --> 00:25:47,840
Speaker 3: is that we had this massive expansion of capacity that

479
00:25:47,880 --> 00:25:51,119
Speaker 3: took place during COVID. You know, we saw if you

480
00:25:51,119 --> 00:25:54,520
Speaker 3: take twenty nineteen to the peak of capacity build, which

481
00:25:54,640 --> 00:25:58,560
Speaker 3: really did not end. So the freight recession started in

482
00:25:58,800 --> 00:26:02,200
Speaker 3: March of two thousand and two, twenty two. It wasn't

483
00:26:02,280 --> 00:26:05,560
Speaker 3: until October of twenty two before we started to see

484
00:26:05,680 --> 00:26:09,600
Speaker 3: the market in terms of new capacity entrance plateau. So

485
00:26:09,640 --> 00:26:12,240
Speaker 3: we're still seeing new entrants come in the market throughout

486
00:26:12,240 --> 00:26:16,560
Speaker 3: twenty twenty two until really the third until the fourth quarter.

487
00:26:17,040 --> 00:26:19,280
Speaker 3: And now what we're looking at as a situation where

488
00:26:19,440 --> 00:26:22,359
Speaker 3: we've had this all this excess capacity that's built up.

489
00:26:22,760 --> 00:26:25,720
Speaker 3: And that's why twenty twenty three was such a miserable

490
00:26:25,800 --> 00:26:29,480
Speaker 3: year for the trucking industry is that we had. You know,

491
00:26:29,520 --> 00:26:34,720
Speaker 3: we're talking sixty thousand more trucking companies in the freight

492
00:26:34,800 --> 00:26:39,159
Speaker 3: market today than what we had prior to Covido. And

493
00:26:39,200 --> 00:26:43,480
Speaker 3: these aren't sixty thousand trucks. We're talking sixty thousand independent

494
00:26:43,800 --> 00:26:47,080
Speaker 3: companies that are in the trucking industry that have entered

495
00:26:47,119 --> 00:26:49,879
Speaker 3: the trucking industry, that are out taking freight. And so

496
00:26:49,920 --> 00:26:52,280
Speaker 3: what you have in the trucking market, we've talked about

497
00:26:52,280 --> 00:26:54,520
Speaker 3: it a few times. All aspects of freightwork this way,

498
00:26:54,560 --> 00:27:01,199
Speaker 3: where you constantly have this demand that's driving soply. So

499
00:27:01,280 --> 00:27:04,520
Speaker 3: what happens is the providers of supply are constantly trying

500
00:27:04,520 --> 00:27:07,280
Speaker 3: to catch up to demand because they see the inputs

501
00:27:07,280 --> 00:27:09,600
Speaker 3: in their business, they see demand in their business, they

502
00:27:09,600 --> 00:27:12,600
Speaker 3: see high rates, and so they're constantly trying to add

503
00:27:13,280 --> 00:27:16,400
Speaker 3: new pieces of equipment to sort of soak up that demand.

504
00:27:16,840 --> 00:27:19,560
Speaker 3: And what ends up happening is, because of the fragmented

505
00:27:19,640 --> 00:27:22,879
Speaker 3: nature of the market, they end up overcorrecting. So everybody

506
00:27:22,920 --> 00:27:25,000
Speaker 3: is doing the same thing. The big carriers are adding trucks,

507
00:27:25,040 --> 00:27:27,240
Speaker 3: the small carriers are adding trucks, New entrants are in

508
00:27:27,280 --> 00:27:31,400
Speaker 3: the market, and we just get flooded with total number

509
00:27:31,440 --> 00:27:34,919
Speaker 3: of infants. It's a classic commodity boom and bus cycle.

510
00:27:36,560 --> 00:27:39,919
Speaker 3: And that is what happened in twenty twenty two that

511
00:27:40,000 --> 00:27:43,800
Speaker 3: brought us to a really miserable twenty twenty three. And

512
00:27:43,840 --> 00:27:45,480
Speaker 3: what's happened over the last couple of months, so we

513
00:27:45,520 --> 00:27:48,639
Speaker 3: started to see a number of bankruptcies. Yallow being the

514
00:27:48,880 --> 00:27:52,960
Speaker 3: you know, Yallowy historical LTL carrier file bankruptcy. It actually

515
00:27:53,040 --> 00:27:55,480
Speaker 3: went out of business. And it felt like this is

516
00:27:55,520 --> 00:27:58,040
Speaker 3: a company that for many years felt like a cockroach

517
00:27:58,080 --> 00:28:01,840
Speaker 3: that just wouldn't die. Yeah out. Unions at one point

518
00:28:01,880 --> 00:28:05,399
Speaker 3: had build them out. It constantly just stayed in business,

519
00:28:05,440 --> 00:28:09,280
Speaker 3: and everybody assumed that it would continue to survive in

520
00:28:09,359 --> 00:28:11,800
Speaker 3: spite of the fact that it was not a well

521
00:28:11,840 --> 00:28:15,040
Speaker 3: run company. And it is out of business, and you

522
00:28:15,119 --> 00:28:17,480
Speaker 3: mentioned teas that earlier, Joe, is that we've seen some

523
00:28:17,520 --> 00:28:20,280
Speaker 3: freight tech companies that raised lot capital. That also another

524
00:28:20,600 --> 00:28:23,040
Speaker 3: and this is a function of a lot of excesses

525
00:28:23,040 --> 00:28:25,159
Speaker 3: that got added to the market that the market just

526
00:28:25,200 --> 00:28:25,920
Speaker 3: has to bleed out.

527
00:28:26,240 --> 00:28:29,280
Speaker 1: Well, I'm glad you mentioned the freight tech companies because

528
00:28:29,280 --> 00:28:31,480
Speaker 1: that's where I was going to go next. So we

529
00:28:31,480 --> 00:28:35,480
Speaker 1: already we already know it was bad for a lot

530
00:28:35,520 --> 00:28:38,360
Speaker 1: of companies in twenty twenty three. You know, going back

531
00:28:38,360 --> 00:28:40,400
Speaker 1: to twenty twenty one, twenty twenty two, you know we

532
00:28:40,520 --> 00:28:44,680
Speaker 1: got interested in freight obviously on the Odd Launch podcast.

533
00:28:45,240 --> 00:28:47,120
Speaker 1: That was also a big year for like tech and

534
00:28:47,160 --> 00:28:50,800
Speaker 1: tech investing. A lot of vcs suddenly probably woke up

535
00:28:50,800 --> 00:28:53,200
Speaker 1: to this idea of this world. We're like, oh, the

536
00:28:53,240 --> 00:28:55,120
Speaker 1: freight industry looks like a mess. I'm sure if we

537
00:28:55,200 --> 00:28:58,160
Speaker 1: just apply our software magic, we could solve all of

538
00:28:58,200 --> 00:29:02,000
Speaker 1: these problems. We saw some really huge fundraising, but then

539
00:29:02,360 --> 00:29:04,800
Speaker 1: also at twenty twenty three, we saw the reversal of it.

540
00:29:05,240 --> 00:29:08,080
Speaker 1: So we saw the freight brokerage Convoy just to basically

541
00:29:08,080 --> 00:29:10,200
Speaker 1: completely go out of business. I think we saw a

542
00:29:10,200 --> 00:29:13,880
Speaker 1: pretty big downturn at a Flexport. We've had their CEO,

543
00:29:13,960 --> 00:29:16,800
Speaker 1: Ryan Peterson on the show a couple of times. What

544
00:29:17,080 --> 00:29:21,320
Speaker 1: happened with freight Tech? What were the theses maybe of

545
00:29:21,360 --> 00:29:23,880
Speaker 1: the investors who are going in, we could solve this

546
00:29:24,000 --> 00:29:27,120
Speaker 1: and sort of like what reality did they run into that?

547
00:29:27,280 --> 00:29:29,880
Speaker 1: Maybe it's a bit harder to solve some of these

548
00:29:29,880 --> 00:29:31,600
Speaker 1: problems than they may have assumed.

549
00:29:31,640 --> 00:29:34,720
Speaker 3: You know, they were playing the Uber lift. Yeah, even

550
00:29:34,760 --> 00:29:38,640
Speaker 3: Airbnb playbooks, which is, hey, I have this capacity and

551
00:29:38,680 --> 00:29:41,080
Speaker 3: I can go out and create a digital app sort

552
00:29:41,080 --> 00:29:43,080
Speaker 3: of just if I could disrupt the taxi industry the

553
00:29:43,120 --> 00:29:45,880
Speaker 3: way Uber did, that could also disrupt.

554
00:29:45,440 --> 00:29:47,040
Speaker 1: The It seems like it should be doable.

555
00:29:47,440 --> 00:29:50,440
Speaker 3: Here's the problem is that the investors that really drove

556
00:29:50,640 --> 00:29:54,560
Speaker 3: the high valuations didn't understand freight They didn't understand the

557
00:29:54,600 --> 00:29:58,160
Speaker 3: boom and bus cycle. Convoy arguably had the best roster.

558
00:29:58,800 --> 00:30:01,560
Speaker 3: It had a dream team investors. I mean you had

559
00:30:01,760 --> 00:30:05,760
Speaker 3: Bill Gates, Jeff Bezos, you had pried Hoffmann, you had

560
00:30:06,200 --> 00:30:09,760
Speaker 3: the who's who of sort of Silicon Valley and sort

561
00:30:09,800 --> 00:30:13,479
Speaker 3: of legacy tech that were investors. I mean it was

562
00:30:13,840 --> 00:30:17,000
Speaker 3: the best lineup of investors of probably any company in

563
00:30:17,280 --> 00:30:20,880
Speaker 3: supply chain possibly have. And yet that did not help

564
00:30:20,920 --> 00:30:24,720
Speaker 3: them survive. And the reason is that really the investors

565
00:30:24,760 --> 00:30:27,600
Speaker 3: and the management team when it first raised money and

566
00:30:27,640 --> 00:30:31,880
Speaker 3: got into this business, did not understand how psychical this

567
00:30:31,960 --> 00:30:36,360
Speaker 3: industry is and how fungible the capacity is. So if

568
00:30:36,360 --> 00:30:39,480
Speaker 3: I wanted to disrupt the taxi industry, the reason that

569
00:30:39,480 --> 00:30:42,120
Speaker 3: that works is I have all of these consumers sitting

570
00:30:42,120 --> 00:30:44,960
Speaker 3: at home with their cars that are idle ninety percent

571
00:30:45,000 --> 00:30:49,280
Speaker 3: of the time. That can create incremental capacity in that

572
00:30:49,400 --> 00:30:52,000
Speaker 3: of a market. So as the market surges, you can

573
00:30:52,080 --> 00:30:54,640
Speaker 3: have and Uber has you know, has piloted us with

574
00:30:54,680 --> 00:30:57,480
Speaker 3: their search pricing. You know, they will send out messages

575
00:30:57,480 --> 00:30:59,840
Speaker 3: to their drivers and say, hey, there's a a football

576
00:30:59,840 --> 00:31:02,000
Speaker 3: game in town, or there's a you know, a big

577
00:31:02,480 --> 00:31:04,880
Speaker 3: event in town, please come out and get three to

578
00:31:04,920 --> 00:31:07,520
Speaker 3: four or five x your normal rate. And they've created

579
00:31:07,520 --> 00:31:10,600
Speaker 3: this sort of surge flexible capacity model that works really

580
00:31:10,640 --> 00:31:14,600
Speaker 3: well in a business like Uber and personal transportation. The

581
00:31:14,720 --> 00:31:17,640
Speaker 3: problem in trucking is there is none of that excess

582
00:31:17,680 --> 00:31:20,560
Speaker 3: capacity sitting against the fence that can flex in and

583
00:31:20,600 --> 00:31:24,200
Speaker 3: out of a market. And so what ultimately happened is

584
00:31:24,240 --> 00:31:28,280
Speaker 3: that they were able to apply some digitization to the

585
00:31:28,320 --> 00:31:32,680
Speaker 3: dispatch process and to the driver management process, but that

586
00:31:32,880 --> 00:31:36,880
Speaker 3: was incremental, and one would argue in Brad Jacobs has

587
00:31:36,960 --> 00:31:41,400
Speaker 3: argued that the incumbents were doing the same thing. Is

588
00:31:41,440 --> 00:31:45,840
Speaker 3: that effectively, all of these companies were spending billions of

589
00:31:45,880 --> 00:31:50,320
Speaker 3: dollars to build technology that everyone else was also building.

590
00:31:50,440 --> 00:31:54,760
Speaker 3: And not just existing companies like XBO and H Robinson,

591
00:31:55,000 --> 00:31:58,040
Speaker 3: but you also had all these tech vendors, companies that

592
00:31:58,080 --> 00:32:01,560
Speaker 3: provide software, that were also building technology that they could

593
00:32:01,560 --> 00:32:04,280
Speaker 3: sell to hundreds of companies. All this was happening at

594
00:32:04,280 --> 00:32:08,360
Speaker 3: the same time and effectively. What Convoy did not understand

595
00:32:08,400 --> 00:32:10,920
Speaker 3: early on, which I think they certainly understood that the

596
00:32:11,040 --> 00:32:13,480
Speaker 3: late part of the cycle, a late part of their business,

597
00:32:13,680 --> 00:32:17,720
Speaker 3: is that freightst commodity it's highly fungible. The capacity is

598
00:32:17,760 --> 00:32:21,160
Speaker 3: highly fungible, and no matter how much money I spend

599
00:32:21,280 --> 00:32:25,760
Speaker 3: acquiring the capacity, there is nothing to keep that capacity

600
00:32:25,800 --> 00:32:29,240
Speaker 3: from going to the next highest bidder. And because of that,

601
00:32:29,480 --> 00:32:33,240
Speaker 3: all of the money that they wasted in acquisition costs

602
00:32:33,520 --> 00:32:38,120
Speaker 3: to acquire capacity was effectively meaningless at the end of

603
00:32:38,120 --> 00:32:40,840
Speaker 3: the day because that capacity could be found elsewhere.

604
00:32:41,240 --> 00:32:44,760
Speaker 2: How much of it comes down to incentives as well.

605
00:32:44,800 --> 00:32:47,640
Speaker 2: So I take the point about fungibility of capacity. But

606
00:32:47,760 --> 00:32:50,400
Speaker 2: like I also get the sense that there are industries

607
00:32:50,480 --> 00:32:54,880
Speaker 2: out there that make money from their role as middlemen.

608
00:32:55,000 --> 00:32:58,440
Speaker 2: They make money from a lack of transparency or opacity.

609
00:32:58,600 --> 00:33:02,440
Speaker 2: And so we talk about new technology to make this

610
00:33:02,480 --> 00:33:06,760
Speaker 2: whole process more efficient, but if there are well defined

611
00:33:06,880 --> 00:33:10,840
Speaker 2: losers from doing that, they might not really be incentivized

612
00:33:10,880 --> 00:33:11,760
Speaker 2: to change.

613
00:33:12,040 --> 00:33:14,440
Speaker 3: So, Tracy, let's imagine that we wanted to disrupt the

614
00:33:14,480 --> 00:33:17,600
Speaker 3: gasoline industry, Okay, and we're going to create a gas station,

615
00:33:18,480 --> 00:33:20,520
Speaker 3: and in this gas station, we're going to charge a

616
00:33:20,560 --> 00:33:23,280
Speaker 3: dollar a gallon. We're going to open it up. We

617
00:33:23,320 --> 00:33:25,920
Speaker 3: could build the largest gas station in the world in

618
00:33:25,960 --> 00:33:29,320
Speaker 3: a matter of potentially weeks. A dollar a gallon we're

619
00:33:29,360 --> 00:33:31,760
Speaker 3: going to charge, and we're disrupting the industry. Now, we

620
00:33:31,800 --> 00:33:34,280
Speaker 3: have some neat technology to do this. That's our That

621
00:33:34,360 --> 00:33:36,240
Speaker 3: is what we've told our investors is we're able to

622
00:33:36,240 --> 00:33:40,479
Speaker 3: disrupt the gasoline industry because our technology has made it

623
00:33:40,480 --> 00:33:43,040
Speaker 3: more efficient for us to deliver gallons. Now, you and

624
00:33:43,040 --> 00:33:44,680
Speaker 3: I both know at the end of the day that

625
00:33:45,120 --> 00:33:49,200
Speaker 3: gasoline is a commodity, yes, and doesn't matter what we

626
00:33:49,720 --> 00:33:53,280
Speaker 3: end up creating technology to solve for. At the end

627
00:33:53,320 --> 00:33:56,640
Speaker 3: of the day. All we've actually done is arbitrage. Is

628
00:33:56,680 --> 00:34:00,000
Speaker 3: the market provide consumers an arbitrage. In other words, consumers

629
00:34:00,080 --> 00:34:02,800
Speaker 3: are buying gasoline at a dollar a gallon. We've built

630
00:34:02,800 --> 00:34:06,120
Speaker 3: this billion dollar gas station in middle of New Jersey

631
00:34:06,360 --> 00:34:08,279
Speaker 3: that is the most successful gas station in the world,

632
00:34:08,360 --> 00:34:10,839
Speaker 3: and we're doing tens of billions of dollars, but we

633
00:34:10,880 --> 00:34:11,520
Speaker 3: are losing.

634
00:34:11,719 --> 00:34:15,120
Speaker 2: Right, we're subsidizing full service gas station.

635
00:34:17,200 --> 00:34:19,720
Speaker 3: That's true, it is full service. Well, you're using technology, robots,

636
00:34:19,760 --> 00:34:24,040
Speaker 3: I'm doing this okay. But effectively, that was the thesis

637
00:34:24,360 --> 00:34:28,200
Speaker 3: that they thought. The investors thought that if they could

638
00:34:28,239 --> 00:34:32,239
Speaker 3: increase the throughput of gallons, that their buying rate would

639
00:34:32,239 --> 00:34:33,759
Speaker 3: be cheaper. Oh I see.

640
00:34:33,840 --> 00:34:36,240
Speaker 2: So it was like the volume would make up the volume.

641
00:34:36,880 --> 00:34:40,600
Speaker 3: I'll lose money on every transaction up and volume. It's

642
00:34:40,640 --> 00:34:43,480
Speaker 3: the same, it's the same. Idea here is that they

643
00:34:43,480 --> 00:34:48,320
Speaker 3: were effectively subsidizing early on a lot of their capacity,

644
00:34:48,640 --> 00:34:51,200
Speaker 3: and what they realized really late and this so they

645
00:34:51,200 --> 00:34:55,800
Speaker 3: did change. Ultimately, Convoy realized about twenty eighteen twenty nineteen

646
00:34:56,239 --> 00:34:59,080
Speaker 3: that that model just didn't work. That really all of

647
00:34:59,120 --> 00:35:02,040
Speaker 3: the money that they had spent in subsidizing capacity and

648
00:35:02,080 --> 00:35:04,600
Speaker 3: acquiring the capacity was meaningless at the end of the

649
00:35:04,680 --> 00:35:09,360
Speaker 3: day because it didn't provide any long term resilience or

650
00:35:09,440 --> 00:35:12,600
Speaker 3: sort of commitments among the shippers and among the carriers

651
00:35:12,600 --> 00:35:16,160
Speaker 3: to stay with their platform. That is really what happened.

652
00:35:16,200 --> 00:35:19,680
Speaker 3: And at the same time, using our gasoline analogy, is

653
00:35:19,719 --> 00:35:23,360
Speaker 3: that not only did Convoy have a gas station, or

654
00:35:23,400 --> 00:35:25,680
Speaker 3: we have this gas station New Jersey, but now Joe

655
00:35:25,760 --> 00:35:28,279
Speaker 3: opens up a rival gas station down the street and

656
00:35:28,320 --> 00:35:30,840
Speaker 3: he's charging ninety nine cents, and so now all of

657
00:35:30,880 --> 00:35:35,520
Speaker 3: those gallons that we've sold go to Joe's gas station,

658
00:35:35,560 --> 00:35:37,920
Speaker 3: which is now cheaper. And that is the reason that

659
00:35:38,200 --> 00:35:43,000
Speaker 3: trucking cannot strictly be disrupted through these technology apps is

660
00:35:43,000 --> 00:35:46,280
Speaker 3: that they were trying to disrupt it by lowering the price,

661
00:35:46,960 --> 00:35:51,960
Speaker 3: buying market share, and effectively subsidizing the customers. The customers

662
00:35:51,960 --> 00:35:54,680
Speaker 3: were benefiting from this, the shippers benefited massively from it

663
00:35:54,920 --> 00:35:57,759
Speaker 3: because they were getting cheaper cost and that's how they

664
00:35:57,760 --> 00:36:01,120
Speaker 3: were able to grow so fast. What ended up happening

665
00:36:01,160 --> 00:36:04,319
Speaker 3: is they learned pretty quickly that those commitments were not

666
00:36:05,040 --> 00:36:08,319
Speaker 3: finding that there was no such thing as contract right.

667
00:36:09,080 --> 00:36:12,759
Speaker 1: So this is really interesting because you know, and I

668
00:36:12,800 --> 00:36:16,080
Speaker 1: think when you get the Uber analogy. I mean, there's

669
00:36:16,160 --> 00:36:20,320
Speaker 1: really feels like there's two elements here. One is just okay,

670
00:36:20,360 --> 00:36:23,680
Speaker 1: you can't be the Uber of trucking unless you have

671
00:36:23,800 --> 00:36:28,920
Speaker 1: some capacity, unless you have some guaranteed for ability.

672
00:36:28,440 --> 00:36:30,200
Speaker 2: To turn on capacity when you need it.

673
00:36:30,239 --> 00:36:32,839
Speaker 1: But then the other, right, the ability to get that

674
00:36:32,880 --> 00:36:35,520
Speaker 1: guaranteed ability to turn on capacity. But then the other

675
00:36:35,680 --> 00:36:39,440
Speaker 1: question is why do we need humans as part of

676
00:36:39,440 --> 00:36:41,680
Speaker 1: the freight brokerage process and why can't it be all

677
00:36:41,719 --> 00:36:44,640
Speaker 1: computers like Uber is. And you know, I'm sure I

678
00:36:44,640 --> 00:36:47,720
Speaker 1: want you to weigh in. We recently talked to Brad Jacobs,

679
00:36:47,760 --> 00:36:51,000
Speaker 1: who is on to his new building supply distribution business

680
00:36:51,400 --> 00:36:54,880
Speaker 1: but also founded a freight brokerage and there seems to

681
00:36:54,920 --> 00:36:56,680
Speaker 1: be some dispute because I asked the question is like,

682
00:36:56,719 --> 00:36:59,000
Speaker 1: why are there still humans in this business? And I

683
00:36:59,080 --> 00:37:02,239
Speaker 1: know there's humans, lots of humans because a you know,

684
00:37:02,360 --> 00:37:05,279
Speaker 1: like I've been I went to the Arrival Logistics de

685
00:37:05,360 --> 00:37:09,279
Speaker 1: facto trading floor. We've talked about it. I see your

686
00:37:09,360 --> 00:37:12,680
Speaker 1: community of you know, freight waves fans. They're always posting

687
00:37:13,000 --> 00:37:15,719
Speaker 1: freight brokerage memes. So I know there are a lot

688
00:37:15,760 --> 00:37:19,480
Speaker 1: of people in offices who, you know, have one phone

689
00:37:19,560 --> 00:37:21,640
Speaker 1: up where they're talking to a shipper and someone else's

690
00:37:21,760 --> 00:37:23,960
Speaker 1: talking to a carrier. But Brad was like, you know,

691
00:37:24,000 --> 00:37:26,080
Speaker 1: there's a lot of it's getting on. What is the truth?

692
00:37:26,200 --> 00:37:29,480
Speaker 1: Like why are there still so many just sitting aside

693
00:37:29,520 --> 00:37:33,080
Speaker 1: the capacity aspect? Or are there so many humans or

694
00:37:33,120 --> 00:37:35,480
Speaker 1: how many humans in this process?

695
00:37:35,560 --> 00:37:37,879
Speaker 3: So it's interesting because Brad talked about the fact that,

696
00:37:38,000 --> 00:37:39,480
Speaker 3: you know, when he got in his industry yees ten

697
00:37:39,560 --> 00:37:42,640
Speaker 3: years ago, it was largely humans and then over time

698
00:37:42,719 --> 00:37:45,360
Speaker 3: it had digitized. And you know, I think the statement

699
00:37:45,400 --> 00:37:47,800
Speaker 3: was he had ninety seven percent of its freight was electronic.

700
00:37:48,280 --> 00:37:50,600
Speaker 3: That very well maybe the case for his business. Think

701
00:37:50,680 --> 00:37:54,480
Speaker 3: of xbo's role in the business, it's a big really

702
00:37:54,560 --> 00:37:59,160
Speaker 3: predominantly you know, in its focus on LTL, which means

703
00:37:59,160 --> 00:38:03,319
Speaker 3: it has very very large enterprise shippers, big commitments. It's

704
00:38:03,400 --> 00:38:06,000
Speaker 3: able to digitize a lot of the transactions, and most

705
00:38:06,000 --> 00:38:08,319
Speaker 3: of the bigger trucking companies are digital. Like if you

706
00:38:08,320 --> 00:38:11,640
Speaker 3: go look at night Swift's operation, look at Schneider's operation,

707
00:38:11,920 --> 00:38:12,960
Speaker 3: go look at old dominions.

708
00:38:13,120 --> 00:38:15,239
Speaker 1: So that is like placing an order on a thing,

709
00:38:15,280 --> 00:38:15,600
Speaker 1: and it just.

710
00:38:15,680 --> 00:38:18,359
Speaker 3: That's right, and that's what the big companies want. To do.

711
00:38:18,520 --> 00:38:22,239
Speaker 3: Is they actually want to eliminate human contact as much

712
00:38:22,239 --> 00:38:25,560
Speaker 3: as possible, because that's how they're able to optimize the model.

713
00:38:25,960 --> 00:38:29,440
Speaker 3: They use technology to do electronic transactions, and that is

714
00:38:29,560 --> 00:38:32,920
Speaker 3: that probably represents twenty percent of the business. It's the

715
00:38:32,920 --> 00:38:35,680
Speaker 3: cream of the crop business. It's the business every company

716
00:38:35,800 --> 00:38:40,200
Speaker 3: wants because it's the high volume shippers, dependable volume.

717
00:38:40,440 --> 00:38:43,880
Speaker 1: And standardized lane, standardized ship or your standardized carrier.

718
00:38:43,920 --> 00:38:48,600
Speaker 3: Is it just exactly and highly predictable, highly consistent business.

719
00:38:48,800 --> 00:38:51,880
Speaker 3: And if you're building a network, then that's what you

720
00:38:51,960 --> 00:38:54,439
Speaker 3: want because I can depend on it day in day out.

721
00:38:55,200 --> 00:38:57,960
Speaker 3: That's what the larger companies focus see. And if you

722
00:38:58,040 --> 00:39:01,279
Speaker 3: ask the CEO of Swift, you would probably get a

723
00:39:01,280 --> 00:39:05,040
Speaker 3: similar answer about how much of its freight is electronically tendered.

724
00:39:05,280 --> 00:39:08,560
Speaker 3: H Robinson, the largest freight broker in the country, publishes

725
00:39:08,640 --> 00:39:11,360
Speaker 3: that seventy eight percent of its freight doesn't have a

726
00:39:11,440 --> 00:39:14,680
Speaker 3: human touch. Okay, but the reality is, Joe, is that

727
00:39:14,719 --> 00:39:18,520
Speaker 3: the hundreds of thousands of freight broker people that are

728
00:39:18,560 --> 00:39:21,880
Speaker 3: out there making up at least you know, the numbers

729
00:39:21,920 --> 00:39:24,120
Speaker 3: are as high as registered frate brokers in the sixty

730
00:39:24,160 --> 00:39:27,080
Speaker 3: to eighty thousand numbers we track and think there's about

731
00:39:27,440 --> 00:39:30,200
Speaker 3: five thousand high scale freight brokers that do more than

732
00:39:30,440 --> 00:39:33,880
Speaker 3: about ten million dollars in revenue a year. They're still

733
00:39:34,120 --> 00:39:37,600
Speaker 3: predominantly human based, and what they're dealing with are the exceptions.

734
00:39:37,880 --> 00:39:41,920
Speaker 3: So what happens is a large volume shipper takes ninety

735
00:39:42,120 --> 00:39:44,200
Speaker 3: five percent of its freight and sends it over to

736
00:39:44,520 --> 00:39:47,640
Speaker 3: the xbos and the h Robinson's and the you know,

737
00:39:47,680 --> 00:39:50,080
Speaker 3: the the night swifts, and so they get all the

738
00:39:50,120 --> 00:39:55,200
Speaker 3: electronics stuff dispatched. What's left over is the really hard

739
00:39:55,400 --> 00:39:59,040
Speaker 3: to manage. It's either a laye that nobody wants. It's

740
00:39:59,040 --> 00:40:03,040
Speaker 3: somebody who literally shops price on every single load. It's

741
00:40:03,320 --> 00:40:05,840
Speaker 3: a commodity that nobody wants. And you'll see in the

742
00:40:05,840 --> 00:40:08,160
Speaker 3: meme if you go on Twitter or on x you

743
00:40:08,200 --> 00:40:10,600
Speaker 3: see all the memes and freight making fun of the

744
00:40:10,680 --> 00:40:13,000
Speaker 3: kinds of freight that nobody wants. This is the type

745
00:40:13,000 --> 00:40:13,839
Speaker 3: of frit that's left over.

746
00:40:13,880 --> 00:40:15,520
Speaker 1: What's an example of a type of freight that no

747
00:40:15,520 --> 00:40:18,319
Speaker 1: one wants to deal with? Grocery Okay, have to have

748
00:40:18,440 --> 00:40:20,680
Speaker 1: like al you have to have a special truck.

749
00:40:20,760 --> 00:40:23,320
Speaker 3: Yeah, well you have to. It's typically going to a

750
00:40:23,360 --> 00:40:26,080
Speaker 3: grocery store. It takes a long time to unload it.

751
00:40:26,239 --> 00:40:28,719
Speaker 3: They're miseraboo because they're in a cold trailer and a

752
00:40:28,719 --> 00:40:31,280
Speaker 3: refrigerator trailer. They have to use something called a lumper.

753
00:40:31,800 --> 00:40:34,360
Speaker 3: A lumper is I pay somebody at the dock to

754
00:40:34,480 --> 00:40:37,640
Speaker 3: unload me, or the driver has to unload themselves. They

755
00:40:37,640 --> 00:40:39,880
Speaker 3: can take eight to ten hours to load at a

756
00:40:40,080 --> 00:40:42,480
Speaker 3: like a farm. They go into a farm facility or

757
00:40:42,520 --> 00:40:45,560
Speaker 3: distribution center, it could take eight because they're all handloaded.

758
00:40:45,600 --> 00:40:49,680
Speaker 3: Think of like a crate of tomatoes or oranges or something.

759
00:40:49,800 --> 00:40:52,400
Speaker 3: A lot of it's like loaded, not on pallettes, but

760
00:40:52,480 --> 00:40:56,239
Speaker 3: actually sort of full loaded. So this is undesirable freight

761
00:40:56,280 --> 00:40:57,640
Speaker 3: for a lot of these guys. It has really tight

762
00:40:57,680 --> 00:41:01,400
Speaker 3: transit times. So that's a type of undersers freight flatbed

763
00:41:01,680 --> 00:41:04,960
Speaker 3: which is hauled to project sites. You're not going to

764
00:41:05,040 --> 00:41:07,520
Speaker 3: a warehouse, but you're going to a construction site that

765
00:41:07,600 --> 00:41:10,520
Speaker 3: has to be manually unloaded. It can take sometimes hours

766
00:41:10,760 --> 00:41:13,200
Speaker 3: or longer where the truck's got to sit, and so

767
00:41:13,200 --> 00:41:15,640
Speaker 3: there's a lot of freight that's just undesired, and that's

768
00:41:15,680 --> 00:41:18,480
Speaker 3: where a lot of the freight brokers, the humans still

769
00:41:18,520 --> 00:41:20,879
Speaker 3: take and manage a lot of these sort of long

770
00:41:20,920 --> 00:41:24,960
Speaker 3: tail transactions. That isn't the world that an XBO plays in.

771
00:41:25,480 --> 00:41:28,480
Speaker 3: That is the world that the prejaminance of your freight brokerage.

772
00:41:28,520 --> 00:41:30,960
Speaker 3: The folks that are on freight Twitter that are doing

773
00:41:30,960 --> 00:41:33,600
Speaker 3: the brokerage job, that's where they that's a large.

774
00:41:33,440 --> 00:41:37,120
Speaker 1: Percent of their freight is managing the light bulb moment sense.

775
00:41:37,360 --> 00:41:40,040
Speaker 2: So much of this reminds me of the move to

776
00:41:40,080 --> 00:41:43,279
Speaker 2: electronic trading in the corporate right, Like it takes a

777
00:41:43,320 --> 00:41:46,800
Speaker 2: long time, and like the stuff that starts being electronified

778
00:41:46,960 --> 00:41:50,280
Speaker 2: first is like the standardized trade. It's the easier ones.

779
00:41:50,440 --> 00:41:53,560
Speaker 2: But again, like incentives play a role there.

780
00:41:54,080 --> 00:41:57,759
Speaker 3: You took twenty years before consumers had access to effectively

781
00:41:57,840 --> 00:42:00,759
Speaker 3: trade at very low cost without a broker. Yeah, this

782
00:42:01,160 --> 00:42:03,960
Speaker 3: you saw early in the nineties. You know, sort of

783
00:42:04,040 --> 00:42:05,959
Speaker 3: happened in the early nineties to sort of late nineties.

784
00:42:06,000 --> 00:42:07,480
Speaker 3: The Internet was born, and all of a sudden, I

785
00:42:07,480 --> 00:42:10,759
Speaker 3: could trade for you know myself, I could execute my trades,

786
00:42:10,800 --> 00:42:12,960
Speaker 3: and then all of a sudden you got into low

787
00:42:13,040 --> 00:42:14,960
Speaker 3: cost trading. And then now we're in sort of zero

788
00:42:15,000 --> 00:42:18,680
Speaker 3: cost trading as consumers. But you still have the finance industry.

789
00:42:18,840 --> 00:42:21,560
Speaker 3: High frequency trading has not gone away. You still have

790
00:42:22,360 --> 00:42:25,759
Speaker 3: you know these large trading floors that are people are

791
00:42:25,840 --> 00:42:29,640
Speaker 3: involved in this transaction, involved in these services that extend

792
00:42:29,680 --> 00:42:31,960
Speaker 3: beyond just executing a trade. I mean, I can't remember

793
00:42:32,000 --> 00:42:34,120
Speaker 3: the last time I called a broker to execute a

794
00:42:34,200 --> 00:42:37,480
Speaker 3: standard stock trade. But I may go to a broker

795
00:42:37,520 --> 00:42:40,440
Speaker 3: if I have something that is unusual that I want

796
00:42:40,480 --> 00:42:43,120
Speaker 3: to do, or perhaps the product or that I'm not

797
00:42:43,120 --> 00:42:45,920
Speaker 3: familiar with, or something specialized. And that's really where we

798
00:42:45,960 --> 00:42:49,000
Speaker 3: see the freight brokerage industry. All those humans are really

799
00:42:49,160 --> 00:42:52,399
Speaker 3: helping solve those problems. But you make an interesting point,

800
00:42:52,440 --> 00:42:54,319
Speaker 3: and I use this analogy a lot. It's freight at

801
00:42:54,320 --> 00:42:56,480
Speaker 3: the end of the day, is a commodity. It is

802
00:42:56,680 --> 00:43:00,200
Speaker 3: price sensitive, and it will move at its in a

803
00:43:00,280 --> 00:43:02,920
Speaker 3: best to the lowest cost provider. Ultimately, that's what it's

804
00:43:02,920 --> 00:43:05,719
Speaker 3: trying to search for. Most of the transactions can be

805
00:43:06,000 --> 00:43:11,399
Speaker 3: digitized and electronically, but everyone is investing in the same technology.

806
00:43:11,719 --> 00:43:14,759
Speaker 3: They're all trying to digitize it. And because they're all

807
00:43:14,800 --> 00:43:17,879
Speaker 3: trying to digitize it is no one actually has an advantage.

808
00:43:18,120 --> 00:43:20,880
Speaker 3: There is no equivalent to a New York stock exchange

809
00:43:20,880 --> 00:43:23,680
Speaker 3: where I can put my servers right next to the

810
00:43:24,440 --> 00:43:27,720
Speaker 3: clearing engine and get nanoseconds because this is a market

811
00:43:27,760 --> 00:43:30,600
Speaker 3: that is not centrally cleared or exchanged, and so there

812
00:43:30,640 --> 00:43:33,360
Speaker 3: is no time advantage that I can get in terms

813
00:43:33,400 --> 00:43:36,239
Speaker 3: of being closer in terms of executing. So really what

814
00:43:36,280 --> 00:43:39,359
Speaker 3: we see is companies try to take the highly commoditized freight.

815
00:43:39,400 --> 00:43:41,879
Speaker 3: The big companies that have the balance sheets and are

816
00:43:41,920 --> 00:43:45,800
Speaker 3: asset based are picking off the really highly desirable freight

817
00:43:45,840 --> 00:43:50,000
Speaker 3: that can be electronically managed, and the freight brokers, which

818
00:43:50,040 --> 00:43:54,200
Speaker 3: continue to proliferate and grow, are taking care of this stuff.

819
00:43:54,280 --> 00:43:56,760
Speaker 3: I can't be easily electronically managed.

820
00:44:13,200 --> 00:44:15,640
Speaker 2: I have just one more question, which is again, I

821
00:44:15,680 --> 00:44:18,120
Speaker 2: think the last time we spoke to you in twenty

822
00:44:18,160 --> 00:44:21,359
Speaker 2: twenty three, you were talking about a coming blood bath

823
00:44:21,440 --> 00:44:25,280
Speaker 2: or the bloodbath in trucking looking out to twenty twenty four,

824
00:44:26,160 --> 00:44:27,279
Speaker 2: how would you characterize it.

825
00:44:27,320 --> 00:44:28,600
Speaker 3: I think we're going to trade at the bottom for

826
00:44:28,600 --> 00:44:31,160
Speaker 3: a while. Like I don't think it's getting worse. I

827
00:44:31,239 --> 00:44:35,160
Speaker 3: don't see a situation where things are quote unquote deteriorating further.

828
00:44:35,880 --> 00:44:38,560
Speaker 3: Now to an individual player that's in the market, they

829
00:44:38,560 --> 00:44:40,960
Speaker 3: may feel differently because their balance sheets are probably wrecked

830
00:44:40,960 --> 00:44:43,640
Speaker 3: at this point. They're taking freight that they're not making

831
00:44:43,680 --> 00:44:46,000
Speaker 3: money on. They've been doing this for probably fourteen to

832
00:44:46,040 --> 00:44:49,239
Speaker 3: eighteen months, and so to them it may feel like

833
00:44:49,280 --> 00:44:50,600
Speaker 3: they're at the end of the line, and there will

834
00:44:50,600 --> 00:44:52,520
Speaker 3: be a number of trucking companies that fail over the

835
00:44:52,600 --> 00:44:55,600
Speaker 3: next couple of months. But I think it's the market wide.

836
00:44:55,840 --> 00:44:58,080
Speaker 3: I think we're in many ways on the way back up,

837
00:44:58,239 --> 00:45:00,319
Speaker 3: and so I think it will take a long time

838
00:45:00,360 --> 00:45:02,960
Speaker 3: to turn out this capacity. But I think we'll see

839
00:45:03,000 --> 00:45:07,200
Speaker 3: improving conditions for carriers as capacity bleeds off and as

840
00:45:07,280 --> 00:45:09,799
Speaker 3: demand looks like it's going to stay persistent. You know,

841
00:45:09,800 --> 00:45:14,760
Speaker 3: the consumer has stayed strong for miraculously strong in this cycle.

842
00:45:14,880 --> 00:45:17,680
Speaker 3: It looks like, you know, going back to the conversation

843
00:45:17,719 --> 00:45:20,160
Speaker 3: we had very early on about near shoring and reshoring,

844
00:45:20,560 --> 00:45:22,879
Speaker 3: it looks like that is starting to take place, and

845
00:45:22,920 --> 00:45:25,680
Speaker 3: because that stuff has a long lead cycle, is we're

846
00:45:25,719 --> 00:45:28,720
Speaker 3: starting to benefit from some of that now. And as

847
00:45:28,960 --> 00:45:33,200
Speaker 3: a manufacturing reshoring really take place in our economy, that

848
00:45:33,239 --> 00:45:36,960
Speaker 3: will drive additional freight demand. And so as we continue

849
00:45:36,960 --> 00:45:42,279
Speaker 3: to bleed off carriers and we see improving economic conditions

850
00:45:42,360 --> 00:45:47,320
Speaker 3: in manufacturing and in inventories have bled off, that will

851
00:45:47,560 --> 00:45:52,719
Speaker 3: help promote higher rates. But also higher demand and ultimately

852
00:45:52,840 --> 00:45:55,600
Speaker 3: the industry will heal and sort of will enter a

853
00:45:55,640 --> 00:45:56,120
Speaker 3: new cycle.

854
00:45:56,160 --> 00:45:58,520
Speaker 2: And one could.

855
00:45:58,400 --> 00:46:00,400
Speaker 3: Argue, well, this is the evand to which I think

856
00:46:00,480 --> 00:46:04,040
Speaker 3: this time around is that you know, we do see

857
00:46:04,280 --> 00:46:07,839
Speaker 3: tightening credit, which is the only thing that's going to

858
00:46:07,920 --> 00:46:09,960
Speaker 3: stop the growth of trucking.

859
00:46:10,360 --> 00:46:12,840
Speaker 2: Oh interesting because I guess the last cycle it was

860
00:46:12,880 --> 00:46:16,000
Speaker 2: not only were freight rates going up, but you also

861
00:46:16,040 --> 00:46:17,799
Speaker 2: had extremely low cost of financing.

862
00:46:17,960 --> 00:46:21,000
Speaker 3: You could get it for almost nothing, to borrow money

863
00:46:21,040 --> 00:46:25,160
Speaker 3: for almost nothing, and small banks they were you know,

864
00:46:25,360 --> 00:46:28,080
Speaker 3: fueled with so much cash and the government was putting

865
00:46:28,080 --> 00:46:30,319
Speaker 3: pressure for them to deploy it. That is no longer

866
00:46:30,320 --> 00:46:32,760
Speaker 3: the case. I think, what and it's really the community

867
00:46:32,800 --> 00:46:35,319
Speaker 3: bank model. It's the community banks and the folks that

868
00:46:35,360 --> 00:46:38,080
Speaker 3: are in that sort of small business lending are the

869
00:46:38,080 --> 00:46:41,320
Speaker 3: folks that really control the outcome of the market. They've

870
00:46:41,360 --> 00:46:43,279
Speaker 3: tightened up. They started to look at trucking as a

871
00:46:43,400 --> 00:46:47,120
Speaker 3: riskier business because they chances are almost every community bank

872
00:46:47,120 --> 00:46:51,080
Speaker 3: in America has some trucking asset in its portfolio. And

873
00:46:51,320 --> 00:46:53,560
Speaker 3: because of that, I think they're starting to say, hey,

874
00:46:53,680 --> 00:46:56,200
Speaker 3: these this may not be a desirable industry to invest

875
00:46:56,239 --> 00:46:58,920
Speaker 3: in or to lend money. To the way it was before,

876
00:46:59,320 --> 00:47:02,080
Speaker 3: and that tightening credit standards will make it more difficult

877
00:47:02,120 --> 00:47:04,920
Speaker 3: for small businesses to borrow money and thus make it

878
00:47:05,000 --> 00:47:07,719
Speaker 3: harder for new expansion to take place. And I've talked

879
00:47:07,719 --> 00:47:10,799
Speaker 3: to a number, you know, in Chattanooga. I'll run into

880
00:47:10,800 --> 00:47:13,720
Speaker 3: people even at the airport and other cities, and people

881
00:47:13,960 --> 00:47:17,279
Speaker 3: who know recognize me or know what of me have

882
00:47:17,480 --> 00:47:19,600
Speaker 3: talked about their small trucking comps. At a guy said

883
00:47:19,840 --> 00:47:22,319
Speaker 3: he had a bank deal that fell apart because the

884
00:47:22,360 --> 00:47:27,239
Speaker 3: banker reads freightwaves and he was like, deal. He's like,

885
00:47:27,280 --> 00:47:29,799
Speaker 3: I have a good business, but because you're talking about

886
00:47:29,800 --> 00:47:32,440
Speaker 3: this freight recession, you have to continue to do that.

887
00:47:32,480 --> 00:47:34,200
Speaker 3: I said, well, my job is to inform, and I

888
00:47:34,239 --> 00:47:38,480
Speaker 3: said you should thank me because had you borrow that money,

889
00:47:38,880 --> 00:47:41,440
Speaker 3: you may not you may be in a different financial situation.

890
00:47:41,600 --> 00:47:46,840
Speaker 3: So I think there is more awareness about the issues

891
00:47:46,840 --> 00:47:49,760
Speaker 3: in trucking and that will probably keep the capacity growth

892
00:47:50,080 --> 00:47:53,200
Speaker 3: at least at Bay. But we will be back like

893
00:47:53,320 --> 00:47:57,120
Speaker 3: this will be a really boom market once again. We

894
00:47:57,160 --> 00:47:59,719
Speaker 3: will see higher freight rates at some point. The vibes

895
00:47:59,760 --> 00:48:03,080
Speaker 3: will be really strong on Twitter, where everyone's super excited

896
00:48:03,080 --> 00:48:05,560
Speaker 3: about high freight rates and there will be an argument

897
00:48:05,560 --> 00:48:07,200
Speaker 3: that this time is different, because that's what they'll say,

898
00:48:07,320 --> 00:48:10,160
Speaker 3: this time is different. It's not gonna roll over. This

899
00:48:10,280 --> 00:48:12,799
Speaker 3: is different for all the sorts of reasons. And we

900
00:48:12,880 --> 00:48:16,480
Speaker 3: will talk about that on this show, and we will

901
00:48:16,520 --> 00:48:18,479
Speaker 3: predict when it will fall apart again because it will.

902
00:48:18,560 --> 00:48:22,080
Speaker 1: All right, one last quick question. I'm gonna pivot we

903
00:48:22,280 --> 00:48:24,360
Speaker 1: you know, founder and see you a freight waves. We

904
00:48:24,400 --> 00:48:26,640
Speaker 1: always talk to you about freight. You also have this

905
00:48:26,680 --> 00:48:30,040
Speaker 1: whole other business and aviation media and other aviation assets.

906
00:48:30,400 --> 00:48:31,840
Speaker 1: I want to do like an hour with you at

907
00:48:31,880 --> 00:48:33,719
Speaker 1: some point talk about that. But just real quickly, is

908
00:48:33,760 --> 00:48:36,080
Speaker 1: it really true that there's more airports than McDonald's.

909
00:48:36,440 --> 00:48:38,560
Speaker 3: This is an insane stat that no one, I think

910
00:48:38,600 --> 00:48:40,560
Speaker 3: everyone finds it hard to believe. So if you take

911
00:48:40,560 --> 00:48:43,880
Speaker 3: the total amount of private this includes private airport kayports.

912
00:48:44,080 --> 00:48:45,880
Speaker 3: So most people think of airports and thinking of like

913
00:48:45,960 --> 00:48:49,840
Speaker 3: JFK and Labordia Newark, the predominants. The vast majority of

914
00:48:49,880 --> 00:48:53,400
Speaker 3: airports the United States are actually privately owned airports or

915
00:48:53,440 --> 00:48:57,040
Speaker 3: community owned airports, places that have very small runways of

916
00:48:57,080 --> 00:49:00,080
Speaker 3: one thousand to two thousand, three thousand feet can how

917
00:49:00,160 --> 00:49:04,200
Speaker 3: many even a jet accommodating small aircraft. Yeah, there's nineteen

918
00:49:04,239 --> 00:49:06,160
Speaker 3: thousand of those, and I think the number on McDonald's

919
00:49:06,200 --> 00:49:08,839
Speaker 3: is like sixteen thousand, so there are This.

920
00:49:08,760 --> 00:49:11,480
Speaker 2: Does not surprise me at all at all. Yeah, because

921
00:49:11,560 --> 00:49:14,920
Speaker 2: just where our places in Connecticut there are two McDonald's

922
00:49:14,960 --> 00:49:17,920
Speaker 2: within like a one hour radios. There's at least three airports.

923
00:49:18,080 --> 00:49:19,959
Speaker 2: One of them is for sale. And I've been thinking

924
00:49:19,960 --> 00:49:20,359
Speaker 2: about it.

925
00:49:20,800 --> 00:49:21,320
Speaker 3: An airport.

926
00:49:21,400 --> 00:49:24,280
Speaker 1: Okay, I got to check this out there that episode

927
00:49:24,360 --> 00:49:26,359
Speaker 1: then we know what the next episode.

928
00:49:26,160 --> 00:49:26,480
Speaker 4: One of it.

929
00:49:26,600 --> 00:49:29,680
Speaker 3: But one of the people think that private airports is

930
00:49:29,760 --> 00:49:32,200
Speaker 3: all about jets, and they always think it's like really

931
00:49:32,239 --> 00:49:34,200
Speaker 3: much people. But the predominance of the folks that use

932
00:49:34,239 --> 00:49:37,919
Speaker 3: these small airports are farmers in their agriculture, and our

933
00:49:38,200 --> 00:49:43,360
Speaker 3: entire ag ecosystem is dependent upon airplanes and bees, but

934
00:49:43,560 --> 00:49:47,080
Speaker 3: airplanes to do things like and so a lot of

935
00:49:47,120 --> 00:49:50,400
Speaker 3: the airports are used in places out in the heartland

936
00:49:50,440 --> 00:49:53,600
Speaker 3: for farming. They're also used to things like mining, you know,

937
00:49:53,920 --> 00:49:56,799
Speaker 3: extraction and stuff, and so the vast majority of those

938
00:49:56,840 --> 00:49:59,880
Speaker 3: airports are very small airports that most people will never see,

939
00:50:00,239 --> 00:50:02,960
Speaker 3: will never notice unless they get in a small airplane

940
00:50:03,000 --> 00:50:04,160
Speaker 3: and see all will get.

941
00:50:04,120 --> 00:50:06,440
Speaker 2: They are very unassuming. Some of them are just fields.

942
00:50:06,560 --> 00:50:10,160
Speaker 3: They're literally most of them. The predominance of them are

943
00:50:10,239 --> 00:50:13,400
Speaker 3: grass fields. Yeah, get pilots, buy into it. Frankly, these

944
00:50:13,400 --> 00:50:16,160
Speaker 3: are farmers that keep an airplane in the barn and

945
00:50:16,440 --> 00:50:17,160
Speaker 3: they fly it out.

946
00:50:17,320 --> 00:50:19,759
Speaker 1: So Craig, we could talk to you for another hour,

947
00:50:19,840 --> 00:50:22,719
Speaker 1: but they're just meetings. Grublet have you back before too long?

948
00:50:22,920 --> 00:50:39,800
Speaker 1: Thank you so much for coming on. Thanks, thank you, Tracy.

949
00:50:39,960 --> 00:50:41,719
Speaker 1: I can't believe you didn't tell me that there's an

950
00:50:41,760 --> 00:50:44,920
Speaker 1: airport for sale by you, and now it seems obvious

951
00:50:44,960 --> 00:50:47,640
Speaker 1: that we have to do an episode on the business

952
00:50:47,680 --> 00:50:49,640
Speaker 1: of running an airport. How much that costs.

953
00:50:49,719 --> 00:50:52,279
Speaker 2: I'm definitely up for doing an episode. One thing I

954
00:50:52,400 --> 00:50:57,320
Speaker 2: learned from being an aviation correspondent is I would not personally,

955
00:50:57,360 --> 00:51:01,280
Speaker 2: as an investor, put much money in. We talk about

956
00:51:01,320 --> 00:51:04,920
Speaker 2: like cyclical industries, aviation is also one of those that

957
00:51:05,040 --> 00:51:06,919
Speaker 2: just goes up and down, up and down, up and down.

958
00:51:07,040 --> 00:51:11,680
Speaker 1: Well, yes, but I think the publicly traded airport stocks,

959
00:51:11,719 --> 00:51:13,800
Speaker 1: and we're really getting off topic from where we started

960
00:51:13,800 --> 00:51:17,239
Speaker 1: the episode. I think actually publicly traded airport stocks have

961
00:51:17,320 --> 00:51:19,799
Speaker 1: done really well, even if the plane, even if the

962
00:51:19,840 --> 00:51:20,960
Speaker 1: carriers haven't done so great.

963
00:51:21,040 --> 00:51:23,520
Speaker 2: I can't remember. There was this amazing chart and I

964
00:51:23,560 --> 00:51:27,440
Speaker 2: think it was like everything attached to air travel like

965
00:51:27,600 --> 00:51:30,920
Speaker 2: does reasonably well, like the aerospace manufacturers, although this was

966
00:51:30,960 --> 00:51:33,880
Speaker 2: before the Boeing scandal, so I'm sure it's changed, but

967
00:51:34,000 --> 00:51:36,920
Speaker 2: like the aerospace and the airports do well, and then

968
00:51:36,960 --> 00:51:39,879
Speaker 2: the airlines are just constantly cycling like in and out

969
00:51:39,880 --> 00:51:43,719
Speaker 2: of bankruptcy. But anyway, I severely doubt my ability to

970
00:51:43,880 --> 00:51:46,200
Speaker 2: run a rural airport.

971
00:51:46,120 --> 00:51:49,480
Speaker 1: On the main area that we talked about. That was

972
00:51:49,520 --> 00:51:51,840
Speaker 1: such a good conversation. I love talking to Craig, and

973
00:51:51,880 --> 00:51:54,120
Speaker 1: I feel like we touched on a bunch of things.

974
00:51:54,560 --> 00:51:56,920
Speaker 1: It's particularly interesting, you know. It just started off the

975
00:51:56,960 --> 00:51:59,840
Speaker 1: sort of some of the geopolitical considerations in the US,

976
00:52:00,239 --> 00:52:03,279
Speaker 1: the degree to which we want to make sense for

977
00:52:03,320 --> 00:52:07,680
Speaker 1: these to invest resources in patrolling the Red Sea.

978
00:52:07,840 --> 00:52:10,960
Speaker 2: Yeah, I mean that seems to be a huge topic

979
00:52:11,000 --> 00:52:14,400
Speaker 2: of conversation at the moment. The idea that maybe we

980
00:52:14,440 --> 00:52:17,319
Speaker 2: could get to a place where the Red Sea just

981
00:52:17,480 --> 00:52:21,920
Speaker 2: isn't considered a viable halfway for container shipping at least,

982
00:52:22,080 --> 00:52:24,800
Speaker 2: that's really interesting. I'm also thinking back, do you remember

983
00:52:24,840 --> 00:52:30,320
Speaker 2: when the Suez Canal was like last closed, not during

984
00:52:30,360 --> 00:52:33,520
Speaker 2: the ever given thing. But during the what's it called

985
00:52:33,520 --> 00:52:34,520
Speaker 2: this Six Days War?

986
00:52:34,840 --> 00:52:36,680
Speaker 1: Is that what it was called the sixth Day were?

987
00:52:36,880 --> 00:52:39,720
Speaker 2: Yeah, do you remember that? I mean not like actually

988
00:52:39,719 --> 00:52:42,239
Speaker 2: remember because we weren't alive. But I think there were

989
00:52:42,280 --> 00:52:45,680
Speaker 2: a few ships that got stuck there during that time,

990
00:52:45,719 --> 00:52:47,760
Speaker 2: and they were stuck for like years.

991
00:52:48,239 --> 00:52:48,520
Speaker 3: Wow.

992
00:52:48,760 --> 00:52:51,080
Speaker 2: And there's some really interesting accounts from people who were

993
00:52:51,080 --> 00:52:53,320
Speaker 2: on those ships. I think they started their own trading

994
00:52:53,360 --> 00:52:56,720
Speaker 2: system and postal service where they had little like postage stamps.

995
00:52:56,760 --> 00:52:59,080
Speaker 1: Oh, we gotta do we gotta find a historian to

996
00:52:59,120 --> 00:52:59,680
Speaker 1: talk about that.

997
00:52:59,760 --> 00:53:00,000
Speaker 4: Yeah.

998
00:53:00,000 --> 00:53:02,920
Speaker 2: I can't remember why or how I know that, but

999
00:53:03,200 --> 00:53:05,160
Speaker 2: it seems like a fun topic anyway.

1000
00:53:05,560 --> 00:53:08,480
Speaker 1: So many good things also freight tech. I thought that

1001
00:53:08,520 --> 00:53:10,680
Speaker 1: was really interesting and that explained so much because I

1002
00:53:10,719 --> 00:53:12,840
Speaker 1: know that there's like a ton of brokers, and I

1003
00:53:12,920 --> 00:53:15,239
Speaker 1: also you know Brad Jacobs saying no, we do it.

1004
00:53:15,239 --> 00:53:18,640
Speaker 1: It's so electronic. So hearing that explanation of like, okay,

1005
00:53:18,719 --> 00:53:22,920
Speaker 1: you can electronify the high volume commodity lanes and lines

1006
00:53:22,920 --> 00:53:27,239
Speaker 1: and products versus the long tail of weird places and

1007
00:53:27,360 --> 00:53:30,239
Speaker 1: undesirable goods. Anyway, so much good stuff telling are well.

1008
00:53:30,280 --> 00:53:33,760
Speaker 2: Also just the insight that freight is ultimately a commodity,

1009
00:53:33,880 --> 00:53:35,440
Speaker 2: and you have to think of it that way. And

1010
00:53:35,520 --> 00:53:38,160
Speaker 2: it's funny that we landed on air travel in the

1011
00:53:38,320 --> 00:53:40,040
Speaker 2: end as well, because I remember one of the first

1012
00:53:40,040 --> 00:53:42,880
Speaker 2: things I learned when I became an aviation correspondent was

1013
00:53:42,920 --> 00:53:46,840
Speaker 2: that error travel was basically a commodity as well. You know,

1014
00:53:46,880 --> 00:53:49,160
Speaker 2: you have a set capacity that is leaving at a

1015
00:53:49,200 --> 00:53:52,080
Speaker 2: certain time. You either have those seats filled or not.

1016
00:53:52,360 --> 00:53:54,120
Speaker 2: And that was always the way that I was taught

1017
00:53:54,160 --> 00:53:56,839
Speaker 2: to sort of think about it. Anyway, Shall we leave

1018
00:53:56,840 --> 00:53:59,040
Speaker 2: it there, Let's leave it there. Okay, this has been

1019
00:53:59,120 --> 00:54:02,560
Speaker 2: another episode of the Adlots podcast. I'm Tracy Alloway. You

1020
00:54:02,600 --> 00:54:04,360
Speaker 2: can follow me at Tracy Alloway.

1021
00:54:04,440 --> 00:54:07,279
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.

1022
00:54:07,520 --> 00:54:10,960
Speaker 1: Follow our guest Craig Fuller, he's at Freight Ali. Follow

1023
00:54:11,000 --> 00:54:14,600
Speaker 1: our producers Carman Rodriguez at Carman Arman, dash Ol Bennett

1024
00:54:14,680 --> 00:54:18,480
Speaker 1: at Dashbot and kel Brooks at kel Brooks. And thank

1025
00:54:18,520 --> 00:54:21,640
Speaker 1: you to our producer Moses On. For more odd Loots content,

1026
00:54:21,719 --> 00:54:24,239
Speaker 1: go to bloomberg dot com slash odd Lots, where we

1027
00:54:24,320 --> 00:54:27,839
Speaker 1: have transcripts of blog and a newsletter and you could

1028
00:54:27,880 --> 00:54:31,160
Speaker 1: chat about this episode with fellow listeners twenty four to seven.

1029
00:54:31,640 --> 00:54:34,840
Speaker 1: In the odd Blogs, discord, we have a Trenisport section

1030
00:54:35,080 --> 00:54:36,680
Speaker 1: in there. There'll be a lot of interest in this

1031
00:54:37,000 --> 00:54:39,520
Speaker 1: loss of a defense section in there too, so Discord,

1032
00:54:39,800 --> 00:54:40,600
Speaker 1: do JG.

1033
00:54:40,560 --> 00:54:44,640
Speaker 2: Slash and if you enjoy Oddlots, if you want to

1034
00:54:44,719 --> 00:54:47,680
Speaker 2: pull our money together to buy a small rural airport

1035
00:54:47,719 --> 00:54:50,719
Speaker 2: in Connecticut, then please leave us a positive review on

1036
00:54:50,800 --> 00:54:52,600
Speaker 2: your favorite podcast platform.

1037
00:54:52,640 --> 00:55:10,560
Speaker 4: Thanks for listening in in