1 00:00:10,800 --> 00:00:15,080 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:15,160 --> 00:00:21,200 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, we've 3 00:00:21,239 --> 00:00:27,720 Speaker 1: been talking about supply chain disruptions, shortages, etcetera. For so 4 00:00:27,760 --> 00:00:31,520 Speaker 1: long now it seems that we're now sort of at 5 00:00:31,520 --> 00:00:34,000 Speaker 1: the point where we need to start getting updates. I 6 00:00:34,040 --> 00:00:36,960 Speaker 1: think from the first people that we spoke to about 7 00:00:36,960 --> 00:00:41,000 Speaker 1: the problem many months ago, we've come full circle by 8 00:00:41,040 --> 00:00:44,279 Speaker 1: not really improving at all. Um, Yeah, I think that's right. 9 00:00:44,320 --> 00:00:48,400 Speaker 1: I mean, I think so we started looking into these issues, well, 10 00:00:48,440 --> 00:00:51,879 Speaker 1: if you include semiconductors and the sort of squeeze we've 11 00:00:51,920 --> 00:00:55,880 Speaker 1: seen in semi conductor production, we started looking into this 12 00:00:56,000 --> 00:00:59,560 Speaker 1: in and then of course we have the global pandemic 13 00:01:00,120 --> 00:01:03,760 Speaker 1: in early and that just kicked off all sorts of 14 00:01:03,800 --> 00:01:09,119 Speaker 1: additional supply chain and transportation gridlock issues. We've been examining 15 00:01:09,120 --> 00:01:11,640 Speaker 1: those one by one by one, and we've had a 16 00:01:11,680 --> 00:01:14,000 Speaker 1: lot of people come on the show, well maybe not 17 00:01:14,040 --> 00:01:15,679 Speaker 1: a lot, but a few people come on the show 18 00:01:15,720 --> 00:01:20,039 Speaker 1: who have predicted that at some point, you know, hopefully 19 00:01:20,120 --> 00:01:22,800 Speaker 1: it gets better. And yet here we are more than 20 00:01:22,800 --> 00:01:26,720 Speaker 1: a year later, and it seems like things are not 21 00:01:26,840 --> 00:01:31,080 Speaker 1: only not getting better, they're actually getting worse. Yeah, that's 22 00:01:31,120 --> 00:01:33,759 Speaker 1: kind of the wild parts. So like we've actually been 23 00:01:33,880 --> 00:01:37,600 Speaker 1: the logistical aspects of the pandemic. We're kind of the 24 00:01:37,640 --> 00:01:41,120 Speaker 1: way we started. But then since the global economies have 25 00:01:41,200 --> 00:01:44,840 Speaker 1: really like sort of reopened like really in the spring, 26 00:01:45,520 --> 00:01:49,000 Speaker 1: and suddenly that's when all these things started piling up. 27 00:01:49,000 --> 00:01:51,880 Speaker 1: And we talked about you know, tanker rates and freight 28 00:01:52,000 --> 00:01:54,000 Speaker 1: rates and what's going on at the porch, were like, 29 00:01:54,080 --> 00:01:56,240 Speaker 1: all right, yeah, but okay, it's gonna ease. When what's 30 00:01:56,240 --> 00:01:58,600 Speaker 1: it gonna take the ease? And when when will we 31 00:01:59,120 --> 00:02:03,680 Speaker 1: see so called normalization? And here we are early October, 32 00:02:04,120 --> 00:02:06,520 Speaker 1: and I think the verdict is that not only has 33 00:02:06,560 --> 00:02:09,880 Speaker 1: there not been any sort of quote normalization unquote and 34 00:02:09,919 --> 00:02:12,760 Speaker 1: supply chains, it seems to be getting worse, Like almost 35 00:02:12,800 --> 00:02:14,639 Speaker 1: every measure, Like if you were to just look at 36 00:02:14,639 --> 00:02:17,200 Speaker 1: like how many ports are docked outside the Port of 37 00:02:17,240 --> 00:02:21,040 Speaker 1: Los Angeles, it's more today than when we did like 38 00:02:21,080 --> 00:02:24,640 Speaker 1: a Port of Los Angeles episode back early in the summer. Yes, 39 00:02:25,080 --> 00:02:29,359 Speaker 1: that's exactly what I just said. I thought, Um, but 40 00:02:31,040 --> 00:02:34,519 Speaker 1: this is I mean, look, we love talking about supply 41 00:02:34,600 --> 00:02:37,360 Speaker 1: chain issues, and um, this also gives us a chance 42 00:02:37,400 --> 00:02:40,800 Speaker 1: to revisit one of my favorite economic concepts, which is 43 00:02:40,840 --> 00:02:42,920 Speaker 1: the bul whip effect and the idea that you know, 44 00:02:42,960 --> 00:02:47,480 Speaker 1: a small fluctuation in supply and demand can reverberate across 45 00:02:47,520 --> 00:02:49,840 Speaker 1: supply chains and just get worse and worse and worse. 46 00:02:49,880 --> 00:02:51,919 Speaker 1: So I think this is going to be a good episode, 47 00:02:52,000 --> 00:02:55,799 Speaker 1: and it's always good to revisit these, uh, these topics. 48 00:02:56,720 --> 00:02:59,880 Speaker 1: So we are, as a noted in the beginning, we're 49 00:03:00,040 --> 00:03:02,120 Speaker 1: at the point where we now have to go back 50 00:03:02,120 --> 00:03:04,639 Speaker 1: to guests that we talked about to get their perspective 51 00:03:04,720 --> 00:03:06,840 Speaker 1: of how things have gotten worse. So I'm very excited 52 00:03:06,880 --> 00:03:10,480 Speaker 1: to welcome back on the show, Ryan Peterson. He is 53 00:03:10,520 --> 00:03:14,040 Speaker 1: the founder and CEO of the firm flex Port, which 54 00:03:14,080 --> 00:03:18,639 Speaker 1: helps companies deal with their logistical and shipping issues. So Ryan, 55 00:03:19,320 --> 00:03:23,160 Speaker 1: thank you so much for coming back on Odd Lots. Yeah, 56 00:03:23,240 --> 00:03:25,160 Speaker 1: it's great to be back. I wish we were back 57 00:03:25,200 --> 00:03:28,320 Speaker 1: to celebrate our success and fixing the world's logistical problems, 58 00:03:28,360 --> 00:03:30,880 Speaker 1: but we're not there yet. Well, we'll have you back on, 59 00:03:31,040 --> 00:03:34,760 Speaker 1: you know, in five when we achieved the true normalization. 60 00:03:35,200 --> 00:03:37,520 Speaker 1: But you know, I just looked it up, so it's October, 61 00:03:38,040 --> 00:03:40,240 Speaker 1: early October. We had you on in May. So it's 62 00:03:40,240 --> 00:03:45,200 Speaker 1: actually five months now since we've spoken, So why don't 63 00:03:45,240 --> 00:03:47,040 Speaker 1: you just sort of give us your very like sort 64 00:03:47,040 --> 00:03:51,360 Speaker 1: of brief description of what's happened in the last five 65 00:03:51,360 --> 00:03:54,640 Speaker 1: months since we've talked to you. Yeah. So, what flex 66 00:03:54,680 --> 00:03:56,520 Speaker 1: Sport does, by the way, is we help company ship 67 00:03:56,560 --> 00:03:58,480 Speaker 1: cargo all over the world, and we have a technology 68 00:03:58,480 --> 00:04:01,200 Speaker 1: platform to make this really easy to connect importers with 69 00:04:01,280 --> 00:04:04,440 Speaker 1: exporters and with all the world's asset owners that ship stuff. 70 00:04:04,440 --> 00:04:07,160 Speaker 1: So we're we're like from I sometimes cause a backstage 71 00:04:07,200 --> 00:04:10,240 Speaker 1: pass to the world's economy. We see everything, we're in 72 00:04:10,280 --> 00:04:12,680 Speaker 1: there and we're fighting through all the frictions. So what 73 00:04:12,760 --> 00:04:16,360 Speaker 1: we've seen in the last five months, in the last 74 00:04:16,760 --> 00:04:19,400 Speaker 1: more than a year, really is I think the way 75 00:04:19,400 --> 00:04:21,240 Speaker 1: you might call it, the best analogy might be a 76 00:04:21,240 --> 00:04:24,760 Speaker 1: traffic gym or another one of my engineer said, it's 77 00:04:24,800 --> 00:04:28,320 Speaker 1: like a distributed denial of service ad DOS attack on 78 00:04:28,320 --> 00:04:31,520 Speaker 1: on global trade is you started with just too many 79 00:04:31,560 --> 00:04:36,000 Speaker 1: containers being shipped, and ad DOS attack in in the 80 00:04:36,040 --> 00:04:39,719 Speaker 1: world of websites is when too many bots hit a server, 81 00:04:39,920 --> 00:04:42,880 Speaker 1: hit a computer and the computer just overloads and shuts down, 82 00:04:43,040 --> 00:04:45,560 Speaker 1: and you kind of almost have that at the ports 83 00:04:45,600 --> 00:04:49,160 Speaker 1: where the volume of containers the amount of cargo being 84 00:04:49,240 --> 00:04:53,320 Speaker 1: shipped shipped went up. Weard looking at about a depends 85 00:04:53,320 --> 00:04:55,640 Speaker 1: on the month, but about a twenty percent and on 86 00:04:55,680 --> 00:04:59,640 Speaker 1: the port, but about increase and container volumes over twenty 87 00:05:00,120 --> 00:05:04,039 Speaker 1: levels over pre pandemic levels, which is really extraordinary. Like 88 00:05:04,080 --> 00:05:06,719 Speaker 1: people who work in the software industry, that is no problem. 89 00:05:06,760 --> 00:05:09,919 Speaker 1: Your systems can easily grow in a week if it 90 00:05:09,920 --> 00:05:13,200 Speaker 1: needs to support just we just don't have the added trout. 91 00:05:13,240 --> 00:05:16,120 Speaker 1: But there's a lot of manual work involved or physical 92 00:05:16,120 --> 00:05:18,800 Speaker 1: assets that need to move growing in such a short 93 00:05:18,800 --> 00:05:21,240 Speaker 1: time frame. Our infrastructure is just not made for that. 94 00:05:21,440 --> 00:05:24,120 Speaker 1: And by the way, the reason that volumes went up 95 00:05:24,160 --> 00:05:26,880 Speaker 1: so much what looks like is pretty clear in the 96 00:05:26,960 --> 00:05:29,960 Speaker 1: data that consumers shifted their spend from going out and 97 00:05:30,000 --> 00:05:33,559 Speaker 1: spying services and restaurants too to buy more stuff. Um 98 00:05:33,680 --> 00:05:35,280 Speaker 1: and we joked about that last time that you can 99 00:05:35,320 --> 00:05:37,320 Speaker 1: be you can be a patriot by going to a 100 00:05:37,360 --> 00:05:40,279 Speaker 1: bar tonight. Try to fix this problem. So what happened 101 00:05:40,279 --> 00:05:42,200 Speaker 1: with this traffic jam is you've got now so many 102 00:05:42,200 --> 00:05:45,159 Speaker 1: containers flowing through that you get literal traffic jams. Trucks 103 00:05:45,279 --> 00:05:48,200 Speaker 1: trying to get to the port are in waiting for 104 00:05:48,279 --> 00:05:51,520 Speaker 1: hours and hours. It's taking truck drivers, you know, many 105 00:05:51,520 --> 00:05:53,919 Speaker 1: many hours to get to get to the container to 106 00:05:53,960 --> 00:05:58,360 Speaker 1: pick up their goods. And it's now happens. What's happened 107 00:05:58,360 --> 00:05:59,960 Speaker 1: is that it used to be a truck driver could 108 00:06:00,000 --> 00:06:03,440 Speaker 1: you two truck loads per day, but now because of 109 00:06:03,440 --> 00:06:06,160 Speaker 1: the traffic, they can only do one. And so now 110 00:06:06,200 --> 00:06:08,440 Speaker 1: you don't have enough trucks the same number of trucks, 111 00:06:08,440 --> 00:06:10,800 Speaker 1: but you're not getting the capacity. And and actually some 112 00:06:10,839 --> 00:06:12,680 Speaker 1: truck drivers are saying, hey, I can make more money 113 00:06:12,720 --> 00:06:15,040 Speaker 1: doing something else than wait here because they get paid 114 00:06:15,040 --> 00:06:17,960 Speaker 1: per load, right, so they make more money doing something else. 115 00:06:17,960 --> 00:06:20,440 Speaker 1: So that's caused the problem on the trucking. Then if 116 00:06:20,440 --> 00:06:23,320 Speaker 1: the containers don't get cleared out of the port, there's 117 00:06:23,360 --> 00:06:27,719 Speaker 1: not enough space to unload containers from the ships because 118 00:06:27,720 --> 00:06:29,400 Speaker 1: the containers have to get unloaded and put in the 119 00:06:29,480 --> 00:06:32,000 Speaker 1: yard somewhere at the port. And there's those are overflowing. 120 00:06:32,040 --> 00:06:33,480 Speaker 1: If you go, if you drive by a port, you'll 121 00:06:33,480 --> 00:06:36,200 Speaker 1: see the stacks of containers are just sky high. And 122 00:06:36,279 --> 00:06:39,599 Speaker 1: so then the containers ships are being docked off shore 123 00:06:39,680 --> 00:06:43,640 Speaker 1: waiting for their turn to unload. And uh, it's a 124 00:06:43,640 --> 00:06:46,000 Speaker 1: complex system it's hard to point it to one problem, 125 00:06:46,000 --> 00:06:48,359 Speaker 1: but it just cascades through the supply chain. You're seeing 126 00:06:48,360 --> 00:06:51,359 Speaker 1: now loading docks in China where if they can't get 127 00:06:51,640 --> 00:06:55,560 Speaker 1: cargo shipped out, then the loading dock, it sits on 128 00:06:55,600 --> 00:06:57,960 Speaker 1: the loading dock. And so wherever you try to solve 129 00:06:58,000 --> 00:06:59,880 Speaker 1: the bottleneck, it seems to just kind of move it 130 00:07:00,000 --> 00:07:03,520 Speaker 1: act one into this kind of bullwhip effect problem that 131 00:07:03,520 --> 00:07:07,320 Speaker 1: you're seeing. One thing you mentioned just on the demand side, 132 00:07:07,400 --> 00:07:09,560 Speaker 1: so you know, during the pandemic, we had a bunch 133 00:07:09,600 --> 00:07:13,120 Speaker 1: of people who were stuck at home and ordering things online, 134 00:07:13,240 --> 00:07:18,200 Speaker 1: ordering stuff from Amazon or whatever. But in the current environment, 135 00:07:18,320 --> 00:07:22,680 Speaker 1: just fast forwarding to now, what's your sense of how 136 00:07:22,760 --> 00:07:25,440 Speaker 1: much of the demand, how much of what's actually getting 137 00:07:25,440 --> 00:07:32,000 Speaker 1: shipped is caused by companies trying to um hoard might 138 00:07:32,000 --> 00:07:34,200 Speaker 1: not be the right word, but trying to boost their 139 00:07:34,240 --> 00:07:39,280 Speaker 1: inventories in anticipation that stuff will be more difficult to get. 140 00:07:40,480 --> 00:07:42,960 Speaker 1: It's hard to say exactly what we are seeing is 141 00:07:43,000 --> 00:07:46,280 Speaker 1: the inventory levels are at all times lows right now, 142 00:07:46,640 --> 00:07:50,120 Speaker 1: um that considerably the inventory to sales ratio is that 143 00:07:50,240 --> 00:07:52,080 Speaker 1: is the one to track there, and it's lower than 144 00:07:52,240 --> 00:07:53,640 Speaker 1: I don't know if it's all time low, but it's 145 00:07:53,640 --> 00:07:57,520 Speaker 1: certainly lower than the less than pre pandemic levels, so 146 00:07:58,160 --> 00:08:00,600 Speaker 1: you know, it's like, yeah, they're trying to repl inventory. 147 00:08:00,600 --> 00:08:02,320 Speaker 1: I don't know if that's over ordering or not, but 148 00:08:02,480 --> 00:08:04,240 Speaker 1: that is one of my big fears is that everyone, 149 00:08:04,600 --> 00:08:06,320 Speaker 1: you know, you get scarcity for a long time and 150 00:08:06,360 --> 00:08:09,920 Speaker 1: creates this scarcity mindset and then you overorder and you 151 00:08:09,920 --> 00:08:13,800 Speaker 1: do get that bullet effect. Well, we've done at Flexboard. 152 00:08:13,840 --> 00:08:17,800 Speaker 1: We have a research team and economics team and the 153 00:08:18,000 --> 00:08:19,920 Speaker 1: fascinating stuff that they're doing, and they created this thing 154 00:08:19,960 --> 00:08:23,000 Speaker 1: called the post COVID Indicator, And what they're doing is 155 00:08:23,080 --> 00:08:25,360 Speaker 1: looking at all of the data that we have we 156 00:08:25,440 --> 00:08:28,240 Speaker 1: shipp and probably we're now more than one percent of 157 00:08:28,240 --> 00:08:31,679 Speaker 1: the containers entering the US on the West coast and 158 00:08:31,680 --> 00:08:34,680 Speaker 1: and you know, significant amount on the East coast. And 159 00:08:34,679 --> 00:08:36,400 Speaker 1: they're doing a decent job of trying to strip out 160 00:08:36,400 --> 00:08:39,480 Speaker 1: like sample biases that exist in relatively small data set 161 00:08:39,520 --> 00:08:42,000 Speaker 1: even though it's a lot of containers. But they're studying 162 00:08:42,040 --> 00:08:44,840 Speaker 1: this data to now try to understand what are the 163 00:08:44,840 --> 00:08:47,360 Speaker 1: goods that being shipped and can that the types of 164 00:08:47,400 --> 00:08:49,680 Speaker 1: categories because we have to classify everything to clear it 165 00:08:49,679 --> 00:08:53,000 Speaker 1: through customs. And so we get really interesting data about 166 00:08:53,040 --> 00:08:56,040 Speaker 1: what's being shipped, and they've actually been able to predict 167 00:08:56,679 --> 00:09:01,520 Speaker 1: the personal consumption expenditure of the economy. So the US 168 00:09:01,600 --> 00:09:05,520 Speaker 1: government publishes this data I think every quarter that says 169 00:09:05,640 --> 00:09:08,559 Speaker 1: what percentage of goods are being what percentage spending by 170 00:09:08,559 --> 00:09:12,920 Speaker 1: consumers is on goods versus services, And our data, through 171 00:09:12,960 --> 00:09:15,280 Speaker 1: this work of this economics team, we're able to predict 172 00:09:15,320 --> 00:09:17,720 Speaker 1: it about ninety days in advance of like our people 173 00:09:17,960 --> 00:09:22,319 Speaker 1: going back to buying services or they still spending on goods. 174 00:09:23,040 --> 00:09:25,200 Speaker 1: And what we're seeing is that we predict or at 175 00:09:25,280 --> 00:09:27,040 Speaker 1: least for the next ninety days, which is as far 176 00:09:27,120 --> 00:09:30,600 Speaker 1: forward as we look, the goods are just increasing and 177 00:09:30,640 --> 00:09:33,959 Speaker 1: it's not shifting back towards people buying services. Companies are 178 00:09:34,520 --> 00:09:36,880 Speaker 1: the consumers are buying goods. Therefore companies are, you know, 179 00:09:36,960 --> 00:09:39,800 Speaker 1: buying ore are getting those goods in advance. I don't 180 00:09:39,800 --> 00:09:41,880 Speaker 1: think that's gonna let up until Christmas at least, and 181 00:09:41,880 --> 00:09:43,960 Speaker 1: then we'll kind of see what happens after after we 182 00:09:43,960 --> 00:09:47,720 Speaker 1: get through Christmas season. That that alone is super interesting 183 00:09:47,800 --> 00:09:51,439 Speaker 1: and I guess a little surprising because I guess from 184 00:09:51,480 --> 00:09:55,920 Speaker 1: it just a strictly virus standpoint, it does feel like 185 00:09:55,960 --> 00:09:59,200 Speaker 1: things are more normalized in some respect. You know, the 186 00:09:59,240 --> 00:10:02,880 Speaker 1: restaurant in New York, they're all currently open for both 187 00:10:02,960 --> 00:10:07,520 Speaker 1: outdoor and indoor dining, unlike last year in which the 188 00:10:07,920 --> 00:10:14,079 Speaker 1: sort of school public schools openness was very spotty and inconsistent. Uh, 189 00:10:14,120 --> 00:10:16,120 Speaker 1: schools are open. You know, I gets to be a 190 00:10:16,200 --> 00:10:18,200 Speaker 1: raising some questions of whether there's gonna be like some 191 00:10:18,320 --> 00:10:21,439 Speaker 1: permanent shifts and consumption patterns if we have this sort 192 00:10:21,480 --> 00:10:24,760 Speaker 1: of like kind of normalization of virus patterns and yet 193 00:10:24,760 --> 00:10:27,600 Speaker 1: you're not seeing a real big shift in spending patterns 194 00:10:27,600 --> 00:10:30,079 Speaker 1: in the data. Yeah, I mean that's what our data 195 00:10:30,120 --> 00:10:31,720 Speaker 1: showing right now. And it's been you know, we've been 196 00:10:31,720 --> 00:10:33,240 Speaker 1: pretty good. We haven't been doing this for that long. 197 00:10:33,280 --> 00:10:35,920 Speaker 1: We've been doing it since earlier this year back testing. 198 00:10:36,200 --> 00:10:40,520 Speaker 1: Our model is pretty decent at predicting this thing thus far. Uh, 199 00:10:40,559 --> 00:10:42,400 Speaker 1: And we show it for the next ninety days that 200 00:10:42,400 --> 00:10:44,400 Speaker 1: people are still buying more good of course, remember Christmas 201 00:10:44,400 --> 00:10:46,480 Speaker 1: season is right now, so people are buying lots of 202 00:10:46,520 --> 00:10:48,440 Speaker 1: goods for Christmas. So we'll have to see how it 203 00:10:48,480 --> 00:10:52,319 Speaker 1: plays out after that. But mhm um, So one thing 204 00:10:52,360 --> 00:10:56,440 Speaker 1: we haven't talked about just yet is also the energy 205 00:10:56,600 --> 00:11:00,880 Speaker 1: crisis that we're seeing in Europe, and probably significantly for 206 00:11:01,000 --> 00:11:04,040 Speaker 1: this conversation in China. And you know, I've seen some 207 00:11:04,080 --> 00:11:09,760 Speaker 1: headlines that it's already hitting production of things like iPhones 208 00:11:09,920 --> 00:11:14,640 Speaker 1: and cardboard weirdly and things like that. What's your take 209 00:11:14,760 --> 00:11:18,680 Speaker 1: on how that is going to flow into global supply 210 00:11:18,760 --> 00:11:22,720 Speaker 1: chains and would you expect it to also impact container 211 00:11:22,760 --> 00:11:26,880 Speaker 1: shipping and other forms of transportation. It's very real in China. 212 00:11:27,040 --> 00:11:29,040 Speaker 1: So we've We've had a lot of customers had to 213 00:11:29,080 --> 00:11:33,480 Speaker 1: cancel shipments, hundreds of containers and a single customer where 214 00:11:33,480 --> 00:11:35,920 Speaker 1: the factories just closed. That. I met with a customer 215 00:11:36,000 --> 00:11:38,960 Speaker 1: yesterday in fact too, whose factory can only work two 216 00:11:39,040 --> 00:11:41,360 Speaker 1: days a week during the daytime and they've had to 217 00:11:41,360 --> 00:11:44,920 Speaker 1: shift to nighttime production because of energy rationing in China, 218 00:11:44,960 --> 00:11:47,440 Speaker 1: So that that's very real. I mean, I haven't gotten 219 00:11:47,559 --> 00:11:50,320 Speaker 1: good details like how to predict from here, but I've 220 00:11:50,360 --> 00:11:52,880 Speaker 1: definitely heard it anecdotes from our customers that yes, their 221 00:11:52,920 --> 00:11:56,160 Speaker 1: factories are being rationed on energy and not able to 222 00:11:56,520 --> 00:11:59,800 Speaker 1: work full cycles and it will cut volumes. So that's 223 00:12:00,440 --> 00:12:02,520 Speaker 1: that's another force here that It's just these things are 224 00:12:02,559 --> 00:12:04,480 Speaker 1: such complex systems it's very hard to point to a 225 00:12:04,480 --> 00:12:06,280 Speaker 1: single thing and be like this is the solution or 226 00:12:06,320 --> 00:12:08,680 Speaker 1: this is the cause of the problem. Yeah, so, I 227 00:12:08,679 --> 00:12:11,240 Speaker 1: mean I think actually, and I was just saw a 228 00:12:11,360 --> 00:12:15,320 Speaker 1: chart this morning some of the lines from China to 229 00:12:15,360 --> 00:12:17,600 Speaker 1: the U S some of these indicries that try to 230 00:12:18,040 --> 00:12:20,720 Speaker 1: track and aggregate with the price of shipping a container 231 00:12:20,800 --> 00:12:24,280 Speaker 1: from say China to Los Angeles, they have come down, 232 00:12:24,800 --> 00:12:26,959 Speaker 1: But it doesn't seem like a good reason, Like if 233 00:12:27,000 --> 00:12:29,840 Speaker 1: the reason is that some of these factories have literally 234 00:12:29,880 --> 00:12:32,520 Speaker 1: had to go dark because now the exports are just 235 00:12:32,559 --> 00:12:35,319 Speaker 1: being turned off, That may on the service look like 236 00:12:35,360 --> 00:12:38,880 Speaker 1: a normalization of some sort from a price standpoint, but 237 00:12:39,000 --> 00:12:42,040 Speaker 1: certainly not a normalization from a sort of like we 238 00:12:42,080 --> 00:12:45,839 Speaker 1: want the system to be working standpoint. Yeah, I mean, 239 00:12:45,880 --> 00:12:49,120 Speaker 1: it might normalize logistics prices, but and logistics prices are 240 00:12:49,280 --> 00:12:52,880 Speaker 1: gonna are flowing through to higher prices, like are the 241 00:12:52,880 --> 00:12:55,240 Speaker 1: customer I met with yesterday said that because of the 242 00:12:55,320 --> 00:12:58,240 Speaker 1: high price of freight, they were having to raise the 243 00:12:58,280 --> 00:13:01,480 Speaker 1: price of their good which are sort of like home 244 00:13:01,840 --> 00:13:04,200 Speaker 1: improvement goods. That there are things that are sold through 245 00:13:04,200 --> 00:13:07,560 Speaker 1: home depot and they had to raise their prices. That 246 00:13:07,640 --> 00:13:10,080 Speaker 1: was the impact of the high prices on freight that 247 00:13:10,200 --> 00:13:13,360 Speaker 1: was passing through to the end consumer. That's just the freight. 248 00:13:13,800 --> 00:13:16,360 Speaker 1: But there's a second piece, which is if you're the 249 00:13:16,400 --> 00:13:19,000 Speaker 1: only person that managed to get your product, the only 250 00:13:19,040 --> 00:13:21,880 Speaker 1: company that managed to get your products through, or there's 251 00:13:21,920 --> 00:13:24,480 Speaker 1: just less products coming through their scarcity, and that will 252 00:13:24,720 --> 00:13:27,440 Speaker 1: naturally raise the prices on its own, not just passing 253 00:13:27,480 --> 00:13:29,160 Speaker 1: through the logistics costs, but just hey, you're the only 254 00:13:29,240 --> 00:13:31,679 Speaker 1: person that has this product, you can raise the price. 255 00:13:31,720 --> 00:13:34,400 Speaker 1: And so if less things are coming out of China 256 00:13:34,480 --> 00:13:37,480 Speaker 1: because factories are shutting down, those that do come out 257 00:13:37,480 --> 00:13:39,720 Speaker 1: are going to be worth more and you'll see inflation 258 00:13:39,800 --> 00:14:00,240 Speaker 1: from that. So you mentioned people passing on higher US 259 00:14:00,360 --> 00:14:05,120 Speaker 1: onto customers, and I'm wondering what else can companies or 260 00:14:05,280 --> 00:14:08,760 Speaker 1: you know, importers actually do to try to offset some 261 00:14:08,840 --> 00:14:12,320 Speaker 1: of these issues. So, you know, when we spoke to you, uh, 262 00:14:12,360 --> 00:14:17,120 Speaker 1: initially earlier this year, these were still kind of newish issues. 263 00:14:17,160 --> 00:14:19,600 Speaker 1: Everyone was trying to wrap their heads around it. And 264 00:14:19,680 --> 00:14:22,720 Speaker 1: now we've had you know, almost a year of this, 265 00:14:23,360 --> 00:14:28,160 Speaker 1: it feels like companies maybe should be getting better at 266 00:14:28,360 --> 00:14:31,640 Speaker 1: managing some of these risks, and maybe transportation companies should 267 00:14:31,640 --> 00:14:33,920 Speaker 1: be getting better at managing some of these risks, and 268 00:14:34,000 --> 00:14:38,120 Speaker 1: yet it feels like we're still struggling. There's there's a 269 00:14:38,120 --> 00:14:39,920 Speaker 1: few things you can do to offset risk, but there's 270 00:14:39,960 --> 00:14:43,240 Speaker 1: no silver bullets, and there's no like, no way to 271 00:14:43,280 --> 00:14:45,920 Speaker 1: forecast where prices go. I mean, what what you see. 272 00:14:46,360 --> 00:14:49,040 Speaker 1: The number one and simplest thing that we recommend is 273 00:14:49,480 --> 00:14:52,120 Speaker 1: go sit with your factory and you probably can't go 274 00:14:52,120 --> 00:14:54,680 Speaker 1: there in person, but make sure you get them, really 275 00:14:54,920 --> 00:14:57,840 Speaker 1: go deep with them and make sure that they're loading 276 00:14:57,880 --> 00:15:01,000 Speaker 1: your container to the brim a cross to our customer base. 277 00:15:01,360 --> 00:15:04,280 Speaker 1: We look and we we use machine learning to digitize 278 00:15:04,280 --> 00:15:06,960 Speaker 1: the packing list. So this is the document that tells 279 00:15:07,000 --> 00:15:10,600 Speaker 1: you what's in the container, and it has the dimensions 280 00:15:10,640 --> 00:15:13,560 Speaker 1: of every carton in there and so by it would 281 00:15:13,560 --> 00:15:16,080 Speaker 1: be a really slow process if you did it by hand, 282 00:15:16,080 --> 00:15:18,800 Speaker 1: going through and doing the geometry of how full these 283 00:15:18,800 --> 00:15:22,360 Speaker 1: containers are, but with our software it's trivial. And what 284 00:15:22,400 --> 00:15:25,440 Speaker 1: we find is that actually, on average they're only sevent full. 285 00:15:26,120 --> 00:15:28,440 Speaker 1: That's just a huge opportunity, a huge amount of waste 286 00:15:28,440 --> 00:15:30,720 Speaker 1: for shipping air in a moment where you can't get 287 00:15:30,720 --> 00:15:32,600 Speaker 1: more containers on the ship, we can't get more containers 288 00:15:32,640 --> 00:15:34,920 Speaker 1: through the ports, but we can put more stuff inside 289 00:15:34,920 --> 00:15:38,440 Speaker 1: the containers. That's that's simple, and that's the very first step. 290 00:15:38,480 --> 00:15:40,560 Speaker 1: It's like, really go and you might we have people 291 00:15:40,560 --> 00:15:43,960 Speaker 1: who are re engineering their packaging to kind of optimize 292 00:15:43,960 --> 00:15:47,360 Speaker 1: the dimensions, make stuff ship smaller. Like your cartons themselves, 293 00:15:47,560 --> 00:15:50,640 Speaker 1: there's often wasted space inside the carton. You've seen companies 294 00:15:50,640 --> 00:15:53,000 Speaker 1: have gotten much better at this, like your iPhone or 295 00:15:53,320 --> 00:15:55,880 Speaker 1: you know, these boxes now getting smaller and smaller and smaller. 296 00:15:55,920 --> 00:15:57,600 Speaker 1: And that's that's the big reason why it saves a 297 00:15:57,600 --> 00:16:00,360 Speaker 1: lot on logistics costs when you do that. Um second, 298 00:16:00,800 --> 00:16:03,960 Speaker 1: you're starting to see the first long term deals in 299 00:16:04,160 --> 00:16:07,160 Speaker 1: global logistics, where the first I think in history. I 300 00:16:07,160 --> 00:16:11,160 Speaker 1: mean typically freight is purchased on an annual cycle, where 301 00:16:11,160 --> 00:16:15,600 Speaker 1: you every May, every April May timeframe. These companies run 302 00:16:15,640 --> 00:16:18,880 Speaker 1: an annual bid and they choose their freight provider for 303 00:16:18,920 --> 00:16:21,760 Speaker 1: the next year, and they do a one year contract. 304 00:16:22,320 --> 00:16:23,960 Speaker 1: And now you're starting to see for the first time 305 00:16:24,000 --> 00:16:28,240 Speaker 1: people signing two and three year deals and those that's 306 00:16:28,320 --> 00:16:31,240 Speaker 1: that's never happened before. It's pretty interesting. You're you're really 307 00:16:31,520 --> 00:16:33,960 Speaker 1: you are taking some real risk. What you're basically doing 308 00:16:33,960 --> 00:16:36,520 Speaker 1: is saying, hey, we'll pay well, we'll guarantee, we'll do 309 00:16:36,560 --> 00:16:39,360 Speaker 1: a three year contract, and we got we want lower 310 00:16:39,400 --> 00:16:42,560 Speaker 1: prices this year, and then we'll pay you above historical 311 00:16:42,640 --> 00:16:45,480 Speaker 1: market rates for the year two and three. It's very 312 00:16:45,520 --> 00:16:48,120 Speaker 1: hard to know what the price goes to. And the 313 00:16:48,200 --> 00:16:55,000 Speaker 1: other big trend here is enforceable contracts. So logistics contracts 314 00:16:55,240 --> 00:16:59,040 Speaker 1: have never really been contracts the way I understand a contract, 315 00:16:59,040 --> 00:17:00,520 Speaker 1: which is like you must do the thing that you 316 00:17:00,520 --> 00:17:02,800 Speaker 1: said you were going to do, And that's not really 317 00:17:02,800 --> 00:17:05,320 Speaker 1: how it works in global logistics, where you sign a 318 00:17:05,320 --> 00:17:07,840 Speaker 1: contract and sort of like an agreement and handshake, and 319 00:17:07,880 --> 00:17:10,920 Speaker 1: if you don't follow through. So like someone says they're 320 00:17:10,920 --> 00:17:14,480 Speaker 1: gonna ship a thousand containers and pay five thousand dollars 321 00:17:14,520 --> 00:17:17,080 Speaker 1: per container, that was like a kind of a pretty 322 00:17:17,119 --> 00:17:19,800 Speaker 1: awesome contract if you signed it last year, or if 323 00:17:19,800 --> 00:17:22,040 Speaker 1: you signed it earlier this year, because of course the 324 00:17:22,119 --> 00:17:24,879 Speaker 1: spot rate went to fifteen to twenty thou and you 325 00:17:24,920 --> 00:17:27,880 Speaker 1: have this five thousand dollar contract to ship that container 326 00:17:28,320 --> 00:17:31,520 Speaker 1: or ship those containers. But if the ocean carrier can 327 00:17:31,560 --> 00:17:33,640 Speaker 1: just sort of say, hey, I'm not gonna load you 328 00:17:34,080 --> 00:17:36,520 Speaker 1: at this price, so yeah, you have this contract, but 329 00:17:36,600 --> 00:17:40,240 Speaker 1: I don't have to load your container on this day, 330 00:17:40,320 --> 00:17:42,320 Speaker 1: and so you had all these contracts that were broken 331 00:17:43,160 --> 00:17:45,920 Speaker 1: this year. And I mean, if if that was me 332 00:17:46,000 --> 00:17:48,560 Speaker 1: and I signed that contract as a as an importer, 333 00:17:48,760 --> 00:17:50,960 Speaker 1: I would probably not sign the contract again if you 334 00:17:51,040 --> 00:17:54,280 Speaker 1: broke it. And so people are starting for the first 335 00:17:54,320 --> 00:17:57,080 Speaker 1: time to do what the ocean carriers have always wanted 336 00:17:57,119 --> 00:17:59,160 Speaker 1: but never been able to make happen, which is make 337 00:17:59,200 --> 00:18:01,600 Speaker 1: these contracts and possible because of course it often goes 338 00:18:01,600 --> 00:18:05,119 Speaker 1: the other way where you signed the contract at five 339 00:18:05,160 --> 00:18:07,520 Speaker 1: thousand dollars and then the price went to four and 340 00:18:07,560 --> 00:18:09,280 Speaker 1: then the importer says, yeah, you know what, I know, 341 00:18:09,320 --> 00:18:11,000 Speaker 1: I have that contract, but I'm not gonna I'll just 342 00:18:11,000 --> 00:18:13,840 Speaker 1: ship with somebody else who's offering me for it. Actually 343 00:18:13,840 --> 00:18:17,080 Speaker 1: probably is progress to make these things enforceable and say like, no, 344 00:18:17,200 --> 00:18:19,280 Speaker 1: you have to ship. If you don't ship a container, 345 00:18:20,000 --> 00:18:23,280 Speaker 1: you owe us money anyways, And that's not how the 346 00:18:23,320 --> 00:18:25,200 Speaker 1: industry has works. So I think that's the last thing 347 00:18:25,240 --> 00:18:27,199 Speaker 1: sustainable change that you're gonna see from this is a 348 00:18:27,240 --> 00:18:29,800 Speaker 1: real move towards enforceable contracts, which to my view is 349 00:18:29,840 --> 00:18:31,520 Speaker 1: a good thing. Like I never when I first I've 350 00:18:31,520 --> 00:18:33,000 Speaker 1: been in this industry almost a decade now, and I 351 00:18:33,040 --> 00:18:35,080 Speaker 1: when I realized that contracts weren't enforceable, I was like, 352 00:18:35,160 --> 00:18:37,920 Speaker 1: I just don't understand, Like, what is a contract that's 353 00:18:37,960 --> 00:18:41,560 Speaker 1: not enforceable? Well, well, no, I was just I was 354 00:18:41,520 --> 00:18:43,280 Speaker 1: just gonna say, like, this is kind of the thing 355 00:18:43,359 --> 00:18:47,720 Speaker 1: that I think, Ryan, I first learned from you in 356 00:18:47,760 --> 00:18:50,120 Speaker 1: the spring, and it's informed a lot of the thinking 357 00:18:50,880 --> 00:18:54,520 Speaker 1: that's helped subsequent episodes on This is just how loose 358 00:18:54,560 --> 00:18:58,280 Speaker 1: the industry has all seemed. And it's like, do you 359 00:18:58,320 --> 00:19:00,919 Speaker 1: know a guy and do you know like you know, 360 00:19:01,040 --> 00:19:03,360 Speaker 1: so is it? Do you know someone in Copenhagen who 361 00:19:03,400 --> 00:19:06,320 Speaker 1: can get your get your box on the on the 362 00:19:06,359 --> 00:19:09,399 Speaker 1: ship or do not and etcetera. And I think that 363 00:19:09,480 --> 00:19:11,359 Speaker 1: really surprised me. And even like in some of our 364 00:19:11,400 --> 00:19:16,560 Speaker 1: other discussions like trucking, etcetera, how sort of informal a 365 00:19:16,560 --> 00:19:19,439 Speaker 1: lot of these arrangements are, how many of these deals 366 00:19:19,440 --> 00:19:22,080 Speaker 1: are like other someone goes on a message board or 367 00:19:22,119 --> 00:19:24,760 Speaker 1: like a WhatsApp group and says like, is there someone 368 00:19:24,800 --> 00:19:27,000 Speaker 1: who can pick up this and this city and get 369 00:19:27,040 --> 00:19:30,359 Speaker 1: it to this city? Overall, I've been sort of surprised 370 00:19:30,359 --> 00:19:33,920 Speaker 1: by how like sort of loose and informal are sort 371 00:19:33,920 --> 00:19:38,040 Speaker 1: of this highly fragile global shipping global logistic systems is 372 00:19:38,440 --> 00:19:40,600 Speaker 1: I think we all imagine, like, you know, go to 373 00:19:40,680 --> 00:19:43,080 Speaker 1: your nearest light switch and flip it on, and it's 374 00:19:43,080 --> 00:19:45,399 Speaker 1: just so reliable. And what you're actually doing when you 375 00:19:45,440 --> 00:19:49,400 Speaker 1: flip that light switches there's a power plant somewhere that's 376 00:19:49,400 --> 00:19:51,680 Speaker 1: actually getting a little generating a little bit more power 377 00:19:51,880 --> 00:19:55,320 Speaker 1: just for you. Like you're actually controlling an enormous machine somewhere, 378 00:19:55,320 --> 00:20:01,120 Speaker 1: and there's this incredibly complex automated electrical rid that's providing 379 00:20:01,119 --> 00:20:02,840 Speaker 1: you that power. And I think we imagine that when 380 00:20:02,880 --> 00:20:04,840 Speaker 1: we buy something, there's the same sort of thing that 381 00:20:04,920 --> 00:20:07,280 Speaker 1: must be happening. It's like this automated system that's all 382 00:20:07,280 --> 00:20:10,760 Speaker 1: connected and orders automatically placed back to the factory and 383 00:20:10,800 --> 00:20:12,680 Speaker 1: there's but in fact, it's like a bunch of people 384 00:20:12,720 --> 00:20:15,280 Speaker 1: on phones and shipping pieces of paper around the world, 385 00:20:15,320 --> 00:20:18,240 Speaker 1: duct taping forwarding emails. And I often joke it it 386 00:20:18,280 --> 00:20:21,000 Speaker 1: should we call our industry freight forwarding, but I'm like, 387 00:20:21,040 --> 00:20:23,320 Speaker 1: it should be called freight email forwarding because you're just 388 00:20:23,400 --> 00:20:26,760 Speaker 1: kind of shuffling PDFs around the world trying to make 389 00:20:26,760 --> 00:20:29,720 Speaker 1: things happen. Yeah, that's one thing I learned from when 390 00:20:29,760 --> 00:20:32,879 Speaker 1: I was trying to send that Teddy Bear by containership 391 00:20:33,000 --> 00:20:35,720 Speaker 1: is just like the amount of emails that that you 392 00:20:36,000 --> 00:20:38,600 Speaker 1: have to send, and then you you get cced into 393 00:20:38,640 --> 00:20:41,560 Speaker 1: some responses, and it's just like one person in the 394 00:20:41,640 --> 00:20:44,800 Speaker 1: logistics chain talking to another person in the logistics chain, 395 00:20:44,800 --> 00:20:47,080 Speaker 1: and it just goes on and on and on um. 396 00:20:47,119 --> 00:20:50,639 Speaker 1: But just going back to what companies can do to 397 00:20:50,800 --> 00:20:55,159 Speaker 1: handle this, have you seen anyone sort of reshuffling um 398 00:20:55,240 --> 00:20:59,960 Speaker 1: their product offerings in order to incorporate these higher calls 399 00:21:00,080 --> 00:21:04,199 Speaker 1: us or greater headaches of transport? So, for instance, is 400 00:21:04,240 --> 00:21:08,760 Speaker 1: anyone just cutting back on big bulky stuff that doesn't 401 00:21:08,760 --> 00:21:14,200 Speaker 1: necessarily have a high profit margin given current costs. Absolutely, 402 00:21:14,240 --> 00:21:17,160 Speaker 1: So people are shifting what if they if they're scarcely 403 00:21:17,200 --> 00:21:19,159 Speaker 1: of what they can ship, They're shipping what we call 404 00:21:19,280 --> 00:21:21,480 Speaker 1: the head skews. So these are just the best products, 405 00:21:21,480 --> 00:21:24,760 Speaker 1: the ones that either sell the most or the highest margin. 406 00:21:25,480 --> 00:21:27,680 Speaker 1: So you're seeing a big shift towards that and taking 407 00:21:27,680 --> 00:21:30,040 Speaker 1: more time to prioritize what witch products do you ship. 408 00:21:30,160 --> 00:21:32,000 Speaker 1: So we're seeing a lot of companies cut back on 409 00:21:32,040 --> 00:21:35,399 Speaker 1: the number of excuse in their catalog and prioritizing the 410 00:21:35,400 --> 00:21:37,600 Speaker 1: ones that where they make the most money the best economics. 411 00:21:37,920 --> 00:21:40,960 Speaker 1: You're also seeing companies opt out and you have a 412 00:21:41,000 --> 00:21:44,760 Speaker 1: classic sort of deadweight loss problem right now where the 413 00:21:44,760 --> 00:21:47,600 Speaker 1: price of freight has gone so high. Actually the ships 414 00:21:47,600 --> 00:21:51,040 Speaker 1: are not all full anymore because you've priced it at 415 00:21:51,040 --> 00:21:54,000 Speaker 1: a level where certain companies, especially furniture industry, where you 416 00:21:54,000 --> 00:21:56,080 Speaker 1: have these, like you said, big bulky stuff that's not 417 00:21:56,160 --> 00:21:59,360 Speaker 1: super high margin, and there there are that's the first 418 00:21:59,400 --> 00:22:01,000 Speaker 1: category we see where people are like, you know what, 419 00:22:01,040 --> 00:22:02,639 Speaker 1: I'm not I'm just not going to ship it until 420 00:22:02,680 --> 00:22:04,879 Speaker 1: prices come down to the economics don't make sense for me. 421 00:22:05,160 --> 00:22:07,760 Speaker 1: So yes, I've you've seen some of that. Very interesting 422 00:22:07,760 --> 00:22:09,800 Speaker 1: to see that that deadweight lost problem in real life, 423 00:22:10,200 --> 00:22:12,639 Speaker 1: like really explicitly, like, look, that container ship is not 424 00:22:12,680 --> 00:22:15,359 Speaker 1: totally full right there, and yet there's lots of people 425 00:22:15,359 --> 00:22:18,240 Speaker 1: who need to ship stuff, but at that price it 426 00:22:18,280 --> 00:22:21,960 Speaker 1: doesn't make sense for a lot of businesses. It's literally 427 00:22:22,080 --> 00:22:25,240 Speaker 1: that that restaurant is so popular and nobody goes there anymore. 428 00:22:25,240 --> 00:22:28,840 Speaker 1: That that shipping rounde is so popular, nobody uses that anymore. 429 00:22:29,200 --> 00:22:32,080 Speaker 1: You know. The other thing that we've seen, and I 430 00:22:32,119 --> 00:22:34,680 Speaker 1: think these are sort of some new developments. I'm trying 431 00:22:34,680 --> 00:22:37,560 Speaker 1: to remember like what's new since May. But I think 432 00:22:37,640 --> 00:22:40,240 Speaker 1: one of the things we've seen is some of these 433 00:22:40,280 --> 00:22:45,600 Speaker 1: big retailers in the US seem to be going upstream 434 00:22:45,640 --> 00:22:49,360 Speaker 1: in terms of getting more hands on with their shipping 435 00:22:49,600 --> 00:22:54,080 Speaker 1: directly or I don't totally get her chartering their own boats. 436 00:22:54,080 --> 00:22:57,520 Speaker 1: So I think home Depot was early on in this trend. 437 00:22:58,119 --> 00:23:01,360 Speaker 1: There was I think cost Go in their recent earnings 438 00:23:01,440 --> 00:23:04,920 Speaker 1: call from about two weeks ago, made some comments about 439 00:23:04,960 --> 00:23:07,520 Speaker 1: taking control of their own boats. Can you talk to 440 00:23:07,600 --> 00:23:11,560 Speaker 1: us about a little bit about size and the degree 441 00:23:11,640 --> 00:23:14,960 Speaker 1: to which companies that I guess, well, I would say 442 00:23:15,080 --> 00:23:18,119 Speaker 1: have a high level of market power because they're huge 443 00:23:18,160 --> 00:23:21,719 Speaker 1: end retailers like a home Depot or Costco are using 444 00:23:21,800 --> 00:23:26,360 Speaker 1: their market strength to have a degree of control over 445 00:23:26,400 --> 00:23:31,800 Speaker 1: the supply chain that smaller competitors may have a harder time. Yes, 446 00:23:31,960 --> 00:23:34,200 Speaker 1: this is a real trend. It's something we're watching really 447 00:23:34,240 --> 00:23:37,199 Speaker 1: closely and sort of uh, kind of chewing on our 448 00:23:37,200 --> 00:23:38,879 Speaker 1: popcorn here as we figured out. I don't know how 449 00:23:38,880 --> 00:23:40,680 Speaker 1: it's gonna play out, but it's fascinating. So you have 450 00:23:40,760 --> 00:23:43,679 Speaker 1: seen those two companies, Deepot and Costco both charted their 451 00:23:43,680 --> 00:23:47,560 Speaker 1: own boats. It's not they're not going full stack vertically integrated. 452 00:23:47,600 --> 00:23:51,040 Speaker 1: We ship everything ourselves. They're sort of augmenting their capacity, 453 00:23:51,200 --> 00:23:55,280 Speaker 1: making sure that they have the extra enough capacity. I 454 00:23:56,200 --> 00:23:58,960 Speaker 1: want to say we did. Someone did the math on 455 00:23:59,000 --> 00:24:02,720 Speaker 1: it was like maybe five of their total container volume 456 00:24:03,480 --> 00:24:05,199 Speaker 1: for one of those companies that was going to be 457 00:24:05,240 --> 00:24:07,840 Speaker 1: on their own ships. So the interesting thing here is 458 00:24:08,040 --> 00:24:09,840 Speaker 1: first off, going to be fun to watch, Like I 459 00:24:09,840 --> 00:24:12,360 Speaker 1: think it's pretty hard to run one of these ocean carriers. 460 00:24:12,400 --> 00:24:15,040 Speaker 1: It's not a trivial thing to like run your own ships. 461 00:24:15,080 --> 00:24:17,360 Speaker 1: And is if the freight doesn't ship, you still pay 462 00:24:17,440 --> 00:24:19,159 Speaker 1: for it, right the fright, the boat has to go. 463 00:24:19,359 --> 00:24:22,560 Speaker 1: And so actually it's one thing to ship a hundred 464 00:24:22,560 --> 00:24:26,240 Speaker 1: thousand containers a year. And so you get this ship 465 00:24:26,320 --> 00:24:28,720 Speaker 1: that has capacity to move a hundred thousand containers. The 466 00:24:28,760 --> 00:24:31,480 Speaker 1: math looks great on the spreadsheet, but that ship is 467 00:24:31,520 --> 00:24:35,840 Speaker 1: gonna leave like on Tuesday October, you know, whatever the 468 00:24:35,960 --> 00:24:39,600 Speaker 1: date is in October, and if you don't have two 469 00:24:39,640 --> 00:24:42,439 Speaker 1: thousand containers waiting at the port on that day, it 470 00:24:42,720 --> 00:24:45,280 Speaker 1: leaves without your containers. So there's a lot of devil 471 00:24:45,280 --> 00:24:48,800 Speaker 1: in the detail and operational excellence to pull those things off. 472 00:24:48,840 --> 00:24:50,959 Speaker 1: And so you're kind of doing a big start up 473 00:24:51,000 --> 00:24:52,679 Speaker 1: within a company to be able to pull something like 474 00:24:52,720 --> 00:24:54,520 Speaker 1: that off. So that's gonna be interesting to watch how 475 00:24:54,520 --> 00:24:56,920 Speaker 1: they do it. The other the other interesting thing is 476 00:24:57,160 --> 00:24:59,320 Speaker 1: you're kind of competing with your vendors at that point, 477 00:24:59,400 --> 00:25:01,879 Speaker 1: like you're a big ocean carriers. I don't know how 478 00:25:01,920 --> 00:25:04,040 Speaker 1: they're going to react to that, but like you know, 479 00:25:04,200 --> 00:25:07,680 Speaker 1: like wait a minute, that why are you doing my job? 480 00:25:08,640 --> 00:25:11,280 Speaker 1: And how and so that ocean carrier when it comes 481 00:25:11,320 --> 00:25:13,680 Speaker 1: to their time to decide, how do they allocate who 482 00:25:13,680 --> 00:25:16,920 Speaker 1: gets space on their boat? Are they going to prioritize 483 00:25:17,400 --> 00:25:21,600 Speaker 1: home depot or lows right next contract season? And so 484 00:25:21,680 --> 00:25:24,880 Speaker 1: how it doesn't It's these things are have second order 485 00:25:24,920 --> 00:25:26,920 Speaker 1: effects that are really hard to predict. So I'm very 486 00:25:26,920 --> 00:25:29,119 Speaker 1: curious how it all plays out, but i can't. I 487 00:25:29,119 --> 00:25:31,639 Speaker 1: can't make predictions. It's more just eat some popcorn and watch. 488 00:25:33,240 --> 00:25:36,080 Speaker 1: So this is kind of a related question, although maybe 489 00:25:36,080 --> 00:25:38,160 Speaker 1: it's a weird one, but you know, you were talking 490 00:25:38,160 --> 00:25:42,520 Speaker 1: about UM some containers going out when they're not completely full, 491 00:25:42,680 --> 00:25:46,560 Speaker 1: or some capacity UM not being completely taken up on 492 00:25:46,760 --> 00:25:50,320 Speaker 1: ships just because of the higher prices. But is there 493 00:25:50,359 --> 00:25:56,080 Speaker 1: like a secondary market for UM shipping capacity. Like, for instance, 494 00:25:56,200 --> 00:26:00,480 Speaker 1: if I'm a company and exporter who's ending a bunch 495 00:26:00,520 --> 00:26:02,439 Speaker 1: of stuff and I happen to have some space in 496 00:26:02,440 --> 00:26:05,400 Speaker 1: one of my containers, or I don't know, I suddenly 497 00:26:05,400 --> 00:26:07,720 Speaker 1: don't need a certain amount of space on a ship. 498 00:26:08,080 --> 00:26:12,760 Speaker 1: Can I sell that onwards to someone else? There's not 499 00:26:12,800 --> 00:26:17,040 Speaker 1: like a super liquid secondary market that everybody can participate in, 500 00:26:17,600 --> 00:26:20,240 Speaker 1: but freight forwarders themselves. So a company like flex Sport 501 00:26:20,320 --> 00:26:22,760 Speaker 1: is able to do that. So if we if one 502 00:26:22,800 --> 00:26:27,000 Speaker 1: customer cancels and we've got a slot, we can reassign 503 00:26:27,119 --> 00:26:30,000 Speaker 1: that and so we actually have built up this pool 504 00:26:30,040 --> 00:26:34,200 Speaker 1: of cargo. We call this subject to role. So getting 505 00:26:34,280 --> 00:26:36,560 Speaker 1: rolled is like when you fly in a passenger planing 506 00:26:36,600 --> 00:26:39,480 Speaker 1: you get bumped. So being subject to role means, hey, 507 00:26:39,560 --> 00:26:42,000 Speaker 1: you've got a ticket, but you might get bumped. It's 508 00:26:42,000 --> 00:26:44,680 Speaker 1: going to be a cheaper ticket because I can't get 509 00:26:44,680 --> 00:26:47,560 Speaker 1: you the same service level promise you may get in 510 00:26:47,640 --> 00:26:49,800 Speaker 1: this market. You probably will get bumped, but you can 511 00:26:49,800 --> 00:26:51,800 Speaker 1: get slightly cheaper freight. And then that way, if we 512 00:26:51,840 --> 00:26:54,080 Speaker 1: have a cancelation, we have somebody who's like, we can 513 00:26:54,119 --> 00:26:57,080 Speaker 1: always fill in. So that's that's one product that's that's 514 00:26:57,080 --> 00:26:59,440 Speaker 1: out there some of the big ocean carriers have been 515 00:26:59,480 --> 00:27:01,400 Speaker 1: have done pretty large deals with this type of thing, 516 00:27:01,400 --> 00:27:04,080 Speaker 1: where they'll have just this that way that ships never full, 517 00:27:04,119 --> 00:27:07,440 Speaker 1: there's always some backup capacity that they can plug in. UM, 518 00:27:07,480 --> 00:27:10,119 Speaker 1: so that's the thing that exists, and then just generally 519 00:27:10,960 --> 00:27:13,600 Speaker 1: there there's yeah, there's no real secondary market. There's also 520 00:27:13,680 --> 00:27:16,080 Speaker 1: no futures market for this, so you can't like short 521 00:27:16,119 --> 00:27:17,960 Speaker 1: the prices are really high. People are like, oh, the 522 00:27:17,960 --> 00:27:20,520 Speaker 1: price has to come down, but there's no um futures 523 00:27:20,520 --> 00:27:23,720 Speaker 1: market where you can short the price of containers. Again, 524 00:27:23,760 --> 00:27:26,040 Speaker 1: I think without enforceable contracts, would be pretty hard to 525 00:27:26,040 --> 00:27:29,480 Speaker 1: have a futures market. So one of the other things 526 00:27:29,560 --> 00:27:32,960 Speaker 1: that I learned from you and others in this series, 527 00:27:32,960 --> 00:27:35,280 Speaker 1: which again I didn't know anything about at the beginning, 528 00:27:35,760 --> 00:27:38,560 Speaker 1: was that you know, like at the margins, at least, 529 00:27:39,240 --> 00:27:42,520 Speaker 1: the disruption and air travel has put more strain on 530 00:27:42,760 --> 00:27:46,320 Speaker 1: ships because even on a sort of commercial passenger flight, 531 00:27:46,359 --> 00:27:50,119 Speaker 1: there's some space reserved for commercial cargo, and with fewer 532 00:27:50,520 --> 00:27:53,760 Speaker 1: planes flying around the world due to the virus, that's 533 00:27:53,800 --> 00:27:56,920 Speaker 1: a diminished capacity. We do seem to have bounced back 534 00:27:57,080 --> 00:28:00,960 Speaker 1: a bit on passenger recreational leisure trail well, but definitely 535 00:28:01,040 --> 00:28:03,439 Speaker 1: not business travel, which is a big part of the market. 536 00:28:03,440 --> 00:28:06,120 Speaker 1: And I think there's a lot of ambiguity about when, 537 00:28:06,240 --> 00:28:09,919 Speaker 1: if ever they will return to normal. How much is 538 00:28:10,000 --> 00:28:14,960 Speaker 1: that still? Uh sort of I guess just crouping overall 539 00:28:15,000 --> 00:28:19,159 Speaker 1: logistical supply right now. Actually, people know, I feel like 540 00:28:19,200 --> 00:28:21,840 Speaker 1: flex sports better known for ocean freight, but we're bigger 541 00:28:21,880 --> 00:28:23,359 Speaker 1: in the air front than we are in ocean in 542 00:28:23,440 --> 00:28:25,960 Speaker 1: terms of market, in terms of market shore um and 543 00:28:26,000 --> 00:28:28,600 Speaker 1: on the air side, what we're seeing is, yeah, there's 544 00:28:28,760 --> 00:28:31,720 Speaker 1: there's customers. You know, passengers are coming back, but on 545 00:28:31,840 --> 00:28:34,399 Speaker 1: very different lanes and different it's not business travel and 546 00:28:34,400 --> 00:28:37,080 Speaker 1: it's not going to Asia. And that's where the cargo 547 00:28:37,160 --> 00:28:39,959 Speaker 1: capacity comes from. And the air cargo markets one one 548 00:28:40,000 --> 00:28:42,600 Speaker 1: of the more fascinating markets from an economic standpoint, because 549 00:28:43,080 --> 00:28:47,720 Speaker 1: your supply of air cargo is driven by passenger travel, 550 00:28:47,800 --> 00:28:50,360 Speaker 1: which is like a whole different market, and you know, 551 00:28:50,640 --> 00:28:52,440 Speaker 1: so you don't have this normal supply and demand thing. 552 00:28:52,480 --> 00:28:55,040 Speaker 1: It's like, okay, demand is all time high for cargo capacity, 553 00:28:55,080 --> 00:28:58,000 Speaker 1: but the supply is for comes from a different market. 554 00:28:58,040 --> 00:29:00,200 Speaker 1: It doesn't come from cargo, It comes right thing in 555 00:29:00,240 --> 00:29:02,760 Speaker 1: the belly of these passenger place of all the air 556 00:29:02,760 --> 00:29:06,880 Speaker 1: cargo before the pandemic flew in the belly of passenger planes, 557 00:29:06,920 --> 00:29:09,760 Speaker 1: and those are you know, you're not seeing flights to China. 558 00:29:09,800 --> 00:29:12,400 Speaker 1: There's a handful of flights that are passenger flights going 559 00:29:12,400 --> 00:29:17,440 Speaker 1: to China. The airlines tell us that they're not projecting 560 00:29:17,560 --> 00:29:21,240 Speaker 1: to redeploy at at pre pandemic levels on the trans 561 00:29:21,280 --> 00:29:25,600 Speaker 1: Pacific until on passenger side. Um, so you're going to 562 00:29:25,680 --> 00:29:30,560 Speaker 1: have supply severely constrained for air freight, and what you're 563 00:29:30,560 --> 00:29:35,720 Speaker 1: gonna see. I hesitate to make predictions, but in all things, 564 00:29:35,760 --> 00:29:39,680 Speaker 1: but next year on the ocean side, because these markets 565 00:29:39,680 --> 00:29:42,520 Speaker 1: are intertwined, right, if air freight shipment could is often 566 00:29:42,800 --> 00:29:45,200 Speaker 1: a late ocean freight shipment and something went wrong and 567 00:29:45,200 --> 00:29:47,760 Speaker 1: they gotta fly it real quick. Um, And what's gonna 568 00:29:47,800 --> 00:29:50,800 Speaker 1: happen next year? In the ocean market, you have the 569 00:29:50,840 --> 00:29:54,440 Speaker 1: International Longshoreman and Warehousing Union. That's the West Coast doc 570 00:29:54,520 --> 00:29:58,080 Speaker 1: Workers Port Report Workers Union. They have a five year 571 00:29:58,120 --> 00:30:02,360 Speaker 1: contract that's up for renegotiation in summer of two and 572 00:30:02,400 --> 00:30:04,800 Speaker 1: the last time they had a contract renegotiation, which was 573 00:30:04,840 --> 00:30:07,920 Speaker 1: five years ago, it had a three month strike on 574 00:30:08,000 --> 00:30:10,920 Speaker 1: the West Coast and nothing could be shipped on the 575 00:30:11,040 --> 00:30:13,680 Speaker 1: into the West coast ports of the United States for 576 00:30:13,760 --> 00:30:16,720 Speaker 1: three months. A lot of companies missed Christmas that year, 577 00:30:16,880 --> 00:30:20,080 Speaker 1: couldn't get any inventory into the into the store. So 578 00:30:20,960 --> 00:30:22,480 Speaker 1: I don't know if there's gonna be a port strike, 579 00:30:22,560 --> 00:30:24,720 Speaker 1: but it's a decent probability that you're going to see 580 00:30:24,720 --> 00:30:27,520 Speaker 1: a strike next summer. And when that happens, the air 581 00:30:27,560 --> 00:30:29,520 Speaker 1: freight prices will go nuts because it's the only it 582 00:30:29,560 --> 00:30:31,080 Speaker 1: will become the only you have to either go through 583 00:30:31,080 --> 00:30:34,280 Speaker 1: the Panama Canal or to the East Coast or fly 584 00:30:34,360 --> 00:30:36,920 Speaker 1: it by air. And so yeah, next next year is 585 00:30:36,960 --> 00:30:39,640 Speaker 1: going to be another wild one for logistics and supply chain. 586 00:30:39,720 --> 00:30:44,520 Speaker 1: Is if that if the Union and the Pacific Maritime Association, 587 00:30:44,560 --> 00:30:47,480 Speaker 1: that's the sort of coalition of terminal operators and the 588 00:30:47,560 --> 00:30:50,560 Speaker 1: ocean carriers, if they can't come to terms, you you 589 00:30:50,840 --> 00:30:54,640 Speaker 1: will likely see a strike. Well, um, something to look 590 00:30:54,720 --> 00:30:56,640 Speaker 1: forward to, I guess. But I mean that kind of 591 00:30:56,640 --> 00:30:59,600 Speaker 1: brings us to the big, big question. And I feel 592 00:30:59,640 --> 00:31:01,880 Speaker 1: like Joe and I have probably asked this more than 593 00:31:01,920 --> 00:31:04,600 Speaker 1: a dozen times this year, But what is it going 594 00:31:04,680 --> 00:31:08,840 Speaker 1: to take in order to rectify some of these issues 595 00:31:09,040 --> 00:31:12,800 Speaker 1: and normalize and get back to where we were pre COVID. 596 00:31:14,400 --> 00:31:19,560 Speaker 1: Take a long pause, because I think about it, it's 597 00:31:19,560 --> 00:31:23,320 Speaker 1: a systemic problem. It's you're looking at a market failure. 598 00:31:23,840 --> 00:31:27,000 Speaker 1: It's not that we just have this like perfect free market. 599 00:31:27,800 --> 00:31:30,000 Speaker 1: I don't think you ever could when you're talking about 600 00:31:30,200 --> 00:31:33,800 Speaker 1: ports and infrastructure. You don't want the wild West of 601 00:31:33,880 --> 00:31:36,400 Speaker 1: like anybody who has a beach front property you can 602 00:31:36,440 --> 00:31:39,360 Speaker 1: build their own ports and start unloading containerships like you're not. 603 00:31:39,960 --> 00:31:41,800 Speaker 1: Of course, it's not going to be a free market 604 00:31:42,560 --> 00:31:45,360 Speaker 1: if you don't have a free market in the first place. 605 00:31:45,760 --> 00:31:49,440 Speaker 1: It's pretty hard to count on just free market solutions. 606 00:31:50,200 --> 00:31:51,640 Speaker 1: And so I do think there's gonna be a role 607 00:31:51,680 --> 00:31:53,719 Speaker 1: for government to come in and when there's a market failure. 608 00:31:53,800 --> 00:31:56,560 Speaker 1: In general, that's a reasonable principle, Like there's a big 609 00:31:56,600 --> 00:31:59,600 Speaker 1: part of the role of government is address market failures, 610 00:32:00,040 --> 00:32:02,920 Speaker 1: which happened more often than we like to think. So 611 00:32:03,040 --> 00:32:04,920 Speaker 1: I think there's gonna be a role for government here 612 00:32:04,960 --> 00:32:07,920 Speaker 1: to come in and say, okay, for example, the ports, 613 00:32:08,400 --> 00:32:12,000 Speaker 1: the ports are not running on the West coast. They're 614 00:32:12,040 --> 00:32:16,800 Speaker 1: running Monday through Friday, a little bit of operations on Saturdays. 615 00:32:16,800 --> 00:32:20,120 Speaker 1: They're not running at night. There's a technology opportunity here 616 00:32:20,200 --> 00:32:22,120 Speaker 1: where I'd like to see Flexiport play a role. We 617 00:32:22,160 --> 00:32:24,360 Speaker 1: have technology that can really work with these ports. So 618 00:32:24,360 --> 00:32:26,480 Speaker 1: what happens with the truck driver is they go to 619 00:32:26,520 --> 00:32:29,360 Speaker 1: the port and they have an appointment slot. They got 620 00:32:29,360 --> 00:32:31,560 Speaker 1: to show up at a certain time. She's like kind 621 00:32:31,600 --> 00:32:33,320 Speaker 1: of almost impossible to hit if you have a four 622 00:32:33,320 --> 00:32:35,640 Speaker 1: hour traffic jam to get into the port. So they 623 00:32:35,680 --> 00:32:37,720 Speaker 1: got to hit this appointment slote and then they go 624 00:32:37,880 --> 00:32:41,360 Speaker 1: with a specific container number that they're going to pick up. 625 00:32:42,120 --> 00:32:45,320 Speaker 1: And so the port the reason for that appointments slowest 626 00:32:45,360 --> 00:32:47,240 Speaker 1: to make sure that container number is at the front 627 00:32:47,240 --> 00:32:50,560 Speaker 1: when they show up. And I think that the solution 628 00:32:50,640 --> 00:32:53,239 Speaker 1: is going to look like government intervention that comes in 629 00:32:53,280 --> 00:32:56,520 Speaker 1: and says, hey, we're we're throwing out this system and 630 00:32:56,800 --> 00:32:59,440 Speaker 1: let's use technology. Flexibord has already built this technology, so 631 00:32:59,480 --> 00:33:02,920 Speaker 1: if they want to work, doesn't be amazing. But but regardless, 632 00:33:02,960 --> 00:33:05,840 Speaker 1: the technology needs to be that the drivers just show 633 00:33:05,960 --> 00:33:09,240 Speaker 1: up and there's no more appointments and there's no more 634 00:33:09,240 --> 00:33:12,560 Speaker 1: showing up for a specific container number. Driver comes in, 635 00:33:13,560 --> 00:33:16,520 Speaker 1: gets it, gets get handed a container, and then our 636 00:33:16,640 --> 00:33:19,040 Speaker 1: mobile app or someone you know, the ports mobile app. 637 00:33:19,160 --> 00:33:21,080 Speaker 1: We have this tech, give me a call. We'll then 638 00:33:21,480 --> 00:33:24,040 Speaker 1: tell them where to go. They've got any old container, 639 00:33:24,080 --> 00:33:27,000 Speaker 1: grab it, go deliver it, and turn around and come 640 00:33:27,040 --> 00:33:29,160 Speaker 1: back and see if, like I think that you could 641 00:33:29,200 --> 00:33:31,400 Speaker 1: really unblock some stuff if we just said, hey, stop, 642 00:33:31,480 --> 00:33:34,040 Speaker 1: It's almost like the way Southwest Airlines boards their planes, right, 643 00:33:34,080 --> 00:33:36,240 Speaker 1: They're just much faster. Just come in and just grab 644 00:33:36,240 --> 00:33:38,160 Speaker 1: the seat, people, let's go. We gotta get this plane 645 00:33:38,160 --> 00:33:56,720 Speaker 1: in the air. So this is kind of what I 646 00:33:56,760 --> 00:33:58,320 Speaker 1: was gonna say, And I was kind of gonna like 647 00:33:58,440 --> 00:34:02,840 Speaker 1: reframe Tracy's question, And because after you know, half a 648 00:34:02,920 --> 00:34:06,479 Speaker 1: year of us asking guests, when all things returned to normal, 649 00:34:06,920 --> 00:34:09,600 Speaker 1: maybe the question should be more like, well, what is 650 00:34:10,200 --> 00:34:14,080 Speaker 1: permanently going to change? And you talked about Okay, we're 651 00:34:14,120 --> 00:34:18,319 Speaker 1: starting to see enforceable contracts and shipping. We're starting to 652 00:34:18,480 --> 00:34:22,960 Speaker 1: see people taking the packing of the containers themselves more seriously. 653 00:34:23,280 --> 00:34:26,240 Speaker 1: We've all like had that experience where like we buy something, 654 00:34:26,360 --> 00:34:29,640 Speaker 1: say on Amazon, and we get like a huge box 655 00:34:29,680 --> 00:34:32,600 Speaker 1: in the mail and there's like four razor blades and 656 00:34:32,640 --> 00:34:35,239 Speaker 1: a bunch of packing material and it or something like that, 657 00:34:35,640 --> 00:34:37,799 Speaker 1: which you know does not seem like a great use 658 00:34:37,840 --> 00:34:41,400 Speaker 1: of space. Do you foresee some of these things, like 659 00:34:41,560 --> 00:34:46,280 Speaker 1: say more serious effort on the internal engineering of space 660 00:34:46,360 --> 00:34:52,359 Speaker 1: within a container, having lasting changes on shipping, even if 661 00:34:52,440 --> 00:34:55,880 Speaker 1: hopefully one day the pandemic is like a true distant memory. 662 00:34:57,200 --> 00:34:59,279 Speaker 1: There's there's no doubt that you're going to see long 663 00:34:59,360 --> 00:35:03,520 Speaker 1: term changes here and more sophistication and that. But there 664 00:35:03,640 --> 00:35:05,920 Speaker 1: is a big doubt of like on what time frame 665 00:35:06,680 --> 00:35:08,680 Speaker 1: do things happen? I mean, if you were like, like 666 00:35:08,719 --> 00:35:11,480 Speaker 1: the ports should the port of Rotterdam, for example, has 667 00:35:11,480 --> 00:35:14,440 Speaker 1: been fully automated for more than thirty years, where they 668 00:35:14,480 --> 00:35:17,520 Speaker 1: have self driving trucks like thirty years ago, because why 669 00:35:17,600 --> 00:35:20,480 Speaker 1: because it's a simple problem. There's no people around if 670 00:35:20,520 --> 00:35:23,719 Speaker 1: you do it right and it doesn't need AI. It 671 00:35:23,760 --> 00:35:26,360 Speaker 1: can just follow some lines on the ground, the truck 672 00:35:26,400 --> 00:35:29,440 Speaker 1: can and like look at paint and just follow along. 673 00:35:29,920 --> 00:35:34,440 Speaker 1: Uh So it's actually a reasonably simple problem that we 674 00:35:34,480 --> 00:35:36,040 Speaker 1: don't have. And and the other thing is that the 675 00:35:36,040 --> 00:35:39,200 Speaker 1: port of Rotterdam and Shinjen they're deep and they have 676 00:35:39,360 --> 00:35:43,759 Speaker 1: bigger cranes. They're made to handle much bigger ships. Ever, 677 00:35:43,920 --> 00:35:46,360 Speaker 1: given the giant ship that we all know now, that 678 00:35:46,440 --> 00:35:49,120 Speaker 1: ship could not come to a US port fully loaded. 679 00:35:49,160 --> 00:35:51,000 Speaker 1: It would be too big. It would be too deep 680 00:35:51,040 --> 00:35:53,840 Speaker 1: in the ports. Our ports are not deep enough. Uh that, 681 00:35:54,040 --> 00:35:55,960 Speaker 1: so these large ships can't come here. So we've got 682 00:35:55,960 --> 00:35:57,920 Speaker 1: to invest in our infrastructure. There's gotta be a role 683 00:35:58,000 --> 00:36:01,040 Speaker 1: for robotics, Like right now, A big part of the 684 00:36:01,080 --> 00:36:03,520 Speaker 1: problem is we can't run these sports on weekends and 685 00:36:03,600 --> 00:36:06,560 Speaker 1: at nights. The unions doesn't have enough staff to go 686 00:36:06,640 --> 00:36:10,960 Speaker 1: and man up and run these things seven and you know, 687 00:36:11,040 --> 00:36:13,160 Speaker 1: and so like a robot would be able to do that. 688 00:36:13,560 --> 00:36:15,960 Speaker 1: The other big thing that I'm like, science fiction wise, 689 00:36:16,000 --> 00:36:17,680 Speaker 1: why can't we do this? And I do think it's 690 00:36:17,680 --> 00:36:19,560 Speaker 1: more of a political will thing than anything else, is like, 691 00:36:19,840 --> 00:36:23,280 Speaker 1: we bring these containers into the port of Long Beach 692 00:36:23,320 --> 00:36:28,759 Speaker 1: in Los Angeles and that's great, big city. Then what 693 00:36:28,880 --> 00:36:31,399 Speaker 1: happens is what is Los Angeles known for? Besides it's 694 00:36:31,440 --> 00:36:35,480 Speaker 1: small because it's traffic. So you're like, have you ever 695 00:36:35,520 --> 00:36:37,719 Speaker 1: been on the four oh five. It's a nightmare, And 696 00:36:37,760 --> 00:36:39,680 Speaker 1: that's where our containers show up. And then they're like, 697 00:36:39,680 --> 00:36:41,799 Speaker 1: all right, cool, we made it from China. We're here 698 00:36:41,840 --> 00:36:43,640 Speaker 1: and they're like, okay, great, we're on the four oh five. 699 00:36:43,840 --> 00:36:47,440 Speaker 1: And so you have, uh, the boring company for example, 700 00:36:47,480 --> 00:36:49,600 Speaker 1: like let's build some tunnels from this port and skip 701 00:36:49,640 --> 00:36:52,160 Speaker 1: the city of Los Angeles and like drop that container. 702 00:36:52,280 --> 00:36:54,239 Speaker 1: You know, see if we can drive a hundred miles 703 00:36:54,239 --> 00:36:56,080 Speaker 1: an hour and you're you're in the you're in the 704 00:36:56,120 --> 00:36:58,880 Speaker 1: desert a hundred miles east before you know it. So 705 00:36:59,000 --> 00:37:01,160 Speaker 1: I think there's gonna be all for those longer term 706 00:37:01,160 --> 00:37:04,800 Speaker 1: infrastructure things that just has to happen. And hopefully people 707 00:37:04,800 --> 00:37:07,120 Speaker 1: our eyes are open right now. So wow, okay, we 708 00:37:07,280 --> 00:37:10,440 Speaker 1: need technology. The fact that we still unload container ships 709 00:37:10,480 --> 00:37:13,799 Speaker 1: one at a time really frustrates me. Like the containership 710 00:37:13,840 --> 00:37:15,840 Speaker 1: was a massive innovation. We we reduced the cost of 711 00:37:15,880 --> 00:37:20,279 Speaker 1: shipping things by or more since it was invented, and 712 00:37:20,360 --> 00:37:22,720 Speaker 1: yet if you look at how these ships are unloaded, 713 00:37:22,760 --> 00:37:26,239 Speaker 1: it takes three days to unload the ship. Well, why 714 00:37:26,280 --> 00:37:28,960 Speaker 1: are we doing one container at a time. Isn't there 715 00:37:28,960 --> 00:37:32,720 Speaker 1: a design fifty years since we first created the container 716 00:37:33,360 --> 00:37:35,880 Speaker 1: crane that could I don't know. I'm picturing like a 717 00:37:35,920 --> 00:37:38,759 Speaker 1: ski lift stype thing where you're a carousel and you're 718 00:37:38,800 --> 00:37:41,880 Speaker 1: grabbing a container every three seconds instead of one a 719 00:37:41,920 --> 00:37:44,799 Speaker 1: minute and you just just tie. How do you ten 720 00:37:45,040 --> 00:37:47,680 Speaker 1: x the throughput of this system? So that's gonna be 721 00:37:47,680 --> 00:37:50,399 Speaker 1: political Well, I'm not sure it's there, but I think 722 00:37:50,400 --> 00:37:52,680 Speaker 1: it's now on people's minds. And you see the problem 723 00:37:52,680 --> 00:37:54,719 Speaker 1: if you don't get it right the price you have 724 00:37:54,800 --> 00:38:00,000 Speaker 1: sort of economic, real national security level economic challenges from 725 00:38:00,000 --> 00:38:02,120 Speaker 1: from the lack of investment in our infrastructure. Some of 726 00:38:02,160 --> 00:38:04,520 Speaker 1: its simple, like let's dredge these ports make them deeper. 727 00:38:04,800 --> 00:38:08,600 Speaker 1: Some of its more futuristic and scientific or science fictionity, 728 00:38:08,920 --> 00:38:11,120 Speaker 1: like the boring company tunnels. But I actually think it's 729 00:38:11,120 --> 00:38:14,080 Speaker 1: all doable if there's political will, and there kind of 730 00:38:14,120 --> 00:38:15,719 Speaker 1: has to be a role for government the nature of 731 00:38:15,760 --> 00:38:17,480 Speaker 1: these ports. Like like I said before, you can't just 732 00:38:17,520 --> 00:38:19,880 Speaker 1: have random people opening up a port and wherever they 733 00:38:19,920 --> 00:38:23,560 Speaker 1: feel like it. So m um, So, just going back 734 00:38:23,600 --> 00:38:26,440 Speaker 1: to this idea of permanent changes, I mean, one of 735 00:38:26,480 --> 00:38:31,800 Speaker 1: the most basic forecasts or predictions that we've seen since 736 00:38:32,320 --> 00:38:35,240 Speaker 1: all this, you know, kind of started all these issues 737 00:38:35,280 --> 00:38:38,160 Speaker 1: and problems that we've been discussing, is the idea that, well, 738 00:38:38,200 --> 00:38:42,080 Speaker 1: maybe people will just move production closer to their customer base. 739 00:38:42,200 --> 00:38:44,800 Speaker 1: Maybe we'll see a bunch of manufacturing that gets re 740 00:38:45,040 --> 00:38:49,319 Speaker 1: shored to markets like America. Is there any sign of 741 00:38:49,640 --> 00:38:53,120 Speaker 1: that happening? Um? And I guess how long would that 742 00:38:53,239 --> 00:38:58,120 Speaker 1: take and how feasible is that entire process thus far, 743 00:38:58,160 --> 00:39:00,400 Speaker 1: it's all anecdotal, and in fact you see the opposite 744 00:39:00,400 --> 00:39:03,560 Speaker 1: trend that we're importing more stuff from China than ever um, 745 00:39:03,600 --> 00:39:07,280 Speaker 1: even on a on a percentage basis. So it's really hard. 746 00:39:07,880 --> 00:39:10,080 Speaker 1: That's a force that's been at work for a long time, 747 00:39:10,160 --> 00:39:12,400 Speaker 1: not re shoring it to the United States, but shifting 748 00:39:12,440 --> 00:39:15,520 Speaker 1: it to lower costs labor, and that's a natural trend 749 00:39:15,600 --> 00:39:20,760 Speaker 1: that happens. You'll see, Uh, lower complexity products have largely 750 00:39:20,840 --> 00:39:25,400 Speaker 1: moved to places like Vietnam, Cambodia, Bangladesh thinks, uh, there's 751 00:39:25,400 --> 00:39:28,239 Speaker 1: not a lot of subcomponents. It's mostly human labor. It's 752 00:39:28,320 --> 00:39:31,560 Speaker 1: kind of you know, making clothes, making um sort of. 753 00:39:31,719 --> 00:39:33,880 Speaker 1: There's there's the thing in China is that there's this 754 00:39:33,880 --> 00:39:37,480 Speaker 1: whole ecosystem of subcomponent suppliers and you can't just pick 755 00:39:37,560 --> 00:39:40,799 Speaker 1: up the whole thing. So even customer of ours makes 756 00:39:40,840 --> 00:39:43,520 Speaker 1: ceiling fans, and you know, there's just no way that 757 00:39:43,560 --> 00:39:46,000 Speaker 1: they can get all the little motorized parts and everything 758 00:39:46,040 --> 00:39:48,880 Speaker 1: you can move to Cambodia. There's no other companies around 759 00:39:48,880 --> 00:39:51,759 Speaker 1: you that tell you those parts. So it's just these 760 00:39:51,760 --> 00:39:54,920 Speaker 1: things are really hard to move. Even the tariffs didn't 761 00:39:54,960 --> 00:39:57,360 Speaker 1: really do it. People are able to pass through the 762 00:39:57,440 --> 00:40:00,040 Speaker 1: higher costs, and so it will depend by industry that 763 00:40:00,040 --> 00:40:02,719 Speaker 1: that trend has been going on in in textiles, apparel 764 00:40:02,840 --> 00:40:05,200 Speaker 1: and other kind of simpler, low complexity products for a 765 00:40:05,200 --> 00:40:07,600 Speaker 1: long long time. Coming back to the United States less 766 00:40:07,600 --> 00:40:10,400 Speaker 1: so you're seeing less up moved to Mexico. Latin America 767 00:40:10,480 --> 00:40:12,319 Speaker 1: is probably a big beneficiary of this, in addition to 768 00:40:12,360 --> 00:40:16,399 Speaker 1: Southeast Asia, but it's more about labor cost trends. But hey, wait, 769 00:40:16,440 --> 00:40:19,640 Speaker 1: if this last in perpetuity where it takes sixty days 770 00:40:19,640 --> 00:40:21,600 Speaker 1: to ship stuff, yes, that will have a big impact 771 00:40:21,600 --> 00:40:24,120 Speaker 1: and people start thinking, you know, let's let's put stuff 772 00:40:24,120 --> 00:40:27,480 Speaker 1: in Latin America where we can get from Central America 773 00:40:27,840 --> 00:40:30,440 Speaker 1: to the Gulf Coast in in three or four days. Um, 774 00:40:30,640 --> 00:40:35,200 Speaker 1: that's gonna be a big competitive advantage for for Latoan. Ryan, 775 00:40:35,320 --> 00:40:37,279 Speaker 1: It's always great to speak with you. That was like 776 00:40:37,320 --> 00:40:39,959 Speaker 1: the perfect update, and I guess we'll have you back 777 00:40:40,000 --> 00:40:43,520 Speaker 1: on again in uh six months when things are even worse. 778 00:40:44,840 --> 00:40:46,920 Speaker 1: As soon as I fix all this stuff, I'll give 779 00:40:46,960 --> 00:40:48,920 Speaker 1: you guys a ring once we once we build that 780 00:40:49,080 --> 00:40:51,400 Speaker 1: boring company tunnel straight to Las Vegas, so all your 781 00:40:51,400 --> 00:40:54,040 Speaker 1: containers can flow freely out of the port. We'll give 782 00:40:54,040 --> 00:40:56,239 Speaker 1: you a call, can't wait, Ryan, Thank you so much. 783 00:40:56,760 --> 00:41:13,480 Speaker 1: All Right, have a great day everybody. Thanks tuk to 784 00:41:13,600 --> 00:41:15,959 Speaker 1: Ryan is always great. I mean, obviously, you know we've 785 00:41:16,000 --> 00:41:18,320 Speaker 1: like sort of you know, we hit all these different 786 00:41:18,360 --> 00:41:21,040 Speaker 1: subcomponents of the supply chain. I feel like from his 787 00:41:21,400 --> 00:41:24,240 Speaker 1: perch in flex Port, he just has like a really 788 00:41:24,360 --> 00:41:26,480 Speaker 1: nice view on like what's going on with everything and 789 00:41:26,600 --> 00:41:29,879 Speaker 1: just like these sort of like the compounding mess at 790 00:41:29,920 --> 00:41:32,279 Speaker 1: every step of the way. Yeah, I mean he kind 791 00:41:32,280 --> 00:41:35,640 Speaker 1: of brings it all together and explains why one thing happening, 792 00:41:35,880 --> 00:41:39,399 Speaker 1: you know, in one area of logistics, like say, um, 793 00:41:39,400 --> 00:41:42,279 Speaker 1: what's going on with drivers, why that impacts another area 794 00:41:42,360 --> 00:41:46,000 Speaker 1: of logistics like container shipping. But I gotta say, Joe, 795 00:41:46,000 --> 00:41:49,560 Speaker 1: I'm very proud I have finished my Christmas shopping already. 796 00:41:49,719 --> 00:41:53,200 Speaker 1: I took the supply Chain episodes to heart, and I've 797 00:41:53,320 --> 00:41:56,480 Speaker 1: ordered pretty much everything that I need to order. Look 798 00:41:56,520 --> 00:41:59,640 Speaker 1: at you I have. I'm just buying everyone n F 799 00:41:59,680 --> 00:42:01,480 Speaker 1: T s this year, so I don't have to worry 800 00:42:01,480 --> 00:42:03,319 Speaker 1: about that. No, I actually have to get on that. 801 00:42:03,600 --> 00:42:05,880 Speaker 1: Thank you for the reminder. That's a good idea. Actually 802 00:42:06,160 --> 00:42:09,040 Speaker 1: everyone gets n f t s and they're stalking, yeah, exactly, 803 00:42:09,400 --> 00:42:13,440 Speaker 1: or a little hardware wallet that has a twelve twelve 804 00:42:13,440 --> 00:42:15,719 Speaker 1: words seed phrase that gives them access to some n 805 00:42:15,760 --> 00:42:17,800 Speaker 1: f t s. No, but in all in all serious 806 00:42:17,840 --> 00:42:19,719 Speaker 1: and it's like, you know, I think there's like sort 807 00:42:19,760 --> 00:42:24,120 Speaker 1: of two things that maybe or like why this is 808 00:42:24,160 --> 00:42:27,279 Speaker 1: not as self correcting as maybe wanted hope did one is. 809 00:42:27,320 --> 00:42:29,880 Speaker 1: I think it's just like the pure complexity of it 810 00:42:29,920 --> 00:42:32,640 Speaker 1: all and so like there's no like obvious self correcting 811 00:42:32,640 --> 00:42:36,319 Speaker 1: mechanism and it's just incredibly complex on its own. And 812 00:42:36,320 --> 00:42:39,040 Speaker 1: it's interesting you ask that sort of like reshoring question 813 00:42:40,080 --> 00:42:42,640 Speaker 1: at the end, and I calls to mind, like, you know, 814 00:42:42,680 --> 00:42:45,920 Speaker 1: we did that semiconductor episode with Stacy Raskin recently, and 815 00:42:45,920 --> 00:42:48,880 Speaker 1: it's like, look, even a chip crosses like what thirty 816 00:42:48,880 --> 00:42:52,000 Speaker 1: five borders in the course of like getting from Like 817 00:42:52,120 --> 00:42:53,920 Speaker 1: it's like so like the idea of even if you 818 00:42:53,960 --> 00:42:56,080 Speaker 1: were to like re short like a few aspects of 819 00:42:56,080 --> 00:42:58,719 Speaker 1: the production, what would that really get you? And then 820 00:42:58,760 --> 00:43:00,520 Speaker 1: it's just like okay, but the and then the whole 821 00:43:00,520 --> 00:43:03,800 Speaker 1: thing is like it was not only is it incredibly complex, 822 00:43:03,800 --> 00:43:06,040 Speaker 1: it's like all tied together with duct tape, and like 823 00:43:06,080 --> 00:43:07,640 Speaker 1: you know a guy, you know, a guy who can 824 00:43:07,680 --> 00:43:10,400 Speaker 1: get your like stuff on the bloat. So you have 825 00:43:10,440 --> 00:43:14,400 Speaker 1: an incredibly complex system all kind of like held together 826 00:43:14,600 --> 00:43:18,520 Speaker 1: with duct tape. And it starts to make more sense 827 00:43:18,560 --> 00:43:21,880 Speaker 1: why this deep into the crisis, like the idea of 828 00:43:21,920 --> 00:43:25,560 Speaker 1: like normalization, Like I'm getting why it's not self correcting 829 00:43:25,600 --> 00:43:28,640 Speaker 1: anytime soon? Yeah. Well, I also wonder if one of 830 00:43:28,640 --> 00:43:31,920 Speaker 1: the more permanent outcomes of this is and again this 831 00:43:32,000 --> 00:43:33,840 Speaker 1: is something that sort of came up with Stacy, is 832 00:43:33,880 --> 00:43:38,080 Speaker 1: this idea that you know, maybe we sort of move 833 00:43:38,360 --> 00:43:42,359 Speaker 1: back to some analog products, or we start stripping out 834 00:43:42,640 --> 00:43:45,960 Speaker 1: certain features or products or materials that are just harder 835 00:43:46,040 --> 00:43:49,320 Speaker 1: to get due to the supply chain issues. Like maybe 836 00:43:49,680 --> 00:43:54,799 Speaker 1: the market actually has to adapt more to these problems. Yeah, no, 837 00:43:54,880 --> 00:43:57,080 Speaker 1: I mean it'll be interesting. Like, you know, one thing 838 00:43:57,160 --> 00:44:00,560 Speaker 1: too is on the financial side, and and just now 839 00:44:00,640 --> 00:44:04,120 Speaker 1: mentioned like the idea of well, in addition to enforceable contracts, 840 00:44:04,520 --> 00:44:07,400 Speaker 1: multi year contracts. And one way to think about a 841 00:44:07,480 --> 00:44:11,719 Speaker 1: multi year contract is your essentially like you're buying an option, right, 842 00:44:11,760 --> 00:44:15,520 Speaker 1: like you're buying a you're buying a put option or something. 843 00:44:15,880 --> 00:44:18,400 Speaker 1: You know, like you're buying insurance, which is so that 844 00:44:18,640 --> 00:44:22,399 Speaker 1: such that you pay more now, or you pay more 845 00:44:22,520 --> 00:44:26,120 Speaker 1: you promised to pay more for your two or three 846 00:44:26,120 --> 00:44:29,800 Speaker 1: shipping such that it's guaranteed. So I wonder if another 847 00:44:29,840 --> 00:44:31,600 Speaker 1: thing is we're going to see a little bit more 848 00:44:31,680 --> 00:44:36,440 Speaker 1: of this system get financialized, maybe perhaps some more derivatives, etcetera. 849 00:44:36,560 --> 00:44:40,360 Speaker 1: Should we start the futures market for shipping containers. It 850 00:44:40,440 --> 00:44:42,640 Speaker 1: sounds like they need one. So you know, another person 851 00:44:42,920 --> 00:44:45,560 Speaker 1: that we should get back actually on the show is 852 00:44:46,080 --> 00:44:49,399 Speaker 1: Craig Fuller of Freight Waves, but he tried that once 853 00:44:49,440 --> 00:44:53,200 Speaker 1: with trucks. He tried actually to get to create a 854 00:44:53,280 --> 00:44:57,400 Speaker 1: trucking futures market in the United States and it was 855 00:44:57,719 --> 00:45:00,680 Speaker 1: very difficult. So that might actually be another one. We 856 00:45:00,719 --> 00:45:05,000 Speaker 1: should probably rebook him and maybe dive more into that 857 00:45:05,120 --> 00:45:07,359 Speaker 1: question of like because that was like I think one 858 00:45:07,400 --> 00:45:10,040 Speaker 1: of his earlier entrepreneur adventures. He wanted to create the 859 00:45:10,080 --> 00:45:12,520 Speaker 1: sort of like CEMME for trucks. They didn't quite work out. 860 00:45:13,000 --> 00:45:16,200 Speaker 1: But why some of this stuff is actually seems to 861 00:45:16,200 --> 00:45:19,759 Speaker 1: be pretty hard to create sort of like liquid futures 862 00:45:19,800 --> 00:45:23,560 Speaker 1: market for this capacity. Yeah, we should totally do that. Great, 863 00:45:23,880 --> 00:45:28,000 Speaker 1: let's book it Okay, uh, shall we leave it there? 864 00:45:28,440 --> 00:45:31,800 Speaker 1: Let's leave it there alright. This has been another episode 865 00:45:31,840 --> 00:45:34,440 Speaker 1: of the Odd Thoughts podcast. I'm Tracy Alloway. You can 866 00:45:34,480 --> 00:45:38,000 Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe 867 00:45:38,000 --> 00:45:40,600 Speaker 1: Why Isn't Thal? You can follow me on Twitter at 868 00:45:40,640 --> 00:45:44,000 Speaker 1: the Stalwart. Follow our guest Ryan Peterson. He's the CEO 869 00:45:44,280 --> 00:45:48,240 Speaker 1: of Flex Sports. His handle is at types Fast. Follow 870 00:45:48,280 --> 00:45:52,280 Speaker 1: our producer Laura Carlson, She's at Laura M. Carlson. Followed 871 00:45:52,320 --> 00:45:56,400 Speaker 1: the Bloomberg head of podcast, Francesca Levi at Francesca Today, 872 00:45:56,520 --> 00:45:59,520 Speaker 1: and check out all of our podcasts at Bloomberg under 873 00:45:59,560 --> 00:46:02,320 Speaker 1: the handle at podcasts. Thanks for listening.