Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisntal and I'm Tracy Halloway. So, Tracy, we've
Speaker 1: obviously been talking a ton on this show about supply chain,
Speaker 1: bottlenext logistics and so forth. Probably you know, we've talked
Speaker 1: about all of it, but had a We've had a
Speaker 1: pretty emphasis on ships vessels, this sort of like international
Speaker 1: freight aspect of global supply chains. I think that's right,
Speaker 1: although I feel like we're getting more and more specialized.
Speaker 1: So we started with container shipping and then we got
Speaker 1: into break book a little bit on our previous episode,
Speaker 1: and we're thinking about doing a barge episode. Now we
Speaker 1: haven't gone into I guess like land transport, but it does.
Speaker 1: It does feel like like we're working our way through
Speaker 1: all the different modes of transport. Like I wonder if
Speaker 1: we're gonna end up doing a sort of odd lots
Speaker 1: of coraical episode at some point, like the wackiest modes
Speaker 1: of moving goods. Yeah, I mean, we got that's that's
Speaker 1: the way to do. It's zoom outgo global and then
Speaker 1: start to drill down to all of the different nootion crannies.
Speaker 1: But as you mentioned we did a sort of the
Speaker 1: bulk shipping episode a couple of weeks ago, and uh,
Speaker 1: at the end we're like, Okay, we gotta go trucking next,
Speaker 1: and to now it's time for now, we gotta talk
Speaker 1: about tripping alright, the truck driving episode. It's time has come.
Speaker 1: I cannot contain my enthusiasm for this episode because I
Speaker 1: think I mentioned this before, but one of my dream
Speaker 1: jobs that I used to fantasize about was being a
Speaker 1: truck driver. I think, like, I'm sure I have a
Speaker 1: romanticized notion of what it is. And obviously part of
Speaker 1: our conversation is going to be about how difficult driving
Speaker 1: and the job actually is for those doing it on
Speaker 1: a day to day basis. But I have a personal
Speaker 1: interest in this industry and I'm really curious to hear
Speaker 1: what exactly is going on at the moment. I also
Speaker 1: have a personal romanticized interest, not because I ever aspired
Speaker 1: to be a truck driver per se, but I'm a
Speaker 1: big fan of country music and there's you know, lots
Speaker 1: of songs about truck driving. And I was a huge
Speaker 1: fan as a kid of that movie Convoy, which also
Speaker 1: has a great soundtrack of song about truck driving six
Speaker 1: Days on the Road, another good song. So I'm also
Speaker 1: very interested in as UM and I'm very excited for
Speaker 1: these episodes. So after we did that last episode, we're like,
Speaker 1: we gotta do the truck driving episode. Today's guest. Multiple
Speaker 1: people reached out and said, you gotta get on this guy.
Speaker 1: He's the obvious next one for it. Yeah, and I
Speaker 1: think it's gonna be interesting. I mean, one of the
Speaker 1: reasons let's come up is because we hear these reports
Speaker 1: of a shortage in truck drivers, which is again feeding
Speaker 1: into the supply chain issues that we've been discussing on
Speaker 1: all thoughts for the past year now. But there's a
Speaker 1: big question mark over whether or not that's actually happening.
Speaker 1: And again to to that point about you and I
Speaker 1: both romanticizing the job, like there's a disconnect. There isn't
Speaker 1: there if there is indeed a shortage, and yet people
Speaker 1: like you and I are thinking, oh, it'd be nice
Speaker 1: to drive a truck around and you know, have an
Speaker 1: opportunity to eat junk food and listen to country music
Speaker 1: and and be like Chris Christofferson and Ally McGraw and convoy.
Speaker 1: Something's going on. So I'm really interested by this dynamic
Speaker 1: and I'm looking forward to this conversation exactly right. So,
Speaker 1: as I mentioned, everyone said, you've got to reach out
Speaker 1: to this guest, so I'm very excited. We're gonna be
Speaker 1: speaking with Craig Fuller. He is the founder and CEO
Speaker 1: of Freight Waves, which which is kind of like the
Speaker 1: Bloomberg Terminal for transport, could be said. They cover transport
Speaker 1: from a news perspective, they also have data all that stuff,
Speaker 1: and he is going to tell us all about domestic
Speaker 1: truck industry and how stuff gets around at or it's
Speaker 1: unloaded from the ports. So Craig, thank you very much
Speaker 1: for joining us. Hey, Joe Tracy, great to be here. Craig,
Speaker 1: so excited to talk to um. Obviously, there's lots to cover,
Speaker 1: and of course we're going to get into all of
Speaker 1: the supply chain messes that we're seeing right now. But
Speaker 1: as always, you know, it sort of helps, and I
Speaker 1: think it's especially true in trucking to talk about what
Speaker 1: the pre crisis environment looked like, because if I recall
Speaker 1: from seeing the reporting, there was a lot of like
Speaker 1: very intense boom and bus cycles just in the last
Speaker 1: few years leading up to periods where it is very good,
Speaker 1: periods where it was weak. How would you describe the
Speaker 1: sort of health of the industry pre crisis. Yeah, So
Speaker 1: this is an industry that runs on very thin margins.
Speaker 1: So if you take the industry average in terms of profitability,
Speaker 1: typically and in a good year the industry will generate
Speaker 1: three cross profits. And so it is not an industry
Speaker 1: that is typically very profitable. There's a lot of there's
Speaker 1: very very few barriers of entry, uh. And it's a
Speaker 1: very cychnical industry. And so it's and there's reasons of
Speaker 1: when the market is good where costs go up significantly
Speaker 1: because the input costs go up. Uh. And when the
Speaker 1: market is really bad, obviously revenue you know, drives up
Speaker 1: when the economy drives its sputtering. And so because of
Speaker 1: all those reasons, it's a very cychnical industry. And so,
Speaker 1: as you mentioned, over the fast past five years, we've
Speaker 1: had two freight recessions uh in the past five years,
Speaker 1: and two big boom cycles and that was pre COVID.
Speaker 1: So you have fuel costs that are big input colls,
Speaker 1: you have labor costs that are big input costs. You
Speaker 1: have driver turnover that's a massive issue for the industry. Uh.
Speaker 1: You have a regulatory environment which continues to be more
Speaker 1: and more restrictive on home you can hire. And then
Speaker 1: you have a whole set of liabilities that the trucking
Speaker 1: companies have to accept because of you know, the way
Speaker 1: that that they manage their drivers and a responsible for them.
Speaker 1: So those drivers up in an accident, Uh, those trucking
Speaker 1: companies can be sued for tens of thirty millions of dollars.
Speaker 1: And so it's an industry that has a lot of
Speaker 1: structural challenges, but it has no bearers of entry. So
Speaker 1: anytime you see the market become really strong, like every
Speaker 1: other commodity market, there's a massive, massive boom cycle. Uh,
Speaker 1: and then when the economy slows down because you've overbuilt
Speaker 1: the capacity, the market crashes. So when you say there's
Speaker 1: no barrier to entry, could you maybe describe what that
Speaker 1: means exactly in practice and what the players in the
Speaker 1: trucking market actually are at the moment, Like, are there
Speaker 1: are a few companies that dominate this form of transport
Speaker 1: in the US, And are there also smaller players that
Speaker 1: might be enticed into it at times when they can
Speaker 1: get paid a lot of money for doing it. Yes,
Speaker 1: so the market is incredibly fragmented. So I know you
Speaker 1: guys have done a lot of shows on the global
Speaker 1: shipping market. The differences between global shipping and trucking is
Speaker 1: that ten if you take a top ten shipping carriers,
Speaker 1: they represent of the capacity. So it's a very concentrated market.
Speaker 1: In trucking, it's completely different. If you take the top
Speaker 1: ten trucking companies, you'll come up with about twelve of
Speaker 1: the total capacity. So there's no LIKESK equivalent none. So
Speaker 1: like the largest asset based trucking company is a company
Speaker 1: called night Swift out of Phoenix, Arizona, but it does
Speaker 1: about five and a half six billion dollars in revenue
Speaker 1: on an industry that does about eight billions. So if
Speaker 1: you sort of look at look at it, it's it
Speaker 1: is a very very fragmented market. Uh. And for those reasons,
Speaker 1: you have a lot of independent decision makers out uh
Speaker 1: driving a lot of the issues in the market. And
Speaker 1: so Tracy, if you wanted to go start a trucking company,
Speaker 1: you could do that today. You would go buy a truck,
Speaker 1: you would get a CDL and then you would be
Speaker 1: off to the races. There's very little that you would
Speaker 1: have to do beyond that, and so, uh, it's an
Speaker 1: industry that allows people who are looking for a level
Speaker 1: of independence and who want to own a company to
Speaker 1: go start a trucking company. Um. The challenges is that
Speaker 1: oftentimes those people don't have strong business acumen or experience,
Speaker 1: and so you have this massive boom bust cycle. I
Speaker 1: was just looking at the number of new trucking companies
Speaker 1: that entered the industry in the last thirty days, and
Speaker 1: we had eleven thousand new trucking companies that entered the
Speaker 1: industry within the past month. Okay, that's okay. Now I
Speaker 1: feel like I want to just like do an episode
Speaker 1: on this alone, but actually I want to follow up
Speaker 1: on this point. So let's say Tracy followed her dream
Speaker 1: and wanted to be a trucker and all she would
Speaker 1: have to do is buy a truck, get a driver's license,
Speaker 1: and cheese in business. The obvious. The other question is
Speaker 1: is there a plug in plane network that allows her
Speaker 1: to immediately get jobs? Like what is the process? So
Speaker 1: of eleventh, obviously it can't be too much of a
Speaker 1: relationship based business where you need to have connections. If
Speaker 1: eleven thousand companies. I have to imagine many of them
Speaker 1: extremely small, maybe one or two people connenter. So when
Speaker 1: you someone starts one of these companies, is there just
Speaker 1: some sort of automatic way where they can start bidding
Speaker 1: for jobs. Yeah. It's essentially like selling e commerce on
Speaker 1: the internet. And so there are what they call loadboards
Speaker 1: which work a lot like Craigslist, where I can take transactions.
Speaker 1: Think of it, you know, probably the best analogy is
Speaker 1: almost like an internet dating site like match dot com,
Speaker 1: where buyers of capacity, so brokers, freight brokers are essentially
Speaker 1: posting loads uh and then the trucking come but easy.
Speaker 1: The tracy and this example would be looking for loads
Speaker 1: wherever she wants to go uh for a load that
Speaker 1: meets her uh, you know what she's looking for uh
Speaker 1: and pays her what she wants to get paid. She
Speaker 1: would take those loads uh and be able to fulfill
Speaker 1: those orders. So that's a loadboard marketplace typically ran by
Speaker 1: brokers uh. And then over time she would get a
Speaker 1: couple of really close shipper relationships. And shippers and our
Speaker 1: h lexicon are the people that move that buy freight services.
Speaker 1: So these are the walmarts and the png s and
Speaker 1: the amazons that are a buying capacity in the market.
Speaker 1: And so over time, if Tracy really wanted to get
Speaker 1: out of the sort of low inside of the market,
Speaker 1: the spot side of the market, she would move into
Speaker 1: developing close relationships with one or two really good shippers
Speaker 1: that can keep her trucks moving at all times. And
Speaker 1: so typically when you start in the industry, you're either
Speaker 1: going to start as a truck driver as an employee driver,
Speaker 1: so you go work for a trucking company doesn't require
Speaker 1: you to go buy a truck. You would have become
Speaker 1: in the other path, has become an owner operator and
Speaker 1: signed up under a trucking authority. So a big trucking
Speaker 1: company would contract you and you would be contracted to
Speaker 1: them and they would help find loads for you. And
Speaker 1: now we have this sort of digital marketplaces that are
Speaker 1: both the traditional load boards or electronic apps where you
Speaker 1: can just download it like an Uber and if you're
Speaker 1: an Uber driver, you can get loads from that app.
Speaker 1: It's a very similar set of marketplaces and trucking where
Speaker 1: you can find orders that will allow you to keep moving.
Speaker 1: So effectively, Tracy, you know, if you decided you want
Speaker 1: to become a started trucking company. Within a couple of weeks,
Speaker 1: you could have a truck, you could have your cd
Speaker 1: L and you would be off to the races. And
Speaker 1: in this market probably making two d thousand dollars a
Speaker 1: year in gross revenue and your cost of good sold
Speaker 1: or you're operating costs to be about a hundreds and thousands,
Speaker 1: so you would make in profit today about a hundred thousand.
Speaker 1: Now here's the challenge the market if it collapses, and
Speaker 1: it will at some point. This is a boom and
Speaker 1: bus cycle. So at some point you would go from
Speaker 1: making two hundred thousand to probably uh in revenue to
Speaker 1: about eighty thousand, and your operating costs would say consistent,
Speaker 1: so you would actually end up losing. And that's what
Speaker 1: causes this bankruptcy cycle that we see a lot. So
Speaker 1: I have so many questions, but I mean, number one,
Speaker 1: this idea of drivers choosing a load or a route
Speaker 1: that they want to take. It reminds me a lot
Speaker 1: of the way airline pilots bid for individual schedules, like
Speaker 1: typically at the airline that actually employs them, but they
Speaker 1: do kind of have the system where they can choose
Speaker 1: where they want to go. And then I guess my
Speaker 1: big question based on that is is there actually a
Speaker 1: trucker shortage? If we have eleven thousand new trucking companies
Speaker 1: being created, it seems like things are moving. It seems
Speaker 1: like truck drivers have some flexibility in the routes that
Speaker 1: they're choosing to take. I guess I'm curious, like, is
Speaker 1: it an actual shortage or our truck drivers just avoiding
Speaker 1: certain routes or certain types of work in the market. Tracy,
Speaker 1: I'm so glad you asked this question because oftentimes people
Speaker 1: talk about a quote unquote driver shortage without really exploring
Speaker 1: what that means. And so I don't like the word
Speaker 1: driver shortage because it's it's a term that is actually
Speaker 1: doesn't really explain much in terms of what's actually taking place.
Speaker 1: And so the way I think of the industry constructs
Speaker 1: are a driver shortage is really a truck, a trucking company,
Speaker 1: a fleet that doesn't have a driver. They have a truck,
Speaker 1: but they don't have a drive before that truck. That's
Speaker 1: a driver shortage the way we would describe it at
Speaker 1: freight waves. And then you have capacity shortages, which is
Speaker 1: which are imbalances between supply and demand. Now you can
Speaker 1: have a driver shortage and a capacity shortage at the
Speaker 1: same time. So a fleet or across the entire industry,
Speaker 1: you can have driver shortages so we have more trucks
Speaker 1: than we do drivers to drive them. That does happen
Speaker 1: um and then you can also have capacity shortages, which
Speaker 1: means there's more freight demand than there are trucks to
Speaker 1: haul it, or you can have a capacity glut at
Speaker 1: the same time. So so if you think about it
Speaker 1: from the perspective of what's happening right now, is there
Speaker 1: is a capacity shortage because the demand is so high.
Speaker 1: And so just using the term driver shortage at times
Speaker 1: doesn't really describe what's happening. Because back in two thousand
Speaker 1: nineteen we had a capacity glut, but some trucking companies
Speaker 1: have uh didn't have drivers to fulfill the trucks, but
Speaker 1: they didn't need to because there wasn't enough freight to
Speaker 1: actually create demand on those trucks. I have a sort
Speaker 1: of very quick question, and it just again goes back
Speaker 1: to Tracy's company that she's going to launch. Are there
Speaker 1: actually trucks for sale? Yeah, so there's a used market
Speaker 1: now you can't today get a new truck. So the
Speaker 1: issue is that this is an asset. So the other
Speaker 1: thing creates real economic issues for trucking companies typically that
Speaker 1: own assets. If you think about owning assets, if you
Speaker 1: own a building or a warehouse, you're gonna that asset
Speaker 1: over time should appreciate and over time, uh, you're gonna
Speaker 1: hold onto that for thirty years. Even in the shipping
Speaker 1: industries you guys have covered, those ships have life cycles
Speaker 1: of twenty to thirty years. And so if I go
Speaker 1: buy a ship, I'm able to operate that ship for
Speaker 1: thirty years. In trucking, I'm only going to be able
Speaker 1: to operate that truck for three years. Uh. And so
Speaker 1: so really, as I run that truck and put as
Speaker 1: many miles as I can, there is a secondary market
Speaker 1: for that uh. And so typically what happens is the
Speaker 1: larger fleets or the owner operators that run nationwide will
Speaker 1: end up running the truck for three years, and after
Speaker 1: the three year cycle, they will end up selling it
Speaker 1: into a secondary market, which will end up going to
Speaker 1: more localized operations support operators, people that don't have as
Speaker 1: strenuous sort of over the road long haul demands. And
Speaker 1: so because of that, the trucking companies have to go
Speaker 1: out and buy new trucks every three you know, they're
Speaker 1: constantly buying new equipment. So you have this really big
Speaker 1: issue where the you know, trucks don't hold their value
Speaker 1: so based on what cycle or in in terms of
Speaker 1: boom or bust, depends on how well they do, and
Speaker 1: so that's a pretty significant issue. But right now, use
Speaker 1: trucks have gone up about in the last three months.
Speaker 1: So it's good if you own equipment and you can
Speaker 1: sell that equipment. If you have too many trucks and
Speaker 1: not enough drivers, you're you're doing quite well because your
Speaker 1: balance sheets have really really improved, and so we're actually
Speaker 1: seeing a lot of that. But ordering a new truck
Speaker 1: here about nine months out to get it. If you
Speaker 1: ordered a truck today, it would take you approximately nine
Speaker 1: months to get it, and that is assuming that they
Speaker 1: will even take your order. Right now, a lot of
Speaker 1: the O. E. M s are not actually accepting new
Speaker 1: truck orders. Just going back to truckers for a second,
Speaker 1: because you know, my new trucking company, we obviously care
Speaker 1: about the equipment, but we care very much about our
Speaker 1: human capital as well. But my understanding is that there's
Speaker 1: a lot of turnover among drivers too, So you know,
Speaker 1: trucks might get worn out after three years. Drivers might
Speaker 1: get worn out in even less time and leave the
Speaker 1: industry altogether. Could you maybe describe how desirable is being
Speaker 1: a truck driver as an occupation at the moment. So
Speaker 1: Joe and I talked about how we both have a
Speaker 1: sort of romanticized view of it, could you maybe um
Speaker 1: tell us what it's really like and how it stacks
Speaker 1: up against the money that you're actually being paid to
Speaker 1: do it at the moment. The realities are quite different
Speaker 1: than your romanticized view of the industry. It is a
Speaker 1: tough job. So if you're an owner operator, you will
Speaker 1: make in this market because the demand is so high,
Speaker 1: you would do quite well. You know, you probably wouldn't
Speaker 1: have a hundred thousand dollars as a employee driver. You're
Speaker 1: probably going to be making about fifty five to sixty
Speaker 1: thou dollars as an employee driver per year, and you're
Speaker 1: gonna be paid on a per mile basis. Um you're
Speaker 1: gonna you're gonna run your truck or drive or work
Speaker 1: about fifty six hours on a given week, so it's
Speaker 1: not a forty hour week. You're actually working fifty six hours.
Speaker 1: But here's the reality is you're not at home every
Speaker 1: single night. The vast majority of the drivers, you're actually
Speaker 1: out and so while you may not be on duty
Speaker 1: that you know, the six hours in a given week,
Speaker 1: you're you're still at a truck stop. You know, you're
Speaker 1: still dealing with sort of being out over the road.
Speaker 1: So it's it's really it creates a lot of strain
Speaker 1: on families. Uh, it creates a lot of strain on people.
Speaker 1: It takes a special kind of person to want a
Speaker 1: life where they're out in the road. It's it's a
Speaker 1: job that's very dangerous. It's one of the most dangerous
Speaker 1: jobs in America. It's a job that has very high
Speaker 1: occupational issues in terms of health. You're sitting in a
Speaker 1: truck for a you know, you're driving for eleven hours
Speaker 1: a day, you're sitting, which you know, drivers have high
Speaker 1: incidents of obesity and diabetes. So it's not a great lifestyle.
Speaker 1: Uh and uh. For all of those reasons, it's not
Speaker 1: a desirable job for for a large percent of the population.
Speaker 1: And the Unfortunately, the industry salaries have not kept up
Speaker 1: with a lot of the competitive industries which they compete
Speaker 1: for labor like warehousing, construction, other types of industries which
Speaker 1: tend to pull the same labor of course, so I'm
Speaker 1: curious like on this, like what were there and you
Speaker 1: alluded to this at the very beginning the workplace trends,
Speaker 1: But what was the trajectory of sort of people entering
Speaker 1: the workforce making their careers as truck drivers. And then
Speaker 1: in this particular spike, has there been any like um
Speaker 1: pay dynamic or any increase in wage that has perhaps
Speaker 1: brought people off the sidelines either to get back into
Speaker 1: trucking or to get their c d L. Yeah, so
Speaker 1: let's let's talk about two things. One is there's effectively
Speaker 1: two separate markets between the employee driver market, which is
Speaker 1: someone who goes and gets a job at a trucking company,
Speaker 1: which is actually seen a three there's three percent less
Speaker 1: truck drivers today that work for fleets then there were
Speaker 1: pre COVID, so we actually lost three percent of the
Speaker 1: industry that the driving force of employees. And then we've
Speaker 1: seen an increase in eleven thousand trucking companies in the
Speaker 1: last month. Those are not employees, those are essentially fleet
Speaker 1: operators that are in that So we've seen some a
Speaker 1: lot of growth in the owner operated market of the
Speaker 1: spot market because they can make a lot more money.
Speaker 1: And we've seen a shortage in the UH employee drivers
Speaker 1: UM and so turnover typically in a trucking companies a
Speaker 1: hundred and fifteen because a lot of people end enter
Speaker 1: the industry but don't really know what they're getting into.
Speaker 1: They have this sort of I don't you know. Tracy
Speaker 1: has this sort of idolized view of how great this
Speaker 1: is going to be, and she enters the industry. She
Speaker 1: goes to a trucking school and is excited about her
Speaker 1: career for the first couple of weeks and then realizes
Speaker 1: just how tough UH it really is to be a
Speaker 1: truck driver, and so she ends up quitting and deciding
Speaker 1: it's not a great job for her, and so she
Speaker 1: ends up going to work at a at a warehouse
Speaker 1: or ends up going to do construction where she can
Speaker 1: make today more money than she can be for it
Speaker 1: can be a truck driver. And so there's just a
Speaker 1: lot of structural issues that are there just for the
Speaker 1: how long H is truck driving school? How long would
Speaker 1: it take an average person to go from never having
Speaker 1: driven a truck to being UH licensed UH six to
Speaker 1: eight weeks um and it depends. And this is in
Speaker 1: a in a COVID world, truck and schools have shut down.
Speaker 1: So this is the other issue is that if you
Speaker 1: sort of look at it, a lot of states didn't
Speaker 1: treat trucking as a critical job or a truck driving
Speaker 1: schools is a critical job. So they were basically a
Speaker 1: lot of them were mandated to be shut down. And
Speaker 1: so a large percent of the people that enter the
Speaker 1: industry that become employee drivers enter through the truck driving schools.
Speaker 1: When we lost twenty percent of them and even the
Speaker 1: ones that did have survived were actually shut down for
Speaker 1: months a couple of months, and so there was this
Speaker 1: big shortage of bringing new people into the industry, uh
Speaker 1: for for those jobs. And that's what's really created as
Speaker 1: to pass the constraint that we see right now. So
Speaker 1: one thing I've been thinking about is is there a
Speaker 1: way aside from raising wages because you mentioned this is
Speaker 1: a slim margin industry and you know, maybe giving truck
Speaker 1: drivers a massive pay rise doesn't really work economically, But
Speaker 1: is there a way to make the job more i
Speaker 1: don't want to say enjoyable, but maybe less stressful or
Speaker 1: make the lifestyle less onerous so that you attract more people,
Speaker 1: particularly women and maybe some other minorities who aren't necessarily
Speaker 1: interested in truck driving at the moment, so that you
Speaker 1: entice them into the job and you have a bigger
Speaker 1: pool of potential drivers. And Rate Trucking Company is trying
Speaker 1: to figure that out, and no one has sort of
Speaker 1: figured out the secret to it. There are certainly initiatives
Speaker 1: to bring women. Some fleets have as as much as
Speaker 1: of their fleet are women. Automated transmissions sort of removing
Speaker 1: the stick, if you will, actually attracted a lot of women.
Speaker 1: A lot of the O. E. M S designed trucks
Speaker 1: that are in seats that are more comfortable for women,
Speaker 1: are allowed for someone who's shorter, has a smaller body
Speaker 1: to fit inside the cab, and typically the trucks were
Speaker 1: built for men, you know, big, big, sort of big
Speaker 1: oversized environments, and now they've sort of focused on the
Speaker 1: aesthetics to trap more women to the industry, and so
Speaker 1: there certainly is an element of that, but the industry
Speaker 1: has not figured it out. Now we do see large
Speaker 1: investments around recruiting Latino drivers, recruiting African American drivers, recruiting
Speaker 1: you know, one of the largest population of truck drivers
Speaker 1: has been very successful has been uh. Indian populations in
Speaker 1: trucking is actually a very respected industry in India. UH.
Speaker 1: And so a lot of the trucking companies have figured
Speaker 1: out that they can bring in, you know, bringing immigrants
Speaker 1: from India that have a pedigree in trucking and they
Speaker 1: will bring their families and their friends to join their fleet.
Speaker 1: And so there's this very large population of Indian American
Speaker 1: truck drivers that have have been very successful. So there
Speaker 1: is a effort to diversify the industry, but it's still
Speaker 1: an industry that is not attractive to a lot of
Speaker 1: people when they can find alternative work. You know. One
Speaker 1: of the issues that you you have in in sort
Speaker 1: of as you diversify is Latino populations into want to
Speaker 1: stay close to families. So the lifestyle of being a
Speaker 1: truck driver doesn't work great for someone who wants to
Speaker 1: be with their family on a you know, every night basis. Um.
Speaker 1: And so you have sort of these constraints that exist
Speaker 1: in the industry and there really isn't an easy answer. Um.
Speaker 1: The job itself requires you to be out over the road.
Speaker 1: You know, freight has to move. It is inconsistent, you
Speaker 1: don't have a consistent schedule, you're not hauling a consistent route,
Speaker 1: and so there's a lot of structural issues that are
Speaker 1: not easily addressed. So, first of all, I hope if
Speaker 1: we do get a lot more Indian or Indian American drivers,
Speaker 1: that they bring the Indian tradition of decorating the trucks
Speaker 1: with them, because they do they do. There's there is
Speaker 1: some awesome YouTube videos which our Body was style and
Speaker 1: they're they're incredible because they're they're dancing in front of
Speaker 1: their rigs and they've outfitted these beautiful rigs. It is
Speaker 1: and and and and the job itself is one of pride.
Speaker 1: It is one that they're very proud of the job.
Speaker 1: And it's it is an unusually there's an esteem associated
Speaker 1: with becoming a truck driver. And it's an industry or
Speaker 1: a group of population that the industry has been very
Speaker 1: successful recruiting. And the challenges because of the American immigration
Speaker 1: policy doesn't allow us to import hundreds of thousands of
Speaker 1: folks from India to take these jobs, and so we're
Speaker 1: sort of stuck with a small portion of the industry
Speaker 1: that that fits that demographic. Yeah, So I've seen some
Speaker 1: of those trucks in India and Pakistan and they're absolutely
Speaker 1: beautiful and I think I've spent a lot of time
Speaker 1: photographing them myself. But the other thing I want to
Speaker 1: ask is, so, if you think that being away from
Speaker 1: home is a major downside for potential truck drivers, is
Speaker 1: there any way to try to fix that problem? Like
Speaker 1: could you organize some of the trucking routes more efficiently?
Speaker 1: Could you develop some sort of end off system where
Speaker 1: instead of having a single driver drive from you know,
Speaker 1: like the west coast to the east coast, they could
Speaker 1: maybe pass on their loads from like, you know, midway
Speaker 1: through the journey or something like that, so that they
Speaker 1: wouldn't have to spend so much time away from their
Speaker 1: home or their home base. Or does that not just
Speaker 1: work economically? Were logistically It's very difficult, and it is
Speaker 1: tried in you know, it is tried and successful and
Speaker 1: sort of parcel operations and what they call lt L
Speaker 1: which are small palettes or small parcel where I'm running
Speaker 1: a terminal determinal network and I sort of it's sort
Speaker 1: of a closed loop, if you will, where the same
Speaker 1: set of drivers are going back and forth. So it
Speaker 1: does work in very limited cases. But supply chains, the
Speaker 1: issue is that the customer demands, the supply chain demands
Speaker 1: are very different than the driver uh and trucking demands.
Speaker 1: And so what supply chains want our products there as
Speaker 1: fast as possible. They want them efficient, you know, they
Speaker 1: want to move. Is all liquidity demanded in the supply chain,
Speaker 1: and so you can't optimize the trucking market or network.
Speaker 1: Should that I agree that, um, you would want to
Speaker 1: if you if everything else is created equals So for
Speaker 1: those reasons, you know, freight tends to run what we
Speaker 1: call head hall and back hall. So you see places
Speaker 1: like southern California l A, which you know is the
Speaker 1: largest port in the United States. You know, a lot
Speaker 1: of freight enters l A, but very very little freight
Speaker 1: is imported into Southern California from the rest of the country.
Speaker 1: So what you have is this massive head haul market
Speaker 1: out of southern California that goes all over the country
Speaker 1: and then basically very little freights coming from the other
Speaker 1: parts of the country back to l A. So there's
Speaker 1: just a lot of inefficiencies and how supply chains work
Speaker 1: that create issues and Frankly, customers want things as soon
Speaker 1: as possible. Businesses want them as soon as possible. And
Speaker 1: for those reasons, you can't optimize, uh as you mentioned,
Speaker 1: for these handoffs scenarios. Companies have tried it. It just
Speaker 1: doesn't work pretty well. So that perfectly leads to where
Speaker 1: I was going to go next, because you know, we've
Speaker 1: talked about a lot about some of the big structural
Speaker 1: issues facing this industry, but also the current moment for
Speaker 1: supply chains, and we've touched on it a little bit,
Speaker 1: has some unique challenges, and I think that's a good
Speaker 1: place to start. The the the gap between outbound shipments
Speaker 1: from the port of Los Angeles elsewhere versus inbound which
Speaker 1: was already very um you know, there's already a big
Speaker 1: disparity for years, but that's really grown massively in this
Speaker 1: crisis because of all the goods important and how little
Speaker 1: is being exported, and that has created its own unique
Speaker 1: challenges for shipping, you know, because the ships aren't taking
Speaker 1: back as many containers and so forth. We've talked about that,
Speaker 1: So let's talk about like other than just the pure
Speaker 1: like overwhelming sort of like supply demand mismatch, how else
Speaker 1: are the sort of like new imbalances making this moment
Speaker 1: even worse and exacerbating some of the structural problems for
Speaker 1: this industry. Well, you know, this is interesting because I
Speaker 1: listened to a couple of your podcast, particularly around shipping,
Speaker 1: and people are now aware of all of the things
Speaker 1: that can go wrong in a supply chain, where before
Speaker 1: no one cared. And so for someone who does this, uh,
Speaker 1: this is you know something we do, I do full time.
Speaker 1: It's really it's it's a really interesting time because all
Speaker 1: of a sudden, people are very aware and very concerned
Speaker 1: about all of the stuff that's taking place across the
Speaker 1: global supply chain, where was before no one cared. I
Speaker 1: would often get asked, can you actually build a media
Speaker 1: and data business? For fraid it seems like a very
Speaker 1: small niche, And I'm like, well, it's two percent of
Speaker 1: the global economy. Of the economy the global economy is
Speaker 1: are logistics dependent end trees. But everybody sort of ignored
Speaker 1: it because they all assumed it all worked because they
Speaker 1: didn't they didn't experience these issues. So these issues that
Speaker 1: we're seeing have always existed, just not to the degree
Speaker 1: that the market was already strained and stretched that we
Speaker 1: see right now, and frankly most people were not aware
Speaker 1: of it. We've always had hurricanes that have disrupted supply chains.
Speaker 1: We've we've had at times pipeline issues. We've had you know,
Speaker 1: presidents that shut down borders that create massive disruptions. Um
Speaker 1: just just out of you know, uh, sit out a
Speaker 1: tweet and all of a sudden, I'm gonna shut on
Speaker 1: the Mexican border because I don't like the fact that
Speaker 1: you're not paying from my wall. And if you do that,
Speaker 1: then all of a sudden, the auto suppliers have to
Speaker 1: put a lot of inventory into Southern Texas that they
Speaker 1: haven't available. These things are always playing out, and now
Speaker 1: we're really aware as a society how vulnerable you are
Speaker 1: supply chain disruptions which have always existed, just not with
Speaker 1: the degree they are and not act back. And so
Speaker 1: a lot of this is sort of I think a
Speaker 1: new awareness and new level of respect that people have.
Speaker 1: There's all this inner dependency. So you look at what's
Speaker 1: happening shipping, it certainly impacts the trucking market, and it's
Speaker 1: both ways, because what ends up happening is the trucking market.
Speaker 1: As much as one fifth of trucking volumes are tied
Speaker 1: directly to imports, and for those reasons, when you see
Speaker 1: this massive amount of imports hit the freight market, uh,
Speaker 1: it creates an enormous amount of strain in terms of
Speaker 1: trucking capacity or trucking demand. And for those reasons, we're
Speaker 1: seeing a lot of issues. Uh. And just look at
Speaker 1: tight inventories and look at the lack of labor supply.
Speaker 1: All this stuff is playing out and now people are
Speaker 1: experiencing that only in their business life, with their experience
Speaker 1: in their personal life. So you mentioned the idea that
Speaker 1: even though the trucking industry is in a boon now
Speaker 1: and people can make a lot of money, that it's
Speaker 1: most certainly going to end up in a bust and
Speaker 1: over capacity at some point in time. And this is
Speaker 1: something that keeps cropping up in all of our discussions
Speaker 1: about shipping. And I'm just wondering, what is it about
Speaker 1: the transport industry that seems to make it so cyclical
Speaker 1: in nature. So you mentioned the low barriers to entry
Speaker 1: for trucking, and I could see how you would get
Speaker 1: a bunch of people who start trucking companies when times
Speaker 1: are good and they think it's an easy way to
Speaker 1: make money and then when things get a little bit
Speaker 1: more difficult, they all go bust and it's a sort
Speaker 1: of self fulfilling cycle. But it's a little bit different
Speaker 1: in shipping, where you do have long lead times to
Speaker 1: build very very expensive vessels. It's dominated by a few
Speaker 1: companies that have a decent amount of money, or at
Speaker 1: least more money than some of the trucking companies. So
Speaker 1: I guess my question is what's the common thread between
Speaker 1: all these transportation and logistics companies that seems to make
Speaker 1: them very, very vulnerable to these cycles of booms and us. Yeah,
Speaker 1: it's a it's a great question. So in the shipping market,
Speaker 1: I'm going to own a ship for thirty years, So
Speaker 1: these shipping cycles typically play out over decades. Um. You know,
Speaker 1: the shipping industry has had this sort of a shut
Speaker 1: recessionary environments two thousand eight since the Great Financial Crisis,
Speaker 1: and in the last two years a sort of has
Speaker 1: had has sort of come out of that, and COVID
Speaker 1: really accelerated that. So that cycle will probably live on
Speaker 1: for some some period of time. Uh. In trucking, they
Speaker 1: typically the industry runs in three to four year cycles
Speaker 1: because it's very it's very close to the broader industrial
Speaker 1: cycle and the economy and the domestic economy. Uh. And
Speaker 1: so for those reasons, if the industrial sector is very soft,
Speaker 1: so well trucking. And but what happens is because of
Speaker 1: the lack of bears of entry, people when they enter
Speaker 1: the industry, they go out by these trucks. You all
Speaker 1: of a sudden have this glut of capacity and the
Speaker 1: industry has to throw that during the softer time. So
Speaker 1: two thousand eighteen was a record year for trucking. Two
Speaker 1: thousand nineteen was the worst year in trucking since the
Speaker 1: Great Depression. Two thousand and twenty. We saw two side,
Speaker 1: you know, really three cycles. We saw the run up
Speaker 1: to COVID where you have this massive surge and demand.
Speaker 1: We saw a crash where you saw this massive hangover.
Speaker 1: So in March you saw this massive surge. In April
Speaker 1: you saw this massive hangover. And then we've seen a
Speaker 1: super demand cycle since then. And so uh, these cycles
Speaker 1: live out and because there's very little barriers of entry,
Speaker 1: it allows the industry to get over supplied really really quickly.
Speaker 1: And because you have such a fragmented market, there are
Speaker 1: forty thousand trucking companies that that have that have employees
Speaker 1: that work for them to have more than one truck.
Speaker 1: And for those reasons, there are so many independent decision
Speaker 1: makers that are out making decisions on what's in their
Speaker 1: best interest and oftentimes don't have you biquitous information across
Speaker 1: the industry, uh that they end up end up buying
Speaker 1: more trucks, growing their fleet, and increasing their costs along
Speaker 1: the way. So right now, what's happening is the trucking
Speaker 1: industry is dramatically increasing labor costs. They're trying to attract
Speaker 1: new drivers into the industry by increasing salaries. Well, the
Speaker 1: problem is when the market busts, they will be stuck
Speaker 1: with those salaries. So they're operating costs have gone up.
Speaker 1: The operating costs have shot, you know, way up. They
Speaker 1: will have to live with those higher operating costs. And
Speaker 1: it's okay, is the market as long as the markets
Speaker 1: doing well. But when the market, when the volume drives up,
Speaker 1: is it inevitably will they will be stuck with very
Speaker 1: high operating costs and we'll just see a massive bleed
Speaker 1: out in the industry. Can you just go back and
Speaker 1: talk about specifically, I mean, that is pretty striking to say,
Speaker 1: is the worst year in a on a growth basis
Speaker 1: since the Depression. It was the worst trucking market in
Speaker 1: terms of bankruptcies since the greater since the Great Procession.
Speaker 1: So just look us through if you don't mind, like
Speaker 1: to give us this summary of what really happened in ten.
Speaker 1: So the government created this new mandate called the electronic
Speaker 1: logging device, which basically in the old days truck drivers
Speaker 1: would would use paper logs and cheating or creative accounting
Speaker 1: as we like to call it, a lot of them
Speaker 1: were cheating the amount of time. Now the big trucking
Speaker 1: companies and there's always this rubbed between the small trucking
Speaker 1: companies which are the independent and the big trucking companies,
Speaker 1: and so there's always this sort of the little guys
Speaker 1: and the big guys are sort of always fighting it
Speaker 1: out in terms of what regulations. So the big carriers
Speaker 1: are all constantly getting sued and constantly getting audited by
Speaker 1: the federal government and others, so they have to keep
Speaker 1: things really really tight compliant otherwise they just you know,
Speaker 1: it would be a pretty nasty situation for them. So
Speaker 1: the small carriers have don't typically have to operate, uh
Speaker 1: in that fashion or have not operated. So the government
Speaker 1: mandated they called electronic clogging devices, which actually electronically monitor
Speaker 1: the amount of hours driver drives and so it records
Speaker 1: all that information. And so this everyone sort of expected
Speaker 1: this massive churn of capacity. Uh. And because everybody thought, well,
Speaker 1: this is going to you know, destroying a lot of
Speaker 1: the available capacity in the market, and for a short term,
Speaker 1: short time, it did. Uh. They're expecting that this would
Speaker 1: create such a tightness in capacity that the rules would
Speaker 1: be different this time. And this is something the industry
Speaker 1: always say, is it's different this time. You'll hear this
Speaker 1: a lot. People say that all the time. To me,
Speaker 1: at this time, it's different. Well, I've heard that for
Speaker 1: forty two years since I, you know, I grew up
Speaker 1: in the industry. So I've heard that it's never different.
Speaker 1: It's just the maybe the situation is different, but the
Speaker 1: rules are always the same. And so the industry were
Speaker 1: we ramped up a lot of capacity headed up to
Speaker 1: the e L demand date. The L demand date happened,
Speaker 1: and what they expected to happen was this massive contraction
Speaker 1: and capacity. We actually saw the opposite. We actually saw
Speaker 1: a building of capacity, and so there was a lot
Speaker 1: of additional supply brought into the market over six to
Speaker 1: nine months in two thousand eighteen. Now, at the time
Speaker 1: in two thousand eighteen, there was a lot of industrial demand.
Speaker 1: The industrial economy was doing quite well. This was post
Speaker 1: Donald Trump's tax cuts. It was sort of you know,
Speaker 1: the economy was doing really well. All of a sudden,
Speaker 1: we had terrorists put in place in mid two thousand eighteen,
Speaker 1: and we saw an industrial slowdown throughout the economy. And
Speaker 1: so as the economy slowed down, the industry was still
Speaker 1: building up capacity and they were continuing to build up
Speaker 1: that capacity all the way until about the third quarter
Speaker 1: or fourth quarter of two thousand and eighteen. And then
Speaker 1: with the slowdown and the industrial economy at a time
Speaker 1: and capacity had been overbuilt. This massive, massive UH issue
Speaker 1: in two dozen nineteen where the market was oversupplied and
Speaker 1: we saw a lot of bankruptcies. You know, we at
Speaker 1: freight ways, we're covering probably for bankruptcies at one point
Speaker 1: for bankruptcies a day where we would you know, and
Speaker 1: some of them were big. There was a four thousand
Speaker 1: Republican try that went out went out of business. New
Speaker 1: England Motor Freight, which is a new York based LTL
Speaker 1: Care went out of business. So you know, there's just
Speaker 1: a lot of bankruptcies that happened in two nineteen because, uh,
Speaker 1: these companies just couldn't survive it. So this sort of
Speaker 1: gets back to the question that I asked earlier, But
Speaker 1: is there anything that can be done in order to
Speaker 1: balance out the industry from this boom bus cycle? No,
Speaker 1: it is. It's classic economics and and so I mean, Tracy,
Speaker 1: this is just the reality of it, and a lot
Speaker 1: of people assume. And so I grew up. My dad,
Speaker 1: uh started a trucking company, my uncle started a trucking company.
Speaker 1: My grandfather was was in trucking. And so I've grown
Speaker 1: up listening to my dad talk about the cycles. And
Speaker 1: it's existed as far back as I can remember, uh,
Speaker 1: these cycles. Uh, and so even you know, we have
Speaker 1: something called the Hall of Fame at Freight Ways, which
Speaker 1: is we cover stories about historical trucking companies for featured.
Speaker 1: A lot of them are now out of business. Um,
Speaker 1: if you go back to pre de regulation, so there
Speaker 1: was a time when trucking was a great industry and
Speaker 1: a great job and that was pred regulation. But when
Speaker 1: the Carter administration deregulated trucking in the in the late
Speaker 1: seventies along with the airlines and telecommunications sector when they
Speaker 1: when they deregulated over you know, the during that period
Speaker 1: of time, what ended up happening is that you saw
Speaker 1: a massive drop in transportation costs send a GDP. But
Speaker 1: what you also saw was this massive boom month cycle.
Speaker 1: Rate used to be fixed, which means there was no
Speaker 1: marketplace for rates. You have a fixed rate, you had
Speaker 1: to file the tariff with the government, and only certain
Speaker 1: carriers could bid on lanes. Very similar to the airline
Speaker 1: whey the airlines work today, uh in terms of international
Speaker 1: sort of you know, they restrict how many airlines could
Speaker 1: fly internationally these routes um but pricing was also fixed
Speaker 1: and and so for those reasons, it was a very
Speaker 1: stable market. But when the government deregulated, it allowed a
Speaker 1: lot of you know, just as massive sort of level
Speaker 1: of altility that is going to be with us as
Speaker 1: long as the economic cycle, which you know, as long
Speaker 1: as as long as we're living a free ish market,
Speaker 1: you always have that. Well, I have an idea to
Speaker 1: stabilize the trucking market. And I'm gonna and tell me
Speaker 1: why if it's ever been tried, and why it won't work.
Speaker 1: I mean, I'm sure it won't work because someone would
Speaker 1: have done it. But instead of Tracy starting a independent
Speaker 1: truck driving company, why doesn't she start like a private
Speaker 1: equity roll up that buys five thousand different trucking companies
Speaker 1: and then create some really slick digital platform where so
Speaker 1: that it's more than the Craigslist for trucking and give
Speaker 1: repeat customers a nice break and try to like really
Speaker 1: become the Marisk of trucking in some way. Why wouldn't
Speaker 1: that work? Can I just say that my dream of
Speaker 1: being a loan truck driver left to my own devices
Speaker 1: has suddenly morphed into me becoming like a private equity
Speaker 1: tycoon rulling over some sort of tech fuel to think
Speaker 1: of a different approach that might be more sustainable. Okay,
Speaker 1: go ahead, Tracy. You would be You would be far
Speaker 1: happier being sitting on the financial side of the industry.
Speaker 1: The driving and so like, it's hard work, and I
Speaker 1: don't want to be dismissive to the drivers. It is
Speaker 1: hard work and they know they keep the economy running.
Speaker 1: And it can't be the first to have thought of that. Well,
Speaker 1: you're not, but the track record of private equity roll
Speaker 1: up is one that is not great. So we've seen
Speaker 1: this tried. So there's really a couple of markets. You've
Speaker 1: seen the l T L and parcel market. There's been
Speaker 1: very successful roll ups in the LTL market, Brad Jacob said,
Speaker 1: XPO has has rolled up a lot of the sort
Speaker 1: of trucking entities UH in the l T L, UH
Speaker 1: and fording market and has been very successful there. But
Speaker 1: in the truckload market, the market that we've taught predominance
Speaker 1: of today, that full truckload market where the vast majority
Speaker 1: of capacity lives UM it is very difficult because it
Speaker 1: takes someone who understands how to operate an entity, and
Speaker 1: there are no there are no economies of scale. And
Speaker 1: here's the reason is that drivers are the factor that
Speaker 1: matter most and trucking and the problem is if you
Speaker 1: start rolling up a bunch of companies, you have all
Speaker 1: of these cultural issues and skill is not your friend
Speaker 1: when you're dealing with human capital. And so as you
Speaker 1: start to roll up entities, oftentimes the companies don't have
Speaker 1: similar operating UH lanes, they don't have similar networks, they
Speaker 1: don't even have similar equipment. And then you have the
Speaker 1: human factor, which typically as you get bigger, you you
Speaker 1: tend to have to have more strenuous requirements on who
Speaker 1: you hire because your insurance companies will demand it because
Speaker 1: you're now a much bigger target in a courtroom. It
Speaker 1: just there are no economies of scale on size, and
Speaker 1: so even the large public trucking companies that are private
Speaker 1: for that matter, that have that are ran by operators,
Speaker 1: their track record and doing big acquisitions is just not great.
Speaker 1: There have been a couple that have been very successful
Speaker 1: as a company out of Cannon called Transport, which is
Speaker 1: probably the most successful acquire which does acquire companies and
Speaker 1: has been successful sort of really operating them and then not.
Speaker 1: Swift has also had a successful track record of buying
Speaker 1: and acquiring, but those were exceptions with exceptional management teams.
Speaker 1: But they're not private equity. So private equity has a
Speaker 1: very very poor track record of acquiring companies. Oftentimes they
Speaker 1: it ends up really really ugly for them because they
Speaker 1: don't know how to operate it. They don't trucking is
Speaker 1: an industry that they're constantly playing. You know, you're playing
Speaker 1: defense on a constant basis because you're dealing with all
Speaker 1: these factors that you have to deal with. When when
Speaker 1: the market is good as it is right now, where
Speaker 1: you would think trucking companies atret to bring really really great,
Speaker 1: they're actually struggling because they can't find people to fill
Speaker 1: their trucks. And so when markets are good, you have
Speaker 1: a new set of problems, and so you go fix
Speaker 1: those set of problems by and care seen driver salaries,
Speaker 1: and all of a sudden you're and everyone else is
Speaker 1: doing it, so you're constantly having to play catch up,
Speaker 1: and then you're stuck with those higher salaries when the
Speaker 1: market softens, and so it's just it's a very tough environment. Now,
Speaker 1: there are other parts of the market, like what we
Speaker 1: call freight brokerages, which there are sixteen thousand independent freight
Speaker 1: brokers in the United States. These are effectively the day
Speaker 1: traders of the market. If you ran a consumer products company,
Speaker 1: you're probably using freight broker because that tends to be
Speaker 1: where they They live a lot in that market. But
Speaker 1: they are the intermediaries, and that's where all the money
Speaker 1: that they don't own, the assets they don't have to build,
Speaker 1: the drivers, they don't have to do with the insurance
Speaker 1: typically and so for those reasons, they do quite well.
Speaker 1: And there's it's been a very attractive private equity play,
Speaker 1: but in trucking, asset based trucking, it's it is not
Speaker 1: a good private equity play. There no return on assets,
Speaker 1: and and for those reasons, it's just it's a really
Speaker 1: nasty industry. Do you have to say? I find it so?
Speaker 1: I find it so counterintuitive that for a logistics industry,
Speaker 1: scale might not be the answer to all its problems.
Speaker 1: Like you would think that if you could just like
Speaker 1: increase size, increase the network, there would be some efficiencies there,
Speaker 1: but it seems like you're suggesting that's not necessarily the case. Well,
Speaker 1: just to add to Tracy's question, you know, like is
Speaker 1: the difference between and it sounds like the difference between
Speaker 1: say like trucking full truckload trucking that we're talking about
Speaker 1: versus a UPS or fed X is really how taxing
Speaker 1: the job is to the humans. Is that the key
Speaker 1: difference there? Well, FedEx and UPS. We would never describe
Speaker 1: FedEx as trucking companies, No, no, no, no, I just
Speaker 1: mean in terms of like a national logistics company. Like
Speaker 1: the reason why that type of logistics and package shipment
Speaker 1: can scale nationally versus trucking where you don't get those scales.
Speaker 1: It sounds like a big difference is how taxing it
Speaker 1: is on the actual humans who have to do the
Speaker 1: job that it's it's partially that, but it's also because
Speaker 1: the parcel market, you know, FedEx and UPS have these
Speaker 1: very sophisticated and very expensive physical networks that go beyond
Speaker 1: just the trucks and the planes. They have physical warehouses
Speaker 1: and sorting facilities, which affords some economis as a scale, like,
Speaker 1: it's very difficult, and Amazon is certainly probably the only
Speaker 1: company that can pull this off, or is trying to
Speaker 1: pull this off, is to build this infrastructure of warehouses
Speaker 1: and sorting centers and network to sort of rival FedEx
Speaker 1: and UPS. Even DHL, you know the world's largest parcel company,
Speaker 1: has struggled in the United States to compete against FedEx
Speaker 1: and UPS because they're so entrenched. And those companies have
Speaker 1: done exceptionally well, even with Amazon as a competitor, and
Speaker 1: and and companies that have tried to, you know, like
Speaker 1: the Jail that tried to come in the market. Truckload
Speaker 1: is very different because it's a fungible commodity you know,
Speaker 1: shippers don't really they have relationships, but most of the
Speaker 1: freight moves based on rate UH. And that rate is
Speaker 1: set by the conditions in the markets. When the market
Speaker 1: is oversupplied, rates collapse. When the market is undersupplied, rates
Speaker 1: shoot up. And there's always a rate that's available in
Speaker 1: the market. You can always move your freight for the
Speaker 1: right price. Even if that price is you know, a
Speaker 1: hundred dollars a mile, you can find someone to do it.
Speaker 1: So for those reasons, Um, it's it's just it's a
Speaker 1: market that has these substantial booms about cycles uh, and
Speaker 1: it's very difficult and doesn't allow for economs of scale. Now,
Speaker 1: the reason you don't get a commis of scale come
Speaker 1: down to the truck driver. That is the factor here.
Speaker 1: And if we sort of fast forward to two thousand
Speaker 1: and thirty five two forty, when we have autonomous or
Speaker 1: driver lest trucks, that's when I think it's an attractive
Speaker 1: industry for private equity. That's when it's an attractive industry
Speaker 1: for technology g As you mentioned, Joe, why don't we
Speaker 1: build a digital experience and marketplace and put it into
Speaker 1: a private equity roll up. When we get there, when
Speaker 1: we get to eliminating the driver as the factor in
Speaker 1: the industry, that's when we will see big dollars into
Speaker 1: the industry and private equity really make some significant plays. Um.
Speaker 1: And frankly, a lot of the carriers that exist today
Speaker 1: just won't survive that. H what is the state of that?
Speaker 1: And like how much does the planning for that theoretical eventuality? Um,
Speaker 1: how much is that affecting the industry today? And like
Speaker 1: sort of like what are you watching there? Like how
Speaker 1: realistic it is it? What's the time frame and what's
Speaker 1: your what's your what's your sense of it? It's very speculative.
Speaker 1: It has been a lot of InterCapital poured into autonomous driving.
Speaker 1: There's been some facts that have gone public for autonomous
Speaker 1: trucking service. Is there's a lot of reasons to be
Speaker 1: bullish on the economics of autonomous talking for many of
Speaker 1: the reasons I've talked about, eliminates the driver and sort
Speaker 1: of the factor in the industry, and then you can
Speaker 1: get economies of scale and you can optimize this this industry.
Speaker 1: But it is is not a technological limitation. So if
Speaker 1: you if you look at it, the technology will be here.
Speaker 1: Autonomous driving and there are you know, around ports and
Speaker 1: closed loop environments, there are autonomous trucking or autonomous freight
Speaker 1: operations happening right now. The port of rodert m is
Speaker 1: largely an automated or semi autonomous facility. You see the
Speaker 1: ports in different parts of the world which have built
Speaker 1: some level of autonomy. So we do see the ability
Speaker 1: and the technology is certainly we're on the cusp of
Speaker 1: having the technology to be able to do this. That's
Speaker 1: not your issue. The issue is the regulatory environment. So
Speaker 1: twenty nine in nine states, the number one job is
Speaker 1: trying driving. And so when you create autonomy and that
Speaker 1: autonomy allows a trucking company to haul freight without a driver,
Speaker 1: then you put those jobs at risk. Those jobs happen
Speaker 1: to be in red states, or the predominance of trucking
Speaker 1: jobs happen to be in states that tend to vote
Speaker 1: Republican or vote read and so an environment which would
Speaker 1: you would expect to be pro business uh and support autonomy,
Speaker 1: happens to be in states where a large percent of
Speaker 1: the population or a represented percent of population have to
Speaker 1: truck drivers. And so it's going to be a really
Speaker 1: difficult thing. And if you just look at our government constructs.
Speaker 1: We can't. You have to get the the state, municipalities,
Speaker 1: and federal laws all to work together to allow point
Speaker 1: to point autonomy, and we can't even make federal laws
Speaker 1: with It's a very dysfunctional government. So for that to happen,
Speaker 1: it just doesn't seem very likely in the next decade.
Speaker 1: So I think autonomy we will see layers of autonomy,
Speaker 1: highway only autonomy within the next decade, but point to
Speaker 1: point being able to see a completely driverless Cavils truck
Speaker 1: is probably twenty years out. Craig. I think that's a
Speaker 1: great place to drop it. That was a fantastic conversation.
Speaker 1: I learned so much and I really appreciate you coming up. Yeah,
Speaker 1: I appreciate it. And Tracy, if you ever want to
Speaker 1: drive a truck for a day, just let me know.
Speaker 1: I will help make those arrangements. You can do a
Speaker 1: whole episode in the truck. I would love to do that.
Speaker 1: We're going to do you should do it. I'm going
Speaker 1: to start thinking about my my trucking handle right now,
Speaker 1: so let me know and I will make those radios. Yes,
Speaker 1: thanks Craig, that was great, Thanks so much, all right, Tracy,
Speaker 1: Thanks Jo Tracy, I kind of feel like, I know,
Speaker 1: I so many people told us we had to talk
Speaker 1: to Craig. Oh totally. That was a fascinating conversation, and
Speaker 1: he was really good at digging into you know, I
Speaker 1: kind of expected us to talk more about the truck
Speaker 1: driver shortage and the experience of being a truck driver
Speaker 1: and whether or not higher wages would solve the problem
Speaker 1: and that sort of thing, but Craig was very good
Speaker 1: at giving an industry level overview of how the entire
Speaker 1: trucking landscape works. So that was great. Yeah, that was
Speaker 1: really interesting. And obviously, like it's clear, like it's just
Speaker 1: such a mess. I mean, the fact that like twenty nineteen,
Speaker 1: which for the rest of the economy was I don't
Speaker 1: think you know it was it was a good it
Speaker 1: was a good year for the economy, and so the
Speaker 1: fact that in what was what was a good year
Speaker 1: for the U. S economy was the worst year for
Speaker 1: truck driving bankruptcy since the Great Depression is just sort
Speaker 1: of like an astonishing fact that speaks to how brutal
Speaker 1: this area already was all going into the coronavirus crisis.
Speaker 1: But this is the thing that I was sort of
Speaker 1: trying to get to with the question about scale and logistics, Like,
Speaker 1: it just seems so strange that industries that are all
Speaker 1: about getting efficiently from point A to point B seem
Speaker 1: to be so prone to their own idiosyncratic chaos and
Speaker 1: you know, um problems. And I guess, I guess what
Speaker 1: what we're learning from the entire past year is that
Speaker 1: it's really hard to make forecasts. And the higher up
Speaker 1: you go on the supply chain, or maybe the further
Speaker 1: along you go on the supply chain, the more difficult
Speaker 1: making those forecasts actually is because you have to take
Speaker 1: into account more and more variables. And I feel like
Speaker 1: logistics and transport sort of sit at the very very
Speaker 1: end of the supply chain. They're the last step between
Speaker 1: goods getting from you know, a factory or a shop
Speaker 1: to an individual, and so I feel like for them,
Speaker 1: it just becomes even more challenging to figure out future capacity,
Speaker 1: and that seems to be one of the reasons for
Speaker 1: getting these big booms and bus You know, it's so
Speaker 1: interesting too, because from a market structure standpoint, like it
Speaker 1: seems like the exact opposite of shipping, where it's like
Speaker 1: there's like three or four big players and it's all
Speaker 1: relationships and you've got to know the guy at marisk
Speaker 1: in Copenhagen or whatever. Versus tens of thousands of trucking companies.
Speaker 1: It's all just sort of done like on electronic message
Speaker 1: boards that still resemble that still resemble Craigslist. But none
Speaker 1: of them really seemed to like be none of them
Speaker 1: feel like one solutions, like how you imagine things should
Speaker 1: work in the modern era. No. Absolutely, it's sort of
Speaker 1: like two different extremes of not one solutions. Yeah, but yeah, well,
Speaker 1: we have to take Craig up on his truck driving offer.
Speaker 1: I feel like that's the next stage. We're definitely taking
Speaker 1: Craig up on that. All right, We're going truck driving,
Speaker 1: and then we're taking a barge up the Mississippi. Yeah yeah, okay,
Speaker 1: and then Coracle journeys next. It's like planes, trains and
Speaker 1: automobiles with All Thoughts. Let's do it. Okay. This has
Speaker 1: been another episode of the All Thoughts Podcast. I'm Tracy Alloway.
Speaker 1: You can follow me on Twitter at Tracy Alloway and
Speaker 1: I'm Joe Wisn't Thought. You can follow me on Twitter
Speaker 1: at the Stalwart and be sure to follow our guests
Speaker 1: on Twitter Craig Fuller He's at Freight Alley, and follow
Speaker 1: our producer Laura Carlson. She's at Laura M. Carlson. Follow
Speaker 1: the Bloomberg Head of podcast, Francesca Levi at Francesca Today,
Speaker 1: and check out all of our podcast at Bloomberg onto
Speaker 1: the handle at podcasts. Thanks for listening.