Learn. Share. Evolve…

0:00:05 It’s a very addictive industry. It’s always on, always different. Every day is unique.
0:00:10 You see what’s happening in the world in an insane degree. I’ve been working on my own thing,
0:00:14 which became Flex for. Our goal is to be an asset-light technology platform for freight
0:00:19 forwarding. And you’re the most tech forward of all the companies. Kind of, we’re the only one.
0:00:23 I think most businesses, like, actually quality costs less. It’s very counterintuitive.
0:00:27 Go deeper on that. Well, in logistics, like, all the costs come from you make a mistake.
0:00:32 Like, if you file a customs entry and you get the wrong classification code,
0:00:37 you’re going to spend weeks on doing that. Hey, that’s the game. You know, it’s business. It’s not a
0:00:42 kind of socialist project. What did you learn from that? This is proprietary secret I’m going to let
0:00:47 you in on. We’re going to get into some of this. These tariffs have had the opposite impact that
0:00:50 Trump would like. I think his intention, there’s some validity to it all, like some of the things
0:00:54 I’ve said from national security and employment and other things. But the result has been…
0:01:06 Welcome to the Knowledge Project Podcast. I’m your host, Shane Parrish. In a world where knowledge
0:01:11 is power, this podcast is your toolkit for mastering the best of what other people have already figured
0:01:19 out. US Customs called Ryan Peterson with surprising news. Steve Jobs was furious. Ryan had just used
0:01:25 public shipping records to predict April’s secret iPhone launch. That same contrarian thinking would
0:01:33 build Flexport into a multi-billion dollar logistics company spanning 147 countries. But Ryan stepped down
0:01:39 as CEO. He was certain that somebody else would do a better job. His successor hired 900 engineers in 12
0:01:47 months and burned through cash. Customer satisfaction crashed from 70 to 17. Paul Graham’s response to Ryan’s
0:01:53 decision cut deep. That’s like saying this other guy would be a better husband for your wife. Ryan returned
0:01:59 to a company hemorrhaging cash. The turnaround forced him to embrace micromanagement. But he discovered it
0:02:06 was just attention to detail with bad PR. In logistics, one customs error destroys a month of efficiency gains.
0:02:12 Most critically, he learned that every operation has a bottleneck. You either choose it or it chooses you.
0:02:18 In this conversation, we explore stories you won’t hear anywhere else, like how he flew 500 million
0:02:24 mass to US hospitals in empty passenger plans, and how tariffs accidentally push American factories
0:02:29 overseas. We also explore the counterintuitive lessons he’s learned from Charlie Munger and Peter
0:02:35 Kaufman. Whether you’re scaling a startup or managing any complex system, Ryan’s journey will reshape how
0:02:41 you think about growth, confidence, and micromanagement. It’s time to listen and learn.
0:02:54 I love the idea of life’s work, and it seems like your interest in logistics started really young. Can
0:03:01 you tell me this story about your mom getting you to get soda? Oh, wow. Yeah, well, my mom’s a great
0:03:10 entrepreneur. Started and sold two companies in the biotech, biochemistry space in Washington, D.C.,
0:03:15 and so both my brother and I had this job. It was like our first job was delivering soda to her off. It
0:03:21 was like stacking the snacks cabinet and the sodas and stuff. So we basically just buy the stuff at
0:03:27 a giant, it’s like Safeway, and then mark it up 2X and so on. Put it in your little, like, cart?
0:03:32 Yeah. Yeah. In my dad’s minivan, we would stack up the back of the, you know, the trunk full of
0:03:38 cases of Coke and Diet Coke. And then my dad taught us to write software. He was a programmer, so we
0:03:43 wrote software to generate the invoices so we could, so she could submit the expenses to the IRS or whatever
0:03:48 and make sure she got the tax deduction on our allowance. You were motivated to do it because you
0:03:53 could just get paid for it. What was the kind of easy money? I mean, you buy this soda case for four and
0:03:57 sell it for nine, make five bucks on every case that I deliver. What were the dinner table
0:04:02 conversations like? Do you remember growing up? Well, two entrepreneurial parents. Yeah, super boring
0:04:06 because they were talking about biochemistry and food safety and regulations. I couldn’t understand
0:04:10 any of it. I think I’m still like a very fast eater as a result. I was trying to get out of there
0:04:17 as quickly as I could. Did you always know you wanted to do your own thing or? No. My brother was
0:04:23 much more an entrepreneur than me. Maybe still is. And when I graduated, I went to UC Berkeley when I
0:04:28 graduated from college. I was 2002. I didn’t, I was thinking I’d go into like international development
0:04:35 or something cool. I like to travel internationally and I traveled a lot in the third world because I
0:04:40 had no money. So I was like traveling places I could afford. And I was always very intrigued by like
0:04:46 why some countries were poor and some were rich. So I wanted to work in some aspect. I would try to get
0:04:51 job in microfinance or government or something. And no one, no one was hiring. I got it. I wasn’t
0:04:54 really, I didn’t have a lot of skills when I graduated college, but my brother was hiring and he was
0:04:57 running a startup. And so I started working for him and that’s how I got into entrepreneurship.
0:05:02 Which startup was that? Well, we didn’t really call ourselves a startup to be honest. We were like
0:05:09 buying motorcycles in China and selling them on the internet in the U S and sort of, uh, this would have
0:05:14 been, I graduated in 2002. He started it before that and we were, um, tech company, but we didn’t call
0:05:19 ourselves that. And we wrote all of our own software to do kind of like, it was pre Shopify, right? So
0:05:25 e-com checkout, inventory management, billing, all this stuff. Like if we’d have been smart,
0:05:29 like Toby was, we had to sell subscriptions to our little platform and maybe could have been Shopify,
0:05:35 but instead we just like bought motorcycles and sold them on eBay motors and actually, uh,
0:05:38 through live car auctions, our own website, et cetera.
0:05:43 So you’re arbitraging sort of buying in China and then selling everywhere else.
0:05:47 Yeah. Uh, buying in China, selling in the U S and you went to live in China. What was that like?
0:05:53 Well, I was very curious about the world and like, I had lived in South America. I speak Spanish and
0:05:56 Portuguese. I was like, Hey, you know, we were making money, not a lot of money, but we’re making
0:06:01 money in China. Didn’t have anyone. We had one employee actually in China, but we weren’t like really
0:06:09 deep in China. And I, it was very clear in 2002 that China was like just on a tear and that it would
0:06:15 be maybe the future. It was like really obvious to me. So I moved there thinking, okay, if anyone can
0:06:18 learn Chinese, I already learned Spanish and Portuguese. I could probably learn Chinese. Let’s
0:06:24 go for it. Uh, so I moved there, kept my work basically of like doing supply chain logistics,
0:06:30 e-com development, web development, uh, customer services, a heck of all trades for the startup
0:06:36 that we had. Um, and then also just like studied Chinese for three hours every day for a few years
0:06:42 while I lived in China. That’s intense. Yeah. It’s supposed to be one of the hardest languages to learn
0:06:49 as an adult. It isn’t, it isn’t. Um, it’s very hard, but the Chinese people, if you give any effort
0:06:55 at all or like, wow, they love it. They compliment you. They reinforce you. They make you want to do more
0:07:00 of it. So it actually, that part makes it kind of rewarding and easy. Whereas I feel like I’ve, I’ve tried to
0:07:04 go in French and I get the, I’m like way better at French than in Chinese, but nobody and everyone
0:07:08 in France is like, ah, you’re terrible. You shouldn’t even try. I’m like, all right, I won’t.
0:07:13 Yeah. They talked to me. I try to speak in French and they talk back in English. If you get like one
0:07:18 word wrong or like, yeah. The Chinese is the opposite of that. You know, you say hello and they’re like,
0:07:24 wow, your Chinese is amazing. So if we think of the beats between being in China and ending up in
0:07:28 Silicon Valley, what are they? What are the major sort of like, how did that happen?
0:07:34 We had this business, um, which we were a startup, but yeah, like I, that’s like, we call it that now
0:07:39 at the time we were just trying to make money, honestly. And it was, we were building tech in
0:07:43 the cloud. We were cutting edge in a lot of ways, like in the early two thousands that weren’t cloud,
0:07:47 you know, I think Salesforce and NetSuite. Well, NetSuite, I don’t even know if it was cloud,
0:07:51 probably it was. Yeah. We realized, and it was while I was living in China, we discovered that
0:07:57 shipping manifests for ocean freight or public record. And it has a lot of really interesting data on it.
0:08:02 The public record in the U S we’ve since learned in like over almost 20 countries that you can get
0:08:08 the shipping manifest data. So it tells you kind of like your plane ticket, your boat ticket for your
0:08:12 cargo. So it tells you which factory, who made the products, where’s it from, who bought it,
0:08:16 who sold it, the dates, the ports, a lot of interesting data. And so we realized this data
0:08:21 was incredibly useful for us in sourcing products for that company. We were always adding new products
0:08:25 to the line, like, cause you could find out who’s manufacturing the products.
0:08:30 Yeah. You could look up any product type and see who the factories are, look up any importers,
0:08:35 see who their factories are, et cetera. So we built, um, a search engine for that data called
0:08:38 import genius.com. Still a great business. So you still own it. So we started that business,
0:08:44 sell subscriptions. And that, that was like, again, bootstrap, not Silicon Valley. We started it in
0:08:50 Arizona, uh, where the motorcycle business was, but we very much like got into tech. Like it was a
0:08:57 SaaS business. I was started following, like trying to learn about SaaS. I wish we knew more the blogging
0:09:02 and podcast world. You can learn so much more about, uh, AI, whatever you can learn so much more now than
0:09:09 you could back 15 years ago, how to run a SaaS business. Um, but that got that, that’s what really
0:09:15 got us into the tech scene. We were still outsiders for sure. Uh, and then both my brother and I both
0:09:20 started new companies. At some point that, that business is a great business, but it’s kind of like
0:09:24 hit, it’s keeps growing actually, but it was, it, it was stopped being a rocket. So we had like a few years
0:09:29 of like runaway growth and then it kind of reached its place in the ecosystem. And it’s been like a steady
0:09:34 compounder for the last decade, but not, wasn’t enough for me to like stay engaged as, as I should
0:09:38 have been. And I came back to this idea of like, should be an online platform to help you with
0:09:42 your logistics, especially your customs clearances coming back to our motorcycle days.
0:09:48 I’m like, man, this, uh, it’s way too important to be this hard and this lack of tech. My brother
0:09:52 had gone in a different direction, which was his is like, what other public data sets are out there
0:09:56 that we could build valuable data sets and sell subscriptions or provide access to. And so he
0:10:02 started a company called build zoom in constructing construction data. So you’re building permits or public
0:10:07 record in most places and building like profile, rich profiles of contractors, or you can look up
0:10:14 any building and see who remodeled it, et cetera. So it’s kind of like both similar origin starting
0:10:19 points, but very different businesses, obviously. Um, and so he had, he did Y Combinator for that.
0:10:26 And that was 2012. He would have been 2013. And we were, and then I saw that I got jealous. I mean,
0:10:30 I’m like, uh, you’re moving from Arizona. I moved to Arizona. I’m not from there. I moved there for
0:10:36 KPX after, uh, before China, actually. No, after China, excuse me, both, um, before and after. So I had
0:10:43 moved there for this business for these businesses. And then I saw him leave to go to the Bay area where I
0:10:48 went to college at Berkeley to work, to do Y Combinator. I was like jealous. I followed him.
0:10:49 Like sleeping on the couch.
0:10:55 Literally. Yeah. Sleeping in the air mattress in the, you know, little apartment. And, and I would just go,
0:10:59 Y Combinator at that time did not have great security. So I would just go with him to all the
0:11:03 Y Combinator, uh, sessions and just said, like, acted like I was part of his company, even though
0:11:09 my kind of was. And then that inspired me to go, I’d been working on my own thing, which became
0:11:14 Flex for, inspired me to apply to Y Combinator and go through it as well. Okay. Let’s pause here for
0:11:19 a beat. I want to go back. Cause there’s the Steve jobs moment that we, we need to capture here with
0:11:25 the import genius. You want to tell us the story? Oh, so back in one of the early, we had built
0:11:32 import genius. It’s a great data set. Um, it’s really powerful and you can look up companies and see
0:11:37 what they’re shipping and who they’re buying up and stuff. And at that time, I guess still the big
0:11:42 thing was, when’s the new iPhone going to come out? I think we were just on that. There was the 3G
0:11:47 iPhone. Forget it. I think that’s just like the second iPhone ever. It was kind of crazy. Where
0:11:53 are we on 5G now? But it was the 3G iPhone. We had built this product and we had like no users for it.
0:11:56 It was a great example of like, if you build it, they will not come while you have to go get
0:12:01 customer. We had a couple of customers, but not really any. Um, so I knew we needed to get some
0:12:05 attention. People needed to know that this data is out here. And I, we had such interesting data
0:12:12 by companies. And so I was searching in the data set for Apple shipments and saw it’s public record.
0:12:17 You can look it up. Um, saw that they were importing a new product. They’d never imported
0:12:22 before called an electric computer, which is very interesting. All computers are electric. It was
0:12:29 like a silly name. Um, and it was a perfect storm, perfect moment. Everybody knew it was already
0:12:34 being rumored that the 3G iPhone was arriving. I don’t even know if it was right. I just put out
0:12:39 this blog post being like, Apple has this new thing. Maybe it’s the 3G iPhone. Um, and it went
0:12:48 very viral. We got within a week, we were doing like $50,000 in monthly revenue, like all of a sudden,
0:12:56 you know, from zero to 50,000 in a couple of weeks. And, um, and I got a call from us customs
0:13:02 at saying, Hey, we just talked to Steve jobs and he’s really pissed about this. You need to explain
0:13:06 where you got this data sort of like threatening to show us out. I’m like, so I showed him the letter.
0:13:11 We showed him the letter of the law explaining why this is public record in this public record. And then
0:13:16 he sent us a letter and email later saying, Hey, thank you so much. I had explained,
0:13:23 I shared that with Apple’s team. Thank you for taking the pressure off of us. Uh, but it was a
0:13:29 bit of the early days of like, you know, how do you get attention and traffic for a new product? That’s
0:13:33 pretty cool. It was kind of like a really viral marketing type thing, even though it was hindsight
0:13:38 kind of a couple of questions here. One, did Apple change the name going forward to make it more
0:13:42 sort of like, I don’t think electric computers there anymore. What are some of the lessons you
0:13:48 take away from import genius before we sort of move on to Flexport? Most important one is the user
0:13:52 retention company’s great. And the data set’s extremely valuable, but for a lot of users,
0:13:56 you don’t need to keep paying for it on an ongoing basis. You can get the data,
0:14:03 run your search, find the factory that you’re looking for or the data, uh, and you don’t need to
0:14:07 keep subscribing. So we had a relatively high churn rate, certain types of, we’ve eventually figured
0:14:12 out which types of customers like would pay every single month. Tended to be actually a freight,
0:14:17 a lot of freight forwarding companies. Oh, interesting. We use it at Flexport is for
0:14:21 list, list construction, lead gen, like finding who’s importing though. They have my sales team
0:14:28 call them and talk to them about their, their freight. Um, and hedge funds and analysts like
0:14:32 Wall Street types that want to see what’s going on. They’ll, they’ll pay and they’ll pay. They’re
0:14:36 not, they’re not that price sensitive and they’ll keep paying every month. So, but we weren’t that
0:14:45 excited and our, our, our signups were always pretty good, relatively consistent. Forgot the
0:14:49 numbers, but we would sign up a few hundred customers every month. And then, but eventually,
0:14:54 you know, you’re the, the size of your business is just simply the number of new signups that you get
0:14:59 divided by your churn rate and your churn rate. And that tells you how many customers you’re going to
0:15:04 get at state at equilibrium when those, cause those two lines will cross. Uh, and we got to that point.
0:15:08 And then from there, I tried everything I could to like, we tried everything we could. It wasn’t just
0:15:14 me, um, to bend that arc, either make the signups go up or the retention change. And like, we ended up
0:15:19 just adding a lot of costs to the business without, you know, we, we did some South that works, but it
0:15:23 really your, your scale of your business is very much limited by your churn rate. If you have any
0:15:28 churn at all, you have like a cap on how big you can be, unless you’re increasing the number of
0:15:33 customers you’re getting or the size of those customers. Like it’s very, it’s pretty simple
0:15:37 math. I teach a lot at Flexport. It’s like how important it is to retain customers.
0:15:43 Are there any other niche data sets that you came across while you were doing that, that are super
0:15:46 tiny, but would be highly valuable in the same way?
0:15:51 Yeah, I think so. My, well, my, that’s what my brother largely does is take data sets and build
0:15:53 businesses around them.
0:15:55 Oh, outside of construction too?
0:15:58 Yeah. So he’s now, he’s got that company builds in, but he has a few other
0:16:04 partners with, uh, great entrepreneurs. And so like for import genius, are these records like paper
0:16:06 and you go and like, you take a picture of them? Like how does that work?
0:16:10 We use Freedom of Information Act to access them from all the, from, from customs and border
0:16:15 protection and you get access to the, to the data. They, they make no effort whatsoever to make
0:16:18 it useful. You don’t have to do paper digitization, but they just give it like data dumps and they
0:16:19 won’t give you past data.
0:16:21 Oh, interesting.
0:16:28 And that’s just custom. That’s just us. We have data sets for Latin America, uh, mostly
0:16:30 Latin America, a couple other countries, India.
0:16:35 Okay. So let’s go back to Ycom and enter 2013. You’re there with your brother, 2014, you apply,
0:16:39 you get in, uh, at that point you have the idea for Flexport?
0:16:45 No, we’d already gotten licensed. Um, and that was the thing, like we had the idea of a debate
0:16:49 between me and my brother and our other partner who had the idea for Flexport. We all claim it.
0:16:56 but first email that I can find like discussing this was like in 2008 or nine, but it took a long
0:17:00 time to get licensed by a customs of border protection. I had to go through an FBI background
0:17:06 check, had to do a whole bunch of, yeah, it just takes two years. Um, so it was when we got the
0:17:12 license from CBP that I left, stepped down and started Flexport. And that was about six months
0:17:17 before YC started. I forgot the timeline of the application, but about six months before. So we
0:17:22 had, but we didn’t like, we had maybe a one customer. We really didn’t have any customers,
0:17:27 but we had a V1 of the software app, had the license, like had a bit of a strategy for what
0:17:28 we’re going to go do.
0:17:31 Take me through the, the Y Combinator experience.
0:17:37 It may have changed. This was already 10 years ago. Um, they do a Tuesday dinner.
0:17:42 PG used to cook it. I think it was really bad food.
0:17:47 You were the last batch where he was the, yeah, I’m really lucky that I, not only was the last
0:17:51 batch, but he announced it mid batch. So you didn’t take it for granted that you’re getting this time
0:17:52 with Paul.
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0:20:20 But for me, it was amazing because I’m not from, I hadn’t been living in the Silicon Valley ecosystem. I
0:20:26 wanted to have connections. And the Evernote CEO, Phil Libin, he was hilarious. Brian Chesky.
0:20:33 Yeah, kind of like somewhat eminent founders and investors. But they just come and give a
0:20:42 talk for a couple hours, do Q and A. So nothing amazing. But the real benefit of what I see, I think,
0:20:51 is the friends that I made. As an outsider, fair to call myself that back then, I didn’t have a lot of
0:20:56 entrepreneur friends. They were trying to find them online and stuff. So all of a sudden, I had all these
0:21:01 peers who were also building businesses. And I don’t know, that’s just super valuable from a life experience
0:21:04 standpoint. I don’t know how much it helped a business, but it just made my life better.
0:21:11 And then it also, I guess that kind of understates like YC, if you’re one of the top companies, I think
0:21:14 it’s very important to be a top company if you’re going to do Y Combinator. There’s a bit of a
0:21:18 competition. A lot of people don’t realize that. It’s like, at the end of the day, there’s only so
0:21:22 many hot companies that can come out each year. And you want to be, if you’re one of those, then it’s
0:21:27 tremendously valuable for you. Because fundraising, I put have raised money, I had built a successful,
0:21:32 profitable SaaS business, I’m sure I could have raised money. But I literally like tried at one point to
0:21:37 raise money. And I showed up in Silicon Valley on Sand Hill Road wearing a suit and tie. I just
0:21:42 didn’t know. I think people like just were like, who’s this guy, you know, and tried to raise money
0:21:48 for it. No, I didn’t try that hard. I did a couple pitches and they went nowhere. And then with YC,
0:21:52 it was a feeding frenzy. It turned it from an outbound sale, which is hard doing outbound kind
0:21:57 of cold calling to an inbound sale where everybody was like eager to invest. They heard about Flexport.
0:22:03 PG himself really liked and likes Flexport and was telling investors, you should invest in this
0:22:08 company, which kind of controversial, YC partners. I think they’re a little better about it now than
0:22:13 they used to be, but they would kind of choose favorites. And hey, that’s the game. You know,
0:22:18 it’s business. It’s not a socialist project. We’re here to like find the best businesses and back them.
0:22:22 Um, um, but it is, I, I, I, I try to tell every founder, like, you’re going to go into YC. It’s
0:22:27 not, you’re not there to have fun. You’re trying to be the best. And it is a competition. You first,
0:22:31 you sure make friends with them, but I’m sure Michael Phelps is friends with the other swimmers,
0:22:35 too. But like you’re trying to beat them on some level. What are some of the lessons that you learned
0:22:40 from Paul Graham that still resonate with you today? I know you still talk to him a lot.
0:22:44 His main thing is not, he doesn’t look at the downside and what could go wrong. He only looks at what
0:22:48 could go right. And like how big and awesome could this be in the best case scenario? And what
0:22:53 should you do to make that happen? He’s not, you’re not looking, and that’s like for a seed investor,
0:22:58 the obviously correct way, because the losers don’t matter. All that matters is you get the
0:23:02 power of all winners that do a hundred thousand X or whatever their best deals have done for them.
0:23:07 Again, I was really lucky because we were in his last batch and he announced like halfway through
0:23:11 the batch that he was stepping down and Sam was taking over, but he kept running the batch the whole way.
0:23:17 So then when it came to demo day, the preparation for a demo day for when you go pitch the investors,
0:23:21 um, I barely worked on my pitch. In fact, my pitch was pretty bad. I think
0:23:26 I’m like, not very good at reading a script and they only give you two minutes. So you kind of have
0:23:30 to have a script if you’re going to do a two minute pitch. But also I was kind of bad because I didn’t
0:23:37 practice very much. I had the opportunity to sit there. I’m in Picasso studio, you know,
0:23:42 watch Picasso paint, you know, he’s about to retire. So I got to sit there and watch PG critique other
0:23:46 people’s pitches instead of go, I don’t want to sit there and paint. Like, let me just watch Picasso
0:23:51 paint, you know? Um, um, so I sat next to him for 12 hours a day for like three days in a row,
0:23:54 watching him critique everyone else’s pitch.
0:23:56 what did you learn from that?
0:24:01 This is proprietary secret. I’m going to let you in on, you should tighten the aspect ratio on your graph
0:24:07 and it’ll make it, the curve looks deeper. I feel like he told everybody that, like,
0:24:14 just scratch your graphs and watch out. Your startup looks hotter. Uh, there’s something to that. You got
0:24:18 to appeal to investors greed. I don’t know if he taught me that or someone else, but it’s kind of the same
0:24:23 thing. You want to, there’s a feeling that goes to it really simplifying things. I mean,
0:24:27 one of the things that PG is really good at, if you read his writing and stuff is just like very
0:24:31 simple language. You won’t read like a PG sentence when you’re like, what is that word? I don’t
0:24:37 understand. He’s like very simple. It’s easy to understand. My favorite PG moment from that period
0:24:44 was one of my friends had us in the batch did a presentation and PG was like, this is terrible.
0:24:48 This is not good. And he rewrote the whole thing for me. He’s like, you should say this,
0:24:52 this, and this. And like, he just said all the things. And my friend just took down perfect notes,
0:24:55 probably does like you pitch for two minutes. Then he gives you like 10 minutes of feedback.
0:25:00 And then the next group comes and he just does that over and over again all day. So there’s a cue.
0:25:04 So if you pitch and you want to do it again to come back and try again, you got to wait like three
0:25:09 hours for your turn. So like three or four hours go by and my friend goes back up and presents the,
0:25:14 the pitch. And he says exactly word for word, everything that PG told him to say. And then
0:25:19 PG was like, that’s perfect. That’s the best pitch I’ve ever heard. He totally forgot. Cause he’s
0:25:23 doing too many pitches in a row. He totally forgot that. That was like, dude, you wrote that pitch.
0:25:28 That was amazing. I learned a lot from all his essays and stuff too. It’s hard to remember what I learned
0:25:35 from him personally versus reading all of his stuff. You get out of YC, uh, 2014. Walk me through the
0:25:41 major beats, uh, and milestones up until the soft bank investment, which was 2019.
0:25:45 There’s a lot. Um, actually one of the funniest things, one of our other investors is Ron Conway.
0:25:49 And he was, he saved Flexport at one point. I don’t know if I’ve ever told this story, but, um,
0:25:54 we had a license from customs and border protection, but it was issued oddly enough in the port of Houston,
0:25:58 which is like the whole story, but it was like, that’s where we got our license for.
0:26:04 And it’s fine. You have a national license. One of the things that made Flexport possible
0:26:14 was that in 2007, I think it was, the customs will change the rules to allow for electronic filing of
0:26:21 customs entries. And it used to be that you had to have a license at each port where you wanted to clear
0:26:25 goods. So a startup could not possibly enter unless you were just like a little mom and pop.
0:26:28 help the local companies, but like, there’s no point in doing an internet company
0:26:35 to serve one port. Um, and so that changed in 2007. We started applying for licenses in
0:26:41 like 09 or something markets aren’t totally efficient, but kind of, um, and okay, so we had this license,
0:26:47 but it was in Houston and we wanted to be in San Francisco after YC. And in order to transfer it,
0:26:52 it’s just an administrative process, but you have to have a business license from the city of San
0:26:58 San Francisco. Simple, right? It’s just a business license. Well, the city of San Francisco had an IT
0:27:04 problem and was unable to issue business licenses. And this was in 2014. They worked, they had not been
0:27:10 issuing business licenses for several years. They could issue a letter that says you have a business
0:27:17 business license, but customers wouldn’t accept that. They wanted the license and they printer
0:27:22 problem. I don’t know what the IT problem was. They wouldn’t accept a letter on city letterhead saying,
0:27:26 yes, this company has a license on file with us. They wanted to see the actual license. It was
0:27:32 kind of like Kafka ass at some point where you just weren’t going to be able to operate.
0:27:37 I mean, we were like operating remotely in Houston and it just wasn’t going to work. And customs was
0:27:42 kind of clear. Like you need to, you can, you can only transmit entries physically sitting in Houston.
0:27:50 So I told Ron Conway about this situation and he emailed the late Ed Lee, who was our mayor.
0:27:56 And Ron was like one of his big donors and friends. And we got the license within six hours. They like
0:28:00 went down. I don’t know what happened at city hall. They got the license printed and we,
0:28:03 you know, sent it to customs and all got moved. But like, there was a moment there where like
0:28:10 Flexport was not going to be able to operate in San Francisco. And it was just crazy. Can’t issue a
0:28:15 license. That’s insane. So anyways, that was very early days. Many things happened. I would say,
0:28:21 like those summary of it all is we had product market fit just like insane from the get go to
0:28:25 the point of it being a problem, like more demand than we could keep up with asking us to do more
0:28:30 things than we were capable of doing just sort of run away. It was not all success, lots of mistakes
0:28:37 and bumps in the road. But, um, I guess the big, a couple of big milestones on there. One is we started
0:28:41 out when we went through why Combinator Flexport was just a customs brokerage. We didn’t do freight
0:28:44 forwarding and we said, Hey, we’re going to do freight forwarding someday, but we wanted to just
0:28:48 focus. The kind of dogma in startups is like, be really good at one thing,
0:28:54 really focus. You’ve written about this, like the need to focus. We also, the other dogma is talk,
0:28:59 you know, why Combinator talk to users and make something people want. And when we were just doing
0:29:05 customs, we get customers, but like we get the worst kind, we get a lot of rough types of customers.
0:29:10 One of the first things we ever imported was, uh, a tuk tuk, which is like, uh, from Cambodia.
0:29:15 Some guy went to Cambodia and bought like one of those little, uh, jeepney, uh, kind of scooters
0:29:20 with the seats in the back. Like Berkeley professor wanted it for the nudist parade in Berkeley.
0:29:25 Uh, this is not, he was only going to do one of those in his life. Not a great customer.
0:29:30 So we had like a lot, a lot of customers for a customs brokerage, but like rough customers doing
0:29:34 things that they were amateurs. They know what they were doing. They weren’t probably going to recur.
0:29:40 Some guy bought like a bouncy house for his kid’s birthday party in China. Cause he was too cheap
0:29:44 to buy one locally, like stuff like that. Is that because people want to deal with one,
0:29:48 one interaction from a freight forwarding and customs brokerage point of view?
0:29:52 Exactly. And so like when, whenever we talk to real companies that were doing repeat transactions,
0:29:56 they’re like, we didn’t want to separate customs from the freight. And if they did,
0:30:00 they were going to give the customs to like the best customs brokerage in the world
0:30:05 with the best reputation for compliance. And like, we were not to the startup.
0:30:09 Now we actually have a lot of big companies that use Flexport for customs only,
0:30:13 uh, because we’ve built our brand and our reputation and our technology systems to actually,
0:30:16 we can say, Hey, we’re the best. If you want to separate your customs from freight,
0:30:20 and there are good reasons to do so. Like it’s a hub for your compliance data. You don’t want to
0:30:23 shop it out there, you know, and have all this compliance records living in
0:30:28 10 different freight forwarder systems, right? People are much more likely to have a single
0:30:32 customs broker and many forwarders that move the freight. But when we were starting out,
0:30:37 like that wasn’t us. So we’d, and when we only did customs, we were not getting like
0:30:42 the legitimate companies that we wanted to build a business around. So that was the first, um,
0:30:47 kind of, it’s not really a pivot. We always knew we’d go into freight, but we went there much faster
0:30:53 than we wanted to. And the moment we did that, it was again, like back to couldn’t keep up with the
0:30:57 demand. And it became a much harder problem. Like customs, like, okay, cool. I self-contained,
0:31:02 there’s a contained environment here. I got to collect the data, got to transmit it to us customs.
0:31:06 Freight forwarding all of a sudden, I’m like unconstrained. I’m out here in the freaking wild,
0:31:07 giant round world.
0:31:14 You’re dealing with multiple parties, different interfaces to each party, because you’re trying
0:31:19 to computerize things at this point. And I don’t imagine there’s API. Like, how does that even work?
0:31:26 Right. There’s, there were no APIs, still very few APIs. Um, a lot of manual work, a lot of like,
0:31:32 we’ve built like automation and software interfaces and wherever there are systems,
0:31:38 like a lot of integration layers into different IT systems of all the vendors. But yeah, we opened
0:31:43 up a can of worms. Like we got unlimited demand, but like problems much harder and hard to keep up.
0:31:46 And as I said, it’s been like this race to like build the capabilities,
0:31:53 tech people, geographic footprint infrastructure around the world to match the demand. Um, but we went
0:31:59 from, but I forget the metrics at the moment of the first soft bank investment, but, um,
0:32:07 one point Inc magazine rated Flexport the second fastest growing company in the world. They did this in
0:32:14 the Inc 5000. We were in, we were second place, but the first place company was started before us and was
0:32:19 smaller than us. Okay. So like the math says we grew faster than they did. I don’t know how they
0:32:22 did their math, but they were wrong. We should have been number one that year. It wasn’t weighted.
0:32:26 I don’t remember who it was, but, um, but we should anyways, we were very fast growing company.
0:32:30 And a lot of times, yeah, that, that can kind of like cover up a lot of problems that we had.
0:32:36 Were you doing things manually and trying to computerize it as you go or trying to do it
0:32:37 computerized from the get go?
0:32:42 Yeah. We were doing a lot of stuff manually. We’re still open to do, we do a lot with people. Um,
0:32:51 but with this, we’re not satisfied with that. We’re like constantly figuring, okay, we’ll just do it.
0:32:57 That’s the secret to our success. We’re willing to do what the customer needs with humans as needed. Um,
0:33:03 but constantly say, this is not good. What are we going to do software wise to take this and structure
0:33:10 the workflow and put it into a automation. So we’re now on like a freight, just a standard plain vanilla
0:33:17 ocean container from any port in Asia to anywhere in the U S inland, all the way to destination.
0:33:26 We break it down about 108 steps that have to be completed. And 92% of those are done either by
0:33:35 software automation or sent out to like a third party BPO processing entity. And so that gets our costs down.
0:33:38 And the quality is really good because everything’s measurable and precise. So we’ve got
0:33:43 that piece is like really, um, took us a long time to build. It wasn’t like that in the beginning.
0:33:49 In the beginning, it was people, uh, people picking up the phone and sending a freight email forwarding,
0:33:53 I call it, but that’s the way every other freight forwarder in the world does it too. So we’re like,
0:33:59 okay, build a better interface for the customer, drive demand, and then have this,
0:34:02 we are not satisfied with the way the industry works. What are we going to do to, you know,
0:34:07 structure? In fact, in many cases, the car costs that be higher because if you don’t structure the data,
0:34:11 you, you just forward the email, the PDF, like that could be cheaper than like being like,
0:34:17 oh, I got to structure that, put it into our database. Um, and so your costs can be higher,
0:34:21 especially if you’re just doing one shipment, one time, like, well, I bother structuring the data.
0:34:25 The whole point is that the second time you ship the same thing, your costs are really low.
0:34:27 Cause you just go, yeah, do that again.
0:34:33 Yeah. So that leads to the SoftBank investment, which was, I think they gave you a billion in cash.
0:34:35 Yeah. 2019.
0:34:37 They and other investors in the round did. Yeah.
0:34:42 So what happened with that? Like you get this money and are you like, we can put the pedal to
0:34:47 the metal here. Cause didn’t something happen right after that? Somebody went bankrupt or something.
0:34:52 Oh, that was even before Hanjin was the big ocean carrier. They went bankrupt in 2016.
0:34:56 Oh, it was 2016. 2016 was very interesting year for, for freight forwarding that everyone’s
0:34:59 forgotten about. Cause we all keep talking about expensive freight and all the chaos and problems
0:35:05 in supply chain. Now tariffs, but COVID a whole bunch of other things, the, the Red Sea crisis,
0:35:08 like wars, but we’re going to get into some of that stuff.
0:35:13 Yeah, I’m sure we will. But in 2016, it’s kind of the opposite. There was so much capacity. It was so
0:35:20 cheap. You can ship a container from China, the U S for our cost was like $600. Uh, normal long run
0:35:24 average about 2000 today. I didn’t check the price this morning, but it was probably four or 5,000
0:35:30 right now. Um, and the peak COVID was, you know, famously got to like 20,000. So it was 600 bucks
0:35:37 that year. And that was an early year. We did YC in 2014. And in 2016, we took those cheap prices and
0:35:43 just pass them through to customers. And it led to crazy growth for us. Um, a good lesson, actually,
0:35:47 we don’t want to be able to play that strategy, pass through low costs and you’ll grow really fast.
0:35:50 So it was 2019 when you started to look for a COO?
0:35:56 2019, we got the funding from SoftBank and then we did, we, I hired a CTO that year.
0:35:57 Okay.
0:36:03 I really upgraded, go invest in our tech. We hired a CTO from Amazon logistics and he was, he helped us
0:36:08 build like some of that workflow software that I just described. It was like kind of the architect for
0:36:14 that. And then COVID hit. And that’s where I say Flexport looked really great. Like we were,
0:36:19 we turned profitable in 2022. Our revenue peaked at 3.8 billion because the price of freight was so high.
0:36:25 But pause, like you knew COVID was going to hit in February before it actually hit.
0:36:29 January even. Yeah. I mean, well, it was, it was in the newspaper, but we have a group called
0:36:35 flexport.org. We do shipping for humanitarian causes like refugee camps and hospitals, non-profits at
0:36:41 cost, uh, sometimes below cost. We had been part, we’re partnered with a lot of great groups,
0:36:46 like international aid groups and things like this. And, um, COVID it was in the newspaper,
0:36:52 it would hit in Wuhan. And we actually got a ton of demand to ship masks to China for the doctors in
0:37:00 China. And so in January of that year, we shipped about 300,000 N95s from the U S to China, which then
0:37:06 like two months later when there were no N95s masks in the U S were like, uh, whoops. Like, um, so yeah,
0:37:13 we saw that pretty early. And then the other thing that came out in that period was people,
0:37:18 about 50% of the world’s air freight travel. We do air freight too, not ocean freight. Um,
0:37:22 and about 50% of the world’s air freight flies in the belly of passenger planes.
0:37:26 And those all got grounded because of COVID, there was no reason to, you know,
0:37:32 I think they’re actually grounded legally. Um, and so we saw, we were at the heart of
0:37:41 kind of bringing masks, bringing PPE generally in for U S hospital networks from mostly produced in
0:37:48 China. And so we saw this insane demand for air freight and there were no ships, no planes to move
0:37:54 it. And the ships are too slow. Like hospitals are running out of masks. So we saw that and got
0:38:00 pretty active. Like, well, you can kind of see the solution to that problem is in the problem itself.
0:38:06 It was like, well, all of the passenger planes are grounded. So we can’t ship any mass. We’re
0:38:11 like, wait, the passenger planes are all grounded. Uh, and so with some of our connections, we got
0:38:16 in touch with all the major passenger airlines and we got 80 plane or 80 passenger aircraft and flew them
0:38:17 to China.
0:38:19 Cause cargo planes are allowed to travel internet.
0:38:22 Yeah. Well, passenger planes could travel too, just not with passengers.
0:38:22 Right.
0:38:27 So we got the airplane, uh, the airlines to give us great deals.
0:38:29 Cause otherwise the planes are just idle.
0:38:32 We’re just sitting there in the desert and still just sitting at the airport. So we got all of this,
0:38:40 we got 80, we did 88, I think it was 87, 88, um, passenger planes, full of masks in the overhead
0:38:46 compartments and every seat, obviously the belly. And we just, we flew 500 million masks and other object,
0:38:50 other PPE items in for us hospital network in March and April of 2020.
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0:40:12 It was crazy. It was like one of the most meaningful parts of my career and everyone at Flexpora. It was
0:40:18 great because we were like, not in a, none of us in the world was in a good place, but it all of a sudden
0:40:23 totally distracted us from whatever problems we trade fell off a cliff. It was really bad for business in
0:40:28 the first month or two. We’re like, who cares? Like we get a hospitals, like there’s civilizational
0:40:32 collapse. If the hospitals don’t show it, the doctors don’t show up for work and became friendly
0:40:39 friends with, um, the guy who runs UCSF, Sam Haga. He’s a chancellor of UCSF, our local hospital.
0:40:45 And, um, I remember years later, I met his wife dinner and she was like, it was, well, when,
0:40:50 when I saw this zoom call of you talking to Sam was the first moment when I realized everything’s
0:40:54 going to be okay. Cause you guys really touched me. It was like, I saw you guys are highly
0:41:00 competent. People are going to get mass delivered, you know, the day before they run out. Uh, now,
0:41:07 another thing that came out of that was in April of 2020, same problem statement. The passenger
0:41:12 planes weren’t very economic. They were giving us great deals because we were serving hospitals and
0:41:18 it was all like kind of pro bono, not for profit work. They were giving us great deals. It was,
0:41:24 I remember once we, one of the planes, the one I remember was a Dreamliner won’t charge us $200,000
0:41:28 to fly a Dreamliner to China and back. Oh, wow. It’s like, if you, anyone’s ever flown private,
0:41:32 that would be like a Dreamliner. I mean, this is many millions of dollars, probably round trip,
0:41:36 a couple of million, like a million, probably 500k. I’m not sure. So it gave us a great deal.
0:41:41 We saw lots of things like that, but it wasn’t sustainable for the business side of things.
0:41:45 Now we had a lot of ongoing demand for air freight, but all the passenger planes are grounded.
0:41:52 So we signed a long-term deal for three 747s from Atlas Airlines, the biggest cargo airline in the
0:41:57 world, dedicated to Flexport. And it was in that response to that, like, hey, the passenger plane,
0:42:02 we had this vision, this view, this perspective that air freight is going to be very expensive
0:42:09 because all the capacity is grounded and stuff still needs to move. People still need to ship stuff.
0:42:16 So we signed a deal with the airline, with that airline at a great rate. And I think they were,
0:42:21 their stock, Atlas was in, is in these airline indices. Because actually, if we were smarter,
0:42:25 we’d have just bought their stock because they were a public company and they were in these public,
0:42:31 these indices for airlines. And those tanked. But the cargo airline, the price should have gone to the
0:42:34 roof because they’re still, the price of air freight is going to go crazy. I think,
0:42:38 I probably haven’t really talked to them about why they signed the deal with us, but we got a good
0:42:43 deal as a result of that moment where there was this, this location. I assume that their stock price
0:42:48 going down was like part of the, their anxiety to like get these things signed off with us. So we got
0:42:55 a good deal. It, but it did kind of turn Flexport into a cargo airline. And we’ve had those planes ever
0:43:01 since. So it’s not our, it was more of a tactic than a strategy. Like our goal is to be an asset
0:43:06 light technology platform for freight forwarding and work, be like more neutral and agnostic and move
0:43:08 the cargo on anybody’s planes. But we, we saw that.
0:43:15 Has that moment, has that helped you in other ways, not from a business point of view, but like learning
0:43:17 and being more responsive to customers.
0:43:20 I mean, it really helped us during those few years of COVID when there’s tight capacity,
0:43:24 we can serve people and no one else could. It really an education about asset ownership
0:43:29 and logistics in, in that it kind of turns you against your customers in some ways that can be
0:43:35 unhealthy. You have to really overcome that inner that because, um, your job when you have a plane
0:43:39 or a ship is to fill the plane or the ship. It’s not to serve the customer anymore.
0:43:44 Like if the customer’s cargo needs to go to a different airport, you’ll try to convince them
0:43:49 to fly it where your plane is going and then truck it a long distance. Or, you know, it was like,
0:43:52 all right, you just wait three days. The plane’s leaving in three days instead of going, Hey,
0:43:58 let me find you a different option. So you have to overcome that culturally. Like if you’re an asset
0:44:03 owner, it’s pretty hard to be customer centric because your job is like fill the asset or you don’t make
0:44:07 money. Which is interesting because later on you get warehouses, but we’ll get to this.
0:44:12 Uh, and okay. So fast forward a couple of years and you’re looking for a COO,
0:44:19 what was the thought behind that? Yeah. So COVID, it did some interesting things for us. It made us
0:44:23 kind of famous in part because of the hospital stuff and some other things that we did during that time
0:44:29 when, when supply chains got dislocated. Um, but it, uh, so it helped the business and the profile of
0:44:36 the business. It financially was, we turned profitable, but it really exposed some flaws in our operations.
0:44:43 And we were, we were remote for way too long. Um, work from home, which just doesn’t work in our
0:44:48 industry, maybe in any industry, but certainly not in logistics. You need to be like in person,
0:44:52 collaborating, partnering on the, with the assets, et cetera. Um, really exposed some flaws. Like
0:44:57 when you, we would just prior to COVID, just send a truck to the port, pick up the container.
0:45:02 Yeah. And you take it for granted. But during that time, you couldn’t get appointments. You
0:45:08 couldn’t get trailers, the chassis to go to hold the containers. There’s not enough capacity. It was
0:45:15 like it, uh, the operation was really failing in a lot of ways. Um, we, by the way, same for all of
0:45:20 our peers and other freight forwarders, everyone was kind of in the same boat, but that’s not how,
0:45:24 that’s not an excuse. We want to be the best. And we didn’t feel like we were winning for a period
0:45:28 there operationally and like how we serve customers. Our net promoter score, like was
0:45:33 always in the seventies, which is a great, good metric for customer satisfaction. And that like
0:45:39 collapsed. I forgot how it got to like 17 at one point. It was pretty bad. So had a lot of operational
0:45:45 problems and I’m, um, much more of a creative type than I am. And operators like do the same
0:45:50 thing every single day and a little bit better measure every detail. And that, that it’s not like,
0:45:54 I’ve gotten good at that, but that’s not like naturally who I am. What my background is. I’m
0:46:00 more just like a freewheeling entrepreneur. So we’re looking for a partner to kind of take that on for
0:46:06 me and help Flexport mature and grow. So yeah, that was in, that would have been in 2022 when we really
0:46:13 like kind of launched in earnest search for a business partner, helping out the operation side of things.
0:46:20 And then you end up meeting Dave Clark, who would go on to take over as CEO for a period of time.
0:46:25 Uh, but he was originally where you think you were thinking COO?
0:46:30 I was trying to hire COO and met Dave Clark. He was the CEO of amazon.com. He’d run Amazon’s logistics
0:46:36 and supply chain for many years. Um, so it seemed like great fit tech and logistics. It was actually
0:46:43 in many ways. And you had the good Amazon hire in 2019, the CTO. Yeah. Um, and a lot of people I hired
0:46:47 from Amazon, we hired a lot of great people. We still have a lot of good people who worked at Amazon
0:46:53 logistics and tech. Like they’re probably the best. I think we’re the best now, but I think that, uh,
0:46:58 I don’t think I could always say that. I think we keep getting better, but, um, yeah, Amazon logistics
0:47:03 and tech, that’s what they’re known for. Right. So it seemed like a perfect fit. Walk me through how
0:47:08 we get from that moment of hiring to you stepping down as CEO. Uh, well, it’s kind of an orderly
0:47:12 transition when we hired him. I was like, Hey, let’s have a path for you to become a CEO. It became
0:47:15 pretty clear that like, I don’t know. It’s hard for me to picture. Like, what am I gonna be better
0:47:19 at today? He’s run this big company. And was that a confidence thing for you? Yeah. I mean,
0:47:24 I feel a lot more confident now. I haven’t seen, uh, done a much better job, uh, in the last 18 months
0:47:29 than we ever did before. So yeah, Dave, he was only the, he was with us for years. The CEO,
0:47:34 he’s just CEO first. We were co-CEOs and then CEO by himself for six months while I became chairman
0:47:41 of the board and work out. I think these hires are really hard in hindsight. What was the first
0:47:48 sort of sign or first moment you realized, oh shit. There are a lot of things that was building up. I
0:47:51 mean, honestly, it was the P and L at the end of the day. Like we just started burning too much money.
0:47:57 Some of that was market forces turned against us. Like we, we over-hired. I approved all those hires.
0:48:04 Like we wanted to go big on tech and just dominate. We kind of read the market. It was just like trying
0:48:09 to be contrarious. So we had a really strong balance sheet. Um, I had like 1.6 billion in the bank
0:48:19 and everybody was cutting tech hiring in 23. And we felt like, let’s go lean in, put the pedal to the
0:48:25 metal and go hire a bunch of engineers. I think we added 900 software engineers in 12, in like 12 months.
0:48:34 Oh wow. And turned out they’re all in the U S or almost all in the U S Seattle. Mostly it was like
0:48:39 very expensive people had a lot of senior execs. So we just like over invested in the business.
0:48:45 And at the same moment, like the freight markets were collapsing. Capital markets got ugly. It
0:48:48 like became clear, like, Hey, you’re not going to go raise. We’d already raised too much money.
0:48:53 Like we don’t need to raise, can’t raise more money. And so it was just like kind of a perfect storm
0:48:57 of bad decisions of which I was like, you know, sign off on all of them. So I don’t blame Dave
0:49:02 for that, but it became clear. We got to change courses here, change course here. And our customer,
0:49:09 one of the mistakes that we made during that period was we took that workflow system I was describing,
0:49:16 where you have like all these tasks that have to get completed. And we had taken this idea of efficiency
0:49:22 way too seriously to where an operator would just do like one or two of these tasks.
0:49:29 and do those over and over and over again, like a robot almost what will happen. Then you have like
0:49:33 50 different people collaborating on one shipment. That’s how fulfillment works. If you go to a
0:49:36 fulfillment center, it’s the only way it could work. You’re like, you’re not going to have the
0:49:42 same person like, yeah, unload the truck, put away the goods, take the good bout, put it in the box.
0:49:45 Like you break it into stages. Right. And so that’s where the Amazon
0:49:51 background and Flexport background really came in conflict actually, because they break it apart into
0:49:54 a simple task and have the same person do it over and over again. And like kind of robot,
0:50:00 human robots, almost like, or literal robots. And at forwarding, it’s much more of a service
0:50:03 business. There’s a lot more exceptions that can go wrong. You’re out there in a messy world.
0:50:07 You don’t own all the assets. You don’t control all the things that are happening. You need to like
0:50:12 oversee these things. And, oh, the trucker didn’t pick it up. Like better call a different trucker.
0:50:16 Like, oh, they’re not responding on the API. Okay. Pick up the phone, you know,
0:50:20 go there. Lost the cargo. All right. Drive to the airport. Like, you know, I mean, it’s a service
0:50:25 business for, and it’s B2B. You spend a lot of time with the customer. So, but especially that,
0:50:31 that piece, um, the quality really started to suffer. And it’s a really good lesson in business.
0:50:35 And I think most businesses, like actually quality costs less. It’s very counterintuitive.
0:50:40 Go deeper on that. But well, in logistics, like all the costs come from, you make a mistake.
0:50:46 Like if you file a customs entry and you get the wrong classification code,
0:50:51 you’re going to spend weeks on doing that with the customs agencies.
0:50:55 And like, you might have license issues or regulatory problems. Like
0:51:02 getting it right that first time costs way less than one mistake, undo all your efficiency gains for
0:51:06 the month, you know, and logistics. So I had to learn that the hard way. Our customer NPS really
0:51:10 started to suffer. So the board was looking at it and going like, okay, you’re burning too much money.
0:51:14 You’re going to have to cut costs. And that means cutting head down. Like that’s where most of the
0:51:21 costs at. So you got to cut costs and you got to improve your quality. That’s a kind of a hard
0:51:27 thing to do. And our culture had been suffering. We brought in all these new leaders and like the
0:51:32 core core people that built the business were like, we grew an insane leaving. We had grown. It’s a
0:51:37 really hard business. Cause it’s so global. Like we shipped to and from 147 countries. We got to have,
0:51:42 we got people all over the world. Like, and so the board kind of looked at this problem and said,
0:51:46 like, this is a problem for the founder of the business. Like you need to come back.
0:51:51 Nothing against Dave per se, but it was like very clear. Like, okay, you’re going to cut people and
0:51:56 tell them you care about the culture and tell them I need you to work harder to solve like customer
0:52:01 problems and do a giant reorg back to the way we’d always been organized that led to all the growth,
0:52:06 which was operator would take a shipment end to end and own all the tasks, own, own that.
0:52:12 And those just like the board was like, Ryan, we need, you know, you, you got to come back and step in
0:52:18 and do this. And I had already taken a job at Founders Fund as a partner. So it was a little,
0:52:21 it was, it’s still embarrassing for me. Like, I’m like, I just took this job and I got to go back.
0:52:25 Like, what am I doing? I got to follow through on my commitments, but it was obviously like I’m
0:52:30 honor bound to, to make Flexport work, make it successful. So I was very happy and excited to come
0:52:35 back. What happened when you told PG you were stepping down? I didn’t tell him until later.
0:52:42 I forget when, but like after I’d, I was the chairman. So I think I was already at Founders Fund.
0:52:46 He was pissed because he thought I should go be a partner at Y Combinator instead of
0:52:50 Founders Fund first off, but I went for a walk with him when he came back to Palo Alto
0:52:55 at one time. And he, um, he asked me why he did it, why I stepped down. I said, well,
0:52:59 I thought, I think Dave’s going to be better at the job than I am. There’s a genuinely true.
0:53:02 That’s why I did it. It wasn’t because I was burnt out or something. I just thought he would be better
0:53:06 for the company. I thought we needed to mature. It’d be better at operations and better at building
0:53:11 tech than we were. And I thought he’d be better at that. Um, and Paul had this amazing line.
0:53:15 He said, uh, that’s like saying this other guy would be a better husband for your wife.
0:53:20 Might be true, but like, don’t act on it. Like this is your company. You need to stay in there.
0:53:25 I thought that was super hilarious. And he then told me, okay, if he’s better than you at these
0:53:30 things. And he asked me, is this your life work? I heard you say that earlier. Is this your life’s
0:53:34 work? Is Flexport your life’s work? I was like, yeah, it is. He’s like, well, then you need to figure
0:53:39 out all the things that he’s better than you at and go learn them. Go learn them from him,
0:53:42 learn them from other people. Like figure out what are these things that you think he’s better than
0:53:48 you. So you can be the next CEO after he steps back. Like Larry Page did, uh, after he came back,
0:53:51 you know, he hired Eric Schmidt for a decade and then came back. He’s like, you need to go
0:53:58 learn those skill sets. But it happened much faster than, uh, PG and I could imagine on that walk.
0:54:01 Did you go and learn those? Was there a conscious effort on your part?
0:54:06 I don’t know. It all happened so fast, but really, uh, I’ve learned plenty of lessons along
0:54:13 the way. Yeah. Walk me through some of those. Well, the number one thing I think is, um, I learned from
0:54:21 Toby from Shopify and Brian Chesky who’ve been good advisors for me. The micromanagement is not a bad
0:54:26 word. It’s a good word. You gotta like stay involved in all the details. And that’s very hard in my
0:54:31 company. We’re like big and sprawling and do a lot of stuff, but need to be way more hands-on.
0:54:37 Do lots of skip levels. Don’t trust, don’t like hire big executives and then just trust them,
0:54:40 like treat them like a black box. Like I had, when I heard him say this, I was like, Oh my God,
0:54:43 I just committed the sin at the highest possible level. Right. But like, don’t do that at any level.
0:54:49 Like it’s all my company, audit everything, inspect everything. It’s, you can’t just like
0:54:54 give people too much leash to run things their way. And if they disagree with me, like
0:54:59 sure. I want to, I want to debate it. I want to hear from them. But like at the end of the day,
0:55:03 I know I’m going to still work at Flexport in 10 years. And I don’t know if that’s true about anyone
0:55:08 else. And that, that’s, that’s how they heard from Chesky. And I was like, you know, it’s like,
0:55:12 it’s probably true. Like, I hope that my team stays and I got the team for 10 years, but I’m positive
0:55:16 that I’ll be here. And so if they really don’t like the way I want to do something like, okay,
0:55:21 no problem, but it’s my company. And like, they can move on. And like, that’s the level of confidence
0:55:22 that I didn’t have prior.
0:55:29 I heard from people that we have in common that you, when you came back, uh, you were a different
0:55:33 CEO and you were like founder mode before it became founder mode.
0:55:40 Yeah. I mean, Chesky’s like way more hardcore. I think I try, uh, learn, but, but I didn’t have as
0:55:44 many frameworks for it. I was just like, Oh, I got to do what I have to do, you know? And there was a
0:55:49 lot of stuff that I really didn’t understand about the company. I had way too much committed all these
0:55:54 sins of just like, okay, there’s a problem in some department, hire a big exec, let them,
0:55:59 and then don’t get in their way. Like that is the kind of the corporate way that most people teach
0:56:03 or like most people expect, like, this is how a company should be run. Micromanagement is a bad
0:56:06 word. Toby’s the first person I ever heard that from that. Like, it’s not a bad, it’s like a great
0:56:12 thing. Get involved. You know, why would you ever want like micromanagement and attention to detail,
0:56:15 same two words for the same thing, right? Attention to details. Great. Like your boss is involved
0:56:18 in your stuff. Like that’s only a problem. If your boss is an idiot,
0:56:23 and out of touch and making bad decisions. But like, if your boss, like genuinely cares
0:56:27 about your work is involved in tune, knows what you’re doing, has good judgment. Like,
0:56:32 why would you not want them looking over your shoulder and participating with you and what
0:56:37 you’re doing? So, but Flashboard is a much, I don’t know. I don’t know. I’ve never worked at
0:56:43 another company really, but it’s, um, compared to other businesses, I think far more complex.
0:56:48 So it’s hard. It’s really actually quite hard for me to live up to Chesky’s ideal of like,
0:56:52 I think he says like, if the company should only do as many things as the founder can be personally
0:56:58 involved in, it’s a nice ideal. It doesn’t work at my company. We’re like in all these different
0:57:03 countries and all these different modes of transport that like one person can’t actually keep it all in
0:57:09 their head, but I try my hardest. How do you hire differently? What do you look for differently?
0:57:14 And then how do you integrate people differently now as a result of these experiences?
0:57:20 I just like only promote from within except for very rare cases where just like really can’t find
0:57:29 the person. Uh, and then I spend a lot more time with the new hire. I’ve only hired one person actually
0:57:34 from external in the last couple of years. And I spent just like loads of time with him. And I told
0:57:38 him he’s not allowed to make any decisions for 90 days. How did that play out?
0:57:43 It was perfect, honestly. And he even told me like, maybe I should have done more time
0:57:50 because I remember he told me at like day 88, but no, he told me day 91 that if I had let him,
0:57:54 if I told him 80 days, he would have made different decisions than he made. And like,
0:57:59 even those last 10 days, there was still like learning and taking things in. You have to approach startups.
0:58:02 If you’re an executive and you’re joining a company, you have to approach it with extreme humility.
0:58:08 Like these are smart, really smart people. Like some of the smartest people I’ve ever
0:58:12 may have worked come through the doors of Flexport or still work at Flexport. And we’ve been obsessed
0:58:17 with the problems that we’re working on for a decade. And like the idea that some big shots could
0:58:21 have come in here, this is no knock on any particular person. It’s just like a class. Like what are the
0:58:28 odds that anyone could come in and know, you know, on day one, do figure out problems that we couldn’t
0:58:34 think of or solutions that we can think of. It’s why I like no investor ever gives me useful advice,
0:58:40 really. Because like, I’m not sure they can about people and some high level stuff for sure,
0:58:45 capital markets, but like business, like strategy, like how could they ever know my business better
0:58:51 than me? I obsess about it. Like every waking hour. I’m always skeptical of people who run businesses
0:58:55 or even government and they contract things out to consultants. And it’s like, well,
0:58:59 how is that consultant know your business better? That scares me.
0:59:03 Yeah. PG wrote about that in his founder mode thing. It’s like, well, if you’re a professional
0:59:10 manager, your mindset is that you can run any companies, how you go in and, and in that world,
0:59:13 you shouldn’t be too involved in all the things. Cause like, Hey, you know, you don’t,
0:59:18 you don’t know about that particular domain, that industry. So just trust the people that are already
0:59:26 there that your job is kind of babysitting at all. But that’s not like founder, founder mode,
0:59:30 as they come to be called is like, you should know all the stuff. Like more or less.
0:59:35 You were at that talk. What did you, were you inspired by that? What did you take away from it?
0:59:38 What was the moment that really like solidified things for you?
0:59:43 He was like, I wish I could, I wish it was recorded. He went on a rant like four out of
0:59:48 three hours. Just like, he’s a very intense guy. I took like four or five pages of notes. I was
0:59:54 definitely like enthralled in the back and like a lot of stuff deeply resonated, but I’m already,
0:59:59 um, yeah, I’ve shared already some of the specific things. A lot of it is like, yeah,
1:00:04 just be way more involved in the day to day. And if the people don’t, and do a lot more skip levels,
1:00:08 like meet the people who report, don’t trust the managers. Not a bad way. Hey, like, you know,
1:00:14 I’m here to help. Like actually I’ll, when I go skip level, meaning like go talk to the people who
1:00:19 work for, I talked to anyone. I’ve, I’ve talked to 40 or 50 people every day on Slack or text or phone,
1:00:24 um, at Flexport. And if I talked to somebody who works for you, I’m not like trying to undermine
1:00:27 you. I’m going to come back to you and be like, here’s what they said. Like, here’s what I think we
1:00:31 need to do. And if the person asks me to keep it confidential, I’ll do my best. But, um,
1:00:36 ultimately I try to solve problems together with my exec. So, you know, and if people have a problem
1:00:39 thus far, they haven’t, but if somebody had a problem with that, I’d be like, well, it’s probably
1:00:42 not a fix. This is my company. I’m going to talk to anyone I want in this company.
1:00:46 I find it interesting. Cause you remember that telephone game in like preschool where you sit
1:00:51 in a circle and there’s like 10 of you and the teacher like passes a message to some kid on the
1:00:55 right. And then it goes through 10 kids. And by the time it gets back to the teacher,
1:01:00 it’s like this completely different sentence and meeting and organizations sort of filter this
1:01:06 way unconsciously. Nobody’s trying to make a mistake. Uh, but people just filter information
1:01:10 differently. And what’s important to somebody on the front line might be different to the manager,
1:01:15 to the team leader, to all the way up to you. And so by the time you get it, it’s like,
1:01:16 how accurate is this information?
1:01:21 And vice versa. Like he’s just like, how, what are the odd that people don’t know what I want.
1:01:27 Exactly. And so the other way just as well, right. It’s an interesting way to think about it.
1:01:32 Yeah. They’re leaning, like leaning way more than I realized in the communications and enablement
1:01:40 training. Like we’ve been doing the last year, huge amount of like strategy sessions and teaching and
1:01:45 like traveling the world and doing these like little, almost like a little music festival.
1:01:50 It’s the wrong analogy, but like, you know, music festival, I give you like multiple tracks that
1:01:53 you can, you know, you go to see different acts. Like we have that. We’ll come to different offices
1:01:56 and have different tracks that learn about different things. I think it’s very important that the people
1:02:01 have agency. You show up in an office and you’re like, okay, we’re going to do a half a day of training.
1:02:05 You have to sit through like four talks in a row. You lose your mind. But if I give you a menu and
1:02:09 you’re like, Hey, there’s like four talks happening right now. And there’s 16 talks,
1:02:12 right? For the next four hours, you can just choose your own adventure. Which talk would
1:02:16 you want to go to people all of a sudden like, this is amazing. I get to go learn about it.
1:02:21 And our business is super interesting. So geographically we’re in all the different
1:02:26 countries and, um, almost all the countries, we, different modes of transport, different
1:02:30 technologies. There’s like, it’s actually an incredible thing. So if you give people agencies,
1:02:36 so we try to do that to like overcome this problem of, I just realized I, I, we haven’t
1:02:41 really, I think we’re a pretty well-run company. We have everybody writing teams like write these
1:02:45 documents of what their strategy is. What happened this month? Like these six pager kind of,
1:02:50 we took this from Amazon years ago before we ever heard Dick Clark, um, the six pagers that you would
1:02:56 write about updates. Well, I read them all. I get access to all of them, but no one else does.
1:03:00 A couple other people on the team. We’re not that secretive, but just like,
1:03:08 it’s not part of the, the structure is like, they don’t disseminate. Uh, so I was just realizing
1:03:12 like no one else has such incredible things happening at this company, but nobody knows
1:03:16 about it or like not enough people know. So we started, I’m trying to work on that problem
1:03:19 more. It was kind of to overcome this telephone problems. Like I just realized, oh, like no one
1:03:25 else has the access. I do. What’s the cadence and frequency of those six page updates monthly.
1:03:31 There’s about 26 teams that do an MBR monthly business review and a six pager. And then that’s
1:03:35 just like, it doesn’t, uh, I think we cap it at six, but it’s the six isn’t that important. It’s mostly,
1:03:43 um, honestly, I actually think the six pager is sort of maybe wrong. Uh, I’m not sure, but it’s more how
1:03:48 much time it takes to read. Right. You know, what’s Twain say? Like, uh, it’s harder to write
1:03:52 a six pager than it is to write a 12 pager for a lot of businesses. And so you’re like,
1:03:55 if you had more empathy for the people who are working hard, you’d let them write the 12 pager
1:04:02 and spend more time reading it. Uh, but it turns out you, that six pages seems fine. Um, so we have,
1:04:07 I think 25 or 26 teams that write those monthly, and then they do an annual plan, uh, two year
1:04:14 rolling, but once a year update. Okay. Uh, Chesky does his twice a year update. Okay.
1:04:18 I don’t know if that’s secret, but, uh, I haven’t moved to that yet.
1:04:23 You mentioned the word obsessed. I want to talk about that for a beat before we move on to tariffs.
1:04:27 What does that mean? Do you? Oh, it’s just like, I can’t stop thinking about Flexport.
1:04:32 It’s just all the time. It’s like consuming the problem. It’s very addictive industry.
1:04:38 It turns out it’s always on. It’s always different. Every day is unique. You have a
1:04:42 front row seat, your backstage pass, you see what’s happening in the world in an insane degree.
1:04:48 And there’s infinite problems to solve ours and our customers and our vendors. Like, I mean,
1:04:54 it’s just like a crazy landscape of problems to solve. So yeah, it’s a, it’s a pretty awesome
1:04:57 industry. And I think one of the things that we’ve done well is show people that actually this thing
1:05:02 that looks boring, you don’t think about it actually a really interesting place to build a career.
1:05:06 Well, let’s talk about what’s going on in the world and let’s start with tariffs a little
1:05:11 bit. And I think it would just help orient people for the conversation. What are tariffs? When do they
1:05:15 apply? Is this a simple question or is this not?
1:05:20 Dariffs. I think it’s an Arabic word. It goes back a long time. Governments have always had
1:05:24 tariffs, thousands of years, control their borders and make money. It used to be the primary source
1:05:31 of revenue for most countries is the tariff. In the United States, that was for sure true. The income tax wasn’t
1:05:37 introduced until Abraham Lincoln in the Civil War. And it has a percent of the value of the goods that
1:05:41 are imported that you have to pay to the U.S. Treasury. Primary reason for it, I guess there’s
1:05:48 a few. Revenue is real. In fact, Trump’s chief economic advisor right now, the chairman of the
1:05:51 council, I don’t know if he’s the chief advisor, but the chairman of the council of economic advisors
1:05:56 is a guy named Stephen Moran. And he, in his current administration, he said
1:06:05 that in the Trump one, first term, that the tariffs on China paid for one third of the tax cuts that
1:06:11 Trump did. So it’s pretty meaningful. I mean, it’s an, it’s an interesting alternative way to fund the
1:06:16 government via tariffs instead of income tax. Like, I’m not sure. I hate that idea. I don’t know what
1:06:21 would happen. So it’s a source of revenues, very, very important and valuable to the government.
1:06:28 It’s a way to control protectionism for companies. That’s been a major reason to use tariffs over the
1:06:34 years is to protect U.S. businesses from competition. In part, just for employment reasons, in part for
1:06:39 national security reasons, like you want to have certain industries be successful. Steel has always
1:06:45 been one of these and autos. Most, most major countries like believe their auto industry is
1:06:51 like so important, not just for jobs, but for armaments. Like you make tanks out of your Ford
1:06:56 factory during a war, et cetera. So yeah, those are legitimate reasons for tariffs.
1:07:01 Why do they matter in the context of like the global politics?
1:07:05 Obviously, it increases the cost for companies that are sourcing goods. And we’ve become
1:07:10 so globalized. Our economy is just like the supply chains are unfathomably complex and
1:07:16 interdependent. And they’re full of independent actors making their own decisions about how they
1:07:22 want to do things. And there’s these component, subcomponent ecosystems of supply, moving goods all
1:07:26 over the world and doing assembly and production in different countries and bringing things together.
1:07:32 So introducing massive changes on short notice to the tariffs has caused borderline chaos,
1:07:37 certainly a lot of disorder in global supply chains, which ultimately affects all the stuff
1:07:42 that we buy. It’s not true that America doesn’t make anything anymore, but like a lot of the kind
1:07:46 of consumer goods that are all made over, a lot of them are made overseas, obviously.
1:07:51 I mean, you talk to a lot of customers, are people on-shoring or are they just sort of accepting or
1:07:52 what’s happening?
1:07:58 Well, that’s the thing. And then you have to judge policies, not by their intention, but by their outcome.
1:08:02 Like they, one of the mistakes that a lot of people make is like, well, it was good intention.
1:08:07 So therefore the policy is fine. And that’s not right. And these tariffs have had the opposite
1:08:10 impact that Trump would like. I think there’s intention. There’s some doubt, some validity to
1:08:14 it all. Like some of the things I said from national security and employment, other things, but the, um,
1:08:20 the result has been thus far, and it’s pretty early in the cycle. We’re only a couple months since the
1:08:25 liberation day or whatever, but the, um, I’ve met way more. I’ve been infinitely more. I haven’t
1:08:28 met anyone who said, Oh, because of these tariffs, I’m going to start doing production in the U S
1:08:31 I’ve read some headlines on it and they’ve done some white house announcements and things,
1:08:37 but like, those aren’t my customer base and my customer base met at least a half a dozen companies
1:08:41 that said stop production in the U S because of the cost of the components coming in.
1:08:42 Oh, interesting.
1:08:49 And there’s kind of like three categories of these two or three. Uh, one is people, for example,
1:08:55 we have a bicycle company that makes bicycles in the U S kids bikes. And for some reason,
1:08:59 they made an exemption for importing bikes. They’re duty-free, but not bike components.
1:09:03 So their costs went way up and their competitors from overseas didn’t
1:09:09 said they are cheaper to manufacture overseas. So they’re moving their factory that like has been a
1:09:14 well-known brand, reasonably well-known brand known for being made in America. And they’re like,
1:09:20 it doesn’t work anymore. So that’s one example. Um, two is if you’re doing it for export,
1:09:25 you’re exporting goods, you’re paying your costs have gone up on the import of the goods of the
1:09:30 components doing assembly in the U S and then exporting. You’re better off setting up that factory
1:09:36 now somewhere else where you don’t have the costs on the imported components. Third would be machinery
1:09:41 costs. So like fact, a friend of mine was setting up a line for a fab, like a semiconductor fab.
1:09:48 Um, and just like the machines are made in Germany for that particular line. And the cost was going
1:09:52 to go up 30%. It’s like, oh, all right, I’ll just build this line somewhere else in another country.
1:09:57 And there’s all sorts of like hedges and ways around this. Like one would, I think a bonded
1:10:02 warehouse is you don’t actually technically pay the tariff until you take it out of. So it’s landed
1:10:05 in the United States, but you don’t pay the tariff until it comes out of the bonded.
1:10:08 Yeah. And it’s temporary though. You’re still going to pay the tariff. So it doesn’t really work
1:10:13 for like changing their nature, but a bonded warehouse will let you make a bet that tariffs
1:10:18 are going to come down. So when tariffs were at 145 on China, we helped a lot of companies move into
1:10:23 bonded warehouses because we all predicted that it would come down from there. So you’re better off
1:10:28 waiting and only enter the goods, only exit them out of the building, but enter them into the U S
1:10:33 commerce after they’ve, after the tariffs have come down. So there’s some, there’s some hacks
1:10:38 around the edges. There’s a lot that you need to do if before you didn’t care about valuation,
1:10:43 the value of the goods, if it was times zero, who cares? Yeah. But now all of a sudden, if it’s times
1:10:49 30% or whatever number you care a lot more of, how is it valued? Um, and there are all kinds of legal
1:10:56 ways and you need to get really great advice on legal advice or, uh, advise trade advisory on how
1:11:01 to do this, but there are ways tracking that, um, you want to be able to really track every single
1:11:08 component of the product. Where is it made? Uh, and what is its stuff? What is, what is its cost? So
1:11:12 like if you have a cow, there’s steel and aluminum duties right now that are really high. I forget the
1:11:19 exact number, but they’re quite high. I think 50% or more, um, on, on Chinese made steel and aluminum,
1:11:23 maybe I should know all this details is very complex. Um, but if you have a couch that has
1:11:28 steel and aluminum, you don’t want to pay that 50%. You don’t want to pay that high duty on the entire
1:11:33 couch. You want to only pay it on the portion that’s steel and aluminum. So you really have to build this
1:11:38 great, we call it a product library, uh, which Flexport offers this technology product. So you,
1:11:42 you want to be able to track all these things at the subcomponent level. Where’s every item made?
1:11:46 And then there’s all these new regulations have been coming out for many, many years.
1:11:51 There’s one called the Uyghur forced labor protection act requires you to track the cotton,
1:11:56 anything cotton, where was it made? Uh, specifically like wet down. And then
1:12:00 the EU has a new ones very similar, but any forestry, any wood product,
1:12:05 you’d be able to show where the wood was grown anywhere in the world. Track that.
1:12:07 This is insanely complex.
1:12:12 Yeah. Carbon. They want to know the carbon border adjustment.
1:12:15 factor. I think it’s called that they want to know all the input,
1:12:20 all the carbon inputs of every single subcomponent of every product in the world,
1:12:25 how much carbon went into making it. So they can measure the carbon footprint.
1:12:29 Um, and then the U coming soon, um, you’re going to have to provide a,
1:12:34 like a QR code on every item that you can scan and it’ll tell you the carbon footprint.
1:12:39 footprint. So the world just keeps getting more and more complex, which plays into the hands of
1:12:44 customs company and companies like Flexport, because you’re like, oh, you need technology to track all
1:12:50 this stuff. Um, kind of classic regulatory capture types of, we’re not lobbying for any of these things,
1:12:54 But, uh, and you’re the most tech forward of all the companies kind of, we’re the only one
1:12:59 founded only one in the top 100 in the world founded after the web browser was invented.
1:13:02 There’s a lot of good companies, but they’re not tech companies fundamentally. So we have to, uh,
1:13:06 we have the, the world is our oyster. We should win it all.
1:13:11 Are there any sort of creative strategies you’ve seen any of your customers use that you’re like,
1:13:16 Oh, that’s novel or interesting. You have to be careful. There’s, um,
1:13:19 there’s some illegal stuff that I see and not so much of our customers. We talk them out of this,
1:13:24 but, um, one of the temptations that a lot of people are falling into right now is
1:13:30 letting your factory import the goods for you and then buying it from them in the U S
1:13:38 and then not turning a blind eye of the factory cheats on the value of the goods or their
1:13:41 classification. That’s kind of rampant in the industry right now.
1:13:46 That’s just a matter of time before I would imagine who regulates that.
1:13:51 Customs and border protection. Um, and DOJ there, uh, the problem is
1:13:56 what the factories will do is set up a shell company, not in the U S you don’t have to have
1:13:59 a U S entity to import goods into the U S. Oh, interesting.
1:14:02 You can just, or Canada or most of Western Europe. So you can just,
1:14:06 they set up the shell company in whatever country, it could be China, it could be anywhere. Um,
1:14:13 that company registers, not as an LLC or any kind of legal entity, but they just register with CBP,
1:14:20 with customs. They import the goods into the U S from abroad. If they cheat, they just disappear and
1:14:27 customs doesn’t have agents in China to go chase it down. So then they just do again under a different
1:14:32 shell company. And that’s a huge amount of what gets sold on Amazon. It’s not not,
1:14:35 not, I’m not saying it’s fraudulent, but is these foreign registered companies.
1:14:38 It’s definitely like a gray area. Do you think they’ll bring that back?
1:14:41 I think they’re going to crack down on that. I think they’re going to shut down that, um,
1:14:43 and make it. So you have to be a U S entity to import.
1:14:47 That’s a great LLC. It can be foreign owned LLC, but you’ll have to have like an LLC that can be held
1:14:53 accountable. Uh, but it’s very unclear exactly how it will be, or should be structured. Like,
1:14:57 does it need to have employees who could face jail time? Like what’s the, you know,
1:15:02 what does it need to have a certain amount of cash in the bank that can be taken if there’s fraud?
1:15:05 There’s a lot of ways, but I have no idea what’s going to pass. There’s a couple,
1:15:10 I understand there’s a few bills like looming, but I haven’t read the text of them yet. Um,
1:15:14 in Washington that would shut down the ability for foreign companies to import or put in new
1:15:19 requirements for it. So that’s like one creative thing that will happen is you get offered as an
1:15:23 importer. You’ve been buying these goods from your factory and then all of a sudden they offer
1:15:27 them to you for way cheaper than the duty alone. You’re like, yeah, that’s not my problem. I just
1:15:33 bought it in the U S guarantee you, like you are reliable for that. Like as a warning, look at the
1:15:38 camera. You have CBP DOJ has announced this. Their number two priority in white collar crime division of
1:15:42 the department of justice is, um, customs fraud after healthcare fraud is number one, and then
1:15:46 customs fraud number two. Are there any other creative strategies we can sort of put out there in the
1:15:50 the world today that you’ve seen not your customers use? Yeah. Well, the good strategies,
1:15:53 let’s not talk about the illegal ones anymore. I mean, but be careful, make sure you’re getting
1:15:59 good advice. Um, is have that database, know all the sub components. There’s a few things like
1:16:05 valuation. You can’t, there’s a thing called first sale. I won’t bore you all with the technicalities
1:16:10 of it, but there’s, it’s called first sale, which basically says that you pay, um, the value of the
1:16:16 goods based on the first time it was sold, not the price that you paid at import. So there’s legal
1:16:19 ways to do that. If you bought it, like there was a middleman or an agent that bought it in
1:16:24 China, marked it up to you. You can actually import the goods at the price they paid, not the price you
1:16:29 paid. You can deduct the Porsche. If you file it all correctly, and don’t quote me on this because
1:16:33 you want to get good legal advice, including from Flexport’s team, but you, uh, you can deduct the
1:16:38 portion that’s us made, but you have to, you don’t just get to automatically do that. You have to like
1:16:42 file all the right paperwork and stuff. And then importantly, if you import something,
1:16:46 you pay duties and then you later export a product with the same classification,
1:16:49 you’re owed a refund on the first pass.
1:16:53 Okay. You get your import back, the import duties you pay.
1:16:57 Yeah. And so every year in the United States, seven billion goes unclaimed. And that was pre
1:17:03 these new tariffs. So it’s presumably much higher. Yeah. So we, we help companies with that. We’ve
1:17:07 been getting people like big checks back that haven’t, and you can go back five years in time. So that’s
1:17:10 like a really important one. If you haven’t done it, it’s called duty drawback. If you haven’t done
1:17:14 that and other countries offer this to most countries. So yeah, there’s a lot of strategies.
1:17:19 In fact, the one thing that people should really know is your data on all your past transactions with
1:17:24 the U S government are with U S customs are your, it’s your data. You have the right to it under the
1:17:31 freedom of information act. So you can pull your last five years of transactions from CBP. Now they won’t,
1:17:36 they give it to you, uh, in a very unusable format. I think like giant CSV dump, basically,
1:17:42 maybe even on CDs, I forget, but they give you like, not, not useful. It is still your data. So it’s
1:17:46 useful, but you have to know how to clean it up. So we’ve built this interface that like visualizes
1:17:50 all of this for you and shows you every transaction you’ve done in and out of the country. And then our
1:17:54 experts kind of walk you through and be like, okay, here’s our checklist. This is ways that we think
1:18:00 we could maybe get you a refund. Now, Trump has lost the lawsuit on these new duty on these new
1:18:08 tariffs. Um, they, they, it’s going to appeal to the oral arguments for that start on July 30th
1:18:13 next month. Is that at the Supreme court level? No, it’s the level below the Supreme court. So
1:18:17 presumably if he, if he loses again, it’ll get appealed again to the Supreme court. So that’s
1:18:21 probably, I don’t know enough how this works, but towards the end of the year is my imagination. Um,
1:18:25 is my guess that it would go to the Supreme court either way. It’ll probably end up there.
1:18:31 Probably it ends at the Supreme court. Yeah. Um, that will be in really an interesting case. If they
1:18:35 lose again, everybody gets a refund on all their duties, but it won’t, they won’t just refund it.
1:18:38 You’re good. Then you’re going to have to file paperwork. Of course. Yeah. They’re not going to
1:18:43 like, here’s a magic check in the middle. Yeah. So it’s going to be, uh, and then it’s already
1:18:47 takes like about a year when you get one of these refunds from the government takes about a year to get your
1:18:52 check. Yeah. When every single company in the country applies for a refund, you probably won’t
1:18:56 see the check for like three years. There’s going to be so much fraud. Oh man. It’s going to be kind
1:19:03 of a total mess. If they lose that lawsuit, where’s traffic now, is it back to normal? Is it down? Is it
1:19:11 volumes from China collapsed 60% down when on April 9th, the day the duties hit stayed down for five
1:19:16 weeks? What? And then as soon as he relaxed, as soon as they, the Trump administration relaxed the
1:19:24 duties on China to 30% instead of one 45, it surged to 80% above pre tariff levels that lasted for two
1:19:31 weeks. And then it’s came down. It’s still above pre tariff levels. I haven’t studied enough that market
1:19:36 data. And now I’m looking at Flexport data and we have got 30% growth over last year.
1:19:42 So then I start to figure we’re actually up again from the drop. Like it came down and now we’re back
1:19:49 up. But I think that’s a Flexport thing. I think the market’s shrinking again from the peak that we hit
1:19:54 post COVID, but, uh, our own volumes were like 30% year over year growth. So what are the markers you
1:19:59 look for that are like public information or that you have as proprietary information that are sort of
1:20:04 indicators? Like the economy is really good. Oh, we’re going to hit some trouble. You know,
1:20:09 one of the things that Buffett has always said, as he looks at intermodal rail volume as a leading
1:20:14 indicator for the economy, I’m curious, like given your aperture into everything.
1:20:19 I’ve never been like a macro person. I’m not an investor like that, so it doesn’t matter to me
1:20:24 that much. I guess it’s, I mean, Buffett’s right. Like the logistics say, but it’s the international
1:20:31 stuff is so, um, less easy. There’s a lot of weirdness and lately in this tariffs data that is
1:20:35 just like, I don’t know if that means you want to know what the consumers are doing ultimately,
1:20:40 what are they buying and selling? And a lot of, there’s just a huge amount of noise. Like they didn’t
1:20:45 ship that much less or more because of consumer demand. That was like, you know, cost and inventory
1:20:52 forecasting. And so I don’t, it’s probably, if I had my access to any data, it would be the consumers,
1:20:59 the sales data from all the customers and inventory levels. I just don’t know. I, the sales data final,
1:21:03 like public companies report on their sales inventory data. I I’ve never understood like
1:21:09 the U S government publishes these inventory, um, metrics every month. I, I, where do they get that?
1:21:14 I have no idea. Um, I haven’t gotten any good economists to answer that. Look how they run
1:21:18 a survey. I’m like, yeah. Interesting. Is that valid data? Is that accurate? I know how hard it is to get
1:21:22 accurate data out of my own company. So the idea of the government economists getting accurate data
1:21:26 about all of the companies, I’m like always very skeptical on these things. It’s a hundred percent
1:21:33 correct. I’m so skeptical. I’m like big government data sets. One of the things that you said that I came
1:21:38 across that really stood out for me was when you’re designing an operation, you’re choosing your
1:21:44 bottleneck. If the bottleneck appears somewhere, you didn’t choose it. You aren’t running an operation.
1:21:47 It’s running you double click on that for a moment.
1:21:54 Bottleneck is going to be, you know, the point, the choke point, the point at which the, um, the limiting
1:22:00 factor. And I think you’re in a, in a company, your bottleneck should always be customer demand should
1:22:04 never be like bottleneck. Oh, I can’t right now. We’re bottlenecked in our customs team, our trade
1:22:09 advisory team, the people that are helping solve these problems that I was describing around how
1:22:14 much dues you owe and how to minimize it, how to be compliant. That team is super bottlenecked. We
1:22:20 didn’t plan for a world that would require this much money, this much expert head count. And it’s
1:22:23 hard to find these types of people that really know the space. So we’re bottlenecked in a place that we
1:22:29 didn’t plan. The bottleneck should be, I don’t have enough customers wanting my thing. Uh, you’d like
1:22:33 that to be in a B2B environment. That should be the bottleneck. But if it shows up somewhere else,
1:22:36 yeah, I’m not in control right now. It feels very uncomfortable. I’m like,
1:22:41 though I want, I don’t want to just hire more people, especially if it’s not, if it’s a temporary
1:22:48 surge. So what, uh, it feels out of control as it, um, and we need to get, get our handle on that. And I,
1:22:53 I hate that. I want my problem always to be like, oh, I need to be more creative in my marketing and sales and
1:22:59 like work on the pitch and the user experience and the things there. Uh, so yeah, if you’re bottlenecked
1:23:03 in how much space we’ve had a number of it, this has, um, been, we’ve had bottlenecks move all over the
1:23:08 place during COVID and, and since, um, how much space there is on ships, there’s been a bottleneck for us
1:23:14 even as recently as last couple of weeks with this huge surge of new bookings following the relax,
1:23:21 relaxation of the terrace. Um, that’s not right. Like there should not be a bottleneck for, I can’t get
1:23:25 cargo loaded on a ship and therefore I can’t help the customer or the customers getting this huge delay
1:23:28 and getting loaded and getting their cargo delivered. It’s a, it is a fact of the industry
1:23:35 right now, but that, um, bottleneck shouldn’t be in a warehouse environment. You know, you’ve got
1:23:41 picture of this flow of goods at the loading dock. You can choose where to put the bottleneck on in the,
1:23:51 in the flow of those goods. So loading dock, unload, put away, pick pack outbound, you know, and ship again.
1:23:59 Um, and the, the way that Amazon does this, as I understand it is they, they try to make the
1:24:05 bottleneck the most capital intensive piece, and then they over stack it so that there’s plenty of
1:24:09 capacity on that. Whatever the machine is probably that is capital intensive. It requires a lot of
1:24:16 capital and have like lots and lots of that machine so that that way they’re never, it just keeps flowing.
1:24:20 The goods, the, the, you don’t hit the bottleneck. You don’t actually hit it. And if you do, it’s because,
1:24:27 oh, okay. Didn’t nothing I could do. There is like more capital needed rather than if it’s labor, you’re
1:24:30 like, cool, just throw more labor at it. That should never be the bottleneck. It’s only where, oh, I need
1:24:36 a lot more capital here, even than I planned. And then they over-invest in CapEx so they don’t hit the bottleneck.
1:24:41 Because you want the most asset intense part sweating just nonstop.
1:24:44 Yeah. The asset intense part should be always, should be operating. No, but you should have
1:24:50 excess capacity there. That way you don’t get stuck with this machine holding you back. Like you have
1:24:56 an extra machine, but it’s, it’s a, um, that’s a strategy for people with a lot of CapEx. That’s
1:25:02 Amazon’s model, but plenty of CapEx. Uh, and I’m not sure that they do it right. Like one of the things
1:25:06 that they do that pisses off their merchants is they have this endless line of trucks at the
1:25:09 warehouse. They can’t unload. They’ve pushed the bottleneck off into the unload piece,
1:25:15 the loading docks and truckers and can’t get appointments and stuff. So I think that’d be
1:25:21 wrong in that framework that like, they should allow the goods to float through. It’s a, it’s
1:25:27 fascinating world of like, uh, you know, W.E. Deming is the, um, kind of business philosopher of
1:25:35 quality. He’s written a lot on, um, statistical process control and creating even flow through
1:25:41 a system that you don’t want to have these spikes and, uh, of, of flow. Cause it makes planning really
1:25:47 hard and labor and assets or people become idle. You don’t want any variance. Yeah. Eliminating
1:25:52 variance is like lean six Sigma type stuff. I’m it’s one of these things that doesn’t come naturally to
1:25:56 me. So I’m like trying to study it and take an interest in it, but it’s not my, uh, natural
1:26:02 forte to go deep on this area. I do find it quite, um, intellectually stimulating, but it hasn’t,
1:26:06 it’s not like my training and background. Is that like the whole Toyota production system
1:26:11 thing? It is. Yeah. Do you guys use that? A little bit. Yeah. I mean the Toyota production
1:26:16 system, I think there’s like two companies that have taken it really, really seriously and advanced
1:26:21 it in the United States. One is, one is Amazon and one is a Donaher manufacturing company.
1:26:26 The idea is a couple of things. One is one things that we do that is very Toyota production
1:26:30 system work like is in the Toyota production system. And I’ve never been to Toyota. I got a
1:26:34 proper tour of this. I’m a bit of a chauffeur knowledge, like repeating what I’ve heard and
1:26:39 learned a little bit from a distance, but is, um, the, the worker, the, the line worker follows the
1:26:45 part down the line and does many of the steps operate several of the, or many of the machines
1:26:53 instead of like in a U S production, Toyota auto production, each guy does one job and kind of more
1:26:58 robotic. Like I was describing earlier. And, you know, our models are similar to the Toyota one in
1:27:03 that sense. They were like the same worker follows this shipment down the line as it were doing all the
1:27:10 tasks until it’s complete. Um, that, that I think Toyota kind of pioneered that, that piece of it
1:27:13 better for the worker, for sure. Or you like have more agency, you’re more involved, you know,
1:27:17 more of the details. You’re like, your career is more interesting. You’re learning all the steps.
1:27:21 Um, but they really, the other thing that Toyota really does is empower the workers to like elevate
1:27:25 problems. It’s like, right. They famously had the rope they can pull to shut down the whole line.
1:27:30 Uh, if things aren’t right and take quality super seriously, quality costs less. I think that comes
1:27:36 from W.E. Deming. So it’s all, it’s all a very interesting area, uh, that we tried to apply.
1:27:41 And this is where I needed help at some point. He’s not like a natural on these things.
1:27:46 You mentioned chauffeur knowledge, which is, uh, such a tell that you’re a Charlie Munger,
1:27:53 uh, devotee. I would love to hear some of the lessons you took away from, uh, reading him or
1:27:57 interacting with him. I got to become friendly with Munger towards that, with Charlie, towards
1:28:01 the end of his life. I went to his 99th birthday party last year, actually, um, before he passed.
1:28:08 I got lucky. I got really, in fact, his, um, the person I’m closer with is Peter Kaufman,
1:28:12 who’s the author of, uh, poor Charlie’s Almanac. And that’s like one of my favorite books.
1:28:16 And when I lived in China, I’ve got a copy of that book.
1:28:21 And really love it. It’s like a coffee table, but Stripe just re-released a copy of it. It’s
1:28:26 now available in print again. It used to be kind of out of print. And I had that book and I loved it.
1:28:30 It really inspired me. Munger has this really wonderful essay, which I actually discovered
1:28:35 on the Y Combinator website, um, called the art of worldly wisdom or something to that effect.
1:28:39 If you Google Munger worldly wisdom, you’ll find it. Um, and it’s a US,
1:28:44 it’s a speech of that he gave at USC. It’s like a graduation speech.
1:28:45 We’ll link to it in the show.
1:28:48 Yeah, you should link to it. It’s wonderful. And it’s about this idea
1:28:56 that there’s like 300 domains in the world of knowledge, 300. It’s kind of an arbitrary,
1:29:00 I don’t remember if he says 300 or not, but there’s some number of limited quantity of domains.
1:29:05 And that in each of these, there are two or three big ideas that carry all the 80% of the freight,
1:29:10 as he said. Uh, and so if you were to go and learn those two or three big ideas from each of the
1:29:13 disciplines that up your alley, I’m sure you’ve written about this before. You have all these
1:29:19 mental models and you have lots of stuff to hang things on. Uh, and then also a lot of the innovation
1:29:25 in the world comes from taking an idea from one domain and applying it elsewhere, a mental model from
1:29:29 one and applying it elsewhere. So I learned about this when I was like 25 or so living in China.
1:29:35 And that really set me off on a lifetime journey of like trying to read because like learn as many of
1:29:43 these domains as I could just try to be worldly wise. Um, and so I, I, I loved that. It really inspired me.
1:29:47 And then one day I was at a party at a house in Silicon Valley, not like a fun party, but like, you know,
1:29:55 gathering a cocktail event or something. And, um, I didn’t know anybody. And I, this older guy’s older
1:29:59 gentleman was there and I struck up, he struck up a conversation. He saw me not talking to anyone
1:30:03 or something. We started talking to each other. And he, at some point asked me what my favorite
1:30:07 book was. I told him, Oh, it’s poor Charlie’s almanac. And because he’s like, why do you like
1:30:10 that book? And I told him all this and he’s like, well, I know that book really well, actually.
1:30:17 I’m the author of that book, uh, Peter Kaufman. And so he’s like one of Munger’s really good friends.
1:30:24 Uh, for many, many years. And he’s the one that put together this almanac. So he just thought that
1:30:27 was so funny that he started bringing me to Charlie’s house and like, tell Charlie the story.
1:30:33 One of my favorite things that Charlie told me at one of these dinners at his house was, uh,
1:30:37 when I told him about Flexport, he was like, Oh, you had a great business because the key to success
1:30:43 is dumb competition, which that’s kind of insulting. We have some really smart competitors, but I always
1:30:49 say that to people who are like building AI companies. It’s just like, what a nightmare.
1:30:54 Your, your competitors are literally AI geniuses. Like you should find a way to apply AI and some
1:30:58 other domain. So you’re not competing with the smartest people on planet earth. Cause like the
1:31:02 odd, it’s like trying to be a boxer. Like you’re gonna, you might beat all the people in your local
1:31:07 gym, but at some point you’re going to run into, uh, somebody bigger, stronger, faster,
1:31:11 John Jones or somebody you’re going to kick your ass. Yeah. I don’t think we’re the smartest people
1:31:16 in the world, but within our little old school industry, we can, we can do some damage.
1:31:22 Funny story about Peter before, uh, he’s a mutual friend years and mine. And the way that I met him,
1:31:28 I was at a Berkshire Hathaway meeting and I had went up to the, uh, the hotel, you know,
1:31:32 naively, this is my first meeting ever, you know, I just show up and I’m like, can I get a hotel room?
1:31:38 And the person behind the counter starts laughing. And I was like, Oh, no problem. I’ll just sleep in
1:31:44 my car, you know, whatever. And Peter walks up to me and he’s like, I hear you, you need a hotel room.
1:31:49 And he ends up giving me, he had a block of rooms and he ends up giving me one of his rooms.
1:31:51 That’s amazing. Which is the perfect Peter room.
1:31:56 It is totally. And it’s the most perfect embodiment of one of his phrases, which is go positive and go
1:32:02 first. Yeah. And he, we ended up striking up a conversation. Uh, we had a mutual friend who joined
1:32:07 us in that, which was Peter Bevelin. And we just ended up chatting for a long time. And he’s like,
1:32:12 if you’re ever in California, you know, come see me. And I was like, Oh, it just so happened to be
1:32:16 there next week. I had no plans to be there at all. Right. But if you’ve ever gone there,
1:32:20 Oh yeah, totally. And, uh, that struck out my friendship with him, which has been,
1:32:24 he’s been an incredible influence. Yeah. Yeah. Okay. That makes sense. That’s hilarious. Cause he loves
1:32:29 inventory. Yeah. And he had, he also had an inventory of extra rooms just in case somebody
1:32:34 needed money. Actually walk me through that. Why does he love inventory? Well, because everyone else hates it.
1:32:37 And I think it was a contrarian element too. And everybody went to business school
1:32:42 and learned that extra inventory is a evil and carries working capital costs, et cetera,
1:32:46 but he’s in his business, which is airline airport, airplane parts, aviation, aviation parts. Uh,
1:32:52 having excess inventory means you can provide the part on demand, any part you have it. No one else
1:32:58 does. So people are willing to pay a real premium. If you’re especially in aviation, if your line is
1:33:03 down or your plane’s not flying, we have a whole branch of logistics called air aircraft on ground,
1:33:08 logistic AOG aircraft on ground. People will pay any price. I once, um,
1:33:14 fluid, this is not what Flexport does, but I know this guy’s a billionaire and his plane,
1:33:21 his G6 50 cold stream, uh, private jet broke down in Antarctica or, uh, in Southern Chile,
1:33:26 like right next to Antarctica, somebody crashed, uh, like a tractor into the wing.
1:33:31 And he called me and said, can you get me a, I need this. I have the wing. I need to fly it to
1:33:39 Chile. I will pay any price. Like this guy told us like 10 times, like, if there’s a way to pay more
1:33:44 to get this there faster, we will do it. And so being the guy with all the parts, uh, for that type of
1:33:49 customer, you think of it, you have this, like in some cases, you know, 10 million to
1:33:56 $200 million plane or more sitting grounded from a like thousand dollar part, or it could be 10,000.
1:34:00 You could charge a hundred K for that part and then you’d be like, no problem.
1:34:05 Yeah. And the inventory, I mean, inventory should be not that expensive to keep around,
1:34:09 but it depends if it’s perishable. Like the COVID was a great example. Like people at the hospitals
1:34:13 didn’t have enough inventories all run just in time, which is just a ridiculous way to run a
1:34:16 healthcare network just in time because in a crisis, so you better have some inventory.
1:34:21 But the problem I think becomes that these, the PPE, the mass and stuff has a shelf life
1:34:25 and expiration. So you can’t just build a warehouse totally full of this stuff and let it sit there.
1:34:29 You only needed to pull it out in 20 years. Yeah. It won’t work. So it’s a hard problem.
1:34:35 Similar with like military, like how much artillery do you want to just produce and just have sitting
1:34:39 around just in case there’s a war, but like you want some when there’s a war, you’re not,
1:34:42 you don’t want to start your production. Then are there any
1:34:45 other Peter Kaufman lessons that stand out?
1:34:48 So many. I don’t know if, uh, you know, hopefully he publishes more books at some
1:34:53 point. He’s written a lot of stuff that he keeps offline. I really like his competitive exclusion
1:34:54 principle. What is that?
1:35:00 It’s basically, it comes from biology and it’s this idea that, um, in a niche, in an ecological
1:35:06 niche ecosystem, there’s only, uh, two, two species can’t occupy the same niche. One of them must
1:35:10 outcompete the other one. If they’re like for life, they’re both occupying the exact same
1:35:15 niche. One will win. The other will get pushed aside and go extinct or have to adapt. And so
1:35:20 in business, the way to apply that is like, you should be able to do all the things that your
1:35:27 competitor can do. And you can’t leave any room for them to exist because they can do something
1:35:31 you can’t do the opposite of this dog. Whether you should only do one thing and do it really,
1:35:35 really well. It’s like, actually you should spread out and make sure there’s no room for the other guy
1:35:39 to stick around and maintain a relationship with your customer just because you’re not able to do that
1:35:45 thing. And we still have some of these, I mean, we very hard to do everything, but he calls it, it’s a,
1:35:48 there’s a Wikipedia article about it. The competitive exclusion principle. I think that’s pretty
1:35:53 interesting. I learned from actually just generally Peter’s whole thing is, um, is the worldly wisdom
1:36:00 ideas, taking the ideas from biology and physics. And I, what’s his other one is the, um, formula for
1:36:07 kinetic energy is one half of mass times velocity squared. We use velocity as like our main word of
1:36:14 flexible velocity. Go deeper on that. Cause velocity matters more because it’s, it’s power log, right?
1:36:20 From the kinetic energy formula, it’s a square function and mass is only a linear. And so this is
1:36:26 why, um, in football, American football is hitting so hard, knocking often. It seems like this little
1:36:30 guy can just like create more, way more energy. Well, they are, they, their velocity,
1:36:33 they’re running really fast. Yeah. It’s more important than how big you are is how fast you’re
1:36:40 moving. And now velocity is different from physics than speed of velocity has a vector. So you got to
1:36:45 go in the right direction in business, but it also, it’s kind of an explanation for why startups out
1:36:51 compete. Big companies have way more mass, but they start to become slow and bureaucratic and three guys
1:36:58 in the garage can often out compete. It’s interesting to sort of visualize as like the incumbent being fat
1:37:04 and you being, you know, skinny and quick and agile, and you kind of want to run upstairs and it sucks
1:37:08 for you, but it really sucks for them. Yeah. That’s how I sort of think about that. Yeah.
1:37:14 Like how do you, how can you cause pain in a way that like, it’s going to suck for you, but it sucks
1:37:19 more for them. What are some things that you got from Peter? Well, the go positive, go first thing is
1:37:24 just such an unlock in life and the demonstration, like I had never talked to him or, or sort of like
1:37:29 had any conversations with him at that point. And it’s just stuck with me. This example is from the
1:37:33 elevator. You’re stuck in an elevator with someone, most people will say nothing, which is like kind
1:37:37 of polite to not say anything. But if you say hello, they’ll actually, turns out most people will say
1:37:41 hello back and be nice to you. And then we don’t do it because like the 2% of people will sort of
1:37:45 scowl at us. I mean, I don’t really want to talk to me about all the meters either, but I get that.
1:37:51 Yeah. I mean, it’s an interesting point. Well, now everybody’s on their phone. It’s a different world.
1:37:56 Ryan, we always end these interviews with the exact same question, which is what is success for you?
1:38:01 I like to be worldly wise. I try to keep learning. I’m lucky to have that, learn that value early on in
1:38:06 my life. That learning is the most important thing. I mean, now I’ve got kids, so it’s love, but learning
1:38:11 is right there as a close second for what my number one value is. That’s why I like flex sports so much. It’s like
1:38:17 a really incredible vehicle to learn. And the best way to learn is to solve, you know, be really engaged
1:38:21 and do things and solve problems for people. In the business context for Flexport, we want to be
1:38:27 the number one logistics company in the world by far. And we think there’s real scale economies
1:38:35 in this industry that you can unlock, but we’re pretty far from that. We’re only about 0.1% of global trade
1:38:43 in the containerized, in the world, in the domain in which we play. So we got 20, 30 years of just
1:38:49 like building, going global. We got Flexport employees in 18 countries. I want to be in
1:38:55 all the world’s countries, be like a true network business or ship anything anywhere,
1:39:01 I think it’s super easy with tech. Actually, we think we can lower the cost of shipping anything
1:39:07 by five to 10%. And I think it could have just like a massive impact on the world economy.
1:39:12 So all those things, all those things are like part of the success path, but we’re trying to enjoy the
1:39:17 journey, like learn every day. We help our customers on that, on that path.
1:39:23 I’m looking forward to rooting for you from the sidelines. Thanks for listening and learning with
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