Flexport's Ryan Petersen on returning as CEO, global logistics in a time of conflict & more | E1881

SPEAKER_02: I lived in China 1819 years ago, for a couple of years. And I was always predicting back then that hey, once these Chinese companies figure out how to do branding, they're gonna take over the world. Yeah, because they make they make the product and then I slap my brand on the thing and mark it up five x and I get all the more they can learn UX UI design. I always SPEAKER_01: said this about Israeli. That's what's happening right now. SPEAKER_00: This Week in Startups is brought to you by Miro helps take ideas from in your head to out there in the world with its ability to democratize collaboration and input. Sign up for free at Miro dot com slash startups. Cura tech. Are you one of those companies that knows you need to be using AI, but you're not even sure where to start? Well, then you need Cura tech. They are AI experts and they're offering twist listeners and AI strategy roadmap tailored to your business for $5,000. That's 50% off the normal cost just for telling them we sent you check out Cura tech comm slash twist and get $5,000 off and ketone IQ is a clean energy boost without sugar or caffeine. Get 30% off your first subscription order of ketone IQ at hv m n.com slash twist. Alright everybody, welcome back to this week in SPEAKER_01: startups fan favorite is back on the program Ryan Peterson is the CEO and co founder of flexport back on the show for the second time you've seen him on the all in podcast two or three times speaks at the all in summit he was last on this podcast this week in startups on Episode 1169 back in February of 2021. I was peak pandemic days and that was 700 episodes if you can imagine. Lots happened since then he stepped down as CEO and became the executive chair in March of last year. We'll get into that then in July. And now she was going to be a partner at Founders Fund and then in September he retook the reins as CEO apparently to get costs and things under control and we're going to get into everything and more today. Welcome back to the program. Ryan Peterson. Thanks for having me back. Wow. It's SPEAKER_02: been did you say it's been 700 episodes? 700? It is you know SPEAKER_01: what happened was Yeah, you know, I always wanted to try being like Howard Stern and have my own daily show. And, you know, over the last couple of years podcast gets popular, the ads sell out and I just told the ad sales team, well, if you sell out all the ads for three months, I'll add a day. And it SPEAKER_01: went from two days, one day a week, two days a week, three days a week, four days a week, five days a week, and six days a week. And then I realized that we did all in and it was seven days a week. And I was you know what, be careful what you wish for life. My entire life became doing podcasts and it was exhausting. And so now I'm back down to four days a week for this week and startups one all in five a week, five days, one hour a day. And you know, I do this instead of having lunch, and getting fat, right? It's like a better deal. Other people have lunch and I just do a podcast. So just to remind everybody, what does Flexport do? What is the business of Flexport? How do you make money for your customers? Well, SPEAKER_02: Flexport is a global logistics company, and we use technology to make that easier, better, cheaper for companies to ship cargo anywhere in the world, from wherever it's made, deliver to the end customer in over 100 countries. And that, you know, what that looks like is we actually our technology lets you place orders to your factories. Factories acknowledge those orders, they become users too. That's one of the coolest parts about Flexport is that every time we get in a US company, that's where we started, but we're now all over the world. But if we get a US company, on average, we had 18 of their factories to become users too. So they're receiving orders through the system, and then placing bookings to get the cargo picked up and shipped whether it's by air or ocean, including some cross border trucking across Canada, Mexico, and then delivery. And then last year, we bought Shopify Logistics. And that's the last mile arm. So now we have fulfillment centers, doing ecommerce pick and pack, delivering both to retail stores and to customers houses all over the United States. This is something I wanted you to SPEAKER_01: explain to me. So in a way, are you software and a marketplace? So the software is what people pay you for. But then there's a marketplace to get those logistics and the deliveries going is we're really closer to like a logistics service SPEAKER_02: provider from a business model standpoint, and the way customers think about us is like you're paying us to move cargo around the world to ship your packages, we use technology to make ourselves much more efficient, reliable, lowering the cost for the customer and then giving them much better user experiences to do things like planning how much inventory to have, getting that the data needs to flow in parallel. At the end of the day, supply chains are about the flow of goods, the flow of data, and then the flow of dollars. And we now have offerings for all of those things, including financing products to help you buy inventory, compliance products, that's part of the data is like clearing customs, getting things delivered. So it's really managed service is closer to that. There are marketplace like dynamics and that we work with on the asset owning side, we have 400,000 trucks in our mobile apps. We've got all contracts with all the ocean carriers and airlines, warehouses, other customs SPEAKER_02: brokers, like these are kind of supply side vendors. But the customer doesn't really think about that as a marketplace, they buy from flexport. And it's on us to get the right providers and lined up. SPEAKER_01: Got it. So I wanted to ask you about this. I think you called it pack and ship from China to a man pack. Oh, from China to SPEAKER_02: the US. Yes. Because there are a series of new websites that SPEAKER_01: have gotten very popular. Some people are not aware of them. Other people are obsessed with them. I think the team who t em you Ali Express, which is part of Alibaba sheen, which is clothing, sh ei n, you see these as some of the top apps in the SPEAKER_01: App Store. And you wonder like who's using these, it turns out it's very popular amongst kids who are on a budget. And I just did this myself as a test. And I think our tick tock now has the ability to they have tick tock shopping. And so I was looking at Laura Piana shoes because Chamath is into the shoes and Laura Piana sent the besties some shoes at the all in summit. And they gave people in the VIP bags like something from Laura Piana. And I saw people promoting knockoffs of these like three or $4,000 shoes. So as a goof, I bought the $20 versions of them. I kid you not. They came two days ago in a plastic bag. It's the worst quality I've ever seen on a pair of shoes. Like and they smell terrible. Like they smell like they're painted with 20 bucks, 20 bucks. I think it was SPEAKER_01: 25 bucks for what were Laura Piana rip off of their like $1,200 loafers. And you know, if you put them next to each other, you'd obviously know the difference. Maybe if you didn't put them next to the other ones. But what is this new phenomenon of people selling knockoff products or pick is that pick and pack? And well things going directly from China to us customers? SPEAKER_02: Yes, so the industry term for this is actually called a section 321 clearance. And that's a section of the US customs regulations, which allows you to not pay customs duties. If you if the goods are worth less than $800, then you don't pay customs to. And now the trick to doing this is that each individual product has to be already consigned to you the end consumer to buy it. And so that means you've got to be able to be efficient and they're like you're fulfilling that unit from China or coming from Mexico. A lot of people are doing this in Mexico and Canada now. But you're crossing the border one item at a time. Now they'll bundle lots of these into a freight shipment. So you still get the low cost of freight. But you're clearing those goods and avoiding customs duties. So with the with the Trump tariffs, you know, which Biden has continued, I think we got to now call them the Biden terrorists or just the new tariff regime that we have that that that can be really significant, you know, 20 25% savings on that by but and so that's, that's what's happening there is fundamentally is like avoiding customs duties. It's huge right now. In Q4, it was about 50% of all the air freight flying across the Pacific was e commerce parcels, generally broadly, parcels. So what's happening logistically is somebody in the SPEAKER_01: United States, orders one of these products. Listen up, I'll say they're lower quality, whatever. But just putting that aside, they order something direct from a factory that a marketer in China has put on a US commerce site, and they pack it up. They put a label on it. And then how does it get to my house from a directly from a Chinese factory that's being packed? Yeah, labeled in China, correct? SPEAKER_02: Yeah, it has to be labeled at origin. So it gets labeled there. It gets flown over on freight, including a lot of this is flying on flex sports, freight freighters gets handed off to what click customs and then hand it off to a last mile provider. And that could be UPS, it could be USPS, it could be, you know, whoever's offering the best rates. And so that's who's delivering it to your door. So it's a transaction. SPEAKER_01: How is this economically feasible is what I'm trying to figure out. Yeah, economics of this because I don't think there were shipping costs or the shipping costs were de minimus on this. SPEAKER_02: Yeah, I don't. You know, it's hard to say it but you know, different customers have different business. These companies have different business models. They're like, hey, maybe they're not making money at 20. But I don't know those shoes might only cost $2 to make Jason I think that's what I don't know. I haven't seen him yet. But SPEAKER_01: what would it cost somebody to prepare shoes like that on an airplane to the United States and then do the last mile SPEAKER_02: price and price of air freight about five bucks a kilo how much you think those things weigh kilos to 2.2 pounds might weigh up. Right. So maybe maybe under a pound. Yeah, maybe. SPEAKER_01: So it's like $2.50 for the air freight. Wow, last mile can be a SPEAKER_02: couple bucks might only cost you five or $6 door to door. On the freight side of things. It used to be worse, you know, which was doing this through big way. Remember, which now used to be worse in the sense that the US government until a few years ago, Trump closed this loophole, the government was actually subsidizing. It was called a packet. And it was like this weird customs. It was a weird postal treaty. And China was considered a developing world country. And so to like promote development there, you could ship something cheaper from China by USPS, then you could from like North Carolina to New York, it was like, to fly it from China to New York. They closed that it was pretty much a loophole, they closed that because it was a reason for the government to be subsidizing this cheap shipping like that. SPEAKER_01: All right, founders always asked me for pitch deck punch ups. And you know what, I got some great news for you. We worked with the team at Miro, the awesome whiteboarding software I've been talking about to create an amazing pitch deck template for founders, which you can see if you're watching the video right now, this is going to help bring your pitch deck from zero to hero from zero to VC ready. And our founder university participants love this template, we use it all the time, it saves some time and it gets them more meetings. So head to Miro comm slash Miro verse mi ro.com slash Miro verse and search for pitch neck to check it out. And if your team is hybrid or fully remote, Miro is so useful for you. It's like an old school in person whiteboarding session, but distributed and asynchronous so you can do it on your own time. Miro lets you brainstorm ideas and collaborate on projects from anywhere in the world. When you think Miro thinks zero to one but faster. And Miro is so much more than a simple digital whiteboard. Your team can collaborate on important stuff like research, design, planning and feedback cycles and faster inputs equals faster outcomes. And we all know product velocity and startup velocity is how your company is going to win. So to access our new mirror verse template and thousands of others sign up today for a free mural account at Miro comm slash startups mi ro.com slash startups, that's mirror comm slash startups to sign up for free. This was all I think, created because of Amazon third party sellers in some way, you know, kind of in in septing in Americans minds, that there are these knockoff products or, you know, similar to products that you can buy for a lot cheaper. Yeah. Well, SPEAKER_02: Amazon's been lobbying quite a bit to close this loophole. It hurts Amazon's business, you know, what's the point of having this like, really impressive network of fulfillment centers all over the US, if you're not going to use them, you just bypass the whole thing and fill out China. So they've been doing quite a bit of lobbying, which is, you know, a public record to close it. It's it originates actually, in the rules as an individual, if you're traveling internationally, you come home, you don't have to file a formal customs entry and $800 is the threshold. You remember that next time is buying something SPEAKER_02: that's blue 800 bucks, you're good, you don't have to deal with all the paperwork and extra duties, you still have to declare it on the back of that little piece of paper, but you won't have to pay any customs duties. Once you get above 800. Now you're like, Oh, man, you got to file an entry and it'd be a lot more painful. So that's where it originally comes from. And then it's called a type 86 clearing, I guess I probably SPEAKER_02: knew it out too much for this. But the ability to do this, like at scale where you can clear like 10,000 of them at once, because if you have to pay a customs broker to do a customs entry, well, we charge like 100 bucks for that. So that'll kill your whole I can't charge you 100 bucks for a customs entry on a $20 pair of shoes. So but there's this manifest clearance it's called where you do 10,000 of them at once. Yes, it's 100 bucks for all the things. Yeah, that's type 86. But section 3021 is the section of the customs regulations that creates this law, this ability to do this is a very interesting phenomenon. SPEAKER_02: It's like kind of taking the world by storm. It's like 30 to 50% of the air freight market depending on the time of year, which you know, up from kind of I don't know what I haven't seen the trend on what it was historically, so I need to go study that a little bit more. But I remember being very surprised when I learned it was like now 50% of the market in certain weeks and quarters. SPEAKER_01: It's just extraordinary to think about this infrastructure that's been built over whatever it is that I don't know less 50 years or 100 years of a factory in China. Somebody makes something there, it goes to some depot, which then goes to an airport, which then flies across the world land somewhere in the United States, and then goes to some depot again, I guess and then gets delivered and it costs five bucks or 250 a pound. SPEAKER_02: Yeah, well, that's that's what's very different about this is like, you know, if you were to ship a FedEx package from China probably cost you 60 70 bucks to get the same. And so it's sort of avoiding that by paying bulk wholesale air freight rates. You should go with Flexport, you know, flight on our set, we have 747. So we fly it in, and then it lands in Chicago or LA. And there we have trucks that literally pull out next to the next to the plane, get loaded right on the truck. It doesn't even go inside a building, it just gets put right on the truck and then shot down the road to UPS and UPS delivers the last mile. So it's a it's a pretty cool product. I had like mixed feelings about this whole thing. I'm like, Hey, what are we doing like flying this stuff up? And then I then I realized like actually Flexport is pretty uniquely positioned to benefit from it because we have air freight customs and with our Shopify logistics acquisition, we have great contracts for the last mile delivery. So it's made us a major player in this kind of e commerce logistics. SPEAKER_01: So this gets rid of this idea of I don't know if it's called drayage or a fulfillment center like Amazon has, where you would order 100 pairs of these shoes, put them in a warehouse somewhere, somebody would order them, then you would ship them. This is factory to consumer, correct? SPEAKER_02: Yeah, we're fulfillment centers in China effectively, instead of an or in Mexico or Canada, you know, you don't have to fly it, you could do this on ground shipping, where you put it up in Mexico, Canada, we'll see there's a lot of efforts to lobby to get this to go away. For sort of obvious reasons. I mean, if you're going to have tariffs, like why not? Why? What SPEAKER_02: the point of this, but there's also lobbying efforts to say, Hey, you know, you should be able to do this out of a bonded out of a free trade foreign trade zone, which is a bonded warehouse in the United States. Like Flexport has foreign trade zones that we operate that are legally technically not inside the commerce of the United States, but you're not allowed to do this clearance from one of those and send it out. So SPEAKER_02: there's there's all kinds of lobbying going on right now. There's a there's a bill in front of Congress that we're monitoring all this stuff, but I don't have all the details in my head. But there's one bill out there that would eliminate it for shipments from China, but allow them from other countries. There's another bill that would raise the threshold instead of lowering their sorry, lower the threshold. So instead of being 800 bucks, it has to be below 200 bucks, which would, you know, limit the number of products, the types of products that could be imported in this fashion. So yeah, it's pretty contentious. And then there's a lot of different business models to where Timo, for example, is a marketplace. So it's like lots of different factories sending stuff. They consolidate it and then send it to you. She Shane is much more kind of like make their own brand design, design their products. Yes, kind of own it, let more first party and less third party, although they think they have some third party aspects to it as well. So that is kind of bypassing the Amazon fulfillment centers or SPEAKER_02: the flex for fulfillment centers, we now have a bunch of these as well. I don't know, you know, I don't know how to feel about it. Like flex ports, pretty well positioned to do well in that world we want to be. It's interesting because like, I if it's gonna last forever, then I got to invest and go, hey, let's go build some fulfillment centers in Canada and Mexico and be really great at it. But if Congress is going to change the law, they could go away overnight. And like, I'm, you know, less, less excited to go do that. It also creates a SPEAKER_01: bunch of issues around the quality and safety of these products, and you know, trademarks and intellectual property because the people who are selling in China, let's say or, you know, pick another country, they might not have the same standards for safety, etc. And they're selling direct to consumer, whereas if it goes through Amazon, Amazon picks up some liability. Yeah. Well, I think Amazon's marketplace, they avoid the SPEAKER_02: liability as well. So it's kind of similar. There's a lot of third parties, you know, a lot of counterfeit issues, sellers will tell you on Amazon as well. But it's, um, you're still SPEAKER_02: subject to the same rules and regulations for importing goods and still has to be counterfeit. So you go, it does create some complexity for us on the compliance front to make sure that we are dialed in like, you know, there's compliance for counterfeiting, which is important. But compliance for dangerous goods for batteries, in particular, not sort of fire SPEAKER_02: on an airplane. 10 times more important in my view, right? Like 1000 times more important, just because people's lives are at risk. And so yeah, it's it's dialing in those compliance processes to make sure that everybody understands like, here's what the rules are that you need. I don't want to bore SPEAKER_00: SPEAKER_02: the audience but material safety data sheet to like validate that there's been drop testing on the batteries and yes, all that all these types of things need to be done to before you can put up before you can put a battery on an airplane. SPEAKER_01: Yeah, I mean, we had all kinds of weird stuff happen with batteries on airplanes. It's an interesting segue. I mean, I had this away bag that they put a built in battery pack where you can plug in your phone to your, you know, roller when you're getting on a plane. I came on the plane, the woman's like, Oh, is that one of the new ones with the battery pack? I was like, Yeah, she's like, Oh, you can't bring it on the plane. And I was like, Yeah, that was a setup. That was a setup. She asked me SPEAKER_01: like, she was personally interested in my own hay bag. SPEAKER_01: And they changed that. But that was a weird one. Yeah. Yeah, SPEAKER_02: that one's, you know, that one always surprised me because well, obviously, they built the product for travel. So it should have sold up. But if it's in the passenger compartment, you are allowed to have battery but they still make you take it out of the suitcase is like it's kind of weird. Yeah, I get why you're not allowed to put it under there's underneath because there's no one there to like monitor and make sure it doesn't SPEAKER_02: go. It's very, very serious issue. Now you can have a battery fire. If it's designed the right way. The battery will sort of like collapse in on it. So the fire will collapse in on itself and not spread. It's like an elaborate, you know, engineering process. And that's why it's important that you do SPEAKER_02: these things professionally and not have like random amateurs trying to do so. SPEAKER_01: There is an interesting topic that's at work right now with the 737 Max is I don't know if those are the planes you fly but you saw the door come on. We got 747. But yeah, and, you know, my SPEAKER_01: friend sky Dayton from earth link and Boingo fame, he just wrote a blog post about this about just training of pilots. He's a pilot close friend of mine. And they're really having challenges now with the number of pilots available and their training and are they getting enough hours. And it turns out they're pushing them to put a lot of hours not in the simulator but into like, you know, sasta 172 is in the training and stuff like that. Tell me is there are there issues right now around flying stuff around the globe? Is that and you starting to see that with pilot shortages and safety with planes? SPEAKER_02: There been a lot you know, all these airlines sort of a self created problem. They laid all their pilots off during COVID a lot of them did and they've had to rehire and then you definitely see it like much younger pilots like trying to find you know, training random. In fact, it's I'm very proud. We've had like six or seven flexport employees in Asia, who were doing freight forwarding work, which is like working with factories to get documents coordinating shipments, shipping stuff that have become pilots for major airlines. Wow, I just found this out. I was in Asia two weeks ago. And I was like, Oh, yeah, this guy left here. He's now a pilot at Cathay Pacific. I was like, really? But that's a lot of opportunities been created. What I heard from the team there was that a lot of the the experienced pilots got went to SPEAKER_02: the Middle East, a lot of the Middle Eastern airlines were still hiring and attracted away a lot of the pilots out of the Asian Airlines who had shut down completely and the Middle Eastern Airlines kept operating, or else that deeper pockets or whatever. So and they're growing a lot. So yeah, interesting SPEAKER_02: dynamic, but I don't think it's creating. It hasn't been a big challenge that hits us in the freight world. I just like hear about it anecdotally. SPEAKER_01: Okay, you've seen Sun and I demo a ton of AI tools. And we've learned that these tools are going to help you do so much more with less. That means more revenue and less overhead. Here's the hard part for a lot of companies. How do you actually integrate your AI into your daily work flow? Well, you got to check out cure attack cure attack specializes in strategic consulting and product engineering for AI tools. cure attack starts with strategic consulting, and they bring those ideas to life with their expert engineering teams. They offer a few key services, AI strategy roadmapping. These are collaborative sessions to find out where AI can give you and your company a competitive edge AI powered SAS features, where they're going to strategize design and even write the code for your AI SAS product, and they'll help you automate repetitive tasks. So here is your call to action cure attack is offering their $10,000 AI strategic roadmapping service for 50% off. This includes up to three 90 minute sessions to find opportunities for AI in your business, a comprehensive breakdown of these opportunities, and a technical roadmap to make the solutions a reality. So go check out cure attack comm slash twist and get $5,000 off that curo TEC comm slash twist. See you are o TEC comm slash twist. Let's get the update on what's going on in the Red Sea. You came on all in the other week and talked about it a little bit and then I've been watching you on Twitter. Man, you shared one graphic of people going around. Is that Cape Horn at the at the end of that's a SPEAKER_02: Cape of Good Hope. Cape Horn is South America, Cape of Good Hope, South America and good hope. Is that the one good hope SPEAKER_01: Yep, Cape of Good Hope, which by the way, is one of the most SPEAKER_01: dangerous turns you can make around a continent. Yeah. Yeah, SPEAKER_02: I mean, the Southern Southern Ocean is pretty crazy, especially we're mentioning is that the winner is my never been down there, but I think the winner is way worse. So we'll see. It's right now it's summer down there. Yeah. So we'll see SPEAKER_02: if that I do I have heard you know, it's not it's non trivial SPEAKER_02: to send container ships through those waters in the winter. So hopefully this gets resolved in the next six months. But people SPEAKER_01: are just electing to take the long route right now just to avoid the possibilities. Yeah. In some areas, somewhere between SPEAKER_02: 90 and 95% of the container ships are routing around the Red Sea. Wow. About 30% of all container ships flow through the Suez regularly throughout their journeys. So it's a huge disruption to global trade to go around, it takes 20 to 25% longer. It's really, you know, we talked about this on on the only pod, but it it's a real challenge to the American led order, like post World War Two, where we said like, hey, we're gonna patrol this freedom of navigation, anybody can trade with anybody else. We'll have this globalized world, peace and harmony. And anybody can, you know, anybody can do business with anybody else, as long as you're not part of the Soviet block or something that was kind of the post World War Two, American led order. And if all of a sudden, you know, the US Navy sends a carrier strike group to the Red Sea, and it's still not enough to keep it open for navigation, and there's still able to hit ships with missiles, you're kind of like, huh, like, what is that? It does make you think about the United SPEAKER_01: States his role and in terms of being the global police officer, and people being scared of pissing off the United States, you know, and if we don't serve that function, then who is I know, for America, we there's a lot of people in America who maybe don't want to be the World Cup. But then if we're a lot of SPEAKER_02: people around the world who don't want us to be the World Cup to like, we make a lot of friends when we go invade these countries, a lot of European countries are like, No, stop doing that, you know, so and as soon as really benefits Europe, SPEAKER_02: and China and Asia, much more than the United States. I mean, we barely use it, we use it for shipments from India, like Indian subcontinent, Middle East to the East Coast. That's the that's the route where the Suez would be the fastest way to deliver. We go through the Red Sea across the Mediterranean, the Suez across the Mediterranean across the Atlantic Ocean, that hit the US East Coast. But if you're going anywhere from China to the US East Coast, you're better to go across the Pacific and through the Panama Canal. Yeah, from China to the West Coast, obviously, you just go straight across the Pacific. So we're, it's an interesting role for the United States, like, should we go patrol the ocean on behalf of European countries who like they themselves don't seem to want to send their navies down there to do it other than France. It's very interesting right now France has got their navy in the Red Sea and only protecting French ships. And the French ships keep going through that's, you know, I said 90 to 95% the ones that keep going to the French ones. And it's a very SPEAKER_02: yeah, it's really like a return like before World War Two. This is how trade worked was like your Navy existed for this SPEAKER_01: purpose. That's why you traded with your colonies like you had SPEAKER_02: colonies out there and you traded with your colonies and you had a navy to protect your ships and make sure no pirates or foreign navies you know, captured them every man for SPEAKER_01: themselves kind of approach right like I hope not I hope SPEAKER_02: not you know, I think the argument the counter arguments are like, well, why should the US do this if it's not if it benefits grew up more and leave it to that is sort of like, well, it's not a zero sum world and the US benefits from global prosperity and you know, rising tide lifts all boats like everybody else. Everybody being better off is good for America. They're more better off than we are. But quite literally in this SPEAKER_01: sense, a rising tide lifts all boats. I mean, you would think that this is an area where the United States, France, and China and India could collaborate. These are all major trading SPEAKER_01: partners, manufacturers, consumers, this would be a great opportunity for Xi Jinping and Biden, or you know, whoever, to just get together and say, you know what, yeah, we all have an interest in making sure that this route stays open and defending ships because we're sellers, you're buyers. Why don't we put some, you know, ships from China and the US in that straight and say, Yeah, you can't you can't attack commercial ships. Sorry. SPEAKER_02: Yeah, that's why I don't think there's gonna last that long. You know, like the rational brain says, Hey, there's too many interests aligned here too many superpowers even India, like last week, sent their special forces their Navy, because there was a ship that had been hijacked or basically taken over by pirates off the coast of Somalia. And it was Indian sailors on board was Indian owned. And the Indian Special Forces went on board and cleared the ship. Yeah, clear. But that's kind of interesting, right? Like that's you would normally think that's the role of the United States Navy, but the Indian Navy stepping up. So yeah, we might like everybody or like everybody stepping up and being part of it SPEAKER_01: and having a dialogue about this. Because, you know, when you have bad actors, it's good for them to get a united front from in here from different voices like, hey, this behavior is not going to be acceptable. We're gonna we're gonna stop it. I'm curious what markets and you know, you keep hearing, and you have your finger on the pulse of this, that, you know, some people are moving factories out of China. I tried to explain this on all in I kind of got a little I think from off left to me, some other folks were like, yeah, Apple's never going to make the iPhone in India. And sure enough, Apple's making the iPhone in India, and they're making more recent versions of it, from what I understand. So is India and Vietnam? Are those two areas specifically? I think also Indonesia becoming, you know, major players in terms of more advanced manufacturing, and you're seeing more shipping coming out of those areas now? SPEAKER_02: Yeah, absolutely. Vietnam, huge winner, lots of manufacturing, lots of manufacturers shifting out of China. And it has been for like 1015 years for the low end kind of where it's just about labor arbitrage, because China is not the cheapest. Mexico as a Mexican labor costs now about half of Chinese, Chinese labor, like dollars per hour that you pay to the workers. And I don't think productivity adjusted, probably not. And then of course, the tariffs have impacted been very real and impacted businesses and a lot of decisions. And then some of it's just brand like companies just don't feel as good about the Chinese brand as they did. Yeah. And so yeah, you SPEAKER_02: see that Vietnam is the biggest winner so far. Well, Vietnam, big country as it is, is like, less than 10% of the population of China. He has a hundred or so right? Yeah, really weak infrastructure. I mean, there's the two biggest cities are Hanoi and Ho Chi Minh. They're not connected by a freeway. I mean, it's like red light stoplight the whole way crazy. These two mega urban centers. Vietnam does benefit they have great rivers. And a lot of the ocean can take a lot of the container shipping actually flows on the rivers because the trucks the roads are so bad. And so we do a ton of bard shipping in Vietnam bringing it out of the country down to the to the coast and put it on a container ship there. But it's, it just doesn't really have the infrastructure. It's happening faster building that freeway as we speak there. But yeah, big factories there Samsung, Apple, lots of these major companies have huge factories in especially around Hanoi, North Vietnam, and India as well. So and then Mexico is the other big the biggest winner right now, but it's kind there is no other China. It's like a lot of other countries kind of coming up at once. This is a long term pattern, though, you know, it used to be you go to Taiwan and Korea and Japan for cheap manufacturing. Yeah. And SPEAKER_02: then they become more advanced and China has become more advanced and manufacturing has moved to for the cheap stuff has moved to cheaper places. But tomorrow's also kind of right, like, for really high end electronics, high end manufacturing, like Apple still the best you can hear Tim co talk about why Apple like for manufacturing the high the best products in the world is still China's the best place to do it. SPEAKER_01: Yeah. Although just the fact that they I think, got the because it used to be they made like the maybe four or five generations ago in India, but now they move the 14 or 15 I think is now being made there. So it's super fascinating. And yeah, really interesting. Vietnam ranks highly 19th of 141 countries in terms of linear shipping connectivity. However, the efficiency of seaport services ranks 83rd according to the World Economic Forum. Yeah, there's pretty bad man. Yeah, so their ports are terrible, but they do have tons of rivers. So that means potential. They have great roads that are bad. But SPEAKER_02: even even like rivers, you know, I was just meeting with the largest I was in Singapore a couple weeks ago, and I met with the largest logistics company in Vietnam, the owner flew over to meet with me because we're big partners with JV with them. And they, they do they own four, they own four river ports. So they're doing this barge shipping, they run all these barges on the rivers. And he was explaining to me how you know the shape of these boats, like we make them bigger, like, how can we get more volume throughput? He's like, well, we can make them longer, but we've already hit the length of what's legal. So we're like, trying to convince the government to make it longer. I was like, why don't we make them taller? He's like, well, there's 200 bridges, you know, along the way, you can't go any higher. And like, they're not, you know, if you're gonna make every bridge higher, like you're talking, you might as well make a better freeway or something. SPEAKER_01: When you're in the start of business, you should always be looking for a performance edge. There are simple ways to do this like getting better sleep, we all know that. But let me tell you about a little hack that elite athletes and US military members use. It's called ketone IQ, a bunch of the quantified itself. People like Andrew Huberman have been talking about the benefits of ketones recently and ketone IQ is a ketone shot that was developed through a contract with DARPA to make American soldiers sharper. You can think of ketones as nature's brain fuel. They have a bunch of proven health benefits like improved focus and weight loss and ketone IQ is a clean energy boost with no sugar and no caffeine. I have been on it for a couple of months now and my energy level has gone up up and my focus as well. I love taking these shots I take in the morning before I work out I take it when I'm skiing and man it makes you feel like a superhero. So here's the call to action get 30% off your first subscription to ketone IQ at HVM n.com slash twist. That's HVM n.com slash twist for 30% off. Or you can easily find ketone dash IQ at your local sprouts market comes in little bottles and you just take this little shot. Boom, you're off to the races. Let's pivot the discussion to this CEO drama. You decide that you were going to become a venture capitalist you were going to hand over flexport. Let's take that first decision is a very hard decision for a founder to make. Why did you make that decision to hand the reins over to begin with? Because usually I see that hey, man, people are burnt out or they feel like hey, maybe I you know, there's somebody better than me to for the next phase. Hey, maybe zero to one. I'm this creative person. Scaling I need somebody maybe who's a little more boring, but is obsessed with scaling. So let's start with that first chapter there. Why did you make that decision that you wanted to try not being the CEO of the company you co founded? Yeah, um, there are SPEAKER_02: separate decisions by the way that being the VC came much later was not pre planned. So it wasn't like a lore of being a SPEAKER_01: VC. It was it really was that I'd like I want just the best SPEAKER_02: for flexport. And I think flexport has a huge lead in technology in our industry. Like it's an old school industry. It's been around for thousands of years. We're the only freight forwarder in the top hundred freight forwarders in the world. There's only one that was founded after Netscape was invented in 94 the web browser and that's flexport like we're the third largest in the US and so we have a big lead on tech but I think it's kind of I don't know comparing yourself to the SPEAKER_02: way it's not that it's not the bar that I want to clear being the best at tech in a freight forwarding industry right now which I would like to be as good as Amazon like or as good as Google like I don't think we're reaching that level. So on the one hand, want to go faster and building technology and to is I do think Amazon is the best logistics tech company in the world. Still, I can say that even though I aspire to be that with flexport, it's like Amazon, it's okay, explain we're better than Amazon at building logistics technology. And so when I had the opportunity, I was looking for an operator and to help me on both those areas like tech and operational rigor efficiency, reliability metrics, like can you quantify it? Can you put in all the processes to dial it in? I just look at Amazon, it's just fine. It'd be so amazing, right? And so I was looking for a partner. One of the things I'll do when I'm trying to recruit an exec is talk to investment bankers. They know a lot of people and they want they want to do flexports IPOs. I just kind of like put the word out there. Hey, here's the profile I'm looking for. A lot of people go to headhunters. I like to headhunter money and you know, I'm working the bankers like they got they want to make this they're trying to jockey for position for IPO. I want to do SPEAKER_01: you a solid. This is a really good favor. Like so. So I had a SPEAKER_02: own Baker kind of put gave him the spec and told him, Hey, here's what I'm looking for. He's like, Oh, you should hire Dave Clark. I was like, I come on, man. He's the CEO of Amazon, like, retail consumer business. Like, don't be crazy. I could hit Yeah. And SPEAKER_02: so he Yeah, exactly. And he's like, I might be open to it. Let's talk to him and turned out he was. And so it was very opportunistic because I was really trying to hire like a CEO that kind of caught a whale. And it became pretty apparent that I, you know, just talking to him and getting to know him and his experience. It was like, really see him like working. Yeah, it worked for me as the chairman of the board, but like, working for me as CEO, like, what would I own? What am I responsible for? What am I going to be better and more experience and which decisions would I own? So I made it made the decision like I thought he'd be better at building the tech, running the operational side of things. And then dialing it in to where we SPEAKER_02: can, you know, be the most reliable, efficient, and therefore affordable logistics company world. So yeah, it was really just down to like, make Flexport better. SPEAKER_01: And then it quickly went sideways. You had him in there for a year or so you weren't happy with the performance, the board wasn't happy, to the extent you can go into it. Maybe you could talk about when you just realized, I need to come back. And I made a mistake in leaving or I made a mistake in hiring this person or both. I don't know what you conclusion you came to there. But it did get a little spicy publicly, obviously. Yeah, it was a little unfortunate. I mean, very SPEAKER_02: unfortunate. The um, you know, one of the things that happened was was really unfortunate and annoying was that journalists kind of dug up a bunch of drama that didn't exist. I'm shocked. And then really turn it up and made it worse. Really created drama out of thin air. So they told, they interviewed somebody like some former employee who told him all this stuff about SPEAKER_00: SPEAKER_02: Dave, that wasn't true. actual allegations, there were some allegations of like fraud. I mean, it was in this article, it's like claiming all these things. And said it was from a source close to Flexport and told and then called Dave and told Dave, who this was, I think it was someone that he fired. Who didn't like him? Well, this and this is important for people SPEAKER_01: to understand when you're the boss, and you have to fire people or layoffs for cause not for cause me or you beat competitors or somebody doesn't a VC doesn't get an allocation. You just start building up these people who have resentment towards you. They're journalists operate, you know, they're SPEAKER_02: always gonna find somebody disgruntled somebody out there with some story and like, you know, maybe there's a half truth to it. But in this case, it was completely fabricated. And then told Dave it was someone close to the company. Right. So Dave, SPEAKER_01: SPEAKER_02: Dave then thought I was the one saying bad things about him. And he's like, Oh, they're gonna make these allegations against me. We're at war and started attacking the company. It's just like spiraled. And we never, you know, we were very careful to go back and look like we never said bad things about him. Like never, there were these allegations weren't true. There was a decision made by our board that like, Hey, we do have to change direction of the company. We've got to pivot pretty hard towards profitability. Dave was going big day was like, all out there. Let's conquer the world. We have a big lead on technology. Yeah, in a massive multi trillion dollar industry. Got a great balance sheet. Let's go after it. Like, let's go dominate this industry hired 800 software engineers. We grew our software tech team from like 400 to 1300. Wow. In a year in like nine months. We've been you know, going really big and the board made this decision that like, Hey, this isn't the right path. We've got to get we got to build towards profitability, which means we have to cut costs. We also need to maintain flex sports, like very entrepreneurial culture of customer, like intimacy, like how we meet with customers and grow with the customer and how we build the culture of our team. And that's a very hard job for a hired CEO to do to both be like, I'm cutting costs, and I care about the culture a lot. SPEAKER_02: Yeah. And it was just like, kind of clear that this would be a better role for the founder to go all right, yeah, I gotta cut costs, socks, but I let people go. But I genuinely and people know me a flex where I've got enough people that believe in that understand me and my love for the company and for the people of the company to say like, Yeah, genuinely do care about the culture even as I do. Yeah, it's a really hard challenge to be saying I'm gonna cut costs and invest in the culture. I'm gonna improve quality, like on time performance and operational efficiency, all these things while cutting costs like these are these transitions thing for a hired CEO to do transitions are like this are never easy. SPEAKER_01: And this occurred during a market collapse. Yeah, this will happen during yes, and then 122 23. There was definitely some SPEAKER_02: aspect of it that's related. The freight, the price of freight came down about 90% 80 to 90%. Um, but that's we knew that was gonna happen. You know, it was in our forecast. It happened faster. It happened about six months faster. We had kind of drawn it as like a smoother curve. But like at the end of the day, it wasn't the deciding factor. Like it was much more just looking at our business and just taking a clean look at like, what's growth look like? Are we hitting our growth targets? Like, what are the customer experiences? What's the customer feedback? Like, what do we need to do? We had, we'd hired a lot of people probably hired too fast, like, takes a while to get people and we have a very complex business to get hired a lot of big leaders out of Amazon. Great people, but it just takes time to like get to know a new culture and new company, a new industry. These although we're on logistics, it's quite different. They're in consumer logistics. You don't have to talk to the customer. And I really do in sales, AWS side to sales, but the Amazon side is like its own flywheel. We're just be you're not going to be taking complaints or SPEAKER_01: getting product requests from your customers at Amazon. They're just yeah, I'm signing up for prime and they're done. Yeah, you know, I make sure to talk to at least one customer SPEAKER_02: every day. Like the last my first 90 days back in the job, I talked to 100 video calls 130 customers and that was like it was it was I did last 90 days. But is the weekends right? Yeah, so you're doing two or three calls a day with customers. SPEAKER_01: There were some days I was doing eight or 10. I mean, I was it SPEAKER_02: was it was deliberate. I was trying to really get out there send a lead from the front said that signal to our teams like, Hey, I really care about the customer. Also, I wanted to document everything. Like what do we need to do? How do we win? What do these customers need to see from us? And we've been really acting on that feedback over the last really since I got back in the job. SPEAKER_01: Such a great technique to just email a customer and say, Can we talk about your experience with our product? Do a quick zoom would really appreciate it. And a lot of founders I find don't do this, they get disconnected from it. And it's almost like the machine tries to pull you away from getting this direct feedback. You know, you have customer support teams, like, we got this boss, the sales team and the customer success teams, like, don't worry, we'll send you a report. They almost try to block you from having a very hard thing to do to be a leader SPEAKER_02: of a large organization and live in reality and find out what's really happening because people want, you know, reality might look bad if you're the person owning that problem. Like, well, I don't want to tell my boss about this terrible thing that happening under my watch. So yeah, talking to customers directly talking to frontline employees directly shadowing them doing the work yourself, like seeing what that looks like. Those are just crucial. And then the other one is just like build your own financial model of the business that's simple enough for caveman whatever level of sophistication you may have for me, it's kind of caveman level of for financial modeling. I do have an MBA, but I'm like financial modeling caveman skills. But it's my model is better, honestly, because I understand it. It's not as I can play with it. There's only three or four assumptions that really matter. And I go, Okay, this is what really matters from a financial perspective. Here's what really matters from a customer perspective. Here's what really matters from the frontline employees perspective. And that's kind of all you really need to leave. This is something I did for a long time when I was SPEAKER_01: on airplanes, and they didn't have pre internet days is I would build models of my media businesses. Okay, we have 10 blogs at web logs, Inc. Okay, we got engaged, it's making this much money. It's got this cost, we're doing this many blog posts. And I just say how many blog posts do we need to do to have a hit blog? What do we need to pay people? How much traffic does each blog posts get? How many ads? How many impressions? What's the CPM? What's the remnant inventory with I just would build like a little model in an Excel document. And boy, does it like help you build this mental model and having the ability to just take out a moleskin and or you know, do it in an Excel and build it from the bottom up yourself. And really think about the assumptions just creates clarity, just like writing plates creates clarity for a person. Yeah, or if you are playing a chess game, and you do a recap of your chess game, and you have to explain every move like chess.com will replay the game for you and tell you when you made mistakes. All of a sudden, you become a much better player of the game. Yeah, distilling it down to something SPEAKER_02: very simple, like not outsourcing that to your finance department. Of course, the finance department needs to build a more complicated model that factors in all the different segments and different things. But like, I just like to be super simple. And I can understand it's probably three or four variables that really matter. And they go Okay, for each of those, what are the three or four things we're going to do to get the number to where we need it to be? And that's very eye opening. SPEAKER_01: Yeah. So it got messy, you came back, you listen to all the customers. You got the company right size, Bill Gurley and Brad Gerson. We did a little podcast last week on this weekend startups little roundtable and we're talking about IPOs. When's the right window to IPO? They're kind of the thought, you know, you know, when you get to that 100 million 200 million, which I understand you guys are, you know, somewhere in that zone, you know, getting public earlier and getting that discipline is a good thing. You've probably gotten I don't think you've ever taken a company public. So what's the advice you've gotten on when you should go public? The earliest advice, the later advice staying private longer, because it seems like there's a lot of varying views on this staying private longer, getting public earlier? Well, in general, you know, it's very hard SPEAKER_02: to give generic advice on these things. Every every company is different. So I'll tell you what, how we think about Flex Board is, yeah, we'd like to go public as soon as as soon as we have one, I'd like to be profitable or like real line of sight to profitability. We have that right now. But I don't think we have enough credibility of our own like one is credibility to the investment community, our investor community of hitting our results. We've not we've not we've had a couple of bad quarters where we missed pretty badly what we thought we were gonna hit. So like getting to where we're like, hey, we reliably like we can forecast the business. And that that's a discipline that we're putting in the right systems and processes. So there's a maturity there that we should have by now, but we're behind on where we should be in predictability. Yeah. And like, of course, the freight market, we're never gonna be able to predict the ups and downs of the freight market. I mean, look, the Red Sea just spiked freight rates like three acts like COVID and that stuff. But there's a level of like, even within what should be predictable, that we need to improve our processes. And then yeah, we'd like to be we'd like to be a profitable cost company. I've got the whole team geared right now to try to get that done this year, like end of the year, not not going public, but be profitable for the quarter in Q4. And then for the full year next year, in 2025. That's gotta be inspiring SPEAKER_01: for folks. Yeah, I hope so. You know, I don't think getting SPEAKER_02: profitable is the most inspiring goal that you can pick in the world, to be honest, like it is for me as the founder of like, Yeah, I don't know, doesn't it make people feel safe? Or like, SPEAKER_01: this is a real business? This isn't one of the crazy companies. I would think that for the right team members, we're driving that SPEAKER_02: right now. And I hope everybody at Flexport is out there is like yeah, all in on that goal. But not not everyone in the world thinks like you and me. So I'm not sure everybody in the world is like, profit, profit, profit, you want to have some level of higher calling of what we try to do around helping customers and serving, you know, serving the wider world, but definitely, you don't get to do any of that if you're not in a profitable business. So and then my view is, hey, once we're profitable, we've got a degree of predictability, you got the right compliance processes, and Sarbanes-Oxley and all the other stuff that goes in the IPO process and go public as soon as you can. So but we're not thinking about it that much. We're thinking all day about the profitability, working a lot of hard work. Our business is much harder, much more complicated than most businesses because on a given Flexport transaction, you're moving and let's just say an ocean freight container, we'll see air freight, we do like parcels, everything else, but just take a ocean freight container on a single transaction, moving that container from Vietnam, what I was just mentioning that the river port on a barge, putting it on ocean carrier, clearing customs, delivering it clear customs, pick it up with a truck, maybe bring it to a warehouse, translate it, maybe bring it up, put it on a rail, then take it off clear customs, take it to a warehouse, unloaded, then put it on a truck. There's insurance, there's a bank that's doing a wire transfer for the customer, there's like 810, you can have 18 vendors literally on this transaction, and they're billing us, we've got to capture their bill, make sure they build us the right amount, make sure they actually provided the service that they were supposed to provide, that their bill is not in some way wrong. Then that we actually added that through correctly and then charged the customer the right amount to make money. And the margins are pretty thin in global logistics, like it's not Google AdWords, like you've got to really dial those processes. So, you know, in the helter-skelter days of just growing 16x in a year, you don't always have every single process dialed on all these things. So that's kind of the maturity level that we're at right now is putting in dialed in processes for these things, making sure you're the right controls, the right audits, all that stuff. level of maturity that's needed. If you want to be go be a public company. So we're working our butts off right now to get done. SPEAKER_01: Yeah. And you talk a little bit about the global workforce and what you're seeing in that regard, you are a truly global business. And one of the trends I'm seeing in startups, and listen, you're a much more mature company now, but you still have that startup ethos. I'm seeing a lot of folks saying, you know what, in America, it's too hard to hire, too hard to inspire. Maybe there's on the margin, some entitlement here or there. And there are other places where people really want work really need work, maybe more commitment, maybe more affordability. So how are you thinking about building out this global team and where you're putting talent and where you're seeing talent emerge that really makes an impact in your company? SPEAKER_02: Yeah, and we're super global pretty much from day one, the nature of flex for one, it's the curse and the beautiful thing about the business. Yeah, we've got employees in 40 different offices around the world. And, and then subcontractors and more to kind of like BPO data entry, some of the service, back office type processing stuff, free audit and stuff like that. The wage disparities are pretty crazy, honestly, is one of these things that's kind of hard to get your head around where you pay, you know, hundreds of thousands of dollars in the US and 20,000 bucks in Asia, not for the same work, but like, hey, if it's one 10th the price, you could have three people doing it like, yeah, yeah, this is a mistake SPEAKER_02: to just go chase things based on labor alone. Like that's companies have done that for years, you get this call center that's on the other side of the world. And it's just like, I don't know, we never will outsource like customer support, or even offshore customer support, like I want that to be close to the customer. There's a lot of value to culture, the culture of being in the market close to your your the same culture as your customer. I believe in that. I think Americans are amazing at customer service globally, like, just like, really awesome people. Yeah. Like we have this idea of tipping. Yeah. You know, we don't tip our freight SPEAKER_02: forwarder, but like we tip our waiters and you could you get better customer service from a waiter in the US and like, well, they you know how they solve this in China is they just assign a waiter to your table who just stands next to your table the whole time. Yeah, they're like, we're gonna make SPEAKER_01: sure that this service is elite services tying you to the table your table 10 different ways are added software engineering is SPEAKER_02: very interesting. You know, a lot of what we do is pretty basic, like web forms and databases and like, you know, some of what we do is more sophisticated AI and machine learning, machine learning, some really interesting data science SPEAKER_01: SPEAKER_02: algorithms and planning and some of that stuff. But you know, we're finding people really good at this at our engineering sites in Asia and Amsterdam has been a great site for us as well Wow. The Dutch the Dutch government has a great kind of incentive program might be the way to frame it but like ways to attract you to come to the country. Yeah. And so we've we've participated there. We've got a nice setup. We've been in Amsterdam as our European headquarters. Almost since the year two or something in the company. So yeah, it's SPEAKER_02: definitely something you studied more and more but we're very cautious not to just go and outsource just to find lower factor costs. You want to go like, hey, where's the talent really map? Yeah, you want to follow the talent and then what SPEAKER_01: you're trying to do? It's a, you know, I'm not a remote work SPEAKER_02: proponent. I said that was exactly where I was going next. SPEAKER_01: Because a lot of this, you know, global workforce seems to be at least in startups, they're saying, well, people don't want to come to the office in the US. And I'm managing somebody in the US who's working for $150,000 a year as a full stack developer or salesperson, but they're in this like low cost place and they don't come to an office. And we've managed we tried it, SPEAKER_02: it didn't work. We're in word back to the office. There's some resistance to that. But but you know, I'm the CEO, so we're not doing it. And it's going to be an office most of the time default like it was before. You don't need to be, you know, the SPEAKER_02: police on this stuff. But like the default assumption is you come to the office and do your work. Like if you need to be at home for a good reason, like we're reasonable people, but yeah, no, if you're sick, your kids sick if yes, mistake. It's SPEAKER_01: all good. But yeah, totally. And like we're, you know, I tell SPEAKER_02: our especially our parents like, hey, we're global logistics business. It's global logistics is 24 7365. Like it doesn't take Christmas off like the ships are still moving, the planes are moving. And so we expect like it's a hard job because, you know, the earth is round and you've got to get stay up late to talk to someone on the other side of the world. And we ask a lot of our people. But with that comes like it doesn't mean you have to work 15 hours a day, but you might go home early, spend some time with your kids in the afternoon and then go work three hours. Yeah. If you're dealing with the Middle East or China, SPEAKER_01: yeah, you might be doing 10 to 2am a lot of nature arms are like SPEAKER_02: that. And so you know, like it doesn't mean I need you to come to the office every time you do a phone call or something. But but we've just found people are so much more productive in the office. It's so much better for culture. Now, there's another way to run a company, which is all remote. But if you're doing that, you know, it's not guys that look like you would want to live in Lake Tahoe, Jason, that are gonna hang out and make 250 grand a year ago and skiing four hours a day and then do you know, go back to two hours a day. Yeah. Go back to the job. Like, SPEAKER_02: it's going to be geniuses in the developing world who cost 1 10th of what you cost. Yes. And come you know, the winners in that I think there'll be very interesting companies that are built on this model who are going like, let's figure out how to find the hidden talent. Yeah, in these countries. Are there SPEAKER_03: SPEAKER_02: people who have like, you know, rock star, they would have gotten what SAT 1600 on the SAT and, you know, they're in Bangladesh, or they're Sri Lankan, or they're Pakistan or SPEAKER_01: India, and they're just like, unappreciated talent pools. SPEAKER_01: Yeah. And those people out there and they're watching this show, SPEAKER_02: probably they're studying learning to code. I think there's kind of two models. One is like, you're in person, you're working your butts off as like a team that's going hardcore. The other is, oh, we are labor costs is one 10th as much in our team is, okay, we only have 80% of the culture in the drive in the, you know, but at one 10th the cost, you could probably build something interesting there. But it's not our business, our business global logistics, like the strong expectation is, wealth, you know, you're going to be in person and often at the port or the warehouse or doing some work like touching the freight, making sure that things get coordinated. And our business very complex. You know, as mentioned, is 18 transactions. But there's a lot of coordination has to happen as cross functional, it's cross disciplinary. That's, you just SPEAKER_02: got to have relationships. It can't just happen on zoom. Everything pre scheduled meetings. Yeah. So, SPEAKER_01: yeah, I know this is becoming a big industry because I keep seeing requests for like, deal, I don't know if you're that company, D l for like hiring contractors remote, all these companies are now abstracting how to do contractor payments around the world. And one startup was dealing with a group of folks and like, we want to be paid in cryptocurrency. And you're like, okay, how do we pay you in cryptocurrency in your country? Like, is that even legal or whatever? And it's like, Yep, just please use, you know, this platform, I don't know if it was DL or remote or plain, there's like all these providers that are now doing this abstraction for you take the time, get them paid and quickly as a product for that SPEAKER_02: now, too. Yeah. So all of them are kind of figuring that all SPEAKER_01: out. And they wouldn't have those products, they wouldn't be solving those problems with software and operations, if there wasn't demand for it. So SPEAKER_02: and like, you know, I mean, my business, my businesses before Flexport were not venture backed, they're bootstrapped, profitable businesses. And so we did all of our software development, back office work in the Philippines. And we've been doing that since the late 90s. And that, you know, when you're not venture backed, it's not necessarily a choice. Like all you can afford is a couple engineers at a much lower price. And yeah, and you manage them really tightly to get the quality that you want. And you need to design yourself and be all over it and make sure it's good. And like, yeah. So yeah, that's, I think there's a real space in the ecosystem for those businesses. I think it's pretty cool. Having run a venture backed business, like just a different kind of discipline that comes with it. Yeah, being a bootstrap business like much more. And I think that venture businesses are new world that we're in will benefit from learning those skills of being way more, if you can be more cash efficient at the early stage, you can SPEAKER_01: maintain the cap table, you need less capital, and maybe you can go faster, right? And you can be faster and lighter. And we're seeing that now I'll see companies that we're looking at angel investing in and I'm like, you have 12 employees are like, Yeah, I'm like, what do you spend every month? And they're like, we're spending 70 and I'm like, 6000 an employee, they're like, Oh, no, no, no, it's like 4000 employee, but we have servers. And we've got this other thing we're doing or producing paid marketing. Like, wait, how are you spending $45,000 per employee? Oh, we have like two people in the US, we got 10 people offshore for this amount 12,000 a year to 40,000 a year. And all I get it, right. And so there's like, SPEAKER_02: it's, it's how good you know, it's very hard to recruit. It's not you just go and just hire people because they're cheap. Like you have to really still put in the good processes, identify the talent. You don't have the same culture of entrepreneurship and aggressive like, not every job can be done there. And they, you know, you have to work really hard to find the right talent, but they're not there. Yeah. Yeah. And SPEAKER_00: SPEAKER_02: putting in a good processes to identify that talent. So yeah, it's a bit of both. We're doing that as well. Like we have quite a lot of people offshore. We've got 600 people in Asia, another five or 600 contractors in Asia in Latin America. Yeah. SPEAKER_02: And I'm coming on strong as well. Some great universities in SPEAKER_01: South America, Latin America. Yeah, just incredible developers coming out of some schools there. And people are starting to pull them together. And then I saw one company would say, which it is, but they're basically taking pools of business process people, skimming the top 2% of them, then putting them through training, and then having them do business functions. So it's kind of like you were saying, like, there's some diamonds in the rough there. And then if you put them through us based training for, let's call it, you know, management type processes, they're gonna get better and better. That's one of the opportunities that's out there is like, you SPEAKER_02: know, people have done offshoring for like, 20 years, like, we're not talking about anything new. No, but they tended to just like send out like, almost like a body shop of people just like do data entry and treat it like almost like a mechanical Turk, like, hey, I don't talk to these people. I just give them work and it gets done. Then I think there's a big opportunity to go, hey, let's actually onboard them to the zoom calls to slash you have them on zoom, like, put them in a sauna. Cool. Yeah, do we know to have them on code, have them SPEAKER_01: do project management and teach them those next generation skills? What's the difference? Smart people are smart people? SPEAKER_02: I haven't seen someone really nail this because it's a different level of like rigor. You know, maybe it's kind of interesting. What's the what's the GitLab? It's been like this fully remote company. I haven't checked in with how they're with what they do. But it's interesting how the fully all remote companies also don't just gravitate towards like, well, don't you just immediately go towards the lowest cost labor SPEAKER_02: function, but they don't necessarily have tons of people in the US. And so it's an interesting point. Like, it's not just the cheapest labor, you've got to get the the team skill and the culture and all these other things together. But over the next 20 years, you're gonna see that, you know, even the rise that we're talking about tying it back together to the ecom companies like I lived in China. So 1819 years ago, for a couple of years, and I was always predicting back then that hey, once these Chinese companies figure out how to do branding, they're gonna take over the world. Yes, they make they make the product and then I slap my brand on the thing and mark it up five x and I get all the hard they can learn UX UI SPEAKER_01: design. I always said this about Israeli. You know, that's what gets that's what's happening right now. I always says about SPEAKER_01: Israeli companies. I would mean Israeli company like this company's got the most amazing technology and then they would tell me the name of it and the domain name would have a dash in it and be a.org and I'm like, yeah, branding on there. So like SPEAKER_01: who cares about branding? I'm like, consumers. Yeah, corporate people. Everybody cares about branding, Apple, Microsoft, you ever see the logos and the design of these websites? Like the branding's a thing. SPEAKER_02: So yeah, 20 years ago, I started to predict that that's going to SPEAKER_02: happen. And what I thought would have to happen and this is what happened is that generation would have to grow up who really speaks English and has a more global mindset to become the leaders of the companies. Yes, because 20 years ago, when I was living in China, they had people who spoke English on the team like doing sales or customer, you know, relationship. Yeah, they weren't the CEO and they're not gonna their English was not good enough, right to like do the marketing and do the branding in the brochures, but they weren't gonna tell the boss my English is not good enough because he'll fire them. Yeah, so their branding was terrible. Right. But then once that guy becomes the CEO, he can go, Hey, my English is not good enough. I know. But not good enough. Let me go get the pros. Let me build it up. Brilliant thing about Singapore, they had this like incredible SPEAKER_01: leader. I've been watching his videos on YouTube. Yeah, Lee Huan, you and at some point, he was just like, English is the language in Singapore. That's it. We're done. We want to be SPEAKER_01: you know, we want to be the leaders in Asia. And Singapore just made this decision to have English as their language. I understand it. And once they made that jump, and people got over it, they really became super powerful. And yeah, you're definitely seeing, you know, increased design. And when I was in the Middle East, there's been a whole generation there now who are our age, you know, 40s 50s, who went to Western schools based upon scholarship. So UAE, Qatar, a kingdom of Saudi Arabia, all these countries had Kuwait, the scholarship programs for the nationals to go to any school in the West. Could be Oxford, could be Michigan could be Harvard, whatever they could get into, plus get a stipend and get paid to go and have their housing paid for. And when I've been spending time in the Middle East, I'm meeting folks and like, Oh, yeah, no, no, I went to, you know, this school, I went to Fordham, I went to, you know, the school in Michigan, I went to, you know, school in Hawaii, whatever it is, Arizona, not all just Ivy League, and they've just got a whole generation there who now have gone back and are running businesses, venture firms, LPS, private businesses, and they're just incredibly, the more worldly, obviously, than Americans, because they've been educated for a decade and lived in the West, and then gone back to their countries. And that's why you're seeing them modernized so quickly over there. Because those people are like, Yeah, I want to have what I had when I lived in America, or when I lived in London, we need that here in our country. SPEAKER_01: And then they build those businesses in Riyadh or Doha, yeah. SPEAKER_02: It's interesting, you know, it's one of the interesting things about Flexport and how we work is that we'll actually onboard local, we call them local heroes. But this like, for example, I was talking about the one in Vietnam, the largest logistics company in Vietnam, but they're only in Vietnam, who a great CEO speaks English really well, he's very global experienced. But they have local capabilities, local assets, so we onboard them to our technology. We get therefore the best service locally at a low cost, because they're good at hiring locals and managing that they're good at local relationships that are needed. And we give them the tech, the global brand, this guy wouldn't, you know, they don't have the sales force all over the world to go sell the Western brands, and bring it so that's a big part of how Flexport works is actually empowering these kind of local companies that do great service in the small in these markets. And we get to meet a lot of these great entrepreneurs. And you're right, a lot of them are educated in the West or spent time that came back to their home country. Yeah, and actually a lot of Flexport teams in these countries are like that, too. Like our head of Korea, lived in Texas for like six years a Korea guy, but he lived in Texas running, sweet, doing sales for a sporting company. He knows Korean barbecue and Texas SPEAKER_01: superpower that I mean, right there to best barbecue you can SPEAKER_01: get. Listen, Brian Peterson, it's great having the program, you're always so honest, continued success. And if you want to work for a great leader and great company, Flexport, maybe they're hiring, maybe they're not I don't know. selectively what is hiring you're trying to keep that be more efficient. We always have roles. We're definitely we're definitely SPEAKER_02: focused big time on profitability and dialing it in and not in not in the hiring sprees that we've been in the past. But yeah, selectively there's definitely there's definitely some interesting jobs, especially in Asia. We're expanding. We launched in Malaysia, Thailand, Vietnam, Korea, I'm really interested in Singapore, or I've been to Korea, but I haven't been to Vietnam, Singapore, I've been to that SPEAKER_01: region. I was just every now and then I don't know if you ever do this, go on Google Maps and just kind of look at that region. It's just Indonesia and Singapore and Vietnam. It's also fascinating to me at least Island chains and they kind of hook up with Australia eventually. And you're, yeah, SPEAKER_01: Google is my favorite product in the world. If I was not not SPEAKER_02: entrepreneur, I tried to go get a job at Google Earth, man. It's such a cool product. SPEAKER_01: Yeah, just like I was looking at the, I don't know if you're tracking what's happening in northern Saudi Arabia, neom, you know, the any om, and they're building this huge city. And, you know, that's by I guess, some of these pathways and ports and everything. A lot of ports around that area and then that part of the Yeah, they're trying to make it a big port, you know, coming SPEAKER_02: back into the Red Sea. It's like, well, if the Red Sea is cut off from trade, that's not gonna work out. So yeah, I do think Saudi is gonna want to SPEAKER_01: beautiful oceans and everything and scuba diving and gorgeous vistas and it's just like, totally undeveloped and now SPEAKER_01: they're like, you know what, we're gonna build Hong Kong or, you know, whatever they're building there, whatever you qualify it as and they're moving fast and they're gonna put like $500 billion into this. It'll probably work. I mean, you know, China's got a big track SPEAKER_02: record of doing this like Hong Kong itself. The Brits did that. Yeah, there was no city there. Shanghai wasn't saying that. And then Hong Kong and then China built Shenzhen overnight, built a new city, economic zone, free trade zones, you set it up, the world will come. So yeah, that'll probably work in the end. It's in a great place. You know, yeah, it's SPEAKER_01: SPEAKER_02: right on them. As long as the Red Sea is open for navigation, you can get to Italy, Greece, you know, you're in a couple of SPEAKER_01: hours on a flight, you can get to India, from Saudi in a couple of hours on a flight. I mean, that's one of the really interesting things about Dubai and that whole region. If you're going to Asia, if you're going to Europe, if you're going to Africa, India, you're just Yeah, it's the center of the world. SPEAKER_01: It's the downside. I still I still am a big believer in SPEAKER_02: building companies in San Francisco. There's something special about the people here. But man, we're the edge of the earth. Like we are getting here. It's like the Pacific Ocean is like spin Google Earth open. You'll see it like half of the earth is the Pacific Ocean. It's very far. We already get anywhere from San Francisco. So that's pretty hard to do a land SPEAKER_01: attack on America, the Atlantic and Pacific. And we've got basically we're complaining about the borders. We've got two borders, folks, it's not really that hard. Southern border, northern border, pretty hard to get into the other one a little easy to get into the southern one. I think we just take it for granted. You know how hard it is to get here. You know, it's you can't. No, geography is just like unstoppable. There's a SPEAKER_02: great YouTube video like from one of my favorite channels called real life lore. Oh, I call why why America's geography is so on point. And it's just like, it'll blow your mind about how blessed we are from a geography or geography. So good that like we no matter how hard we screw it out, try to screw it up with politics. We still can't seem to screw it up. So yeah, SPEAKER_01: no, I mean, to have two giant oceans on either side of us, and then the middle of the country is empty. You fly over this country, and you're just like, we have 300 million people, we can have three. But it's full of farmland, you know, SPEAKER_01: trees. I mean, it's unbelievable. SPEAKER_02: The river network is, you know, I was mentioning Vietnam, how they have a big advantage having river network for doing navigation of freight movements, but United States has more navigable rivers and all the other countries in the world combined. Yeah. And and just really contrast. Yeah. And and SPEAKER_02: the Mississippi River is just incredible. The network that goes in, it connects to the Great Lakes, and then all the way up to Canada. Yeah. And you compare that to Mexico, they don't have a single navigable river in the entire country. Wow. So we're trying to last too close to the equator. Yeah, too mountainous. And yeah, too dry to manage. So we're just very blessed geographically. We got like, we did water. SPEAKER_01: SPEAKER_02: Totally. Yeah, it rains a lot over in these guys. And we don't think about that that much because you're like rivers, whatever. But we use we use it like crazy and logistics, like all the green shipping out of the Midwest is going down. We're the biggest food export in the world. That's why oil exports are flowing down these rivers like tons of ore and products flowing in. That really like if you look at Napa, Yountville, Petaluma, all SPEAKER_01: of those areas north of San Francisco, they used to bring the butter, the cheese, the milk down all of these. You can look it up online and they still have it with the Napa River and all these inland river and Petaluma River, they would just take SPEAKER_01: barges down with milk, cheese, whatever into San Francisco, then San Francisco to the rest of the country in the world. It's what allowed the United States to become like SPEAKER_02: industrialized that the East Coast cities could because normally, you know, if without the river network, you'd have all those great planes. But how could you get the food there from there to the East Coast that you can't food can't travel on the back of a horse, the horse will eat all the food, you know, it can go about 100 miles before it eats all the food not calorie efficient model. SPEAKER_01: It just won't work for grain or whatever you need chips. And so SPEAKER_02: the fact that we had that river network flow down out of New Orleans and up around Florida and up to the East Coast, like that's what allowed America to develop and we're blessed on that. And it's not obvious like you sit there at home and go America. It's like, it's not just about culture. A lot of this geography and it's gets very underrated. SPEAKER_01: Yeah, I mean, I think I've heard that geography is destiny. Yeah, a lot of it is destiny. All right, listen, second time I'll try to end the show third time. It's so great to talk to you, Brian. No, it's hard. I mean, we always get some pivot point and just another idea, another idea, another idea, continued success with the company. Congrats at being back in the in the driver's seat and wish you good luck on this very important 2024 for you and the team. Get profitable, get fit and who knows maybe 2025. Man betrayed the stock. SPEAKER_02: I appreciate thanks for having me back on the show. You know, listening to this show since 2008 or something so glad to see you some grinding man. It's like, how many episodes you've done? No, I mean, it's like 1900 of this and 160 of all in so it's SPEAKER_01: over 2000 now. And I just look at it as this would have been like you and I having a drink. Right? We just would sit there and just, oh, let's talk about America. Let's talk about Saudi. Let's talk about neon. Let's talk about outsourcing. And then I leave this what people don't understand is I took the Myers Briggs, which is like astrology for men. So we call it. And I was like 94 and 100% extroverted on two times I took the test in 20 years, which means I get out of this conversation. I have all these notes I've written down. I feel like my battery's full after talking to entrepreneurs, investors, people who are building in the world, so greatest gift in the world that I get paid with the advertising on this program. To just share stories with the world, you know, and millions of people watch it and it feels great. And I get a lot out of it. Yeah. All right. Well, thanks for having SPEAKER_02: me here. Good luck to the team and we'll talk to you soon.