Ryan Petersen: Tariffs, Y Combinator, and the Future of Global Logistics | The Knowledge Project

It's a very addictive industry. It's always on. It's always different. Every day is unique. You see what's happening in the world in an insane degree.

I've been working on my own thing which became Flexport. Our goal is to be an asset light technology platform for freight forwarding.

And you're the most tech-forward of all the companies. Kind of. We're the only one. I think most businesses like, "Actually, quality costs less." It's very counterintuitive.

Go deeper on that.

But well, in logistics, like all the costs come from you making a mistake. Like if you file a customs entry and you get the wrong classification code, you're gonna spend weeks on doing that. Hey, that's the game, you know? It's business. It's not a, it's not a socialist project.

What did you learn from that?

This is proprietary secret I'm going to let you in on.

We're going to get into some of this. These tariffs have had the opposite impact that Trump would like. I think there's intention and there's some validity to it all, like some of the things I said from national security and employment, other things. But the result has been [Music]

Welcome to The Knowledge Project podcast. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best of what other people have already figured out.

US Customs called Ryan Peterson with surprising news. Steve Jobs was furious. Ryan had just used public shipping records to predict Apple's secret iPhone launch. That same contrarian thinking would build Flexport into a multi-billion dollar logistics company spanning 147 countries.

But Ryan stepped down as CEO. He was certain that somebody else would do a better job. His successor hired 900 engineers in 12 months and burned through cash. Customer satisfaction crashed from 70% to 17%. Paul Graham's response to Ryan's decision cut deep. That's like saying this other guy would be a better husband for your wife.

Ryan returned to a company hemorrhaging cash. The turnaround forced him to embrace micromanagement. But he discovered it was just attention to detail with bad PR. In logistics, one customs error destroys a month of efficiency gains. Most critically, he learned that every operation has a bottleneck. You either choose it or it chooses you.

In this conversation, we explore stories you won't hear anywhere else, like how he flew 500 million masks to US hospitals in empty passenger planes and how tariffs accidentally push American factories overseas. We also explore the counterintuitive lessons he's learned from Charlie Munger and Peter Kaufman. Whether you're scaling a startup or managing any complex system, Ryan's journey will reshape how you think about growth, confidence, and micromanagement. It's time to listen and learn.

I love the idea of life's work, and it seems like your interest in logistics started really young. Can you tell me the story about your mom getting you to get soda?

Oh, wow. Uh, yeah. Well, my mom's a great entrepreneur. Sold two, started and sold two companies, uh, in the biotech biochemistry space in in Washington D.C. And so I, um, both my brother and I had this job. It was like our first job was delivering soda to off, like stacking the snacks cabinet and the sodas and stuff. So she, we basically just buy the stuff at a giant like Safeway and then mark it up 2x.

Your little like cart?

Yeah. Yeah. And my dad's minivan. We'd stack up the back of the, you know, the trunk full of, uh, cases of Coke and Diet Coke. And then, um, my dad taught us to write software. He's a programmer. So, we wrote software to generate the invoices so we could, she could submit the expenses to the IRS or whatever and make sure she got the tax deduction on our allowance.

You were motivated to do it because you could just get paid for it. What were?

Kind of easy money. I mean, you buy the soda case for four and sell it for nine, make five bucks on every case that I deliver.

What were the dinner table conversations like? Do you remember growing up?

Well, two entrepreneurial parents.

Yeah.

Super boring because they were talking about biochemistry and food safety and regulations. I couldn't understand any of it. I think I'm still like a very fast eater. As a result, I was trying to get out of there as quickly as I could.

Did you always know you wanted to do your own thing or?

No, my brother was much more the entrepreneur than me. Maybe still is. And when I graduated, I went to UC Berkeley. When I graduated from college, I could, it was 2002. I didn't, I was thinking I'd go into like international development or something cool. I like to travel internationally and I traveled a lot in the third world cuz I had no money. So I was like traveling places I could afford and I was always very intrigued by like why some countries were poor and some were rich. So I wanted to work in some aspect. I was trying to get a job in microfinance or government or something. No one, no one was hiring. I, I wasn't really, I didn't have a lot of skills when I graduated college, but my brother was hiring and he was running a startup and so I started working for him and that's how I got into entrepreneurship.

Which startup was that?

Well, we didn't really call ourselves a startup to be honest. We were like buying motorcycles in China and selling them on the internet in the US and sort of, uh, this would have been, I graduated in 2002. He started it before that and we were, um, tech company, but we didn't call ourselves that. We wrote all of our own software to do kind of like it was pre-Shopify, right? So, e-com checkout, inventory management, billing, all this stuff. Like, if we'd have been smart like Toby was, we'd have sold subscriptions through our little platform and maybe could have been Shopify, but instead we just like bought motorcycles and sold them on eBay Motors and actually, uh, through live car auctions, our own website, etc.

So, you were arbiting sort of buying in China and then selling everywhere else.

Yeah. Buying in China, selling in the US.

And you went to live in China. What was that like?

Well, I was very curious about the world and like I had lived in South America. I speak Spanish and Portuguese. I was like, you know, we were making money, not a lot of money, but we were making money in China. Didn't have anyone. We had one employee actually in China, but we weren't like really deep in China. And I, it was very clear in 2002 that China was like just on a tear and that it would be maybe the future. It was like really obvious to me. So, I moved there thinking, okay, if anyone could learn Chinese, I already learned Spanish and Portuguese. I can probably learn Chinese. Let's go for it. Uh, so I moved there, kept my work basically of like doing supply chain logistics, e-com development, web development, uh, customer service, just a jack of all trades for the startup that we had. And and then also just like study Chinese for three hours every day for a few years while I lived in China.

That's intense.

Yeah, it's fun.

Mandarin is supposed to be one of the hardest languages to learn as an adult.

It isn't. It isn't. Um, it's very hard. But the Chinese people, if you give any effort at all, are like, "Wow, they love it. They compliment you. They reinforce you. They make you want to do more of it." So, it actually that part makes it kind of rewarding and easy. Whereas, I feel like I've, I've tried to learn French and I get, I'm like way better at French than at Chinese, but nobody, everyone in France like, "Ah, you're, you're terrible. You shouldn't even try." I'm like, "All right, I won't."

Yeah. They talk to me. I, I try to speak in French and they talk back in English. If you get like one word wrong or like?

So Chinese is the opposite of that. You know, you say hello and they're like, "Wow, your Chinese is amazing."

So, if we think of the beats between being in China and ending up in Silicon Valley, what are they? What are the major sort of like how did that happen?

We had this business, um, which we were a startup, but yeah, like that's like we call it that now. At the time we were just trying to make money, honestly, and it was, we were building tech in the cloud. We were cutting edge in a lot of ways like in the early 2000s, there weren't cloud, you know, I think Salesforce and NetSuite, but NetSuite, I don't even know if it was cloud, probably was, yeah. We realized, and it was while I was living in China, we discovered that shipping manifests for ocean freight are public record and it has a lot of really interesting data on it. The public record in the US, we've since learned in like over almost 20 countries that you can get the shipping manifest data. So it tells you, it's kind of like your plane ticket, your boat ticket for your cargo. So it tells you which factory, who made the products, where's it from, who bought it, who sold it, the dates, the ports, a lot of interesting data. And so we realized this data was incredibly useful for us in sourcing products for that company. We were always adding new products to the line like.

Cuz you could find out who's manufacturing the products.

Yeah. You could look up any product type and see who the factories are, look up any importer, see who their factories are, etc. So we built, um, a search engine for that data called importgenius.com. Still a great business, still own it. So we started that business, sell subscriptions, and that, that was like again, bootstrap, not Silicon Valley. We started it in Arizona, uh, where the motorcycle business was, but we very much like got into tech like it was a SaaS business. I was started following like trying to learn about SaaS. I wish we knew more, the blogging and podcast world, you can learn so much more about, uh, AI, whatever, you can learn so much more now than you could back 15 years ago, how to run a SaaS business. Um, uh, that got, that, that's what really got us into the tech scene. We were still outsiders, for sure. Uh, and then both my brother and I both started new companies at some point. That, that business, great business, but it's kind of like hit its, keeps growing actually, but it was, it, it stopped being a rocket. We had like a few years of like runaway growth and then it kind of reached its place in the ecosystem and it's been like a steady compounder for the last decade, but not, wasn't enough for me to like stay engaged as, as I should have been. And I came back to this idea of like, should be an online platform to help you with logistics, with especially your customs clearances. Coming back to our motorcycle days of like, man, this, uh, it's way too important to be this hard and this lack of tech. My brother had gone this different direction, which was his like, what other public data sets are out there that we could build valuable data sets and sell subscriptions or provide access to. And so he started a company called BuildZoom in construction, taking construction data. So your building permits are public record in most places and building like prof, rich profiles of contractors, or you can look up any building and see who remodeled it, etc. So it's kind of like both similar origin starting points, but very different businesses, obviously. Um, and so he, he did Y Combinator for that.

And that was 2012?

He would have been 2013.

We were, and then I saw that, I got jealous. I mean, I'm like, you're, we're moving from Arizona. I moved to Arizona. I'm not from there. I moved there for KPX after, uh, before China, actually. No, after China, excuse me, both, um, before he had, after. So I had moved there for this business, for these businesses, and then I saw him leave to go to the Bay Area, where I went to college at Berkeley, to work, to do Y Combinator. I was like, jealous. So I followed him.

Like sleeping on the couch?

Literally. Yeah. Sleeping on the air mattress in the, in our little apartment. And and I would just go, Y Combinator at that time did not have great security. So I would just go with him to all the Y Combinator, uh, sessions and just sit out, like acted like I was part of his company, even though I kind of was. And then that inspired me to go, I've been working on my own thing, which became Flexport. Inspired me to apply to Y Combinator and go through it as well.

Kayla, let's pause here for a beat. I want to go back because there's a Steve Jobs moment that we, we need to capture here with the Import Genius. You want to tell us the story?

Oh, so back in one of the early, we had built Import Genius. It's a great data set. Um, it's really powerful and you can look up companies and see what they're shipping, who they're buying it from, and stuff. And at that time, I guess still the big thing was, when's the new iPhone going to come out? I think we were just on the, it was the 3G iPhone. Forget, I think that's just like the second iPhone ever. It's kind of crazy. Where are we on 5G now? But it was the 3G iPhone. We had built this product and we had like no users for it. It was a great example of like, if you build it, they will not come. Like you have to go get customers. We had a couple customers, but not really any. Um, so I knew we needed to get some attention. People needed to know that this data is out here and I, we had such interesting data about companies. And so I was searching in the data set for Apple shipments and saw, it's public record. You can look it up. Um, saw that they were importing a new product they had never imported before called an "electric computer," which is very interesting. All computers are electric. It was like a silly name. Um, and it was a perfect storm, perfect moment. Everybody knew, it was already being rumored that the 3G iPhone was arriving. I didn't even know if it was right. I just put out this blog post being like, "Apple has this new thing. Maybe it's the 3G iPhone." Um, and it went very viral. We got within a week, we were doing like $50,000 in monthly revenue, like all the, you know, from zero to $50,000 in a in a couple of weeks. And, um, and I got a call from US Customs at saying, "Hey, we just talked to Steve Jobs and he's really pissed about this. You need to explain where you got this data." Sort of like threatening to shut us out. I'm like, so I showed him the letter. We showed him the letter of the law explaining why this is public record and it's public record. And then he sent us a letter, an email later saying, "Hey, thank you so much. I had to explain, I shared that with Apple's team. Thank you for taking the pressure off of us." But it was a bit of the early days of like, you know, how do you get attention and traffic for a new product? That's pretty cool. It was kind of like a really viral marketing type thing, even though it was in hindsight, kind of.

Couple questions here. One, did Apple change the name going forward to make it more sort of like?

I don't think "Electric Computer" is there anymore.

What are some of the lessons you take away from Import Genius before we sort of move on to Flexport?

Most important one is the user retention. The company's great and the data set's extremely valuable, but for a lot of users, you don't need to keep paying for it on an ongoing basis. You can get the data, run your search, find the factory that you're looking for or the data, uh, and you don't need to keep subscribing. So, we had a relatively high churn rate. Certain types of, we eventually figured out which types of customers like would pay every single month tended to be actually a freight, a lot of freight forwarding companies.

Oh, interesting. Cuz you, you, we use it at Flexport is for list, list construction, lead gen, like finding who's importing. They have my sales team call them and talk to them about their their freight. Um, and hedge funds and analysts, like Wall Street types that want to see what's going on. They'll, they'll pay and they'll pay, they're not, they're not that price sensitive and they'll keep paying every month. So, but we weren't that sophisticated and our re, our signups were always pretty good, relatively consistent. Forgot the numbers, but we would sign up a few hundred customers every month. And then, but eventually, you know, your, the size of your business is just simply the number of new signups that you get divided by your churn rate, annual churn rate, and that tells you how many customers you're going to get at at equilibrium when those, because those two lines will cross. Uh, and we got to that point and then from there I tried everything I could to, like we tried everything we could. It wasn't just me. Um, to bend that arc, either make the signups go up or the retention change and like we ended up just adding a lot of cost to the business without. Yeah, we, we did some stuff that works, but it really, your, your scale of your business is very much limited by your churn rate. If you have any churn at all, you have like a cap on how big you can be unless you're increasing the number of customers you're getting or the size of those customers. Like it's very, it's pretty simple math. I, I teach it a lot at Flexport. It's like how important it is to retain customers.

Are there any other niche data sets that you came across while you were doing that that are super tiny but would be highly valuable in the same way?

Yeah, I think so. My, well, my, that's what my brother largely does is take data sets and build businesses around them.

Oh, construction too.

Yeah. So he's now, he's got that company BuildZoom, but he has a few other, he partners with, uh, great entrepreneurs. And.

So like for Import Genius, are these records like paper and you go and like you take a picture of them? Like how does that work?

You have to, at least Freedom of Information Act to access them from all the, from from Customs and Border Protection. You get access to the, to the data. They they make no effort whatsoever to make it useful. You don't have to do paper digitization, but they just give like data dumps and they won't give you past data.

Oh, interesting.

And that's just Customs. That's just US. We have data sets for Latin America, uh, mostly Latin America, a couple other countries, India.

Okay, so let's go back to Y Combinator. 2013, you're there with your brother. 2014, you apply, you get in. Uh, at that point, you have the idea for Flexport.

No, we'd already gotten licensed. Um, and that was the thing, like we had the idea. There's a lot of debate between me and my brother and our other partner who had the idea for Flexport. We all claim it. Uh, but the first email that I can find like discussing this was like in 2008 or nine, but it took a long time to get licensed by Customs and Border Protection. Had to go through an FBI background check. Had to do a whole bunch of, yeah, it just takes, took years. Um, so it was when we got the license from CBP that I left, stepped down and started Flexport. And that was about six months before YC started. I forget the timeline of the application, but about six months before. So we had, but we didn't, like we had maybe a one customer. We really didn't have any customers, but we had a V1 of the software app, had the license, like had a bit of a strategy for what we're going to go do.

Take me through the, the Y Combinator experience.

It may have changed. This was already 10 years ago. Um, they do a Tuesday dinner. PG used to cook it. I think it was really bad food.

You were the last batch where he was the?

Yeah. Really lucky that I not only was the last batch, but he announced it mid-batch, so you didn't take it for granted that you're getting this time with Paul.

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But for me, it was amazing cuz I'm not from, I hadn't been living in the S Silicon Valley ecosystem. I didn't have connections. And the Evernote CEO, Phil Libin, he was hilarious. Ches, Brian Chesky. Um, yeah, kind of like somewhat eminent founders and investors and stuff, but they just come and give a talk for a couple hours, do Q&A. So nothing amazing, but, um, the real benefit of YC, I think, is the friends that that I made. Like, as an outsider, fair to call myself that back then, like I didn't have a lot of entrepreneur friends. They were trying to find them online and stuff. So this, like, all of a sudden I had all these peers who were also building businesses and like, that's, I don't know, that's just super valuable from a life experience standpoint. I don't know how much it helped the business, but just like made my life better. And then it also, I guess that kind of understates, like YC, if you're one of the top companies. I think it's very important to be a top company if you're going to do Y Combinator. There's a bit of a competition. A lot of people don't realize that. It's like, at the end of the day, there's only so many hot companies that can come out each year and you want to be, if you're one of those, then it's tremendously valuable for you because fundraising, I could have raised money. I had built a successful profitable SaaS business. I'm sure I could have raised money, but I literally like tried at one point to raise money and I showed up in Silicon Valley on Sand Hill Road wearing a suit and tie. I just didn't know. I think people like just were like, "Who's this guy?" You know, uh, and tried to raise money for it. Now, I didn't try that hard. I did a couple pitches and they went nowhere. Uh, and then with YC, it was a feeding frenzy. Was it turned from an outbound sale, which is hard, doing outbound kind of cold calling, to an inbound sale where everybody was like eager to invest. They heard about Flexport. PG himself really like liked and likes Flexport and was telling investors, you should invest in this company, which kind of controversial YC partners. I think they're a little better about it now than they used to be, but they would kind of pick favorites. And hey, that's the game, you know? It's business. It's not a, it's not a socialist project. We're here to like find the best businesses and back them. Um, but it is, I, I, I try to tell every founder, like, you're going to go into YC, it's not, you're not there to have fun. You're trying to be the best. And it is a competition. You versus you, sure, make friends with them. I'm sure Michael Phelps is friends with the other swimmers too, but like, you're trying to beat them on some level.

What are some of the lessons that you learned from Paul Graham that still resonate with you today? I know you still talk to him a lot.

His main thing is not, he doesn't look at the downside and what could go wrong. He only looks at what could go right and like how big and awesome could this be in the best case scenario and what should you do to make that happen. It's not, you're not lo, and and that's like for a seed investor, the obviously correct way because the losers don't matter. All that matters is you get the power law winners that do 100,000x or whatever their best deals have done for them. Again, I was really lucky cuz we were in his last batch and he announced like halfway through the batch that he was stepping down and Sam was taking over, but he kept running the batch the whole way. So then when it came to demo day, the preparation for demo day for when you go pitch the investors, um, I barely worked on my pitch. In fact, my pitch was pretty bad. I think I'm like not very good at reading a script and they only give you two minutes. So you kind of have to have a script if you're going to do a two-minute pitch. But also, I was kind of back cuz I didn't practice very much. I had the opportunity to sit there. I'm in Picasso's studio. You're gonna watch Picasso paint. You know, he's about to retire. So, I got to sit there and watch PG critique other people's pitches instead of go, I don't want to sit there and paint. Like, let me just watch Picasso paint, you know? Um, so I sat next to him for 12 hours a day for like three days in a row watching him critique everyone else's pitch.

What did you learn from that?

This is proprietary secret I'm going to let you in on. You should tighten the aspect ratio on your graph and it'll make it the curve looks steeper. I feel like he told everybody that. Like just scrunch your graph and watch how your startup looks hotter. Uh, there's something to that. You got to appeal to investors' greed. I don't know if he taught me that or someone else, but it's kind of the same thing. You want to, there's, there's a feeling that goes to it. Really simplifying things. I mean, one of the things that PG is really good at, if you read his writing and stuff, is just like very simple language. You won't read like a PG sentence when you're like, "What is that word? I don't understand." He's like very simple. It's easy to understand. My favorite PG moment from that period was one of my friends had us in the batch did a presentation and PG was like, "This is terrible. This is not good." And he rewrote the whole thing for me. He's like, "You should say this, this, and this." And like he just said all the things and my friend just took down perfect notes. Probably does, like you pitch for two minutes, then he gives you like 10 minutes of feedback, and then the next group comes and he just does that over and over again all day. So there's a queue. So if you pitch and you want to do it again and come back and try again, you got to wait like three hours for your turn. So like three or four hours go by. My friend goes back up and presents the the the pitch and he says exactly word for word everything that PG told him to say. And then PG was like, "That's perfect. That's the best pitch I've ever heard." He totally forgot cuz he's doing too many pitches in a row. He totally forgot that. That was like, "Dude, you wrote that pitch." That was amazing. I learned a lot from all his essays and stuff, too. It's hard to remember what I learned from him personally versus reading all of his stuff.

You get out of YC, uh, 2014. Walk me through the major beats and milestones up until the SoftBank investment, which was 2019.

There's a lot. Um, actually, one of the funniest things, one of our other investors is Ron Conway, and he was, he saved Flexport at one. I don't know if I've ever told this story, but, um, we had a license from Customs and Border Protection, but it was issued, oddly enough, in the port of Houston, which is like the whole story, but it was like that's where we got our license for. And it's fine. You have a national license. One, one of the things that made Flexport possible was that in 2007, I think it was, the customs changed the rules to allow for electronic filing of customs entries. And it used to be that you had to have a license at each port where you wanted to clear goods. So a startup could not possibly enter unless you were just like a little mom and pop help the local companies, but like there's no point in doing an internet company to serve one port. Um, and so that changed in 2007. We started applying for licenses in like '09 or something. Markets aren't totally efficient, but kind of. Um, and okay, so we had this license, but it was in Houston and we wanted to be in San Francisco after YC and in order to transfer it, it's just an administrative process, but you have to have a business license from the city of San Francisco. Simple, right? It's just a business license. Well, the city of San Francisco had an IT problem and was unable to issue business licenses. And this was in 2014. They were, they had not been issuing business licenses for several years. They could issue a letter that says you have a business license, but Customs wouldn't accept that. They wanted the license and they, printer problem, I don't know what the IT problem was. They wouldn't accept a letter on city letterhead saying yes, this company has a license on file with us. They wanted to see the actual license. It was a kind of like Kafka-esque. At some point, we just weren't going to be able to operate in San, we were like operating remotely in Houston and, and it just wasn't going to work and Customs was kind of clear, like, you need to, you can, you can only transmit entries physically sitting in Houston. So, I told Ron Conway about this situation and he emailed the late Ed Lee, who was our mayor, and I, Ron was like one of his big, uh, donors and friends, and we got the license within six hours. They like went down. I don't know what happened at City Hall. They got the license printed and we, you know, sent it to Customs and all got moved. But like, there was a moment there where like Flexport was not going to be able to operate in San Francisco, uh, if it was, and it was just crazy. Can't, can't issue a license.

That's insane. So anyways, that was very early days. Um, many things happen. I would say like the summary of it all is we had product market fit, just like insane from the get-go to the point of it being a problem, like more demand than we could keep up with, asking us to do more things than we were capable of doing. Just sort of runaway. It was not all success. Lots of mistakes and bumps in the road. But, um, I guess the big, a couple of big milestones on there. One is we started out when we went through my Combinator, Flexport was just a customs brokerage. We didn't do freight forwarding, and we said, hey, we're gonna do freight forwarding someday, but we wanted to just focus. The kind of dogma in startups is like, be really good at one thing, really focus. You've written about this, like need to focus. We also, the other dogma is talk, you know, Y Combinator, talk to users and make something people want. And when we were just doing customs, we get customers, but like, we get the worst kind. We get a lot of rough types of customers. One of the first things we ever imported was a, a tuk-tuk, which is like from Cambodia. Some guy went to Cambodia and bought like one of those little, uh, jeep-like scooters with the cool seats in the back. Like Berkeley professor wanted it for the nudist parade in Berkeley. Uh, not, he was only going to do one of those in his life. Not a great customer. So we had like a lot, a lot of customers for customs brokerage, but like rough customers doing things that they were amateurs. They didn't know what they were doing. They weren't probably going to recur. Some guy bought like a bouncy house for his kids' birthday party in China because he was too cheap to buy one locally. Like stuff like that.

Is that because people want to deal with one, one interaction from a freight forwarding and customs brokerage point of view?

Exactly. And so like when whenever we talked to real companies that were doing repeat transactions, they're like, "We didn't want to separate customs from the freight." And if they did, they were going to give the customs to like the best customs brokerage in the world with the best reputation for compliance. And like, we were not to the startup. Uh, now we actually have a lot of big companies that use Flexport for customs only. Uh, because we've built our brand and our reputation and our technology systems to actually, we can say, hey, we're the best if you want to separate your customs from freight. And there are good reasons to do so. Like it's a hub for your compliance data. You don't want to shop it out, you know, and have all these compliance records living in 10 different freight forwarder systems.

Right.

People are much more likely to have a single customs broker and many forwarders that move the freight. But when we were starting out, like that wasn't us. So we, and when we only did customs, we were not getting like the legitimate companies that we wanted to build a business around. So that was the first, um, kind of, it's not really a pivot. We always knew we'd go into freight, but we went there much faster than we wanted to. And the moment we did that, it was again, like back to couldn't keep up with the demand. And it became a much harder problem. Like customs, like, "Okay, cool. I self-contained. This is a contained environment here. I got to collect the data, got to transmit it to US Customs." Freight forwarding. All of a sudden, I'm like unconstrained. I'm out here in the freaking wild, giant round world. You're dealing with multiple parties, different interfaces to each party, cuz you're trying to computerize things at this point. And there, I don't imagine there's API. Like how does that even work?

Right. There's, there were no APIs, still very few APIs. Um, a lot of manual work, a lot of like, we've built like automation and software interfaces and wherever there are systems, like a lot of integration layers into different IT systems of all the vendors. Um, but yeah, we opened up a can of worms. Like we got unlimited demand, but like problems much harder and hard to keep up. That's why I say it's been like this race to like build the capabilities, tech, people, geographic footprint, infrastructure around the world to match the demand. Um, but we went from, I, I forget the metrics at the moment of the first SoftBank investment, but, um, one point in magazine rated Flexport the second fastest growing company in the world. They did in the Inc. 5000. We were, we were second place, but the first place company was started before us and was smaller than us.

Okay.

So, like the math says we grew faster than they did. I don't know how they did their math, but they were wrong. We should have been number one that year.

It wasn't weighted?

I don't remember who it was, but, um, but we should. Anyways, we were very fast growing company and a lot of times, yeah, that that can kind of like cover up a lot of problems that we had.

Were you doing things manually and trying to computerize it as you go, or trying to do it computerized from the get-go?

We were do a lot of stuff manually. We're still open to, we do a lot with people. Um, but with this, we're not satisfied with that. We're like constantly figuring, okay, we'll just do it. Make the, that's, that's the secret to our success. We're willing to do what the customer needs with humans as needed. Um, but constantly say, this is not good. What are we going to do software-wise to take this and structure the workflow and put it into a automation? So we're now on like a freight, just a standard plain vanilla ocean container from any port in Asia to anywhere in the US inland all the way to destination. We break it down to about 108 steps that have to be completed and 92% of those are done either by software automation or sent out to like a third party BPO processing entity. Um, so that gets our cost down and the quality is really good because everything's measurable and precise. So we've got that piece is like really, um, took us a long time to build. It wasn't like that in the beginning. In the beginning of people, uh, people picking up the phone and sending a freight email forwarding, I call it, but that's the way every other freight forwarder in the world does it too. So we're like, okay, build a better interface for the customer, drive demand, and then have this, we are not satisfied with the way the industry works. What are we going to do to, you know, structure all, in fact, in many cases, our cost be higher because if you don't structure the data, you, you just forward the email, the PDF, like that could be cheaper than like being like, oh, I got to structure that, put it into our database. Um, and so your costs can be higher, especially if you're just doing one shipment one time. Like why bother structuring the data? The whole point is that the second time you ship the same thing, your costs are really low because you just go, "Yeah, do that again."

Yeah. So that leads to the SoftBank investment, which was, I think they gave you a billion in cash.

Yeah.

2019.

They and other investors in the round did. Yeah.

So what happened with that? Like, you get this money and are you like, we can put the pedal to the metal here? Cuz didn't something happen right after that? Somebody went bankrupt or something.

Oh, that was even before. Hanjin was the big ocean carrier. They went bankrupt in 2016.

Oh, it was 2016. Uh, 2016 was a very interesting year for for freight forwarding that everyone's forgotten about because we all keep talking about expensive freight and all the chaos and problems in supply chain now, tariffs, but COVID, a whole bunch of other things, the Red Sea crisis, like wars, but.

Well, we're going to get into some of that stuff.

Yeah, I'm sure we will. But in 2016, it's kind of the opposite. There was so much capacity. It was so cheap, you could ship a container from China to the US for, our costs were like $600. Uh, normal long run average about $2,000 today. Hey, I didn't check the price this morning. It was probably $4 or $5,000 right now. Um, and the peak COVID was, you know, famously got to like $20,000. So, but it was $600 bucks that year and that was an early year. We did YC in 2014 and in 2016, we took that as cheap prices and just passed them through to customers and it led to crazy growth for us. Um, a good lesson actually that we want to be able to play that strategy. Pass through low costs and you'll grow really fast. So was 2019 when you started to look for a COO?

2019 we got the funding from SoftBank and then we did, I hired a CTO that year.

Okay. Really upgraded, coin invested in our tech. We hired a CTO from Amazon Logistics and he was, he helped us build like some of that workflow software that I described was like kind of architect for that. And then COVID hit and that's where I say Flexport looked really great. Like we were, we turned profitable in 2022. Our revenue peaked at 3.8 billion because the price of freight was so high.

But pause, like you knew COVID was going to hit in February before it actually hit?

January even. Yeah. I mean, well, it was it was in the newspaper, but we have a group called Flexport.org. We do shipping for humanitarian causes like refugee camps and hospitals, nonprofits at cost, uh, sometimes below cost. We had been part, we're partnered with a lot of groups like international aid groups and things like this. And, um, COVID, it was in the newspaper, it would hit in Wuhan, and we actually got a ton of demand to ship masks to China for the doctors in China. And so in January of that year, we shipped about 300,000 N95s from the US to China, which then like two months later, when there were no N95 masks in the US, we're like, whoops, like, um, so yeah, we saw that pretty early. And then the other thing that came out in that period was people, about 50% of the world's air freight travel, we do air freight too, ocean freight, um, and about 50% of the world's air freight flies in the belly of passenger planes and those all got grounded because of COVID. There was no reason to, you know, I think they're actually grounded legally, um, and so we saw, we were at the heart of kind of bringing masks, bringing PPE generally in for US hospital networks from mostly produced in China. And so we saw this insane demand for air freight and there were no ships and no planes to move it and the ships are too slow, like hospitals are running out of masks. So we saw that and got pretty active like, well, you can kind of see the solution to that problem is in the problem itself. Was like, well, all of the passenger planes are grounded so we can't ship any masks. You're like, "Wait, the passenger planes are all grounded." Uh, and so with some of our connections, we got in touch with all the major passenger airlines and we got 80 plane, 80 passenger aircraft and flew them to China.

Because cargo planes are allowed to travel, internet?

Well, passenger planes could travel too, just not with passengers, right? So, we got the airplane, uh, the airlines to give us great deals.

Because otherwise the planes are just idle?

Just sitting there in the desert and stuff and just sitting at the airport. So we got all this. We got 80, we did 88, I think it was, 87, 88, um, passenger planes full of masks in the overhead compartments, in every seat, obviously the belly, and we just, we flew 500 million masks and other object, other PPE items in for US hospital network in March and April of 2020.

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It was crazy. It was like one of the most meaningful parts of my career and everyone at Flexora. It was great cuz we were like not in a none of us and the world was in a good place, but it all of a sudden totally distracted us from whatever problems we trade fell off a cliff. It was really bad for business in the first month or two. We're like who cares? Like we get a hospitals like the civilization will collapse if the hospitals don't show if the doctors don't show up for work and became friendly friends with um the guy who runs UCSF Sam Hoga. He's the chancellor of UCSF our local hospital. And um remember years later I met his wife dinner and she was like it was when when I saw this Zoom call of you talking to Sam was the first moment when I realized everything's going to be okay cuz you it really touched me. It was like I said you guys are highly compensated people are going to get mass delivered you know the day before they run out.

Uh now another thing that came out of that was in April of 2020 same problem statement. The passenger planes weren't very economic. They were giving us great deals because we were serving hospitals and it was all like kind of pro bono not for-p profofit work. >> Mhm. >> They were giving us great deals. It was I remember once we one of the planes the one I remember was a Dreamliner only charged us $200,000 to fly a Dreamliner to China and back. >> Oh wow. >> Which like if you anyone's ever flown private that would be like a Dreamliner. I mean this is many millions of dollars probably round trip. Couple mill like a million probably or 500k I'm not sure. So they gave us a great deal. We saw lots of things like that, but it wasn't sustainable for the business side of things now. And we had a lot of ongoing demand for air freight, but all the passenger planes are grounded. So, we signed a long-term deal for three 747s from Atlas Airlines, the biggest cargo airline in the world, dedicated to Flexport. And it was in that response to that of like hey the passenger plane we had this vision this view this perspective that air frees can be very expensive because all the capacity is grounded and stuff still needs to move. People still need to ship stuff. So we signed a deal with the airline uh with that airline at a great rate and I think they were their their stock Atlas was in is in these airline indices. It's actually if we were smarter we would have just bought their stock because they were public company and they were in these public these indices for airlines and those tanked. >> Yeah. >> But the cargo airline the price should have gone to the roof cuz they're still they're the price of air freight is going to go crazy. I think I pro I haven't really talked to them about why they signed the deal with us but we got a good deal as a result of that moment where there was this dislocation. I assume that their stock price going down was like part of the their anxiety to like get these things signed off with us. So we got a good deal. it, but it did kind of turn Flexport into a cargo airline. Uh, and we've had those planes ever since. So, it's not our it was more of a tactic than a strategy. Like our goal is to be an asset light technology platform for freight forwarding and work be like more neutral and agnostic and move the cargo on anybody's planes. But we we saw that >> moment.

Has that helped you in other ways? Not from a business point of view, but like learning and being more responsive to customers? I mean it really helped us during those few years of co when there's tight capacity we could serve people and no one else could. It really an education about asset ownership in logistics in in that it kind of turns you against your customers in some ways that can be unhealthy. You have to really overcome that inner that because um your job when you have a plane or a ship is to fill the plane or the ship. It's not to serve the customer anymore. like if the customer's cargo needs to go to a different airport, you'll try to convince them to fly it where your plane is going and then truck it a long distance or you know it's like oh you just wait 3 days the plane's leaving in 3 days instead of going hey let me find you a different option. So you have to overcome that culturally. Like if you're an asset owner, it's pretty hard to be customer centric because your job is like fill the asset or you don't make money. >> Which is interesting because later on you get warehouses, but we'll we'll get to this. >> Uh and okay, so fast forward a couple years and you're looking for a COO. >> Mhm. >> What was the the thought behind that?

>> Yeah. So co it did some interesting things for us. It made us kind of famous and park has the hospital stuff and some other things that we did during that time when when supply chains got dislocated. Um, but it uh so it helped the business and the profile of the business. It financially was we turned profitable but it really exposed some flaws in our operations and we were we were remote for way too long. Um work from home which just doesn't work in our industry maybe in any industry but certainly not in logistics. she needs to be like in person collaborating, partnering on the with the assets, etc. Um, really exposed some flaws like when you we would just prior to co just send a truck to the port, pick up the container. >> Yeah. >> And you take it for granted. But during that time, you couldn't get appointments, you couldn't get trailers, the chassis to go to haul the containers, just not enough capacity. It was like it the operation was really failing in a lot of ways. Um, we, by the way, same for all of our peers and other freight forwarders. Everyone was kind of in the same boat, but that's not how that's not an excuse. We want to be the best. And we didn't feel like we were winning for a period there operationally and like how we serve customers. Our net promoter score like was always in the 70s, which is a great good metric for customer satisfaction. And that like collapsed. I forgot how got to like 17 at one point. It was pretty bad. So, had a lot of operational problems. And I'm um much more of a creative type, >> okay, >> than I am an operators like do the same thing every single day and a little bit better and measure every detail. And that that it's not like I've gotten good at that, but that's not like naturally who I am, what my background is. I'm more just like a freewheing entrepreneur. So was looking for a partner to kind of take that on for me and help Flexport mature and grow. So yeah, that was in that would have been in 2022 when we really like kind of launched in earnest search for a business partner to help me out the operation side of things. And then you end up meeting Dave Clark who would go on to take over as CEO for a period of time. >> Uh but he was originally were you think you were thinking COO or >> was trying to hire COO and met Dave Clark. He was the CEO of Amazon.com. He'd run Amazon's logistics and supply chain for many years. Um, so it seemed like a great fit. Tech and logistics. It was actually in many ways. He was >> And you had the good Amazon hire in 2019, the CTO. >> Yeah. Um, and a lot of people I hired from Amazon. We hired a lot of great people. We still have a lot of good people who worked at Amazon. Logistics and tech, like they're probably the best at I think we're the best now, but I think we keep getting better. But um, yeah, Amazon logistics and tech, that's what they're known for, right? So it seemed like a perfect fit. walk me through how we get from that moment of hiring to you stepping down as CEO.

>> Uh, well, it was kind of an orderly transition when we hired him was like, "Hey, let's have a path for you to become the CEO." It became pretty clear that like I don't know, it's hard for me to picture like what am I going to be better at today run this big company? And was that a confidence thing for you? >> Yeah, I mean, I feel a lot more confident now having seen uh done a much better job uh in the last 18 months than we ever did before. So, yeah, Dave, he was only the he was with us for a year. was the CE CEO for we were co-CEOs and then CEO by himself for 6 months while I became chairman of the board. Didn't work out. I think these hires are really hard in hindsight. >> What was the first sort of sign or first moment you realized oh >> there are a lot of things it was building up. I mean honestly it was the P&L at the end of the day like we just started burning too much money. Some of that was market forces turned against us. like we we overhired. I I approved all those hires like we wanted to go big on tech and just dominate. We kind of read the market. It was like trying to be contrarian. So they had a really strong balance sheet. Um had like 1.6 billion in the bank and everybody was cutting tech hiring in 23 and we felt like let's go lean in, >> put the pedal to the metal >> and and go hire a bunch of engineers. I think we added 900 software engineers in in like 12 months. >> Oh wow. >> And turned out they're all in the US or almost all in the US, Seattle mostly. It was like very expensive. People had a lot of senior exeacts. So we just like overinvested in the business and at the same moment like the freight markets were collapsing. Capital markets got ugly. It like became clear like hey you're not going to go raise we'd already raised too much money like we don't need to raise can't raise more money. And so it was just like kind of a perfect storm of bad decisions of which I was like you know signed off on all of them so I don't blame Dave for that but it became clear we got to change courses here change course here and our customer one of the mistakes that we made during that period was we took that that workflow system I was describing where you have like all these tasks that have to get completed and we had taken this idea of efficiency way too seriously to where an operator here would just do like one or two of these tasks and do those over and over and over again like a robot almost. What will happen? Then you have like 50 different people collaborating on one shipment. That's how fulfillment works. If you go to a fulfillment center, it's the only way it could work. You're not going to have the same person like >> Yeah. >> unload the truck, put away the goods, take the good, put it in a box. Like you break it into stages, right? And so that's where the Amazon background and flexboard background really came in conflict actually because they break it apart into simple tasks and have the same person do it over and over again and like kind of robot human robots almost like or literal robots and and at forwarding it's much more of a service business. There's a lot more exceptions that can go wrong. You're out there in a messy world. You don't know all the assets. You don't control all the things that are happening. You need to like oversee these things and oh the trucker didn't pick it up. Like better call a different trucker. like, "Oh, they're not responding on the API." Okay, pick up the phone. You know, go there. Lost the cargo. All right, drive to the airport. Like, you know, I mean, it's it's a service business for and it's B2B. You spend a lot of time with the customer. So, but especially that that piece um the quality really started to suffer and it's a really good lesson in business and I think most businesses like actually quality costs less. It's very counterintuitive. >> Go deeper on that. And well, in logistics, like all the costs come from you making a mistake. Like like if you file a customs entry and you get the wrong classification code, you're going to spend weeks on doing that with the customs agencies and like you might have license issues or regulatory problems. Like getting it right the first time costs way less than one mistake will undo all your efficiency gains for the month, you know, in logistics. So had to learn that the hard way. our customer NPS really started to suffer. So the board was looking at it and going like, "Okay, you're burning too much money. You're going to have to cut costs and that means cutting headcount." Like that's where most of the costs at.

>> So you got to cut costs and you got to improve your quality. That's a kind of a hard thing to do and our culture had been suffering. We brought in all these new leaders and like the core people that built the business were like >> we grew in insanity >> leaving. We had grown. It's a really hard business cuz it's so global. like we ship to and from 147 countries. We have we have people all over the world. Like and so the board kind of looked at this problem and said like this is a problem for the founder of the business. Like you need to come back. Nothing against Dave per se, but it was like very clear like, okay, you're gonna cut people and tell them you care about the culture and tell them I need you to work harder to solve like customer problems and do a giant reorg back to the way we'd always been organized that led to all the growth, which was operator would take a shipment end to end and own all the tasks, own that. And just like the board was like, Ryan, we need, you know, you got to come back and step in and do this. And I had already taken a job at Founders Fund as a partner. So it was a little it was it's so embarrassing for me like I'm like I just took this job and now I got to go back like what am I doing? I got to follow through on my commitments. But it was obviously like I'm honor bound to to make Flex Bar work make it successful. So I I was very happy and excited to come back. >> What happened when you told PG you were stepping down? I didn't tell him till later. I forget when, but like after I I was the chairman, so I think I was already at Founders Fun. He was pissed because he thought I should go be a partner at Y Combinator instead of Founders Fun first off. But I went for a walk with him when he came back to Palo Alto one time. And he um he asked me why he did it, why I stepped down. I said, "Well, I thought I think Dave's going to be better at the job than I am," which is genuinely true. That's why I did it. It wasn't cuz I was burnt out or something. I just thought he would be better for the company. thought we needed to mature and be better at operations and better at building tech than we were. And I thought he'd be better at that. Um, and Paul had this amazing line. He said, uh, that's like saying this other guy would be a better husband for your wife, might be true, but like don't act on it. Like this is your company. You need to stay in there. I thought that was super hilarious. And he then told me, "Okay, if he's better than you at these things," and he asked me, "Is this your life's work?" Heard you say that earlier. "Is this your life's work? Is Flexport your life's work?" I was like, "Yeah, it is." He's like, "Well, then you need to figure out all the things that he's better than you at and go learn them. Go learn them from him. Learn them from other people. Like, figure out what are these things that you think he's better than you so you can be the next CEO after he steps back like Larry Paige did uh after he came back. He hired Eric Schmidt for a decade and then came back." He's like, "You need to go learn those skill sets." But it happened much faster than uh PG and I could have imagined on that walk.

>> Did you go and learn those? Was there a conscious effort on your part? >> I don't know. They all happened so fast. Not really. Um, but I've learned plenty of lessons along the way. Yeah. >> Walk me through some of those. >> Well, the number one thing I think is um I learned from Toby from Shopify and Brian Chesy who've been good advisors for me. The micromanagement is not a bad word, it's a good word. You got to like stay involved in all the details and that's very hard in my company. were like big and sprawling and do a lot of stuff, but need to be way more hands-on. Do lots of skip levels. Don't trust don't like hire big executives and then just trust them. Like treat them like a black box. Like I had when I heard him say this, I was like, "Oh my god, I committed this sin at the highest possible level, right?" But like don't do that at any level. Like it's all my company. Audit everything. Inspect everything. It's you can't just like give people too much leash to run things their way. And if they disagree with me, like sure, I want to I want to debate it. I want to hear from them, but like at the end of the day, I know I'm going to still work at Flexboard in 10 years. And I don't know if that's true about anyone else. And that that's that's something I heard from Chesy. And I was like, you know, it's like it's probably true. Like I hope that my team stays and I got the team for 10 years, but I'm positive that I'll be here. And so if they really don't like the way I want to do something, like, okay, no problem. But it's my company and like they can move on. And like that's a level of confidence that I didn't have prior. >> I heard from people that we have in common that you when you came back uh you were a different CEO and you were like founder mode before it became founder mode. >> Yeah. I mean Jes hardcore I think I try learn but but I didn't have as many frameworks for it. I was just like oh I got to do what I have to do you know and there was a lot of stuff that I really didn't understand about the company. I had way too much committed all these sins of just like okay there's a problem in some department hire a big exec let them and then don't get in their way like that is the kind of the corporate way that most people teach or like most people expect like this is how a company should be run micromanagement is a bad word to the first person I ever heard that from that like it's not a bad it's like a great thing get involved you know why would you ever want like micromanagement and attention to detail the same two words for the same thing right attention to detail is great like your boss is involved in your stuff Like that's only a problem if your boss is an idiot and out of touch and making bad decisions. But like if your boss like genuinely cares about your work, is involved in tune, knows what you're doing, has good judgment, like why would you not want them looking over your shoulder and participating with you in what you're doing? So but is a much I don't know. I don't know. I've never worked at another company really, but it's um compared to other businesses, I think far more complex. So, it's hard. It's really actually quite hard for me to live up to Chesy's ideal of like I think he says like if the company should only do as many things as the founder can be personally involved in. It's a nice ideal. It doesn't work at my company. We're like in all these different countries and all these different modes of transport that like one person can't actually keep it all in their head, but I try my hardest. How do you hire differently? What do you look for differently? And then how do you integrate people differently now as a result of these experiences?

>> I just like only promote from within except for very rare cases where just like really can't find the person. Uh and then I spend a lot more time with new hire. I've only hired one person actually from external in the last couple years and I spent just like loads of time with him and I told him he's not allowed to make any decisions for 90 days. >> How did that play out? It was perfect honestly. And he even told me like maybe I should have done more time because I remember he told me at like day 88 but no he told me day 91 that if I had let him if I had told him 80 days he would have made different decisions than he made and like even those last 10 days there was still like learning and taking things in. You have to approach startups if you're an executive and you're joining a company you have to approach it with extreme humility. Like these are smart, really smart people. Like some of the smartest people I've ever met have worked come through the doors of Flexport or still work at Flexport. And we've been obsessed with the problems that we're working on for a decade. And like the idea that some big shots could come in here, this is no knock on any particular person. It's just like a classic like what are the odds that anyone could come in and know, you know, on day one do figure out problems that we couldn't think of or solutions that we couldn't think of. It's why like no investor ever gives me useful advice really because like I not sure they can't about people and some high level stuff for sure or capital markets but like business like strategy like how could they ever know my business better than me? I obsess about it like every waking hour. >> I'm always skeptical of people who run businesses or even government and they contract things out to consultants and it's like well how is that consultant know your business better than that scares me. >> Excitement. Yeah. uh PJ wrote about that in his founder mode. He's like, well, if you're a professional manager, your mindset is like you can run any company. So, you go in and and in that world, you shouldn't be too involved in all the things cuz like, hey, you know, you don't you don't know about that particular domain, that industry. So, just trust the people that are already there. Your job is kind of babysitting it all. But that's sort of like founder founder mode as they come to be called is like you should know all the stuff like more or less. >> You were at that talk. What did you Were you inspired by that? What did you take away from it? What was the moment that really like solidified things for you? >> My god, I wish I could I wish it was recorded. He went on a rant like four three hours just like he's a very intense guy. I took like four or five pages of notes. So, I was definitely like enthralled in the back and like a lot of stuff deeply resonated, but I'm already um yeah, I've shared already some of the specific things. A lot of it is like yeah, just be way more involved in the day-to-day and if the people don't and do a lot more skip levels like meet the people who report. Don't trust the managers. Not in a bad way. Like, you know, I'm here to help. Like, actually, I'll when I go skip level meaning like go talk to the people who work for I talk to anyone. I've I've talked to 40 or 50 people every day on Slack or text or phone um at Flexport. And if I talk to somebody who works for you, I'm not like trying to undermine you. I'm going to come back to you and be like, "Here's what they said. Like, here's what I think we need to do." And if the person asked me to keep it confidential, I'll do my best. But, um ultimately, I'm trying to solve problems together with my exact. So, you know, if people have a problem, thus far, they haven't. But if someone had a problem with that, I'll be like, "Well, it's probably not a fix. This is my company. I'm going to talk to anyone I want in this company." I find it interesting cuz you remember that telephone game in like preschool where you sit in a circle and there's like 10 of you and the teacher like passes a message to some kid on the right and then it goes through 10 kids and by the time it gets back to the teacher it's like this completely different >> sentence in meeting and organizations sort of filter this way unconsciously. Nobody's trying to make a mistake. Uh but people just filter information differently and what's important to somebody on the front line might be different to the manager to the team leader to the all the way up to you and so by the time you get it it's like how accurate is this information >> and vice versa like he's like how what are the odd the people don't know what I want >> exactly and so the other way just as well right it's an interesting way to think about it >> yeah they're lean like lean in way more than I realized into communications and enablement training like we've and doing the last year huge amount of like strategy sessions and teaching and like traveling the world and doing these like little almost like a little music festival. It's the wrong analogy but like you know music festival they give you like multiple tracks that you could you know you go to see different acts like we have that we'll come to different offices and have different tracks to learn about different things. I think it's very important that the people have agency. You show up in an office and you're like, "Okay, we're going to do a half a day of training." You have to sit through like four talks in a row, you lose your mind. But if I give you a menu and you're like, "Hey, there's like four talks happening right now and there's 16 talks, right? For the next four hours, you can just choose your own adventure. Which talk would you want to go to?" People all of a sudden like, "This is amazing." Um, >> get to go learn about. And our business is super interesting geographically. We're in all the different countries and um almost all the countries we different modes of transport, different technologies, there's like it's actually an incredible thing. So if you give people agency so we trying to do that to like overcome this problem of I just realized I I we have an I think we're a pretty well-run company. We have everybody writing teams like write these documents of what their strategy is, what happened this month, like these six pager kind of we took this from Amazon years ago before we ever heard Dick Clark. um the six pagers that you would write about updates. Well, I read them all. I get access to all of them, but no one else does. A couple other people on the team. We're not that secretive, but just like this not part of the the structure is like they don't disseminate. Uh so I was just realizing like no one else has there's such incredible things happening at this company, but nobody knows about it or like not enough people know. But we started I'm trying to work on that problem more as kind of to overcome this telephone problem. It's like I just realized oh like no one else has the access I do. >> What's the cadence and frequency of those six page updates >> monthly? There's about 26 teams that do an MBR monthly business review and a six pager and then that's just like it doesn't I think we cap it at six but it's the six isn't that important. It's mostly um honestly I actually think the six pager is sort of maybe wrong. Uh, I'm not sure, but it's more how much time it takes to read, >> right? >> You know what's Twain say? Like, uh, it's harder to write a six-pager than it is to write a 12-pager. >> Yeah. >> For a lot of businesses. And so, you're like, if you had more empathy for the people who are working hard, you'd let them write the 12-pager and spend more time reading it. Uh, >> but it turns out you >> that six pages seems fine. Um, so we have, I think, 25 or 26 teams that write those monthly and then they do an annual plan, uh, two-year rolling, but once a year update. Okay. >> Chesky does his twice a year update. >> Okay. >> I don't know if that's secret, but uh I haven't moved to that yet. >> You mentioned the word obsessed. I want to talk about that for a beat before we move on to tariffs. What does that mean to you? >> Oh, it's just like I can't stop thinking about flexport. >> It's just all the time. It's like consuming. >> It's a problem. It's a very addictive industry. It turns out it's always on. It's always different. >> Every day is unique. You got a front row seat, you backstage pass, you see what's happening in the world in an insane degree, and there's infinite problems to solve. Ours and our customers and our vendors, like I mean, it's just like a crazy landscape of problems to solve. So, yeah, it's a it's a pretty awesome industry. And I think one of the things that we've done well is show people that actually this thing that looks boring, you don't think about it, actually a really interesting place to build a career.

Let's talk about what's going on in the world. Let's start with tariffs a little bit. And I think it would just help orient people for the conversation. What are tariffs? When do they apply? Is this a question or is this not? Tariffs, I think it's an Arabic word. It goes back a long time. Governments have always had tariffs thousands of years. Control their borders uh and make money. It used to be the primary source of revenue for most countries is tariff. Uh in the United States, that was for sure true. Uh the income tax wasn't introduced until Abraham Lincoln in the Civil War. And uh yeah, it's the percent of the value of the goods that are imported that you have to pay to the US Treasury. Primary reason for it, I guess there's a few you revenue is real. Um in fact, Trump's chief economic adviser right now, the chairman of the council of I don't know if he's the chief adviser, but the chairman of the council of economic Adviserss um is a guy named Steven Moran. Um and he in his current administration he said that in the Trump won first term that the tariffs on China paid for onethird of the tax cuts that Trump did. It's pretty meaningful. I mean it's an it's an interesting alternative way to fund the government via tariffs instead of income tax. Like I'm not sure I hate that idea. I don't know what would happen. It's uh so it's a source of revenue is very very important and valuable to the government. It's a way to control protectionism for companies. That's been a major reason to use tariffs over the years is to protect US businesses from competition. In part just for employment reasons, in part for national security reasons like you want to have certain industries be successful. Steel has always been one of these and autos most comp most major countries like believe their auto industry is like important not just for jobs but for armaments. Like you make tanks. your Ford factory during a war etc. So yeah, those are legitimate reasons for terrorists.

>> Why do they matter in the context of like the global politics? >> Obviously the increase of the cost for companies that are sourcing goods and we've become so globalized our economy is just like the supply chains are unfathomably complex and interdependent and they're full of independent actors making their own decisions about how they want to do things. And um there's these component subcomponent ecosystems of supply of moving goods all over the world and doing assembly and production in different countries and bringing things together. So it introducing massive changes on short notice to the tariffs has caused borderline chaos. Certainly a lot of disorder in global supply chains which ultimately affects all the stuff that we buy. Most it's not true that America doesn't make anything anymore but like a lot of the kind of consumer goods that are all made over a lot of them are made overseas obviously. I mean you talk to a lot of customers are people onshoring or are they just sort of accepting or or what's happening? >> Well that's the thing you have to judge policies not by their intention but by their outcome like one of the mistakes that a lot a lot of people make is like well there's good intention so therefore the policy is fine and that's just not right and these tariffs have had the opposite impact that Trump would like. I think there's intention there's some dou some validity to it all like some of the things I said from national security and employment other things but the um the result has been thus far and it's pretty early in the cycle we're only a couple months since the liberation day or whatever but the um I've met way more I've met infinitely more I haven't met anyone who said oh because of these terrorists I'm going to start doing production in the US I've read some headlines on it and they've done some white house announcements and things but like those aren't my customer base and my customer base met at least a half a dozen companies that said stop production in the US because of the cost of the components coming in. >> Oh, interesting. >> Uh, and there's kind of like three categories of these, two or three. Uh, one is people, for example, we have a bicycle, a company that makes bicycles in the US, kids bikes. And for some reason, they made an exemption for importing bikes that are duty-free, but not bike components. So their cost went way up and their competitors from overseas didn't. So they are cheaper to manufacture overseas. So they're moving their factory that like has been a well-known brand, reasonably well-known brand known for being made in America and they're like doesn't work anymore. So that's one example. Um two is if you're ex doing it for export, you're exporting goods, you're paying your costs have gone up on the import of the goods of the components doing assembly in the US and then exporting. you're better off setting up that factory now somewhere else where you don't have the cost on the imported components. Third would be machinery costs. So like fact a friend of mine was setting up a line for a fab like a semiconductor fab um and just like the machines are made in Germany for that particular line and the cost was going to go up 30%. He's like, "All right, I'll just build this line somewhere else in another country."

And there's all sorts of like hedges and ways around this. Like one would I think a bonded warehouse is you don't actually technically pay the tariff until you take it out of So it's landed in the United States, but you don't pay the tariff until it comes out of the bonded warehouse. >> Yeah, it's temporary though. You're still going to pay the tariff. So it doesn't really work for like changing the nature. But bonded warehouse will let you make a bet that tariffs are going to come down. So when tariffs were at 145 on China, we helped a lot of companies move into bonded warehouses cuz we all predicted that it would come down from there. So you're better off waiting and only enter the goods, only exit them out of the building, but enter them into the US commerce after they've after the tariffs have come down. So there's some there's some hacks around the edges. There's a lot that you need to do. If before you didn't care about valuation, the value of the goods, if it was time zero, who cares? >> Yeah. But now all of a sudden if it's times 30% or whatever number you care a lot more of how is it valued. >> Um and there are all kinds of legal ways and you need to get really great advice on legal advice or ad trade advisory on how to do this. But there are ways tracking the um you want to be able to really track every single component of a product. Where is it made? Uh and what is its what is its cost. So, like if you have a cow, there's steel and aluminum duties right now that are really high. Forget the exact number, but they're quite high. I think 50% or more um on on Chinese made steel and aluminum. Maybe on all I should know all these details. It's very complex. Um, but if you have a couch that has steel and aluminum, you don't want to pay that 50%. You don't want to pay that high duty on the entire couch. You want to only pay it on the portion that's steel and aluminum. So you really have to build this great we call it a product library uh which flexboard offers this technology product. So you you want to be able to track all these things at the subcomponent level. Where's every item made? And then there's all these new regulations that have been coming out for many many years. There's one called the Weaguer Force Labor Protection Act requires you to track the cotton anything cotton where was it made uh specifically like what down and then the EU has a new one's very similar but any forestry any wood product you be able to show where the wood was grown anywhere in the world track that >> this is insanely complex >> yeah carbon they want to know the carbon border adjustment factor I think it's called that they want to know all the input that all the carbon inputs of every single subcomponent of every product in the world, how much carbon went into making it so they can measure the carbon footprint. Um, and then you coming soon, um, you're going to have to provide a like a QR code on every item that you can scan and they'll tell you the carbon footprint. So, the world just keeps getting more and more complex, which plays in the hands of customs company, companies like Flexport because like cool, you need technology to track all this stuff. Um, kind of classic regulatory recapture type stuff. We're not lobbying for any of these things, but uh >> and you're the most techforward of all the companies >> kind of we're the only one founded only one in the top hundred in the world founded after the web browser was invented. A lot of good companies, but they're not tech companies fundamentally. So, we have to uh we have the the world is our oyster. we should win at all.

Are there any sort of creative strategies you've seen any of your customers use that you're like, "Oh, that's novel or interesting." >> You have to be careful. There's um there's some illegal stuff that I see and not so much at our customers. we talk out of this, but um one of the temptations that a lot of people are falling into right now is letting your factory import the goods for you and then buying it from them in the US and then not turning a blind eye if the factory cheats on the value of the goods or their classification. That's kind of rampant in the industry right now. That's just a matter of time before I would imagine who regulates that >> Customs and Border Protection um and DOJ their uh their problem is what the factories will do is set up a shell company, not in the US. You don't have to have a US entity to import goods into the US. >> Oh, interesting. >> You can just work Canada or most of Western Europe. So, you can just they set up the shell company in whatever country. It could be China. It could be anywhere. um that company registers not as an LLC or any kind of legal entity, but they just register with CBP with customs. They import the goods into the US from abroad. If they cheat, they just disappear. And C customs doesn't have agents in China to go chase it down. So then they just do it again under a different shell company. And that's a huge amount of what gets sold on Amazon. It's not not I'm not saying it's fraudulent, but is these foreign registered companies. It's definitely like a gray area. Do you think they'll bring that back? >> I think they're going to crack down that. I think they're going to shut down that. Um, >> and make it so you have to be a US entity to import. >> That's a created LLC. It can be foreign owned LLC, but you'll have to have like an LLC that can be held accountable. >> U, but it's very unclear exactly how it will be or should be structured. Like, does it need to have employees who could face jail time? Like, what's the, you know, what does it need to have a certain amount of cash in the bank that can be taken if there's fraud? There's a lot of ways, but I have no idea what's going to pass. There's a couple I understand there's a few bills like looming but I haven't read the text of them yet um in Washington that would shut down the ability for foreign companies to import or put in new requirements for it. So that's like one creative thing. Now what'll happen is you get offered as an importer. You've been buying these goods from your factory and then all of a sudden they offer them to you for way cheaper than the duty alone. You're like hey it's not my problem. I just bought it in the US. Guarantee you like you are liable for that. Like as a warning, look at the camera. CBP DOJ has announced it's their number two priority in white collar crime division of the Department of Justice is um customs fraud. Healthcare fraud number one and then customs fraud number two.

Are there any other creative strategies we can sort of put out there in the world today that you've seen not your customers use? >> Yeah. Well, the good strategies, let's not talk about the illegal ones anymore. I mean, but be careful. Make sure you're getting good advice. Um is have that database, know all the subcomponents. There's a few things like valuation. You can there's a thing called first sale. I won't bore you all with the technicalities of it, but there's it's called first sale, which basically says that you pay um the value of the goods based on the first time it was sold, not the price that you paid at import. So, there's legal ways to do that. If you bought it, like there was a middleman or an agent that bought it in China, marked it up to you, you can actually import the goods at the price they paid, not the price you paid. You can deduct the portion if you file it all correctly. And don't quote me on this because you want to get good legal advice, including from Flexport's team, but you uh you can deduct the portion that's USmade, but you have to you don't just get to automatically do that. You have to like file the right paperwork and stuff. And then importantly, if you import something, you pay duties and then you later export a product with the same classification, you're owed a refund on pass. >> Okay. You get your

import back the imported duties you pay.

Yeah. And so every year in the United States, 7 billion goes unclaimed. And that was pre these new tariffs. So it's presumably much higher. Yeah. So we we help companies with that. We've been getting people like big checks back that haven't and you can go back five years in time. So that's like a really important one if you haven't done it's called duty drawback if you haven't done that. And other countries offer this too. Most countries.

So yeah, there's a lot of strategies. In fact, the one thing that people should really know is your data on all your past transactions with the US government are with US customs are your is your data. You have the right to it under the Freedom of Information Act. So, you can pull your last 5 years of transactions from CBP. Now, they won't they give it to you uh in a very unusable format. I think like giant CSV dump basically, maybe even on CVS, I forget, but they give you like this not not useful. It is still your data, so it's useful, but you have to know how to clean up. So, we've built this interface that like visualizes all of this for you and shows you every transaction you've done in and out of the country and then our experts kind of walk you through and be like, "Okay, here's our checklist. This is ways that we think we could maybe get you a refund."

Now, Trump has lost the lawsuit on these new duty on these new tariffs. And they they is going to appeal. So, the oral arguments for that start on July 30th, next month.

Is that at the Supreme Court level?

No, it's the level below the Supreme Court. So presumably if he if he loses again, it'll get appealed again to the Supreme Court. So that's I don't know enough how this works, but towards the end of the year is my imagination. Um is my guess that it'll go to the Supreme Court.

Either way, it'll probably end up there.

Probably it ends at the Supreme Court. Yeah. Um that will be an really an interesting case. If they lose again, everybody gets a refund on all their duties, but it won't they won't just refund it. You're then going to have to file paperwork.

Of course.

Yeah. They're not going to like here's a magic check in the mail.

Yeah. So, it's going to be And then it's already takes like about a year when you get one of these refunds from the government. Takes about a year to get your check.

Yeah.

When every single company in the country

Applies for a refund, you probably won't see the check for like three years. There's going to be so much fraud. Oh, man. It's going to be kind of a total mess if they lose that lawsuit.

Where's traffic now? Is it back to normal? Is it down? Is it

Volumes from China collapsed 60% down when on April 9th the day the duties hit stayed down for 5 weeks what and then as soon as he relaxed as soon as they the Trump administration relaxed the duties on China to 30% instead of 145 it surged to 80% above pre-tariff levels that lasted for two weeks and then it came down it's still above pre-tariff levels I haven't studied enough the market data and now I'm looking at flex export data and we have got 30% growth over last year. So then I start to figure we're actually up again from the trough like it came down and now we're back up but I think that's a flexible thing. I think the market's shrinking again from the peak that we hit postcoid but uh our own volumes were like 30% year-over-year growth.

What are the markers you look for that are like public information or that you have as proprietary information that are sort of indicators like the economy is really good. Oh, we're gonna hit some trouble. You know, one of the things that Buffett has always said is he looks at intermodal rail volume as a leading indicator for the economy. I'm curious like given your aperture into everything.

I've never been like a macro person. I'm not an investor like that. So, it doesn't matter to me that much. I guess it's I mean Buffett is right like the logistics, but it's the international stuff is so um seasonality. There's a lot of weirdness in lately in this tariff data that is just like I don't know if that means you want to know what the consumers are doing ultimately. What are they buying and selling and a lot there's just a huge amount of noise like they didn't ship that much less or more because of consumer demand. That was like you know cost and inventory forecasting and so I don't it's probably if I had access to any data it would be the consumer you know sales data from all the customers and inventory levels. I just don't know. I the sales data fine. I like public companies report on their sales inventory data. I I've never understood like the US government publishes these inventory um metrics every month. I I where do they get that? I have no idea.

Um I haven't gotten any good economists to answer that. Look how they run a survey. I'm like

Interesting valid data. Is that accurate? I know how hard it is to get accurate data out of my own company. So the idea of like government economists getting accurate data about all of the companies, I'm like always very skeptical on these things.

It's 100% correct. I was so skeptical on like big government data sets.

One of the things that you said that I came across that really stood out for me was when you're designing an operation, you're choosing your bottleneck. If the bottleneck appears somewhere, you didn't choose it. You aren't running an operation, it's running you. Double click on that for a moment.

Bottleneck is going to be, you know, the point, the choke point, the point at which the um the limiting factor. And I think you're in a in a company, your bottleneck should always be customer demand should never be like bottleneck. Oh, I can't. Right now, we're bottlenecked in our customs team. Our trade advisory team, the people that are helping solve these problems that I was describing around how much dues you owe and how to minimize it, how to be compliant. That team is super bottlenecked. We didn't plan for a world that would require this much money, this much expert headcount. And it's hard to find these types of people that really know the space. So, we're bottlenecked in a place that we didn't plan. The bottleneck should be I don't have enough customers wanting my thing. Uh you'd like that to be in a B2B environment. That should be the bottleneck. But if it shows up somewhere else, yeah, I'm not in control right now. It feels very uncomfortable. I'm like, do I want I don't want to just hire more people, especially if it's not if it's a temporary surge. So what uh it feels out of control as it um and we need to get get our handle on that. And I I hate that. I want my problem always to be like, "Oh, I need to be more creative in my marketing and sales and like work on the pitch and the user experience and the things there." And so, yeah, if you're bottlenecked in how much space, we've had a number of it. This is um been we've had bottlenecks move all over the place during CO and and since um how much space there is on ships, there's been a bottleneck for us even as recently as last couple weeks with this huge surge of new bookings following the relaxation of the terrace. Um that's not right. like there should not be a bottleneck for I can't get cargo loaded on a ship and therefore I can't help the customer or the customer's getting this huge delay and getting loaded and getting their cargo delivered. It's a it is a fact of the industry right now. But that um bottleneck shouldn't be in a warehouse environment. You know, you've got picture this flow of goods at the loading dock. You can choose where to put the bottleneck on in in the flow of those goods. loading dock, unload, put away, pick, pack, outbound, you know, and and ship again. Um, and the the way that Amazon does this, as I understand it, is they they try to make the bottleneck the most capital intensive piece and then they overstack it so that there's plenty of capacity on that whatever the machine is probably that is capital intensive, that requires a lot of capital, have like lots and lots of that machine. So that that way they're never it just keeps flowing the goods the you don't hit the bottleneck. You don't actually hit and if you do it's cuz oh okay, didn't nothing I could do there is like more capital needed rather than if it's labor you're like cool just throw more labor at it that should never be the bottleneck. It's only where oh I need a lot more capital here even than I planned and then they overinvest in capex so they don't hit the bottleneck

Because you want the most asset intense part sweating just non-stop.

Yeah. The asset intense part should be always should be operating. No, but you should have excess capacity there. That way you don't get stuck with this machine holding you back like you have extra machine but it's it's a um that's a strategy for people with a lot of capex. That's Amazon's model with plenty of capbacks. Uh and I'm not sure that they do it right. Like one of the things that they do that pisses off their merchants is they have this endless line of trucks at the warehouse. They can't unload. They've pushed the bottleneck often to the unload piece. the loading docks and truckers and can't get appointments and stuff. So, I think that'd be wrong in that framework that like they should allow the goods to flow through. It's a it's fascinating world of like you know web deming is the um kind of business philosopher of quality. He's written a lot on um statistical process control and creating even flow through a system that you don't want to have these spikes in uh of flow because it makes planning really hard and labor and assets or people become idle.

You don't want any variance.

Yeah. Eliminating variance is like lean six sigma type stuff. I'm I'm It's one of these things that doesn't come naturally to me. I'm like trying to study it and take an interest in it but it's not my uh natural forte to go deep on this area. I do find it quite um intellectually stimulating but it hasn't it's not like my training and background.

Is that like the whole Toyota production system thing?

It is. Yeah.

Do you guys use that

A little bit? Yeah. I mean the Toyota production system I think there's like two companies that have taken it really really seriously and advanced it in the United States. One is one is Amazon and one is Danaher manufacturing company. The idea is a couple things. One is one things that we do that is very Toyota production system like is in the Toyota production system and I've never been to Toyota. I got a proper tour of this. I'm a bit of a chauffeur knowledge like repeating what I've heard and learned a little bit from a distance but is um the the worker the the line worker follows the part down the line and does many of the steps operate several of or many of the machines instead of like in a US production Toyota auto production each guy does one job and kind of more robotic like I was describing earlier and you know our model is very similar to the Toyota one in that sense like the same worker follows this shipment down the line as it were doing all the tasks until it's complete. Um that that I think Toyota kind of pioneered that that piece of it. Better for the worker for sure. You like have more agency. You're more involved. You know more of the details. You're like your career is more interesting. You're learning all the steps. Um but they really the other thing that Toyota really does is empower the workers to like elevate problems. It's right. They famously have the rope they can pull to shut down the whole line uh if things aren't right and take quality super seriously. Quality costs less. I think that comes from we deming. So it's all it's all a very interesting area uh that we tried to apply and this is where I needed help at some point. He's not like a natural on these things.

You mentioned chauffeur knowledge which is uh such a tell that you're a Charlie Mer uh devote. I would love to hear some of the lessons you took away from uh reading him or interacting with him.

I got to become friendly with Mer towards the with Charlie towards the end of his life. I went to his 99th birthday party late last year actually um before he passed. I got lucky. I got really in fact his um the person I'm closer with is Peter Kaufman who's the author of Poor Charlie's Almanac and that's like one of my favorite books. And when I lived in China, I got a copy of that book and really it's like a coffee table but Stripe just re-released a copy of it. It's now available in print again. It used to be kind of out of print and I had that book and I loved it and it really inspired me. Mer has this really wonderful essay which I actually discovered on the Y cominator website um called the art of worldly wisdom or something to that effect. If you if you Google munger worldly wisdom you'll find it um and it's a US it's a speech of that he gave at USC. It's like a graduation speech.

We'll link to it in the show.

Yeah, you should link to it. It's wonderful. And it's about this idea that there's like 300 domains in the world of knowledge. 300. It's kind of an arbitrary. I don't I don't remember if he says 300 or not, but there's some number of limited quantity of domains and that in each of these there are two or three big ideas that carry all the 80% of the freight as he said it. Uh and so if you were to go and learn those two or three big ideas from each of the disciplines up your alley, I'm sure you've written about this before. you have all these mental models and you have lots of stuff to hang things on. Uh and then also a lot of the innovation in the world comes from taking an idea from one domain and applying it elsewhere or a mental model from one applying it elsewhere. So I learned about this when I was like 25 or so living in China and that really set me off on a lifetime journey of like trying to re become like learn as many of these domains as I could try to be worldly wise. Um and so I I I love that. It really inspired me. And then one day I was at a party at a house in Silicon Valley. Not like a fun party but like you know gathering a cocktail event or something. And um I didn't know anybody and I this older guys older gentleman was there and I struck up he struck up a conversation. He saw me not talking to anyone or something. We started talking to each other and he at some point asked me what my favorite book was. I told him it's poor Charlie's Almanac. And because he's like why do you like that book? And I told him all this and he's like well I know that book really well actually. I'm the author of that book, Peter Kaufman. And so he's like one of Munger's really good friends, uh, for many, many years. And he's the one that put together this almanac. So he just thought that was so funny that he started bringing me to Charlie's house and like tells Charlie the story. One of my favorite things that Charlie told me at one of these dinners at his house was uh when I told him about Flexport, he was like, "Oh, you had a great business because the key to success is dumb competition." which that's kind of insulting. We have some really smart competitors, but I I always say that to people who are like building AI companies. It's just like what a nightmare. Your your competitors are literally AI geniuses. Like you should find a way to apply AI in some other domain. So you're not competing with the smartest people on planet Earth because like the odd it's like trying to be a boxer. like you're going to you might beat all the people in your local gym, but at some point you're going to run into uh somebody bigger, stronger, faster,

Jon Jones or somebody's going to kick your ass.

Yeah.

I don't think we're the smartest people in the world, but within our little old school industry, we can we can do some damage.

Funny story about Peter before uh he's a mutual friend, yours and mine.

And the way that I met him, I was at a Bergkshire Hathway meeting >> and I had went up to the uh the hotel, you know, naively. this my first meeting ever, you know, I just show up and I'm like, "Can I get a hotel room?" And the person behind the counter starts laughing and I was like, "Oh, no problem. I'll just sleep in my car, you know, whatever."

And Peter walks up to me and he's like, "I hear you. You need a hotel room." And he ends up giving me he had a block of rooms and he ends up giving me one of his rooms.

That's amazing.

Which is the perfect Peter move.

It is totally. And it's the most perfect embodiment of one of his phrases, which is go positive and go first.

Yeah. and he we ended up striking up a conversation. Uh we had a mutual friend who joined us in that which was Peter Bevlin and we just ended up chatting for a long time and he's like if you're ever out in California, you know, come see me and I was like oh it just so happened to be there next week. I had no plans to be there at all. Right. But

You go on air.

Oh yeah, totally. And that struck up my friendship with him which has been he's been an incredible influence.

Yeah. Yeah. Okay, that makes sense. That's hilarious cuz he loves inventory.

Yeah. And he had he also had an inventory of extra rooms just in case somebody needed one.

Actually, walk me through that. Why why does he love inventory?

Well, because everyone else hates it. I There's a contrarian element to it. Everybody went to business school and learned that extra inventory is uh evil and carries working capital costs, etc. But he's in his business, which is airline airport airplane parts, avi aviation parts, uh having excess inventory means you can provide the part on demand. Any part you have it, no one else does. So people are willing to pay a real premium if you're especially in aviation if your line is down or your plane's not flying. We have a whole branch of logistics called air aircraft on ground logistic AOG aircraft on ground. People will pay any price. I once um flew an this is not what Flexport does, but I know this guy's a billionaire and his plane, his G650 Gulfream uh private jet broke down in Antarctica or uh in southern Chile, like right next to Antarctica. Somebody crashed it uh like a tractor into the wing and he called me. He's like, "Can you get me a I need this? I have the wing. I need to fly it to Chile. I will pay any price." like connect you with this guy and he told us like 10 times like if there's a way to pay more to get this there faster we will do it. And so being the guy with all the parts uh for that type of customer you think about it you have this like in some cases you know 10 million to $200 million plane or more >> sitting grounded from a like $1,000 part or could be 10,000 you could charge 100k for that part and they're going to be like no problem.

Yeah. And inventory I mean inventory should be not that expensive to keep around but it depends if it's perishable like the co was a great example like people the hospitals didn't have enough inventories all run just in time which is just ridiculous way to run a healthcare network just in time because in a crisis so you better have some inventory but the problem I think becomes that these the PPE the mass and stuff has a shelf life and expiration load so you can't just build a warehouse

Totally

Full of this stuff and let it sit there you only need to

Pull it out 20 years

Yeah, it won't work so it's a hard problem similar with like military like how much artillery do you want to just produce and just have sitting around just in case there's a war but like you want some when there's a war you you don't want to start your production then

Are there any other Peter Kaufman lessons that stand out

So many I don't know if you know hopefully he publishes more books at some point he's written a lot of stuff that he keeps offline I really like his um competitive exclusion principle what is that it's basically it comes from biology and it's this idea that um in a niche in an ecological niche ecosystem there's only a two two species can't occupy the same niche one of them must out compete the other one if they're like for life they're both occupying the exact same niche one will win the other will get pushed aside go extinct or have to adapt and so in business the way to apply that is like you should be able to do all the things that your competitor can do and you can't leave any room for them to exist because they can do something you can't do the opposite of this dogma that you should only do one thing and do it really really well. It's like actually you should spread out and make sure there's no room for the other guy to stick around and maintain a relationship with your customer just because you're not able to do that thing. And we still have some of these. I mean we it's very hard to do everything. Well, he calls it's a there's a Wikipedia article about it the competitive exclusion principle. I think that's pretty interesting. I learned from actually just generally Peter's whole thing is um is the worldly wisdom idea. taking

Ideas from biology of physics and what's his other one is the um formula for kinetic energy is 1/2 of mass times velocity squared we use velocity as like our main word at flexport velocity

Go deeper on that because velocity matters more because it's it's power law right

From the kinetic energy formula it's a square function and mass is only linear and so this is why um in football American football is hitting so are knocking. Often it seems like this little guy can just like create more way more energy. Well, they are. They're velocity. They're running really fast. Yeah.

It's more important than how big you are. It's how fast you're moving.

And now velocity is different from physics than speed. Velocity has a vector. So, you got to go in the right direction in business. But it also it's sort of an explanation for why startups out compete. Big companies have way more mass, but they start to become slow and bureaucratic and three guys in the garage can often out compete. It it's interesting to sort of visualize as like the incumbent being fat and you being, you know, skinny and quick and agile and you kind of want to run upstairs and it sucks for you but it really sucks for them.

Yeah.

That's how I sort of think about that which is like how do you how can you cause pain in a way that like it's going to suck for you but it sucks more for them.

What are some things that you got from Peter? Well, the go positive, go first thing is just such an unlock in life. And the demonstration like I'd never talked to him or or sort of like had any conversations with them at that point. And it just stuck with me. It st

This example is from the elevator.

You're stuck in an elevator with someone. Most people will say nothing,

Which is like kind of polite to not say anything, but if you say hello, they'll actually turns out most people will say hello back and be nice to you.

And then we don't do it because like the 2% of people will sort of scallow at us. Yeah.

I don't really want to talk to people at elevators either, but I get that. Yeah. I mean, it's an interesting uh point.

Well, now everybody's on their phone, so it's it's it's a different world. Ryan, we always end these interviews with the exact same question, which is, what is success for you?

I'd like to be worldly wise. I try to keep learning. I'm lucky to have that learn that value early on in my life that learning is the most important thing. I mean, now I've got kids, so it's love, but learning is right there as a close second for what my number one value is. That's why I like Flexport so much. just like a really incredible vehicle to learn and the best way to learn is to solve a problem, you know, be really engaged and do things and solve problems for people. In the business context for Flexport, we want to be the number one logistics company in the world by far. And we think there's real scale economies in this industry that you can unlock, but we're pretty far from that. We're only about 0.1% of global trade uh in the containeriz in the world in the domain in which we play. So I we got 20 30 years of just like building going global. We we got flexboard employees in 18 countries. I want to be in all the world's countries be like a true network business where ship anything anywhere make it super easy with tech. Uh actually I think we can lower the cost of shipping anything by 5 to 10%. And I think it could have just like a massive impact on the world economy. So all those all those things are like part of the success path but we're trying to enjoy the journey like learn every day help our customers on that along that path.

I'm looking forward to rooting for you from the sidelines.

Thanks.

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