The Knowledge Project with Shane Parrish - Ryan Petersen: How to Build a Global Logistics Engine

Episode Date: August 5, 2025

Build the system behind the system. Flexport founder Ryan Petersen shows how to turn messy, multi‑party operations into a simple, scalable system that compounds growth without sacrificing trust. He explains: The iPhone clue: using public shipping data to predict launches—and create pull from zero Retention is destiny: the equilibrium math that caps growth (and how to bend it) Full‑stack or bust: customers buy outcomes, not point tools 108 steps to scale: structure the workflow, then automate or offload 90%+ Freight whiplash playbook: win share at $600 rates, keep trust at $20,000 The YC clarity rule: say it simply, make upside legible, accelerate yes Crisis ops at speed: repurposed jets and 500M masks during a global shutdown The confidence gap: why stepping away was rational—and what evidence made the comeback inevitable Choosing bottlenecks: sequence capability buildouts so quality scales with volume Automate vs. outsource vs. in‑house: a decision rule for cost, quality, and speed About Ryan:Ryan Petersen is the founder and CEO of Flexport, orchestrating global logistics across 147+ countries. ------ Thanks to our sponsors for this episode: SHOPIFY: Sign up for your one-dollar-per-month trial period at www.shopify.com/knowledgeproject Basecamp: Stop struggling, start making progress. Get somewhere with Basecamp. Sign up free at www.basecamp.com/knowledgeproject ReMarkable for sponsoring this episode. Get your paper tablet at ⁠reMarkable.com⁠ today ------ Approximate Timestamps: (0:00) Start (2:49) Early Life   (4:58) First “Start Up”   (5:38) Living Abroad in China   (10:19) Y Combinator   (11:13) Steve Jobs & the iPhone 3G Launch   (13:41) Lessons from Import Genius   (22:33) Lessons from Paul Graham (25:31) Flexport Early Days   (36:08) COVID-Era Flexport   (44:09) Hiring Flexport’s First COO   (47:02) Stepping Down as CEO of Flexport   (51:07) Cutting Cost & Improving Quality   (53:57) Lessons from Other CEOs   (57:05) How to Hire the Best Employees   (59:31) Paul Graham’s Closed-Door Talk   (1:03:21) The Value of a 6-Page Monthly Business Review   (1:06:57) Why Do Tariffs Matter?  (1:09:52) Tricks for Dealing with Tariffs   (1:15:43) Other Creative Strategies for Tariffs   (1:21:30) Dealing with Operational Bottlenecks   (1:27:41) Lessons from Charlie Munger (1:30:12) Lessons from Peter Kaufman   (1:37:50) What Is Success for You? ------ Upgrade: Get a hand edited transcript and ad free experiences along with my thoughts and reflections at the end of every conversation. Learn more @ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Newsletter: The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at ⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/newsletter⁠⁠⁠⁠⁠ ------ Ryan Peterson @typefast ------ Follow Shane Parrish X @ShaneAParrish Insta @farnamstreet Learn more about your ad choices. Visit megaphone.fm/adchoices

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 we came to explore. 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. Well, in logistics, like, all the costs come from, you make a mistake. Like, if you file a customs entry, and you get the wrong classification code. You're going to spend weeks on doing that.

Hey, that's the game. You know, it's business. 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 us. These tariffs have had the opposite impact that Trump would like.

I think there's intention. There's some validity to it all, some of the things I've said from national security and employment and other things. But the result has been... 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 for 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 April'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 discussed 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 U.S. hospitals and empty passenger plans, 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 this story about your mom getting you to get soda? Oh, wow. Yeah, well, my mom's a great entrepreneur. She started and sold two companies into biotech chemistry space in Washington, D.C., and so I both my brother and I had this job. It was like our first job was delivering soda they're off.

It's like stacking the snacks cabinet and the sodas and stuff. So we basically just buy the stuff at a giant, it's like safe weight and then market up two X and sell it down. Put it in a little like cart. Yep, and my dad's minivan, we would stack up the back of the, you know, the trunk full of cases of coke and die coke. And then my dad taught us to write software. He was a programmer, so we wrote software to generate the invoices so 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. What was the kind of easy money?

I mean, you could 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, to entrepreneurial parents. Yeah, super boring because they were talking about biochemistry and food safety and regulations. I couldn't understand any, but 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 graduate, I went to UC Berkeley when I graduated from college, I was 2002. I didn't, I just think I'd go into like international development or something cool. I like to travel internationally and I's traveled a lot in the third world because I had no money. So I was like traveling, but that 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 of trying to get job in microfinance or government or something. And no one was hiring. I got an idea. I wasn't really, I don'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 an 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 U.S. And sort of, this would have been I graduated in 2002. He started it before that. And we were a tech company, but we didn't call ourselves that. And we wrote all of our own software to do kind of like it was pre-shoppify, 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 to our little platform and maybe could have been Shopify, but instead we just, like, bought motorcycles and sold them on eBay motors and actually through live car auctions, our own website, et cetera. So you're arbitraging, sort of buying in China and then selling everywhere else?

Yeah, buying in China and selling in the U.S. 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 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 could probably learn Chinese. Let's go for it. So I moved there.

kept my work basically of like doing supply chain logistics, e-com development, web development, customer services, exactly all trades for the startup that we had. 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. It's very hard. But the Chinese people, if you give any effort at all, or like, wow, they love it. They compliment you. They reinforce you. They make you want to do more of it.

So actually, that part makes it kind of rewarding and easy. I feel like I've tried to learn French, and I get that. I'm like way better at French than a Chinese, but nobody and everyone in France, like, oh, you're terrible. You shouldn't even try. I'm like, all right, I won't. Yeah, they talk to me. I try to speak in French and they talk back in English.

If you get like one word wrong or like, yeah. The Chinese is the opposite of that. You know, you say hello. And they're like, well, 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, 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 that 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 Freighter Public Record, and it has a lot of really interesting data on it. The public record in the U.S.,

we've since learned in like over almost 20 countries that you can get, the shipping manifest data. So it tells you 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. Because 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 a search engine for that data called importgenius.com. Still a great business, so we still own it. So we started that business, sell subscriptions.

And that was like, again, bootstrap, not Silicon Valley. We started it in Arizona where the motorcycle business was. We very much like got into tech. Like it was a SaaS business. I started following like trying to learn about SaaS. I wish we knew more the blogging, a podcast world. You can learn so much more about AI, whatever. You can learn so much more now than you could back 15 years ago

about how to run a SaaS business. But that got that that that's what really got us into the tech scene. We were still outsiders for sure. And then both my brother and I both started new companies. at some point that business it's great business but it's kind of like it keeps growing actually

but it was it was not being a rocket show we had like a few years of like runaway growth and 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 I should have been and I came back to this idea of like should be an online platform to help you with your logistics with especially your customs clearance is coming back to our motorcycle days of like man

it's way too important to be this hard and this lack of tech. My brother had gone in this different direction, which was his, is 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 and constructing construction data. So you're building permits or public record in most places and building like rich profiles of contractors or you can look up any building and see who remodeled it, et cetera. So it's kind of like both similar origin

starting points, but very different businesses. obviously. And so he did Y Combinator for that. And that was 20. He would have been 2013. And we were, and then I saw that. I got jealous. I mean, I'm like, you're moving from Arizona. I moved to Arizona. I'm not from there. I moved there for KPX after, before China, actually. No, after China, excuse me, both before I 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. I followed him. Like sleeping on the couch. Literally.

Yeah, sleeping in the air mattress in the, you know, a 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 sessions and just said, like, acted like I was part of his company, even though my kind of was. And then that inspired me to go, I've been working on my own thing, which we came for X-Port, inspired me to apply to Y Combinator and go through it as well. Kayla's pause here for a beat. I want to go back because there's the 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. It's really powerful. And you can look up companies and see what they're shipping and who they're buying up around 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 that, there was the 3G iPhone. Forget. I think that's just like the second iPhone. It was 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. Well, you have to go get a customer. We had a couple customers, but not really. And so I knew we needed to get some attention. People needed to know that this data is out here.

And we had such interesting data by companies. And so I was searching in the data set for Apple's shipments and saw it's public record. You could look it up. saw that they were importing a new product they'd never imported before called an electric computer, which is very interesting. All computers are electric. It was like a silly name. 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. And it went very viral. We got within a week. doing like $50,000 in monthly revenue, like all the sudden, you know, from zero to $50,000 in a couple of weeks.

And, and I got a call from U.S. 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 show 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 this public record. And then he sent us a letter and 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 in traffic for a new product? That's pretty cool. It's kind of like a really viral marketing type thing, even though it was in hindsight kind of. A couple questions here. One, did Apple change the name going forward to make it more sort of like? I don't think electric computer's 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, and you don't need to keep subscribing. So we had a relatively high churn rate. Certain types of we've eventually figured out which types of customers would pay every single month. tended to be actually a freight, a lot of freight forwarding companies. Oh, interesting. Because we use it at Flexport is for list construction, lead gen, like finding who's importing. They have my sales team call them, talk to them about their freight.

And hedge funds and analysts, like Wall Street types that want to see what's going on. They'll pay and they'll pay. They're not that price sensitive and they'll keep paying every month. So, but we weren't that sophisticated and our signups. always pretty good relatively consistent forget the numbers but we would sign up a few hundred customers every month and then but eventually you know you're the size of your business is just simply the number of new signups that you get divided by your turn rate and annual turn rate and that tells you how many customers you're going to get at equilibrium when those because those two lines

will cross and we got to that point and then from there I tried everything I could to like we tried everything was just me to bend that arc either make the signups go up or the retention changed and like we ended up just adding a lot of costs to the business without we did some stuff that works but really your scale of your business is very much limited by your turn rate if you have any turn 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 teach you 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 what you were doing that that are super tiny but would be highly valuable in the same way? Yeah, I think so. Well, that's what my brother largely does is take data sets and build businesses around them. Oh, outside of construction, too? Yeah, so he's now, he's got that company builds in, but he has a few other partners with great entrepreneurs.

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? We use Freedom of Information Act to access them from all the, from Customs and Border Protection. You get access to the data. 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 custom. That's just U.S. We have data sets for Latin America, mostly Latin America, a couple other countries, India. Okay, so let's go back to Wycom and Inter, 2013. You're there with your brother. 2014. You apply.

get in at that point you have the idea for flexport no we'd already got licensed um and that was the thing like we had the idea a debate between me and my brother and our other partner who had the idea for flexport we all claim it uh but 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 of border protection had to go through an fbi background check had to do a whole bunch of yeah it just takes two 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 forgot 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 Y Combinator experience. It may have changed. This was already 10 years ago. They do a Tuesday dinner. PG used to cook it, I think.

It was really bad food. He was the last batch where he was the... Yeah, I'm really lucky that not only was the last batch, but he announced it at mid-batch, so he didn't take it for granted that you were getting this time with Paul. You know, people talk a lot about product market fit, sales tactics, or pricing strategy. The truth is, success in selling often comes down to something much simpler.

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I didn't have connections and the Evernote CEO, Phil Libby. He was hilarious, Brian Cheskey. Yeah, kind of like, like somewhat eminent founders and investors and they just come and give a talk for a couple hours to Q&A. So nothing amazing, but the real benefit of why I see, I think, is the friends 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 a business but just like made my life better and then it also I guess that that kind of understates like why see 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 put have raised money I had built a successful profitable 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, and tried to raise money for it. Now, I didn't try that hard. I did a couple pitches, and they went nowhere. And then with YC, it was a feeding frenzy. It turned it 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 liked and likes Flexport and was telling investors you should invest in this company, which is kind of controversial. YC partners. I think they're a little better about now than they used to be, but they would kind of pick choose favorites and, hey, that's the game. You know, it's business. It's not a socialist project. We're here to like find the best businesses and back them. But it is, 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. sure make friends with them but 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 he's not you're not looking and that's like for a seed investor the obviously correct way because the losers don't matter All that matters you get the power law winners that do 100,000 X or whatever their best deals have done for them. Again, I was really lucky because we were in his last batch.

And he announced like halfway through the badge 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 a demo day for when you go pitch the investors, 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. going to do a two-minute pitch. But also, I was kind of back because I didn't practice very much.

I had the opportunity to sit there. I'm in Picasso's studio. You know, 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 going, I don't want to sit there and paint. Like, let me just watch Picasso paint, you know? 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 deeper i feel like he told everybody that like it would just scratch your graphs and watch how your startup looks hotter uh there's something to that you got 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 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 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 terrible. This is not good. And he rewrote the whole thing for me. He's like, you should say this, this, this and this. And like he just said all the things. And my friend just took that on 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 cue.

So if you pitch and you want to do it again to come back and try again, you get to wait like three hours for your turn. So like three or four hours go by and my friend goes back up and presents 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 because 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 2014, walk me through the major beats and milestones up until the soft bank investment, which was 2019.

There's a lot. Actually, one of the funniest things, one of our other investors is Ron Conway. And he was, he saved Flexport at one point. I don't know if I've ever told this story, but 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 of the things that made Flexport possible was that in 2007, I think it was, the customs will change 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. And so that changed in 2007. We started applying for licenses in like 09 or something. Markets aren't totally efficient, but kind of. 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 customers 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 and he has a license on file with us. They wanted to see the actual license. It was kind of like Kafka S.

At some point, we just weren't going to be able to operate. I mean, we were like operating remotely in Houston and it just wasn't going to work. And Customs was kind of clear. Like, you need to, 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 Ron was like one of his big,

donors and friends and we got the license within six hours they like went down I know what happened at city hall they got the license printed and we you know sent it to customs it 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 issue a license that's insane so anyways that was very early days um many things happen i would say like those 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 run away.

It was not all success, lots of mistakes and bumps in the road. But I guess a big, a couple of big milestones on there. One is we started out when we went through why Combinator Flexport was just a customs brokerage. We didn't do freight forwarding. And we said, hey, we're going to do freight forwarding someday. But we wanted to just focus. The kind of dogmine startups is like be really good at one thing. Really focus.

You've written about this. Like the need to focus. We also, the other talk about is, 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 of, we get a lot of rough types of customers. One of the first things we ever imported was a Tukuk,

which is like a from Cambodia. Some guy went to Cambodia and bought like one of those little Jeepney kind of scooters with the seats in the back. Like Berkeley professor wanted it for the nudist parade in Berkeley. 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 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 whatever we talk 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 start up. Now we actually have a lot of big companies that use Flexport for customs only 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 this 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'd, 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 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. So in 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 is like, okay, cool. Self-contained. This is a contained environment here. I've got to collect the data.

Got to transmit it to U.S. 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 because you're trying to computerize things at this point. And I don't imagine. there's API? Like, how does that even work? Right. There's, there were new APIs. It's still very few APIs.

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. But, yeah, we open up a can of worms. Like, we got unlimited demand, but, like, problems much harder and hard to keep up. And as 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. But we went from, I forget the metrics at the moment of the first soft bank investment, but one point Inc. Magazine rated Flexport, the second fastest growing company in the world. They did this in the Inc. 5,000. 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 we should, anyways, we were very fast-growing company, and a lot of times, yeah, 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 doing a lot of stuff manually. We're still open to, we do a lot with people. but with this we're not satisfied with that we're like constantly figuring out okay we'll just do it

that's the secret to our success we're willing to do what the customer needs with humans as needed 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 an 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 U.S., 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 or automation or sent out to like a third-party BPO processing entity.

And 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, took us a long time to build. It wasn't like that in the beginning. In the beginning, it was people picking up the phone and sending a free email forwarding, I call it.

But that's the way every other freight forwarder in the world does it too. So like I can 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, the car cost that be higher because if you don't structure the data, you just forward the email, the PDF. like that could be cheaper than like being like, oh, I got to structure that, put it in our database. And so your cost 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 soft bank investment, which was, I think they gave you a billion in cash. Yeah. 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? Because 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. 2016 was very interesting year for freight forwarding that everyone's forgotten about it 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.

Oh, we're going to get into some of that. 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, the U.S. for our cost was like $600. Normal, long-gone average, about $2,000.

Today, I didn't check the price this morning, but it was probably $4,000 or $5,000 right now. And the peak COVID was, you know, famously got to like $20,000. So it was $600 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. A good lesson, actually, that we don't want to be able to play that strategy. Pass through low costs, and you'll grow really fast. So is 2019 when you started to look for a CFO? 2019, we got the funding from SoftBank, and then we did, I hired a CTO that year. Okay. I really upgraded.

Go invest in our tech. We hired a CTO from Amazon logistics. And he helped us build some of that workflow software that I should describe. It was like kind of an architect for that. And then COVID hit. And that's where I say Fleck Sport looked really great. Like we were, we turned profitable at 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 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, sometimes below cost. we had been part we're partnered with a lot of great 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 U.S. to China which then like two months later when there were no N95 masks in the U.S. were like uh it looks 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, not ocean freight. 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. And so we saw, we were at the heart of kind of bringing masks, bringing PPE generally in. for U.S. hospital networks from mostly produced in China. And so we saw this insane demand for air freight.

And there were no ships, 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. It 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 ground.

And so with some of our connections, we got in touch with all the major passenger airlines, and we got 80 passenger aircraft and flew them to China. Because cargo planes were allowed to travel Internet. Well, passenger planes could travel, too, just not with passengers. Right. So we got the airplane, the airlines to give us great deals. Because otherwise the planes are just idle. You're just sitting there in the desert and just sitting at the airport.

So we got all of this, we got 80, we did 87, 88 passenger planes. full of masks and overhead compartments in every seat, obviously the belly. And we just, we flew 500 million masks and other object, other PPE items in for U.S. Hospital Network in March and April of 2020. Do you ever struggle to stay focused? There's a reason I reach for my remarkable paper pro when I need to think clearly. If you're looking for something that can help you really hone in on your work without all the distractions, remarkable, the paper tablet might just be what you're looking for.

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Not sure if it's for you, no worries. You can try Remarkable Paper Pro for up to 100 days with a satisfaction guarantee. If it's not the game changer you were hoping for, you'll get your money back. get your paper tablet at remarkable.com today. It was crazy. It was like one of the most meaningful parts of my career and everyone at FlexPora. It was great because we were like,

not in a, none of us in the world was in a good place, but it all of a sudden totally distracted us from whatever problems. 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, there's civilizational collapse if the hospitals don't show, the doctors don't show up for work. and became friendly, friends with the guy who runs UCSF, Sam Hoggah, he's the chancellor of UCSF, our local hospital. And I remember years later, I met his wife dinner, and she was like, it was when I saw this Zoom call of you talking to Sam

was the first moment when I realized everything's going to be okay. Because you guys really touched me. It was like, you guys are highly competent people are going to get mass delivered, you know, the day before they run out. 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 given us great deals because we were serving hospitals. And it was all like kind of pro bono, not-for-profit work.

They were giving us great deals. I remember one of the planes, the one I remember was a Dreamliner. I won't charge us $200,000 to fly a Dreamliner to China back. Oh, wow. Which, like, if anyone's ever flown private, that would be like a dreamliner. I mean, this is many millions of dollars probably around trip. A couple million. I'm like a million probably, or 500K.

I'm not sure. So it gives us a great deal. We saw lots of things like that, but it wasn't sustainable for the business side of things. Now, when 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 3-747s from Atlas Airlines, the biggest cargo airline in the world, dedicated to Flexport. And it was in that response to that. hey, the passenger plate, we had this view, this perspective that air freight's 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 that airline at a great rate. And I think they were, their stock, Atlas was in, is in these airline indices. Because actually, if we were smarter, it is just bought their stock because they were a public company 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 because they're still they're the price of air freight's gonna go crazy i think i probably 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 this location 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 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 COVID when there's tight capacity. We can serve people and no one else could. It was really an education about asset ownership.

in logistics 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 three days the plane's leaving in three days instead of going hey let me find you a different option And 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 get to this. And okay, so fast forward a couple years and you're looking for a COO. What was the thought behind that? Yeah, so COVID, it did some interesting things for us. It made us kind of famous in part because the hospital stuff and some other things that we did during that time. when supply chains got dislocated. But it, 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 remote for way too long, work from home, which just doesn't work in our industry, maybe in any industry, but certainly not in logistics.

You need to be like in person, collaborating, partnering on the, with the assets, etc. Really expose some flaws. like when you we would just prior to COVID 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 the operation was really failing in a lot of ways um 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 much more of a creative type okay than I am and operators like do the same thing every single day and a little bit better measure every detail and that that'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 freewheeling entrepreneur. So we're 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. but he was originally where you think you were thinking C-O-O was trying to hire C-O and met Dave Clark. He was the CEO of Amazon.com. He'd run Amazon's logistics and supply chain for many years. So it seemed like great fit tech and logistics.

It wasn't actually in many ways. And you had the good Amazon hire in 2019, the CTO. Yeah. 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. I think we're the best now, but I think they, I don't think I could always say that. I think we keep getting better.

But, 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. Well, it's kind of an orderly transition. When we hired him, I was like, 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 a picture. Like, what am I going to be better at the day if we run this big company? Was that a confidence thing for you?

Yeah, I mean, I feel a lot more confident now. I've seen a much better job in the last 18 months than we ever did before. So, yeah, Dave, he was only the, he was with us for a year. He's his CEO for, we were co-CEOes and then CEO by himself for six 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 shit?

There are a lot of things. I 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 overhired. I approved all this hires. Like we wanted to go big on tech is just dominate.

We kind of read the market. It was just like trying to be contrary. So they were a really strong balance sheet. I 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. Let's put the pedal to them at all. And go hire a bunch of engineers.

I think we added 900 software engineers in like 12 months. Oh, wow. And turned out they're all in the U.S. or almost all in the U.S., Seattle, mostly. It was like very expensive people. Had a lot of senior execs. So we just like over-invested in the business. And at the same moment, like the freight markets were collapsing.

Capital markets got ugly. It became clear like, hey, you're not going to go raise. We'd already raise too much money. like we don't need to raise can't raise more money and so it's just like kind of a perfect storm of bad decisions of which i was like you know sign off on all of them so i don't blame paid 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 would just do like one or two of these tasks and do those 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 unload the truck, put away the goods, take the good bout, put it in the box. Like you break it into stages, right? And so that's where the Amazon background and FlexSport background really came at conflict, actually,

because they break it apart into simple tasks and have the same person do it over and over again. And kind of robot, human robots, almost, like, or literal robots. And 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 in 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 car. All right, drive to the airport. Like, you know, I mean, 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, 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. Good deep around that.

But, well, in logistics, like, all the costs come from, you make a mistake. 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, giving it right their first time costs way less. Then one mistake will undo all your efficiency gains for the month, you know, in logistics. So I 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 head down. Like, that's where it must the cost sat. So you got to cut costs. And you've got to improve your quality as 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 core people that built the business were like,

we grew an insane. Leaving. We had grown. It's a really hard business because it's so global. Like, we shipped to and from 147 countries. We have people all over the world. 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 going to 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 those just like the board was like Ryan we need you know you got to come back and step in to do this and I had already taken a job

at Founders Fund as a partner so it was a little it was so embarrassing for me like i'm like i just took this job and i'm gonna go back like what am i doing i got to fall through all my commitments but it was obviously like i'm honor bound to to make flex bar at work make it successful so i was very happy excited to come back what happened when you told pg you were stepping down i didn't tell until later i forget when but like after i i was the chairman so i think i was already at founders fun And he was pissed because he thought I should go be a partner at Y Combinator instead of, I understand, first off. But I went for a walk with him when he came back to Palo Alto one time.

And 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. There's generally true. That's why I did it. It wasn't because I was burnt out or something. I just thought he would be better for the company. I thought we needed to mature. It would be better at operations and better at building tech than we were.

And I thought he'd be better at that. And Paul had this amazing line. And he said, 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 funny. 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 for work? They heard you say that earlier. Is this your life's work? Is this your life's work? I was like, yeah, it is. And 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? things that you think he's better than you say you can be the next CEO after he steps back like Larry Page did after he came back, he hired Eric Schmidt for a decade and then came back. He's like, you need to go learn those skillsets. But it happened much faster than 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. It all happened so fast, not really. But I've learned plenty of lessons along the way. Walk me through some of those. Well, the number one thing, I think is I learned from Toby from Shopify and Brian Chesky.

I'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. We're like big and sprawling and do a lot of stuff. But you 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 them say this, I was like, oh my God, I just committed this in. the highest possible level, right? But, like, don't do that at any level. Like, it's all my company, audit everything, inspect everything. 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 Flexport in 10 years, and I don't know if that's true about anyone else. And that's, that's not they heard from Chesky. 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 the level of confidence that I didn't have prior. I heard from people that we have in common that when you came back, you were a different

CEO and you were like founder mode before it became founder mode. Yeah. I mean, Chesky's like way more hardcore, I think. I try, but I didn't have as many frameworks for it. 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's a bad word. Toby's 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? attention to detail, the same, two words for the same thing, right? Attention to the 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 and what you're doing? So, but flyboard is a much, I don't know, I don't know, I've never worked at another company, really. but it's 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 Chesky'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 different? 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. And then I spend a lot more time with Newhart. I've only had one person actually from external in the last couple of 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? 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, you 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 it. 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 have 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, sure, they can about people and some of, 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 that scares me yeah i pg wrote about that his founder mode thing it's like well if you're a professional manager your mindset is like you can run any companies how you go in and in that world you shouldn't be too involved in all the things because like hey you know you don't know about that particular domain that industry so just trust the people that are already there that your job is kind of babysitting at all but that's not of like founder founder mode as like 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? I was like, I wish I was 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. I was definitely, like, enthralled in the back. And, like, a lot of stuff deeply resonated.

But I don't know, 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. trust the managers. Not a bad way. Hey, 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 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. 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 past. But, um, ultimately, I try to solve problems together with my exact. So, you know, If people have a problem, that's far, they haven't. But if somebody had a problem with that, I'd 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 because you remember that telephone game in, like, preschool where you sit in a circle and there's, like, 10 of you. Yeah.

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 and meeting. And organizations sort of filter this way unconsciously. Nobody's trying to make a mistake. 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 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 what are the odd that 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 leaning like leaning way more than I realized into communications and enablement training like We've been 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 will give you like multiple tracks that you can, you know, you go to see different acts. Like we have that we'll come to different offices and have different tracks that learn about different things. I think it's very important that the people have agency. You just 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. 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 do you want to go to? People all of a sudden, like, this is amazing. I get to go learning about it. And our business is super interesting. Geographically, we're in all the different countries and 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 try to do that to like overcome.

this problem of I just realize I we have an really 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 pages 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 a couple other people on the team we're not that secretive but It's not part of the structure as like they don't disseminate. So I was just realizing like no one else has such incredible things happening at this company, but nobody knows about it or like not enough people know.

So we started, I'm trying to work on that problem more. It was kind of to overcome this telephone problem. I was 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 NBR, a month of business review, the 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 dot 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 it's harder to write a six page or than is to write a 12 pageer 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 12th pager and spend more time reading it uh yeah but it turns out you'd 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 uh cheskey 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 cheriffs

what does that mean do you oh just like i can't stop thinking about flexport it's just all the time it's like consuming the 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're 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 actually a really interesting place to build a career.

Well, 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 simple 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 in McMillia. It used to be the primary source of revenue for most countries is the tariff. in the United States that was for sure true the income tax wasn't introduced until Abraham Lincoln and the Civil War and it is a percent of the value of the goods that are imported that you have to pay to the U.S. Treasury

primary reason for it I guess there's a few revenues real in fact Trump's chief economic advisor right now the chairman of the council I don't know if he's his chief advisor but the chairman of the council of economic advisors is a guy named Stephen Moran

and he in his current administration He said that in the Trump won, first a term, that the tariffs on China paid for one-third of the tax cuts that Trump did. So it's pretty meaningful. I mean, 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. So it's sorts of revenues are 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 U.S. 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 in autos, most major countries, like believe their auto industry is important, not just for jobs, but for armaments. Like you make tanks out of your Ford factory during a war, et cetera. So, yeah, those are legitimate reasons for terrorists. Why do they matter in the context of like the global politics? Obviously, it increased 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 there's these component, subcomponent ecosystems of supply, moving goods all over the world and doing assembly and production in different countries and bringing things together. So introducing massive changes on short notice of the tariffs has caused borderline chaos, certainly a lot of disorder in global supply chains, which ultimately affects all the stuff that would buy. 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 onshore or are they just sort of accepting or what's happening? Well, that's the thing. And you have to judge policies not by their intention, but by their outcome. Like, one of the mistakes that a lot of people make is like, well, it'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 or some validity to it all, some of the things I said from national security and employment, other things. But 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 tariffs i'm going to start doing production in the u.s 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 in my customer base met at least a half a dozen companies that said stop production in the u.s because of the

cost of the components coming in oh interesting 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 they're duty-free but not bike components so their costs went way up and their competitors from overseas didn't so they're 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 you're paying your cost 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 and just like the machines are made in Germany for that particular line and the cost was going to go up 30% is like Yeah, 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, I think a bonded warehouse is you don't actually technically pay the tariff until you take it out of it. 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 their nature. But a 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. because 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 U.S. commerce after the terrace will come down. So there's some hacks around the edges. There's a lot that you need to do. Before you didn't care about valuation, the value of the goods, if it was times zero, who cares? But now, of a sudden, if it's times 30% or whatever number, you care a lot more of how is it valued? And there are all kinds of legal ways, and you need to get really great advice on legal advice or trade advisory on how to do this.

But there are ways tracking that you want to be able to really track every single component of the product. Where is it made? And what is its cost? So, like, if you have a count, 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. on Chinese-made steel and aluminum. Maybe I should know all this details is very complex.

But if you have a couch that has steel an 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 an aluminum. So you really have to build this great, we call it a product library, which Flexport offers it as technology products. So 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 Uyghur, forced labor protection act requires you to track the cotton anything cotton where was it made specifically like what down and then the EU has a new one's very similar but any forestry any wood product you'll 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 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 and then you coming soon 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 you're like cool you need technology to track all this stuff kind of classic

illatory capture types of. We're not lobbying for any of these things, but... And you're the most tech forward of all the companies. Kind of, we're the only one founded. Only one in the top 100 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, we have the world is our oyster. We should win it 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 some illegal stuff that I see. see, not so much on our customers. We talk them out of this, but 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 U.S. And then not turning a blind eye of 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. And DOJ, their problem is what the factories will do is set up a shell company, not in the U.S. You don't have to have a U.S. entity to import goods into the U.S. Oh, interesting. You can just, or 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. That company registers, not those at LLC or any kind of legal entity, but they just register with CBP with customs. They import the goods into the U.S. from abroad. if they cheat, they just disappear and Customs doesn't have agents in China to go chase it down. So then they just do again under a different shell company. And that's a huge amount of what gets sold on Amazon. It's not, I'm not saying it's fraudulent, but is these foreign registered companies? 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. And make it so you have to be a U.S. energy 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. 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 they 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 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 that will have.

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, yeah, it's not my problem. I just bought it in the U.S. Guarantee you, like, you are reliable for that. Like, as a warning, look at the camera. CBP DOJ has announced this their number two priority in White Collar Crime Division of the Department of Justice is customs fraud. Health care fraud is 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 strategy is let's not talk about the illegal ones anymore. I mean, but be careful, make sure you're getting good advice, is have that database, know all the sub-components. There's a few things like valuation. You can't, there's a thing called first sale. I won't bore you all with the technicalities of it, but it's called first sale, which basically says that you pay 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 that 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 Flash Sports team, but you can deduct the portion that's US made, but you have to, you don't just get to automatically do that.

You have to, like, file all 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 that first pass. Okay. You get your import back, the imported duties you pay. Yeah. So every year in the United States,

seven billion goes unclaimed. And that was pre these new tariffs. So it's presumably much higher. Yeah. So 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, 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 day on all your past transactions with the U.S. Customs are your, it's your data. You have the right to it under the Freedom of Information Act. So you can pull your last five years of transactions from CBP.

Now, they give it to you in a very unusable format. I think like giant CSV dump basically. Maybe even on CVs, I forget, but they give you like, it's not useful. It's 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 four years. you. It shows you every transaction you've done in and out of the country. And then our experts kind of walking 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 duties, on these new

tariffs. And they, they, it's going to appeal to 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, I don't know enough how this works, but towards the end of the year is my imagination, is my guess, that it would go to the Supreme Court. Either way, it'll probably end up there. Probably it ends at the Supreme Court, yeah. That will be really an interesting case. If they lose again, everybody gets a refund on all their duties, but 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. It 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 five weeks. And then as soon as he relaxed, as soon as 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 flexport data,

and we have got 30% growth over last year. So then I start to figure, we're actually up again from the drop, like it came down, and now we're back up. But I think that's a flex-port thing. I think the market's shrinking again from the peak that we hit post-COVID, but 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 going to 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 giving 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's right, like the logistics data, but it's the international stuff is so less seasonality.

There's a lot of weirdness, and lately in this tariff's data that it's just like, I don't know if that means, you want to know what the consumers are doing ultimately, or are they buying and selling. And a lot of, 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, in inventory forecasting and so I don't it's probably if I had my access to any data would be the consumers sales data from all the customers and inventory levels I just don't know 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 don't know where they get that I have no idea um I haven't got any good economists to answer that look how they run survey. I'm like, yeah. Interesting. Is that valid data? Is that accurate? I know how hard it is to get accurate data out of my own company. So the idea of the government economists getting accurate data about all of the companies, I'm like always very skeptical on these things. It's 100% correct. I'm 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, at which the limiting factor. And I think you're in a company, your bottleneck should always be customer demand. Should never be like bottlenecked. 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 do is you owe and how to minimize it, how to be compliant. That team is super bottleneck. We didn't plan for a world that would require 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. 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, I don't want to just hire more people, especially if it's not, if it's a temporary surge. So what it feels out of control is it And we need to get our handle on that And 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 and how much space We've had a number of it This has been we've had bottlenecks move all over the place during COVID And since 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. That's not right. It 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 is getting this huge delay and getting loaded and getting their cargo delivered.

It is a fact of the industry right now, but that bottleneck shouldn't be in a warehouse environment. You know, you've got a picture of this flow of goods at the loading dock. You can choose where to put the bottleneck in the flow of those goods. So loading dock, unload, put away,

pick, pack, outbound, you know, and ship again. And the way that Amazon does this, as I understand it, is they try to make the bottleneck the most capital-intensive piece. And then they over-stack it so that there's plenty of capacity on that,

whatever the machine is probably that is capital-intensive. It requires a lot of capital and have lots and lots of that. machine so that that way they're never it just keeps flowing the goods you don't hit the bottleneck you don't actually hit it and if you do it's because 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 out of it that should never be the bottleneck it's only where oh I need a lot more capital here even that I planed and then

they overinvest in capax so they don't hit the bottleneck because you want the most asset intense part sweating just nonstop 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 that's a strategy for people with a lot of capax that's amazon's model but plenty of capax 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 fascinating world of like, you know, W.E. Deming is the kind of business philosopher of quality. He's written a lot on statistical process control and creating even flow through a system that you don't want to have these spikes of, of. flow because it makes planning really hard and labor and assets people become idle you don't want any variance yeah eliminating variance is like lean six sigma type stuff i'm it's one of these things

that doesn't come naturally to me so 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 in background is that like the whole toto 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 a couple of things. One is one thing that we do that is very Toyota production system like is in the Toyota production system.

And I've never been to Toyota and 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 the worker, the line worker follows the part down the line and does many of the steps, operates several or many of the machines instead of like in a U.S. production, Toyota auto production, each guy does one job and kind of more robotic like I was describing earlier. And our models are similar to the Toyota one in that sense. The same worker follows this shipment down the line as it were doing all the tasks

until it's complete. That, that, I think Toyota kind of pioneered that, that piece of it. Better for the worker, for sure. Are you, like, have more agency, you're more involved, you know more of the details, you're like, your career's more interesting, you're learning all the steps. But they really, the other thing that Toyota really does is empower the workers to, like, elevate problems. It's like, right?

They famously have the rope they can pull or shut down the whole line if things aren't right and take quality super seriously. Quality costs less. I think that comes from W.E. Deming. So it's all, it's all very, interesting area that we try to apply and this is where I need to help at some point he's not like a natural on these things. You mentioned chauffeur knowledge, which is such a tell that you're a Charlie Munger, a devotee. I would love to hear some of the lessons you took away

from reading him or interacting with him. I got to become friendly with Munger towards the end of his life. I went to his 99th birthday party last year actually 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 Ominek and that's like one of my favorite books and when I lived in China I've got a copy of that book and really love it's like a coffee tip 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 they really inspired me munger has this really wonderful essay which I actually discovered on the Y Combinator website um called the art of worldly

wisdom or something to that effect. If you Google Munger worldly wisdom, you'll find it. And it's a U.S. It's a speech that he gave at USC. It's 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 remember he says 300 or not. But there's some number of limited quantity of domains. And in each of these, there are two or three big ideas that carry all 80% of the freight, as he said it. And so if you were to go and learn those two or three big ideas from each of the disciplines,

your alley, I'm sure you've written about this before you have all these mental models and you have lots of stuff that hang things on. 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 read because like learn as many of these domains as I could you try to be worldly wise um and so 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 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

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 tell Charlie the story. One of my favorite things that Charlie told me

at one of these dinners at his house was when I told him, 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 always say that to people who are, like, building AI companies. It's just like, what a nightmare. 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, it's like trying to be a boxer. Like, you're kind of, you might beat all the people in your local gym, but at some point, you're going to.

of run into somebody bigger strung pastor john jones or somebody you're 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 oh cool years and mine and the way that i met him i was at a berkshire halfway meeting and i had went up to the uh the hotel you know naively this is my first meeting ever you know i just show up and i'm like can i get a hotel rip 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 room 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 we end up striking of a conversation we had a mutual friend who

joined us in that, which was Peter Bevelin, 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? You've got to go in there? Oh, yeah, totally. And that sparked up by friendship with him, which has been, he's been an incredible influence. Yeah, yeah. Okay, that makes sense. That's hilarious because he loves inventory. Yeah. And he also had an inventory of extra rooms just in case somebody needed him. Actually, walk me through that. Why does he love him Well, because everyone else hates it.

I think there's a contrarian element, too, and everybody went to business school and learned that extra inventory is evil and carries working capital costs, etc. But he's in his business, which is airline, airport, airplane parts, aviation parts. Having excess inventory means you can provide the part on demand, any part, and 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 aircraft on ground logista a og aircraft on ground people will pay any price i once um

fluid this is not what flexport does but i know this guy's a billionaire and his plane his g650 cold stream uh private jet broke down in antarctica or uh in southern chili like right next to antarctica somebody crashed uh like a tractor into the wing and he called me so can you get me uh I need to have the wing. I need to fly it to Chile. I will pay any price. Like, and then pregnant you and this guy,

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 for that type of customer.

You think of 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 it could be $10,000.

You could charge 100K for that part. And they'd be like, problem. Yeah, and the inventory, I mean, inventory should be not that expensive to keep around, but it depends if it's perishable. Like the COVID was a great example. Like people, the hospitals didn't have enough inventories all run just in time, which is just a ridiculous way to run a health care 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 masks and stuff has in shelf life and expiration lot. So you can't just build a warehouse totally full of this stuff and let it sit there. You only need it. Pull it out in 20 years. Yeah, it won't work. So it's a hard problem.

And 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 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 competitive exclusion principle.

What is that? It's basically, it comes from biology. And it's this idea that in an niche, in an ecological niche ecosystem, there's only 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 and 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. 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 very hard to do everything but 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 ideas, taking ideas from biology and physics. And what's his other one is the formula for kinetic energy is one half of mass times velocity squared. We use velocity as like our main word at flexport velocity. Good deeper on that because velocity matters more because it's power lodge, right? From the kinetic energy formula, it's a square function and mass is only a linear. And so this is why in football, American football is hitting so. hard knocking. It often seems like this little guy can just, like, create more, way more energy.

Well, they are. Their velocity, they're running really fast. Yeah. It's more important than how big you are, is how fast you're moving. And now, velocity is different from physics than speed. A velocity has a vector. So you've got to go in the right direction in business. But it also, it's kind of an explanation for why startups outcompete. 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'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. Yeah. 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 talk to him or. or sort of like had any conversations with them at that point. And it's just stuck with me.

It's the 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, it turns out most people will say hello back and be nice to use. And then we don't do it because like the 2% of people will sort of scow at us. I mean, I don't really talk to big old elevators either. But I get that. Yeah.

I mean, it's an interesting point. Well, now everybody's on their phone. 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 really 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 is a close second for what my number one value is. That's why I like Flexport so much. It's 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. We think there's real at 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 in the containerized, in the world, in the domain in which we play. So, when we've got 20, 30 years of just like building, going global.

We got flex-board employees in 18 countries. I want to be in all the world's, countries be like a true network business or ship anything anywhere make it super easy with tech actually we think we can lower the cost of shipping anything by five to 10 percent and I think could have just like a massive impact on the world economy so all those things are like part of the success path but we're trying to enjoy the journey like learn every day we help our customers on that on that path I'm looking forward to rooting for you from the sidelines thanks Thanks for listening and learning with us.

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