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Transcript of our conversation with Ryan Petersen
Immad (00:00.571)
All right, welcome to the Founders in Arms podcast with me, Imad Akin, co-founder and CEO of Mercury.
Raj (00:06.389)
And I'm Raj Suri, co-founder of Lima and Tribe. And today we're excited to welcome Ryan Petersen, co-founder and CEO of Flexport. Welcome Ryan.
Immad (00:16.627)
Yeah. This is being recorded on Wednesday. So, you know, by the time we release this, who knows what the situation would be. But we just had, yeah, April 9th. So we just had 104 percent tariffs on China go live. China's reciprocated with 84 percent tariffs on American goods. I guess the rest of the reciprocal tariffs also went live, right? So we have like Canada has been live. I think all of them are live. I think the Vietnam ones like 50 percent. Yeah.
Raj (00:25.313)
Well, it's April 9th.
Raj (00:40.001)
Canada would like.
Ryan Petersen (00:44.334)
Canada's been live for a while.
Raj (00:44.763)
And there were new tariffs that put into place recently for Canada. Like, Carney just announced that there are some new tariffs going into place.
Ryan Petersen (00:52.36)
That's Canada putting tariffs on the US, yeah.
Raj (00:54.387)
Yes, yes, yes. Okay.
Immad (00:56.081)
Yeah, so Ryan, what is it like running Flexport right now? Like what's happening on the ground?
Ryan Petersen (01:02.274)
You know, we're back in wartime mode and we've been there a bunch of times over last 10 years. think we, those of us at Flexport kind of thrive on it. It's always why we work here, why we work in this industry. But it's, no one's celebrating it. I mean, wartime is definitely not great. It's really tough for our customers. Like we have some customers going through some existential issues.
Immad (01:23.985)
Yeah. I was actually wondering, like, what happens with all this inventory that's just on a boat, right? Like, I mean, it's going to land and might be completely unprofitable, right? Like, how does that even work?
Ryan Petersen (01:33.086)
So the inventory, well it's less about the inventory and the boat. The way that they set the rules up was like if it departed, it's based on the departure date of the ship. So if it was already on a ship, it's good, you're good. It was actually midnight tonight, so there was a mad scramble to get everything out, both boats and planes. So that's not the biggest issue, but if you placed orders...
Immad (01:39.521)
okay. Okay, so that does help.
Ryan Petersen (01:56.076)
You know, usually you place an order 90 days later at Chips or something like that, right? So there's definitely a backlog of inventory there that was planned and ordered in a world where these tariffs weren't there. So yeah, it's going to be kind of ugly for a lot of companies.
Immad (01:59.006)
Yeah.
Raj (02:10.753)
Are there a lot of council orders happening, that you see people are like sending? Yeah.
Ryan Petersen (02:14.38)
Yeah, we're seeing a lot of that, a lot of canceled POs and a lot of renegotiations of terms. So I was just talking with a customer this morning who sells products to Costco and fighting with Costco to make sure that they accept the higher tariffs on their, you know, and so, yeah, I think different companies will have different rates of success with that. And it's a really tough place because you either like let your company die or.
or let your reputation suffer with your retailer and one of those is a lot better than the other. So you gotta be hardcore in this environment.
Immad (02:50.099)
It's also messy because you don't know what the kind of steady state is, right? You don't know what to plan for. Like, did you have to plan for 104 %? Do you have to plan for 50%, 30%, 10 %? Like, do you think it can go higher than this?
Raj (02:50.134)
Yeah.
Ryan Petersen (02:58.434)
I go up, I go up a lot, I go down, you just don't know. Sure.
Immad (03:04.774)
Hehehehe
Raj (03:06.305)
At this rate of like with China. Exactly. Yeah, within the next 24 hours. At this rate of 100%. I mean, this is like huge levels. You're doubling the cost of something you're buying from China. You know, that's going to eat into a lot of march.
Ryan Petersen (03:07.724)
Maybe by the time we air the show.
Immad (03:09.895)
Yeah
Ryan Petersen (03:18.606)
Don't forget, by the way, Raj, it's 104 % on top of the 25 % for a lot of categories that Trump put in his first term. So it's like a sofa from China is 129 % right now. But yeah, sorry to make you all.
Raj (03:29.953)
Yeah, know, but that's a good point. mean, like we're talking, you know, doubling the cost and more, right, from something you buy from China. you know, like, did this just block all trade? Like if this stays in place for 12 months, you know, is it basically going to be almost de minimis trade between US and China? At these, you know, like what's going to actually be traded at 100 plus percent?
Ryan Petersen (03:53.402)
I don't know, we've got to see how some of this plays through, plays through the math and you know, like how many more iPhone, how often do you update your iPhone right now? You buy one every cycle like me or you wait every two years or something? How much of a nerd are you? Every year, so me too. But there are a lot of people who already buy.
Raj (04:05.269)
Yeah, well.
Raj (04:09.427)
Nowadays I buy every every year. Yeah Yeah
Immad (04:09.491)
I'm on every two because they... I feel like... Really? I feel like they break things every now and then.
Ryan Petersen (04:15.47)
There's a lot of people who only buy every other year every fire you got some employee of mine recently I was like, what is this iPhone 12 you're using? You're gonna see more people like that that you know if the iPhone is gonna cost X dollars more 500 more something like that We'll see I haven't seen what Apple's doing with their pricing yet
Raj (04:21.345)
Yeah.
Ryan Petersen (04:33.038)
but that's gonna slow down the number of units sold and that's, the iPhone's a super in demand product that everybody wants, but a lot of stuff is less, most stuff doesn't have their power over consumers. So that's the big fallout that we're gonna find out. And then yeah, are there substitutes like,
A lot of electronics has to be made in Shenzhen still. There's not other or some part of China. There's not. They just have real lock on that ecosystem and they do a better job manufacturing stuff. So how much do we need those products and stuff that can move largely is moved already. Even the 25 percent duty was enough for apparel companies and a lot of stuff to shift.
Immad (05:06.803)
What's?
Immad (05:12.317)
What is stopping, and like people talking about this, what's stopping China shipping stuff to Vietnam or Mexico for it to then be shipped into America? Like presumably it's such a high tariff that like there's a big incentive to anything that can bypass it, right?
Ryan Petersen (05:26.444)
Well, it's about where the goods are produced. So you have to do what's called a substantial transformation of the goods. And so you can import components to Vietnam and...
Immad (05:34.077)
Sure. But how can they tell? Like, are people opening the stuff up and saying like, this was a substantial like, it seems like this would be very hard to police.
Ryan Petersen (05:43.438)
is a felony, so you go to jail if you get caught doing this stuff. It is hard to police and people should know, there's a 10 % whistleblower reward if you turn somebody in who's committing customs fraud. It might be a good way to make money.
Immad (05:53.868)
Yeah, so you're trying to get them in trouble, Peter?
Ryan Petersen (06:01.558)
Not gonna be Flexport, you know, we're gonna be the trusted advisor helping you avoid, you know, kind of like you're almost like your lawyer. You can come talk to us and we'll help you with your problems and help you avoid fraud and don't do bad things, but.
Immad (06:12.915)
So have you had to update all your software to measure all this stuff? Are you the one making the payments to customs or does the customer do?
Ryan Petersen (06:18.072)
Sure.
In some cases, yeah, in some cases we are the ones that setting the helping them classify, know, store the classification codes and then therefore the duty rates and define how much they owe. Some cases we transmit the money. In some cases we actually front them the money. We have a lending product where we lend money for customs duties. It's a nice part of our business. And yeah, we've been making furious updates. Like we, our customs tech team spent the last year automating manual work and they made so much progress and they were like, have this roadmap.
Immad (06:37.491)
Mm-hmm.
Ryan Petersen (06:49.808)
that by the end of the year something in the high 90s percent of the work is going to be fully hands off the wheel and now are like it's not that important compared to all the visualizing the data, update the reports, show trends over time. mean we did a whole bunch of replanting exercises in the last week or two around this.
Immad (06:59.549)
Yeah, yeah, in this moment you just do whatever.
Immad (07:13.171)
Yeah, so I guess what's your take on how this moves forward, right? Is it like China and the US are just like going to keep upping the ante? Do you think they'll come to a settlement? how does this play out in the next few weeks?
Raj (07:28.129)
Easy question for you.
Ryan Petersen (07:30.51)
I don't know, I really...
Ryan Petersen (07:35.765)
I have a few insights. So I did talk to a cabinet secretary, not involved in trade, but another one. what he told me was that, and this was about 10 days ago, and he said that Liberation Day, April 2nd, would be the start and not the end of the process of negotiations. so that therefore, you know, by the way, it could mean the start and then it escalates, which is what we've seen with China and some other countries, or it could be the start and then we negotiate things back down. I think there's going to be more of that.
Immad (07:50.163)
Mm-hmm.
Ryan Petersen (08:04.2)
I think that we want to you know, this stuff's too important It's been too crazy for the equity markets the bond markets go in the wrong direction right now from what Trump wants to achieve and so I just It's just like too fundamental to the economy and these it can't be that this administration just believes in central planning of our economy like that is
I'm the government can set some rules and guide some things in the direction they want, like you can't, this is like greatly forward stuff. Like during the 1950s, Mao had everybody in China, they said they needed iron production and steel production. So they had every China, every person in China make their own backyard furnace, literally in their backyard to produce iron, chopped down all the trees in the country. And then it turned out the iron was useless. so, you know, this is, we can't be doing this kind of top-down planning.
Immad (08:26.259)
I mean, they might.
Ryan Petersen (08:55.632)
Soviets also proved that this stuff is idiotic.
Raj (09:00.745)
Yeah, I've seen those memes about we're becoming a Maoist country, kind of become like an autarky. Is that what they call it here?
Immad (09:08.755)
I did really love that AI video with a bunch of Americans in a sewing factory. It was just a hilarious image. And yeah, I guess everyone's like, oh, we can build factories that are automated. But this stuff takes years, right? This is such a non-
Ryan Petersen (09:13.257)
my god, that was so good.
Ryan Petersen (09:23.862)
It takes years and you know, I know at least two people who were in the middle of building out factories and pause their work because the machines they were buying were from Germany and just like 20 % more expensive and they were just like needing more financing and capital and make the ROI case. The components were going to be coming from other countries. You saw Haas Automation, which is a major seller of machine tools and automation. They're seeing less demand. You're going to set up a factory in another country for anything export oriented. If you have to pay, if the US companies
Immad (09:31.176)
why?
Immad (09:38.631)
Yeah.
Ryan Petersen (09:53.888)
has to pay duties on the import and other countries don't like so
Immad (09:59.027)
because if you're reselling it outward, it's and it even gets worse because of the like the tariffs from all the other countries hitting the US makes it even worse. Yeah.
Ryan Petersen (10:01.997)
It's
Ryan Petersen (10:05.482)
other countries are putting totally. the one thing we know from Asia, there's a great book that I recommend to everybody, especially now, it's called How Asia Works. And it's a book about the industrialization, the industrial policies that allowed some of these Asian tiger economies to win and why some of the other ones didn't become industrialized, Malaysia, et cetera. And the main difference,
was their emphasis on exports. Malaysia also built a domestic champion for autos. I forget the name of the company, was a Malaysian car company you've never heard of because they don't export. But they protected it, they didn't allow imports, became the dominant player in Malaysia, but all they did was hurt the people of Malaysia. They made them buy inferior cars, they cost more and didn't win. Taiwan, sorry not Taiwan, Korea and Japan obviously built, and now China, BYD,
these dynamic, amazing car companies and it was all because they exports are the proving ground. It's how you demonstrate that in fact your country, your companies are competitive, your products are awesome. If nobody wants to buy it internationally, you don't have a good product in that world. And so it's kind of like Amazon strategy of externalizing their internal products.
If nobody buys Amazon customer service software, which they kind of, I think, haven't succeeded in that one, it's a pretty good indicator that, maybe we should, we either need to make our customer service software that our reps use better, or we should just buy Zendesk, use Zendesk, like if nobody wants our stuff. It's a similar concept applied on the global macro scale. And so if we're gonna punish our exporters, then it's just failing at like industrialization 101.
Immad (11:49.297)
Yeah, it just seems like even if you believe in trying to like improve the trade surplus or the trade deficit and and reindustrialize this, there's got to be a better way to do it rather than this like kind of hammer of a broad tariff approach.
Raj (11:49.473)
Yeah.
Ryan Petersen (12:05.39)
And the simplest thing would be like, us a year's notice so we can start to plan around this stuff. Like, you do it overnight, know, like, how am I gonna shut down my factory line? I don't have the local suppliers ready to do this. Like, nobody's ready, so.
Immad (12:19.091)
I mean, there is this like mad man theory of negotiation, but like, just, I don't know if that's like.
Ryan Petersen (12:26.7)
He's himself a great negotiating position. Everybody needs to come to the table right now and negotiate some deals.
Immad (12:30.803)
Yeah, everyone's freaking out, I guess.
Raj (12:35.457)
One question, Ryan, you mentioned the auto stuff. It was very interesting. Trump, think yesterday, was complaining about like, no one's taking our cars, you know, and they have these regulations where like you drop a bowling ball from 20 feet, and if it makes a dent on a car, they don't take it. Is that true? Like, is there actually really tough, is it tough for our car companies to export to other countries?
Ryan Petersen (12:45.677)
Yeah.
Ryan Petersen (12:56.59)
I don't know enough about those ones. That's interesting. didn't see that bowling ball. mean, cars kind of suck compared to some of these countries. So other than Tesla, Tesla cars are amazing. think Tesla should be. But I think Tesla's mostly built local factories in their markets where they sell rather than try to export them from the US. But yeah, until you make a competitive product, it's hard to make that case. Where you do see this for sure it's true is in Ag.
Raj (13:03.201)
Yeah. Yeah.
Ryan Petersen (13:21.268)
And the Europeans have banned, now from my perspective, my perspective, Europeans have banned genetically modified foods. the American corn, you can't sell it in Europe. All the corn, everything's genetically modified in the United States in order, oddly enough, and most people don't know this, they genetically modify it so that it has a natural fertilizer built in, a natural pesticide built in. But it's an enzyme that the human body cannot digest, so it's not harmful to humans.
Raj (13:32.267)
Hmm. Wow.
Raj (13:48.661)
Yeah, smart.
Immad (13:48.824)
that's interesting.
Ryan Petersen (13:50.092)
Yeah, and then they don't need to apply pesticides to the fields and like it's a big win for the environment. But Europe has banned this on environmental grounds, on health grounds, on other things that this administration argues is non-scientific, although we haven't asked RFK his opinion.
Immad (14:04.433)
I think people don't realize this, but agriculture in Europe is seen as like a national security interest, right? Like they're still scared after the world wars like this, yeah.
Ryan Petersen (14:12.174)
Fair enough, by the way. Fair enough. also, like, who wants to, you know, you go to France, you want to see some nice farms in the countryside or whatever. you know, I don't want that to all go away. So these issues are complex, but yes, there are barriers for US products. I don't know enough about the auto one. Having driven American cars other than the Tesla, just think you work on your quality first, but.
Immad (14:19.431)
Yeah.
Raj (14:35.861)
Yeah, mean, it's a problem. In the US, we have this obsession with our auto industry, right? Like, I mean, we're doing great on software and services, and we have trade surpluses, you know, with other countries, and like, you AI is big area for us. But we're obsessed with like bringing back the 50s for the auto industry.
Ryan Petersen (14:49.103)
By the way, Joe, the other other auto barrier, I forgot I saw this great tweet from Joe Wiesenthal from the odd lots podcast yesterday. He said, you know, Europe has this non tariff barrier to trade their to autos. Their roads are just not wide enough for a F-150 to fit down. This is totally unfair.
Immad (15:04.339)
I mean, I think that guess folks are still interesting conversation around kind of services, right? Like there's this obviously like all these tariffs are about like goods and they're ignoring services. Like, but at the same time, you know, when Metta makes a bunch of money in Europe, they do it through the Irish subsidiary, right? They don't necessarily like bring the profits to the US entity. So like how would a smart
Raj (15:05.695)
Yeah, yeah, yeah.
Immad (15:33.319)
policy take like services into account.
Ryan Petersen (15:35.092)
yeah, I haven't thought enough about that. But I do think there's something there that needs modern economy services, software products, all these other things. If you're not counting that in the trade flows, then something's missing. But yeah, it's a good point, you're creating these shell companies.
that the profits may not flow back. One thing that Trump did in his first term was change the corporate taxation rate for those profits that a lot of them did come back where before it was just crazy to bring it back and all this money was sitting offshore. So there's probably something there of just like make less incentive to hide the money offshore.
Raj (15:57.973)
Yes. Yes.
Immad (16:05.895)
Making easy, yeah.
Ryan Petersen (16:09.484)
But yeah, mean, our best companies are not physical goods companies and that maybe it's a problem. see their point. You know, one principle that I have in life is never getting an argument with anyone unless you feel like you can make their argument better than they can.
And so you got to understand the other side's point of view. I've tried to do that here is just like really, and they have some valid points. They're certainly addressing some fundamental problems that are real. And I think there's like, if you categorize it, I would say there's at least three good reasons why.
why they're doing what they're doing. One would be we have a massive debt crisis, our deficit's like two trillion dollars a year, and we gotta pay for that somehow. And so tariffs generate a lot of revenue, like, you know, they're trying to offset income taxes. Okay, it's valid, like there's real revenue there. Two is from a national security standpoint, we don't make anything in a wartime environment, your factories that make things, you know, that make cars.
make tanks, the ones that make commercial ships make Navy ships, etc. So there's that's probably valid. Manufacturing jobs is the third one like our the middle America like lost tons of jobs. A lot of these towns have become kind of like ghost towns from, you know, fentanyl crisis and opioid crisis. And there's just less work available to people. So that's those are all valid.
Points and then the fourth one I guess is tariffs give you good negotiating leverage and get these guys to drop their barriers If you put the barriers up and get them to drop their barriers, so I'm not saying by the way I'm not saying I agree with any of it. just like okay Look, make sure you understand their case before you before you attack
Immad (17:39.539)
if you want things to change. There is a fifth one. Yeah, yeah. Yeah, yeah. There's a fifth one that's like kind of, it's important but like hard to understand, which is that, like this whole situation where America has a very long running trade deficit against the rest of the world is a bit of an unnatural situation. And it only happens because America,
has the reserve currency. like, all of this money that's like, how it's supposed to happen between two countries, like if you have a trade surplus against it, you get a bunch of their currency and then you have to do something with it. And normally you sell it or buy their goods and like it tends to equalize. But with America, it doesn't happen because everyone just likes, it's like, let me just keep accumulating USD assets and holding the dollars.
Ryan Petersen (18:10.253)
Yeah.
Ryan Petersen (18:26.136)
Yeah.
Ryan Petersen (18:32.375)
I'll hold the dollars. Yeah. And you can see it, like, there's definitely...
You know, like look at Vietnam, my favorite currency in the world, the Vietnamese Dong is going down over the last few years, even as they've had like this incredible manufacturing boom and so many dollars are flowing in. Like it doesn't add up. Like your currency should appreciate. So, yeah, there's definitely some validity to this, to these points around currency, whether you call it manipulation or just like, it's our privilege as the reserve currency. It also kind of makes it.
Immad (19:03.239)
Yeah, this is actually a common problem with reserve currencies that like you get, you end up having these deficits and then you end up actually becomes so cheap for you to have debt that you accumulate more and more debt. And this has happened like over many reserve currency situations.
Ryan Petersen (19:06.264)
Mm.
Ryan Petersen (19:14.498)
Yep. And your people become, do they always become rich and lazy and hang out and just want to be served by some, yeah.
Immad (19:21.789)
Well, the problem is it's like not necessarily a sustainable situation. Like eventually, like the debt, like we got more and more debt in America and then suddenly interest rates go up and now like debt is, the interest rate payments get a credit and everything.
Ryan Petersen (19:33.42)
Yeah, think underlying that, think that's the... The piece that I agree with is like, hey, there's a lot of stuff here that wasn't sustainable in the way that things were working and needed some change. But now I'm feeling like, hey, maybe kicking the can down the road was better, you know?
Immad (19:48.819)
I mean, there's got to be a better way to like, even if they were like, okay, in one year, we're going to do it, right? Like, there's got to be a better way to implement this. This is like such a crazy method.
Raj (19:49.417)
He
Raj (19:57.183)
Well, the counter argument is that like the CHIPS Act shows the better way to like solve a lot of these problems, right? Like, you you're actually selectively on shoring strategic industries, you're creating jobs, you're picking and choosing which industries are you you want to that were really important for our national security and like give us the ability to build. Isn't that like, like, you know, the surgical approach versus a blood instrument?
Immad (20:20.179)
Yeah, and that's also the way China does it, right? Like China's like, we need EVs and then they went all in on EVs. It's actually, they also do plan an industrial kind of process.
Raj (20:32.255)
Yeah, but what's the argument against the Chips Act type of strategy? mean, and the China strategy. Isn't that like, wasn't that the consensus before this, we went this direction, that this is the way we should do it?
Ryan Petersen (20:41.038)
I don't know enough about the chips act to say whether it was anything or just like a subsidy for Intel or something. I don't know. It's like what chips are getting produced as a result of it. It'd be interesting. Grok makes their chips in America. Not Elon, not XAI's Grok, but the original Grok with a Q makes their chips in upstate New York. Little known fact. And they should be way more. They get way more attention and credit for it. They're making amazing. They're using global foundries.
Raj (20:57.057)
With a Q. Yeah. Yeah.
Immad (21:05.305)
Do they have their own foundry or they're using like the global foundries? Yeah. So they don't have like the.
Raj (21:10.079)
Well, TSMC just stood up their factory in Arizona, right? Like that's actively producing, you know, chips. Seems like that's the right strategies. Like we're picking an industry, we're giving them subsidies, some incentives to come and produce here. We help them get everything out of the way.
Immad (21:13.234)
Yes.
Ryan Petersen (21:14.594)
Yep.
Ryan Petersen (21:24.686)
And importantly, find ways to incentivize exports. Make sure that the stuff that they make is actually globally competitive. If we're just putting barriers up and, you yeah, you can make a big company just only selling to Americans, but you're actually, if the product's inferior and Americans are paying more for this thing, nobody else would buy it, then you're actually just hurting Americans rather than, you know, generating surplus.
Immad (21:46.813)
Yeah. So Ryan, what advice are you giving your customers, right? Like if someone is, especially if they're like a low margin business that's like importing from China, like what is their strategy right now?
Ryan Petersen (21:56.493)
Yeah.
Well, the first advice in any crisis is to stay calm. Everybody will rally around the calmest person in the room. all your employees are looking at you and looking at me too. You can't be freaking out. You don't make good decisions in that headspace anyways. I do think.
know, wait and see is the right plan. We've seen a lot of customers pause their bookings of ocean freight and air freight coming from China. There was a big surge last week to get out before this deadline. But now that it's here, there's a big pause. A lot of companies are saying, let's we saw this coming for months. Anybody with the brain knew there was going to be tariffs last week and they imported a lot. So they well stocked, they have inventory for the most part. And they're saying, hey, let's take a pause, sell through that inventory and fix
out did the tariffs come back down from here I do think there's likely to be some deals cut the White House is very much signaling that right now and so don't overreact we were kind of
We have a tendency as a species to get ourselves really worked up in a kind of reflexive, mimetic loop with other people who are all freaking out together. so like, gotta stay calm here and figure out, know, be patient. Definitely, you're already seeing people raise their prices. They don't need that advice from me, but you're seeing around 5 % price increase from our customers in terms of the ones that are e-comm and you can see their prices on their website.
Ryan Petersen (23:30.016)
And so we're going to find out. I don't know if that's enough. It'll depend on their margins. And these tariffs are probably higher. I suspect that that data point was from last Friday. So I haven't rerun it yet. But I suspect you're going to see even higher prices than that. hundred and four percent tariff. You know, we only were sure about that yesterday. So.
Immad (23:48.231)
Yeah, I don't know how that translates to 5%.
Raj (23:51.199)
Yeah.
Ryan Petersen (23:51.63)
Well, you'd have to have like a, what is that? I forget what the math works out to. think you need a 20X profit margin. So if three X is a more normal, like from your cogs to what you sell the thing for. And so you, you know, you're going to need to raise your prices 33%, I think is what the math would say. And then it's a big, what happens, you know, when you raise your price 33 %?
Raj (23:57.524)
Exactly.
Ryan Petersen (24:13.55)
The principles that we're operating on here at Flexport, I mean, this is a crisis for us. Like if our customers are in crisis and their bookings are slowing down, this is going to be rough sailing for us. And Flexport's revenue is P times Q, right? And so both of these are likely to go down at the same time. The price of freight is going to come down because there's less demand, supply and demand. So volumes come down, price comes down. It's part of why you get these cycles in our industry. So we're operating on like sort of four core principles, right?
now one is preserve cash we got to eliminate waste everywhere we can. Two is be decisive make some like don't you know you can make a decision just get it done quickly. Third is take market share prices are falling we got to be the place that everyone knows come come to Flexport.
be the place that's in front of customers, embrace the customer, go take and seize the opportunity. If we're better at responding to a crisis, then the competition will take market share. And then the last is, yeah, I think we this window to be a hero, be the hero of this crisis on behalf of our customers.
Part of why I'm trying to be, you know, do buy gas and get in front of people and tell the story and make sure Flexport's standing out here. There's all kinds of ways for us to bend over backwards and do extraordinary things. So we're converting a bunch of our warehouses to foreign trade zones where people can store goods and defer the duty. You only pay the duty when it leaves the foreign trade zone, not when it comes in. Yeah.
Immad (25:42.643)
In the US? Well, really.
Ryan Petersen (25:44.928)
in the US. And so there's all kinds of things like this that we're creating programs, refund programs to get duties back from customs. If you export something.
Immad (25:53.181)
They do this in China, right? Where there's like a foreign trade zone and like there's no tariff coming in and all the intermediate stuff doesn't get tariffed and then it can leave. you could do that in the US as well.
Ryan Petersen (26:01.654)
Yeah, yeah, yeah, similar concept. So yeah, those are our principles that we're operating on right now.
Raj (26:06.646)
Yeah.
Immad (26:09.191)
Yeah. Do you feel like the first one and the third one contradict? Like you're trying to cut costs, but you're trying to gain market share? Like often like to gain market share, have to like invest.
Ryan Petersen (26:16.226)
Well, you cut costs so that you can do the third, you know, got to preserve cash and cut costs so that you can afford to go take market share, pass through the falling prices, et cetera. yeah, they're kind of, one is required in order to do the other.
Raj (26:31.201)
Yeah. Right. I've been really impressed by how you've really taken on this like almost like national leader in the supply chain and trade. You know, I've known you for a long time. Like you, you we were one of your early customers in my last company. And so it's been really impressive to see how you've become this like, you know, like national leader in, in trade policy. think there's famously you went over to the Los Angeles ports, right. And you've done a bunch of very interesting.
thought pieces on like trade and then how we can be better. I just wonder what advice you would have for other founders who could take on that for their industries, because founders get very deep in the industry to become experts. Imad was not born a leader in banking, but he's like become, yeah. So what advice would you have for like new founders to become like a leader, like a very public thought leader?
Ryan Petersen (27:16.182)
He's with gaming when I met him, so...
Immad (27:18.035)
Yeah.
Ryan Petersen (27:25.71)
Well, everybody wants to make their company more famous, hopefully for the right reasons, to make it more successful, not for your personal ego. The number one thing that I advise people on that is remember that no one cares about you.
The sooner you get this lesson in your life, the better you'll be. No one cares at all about you. They care about themselves. They care about trends that are happening in the world. like they care about you to the extent that you can either help them or provide insight into that trend or an example of it, et cetera. And so stop pitching yourself in why you're so great. Self-promotion is totally dead in the world. The Internet killed it. It's too easy to anyone can go on LinkedIn and say I'm the freaking best and like it's free. So it doesn't work.
used to work, like on television you could promote yourself and say I'm the champagne of beers or whatever and people would believe it in Bi Miller Highlife. But that stuff doesn't work in the modern world because it's free, anybody can do it. So you have to be able to provide insight, thought, leadership. And so I think for a startup it's figuring out what are the trends, what do people care about, what do they care about whether or not you exist, that you can be an example of.
Immad (28:18.931)
You
Raj (28:36.351)
Love that.
Ryan Petersen (28:36.686)
and then make sure you're putting out lots of good content about that. If you've done a good job picking the trend, they will be interested.
Immad (28:47.667)
Do you think like marketing, I mean, I'm going to call the marketing stunts, but maybe that's like a underdoing it, but like, you know, when you, it's not like when you do the, that like LA thing, like I think you got a boat and like you were like, yeah, it's kind of like a stunty kind of thing to do. Like, do you think that stuff works?
Ryan Petersen (29:03.758)
To be honest, it genuinely was not a stunt. The reason I got the boat was I was trying to get information out of this guy.
Immad (29:11.954)
Okay.
Ryan Petersen (29:12.074)
And the best way to get information out of somebody is to trap them on a boat where they can't leave. And you just said they're supposed to talk to you for a couple hours. So I invited this dude to it who runs a trucking company at the port to come on a boat tour with me. And he agreed and said I spent two hours asking him questions and learning how it all works. But I'm not anti-marketing by any means. Those are some way to stand out. There's probably, there's some.
Immad (29:16.785)
Yeah
Immad (29:20.646)
Yeah.
Ryan Petersen (29:41.422)
The other interesting insight from a marketing standpoint, I'm a huge fan of Rory Sutherland. I don't know if you guys know Rory. You should try to get him on the pod. He's the man. He's the head of, or he's the chairman, vice chairman of Ogilvy UK, the ad agency. He's a legend. He's a hilarious guy. And he wrote this book called Alchemy. And Alchemy is, it's about the power of irrational ideas and the idea that...
Raj (29:56.235)
Hmm. Hmm.
Ryan Petersen (30:07.126)
Well, we're all trained to be logical, like our whole school system, our companies promote people who are logical, like we're using math all the time and pursuing things that make sense. And therefore there's no arb in any of that stuff because if someone else has already thought of it, because everyone else is logical, the only ideas that are going to actually work, the only ideas that will really stand out and work are the crazy ones. Now, most crazy ideas are bad. So you're like this intersection of like crazy and good, you know, that quadrant is where all of the arb in life comes from. And so to the extent that Mark
Raj (30:21.153)
Hmm.
Immad (30:27.751)
Yeah. Yeah.
Immad (30:35.859)
That's interesting. I kind of think about it as like a startup people are kind of tuned to this is like the low probability high ROI thing. It's like, if you really believe something has like a slightly higher probability and everyone else is like, oh, it's like, if it's less than 1%, you're like that zero.
Ryan Petersen (30:37.04)
going to give it.
Ryan Petersen (30:43.383)
Yeah, yeah.
Ryan Petersen (30:49.55)
Yeah, mean like look, all right, is like Flexport airplane. I sent 500 of these to like some big air shippers and we had like a 15 % conversion rate. These are million dollar accounts, multi-million dollar accounts off a freaking toy like airplane that I sent them. Yeah, no, I mailed them this thing and it's like.
Raj (30:54.24)
You
Raj (31:07.637)
Ha ha ha.
Immad (31:08.294)
literally the toy. I thought you were sending actual planes.
Ryan Petersen (31:14.05)
You know, like any rational finance guy would like, why are we sending toy airplanes to these companies? What are you doing, Ryan? And I'm like, well, let's see.
Raj (31:21.345)
Yeah, that's cool. Yeah, we used to send AirPods or like some kind of, know, something that was useful that we thought was useful, right? And that actually worked really well, sending gifts to like random enterprise customers actually worked, yeah.
Immad (31:21.715)
Well, that's a good idea.
Ryan Petersen (31:32.576)
It can work, Events, mean there's a lot of Some of the stuff is logical. My point is like the more logical and obvious it is, the less likely it is to work because someone else probably also sent them some AirPods. No one else is sending them a Toy Flexboard airplane, that's for sure. Although in our industry, people send a DHL airplane or something, so.
Raj (31:45.568)
Yeah, fair enough.
Yeah, yeah. in our end, because we were selling to restaurants, like restaurants are super low tech, probably no one wants to actually send in their AirPods. But yeah, absolutely, that could work pretty well. One question I have just about like, so you've built this great presence, like, does that also give you access to key people? It sounds like you're working with the government on things. that part of your strategy as well to like, yeah.
Ryan Petersen (31:54.08)
Yeah. Yeah, yeah, yeah.
Ryan Petersen (32:14.734)
There's an extent of that. Until recently, haven't had a... Even though it's the tariff stuff, no one cares what I think. They have their own tariff policy. And obviously, I'm selling my own book. Tariffs are very bad for my business. they're not going to listen to me and my customers. They know these things. But there's angles now where people may listen to me. For example, this ship...
provision where the Chinese ships are going to have to pay a big fee. I did like a big tweet storm about that this week and that I'm told got circulated around the White House and other places and then they announced the next day that they might change the way that it's done. hopefully, yeah, hopefully I can be a voice for some reason and it's a good sign if they're listening to people who are in the game in the arena.
And but it's not necessarily that stated over the last decade. haven't had a lot of issues where I'm like, I really need the government to do this differently. Like we're different than I think a lot of startups are kind of a lot of real world startups are sort of test cases of, you know, should this be legal?
Raj (33:23.105)
You
Ryan Petersen (33:23.822)
Should you be allowed to run a unlicensed hotel in your living room or not and like they? Have probably more active need for lobbying and changing rules and communicating with the government We're like yeah, like government's gonna secure the border collect customs duties Have all kinds of safety regulations about shipping like all that stuff is good Like we'll just comply with every single rule in every country in the world. We're not a test case. So it's a little bit different
Raj (33:28.033)
Right.
Raj (33:54.593)
There's been a lot of talk about the Jones Act recently. Do you have any opinions on that one? You ever see that?
Ryan Petersen (33:59.266)
Has there?
Immad (34:01.223)
did see a little bit of it. the Jones Act is the one that like forbids any ship to use American waterways unless it's like American made. Is that right?
Ryan Petersen (34:08.814)
It's more specifically to transport.
freight domestically between two American cities. So it's mostly applying to cargo moving out to Alaska, Hawaii, Puerto Rico, Guam, and very importantly, on the Mississippi River, we have the best navigable river network and it's very underutilized because the ships that have to be made in America and therefore like really, and crewed by Americans, they end up being very expensive as a result of that Made in America clause.
So I, yeah, I'm pretty anti these things. I'm like a libertarian at heart, although not a stupid one. There's plenty of ways, reasons why government needs to intervene and be involved in the economy. But, Jones Act seems like it has not achieved its goal, is the main thing. The goal was noble, it was like to promote American shipbuilding. But here we are. We didn't build any container ships last year as a country, so it doesn't work. Let's try something different next.
Immad (35:10.119)
I guess it's like the Jones Act is kind of the end result of these tariffs. It's like we not only don't build the thing, we also just don't have the thing.
Ryan Petersen (35:18.454)
Yes. And, you know, the people who should be up in arms about the Jones Act, Hawaii, Alaska, Hawaii pays like so much for everything. A part of the reason everything's so expensive in Hawaii is the Jones Act. costs like, I haven't checked the prices lately, we don't do a lot of Hawaii shipping, but.
I mean, it was like 20 times more to ship a container from California to Hawaii than from California to China. And I don't, you I don't spend a lot of, you might not spend a lot of time on Google Earth like me, but China's past Hawaii, yes.
Raj (35:42.645)
Wow, that's crazy.
Raj (35:48.193)
you
Immad (35:48.435)
It's on the way. Should be half the price. So Ryan, you left to be a VC for I guess a couple of years and then you came back.
Ryan Petersen (35:59.83)
No, couple of months really. yes, it was short. Six months stint, six months as executive chairman and then back as CEO. And of that six months, I'm still moonlighting.
Immad (36:02.194)
really? Was it that short? I thought it was worth it.
Immad (36:11.948)
So did you do any deals as a VC in the six months?
Ryan Petersen (36:14.734)
I didn't lead any deals. I helped Founders Fund on a few things. I was there when we did the Neuralink deal, which was really a proud to be part of that. It was really exciting. They didn't need my help, I was definitely an advocate that if you don't fund this kind of stuff, like what are we even doing? Is Founders Fund? But they didn't need me to say that. They all got it.
Immad (36:20.381)
Nice.
Immad (36:27.613)
Do it.
Yeah. How did you transform? Yeah. How did you kind of transform as a CEO in that time period?
Ryan Petersen (36:41.774)
Well, I've made a lot of changes when I came back to myself personally. First off, the VC experience actually did help me. One of the things I did, because I'm not a professional investor, I've done a ton of startup investments, but one of the, not a professional investor by any means, so I read every book I could on investing for like...
The whole time I was there I was just reading books about investing and trying to be really good. That gave me a good perspective of flexport from an investor's perspective. What is the return on invested capital? How do we think about capital efficiency? lot of the metrics that an investor would look at and start wearing that hat was really helpful. I'm also an investor in a small business that is quite profitable and can't grow.
And so it's like a hotel. And so it's very interesting to be part of that because that's such a nice, that's just a simple constraint to apply to your business. Like it can't grow the number of people that stay there a night. But it could grow its revenue only if you, and it makes money. So you're like, I'd like to have that money myself, but if you could.
Immad (37:42.493)
Hmm. Yeah.
in
Ryan Petersen (37:50.988)
make the case that investing in these new curtains will allow me to charge more, like I would be open to that. And you take that constraint of growth, no one should do that in startup world, but we're so used to like, I can always invest more for more growth. But if you take that away, then you start thinking much more about return on invested capital in a sensible way. So that was pretty helpful for us of like, can we, what are the things that are gonna allow us to charge more for our service? Not just get more customers, which has always been our thing. Get more customers, more volume, grow, grow, grow.
Immad (38:18.218)
When did you buy this hotel?
Ryan Petersen (38:20.758)
I didn't buy it, I'm just a small investor in it a few years ago.
Immad (38:22.673)
I see. Interesting. But yeah, I think a normal business is actually quite a good way to learn startup land. Towards the end of Hazard, we were profitable in my previous company, and we just didn't have that much money or anything. So it just completely changes your mindset where you're like, OK, how do you make the cash cycle quicker? How do you get the invoices paid? There's so many factors that I think a high growth startup doesn't have to think about.
Ryan Petersen (38:29.368)
Yeah.
Ryan Petersen (38:46.894)
Yeah, yeah, And startups, especially like compound startups where you just have so many different products, there's always new things that you can invest in. applying that constraint of like, what's going to let me really charging more is the easiest way to make money. But you can't just charge more customers with leave. how do you create more value that people are to pay for? But the main ways I changed at Flexport was like, the market, it weren't related to being an investor at all. was just...
coming back and realizing you gotta go into much more hardcore mode. So I think I was doing, the biggest mistake I had over last decade, a lot of startups, founders make is,
hiring senior execs and then just like kind of trusting them and managing through them instead of going, okay, hire them but I still own this problem and skip levels, involve them if you need to but just go straight to the front line, talk to everybody, ignore the org chart way more. now if you were to look at my Slack, I probably talk to 60 or 70 people a day and they're different every day.
I mean a lot of the same people, full on, full on. And I was there, I was in that mode before I heard, was there that day, Chesky gave that talk. So, but I was there, I was in that, but I wrote down four pages of notes because I was like, yes, yes, yes.
Raj (39:59.201)
So you're founder mode, you're a true founder mode.
Immad (40:12.605)
Yeah, I feel like most good founders had discovered the need to be in founder mode before Chesky gave that talk, but I think it was good to have it described. Did you actually change anything that you did after that talk? Okay.
Ryan Petersen (40:22.528)
Yeah, you put it in simple words.
I made two big changes that were more high level strategic stuff that we did. There were three changes. The first was we had a design org that was like per product. It was a designer and we changed it to be like, let's have a design flow across all the things and think about the user experience. Make you don't ship your org chart, like have a design that's end to end. Two was...
Immad (40:46.919)
Yeah, consistency and stuff.
Ryan Petersen (40:53.646)
We actually did this leadership summit and we're such a globally distributed company that it's hard to get everybody on the same page. I brought 100, now I'm doing this twice a year, brought 150 people from our leadership team together.
For like three days of review the strategic review the strategy review the product roadmap review go through all the different product areas like get everybody informed about Everybody meets each other that that Duras drove insane engagement and culture upgrade and problem-solving and relationships that people are calling each other now They know each other much better and that was just like me rec I got it from Chesky But I've been look craving this because he recognized I just know every I don't know everything But I know I have so much more access to information is the way to say that
than the team does and I just kind of take that for granted so you realize like I'm in all these business reviews But even my other executives don't join all of those reviews so they don't see everything no one else can see it So how do you bring that information to more people and then the third thing that Chesky told me to do? That he got he got a lot of this from Apple by the way I don't know if that was in polygrams post, but he got He got access to like how Steve Jobs ran Apple and like cloned it for Airbnb
Raj (42:04.449)
Hmm, interesting, I didn't know that.
Ryan Petersen (42:06.306)
And the third one is that biannual, twice annual tech release all at once, bundle all your software, all your new products and launch it. And we did that in February. We launched like 20 new AI products and just kind of in our industry where it's kind of glacial pace, nothing much changes, we were able to make a huge splash all at once, get attention on our tech.
Immad (42:30.621)
So if something is ready before that six month time period, like do you actually pause it or is the thing like you're shipping all the time but like that creates a timeline?
Ryan Petersen (42:35.406)
A fair amount of that stuff was stuff that had soft launch in beta. were using it and you just didn't really talk about it and do any kind of announcement.
Raj (42:44.833)
That makes sense, yeah.
Ryan Petersen (42:45.794)
But a lot of it was stuff that we ship Sunday night, you know, night before the release, like working the weekend. So a huge amount of benefit to doing that. one was that deadlines are super powerful. You need them in especially in tech org where it can kind of linger. And then to the coordination we got from our marketing team and the engineering teams to actually know what we're building, why we're building it, help them tell a story where before we would just, we built the thing and then marketing would be like, what is this thing?
and never get their head around it to launch. So they started work partnering three months earlier in the cycle and seeing what was coming.
Raj (43:16.191)
Yeah.
Raj (43:24.737)
One of the interesting pieces of advice I heard about that was like, you actually write the press release for the product on inception. know, that's like, marketing is in the room when you actually start designing the product. And I think...
Immad (43:37.117)
That's like an Amazon thing. It's called like working backwards.
Ryan Petersen (43:38.562)
That's an Amazon PRFAQ. do those. Some of our teams do that. We have pockets. We have a lot of Amazon people. So we haven't made that a consistent requirement for every team.
Raj (43:40.182)
Yeah.
Immad (43:51.577)
it depends exactly what it is and whether it works. Maybe we're talking about San Francisco a little bit just to go from like super global to super local. I feel like San Francisco has improved a lot. Ryan and I both live somewhat close together but I saw you tweet about like a startup that you're involved in, Room can't sell these kind of phone booths inside San Francisco now.
Ryan Petersen (44:15.662)
Room sold, so I'm not sure. It's not actually coming from Room. They might still be selling, I'm not sure. I'm not involved anymore. But no, that was my friend's startup got shaken down by the fire department and made them rip out all their phone booths. And apparently this has been happening. Once I tweeted about it, like some commercial real estate broker has been, yeah, the last few years the fire department's been going door to door and offices and telling startups.
Immad (44:28.894)
really?
Immad (44:37.063)
I mean, these are like small boots. Like what is the fire risk?
Ryan Petersen (44:42.028)
I'm sure it's some fire code that says if you have a room that you need to have a sprinkler. So these things are rooms. They're phone booths. like, I mean, it's just kind of ridiculous. I will say the mayor was super receptive. I met the mayor not that long ago and I texted him my tweet and he replied, I'm on it. And then he called me this morning. Speaking of being able to get, I miss his call. So hopefully he's fixing it. I don't know. don't know. But I do, I'm.
Raj (44:50.859)
Yeah, pretty, good.
Raj (45:01.686)
Wow.
Immad (45:01.707)
really?
Raj (45:04.255)
Yeah.
Immad (45:05.011)
that's great that he's on top of her.
Ryan Petersen (45:08.942)
I'm optimistic about the mayor. I haven't been all in on him yet because he's saying all the right things, but starting to see that there's some action doing the right things around.
Immad (45:17.085)
I mean, London Breed also said all the previous ma'am. She also said many of the right things. Yeah.
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