Podcast Transcript:

Wade Carlson                 

Hey everyone and Welcome back. Thanks for joining us for the 2nd edition of our flagship podcast that we like to call: The PortCast – Where we speak logistics. In this special two-part installment, Craig Fuller, CEO of the data and content forum Freight Waves, sits with Stephen Dedola to discuss how they use industry experts paired with accelerating technology to interpret the domestic freight market; and how FreightWaves is establishing itself as the ESPN of the freight industry, breaking out of the pack and scoring big in the competitive, competitive market analysis game. For Dedola Global Logistics in Long Beach, CA I’m Wade, this is the Port Cast and we speak logistics.

Stephen Dedola:             

Your last chance. Okay, so I’m going to start right now. So I’m talking today with Craig Fuller. He’s CEO and founder of FreightWaves. Thank you very much Craig for joining us today.

Craig Fuller:                       

Yeah, happy to be here.

Stephen Dedola:             

Great, so one of the first things I wanted to start with is to congratulate you and thank you for the FreightWaves Transparency Conference last month. It was a great event. It was probably one of the best conferences that I’ve attended in my, I don’t know, decades in this business. I thought it was a great combination of technology, and engaging and informative speakers. I definitely came away from it with some game changing and actionable, which is more important, ideas. So kudos on that.

Craig Fuller:                       

Yeah, appreciate it. We, the team works hard to get, you know, good content and do it at a cadence that doesn’t bore people. I think we try to differentiate between a lot of industry conferences, particularly ones put on by mostly associations, which tend to be driven a little bit more on a sort of long form format and sort of traditional, you know, same set of speakers each time. And I think what we’re trying to do is shake it up by really bringing the telling market content in a way that’s, that has a much shorter sort of time span. So we believe our conferences are built for this version of the industry that we’re seeing right now evolve, versus what has been around for decades.

Stephen Dedola:             

That is definitely the feeling I got from it. That you’re really looking at this, the way the technology works, which it’s fast, it’s a, you know, there’s, it’s what’s happening right now is very important. Even though it may kind of stretch into the future and it may change how things go, it changes quickly and has many different facets. So it was definitely felt in that sense. So from your website, and I went into your about, because of course that’s where the keeper of all information about all companies nowadays is, but I’ll give you what I pulled it as being kind of like, let’s say the core idea of what FreightWaves is. It says FreightWaves is a data and content forum that provides market participants with near time analytics on the state of the freight market, and tools that provide actionable outcomes. Now if you could, if you could unpack that for us a little bit, and also add anything you’d like to kind of, you know, flesh that out a little bit for us.

Craig Fuller:                       

Yeah, so what we do is we’re interpreting data and really informing market data with commentary from experts. We call it having tribal knowledge, people that have been around the industry for decades at very large companies. But I have done all aspects of the job, whether it’s everything from truck driving to senior executives at multi-billion dollars 4PLs to asset based carriers to NBOCCs, et cetera. And what we’ve tried to do is bring in those market experts to provide play-by-play information on the market informed by near term data. And so the analogies that, you know, as we thought about our business originally it was sort of Bloomberg for freight. We still stand behind that. You know, it’s interesting talking to truck drivers who aren’t tuning into Bloomberg or looking at the Bloomberg terminal typically. For them it’s, the analogy they like to use is the ESPN of freight.

Craig Fuller:                       

And I consider that complimentary and I think it actually is well informed because a lot of what we do, and I think where we’ve been successful is if we’re the ESPN of freight, then we’re bringing in the former quarterback, you know, the former pitchers that can go and interpret the signals in the market. And so these individuals have experience of being on the ground. They quote unquote know where the bodies are buried. They know how to interpret data because they’ve actually been there before, and can really get down to the bottom line of what’s happening, both the good and bad. I think, you know, for a lot of reasons, having that informed view of the market allows us to evolve our understanding of the market as things change, but also maintain a pulse and interpret things going on right now.

Craig Fuller:                      

  I mean a great example of what’s happening at this moment is what’s happening with the freight market. And this is, you know, if you look at Pertinent, there’s a lot of questions about is the market decelerating? Are we going in, are we continuing the expansion we’ve had for the past 10 years? Or we’re in a situation where the freight market is starting to really, really slow. And of course if you only take, you can make a bull case or a bear case. I think we believe that by having that industry experience and interpreting which data sets are most relevant to the market, that we can decipher what’s really happening. And so that’s how we see it. And of course, where our position is at this moment, that we believe that the market is decelerating, not accelerating. We just think that there’s a lot of factors that are dramatically impacting sort of the state of the market, and we’re using data and experience to sort of drive to those conclusions.

Stephen Dedola:             

So would you say that what FreightWaves is trying to do is not only provide the data, but help your, let’s say clients or your readers or your participants to interpret the data?

Craig Fuller:                       

That’s correct. Yes. We have 25 full time journalists. We have 12 analysts which provide it and we have about 20 data scientists. So, the important thing about data that you have to keep in mind is that data without context is meaningless. Because oftentimes people take data and they interpret, you know, there’s confirmation bias into the data. There’s, they don’t know how to interpret rethink, and sometimes data that you think is telling you something actually is telling you something completely different. And so what we’re doing is providing that context for what is meaningful about the data. And I think this had been done in other markets. If you look at financial markets, they’re exceptionally good at interpreting different signals and quite mature. I think even some of the government data sets that are broad base, you know, whether it’s the USDA reports, Crop Reports or even you know the Department Treasury, the Bureau of Labor, BLS, they provide commentary to explain how these data sets are important.

Craig Fuller:                       

Freight, historically what you’ll have is you’ll have one company or one firm that provides one set of data, and that becomes their data set. And I think you know, that’s great. What we’ve tried to do is bring those data sets together. The challenge is, I think oftentimes a lot of organizations in this space try to use one single dataset to explain everything. And the problem with that is that oftentimes you can’t do that because different data actually prove different things. And they’re actually telling you different things. And I think what’s important for us is to know what those things are both the good and bad and interpret… Like we have data sets that we publish that are useful only for very select cases. And some are more relevant for others. And so we have to understand how those data sets are useful and not get caught up in trying to, you know, lead with a lot of confirmation bias. And then also having said that, you know, at times our team will disagree, we will have different points of view that may be in conflict with one another and I think that creates a very healthy dialogue.

Stephen Dedola:             

I hear you. I think again, what kind of popped into my mind is kind of a Venn Diagram, right? Where you’ve got all these different maybe complimentary or even just separate pieces of data and you’re trying to see how they intersect, and seeing where those, what happens when they do, and what it tells you when they do. Would that be a kind of a way of looking it?

Craig Fuller:                       

That’s a great explanation. Yeah, that’s a great explanation. And I think again, it’s having the context that’s important. And look, we’re, we’re going to get things wrong on occasion. Hopefully our batting average is better than most. But there’s times where we, you know, we will make a mistake, we interpret something incorrectly. Or we think, you know, we may come out and say, “Hey, we don’t think this in the case with this particular data.” And then we turn out to be wrong. And that happens as well. I think you have to sort of own up to those situations if they do come, because that credibility is very important.

Stephen Dedola:             

Absolutely. So the two different things that you’re doing that I heard about at the conference, and I know that are kind of near and dear to your heart, one is sonar and the other one is trucking futures. So again you mentioned these other industries or other areas that do this kind of data crunching and make predictions about the future, one of them being commodities and I think that’s what you’re going for with the trucking futures concept. So can you tell us a little bit about that?

Craig Fuller:                       

Yeah, so really what a futures contract is, is a financially subtle futures contract. Which means a truck will never show up. So these are trucking futures that we’ve listed on an exchange. And basically it’s an average, it’s an index that tracks an average of the market. In this case it’s trucking rate averages. And what we’re effectively doing is tracking the average price in the trucking market for spot rates, and then using that data to build, we have built an index and then we list the contracts against it. What it does is it lets companies that are exposed to price volatility in the truck and spot market hedge, or trade against that volatility. So if you’re a trucking company, your natural inclination is that you want rates to go up as a hedge instrument. You’re actually shorting the market, so you’re actually, you’re making a transaction or a bet that prices will go down. And that bet is offsetting your natural exposure. So the idea of futures is really to create an offsetting exposure to where you naturally exist.

Stephen Dedola:             

So the idea again is again, obviously this becomes more and more important as your volume goes up, and I think probably the more sophisticated players in the market will understand this and adopt it more readily than maybe your smaller players. I can tell you that having spoken to some of your experts, and I consider myself a relatively intelligent guy. A lot of it went over my head when they started really getting into the nuts and bolts of it. Your explanation I think is a clear one in the sense that if you know anything about futures markets, the idea is that it functions in the same way. You’re hedging your bets by betting for or against these fluctuations. And the idea is there’s volatility, and volatility can be opportunity, and it can be risk. And that if you can find a way of sort of flattening that volatility out by making good bets, then that kind of gives you a little bit more of a reliable or predictable cost.

Craig Fuller:                       

Yeah, that’s correct. I think that’s spot on, no pun intended.

Stephen Dedola:             

Thanks. Well great. Okay. So good idea then. So this is kind of a, would it be correct to call it a fledgling part of your service?

Craig Fuller:                       

Yeah. You know it started as the core part of what we were trying to do two years ago or three years ago when we started the business. And so it was the idea to create a financial market based on trucking. And I think what happened is, as we went to market and sort of talking about futures, and what the sort of common themes that we did, we looked at markets that were successful. We looked at markets that were unsuccessful. And I think what we realized is, that in order to create a successful futures market, you have to have commentary in data that provides insights on what’s happening. We just didn’t feel like the freight market at the time was trucking only. The trucking market had really good market insight data that was done on a near time and we say near time, 24 hour basis of turnaround in data. There wasn’t really a good market commentary from a news standpoint, and we went out and built that and we built that entirely to focus on to help drive liquidity in our futures market.

Craig Fuller:                       

We never ever thought that this would become a core part of what we do or become part of what we do. And that’s exactly what happened. Is as we started writing commentary and publishing data and aggregating data, there was just such a desire for that information in the market, that it really accelerated a lot of what we do today. And so now we think of our business much broader than that. Certainly futures are fledging. It’s not, you know, as I went out and raised capital for investors, I basically said, made the case that, you know, what they need to do is get comfortable with the core part of our business, which is our data business and our news business, our community, we call it, get comfortable with the thesis, the investment thesis around that. And then ultimately futures are a, it’s a lottery ticket or they’re getting, you know, the word of the markets, they’re getting a free option on futures, the futures market.

Craig Fuller:                       

So if it does well, then it’s immensely successful for them. If it doesn’t hit the mark in terms of getting true liquidity or if it takes a lot longer than we would like, then it’s, the business itself has fundamental value through our data products. And so what’s happened with that is that we’ve brought in a lot of market experts from the financial markets and the commodity markets and in oil and ag and different commodities sectors to learn how those work. And what that did was it helped us build this mind of the market in terms of what’s happening with a financial perspective. And so I think that’s really where we’ve been successful, is that we’ve applied a financial markets understanding of data, understanding of information, understanding of context, and tried to be unbiased in the sense that we’re trying to interpret these signals without any goal in what they become.

Craig Fuller:                       

Because in a market, if you’ve got a commodity market, there are winners and losers. They typically, commodities are in some ways on a transaction by transaction, the zero sum game. And it doesn’t mean that it’s zero sum, it just means for overall, it just means on that particular trade, one party is bullish and one party is bearish or one party’s long and one party’s short. and because of that-

Stephen Dedola:             

Someone’s going to win, someone’s going to lose, basically, right?

Craig Fuller:                       

Yeah. but it’s the same thing in the freight market. And so shippers right now, shippers always want prices to go down. Carriers always want prices to go up. Neither party wants the economy to go down, they have a mutually aligned interest there. But at the same token, one wants to go up, one wants to go down. And because of that, we look at it. And even though we probably inherently want things to go well and volume to be up, we’re agnostic to the direction of the market and we have to be.

Automated:                      

Yeah. And I think that kind of dovetails into the sonar product, right? And I think you’ve also got, you’ve talked a little bit about to the extent that this draws what we were just discussing together a bit. And also, I believe you’ve got a 4.0 coming out too. So if you want to talk about that a little bit.

Craig Fuller:                       

So Sonar is a, you know, we were inspired about Bloomberg, when we built the platform, we looked at how our financial data dashboard’s built, and what do they do? And what they essentially do is they take really complicated information, provide a consistent way for, at times an unsophisticated person. And I don’t mean that they’re not sophisticated in using it, it just means they don’t have to understand everything about the data that they’re reading. It provides a really good way for them just to get quick insights. And it creates basically a business analytics, it’s a business analytics platform, essentially Bloomberg’s core, it connects the world financial markets data with a business analytics platform. And so we took that inspiration from Bloomberg. In fact, you know, it’s no shock that our system has a lot of the look and feel of Bloomberg or the financial markets terminals, because that’s exactly how we were inspired when we built it.

Stephen Dedola:             

Imitation is the greatest form of flattery, right?

Craig Fuller:                       

Exactly. We have an active partnership with, you know, we’ve worked with a lot of financial markets companies. So, you know, we would be very transparent to them as to what they are and I think they’ve been very complimentary to us. And so because of that, we built this market dashboard that takes in hundreds of thousands of data points every day and builds those data points into aggregated indices. We have about 700 different sources of data that come into the platform, different types of data sets. And so those data sets then provide basically an anonymize. It’s not personal information about any individual participant, but it’s an anonymized perspective on the freight market. And it lets you know really the supply and demand. But it also lets you know a lot of other things that you want to know about what’s happening with global trade, what’s happening with you know, all the workflow elements of what people are doing in the market we’ve tried to aggregate as well.

Stephen Dedola:             

Great. And as far as, again, is 4.0 a great leap forward or is it just refinement on the existing?

Craig Fuller:                       

I would describe it as an evolutionary product. I think as a SAS company, everything builds on itself. And I think certainly we would argue that Sonar, when it came out was quote unquote revolutionary in the sense that it did something in freight that hadn’t been done before. I think now as we do new releases, it’s just building on the existing framework, but doing it in a way at a speed which is atypical, which is not typically done in freight, because we’re able to do it, you know, these are, everything’s in the cloud. We’re able to move really quick. We have a multimillion dollar development budget. We have a multimillion dollar data acquisition strategy, and we’re publishing information insights every single day that we have an active R&D process of doing a lot of research and finding what other data exist. And then often times 93% of the data that we have on the platform is actually exclusive to us. So oftentimes we’re bringing in different data sets to, to build some machine learning algorithms on trying to predict things, and trying to come up with insights by bringing in different datasets that have never been brought together before.

Wade Carlson                   

Hey everyone thanks for listening to part 1 of our interview with Freight Waves CEO Craig Fuller, and look forward to the conclusion of our interview where Craig and Stephen weigh in on the speed of freight over the next 5 years and the trade war with China. For Dedola Global Logistics in Long Beach, CA I’m Wade, this is the Port cast and we speak logistics.