Podcast Transcript:

Stephen Dedola:  

What I’d like to kind of get from you maybe is, you know, and it may be in a sound bite or if you want to go a little further, what do you think is the most crucial thing that people who are in the freight business or in the international shipping business, whether they be importers or exporters, or freight forwarders 3PLs. What is the, like in the next five years, what’s the thing to keep an eye on? What’s going to be the most important factor?

Craig Fuller:     

Well, look, I think it’s sort of consistent and will be consistent to the end of time. Is that what’s happening now with all this digitization is that information, so customers are wanting to move things faster. They want to streamline their supply chains. You mentioned Amazon. Amazon’s is trying to get freight move through the supply chain faster, both domestically and internationally. And I think that’s true for every single shipper. They also want information flowing between these parties. So there’s a constant drive to better information, connecting all these parties, more expedient connectivity and I think all of that’s sort of a macro trend that’s not going to change. I would also argue that because most of the decisions are being made, if you think of it just in the trucking market, you know by the time you ship a shipment, the time it picks up, it’s about just a two day window. And it’s getting faster and faster as time goes on, whether it’s air freight or ocean, what’s happening is all of these geopolitical events are impacting trade.

Craig Fuller:    

All of the market conditional events are impacting trade. And so you have to have real time analytics on what’s happening. I think that’s a trend that’s going to continue. Certainly we’re doing our part by doing that, and there are other parts of the ecosystem that are bringing better connectivity. And I think you don’t have to go buy our product, which is fine and great if you don’t. But what is important at the end of the day is that you understand that whether they’re shippers or freight forwarders, or carriers, is that everyone is as mutually aligned to bring together information and visibility. And that visibility push is going to be a permanent fixture of our reality broadly.

Craig Fuller:  

And the opportunity is exponential because once you get certain level of visibility, it then builds on itself and requires more visibility. And then ultimately we’re going to end up in a more digitally connected world, hopefully. I mean, assuming there’s nothing sort of that breaks that, like geopolitical constructs or say a natural disaster. And so as we have a more connected world, then that allows for more efficient processes and for more information flow. And so I think that’s where we’re headed, is really, it’s not just about JIT Transportation, but it’s about JIT connectivity. And I think that’s where we’re, we’re ultimately headed.

Stephen Dedola:   

So the idea would be, and again what you, not optimistically see for the next few years is pulling together all these separate systems and entities and creating a much more seamless flow of information for the end users and the senders and all the rest of it. So that good decisions can be made and visibility can be had and customers can be satisfied.

Craig Fuller:  

Yeah, and so I think, I mean it’s happening across all avenues and spectrums. The shippers are demanding it. They want better visibility of their freight. They want to make sure that their appointments are registered and on time, and they’re putting penalties if you don’t. Carriers are probably the slowest to adapt, of any mode. Carriers are always the slowest to adapt.

Stephen Dedola:   

Very true.

Craig Fuller:  

Air may be the biggest, they may be the earliest adopter of any sort of technology just because their businesses tend to be… an airline is far more technology-focused just because of the nature of how their businesses work, than what the other modes of traffic are.

Stephen Dedola: 

But they’re high risk, that’s for sure.

Craig Fuller:                    

They invest in technology, it’s just closer to their DNA. Than say the ship lines, which tend to the slowest adopters.

Stephen Dedola:          

Yeah I think if the ship lines could raise a sail, I think they probably would be doing this.

Craig Fuller:    

Exactly. Exactly. So I think all of that’s happening. And so, you know, companies like Amazon and Walmart, they’re forcing everyone to bring information together. So what they’re doing is they’re requiring their clearest investment technology, the government’s doing its part to have better visibility and tracking of hours and labor and all of this. And that’s forcing everyone to sort of adopt it. And the challenge that I see, and this is really across the board, is I think there’s always this sort of resistance or almost concern of what people are doing with information. And there’s this desire of we want it to go back to the old ways. We don’t want to be digitized. We don’t want to be accountable to these digits, because it doesn’t provide context for us. And I think the challenge is that this process is inevitable.

Craig Fuller:    

There is nothing you can do about it. And it’s not just, you know, we are sort of a secondary benefit to it because we can get context and data, but there’s a primary benefit to the suppliers in the business because they can be more efficient and have more information and know what’s happening. It’s more beneficial to the retailers. That visibility actually can bring a substantial amount of benefits over time. And regardless of whether it helps our business or not, it’s still going to be inevitable reality for the way business is changing and freight transportation.

Stephen Dedola:     

Again that’s one of the things I really appreciate about what you’re doing because I really see you bringing value and I think that that is, you know, that you’re taking and you’re trying to bring together all these pieces and also helping an industry, which is historically like you described, very slow to adopt technology. To kind of accelerate that pace before the disruptors come in and just eat everybody’s lunch. And I think that that’s definitely a valuable service. So from the perspective of some consumer of it, you know.

Craig Fuller:     

The disruptors, the challenge for the industry, and the incumbents is the disruptors are telling a story that is actually factually correct, which is the industry broadly is slow to adapt technology. And what they found is this, it really resonates with Silicon Valley investors is this idea of disintermediation through technology. The challenge is that those same disruptors oftentimes don’t have the experience in the industry, and don’t have the sort of base of business to draw. That is both an advantage because they don’t have bias on how things used to be. It’s also a challenge for them because a lot of freight and freight management, particularly in the non-asset based, you know, intermediary side of the space. There’s a lot about exception management, which actually requires people. So it’s interesting to watch. And look, I’m a big fan of companies that are doing machine things. That’s why the disruptors are really, I’m a fan of them broadly. Whether they’re business models or they’re valuations that I could subscribe to or not is irrelevant, but I think it’s very lucky to get focused.

Craig Fuller:         

What I think that those companies are doing is pushing the envelope around these factors because they don’t have any, they don’t have sort of the scars of having tried this stuff and it not working and sort of giving up on it, or afraid to try. And I think we have to give them credit, and I think as an industry, if you’re not classified as a disruptor and you sort of have to operate the way every other business in America does, which is you have to make a profit, you have to generate revenues, and that’s how you’re valued. Then you have to look at business and say, I can’t function alone and I can’t sit there and stick my head in the sand because if I do, then these disruptors would come in and just completely displace me. And they’re going to, that’s their goal. And I don’t think this is just shoe fitters creative destruction at it’s finest.

Craig Fuller:       

It’s just that our industry has historically not had space. What often people describe as interlopers, they haven’t had to face these sort of outside companies come in and disrupting. A lot of times in the past it’s sort of had, there was a lot of discussion around it. The difference this time is that we have the right environment for those conditions to exist and I would not count any of those companies out, and I would not be surprised if we see over the next couple of decades, or even over the next decade that some of these guys really create tension on a scale and end up becoming, achieve their goals. Now they will burn a lot of capital to do it.They will burn a lot, they will make a lot of mistakes along the way. They will make a lot and it’s easy to sort of point those out, but at the end of the day there will be a couple of those in each sector that really, really change the way the business is operating.

Craig Fuller:      

And I don’t think you have to go and look at, you know, you look at what Uber has done to the taxi business, you can look what Amazon has done to retail, you can look at what the internet broadly, Google has done to media or Facebook has done the advertising. And so this is a factor that we’re all going to live with. I mean the cable companies, media is being completely displaced by… Netflix is eating all their launch and I think these are just, this is just reality.

Stephen Dedola:            

Yeah, no, I agree. I think it’s the level of complexity that I think is what you described in terms of like the intermediary area, which is my area that I don’t think that they are completely grasping yet. And that’s why a lot of these very appealing technology-based companies end up falling down is because they haven’t really grasped the complexity of what they’re doing and that need for having experienced people on the ground. But that’s just a matter of time. You’re right. I mean if we’re waiting for them just to fail and let’s see him as a flash in the pan, I think that’s the wrong approach. Now beating them at their own game, or joining in, or if you can’t an’t beat them, join them. Whichever analogy you want to use, then I think that’s a much better strategy I think in the long run.

Craig Fuller:             

Yeah, that’s exactly right. I think that, so you have to understand how they work, because they’ve got to go out and build substantial revenue grows. So they tend to go, the really successful ones are going after what I would call high volume, high frequency shippers, because they can just get substantial amount of volume from it. You know, they sort of go and raise capital on the long tail, and solve the efficiencies of the world. But the reality of their businesses is that the majority of their business is coming from these large high-volume shippers. And the reason that that makes sense for them is they can build a lot of density in their networks, and they can operate efficiently. What we’ve seen recently is some of those disruptors are starting to put physical infrastructure. You know, they become assets-centric. Whether it’s drop trailers or warehouses or whatever, or consulting services that are attached for their digitization, which looks a lot like a, you would say, like any of the traditional freight forwarders, or any of the traditional freight [inaudible 00:30:40].

Craig Fuller:          

The thing is they understand they have to do that. The problem is that you can’t sit there and avoid… the reality is that they are thinking every single day about how to disrupt the broader market. And if you don’t get on board to digitization, you don’t get on board to be making investments or at least trying to make these investments, then you are going to be displaced. It’s inevitable unless you have a really small niche that they don’t want to come after. I mean that’s actually a really sort of defensible strategy, is if you do something that is outside of their niche, or outside of their core business or sort of small niche, the chances of them coming into your market is actually quite small.

Stephen Dedola:   

That makes sense. So more on the macro level and then I’m going to close with this and from my end of it, I like to ask this of anyone I can get an opinion out of and you don’t have to answer if you don’t want to, but regarding the trade war, so a brilliant marksmen-like move or wrong-headed ridiculous folly?

Craig Fuller:  

It’s the most absurd thing I think I’ve seen in geopolitics in decades. Is the idea that somehow you’re going to bully, first of all, we’re picking, you know, the Mexicans are quite different than the Chinese. The Mexicans are far more dependent upon the US markets and the US has a ton of leverage in that relationship that we just don’t have with the Chinese. There’s two reasons for that. One is the Chinese as a society, as in a culture are willing to play the 50 year, or hundred year game. They have a very long-sided game.

Stephen Dedola:       

You’ve read my rant obviously.

Craig Fuller:   

The other that you have to understand that Chinese culture is that there’s this idea of losing face. And so what the Chinese don’t want to do is be humiliated on a global stage. And the problem is, you know, our president is effectively, is playing into that card which is making, he’s looking sort of, you know, he’s making these stands of trying to change the way the Chinese work and sort of bully them into to submission. The problem is the Chinese have way too much to lose both domestically, because this is the greatest gift to Chinese nationalism that you could possibly ever give the premiere. Because what you’re doing is you’re basically, and globally.

Craig Fuller:  

Because what you’re doing is you’re separating the world between us and them, and the Chinese have had over the last 20 years, have had a strategy of engaging with countries, whether it’s Australia, or parts of Asia, and they’ve always been frustrated with the US just having more sophisticated and more connected foreign policy. It was much more sophisticated and provided a lot more to the table. The problem is that we have sort of said it’s us versus them. And we have excluded the Chinese from this conversation. They’ve been forced to sort of think about their business quite differently. And I think that’s an enormous mistake. And I think if we’re going to come back and face this for unfortunately this is going to be many, many decades that we’re going to be paying the price.

Stephen Dedola:          

Yeah, no, I totally agree. And when you talk about playing the long game, I know one of the things I talked about in, I think it was a couple months ago, was the fact that China as a society has had a continuous history. It’s measured in millennia. So I mean, we’re talking about, you know, a deep history and a deep sense of history. And then again, and they’re the same people that made the deal on Hong Kong and Macau, you know, these 99 year leases, and again, this is long game, long strategy, and also the fact that they don’t have a, this four year cycle of political upheaval that we have. They have a very continuous, and a very stable, let’s not, we can get into the possibly the geopolitical issues that they have, and the domestic possibility but we’re not talking about every four years they could possibly be voted out of office. And that makes a big difference.

Craig Fuller:         

No, that’s right. The thing that also is probably less understood is the Chinese as a culture. So the Asian cultures don’t look at the individual as important as Western societies do. It’s a group, it’s a collective. And the thing is we have a tendency to think about our own self interest as our timeline, as you mentioned, the 99 year deal for Macau in Hong Kong. The Chinese can look at it in terms of centuries because they don’t think of themselves as a single individual. It’s what does it do for the betterment of everybody. And I think that is a, it’s an enormous mistake to sort of underestimate how big of a factor that is.

Stephen Dedola:     

Yeah. No I agree with you. And you make some important points, especially about how they are culturally. And again it’s the whole idea of saving face. It’s something that’s completely missed in the current administration’s… I kind of like to leave it, remain nameless because there’s way too much… evoking the name. I think that’s one of the problems. So just as a final thing, you’ve got an event coming up in… this fall. You want to talk a little bit about that? Just give us a quick plug?

Craig Fuller:    

Yeah. Chicago FreightWaves Live, it was formally called MarketWaves. We decided, people kept saying, “I’m coming to FreightWaves, I’m coming FreightWaves.” Which was really just our conferences. We have an event dedicated to technology and innovation and markets in Chicago. It is on November 12th and 13th at McCormick Center. It will be fast, it will be LED lit like it was at the last conference. Fast cadence, high thinkers. And look, we’re hoping to have a really active dialogue, and create a lot of energy. Because there’s a ton of stuff happening. And I think we’re hoping to be a part of that conversation and help bring that conversation together, so you can go to our website, FreightWaves.com, and under events you’ll see that particular event listed, and hopefully we’ll have a great turnout, which we expect to, we already, I think up four or five times what we have in terms of the cadence than we had in the last two two conferences.

Stephen Dedola:      

That’s great. Well I’m definitely going to be there and I’m going to probably bring one or two of my staff with me this time because I think there’s just a lot to be gained and a lot to be learned from these conferences. And you guys do it well. So Hey, you know, that’s the best of both worlds. So. Well that’s all we have time for today. I really appreciate you coming, Craig Fuller from FreightWaves, and we’re very excited to see what’s happening. What’s happening in the future for you and I’m looking forward to Chicago.

Craig Fuller:    

All right, good. Look forward to seeing you there, and hope to talk soon.