 Kia ora kato, na mai hairi mai. Greetings to you all and welcome to this month's EHF Live session. Today we're going to be talking about freight collaboration in the future and what this means. But firstly, Edmund Hillary Fellowship is a collective of entrepreneurs, scientists, storytellers, creatives and investment change makers who want to make an impact globally from Aotearoa, New Zealand. You'll notice these are informal sessions, plans, so there'll be plenty of time during the next 60 minutes to join the discussion with Q&A after the initial interview. But first, just some general housekeeping. It is recorded and it will be up on our website afterwards. Just stay muted until the Q&A and you can pop questions in the chat box and then Tava will be taking those at the end. If you are on the live streaming, you can add your questions to this comment section and Paula will be taking those and she'll putting them into the chat box for us after this as well. Now today we're going to be joined by EHF fellow Ryan Peterson, founder of Flexport, as he's interviewed by Professor Tava Olson of the University of Auckland. You're going to hear about global trends in supply chain management and what this means for New Zealand. What is just a COVID blip versus a global change? What will New Zealand freight be just a spoke out of Australia? Now Tava is the Director of Centre for Supply Chain Management at the University of Auckland Business School and is Head Department of Information Systems and Operations Management Department in the Accounting and Finance Department. She serves as the Program Director for Strategic Supply Chain Management Program and is widely involved in supply chain research. So over to you Tava. Thanks Michelle and thanks to the Edmontonnery Fellowship Organisation for organising this and inviting Ryan and thank you Ryan for joining us from New York. So Ryan is the founder and CEO of Flexport, which is a freight forwarding company which delivers deep visibility and control low and predictable supply chain costs and faster and more reliable trends at times, which is I think all the things that we would like in our supply chains. It employs 2000 employees and 25 locations. And then Ryan has also created Flexport.org, which is a social enterprise which provides international logistics services for millions of people affected by natural disasters. He's also the founder of Room.com, Import Genius, Build Zoom and has raised significant values of VC funds. So I guess he's a serial entrepreneur as we would call him. So welcome Ryan and can you tell us a little bit more about Flexport or Flexport.org either either way? Yeah, happy to and thanks for having me on everybody and hopefully we get a chance to have a good dialogue because it sounds like you may know given what you're doing at the university there as much about some of these issues as I do. So we'll make sure we can get happy to that wisdom as well. So I started Flexport about 10 years ago with the mission to make global trade easy for everyone. And what I found is that global trade is one of the more important forces for good in the world, something that we've probably lifted a billion people out of poverty through the ability of companies to go global for people to find their best customer in any country, their best supplier in any country over the last 50 years. More than a billion people lifted out of poverty, especially in developing worlds in China. You can point to many, many examples over the world. And yet anyone who's participated in it as an active stakeholder, someone who's tried to import something from another country, tried to export something will tell you it is a pretty much a nightmare of complexity, paperwork, opaqueness. Nobody knows when the stuff is going to arrive. There's just huge barriers. I mean, not and not just talking about actual tariffs of which there are many in and increasing all over the world, but but actually the regulatory paperwork and there's good reasons for these regulations as well. But figuring it out is very difficult. And that means that only some of the biggest companies in the world have really participated in this benefit, benefited, they've benefited disproportionately. It's very hard for small businesses to go global. And so that was the thing that we, the problem that we wanted to address is we were starting out help companies, you know, entrepreneurs, people like myself who have started other businesses who are really kind of trying to live their dream, but make a new product, ticket to market, ticket global, find customers or find a new source for their goods, raw materials or else or finished goods and make that easy for them. Give them technology that gives them visibility and control and the kind of tutorials show them what all this confusing terminology is and what it means for them and how they can get the paperwork and how they can fill it out, make it easy, make it affordable, give people lots of options. That was where we started out and that was more or less what we've been doing for the last decade. We found out that even big companies that I thought had this problem really solved also struggle with it. They have a lot of complexity. It's really hard to keep track of. And so now we really see a lot of these big companies are under threat by kind of like e-commerce, the ability to shift their business model to become e-commerce-centric. We've seen massive bankruptcies of really iconic brands over the last decade that haven't made that shift successfully. And so we see that as a big part of our mandate too is how do we help these companies make the transition to e-commerce, which requires a different type of supply chain and a different set up. So that's the Flexport story. We're now 10 years in. We'll do almost five billion US dollars in revenue this year. If we continue on trend line for the rest of the year, we're profitable. We have raised lots and lots of venture capital so we can speak to that if that's an interesting topic for folks on the audience. And yeah, all systems go that the company is doing really, really well beyond anything that I wrote. I mean, my original business model, I think, only had me, I drew it out to the first million in revenue. So we've been living in the land of dreams for the last, you know, for many, many years now. Then up in 2017, really in response to the civil war in Syria, we started to do in a really formal established way. We started Flexport.org to do humanitarian relief logistics starting with refugee camps from the Syrian war, realizing that, hey, we have logistics sort of super powers. We can ship anything anywhere in these refugee camps. And even if it's not a camp, just sites and schools or things that are nonprofit agencies of all kinds or they don't have, they don't get great support from the logistics industry. In fact, most logistics companies treat them as a real profit center where they kind of will make much higher margins because it is hard to ship to these difficult places. So they charge a higher profit margin. So we set up Flexport.org as a humanitarian relief logistics arm doing pro bono logistics, often below cost or free thanks to donors. And those donors can be philanthropists. We've raised over almost $100 million from philanthropists to provide free logistics to people like UNICEF, Doctors Without Borders, a long list of hundreds of nonprofits that we ship for, as well as government agencies. So, but we also get donations, that's cash donations, but we also get donations in kind from major airlines, United Airlines, Delta Airlines, Atlas Airlines, have all been really generous in donating airplanes and flying freight for us for free into these sites. So we've seen that when you can kind of bring people together around a higher cause, you really activate the community. And then we get our customers to donate product. So if we see that, one of the problems that we saw with Flexport.org is that 60% of all the goods that are sent in disaster relief end up ultimately in the landfill because there was nobody on the end to receive the goods and make sure that they got into where they were actually needed, sent to the wrong place, to the wrong time, with the wrong goods, the wrong people. It just doesn't end up in years later, you find this thing sitting on the side of the runway somewhere, just like nobody used it. So we kind of changed that model on its head by partnering with great on-the-ground distribution partners who were really responding to that disaster in real time and that we asked them, what do you need? And often it's other nonprofits or aid agencies that have that good, but in many cases, we found where our customers, our commercial customers have those products. It can be socks, feminine hygiene products, mattresses, all these things that we go to customers that make those things and say, would you be willing to donate? Someone else will pay for the freight. So it's really a win-win-win and people when they're asked to support something, they usually step up. And so we found that to be, we don't do a lot of marketing for Flexport.org and yet it's become, we're really well known for it because we're unapologetic about asking people to contribute. And next thing you know, it's not that different from marketing if you're asking people to get involved in something. So I found that to be a, I hope a template that other for-profit companies can use to sort of launch their mission-driven social enterprises. We've had a big impact on Airbnb.org, for example. We copied our model in a lot of ways. We're very proud of that to actually start taking outside capital into Flexport.org from Philanthropists, into Airbnb.org. We showed them how we did it and they got intrigued. They've since done similar things. So yeah, I'll probably stop there and see if there's, we want to take the conversation, but that's kind of a high level of the two arms of Flexport. Yeah, great. So can you talk a bit about the global supply chain trends you're seeing right now and which of them you think are going to be long-term versus short-term? Yeah, so I mean, obviously the biggest trend in supply chain, well, actually it's, you know, you can debate what the biggest one is right now. It's been COVID and the shifting consumer demands which caused when COVID hit, countries and companies and individuals locked down and kind of went, didn't go shut down restaurants and you know, I don't need to tell everybody the whole COVID story, but what ended up happening was you still have similar levels of income, especially in countries that did a lot of stimulus and gave people cash. And so people and the stock market was really boosted by various government activities or whatever, just boom manias. So we had this huge boom and people had money but couldn't spend it on services and travel and restaurants and stuff and so they bought more goods. Imports into the United States increased by about 20% and that's something that no one really had on their prediction cards at the beginning of the pandemic, which is really, really, I find it to be a really indictment of the economics industry is it not a single economist predicted this? You know, nobody's going to predict COVID but you could have probably predicted that if you can't spend money on services like restaurants and travel, you'll buy more stuff but no one thought that was going to happen. Everybody predicted a decline in trade. So I think that's pretty interesting and should make us all be a little bit more cautious about predicting the future. It's not easy to do. So what then followed from that is if you have this huge surge in goods being shipped, the reality is we don't have 20% of excess infrastructure, excess capacity in our infrastructure. You don't really want that. If you had 20% of all these empty trucks just sitting around in case of a spike one year, that would be a huge waste. 20% extra space on ships like the ocean carriers traditionally start to lose money and go bankrupt if this ship is not at least 90% full. And so if you were 80% full, you didn't exist anymore as a company. And so we're just not really set up in a physical world to surge 20% one year. It's very weird for many of my investors and employees to think about because we're so used to software where you can surge 20% in one day and it wouldn't, it would be fine. But in the physical world, that's just not how it works. And so we ended up not, the infrastructure of the world just couldn't keep up with that. I don't think it was anybody's fault. Everybody wants to find a scapegoat and blame somebody, but you just shouldn't have that much infrastructure sitting around. Now we can get things to be a lot more efficient. It's kind of exposed bottlenecks and certain, there are definitely areas to get better and government has a role to play, private sector has a lot of different places where we can improve things. But if we can just start by being like, hey, it's nobody's fault. We don't need to scapegoat anybody. But it has had major implications to the price. Of course, if I'm trying to ship 120 things and I only have room for 100, well, the price is going to go to the moon because some of these people are making a lot of money per container and they're willing to pay anything to ship that container. If you have a container full of, well, probably the most valuable product in the world is the iPhone. If you had a container full of iPhones, that would be worth, I don't know, I haven't done them out, but tens of millions of dollars and your profit margins are pretty good as people can read about on Apple's profit margin. So would they be willing to spend $20,000 on a container? I'm sure they would, right? I don't mean to call on Apple, they're a great company and that's anything wrong here, but you end up getting these crazy price surges and many business models couldn't support that. And it's led to a lot of inflation. It's been a major contribution to the inflation in the world. So I would say that's like, has been the story that's the most important story in supply chain, but now you have, of course, a war and that's probably gonna trump COVID as the most important story if it hasn't already because of, well, a number of reasons. First off, directly the price of fuel has gone, has shot through the roof and who knows what happens there, if that energy doesn't get to Europe, you're gonna have major problems from all kinds of companies not being able to afford to produce things in Europe. But the one that worries me the most is food exports. Ukraine and Russia combine, well, their first and fifth and wheat exports in the world, I think they combine for about 30% of global wheat exports. And a huge number of countries have become dependent on those wheat imports from those markets. And so if that's not reaching the market, it's not able to get out through the Black Sea ports, which are mined. Ukrainian side has been mined to protect them from Russian amphibious invasion. And so if that grain can't reach the market, you're gonna see when we are seeing huge increases in food prices and food prices are a little bit different than other kinds of inflation. If you can't feed your family very quickly leads to violence. Other types of things might, some economic harm, some there's a lot of pain, but it's less obvious, less in your face. But if you can't feed your family, you're gonna take to the streets and you get revolutions and civil wars and violence. So that's, I think something to be really, really concerned about we should all be thinking about it. I know I'm spending a lot of my time on the flexport.org side of things, looking at what can we do to help find creative ways to get that grain to market. The reality is there is no substitute for the ship. You could try to do it by train and truck, but there's just not enough trucks and trains in the world to make up for the size and scale of the ships that used to call it the Black Sea ports for the Ukraine. So those are probably the big global things. One thing we've learned over the last decades is that there really is no normal sea and supply chains. It seems like every year there's some big hit that shocks things. I think the advice we give to our customers and the people we partner with is be ready for anything. Try to position yourself to be able to quickly adapt to whatever, adapt and really adapt it implies that you're being reactive, but how do you quickly change from a stance of reacting to what's happening to you to, hey, how can we proactively take action into this and use it to our advantage? I think there are ways for companies to do that, but it requires one is a lot of, you need to have a sense of security and therefore for a business that means balance sheet, having cash on the balance sheet lets you actually continue to play offence even when chaos is happening all around you. If you're worried about your survival, you're going to be cut in. You're not going to be going to play offence. So that's been a principle that we've used at Flexport. People including my board has often told me we raised too much money and we don't have anything to spend it on, but that's on purpose to be ready for whatever the world throws at us because we know it's a chaotic world and I would predict more so in the years to come. We're at a real interesting crossroads of whether or not all of this means that global supply chains, as we've known them for the last 50 years, really since China's accession opening up in the 1980, we've had a world where there's been, you've been able to do business globally and trade anywhere in the world. And that's, as I started out by saying, led to a lot of real benefits economically around the world. And now at a crossroads to see does that continue or do we live in a future that's much less globalised and much more regionalised and even within countries being self-sufficient to produce everything locally? There's benefits to that too, but I think on balance, humanity's better off when it's connected, interconnected, trading freely. Businesses can find their best customer and not just focus on a local market. Consumers can find products made all over the world. So yeah, really interesting moment to come together. And so what is actually your best guess on that? Do you think there has actually and will actually be a fundamental shift to more on-shoring and less global trade or will it? I think it a lot depends on how the United States government reacts to, you know, it's really war is the thing. Global supply chains and the global economy is sort of dependent. It's built on this assumption of peace. It's built on the assumption that we can do business globally safely without risk to our lives and our property. And so the moment that that assumption fails, you have to discard a lot of other assumptions that are built up from that. And we take it for granted that container ships can just call it any port in the world. Well, that's a relatively new trend that kind of started after World War II when the United States Navy stepped up and said, no more pirates and no more no other navies. We're going to protect all the container ships and if you and we'll provide freedom of navigation. If the United States Navy pulls back from that role and it may well do, then it'll be very interesting to see all of a sudden you used to before World War II trade mostly took place between a colonial nation and its colonial dependencies or its colonies. And that's obviously not the world we're going to ever want to go back to. But the world that we're in now is not that old. We kind of take it for granted that of course everybody can trade with everybody and do business globally, but it's a pretty new phenomenon in human history. Trading merchant marine used to have cannons on board. That was like the way trade was done back in the day. So I personally, personal view, I think humans want to trade. There's so much benefit to it. Companies want to do business globally. There's so much upside from it that I think that'll probably overcome. But if there's continued things like Russia invading Ukraine and if you see more things like that break out, all of a sudden no company will be able to depend on global supply chains. And I think countries at the national level need to take that into account as a possibility and not be so dependent on, certainly for food imports, right? I mean it's pretty irresponsible Egypt is the one that I think is the most embarrassing. I mean for thousands of years, Egypt was the great exporter of wheat in the world. I think the saying was that the Robin legions marched on Egyptian bread, Egyptian wheat. And so the idea that Egypt has now become a major importer of calories is sort of like, hey, what's going on here? This is not a good setup. So food independence seems like just absolutely crucial for countries to figure out. And if you're too reliant on global peace and prosperity to be able to feed your people and you're taking a lot of risks there that you might not even be aware of. So, but I think if it wasn't for the war situation, it was just COVID, I think we'd come straight back to normal. It would take some time and there's some adjustment, there's some pain, some companies will fail. For example, right now we don't have enough capacity in our ocean carriers to move the freight but the ship owners have ordered 35% more ships to be deployed in the next three to five years. Well, guess what? You pretty soon you're gonna have too much capacity and it'll be your super cheap to ship anything, anywhere. So I think the market response to those high prices, that the markets can deal with the free markets. It's peace and prosperity. Peace as an anchor, as a foundation of prosperity that there's no free market answer to that. Thank you. I do wanna pick up what you said about food independence. I see my colleague David Rovers also on the school and both of us have been pushing this idea that the New Zealand Government needs to take a good hard look at what would happen if our border is shut. We are not food independent in terms of, well, we certainly export more food than we import but types of food, what would we run out of? Types of medicines, types of healthcare products? Yeah. Well, where would we be in trouble? So I guess it's- Yeah, exactly. I think importing small island nations, importing nations have to figure this out and it might not be reasonable to produce everything but the stuff that's really mission critical and life-saving and going to lead to being food is a crucial one. And by the way, there are certain parts of the world that just don't make enough food. It might just be reality but there's gotta be plans in place for how this can work in a world. You can't be too dependent on one region for your food imports or one place just because it's the cheapest and you get all your food from there. There's gotta be a diversity of sources of where you get your goods. And what should companies be thinking about in terms of not so much food but the increased risk that we're seeing, how they should be thinking about risk and resilience? You said there are some opportunities there. Yeah, what should organisations be doing? Well, it's a really ugly moment especially for direct to consumer. You've had a whole boom over the last decade of direct to consumer e-commerce businesses that have been built up because building their own brand, cutting out the retailer, cutting out the distribution to middleman and selling directly to the consumer. That was a really hot business model for the last decade that now has been facing a real triple whammy of pain. So we've mentioned supply chain costs and that's brutal for all businesses and those included but they've been hit as well by Apple has changed rules to run the types of ads that you can run and the ways that you can target consumers and a lot of things that they were doing. For example, it used to be that if you visited the website of this company and they could cookie you and track you and show you ads for their product all over the world or wherever you went on the web and that's been banned by Apple. Well, businesses depended on that and that was how they were finding target and targeting their customers and their customer acquisition models don't work and then adding to that capital markets, we've all seen, I drag as close to anybody but the stock prices of their comprobles, the public market ones, the ones that have gone out are down 80 to 95% and so that's a brutal reality that they don't need me to tell them about that but I think the answer is unfortunately you're going to have to do more with less, you're going to have to be leaner, you're going to have to have, you're going to have to be aimed to be profitable faster. You might have to shut down products that aren't going to be profitable in this world and find new ways to advertise new, you've got to be creative so influencer marketing on that side. Supply chain might mean doing, importing less goods. You might want to find new business models where you only import the goods after they've been sold or something like that, improve so you don't end up with excess inventory or selling to new markets. So going global, most companies will only sell it in a handful of countries but if you could make it easy to go launch in Racky 10 or Mercado, Libre or Coupang as the Korean e-commerce leader, Flipkart, how do you go global faster might be part of, oddly enough, might be part of the answer is, hey, your business is under threat, go global. Supply chains are real challenging globally, go global. It sounds very counterintuitive but that would be an example of being very creative and aggressive at a time when other people are cutting and you're saying, hey, let's go global. Then the other thing is, look, there are going to be casualties of this, some companies are going to fail and so if you're a survivor, you may do very well because it'll be a less competitive landscape or less competitive marketplace. I think everybody needs to be thinking in terms of how do we survive this downturn but it's a real triple whammy for those direct-to-consumer businesses that were built off online advertising. Some of them may have to launch stores and get into or do deals with traditional retail to influence our market, I think I mentioned, but one of the new ways of getting around it is, and that's entrepreneurship. I mean, we always have to find a way to solve the problem on the face of things so it'll, my prediction would be that it'll be the younger, not younger in people that work there but younger, newer, more dynamic like newer institutions because they tend to have a little bit more lifeblood and being creative. If you've been doing the same thing every day for 20 years, it's a little bit harder to suddenly do something new whereas if you're a year old, you're like, well, we were all still learning anyway so now we've got to learn a new game. Interesting. Now, I know you're not a New Zealand expert but if we could turn a little bit towards what you feel New Zealand should be aware of what you see for trends for New Zealand, one of the discussions here is often the danger that goods will be hubbed through Australia even more and we just become a spoke. There was a news article recently talking about a 13-week difference in shipping time to Australia versus New Zealand, which is obviously really bad for New Zealand businesses. So, what do you see, what can you speak to in that domain as this part of the challenges we've got on supply chain is why we're seeing these differences? Yeah, I mean, and New Zealand's really become sort of like sifting from a real agrarian economy to one that's really heavily dependent on global integration with the global economy, global trade, but also tourism and being connected, I think, should be a very powerful force for New Zealand. So, on the supply chain front, yeah, I think being a relatively small economy that's an island nation creates challenges. As you mentioned, 13 weeks longer, it's out of the way. The big ships, the ships have gotten massive. These big container ships may not want to call at a reasonably small economy. They might be better suited. It's a bit like the Airbus A380. You'd rather, you know, it can only go between a handful of mega cities as hubs and the little, your small town doesn't necessarily get the big flight like that. Similar things have happened in the ocean container industry where these ships are now so big, but my personal view is I think those ships are too big and not the best designed because they can't small call at all the smaller ports. And that I think the future, I don't feel like my company doesn't own ships. So like, I'm not sure that my personal view matters that much because I'm not the one making the decision about what kinds of ships to buy. But if I do own ships, I'd be buying smaller, faster ships and running a bit more, a much more of a diverse network that's really fast and focused on speed, which I think is what customers are going to care about the most. We've gotten used to really high prices now but what we don't have is reliable transit times. And if we could get fast, the smaller ships go faster, costs a little bit more, but go a lot faster. And the cost of goods sitting on the water is a real cost. Inventory capital carrying costs and as interest rates go up, you care more and more about that too. So I don't think that in the long term that's going to be a really big problem. I actually think this will kind of correct itself when there will be companies that build fast boat services that are really profitable. And I think New Zealand would be a really good candidate for that and probably do very well running fast boats. Even if it's to Australia, it's not the worst thing to have to make a stop. But there's no reason it should be 13 weeks longer. Like that's a trend that hopefully the market corrects itself on and says, hey, there's an opportunity here. If you cut that to one week or three days or whatever it could be, you'll make a lot of money and there'll be demand for your service. But yeah, I think taking New Zealand's in an interesting moment, one real positive side on the service side of the economy is that from my view and I think surprising, the country can do a better job marketing this, but it's only a three hour time difference to the West Coast of the United States, which is kind of a mind blowing given how far away it is, but it's 21 hours forward or three hours back. So that's a pretty good setup, I think for service economy, for being able in a remote work world, for being able to find jobs, for being able to, I think that there's a lot upside. And being a small country, I've seen better governance in New Zealand than in most, you know, it's easier to govern a small country, perhaps, or there's something in the water, but have a pretty engaged government that seems to really want growth and equitable growth and the right kinds of economic development that you don't necessarily see, at least in the country where I'm from, where thankfully we're allowed to criticize our government, but there is a lot to criticize. And I think having a well, a government that's actually focused on growth is a huge competitive advantage because you'd be surprised how many governments that's not on their priorities list. Thanks. And then my last question before we turn a bit to questions in the chat is can you talk a bit about where you see technology taking supply chains? Are there big changes on the horizon? You know, what trends are you seeing that we should be aware of? Yes. I think you're going to see a massive revolutions of technology that are going to transform the way supply chains run. A lot of stuff that you would expect if you haven't worked in this industry don't exist. That table stakes things like with databases and auto-populating fields and forms that remember what you did the last time and just make it easy to do it again. Those are a set of table stakes. Like, wait, that's not how this works. Tracking trace the ability to see where your products are and get a sense of when they're going to arrive. A lot of this technology has existed for a long, long time. It just needs to be deployed and put to use. So satellite trackers, price of that is coming down really fast. 5G networking where you can put a little very cheap tracking device on the specific product and track it all over the world. Starlink's internet is going to be a really big deal. The SpaceX ability to get internet on the sea in the middle of nowhere. That's going to be a really big deal for supply chains. By the way, it should really improve the life of sailors as well, which maybe people on this call don't care about that much, but I think will help a lot if you're on this boat for weeks and weeks at a time. Now you can FaceTime video your family every night when today they don't have, they have internet maybe at like the slowest speed you could imagine, right? And so that should be a big quality of life improvement, but I think which we should all care about, but it will translate through as well to like better visibility, when is stuff going on there? When is it going to arrive? So then I think you're going to see a revolution through computer vision of what can be done. We've already put this to work. If a lot of these technologies were deployed at Flexport, but computer vision to ingest documents, understand what their content is automatically put the data from those documents into the right place in our database. Knowing you get more, one of the problems in supply chains is that you get multiple sources of data for almost every data point that you care about. You'll have two or more sources and knowing who's right when those things disagree is a really interesting problem and machine learning can be quite good at this by looking, especially once you put a human in the loop. So a human is assessing who's right and then over time the machines are able to figure out which data sources to believe and under what circumstances should we believe. So the port might tell you that this container has been picked up and the trucker will tell you I don't have the container yet or vice versa and the carrier says no, the container's still on our ship. So you have all these disparate data sources and figuring out truth from noise is a really hard problem that we underestimated. Like I thought putting track and trace would be a simple matter of just taking the data and showing it to the customer. It turns out a lot of the data is bad. Ocean carriers are only accurate about 20% of the time with their schedules. Now that's a COVID thing and there've been a lot of problems that port delays and stuff so it's hard to maintain a schedule but our machine learning can be much more accurate already just by looking at the past and looking at the current trends at each port along the way and how long things are taking. So you'll see computer vision which is built off of machine learning in the first place but machine learning is gonna have a massive impact and then fundamentally what we'd like to be able to do the big problem in supply chain ultimately is a lack of information flowing freely to all that. It's the chain, right? It's a chain of companies and entities and individuals and information doesn't flow freely. And so it leads to silo decision making where you don't know the classic business school. I hope you teach the beer game in your class because it's a lot of fun but this exercise called the beer game which it's not as fun as it sounds it's an interesting teaching case study about what can happen in a supply chain where you don't have perfect information flowing and you'll have four layers between the consumer some kind of retail store, a distributor and the manufacturer and with each placing orders without knowing what's happening other than just one stream up or down of them they don't know what's happening for their upstream or downstream. You can get these crazy gyrations and we're going through this as a civilisation level right now with COVID changing order patterns from consumers and people don't know how to react to that that you either order way too much inventory or not enough and you kind of everybody's scrambling around. And so technology can really pave the way towards sharing data more seamlessly in ways that can help eliminate this problem even and perhaps anonymously in some cases you don't want to share all the data but it would be useful if everybody had access to anonymised data and paved the way towards better utilisation of assets. So for example, when we ship, Flexport will ship about 500,000 containers of freight this year, ocean containers. And when we digitize the packing list again using machine learning the packing list tells you what's in them like the dimensions of all the cartons. And so you can do simple geometry that says how full is this container off of that packing list. And when we do that, you wouldn't bother to do that if you had to have a human type it in. I mean the math is not hard it'd be a lot of exercise, a lot of work. But machine learning makes it pretty trivial. So we've done that and we've seen that on average they're only 70% full. And so there's 30% excess capacity. So we talk about, what are we going to do to decarbonise shipping? Well the easiest thing to do is just fill the containers up and you wouldn't need to ship nearly as many containers. And that doesn't require revolutions in engineering. But it might require the real deployment of machine learning and technologies that can help you find these problems so you can go attack them. And that's just one example of many of optimisations that are available as we allow machines to make first-surface insights but ultimately they're going to make decisions about when should you order goods, how many should you order to keep in stock, trying to predict in consumer demand is something I'll probably never be good at. But there will be people who are better than ever in the past at this using machine learning, trying to get a sense of what the data is showing and building predictive models for this. So I think that overall technology can have a massive, massive impact but the space to watch is machine learning and this is a place where you're really going to see applied machine learning instead of kind of like pie-in-the-sky AI technology looking for a problem to solve. This is like real problems that you can immediately start to generate a massive impact. So you briefly mentioned climate change and remissions, et cetera. There's a question here in the chat asking what impact you see particularly New Zealand exports a lot. Are we going to see people being more aware of and then applying some sort of penalty in terms of the emissions of our exports? And then there's a second question about which I'm going to tie them together because it's about whether you see smaller solar ships, whether they'll even be nuclear cargo. Where are we in terms of people thinking about emissions in the supply chain and how much it is? It's one of the biggest topics for sure. And it's not a topic that I've seen any satisfactory answer for as of yet. The reality is that the batteries, if you wanted to do electric ships, the batteries would take up most of the cargo hold and you wouldn't be able to ship much and that's just raw physics that you're not going to be able to overcome. Hydrogen shipping might be interesting but we'd have to build a whole hydrogen economy that doesn't exist in supply chain for producing the hydrogen and shipping it around liquid form. And by the way, where does the hydrogen come from? You had to make energy somewhere. So that seems pretty far-fetched. Nuclear, there have been nuclear ships in the past on the civilian side. Obviously the US Navy has made 700 nuclear reactors, nuclear ships in its life. It's a possibility. I don't think a lot of people want that. We have a hard enough time getting nuclear on land where you can build a security perimeter about it. The idea of a nuclear ship that can go anywhere, not really welcoming. I know New Zealand certainly won't, I mean New Zealand notoriously doesn't allow the United States nuclear fleet to even call at Harvard so I don't think that's going to be an answer for cargo ships. And it's just not an area that I've seen satisfactory answers to. I've seen a lot of people talking about it as if it's this huge opportunity and we're going to make the world's going to go green. It's going to be such a big opportunity but like the reality is how? Like I just haven't seen a clear picture to my view, you know, having a, we did have carbon neutral shipping for a couple thousand years using sales. It doesn't feel like progress to me to go back to the clipper ship hauling containers around the world. And yet like I've seen that touted as like what we're going to do and it doesn't seem, it's not really satisfactory to me. One positive feeling, now I think it's very possible there are going to be impositions of taxes or regulations that will make shipping more expensive as a result of carbon emission. I just think that's the politicals like guys that we're going into. The one positive thing really, realistically is that shipping is a very low carbon form of transportation. In fact that I've done a study almost to troll people and I never published it because I thought I would get canceled for it showing that a Fiji water ship to the United States emits less carbon per bottle than a bottle of water shipped from the middle of the United States to the coast because trucking generates so much more carbon and a ship is so efficient. That's actually true the math holds but it's not a popular statement. Every Fiji water is widely criticized for being shipped across the world. It seems very inefficient but trucking bottled water across the United States is also not good. Coastal sea ocean freight is a reasonably low carbon form of transport because of the efficiency of a boat. To give you a sense, a horse hauling cargo on its back can carry about 300 pounds of cargo. Be a pretty heavily elated horse but it can do it. Pulling a wagon can carry about 1200 pounds of carbon and that same horse if it's pulling a barge in a canal can carry 40,000 pounds of cargo. Just to give you a sense of the raw efficiency of something that's floating. It's an incredible form of transport that can be quite green. So I don't think that it's inherently a bad thing but there is this movement that we have to stop lower carbon emissions from shipping, I agree. But it has to be grounded in engineering reality rather than imposed. Because if there's no solution all you're going to do is crush the economy and not actually reduce carbon. Or you reduce carbon by crushing the economy which is going to create a lot more pain, a lot more poverty. It doesn't actually solve the problem for humanity which is what we need. So it's an area of frustration for me that I think that's probably the world we're going into where we just kind of unilaterally, you can't regulate away the carbon. You have to generate engineering solutions. So it's something that hopefully the economy, one big solution they've been investing in a lot is natural gas shipping which is a lot more efficient from a carbon perspective. Unfortunately with the Russian invasion of Ukraine the price of natural gas in Europe has gone up about 10x. And so I think that's now off the table. Those boats will no longer work and they're going to end up shipping using bunker fuel like everybody else. Not an area that I have great answers to or feel overlaid. I don't want to pretend some optimism here. I think it's a real problem for the world but it's also one that we have to be careful because the world economy depends on this stuff and if you crush it, you're going to create a lot of pain and suffering. And I think there are much lower hanging fruit in terms of where we can eliminate, decarbonise than there are in the ocean where we just don't have fundamental engineering to make it work. And while we're being pessimistic, there's a question here from Roger about what happens if the South China Sea becomes a no-go zone commercial fix. Yeah, I mean this is exactly what I was getting to where capitalism, free market, economics and really the global order, the global modern civilisation depends on peace and prosperity. Really any system of economic order is not going to be successful in a world of war. We take it for granted that we've lived most of our lifetimes, hopefully most of us have lived most of our lifetimes in peace, they've been worse but they've been pretty small scale compared to what came before. So if the South China Sea becomes a no-go zone for commercial ships, I think all bets are off and that can turn pretty traumatic, pretty fast. So yeah, this is a pessimistic question. But you should not be set up in a way that everything fails for you, right? If you don't live in that region, what can you do that you, like I told our team, like I don't want to wake up one day and read the headlines that that's the headline right there and it's not something we've ever thought about before and we don't have any, let's make sure there are plans in place for what would we do even in this nightmare scenario. So I think that's one thing you can do whatever your institution, business, government, whatever, it's like, well, you don't want to just go through life pretending the bad things will never happen. Let's prepare for the worst and then hope for the best. And then slightly related, Michelle's asking if stockpiling is happening anywhere in the world and whether you're seeing stockpiling either by government or by companies, builder. Well, you've seen that, I don't know how much of it is intentional on the companies part, but you've seen a lot, inventories are really, levels are running quite high right now in the United States. We're about 20% of the shipments we try to deliver to US companies are not able to be delivered because the warehouse is full and they don't have a place to put it. But it's not always, it's one of these things where sometimes like, especially a manufacturing operation where if you're missing one little piece, then all of the, it might be 1% of the product, but you can't sell the product. So you end up with all this other inventory. I was on a call with the United States government where Tesla was advocating for this. It's like, hey, we've got to have some kind of priority window for shipments that are crucial components for the manufacturing because if they're, you know, like I said, if they're missing one piece, the whole car can't get delivered and they end up with all this excess inventory. So there's some unintentional stockpiling there. I have not been tracking as closely the, in the last year, the stockpiling of PPE, personal protective equipment and kind of life-siving medical supplies, but I hope that they've started to build, learn the lesson from the last pandemic and build up some stockpiles of this stuff. It's very cheap and PPE is very cheap, but very expensive when you don't have any. And so, yeah, I would hope so. I think I hope that the world learns some lessons of just in time as a nice system, but you shouldn't probably run it on things that are life-saving medical supplies. Like it's nice to run an efficient operation, but I think certain areas you can sacrifice some efficiency. And so, but I haven't been tracking that much in terms of what's happening in that industry or if the government's taking really proactive action. Hopefully, again, New Zealand's a smaller country can solve problems probably a little bit better than the United States can. And then there's a great question here from Roger, which is pointing out that a lot of these questions have been what-if and asking what flex sport does in terms of, do you have a process to incorporate scenarios into your strategy? How do you think about these what-ifs? Yeah, absolutely. Thank you, Roger. I kind of have three principles from a capital allocation standpoint. One is to invest in what's never happened before, and that's our core business of applying technology to global supply chains. And we've got to be able to keep investing through cycles and play the long game there. Two is to hedge for regression to the mean. And what that's meant is we've lived in a world of rising prosperity and no recessions, and it seems like the recessions are... Once every 10 years has been the norm for the last two decades, but for most of human civilisation, there was a recession every few years. Like these 10-year gaps are pretty, pretty rare. And we should expect there to be more downturns and that shouldn't cause trauma. We should be okay with that. Just like in an ecosystem, you have small-scale fires that allow for the clearing of brush. But if man suppresses all the fires, then you get huge forest fires when they do break out. And it's a bit like what we're doing with our economy, where we just let no fire is ever allowed. We can't have any recession. And it's not very healthy. So we should expect to be ready for that. And then the third scenario, which is the answer to Roger's question, is to plan for the unimaginable, which is almost impossible because it's unimaginable, but we are very creative. And so if we spend time making lists of what's the worst thing you could imagine, you can make long lists of... Of course, the world will surprise you. It would be something else, but it might be that your plans that you've made for this other thing are useful for that. And so we have a list of about 50 risks that I personally probably put 40 of them on there, but others have contributed to. And then one-page plans of like, if that happened, what would we do? That way, again, you don't want to be making a plan after the world's already gone crazy on you. You'll be too emotional and not in a level-headed place to execute against it. So it's better if you have a plan for as many of the possible things. But the reality is, I think General Eisenhower said that kind of planning is... Plans are useless, but planning is indispensable. That they're very action of going through the planning motion, kind of like creates muscles and pattern matching recognition, the ability to do things, even though the original plan probably never survives first contact. I think it was Mike Tyson, the wise Mike Tyson, who said, no, everyone has a plan until they get punched in the mouth. So you got to be ready for whatever comes your way. Interesting. And then there's a question here from Stephen around the shift towards people working from home, working from remote locations, sort of picking up on your point on time zones. What do we see with respect to supply chains and that trend? Is it significant or it's not really? But this is the question around remote work. Working from home, yeah, the move towards in a remote location, so working from Queenstown and New Zealand. It's a grand experiment that's happening around whether people working from home can be as productive at scale. I think individuals can be, but what happens to teams and institutions, organisations, it's still a pretty big unknown. There will be companies that thrive in this environment. And I think from that sense, New Zealand is probably as well positioned as any country in the world. It's an incredibly beautiful place to live with a wonderful culture. Time zone-wise is set up for both the United States and Asia, as Stephen points out. Pretty interesting for remote work as a destination. It's a lower cost than the United States, so it'll be a very attractive place. And yet, English as the native language, I think culturally it's easy to translate. So I think there's a lot of reasons New Zealand would win in that world. I'm personally a remote work sceptic in the way that it's... I think some companies will do it really, really well. Video conferencing is about seven years old and humans have been doing face-to-face meetings well, since we were still apes seven million years ago. So I think there's a couple of many orders of magnitude of tried and true methodologies for humans working together in person versus the video conferencing thing. And I don't know if the average human does better in isolation on their own versus in person with a team and a leader who's kind of beaten that drum of what are we gonna do, setting the tones, setting the cadences, getting the emotional energy up, getting people driven. And the ferocity of opposition to criticism by the remote work fanatics is one of my triggers for there's something here, why do you care this much if someone challenges it? I posted a tweet. I said remote work plus legal marijuana is not a recipe for high output management and the amount of hate that I generated, I got thousands of people calling me in all kinds of names. And I was like, hey, like I'm just saying, you know, being high in your house is like he's not gonna be productive. But people were defending both sides of it and everything. So I don't know. I think people will figure this out. I don't know that the solution will be that wonderful for your average like the people who are big supporters, for example, very highly paid engineers in San Francisco, California love remote work. But is that who's gonna get hired in a remote work world or is the company gonna find someone who costs one tenth as much and can do the job? If you have a basic understanding of the capitalist incentive, it's probably not gonna go that well for that very, very highly paid worker to create a totally level global playing field. Now it might do well for New Zealand because it's lower cost than the United States but actually who's really gonna benefit is places like the Philippines and Vietnam and places in Africa. So I'm not saying it's a bad thing for the world but careful what you wish for if you're just a random engineer who wants to be left alone at their house. I agree with you actually. I think I think very much agree with you. Well, we seem to have basically run out of time here. That's been a conversation. Are there any final words you wanted to make and probably Michelle will have some too. Well, no, thanks so much everybody for coming and it would be a great turnout. I'm really surprised. I wasn't sure what it was gonna look like but I'm really happy to be with you. Huge fan of New Zealand were playing at Flexport. We haven't announced anything but we're planning some expansion in the region and love to be in touch with folks. If you have shipping challenges or interested in learning more about our company or anything that we're doing on Flexport.org side, my email is just ryan at Flexport.org. Be happy to connect with anybody out there and loved the network as I come down. I don't have a trip on the books yet but I'm hoping to get down to New Zealand for a few weeks next year. Thank you, Ryan. That was awesome and thanks Tava. An amazing interview and I know lots of people have been scrambling around taking notes and I have put in the chat that we will be putting the recording up on our website so that if you do want to review it or share it with your colleagues or networks, feel free. And I know that Ryan has got a team member on the website, also on the call that can put the links to the Flexport in there and maybe some core staff member that people can contact directly first perhaps as well. Otherwise, you might get bombarded, Brian. A whole bunch of Christians. And I know that New Zealand companies have already been going your way. So thank you so much for your time and Tava, amazing and good conversation, good topic and we will stay in touch. Thank you. Ka kite, everyone. Thanks so much everybody. Really appreciate it by Tava. Thanks, Michelle and Rosalie.