Bill Gates (Microsoft) And Jeff Bezos (Amazon) Crushed By Trucking!

Recently, a brokerage firm called Convoy went bankrupt. The company's major investors were Bill Gates (Microsoft), Jeff Bezos (Amazon), Bono (singer of the band U2), and other high-profile investors.

Link to article:

Convoy's Shutdown Exposes The Desperate State Of Trucking

They thought trucking seemed antiquated, so they brought in an army of 25-year-old techies to change everything. They grew the company to an almost $4 billion valuation, but then went bankrupt and liquidated everything.

Here are a few quotes:

Quotes Highlighting Challenges:

• "It’s also not as easy to fix trucking as a slide deck might make it seem."
• "The issues in trucking have been around for so long not because the longtimers were ignorant or uncaring. It’s because those problems are complex."
• "Many of the issues in digital freight brokerage – and especially at Convoy – come down to the practice of 'blitzscaling'."
• "Players in the trucking industry are able to take advantage of low rates when they’re offered and then jump ship to any other provider when the situation changes."
• "As of now, the tech bros haven’t fixed trucking and neither have the fuddy-duddy incumbents."

For almost 17 years, I've been telling people that trucking simply doesn't change. I've been called a dinosaur, a has-been who can't hack it anymore, and even been accused of never being a driver in the first place!

But why doesn't trucking change?

I believe trucking is so hyper-competitive that almost every imaginable human idea has been tried a thousand times. These people who think they're coming in with fresh ideas need to realize their ideas are not fresh or new, and the problems they're trying to solve are far more difficult and complex than they imagine.

In my mind, trucking should be on the cover of "Capitalist Magazine" because it is the closest thing to a free-market competition that I know of. Almost every industry in the U.S. has consolidated power to a few companies that dominate their industry. Trucking has not.

If you look at rates over the years, trucking has been one of the most efficient industries on the planet. The competition is so fierce that you either become incredibly efficient or you disappear in a hurry.

Gates and Bezos learned the hard way that it is far more difficult to compete in an environment where you're not the leading player and you don't have the politicians in your pocket. When you have to go out there and fight it out fair and square, it's a different ballgame.

Long live trucking.

Yours truly,

Not A Dinosaur

Not A Dinosaur

That ending to the post cracked me up!

I remember posting something way back where I couldn't believe Jeff Bezos was getting into trucking. I also stated I would never bet against Mr. Bezos. He's obviously a very smart guy.

Trucking is complex, yet it seems like a simpleton's game when viewed from the outside. You simply are moving products from one place to another, such as from a manufacturer to the market place, or even straight to the customer. That's easy right? The same kind of mistakes made by these high profile tech guys are made by new truck driver wannabes all the time.

People inexplicably underestimate the efficiency of how all this gets done. The complexities are buried in the minutia. The simplicities are veiled in the details. The dogs have eaten the dogs in this business since its conception.

You really need to have an understanding of this business to make a go of it on a grand scale. You absolutely are forced to maximize your use of the economy of scale to accomplish anything of magnitude in trucking. Just having some great software and some new ideas won't slay the dragon. It has already been slain. What's left are the wily and experienced soldiers from the battle. Just showing up on the battlefield after the victory has been accomplished doesn't make you one of the victors.

I believe much of the efficiency in trucking boils down to individuals who just know how to get things done. Of course it is much more complex than that, but drivers take note. While you may be at the bottom of the chain of command in this struggle, you are a very important cog in the massive wheel we call trucking. Trucking depends on you each moment of each day. You hold a dynamic position in this industry. Trucking's efficiencies are highly dependent on your ability and willingness to outsmart a host of issues that arise and change with unexpected regularity.

Keep up the great work drivers! You are doing a great job solving some of the complex problems in trucking that even some of the smartest guys in the world couldn't seem to recognize and correct.

Being a relative newbie to the trucking world (since 2018), I am constantly amazed at how incredibly massive and complex the trucking system is. Is there anything besides the Federal government and the military that is more complex? And the moving of goods and materials is of a worldwide scope. A complex system like that does not change quickly. It evolves very gradually over long periods of time, regardless of how much money certain men are able to throw at the industry.

This topic reminded me of a conversation I had with the number 3 man in management at the company I work for. I asked him to explain why the company has had continued success. He said that over the years they had found a profitable way of doing things that worked, so they basically keep following that plan while trying to improve a little bit at a time as new things come to their attention. Over the years, the company has made many changes and advances, but nothing quick and earthshaking.

I believe that in the next 50 years or so our industry will change a lot, but it will be so gradual that it will be like watching laundry drying on the line. We know it’s going to happen, but it’s so slow we really don’t recognize it as it happens.

And in 50 years from now, I expect that I will be working on perhaps 6 or 7 million miles in a nuclear powered truck that is amphibious and can fly when weather permits. Lol.

I'm paet of the experiment being wrought on trucking by one of them. All very digital and perfectly well thought out. Even down to allowing factoring in traffic delays. 24 hrs before the actual driving takes place. We have been instructed by the omnipotent and omniscient great computer that "traffic" is not an acceptable reason to be late, as they have factored it in already. I like what I'm doing and my compensation. I just wish the hipster arrogance was less pronounced. Case in point. Had to travel from one location in LA area to another. At 630am. Actual driving time, 1:53 minutes. Their "factored in" allotment? 63 minutes...

Yep. Complex. Especially when you have a preordination of all the answers and no desire to listen to input from practitioners.

The entire global economy changed abruptly within 2 years of Carter's deregulation. Though I don't think it was intentional on his part, it certainly was on the lobbying force for it.

The result of it was destructive competition. While it is a free market, it isn't at the same time. It's a marketplace that was manipulated so grossly that it never recovered. It was the death blow for the economy of private enterprise and the birth of corporate monopolies of scale.

It baffles me that the entire nation and consequently world is so dependent on the trucking industry, yet the customer sets the shipping rates. In a healthy free market, short of the customer having the resources to move their own products at scale, the service provider (the carrier) would set their own prices. Companies that lowered their prices while offering the best service would succeed, those that don't, will fail. But in this market, it's simply lowest price and that price is set by the customer.

With the economies of scale today dependent on the shippers (which used to be the customer, the trucking companies were the shippers prior) keeping the price to move freight so low, it's doubtful that any meaningful change will happen, wages and rates will continue to decline or at least be marginalized to a non essential level.

The only change perhaps would be the federal governments love of regulation, in that over the course of time, they continue to slowly pile on regulation after regulation that choke the entry into the industry down again. Consider that electricians and plumbers are more regulated than we are.

It's one of those things that my instincts tell me are just plain off. Like an itch that you can't quite scratch. The question of "Why are we not able to determine our own price of our labor?" pops up almost daily. I would think that question should be floating around your head too if you've ever ran a business of any sort.

This is nothing new with tech companies of late. They pick an industry, claim they are going to change it, collect millions in investment, become overvalued before producing anything then go bankrupt.

I'm just surprised it took this long for them to do it trucking.

Convoy is not the only broker going out. Weekly there are 2 or 3 listed in Freightwaves. CH Robinson is the largest and have laid off 600 employee’s during the past 12 months. TQL, 3rd largest broker has laid of 300 with talks of another round.

Convoy bought a large number of trailers and had some large customers. Trailer pool for each customer. From my knowledge they had preloaded trailers, depended on O/O’s moving those trailers. The advertised a nice appearing rate per mile, however they required you to bring the trailer back empty to the customer/shipper. They said an O/O could use the trailer for a backhaul, but set a timeframe that didn’t allow for it. No O/O that understands the industrywould ever get into that.

My guess there is more to the convoy story.

Brokers came out of the woodwork heavily starting around 2010 and the requirements have been lowered to get a brokers license and that part of the industry has found itself breeding alot of theft and corruption.

I’m sure it will end up self correcting itself just like capacity will. It tends to be slow though.

Davy I’m not sure how much you know of the O/O side of the industry. We do set our own rates, and its up to the customer if they want to pay that rate.

The national average per mile rate that comes out weekly is based on several complex equations. Those are for spot rates. Contract rates are an entire different scenario. For simplicity trucking company quote’s the company a rate. They are free to negoaite or refuse that rate.

Different lanes pay differently.

These are just a few highlights why people who can drive, may not be cutout to be an O/O. I wish many times a month, I would have just stayed a company driver. The headaches only get bigger in times like we are currently in.

Rant over!!

I'm sure they do. Production of new home building is very similar in some ways, and unfortunately has even less regulation. While in theory, the subs set their own prices, in practice, the large builders set the pricing. There's no spot market per se there, though. And the builders easily have the resources to build the houses if they so choose, in some ways, it's easy to see why the rates are so low there.

What I meant about trucking is that in general, in a healthy marketplace, I would think that overall, in both the spot market and contract market, the carrier should have the leverage. It seems that even in times of balance capacity, as a whole, the carriers are subject to an average of what the shipper will pay, rather than what the actual value of the service performed is.

I don't see it changing anytime soon. But it is an irritant on a fundamental level. Shippers by and large don't have the resources to set up and maintain a trucking division for their products. Ergo, the carrier to a certain extent, has them over a barrel, even with too many trucks and drivers, but it doesn't seem to translate to reality.

It would seem that like when diesel prices escalated so sharply., the trucking industry should have passed those coats on immediately to the shippers, who in turn would pass it on to the consumer, which would cause inflation to rise. That would have been a positive in that it would have been an immediate pain in response to failing energy policies.

I never got a straight answer as to why we didn't pass them on other than most said we couldn't because it would raise the cost of products too high, while the market isn't regulated, it seems like there is certainly pressure from the government and large corporations downward that keep it from reacting normally, when the costs to produce a service go higher, eventually the market passes that cost on to the end users.

I probably just overthink all this, but it drives me nuts.

It would seem that like when diesel prices escalated so sharply., the trucking industry should have passed those coats on immediately to the shippers, who in turn would pass it on to the consumer, which would cause inflation to rise

That's exactly what happened. Then diesel prices fell, and trucking rates fell with it.

I built this quick chart. It shows the producer price index overall, the producer price index for trucking, and diesel prices nationwide starting at the beginning of 2020.

You can see how closely producer pricing in trucking tracks with diesel prices. You can also see that pricing throughout the economy continues to move higher, even as diesel prices and trucking rates drop.

All companies have a much easier time of passing on costs during times of inflation because everyone just kind of accepts that prices are going up. It becomes a self-fulfilling prophecy to some degree.

Interesting, if thats the case, why do we hear so much of the time that it's a bad time to be an owner op due to the fuel costs. It's said over and over like a mantra, we're led to believe that the primary reason for difficulties is the cost of fuel.

Also, does producer mean shipper? If so, the shippers are making increased profits off the rising fuel costs, but are the carriers?

Again, I would think that small owner ops, especially on the spot market, would start to charge more, the carriers would start to charge more.

I've only been a company driver so I don't have the knowledge of it, but in construction, we just generally grumbled when the materials prices escalated, but in truth, we made increased profits.

Because we charge overhead and profit on anything we do (if we want to stay in business), the more the components cost us, the more we make in profit. So our collective public face was that wow, these prices are killing us, but in actuality they helped us. Perhaps that's part of it here? But it seems to me, that from everything I've read, that in general, carriers are taking a beating from brokers and shippers. Even in good times, it seems that the business of moving freight is barely profitable. The average is 4 to 6 percent gross margins?