AI Is Eating Logistics

**Ryan Petersen** (0:00)
Logistics is a very scale driven industry, and so the bigger you get, the cheaper you get. Our take is that we can make the price of shipping anything by ocean container shipping between 8 and 10% cheaper over the next few years, and AI is a big part of that. So our AI for that saved us 2% of our ocean freight spend while improving transit time 20%. Usually that's a trade off. It's like either faster or cheaper, but not both.

**SPEAKER_2** (0:25)
And you're at $2 billion of your revenue and just getting started. Welcome back to another episode of the Lightcone. We've got a real treat today. We have Ryan Petersen of Flexport with us. He went through YC in 2014, and he is easily one of the most awesome founders I've ever met. Ryan, thanks a lot for joining.

**Ryan Petersen** (0:51)
Thank you.

**SPEAKER_2** (0:52)
To start, Ryan, what is Flexport, and what are some of the things in AI you're actually implementing right now?

**Ryan Petersen** (0:58)
So, Flexport is a global logistics company built around a modern tech stack, and that means we help companies ship cargo from point A to point B across any mode of transport, so air, ocean, truck, and rail, and get that cargo delivered, hopefully on time and in full at a lower cost, thanks to the tech. What we're doing with AI is, man, I had to make an exhaustive, we had to extend the length of the podcast to pull that off, but it starts with customer user experience, what can we do with their data, getting them better access, how do we load containers in the optimal way, how do we put that container onto the right ship at the lowest cost, while maintaining or beating transit time expectations, automating just tons of work that's done in e-mail or phone, or work that you wouldn't even do because the cost is too high for a human, but actually does create some value that's worth it with AI. So most contracts in logistics come in giant Excel files, thousands of rows and a dozen tabs. You can't just feed that to OpenAI and get a structured JSON file back, it needs intelligence. But writing code and then having AI write the code, you write a parser that ingests it and then have AI that can write those parsers for you, learning. It's an endless list and we feel like we don't even know all the things that it can do. It's still pretty new.

**SPEAKER_2** (2:16)
So basically, one of the most human intensive things now can be streamlined to the point where actually it might affect GDP in the world.

**Ryan Petersen** (2:25)
Our take is that we can make the price of shipping anything by ocean container shipping cheaper by between 8 and 10 percent cheaper over the next few years. And AI is a big, not the only part of that, but a big part of that. As our business model, the way we think about it is as I call it, scale economies shared, which is the bigger you get, the cheaper you get, the more automation is a form of scale. And the bigger you get or the cheaper you get, the lower your costs, you share that with your customer, which will make them do even more volume with you. There's scale benefits that come, logistics are very scale driven industry. And so the bigger you get, the cheaper you get. Like the Costco model, I like, I love Costco, even though I don't shop there, I just love the business. You keep driving down the price, that makes you more attractive, more competitive, and just keep going, yeah.

**SPEAKER_2** (3:12)
And you're at $2 billion of your revenue and just getting started.

**Ryan Petersen** (3:15)
Just getting started, yes.

**SPEAKER_3** (3:16)
Something I'm curious about, so from our perspective, we work with the startups, and we've seen like AI over the last couple of years go from when ChatGBT launched and then some startups in the back start playing around with it and it's become progressively more serious. I think you're the first person we've had on the show who's running a company at scale that was founded pre-AI.
What have the last few years been like for you from that perspective from ChatGBT launch?
At what point did it start becoming a thing you were paying more attention to?

**Ryan Petersen** (3:44)
Like so many other people, it was on November of 2022 It's already been a few years since the ChatGBT launch. I've been personally obsessed ever since then. It's interesting to watch it take hold at the company, and in some cases not take hold, and you then saying, come on, guys, we can't be this boomer company. Everybody needs to be using this. We're trying to drive that sense of paranoia from the top, from me, but many others in the company may be even more paranoid than me, or more enthusiastic, excited than me as well, to say that story that we say of like, well, we're the only large logistics company founded since the web browser. And I know there's a kid in the NYC batch who say, hey, we're the only freight boarder founded since Shatchie Poutine November 2022 Like, it's got a point. So we have to be leading on this. This is true of all incumbents in an industry. They have some real advantages when it comes to AI and benefiting from it.