Ryan Petersen on Flexport, supply chain resilience under tariffs, and why the trade war is reshaping global logistics

capital. So it's like it makes it hard to get it makes it hard to get the money out. Um, but they they do solve certain issues and I think it's really nice as an investor to be able to take a really long-term view on things and not get caught up in the market cycles.

Like the trick is like just like even the your conversation about implied intuition. It's like if you can just be in this company for a really long period of time like who cares what multiples are today?

I care whether or not the the fundamentals of the business 100x over the next 10 years who care what even the multiples are terrible then it won't matter, right? Like so that's Yeah, it does seem like there's a shift. I mean, the the the I don't know who came up with the idea of a 10-year life cycle for a fund.

It seems arbitrary. Seems like they were just like, eh, like make it double digits, make it a round nice round number. But now it does feel like VCs are starting to think, oh, well, like there's extension periods, there's continuation vehicles, maybe we should be thinking in 20ear cycles, 25.

Look, it turns out everything is historical and structural, right? The reason it was 10 years is that the so so you go back to like when we started a business in 2011, right? Yeah, the first company that really kind of stayed private for a really long time was like Facebook, right?

Like that was sort of the that was sort of that wasn't even that long. But back then, right, the average with Google and and like these companies went public so fast time to liquidity was like, you know, I think probably four or five years back then when we started uh 137 and 11, it was like 6 or seven years.

It's now like 12 or 13 at this point. So like people picked 10 because they couldn't conceptualize the companies would still be private in 10 and they like they like doubled it and round it up, right? And so now what's happening is like no way this company is going to be private 10 years. This is super safe. Exactly.

And then and that's and that obviously that broke the system. How how early do you uh do you try to identify these companies? Right.

because once you have a a a generational company in the portfolio and and you plan to help support, you know, all the shareholders over, you know, numerous years, it doesn't matter exactly when you get in.

But, uh, I'm I'm assuming that other other now even growth stage investors are looking for you guys for signal in in some way or another to to kind of just given the track record of 137.

I mean, for us, I think we're looking at companies that are kind of pro postp product market fit and that are that are scaling the business. Yeah. And the thing that's sort of changed if you look at the last 20 years or so is that there's really no there's really no cap, right?

Like it used to be that a billion dollar company was like a incredibly huge outcome and like honestly there's a there's there's hundreds of those companies in the private markets now.

And and so like for us it's really just this question about what you know can the investment hit our cost of capital and if you have you know you have an opportunity to invest even like take SpaceX at 350. Like if you can believe that's a trillion dollar company, like that can still be a great investment.

Like sure it's a big number or whatever, but like it doesn't really matter where you are. It matters where you're going. And that's I think the thing that is different in the private markets or really even look at the public markets. I mean look at the valuations on Nvidia.

I mean that's a that's an incredible growth story in the public markets. Like yeah, you don't see that at that scale usually, but I mean look at Google, look at Apple, right? I mean like look at all of the all of the major tech companies. like it's it it the opportunity is much bigger than people imagined. It's true.

Uh any other questions? No, this is fantastic. We'll let you get out of here. Thank you so much for this whole thing on. It's it's uh we're happy to help help make this thing possible and you guys have done quite quite the job this year. I hope I hope you make it back next year. Oh, absolutely. We'll be back.

Thank you so much. This is great. Cheers. Thanks so much. Let's uh let's get Ryan Peterson in. Well, yeah, we have uh Zeerfeld. We I think we should bring in Cornelius real quickly. Do five minutes. We need to go into lightning round, folks. text. We got a bunch of people. Yeah. Yeah. Yeah. Lightning round Cornelius.

We got to talk about Let's Let's talk about the chain real quick and the fit because it is one of Every time I see him, he's dressed fantastically. Here, pull pull this up. This is happening. Zellerfeld. Thanks. Uh yeah, obviously as I'm from Zeller. You can put your shoes on the desk if you want.

If you want to put it up for the audience, since you are in the shoe business. There we go. There we go. Right on the desk. Look at this. Made 3D printed shoes. 3D printed shoes. Yes. in the US. So, so far we have done most of our production in Hamburg, Germany. So, that's where we started.

But obviously like like a huge part of our market right now is is US. So, we just bringing that back. Um, we had 200 printers in Hamburg, Germany, and now we're bringing 2,000 printers here to the US, printing millions of pairs a year. Amazing. Insane. Insane.

Where is all the where's the demand coming from outside of the the tech community? Um it's mostly fashion guys. So um um I don't know if you have seen but we are printing shoes now for Nike, for Louis Vuitton, for even like lots of celebrities are wearing our shoes all the time.

Drake did a huge cowboy boot with us because he just he he just bought a Texas in Texas a ranch. Sure. There we go. He needed some cowboy boots. So, um, just what have you learned from I mean, we read a story in the Wall Street Journal recently that Nike was having trouble.

Uh, Nike was having trouble using robotic automation to assemble shoes and and, uh, meld the upper with the soles because there's so many different sizes. It feels like a unique case for 3D printing, but uh, is there any hope to iterate on your product to a point where there are multiple materials? Yes.

Um, also multiple colors.

I think previous experiments often failed mostly because everybody is trying to make the same product as before just assembled by robots kind of um but you need to think about it from first principles 100% and um then you can do even crazier stuff that traditionally wasn't done in performance footwear or so.

So all of a sudden with 3D printing every shoe can be custom made. So when you think of performance, you know, everybody talks about Nike's mission statement goes something like every athletes dream come true.

But like if you think about it, lots of those brands like they have custom fed shoes for those performance athletes. But what about the kid on the on the school schoolyard that just wants to kick uh some soccer for example?

And all of a sudden with 3D printing you can get those kids the same custom fitted experience like a pro soccer player. And when you think of not just performance footwear but even anyone I I think what will happen is I mean I wear this this is happening cap because printed shoes will be on every foot. Yes.

Um and a big reason is because all of a sudden you can do stuff like I don't know every shoe fits whatever design. So talk about the time today shoes are made in factories far away from the end consumer. Yep. They get made they get sent eventually they get to the consumer whether it's through retail or online.

Talk about kind of like what is the actual uh activity you know where is the printing going to happen long term? Is it is could we get to a point where decentralized. Yeah. Could Nike in a retail store, could somebody design a shoe and print it in real time? Is that where we're going?

So, basically, basically what's going to happen is you will have farms all over the world. Maybe a little bit like Coca-Cola has bottling plants all all over the world. Um, and then what's going to happen is you buy a shoe for example on zealafel.

com and depending on where the end consumer is, that's where the production job is going to get to. And then what I love is that people are now buying shoes on zeafel. com and like basically like few seconds later the printer starts printing and you can have a custom fitted shoe I don't know 2 days later. Yeah.

Uh and that is completely changing the game. Um and without you know usually in footwear you have cycles production cycles and marketing cycles of 18 months and longer. So you need to make the commitment in the factory in Asia 18 months before but you don't even know how many will sell.

So what's great here is that on demand production basically changes that completely and it can still be as quick as Amazon. Yeah. No, it's such an interesting story just given you know we we've studied how Nike just struggled to bring back shoe production with with one of the most advanced manufacturers in the world.

But again, it was because they were just taking the the traditional way. Shoes has like 14 parts or something like that, trying to make it with a robot. And I think what you're doing with shoes, we can apply to so many other categories in terms of um Thank you for stopping by. We'll let you get back out there. Yeah.

Come back on the show soon dive. Should we bring in Augustus, Ryan Peterson? Let's do Ryan Peterson because I told uh unless Ryan Augustus was on the schedule. Augustus, do you have to go or can we do Ryan for five minutes? Okay, wait. Hold on for a minute. We got Ryan cuz I think he hasn't made a call.

We'll bring you in in 10. Sorry. Oh yeah, we're still live. Ryan Peterson, welcome back to the show. Third time. Treated like cattle. Yes, I know it's really rough. Sorry about that. We're We're not A+. We're iterating. We're learning. But how has your Hillen Valley experience been? How's your time in DC been?

It's great. It's great to be in the capital. Yeah. Haven't been here since January 6th. No, I'm just kidding. Bad joke. Um, but yeah, I mean, uh, you're you're in a very interesting business. Obviously, in the news, everyone has called you. You've done Mad Money.

Wall Street Journal's calling you the most boring business that we need to know about or something like that. Uh, what is top of mind? What are you telling lawmakers that could change or could uh, you know, improve to like what does a great outcome here look like in the next couple years?

What like what's your stump speech? Couple years. Uh, yeah. I mean, you worry about the next couple weeks. What what's on your mind? I don't think anyone cares what I think. I told them tariffs should come way down. Okay. Yeah. Yeah. We what we've seen in our data is a 60% decline in freight from China to the US. Yeah.

Can you unpack that? I heard something about like the the the freight rates are actually high because they're not even their ships aren't even moving. Is that right? No. Rates are pretty reasonably low right now. U there's a risk of it going higher. Like I think it'll be a first class problem.

If they undo the tariffs and a lot of volume comes through, then it goes high. then you'll see this spike. But if you're willing to pay the tariff, you have a really high margin, you can get stuff out of China right now. Yeah, there's a little bit.

So like, so you've had a 60% decline in bookings of ocean freight from China to the US. That's resulted in 25% decline of sailings. Ocean carriers pulled 25% of the ships are not sailing. So like it it's a little bit harder to get service. Got it. Cuz like ships are getting cancelled.

It's actually made flagport more valuable because if you're booking directly with an ocean carrier, they might cancel the sailing. Yep. Yeah, we'll find you a different one on a different carrier. We'll solve your problem.

So, on some level, some of this like helps us a little bit, but um I'm very worried for our customers that those are their businesses like 60% decline. There's a lot of companies just deciding opting out of the system. Yeah. And they can't they they can't necessarily move to a new manufacturer. Small business.

They didn't spend enough at the inauguration because the exemption like didn't what uh what's been what have you been hearing on the ground in ch freight coming out of China is very bad for China right like the the the sort of the party can kind of spin that however they want they have a lot of control over um very bad for China you're saying yeah yeah very bad very bad for China in in an economy that was already bad in an economy that had extremely high youth unemployment uh have you heard anything from the uh you know uh I I you know all the different groups that you interact with on on that side of the pond.

Um definitely bad. I mean it's bad for both parties. You know you kind of have a game of chicken and there is an outcome where the cars scratching each other and everybody dies. Uh and so you hope somebody swerves and gets solved. I my view of it I don't have a lot of like inside intel here.

It's certainly bad for factories.

Uh I just think China can withstand a lot more pain than America just due to the the way like the last h 100red years of Chinese history they like what a couple percent of GDP decline like oh my god look at the history they've been through warlord era like all these different famines and things that like pain is built into the culture these are kind of yeah this will be a pretty small amount of pain for them to bear American side we're kind of soft there's a lot more feedback mechanism here.

Mhm. Yeah. Trump, I I have to say this is like an iron will on a lot, you know, any of the policy. I don't like any of the tariff policy. There's other policies as I, you know, not what we're going to talk about right now, but I don't like any of anything about the tariff policy.

And yet got to have respect for this guy who's like the whole world is it's everyone against Trump uh and he doesn't care. Yeah. Uh I would have this power. We we've you know heard rumors that that there's you know