00:00:00: Hello and welcome to the logistics tribe I'm Boris felgendreher founder of the logistics tribe in today
00:00:11: I have a very special episode for you it's different because we typically bring you conversations between a host and one or sometimes two gas that are 45 minutes or so in length.
00:00:20: Today's episode is a deep dive into one very specific topic with two people were very deep domain expertise in this field and the episode is 2 hours and 45 minutes long yes that's right.
00:00:34: The idea here is to really take the time to tackle one very specific topic and go super deep on it it's a bit of an experiment that we haven't tried before and I'm not aware of a lot of podcasts we have done this type of thing and Logistics
00:00:47: today's topic is Platforms in the logistics and the to exports are Jonah McIntire who's been a regular contributor to the logistics tribe both as a host and a guest,
00:00:57: and märten veskimäe who's currently a product strategist at transporting both are super deep thinkers on this topic as you will soon find out they look at examples of businesses that are platforms versus business that aren't what the defining attributes of platforms are
00:01:09: what areas of logistics and supply chain platforms are suitable for what successful platforms to differently how they compete against each other and much more
00:01:17: there's a LinkedIn post that Jonah has prepared that with accompany this podcast episode you will find a link to this post and the show notes,
00:01:24: please visit the post and contribute to the discussion can also let us know they're how you like the content of this episode we really appreciate your feedback on this
00:01:33: before we get started with today's show a quick thanks to our supporters great orange great orange automate swears operations through a combination of AI software and autonomous mobile robots.
00:01:43: Gray orange systems on place at some very prominent companies such as Ikea or the Danish household goods and Furniture retailer you ask if you're looking to get your Warehouse in fulfillment operations to the next level with the help of autonomous robots and automation,
00:01:54: you should definitely have great orange on your list check them out at grey orange.com,
00:02:00: all right and now let's move on to our deep dive show with Jonah McIntire and märten veskimäe enjoy all right let's kick it off America
00:02:10: I believe we're both excited to do this right sure of course okay so what we had today was a deep dive
00:02:18: on the question of platforms and Logistics in the business models that depend on them how are they different and.
00:02:25: Is this really suitable or not to Logistics and kind of the future Trends in our prep we had talked about covering what is a platform business as as just an opener so we need to
00:02:35: level set I think for ourselves and also for everybody else who's listening when we talk about platform businesses you know I'll just throw this out here I see these as,
00:02:45: multi-party interactions as the core of value Creation in the value capture you know if you don't bring multi-party interaction in the core of your business then it's going to be hard for you to call yourself a platform
00:02:58: you agree with that yes but I think the key theories that the platform itself does not own the interaction or the
00:03:07: the thing that is being interacted on so it just facilitates that interaction
00:03:14: versus it procure something and then tries to sell it off to somebody else,
00:03:19: I think that's a key differentiator yeah that's an interesting difference so,
00:03:25: if you were to continue in your mind can you kind of contrast what would be an example of something then that's platform and some other business model which is,
00:03:33: not platform but it's dealing with essentially the same data or the same interactions but it's doing it in a,
00:03:40: I bought it so I own it now I'm going to hand it off to somebody else since yeah I think perhaps Amazon is a good example,
00:03:48: off a platform and also something that is not a platform.
00:03:52: So when Amazon buys stuff in order to sell it on to Amazon customers they need that thing doesn't act as a platform,
00:04:01: but when it lands its platform or its its services its environment painting Services whatever,
00:04:08: two other third-party Merchants they need acts as a platform,
00:04:12: because it gives the merchants available at the the ability to put their stuff online to acquire customers and set it off yeah and so in that case it's platform because,
00:04:24: rather than controlling the interaction in your view it has a platform.
00:04:30: Aspect because it's it's simply acting as a conduit or a meeting place a facilitator of.
00:04:37: Multi-party interactions yeah you know platforms don't have to be online they can also exist in our physical space,
00:04:46: and maybe another analogy would be a shopping mall or like a shopping center is a platform for shops and customers,
00:04:55: whereas and a individuals shop is not a platform necessarily because they buy their own,
00:05:04: products and then they sell it off so platforms businesses to attract multiple parties to one location either virtual or in real world.
00:05:18: Whereas other shops buy stuff in order to sell them so they have a different different business model is it when I Was preparing for this I was thinking through,
00:05:28: one of the obvious and very focused on data and Technology businesses one of the key differentiators that I believe enables platforms to become so much more prevalent,
00:05:40: and digital Enterprises or Enterprise which the main,
00:05:45: interactions are around data is the ability for data to be multiplied that it doesn't,
00:05:52: it doesn't simply owned and if if I lose one point of data you gain one point of data as well we can both gain one point of data,
00:06:00: and when I think about the physical examples that you're talking about for example.
00:06:05: Amazon's reseller Marketplace as a as a means to have a platform or a shopping mall as a platform one of the interesting corollaries is that these are places where.
00:06:18: It is a zero-sum game where.
00:06:21: I have a cut take the shopping mall example the fact that my store at position a in the shopping mall has a foot traffic is sort of,
00:06:32: additive to the other foot traffic around it it's not it's not like once I have the foot traffic it's it's lost to somebody else,
00:06:40: and I would imagine if we were to try to dig into platform businesses they probably at their core they have something about them which is.
00:06:48: Has this additive aspect that in other contexts called Network effects where sort of one addition is beneficial to everybody else.
00:06:58: So like the more customers,
00:07:02: a shopping mall attracts the more valuable it becomes the shops you me yeah the more you do the more input on some Dimension the more value not just to the,
00:07:15: to the direct interaction but to sort of the to all members or or to most members or at least many members so some sort of.
00:07:26: Multiplying effect which is which is inherent in Platforms in the.
00:07:33: In the software space and Technology space we see this.
00:07:38: Just being bait further and further into the unit economics of software we're like in the old days you would build software which was shipped on disks to be installed on servers and.
00:07:51: You know if you made a patch or something you made something else in the future version it was very difficult to sort of redeploy that and have a,
00:08:02: you don't have any leverage on on that investment and then over time as we move towards SASS and the idea of having a single code base,
00:08:10: which is shared across all customers,
00:08:12: and then eventually to a single database maybe that shared across all members be really good at this incredible leverage on on shared data and.
00:08:25: You know if you sort of play that back you would go well a.
00:08:29: Like a CRM like a customer relationship management tool that was on-premise installed off of it,
00:08:36: CD onto your server or whatever that's just it's just very difficult to call that a platform you know and I don't think anybody can see the platform effect but something like Salesforce,
00:08:48: or force.com or LinkedIn which might trade in much the same data I kind of been that internal,
00:08:56: you know it's a company's its contacts and so forth it really does pass the kind of the test of being a platform because.
00:09:07: If we look at LinkedIn you can see this richness of,
00:09:11: hey we're sharing this Resource Center nobody nobody but Jonah owns shown this profile but a lot of people use it and they get the benefits of it in this way that multiplies the input,
00:09:23: yeah I think there are so multiple layers to that so.
00:09:27: A platform can define a space or a domain on which the participants interact so windows or Os is a platform.
00:09:42: And it doesn't necessarily Define,
00:09:44: what developers are going to be developing not even the language that they can use but it just defines a rough rough edges of,
00:09:54: what this platform is about whereas other platforms are much more strict yeah I whenever when I think about Platforms in that sense like the,
00:10:04: the rise of Microsoft operating systems the thing that my mind goes to a standardization that it's its primary benefit as a platform is that it's established,
00:10:19: I kind of a standard for multiple parties to work on to everyone's benefit and,
00:10:25: I found this the whole standardization direction for platform businesses is super fascinating for me because you know but kind of by definition.
00:10:34: In order to standardize something you have to to diminish something you you you when you standardize on to the Microsoft operating system there's some capability that just isn't possible anymore.
00:10:49: Because you adhere to the standard so to the extent that platform businesses succeed in their standardization there's just a,
00:10:57: very clear value creation trade-off that's happening that says we as the multi-party community who works on this platform are going.
00:11:06: Agree to not explore some combination of things which are outside the standards but.
00:11:15: But it's more valuable for us to agree on that in advance and be interoperable than it is for us to.
00:11:20: Have it be wild west and then I imagine that's kind of how platforms eventually think it overwhelmed by some new platform is that space of what you agreed not to explore.
00:11:31: Turns out to have a lot of value in it and eventually someone sort of three platforms recreates a platform which changes the standardization.
00:11:40: Yeah I I think the mobile OS development 15 years ago was a very exciting.
00:11:49: Case study where where Android and iOS to go over the.
00:11:54: What was it called the Nokia's yeah platform which was more of like a collaborative efforts.
00:12:02: And then iOS came and kind of unified a lot of things which was really attractive for developers and users alike.
00:12:10: I still IOS as a very different approach than that's the Android iOS is much more closed whereas Android is much more open.
00:12:17: Bright and and in both cases you can almost imagine them on a well it's multi-dimensional but you can imagine them on the Continuum we're just on something like.
00:12:29: To what what is it take or how deep can you access the physical the physical Hardware of the device you've got say a different.
00:12:40: Like point of standardization between IOS and Android as to platform businesses.
00:12:46: And in some sense you see them playing you see a competition playing out between the two platforms on this question of,
00:12:54: which one has the right level of standardization,
00:12:57: and to go back to like well why wouldn't you just blow it a little bit so when you blow it all open and then you what your what you leave then is like in this operating system example is that everybody's mobile phone.
00:13:10: Is sort of exposing anything that could possibly be done at the hardware level and above to all software that you might install and that's.
00:13:20: Blake let's say it's risky for everybody but for the minority of people who could handle the risk it's also very time-consuming so you can just click you just so obvious that the platform adds value by locking out certain.
00:13:33: Certain possibilities and calling the rest of the standards yeah yeah I essentially they bring order to the chaos.
00:13:41: Hmm and that's attractive it's predictable it's convenient you can develop on it you can depend on it that's what platforms,
00:13:49: essentially they reduce friction for these interactions yes I love you I think yeah and I love the idea like it's such a it's such a great framing of like they are,
00:14:01: Bringers of order to something that is that would otherwise be chaotic.
00:14:06: I if you go back to the physical examples that you gave for example the the shopping mall example yeah it completely Clicks in.
00:14:14: I want to be in a shop if I'm if I'm a retailer where I'm a consumer.
00:14:19: I would like all the stores in the shopping mall to adhere to a search this certain hours right I do what.
00:14:25: I got a shopping mall and have 25% of the stores closed because they run their own schedule right so,
00:14:33: not very value-adding now obviously for any schedule that you would adhere to theirs it's going to be suboptimal for somebody so it's it might be some consumers.
00:14:43: The shops at open or it might be the stores are saying well hey I you know I don't really want to be opened at this time I don't do a lot of traffic,
00:14:50: and I don't want to staff right for this time of day but I'm gonna stay with fact when I was at back at the beginning my career when I was at Build-A-Bear Workshop a retailer you had a bit this challenge of.
00:15:04: They were catering towards children and children's shopping hours are just fundamentally different than say the Victoria Secrets which would be in the same shopping mall so.
00:15:14: You had this thing but it was in everybody's interest to standardize on the working hours.
00:15:20: And I think the shopping mall example also speaks to the ReUse of the infrastructure,
00:15:29: point that you made earlier.
00:15:32: So the shops in the shopping malls on the merchants they get to use the same infrastructure built by the shopping mall developer the same loading docks the same heating system of these utilities.
00:15:46: Yeah we just essentially scale economy.
00:15:49: Right so the so if we if we try to wrap it wrap it up for people who are who are thinking,
00:15:56: alright very theoretical what are we coming to his platform businesses maraton and Jonah.
00:16:04: We're essentially saying they've got State they've got act as a standardized ER so they bring order to the chaos of some potential are action.
00:16:13: They've got to have multi-party interaction we're sort of no single player mode platform right and they provide some sort of a scale economy.
00:16:23: On a shared resource they can be as simple as everybody is chipping in to pay for.
00:16:29: How some infrastructure you know operating leverage essentially that the.
00:16:36: The parking lot costs a certain amount of money and if we all chip in to pick to maintain its cheaper than if we get our own parking lots or it could be the very.
00:16:46: Web 2.0 to web 3.0 phase where it's where its data.
00:16:52: So it serves standardization shared resources and multi-party interactions that's that's platforms that.
00:17:01: Am I doing it right my doing nothing but still Rising it correctly I think that sums it up pretty much I mean usually if we get something else or arrive at something else we can.
00:17:13: We can update the definition okay so it brings order to chaos.
00:17:21: There's multiple parties interacting on it and they're leveraging shared resources so does Logistics lend itself to that our businesses that are built on those three fundamentals as as a platform business.
00:17:36: Are they going to be well-suited to the logistics what do you think I think there are areas where,
00:17:45: where it's true Logistics is a great place for a platform businesses and then there are areas.
00:17:53: Where I might not be true at least not all the time.
00:17:58: There could be cases where companies are not interested in sharing the infrastructure because infrastructure can also be a competitive advantage.
00:18:09: I think Logistics in logistics especially when it comes to data.
00:18:13: That's an important aspect to think about you know the first thing that goes through my mind when I when I ask myself is logistics inherently good for platform plays platform businesses is.
00:18:25: Go back to my university days and say well.
00:18:28: It's really more supply chain supply chain management has that has that three pillars of the flows of material the flows of capital and flows of information across a.
00:18:42: Group of collaborators who are in a value chain and when I think about those I go well material which is the logistics arm of that.
00:18:51: Do they need to have standards set and shared resources going to Shared investment and how multi-party interactions they do but I suspect that,
00:19:03: it's the coordination of the whole supply chain so in other words the capital and the flow of information which is.
00:19:11: Which is actually more appropriate for for platform like I think the technology advances and.
00:19:17: Logistics probably are more centered on the flow of material so that's things like.
00:19:24: Driverless Vehicles drone deliveries you know Material Handling unit optimization.
00:19:33: So I think that it's it's actually a little far afield to say Logistics should is is going to be.
00:19:40: Ideal for platform plays some little contrarian on this but maybe I maybe it's just a.
00:19:45: Maybe it's also too much of a technicality you you're probably thinking yeah right just just call it Logistics and move on,
00:19:54: no not necessarily I mean the way I interpret what you're saying is is that the supply chain chain is the sort of Next Step from Logistics.
00:20:04: So you can have coordination of movement of financial flows also in logistics.
00:20:13: In a lot of ways forwarders offer that service.
00:20:18: They offer that Logistics coordination for smaller acetone carriers to try to package multiple deliveries into one attractive and also financially attractive package for carriers,
00:20:32: which is essentially a platform platform and ever.
00:20:40: But you can also you know expanded to the whole supply chain anything.
00:20:45: I find that last comment interesting because when I think about four doors and actually I think about Platforms in general.
00:20:55: It does one does Wonder OK platforms Act is almost a mini market you know in some sense they.
00:21:05: They look like like a large-scale market for goods and services but just super focused on some subset with,
00:21:16: instead of an invisible hand establishing things like norms,
00:21:21: roles responsibilities standards a very visible hand and the form of the platform owner.
00:21:28: And if we if we do double click on the logistics we think about the large Logistics providers so.
00:21:37: XPO Logistics DB Schenker THL,
00:21:42: these seat Robin said they these companies ostensibly provide a service that that's sort of what you get at the frontier so when you kind of write up on your horse to the edge of these companies,
00:21:54: you don't get to buy platform from them you get to by like transport execution or.
00:21:59: A booking service for for ocean shipping but on the inside the coordination that happens on the inside can look very platform ask you know there can be.
00:22:12: Multi parties that are being coordinated with standard set to the betterment of everybody and some sort of a shared investment in resources and I think one of the reasons for example in the u.s. why the,
00:22:27: brokerage Market remains intact is because in some sense you could think about it as the very large pool of carriers.
00:22:36: Agreeing to pay for a platform called a company like JB Hunt agreeing to pay for that platform so that it will provide them with standardized.
00:22:45: Sort of concentrated invoicing and payment processing.
00:22:52: So it is what I guess what I'm saying here is I see your point that four doors on the inside can look quite platform ask it's just that you can't buy platform from them right like you have to buy.
00:23:05: The service that they offer not which is transported or warehousing or something you can't buy the just the platform.
00:23:13: I think there are a special kind of platform some Golem aggregators some say aggregators are not a platform at all.
00:23:22: I think Bill Gates said this quote that when when the.
00:23:28: Interactions that happen on a platform when the value of those interactions does not exceed the platforms value itself so when platform is more valuable than the interaction or some of interactions.
00:23:42: Then it's not really a platform and that was.
00:23:45: Directed to Facebook so feeding more valuable than all the interactions combined on Facebook kind of Facebook tends to.
00:23:54: Commoditize one or many parts of the platform and I think it Forward is its kind of the same.
00:24:04: For those who want to ship their cargo for the segregates the carriers.
00:24:12: Hmm to say that we provide infinite capacity but it's still on the other hand to connect these two parties and all parties are aware that the forward doesn't do on these assets the fool murder aggregates,
00:24:24: some sort of capacity yeah,
00:24:28: I'm processing it because it's it is a night it is an interesting perspective on the forwarding business where's the where's the sort of shared resource.
00:24:38: You know shared resource and standardization there will standardization is clear actually standardization is clear if you.
00:24:47: Yeah that the standardization is definitely there if I am working with XPO Logistics and I want to make a booking with them,
00:24:53: like I don't have to alter that format in any way for any of their underlying carriers right so I make this sort of standardized,
00:25:03: in quotes standardized booking with XP 0 which is may be defined by XPO maybe not but whatever it is it's single format and then by working through XPO I can,
00:25:15: access sort of a lot of cat potential counterparties multiple other parties through that standardization but where's the shared resource part that maybe I'm not saying with the.
00:25:27: Foragers is platforms I'm inclined to think that the data is the shared resource there and I'm thinking about samples such as Uber Freight or Convoy.
00:25:37: Well would you say that who Burr the taxi business.
00:25:42: Is that a platform will there another one that's kind of challenging is from on the inside if you are a if you were.
00:25:49: Orchestrating it on the inside view or manage a manager of the Uber platform and I think this applies to a freight as well.
00:25:57: It would sure look like a platform you would you would you would sure look like you are bringing in multiple multiple parties.
00:26:06: They agree to certain standards and there's a.
00:26:12: Kind of a share a shared economy there's a shared - or a economy of scale on aspects like.
00:26:22: The development resources necessary to you know to build that technology but the you know the counter argument would be that.
00:26:29: No it's just a service provider I all like if I'm a if I'm a writer would I get us a ride I buy a ride at an arm's length of great price.
00:26:39: And if I'm a driver I accept a.
00:26:44: In most countries I accept a independent contract job of one job you know of one size at a set price so it's.
00:26:54: Yeah maybe our vocabulary is not rich enough to Encompass all the,
00:26:58: all the permutations of platform what would you say to to boober or Hooper Freight example yeah I guess there has to be a clear distinction between what is just a network products,
00:27:11: our product it has Network effects versus a platform yes and he's aggregator in the end a platform or not I think that's also open open discussion still yeah I think,
00:27:24: we touched on this like what is the difference between a network effects product and.
00:27:29: And a platform because there are network effects aspects to things like just a catalog,
00:27:36: you know that if we agree if somebody puts together a catalog there's some there's some element of of one addition sort of helps everybody else.
00:27:48: But is that a platform I'm not so sure.
00:27:52: Would you say newspapers at form yes yeah I guess maybe it's a bias yeah I would say that we magazines it's clear because.
00:28:02: There's a read magazines they get stories sometimes we get discounts and usually those stories are,
00:28:10: focused around one theme either beauty or Hobbies.
00:28:15: And magazines make most of their money through advertisements yeah yeah well he's spooked and other social media well they sort of.
00:28:25: D bundle that or or they got into that value chain and.
00:28:30: Aggregated all the eyes on their platforms yeah I wonder as we go this conversation it's.
00:28:40: Kind of bubbling up in the back of my mind that perhaps I have,
00:28:45: hey bias against old-school businesses like a magazine that makes me say yeah they just can't be a platform because it's just too old it's just too old school and that's that's unfortunate that my my bias,
00:28:59: is that because clearly you can have a high platform businesses that predate kind of modern internet but that just so so associated with businesses that.
00:29:13: Our asset lights that they pay their primary product is the matching and the.
00:29:21: Yeah the matchmaking between parties and that's that that's certainly a group of people who are platforms but it's not exhaustive I think the bias might come from.
00:29:31: So tell me if I'm correct that you are assuming that on a platform all the parties want to,
00:29:39: be connected or get connected with somebody else whereas in that business.
00:29:46: It's not often that you want to see those ads but you're willing to go through the ads.
00:29:53: Because of some value you get from the platform.
00:29:57: So it's not always voluntary it my guessing yes I think that's true so so I had I come into it with,
00:30:07: naive and unstated assumption that a platform business will make it.
00:30:14: It's platform nature clear to the participants and they'll know that they're essentially joining signing up.
00:30:23: Entering platform now they may not be fully aware of the economic conditions for all the other parties.
00:30:33: I've take the example you give as a great one old-school economy magazines make most of their well they essentially make their money off of the advertisement not from the subscription fees.
00:30:44: If we think about.
00:30:47: The beautiful triangle that sits behind a business like YouTube where you've got,
00:30:56: viewers are consumers like like you and me we want to go see stuff that's produced by group to which is the content creators the content creators.
00:31:06: Maybe they care about is maybe they don't but they really want to be do is they want to be paid by advertisers that's group 3 and the advertisers don't care at all about the content all they care about is inserting.
00:31:18: Ten seconds of advertisements for every 200 seconds of video watching.
00:31:24: In front of consumers like like like you and me and so you've got three parties each really seeking the input or the resource or whatever of of one other one.
00:31:38: And it's hugely profitable it's also such as profitable it's also value creating like everybody everybody in that triangle wins but the thing to come back to the magazine example the thing that is interesting to me is that,
00:31:52: I see that as a vol everyone knows what they're getting into whereas with the Magazine's I sort of suspect that most vague magazine readers they don't,
00:32:01: they don't quite know that that triangle exists they think that they're they think they're buying the magnet they're paying for the magazine they think they're the ones that are supporting the the author's when in fact they're they're not right.
00:32:15: I could imagine or maybe maybe you remember or have read some local newspapers,
00:32:24: if you ever try to imagine the days before the internet and this was a lot of the issues that you can remember you know they barely exist anymore yeah yeah that's sure if you remember that they before the internet's right then this will see,
00:32:39: one of the very few places where a local business Koontz reach out to a wider audience yes outside the neighborhoods,
00:32:49: they also formed another thing which is I think somehow in the constellation of these topics of platform there's another thing that is is sitting around here,
00:32:58: which is natural monopolies if I if I remember correctly I believe that this is why.
00:33:05: Warren Buffett was really into newspapers I think there was there is a some ego and that I mean you get to be.
00:33:14: There's a little bit of ego and being on the board on the board of a major newspaper like Washington Post or being the owner of you know the local newspaper but for most,
00:33:27: for most areas there don't have enough population this before internet days they didn't have enough population to support a lot of newspaper competitions so they formed essentially natural monopolies.
00:33:40: I have a feeling that natural monopolies does sit in this constellation of Concepts around platforms because if you look at the really powerful platforms they sure do look like.
00:33:52: At least for the there hit the time period if they get their standards and the resource you know resource sharing right they say they sure do look like a monopoly for the space that they said in.
00:34:07: Yeah newspapers were great businesses for a number of reasons one was also that you had to buy a new one every day.
00:34:17: You can get like reuse the old one multiple times.
00:34:21: Yeah service like product qualities so you can't you can't sort of by 10 of them today and save them for tomorrow and you can't you can't use yesterday's for today yeah.
00:34:32: But there's definitely the scale economy effects especially when it comes to distribution.
00:34:38: Those things as well yeah so does it so if we go back to cut is logistics inherently.
00:34:46: Lending itself to to platform plays besides the nitpicking on the word logistics compared to supply chain in my view is if it probably does like.
00:34:56: If I just think about them like.
00:35:00: One of the things if we're going to try to talk about standardization it's an industry that just begs to be standardized just anybody in who spent their career in any way and Logistics.
00:35:12: I will lament the fact that there is not enough standardization and it's ironic because these are not like totally novel.
00:35:20: Processes or more data objects that are being standardized things like.
00:35:29: He's like Customs clearance things like purchase orders stock transfer orders,
00:35:35: you know shipments bills of lading these things are just in some cases they're legally defined documents in other cases they're just very mature quite stable business objects.
00:35:48: And the fact that there is a standardization here kind of ubiquitous standardization is really surprising but I think that that's since that's a value of platform so I think it makes sense another thing is that.
00:36:01: Logistics and supply chain is usually occurring across a kind of a.
00:36:07: A depth of companies you know that maybe there might be five or six companies deep in the value chain.
00:36:14: So you got a lot of things to share a lot of connections to make and.
00:36:21: Given the platform's abilities to just sort of facilitate again economy of scale of investing in.
00:36:30: Connectivity or sharing data it seems like a natural fit.
00:36:35: For that as well so so I probably my short answer be yes I think that Logistics does lend itself to platform as a business model would you think I would say yes.
00:36:48: I would say definitely as if you if you agree that the foreigners are platforms.
00:36:55: So then you then you start to see those sort of business models everywhere yeah I think it becomes tricky.
00:37:03: When we talk about platforms to try to connect different for orders carriers those sort of things and try to standardize their processes,
00:37:12: because I think there's an inherent risk for for a lot of companies because they they risk losing what makes them different from others.
00:37:23: There's sort of that farmers might create in different in differentiated experiences for the end users.
00:37:30: And that's a risk for these businesses to be commoditized,
00:37:33: right that's one of the barriers why we haven't seen sort of winner-takes-all Winner Takes most.
00:37:43: Type of Platforms in the logistics.
00:37:46: Like I mean to the scale that Facebook did with social media Google did with search why we don't have this one.
00:37:55: You know if we keep if we keep in examples that are a combination of physical and and informational flows.
00:38:04: I have always felt like there's lessons to be learned in this regard from the financial industry in particular things like.
00:38:14: Commodity and or and or even Equity exchanges where,
00:38:21: commodity exchanges future exchanges for example you're talking about it's as physical as it gets right we're talking about tons or in some cases less than ton but mostly like large-scale movements of,
00:38:34: physical Goods through pipelines through bulk shipping.
00:38:39: And at the same time as you have that you have the you have this intense push to standardize agree on standards.
00:38:48: And to bring a combination of like standards and transparency,
00:38:54: and sort of centrality to it in a way that that facility that brings order to chaos to kind of use your your expression in the beginning so you know I look at the world like what would the world look like if there wasn't.
00:39:09: Come on the exchanges and there was just over-the-counter exchange what's called over-the-counter exchanges for big-time Commodities like natural gas and oil and wheat and so forth and you go,
00:39:22: will be a lot worse right like which is a lot worse,
00:39:27: and then I look at Logistics and go well there is no you know there there's no exchange for that you know exchange kind of have multiple parties right they are sorry multi parts to them that make them valuable they've got they've got standard setting which that's then enables.
00:39:42: Public trading and they've got kind of clearing operations that say.
00:39:48: We'll take this thing that the parties agreed on and then we'll clear it in a way that means that,
00:39:55: that neither party really has to establish a direct Financial relationship with the other one there they're going through some sort of a central player that's that's more common and in like everybody mom like these to Lenny.
00:40:08: Yeah yeah exactly there's also a MasterCard and Visa very common examples.
00:40:16: Hey Andy do you have an answer to that te to figure it out.
00:40:23: Well I think actually Logistics is following the path so there's a there's a if you go back and look at the history of the equity markets,
00:40:31: and particular if you look at the history of the equity markets as regards to price discovery which is one of the.
00:40:39: The main elements of Market marketplaces in markets is that they execute because the 3 R's are two things they do counterparty discovery which is,
00:40:51: you know I don't know what to buy some IBM stock so who do I buy it from well I need to find a counterparty or the best counterparty and then the second is at what price should that agreement be struck and that's that's price discovery.
00:41:05: If you go back not too long ago so
00:41:08: the 70s and you start look at you inspect well how did those two things happen so in the in the 70s for major businesses and the most advanced economy so that kissing the u.s. for their equities Market,
00:41:23: listed companies they would have a couple market makers.
00:41:27: And people would find the market maker by Looking In A Thing Called the pink sheet is basically a newspaper writer or a little magazine that went out and they'd go down through and they'd be like I want to buy IBM stock and you'd see there's four market makers and maybe one of them is you know Merit ins brokerage,
00:41:42: and I would call Mertens brokerage and say hey.
00:41:45: How much is IBM stock and you'd be right you'd be required to provide me a buying a cell rate but they could be anything,
00:41:52: and at the time you know these that meant that the price for a stock was just insanely different,
00:42:00: depending on who you knew who that because if they felt like they all know who you are so they thought you were maybe somebody just sniffing around for the pricing they might give you really really outrageous pricing.
00:42:12: So so you're going well didn't people know about it from the you know the public data well there was no public data I mean the,
00:42:21: it really took this is like the formation of the NASDAQ the but it really took.
00:42:28: Decades actually it began with at it began with,
00:42:33: delayed end of day reporting where Brokers would report just maybe their average at the end of the day and then it became,
00:42:40: the end of day buy and sell and then it became and then all the way up till now you have like this public order book essentially which includes volume so not just,
00:42:50: I will buy or sell this but I will buy or sell this and this is how many shares I would take at that price.
00:42:55: I think that Logistics would follow a similar path it's just it's just decades behind.
00:43:02: It was a long way to say yes I think it's going to happen I just think it's decades behind sorry yeah I was I was thinking about the examples that you brought on I think the key there is scalability,
00:43:15: still businesses would really benefit from this infrastructure because they can scale.
00:43:22: And you know it's the same thing with MasterCard and Visa as well especially when travel started to become more common when you turn it was taking off.
00:43:31: These businesses out the opportunity to scale whereas in logistics the scalability is limited,
00:43:39: you can only drive as much with with the assets that you have.
00:43:45: Yeah it's actually a fair point I mean as I understand it obviously I wasn't trading stocks in the 1970s but as I understand that those changes were fought really hard by the.
00:43:58: By The Brokerage has kind of been every step and only a few of the brokerage leaders it just kind of enough of The Brokerage leaders combined with.
00:44:08: The public companies that were being you know the whose stock was being traded,
00:44:14: just enough people sort of wanted each next step to happen that they were able to.
00:44:21: Push it through but what we find if we played the tape in reverse and we go so who is right who is wrong and that you know to brokerage just lose or did broker it well it turns out they they won because they made it up on volume I mean but you know
00:44:36: no question that that,
00:44:39: trading maybe it had a real Heyday in the 80s and 90s but it's made it up on volume and.
00:44:47: If I look at Logistics that maybe the Achilles heel here is I'm not convinced that better price Discovery would mean that there would be.
00:44:56: Ten times as much Logistics happening because which is kind of what happened when trading something that used to be quite murky and.
00:45:05: Only the people truly experienced people would even consider doing it and the transaction fees were outrageous so you didn't really trade you just you just bought Bob and then when you need to buy a house or something you sold,
00:45:17: became a more High frequent thing but I don't think that'll happen with Logistics so maybe that is the barrier to make to make them the motivation for people to shift yeah I'm not going to like buy and sell.
00:45:31: I'm not going to buy and sell as like a day Logistics yeah it's like that's not that's not in the cards.
00:45:40: Yeah okay the next question which I think is the one that you and I are just so much,
00:45:47: you know more interested in because the first two is like what's the platform business and doesn't lend itself to Logistics those are just us getting our our feet on the ground and running but the next one which is where we really have a lot to talk about is,
00:46:02: how do you measure platform businesses different from non platform businesses.
00:46:06: Where we were coming into this the first thing that came to my mind is you measure business like the way you measure business if it's based on its future potential for free cash flows some discounted back to today it's just.
00:46:21: It doesn't matter what industry you're in doesn't matter what business model you run.
00:46:27: Things that work find their way to the financials.
00:46:32: But I think we both have a view of like why that isn't why that's insufficient and and mine was just well if you're building a platform business like you and you and I are in our day jobs or if you're examining somebody else's,
00:46:47: are you competing with somebody else's or if your investor thinking about you know backing one.
00:46:52: You need leading metrics essentially need a mechanism to to assess the health or in our case to tweak the health of a platform towards being a good business,
00:47:02: and that data is now available the,
00:47:05: final result on future cash flow of future free cash flow is not available today mmm so the question is,
00:47:12: um what shoots people interested in platforms look for,
00:47:18: yeah exactly like what are the from the outside of the
00:47:22: the castle walls up a platform and assuming that you can't see its future and you can't get inside and you know look at the books you have the outside what is
00:47:33: what's actually accessible and then I guess if you're building one also what should you be considering so.
00:47:39: What are the elements that you would look at the darkness like a normal this is just normal business you go What's the total addressable market right like who's the competitors those are basics for the for business but.
00:47:49: What's different for platform so I think it comes back to the definition that we talked about before which is that the platform is something that facilitates interactions so the interactions are key,
00:48:04: copy the total count of users that you have but rather how many interactions these users create.
00:48:13: Versus how many interactions those users want to have but we're not able to have because of reasons.
00:48:23: So overall I think the term for that is Network Health,
00:48:28: you have a network on your platform and you want that a network to be healthy to be very dense in the sense that if you're looking to get something out of the platform,
00:48:38: then you always get it so if I use the Uber to get a taxi.
00:48:44: I usually get a taxi from Uber and that's great for me so I think that's a key method for assessing platforms,
00:48:53: it's a sort of match success rate but yeah how would that but whatever I mean I call it bad Schmidt you're right it's more like transaction or interaction.
00:49:04: Because sometimes these interactions are not,
00:49:07: the not of the nature of the platform puts you together but it's that you found each other or it might be multi-sided so you have two or three.
00:49:15: Two or three connections necessary.
00:49:19: Prepped in order to make one transaction something like that but so happy how would that be different the success rate to have a interaction on the platform.
00:49:31: How would that be different from say the drop-off rate on Amazon's web cart you know Amazon wants you to complete your purchase as a consumer,
00:49:39: they monitor very carefully the drop-off rate how is that not equivalent to Network Health and the definition you just gave.
00:49:48: I think in the network case it's more Dynamic so if I have a bad experience and leave the platform because of that.
00:49:58: The other other side on the platform also will have a worse experience because of it.
00:50:06: It's a reverse Network its Network effects on - internet with - yeah yeah I think that's the thing.
00:50:14: What I think if you if you remember Google had Google Circles.
00:50:20: Yeah Facebook was just created and they had like they launched and then they had I don't know like 70 million users.
00:50:29: Yeah and then they just they just activated for everybody yeah the networks were super super sparse so I think the average time a user spent on Google Circles was.
00:50:44: I don't know like a couple of minutes per day maybe whereas on Facebook it was Tom's higher.
00:50:51: Yeah because yeah just so much more to do on the platform so much more people to interact with yeah yeah the the network I'm buying the idea of a Network Health I'm also buying the idea that it differs from,
00:51:03: some version of success say you know sales success or.
00:51:07: Or transaction success in that failure has a propagation element to it that,
00:51:14: failure failure now impacts the or reduces the likelihood of successful in subsequent interactions not just with that.
00:51:24: Individual customer but with others.
00:51:28: One of the things that's been running through my mind when I try to assess platforms is I do wonder about the.
00:51:35: The trade-off between frequency of interaction and criticality of interaction so for example.
00:51:45: Do you have a better platform if your platform is.
00:51:50: Focused on large kind of large impact like let's say buying a house or in the case of logistics let's say an annual RFQ in procurement,
00:52:02: so happens once a year right large impact highly critical.
00:52:06: But it's infrequent now how does that compare to something like order execution.
00:52:13: In transit visibility these sort of things that are each individual transaction each individual.
00:52:22: Interaction that the platform might facilitate.
00:52:25: Is a modest value but they're just so many of them so kind of in my mind I'm trying to figure out which is it both dimensions matter but of course then what's the trade-off between these two because you're not going to have.
00:52:40: High volume of high criticality transactions for most platforms this is kind of like Market size and the ends.
00:52:48: So you have high volume transactions just multiplies yeah it's just a bigger Market.
00:52:54: Yeah you're basically saying just multiply them and the bigger one is the better one well I mean in terms of if you have constrained resources.
00:53:03: I mean you can speak one then it seems more attractive but if you were on your own server yeah you're looking for a niche some underserved.
00:53:15: Product and you might be you might have more success looking at the low volume 1 if you were if you are on the outside of the platform like let's say you're on the outside of platform and you were looking at,
00:53:27: you were looking at 22 platforms let's say we're looking at parsley or local local courier delivery.
00:53:37: And there's one platform which is matching a buyers and sellers of the service.
00:53:44: But they do it on a annual basis so there they're facilitating.
00:53:49: They provide standards they they do benchmarking of the data something like that.
00:53:57: And their matching up buyers and sellers on a frequency of once a year and then you have another one same.
00:54:06: Let's say the same total spend going through it.
00:54:10: But it's doing this on ad hoc shipping so it's sort of the average interaction the average parties are coming in and interacting.
00:54:20: Let's say once per month so it's a factor of 12 is basically an order of magnitude difference.
00:54:26: Same total value which of these do you think.
00:54:31: And your opinion which of these is or is it a relevant between these two would you look at this and go equally good off to a good start in their platform business hmm so I'm thinking can I make a case for for the first.
00:54:45: Example hmm it's higher trust me it's the first example would say the bigger the bigger the criticality of the of the interaction,
00:54:57: the better branding power essentially is some form of branding power trust that the platform is June is in generating so.
00:55:06: I will get my foot I'll put my foot in the water and try something if it's easily reversible or low-impact if it fails,
00:55:14: if failure means that I lost a bunch of money for a whole year then you got to be bit more proven so I think the platform.
00:55:23: The upside to platform a is that to succeed when you succeed in that business you've established some form of brand power.
00:55:33: In the upside I guess in platform B is that.
00:55:37: Well one is you know the inverse is true it's easier to get new probably easier to get new customers but but the more important thing is the upside for number two is that you are establishing probably more.
00:55:50: Kind of mind share or more of a sticky relationship one would assume with the members because you're just.
00:55:59: You know the way human beings work is they frequency matters right if I see somebody daily of a stronger relationship with them even if.
00:56:08: I add up the mundum number of minutes and I compared to somebody I see once a month but for a longer block of time.
00:56:14: Mmm yeah that makes sense and if I'm working on something where I have to use a specific tool once a year and I've used it once before I don't necessarily want to use or learn something new,
00:56:29: just for that yeah one time use yeah yeah definitely if the experience wasn't like super great.
00:56:38: Yeah that's a fair point that you'd there's there's a different the barriers essentially a different me we'll get into this later we talk about competition,
00:56:45: potentials but the barriers are different yeah one of the things that I find so as compared to a typical,
00:56:54: business that wasn't platform that was just hey we buy and sell a service we buy sell product whether things I find different about platforms that night I really do try to inspect when I when someone mentions a platform in our industry,
00:57:06: is the the exact nature of the network effect so one of the things that that matters with these Network effects is.
00:57:14: Kind of you have to go deeper than the.
00:57:17: Well when the new buyer comes in at sort of better for all Sellers and when new seller comes exact for all buyers or when a new in the case of,
00:57:25: maybe datos data sources so a new internet of things you know connection comes onto your real-time visibility platform and sort of better hurry right it's like well you're in good expect that because some of these Network effects,
00:57:40: they just never stopped right like they sexually they're additive everyone that comes on or every new interaction the value of the dads.
00:57:49: Is is sort of a pure number X and maybe the number X diminishes over time but it's always,
00:57:55: plus right and then others are more like a swapping effect so so if I think about procurement platforms just as an example,
00:58:06: when from a buyer's perspective if I was a if I was a buyer at let's say Nike and I was buying warehousing.
00:58:15: When a new warehousing provider comes onto my procurement platform that I'm on.
00:58:20: Yes it's more valuable for me but how was that value actually created well the network effect is that maybe that that that new seller of warehousing services replaced.
00:58:31: Or competes with but basically could replace another one so.
00:58:36: That can only go on so long and it's sort of like somebody loses for somebody else to gain that's the network effect whereas when I think about the benchmarking platform so think about like the nada,
00:58:51: as an example which is which is interesting because it's one-sided it's.
00:58:55: There are many multi-party interactions there but they're all on the same side they're all buyers and they submit their data for it to be benchmarked and,
00:59:05: nobody loses so there's no trade-off there it's simply a linear value-add now the value tapers off because kind of what are you going to learn from the millionth and 1000001.
00:59:16: Contribution will it's going to be a lot smaller than the second contribution,
00:59:20: but it is additive so that's something I pay a lot of attention to that's something that they a lot of tension to with platforms yeah I guess you could also say that at some point the added value starts to diminish,
00:59:33: also because of additional spam or the additional cost of having to go through all these interactions that really don't bring you,
00:59:42: much more new value so so then platforms have to start thinking about spam filters or start to restrict interactions,
00:59:53: yeah it only to use the ones gets true.
00:59:57: That's also a factor that I think you have to look for in platforms That You Don't See Another other businesses which is that,
01:00:04: you have to balance a abundance with relevance I think that good platform businesses if you it just think about kind of,
01:00:14: something like LinkedIn which we're all familiar with good platform businesses as they create an abundance of possible interactions.
01:00:23: If left to their own so if you take if I really wanted to have interactions with 10 people in my network,
01:00:29: and my networks 100 people I got one in ten chance right if I explode that Network by by 100 going to factor 100.
01:00:39: There may be some in there that I want to have more interactions with so maybe my are actions now it's like little higher but it just bloats out with the.
01:00:47: You know the visitor of that of that ratio kind of the denominator is just gets,
01:00:52: too big and so what I see good platforms doing and is also a sign if you're on the outside and you're sort of are they really growing you know with a where they really at you start noticing that they pay more attention to.
01:01:05: Maintaining High relevance for the parties.
01:01:10: To combat that sort of abundance of possible interactions Mmm Yeah it's difficult from the outside to measure those things though.
01:01:18: Yeah you hear something that gets reported.
01:01:22: Yeah what was our my traits yeah the only time it's reported is with it's a vanity metric right yeah.
01:01:31: I mean you don't musk was supposed to buy Twitter but it's now stuck because they are fighting over how many Bots there aren't reader,
01:01:39: yeah exactly everybody's acting all right I don't know if if everybody has that opinion but it seems to me at least that there certainly should be more than 5% of bots at least in my network that I follow,
01:01:52: person right,
01:01:53: yeah yeah I mean II think I think that the I think that Network owners yeah they inherently don't have much incentive to to sort of.
01:02:03: Be exposed on this,
01:02:05: also probably if we're If we're honest I mean I'll also probably for good reason I I suspect that any platform kind of by definition like platform doesn't play the game it sets the rules of the game and then the people who are on the platform play.
01:02:19: So the more you reveal about how the inner workings of those rules operate the more you're inviting yourself to to be,
01:02:31: you know if you want to be nice about this call this growth hacking but,
01:02:34: really it's more like spam radiation I mean I tell you like an example I for my own experience was,
01:02:42: when I was starting my first company there was a platform for it at the time called investi right now called Verve and Switzerland for Angel Investors and as I you know as I checked kind of how do you get the attention of Angel Investors,
01:02:57: they were pretty transparent at the time about what are the ranking algorithm and.
01:03:03: How does one get into the top of the list for the kind of weekly Roundup or whatever and because they were clear about the mechanism of how their platform worked because their platform was you know startups could apply,
01:03:16: fill out a profile provide some details and then seed investors could see those profiles but you know there are a lot of profiles so how they how did they get,
01:03:26: to the head you get to the top of the list well they're pretty clear about that and therefore it was hackable and I got us to the top of the list when pretty minimal effort now.
01:03:36: It was that was that value-creating for the platform you know maybe if
01:03:42: if you design them in academic the mechanisms properly then maybe revealing the mechanism is is simply like reinforcing good behavior sort of truthful Behavior makes it easier for people to Google.
01:03:55: Has done and then not done this in the past with with ranking algorithms where they sometimes they would talk about what gets you to the top of the search algorithm and and then other times they felt like that was being overly hacked,
01:04:09: but I think that's the positive reason why platforms hide this information.
01:04:14: The negative reason is they want to keep the valuations high and it doesn't look good enough yet it's definitely very important thing about platforms.
01:04:23: I mean you mentioned Google +.
01:04:26: We have a whole industry around that called search engine optimization all right companies just specialized trying,
01:04:34: figure out what's to algorithm doing right now or currently current version yeah and it and the pride like the degree to with the to which the platform becomes,
01:04:47: large like the prize for that just creates a cottage industry of of how do you you know how do you best performance.
01:04:54: Platform which I think we see already starting to emerge in some of the logistics platforms.
01:05:01: Not already I mean there's certainly a visors right now right that you could find who have made a cottage industry of.
01:05:10: How to get through RFQ platforms how to maximize your business,
01:05:17: like if you if you're starting a carrier like an asset operating carrier in the US.
01:05:23: You certainly could find advisors that would help you best navigate the.
01:05:29: Are the platforms like dat truck stop,
01:05:34: and also the sort of semi-private platform or the private platforms run by people like JB Hunt and c.h. Robinson and now it's here and all that and their sales pitch is Imagine same that they help,
01:05:48: sell their services and they specialize on these tools that are out there.
01:05:56: Yeah I think again going to kind of how do we assess platforms differently from from normal businesses.
01:06:04: One of the things that I certainly look for is the that we talked about the interaction kind of,
01:06:12: the the nature of that interaction I'm looking for well how many factors need to go into making that,
01:06:18: that interaction successful so one of the one of the things that I was always skeptical about four platforms that were essentially a play off of,
01:06:28: the arrival of uber so for a long time people talk about we're launching an Uber for trucks and then you over for trucks arrived at super free launched by Uber and then,
01:06:39: I kind of backed off of that at least in Europe they just decided it isn't worth it and then,
01:06:45: and in the US and me the financial results are pretty terrible one of the things that was always interesting was.
01:06:52: The lack of attention to how much more heterogeneous the factories of a good.
01:06:59: Match are in logistics so right if I'm looking for a ride on the Uber as a Jonah to get to the airport.
01:07:08: I got waiting time to my pickup I got desirability of the destination point.
01:07:15: And I've got the number of passengers and that's it right so it's like three factors to get to a match don't care what color the.
01:07:23: You know the ride is I don't care what model the car is all that stuff them are Logistics you know Trucking so many more match factors are involved here.
01:07:37: What this tells me when I hear about a platform in our industry and Logistics I'm immediately checking on this topic in my mind so what I'm when I'm first thing I'm thinking is,
01:07:47: if it's a high heterogeneity of match factors if you need to match in like 30 or 40 things you got to have big time scale to get off the ground that is a work unless you.
01:07:58: You somehow can get the cold start problem is harder right the cold starting problem being a reference to like what do you do on day one and they sort of environments,
01:08:06: well you got a lot more people on there because there's a lot more ways to not be a good match the second thing that comes to mind is.
01:08:15: With these high heterogeneity of match factors is that.
01:08:21: If you can get off the ground if you can be creating matches they're probably more durable like this is probably a harder platform to dislodge,
01:08:30: because the chances of just kind of raw chance to make such a such a match.
01:08:37: Is going to be hot is going to be lower so it's harder to compete with.
01:08:41: As a result and the third thing I checked for this is my this is my like checking for vaporware is.
01:08:49: Does the platform who says they're going to provide that interaction that match.
01:08:54: Do they even have a way to give this data so I'll give an example.
01:09:01: There's a company called load fox out no longer around but they is just their tagline was they were doing playing Tetris with part loads and they,
01:09:12: you know said that they're doing matching between shippers and Logistics providers in a way that they would sort of,
01:09:18: do the 3D optimization of putting things into a truck and that's an example where there's a lot of heterogeneity you really need to know a lot of things to be able to code load cargo,
01:09:27: but then if you checked their API and what data you could send them about your shipment it didn't include any of that stuff so.
01:09:35: You know if I can't tell you that my cargo is temperature-controlled that you probably can't match me based on temperature control and so so is this sort of like that's my vaporware check on platforms is well,
01:09:48: if a match requires 40 factors at night and you don't give me away to tell you what those 40 factories are,
01:09:54: then it's not you're not going to be able to facilitate the match all the things that you,
01:09:59: or we're talking about right right now seem to indicate to me that in order to really evaluate the platform business you gotta get your hands dirty,
01:10:09: yeah yeah you have to really understand how it works.
01:10:14: Who's on it and again you get any value out of it,
01:10:19: is it utility right now and doesn't this feel like the definitive factor in logistics and Logistics startups that,
01:10:28: people who are incumbents and Logistics event for a while this is what they would say when they see a new startup arriving who sort of seems to be saying that message of
01:10:39: you know Logistics has been done this way since the 90s it's all Excel and email and we're going to change the world and the incumbents are like yeah.
01:10:48: Details Matter here boys like you really gotta right here you gotta you gotta pay more attention and then also the.
01:10:56: Those newbies the people who are coming in from the outside who are saying that they tend to sort of sheepishly say a little bit later they're like wow the details really matter in this industry I didn't realize there were that many details.
01:11:08: And that seems to be the.
01:11:11: I'm like the call two modes because that's sort of a loaded word but that seems to be the barrier for the software eats World phenomenon hitting Logistics has a lot of that stuff dies at the edges because.
01:11:24: You got to operate at a very low level of detail in the business,
01:11:27: to have any chance of success yeah is that disheartening no I mean I was I was just thinking that if I if I were to forecast the future of these Tech startups that have come to Logistics,
01:11:41: please do so I would say.
01:11:46: That I think a fair share of them are considering a specialization yeah to some specific Niche yeah that has worked for them.
01:11:56: Yeah now know now do you think that's because do you think that's a defensive reaction like.
01:12:02: When they started out they thought they did that kind of naive thing where they were like they said well it's a huge addressable Market.
01:12:09: You know we're going to be trying to make the next decade unicorn and,
01:12:15: and then when they hit reality they said well well well wait let's let's just specialized for now and then we'll come back to the rest I think that given given the white knit that they cast they have to catch something probably,
01:12:30: and they going to narrow it down to that.
01:12:33: Okay so it's opportunistic essentially the cast a wide net something something gels exactly yeah they they pursue that yeah imagine going that way.
01:12:44: Yeah I could see that.
01:12:46: And you know it's Bri back to the platform place because many of these are attempting to be platform plays the things we're talking about you know the fact that you want to look for additive Network effects,
01:12:58: you want if you're going to be matching stuff up you're probably going to face High heterogeneity,
01:13:03: and then just the sheer sort of scale of the number of participants was one of the things that also probably lends itself to platform businesses in our Logistics industry that we didn't touch on is just.
01:13:16: How broken up market share is if you look at the trucking which is Trucking Trucking.
01:13:24: Because half of logistics cost is Trucking worldwide and if you look at who is the leader by market saying the US and Europe and how much market share they have you know it's,
01:13:37: it's two or two and a half percent Europe and one or one and a half percent in the US for the market leader it's just an insane.
01:13:47: Is the opposite of concentration where your it would tell you that there's probably not an economy of scale in that business.
01:13:55: And also it would tell you if you want to be a platform well the value of the platform would be that.
01:14:02: People aren't going to be able to this intermediate you because there's just a lot of people to connect do you think that problem could also be that.
01:14:12: That the definition of the markets is just too broad we shouldn't be thinking about logistics but maybe,
01:14:22: you know Chicago refrigerated Market yeah,
01:14:29: yeah yeah yeah I think so as well I see the point the the flip side to it though is that and the reason why I think people sort of end up,
01:14:42: popping up a level again and saying well let's just talk about the trucking Market the FTL Trucking Market.
01:14:48: Is as soon as you make it it says you go down a level into kind of a micro Market where you say why I'm really talking about.
01:14:57: I don't know refrigerated refrigerated trailer full truckload in Germany is the participants in that market spillover into a bunch of other you know markets.
01:15:11: And every time you try to find a framing and which the participants is a fixed group.
01:15:18: You sort of kind of cut off half of the picture and then you have to like reframe again a little bit larger to include those people and then you've cut off half of the you know the picture again.
01:15:29: I think it could be it's very challenging can't win them all at the same time but if you if you're a business who's trying to somehow.
01:15:38: Platform was a for the logistics sector if you do often end up with this this Catch 22 where you go well.
01:15:48: It's not valuable to do for example it just go back to this refrigerated full truckload Germany it's like well.
01:15:56: It's not valuable to the participants in refrigerated truck load Germany to.
01:16:02: Come into this platform if all I do is refrigerated truck load Germany because they also do Poland and Belgium and you go okay yeah got it you know they need if I hear my customer you know my customers telling me.
01:16:16: But I also have you know Belgium and Poland so can you please add that and then when you expand out to Belgium Poland you find that those markets like the Belgium markets got a bunch of people from France,
01:16:26: hey go got it okay so you know they need France he explained that friends and you end up again cities yeah it's a I think that's one of the things that kills,
01:16:34: platforms plays in our sector.
01:16:37: Is that the the critical scale that is needed for the cold start phase where you get off the ground is pretty high I mean it you compare it again to Uber.
01:16:50: As a quintessential consumer platform they go city-by-city like I went you know if I'm Uber if I make Berlin work.
01:17:00: Sylvia you know right it's more men I think like Airbnb where it's like Airbnb as an example has to kind of have everywhere for it to work.
01:17:10: Yeah we do burr I think they started even District by District yeah yeah it was exactly and hyperlocal,
01:17:19: with Logistics it's the borders are really not as well defined because you have to cater to companies that work let's say on Germany Poland Lane.
01:17:33: But the the the other parts or their customers in Poland perhaps work in Poland's fault explain.
01:17:42: Young so it's hard to draw the line somewhere yeah it's hard to find something now I think the clever startups.
01:17:50: Those who have sort of read zero to one and and understood you got to find a place where you can be the Monopoly whatever,
01:18:00: you dude look for something like that like you say well let's just focus on the companies that do the channel Crossing from from England to France for example,
01:18:10: and suddenly you're down to a group of people who is perhaps Limited in scale enough and concentrated scale enough and I believe that as.
01:18:20: You know as somebody who's launching a platform this is kind of referred to as like nail the hardside first you gotta find you got to find the side that is going to be the one that can dictate,
01:18:32: the easy side to come to it so if you're an importer to the UK because they have more Imports than exports but if you have your an importer to the UK.
01:18:44: And tomorrow there was a platform where say half of the logistics companies that manage Imports this are directing you like hey could you just go to this like.
01:18:54: I don't know Rebecca brexit we're brexit platform that that the new.
01:19:02: The cool kids are using for their importance to the UK wolf like half of them say go there that's the hard side so so you know the importance of go there.
01:19:11: I think there are some ways to platforms get off the ground and Logistics like this if I think about Sonata again they did it with n and some other companies like them did it by trying to find.
01:19:23: Really big Lighthouse names who would share rates and Freight waves did a bit of this as well but but it's,
01:19:30: it's still a challenge I think it's not as easy as this comes back to
01:19:33: kind of Outsiders think it's going to be easier and Logistics than it is it's hard The Details Matter there's a lot of heterogeneity a lot of Dimensions to deal with one of the other things I want to throw out about that I look for in platforms for.
01:19:47: From the beginning from the outside is is their value creation there sort of network effect.
01:19:53: Is it same side or cross side so the quintessential cross side one is mentioned earlier with procurement would be,
01:20:02: you know a buyer comes in and now that there's a new buyer it sort of better for all the sellers because the sellers have somebody they can they can generate revenue from this new buyer and the.
01:20:14: The buyer has this large pool of sellers that they can get into but it's not necessarily better for the other buyers.
01:20:19: Or same thing if a seller comes in new Trucking Company joins this procurement platform is that good for the other trucking company as well you know probably not right they're probably going to drive the prices a little bit lower,
01:20:31: and they're going to take away some of the revenue some of the volume from the existing players now.
01:20:37: The same sided kind of network effects would be something like like Facebook's by the quintessential one which is when.
01:20:47: People like you and me sort of the not the advertisers but the but the even know what they call Facebook members maybe users data providers.
01:20:57: Data providers very very very clean Market friendly word I like it's not technical,
01:21:04: it's it's something that you know your G grandparents would say so the data providers when they don't like sorry David owners start a the donors and the data donors,
01:21:14: come into Facebook.
01:21:16: The value accumulates obviously there's value on The Advertiser side but it's also valuable for like me and you right so that same sided value versus cross-site value seems to be a real.
01:21:28: Determine it perhaps in the kind of peak value potential.
01:21:34: Other platform because I had the feeling that when it's cross side what my feeling is that it's stickier perhaps but it's also.
01:21:43: It's more likely to be this replace event or kind of competitive Network effect rather than the additive one whereas same side seems to be more additive like.
01:21:52: There's just going to be more of us and therefore we're going to get a better we're going to get a better outcome yeah I think it's some for a platform it creates a small dilemma.
01:22:02: So platform is successful.
01:22:06: If the user base is dynamic if it's not stale if they constantly need to have more interactions in order to discover counterparties.
01:22:16: When when when the network becomes stale there's less need for the platform I think it's one of the.
01:22:27: Arguments that I would make and on the other side they would have to balance that.
01:22:32: An additional user on the platform which is a competitor for the other same type of users that this.
01:22:42: This wouldn't kill off yeah the platform because I think essentially what it's.
01:22:49: The danger is that somebody's going to start the competing platform I think yeah and they're going to win over those dissatisfied.
01:22:59: Customers that aren't able to make deals on the platform this is actually it's kind of like a saturation point.
01:23:07: Yeah yeah it's a question exactly it's like a question of,
01:23:11: of what is the saturation point of this platform when you look at any any platform business as it's structured on that day I mean obviously they can The Operators of that platform business can tweak.
01:23:24: What did what's the core value offering and and kind of add editions and do things but at any given moment a platform is going to have some saturation point where you go well.
01:23:35: It will be valuable,
01:23:37: for most people to kind of opt into this until this point but about that point it's kind of it's It's not less valuable but it's not more valuable Iver and.
01:23:49: I I was you know I was thinking of this in the procurement example of a lot of the logistics companies so sorry a lot of the.
01:23:58: Say like a retailer is.
01:24:00: Not going to have very many Logistics providers in a region they may have you know you're you're a big player you may have 60 or something so I may have significant I'm a.
01:24:11: If I'm a car for I may have 60 Logistics providers doing full truckload between my distribution centers.
01:24:19: So if I enter and I'm look at let's say for some reason I'm I'm you know,
01:24:25: I'm looking for 60 completely New Logistics providers so no incumbent can stay with me next year which would be a little weird but let's say that incumbents are all out you know they broke my heart I want I don't want to receive them again,
01:24:39: someone to pick 60 New Logistics providers and I join this amazing procurement platform that has.
01:24:45: 60,000 you know but Justice providers and in my region you go okay great so.
01:24:53: From the point of view of the logistics providers to get a 0.1% chance of being chosen all else being equal,
01:25:00: now the question is like well if it was double the number of logistics providers to 60,000 hundred twenty thousand and you're still picking 60 you go.
01:25:11: Is that like that meaningfully different.
01:25:14: And I'm not sure on either side if that's really meaningfully different if I'm honest because the probability that.
01:25:23: You know you have some breakthrough on maybe a breakthrough on one of the.
01:25:28: One of those providers or something but you're not going to I doubt that another way to say is if you pick 60 and then I and then I revealed behind door number 2,
01:25:37: another 60,000 carriers that you could inspect I don't think you would just throw out the first 60 and pick 60 from the new group I think what you'd find is perhaps.
01:25:47: Maybe half change or more or less and therefore this indicates diminishing returns.
01:25:54: You know if it's out of the first 60,000 you get 60 and then out of the next is 2000 get 30 you've got some diminishing returns and that indicates that there's a saturation point for the platform value and this leads into this lease it to,
01:26:08: the next thing which is for you and me as going to platform platform Builders by the most interesting as the competitive Dynamics and.
01:26:18: You mentioned that a second ago but just for people who are who are listening who didn't catch it.
01:26:23: You know platforms compete with their own members because if the platform is facilitating interactions,
01:26:30: and when we go back to it like what's but from doing rights you know it's providing standards it's facilitating interactions and it's providing some sort of a resource where usage.
01:26:40: But if.
01:26:41: If it's doing if the standards would otherwise be adhered to and if the parties who are going to have the interaction already know each other because as you said it's quite a stable relationship.
01:26:53: There will be people who say let's just take this off the platform right like in other words use as a platform you have to you're an intermediary and you have to compete with your members in order to not be disintermediated.
01:27:06: Four daughters who are listening who.
01:27:09: Earlier her to say that Porter's might be platforms are going yeah yeah totally you guys are you guys not be disintermediated yeah yeah I think a lot of platforms have had that issue.
01:27:23: And I didn't know if there's a catch-all response to that.
01:27:30: I think for example what booking.com the was they not I wouldn't say Force but the requirement for hotels was,
01:27:40: that they have to use the infrastructure of booking.com for payments and those are things for others I think they win with convenience so Airbnb is just so easy to use.
01:27:54: Yeah even if if the host gives you a 10% discount you know.
01:28:03: You might take it you might not you it's definitely easier to trust the platform.
01:28:08: Yeah and some unknown other provider or Merchants who are interacting with yeah are there other exhibit I think it's interesting if we think about the competitive Dynamics which is kind of where we're at now is like.
01:28:22: Competition or another way to say this is value capture so if I'm a platform operator Platt I built a logistics platform,
01:28:32: and people are using it they're finding it valuable how much can I take rate be right how much can I how much value how much can I charge people in extract out of that interaction.
01:28:42: And the First Dimension that they compete with is that the people just go off the platform they go yeah it's great you know I really enjoyed using Jonah's platform to find.
01:28:53: My new Customs clearance agent but now that I found the Customs clearing agent really like really like her and so we're going to go do a direct contract,
01:29:03: and so the things that you know I see as as mechanisms that I'm kind of watching platforms for one is legal you mentioned it I mean booking had this for a long time,
01:29:13: I'm not sure if this is held up in court everywhere but they used to have these have agreements with hotels it said you can't offer a lower price outside of booking.com so you have to offer your lowest price through us.
01:29:24: And that certainly makes it less advantageous to go around their you know their platform then it's the convenience factor I think that that,
01:29:33: especially in B2B actually drives it's a it's called inertia once you're on you know inertia in business.
01:29:42: Typically is the determining factor of how people will behave they'll simply behave the way that they did in the past.
01:29:49: And then and then there's there there there is some sort of risk element to this like.
01:29:55: I know with Airbnb they have this thing where they'll ensure you know they'll provide you some level of insurance if you're the,
01:30:02: homeowner who's renting if you're the host they would say if you're renting out your home.
01:30:06: And you just took some cash from somebody because you went off the platform and then they steal a bunch of stuff will like yeah you file a criminal complaint but you know it's sort of on YouTube to get the,
01:30:16: to get them to pay for your stuff but if you get it through your PB,
01:30:20: and let them take their fees well if there's a certain instant they'll cover Insurance are there others besides though like just thinking of so we talk about risk we talked about contractual terms that we talked about convenience.
01:30:32: Behind the station comes to mind yeah so if you if you know the cycle,
01:30:39: how long does it take for for somebody to want me to react again.
01:30:43: Then you get it's grade a monetization strategy cater to that cycle.
01:30:50: So incentivize the early interactions or so.
01:30:54: Get changed when the values delivered for them so that they stay on the platform at that crucial yeah at crucial times.
01:31:03: So I guess the the idea there is that the if it's a fixed subscription costs are normally.
01:31:11: Then it has to cover multiple transactions so if you are already paid for that for the transaction.
01:31:19: What's the point of going offline off right yeah so playing with the monetization playing with the pricing Dynamic so that you make the by decision at the moment when you need the platform.
01:31:33: And then when the when you might go off the platform it would give you know Financial upside to do so that's a,
01:31:42: that's clever that's really cool that's an interesting idea yeah I think one of the I think the natural one that we sort of skipped over but is but it's probably.
01:31:53: Platforms we hope they're competing they're using to keep their members on them is just optimal outcome some version of yeah you can go off of us but,
01:32:02: he'll just be back to where you were prior to using us which is you weren't quite sure if you were getting the best outcome or you know you're wondering what else what other possible interactions would be of more value,
01:32:14: and you want that so it's a sort of.
01:32:16: You have no Assurance of Optima of optimal outcome if you go off of us this is kind of like trying to read last week's newspaper.
01:32:25: Over and over again,
01:32:27: I think it I think it'd be a well I think it would be yeah it'd be like reading last week's newspaper or it would be like you know if back to my stop buying example well we see this in the logistics so let's just let's just use the logistics we need to go outside the industry,
01:32:41: you know if I did a sourcing event and I use somebody's platform 2.
01:32:46: Benchmark rates and to check service levels and validate that.
01:32:52: The people who are making me offers half like the correct Insurance levels everything so I use the platform for its Superior.
01:33:01: Kind of data up data capture and awareness.
01:33:04: And then the next year instead of using the platform we decide well we're just gonna do this bilaterally you know we're just gonna we're just going to go she ate together what you miss is,
01:33:13: well what might weather information you you know who you know about your counterparty so that's no longer,
01:33:18: the platform is no longer going to provide you data there but it's the people you don't know about that the platform would provide you data to the counterparty Discovery in the price discovery about those people.
01:33:29: And I suspect that most Logistics platforms kind of place their chips on that debt.
01:33:36: That's really what they're trying to achieve and then maybe they it doesn't work and they sort of dabble in these other elements you know make sense I wonder if there's also,
01:33:46: reputational you know reputation almost like like brands,
01:33:52: yeah like yeah like brand value I mean I'm thinking about someone like Gartner here who act as a platform for salespeople to meet with you know budget holders.
01:34:05: At conferences and both sides pay to get essentially to get into that to get into that platform to have those interactions but there's brand Equity associated with being.
01:34:17: A door in the Gartner you know ecosystem or event.
01:34:22: And so sure you could go let's say that you are a supply chain officer at a at a company you could decide no I'm not going to spend the money to be on that platform we're in those events and I'm simply going,
01:34:37: to invite the same companies that we're at that have had to come talk come talk to my team here.
01:34:44: What you would but what should be foregoing is not just the awareness or whatever but you'd be for going some measure of like reputation and brand associated with the gardener,
01:34:54: stamp Mmm Yeah I didn't know how strong that affect being Logistics.
01:35:02: Yeah it's kind of hard to put a finger on it.
01:35:06: We don't have a lot of strong Brands right yeah I'm just not sure whether people would pay extra for the bread.
01:35:16: Yeah yeah or or if they do it's the the leader margin on brand is not is that.
01:35:24: An enormous Edition right for kind of leading brand platform you there is no I mean,
01:35:31: my impression is right now the platform plays are happening in logistics or almost the opposite like there's subsidizing membership by Often by discounting,
01:35:42: their services or yeah otherwise sort of like delaying the fees to join the platform and
01:35:48: and as a result you've got you'd almost have the opposite right yeah I mean from from an outside perspective one could assume that Logistics.
01:35:58: Traditionally having relatively low margins would not be very suitable for brands,
01:36:05: type of barriers yeah we do it secure agree with that yeah yeah yeah I'm not so sure you know if we look at
01:36:14: if we look at some other Industries so like I'll just take I'll take mobile phones for example there's the whole gamut with my mobile phones he's got
01:36:24: incredible margins with Brands so you stay with like iPhone it started with an apple.
01:36:32: So the like the the the iPhone line is just incredible margins and I think you got a that's a squid pretty hard to see.
01:36:41: You know Hardware difference.
01:36:43: There's Hardware differences but are they are they margin inducing I'm not so sure I and there are obviously their feature sort of there's the whole feature lock in into the ecosystem,
01:36:54: I get that that's also value-creating but there's but that whole thing is wrapped up also in brand,
01:37:01: so could someone do that and Logistics,
01:37:05: like Majestics yeah Trucking well if you hit I mean if you had I think one of the ironies with one of the reasons why we keep as an industry we keep being circled by these.
01:37:17: They sort of vc-backed startups that maybe don't really know the industry is from the outside it just sounds ridiculous that.
01:37:25: Things that we take for granted as a consumer or not possible in supply chain you know why can't I track every package through every handling point that it goes through like why can't.
01:37:37: I get next day delivery for just every category of goods in the same that you know in the in the same region that I can get it from,
01:37:46: L like Amazon so so I think a company that would just do it you know that would just make excellent Logistics and make that associate with your brand maybe they go to I'm not sure.
01:37:57: Hey maybe maybe that's not a feasible thing to create up to create a business maybe the cell possible I don't know but.
01:38:06: That would be a direction I would think we're brand would be able to
01:38:09: to break through mmm maybe yeah maybe we younger people entering the industry Maybe,
01:38:19: they might be more tech-savvy or maybe maybe some tools mites attracts certain type of people and then they get attached around yeah that seems to have happened in the IT industry,
01:38:30: a lot of people prefer slack to,
01:38:34: other messaging platforms hard to say whether it's because of the brand or because of the value that they get out of it,
01:38:42: yeah I think the brand valent valiance is essentially a trust that so for an existing product its,
01:38:50: it's sort of clear you can measure it on the on,
01:38:53: or they existing service you can sort of measure it on what it is but I think the brand power comes from a willingness to forgo or pre or preempt.
01:39:04: Evaluation on the what it is on the basis that you'll simply trust that that that they will be better,
01:39:12: and given if you know to his credit to perform Brandt for Brand Power if I think about logistics a lot of the a lot of the pricing power would come from agreements around can I trust you can I trust this provider I,
01:39:26: I know for being on the buying and the selling side and Logistics services that there's a pretty decent room for for premiums if,
01:39:36: you know that you won't be embarrassed or let down because most companies I think about a company like Adidas so I don't know that three percent maybe of their of their realm of their revenue might go towards the logistics like,
01:39:51: if that goes up by 10% but but number of disappointed customers goes down substantially then no one will blanket that.
01:40:03: I think there's definitely sectors like Pharma high-value Goods fast-fashion Brands high-end brands.
01:40:14: Luxury there's definitely segments where where the logistics branding as a purveyor of kind of certainty and high-quality would work,
01:40:24: I mean bring it back to platform place I think that that's certainly a possible way to avoid being,
01:40:29: disintermediated with your buyer you're sort of your members mmm I'm baby till on defense but it's because I have a hard time distinguishing between brand and value delivered yeah,
01:40:42: yeah fair enough I mean I'm kind of intermingling them right now well okay so we talk about competition with your own members as a platform.
01:40:51: What about the competition between platforms.
01:40:55: Kind of what are we looking for when we're inspecting a platform for Hallmarks of something that's really going to compete well against.
01:41:05: Other platforms where the ones at all throw out there is that they got the standards right I really think.
01:41:12: You mentioned that this is this is probably more than half of the game I think it building a platform and Logistics is.
01:41:19: What you mentioned when we talked about standards was that.
01:41:24: So many people will resist standard-setting because they feel like adhering to somebody else's kind of poorly defined standards eliminates their competitive advantage.
01:41:34: And so,
01:41:36: I feel like the industry's been crap you know just cries out constantly for good standards but at the same time rejects most of the standards that have been thrown out there not because it doesn't want standards but because they are simply not well thought through.
01:41:51: And so when I look at platform to platform competition wonder it kind of.
01:41:59: Is is the logistics platform that's coming up let's assume that it can keep its members on platform how is it going to compete with another platform that tries to offer a similar service it's that standards the standards isn't just like defining the data but it's also like,
01:42:14: the process what can you do with the data simple things like you guys have agreed on it let's say you've agreed on a on a on a.
01:42:23: Purchase can you negate that can you can is that cancellable and,
01:42:28: some platform I'd say no it's immutable it's once it's done it's done but some people might say it's double opt-in wear well,
01:42:36: the buyer and the seller have to both agree to cancel it some would say well just the more powerful side will get to decide that maybe the buyer gets to cancel if they want to.
01:42:45: And that's the kind of thing where the platform has to draw its own Line in the Sand and say these are the standards were going to said because if they say there's no standard then there's no then we're back to well why would.
01:42:58: The members stay on platform like what's the value add to them yeah I think each platform has to take a stance.
01:43:06: How much value they're going to provide to one side versus another,
01:43:11: how's it going to monetize platforms don't have to be symmetric in that sense they can be highly asymmetric and still work,
01:43:18: quite well and work for all parties there's an interesting thing and then that and also a risk that platforms have to have to take as part of their design,
01:43:27: internal design and in your mind when you're assessing the competitiveness of a logistics platform.
01:43:34: So let's say that there was a logistics platform let's say dat in the US where you've got,
01:43:41: carry the load board or in European terms this would be like Tim oh Cam where you have,
01:43:46: carriers and you have Freight forwarders and they're finding each other to kind of like Craigslist tile frankly they're kind of finding each other to negotiate offline so they find each other,
01:44:00: and then they threw their help wanted ad and then they kind of go offline to negotiate the price and strike an agreement if we look at the monetization like you just mentioned you could have a symmetric monetization which is I'm going to charge both sides,
01:44:14: roughly the same you know the same amount.
01:44:17: Or you can have a highly asymmetrical line where it's like I'm going to charge one side the entirety of the you could even have go the further I'm going to charge one sides a lot of money and them in the,
01:44:28: is affects the other one subsidized hey the other one it in your sort of in your assessment is one.
01:44:36: Model inherently more competitively strong than the other well with the asymmetric option going as far as subsidizing I think it does great eye.
01:44:48: Explicit barrier so it raises the switching costs yeah so your competitor good cop it's.
01:44:57: Well I guess then you're out of luck.
01:45:01: But there's still a significant switching cost for these people to leave the platform versus to another platform where they don't get subsidized.
01:45:10: Where they perhaps have to pay yeah there's a there's essentially a counter positioning element to this which says that maybe the the.
01:45:19: Lead in expectation of everybody in the world is I'll be charged for what I use or I'll be charged for things that are valuable to me and so when you arrive at something which is free.
01:45:31: Even essentially pays you to use it.
01:45:35: There is something that's sort of inherently motivating about that and so if you think about like the search space.
01:45:44: Was like Google's Google search is incredibly valuable I would pay.
01:45:49: At least single-digit thousands if not if not more Euros or US dollars per year to use Google search if it was a walled that way,
01:45:58: but it's not paid well that way and so I'm super sticky to Google right like it's free to me you think a really screw it up before I would.
01:46:08: I would leave them and they've created this barrier for their competitors it says well if you want you know you want to play this game.
01:46:17: By the way you can't charge what one of the one of the sides of this three or four sided platforms.
01:46:25: You'll have to because the about their platform is kind of SEO searchers.
01:46:31: Advertisers and then and then content right content owners so you have kind of four sides essentially and,
01:46:39: they would go there we go like yeah if you want to get in on this you get you know if you wanted to be with us we've set this the terms such that.
01:46:48: You have to run this highly asymmetric commercial bottle and I kind of agree with you that I think that my intuition is that.
01:46:58: Platform models are commercial models are inherently harder to overcome as the as the platform competitive competition interestingly I think that the downside to them is that.
01:47:13: The competition might start to evolve around,
01:47:18: the other side and in particular I could see two ways that competition evolves that's just sort of - for everybody which is which is one is the the the other side.
01:47:32: You know is so the payer becomes the,
01:47:36: kind of overly focused on in platforms so you sort of degrade the value create because the value create the more you know I think in the business the more you you make your value create,
01:47:49: go off of the track of the value capture then the more conflict of interest you have right like
01:47:55: if the platform just gets to cap gets to capture exactly a percentage of every time and creates value that that would be best because I already told alignment but if it's this the more asymmetric the commercial model the more likely you are to have a platform,
01:48:08: creators of manages the platform that get off track and they focus too much on the pay or at the detriment of like total value.
01:48:16: And the the second is that I suspect that this would start to,
01:48:21: lead to competition which is essentially discounting down I'm thinking of things like the insurance industry where like now if you run an insurance if you if you were to run an insurance business,
01:48:34: the insurance premiums are actually lower than the expected,
01:48:37: payout amount so you'll if you just were to collect the premiums and then pay out you would lose money you have to deploy the capital,
01:48:46: in an effective way or if you think about like CRM we're or slack right I think about slack is super valuable that these other messaging applications Salesforce super valuable but the competition has forced them to an effect.
01:49:00: Discount because they say well the lifetime value is really high so I'm going to Discount to win business in the beginning,
01:49:08: and they that's brought the margins of those businesses down and I suspect that something like that could get off the ground faster with an asymmetric that kind of price War could get off the ground faster with an asymmetric platforms,
01:49:22: commercial model against an asymmetric.
01:49:25: Model then with a symmetric one I'm just thinking about examples that come to mind,
01:49:32: about platforms that apply this asymmetric monetization it seems to me that it's usually the buyers who get the better.
01:49:44: Better deal on these platforms you mentioned Google so,
01:49:50: in terms of Arts it's usually consumers like you and me who end up buying those products yeah I'm thinking about.
01:50:00: It's a restaurant table booking platforms.
01:50:05: You don't usually pay their sometimes you can get a discount at it after every 10th you know booking yeah do you have any counter examples or anything comes to mind where it's the cellar,
01:50:17: where's the cellar that's the incentivized the incentivize party the party who gets sort of a steel like like a shopping mall where the,
01:50:28: customers have to pay to get in well yeah actually when does come to mind in the case of Airbnb.
01:50:35: So the hard side and Airbnb is the is what they call the host which is the the housing owner.
01:50:42: So you know if you look at Airbnb they subsidize or at least for a long time maybe not now,
01:50:49: but for a long time they subsidized catered to they provided higher quality service to,
01:50:56: the sellers the homeowners the what they would call the hosts because.
01:51:01: Fundamentally if you think about the demand side the buyers so so I'm Joe's going on vacation jungle is going to stay someplace,
01:51:10: that could be intercepted that was like a flow of demand that could be intercepted every given day ever given our there certain number of people who are just looking for a place to stay right like just flow demand and.
01:51:22: You can intercept that demand in straightforward kind of marketing ways they turned out to not be very good at this they have mostly organic volume but it doesn't matter,
01:51:35: someone like booking a kind of gets it through Google ad AdWords that kind of thing but the.
01:51:42: But the hosts you know you and me if we want her in our house like we are not just,
01:51:49: there's not just a flow of these people it's very idiosyncratic and it's a smaller group and.
01:51:56: You know if they're gone they're gone right like they're not they don't is going to be very hard to get them back so yeah I agree with you that in most of the world there's,
01:52:07: more this guy like buyers are the limited quantity and sellers are the ones who are popping up in the disappearing and popping up again and you know they're the easy side of the market but there are exceptions to that where,
01:52:21: The Cellar is the hot is the hard side of the market.
01:52:25: Yeah and the platforms the smart platform operators thing than play that I guess the logistics is also the case where it's not always clear which side is harder to win over.
01:52:37: Right given how fragmented diverse this spaces.
01:52:43: Yeah I'm not sure I'm not sure I buy it but we hear it all the time that there's a swaying in the market and now because you know now it's the carriers Market or it's the,
01:52:57: you know it's it with the ocean shipping it was like now it's the ocean Shipping Lines Market because.
01:53:05: There's not enough capacity and there's all this demand and so they're the ones with the pricing power,
01:53:11: in transportation it feels like every submarket within Transportation there's this constant oscillation,
01:53:18: between who has the power which makes it very challenging I believe her for
01:53:22: platforms plays to come in because you can't just focus on cornering the hard side of the market the what is the hard side keeps,
01:53:30: keep switching with the exception of some niches for it's like parcel for example there's just a couple Sellers and parcel that you you know you got,
01:53:39: can I have five or six companies that you would need to if you wanted to start a platform for parcel there's only going to five or six sellers that you would really want to nail
01:53:48: for example one of the things that I look for also when I'm thinking about platform to platform competition is the true relay so when I'm thinking about what I see a logistics platform and I think.
01:54:01: What would it take to unseat that Logistics platform really try to inspect.
01:54:06: The interaction which is at the core of the platform so the kind of the matching event or what or the the.
01:54:14: Yeah the interaction I try to inspect like,
01:54:17: how did that interaction come about because I kind of classified into four categories so,
01:54:24: I'm going to use procurement both because I,
01:54:27: I think about this area a lot but I think it's a massive area for Logistics platforms so in a buyer and a seller find each other in something like a let's say a Fray toast type company,
01:54:40: level 1 which would be the simplest and easiest for another platform to replace is is navigation there's centrally a catalog exposed one or the other side knows who they're looking for inside that catalog or they know
01:54:54: some element they're looking for so they look at like who does what service and the catalogs is like search basically.
01:55:00: They navigate to the party they're looking for and
01:55:04: engage in that interaction and then the second level is search where you you maybe know the metadata but you don't know the actual catalog so this would be like I can't I can't see the entire member list of this platform and I maybe I don't know them,
01:55:19: so there's a now there's counterparty Discovery going on like I don't know these people but I know the kind of company I went to look for,
01:55:26: and so I use search to find that kind of company and then we begin the interaction.
01:55:32: I think the third where it starts to get more interesting as platform recommendations and one from recommendation differs because the member who's in who's initiating the interaction,
01:55:42: they may not actually the will they definitely don't need to know the catalog of other members on the platform but they also don't necessarily need to extrinsically have stated their desires so,
01:55:53: the recommendation engine the recommendation process hasn't just it's not just a search phrase it wasn't like you tell me what you're looking for and I'll give you back,
01:56:02: results it's other people who are like you would be looking for this or other times when you came to us you were looking for something like this and then here's a potentially delightful interaction and when that succeeds,
01:56:15: platforms definitely has more competitive power and then the last which is the kind of the deepest possibility here
01:56:21: is assignment so it's like and this you see with somebody this is where the freight forwarders really are where you go to say Uber Freight
01:56:29: when I order when I commit to a truck on Uber afraid I don't have to navigate their list I don't search her trucks they do recommend trucks to me they just assign a truck to me.
01:56:39: And as a result another platform who's competing with them,
01:56:44: has either got to give assignment level matching kind of as their interaction style or they got to provide a hell of a lot more value that would make me move down that ladder to like recommendations their search,
01:56:56: because the higher up the ladder you go the more,
01:57:00: the more like lifting essentially the platform does to facilitate that interaction so just to recap
01:57:06: members achieving their interaction of their match through kind of Ford levels like the navigation navigation meaning they know who the other members are search meaning they don't know who they are but they can find them in ways that are
01:57:18: straightforward based on what they want recommendations which is they only know what they want but the platform brings them great great potentials,
01:57:25: and then assignment which means the platform takes full responsibility for picking,
01:57:30: and then kind of consummating the interaction with the match to me the further up you get up in this list,
01:57:37: the higher the bar you set for another platform to dislodge you that you're essentially saying that.
01:57:43: There's inherently more value in the being added by the platform as an intermediary therefore if you want to come intermediate instead of me,
01:57:52: you better add that much value or more yeah you could have Niche products around each of those four areas.
01:58:01: I still have a successful business yes.
01:58:05: Yeah so you're saying you think that it's not sort of always one level up is is better that there's some there's demand out there for essential to your point I guess there's demand for recommendations.
01:58:18: In a sense it in a situation where people wouldn't one assignment they want to still choose even though that takes some effort and they make a bad choice that,
01:58:27: they want the agency that recommendation leaves the I guess I'm saying that all those use cases might be valid at some time or another.
01:58:37: And you could feel the product around it I don't disagree that having a fully automated system is just much more hot harder to build and us it's easier to protect protect that business yeah
01:58:50: I think you're right about that that that there's essentially there's Niche there's niches in every at every level.
01:58:58: The last thing I had in my list for assessing platform to platform competition,
01:59:04: is a kind of a lock-in effect where in the is this term multihoming where someone could if we take visibility for a second so.
01:59:17: Someone could you be using for kites.
01:59:21: As well as say project 44 as well as GT Nexus as well as transport Ian and.
01:59:30: There's this question of like well like what why what's the stopped the members of these platforms from.
01:59:40: The keeping homes kind of on each platform and then from from that perspective so if you imagine a.
01:59:49: Shipper will you sort of generic terms here if we imagine a shipper and the carrier and the shipper says yeah we can get connectivity through.
01:59:58: For kites or transport in and the carrier says oh I'm on four Kites and transport Ian.
02:00:05: Kind of by definition the platforms are then facing intense commoditization where it's different if once one of the sides is on both and the other one is only on one but if they're both sides of that the shipper and the carrier sort of on both.
02:00:20: Then I think it's very challenging for the platforms to have a differentiated,
02:00:25: March and Beyond just maybe economies of scale or how it kind of the cost side if their equation.
02:00:33: Yeah I think that's one of the perhaps downsides of maybe not even.
02:00:41: Platforms or uniquely the platforms but just digital businesses overall.
02:00:48: That the margins the tend to be perhaps lower.
02:00:53: Profit margins because it's easier to replicate a business set up a new business.
02:01:00: Um maybe one of the things to look out for in terms of platforms is what's The Upfront cost of building that platforms.
02:01:11: If it's significantly higher it means that perhaps the market can sustain only so few businesses and that might lead to more profitable businesses a as well.
02:01:24: Yeah net can we come back to the natural monopoly question of some platforms certainly seem like they will find their niche.
02:01:34: As Natural monopolies I believe load boards came close to this in the US and Europe either they didn't quite hit it.
02:01:45: But you could imagine a world where say Tim command deity simply took,
02:01:53: took the natural monopolies of those you know wouldn't would practice him to have happened is that to your point earlier that
02:02:01: Logistics and or transportation in this case
02:02:04: is not homogeneous enough to be called kind of one market so say in the Europe you had Tim welcome who definitely had a chance to be to fill the.
02:02:15: The natural monopoly first but they,
02:02:18: didn't get sufficient come they weren't of easy backs company who is going for complete scale so they left niches uncovered where people like tell a root and
02:02:29: trans study you in countries where Tim oh Cam wasn't fast enough sort of,
02:02:35: emerged and therefore they didn't get complete domination Mmm Yeah but I can't go back to the multihoming I mean I unload boards and as a great example.
02:02:47: I have a hard time seeing how seeing the differential margin.
02:02:53: Potential of let's say Trend study you versus Tim welcome just just give an example because all of the foreigners will be on,
02:03:03: every Foreigner who operates saying Germany and Poland will have a translator you account and they'll have it they'll have it to Macomb account and all of the carriers who operate their will have a trend study you account and they,
02:03:15: Tim, count.
02:03:17: And I think specifically what it means is that neither one of those platforms can really move there they have no pricing power they can't they can't unilaterally move their price up 20%,
02:03:29: without facing a migration of customers over to the other platform and therefore they're there.
02:03:37: They're competitive basis really is just on the cost side of the equation like can I cut out well sorry their margin potential is really on the cost side of the equation,
02:03:46: rather than on the on the price point side of the equation yeah or providing some additional value or starting up a new business line or something like that expand yeah,
02:03:58: yeah we're else yeah yeah potentially like essentially,
02:04:01: not in this line of business but some other line of business which is being funded somehow by the by the same company,
02:04:09: but if you look at the line of business of the load boards or what what I think is called frayed auction
02:04:15: freed auctions for free exchanges excuse me for a changes in Europe totally commoditized and I think as a when I think about the platform to platform competition aspect when I'm when I'm someone's mentioning the logistics platform and I'm trying to assess them in my mind,
02:04:29: one of the elements is is well how effective would,
02:04:33: the members of this platform be at multihoming you know can they go find other logistics platforms and sign up for them and use them or is there some,
02:04:42: sticky lock in barrier that's going to make it and I think you think about the sticky lock and barriers things like,
02:04:48: I'm super reliant on the recommendation of this platform well signing up for another platforms not going that you can't
02:04:55: take over your recommendations right the valve are the most of those recommendations aren't yours to take with you so that would be a good weight defensive maneuver for multihoming.
02:05:05: I think the thing that's the much weaker one is simply scale simply just just saying like well but we have more of X then this other platform it's like well.
02:05:15: Getting to X are getting more of X may not actually be as challenging as it looks like at First Sight yeah they serve brings brings back the,
02:05:25: forecast that I tried to make it so another option could still be specializing on some specific aspect and.
02:05:33: Providing differentiated experiences that way yes so yeah set of scaling up you scale down your narrow down and something very specific.
02:05:42: Yeah yeah I think this reminds me a bit of the Delta model and strategy which we say like what really matters in strategy is here,
02:05:51: your relationship with your customer and the skin the sort of narrowing down would say we're really going to do is we're really going to become more essential going to move to be more intimate with the customer,
02:06:03: so it's not that we're going to try to have many many more customers is that we're going to have a deeper stickier like deeper.
02:06:11: Relationship with the customers we already have in a way that they would forgo.
02:06:16: Kind of a broad platform because ours is so much better suited and.
02:06:22: That might be optimized to a process or it might be optimized to them as a business I think so actually I'll give you an example that comes to mind immediately is a limit car.
02:06:33: Which is this so it's a it's a chemical it's a chemical Logistics sort of order management platform and that thing I just said there I say it's a chemical,
02:06:44: it's like that's their defense ability as a platform is there trying to say well we never really got any traction outside of chemical but we're but in chemical people know us and that that's.
02:06:57: As a platform that's been their play maybe they I would suspect that was Defensive that they just didn't.
02:07:03: Didn't get outside of the borders of chemical fast enough and now they really haven't got.
02:07:08: A strength to do so but but maybe as you said maybe that was there was actually proactive and they wanted to stay on chemical and and go deeper I just hope there is that,
02:07:20: the world is wide enough so other potential competitors might just find their own niche,
02:07:28: and we get to their Turf yeah blue ocean not red ocean stuff.
02:07:34: What's for the logistics has it right it's hard to find great statistic on this but Logistics seems to represent 4% of.
02:07:44: All spending on anything anywhere and so one would hope that with four percent.
02:07:51: Four Euros out of every 100 euros are spent on anything is on Logistics one would expect there's a ton of space there for platforms to coexist.
02:07:59: So one would hope that they focus on like making the pie bigger through creating value for all these different.
02:08:08: Dimensions rather than checking out the pie that somebody else is being is making and trying to make a competitive version that's that they get a little bit more of,
02:08:18: okay maybe we move on so as we wrap it up here there's kind of two questions that we said we wanted to look at one was.
02:08:29: What are notable platform businesses in our sector and is there anything you know interesting to discuss about them and then are there any underlying trends,
02:08:38: that are kind of Shifting in favor or away from platform as a business model so on the noble platform businesses in our sector.
02:08:46: Obviously you and I work for a notable platform business in our sector so the careful here not to to sort of talk our game and and also not too.
02:08:57: Talk our competitors game but I put kind of three categories together in my mind of platform businesses for for Logistics so the first is anything that's about,
02:09:08: the internet of things and essentially it's there's physical things moving around the world and we're slowly instrumenting and addressing,
02:09:16: each of them uniquely so.
02:09:19: So slowly the number of uniquely addressable material things in the world is Raising and the instrumentation of.
02:09:29: Their qualities like their temperature whether they are being shocked how fast they're moving and what were you Tatian they're sending all of that stuff is coming up and I think that there's tons of platform potential.
02:09:41: In the space just huge flow of data it wants to be shared it wants to be standardized.
02:09:47: And it can be linked to kind of clear value creation across multiple multiple parties,
02:09:54: the second was business objects messaging so this is anything related to forecast demand Supply quotations Contracting.
02:10:03: Bill material specification invoices peripheral and proof of legging.
02:10:10: Transport orders anything that's a business object that needs to be exchanged between parties and I think there's a lot of platforms this is quite mature now this quite a lot of platforms that try to do this and then the last is business directories because it's such a fractional Market of logistics,
02:10:24: strangely just a catalog of who is in logistics and what do they do and how good are they that would be if there's a.
02:10:33: A encyclopedia that was definitive for that that would be a beautiful platform by itself even if it didn't do anything else any others one that comes to mind is visibility platforms,
02:10:45: I I think essentially they are data Exchange,
02:10:50: layers what what serve interests me about visibility platforms is is their evolution.
02:10:58: How they started with a particular value of R which is people get to see where their stuff is at any given time.
02:11:09: I I sort of see or I would predict that this data will get used in other services as well so it will perhaps fuel.
02:11:19: Those matchmaking services in the procurement areas,
02:11:23: yeah yeah Shirley yeah and I think that's an interesting I don't know if if a conscious decision in terms of business strategy but it just an interesting development,
02:11:36: of how that particular product has turned into a strategically important data source yeah this ability is interesting as a category we talk about supply chain visibility,
02:11:47: it is a combination of the first two categories I mentioned in this marriage or this this sort of dual Apex of.
02:12:00: You sort of uniquely addressable physical objects and their attributes combined with how those physical objects map onto our our business objects which are things like orders transport orders,
02:12:15: invoices contracts Etc and.
02:12:19: If it's just business objects against business objects you've got the kind of V2 visibility which is all just status visibility you know did you accept my transport order,
02:12:29: did you approve my invoice did you confirm payment and then the kind of V3 visibility is.
02:12:37: Merging that with a fit or overlaying that with a physical reality that says yet like like the shipment that we're talking about is not just a,
02:12:46: ID in this table or this view it's like a it's like a internet-of-things tag sitting on this palette and.
02:12:55: I have this super tight connection to this physical device and to my business objects and that to me is where the,
02:13:03: visibility platforms as a platform play really have a kind of a future in the world is,
02:13:10: is not just the exchanging of the business objects in the statuses and not just the the harmonization of the internet of things but it's the merger of the two.
02:13:19: Mmm kind of reminds me of this notion of come for the tool stay for the network as well yeah yeah it's a way to start a.
02:13:31: A platform business in logistics first you build a specific tool for visibility it's not necessarily that you care about the network underneath it.
02:13:40: Although network is a resource that's fueling the product but.
02:13:47: The real value comes from what you can do with that data afterwards.
02:13:52: Platforms business yeah I mean it's interesting because the platform businesses here tend to use the tool,
02:14:00: there seems to be a time play here where tool has to do with immediate use cases so if I was making,
02:14:10: just sake of argument if I was making a new if I was if I was a typo TiVo The Internet of Things sensor company that makes these kind of interesting very,
02:14:24: you know very cost-effective very lightweight sensors for keeping track of where things are and their temperatures and all that.
02:14:34: The tool is often the way it you know the use case with tool with often be an immediate need to track the device like I need to know where this is I mean we're like physically on Earth where is it and what temperature is it,
02:14:47: and when temperature was it in the last 28 hours but.
02:14:52: To your point set of once you've got the tool business case which is kind of what pays for getting you started and as a as a.
02:15:00: Operator of that business is white got got you the sale so to speak then there's this longer time Horizon use case for goes well you know actually
02:15:09: now that I have that data and that data might be business partner related or might be
02:15:14: you know temperature and shock and movement of goods like well what else could I do with that and it turns out that there's just a ton of stuff you can do with it it's we're probably just,
02:15:24: just scratching the surface on the potential Downstream longer-term use cases of data that tools like that can unlock hmm that seems to be a Playbook and developments yeah.
02:15:39: Because I see visibility.
02:15:42: Offerings or products popping up in many many places lots of different tools that are offering that capability.
02:15:51: Yeah indeed and we would you and I would sort of assume that the ones that have a single Cent single player mode but they have like a near-term practical tool like application.
02:16:05: They've got more.
02:16:07: They've got more potential than the ones that kind of need to be platform need to be high scale platform before their use kicks kicks in hmm.
02:16:17: Yeah I mean it could be yeah it was one of the ones one of the counter kind of the counter patterns that I look for are people whose platform Amounts is some is some version of.
02:16:30: If everybody were to change the way they work life would be better and,
02:16:35: you know you see this with there was all the platform will come up the bolt that will be like it you see it in particular with the standard setting of platforms but since it's something I'll come up where it's like,
02:16:47: there is no path to get there and I think that that that's the key thing about the counter pattern is to your point like come for the tool stays in the network implies that there was a reason to come at all.
02:16:58: It was the tool right the tool was what motivated you to start and then once you're there you're getting the second order effect of network I think there's a lot of platforms that forget the first element which is if you're going if your platform is predicated on people just.
02:17:13: Like all people or some large portion of people changing the way they work and you haven't given the first people.
02:17:20: An immediate and a huge immediate reason to change then you've got no on-ramp,
02:17:26: yeah it's a be similar to everybody in the world agreeing to change their electric plugs to the same model it's like yes.
02:17:35: If you could do it that would be beneficial but there's no on-ramp to get there unless you're Europe and you just tell everyone to use the same charger plug for.
02:17:46: For for mobile phones.
02:17:49: Yeah okay it's always government intervention that's could also work in terms of CO2 are the reduction yeah yeah I can see that working that way.
02:18:01: Yeah or at least a mission reporting I wouldn't put it past particularly the EU but but other governments as well I wouldn't put it past them to in effect mandate some form of platforms,
02:18:14: you know platform usage.
02:18:17: As it as regards to emissions and and sort of sustainable yeah sustainable business yeah I could see that.
02:18:26: Okay then the last question we had for this Epic.
02:18:31: Undertaking an understanding platform plays in logistics was are there any trends that would change the analysis that you and I just just just painstakingly went through so is there anything that's like saying,
02:18:45: yeah today that's how you should think about it but by the way the future is going to be different and some in some predictable way and therefore you know really,
02:18:54: platform plays are going to become way more important or perhaps less important or more risky or something the only one that I have in mind just kind of called out there is that I think platforms,
02:19:07: place today are probably,
02:19:09: getting kind of an overestimating what their potential margins can be based on the lack of,
02:19:17: I've real know how in creating platforms is very few people who are experts in creating platforms out there great very few leaders and product product leaders.
02:19:26: Or Business Leaders who know how to put together a good platform business but that knowledge will accumulate,
02:19:33: and I suspect that the kind of the leader margin the the best platform compared to the next best you know platform in the next best business,
02:19:41: model is quite large today,
02:19:45: and then over time that there will be a natural competitive element that forces it forces it down but that's simply because I think.
02:19:54: You could say the same thing for any new innovation and business models where,
02:19:59: there is a leader advantage and then eventually the rest of the community figures out how to counter it and,
02:20:05: brings it back down Mmm Yeah it's it's kind of kind of hard to predict those things like right now I think it's hard to predict what could bring down Google.
02:20:15: And I think it's just as hard as it was maybe 30 years ago to predict what would bring down your logo newspaper yeah you know it has been around for 100 years.
02:20:28: Essentially takes a new type of technology that just hasn't been invented yet yeah well the I think also I mean to kind of talk the,
02:20:38: the bull case here of like like why would we think that platforms are going to be a dominant business model and Logistics.
02:20:47: It's not just that we don't know the future like as you're describing but it's also that this this natural monopolies question of.
02:20:54: There probably are some segments of logistics or supply chain businesses which.
02:21:00: Once you have an effective platform in place they are they they are like the newspaper in a small town.
02:21:08: Where what while it might be possible to sort of launch something new and price for your way you know into leadership.
02:21:17: There's just nobody who's really willing to do so so it would almost I'm thinking of why do frankly really dusty,
02:21:27: kind of load boards both in the US and in Europe why do they why do they stick around it's like well,
02:21:34: because there they cut they sit in a natural monopoly.
02:21:38: Where you could dislodge them but the cost of doing that is is not worth the win.
02:21:45: And I suspect that whether that's not anybody's except for them that that's not anybody in the industries benefit but,
02:21:53: I suspect that there are kind of stable equilibrium points where a decent platform play which got into place in the industry.
02:22:04: In some Logistics area could.
02:22:07: Maybe not grow but but also just run High margins and and and hold its ground and it comes down to,
02:22:15: would you say the network effects that they've established it's hard to dislodge them yeah without like significant value of her yeah I think it's the heterogeneity of the of the.
02:22:30: The matching so if you take the load boards for example I'm just just let's just take a concrete example of,
02:22:36: if you wanted to start a new Load Board in Europe and you wanted to go head-to-head with say Tim calm and Trend side to you and tell route these these these players,
02:22:47: is it fresh technology that they have what they know is the user experience pretty pretty.
02:22:53: Pretty kludgy yes so what would be the problem with the problem is is the sort of cold start problem of they sit in a place where.
02:23:02: There the community wants to have just what that's why it's a natural monopoly it's like the community wants to have just one provider,
02:23:09: the community inherently has high switching cost not because the load boards impose it on them but because the community itself imposes it on them like,
02:23:19: they want to just have one place where they can go to list their empty truck or to list their load and,
02:23:24: and begin a negotiation and so how would you get them off of that you would need to have a lot of people switch at the same time well okay that's not going to happen so how would you get the first people switch you'd have to subsidize them a bit like.
02:23:38: You know Uber launching in the new city they start by just paying out of pocket for the drivers,
02:23:45: even if the drivers have no look I have no rides they subsidize them so that,
02:23:50: ready and waiting when the writers arrive and you'd have to have that kind of like almost vc-backed blitzscaling style expenditures where someone would say I'm just gonna I'm just gonna pay up,
02:24:03: to move a significant section of the industry over to my new load board.
02:24:08: And then let's say that you did that and somehow you moved enough people that there was this massive,
02:24:15: waterfall and everybody switched over to you what is that resulting business worth and I'm not sure it's worth The Upfront cost but essentially definitely not worth the risk adjusted upfront cost if you said like well and also there's a 50% chance I got it wrong
02:24:29: then you're really not worth it but I even even if you knew you're gonna get right I'm not I'm not so sure it's worth it,
02:24:36: that I think and and also the economy scale kicks in because think about what the competitive response is if the.
02:24:42: Tim common trends that you see that they really work at risk they already have the scale so and it's highly leveraged across,
02:24:50: you know they have a small engineering base a small-scale customer support base and they have a large number of customers so they can lower their prices and make it even worse of a business to come into so they can sort of initiate a price for,
02:25:02: I make it even more costly to try to take their business from them because afterwards you'll have what you'll have a fraction of it even smaller market now like,
02:25:12: that's that's where I think the natural monopoly effects could kick in for the logistics businesses we're in the future we see some,
02:25:20: Logistics topics like load boards are natural monopolies and are for,
02:25:25: platforms dumb you know get their ring around it early enough or securely enough and then it just doesn't have a Novation kind of stays that way for too long so that's one point for that.
02:25:38: Bull case yeah I think that's right yeah so that started the podcast you mentioned that data standardization is something that you see as key,
02:25:51: yeah as another Pool case I would add carbon emissions and CO2 reduction and government intervention could lead to some sort of standardization.
02:26:05: That is imposed on the industry and I would that would give head way for.
02:26:10: Either existing platforms are new platforms yeah you're usually right I think when you're waiting thinking about businesses,
02:26:19: especially sort of founding a businesses or or targeting where to play marking to Market selection of businesses or what to invest in one of the most attractive segments you can head towards is anything that is.
02:26:33: Any new market which will be created.
02:26:37: Essentially by government decorative declaration so if government says from 2035 every logistics company every Logistics activity has to report its,
02:26:50: you know it's a missions in a certain way.
02:26:54: To a to a certain entity and maybe because most Logistics operations are sort of multi-party,
02:27:01: the parties have to sign off on it so maybe like just for the sake of this hypothetical experiment imagine let's say Sweden Sweden says all all emissions which somehow touch our domestic,
02:27:15: you know businesses that you have to report them in a certain way and the.
02:27:20: Parties who are you know providing or buying the logistics service have to,
02:27:26: both sign off on the transaction so there's some sort of multi-part Enos to the to the obligation for sure that's a mean immediately you go was gonna be a platform right yeah that is not going to be.
02:27:38: License and install software that's not going to be a consultancy that does a little project on the side the business model is going to be platform software so you're right there's a bull case that,
02:27:51: government mandate will simply necessitate platforms I think it's very realistic to expect that,
02:27:58: yeah in Europe at least for sure yeah yeah I wouldn't bet I so this this sort of interventionism in the by your by European governments is the religion of the continent it's like it's the,
02:28:12: the high art and the center of the you know Center of worship for.
02:28:18: Intervention in markets and on that on top of a committee missions they may actually be leader in World in that sense where it may be something,
02:28:25: they create the intervention demonstrate that it works and then other countries follow a similar path maybe not the same path but similar path I think the second,
02:28:34: full case that I could make and it's kind of connected to that.
02:28:39: Is just the advancement of technology and you mentioned IIT before yeah with new trucks I think there's,
02:28:47: iot or sensors are going to be much more standardized yes data Gathering is going to be much more standardized which.
02:28:57: It's probably going to translate into,
02:28:59: the success of platforms that interact with these sensors so it's a shame I I agree with you but you could also say that's a that's a bear case because because of multihoming so to the degree that the the data format,
02:29:15: it becomes standardized and the data access becomes kind of ambiguous then it calls into question like why would one platform.
02:29:24: Have any differentiation from another platform in that regard and here this is where I sort of see like.
02:29:31: Platforms will either go the way of other business models and they'll it'll be like yeah.
02:29:37: You know the the early for example early fast fashion retailers people like Zarate just had the field right nobody was nobody was competing with them,
02:29:45: and then eventually people adapted to this to perform competitive models in that space and I suspect that platform plays and Logistics will have a similar thing for some segments and then for other segments,
02:29:57: they'll Corner the resource or they'll you know they'll establish the unbreakable economy of scale or something or they'll
02:30:06: capture a natural monopoly where everyone in the industry just wants there to be one party anyway and so they'll give their business to whoever is their first and not question it again and.
02:30:17: So I suspect they'll be a very big dichotomy actually between.
02:30:22: Very high margin very difficult to break platforms and platform is just another way to say business.
02:30:30: Main cast of 22 outcomes perhaps that's,
02:30:34: also an opportunity for companies who have invested or are willing to invest into data science or yeah the sort of get their first editions together first and to make use of the data.
02:30:47: And to provide that value that is very competitive competition harder to replicate later on because they might not have the data,
02:30:57: they might not have the resources to provide that value from day one yeah and the thing that we didn't talk about because it's.
02:31:05: It's so it's so hard to tell where this is going to go is the move towards tokenization.
02:31:13: Of data where is you know I said the beginning that one of the things that I find interesting about.
02:31:19: About platform plays that are that are digital companies essentially there are software companies is that data is replicatable you know my status update can be shared with you without me losing it whereas.
02:31:32: In a traditional physical exchanges they have to establish ownership of physical thing because I can't I can't use it if you use etcetera well,
02:31:42: tokenization brings back the this ownership principle into Data where you go
02:31:48: well it's tokenized you know really I can share it with you in a way that I lose it and you gain it,
02:31:55: it's just way early days to see where that takes platform businesses and Logistics.
02:32:01: But you could imagine Platt imeem somehow you can imagine platforms where data isn't simply kind of lost to the platform on capture and share,
02:32:13: but that it's it's still rate limited by who you know.
02:32:17: It's some ownership is still maintained in a way that makes it look much more like a physical.
02:32:24: Thing than a digital thing there are certainly groups working towards that Vision I still have a hard time.
02:32:32: Seeing or analyzing those sort of businesses or business plans yeah yeah yeah that's good yeah it this is another place where it feels like.
02:32:44: I sort of show my age because I almost intuitively go way you want to bring scarcity back like.
02:32:53: My a lot of my professional career in my mind to kind of all my energy has been on things like eliminating the silos and making it possible for people to capture one's share often data and.
02:33:07: And not not every single.
02:33:10: You know party have to reinvent their data capture and sense-making and analytical capability that it somehow will achieve,
02:33:18: economies of scale in this and then you get this tokenization that's like whoa brakes on that let's reinvent some business models where data is scarce,
02:33:31: they'll be use cases for it every I'm not throwing it out wholesale it's just I agree with you I 5 hard time in fishing them right now,
02:33:40: this allows me to a bear case but maybe you have more,
02:33:44: no no no I'm out okay so I'm and we also talked about it a little bit before under,
02:33:54: a case that I would make is for a lot of companies in the logistics data he's there,
02:34:01: bread and butter it's you know it's not a very abstract thing for them it's their operations it's where they drive for what prices and for whom and so.
02:34:13: Going on a platform platform where their data is potentially also used by,
02:34:21: well not used directly but indirectly others might benefit from that,
02:34:26: yes perhaps a scary thought yes well it's scary enough that they block it essentially so we're saying the bear case is the bear cases it may very well be that it would be good for.
02:34:39: The everyone else in the universe but if it's not good for the person who can make the decision then they block it yeah and for me it's kind of hard to,
02:34:49: imagine a platform that brings together all those different loads from all those different load Port boards.
02:34:56: Yeah I'm provides that in differentiated experience for the end user yeah well I know in Europe and I actually I know Europe and in the u.s. there were companies that were.
02:35:09: Acting as metasearch or aggregators of load boards and they just got blocked by the leading load boards you know DT and Tim oh Cam Sanders is I understand it I mean I didn't see the communications but,
02:35:24: simply block them and said your your business you know your business violates terms and conditions that,
02:35:31: we recently published and all members have to adhere to and you can't you see you can't simply scrape our load board and,
02:35:40: put it into a meta search or or I met a little bored so I even at a platform level to kind of go back to like,
02:35:47: this incentive alignment bear case that you're talking about even in a platform level kind of the baby platforms those like some platforms are going to resist being platform eyes,
02:35:58: by something larger than them if it's adverse to their commercials kind of commercial outcomes so I think there are economic reasons why companies want to protect their data.
02:36:12: Yeah on platforms and and sometimes also
02:36:16: by not joining platforms yeah well it I think this could this bear case connects to one that I mentioned this sort of anti pattern of if everybody would just change the world would be better
02:36:26: is it's the time phase of benefits that's the problem there is you have to change first everyone else has changed at the same time,
02:36:34: and then you get benefits and you're describing a case so it just similar nature it's like yeah.
02:36:39: It might be good for the world later even my even be good for me later if it's like a prisoner's dilemma almost it's like yeah it might be good for my future self if I were to agree to you.
02:36:51: I agree with you to join your platform but if it's bad for my quarter or my year and that's the one I have to live through right now and that I am for sure going to experience then I'm not I'm not going to give you my data actually
02:37:03: mmm so if there's,
02:37:07: I'm sure you've heard of different numbers but one number that gets thrown around is this we have 20% of empty,
02:37:14: yeah so okay might be attended might be 30.
02:37:21: Who knows but one could look at that number and then think that okay so we fixed that problem doesn't mean that we have then 20% Less business.
02:37:33: Is that does that mean that I'm going to 20% Less business.
02:37:38: Yeah or maybe you know I'm going to do hundred percent less business because somebody is better at optimizing yeah bigger player well I think that the thing we mentioned with platform when you and I think about platforms instead of the.
02:37:53: The best platforms are going to be asymmetrically commercialized that.
02:37:59: With this 20% or whatever it is of wasted you know empty movement of a truck that has made its appearance on every single startup pitch deck.
02:38:13: Of anybody in this space ever that that figure,
02:38:19: to me just cries out for a symmetric commercialization like so think about what that means is right now shippers essentially buyers of trucking services are paying.
02:38:31: Trucking companies to move,
02:38:33: 20% of their kilometers of their miles if you're if you're in the u.s. empty someone's paying for that it's not you know they don't don't do that stuff for free the government doesn't pay for its not subsidized,
02:38:46: it's paid movement but it's paid movement of nothing in the truck so.
02:38:51: It's your point if you were to cut that out I think the very naive pitch decks and and presentations for elevator pitches from the startups is that like everybody will benefit I think that's actually
02:39:03: a failure path for for someone to launch platform the current cost benefit is asymmetric and therefore the right platform play is also asymmetrically,
02:39:12: should be asymmetrically structured where there's a bull case in my mind that says oh yeah you could you could,
02:39:19: I don't know you don't know when they talked all of it but you could eliminate a bit of that.
02:39:23: But don't expect the benefits to accrue to sort of everybody the benefits going to crew to one party probably preferably the one where you're targeting.
02:39:33: Yeah yeah yeah I think the benefits are going to accrue to the one that's the hardest to get on the platform the hardside you know you're going to you're going to cold start by getting one side on.
02:39:47: And in this case in this case I got to leave it would be the logistics provider.
02:39:53: And you go yeah we're going to eliminate this but your rates will stay the same you know so you'll make.
02:40:00: Either the truck doesn't move so your drivers get home earlier and there you know everyone's happier you have less wear and tear on your vehicle or you get to go more to do other jobs or something something like that and
02:40:11: and the right way to read that platform would be and the shipper keeps paying the same price and nobody knows,
02:40:16: and maybe maybe the maybe the triangle here actually would be around emissions like the shipper would say yeah I'll keep paying the same price,
02:40:24: I know that I'm in theory I could pay less but you know somehow I'm locked into the same pricing but I get to get credit for the emission reduction and then the carrier is like,
02:40:35: I'm not giving up anything on money my revenues the same okay I get the revenue side,
02:40:42: and the platform gets some sort of a cut of something okay I think I think our epic exploration of platform plays in logistics,
02:40:52: is wrapping up what's what for you like what's a what's a takeaway after this prolonged conversation.
02:40:59: Where we get sprayed storm on the topic with something that you like so I think the central theme was for a lot of the discussion was that size isn't everything.
02:41:11: It's what's underneath the size that matters that affects our interdependence.
02:41:19: So what happens to one side effects the other side and platforms have to.
02:41:27: Take a stance on how they're going to cater to the different interests of the different sides on their platform.
02:41:36: Can be symmetric can be asymmetric so I think.
02:41:40: These were two takeaways from me yeah I like them I mean I resonate with each of them the the one that,
02:41:48: hit me the most that I was I'm still processing in my mind is the extent to which kind of a asymmetric commercial models.
02:41:59: Probably are superior to symmetric commercial models that for the counter positioning,
02:42:07: as well as I suspect that a symmetric model might be shorthand for unoptimized in other words it might be that the group that launched the platform and it's running the platform just hasn't yet,
02:42:20: thought through the actual like the optimal way to commercialize the platform that they created,
02:42:27: so in for coming out of this discussion I'm going to pay more attention to the,
02:42:34: symmetry of the commercial Arrangements on the platform in our sector that I was before our conversation I think that's a that's a real,
02:42:42: important takeaway for me yeah okay and what makes it interesting and Logistics is that the market is dynamic so,
02:42:49: yeah what works and want I might not work the year later yeah how how things go,
02:42:58: well yeah you're all so you'd on the same topic you'd mentioned something that I hadn't thought of before which is that,
02:43:06: how to play a riff essentially a rhythm game on or Rhythm strategy as regards to paying for the platform versus when you might want to up some kind of exit the platform with your.
02:43:18: And take your counterparties with you and transact off the platform so,
02:43:23: so if you if you gate it where like you have to pay for a year once that you're made a great point that if you gate it properly as a platform operator and someone has to pay to get in once they're in the,
02:43:35: theme park or whatever they're going to stay for the day so yeah so it's sort of like.
02:43:42: If you if you just time it properly the the commercialization step in the ask and when they pay,
02:43:50: that alone can help deal with the the inherent competition you have with your members on the platform who have an incentive to go to to disintermediate you and go directly to each other,
02:44:02: very very interesting observation you had their that,
02:44:06: the timing alone could be the defensive factor to not being disintermediated as a platform okay
02:44:13: it was interesting thanks very much we'll we'll do this again on some other topic that merits
02:44:18: several hours of conversation sure thanks I hear all right that was the logistics try podcast Deep dive on the topic of Platforms in logistics we are very interested in your feedback on this episode,
02:44:31: please visit Jonas LinkedIn post that we link to in the show notes to contribute to the conversation and to let us know how you like this content.
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