You said remote work is... Can you help me fill in the statement here?
Well, I say it's white collar fraud. I have a three-year-old and a five-year-old. The idea that I could do any work at my house is like a total fantasy. Like, come on. You're kidding.
Our guest today is a longtime friend of mine, Ryan Petersen, founder of Flexport. He's been on many shows before. I don't think he's ever had a conversation as open and honest as this, where we touched on everything from Chinese open source models, is the CCP a risk, why remote work is like white collar fraud, and so much more. I think the negotiation that we're going to have with Salesforce is going to be a lot different than the last one. I think selling SaaS to tech companies is going to be a tough business because we can build stuff for ourselves. Revenge and patriotism is a great investment thesis. There's a lot of collusion in VC. I have a feeling that most VCs actually collude more with competitors than with their own partners. Ready to go.
Ryan, I cannot wait for this. Dude, we've done this a couple of times remote, but I feel it's much more special in person. We're going to get to remote work, but remote interviews are not as good as in person, dude. So, thank you for being here.
Dude, I want to start on what motivates you more. I'm finding this really interesting pattern. It's either the fear of losing or it's the thrill of winning. Which one is it for you?
Probably the fear of losing.
I don't want to be a loser. But it's like you never win enough, right? I've already won and yet I still don't feel like I won. But by any standard of what I set out when I started the company, I've won. My first and only financial model that I made for myself for the business got to one million of revenue, right? And like we did over two billion last year.
I hate Excel models. I'm terrible at it. When I open up Excel, it says sign in or register and I'm just like I'll leave it for someone else.
No. And I feel like making a good model requires you to organize your stuff. So today's rule is we're going to play a game. Now you've done shows before. Every single question that I ask has to be a question that no one else has asked before.
And if I ask a question that someone has asked before, you have to tell me and I will donate $100 to a charity.
All right. So we're... do I get to pick the charity? What are we going to do?
Sure. What's your charity?
My mom's got MS. I do give it to an MS charity. But that's the deal. Okay.
Okay. So, these questions could be weird or interesting. Do I still answer the question?
No, I don't answer. I just go $100.
No, you just go bang bang.
Great. But if you lie, you pay $1,000.
So, if it's a hard question, I get out of any question just by paying $1,000.
Actually, it's not a bad start. You should have rethought your rules. The first one I wanted to ask is when we were chatting before, you said about the nature of VC jobs and why it means that inevitably the way that VCs' jobs work is they end up as herd animals. Why did you think that was something interesting we should discuss?
Well, your show is called 20-Minute VC, so what's a hot take on venture capital? The nature of the job is simply that it's just such a good job. It pays really well. If you were listing what attributes someone who likes to have a job would want: pays really well, you basically don't have a boss once you're a partner, you have no boss, pays well, you don't have to be anywhere on any given day, it's kind of not a fixed schedule, and it's very hard to measure if you're good or not on any reasonable time frame. So you can't get fired. These are pretty good attributes of a job.
Yeah, that's fees for 10 years.
Not only can you not get fired, but dude, I run a media company, you run a company, revenues can go down. They are not certain. Fund fees are legally structured.
Yeah. So, if you're a partner, now if you run the fund that's one thing, but if you're a partner that doesn't own the fund you could get fired. So you don't have infinite job security. So your whole thing has to be how do I avoid getting fired. You can do this in reverse or invert the problem: how would you get fired as a VC? Okay, scandal, sure, avoid that. And you can't allow everyone else who works at your firm to think you're dumb or doing bad things, like doing stupid deals. They don't know. It can be bad deals or they could be great deals. You could be doing great deals, but if people think they're bad deals, you might lose your job. So therefore, okay, I need everyone's consensus. You're going to get consensus, right? And you're also going to channel check all your deals. You're going to check with your competitors. There's a lot of collusion in VC. VCs are constantly talking to each other in part because they need to make sure that they don't step out on the edge and do something that their own partners are going to think are dumb. I have a feeling that most VCs actually collude more with competitors than with their own partners because they need to spot check their deal and make sure it's good before bringing it to the other partners to make sure that they're not seen as being dumb. So that's where you get the herd behavior. I love Keith Rabois who says that he likes to sense check his deals with friends and if they don't think that his deal is stupid or crazy, he's not doing his job.
Oh yeah. Okay, good. Yes, I think Founders Fund and Keith was at Founders Fund for a while. Either there's a few funds that avoid this type of behavior somehow or some people are just born into it with a contrarian bone.
But do you think you can only do stupid or crazy stuff because you have money now?
Me personally, I don't have that much money.
So, but you don't need money.
No, I have enough. I have enough. Like when you're paying rent and school fees and it's like, oh god, fingers crossed. I think that richer investors make better investors. Sequoia are focused on upside maximization. How big could this be? They are not fearful of LPs coming back for their next fund. They're not fearful of deployment speed compressing. So they elongated. They just invest in what they think can be mega companies.
When I started as an entrepreneur, it was kind of like now everybody's becoming an entrepreneur, but I started doing companies in the early 2000s, late 90s even with my older brother. It was less mainstream to start a company and we weren't in Silicon Valley. We didn't call ourselves a tech startup. We didn't raise venture. We were just hustling to make money. And one of my tricks actually was I moved to China when I was 25 years old for this company. My rent was $120 a month for a two-bedroom apartment in a nice part of a second tier city. That gave me a lot of permission to be an entrepreneur and to do crazy stuff because I knew I could live off of $500 a month. I could survive and I knew I could always make $500 a month. So I could do a startup, I could take risk because worst case I lived in a nice apartment in a nice town. I had a good quality of life. My total opex was like $250 a month. So it gave me permission to take some risk. But it's the opposite now. I was relatively rich.
What's your number? Basically means what's the number that you had in your head of like once I have this I'll be happy.
So for me it was always like $20 million with the rationale that you have 5% interest, you make a million bucks a year for doing nothing. A million bucks a year is more than enough for anyone who's adjusted mentally.
Well, how you know money is amazing because the more you have the more you want. You can never satiate the human desire.
Not in that regard. No, of course you want more, but I only buy trainers. I would much rather have more convenience than more money.
Yeah. I mean I haven't been that motivated by money. I'm more into like power. I want to do big things.
That's really interesting. You know, there was a question that my girlfriend asked me the other day, and she said, if you lost 90% of your money, how much of your self-worth and self-esteem would you lose in percent? Maybe you're more adjusted than me. I said I'd go down 90%.
No, I did. But mine is like my work is directly correlated to the financial outputs that you have. Candidly, if you are a general in the army, your success in your profession does not correlate to your financial statement. At the end of the day, I'm a venture capitalist. The clue is in the name. If you're good, you make bank. If you're not, you don't.
Yeah, but you got to forget the past and the future. The future's not written, so you can go make it.
If Flexport would have raised today, what do you think you'd raise at?
I don't know. I really don't know. I think this year we're going to get to basically break even. We're on run rate to do about $450 million of revenue, net revenue. Breaking news here. I haven't shared that, but 450 million of net revenue.
No, 350 million last year. So what is that? About almost 30%.
So you're doing 30% at... you said 450.
Yeah. And I think we'll do 600. The goal is to keep going 30% every year for 10 years. The big question for most startups: there's two things you have to ask. Actually, I got this from Paul Graham where he said there's two questions every startup with a hockey stick growth curve needs to ask: are they doing some kind of hack that's unsustainable and going to stop working, number one, and two, is the market big enough for it to keep going. If the answer is no there's no hack, this is genuine growth, and two the market is really big, then the thing will just keep going. And I think Flexport's like that. There's no hacks, it's actually a grind. We've got salespeople out there in the field calling on businesses and going around the world. And the market's enormous. We're still less than 0.1%.
When you extrapolate that out, you said 450 to 600 and then you can be 750. Do you worry about the constraining exit landscape? When you look at IPOs today, dude, unless you're mega scale, you don't want to go out. With the greatest of respect, strategic buyers are less present than ever before. And then you've got buyout firms which are running for the hills because the Medallas and the Coopers and the Anna plans of the world are all bluntly looking pretty precarious right now. Do you think that's a concern that should be felt or not?
I don't think about it at all for Flexport. The word exit implies that I'm going to stop working. I don't think of it in that term.
IPO would be... do you want to take the company public?
Yeah. We intend to go public. And I don't know what the valuation is or should be or will be. It's sort of like, well, if we can just keep growing, you just draw the math out.
But when do you think you should go public then?
I'd like to be nicely profitable making a few hundred million of EBITDA then we'll go public. It could happen in a couple years. The way that things are going right now, we should be able to get there. And maybe I don't know what it will be worth and the market kind of sets that at the end of the day. And if it's undervalued, okay, as long as you're generating a lot of cash, then if you're really undervalued you just buy your own shares back and maybe that's a good thing.
Do you think you should underprice on IPO day so you have the pop or you like you should price to perfection?
People focus so much on this. I don't understand it. Of course you're going to focus on your price and whatever, but there's this concept of an IPO window that investment bankers and founders talk about. They say the window's closed, you can't go public because the price won't be there or something. But you're like, well, what if you went public and then your price went down? Is that better? I mean, it's the same thing, isn't it? So I don't quite understand that dynamic. I think you just run, I'm an operator, run a good business, make it super profitable, have it grow, and don't compare yourself too much to Anthropic or these AI companies that are raising for 15 years, and there's companies that are getting to our revenue in 18 months. And envy is a very bad, is it one of the seven deadly sins? You certainly should avoid it.
Do you worry about the concentration of value to a few companies when you look at eight companies making up 85% of year-to-date gains in the stock markets and then you look at Anthropic and OpenAI? Do you worry about that concentration of value to a smaller and smaller number of names?
As long as I'm allowed to use OpenAI and Anthropic, then I don't mind at all. They deserve it. These things are just incredible, miraculous products. What I worry about is that they cut us off and then we can't use it anymore. If I can't use OpenAI, we're all going to go back to being just idiots we were two years ago. I need this stuff, we're so dependent on it both personally and we've put it into so many of our processes almost.
It's a ton of business logic, a lot of rules, because every enterprise... we're an enterprise logistics company. We help businesses manage their cargo shipping around the world. And every business is unique and has their own process and their own requirements.
They say, we need this data in this format moved into this ERP system, we want you to notify us. Some companies want to be notified 10 days in advance of their container arriving at their warehouse and some seven. They really care about that and they spend so much money that you have to do what they say. A lot of our tech is like this big rules engine and you get all these if-then type statements and it becomes very unwieldy. At the end of the day it can't really keep up and you end up with people managing some of this business logic. Well, the agents can just do it.
And RPA couldn't do that before because I thought that was the promise of robotic process automation. I thought that was kind of the promise of RPA that was meant to be fulfilled.
It does a lot and we've gone a long ways with that. We've probably... but agents can go all the way. We think we can automate the full end to end.
And this is you're building your own?
We're using OpenAI, using Anthropic. We're going to increasingly use open source models to save money, but also because we don't today have a budget constraint on our Anthropic contract.
Did you see that article the other day? It's like we spent half a billion dollars.
Are you kidding me. We do not have a budget. We don't have a budget on our contract. And yet last Thursday I woke up and they were like, I don't know when we're going to air this, but it was a few days before the end of the month and it said your organization has reached your limit for the month, which is not true, something went wrong on their side. But I had this moment of like, oh man, what if they just decide one day to cut us off and say no. And I actually think this is a realistic scenario where they decide the compute they have is more valuable for training super intelligence than it is for letting customers use it and they stop, just cut us off and we all just come back to being idiots at that point.
Do you not think governments need to step in?
Do you not think actually though you're extrapolating it a bit far given the fact that I can't even do clips on AI right now?
Like this is my point. Not yet. No, you're seeing Uber and Microsoft come out saying, yeah, the productivity gains are kind of questionable. I think that's probably true in those businesses. Our business has just tons of manual operations with humans like forwarding email. We call it freight forwarding. I often say it should be called freight email forwarding. It's people passing PDFs around and moving data between enterprise systems and there's just a huge amount of human labor. And I think most of the economy looks like that. Not like Uber, which is a highly automated built business. Although I don't know why they have tens of thousands, 30,000 more employees because it's pretty automated, right? I don't quite get that.
You said the team is 2,000.
In four years' time, how big is the team then?
It'll might be about the same. We're hiring a lot of salespeople and we're expanding a lot in new markets. But I think you're going to see a shift from people that today do operations kind of manual work that I was describing earlier into, okay, the work style is going to change. And if the people are not able to make that shift, then we're going to have to rebalance. But into much more customer-facing, account management, sales kind of roles. I think that's the future.
Do you not think the future is super contributors? And I don't see people talking about this enough. Zab from ClickUp said this in his post, which we chatted about before. He essentially said he was cutting people so he could pay the super contributors 10x more. You don't need more salespeople. You need more amazing salespeople who leverage AI, outbound AI tools, inbound AI tools, pipeline tools, forecasting tools to be the next great sales leader that leverages AI.
Certainly want as many of those people as you can get. There's just a lot of mass that you want out there in the field. I mean, think about our business. We're a global trade platform for global trade. There's every business on the planet that needs to ship something anywhere. There's a lot of boots on the ground that you want to just to interface with those companies out there. And there's a limit to how many relationships a human can have. And I think you can probably use AI and other techniques to double that ratio or something. But there's some limit to how many relationships you can maintain and it's a relationships game at the end of the day, sales. So I'm somewhat skeptical. Yeah, this is an interesting question though. Yelp has 3,600 salespeople calling on restaurants. It's actually a pretty good business. I think they haven't grown that much, but they print cash. 3,600 salespeople. If Yelp can have 3,600 salespeople, I feel like we should have more.
I interviewed the founder of Invisible, which is another data provider. He said that you can't do enterprise without a fully-fledged FTE model. Do you think that's true working with some of the biggest companies?
No, it's not true. You can do it without that, but your business is better if you can get that level of integration. The freight industry was the original FTEs, they just weren't engineers. I met, one of the big tech companies that runs like a hyperscaler, one of our direct competitors has 130 full-time employees that work at that company that have badges that show up to work every day that run their logistics for them. And we cannot crack the door at that place. I won't say their name, but we cannot get our foot in the door because all the decision-making is done by our competitor. I think it's an insanely great competitive advantage and positioning to have. So, I'm jealous. They're not software engineers. These are just logistics people. And if you can get that same thing and just deeply embed yourself into the process workflow of a company, it's so valuable. It's not easy to do. It's not easy to find FTEs who will know what to do, show up and do a good job every day and stay in the job and not have the turnover.
And you also have a question of do truly great engineers want to be FTEs? It's not often as close to the pure art of solving engineering problems that they want.
Yeah, they actually, speaking of the, so it's quite common in our industry where you have these forward deployed, they're not engineers, they're like forward deployed logisticians or something. They're on site. And we had this recent, we just had this huge customer win, one of our biggest ever. I was like wow this is great. But I had heard that our competitor has one of these forward deployed logisticians and runs their RFP, runs their process for choosing a freight forwarder, and they always choose themselves, which I'd heard about and was like wow this is idiotic, why do they do this?
It's a great business. Today I'm going to choose me.
And we won. And I was like wow what happened. And I found out the competitor had been acquired by another one of our competitors and they did a huge layoff and they fired the person and she got hired by the company and then they chose us to get back at them.
Never underestimate corporate incompetence.
What's your largest customer? Like not name, size.
Spend about 150 million a year. The biggest one. We don't have too many like that, but we have probably a dozen that spend over 50 million.
Yeah. Logistics is expensive. It's 11% of GDP. So people spend, and these aren't, they don't have to be that big of a company. That's the thing that I will often have to educate investors on. Logistics is a much bigger market than software. A medium-sized company will spend about 5% of their revenue on logistics if they're physical goods companies. They're not spending 5% on any software. Maybe at scale our price point is similar to what you would spend on Oracle or something for a comparably sized company, but actually less.
But then you would say that we are not seeing the productivity gains in logistics that we are seeing in software creation because if we were you'd be seeing revenue scaling in logistics like you have done for a Cognition or a Cursor.
You see costs come down at least. Yeah, I don't know that you're going to see a huge revenue scaling of this. Our competitors and others that are serving data center companies, that part of the business is growing like crazy because there's data centers, all this physical stuff, the data centers have to be built.
The data center economy is wild.
But when we go back to the teams themselves, I am intrigued you said about the use of Anthropic. Have you always used Anthropic or has that been a switch?
We switch back and forth. We're using Codex too. In fact, Codex won us over. Sam stole my heart two months ago when he said you can have two months free. That was like 30 days ago. So, we switched everything to Codex.
So, you switched everything to Codex.
The engineers can choose both.
What do the engineers choose?
I think they're still more habit-formed on Claude, but they use Codex. We're Cursor users. We use everything. As an enterprise, we've been more Gemini, because we're Google Docentric and it's really nice how baked in it is and NotebookLM and these things. But all of our employees have Claude access as well.
You're able to invest in OpenAI or Anthropic. OpenAI is whatever 900 billion and Anthropic is a trillion. So, slight difference on price. But you can only invest in one. Which one do you invest in?
Oh, I can only invest in one? Why can't I invest in both?
Because I'm forcing you to choose. It'd be easy if you could choose both.
At the same price? Let's do same price.
I think I'm going Anthropic. No offense because Sam's a friend of mine.
Just because the enterprise business.
Yeah, the enterprise business seems great. And the team, I think there's a lot of value in this cohesive team that's been together forever and OpenAI's had ups and downs and people have left and it's been hard to keep the whole team in place. There's just so much value in founders that love each other and no one quits and the talent density, etc.
Do you worry about... nobody has... people sleep on...
I would invest in both, right? I have... I would do as much as I could into either of them.
You invested in Anthropic.
What price did you do it at?
I forget, 600 or something. It was already... it already ran away. So, I'm not going to make much money off that.
Doing it at 600 is not bad.
Well, like 2 months later, it wasn't very long ago. I just recently...
My finances are private, but not that much. I don't have that much money.
Do you worry about open source as a threat to Anthropic?
I don't know, dude. If you think about what you just said earlier, actually, which is a lot of the usage from frontier models can be moved over time for more mundane tasks to open source models.
Which we both agreed on that massively narrows the market for the core providers.
Yeah. If we only use them for the most frontier advanced tasks and everything else we can just push to open source or older models, the core business is much smaller than you think.
No, but your question was do I worry about that?
I don't care. I mean if Anthropic goes to zero, I don't care. I didn't put an amount of money that matters for me. So on my personal basis, and if AI and intelligence becomes really cheap, that's much better for the world.
The majority of open source models are Chinese.
Not really. I don't know how they work, how they can stay competitive on some level. But if they're open source, they're open source, who cares where they're from, we can use them.
Well because you're essentially feeding data back to the CCP would be the fear from Keith Rabois and others. And that actually CCP-funded open source models are powering the majority of early stage Silicon Valley companies. And that essentially is giving a window into Silicon Valley for China.
Yeah, it's pretty interesting. I don't personally spend a lot of time... I don't lose sleep over it.
Do you lose sleep over China?
Not really. I lived in China for a few years and I speak Chinese passively, not really well, but I could have a conversation. And so I feel like I know China better than most. It's not a high bar. On some level, I think that China and the US, there's a huge amount of mutual dependence there that is underplayed. And I think there's a lot, the interests align, are much more aligned than people give credit. And there's so much saber rattling and so many people trying to sound, I don't know if they're trying to sound smart or tough or something, but they're casually throwing around war between China and the United States without realizing that such a thing would be a nuclear war and you'd all be dead. I think that the odds of that happening are pretty low. I don't really believe that these countries are going to suddenly start shooting nukes at each other. And yet, if you have war between these two powers, that's what it would be.
I loved it when Trump landed in China and they played YMCA.
There's this video of Trump and you can see he's kind of like a little child at a party desperate to dance but not allowed to.
Yeah. It's just brilliant. YMCA playing in the background. Well, remember when Obama went there, they didn't even roll out the red carpet. They didn't bring up the stairs to Air Force One. You had to climb out the bottom of it.
Yeah, you can look it up.
And when I think about China, I sadly these days think about a mutual friend of ours, Keith Rabois, given his very open concerns around China. And it goes to something you said to me before, which was going back to venture and fundraising, how you kind of fluffed up two funding rounds. Very humble of you, and how Founders Fund bailed you out of them.
They're both different stories. God, it'd be rather embarrassing if you did the same mistake twice. Yeah, exactly. The first time, but they're both my fault. Well, at least the first one was definitely my fault. So, our Flexport Series B round and we were like a hot company. A VC came in and tried to preempt our round and offered us what, for our scale and where we were, were great terms. I think it was at that time like 50 on a 500 million valuation or something but this was in 2015 I want to say, 2016. It was pretty early in our journey. We were founded in 2013. So, they were good terms. And I was very happy with the terms. And yet the VC wasn't that famous or well known. They're a good firm. I'm not going to say their name. I don't need to be starting fights. But I decided, and this is where I screwed up, I decided I could get the same or better terms from a better known investor. And so, this was like on a Thursday, and I spent Friday and the weekend hustling, trying to pitch a whole bunch of investors. But I had no data room or deck or anything that you would need to do a fundraiser because I was being preempted. And I think the word must have got back to this investor because he ghosted me. I basically never talked to him again. He definitely didn't show up with an actual term sheet. And then now I'm in the midst of a fundraise where I've set this artificially high price and I wasn't fundraising but you can't turn off the fundraising. We didn't need money then but we were going to need it within a year. And so it was just this very awkward position. Founders Fund was our investor at that time, they led the Series A. So I should have just called Founders Fund day one and said hey I want to raise, will you do this round? But I thought I was hot. And eventually I did call Founders Fund and told them, yo, here's how I screwed this up. I tried to raise money, failed.
Best offer. I did have an offer, but the best offer I got from my process that I ran post was like a 275 million valuation instead of 500. And I went to Founders Fund. I just told him everything. Here's how I screwed this up. Best offer I got was 275, but the firm wants board control. So, if you'll just do it without taking the control of the board, you guys can have it. And Peter just offered 300 instead of 275, which wasn't as good as my 500, but he didn't need to do that. I told him he could have it at 275 and he offered 300.
What's been your biggest lesson from working with Peter? They've invested several times in you.
Yeah, they have. Founders Fund led our A or B, participated in the C or D and led our E.
How much of the company do they have?
Probably I'd have to go look at the latest cap table. Probably like almost, what, 15% or something, maybe 12. There's been some dilution. Yeah.
Okay. But any big lessons from Peter?
Just amazing how far in the future he's able to look and be right. The number of predictions that he's made like well out there just kind of blow your mind. That's not unique insight for me, but that's one of the things that amazes me. Actually, one of the things I love personally about Peter is that I feel like most people I talk to talk too slow. And Peter does not. If you accelerate your speech with him, at least when Peter and I talk to each other, I think we talk like two times faster than when we talk to other people. And there's never a moment where he doesn't understand what I'm trying to say.
I care a lot about word to value ratio. You know, the people who take a very long time to say quite a simple message and you're like, for sake, just say the thing.
Yeah, I'm with you. Should you always take the highest price when fundraising?
Yeah. No. Maybe. It depends.
That was the worst. I hate fluff where people don't get to it. Should you or no? Maybe it...
I'm trying to think. Over the years I kind of would always just take the highest price.
Brian Chesky says don't ever take the highest price.
Don't ever, that I disagree with. It could be quite uncorrelated like the best brand name investor can pay more than the second best sometimes. It's hard to advise. It's very hard to give generic fundraising advice. I think it's very dangerous. If a founder asked me for advice, I'm like you know your situation much better than I do. So you have to be careful on that.
No, I disagree totally actually. And with the greatest of respect I actually think there is generic advice which you should listen to. Which is tier ones are worth it, take a discount. They will help you get a next round unwaveringly.
Yeah, that's the next thing I was going to say is with that caveat you probably will get a bet. The fact that we're a Founders Fund company has made so many other investors want to invest in Flexport.
You consistently underestimate how team members think about VCs and the importance of VCs to joining a company. A great number of great operators who you're like well they wouldn't be, I don't mean this rudely, dumb or naive enough to just join a company because of a VC, do just join a company because of a VC.
They'll go oh it's a Sequoia-backed company. Oh it's a Founders Fund-backed company. It must be hot.
Yeah. Well, and employees have the hardest time because they only get to pick one at a time, right? One company.
I don't know. In Silicon Valley right now, I think you hop around. That's why I said one at a time. And they need that signal.
Do you find that hard? The hopping that seems so prevalent today more than ever. It seems like there's a lack of loyalty.
For sure. And we basically moved away from San Francisco as a result. Our team in San Francisco is maybe 4% of the company, even though that's where we were founded and where I'm based. I think maybe we overdid it.
Because of cost and loyalty, retention of good people has always been really hard.
And acquisition. And respectfully you're fighting against OpenAI, Anthropic, and some of the hottest companies on the planet. As great a business as you are, you're not as sexy.
And like our customers aren't there so I don't need a big sales team in San Francisco. We need to be everywhere, not just in San Francisco. So, I think we maybe overdid it though. Six years ago, 5 years ago, I had 100 people in San Francisco. And right now, we're down to about 75. And actually, I'm looking around being like, my leadership team is too distributed. I want more talent in San Francisco. So I'm pushing, I'm probably going to start pushing more of our employees like, hey, you should come move back to San Francisco. I just got our CFO to move to San Francisco. It's made the business much better.
Leadership team distributed. You said remote work is what? Dot dot dot. Can you help me fill in the statement here?
Well, I say it's white collar fraud. I have a three-year-old and a five-year-old. The idea that I could do any work at my house is like a total fantasy. Come on. You're kidding. And I have a bigger house than most employees do. I actually do have a private office I can close the door on. It doesn't matter. There's no work getting done at that house when the children are around. The kids come home at, when does school end, 3pm, your workday needs to keep going. So I'm highly against it but we're five day a week in office as the baseline assumption at our company. And I made the mistake during COVID of going remote and letting it stay remote for way too long. So I think our culture suffered as a result.
Was it difficult to bring it back in? Difficult for the people who don't work here anymore.
But a lot of founders are sitting in the seat today going, man, I want to bring it back. I want in person. I know the value of in person, but I don't want a revolt when I say I'm sorry.
What advice would you have to them?
Yeah, you just got to do what you want to do. I think all the bad things that have happened at Flexport were when I didn't do what I wanted to do and was trying to... you don't want to ever be afraid of your employees first of all. The employees don't want that either. They want a leader who's going to go in the direction that they believe in. Even if they disagree, they want to follow a good leader. And if they opt out, that's fine. They can opt out. Not every, you know, and there's a lot of good jobs. I think also the idea that work from home is going to benefit highly paid employees is sort of a total fantasy. Work from home done correctly, you should be hiring the world's greatest geniuses. There should be a labor arbitrage here where you're finding really really smart people who make a lot less money because of the way that our economy is structured where some countries just have a lower purchasing power.
And you can hire people, like my brother has an assistant who has like off the charts IQ in the Philippines and makes like 500 bucks a month or something. I don't know what he's paying the person now, but that's who's going to benefit from a work from home environment. It's not the guy who's making 250k a year and lives in Jackson Hole and wants to go skiing for four hours a day. That is... and there's too much of that. Your podcast is better if we're in person.
It's the exact same with every meeting that you have. I struggle personally and my team all knows this, I struggle with paying attention in video meetings.
I don't actually really do Zooms anymore because I just find that the quality of interaction is so low.
And I'm so disengaged. I know. It's bad. It's bad. And yet, it's the nature of our business. So I do want more of our talent to come back to SF.
And need to find, Google has this new product. I haven't used it yet, but they built this, I think HP is marketing it for them called the dimension. Oh, it's like the hologram.
People have used it said it's amazing.
I quite like the sound of this.
But they're like 250,000 bucks each and then you need one.
No, but I need one in every office.
Well, how many offices do you have?
Oh, yeah. You can't afford it.
It gets a little crazy, right? That's a lot. And we need to have an office in every country on Earth. So, and then that's only one person at a time.
I do want to ask just going back to the exact—you said before to me that we should touch on why you should never hire execs. Was it you should never hire execs?
Most startup founders—yes. Yeah.
And I just consistently see—I saw this the other day with this founder and a really fast-growing company and they hired the CMO from one of these big-logoed companies. And I go to the CMO's Twitter. They don't have Twitter. CMO doesn't have Twitter. And it's like the most enterprise CMO ever.
Marketing is the hardest thing to hire for too. Marketing and HR.
Well, pause. Why is marketing and HR the hardest to hire for?
In enterprise marketing, the moment something works, it stops working because your competitors will copy it. And so it's all about creativity and originality. And how do you get creativity and originality in B2B enterprise marketing? If you are creative, you probably kind of become a founder if you can do good storytelling and creative ideation in the marketing storytelling angle. So if you find a good marketer in B2B, you really want to lock them in and get it right. That's a hard one to hire for. And also, to do successful B2B marketing and stand out—it's one thing, oh I just make good sales decks for the team and okay fine, that's some baseline stuff but you're not going to differentiate or bend the curve on a company's success. You have to be doing kind of crazy stuff. Most crazy ideas are bad ideas. So it's like being an investor—you want to do crazy things that happen to also be good ideas. It's that narrow intersection.
Which also don't denigrate enterprise brand, which is even harder.
Yes. And as an employee, it's so hard to take that risk because you're like, I don't know, if I do something crazy and it blows up, I get fired. Why take the risk? So it's very very hard to find a marketer that's not part of the founding team. You have to—as a founder, if you're not the one coming up with these crazy ideas and trying things, you have to protect the team and let the leaders there know, I want you to experiment because if it's not crazy, it won't work or it has to be very expensive. And most startups can't afford that. The big benefit a big brand has is they can just do really expensive stuff. And expensive is a feature in enterprise marketing because you wouldn't spend a lot of money promoting something if it wasn't good. So it must be good.
What's the most expensive thing you've done marketing-wise?
Well, we don't have money to waste on marketing. So—
But you've never spent like a million dollars on big logos, big brand?
No, I mean a million dollars, sure. We do like a conference that costs maybe a little bit more than that. A customer conference.
Do you find them effective?
Yeah, yeah, yeah. For sure. Events work all day. And by the way, you don't have to be that crazy to do events. B2B marketing is events marketing to some extent. That's like plain vanilla. But you don't need an exec. You don't need to go hire a CMO to run events. Conferences are kind of hard to pull off, but normal events like, hey, host a dinner—you don't need marketing at all. Just have your sales guy call the people and give them a budget for it.
So I basically was prepping for a show with Adam from AppLovin, and he's like, 'Oh, I hate HR and every great CEO hates HR.' And like a complete dick that I am, I thought I'd front-run his show and take 'every great CEO hates HR' and tweet it myself. Oh my god, I got killed by everyone for this tweet, which was essentially Adam's words, which I agree with and I think he's right and credit to Adam, he's amazing. Do you agree every great CEO hates HR?
You probably go through these phases, right? The thing that you cannot have is them being like union representatives of your employees. They're not. They're to represent the company and therefore the CEO. And so if you don't have that as a CEO—a trusted HR leader—and you feel like the HR leader is more on the side of the employees than on the side of the company, then there's a problem. There have been periods in my company's history and the industry in general where you didn't have the right HR leadership that wasn't focused on the business outcome. But the employees are the company and the company is the employees. Everything else is a fiction. We're just a fake brand name here with a bunch of people that are building the company or serving the customer. So the word HR is kind of wrong because humans are not a resource that you can mine and take out of the earth. You have to give back to the employees and have a two-way relationship.
They're not. But agents are resources.
That you mine and agents will in large part replace humans. And so the really interesting job function that could be created is agent resources. That is a good idea honestly. It's like 996 is being replaced by 007, which is midnight to midday seven days a week, which is your new agent timeline. Do you buy the SaaS apocalypse? And what I mean by that is you said earlier that you've built agents for a lot of workflows. Have you ripped and replaced Salesforce, Couper, you name it, and built your own SaaS tools?
