Freight Market Reality Check (Dean Croke of DAT) | Episode 354

Dean Croke of DAT joins us to unpack why a World Cup "micro surge" quietly disrupted freight lanes despite a soft economy, then goes boots-on-the-ground with Salinas lettuce hauls to expose the hidden realities of reefer detention, agricultural exemptions, and driver fatigue. We also cover the structural forces reshaping trucking capacity—language enforcement, drug testing, and rate resets—plus the insurance and liability risks that "vetting carriers" often misses.

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Transcript

Welcome And Quick Catch-Up

SPEAKER_03 0:00

Hey, welcome to this week's episode of Freight 360. I've got Dean Croak from DAT. Nate is out for the week because he's on uh National Guard. I think it's actually his last week or two, I believe. And then I think he might be heading into retirement. So Yeah, pretty exciting. Yeah, also makes me feel pretty old that like people my age or younger than me are retiring from anything at this point in time. But super happy for him. So we're just gonna skip news. We'll skip, well, I mean, anything relevant, transportation news. Usually Nate and I dig a little bit into sports, but I don't have anything sports related unless you do. If there's not pretty much anything other than preseason starting tonight, Stealers play. That's about it.

SPEAKER_00 0:42

Tour de France is over, World Cup's over. Um yeah, this is Red Sox are apparently doing pretty well. My son keeps telling me about how well they're doing, but that's I'm a truck guy. I I don't follow sports that here and there.

SPEAKER_03 0:59

I know the Pirates were doing a little well, but not so well. I follow most of what's going on in Pittsburgh, but other than that, pretty much a lull in the year.

SPEAKER_00 1:07

I think it I've been lucky we had World Cup this year. That's part of the reason rates did so well.

SPEAKER_03 1:13

I heard about that. And I'm curious your take on that, because I've read some articles that there was for sure like a lot of people, a lot of stadium, a lot of traffic, a lot of restaurants, and that drives a lot of freight. What were you seeing on the freight side of things?

World Cup Watch Parties Move Freight

SPEAKER_00 1:26

Um hard to quantify the volumes because there were like, I think, 11 host cities. But what the outsized demand was really the watch parties. And what tipped me off to it was uh my wife's catering business here in Boston. They were getting hired to do watch parties for hundreds of people when there was an event on in a city and they'd have watch parties all over the city, corporate events with big TV screens and they'd watch and they'd have catering. So she did half a dozen of these big events, and of course, watch parties were going on in houses all over the country. Yeah. I think that's what we didn't see was at a truckload level how much you know went on a lane level specific to watch parties. But when I saw the rates to the host cities, inbound rates to host cities, there was definitely an it was a needle-moving event. But those rates were much higher. Um it makes sense.

SPEAKER_03 2:28

I mean, because I remember obviously during COVID when they all shut down, we saw like a huge downtick in freight, and it really became apparent how much of that food going to restaurants when people aren't going there, it just drastically moved the needle. Yeah. And and it's like anecdotal, but I'm in South Florida. So like even when we weren't hosting the World Cup, like when I talked to friends, everybody's watched parties down here. Because like there's just a lot of soccer fans, obviously, in South Florida. So like every restaurant, bar, catering place was basically busy for every game. So I mean it makes sense.

SPEAKER_00 3:00

Yeah. I I just think it's without that, it would have been a pretty soft July, I think, from a freight demand perspective, because produce volumes were down. They'd been tracking down about 10% year to date. Uh Mexico's volumes were off. So, you know, this and and you look at the latest data from the restaurant uh association, uh, traffic's down about 10% in restaurants. It's been a shift to from restaurants to supermarket traffic. You know, so people are buying, you know, not not eating out as much and buying more frozen, you know, stuff in the in the to cut costs. So you know, the fact that reefer rates went up so much in July when produce volumes were down, it it speaks to you know why there was volatility on the lanes where there were host cities. You know, the rates were up much higher because there was a higher volume of inbound both protein and produce and you know, food and bev to meet those uh big events. Because I think there was a there was a relationship between a surge in watch parties at corporate events and houses and this the stadium where they were being held, like Atlanta, New Jersey, um, Seattle. There was there was a definite effect there. So yeah, for the first couple of weeks in that July, I saw a, you probably saw some of my LinkedIn posts, but that was there was a definite needle-moving event. But in otherwise, what's been a fairly flat economy, but still what we would call a two-tiered freight economy, you know, where demand isn't broad-based. Like it's there's pockets that are doing well and other pockets that aren't. The really obvious examples would be anything to do with AI data center infrastructure is off the charts, whereas anything to do with single family housing is down because interest rates are high and starts and permits are a way off.

Produce Demand Drops In Real Time

SPEAKER_03 4:52

Well, you brought that up too. I wanted to ask you something too before we, because I wanted your thoughts on that. We talked about that last time we spoke. But on the produce side, was it down mostly related to just like not a lot of harvest? Like just the supply was down or the demand was down for the supply or a little bit of both? Where did you see most of that drop?

SPEAKER_00 5:11

It was really the demand. Um, I'm just out in Salinas for most of last week. And what was interesting, I talked to the farmers. We were out in amongst a lettuce field, and we were watching the workers cut lettuce by hand with machetes and putting it onto a conveyor belt, and it goes up into a machine, and we stood behind all the immigrant workers packing lettuce into boxes. So we had a first hand look at it. But what shocked me was the machine is crawling through the field at half a mile an hour, right? With everybody working and cutting. But they were leaving about 30% of the lettuce behind. We were walking over it, and the machine is rolling over it. And I said to the farmer, why aren't you cutting all the lettuce? He said, We don't have the demand, we'll just plow it back in.

SPEAKER_03 5:59

Oh, to keep the field, to keep the nutrients back in it so you have the crop mixture rather than waste it.

SPEAKER_00 6:08

And I thought, oh, that's interesting because that maps to my numbers. Demand is down for lettuce and all the different commodities. And uh and he said we're behind. I I thought he meant schedule. No, we're behind in tonnage, the demand for tonnage. So that's it.

SPEAKER_03 6:25

That makes so much sense. And I never knew they did that. And it's super interesting because I'm like, well, I always just kind of assume, like, well, if you grow it, try to sell it because what's your loss? But then you're storing it, you're paying it for it to sit somewhere, you're shipping it somewhere where they're not going to buy it. You might as well leave the nutrients back in the soil.

SPEAKER_00 6:40

He was it was interesting because I was watching there were eight guys out front. Now, these immigrant workers come from Mexico on two 30-day visas, start at sun up, work eight hours a day plus overtime, they're housed on site. Um, but this backbreaking work. Like, and it gets pretty hot out there in Salinas. And and I was watching them, there was a there were two supervisors watching the eight cutters out the front of the machine, bending over cutting lettuce at the stem. But they were they were being very selective about which plant to pick based on its quality. Now I couldn't tell from looking at it what was what, but he said as we get further towards the fence, the quality diminishes because of the wind and the heat effect from that big fence. It impacts the quality. I thought, I didn't have any idea that a fence at the end of the row could have such an impact. But the point was they were being very selective out of which lettuce head to cut. And they were eyeballing the quality. And it was fascinating to watch the iterative training that was going on because I could see the supervisor walk over to a guy and say, you know, like, and do some education around what's the work for but the ploughing back in was what really surprised me because it just mapped to what we'd heard about

How Salinas Harvest And Cooling Works

SPEAKER_00 7:56

in the news. Uh, but labor wasn't the issue, Benjamin. That they've got people that can come in on visas. He has eight, this one farm had eight 50-person crews. So each crew is about 50 people that are that are running a machine and doing all the cutting and packing and and whatever. And the produce is in the cooler pull down to 34 degrees within an hour of harvesting.

SPEAKER_03 8:19

That's pretty fast.

SPEAKER_00 8:20

It's a slick operation. When you go and watch what goes on in Salinas, it's pretty slick. Now, of course, it goes into the cooler, which is what they they have a tube that the a 24-pallet forklift will put the produce into a cooler and it's a tube, then in half an hour it'll pull down the temperature to 34. Cauliflower takes a little bit longer, and then I'll pull it out of this cooler, like it's a big tube, they call it a tube, and put it into the warehouse at 34, and then the trucks come around and do all the picks. But it's it's a long time. I'm picturing in my head.

SPEAKER_03 8:51

So they're cooling it literally through a tube, so you can cool them quicker rather than cooling the whole box or the pallet because there's more air between it, then they go into the box. Now it's pre-cooled faster.

SPEAKER_00 9:01

The freight comes in, the all the boxes are packed at the end of the machine, then they get put put onto 28-foot, no, 24, uh, maybe 28-foot trailers that are parked at the end of each row. You know, they'll load the boxes onto the trailers and then they'll run a double trailer set. So that what you see, once the once the produce is picked, you get the mid-morning and the first couple of trailer loads are ready, there'll be, you know, day cabs shuttling these trailers into the coolers about mid-morning. Like it's it's fascinating to watch the volume of trucks running from farms to coolers. And a 24-pallet forklift will pick up the whole load and put it onto a set of rollers that goes through this.

SPEAKER_03 9:43

I don't think I've ever even seen a picture of one of those.

SPEAKER_00 9:45

It's massive. And they just go pick it up onto the rollers and it goes through the tube and they shut the tube off. It can be either air or hydro cooling, depending on the product. And 30 minutes later it comes out the other end of the tube, pick it up, and then run it straight into the warehouse. And you could be ready to load then. But the reality is you're not getting out of there till midnight.

Multi-Pick Produce Leads To Fatigue

SPEAKER_01 10:08

Yeah.

SPEAKER_00 10:08

So, like if it's harvested at sunup, gets shipped to the coolers, all the pick pack, and you'll see what you see is all of these reefer trucks that you and I dispatch and watch and you know negotiate.

SPEAKER_03 10:21

I'm thinking of all the claims I've dealt with on lettuce when they loaded it hot from the field. Half the load was pre-cooled, half was loaded, and then you got a claim on the whole thing because they pulled the cool one and not the hot one that came off the flatbed. And I'm just picturing them like, I never even knew they did it that way. Like that's super interesting.

SPEAKER_00 10:38

Yeah, and then and then, you know, they'll they'll talk about four and five pick loads, which are four coolers, four or five coolers, you've got to go to to pick up four or five pallets, six pallets, ten pallets. And not every cooler's ready at the same time when their slot when your slot's booked.

SPEAKER_03 10:56

Oh. So it's so that's what the backup is mostly.

SPEAKER_00 10:59

Yeah, now you're so you're sitting there on your using your ag haul as exemption and you're off duty and your sort of personal conveyance or whatever it is, and you're running around Salinas, not a big place, but you're running around between coolers trying to get the van full. And you might purposely pick a cooler that's slow as the last place to go to at eight or nine o'clock at night. And it and so here's the thing, you're off you're you're essentially awake but not logging at rolling time, right? So you could be awake 12, 15 hours before you go on duty to drive 11.

SPEAKER_01 11:37

Like so that's wild.

SPEAKER_00 11:39

It it's yeah, so this is the this is the problem with uh sleep deprivation and fatigue, because it's not about hours work, it's about how long you've been awake before you started work.

SPEAKER_01 11:51

Yeah.

SPEAKER_00 11:52

And and I know I can I've done produce a good part of my life. I know how hard this is. And a lot of a lot of brokers and shippers will say, Well, why did you pull up? Well, and you've only been driving eight hours. Well, and you and you can't say, Well, I had to do five pickups around Salinas at all these different coolers, and they were never ready. No one wants to, no one wants to really hear that about the driver. So, but that's what they go through. That's that's reality.

SPEAKER_03 12:17

You we did an episode years ago where we really dove into that. I think we did like an entire episode because you did a lot of research on sleep deprivation and how that basically not even, I wouldn't even say correlates, but causes a lot of the issues that happen over the road.

SPEAKER_00 12:32

When I was with uh my son in Truckee, California, I'm I'm at about the spot where drivers would be 24 hours awake from when they started in the coolers loading the previous morning. Now, 24 hours of wake, you could still be legal on your log, right? Yeah. The tail end of your 11 and 14. But in terms of impairment, 24 hours awake is the same as 0.12 blood alcohol content.

SPEAKER_03 12:58

Yep.

SPEAKER_00 12:59

That's a lot.

SPEAKER_03 13:00

0.12, because I think legal is 0.03. So that's like three or four times the legal limit, give or take, right?

SPEAKER_00 13:05

16 hours awake is 0.08. That's well-established science.

unknown 13:10

Yeah.

SPEAKER_00 13:10

In terms of impairment, when you compare two groups on a simulator, one's got alcohol, the other's sleep deprived. Um, 16 hours is 0.08. But you get up into 0.12 levels uh when you get out to 24 hours awake. And that's why drivers really struggle with um, you know, the produce game. It's a tough industry. And and of course, it skews towards um, you know, live load. Produce is a live load, you've got a lot of detention time, you pick up times along, you got multiple pick, multiple drop. Um, so it's it's a tough gig. But because of um the you know, the emphasis on immigration and that's disproportionately affected California, that's why your California rates are are holding in that 25 to 30 percent higher on all your produce lanes compared to last year, because there's just fewer drivers around.

SPEAKER_03 15:01

The two questions I'm very curious about is why nobody has addressed that from and I don't want to say like regulatory regulatory standpoint, because everyone thinks, like, well, why does the government allow this? Because they regulate hours and driver safety, obviously, everywhere else. And there are agricultural exemptions. But the question I'm more curious about is like, this has probably been going on long before I was in the industry because the lies companies like just legitimately don't pay attention. This is just the way it works. And I'm like, how do not some of like the larger like trucking lobbies like not advocate in some way for safety when there's a giant push for that right now? I feel like there's like a bunch of tailwinds to have this being addressed. Like nobody talks about this, like at all.

SPEAKER_00 15:46

Um yeah, the convenience of you know, when capacity is tight, you know, I've had I had a CEO of a large truckload carrier say one day, you know, we'd probably hire 80 drivers each day that given our choice we wouldn't hire because we just couldn't find drivers. If you're running 85, 90% turnover, you're you know, the bar gets lowered. Um but the what

Enforcement And English Rules Cut Capacity

SPEAKER_00 16:09

really drove this was the three, four-year freight recession that we've just come out of. And that really, you know, screwed down profitability for a lot of big carriers, a lot of small carriers, spot rate carriers started to get very vocal on social media. Uh, you know, the next thing you've got that driver allegedly being uh pulled out of a truck in Arkansas because he couldn't speak English and would find five grand, and it was ten grand for the company. No one's ever really validated that that was an accurate data point, but it got traction on social media and ended up in an executive order. And now we've got government policy overlaying federal regulations around English language proficiency, CDL training school language, you name it, all of this focus on what we were talking about off here, which is essentially road check week year, starting in January when they had a 26-state blitz on English language and immigration status. You saw a lot of capacity leave the industry very quickly. And it wasn't roadside enforcement catching them, it was drivers saying, we're not going anywhere near the southern border, because that's where ICE and DHS are. We're just not going anywhere. And of course, that's when you saw rates start to take off on a lane level, same with loads into Florida, because it's a very narrow funnel, hard to get in and out, you know, every single time.

SPEAKER_03 17:27

You can't dodge it. You can't just go west or east or south. Like you're pretty much.

SPEAKER_00 17:34

So you've you know, so I think that's why you've seen spot rates hold much higher, a new floor compared to last year, is there's just fewer drivers around in the spot market now. And there's even getting fewer drivers for contract drivers to hire. Because the the changes that are being made, you know, now they're trying to codify, codify English language proficiency, CDL training school requirements, uh, all that stuff just means that the pool of drivers that we normally pull from just shrunk dramatically. But it's but it's permanent. Like so this isn't a cycle.

SPEAKER_01 18:09

Yeah.

SPEAKER_00 18:10

A disqualified driver is not coming back. And if they do, they've got a lot more hoops to come to jump through.

SPEAKER_03 18:16

I have a question about that too, right? So, like, because in my head, the last time this occurred was like ELD. So we thought that was like a permanent shrinking of capacity because of the regulation around drivetime. But after like four or five months, and probably like around mid-summer of that year, because it like basically happened in January, like it kind of like went away. And every other time this is cycled, there's the shrinking and then expansion because there's money, people would leave construction jobs, go jump in a truck, and you would see labor shift based on the profitability, right? But my two questions are do you think that will occur with the other question of like, you said like once they're pulled out, they have more hoops to get through. But my question is like, are they gonna be able to keep the hoops in place? Because I feel like the front door has always been open, even though they were catching people on the back end. And I know that's shifting, but I'm very curious about like the resupply of capacity and how you see it against those two things.

SPEAKER_00 19:15

I think the permanency of the change, that's why regulators, uh policymakers are desperately trying to get, you know, a lot of this into statute. You know, um Delilah's law is going to be the big one, right? If they can, if it's waiting for a house vote, a floor vote right now, if they can get that through, um, because what they're worried about is an executive order from a new administration takes all of this away.

SPEAKER_01 19:38

Yeah.

SPEAKER_00 19:39

Right? Because the if you look at the current court case around non-domicile CDLs, it's split along party lines. There's like 23 states for it, 21 against. Like so it's kind of blue versus red when it comes to this.

SPEAKER_03 19:52

What is the what is the what are the two opposing opinions? Just like from a high level. Like we don't get to dive super deep into non-domicile, but like what is the overview of why there are competing opinions? Like, why is that a political issue?

SPEAKER_00 20:05

Aaron Powell It It shouldn't be. It should have bipartisan support around road safety, but because the policy it started with a focus on on minority truckers. So like that's that was the wedge. You know, I thought it was a wedge issue from the get-go. Because what we weren't talking about was the 65 million Americans who are considered illiterate. We weren't saying, let's raise the standard for people who have trouble with English language. No, we started with minority truckers who couldn't speak English and who are of a different color. We went after them. So because we're cutting through the.

SPEAKER_03 20:41

We could have achieved the same objective without basically ostracizing a group and just.

SPEAKER_00 21:01

So that you know, that's really the wedge issue, right? It was just another wedge issue that we've seen over the last decade, really. It's been a um, you know, as an immigrant in this country, I've felt it acutely. You know, I as a CDL holder, I um I have to deal with it. So so, you know, it and it's kind of continued down this path to the point where the federal government's withholding funding to states who don't want to support the policy. So you know, funding is being used as an enforcement tool.

SPEAKER_03 21:33

I know it wasn't California. That was like pretty large news, at least from like a big number. When you see like their total budget, you're like, eh, maybe like they waste more than a million dollars. They're still not right.

SPEAKER_00 21:43

So this is sort of, but I see it on the road. I see the behavior of drivers on the road that shouldn't be on the road. Like, I'm not singling anybody out. There's a lot of you know, stupidity on the roads is not a race, colour, language thing. It's like it's there's a lot of truck drivers out there of all different backgrounds that shouldn't be on the road. Like there's some people just can't drive. And um so that's sort of where we've landed is this massive impact impact on immigrants that's affected multiple industries, whether it's my wife's catering business who has an almost Spanish-speaking kitchen, hotels, uh restaurants, a lot of desert.

SPEAKER_03 22:28

Yeah.

SPEAKER_00 22:29

A lot of people feel ostracized and feel threatened and um and are worried about their status. So and truckers are just one other group that's been really impacted by this. Now, there is another part of the debate around you know, chameleon carriers and ghost fleets and the movement of MC numbers across trucks and all that shady stuff. So that gets back to the front door piece. Like that's an FMCSA question, right?

SPEAKER_03 22:57

Right. Because like the one, the 60 minutes piece, right, with the company. That was on there. Like we've had multiple emails that that company still exists, is operating under different numbers, different companies, different name on the building, same employees. Like literally nothing has changed for them. It's still business as usual under different authorities.

SPEAKER_00 23:15

Right. Yeah. Uh again, we don't see it in the numbers because the MC number doesn't go out of business. It's just moving around. So if I look at my four higher authorities, uh MODIS clearly had an impact. We saw like nearly 4,000 authorities revoked in July. The average is about 1,400. So there was something going on around MODIS. Um it's but I think they know who they are. I think I think they know who they are. I don't know they've figured out how to stop this yet because you really only find out about it when there's a bad wreck.

SPEAKER_01 23:49

Yes.

SPEAKER_00 23:50

Now, having said that, I'm sure if they use gen logs data, I know exactly who they are, where they are.

SPEAKER_03 23:56

Well, that's the interesting thing, right? And like I always hesitate to like put out there how some of these groups are doing it, because I'm like, there's definitely a handful of people that like we work with pretty regularly that we've been able to track this, like either from like gen logs data, but comparing gen logs data to MCs versus addresses versus addresses that aren't really addresses. And like there are data points out there to your point that like you can identify this from like an information standpoint, right? But can you get ahead of it? Is the other one like you're seeing it after it's occurred in some ways?

SPEAKER_00 24:26

Well, I'll give you my 10-state, 4,500-mile trip in my truck in my Peterbill in June. But I'll I'll answer the previous question first. Um, I think through data like Genlogs, they were able to identify a bunch of Mexican carriers that were running outside the free trade zone.

SPEAKER_01 24:41

Yep.

SPEAKER_00 24:41

And some big, large truckload carriers that work south of the border were very vocal about that. I read that they'd uh taken away about 3,200 visas from carriers that clearly were taking away freight outside the the free trade zone. So there's one data point there that sort of uh, you know, is is is a tangible one. But from an enforcement perspective, it's pretty easy to get around this. Like so I did 10 states, 4,500 miles, two scales. 4,500 miles, 10 states. I hit two scales that were over. 4,500 miles only two scales. And I was interstate 90, 94, 75, uh all the way to Cincinnati and then out to Denver and back. So I'm on 70. So I'm on some pretty major interstates.

SPEAKER_01 25:25

Yeah.

SPEAKER_00 25:26

Now and again, that's not unusual to find scales not open. And you know, I don't have to roll onto them, but I do because I'm a not-for-hire carrier in my truck. And uh but what's shocked me, this this was the the other part about gets back to road check week year, was the little pop-up in pop-up enforcement centers. They're called high-column pop-ups. And and what you'd see in the middle of nowhere in a rest area, all these big SUVs parked, and they're pulling in everybody.

SPEAKER_03 25:58

Cars, like a DUI checkpoint. Like on a Friday night, randomly, just you're on that road, you're getting pulled over.

SPEAKER_00 26:04

State troopers, local, DOT, you've got the whole lot there, lights flashing the whole thing. But Benjamin, you'll see that I've seen that here in Massachusetts in a little town on a two-lane black top road, checking everybody for immigration status. So the net has been cast very wide, but it's all year. It's not road check week, it's been going on all year.

SPEAKER_03 26:28

Well, to me, there's two things that jump out. One, or a couple. One, we've I've always found it super curious that they announced DOT Blitz Week, like long before it. Because I'm like, I feel like that defeats the purpose. Right. But the other piece of that is it's like it's the social impact, not necessarily that you're everywhere all the time. Because if at any point in time you're driving, there might just be one anywhere, right? Psychologically, you're less likely to take the risk because everywhere's an unknown. And that's probably the more effective piece, I would assume, as to why you're seeing drivers just opt out of driving and just saying it's just not worth the risk.

SPEAKER_00 27:05

Well, I think you touched on something earlier. At some point, uh, driver pay and driver pay starting to increase, right? So at some point you get trucking becomes such a well-paid job that's better than construction. I'm not sure that being away from home for three weeks and is better than it's a good thing. Straight off for sure. Yeah. But if you're new to the industry and you want to make some money and the lure of the road gets you going, uh I could see better driver pay being a catalyst and working for good companies. So that that that pendulum will swing back in, just like it will swing from least on owner-operator to independent contractor status when if rates stay high, but diesel volatility goes away. Well, if it, you know, diesel's up 21 cents in the last three days, it's up 29% since the war started. That will give you pause if you're thinking about going out with your own authority, right? So even though rates would are, I could argue rates are better on the independent contractor side of the ledger, paying $5, I'm about to go and pay $6 up in Greenland, New Hampshire to fill my truck up. Like $6 a gallon, that's ludicrous. But the national average is $545 at the 900 pilots this morning. So, you know, that's a big impact on your cash flow. But I think even though rates are high, providing a cushion, what you don't know is are are diesel prices going to really take off the longer this goes on, or are they going to come back down? We don't know.

SPEAKER_01 28:32

Yeah, maybe.

SPEAKER_00 28:34

We know rates are cooling. That's not good news for the those carriers.

SPEAKER_03 28:37

Well, I think that's a really good segue into something we've literally been talking about for like four or five years, which is we've had an inverted yield curve. And for like the audience, all that means is like, if you give me something for a long time, like I should give you a discount because I know you're going to keep giving me business. That's a contract, right? You give me this load every Monday. I give you a better rate than if you need a truck just today, and I don't know if you need help next week. Right. So if you need a truck last minute, it should cost more than if you keep giving me business, which is contract spot. So contract should be less expensive than the spot market, which is usually which creates the volatility. But for four years now, they've been upside down, which is like what happens with interest rates. Like the short term should not be higher than the long term, vice versa. But that's now flipped back over. And we were talking about this a little bit off air, which is like it's back where it's supposed to be from like an economic perspective. How long do you think that lasts? Do you think we will trend back into the traditional economics of just time?

Spot And Contract Rates Rebalance

SPEAKER_00 29:43

Um I think spot's gonna drop back under contract pretty quickly. Right. So I think I think that premium that contract that Spot's enjoying, I think it comes back down. I think they're getting back down to parity pretty quickly here.

SPEAKER_03 29:58

Um how long have they been back to where they were supposed to? Like how long have they been uh uninverted or normalized?

SPEAKER_00 30:04

Uh oh, so they were the so contract was higher than spot for three and a half years, and it's been in the last two months that that spot rate has has jumped. Probably more so in the last four weeks, it's certainly accelerated. Uh, but then it's come back down in the last couple of weeks as spot rates have cooled. So Yeah, so I think that's the uh you know, this is this is sort of hard to know because I don't spot rates are gonna cool, but I don't know how much they're gonna drop to. That's sort of the they're definitely gonna cool and hold find some sort of a new baseline around where demand is. But I don't know where that kind of lands just yet. Uh I've got spot rates in dry band and reefer on our 35-day forecast. I've got them flat out to uh the end of September. So, you know, that which is kind of interesting in and of itself because rates would normally uh cool off a little bit more than that during the fall.

SPEAKER_03 31:01

Well, normally, like we bring in a bunch of all the container volume came in early this year for three and four, which basically front-loaded that. So, because normally don't you see like the peak kind of coming into the holiday season where everyone's bringing inventory, but like now we're kind of flat because in my mind, when I'm like picturing, I literally have your graph up on my other screen. When I was looking at it this morning, I'm like, well, because we're doing bids and clients are doing bids, and I'm like, if it stays where it's supposed to be, more expensive for spot than contract through at least one bid quarter, I feel like those shippers will have to make some decisions or bets on how long. And to me, that is the step up, right? Where you start to see Yeah.

SPEAKER_00 32:50

I think the the key is that um there was a there was a lot of talk around you know diesel prices being sorry, uh spot rates being sort of at ridiculously high levels uh going into what were they um they were they're off. I mean, so think about this, since since all of that panic around spot rates and capacity and repricing of bids, since July 4, dry van's shared uh 23 cents, reefer 21 cents, flatbed 21 cents. So they've come off 21 to 23 cents since July 4. So when you talk to shippers, you know, a lot of that steam that was built up has started to disappear out of the market, which has given them a chance to maybe reprice their freight a little bit lower than what they were budgeting for.

SPEAKER_03 33:37

That's what I'm curious. I'm curious what you guys are hearing with the shippers that you guys talk to from DAT's point of view, because like you, they're your customers when I talk to them in some ways. Like some are clients, but most of them, like I'm talking to from like the perspective of a brokerage. So there's the negotiation aspect of like what is true and what isn't. Because the other thing is like they're still up like 30, 40% over last year. And I'm like, I know shippers tend to try, I know there's a short run and you see the ups and downs. But when they're doing bids that are six months and they're seeing numbers that are 30, 40 percent over last year, I'm curious what you're hearing from them as to how they're looking at it.

SPEAKER_00 34:13

Our numbers, our numbers are in the nine to eleven percent higher year over year, right? So we're not seeing those kind of numbers. Maybe that's at a lane level. But if I look at the average of all new rates coming into routing guides based on shipper a carrier broker negotiations with a shipper, they're coming in nine to eleven percent higher than last year. But it's it's the rate, the rate of increase is exponential. So so they've been they've been getting higher and higher as we get further into the year. Now, what I was saying is the steam goes out of the market. I think that climb starts to ease off. But we've still got rates up 16% by the end of the year on the contract side. So I think contract rates are going to continue to reprice because but spot might lose its steam and fall back. It'll lose a bit and kind of plateau out, and then it'll have some volatility around, you know, Thanksgiving, Halloween, all those sorts of events, uh, break check week coming up. Uh, but I think the the the bigger the bigger story is that what a lot aren't seeing is contract carriers are are saying now we've got we we're doing record pay increases, sign-on bonuses, you're seeing that in the news now. So that's a sign that drivers are hard to find. But because of the permanency of the regulations and the news statutes they're trying to bring in, the permanency of this change, like even some states like Alabama, have codified the English language test on the roadside piece. So some states are going it alone. So that means that the permanency of the driver capacity reduction, like it's permanent going out next year. So it just means that when they enhance drug testing and all the qualifications, the training schools, um, it just means that the driver pool gets very narrow and tight.

SPEAKER_03 36:05

And slower to get in, slower to refill, too, because there's more than oh well.

SPEAKER_00 36:09

We haven't even talked about the higher cost of EPA 27 and tariffs on steel and aluminum on new truck.

SPEAKER_03 36:14

I that was I literally after this, I wanted to pivot directly into like the demand side and what you're seeing, because like the manufacturing and I'm grabbing water, but keep going with that thought real quick.

SPEAKER_00 36:23

I just think it means that contract rates are going to be you know, they're gonna reprice. They probably have a little bit of an easing in terms of that rate of increase we're starting to see every couple of weeks on new new rates entering routing guides. They'll probably ease off a little bit, but they are going to reprice higher. And I think the the trajectory is upwards. Um even if demand stays flat, there's just fewer trucks, and there's fewer drivers available to drive those trucks. So that's the part that I see out in the 2027 is that the the driver availability pool is very, very small, getting smaller because of the permanency of the changes. Now, drivers that will come back in, there'll be new drivers come back into this industry once pay starts to become the draw card and they'll meet the standards. But the standards have just got very high. And and we haven't even got to hair follicle testing for random and pre-employment drug tests. Because urine tests is like a three to five day look back, hair follicle is a 90-day look back.

SPEAKER_03 37:24

Yeah. Very, very different.

SPEAKER_00 37:27

If that if that comes in, then the the door that drivers come through got incredibly narrow. So going back to contract rates, I think contract rates are, you know, this this is no longer a cycle, right? Because I think what you're seeing is a structural movement in the floor price to run a truck. And I think that's the important point. Even if demand, so imagine if demand improves.

SPEAKER_03 37:51

Right. Because my here's my other question, right? Like I saw this the other day. I think the stat was basically everything's about 50% more across the board than what it was called five years ago, just with like inflation since like 2020, right? 2021. And the two things are we're talking about is like structurally, you're gonna have a harder qualification to get new drivers in. You have more of them leaving. And when it's harder and slower to get them in, like it's just not gonna cycle back up where it did before. But also, like the cost to run a truck is not like just temporarily more expensive because fuel's up and it'll go down. Like to run a truck is like more expensive to maintain it, to buy it across the board. And that is never gonna go back down. Like that'll just be there forever. Right. So, how do you see this playing out against like the demand side? Like the number of loads being moved. Like we talked about this in the last episode, like the flatbed market. You're not seeing houses being built, they're not being renovated, you don't see a lot of building commercial real estate. Well, you see a ton of demand at data centers. So open deck's doing well, just not in the same lanes, areas, or commodities they move. Produce is changing, but like the overall economy, again, for at least from what I'm seeing, like is not really growing. But then anecdotally, I'll hear like manufacturing is like back over 50. The uh my mind's blanking. It's an expanding territory. It's expanding. But like, what are we making more of? Like, where is that just for the data centers? Like, where's that stuff going? Because I'm like, in my head, I'm like, what are we making more of that we weren't before?

SPEAKER_00 39:22

Yeah, I think we're making more of low density freight, things that doesn't fill a full, you know, like semiconductor chips, computers, racking, all that sort of stuff. So yeah, so I think, you know, I don't this time of the year though, people spend more on services. They're, you know, they're not buying furniture as much as they would be spending it on restaurants and travel in summer. So uh we've still got a two-tiered economy. There's no question about that. Uh, but there are some signs that things are picking up. I was encouraged by Jason Miller's truckload ton mile index. It came out this week, is up 1.3% year over year. That's an interesting sign. But again, he points to the impact of um AI and data centers and electronics and those sorts of things being the driver of demand. But they don't take up a lot of freight in terms of a force base. So I think that so data centers is an interesting one. There's a lot of community pushback on data centers for a variety of reasons. And the, you know, I might know the I might say the wheels will fall off it, but demand, those certainly won't build as many as there are on the drawing books at some point. If it really starts to get momentum and there's a political backlash around data centers, that could slow things down. But I don't know that we're talking about that in the next year. Like I think there's gonna be a lot of flatbed demand for the ones that are being built right now. And it's a real spot market play because of the location, the one-off, there's a lot of deadhead miles, there's cranes, all that stuff. So it's a real that's what's been underpinning the spot market for almost two years now that I've been studying it.

SPEAKER_03 40:54

Yeah, I think it's gonna be really pretty interesting

Data Centers Reshape Freight Demand

SPEAKER_03 40:56

how that plays out because it's like, yeah, thick you see it in the SP too, right? Like if you look at like the percentage growth, it is such a small number of companies that all of that growth is allocated to. It's not exactly like it's spread across all 500. It's basically like 493 of them are like flattered down, and seven have all of the growth for the entire SP.

SPEAKER_00 41:19

Yeah, yeah. Yeah, it's uh this is a crazy economy. I I'm just sort of fascinated by what happens when demand finally returns. I just I don't know that you can hire enough trucks, find enough trucks to move the demand if this economy takes off. Because it the market's lost the elasticity. Like it you just can't go out and ramp up.

SPEAKER_01 41:41

Right.

SPEAKER_00 41:42

Could you see a lot of least on owner operators go across to independent contractors? Could you see a lot of company drivers go out and buy their own truck? Absolutely.

SPEAKER_03 41:50

So But that's not more drivers and trucks. That's not more trucks on the road. That's like a redistribution of the driver working for this company versus another one. And like if there's more things to move and there aren't more people to move them, that gets more expensive.

SPEAKER_00 42:04

And you've got the headwind of insurance, so insurance companies are going to be more selective.

unknown 42:08

Right.

SPEAKER_03 42:09

Definitely wanted to talk about that too, because I'm very curious also what you're seeing from like the carrier side brokers that you talk to across the board related to obviously you have like two competing rulings. The Supreme Court that basically got rid of the blanket protection for brokers, which I still have a very hard time understanding how that got to that point. But then the Texas Supreme Court said the exact opposite, right? And they're like, let this just play out in litigation. And I'm like, oh, great. So like everyone pays more insurance, pays for more attorneys while they just sue each other until basically this like to me, that is like so nonsensical to like approach a solution. But like, what are you hearing from anybody? Like, literally, shippers, brokers, cares, like what is what's the sentiment related to insurance?

SPEAKER_00 42:58

Shippers were kind of, yeah, there's no impact. And I'm thinking, I actually said to them, I said, well, rest assured when the first court case comes along, they're gonna, a plaintiff attorney is gonna be all over you, not just the broker. They're gonna want to know how did the driver get loaded? What did he do? What was the paperwork? How did you not know he was this, that, or they'll ask the questions. So they'll get roped into it at some point. Um, of course, the you know, the brokers now have the liability of this. And I think that where I'd land with this, Benjamin, is for for good brokers that have been doing this all along, there's no change, and same for carriers, but compliance for brokers and carriers just became a competitive advantage, not a line item on a PL. Right. So that what that does, it creates a chasm between the haves and the have nots. So, you know, some spot carriers will be finding it hard to deal with you because you're more selective, or CH Robinson or Ease Logistics. It doesn't matter who you talk to, they will be more careful about who they bring in. The problem is who they bring in, who they bring in, you kind of miss the mark because a lot of them look for age aged authorities, but the guy could have had 20 years experience as a driver. Yes, cool.

SPEAKER_03 44:11

And it's so misleading. The criteria that we have to evaluate a carrier is flawed and like doesn't really tell you to your point, like, oh great, this authority is five years old or 10 years old. The driver might have been driving for six months. This authority is a year old, and the guy could have been behind the wheel for 25 years, right?

Broker Insurance And Nuclear Verdict Risk

SPEAKER_00 44:29

So this is the problem. Um, you I I worked when I worked for Qualcomm and Omnitrax, I studied truckload truckload carrier data for the best part of a decade. And over time, only about 5% of their accidents make it into the federal government database. So the accidents you're looking at only represent about 5% of a truckload carrier's total accidents, right? Because they are what's called DOT recordables, which is someone's killed, a vehicle is towed, or a person is treated away from the scene. If you're treated at the scene, it doesn't count. So if you meet one of those three things, the state trooper reports it to the federal government and but doesn't assign fault who caused the accident. That's about 5% of a truckload carrier's accidents. So when you look at the crash risk and all that stuff, like it's not now, granted, DOT recordables uh have a higher correlation with you know serious wrecks, right? But but again, no fault assigned in that data. But the other thing I I want to say, I say to everybody listening is just because a carrier ticks all the boxes, it hasn't changed the probability of an accident happening. That's still the same because you can be 100% compliant with your hours of service and sound asleep at the wheel at the same time. So don't think because you're checking all the boxes that you're gonna somehow not have a nuclear verdict on your hands at some point. The probability of that's happening still exists.

SPEAKER_03 45:59

So then the uh Tim Haim had put this out there. Maybe we maybe we did an episode with him. Either way, I was talking. With him over at Ascent and Nate. And like the point he was making is like, okay, if the money's in the nuclear verdicts, right, like you're not gonna spend a million dollars in attorney fees, whether you take the case pro bono or not, right? To go after a broker that does 20 million or 30 million a year and maybe bottom line makes two million, and that's before some expenses. Like the juice isn't worth the squeeze. His point is like, hey, there was articles saying CH might have just let this happen so they can grab more market because they have more money. But like that's who the attorneys are going to go after. And those same large companies are, like you said, they're shrinking the carrier base based on information that is at the very least not complete and not as predictive as they think it is. So they shrink their carrier base. They've got a target because they have the bank role to be able to pay some of these litigations. But all those carriers that are really good that aren't able to get the loads from the big brokers that are the target now, they're going to middle market brokers. They're going to smaller brokers. And to me, I feel like there could be a shift in the market where shippers are like, well, yeah, I use TQO and CH, but like now they're a target. If they get sued, I'm getting sued. Maybe I use a smaller broker because like they're just less likely to loop me into this. And their carrier base is growing because they're using the good drivers because they're talking to them. They're not using numbers to determine who can or cannot work with them.

SPEAKER_00 47:30

This is a this is a crazy environment because all of the data that we look at has got very little bearing on what causes accidents. Yeah.

SPEAKER_03 47:37

Right. Correlation versus causation. It's just like, okay, well, like that's kind of there, but it doesn't tell you much. 5%, like you said.

SPEAKER_00 47:43

It's nuts what causes accidents on the road. My dash cam in my truck is full of the most stupid things car drivers do you could ever imagine. You wouldn't believe me if I told you, but if I showed you the video, you'd say, oh, okay, I could see that. Now, that's what that's what causes accidents, and that's what's the problem out on the roads. It's not drivers with their language. Um it's not the colour of their skin.

SPEAKER_03 48:09

It's a car pulling in front of them, slamming on their brakes, and thinking that there's not a 90,000 or 85,000 pound truck behind them that's doing 65 as they get onto an on-ramp.

SPEAKER_00 48:18

It's the 14-hour clock. Like, so you're forced, you know, to rush to appointments to maximize your roll time within this window that doesn't reset if you pull up for a nap. Like it's fundamentally flawed from the outset. So being compliant to unsafe regulations doesn't make you safer. Right? So there's if you want to really fix this, you've got to there's a holistic approach to this that's got nothing to do with uh, you know, compliance and vetting and uh hours of service compliance and all that stuff. Um, some of the changes they're doing around the split sleeper birth rule that allows the 14-hour clock to be reset, love all that stuff. Build the flexibility of paper logs into an ELD environment, and you have a much safer outcome for everybody, which reduces the probability of your uh nuclear verdicts. Because to the point we started with earlier, you could be loading all day in Salinas and then hit the road and do 11 hours, but be 24 hours awake by the time you get to the end of year 11. And you are out of your mind. Like, and that whole week then becomes a roller coaster of frustration and anger and mispointless stuff.

SPEAKER_03 49:23

Yeah. And like we've talked about this, but like there's so much data on even like not truck drivers, but like um nurses, it's really apparent when you switch shifts, like your cognitive ability to go to sleep at between 12 and 8 in the morning, and then three days later you're sleeping between noon and eight at night, and then five days later, a week later, like there's a lot that shows that like that isn't good for you overall, and definitely slows your cognitive ability. And then you put someone behind the wheel and you make them do that without taking naps is like the most absurd thing just from a common sense point of view.

SPEAKER_00 49:59

It's uh the rapid changing of you know, you know, if you're running cross-country as a team and you're doing East Coast in two

The Data Used To Vet Carriers

SPEAKER_00 50:06

days, two and a half days, east to west or west to east, like the changes in because your body cock's reset by sunlight. Yeah, you know, time zones. But the so someone that's done a few million miles as a driver, I can tell you that sleep deprivation and staying awake at the wheel is one of the hardest things that you'll ever attempt to do in your life. Like, especially if it's at night, like it's not programmed to work at night. So um you know, I I have a real problem with this strong solo thing that I hear from brokers, and I think stop. Like, do you know what that means? Yes. See how hard that is, and and to encourage and use that to dispatch drivers that do that, like that's the 80s. Like, that's the good old days of the 80s. Like, and there's a lot of really unhealthy guys my age now that wish they didn't do that kind of stuff.

SPEAKER_03 51:02

You're fighting evolution, right? You're literally fighting human biology, right? To do the opposite of what your body has been designed to do. And then you're gonna go in the dark and you're going to look at literally a trancing, mesmerizing scenario of watching dots beep in front of you. I'm like, how I literally I can't drive more than three hours. I have to like literally stop and go do something because like I will just fall asleep, even if it's like in the middle of the day when I'm like wide awake, I can't.

SPEAKER_00 51:26

Like that's why I was watching these guys in Salinas, because I'd done that. I'd done multiple picks on farms all day, and then you gotta make a 3 a.m. market somewhere. Or you know, and I and I was just I felt for these guys because I'm watching them in the hot summer day, trying to grab a bit of sleep. The sleep quality is questionable at best. You're waiting for the doc to call to get on the dock to get your six pallets or 12 pallets. It's hot, it's dusty, and then you know you've got another three pallets, you don't know whether the coolers are open, no one's talking to you, the broker's yelling at you, why aren't you loaded? You know, and you've got to be somewhere a long way away in a few days. And then you think, well, how am I gonna get through tonight? Because I've got my 11 hours to run. You know, this is it, it's it's such a we're we're designed to sleep at night and work in the day, and and the body doesn't compute that you haven't been working all day. It sees sunset and says, Oh, time to bed. Go to sleep. You've got to work all night. Like it's I it it's probably one of the hardest things I've ever done in my life was drive trucks at night. Like it's a really hard thing to do. The urge to fall asleep is overwhelming um during the early hours of the morning. Um so it's no surprise you see the sort of accidents we see on the roads. I think there's a lot of luck involved in drivers not having accidents because um, you know, uh the average micro sleep where your eyes close is about five and a half seconds in the US, and that's a couple of hundred feet where your truck drifts at four degrees from lane center because of the crown of the road to run water. You'll drift at four degrees when you stop steering. So it's either into the median or into a guardrail or a bridge or a car. So it's a pretty random event. So that's why you don't see the amount of severity on the roads, because most of the times when you fall asleep, nothing bad happens.

SPEAKER_03 53:10

Hit a berm, wakes you back up, you pull back on the road, hopefully you're gonna go in five and a half seconds, like your head snaps and you wake up.

SPEAKER_00 53:16

Well, most of the time it's just luck. And and that's why you don't see it. But typically, when you look at insurance loss runs in most insurance companies, uh 90% of their frequency, 90% of their cost comes from about 10% of the accidents.

SPEAKER_03 53:30

So most of the cost in an insurance Credo's principle. Uh by about 10%. Yep. All the ex all the expenses come from a smaller number.

SPEAKER_00 53:37

Multiple continents. I've studied this in my insurance days with Alliance. And and when you look at the 10% of the accidents, the vast majority are single vehicle lane departures. You see some high-speed rear ends where the brain's asleep but the eyes are open, it's called automatic behavior syndrome. Um, and you can keep the truck in a dead straight line because your eyes are working, but the part of the brain that processes vehicle stopped, has it hit the brakes? Depth perception, not working. It's bright red under an MRI. So um so you see high-speed runovers. Uh but the problem with the problem with insurance databases and truck loss runs is the accidents coded by a description of what happened, not what caused it. Oh, just the result instead of what led to the result. Wrecker, roll-off, rollover, rear end, hit animal. When you go back and reconstruct them all, you can see the driver clearly disconnected from the driving task and was asleep because the outcome was random. Whereas when you make a mistake because you're distracted, you're trying to minimize the damage at the point of impact. You're trying to evade impact. Whereas when you're asleep, you're gonna hit whatever you're gonna hit.

SPEAKER_03 54:44

Whatever you're gonna hit.

SPEAKER_00 54:45

So the the risk signatures are very distinct around these two types of accidents, but your single vehicle lane departures happen a lot, especially in the early hours of the morning, uh, when we're trying to get a lot of freight moved um across the nation.

SPEAKER_03 54:58

The question I have to, again, like just I feel like it seems obvious, is like usually the companies with the biggest checkbook that are losing the most will spend the most to fix government because it's in their best interest. Why aren't giant insurance companies that lose 90% of their losses for 5%, which basically you identified as one reason, are they not spending a fortune lobbying for that to be addressed?

SPEAKER_00 55:23

Two things. One is a lot of carriers would say if claims and insurance aren't over 5% of my costs, I'm not gonna worry. It's a line item on a PL. That's the tragedy. Uh insurance companies will look will look at a fleet within the whole book. So not doing portfolio segmentation, they're not segmenting out your fleet from another fleet and pricing you. You're in the pool of truckload carriers in Florida. You're in with the good, the bad, and the ugly. And your loss fund, right?

SPEAKER_03 55:52

I I can so for the audience, like I live in Florida, and when I moved here, I lived in Pennsylvania and I had nothing on my driving record, right?

Sleep Deprivation Drives Severe Crashes

SPEAKER_03 56:00

I think I paid like $120 a month when I lived in Pittsburgh. When I moved here, my quote was like $450 a month for insurance. And I remember asking the agent, I'm like, why is it so expensive? And they said exactly what you said. They said, well, I think it was like 48% of the drivers in Florida on the road are under or uninsured. So everybody pays more. So I'm like, so the legal with the right insurance, we pay for the people that aren't. And they're like, that's pretty much how it works, which is literally what you're just saying with like the carrier side of the street.

SPEAKER_00 56:31

I used to run a long-haul insurance book um in Jacksonville, Florida. And I was struck by uh, we were looking at a fleet, and I looked at the accidents. I saw hit guard rail, hit guard rail, hit guard rail, wrecker. And I thought, shit, these drivers have all fallen asleep. You could tell. Like you could tell the speed, the rain, like you could, I just knew because I'd done it as a driver. I'd done it, I'd been there. And I thought, and I said, so how do you think this fleet's running? It's a great fleet. They've had only five claims in five years, and the loss is 20%. Well, like the the cost of an $850 wrecker and a 1200 hit guardrail. Oh, this loss ratio is fantastic. I said, You are dodging bullets. Do you realize that this could have been a nuclear verdict that wiped out an entire year's worth of profits? And I couldn't really get the connection with the exposure because they were looking at historical five-year loss runs and said, Oh, it's a great fleet. Well, I looked at it differently and said, Yeah, this is a this is a bomb waiting to go off.

SPEAKER_03 57:34

So it's so funny you said, right. And it makes so much sense to me because like when I'll go into a brokerage and I'll see like, call it procedures, right? Like vetting carriers, verifying tracking info, making sure the carrier you booked is the one that picks up. And they're like, we haven't had a load stolen like all year. And I'm like, yeah, I know. Like, but like just because you've gotten away with it until now, like it's inevitable. I'm like, I don't know if it'll happen next week or next year or in six months, but like if you're not paying attention to who's doing this, I'm like, you guys are moving commodities that are like super high theft. Like, you're absolutely gonna get a load stolen, like if we don't resist. Like, oh no, it's fine. Like, we don't need to worry about it. I'm like, okay, like it's this all old adage of like, do whatever you want because nothing bad has happened yet. Like, that doesn't mean you're taking more risks than you're aware of just because nothing's bitten you yet.

SPEAKER_00 58:23

Well, that's why, you know, Montgomery and all et al. are all going to be determined in the courts and someone's gonna figure out where the new line in the sand is. Yeah. And then we'll have a whole new set of procedures around that. That's the uh but I just I just want everyone to realize that all of this talk around compliance and vetting hasn't changed the probability of a nuclear verdict. That hasn't changed.

SPEAKER_03 58:47

Now the ability to defend yourself has. That's really all that has changed. It's like do this so you have a defense, whether or not that will work, we don't know.

SPEAKER_00 58:55

But it's back to the falling asleep bit. Falling asleep has nothing to do with the language you speak or the color of your skin. Nothing. And most of your severe accidents are gonna come from I can guarantee you, some form of sleep deprivation or circadian rhythm disruption or sleep disorder. That's where your severe accidents are gonna come from. I can guarantee it. And the probability of that hasn't changed. Because if you're still running the miles and you're running them at night, nothing's gonna change there. So that's the part that I think most people forget is that you somehow vetting a carrier based on this government data set somehow tells good from bad. And you but you could be you Benjamin, you could be a 20-year MC number, perfect scores, no accidents, no violations, but sound asleep at the wheel right now. Literally, right now.

SPEAKER_03 59:51

That's a really good point. And that's probably happening somewhere right now. Like literally.

SPEAKER_00 59:57

Like, so so there's a whole aging effect going on here too that we can't get into today, but the the every drive is different in terms of their preferred sleep pattern and their sleep quality. Like, so this is a you know, it's a bit like Russian roulette in a way, when you look at it like this, because you never really know where what I call the sleepers are, not literally, but the sleepers are the accidents waiting to happen. I can spot them, right, in the data and the people. I can I because I know what they look like and how the schedules run. Um you mean we built schedule when I was at Omnitrax, we built an accident severity model that took an ELD data feed from the ECM, put it into a cloud model. I was just gonna ask you this. To predict who was gonna fall asleep at the wheel and have a wreck. Worked perfectly. No one really wanted to know about it because of the discoverability.

SPEAKER_03 1:00:49

So I swear to God, like I literally in my head, as you were saying how you saw the data and where you saw it, I'm like, it's in the ELD data if it's accurate. And I'm like, you would see the pattern, you would see when they wanted to sleep because they were running that sleep pattern, you would see when it was off, and you would have the predictability of when this is actually likely to occur to a boy.

SPEAKER_00 1:01:12

I could tell you which drivers in the fleet had the same shift pattern and sleep patterns, because we could predict sleep on off-duty hours, as drivers who have had single vehicle wrecks in the past, not by dollar amount, because that's where people go wrong, because it's a random event. Yep. We could predict every hour which drivers were running schedules at any time of the day that map to drivers that have had wrecks in the past. And of course, there's a discoverability angle to that, because we're in an era where less is more. You want less, not more, because it's all discoverable. Right? And nobody wanted to know about it.

SPEAKER_03 1:01:49

So this reminds me, I talked to a guy that was building some tech for our space. And the previous thing he had built, this was probably like 2011 or 12, like 10, 15 years ago. But he built a model that was basically able to predict CTE and like football players who went and had some meetings with like owners, like they were like a value and they're like, this works. And the owners of the major teams went, Oh, I don't want this. And they went, he went, like, why do you want it? He's like, well, because if I know this and they play, then I'm liable. Like, you're not gonna be able to sell us to any owners of teams, but like once the once the league requires us to, like, then I would love to have your tool for your exact point, which to me is like company uh worked for seeing machines, and we had a micro sleep detector we'd put in trucks that would detect when the eyelids closed.

SPEAKER_00 1:02:37

It's called seeing machines. It's a call guardian now, it's an Australian company, but it can detect when you fall asleep. And we put it in a large um energy company, I'll say, and we had it in uh 30, 40 trucks

Predicting Fatigue And Discoverability Fears

SPEAKER_00 1:02:51

and uh successful for a year, great outcomes, no accidents, we'd had no fatalities, they'd had fatalities prior. The attorney got wind of it and said, You're capturing five-second quick time movie files of a driver falling asleep at 70 miles an hour and it's in our data.

SPEAKER_01 1:03:09

Yeah.

SPEAKER_00 1:03:10

That next day they were all removed from the trucks and shipped back to me on a pallet.

SPEAKER_03 1:03:16

Didn't want to why we need tort reform because we'd rather not get sued than make sure people are safe. That's where we're at.

SPEAKER_00 1:03:25

So, yeah, it doesn't matter how much tech you've got to throw at this, uh, it comes down to appetite. And I I can understand, like, why would I invest in a driver that's going to leave me in 90 days? Like, I I could see, I've heard that.

unknown 1:03:37

Yeah.

SPEAKER_00 1:03:37

Uh, but at some point you've got to slow down the revolving door. Like, and we've got a big retention problem in this industry, and a lot of people don't connect the dots with sleep deprivation and my inability to handle frustration. Like, because a lot of drivers will get tired and then say, I'm quit, I'm out of here. Well, I can tell you as a driver, well-rested drivers run more miles and they stay more often. That isn't hard to believe.

SPEAKER_03 1:04:03

It's the same thing with employees. Like, if you treat them better and you it's mutually beneficial, less people want to leave your company and they want to do more work with other people they're working with because they're being treated better, right? Like they're sleep deprived, they're gonna be more irritable, you're probably gonna have to keep hiring people.

SPEAKER_00 1:04:19

It's like a wild thought. Um, I've done a lot of work with biocompatible scheduling. We've talked about it here on the show. Yeah, it's where you design the whole driver's schedule around their preferred sleep pattern, not around the appointment time.

SPEAKER_01 1:04:31

Yep.

SPEAKER_00 1:04:31

You still do the same miles, same freight gets delivered, but you do it safely. Like, and I've done it in some other industries, mining, airline industries with a biocompatible scheduling, proportional staffing analysis in call centers. Like, there's all this creative stuff you can do. It's hard to get truckload carriers to move to something that they're not used to because everybody works on appointment times and it's all back to front.

SPEAKER_03 1:04:58

Changes dip. Well, let's end on a positive note. I know you got to get in your truck and you gotta head out on the road, but like, what do we have positive looking forward to in the outlook market in general? What are some of the things you're optimistic with for us to wrap on a high note?

SPEAKER_00 1:05:12

Wow. Super depressing. It's hard to be optimistic in this freight market. Um, Hank, if I was if I had a RGN with a flip axle and a pusher axle under my Peter bill, I'd be out hauling data center stuff till the cows come home. I think that's uh that's where the money is for both broker and carrier perspective. You've got to know what you're doing because you've got permits and over width, over height, all that stuff. So yeah, but that's where the money is at the moment. Um I also think though, you that if you know where to run, I I and you're a good carrier and you're professional at it, right? And you can tick all the boxes, I think this is a great freight market. And it's gonna stay that way because there's far fewer trucks around for you to compete with. I agree. If I could get into someone's private network uh and and run lanes that suited me and got me home every weekend, I I'd be quite happy as a driver, I think. So I think that's the that's the good news is that a lot of the capacity that I would have been competing with in the last four years has started to shift out of the industry. And people are realizing that it actually costs a lot more to run a truck than what they thought. Because the all of that capacity that we all took advantage of has kind of disappeared, right?

SPEAKER_03 1:06:23

Yeah, the dollar ten a mile, dollar five a mile. Like, oh, they can run 900, 1100 miles a day. Like, this is not economically or physically possible to be doing this over and over. Like, oh, we're seeing it, this is what we're paying. Yeah. I'm like, this is the craziest thing I've ever seen.

SPEAKER_00 1:06:38

Last thought, I went back and looked at the profitability of carriers. They were in the hole trading below break-even for 14 of the last 18 months up until November last year. And for the last eight, nine months, they've actually been trading in the positive, making positive. But when you look at the the deficit from the previous three years to now, they're only just back to square one. They lost 21,500 below break-even over that freight recession period. They've made 94% of that back as we sit here in August. So they're it's so it's not a the the market hasn't flipped for them if you look at the last four years. They're just back to square one. So put that into perspective when you think about

What Still Looks Positive Ahead

SPEAKER_00 1:07:18

where rates are right now.

SPEAKER_03 1:07:20

And I would say that is a pretty high nip because for the last four years, we've done this episode once or twice a year, thinking it was gonna happen in the next six to eight months. And at the very least, we don't know how long it'll last, but we're there at this point in time back to square.

SPEAKER_00 1:07:33

It wasn't demand this time, which again is a first. So this is a supply-led pricing recover that's gonna be have some permanency to it.

SPEAKER_03 1:07:40

Which I will laugh because Jason and I have been have Jason and I have been having that back and forth on LinkedIn for like three years. He's like, that's just never happened. I'm like, yeah, we've never had the oversupply we have. And if that goes away, like this might be a first where like pulling back the capacity would shift the market.

SPEAKER_00 1:07:56

So and there's a lot of permanency around it too. So for sure with you.

SPEAKER_03 1:08:03

Great having you, Dean. Looking forward to having you again. And whether you believe you can or believe you can't, you're right.