Meet the CEO of Echo and Learn more about LTL too!

CEO, Doug Waggoner of Echo Global Logistics to innovation.
Watch on YouTube

Let's get his thoughts on the Convoy Inc - MoLo Solutions debate as well (link in the comments if you missed that thriller). 🔥

Doug's last episode: https://youtu.be/aiGZdfudUY8

Sponsored by our friends at OTR Capital and Tive Inc.
Connect with Krenar Komoni & Grace Maher, CAEF on LinkedIn!
Check out tive -  https://tive.co/
Check out OTR -   https://otrcapital.com/madgaines/

Transcript

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happy friday everybody[Music] happy friday and oh you guys are a little surprised by my new treat i look like doctor disrespect for anybody who's on twitch i did this for vitaly he he loves dr disrespect so welcome you guys we have a new layout new screen you have to let me know what you guys think i should be on youtube by now for those of you who are on other platforms come on over to youtube uh that is where all the chatter is going to be make sure you hit that subscribe button if you hit the subscribe button there's this little spot right there that your name will pop up and then i think this spot is for like some kind of super chat right in the middle and then this spot is for donations if anyone just wants to give away money i am willing to accept the money so let me switch over because i want to tell everybody let me see i gotta go back i still have to figure out how to operate this thing so watch this [ __ ] yeah all right so we have doug wagner ceo of echo who's joining us today doug you are actually on the screen now you've got a chat going on above your head we've got gadgets we've got logos and speaking of logos that are right above my head so today's episode is sponsored by two companies otr capital which is my favorite factoring company and i'll tell you why i love them because they treat you like family so no hidden fees they're going to help you with your back end work they're going to help you source loads or load matching and also they're not going to mess around with your data too i know a lot of carriers are worried about that so otr doesn't play games with your data i think you guys should find grace she's going to be in the comments make friends with her some of you might remember that she was actually on our uh factory episode about two months ago that was a really good episode so you haven't watched that watch it and you can also get to know grace too she's very cool we also see a new company up above called tithe i'm very excited about this company i love this startup um so okay i wrote down a couple notes for you guys i want you guys to know this because i did my research so back in the day when i used to be involved with cargo security we used to put gps on uh you know expensive loads of uh electronics or different things like that and they were kind of janky uh sometimes the gps cut out whoever know but these ones so tithe is a different type of tracker so what i learned was is a single use tracker that you can put on the load and it uses 5g for gps tracking which is better than our older ones that we're used to no lithium batteries so it's a really nice battery and it's cost efficient so you will find kernar in the feed and make friends with him and join and connect with him on linkedin too he's new to metropolis we are very excited to have you both and doug thank you for coming on how are you today i'm great thanks for having me cassandra you look like joe rogan there with your uh your front end advertisers yeah okay you actually started this because you're the one who sent me the the uh you were like oh look how joe rogan does this i don't know this these kind of sponsorships and i was like if joe can do it i can do it sure were you nervous about coming on today yeah i'm always nervous when i gotta get in front of you especially with an audience because who knows what you're gonna get right um for those of you who uh is the first time you're even seeing doug doug came on back in i think it was march or may i can't remember but it was very early on when mad games was a little wild still wild but and i lied to doug i told him come on for 15 minutes just pop in answer a few questions and you can just leave and doug doug knows lawyers sometimes lie or don't tell the whole truth uh i think we had you for almost two hours doug yeah i had to take a shower when it was finished and i know the echo people loved it um but we're glad you're back on and i did promise doug i would keep this more vanilla so echoes marketing svp chris clemonson i think he just like sighed like a big relief like he's like oh thank god she's not gonna be crazy on doug again this time so um i'm gonna there are some different topics i want to talk to you about but i'm going to skip ahead to one of my favorite topics that i'm very interested in what you have to say which is what did you watch the debate between molo um the ceo of molo convoy and with our shipper ron kane yeah that was better than trump biden that was actually what were some of your thoughts like uh my one of my favorite parts because i love ron is uh he hey becker just donated wow cool look at all this stuff going on down here sorry squirrel um so one of my favorite parts was when andrew silver asks to convoy challenges convoy and says you know are you when are you guys going to make money and ron's like why why do you care and ron says that there are a lot of shippers out there who just simply don't care about whether a broker is going to lose they're running a negative margin or not and it was interesting because i was i rewatched the episode and then i watched the comments on different social media platforms and i saw that some shippers agreed with ron and then some shippers disagreed with him but i knew that brokers were really like wild wildly vehemently disagreed with ron what were your thoughts when you heard that i think there's two sides of it if you ask me personally how do you like competing against companies that don't necessarily have to make a profit and can price for market share i would say i hate that right because it's it's tough to compete with that when you know my investors expect me to make a profit on the other hand um you know i can't judge it because i agree with ron in that respect and that who cares if a company makes profit or not you know if i wanted to buy uh products that uh best buy and they're losing money but they've got a good deal on a tv that doesn't stop me from best buy to go into best buy to buy that tv so i think you have to look a little deeper and understand what are the motivations of those companies and their investors because that that sort of dictates the strategy and in some cases creates different sets of rules um but i i don't you know i can't judge anybody and what their strategy is whether they want to you know price for market share and take market share or you know have slow profitable growth yeah i thought most would have the same the same feeling i mean i saw some people in the comments that were saying you know it's very important to know whether a broker is going to go out of business or not but i think like okay so you've been in the business for a long time i'm trying to remember the last time a major broker like convoy the size of convoy went out of business yeah i can't think of it you know in the old days when you had a lot of unionized ltl carriers there were a lot of bankruptcies and the shippers out there will remember having their freight stranded you know in an ltl carrier's network and so that did cause a lot of concern with shippers about the profitability of their ltl carriers but you know those those days are pretty much gone and the most part most lto carriers are profitable uh but in the case of a broker they don't even physically possess the freight so i i i can't imagine that brokers have a lot of concern about the profitability i'm sorry shippers have a lot of concern about the profitability of their brokers what's what's the they want price and they want services yeah but that that's what most shippers were the ones that told me they want they just want their pricing and they said that if a shipper goes out of business then we're going to sorry if a broker is out of business then we're going to you know pick another broker there's a new broker yeah so it is it is interesting to think about that but there were a lot of brokers that came out vehemently saying no you you know shippers need to be careful who do they do business with um you know they don't want to have to if a broker goes out of business uh the shippers can be on the hook for paying the carriers which is uh often a problem in our industry with i think small maybe smaller brokers not something of your size or whatnot um so what is the difference with finances since echo is a public company and something like convoy and molo and other companies are private um and have investors what's what's the difference here when it comes to reporting finances well it's a great question and it's and it's more than just reporting finances i think if you look at kind of the dna of different types of companies right you've got um public companies you've got call it private equity backed companies and then you've got venture capital backed companies and if you look at those types of investors they're they're kind of on a spectrum right and so public company investors are very risk-averse they they have fairly modest goals for their investing they generally just want to beat the s p and in order to do that they need to pick good stocks that grow the top line and grow the bottom line and increase their eps and and then they use stock price divided by eps to come up with a multiple to do comparable analysis evaluation so that's that's the conservative end of the spectrum now being a public company takes a lot of rigor you know you've got to uh the process of going public which we did in 2009 you know you've got to get everything buttoned up you've got to get internal audit procedures in place you've got to get sarbanes-oxley compliant you've got reporting requirements and it takes a whole lot of the management team's time you know doing the things that you have to do as a public company so i would say that in that in that realm you know public companies have uh probably more modest expectations from their investors they have high expectations around risk they don't want you taking any and you know you've got all the paperwork to do to be a public company and all the time that it takes to meet with investors kind of the next realm i would say would be private equity back companies private equity investors have a larger appetite for this right and they don't just want to beat the s p 500 you know they want to make a two and a half three four even five times cash on cash return for their investment and they'd like to do it in four years so um they're taking more risk but they also have expectations for for a bigger return you know and so that's going to dictate a certain type of company strategy and a market strategy that might be a little different than a public company and then on the other extreme you've got a private equity bank and you know private equity investors you know routinely shoot for five to ten times cash on cash return but they also know that um they might only have two out of ten companies that actually hit so they're big risk takers but they also expect to make big returns when they hit it and you know a lot of that mindset has grown up out of silicon valley where you know there have been lots of home runs and people get excited about those opportunities and so those those three different types of investors you know the public company investors which are mutual funds and hedge funds and retirement funds and you know sovereign wealth funds uh those are very conservative investors for the most part um private equity in the middle venture capital man they're gunslingers so they they've seen the success that tech companies have had throwing capital at buying market share and then turning up the pricing dial at some point in the future to get profitable when it's time to do that and the perfect case example of that would be amazon and jeff bezos you know for years they were not profitable that's right but they were buying market share they were they were disintermediating the market and so um and they were also a story stock you know so as a public company sub public companies get a break and they can operate a little bit differently and and they would call that a story stock because there's a great story to tell and a very charismatic leader in the jeff bezos so um not many companies have the luxury of doing that and and amazon was one of them and some other tech companies do that but uh so if you look at those three classes of investors it just creates a different set of dynamics different expectations different risk tolerance and so companies behave differently in those environments and so i think that explains a lot of the differences that we have and you know i don't think you can say one is writer one as well it probably just fits for what what fits for the company what do you what fit best for echo when you were deciding i think it was in 2010 whether you want to take it public um or or you want to keep it private and continue to get investors like what was your deciding points because to me when a company goes public like i was at schneider when schneider went public and i was so disappointed because uh there's just so much the world is the company's just so different when you go public uh you have to be so careful you can't make snap judgment moves and you do often have to put profit ahead of other considerations um from a non-ceo saying that could be different since you've been doing it a lot longer but i'll let you answer yeah well you know our company was started in 2005. i joined the two founders and 06 they brought me in as a ceo and they bought my tech company for me and they told me from the day they hired me that they were going to do an ipo that was going to be their exit okay and so in 2009 in september of 09 we actually did the ipo and at the time our revenues were about 260 million and if you think about it that was probably too soon you know we we could have raised capital a lot of other ways um and and we in a sense we backed ourselves in a corner because we went out you know when you do an ipo you spend a lot of time marketing the story meeting with investors meeting with analysts and you know we said hey we're going to grow and we're going to be profitable you know we're a growth company and we're probably well the truth of the matter is you know for a startup and we consider ourselves to be a tech startup in those days um it's hard to do both you know it's hard to have monster growth and also be profitable in the early years you can probably do one or the other yeah and so one thing i'm proud of at echo is we actually did both but it was really hard and and we probably could have grown a lot faster if we were willing to give up some of our profitability but uh going public at 260 million of revenue was probably a little bit soon especially when you look at the size of some of the public transportation companies and their revenues you know we were considerably smaller but it was a good story investors liked it they wanted to place pets on it and and so we were very successful in the in the ipo and we got a good price but um you know it wasn't really my call it was the uh the predominant owners of that time that's how they wanted to monetize their investment and so that's what we did what was the tech company that they that they bought you said they bought your tech company yeah a company called select trans and it was uh maybe it was ahead of its time this was back in 2005 i started it and it was a a sas tms company that was designed for shippers and brokers and so um i spent a year and a half with with a partner and the two of us wrote the code and uh we started marketing it we brought on about six customers and at the time uh that i was approached by the two founders of echo you know i was having a lot of fun with my new little tech startup and um they told me a pretty compelling story about why i should join them and one of the most compelling parts of it was that they had money and i didn't so i joined them and uh you know they i said what do you want me to do with with my company you know because they bought it and uh they said do whatever you want with it you know you can keep running it on the side you can take some of the technology and put it into echo they were very flexible and we ended up shutting it down over time but um we actually incorporated some of the code that i wrote uh into the systems at echo i was just gonna ask that and i was uh yeah so i'm not that good of a coder by the way but uh you know i can i can hack a little bit and uh so that was that was the origins there used to be an echo this guy he was in the tech department this just reminded me because of coding and you wore all jean like jean outfits like a jean jacket jean jeans jean shirt do you remember this guy is he still with echo i don't think so he would always go busted into your office like you'd be in middle meetings and he'd just be like i want to talk about[Music] and we all used to be like who's that sorry very squirrel moment but it just reminded me when you said coding that like you you were close with the i.t folks and they loved you they would bust into your office like you were their best friend and i always go stick my nose in their business and try to insert myself into the technology yeah and i'm sure well i'm sure they appreciate the attention too um and rule of thumb for anybody who's new to this industry or working at a big company if you make best friends with the i.t people you are golden because i used to go over echo and i used to bring them food and make friends with all of them so if i needed a hookup they would hook me up and they prioritize me when things went wrong they're the department to make happy at all times um so uh you recently actually wait a second i'm not paying attention to the comments and the questions uh for those of you who have questions for doug when do you get to ask somebody like doug questions this is your opportunity look for amanda miller she is my favorite favorite flatbed broker out of alabama and she will funnel your questions to me and if you have any questions about any of the tech or whatever is going on over here i see we have a lot of chatter um find amanda she knows everything that's going on so here we go andrew silver's in the comments cracking me up i'm trying to pay attention to doug and i'm getting silver cracking me up um okay so from aunt we have another andrew andrew teal at medtropolis andrew thiel okay so andrew thiel says i would love doug's perspective on the q3 environment shippers brokers felt compared to muted results jb hunt martin and heartland often reported have reported already doug do you know what that means okay because i don't andrew andrew is obsessed with data and all this stuff and often he has questions that i hope the guest will understand yeah i i know what it means unfortunately i can't talk a lot about it because we haven't reported yet okay um and we report in two weeks or next week so um okay okay so you andrew you want to wait oh go ahead go ahead dog sorry well i'll talk a little bit about it i just can't talk about echo's results so you know q3 was a crazy market you know we we came into april um we saw the cobit pandemic hit you know companies started sending people home some of them closed doors you know it wasn't uncommon with transportation companies to see drops of revenue in the neighborhood of 20 or 25 even 30 you know in the end of march early april then by mid-may you know we started to see business coming back and we saw a lot of volume group and you know there are a lot of stories about why that happened in a lot of theories but i think it's it's generally accepted that you know people were staying at home and they weren't buying services they weren't flying on airplanes they weren't staying in hotels you know they weren't going on vacation but they were buying more stuff and that stuff has to ship so you know retail's done pretty good and i think there was another couple of factors at play you had a lot of the smaller shippers that were completely shut down and when they reopened they pretty quickly depleted their inventories and then when they went to their suppliers to get you know additional inventory it took a lot longer than normal so i think we have a major disruption in the supply chain you know not to mention the freight that comes from asia and china and the disruption that we saw on the ocean parade and and so it's hard to tell but back to your question so q3 we saw this tremendous surge of freight and at the same time the truckload carriers were tapped out in capacity and it was a couple of things right first of all um they don't have drivers there were a lot of drivers that were furloughed back in march and april and a lot of those drivers chose to stay home when the uh the unemployment subsidies came long paid more money to stay at home on your couch than to drive a truck and the quality of life's a lot better and then even when that came to an end there was a sentiment with some drivers that i think there's going to be another round of stimulus so i'm going to wait and see and so so there were a lot of drivers that just chose to sit out you had another situation where um you know if you look at the larger truck truckload carriers they source a lot of their drivers from driving schools and driving schools shut down are either shut down or their enrollment is de minimis so you know the truckload cares have a fairly severe driver problem right now and normally in this type of a market what would happen the truckload carriers would go out and buy more trucks and we've seen some increase in in truck purchases recently i haven't studied it that much but i don't think it's significantly above the replacement level so and why aren't they buying trucks it's because they don't have people to drive them i talked to some carriers recently that said you know generally they would model into their network about four to five percent unseated truck tractors that means they've got tractors on the fence when one breaks down they they bring one into service and four or five percent is about the right amount i've heard recently there are carriers that have you know around 15 unseated trackers right now which is unheard of given you know all the freight that exists in the marketplace so it's just this crazy market um prices the last time i looked and it's been a couple weeks ago had increased in the truckload markets 20 straight weeks in a row and so if you think about that you know you've got all the dynamics that we all know about you know you've got your contractual freight getting squeezed you've got your spot freight where you know you're charging much higher rates and so there's just been a lot of noise in the market and so i think um i don't i've really studied the jb hunt numbers and it's not my place to do it and certainly not here but i think if you look at the q3 results for the public company brokers it's really going to come down to how well did they manage their mix of business contract versus spot repricing and all the dynamics that go on and we'll see what happens yeah i think that okay so can we talk about the ltl market a little bit too for those who don't know um we've been on this show i do tend to focus on truckload and lean toward truckload but from an ltl perspective have they been facing those carriers been facing the same driver shortage and the same volatile nature of rates no ltl carriers uh first of all driving for an ltl care is the best job in town right because you you come to work every day and you go home every night if you're a pickup and delivery driver and if you're uh you know over the road driver you're typically going out and back you know and you're gone for a day and you have one night in hotel and so it's it's a much better life than you know driving over the road for a truckload care or as an owner operator so so they don't tend to have driver shortages like the truckload carriers do the problem that the ltl cares have had is that they run a terminal network right so they've got these hub and spoke terminals they have dozens or hundreds of brick and mortar terminals and the drivers go in every day to the terminals you've got dock workers that are loading their trailers and and so they're in close proximity to each other and so you have a bit of a covet problem so right now in the ltl market freight volumes are pretty strong you know the rates are rates aren't as vulnerable as in truckload but you know a lot of the cares are being impacted by cobit you know they may have a terminal where you know there's an outbreak and they don't have enough people to stop the terminal so uh it's it's an interesting time for ltl because they have to come to you know unlike echo we have nearly all of our employees working from home right now but if you're an ltl carrier everybody has to go to work yeah that's interesting it's uh it's i i wish that there was a way we could make the truckload market more uh steady and consistent and um not to go back to ron cain uh i i poor ron i keep citing to him but he made a point in one of our episodes one time that because i i was kind of complaining actually it might have been the episode with you uh i was kind of complaining like i wish we could do something to make the truckload industry more stable and he had said i don't know if the industry wants that sometimes i feel as though the industry likes the volatility they thrive off of it and they enjoy they enjoy the nature of it what do you think about that well the truckload market's just very inefficient right so you've got a lot of parts that make it inefficient you've got shippers budgets and they run an annual rfp and and who can predict prices in this business you know a year from now nobody and i don't care how good your algorithms are you can't do it there's too many uh um exogenous factors that can affect you know either supply or demand so first of all you have shippers with budgets they run rfps you've got a fixed commitment between either a carrier and a shipper or a broker and a shipper and the market moves from that it moves up or it moves down and dan talked a little bit about this you know in that last broadcast that you did um so when the market let's just let's just talk about a rising market you know the rates go skyrocketing like we've seen in q3 going up 20 weeks in a row and and uh over time you know truckload carriers actually lead to lead the way on this they start to refuse freight or give it back um you know that gives more spot market opportunity to other carriers or other brokers so you start to see a movement of freight from the contractual uh segment into the spot because of the load tender rejections and the spot market in that kind of condition is always going to carry a higher price so as the shipper has to keep paying a higher price because more and more of their freight is going into the spot market they're actually motivated to renegotiate their contract freight to mitigate the increase in spot freight so you know everybody says the big bad brokers and shares going and change the price well you know it's it's the marketplace that's making that happen and so but you know go back to the shipper's point of view you know he gave his boss a budget and now he's busting the budget and you know in 2018 there were a lot of supply chain people that got fired over their budgets because of what we saw happen in 2018 yes so you know and then you have the reverse site is true the market softens up prices go down it's easy to find a truck now the shippers are over paying because they're locked in a contractual rate um so i think ron makes a good point it would be nice to have something that wasn't as clunky as that yeah you know the other thing that makes the market in inefficient is that you have hundreds of thousands of carriers and you have hundreds of thousands of shippers and you've got this big country of ours with all these miles and so if you knew the exact percentage of the capacity that was running empty at any one point in time you know you would be amazed at how inefficient that is i talked to a truckload carrier recently that told me you know despite these these much much higher rates that we have their total rate per mile was actually down year over year their total loaded rate per mile was was up considerably but what does that tell you it tells you they're running a lot of empty miles and why is that because you know as we've recovered from kovid it's been a very uneven recovery so some some industries have recovered faster some slower which starts to change the flows of freight and so if you're a truckload carrier who's built a network around your poor customers and they're recovering under equally now suddenly you're running an imbalance in your network and you've got to run more empties to get it back inbound so you know between you know the market changing the the surplus of cares and shippers and you know it's just too many moving parts and you've come back to the convoy idea that you guys talked about the other day it's a nice idea you know if if shippers want to pay on a cost plus basis um i love that you know and we've been doing that by the way yeah you guys haven't been doing it for a long time now we we mostly do it with our contractual customers uh and when i say contractual i'm talking about manage trans but it's because we've got to know them they've got to know us there's a trust factor they they believe that we can source well they believe that we pay a fair price and eventually the relationship evolves to a point where you want more transparency and so customer says hey let's do it on a cost plus basis and we negotiate what the margin is and it's open book and and it's fine and we love that and and for the shippers that can do that it does protect them as long as their budgeting process allows for that sort of volatility in the future i don't know if that idea works as well with rfp shippers who run a routing guide and and award lanes because they're dealing with so many parties i i think uh you know you don't have the trust factor to know okay it's cost plus arrangement but can i really trust that you're giving me the right cost right and if you can get over that hump it's a good deal yeah when um when you guys have managed trans manage transportation for those of you who those who don't know um could you could you explain it and is it both is it more ltl than truckload or is it both um just for those people who i saw a couple things popped up in the comments about managed transportation yeah so for us managed trans is uh we basically agree with a customer for them to outsource their transportation management function to echo so just like some companies might outsource their hr department or they might outsource their you know their it organization um some companies will outsource their transportation management function and you know the companies that want to do that tend to be small to mid-sized companies who don't have a lot of staff committed to supply chain they don't have any supply chain technology they don't have data they don't have the wherewithal to deal with hundreds or even thousands of transportation partners so it's a it's a great solution where we go in and work with the existing people um and and help them manage their transportation better using our technology and our in our network of carriers i was just about to ask they like log in do they have their own login they can see all their shipments so there's there's a lot of different ways we do it i mean they can use our customer portal and and work in a self-service mode if they want more generally what we do is we do integration with their erp systems so as they're processing orders in their business those those orders are queuing up in our system of transportation and uh you know we can run rfps for them we you know we can do whatever they need it's a multi-modal service so we do uh we do ltl we do truckload we do intermodal and we even do a little international here and there but i would say predominantly because of the size of the customers that they tend to be small to mid-sized companies it's it's a little more heavy in the ltl yeah um i have i'm sorry folks i i forgot amanda miller thank you for sending me questions all right follow up from our famous metropolis andrew thiel who someday i think andrew thiel is actually just going to replace me and we'll call the show teal dive and it'll be me and say him he said um he has a follow-up question for you tons of volume rates went up why are their results not showing the home run um you might have hit on this a little bit yeah i mean look i didn't even look at i saw the headline i didn't read the details and i'm certainly not in a position to comment on uh what their business is doing or not doing i will just make a general statement that when rates go up rapidly and you have contractual business that you've committed a price to just like andrew silver talked about if you want to hold to your commitments yeah your margins your margins are going to get squeezed and on many loads you're going to lose money and so um you know in a rising price environment it can be tough on a broker's margins unless you can supplement it with spot rate makes sense um the reason why i keep leaning toward asking you about ltl is i think i could be wrong you used to work for like a big ltl carrier before you before your tech startup maybe and what was your experience before you even got into tech if anything i'm just randomly asking that because i actually don't know the answer to this well keep it short because it's probably a boring story um well i got out of college and i had two two job offers one was to go to eds i don't know if you remember that company that was ross perot's company ross[Music] the other offer was a management training position with an ltl carrier who's no longer even in business but at the time they were the fourth largest trucking company so i spent uh you know the first half of my career working in ltl and uh i worked in sales operations engineering i.t i ran a couple of ltl carriers um and so yeah i was an ltl guy and when i got to echo um echo was uh you know less than a year old echo is predominantly a managed transportation company in 2006. i introduced ltl to echo based on my industry knowledge and relationships and we built uh all the way to the ipo we built a big ltl brokerage and then it wasn't really until about 2010 that we said hey we ought to do truckload too because oh by the way it's it's 10 times bigger than the lto market so we stumbled along for a couple years because we you know none of us including me really knew a lot about truckload and we had to figure it out but uh i would say you know 2011 12 13 was kind of when we lit really started to build up our truckload shops yeah makes sense and that's and i think that it's uh so it's interesting for those who don't know um when i first got to echo because i was that was in-house counsel uh doug saved me from the burning dumpster fire of global trans which which at the time you guys global time is a great company now ever since bob took it over it's been amazing at the time that doug plucked me from that company it was a dumpster fire and boy was that back in the day but but i remember when i got in people kept telling me echo is like a master at ltl they they're so good at ltl and you guys were pushing the truckload initiatives and it was it was fun um and i think partial too i think you were pushing as well and it was it was fun to be part of that growth um and and and learn from that uh was it hard for you though to adjust going from a carrier to a tech company and then now going into brokerage because it's a different world i feel for carriers and going into brokerage yeah there were several adjustments i had to make growing up in the ltl world you know ltl cares tend to be big companies so i work with really big companies in fact i worked at yrc for many many years and had a lot of different positions at yrc and also uh you might remember consolidated freeways i worked for them as well and and so um i grew up in that big kind of corporate environment you know of the asset-based trucking industry um labor-intensive and in fact unionized labor so that was the world i grew up in and i worked a lot in operations out on freight docks and so um that was my world when i started my little tech company you know it was me and a guy that i used to work with darrell schull uh just coming up with an idea and hammering code and spending a year writing the system and having some fun with that but then when i joined echo the two founders are serial entrepreneurs you know they they formed many many companies including groupon and others and uh that was fun for me because they took they plucked me out of the corporate world and they said it was kind of a great marriage right they said to us and they were young at the time they were 38 years old very successful multiple successful startups and i was kind of like the old guy in those days in my late 40s and they said we need somebody with you know executive experience and industry experience and all of that to help us build the company and we're going to teach you how to be an entrepreneur and so for me it was a lot of fun to be taught how to be an entrepreneur because i've grown up in the stuffy corporate world and you know i remember in the in earlier in my career when i worked in the yrc then called yellow corporate office you know you wore suit and tie every day to work and when you went in your office you were allowed to take your code off that sounds like what it's like to work at a law firm but if you left your office you had to put your coat on you know and and uh it's not like that now but uh you know when i got here and i was introduced to these two 38 year old entrepreneurs that were wild and crazy and and and took risk and rolled the dice you know that was fun for me you know because i've worked in the stodgy ltl industry where you're trying to save your way to prosperity all the time by cutting costs yeah now suddenly i got to spend money and uh you know invest in growth so it was fun yeah that does sound fun and i would like to note for the record i think one of those um founders was a lawyer they're both lawyers they're both lawyers see doug not all lawyers are bad are painful to deal with they're they're two lawyers that never practiced law they got their law degree yeah and i think there's a story when they were in law school they were like creating companies and doing different things too i've got to get one of them on here uh brad keewell and then lefkovsky right um yeah i know lufkovsky's brother really well i always forget his first name not the brother but the other one but anyhow i should get yes and uh but i should get them on here one day to tell their entrepreneur stories because this is pretty cool story uh so so uh hold on uh questions have come through so we have uh someone in the comments has said mike in the comments says the new convoy tools anything different than plus cost dance okay i don't think that's a question good point mike i think we all think it's plus cost but maybe cost plus but i think dan dan lewis is actually going to be on the show again december 4th so we you guys semi or amanda miller your questions for him if you want to challenge whether or not his new model is cost plus or not um but john says what does doug think the future of ltl looks like seems like shared slash partial truckload seems to be picking up well you know echo's got a great partial truckload business and there's a reason for it um there's there's a segment of freight that's too big to be ltl and too small to be truckload and if you think about that you know an ltl carrier has a very high cost they've got all this brick and mortar they've got all these trucks all these employees labor potentially unionized labor so the way that ltl carriers make money is keeping the trucks full and managing the price you know and so they're always managing uh you know their their network utilization and their managing their yield or their revenue per 100 um so i think that if you look at heavier shipments in most ltl trucking companies they have to apply that high cost structure to the shipment to derive a revenue to charge the customer and it's generally an astronomically high number you know i can remember if you if you get an ltl carrier to quote on ten thousand pounds this was before they had spot rate programs you know it would cost more to ship ten thousand pounds with an ltl carrier than it does you know a full uh full truck with a truckload carrier since then the lto carriers have gotten wise and so now they they realize that hey if i've got empty miles i'm not going to charge my tariff rate on the 10 000 pound line i'm going to make up a spot spot price that puts some revenue on my trailer while i reposition it back to where i need it um truckload carriers on the other hand you know if i'm if i've got 53 feet of trailer space and you're only going to use 10 of it i still got to charge you for the whole thing right so you end up paying a lot more than you should so so the partial business you know if those shipments that either based on weight or based on cube are in that kind of tweener category and by being creative operationally you can find ways to charge the customer or more of like a proportional truckload cost than you know an inflated lto cost so that's that's i think why that market does well in terms of the future of ltl there's always going to be a need for ltl because um you know the small parcel carriers can't take everything they've got size limits and if you can't buy a whole truckload you need to ship it on pallets and ltl cares are how you do it i think what's changing with ltl is more the the nature of their networks you know you used to have lots and lots of long-haul carriers and you know lots of uh two 3000 mile ltl shipments you know you barely see that anymore and that's why you've seen the surge in regional ltl carriers who have a shorter length of fall because shippers have gone more to you know regional distribution they've got more dc's that are closer to their customers so the overall length of paul is shrunken and that's benefited regional ltl carriers so um there's a place for ltl and uh i think that the companies today are doing well you know it seems like the revenues are good their networks are full and that's how they make money i didn't know ltl had a spot market i thought it was all contracted via tariff and well you know because ltl cares have a hub and spoke system so they've got you know destination underlying terminals that feed into a hub that go to another hub and then to the other destination destination terminal so if you're shipping from uh seattle to you know atlanta you know your your shipment is going to get handled multiple times but if you have a 10 000 pound shipment and it's in an attractive lane for that carrier meaning they run empty miles there they don't fill their trucks they'll take your 10 000 pound shipment and put it in the nose of the truck and they'll never touch it again until it delivers they'll load other freight behind it and they'll take the off and so that's uh you know that's that's an attractive way for them to utilize unused capacity for sure and also i remember though um at a couple different uh let me i don't remember what world but there are people who get really annoyed when carriers partial their freight um and add other freight onto their to their shipment so it's interesting because some carriers will do it to make money uh without telling the brokers or the shippers and then they find out and they get pretty upset side note but um doug more questions for you whoa one question is a really good one i'm gonna wait on this one because this one's synergistic steven asks ltl carriers are they going to move away from and then i always mess this up nmfc classification i'm like like you know how you can't say cinnamon sometimes that's one for me and mfc classification and moved more toward the i am pricing what does that mean well there's there's been a debate for you you know the nmfc system is uh you know archaic and it uses a huge care tariff that basically classifies every commodity and then based on the density of that product and its susceptibility to damage and kind of the value per pound um they come up with a numeric value they call it a class and and then they refer to rate tables so you can think of if you're shipping bowling balls they're heavy and dense they don't take up much space they're difficult to damage those would be like a class 50. if you're shipping ping pong balls they weigh nothing um you could fill up a whole trailer and barely have any weight and ltl carriers charged by the pound so they they would give them a higher class maybe class 400 and it would have a much much higher rate per pound it creates all these these challenges between shippers and carriers and and intermediaries where you know the customer just describes the commodity one way the tariff doesn't exactly match it the the carrier reclassifies it it creates a lot of headaches it also makes it difficult for the carriers to cost the freight in their network and know if they're pricing it correctly or making a profit so there's always been interest by the carriers to go to a density-based pricing system much like international freight where you're looking at the cube of the shipment how much space does it take up and what does it weigh and what's the density in terms of pounds per cubic foot the problem you have and i actually studied this back early in my career when we were trying to do it is it's hard to make the transition because there's a lot of shippers that have the archaic system built into their tms and uh the other thing is you know if i want to switch from a classification based system to a density based system i can tweak you know the pricing and and make a shipper hole you know where your total freight spend under the two systems is equal but on a ship and by shipment basis i'll never be able to match it shipment by shipment so what happens on this shipment i'm paying a premium on this ship and i'm getting a discount but that shipment is going to one of my customers and so if suddenly i raise that customer's freight prices he's going to raise hell with me and so so carriers find it hard to sell a new pricing system to shippers that are ingrained in the old way but i can tell you the carriers themselves would love to do it and there are several carriers right now that are doing it and they're pushing it hard and they're trying to make it the new de facto standard and i support that yeah i've heard of it lately too uh and i think it's i think it's very interesting um i did notice some comments coming through so uh my my little brother is actually here uh chris gaines he's in the comments he says this is great info for a guy just getting into freight uh chris is working for jb hunt he just started i think like a week ago um and uh he uh he saw the he saw the shelly simpson episode and dove into the application process uh and then chris baker just joined and someone else asked if you guys are doing reefer ltl we do but it's hard to do it and you can only do it in certain areas i've heard that special cares that have the equipment there have been several attempts in the past to create a a product that is basically like a pallet with a refrigerated box on it and there's been several companies that have attempted that and it works well the technology is great they're these little portable refrigerators and you put you know a thousand pounds of your ltl freight in and keep it cold all the way to the destination the problem is what do you do with that that box when you deliver it you know you got to get it back to where it came from and somebody has to pay for that so i think uh it's hard to do ltl unless it's a a truckload uh reefer company that does milk runs meaning they they do drops and picks and multiple stops and uh there are a couple of ltl uh reefer companies but it's a it's a fairly a specific product um there was another question that came through uh you man you're getting drilled with questions don't worry i'll have you off in five minutes i heard all your alarms going off and i i hear chris clementson being like she's not gonna keep you for two hours again is she doug maker make her wrap up doug i know chris i know i know i'll behave for once next time doug comes on i will not behave so um so uh the next question oh this is a tough one so uh echo recently lost two c-level executives is there something at echo going on that we should know about a little drama who you lost uh like kyle sowers the cfo one of my favorite people in the whole world he left right and then the other one was miles i think the question is there's something going on yeah is there some echo drama we need to know about yeah no there is something going on there is something going on um what's going on is you know in the last 15 years we built the startup company from zero to two and a half billion dollars we've been profitable every year since the year number one um we did an ipo we we've been very successful and it was a talented team of people that made that happen and um when you have talented people that have success other people try to steal them and you know we've always lived with that and and i hate to lose them on one hand on the other hand it makes me proud that people value what we have yeah and uh and it also you know creates an opportunity for people to move up you know we moved up uh pete rogers he's been our senior vice president well he started as a staff accountant 13 years ago and he's worked his way up he's done all of our sec work um he's earned the right you know and he's going to step into the chair with without a hitch and so um look at the end of the day you know echo runs like a machine you know we put oil on it and keep trying to make it better and find ways to improve things but you know when you have a company in that state we're all replaceable including me yeah and so the best thing that we can do is to have a strong bench and be ready for when those days come and you know it's part of part of life and business you know people will come along with a with a good deal and try to steal you away and we've always had to deal with that i know the answer to this question because i i worked for you but there are some companies that if an ex a c-level executive leaves operations just crumble because they were the for lack of better words almost the bottleneck of decisions and direction and whatnot um and then there's there are other companies where they build their bench and of leaders and the leaders are taught to you train your future leaders to take over our our positions which one is echo well it's a great question because you know i think back to the early days of echo when we were truly a startup and and it was it was uh i'm sure like other startups right it was a wild wild west you know and um in fact until we got to about 400 million of revenue we outsourced hr you know because we were trying to save a buck or two and yeah and so you know in those early days we would change things all the time we would try something and if it didn't work we would stop and do something different and and then if we tried something and it worked we would do it harder and and that was just kind of how we operated but then over the course the years you you get bigger you have to necessarily add some bureaucracy right and you don't always want to because you don't want to lose the entrepreneurial spirit but you have to right and you have to grow up as a company and and uh and so we've done that you know and we try to keep our entrepreneurial dna intact and try not to get too bureaucratic but in the process of growing up you know we have a world-class hr organization and they do things like succession planning you know and so we have regular sessions not only in our management team but with our board where we talk about okay what happens when doug gets hit by a truck or what happens if this person finds a better deal you know and so we have those discussions on a regular basis and that's something that all you know larger more seasoned companies have to do and if you're a public company you know you have to do it yeah and so i i think you know i feel good that we've built a good bench we do a lot of training and employee development you know in our organization uh we think about people's career paths we coach them on their career paths and there's a lot of people who want to get promoted so it's a good opportunity to be here just so you guys know when he says bureaucracy he's his he's pointing at me you guys just can't see it that was one of his bureaucracy i was his first lawyer he had to hire in-house boy boy whipped poor man okay so last question for you darn it okay this will take two seconds because this is a really good one i've been saving this this is from mike um he said doug did you hang out with the eagles are you in a band doug yeah i'm in a band but i never hang out with the eagles oh man that would've been cool if you said yes you're so you're in a band what instrument do you play i play bass and sax and little keys oh you're one of those talented people i did i used to hang out with steve miller a little bit back in that video that's what it was mike steve miller steve miller's good that's cool all right we finished strong then so doug chris chris clementson this wasn't that bad look we no games we stayed on time he can make his next meeting so everybody's happy doug thank you so so much uh we all love you to pieces and um and we will see you next time next time is not gonna be as easy though we're gonna have games and inappropriate conversations and cursing endless amounts of cursing thanks for having cassandra thank you i will see you next time and everybody else make sure you subscribe to the youtube channel and we'll see you next friday where we're gonna have to talk about mexico shipping part two with andrew silver's brother matt silver i can't these silvers have taken over my life lately all right let me get my little ending screen