Your $175B Tariff Refund Checklist With Ryan Petersen, Flexport CEO

15:31Ryan Petersen:If I see you as a bad actor who's not fulfilling on your promise to do that, then the next time I rule against you, I'm just going to be like, no, we're not collecting these anymore.

15:39Mike Beckham:Yeah. I wouldn't want to speculate whether 122s hold up. I'm not probably not qualified on that. I think a lot of these have held up in the past. It was I, you know, that was the extraordinary one or it's never been done before. But but it will get challenged 122. And I haven't talked to enough lawyers that have I think they won't give you that level of certainty that it's going to get struck down. But it's temporary is the thing. And, you know, I think the furniture one is very likely to get struck down. Others will that that first thing you said, though, that customs has to do a manual review.

16:08Mike Beckham:I mean, come on. Like literally, if you go to tariffstopflexboard.com, go to the top and click the refund button. There's a refund calculator there. We've calculated three and a half billion and it's instant. You just download your data from the government system, upload it, and you'll see your refund amount instantly. We've calculated three and a half billion dollars of refunds for people and it's zero human labor. Like you just do it.

16:30Ryan Petersen:Ryan, they're using Abacus's. This is not, it's not as simple as you're making it out to be. It has to be done manually. Yeah.

16:36Mike Beckham:So we'll see. We'll see. They'll drag their feet probably.

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17:13Sean Frank:This means more conversions, higher AOV, less lost demand. So you are driving more revenue and doing it more efficiently. Check out Shopper from Postscript. We use it at PILA, which is why I am telling you to check it out. I would love to get money back from the government, but the whole time I've been so nervous that it's never going to happen just because like my relationship with the government is money goes one way. So I'm glad we're all very confident we're going to get it back. Have we thought about ways we could get screwed over though? Have we thought about ways that they could not pay the money back?

17:45Sean Frank:Like what, what are the risks as you sit here today?

17:47Mike Beckham:First off, Flexport has gotten over$900 million of refunds from government, from CBP on behalf of our customers over the last five years. So it's like, there's a long precedent here of getting refunds. If you overpay duties, you're owed money back. There's a simple process. It's not simple, But there is a process for this that we've largely automated that we can go file those and get it back. It's unclear as of today if, well, I guess to answer your question, what are the risks? One risk is they don't file the standard process of how this has worked over the last decade and beyond. You file what's called either a post-summary correction or a protest.

18:20Mike Beckham:And that's pretty straightforward. We know how to do it. We do it every day on behalf of people who have overpaid their duties in some other way. Now, one risk is what Mike was alluding to is the government says, we can't do this. We don't know how to do this. And it's all it all depends on this one guy named John who has to review every piece of paper. And John doesn't have, you know, John only works nine to five and he's a government employee. So we're not it's going to take us 100 years to file your thing. So that's a real risk. And then it goes back to lawsuit and judge has to order it. And then they just don't comply.

18:50Mike Beckham:I mean, there's ultimate there's some risk here of like you talking about our democracy. Like, will they comply with order from the Supreme Court? It's always a risk, I suppose. I mean, I think it's probably overhyped that risk, but they took away one big risk. So over the last five years, there's$900 million that we got for customers. Until February 6th, like one month ago, those were all set via paper checks in the mail. And we were having so many incidents of the check never showing up and then getting cash by a scammer for our customers that thank goodness they finally set it up. So if you want to get your refunds, you must go to the ACE portal.

19:27Mike Beckham:ACE's Customs Technology System is called the Automated Commercial Environment. You should have an account as an importer. You get one. If you don't have one, go sign up. You've got to go put your ACH details for your bank account in there because that's how the wires are actually going to come through is go into ACE and set it up. And I thought it was very interesting that in late January is when they announced, hey, we're switching away from paper checks to automated ACH refunds.

19:52Ryan Petersen:It's a coincidence, Ryan. Totally a coincidence. It could not have been because they felt they were going to lose.

19:56Mike Beckham:I think customs are gearing up knowing that they're going to have to pay this. And customs is run by like responsible civil servants. So, you know, it's not they're not really political appointees in there. These are people who were like Supreme Court orders them to do something. I think they're probably going to do it. So that's that's kind of my take on it.

20:12Ryan Petersen:So the number one thing you're saying is to if you have paid these these tariffs, you should file protests, especially on anything that could be getting close to liquidation. That's our approach.

20:24Mike Beckham:That's our approach. It's not very costly. It's like, go ahead and get ahead of this, like avoid. But if you're already in a lawsuit, maybe it covers the bases already. But like the traditional approach to getting refunds is very straightforward, very standard. You file either a post summary correction or a protest. By the way, the difference to those, not to get too technical, but basically the post-summary correction comes first, and you can only do that for the first 188 days or something after the entry. And then you have another window of 180 days for the protest, and then it starts to go to liquidation.

20:57Mike Beckham:The dates are always a little hard for me to remember, but something around those lines.

21:00Sean Frank:we ended up joining a class action in december of last year just before there was the ruling just to like prevent or save our stuff from going into liquidation and there's so many of them happening right now that we were able to join one it was like fourteen thousand dollars from a big law firm and that guarantees like all the way through right and we did the math and it's like we were doing a lot of daily bringovers and like it was going to be like 200 bucks a pop to file the protests or something if we did it like piece by piece?

21:31Mike Beckham:No, but you can file all the entries for that. You don't need to file like every single entry individually for 200 bucks. But yeah, it would be like maybe you do it once a quarter or once a month or something like that as the new ones keep coming off.

21:43Ryan Petersen:So one of the things that's making it more affordable legally is that you've got big dogs like Costco that have billions at stake that are really leading the process and pushing this through the courts. Like Simple Modern and Ridge aren't at the front bearing the cost. And so I think it sounds like we're pretty similarly situated, Sean. We're a part of one of these larger lawsuits, but we're not having to incur the costs.

22:06Mike Beckham:And as of, by the way, as of, I looked at this like the week after the Supreme Court ruling, there were 2 ,100 lawsuits challenging, basically demanding a refund. So that's also part of why we're like, you probably don't need to file yet another lawsuit. The court has said, if one company gets a refund, everybody's getting a refund. So our views have been like, yeah, God bless you, Costco and you guys for bearing the cost. But I don't think every single company in the world needs to file a lawsuit. But if you're in your state, you said eight figures, like, all right, you know, if it's 14 ,000 bucks, great.

22:40Mike Beckham:Like throw in on that all day.

22:42Sean Frank:How much of the strategy of delay, delay, delay do you think is just letting stuff go to liquidation? And my second question is how much, how likely is it that Congress gets together and actually, you know, passes a law this year. That they must do a refund? Or, you know, must do a refund or actually gives us more framework around, like, how about clear guidelines of what the president can do when it comes to tariffs, right? Like, you know, Congress hasn't functioned in probably 15 years. So do you think that's ever going to happen?

23:12Mike Beckham:No, I don't think you're going to get anything from Congress because the midterm elections are coming up and both sides, like the Republican side doesn't want to be seen opposing Trump because that makes him unelectable and the Democrats don't want to be seen siding with him. So it's very hard for those two sides to align, especially on trade right now. There's other trade acts that are just going nowhere in the current day. I don't know, your other question about dragging feet, I don't think they are. I assume that the people at the top don't understand this liquidations process. The people in the administration, I mean, it's pretty technical and I think they're just moreover dragging their feet to hope that somehow they win their appeal or something happens.

23:54Mike Beckham:And they may not be dragging their feet. Like at this point, we'll find out pretty soon. Customs said last week that they would issue guidance in 45 days. Some puts us kind of, I want to say middle of April is when Customs said they would issue guidelines on how refunds, what's going to happen with refunds.

24:11Ryan Petersen:Yeah, I think it's just timelines at this point. It's going to happen. It's just kind of, when does it happen?

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25:03Mike Beckham:We should mention the secondary market that's brewing and I'd love to get your guys' take. Oh, yeah. How you read it?

25:08Ryan Petersen:We've had offers. Sean, have you guys had offers recently at higher percentages?

25:13Sean Frank:Well, Cancer Fitzgerald, day one of the tariff was offering us 33 cents on the dollar, right? Or 50 cents on the dollar. So there is a lot of money markets to be made doing this. But we haven't taken any deal. I actually don't know of any brand who's taken any deal. So Ryan, I would love to hear your perspective.

25:33Mike Beckham:We see quite a few. There are a few brokers out there, kind of banks that are doing this. and the price was around 20 to 25 cents of the dollar until the morning of the Supreme Court. It may be if some outliers like 33 or something, but it was around 20, 25 is what we were hearing. And then by the night of the Supreme Court, by that Friday, it hit 50. So like capitalism, just a beautiful thing. I heard about two transactions that took place in the kind of 58 to 62 % range of about a hundred million dollars of like big claims. so there is transacting now and i've talked to a lot of ceos i'd love to take hear your guys pulse on this but i talked to a lot of people who were like get me 70 i'm in and there's kind of the market hasn't cleared at that level so i think there's a lot of pent-up demand a little bit higher just because of the uncertainty of timing and a lot of people are skeptics like sean say i don't know there's probably a million ways i cannot get paid the government never pays me anything and there's some people just need the cash or have good you know you got a good opportunity to invest it, you think you can earn a higher return inside your business than whatever interest rate you're getting here.

26:39Mike Beckham:So I think at 70%, there's a lot of demand. The other thing is those buyers have only been restricted to claims above 10 million bucks. So the smaller guys with a million or 2 million bucks haven't been able to participate. Watch this space. I think Flexport, as we've processed three and a half billion of calculations, we want to come to those people and go, hey, you want to sell? Here's the deal. It's like everything's a prediction market.

27:01Ryan Petersen:It's like, you know, in some ways it's just like, this is another version of a prediction market. And, uh, that's interestingly, like when you think about the ways that poly market has like kind of insert intersected my life, the place where I trap my go-to on like, what is likely to happen was looking at the poly market on, uh, the, the U S losing its Supreme court case on tariffs. And I would just, I'd watch it daily. Uh, and if it ticked up, I'd get nervous. And And if it went down, I'd feel pretty good because I've just kind of come to assume that whoever, there is some alpha and there's some people that really know things that I don't know that are betting on those.

27:38Mike Beckham:The fascinating thing too is like the Monday after the Supreme Court case, you do, Simple Modern does a fair amount of retail sales. I don't know if you've had this experience or want to talk about it, but the Monday after a bunch of our customers who sell through retailers, big box said, hey, we got calls that Monday saying, hey, let's talk about refunds and what's going to happen here. You have no legal obligation to give money back to whatever retailer, but they have no legal obligation to carry your product.

28:03Ryan Petersen:It's one of the reasons why when you when you sell to retailers, you you know that they're doing channel checks, looking at your cost structure and that they've got their own internal estimates, your cost structure. But you're always going to be, you know, as protective of that information as you can. And tariffs are kind of this very public way for people to understand and get insight into your cost structure. And with us, interestingly, we were already we'd already decided, hey, regardless of what happens here, we're going to make some moves on pricing and cut pricing in some areas. So fortunately, like we were kind of we didn't get those calls because we were already like moving that direction.

28:39Ryan Petersen:But like you said, Ryan, like for sure, if I'm a DMM at Walmart, I'm like, hey, it's time to dial for dollars. The Supreme Court just struck these down and we know everybody's cost structure just went down, you know, whatever, 10, 15 percent. Let's go get it. And that's the game.

28:56Mike Beckham:Yeah. And it's, it'll be interesting to see how much of that is just lower my price going forward versus like, hey, I want a piece. I want a piece of the action. It was a great moment for DTC founders because you just get all the money. And I don't, I mean, Costco said they were going to give refunds to their members, which is kind of epic marketing. We'll see what that looks like. But your average DTC company is not going to go do that. You're just in a pretty good place where all of a sudden you got a cash windfall. Don't go waste it.

29:20Sean Frank:Yeah. As long as you survived, right? You just said the small guys can't sell their refund potential to a bank or whatever, those are the people who would need it. If you have a$500 ,000 claim or a million-dollar claim, we know a lot of people who got super screwed, nearly went out of business or some that did go out of business because they couldn't handle the rapid change so fast. If you were doing Section 321 out of Mexico and then you had a 0 % tariff, then it goes to 147%. You couldn't deal with that. You had no U.S. presence. And we know people who got caught in that.

29:56Mike Beckham:Call them up. They're on the beach somewhere. They might have a nice asset coming their way that they forgot about. That's the next interesting play here. It's probably going to be this whole secondary market of buying up bankrupt, failed companies just to go get their refund claims.

30:10Ryan Petersen:Let's pivot to the rest of tariffs. This obviously isn't over, Ryan. It's just going to be kind of a feature of this presidency for as long as it lasts. And I think that, as you mentioned, we've got Congress is going through midterms. It doesn't look great for the Republican Party. It usually doesn't when you have the kind of incumbent president. It seems like we're going to continue to have tariffs and we're going to continue to have legal challenges and kind of congressional indifference or potentially even antipathy towards. So what happens in July? So July is a big day because that's when the 122s have to roll off.

30:51Ryan Petersen:This is not in debate. So what will happen then in your view?

30:55Mike Beckham:I think what you should expect is between now and July that they replace these temporary Section 122 tariffs, the 10 % that's going to be 15 % as soon as they remember to do it. When that will roll off in the second half of July, by then they're going to want to have rolled out new tariffs under either Section 301 or Section 232. And those require this investigation either by USTR or Commerce Department. I forget which one is which. One of those requires Commerce and one USTR. Those require a little bit more formality, let's call it, like a two to three month process. There's 12 of those investigations ongoing right now at the Commerce Department for different sectors.

31:40Mike Beckham:They did one for furniture. They're going to do one. They've got one going for semiconductors. You can look these up and see what are the 12 different sectors and see is my product falling in that area. So I would expect a bunch of those to ramp up and get deployed. They kind of have this deadline like, yo, we need new tariffs by July. We're not out of the woods here. And it's going to get even more complicated as they stack in different ways. And you've got some tariff stack, some are replacements, some, you know, so it's not a simple math.

32:11Sean Frank:Yeah, right. And so let's really unpack that for the audience. Because if you're not in the industry and you just read headlines, what you just heard is that tariffs are now illegal. And what you're saying and explaining to everybody is that one very small slice of the tariff pie got overturned, you'll be refunded for. For some people, it's a lot of money, right? For some people, the only tariff they paid was IEPA, right? The famous one was syringes got to 187 % or whatever. I don't know if syringes have other tariffs and duties on top of them, but that was a big deal, the IEPA tariffs on that.

32:44Sean Frank:But for me, stealing aluminum has remained unchallenged. No one is trying to give them a refund for that. That is going to continue because it went through section 202 or 301 or whatever the hell it is.

32:55Mike Beckham:232, 233, yeah.

32:57Sean Frank:There you go. And I'm going to have to pay that forever because that's just the new regime. And what you're saying is, hey, IEPA is going to be done. You're going to get a refund for that. But you're not out of the woods. There's going to be more tariffs coming. And you have to watch really closely if your industry is going to be caught up in one of these 12 investigations. Is that what you're saying?

33:12Mike Beckham:Yeah, exactly. And 12 investigations, that stat's a month old. I should have prepared a little bit more here. There are probably some other ones that I haven't paid attention that I should be all over. But the Commerce Department has got these little investigations, big investigations going. And I don't know, like, by the way, in the age of AI, how hard is it to make an investigation? You're like, hey, you know, Claude, write me a six, you know, take here's the investigation we did on steel and aluminum. Make one of these for semiconductors. And like it spits it out and you're like, OK, present that to Congress.

33:41Mike Beckham:So this idea that that's some kind of blocker for the administration may not be true anymore. It's just create these investigations and spin them up on the fly. So there's going to be yeah, it's going to get more complex and not really go away. has quite a few levers to keep imposing tariffs. But they're all like a little bit more constrained in terms of like, it's either one sector at a time or one country at a time. They're not just this blank. And it takes more formality, not this blanket like, oh, I didn't like the way the prime minister of Canada looked at me like FU Canada type of vibe that we've had.

34:13Sean Frank:But if you're a betting man, Ryan, if you're going on Polymarket, you know, would you say in a year, the average consumer brand is spending more money on tariffs than today or less money on tariffs than today?

34:25Mike Beckham:Well, let's not say today, but then three months ago, like a month ago, I would say less. Like this has helped the Supreme Court. It is going to come down. Relative today, it might go up a little bit because it's only at 10 % for a lot of markets. They'll have some levers to go higher than that for certain industries that they want to target.

34:43Ryan Petersen:So my take on this is that actually this is going to kind of work out well for brands. What's going on with Iran, which is where I want to pivot next after this, is you're getting a lot of disruption. You're getting oil prices going up. That's absolutely not what you want when you're the party that's in control going into midterm elections. And I think that you're going to see some real efforts by the administration to keep inflation in check as much as they can. And so I think that you'll have some, it's interesting before the Supreme Court ruled against the government, in our particular industry, there was some chatter that they might relax, reduce the tariffs on things like water bottles just because it's a consumer product that's basically all made in other countries.

35:25Ryan Petersen:And it's just they know that it's driving inflation. There's not really a domestic industry to kind of prop up. So we'll see. I think the other thing that's interesting here is the unilateral nature of IEPA was probably the most frustrating thing about it because there was no alpha in having a great supply chain. It's like, oh, great, you built redundancy where you can produce in Malaysia and Thailand and China, doesn't matter. They're all at the same tariff rate. And my guess is that there's going to be some room for that in what's to come, that as the administration goes and does these investigations, that it's not going to hold up to be like, you know what, everybody making furniture everywhere but the United States is bad and violating it.

36:05Ryan Petersen:Like that just doesn't hold up in court anymore. It's going to have to be, okay, this country and this industry is not behaving ethically. And to be clear, we should have things that punish that and keep that in check. My big position on this thing the whole time has been we have separation of powers and we have processes for a reason. And that's what makes our country great. And I think that regardless of where you are on how you view international trade, China, some of these things, I think we can all agree it's good when the process works. So it'll be interesting to see how that plays out. But But like, Ryan, tell me, tell us a little bit about what you're seeing with the Iran situation.

36:41Ryan Petersen:Obviously, we've had a very important trade route that's just totally been closed off. And oil for a short period of time went up to like$110 a barrel. Things are pretty wild right now. How is this impacting things on the ground?

36:55Mike Beckham:Actually, one of the big impacts, the Persian Gulf is not that important from an ocean freight perspective, from a containerized ocean freight. It's hugely impactful for oil, famously. And that's the real impact here is what happens to the economy with the price of oil. And not just price of oil, but oil shortages in many parts of the world because price goes to infinity if there's no oil. So that can be very ugly. It is not that important for containerized freight because if you just look at the map, it's a cul-de-sac. It's not the Red Sea where it's just this main thoroughfare that every container has to go through.

37:2635 % of the world's containers go through the Red Sea before the Houthis problem.

37:31Mike Beckham:But actually, these are very closely linked conflicts. And one of the bad, really bad impacts of this is that Maersk, the second or third largest container operator in the world, container line, had just in February begun resuming service through the Red Sea, through the Suez. As that took hold and their competitors followed suit, that was going to unlock about 15 % of ocean freight container capacity in the world. And it would have dropped the price of container shipping like dramatically. They immediately pulled out because, of course, the Houthis are considered this proxy for Iran. And if Iran's shooting missiles in the Persian Gulf, like for sure you can't trust your ships sailing through the Red Sea.

38:10Mike Beckham:And so they pulled back after just one month. Kind of worst case scenario from their perspective is to start it and then pull back. So that's probably the biggest impact on container shipping is actually we were about to see green shoots of capacity coming back. It unlocks a huge amount of capacity just because it takes the ships so long to go around Africa.

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39:12Mike Beckham:Air freight is the other big impact and bigger impact because the Middle Eastern airlines own, I think I read 18 % of the world's cargo airplanes, cargo capacity rather, is owned by Emirates, Etihad and Qatar Air. There's three and maybe that counts to Saudi Arabia too. So those are basically grounded. they're starting to fly back again surprisingly to my view like I read this morning from our air freight team that Emirates has restarted service out of Dubai airport to Asia from Asia to Dubai so you're seeing some amount of capacity come online it temporarily I hope temporarily this week the price of air freight spiked by about 50 % from Vietnam to the US like a trade land that you I don't know why that's connected on the surface but these are all connected because it's a global market of supply and demand.

40:03Mike Beckham:And there's always a case in the logistics of like you price what you can get away with and people finding there's some excuse to raise prices. They'll try it and see if the market will bear it. I don't think that's going to hold at that level of 50 % probably. But yeah, price is going to be a little elevated for those who do air freight. Hopefully you guys are all ocean freight, but some air freight. But the real impact of all of this is the price of oil and what happens to the availability of oil. And if the straight-up form of use stays closed, container shipping is not your problem. your problem is like oil and can't run manufacturing and cars and buses all over the world we're

40:37Sean Frank:getting quotes you're coming to chinese new year we have a hit product i'm trying to get it into every market as fast as possible and you know if we want to get this hit product from china to the uk it's we're getting quoted 60 days basically for ocean right and we're like okay we'll air it right yeah and it's like oh it's five dollars a unit to air it's like okay well i'm gonna look into a train and you know there's there's only like one train that can take it over there yeah

41:05Mike Beckham:and i guess i'm just gonna wait the 60 days train um we're talking offline we get you on a sea air option you could do air you could do uh ocean part of the way and air the rest of the way

41:15Ryan Petersen:there's some creative express sean we'll have people on horseback and that's not a big item that you're doing. In a wallet?

41:21Mike Beckham:What product you got?

41:21Ryan Petersen:Five bucks is a... No, it's like, it's not a big item. You're not talking about a piece of luggage either, right, Sean?

41:26Sean Frank:This has a battery in it. So that's why it's really hard to get it on an airplane.

41:30Mike Beckham:I think you'll start to see that come down. I think the capacity is starting to come online. As I said, Dubai is already, Emirates has already restarted shipping flights to Southeast Asia. What's happened is that they've been routing. There's basically three routes that the airlines have done to skip Dubai Airport until it reopens. And that was, They're flying a lot to India and then refueling and going onward. They were going over Iran. Remember, you can't fly over Ukraine either. So you're like trying to weave your way through here and landing in Istanbul and refueling. And then some others are going to Egypt and refueling.

42:06Mike Beckham:Those are the three routes that I've seen.

42:07Sean Frank:There's a chart of all the airplanes flying and they call it World War III. And like nobody's flying over Iran. No one's flying over Ukraine. And then nobody's flying over where the Houthis are in the Red Sea. and then nobody's flying over South Sudan where there's another conflict happening. So there's just like two or three little highways where all of the planes on Earth are going through right now. And it just looks crazy.

42:31Ryan Petersen:You said this, Ryan, but one thing I think that's good for people listening to understand. There were two or three times that you mentioned like, hey, that could be a 15 % reduction or a 20 % increase in capacity. But one of the, I would say, counterintuitive things is if you lose 15 % capacity, you don't get like a 15 % move in prices. Or if you gain 15 % capacity, that doesn't just mean that things get 15 % cheaper. It tends to be a lot more dramatic than that. Is that accurate?

43:01Mike Beckham:Yeah, it's incredibly volatile. And for the simple reason that you don't, the amount of units you ship is rarely a function of the price of freight. it's always a function of your demand and your overall margin structure and can you make money I mean Sean will pay five bucks for that product if he can make money he'll do it you know it's like doesn't it really matter it'll matter if you can't make money but otherwise you're better off shipping it than not shipping it but maybe another way to frame that is in a world where there's excess capacity then the price of freight drops to the in pure economic theory to the marginal cost of that supplier of that carrier and in let's take the ocean freight example let's say there's excess capacity in the network, in your ship.

43:40Mike Beckham:I've got a ship sailing today. It's not full. The cost of throwing one more container on the top, loading it in China is like a hundred bucks. Unloading, it's like 300. Cool. As long as someone's willing to pay me 500 bucks, I'll make a profit. I should take that container.

43:53Ryan Petersen:Yeah. It's kind of like the airline example where when they have an empty seat on a plane, that's about to take off, you know, they'll sell it for 50 bucks maybe. But when you've got a full flight and they're asking, will anybody give up their seat. Sometimes they have to pay you$2 ,000 to give up your seat. Same exact principle.

44:09Mike Beckham:It's very similar. And then on the inverse side, when there's not enough capacity, when there's excess demand, people pay any price. And I was just reading recently, there was a Washington Post article yesterday about Apple having a container load of iPhones or some product, maybe a computer stolen, and it had$7 million worth of electronics in it. If you're shipping$7 million worth of freight, do you really care if the price of freight is $2 ,000 or$3 ,000? No, you need to make sure it gets there and doesn't get stolen. And you saw that in COVID. The price can go to$20 ,000 because Apple and other people that have been making plenty of money, they're willing to spend it if the price goes crazy.

44:44Mike Beckham:So it's a very volatile market. It makes it difficult, by the way, to operate. It's why most of the ocean carriers are either privately held in family businesses or owned by a government. Because Wall Street can't handle this kind of like volatility they want nice quarterly predictable earnings you're like oh one year you make 100 billion and then you lose money for 10 years like that is not a

45:09Ryan Petersen:walk i saw some crazy stat like in 21 there were there were a couple of these that made more than they'd made in the previous 20 years or something like just insane they're 10 companies and they combined made 150 billion dollars in one year and they're owned by these families like that they

45:27Mike Beckham:They got some nice art collections and like one year, make$20 billion. You're like, and after a decade, some of them were borderline bankrupt. Like their debt was trading at huge discounts. And then Hanjin did go bankrupt. The Korean one. Two of them went bankrupt like two to three years before the COVID thing when they would have just - Oh, dude, that's brutal.

45:49Ryan Petersen:That's a bad beat right there.

45:51Sean Frank:I was going to say, it's also why the oil takers won't risk going through this trade of home use. It's because the oil takers, they cost$4 billion for one of those ships. So you lose everything if it goes down.

46:06Ryan Petersen:Yeah. It's super asymmetric risk. You can not sail for a while.

46:10Mike Beckham:There was one Greek god of oil who's just running the straight though.

46:14Ryan Petersen:Greek god of oil. That's what I aspire to, guys. Later in my career, I just want to have some weird esoteric part of the logistics chain that I just own. I'm the Australian railroad tycoon. You can't go through Australia on these tracks without my approval.

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47:19Ryan Petersen:All right, Sean, Ryan, I know both of you guys are very AI forward with your organization. and it's been insane. I feel like it's taken up every spare moment I've had over the last couple months. Ryan, I'll start with you. How are you seeing AI? And I think you used the phrase in a text with me, like kind of the age of wonder. How are you seeing AI impact the way that you run your company and do business?

47:47Mike Beckham:I've had a couple of moments here where I just woke up and said, okay, every single thing has changed and it keeps happening to me. The most recent one being Claude Opus 4.6, like the last month of my life has just been, I haven't been this excited about tech since I was a teenager. Just unbelievable, just building stuff and building apps and lighting people on fire, frankly, at my company being like, look what I did in one minute. What are you doing? Like, what's going on? Why are you taking so long? Like, look what I can, look what you can do. And we're a licensed customers broker. As a licensed customers broker.

48:19Mike Beckham:That's why we're talking about tariffs a lot here. But we have a compliance process, as one does. So we review about 5 % of entries a second time with a more seasoned, experienced customs compliance team. And we just re-reviewed the customs entry to see if we made mistakes. Our error rate on those was 1.8%, which is best in class. It's very good. By the way, it doesn't mean we made mistakes that were illegal, but maybe you didn't include some free trade agreement that you were eligible for. And then we had to go back and file a correction, a protest. Well, in October of last year, we introduced this AI agent and now we audit 100 % of entries before we hit submit.

48:58Mike Beckham:We still do the same exact compliance after the fact, but now we do a hundred percent audit. We took our error rate from 1.8 % to 0.2%. And that was the moment for me. We had that, we started to get that data in around November when you go, oh, wait, the AI is not just free and cheap labor. It's way better than the experts are. It can do this. And then you start looking at, wait a minute, it can do this across every part of our business. And so that was the big wake up call. We started building agents for everything. We've got agents for bill audit, agent for consolidating freight, for looking at opportunities, for checking, did we invoice the customer the right amount based on what we quoted or what the services that were rendered are on this thing.

49:39Mike Beckham:So that was that. And then if you guys, I mean, I assume you're using it by cloud code, everyone talks about, I think cloud co-work for a non engineer, non-technical person, it was the first thing that people see that will just totally blow their mind because it lets you watch the agent work on your behalf and just go out to use other apps and just get work done. It's unbelievable, mind blowing as a technologist to see this take place.

50:04Sean Frank:Yeah. Sean, what about you? What's, how's this showing up with Ridge? We're really entering the agent age, right? So, you know, uh, AI and, you know, prompting Claude to do work for you or sending data is awesome. Um, but yeah, Claude co-work, uh, I use a lot of Manus to, to do a lot of like, you know, deep research stuff for me and actually like build presentations. And then And we just rolled out Victor. So Victor's in, I think it's a fork of OpenClaw that lives in Slack. So the reason why this is good is setting up OpenClaw is a pain in the ass. So Victor's like SOC2 compliant and like, you know, data and security ready for an organization.

50:44Sean Frank:And then because it's in Slack, everyone can use it. And that was the big game changer in an organization is like, you know, I'm very confident, you know, if I had Ryan on my team, he'd go out there and he'd figure stuff out and build awesome stuff. But Mike and my team is the same thing. How do you get someone who is, you know, a junior level account manager to actually use the best in class tools? How do you how do you put it in front of them and make sure they're engaging with it? Victor has been awesome because they can roll it out across Slack and he's in every single channel and he's doing summaries.

51:12Sean Frank:And I have people now asking Victor to go do work for him and you could just watch it happen in real time. Right. You can actually do everything.

51:19Ryan Petersen:This is very similar to what we've experienced. experienced, I talk into a lot of different people, a lot of different chat groups are going crazy right now. And what it seems to be the key is there's all these different tools. Like I haven't used Manus at all. A lot of people are using Cloud Code, but you've got things like Victor and you've got, you know, Perplexity has their kind of all-in-one kind of solution. There's all kinds of stuff and there's more stuff coming to market just literally hourly. And what I think I've learned is it's not even about what tool are you using? It's are you helping people in your organization to have that initial aha moment where they realize what is possible is so much greater than what they thought.

52:01Ryan Petersen:And I think you nailed it, Ryan. I had a similar situation. I've run our Amazon ads accounts for a lot of the last 10 years. And then in one of our newer businesses, I'm running it. And I just was like, I'm going to build a system that does this in an automated way. And the thing that is kind of radicalizing about it wasn't just that I built the system and I'm like, I've probably spent 1 ,500 hours working with Amazon's ad system. And now I can spend like five hours a year. It was that I built a system that does it better than me. Like it just, it has more inputs. It has better judgment because it can look at more things at once.

52:40Ryan Petersen:And so like, this isn't just like outsourcing. It's more like upgrading what's even possible for your organization to do. And I think that that's, that's kind of the way that I've thought about it going forward as a CEO is my number one job. And some of that's like me building things and showing it to people to give them inspiration. Some of that's bringing in tools, whether it's Victor or anything else, to help people have that initial light bulb moment. It's funny, I had a back and forth with our creative director for Simple Modern last week. And I think to him, AI had been more of a discouragement than an encouragement, you know, because it's just like you see it cannibalizing all these skills that you've built.

53:24Ryan Petersen:Anyway, we had a good conversation, but Friday at 9.30 PM, he sends me a Slack and he's just like, okay, this is amazing. This is my radicalizing moment because this would have taken me four hours and I just did it in 30 seconds. He attached like a loom where he just showed it in like 30 seconds. He did this amazing thing that would have taken him a long time under any kind of previous set of tools. So that's my big takeaway is that, like you said, Ryan, it's a fundamental reshaping of what business is going to look like, what's possible. This thing absolutely destroys busy work, which is awesome.

53:57Ryan Petersen:Nobody wants to be doing reconciliations?

53:59Sean Frank:Yeah. You know, one of the biggest wins we had over here is we have a licensing business. Mike, you're a licensing business. You typically, if you want to run a licensing business in your organization, you need two to three full-time hires. Okay. Because the amount of paperwork that goes into a licensing business is insane, right? Like every month, you're sending a different report to the NFL or the MLB or whoever else, right? Claude just does it now. It really, it really was a 20 hour per month, you know, uh, structure of, of reports and paperwork and emails and whatever. And it's down to five minutes.

54:33Sean Frank:It's like, here's all our sales running for us. And like, there's going to be so many, so many big unlocks like that.

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55:22Ryan Petersen:So check out AfterSell and tell them that the operator sent you.

55:27Mike Beckham:One of my favorite examples here, this was just a creative endeavor and to learn what the AI is capable of. And I was using Claude Cowork. And Claude, actually I had to do a little bit of research on this, but only as of right now, MidJourney is the image generation AI that can actually upscale to the level required to print something at a resident dpi that's necessary um and i so i wrote a children's book i wrote a children's book actually a few years ago about the ship that got stuck in the suez canal plug it right here it's on amazon you can buy it um but i i just wrote another one about tariff refunds and it took this one this is hand this is an artisanal hand-drawn real humans were involved in writing and drawing this one i did it with cloud code controlling mid-journey in the browser it generated the prompt, it generated the script.

56:16Mike Beckham:It logged in. I used a bookbaby.com to print this thing. I gave it access to my bookbaby.com account. It logged in, it figured out all of the design specs, like how big does it need to be? The bleeds, the sizing, everything. It then logged into mid journey, created the prompts. I gave it a high level hero's journey of a story of, you know, this mouse importing cheese from France. And then like the business got up by tariffs. And then, you know, there's a refund and everybody gets free cheese. It was kind of my high level story. And it figured a whole thing out and nailed it. It's like the most beautiful art.

56:47Mike Beckham:It's 10 times better book than this one. It actually took me four or five hours, but that's because I made some mistakes along the way. And it was a fun process. I was iterating, but I created it as a skill that I saved in a doc that now I can do. I think I'll have my next children's book in like an hour of work.

57:03Ryan Petersen:That's the thing that's crazy is like, there is some tuition, there is some learning, but then once you've done it, you're like, okay, now I can move 10X faster because I don't need to think through all the setup. And it was similar with me when I was getting open claw set up. Like I did a lot of things wrong, but now I could go, it probably took me a hundred hours to get to where I am, but I could probably reset it up in five because I kind of understand the concepts. And I'm not even convinced. I think where we're going, I think these models are going to be so good that even a lot of the things we're having to do where we're kind of getting in the way, I think even those things are going to get abstracted.

57:39Ryan Petersen:that you're just going to be able to qualitatively say, hey, do this. I don't care about all the details and the logins and the crons that you need to do to pull this off. Just tell me what you're going to do and go do it. And it'll be like, OK, great.

57:52Mike Beckham:There's also downsides on some of these things like my brother's building. My brother's a great computer programmer and he's more obsessed with this than anybody. He actually has cloud code hooked to voice mode. So he just walks around wherever he's going and just coding on his phone just by talking to it. But he showed me this hilarious screenshot where it completely deleted everything in his database. And, oh, yeah, I shouldn't have done that. Sorry. Like, wait, what? And Amazon this morning just announced that they're, like, heavily restricting what junior developers can push with code. Because very often, if you're actually running a SaaS application, when you tell it to make a change, what it actually does is delete the entire application and make a new one.

58:32Ryan Petersen:Well, Amazon pushed bad code last week. They took the entire front end down for three hours. And we were talking about that. We're like, how many billions of dollars in sales is that? I don't even know. But it's like, it's some kind of an insane number of sales they lost because they pushed some bad code. And this is going to be another interesting thing. It's like, depending on where you are as a company, are you a public company? Are you private? How big are you? Your ability to lean in. This is actually, I think, like really bullish for small businesses. Amazon is going to have to be more brittle.

59:05Ryan Petersen:They're going to have to be more regulated. Whereas, you know, people like Simple Modern, like we can move it basically as fast as we want to move because there's not any kind of customer-facing code that would be that bad if we broke it.

59:19Mike Beckham:Yeah, and think down to lead. Like, you can give everybody forgiveness, like, and set the pace, like, yo, we're going to take some risk here. We're going to move fast. We're going to break things. We're going to get it done. Whereas if you're some middle manager in a giant company, They're like, it's not worth the risk, man. You got fired. And the upside is like, oh, it's a conversion rate optimization. Like, it's not worth it.

59:37Sean Frank:You said in one of the group chats, you said like AI is making everybody like a programmer, but without the security and optimization of like the years of training. We have a friend who spent like$4 ,000 on tokens just like because he built something wrong. He just let it run overnight. It's like, oh, it cost me$4 ,000. And it's like, we're all programmers, but we actually have no idea how to make something secure or efficient.

1:00:01Ryan Petersen:What we don't know is we don't know what comes next because we know the technology is going to get way better. And we know that there's going to be some real security issues that pop up, that people are going to start cutting off access to their data. They're going to try and start creating more walled gardens. And you're going to have some pretty major breaches, I'm guessing, in some pretty public places. And so we'll see. I don't know. But I think what we've been emphasizing with our team is like two things that I don't think abstract is data is going to be really, really, really valuable in a world where everybody has access to these models.

1:00:35Ryan Petersen:It's your ability to create interesting things is what your access to data. And then there's still a judgment layer. And what I've been challenging people around me with is even if you have, it's kind of like the magic lamp with the genie, right? Right. It's it's kind of an age old story, because let's say you did find a magic lamp that where you rubbed it and there was a genie and he gave you three wishes. What would you use the three wishes on? It's kind of a hard question. And in a way, that's kind of what clogged code is. It's like, oh, I can do literally anything with you. And then it's a little bit overwhelming.

1:01:07Ryan Petersen:It's like, well, I don't even know what I would build. And so it actually takes kind of rewiring your brain to even think through, like, how would I use all this power? and that's what I've been really trying to challenge myself and the people around me to do recently. All right, thanks for being with us. We want to thank our special guest, Ryan Peterson. He did a great job of summarizing what's going on, the craziness with logistics. I'm sure we will have him on again very soon. Want to thank everybody for joining us and a special thanks to all of our sponsors that make the pod possible. We appreciate all of you.

1:01:38Ryan Petersen:All right, till next time. See ya.

1:01:45You