I don’t’ think Softbank made a mistake by investing in WeWork¹, If you are sitting on top of a $100 billion VC Fund, and you want to shop for startups., suddenly you would realize, that all of the ‘tech-startups niches’ are either too much saturated or dominated by very big players, leaving a little room for any disruption.

So where would you invest then., you have to look for startups, that are still looking promising and going through hyper-growth, so it made a perfect sense (as a late stage VC). And I guess it’s the very reason Softbank bought them out, It’s a great idea with too much growth.

However it ended up being a way more expensive deal for the Softbank than they would have anticipated and nearly lost $4.6 Billion as shown in their recent quarterly results, that reported a total loss of $6.5 Billion (Wework + Uber) www.bloomberg.com for the first time in 14 years, that’s a major setback to their aggressive investing strategy., and raising the successor to their first mega VisionFund.

Edited following the quarterly results posted by the SoftBank.

1. The only mistake Son made was, he invested in the startup not its founder. Always invest in founders first then their startup. This would serve as a great lesson for the VC community.

Bill Paul is the industry veteran, who has been critical of the freight forwarding tech-startup Flexport since their inception. We both had a chance to converse regarding the fate of Flexport as below.

Bill Paul

We know that Logistics technology works. That’s why CH Robinson, DSV, Expeditors, Kuehne + Nagel and pretty much every other Freight Forwarder on the planet has been so successful for decades using it in conjunction with their own global network and talented employees. However, just having technology won’t help the next upstart (yes, I said upstart and meant upstart) achieve global domination regardless of how much money their VC backers are pumping into their marketing and hype.

Imran Jafri

Yes, couldn’t agree more, our industry is tough. Tech alone isn’t going to help you succeed, and you need a lot of talented people with the knowledge of freight and customs too. But VC funding does provide a ‘head start’. If they keep a fair balance between their burn-rate and revenue they can keep the head-start for a very long time, or even becoming the leader in their niche ultimately.

Bill Paul

If you’re referring to Flexport, they aren’t going to become a leader in their niche ever. They’ve already discovered that Freight Forwarding and Customs Brokerage is a low-margin business which is why they cruised Google looking for competitors who might be interested in handling their Customs Brokerage. How long before they get out of Freight Forwarding, too and just become a tech company trying to sell their Operating System to other Forwarders and compete with CargoWise?

Imran Jafri

The only problem I see in your comment is that, it’s extremely ‘speculative’ what you said may and may not be true, and it’s valid for any wild statement that we may make. For instance look at Google, Yahoo refused to buy it for a fraction of the price what they are worth today. And who had guessed it, they would become a nearly trillion dollar company later. And even Paul Krugman had dismissed Internet in the beginning as nothing more than a replacement for a Fax machine. 

So the point I am trying to make, Flexport is the first VC funded startup of its kind, and making a firm statement about their fate, would be too premature. But at least they’ve already established themselves as the leader in the ‘tech-freight’ scene. They may be lagging behind the traditional behemoth freight forwarders, and only time would tell, if they catch up or not. Even by the traditional freight forwarders standards, it’s my educated guess they would be into top 100, if not top 25. Which is still very remarkable in the face of, how competitive and tough our industry is.

Bill Paul

Of course my comment is speculative. It’s an opinion based on historical data and their most recent PR flop when they randomly messaged competitors they found through a Google search to see if they wanted to handle their Customs clearances. If heads don’t roll after that clanger, they never will.

Imran Jafri

I would agree it wasn’t a wise move however calling it a blunder is little too harsh. I haven’t seen the content of that email and even not sure at what staff level it was broadcasted. Nevertheless subcontracting local brokers doesn’t seem to me a bad idea. But definitely an unsolicited bulk email isn’t the right way to do so.

An 800 pound gorilla (DHL) tried to use SAP for digital transformation, and lost $1 Billion in the process. When in IMO they could have achieved all this under $10-$20 Million, only if they had hired 50-100 full stack Rails developers. 😐

But neither do they know what is a full stack developer nor Rails. They just know SAP and Oracle. That their teachers taught them in the 90s. On a serious note, scaling is the major issue for a company of that size, But I guess Rails could have handled it easily. For instance most probably twitter runs on Rails too.

That’s brilliant, never been to Bangladesh though, but everyone who did, tells the same, too much traffic congestion. It’s the most densely populated country in the world¹. However I cant’ appreciate enough how their Govt is involved in developing the export sector and its infrastructure. In particular their garment export industry that was kicked off, a decade or so ago, by the Pakistani garment exporters who were facing at the time, crippling electricity shortage 8-10 hrs per day (now 1 or 2 hrs per day).

Bangladesh took advantage of the situation, offered them lavish terms to move there. But as soon as their own exporters caught up, they were left hanging in the middle, even the land/properties they had purchased won’t get sold, because everyone knew they are going back. A little brutal on the part of Bangladesh Govt., but very smart for their own good.

[1] Of the larger countries, Bangladesh is the most densely-populated with 1,252 people per square kilometer; this is almost three times as dense as its neighbour, India. It’s followed by Lebanon (595), South Korea (528), the Netherlands (508) and Rwanda (495 per km2) completing the top five. Source

We are capable of calculating quotations for three major projects, making booking for 5 different shipments and answering 12 totally unnecessary calls per hour, all simultaneously. We do not require sleep and are at your service 25 hours a day, 8 days a week. Our home numbers are your numbers.

We are responsible for production delays, traffic jams, mechanical problems with trucks, aircraft and ships and depressed economic conditions overall. We are totally responsible for any lost or damaged freight and will personally replace it upon request.

We have powers which allow us to add unlimited weight and volume to and upon an already overloaded truck. We create miracles by loading unlimited weight and volume into airline/ sea freight containers. Furthermore, we can always motivate drivers to be your free-of-charge temporary employees to help with loading and unloading.

Yesterday’s delivery requirements with cargo loading today are regularly completed the day before yesterday, ten times a day, every day. We know that when you order a truck for loading on Monday that you really needed it on Saturday, but that you only want the overnight load delivered the following Wednesday. You want us to be at the office on weekends & public holidays to unload your goods at 2 am to ensure that your truck returns in time for your normal deliveries.

We are always friendly with a smile, have mastered telepathy, show empathy and gladly act as our customers’ psychiatrists. We embrace the challenge when you cancel the space with the airline and one hour later expect the airline to hold the space for you just in case you require the capacity again, and do this daily.

We embrace the opportunity that you allow us to develop our negotiation skills with airline staff in securing capacity on already overbooked flight and allowing us to freely negotiate a cheap spot rate for the freight as well.

We speak all languages and know the location of even the smallest town anywhere in the world. We are able to obtain a freight rate inclusive of clearance and door delivery to the strangest of places at a moment’s notice. At your request we can comply with any and all additional requirements your company may have. We also repair vehicles and computers!

For undisturbed road traffic, we have clocked our vehicles and if that does not resolve a traffic jam, we are capable of freeing the roads of traffic, upon request, in order to meet cut-offs.

Naturally, payment of our invoices is optional, and if your company has financial difficulties we will gladly advance unlimited funds for as long as you require them.

Our lives have been enriched by the endless opportunities that you have allowed us to experience.

Sincerely,

Your Eternally Grateful.

Alex Lennane

The Lufthansa Cargo embargo on three companies over an ‘incident’ involving dangerous goods has been lifted, the carrier has confirmed to The Loadstar. There has been quite some noise over the ban, in part because one of the companies involved was Flexport Asia, the forwarder everyone loves to hate. There have been various and potentially damaging remarks over the ‘incident’, despite the details not being made public.

I was surprised, how everyone kept jumping to conclusions, especially when LH (Lufthansa) had provided little to no information on the incident.

This story also provides hints to freight forwarders to be even more vigilant when handling DG cargo or Li-ion batteries, and shouldn’t rely solely on exporters, who may at times could place incorrect labels on the cargo, which had been the case in this incident. Therefore, forwarders must ensure the proper labels are placed on the cargo according to the MSDS¹ before handing over to the carrier.

Li-ion batteries are very commonly used in everyday electronics, such as from our laptops, cell phones to children toys etc, and IATA has a clear instructions on its handling through air cargo, which must be ensured at all times. IATA Li-ion Battery Guide 1MB

This entire episode that spanned over a week, began when Lufthansa Cargo Hong Kong (LH HKG) issued a Circular.txt banning a vape manufacturer, and two other freight forwarders involved in the incident of mislabeling of the cargo that contained Li-ion batteries.

However according to what I could gather, this move was triggered by an incident that took place a month ago, where an Air China passenger flight caught fire IMG at the Beijing Airport, and caused to collapse its airframe., the incident was linked to Li-ion batteries in the main deck cargo compartment of the aircraft.

The LH circular instantly stirred up a lot of buzz over the linkedin, because one of the freight forwarders involved was Flexport, a San Francisco based technology startup and freight forwarder.

The embargo however was lifted in a week or so, and most likely Lufthansa Cargo Hong Kong (LH HKG) acted out of extreme caution, in the wake of recent Air China incident.

1. A Material Safety Data Sheet (MSDS) is a document that contains information on the potential health effects of exposure to chemicals, or other potentially dangerous substances, and on safe working procedures when handling chemical products. It is an essential starting point for the development of a complete health and safety program. It contains hazard evaluations on the use, storage, handling and emergency procedures related to that material. The MSDS contains much more information about the material than the label and it is prepared by the supplier. It is intended to tell what the hazards of the product are, how to use the product safely, what to expect if the recommendations are not followed, what to do if accidents occur, how to recognize symptoms of overexposure, and what to do if such incidents occur. Source

Ruma Paul

The government of the world’s second biggest garment exporter behind China said this week it would consider demands for an increase in the minimum wage, after clashes between police and protesters killed one worker and wounded dozens. The government said in September that the minimum wage for garment workers would increase by up to 51 percent this year to 8,000 taka ($95) a month, the first such increase since 2013. But union leaders say that increase will benefit only a small percentage of workers in the garment sector, which employs 4 million in the country of 165 million people. Low wages and trade deals with Western countries have made the sector a $30 billion industry accounting for 80 percent of Bangladesh’s exports.

Pakistan started to devalue its currency beginning from 2017 and until now it has depreciated more than 50% against the US Dollar, triggering a ripple effect across its export sector, and making it more competitive in low-wages industries. PKRUSD

With regard to garment industry, Bangladesh¹ had a per month minimum wage of $64 in 2018 versus $136 in Pakistan. However things have quite changed since then in 2019, Bangladesh has raised the wages to $95 and on the contrary Pakistan’s minimum wage per month declined to $107² due to massive currency devaluation.

However, the chances of the textile and clothing exporters increasing their share in international trade — both in terms of export value and quantity — despite emerging global opportunities are minimal because of the shrinking size of the industry. The industry’s capacity to produce exportable surplus has contracted substantially because of factory closures on the back of crippling energy shortages that hit the economy in the second half of 2000s, the previous government’s obsession for an overvalued rupee, lack of investment in new more efficient technologies and capacity, the controversial free trade agreement with China and so on.

However lower wages alone are not going to help Pakistan increase its global market share, due to lack of the production capacity as the above article stated. Government must work toward attracting foreign investment in the textile and garment sector., as well as encourage local industrialists by facilitating them with cheaper energy prices, and waiving duties and taxes on the import of textile machinery and its parts altogether.

1. A historical fact, Bangladesh was known as East Pakistan until the 1971 fiasco that led to division of the two parts. West Pakistan is now simply referred to as Pakistan.

2. The data is based on the source Renaissance Capital and adjusted to open market exchange rates, it may not be 100% accurate nevertheless provides a reasonable guidance.