This week’s podcast is about how “traditionally great” logistics businesses like DHL and ecommerce giants like JD Logistics are both doing major digital upgrades in logistics. It’s a big unknown but it all looks pretty attractive.

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Welcome, welcome, everybody. My name is Jeff Towson, and this is Tech Strategy. And the topic for today, JD Logistics versus DHL in Smart IoT Logistics. And this is kind of an area I think people don’t pay a lot of attention to because it’s not terribly sexy or interesting. Well, I think it’s interesting, but most people don’t, which is the logistics networks that are sort of the backside of e-commerce. And there’s a lot of interesting stuff going on there. There’s a lot of companies with very powerful economics and very attractive moats that have always been there. And it’s just sort of becoming more and more interesting, definitely in China, definitely globally, less so in the US, but I think that’s probably on the way. So I want to talk a little bit about this today, mostly because I’m always on the hunt for companies that I think have fairly powerful positions. And I just think it’s a great place to hunt. There’s a lot of them in this logistic space, especially within China, especially globally. Now, first, let me apologize for being late this week. It’s Wednesday when I’m recording this, so I’m about three days behind. I’ve been on the road a lot, and it’s been kind of tough. COVID shot, which really knocked me out. The second Pfizer dose was really a doozy. I’ll talk about that at the end. I flew around the US into New York. I just landed in Guadalajara a couple hours ago, so I’m sitting in an Airbnb here. I thought I’d do this. I actually tried to do this last night at JFK Airport, and it was a total disaster. Like, the background noise was crazy. I gave up after about 15 minutes. So anyways, finally sort of back online, and I think this will be kind of a fun, but probably a short topic for today. Now, those of you who are subscribers, I’ve sent you A decent amount on JD Logistics, which has gone public recently in the last week or so. Really interesting company. Kind of hard to take apart because it’s sort of a unique animal, but a lot of interesting stuff going on. I’ll probably send you some more on that. But the other company I’m teeing up is Truck Alliance, which has filed the Go IPO, and this is yet another China tech company which most of the world’s never heard of. It’s basically like Uber for trucking. for freight matching people who want to ship stuff with people who have trucks. And because it’s China, it’s big. And I used to make fun of the name, Truck Alliance. I thought it was not very interesting. And then they changed the name to Man Bang, which is in English, it’s really funny. In Chinese, it sounds a lot better. But in English, I laugh every time I hear about Man Bang, which is spelled just like you think it is, M-A-N-B-A-N-G. It’s my second favorite bad translation of a Chinese company. Well, really third. Number two, there’s a retailer in China called Hot Wind, which is the shoes and stuff. So you see all these stores and they write on English on the front. Hot Wind, which makes me laugh. My favorite all-time one, there was a hotel in Shenzhen, this must have been 10 years ago, where there’s a word for concept in China, which is 旧意, and it’s a cool word in Chinese. It’s sort of, so it was like new concept hotel. but they translated it wrong to Conception Hotel. And they put it in these massive letters on the side of the hotel. They were like 10 feet tall. And so you’re walking in Shenzhen and there’s this big sign on the hotel of Conception Hotel, which is really, I don’t know if it’s still there, but it’s a great place to take a girlfriend, too, just to, if you wanna get a good reaction. I think they took it down eventually. Anyways, gonna talk about Mandem, Truck Alliance, we’ll say Truck Alliance, in a couple days. And let me think, what else? Those of you who aren’t subscribers, feel free to sign up. You can go over to jefftowson.com, sign up there for a free 30 day trial. Standard disclaimer, nothing in this podcast or in my writing or website is investment advice. The numbers and information from me and any of the guests may be incorrect. The views and opinions may be incorrect or no longer relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let me get into the topic. Okay. Now, the concepts for today, which I’ve listed in the show notes, and you can always find these in the concept library, I want to talk about scale economies by virtue of geographic density. Now, there’s a lot of ways you can get scale economies. You can get them on the demand side. We call those network effects. You can get them on the supply side. And there’s multiple versions. There’s purchasing economies. Hey, on Walmart, I can buy stuff cheaper. There’s geometric ones where, you know, the size of tankers increases by volume greater than the surface area of the tank itself. But the one that’s interesting here is scale economies by virtue of geographic density. And this is a pretty big deal in logistics. It’s a pretty big deal in companies like DD and Meituan, which are showing economies of scale because of their density of order and routes and activity. within a specific geography. You can actually get cheaper and cheaper per unit. We’re seeing a lot of that play out, so it’s kind of an important thing. So that’s idea number one, scale economies in geographic density. And I’ve listed them in the show notes, or I’ve listed them on the concept library, the multiple types of scale economies. There’s four or five you want to be familiar with. The second one is standardization and interconnection network effects. This is a type of network effect. that comes from either standardization of a media or file format type, like everyone uses PDF. I talked about this in the Adobe episodes. But also by virtue of interconnection, basically the more people that use a certain type of format or standard or size of the railroad tracks, the more easy it is for them all to connect. And therefore, the value goes up with more usage, i.e. a network effect. Also called the demand side economy of scale, but I don’t usually go for that. Those are the two ideas. They’re in the show notes. Anytime, you can go to the concept library and find them there. Now, companies like FedEx, UPS, DHL, they’ve long been on my radar as companies with particularly powerful competitive advantages and usually attractive unit economics. I came across this, I don’t know, eight years ago, nine years ago, because I spent a period of time, a couple of years really. reverse engineering every Warren Buffett deal that I could find. And I mean, I went all the way back to the 60s. Berkshire, Sanborn Mapping Company, all of this stuff. And I noticed over the years, he would get attracted to companies like this, like UPS, like DHL, like FedEx, because of their sort of interesting network based structure. And that’s really what they are, their network based business models. They’re just in the physical world. as opposed to in the digital world, where we’re making digital connections. We’re making physical connections. And generally, the difference between those is the power of a network has to do with the number of interactions that are valuable versus the number of nodes in the network. So as you make more people put more people on Facebook, those are nodes, the connections between people increase at the square, more or less. But the value of those, so the number increases, which they call Metcalfe’s law, which I don’t really buy very much. But generally, the value does increase to some degree beyond the number of the nodes. It’s beyond linear. OK. The physical version of that is a bit different. Because when you’re talking about Facebook, everyone is connecting to everyone. If we have five people on Facebook and the sixth person joins, we didn’t increase the number of connections by one. We connect basically by six, or by five in that case. Physical networks don’t work that way. Physical networks are often called radial networks, where you have a hub and spoke model. Because it’s not like every place you can ship from has a direct connection with another place that can receive it. Generally, they have to go through a hub. And then it sort of does hub and spoke. So the network effects are less powerful. But they’re still there. So you can sort of see ubiquitous network versus hub and spoke network, often called a radial network. But physical. goods usually up. When you’re moving physical goods as opposed to digital information, that’s usually what you’re talking about. This is what airlines have. This is what trucking has. Lots of stuff like that. So that’s kind of interesting. My main thing is always competitive advantages. So these types of businesses, FedEx, DHL, usually they sort of do single service logistics. Like FedEx just does express delivery. Maybe they might do one other. UPS does more big ship. boxes and things like that. You can move into freight. That’s another. So these are sort of single service logistics networks, for the most part. Although JD Logistics is doing sort of uniform, multi-service logistics services. OK, so that’s one thing that’s attractive. The other thing that jumps out at you when you start looking at these businesses is they have a nice secular trend underneath them. I like sort of secular trends. the rising wealth and spending of Chinese middle class families. That’s my North Star. That’s my 10-year secular trend, really 30-year secular trend. But there’s other ones. One of the interesting secular trends is the number of physical goods that move around in a geography appears to go up with the wealth of the geography. The more people there are in the US, the more money the people in the US have, the number of packages that just move around in the continental US seems to go up and up and up. It appears to be a secular trend. I don’t totally understand it, but we’re definitely seeing that in China. I mean, if you ever wanna have, I won’t go through the numbers, but if you Google express delivery packages in mainland China over the last 10 years, the numbers have just gone through the roof. It dwarfs the US now. I mean, these numbers are like a rocket ship going straight up. The number of packages moving around mainland continental China is unbelievable. And it just keeps going up. So it’s got two of the things I like. It’s got a long-term secular trend. It’s got some powerful competitive advantages. And then outside of that, it’s pretty understandable. You can actually take it apart. The regulatory aspect is not that difficult. The one sort of unknown when I look at the sector is the role of technology. Because traditionally, a logistics network has been buildings and people. You lift stuff off the truck, you put it on the warehouse shelf, then you put it back on the truck. It’s kind of trucks, warehouses, and people. Well, now it’s becoming digital. And that’s what JD Logistics is sort of on the forefront of, in China. But it’s also like DHL is doing similar stuff globally, because they have a global network. JD has a regional or mostly country level network. So that was kind of the point for this podcast, was look, this is kind of the big unknown within this fairly attractive business. And I thought I’d talk about what two players I’m watching are doing, hence the podcast. Now, when you’re looking at network effects, and networks in generally, generally global networks are the best because they’re the hardest to reproduce. They take a long time to put together. And they’re just better. But you need a product. Most of times when people talk about global networks and global network effects, they’re really talking about a bunch of local ones that one company tends to be doing. DD would be like that. Uber would be like that. Yeah, they have these networks. But it’s most likely local. And then they’re just in multiple countries. They’re not really global. They’re more like multi-local. But there are a couple. What you want is you want an activity itself, which is inherently cross-border. That’s why a company like Airbnb and Ctrip are so interesting because tourism is inherently cross-border, and the network effects that Airbnb has and that Ctrip is absolutely trying to build are global. Very attractive. Well, you can get those in payment. You can get those in tourism, MasterCard, Visa. But you can also get them in logistics, and that’s what DHL has been building for decades and decades. It’s $%&$. mostly about shipping cross-border. If you look at DHL in the United States, it’s mostly going to be about shipping outside of the US, depending where the company’s from. I’ve visited a couple of these facilities in China over the years. And in China, they’re not really allowed to operate domestically very much, the foreign UBS DHL at FedEx. So what they do is they do the cross-border link. So I went to one of them. Was it DHL or FedEx? I think it was FedEx. I went to one of their facility in Guangzhou. This was like a decade ago. And got to tour around and met everyone. They were basically doing the cross-border piece. So that’s kind of what we see. But DHL has a global network. That’s why I think it’s really, really interesting. Or second to that, I like big national economies like China and the US and the EU. And so JD is a good example of that. So that’s interesting. But when you start looking at Asia, Asia is really, really interesting for logistics. I mean, there’s a lot of big things happening here. One is this idea of, OK, it’s a big rising middle class. Chinese middle class families, Asian middle class families, that’s my North Star. If that ties to logistics usage, which it does, that’s fantastic. It’s about as good a middle class story as you can find anywhere on the planet is China, Asia. Really, I think it is the best one, but that’s my opinion. OK, second, that’s a good driver for logistics. Second, you have this massive consumer e-commerce phenomenon of China, South Korea, Southeast Asia. Well, that directly links into logistics, right? I mean, if you’re buying stuff on Taobao, who’s shipping it to you? Or JD. So you get this e-commerce driver as well. And then the third piece we’re seeing now is you get this industrial internet, one of the things Asia has that makes it so different. is consumers. Another thing they have is the manufacturing base for most of the world. Well, that manufacturing base is being digitized, upgraded, and connected directly to consumers, and retailers, and business. And how are they doing this? Well, they’re connecting through the logistics network. So the whole sort of industrial internet is enabling cross-border. I talked about Shein last week. It’s connecting to C to M. I mean, there’s at least two to three major things happening here that are going to drive growth in logistics. And they’re kind of sitting at the intersection of all of this. And then if you really want to go into a bit of a niche, you can start looking at agriculture in China, which is a problem. Lots of small, low productivity farms, they’re all being upgraded right now. They’re all being upgraded right now. Again, logistics farm to table is a big part of that equation. And Pinduoduo is doing a lot of this. So when you look at the major e-commerce players, everyone’s talking about logistics. When you look at the major manufacturing players doing digital, they’re all talking about logistics. There’s just a lot of big, let’s call it, tailwinds happening in logistics in Asia. OK, if that’s sort of the lay of the land, what’s different right now? Well, what’s different right now is something I’ve talked about quite a lot on this podcast, which is that the physical networks for logistics and supply chain management are becoming digital. becoming automated, they’re becoming connected, and they’re increasingly becoming smart. It’s a big big phenomenon. Asia is definitely the frontier. I don’t know anyone in the world who’s doing what JD Logistics and Tanya are doing. I see smaller versions of this in places like South Korea, but the scale of what they’re doing is pretty amazing. I’ll put a link in the show notes about how JD, I think I just I described JD Logistics as Smart automated logistics at scale. We don’t know what that is. We don’t know what logistics means when we make it digital, connected, smart at this level of scale. We’ve never seen that before. Anyways, I’ll put a link to that article if you’re curious. But I basically described that as a three phase situation. And as far as I can tell, JD Logistics and Tynow, which is Alibaba’s thing, are basically doing the same playbook. which is phase one, they’ve already built the physical structures. That’s been done since JD started building out their own in-house logistics network in 2008. Alibaba has always sort of done it more asset light through partnerships, although they’re kind of moving more of it into house these days. But they’ve been building the physical network for a long, long time. And they cover every one of China’s little cities now. I mean, they’ve covered the whole geography. What they’re doing now is sort of a three-phase thing. Number one is they’re digitizing and standardizing. So you take a dumb system and you start putting in sensors and cameras and GPS in every truck. And they’re making robots and they’re doing AI and they’re connecting one factory to the next, to the warehouse. It’s like when you. Everyone’s been building the railroad tracks for a long time, and now what they’re doing is they’re making them standardized so that they can all connect to each other. And for example, like JD Logistics and their IPO filing, they talked about how they have about 800 warehouses in their network, which all run the same software, their warehouse management software system. But they also have 1,200 cloud warehouses. Now, these are warehouses that other people own. But they plug their software into that and basically allow them to connect to their core network. So once you’ve standardized and digitized, it gives you an ability to sort of bring in other physical assets into your network. Because what really matters is not the building. What really matters is the software and the network connections. So they’re digitizing, they’re standardizing, and there’s a lot of experimentation going on, a lot of robotic stuff. I visited the JD Robotics Laboratory a couple years ago, which is sort of in southeastern Beijing and they’re building their own robots, you know, that pick and sort and I visited their smartest warehouse, which is their Shanghai number one warehouse, which is about half automated at this point. A lot of the stuff, taking things off trucks, putting them on trucks is still physical labor, but once it’s taken off the trucks and put into the racks. Then the racks are all identified and data driven, and things can be pulled from racks through automated systems. So the robots just scale up and down the corridors and pull what they need. So it’s about half automated at this point. And people are figuring all that stuff out. But basically, digitize, standardize, and connect. That’s phase one, which is I think they’re pretty much done with that. OK, phase two is you begin to open this network up. to other participants, other developers, outside players. And the analogy, which is not a great analogy, the analogy is this is when Steve Jobs launched the iPhone. And at the beginning, it was only going to be by app developers that worked at Apple. He didn’t want other people’s apps in the App Store. And then somewhere along the way in the first year or so, somebody convinced him, no, no, you want to open it up to developers. You want the App Store. You want the platform. the ecosystem, but then you want a developer ecosystem to build all these millions of apps we use. So they open the system to a large degree. OK, JD looks, from what they’ve told me, that’s what they’re doing. They’re going to open the system up to people who can write apps, to people that have warehouses, to people that have trucks. And all you do is plug into the system, and suddenly everyone can participate. And the system gets a lot, lot smarter. That’s phase two. sort of open the system and become an ecosystem. Phase three, make it smart and increasingly automated. So you’ve got this system. You’re gathering the data. You have all the cameras. You have all your robots. And you’ve got 5G, and you’re connecting it to the cloud. Well, you’ve got the AI running in the cloud, or to some degree edge computing in the trucks and in the robots. And the thing just gets smarter. It can see everything. It can move everything. And increasingly, not only can it do prediction, which is what AI does, but it can also make the decision and move the trucks themselves, move all the robots in the warehouses, reconfigure the warehouses. Increasingly, we’ll see a smart and automated system. So that’s kind of where we are now. It’s like we have a cool business model, which is a logistics network based on people and buildings and trucks. Now it’s being digitized and standardized. That’s phase one. I think it’s basically done. open it up to developers and other ecosystem partners. Phase 3, smart and automated. That’s where we’re going. And JD Logistics has been talking about this for years. It’s pretty impressive stuff. Now within all of this, the tech that everyone’s been talking about forever is IoT, Internet of Things, which is kind of why I put that in the title of the podcast. And IoT is one of those things where, I mean, IoT is anything that’s a sensor. It’s a camera, it’s a temperature sensor, it can be anything, it can be GPS. It’s anything that’s gathering data, which can be lots of different types of things, temperature, your body, your heart resting, heart rate, what the camera can see. You’re gathering data by these little devices that have very different specifications than most smart devices we’re used to talking about. Very little connectivity, very little battery life. They have to run on a different operating system. So Harmony OS, which is now rolling out literally this week, which is Huawei’s new smartphone operating system to take on Android, which I’ve written about, that began Harmony OS as an operating system for IoT, which had very different specifications. And they’ve kind of adapted it to be more smartphone-ish or smart TV-ish. But it was for these little devices. Now IoT is one of these things. We’ve been hearing about this for five years. And if you want to look up some funny numbers, look up predictions for how many IoT devices will be in place. And you’ll see these big, huge predictions by the Goldman’s and the JP Morgan’s and the consulting groups. And they’ve all been wrong. Like five years, it was going to be billions. It never really took off like people thought it was going to take off. and they keep having to redo their predictions. And there was always kind of a missing killer use case to drive adoption of these things. And maybe logistics will be it, but whenever I hear IoT, I get a little suspect because I’ve heard the predictions for so long and none of them came true. So anyways, something to think about. Now, one of the perks, I guess, or interesting things about being a professor. I mean, I teach about the. you know, digital China, digital Asia, both in Beijing, Shanghai, and this year Bangkok as well. I get lots of student papers. Usually we do them in teams, they’re executive MBAs, they’re regular MBAs, even some undergrads recently out of Bangkok. So I get this, you know, stack of papers every couple months I go through and they’re always fascinating. Like I always learn stuff I didn’t know and companies I wasn’t aware of. So it’s actually kind of a fun part of my job. One of the papers I got a couple months ago was basically about what DHL was doing with their digital initiatives. Because I kind of knew the China Asia story pretty well, and then I wasn’t too familiar with what DHL was doing. So they did a bit of a deep dive into what they’ve been working on. And I just thought it was really helpful. And I thought I’d just sort of summarize some of the key points. But in terms of IoT, it appears from the paper that the two initiatives they’re doing are smart trucking and smart warehouses, which is not a big surprise. I mean, those are their main assets. Those are what make up their network. They’re people-based, but if you can digitize that and replace the human agents with digital agents, that has some benefits. Or if you just make the system smarter and more data-driven, you’re going to make a lot of benefits there. And that’s pretty much what I just said, JD phase one. That’s pretty much what they were doing as well. Get the data, get smarter decision making, have a better viewpoint and transparency into what’s going on, and go from there. It’s usually the first wave of any big digital initiative is that. So anyways, DHL, for those of you who aren’t familiar, I’m not going to go through it. It’s a big express delivery company, global shipping company. They do boxes. They do packages. They do express. Generally, I don’t think they do too much in the freight category. They might, but that’s not kind of what they’re known for. No, I mean, FedEx has always been mostly on the express delivery side. And then these other companies like UPS and DHL, they tend to move from there into maybe more larger boxes and things like that. But most of them don’t go to creating pallets and putting them on ships and stuff like that. So the general category, 220 plus countries they operate in. What I always thought was cool about them was the fact that their network is mostly global. And as I mentioned, I kind of like the network effects of that stuff. OK, so two initiatives that the students looked into. One was smart trucking, which began in 2018 at DHL, basically putting IoT devices integration into trucks and things as they move around. And they began in India. and basically had some pretty great results. What did they do? Well, first thing, big surprise, you get location data. You put devices on every truck, you suddenly know where it is. All the trucks are IoT enabled, which means they’re connected to the internet. And you’re getting what they described as 21 different telematic technologies to look at the truck, where it is, the status of the cargo, things like that. And it’s 24-7, so things become a lot more visible. Not a big surprise there. Monitoring temperature, digital sensors, and the cargo holds so that you can measure the temperature and you can even adjust it remotely. And third one, a 24-7 control tower. So suddenly, your centralized control tower at DHL can see everything. You can see fleet movement. You can identify issues. You can see where assistance might be needed. You can reroute fleets. Emergencies can all be handled by the tower. That’s pretty great. It all makes a lot of sense. I like situations where it’s sort of two way. Of the three things I just mentioned, most of that is one direction. The data comes from the truck, from the cargo, on temperature, and then the person in the control booth sees it and makes a decision. Oftentimes, you can get two-way, like the temperature control. If you’re reading temperature control in the cargo and it’s got to stay in a certain range for whatever reason, in theory, the control booth can then adjust the temperature in the cargo holds in real time. So in that case, it can be sort of bi-directional, which tends to be more interesting. So one, you get just better visibility, better transparency. Everything becomes smarter. OK, next sort of big benefit of doing this smart trucking initiative, better security, which is a big deal for trucks. I mean, people break into trucks. So you can see what’s going on, and you can have sort of a quick, rapid emergency team that can respond to accidents, security issues, whatever. That makes sense. Anti-theft measures, basically. Protect the cargo from pillage, theft. You can put sensors in the doors. You can put sensors in the container locks so you can see when certain things are being opened. Load securing. You know, you put things in the truck, is it locked down, is the truck balanced, are things moving around? That can help you with transportation damage and other things. Cross contamination. Let’s say you have a cold chain fleet so you’re moving things that are temperature controlled. And you need to desanitize or do sort of washing and for whatever reason. You can then see where each truck that’s had this is going and avoid cross-contamination. And then, of course, product integrity. You can basically show to your customer when you deliver, here is the exact route this thing took. It was never touched. So you sort of have this sort of service integrity measurement. OK. So. another wave. Another type of benefit to this, getting better service from your people and just overall, you can train your drivers. I mean, you don’t really know what your drivers are doing if you’re doing DHL and they’re out on the road. I mean, you don’t really know what they’re doing. Well, I mean, you can have sensors and see what the driver’s doing and, you know, you can obviously monitor them, which a lot of people don’t like, but you can also use that for training. You can see what they’re doing and give them feedback. And that should, in theory, increase the level of service. Or if not increase the level of service, it should decrease the variability. And you can get rid of some of the problem issues. In theory, you should be able to get greater reach over time. As the system gets better, you can track your trucks longer. You can start to put IoT devices into warehouses. As I kind of mentioned, like the cloud warehouse thing. When JD had its 800, or I think it’s 900, core warehouses, once they got the digital technology set, they could then extend that to warehouses they didn’t own quite easily. So it gives you an ability to extend into other people’s assets because you control the digital connections. And last one, get you some efficiencies. Big surprise. You start to get better performance. You start to get lower costs. You start to study everything. Onboard diagnostics, data science, predictive analytics, route planning, preventive maintenance of trucks. The whole system gets better and you start to get usually cheaper and more productive. So here’s the numbers that came out of that according to DHL 2020. 95% reliability for on time delivery with their smart trucks. a 50% reduction in transit time compared to traditional trucking, and basically 24-7 real-time tracking. So that was kind of the benefits. That’s all very convincing, and it doesn’t seem like a stretch. Okay, and next one. I think this will be the last one for today. Today’s going to be pretty short. Well, short for me. Smart Warehouse. Which, if you look at the JD Logistics filing, they talk a lot about their smart warehouse and the software and hardware they’re building for this. Yeah, big surprise. You got a lot of trucks. You got a lot of warehouses. This is where the idea of digital twinning comes up. Digital twin, I don’t know if it’s a verb, digital twin where you basically put sensors everywhere. You put them in every door. You put them on every machine. You put in the cameras. And then the software basically recreates a digital copy. of your warehouse. You know in Iron Man when he’s standing at his desk, Tony starts at his desk and the little visual of the device comes off and he moves it with his hands and he puts it on and looks at it. That’s kind of like a digital twin. It basically lets you visualize your physical warehouse in real time, which is useful. Anytime something happens, that’s useful. You can see what’s going on. But also the real power, a lot of the power. is it allows you to simulate new ways of responding and scenarios. And if we change this, what’s going to happen? Once you build the digital twin, you can start running scenarios. What if there’s a fire? What if we change the operations here and we move that machine there? I mean, you can start to predict all of those things out, which is pretty cool. The ones they listed, they’re working on operational coordination. OK. 24-7 ability to respond and solve problems as they emerge. Fine. Decision making. Obviously, you’re seeing things a lot more clearly. You’re able to make decisions. You can look at how resources are being handled. You can see congestion. You can see what the workload is, where the bottlenecks are. They talk about proximity sensors, collisions, things like that, security. Obviously restricted areas, you can see who’s going where. Similar to the smart trucking, you can have a big control tower that sees everything in real time. You can regulate the inflows and outflows of all goods to optimize time, efficiency, proper storage, fast storage, smarter system, just like the trucks. And then storage management, where are you putting things, how are you managing that over time, how fast is your inventory going up and down. Operational safety is kind of a big deal within all of this, especially moving items. People get hurt in warehouses on a fairly regular basis. It is actually kind of a big thing. Anyways, that appears to be the major initiatives they’re doing for IoT right now, according to what I’ve read and then this report we had done, or the students did. Interesting, pretty much syncs in with what we’re seeing at JD and Sanyao in China. The difference is one’s doing it at the national level. and one’s doing it at the global level, where they kind of interact, which is interesting, is JD is going global in terms of its supply chain. Most of its logistics network is China, but a lot of what serves Chinese consumers comes from places like Mexico, like avocados are a big deal from Mexico to China. So they’re building out their supply chains internationally. That’s JD. Alibaba, Cynia is more ambitious. They are building, as far as I can tell, a global logistics network. So they’re serving consumers in Southeast Asia. They’re serving consumers in Russia, Poland, Italy, Spain. So that’s probably more of a collision course with DHL, which will be interesting to watch how that plays out. But on the tech side, they both appear to be doing the same thing. And then I guess the question is, well, who do you think’s better at the software side? All the gazillion of software engineers that work at JD and Alibaba or at DHL? So let’s say we’re looking at Alibaba, JD, and DHL all competing with each other. Do you compete on the physical aspects, the trucks and the warehouses, or is all the hardware gonna become commoditized? If so, then… Maybe it’s about the software and the abilities of digital, in which case Alibaba and JD have tremendous advantages there in terms of their workforce and what they’re able to do. The other dimension might be the power of the network. Now in that case, DHL has a very strong global network. That’s kind of how I’m looking at the competitive diamond. Let’s say Alibaba and DHL go head to head. I’d assume the hardware is gonna basically be commoditized. So I’d be looking at, is it the power of the network, which DHL has, versus the power of software, digital, AI, which Alibaba is better at? That would be kind of the dynamic I’d be thinking about. OK. That’s pretty much what I wanted to talk about today. The two concepts, which I guess I didn’t go into in much detail, was economies of scale based on geographic density. And that’s really what’s going on with these network-based models of warehouses, trucks. You’re basically going for geographic density on the supply side, economies of scale. And then you complement that with network effects on the demand side. So you’ve got some pretty good, powerful competitive advantages there. And the other one was a network effect, which is based on standardization and interoperability. Now, that’s different. That’s JD connecting everything under the same standard so everyone can connect with each other. That’s closer to a type of advantage you get by standardizing PDF in file formats. So we’ve got three or four major competitive advantages playing out here, which are kind of fun to think about. But that is it for today. As for me, it’s been a crazy week. I’ve been flying all over. I’m pretty wiped out. I think you can kind of tell by today’s podcast. I’m only about half here today. I’m really kind of. I need to take a break for a day and just sort of recuperate. Um, but yeah, I was in, um, I was in Juarez, which is across the border from El Paso. And then in sort of the El Paso area, I got my second COVID vaccine and I took the Pfizer one and I’d heard that the second dose was a bit of a doozy and it really was. I mean, it was like, you get the shot, go home, hang out for 12 hours. I’m watching Netflix. About 14 hours after I get the shot, man, it just hit me like a ton of bricks. Fever went way up, chills, shakes, like my hands were literally shaking. It took me about really a day. I mean, that second day I was just at a commission. I started to feel better on the third day and then I was pretty much back to normal, but man, it does hit you. So that was kind of an experience. And now I’m in Guadalajara, which you can hear it’s raining now, it just started. It’s a nice pleasant city. I’m really just passing through. I’m on my way down to Mexico City I’m gonna hang out there for a couple weeks and finish this book finally And then it’s back to Bangkok unless Bangkok changes the rules again I keep getting news updates on how difficult it is to get back into the country So if they change the rules again, I may I may pull the ripcord and go down to Rio for a month and then try again at the end of July. We’ll see. Anyways, it’s kind of crazy, but I should be back up to speed in another couple days. So that’s it for me. I hope everyone’s doing well. Staying safe, having a good start to the summer, and cheers from Guadalajara. I will talk to you next week. Bye bye.