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Part 2: Global Trade and Gen AI with Ami Daniel
53 Plays10 months ago
In the second and final part of this series, Ami Daniel, Co-Founder and CEO of Windward, joins Host Brian Glick, CEO of Chain.io, to discuss:
- Global trade, job security, and the impact of technology
- AI-generated content and its impact on businesses
- The cost of capital and company growth
- The future of supply chains with emerging technologies
Ami is the co-Founder and CEO of Windward, a maritime data and analytics company bringing visibility to the maritime domain.
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Transcript
Introduction to Gen AI in Capital Markets
00:00:05
Speaker
Welcome to Supply Chain Connections. I'm Brian Glick, founder and CEO at Chain.io. This is part two of our conversation with Ami Daniel, who is the founder and CEO at Windward. If you haven't caught part one, go check that out. It should be right before this one, wherever you find our podcast. And in this episode, we're going to pick up with some extended conversations around Gen AI and the capital markets and some other
00:00:31
Speaker
Really fun stuff, including what we're excited about for the future. So I hope you enjoy listening in and this will be the conclusion of the conversation.
Impact of Global Trade on Quality of Life
00:00:49
Speaker
That global trade thing, I was at an event recently and there were a couple of very senior people from the US government or just like the US government.
00:01:00
Speaker
And they were talking about kind of the broad arc of the nineties, the two thousands, the two thousand tens and where we are today. And they took the position almost as an assumption, almost as the starting point of the argument. Oh, we all thought global trade was going to fix everything. And now it is clear that global trade completely failed, which seemed very extreme to me because I don't feel that way. No, I didn't feel that way as well. But I heard some like very, very smart and relatively famous people
00:01:27
Speaker
saying this it sounds like you think they're overreacting i don't think it could have fixed ever everything right because global trade doesn't fix ideology right if my ideology is you should be dead and i should get everything you have you know that's not going to get fixed by selling toys however i think good quality of life incentivizes people to leave peaceful in a peaceful way because you have something to lose and that my friend
00:01:57
Speaker
is an outcome of global trade. Because the easier you can import and export and trade in the free world and cost of selling it on the other side of the ocean is more normal. And there's less friction, the more peaceful and stable the world is. Because if you don't have wheat, you don't have bread, well, that's an issue. So I think global trade and frictionless global trade underpins everything we have. Think of it like Maslow. You have the pyramid.
00:02:25
Speaker
So if you think of the pyramid of life right now, obviously here downstairs there's Wi-Fi, right? You take Wi-Fi, we all die. But otherwise, right, there's security. So I think that food security and that, you know, financial security, and just that security, and then somebody who's lost a lot of this security over the last 52 days, I can tell you when somebody pulls a rug under you, my friend, you fall big time. So I think just the expectation of lower trade to fix everything is just disconnected from reality.
00:02:54
Speaker
So if you have irrelevant expectations, you know, don't be surprised to get disappointed, but perhaps just set the right expectations. It's part of it, but it's not all of it. So that security and that, you know, like having a job and, you know, a thing we went through here in the U S over the last 60 years is a lot of the jobs, things like mining and what have you, there was always this discussion of, Oh, well in net we're going to have the same amount of jobs. So they're going to be distributed to different people.
00:03:21
Speaker
that the person who is doing the mining is not the person who moved into the automotive manufacturer and then eventually into the accounting firm.
Generative AI's Role in Logistics
00:03:30
Speaker
AI, generative AI. I know you have a lot of thoughts and that people are seeing that as a threat to certain people's stability, but where's your head around AI? First of all, I think every technological breakthrough is a threat to people's stability. I agree completely. However, you don't have a choice. Nobody has a choice. It's like, great.
00:03:49
Speaker
Let's say it's a threat. Now what? Nothing. Are phones a stability to pigeons? Probably yes. You used to send letters with pigeons. Actually, maybe it's a benefit to pigeons, I guess, right? Did pigeons like to send all these letters? I don't know. Yes, absolutely. Phones and the telegraph are a threat to pigeons. For the job security of pigeons, I'm your present. Not to anybody ever phrase it this way. But yeah, Gen.A.I., first of all, I think let's take a step back, you know, especially in logistics, by the way, but in everything,
00:04:19
Speaker
We have so much unstructured data. When I say unstructured data, I would say contracts, words, emails, everything that is not a table. Most of the technology people use, SAP, for instance, it's basically a bloody big table with a lot of functions on it. But SAP takes everything you have in life, all the SKUs and so forth, and puts it into a big table and allows you to create actions on it, like query this, query that, check this, check that. That's great. Beautiful. I think generated AI has the potential
00:04:49
Speaker
to take all the rest of the world, which is the documentation, the bookings, the emails, the PDFs, all that, and have the same effect that you could have today putting everything into a big table on. And nowhere it is more relevant than logistics, where I spoke to one of our customers this week, and I saw, obviously, you know that, right? But what does it take to move a box? Oh, my god. I saw like quotes in five languages.
00:05:14
Speaker
and three currencies and five tariffs and three agreements. And it's one box, one box, one box. You know, they do 300,000. That's one box. Just think of the scale. So I think that's what gets me excited. Is it a threat? Yes, absolutely. Now you have people reading that and manually doing it, reading this document and calling this guy and this guy and so forth. Of course, can be automated. Absolutely. Yes. However, I think history shows. And by the way, most of the executives I meet all say to me,
00:05:44
Speaker
We don't like cost reductions. So what is your response to that comment? You don't like cost reductions? No, it's funny, right? Because they never end up as cost reductions. Ah, no, I've seen this argument. Yeah. They don't like you justifying your ROI by saying, Oh, you're going to remove three heads because they never get rid of the three people. Exactly. That's the point because of labor laws. I have personally kicked people out of my office. Yeah.
00:06:09
Speaker
for coming in and saying, my software is going to save you three people. I've watched the CFO did this one time. He literally looked at the sales guy and goes, which three? Yeah, exactly. Are you going to walk over to the desk and fire them for me right now? I think he said, I can save you 10 hours a week. But I think life is that, especially by the way in logistics, these are hyper-specialized people. They might be working for you for 17 years. You save one thing to do. You may create three other things to do. You want to use them more efficiently. So I've seen people say that they don't trust.
00:06:39
Speaker
promises for cost reductions. They trust things they can connect revenue to. That's a very, very different thing. So in my view, Generated Vi absolutely is a threat, but you don't have a choice. So if you can't beat them, join them. I gotta say, I think most of the people I've saw using, looking at products with Generated Vi are pretty shallow because they were like, Oh my God, let's use LLMs for what? Let's do a chatbot. Okay, great chatbot for what? On our website, let's do a chatbot. Great. What's the value? What do you mean? What's the value? There's chatbot.
00:07:08
Speaker
So I think that's not necessarily the right thing to do. I think you should have a bit more imagination for that, but that's just hard work. We actually literally an hour before we're recording this, we were having a strategy meeting for us for next year and somebody was discussing threat of AI. We didn't decide to build a chatbot, but there was this discussion of like, what's the threat for AI to our business as an integration company? And the discussion we had was, oh my God, if we were selling the world's simplest integrations, huge threat.
00:07:37
Speaker
but it's the difference between driving a self-driving car on a course and on a road. When these things hit the real world, it's a lot more work than just writing the code. Right? So yeah, of course, a hundred percent for what it's worth. And I think most people don't get it. There are not many actually Gen AI products which make money right now because it's hugely expensive. So I think when building a product, you need to understand, and I've seen a company by the way, in the space,
00:08:08
Speaker
that has a great business that sells for $2 a box, but it costs them $5 a box to serve that. Obviously, that's a challenge. I see a flaw in your plan. Yes, that's a problem. Obviously, by the way, the investors who gave them whatever, just short of $100 million, didn't see that flaw because the projection said at some point it's going to flip and it's going to make a lot of money. Similarly, at some point was, I guess, down the road and
00:08:32
Speaker
They never got to that road, nor can I see that road right now. And I think it's also a consideration when you build a Gen AI product, what is the problem you're solving? You need to make sure that the customers will be willing to pay enough for you to make money because I understand why it's good for open AI. I just don't understand why it's good for me. And by the way, the second thread is for companies because if you don't have a deep product, I think Gen AI allows enterprises to jump a few levels or skip a few levels of innovation. Just throw an LLM on their data lake and ask questions.
00:09:02
Speaker
That will kill a ton of startups. So if your product isn't doing something unique, sophisticated workflow wise and so forth, but just organizing data, I think that's also a huge threat for you. But equally, you know, we signed up to a platform, a Genia platform on our internal data for us, because I think you can be about 30% more productive. And if you think about, you know, the cost of capital and so forth, then if you can get 20 to 30% more of your people,
00:09:28
Speaker
Maybe you can make more revenue. That's got to be a good deal. So I think that's also another one of the opportunities, I think. Yeah. And I think, you know, we're kind of in the same boat where we are using some very successful JNI tools, really the off the shelf ones, but they're individual tools, but they haven't changed yet the processes we do. It's like, okay, I need to code something. Copilot's going to help me code it faster. But I haven't changed the whole concept of the fact that I still need to develop.
00:09:57
Speaker
And I think that that's the jump that people don't realize how far we are between the sophistication of the tools today and the, Oh, I'm going to fire all my developers and just type in like a thought. And there's going to be a company. That's the hype cycle that's going on right now out there a little bit, I think. Yeah. You know, there's a good book called the coming wave, which I liked about AI kind of reflection AI. And I think it talks about the convergence of gen AI and biology.
00:10:27
Speaker
and looks at what can this do? And I think in the next five to seven years, it can do a lot. Having said that, by the way, I think it's moving so fast that I spoke to a few people who've been building things since Jan that right now are obsolete three times. So when do you get into the race and at what point and what size of company are you? In my view, that's the right time to get into the race. Assuming you can build a product that adds value, otherwise just add cost. Basically, if you just add a chat button or your data, it consumes like 50 tokens per query.
00:10:57
Speaker
you're just going to pay more and kill your margin with a high cost of capital. You know, so you need to be very careful, but also very imaginative.
Capital Costs and Startup Investment
00:11:05
Speaker
I don't know if that makes sense. So let's talk about that high cost of capital for a second and the market and the world that we're living in. Sure. Because can you explain for the people who are not founders or who maybe don't have to sit with finance every day, the impact of what that means that the cost of capital has gone up to our industry?
00:11:26
Speaker
It's very simple, by the way, I can also tell you an S&P, but basically you can put your dollars in a bank and get six or 7% interest right now with zero risk, zero, zero, nothing at all, and have it pretty much liquid. That creates an alternative, which is quite solid to alternative investments or to stocks investments. Cause if you look at the S&P 500 and you take out this magnificent seven, it doesn't make much more than 7% a year, 8%.
00:11:51
Speaker
Last year was awful, by the way. This year is good, but again, take them out. And it's very weighted towards, you know, Microsoft and Google and meta and so forth, Nvidia and Tesla. So that means that there is less will to take long-term investments like VC, which are not really liquid. Cause if I put money in chain IO, I need to wait for your exit. That could be next year. It could be three years, could be 10 years. I don't really know. And maybe I have a safer bet that is liquid. So less people want to invest in VC money.
00:12:20
Speaker
or in private equity money. And their hurdle rate, because in private equity, for instance, they have a hurdle rate, which only above that, they get paid a success fee, has gone to like 12% because of the interest rates and something called IRR. So that means it's hard to raise capital. By the way, also in the public markets, you need to be a better company to do that. So in the VC model, companies used to die. Basically in the VC model means out of every 10 investments, one or two is
00:12:46
Speaker
Tremendously successful six seven die and there's a couple that are like, okay in the last 12 years None died like none They always found people who are willing to put a more capital in because the cost of capital was zero So you didn't have an alternative investments could make six hundred percent So we were looking for that right the markets kept going up So it kind of was a cycle with more money more money more money The outcome is it's harder to raise capital
00:13:11
Speaker
You need to look at the economics like how much does it cost you to acquire a customer or the SDR phenomenon which is just raising the cost of sales. So all of these fundamental economics the rule of 40 which means EBIT plus growth needs to be 40% is becoming popular again. And that's why you see the pursuit of unlimited growth going away a bit because that influences everybody.
00:13:37
Speaker
because everybody in the market becomes more capital conscious, more investment conscious because their valuations are dependent on that. They have less capital, less valuation. So in the public markets, you saw in NASDAQ, growth companies, according to, I think it was JP Morgan, the growth haft from 38% on average a couple of years ago to 19% last year.
00:14:01
Speaker
Just halved. Why? Because the cost of capital is higher. People buy less. There's also a bit of recession because of that, because people are not spending their money. They're putting in the bank and getting 6%. So all of this is interconnected. The outcome is if you're in a company which is not well-financed, you might die. And a good example, by the way, is Nautilus Labs. And I know the company. I think very highly of them. They're a great company. They're in the shipping space. They're doing decarbonization, fuel consumption. It was just acquired kind of in a
00:14:29
Speaker
last minute sale by downlink, which is a Danish company. And I suspect to see more of these. Unfortunately, it's not an amazing exit. And again, I think they're a great company and very smart people, but you know, sometimes it's just tough. I think one of the things that I've noticed that I didn't understand when I raised money for my company and that I think a lot of people understand is that the hidden third party in a VC transaction
00:14:54
Speaker
is what's called the limited partners, which are usually a pension fund, a huge corporation, somebody who's got a lot of money that they have to invest. When you ask a random person on the street who may be generally aware of what VC is, they'll say, okay, the venture capitalists investing companies, that's not actually true. The venture capitalists just direct the money from these big pension funds to companies. It's not their money that
00:15:24
Speaker
usually that they're investing, right? They might be a little bit, but it's this kind of very cold world of talking about the percentages of interest in whatever is what matters to the venture capitalists when they have to raise their money. Sure. Right. And the amount of people who want to invest in that, of course. Yeah. And I think the public perception is much more of that venture capitalists are gunslingers than they really are.
00:15:49
Speaker
Right. Yeah. I think they've run slingers at all. And by the way, I think you look at E2Open, which is a public company. It's really interesting. I think E2Open, you're right now, the stock is at 3. something, which means like a billion two, but they acquired BlueJ for 1.7 billion. So just their one acquisition out of like 50 or 60 is more than the market capitalization now, right? That's single one. So I think that all the metrics have changed.
00:16:16
Speaker
which I think people have started talking about in the last couple of years, which is kind of our mantra, sustainable growth, which is how do you grow in a sustainable way?
Shift to Sustainable Growth in Tech Industry
00:16:24
Speaker
You'll bear a lot of cash. You have a healthy business with margins. And I think it actually changes the way you run the company because you're more cost aware and more capital aware. I'm hyper capital aware about every daughter. I think it's the right way to run the business by the way, as a mission driven founder, right? Both of us, I think for me, at least I've said a couple of times this year,
00:16:44
Speaker
I prefer to operate in this environment. I know it's harder to sell, but emotionally I prefer because things make sense to me because people who are being successful, the ones who are being paid for the value that their product is producing. And that in my mind makes a lot more sense than people are being paid based on the value of how well they can tell the story about what their product might produce someday in the future.
00:17:11
Speaker
Yeah, but that's also not because of capital rates. That's, I think you're operating in logistics, you know, area where COVID was really like, so I think I connected also to that outlier. I think broadly saying technology, and I've seen this through a few industries, sometimes had a lot of promise and also a lot of disappointment. So I think what you're saying, I'm seeing this in the visibility space where a lot of people, you know, I know I see this company who you pay $600 a year and they haven't integrated data because they can't.
00:17:38
Speaker
For two years. So they're paying the check, but not even using it. That doesn't make sense to me. Or people getting data and not translating that data into an outcome. So I think what many traditional industries understand is that when you buy technology, you need to change how you work. And that's the job of the CEO or the CFO or the COO or the CTO. You can't just buy stuff and not change how you work. That's just a waste of time. And also the tech companies, it's their job. And I always reference to my sales guys.
00:18:04
Speaker
It'll challenge your sales i like the book challenge your sales because like the type of thinking because it's about partnership with your customer and what are the outcomes they can achieve. When there is success for we're successful horses here is a product come you know sign this and this and this because they end up getting disappointed it's always bad for the long term i always been longing for good or bad. I agree kind of wrap up like what are you excited about whether it's the company whether it's with the industry anything kind of like what's got you jazzed up.
00:18:34
Speaker
Yeah, first of all, I'm moving to London with my family that gets me jazzed up before Dean Jan. So it's a fresh way to look at the world, you know, fresh opportunities, fresh area, you know, so London is a great place also for AI. So I'm jazzed up about that. But I'm also jazzed up about just the opportunity to build I think right now.
00:18:53
Speaker
with the revolution of generative AI, I think there's so much opportunity to enhance and improve things we've done previously differently. So I'm really invested in that because I think you can build a new generation of products to solve completely different problems based on the platform we've built. So I'm jazzed up about our size, a couple hundred customers. It's much easier to build a product that way by the brand, the ability to build a global business. I also think that I just feel more comfortable and confident than I was before.
00:19:22
Speaker
Like getting to where we got today. And I think this has been our best year ever. I'm jazzed up about the opportunity to build more and make a bigger difference.
Generative AI and Global Supply Chain Innovation
00:19:32
Speaker
And I think on the global stage, that's super exciting because it's just the right time. A lot of people try tech, they're disappointed. If you build the right value proposition, you've partnered the right way, you can make a huge difference. And maybe I'll just reference that and I'll finish that up. I had a really interesting conversation with the PE a couple of weeks ago and they made me... So what do you think about supply chain?
00:19:50
Speaker
He said, when you say supply chain, what do you mean? They said, oh, what do you mean? We mean stuff in containers. And I said, uh, well, I think of supply chain differently. Like the cargo of grain in a bulk vessel is still supply chain because it's used to make bread. So I think viewing the world through these glasses of supply chain is everything that moves raw material that ends up as a finished product source to sold and the understanding of how to use AI to improve that reduce friction.
00:20:18
Speaker
That's fresh perspective, not many people have, and I'm super jazzed about. And just the fact that there's a lot of opportunity in the world, you know? That is an awesome place to wrap and really appreciate you taking the time. I know it's been chaotic on so many levels for you lately, so we genuinely appreciate you being here and sharing all this with us. And I could probably, just your last three sentences there, I have another hour's worth of stuff I want to talk about, but we'll save it for another time. Save it for a beer, my friends. And yes, again, thank you so much for being here. Thank you so much.
00:20:48
Speaker
Well, thanks again to me for a tour de force conversation across two episodes here. Even after we stopped the recording, he and I were just continuing to chat and so excited to talk to him more about all of these topics. So hope everyone enjoyed it. Too much for me to summarize here in a short little bit. So we'll have, again, links to where to find more content about Windward. We didn't really get into too much what the company does, but we'll have the links there for you.
00:21:19
Speaker
Again, thank you for listening and we'll look forward to chatting with you next time.