Ryan Petersen on Wealth, Negotiation and Munger

TL;DR

Import Genius turns public shipping manifest data into a searchable product that reveals which factory supplies any brand and which brands any factory serves, for roughly $99 to $199 a subscription. That structured-public-data idea grew out of frustration with fake Alibaba factories and became the pattern behind Flexport. The habit underneath both: notice problems everyone else has accepted as reality.

Transcript

all right today we're talking to Ryan Peterson Ryan's an interesting guy cuz he started out working in a pizza shop bootstrapping his own company to millions of dollars and now he runs flexport which is a multi-billion dollar company so he's kind of done both sides the big Silicon Valley game as well as the bootstrap Mak something out of nothing fo... Read More

Key Insights

• Import Genius works by taking publicly available shipping manifest data and structuring it, so a user can search any business to see its supplier, or any supplier to see every business it ships to. The subscription has stayed around $99 to $199 with almost no price increases.
• The fastest way to find a good overseas factory is to reverse engineer it rather than search for it. Instead of trying every supplier on Alibaba, identify the brand with the best quality and look up which factory appears on its shipping manifests.
• Alibaba's factory listings function like paid search rather than organic results, with placement driven by who pays. Alibaba's market cap is not driven by that original B2B factory search product but by Taobao, Alipay and its other consumer products.
• Schlep blindness, Paul Graham's term, describes being blind to the biggest problems in the world because you have accepted them as just reality. Petersen credits noticing and getting curious about those accepted problems as the origin of both Import Genius and Flexport.
• Paul Graham's superpower as a seed investor is seeing only what is possible if everything works and ignoring every other outcome. That is the correct posture in a power-law world, though psychologically hard, since most of the companies a Y Combinator partner backs will fail.
• A first believer functions as a short-term loan of conviction: someone believes in you more than you believe in yourself for a period of time. Once an entrepreneur has some success, lending that conviction to others becomes a role worth playing.
• Flexport.org is Flexport's humanitarian relief logistics division, handling refugee camp logistics and disaster recovery logistics for nonprofits. Paul Graham has donated millions of dollars to it and helped spread the word about the work it does.
• Both Import Genius and Flexport grew from the same two frustrations Petersen hit while working for his brother's scooter business: freight forwarders and customs brokers were painful to deal with, and finding a trustworthy factory was unreliable.

Questions & Answers

Q: What is Import Genius and how does it work?

Import Genius is a business Ryan Petersen started that takes publicly available shipping manifest data and organizes and structures it into a searchable product. For any business you can see who their supplier is, and for any supplier you can see all the businesses they work with. Subscriptions have stayed at roughly $99 to $199 and prices have barely been raised since launch. It remains a profitable business generating millions in EBITDA even while Petersen runs Flexport.

Q: How do you find a reliable factory instead of guessing on Alibaba?

Rather than contacting every supplier on Alibaba and hoping one is legitimate, work backwards from quality. Identify the brand whose product quality you admire, then use shipping manifest data to reverse engineer which factory actually supplies them. One founder in the conversation did exactly this using an Import Genius subscription; when the search returned nothing at first, a support team member searched further back, 12 to 15 months in the records, and surfaced a single manifest that identified the factory.

Q: Why did Ryan Petersen start Import Genius?

He started it out of frustration while living in China. He would use Alibaba to find a factory, show up at the address unannounced, and discover it was not a real factory at all: sometimes just a middleman, and in one case a group of guys in a warehouse with no equipment clearly faking the operation. Even giving a couple of days advance notice did not prevent this. Structured public shipping data solved the verification problem that Alibaba listings could not.

Q: What is schlep blindness?

Schlep blindness is Paul Graham's term, from an essay on his site, for being blind to the biggest problems in the world because you have quietly accepted them as just how reality works. Petersen says his own brand is noticing exactly those problems other people take for granted, then getting genuinely curious about what could be done to solve them. He describes the habit as compulsive, including doing bottleneck analysis on a restaurant cashier to figure out how to move traffic through faster.

Q: How did Ryan Petersen meet Paul Graham?

They met at a park before Flexport existed as anything more than an idea. Petersen was renting an apartment that had previously been Max Levchin's, which they knew because they kept getting his mail. Petersen's brother was in the Y Combinator batch ahead of him at the time. Graham would take his son George to a nearby park, Petersen would take his dog there, and the two struck up conversations that grew into a long advisory relationship.

Q: What is Paul Graham's superpower as an investor?

According to Petersen, Graham sees only what is possible: how valuable and how big a company could become if everything works, while ignoring every other outcome. That is arguably the right approach to seed investing in a power-law world, where returns come from the rare enormous winner. It is also psychologically difficult, because most companies a Y Combinator partner backs will fail, so the job requires a degree of deliberate self-delusion.

Q: What is Flexport.org?

Flexport.org is Flexport's humanitarian relief logistics division. It helps nonprofits with work such as refugee camp logistics and other forms of disaster recovery logistics. Paul Graham has been a major supporter of it, donating millions of dollars to the division and helping publicize the work it does. It sits alongside Flexport's core freight forwarding business, which Petersen built into a multi-billion dollar company after going through Y Combinator.

Q: Why does having a first believer matter for founders?

A first believer is the person who believes in you more than you believe in yourself for a stretch of time. The description offered is a short-term loan of conviction: you borrow their belief until your own catches up, which is enormously helpful early in a company's life. Graham played that role for Flexport by sending emails to top engineers praising the company, giving quotes to press, and helping sell the story to other investors. Successful entrepreneurs can then extend the same loan to others.

Summary & Key Takeaways

• Ryan Petersen worked at Domino's Pizza as a teenager, flipped scooters on eBay for his older brother and Michael K, then bootstrapped Import Genius into a business still generating millions in EBITDA, before founding Flexport, a multi-billion dollar company that went through Y Combinator. He has played both the bootstrap game and the venture-backed Silicon Valley game.

• Import Genius came from living in China and being burned by Alibaba: Petersen would show up at a listed factory and find a middleman or a warehouse with no equipment. Import Genius takes public shipping manifest data and structures it so anyone can look up a company's supplier, or a supplier's full customer list, for about $99 to $199.

• Paul Graham met Petersen at a dog park near his home before Flexport existed, when Petersen's brother was in the Y Combinator batch ahead of him. Graham called him an armor-piercing shell, sent emails praising the company to top engineers, and has donated millions of dollars to Flexport.org, its humanitarian relief logistics division.