From Penny Stocks to Predicting LogTech's Future

Welcome to the 65th edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Earlier this week, I looked at how inventory and sourcing strategies are changing during the supply chain crisis ™. Today, I’m training my gaze at consumers and whether we should be using the current crisis as a catalyst to rethink our expectations.

As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.

For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.

At some point in high school, one of my teachers set aside our normal lessons for the day and decided to have us do that age-old exercise of learning how the stock market works. He handed out newspapers that listed all the penny stocks (yes kids, that’s actually how we tracked the stock market in 1992), grouped us into teams of five, and challenged us to pick 10 stocks.

Each team was allotted $10 and we had to come up with a plan to disperse that money among the myriad stocks on offer. We would check a month later and see who had chosen well and, of course, who hadn’t.

The exercise was more like a lottery than a lesson in which companies actually had value. But I suppose it gave us at least a superficial insight into how markets worked, and how a small amount of capital could potentially grow or crash to nothing. None of us were Alex P. Keaton, so it surely helped to be introduced to this world. My main takeaway: leave this stuff to the experts. I don’t have a mind for finance.

This is all prologue to a crazy idea I recently had, one which I’ll share in this week’s newsletter. I’m going to start a dummy venture fund. Let’s call it LogTech Ventures for simplicity. Here’s how it will work. I’m going to draw up a list of 20 early stage companies (meaning in the seed to series A stage) that I would invest in if I could. Out of those 20, I’m going to randomly draw eight names and remove them from the list, assuming that I wouldn’t get an allocation in all 20 companies in which I want to invest. Out of the remaining 12, I will randomly draw three names in which I will lead the round and the other nine where I’ll participate.

I’m going to save myself the really hard part of venture by granting myself $25 million to play with (I have amazing fictional LPs who needed literally zero convincing to back a wise investor such as myself). Now for the hard part: what’s my investment thesis? Well, I’m going to stick to my area of expertise, which is tracking solutions that help importers, exporters, logistics providers, carriers across modes, ports, terminals, and warehousing operators manage the movement of goods. I’m willing to go a little upstream, into sourcing decisions and manufacturing, and a little downstream, into fulfillment and last-mile. I’m also willing to consider broad supply chain management and design platforms. I will definitely focus on two areas: solutions that are minimally invasive relative to other systems, and those that create platform opportunities. But the fund will mostly focus on core logistics activities and technologies that impact, enable, replace, or automate those functions.

Here’s the thing, and sorry to disappoint, I’m not going to publicly name the companies I plan to faux invest in. I’m first and foremost a journalist, and picking favorite companies or specific categories would put me in an untenable position. When I go on a podcast and a host asks me what technology I think will have the biggest impact on the industry, I’m happy to speculate on that, but I don’t have any skin in the game in that scenario. Putting even fictional cash into a company or category is a different story. My job is to observe and analyze the industry, to convene the top thinkers, to help buyers build themselves a technology procurement framework. It’s not to move the direction of the market, and publicly picking favorites might have the unintentional effect of doing just that.

I realize that last statement seems like a bit of a humblebrag, so let me assuage your fears of my ego growing too large, what with me overseeing a $25 million fund that I can deploy at my sole discretion. I don’t own a Robinhood account, my pedestrian efforts to pick stocks on E-Trade a decade ago ended mostly in tears. As I realized 30 years ago, this stuff is best left to the experts. So privately, I have very low expectations for my fund. Publicly, I think LogTech Ventures will be considered the most successful venture fund in the history of this asset class. I’ll update how this whole exercise goes over the next few months. Determining how successful I am is not feasible short-term. It can takes years to determine whether an early stage investment yields fruit. I’ll be leaning on my contacts in the venture world to help me determine how things like carry and follow-on can help me achieve success on an individual investment basis. First task is to draw up the list of 20 companies, and formalize a thesis, which I’ll be doing over the next week. Wish me luck!

Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):

• Been writing the last five years about uptake of APIs in logistics, and yet, as a report this week from ECU Worldwide found, there is much still that needs to be done. Interestingly, the report advocated for forwarders to adopt a blended approach, rather than a rip-the-band-aid off and only go API everything.

• More news on the seemingly everpresent project44, this time a planned expansion into South America, where carriers are largely small-fleet dominated and where ELD usage is still relatively low.

• My colleague Bill Cassidy talked to Relay Payments about them broadening their digitization of lumper payments into less-than-truckload.

And here are some recent discussions, reports, and analysis I found interesting:

• From a few weeks ago, but thought this was interesting from HBR on whether accommodating a new tool is worth it. For reference, earlier this year I explored how building a niche tool is really the only way for LogTech startups to get a foothold.

• Quick and worthwhile discussion on country of origin issues from QAD Precision.

• Here’s the on-demand replay of my conversation with FlavorCloud CEO Rathna Sharad. We covered a lot of ground so you’ll definitely want to set aside some time to watch (plus a really great Diwali-themed dad joke). Subscribe here to get alerts about upcoming episodes.

• I spoke with Troy Mix at the University of Delaware about the LogTech Map and where logistics technology is gaining traction. The conversation was so deep, he split it into two parts. Check part one here and part two here.

Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.