Hey, how are you doing? It's Patrick Escolas with another Banyan Tire Tracks Podcast. I have with me today, Brent Hutto of Truckstop. Again, he is –

Glad to be on.

He's a sucker for abuse, apparently. He's coming on again a year later. How're you doing, Brent?

Good to see you. I'm a sucker for Banyan abuse. Okay. Not all abuse, just Banyan abuse.

Very specific.

As long it’s you guys, I'm okay with it.

I like that. So, let's start off. It's been a year. I learned way, way more than I knew about Truckstop last time we spoke. But what's happening this year for Truckstop?

Well, customers have little bit of angst, because the marketplace has come back down to normal, after a historic marketplace. That's kind of a normal human reaction, and although it's been a bit of pretty normal marketplace. I would say this, Patrick, the thing is, is that they're just adjusting to a new norm, which is kind of the way it always works in trucking, because it goes up and down all the time. So, it's just the adjustment back to a new normal. A new normal freight marketplace. The economy has got its own issues and things going on with it, but a new normal freight marketplace. Although there's challenges within that, too.

What is that doing to pricing right now?

Oh, my goodness. Well, pricing went from a lot per mile. We had owner, operators, and carriers out there say, “Well, if I can't get $4 or $5 a mile, I'm not doing it.” It's like now, the average is like 2.30 a mile. That's the average of the whole marketplace. So, look, there's good freight to be had. There's always good freight to be had. But you got to know where to look for it and know what part of the country to look for it, in certain different times, in different geographic areas. But pricing has come down to be around 2.33 a mile, that’s the overall [inaudible 0:01:51], especially it’s on player. It's about 58 cents fuel surcharge amount. So, that’s like, you take 2.33, take 58 cents out of it, you see the real mile they’re operating within. You can make money on the fuel surcharge –

Not as much as you were used to.

Well, not as much. Yes, and then inflation is another problem. That's a challenge for any trucking company.

Right. And from what you've seen, are we expecting to 30 to kind of stay where it's at for a minute or go down or up? Or what do we think from there?

Well, what I would say to you is we're in a seasonal time period, holiday shipping. So, anytime there's hardship, there's more freight in the marketplace. When there's more freight, the rates go up. But that's going to be like a regular seasonal lift, probably going to be in the same standard marketplace, around 2.30 to 2.40 for a little while. And it may go a little lower than that for a short period of time, then it's going to come back up during the holidays, during the Thanksgiving and Christmas holidays. But for the most part, just kind of a Groundhog Day, it's going to be this same.

Same old –

It’s going to be the same thing for quite a while and really not predicted to come back meaningfully until, maybe sometime in 2024.

Okay. And with that in 2024, as far as meaningful, what does that mean? Is that a dollar up? What does that look like?

Yes, I wouldn't think so. Historic averages in our marketplace. Before the pandemic, it was about 2.20 a mile.

Got you.

That's when the fuel was about 37 – fuel surcharges about 37 cents.

So, it's very relative – okay.

So, we’re at almost, we're at almost 2.33 right now, for the average spot market freight. Next year, it could come up some in the rates, but it's unlikely it'll change dramatically. Look, we're not going to go back to the pandemic timeframe. That was a consumer driven change in our market, not a government regulation change, or not a normal market, freight market change. It was a consumer driven change. So, that's not going to happen again, because we're not going to go through another pandemic. Let’s hope not.

Right. Yes. No one is hoping for that. I agree. With that in, do you – do you, and we expect that, kind of same margin of what is that? So, maybe $1.60 between where that actually is with a fuel sur –

About $1.80 which is still profitable.

But you’re better at math than me.

I am from Alabama, but I can do math, okay?

I don't have enough in me to do math this morning.

Math was my thing.

Good. I'm sure that makes a lot of people feel more comfortable about what you have to say. That's right.

So, the thing is, what needs to get, like for instance, when – and nothing against – I’ve got no aspersions into politics. I just can tell you that administration decisions affect things. When our current administration decided to cut off the Keystone pipeline, we became more beholden to the market forces of what oil is going to cost. When oil is really high, recessions happen. When oil is competitive in the marketplace, recessions don't happen in the United States, and sometimes worldwide. But the point being is that fuel is such a determinant factor.

Yes. Say, it’s a key metric.

For the small players. The big players negotiate it really well, but it's still profitability. So, fuel is the big thing in the inflation, of course. Inflation being, we went through such a long period of low inflation and our dollar went further. Well, that affects everybody, especially truckers. They buy a lot of fuel. So, it's like 70% of their cost.

Yes, it makes sense.

So, it’s a big deal. The fuel and the inflation is a big deal. So, get those back in line, then the profitability the 2.30, the 2.40, the 2.50 is a good profitable amount. Yes.

Okay. And you mentioned two things that, I think in my next kind of question, kind of talked about the government administration, as well as the kind of the cost for those for those truck operators. So, AB5 went through. So –

AB5. Went through in California. 

Went through in California. Right, exactly.

Just in California.

But as we know, a lot of the nation kind of looks at California for how’s that work? Was that something we need to utilize or to follow up with? So that, we know, I talked about it with Anne Reinke of TIA last year as they were still kind of – it was still up in the air, whether or not AB5 would go or not. But one thing that I thought was interesting was, if the engine is 2010 or older –

That’s another part of it. 

Talk to me about that, because that's a cost.

You got two things.

And with that, yes, so answer that about what your thoughts are. And then I got to kind of another follow up question. How many trucks out there are affected by that?

Oh, my goodness. So, that's going to be a tough one for me to answer, but I’ll maybe get a –

I’ll take generality. That’s fine.

I’ll give it a horses and hand grenades answer, maybe. So, on the AB5 issue. That is not a new issue. It sounds like a new issue in our industry, but it's not. The federal government has been coming after – but that's not fair. Has been wanting the trucking industry to follow the independent contractor rules and regulations for a long time. I've been this market since ‘98. It's a pretty good time. That's pretty good, and it's always been a threat. The independent contractor – I always wondered why big fleets called their lease owner operators, independent contractors, but they're owner operators. Why don’t call them on – they call them independent contractors, because they want to make sure that they're emphasizing that their lease owner operators meet the independent contractor laws. Right?

So, you mentioned California. California is a very unique state, because they run their – they're able to run their EPA differently, because they have their own EPA, and they're able to run their approach to a marketplace very different. So, this is why California is so important in the overall transportation marketplace. This is the old saying, what happens in California eventually comes east, because California is a unique state for a lot of ways in which they vote, in which way they look at things. They're very environmentally conscious, more than the rest of the nation, and there's nothing wrong with it at all. But how does it apply to industry? Because the last time I checked, industry is pretty important in states,

I'd say so.

But the AB5 laws, when it got – when the Supreme Court decided, “We're not ruling on this, we're going to push it back to the state.” It meant because it was passed once already in California, it meant it went automatically into law, because it's already been passed. So, it was in limbo, because it went to the Supreme Court. So, once they refused, it went into automatic law. You've got about 50,000 owner operators in California, most of them on the trade side, because the two biggest ports in America are in California.

And then the other, because California is a giant in and of itself.

California is big. Lots of population. Most electoral votes. But here's the point about AB5. They've passed it. There are approximately 17 other states in the United States looking at passing AB5 laws, and it's all for one reason. It's tax reasons. You get more taxes if their employees, than they are if they're independent contractors. Because an independent contractor is an independent business. We are fundamentally, at Truckstop, we're against AB5 laws. We're not against the government trying to regulate things. That's a good thing. The FMCSA says, great. Sure. But they're not in this. This is a state thing. They push it back to the States.

But the AB5 laws change the status of the business has chosen to operate that way. So, they've chosen to operate as a leased owner operator, or an independent contractor.

So, It's kind of that imposition of will that you –

If you're a lease owner operator working for another fleet, California says you can't do that. You're really an employee, because your business isn't any different than the business you work for. That's where it doesn't meet what's called the – I think it's called the beep wrong. It doesn't meet that. So, this is what's going on. That's changed things fundamentally in California. But there has been not a whole lot of enforcement in it so far. So, it hasn't really had a huge impact, but it will. As more states come along that do this, then you'll find there'll be more pressure on the system. Now, the unique thing is that right now, it really only reflects and affects trucking in California. Because all the other people that have independent contractors that are like hairstylist and contractors. They were all excluded from the –

Really?

Yes, totally excluded from it.

Oh, I would have thought it would be a more of a blanket reform or legislation.

No. It’s not. Not at all. The Uber and Lyft drivers excluded. They did a very good job of litigating that and got themselves excluded, because all the Uber and Lyft drivers are independent contractors. They don't work for. They’re not employees. So, my point about this, there's a long answer, you think, AB5 can fundamentally change things because you're going to take about – if you look at the pie of owner operators that are out there, about 60% are leased onto another fleet. If they can no longer be leased on, and they have to become employees, changes this dynamic.

It's going to limit their options as well.

It can limit their option, or it forces them to operate their business differently. So, it's interesting. There's a lot of talking conjecture on this, not much to talk about now from an effect standpoint, but certainly something look at going forward. And then you asked me another question about how many – oh, the 2010 thing. But that’s another really big issue.

Is that driven, kind of from, as you talked about, California has its own EPA. Is that more of it from a green standpoint that they're doing that? Or is there’s safety aspect too?

Well, here's the thing. There's a big part of our population that disbelieves that we need to have the absolute cleanest air possible, nothing wrong with that.

Fair point.

But how you go administering that is very difficult, because you can't really administer it on to the driving normal consumer public, because it's very fragmented. It's easy to go after the trucking companies, because they're all aggregated under a certain number of companies. So, it's a lot easier to go, okay, well, you can't operate unless your truck only puts out this much diesel particulate in the atmosphere. That was all the regulations. So, it's called the 2010 CSA rule – not CSA. The 2010 EPA rule. I started in California, but then it was adopted federally. So, that made all –

So, this is outside of AB5?

This is not related to AB5. Not related at all. It's just in the same state, just California’s EPA.

Just another example of California leading –

Leads everything else. So, what happens is they want trucks to be as clean as possible. Everybody knows this. There's no argument about that. But it's like, how do you make it happen? So, most owner operators, the small players in the market, don't own new trucks. They don't transition their trucks every three to five years.

That was kind of my thought.

They’ll keep them for a decade. So, there's a lot of grandfathering and things like that to go into this. But eventually, it catches up. So, it will have a mark on the industry, not immediately. But eventually it has a mark on the industry, because trucks and truck engines can run a long time.

Right. And you think with that both, what we've just talked about with the truck engines, and AB5, that there might be less operators willing to continue. If you're on the cusp of it, is it time to maybe put the keys down? 

No. I don't think so. I think that this industry has been at about the same number of trucks for the last 20 years I've been in the industry. It’s about 3.5 million. Grew some during COVID, because it was a good market to get into. But I don't see fundamentally because freight is going to continue to grow. So, there’s always going to be opportunity. It might have some ones that don't want to –

It might be a tradeoff of numbers. Some people drop off, but some people jump in.

But what you're going to find is you're going to find that more – as the marketplace becomes more efficient, it will be more of a job that more people like, because it won't be as difficult to do. In other words, most cross-country, full truckload haulers are out 14 to 21 days a month, away from home. So, if you were gone half that much, more people be attracted to you.

Exactly. It'd be less of a hardship. That makes a lot of sense. Appreciate – you got both of those. It took us a while, and you're very thorough in your answer too, so I appreciate that. Then, with Truckstop and with truckload, in general, one of the biggest things that's come up in the past year and as we've talked to trucker tools is communication and visibility from a brokerage, from the shipper. What are you seeing within that? What new things as Truckstop in identifying?

Yes. Well, I think maybe the reason that visibility was high, the need for visible was high was basically didn't know what the freight is. Because in the pandemic, it was hard to get things moved, and that was very difficult. But now –

You’ll get it when you get it.

But now, it's pivoted, Patrick. It's pivoted to, there's some fraud happening in the industry. So, that's a big focus. It's one thing –

Now, is this new fraud or just a bigger number of it? I mean, like, is this something that's always been going on?

Fraud has been a part of our industry since day one.

But is this a new version of it?

As our industry has become more automated, it has allowed more cybercrime to go long.

I get you.

Stealing of identity. Because when you can do it electronically, you can do it at a bigger scale. It's not just I went to the truck – bad guys went to the truck stop parking lot. And I mean, truck stuff, not my company. They knocked the guy out, locked the truck driver, and steal his truck. I'm talking about the stealing of freight payments and the stealing of cargo, when it's delivered to somewhere by the owner operator or by the carrier thinking that's the place is supposed to go. But it's not.

Because when you can electronically change things, then you can direct things in different places. So, it's not the old school, the wild, wild west. It's more surgical now. But it's increased because these players use electronic means to get it done. So, what we've done as a company is we've really, first off, we've communicated much more broadly. Starting in May, we had this thing called fraud protection Fridays. So, we were communicating to, as wide as we can in the industry, and I'm on a lot of interviews going, “What’s going on with fraud prevention Friday?” I’m like, “Hey, we're doing this on how to protect yourself against identity theft. How to protect yourself at a fuel pump. How the different things in the marketplace.”

But the thing we've done is we've taken systematically, because we have so many customers, and we've actually taken our system to be able to pick out the bad guys a lot better.

Oh, really?

And protect them – oh, absolutely. Because we have such a such a deep contact with the customers. We have a system called [inaudible 0:16:12] that has about 350,000 view into 350,000 carriers. So, making sure that they are who they say they are, they're working with people who they are, who say they are, and really purifying the information. Trying to keep the bad guys out as best as possible.

And is that just some kind of a high-end credentialing system? Or dual factor authentication? What does that look like?

All of that, yes. Every single piece of it. Just like could we consumers go through that, put in my password, then they say, “Hey, can you visualize?”

Are you sure?

“Is this really you? We're going to send you a pin.” All of that plays into this. Absolutely. Now, here's the thing, slows trucking down and trucking doesn't love this. But they also love to get paid and you love to be protected. So, it's going to be a part of our normal freight experience going forward, because nobody likes when the bad guys win.

And it kind of makes sense, because we've seen the adoption of that dual factor and just about everything. It started with a bank pin, but now it's on every website or app you go into, you really have to prove you are who you are.

Yes. Nothing wrong with that.

No, exactly. So, do you see that being kind of a good first step or do you think that's the last step?

No, it’s going.

What else needs to happen?

Yes, great question. Well, it's like everything. You plug one hole and somebody drills another one. So, you just got to keep plugging holes. It's like anything. If you're at home or any business has had to step up their cybersecurity and it's not – if it's going to happen to you, it when it happens. It’s when, because it's just part of the automatic, excuse me, the technological world that we live in. It's incumbent upon great companies like yours and great companies like mine to be the front firewall, the front wall between the bad guys –

And we’ve got that data and the technology and the access to it.

Absolutely, yes. So, it ongoing, Patrick. It never stops.

I was going to say, it just keep being that plug that hole, find another? Or at a certain point, do we start getting more proactive or that's tough to do?

No, proactive is absolutely, yes. You got to be proactive, because there's ways in which to protect yourself to make sure that if you're a carrier, that all of your – your provable identity is immediate. And if you're a broker, your provable identity is immediate. I talked to a lot of owner operators, and they're always asking me, how do they protect themselves. I talked to an owner operator in the Denver Airport on Monday morning, when I was flying to another event before I came here. I met him. He just got back from Hawaii. He said, “Hey, I'm getting paid on this $2,500 load. They've been trying to chase this guy down for two months.” And I'm like, “It's unlikely you're going to get this. I think you've been to fraud.” I said, “But send us the information.” He had just become a Truckstop customer. It’s so funny. He kept looking at my phone because I have a sticker on the phone. He kept going, he goes, “Do you work for Truckstop?” And I go, “I sure do.” He’s like, “You got to be kidding me. You're an owner operator.” He goes, “Yes.” So, he said, “Could you help me this?” I go, “Well, we didn't do it. It wasn’t one.”

First off, that's not why I'm traveling first class today.

I’m business class. The thing is, is that we want to be helpful no matter what. So, when an owner operator needs help, and I'll see there needs to be help, we’re going to help no matter what. He's going to be sending me the information. I'm going to say at least we can track it down for him.

And chief relations officer, really getting out there.

That’s my job. That’s my job.

That's awesome.

I did buy him breakfast too. His name was Sylvester and his wife's name was Devon. And they run a company called Family Saddle Express out of Kansas City. Great company. 

That's awesome. That's a great coincidence too. Like, “Hey, we just signed up.” “Oh, there you go. Talking to the brass.”

I see customers. What's a big industry? I see customers everywhere. It’s so fun.

It's still nice. And plus, it's just you're traveling all over. It's all across. So, there's going to be a different perspective from everyone too, and with that. So, I kind of asked the questions I was looking to hear about hear, what's something we didn't talk on that you have as a message, either from Truckstop? Or that you're seeing in the industry here?

Yes. I think the thing to do is, it's a little bit like what we talked about this morning here at the conference. Conference has been great. Really appreciate being here.

Thanks. Be here next year.

Absolutely.

He’s two for two.

I hope so. Kind of come back for the trifecta. So, what I would say is, in any business, you always want to look for a competitive advantage. Find the companies that can give you a competitive advantage from a systematic standpoint. So, take those systems and adopt them in to your company, and then use your great talented human power to solve another problem. So, to me, that's where – it's whether – it's not just go buy a piece of technology, because I'm a technology company, and you’re a technology company. It's deploy your resources the best. So, we're in we're in a marketplace, that's a normal market. We're not a horrible marketplace. Yes, it's not what it was a while back, during the pandemic –

And it might never be. So, we need to reevaluate and see if you’re basing it on that. I would say, I think my biggest advice to any player, whether it's a one truck owner operator, or whether it's really, a billion-dollar brokerage company, is you've always got to be investigating ways to grow. Now is a good time, because you can exhale in the market. Because the marketplace isn't running like crazy like it was during the pandemic. So, now, you can figure out strategy for what you need to employ to be able to grow in the future, because growth is everything.

I think it's a great point, because just getting the technology by itself isn't enough. You’ve got to make sure you use it. I think something you said kind of resonated well with me is that a lot of times you go out, Banyan will talk to people that don't use technology, and someone's afraid. It's going to take their job, because they're doing manual. And to your point, don't use it to replace people. Use it to put in place so those good people can work on other tasks that you got to have hands on the wheel for.

Well, I know everybody's afraid of AI. It's going to take over and be the terminator or something. But it's not. We've been going through technological advance for the last 30 years in the United States and there's –

So, no Skynet?

No Skynet. There's poor people employed or can be employed. There's more jobs available. The jobs just change. So, there's always opportunity for anybody that wants to work hard. That's the American way. It's what we do as a country. So, I don't worry too much about that stuff. Look, I'm 56 years old. I've had to reinvent myself as a worker, multiple times. If you want to stay successful, that's the key. Always look to –

You kind of have to keep changing?

Well, just reinvent yourself. Find ways to fundamentally – 

Adapt.

Yes, absolutely.

Adapt and overcome.

Yes. The old Gunny highway.

Exactly. But that's awesome.

Thanks for having me. Great to be with you.

Thank you. It's been another episode of Banyan Tire Tracks Podcast. Thanks for listening and watching and stay tuned for more. Thanks again for Truckstop and Brent Hutto. Thank you very much, man.

Appreciate it.