As Uber battles taxis and other ride-hailing apps in cities across the world, the company is beginning to move quickly into a much larger transportation market: trucking.
This spring, Uber unveiled Uber Freight, a brokerage service connecting shippers and truckers through a new app. Conceptually, “Uber for trucking” seems like a logical extension of the passenger transport business.
But the logistics industry has totally different dynamics. For one, it’s business to business. Most truckers are owner-operators or they’re part of very small companies with a handful of vehicles. The industry has well-established ways of doing things. Truckers basically work in the places where Uber’s ride-hailing service doesn’t. And unlike Uber’s ride-hailing service, the company can’t bring a huge new supply of drivers onto the market to change the dynamics of transportation. As it is, there are somewhere north of 3 million truck drivers in America, between long-haul and delivery.
Uber Freight was born out of the marriage of an internal team with members of Otto, after Uber acquired the latter company early last year. Since then, the teams have split up into self-driving research and development, managed by Alden Woodrow, formerly of Google X, and the Uber Freight team. Freight has a floor of one of Uber’s offices in downtown San Francisco and a large operations team in Chicago.
Uber has had a brutal last year. The company's culture has been critiqued from the inside and outside as sexist and fratty. The problems led to the ouster of a series of top executives, including founder Travis Kalanick. Even in trucking, Uber's acquisition of Otto has led to a lawsuit filed by Alphabet's self-driving car division, Waymo, related to the alleged theft of sensor technology. One Uber employee I know recently joked, "Uber's become a four-letter word."
I visited the company’s San Francisco office with Uber Freight’s product lead, Eric Berdinis. He’d come to Uber via Otto after a stint at Motorola working on the Moto 360 smartwatch, among other things. He graduated from the University of Pennsylvania in 2013, which makes him roughly 27 years old.
We walked the floor that is Berdinis’s domain. The engineering team is on the west side of the building, ops on the east. In the ops room, heat maps of America glowed on mounted televisions, showing where Uber is doing the most business. Texas was hot. This is certainly one of the places where software is nibbling away at the world.
Then we tucked into a conference room for an extensive interview. We talked through how to actually build “Uber for trucking,” what really hurts truckers, whether Otto oversold the speed at which self-driving trucks would arrive, and what drivers think of Travis Kalanick.
Alexis Madrigal: Let’s talk about Uber Freight and self-driving trucks. When Uber started, self-driving cars were pretty far away. When Uber Freight starts, perhaps self-driving trucks are not that far away. How much do you think self-driving trucks would change the economics for you guys?
Eric Berdinis: In my time at Otto, we did spend a decent amount of time thinking about the economics of trucking once it happens, even if it is a decade out. Now that I have been spending more time on the freight side, I haven’t been as close to that. But the teams are in communication about how these things might work together at some point.
Madrigal: And what is the relationship between the self-driving and Freight teams now?
Berdinis: They were born from a similar origin story. At least, I came from that team. The day-to-day workings are pretty separate. They are going down the path of finding their first customers and we’re scaling up the business and building the network. We’re in sync on what’s happening, but no active workstreams together like that.
Madrigal: Are you hearing from drivers that they are worried about it?
Berdinis: You see that come up every once in a while.
Madrigal: I know this isn’t what you’re doing on a day-to-day basis anymore, but how could you see the automation playing out?
Berdinis: I’ll first start by saying that one of the last things I worked on on the Otto side was the Otto-Budweister partnership and the video and the whole thing around that. Once I joined Uber Freight full time, I was thinking to myself, “We really made it seem like this thing was coming sooner than it is. We probably scared a lot of people. We kind of hyped this thing up.”
And it is showing what the future will be like. But it won’t be coming as fast as the video made it seem. The reality is that the transition to any kind of self-driving truck future is quite a ways away.
But in terms of how we think about that future, we actually do see a future where jobs don’t get impacted in the way that people expect them to. We wouldn’t be doing Uber Freight, which is a human-driven product, if we didn’t think that there was a responsible way for the future to look with humans and self-driving trucks.
Madrigal: Can you describe the future you see where there are autonomous trucks but jobs are not negatively impacted?
Berdinis: The answers aren’t perfectly clear yet, but the way that we’re building out this product is heading toward a direction that is the most driver-friendly possible. Once we have a more defined plan for how self-driving trucks and Uber Freight could work together, the specific will be more clear. There are lots of path that that could happen. Nothing to go into detail on now.
Madrigal: Has the recent trouble at Uber affected you all more or less than the standard employee at the company?
Berdinis: Uber Freight, because it has been incubated from the beginning with the Otto acquisition, we’ve always had really strong leadership internally. So, there has not been a huge impact from any of the searches for COO or CEO. The board is extremely excited about freight. They love having Uber with a diverse set of business opportunities. It hasn’t affected shippers. It hasn’t affected drivers. If you asked a driver, “Did you hear about Travis Kalanick?” They’d be like, “What are you talking about?”
Madrigal: But you did have a big departure from Otto in [founder Anthony] Levandowski. And there’s the Waymo lawsuit. Does that affect you guys on the Uber Freight ops side?
Berdinis: It really doesn’t. Because there are no self-driving components to Uber Freight. We definitely get questions like you’re asking me now. But it’s not like our technologies have anything to do with self-driving.
Madrigal: How did Uber Freight get started?
Berdinis: Curtis Chambers, who I think was the #7 employee at Uber, was tasked with exploring new opportunities in transportation. He was there for the start of uberX. He started UberEATS. Then, around the time that Otto was started, which was January/February of last year, Curtis was off with a few salespeople and engineers talking to trucking companies and starting to figure out if Uber should get into trucking. With the Otto acquisition, that solidified. The team we had created and the team Curtis had created—3 or 4 people on each side—we said, okay, let’s build out Uber Freight.
Madrigal: And the model you settled on is that Uber Freight essentially works as a broker between people with stuff to ship and truckers?
Berdinis: There is a defined model for how you build a company in the brokerage industry, which is the middle man between shippers and carriers. There have been a lot of brokers that have come along since the 1980s, when brokers became a formal thing.
Madrigal: Because of deregulation.
Berdinis: Right. So, there was a playbook for that. But it was completely unknown for how we do this in a tech-forward way that doesn’t totally follow the normal step-by-step that a brokerage would go after.
Madrigal: Which would just be lining up both sides of the marketplace, getting loads and getting trucks.
Berdinis: You make a promise to a shipper and hustle to find a driver and then, boom, that’s your first load. You just keep doing that at scale. It’s very easy to do it manually because you’re just calling and negotiating. You can muscle through that. But how do you get drivers to use an app or embrace a new way of doing things, especially when: 1) These drivers don’t really use technology in their day-to-day lives, and 2) when we’re really small, they log in and there are like five loads. That’s not a very useful product. So how do we get past the chicken-and-egg problem to the point where we are today when drivers come back every single day. And some of them are 100 percent on Uber Freight, like they completely transitioned their business.
Madrigal: How did you do that?
Berdinis: We didn’t actually put the apps out into the stores, the point where you can log in and book a load. That wasn’t until February for Android and March for iOS. So between September when we moved the first load until February, it was a lot of manual work, old-school hustle, get the loads, get the drivers.
Madrigal: Did you hire people from the other brokers?
Berdinis: Yeah, for sure. Uber has a very specific kind of ops executor. The Uber-style ops executor is very analytical, lot of them from finance backgrounds. They can work very hard and think through problems in a very analytical, data-driven way. And then there is the brokerage-style ops person, who is much more on the execution side. They know the industry really well. They can hear in the driver’s tone of voice if they are lying about a flat tire or just delayed from their previous shipment. All that kind of stuff. So, marrying the two kinds of operators together helped us build that ops team.
Madrigal: You guys decided to regionally build out. So the first market is ... Dallas?
Berdinis: We call it the Golden Triangle: Dallas, Houston, San Antonio. There are pretty even flows of freight in and out of each of those cities. So if we can capture that triangle, as soon as you drop off a load in Dallas, you can pick up a load to either Houston or San Antonio. There are other kinds of natural triangles around the country, but just within that triangle area, that makes up about 10 percent of the country’s freight.
Madrigal: Relative to other brokerages, you’re better capitalized and possibly better organized, and you don’t have to make money right away. There are a lot of advantages you guys have in going into a market like that. But what were the hard things about it?
Berdinis: When we we were starting up, before we publicly launched, most of the drivers we had talked to had never heard of Uber. They operate between cities and between cities, Uber doesn’t exist. So, it’s not top of mind. Once we did launch publicly, we started to see the camaraderie with their taxi friends. But you also hear other drivers coming and pushing back against them, saying, “With taxis, they created new supply. And that’s why there is competition. With trucking, Uber Freight is not creating new truck drivers.” We’re actually just giving loads in a more efficient way. We’re paying quickly. Over the last nine months, we’ve gotten pretty deep in the crazy pain points that drivers have and are going one by one to knock them off.
Madrigal: What are those?
Berdinis: It all comes back to earnings at the end of the day.
Madrigal: Because they are small business owners.
Berdinis: And drivers get paid from shippers, net 30– and net 60–day terms. [Meaning, the people shipping stuff have 30 or 60 days from the work being completed to pay the truckers.] If their truck breaks down, they struggle with the 60-day terms because they are working week to week. As a result, there is this huge industry called “factoring,” it’s kind of like payday loans. The trucker says, “Give me 95 percent of this receivable but today, versus making me wait 60 days.” That’s just 2–5 percent skimmed off of every single load. And when these drivers are only making a few percent profit margin, that could be all the profit they are making. The whole payment process does not work and it is causing a lot of trucking companies to go out of business.
Madrigal: What else has surprised you in making this foray into logistics?
Berdinis: I’ll start with the app itself. There was lots of apprehension at the beginning when we started calling drivers. A, they’d never heard of Uber. So the sell was hard. And B, a lot of them had never downloaded an app. They might have an iPhone, but we’d say, “Go to the App Store.” And they’d say, “What is that?” It was 45 minutes per driver walking them through the download process and password. We started to think that if we had to do this for tens of thousands of drivers, we could never scale.
But as time went on, drivers started showing up to us, instead of us going to them, it started self-selecting for drivers who know how to use apps and get it. The usage of the app was far exceeding what our expectations were.
We are seeing that not only are the ones who booked loads with us booking more loads every single week that they come back. But drivers who never booked a load with us, continued opening up the app almost every single day to check for new opportunities. We saw this crazy engagement. There’s not a lot of ways for drivers to see what loads are available out there. And just having the list and the price—that visibility in and of itself—is a huge mental shift.
Madrigal: It’s almost like the early stories around cell phones and farmers in whatever country being able to check the prices at market.
Berdinis: This is like that for a lot of these truck drivers. We were super skeptical that the divers would know how to use the app. But whether it is self-selection or whatever, we found this incredible affinity to come back and check more. We were pleasantly surprised by that.
Madrigal: Where does all this go from here? What are the next steps?
Berdinis: Texas was our original focus and yesterday, we announced six new states or regions we’ll do our same kind of density play in. That’s gonna help us understand if we can replicate the success we’ve seen in Texas in these other markets.
Madrigal: Do you have a GM for those markets, the way Uber’s passenger business would?
Berdinis: We don’t have a GM for those markets. It is all centralized from the ops team. When Uber launches new cities, they have a GM. They have a pretty standard process. For Freight, it’s not exactly like that. Because freight moves between cities. And the lines are not as clean as “Here’s Los Angeles that’s launched.”
Madrigal: Okay, that’s one shift. What’s the other big thing?
Berdinis: Up until now, the way drivers interacted with the app, they have to go into the app and search for what they want. We’ve learned that drivers have pretty specific preferences. Uber drivers don’t really have preferences. Maybe they can use this tool that helps them drive home at the end of the day. But during the day, the whole city is where they are working. With truck drivers, you can’t tell a local driver, someone driving within 100 miles of their home, to go take a load from Houston to New York. There is no point to surfacing that. So, now the app is a lot more proactive about personalizing that search-and-discovery experience.
So, we’re sending out push notifications. Hey, this load is one you’ve taken before. It just showed up on our system. Do you wanna book it? And then when they get into an app, there is a whole For You section. It’ll say: Recommended Because The Load Will Take You Home. Recommended Because You’ve Done This Load Before.
Madrigal: Are there other companies that want to digitize the brokerage business?
Berdinis: There’s a few “Uber for trucking companies.” They don’t call themselves that anymore, but they used to. There’s Transfix out of New York, Convoy out of Seattle. And if you search “Uber for trucking” you’ll see dozens that came and went.