Aaron Graft: I wouldn’t tie it to that. That’s just 1 data point. I start with the point, Gary, that I think any of us in the industry begin with the hope that we’re wrong, right? We all want the industry to return to 2022 levels, although I think any of us who lived through that would acknowledge, I don’t know that, that was particularly healthy either. It was very profitable in the short term in 2021 in that time period. What I look at is normally in this part of the season, you would see invoice the spot rates moving and those moves would certainly pick up a movement in diesel cost. Because if you think about what the spot rate is, it’s just – it’s marking to market every night. It’s marking to market capacity.
It’s marking-to-market input cost, of which diesel is a very large one. And at this point in the season, if we believe all that has been written about retailers are at the end of the destocking phase that we went through this bullwhip effect that some people were very right on that – of why the market got so tight for a while. If we believed we were coming to the end of that we would see the spot rates more sensitive to the input costs in the system. We are not seeing that. And that, plus just all of the things we see just leads me to believe we have excess capacity in the system. I would think that many, a very significant number of small carriers are unable to earn their cost of capital, taking spot rate loads right now. Of course, there are exceptions, if you’re in a certain lane.
But on the whole, I believe that to be true. And that is why you’re seeing the attrition in our own factoring client base. That’s why I think you’re seeing softness across the market. And so my view is it is what it is. So what is it? I think freight has not rebounded to the point where most carriers can earn their cost of capital, which means we need capacity to lead the system in order to recreate equilibrium. And I hope we’re wrong. I don’t think we are. How long it takes to do that, there will be catalysts. If you think about what’s happened in the last few days with the announcements we’ve referred to, it seems like these things always start slow at first and then they accelerate. And so it may be that the industry recalibrates more quickly than I would expect.
But right now, my own personal view is this takes the next 12 months for the industry to sort itself out and achieve equilibrium.
Gary Tenner: I appreciate that. And since you just kind of alluded to recent news and that Convoy wind down, I don’t know that to company really well. But – was there anything at my understand they were a carrier that was kind of tech-enabled, but was there anything they were doing that you think was particularly interesting, and that kind of plays into your one-term view of the freight industry?
Aaron Graft: I think Convoy built tremendous technology. They were exceptionally talented and smart people. The problem that they and some of these other tech-enabled brokers have is that in order to build – go from just traditional brokerage. Like if you think about what was traditional freight brokerage, it was contracting with shippers to move loads and then using people and using phones to find carriers to haul those loans and make a 15% margin, beautiful business model, highly scalable. A lot of freight brokers have done exceptionally well with that.Take the last 10 years, there has been this move to we should create digital freight marketplaces. And conceptually, I don’t disagree with that. I think the idea is right.
