The wave of creative destruction unleashed by twenty-first century information technology has left no industry untouched. The latest beneficiary—or victim, depending on your perspective—is the trucking industry. The Wall Street Journal reports on a handful of Silicon Valley backed startups looking to cut costs in the industry by reducing the need for intermediaries between truckers and customers:
Investors are pouring millions of dollars into startups hoping to disrupt the $700 billion trucking industry, the latest example of Silicon Valley’s efforts to upend the traditional economy.
A series of startups are vying to become an “Uber of trucking,” leveraging truck drivers’ smartphones to quickly connect them with nearby companies looking to ship goods. The upstarts aim to reinvent a fragmented U.S. trucking industry that has long relied on third-party brokers, essentially travel agents for trucking who connect truckers with customers.
Silicon Valley’s interest in trucking has accelerated in recent months. San Francisco-based Trucker Path Inc. says it is aiming to reach a $1 billion valuation next year. The latest entrant, Seattle-based Convoy, said Tuesday it had raised $2.5 million in seed funding from investors including Amazon.com Inc. founder Jeff Bezos, Salesforce.com Inc. founder Marc Benioff, eBay Inc. founder Pierre Omidyar and Uber Technologies Inc. co-founder Garrett Camp.
Trucking was once a pillar of the blue model economy. Before a series of deregulation bills passed in the 1980s and 1990s, routes and prices were controlled by federal regulators. Trucking was also heavily unionized by the Teamsters, an organization whose Mafia ties were an open secret for much of the last century. But after deregulation, and as corporate cost cutting pressures spread in a more competitive economy, trucking was under heavy pressure to cut costs. NAFTA opened U.S. border states to Mexican truckers, something the Teamsters fought bitterly for years.
And now Silicon Valley is trying to work its own magic.
This is a classic case of blue model disruption driven by technological innovation. On the one hand, change is chipping away at embedded costs—high prices for trucking are like a tax on the economy, making everything more expensive. On the other hand, the beneficiaries of the old system, including truckers who benefitted from fixed rates and union wages, are in the crosshairs. Global competition and technological innovation had already made the old system harder and harder to maintain. Technology and innovation are delivering the knockout blow.
Teamsters and the big trucking companies will likely try to use their political clout to stop change in its tracks, and will cite everything from safety to fairness—as taxi medallion fleets have done against Uber, as teacher unions have done against charter schools, and so on. There will be some truth to some of these claims—no changes come without a cost. But what will really be driving their ire isn’t the general good of the public, but the mortal threat to the business models on which they depend. There is nothing wrong with that moral point of view—it’s only natural that people who are heavily invested in one way of doing business should organize to protect their way of life. In a democracy, citizens have every right to do this.
But from a larger ethical standpoint, it is questionable whether the trucking companies and the Teamster members have the right to preserve their standards of living at the cost of what is essentially a tax on everybody else. The tax from preserving inefficiencies in the trucking industry is in effect a hidden sales tax, and like all such taxes it is regressive—the poor get hit hardest when the price of goods is artificially high. Moreover, anything that makes trucking and transportation more efficient will be substantially better for the environment, reducing the pollution associated with the transport of goods, and perhaps reducing the number of trucks on the road if they can be dispatched more efficiently.
Still, it will strike many people that Silicon Valley venture capitalists are getting richer and that middle-class Teamsters are having their middle class standards of living threatened. To many partisans of the blue social model it will look like yet another example of the destruction of everything good and decent by the onrushing forces of unbridled capitalism.
The turmoil in the trucking industry is a window into the social and economic changes sweeping the country; expect to see more industries faced with similar challenges as the blue economy fades away.
Of course, the new trucking economy—if in fact Silicon Valley succeeds in making one—won’t be the end of the story. Next up: self driving trucks…
[The post has been updated for clarity.]