AI Fears, Fed Rate Rises, and Distribution's Next Growth Platform

[00:00:04] [SPEAKER_00] Welcome to Around the Horn in Wholesale Distribution Podcast with Kevin Brown and Tom Burton. Sponsored each week by LeadSmart Technologies, Tom, Kevin, and their guests review the news of the week and dive deep into the topics impacting manufacturers, wholesale distribution, independent sales agents, and the global wholesale supply chain.

[00:00:24] [SPEAKER_00] Whether it's M&A, SaaS and cloud computing, B2B e-commerce, or supply chain issues, we peel back the onion with our guests into the topics that impact your business the most.

[00:00:41] [SPEAKER_03] Boy, impressive rhythm.

[00:00:45] [SPEAKER_01] Be a drummer. For about the first four beats that I lose.

[00:00:50] [SPEAKER_03] Let's go ahead and keep the day job, Barrett.

[00:00:52] [SPEAKER_01] Keep the day job? Yeah. Some days you don't even think I should do that.

[00:00:56] [SPEAKER_03] Yeah. Well, okay. Maybe you should be a drummer.

[00:01:01] [SPEAKER_01] You know what I should be is a corporate spokesperson.

[00:01:04] [SPEAKER_03] Yeah. Are they paying for that?

[00:01:06] [SPEAKER_01] I was just thinking about it. I was looking at a cup I'm drinking at.

[00:01:10] [SPEAKER_03] My friend worked on it. You're usually drinking Diet Coke. Maybe we can get a deal with them. There we go.

[00:01:18] [SPEAKER_01] My Vanna White moment. That's right.

[00:01:20] [SPEAKER_03] We should get a deal with them. Product placement. Product placement.

[00:01:23] [SPEAKER_01] Yep. You know, we always joke about one of these days we're going to have Bloody Marys or cocktails or something on a Friday morning. We didn't even do it when we did our 200th show celebration.

[00:01:35] [SPEAKER_03] Yeah. We were lucky to be in our 200th show. That's true. That's true. That's true.

[00:01:40] [SPEAKER_01] No, I was just thinking about this. This chamomile tea moment you brought by our friends at Enable.

[00:01:50] [SPEAKER_04] Yeah.

[00:01:51] [SPEAKER_01] So, our buddy Mark Gillen gave me that Yeti coffee cup and it just happens to be on the side of my desk and I realized, wow, here we are doing plugs for people before we even talk about our show or anything else. So, Mark, there's a bill coming your way.

[00:02:08] [SPEAKER_03] Okay.

[00:02:08] [SPEAKER_01] Hey, how are you? Crazy week, huh?

[00:02:10] [SPEAKER_03] Yeah, crazy week. We have high interest rates and we're all going to die from AI here in the next couple of years.

[00:02:17] [SPEAKER_01] Well, let's call it a day and head for the beach.

[00:02:19] [SPEAKER_03] That's right.

[00:02:20] [SPEAKER_01] So, hey, what's the weather up there? It's pleasant.

[00:02:23] [SPEAKER_03] It's cool. Yeah, it's very pleasant.

[00:02:25] [SPEAKER_01] I left the house and it was 64 degrees.

[00:02:28] [SPEAKER_03] Yeah, it was in the 50s last night. It's great. No air conditioning. It's great.

[00:02:34] [SPEAKER_01] Okay. I guess this summer thing is going away.

[00:02:38] [SPEAKER_03] Yeah. Fall is right around the corner. Two days, I guess. Two or three days.

[00:02:41] [SPEAKER_01] Last week, it was almost 100 degrees at our house and it's morning it was 63 degrees when I left, but I'm not sure anybody cares about that.

[00:02:48] [SPEAKER_03] So, let's get on with it.

[00:02:50] [SPEAKER_01] Why don't we get on with it? I'm Kevin Brown. I'm here with my Lifeline friend, co-host of our weekly show, Tom Burton. We get together every Friday morning at nine o'clock Pacific and we talk about the news of the week and the things that happened in the economy around the world. The supply chain, what's going on in shipping and other things related to that. We talk about manufacturing and distribution. We talk about AI. We talk about robotics. We talk about technology in general. We talk about people and leadership.

[00:03:19] [SPEAKER_01] We talk about all the different topics and the articles that we saw during the week for the things that we've read. We get together and we talk about that and bring that back to how that impacts wholesale distribution and manufacturing. We do that by way of the newsletter that we publish every Friday morning. It is well is entitled around the horn and wholesale distribution and manufacturing goes out to thousands, thousands, thousands, thousands of people.

[00:03:41] [SPEAKER_01] And I looked the other day, Tom, from a listener standpoint and downloads in the last 30 days, the podcast has been downloaded in roughly 30 countries. And it's pretty impressive. Yep. So newsletter is probably going out to five to seven, I think, countries right now. But anyways, if you'd like to get that newsletter, you can reach out to us anytime to send us a note at hello at leadsmarttech.com or just subscribe to it on.

[00:04:11] [SPEAKER_01] LinkedIn, which is the easiest thing to do. You can just look it up there or we have a website for the podcast around the horn pod dot com. And you can see that going on there as well. Just subscribe to the show. For those of you that are listening on the recorded podcast, Apple, Spotify, Odyssey, wherever that might be, that might be the easiest thing for you because we're going to be showing that newsletter today as we talk about it as well. And we'd love to get that out to you as well. Yeah, Tom, I was surprised.

[00:04:38] [SPEAKER_01] I was looking at some of our statistics last week for the show and we're still sitting at number two globally. So we got to get to got to get to that number one number. And when I looked at I think it was 20, a little over 20 countries in the last. I think I misspoke a little over 20 countries in the last 30 days. There's been downloads and 30 countries in the last 60 days. So we're getting some reach.

[00:05:03] [SPEAKER_03] Yeah.

[00:05:04] [SPEAKER_01] Yeah. So, I mean, there could be like that.

[00:05:07] [SPEAKER_03] That's not states or cities.

[00:05:10] [SPEAKER_01] No, no, no, no. All the statistics are available for you to look at as well.

[00:05:15] [SPEAKER_03] Okay, I'll take a look.

[00:05:16] [SPEAKER_01] Yeah, just jump on into the software and you can see it as well. You know, it could be that there's just, you know, a shepherd in the mountains of, you know, Uzbekistan that accidentally clicked the wrong button or something like that, you know, downloaded our show and he thought he was getting Joe Rogan or something like that. But who knows?

[00:05:36] [SPEAKER_03] I'm thinking they're getting the around the horn with that sports podcast.

[00:05:40] [SPEAKER_01] I don't think that's a factor anymore.

[00:05:42] [SPEAKER_03] I don't think it exists anymore. I think it went away.

[00:05:44] [SPEAKER_01] It's been gone for almost two years. I think they canceled that show. And I think what happened was, in all frankness, and I think you can understand why, is that it was two years in of there being another around the horn podcast and their listening body, it was just plummeting because of the people who were coming to our show.

[00:06:03] [SPEAKER_03] Yeah. Right. That sounds like exactly what happened. Yeah.

[00:06:07] [SPEAKER_01] You know, always count on me for the optimistic, right? Sometimes, sometimes not based on fact, but there's going to be an online between optimism

[00:06:16] [SPEAKER_03] and delusion.

[00:06:18] [SPEAKER_01] I walk it every day. Okay. And I have a couple of people right down the hall, you and the lovely woman that I've spent the last 22 years with that bring me back in line from that. Right. So, Hey, before we dive into it, start talking about things. Let's just talk about how we get here every week. This is a episode number 205 for Tom and I just astounds me every day as we think about that. But, um, we're sponsored here in our show.

[00:06:46] [SPEAKER_01] There's costs that go with doing this as you can imagine, uh, putting this highly professional, you know, show together that we have just that is astounding in its, uh, in its journalistic, uh, style and so forth. So there's costs that go with that. We have people on the front end and on the, on the back, uh, back end of it that help us with that. We've got, uh, people that help get the newsletter together and so forth. And then we've got John and his team on the back end to do the production and editing, uh, post-production issues and so forth. So that costs us money.

[00:07:16] [SPEAKER_01] So our company that Tom and I work for lead smart technologies is who sponsors that lead smart is actually getting ready next week. You hear the drum roll.

[00:07:32] [SPEAKER_03] Yeah, it's a good thing. I didn't have my headphone on. I would have no ears left.

[00:07:35] [SPEAKER_01] Well, because you didn't push the button with your, for the drum roll with your little sound thing there, but we are getting ready to. I'm going to have some really exciting, you know, before the symbol, you know what that sounds like bongo drum, the beginning of Hawaii five. Oh, the original version.

[00:07:55] [SPEAKER_03] I guess that's true.

[00:07:58] [SPEAKER_01] Think about that. All right. So, Hey, big announcement coming, uh, next week from lead smart, some new, uh, entire new product offerings to help wholesale distributors and manufacturers, both gain deeper insights into their business and their customers. And their overall teams by using technology and gathering data from across their company to bring that into a single platform that helps them really gain insights and help them grow that they've never seen before. We call that an enterprise growth platform.

[00:08:28] [SPEAKER_01] Um, and at lead smart, we've been working with wholesale distributors for about six, so seven years now, and we help them understand both their customers, their teams, and their overall business by, as we said, getting a closer look at things by connecting systems. Most distributors are running blind. We've got a system of financial record over here that they use as a source of truth, which is typically their ERP system. But there is so much more going on in their business that we'll be talking more about next week.

[00:08:56] [SPEAKER_01] So if you're a wholesale distributor or manufacturer, you're looking to better understand your distributors and excuse me, your customers and your teams and your business better by pulling all of that data together in one place to gain insights and updates and things like that, then you should be talking to us and we would love to do that. So we have some comments here. Bob saying, uh, thanks for that earworm, Kevin. I'll be humming Hawaii five Oh all day now. Very good. Right?

[00:09:23] [SPEAKER_01] Well, and Bob, if I remember correctly, used to live in Hawaii, uh, Bob's a regular on our show. So, uh, you know what I'm going to say, this is I'm going to make this comment, Bob, with all the love out there. Bob is norm.

[00:09:40] [SPEAKER_03] Norm. Norm. Oh, you know, Norm from the chairs. Norm from the chairs.

[00:09:42] [SPEAKER_01] He's with us, man. He's he, you can count on Bob being with the live show. That's true. And I'm grateful for that. So we're going to, we're going to say Bob or Norm made a comment if Bob makes a comment on the live show today. So that seems to be a number of other people here live with us today. So we appreciate that. So Tom, anyways, why don't we dive into the news? I guess the feds spoke.

[00:10:03] [SPEAKER_03] I just wanted to say one more thing about our new release that's coming out. You know, we, with this new release, you get it.

[00:10:10] [SPEAKER_01] Did you get approval? Did you get approval from marketing to talk about this?

[00:10:15] [SPEAKER_03] Um, yeah, I did. I created a video on it even so.

[00:10:18] [SPEAKER_04] Okay.

[00:10:19] [SPEAKER_03] Um, but you know, historically, right. We've been known as a CRM company and over the years, our customers of which we have a lot of really good, large customers in the industry have, you know, said, Hey, look, CRM. That's nice, but here's all the things we really want to be able to do to drive growth. And yes, Bob, I would definitely take that as a compliment. Um, I think he's going to, if he, if he, what was the mailman's name?

[00:10:46] [SPEAKER_03] What was the mailman's, the, uh, not, oh man.

[00:10:51] [SPEAKER_01] Norm. Somebody has got to pop in here and tell us.

[00:10:54] [SPEAKER_03] Yeah. Tell us the mail. I can't remember the mail name, but anyway, um, what was I saying? So anyway, a lot of our, we've, as we work with yourself. Yeah. We, as we worked with customers, they've said, well, CRM is great. But what we really want to do is all of these things to help grow the business, enable the sales team, find white space, use AI. Cliff Clavin. Cliff Clavin. Cliff Clavin. That's right. Yeah. All those types of things.

[00:11:20] [SPEAKER_03] And I think we've been doing this and we've been learning from it and now it's finally actually coming together into the product. So, um, I think we're, this product is kind of a culmination of a lot of things that we've been doing for many years, just haven't really properly packaged them. It's a good thing.

[00:11:37] Yeah.

[00:11:38] [SPEAKER_01] I couldn't agree more. Stand by, watch all your social channels on Tuesday.

[00:11:43] [SPEAKER_04] Yeah.

[00:11:43] [SPEAKER_01] Check the press release. By the way, I had a response. I was sharing with, uh, what I were, somebody that I highly respect in the industry specifically related to AI was texting with him yesterday. And I shared with him one of those videos that, uh, we made the other day that I showed you. And, uh, his, his comment was obsessed. He was obsessed with that video, that black and white one.

[00:12:09] [SPEAKER_01] So watch your social channels at lead sport, some fun stuff coming soon. So let's talk about, uh, your buddy, Kevin Warsh. He seems to have your attention.

[00:12:21] [SPEAKER_03] Obviously not. Um, clearly he's not listening to me or he's not listening to, to Trump either. To you didn't hear what I said.

[00:12:29] [SPEAKER_01] He has your attention. Oh, he does have my attention. That is not, he, he may not.

[00:12:35] [SPEAKER_03] I certainly don't have his attention.

[00:12:36] [SPEAKER_01] Yeah.

[00:12:37] [SPEAKER_03] So, so obviously everybody knows by now rate increase 12 to nothing consensus among all the board of governors is I was telling you, Kevin, before the show, well, I've said this for weeks, right? I think it was, it was a stupid idea. Um, I don't think it's the right move. Um, president Trump, the right move.

[00:13:04] [SPEAKER_03] There's definitely others that agree with that, but it was like, okay, great. It's nice that I don't think it's the right move, but what the hell do I know? Um, so I really said, you know, that if for 12 intelligent, 12 intelligent individuals, I'm going to assume they're intelligent that are kind of at the top of their game of economics, they have done this. Why vote 12 to nothing? I mean, cause it appeared to be not much of an argument. It was just like, yeah, we're going to do this.

[00:13:33] [SPEAKER_03] And there appears to be not much of an argument that they're going to continue to raise rates at least a quarter point before the end of the year.

[00:13:40] [SPEAKER_01] Now they certainly telegraphed that right.

[00:13:43] [SPEAKER_03] Right. Now completely side note, it'll be interesting to see if they do that at the next meeting, which is I think the week before the midterms.

[00:13:50] [SPEAKER_02] Mm hmm.

[00:13:51] [SPEAKER_03] I, and I think most people don't think they will. And they'll wait till December, um, after the midterms. I don't know that it would matter much at that point, but anyway, it'll be interesting to see.

[00:14:02] [SPEAKER_01] Well, if they wait that long, then they've got the political component of it all. Right. That's the people saying what's going to happen or that they're going to be able to influence that. Right.

[00:14:13] [SPEAKER_03] Yeah. But it doesn't mean it won't happen.

[00:14:16] [SPEAKER_01] So that's true. Yeah.

[00:14:18] [SPEAKER_03] So here's what, from what I've been able to find, and we can kind of, kind of chat back and forth on this. What I've been able to find is kind of, this is not, why did this happen? Why, why has this happened and what will happen going forward? And obviously we're here about manufacturing and wholesale distribution. So what does it mean going forward? First of all, the written, and worse, she even said this in the, in his press conference.

[00:14:42] [SPEAKER_03] This seems to be all around what's happened with the 10 year note, the 10 year government. Okay. But seeing a five it's been up considerably over the last say 45 days. I think it was in the high threes, 45 days ago. Now it's at five. So what he said in the press conference is there were three things influencing that.

[00:15:10] [SPEAKER_03] The, the, the, that jump on the, on the 10 year note.

[00:15:17] [SPEAKER_04] Right.

[00:15:18] [SPEAKER_03] One was the geopolitical and the fact that you roller coaster conflict is over. The conflict is back. The conflict is over. The conflict is back. That was causing unpredictability for buyers of T bonds. And remember that the way that the interest rate works, if the price of the. Um, on goes down, then you get a higher rate, right? You get a higher rate. If it goes up, which means there's more demand than you get a lower rate.

[00:15:48] [SPEAKER_03] So demand is down prices are down higher rates along the way. So fewer people are purchasing. These 10 year notes. When there is this geopolitical uncertainty. That's number one. Number two and three, which I think are, are interesting. The second one was a, that it's a very strong economy right now. And so people are, you know, risk on, right. They're putting money into places.

[00:16:13] [SPEAKER_04] Sure.

[00:16:14] [SPEAKER_03] But looking for that higher return and related to that, which the third point is he said, a lot of money pulled you all of the AI trade. All right. The data centers, the, you know, AI, AI trades, AI projects, you know, all the other things that are going on. So there's less money available to go into these notes that are here. Those are, those are worse. His words are not mine. Those are the three reasons he believes that the bond rates have gone up.

[00:16:44] [SPEAKER_03] Right. And what he then said is, well, we, now there's a huge gap, right. Between the fed fund rate and the 10 year note, the fed fund rate, seeing at three, five to three, seven, five prior to the rate. Right. That's what a point and a quarter point and a half difference between the short term rate and the long term. Long term.

[00:17:07] [SPEAKER_04] Yep. Right.

[00:17:08] [SPEAKER_03] So there's a substantial, so the market is basically saying you could read it, right. If you just read the cover of the book, the market is saying, well, you know, we think inflation is going to be higher for longer. That's why we demand, you know, why do we think the note is going up? Therefore you better catch up and, you know, at the fed funds fund rate.

[00:17:32] [SPEAKER_03] However, if you look at the, those, the, the things that are driving, what he said are the three points of the 5% rate, right. Right. What happens tomorrow? If the, if the conflict in the middle East really did get settled. Okay. I would think you would see a pretty substantial drop in the rate. Right. Right. Oh, well, literally almost overnight. It was there.

[00:17:58] [SPEAKER_03] So, and I don't think you want to necessarily decrease the, or slow down the economy. I mean, that's Trump's position as well, but yet that is the strategy here for raising the rates on the, on the fed fund rates is slow down immediate spending, slow down short term pieces, slow down pieces that are there.

[00:18:19] [SPEAKER_03] But really the bottom line was, is that the tail was wagging the dog or is wagging the dog in a sense that the five year rates skyrocketed or the tenure rates skyrocketed 5%. And the fed basically said, Hey, we got to do something and show that we're, that we're relevant and that we're in the game and that we're doing something about this.

[00:18:41] [SPEAKER_01] Even though the tail being the tenure.

[00:18:44] [SPEAKER_03] The tenure. Yeah. Yeah. Yeah. Because generally the short term rates dictate or drive the longer term rates, but now the other way around the longer term rates are driving the short term rates. So it's, I find it quite interesting. What this means is that to me, right? What we need to be watching is what is the fed fund rate? I'm sorry. What is the tenure doing?

[00:19:11] [SPEAKER_03] And that's really going to determine what's going to happen with interest rates in general, rather than focusing so much on the, on the fed, because at least for the next, you know, period of time, whatever that period, you know, at least the next 90 to 180 days.

[00:19:26] [SPEAKER_01] So it just gives me a bunch of questions to kind of go with that. So, and I think, I guess the way I would say to start with Tom is I think your point about what happens if next week, Iran capitulates or the week after next, the president says, Oh, we've come to enough of agreement, whether they have or not. And we'll let them control the straighter hormone, whatever it is, right.

[00:19:53] [SPEAKER_01] Let's just say oil and raw materials, fertilizers, all of that nitrogen all start leaving the straighter hormones, no problems get pushed out. Right. Now what happens with all of that? Because now we know that they've got, what do they call it where they've got the two different ways that they're looking at, at was a core PPC versus when they take out energy food. And, and, and so forth.

[00:20:21] [SPEAKER_01] So what happens if now that adjusts, right. In this ends, where do these guys sit? What it seems like they're looking at. And I, I'm really interested in the comment you made about the tail wagging dog is it seems like they're bouncing almost to, well, we're going to take solace and, and, or limited solace. We're going to take cover under this. We're taking action because inflation's high, but look at the tenure. And, and what happens, right.

[00:20:51] [SPEAKER_01] If things now start balancing out.

[00:20:52] [SPEAKER_03] Core inflation isn't that high.

[00:20:54] [SPEAKER_01] No, core is not correct. That, but yeah. But, but it's kind of back to your point about the tail wagging the dog. It's almost like the, I hate to say this, but it's almost the point that we've talked about a number of times in the past on the show is that it's like these guys are fighting to stay relevant.

[00:21:11] [SPEAKER_03] There's a, there's a bit of a bit of a point of that. Yeah.

[00:21:14] [SPEAKER_01] Yeah. So let me ask you a question that goes with that. Um, so you got what 5.2, 5.3, I think is the tenure today. Something like that.

[00:21:24] [SPEAKER_03] No, no, five, five, even.

[00:21:25] [SPEAKER_01] I thought it was just a touch over.

[00:21:26] [SPEAKER_03] 30 years, 5.3 or five.

[00:21:28] [SPEAKER_01] That's okay. That's right. Okay. So you got a 10 year of five.

[00:21:32] [SPEAKER_03] Five exactly at this exact moment.

[00:21:34] [SPEAKER_01] Yeah. And you have $8 million in the bank. You have $80 million in the bank. Maybe it's more important of what, what if you have $8 million. Are you moving out of equities and moving over to the 10 year based upon that number? And if you are, we've had such a robust, let's just say, forget about the guy with 8 million or 80 million, but what are the funds doing?

[00:22:02] [SPEAKER_01] What are the ETFs doing and balancing things with the geopolitical instability that we're facing, not just in the Middle East, but in other parts of the world. What happens to what, let me just finish on this real quick. But the question here is what happens then? Why not have we've got the stock market to hit the low.

[00:22:32] [SPEAKER_01] We've got the hangover from all of that. Okay? It's fine. But the stock market hasn't really cared that much through this whole thing. Well, now with the 10-year at 5, could that impact the equity market by money moving to that versus staying strong in the equity market?

[00:22:51] [SPEAKER_03] Well, you would have expected, right? And I think by raising the Fed fund rates, had it had the anticipated result of potentially people believing it's going to slow the economy, right? You would have seen, I don't know, likely a drop in the market and a reduction of rates. Now, it did go down, I think, to 4.95 for a day or two. And now it's back up to 5.

[00:23:18] [SPEAKER_01] But is 5 basis points going to change? Which, you know, anybody's mind of whether they're going to put money over there?

[00:23:28] [SPEAKER_03] No, no. Clearly, it's not, right?

[00:23:30] [SPEAKER_01] Yeah.

[00:23:30] [SPEAKER_03] Because the economy and everything else is still full speed ahead, right? All the things that we just said. So it didn't, in other words, the market didn't buy the fact that this is, to me, it's like taking your hand and sticking it out the window when you're driving and expecting that to slow down the car, right? If they really wanted to make a great analogy.

[00:23:50] [SPEAKER_01] Right. Come up with that.

[00:23:52] [SPEAKER_03] Well, it's just like, what they wanted to do is they want to potentially slow the spending, consumer spending, slow, you know, slow growth in some cases as a way to, you know, it's like the airplane, right? When they throw on the spoilers and the reverse and all that stuff to slow down everything. Yeah. To slow down everything. If that was really their objective, well, I don't think it's worked so far. Now, granted, it's been a day.

[00:24:20] [SPEAKER_03] But if that's what they were really doing, why didn't they raise a half a point? Why didn't they raise, you know, really do something to, other than stick your hand out the window? Right. And so maybe they're saying, well, we'll do it again in December, right? So it's not, you know, we'll do it a little bite-sized chunks along the way.

[00:24:37] [SPEAKER_03] But no, it's not really, it's not changing the behavior generally of where the money going or changing the fact that people are now running to buy bonds, which would then bring down the yield on the overall bonds that are there. So it's, look, we'll see what happens here over the next, you know, six months or so. At the end of the day, it comes back to what I've said, I think, for the last few weeks.

[00:25:05] [SPEAKER_03] I think it was done as a, cover your ass might be too strong, but it was done as, hey, we just can't sit here and do nothing and watch the 10-year continue to go higher and higher and higher. And if it really does cause long-term price increase and price instability, and we didn't do anything about it, then we're asleep at the wheel. So we better do something. And I just think they would have been better served doing a half a point or more if that was really their objective.

[00:25:35] [SPEAKER_01] But can't recover from that as quick.

[00:25:38] [SPEAKER_03] Yeah. Right? Yeah.

[00:25:41] [SPEAKER_01] But I mean, that goes, anyways, we talked about it over and over again about the, I would say the relevance, because the relevance, the Fed has the relevance still because of what they can and can't do. I think one of the struggles, this is that, I don't know, I mean, when we grew up, you know, and I hate to say it this way because it just ages us, but, you know, our parents saved. Right? We saved.

[00:26:09] [SPEAKER_01] We, maybe whether we do the same amount or not now is not the point here, but we have an economy that people will, you know, when I turn the news on, which you don't do very often, when I turn the local news on, what I hear people is, is complaining and whining about the price of gas, but they're interviewing them at the gas station. Right? It's not that they got on a bus because it was so bad.

[00:26:36] [SPEAKER_01] They're interviewing at the gas station or in front of Target and they were still in their buying. Right? Now, I'm not suggesting that, you know, people don't need food and people don't need gas to get to work at all, but we're not seeing with, I mean, what's credit card interest rates now? You know, 25, 27, 29% probably. You know, none of this has slowed people's spending down in a significant manner.

[00:27:03] [SPEAKER_01] And that's what a big part of this is supposed to be doing. Right?

[00:27:08] [SPEAKER_03] Yeah, not just consumer, but business spending as well.

[00:27:11] [SPEAKER_01] Sure.

[00:27:12] [SPEAKER_03] But one of the other points that they brought up, which I found kind of interesting, is that if we didn't raise rates, then the consumer may think that they're not doing anything about it and that inflation is going to get higher and then consumer confidence would drop and then we would have even a more severe situation like a recession or whatever. It's like, okay. Let's see.

[00:27:40] [SPEAKER_03] All of this stuff seems like overly complicated rationale that doesn't really make a lot of sense. And, you know, what Trump's position is, is, you know, get your hand out of the, you know, don't stick your hand out the window and put the, you know, pedal on the gas even faster and let's grow our way out of this. Right? And let's grow our way through all of this that are going forward. And this issue in the Middle East will, you know, take care of itself

[00:28:09] [SPEAKER_03] and the price of gas will come down and so forth. So, anyway. Yeah, I think, as Bob said, the impact is probably more psychological than material than the people that are there. And, you know, anyway.

[00:28:28] [SPEAKER_01] So, what's next? Because what I'm seeing here is I'm seeing a Fed that is scrambling to find different places to hide or to support, right? It's, yes, we want to get to 2%, which just drives me crazy. You know, if you look at, and maybe this is your next research project. The historical difference between inflation and core inflation and does,

[00:28:57] [SPEAKER_01] which one's the most relevant to this whole process.

[00:29:00] [SPEAKER_02] Yep.

[00:29:01] [SPEAKER_01] Right? And so, I think if you think about core inflation, core inflation would suggest, and this really even just, man, just these thoughts are firing through my brain right now. But if gas prices, if fuel starts flowing, right, we have, you know, you're not going to find peace in the Middle East any time. But, you know, let me rephrase that. You're not going to find peace in the Middle East based upon the factors of what are going on today.

[00:29:33] [SPEAKER_01] But let's just say oil starts flowing freely like it was this time last year. Right? So, now you've just got in places like we live in the People's Republic of California is that, you know, we have all these silly taxes and summer blended, winter blended. So, we always have that. I remember we were traveling together probably a year and a half ago. I think we were in Mississippi. And, you know, I had looked at gas prices at like $4.75 or something like that,

[00:30:02] [SPEAKER_01] driving to the airport in the morning and get to Mississippi. And it's like $2.15 or something like that. But it's, I think we're in this place, if we just got some stability in the fuel market and some clarity that that's going to continue, we might find even a better balance of the core inflation at that standpoint. And then it goes back to this conversation that we've been having here for a couple of years now

[00:30:30] [SPEAKER_01] is do we use the right numbers in all of this?

[00:30:33] [SPEAKER_03] Well, that's not up for debate, right? So, at least in his world, that's not up for debate.

[00:30:39] [SPEAKER_01] No, well, it's in none of their, is that the case in their world? Because in their world, what they're seeing in this is I have, right? I mean, you got to think about it, right? And look, this is just the way the world works. But it's interesting. I think it's why Washington, D.C. is one of my favorite towns to travel to for business because there is just a different dynamic going on there than there is other places.

[00:31:07] [SPEAKER_01] But if you think about it, it is probably no different than many politicians. It is if you look at, if you have a spot, if you have a seat on the Fed, right? The consulting, the books, the speaking, the, you know, that's usually you're writing your ticket to the financial future, personal financial future, right? So, I think this idea of staying, I think you brought it up early on in the discussion with staying relevant through all of these things becomes pretty critical.

[00:31:37] [SPEAKER_01] And, you know, it's not to say that these people aren't smart. It is interesting that the, you know, only the second meeting under a new chairman and they get a rate and the president was wanting to put somebody in there that they weren't going to get a raise from.

[00:31:53] [SPEAKER_03] And I think the president, from what I understand, even told Warsh, is like, look, you're going to get outvoted on this, so you might as well just go along with it. And maybe who knows, right?

[00:32:05] [SPEAKER_01] And Warsh would like people to think that conversation never happened.

[00:32:08] [SPEAKER_03] Right, right. But anyway, I think if, again, if you're looking ahead, right, and you're looking at, you're trying to plan, you're trying to look at your 2027 plans and so forth, what I would do is keep a very close eye on that 10-year. And obviously, as we, the end of 10-year is influenced by the things we just talked about. If there is a major change in the 10-year,

[00:32:33] [SPEAKER_03] then you can probably expect that there could be a potential update in the Fed fund rate as well. But I don't think it's the other way around. So what the 10-year is going to dictate what the Fed fund rate is, at least for the next 180 days. Yeah. So, and I think a lot of people look at the reverse. And you okay?

[00:32:57] [SPEAKER_01] Okay.

[00:32:58] [SPEAKER_03] Okay. All right. Let's get on with other news.

[00:33:01] [SPEAKER_01] You know me, though. That was three sneezes. I went on mute. That was three sneezes. You know what happens now? You got to know there's two more coming.

[00:33:09] [SPEAKER_03] You got to know there's two more. I didn't know there was a limit. Is it one for every point of the 10-year?

[00:33:16] [SPEAKER_01] I sneeze in fours or fives minimum.

[00:33:21] [SPEAKER_03] Oh, I didn't know that. After all these years, and I didn't quite know what your sneezing habit was.

[00:33:26] [SPEAKER_01] Come on. It's really straightforward.

[00:33:29] [SPEAKER_03] That probably drives Darlene crazy, right? She's probably like, why do you have to sneeze five times?

[00:33:35] [SPEAKER_01] It's just part of the long list of things that I do that drive the poor woman crazy. So, in German, you know, people say Gesundheit, right? And so, my dad used to say the second or third Gesundheit in a row. And then he'd say, eins mehr bis dein Krankheit, which is sick. So, if you sneeze one more time, you're sick. So, there's your German lesson for the day. All right.

[00:34:04] [SPEAKER_01] So, look, U.S. import prices jumped in August, right? Which is pretty funny. Next article there that we have from Reuters in today's newsletter, which is here we are talking about all the doom and gloom, but then things jump up there a little bit. So, then the AP News article, retail sales rise better than expected in August, 1.2% rise. People are spending, right?

[00:34:31] [SPEAKER_03] Yeah.

[00:34:31] [SPEAKER_01] And now, following up to that, we have the Canadian conflict. I think that maybe will be the term for the 2026-2027 U.S.-Canadian relationship would be the Canadian conflict. And now, the president of the European Union has reached out and said, why don't you become an associate member with us?

[00:35:27] [SPEAKER_01] Yeah. We have a couple of the big trade events here in the U.S. later this year. Well, actually, next month. And they have decided to come. But there was a discussion amongst them and some of their peers about kind of boycotting things here. And so, it was kind of interesting when that discussion. They've decided to come. But we were talking about this.

[00:35:52] [SPEAKER_01] And, you know, the big picture of the Canadian situation, you know, these 50% tariffs back and forth with each other is this has a meaningful impact on the Canadian economy. The Canadian return raise of tariffs on goods is might lumber prices jump up a little bit? Yep.

[00:36:22] [SPEAKER_01] You know, we get some fuel from there and some electricity. Those prices could. But you don't see people. I'll put it this way. Like, we have a handful of great customers in Canada and I have this type of discussion with them about how they're feeling about things. And then I talk to 5x the number of U.S. distributors and manufacturers every day. And I have not heard any one of them have a frustration with Canada raising the tariffs on us. So, it is an interesting thing.

[00:36:53] [SPEAKER_01] What we talked about with this in this setting was that, you know, this would be a nicety of having this associate member status thing. But I think what it could be uniquely tied to this, what a friend Steve and I were talking about the other day was potentially, if you look at that, right, is, you know, the U.K.'s probably kicking themselves about the whole Brexit thing.

[00:37:20] [SPEAKER_01] But if you were to look at all the Commonwealth countries, if you think about Australia, New Zealand, Canada, and so forth that have spurred out of all of this, if those countries all got together and tried to tie themselves to the EU's negotiated tax rate or tariff rate, that would be a really –

[00:37:43] [SPEAKER_01] So, we had – Steve and I had a really nice conversation about, you know, the potential of either a group of countries, right, tying together like that to find a balance. So, if you look at that or even then – and I don't know, I haven't read closely enough about this piece with the EU chief and this olive branch, so to speak.

[00:38:05] [SPEAKER_01] So, you're not an olive branch, but just this reach out to Canada to become part of this is – really could be the idea that says, why don't you just – hey, U.S., why don't you just work with them with the numbers that we have?

[00:38:19] [SPEAKER_03] Could be. I mean, I think that's one element to it. I think there's a leverage point that Europe is trying to potentially start to build with, you know, incorporating Canada into the mix. I guess the associate, you know, because in order to join the EU, you had to kind of give up your sovereignty, right? You had to do the euro. There's a lot of things that you have to do to become part of the European Union.

[00:38:46] [SPEAKER_01] You did – yeah, you didn't have to give up your currency. Not everybody did, but it was the wise thing to do because it gave you balance and was beneficial to your economy. The British didn't.

[00:38:57] [SPEAKER_03] Yeah. No, but the – but you basically gave up your sovereignty. You had a different – you have a passport that was the European Union passport, not a country-specific passport. That's not what Canada's – this would be about. They would still be their own sovereign nation. Sure. And – but they would, I guess, potentially have unlimited rights to live in Europe or no visa, no requirement for visa. I don't know how that would work.

[00:39:23] [SPEAKER_03] I guess it would just be a – you still have a Canadian passport, but maybe you have a special visa that allows you to – Sure. Just come and go, all those types of things.

[00:39:32] [SPEAKER_01] Oh, see, it's easy enough to just say if you have a Canadian passport, it works in Europe like, you know, like an EU passport. That would not be that difficult to do.

[00:39:42] [SPEAKER_03] Yeah, yeah. So, here's an interesting one from Bob. He says, foreign policy is based on American security. When Canada chooses to align with China and the EU, that's a potential threat to the US. So, another leverage point, potentially, saying, hey, you know, from a security perspective and so forth, we're going to move more in this direction.

[00:40:10] [SPEAKER_03] Is that leverage for you to treat us, you know, in their mind with fewer tariffs and fewer issues? Yeah.

[00:40:20] [SPEAKER_01] Well, I think this probably some of this discussion starts with this standpoint. You know, I've not heard anything from the president make any comments about all of this. But, you know, it could very well be. Maybe this could be an overreaction on Canada's part because they've already been basically saying, hey, you know, if we can't get this from you at a reasonable rate, we'll go align a little bit with China. And they might be doing a little bit of a pivot, right? Maybe.

[00:40:49] [SPEAKER_01] You're a former high school basketball player. Maybe their pivot turns into a travel on this, right? Because now if you're saying, hey, I'm kind of already aligning over here with this other – if I'm allying myself with China, which the US has the conflicts with China going on and they're working through these things, I think there's a big meeting next week that the president's going to be attending as well.

[00:41:15] [SPEAKER_01] And I think she is coming here, if I'm not mistaken. So we get Marco Rubio and Vance and the president in meeting with him. So we'll see what comes out of that. But it could be, you know, the president could look at this, you know, the administration will say could look at this interestingly from a different angle.

[00:41:33] [SPEAKER_01] It's like, well, if you just want to continue to align yourself with all of these people that, you know, that there's not a conflict per se with the EU because that's mostly settled now. But it could be looked at the wrong way pretty quickly and easily.

[00:41:50] [SPEAKER_03] Yep. All right. Where would you like to go next?

[00:41:56] [SPEAKER_01] Yeah. Well, the comment says here, Tom, you play hoops, how tall are you? I'll just say that the height has nothing to do with skill.

[00:42:03] [SPEAKER_03] That's right.

[00:42:05] [SPEAKER_01] I have a good friend that's 6'8 and he does not move well. And you would think that he would be phenomenal on the basketball court. And I've never seen anything so awkward. So.

[00:42:19] [SPEAKER_03] I was tall for my age, Bob. I haven't grown that much more since then, since high school, but I was 6'2 in high school, which was taller than usual. But there were definitely people taller than me.

[00:42:35] [SPEAKER_01] Yeah. And I guess maybe I misspoke, right? Because if guys like, you know, John Sweeney or Kelly San Jose or Mike Murchison were listening today, all your high school basketball buddies, they would have corrected me because I said you played high school basketball. They would say you were a team.

[00:42:52] [SPEAKER_03] No.

[00:42:55] [SPEAKER_01] So I couldn't resist.

[00:42:56] [SPEAKER_03] Some of those people. Anyway, I'll save that. I found some pictures. Maybe I'll bring some of the pictures. I had some pictures from, I found recently from some high school and junior high basketball stuff.

[00:43:07] [SPEAKER_01] I'd love to see those.

[00:43:08] [SPEAKER_03] I'll see if I can digitize them and bring them on to the show. I'm sure that'll help ratings.

[00:43:15] [SPEAKER_01] Yeah. Yep. But by the way, to answer the question here, Tom is tall. So 6'2"? You still 6'2"?

[00:43:22] [SPEAKER_03] Still. I think so. Yeah. I haven't shrunk yet.

[00:43:24] [SPEAKER_01] I used to be 5'11 and not even close anymore. My feet went flat. But who cares about that? Let's talk about, you know, Tom, with the time we have left today, I want to kind of bypass our supply chain section that we have in the newsletter in a couple of these areas. There's some good stuff. Not to be missed. There's a good article that we had.

[00:43:45] [SPEAKER_01] There is actually a good article in our manufacturing distribution segment of the newsletter today about northern tools reshoring from Mexico. They're calling it insourcing, which they think will also improve their quality.

[00:44:00] [SPEAKER_01] I mean, that's something I want to talk more about in some future shows is, you know, one of the big, big pushes of the president was to get early on in the administration was to reshore a lot of businesses and bring manufacturing more and more back to the U.S. In fact, it was interesting. It was a big topic. The vice president was yesterday at the All In Summit in L.A., which is another podcast that we both enjoy listening to.

[00:44:28] [SPEAKER_01] And I listened to a little bit of the vice president talking last night, and he was talking about how this country had become a technology and services country versus historically being a manufacturing company.

[00:44:46] [SPEAKER_01] And he was referencing, I don't know if you've listened to that, Tom, yet, but he was really, really focusing on that idea that says any country cannot be the powerhouse that they would want to be in the world economy without having a very, very strong manufacturing base as well, both for export and for domestic use. So I thought that was interesting. So it's nice to start seeing this.

[00:45:11] [SPEAKER_01] I want to maybe do a little bit of research and starting some more opportunities on talking about what is being reshored. So why don't we, you want to slide down maybe to our, hit the AI component of things?

[00:45:24] [SPEAKER_03] Sure.

[00:45:24] [SPEAKER_01] Yeah. So we have a component of the newsletter that we talked about every week called AI, the latest news updates and tools. A lot going on there.

[00:45:33] [SPEAKER_01] But that actually is a good point in time for me to stop and say, don't forget, if you're listening to today's show and not watching today's show, if you're listening on Apple, Spotify, wherever it might be versus watching us on YouTube or LinkedIn or Facebook, you would certainly want to subscribe and get this newsletter.

[00:45:55] [SPEAKER_01] If you aren't already, the easy way to do that is just to send us a note at hello at leadsmarttech.com or find the newsletter every week on LinkedIn or certainly just go to our website, which is www.aroundthehornpod.com. And you can get that there. So Tom, the world is either going to be the best place it's ever been with unlimited opportunity for mankind to thrive.

[00:46:23] [SPEAKER_01] Elon Musk was telling us a few years ago that we wouldn't even have to work because we would have a standard wage for everybody. And that's all anybody would need because the robots and the AI would do all of the work for us. And now apparently we're all going to die.

[00:46:42] [SPEAKER_03] Yeah, I guess so. With a, I think it's a 10% chance.

[00:46:49] [SPEAKER_01] Depends on who you talk to. I heard somebody last week say 20% as well. So, you know.

[00:46:56] [SPEAKER_03] So this is a.

[00:46:58] [SPEAKER_01] I'll say it now. I say take it away.

[00:47:00] [SPEAKER_03] Yeah. Complicated subject. But I think, I don't know if you've had, but I've had, you know, friends and family that are not technical or not in the technology industry. Asked me this week is like, what is this? Is this real or what's going on? Is this really a. Sure. A situation and so forth. So I think this. This all started with somebody from Anthropic, the Claude person.

[00:47:27] [SPEAKER_01] Well, this round of it, right? This round of it. Yeah. You've got this young guy who had been there for like three months. But prior to that, working for NGOs and government, non-government organizations that are so-called not-for-profits. That's in related to the doom and gloom potential. He gets a job at Anthropic. People question whether he really even had access to enough to even be knowledgeable about it. Had not had a Twitter or X account.

[00:47:56] [SPEAKER_01] No followers. And then comes out with this big announcement that we're all going to die because he quit his job at Anthropic because he just can't work there because of this. That's the rough piece with this one particular gentleman.

[00:48:10] [SPEAKER_03] Yeah. Yeah. And do you know exactly what he said?

[00:48:15] [SPEAKER_01] No. Tell me.

[00:48:16] [SPEAKER_03] I don't know. I didn't know if you knew right offhand.

[00:48:18] [SPEAKER_01] Well, let me look it up. And you keep talking and I'll fill in. You fill in my void here.

[00:48:23] [SPEAKER_03] So anyway, yes, he had some big proclamation that his name was Jacob Coxon.

[00:48:32] [SPEAKER_01] And he had millions of followers on Twitter in the first day. I'll be. Go ahead. Keep talking.

[00:48:39] [SPEAKER_03] Yeah. He said, I left Anthropic Safety Team two weeks ago. AI companies are racing to build machines that are much smarter than any human. And we may not survive this.

[00:48:51] [SPEAKER_01] We're gambling with our lives, he said.

[00:48:54] [SPEAKER_03] We're gambling with our lives.

[00:48:55] [SPEAKER_01] The deadline for humanity.

[00:48:57] Right.

[00:48:59] [SPEAKER_03] So, you know, people called him a whistleblower. That was one of the things I heard.

[00:49:03] [SPEAKER_01] Oh, I didn't hear that.

[00:49:03] [SPEAKER_03] Yeah, I've heard that quite a bit. Oh, it's a whistleblower on this type of thing. So what happened? Again, I may have all the timeline wrong because there's been all kinds of conversation and so forth. But then, you know, I'm going to be thinking about slowing down.

[00:49:34] [SPEAKER_03] You know, potentially are taking a step back. Now, no specifics of what that really meant. But there was, in fact, a safety concern. As it relates to this guy.

[00:49:46] [SPEAKER_01] And then Amazon jumped in on that this week as well. Right. Later in the week, right?

[00:49:51] [SPEAKER_03] Right. But just go back to this person, this coxswain, right? Open or Anthropic did not jump in right away and go, whoa, whoa, whoa, whoa. Hold on a minute. Well, this guy. Right. And.

[00:50:05] [SPEAKER_01] Which most organizations would, right? Especially somebody that's getting ready to go public.

[00:50:09] [SPEAKER_03] Well, and that's what the interesting angle seems to be here, right? So, they're getting ready to go public. They're about ready to produce all their materials that they need to do to go public, right? That they release on those things. Do you think that if you put in your materials, your, you know, pre-IPO materials, hey, there's a high probability that our product, which is this, could cause loss of life.

[00:50:37] [SPEAKER_03] Forget even, you know, the degree and level of this guy. Okay. But loss of life and product liability and all this kind of stuff. What would that actually do to the potential of that IPO and of the companies that would invest in that IPO? Remember, who invests in IPOs are big institutions, big companies. It's rarely the, you know, you and I, right? That are doing that.

[00:51:04] [SPEAKER_03] So, are they going to be willing to risk to invest in those things? There is rumor. And there's legitimate rumor to it to me that this was a shot across the bow. That was, hey, let's go throw the shot across the bow that maybe there's some issues here that I'm going to go after that could be there. Let everybody talk about it, go crazy about it.

[00:51:26] [SPEAKER_03] Then when we put anything in our, was it S1 or whatever the materials are that they do for IPO, it's already old news and nobody really cares about it from what is there. I think there is an aspect of that that's there. I also know that if there was a real truth to this, that there would be, you know, the government wouldn't, if the government thought a company was building something, a product that could have serious impact on human life, right?

[00:51:55] [SPEAKER_03] They would probably step in and do something about it pretty quickly that are here. Nobody's stepping in and doing anything. Now that all said, all of those things said, yes, there is risk, right? And what's going on with the AI and the models and so forth that in theory, yes, could get something out of control, run on its own thing, cause, you know, numerous potential issues that would have.

[00:52:20] [SPEAKER_01] Oh, the jailbreaks that are happening right now, right?

[00:52:24] [SPEAKER_03] Right. But those are not necessarily a threat to human life. Those are threat to business and so forth. There are things that could happen to threat to human life. But the obvious answer then is that if that exists and you guys are some of the smartest people in the world as it relates to reach these models, then okay, then maybe we do need to spend some time thinking about fail safes or other things that are going to be deterrents to those things actually occurring.

[00:52:50] [SPEAKER_03] So I don't, again, I'm not 100% sure I know exactly what the angle is here, but I do think there is potentially one, hey, it's a way for us to get ahead of this as our, on our IPO. Two, you know, they've always, they've always wanted to kind of dictate Anthropic Bean and the company that is dictating the regulations and so forth.

[00:53:15] [SPEAKER_03] I think there's always been using this as a way to potentially squash open source models because, of course, you can't control open source models. A lot of different dynamics and variables, but I guess long story short, what I've been telling my friends and family, I don't think you need to be worried about are you going to be extinct from AI in the next, you know, 60 days.

[00:53:39] [SPEAKER_01] What about next 10 years?

[00:53:42] [SPEAKER_03] Next 10 years, next 10 years, no.

[00:53:47] [SPEAKER_01] So if you take the start peeling the onion, right? This all came out of Anthropic. Where did Anthropic start, right? Dario Amadei and his sister left open AI because open AI, which was supposed to be a public benefit company, hence the big lawsuit with Elon Musk, because he had originally funded.

[00:54:08] [SPEAKER_01] I can't remember, I can't remember, it was like $100 million or something like that, threw in to start open AI because it was going to be a public benefit company, so to speak. And now he's suing them over that. And of course, he has his Grok solution that's part of his organization. But Dario and his sister leave open AI to start this, their new venture, which is supposed to be wonderful for the world.

[00:54:35] [SPEAKER_01] And with Anthropic. But there is a trend to follow here, Tom, if you kind of pull the thread. If not every, nearly every fundraising round that Anthropic has gone through, there's been this Machiavellian type pragmatic warning from Dario Amadei about the risks with AI. So this is not new.

[00:55:04] [SPEAKER_01] And you could say that this guy quitting because they're in a quiet period at Anthropic, prior to going public right now. You could be saying right now that this is, now this might be, I was just actually going to say it might be a little bit of a conspiracy theory concept.

[00:55:25] [SPEAKER_01] But if you really look at the history, every time there's been these discussions, and not discussions, but there's been fundraising, Dario Amadei has come out and talked about the risks that go with things. Two things he doesn't, two things he wants. He wants, obviously, now he's as a public company, right? I'll say three things he wants.

[00:55:48] [SPEAKER_01] He wants to be the go-to source with their cloud model and the Anthropic APIs for companies like ours use and so forth. He wants to be the go-to source. Two, that translates into huge dollars for their IPO and so forth that they go through. But probably the thing that he's looking for the most, which leads to the, and he almost needs to get the other two, is open source models.

[00:56:16] [SPEAKER_01] The models from China and Meta's Lama and so forth that get better and better over time. Right? Right. NVIDIA now. They get better and better and better over time because of other people's input to it. Those drive prices down in those settings, right? Which does not go well for them. So his big thing is we need government intervention.

[00:56:39] [SPEAKER_01] It's funny, we're going deep on this and maybe we shouldn't because we wanted to do a Round the Horn 2.0 session with some of our friends that are deep into this stuff as well. I'm not sure anybody cares about this in the distribution world, but they should. At least understand it, right? Because who you spend your money with is tied to people right now are trying to pick models out there, right?

[00:57:08] [SPEAKER_01] Within wholesale distribution manufacturing, right? And we see this all the time. I just bought, you know, chat GPT licenses for my whole team to go try and do some things, right? Now some people are really trying to build some things. This all leads to a bigger picture. I don't even know we have time to talk about today of where the market's headed. But if you look at this now, you got to peel that onion, so to speak, or pull that string or whatever you want to look at it. Somebody just made a comment here about pattern recognition.

[00:57:39] [SPEAKER_01] From that standpoint is what is the motivation behind what's going on here? And if you look at this, right, is every time that they've raised money, he's looked to say, I'm raising money. You're giving me billions of dollars for my approaching trillion dollar valuation. But I need to tell you, I need to tell you there's a risk here and I'm the one who told you about this, right? And now he can't do that because they're not raising money.

[00:58:09] [SPEAKER_01] He can't speak. So let's get a 12-year-old in our age terms, right, who I believe, I looked this up while you were talking a moment ago. He worked at the company for four months.

[00:58:21] [SPEAKER_03] Okay.

[00:58:22] [SPEAKER_01] And, you know, there's people talking about something on CNN, so you can consider that as the source, about all the money he walked away because he was there for four months. And apparently now pre-IPO, you vested six months. But what would he have vested of shares over six months at the company? It's probably not that much.

[00:58:46] [SPEAKER_01] So there is a conspiracy here that this kid could be a shell for these other organizations that are pro-regulation for AI, which is where he previously worked.

[00:58:58] [SPEAKER_02] Right.

[00:58:59] [SPEAKER_01] Right? That he's just a shill that got a job to play the narrative to get that same message out about no open source model should be available. Sure. And we're the ones telling the truth. And it's so important that this young man who was an employee quit and gave up millions of dollars in stock options in the IPO. This could be one of those things that somebody is giving him that money out of their own pocket to play this game.

[00:59:29] [SPEAKER_01] The interesting thing about this as well, and we don't want to spend too much time talking about the backside of this, is I heard this on a podcast the other day, was that interestingly enough, the Wall Street Journal broke the story before his Twitter post went out.

[00:59:44] [SPEAKER_03] Yeah. No, it was well publicized. This wasn't some guy just going to Twitter and saying, I quit. Right? There was a whole lot of...

[00:59:54] [SPEAKER_01] He didn't have a Twitter account the day before.

[00:59:56] [SPEAKER_03] Right. Right. So this was well planned out. This was well put together. Look, I think at the end of the day, you got to follow the money. Right? When in doubt, follow the money. I don't... You know, Anthropix plans is to do a $2 trillion, an IPO at a $2 trillion valuation. That is a higher valuation than all of the other IPOs in Silicon Valley in the last 20 years combined. Mm-hmm.

[01:00:25] [SPEAKER_03] I mean, that is... That's bigger than Google, Facebook. Right. I don't know. Microsoft was probably longer than 20 years. But there's been a lot of companies that have gone public over the last 20 years. There is a lot, a lot, a lot, a lot of money here involved in this and related to this that's here. And I think if you just follow the money, to me, that's what you're seeing here. And why not throw the hand grenade now rather than before I actually throw the...

[01:00:55] [SPEAKER_03] Put together an S1. And at least they say, I told you so. Plus, all the things you just talked about, where it leads to regulation, where it leads to Anthropix being the voice of reason in that regulation, the potential, if not elimination of open source models. Certainly a lot of additional scrutiny and regulation on open source models, which is just about impossible to do. So, to me, that's a moot point.

[01:01:22] [SPEAKER_03] Anyway, I mean, if you want an open source model, you'll get it one way or the other, whether they're legal in the United States or not. So, anyway, I think a lot of this is just follow the money. It goes back to the same thing. There's a lot of things you can do to protect yourself.

[01:01:40] [SPEAKER_03] You can use the same AI that would basically create these doomsday situations to potentially monitor and reduce the threat of those doomsday situations. I don't know. I would prefer not to hear a lot more conversation about it, but I don't think we're...

[01:02:00] [SPEAKER_01] Oh, I think we're just getting started, my friend. I think we're just getting started in this, right?

[01:02:04] [SPEAKER_03] Right.

[01:02:04] [SPEAKER_01] And the issue, and this ties, and if you just want to look at this big picture, right, it really ties back to the uniqueness of all of this. Because the importance of this is to the audience that we serve here in wholesale distribution and manufacturing ties to this.

[01:02:22] [SPEAKER_01] It's a lot of things that we're trying to make sure that hot water heaters got shipped today or that your spot price on lumber or whatever it might be is correct to be in the know and understanding all of these things. And it's interesting to watch this going on because there's two things I want to hit here.

[01:02:44] [SPEAKER_01] One is finding a place to do your AI work, but the other side of this really ties to the concept of what we're going to... I believe we're going to see a lot more of very quickly, which would be a detriment of all of these model companies, is these router tools, right, that are being built. So we think about historically, we think about a router is where you plug all your internet connections into.

[01:03:10] [SPEAKER_01] Well, now think about a router being behind, as an example, our software at LeadSmart, that when you ask an AI-driven question, that rather than, you know, and this is a ways down the road, but think about that is that because there's costs that go with all of these models, right?

[01:03:31] [SPEAKER_01] And the average person, we were talking about this yesterday in a meeting here at the office, the average, it was funny because we were doing some work with Claude, with our marketing director, Dane, and Claude timed out on her. And I said, well, you're doing hard work and it wants you to go take a break, right?

[01:03:47] [SPEAKER_01] Because other people are wanting to do hard work and the idea behind that is that that $20 a month subscription that John and Judy have at home, right, is something that they're losing money on at ChatGPT or at Claude, wherever it might be, or those two companies. They're losing money on those. They're driven by that enterprise user or the companies that are buying API connections, which are high token use driving dollars.

[01:04:15] [SPEAKER_01] Well, I don't know that anybody ever stopped and thought about putting a router behind that that says, and, you know, most people are suggesting now, and you know more about this because of your background in engineering and computer science, and I do. But, I mean, I sell hammers and hard hats. So with your background and understanding of this is important.

[01:04:38] [SPEAKER_01] But I think what's happened now is if you were to look at the basic questions that a person asks, ChatGPT, Claude, Meta, see if I say, hey, Meta, then I hear a little beep in my ear because I have my Meta glasses on today. But in theory right now, all of those models are pretty close. Meta is llama. Then you've got all the open source models that are out there as well that are substantially lower in price.

[01:05:09] [SPEAKER_01] So if all of those are pretty much equal, and they have been for quite some time, if all of those are pretty much equal now for a generic question, analyze my sales forecast or, you know, who won the Russian XYZ war, if you look at something like that, they're all basically the same. So then why not use the cheapest one for those generic questions, right?

[01:05:36] [SPEAKER_01] So now imagine behind the software you're using because you're using not directly going to Claude to get information, but you're using, you know, lead smart system, right? What if there was a router behind that to keep your costs down that said, well, that's so simple. I'm going to go to Kimi 2 or whatever it might be that's nearly free, and I'm going to go over here to this one. But, oh, that one's tough. I'm going to fable on with OpenAI for those answers.

[01:06:03] [SPEAKER_01] Just that router concept becomes very problematic for these companies that are getting ready to go public.

[01:06:11] [SPEAKER_03] Yeah, no, the growth that has occurred specifically with Anthropic, right, has been predominantly around coding and the use of the tokens for heavy-duty token. And, yes, being kind of the only game in town or one of the only games in town for doing that.

[01:06:29] [SPEAKER_03] So, A, it's not that coding is going to drop, but I believe that the scrutiny that will occur with the money that's being spent for coding tokens or any tokens is going to be more highly scrutinized. And, yes, as more models proliferate and it's easy to navigate between one model to another, then, yes, you have choices that are there for along those things.

[01:06:56] [SPEAKER_03] So, you know, a lot of their valuation is being based upon their growth rate, which has been amazing going from whatever, $10 billion to $100 billion. Nothing.

[01:07:08] [SPEAKER_01] You were saying earlier, right? We've never seen anything like it.

[01:07:11] [SPEAKER_03] Right. But is that going to be maintained and can that be maintained? Mm-hmm. It's, you know, for the points you brought up, yes, it's doubtful along the way that's there. But they need to go public. They need to go, in their mind, I'm sure. I mean, and they have thousands of investors and maybe more than tens of thousands or hundreds of thousands and all these special purpose vehicles that were created and different sort of scenarios for people who wanted to get into Anthropic, right?

[01:07:39] [SPEAKER_03] But there is a lot of money on the sidelines that need and want to benefit from this IPO. Sure. And don't want to risk, you know, not getting their riches from this. So there's a lot of vested interest, I guess.

[01:07:54] [SPEAKER_01] Well, there's a whole lot of people that are, yeah. Yeah, and there's large individuals and large organizations and large funds that are deeply invested in both open AI and Anthropic in this setting. Yeah. So anyway. The interesting thing, before we move on, I do want to move on to our last few minutes, though, talk about a few other things outside of this. In fact, there's an interesting article here we have about some new humanoid robots. But this is a bigger discussion. We'll have it a show soon. But I think it's very interesting.

[01:08:25] [SPEAKER_01] And it kind of plays along a little bit with what we're working on and doing at LeadSmart now. But if you look at, there's two organizations that I see out there right now that are doing something very interesting. The challenge is that it's problematic for the typical wholesale distributor or manufacturer with an average-sized IT team and lots of other things going on in their business. They're kind of problematic because of the size of these companies and the third-party consultants and everything that are needed for a wholesale distributor typically to work with.

[01:08:54] [SPEAKER_01] But it would be ServiceNow and Salesforce. And what both of these organizations who are behemoths and publicly traded companies, behemoth Salesforce being the biggest and the baddest ever at what they do with CRM, are moving way beyond and way past that. And what these organizations are saying is, come do your AI here. Right?

[01:09:16] [SPEAKER_01] And it's aligned with some of the tools that we'll be announcing soon that you and your team have been working on LeadSmart is you don't need to download CSV files anymore and then go plug them into Cloud to do analysis. You can do that right within Salesforce's place. You can do a lot of it right within Slack. Right? You know, in your messaging platform. And so I'm watching these two organizations and their position.

[01:09:40] [SPEAKER_01] I think ServiceNow, you probably shouldn't say this because we're a global strategic OEM partner of Salesforce and they're a partner in the distribution and marketing world of the solutions that we've built using their security and their cloud system and their development layer with our solutions at LeadSmart. But I think ServiceNow is doing a phenomenal job with this that is saying, do your AI here. Right? You get our security layers. You get all the things that go with that. And I think we're getting ready to come in.

[01:10:09] [SPEAKER_01] And I'm sure there are people that are listening or that will listen later to this that might argue with me. But I think specifically in the market that we serve and the reason that we exist on this show is to support wholesale distribution and manufacturing. Is I think there is a bit of fatigue and fatigue might be an understatement for wholesale distributors in particular getting bombarded with a million different AI point solutions. And then what should I be doing with cloud?

[01:10:37] [SPEAKER_01] Should I be investing in cloud or chat GPT? Or should I do both? Wait, that gets really expensive. I'm not quite sure. And what we're starting to see, I think, in some levels is some paralysis of people that are just overwhelmed with what to do. So they'll go buy an inexpensive tool that might help with an issue within purchasing or something like that. But it's not a big picture solution to what their needs are for their business. And that is, I think, a big component of what's going on right now.

[01:11:07] [SPEAKER_01] And people need an answer to how they're going to go get this work done in their business.

[01:11:15] [SPEAKER_04] All right.

[01:11:15] [SPEAKER_01] So, hey, there's as we kind of wind down today and looking at things, there's a great article I ran across on LinkedIn. It's called A Hidden in Plain Sight Reason Your Deals Aren't Closing. And there is a key to this is one, two, three, four, five, six points about why it happened.

[01:11:43] [SPEAKER_01] And that was written by our friend Norm that's here visiting with, I'm sorry, Bob on the show today. Bob, if you're not following Bob on LinkedIn, he has a page there called Grow Your Top Line Revenue. Bob Britton, B-R-I-T-T-O-N. And he does some nice writing. And we appreciate that.

[01:12:07] [SPEAKER_01] And I always, when he writes stuff that's of interest and unique and relevant, I guess it's always relevant, but fits well with our audience and our show. I want to make sure those things happen. And we get that to him. So, he talks about deal stalls.

[01:12:21] [SPEAKER_03] Well, and he talks a lot about communication and messaging. Sure. Right.

[01:12:25] [SPEAKER_01] It's not about the product.

[01:12:26] [SPEAKER_03] Right. And we've been going through this exercise with this new release or new thing that we're doing on Tuesday. And it is so true. And we've seen this over and over, right? We try and explain something to somebody as precise and concise as possible. And what they hear and what we say are two different things. And then what they do and then how they translate it and communicate it to the next guy. It's like, how did you get from here to there?

[01:12:56] [SPEAKER_03] Right. And I think one of the things now, and this is something I know we're trying to be, in our new release, trying to be very conscientious of, is marketing hype. Right. You know, where you're, God, this is the greatest ever. And, you know, best and biggest. And you're never going to, you know, you've never seen anything like this. I think that just adds more problem and challenge to these communication problem. Right.

[01:13:21] [SPEAKER_03] And to Bob's point in the article, when you're dealing with sales, you're not necessarily just dealing with one. You may have a champion, but there is a champion may or may not be the decision maker. They may have multiple decision makers or committees in the organization. And you have to somehow be able to figure out how to communicate concisely and in a way that they actually duplicate what you're communicating into that organization.

[01:13:51] [SPEAKER_03] Otherwise, I mean, we've seen this over and over. Right. Right. And I think we do a reasonably good job. And then you come, even like we do a demo or something with an organization. And then the next conversation, it's like, are we on the same conversation that we were before? So anyway, I think he brings up a really good point in here about communication, the importance of really thinking through how to be as concise and clear.

[01:14:21] [SPEAKER_03] And I don't know, is there a way to kind of even test as you go along, right, for this to know, are you really getting your message across or what you believe your message is? Is that really what's going into the organization?

[01:14:35] [SPEAKER_04] Yep.

[01:14:36] [SPEAKER_03] And I think we have a real challenge on what we're doing going forward, right? We have a real challenge with this. And I think we'll have to see how this all plays out. But it is an issue. What are you listening to the radio or turn on the news?

[01:14:51] [SPEAKER_01] No, I just keep getting beeps.

[01:14:53] [SPEAKER_03] Oh.

[01:14:54] [SPEAKER_01] You're getting boring. I've been with you for an hour and 16 minutes.

[01:14:58] [SPEAKER_03] Yeah, I was going to say, are you checking out and going to go turn on the news? Sure.

[01:15:02] [SPEAKER_01] I was just thinking about maybe turning Spotify on and listening to something interesting.

[01:15:07] [SPEAKER_03] All right.

[01:15:08] [SPEAKER_01] Well, I was trying to give Bob a shout out. You're trying to rewrite his article and tell the world that we're not going to be able to sell enough of our new product that we're getting ready to offer.

[01:15:16] [SPEAKER_03] No, I just think it's something that we have to – we, everybody, I'm not just talking about you or LeadSmart. I'm talking about as companies, and you just talked about this, people being fatigued in the AI industry and all that kind of stuff, right? We have to be conscientious of the noise, not just as a company but as an industry.

[01:15:33] [SPEAKER_03] And because who knows what the industry is saying even right now about AI and so forth, how that is actually being translated and duplicated and communicated within the organization, especially as it moves up the command line.

[01:15:50] [SPEAKER_01] Well, I think you've got champions that might be a buyer. You might have committees. But you, no matter whether the buyer says he has authority or not, unless you're buying a commodity that they buy over and over again, there is oftentimes a hidden committee. There are influencers that need to be satisfied even though they might not be truly involved in the decision. So we can talk about that for hours.

[01:16:19] [SPEAKER_01] So there was – before we wrap up today, they're just in our industry scuttlebutt section. I was going to try and get him to join today, but he was pretty busy. One of our customers at LeadSmart, our good friend James Gilman, runs a division of what was recently ODP.

[01:16:45] [SPEAKER_01] And so Office, that's part of was basically Office Depot, their business side of things. And they were running under that for quite some time. That was their business solution side.

[01:17:03] [SPEAKER_01] And they've got, as part of that on their B2B side of Office Depot, they've got – I don't know if it's dozens, but many, many, many companies like our customer LeadSmart Perimeter Office Supply and a number of other ones. And James is president of two of those. And we were talking earlier in the week about some of these changes going on. In fact, James Voss is now the new CEO. But they're going back to the branding of using the Office Depot branding, both B2C and B2B in this, which is really interesting.

[01:17:33] [SPEAKER_01] So there's a lot going on.

[01:17:34] [SPEAKER_03] So is Perimeter's name going to change?

[01:17:37] [SPEAKER_01] No, no, no. Just for the big picture of what they're doing. Okay. But we're going to have – James is going to join us sometime soon and talk about it a little bit. Because there's a bigger picture behind this. And as we talk about this office products arena, which is so much more than magic markers and paper. It's furniture. It's all of the things that go with that. But there's one of the biggest wholesalers, right, of that is Ascendant.

[01:18:06] [SPEAKER_01] And we've published a few things about Ascendant. And Ascendant is on the verge of going out of business. And that's a major, major impact to the wholesale side of office products. So we'll get James on with us soon and talk about this a little bit more as there's further announcements for that. But there's a unique place, right? We talk so much about the typical place that we work with LeadSmart. It's just where we are. We've got some customers in the medical arena and some customers in office products and so forth, which are great.

[01:18:33] [SPEAKER_01] But we do so much with building material distributors and industrial distributors and manufacturers and plumbing and so forth that are our existing customers. That, you know, the world is full of distribution. You know, I tell people when we're out to dinner and somebody asks what I do, I try and use the term wholesale distribution and people's eyes roll.

[01:18:52] [SPEAKER_01] And so I just remind them that the chair that they're sitting in and the napkin that they're put in their lap and the martini glass in front of them and the olives in their martini and the steak that's coming out for them shortly from there came through a wholesale distributor to the restaurant. So it's a big market, big place, and this office component side of it is a big factor of keeping businesses running.

[01:19:17] [SPEAKER_01] So last piece here is our customer and friends at EB Horseman and son in Western Canada. They just opened another branch. So we every week have our industry scuttlebutt, trying to make sure that friends of the show, friends of the company always get a good shout out as well. So that's about it for today, huh, Tom? I think that's a wrap. Very good. Any big weekend plans?

[01:19:39] [SPEAKER_03] I've got some travel coming up to the East Coast this weekend.

[01:19:43] [SPEAKER_01] So I forgot about it. You're leaving in the morning, right?

[01:19:45] [SPEAKER_03] Leaving in the morning. So I've got some stuff to do.

[01:19:48] [SPEAKER_01] Off to FLA. LA? Florida?

[01:19:53] [SPEAKER_03] Oh, yeah.

[01:19:54] [SPEAKER_01] Designator? Yeah. Sorry. Are you tired?

[01:20:00] [SPEAKER_03] I'm just bored. I'm just bored of listening to you. I had the news on. I was something. Sorry. That's a distraction, Tom. Yeah.

[01:20:08] [SPEAKER_01] No text messages, no news. So for those of you that don't understand that, I listen to the news constantly. Tom, he says that he doesn't listen to the news, but then he all of a sudden comes out of the... He doesn't listen to the news. You know, high-speed chases. He listens to the stuff that he wants to talk about. Which is good. Good show today. I don't know.

[01:20:32] [SPEAKER_01] Maybe we went a little deep on doom and gloom of AI, but I think it was worth talking about because our audience is getting hit with it day in and day out. So I think it's good to do that. Great. So anyways, I will wish everybody a fine weekend. Hope we see you again soon. Again, if you have downloaded the show and are listening to it on a podcast platform and you'd like our newsletter, just reach out to us at hello at leadsmarttech.com. We'll get that out to you.

[01:21:02] [SPEAKER_01] Big launch coming this week. Watch if you're listening on LinkedIn, follow the Lead Smart Technologies page. Just click that little follow button and you'll see the big announcements coming this week. You've got a great team working behind the scenes on all of that. Press releases were approved yesterday. Everything's ready to roll. There's even a new website. There's even a new website, right? New website. We'll be hitting the button on that on Tuesday.

[01:21:25] [SPEAKER_03] New video? New video with some amazing voiceover work? New video.

[01:21:31] [SPEAKER_01] So never miss a chance to tout yourself on that. That's right. Tom made the, what do you call it? Sizzle video. Yeah, hero video. It's on the homepage. Hero. Well, your title of the video when you sent it over to me was sizzle.

[01:21:45] [SPEAKER_03] Okay.

[01:21:48] [SPEAKER_01] And you only have five more videos to make.

[01:21:51] [SPEAKER_03] That's true. I better get on it. All right, let's go.

[01:21:54] [SPEAKER_01] So you're going to tout yourself. I'm going to remind you about that. Tom made a beautiful video. It'll be available on Tuesday at the new website, which I guess if you log into or if you go to www.leadsmarttech.com, that'll point you to the new domain as well. And we'll announce that on Tuesday. So exciting times.

[01:22:17] [SPEAKER_03] All right. Let's rock and roll.

[01:22:19] [SPEAKER_01] All right, everybody. Have a great weekend. Be kind, be safe, and do good things.

[01:22:27] [SPEAKER_00] We hope you enjoyed today's episode and our guests. Each week, we try our best to dig into the topics that are impacting your business. So please reach out to us and let us know how you think we can make the show better or topics you'd like for us to tackle or talk about more often and even guests you'd like to see join us. We're looking forward to bringing you next week's session and hope that until then, you stay safe, stay focused, and do great things.

[01:22:53] [SPEAKER_00] If you haven't already, please subscribe to the podcast and leave a review to help others in wholesale distribution get access to the conversation. And finally, please check out our sponsor, Lead Smart Technologies and their manufacturing and wholesale distribution industry CRM, customer intelligence, and channel collaboration platform. That's Lead Smart Technologies at leadsmarttech.com.