Data Centers Everywhere, Section 301 Tariffs, and Amazon Business Crushing It: What A Time To Be Alive!

[00:00:04] Welcome to Around the Horn in Wholesale Distribution 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. Whether it's M&A, SaaS and cloud computing, B2B e-commerce, or supply chain, we're going to be able to get a lot of data from the world.

[00:00:30] With the high chain issues, we peel back the onion with our guests into the topics that impact your business the most. Audience got a good laugh out of that one. I'm telling you.

[00:01:00] All right. I'm shutting them up. Are you done? I'm done. I'm done. I didn't realize there was that much laughter to be had there. Yeah. Well, it's my dancing, I guess, you know. Yeah. If you were to ask my wife, I'm not a great dancer. So, apparently, you and your finger on the trigger of the laugh track agree. Right. But we're coming up on 200 episodes of that happening. So, probably not going to get away from it. That is true. Although you did say you want to change the music.

[00:01:30] I think we need to, we need to kind of take a step back and see if we need to freshen some things up. So, okay. Well, let me know what you come up with on that. I will, I will work on that. I will work on that. Okay. I'll tell you what, I will assist you in it when you take the lead on it. That's okay. I'm not going to let this one go with you just suggesting that I go do something. So, we'll work on it together. There are great, great resources now that we could create something of our own. So, we could certainly look into doing that.

[00:02:02] How are you? Okay. Good. You know, what's, what's funny is, I just keep looking at the data and I'm grateful is the amount of listeners is growing exponentially on the recorded podcast. And so, the, those poor people don't get to see me dancing when you play those laugh tracks. They just hear us talking about it. They can just only assume that it's, you know.

[00:02:28] Maybe that's the sub, maybe that's the subliminal message to drive those people to YouTube to watch the recording. Yes, that's true. Watch the first 30 seconds of the recording. Yeah. After that, it probably doesn't matter a whole lot. Good. All right. You doing all right then? Good week behind us almost? Let me get ready and dive right in. I'm Kevin Brown and this is my lifelong friend and business partner, Tom Burton. We get together every Friday morning and we chat about the news of the week.

[00:02:57] We do that through the use of the newsletter that we publish. It's called Around the Horn and Wholesale Distribution. That goes out to tens of thousands of people at this point. I think we're 12, 13,000, something like that. And multiple countries around the world where we cover the topics that impact wholesale distribution and manufacturing. So we have sections on the supply chain. We have the economy and world news.

[00:03:22] We have mergers and acquisitions, sales, marketing, AI, technology, robotics. We kind of talk about it all, including people and leadership and how the things that are going on in the news impact the workers that we have to get things done. And the one third of the world's or excuse me, one third of the US GDP goes through wholesale distribution. So probably an important group of people to be talking to and about an important audience to serve.

[00:03:50] So we again, coming up on today is one 99. This is astounding to me, Tom. But I think we should be really clear that even though next week is 200. It'll be kind of a business as usual one next week because the 200 celebration is not till the 21st. How's that for confusing? Yes, exactly right. Exactly right. The 202nd one will be what? The 202nd one, maybe? Or something?

[00:04:18] Maybe we're just going to celebrate 202. Maybe that's a simple way to do it. We'll just celebrate our 202nd episode. No, I think you nailed it. Absolutely. Correct. Right. So we're going to do ongoing shows. We're going to miss the seventh. As I always say, we do this show unless someone's on an airplane in the hospital or on a planned vacation. I will be taking a two day. I really hope I'm not in the hospital because I will be in another country.

[00:04:47] So I'm excited. I'll talk about it a little bit more next week. But I'm meeting my good friend and friend of the show, Dirk Beveridge. We're going to meet in Puerto Rico and join the folks at the Primera Buying Group, which is a wonderful group of people who are in the turf, landscape and ornamental horticulture business. So it's the buying group for that level of distribution.

[00:05:13] And they're having their 25th anniversary celebration in San Juan, Puerto Rico. And Dirk and I are combining to do their keynote address for their event and their members. And we're going to talk about as we're going to talk about a little bit today. We're going to talk about the convergence of technology and its impact on people and workers within a business. So we've been working hard on preparing that.

[00:05:37] And then the lovely Mrs. Brown and I are going to hop off to another island nearby for a few days of R&R. And then from there, it's straight to Chicago for another trade event. So I've got 14 days away. So you'll have to get down here and get into the office here and keep people in line. I guess so. Yeah. Yeah. As opposed to them keeping me in line. So we digress as we do so often. So let's talk about the last part of why we're here. So we do this each week.

[00:06:07] As mentioned, we're coming up on episode number 200. We couldn't do it without the folks that are supporting us. We've got people that come in on a nearly weekly basis. Many who have been around since the beginning. So that's the great part of this is the new friends that we make and the relationships that we make and the growing things we do. You and I were at an event a couple of weeks ago, and we had what hopefully will be a new customer of ours at LeadSmart come straight to the booth.

[00:06:36] And before they wanted to talk about our technology, they wanted to say how much they enjoy the show. And that's what makes the hard work of preparing for this worth it. If you don't get that newsletter we were mentioning, it's called around the horn and wholesale distribution. You can just let us know simple email to hello at lead smart tech dot com or pop a note to us on the website for the show, which is around the horn pod dot com.

[00:07:00] And finally, if you're active on LinkedIn, you could just look to show up and or Tom or myself on LinkedIn and we'll make sure and subscribe that you subscribe to it there. We can also make sure it gets emailed to you each week. We would love to do that and add you to the list of people that do that. Finally, we couldn't do the show that we do every week here without the support of the company that Tom and I work for. LeadSmart Technologies at LeadSmart.

[00:07:20] We've developed what we call an enterprise growth platform where we've taken sales enablement, CRM, marketing IQ centers, quote management and quote what we call a quote IQ engine. We pulled all of those things together in a fantastic solution to help wholesale distribution manufacturers bring the silos from across their business together into a single platform where we use our Meridian 360 hub to bring that data together.

[00:07:48] We now can visualize what's happening deeply at the customer, our teams and within our business to fully understand what's happening, where there's opportunities to sell more, where there might be risks with our customers. We unify data from across the business to help us understand deeper into how we can grow and accelerate growth within our business. So if your company is looking to digitally transform, starting to use AI to look to grow and accelerate the growth in your business, we'd love to share and talk with you more about what we do at LeadSmart.

[00:08:18] But that's who pays the bills for the front end people in the back end production and editorial side of this show. So Tom, anything to add before we dive into the news? Well, what's pretty cool actually related to, and I think we have a call today with a prospect that we had got some data from them, some ERP data, and we were able to load that in the system that goes fairly fast.

[00:08:40] But literally now with a push of a button in about five minutes of processing, all of that raw data has turned into all kinds of interesting insights and white space opportunities and wallet share and all of that stuff. It's just really cool to watch that transformation take place. It happens so quickly. It happens so quickly, which is really...

[00:09:03] You know what's really neat about that too is you were talking about loading that data so they can understand and see what we can uncover using the tools is we were talking to a customer recently that's getting ready to start doing a lot of M&A work, looking to do a handful of acquisitions. And actually that tool that you and the team built specifically with our Genius Feed AI solution and Revenue Expander tool, you could actually use that for M&A when you're in diligence, right? You could take that data, right?

[00:09:33] Once you're under NDA and diving into diligence and load that same data in and look at what the opportunities that are being missed in that potential acquisition and help you with your pricing, right? Figuring out what am I willing to pay for this business? Or you don't know. Yeah, you may find out you've got a diamond in the rough, right? Exactly. That was my point. Might space saying, hey, look, I'm looking to spend X millions of dollars on this company. The math pencil is out pretty close already.

[00:09:57] But when I run this through the Revenue Expander and Revenue Expander and Genius Feed come back and say, well, wait a minute, there's another $8 million that they should be able to get with low-hanging fruit. I'm willing to pay what they're asking because they have no idea what they have here. Yeah. We need it. We need to sell it. We need to go make a version of this for PE companies. All right. Well, let's give it a moment. Yeah, I agree. Bob is providing some options here for new intros.

[00:10:26] If anybody else has any other option, I'm going to check that one out. I like the good, the bad, and the ugly. What did you call me? I just said the good, the bad, and the ugly. You can decide what I called you. I'll just be the good. There you go. Okay. What are you going to take? There's only two left. I'll just take the bad. You're either bad or ugly. I'll just take the bad. That's why I jumped on the good real quick because I had to give you a make-a-choice. All right. You want to talk about news today? Yep. Let me figure out how to do it. What's happening in the world?

[00:10:56] There we go. Yeah. Bring that newsletter up. For those of you, again, that don't get that newsletter, we're putting it up on the screen right now. You're probably going to want to get a copy of this soon because this boils it down for you every week. Okay. So first one here, I guess Warsh has three phrases that he's really liking. Yeah. Or getting stuck on. And I guess then that all the pundits are then trying to figure out what that really means. Yeah.

[00:11:25] So there's three, easy for me to say, three phrases that he is using, I guess consistently. One called one family fight. Second, first principles. And third, inflation is a choice. So I guess in his speeches, he's used family fight 13 times, first principles 11 times and inflation a choice six times.

[00:11:50] So what those mean, and again, I'm not sure how you take all of this and interpret it into maybe we need to have Claude or AI help us interpret this because I'm not quite connecting all the dots. But family fight means that the committee is divided on their thought process in terms of either holding steady or reducing rates or hiking rates. The article said split evenly. I don't know if that is in fact the case.

[00:12:20] I think there's a little bit more. I don't think there's quite as many on the hike side as there is on the hold steady side. But anyway, it's still split, right? It's not 100%. First principles relate to his committees. We talked about, I believe, last week. The five three-person task forces that are out looking at all of the data, the balance sheet, the communications, the inflation measurement, and so forth.

[00:12:45] And then the last one, which I told you he's really doubling down on the 2%, is his stance, inflation as a choice, that anything above 2% will not be tolerated. And that whatever they're going to do is going to push to get down to that 2%. Yeah, what he's really saying, though, is until they make the adjustment to 2.75. Well, we'll see.

[00:13:11] Maybe his first principles team will come back and say, hey, yes, this is not this 2%. I mean, I'm surprised you weren't on that first principles team. I said that a week or so ago. Like I said, yeah. I just lost my complete train of thought. Which is why you're not on the team. Which is why I'm not on the team, because I'm way too old.

[00:13:41] Mark Andreessen is my proxy. That's what I was trying to get to. Yeah, well, he's older than both of us, I think. Yeah, well, certainly has a couple extra zeros on his bank balance. That's for sure. But anyway, I think it's interesting. It's right. Part of that inflation as a choice comment that he's talking about there is really the idea of taking full responsibility for it. And I think what he's trying to say here is, hey, we're going to make something happen.

[00:14:09] And I know I throw a lot of rocks at the former Fed Governor or Chairman Powell. But it just felt like that Fed was like, you know, you meet people in the world that are just trying to not upset an apple cart or just trying to not have any conflict or just trying to get through the day or get through life.

[00:14:39] And I think that's where that prior Fed was. And I think what he's kind of saying here is that, hey, we're actually going to take some action. We might skin a few knees or bruise a few egos along the way. But we're going to look to get this done. Yeah, but it would be interesting to see if his first principles exercises. I don't see how we get to 2%. I don't see any logical path at this point that's going to get us to 2%.

[00:15:09] Raising rates isn't going to get us to 2%. Absolutely not. So it would be interesting to see as that starts to materialize if he comes back with an actual plan or strategy for achieving the 2% rather than just pounding the table and saying we're going to get to 2%.

[00:15:26] Well, I think what's going to come out of that is I think the single biggest question to ask is if he wants to talk about first principles here is what kind of teeth is he going to put behind this group?

[00:15:42] Do they really have the capability to advise them and are they going to care about it or are they just going to be, let's go to lots of meetings, let's go to lots of meetings and then have a house divided again as he talked about here, a family fight as he says, and lumber along. I think they've got to do something. I'm in agreement, as I joke about all the time here on the show is neither of us are economists.

[00:16:13] I'll say we're hobbyists, Friday hobbyists as economists. But raising rates is not going to help with anything. It didn't slow down spending. Mortgage rates went up again this week. And although Fed rates haven't gone up, but mortgage rates went up this week. And there doesn't seem to be any value that they've really created by raising the rates. Stock market's just cranking along.

[00:16:43] The economy's moving. The issues that we really have that are stubborn to us is obviously price increases. But what's going on with the war? Right. We're going to get into that here in just a few minutes as we talk about tariffs and so forth. But, man, it's really unique. And I think the majority, I would say, of our listeners here on the show are well-employed people.

[00:17:11] Doesn't mean that they're wealthy people, but they're gainfully employed in their career. Some are wealthy. Some are not, perhaps. But the likelihood of the price increases at the grocery store, at the pump, probably don't impact them the same as maybe some other people that we all might even know. I don't have the same impact from it. But I feel it and see it and don't like it.

[00:17:39] And so I think those are the things that they've got to get their arms around is how do we get some prices down? And the first thing I think, Kevin, you talk about this all the time is if we lowered rates, there's not a big risk because a few months later you can go back and raise them right away. Right. And there's nothing catastrophic that could happen from that reduction. I don't believe so, but others do. Others believe that it could be runaway price increase in inflation, more money in the system and so forth.

[00:18:10] But the other side of it is you think about, let's just say a family of four that lives maybe not quite paycheck to paycheck, but maybe similar to that. But maybe they have a high credit card balance. If all of a sudden they've got a lower, if their credit card bills go down by $200 a month, that certainly allows them to balance out the price increases that they're seeing at the pump or whatever else as well, instead of driving their debt up even higher.

[00:18:39] Because what we found is that raising prices and raising rates has not slowed purchases down. As we watch the updates to the purchasing index, it's not changed too much. No, but I do believe, and again, this is kind of going off track from this, but I do believe as you look at that, you will see that the upper middle class has continued to purchase or even purchase, but the lower middle class has not. Right.

[00:19:09] So what do they call it? The K-shape, the K-shape model. All right. So I think there's a lot of complexity to all of this, clearly. I just going back to this article. Look, those are three interesting key phrases. I actually am very interested to see if these task force come back with anything that's relevant. And I really am interested to see if he has a strategy or a blueprint for achieving the 2% rather than just talking about it.

[00:19:39] Well, he better come back with one pretty quick because he's got some pretty high expectations. Yeah. Right. And he's got extremely high expectations from the president, who's the one who put him in the role. Yeah. So, you know, it will be interesting to see with that, Tom, is does anything come out of that related to pressure from the White House as well? So. I think there's constant pressure just to lower rates, right? Period. Constant pressure. Right. For doing that.

[00:20:06] I don't think that's gone away or changed or anything. Right. Well, that ties back to our upcoming 200 episode celebration and 200 anniversary celebration. Is that what we'll call it? The country is 250 and around the horn is 200. Something like that. And we can make that correlation.

[00:20:32] But that's going to be something we'll be talking about significantly with our guests. And we've got who we have? We've got Dan Schubert from NAW. We've got Mike Marks from Indian River Consulting. We've got Alex Jusofsky, our good friend who's a regular with us on the show. We've got Dirk Beveridge. We've got who am I missing? Come on. I'm missing Steve Levy from Infor. And then the two of us.

[00:20:58] So it's going to be a really, really good group there with us to join us for that event. But we're going to be talking a lot about what's going to happen with this is instability in shipping routes. Right. High interest rates. Pressure on the economy in general. The wavering that we have up and down on interest rates and so forth and how that's going to impact wholesale distribution in the coming year.

[00:21:24] So we'll have a lot of good discussion about that along with our discussions about technology and so forth. So that will be one you will not want to miss. No, that's for sure. Yep. So want to jump ahead? To tariffs? Why not? Big, big, big, well, big day, I guess, for tariffs today. Yeah. So the global temporary tariffs. I can never remember all the sections. What section was that? 222 or something?

[00:21:51] The 122 is prior and now we're at 301, which is exactly what was discussed on this show over the course of the Supreme Court and their findings there. Yeah. So the Supreme Court obviously knocked down the previous tariffs. He implemented temporary tariffs using the Section 122. Section 122 tariffs only lasted for 150 days.

[00:22:19] The 150 days ended last night at midnight. Right. Unless Congress were to extend the tariffs. The Congress had not obviously extend the tariffs. So now we are moving into a new realm, a new chapter of tariffs under Section 301.

[00:22:38] And that has been based around him or the administration looking at, you know, many, I guess, up to 60 different countries as to how they handle forced labor. And that therefore, based on their track record with forced labor, we now have the right to incorporate tariffs in the range of 10 to 15 percent. Yes. And this is the one that can stick.

[00:23:09] Well, this one is the most, quote unquote, legally durable. I mean, right. So this is and we talked about this. Right. So there's a lot more. There's a lot more to it than forced labor. Right. There's discriminatory pricing to the U.S. There's unreasonable or unfair and inequitable pricing. All of that. So this is the thing where people are being, you know, when they're disbehaving, they're getting their hands slapped. Right. For a number of different things.

[00:23:40] And there's a bit of. There's a bit of arbitrary decisions on this that can be decided specifically right by by the U.S. in this case. Right. So this is the one, though, when we talked about this, Tom, in the show quite a quite a bit early in the year when the Supreme Court was we were waiting to hear from the Supreme Court about the IEPA tariffs. Right. Assuming that those were going to get struck down what they were.

[00:24:10] We had these three or four other options. So the first one was the president was able to go do. Second one then required the research to be done. And we talked. I said this multiple times. Is it you know that the second that this went to the Supreme Court, that this body at the. Always lose this. USTR, U.S. Trade Representative. They started that research and digging in and finding out what can we be using this for.

[00:24:38] And it took them this long to get to the spot that says, OK, here's where we're at with all of these. They. To basically come back and say, this is what our plan is. Right. And we're going to hit you with X, Y and Z. The interesting thing is, and we will. I'm just going to jump ahead for a second because we have an article here from Euronews.com is that the literally and this is Euronews.com, not not CNN or CNBC.

[00:25:06] It says the U.S. set to bow to fresh U.S. tariffs after current regime lapses. So the reality of what's coming out of all of this is exactly what we talked about a month or so ago when the EU came back and said, hey, we're basically just going to sign a trade agreement with you. Right. Because where we understand and I'm trying to articulate this as best as I can and what I believe they were really saying.

[00:25:32] What they were really saying is, and I think Japan's right behind him and I think other people are going to fall in line is this isn't going away. And now we're on the hook for this 301, Section 301. Right. We really can't fight it because the U.S. gets to decide. Right. They're just using this particular statute. It's not like there's there's a a international court that you go to to arbitrate something like this.

[00:25:58] They're in place is the smart folks out there saying, let's just let's just put a trade agreement in place. And what Europe is saying is here is they keep it within the range that we've already discussed and we won't have any issue with this. Yeah. Well, they had agreed to 15 percent. So if they come back and get less than 15 percent or 12 percent or whatever, then it's still within the range of what they had agreed to. Right. Basically, the agreement put a cap on what they can do.

[00:26:26] Yep. So, you know, some of the I've got a little prompt I use with my tool to prepare a little view behind the kimono. So so forth here is but 90 this is talking about 99.4 percent of U.S. trade is impacted by this. So the 60 trade partners cover 99.4 of U.S. trade, according to the Office of the U.S. Trade Representative.

[00:26:53] So the duties are now basically 10 percent up to 12 and a half percent. This replaces that temporary 10 percent on this. So now you've got to look at this as a distributor and say, OK, well, how is this going to impact me?

[00:27:08] Because now maybe in this setting and hopefully, hopefully the president just looks at this and says, OK, I'm going to settle down for a little bit because it's better for this U.S. economy if there can be some level of clarity. But if you're a distributor and you can look at this and say, OK, look, I've got now of these 60 countries, I'm doing I'm doing I'm trading partners in 42 of them.

[00:27:37] Right. Or I'm getting goods for 42 of them. I now can probably start looking at some level of stability to do some planning from. And now I would think and I know the president listens to this show because it's the number one podcast in the world. And he must be listening to us. Certainly his advisers are Kevin Lutnick and Vessent and so forth have got to be listeners. I was waiting for the gong or some some soundbite to come from all that. Yeah, I was wondering where the delusion was coming from there.

[00:28:09] The but anyways, now would be a great time to have these things in place and just cool your jets for a little bit, Mr. President. Well, I don't know if he's cooling his jets. We have an article right above that one, right? That some Canadian goods are getting hit with 50 percent tariffs. But I wanted to go back to something you just said a minute ago.

[00:28:31] If that if the 60 countries represent 99.4 percent of the trades that we do in the US, what we're basically saying is that 99 percent of the countries that we do trade with are misbehaving in some way, shape or form. Or we believe they're misbehaving in some way, shape or form.

[00:28:50] And so therefore, we are, you know, based upon whatever situation we believe are there, we are then saying, OK, we're going to go ahead and put those tariffs in place because you've been misbehaving. Now, some people like in Canada's situation, he's saying they've been misbehaving even worse or maybe more short term. I think I'd be more egregious. Yeah, I think some of this is even related to the fires, believe it or not. Smoke from the fire. That's just silly, right?

[00:29:19] Yeah, but I do agree that. So first of all, the Section 301, from what I have read, is much more legally durable. Everyone believes there will be lawsuits, but it's going to be very hard to overturn these. Right. And to show evidence that otherwise that would overturn these, maybe on a country by country basis somehow, but it's certainly not going to overturn them in a mass way like happened before. Right. So they're more legally durable.

[00:29:47] So maybe this does put some consistency in place, whether you like it or not, of what you can be thinking about over the next, anyway, the next couple of years. Mm-hmm. Right. At least through 2028. Could you look at this and go, OK, maybe I have, there's now some stability or some certainty or some level of certainty that things aren't going to radically, other than maybe some special case situations along the way. Yeah.

[00:30:16] So the big, well put, the good news of this increase, though, is the majority of it's tied to motor vehicles, alcohol, and dairy. I would have to go look, but the more important goods that we're seeing from Canada in this setting are lumber and steel. Right? The U.S. has lots of- You're talking about the Canada one? You're talking about the Canada one? OK. Correct. Canadian ones are mostly tied to that. Yes. And honey.

[00:30:47] What's that? Honey and syrup, I think, too. Yeah, I just, OK. I didn't catch that part, but it very much could be. Yeah. But the biggest components that we're concerned about that are impacting U.S. business, home building in particular, is lumber and steel. Sure. And so those don't have this additional impact.

[00:31:09] The interesting part of that is the automotive component, because Ford and GM have quite a few plants, as do their subsidiaries, not subsidiaries, but their key OEM vendors have those as well within Canada. So that is a pretty significant impact. So we'll see what comes on that next. But it doesn't have the sweeping impact if it was across the board on things like lumber and so forth.

[00:31:38] So why don't we kind of jump ahead? We talked about the EU already. We've got that article there. Why don't we roll down into our supply chain? And, you know, this is a good article here from Industry Today about carrier disruption demand supply chain visibility and so much going on with over the road trucking and rail so forth right now with pricing. I've got to look. I just shipped quite a bit of stuff for some trade events.

[00:32:08] Haven't looked at the FedEx bill yet, but I assume we've got a fuel surcharge in that now. So think about the people that are every day, all day loading up, you know, our customers of LeadSmart and the majority of our listeners here have fleets of trucks. You know, we have customers that have, you know, dozens and dozens and dozens of delivery trucks and semi trucks that are going over the road between distribution centers and so forth.

[00:32:32] So this, using third-party carriers, this is an interesting article about the struggle of the ups and the downs of that economics of that.

[00:32:42] Yeah, I mean, look, if this El Nino actually materializes the way they're talking about and certainly the conflict, I'll call it, right, the conflict doesn't seem to have any roadmap for getting addressed anytime soon that I can tell, anyway. Yep. So, yeah, I think you could end up with a mess, but I don't know.

[00:33:13] And again, I think this is where there were, you know, based on your business, right? Every business is a little different where they get things from and so forth. I do think you could start to come up with some contingency planning now on some of this, assuming that it's going to be a mess, right? Or, again, depending upon your business and where you get things from and where you source products from and so forth.

[00:33:37] But, you know, I don't know that we have all that U.S. has all that much impact, as we've talked about on the Strait of Hormuz or even some of the, you know, Saudi tanker things that the Hooties did. But certainly the Panama Canal could have some significant issues. Well, let's talk about this in a broader sense, right? Because you kind of hopped an article there, which is good. So let's just talk about global supply chain, if you stop and think about it, right?

[00:34:04] For a minute is you've got, you know, Strait of Hormuz, right? The majority of the world's oil, helium, other gases, liquefied natural gas. You've got all of the components, the nitrogen and the other components that go into fertilizers that are impacting the world. Those are the things, right? And that's basically blocked right now.

[00:34:32] There's literally people abandoning ships. There was earlier this week, there were some drone attacks where people just left the lifeboats and just left the ships behind. You've got, and by the way, I'm going to hit pause on this broader discussion. I read an article yesterday in preparing our newsletter. There is a potential huge impact on the world's oceans from this.

[00:34:54] Because there are, in the Strait of Hormuz, there are different types of algaes, mussels, and things like that that are growing on the side of these boats that could be having massive damage to other ecosystems around the world. So think about it, you know, if you go to the lake, depending on what part of the country you're in, you know, you go to the lake or you go to the launch ramp of the boat. There's typically different signs up for whatever there might be of invasive species, right?

[00:35:23] You don't want that being the bottom of your boat because you've been in one body of water bringing it to another body of water. Now you've had these ships sitting there for months, right? There's a really interesting article. I won't go into that too far. But there's just so many deeper, you know, just these trickle-down effects of all of this. But if you stop them. Yeah. So if you look at this, we've got this natural component, right? In El Nino. El Nino comes and we get all the rain up here.

[00:35:51] And they're not getting rain in the southern hemisphere. We're getting in the northern hemisphere. Now that lake is going down. The Panama Canal is going down. So only ships that have a lower draft. So larger ships can no longer get through. It's narrower now. So they get fewer ships through a day. That's going to have a major impact. We dealt with that two years ago that we talked about regularly on this show about the impact of that. So we have that.

[00:36:20] Stradar Hormuz closed, basically. Right? And now what the Houthi rebels are saying is it's really any ships that are tied to really the Israel or the U.S. They're trying to create a bottleneck at the southern part of it where the entrance would be to the Suez Canal. It's called the Bab al-Mandeb Strait.

[00:36:43] So they're threatening and attacking vessels tied to any Saudi ports that are utilizing that area. So in effect, right, this forces those commercial vessels now to any of the tankers, anything that's either they're either stopping operations. They're reversing course and moving a different direction or they're abandoning that whole region and they have to go all the way down around the Cape of Good Hope in South Africa. Right?

[00:37:12] So this is putting – and if you think about a tanker that's moving, that's adding thousands of miles and millions of dollars for each shipment. So now if you stop and think about that is Europe is running low on natural gas. Asia is in a dire predicament with natural gas and importing of fuel.

[00:37:35] And then you've got the U.S., which our reserves are the lowest that they've ever been from our national reserve for oil stocks. So something's got to give with all of this because I don't – and it's really interesting. You know, you think about maybe we just have watched too much television or movies. But, you know, you see these war rooms where they're mapping and planning and worst-case scenarios and so forth.

[00:38:02] It's like were people not thinking that the Houthi rebels that can have caused so much damage around – not around the world, but in that part of the world, they're completely funded by the Revolutionary Guard and the Iranian government that they wouldn't pick up. And they hate Israel as much as Iran does. So it's a pretty bad situation. If you stop and look at this, where we could be coming into is three major arteries.

[00:38:32] And there's other stuff going on in the Black Sea right now that we'll see how that develops. We'll talk more about that in an upcoming show. But this could be quite a predicament for shipping. No, it does seem no pun intended. The perfect storm is starting to come together for this. I think you should intend a pun like that. Okay. I intended the pun like that. Yeah, I think it's very reasonable to intend on that. Because the El Nino is really going to be the key to the perfect storm.

[00:39:01] But my point on this to start is I do think if you're going to assume – you can make some assumptions that, yes, maybe there is going to be some impacts. How do I start planning for that? Right now. Right. The Panama Canal is already starting to ration, if you want to call it that, or control what's – ration water. The problem doesn't exist yet.

[00:39:24] They're just trying to ration the water they have in the lake currently so that they don't get in a situation later on. Yep. All right, Tom. Let's roll into our manufacturing distribution and M&A segment. We published an article for earlier this week. And actually, in the newsletter, we have two that came from our friends at the Distribution Strategy Group. We have the first one that Mark wrote. Mark Rohan wrote. I saw Mark last week at the AD event.

[00:39:52] He was there covering it and did not get to talk. He came by our booth twice and was happy to say that both times Mark came by. Mark, if you're listening today, let's do a call soon. I'm sorry that we didn't get the chat. We were elbow deep and people interested in enterprise growth platforms for their business at that point. So I was happy to see that. But Mark wrote an article.

[00:40:14] And then Ian Heller, one of the founders with Jonathan Bein at DSG, wrote a follow-up article that we actually have that in our – in the newsletter as well at the bottom in our second look. Oh, okay. I was wondering. Yeah. Okay, yeah. I didn't know that was the second look. Yeah, put that there, just kind of strategically placed. It's not because it's less important that it's in the bottom. That's just where our second look is.

[00:40:39] But the conversation here is that Amazon Business hit $60 billion in revenue going straight after our core audiences here business. And so $60 billion is just a crazy huge number, right? I mean, you have very, very few people in wholesale distribution that are doing over a billion dollars and a handful that are doing 10 plus.

[00:41:05] But I should say those doing 10 plus are probably one hand, maybe two hands at the most. But that billion dollar, one to $10 billion range is rare air to start with.

[00:41:18] So when you look at this and look at this $60 billion, and this is everything from dust masks to fall protection equipment to trash can liners and Jansan products and everything in between, including a little bit of technical products that they're trying to get a little bit more into. But it's really a unique position.

[00:41:40] And it's finally kind of getting to the place as they're expanding this more of having much more of a significant impact on distributors being really in two camps. One is, I hate this, I want to fight it, and I want to maybe bury my head in the ground. One is, two is, there are people that are doing a nice job of kind of taking advantage of this and becoming Amazon sellers themselves so that they're selling their goods online in their own Amazon store.

[00:42:09] It's kind of two camps on this, and they're both in very different positions. All of them, they'll have a threat right now. Yeah. A couple points on this. The GMV stands for gross marketing value or merchandise value. Merchandise value. Based on how much they've actually sold, it's not how much Amazon is made off of it. Because Amazon only makes... Sure, it's certainly not profits.

[00:42:34] I mean, it's no different than when we talk about any one of our customers and they're doing, you know, $342 million a year in revenues or whatever it might be. The other thing they did say is that, you know, Amazon's sweet spot is more of those MRO products, things that are... Consumables. Consumables, right, that they're using over and over. More simple type things that don't require a more technical sale. That kind of thing. But yeah, that's a lot of stuff, right? That's the bottom line of a lot of stuff.

[00:43:05] So... And I assume they're going to just, you know, they're embedding themselves more into customer purchasing workflows. And, you know, obviously that's their sweet spot is to really incorporate themselves to make it, you know, the easy button for actually making these purchases. Yep. Well, 11 million organizations worldwide. So are buying from them on a consistent basis. So... And then they're continuing over the past year. The article talked about too. They've increased their...

[00:43:33] Basically their selection or product selection by 30%. So I'm going to say that skew level by 30%. If you're growing your skews that you're selling by 30%, there will be... Because right now you might have somebody that says, well, I am, you know, I sell veterinary products. I distribute veterinary products, you know, solely for, you know, exotic bird veterinarians, right? Right. They're never going to touch me.

[00:44:03] Well, if they're increasing their product selection by 30% a year, they'll be there soon. Yeah. Right. Maybe we should run our revenue expander with them and see what kind of white space. Right. Maybe they can give us a 1% commission on all the white space we find. Right. Well, you know, I've talked about this, Tom, many, many times on this show. But, you know, one of my first exposures to Amazon business, it was called Amazon Supply when it first got started.

[00:44:33] You know, there's... It was a natural progression for them to do this. And... But, you know, I was talking to some Amazon executives. Two different discussions. One was at their headquarters in Washington in... Let's see, this was probably 2010, I want to say. And... And... Which does not seem like 16 years ago. But the...

[00:45:03] They were describing... This particular discussion was... I was at lunch with a manufacturer's rep and a couple of upper middle management folks from Amazon. And one of the manufacturer's reps that I was there with, having this lunch with, was commenting about having stopped in at a new wind farm. We're in eastern Washington. And... And again, this was early in Amazon Supply at the time.

[00:45:31] And the guy there, he asked the procurement manager at this wind farm that was being built, who he buys his safety supplies from in this case. And he's, you know, rattled off the usual suspects, some of who are regular listeners on this show. And he said, but I do more and more business every week with Amazon. And so the rep asked him. And he said, tell me about that.

[00:45:56] And the guy said, look, he goes, right now, you know, when I call in all of these companies have gotten better because of technology and their inventory management. He says, I call it ABC company and they have 70% of what I need, but the other 30% they won't have for a couple of days or more. The next guy has 60%, another guy has 82%, but rarely can I get an order shipped complete right away.

[00:46:19] Because I go online to Amazon to get my flashlights and my batteries and my safety vests and my trash can liners, all of those things. He goes, I use my personal Amazon Prime account and it's all here. And at that time, everything was two days, right? And so he was describing that process. Now we've just watched that grow and grow and grow and grow. And then literally within less than a year of that meeting, I was at dinner in San Diego with a couple of Amazon executives.

[00:46:50] I remember the steakhouse, remember the room. My wife actually happened to have been with me at this meeting. And we were talking about the growth within Amazon supply at the time. And I said, what won't you sell? And he said, look, if it's, I think his words were, if it's legal, reasonably ethical and fits in a box, we'll move it. Right? So they're going to be everywhere. So what do you do?

[00:47:21] You know what? You do a couple of things. And I think Ian does a really nice job in the article that we have posted there of kind of describing some of that positioning of where you could be with this. And he talks about, and this was going to kind of pull that one up here real quick, but thinks about the idea of where you're at from a standpoint of how well are you servicing your customers? How well are you really getting in front of them?

[00:47:50] And if it's commodity level stuff, how well are you taking care of that? And then are you clarifying your value on an ongoing basis? Are you doing vendor managed inventories with them where you've got your own crib on site with people managing that? So there's just a ton of opportunity for distributors to still do that.

[00:48:11] But a big component of that, because you're never going to beat them fully on logistics, but a big component of that is can you do a better job of your online ordering opportunities? Can you make, and just hats off to Ian, just with his 30 plus years from Grainger and HD Supply and other places and so forth. But you're not going to beat them on fulfillment and timing on that typically.

[00:48:41] But if you could step your game up, and Ian made this comment on, I think it was on our 100th anniversary show that he was with us on. And we were talking about e-commerce, and he says, you have to meet the customer where they are. And you've got to meet them where they want to buy. And so we're talking every day. We talked with a lot of distributors last week who are growing with e-commerce. And younger buyers want access to what they want to buy online.

[00:49:08] They want to click buttons on their phone and purchase. And they want to be able to ask you to come on site if they want to ask you to come on site. They want to be able to Zoom or FaceTime or whatever it is with you to solve problems. But you've got to meet the customer where they're at is what comes down to this. Okay. So the moral of the story is, be sure to read the article at the bottom here, the very bottom here, the second look one.

[00:49:34] I would say the more important part of that is continue to tune into this show on an ongoing basis. Right? Yeah, of course. Well, that goes with that. So, yeah. So, well, I don't know. We think we should always say it. You can never say it enough. Number one show in the world right now. As of this moment. Right? Just hit it. So Ian's points here, right? Ties a little bit to what I was describing. We've talked about in the past. He says, make complexity your strategy and deepen it. Right? Okay.

[00:50:04] Make those hard transactions, whether it's kitting, cutting items, custom technical support, on-site issues that you can be working with, commissioning of equipment that you're bringing on site, and moving the bar to the complexity of the problems that you solve. Then, he said, number two, embed yourselves directly into customer operations. I had mentioned earlier, vendor-managed inventories, right?

[00:50:29] If you can get in there where you're partnered with a customer and the customer looks at you and says, we've got – and we see this constantly. Granger's done it for years. Fastenal does a great job with vending machines. I don't think vending machines is the answer.

[00:50:42] But when you're helping them as part of their own supply chain management, and you've got people that literally are on-site running a tool crib at a large facility, or maybe – I just saw a thing from a large electrical distributor literally having containers with their name on the side of them, full of product that's designated for that job site with people there day in and day out.

[00:51:07] If you've got a person there that's got ABC electric supply on their hat, hard hat, right, and they know and have relationships at the job site, that is that depth of being embedded where why bother going to Amazon if it's in that trailer over there already. So just keeping that high-touch embedding is going to be a key to things. We'll continue to talk about that here. It would be a good thing for us to talk about with other folks on the 200th Celebration Show. Good. Good.

[00:51:37] Where do you want to go next? Do you want to talk about copper, or do you want to move on? Let's hit that copper thing real quick. Do you have any takeaways? I just talked a lot. Your turn. If you want to hit on that, and I can talk about it as well. Well, you hear a lot about data centers, right, and the need for, obviously, chips and power and so forth. But again, if you kind of go break it down, a lot of this is driven by copper.

[00:52:06] So I think what they were saying is that there is a shortfall of about 10 million metric tons of copper that we have in the U.S. here to support the copper components and everything that are incorporated into these data centers. And so forth. And 2 million of new demand coming by 2040. Right. So I'm wondering if all my pennies that I saved that are all in a big bucket are now worth something.

[00:52:36] We can melt them down and turn them into copper wire and so forth. Yeah. Well. Because I have a bunch of pennies here. I bet you do. Yeah. I would be shocked if you didn't. Yeah. So I'm going to have to keep an eye on that. But, you know, one of the things they said is that developing new copper mines can take up to 30 years from discovery to production.

[00:53:06] And, you know, power transmission, everything takes a long time to build. But this is an area that people haven't been talking about quite the same level that they have with, you know, chips and electricity and so forth, which are the compute, as they call it. Right. Which is the seems to be the shortfall for a lot of the data centers. Well, I mean, this is it cuts to the core of the electrical side of things. Right. In this setting. Right.

[00:53:34] You've got wiring harnesses and components. You've got motors, drives, all of those things that are going into these centers and these equipment that are heavily reliant on that copper. And as we have a copper shortage. Right. You're not going to be able to get some of these things completed and done. Yeah. What's interesting is I'm going to pivot, if you don't mind, a little bit on this. And we didn't talk about discussing this at all today.

[00:54:01] But I've heard this a few different times in one of the podcasts that you and I listen to regularly. The All In podcast was, I think it was, they had Mark Cuban on in a one-on-one discussion this week. And one of the, I don't know if you listened to that one yet, but I think that was the one. And what came from it was that, and it's something I've heard about and I've thought about quite a bit.

[00:54:29] But we talk about the energy issues that go with, and the need for energy infrastructure to support data centers and so forth that we're going to need to support AI. And not just AI, but just the overall electrical needs of the nation. One of the articles that we have in the AI segment here is a U.S.-China AI summit. Right.

[00:54:56] We've got this massive contest going on right now. Right. Who's going to win the AI race? So if the U.S. needs to, for national security and all these other reasons, needs to win that battle, we need energy. We need data centers. We need all of that. But the interesting thing about it, and there's the doom and gloom that goes with that about how far behind we are. We've got the NIMBYs that don't want data centers built. We've got a small group, and specifically in the northeastern part of the U.S.

[00:55:26] that's in Congress or the Senate that is trying to block a lot of the data centers being built. What happens, Tom? And you're our technical expert on this here. It's not necessarily a software question or technology question. But what happens in your mind? Or how do you view this scenario?

[00:55:48] Because in my mind is you think about what was the calculation for Moore's law for chips? Was it doubling every 18 months? Doubling every 18 months, right? And so what we're seeing, though, is significantly more than that. I don't know if there's truly a name for something yet related to what we're looking at from the chips that are being used and needed for AI.

[00:56:17] But power data centers for these NVIDIA and other Taiwan semiconductors, all of the chips. But if the chip technology is growing exponentially, isn't it likely that in the next 6 months, 12 months, 18 months, 36 months, that the technology behind that is going to be better, faster chips that are more efficient that require less energy?

[00:56:47] Aren't they going to be building for that? Building, well, I think we've talked about this before, right? If things are more efficient, people will use more or want to use more. Okay. So any sort of efficiencies will be eaten up by the demand aspect of it. Are we sure about that? I'm pretty sure about it. I mean... You don't think the efficiencies could improve that we don't?

[00:57:11] The question comes is, if chip technology continues to improve and efficiencies continue to improve and energy consumption by those chips is reduced, right? And this is literally right outside the window here is my new EV and that I finally bought. We talked about it on the show about three weeks ago.

[00:57:38] So I leased it when I typically lease my vehicles, but most importantly, I leased it specifically because I believe at the end of my three-year lease, I want to turn it in and get another one if I continue to like it because the battery technology is going to be so much better and so much more efficient. Why would I want to own this for five to seven or nine years or whatever? It probably will be, right? There's no argument that there won't be improvements, right, in everything that we hear.

[00:58:07] But the improvements are not going to, in my opinion, and I think there's a lot of other people that agree with me, that all the improvements are going to do as the costs come down, right, for these things, is the demand will... We barely scratched the surface of the demand or even the use cases of where AI could be applied, right? Well, the use cases will drive that extended demand. Of course, right. Right. So you're saying... Go ahead, I'm sorry. No, I mean, it's just... It's...

[00:58:37] You know, I think you have some AI thing that runs every morning or something and gives you a... I do. I have... A summary or whatever, right? Oh, I have six different agents that run every day that guide me through my day. Right. Well, let me phrase it. I have six of them that are controlled by the master, Darlene. Okay. But either way is that, you know, maybe they run once a day right now.

[00:58:58] In theory, if the capacity was there, you could have those things running every hour and every minute or every 15 minutes or whatever the case may be, right? Right now, if you do those types of things, you run out of tokens, your cloud freezes up, your usage is down and so forth along the way. So it's... The demand becomes... The demand is going to become a function of, yes, more use cases, more...

[00:59:27] I mean, we're just barely scratching the surface. So I don't see any real risk of investing in more data centers, right? We definitely need them. And it's just going to get better. Again, the efficiency is going to get better, but the usage is going to get better. Mm-hmm. And yeah, this is definitely... I mean, it's interesting. We should look this up for the next show because there is...

[00:59:54] It's not so much that the chips are changing or Moore's Law is not being applied for the chips that are being created, but some of the AI capabilities are accelerating faster than what we have through Moore's Law. Right. Oh, I think it leaves Moore's Law behind, right? I mean, that's... Moore's Law was related to chips. It wasn't related to AI. It was related to memory, right? No, chips. Chips. CPU. CPU chips. Okay.

[01:00:24] CPU chips double in capacity every 18 months. So... And that may still be true with the GPUs and the other chips that are coming out. But the AI capabilities are accelerating faster than that. Mm-hmm. Yep. So... Micro... Micro processor, I guess, would be the right... Yeah. Which are CPUs. Yeah. Yeah. CPUs. Okay.

[01:00:46] So, in your thinking, is there will not be ever a place where we have too many data centers and too much... We've overbuilt infrastructure because the efficiencies of the technology require less energy? Well, I won't say never, but I don't think so in the next 10 years. Okay. Right. We should be building. I mean, yes, I agree.

[01:01:16] I don't want a data center in my backyard, but there's a lot of land in this country. You know, New York just put a moratorium on new data centers. And, I mean, think about New York State, right? It's like how big that state is and how much land there is there. Right? Sure. You know, and obviously in Texas and things like that and all the reasons they said for the moratorium, most of them are not true, like the water usage. Yeah, absolutely. Yeah.

[01:01:44] A lot of it's just kind of whatever. But, yeah, I agree, Paul. I think we should call it Burton's Law. That's a good idea. Oh, my gosh. Oh, my gosh. I think that's a very good idea now that he brings that up. Oh, my goodness. You know why he did that? Look at the grin on your face. It's gone now. It's back. Yeah. All right. He's just poking at me. Okay. All right.

[01:02:14] That's fun. That's fun. I appreciate that. We've got a call later today with some of Paul's great team members. So this is called Jeevon's or Jevon's paradox. When technology becomes more efficient, the energy required per calculation drops significantly. However, this reduction slashes the financial cost of computing, making the technology hyper accessible and widely profitable.

[01:02:43] And this is what triggers that paradox. The cost per unit of work plummets. The explosion of demand for that work far up paces the efficiency gains. I mean, look at the internet. It's got a name already, Paul. We don't need it to be Burton's Law. Well, I think there's a hybrid sort of thing that could become Burton's Law here. I'll think more about that. But if you look at the internet and the fiber back in the 2000s. Yeah, sure.

[01:03:07] Who would have ever thought at the time we'd be streaming video to the degree that we do it today? All of that is done through the internet and through the fiber. Right. Right. So, I mean, if you look at the use cases that were being discussed back in the day of dial-up, streaming video was not one of them. Right. Right. And the volume of streaming video that we have now is an example. Right. So, we have come up with use cases and all that fiber is being used. And then some.

[01:03:38] No, I do agree, Bob. I agree that data centers will level out over time. But I think that's not any time in the next couple of years. That is, I think, you know, we've got 10 years minimally. You think so? I do. All right. All right. Good. All right. Well, let's scroll into AI because we've got Bob here commenting. And he loves his favorite section. Yes, I know he's been looking forward to it.

[01:04:04] So, there's a good article here from HR Dive about workers who direct agents outperform peers who simply delegate. So, do you want to unpack that a little bit since you're apparently that everybody's a big fan of yours today and all that you, your wisdom? Well, some of the key points of Burton's Law. Yeah, there's some key issues, some key things. Oh, boy.

[01:04:29] Anyway, this article is talking about looking at workers who use AI, I guess, more as a tool. And then evaluate the output of that AI and use the output of that AI as, again, a tool for them. But don't take it status, you know, word for word that this is exactly what it is. So that they evaluate and they judge and they determine how that AI output can be used.

[01:04:58] Versus just taking the AI output as it is and saying, okay, thank you. And what they found was, is that workers who do that outperformed peers who simply delegate the task to AI. It's pretty obvious when you think about that. But I do think this is something that, and I think we've even done this, Kevin, is you get something out of AI and you kind of look at it and you're like, that's good enough.

[01:05:25] And I think that's a little dangerous because maybe it is good enough. But if you take some more time to evaluate it on your own, look at it, scrutinize it, you know, even use different AI capabilities to look at it a little bit more. You can go from good enough to something that's really superior. And I think what this point of this article is saying is a lot of people are just using AI to get things that are maybe at least perceived to be good enough.

[01:05:54] And, you know, they may be full of hallucinations and falseness, false things, but at least it comes out and it looks like it's good enough. I just, side note, just sent our friend Paul Kennedy a text and said, oh, brother. And he said, I've created a monster. Yeah. So we're going to be hearing about this Burton's Law for a long time, I'm sure about it. I just got to figure out what it is.

[01:06:24] Sounds nice. It has a nice ring to it. I just don't know what exactly the law is. So I've got to figure that out. All right. Well, back to the topic at hand. What comes to my mind in this time as we kind of talk about this is you've got... And it just makes me think about a company you and I talked with a year or so ago. Great folks, but they had chosen very early on.

[01:06:49] They just kind of bought everybody in their company that wanted one of ChatGPT license and kind of let them go. So forgetting about the security issues, we won't even talk about that. But there are, I think, maybe tiered levels of use that you could talk about, I think, in this setting. There is the person that says, I have... And I think the biggest component of this is what we're seeing with Copilot from Microsoft. I'm sure there are people...

[01:07:18] You have a good friend, Carson, that does some amazing things with Copilot. But my experience with Copilot has failed miserably in just about everything that I've tried to get it to do, which is probably why Microsoft has such a big investment in multiple other LLMs and so forth. But you've got the person that says, hey, I need to get an answer to something. I'm going to not even write a prompt. I'm just going to ask a question. And then that becomes gospel.

[01:07:45] Then, so let's call that sloppy, right? And then you've got the... Maybe the next level where somebody says, I'm going to write something of a prompt, but I'm not going to engineer that prompt. And when I say engineer that prompt, that could be just as simple as having the discussion with whatever LLM you're using that says, I'm looking to solve for this.

[01:08:11] Ask me these questions to help us together build a prompt, right? We've got that next layer and you do something like that. And then maybe what comes out of that is, I've got a good answer and I'm just going to... That becomes good enough to your point. And then there's doing some things that we've used and specifically our marketing team recently.

[01:08:31] I use the term because we've built some agents within Claude in particular and Claude Cowork where I call them the third brain in the room if there's two other people, right? It's that extra brain in the room because they understand not just prompt, but they have documents, they have books, they have research, they have all of these things built into the skill. And they are another brand in the room.

[01:08:58] Then if you take that, which becomes a very good output and describe what you're saying and say, okay, now maybe I'm going to have this concept. Claude likes to use the term manifesto, right? Bring out a document that is an overview of what you just achieved. Maybe run that through another agent is what you're saying or another model to pressure test them a little bit. That's where we start getting it.

[01:09:23] And I think what this article is talking about is we've got a lot of people using up a whole lot of tokens by just getting that super sloppy. Yeah, and it's not even that it's sloppy. I think Bob's comment here is great. He's saying the reason AI is good enough is it tends to return the most commonly accepted answers, right? Highest probability answers. And that stalls growth because growth doesn't happen in the middle where AI lives. It happens at the edges, right?

[01:09:49] So that's what I mean is that the reason that people are accepting the good enough because it's the highest probability or most commonly used thing that is there. It's not that it's slop. It's not that it's even necessarily wrong. It's just there's more to be had potentially. And so just getting comfortable with good enough, again, kind of creates that mediocrity that we're we're talking about.

[01:10:16] Well, and what I was describing about when I said sloppy was the it could be wrong. If you just right. Right. If you just go ask a general question and you don't pressure test it. I'll just use that term again and really poke at it to say, where did this come from? I mean, I get output even from sometimes from some of the agents that I built and I don't believe it. Right. And I go back and we've sat in a room together doing things. It says, oh, yeah, sorry.

[01:10:43] I missed this part of I mean, literally, it'll come back sometimes when it clawed or chat GPT and come back and say, you're right. I forgot to do this instruction that I have in my instructions. So I think this guidance and staying close to it and watching your output is pretty critical. Obviously. So good. Where do you want to go next? We got just a few more minutes left. You want to talk anything further about any of the other articles?

[01:11:11] What about that cost overruns of 70 percent of companies that have been interviewed in that setting? Yeah. You know, I started to do this. The article is nearly seven in 10 firms report AI cost overruns. And I didn't do as much homework on this as I would have liked. But very few companies have AI budgets yet. How do you know if you have cost overruns if you don't have a budget to measure it against? Well, I think is that is that statement?

[01:11:40] Let me ask you a question. When you say very few companies, are you relating that to maybe our customers or the people that you're meeting with and talking to in our biz, our line of work or just a... Certainly in our line of work. Certainly in our line of work. But I think in general. Right. That's where this whole token maxing concept has come about. Right.

[01:12:02] Is that, look, a year ago, most companies had no AI spend other than their $20 for chat GPT or whatever. Right. Now with coding in particular, a lot of companies have run up some substantially large bills. Even Fortune 500 companies, right? Through coding predominantly, AI coding along the way. But that wasn't in a budget. It was just, oh, let's give this a try and, you know, hopefully magic does. Right.

[01:12:31] Let's get some magic out of this. And then they're realizing they're spending... When you hear what Mark Benioff said at Salesforce, they're spending $300 million a year on tokens for coding. Right. Was that in the budget, you know, a year ago? It was even in the budget now. So I think that the scenario is not so much that there's cost overruns.

[01:12:54] I think there's new costs that are new expenses that are substantial that are now creeping into the equation that probably... This is from CFO dive, right? That CFOs are probably going, wait a minute, where did all these extra costs come from? I mean, this is now meaningful. This is actually... Can impact our earnings. And if you're a public company and all of those types of things, there is definitely potential... You know, it's starting to really matter. I can answer Bob's question.

[01:13:24] We have dashboards and reports. Bob asks, how do you know if you're improving the top-line performance by using AI? If you're using our technology, you'll have a dashboard that tells you exactly what you're uncovering and what you're uncovering and what you're recovering in top-line sales and what you missed if you're using the right technology. So thanks for that plug, Bob. It gave me an opportunity to dive right in. But it's a really good question, right?

[01:13:51] Because we talk about this all the time, is that Silicon Valley is minting technology companies that are AI or machine learning driven day in and day out. And many of them are popping into wholesale distribution and manufacturing because of just the mass size of the market and where the opportunity is with people that have no background and no experience in understanding of the day-to-day. What does it mean to get up in the morning and put on a pair of boots and get in a truck and go to a job site?

[01:14:20] Or what does it mean to be a counter manager at a branch and so forth? But they've got these tools and they're supposed to work. And I think right now we're in a place that this is very contrarian to what... I guess that's the beauty of us not having sponsors other than our company, Tom, is we get to voice our opinion versus what pays our bills.

[01:14:43] Because most of the other podcasts and webinars out there are done, are being sponsored by technology companies. But I talked... We had multiple companies at our booth last week at the big affiliated distributors event we were at who were coming to us with horror stories about money that they had spent on technology that was supposed to revolutionize things within their business. And the implementation went horrible. The product was half-baked. The outcomes weren't achievable.

[01:15:13] And now they're moving on. Right? And so I think we're in this place right now where caveat emptor or buyer beware is pretty important to be talking to other companies about the results that they've seen. And really digging into that because you can... There is a lot of shiny objects out there. And that's not to say that they're all bad. I think there's a lot of products out there that are maybe a little half-baked right now. And because to your point earlier, right? We're...

[01:15:43] I don't know. Maybe we're in the first inning of what AI is going to be able to do if we're not still in batting practice. You know? Of where we're going to be. But I think right now there is that risk of this. And, you know, to your point is do they even really have a budget? But, you know, I was thinking about... I was listening to Jensen Wong from NVIDIA recently. And, Tom, I know you heard the same thing I did.

[01:16:06] I think he said something like his expectation was if he has a $500,000 a year engineer, he better be spending $500,000 a year in tokens. Was that roughly what you said? Yeah. Yeah, yeah. Right? But to achieve an output that is driving the business ahead because they were looking at an outcome that they wanted from that engineer. And I think that's where Bob's made a couple of nice points here as well with this is what is it that you want to achieve? Do you...

[01:16:35] Did I just buy the software because it's going to make me more efficient in this? Or do I clearly go in understanding? It's like, you know, we started doing, you know, late last year. We don't do an implementation with a new customer of LeadSmart if we don't have two to four very specific outcomes that we all want to achieve at the end of the first year. And I think any software company that talks about the results they're supposed to be able to bring you should be asking you for what do we want to achieve in our first year together?

[01:17:05] And then drive your client success meetings and your implementations based upon getting those outcomes. What are we doing together to get those outcomes? And everybody holds a stake in. Yeah. But again, going back to the article, right? I don't believe that it's cost overruns.

[01:17:25] I just think it's new costs that are new in a lot of organizations and are like becoming meaningful enough where the CFO and the other people are going, you know, okay, what is this?

[01:18:06] Yeah. Because they're going to help with these things. And the next thing they know, if they were driven by an open AI connection or a cloud connection and so forth, right? That's maybe even running behind the scenes that they're going to be token consumption and overruns and implementation delays. Those are costs as well. Good. Good. All right. Let's wrap up. Yeah. I was going to say if you wanted to pick one more, but that's okay. We'll just go.

[01:18:35] There's a handful of good articles in our cybersecurity and robotics segment here. There is an interesting, this is from the article is from China Daily, but I thought it was interesting. It said that humanoid robots are close to a chat GPT moment. I don't know if you looked into that at all, but this is, and it's pretty funny because I was messaging yesterday with Max Meister from Ludwig Meister in Germany.

[01:19:04] He's been on the show with us a couple of times and we were talking about, I just had seen something about that, his favorite soccer team and my, my Bundesliga favorite team is, is one in the same, Bayern Munich. And so I saw something and I messaged with him yesterday and we were, I was trying to get to a conference earlier this year that Max was in the U.S. for and I wasn't able to get to it. But we had kind of made a bet about humanoid robots being in the Brown household.

[01:19:34] And so he asked me in our messaging yesterday if I had ordered my humanoid robot yet. And I said, no. And so we were trading the steakhouses that we might have a stake at in Munich versus here in Laguna. So he wants to come to Laguna. I want to go to, I want to go to Munich. But we were kind of chatting about this hitting this time where we're getting very close to this explosion of humanoid robots.

[01:19:59] And it's just, this was kind of an interesting article about the, the manufacturing units. And China's going to make a hundred thousand humanoid robots this year. And if you look at what they're looking to do at Tesla, right? And what Elon Musk's goal is, he's talked about every person having multiple humanoid robots.

[01:20:23] I think the most unique thing about humanoid robots, and I won't belabor this too much because we said we were going to wrap up, but was the, and you're yawning. So isn't that boring? You're not into robots at all, are you? I'll, I'll be, I'll be, I'll believe him when I see him. Yeah. Okay. When you, when you're sitting in my patio, having a glass of wine and you're watching my yard get weeded, then you're, you're in. I'm in. Yeah. Yeah. Okay. Um, I tell you, I've got, we got to check with him.

[01:20:50] Our friend, uh, Pierre from Oblico, one of our partners is, uh, he's got one on order. So, uh, I was talking to his wife the other day and, uh, at the Florida event we were just at, and she said, she'll believe it when she sees it. But the, uh, the point being is you think about what Elon Musk is looking at, what's his big goal with SpaceX? Mars. Mm-hmm. What do you put on Mars? Humanoid robots. Sure. Of course. But that's, yeah. I mean, he's obviously. Huh?

[01:21:20] You're not buying it? No, I'm buying it. I'm buying it. But I think that's not the short term, the short term, his short term goal is not Mars. His short term goal is to be able to have a lot of robots, humanoid robots and consumer and business side of things. And, you know, in his mind, that'll well overtake anything that Tesla's, the car company is doing. Yeah.

[01:21:41] So last kind of comment on this particular article, and then we can kind of wind down, was they said right now there's humanoid robots that can be used in, for labor augmentation, warehouse automation, um, all different types of things. Loading, unloading trucks and so forth. Right now they're at a 70 to 80% success rate, um, for, for tasks that they've been trained on. So what would be interesting to see is if you were to look at what's the, uh, what is the success rate?

[01:22:10] Let's just say somebody that's loading and unloading, uh, pallets, right? In a, in a warehouse, maybe a pipe valves and fittings. Their success rate, I'm going to guess is probably in the, in the nineties or at an error rate that's, you know, low single digits probably. Well, you know, these robots aren't too far behind that if they're at 70 and 80%. So my assumption is it's manual dexterity issues and then good training. So I think they're coming. I'm going to continue to put articles in here about robots. Okay. All right.

[01:22:40] We'll see. Okay. I have to make a, make a bet when, when, when the first robot shows up at your house. How funny was that last week when we met, uh, met Rhonda at, uh, at our, at our booth at the show. And she said, have there been any tacos purchased while you're here together? Right. She's, uh, she didn't mention the steak you owe me. She mentioned the tacos that I owe you, which I thought was kind of funny. Well, so priorities are in place. All right. All right. My friend, I'll, uh, am I going to see you next week? I think so. I think so.

[01:23:10] Yes. All right. We'll catch up with you about that later. Um, thank you for a good day. Appreciate everybody's comments, regardless of, uh, this Burton's law silliness. Uh, sure. We'll continue to hear about that. Unfortunately, probably a sign in my office about it or something next week, but, um, you know, just what I need this way more of more reminders of how smart Tom is. Um, so good. We appreciate everybody. It's great to be with you.

[01:23:39] Uh, episode one 99 in the books here cannot even remotely believe that we would have ever got to this place. So we're thankful for everybody that joins us, uh, whether you're listening in from a foreign country or here in, uh, here in the U S we appreciate you being with us. So we'll wish everybody a great weekend. Again, uh, if you're thinking about digitally transforming your company and looking how to bring the silos together of all of the data that you have across your business and together in one place to get a real source of truth and understanding what's happening with your

[01:24:09] customers, your teams, and your business, we would love to talk to you at lead smart, but we thank you for your continued listening here. Again, if you don't get our newsletter, please just reach out to us around, uh, around the horn pod.com is probably fastest and easiest LinkedIn or an email to us as well. We've got some other big announcements coming about expansions of the show and some things we're doing coming in the coming months. So we're grateful for everybody that has hung with us for all this time and we'll see you again next week. So until then we'll wish you a great weekend.

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