How Distributors Can Win in a Soft Landing Economy, with Taylor St. Germain

[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.

[00:00:24] 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. This is the prerequisite, Taylor, as you watch Kevin dance when we start the show here. How do you not dance to that music? Right? I mean, come on. You don't have any groove in you if you don't want to move when you hear that.

[00:00:53] How are you guys doing? We're doing okay. Very well. Mr. St. Germain. Welcome back to California. I'm sorry? I said welcome back to California. Thank you. Yeah, you know, been gone for, I just left Monday and got back late last night, but I tell you what, having, I was in the Distribution Strategy Group's Applied AI for Distribution Conference, which is just a great event. Our friends Ian Heller and Jonathan Bine put this together with their team.

[00:01:22] It is interesting. I think they had, I was thinking about this as I was leaving yesterday. I think they had a team of about five or six folks with them. And to put on an event with just a small team, that in itself was quite a, quite a feat, but great speakers, all different facets from an HR component to putting guardrails on your AI plans and, and understanding a little bit more about what you can do and where you're at.

[00:01:51] And then some great real world examples from some, some large distributors with some of their tools. But you know, one of the things I love is this, I, Chicago, Taylor, Chicago is one of my favorite cities to travel to. And probably if, you know, as far as a good big city goes by far my favorite in the U S and but this event was so easy because it was at the O'Hare Marriott.

[00:02:13] So off the plane with your bag at the hotel in a couple of minutes, some decent restaurants nearby had a fantastic evening out with a good friend, Paul Kennedy and stuff. Follow up from, from a DSG or Dakota supply group and evening with them was great. Uh, but then time to go to the airport, man, it's fast and easy. So when you're in that Rosemont area, so it's really good event. Uh, but it is nice to be home because I'm home for a week and then it's two more weeks on the road.

[00:02:41] So, uh, East coast going to be, uh, visiting week after next, a great, uh, great customer of ours in Maryland. And then onto the, some meetings with the good folks at the national association of wholesalers and distributors in DC. And then the following week to Orlando with affiliated distributors and whirlwind. It's time of year. So anyways, that, uh, that's the off we go. So, so we got Tom Burton in Ventura, California.

[00:03:07] We've got Taylor in Castle Rock, Colorado, and I'm here in a couple hours South of Tom and Laguna Niguel. And we're going to dive into the news of the week and the economy and supply chain and how that impacts, uh, wholesale distribution and manufacturing. We're happy to have Taylor with us today, but before we dive in and talk a little bit more about the work that Taylor does, uh, with ITR economics and so forth.

[00:03:30] Uh, again, we introduced ourselves, but we get together every week and we talk about, as mentioned, the economy, the supply chain, mergers and acquisition, sales, marketing, AI, robotics, all of the things that are going on in the world around us. And what we try and do is we, uh, kind of, as we say, peel back the onion a little bit on that and talk about the impact that that has on our normal and typical audience, which is wholesale distributors and manufacturers that join us on a regular basis.

[00:03:58] Uh, but how we go about this discussion is that we publish a newsletter every Friday. We have, uh, a team that works with us on both the newsletter and the podcast itself. That's got front end support with Lily doing the newsletter and getting that out for us. And that newsletter again is called around the horn and wholesale distribution manufacturing goes out to 10,000 plus people each week. And we break, uh, break down the news that we think from what we see throughout the week might be important to, to our readers.

[00:04:26] So if you don't get that newsletter and you would like to three simple ways to do that, you can send us a quick and easy email at hello at lead smart tech.com. And, uh, we'll get the newsletter out for you. Just request the newsletter. If you're active and regular on LinkedIn, you can certainly just search around the horn and wholesale distribution newsletter and it'll pop up. Or you can go to the lead smart technologies page and, uh, that will have that available for you there. And you can sign up there.

[00:04:53] We also have a website for the podcast, which is www.aroundthehornpod.com. And you can sign up there as well as subscribe. So for those of you who are listening to the recorded version, because Tom and Taylor and I are live on LinkedIn, YouTube, and Facebook this morning at a nine Oh six Pacific time. For those of you that are listening to the recorded version on Amazon or Spotify or Apple podcasts, wherever you get your podcasts,

[00:05:20] you won't be one seeing these three handsome faces, but you also will not be seeing the newsletter that we'll have up. So, uh, if you're listening in or maybe listening in on the podcast for the first time, and you're wondering where all this information is coming from as we're just going through the articles that we posted. So we'd love for you to get that newsletter. Finally, in closing out on all of that, before we dive in, we couldn't have our show every week. There's costs to go with that. There's people involved in production costs and so forth.

[00:05:49] So we have the sponsorship of the company that Tom and I work for, which is lead smart technologies at lead smart. We've developed a product that we call channel cloud, which is a AI enabled, what we call smart CRM and customer intelligence platform. That's been solely developed for wholesale distributors and manufacturers. We have versions for each. It allows companies to see deeply into both their customers, their teams, and their overall business to get insight on what we call siloed data.

[00:06:16] We use the term called calling a corralled or siloed data from across their business. So the ERP data, the marketing automation, the e-commerce data, the other pieces of data that you have about your customer and your business, and all the different journeys that their customers are taking across those areas. We now bring that into one single platform. We use artificial intelligence and other tools to bring insights into that to help you make better decisions. So if you're a wholesale distributor or manufacturer, which most folks are that are with us,

[00:06:45] if we can help you on your digital journey where you want to find significant double-digit growth within your organization by understanding your customers better, serving them better, and understanding your organization as a whole better, we'd love to talk to you. Happy to talk at any point in time. So enough of that. Let's kind of dive in a little bit as we're ready to dive into news. But, Taylor, before we get rolling on this, I had a chance to meet you and met very briefly at first

[00:07:13] when you gave a great talk at the ISA 2025 spring meeting. Brendan Breen and his great team put on a fantastic event, two of them, spring and fall. We tried to be at all of those. I had an opportunity to be part of a great panel on digital transformation and AI at that event. And you were the closing keynote speaker, which was just fantastic.

[00:07:39] But we happened to run into each other walking back to the other part of the hotel and had a nice walk and chat. And I asked you if you'd join us, and you were gracious enough to say yes. So, Taylor, before we dive into the news, will you kind of tell us a little bit, one, about your background? I know that you're an economist, but while you're in Colorado, you're also a New Hampshire guy and buddies with our friend, Alice Chasofsky, who's been with us on the show a couple of times. We're going to have him again.

[00:08:08] So maybe give us a little bit of background about you and ITR. Yeah, Kevin, Tom, thanks so much for having me. I've been an economist for going on 10 years now. I've been with ITR for the majority of that. I did get my start with the team in Manchester, New Hampshire before sending me to Dallas, Texas to open a remote office for ITR. Of course, our launch date for that office was March 2020. So the joys of that. And then the company went remote.

[00:08:37] And so I ran up here to Colorado. But my background, I come from a math background. My bachelor's degree is in mathematics with a minor in political science. And then I went to Southern New Hampshire University, actually, to complete my master's in applied economics. When I'm not traveling the world public speaking, I'm usually behind the computer on Zoom calls consulting for our individual clients. And that's really how ITR interacts with our clients. It's really three different ways.

[00:09:06] Public speaking is one of them. Our consulting relationships where we help companies find leading indicators and forecast their business. And then finally, we have a great team that produces a lot of subscriptions on forecasting different aspects of the economy. We've been around since 1948. For those of you that haven't heard of ITR economics, we were founded by a man named Chapin Hoskins back in 1940s. And he was really upset nobody saw the Great Depression coming. So we still use a lot of his theory, methodology and intellectual property today.

[00:09:37] And we're one of the longest privately held, continuously operating economics firms in the country. So we've got a great history. We hold ourselves to an accuracy rate of 94.7 percent, four quarters out. And I'm really excited to be here with you all. It's a fun time to be an economist, to say the least. I would say probably a challenging time, too, right? You bet. You bet. Taylor, what are the types of companies that hire you and what kind of work do they generally ask you to do? Yeah, we do.

[00:10:07] We are a global forecasting firm. So we do get countries from all over the world. But our base is primarily here in the United States. When you look at the breakdown of the clients I work with, it is manufacturers and distributors primarily. That is our sweet spot. We work with a lot of construction contractors, too. But we are very heavy in the industrial world. We spend a lot more time with the wholesalers, the producers.

[00:10:31] So I like to say we're a little bit of everything, but there's definitely a focus on the industrial base. And do you help them with their planning and their long-term planning and kind of forecasting and things along those lines? Absolutely. One of the – in our consulting relationships, we're often working with clients on the three- to five-year future. So, an example, a client will send me their historical financial data. I'll find leading indicators and I'll put together a three-year forecast for them.

[00:11:01] So we take both a look at the short-term and the long-term. But we're really taking a step back saying these are the drivers of your business. This is what's out there in front of you. And here's how to best prepare. Okay. Excellent. Yeah, let's just kind of go along a little bit with that because we have a big percentage of our audience as distributors. What's the – and this may be a hard question – what's the typical size?

[00:11:26] Is it very, very large or PE-owned or publicly traded distributors? Or is it the – do you also do some work with maybe a 10- or 20-branch regional distributor? How does that break out for you? You know, my client base extends from $15 million in annual revenue up to $5 million in annual revenue. So we really are all over the map there. Some publicly traded, some private.

[00:11:53] Our new parent company, Crow, is very much into the PE space. So we're spending a lot more time in that space as well. But it is very broad from all different backgrounds, from mom and pop to some of the biggest Fortune 500 companies. That's great. That's – I was kind of hoping to hear that and understand that a little bit better. And happy to hear about the smaller ones as well. So that's great to see.

[00:12:16] And what I love about that is that there is, you know, a $15 million distributor is oftentimes a single branch location. And that they're taking the time and the energy to put into understanding what's going on in their market. Because, you know, they can get a lot of data from your trade associations and so forth. So I'm going to – this just triggered another question. But – and this may or may not fit with your conversations with them.

[00:12:44] But is there a theme across your – and I'll call it forward-thinking customer base that's really looking towards the future. Is there a theme across there that they also take advantage of the trade associations or buying groups to really get involved and stay active to pick up on more data and more available tools for them? Yeah. Yeah.

[00:13:11] There's a – maybe I want to make sure I'm answering your question, right, Kevin? Yeah. There's – when we look at the different data sets, the different ways we work with these trade associations, a lot of the ways that we work with them is through this correlation analysis that we do. We have a database of 15,000 economic indicators. It's very vast. Wow. And so we are pulling in sources from trade associations. We're pulling in from publicly available data sets.

[00:13:36] There's a number of mediums in which we're helping clients interact with their data. But we really specialize in the leading indicator analysis. And so I think that's the overall theme to ITR and how we interact with these folks is, hey, take your data, run it against our database, find these indicators that can allow you to plan for the future with confidence. And that's really a lot of the work that we do. So, you know, I'd say the overall theme is right now businesses are in – it was a challenging first half of the year. Yeah.

[00:14:06] And so they're looking for these leading indicators that are showing that there are better times ahead. And that's not difficult to find right now despite the environment we're in. And so we're working with a lot of our clients to say, I know things have been weak in the first half of the year. There's a lot of growth coming our way as we extend later into this year and into the second half of this decade. And we need to be approaching it with that mindset. That's great. And I think what I was – maybe I probably formatted the question poorly.

[00:14:35] I think in my travels is I see a strong correlation between really strong businesses who are involved in specifically trade associations but also buying groups. I mean, I spent some good time over the last few days with people that are, you know, taking the time and putting the energy in and spending the money and not just the money but the time away from their business to go to AI conferences for distribution.

[00:15:04] Or they're going to the industrial supply association event. Or they're involved not only in that but they're also involved in buying groups and go to all of their events and their meetings. And I think there's typically a correlation to somebody that is really forward thinking of driving their business and their growth based upon not just data but understanding that would – that guy is probably more likely to bring you in on something. That was a correlation. You could also be the other way around, right?

[00:15:33] Because if you, Taylor, work with them on a three- to five-year strategy, part of that strategy could include getting enlightened, educated, and moving more, right? So it's part of the strategy is to attend more events and to be more active. And I would think even joining buying groups, right, might be part of a financial strategy as well. Yeah. Especially with the growth of uncertainty that we're in. You know, the conferences – I go to so many trade association conferences.

[00:16:01] And the way they attack all of these different challenges that are ahead of us, I mean, that information is so powerful. And so I do find that, you know, those clients that are engaged in that way are really the ones that have had success and will likely have the most success in the future. So I think that connectivity to the trade associations in particular doesn't get much better than that. So, hey, we're going to jump into the news here. Yeah, let's do it. But I wanted to say good morning to Bob.

[00:16:30] I'm not sure where Bob is from. Aloha, New Hampshire, Texas. Yeah. Anyway, that's okay. I'm guessing, Tom, you have more of a connection to – although born and raised in Southern California with me, but you have a connection to New Hampshire from your wife. Is MHT, I'm guessing, is a California guy. That's Manchester, New Hampshire. That's slang? Yeah. Okay. That's their code for Manchester. But, hey, if you're out there listening, please jump in. Welcome, Taylor.

[00:16:59] Ask questions because I think we're going to have quite a spirited discussion today. Yeah. Well, let's dive into the news. And, you know, we've – it's funny. As we were talking before we went live today, you know, we just keep telling each other that we're going to spend less time on economy and supply chain, and we're going to spend more time on – start to spend more time on the other marketing and AI and the other segments that we have. But, you know, there has just been so – there we go.

[00:17:28] Bob says the Witness Protection Program keeps him on the move. Very good. That answers the question, right? Yeah. Perfect response. But I think today, specifically with Taylor with us as an economist because, you know, Taylor, the caveat that I say pretty much every week is I'm not an economist, however, by sharing, you know, thoughts on things, right?

[00:17:51] So then when we do have an economist or, you know, it's funny when we have Alex on the show is he doesn't claim to be an economist, but he sure sounds like one, right? He was my mentor for the first five years of my career. I love that man.

[00:18:04] Yeah, he talks fast with great wisdom and data to back up everything he says, but he does it in a way that's understandable and digestible, which I figure if I can keep up, most others can. Well, hopefully you see some of me and him. That's for sure. No, that's – well, that's a great compliment for him. But with you here, I think we're going to, you know, kind of dive in a little bit, you know, as we kind of look to get started today.

[00:18:34] Let's spend a little bit of time talking about, you know, interest rates, and then that'll probably kind of wind us into a tariff discussion. And these things will probably kind of combine a little bit with what's going on. And these, you know, again, as our audiences, manufacturers and wholesale distributors, you know, we talk, Tom and I talk constantly about, you know, organic growth within their business.

[00:18:58] And we're in a place right now and, you know, growing by doing more with what you have versus necessarily just opening new branches or whatever it might be. And a great strategy is being able to do both right now with interest rates higher, some economic uncertainties, supply chain issues. And, you know, even you throw in that some of the instability geopolitically, not just the geopolitical instability in the Middle East.

[00:19:26] But I would almost now, and then we talk regularly to Taylor about the, you know, instability in China and China with Taiwan and the things that go with that. But now I would say, and it's not political instability from a risk of war or things like that. But I think that you could almost throw the term political instability in with the U.S.'s relationship with Canada and Mexico. And I throw, have been, you know, for probably close to two years.

[00:19:55] We're, where are we at, Tom? What number are we today? 148, right? In two more shows, it's our 150th show. So, you know, we're coming up on three years here of doing this now, which still astounds me. It still astounds me that people keep coming to listen. But the, I have this bend that Mexico is going to become much more important than Canada. And there are probably a lot more risks.

[00:20:25] No offense to any of my Canadian friends or customers. But I think the pressure that Mexico is feeling from China and from other countries to do more in partnership with them, it puts us at a little bit of risk there. So, diving into all of that, right? Let's kind of look at what we saw last week from Powell holding the line on interest rates. And there's a lot of, obviously, pressure.

[00:20:50] There were some things I was listening to this morning already that there's some rumors of four potential replacements that the administration already is looking at for Powell. Of course, obviously, those are people that have now already come out and talked about the lesser risk of inflation from tariffs. And a couple of them have been talking about their belief of a July interest rate cut. So, you would assume that would be the case.

[00:21:18] So, anyways, those are my thoughts getting started. The first article we have is from CFO Dive Magazine about the wait and see view. But let me throw this out to you guys and your thoughts on where we're at. Okay. Taylor, I'll let you go first and then I'll jump in with some questions if that's okay. I can appreciate the Fed being very careful. I do agree. If you look at the PPI, for example, we haven't seen the producer price index. Sorry for those of you that aren't a data nerd like I am.

[00:21:50] A lot of the buying so far has been pre-tariff. A lot of folks pulled in imports well ahead of the tariffs. As we bleed down that pre-tariff inventory, I expect these pricing pressures to become more relevant, which is why I would be concerned about the Fed acting too quickly here. And so, I tend to agree with Chairman Powell more than President Trump, not trying to be political here, just from a data perspective, that we have to be very careful around inflation.

[00:22:19] Our thoughts is that inflation on the CPI stays relatively flat from where we're at for the remainder of the year, which likely doesn't give the Fed enough ammunition to cut rates like they'd anticipate. So, we are expecting that rates stay relatively flat this year. And I think most, again, half the Fed thinks in that way. The other half of the Fed is a little more spread out. And there's a lot of, very much a mixed bag among these Fed officials.

[00:22:46] But I think we're yet to really see the pricing impacts from the tariffs because we had so much of that pre-tariff inventory. So, I think tariffs scared the Fed this year. You know, coming into the year, they said four rate cuts. And we haven't had one so far in 2025. And I think they're just very nervous around when we actually see this inflation rear its head from tariffs. Now, to see some agreements, we have the UK agreement, right? We've seen the early news of the agreement with China.

[00:23:14] So, we can maybe mitigate some of those concerns. But I just don't see inflation dropping enough to really make Chairman Powell comfortable. And obviously, that's at odds with what the president is. So, our base case is that we really don't see rates move much at all this year. But, Taylor, a couple questions related to that. So, first of all, right, we do have a bit more clarity on the tariff and where the actual numbers may land, especially with some of the bigger trade partners.

[00:23:43] Do we, and I think today, I think I saw that the tariffs from China will be 30% is what they're proposing. I don't know how that compared to what they were paying before, right? Or what we were paying for tariffs exactly before. And there was 20, 24, 25, I think to start with, right? So, and there was that fentanyl tax or whatever it was before. Yeah. So, do you really think that when everything is said and done here, that other than maybe a blip or some short-term work in this 90-day period,

[00:24:13] are we really going to have that much inflation from those tariffs? Whereas, if we're the value, and I think this is the argument, right? The value of cutting rates, even some, and even a half a point, would make a big difference in our national debt. It would spur potential investment, all of that.

[00:24:33] So, I guess my risk-reward scenario is, to me, it feels like the risk of cutting rates and the potential reward outweighs that, hey, I'm going to sit stale for the next few months. What's your take? I know tariffs are a big part of the inflation conversation, but we have other factors driving inflation higher as we look, especially later this year and into 26. It's not just tariffs.

[00:25:02] Tariffs are only one quarter of the inflation conversation for us. Interesting. We talk a lot about fiscal policy. Again, Elon came in and cut spending, and then all of a sudden, this big, beautiful bill gets introduced, and boy, that thing's going to increase our national debt. And government spending does drive inflation. You've got labor costs. We're projecting a 28% labor cost increase over the next five years. I heard a guy at a conference a couple months ago said, hire now. Yes. He's definitely in you.

[00:25:32] Yeah, I hope it was me. It was. Yes, of course. But, Kayla, real quick, not to go off on a tangent. Just quickly, what drives that 28%? Man, especially when you have all this fear of jobs being lost to AI and other things. What's going to drive that increase in salary? Our demographics. The baby boomers leaving the workforce. If you look at the 65-plus participation rate in the workforce, it's below 20%. We're moving into this sweet spot where we're having the biggest generation ever and the baby boomers retiring,

[00:26:02] and we just don't have enough people to fill all of the open jobs that we have in the country. And that's very specific to manufacturing skilled workers, construction skilled workers. Some of those jobs that AI is still very far away from being able to replace. Now, automation and AI has to be part of the solution to this. But it's more the white-collar folks like myself forecasting things that I should be more worried about AI than some of those blue-collar workers. And that's really where the shortage is.

[00:26:31] So we're just moving into this. I call it sweet spot. It's really not so sweet spot over the next five years where you have the biggest generation ever leaving the workforce, and we didn't have enough kids. And so we just don't have the people replacing them. That's what really drives that labor cost. On top of that, throw our immigration policy into that. You know, the reality is, I say this as an economist, I don't think it's controversial to say we should know who's coming into our country. I think that's important.

[00:26:57] But we also need to fix the legal side of immigration because the reality is we need good qualified immigrants. Right. So we saw the huge piece of that, right, earlier in the month here in Southern California, right, with all the craziness going on in Los Angeles and the immigration raids and so forth. And then when those things start hitting, really when they started hitting agriculture is when you saw the president step up and say,

[00:27:22] wait a minute, we're going to have to make some allowances because there are people in this country that have been in this country for 20 plus years and are a part of the core of the workforce in particular, I was going to say verticals, but particular job categories. Right.

[00:27:39] And if you look at what you would do, if you got every illegal, every person that's here illegally took them out of the garment production industry or agriculture, as an example, those pretty much shut down. Yeah. My son owns a clothing company and they do a lot of their production work here in Los Angeles. And he didn't have a significant impact through all of that on his business.

[00:28:09] You're starting to feel it, but not significantly, but his vendors. Yeah. Vendors had a huge issue. So I think to your point, right, is if we've got a labor, you know, risk of a labor shortage, and that's even different from the fact of what you were describing, the baby boomers. The event I was just at, you know, I was listening to a distributor talk and they looked across their workforce.

[00:28:33] And then I think, I can't remember the exact statistic, but it was, I think, in the next like either 24 or 36 months, they were going to lose over a thousand people in their organization. Right. To retirement. Yeah. Yeah. Absolutely. And it's not just the body, it's the knowledge. Yeah. Yeah. You bet. You bet. And it's, you know, I think it's the loyalty too. Sure. I'll say that among the babies. Well, it's a great point. Yeah. There was a lot of loyalty.

[00:29:01] There wasn't the same job hopping that you see from the younger generation. So not only do you have less people, you have people that don't stay at companies the way they used to at the same time. Timex and Seiko have lost a big piece of business in those 20-year watch awards that were given out, right? You bet. You bet. That is, so there's a lot of factors that are hitting on the labor side of this. So that's an interesting thing to talk about.

[00:29:25] So I want to throw this out to you because, you know, Bob made a comment here about thinking that there's, he just said he'd listened to a good part of Powell's conversation about interest rates. He says he's convinced that some of the decisions are political and personal. And, you know, it's hard to listen to him talk. And it's just, and it's probably just his personality.

[00:29:52] But I get a feeling a little bit myself, and I didn't listen to the whole thing, but I get a little bit of a feel myself that he's digging his heels in. Yeah. Now, because... Well, and remember, he got blamed for being so late to the thing before. I think doing nothing helps potentially reduce the blame, right?

[00:30:18] Hey, I'm being more, but I do think that there is an opportunity for... I agree with you, Kevin. I think he is digging in his heels a bit, but I also think there's a blame factor on the whole thing. Mm-hmm. Yep. When you have a lawyer as your Fed chair, it's a little bit different from an economist. So I like to say, not to take too many shots at Powell, but that's, you know, that's a reality. Now, I will say, when we plot the Fed's decisions over time compared to inflation, they're always late, whether it's on the way up or the way down.

[00:30:47] That has always been the case. But I do think there is an element to it where he has just been criticized by President Trump so much that he is trying to really stick to the Fed's apolitical. We don't care about what politics says. So I do think there's, of course, an element to it there. But just almost just... I'm sorry to interrupt you, Taylor, but almost just having to go say that comment says that it's not. Mm-hmm. Right?

[00:31:12] If you have to bang your chest and say that that's the case, you got to almost question, are you really? Yeah. So anyway, I'm sorry to interrupt you. No, no, certainly. And just to get back to Tom's question, I'm not ruling out a potential interest rate cut later this year. It just seems unlikely, based on our inflation forecast, that we get any dramatic change. So could we get a cut in the second half of the year, especially if the second quarter GDP data comes in a little bit softer? Not ruling that out.

[00:31:42] But in terms of seeing anything more substantial than that, we don't think so. And our forecast is that interest rates beginning in 2026 actually start to rise again because inflation picks up its pace of growth. And part of that's just economic demand increasing. We expect record high GDP growth in 26. So there's a demand pull on that. But again, the other factors I mentioned are electricity costs are skyrocketing. We can thank data centers for that. Right? You know, we're seeing labor costs start to pick up.

[00:32:11] So we at ITR expect interest rates to actually generally rise between 26 in the end of this decade. We're talking about potential interest rates of around 8% by the time we're in 2029. So we really say 25, you might get a little bit of alleviation. But the takeaway for businesses is, hey, if you need to take on a line of credit, if you need to borrow, do so in 2025. Because, yeah, we could still get an interest rate cut.

[00:32:37] But at least it's regardless if we get that or not, it's still the lowest interest rate we're expecting to see for quite some time. So, Taylor, just to be clear, are you saying CPI will be around 8% or the interest rates will be around 8%? I'm talking about long-term bond yields. Okay. So around 8%. Interesting. By the end of the year. So that would certainly have a gigantic impact on the national debt unless it can be sort of out-GDPed, right?

[00:33:05] How do you do that to that level? But what is that going to do to the housing market? What is that going to do to the consumer? What is that going to do to the consumer debt? And I think Alex even talked about this, Kevin, on his. I've been a little concerned about consumer debt. And he was like, yeah, it's not really a problem. It wasn't. Yeah. And I don't know how that fits with where we're at today with it. That was, what, three, four months ago. Yeah. I agree with Alex there.

[00:33:33] I look at debt as a percentage of earnings. And what we've seen is basically a plateau in household debt. Household debt's at about 107% of earnings. That sounds awful. I get that. What does that mean exactly? Their annual or their debt that they have on their balance sheet is 107% of their annual earnings? So I make $65,000 a year or $70,000 a year and I have 84, whatever it is.

[00:34:02] And does that include mortgage? That includes mortgage debt? It does. Okay. And that number is actually consistent with where it was between 2010 and 2019. So it hasn't ballooned. And one of the reasons that we, yes, do we have more debt in terms of the dollar value of debt? We do. But our earnings have risen so dramatically that it's kept that number flat. So they're basically both rising in proportion to each other.

[00:34:29] That's why that metric has stayed flat for the better part of the last 15 years. To give you a perspective, during 08-09, that number was 145%. Right? So we're nowhere close to that 08-09 level. I think of credit card debt the same way. Credit card debt's at 14.7% of earnings right now. That's still below the pre-pandemic level. Has it risen lately? Yes. Do we have to watch it? You bet. But it's still below the pre-pandemic level and then that historical 10-year average.

[00:34:59] And again, during 08-09, that number was more than 22%. So we're handling debt okay. Boy, this is so many questions and they have nothing to do with the news. Should we just stay on after the show for two hours and answer all my other questions? That makes me think about questions I have related to our business and myself. But I think what I'm hearing you say, Taylor, is if you combine the fact that there's going to be wage growth over the next several years and you're going to combine that, hey, we're

[00:35:28] not even saturated from the consumer debt. So I actually have a little, as a consumer, a little more room maybe to even take on a little bit more debt. Plus, I have higher salaries that the consumer is going to continue to drive the economy for the next four or five years. Where is the cliff? Right. At what point does that cliff happen? Is it that 2030? And what event creates that cliff? Or is it an event? And is it or is it more of just sort of a part of the journey? Yeah, absolutely.

[00:35:56] You know, the first question I had for our CEO was, what is going to happen in the housing market in the second half of the decade? And we expect it to grow. And I said, with those types of rates coming our way, you're crazy. How do wages keep up with that? Right. That 28% wage number is key to that. Yeah, for sure. We're going to outpace that. And so that was one of our CEO's key points. Now, the other thing he said is you need a history lesson, my friend.

[00:36:25] He said, I know, Mr. Millennial, that you are. We live during a lot higher rates in the 70s and 80s, and we all invested in our business. You have to look at the consumer position. And with handling our debt well and to see our wages likely to outpace inflation over the next five years, we can still grow when that happens. But Tom, you're right that eventually this comes to a head. All of those numbers have to align.

[00:36:50] And you can't have any hiccups in those numbers, right? Yeah, you're exactly right. And the bubble bursts, so to say, in 2030 for us, because that's where you get the alignment of the demographic concerns at their greatest. What I mean by that is 2030 is the time where the baby boomers will be drawing down on increasing health care costs.

[00:37:18] What many people in this country don't know is 90% of your lifetime health care costs come within the last 10 years of your life. Sure. It's really expensive to die in the United States. I've never heard this statistic, but with having lost my dad last year and my mom's aging that quickly, it makes perfect sense. Yeah, it does. And then the Social Security part, of course, with the baby boomers being such a big generation, you get that drawdown. So 2030 is when those things come to a head.

[00:37:47] Not to mention, like we're talking about, higher interest rates continue to create this situation where the national debt continues to climb. And that interest payment on the debt today is already something like $1.1 trillion. And that continues to grow for us. So I saw a statistic, Congressional Budget Office put this out. You might both appreciate this. In 2018, 57% of all of our spending in the U.S. was just health care, social security, and interest payments on the debt.

[00:38:16] So 57% is just those three things. By 2030, that number jumps to 70% based on some of their projections. So you're talking about 70% of all of our spending being just interest payments, health care, and social security. That's concerning. And again, you can't change demographics. Now, AI, could it be a disruptor of the 2030s and make this not as bad as we're expecting?

[00:38:44] There might be potential for that, but you're only solving one part of that problem, which is the demographic problem, right? You're still not solving where our government will be from a debt perspective. That really requires our politicians to change their thoughts on spending and taxes. And I just don't see that happening in the world of politics. So we've had a couple of good comments here, and I want to tie these into what we've just been talking about and you've been saying, Taylor.

[00:39:13] So Andy made a good comment earlier about focusing on, this was when we were chatting earlier about jobs and so forth. He said, be more afraid of robotics and automation. Great point. And then I think that Jason Hine here, I had a chance to sit down with Jason for a few minutes the other day in Chicago. We're going to try and get him on as a guest before too long. Very sharp individual, focused in the e-commerce arena. But what a great comment, right? We were talking about labor market.

[00:39:43] He said younger generations also watch their parents get laid off in the 80s and 90s, and they learn that employers aren't always as loyal to their employees. So that does kind of go both ways. So now let's take this back a step, right? Because we're hearing all of these things related to AI and it's going to take some jobs away. Then there's a whole other discussion where my beliefs tie a little bit closer to is that, you know what?

[00:40:09] We're not going to necessarily replace jobs, but we're going to augment the ones that we have. A perfect scenario, right? As I've been talking to a lot of our customers and prospects and people that I network with that are wholesale distributors. I used the point that just says, just imagine if you could, through robotics and AI, be able to run your branches with, say, 20% less people.

[00:40:39] It's probably a lot more than that. Just say it's 20% less people, right? Now we push the people that we have into the new branches that we want to open. And now all of a sudden we can need to open fewer branches because we're so much efficient with how we're managing our supply chain through digital twins and all the things that go with that to plan our purchasing scenarios and all of the things that happen with that. But we can continue to grow, but we do it with the same amount of people.

[00:41:05] So all of a sudden, yeah, we can grow by five branches over the next three years, but we didn't, we added, you know, let's just say you can have a 30% business growth with a 2% headcount. Yeah. You know, something, you know, some, something in that. So assuming we look at that, how does those types of things impact? And this ties back to something I've said for, for the last two years.

[00:41:31] And when we look at, you know, 2% inflation, is that still the right number? Right. Because that number came from some hack in New Zealand in a news conference. Right. So I shouldn't say hack, but if I said it, it would be a hack. But, but, you know, wasn't that it was like the world economic forum used that number and then the rest of the world adopted the 2% inflation. So with all of these factors that we're seeing and in no offense to what you guys do, because

[00:42:00] what you do is what you do and it's based upon the factors of the world, but the world is changing quickly. Are we still using the right numbers and the right factors? And with these variances that we're seeing with employment and so forth, how does that impact what we're, what we're looking at and what we expect based upon how the governments of this country and the rest of the world are looking at economic data, which is in turn

[00:42:28] forcing how firms like yours have to look at it? Yeah. Yeah. You know, that 2% number always makes me chuckle because it really is just, we think this is what is healthy for us. Is it still? Right. Well, and you already see the Fed being even here in the U S say close enough, you know, sometimes they'll, they'll change rates if it's like, well, we're on our way to 2%. That's good enough for us.

[00:42:56] Um, so you, you already do see a little bit more of that flexibility, but of course these interest rate fluctuations have big impact on currencies as well. Right. And so having a benchmark like 2%, I think helps stabilize some of the currencies around the world, right? The European central banks are already running into this where they, they have lower inflation than we have here in the U S and they're cutting rates, but they're like, well, we have to be careful how far we cut if the U S isn't though, cause then it destroys the value of the euro. Right. But they're cutting, they're cutting pretty quickly too.

[00:43:27] They sure are. They sure are. And likely have more to come. So there, I think a 2% number, I, I too agree. It's like kind of shrug as an economist. That's really looked at some of that stuff, but having a number to pinpoint for the sake of currencies, there can be some importance to that. Yeah. That's what I said before is it's, it's real nice to say we want to arbitrarily change some

[00:43:52] of these numbers, but there's side effects across all of those, but regardless of what anyone thinks is the right number. Right. I think Taylor, to your point, let's look at the actual data that's occurring. Right. And what I'm hearing you say is that per your research, the 2%, whether it's 2% or 3% probably isn't in the cards over the next, right. So whether we like it or not, we're going to see much higher results than, than what those things actually are.

[00:44:22] We have the TDI going north of two, 4% next year, just to give you a number. Just next year. Next year. Yeah. Just by the end of next year, that's a year over year growth rate. So yeah, just giving you some ammunition there. Yeah. You know, we, we're not talking to 3%, we're talking higher. So, so I'm going to go back to interest rates. I think I know the answer from both of you, but I'm going to ask the question anyways.

[00:44:46] So you've got, um, earlier this week, you've got Christopher Waller and Michelle Bowman, both fed governors who have said July, they're good with a cut there. You've got the pressure from the administration. I think that I want to say administration, not just the president. Right. Uh, I think you've got, you know, Besant and so forth out there. And I saw a thing on, um, Yahoo finance this morning that, you know, Besant is in the mix

[00:45:15] of, he says he's got a lot of work to do left, but he's in the mix as a fed, fed, uh, chair replacement. Any, I'll just ask you guys this way. What's the percentage likelihood of any type of cut in July? 25%. Okay. Yeah. I was going to go a little higher.

[00:45:40] I'm going to say, uh, 50% for July, just because I think to the point of what we were talking about before, you know, pal digging in his or looking like he's, you know, digging in his heels or whatever, I think throwing a bone of 22, uh, a quarter point, a quarter point cut, um, kind of alleviates a few things. Doesn't create a big risk. And, you know, maybe, maybe he feels like he's giving in.

[00:46:07] I don't know, but I think there's going to be a lot of pressure, but I wouldn't put it any higher than that. Okay. My answer came from 75% of analysts were surveys and they said unchanged for the next one. Yeah. That's all right. The 25%. Yeah. I'm going with the market. All right. The, uh, that's why your stock picking is probably much better. Oh, no, no. Don't ask me about that. I'm a long-term economist. Okay.

[00:46:31] Tom, the other side of that is Taylor has a lot at risk with what he says. We have nothing. We're just, we're just two knuckleheads in the, you know, the best answer, by the way, that is the best answer for sure. Uh, so the, uh, I, I, I think, I think it's probably somewhere between Tom's 60% and 50%. I think it's 60 to 70%. You're taking the over.

[00:47:01] You're taking the over. Absolutely. Um, but I, but Tom, before we go on from here, I do want to ask Taylor a question and I'm not trying to put you on the spot here, but if we see, let, let's say, say we see something dramatic and, and we see a half a point drop in July. Now I know that that's, you know, off the charts unlikely, right? That's not going to happen. But what if we were to see something like that?

[00:47:29] What does that do to your numbers and what we're looking at as a whole? And let's just use it this way. What if we saw between now and the end of the year, three quarters of a point or a full point, what does that do to all of the, you know, how do the stars align with something like that? I do think, you know, my mind goes to CapEx. One of the weak areas of the year, especially because interest rates haven't moved. Businesses are hesitant to invest.

[00:47:59] It's uncertainty at higher interest rates. We do have CapEx growth in the second half of 25. Okay. I think you can increase the slope of that growth if you see interest rates come down further. So yes, there can be other consequences maybe on the negative, but I'd say for a positive consequence, I do think you see a lot of this cash get off the sidelines quicker. So both from businesses spending it and do you see the same thing from venture capital

[00:48:26] and private equity jumping in and putting more of their capital to work? Yeah. The M&A data set we have was already in the recovery phase, which it was still negative year over year in terms of overall transactions, but it was getting less negative. And I think you lower rates and those folks get even more aggressive. Okay. Very good. Very good. Well, that's one last thing on tariffs.

[00:48:52] I just wanted before we kind of move ahead and dive a little bit, I want to talk just a little bit about kind of supply chain stuff, but I forgot to send this to you, Tom. I'm sending it over to you now if you wanted to, I don't know if you can get it quick enough to click on it, but I've been trying to find some really good resources. You guys probably have a bunch of them you use internally, but of following the tracking of kind of what's going on with tariffs. And even some of the government related ones in the World Economic Forums is like, they

[00:49:21] haven't done any updating to anything on it in weeks and weeks. But I found one from what I think is probably a really good source, which is Maersk, the shipping line. And obviously these things are very, very important to their business because they had, you know, if you looked at some of the shipping service mapping tools like AIS, that, you know, you can see a global map of where all the ships are around the world, right?

[00:49:47] We went when the, you know, first, in fact, when we were together in Nashville in April, all of a sudden everything stopped, right? Within the next week or so. And all you saw is, you know, around the coast of China were all these ships sitting and the amount of them moving across the Pacific were, you know, over the next few weeks were minimal. And then things started to move a little bit. So, you know, we've been, I've been trying to find a good source of this. And I think Maersk has a pretty nice one.

[00:50:15] You can click on them by country and then it shows you where the kind of most recent updates were and what's happening. So, kind of some neat things with this one. If people are trying to track it, I wanted to share this one with them. I'm going to continue to try and kind of follow this one as an update because things are changing every day, right? I mean, there was, I think it was either last night or early this morning is that the administration was saying, you know, the China thing is pretty much inked now on more, at least more facets of it.

[00:50:43] So, it'll be interesting. What I'm going to be really intrigued in is, you know, if we all got together again in six months, the three of us and sat down is where did they really land and how bad was it really? My gut tells me these things are going to be very manageable. There is a lot of opportunity from them.

[00:51:06] And what we saw through all of this was a just different style of negotiating from a particular person in office. And if we would have looked very closely at that and looked at the who and the how, we would have understood it a lot better than the, you know, global frustration with it all. So, I'm hoping for good outcomes from this.

[00:51:32] But that also, in my mind, ties to lower interest rates and I can't get anybody to agree with me that interest rates are going to go down. So, we'll run from there. So, any other recaps as we talk about inflation and tariffs from either of you? Nope. We'll just have to see how we end up in July. Good. And by the way, Taylor, you can still... The ISA conference, I think it was NAW's lobbyist that was there that says... Brian Wilde. Yeah, Brian.

[00:52:02] He said, I can't believe folks are surprised that a person who wrote the book called The Art of the Deal is negotiating in this way. And that comment he made has just stuck with me. You know, when I look at the tariffs from 2018, President Trump's first administration, you know, during that time, inflation was still relatively low. So, I do think the inflation piece is a little bit overblown here. And I hope in six months that that's how we feel.

[00:52:32] That's... I love that. I agree. I just... To kind of say the final word, as I have said this before, I don't think when all the dust settles, tariffs are going to have that much of an impact on what we're doing. I think we're already adjusting. We're seeing that. We're seeing the market respond to that. I didn't, you know, I hadn't thought as much about some of the other points that you brought up, Taylor, about inflation drivers beyond that. But I don't think that tariffs are going to be the monster that everyone had made them out to be.

[00:53:01] And I think it's proving out that way. Well, and we haven't even talked at all today. We've been focused on interest rates and tariffs. We haven't all talked at all about the recessionary issue that, you know, so many people have been concerned about. I think we're seeing a lot less of those concerns as well. And I think Taylor's point, right? We're full speed ahead for five years. And then that recession hits us hard in the 2030s. Almost to the point, I believe, Taylor, your firm calls it a depression based on the

[00:53:29] length of what it could last, right? Based around. So it could be more severe than the 2008-2009 recession. And by the way, Taylor, I didn't share this with you earlier. Feel free to go out on a limb. We have like seven listeners. So, you know, don't worry about it. You can say whatever you want. No, I appreciate that. Yeah, it is a depression. That's how we talk about 2030 because it's a lot. It's not 08-09 where things fall apart immediately and then we're back, you know, a year and a half later.

[00:53:59] It's more of a long, steady, gradual decline. And again, demographics play a lot into that thought. So we call it a depression. I know economies change over five years. I know things change. But we tell our clients, listen, we're headed for a downturn. Call it a recession or depression. The advice on how to prepare is the same and you're not going to be upset with a way to prepare for it. The verbiage is irrelevant. The factors are what matters, right? Right. Very good. Tom, where do you want to head to next?

[00:54:29] Should we just jump out and move into our next section? I think we've done a lot. Yeah, I think we've done a good job there. I think, you know, we're going to continue. There was an article there from Supply Chain Digital about Middle East conflicts. Can I put out a source for your listeners on the supply chain just to check out? FM Resiliency Index. Say it again? Google the FM Resiliency Index.

[00:54:56] They show you the most resilient supply chains around the world country by country based on 18 different factors. There's an interactive map. It's the coolest thing. And again, I'm nerding out a little bit here. But if you want to know who has the most resilient supply chain as businesses are thinking about orienting their supply chain for success, it's a really cool source. So is that organized by a country or how is it?

[00:55:21] Yeah, so basically they take 18 factors for each country around the world and they score each of these 18 factors on how the country ranks. It's like political risk, climate risk, all these different factors. And then they total that score and it shows you who has the most resilient supply chain based on those 18 factors. I've been sharing it with all of our clients as they think about new supply chain, you know, moving their supply chains around for success over the next five years. It's a really cool, really cool website.

[00:55:51] Is that FM Global that does that? Is that the right one? FM Global Resiliency Index is what it should be there. Yep. Gotcha. Okay. Very good. We'll look into that a little bit further and maybe keep that as one of our sources. I appreciate that. Tom's searching it for us now. We'll show it here coming up. You've now been cookie-ized. Yep.

[00:56:17] You can just hover over any of the countries and it shows you their overall score. I put some of this into a chart. It's really cool to look at. That's great. We'll share that further. That'll be great. Great to have. We appreciate you sharing that with us. So let's kind of jump ahead here. There was a little bit, I thought, that was an article that we have from Harvard Business Review.

[00:56:45] I think that Tom is going down in the manufacturing section. It talks about tariff technology and the new geography of manufacturing. And, you know, we're hearing so much more now about the, you know, nearshoring and onshoring. And obviously, if we could onshore, all the better, right? It brings the taxes to the U.S., the jobs to the U.S., the building, all the things that go with this. But I think this article was kind of interesting.

[00:57:14] I don't know how close you guys were able to take a look at it. But one of the things I was really liking, some of the statistics that it was sharing were, you know, historically, there's been a 16% cost advantage to manufacturing in Mexico. But if that, if there's a 25% tariff, right, what just happened there? And, you know, when you dig deeper about tariffs is the idea is, right, we want trade balance with the countries.

[00:57:43] Some of them were trying to, specifically China, there's a issue with the fentanyl and so forth. And if you look at Mexico, there's the border issue that goes with that. So there's more behind it. But, you know, there was one of the economic trade advisors to the White House. I heard them talking this morning on the news, and they were talking, you know, about the bigger factor that,

[00:58:07] not a bigger, but an equal factor that we don't talk about enough is not just this tariffs about goods coming in, but it's where are they opening the doors for the U.S. to be coming into their country and be U.S. companies selling more there now where they've been blocked and locked out. So I think there's a big factor with that. But, you know, there were some good points in this article for me that kind of talked about,

[00:58:33] with the way things are looking right now that things will settle out, regardless of where the tariff numbers be. Really, I think nearshoring becomes more of a geopolitical hedge versus a financial hedge. Unshoring is your financial hedge. Is that a fair way to put it in your guys' view? I think that's fair. I think that regardless of the number, and I agree, right, a lot of these negotiations are trade relations.

[00:59:02] They're not just tariff negotiations. So you have to look at it from that perspective. But if you look at, right, even if China was similar in cost to what it would be from Mexico or some other place, you still have the transportation issue, the logistics issue. Right. There's a lot of other factors that could potentially obviously affect the supply chain there,

[00:59:27] where maybe those logistical issues don't exist the same way in Mexico or Canada or obviously here in the U.S. So I don't think there's any one thing. I think diversity probably is going to be the strategy. Right. Having options and diversity, I think where we got into trouble is we put too many of our eggs in one basket and on a lot of different fronts, not just, you know, that.

[00:59:51] And so I think the diversity aspect of it and having options is the key thing. Taylor, any thoughts on that? Yeah, I think we learned a lot of lessons from the pandemic, especially around the logistics side. And I think some of those lessons are really stimulating a lot of the onshoring and reshoring that we're having is even if it is a little bit more expensive in Mexico and the U.S. compared to China, Vietnam, India. Oh, yeah. Just being closer.

[01:00:19] I mean, because we just didn't have the material back from the pandemic. So it didn't matter what the cost was or who was more resilient. If you didn't have anything, you were SOL. Well, and so I do think the proximity and we saw this in a survey, you know, there was more than 174 businesses, I believe was the number that said they were onshoring or nearshoring to North America just because of proximity reasons. Yeah.

[01:00:45] Well, and I think you put the geopolitical pressure from China in particular. Right. You know, I mean, I was caught unaware when the first negotiations there, when we were talking about the rare earth minerals, I had no idea of the amount of rare earth minerals that were coming from China to the U.S. solely for military use. Yeah. Right. And defense. I'll just say defense, so to speak.

[01:01:15] I didn't know that at all. And I was like, well, wait a minute. You've got, you know, the country that you probably have the most pressure with from a risk factor from a geopolitical factor. And that's where you're getting your rare earth minerals that go into all of your defense systems. Yeah. That's not a good spot. Right. No. And so figuring out how to get that, not only that solved, but maybe reversed.

[01:01:45] And I think, you know, the timelines that you were talking about, right, in supply chain, relying on consistent freight coming and so forth is a big factor. But, you know, there's, to your point about that happening just from a proximity base is important.

[01:02:03] But I think there's another factor that goes with that is that when we, I mean, I think it was 70s, 80s, roughly, that we pushed most things to China because of a cost base. Right. Well, there was two levels of groups of people in China. There was the working group who had nothing. And there was a upper class and the control class and the party class there.

[01:02:31] Well, now there's a middle class in China. And so prices, and I'm sure, Taylor, you have reviewed in the past, the details far greater. But now pricing from China has moved up and the disparity from on Shorington, U.S. versus U.S. and Mexico, there's not this monster gap. These things have started. Now, they haven't got anywhere close to parity. Right. Right.

[01:02:59] But now all of a sudden, you know, doing something in Southeast Asia, Vietnam, Laos, Thailand is much closer in cost to China without the risk of China. And then if you move to Mexico or other parts of Latin America, it becomes even more so because as China's costs go up, Mexico is kind of stabilized from that standpoint and other parts manufacturing components of Latin or parts of Latin America.

[01:03:29] And now we're getting, it's again, nowhere close to parity. But boy, if you can say, I don't know what the numbers are, but if you can give me a reasonable percentage that says my product needs to travel over the road or a rail for two days versus 15 days or 30 days or whatever the number is, there's a lot of factors that go into that now. So I go back to Mexico, Mexico, Mexico is where we need to be paying attention to. I agree. I agree.

[01:03:59] Mexico, by the way, was one of the areas we were most excited about even through the 2030s because China has a declining population right now and it's only going to continue to decline. They're really kicking themselves for that one child policy all those years ago. Mexico is one of the few countries in the world that has a growing population all through the 2030s. So for us, it was like, boy, if we can solve these geopolitical issues, maybe some of the corruption within Mexico as well.

[01:04:28] The underlying economic fundamentals of Mexico are very exciting. Those are big ifs before that, of course. Right, right. But from an underlying economic standpoint, Mexico could be a huge competitive advantage for us here. If manufacturing could outpace cartels, right? Because you can get the tax off the manufacturing side, right? And then you can grow the economy in general. So, but you know, this is a conversation for another day that can go on and on.

[01:04:56] I've just been kind of just scratching the surface of understanding it better. But, you know, if you were to listen to Elon Musk about population, right? You know, all three of us should go have 17 kids right now. So there's a lot of factors that go with that. I've got a nine-month-old, so I'm trying. Okay, good. Yeah. We'll keep going. I have, I have, I'm a grandfather now, so I'm supporting it from that side. So my kids are, my kids are doing the work.

[01:05:25] So Tom, let's roll into e-commerce and marketing a little bit and talk a little bit more about this. Tom, any of these things pique your interest? Well, there are a couple of them I thought that were interesting, maybe a little bit of a story behind the story. So the first article here was why millennials and Gen Z make good B2B marketing leaders. And this ties in, Taylor, I'm interested in your take on this.

[01:05:49] What I read in the, and there's a couple articles where this touches on this, is we're seeing a lot more younger people, Gen Z, millennials, moving into marketing roles and in certain roles in the business. And we're seeing, maybe, and I see this, you know, working with a lot of sales organizations and distribution sales organizations. The speed of which the younger generation is moving in there is slower than in other parts of the business, right?

[01:06:17] Yesterday, I had a call with a new customer that's actually going live this weekend. And one of the biggest things is, well, we've got to get the older salespeople to just be able to log in and be willing to use the browser and, you know, do some of these things that are here. Are you seeing that there's certain areas that are maybe faster to have more of a younger generation fill in?

[01:06:40] The younger generation is more willing to work in those certain roles, less willing to work in some roles, less of them that are going to maybe take a longer time to kind of see the shift. Any particular, you know, data or feedback you're seeing in that area? You know, I present on one of the slides around participation rates of the different generations. The millennials have taken over the workforce. Their participation rate is about 84%. Gen X is right behind them at 82%. The problem is Gen Z is at about 55 right now.

[01:07:11] We can't figure out how to get Gen Z to join the workforce. We're just struggling to get these young people in, in comparison to how quickly previous generations have entered the workforce, right? But a lot of those, especially a lot of the remote technology jobs, marketing jobs, that's where Gen Z is focused right now. Because what Gen Z is great at, and we see it through the influencer community on social media, is generating income for themselves through these different platforms.

[01:07:39] We as businesses just need to figure out a way to show these folks how they can transfer those skills into the workforce. And I think that's really what we're struggling with right now. Gen Z is remarkable with technology, digital transformation. But we're having difficulty showing them how they can apply that in a distribution company, for example. And that's the big hurdle for me over the next five years.

[01:08:02] We saw some statistic a while back, and I can't remember where it came from, and Tom might remember the percentage. But it was something like 90-some percent of high school seniors believed that influencer was a career that should be, not just a career, but that should be a career that was aspired to.

[01:08:27] It was like the most desired career was to be an influencer, even higher than, I think, pro-athlete. And I think your chances of becoming an influencer are probably less than or similar to becoming a pro-athlete. Yeah. That just astounds me. But you look at that, too, and you were talking about the trades and so forth. And you think about Mike Rowe from the Dirty Jobs TV show guy, right? He's out there.

[01:08:54] And as other people are out there and saying, forget about college, right? You can make $175,000 a year as a plumber, right? Yes. Go, you know, and how many people are making 106 figures, you know, right out of college these days? The other side of it's what's translating to, I think, too, and it's a little bit tied to what Tom was commenting about, was about, you know, with some of our customers is, you know, Tom runs the team that implements our customers.

[01:09:23] So Tom runs our technology team that's building and developing our technology and the group that onboards and works with our customers. And then I'm on the other side, on the front end of it. But I'm talking to people every day that, yes, they have that, you know, that aging workforce that's probably going to be retiring in the next five to 10 years.

[01:09:44] But, you know, I have the conversation with them and say, you know, as you're trying to fill these, you know, sales roles, support roles, whatever it might be, I'm asking them how many of these younger people are asking you about what technology you use, right?

[01:10:03] Now, the last thing that the guy that's in his 50s was caring about when he took a job as a sales manager at a, you know, roofing distributor, wherever, whatever it might be, food service distributor was, you know, what technology platformer you are. But I'm hearing day in and day out, that's a question that is coming, you know, and what that's going to shift to very quickly.

[01:10:24] And I've heard this at some conferences, and we've spoke about it on this show a number of times, is that is what AI tools do you have, right? We're going to be at a place before too long where, you know, we're doing some work right now with Tom and I are both about cloning ourselves, about cloning our knowledge base. So there's tools like Delphi.ai and some of those.

[01:10:51] In fact, I was yesterday, I was having lunch with a couple of gentlemen in Chicago before when the conference I was at was over. And I was talking with another gentleman who's there that's a technology B2B SaaS software company. And he was saying that he, and he's the founder of the company, Tom and I are working on this as well right now.

[01:11:11] He has just spent the last basically a month of putting all of his knowledge base from all of his videos that he's created, his blog posts, his articles that he's written, ongoing things that his internal notes, specific things out of SharePoint and or Dropbox within their organization.

[01:11:33] And then all kinds of recordings that he's been making to clone himself, both as the thought leader, but as the CEO of the company. And what he's starting to do, and I haven't thought through this enough yesterday. This was less than 24 hours ago. He shared this with me. And the 24 hours has been a little bit of a whirlwind. But what he's asking his team to do is, before you come to me with a question, ask my clone. Yes. Right?

[01:12:02] So thinking about back to the workforce is, we're going to have people come to apply for jobs who have their own clone already and are going to be asking for, what are your AI tools? Or how are you going to help me build a digital twin? Or what tools do you have from an AI standpoint is what's going next?

[01:12:21] Because what we're learning and we're seeing already, and Taylor, I'll ask you this question because I'm asking people constantly, is in the last three, six, nine, or 12 months, how has your search, online search changed when you go to, we use the term Google, it, right? Has that changed or shifted at all for you yet? I only use chat GPT. I never use Google. Great. Only. Yeah, you're right.

[01:12:48] I watched, I was a video on social media and it was a gentleman graduating college. And he said, if your business doesn't have its own large language learning model, or at least a co-pilot in AI, I'm not applying to your company. Because you're just too far behind. And of course, I'm like, here at Crow, our parent company has their own language learning model. We've got co-pilots.

[01:13:14] And two, if we have questions about policies in the company, anything, we go to our Crow mind. That's what we call our AI model. And my answers come from there. I'm not reaching out to someone via email. So, but yeah, I'm solely chat GPT 24-7. Taylor, do you think that the adoption of AI and just more modern technologies will kind of act as a carrot to drag in some of those Gen Zers that keep sitting on the sideline and as an opportunity to join the workforce?

[01:13:43] Great point, Tom. Absolutely. And I tell our clients that all the time. I say, you have to understand how millennials and Gen Z do business. And if you don't, your market share is going to pay for it. And I think AI is a big part of that conversation. Like I said, millennials took over the workforce. Gen Z is coming into the workforce. We are going to be your clients. We are going to be your business leaders, your customers. And we need to adapt to the new ways that this younger workforce is coming in. Yeah. And that actually leads well into one of these other articles.

[01:14:13] Tom, before you jump on that, though, hit Bob's comment there, though, about wisdom, discernment, and strategic vision. I think that is a good point to add. I'm putting all of mine into Delphi, right? All of my wisdom, discernment, and strategic vision will be cloned into Delphi. But I think that is, and there's a lot of AI. I assume when you said older folks, he was referring to me. So that's why I'm answering the question. Well, you're the oldest guy on the show today. Right.

[01:14:43] Not you. I know. Yeah. Not you. So I figured you. Taylor, I don't know if I shared this with you. Tom and I have been friends since kindergarten. But my birthday is in July, and his is in January. So he's older. Okay. Gotcha. So he's got me for six and a half months a year. He's older than I am. So he's the old guy. When we were in kindergarten, I was five and a half, and he was only five. So it was a positive.

[01:15:14] But I will tell you, though, before Tom tells you this, is that on many, many fronts, Tom is that six and a half months smarter than I am, too. So not on all, but on many. But I think to Bob's point, right, I don't think, you know, look, the human race goes away if we have all machine and all machine learning or AI and so forth. Right.

[01:15:42] And there's all the risks of those things. I listened to a great podcast last week about one of, I can't remember the gentleman's name, but he's one of the early, he's been working on AI for 40 years. And he was talking about the absolute most important thing to figure out right now with AI for the world is how to make sure that as, if AGI can ever come around, if that when

[01:16:08] it does, it does not have the capabilities to surpass having controls in place by humans. And I do believe, to Bob's point is, right, an organization is still going to need wisdom, discernment, and strategic vision from, and we see this a lot of people talking about, you're never going to replace the CEO with an AI version of a CEO.

[01:16:36] That's a job that's not going to go away because someone needs to be able to take all the AI tools, all the data that we have and life experience and compare that with what the models are saying because the models are wrong all the time. Right. I mean, we just saw this last week and, you know, they're our strategic partner because our technology is built on the same software development that Salesforce is built on and

[01:17:03] our customers' data is in Salesforce's cloud, but they're, right now, their agents are, what was it, Tom, 58% correct or efficient? Yeah, it's probably correct. I think the research that just came out last week. So I think there is, I call it adult supervision. To Bob's point about wisdom, discernment, and strategic vision, I think those things are going to continue to be a major factor along with, I think about it as a CEO is,

[01:17:32] I want to make a decision, but I want my decision augmented with data that comes from models. Yeah. Right? To come to that conclusion. So anyways, Tom, I thought Bob's point was nice to have there. Very good. Let's jump ahead. Let's talk about it. We're already at 1020 here. I just wanted to get one point here about this marketing piece is one of the things here that they were talking a lot about in these upcoming articles is not just the buyer, I'm sorry, the millennial and younger as a employee, but as a buyer.

[01:18:02] And I'd love your take real quick, Taylor, because I am convinced that the younger buyer hears marketease and promotional stuff, and they just tune out so fast that they don't hear a word. And the only thing that they really respond to is authenticity and real communication versus marketing talk along the way. And I would love your just quick take. Do you agree with that?

[01:18:28] And again, it's about how we market and how we build our brand compared to how we did it in the past. Yeah, I completely agree. Give you a specific example. I have a client distributor via e-commerce. Um, he had his millennial generation, Gen Z generation come in and redesign his user buying experience as well as the marketing that was being shown on his website. It was a two and a half million dollar investment when it was all said and done based on their feedback.

[01:18:56] It's not a small investment in a website or a platform. We do business differently. We care about different things as millennials and Gen Z. So I don't think, yeah, I completely agree with you. Yeah. And there's a real dollars attached to that. Yeah. No, I mean, it's, you talk about organic growth, right? To me, part of that organic growth strategy is understanding your buyer in aligning under, first of all, understanding the buyer, understanding the buyer journey, understand the buyer behavior,

[01:19:25] and then align yourself to that. Right. Rather than, and that will build your brand, right? Because your brand and how you're perceived in the marketplace will definitely come about as a result of what we're dealing with. I spent, uh, I spent about a half hour while I was in Chicago on Wednesday with, uh, Mike Marks. And I don't know if you've, you know, Mike is, but Mike's, uh, um, started in the electronics

[01:19:55] world, uh, in the distribution world and, uh, and then the electrical electronics and then spanned out from there. Now he's a keynote speaker, thought leader, writer, Mike's, uh, older, older than Tom and I has that. I, I, I won't try and pin Mike's age, but he's, he's, as he says, he's been trying to retire for about 10 years. And, uh, but he's just, just a great, great guy. Now he's board of director of, you know, many, many huge distributors.

[01:20:23] Um, but he also does some teaching and, uh, I can't remember what university, but, uh, one of the schools that he works with, I think it's quarterly. He says he has a group of students come in and realign his thinking, right? He just really wants to, to, to engage with them and understand what these future leaders in business are thinking and what's going on in their mind and comparing that to what's going through his.

[01:20:52] And it's, it's probably one of the most insightful things. I, I've heard a lot of insightful things from Mike and I, I'm happy to consider Mike a friend, but, um, I thought that was really a great thing to do ongoing. And, you know, I don't, I don't think of myself as, I don't even know what generation I am at 60, but, um, I, I don't think of myself as, as old as I am, but you know what? There's a whole new thought train that's coming into business for us right now. Yeah. So good.

[01:21:21] Tom, anything else you want to hit as we kind of wind down for the day? I mean, there's plenty of really good articles left in here. We're not going to have time. There's one for me. I just wanted to, and it's the one that stands out for me. Um, and I just wanted to get, and we've, we've touched, you know, kind of tiptoed around this today, but there's the article just, I think above where you're out on the screen right now is talking about Nvidia's work on, uh, on robotics.

[01:21:45] And, um, is that something that, you know, robot, I mean, Fox, Foxconn is literally working right now on, you know, robots that can put an iPhone together. So we we've talked about the workforce. We've talked about labor. We've talked about AI. We've talked about all of these things. You know, we can only as we get, and, and, you know, I've said that I'm hoping that in the next 18 to 24 months, Taylor, I've said on the show a number of times, I'm sure I'm going to be wrong.

[01:22:12] It's going to be a little bit longer, but I'm hoping to buy, you know, the, the humanoid robot that can take care of the yard and the house. Right. Maybe it can't put a new roof on my house, but probably not that far away because the data said it would have available and the dexterity that we're seeing now in there. I don't know if you saw, there was a video out a while back that was, you know, literally showing somebody putting groceries on the counter. Right.

[01:22:38] And it being able to decipher what needed to go in the fruit bowl versus the refrigerator. Right. So we're very close on these things, but what are you guys tracking that or following that on what, one, what does that do to business? And then what does it do to the workforce? Yeah, we look at a little of this today, but I just thought I'd dive in as we close out today. We look at robotics, new orders and production. So we're looking at both the orders and production series.

[01:23:07] I dare not call them recession proof, but they have very little downturns in the data right now to say the least. Again, we see that this has to be part of the solution moving forward. My concern in the next five years is not, will we grow? It's can businesses keep up with this growth, especially because of the labor shortage we mentioned earlier. So automation and robotics has to be the solution if we want to keep up. Again, I just don't see the immigration situation changing at all.

[01:23:36] And so to us, it's more of, listen, if we're forecasting most businesses that I work with, I'd say about 75% to have record high revenue over the next three years. How are you going to keep up with that when you don't have the people to? Yes, AI is going to increasingly be a part of it. But for those jobs where we manufacturing, construction, we're going to need these types of robots. So for us, this is a need more than a want.

[01:24:05] And we're hoping that this technology continues to progress to solve that human problem, lack of humans that we have here in the US. Well, and it's interesting, right? Because as companies try and pivot, if you will, from less technology and pivot into using robotics, using automation, that's where you need your best and brightest people is to help facilitate that pivot. Maybe once the pivot sort of comes together, you don't maybe need quite as many people.

[01:24:34] But I think over the next five years, we're going to see a lot of pivoting, at least trying to take place. And I agree with you, we don't have the people and the knowledge even to facilitate that pivot. And robots are not just like something you just drop in, right? There is a whole infrastructure and a whole, you know, if you want to just look at it from an IT perspective, there's a whole IT infrastructure that would be required to deal with some of

[01:25:02] these things that most organizations wouldn't have in place. So I think the pivot is what's going to be the pain, right? The pain is going to come from the pivot. Once we get through the pivot, I do think there's a longer term upside along the way. I'm kind of wondering, it just kind of triggered for me. We have a great, great customer who's turned into some good friends there as well. It's a company called APR in their HVC and plumbing distribution company in Pennsylvania. Just great people.

[01:25:31] And as we've gotten to know them, working with them for about a year now. And, you know, our technology is core to their, the revenue side of their business. But, you know, going and seeing their, they have a robotic system that's stacks of inventory with the box robots moving around and grabbing these. It's so astounding to do that. But I was also talking to another distributor who's even a little bit larger than them at the event I was at this week that doesn't have that. And what kind of came to my mind just from this discussion was, I almost wonder if I was

[01:26:01] a distributor that was thinking about putting in any type of, I don't know what the right term is, but I'll say stationary robotics, whether it's a system where there's boxes moving and grabbing orders, or it's an arm moving something. Yep. I'll just call those stationary systems versus humanoids. I'm almost wondering if I haven't moved to the stationary component of it yet, or an order

[01:26:28] picking robotic system is maybe do I wait six, nine, 12 months, whatever it is, or at least to be building the humanoid robot plan into my robotics. Because I think we're going to be at a spot very quickly where we see, I always use the example is, you know, and I think what we're learning right now is that it's best to give each one some very specific type of tasks and learning that says, this one picks boxes and maybe can sweep.

[01:26:59] I've talked a lot about, you know, the one that can do all of those things, but also has carbon monoxide sensors and, and, uh, and a, a, um, uh, a camera on it that could count inventory at a, at a rack outside. But I'm starting to read more that those are probably two separate ones, but probably the plan long-term is to put a, I've got order picking ones, and then I've got humanoid robots together.

[01:27:24] And to Tom's point, I think that's going to take a bigger tech group within your organization. And you're also going to need somebody to maintain and service those now too. And where does that come from? And that's what I leave you with for my comments on that is everyone's afraid about jobs going away. Think about the jobs that are going to be produced by these things. I think the simplest, a perfect point in wrapping up today in this Taylor, I think is what you're describing is, you know, the internet made jobs, didn't kill jobs. And everybody thought the internet was going to kill jobs.

[01:27:54] So great way to go. So Taylor, I'm going to call you my friend now, if that's all right. Um, thank you for being with us. Your thoughts on the day in the show, would you do it again? I would love to. Okay. Many times. If you've got some thoughts on how we can make the show better or other things we can do, we would welcome those, uh, comments that we had today from folks. We really, really appreciate. So Tom, anything as we wrap up? No, I, I, great conversation. I think there's a lot more we can unpack and it'll be interesting to see.

[01:28:24] Now I'm very interested to see how the next, at least the next six months play out and where we end up at the end of the year. So, all right. So you guys are just, when you, when you see that, that quarter, quarter point cut in July, just remember, remember this discussion. And if that's the case from what Taylor told us today, we'll know it is political. Right. Very good. All right. Well, as we close out again, we do this every week. We, uh, we appreciate the folks that join us.

[01:28:51] I think we had three or four different, at least three or four different countries that were joining us today that we know of. We'll see more of that when we see some, some, uh, podcast statistics. But again, I'm Kevin Brown. We're here with our friend Taylor St. Germain and, and, uh, Tom Burton. And we do this, Tom and I do this every Friday. We would love to have you join us again. As we mentioned earlier at the kickoff of our show, uh, that we publish a newsletter every week that we get out, it's called around the horn and wholesale distribution of manufacturing.

[01:29:18] If you don't get that and you would like to, you can certainly, uh, reach out to us. You can do that simply. If you're on LinkedIn, just look that up, uh, around the horn and wholesale distribution. You can search for that or go to the lead smart technologies page and a request to get that LinkedIn. We'll actually send it to you. Send us an email at hello at lead smart tech.com. We'll get that out. And then we have a website for the podcast, uh, called around the horn pod.com. And you can get that as well.

[01:29:46] We like to ask a favor of, uh, those people that were with us that if you're listening in, uh, regardless of whether you're getting us live or you're listening on the podcast, click the like, click the subscribe, click the follow button. Uh, if you listen both and I'm meeting a lot of people who are kind of hybrid, they catch a little bit of the show, then they might listen later on, on Apple podcasts. The best thing you can do to help us to get this message out, especially seems like the

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[01:30:41] If you're looking to digitally transform, whether you're never have had those types of systems in your business or you're not getting the results you need for the ones you have, please reach out. We'd love to talk to you. And until, wait, stop. I was going to say until next week, we're not here next week. Next week is July. Okay. All right. So we're coming back the week. I'm doing the show solo on the fourth. If you choose to, that's fine, but, or, or I will be in a very different clothes and,

[01:31:10] uh, probably outside, but, uh, we could do something. I don't know. I don't know what Mrs. Brown would say, but, uh, you know what, based upon the fact that, that, uh, we both have to travel on Sunday, the 6th, we should not even remotely let anybody think that there's going to be a show. All right. Our wives, our families deserve a little bit more of our attention. Tom and I have to be in, uh, in Maryland for some meetings on Monday.

[01:31:37] So Taylor, any exciting plans for your family on the holiday coming up? Yeah, we're going to head up into the Rocky mountains and, uh, spend a few nights camping up there and then, uh, back for a neighborhood block party on the 4th. That's awesome. Camping with a nine month old. I'm looking forward to hearing about that down the road. That's great. It's going to be an experience. Yep. That's good. Hey, thank you again. We appreciate you being with us. All those that were here, whether you commented or we're just listening in, we're grateful for that.

[01:32:05] We'll wish everybody a fantastic weekend. Be kind, be safe and do good things. Thanks, Ken. Thanks so much. Thanks. 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.

[01:32:35] 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. 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.

[01:33:04] That's Lead Smart Technologies at leadsmarttech.com.