How Nearshoring, Digital Transformation, & AI Are Reshaping Distribution, with Guest David Gordon

[00:00:04] Welcome to Around the Horn in Wholesale Distribution, with Kevin Brown and Tom Burton. Sponsored each week by LeadSmart Technologies, Tom, Kevin and their guests review the news of the week and dive deep into the topics impacting manufacturers, wholesale distribution, independent sales agents, and the global wholesale supply chain. Whether it's M&A, SaaS and cloud computing, B2B e-commerce, or supply chain, we'll be able to get a little bit more.

[00:00:30] By chain issues, we peel back the onion with our guests into the topics that impact your business the most. Gents, how are you? Good to see you both. Doing well, thanks. Fantastic. Well, I'm going to kind of dive in and we'll get into the news, but David, really appreciate you joining us. It's your second time with us, I think. We probably need to get this a little more organized and get your wisdom with us.

[00:00:55] I put a note out to my LinkedIn audience just a bit ago. I called you the illustrious, so that you were joining us this morning, the illustrious David Gordon. So the pressure is on. The pressure is big. I'm getting concerned. Very good. I love my agent about this. Great. Yeah. Well, I think we were just talking about her a few minutes ago. She was with her Amazon cart, right? Exactly. Very good. Very good. My bosses.

[00:01:23] I think we're all aware of who our bosses are. Yeah. So those of us that have one of these things on our fingers. So, good. Hey, you know what? Tom, just check Will's comment there. You know, you don't have to share it, but he was dancing along with me. So that's good. That's good. Good morning to Bob as well. Yeah, Bob. And yeah, if anybody else is out there and would like to comment on Kevin's dancing, please do so.

[00:01:51] Let's make sure that that is not the highlight of today's show. So before we drag that out too much longer, let me kind of dive in and do a little bit of housekeeping that we do every week. I'm Kevin Brown. I'm here with my lifelong friend and business partner, Tom Burton. We're joined by David Gordon today, our good friend, and we're going to talk about David and his business and the expertise that he brings to wholesale distribution in just a moment. But we get together every Friday morning.

[00:02:17] We're live on LinkedIn, LinkedIn Live, YouTube Live, and Facebook Live. Later in the day, John and Lily pulled their work together. The people are working behind the scenes for us and our admin support and our producer and editor, and they bring all of this data together and they get it out on all the podcast formats around the world. So whether you listen on Spotify or Apple or any of the other podcast formats later in the day today, that will be available to you.

[00:02:46] What do we do while we're here? Well, we bring all the news of the week together. We look at the economy, the supply chain issues out there, mergers and acquisitions, sales and marketing, AI, technology, cybersecurity. We look at the news that's going on within the industries of wholesale distribution and manufacturing. We take all that news together, put it into a newsletter we call around the horn in wholesale distribution and manufacturing that goes out to about 10,000, 10,000, 10,500 or so people each week.

[00:03:14] And we go through those articles and we try and break those down or, as we say, sometimes peel back the onion on that story, finding the story behind the story and bring its relevance to wholesale distribution and manufacturing to our audience. Again, we're going to have a live show today. We'll be reviewing that newsletter. If you don't get the newsletter and if you would like to, just let us know. There's three simple ways to do it. If you're active on LinkedIn, you can just search around the horn and wholesale distribution podcast. The newsletter option will be there to sign up.

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[00:04:41] When you do that, let's other people see that that we're out there and we get to get this information in front of further and more people. So very helpful to us. Last but not least, we couldn't do this each week if we didn't have a sponsorship. Most podcasts and live shows are sponsored by many different companies week after week. But we do the same thing week after week as well. And we're sponsored by the company that Tom and I work for, Lead Smart Technologies. What we've developed at Lead Smart is an AI enabled CRM and customer intelligence platform.

[00:05:11] Very different than historical CRM and customer intelligence tools being a platform. The tools there can be moved throughout your entire organization. So it's not just a revenue side of your business or sales and marketing side, but the platform can be used across your business. We take data that's siloed from around organizations. We see data in ERP systems, marketing automation systems, e-commerce systems, data lakes, other forms.

[00:05:36] We bring all that data together into one single platform where we can use AI tools and other types of tools to evaluate that and help make smart decisions by giving actionable insights and alerts to sales and marketing teams and others in the organization to uncover growth opportunities and even potentially identify risks to the business as well. So if your business is working on digital transformation, you're trying to find a way to get that silo data together in a certain place

[00:06:03] to get actionable insights and revenue growth within your company, we'd love to talk to you. Again, hello at Lead Smart Tech. It's a great way to catch us. So Tom, David, did I miss anything? No, I feel very well informed. Yeah. So go ahead. I just wanted to say welcome and good morning to Paul and Ted. Mr. Judge is with us, Mark. So thank you all for checking in. I'm always. The pressure is really on now. We've got some, we've got some.

[00:06:33] It'd be interesting to see what word they use afterwards. Yeah. If you're not illustrious, what are we going to end up with? Well, Ted has translated that into illustrious. That's right. And with us, indeed. So illustrious, indeed. So I think Ted agrees with me in the post that I made out there about you being with us. And anytime Dan Judge is with us, that's going to be a good day. Dan's one of my heroes out there. So it's always good to have him.

[00:07:01] Mark is calling in from the UK. So Mark, I just love it when he's here with us because I just picture him in the UK because it's evening time with a gin and tonic. You know, happy hour somewhere. So there you go. Or five o'clock. Yeah. That's why I was dancing was to, you know, really make that mark. It's exactly right. Well, if you're sitting back with a gin and tonic in the UK and you want to see some knucklehead in California dance, why not tune into the podcast? That's right. All right.

[00:07:31] Well, hey, before we dive into the news, let's talk about you, Mr. Gordon. Will you fill us in on your company and your background and history and what you do to help distribution? Well, we've got a lot of different things going on. The core business is Channel Marketing Group, as you guys know. So we're consulting with manufacturers, distributors, and reps in the construction and industrial trades. Do a lot in electrical and HVAC across those three boards in the areas of strategy, marketing, and market research.

[00:08:01] So we've got all sorts of client things going on right now, everything from some M&A stuff that we're involved in to customer satisfaction to e-commerce to strategy development. So just a wide array of activities for different types. And as you know, we also publish Electrical Trends, which we've done for 18 and a half years now. Wow. So 2,000 articles on that. Wow. Yeah.

[00:08:29] And it's amazing how when I started, it was kind of as a lark, really to be a self-controlled communications vehicle. vehicle. And I was just at NAD this past week and was sitting next to someone and we got introduced and she said, I know you from Electrical Trends. Isn't that great? And I said, Heather, I've been trying to follow up with you and get a meeting on the CMG side and I know these six people in your company.

[00:08:57] So it becomes a way. So, and then we launched HVACR Trends about three years ago for the HVAC space. And I've got a digital publication in the lighting space called US Lighting Trends that has 29,000 people on it. Wow. And then we just launched a site, ecommerce4distributors.com. Oh. On behalf of a client and that's going to have some other information on ecommerce.

[00:09:27] And we'll get some other things coming up in the next couple of weeks that we'll be launching. Well, we, before we dive even in a little bit further to that, we're getting some great comments about people that are fans of yours. My friend Paul Kennedy says that he chatted with you earlier this week and he says, I'm smarter for it. So if you made, if you made Paul Kennedy smarter, imagine what you could do for me. Ah, you know. You work the other way. It's interesting.

[00:09:53] I was at the NEMRA conference earlier this month and had a presentation, two presentations there. One was manufacturer of the future, which is manufacturer of rep relationships. Another was rep of the future. We do that for NEMRA looking out to 2020 to 2030. But I had a slide in there based upon some information I'd gotten from some guy who reached

[00:10:20] out, said, take this little test to see if you have ADHD. So I took it. He comes back. Oh, you've got entrepreneurial ADHD. Are you surprised? I responded. Well, I'm a consultant. I usually run eight to 12 clients. I'm running five different websites. Does that sound like ADHD or ADXD? Right. Yeah. I completely, completely understand that. In fact, I'd love to see.

[00:10:49] We're entrepreneurs by definition, right? Yeah. Very, very good. Good. So that NEMRA that you were talking about, that's a National Electrical Manufacturers Reps Association, correct? Correct. Yes. Yep. Great. So I always love when you share stuff about that because I was a manufacturer's rep for many years in the industrial segment in my earlier part of my career. So that's great. So, David, how do people get in touch with you if they want to get those newsletters?

[00:11:13] And besides connecting with you on LinkedIn, which is a great thing to do, how else would they do that? Connect on LinkedIn. They can go to electricaltrends.com to subscribe or HVACRtrends.com to subscribe or email me at dgordon at channelmkt.com. There we go. There's our ad for the day and that's important. We try and feature some of your articles here and there and I try and read, I get all of

[00:11:43] the newsletters. So in fact, I shouldn't say that. I need to sign up for the e-commerce newsletter because I wasn't aware of that one. So we'll get that one going as well. So Mr. Burton, anything to add before we dive in? I think we need to be ready to dive. Let's do it. Let's do it. So we talk about economy and supply chain is the first segment of the newsletter. And again, if you're listening on the podcast and not seeing our screen, we have the newsletter open that we publish each week. U.S. import prices rise moderately in January, an article from Reuters.

[00:12:12] Gentlemen, either of you have any initial thoughts on that one? Unfortunately, it was kind of expected. If you look between fuel and just go to the grocery store, everything in food, try buying produce that doesn't come from south of the border. It's all gone higher. Well, you know, as we looked at some of those numbers and some of them to be expected as discussed, you know, they talked a lot about the petroleum side of things.

[00:12:41] And I think, you know, it got me thinking about it as I'd looked at the article yesterday and looked at it again this morning. And I think, you know, most people or many people, if not most, when they think petroleum prices, they think putting gas in their car. But probably the bigger factor of that is, you know, anything you touch that's plastic is made from petroleum products, right?

[00:13:08] So whether it's the microphone in front of any of us or whatever it might be in that setting, the things in our garage that are plastic, whether they're rotationally molded plastics, injection molded, those all take two things, right? They take the petroleum products and the pellets that are driven by the same prices that we see at the pump. And they take the natural gas that this article describes as well to me.

[00:13:35] So when we start seeing those petroleum prices rise, then we have the other implications of the economy right now as well, puts us in a difficult spot because so much of what we touch every day is tied to the plastic side of things. Yeah. Well, it's interesting you mentioned the natural gas. And obviously, we export a lot of natural gas versus the alternative. But I was on a call yesterday relative to data centers.

[00:13:59] And a lot of data centers now, a challenge with expanding data centers. And there's $300 to $500 billion worth of data center work that's been announced so far. Big challenge is getting power to them. But the price of natural gas, I think they said per megawatt, for power in the data centers has gone up by about a third in the past year.

[00:14:29] Probably about $2.25. I think they said from like $2.25 to like $3.25. Maybe it's not per megawatt, but they add that type of... And they see that getting over $5, which is why they're looking at renewables and different types of nuclear to power data centers in the future. Well, that's not the structure. Right. So that's going to tie to a much broader discussion.

[00:14:58] We're going to talk a little bit, surprisingly enough, we're going to talk a little bit about AI later in the day. And we've got to have the data centers. We've got to have the chips that are running that are taking that side of power. And listening to a couple of experts in the past on the AI side of the world is talking even about the idea of needing fusion to power some of these things because we can't keep doing what we're trying to do.

[00:15:23] And the idea of makes great sense that potentially we can solve cancer and other types of medical problems and so forth based upon the data that's going to be pumped into those things from research and studies and whatever it might be. But if we can't power those chips to do that learning, and the more data that we're plugging in, the more power it takes, we're going to have to get those places powered properly.

[00:15:48] So, you know, I'm thinking ahead right on this next article where it talks about inflation warning signs mount. And I think this is interesting is what we were just talking about. Everyone's talking about tariffs, right? Inflation equals blame tariffs. But clearly there's a bit more to the equation than just tariffs. And we talked about this last week, right? About when we were deciding, well, when does the next interest rate cut going to be?

[00:16:16] And I think the minutes came out this week and they were talking about, well, we got to watch and see what the tariffs happen before we make any decisions on that. But clearly there's other variables like we just talked about here, fuel and other factors that are going to determine the inflationary factor. And this next article, again, they're just talking in general about the fact that the warning signs are mounting, although they were focusing predominantly on the tariff side of things.

[00:16:44] I think that's interesting, Tom, from that standpoint. So jumping ahead, this is an article from Axios. It's inflation warning signs mount. And they talked about, you know, just the initial quote, Trump administration of the Federal Reserve face a headwind in securing a return to low inflation. Concerns have escalated in the last few weeks as the president's threatened tariffs on a variety of U.S. trading partners.

[00:17:11] And it talks about the bond prices and some of the implications of all this. Bond prices now imply 2.7 annual consumer price index inflation for up to five years. That really surprised me for how long that that was suggesting that. And then it says the only time five-year break-evens have been higher in a data series that dates to 2003, we're during the peak of the 2022 inflation surge.

[00:17:36] So the bond side of this, and I don't proclaim to be a bond expert for a second, but Tom, you often talk about that, but this is pretty profound. Yeah, I mean, you'd strip it all away, right? They're basically saying, and David, are you hearing the same sentiment as you're out there, but are people preparing for higher inflation for longer periods? And I think it's going to be a way of life for the next few years.

[00:18:06] The higher inflation, yes, they're kind of expecting. You know, I think some of this is going to play into what's going to happen on the workforce. You know, especially as we change the whole issue of immigration or the migration issues, and you're going to have all these government employees who are being laid off. And are they going to want to go into certain types of environments? You know, the tariffs you want to bring back industrial? Sorry.

[00:18:36] So these people who are just laid off from the IRS, are they going to go work in industrial facilities? So labor costs. You look in the trades, there's not enough bodies. So what happens to the labor rate for those things? Right. That type of construction costs and things like that. So it's all going to end up building. But I think the other part that plays into the Fed issues is you don't know what's going to go on

[00:19:03] on a daily basis on what's even going to happen on the tariffs. Hey, there's going to be another country and another thing. And how long will that be? So how do you make longer term policy? How do you make longer term decisions? That's a great point. I was getting ready this morning and listening to CNBC. I'm looking over here to the side because I've got a picture that I took.

[00:19:28] Um, the, uh, Atlanta Fed president, Raphael Bostic said, Tom, you'll love this from some of our discussions over the last couple of years. Pervasive ambiguity calls for caution and humility. Right. So there's one comment from, from, uh, Atlanta Fed president. And then this is a same, same discussion that they had is, uh, Stephen Davis, a economist

[00:19:54] at Stanford says high levels of policy uncertainty and encourage businesses to cut or postpone investment and hiring as they wait for the operating environment to become less risky and the rules of the game to become less murky. And I think that last part of that sentence was rules of the game become less murky because when you don't know what's, what's next and you're still trying to figure this stuff out, makes it hard to make big, big decisions. Right. Creates paralysis. Yeah.

[00:20:22] And businesses want certainty. Yep. You know, it's even, if you go back to the tariffs that we had in 2018, if they said that those tariffs are going to be there for at least 10 years, businesses would be able to make decisions. Yeah. And on the electrical side, uh, Deborah Phillips from NEMA shared some data that in the electrical

[00:20:47] industry back in 2018, 32% of material came in from China. Now it's down to about 19%. Yeah. But back then, if it was said that it was going to be this long, if not longer, would more companies have been proactive in making decisions? It's not that that business has necessarily come here because a lot of Chinese companies

[00:21:15] have even moved stuff to Thailand and Vietnam and things like that. Right. But it's sort of like when, uh, remember when Trump first came in and Obama came over had to go away? Does businesses want to think about changing their healthcare strategies every four years? No, it's almost like thinking about changing your ERP every four years. Yeah.

[00:21:40] I had somebody, had somebody tell me recently that, that they would rather have a spinal transplant for their whole spine than change their ERP. So I think that's an interesting, interesting point you make. I was talking to a industrial distributor. He was early last week and, uh, you know, in their company, they've been working on moving their supply chain out of China for the last couple of years. And they've done a pretty good job of that.

[00:22:08] Um, moving to Southeast Asia for, for some things and, um, India for some other things and Mexico for some things as well. I think we're just going to continue to see more and more of that. And those people that aren't doing that, I think, um, is if you're not doing that, you're probably missing the boat on some of these things. But the other side of that, those percentages and numbers you described, David, for me is kind of interesting because as you commented about Chinese manufacturers, even moving some

[00:22:36] stuff out is I think what we're seeing in Southeast Asia is you've got some Chinese manufacturers that are doing some final assembly or some things like that in Thailand or other parts of Southeast Asia and putting that stamp on it versus the Chinese stamp. And I think we're starting to see some of that going on in Mexico as well. Um, uh, a lot of that in Mexico. Yeah. I mean, there are entire industrial developments where the land was bought by the Chinese. Yep.

[00:23:07] Yep. Well, I, that's not Chinese government money involved. Well, that's exactly right. And when you, as you, we were, you were pointing out in our discussion before we even got started today about the Chinese government's ability to manipulate the currency, not just in, you know, as we're talking about tariffs, Tom made a great point in our discussion before we jumped live today is that, you know, the high likelihood of the Chinese government offsetting a lot of these.

[00:23:32] I had made the comment and talking to a distributor recently that said he's actually already proactively hearing from some suppliers in China that are backing off on some prices and adjusting some rebates to soften the blow on some of these things. But to Tom's point is, you know, does the Chinese government just get backstop all of that or, and then I think you made the comment about, do they just manipulate the currency? So interesting thoughts, Tom, anything further? You're, you're not, we're not able to hear you, Tom.

[00:24:03] How about now? Yeah. We'll, we'll Quinn told you last week to forget your microphone. Well, I think, I think it's like nine 20 in the morning, the microphone just decides to go out. It's, but, but I wanted to hit on one thing before we move here. And I, that term that you use from one of the fed things, what was it? Persistent ambiguity or something. We've been doing this podcast for what? A little over two years. Today's one 30 times.

[00:24:30] Have we, in the entire time that we've been doing this, have we ever had a period that wasn't ambiguous and wasn't uncertain? Well, that's, I mean, that's the new normal or that is the normal. It's not even the new normal. It is the normal. Right. I don't know that we're ever going to wait for a point where everything is going to settle down and there's going to be all this certainty and predictability. Well, there's nothing to suggest the stars are going to align. Yeah. And that's why I said, when we started on these topics, I said, Tom, you're going to love this,

[00:25:00] right? Because these statements, because we've been saying this to your point, right? And today's our 130th time of doing this. And it's funny, it makes me think as just as a side note, David, as you had commented about one of your newsletters doing it on a lark is here we are, you know, 130th episode today. And I think back all the time, I was telling this story yesterday to an association executive that, you know, I threw an idea out to Tom out, you know, two and a half years ago that

[00:25:29] said, Hey, you know, what if we put out a newsletter? Just, you know, try and support the industry and be some help with some thought leadership. And, and Tom was the one who said, Hey, well, you know what? LinkedIn's got this LinkedIn live thing. And now here we are in multiple countries every week. And, uh, I still scratch my head. How did that happen some days? So, uh, it's, uh, the larks do happen, but to Tom's point, I think we've used the term simmer and, you know, um, tepid.

[00:25:58] And so over and over again for the last couple of years, and that's a good point, Tom, about, uh, that is the, probably the new normal. Yeah. So I think I like the way Bob described it. Everyone's crystal ball is equally cloudy. Yeah. And I don't think that's going to change. So I don't think that you can just go into a holding pattern, right? Be because of that. It's like, how do you, and we're going to talk, I think some things as we go forward,

[00:26:22] how do you navigate on things that you can control versus trying to worry about all the things that you can't, but. Well, and I think even if we kind of hit the last part of the article in this section, it's from DC velocity.com. It talks about the articles, um, in their supply chain section. And it says, uh, uh, tariffs would accelerate change in global trade flows. And as I was looking at this article, it stood out to me was it, it just talks about all of

[00:26:50] these factors and we've got, you know, just from some of the folks who have made comments today, we have a lot of people on the distribution side of things. And, and it says geopolitical rivalries, alliances, and aspirations are renewing the global economy and the imposition of new tariffs on foreign imports by the U S will accelerate that process. This is from the Boston consulting group. But, you know, I think you even, you look at, you know, we have an administration now who

[00:27:17] is basically using business tactics or geopolitical accomplishments, right? And, and tariffs are, we've talked about this a number of times in the last month or so is that the tariffs is if you stop and take a step back is the tariffs aren't necessarily about the economy. Tariffs about wanting to are about wanting to accomplish other things. And, you know, I, I made this comment, uh, I think it was two weeks ago that said, you

[00:27:43] know, when we think about NAFTA and I think it's hard to look at NAFTA and David, I'd be real interested in your thoughts on, on this comment I'm going to make here. But if you look at NAFTA right now is I think we have to look at Mexico differently than we have historically looked at Canada, Mexico, U S Mexico. That's one issue of what's going on in Mexico with the Chinese influence and so forth. But really what the Chinese Mexico tariffs are tied to is strengthen the border, right? Or else.

[00:28:12] And that's going to keep immigration issues in play. And that's going to hopefully help with the fentanyl crisis, but that's being pressured and done on a geopolitical level through tariffs and pressuring other countries and other means to get them to do what we want to accomplish something. So I think what we've historically seen in this country is administered presidential administrations that have looked at wanting to negotiate things and lots of meetings and traveling around it, you know, gold plated conference tables all over the world.

[00:28:41] And this administration is saying, no, I don't know how to do it that way because I'm not a politician. I know how to do it from a business standpoint and I just squeeze you in different ways. Yeah. It's used as a negotiation tool. There was a presentation at the NAD Western by someone who was initially pitched as an economist really turned out to be more of a futurist who looked at the Southeast, Southwest

[00:29:07] and Northern Mexico as really calling it the way the future prosperity is really for the world. And so many companies from outside. David, where was that again? Where was that? Where are those locations? The U.S. Southeast, Southwest and Northern Mexico. Interesting. Okay. Because that's where growth is.

[00:29:36] That's where there's resources. That's where population is going. That's the areas that have really the growth that's happening. Companies from throughout the world want to do business within the U.S., but population and the growth is driving in those areas. That's where people are. And she called Mexico China with quality. So much of the U.S.

[00:30:06] companies have moved in there too and are automating the places and are adding education and things like that and raising the standard of living. And the quality of the workforce and the work ethic is better. Now, to Kevin's point about the tariffs is when you look at the tariffs, it's really border control for the illicit activities. Whether that be people issues. That be drug issues. That be criminal issues.

[00:30:37] That just have been allowed to percolate over the years. And no one knows how to really deal with it. I think that's exactly right. And just to Bob's comment that he made there, no, I wasn't suggesting for a second that we should not be viewing geopolitics through a business lens. I think you have to at some point.

[00:31:01] My point was more tied to the idea that people are used to more of a political aspect to try and accomplish things where we take years of meetings and conferences and events and so forth, as opposed to throwing the gauntlet down from a business standpoint. So I think that's great. It's interesting. It's not really from a political. I don't think that they know how to do it from a diplomatic. Yeah. Okay. That's probably the better aspect. I think that's fantastic. Well said.

[00:31:31] Yeah. Absolutely. Diplomacy is not necessarily a strength of the current administration. No. How's that? It wasn't when he negotiated the first real estate project. That's right. Yep. So anyways, I think that's a real good view of all of this. I want to just hit on the Mexico thing, David, because you really reinforced some of the things I've been saying.

[00:31:56] I've been saying for quite some time is if you're in just in business in general and specifically in manufacturing, wholesale distribution, I've been pounding on this as Mexico, Mexico, Mexico, Mexico, Mexico.

[00:32:41] Pay attention to Mexico. 60, 70 miles from the Mexican border. And in the years that I was a manufacturer's rep, I crossed the border all the time for U.S. manufacturers calling them a Kiliador plants and Mexican distribution. That is just now it's settled for a number of years, that whole Kiliador region. But it's now booming in and it's not just that border area. There's parts in the central part of Mexico where there's whole new airports being built.

[00:33:11] There's literally, and I don't see this happening, but in Baja, California, there's been conversation off and on for years and years and years about putting a canal through there that would go or at least a larger port with a rail line that gets across to go to the Google Maps now says the Gulf of America to get across to that. So interesting kind of play.

[00:33:35] I just think that Mexico, and I think you reinforced it with what you just commented about, Southeast, Southwest, U.S. and Northern Mexico. It's almost like it's going to become its own economy. So good stuff. Tom, your mic broken or am I just talking too much? I think, can you hear me? If you can. That answers your question. Okay. He's a great wife, Kevin. Yeah. Yeah, well done. Well done. Okay.

[00:34:05] So that's good. Well, Ted commented, nearshoring is the most talked about term with his relationships in Mexico. And it couldn't be more true, right? And then I think we're even going to see the onshoring growing as well. It'll be interesting over the next couple of years to watch the statistics related to nearshoring and onshoring because I'm really intrigued about, this shows you how boring my life is.

[00:34:32] I'm really intrigued by the balance that we may see between nearshoring and onshoring. Whether we're doing something in Mexico or Latin America somewhere versus in this country. So we'll see how that plays out. But I think a part of that, though, Kevin, I think the nearshoring is going to be things that are more labor intensive. The onshore is going to end up being more robotic driven. Yeah, I think that's right.

[00:35:01] It's probably more capital intensive things and so forth. Well, part of it's also people's willingness to work in some of those environments. Yeah. Well, you commented on the trades earlier, right? I don't think we're going to see a laid off FDA worker become a welder that somebody made a comment earlier that they're going to go become a welder. So I think that's an interesting spot. Tom, any thoughts before we jump ahead? Let's move on. Yep. Very good.

[00:35:26] So in our manufacturing and distribution section, we can hit this really quick, but there's an article there about a manufacturing and plumbing and pipe valve and fitting segment who is already published. You know, the article actually shows and this is from impomag.com. And they were actually showing a price increase and they had a screenshot of one segment of their plumbing related items that are 10% across the board increases already coming out.

[00:35:53] And I think that's and David, you would probably have a lot more insight to this than I do. Just because of your conversations day in and day out. And I've not asked enough questions about this, but, you know, most people are still sitting on, you know, middle of 2024, later 2024 inventories.

[00:36:15] So publishing a full price increase right off the bat right now, I could, to me, it seemed like it would make more sense to let maybe make some announcements that it's coming. We don't know what it's going to be kind of laying the groundwork to it because of incoming shipments that are, let's say, in the last two weeks, manufactured goods are now going to have those tariffs on it. But the stuff that's on a boat right now and the stuff that's in a warehouse right now wasn't subject to that. So that's kind of what ran through my mind.

[00:36:46] Well, usually the companies that come up with these type of announcements, they're basically telling you what they have left in their warehouse. Okay. Because this company is really an importer. It's not a distributor. Yep. Think of it, it's a manufacturer that... Manufacturing, not sure. It's really a master distributor, probably. And I've seen it in electrical companies saying, well, we're going to be increasing our price as of March 31st.

[00:37:16] Well, that's telling you what they got in their warehouse right now. Yeah. Yep. Very good. Good point. Tom, any thoughts on that before we jump ahead? Nope. Let's keep going. All right. So suppliers shift volumes to distributors with eyes on a European prize. It's an interesting article from Industrial Distribution. Any thoughts from you, gentlemen, before I chime in?

[00:37:37] I thought this is an article that if I'm a distributor, they should read to reinforce back to their manufacturers why distributors are important versus manufacturers selling direct. I mean, the European model has always been different. It reinforces in Europe that these manufacturers are also probably cutting costs. Yeah. Well, it's so I think that part of this is tying to selling direct and selling to distribution.

[00:38:05] This is an article, again, from industrialdistribution.com or indist.com. And it talks about strategic shifts within the European market. But it was interesting. They were talking specifically about the MRO or the maintenance, repair, and operating supply market. I was shocked at some of the statistics, though, with that in them talking about the European MRO market being larger than the U.S.

[00:38:36] And it shocked me, I guess, is all I can say. How could that be? Just the statistics, it shares. I'll just quote this. Although Europe is the larger MRO consumer, the U.S. is a more mature market, a trait reflected in its consolidation, which is a little bit to David's point earlier. It says in the U.S., the main MRO providers have a combined 30 percent market share. While in Europe, the market is extremely fragmented.

[00:39:04] The top five players account for less than 8 percent of the market. In fact, the market leader, Rubik's, makes up just 3 percent of the market. So I think that comparison there would be that 3 percent that they might have of that market if you were to compare that to a Granger in the MRO market in the U.S. or some of the other major MRO players, I think, is the consistency there. Would Amazon have a factor on that in the U.S.? I mean, Amazon has taken a lot of the MRO type of opportunity, right?

[00:39:35] Yeah, correct. Correct. But I think it's just what they're describing. Yes. But I think what they're describing is it's so much more fragmented in Europe, right? Than it is. There's no gorillas. There's no gorillas. You know, a lot of small companies, family-owned companies like that in Europe, too. You don't have as many manufacturing hubs in a lot of Europe. So it may just be the way the dynamics of the marketplace itself.

[00:40:06] Well, and I think Bob's telling us here that he may not even agree with these statistics because he says 68.7 percent of all statistics are inaccurate. That's a good one. I like that. So I thought this was an interesting article to kind of make those comparisons. And, you know, I think when you look at the EU like this, it's definitely an opportunity.

[00:40:32] And it's certainly not as mature of a market as we have here, as it was discussing. So very good. All right. Tom, where are you on next? You want to talk about digital? We're still in the same section here. And distributors sales. Let me try that again. Distributors growth sales nearly half a trillion despite 2024 headwinds.

[00:40:54] So what it's saying basically in this article is that, and this is from Digital Commerce 360, despite all the uncertainty and everything that we've been talking about here, 400,000 plus, which I thought was a gigantic number. Yep. U.S. Distributors saw some growth in 2024. So what do you think about 400,000? Does that sound even remotely possible? David, that brings up an interesting point.

[00:41:22] We battle about this and say battle about it, scratch our heads about it all the time. Just as we, you know, the company that Tom and I run, LeadSmart, you know, our largest customers are distributors just because they have a lot more people than manufacturers in that setting, right? But what's your view on the statistics of how many wholesale distributors there are in the U.S.? Quite frankly, I haven't looked at from a macro number like that because you'd be looking at every single industry.

[00:41:50] I think there are 400,000 distributors across. Who knows? Yeah, it's the reason about, you know, the small little food distributor who's only doing Peruvian food and employs five people. You know, why I picked Peruvian food, forgive me. But you know what I'm saying?

[00:42:16] Sometimes, you know, to Bob's point where he said the 67.8 or 68.7, numbers can lie and liars can use numbers. Is that 400,000? Is that 600,000? 100,000? I think the bigger issue is, you know, they're talking about growth. It's really channel shift inevitably with a lot of e-commerce.

[00:42:41] Is it really more sales that went into these businesses or that customers chose to do business electronically? Unpack that a little more for us if you would. There's still only X amount of dollars being per. So where did it go? How was it spent? It just got transacted electronically versus someone calling or faxing or sending it in another way.

[00:43:12] Okay. So it's an order. The transaction is just consummated somewhat differently. Now, if you have e-commerce capabilities, that gives you a greater propensity to forget in that business. But the overall pie of what went through distribution didn't change. Just the order mix changed. So I think it's said here that the growth was half a trillion.

[00:43:42] I'm trying to look at the article here. But Tom, that's growth in an electronic channel versus growth for people coming to a counter. Okay. If you took it into the retail world, think of it as purchases online versus purchases through the mall. Sure. The mixture changed. So you're suggesting there's not growth. It's just a shift. Right.

[00:44:10] There's growth in the electronic just means that it's declined in non-electronic. Interesting. Okay. Okay. Yeah. A lot of statistics to sort through there. Yeah. I'm going to dive into that one a little bit deeper. What's interesting, though, I'm going to go back, though, and talk about what we discussed at the beginning. My question about the number of companies out there.

[00:44:35] I find it intriguing because you can almost find almost any statistic you're looking for related to that number. And I do agree with you wholeheartedly about the Peruvian purple potato distributor that's working out of their garage.

[00:44:58] I see that across every industry, right, is that there's people that are distributors, but they're one guy with some inventory that's selling on Amazon. But I think that's a – and it would be great is to figure out what that percentage is. But I've never seen – in fact, I'm going to – this is an article that our friend Mark Brohan, who was on the show with us a couple months ago, wrote.

[00:45:22] I'm going to reach out to Mark about that number because that 400,000 number is an interesting thing to see because I've never seen that before. I've seen the 200,000, 250,000 number many, many times. But what's interesting is even on the NAW's website, one place they reference 48,000 wholesale distributors in the U.S., and another part of their website references over 200,000.

[00:45:48] So I extrapolate that there's probably 100,000, 150,000 that have relevance.

[00:46:24] Yeah. Don't work on from that. Tom? No, I'm sorry. I didn't mean Tom. I wanted to rattle him a little bit, though. Good. So jumping into e-commerce and marketing article from Digital Commerce 360 again is – oh, listen, Kelly just shared – thank you, Kelly. She just shared an article with us. If you're with us live, you can see this or watch the recording.

[00:46:52] You'll see this, but if you're listening on the podcast, www.coherentmarketinsights.com and forward slash industry dash reports. You'll be able to find some data. And thank you, Kelly, for sharing that. I appreciate that. Kelly's a distribution industry veteran in Wisconsin. So I appreciate her sharing that with us. So, Tom, jumping ahead, 97% of shoppers abandon purchases due to inconvenience.

[00:47:19] A FedEx report talked about consumers abandoning purchases. I think this ties back into some of our broader discussions in the B2B market. Tom, you want to kick us off on that one? Yeah, well, we kind of touched on this a little bit before we started here. The question I have is it says 97% of consumers abandon purchases due to inconvenient shopping experience. So does that mean that they abandoned them completely?

[00:47:47] Or did they take their business elsewhere, as you might say, to find a more convenient experience and then actually make the transaction or the purchase in those areas? Obviously, the answer is probably in some cases yes, in some cases no. So, clearly, I'm sure there's money being left on the table. And, you know, actually, this is something, David, I'd love your opinion on. As I work with our customers more and more and we get more and more into their data and we use AI to do analysis,

[00:48:17] every day I'm seeing tremendous amounts of dollars that are either being left on the table or never got to the table at all. Right? Like opportunity, you know, we call it white space or whatever, but opportunity that it was like a blind spot, right? We didn't even know it existed or we didn't think that it existed or we didn't have enough insights or awareness to know to go look for it at that point. Right. Do you think, you know, I guess there's two questions for you here.

[00:48:45] One is, what's your take on this 97% but then related to that as it ties back to distribution, do you feel like we're leaving a lot of dollars on the table? I just personally believe that organic growth opportunities are really gigantic and have been kind of overlooked for a long time when you start talking about, you know, opportunities for growth in the industry. Well, let me unpack it two ways.

[00:49:11] One is I think that 97% number kind of relates to another article we have in here on PR versus publicity. Mm-hmm. Okay. You know, I think the 97% is, you know, we're just trying to get publicity because there's no way almost everyone who abandons a car was actually intending to purchase. That's a good point. Yeah.

[00:49:38] They may have found the product somewhere else at a different price. They may have put it in and decided not to. I can't tell you how many times I put something into a cart and decide not to buy it, shut down the site. Do I clear out the cart? No. I think so. That's why I think it's more hype than anything else. Well, I think that's an interesting point. You know, I included this article. This is, you know, they're talking about consumers here.

[00:50:04] But we talk constantly on our show about, you know, the B2B side of e-commerce. And the important part of this is why I included it, and I wanted to let both of you kind of go first here, is the idea that what they identified were important to consumers is translating over. And, David, I don't know if you've ever heard me share this before.

[00:50:26] One of my beliefs is we're in a gray area right now of specifically within the millennials that are in the marketplace, right? Because I think all of us here are probably, I don't want to insinuate your age, David, but I'm going to, I guess I will, that you're a baby boomer like Tom and I are at the tail end of that. I think that's right. What's that? We're Gen Xers. We're Gen Xers.

[00:50:55] And the, from that side of things. But as we start looking about, you know, I think the number is up over 70% now of B2B buyers are millennials. And that's just going to continue to that phase from that standpoint. Their issues and consumers' issues are pretty much the same, right?

[00:51:16] They're bringing that world of, I want a B2B buying experience to be like my B2C buying experience because I do it from a mobile device or I do it from wherever is convenient for me. And placing orders should not require me to be at my desk at the plant, right? In that setting. So I think when I was looking at this article, you know, they talked about delivery issues, shipping issues, real-time tracking, and a few other expectations.

[00:51:44] And the point being with this is the, Tom, Will's just telling us Gen X is 65 to 80. Oh, good. So since I was born in 79, I just make it. That's good. That's good to know. Well, it's funny is I was born in 64 and you're older than I am. Yeah, well, you know. Remember about statistics, right? What are you saying? Yeah, that's right. Bob told us earlier that. Mine don't matter, not mine. Well, as I say all the time, right?

[00:52:13] My driver's license says I'm 60. My mind thinks I'm 35. My wife says I act like I'm 12, but my knees and my ankles think I fought the Civil War. So that's my life at the moment. But I think the reason that we're talking about this today is no question, no ifs, ands, or buts about the importance of wholesale distribution is in a world that we have to be thinking about our buyer differently than we've historically thought about them.

[00:52:43] They want that experience as I might send a guy to buy at your counter. I might want it delivered. And I might want to call you on the phone or I might want to see a salesperson. And we had an article last week that said 2025's trending is that in the latter part of 2024 was that people are more interested in seeing salespeople than they had previously. I'm assuming that's for high-tech related. I won't say high-tech, but more sophisticated products versus a consumable.

[00:53:13] But we need to be thinking about what does that buyer want? Ian Heller has said on this show before from Distribution Strategy, we have to meet the buyer where they're at. And where they're at right now is that they're expecting more of a consumer-like experience in a B2B world. Well, you need to be where they are at when they want to be there. Because they may change each interaction depending upon what they're buying. Whether that's face-to-face, whether that's text, whether that's online.

[00:53:43] It's all going to change. We're actually doing some research for a client right now on that. And we wrote about that recently. If you're going to do it on the web, though, they do want more of that consumer experience. However, they also want that experience tailored to the distribution mentality. And what I mean by that is they expect their price, not like in the consumer world where you have the same price essentially.

[00:54:13] You also have credit being handled totally different because not everyone's going to just put it on a credit card because of dollar values and company policies and terms and things like that. So there are some nuances that the business customer understands when they're interacting with certain types of people, meaning an existing supplier. Gotcha.

[00:54:40] To your point, for the article's purpose, totally agree with you. Where their number gets off is the whole issue of they're missing the issue of intent. Ah, okay. Yeah, I think you're right, right? The shopping cart becomes like a virtual storage area for things. It's like you're kind of like going into your garage and seeing all this kind of stuff piled up. You go into your cart and see all this stuff piled up that you think you may be interested in.

[00:55:09] But to your point, David, that's very different than intent. Exactly. Or even like on Best Buy, sometimes you can't find out the price until you put it into the cart. Yeah, okay. Because of MSRP rules and things like that. Yeah. So that's an abandoned cart? Right. Good point. Good. All right, Tom, let's kind of jump ahead.

[00:55:36] We're going to fly into a little bit ahead of ourselves. We had a couple other articles about, Tom, to you slide back just a touch, right? Good article about generative AI amongst chief marketing officers. It's some research from Gartner. Again, I missed this earlier, but if you're listening on the podcast and you're not with us live today, you're not seeing the newsletter that's there, we publish this newsletter every week. If you would like to get that newsletter, just reach out to us.

[00:56:04] If you're on LinkedIn, just search either Lead Smart Technologies or around the Horn and Wholesale distribution. You can sign up there. And then you can simply send us an email at hello at leadsmarttech.com. We'll get you the newsletter out. So then there is a marketing professionals or marketingprofs.com article about the difference between PR and publicity. We're not going to jump into that, but that was pretty good.

[00:56:28] And then we're going to go right into our segment on AI technology and cybersecurity. Can you slide us down there, Tom? I believe I can. There you go. Quantum stocks climb as Microsoft's chip sparks debate, an article from Reuters. We have a smartindustry.com article after that about the promise of quantum computing and manufacturing.

[00:56:54] So I thought in the time that we have left today, I wanted to kind of get into some of these topics about AI and how we're seeing that moving. And David, some of your thoughts on those things that you're seeing in the electrical and HVAC markets that you're so focused, so closely focused on. Tom, you want to kind of lead us off on what's the difference between regular computing and quantum computing? Yeah, I mean, I think, you know, look, Claire, we can get into the, okay, Bob will be signing off because we're getting into the AI discussions.

[00:57:22] And I've noticed we've had a few people leave for meetings. So we're going to have to make sure that we let everybody know that this is like turning into a three-hour show and, you know, mark your calendar off. You know, don't schedule any meetings during the right. That's right. Well, you know, I was talking to my wife about this last week. Because she listened to part of the show before a business call she had. And she said, you know, you guys are going longer these days.

[00:57:46] And I said, you know, when industry leaders stop commenting on things after a certain period of time. I mean, last week we were an hour and 20 minutes and we still had some dedicated folks listening in. So we kept talking. Mark says AI doesn't exist. It's David behind a laptop. Am I the artificial or the intelligence? Yeah. I'm glad that we've nailed that down.

[00:58:16] Yeah. Well, I've been accused of that many times is that any intelligence that I have is artificial. All right, Tom. Talk about Tom. And David, by the way, I don't know if you're aware of this. But Tom is, to my knowledge of the group of us here, he's the only computer scientist by education here. So we're going to let him lead us off on this and we can talk about the broader scope. We didn't study a lot of quantum computing back in 19, whatever it was. I thought you said you were born in 79. Yeah.

[00:58:44] So that would have been like in the 90s, I guess. Yeah. You should have had some of that. Talk about delusion, right? But so anyway, I mean, look, the simple answer for quantum computing is it's a way of computing. You know, computing is, when you think about it, is binary one and zero, one and zero, one and zero. Computing has been that way since I was in college back in the 80s. And it hasn't changed much.

[00:59:10] Quantum computing basically takes a different approach that doesn't rely on ones and zeros, but basically allows things to be one and zero at the same time and really opens up the door to an order of magnitude increase in computing power, especially related to things that require mathematical analysis and deep sort of, you know, research and all of those kinds of stuff and so forth.

[00:59:38] And we've heard a lot, and I think I'm glad we're talking about this because I do believe that this is going to be a much more in the news here over the next, you know, during the course of the year is, you know, quantum computing has been more of an idea than a practical reality. And with Microsoft releasing this chip and in showing that it, I guess there's some potential that this is now turning more in.

[01:00:06] And I know Google and other competitors are also researching and spending time in this area, that maybe this could become more of a reality, a practical reality sooner than later. And I guess just to say, well, so what, why does, why should we care? What's the, I mean, there are some things, you know, you always talk about Kevin curing cancer, right?

[01:00:29] AI curing cancer or, you know, deep math problems, or even looking at, you know, even from a distribution standpoint, all the different potential routes and scenarios and things like that. It could take things that literally could take a hundred years to compute and, and compute that in an hour or a few minutes, right? So we're talking like orders of magnitude improvement in computational power. Now you start applying that potentially to AI, right? Which we've talked a lot about.

[01:00:59] And, you know, you hear the word AGI or artificial general intelligence or artificial super intelligence. You combine these potential of these much higher computing power. You can start to see that things start to go to another level. Obviously, again, still lots of challenges, very difficult to do. And these chips have to be used in very, very cold environments.

[01:01:21] They have to be, I don't remember it, I think it said in the article, but like literally down in like, you know, sub freezing temperatures, it has to be run in these environments. So again, there's a lot of things that make it maybe less than, less than practical. But anyway, lots of conversation about it. We'll see if this starts to materialize as a more practical thing.

[01:01:45] One of the things that came out of that article was that Jensen Wong from NVIDIA had said that there were two decades away from that really happening and that, you know, the workhorse is really tied to AI right now. And with this chip coming out and some of the other things that have been being announced and being shown recently is that this is going to be much, much closer to have that working in a, in a,

[01:02:14] specifically as the next article we're going to talk about from smart industry is the promise of quantum computing and manufacturing. These things are much closer than we probably have thought about previously. And I think what's probably interesting is getting all in time. You could probably quote that this best is I'm assuming AI is helping us just get closer to quantum computing being a reality. It's, it's moving the ball, moving the ball down the field faster. Potentially.

[01:02:39] And I personally don't know is how much NVIDIA is investing in quantum computing compared to some of the other vendors that are out there. So his statement about it, oh, it's a long way away. Maybe again, something that's, you know, more in alignment with where they're headed. But yes, I'm sure there's a lot of, a lot of, right. It kind of feeds on itself as it goes forward there.

[01:03:03] Well, Microsoft said in a CNBC article that they could see 2030 is when they're going to stop being able to do something with this. But is that going to be kind of an early stage? Yeah. You know, alpha test, or is that something where they could see it being a commercial, you know, practically a commercial thing? Initial commercial. Okay. You know, specific applications, chemo.

[01:03:30] They talked about some chemicals, some pharmaceutical, potentially some military. Yeah. So that's, that ties to that, you know, the secondary article we have here, as I mentioned from Smart Industry. They're quoting a recent McKinsey report and said there's four specific sectors to David, to your point. Chemicals, life sciences, finances, and finance mobility are likely to see the earliest impact. It said it could gain up to $2 trillion in end user economic impact by 2035.

[01:03:59] So 2030, 2035, five to 10 years out, major, major impacts. But that's not multiple decades, which was the, you know, Jensen Wong's comment about that. But I think what's going to be interesting is, you know, is if we see that first, and this article talks about use cases in manufacturers, manufacturing. It talked a lot about data analytics and AI. It says, you know, just a simple quote, and it ties to, Tom, to kind of what you were describing is,

[01:04:27] quantum computers can process large amounts of data much faster, enabling quicker and more complex data analysis. The increased processing capability can lead to more accurate predictions and insights. So we're going to talk about in a minute, we're going to talk about digital twins. So if you can now process those digital twins or your AI decisions that you're being made are being made that much quicker, because of our ability to go through, it probably defines, I'm assuming, again, you know, David,

[01:04:55] you might have some research on this, but Tom, you might know from your background is, it talks about quantum algorithms in this article as well. I would assume algorithms are going to drastically change as well, because most algorithms now are defined based upon our ability to run those algorithms. And if you can now have a quantum computer system that's, you know, managing those, those algorithms can grow exponentially too.

[01:05:21] Well, the big difference is, right, traditional computing algorithms, even with AI and everything else, are sequential, right? Things happen, you do this, you do this, you do this, you do this. You know, sequentially in quantum computing, that sequential aspect of it goes away, and things start happening in parallel or at the same time, which is what allows things to obviously move a lot faster and process a lot more data, a lot more efficiently. So where did you, go ahead, David.

[01:05:50] It's not me thinking, though, you know, they talk about, and Tom might have the wrong term, that it's out of like one qubit, and they go into three, and then they need to go to 10, and they got to go to 100 qubits. What's that do for storage size, for data centers, for power to generate all those? Yeah, it's interesting on the power. It's interesting on the power, because I did a little research into this.

[01:06:16] The power is not to power the computers themselves. It's the power to keep everything cool. Cool. Interesting. But it's not to scale based upon the number of those qubits that they start doing. That's right. That's right. And I haven't heard anything about, like, how much. I mean, I've even heard of some, like, data centers being put underwater into the ocean. Under the Antarctic? Yeah.

[01:06:43] Well, literally sunk at, like, 300 feet, if not deeper. Wow. Because of the cold part that they need to get to. So who knows what next version of science or some of these other areas are going to really be needed? And then how do people on the power side handle that? And what other type of equipment is needed?

[01:07:10] There's going to be a lot learning that's going to happen in the next 5, 10 years. Yeah, most quantum computers operate for, and again, I'm getting this off the internet, so this is subject to confirmation. But they're saying they have to operate close to near absolute zero, which is minus 273 Celsius.

[01:07:33] So I don't know if that's true or not, but the quote being is they need to be very, very cold for them to operate efficiently. Yep. So let's kind of bring this full circle because we're getting way geeky here. Is that... You're the one who put these articles in here. I mean, what did you expect? Well, some days it's my role to bring us back in line. All right. Fair enough. How's that?

[01:08:04] I'm going to just try to bring this back full circle too. And frankly, I've learned some things from this discussion and these articles. But we spend so much time on our show. David, you're publishing articles regularly about AI and so forth on your publications with electrical trends and HVAC trends and so forth about that as well.

[01:08:29] We're just scratching the surface of AI, right, in wholesale distribution. We're using it in tools like our CRM and customer intelligence solution to send alerts about customers who aren't buying things that they should be buying and quotes that are coming up to be closed and things like that. That's even some early stage AI. What we're talking about, this article in Smart Industry talks about optimization. I'm just going to share a few things here.

[01:08:56] It says, quantum computers will revolutionize many pieces of the supply chain from resource allocation to logistics and delivery. Now, we've been talking for the last 18 months or really two years plus now, I should say. If I took that sentence and read it again and said, instead of quantum, I say AI, computers will revolutionize many pieces of the supply chain. Now, we're just taking that to the next level.

[01:09:21] And it says one of the first problems that students are learning to tackle with quantum computing is the age-old traveling salesman dilemma. Bring this back to our dance. How do I get to these five stops and come back to my base of operations in the shortest time, right? Now, if you take that to the next level is I have – and there's companies that are working on this now. Folks like our friends at ORS.ai are working on some of these things right now from a standpoint that says,

[01:09:51] I've got these four containers on that ship, these two containers on another ship, this stuff coming on trucks from Mexico, and then I've got these other things planned that should be going on a truck to get to the port in Shanghai next week. Which of my warehouses do I need that in? And what percentage of that container needs to go to a different warehouse because it snowed in Dallas this week?

[01:10:19] And don't forget to add in the meteorological part of what the tidal waves are going to do. Right. So that we know if the ship is actually going to arrive on time. Right. And so that's a great point. And just to my comment earlier about it snowed in Dallas this week, but what's it supposed to be doing next week at the port of LA? Right. And now we can – we could, you know, go sit in a room and talk about some ideas we might have. But that's just ideas. Now we take – AI can already start working on those things.

[01:10:48] But now from a quantum computing standpoint is the manufacturer can tell you what you should be doing with it, and you can be analyzing those things. But it's literally we're going to be at a point in – if these articles we're talking about today are correct, in the next five to ten years, we're going to be doing that from our phone by talking to our phone. Right. And it assumes that all these manufacturing companies are going to upgrade their equipment. Sure.

[01:11:17] So that the production worker can have it go automatically from the MRP system right to the ERP system to all these things. But it also gets back then, Kevin, to that phrase about caution from the Fed. Yeah. True. Paralysis. So we're going to have people who don't do anything because they're waiting for the quantum to come.

[01:11:43] So they're not going to invest in the AI as the interim because it's going to be obsoleted in five and ten years. Well, I'm going to throw a wrench at that. Yeah, that's human intelligence. Yeah. But I don't think you can use quantum if you – I don't think you'll be able to use quantum if you haven't figured out how to use AI. But there will be people who mentally say, I'm not going to do it. I'll just jump to that. Yeah. It kind of gets to the issue – I have an issue with the word transformation for digital.

[01:12:13] Mm-hmm. Because transformation infers something happens like that. This is all evolutionary. Agreed. I couldn't agree more. You need to start doing things and you need to go along and you've got to do incrementalism. You don't always have to be on the cutting edge or the bleeding edge or the bleeding edge.

[01:12:36] You can be a fast follower and implement stuff that's proven and be very successful. Very good. Profitable. Yep. Well, and I know we need to move ahead here, but what is the common denominator between all of this that we've been talking about? AI, quantum computing, so far it's data. Data is the common denominator of all of those things.

[01:13:04] And I couldn't agree with you more, David, is I really would like to remove the word transformation out of the vocabulary because it sounds like I do something and then I'm done. And then I move on to the thing. And it is very evolutionary and incremental. But there are some fundamentals that can be put into place that you can build on as you go ahead. And really the data issue is cleaning up all the things that we had before. Yep. We didn't do it right.

[01:13:33] We didn't think through it and do it right the first time. Data was like sawdust, right? It could just be tossed away and not important. So. Anymore. All right, Kevin, where do you want to go next? I know we can't go up too often. We don't. We're kind of short on time, but I've really enjoyed this discussion. So there's a good article here from Industry Today about digital twins, the backbone of effective integration. But before we either you want to comment on that article at all before we jump ahead to our sales and M&A segment.

[01:14:03] You know, there's a lot. I mean that we could spend quite a bit of time on that. But the long story short, right, is and digital twin can be used outside of manufacturing. Absolutely. But how do I take something and replicate, you know, a physical thing, something I have physically in the physical world. It could be a sales process. It could be a marketing process. It could be manufacturing. It could be a business process. And I want to be able to replicate that and then be able to run through it and look at the what ifs and all of those things that are there.

[01:14:32] So obviously there's a lot. Maybe we'll leave the thing. Maybe we'll just add this article in again next week, talk about it a little further. That'd be a good idea. Yeah, we've got a number of articles in our sales and M&A segment. The AI teammate had to collaborate with artificial intelligence in sales. Again, if you don't get our newsletter, just reach out to us. Hello at leadsmarttech.com and we'll get that out to you so you can read these. There's an interesting one here and I don't want to spend any time on it because there's a great article in here.

[01:15:02] I'm going to talk about PE firms that I want to get to momentarily. But that was a previous article was talking about what 5 million cold calls reveal about selling in 2025. Now, we don't see as much cold calling in wholesale distribution as we do maybe in the consumer world. But inside sales are on the phone every day, all day. And customer service is on the phone inside. Excuse me, customer service is every day on the phone, all day, every day.

[01:15:32] And so this is some good ideas about templates and things that can be used to make that more efficient. So good article there. But I did want to, while we have a few last minutes, to talk about a comment from an article. Publication, they're pretty good. You know, I don't know. It's called Electrical Trends. But anyways, that's David's publication, Are All PE Firms Barbarians?

[01:15:57] So let's chat about that for a few minutes because I like that even the title is great. You guys want to dive in on that? Well, I'd like to ask David, are all PE firms barbarians? Well, you know where the term barbarian came from. But that's, you know, from the book Barbarians at the Gate. The guy who actually stimulated the thought process, Quinn Carlson presented at Hardy back in December.

[01:16:25] So he shared thoughts on a lot of the money that's sitting on the sidelines from PE firms that are looking at various industries. In the HVAC environment, you've got about half a dozen PE firms that have been active acquirers in rolling up. And there was actually an acquisition that was announced late last week, early this week.

[01:16:54] Republic companies who had been, shall we say, purchased or invested in by Raycliffe Partners. They went out and made their first bolt-on to a company called TF Earhart. It's in our scuttlebutt section announced as well. We're good friends with the folks at Republic. Yep. So, I mean, PE firms look to build platforms. There are PE firms that are looking to do something like that and build it and then flip.

[01:17:24] There are firms that take a long-term view. Buy and hold. Yeah. I mean, there's plenty of stuff that people like a KKR and a Blackstone have. People would be shocked how many companies in this country are owned by PE firms in the background. Mm-hmm. And you've got the other ones that, yeah, they come in and they slash and burn and cut costs and may or may not add to it and look to flip in two, three years.

[01:17:53] Typically, they'll go three to seven years. In electrical, we've had a couple of firms that were really good. There was a company that invested into one-source distributors years ago, bought 49%, let the existing ownership run it, and that business was eventually sold to Sonopart. Mm-hmm. Electric supplier, Tampa, supply chain equity partners came in. They acquired it.

[01:18:23] They made some bolt-ons. They invested. The company grew. Improved profitability. It flipped to Sonopart too. There's a couple of others that have bought mid-sized companies. But then you've got manufacturers who are like buy and hold or some of them, you know, they're there for three years. They grow the business using what I'll call OPM, other people's money. Mm-hmm. Danny DeVito said that, right?

[01:18:53] Yep. The challenge with some of these is none of these businesses are ever going to go public. The old days of PE buying something and the goal was to get on Wall Street really isn't there anymore. This, if you look at it, David, do you think that is because- Different levels that they sell to each other.

[01:19:16] David, do you think that the hesitancy or the lack of IPO is because of the IPO market? And because the IPO market has been so poor over the last few years, it's just they've kind of written it off. Or do you think if the IPO market picks up, which a lot of, there's a lot of speculation that it could, you would see more of that? I don't really think it's too much tied to the IPO side. Okay.

[01:19:44] Because a lot of these companies in the industries we're talking about aren't fast grow performers. If they went public, they'd really be cash flow companies and should really be dividend companies. Sure. Or Wesco and so forth, right? Right. You know, and Wesco stock has gone up well. But think of like a lot of these manufacturers. There, you know, there was a company, Thomas and Betts, which is now part of ABB.

[01:20:11] Years and years ago, and we'll put aside for those in the electrical industry, some of the legal issues they went through. Clyde Moore, who was the president, said, there's two ways to look at Wall Street. You either need to be a fast grow company and commit to 15% year over year growth to drive your stock price. Or you need to be a cash flow company. Always have a good dividend. Makes perfect sense.

[01:20:38] When you look at our industries that we're pretty much all playing in, they're cash flow businesses. They're growing 3% to 5% GDP, unless they're making acquisitions or some new product development, because of the types of businesses that they're in. Yeah. Yeah. Well, it's why you see all of the acquisitions from a Sona part, whoever it might be in that setting, right? Right. Is the ongoing, I'll buy additional cash flow. Right.

[01:21:08] And when you look at Wall Street nowadays, the days that I think we all grew up in where people invested the longer term through Wall Street, now it's how do you do trading? It's different than investing versus trading from that venue. So the PE firms, they've got so much money from pension firms and wealth managers and stuff like that. They don't need the public market, right?

[01:21:35] There's enough capital in their ecosystem to... To sell it to the next person up. That's right. Well, and I think so often right in these settings is, you know, we see this even, you know, while we talk about wholesale distribution and why we're here in the show. And it's my background, obviously, from my career. But, you know, Tom and I run a company that is in the technology world. And the multiples are different in acquisition.

[01:21:59] But so often in the technology world, just like in general, PE world is, if you're not a buy and hold, which I think there's fewer of those probably than the transactional ones, they already know the buyer. Right. They're next, they've got two, three, maybe five different PE firms that play in their space that are ready to pay a higher amount of money to reduce their amount of risk that goes with that.

[01:22:29] And they know who they're going to sell to next. And that might be the company that's, you know, I mean, I could even see some of these deals for potentially you're going to sell. I'm going to buy five, you know, electric companies like the Republic acquisition that we're just talking about. Right. I'm going to buy five of those, roll those up. And I know the three guys over here that are going to give me 5x on EBITDA. And when I do that, my return is this.

[01:22:56] And that next guy might be thinking, well, I'm going to put 30 of these together. And that maybe all maybe I will go public. But people have different ideas and different roles in that PE world. And to that point, I know a manufacturer that was recently sold from one PE firm to another.

[01:23:15] But one of the PE firms that was bidding on them went through that exact same scenario planning to say, all right, if we bought them and if we do this, this and this and we grow them to X through some other acquisitions, who's the next player? Well, and in theory. They haven't backed out of the deal. Yeah. Because they couldn't clearly identify who that next player was. So we're seeing that.

[01:23:41] We've also seen PE come in on manufacturer reps. Mm-hmm. Yep. Sure. So that's a. You've got the Osceola group in Florida that's doing that with some roll-ups and some rep agencies. Absolutely. Yeah. There's a couple of that. We're also seeing more ESOPs. Yeah. Well, I think that's pretty significant as well. I think in kind of wrapping this up is that the real idea behind this is if you're sitting on the side. And so not.

[01:24:10] I think that my takeaway is not all firms, not all PE firms are not barbarians. There is boatloads of money. I think the comment was trillion plus dollars on the sidelines. Mm-hmm. I would throw this out there, whether you're an electrical distributor, industrial distributor, pipe valve and fitting office products, whatever it is. If you're talking to PE, most PE conversations are going to suggest that you leave a few dollars on the table to participate in the next deal.

[01:24:38] The big question should be, then tell me who the next deal is going to be with and what does that look like? Because they probably have the roadmap, but they don't always share it. And also, if you're deciding to stay in, think of who you're selling to. Well, that was my point. Yeah. Not only from the exit part, though, Kevin. Right. The culture part. The culture part. The culture part. You can optimize your price if you're not caring who you sell to. Yep. But there are other people who are willing to take a little less.

[01:25:08] After a while, you're making so many hundreds of millions of dollars. Right. That you may care who you'll leave in your legacy or your people to. Very good. Agreed. Totally agree. So we need to wrap up. I think, in fact, I've got a phone call with a listener here shortly. But, Tom, we've got our people in leadership segment. We won't forget that. We also talk about our channels, channel leaders on the move. A couple of articles there from the newsletter. And then our industry scuttlebutt section.

[01:25:36] We talked already a little bit about that with Republic and T.F. Airheart. Hardy Heating and Air Conditioning Refrigeration Group. The Trade Association reported some 14.2% revenue increase in December for their members. Good news there. We're going to kind of, Tom, if you would just kind of scroll down to the end with our updates that we have with our upcoming events.

[01:26:01] The reason I mention that is we've got NEW is doing their March 12th AI for Distributor Summit. It's a virtual event through the National Association of Wholesalers and MDM are putting that on together. But then the end of March is the ISA Spring event in Nashville, Industrial Supply Association. And I'm jumping off to get on the phone with Brendan Breen, the CEO of ISA. I think he was with us. So is this one correct, the March 2nd to 5th? That doesn't... That is...

[01:26:31] It's a different group that somehow made it onto our list. So we'll get that fixed momentarily. Yeah. I just sent a request off for that. But the ISA Spring event is March 31st to April 2nd in Nashville. And so some good stuff coming up. You know, David, if you ever have any specific events that you think we should add to that, maybe let us know. So we're going to wrap up. David, I can't thank you enough for being with us. Always insightful. Will you join us again maybe later in the year?

[01:27:01] I will join whenever you'd like. I've enjoyed it. We've had a lot of fun. That was great. Hopefully we have a million people. And thank you to everybody who jumped in. Bob, Will, John, Mark, I mean, Kelly, Ted, all of these great comments today. It really makes the show that much better. That's great. That's fantastic. That's funny. I just got a text from Brendan that he's five minutes behind. So that is good for me as well. He's listening to the show.

[01:27:30] And he's like, God, this damn thing keeps running on and on and on. Very good. Well, Will, thank everybody for being with us again. I'm Kevin Brown. I'm here with our friend David Gordon, my business partner, Tom Burton. We do this every week. We always say if we're not on an airplane, a hospital, or a planned vacation, we're going to do our show. We hope you can join us again. As we mention all the time is if you like what you hear, click the like button, share the newsletter with your friends, forward and on to others.

[01:27:58] We get more and more good comments, which allows us to get even greater guests all the time. Our guests level seem to be rising. David, we appreciate it again of you being with us. So we'll wish everybody a great weekend. Be kind, be safe and do good things. Thanks, everyone. Have a good weekend. Thanks. Take care. We hope you enjoyed today's episode and our guests.

[01:28:25] Each week, we try our best to dig into the topics that are impacting your business. So please reach out to us and let us know how you think we can make the show better or topics you'd like for us to tackle or talk about more often. And even guests you'd like to see join us. We're looking forward to bringing you next week's session and hope that until then, you stay safe, stay focused and do great things.

[01:28:48] 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, LeadSmart Technologies and their manufacturing and wholesale distribution industry CRM customer intelligence and channel collaboration platform. That's LeadSmart Technologies at LeadSmartTech.com.