Inflation Metrics, Tariff Refunds, and AI Pricing Models with Guest Mark Gilham of Enable

[00:00:04] Welcome to Around the Horn in Wholesale Distribution Podcast with Kevin Brown and Tom Burton. Sponsored each week by Lead Smart Technologies, Tom, Kevin, and their guests review the news of the week and dive deep into the topics impacting manufacturers, wholesale distribution, independent sales agents, and the global wholesale supply chain. Whether it's M&A, SaaS and cloud computing, B2B e-commerce, or supply chain, we're going to be a big deal with the top of the world.

[00:00:30] By chain issues, we peel back the onion with our guests into the topics that impact your business the most. Good morning, good morning, good morning, good morning. Good morning. What's happening? Good afternoon to Mark. I was just going to say it's lunchtime for Mark, right? It is, yes. Two minutes into lunchtime.

[00:00:51] Yeah, well, and it just makes me think, you know, I think the first time you were with us on the show, you were here in the US, but we got to know you as a listener originally. When you were still in the UK. So we always used to joke about that. You're sitting back and listening to the show with a gin and tonic. You know, that sounded very British. Yes, absolutely. Yes. It's a gin and tonic for lunch today. Maybe. That's right. You could have just, that's right. It's five o'clock somewhere. That's right. Very good. Well, welcome everybody.

[00:01:21] I'm Kevin Brown. I'm here with my lifelong friend and business partner and co-host of our show, Tom Burton. And then we've got our good friend and guest today, Mark Gillum from Enable. Mark is, I think we met for the first time, didn't we, Mark, at an Industrial Supply Association event? Is that right? Yes. Yeah. Since then, we've had some lunches and a great dinner in Las Vegas late last year that was memorable for me.

[00:01:46] We had a nice evening chatting with our good friend, Pierre from Oblico and a bunch of other industry and technology people. And we snuck off for a nice dinner in Vegas. And Tom, all Tom's thinking about is the seafood towers and wine lists. I see another expense report. The, anyways, that was a fun night. I appreciate that. Enjoy it. But it's great to have you back with us, Mark.

[00:02:12] Before we kind of dive into the regular part of our show today, why don't you just tell us maybe a little bit about Enable and what you guys do there. But just as importantly, tell us about Mark. Yeah, sure. So hopefully Mark and Enable, they kind of come as a package because I was a client of Enables before working for them. My background is accounting. I spent a lot of years in the distribution space. Hits the, you know, the elevated heights of being a CFO.

[00:02:40] And moved over to software shortly thereafter. Where I spend most of my time with Enable now really focusing in on how businesses do trade together. So more in the B2B space, how are manufacturers and the distributors really trading together and trying to streamline and, you know, bring clarity to those operations.

[00:03:05] So really interesting space, especially at the moment because I think businesses have squeezed most things in their kind of, you know, their profit and loss account. But we operate often in the little gaps and we're still seeing some big opportunities there. So an AI is obviously challenging us as it is everybody else. So it's an exciting time. Good. You shared some things earlier.

[00:03:31] We'll build into the show later about some discussions you've been having related to that. You know, those small spaces add up pretty quick. I was kind of, I think I heard years and years ago that you find enough grains of sand, you'll have a sandcastle. And right. So you do that and we do quite a bit of that with what we do at LeadSmart as well. So you're originally from the UK now living in North Carolina, right? Correct. Yeah. So the summer is starting to come here.

[00:03:59] So yeah, this is when it was starting to pick up that southern accent. So yeah, I was wondering where that was. I will say y'all. Yeah. Very good. So you have a question for Mark, Kevin, before we move on. I think you said something that I think is very important. You know, we talk a lot about manufacturers and we talk about distributors, right? But what I heard you say is you spend a lot of time really understanding the interrelationship between those two.

[00:04:26] And how, you know, money and process and everything moves between those two kind of critical entities in the process. Did I get that right? Yeah, absolutely. So this can be whether it's the pricing or the rebate side of things and enable helping both of them. But it's really interesting seeing what happens when you take a manufacturer's sales team, a distributors procurement team, who can do a deal. But does that deal actually drive something in the marketplace or not?

[00:04:56] Does it make it to the distributors sales team, which obviously is a big part of your world? Mm-hmm. And how do you connect those dots? And technology all of the time is getting better, but I still think it's a huge opportunity there. Yeah, I agree. I think the connecting of the dots, as you said, has been historically difficult, right? Because of data integrations, all of that.

[00:05:19] But I think AI starts to open up the door to make that dot connecting easier and more scalable and more reliable and sustainable. Yeah, absolutely. And then that data and that insight starts to get fed into kind of platforms like yours at Leadsmart. All of a sudden, you have the full picture. Everybody has the full picture. And I talk a lot about businesses trading intelligently.

[00:05:45] We're going to move from trading on instinct to moving to trading on insight and intelligence, where I'm trying to get businesses to. That's great. So, Mark, the core main functionality of how most people that know Enable would probably look at that as rebate management and some related tools to that. But it goes a lot deeper than that, right? It does, and it's evolving all of the time.

[00:06:12] And we started many years ago when I was the client, managing rebates for distributors, making sure they were collecting everything from their suppliers. And it's evolved since then to working with both the manufacturers now and the distributors. But then more recently, we purchased a piece of pricing software, which again is price management. So, it's really about making sure that you're well thought through commercial plans executed properly.

[00:06:41] The customer is charged the right price because I know from my distribution background, you make one mistake on a customer's statement, they go through the whole statement and it erodes trust. So, we're really focusing on that area, just making sure execution is perfect. That's great. Very good. Well, that kind of ties into who Tom and I work for, which is Lead Smart Technologies.

[00:07:06] And LeadSmart is the sponsor of our show here in Around the Horn and Wholesale Distribution Manufacturing. And LeadSmart is what we have developed at our company is an enterprise growth platform. Our enterprise growth platform builds on the type of things that Mark's talking about with Enable, where we've got lots of siloed data typically around a business. We've got, or you might want to use the term, fragmented data.

[00:07:30] So, we like to look at all that data that comes across the business, whether it's that pricing data, it's rebate data, it's marketing automation data, e-commerce data. Of course, ERP data is critical. And we bring all of that together into a data hub and our platform. And then we use that intelligently with sales enablement tools, what we call Smart CRM as well. And we bring all of that data that's typically fragmented into one place.

[00:07:56] Then we can use artificial intelligence against that and other advanced business tools and technology. Or we can use those against that combined data that's in that platform to make intelligent business decisions across the business. So, historically, people have looked at our company as a company that does CRM, but CRM is now a component of what we do. But we're really, as we described, this enterprise growth platform. So, a lot of exciting news about that coming out as well.

[00:08:22] So, if your company is looking to digitally transform, you recognize that you've got fragmented data. The AI bell is ringing, whether it's from leadership or a board or just what you're seeing online and reading and social and so forth. And it's time to really try to bring AI and the future of business into your organization. We would love to chat with you and help you see how you can take that fragmented business and start uncovering both opportunities and risks that you've never seen before in your business to accelerate growth as you go.

[00:08:52] So, Tom, we get together every week, don't we? We talk about the news of the week. We've got a wonderful newsletter that goes out. That newsletter goes out to well over 10,000 people. I think 12, 13,000 people roughly now. And it's called Around the Horn and Wholesale Distribution. So, if you're listening in with us live this morning on YouTube Live, LinkedIn Live, or Facebook Live, you're seeing three handsome faces and a newsletter and some charts and some graphs and things like that up in front of you today.

[00:09:18] But if you're listening on the recorded podcasts on Apple or Spotify or Amazon or Odyssey or wherever that might be, you will not be seeing this screen. But we would love to get that newsletter out to you. Again, it goes out to thousands of people in dozens of countries right now. You can reach out to us three simple ways. If you're active on LinkedIn, you could just search Around the Horn and Wholesale Distribution on LinkedIn and you'll see the page there.

[00:09:41] If you went to the Lead Smart Technologies page on LinkedIn, you would see in the far left column a little button that says Newsletter. You can click that and sign up there. And that will come directly to your email, but you'll click on it to read it in LinkedIn. If you would like it sent to your email box, simplest way to do that is to just send an email to hello at leadsmarttech.com. We'll get that out to you right away. And then finally, we have a website for the podcast. It's www.aroundthehornpod.com.

[00:10:09] And you can sign up there, see past episodes and so forth as well. And then on the Lead Smart Technology website, it's leadsmarttech.com. You can click on the resources segment and all of our past episodes are there as well. So we get together every week. Today is week number 192. Amazing to me that we've been doing this 192 times, but we continue to get together every week. And so we're coming up on 200 here shortly. We're going to have a big extravaganza for that.

[00:10:38] But we hope that you can continue to join us. The one thing we would ask you is if you like what you hear each week, one chime in, give us some thoughts and ideas in the comments section if you're live with us. But if you're listening in Apple or Spotify, wherever that might be, click the subscribe button. And then big help to us if you leave a review to go with that. We get this show out in front of more people. So from that standpoint, let's dive into the news. We talk each week about we start off in the newsletter about the economy and supply chain.

[00:11:07] So this week, core inflation hit the annual rate of 3.3 that we can see in April with those numbers adjusted. And the Fed's preferred gauges are doing some wobbling up and down. Tom, you want to take us away and get started on that? I actually wanted to kind of do a two for one here on these first two articles here because they're related. And I learned something that I didn't know about the economy. And Kevin is an expert economist like you are. You probably knew a lot about all this already.

[00:11:34] But what they're talking about in these first two articles is core inflation versus trimmed averages. So do you know what trimmed averages are? I'm going to have you explain it to me because you're a computer scientist and I just studied business. Okay. So core inflation, right, that we hear a lot about is taking inflation but removing the cost and increase of food and energy. Right.

[00:11:57] So you get rid of food and energy, and then you end up the cost of everything else, whether it's insurance or services or whatever the case may be. The trimmed average looks at things each month. So rather than saying we're just going to remove food and energy, it looks at the outliers each month. Mm-hmm. So let's say for this month that health insurance was crazy, crazy went up and something else was static or went down or whatever.

[00:12:25] It will trim both ends of the bell curve, if you will. Right. And then look at the inflation based on the middle, but based around month to month versus just arbitrarily saying let's remove food and energy as the core piece there. Let's go. So what I find interesting about this is that is March is favorite way of evaluating inflation. I don't know. So you're going way down a new path now.

[00:12:52] So now you're talking about the new Fed chair, Kevin Warsh, right? Yes. But I was going back to that. My point is, is the differences are quite significant. Right. The differences, if you look, and I'll bring this back up again. If you look in the first article, core inflation was 2 point, I'm sorry, 3.3%. Mm-hmm. But when you did the trimmed average, it was actually 2.3%. Right.

[00:13:19] So that's significantly different, especially if that is your gauge for how you're measuring the economy, rate cuts and everything else. Well, it's kind of how they score like a lot of sports too, right? Like, I think it's like gymnastics and some things like that, right? They throw out the top and the bottom and they come to a mean. Yeah. And look to it from that point as well.

[00:13:42] I would suggest that you're just reinforcing the idea that one of our guests, a regular on this show, has been saying for probably two years now that there's a better way to figure out what the right percentage point is and how we get there. Right.

[00:13:59] Because if you're talking about now as like we've got trimmed averages or these core components of it, and then they're measuring that against this broader number where you have food and energy and other things tied into that, maybe it's time to take a big look at really what is it that we should be tracking. Yeah. And I think, by the way, good morning to Bob. And I wanted to touch on Christine's comment here, which makes sense.

[00:14:28] Look, it's easy to pick a number, right? Or pick a way to calculate a number and determine what makes the story sound the best. Yep. But I do think arbitrarily just removing food and energy, right, in there. Or you look at the impact, kind of the weight of what energy could be on those things here is, I do agree that this is maybe a more intelligent way of looking at things because things change so rapidly.

[00:14:57] Mark, do you have any thoughts on this? Yeah. Yeah. I'm going to put my accountants hat on here. And the way I see it is you require consistency in a set of standards to the point I think you're making because you can make numbers always tell a story and the story you want to tell. But the problem you've got is if it's not comparable to past stories that have been told, you don't really know the kind of the true performance.

[00:15:25] So for me, it is picking – I think the challenge is there's no perfect system. So because we've been in a very extraordinary environment over the last decade nearly now, you start to see some kind of inconsistencies in what the data might tell you.

[00:15:50] So to your point about using this newer framework, it feels like it cuts out some of that or it kind of normalizes things to a degree. But then that might mean that we need a different mindset in terms of we might have previously thought 2% is the right number. But if 2% was always based on an old calculation, do we now need to say actually 1% is the right number? Cash are smart.

[00:16:20] Well, Kevin's the one who wants to go the other direction. Kevin wants to change it to 3% or 4%. My bigger point is forget about what the number is, is how do we get there? I mean, I just was bringing up some info here that – Mark, you've probably heard me harp on this before. But if we look back to this – and I just pulled this up, right?

[00:16:41] It says between 1989 and 1991, New Zealand pioneered the formal inflation target, initially setting it at 0% to 2%. Canada and the UK followed suit by adopting explicit 2% targets. And this all started because a politician in a hallway in New Zealand, right? Where there's more – oh, my Kiwi friends, I'm sorry – but there's more sheep than people.

[00:17:08] And I don't know how New Zealand sets the gold standard for the world, which we – I mean, they did it, right? So good on them, right, that they were able to do it. But they did that. UK and Canada jumped right in. Then from 1998 to 2003, the European Central Bank said price stability is inflation under 2% and later fine-tuned that to below, but close to 2%.

[00:17:32] And then in January of 2012, the U.S. Federal Reserve officially announced a public target of 2%. And in 2013, the Bank of Japan followed suit. So it's like – it feels like – and again, I studied business management in school, and Tom's a computer scientist, and Mark, you're an accountant. In the UK, do you say chartered accountant? I know that's what they say, like in New Zealand and Australia, I think. Is that –

[00:17:58] Yeah, there's different qualifications, but generally, yes, most accountants are chartered. So – but anyways, this looks and feels like people just said, yeah, it's a good number. Let's go with that, right? And here we are. But as we talk about all the time on this show, right, we have instant access to data. And all these – all that the feds in the U.S. now is looking at is lagging data on all of this.

[00:18:25] And I'm just suggesting maybe we're in a world right now where putting a committee together, maybe of European Central Bank and the U.S. Fed and a few other organizations like that and saying, let's look at all the data that we have and what's real. If you're at a place to – Tom, and I'm glad you brought that up in talking about that trimmed average, so to speak, of that as well, and core versus non, if we have to put all those variances in place with that,

[00:18:57] maybe there's a better way that we just use as a standardized system. And whether that number is 1%, 2%, or 3%, I don't know. I'm not smart enough to know that. It just seems to me like we live in a day and an age that we could get better access to real-time data that truly tells us versus – and Tom and I laugh about this all the time because we talk about it on the show regularly – it just seems forever we're looking at updated or restated data two months later.

[00:19:25] Well, what really happened in April – and here we are, this first article that we were talking about today in the newsletter – is talking about April's inflation rate of – annual rate is 3.3, and we're – Sunday's June. We've got access to better data is my point. Yeah, I mean, just to pick up – so Christine's put a couple of great comments.

[00:19:49] I know Christine, and she's super smart, very much a data analytics type person. So we should have had her on the show. Should have, yes. She'll be answering these questions far better than me. But the way I see it is you can't be selective with this kind of thing. You can't turn around and say, well, actually, because the price of gas is going on, we'll exclude that. You know, and things like that. We just need consistency and benchmarks to work against.

[00:20:15] And then the other thing I would say, in the most surprising of places – I want to get my hair cut if you haven't noticed. Yeah, he's very handsome. Thank you. And the barber, I asked him because I think, you know, my view is, who better to ask than your barber about what's going on? What are people generally in the local community feeling?

[00:20:34] And he said everybody's feeling the squeeze, and he said he wouldn't surprise him if the government doesn't do something to buy goodwill, like giving everybody a bit of cash. He said, but then that's just going to push up inflation, and we don't want that. Or flooding money into the economy, right?

[00:20:51] So I had an economics lesson from my barber, but it was really interesting, you know, to hear, you know, just the general consensus, which is generally people are feeling the squeeze, but they're not seeing it in these numbers that are getting reported. So they're a bit confused. Yep. So what you're saying is that your barber listens to the Around the Horn and Wholesale Distribution show each week and really comes out of that with some great insights? That's absolutely it, yes.

[00:21:19] Yeah, perfect, perfect. That's right. As my father-in-law used to say, you lie to your friends and I'll lie to mine, but let's not lie to each other. So anyways, I think there's some opportunity for better data, I guess, is my takeaway from all of this. But I'm glad, Tom, I'm glad you brought that up about that core component as well.

[00:21:43] And we can move on from here, but I don't, what I hear when reading these is that maybe he's looking at, and I'm not saying that the trimmed average is the right way or the wrong way. I think what he's trying to do is introduce some potentially different ways of looking at the data, looking at it from multi-dimensions rather than maybe a more linear set of things that are there.

[00:22:08] And it'll be interesting to see then how that manifests in the mindset of the governors and how they move about with the rate cuts and so forth. Yep. I just thought it's the first time, and we've been talking about this for literally years, and this is the first time I've heard this word trimmed average. Yep, right.

[00:22:29] So back to you've got our newsletter up there again, but the first article we had was from CNBC, and it was talking about the updates to the April inflation numbers. Then the next two articles we have are related to Kevin Marsh, or Warsh, I should say, and as the new Fed chair.

[00:22:49] And the Yahoo Finance article there talked about him taking more of a Greenspan-style approach at the central bank, which was greatly supported by Treasury Secretary Besant in that. So the idea behind that was basically is looking to prioritize monetary flexibility. And in fact, it even talked about suggesting that technology booms and specifically the adoption of AI will drive productivity gains and naturally lower inflation.

[00:23:18] So to me, this was encouraging going back to what we've been talking about is let's start looking at some things in maybe a different lens. And it just feels like, I can't remember, I mean, they use the term hawk and dovish, right, in all of this. And in Wall Street, we think bulls and bears.

[00:23:34] But it just seems like, and I've probably beaten up pretty hard over the last couple of years about the former Treasury Secretary, I'm sorry, former Fed chair of Powell. But he just seemed to be way too cautious. I mean, I would listen to him talk and I don't know about you guys and remark if you've listened to much of the comments he would make after the Fed meetings.

[00:24:03] And it just seemed like he was so unbelievably cautious and every word parsed. And I recognize that one misstatement by a Fed chair can change markets and crazy things can happen from that. But it just seemed over the top to me.

[00:24:21] And it just, there's, for me, I like what I'm hearing from this particular article and what Warsh is saying so far is like, hey, we're going to look at some bigger picture stuff here. And he's tying that into Greenspan in that as well. So I think it's a positive component there. Yeah. I'm sorry, go ahead, Tom. No, I was just going to say, I mean, Greenspan had a reputation, right, of holding off on rate increases.

[00:24:51] And, you know, certainly being not jumping in and raising rates. And even in the dot-com boom, he was, hey, you know, let's let this play out. There's a lot of productivity, right? Why do we need to raise rates in an era of productivity increases? It wasn't that there was necessarily increased money flow into the system as inflation. So anyway, go ahead, Mark. Yeah. I mean, I was looking at this from a, you know, from a planning perspective.

[00:25:18] And I agree that basically rather than making commitments, the view is, you know, let's let some of these things play out and really be more agile in, you know, in kind of policy. The only downside to that is how do you plan around that? You know, you can't create a five-year model with one interest rate. So how do you plan things like your CapEx investments, debt refinancing, these kinds of things as an organization?

[00:25:48] Business is going to have to go back to planning under things like rate uncertainty. Because the Fed's not going to give a long outlook that, you know, that they can depend on. So I just think, yes, businesses are now going to have to start modeling in interest rates uncertainty into decisions. But it even comes right back to the inflation point.

[00:26:14] We as a distributor, and I suspect many of the same, the way our system works, we would buy at cost, we would sell, let's say, two months later, at whatever that cost is. So actually, inflation was good for our margins, providing the market's paying for it.

[00:26:31] So when we're building out our profit forecasts or our working capital models, cash flows, how much inventory we're going to hold, knowing or having confidence around interest rates is really useful. So that's – Sure. That's – this is obviously the offset of that. But I think it's better if you don't know what the future is going to be or don't put things out there. So, yeah, I agree.

[00:27:01] It's just going to need a different approach, I think, from some finance leaders. When in doubt, right, when in doubt, use the prediction markets. Yeah, there we go. I mean, and it sounds dumb and foolish, but at the same time, right, they're probably the most accurate sort of prediction of the future, to your point, Mark, to incorporate into planning, right, of what you're doing.

[00:27:28] The prediction markets are going to generally be much better than you're going to hear out of CNBC or some media coverage or even maybe from the Fed themselves on some of the data or lack of data they provide. So it's interesting, too, because a lot of these – Tom, tell us what you're looking at and describe it because most people are not watching your screen. Sure.

[00:27:53] So I've got Polymarket up here, the Fed decision basically voting in June, July, and September. They have three months out. Clearly, we've talked about this, right? 98% say there'll be no change in June. I believe it's around 80-some, 93 in July, and 78, 74 in September.

[00:28:17] So, again, per the prediction markets, there will be a much higher – not a great chance, but a higher chance – of a decrease in September than there would be. But if I was a business person, Mark, as you're pointing out, I certainly wouldn't be betting the farm on a 25% decrease in these things that are here.

[00:28:37] One of the things that I think we're going to see more of in Polymarket and these other prediction markets is their API capabilities to be able to tie into their APIs, use that into your systems to potentially help influence some of your predictability things that you're doing here. Because, I mean, there's a lot of data here, right? There's a lot of data behind some of this.

[00:28:58] And it's not just these raw numbers, but if you, through an API, could get some of the raw data that is actually driving these things incorporated into AI, you would, in fact, be able to have potentially a reasonable way of at least a midterm set of predictability on things.

[00:29:17] So, I'll throw out to you, I think if I – and, Mark, I think you're wise with your comment about the idea of you want a benchmark that you'd like to be able to look to for predictability, right? But we haven't seen predictability-related interest rates in a few years. And I think if I'm looking at this, right, and it's kind of interesting, I look at this from, you know, in my personal life is there's a new roof getting ready to go on this house and a handful of other things.

[00:29:47] I'm working from my home office this morning and a handful of things getting ready to be done to this house. And guess what? I'm not writing a check from it. There's going to be some of it's going to be financed. And my caution is rates going up, right? And because there's nothing that what we've talked about here or what Kevin Warsh is suggesting or what we're really seeing that would suggest an increase based upon especially how he believes the Fed is going to look.

[00:30:14] And by the way, remember, we had the very final vote of the prior Fed was going against what Powell and that group was saying. So, there was already a little bit of an upheaval there. For me, if I'm a distributor or manufacturer and I'm thinking, or just a business person in general, I'm thinking about what the future holds is, I'd probably be looking at two components. One is, is there risk of interest rates going up?

[00:30:43] And then thinking about, okay, I would look at this and say, I've got a president who has, what, two and a half more years, right, in office, who has very clearly said his goal is fair, you know, close the borders, stop fentanyl, fair trade. And with the tariffs and with the tariffs and so forth, drive interest rates down onshore, increase manufacturing, increase in jobs. That's his, where he's at.

[00:31:14] Warsh is there because the president realized one of, and I say one of two things, two things I would suggest. One is Warsh is the guy that he could get across the finish line to get approved for the Fed that is most likely to push that agenda forward. Everybody agree with that? Seemed reasonable. Yeah. So we've got somebody at the Fed now who has the president's support.

[00:31:41] He is describing things already that says he wants to take a closer look at what happens and maybe even let things play out a little bit more and looking at productivity increases and things that might come from this. So I would be looking at this and saying, I'm hedging against making sure I'm confident nothing's going up in rates and that I probably got for a period of time while the economy stables out, stabilizes maybe a little bit. There's probably no cuts this year.

[00:32:09] I mean, I know, Tom, we have a bet on what was going to happen. And I had stronger thoughts on what might be happening certainly than I do right now with things because we weren't predicting when we had those discussions in, I guess it would have been January, right, Tom, about we weren't anticipating that we would be three months at war and Hormuz Strait being blocked and oil not getting through. And, you know, almost $7 oil here in California or gas prices here in California.

[00:32:35] So I would be balancing this out from a standpoint that says I want to make sure I'm hedging against the fact and I'm confident before I make some investments that rates aren't going to go up. They're probably going to stay fairly stable or a minor reduction for the next 8 to 12 months probably in that place and then make my business decisions based upon that. Yeah. Seems good. I can compare it again with some of the prediction markets and so forth. But I agree.

[00:33:03] I'm interested, Tom, as you described it. Let's talk about that for a moment before we go on. And I'm not suggesting it's right or wrong or certainly not wrong. That's a bold statement, though, I think, that you make about a wholesale distributor using data points from a prediction market to make business decisions from. What are your thoughts on that, Mark? I'm not saying it's right or wrong.

[00:33:33] I just think it's a really unique concept. I think it's an evolution, as we mentioned, into the world where actually, whether it's our margin data, it's kind of the prediction markets. As businesses, we are almost overwhelmed with data points, which is where we're seeing the technologies like yours and where AI can help us, where we can have many sets of eyes looking at things for us.

[00:34:00] Because, and I'm always of the view, yeah, the more data, as long as you can use it and you can consume it, the better. And I think, so when you look at the quality of the data and you think, well, these prediction markets, they're live. They weren't written. And two months ago, it sat on somebody's desk for approval. And it's... It's not... There's nothing lagging on it, right? Everything else we look at is lagging data. Yeah. So, so that's really useful.

[00:34:29] And I do think there's, there's also this element of, we can think of, we think we've got everything nailed down, but then all of a sudden we have a, like a situation with Iran and the price of oil. And suddenly you would say that the whole scenario has changed again, which again is why the prediction markets are useful because they can react hyper quick.

[00:34:53] As opposed to a report that was written yesterday, something's announced by the administration today and it's out of date. Well, and you can take multiple different predictions, right? So we were just talking about the prediction of a rate cut. That's, that's all that was. And the, the betting occurs around that one. And, but there's other predictions about how long the, the, the war or the conflict will last, or will we have a agreement by a certain date?

[00:35:22] Or there's a number of different prediction things that are, you would, if you had a Venn diagram, they'd overlap, right? There is definitely overlap between them. So now if you took those together, right? And you had the feeds or you had API feeds for those, you know, maybe, maybe it's only half a dozen or four or five, right? Not talking about 500. And you put those together, you now start to get a story that you could actually, as you point out, Mark, in real time, and it could adjust, right?

[00:35:51] As things go through on the, on the predictability there. It's something, Kevin, I've, I've been wanting to look into more. I don't know what they charge for API access, things like that. But I think there's some really interesting, especially as they proliferate, right? You get more involved and more people and more participation in theory, the better they should become, right?

[00:36:13] The more accurate they become, but they certainly have been proven to be even very accurate up to this point compared to other individual opinions or ideas. Yeah. So what would you do with that API data? What are you, what are you thinking about that? Well, if you wanted to incorporate into a trend, right?

[00:36:32] If you wanted to provide, again, into a system that says, what do you believe, you know, interest rates are going, as an example, or what do we think this environment's going to look like or whatever, right? Again, that just becomes more data that can be incorporated into your AI conversations or your AI agents or, or decisions that are being made or analysis that's being made as you, you know, go forward and trying to drive the business.

[00:37:00] And Tom, I'm assuming with this as well. Well, the beauty of this is if something doesn't currently exist, you can make it exist. So if you wanted to know for argument's sake, what do people predict crop yields are going to be on something? You, you can create this kind of thing and starts to see, you know, where people would be putting their money. Yeah, it's a good, it's a good question. I don't know. I'd have to go a little more research, but yeah, I don't know how new topics get started, right?

[00:37:29] Do you submit a topic and then they approve it and they think that that's relevant enough? But, but yes, you certainly can, you have the opportunity to potentially enter in new topics or, or new views of the things that can go together. And I think it's such a strong piece you're mentioning, which is if you just purely look at one index or market, you've only got what you get, obviously many perspectives, but on the same thing.

[00:37:54] But when you start to overlay that as to the interest rates, maybe with, and the strength of the dollar with other things, and you start to see an overriding pattern across them all, your confidence grows that that picture is correct. Right. So a lot of, and I'll just say one more thing. And then, you know, in our technology, our software, right, we tend to look at a lot of historical data, right?

[00:38:22] We look at ERP, we look at purchasing trends, we look at things that have happened in the past, which you can use some of that data to help predict the future. Right. But if you now combine that with what is believed in the predictability of where the future is going, you certainly have now a lot more potential intelligence, right? And what you're doing is you're, okay, here's what has happened.

[00:38:47] Here's what we believe, or here's what the prediction markets or otherwise believe will happen. Now let's combine those together to use, you know, we talk a lot about forecasting projections, all of those things now start to potentially become a lot more accurate and a lot more defendable because you have the data behind them of which to back it up.

[00:39:10] And Tom, the other thing as well is market, you actually get to a point where the market is actually influenced because everybody's predicted it almost has to happen. That's right.

[00:39:19] Well, Matt, I'm glad you said that, Mark, because what's been going through my mind, it's really triggered for me when Tom first brought this up earlier in the show was that, you know, I'm thinking about, man, if I'm a CFO of a half a billion dollar distributor or, you know, a finance manager or a CEO of a hundred million dollar distributor or similar size manufacturer. And, and like, and you're suggesting, I go look at poly market to help make these decisions.

[00:39:47] That could be like an 18 year old Uber driver that, you know, is influencing what poly market says. But if we have enough data at enough, enough inputs to the data from enough different sources, then that is going to drive that, like the likelihood of that actually happening. It's interesting because at that point in time, it doesn't really matter. Help, help me, help me think through this. It doesn't really matter who the input is coming from. Right.

[00:40:18] Because in theory, right, if I'm running a business, I want my, my data sources coming from relevant, you know, I want it coming from a, from a chartered, you know, CPA or a chartered accountant. I want it coming from a data scientist or I want it coming from an industry influencer who talks to people every day, all day about what's going on.

[00:40:38] I don't want it from somebody that's just wants to take a random bet on something in a, in a, um, uh, on a poly market type or a Cal sheet type system. So, but remember, right. That these people are not just, isn't just a poll. Yes. We're putting the money, putting their money on it. Right. Yes. Yeah. It becomes intriguing. Right. Yeah. Okay.

[00:41:02] So, so Mark, are you going to have some conversations with the, uh, executive leadership team at Enable and think about setting some trends and some plans based upon, uh, on, uh, prediction markets? Not yet. Not yet. We're going to focus. We're going to stick with our rebates and our pricing. Okay. Stay where we, where we know our subject. But yeah. All right. It's an interesting area. Yeah.

[00:41:26] I'm going to wait for, uh, our Tuesday EOS, uh, uh, leadership meeting with Tom and see if we've got, uh, financial decisions being made, uh, or suggestions being made off of those. But I think it's great. So let's shift gears a little bit. Let's talk briefly about, uh, we have another article that we talked about today. It's from CFO died magazine. Mark and I'm, I'm interested. We're not going to spend a lot of time talking about tariffs, but we haven't really talked to you and you're, you're, you're at industry events constantly.

[00:41:53] And on the phone and in meetings with, uh, distribution manufacturing experts and, and executives. So this article was talking about, uh, CFOs are facing a tricky tariff refund questions as processes are starting to gain speed. It says faster than expected results are easing early operational fields while fears while shifting attention to decisions on accounting tax and financial reporting issues. So this is kind of starting to talk about, it's like, okay, we paid this out.

[00:42:21] Now I get this money coming back into our business. There's a balancing act that has to go with us. Any thoughts from either of you on that, that particular article? Yeah. I mean, I've got some pretty strong views on this, which is those, when the tariffs first came around, those who invested in being able to deal with them did a lot better. That investment is now going to pay off again because this money is not just going to be handed to you.

[00:42:49] My understanding is, yeah, you're going to have to do a lot of, you know, you still need to know what you're owed and make these claims back. Sure. You got to prove you're owed. You have to prove that you're owed the money. Yeah. So if you didn't have the right processes and procedures in place at the front, how are you now going to do it at the back? Yep. But then the other side is the follow-on from this. What are the customers going to say? Customers are going to say, hang on, you know, you increased our prices. We agreed a very fair and transparent process.

[00:43:16] You said everything had to go up by 10%. I took it. I know you're getting your 10% back. I want it back because that's how transparency works. What if you can't calculate that? What if you, yeah, you're going to want to set your customers as well. So it's not just getting the money and able to allocate it back. Understanding the accounting requirements around these things as well is going to be really important.

[00:43:41] So the businesses don't get this wrong in terms of whether you're, you know, recognizing this as revenue and, you know, it's coming back to you. Is it cost a good soul? Things like that. So this is really important. And it all assumes that nothing's going to change again. So, yeah, I think it's, you know, there's a lot of question marks and there's circles that I'm in.

[00:44:06] It feels like the tariff noise has subsided. There's definitely this side of it, which is, this is all good news, but how are we going to deal with it? Well, you're bringing up something that, you know, we've talked about a lot here is, you know, the downstream effect of it, right? Because we've got the, you know, the importer of record, which typically is going to be the manufacturer unless the distributors doing private label work on their own and so forth.

[00:44:34] But in general, that's what we're going to see. And Mark, with you being an accountant, you could probably comment on this well, is that, you know, one of the comments that I made very early on, you might have heard it in the show. And Tom and I have discussed is that a big component about how this plays out, because you're talking about the downstream impacts of manufacturer gets this tariff money back. Distributor starts thinking, well, wait a minute, you know, XYZ manufacturer that I've spent all this money with, you got this money back. I want some of it back.

[00:45:02] And then the downstream risk of that is that the contractor that bought the water heater that had a tariff associated with it from the distributor followed up on. And then as the three of us, you know, homeowners, we call the contractor and he just raised his price. What happens, right? There's a very unique evolution or ecosystem there that happens.

[00:45:22] Now, we've said over and over again and probably expected, you know, accepted the fact that it's unlikely that downstream contractor down to, you know, consumer are going to see any value from that, right? I joke about it all the time with Tom is that, you know, Costco's filed this $200 million lawsuit. Well, I can't get to the interstate without driving by Costco. Are they going to apply something back to my account because of all those extra fees I paid in tariffs? Obviously, it's unlikely.

[00:45:51] But where I think it is important, and Mark, I'll throw this to you just because of your experience in the accounting field, I think a huge component of what you described, my friend, is that distributor that wants to potentially go back to the manufacturer is what was the wording on the line item on an invoice from a manufacturer of how did they describe that increase? Is it a straight line that just says tariff adjustment?

[00:46:20] Is it a line that says something else or is it just an increase? Because I think that's really going to play out is how did they describe it. So any thoughts on that from your background experience? Yeah, I think completely agree. You know, there was a lot of recommendations at the time about using things like surcharge mechanisms and things like that, which you would argue if the money comes back, it should be passed back. And I also, yeah, it's a really kind of interesting topic.

[00:46:50] How far back down the change should the money go? So, yeah.

[00:47:23] The distributors, inflation, we buy the goods today, we sell them in 60 days' time. Generally, we're selling them, you know, it's good when prices are going up. If this was to create price decreases, that could actually be a real challenge because we're buying the goods today and selling them for less in 60 days' time. So that's something that distributors always have to be ultra mindful of as well.

[00:47:52] And we've got these new price points and these price perceptions. So could this just end up being, yeah, just, you know, some people in the supply chain are just going to continue being a little bit more profitable thanks to, you know, these tariffs. So, yeah, lots of great questions. And all I would say, I would just caution businesses on how you account for these things because there's going to be some... Legally, it's taxable income.

[00:48:22] Yeah. So any refund that they get is potentially a form of income, right, that could be taxable on their piece. That's come across loud and clear. Yeah. Yeah. So it's good news, but it's also more work. Yeah. Well, and to your point earlier, right, it's how did you handle this early on is a big... From manufacturing standpoint, how did you handle this early on is critical.

[00:48:52] And I guess for a distributor, the same thing, right, is how did they manage that process? And if you managed it well, you got some early gains, as you described. And we had some good conversations just as this was getting started, is that there are some opportunities for people that had really strong balance sheets that could manage balancing inventories of, you know, last in, first out, so forth. And really figuring out how our inventory and overall costs are balanced based upon all of this.

[00:49:21] But that's, you know, leveraging strong balance sheets helps anytime. But I think it's how you manage this in the back end. But now moving forward, and what I wonder about is, are people going to start looking at it as saying, okay, I just got, let's just say I got a half a million dollars back if I'm a small, mid-sized manufacturer. Should I be setting some of that aside in case I have somebody wanting to sue me or, you know, I have a group of people that are wanting to come after me? Should I be thinking about setting some of those dollars aside as well?

[00:49:49] And now I've got taxable income, to Tom's point, that I could potentially have people coming back and putting pressure on me to share with them. How do I manage this? What do I do? I think the practice, here's what I would do if it were me in my shoes.

[00:50:05] I think there's an opportunity here, whether you're the manufacturer or other system of record, from a PR and a brand development perspective, to just basically send a letter or a note to your distributors and your other people and go, either A, I'm not beginning any of these refunds. For whatever reason, we will not be receiving these refunds. You know, whatever. But if we are, right, here is our plan, right?

[00:50:31] And our plan is, it may not be a rebate or maybe it's a rebate or maybe it's money back or maybe, I don't know. I mean, there's a million different ways you can handle it. But I think by being transparent and by being upfront with it rather than trying to hide it and hope that people don't catch it,

[00:50:49] I think you have a real opportunity to continue to develop the relationships that you have with your distributors and downstream partners and build some brand loyalty or brand recognition from doing it. I think Costco could do something really simple, Kevin. They could say, you know, we have filed suit for blah, blah, blah. If we receive $200 million, our plan is... Kevin and Darlene get it all. Right.

[00:51:16] When you get your annual check or whatever for the money you spend, you'll see an extra percentage there. We appreciate your ongoing support and we're working to share the wealth. It's very simple, right? It just alleviates it. It's when you say nothing or somebody feels like you're trying to cheat them or you're trying to do... That's where the lawsuits come. That's where all the other things start to, you know, come into play. So I think there's an opportunity here. The idea of people feeling like you're profiting from me. That's right. Right.

[00:51:46] Good. To your point, Tom, it could just be a matter of data. Costco may know exactly it's 20 extra cents on this product, 15 on that, and they've got full purchase records of every customer. That's right. And just run a calculation and give everybody back. I also do wonder whether there would be any pressure from the government to say, hang on. You know, we're trying to get prices down as per the president's commitment. You need to get there.

[00:52:15] This money needs to get back. You know, and we want to see that in price reductions because some of the Costco's and some of the other large corporations put a lot of pressure on the government when the tariffs first came out. The government will now flip it and say, okay, you got what you wanted. Now give it back. Yeah. Well, we could spend the next hour on this topic, but I'm going to make a statement. You guys can choose to respond or we can move on from here.

[00:52:42] But I think the bigger factor that we haven't mentioned anything about here yet is the fact that it almost sounds like from our discussion in this topic that tariffs are done and behind us. Right. Tariffs just have a different statute that they're coming with now. And then, Mark, we talked last week about the European Union has now fully voted and ratified their tariff agreement with the U.S. So it doesn't even matter what statute it's coming from.

[00:53:09] And, you know, Tom and I were discussing that there's likely a whole lot more people that are probably going to follow suit that says, uncle, we give, you know, white flag. You're going to get some type of tariff through. Let's negotiate with you and get the best deal we think we can and just agree to that. And then the tariff thing goes away from that line item of a tariff, per se, because we just have a new trade deal. Yeah.

[00:53:35] And I was expecting maybe falsely on the back of President Trump's visit to China. Tariffs, we know they were discussed, but we haven't seen any announcements in that space. I thought about that a lot, my friend. And what I came up with related to that was that there is so much going on with the war and the impact of the war and fuel prices.

[00:54:01] And then the fact that China needs so much fuel that I'm guessing that the figuring out what's going on with the war probably overshadowed a lot of those conversations. Yeah. I think it just would have had to. I think if we didn't have the Hormuz straight blocked, then that probably would have been a much, much, much stronger level of discussion and much more would have come out of it about that.

[00:54:24] So it's just interesting what will be, you know, I just thought about something and I don't want to give credit where credit may not be due. But how crazy would it be if when all this is said and done and we look back 10 years from now about this whole tariff thing that we've, you know, it's been wonderful fodder for this show.

[00:54:44] But if we look back at it and realize that now there's these, you know, Latin American, Canadian, European Union, Chinese, Southeast Asia, Indian trade deals that are now in place that all came out of it because of this tariff threat. That there was this big uproar that went to the Supreme Court that some old guy with orange hair.

[00:55:14] This was his plan all along. I'm going to create this international uproar. We're going to be, people are going to hate me. And when all said and done, I'm going to have trade deals that don't even need tariffs. That are really good for the U S you know, it's that three dimensional chess. Is that what they call it? You know, long game. Who knows? Who knows? We'll come from.

[00:55:38] So, Hey, before we jump in, I want, there's a big breaking news this week that we want to talk about in manufacturing distribution, but there is an article that we had that's quoted here. And it talks about the, and it's from, I just want to double check where it's from, from a supply and demand chain executive.com. And it talks about the six maritime choke points of global trade. And Tom, the reason I wanted to just hit on that for a minute is over the last few years of this show, we've had Suez canal issues.

[00:56:09] We've had South China sea issues that we've talked about and certainly Panama canal issues. And now we've been talking consistently about the straight of Hormuz. And this talks about the reality of what can really happen when the, um, it talks about efficiency versus fragility of just in time inventory versus just in case inventory that comes when we have these shock waves that hit us from these things.

[00:56:36] And it talked about, there was a, uh, a particular piece that talked about in 2021, when the Suez canal was blocked, uh, the cost of it was $9.6 billion per day. And so these choke points that it references are the straight of Hormuz, which we're dealing with now, right.

[00:56:54] In, um, in the middle East, the Suez canal, which connects Europe and Asia, uh, through there, the South China sea, which, uh, then gets, it talks about the, is key access points to the straight of Malacca and moving through there. The Panama canal that links the Atlantic and the Pacific, the English channel kind of surprised me, but maybe that's my inefficiency.

[00:57:19] And I think that's the same thing in geography of realizing, recognizing that linking the North sea to the Atlantic, but it does make sense if I stop and think about that, right. We've got everything from Northern Europe that needs to go through the English channel there and then the Bosphorus straight, uh, as well. So I just thought it was, I hadn't, I typically would think about, you know, Suez canal, Panama canal, mostly in this setting, but anyways, any takeaways from you guys on that? No, I mean, those are the six, those are the six choke points, right.

[00:57:48] And, um, we've had what three of them or three or four of them that have had impact on thing. And I guess it ties back into this final article in the section there about supply chains. New normal is, is instability. It's, it's changed. Yep. Yep. And we don't, and I think that's important and we don't, you know, we don't think about, you know, what really goes through, you know, uh, this and, you know, there's single container ships can hold 20,000 containers.

[00:58:17] So when we stop and really think about what is going on in shipping, it's just that the magnitude is, is just, it's astounding. And, you know, it talks about this article reference that there's 12,758 vessels, um, through the Suez canal, just the Suez canal in 2025. So, you know, crazy statistics of what's going on and what's actually moving out there. And when you talk about the Strait of Hormuz, you know, it's interesting. We were talking about gas prices.

[00:58:47] My wife and I were last, last weekend. And, you know, I was commenting about fertilizer and all of the other commodities that, you know, we don't think about helium, right. That's the vast majority of that that's coming out for the world is coming out of the Middle East and through the Strait of Hormuz. So the, the, the volatility that goes with these choke points is great. So we can jump ahead. I just wanted to make that reference. It's a great chart that's there.

[00:59:14] Uh, check out today's newsletter and, uh, you can see that and read the whole article there. So jumping into, uh, manufacturing and supply chain, big, big announcement this week, which was, uh, a lot of, uh, so, so much of it. So many of our listeners are, um, in the industrial, the building material world, electrical, plumbing, HVAC, and so forth.

[00:59:35] And so many of the distributors that, uh, make up the network and, and our ecosystem and family here within the round the horn and wholesale distribution show are part of buying groups and trade groups. And one of the large, uh, or I won't say large, but a good size and long lived and well-known buying groups within the industrial and construction segment evergreen shut their doors basically this week. And, uh, it's a big deal.

[01:00:03] It impacts, you know, 37 years of operations. Um, and it was kind of surprising because last year they had just shown that their member sales were up 13%. And, uh, I had heard quite a few rumors going on for the last few months within the industry that there was quite a bit of discussion about them being bought, uh, and, or some mergers with some others. Um, but they ended up just shutting down. So it was kind of surprising to see.

[01:00:34] So what's the impact? What do you, what is, what is the impact and why, why would they just shut down? Well, they obviously were, uh, they weren't achieving enough. It's so the, the challenge is there are, is there are very large buying groups. And, uh, a good example is affiliated distributors. They pass on a hundred percent of their rebates, right?

[01:00:57] Mark, you know a little bit about this since Mark's company manages the rebates for them, uh, is that a hundred percent of the rebates go back to the members. So there's pressure on the smaller buying groups because they can't do that because they don't have the dollar volume going through them.

[01:01:14] And, uh, and the smaller buying groups typically are getting those, their cash as a percentage back from the manufacturer versus the distributor paying their bills for those particular vendors through the buying group. And then the buying group can live off the float of those dollars. But if you're waiting on those dollars coming back from a manufacturer, you're sharing those dollars now back with your members.

[01:01:41] Your members don't maximize the rebates that they could be getting because they're sharing the dollars, right? There's a gap in that. And I don't know the financial situation of what was going on with Evergreen. My assumption was they, you know, couldn't continue to make it work. But what I've been seeing with other, you know, midsize buying groups out there that some of the struggle is because of just the business model and the sheer volume of revenue is that you have the larger.

[01:02:09] And this could be within any, well, it doesn't matter whether it's a, an organization like affiliated distributors and, and Evergreen impact or, you know, a buying group in the medical marketplace or the office products or food service or wherever it is. It's the same, same economics is if you can't pass on 100% of your, your rebate dollars.

[01:02:34] And you've got members who are continuing to grow their business in spite of that. Eventually they become attractive to the buying group that can pass on 100% of their rebates or just even a higher percentage. And you tend to then start losing members to the behemoth. It's a churn. It's a churn issue. Exactly right. And there's a point in time where it's not sustainable anymore. And I think that's what we saw this week. Because you're not adding enough new members to offset the churn.

[01:03:03] Not enough new companies starting, right? Right. When you, and you, I mean, think about Tom, if you think about our customers at LeapSmart, you know, we have, you know, multiple companies and customers that are, that are a hundred plus years old. So, right. You've, you start thinking about that. That it's not like there's 10 new, and while there, I'm sure you could look at the statistics, and there are a lot of new wholesale distributors starting every year. They're not driving huge revenue amounts. Right.

[01:03:32] Not volumes are not, right? Not top. Yeah, exactly right. So, you know, I think it's extremely valuable to have a lot of players in them. Not necessarily a lot, but multiple players in each vertical in the buying group arena. But it's, it's fragile. Mark, any thoughts on it? Yeah, there's definitely, you know, the risk of further consolidation, I think, in this space. I think it's just as the manufacturers are competing and the distributors are competing.

[01:04:02] These buying groups and co-ops are also competing. Yep. And if, you know, I, we're fortunate to have a few clients in that space. And when you speak to them, you know, they say, you know, in many cases, they can have 10, 15 year long relationships even longer. We're coming to the same book. This one will give me a 5% rebate when you only give me four. And that's, that's the top and bottom of the conversation. Yeah.

[01:04:32] And what happens, like you said, is then to the manufacturer who's funding this, do they put their money where the, the buying group that's growing members, growing spend, who will insist on better terms than the competitors? So it's, yeah, it happens the same in business. The big businesses eat the small businesses, the big buying groups, you know, I think we'll see them increasingly eat the small ones. Yep.

[01:05:00] Well, I think in this particular case, I know there were some discussions from another buying group. I won't mention them, but about them acquiring Evergreen or even there being some level of a merger. And my assumption has to be that it was too little too late in this particular case. The numbers didn't play out, right? The numbers didn't cancel out. Yeah. And so, you know, it either works. Yeah.

[01:05:24] In this case, they've already, there's already been announcements by the Sphere One buying group that a large number of Evergreen members have come over to them. And I know that affiliated distributors has already picked up a handful of the ones that were already attractive to them to start with. But, you know, I was at an event a couple of years ago of a buying group and was playing in their golf outing. And I was talking with a senior executive of a major industrial supply company.

[01:05:56] And we were playing together in a foursome and chatting quite a bit. And he was actually, their company was actually a member of two buying groups. And he's, and it just because they do construction and industrial and there was crossover and he's trying to figure out what to do with that. But then he was also being courted by one of the biggest ones at the same time. And he said, it's just, the challenge is, he said, you know, we have just deep personal relationships within these groups as well. And so there's more than just the economics.

[01:06:24] There's the personal and human component of it well that he was really struggling with. But they ended up moving from one to, I think in the end, they were still part of Evergreen and then also affiliated distributors at that point. So they just roll everything over to AD at that point. But, you know, good news for some of the larger buying groups. But anyway, sad to see this go away. So I wanted to know about that.

[01:06:50] What I would add as well is what I've seen the really good buying groups do, it's not just about buying. They start, they help their members sell as well. Sure. And that's where I'm seeing the differentiator these days. And I was at a conference last year and yet there was a real big focus around that and creating this community. So, yeah, never good to see things closing down. But, you know, I suppose it is business.

[01:07:18] It's the world we live in, you know, no matter how we slice that. Let's slide into our AI segment. Is that all right, Tom? Yeah. Before I do that, I want to do a quick shout out to my friend Niall who just made a comment. I haven't talked to Niall in a few years, but he is the ultimate visionary person of all time. He was one of the creators of MTV. Wow. Really, really an amazing visionary.

[01:07:46] So, Niall, great to see you here and thanks for checking in. That's really cool. It's been a long time, yes. I want my MTV. Remember that? You're dating yourself. You're dating yourself. Dire Straits, right? I don't think that was Dire Straits, yes. Come on. Yes. Do you know what the first song was that was played on MTV? Oh. I probably won't get it. Go ahead. No, I don't think I know.

[01:08:16] I think it was a Niall maybe can tell us, but I think it was a Michael Jackson song or a Madonna song, but I'm not 100% sure. All right. All right. Where are we going now? It was the first song ever played on This Is Crazy. So, what did you say, Tom? Madonna or Michael Jackson? Michael Jackson, yeah. Hmm. How about The Buggles?

[01:08:45] The what? Video killed the radio star. Remember that song? I do, but who sang that? The Buggles. How do you spell that? B-U-G-G-L-E-S. It's not The Bangles, The Buggles. The Buggles. Wow. Video killed the radio star was the first song ever played on MTV. It is astounding the things that we can find on Gemini in just a flash of a moment, huh? Okay. All right. So, Mark's thinking, why did I join these guys today?

[01:09:15] One of them's trying to sing and they're talking about stuff. Don't give up your day job. Yeah. I was thinking, actually, my favorite MTV program used to be MTV Cribs. They are the rich and wealthy live. And that was always interesting. That was later, though. In the beginning, all it was just was videos, right? That's all they played was videos, yeah. But now we're 1981, right?

[01:09:40] So, it was August 1st, 1981 at 12.01 a.m. was the first one that aired. So, just all that shows is there's a generational gap between Mark and Tom and I. Because Tom and I were juniors in high school in 1981. We were just getting ready to go into our senior year of high school. Well, and MTV along with ESPN and all those only really came about through the proliferation of cable TV, right? Right. Which really did. Absolutely. Up until that point.

[01:10:08] Because, Mark, here's where the era Tom and I grew up in. And our whole entire life, we've had remote control TVs. Because for the first 15 or 15, 16 years of our life, our dads would tell us what channel to go change. Go get up. Channel 4. We would get up and go walk over to the TV because we were our father's remote until the real ones came along.

[01:10:35] But it's the same TVs where you would go around the back and there's a little knob and it would make the picture stop rolling. Yeah. And then you'd have to adjust. Did we put foil on the antennas or not? So I'm confident nobody came here for that today. So now that we're done with our historical TV section, where are we going next? But Niall, thanks for joining us. It's great to have you with us. And we're just a complete rabbit hole in the show.

[01:11:03] So I think we should jump into our AI technology section. There's an article there from ITPro. NVIDIA CEO Jensen Wong says that these professions will be the big winners of the generative AI boom. But the reason that I wanted to talk about this is I think it's a good stepping off point. First, let's talk about the article a little bit.

[01:11:26] And we've got so much of a discussion about data centers and being built and so forth. But it's a stepping off point into a topic, Mark, that you had brought up that we should talk a little bit about today about some of how manufacturers are starting to view data. And I think it'll be a good jumping off point. But let's talk about this a little bit first. Do you guys get a look at that article? Yeah.

[01:11:53] I mean, basically what he has said, which people probably wouldn't immediately think, is the winners right now are the tradesmen. Right? So the electrician, the builder, all of this infrastructure. Iron workers, plumbers, electricians, HVAC techs. All of this infrastructure that we need to be building requires, you know, we don't have robots doing it yet. So it requires people skilled.

[01:12:21] And you think about just like these data centers, right? These aren't just an ordinary. No. There's so much involved in them and so much, you know, the cooling and everything else involved and all of that. So, yeah, I know. I mean, I know there's, you know, definitely, I know of plumbers and electricians and so forth that are making $250, $300 an hour right now. And his point being is, you know, this is kind of a opportunity to.

[01:12:51] And who was, I was talking to somebody that, you know, he was telling their kids, right, that, you know, if you're going to go, don't go study computer science and stool, go study electric or electrical or learn how to be an electrician or a plumber or things like that. If you really want to make big money. And not the risk of being replaced right away by AI. Our youngest son, right? Austin, you know, Tom is a couple of years out of school. He's married.

[01:13:19] He's got a little baby now and he's got a pretty good job, but he's looking at getting interested in getting involved in law enforcement, which is a noble career. And I admire that. But I've been talking to him about trades, you know, and it's safe. You're home every night with your family. Nobody's asking it. Rarely are you going to need to work in the middle of the night.

[01:13:42] And you could probably make double the salary as, you know, and where they live in Colorado Springs. In Colorado, there's just booming, booming building going on there. And it's like, he's, you know, I'm just a data source or the data point for him at this stage. He's going to do what he wants to do, but I've been encouraging that. So, anyways, let's kind of continue.

[01:14:11] Mark, you had brought up an interesting point, though, that you had had in our, we were text messaging yesterday about some conversation while we're talking about AI and technology. I think rather than kind of jumping to all of these next articles, although there's a couple of additional good ones, one from McKinsey about AI assembly lines and imperative, strategic imperatives for CEOs to be thinking about. We can talk about that a little bit. But Mark, can you kind of introduce that discussion and comment that you had made about some discussions you've been having with some manufacturers recently?

[01:14:41] Yeah, absolutely. And it makes sense when you think about it, but it's something you don't immediately think of. I've been speaking to a number of manufacturers recently, and they're a bit nervous about how distributors are going about implementing AI. Why? Because these manufacturers have spent decades building relationships with these distributors.

[01:15:09] And there's the risk that all of a sudden, future decisions are not going to be made based on a relationship. They're going to be made based on what the AI model, based on data, tells that distributor, which might be stop selling that manufacturer's products and sell this ones instead. Which means the value of that relationship, yeah, AI doesn't look at that.

[01:15:35] It doesn't look at, did you give me tickets to the Yankees game or anything like that? It purely looks at the data. And so the manufacturers that I've been speaking to are saying, you know, how can we safeguard against this risk? We're mindful that the way we do business with our distributors is going to change because of AI. And it really got me to thinking about, yeah, how much is that landscape going to change?

[01:16:04] And it might be that there's still a relationship, but the relationship is going to have data at its foundation. And so I thought it was a really interesting point. And as I've discussed it with multiple manufacturers, it is a concern they're having. So, yeah.

[01:16:25] Mark, do you think that this impact impacts both sides of the equation, the manufacturer and the distributor? Because it's not just the manufacturer that's building the ties based on relationships. The distributor is doing the same thing as well. Yeah, I mean, it does work both ways. I just feel that the manufacturers, especially in certain industries for such a long time, have enjoyed certain on certain product ranges, very healthy margins,

[01:16:56] and have been able to exert a degree of dominance. Whereas what we're going to see is just purely data-driven decisions. And so when you think about it, and I'm just making things up here, but you might have products that are 10% cheaper, but with 99% of the quality. And the AI will look at that and go, well, actually, I've done all the mass.

[01:17:26] I've done the trade-off. We're not going to go with the branded manufacturer anymore. Yep. So that, Mark, that, I'm sorry to interrupt you there, but that implies to make the right decision that you have a lot more data points than just ERP data. Because there's a lot of, I'll just say, intrinsic things, the brand recognition and some different things like that. And I think you're already alluding to that a little bit.

[01:17:54] But you need a whole lot more data, I would say, to really make a decision than just straight ERP data. It's probably the core and the most important part. But you need more than just that. Wouldn't you agree? Yeah, absolutely. And I think where this gets to as well is, you know, again, we've traded for so long on instinct. We assume our customer is brand loyal. And maybe it's never been tested.

[01:18:22] Well, AI will come along and test these things and say, hang on. Now, yes, the customer's loyal to this particular product, but this one, they'll take just the cheapest item on the shelf. So, yeah, a lot of these assumptions are going to be challenged. I think that this will cause manufacturers to be more willing or to take that step to go direct

[01:18:50] and do more with, you know, even the Amazons and things like that. Do you think that opens up that door more and encourages that more? I don't, I'm not sure. What I am certain of is it's going to mean that manufacturers are going to have to do a whole lot more in terms of helping distributors become sales houses rather than order takers.

[01:19:16] They're going to have to really invest in that space so that, yeah, so that decisions can be educated. Almost the manufacturer is going to have to help guide the distributors' AI and things, but also the manufacturer is going to learn as well. I think that's, you just kind of nailed it, right? The manufacturer in this case, and I think from what we were texting about yesterday,

[01:19:46] is they probably don't want to do this or maybe don't even know how, is they need to be driving, having more data, more understanding to help the distributor understand their value, right? And historically, that's been limited to things like quality, inventory levels, brand recognition, and things that they can control.

[01:20:10] And the brand side of it kind of comes from that baseball tickets and hockey games and barbecues and the things that go with that. I think that will always play a component, right? And then we just spent all that time a little bit ago talking about buying groups and so forth. The buying group probably is going to need to be able to have some level of an understanding or maybe being able to help a manufacturer with some maybe aggregated data

[01:20:39] that would help them make some decisions to support and develop their distributors and distribution a little bit more. I just think it's interesting. I started my career in the early 90s working for a distributor carrying a bag and so forth and selling the old-fashioned way. We sold on value and relationships and pulling through things. When I worked as a manufacturer's rep, I think pulling things through the end user

[01:21:07] and helping the end user understand the brand value. Now we're just needing to do that exponentially better, right? Because there's always going to be that human component, and I think there's going to be some of that relationship piece that if all things were equal, Mark, the analysis you just described, if things were, let's just say, within 3% to 5% points, you could have the human relationship component push something over the top.

[01:21:33] But when you start seeing these trend lines that say, well, it's 5%, but it's 5% on this category and 3% on this next category from the same vendor and 7% in this other category that we buy from, wow, it becomes powerful. I'd suggest, this just came to my mind, but I'd suggest for the manufacturer is if you could get ahead of that for your distributor to help them see why they should be buying more from you.

[01:22:02] We taught them, it's literally what we're doing for distributors with LeadSmart with our revenue expander tool that identifies white space and helps the distributor see where an end user should be buying more from them that they're not buying. If a manufacturer could get their head around using AI and other tools that says, going back to the distributor that says, here's the economic pressures we understand you're under, here's what we understand is going on with your customers as well,

[01:22:29] and here's how we think we can help you solve that problem in our partnership, they'll win. But if they don't have that data, it could be a struggle. So just to wrap up here, Bob made a comment. He said buyers want the risk minimized and more data doesn't get them closer to that. Mark, what's your thought on that? Do you agree or the data is not? Yeah. I think like I said earlier, there's no shortage of data out there.

[01:22:58] And it's, I think in terms of what we're looking at here is the data is great. But I think the most important thing is, what are you asking the AI to do? If the AI doesn't have the right brief or isn't configured the right way, and, you know, it's very much a kind of point it in a direction, pull the trigger.

[01:23:24] So do you tell the AI that you are trying to improve the profitability of the supply chain or just your business and things like that and understanding how that's working? Because... But you need to help improve the relationship, right? What do I do to help the relationship too? It all depends on the brief the AI has, not the amount of data it has, in my opinion. That's good.

[01:23:55] And yeah, I just think, you know, I see it in data where I can see a manufacturer making 60% and the distributor to making 20. And then on the flip side, I see a distributor making 40 and a manufacturer, say, making 40. Yeah. AI is going to come along and I assume it's going to try and normalize some of this. Sure. The worst thing that can happen is it comes along and starts trying to reduce prices in marketplaces. Yeah. Because that doesn't help anybody.

[01:24:25] Yeah, but that's likely the next use case that flows from this discussion, right? Yeah. Right. But, you know, what's interesting about that, I'll just tie this in, is, you know, we referenced affiliated distributors earlier, our good friends there, and, you know, I do all of their divisional events each year where they've got their national meetings and they've got their members that are coming to meet with the manufacturers and

[01:24:53] some of the service providers like our company. It's astounding the amount of, it's not just, this is not just at AD. This is, AD has some of the most forward thinking and advanced members out there. This across the board in wholesale distribution, specifically in North America, is the amount of, I'll say, I'll just, I'll say $102 billion a year companies that are still going to meetings

[01:25:19] with their manufacturers with three ring binders and spreadsheet printouts and ERP printouts and a binder. Astounding to see that in 2026. Now, maybe I'll get to those events this fall and I'll see none of that. I don't think so. Right? So there are going to be those people, though, that are taking that data and instead of printing it out in a 3D binder, they're running it into, say, MAI models that are going to really help them when they sit down with an event.

[01:25:47] And I think, Mark, you brought, in bringing this whole topic up, this is the angst of a manufacturer, is when a distributor can come back to them with just tons and tons of data that they've never had before, but they can aggregate it so much better now to make decisions and come back and start asking for concessions or different things that will be very uncomfortable. Interesting point. All right, Kevin, we need to wrap up. You got to go? Somewhere to be? I got somewhere to be. Yeah. Okay. Down the hall?

[01:26:17] We need to go two things to do. That's right. And it's Friday. Mark, any big plans for the weekend? My father's over. Oh, fantastic. First time ever in the United States. So I've been taking him to all the local places and things like that. So yeah. Take him to the local Lowe's, everything like that. He's getting to see the full experience. What does he think about? We're going to get him to Waffle House so he can get that experience. That's it.

[01:26:45] I was going to say, what does he think about North Carolina barbecue so far? He likes it. Yeah, he really does. That's good. And we've been having, we've had the grill on just about every single night. So yeah. Well, we'll tell him that I'm a big fan of his son and he did well in raising you with some smarts. So Mark, we thank you for being with us. You're always a great guest. We're certainly appreciative of you and everybody that joined us today and the comments that came in were great. We're appreciative of that.

[01:27:15] We've had quite a few new listeners. Last week, I think the show got out on the recorded podcast format. I think we were in either seven or eight countries we had downloads and listeners in. So we're appreciative of the growth of the show and the support that we have behind the scenes with Lily and John and their teams getting us ready to do these each week. So again, we love it when you're with us. And we appreciate the folks that comment on a regular basis.

[01:27:45] If you'd like to help us grow and continue to expand the audience that we have, hit the subscribe button, share the newsletter with your friends. Again, if you don't get that newsletter, we'd love to get it out to you. Simply just request it at hello at leadsmarttech.com or search us out on LinkedIn and find it there and we'll get that out to you as well. And we appreciate everybody helping us in the support of that. Lastly, again, we couldn't do this every week without the support of the company that Tom and I work for, Elite Smart Technologies.

[01:28:13] So if your company is looking to digitally transform, understand your customers better, find risks, rewards, opportunities to accelerate growth within your business and understand your team, your customer, and your overall business better, we'd love to chat with you about our enterprise growth platform and see how that can help you like it helps lots of other companies. So Mark, thanks again. Tom, we'll catch you on the next meeting that's coming up not too long and we appreciate you all and we'll wish you a great weekend. Thanks everyone. Thanks.

[01:28:47] We hope you enjoyed today's episode and our guests. Each week, we try our best to dig into the topics that are impacting your business. So please reach out to us and let us know how you think we can make the show better or topics you'd like for us to tackle or talk about more often and even guests you'd like to see join us. We're looking forward to bringing you next week's session and hope that until then, you stay safe, stay focused, and do great things.

[01:29:13] If you haven't already, please subscribe to the podcast and leave a review to help others in wholesale distribution get access to the conversation. And finally, please check out our sponsor, Lead Smart Technologies and their manufacturing and wholesale distribution industry CRM customer intelligence and channel collaboration platform. That's Lead Smart Technologies at leadsmarttech.com.