Our All-Star Panel of Experts Discuss The Past, Present & Future of Wholesale Distribution

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

[00:00:30] With the high chain issues, we peel back the onion with our guests into the topics that impact your business the most. Welcome to the 200th episode celebration of Around the Horn in Wholesale Distribution. Today we have a very special panel of guests who we will introduce in just a moment. First, your hosts from episode one to episode 200, Kevin Brown and Tom Burton. So, you guys see behind us? That's the ocean. Yeah.

[00:00:59] That's the Pacific Ocean behind us, as far as we know. As far as anybody knows. As far as anybody knows. We were supposed to be in a location with the ocean behind us and all kinds of stuff. Didn't play out. 100% play out. So, here we are at our offices. This is our office plan B. But anyway, just pretend. Pretend. But here we are with the right group of people. Doesn't matter where we're at, but we're here with the right group of people.

[00:01:26] So, John, before you kick things off, let's say if we can, why don't we go around the horn and ask our guests to briefly introduce themselves. But I'm going to go, because of the look on Mike's face, I'm going to go counterclockwise and ask Alex if he'll do a quick introduction to himself and what he does with his new venture and so forth. And we'll wind down with Dirk on this. Yeah. Thanks for the lead off opportunity. Appreciate it.

[00:01:53] My name is Alex Chausovsky, president and CEO of 3DM Consulting. I do a lot of public speaking on the economy, on geopolitics. And over the last couple of years, I've been really getting into the crisis simulation game. So, think of this as corporate war gaming. We're doing this at trade association events. We're doing it in corporate boardrooms.

[00:02:14] And we're helping companies prepare for the complexity by simulating potential crises, whether that's geopolitical, climate or otherwise, and helping them flex their muscles in terms of how they will respond. What levers can they pull in terms of inventory, price response, supply chain diversification. And it's been something that's been really well received by the industry. So, thanks for the opportunity to introduce that concept. Dan.

[00:02:43] Hey, I'm Dan Schubert. I help lead the National Association of Wholesaler Distributors. We're the trade association here in Washington, D.C. that represents the entirety of the U.S. distribution industry. By our count, that's around $8.2 trillion in GDP to the U.S. economy. So, a major segment of our industry. And I spend my time helping members solve complex business challenges. Helping them navigate what's happening here in Washington.

[00:03:08] I also focused a lot on helping them adopt and work through what is now a technology boom for our industry. Artificial intelligence having a huge impact. So, I'm member facing. I spend my time on the road. I'm just happy to share some of what I'm hearing with you guys today. We appreciate you being with us, Dan. You're an important voice in your organization. Certainly does great things for the industry that we all work so hard for each day. You've been a guest with us before. A wonderful guest. We've actually had Eric Hoplin, your CEO on with us.

[00:03:37] In fact, he was back in January on a snowy night in D.C. We were with Mr. Levy there as well. And one of the first things that Eric said to me was, when am I going to be on your show again? My response to Eric was, last time I saw you, you were on Fox Business with Maria Bartiroma. I don't know why you're worried about us. He was, I want to come back. So, it was great. He wants to move up a little. That's right. He wants to step it up. So, yeah. And Steve can vouch for this briefly.

[00:04:04] Dan, you also have a kind of a little side gig, side hustle as a professional karaoke singer as well. My alter ego down in Nashville. Only in Nashville. That's it when we were in. I was astounded how good you were. So, Steve and I were with you at InForrest Big Tug event in Nashville a few months ago. It was a great time. Speaking of Mr. Levy, why don't you share with us a little bit about you? That was a great time.

[00:04:31] It was a good time until Dan got up there. Then there was a party down on Fifth Street. I mean, that's where you brought the noise, Dan. That was a great time. My name is Steve Levy. I work for InFor. I am humbled to be here amongst friends and thought leaders in the distribution industry. My job at InFor is to make sure that all of our industry-specific solutions are aligned to our customers' goals. But my passion is really solving distribution problems, which is why I'm humbled to be here.

[00:05:02] And really privileged to call so many people on this webinar with me, friends. It's great to see you all again. I can't wait until we get together in person. It's a shame we couldn't get together. Maybe for 300, we'll all get together and do something in person where we're one big panel. That'd be fun. And I know why Dan's CEO wanted to be with you, Kevin. I think they say that only 2% or 3% get to 200 episodes. And we talk about podcasts.

[00:05:26] You are undeniably one out of 17 or less, depending on which data set you look at. So being amongst the top 2% of all podcasts and the top 1% when you start looking at niches, that's why Maria Bartolomeo, Fox News, they're nothing. I mean, they're in the top five, but you guys are in the top one. John, can we get a clip or a reel out of this? I'm going to get that for sure. Done. Why don't we jump up to...

[00:05:55] John, tell us who you are and what your company does and how you support us real quick. And we'll go to Mike and Dirk and then we'll get to the questions. Sure. I'm John Taylor, founder of the Act 3 Agency, where we do podcast marketing, production, discovery, all that good stuff. I've been with the team since probably around episode 30 or 40. That's when I came on board and have been producing ever since. And we couldn't do this without John.

[00:06:20] I met John when you were doing this as not a side gig, but as you were just getting rolling, right? And we've been friends since we need to drink some wine together, which would be important for us to do since you're up that Napa Valley way. But John is just an integral to what we do each week and the power behind the editing of all these things. So, Mr. Marks, I'm so grateful that there's not a stick on your shoulder and there's a discussion about your medics. Yeah, that's right.

[00:06:49] Remember Hunter at the show and Dan? Mike was medicated, so... I'm not giving the shirt back. And by the way, for those of you that are listening, this group of people is often referred to as the usual suspects. You've got a nice cross section here and trash talking is a sign of respect. So I just want to get that out of the way. From the beginning. I'm an old consultant. I'm semi-retired. People laugh at me because I've retired three times.

[00:07:16] And we've worked in distribution. I'm a founding partner of the Indian River Consulting Group. We've been at it almost 40 years. And working in distribution, strategy, marketing, center design, a bunch of stuff. I'm spending probably half of my time now in AI. Back in 1970, I did my first AI project for the U.S. Army, which I didn't talk about until all this other stuff came out here in the last couple of years and Monte Carlo simulation.

[00:07:44] And all of a sudden, everything that's old is new again. I can't fit into my leisure suits. So I'm just working on AI and trying to help people through it. So glad to be on the broadcast. And I think this is one of those conversations that could probably go on all day long. So I'm not quite sure who... I'm hoping John Taylor's the adult supervision. Which... So I'm glad to be here. If you knew what John did on the weekends, then you would wonder if that's the case.

[00:08:13] John and his brother have a very popular... John, what do you call it? Just rock band as well? Rock band works. Yeah. Nice. The uninvited. Thanks for the plug. I appreciate it. But it's all right, Mike. I've got a timer and a taser. So we're going to keep this under control. And sound effects. If you don't mind, before we jump to you, I wanted to say thank you to some of the great, great comments we have here.

[00:08:42] We're just good friends. James at Infor, James Munford making a nice, appreciative comment here. And Dan Judge, I think everybody here knows Dan Judge from NetPlus Alliance and what an industry icon he is. And Bob Britton, who's with us regularly at the show. Paul Kennedy, thanks so much. Paul's been a wonderful guest with us as well. So I appreciate all the comments that are coming in and congratulations as well. We've got Steve and Rommel as well there popping in. So thank you for everybody for that. I think Bob's been with us all 200. Could be. Yeah, Bob, Bob Britton's here weekly.

[00:09:12] We appreciate that. So Dirk, I haven't seen you in two weeks and we were on an island together when I saw you last. We don't need to know the details of that. No, but Dirk might have a funny story about something that happened in our setup. So when I fell off the stage. Oh my God. I was worried. I was worried. I was worried that Kevin broke his hip as he tried to be young again and jump up on the stage. And he goes crashing over the side. Empty dumpty. But, but damn, he got up. Adrenaline was going.

[00:09:42] And all I did was ask you to breathe, Kevin. That's right. Dirk took care of me. We were doing a little prep, the two of us, for we were shared a stage together in San Juan, Puerto Rico, two weeks ago. And, and what a wonderful time. What is it? I guess the question is, what is it about me that would make Kevin fall off the stage? That might be another conversation, but there's probably something there. Another show. He was medicated. He was medicated. I was still overwhelmed with the privilege of that.

[00:10:11] So Dirk, tell us about your work. Yeah. Thanks. Thanks for having us again, guys. I always love being with you and love these conversations. Guys, I'm Dirk Beveridge, founder of the fam, the fully alive. After 40 years of working in the industry, consulting with distribution associations on things like strategy, innovation, sales and leadership. Coming out of COVID, many of you know that I created something called We Supply America.

[00:10:38] And for four summers with no business plan, no revenue model, just a calling, just a calling to go out and meet the people that keep our country supplied. So for four summers, after 40 years of walking into the front door of your businesses, for four summers, we walked into the back door of the businesses. And when you do that, and there might be a little challenge to each of you on here.

[00:11:04] When is the last time you walked into your business through a different door? Because when you walk in through a different door, you see the business in a new light. You see it through a new lens. You meet different people and you hear different stories.

[00:11:18] And it's those experiences, those stories, the hugs out there on the warehouse floor with the drivers, with the individuals in the office, that my partner, Bethany and I have created the fam, the fully alive movement. And we are on a mission to empower one million people to rise from just getting by to living fully alive.

[00:11:47] And when you look at that from a business perspective, great places to work will tell us that only 16% of your employees are flourishing. It tells me as great and as good as we are, we have a lot of work to do in terms of helping our people flourish personally and professionally. That's the mission that we're on. Nice. Love it. Love it. Dirk, I think I know why Kevin jumped off the stage.

[00:12:16] He was afraid to share it with you. You are a prolific speaker. I'm not always in a great calling, right? But you really are a profound speaker as well. I would have jumped off the stage too, Kevin. I got you. He fell off the stage. Truth be told, everybody here, we've been more than others. I don't know, probably Alex has probably done a hundred presentations already this year. I just decided I could jump up on the stage without needing the stairs because I'm 35 years old, right?

[00:12:46] No problem. Well, I almost got there and then just before it was off the side and I'm laying on my side off the side of the stage. It's only Dirk and I in the room, fortunately. And so when we did go up on stage to a large audience a little bit later, I did in fact take the stairs. John, let's get started with some questions. We've got a great time. Let's do it. We've got tons of comments coming in. I actually just got a couple of text messages, not just comments on the stream here, but I'm getting some text messages from people flowing in as well. Awesome.

[00:13:15] Let's take it away. We're going to dive in, John. Maybe you can tell us about our format. Absolutely. So what we're going to do here is start off with a series of questions about all the things that we typically talk about on the podcast, the economy, supply chain, manufactured and distributors, AI strategy, technology, and more. So we're going to kick things off with the first question about the economy. And this one goes to you, Alex.

[00:13:40] If you had to explain the state of the economy to an independent distributor today, what would you tell them to pay attention to? And what would you ignore? There's so much to impact. And you have 15 seconds to answer. 15 seconds. Exactly. All right. I will say when I look at the economy today, I am proud of the resilience that I observe.

[00:14:05] I'm proud of the fact that despite the headwinds that we've seen, whether it's from tariffs or war, that the economy continues to move in that positive direction. But I'm also cognizant of the fact that not all cylinders of the economic engine are firing at the same speed or in the same direction. So we've got winners and losers on the biggest part of the economy, the consumption side, you know, the money that you and I spend as individual consumers. You know, the top 20 percent of the income earners continue to drive most of the growth.

[00:14:34] They account for basically 60 percent of all consumption activity. The bottom 80 percent, that means the middle class and those below it, account for just 40 percent. So there's clearly the haves and the have nots. And that's playing out in our society. So we have a lot of money on the industrial side, the distribution, the B2B side. We have winners and losers as well.

[00:14:53] So everything related to war making, conducting combat, aerospace defense, military applications doing quite well, as is anything related to, of course, the AI build out, the ecosystem. So not just the data centers, but the electronic components, the electrification, the power generation, the water that's booming right now.

[00:15:15] That's contributing a lot to the growth in terms of some of the weaker segments dealing with interest rates and high cost of borrowing. So housing is suffering, non-residential construction not doing that great right now. Anything related to those sectors, anything that's interest rate sensitive, struggling a little bit. And of course, we're no longer talking about interest rate cuts in this environment. We're not talking about how many hikes will we get before the end of the year.

[00:15:41] So as I try to wrap my mind around all of that, specifically from a distributor's perspective, I go back to the fundamentals. I realize, you know, you've got to focus on margin preservation, making sure that you remember you're in business to make a profit, not just to drive revenue growth. And there's a lot that has to be done for that to maintain in this environment. Focus on the relationships that you have with your customers, with your supply chain partners.

[00:16:06] The thing that you can control is how frequently you communicate, how transparent and honest you are with people. There are many things you can control, but focusing on the controllables will go a long way in making sure your business stays healthy and resilient as well. So there's a lot to unpack in all of those. I don't want to hide the time, but that's where I'll leave it off for the rest of the group to chime in. So before we jump ahead, Alex, and you can answer this in either one word or one sentence.

[00:16:36] Interest rate hikes, interest rate reduction or flat the rest of the year? Well, again, the devil's in the details. You look at the latest labor report, there are some signs of softening, you know, the CPI, the inflation data or the PCE measure that the Fed likes to look at, not showing really the need to hike substantially right now. And there's two camps there.

[00:17:00] So my baseline case is at least near term will probably get a rate hike of about 25 basis points or a quarter percent between now and the end of the year. The timing of that is less certain. They're going to want to see more data. We saw the new Fed shared comment on that. They're going to be data driven. They're not issuing guidance specifically because I think they want to have a wait and see mentality.

[00:17:22] And so my baseline case is no real substantive change to interest rate policy relative to where we are right now, between now and the end of the year. Anybody else realize that Alex's one sentence is like my one sentence? I was going to say, Kevin, do you want to add anything to that? Yeah. You don't get to. No, I think it's, I think it's, I'm appreciative of all of that. And I always look to Alex on these things first.

[00:17:47] And what I, the reason I asked the question about the interest rates is Tom and I don't have any active bets going on right now. We were at a, we were at a affiliated distributors event together a few weeks ago and a company that is now as of yesterday, a new lead smart technologies customer, wonderful distributor in Illinois as well. Just joined us.

[00:18:10] One of the people from their team that was coming to meet with us about our technology came up to the booth and said, before we even talk about anything else, I want to know, has anybody bought anybody a steak or a taco? So she's been a long time listener. So we appreciate Rhonda with the capital group that was there for us because Tom and I have had these bets about interest rates and so forth. And, and so we don't go ahead. So I just want to make sure Alex, you say no interest rate cut or no, or did you say a hike? He said 25 basis points. Yeah.

[00:18:39] I think it's, it's a toss up whether that happens in September or push out towards the end of the year. I do think that there's a propensity to want to cut rates, but maybe one cut between now and the day. One cut, one cut. Sorry, sorry, one increase. That's what I thought I heard you say. Because I'm, I'm actually betting towards a cut. You are. That's fascinating. It's a long shot. I understand that, but I'm betting for the, I'm going to, we talked about this last week. Didn't you sell Microsoft before their last earnings? Yes, I did. And what happened?

[00:19:08] Let's not go into that. Let's move on to the next. Okay. Moving on, Dan. Let's talk about supply chain then. Dan, this one is to you. Supply chain challenges aren't new for distributors, but shipping disruptions, fuel costs, tariffs, and other pressures have made them a much more immediate day-to-day concern. How has that shift changed the way distributors operate and make decisions? And what, if anything, has permanently changed?

[00:19:34] Yeah, I think this is probably the number one topic that I hear about any single time I walk into a distribution executive committee meeting. And, you know, so maybe I presented and frame it this way. First, you know, look, our industry is built to handle the unexpected and to make adjustments, right? That's the entire reason why we're in business. You know, our job is to maintain a resilient supply chain, make sure that goods and services flow down through the American economy. So this is what we do all day.

[00:20:03] But if you look at what's happened in the last five years, it's gotten harder, not because some of these challenges are unexpected, but because they're compounding. And so if you go back to 2022, you know, you're in a peak inflationary period and you've got huge pricing concerns as manufacturers, distributors, and ultimately end users are dealing with a certain little pig working through the Python, so to speak, on large price increases handing down. That's ebbed a little bit, but we're certainly in a higher inflationary environment than where we've been historically.

[00:20:33] You know, now you compound that, flash forward to 2025 and Liberation Day, you've got a tariff infrastructure that's the most robust that it's been largely since the early 1900s. IEPA obviously went down, but it's going to be replaced and is being actively replaced with Schedule 232 and 301 tariffs. So I think we're in a longer term tariff environment. Compound that with conflict in the Middle East that leads to fuel surcharges that don't seem to be ebbing anytime soon.

[00:21:01] Oh, and by the way, the federal government might not be pushing hard on the regulatory front, but you better believe state governments are. And so all of that combined is putting immense pressure on distributors, largely around the pricing and the efficiency side. And so the number one thing I hear about in my conversations are, my goodness, I've had to have three or four different conversations with my customers in the last handful of months because it's not one issue, not two issues,

[00:21:28] but it might be four issues that are causing me to have to charge more for the same goods in order to make my margin. And Alitz, you said it well, we're in the business of staying in business. And so margin protection matters in an industry that has historically thin margins. And so I think what does that mean for us? I think the question is what long-term impacts are we looking at here? One is scale matters more than any other time. You know, distributors that have scale, that have the ability to maintain market share without having to compete on bottom basement pricing.

[00:21:58] You know, they're the ones that are weathering the storm more effectively, and you're seeing that come out in financial reports. The second is the only other lever we really have at our disposal is business and operating efficiency. And so I think it's accelerating a demand to invest in technology to make sure that we can be nimble, to make sure that we can move more product with less people and less effort. And so I think it's really spurring investments in technology, in artificial intelligence, in automation, in order, again, to maintain that margin and ultimately stay above water.

[00:22:27] So I think that's a permanent trend. I don't think that's a short-term trend, but I think the compounding of these different variables are accelerating those trends at a pace that we haven't seen in our industry's history. Great. Great. Mike, do you have anything to add to that? About two hours worth, but I'll give you the one-word answer like Alex does. But I really want to talk about this compounding thing that Dan talks about is really flummoxed a lot of people because they get used to one crisis,

[00:22:56] we get through it, and then they think we're going to go back to normal, whatever normal is. The new normal is chaos. And it's going to just – what we've got is we've got higher volatility. If you think back, there's always three things in any business. You want a computer? I want a really good computer. I want it really fast, and I want it really cheap. You can have any two out of three. All of our supply chains, if you look at product quality, everybody had good, better, best.

[00:23:23] The reliability of the supply chains, even with containers and offshore and everything else, was very reliable. So what happened, everybody optimized. They took scheduled deliveries, and they took product quality for granted, and they optimized how do I get the lowest cost I can. And now all of a sudden they've lost the ability to be resilient, and everybody's talking about it.

[00:23:45] But one of the things I'll tell you, and this is – I know this for a fact, but I can't say without going to jail because I'd have to violate a bunch of nondisclosures. Distributors, in terms of really talking about managing supply chains, are miles ahead of what the suppliers are doing. If you think about inventory, inventory is a substitute for demand information.

[00:24:07] If I have perfect demand information, if you look at one of Dan's trade associations, the flower distributors, the definition of dead stock when you're selling flowers is when inventory returns drop below 300. They designed their business to be able to deal with that kind of philosophy. And everybody just got very comfortable with the way it was. And a big part of this is whining. It's very challenging because nobody wants to do anything different.

[00:24:32] There are manufacturers that are actually – there's a lot of what's called – it's called black box consulting or enterprise consulting. Okay. Where – and we used to do a lot of this. I'm trying to be semi-retired now. But where you take a manufacturer and a set of distributors and you take all of the information, all their financial information, and assume it's one company. And if it's one company, manufacturers keep – I want a loaded distributor as a loyal distributor. Assume the position.

[00:25:02] Hold all this inventory. My competitor can't get in because your shelves are full of mine. That's so much 1980s. And now when people are starting to share information and the manufacturer that talks about sharing finished goods, inventory, and production schedule and finally develops an assemble to order instead of an old MRP thing, which is 40 years old. There's all kinds of ways to do this. The limit is people taking a look at it. And there are innovators that are making big changes. So it's going to continue to be goofy.

[00:25:31] And you're seeing people make – you can't fix what we're doing because all of our replenishment stuff, most of the ERPs that are out there now are still operating on Gordon Graham's replacement model. And there's new things with Monte Carlo simulation where I can reduce my inventory, improve my working capital sales, and improve my fill rate. I can pick a number for a fill rate, and the software will actually develop it. So all those things are out there. People just aren't using them.

[00:26:01] And it's the last comment. We're sitting on the porch, and we've got a hound dog that's laying down, and he's whining. And somebody says, why is he whining? And you go, he's laying on a nail, but it's not bad enough for him to get up and move. So he's just whining. I think in a couple years, this will be gone because we'll be doing different things. Yeah. Mike, can I ask a quick question? Mike, one you said, but people aren't using them. Yep. For you and the rest of the world, why? What's the obstacle?

[00:26:31] What's stopping them from using the tools and capabilities that are available to everyone? The issue is not the people in the organization. And my straight view, Dirk, is that it's the leaders, and they're trying to take this model and force it and put more urgency on it. And they're not looking at the options that are out there. They're innovation. Nobody has to invent anything. The solutions, all these things are already out, but the managers just want to keep doing the same thing they did and just do it better.

[00:27:00] To me, it's a leadership issue. We have a question here from the comment section from Peter. Steve, why don't I lob this over to you? If you were starting a wholesale distribution company today with no legacy infrastructure, what would you deliberately not replicate from the traditional distribution model? And where would you invest instead? You've got five seconds. Wow.

[00:27:30] That is, Peter, a fantastic question. I don't know that I would start a traditional wholesale distributor today, which is what's causing me such pause. I don't know that I would want to invest in a project. I've never seen you short of words. I know. It's crazy. The one thing that I wouldn't replicate is historically when we have a problem, we tend as an industry to just throw bodies at it. I mean, it's everything we do. It's our brute force nature.

[00:28:00] We are get stuff done kind of guys. It's in our blood, right? By nature, we want to count a warehouse. We send everybody out there with a couple boxes of pizza and we count every single SKU in the whole warehouse, every widget. I would really avoid the ability to send brute force labor after things and I would build everything from an automated platform forward and only have people manage exceptions. The happy path would never be a person doing something.

[00:28:29] Every happy path would be automated and only people would be used for exceptions. Mike, did you raise your hand in there or were you just saying hi? I did. And Peter's one of those kind of guys. He's one of the usual suspects too, but he's one of those guys you go into a bar with, he says something to somebody and then he beats the crap out of you. But the thing I would do that was different, frankly, if you look at everything that's happening in the world, everybody, the roles have specialized. Most distributors are spending 25 to 30 percent of their gross margin on selling expenses.

[00:28:59] I would not have general line salespeople. If you look at what's happening, there are people that are market makers. They go out and capture new logos, develop it. They don't maintain that account. And if you just look at this, everybody's hostage to history. That would be the one thing I would start. And you can see a lot of distributors that are changing this now. I mean, we're avoiding names, but there are several people that are very proud of not having field sales reps anymore and doing quite well. Now, do they still have people that make the market?

[00:29:27] Yes, but that would be the one thing that would be different. That's the biggest cost lever I could see. All right. Great. I heard to go along with that real quick. I'll make a quick comment here, John. I heard an esteemed industry executive, Steve Lee, on a show that we had a while back, comment about the potential literally of being able to double the size of a distribution company without adding people because of the use of technology.

[00:29:57] I was astounded that Steve said that. But if it was somebody from other that I didn't have the same respect I do for Steve, I'd just call them crazy. I kind of wonder sometimes if that will be able to be done with a small group of people. And I think we're getting towards that. So I have a question for Dirk related to that. Yeah. Right. Dirk, about people and fulfilling the life that you're trying to do. Do you believe that through the use of technology and the way that they're discussing that, that actually provides a elevated opportunity for people?

[00:30:24] Or is that, you know, we hear all this doom and gloom about jobs being lost and so forth. But there's a lot of jobs I assume that people don't really like doing. Tom, I believe this. I believe we are not looking at the topic deeply enough. We're talking about it at a surface level about don't worry, AI is going to take jobs, but it's going to create other jobs.

[00:30:51] But I believe we need to think deeper about how we can help individuals grow and develop, again, both personally and professionally. That means their skills. But let's go to a word that has been used a couple of times here from the supply chain perspective. And that word is chaos. Mike, did you say or Dan, did you say that the norm today is ongoing chaos? Right. Well, that's not only true for a business.

[00:31:21] That's true for the human being that's being asked to run and to do the work in those businesses. Three days ago, I was with a group of 10 different independent distributors, two manufacturers and a manufacturer rep agency. And I was inspired as hell by Bill Zoller, the CEO of Zoller Pumps down in Louisville.

[00:31:45] And what he shared with the group is that from a human perspective, their entire mission is to help eliminate the chaos that their employees have at home. Why? Because if they are overwhelmed by the chaos of finance, overwhelmed by the chaos of how they're going to educate their kids, overwhelmed of the chaos of how they're going to care for their aging parents.

[00:32:14] We could go on and on and on. They know that when they come into that facility, that they aren't going to have the energy or the drive or the initiative to learn, to become creative. So there's another layer here that we really need to go deeper on in terms of this human level, the human being level, to say what are the conditions that we need to create to ensure that they are in a state of fulfillment.

[00:32:43] And I could talk about that as well. In fact, I'll go there real quick. Guys, one day I'm on my Zoom call with my philosopher mentor who's in Athens, Greece. And we're talking about the word fulfillment. And look at that word. I stopped him and I said, look at that word fulfillment. And it caught me because it uses the exact same word twice to make one word. Full and fill. And it's so important to me.

[00:33:10] Because what that word is telling us as leaders, Mike, to your point about it comes down to leadership. And we need to get people aligned to the mission and then ready and capable to move forward to this new world. Two things need to happen. One, full. We need the environment. We need the leadership to ensure that that individual, that person is full in the current moment. They're secure. They feel safe. They believe in the future. They believe in the future of the company.

[00:33:40] They believe in their own capabilities. But they need to feel that fullness in that moment. Second, they also need to be receptive to filling themselves at the same time. Learning and growing and evolving and adapting at the exact same time. We're not talking about that. We're just saying, oh, they'll go and learn. I don't know about that. So, Tom, thanks for the question.

[00:34:08] There's a deeper level that I think we need to be talking about. Yeah. That's absolutely fascinating. And I want to know where I can get a Greek philosopher mentor. So just let me know about that. John, those 90 minutes are the best. I love this time with you guys. But the 90 minutes I spend every single Monday with Athens John is the best part of my week. It's amazing. It's amazing. You should go on Dirk's next trip. Yeah, I'm there.

[00:34:38] I'm there for sure. All right. We're going to skip ahead here a little bit because I want to hear from Steve on this. We're going to go to the technology question. All right, Steve. Is AI going to fundamentally change the distributor's business or simply make good distributors more productive? John, how did I wind up following Dirk? I want to jump off the stage. It's impossible to jump off the stage or fall off whatever I need to do.

[00:35:02] If you don't have a Greek mentor, then maybe we should just pass this question on. Yeah, I do not have a Greek philosopher. I get a secondhand Greek philosopher. Dirk Beveridge is actually my philosopher. But secondhand. Holy shit. I got a pain. He pays. I hear what he pays for. It's almost as good.

[00:35:28] I think that Alex really summed it up well in the first answer in this show. I don't believe that AI is fundamentally going to change what we're going to do. I think it's going to help us get back to fundamentals and get more at it. So when I talk to my second rate philosopher, second tier philosopher, Dirk, sometimes we talk about artificial intelligence. I know this is shocking because it's kind of on trend.

[00:35:57] And those philosophies, they have to start at the basis. I don't know if you learned much from Dirk talking about the root of fulfillment. But word roots are important. So we think a lot about what is intelligence and what is AI going to do for us. If I think about intelligence at its core, it's really just about prediction, right? Why mammals have brains, why we think about what things are intelligence.

[00:36:22] It's knowing the next word, the next token, the next thing that's going to eat you, the next risk to mitigate, the next issue to avoid, the next supply chain disruption to maybe get some safety stock against. So AI is really going to help us grow in intelligence. It's going to help us make recommendations about predictions in the future. But also, as Alex said, the fundamentals of managing the supply chain, pricing to maintain our margin, maintaining relationships with our customers.

[00:36:51] These are things that fundamentally we're going to have to do ourselves. It'll make it easier. It'll make the prediction of disruption better. It'll help us see what comes next. But I don't think it'll fundamentally change what we do as an industry. We still have to keep the supply chain supplying, quite frankly. Mm-hmm. Tom, do you have anything to add? Oh, boy. I don't know if I have anything to add. I guess I have a broader question.

[00:37:20] And Mike, maybe I know you said you were doing a lot with AI in organizations. If you were to look for kind of the low-hanging fruit and what we can take advantage of with AI, let's say, over the next 12 to 18 months, what would you say is kind of the low-hanging fruit or maybe the best opportunity right now? What part of the business or is there a certain part of the business or a certain area that you would think AI could most benefit?

[00:37:46] You were muted. I think you were muted. You were muted there for a second. And that summarizes my position. Not very much. Everybody's trying to apply. It's kind of like we've invented a gun, but nobody's explained or read the manual. We're running around using them as clubs. And I think there's an awful lot of misuse.

[00:38:17] A, I've been involved with a lot of companies. Typically, everybody talks about using it to grow sales and the rest of it. It's cleaning up and fixing the process deficit. So what companies do is they drop the ball when they're trashing the baton from function to function because we have islands of information and silos. And working on the internal so you stop dropping the baton when you're passing it around, that's the low-hanging fruit.

[00:38:44] Because you can use an agent and create a very small application to solve something that you're most embarrassed about with your customers or your suppliers. And if you just stop there, you can actually get a payoff to prove it. You can't. What happened, the reason so many people are failing, they're trying to go too fast. And right now, every CEO has got pressure from their board. What's your AI strategy?

[00:39:09] Because distribution, and Alex is an expert at this, he was trying to make people successful in spite of themselves when we're talking about exchanges and looking at different ways to go to market. And all of those things are going to work and all those things are going to gain scale. And they were so far behind the curve, they're now overspending and trying to move very quickly and not moving well. And that's why we're having so many failures.

[00:39:32] But I think fixing where we're dropping the baton internal, the whole thing is that improves customer experience. But it's a whole different thing than actually doing orchestration. Because what I just talked about is adding AI tools to existing processes that are flawed. Because almost every distributor process has a process deficit where there's open loops and things crash. But that's probably where, that's the low-hanging fruit.

[00:40:01] If I wanted to get a lot of money out of a distributor, I'd get them to go do that. And it's like the crack pusher. It felt really good. It's free. Now I'll charge you for more. That's it. There's a great comment on here from Bob Britton about AI. And he's saying, AI makes us more efficient, but it does not, and that's in capitals, does not make us more effective. Effectiveness comes from humans, not technology.

[00:40:29] He nailed it because what happens, people are using AI like they used to use Google. And they don't even know. I do 10-page prompts. I have probably 500 types pages of context when I'm working with a client. And I'll show them what my prompt is, and even the short prompt. But once the model's trained, it's incredibly powerful.

[00:40:55] Only 2% to 3%, depending on the data set you look at, are people that actually have a paid subscription to anything. And 90-some percent of people have never used it at all, don't even know. I got to put one thing. We just opened a Space Coast chapter of the AI Collective, which is the largest AI organization in the world. There's 200,000 members. It's designed. And, Dirk, you need to actually be one of the main guys there. It's whole design. It's not for profit.

[00:41:24] Nobody can sell anything. It's about how do you put the human back in the AI conversation. And AI anxiety is wealth. We just started a Space Coast chapter with a couple of my buddies. We have less than a year. We have over 120 members now. But we're actually doing a grandma session. How do you use AI to buy contact lenses or airplane tickets or get your kids to call you? And it just, we got to put people back in this.

[00:41:52] We did a town hall meeting, and people were asking me questions of things that just weren't true. And I think our media is doing a horrible job of informing the public about what all this is about. So, sorry, I went off on a jack. May I come on that? Go ahead, Dirk. Dirk, before you go ahead, I want to come to, as soon as we're done, John, if you don't mind, I want to get Dan to take because he's out on this too because he's out talking data. How many of you typically see a week? It seems like at least two. So let's come back.

[00:42:20] Hit Dirk and come back to Dan real quick on that. All right. Thanks. I'll keep it short. So, you know, everything I'm hearing about AI is about the efficiency, right? And not the effectiveness, if you will, the creativity. And I agree with that. Hell, I'm going to be, until I take my last breath, talking about, you know, the humanity of everything that we do here.

[00:42:42] And at the same time, this group that I was with just this week, where we're really looking at what is that people advantage that the independent, family-owned, employee-owned distribution businesses can, in fact, plant the flag and say, this is our differentiator. It's our people, right? And so one of the things we did is we used technology.

[00:43:05] And, Mike, to your point about the engineering of prompts, a month ago, we spent over a day engineering the right AI prompt to send out to these 10 companies to have them think deeper.

[00:43:23] Oh, damn, may I even say, maybe even more philosophically, about their core beliefs, about who they are and why they are who they are and how that can create an advantage. Forget about the products on the shelves. Let's talk about who you are as an organization. Because we were after developing some best practices. But you know what happens when best practices are created. We just take something off the shelf and we package it up and we send it on.

[00:43:52] That's not what we need. We need deeper thinking. We need better thinking. We need to get down to the root of the issue. And in this effort, the root was the people. So we used AI to help them go on an internal journey. We promised them that it would only be a 60-minute journey. Many of them took three to four hours on this journey.

[00:44:15] Many, as a team, going through this prompt where AI that we engineered for them went down deep into who they are. And what happened as a result of that, we don't have the time now, but I'm looking. That's what I pulled up on my phone.

[00:44:30] Nine fundamental differentiating beliefs of what separates independent family-owned distribution businesses from a human perspective came out of those exercises. And there is a great example where it's not about efficiency. It's about getting back to who we are, human beings serving human beings.

[00:44:56] And, oh, by the way, we've got product and technology and supply chain and all that over here. But in the end, it's about those people. Yeah. That ties pretty well, John, with Will's comment that you just made here about AI changes or risk of AI change or eliminating jobs. He talks about a responsibility to help people prepare for what comes next. So I think Will's on to that, too. Will's been a great guest with us before. Great. Did you want to get Dan's input on that? Yeah.

[00:45:25] We'll take from Dan if you could. Yeah. I like a lot of what I'm hearing, and maybe I'll give you a little bit of a personal take from someone who spent a career in private sector distribution. I think probably the most positive way I'd think about AI, and I'm a huge believer and huge user in its capabilities, largely around the LLM side.

[00:45:43] I think AI has the power to distill down and unlock somebody's true potential in some of the areas that are probably the most valuable in someone's career contribution. And I'll give you the very specific example. So I believe when you hire leaders into a distribution business or really any enterprise, you're really looking for a couple of things. You're looking for someone's ability to understand problems and opportunities.

[00:46:10] You're looking for someone to be able to understand the information they need, to be able to analyze that problem or opportunity and reach a decision. And then you're looking for someone to exercise judgment and ultimately to prioritize opportunities or problems to solve and then obviously deploy resources accordingly. So I think those are probably the most important things you hire a leader to do. Well, throughout my career, I was pretty good at that stuff.

[00:46:35] But I had a couple of limitations that made my effectiveness probably challenged and psyched. One was I was a painfully slow writer. But in our organization, we valued written communication over verbal communication. So I can sit here and tell you a story and weave together my logic. But at the end of the day, I had to produce memos and documents and defensible, essentially, publications that had to go through scrutiny. I was pretty lousy at the visual representation of ideas.

[00:47:05] You know, it would take me days to create charts and graphs. And I was never an Excel whiz. I got good enough to be dangerous. But some of those technical skills that really prevented me within the culture I was in in my company from being as effective and having my ideas kind of see the light of day, that was a challenge for me. And so now, you know, when I'm sitting here and I'm solving problems at NAW or I'm helping our members solve problems, I'm able to talk to an LLM. I'm able to give it my thinking.

[00:47:35] I'm able to share with it the data that I think is important to be able to bring to bear on that challenge. And I'm able to have open dialogue and conversation and not just produce sort of a sounding board, but also to walk away with a work product that is beautiful, that tells a story in a way that truly represents the ideas that are in my head and the experience that I'm bringing to the table as a career manager and leader.

[00:47:57] That is, it's emotional when I look at that work product because I could not have produced that in my career as an individual contributor. I would have paid someone to do that, and that's terribly inefficient. So I just, I get excited when someone's best ideas and thinking, you know, isn't buried under some of their technical limitations. And it can really shine. And I think that's where we're going to see the potential of human capability in our organizations.

[00:48:23] If you expand that out and allow everyone access to those tools, you're going to see some amazing ideas come forward, probably from some places and from some people you wouldn't have expected had that in them. And I think that just gets me really excited. That's great, Dean. Yeah. I see Dirk. He wants to reach out. Hug Dan. Yeah. There's a hundred one on there, right? Come on, baby. Come on, Dan. You and me, man. Just like me. I think we're really, really on a nice track with this.

[00:48:53] And I think it's so important. And, you know, Dan, you're out every day, every week seeing distributors. Steve is. Tom and I are on the phone or visiting every week. Everybody has these discussions on an ongoing basis. You know, Mike, you made a comment earlier that I think was, it went fast, but you talked about the silos within the businesses that are out there. And I think we've got this challenge right now that we see in talking to people day in and day out.

[00:49:18] And this ties kind of well to the people discussion is we have across the board throughout the history of distribution, whether you were at a ledger sheet. We've got a great friend, Dan Judge, with us here listening today. I remember Dan telling me some stories about pre-ERP systems and the things that they worked on in warehouses and used. But we've got now all these silos within these businesses, and we have people attached to each one of these silos as well. So we've got our ERP. We've got our marketing automation.

[00:49:47] Now we've got e-commerce. Maybe you've got CRM. Then you have these loads of data in your data warehouses and other places that they're stored. Dirk and I were on stage together a couple weeks ago when I told the story that I was thinking about about, you know, Rhonda or Ralph in an organization. Everybody's got one, right? The guy that's been there for 35 years or the woman that's been there for 35 years. They've sat at seven different desks in seven different positions. They are knowledgeable about everything out there.

[00:50:16] They know where, you know, where that one folder is that's in three warehouses down the road and how to get to that. Now they're working. I've been working with all these business silos that they've had and technology silos. And now we're dumping AI into that and we're getting AI silos if we're not careful in that. And we end up in that same boat, right? We just have silos that now have AI applied to them. We start doing the things that Mike's talking about. Then we can take the Dan's of the world that Dan just was telling us about his experience and what it does for him.

[00:50:46] And we can do that with every single person, whether they're a 20-year-old joining our organization or a 65 or 70-year-old that still wants to be working. And when we bring all of that data together and access to that data together, get it out of the silos, now we really have that technology and that capability to use technology to help people. Absolutely. Absolutely. That's a great point. And I want to springboard off of that, of this technology question and pose this to Alex.

[00:51:14] As we come out of the, or knee deep, let's say, in the AI world, if we were sitting here recording episode 300, what do you think we'll be talking about that seems almost impossible to predict today? Wow. Well, I spent a lot of time thinking about this and I was trying to determine how risque, how really frontier challenging I want to be with my response.

[00:51:43] And I'm going to go kind of middle of the road here, not too far out, but not too conservative either. You know, I think a lot of the part of the conversation about AI masks the fact that people use the term AI without really understanding what it means, right? Like, you know, Dan mentioned LLM specifically. And I think that's how most people refer to AI as these large language models.

[00:52:06] Those things are just taking information regurgitated in a way that, like, is based on historic things that it has learned and give you the best possible outcome. There's really very little new idea formation, new ingenuity and things like that. And there's economic data to support the fact that AI hasn't been so far quite beneficial. New business formation is double the levels that it was pre-2020.

[00:52:30] We've got, you know, a significant amount of new capabilities, people using that creativity and ingenuity to bring new business idea to the market. And so to answer your question more directly, I will say for me, if we look at episode 300, which is two year time frame, I think the real story is going to be the cross section of AI with robotics. I think that we've got a significant opportunity of convergence for those two trends.

[00:52:58] There's exponential growth happening in both of them. And we're starting to see the inkling of real world events being influenced by this cross section. In particular, I'll give you an example, specifically in China, which, of course, one of our main adversaries, the greatest competitor that the U.S. has on the global stage.

[00:53:17] They are already implementing robotic inspection devices, whether that's wheeled, mechanized, whether it's track or like robotic dogs. They're setting it out into rural territories to do grid inspection and in some cases repair as well. I think it's that cross section of AI and robotics that presents one of the greatest exponential opportunities for the economy to really kick it up into that next year.

[00:53:46] So that's what I'm talking about in two years is where have we come along in that cross section of AI and robotics. I have a quick follow up question for you, Alex, on that. Will Kevin have a robot in his house doing his yard work and everything by then? Not in two years, but I'm very convinced that you will have robots all over your house by the time that you no longer want to do the work yourself.

[00:54:11] Mowing your lawn, taking care of you in your old age, making sure you get all your prescriptions, potentially cooking your meals. I really believe that the combination of lack of available labor plus the advancements in the technology sides will allow us to offset and really outsource most of those tasks to the cross section of AI and robotics. So a robotic martini shaker. That's right.

[00:54:37] You can get it as like a mechanized arm or a robot dressed up in the full pucks, depending on the vibe that you are. Well, Alex, to go with what you're talking about, I'm going to guess that our friend Mr. Marks here has some experience with this as well. So much of what you're talking about, about that convergence of AI and physical AI is kind of the term to go with that as well. We spent so much time talking about the people side of this.

[00:55:04] There are people all over the world who are going into dangerous environments wearing protective clothing and personal protective equipment that is marginally going to help them in a major incident. And now what we're seeing, and it's already happening in the U.S. as well, where there's dog looking type robots. And, you know, typically they're four legged because of the balancing and the unstable terrain and so forth, which are going out and monitoring for dangerous gases and things like that. Right.

[00:55:33] That's where we're going to see this. And so I think what we are talking about today, and this is the perfect audience for this.

[00:55:39] And it's always, I'm grateful for the, I don't want to say shift that you've made, Dirk, but when you started We Supply America and then the work that you're doing now to really get us all thinking about the importance of the people, there might not have ever been a better time in history other than perhaps the creation of the assembly line to be bringing executives, to be thinking about the people in their business and developing them. Because we have these tools, right?

[00:56:34] I'd say intersection of robotics and traditional or regular AI together. That's going to make everybody's jobs better. Well, you know, Kevin, I have been using AI since 1979. Just in my case, it's Alex's intelligence, not artificial intelligence. Since 1979. Mike, what were you doing? You're muted again, Mike. Yeah, but that was awesome.

[00:57:04] I knew that would be good. Well, I was in 1979. I was on my second wife. I was living in London. And I was having a wonderful time, actually. So, but what's coming out of this, I mean, people come, you know, they're worried about their AI strategy. And when they don't know, they just feel this urgency to get it. I go, well, tell me what your fact strategy was. And they look at me and go, what? I go, that was the life technology.

[00:57:32] I think it's going to be scrutinized where we just get used to it. I mean, I stayed married to a mean woman for 11 years. That was 1979. You get used to anything. And we'll get used to all of this. Everybody worries. Nobody likes change except the wet baby. And so everybody's just, there's a lot of whining. It's all going to sort out, you know. But the Industrial Revolution took three generations and two world wars to get fully integrated.

[00:58:01] And I'm sure we'll have a number of adventures and many things for people to talk about. People still be here. Dirk. Just, and I'll try to make this real quick. Again, I want to throw out a counterintuitive thought. You just mentioned the Industrial Revolution, Mike. You mentioned, Kevin, the assembly line. And you then said, Kevin, that jobs are going to get better. Okay, great. Let's stipulate that.

[00:58:30] However, I'm going to challenge the thinking. The Industrial Revolution and the assembly lines did amazing things. They are the reason, right, for the rise of the middle class. They're the reason for our country and our economy to take off. And at the same time, what did they do to jobs? What they did to jobs is they created machines out of people. Right?

[00:58:58] They took the craftsmanship, generally speaking, out of the work. And they asked individuals to standardize and take their thinking out of it and become a cog in a wheel. And I'm not, look, it's amazing what that has done for our society, for humanity, and for our economy.

[00:59:23] I believe so damn strongly right now that it's time to rethink, Kevin, to your point. What is a good job? What is a good job? And we have the opportunity, I believe, to rethink what the word job or work actually means.

[00:59:48] And right now, it's become the word work is almost for the majority of individuals. It's a nine to five. I must go do this transaction to take back some pay. But going forward, I think there's an opportunity to say, you know what? We can, should, and must ensure that people derive real meaning out of their work.

[01:00:13] When I saw what AI and robots are doing in the home, i.e., folding sheets, doing the dishes, we all get excited about that. Cool. But there's a side of me, the philosopher's side of me says, wait, let's stop and think about that. Because this folding of the sheets, the doing of the dishes provides real meaning and purpose to some stay-at-home moms and to some stay-at-home dads. What happens when we even take the mundane away from those individuals?

[01:00:42] So, to me, there's an opportunity for a philosophical conversation about what is the purpose of work. And I think that definition is being changed in front of us. And, Mike, I agree with you, man. All things are going to work out. But, damn it, let's do, let's control our destiny. Let's have these conversations rather than just allowing the technology to overwhelm us.

[01:01:11] The real reason? Go ahead, Steve. Just, Dirk, I couldn't agree with you more. And I couldn't agree with Will Quinn's comment in the chat section that's agreeing with you before. I think that as we look at jobs on an economic level, AI will create more jobs than it costs. But if we look at the current definition of jobs, it will cost jobs. And I've been looking a lot at the automated switchboard invention and what that did to generations of women that used to be telephone operators.

[01:01:40] It's a great data point to really look at this from an economic standpoint that individuals and families will be impacted. But, ultimately, there's a lot more jobs in telephony than there was when there was hundreds of thousands of women in every city employed as a switchboard operator. Which brings us back to John Taylor's question. What do we see two years from now in episode 300? We're already seeing AI moving from assistance to delegation. I mean, Alex said that Kevin won't have a robot.

[01:02:08] I have one that's already mowing my lawn in my community. We don't have a landscaper. It's a Roomba that works out and mows the lawn. And then I have one doing my vacuuming and sweeping upstairs. I can hear it above me right now. These are tasks that I used to do. I think we're going to see a lot more moving to delegation. So, in two years, John, instead of discussing about what AI's impact will be, we'll really be talking about how much authority we're going to give it. Do you trust it to place a million-dollar PM?

[01:02:37] Do you trust it to give it a number and manage your terms and inventory? Or do you want people in there? And I think that really how much authority we'll be giving these agents in AI will be the topical conversation years from now. Yeah. Great one. All right. Let's dive then into this lightning round. Or in our case here, the maybe just a little faster than usual round. What does it mean, John? Are you going to just mute me? John, are you just going to mute me then?

[01:03:06] No, I'm going to let you go first. You go first, Kevin. And you set the standard, okay? You're setting the bar here. By episode 300, or in about two years, wholesale distribution will... My... It's so hard to answer that question, John, because right now I'm trying to wrap my head around two more years of this. That's the biggest challenge. I think when we look at that two years from now, what we're...

[01:03:36] I'm going to say what I hope we see, and it's going to be... I'm going to tie that, I think, to what we should see. We should see dramatically more efficient organizations that are serving their customers better, their people and their teams better, and their entire organization better, because they've tied all of the facets of the data that they have within their business together. They're sharing more data across with their customers and with their vendors. If you're talking about a distributor, we...

[01:04:04] You know, I started my career early working for a large distributor, and then 10 years as a manufacturer's rep. We're not too different right now than we were in 2003 or 1983 with what distributors and manufacturers are willing to share back and forth with data. I think within a couple of years, we're going to see dramatically more of that, and customers are going to be sharing dramatically more information with the distribution network. And what that is going to do for all of us is the customer is going to have a better experience.

[01:04:33] The supply chain will be better because of it, and our people will thrive more, and we'll be able to do better things because of how we're using our data, because we're accessing every source of data throughout the organization in one location to make the best decisions, and that will be better for everybody involved. Excellent. Tom, how about you? Yeah, I agree with Kevin. You want me to say that again? Just record that. You're done. You're done.

[01:05:01] We have a bunch of our employees and team here. They're right outside the door. My wife happens to be with them today. If I could get my wife to say that just I agree with Kevin and Tom on the same day, I'm done. We'll never be in episode 201 if you get posted. Yes. No, I want to take what Kevin's saying related to data. I work with distributors and manufacturers all day long. They're very rich in data. Right? But they're rich.

[01:05:30] They have a lot of data in their ERP and the raw data. But what we're learning and seeing is that when you take that data and you kind of create another layer of derived data from the raw data that's there. And this is where AI really can help us. And we combine that with skills and some unstructured data, if you will, about the practices and the things in the organization. There's some real magic that can happen. And that magic can lead towards those higher gross profits, Alex, that you're talking about.

[01:06:00] It can lead towards a fulfillment. You know, we work a lot with salespeople. Right? So having an especially even a new outside salesperson who comes into an organization, look, it's a lot for them to learn and to grasp and to be productive and stuff quickly. Right? Sometimes it takes months or longer before they feel like they're comfortable. Right? In their role with consulting customers and working with customers. How we can accelerate that.

[01:06:26] How we can make them more productive and more intelligent about the business and how they communicate the business. That leads to, right, your point, Dirk, fulfillment. That leads to them feeling like they're achieving an outcome in the organization rather than just bringing donuts or doing that type of thing.

[01:06:43] So I guess the short answer to the question is, yeah, I think with the use of data and the derived data and AI and incorporating the skills and things like that, I think organizations will be more productive. They'll be generating more profit. They'll be able to handle the supply chain challenges that we just talked about. Obviously, they're going to have to do something about that now and start moving in that direction to make that happen.

[01:07:08] But the opportunity is there, I think, to make the win for the people as well as the organization itself. John, before we move on, can I say I did not agree more with Tom and I thought that was extremely articulate. Mine was shorter. He agreed with you. He agreed with you. You should just leave it at that. Mine was shorter. I have to fill in the gaps.

[01:07:37] There you go. Over to you, Mike. Two years from now. Two years from now, I think we're still going to be here. I think gross margin will be a lot less important because I think the AI impact, people have looked to make profit to drive it with more gross margin because the SG&A expense level, the way we organize, everybody does it the same way and it's very hard to move.

[01:08:00] So you're going to see a lot of innovation where people are finding ways to drop their SG&A expenses 300 basis points and they'll end up having lower margin and still have a very high return on sales, even at an operating level, not even EBIT. I think the key thing we're going to have continuing consolidation, new business startups, new business startups will be competitors, will be challenging and have different go-to-market models that will give customers better choices, which will force innovation and the rest of it.

[01:08:29] And I think the number one thing, and I almost hate to say this in front of Dirk, the number one thing that defines the winners and the losers is how engaged their employees are and how well. It's the number one deal. I do orchestration. And the number one obstacle is that it's not a technology project. It's not an AI. It's not an IT project. It's organizational change and human development. I'm spending a lot of time teaching people how to do critical thinking. That's the only way you can use AI.

[01:08:59] So we're still here. Great. Great. All right, Dirk, that's a good segue for you. Two years from now. Here's the way I'm thinking about it. Over time, the industry, we're always and repeatedly asking and looking to decide where the next advantage is going to come from. Right? And that's really what we're asking about for these next two years. So just, if you don't mind, bear with me.

[01:09:25] As I thought about this, Dan, I was so honored years ago working with the NAW. When back in 2009, Mike, you and I were doing a lot of work back then in terms of sales and outside sales and all that. And what we did is we looked internally amongst ourselves and we said, you know what? There used to be enough business that everybody locally could compete and win.

[01:09:51] At this time, in about 2009, we had to start looking within ourselves to try to take share from the local competitors across the street from us. So Dan, back then, working with the NAW, we did a research project and we wrote a book called Driving Distributors Sales Beyond. Right? How to take more from the market than the market's prepared to give you. Because the advantage was going to come by outperforming your competition.

[01:10:18] Well, then what happened in 2014, Amazon decided to get into the B2B space. Forbes Magazine then wrote an article that was titled, let me get it right here. The article was titled in Forbes Magazine, Amazon Wholesale Slaughter. Jeff Bezos' $8 Trillion B2B Bet.

[01:10:42] So then it was in 2014, we had to start thinking not how we're going to compete against ourselves, but how are we going to compete against these non-traditional competitors? So we had to think of a new way for advantage. So I remember when that came out, I sat down at my kitchen table and I wrote a white paper that was titled, the bet that every distributor needed to make. And in that white paper, I said, we're going to be competing against the boldest, smartest, and most relentless people in the world.

[01:11:11] How the hell are we going to do that? That's where the advantage is going to come from. That led then to, again, where's advantage going to come from? Dan working with NAW, it was an amazing project, man, where we did the research on innovation and we wrote the book called Innovate. How successful distributors lead change in disruptive times. And together, that really drove a lot of the conversation about industry, about innovation throughout the industry.

[01:11:36] So it drove conversations on innovation, business model innovation, value proposition innovation, technology and the like. And then COVID and we came out with We Supply America and we said, you know what? The next advantage is we have to remember who we are. And Steve, man, we couldn't have done that without you and the M4 team. So thank you. And that brings us to today. And that brings us to the question of for the next two years that you put on the table, where's the advantage going to come from?

[01:12:05] I firmly believe this. Thriving companies are built by thriving individuals, not the other way around. We have to double down. We have to go deeper. We have to think harder about the human element and not just how to drive engagement. We must go deeper than that and help and think what is our role as an employer

[01:12:32] to help our people thrive and flourish because they spend 50% of their waking hours under your roof. You aren't stewards of a business. You're stewards of half of a life. There's a lot of responsibility there. There's an opportunity.

[01:12:51] And so I hope that we can play a part together to ensure that two years from now, we have embraced this human element more than we ever thought we would need to. Excellent. Excellent. All right. Follow that, Steve. Jeez. Again. I'll go back into the speed round mode.

[01:13:16] For the reasons that everyone has said, the elimination of the data silos, our ability to see across different systems. Mike Mark's early comment that the new normal equals chaos. I believe that in two years, distributors will be more profitable than they are today. That's awesome. That's cool, dude. I like that one. All right, Dan, how about you? I hope the distributors do, too. I think Steve understands the word lightning round. The rest of us, bro. I'll go back, I think, to one of Mike's comments, and I think I'll drill deeper into it.

[01:13:46] Mike, you mentioned consolidation as a trend you obviously expect to continue. I see for a lot of the reasons that I talked about earlier about some of those external threats, I think you're going to continue to see consolidation accelerate to a degree that we haven't seen probably in our industry's history. And so a few reasons behind that, and I think I grounds my thinking in a recent paper that Spencer Stewart put out. The thesis with that paper was essentially, look, scale has always been a competitive advantage.

[01:14:14] Purchasing power, distribution, logistics, networks, et cetera. Scale is now a design requirement for longevity within the industry. And the thesis essentially said, look, you know, if you don't have scale in the industry, all of these different factors, inflation, tariff, fuel prices, regulatory burdens, disrupting factors, it's going to be incredibly difficult to weather those things, maintain market share, and essentially compete with companies that have those institutional advantages.

[01:14:43] And so I think you're going to see those trends accelerate. I think you're going to see a compounding factor in that scale simply because technology is making it easier to scale. You know, one of the things that I've been shocked at when I go and talk to companies is the time it takes to purchase another company, integrate the data, bring the workforces together, right size their supply chain and logistics network, figure out how they're going to serve customers well and better than they did before.

[01:15:12] You know, that could take years in the past when you're dealing with meaningful acquisitions. The curve on that has shrunk in some cases to months. And that, I think, fuels faster deal turnaround. It reduces the cost of some of these really painful, large national integrations.

[01:15:28] And the technology community, whether it be the creation of data lakes, the tools that are bringing together and creating really thoughtful data taxonomy that are consolidating products and catalogs, it's remarkably quickened the pace of something that often took years in the past. So all these factors, in my mind, are coming together to create a perfect storm where the bigs are going to get bigger. There's going to be tremendous pressure on regional companies that kind of fall within that small local market footprint.

[01:15:56] And of those that are knocking on the door to be national players, I think those folks are going to see a lot of pressure. And so they either need to catch up by adopting technology and scaling themselves, or I think they're going to find themselves in an incredibly difficult operating environment. So consolidation and scale, I think, is the thing you're going to want to keep an eye on for the next couple of years. Yeah. Interesting point, too, because both in the comment section, both Will Quinn and Peter Rincon, sorry if I got your last name wrong, both mentioned consolidation in this context.

[01:16:26] So, all right, Alex. John, before we go on that, I think maybe this group would probably all agree there's probably never been a better time and opportunity for people to accelerate the growth of everything within their organization. And the ones that do it best across the board in all facets within their organization will be the market leaders moving forward.

[01:16:49] And there will be fewer people because the barrier to entry, excuse me, I've said this a number of times, the barrier to entry now into distribution is probably the lowest it's ever been. Because you could have a Quonset hut in the middle of a field in Iowa that's surrounded by cattle, put up a Starlink connection out in the field and have a Quonset hut and get ORS, NASCO or the dozens of others wholesalers out there to get you into that business.

[01:17:17] And the people that leverage the technology that's there and the people that they have, I think, will win, you know, at the end of the day. And I think it's kind of pulling all of those things together. So, John, did we start with Alex? Alex, you did, right? Oh, we did. Yeah, I guess we did. We started that question with Alex. We'll give you the last word anyway, if you want. Last word.

[01:17:36] I think two years from now, I hope that we're all together again, talking on the 300th episode and reflecting on the changes that we foresee for the best. Nice. Perfect. Perfect last word. John, as we wrap this up, there is one thing I wanted to address before we go. Mike, you, I think, would remember this. Dan was with us for our 100th show. Dirk was there.

[01:18:04] And the amount of discussion, excuse me, I'm sorry, in the distribution world and specifically on this show about people is more than it's ever been. And on that 100th episode, we were talking a little bit about the Around the Horn and Wholesale Distribution Newsletter. It's out to 12,000, 13,000 people every Friday that we send out. A little plug for that. If you'd like it, just let us know and we'll get that to you if you don't. But Dirk made the comment.

[01:18:29] He called us out on that show and said that we didn't talk enough in the show about people and we didn't do anything about it in the newsletter. And the following Friday, we had a section about people and leadership in that. I don't think if Dirk wasn't doing the work that Dirk has just really started doing that we would have spent nearly the amount of time today that we've talked about the people component of all of this. So I just, Dirk called us out on it.

[01:18:58] It was like an awakening for us. And we talk about people now more and more in the show consistently. So I wanted to reference that. So it'll be interesting when, if this 300 episode thing is just, it's got my mind a little boggled now each time we talk about that. But I want... 200 weeks. 200 weeks. 100 weeks. 100 weeks. I'm sorry. Yeah. Okay. I want to be not falling off stages in 100 weeks.

[01:19:26] But I hope we can bring this group back together. And I can't tell you all how grateful I am. And as I've said to this group before, I only try and compliment Tom once a month. But the live show was Tom's idea. I had an idea about a newsletter four years ago. And Tom said, let's go live on LinkedIn and see if anybody cares. And here we are, 200 episodes with some of the best thought leaders in the global distribution market. So my thank you to all of you and the people that come listen to us every week.

[01:19:54] So thanks for having me. Great. Congratulations, guys. Great job. Well done, gentlemen. All right. You want to wrap this up here? Yes. Thank you all for joining us on the 200th episode celebration of Around the Horn in Wholesale Distribution. Remember that you can get this podcast on any of your favorite podcast platforms. You can see it on YouTube as well. And join us on LinkedIn, Facebook, and X, I believe.

[01:20:23] Thanks again, everybody. Thanks, everyone. We hope you enjoyed today's episode and our guests. Each week, we try our best to dig into the topics that are impacting your business. So please reach out to us and let us know how you think we can make the show better or topics you'd like for us to tackle or talk about more often and even guests you'd like to see join us.

[01:20:52] We're looking forward to bringing you next week's session and hope that until then, you stay safe, stay focused, and do great things. If you haven't already, please subscribe to the podcast and leave a review to help others in wholesale distribution get access to the conversation. And finally, please check out our sponsor, LeadSmart Technologies, and their manufacturing and wholesale distribution industry CRM customer intelligence and channel collaboration platform.

[01:21:20] That's LeadSmart Technologies at LeadSmartTech.com.