What Do The Midterm Election Results Mean For Wholesale Distribution?

[00:00:04] [SPEAKER_00] 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'll be able to get into the next few weeks.

[00:00:30] [SPEAKER_00] With the high chain issues, we peel back the onion with our guests into the topics that impact your business the most.

[00:00:36] [SPEAKER_01] Keep going. Just don't fall over. Don't tip over? Yeah. Alright. Are you dancing because of all the exciting things that happened this week?

[00:00:47] [SPEAKER_03] I am dancing because I just want to make sure I'm staying in a good mood and it would not be the Around the Horn in Wholesale Distribution Podcast if I didn't start the show with dancing. Alright, fair enough. In fact, I think it was kind of amusing that our editor and producer, John, posted a little reel the other day of why people come to the show. It's to see my dancing. Yes. I commented on that. So we have found the secret.

[00:01:17] [SPEAKER_03] The secret sauce. We have found the secret sauce. Exactly. Yeah. Well, that's good. Well, welcome back everybody. Happy to have the folks that are with us live and later today as we get rolling on to Apple and Spotify and all of those other podcast formats. We're appreciative of anybody, whether you've tuned in live with us or you're listening to the recorded podcast. We're grateful that you've come back week after week after week. Today is number 210.

[00:01:44] [SPEAKER_01] 10% of our way there to 300.

[00:01:46] [SPEAKER_03] 10% of the way to 300. I'm just still laugh about that is that when we did the 200th anniversary show and people kept talking about getting to 300 and it just baffled my mind. Like, are you kidding? Are you kidding? Okay. So anyways, that's the that's the case. I'm sure we'll make it there. It's good. So you, you look like you're in a hotel room on the East Coast again, aren't you?

[00:02:13] [SPEAKER_01] Yeah. I'm sorry if I'm looking kind of ghosty like I'll try and figure out the lighting as we come forward here. That's right. You're not sick or ghostly. It's just, I don't know, maybe it's like a post Halloween sort of thing. You're red is what you are.

[00:02:27] [SPEAKER_03] You're red.

[00:02:28] [SPEAKER_01] Looks kind of ghostly to me.

[00:02:30] [SPEAKER_03] But anyway. That's all right. I don't think people come to the show for how we look, Tom. Yeah, that's right. Let's get on with it. No one needs to. Yeah, that's exactly right.

[00:02:38] [SPEAKER_02] Good.

[00:02:39] [SPEAKER_03] Well, again, welcome everybody. We appreciate you coming back week after week. I'm Kevin Brown. This is Tom Burton. And we get together every Friday morning unless we're on an airplane in a hospital or a planned vacation, as we said. So we're appreciative of you joining us each week. Like we said, this is episode number 210. And so, let's see. I think the comment was pasty. You look pasty. Okay.

[00:03:10] [SPEAKER_03] That's good. That's good. So anyways, I digressed. So we get together every week here and we chat about the news of the week. And this was certainly a week full of news that we'll dive into momentarily. But more importantly, talking about the news, we talk about how that impacts wholesale distribution and manufacturing, which is the audience that we serve in our day-to-day real jobs that Tom and I have. And the audience that joins us on a regular basis. So we're appreciative of you coming back with us.

[00:03:39] [SPEAKER_03] We publish a newsletter that goes with our show. Our show is around the horn and wholesale distribution and manufacturing. The same title as the newsletter that goes out to, I don't know, we're at 11, 12, 13,000. It goes up and down. But I think that's where we're at about with the newsletter going out. And if you don't get that newsletter and you would like to, we would love nothing more than to share that with you. I mentioned last week that we're, or the week before, excuse me, that we're just a couple weeks away from this information changing.

[00:04:07] [SPEAKER_03] But for right now, you can reach out to us at hello at leadsmarttech.com and we'll get that out to you. Another way is you can go straight to our website for the show, aroundthehornpod.com. And then sign up there as well as see past episodes and so forth. Or if you're active on LinkedIn, you can certainly just look up around the Horn and Wholesale Distribution and Manufacturing Podcast on LinkedIn.

[00:04:32] [SPEAKER_03] And the newsletter will be there and you can request it there as well, which would show up on your LinkedIn feed, as well as getting an email every week from LinkedIn about the newsletter. So I'd love to get that out to you. We try and cover topics related to the economy and supply chain and the depth of what is happening in the economy, supply chain, mergers and acquisitions,

[00:04:56] [SPEAKER_03] economic results, sales, marketing, AI, robotics, and all of the different technologies and issues that impact wholesale distributors and manufacturers. And we bring that together onto this show. So we couldn't do that if we didn't have an opportunity to have the support of the company that Tom and I work for, which is LeadSmart Technologies. LeadSmart has developed the industry's first enterprise growth platform. And what is an enterprise growth platform?

[00:05:22] [SPEAKER_03] An enterprise growth platform is our system is called Meridian 360. And that helps companies understand more about their customers, their teams, and their overall business by uncovering blind spots that get in the way of growth. So when we can reduce the amount of blind spots we have, of risks and other things like that that we have in our business, then we get deeper insights into what's happening. We can see things like at-risk accounts and what revenue opportunities did we miss,

[00:05:49] [SPEAKER_03] what people are buying and not buying and should be buying. And we can get, as I said, a deeper insight into what's happening at the customer level, at the team level, and at the overall business by turning what we say is insights into action, getting rid of noise, seeing signals, and being able to identify through technology and artificial intelligence how we can grow our business as a whole. So if your company is digitally transforming, looking at how you can use artificial intelligence,

[00:06:17] [SPEAKER_03] figuring out how to get away from the hype of AI and actually put it to use in your business in a way that's going to drive revenue and help you see deeper into your business, and we would love to talk to you about how we can help you with that. So, Tom, what happened this week? It's been kind of quiet, not a lot going on, huh?

[00:06:35] [SPEAKER_01] Yeah, I know. It must have been hard for you to kind of figure out what articles we were going to put in the newsletter this week because it's pretty quiet. But I don't know, maybe we start a little bit about the economy and what do they call it, the blue wave of the democratic route?

[00:06:51] [SPEAKER_03] Yeah, evidently something happened on Tuesday, huh?

[00:06:56] [SPEAKER_01] Yeah, yeah. I think it was a bit of a surprise for a lot of people. I know I was surprised. I was not expecting sort of that level of results that we saw. What were you expecting? I was expecting that the Senate race would be a lot closer. The congressional races, I kind of assumed, was going to lean in the direction of the Democrats.

[00:07:23] [SPEAKER_01] I thought the Senate would be much closer and it could be kind of a coin toss. And I was surprised at the number of sort of governors and other things that was kind of across the board. So, which, you know, and we can talk about this later, but, you know, what everybody says is, but why? Why did they, why were the Democrats so successful? And it all comes back to cost of living, right?

[00:07:47] [SPEAKER_01] And, you know, I know you've said over and over, hey, shouldn't we have like a new metric instead of this 2%, right? Why couldn't we have 3% or whatever, right? But yet, you know, granted, we're higher than 3%, we're at 3.7 or whatever.

[00:08:06] [SPEAKER_01] But anyway, it's just clearly the prices and inflation and price increasing increases are a much, much bigger issue than I'm thinking a lot of people understand. Right. You know, it's one thing for you and I maybe to go to the store and be, you know, stuff increased 30, 40, especially meat, 30, 40, 50%.

[00:08:33] [SPEAKER_01] But for a large part of the country, that's like devastating. Yes. Oh. Yeah.

[00:08:41] [SPEAKER_03] There are a group of people who have not changed what they're eating in their household because of cost increases. There are a far larger group who has significantly changed where they go, what they do, how far they're willing to or able to drive and what they're eating in their household because of these cost increases that have hit that.

[00:09:03] [SPEAKER_03] I kind of wonder if we would have seen these results if gas prices were 50 cents less, a dollar less.

[00:09:12] [SPEAKER_01] Yeah, I think we would have seen, I think even Vice President Vance came out and said, hey, this was all because of the war, right? If the war hadn't dragged on like it was, then we wouldn't have had such sustained, now I don't know if that's true, but sustained prices and gas and all that stuff and everything would have been much more closer. But I think the, look, I get it.

[00:09:38] [SPEAKER_01] I mean, every time I go to the grocery store, it's, you know, we had, I would say on like an average trip to the grocery store maybe two years ago was, you know, say $50. Now the average price of the grocery store is like $94. And that's more than 3% inflation.

[00:10:00] [SPEAKER_03] I drove by, I drove through last night. Thursdays is typically in our household is El Pollo Loco, which if you're listening in other parts of the world or east of the western U.S. is a Hispanic or Mexican themed grilled chicken restaurant that's really good. So we go to a Bible study every Thursday night, Darlene and I do. So it's usually me driving home from work and going through El Pollo Loco.

[00:10:28] [SPEAKER_03] I got a Mexican chicken salad and a chicken burrito for Darlene last night and I. Guess how much it was?

[00:10:41] [SPEAKER_01] $22.

[00:10:43] [SPEAKER_03] $23. Okay. For a burrito and a chicken salad. Drive-thru. Drive-thru, right? Yeah, no tip.

[00:10:51] [SPEAKER_01] No tip, right?

[00:10:52] [SPEAKER_03] No, it's just, it's just a challenge. So anyways, diving into this a little bit deeper. Bob says here, you know, to your point about Vance is he's jockeying for 28. And I think it's, you know, anybody that's out there that's, you know, looking like they could be a potential next candidate in that. I thought it was interesting is that when he made those comments about the war is no pushback from the president.

[00:11:22] [SPEAKER_03] So I think the president's going to be supporting him in that setting. But let's look at the more important part of this is, and what we're here to talk about, this is a political show, is what does this mean to the economy, right? So there's an interesting article we start off the newsletter with today, is thinking about here's what the democratic election route could mean for the U.S. economy. And, you know, now this is CNBC, so got to be guarded with a little, a little bit as well, just based upon the source.

[00:11:51] [SPEAKER_03] But, you know, they're talking about this being trade will likely be on the table and looking at things, right? There can be a big, harder, stronger push against tariffs. I think we can spend a little time even talking about what this could mean to interest rates, right? The Fed is not going to be under the pressure not to raise that they have been under from the president. They've got some backing on that. And it's going to be kind of interesting to watch.

[00:12:20] [SPEAKER_03] There's a whole other set of discussions I kind of want to have about this, about data centers and AI regulations and so forth that we can dive into a minute. But overall, you know, what we've been looking at right now is, I think, an administration that has been willing to, and it's to their demise in this setting, right?

[00:12:41] [SPEAKER_03] The administration has been willing to take some short-term hits to the economy to try and look at national security being stronger, but also broader, bigger view of what could happen for the economy. We've talked about this for the last two years since this administration has been there, that the focus has been on stopping the fentanyl coming into the country was one. Two was the borders.

[00:13:08] [SPEAKER_03] Three was interest rates that would then be tied to stimulating the economy, reshoring of manufacturing and growth to the economy from all of that. Well, we saw the big push for that because, you know, this is, and by the way, you know, I saw, I think I sent it to you. I saw a very interesting, I guess it was a cartoon on Instagram the other day that was, did you, I don't know, did you open that and read that, that I, I watched that, that I sent you?

[00:13:33] [SPEAKER_03] It was about past, I think it was since 1935. There's only been three presidents who have not lost control at the midterms. And it was Bush Jr. And Clinton and I want to say Roosevelt. Everybody else.

[00:14:00] [SPEAKER_03] And, and, and I saw a thing on, I can't remember what news it was, but it was about Obama stepping up and he used the word having gotten shellacked in the midterms. Right. So this cycle is not uncommon.

[00:14:16] [SPEAKER_01] Right.

[00:14:17] [SPEAKER_03] It's, it's, it's, it would be uncommon to hold either of the houses through this and to have, um, to use, uh, former president Obama's term was to getting shellacked is, is also not uncommon. But the, the, the news hype around this, right. And most of the, the, the day-to-day news is very left leaning. So you see that the hype that goes around it. And so I don't think the president was shocked with all of this.

[00:14:45] [SPEAKER_03] Uh, the question is what happens next? And so as we dive into this a little bit more is really thinking about this. And I think that the two things that are worth talking about is, you know, one, the, the, the, I guess the, the biggest question is what will the now democratic controlled house and Senate, what will they really be able to do to quickly impact affordability? Right.

[00:15:14] [SPEAKER_03] Because the only control that they have over, I think I'm not an expert in this thing, but I think the only control that I have, um, with this is the, um, uh, purse strings related to stopping the war. Right. Right. But that's not going to happen next week. That's going to take a period of time. Right. And so how do you impact this very quickly to make change in the economy?

[00:15:44] [SPEAKER_01] Yeah. So the short answer is you don't, um, if you look at the two things that are, and again, we need to get Alex or one of our economists back on here to explain this. But if you look at the thing that quote unquote, have been impacting the economy, it's been the war and tariffs. Both of those are executive, basically orders or executive actions. They're not legislative actions. They're not things that had to be agreed on by the Congress and by Congress and the Senate or voted on by them.

[00:16:14] [SPEAKER_01] It can be done entirely through the executive branch of the, you know, in the president. So for at least two more years, right, he at least has those executive, um, orders. And it's not just an order, but executive strategies that are being applied through that.

[00:16:31] [SPEAKER_01] But the only thing that could change is if, if the House and the Democrat, if they use that with leverage or they use other things for leverage to try and negotiate with the president and with the executive branch to either reduce tariffs or, you know, figure out how to put a stop landing to the war or whatever the case may be. Right. But they can't stop it directly. They can't just go, oh, okay, we're done with the war and we're done with tariffs. They can't do that.

[00:16:59] [SPEAKER_01] So, yeah, I think there's a lot, there's no easy, you know, easy button, so to speak here on all of this. The one thing that we even haven't even brought up is the jobs report came up today and it was way above expectations. I believe 165,000 new jobs were created.

[00:17:16] [SPEAKER_03] Which puts it right around 4.1, which puts it right around 4.1%, which is basically neutral. Right. Right. Right. I mean, that's the way the Fed looks at that is around right around 4% is neutral. Right. Right.

[00:17:31] [SPEAKER_01] I mean, I think whether we like it or not, we're going to see another rate hike in December. Right. So, no, I don't, I don't think there's any, any magic bullet as it relates to the consumer. Now, back to, you know, we wanted to talk about what does this mean to wholesale distribution and to the business world, which we can get into. But I don't think your burrito is coming down in price anytime soon.

[00:17:56] [SPEAKER_03] Well, and that, so that's, that's the impact. Right. And I think about this is if, if I'm, you know, if I'm a building material distributor in middle America. Right. And, and more importantly, if I'm a guy that drives a forklift or helps run the warehouse at that wholesale distributor in middle America. What am I really going to see from this? Right. How much can change in the two years before all this can turn around again?

[00:18:27] [SPEAKER_01] Well, yeah. But I think what, you know, the biggest thing, right. I think we had in the article here was the whole data center conversation.

[00:18:38] [SPEAKER_02] Yeah.

[00:18:39] [SPEAKER_01] I could, I don't think tariffs are going to, there's going to be at least for a while. Like I said, there could be some negotiations and other things around tariffs, but I don't think that's going to change over the radically. Over the next couple of years could change depending upon what happens in the presidential election in two years, but it's not going to change over the next couple of years. So, you know, what are a lot of the, I guess, a lot of the impacts on distribution has been tariff related, but now the data center thing.

[00:19:08] [SPEAKER_01] I know you have kind of a take on that. Maybe let you do your take and then I can, I have, I think a slightly different take on it, but what do we think this is going to do?

[00:19:17] [SPEAKER_03] Now already, you want to admit now that you're wrong?

[00:19:20] [SPEAKER_01] No, I'm going to wait for you to do yours first and then I'll provide the correct answer. You'll correct it? That's right. That's right.

[00:19:28] [SPEAKER_03] I'm just laughing at this because I was sitting in my office here yesterday at our LeadSmart offices and I had our client success manager and our marketing director both on the other side of the table for me and they were standing up and I was sitting down and I was thinking to myself,

[00:19:50] [SPEAKER_03] you know, I come to work and I have these lovely ladies guiding and directing everything that I need to do and I go home and I have my lovely wife. And then as you say, then if I would just listen to you on top of those, the rest of them, everything would be fine. So I was just kind of, kind of laughing, laughing about that as well as that all plays out.

[00:20:12] [SPEAKER_03] But in back to bigger picture here, Tom is look right now we've got this whole change that we're seeing and we've got a huge component of what's happening in wholesale distribution. And then on the manufacturing side as well to support that is this whole view of what's going on with data centers. Now there's so much more to that, right?

[00:20:38] [SPEAKER_03] But we need, we have a world now that is shifting towards artificial intelligence. We've got a lot of things we're going to talk about later today related to that as well. But we've got this infrastructure component that we can't do the things that we need to do with artificial intelligence without having data centers to support that and the power to go with it. Well, now we've got this article here this morning that we talk about.

[00:21:03] [SPEAKER_03] We don't need to show it, but you know, the title of it is Top Democrats Call the Rain in AI Buildout After Midterm Sweep, National Data Center Moratorium Now, right? So you've got an interesting thing. There was just a comment that from someone in Texas here that says the new governor is signaling that she's going to stamp on the data center, stomp on the data center brakes.

[00:21:28] [SPEAKER_03] Now, the Republican governor in Texas had already put a pause on some new data centers already. And big, big challenge when you come to that. If you think about a state like Texas, right, you look at Tesla has moved everywhere. It's not everything, but they're in the process of moving most things in corporate headquarters to Texas. Got a lot of other groups that have moved to Texas.

[00:21:52] [SPEAKER_03] Texas has not had any state income tax, but it has always been, I don't want to say always, but most recently controlled by a right-leaning group of people. And so now we're in this place as if you've got data centers, and this is just my gut take on this, is if you've got a state like Texas that is pro-business, pro-business, pro-business, that as a governor,

[00:22:16] [SPEAKER_03] and now one of the state senators there is going to be putting the pressure on these things, I think there's a big issue at hand. You've got Bernie Sanders, right, from Vermont, has just said that he wants to put a complete stop and moratorium on data center build out, and then start looking deeply at AI regulation. So you can't get, and these two things are uniquely intertwined, right?

[00:22:43] [SPEAKER_03] You can't get to what we want to be able to do as a group of humans right now with AI without having that backbone and support of it. And then if we, and we've talked about it a number of times, and you can dive in on this in a moment, is if we start putting deep regulation on AI, right, then there is the risk that other countries, most specifically China, gets a step ahead of us on that as well.

[00:23:12] [SPEAKER_01] Yeah. So you think that this is going to come to a grinding halt?

[00:23:17] [SPEAKER_03] Well, I don't think it, I don't know. Here's what I do know. I do know that there is going to be pressure on that right now. I think you, in this setting, there could be a risk that, you know, obviously nothing's going to stop if you've got a data center that's two-thirds built, right? Or, you know, you've poured foundations or something like that.

[00:23:44] [SPEAKER_03] But you could have approval stalled, right? You could have states that are now, you know, and you made a comment earlier about it, right, about your surprise, I think you said, of the number of state governors that have shifted, right, in many states where, and I think Texas is probably the biggest and best example of that, is Texas has always been, let's go to Texas because we can get business done.

[00:24:14] [SPEAKER_03] Maybe it'll stay like that. But, you know, the comment was just made here from a listener, Bob, that, you know, he lives in Texas. He said Texas was pro-business and the new governor is already signaling that she's going to stomp the brakes on data centers. So what does that mean? If you're a wholesale distributor in Texas and you're in anything related to building materials or, you know, electrical HVAC,

[00:24:39] [SPEAKER_03] I did a little research yesterday and this is just some AI research that I did. But I just, I did a query and was talking about really what goes into a data center from the building material side of things. And so they talked about in this, I thought it was really interesting, the four key components were electrical infrastructure, HVAC and thermal management, plumbing and water systems, structural, architectural and civil materials.

[00:25:09] [SPEAKER_03] This said that in a typical data center, number one would be a budget share on building materials. Electrical infrastructure is 40 to 45 percent between 136 and 153 million for the electrical infrastructure. Switch gear, wire, transformers, generator backups, uninterrupted power systems, PDUs as well. Second was HVAC, which was 51 to 68 million.

[00:25:39] [SPEAKER_03] And this is just in an average data center. And then it goes on from there. Plumbing and fire suppression was the lowest between six and a half and $10 million. So from that standpoint is you think about that is if I'm an electrical distributor or an HVAC distributor, let's just continue to use Texas as an example, right? And I've been gearing up perhaps in my business because I see what's been going on and have the desire to participate in this.

[00:26:06] [SPEAKER_03] Maybe I'm not sitting on extra inventory yet, but I was on the phone earlier today, early in the week I should say, with an extremely large electrical and HVAC and plumbing distributor in the Midwest. And they have a whole team, sales team, solely devoted to data centers, right? So what if data centers just get cut by 50 percent, right? Yeah.

[00:26:31] [SPEAKER_01] So go ahead and give your take. So you want to hear all the kind of the corrections and the right things on all of this?

[00:26:40] [SPEAKER_03] I don't know where. Do you have a guest that's going to join us, that's going to give us that?

[00:26:46] [SPEAKER_01] Yeah. Is there somebody coming on the show today that I'm not aware of? That's this pasty ghosty guy that's here. Okay. But I'm going to, Paul made a comment, right? He says there's been a less, I'm going to just start here, a less frenetic pace on data centers going forward already due to public pushback. And that has already slowed. So it's going to be slow and more deliberate. So let's take a step back. What are the people generally complaining about with data centers? Yeah, they're not in my backyard. But if you push that aside, it's electrical, right? Electrical water.

[00:27:16] [SPEAKER_01] And water. And water, right? So the perception that has been created is that a data center is going to drive up our electrical costs in an area. If I live in, if I put one in Ventura, my toss in Ventura are going to go up through the roof for electricity because there's not enough of it. And I'm going to burden that, that cost. And then there's the whole, oh, it's going to have to take all this water every day, all the time.

[00:27:42] [SPEAKER_01] It's going to waste all of this water putting through the system there. That is the perception that has been created from that. The reality is actually, now, granted, I'm sure there are some data centers that have not been designed to be sort of self-sufficient.

[00:27:57] [SPEAKER_01] But the fact is, is that most of the more modern data centers that are being designed going forward are going to be designed to be electrical, self-sufficient, and potentially even have some surplus of electricity that could go back to the grid and to the area there. A lot of the data center people have offered to even possibly subsidize electric costs for people who live in the area.

[00:28:20] [SPEAKER_03] They came out of the woodwork yesterday guaranteeing all kinds of additional things, too.

[00:28:24] [SPEAKER_01] Right, right. They had to. Right. But, okay, that makes sense. Right? And then the whole water thing, most of the data centers are being now designed to use reclaimed water, and the water recycles through the system. It doesn't use up a whole bunch of water. So a lot of these sort of claims that have created a lot of the negative press around data centers are being addressed or being addressed all the way.

[00:28:53] [SPEAKER_01] Now, again, we'll see if the public or whatever gets some of that, how that actually is communicated. But then the other part of the equation is you have to follow the money. Right? Who benefits, right? What companies benefit from data centers? It's the tech companies. It's the Microsofts, the Google, the Apple, the Anthropics soon as a public company. All of those. If we shut down data centers, what does it do to those companies? What does it do to their earnings?

[00:29:20] [SPEAKER_01] What does it do to all the money they borrowed to build out infrastructure? It hurts them. It hurts. And then that drops the stock price. That hurts 401ks. All of the things are the trickle down effect by that as well. And a lot of those companies are big contributors as well to the Democratic Party. Right? They're very big contributors on that.

[00:29:44] [SPEAKER_03] But, Tom, they were big contributors when the House and the Senate were controlled by the Republicans and the Democrats. They were still contributing to the Democrats.

[00:29:53] [SPEAKER_02] Sure.

[00:29:53] [SPEAKER_03] Right? But it didn't stop the push for – look, I've got to push back on you on this hard. Because specifically on that donor thing, because I think it's irrelevant in all honesty. No, I don't. Because if you – Not at all. Let me just finish here. Right?

[00:30:10] [SPEAKER_03] You had a big push from the Democrats who were getting the money from these people, right, for moratoriums, for pushback, for slowdowns, or stopping while they had that money coming in before. How is it going to be any different now? Now they have control. They were pushing back before.

[00:30:32] [SPEAKER_03] They got to the point where you had a pro-business governor in Texas put a moratorium on any new ones until they did some more research and things. And now he's out of office. And the Democrats control the House and the Senate. They were getting them with money. So I guess if your point was valid on that, it would be they're going to have to get dramatically more money than they were already getting. Because they were already getting that money, to your point.

[00:31:02] [SPEAKER_03] Right? And it didn't change their mind.

[00:31:05] [SPEAKER_01] But it's to the point of what Paul said, right, is more slowly and deliberate. I believe it will be more slowly and deliberate along the way. But it's not going to be stopped. Right?

[00:31:15] [SPEAKER_03] I'm not suggesting they're going to stop. But there is going to be a struggle to get these things built, it appears. And the other side of that, and we'll get into this in a minute, is the idea of AI regulation. Because if AI gets regulated, right? If AI gets regulated, then maybe there isn't a need for as many data centers. And that could be what's pushing some of this as well.

[00:31:39] [SPEAKER_01] That won't happen either. You've got to follow the money. Right? And obviously, time will tell. We're going to follow them.

[00:31:45] [SPEAKER_03] The money has been going to these people already.

[00:31:48] [SPEAKER_01] Right. But they didn't have the friction that you're supposedly going to have now. Right? The whole thing is there's going to be a lot more friction, either with AI and or data centers.

[00:31:59] [SPEAKER_03] Help me understand this.

[00:32:00] [SPEAKER_01] Help me understand this. So I'm... What the perception is, right, what you're saying, and I don't disagree, is that with the new democratic... legislation, is that there's going to be a much higher friction, either related to AI regulation or building out infrastructure to support AI. Right? Who is the loser of that? The loser of that is Anthropic, Microsoft, Google, Meta, all of those companies.

[00:32:30] [SPEAKER_01] They're all the losers. Right? For that. They're the ones funding a lot of the democratic... Are they just going to go, oh, well, fine. Thanks. No problem. Right? Or are they going to push back and go, we've got to solve this and we've got to move this forward? And they have people who are doing that.

[00:32:43] [SPEAKER_03] They came crawling yesterday saying, basically, tell us, Wednesday and Thursday, tell us what we need to do so you won't do this. Right? If you look at all the news reports out there. Right? But my point is, they were already funding these people that were opponents. They're not. Right? Sure.

[00:33:02] [SPEAKER_01] But now there's real... Before it was all rhetoric, now there's like real threat that they're going to make it happen. Sure. So what do you do?

[00:33:11] [SPEAKER_03] Do you give more money to get these people to change their mind?

[00:33:14] [SPEAKER_01] Or I say, I'm going to pull the money unless you start cooperating here. Right?

[00:33:20] [SPEAKER_03] I think that's already been a threat. I mean, how could that not have already been a threat? And then you have the other side of it. You have the Anthropic who wants AI regulation because it benefits their business. Right? Right? Yes. Yeah. But that's anyway. I can't buy into the idea that says, follow the money related to the politicians because they're already getting the money. Of course. But they could stop. But nobody pulled. Why wouldn't they have stopped it before?

[00:33:48] [SPEAKER_01] Because they didn't have the friction. It was all rhetoric. Now they have to.

[00:33:51] [SPEAKER_03] The friction was already there. The friction was... You had... Tom, you had the... You had the... A staunch Trump supporter Republican governor in Texas put a moratorium on AI data centers a while... A few months ago. Okay. Right? Okay. So you have that guy who is as far to the right as you can get. Right? And getting money flowing in from these organizations as well put a pause to things there.

[00:34:18] [SPEAKER_03] You had that before you had the House and the Senate change and now a Democratic governor there. I just... I'm not going to say you're wrong. I struggle to buy into the... Okay. I don't...

[00:34:28] [SPEAKER_01] Let's try. You can... All I'm saying is...

[00:34:30] [SPEAKER_03] You can always say in any case, follow the money, follow the money, follow the money. I don't think that you can get a Bernie Sanders and the people that follow his train are as overly concerned about those dollars.

[00:34:45] [SPEAKER_01] We'll see. Okay. We'll see. And we can move on. But here's the bottom line. Here's what I'm basically trying to say. And regardless of you agree with me or not, is I don't believe after all the dust settles here and everything goes through, there's going to be a whole lot of change on how the data center process is moving. It's already been more slower and more deliberate. Yes, I think there's going to be more scrutiny. I think there's been a storyline Paul brought up here about a good... The storyline is changing.

[00:35:13] [SPEAKER_01] People are starting to get better PR and understanding what's going on. It's not... There's definitely been some... There's been some, in a lot of places, some real economic benefit for data centers in certain parts of the country. Right? Yep. Which has been... So I think as the storyline improves and all the things we just talked about that are here, like Will says, jobs are being... Tons of jobs are being created in the trades. Right? There's a lot of benefit to it that has been kind of swept under the rug, if you will, in terms of messaging. Right.

[00:35:42] [SPEAKER_01] So I think if you combine the messaging, yes, will there be some more scrutiny in certain areas? Will there be more deliberate pieces there? But at the end of the day, I don't think it's... After the dust settles here, I don't think it's going to be a big change from where we are right now.

[00:35:58] [SPEAKER_03] All right. Just... I just looked something up real quick. It said... This is from Time Magazine. It said, Democratic campaigns lean heavily into anti-big tech and anti-data center populism rather than accepting massive corporate tech checks. Democratic candidates spent over $100 million on broadcast ads, casting their opponents as too cozy with big tech oligarchs. So it's interesting, right?

[00:36:26] [SPEAKER_03] That that's this position that's been taken. So it's... Anyways, I'm not buying it, but I'm not going to say you're wrong, but I'm not buying it on the idea of that they're going to be able to buy their way out of this. I do think it's important that... You know, Will Quinn made a point here. Data centers are creating tons of jobs in the trades. They'll help ensure data centers get built. I mean, look, we're short tradesmen in this country.

[00:36:56] [SPEAKER_03] And I think this could be a boom to getting more people into the trades because you got people that can make a ton of money. I do think the comment that was made earlier that Paul made about there's been a communication problems from some of these big tech companies. They've done a poor job of really helping people understand. You know, the idea of this, and he talks about it here, closed loop cooling system on this. People are concerned, right?

[00:37:20] [SPEAKER_03] Because there's just been an issue and a problem with people understanding what does it really mean to have that data center. But it is kind of interesting. I saw... I can't remember what news channel it was on, but I saw an interview. I don't think it was 60 Minutes, but it was a week or so ago. And they were talking to a farmer somewhere in the south.

[00:37:46] [SPEAKER_03] And his family's been farming this land that they own for four or five generations. And the people that own the land adjacent to them just sold all the land off for a data center. So now what was basically farmland, as far as you could see, is now going to be this big data center. And he was talking about... In this... I think he was in Texas.

[00:38:15] [SPEAKER_03] And he was saying for the first time in his life, he has... Literally in his life, and he said he's lost friends over it, was voting Democratic because of his frustration about the data center that was going to be built next door to him. Is it because he had misinformation on what it might do to his electric bills? Is it because of what he thought about the water system? I'm not quite sure about that. But it is... This is going to be a challenge. And the challenge then comes...

[00:38:44] [SPEAKER_03] And let's kind of shift gears on this because I don't want you to bury yourself any further in your wrong views with the audience here. But let's kind of jump in and talk a little bit about AI regulation in this setting. And what does that mean to it all?

[00:39:01] [SPEAKER_01] Look, I don't... I haven't looked enough to... Everyone's been talking about regulation. I think that it's the... Well, what does it really mean? Right? And that's the thing that... What are they really looking for? Right? What are they looking for? Right? If you really look at going back to some of the things that happened a few months ago when they had all those leaders at the White House and they came up with some framework for governing and so forth. I mean, I thought that was a great step in the right direction.

[00:39:31] [SPEAKER_01] But yeah, I don't know what it is that people are actually looking for. And most people... I'm sure if you walk down the street and said, if you could have AI regulation, what would you want that to be? And people would be like, well, I don't want it to take my job and I don't want it to blow up the world and stuff. I mean, but that's not AI regulation. Those are just things that we don't want as outcomes for what we're doing.

[00:39:56] [SPEAKER_01] So yeah, I just think it's a very vague and it's going to have a lot of conversation and a lot of noise. But, you know, and also just to kind of... There's a whole conspiracy theory approach to this. It actually has some real evidence to it. A lot of this whole rhetoric and, you know, the whole thing with the data center has been fueled by the Chinese. And... Never heard that. Tell me about that. You haven't heard that? Oh, no.

[00:40:22] [SPEAKER_01] Because the Chinese have used this as a play to slow down the US so that they can speed up and get ahead of us in their infrastructure build-out and their use of AI. And there is actual evidence that has shown that a lot of the sort of rhetoric that has fueled social media and other things over the last, you know, couple of years related to data centers and regulation and anything that just slows down the process has emanated from a lot of Chinese sources.

[00:40:51] [SPEAKER_01] And I'd like to do more. I haven't done enough homework on it to be an expert, but there is definitely evidence and stuff that I've heard from really reputable people that that isn't just some sort of crazy foil hat conspiracy theory thing.

[00:41:04] [SPEAKER_03] No, I wouldn't...

[00:41:05] [SPEAKER_01] It makes sense if you think about it.

[00:41:07] [SPEAKER_03] Yeah, that wouldn't surprise me a bit. But see, I think this is where we... This is where we get to the risk that goes with this, right? Is you've got... Right in the left side of the aisle, so to speak, right? Has historically been right side is less government, less regulations, cut spending, right? Let people make some decisions of their own. And you've got the other side of the aisle that says more programs, more spending,

[00:41:36] [SPEAKER_03] all the things that go with that. And I don't want to overly generalize this, but it's oftentimes been we'll help decide what's best for you, right? And I think that's where the risk comes with this from the AI regulation is. And what triggered me to think about this, Tom, was your comment about if you walk down the street and ask somebody, what does that mean? Is I believe that there are some people that are now even more empowered

[00:42:05] [SPEAKER_03] that believe is you don't know, you know, John Q. Public, you don't know what's good for you related to AI, and I know what it is. So we're going to put the guardrails on this and slow things down and so forth. And, you know, there is... And I've talked about this and comment about this before. I have some cautious cautions about how willy-nilly... I don't want to say willy-nilly, that's not true.

[00:42:34] [SPEAKER_03] But how quickly some of these models are being released and how some of these models are coming out so quickly because everybody wants to stay ahead of each other. I mean, you just kind of think about it mostly anthropic and open AI with this. I think they're running a little wild west on some of this where there are some risks coming, right? Bank attacks, the Bitcoin that was stolen a couple of weeks ago

[00:43:04] [SPEAKER_03] through some of these attacks and so forth. That there is something in it. And I don't feel like we need regulation. But, you know, you think about it. If you and I wanted to go start a car company, it would take us 20 years to get... Or 10 years to get approval to... Safety approvals to have a car company. You know, if you want to build a new airplane, you've got some pretty significant guardrails that you have to go through.

[00:43:30] [SPEAKER_03] So I'm not a big fan of the regulation component of this. But I do think there we would be well served to have some guardrails on how fast things might be moving right now. But my concern is that the risk is that what's being talked about here is that we have some very strict things put. And there's true government agencies about all of this. And that would then slow down the AI race and probably turn things over to the Chinese.

[00:43:58] [SPEAKER_03] And then back to your whole speculation point about Chinese being behind the data center issues is who knows how much money they funneled into the elections. I don't know. I don't know. Well, keep going on your conspiracy theories.

[00:44:13] [SPEAKER_01] Maybe I better do a deep dive research before next week. We'll figure out... I'll take that as a note.

[00:44:19] [SPEAKER_03] Yeah.

[00:44:19] [SPEAKER_01] See if I can find out.

[00:44:21] [SPEAKER_03] Yeah. But I do think that this is something that we'll be talking about a lot. And again, it's not with the idea of taking a political position from here. It's the idea of what does it mean to this and how does this tie back? So let's get back to our audience, right? There are a lot of distributors who have invested in and prepared themselves to do a lot and do a lot more with data centers. Now, the good news... I said good news.

[00:44:49] [SPEAKER_03] The silver lining is that I think distributors as a whole right now are being cautious in everything that they're doing because of tariffs and because of prices and because of lack of availability of copper and other things like that, that they're having to manage their businesses differently than they historically have. I won't say historically have, but maybe tighter and closer because the margin for error is so much thinner right now in that setting.

[00:45:18] [SPEAKER_03] So the data center component could have an impact on growth for people that had planned for next year. Even forget about whether we were going to stop building data centers. I don't agree that that's the case would ever happen either. The issue is how much harder is it going to be to get those built? And that could impact the growth of quite a few different types of distribution companies out there that are tied to that.

[00:45:45] [SPEAKER_03] The other component of that is we have, you know, the vast majority, and the people that we talk to every day are looking at now expanding how they're using AI in their business. And they're wanting to do more and more with AI. And if AI slows down too much because of some unreasonable regulations or some pauses that get hit and so forth, then what does that mean to those folks as well?

[00:46:13] [SPEAKER_01] Yeah. Do you want to jump to that or do you want to finish off some of the stuff here in the economy part?

[00:46:20] [SPEAKER_03] Well, why don't we do that? Let's hit real quick. That's a good point. We're going to come to that a little bit deeper. So there was an article that NAW posted about, that we shared in the newsletter about reshoring jobs holding steady in 2025, that they finally have those statistics, and that overall 25% growth of reshoring is expected when they get the numbers in from this year, which I think that's really encouraging. We can hit real quick.

[00:46:50] [SPEAKER_03] There was a good article there about Canada's prime minister talks about progress made in U.S. trade talks. Do you have any thoughts or ideas, Tom, on what the new shift in power might have on what's going on with tariffs?

[00:47:08] [SPEAKER_01] Well, like I said, I don't think anything is going to go on with tariffs. I don't either. Because it's all through an executive branch, unless it's being used as leveraged to negotiate something later on. But I don't think anything in media is going to change with tariffs.

[00:47:21] [SPEAKER_03] When you say leverage, are you thinking that the Democrats will come back to the president and say, if you want to do X, you got to do Y with tariffs?

[00:47:32] [SPEAKER_01] Yeah, something like that. If you want this bill passed or whatever legislation we're doing, you're going to have to tit for tat, basically. And tariffs would be a leverage point.

[00:47:43] [SPEAKER_03] Good. Okay. All right. We talked about the job reports a little bit. So why don't we roll into, just in our supply chain news and views, big risk of another port strike with Pacific Maritime Association and Southern California ports here where we are, the ports of Los Angeles. And we've talked about this on the show here many times in the past. But if you're not a student of geography of Southern California,

[00:48:10] [SPEAKER_03] the ports of LA and Long Beach are, there's a man-made spit of land that goes out that separates the two of them or it would just be one big port. And if you took that spit of land out and made the one big port, I think it's either the third or fourth busiest port in the world. So when things happen there, it's pretty powerful. And you start thinking about this with the issues going on with Hormuz Strait, Red Sea,

[00:48:40] [SPEAKER_03] challenges potentially this year again with too much flooding and too much rain in the Panama Canal. There could be some bottlenecks happening with that if there was a port strike. I just read this morning that it's been put on pause again. So I think that's an important thing that we'll keep watching here.

[00:48:57] [SPEAKER_01] And isn't it just the security, like security people are the ones striking? Yeah, I think that's the case. But they're concerned about the other dock workers wanting to cross the picket line and all that.

[00:49:07] [SPEAKER_03] Well, you have anybody in that setting go on strike, right? And the rest of them aren't going to cross over. Yeah. So that's a big issue. I thought there was, I didn't get a chance to look at this, but I'll mention it just because it's worth folks going and taking a look at the newsletter. Again, if you don't get our newsletter that we publish each week, it's called Around the Horn and Wholesale Distribution Manufacturing. We'd love to send that to you. Just pop us a note at hello at leadsmarttech.com

[00:49:34] [SPEAKER_03] or go to the website for the podcast, which is aroundthehornpod.com and you can sign up for it there. But there's an interesting thing in there about global dock workers strike over arms shipments and working conditions. So you think about this as you get multiple port strikes around the world. This could be pretty damaging, but this is specifically European port workers were striking as a part of what they describe as an international campaign.

[00:50:04] [SPEAKER_03] But unions in France, Italy, Greece, Spain, Turkey, and Morocco issued a joint call to end the war in the Middle East and the militarization of the ports. So they said that ports must not be used for transport of weapons, ammunition, military equipment, and troops. So it's like, well, how else do you want to get that stuff moving? Yeah, yeah. Where else do you go? Yeah, but if you think about that, if you've got port slowdowns

[00:50:32] [SPEAKER_03] on the west coast of the U.S. and potentially in port slowdowns throughout big parts of Europe, and then you've got the issues going on that are impacting shipping and slowdown of shipping because of some of the other canals, so to speak, and the other Suez Canal, Strait of Hormuz, Panama Canal, issues going on with all of those, it's something to pay attention to if you make your living based upon things transiting across oceans

[00:51:00] [SPEAKER_03] and getting onto rail lines and trucks in some of the U.S. ports. Okay. I want to roll into, I want to jump down straight to our, by the way, we added a new section to our newsletter. We call it the Deal Desk. It's about M&A, financial results, funding, and investments. So we, I failed to mention that in the last show, but we added that in because so much gets reported each week in the news about publicly traded organizations,

[00:51:31] [SPEAKER_03] private companies, affiliated distributors, just reported in the first nine months of this year, huge sales growth for their members at $89.6 billion in the first nine months of the year, which is an increase over 15%. So affiliated distributors being one of the largest buying groups in North America, covering U.S., Canada, and Mexico. Some great events that they hosted last month. And I had an opportunity to go, I think I've been to five

[00:52:01] [SPEAKER_03] affiliated distributors or AD events this year. So we're very grateful for the partnership that we have at Lead Smart with our friends at AD. So Tommy, you want to dive maybe down into the time we have left today into getting into our AI and technology segments?

[00:52:17] [SPEAKER_01] Yeah, that is, by the way, that is some good articles you've added in here. on the deal.

[00:52:22] [SPEAKER_03] I did a good job this week on curating the newsletter.

[00:52:27] [SPEAKER_01] Yeah, finally. Finally. Finally.

[00:52:32] [SPEAKER_03] Well, people keep sending us notes asking to subscribe to the newsletter, so I guess it must be doing okay.

[00:52:38] [SPEAKER_01] It's definitely getting meatier. You definitely have more in there every week.

[00:52:43] [SPEAKER_03] You mean meatier in quality or quantity?

[00:52:47] [SPEAKER_01] Both. Both. Okay. Both. We need some good articles here. Was that a compliment? Was that a compliment? I don't know. We'll let the audience decide. I think it was a compliment. I'm going to win with it. Take it. Take it. Okay. No, good job. Good job. Definitely a compliment.

[00:53:03] [SPEAKER_03] I need that.

[00:53:04] [SPEAKER_01] I need that affirmation once in a while. Okay. All right. Okay. And yeah, definitely read some of those. I'd like to actually spend, be able to have more time we could spend on some of those M&A things on future shows because there's some good stuff in there.

[00:53:18] [SPEAKER_03] Well, I think it would be well worthwhile us doing an Around the Horn 2.0 show on the state of M&A.

[00:53:24] [SPEAKER_01] Yeah. Well, we've been talking about that and yet we haven't done it. So we better. Well,

[00:53:30] [SPEAKER_03] why don't you, you're a 50% owner of this company. Why don't you go schedule it?

[00:53:35] [SPEAKER_01] Okay. I'll get that done.

[00:53:36] [SPEAKER_03] Get on that. Yep. Right. I'm not putting up with that. I'm not putting up with that. Fair enough. All right. Good. What do you want to talk

[00:53:49] [SPEAKER_01] about that? I think, you know, there's a couple articles right here. The state of AI and the enterprise from Deloitte. That's interesting. Yeah. And then there was another article here. Hold on. I wanted to.

[00:54:04] [SPEAKER_03] Paul just says, yes, he thinks it was a compliment and that's the only one for the month.

[00:54:10] [SPEAKER_01] It's true.

[00:54:12] [SPEAKER_03] You know, it's funny you say that. I joke about it all the time that I try not to give Tom more than a couple compliments a month. You've never heard him say that he's willing to give me any. So I say there's a couple of them that I do. So that's good.

[00:54:26] [SPEAKER_01] I'm going to back. Yeah. Well, I guess I got to get my quote up. I'm going to go all the way back, actually, to the manufacturing and distribution summit. There was the AI and leadership takeaways from the ISA fall summit. Yep. I think this was an article John Gunderson wrote about the great phone call

[00:54:45] [SPEAKER_03] with John last week. I'm going to get John back on the deck on the show here soon.

[00:54:50] [SPEAKER_01] What I found interesting, and this is what I wanted to touch on because I can't, I cannot believe the difference in conversations I'm having with prospects and customers over the last even 45 days compared to what we've been having for the entire year related to AI. So what John said in this article is attendees were no longer focused mainly on whether to try AI.

[00:55:19] [SPEAKER_01] they were discussing where it can improve inside sales, customer service, pricing, and inventory processes. Right? So what is he basically saying? He's saying that it's gone from oh, let's fool around with AI to let's figure out our use cases for AI. Mm-hmm. And what the conversation that I'm having I've switched from like, well,

[00:55:49] [SPEAKER_01] AI, what is that? How would it work to I would say pretty big ideas and vision of how they want to use AI at an enterprise level particularly in our case related to sales, marketing, biz dev, growth, you know, business revenue growth in the company, right? I'm sure it's also existing in other parts of the area as well. So, but what's what's kind of interesting is

[00:56:19] [SPEAKER_01] which I so I love the fact that this vision seems to be coming together, right? That there's a vision and it's a vision of you know, the request that the conversations and the requests I've had in the last month or so are actually quite visionary on how they want to and I'm just a generalization but this is probably across 20 different companies anyway that I've talked to about this is it's it's a visionary concept but it's trying to do things that they would never have been

[00:56:49] [SPEAKER_01] able to do before. So, it's not just say how do I automatic expense report or something like that but how do I actually use this to drive growth, drive organic growth, drive sales and things in the organization and do things with our sales teams and our marketing teams and stuff that we would never have been able to do before. And coming up with some really interesting ideas. The challenge though is that most and this is we really do need to do

[00:57:18] [SPEAKER_01] a 2.0 around the horn on is understanding that what is really required to do AI at enterprise scale versus AI where you have your cloud bot and you pay your $20 a month or whatever it is and you use your cloud or your open AI chat bot for $20 a month. There's a very big difference in strategy, security, everything like that when you're looking to do AI at scale and across

[00:57:48] [SPEAKER_01] the organization versus like I said using a chat bot I'm going to load up a spreadsheet and ask questions about the chat bot from the spreadsheet. So I think that's an area we're going to need to spend a lot more time on and going through but what I'm seeing and what John reported in that article seems to be in alignment.

[00:58:08] [SPEAKER_03] No, I think it makes a lot of sense, right? So I think we're going into this and we talked about it a few weeks ago related to the Gartner hype cycle so to speak right? Of this is that you know we've got this exuberance that we've seen of the excitement of what could be you know and as I travel around the company a country I should say looking at talking to distributors manufacturers at the events

[00:58:37] [SPEAKER_03] that we end up going to is there we've moved from this place where I don't want to say everybody but a lot of forward thinking people have moved from this place of okay we need to do something and maybe we bought a bunch of chat GPT licenses and or maybe we bought a one-off very narrow specific type of software that has some AI tools in it to help us build something internally or do something to thinking about bigger issues of what

[00:59:07] [SPEAKER_03] does this mean to our company as an enterprise right and as we're seeing that kind of shift we have to move out of this place where we see presentations about hey connect you connect Claude to an Excel spreadsheet and then ask it these questions and so forth because those aren't enterprise strategies right that's not scalable to grow an organization and scale it so I applaud all of the people that are out there doing presentations

[00:59:36] [SPEAKER_03] to help get people enthused about the potential of AI but if you're running an organization and you're looking to scale an organization by using enterprise level technology you have to understand what that means now I was on the phone earlier this week with a chief digital officer for a very large distribution company approaching a billion dollars in revenue and he gets it right he understands

[01:00:06] [SPEAKER_03] what all of this stuff means from an enterprise level of how are we going to apply AI across our organization from an enterprise level but then you have the other side to tell you about what the potential is of AI or you go to a trade event and you hear somebody talking about these wonderful things and how easy it is to just get some basic

[01:00:36] [SPEAKER_03] head starts going it's not that any of that's bad the risk though is that people get overly excited about what the potential is and it got oversimplified for them in a presentation somewhere or they were texting on their phone when somebody was talking about the other side of this right and again no no offense to anybody that's out you know making a living

[01:01:06] [SPEAKER_03] an overall plan for how AI will be adopted in your organization who you partner with for technology matters now more than it ever does right understanding the difference between what a platform is truly when a business versus the hype of an AI company saying they're a platform a platform matters right and I'm seeing some of this and I

[01:01:36] [SPEAKER_03] some people that have gone or heard a presentation or watched a podcast or whatever that says oh man we're going to do all these things but they don't have a plan they don't have guardrails they don't understand what a platform is and they don't necessarily understand the risks that can be caused from some of these things right and I have not heard too many of these presentations that talk about the guardrails that you need for what are these people when you go by you know a and we saw an example of this with one of our customers this week

[01:02:06] [SPEAKER_03] right and my concern comes with what you're describing

[01:02:22] [SPEAKER_01] there's three legs to the stool and we'll do a 2-0 on this right and again what am I referring to here if I want to start using AI at scale in my organization meaning as an example right we had a request this week I want I want to create an account blueprint for each of our sales people their top accounts that laid out a blueprint of everything they should be doing with that account risks strategy

[01:02:52] [SPEAKER_01] all that kind of stuff great idea no issue there with that but think about that now you're creating one of those or let's say you have 100 sales people and you have say I don't a thousand accounts right that to the appropriate sales people right and to do that at scale and you have to do it you can't just do it once and be done right the health of a customer can change from one day to the next or one

[01:03:22] [SPEAKER_01] hour to the next right so running that through cloud and running some spreadsheets and that doesn't scale it doesn't work it won't it won't it it's times forgot about one is accuracy right so what is the accuracy of what's being created here and how do I have an audit trail or a way to verify that accuracy so

[01:03:52] [SPEAKER_01] you know what's being presented two what is the economics of it right I think we the AI APIs and so forth because again so do that math

[01:04:17] [SPEAKER_03] to your well you got 100 sales people they make five sales calls a day

[01:04:20] [SPEAKER_01] a thousand calls right it's all of a sudden becomes not workable economically right is not economically feasible well if you set up how you're going about and using the AI and making the communication you can reduce those costs significantly through the structure one of the things that one of our engineers is working on the whole framework for that so that we can minimize the repeatability of how we're using tokens and burning tokens and so forth the third is security

[01:04:50] [SPEAKER_01] right how do you maintain the security of what is going in I'm not talking about who has access but what security is being done to ensure that there's not prompt injections and other things that are going in to the data that's being done there those are the and I think that's where the trough of dissolution that comes into play is that infrastructure the good news how do this at scale

[01:05:21] [SPEAKER_01] I think it's just really important for companies to understand that playing with chat GPT or playing with Claude while there's nothing wrong with that that doesn't translate per se to what you're looking at if you're trying to do this at scale within the organization and unfortunately Claude will do a lot of miraculous things for you if you ask it to which is great but the other

[01:05:47] [SPEAKER_03] side of it is I think you just hit another key point to that is Claude will do some miraculous things if you know how to ask it correctly

[01:05:58] but

[01:05:59] [SPEAKER_01] you know we pay most of us pay whatever even businesses I think pay what 20 bucks a

[01:06:14] [SPEAKER_03] account that we have had definitely has some limits to it which is different than what you're doing

[01:06:21] [SPEAKER_01] with API connections and so well and remember the Claude and API are basically losing money on those sort of all you can eat from those things there so it's a different philosophical approach to how you're doing it versus just sitting there

[01:06:51] [SPEAKER_01] with a $20 Claude license

[01:06:55] [SPEAKER_03] so having a plan having a structure and having an understanding of who you're partnering with is important

[01:07:04] [SPEAKER_01] yeah I of this right is that we have opportunities to implement some of these things at an enterprise level with some miraculous results right but we have to understand what we're and you know you hear all these companies and mostly tech companies that went out and did

[01:07:44] [SPEAKER_01] just talked about

[01:07:46] [SPEAKER_03] nice comment here using AI at scale requires an enterprise strategy I mean that that just does there's a nutshell right putting things into a nutshell maybe we should just have Paul run this show for us regularly because he just distilled down seven minutes of our banter yeah so let's let's tie this in as we if we were to look into our segment about cybersecurity and HR dive and it says companies are

[01:08:16] [SPEAKER_03] not saving money with AI Gartner fine so this was from a Gartner study but just a couple of sound bites from this right 97% of organizations are currently incapable of cutting expenses solely through AI productivity measures 38% of companies are already over budget on their artificial intelligence initiatives only 21% of the actual time saved by employees via AI is successfully redirected into more innovative work and 78% of

[01:08:46] [SPEAKER_03] leaders are fundamentally misaligned regarding where AI is most helpful in their workplace

[01:08:51] [SPEAKER_01] 78% of good no I mean did they explain why that is happening did they have an explanation of what is the why these situations are occurring are these

[01:09:04] [SPEAKER_03] this this no they didn't it didn't go into that in this particular article as part of an overall Gartner overall study but but think about that 78% of leaders are fundamentally misaligned regarding where AI is most helpful in their workplace

[01:09:19] [SPEAKER_01] sounds like they're missing an enterprise strategy

[01:09:22] [SPEAKER_03] that's exactly right yep it's exactly right you know so I think it just we are in this place and I right now where we I mean never a better time to be alive depending on how you look at things if you look at where the opportunity is ahead for us right the opportunity for these things is great but you know at the end of the day we got people here that have joined us live on this show today and we got people that we talk to every day all day they got companies to run

[01:09:52] [SPEAKER_03] they have to be focused on driving the revenue growing the doing more with less and how can technology and AI enabled technology help us to do that as a whole but we are also in this place where there is

[01:10:23] [SPEAKER_03] yeah the word that came to my mind was charlatan but that's way too harsh but there are a lot of companies out there that are popping into the marketplace that don't necessarily understand distribution they don't understand anything than their own business model of what they're doing but they identified that distribution might be a great place to drop in to find a new market for their technology and we're seeing more and more of that what are laughing at Tom I see the giggle on your face

[01:10:52] [SPEAKER_01] I that is that what we're claiming here

[01:11:03] [SPEAKER_03] I don't know that's a big claim that's an understatement so with that as a whole so I

[01:11:57] [SPEAKER_03] look what happens is you're servicing your customer better because you understand your customer better your customer in theory is going to buy more from you because you've now uncovered things that they probably aren't buying from you or they maybe didn't recognize you

[01:12:30] [SPEAKER_01] the whole point here is to go in eyes wide open because I think if you go in with expecting something magical because of maybe something you've seen or heard I think that can be that disillusionment but on the other hand if it doesn't have to be overwhelmingly hard it's kind like you said who do you partner with on these things to do that we're spending a lot of money on our end making

[01:12:59] [SPEAKER_01] sure we can address those three points I brought up which is accuracy affordability and security and be able to do that at scale and across all of the different use cases that we would have to do that was one of the things that we've been struggling with how do we build something like that that works with not just a generic set of use cases but then those use cases with the derivative nuances that exist in a company right not everybody does things exactly

[01:13:29] [SPEAKER_01] the same and so forth so anyway there's just I think there's no magic here

[01:13:36] [SPEAKER_03] no but two comments are worthwhile here the first first one Bob says that efficiencies generated by AI do not necessarily translate into top line effectiveness they absolutely won't unless you have executive buy-in across the board and understanding what you want to go achieve as appreciative of what Sven said here sometimes we see a lack of ownership of individual initiatives and the change management is a challenge to driving AI efficiency

[01:14:06] [SPEAKER_03] not necessarily an overall strategy any change requires work in getting people on board the rewards are significant but they are earned and I think that last sentence is super powerful thank you for that comment Sven says the rewards are significant but they are

[01:14:37] [SPEAKER_03] it takes commitment it takes strategy and it does take work but the rewards are phenomenal when done correctly right so good in a few minutes we have left anything exciting that catches your eye from the newsletter further

[01:14:56] [SPEAKER_01] I didn't get a chance to read this one the optimist wait list report you know I know you're waiting for your robot so it's going to come mow your lawn yeah I was wondering if you would bring that up or not yeah did you have any notes on that or

[01:15:11] [SPEAKER_03] well just the articles from san francisco standard it says tesla is set to open reservations for optimist robot later this year that's coming from industry experts so they're talking about targeting a price tag just above twenty thousand dollars and so they've been converting parts of their fremont california which is just south of oakland by a little bit for those of you not from california or haven't spent time here

[01:15:41] [SPEAKER_03] so we'll see if that really happens it's there's a little tension between the aggressive production goals and then the marketing ambitions of it all but look elon musk has been saying for quite that we're going to have more robots than people on earth because all of us should have multiple robots to go with this so that's the key behind all of this but

[01:16:10] [SPEAKER_03] it's happening faster than maybe we thought not I thought but you thought

[01:16:17] [SPEAKER_01] yeah so it's coming right is what you're saying

[01:16:22] [SPEAKER_03] yeah there's nothing it says ceo elon musk appeared to deny any december waitlist in a post on x x but it's industry experts that are looking at what they're doing in their facilities and so forth are saying that yeah it's closer than we believe this a few have said december well okay but i think that

[01:16:55] [SPEAKER_03] he he wants to make sure he's going to control all of that but they have robots working in the robot factories now so the optimist seems like it's going to be great i was on the phone with her friend from oblico their ceo pierre barbeau this morning on my drive into

[01:17:25] [SPEAKER_03] take on this so i think this is going to be interesting right but this is going to be another one of those solutions right there's a big difference if

[01:17:55] [SPEAKER_03] we've been seeing you know arms that move and weld car parts and so forth for decades basically but now we're thinking about what am i going to do do i want to put five optimist robots into my warehouse to do using cameras and sensors to do inventory counts and loading boxes on and off a truck

[01:18:17] [SPEAKER_01] but

[01:18:18] [SPEAKER_03] same scenario because the data that's going to be generated by that robot is going to be wonderful to be used with other data sources from within your business right what if you and man tom i'm going to tangent on you here for a second but it goes back to that you know you hear me harp constantly about the difference between software and a platform if you have a platform that's a true platform technology platform in

[01:18:48] [SPEAKER_03] your business and you decide you want to put three or four robots out in your facility and you're literally the same tool that you're using for sales enablement in a platform could literally be extended out to manage data that's coming from a robot so talk about the need for a technology plan in a business robotics is just another component of it and it goes back to

[01:19:18] [SPEAKER_03] do you have the right partner that understands how to help you extend these things in your business and you have the right platform for technology so that you can get rid of silo data because robotics the data that's going to come from robots imagine having a robot that is walking your perimeter of your facility at night doing inventory counts whatever that is that's just another set of silo data if it's not applied properly across the platform sure

[01:19:46] [SPEAKER_01] that's my special what's that no please no I have a special little treat here before we end off

[01:19:54] [SPEAKER_03] this scares me because I have no idea what you're going to do

[01:19:58] [SPEAKER_01] okay do you see the screen there

[01:19:59] [SPEAKER_03] it's coming

[01:20:00] [SPEAKER_01] so I'm going to set the stage Kevin and I were

[01:20:16] [SPEAKER_03] in in our cyber cab so for those of you who are listening to the recorded podcast and not watching with us live or even the recording we are Tom and I were in Austin Texas last week and what we're going to describe here is our first ride in a cyber cab which was

[01:20:35] [SPEAKER_01] in the dang thing I can turn it down that's the sound will come through but yeah notice the

[01:20:47] [SPEAKER_03] weirdest sensation in my life was getting into the left side of a vehicle with no pedals and no wheel

[01:20:55] [SPEAKER_01] right so then you press the button see there got to press the button the guy kind of walks in front of us car doesn't go and then once the guy leaves the car starts to move at that point Kevin's about ready to jump out of the car at that point

[01:21:11] [SPEAKER_03] I was very uncomfortable

[01:21:14] [SPEAKER_01] you're going to notice here that we're coming into kind of a very busy highway that we're going to turn into and this is about where you said

[01:21:25] [SPEAKER_03] this is the future

[01:21:27] [SPEAKER_01] this is the future so this

[01:21:31] [SPEAKER_03] is in Austin

[01:21:31] [SPEAKER_01] Texas the you could be doing whatever you don't have any control over any of the stuff that's here but finally makes the turn goes out and we won't bore everybody with the two minutes of this then

[01:21:53] [SPEAKER_03] don't push the button up above you there where it looks like the lights turn on right yeah

[01:21:58] [SPEAKER_01] there's up above there it looks like a light it's actually a panic button and Kevin pushed that the car immediately pulled into a parking lot and then a guy pops up or a voice comes up on that screen there and saying what's your problem what's wrong what do I need to do and said well we just pushed the wrong button I

[01:22:19] [SPEAKER_03] had to acknowledge that I was a little bit anxious with it all but we took one to dinner to meet our buddy Jeremy from Robert Madden Industries for some good barbecue so they can't go on the interstate highway this is I think the only places there in Austin that they have these so my take you've been excited about this and so it's good that you don't like to drive probably true and so

[01:22:49] [SPEAKER_03] the the and what's funny is on that so I have a Rivian now that has will certainly have self

[01:23:19] [SPEAKER_03] driving at some point in the not too distant future certainly need to get those regulations changed and so forth but what came to my mind is it I finally got my arms around it self driving for me is if I'm going to go visit my mom in the nursing home that she's in that's an hour and a half away that I visit each week and I drive over this beautiful mountain pass when there's been raining there's a small river that goes through beautiful California coastal oak trees it's two lane highway it's 40 minutes

[01:23:49] [SPEAKER_03] of the drive is there it's gorgeous I like driving the two lane windy mountain road and it's a lot of fun but if I were to go up to see you in Ventura there's no way to get to see you without driving through LA right and you might not have

[01:24:24] [SPEAKER_03] the push a couple buttons and say here's where you drive and I take a nap or work awesome but if I

[01:24:54] [SPEAKER_03] was an interesting experience I think your

[01:24:55] [SPEAKER_01] hybrid model is very true and I think that's going to exist very soon you just get in the right side and

[01:25:24] [SPEAKER_03] so we enjoy getting together with everybody every Friday morning great great comments today quite a few comments from some new people that haven't commented before so we greatly appreciate that again a reminder if you're listening to us on the recorded podcast Apple Spotify Odyssey Amazon wherever that might be of your choice the vast majority of our listeners are on Apple we see each week an Apple podcast

[01:25:54] [SPEAKER_03] we would ask you a favor if you wouldn't mind specifically with YouTube and Apple would be not only click the subscribe button but leave a review and that helps get this show out in front of a lot of other people if you're whether you're listening in run the recorded podcast or you've been with us live today tell your

[01:26:24] [SPEAKER_03] comments and the better comments that we get the better the show gets and people have the listen less to Tom and I working hard right now on the Q1 guest list for the show and so we'll have more and more guests coming into Q1 coming in the late part of the year here we'll have a couple of weeks where we won't have shows because of holiday weekends and so forth but we're grateful for the people that come with us the super appreciative of

[01:27:03] [SPEAKER_03] not hearing some of the things we had to say earlier we understand wholesale distribution at lead smart technologies we understand the depth of AI and technology and what it can do and how it can help your business if you'd like to unleash the power of the data that you already have in your business through a true platform that can extend many parts of your business to help you understand your customers better your overall business better and certainly your team is better then we would love to talk to you and share more with what we do with our Meridian 360

[01:27:32] [SPEAKER_03] enterprise growth platform to help you gain the maximum benefits that you can through technology we'd love to share here just to make sure that you I'll be at happy hour by then so happy hour sounds good all right well thanks Tom appreciate your insights

[01:28:02] [SPEAKER_03] even though you were wrong about some stuff it's okay Bernie Sanders has it out for you that's

[01:28:12] [SPEAKER_01] right we

[01:28:13] [SPEAKER_03] will

[01:28:13] [SPEAKER_01] all see

[01:28:14] [SPEAKER_03] well we will be here each week to continue to cover the news of the week as it impacts wholesale distribution and manufacturing again we thank everybody for being with us we'll wish you all a wonderful weekend be kind be safe and do good things

[01:28:45] [SPEAKER_00] 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 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

[01:29:14] [SPEAKER_00] CRM customer intelligence and channel collaboration platform that's lead smart technologies at lead smart tech dot com