What Tariff Inflation Means 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.

[00:00:24] [SPEAKER_00] Whether it's M&A, SaaS and cloud computing, B2B e-commerce, or supply chain issues, we peel back the onion with our guests into the topics that impact your business the most.

[00:00:36] [SPEAKER_01] Hey, that's a lame dance. Where is the spinning around? Where's the backflips?

[00:00:41] [SPEAKER_03] That's all I've got today, Tom.

[00:00:45] [SPEAKER_01] You didn't shave either.

[00:00:47] [SPEAKER_03] No, I'm growing a goatee. Come on.

[00:00:50] [SPEAKER_01] Oh, again? Okay. Is this like goatee 8.0?

[00:00:54] [SPEAKER_03] Right. For this year. Exactly right.

[00:00:57] Okay.

[00:00:57] [SPEAKER_01] Okay.

[00:00:58] [SPEAKER_03] I've got a really good friend that I was talking to the other day at Bible study, and he was like, they have a home in Wisconsin as well, so actually he's quite pleased today. And on that note, I guess, congratulations to the Brewers. I think I saw on LinkedIn that Mike Hockett from MDM was going to join us today, and Brewer swept our Dodgers, Tom.

[00:01:25] [SPEAKER_01] Oh, I didn't even look. I saw they were down last night, so yeah. Well, they were ahead 4-0. They were up 4-0, yeah. And then what was the final score? I didn't even see the final score.

[00:01:34] [SPEAKER_03] I want to say it was 5-4. I think I didn't, I wasn't able to watch the game. Pretty sad. Well, you know, Dodgers swept the Brewers last year. So anyways, this buddy of mine, he just makes fun of me. He's like, you know, we'll go to Wisconsin for a month and come back and, you know, you've got a beard. And then we'll be here for three weeks and you don't have a beard. And then it's like, I don't know, just ask for a rhyme or reason. And I said, no rhyme or reason.

[00:02:00] [SPEAKER_03] Anyway, you're in, I don't think anybody tuned in today to pay attention to my facial hair. You're in your living room. What's going on?

[00:02:09] [SPEAKER_01] My dining room. My dining room. Kevin, Bob says you sound far away. You sound okay to me.

[00:02:18] [SPEAKER_03] All right. Give us a thumbs up there, Bob.

[00:02:21] [SPEAKER_01] Yeah, that's better. That's definitely louder. Whatever you did there.

[00:02:24] [SPEAKER_03] All right. I did exactly what Bob said. Turn your gain up. Okay. So good thing we have a production guy here helping us out. Well, I mean, I just listen. Now I've got, you know, mostly it's, I hear from you is just listen to you. I hear from my wife, listen to her. And now I guess I need to listen to Bob too. That's right. Absolutely. All right. So you've got, you're in your, you're in your dining room, your dining room, right? Some art behind you and you're in shaven as well. Yeah. You lost some hair overnight.

[00:02:53] [SPEAKER_01] This is, this is goatee 1.0. This isn't goatee 8.0.

[00:02:57] [SPEAKER_03] From, so like 27 years. That's goatee. For 27 years. Yeah.

[00:03:00] [SPEAKER_01] It just got changed color.

[00:03:01] [SPEAKER_03] So what's happening in, what's happening in Ventura today that you're sitting in your living room or dining room?

[00:03:06] [SPEAKER_01] Well, we have no power as of 5.30 this morning. Um, and, uh, I'm going to shout out to my friend and neighbor, Matt next door, who has let me connect to his generator. That is right over the wall over here on the, on where I'm sitting. So the show can go on. Um, and, uh, I was able to get the internet running. I mean, they say that we're having big winds. So the winds have been blowing 30, 40, 50 miles an hour. It's a fire danger.

[00:03:36] [SPEAKER_01] They shut off the power. Um, it's not like we're in the middle of the forest somewhere or whatever, but I guess because we're close enough to those avocado groves and things like that. It's, uh, it's better. So, um, though anyway, we're here, right? That's, that's not one of the reasons we, we allow for, for not continuing.

[00:03:58] [SPEAKER_03] Yeah. So that's what we were just, we were talking about before I went live today. Right. As we always say, it's like, unless someone's on an airplane in the hospital or a planned vacation, the show must go on. And here we are today, uh, in that case where you're out of power. Right. And by the way, um, I'll send Matt a note. You're, you've got one of the coolest neighbors someone could have. Uh, there could be a TV show, uh, about, uh, about you and Matt.

[00:04:26] [SPEAKER_03] So he's great guy, but, uh, I'm appreciative of him helping you out. So you could be here today. And I just went through, uh, my, um, poor wife was in the hospital last night. So, um, we were up, gone most of the night. She had an allergic, she'd been in the hospital the day before and had an allergic reaction to some of the medicines they were giving her. So she was on all kinds of, all kinds of stuff last night. So she's down the hall resting. I'm doing the podcast from home for the first time in many, many months.

[00:04:56] [SPEAKER_01] I was in the hospital does not count as a reason to not continue.

[00:05:00] [SPEAKER_03] The show goes on as she said, I think she just wanted me to stop bothering her. Yeah. Get the hell out of here. Right. Yeah. Right. I was, you know, my wife, Darlene is, uh, in one of those people that, uh, is, um, Benadryl makes her antsy and kind of amped up. And so she had IV Benadryl last night and, uh, she had this horrible reaction and her face was swelling up and we're concerned about her breathing.

[00:05:29] [SPEAKER_03] She's had an incident before like that, where she had to have a, use an EpiPen and stuff. So I was quite concerned, but, um, so she's like up and about this morning. I'm like, your body has been through so much in the last few days. You got to go to bed. So she's tired of me telling her what to do. So maybe you or Bob Britton could tell her what to do since you guys tell me what to do.

[00:05:47] [SPEAKER_01] And I respond accordingly, but she should go get some rest and lay off the Benadryl.

[00:05:53] [SPEAKER_03] Well, the Benadryl is what's keeping her, keeping her okay right now. So it's a little balancing act with that. But anyways, she'll, she'll Darlene will be good. She's, she's a strong woman. So, um, but anyways, I've got a feeling we're going to, with your situation, they're worrying about the power. We should probably compress our show a little bit today. We're grateful for the people that come with us. So here we are episode 208. I was looking at this yesterday as I was putting the final notes together for the newsletter that went out with his like, you know,

[00:06:23] [SPEAKER_03] I was cringing when we did our 200th celebration show about people talking about, you know, excited about getting to 300. And I'm like, well, we're eight weeks into that. So maybe, maybe I'll be alive and we'll get there. So, um, 8% of the way, 8% of the way. That's the great way to look at that. Good, good, good, good. Well, again, we're here every week, 208 times. I'm Kevin Brown. This is Tom Burton.

[00:06:48] [SPEAKER_03] And, uh, we get together every Friday morning, as we say, if, um, no one's on an airplane, a planned vacation or in the hospital. And so now we know spouses don't count and, uh, power outages don't count because here we are. Yeah. So, uh, but we do this every week. We do this by means of the newsletter that we send out. Uh, we have a unique show here. If you, for some reason are joining us for the first time and our audience continues to grow mostly on the podcast, uh, recorded podcast side and Apple and Spotify and Odyssey.

[00:07:17] [SPEAKER_03] And then last week we had, um, what was it? 680 or something like that. People join us just on YouTube. So, uh, shows growing and growing and growing in lots of different places. LinkedIn happens to be where a lot of our friends here that, that tune in and are able to make comments are. But if you're, uh, joining us on YouTube this morning, you certainly are able to make some comments there as well. But, um, we get out that newsletter that I mentioned every week. It's called around the horn and wholesale distribution and manufacturing.

[00:07:46] [SPEAKER_03] And, uh, that goes out, um, I don't know, 13,000, 12, 13,000 people. I haven't looked in the last few weeks, uh, every week. And what we do is we publish news and information about the economy, supply chain, manufacturing, and distribution, automation, AI, robotics, technology, um, human resources, leadership, uh, M&A, and all kinds of different things.

[00:08:10] [SPEAKER_03] And we try and discuss some of those articles each week on the show, uh, and, uh, get some feedback from the audience that we have here. But we always try and tie that back into the audience that we serve, uh, in wholesale distribution and manufacturing. With that said, we couldn't do the show each week without the support of the company that Tom and I both work for, which is LeadSmart Technologies. LeadSmart, uh, has developed what we describe as a enterprise growth platform.

[00:08:37] [SPEAKER_03] So last month we launched the industry's first enterprise growth platform. It's called Meridian 360. Our company still remains LeadSmart Technologies. A lot of people just call our product LeadSmart because that's what we were called when we first got started. So we started the company about six years ago. Uh, we were just a traditional CRM with all kinds of bells and whistles and tools and technology and workflows and things that Tom and his team developed to help wholesale distributors, uh, use technology better.

[00:09:06] [SPEAKER_03] And over time that grew and expanded into having all kinds of, uh, I call them tentacles. You called it a spaghetti bowl one time of, uh, just dramatically more tools and capabilities. So what we decided to do was really look at what the industry needed and what the industry needed was not more. What the industry needed was a platform that brings all of the disparate data from across your business into one place.

[00:09:29] [SPEAKER_03] And that disparate data can now be used with AI and other technology tools to really get an understanding and a deep understanding. That's a unified view of your customers, your team and your overall business. So we have tools like our sales compass, uh, our channel cloud, smart CRM. We have marketing IQ insights, quoting insights, and a quoting tool as well. And then, uh, we're finalizing now some digital commerce tools as well. So now we can bring all that can disconnected data together and help make great decisions.

[00:09:59] [SPEAKER_03] And what's wonderful about this is it's just not one more place for a sales rep or a purchasing person, whoever it is to have to go log in. It is truly a system of record within a business because your ERP system is a nice transactional view of something that happened in the past. Your e-commerce system is giving you some information about what people might be buying online or looking at. But when we bring all that data together, we truly have a source of truth and a system of record.

[00:10:25] [SPEAKER_03] So if your company is looking to digitally transform, accelerate growth in a way that people can literally get push notifications and email notifications to their phones about, about what's important to the customer at that moment in time, we would love to talk with you and share with you how we can help you accelerate the growth of your company. So Tom, that said, anything to add to that? Anything exciting to happen with our customers this week?

[00:10:51] [SPEAKER_01] Oh, God. Boy, this week was a quick week. A whirlwind. Yeah. A whirlwind. So I don't know of anything right off the top of my head. So all these last things. Let's dive into the news. Yeah, let's do that. So, all right. You have a few articles here that seems to have a little bit of a theme about inflation.

[00:11:15] [SPEAKER_03] That is my purpose each week to have a little bit of a theme.

[00:11:18] [SPEAKER_01] Yeah, there seems to be a bit of a theme here on these first two free articles. So I guess we can start with the PPI report came in yesterday. I think it was or the day before. It was yesterday.

[00:11:30] [SPEAKER_03] Yep.

[00:11:31] [SPEAKER_01] And it was higher than expected. What did they say? It was one of the highest dumps, I guess, in 20 years. Like 1.6%.

[00:11:42] [SPEAKER_03] Until it gets updated and revised, right? Of course. Yeah. They call it hotter than expected.

[00:11:49] [SPEAKER_01] Yeah. Um, so, and then, so there's all these things, you know, talking about, oh, there, are they going to raise more rates? You know, last week we were on the show or the week before, and there would be a cooler inflation report. We were talking about, oh, maybe they'll cut rates again. You know, it's like, if you don't like what they're saying, just wait 15 minutes that are there.

[00:12:07] [SPEAKER_02] Yep.

[00:12:08] [SPEAKER_01] Um, but, uh, yeah, the, um, bottom line is, is, you know, more inflation. Again, I hate to use that word because it's not so much inflation, meaning there's a lot of money, new money going into the system. It's price increases. And, you know, that's really what these articles are talking about is that price increases are just continual and have been continual.

[00:12:33] [SPEAKER_01] I believe they said for 22 months, our cost of living has increased from the last each month for 22 months straight. Right. Which is the longest it's ever happened in the, I think since it's been recorded. But nobody seems to care. But nobody seems to care. And I think that one of the articles there, right, the fed and everybody is very concerned and I, and maybe this is a train that's long since passed is that people will just start expecting consumers in general, they'll start expecting that.

[00:13:03] [SPEAKER_01] That, and businesses that inflation's are again, I'm gonna call it higher prices, increased prices and higher prices are a fact of life that we have, we have to live with.

[00:13:13] [SPEAKER_02] Yeah.

[00:13:14] [SPEAKER_01] And, and then that will lead to increased wages to make up for the higher prices. And the whole thing just kind of keeps going. Um, and it becomes impossible to stop. Right. I don't know. I think we've passed that point of no return. And I, at least from a price increase perspective, I think with all the great, if you look at where even the, um, if you look at behind the scenes of this latest increase, it's fuel, but it's

[00:13:44] [SPEAKER_01] also price increases related to directly or indirectly to transportation costs and everything else that's, you know, related to fuel and diesel and all that kind of stuff that's there. So, um, I don't know. I, it seems to me, I don't know how, yes, a reduction in fuel costs would make a difference, but I think companies and consumer companies, it's, everyone feels like it's okay to raise prices now and they'll get away with it and they're going to keep doing.

[00:14:13] [SPEAKER_03] Yeah. Yeah. It's, uh, I guess the, um, it's really kind of a unique place that we're in and it just kind of goes back to, to a conversation we have pretty consistently is this is a very unique economy that, uh, that we're in right now because you know, the, the levers, the ratchets, the buttons, the, the strings that the fed pulls as well as the data that they're using is, I think,

[00:14:43] [SPEAKER_03] maybe for the first time ever, it's just not the things that they've trying to do and the things that they're trying to accomplish are just not the same.

[00:15:00] [SPEAKER_01] So they're just, they're just, is that you freezing or is that me?

[00:15:03] [SPEAKER_03] No, I think it was, I think it was me. That's the camera that I have at home here, but, uh, you were able to hear me, correct?

[00:15:10] [SPEAKER_01] Or you broke up for a minute and then you came back.

[00:15:12] [SPEAKER_03] Anyways, my point, my point was that the, the, um, issues that we have right now is that the levers and the buttons that the fed is trying to push are not having the impact they want. Um, and so they lowered a little bit and things kind of stayed the same. They raised, things kind of stayed the same. Um, they'll may or may not raise again.

[00:15:38] [SPEAKER_03] Um, and, but people aren't slowing down and they're still spending the way they were previously. Right. So you've got this issue, right. And I think you, we were talking earlier today and you were kind of saying like, when does this end? Right. Because you, you, what were you saying that, you know, Costco was a zoo the other day and everywhere you turn, there's still people shopping.

[00:15:58] [SPEAKER_01] I mean, I, I mean, you've been traveling, airports are packed, flights are packed.

[00:16:03] [SPEAKER_02] Yeah.

[00:16:03] [SPEAKER_01] Right. Um, hotels are packed. Um, restaurants are packed. Costco was, I have never seen anything as many people running around a store and buying the quantity of stuff as I saw on Saturday at Costco. It's like, I don't see any sign of anybody, especially at the consumer level, slowing down. And I know we're not seeing any evidence on the business side of anybody slowing down.

[00:16:30] [SPEAKER_01] So I guess the billion dollar question is, is what would have to happen? Because again, the Fed is trying to slow down, right? They're trying to slow the plane down. They're trying to get people to be more deliberate and change their behavior on their spending. Yep. What do you, what do you think? And not just the Fed, but what do you think is going to have to happen for that to occur? And as Bob points out, right, as long as the wages keep going up, people are like, well, I've, you know, I'm paying more, but I'm making more.

[00:16:58] [SPEAKER_01] So life's good, you know, or at least okay. Maybe not good, but okay.

[00:17:03] [SPEAKER_03] Right. If prices go up 5% and wages go up 3%, I have a 2%, you know, delta there that I can absorb because I just adjust where I'm spending. Right.

[00:17:13] [SPEAKER_01] Yeah. Or even if I get a CPI increase in my salary, right? That's kind of more or less, more or less keeping up with, with inflation there. But you are seeing in some industries, higher salaries for sure. More money, you know, more money being paid for the things that are there. So it's, you know, I was thinking about this as like, if the Fed raised rates 2% or 2 points at the next meeting, instead of a quarter point, let's say they just went crazy and raised 2 points. What do you, what do you think that would change anything?

[00:17:44] [SPEAKER_03] I lost you there for a second. Tom, tell me again.

[00:17:48] [SPEAKER_01] No, let's say at the next meeting that the Fed did something crazy and raised the rates 2 points instead of 0.25 points. Mm-hmm. 2 percentage points. Yeah, 2 points. Right? Like crazy, crazy stuff. Crazy, ridiculous, almost ridiculous stuff. But would that create, would that be enough of a hand grenade into the process to cause everybody to go, whoa? And really, I mean, I understand it might have a rate in the market. I'm not talking about the stock market.

[00:18:17] [SPEAKER_01] I'm just talking about the behavior of businesses and or particularly the consumer.

[00:18:25] [SPEAKER_03] I mean, I think the first thing that comes to mind is something that dramatic, right, is the stock market goes into a frenzy. Many, many people slow down and dramatically slow down in their purchasing. But you'll have others that just keep pushing right along because they've got somebody to impress or they've got some other reason and they just drive up credit cards. But now credit card rates just went through the roof. I don't see how something like that accomplishes all that much.

[00:18:51] [SPEAKER_03] And the damage, I think, that causes is that the people that are in the equity markets and so forth, which is, we talked about this a while back, it's just such a small percentage of U.S. population that actually owns any equities or any stocks, any bonds, anything like that, that that group of people has a huge impact on them because that's going to throw the market into a frenzy.

[00:19:19] [SPEAKER_03] And then you've got, my assumption would be you just have a mid-tier, right, that says, ooh, I got to, you know, eat a little more hamburger helper than just hamburger and extend some things a little bit. So, that's my takeaway on what could happen in that setting.

[00:19:35] [SPEAKER_01] But would it stop or would it result in a long-term or, you know, and Paul's saying consumer debt is getting strained now. And would that be the straw of the bridge to the back? That's the question, right? I know when we had Alex on earlier, yeah, you know, he was saying consumer debt was still pretty, you know, not too bad.

[00:20:01] [SPEAKER_01] Now, maybe it's getting worse or maybe it is getting, I don't know how it couldn't be given what's going on. But yeah, would that be the straw that breaks the back? I don't think that people are getting the message, right? I think that, you know, the Fed and the others are trying to communicate a message and people are not getting the message and they're kind of just, well, it's just the way that it is and we'll figure this out.

[00:20:27] [SPEAKER_03] Well, that kind of ties well to the next article that we have there, Tom. It's from a couple of days ago, but it's from CFO Dive. And it says, borrowing costs still too low to cool inflation. Economist said in a survey, it says business spending will likely grow at 12.6% annual rate this year before slowing. Going to 6.2% in 2027. So that's just a survey of economists.

[00:20:51] [SPEAKER_03] But it says the rise of U.S. borrowing costs since August triggered partly by tighter monetary policy is too low to cool inflation or slow growth. That's 59% of the economists surveyed said that. Price pressures pose the biggest threat to the economy. The core personal consumption expenditure price index, the Federal Reserve preferred method of inflation will likely edge up in the coming month.

[00:21:15] [SPEAKER_03] Then ease slightly during the second half of 2027 while remaining above the Fed's 2% target. And then it says here, noted Friday economist Kevin Brown from the Around the Horn and Wholesale Distribution podcast has been referenced as saying, we're using the wrong metrics if we're looking at 2%.

[00:21:37] [SPEAKER_01] What does he know? Did you say, but what does he know?

[00:21:41] [SPEAKER_03] No, it says here that Cleveland Fed President Beth Hammock fully agrees with Brown.

[00:21:46] [SPEAKER_01] Okay. That's a suspect. Yeah. You're not buying it? The rest of it was true. Okay. Okay.

[00:21:59] [SPEAKER_03] The rest of it was true. Yeah.

[00:22:01] [SPEAKER_01] But actually, to your point on your 2% or your 2% the wrong number point that you made, right? What is actually happening is whether the Fed agrees with it or not, the consumer is. Right? The consumer is saying...

[00:22:15] [SPEAKER_03] The Fed says 2.5% or 3% is the right number.

[00:22:19] [SPEAKER_01] Well, I don't know if it's the right number. It's what is agreed is the right number, right? Or can we live with that number? Well, that's my point.

[00:22:27] [SPEAKER_03] Maybe I articulated that poorly. But my point is, everything that we're seeing out there says that things can move along fine at a higher number than 2%. Right.

[00:22:38] [SPEAKER_01] Yes. But their point is, if you let that go... And this is, I think, in the article. Yeah, the next article. Wholesale Inflation Reaches Levels. Last seen in 2022. Is if you just let that keep going unchecked, it's a cancer that is... It over time ends up... 3% a year starts to add up a lot over time. Now, granted, 2% a year can add up.

[00:23:06] [SPEAKER_01] But if you let 3%, then it just become 4%. So that's why they believe that they have to bring it all the way back to that 2% level so it doesn't get completely out of control.

[00:23:17] [SPEAKER_03] Yeah. Well, that kind of ties into the other article that we have here from CNBC about how high inflation is becoming a fact of life in the U.S., right? It says that U.S. consumers are in the midst of one of the longest streaks of elevated inflation levels on record. Some are beginning to act like high inflation is the new normal, which can cripple the power of the Federal Reserve monetary policy. Right? So they've got these particular tools that they want to use in this setting, but it's not changing anything.

[00:23:47] [SPEAKER_01] Well, I said that was my point, right? If they raise it 2 points, would that change anything?

[00:23:52] [SPEAKER_03] You know what? What do you really believe about that?

[00:24:00] [SPEAKER_01] I agree with what you said as I think it would throw a turmoil in the market. Would it create, you know, I'm sure people would argue that we created a recession or worse. You know, that spending would stop and all that stuff. I don't know. I think Bob mentioned something earlier about, you know, you might have said it would change the politics, but the economy economics would eventually balance out.

[00:24:23] [SPEAKER_04] Yeah.

[00:24:24] [SPEAKER_01] I tend to agree with it. I don't think it would have the, it would create a lot of turmoil, but I don't know that it would create the economic result that they would be looking for, which is everybody stops spending. It would certainly, it would certainly affect home prices. It would be interesting to see, you know, again, we talked about a couple of weeks ago, right? The bond market, kind of the Fed, the dog ragging the trail or the tail wagging the dog, right?

[00:24:50] [SPEAKER_01] Is that the bond market was kind of dictating what the Fed was doing. The bond market has been down significantly over this week. So, yeah, maybe we need to get Alex or somebody who knows more about this than we do back on to sort it all out for us.

[00:25:07] [SPEAKER_03] You read with this woman from...

[00:25:08] [SPEAKER_01] Before we confuse everybody.

[00:25:10] [SPEAKER_03] You read what this woman from the Fed said about me.

[00:25:14] [SPEAKER_01] About the 2%, yeah.

[00:25:15] [SPEAKER_03] Yeah, no, I just, I mean, she's like clearly believes that we're in the know here on Around the Horn, so...

[00:25:22] [SPEAKER_01] Well, I think we, I bet I think we never bring in some other expert guests so that we're on the know.

[00:25:27] [SPEAKER_03] I don't know. I'm telling you, we're learning more every week from all of this. So, I guess, you know, at the end of the day, right, this is, I guess it's the fodder for shows like ours, right? Is to continue to look at this. But at the end of the day, right, I'm looking at some of the listeners and I just, you know, a comment here earlier from our friend Paul Kennedy. I got to spend some time with Paul a little over a week ago. I'm going to see him again in a couple of days.

[00:25:54] [SPEAKER_03] And, you know, here's a gentleman that's running, you know, a large distribution company, employee-owned company, 60, probably close to 70 branches. Now, I think last time I asked it was 66 branches. You know, 1,000 plus people working there. And people like that that tune into this show, they have to make business decisions that are best for their stakeholders, right?

[00:26:24] [SPEAKER_03] Their employees. If the company has investors that are best for that and looking at that. And we've got these ups and downs and it becomes very hard when you don't have anything specific to look at and to rely on to go say, okay, I want to open three new branches this year. Now, you know, we've talked about this over and over again.

[00:26:48] [SPEAKER_03] Over and over and over again that the people that have really strong balance sheets and really understand purchasing dynamics and so forth can do some good things in these settings. But, you know, I remember the first time somebody brought that up. It was John Gunderson, which was on, what was it? Liberation Day, is that what it's called? When the tariffs all came out, right? John brought that up on the show that week where he joined us and about, you know, leveraging balance sheets. But that's a year and a half ago now, right?

[00:27:16] [SPEAKER_03] You know, a year and a half ago now that we've had this. So I think that that's the scenario we've got to look at is, you know, we think about consistently the consumer in this setting. But we've got to think about the consumers are people that work for wholesale distributors and manufacturers is where they go to work every day. And getting some stability in place for these folks to, you know, make some bets, gamble, grow their business, refine how they do things and expand.

[00:27:46] [SPEAKER_03] Some certainty would be great. And the best thing, I don't want to say the best thing, but one of the best things that can happen in that setting is that you have some more manageable interest rates so that you can leverage your business to grow and expand and support that growth that everybody that would like to get.

[00:28:03] [SPEAKER_01] So, okay, so I have three questions for you and then we'll move off this topic.

[00:28:07] [SPEAKER_03] I think there was just a really important comment made there.

[00:28:11] [SPEAKER_01] Oh, about where Paul's saying where people go for all their cutting edge. Yeah, I agree.

[00:28:16] [SPEAKER_03] Where people go for all of their cutting edge economic deliberations. Yes, yes. Maybe we should leave it. He didn't say facts. He didn't say.

[00:28:25] [SPEAKER_01] Maybe we should get a board of governors and start, you know, determining where some of these things go.

[00:28:29] [SPEAKER_03] Well, you know, I did take that selfie of him back in front of the Cleveland Fed when I was taking a walk one night. So they just didn't let me in the building.

[00:28:40] [SPEAKER_01] I have three questions. Okay. And I'll answer them too. And make them quick. Quick answers. By July 4th.

[00:28:48] [SPEAKER_03] Who were you asking for a quick answer?

[00:28:51] [SPEAKER_01] Yeah, that was dumb. Let's see if you can go as fast as you humanly can. Okay. So by July 4th of next year, 2027. Yeah. What will the price of gas be in California? How many interest rates will we have? And will the Iran war still be going on?

[00:29:06] [SPEAKER_03] How many interest rates will we have?

[00:29:08] [SPEAKER_01] How many increases or decreases will we have? Where will we be by July 4th of next year? There's no bets on this, is there? No bets. I'm just asking for your expert economic opinion.

[00:29:24] [SPEAKER_03] Okay. Fuel prices will be in California. California. They've been falling the last two weeks. Slightly fuel prices will be mid to high $4 range.

[00:29:36] [SPEAKER_01] Wow.

[00:29:36] [SPEAKER_03] Okay. We'll have had by July 4th of 27. So that's what? Eight and a half months. Yeah. Interest rates will have gone up a quarter point twice.

[00:29:57] [SPEAKER_03] And they'll have come down the equivalent of three quarters or 75 basis points after that. And what was the third question?

[00:30:09] [SPEAKER_01] Will the Iran war or conflict still be happening, taking place?

[00:30:14] [SPEAKER_03] I think as we know it, it will be over. As we know it today, it will be over. But that does not mean there won't be conflicts throughout the Middle East. A threat of more U.S. intervention in Iran. And plenty of activity from the Houthis, the Houthi rebels, both on land. Right? They've been going after airports and stuff like that in the past week. And more and more activity in the Red Sea and other areas.

[00:30:43] [SPEAKER_03] I think we'll see increased activity from splinter, so-called splinter groups like that. But I do think the war as it's described. Let me rephrase that. I think the administration will have said that the war is over. There will still... There's always going to be conflicts in the Middle East. It's just how big and how bad. Right? So those are my predictions.

[00:31:06] [SPEAKER_01] All right. So I... And it's good.

[00:31:10] [SPEAKER_03] Nobody listens to this show and it's not recorded. So, you know.

[00:31:13] [SPEAKER_01] Right. I tend to agree with you on the Iran Middle East situation. So I won't spend time. I think I would agree more or less the same. I think California fuel will be $6 a gallon or more. So no change. But no change. Basically where we are right now. $6. And I think we will have three rate increases between now and then. And no decreases between now and then. And possibly four.

[00:31:43] [SPEAKER_03] Okay. Well, we just heard from someone here.

[00:31:46] [SPEAKER_01] Oh, I didn't see that. Three hikes. He agrees with me.

[00:31:49] [SPEAKER_03] Yeah. He can't comment on California fuel. Three interest rate hikes and the war will still be on. I just believe that the war will... The administration will have said that the war is over. I think there will still be major conflicts going on.

[00:32:02] [SPEAKER_01] Bob says fuel will be $2 in Texas. You know, I was in Dallas a couple of weeks ago. It was $3.37, which was irritating. But so that's a significant drop. Interest rates will be a quarter point lower than the day and the war will be over.

[00:32:15] [SPEAKER_02] Tesla. Tesla. Tesla. Tesla, Tom. Get your Tesla. Tom. I can't afford it. I can't afford it. Get your Tesla.

[00:32:25] [SPEAKER_01] And the creases are too high.

[00:32:26] [SPEAKER_03] I'm going to go down the hall and get Mrs. Brown. You made a commitment to her that you were going to buy a Tesla.

[00:32:36] [SPEAKER_01] Well, I haven't seen the contract sign that you were going to sign. So I'm waiting for that.

[00:32:41] [SPEAKER_03] The lawyers on the other side said the red lines are done and agreed to. So I'll sign it.

[00:32:47] [SPEAKER_01] I'll sign it. Anyway, I wanted to get... So Bob, $2 in gas, quarter point lower, and Iran will have lost its political leverage after the midterms. That's an interesting one where we'll be over because... All right. Those are some three different interesting tapes. So now everybody can use this to do their planning.

[00:33:07] [SPEAKER_03] So yeah, right, right. Plan your budgets for next year and your branch openings and your home purchases or whatever based upon this. What we haven't talked about is something I'd actually like to do some research and understand better, right? That basically the administration is saying...

[00:33:35] [SPEAKER_03] Is talking about the crumbling economy in Iran, right? So the attempt there, right, is rather than putting boots on the ground... You know, you think about this and I'm certainly nowhere I would ever... Nothing I would ever want to be involved with. But making those decisions that says, okay, we want to take out all of their ability to make nuclear weapons. We want to take out some infrastructure.

[00:34:04] [SPEAKER_03] But if we take out all the infrastructure to go win the war, then we have to go back and help rebuild that for the people there, right? That's bad. We don't want to put boots on the ground. So the whole thing now is trying to put this... That's pretty funny. I did still... The ups and the downs of having a live show with comments coming in. And always when something like that comes in, it's...

[00:34:31] [SPEAKER_03] The best part of it is your reaction and the look on your face. So that's always good. It's like when you play with the soundtrack thing, right? Nobody has more fun with that than you do. And I don't even hear much of what's going on with it. Just laughing at your response. But anyways, the view right now is like, right, let's get this economic pressure.

[00:34:54] [SPEAKER_03] And the acupuncturist that my wife and I go back to, she was an MD in Iran before she moved here. And she's always got some good insights. But I haven't talked to her about... When she talks to her family about the real pressure of the economic impact. Because if the economy starts to crumble, which is the hope there, then maybe they can say, yes, we've won this war. So let's move ahead, Tom.

[00:35:26] [SPEAKER_03] All right. Should we get out of the economy? Yeah. Let's maybe jump in to talk about a little technology or something. What do you think?

[00:35:33] [SPEAKER_01] Do you want to skip supply chain or anything here you want to get?

[00:35:35] [SPEAKER_03] Well, you know, this is actually having somebody here making, giving us some comments today that is in the electrical business. I thought there was an interesting article that our friend Mark Brohan wrote for a distribution strategy group that Border States, the large distributor, warns that data center demand is squeezing electrical supplies. And I'm kind of struggling with it.

[00:36:01] [SPEAKER_01] It's not rocket science, I wouldn't think. I mean, that seems pretty obvious.

[00:36:05] [SPEAKER_03] It's not. But if you think about it with that is, and maybe it's that there, I guess where my struggle is, my struggle with that is that there's so many of them that are stalled and the permits aren't even in yet. Now, there's quite a few being built. But obviously, there's a copper issue here. But, you know, there's a statistic that Mark put in here that said data centers could use

[00:36:34] [SPEAKER_03] up to 17% of U.S. electricity by 2030. And it says manufacturing restraints are particularly pronounced for larger conduits. Interesting. So they're struggling. And this is copper remains particularly exposed as data centers compete with electrification and other infrastructure investments for the supply. So it's just an interesting component of that is that the copper is such a big issue, right?

[00:37:02] [SPEAKER_03] And so, but the reason I just, there's a rub there for me is that there's so many of these that are on hold or not permitted yet. I don't know, be an interesting thing. Let me see if I can do a little search here.

[00:37:19] [SPEAKER_01] Interesting. You know, the fairgrounds in Santa Barbara? Mm-hmm. The Earl Warren's Fairgrounds is right off the freeway there?

[00:37:27] [SPEAKER_03] Right off the train tracks, right where the train station is.

[00:37:29] [SPEAKER_01] So I believe the city council in Santa Barbara yesterday, the day before, approved putting a data center into the fairgrounds there. And the logic behind it was, you know, the fairgrounds only makes money when there's an event, right? So they make money when somebody, but now they could have money coming in all the time from the use of the data center. I think it was like a hundred year lease or some long-term thing.

[00:37:55] [SPEAKER_01] And now they would have the funds to actually maintain it better and build more facilities and all that kind of stuff through the data center.

[00:38:04] [SPEAKER_03] So it's got to be a small one there to not take up too much space because that's not a huge fairground.

[00:38:09] [SPEAKER_01] It's pretty big. And I don't think it's going to be monstrous, no. But they're going to put in some form of a data center, or at least they're talking about that in that area there. So I think you're going to see more and more of that. I mean, that's a hard one to argue, I think, economically, right? That fairground in particular has had problems because it hasn't really been kept up. And, you know, it's economically been hard.

[00:38:34] [SPEAKER_03] It almost looks abandoned when you go through there on train.

[00:38:37] [SPEAKER_01] Yeah. Yeah. Yep.

[00:38:38] [SPEAKER_03] So this says that there's currently 400 data centers under construction and an additional 1,199 planned projects. So 400 of them under construction around the U.S. right now. So I guess, you know, if we've got, that's, you know, what, a fifth of them that are planned are under construction. Let me take that back.

[00:39:06] [SPEAKER_03] About a third of them are under construction. And right now, so maybe that is enough to start constraining supply, right? Yeah.

[00:39:15] [SPEAKER_01] From that particular report. I'm not surprised. So who loses there, right? Now, so what happens? Is that just, again, drive prices up? Does it slow other projects down that, you know, buildings and other things? I mean, everybody needs electrical. So I guess you can do some surveying next week at the AD event because that's the electrical.

[00:39:38] [SPEAKER_03] AD electrical event next week. I'll ask around and see if people are feeling that already. That's great. That's great cocktail hour fodder, right? Paul says here, copper, conduit, cable tray are all under pressure. It'll be more significant impact if the commercial residential businesses were strong as well, but they're not. If we see a bounce back in the rest of the business, it'll become an even more acute problem. So I guess that almost comes down to, like, I mean, think about this.

[00:40:07] [SPEAKER_03] And it makes me think about, Tom, probably a year and a half ago, we had, it'd be good to have back as a guest, Mike Mortensen from ARG. And I remember Mike talking about, you know, and this was maybe right as tariffs were being, maybe they were being threatened versus fully announced yet.

[00:40:26] [SPEAKER_03] But Mike was talking about the fact that, you know, they used to have with key suppliers, they, you know, had monthly or quarterly reviews on buying plans and pricing and so forth. And he said those had moved down to weekly calls with key suppliers and could be even tightened up even more just to talk about, you know, supply, the supply chain issues that go with that.

[00:40:51] [SPEAKER_03] So if you start thinking about this is, you know, as I was reading some of this yesterday, you know, the person that can really figure out how to, and I'm sure there's many other ways to transmit power other than copper. But it sure does seem to be the, you know, as I would say, it does, seems to be, it is the predominant method.

[00:41:15] [SPEAKER_03] If somebody can find something that's much more renewable and priced better, it'd be pretty much a game changer in this setting, right? I just think about, you know, you know, where I live in South Orange County, we get Los Angeles news. You get probably Los Angeles news and Santa Barbara news where you are.

[00:41:33] [SPEAKER_03] It just seems like every day you're seeing, you know, the catalytic converters that were stolen or the telephone poles that aren't working because somebody, you know, risked their life by ripping out the wires to go sell some copper to go. Who knows what they were going to go do with the money.

[00:41:52] [SPEAKER_01] But I've got a big jar of pennies. Do you think that's worth a lot now?

[00:41:56] [SPEAKER_03] It might be down the road because they're not making pennies anymore.

[00:42:00] [SPEAKER_01] Well, yeah, but I know if that's, I could sell that copper.

[00:42:02] [SPEAKER_03] You have, you have a big jar of pennies that you've probably been collecting since you were nine.

[00:42:07] [SPEAKER_01] Pretty much, yeah. No, it's big. It's like almost a five gallon, like, sparkless bottle.

[00:42:12] [SPEAKER_03] Hey, look, that does not surprise me one bit. What? Because you are a penny pincher. That's right. So pressure and aluminum wire as well. So, I mean, you think about this, right? Is, and we're just, let's take, just take this back to the consumer side of things. So you can't get, it's difficult to get some of these commodities, right? Maybe that slows down some of these building things. We've got a big push to get more trades people in there.

[00:42:40] [SPEAKER_03] The trades people there, the people that work for the distributor, whether it's an electrical distributor, a plumbing distributor, whoever it is, right? The data centers that are being built, it's a big boom for all of those organizations. And so, but the trickle down is if we can't get the materials or get the materials at the right cost and things don't get built, then we have a job impact on that. And that's just a trickle down right into the economy as a whole. So this is what I was looking for. Somebody smarter than me.

[00:43:07] [SPEAKER_03] Micro LED connectors will replace copper wire and dramatically reduce energy. Jonathan, I'm going to assume you're an expert on this. And if that's the case, I think it would be wonderful. So although there's nobody making LED connectors in the U.S. that I would imagine. So Tom, let's dive in. We don't have a lot of time today. I'm a little concerned about power at your place and my connection here as well. I've got the same winds that you have. We haven't had any power threat yet.

[00:43:37] [SPEAKER_03] But for those of you listening in other parts of the world, I think last week we had seven different countries download the podcast. Is it Tom and I both live in Southern California on the West Coast of the U.S.? I'm just about 75 miles north of the Mexican border. And Tom's about another hour and a half to two hours north of me here. Both of us live within a couple of miles of the coastline here. And we get a thing, a phenomenon called Santa Ana winds.

[00:44:03] [SPEAKER_03] And that basically is a compression of high pressure systems over Utah and Idaho and even up to Montana and parts of Canada. And as those winds come down, they hit some of the mountainous areas and they compress. And they push winds from the northeast down through these areas. And they're very, very warm, dry winds. This time of year later in the winter, they'll be cold, but extremely dry winds. And so a major brush fire burning in Malibu right now, not far from where there is.

[00:44:33] [SPEAKER_01] I didn't know if there were any fires.

[00:44:35] [SPEAKER_03] You know Darlene, right? She's the weather girl and pays attention to the fire. She's supposed to be sleeping.

[00:44:40] [SPEAKER_01] She is. Okay. Tell her she needs to get off her phone and go to sleep. Tell her Tom says that get off the phone and go to sleep.

[00:44:50] [SPEAKER_03] Yeah. The challenge for Darlene is that if I took a half of Benadryl right now, I'd wake up on Sunday and Darlene had a Benadryl IV last night and she's all amped up. So she's resting, but not like she should be. But no, she stays on top of all of this stuff. So we've got a couple of fires burning down here. But anyways, that's what Tom and I are talking about. Tom is on generator power from his next door neighbor that could go.

[00:45:19] [SPEAKER_03] Who knows what happens with that? But anyways, that's what we're being impacted by today. Certainly no damage or major risk, but it is crazy windy outside here. So anyways, let's talk about a couple of...

[00:45:34] [SPEAKER_01] We've had some 50 mile an hour guests and my patio furniture is all over the backyard. But other than that, we're okay.

[00:45:42] [SPEAKER_03] Do you have permission to take a full lunch break today and go ahead and put that back in place?

[00:45:48] [SPEAKER_01] I'll just let it do its thing. And then when it dies out, we'll put everything back together.

[00:45:52] [SPEAKER_03] Very good. Why don't we catch a couple of things on technology? Actually, the one last thing is this in our manufacturing distribution and M&A segment, there's an article there about the ascendant... I'll just call it the debacle, right? We had this large organization as a wholesaler or resaler in office products and related area that basically closed their doors.

[00:46:17] [SPEAKER_03] We have some customers in that space as well that are hugely impacted by this because so many things in the office product spaces, they're bulky, they're heavy, whether it's chairs or it's reams of paper. So a lot of people work with wholesalers in that setting. They can get access to things quickly and easily and not have to inventory as much of that type of stuff. But a big impact on a few of our customers that we've talked to are LeadSmart customers.

[00:46:48] [SPEAKER_03] And our friends over at ORS NASCO have picked up a few of the brands specifically from Ascendant and getting a little bit further into the office products arena with that as well. But now we're starting to see this article there about the creditor actions and supplier lawsuits and based upon how they've handled and managed all of this. And there was a little bit of, I don't know, cloak and dagger.

[00:47:19] [SPEAKER_03] But there was more going on behind the scenes that was let on and the full shutdown of things and the closing of the warehouses surprised some people. So we'll watch that one a little bit closer and continue to share a little bit more.

[00:47:33] [SPEAKER_01] What caused them to shut down? I haven't followed it very closely. Leverage.

[00:47:37] [SPEAKER_03] I think leverage was...

[00:47:39] [SPEAKER_01] Over leveraged? Yep. We've seen that before.

[00:47:42] [SPEAKER_03] I'm sure there's a tariff component, a handful of different things that went with it. But it was... It was... The full shutdown was what the surprise was. There was pressure. There was struggles. But then there was a full shutdown that hit everybody a little bit by surprise. So let's dive into... Let's pick a couple articles here about what's going on.

[00:48:10] [SPEAKER_03] And I think that the two things in... This is week number two. I think that we're threatening to do a whole show about AI regulation. So we have three articles here. The White House now has their... Really, their SI task force. The article here references it from Cybersecurity Dive. References it the White House AI task force.

[00:48:38] [SPEAKER_03] But it's the Super Intelligence Task Force. I thought it was interesting. I read earlier this week is that Salesforce is now calling one of their agentic platforms the SI platform versus AI platform. And so others are starting to adopt in the business world. Not just the hyperscalers and the other technology companies around the AI movement are adopting because it's the big push of the president.

[00:49:08] [SPEAKER_03] But it's... At least he's not wanting to call it TI. Right? TI?

[00:49:14] [SPEAKER_01] TI would be... Trump Intelligence? Trump Intelligence. So, you know, with all the domains, right, that are .ai, is there going to be a .SI? And if so, we should go out and buy all those domains right now. Because everyone would have to move from, you know, leadsmarttech.ai to leadsmarttech.si.

[00:49:32] [SPEAKER_03] So, let me ask you. Do you think that phrase sticks?

[00:49:44] [SPEAKER_01] I don't think so, no.

[00:49:47] [SPEAKER_02] Okay.

[00:49:47] [SPEAKER_01] And the reason is AI as a term has been around for many, many years. Way before, you know, chat GPT and all that kind of stuff. It's kind of... It is the longer term umbrella over that. It sounds better than SI. AI sounds better than SI. It comes off your tongue a little bit better. So, no, I don't think it will stick or replace the AI word. But, you know, who knows?

[00:50:20] [SPEAKER_03] Well, I think what's going to be interesting in it is if you have more people, right? I mean, just Salesforce publicly traded, you know, $40 billion, $46 billion, I think, in revenue earlier this week. What they were calling AI force is now SI force.

[00:50:41] [SPEAKER_01] I haven't seen that either. Okay.

[00:50:43] [SPEAKER_03] Tom, come on. You literally... I was down there. I was down there. No, no, no. Stop for a second. Stop.

[00:50:49] [SPEAKER_01] Holding everything together for everybody without...

[00:50:52] [SPEAKER_03] Stop the excuses. Stop the excuses. You literally are the co-founder and chief technology officer of an AI-driven technology company who is a global strategic OEM partner of Salesforce, meaning we're one of four or maybe 500 companies globally that build software in partnership with them on their platform. You co-host one of the most popular podcasts and live shows globally. In the world. Yeah, in the world. Right?

[00:51:23] [SPEAKER_03] With a major component of it being AI and technology. And you don't know that our partner changed the name of a whole segment of their products?

[00:51:33] [SPEAKER_01] You're right. I don't. I don't. Okay.

[00:51:36] [SPEAKER_03] No excuses.

[00:51:37] [SPEAKER_01] Audience... I was busy down in Orange County this week.

[00:51:39] [SPEAKER_03] Audience here, you were busy all the way here. Yeah. All right.

[00:51:44] [SPEAKER_01] I got...

[00:51:45] [SPEAKER_03] You know what... I guarantee you, you know what Salesforce's stock did all week.

[00:51:52] [SPEAKER_01] It's about the same, I think. Or moved down, maybe.

[00:51:54] [SPEAKER_03] You checked it every day, all day. So... Yeah.

[00:51:57] [SPEAKER_01] I just don't watch the news, so I have to go dig into these things more. But yes, you're right. I need to do a little homework. I guess the only news... I will be back next week much more prepared. All right. For the dot. Yeah.

[00:52:09] [SPEAKER_03] Yeah. So, look, Bob says it won't stick. There's already an AI taxonomy. Interesting. With, you know, ANI, artificial narrow intelligence, AGI, ASI. Jonathan says that Sports Illustrated web address is relevant again. Right? And, yeah. And then Vasim says, could you imagine leadsmarttech.si? So...

[00:52:36] [SPEAKER_01] I think we need to get that domain, and I think we need to... You know, it's a flyer, but they'll buy up all the, you know, one-word domains dot SI. You know, Coca-Cola dot SI. Can I make a... CleanX dot SI or something.

[00:52:50] [SPEAKER_03] Can I make a suggestion? Uh-huh. So... Why don't you use that time to just stay on top of the news?

[00:52:58] [SPEAKER_01] It doesn't make money, right? This would be a... And we need to do a polymarket to see if this is really going to stick.

[00:53:05] [SPEAKER_03] Look at... Polymarket might have it. Take a look real quick. It might have it.

[00:53:09] [SPEAKER_01] No, I don't think so.

[00:53:11] [SPEAKER_03] Anyways, point being here, back to what we're really wanting to discuss here is we are in a place right now, regardless of whether you call it AI or SI, it doesn't really matter, is there are some major factors going on around the world right now. Big, big push in Europe now to have, and there's a couple of good articles we have here. One's from Reuters.

[00:53:36] [SPEAKER_03] It says, behind the industries, call for independent reviews, a fight over what gets made public or not. And so, basically, what you have now is you have this group of AI leaders from Meta to Anthropic to OpenAI to NVIDIA, Grok, and so forth. You've got... So Elon Musk, right? Mark Zuckerberg, Sam Altman, Dario...

[00:54:05] [SPEAKER_03] Gosh, I never can remember his name. It'll come to me in a second. So you had this big group of people who got together a couple of weeks ago with the president and said, hey, we're going to self-regulate ourselves, right? So the question is, and there's an article here we have today about Canada putting together a group to start looking at regulations there. There's a big push in Europe now for some regulations with this. And I know, Tom, you have historically been very anti-regulation to go with this.

[00:54:34] [SPEAKER_03] I am too, but I got to tell you, and I don't want to go too deep into this today because I do think it's worth a whole separate Around the Horn 2.0 show talking about this. Maybe we'll get one of our friends from Infor or something like that to join us. But there is an interesting spin in this Reuters article, which is from the 13th of this month.

[00:54:57] [SPEAKER_03] They were at an AI conference in Europe, and there's a video there, and it talks about a gentleman that he was just saying, and he's an AI researcher, a guy probably mid-40s, I'd guess. And he said, look, he said, you can't put an airplane in the sky without years and years of testing and regulation. You can't put a car out without having some level of testing and controls for safety.

[00:55:27] [SPEAKER_03] And he was talking about not necessarily needing to try and put guardrails on something that says, hey, it's going to take you a year to get approval to release a model, but that there's some level of required safety testing or some things that go with that, right? And I'm leaning towards, at 9.57 Pacific time on October 16th, I'm leaning towards we need

[00:55:52] [SPEAKER_03] something more out there of something of a, you know, it's interesting. Maybe I'll relate it to that.

[00:55:59] [SPEAKER_01] But hold on, but what you just described is exactly what they agreed to with that.

[00:56:03] [SPEAKER_03] Yeah, but it's what they agreed to. There's nothing, I mean, I agree with you totally because your response is going to be, yeah, but they're going to have these third-party auditors and there's the risk, right, that they can't get officer and director insurance. And I think those things are a really good start. And I do think those have some teeth to them. I also think that there's a propensity in this administration, which is probably why these business people are surrounding themselves around him, is that they don't want, there's

[00:56:32] [SPEAKER_03] only one of them that want true regulation, right? Dario Omidy is his name. They knew it would come to me. Is, you know, and that's the open source model, closed source model argument. And that's, we'll push that off to another day to discuss that further. But I think that they're, and let me just throw this out.

[00:56:57] [SPEAKER_03] In the world of physical products, both in B2B and B2C, but a big percentage of it is in B2B. And I'll just use an example, safety equipment, right? There's the American National Standards Institute, right? They set standards for expectation of how products are work, how they're manufactured to a certain level, to a certain standard, and quality levels that go with that.

[00:57:27] [SPEAKER_03] So if you have something that has an ANSI or American National Standards Institute stamp that it meets that requirement, you can feel much better about it. And certainly, if you were to be, have a situation, let's just most simply use a piece of safety equipment as an example in a B2B setting, right? You use ANSI approved products or non-ANSI approved products.

[00:57:54] [SPEAKER_03] If you were to use non-ANSI approved products, it's not that you're going to get cited for that. But if there's litigation and you had the opportunity to use an ANSI approved product, you are certainly going to be in a difficult spot that you didn't take the opportunity to use an industry standard product. So maybe it's something like an ANSI is what's needed in this setting, is there is a universal,

[00:58:21] [SPEAKER_03] minimal, acceptable standard for testing for safety before something goes out. So just a thought.

[00:58:29] [SPEAKER_01] Yeah, I think that's where they're headed, right? I think they're headed, and I think it's, there's a difference between oversight and I guess you could call it QA or safety assurance versus regulation.

[00:58:43] [SPEAKER_03] I mean, oversight and over-regulation, right?

[00:58:45] [SPEAKER_01] There's a difference. Right, but regulation are two different things, right? Oversight is more to your point. Hey, are these models been tested? Are they certified as being quote unquote safe? Have they been reviewed and QA'd by external parties and not done by just everybody in-house, right? So you could get the good housekeeping seal of approval on the oversight here. Regulation's a very different thing. Regulation's like saying what you can do, what you can't do, what you can build, all those

[00:59:14] [SPEAKER_01] types of things. And I've been, I'm not against some oversight. I think oversight is a really, especially at this point, is the right time.

[00:59:23] [SPEAKER_03] Yeah, let me ask you though, what goes with that from the regulation standpoint, as you described it. I think it's a good point. Their oversight, I should say. Should the inmates be running the asylum?

[00:59:34] [SPEAKER_01] No, that's my point. That's why if you have an external, you will have internal testing, of course, right? I mean, same as like bank auditors or anything like that, right? You have internal auditors that do things at banks and look at the numbers and all that stuff. And then you have an external auditor and even look at the IT world. I mean, I spent many, many years working in large banks and financial institutions because they had audits, IT audits, not just financial audits, but IT audits.

[01:00:04] [SPEAKER_01] And were their systems being protected? And how was their code being moved into production? And did it follow certain standards and all of those types of things? And they took it very seriously. So maybe it was done by an external group.

[01:00:18] [SPEAKER_03] Yeah, maybe an FDIC type scenario?

[01:00:22] [SPEAKER_01] Look, I don't know it's a regulatory agency. I don't think that's the right way to do it. I think, and I think we talked about this, right? The big auditors and the Ernst & Young and the Pricewaterhouse and Accenture and other companies will evolve that are certified auditors for these types of things. And that can go in and know the right testing and the right checks to actually make.

[01:00:48] [SPEAKER_01] And they have a fiduciary responsibility to not get corners, right? And the report that comes out, the company has a responsibility to not ignore those things that are there. So I think oversight, and is it worked out? No. I think there's a lot of details to be worked out. There's a lot of... is way better than any sort of regulatory body that is going to be dictating what you do, how you can do it, why, and all that kind of stuff.

[01:01:15] [SPEAKER_01] But all that's going to do is, A, it's going to be out of date before they even get started. It's going to slow innovation and so forth. And then we've talked about this. If you do this at different geographical areas and state levels or whatever, it becomes confusing, all that kind of stuff. So I think it's an oversight and let the market take care of itself through an oversight framework. I don't know if that's how it works in the safety industry or not, but maybe it's a government

[01:01:44] [SPEAKER_01] body that's doing these safety checks. But that would be my... And I think now is the right time to start implementing those things.

[01:01:53] [SPEAKER_03] Yeah. Well, it's interesting with that. We're having some power blips here too. It's interesting. Every once in a while, sorry.

[01:02:02] [SPEAKER_01] Every once in a while, we get this big gust of wind. And all I hear is all this stuff flying around the backyard. It's like a train coming by. And then it will be calm for a few minutes. And then we just get another one, like another train going through. So anyway, I digress.

[01:02:18] [SPEAKER_03] No way. We never digress on this show. So listen, I think with the weather stuff going on, we both are here. We should probably look to wind down a little bit earlier. John Taylor, our producer and editor, will be happy because he keeps telling me to make the show shorter and it'll do better on the YouTube algorithms. And I'm like, I like talking for an hour and a half on Friday mornings with my friend Tom and thousands of other people around the world.

[01:02:45] [SPEAKER_03] So last topic for this or last point on this topic and we'll call it a day. So I don't think we're too far off. I think there's a lot of discussion of what needs to happen here. But my caution right now with this is you've got, lack of a better term, right? Inmates running the asylum. You got the people that have the most to gain, the most to lose are who are influencing the U.S. administration.

[01:03:13] [SPEAKER_03] And we have this article that we published here as well today about Canada sets up National Artificial Intelligence Council. So they just did their own, it's called AI for All this week, right? That's got a 12 member council on artificial intelligence. It says the government projects 200 billion in AI related economic growth aiming to create 250,000 jobs. And they've got this group of people, some politicians, some technology people and stuff that goes with that.

[01:03:40] [SPEAKER_03] So now what do you do if you've got, the EU has already been much, much more stringent and looking at regulations on this as well. And so you have that going on. You have Canada setting this up. It's probably not long before somewhere in Latin America, right? You've got the BRICS countries could be doing something as well.

[01:04:09] [SPEAKER_03] And then you've got this whole thing going on in the U.S. So there probably needs to be some standard that comes together that is agreed upon globally. And so maybe there's an international organization for safety of SI, right? I-O-S-S-I.

[01:04:36] [SPEAKER_01] SI, superintelligence, yes.

[01:04:38] [SPEAKER_03] I-I, international organization for safety of superintelligence.

[01:04:44] [SPEAKER_01] Yeah, I-O-S-S-I.

[01:04:45] [SPEAKER_03] I think there's going to have to be something because look, at the end of the day, I don't think anybody, well, let me rephrase it. Neither of us believe that AI is going to make mankind extinct in three and a half years. But are there some risks when we start connecting bank accounts to GrokBot and some of these tools? And I tell you what, I'm a victim of this.

[01:05:11] [SPEAKER_03] I've never connected any financial accounts or accounting systems or anything to any of the agents or bots that I built. But I don't think twice about connecting it to SharePoint and to some other things. And, you know, and I'm reasonably in the know on this type of stuff. So, I do think there are some guardrails. And so, maybe what we do is we agree on guardrails for the day.

[01:05:37] [SPEAKER_03] And we come back to visit this another time and talk about maybe a full show about what those guardrails really look like.

[01:05:44] [SPEAKER_01] I'll just say one thing and then we'll wrap up. We've said that three times, both of us. Yeah, you said that, you know, what did you say? The inmates are running the asylum or whatever. And it is true, but they're the only ones who really understand what's going on with their models. Right? Sure. At this point. And, yes, it's a big ask.

[01:06:06] [SPEAKER_01] But I do think there's a responsibility that they will take to actually accurately report some safety issues or address safety issues. Because think about it, I mean, think about if BOD actually did something, right, that really was a major, major problem or issue or safety issue or whatever. And their $2 trillion valuation could go down to nothing literally overnight. Right?

[01:06:35] [SPEAKER_01] So, they have a big job and a big responsibility that one misstep, one big misstep, would basically wipe out their entire market cap. So, I think there is, yes, there is. Right now, they're the people who really only understand these models and understand what they're building. Nobody else knows what's coming. You know, this super intelligence thing is a arbitrary definition. Like, what does it really mean? Right?

[01:07:02] [SPEAKER_01] And they, but they're the only ones who really know is this even going to happen or could happen or whatever over what time period. So, I think we have to, unfortunately, rely on them a little bit right now for this oversight. But, yeah, let's do a, let's do a, we've talked about this. Let's do another show on this in our spare time.

[01:07:24] [SPEAKER_03] Well, hopefully. All right. Let's wrap up. Hopefully, our marketing director, Dana, is listening to this and she holds us to task on that. Otherwise, it'll just be us going, I'm too busy. I'm too busy. So, no, it's good discussion. But, you know, as the note here is final, final. So, this is the final thought, right, is we're only here because we serve wholesale distributors and manufacturers. How does this, what does this mean? What does this matter? So, this will be my final thought and say goodbye.

[01:07:53] [SPEAKER_03] It's important that we're paying attention to what goes on here because you've got, you know, anything from a $5 million a year company to a $5 billion a year wholesale distributor that are being pressured every day to use more and more AI tools. They've got vendors coming out of the woodwork right now. I use the term Silicon Valley as minting new AI companies and pointing them towards wholesale distribution.

[01:08:22] [SPEAKER_03] Don't know how much security they have, right? You don't know what's the depth in the platform and how good their technology is in general other than it seems to work. But what's really behind that? We're connecting those systems into our ERP system, right? And then we, I'm just thinking of a company we did some work with a while back, just kind of some consulting help with.

[01:08:43] [SPEAKER_03] And, you know, they had a couple of hundred people who they had just bought ChatGPT licenses for and let them see how it worked for them, right? And so, I think there is a risk right now that our audience of wholesale distributors and manufacturers really need to be paying attention to this type of topic because of the impact it could have on their business of how these tools are used.

[01:09:07] [SPEAKER_03] Because many, many companies, including ours, have tools from OpenAI and Anthropic and other companies running in the background to help support our tools as well. And so, this is an important thing to be paying attention to of the security layer that goes with this. And it ties into what we're doing. A little plug for what we're doing with Meridian 360 at LeadSmart is there is no technology company out there.

[01:09:32] [SPEAKER_03] That has a deeper, I'll call it bench strength, back to our October analogy to baseball, of certifications and attestations for security. And security behind technology in general is critical. And now when you have bad actors that are using AI for hacks and so forth, what goes on and how AI is going to be managed and regulated? Forget about extinction of mankind. It's what does it mean to our businesses? So, important to be paying attention to this stuff and we'll keep talking about it here.

[01:10:04] [SPEAKER_03] All right. That's the last word. You go put your furniture back in place in your yard, maybe strap it down.

[01:10:10] [SPEAKER_01] It's already over on the list. It's out of the way. It's blowing over onto the grass and it's out of danger. It's not going to go through the window or anything.

[01:10:17] [SPEAKER_03] We have a whole process we go through with this. We've got an awning that's got a canvas cover over it in the backyard and it gets tied down. And furniture gets planners put on top of them. And we don't have a checklist, but I'm waiting for her to provide that for me for wind and storm events. And we've got Super El Nino coming too. Supposedly the last two weeks of November it starts.

[01:10:45] [SPEAKER_01] Well, the show will have to go on even during Super El Nino.

[01:10:49] [SPEAKER_03] Yes. All right. Well, hey, Tom, thanks for the time today. Hope the power comes back shortly for you so you're not...

[01:10:56] [SPEAKER_01] I'd say tomorrow morning at 5 a.m. is what the prediction is now.

[01:11:00] [SPEAKER_03] So, quick question. What's Matt charging you to be connected to his generator? Gin?

[01:11:05] [SPEAKER_01] Yeah, a couple of drinks. He'll be good.

[01:11:08] [SPEAKER_03] I don't think it's a couple of drinks. I think it's another bottle of that Blue Dot.

[01:11:13] [SPEAKER_01] Okay. That's probably true. That's a... Maybe a Monkey 47, yeah.

[01:11:18] [SPEAKER_03] South Africa is where that Blue Dot's from. Is that right? Kenya, I think. Kenya. Kenya, that's right. I got to try that. So, Blue Dot... Tom and I both love gin and his neighbor Matt is an aficionado. Matt's just a cocktail aficionado, I think. But I think a bottle of Blue Dot right here. I'm going on the air across many, many countries suggesting that you should buy your neighbor Matt a bottle of Blue Dot gin. And on that note, we'll tell everybody thank you.

[01:11:47] [SPEAKER_03] We do this every week. Some weeks it's a little more organized and structured with less weirdness going on around us. We're grateful. As I said 208 times we've done this and we have a growing audience that continues to expand and grow both in YouTube and the podcast channels. If you like what we do, one thing you could do for us that we'd be grateful for.

[01:12:09] [SPEAKER_03] Even if you don't use Apple Podcasts or Spotify or YouTube, pop into YouTube or Apple, subscribe to the show and leave a review. That's the best way we can get this out to more people because the algorithms within YouTube and Apple are the most valued ones. And that gets that out to more and more people. People forget oftentimes that where does everybody in the world go to ask questions and get information from for the last 20 years? They go to Google.

[01:12:38] [SPEAKER_03] And what asset does Google own? Google owns YouTube. And YouTube is now the second most sourced search engine in the world. So we're trying to rank up their hire with wholesale distribution and manufacturing. So if you like what you hear, it's a little something you could do for us. We'd appreciate it. Couldn't do this without the sponsorship of the company that Tom and I work for at LeadSmart Technologies. We've developed our new Meridian 360 enterprise growth platform for wholesale distributors and manufacturers. So, Tom, I hope the weekend is calm for you. I hope it is for me.

[01:13:08] [SPEAKER_03] I will be heading down. Unfortunately, I am off to an event with affiliated distributors, our great partner that we work closely with them and so many of their members going down for an event with them. But it's in San Diego. So all three of their major NAM events this year, national meetings, have been in San Diego. So it's about an hour and 45 minutes or hour and a half depending on traffic for me. So I get to go down on Monday morning instead of on Sunday. So I'm thankful for that.

[01:13:37] [SPEAKER_03] So anyways, we'll wish everybody a wonderful weekend. Be safe. Be kind. Do good things.

[01:13:47] [SPEAKER_00] We hope you enjoyed today's episode and our guests. Each week, we try our best to dig into the topics that are impacting your business. So please reach out to us and let us know how you think we can make the show better or topics you'd like for us to tackle or talk about more often and even guests you'd like to see join us. We're looking forward to bringing you next week's session and hope that until then, you stay safe, stay focused and do great things.

[01:14:13] [SPEAKER_00] If you haven't already, please subscribe to the podcast and leave a review to help others in wholesale distribution get access to the conversation. And finally, please check out our sponsor, Lead Smart Technologies and their manufacturing and wholesale distribution industry CRM customer intelligence and channel collaboration platform. That's Lead Smart Technologies at LeadSmartTech.com.