AI in Business: Sirius XM Business Radio Interview

Well, we know that AI is becoming a bigger player with so many companies around the world and that there are questions of whether or not there would be an impact on the labor markets. Add in with what the state of the economy is at the moment, and some questions are now being asked about what the labor markets will look like this coming year. Bill Canady is the CEO of OTC Industrial Technologies and Arrowhead Engineered Products. He's also authored the upcoming book From Panic to Profit: Uncovering Value, Boost Revenue, and Grow Your Business with an 80/20 Principle. Bill, welcome. Great to have you with us today. Thanks for your time.

Dan, it's so great to be here. Thank you so much for having me.

Thank you. All right. So we're seeing, I think, a few things go on right now. Obviously, we've seen a little bit of a slowing in the labor market, and to a degree, that's exactly what the Federal Reserve wanted to see. And the question is, how much will that continue on into next year? Some are saying it will, maybe will pick up pace a little bit. What are you seeing right now? What are your expectations?

You know, when we look at the market, you can almost lay a ruler out to it, right? I don't think we found quite the bottom yet. As we look forward, we don't actually see it coming back until probably mid, mid next year.

And so then The expectation is that how will companies be looking at the potential of hiring, firing, layoffs, et cetera?

Yeah, that's such a, such a great question, right? When you start out your budgeting, you kind of have it laid out so that you're like, hey, this is what I hope is going to happen, right? This is, this is how you think about it. As you get into your year, you start realizing that maybe it's not going exactly the way that we, we thought it would be, right? And what we find right now as we go into the 4th quarter, you know, I run 2 companies myself. You know, we're having to deal with the reality of that. And if you didn't get ahead of it today, you're going to have to take not so much necessarily drastic action. It really depends on, on the quality of your business. But you are having to take actions if you're going to take and meet your, your final numbers for the year. So what this does for us, if it's done appropriately, if you do it by the numbers, it positions you really well to come out strong next year. And I think that's where we are, where we're sitting at today. People are going to be taking actions like you've seen Disney, you've seen Boeing, you've seen these other ones coming through. Stellantis is going through it right now. We're all positioning ourselves so we have a shot to win next year.

But the goal is, you know, in many cases when you see layoffs, I think the first thought is, okay, the company's going through troubles. There are probably some instances where it's almost a little bit of a rightsizing, isn't it, that you're just kind of reconfiguring things so that the company continues to be strong? There isn't necessarily a, a negative path that the firm is on financially at the moment.

You're absolutely right. So you have 2 different extremes. So yeah, I just listened to your show and you got one extreme and I'll just pick on Boeing because they're going through it, right? A lot of labor unrest, a lot of things going back over the years, but the majority of companies are not facing that. What they're finding is they just have an overhang coming out of the pandemic, coming out of, you know, depending on wherever they were in it, they've got too many employees, too much inventory. They've got to get that right size. Candidly, and this is kind of the, uh, a little bit of a dirty secret, if you will, the first cut that they do after this, they're kind of grateful for it, right? They need to clean up their balance sheet. They need, there's too people who maybe, you know, are doing great, maybe some could do a little better somewhere else. The first one is not so bad for them. This allows them to get themselves aligned. It's that second or third cut where it really gets tough for organizations.

We talk a lot about AI. How is AI starting to factor into the conversations that you're having at your companies? But you're hearing from other leaders as well about how it may impact the labor of each of these firms.

Yeah, it's interesting with AI. It's kind of a two-edged sword. I think it's that way maybe for all of us. So on one hand, I'll just give you an example. So in our accounts payable department, we have huge turnover in that group, right? It's a really tough job. It's kind of a dull, monotonous job of you have thousands and thousands of invoices coming in. There's a lot of issues with them, and it takes a human being sitting in there to do it. Our turnover has historically been about 300% in that, no matter what we pay for them. Right. With AI, we've introduced it in now today when invoices are coming in, it automatically is doing all that matching, is putting it together, and it's taking a human being when things don't work to go and figure out, you know, what is the issue. Right. This makes it much more interesting work. People are more fulfilled in that work than they are in simply trying to match things together. So AI, on one hand, has been a real reliever of dull, dangerous, and just, you know, kind of boring jobs. On the other hand, what it's done is it's allowed you to hire and allow you to train your employees to where it's much more interesting right there. You're investing in them. They're investing in themselves. They have a more fulfilling job. So what we're really seeing today where you win with AI is what we call cobotting, where you've got a person there making the difficult decision and you've got the, the, the robot, if you will, handling that boring repetition thing of matching invoices to, to bills.

Right, right about now, where do you think companies are or should they be in the process of thinking about hiring or layoffs if that's on their radar, you know, come the end of the year? Yeah.

So for a lot of the very basic tasks, right, so today where you're— you go into a McDonald's, right, you have extraordinary labor costs that's going on. You go into the average McDonald's today, you're going to walk— there's not even anyone standing at the counter, right? There's a machine there you have to take and put it in. You had to put your own order in. I think that's where you're seeing a lot of companies going, these lower-skilled or no-skilled jobs where it's just someone pressing a button in. We are all moving more and more towards AI. Now, where you see people and investments going now is around the higher-skilled area of it. So I think there's 3 things that's happening. The first is the boring stuff. We're trying to get the boring repetition stuff. We're trying to get that to where it's a machine doing it. On the more interesting piece of it, we're recruiting people with that skill set. We're investing people to go get those skill sets. And jobs are becoming more fulfilling. And the interesting output of it is the average wages are now going up because you're someone that has a better skill set. You have someone who is not only just simply doing a repetitive task but is adding value to it. So in our mind, it is absolutely— it's wonderful. But change is hard. A lot of people don't want to change. It makes them feel scared. It makes them feel unsafe. We all have to come together and help each other through this journey. But it's for sure coming.

From your— the experience from your companies and again, what you're hearing from other ones, how unique has it been from the time of the start of the pandemic when obviously, you know, companies were, you know, just doing anything they could to stay open to where we are now?

When you talk about the labor component of these companies, you know, what has happened was if you go back into '19, I think '19 was the last what I would call real stable year. Right. And if you were to extrapolate out what you've seen is we went through this period of where we weren't sure if any of us were going to make it, probably personally as well as professionally. Then all of a sudden, you had this extraordinary demand, right? This extraordinary demand. People had time, people had money in their pockets for a whole variety of reasons, and they needed to get out of that house, right?

Yes.

All of a sudden, all the things that were from going out to eat to RVs to motorcycles, being outdoors, national parks, you saw people just rush out there to go do it. They needed people to help them. And guess what? The people really didn't want to be helping, right? It was the people who typically do those service jobs were put upon. Many of them did not come back to work. And it was a very small cadre of people out there trying to do it. And no matter what you paid, it didn't make up for the fact it was a miserable job. Well, the leaders of these businesses have had to pivot now to figure out, how do I get these simple tasks that are repetitive, how do I get those taken care of? Now, we've had just enough time to where we're starting to see some of the impacts of those things, and they're manifesting And what I think of is 2 ways. One is you see government getting much more involved. They're dictating what everyone from an Uber driver should be making per hour to someone taking your order in a fast food restaurant out in California. You see that that's putting pressure on these jobs that honestly you can't afford to pay it. It just doesn't— it just— the math doesn't work out. At the same time, today we are more technologically savvy than we've ever been in our lives. And you see things from where there's private equity or these companies are making massive investments in technology. So people can self-serve. So you go today and you try to call someone at— pick your favorite telecommunications, say Verizon. It's almost impossible to get someone on the phone. You can go online, do a chatbot. You may not even realize it's a chatbot, but if you just need that credit, that chatbot can give you that credit instantly, right? So you've seen that shift, and I think you'll see it only go faster, right? I think you'll only see it go faster. But the fear that we all have is like when we went from— to make it really an example— from horses to cars, right? People were making buggy whips. They're like, oh my God, what am I going to do? We don't need buggy whips anymore. It's the same thing here. A lot of those entry-level jobs are just going to go away. It's going to be taken care of by a chatbot or you self-enter your order in it. But it really gives us a chance to upskill and give people, you know, these college educations, these people who've spent all this time on their money themselves and things like that, gives them a chance to go out and do that, make it more fulfilling for them and the organization.

How do you think it impacts HR departments then when you have these new dynamics at play? Because, you know, the big story that I've talked with a variety of different companies about is, you know, the, the value that they have to factor in in losing employees right now. Well, if you're gonna, you know, not have as many employees, obviously the dynamics of AI and chatbots, etc., are going to play a role here. Uh, I think that, that changes some of the dynamics for HR as well, doesn't it?

It really does. It changes everything, right? So the type of employee that you're recruiting, change that profile, changes. You're looking for people who are competent and comfortable with technology, can either work side by side with it, can program it, can do all that. It starts skewing to a younger piece. It's people like myself, right? We're, you know, I'm in my 50s now and it's like, all right, what do I do with all this stuff? It puts pressure on us to be willing to change and go forward. So HR has to have that balance of how do I recruit someone that's comfortable with technology, While at the same time looking at my workforce. So the industries I'm in are kind of old-line industries, right? We make things. We're manufacturing. We're distributing industrial products, powersport products, all these things. And if you look at our average employee, right, our average employee is in the early 50s. We have to make sure that we offer not just opportunity for this, but we have to take and invest in our folks, right? It's a hand up, not just a handout.

Right.

And at the end of the day, those who want to do it are going to participate and go with it. It's going to be hard. Some are going to opt out. Right. And it's incumbent upon HR to help those people find the path for them while at the same time figuring out how we keep this organization going. Right. It's tough. You have to weave your way through it.

How do you go about that? Because, I mean, that's— I don't think we talk enough about the dynamic of age and how, you know, having an older workforce can play a significant role on a company's profitability, uh, you know, down the road. So you have to be consistently thinking about that shift, uh, but, you know, it can be a challenge, can't it?

Oh, for sure. But think about it, right? This has been happening forever. If you go all the way back, there's always the next generation thing coming. I remember, you know, back in the day when I got my first cell phone. So I kind of really got into the workforce in the late '80s, early '90s, and I got a cell phone. I was like, oh my God. And I was working with people and they're like, I'll never use that thing, or it's probably going to give me brain cancer, right? And the phones kept getting bigger and bigger, then they got smaller and smaller. Now we're back to somewhere in the middle. It's that journey that we all have to go through and we all have to adopt. There's nothing different what's happening on today as what's happening before, but it's scary. And there's these big seminal leaps that have happened, right? So, you know, just, just using that, you go back in the '70s and '80s, we didn't really have computers. They started coming out. All of a sudden we got computers and we didn't know what to do with them. Then this internet thing came along, right?

Mm-hmm.

Fast forward to where we are today. You've got AI that you can put into a question and it can give you answer back. But here's the secret to it. Someone has to program that thing. That information has to come from somewhere. And when you look at the laws of big data, OpenAI, and these other ones, they've kind of consumed the internet already, right? The problem is there's not enough data out there. It's still going to take a human being sitting side by side that allows us to take and go forward. Give you one example, right? So years ago, I got my pilot's license and I went and flew a little teeny plane. Right? So it's not a— not particularly impressive, but you fly these things by hand. And, you know, I got pretty good at it. But then one day I upgraded and I put automatic pilot in. And, and this automatic pilot that would take over for me flew it so much better. I still had to land it. I still had to take it off. I still had to be there during the times that the machine couldn't handle it. But together we produced a better result than either one of us could by ourselves. That's where we are today, right? It's embracing what's coming next so we can understand how we can go forward. Because, look, It's, it's going to get better and faster and more for all of us, and we're all going to benefit, but we're also going to feel the burden of it.

Bill, great to meet you. Good luck with the book. Thanks very much for your time today.

Thanks so much, Dan. This is fantastic. Have a great day now.

You got it. Uh, Bill Canady is the CEO of OTC Industrial Technologies and Arrowhead Engineered Products. The book, by the way, uh, coming out soon is From Panic to Profit. Uncover value, boost revenue, and grow your business with the 80/20 principle.