Around the Horn in Wholesale Distribution With Guest Steven Levy, Episode 127

We let Kevin finish, Steve, and then we get started. So it's okay.

Just a great tune, right? You know, there are people that come to this weekly show that if they do not see me playing a musical instrument or dancing, they comment. And so we got to make sure that that continues. So. Good morning, gentlemen.

Good morning.

Good to see you both. Mr. Burton, Mr. Levy, glad to have you with us today. Tom was just encouraging me, Steve, while you stepped away for a minute, to hurry up and get through our housekeeping and our introductions and so forth so we can get to the news because there's so much to discuss today. So looks like we've got some great guests and listeners popping in. Aloha to Bob. And see some more coming in here fairly quickly. So happy to have the group with us. That's with us live, but we'll get started. My name is Kevin Brown. I'm here with my lifelong friend and co founder of the company that Tom and I work for, Lead Smart Technologies. And we get together every Friday with great guests like Steve, who will introduce fully in a. In a moment. And there we go. Paul says air drums. Exactly right. What that was Paul. Thank you. So he's correct of what that was. But we get together every. Every Friday morning unless, as we say, someone's either in the hospital, on an airplane, or on a planned vacation. And so we get together each week, we talk about the news of the week as it relates to the economy, mergers and acquisitions, supply chain technology, AI people and leadership. And so we do that each week by trying to break down what's going on in the news and as we kind of say unpack things or peel back the onion and provide some context to that news and how it impacts the world of wholesale distribution and manufacturing. We do that through the newsletter that we publish every week. The newsletter is called around the Horn in Wholesale Distribution and Manufacturing. If you don't get that newsletter and you would like to, we would love to get it to you. There's three simple ways to do it. The first is that you can send us an email very simply@helloadsmartech.com the second would be if you're active on LinkedIn, which we hope you are, just pop on over to the search bar, put in around the Horn podcast and the newsletter option will come up. Subscribe to the newsletter, subscribe to the podcast. And then if you're active on LinkedIn and you'd like to watch past episodes, all of those episodes are on the lead Smart Technologies LinkedIn page. They're also on YouTube and they're on the LinkedIn or the lead Smart page on Facebook as well. So follow us on any of those platforms and you'll be able to get the updates of what's coming and so forth. So each week, as I said, we go live on those three platforms, LinkedIn, YouTube and Facebook. But later in the day, our editor and producer John will take all of this data, he'll combine it all, he'll put those things together and it'll be published on the all the popular podcast platforms, Apple, Spotify, Amazon, Odyssey, wherever you get your podcasts. So if you get those then, and that's where you're listening, just subscribe and you'll get those updates every week. I didn't mention the third way to get it, which is the www.aroundthehornpod.com website and past episodes. Subscription opportunities are there. Our request of you is that if you like what you hear, you share the newsletter, you share what we do with your friends and colleagues. If you're listening on any of the formats, hit the like button. On the podcast formats, hit the subscribe button and leave a review that gets this out to more people. The last part of our intro about what we do each week is that we couldn't do this if we didn't have the sponsorship of the company that Tom and I work for. We've got two people behind the scenes that are involved in all of that and getting that ready for us. And this all costs money. And so we're sponsored by the company that Tom and I work for, Lead Smart Technologies. We've developed a product that we call the Lead Smart Channel Cloud. And Lead Smart Channel Cloud is an AI enabled CRM and customer intelligence solution that is solely built for wholesale distribution. So what we like to try and do is help our customers gain deep insights into their customers, their team, which then provides data across their whole company to help make relevant decisions of how we spend our time, identify what we're selling, what we should be selling and how we support our customers better. And in doing so brings great insights for executive management within the business. We're able to do that through some great AI related tools that again bring deep insights into the business. And we do that in a fast and cost effective way solely for wholesale distributors and manufacturers. So if your company is looking to gain deeper insights into your customers, accelerate growth, help, have some guidance and enablement for your team to do the right thing each day with their time, we'd love to talk to you at some point. So that's, I think about it for the moment that I've got Tom, if I didn't miss anything.

Let's go.

Go put that with Steve for a minute here and, and learn about our friend.

Well, Will says we have the smartest and most handsome Infor guy on the show today. So. Steve, welcome.

That is so great that Will, the distribution guy loves me enough to lie to me. I really appreciate that.

Well, on the other side of it is you just said that word and you owe him a dollar.

That's true.

Because Will has the phrase the distribution guy trademarked and. And now you know, recently I have the distribution dude.

Nice.

Right.

So we're gonna watering down his mark.

Kevin.

Yeah, that's it. But he's a friend, you know, He's a friend. So that's good. So we're happy to have Will with us as well. Steve, you know what, your title, that's there. I. I was thinking about yesterday as we were preparing for the show and VP of Enterprise Architecture to me in my mind is there's some really smart dude that doesn't, you know, should. Should stay in the office and not get out and see people. Probably goes with that. You are everywhere.

Oh no.

Did he freeze?

He froze.

Boy, that's not a very good shot either.

Sorry. Unfortunate position to put in.

Unfortunate position for his freeze. So. So yes, Steve, tell us a little bit about yourself, your background and, and what you're doing it in for.

Yeah, sure. I. I think Kevin was going to ask me. Don't most people in my job, aren't they introverts or something? I guess that's true. So. So I am the Vice President of Enterprise Architecture. It's a really weird title. Not many people know what it means. I like it that way. That way the expectations stay real low. Nobody. Nobody really knows what to expect from a guy whose title they don't understand. So I. I like it being that way. But I'm accountable at Infor to make sure that our products and solutions are aligned to our customers needs. Specifically the distribution industry's needs. So we just lost Kevin.

Yeah.

You and I aren't lifetime friends, but we will be after today, Tom.

That's right. That's right. Hey, we have the same hairstyle.

We definitely do. I mean distribution does that to you. It ages you in dog years. So in addition to aging and dog years in distribution, I've been trying to align our products to the needs of distributors and where we'll need things in about three to five years. So for example, our products at Infor, they do allow you to handle tariffs even if you don't know the price and the percentage of that tariff at the time when you receive your purchase order. This has always been built in. We thought about it more in terms of freight charges coming late and third party carrier fees and hotshots coming in late. That was the, the capability that we built out years ago. So we're ready for this tariff thing by sheer luck. I'd like to say it was smart architecture and that I saw this all coming. I did not. But we did see the need for these capabilities in other forms and, and therefore it's there. So a lot of what I do is get lucky.

Okay, well. And hey, I have a question for you before we start. Who are you rooting for on the Super Bowl? It's not clear if you look behind you who you're rooting for there.

It's. It's tough, but I am that a hole. Yeah. Not only am I an Eagles fan, I'm an Eagles fan in a winning season. I feel bad for my colleagues, really, our customers, anyone who's had to deal with me, anyone that's had me on a pod or seen me at a show. I've been a lot this this year, especially in the, in the postseason.

Yeah, well, I'm rooting for the Eagles too, so I'm with you.

Awesome. I'm very grateful to usually our rivals, the Giants. I mean, this year I have nothing but gratitude for the Giants because not only did they give us Saquon, they had the courtesy to lose to us twice. Been great.

So, hey, Andy says that there's no big loss with Kevin, so I think, I think we should just get started here.

Amazing.

Yeah.

The newsletter is huge this week. I mean, and I think that our cycles are growing. Right, Tom? It. It felt like before January 20th, you could sleep most of the week and you wouldn't miss a lot since then. I mean, the newsletter is long, the scroll bar is very small. The stories are massive. Right. I mean, one new company pops up, wipes out a trillion dollars in debt, and has a cyber security leak leaking millions of passwords all at the same time. That's just one story in one cycle by Tuesday. Yeah, this is, this is a busy week and a heck of a newsletter this week.

Yeah, I. I think. And I think this is what we're going to be having at least for a while. Right? I think every week is like maybe a year's worth of news before all of all of a sudden. And as we were kind of chatting before the show, Lots of change. Lots of, I guess, unpredictability and inconsistency and all of that stuff. So I guess it just makes it more fun to try and unpack some of the stuff.

But if we're already aging in dog years.

Yeah.

Will this hyper cycle age us even further?

It's possible. It's possible. So, hey, let's start with economy and supply chain. This is what we usually start with each week. Obviously, you probably know the Fed had their meeting, I guess it was Wednesday. Right. When they basically did not raise rates. They kept the rates where they were. The statement said, as it says here, there was optimism about the labor market, but omitted a reference related to the inflation progress, which to me says, speaking of uncertainty, they don't have a lot of certainty on what's happening with inflation, which is understandable. Hey, look who's back here. See if I can. He's completely different. Camera or whatever. I don't know what's.

I'm on my phone. I just don't know what happened that all of a sudden Internet's gone and phones coming in. Because I knew you guys would miss me if I didn't come back.

We really were missing you. But I'm glad we got your good side. Now that you've got the phone there, that's way better.

Maybe I'll put my hand a little further away, but I'll be back with you soon.

Awesome.

Did your Internet go down? Is that what happened?

Or down? So checking what's going on with that. But let's keep going. Let's not worry about.

All right, well, we're talking about. We're talking about rates and inflation and all of that. So, Steve, I'll push this over to you. Do you have any immediate take on this? You know, we talk about this every week. What's your thought on. On where you think this might be headed over the next, you know, say three to six months?

I think the issue, first off, I think you're. You're baiting me into another bet to go double or nothing on our stake. But I'm not. I'm not going to have any of that. But I think in my view of this is I was fully anticipating that coming out of the. This pre. Even pre election, but getting to a place where we had a couple of cuts, probably get a couple of more cuts, and we'd see some things really stabilizing with interest rates. And now we're seeing this just kind of goofiness of the bond market. Interest rates went down, then home, home mortgage Rates went up, and I thought we'd see some stabilization and some falling off in rates across the board, whether it was credit cards or wherever it might be. And, and we're just not seeing that. We're still seeing this kind of simmering that we've been talking about for two years now, even though we've had multiple cuts.

I, I couldn't agree more, Kevin. I, I wasn't really surprised that they kept the rate steady. I do think that, to Tom's point, well, or, or what Tom implied, we're going to see some inflation coming our way in, in the short term. I, I don't think it'll be amazingly steep, but I do think we're going to see inflation in, in the short term. And just between the three of us and everybody out there, I, I don't believe that any amount of tariffs are going to ease the ability to, to offset this inflation. I mean, we're, you know, our salaries have to go up. We're spending a lot more than we're actually earning. I think inflation is an inevitable consequence in the short haul.

Yeah. I think you've, you've still have the dynamics in place. Right. Where purchasing power is continuing to decrease. Right. Costs are, are continuing to go up. There's nothing that, there's nothing to me that you can look ahead and say, oh, this is going to change or whatever that's going to bring it down to that quote, unquote 2% nirvana level that everybody wants it to get to. So anyway, I think, I think we're going to see this for a while. I know there's pressure from our new president on the Fed to reduce rates. I know he's trying to pressure them to reduce rates and bring rates down. I don't know if that will have any effect or not, but. No, I'm not going to bet on this, Kevin, but I would, I would doubt that we're going to see a rate cut probably until summer and maybe not. Maybe not until then. That's my.

We don't need to bet until we, we settle up on the last one. But I took you to Outback.

You had your Outback steak and your blooming onion. You're good.

I was just thinking about the last time I had the steak with you. The company paid and there was a bunch of people there, so not, not so sure. But anyways, the, the reality of it all is, and I think what we're going to see first here is we're going to see a little bit of dancing with our, with our President and the the head of the Fed here because, you know. Yes. I don't know if either of you had a chance to watch the any of the Fed meeting in Powell's comments, but I watched it over lunch. Yes. I guess it was yesterday. And from that standpoint, and it was astounding to me, the amount of, I guess I'll just say baiting and questions that were really, really challenging of people just trying to get him to talk about going toe to toe with with the new, the new administration on things. So it was, I think we're going to see more of that before we we see any balancing of this stuff. And we're gonna have to see how Powell and the, and the president get through the next, I'd say, few months before we see any additional changes. Because he said over and over again he's not going to get bullied, right?

No, no.

All right. Should we move ahead? Sorry, yeah, sorry, but go ahead, Steve.

Sorry, I was gonna say baiting and bullying at the Federal Reserve. Who'd have thought interest rates would get exciting, too? I mean, in all honesty, this has always been the most boring topic, very important to us as business people. Right. Because it's how we earn, but it's usually a boring area. And if I heard you right, it sounds like it's going to get exciting over at the Fed, right? Kevin?

Well, that's, I think what we, what I saw yesterday out of that, that was intriguing to me was the, the fact that the reporters who are all, you know, typically they're just all financial reporters were, I guess, I don't know how to have to say it, and they were just trying to bait some conflict and put, put a bunch of politics into the Fed discussion on interest rates. And, and obviously there's a component of that, no matter how you slice it. But I just thought it was interesting, the magnitude of some of the questions that we're trying to take Powell down a path. So I think we're just going to see more of that until, you know, things stabilize. But until we and this, Tom, I think, you know, this makes me think we've historically, and we've talked about this a bunch in the past historically, you know, we've been in a place where we've had the economy is going to do X, Y and Z, right? We're going to look at jobs, we're going to look at gdp, we're going to look at a bunch of things, and that's what's going to give us the capabilities to the Fed, the capabilities to really track and manage what the rates are going to look like. Well now we've got this the market and we talked about it a lot last year. Right. The stock market doesn't really seem to care what the, the Fed is saying and what interest rates. Right. They should be correlated. Bond market is still kind of doing some of those things. But I think we're in a place where and I just becoming I'm believing this more and more and more on an ongoing basis is that maybe, maybe the way we track interest rates and so forth and the tools that we use and, and we talked about this a bunch last year was you know the 2% in you know from an inflation standpoint rate comes from a comment that a, you know was that the commerce secretary in New Zealand said like in 1974.

Right.

We just adopted this around the world so maybe it's time to look at these things again because the stock market seems to care less. It builds in what it's going to want to build on. Tom, you've talked a lot about that in the past.

Yeah, look I, I agree that probably a lot of this is outdated and, and, and for sure and maybe just should but I don't think that's going to change anytime soon. Yeah.

Yeah.

You're coming back in another. Now we have an Echo.

Studio. There we go.

Hey, you're back.

Literally the whole area's Internet was just out. So sorry about that and sorry those that view that are listening or that are watching today versus just listening and had to look at up my nostrils there when I was on the phone for a few minutes.

Well Andy said earlier there was no big loss so we were, we were moving ahead.

That's, that's my friend there. Right.

So all right, so let's move ahead. I know we got a lot lot to cover. Where do you want to go next Kevin, on this?

Well, you know there's that article there. It talks a little bit about you know record U.S. goods and trade deficit scene. That's a Reuters but that kind of ties into one what we were talking about before about interest rates and the economy in general but the follow up article to that is about supply chain factors. So I think this is a good. And again I was gone there for a moment and so I didn't get to necessarily hear everything that was being discussed. But Steve, with your background with you're talking to wholesale distributors every day work with some manufacturers. You were at NAW's big meeting earlier in the week. I think a couple of these articles I Think we can tie them together a little bit this morning is we have so much going on in general with the political pressures that are out there right now, globally. I'll say the tensions that are out there right now are significant. Big challenge with that going on for us. And then the second place with that is we're talking about on shoring and near shoring. All of these pieces are kind of coming together, and a lot of it's geopolitical tensions as well. So I think maybe that's a good way to start. Maybe we can start talking about just supply chain in general and the impacts that these have, because we've got this trade deficit that was seen and now we've got these issues with the risk of tariffs, specifically with China, that there's a lot of discussion of boosting inventories. And I know, Steve, you and your team are talking to people about inventories because big part of what INFOR is able to help and support with. So maybe, maybe I'm going to jump that over to you right away.

Wow. A political hand grenade you tossed in my lap. Kevin, thank you so much for that.

Nobody listens to this show, so don't worry about what you say. You know, it's not like anybody's here that's important. That's, you know, could be listening in today.

Oh, that's. That's very reassuring. Thanks. It's just the three of us then. That's.

Yeah.

Way better.

Yeah.

Awesome.

And then, by the way, apparently I just saw a comment come in from my lovely wife, and she doesn't like you, by the way. I didn't get a chance to mention this, Steve. She doesn't like you because you took me to a wonderful dinner in Orlando. I didn't get a chance to say this when we were being introduced, but my wife was very concerned because there was a hurricane approaching when we were in Orlando. And you had this great idea to go to this fantastic fancy new restaurant that was, what, 40 minutes away from the hotel as the hurricane is. Hurricane Helene is arriving in Orlando. And my wife was, you know, texting me about, hey, you know, do you have furniture by the windows? Should you have flown home earlier? And. And then she's like, well, where are you? And I said, I'm having dinner. And she said, oh, like, just in the hotel restaurant. I'm like, no, Steven, I went to dinner, like, 40 minutes away. And so she wasn't happy with me.

Yeah, I thought that your wife didn't like me simply because she's a good judge of character. However, that. That was in, in retrospect, a little crazy. I mean, it was full floor to ceiling glass and we're watching the palm trees outside bend while we were drinking. Oh. I mean, it was very calm. There was really like nothing going on.

Yeah, exactly.

Nobody watches. Does Arlene watch?

Yeah, she's in here today with us. So. Yeah.

Hi, Darlene. It was very calm. I was actually shocked. We got an Uber. I didn't think it would work.

Lovely evening and thank you again. But it was kind of funny because that's our story now is we. We went through Hurricane Helene and with. With the craft cocktails. So anyways, and now the third person.

That was there who actually was able to fly out at the beginning of dinner was. Was also at. Naw, I was just telling the story about. I mean, this guy had to take off in like 20 minutes and he was just sitting there calmly, coolly eat out. If I had to fly through that hurricane, I wouldn't have.

Yeah, yeah.

Might have been sweating. He was so cool. It was one of the.

So we had some. We had some of your team. We had my. The two of us. And then Nick Paraclete was with us from Profit Optics as well. So that was, that was a great. We'll need to recreate that in. Was it late February or March? We'll be in with ISA again. So that was at the ISA spring or fall event. So anyways, I digressed. Tom doesn't like it when I digress, but I thought that that was kind of funny about that evening. But let's kind of talk about supply chain issues. The near shoring onshoring thing is really becoming a much bigger factor than it's been.

It's.

It's been a topic for quite some time, but it's probably now more than ever we're seeing the importance of that.

So the tariffs, the trade wars and tariffs in general, I tend to think they're. They're a great tool for, For a country to use. I happen to believe personally that being a country that doesn't make anything that's purely service based is. Is a risky place to be. So we raise tariffs to make products that are offshore cost more and that makes it more incentivized to build stuff here and people will buy our products. It seems like a very vir cycle. However, consumers. I mean, when we talk about a 25% tariff on Mexico and I have an Anejo tequila problem, it feels like I might pay that 25% upcharge and just be paying 25% more for tequila, which of course creates an inflationary event. So at naw, everyone was really concerned about this. We're distributors. We have contracts with our customers. Is a tariff force majeure? Well, yes, especially at 25. We.

Great, great point.

That's interesting that I've never related that.

To force majeure, which is in supply contracts. Right. That's a great. Okay, you come back. You get to come back again another time.

Legally, Steve. Legally. Is that. Did that come up as being a legitimate legal.

It did come up as a legitimate legal defense. But as. As every distributor and you guys know, saying I need to raise your prices 25 due to force majeure is effectively saying your customers, you have the right to shop. And we don't want to lose our customers. So we won't get. If there's a 25 increase or tariff on an item from, say, Mexico, we won't be able to get that entire 25 passed on. Our customers expect us to be partners. They expect us to eat some. So maybe we can get 20%. It's a 5% squeeze. I mean, that, that we're really concerned as an industry about this impact on our relationship with our customers. We have every right to pass along new charges, and if they were rational human beings, they'd accept it. But they are negotiators and they will. You know, customers have evolving expectations. We like to say it's one of the challenges of distribution. Right. Is ever evolving customer expectations, which I think is a professional way of saying our customers are paying infor. Customers aren't. We love them and they help us evolve our product forward. But distributions, customers, but, but I do, I do think.

And I really like that discussion, the force majeure issue, because at least. At least it's a conversation opening that is, you know, I mean, sometimes that, you know, the, the contract issue is a hammer, but it also is a baseline, you know, or whatever agreement you have in place, but it is a baseline for discussion. So I think there is that opportunity to go back in that setting and say, hey, you know what? We have this. We have this issue, right. We have something here in our agreement that says that, you know, we have rights or whatever. That's not why we need to have this conversation. Right. Let's have a conversation about business people, about how we work together and handle this. And if you don't have a customer that is willing to at least participate in that kind of conversation, you probably have other issues with your. With your customers.

Absolutely.

You know.

Yep.

And I would suspect that if you actually had, if the distributor had to eat a 20 or even 25% piece, I mean that almost could be an extinction event for some.

Yeah, it would kill our industry. I mean, you know, our, our average margin is 22 to 27. You take, you eat 25 and most of us go under. I mean, forget about, none of us are netting that much when we talk about ebitda that isn't it. So if we, we can't get it all, we get squeezed. What is a distributor to do? And luckily we have some models about this. There was not our last president, but the president before was also very fond of tariffs. So we can look at what businesses did, who succeeded and who failed. And there's a really interesting trend on non contract business. Right. The force majeure. We get as much as we can. But the street business as I like to call it, there's a play we can move. You may remember there was a tariff on washing machines specifically made from China. A very significant tariff on washing machines. What we've seen places like Home Depot do that was very successful is to the street. They also raised the price of dryers. Most people don't realize the tariff was only on washing machines. The street did not realize it because they paid the higher price on dryers. So what Home Depot did and two administrations ago is they made up the money that they got squeezed in their contractual business because again we have to reward long term customers. We are business partners together. It's really what we do as, as distributors. Right. Is we are the supply chain to our customers so we have to be trustworthy. And what we do on the other side is we make it up on complimentary and ancillary items that the street expects would go up with those tariffs as well. So you know, Canadian products along with your Mexican products are going to be a problem. But maybe you raise some Australian products in and bring them up along with it is a good way to do it from Australian liqueur, you just put it next to the tequila. So my suggestion to all your listeners out there in the industry is try to find other areas where you can raise the street that seem to go along. Your data will show you your correlated items as you raise one. You usually relate a bunch.

Yeah.

In, in the paper industry it was plastics, right. Liners and forks always went up and down together. The cutlery that you got and the trash liners, because it's all the same resin, they would always be correlated. So look for correlated items and items that people buy together in your Baskets. Because just as humans we expect it all to go up at the same time. Try to get a couple extra pennies on those.

It' Tom can't hear you. It's a technical difficulty day for us all around.

How about now?

Yep, we got you.

I, I would, you know, Mark or Mark, this is a bad day.

We were looking at Mark's comment from Enable, that rebate management company. Mark just ruined our story, Steve.

Right.

I think, and I think if I'm not mistaken, I think Mark was on the panel with, at the ISA event in the fall with Nick and that we were just talking about earlier and he's blowing our story. So that was a mild breeze but you know he's, he's British so it.

Was just a little blustery.

Yeah. Where we were at though, the trees were sideways.

Yes, definitely. And, and Tom, it's, it was probably a mistake, I mean in retrospect for us to get drunk before we did today's meeting. It's still the morning.

Yeah, I know.

We'll stay sober.

We gotta do technology stuff going on today. Yeah.

But I was just going to say, you know, bottom line.

Right.

What I'm hearing you say, Steve, and I think your strategy makes sense. Right. Think about other places. But bottom line, that still equals higher prices. That equals inflation, which is what we were just talking about before. That's going to get passed on to the distributor customer. Guess what? The distributor is going to pass or the distributors customer is going to pass that on to their, their customer. All of this equals inflation. That's the bottom line.

So just Tom, before we kind of jump ahead, one of these articles talking about supply chain. It said despite efforts to diversify, China remains integral to the global supply chains with a plus 29% year over year growth in demand. So the demand is there, we've got all these geopolitical issues, but it goes on and it talks about not only the tariffs but it's talking about people stockpiling. We're seeing inventory rates rise. We've talked about that for a number of weeks now. But it said countries like Mexico, Guatemala and the Dominican Republic are quickly gaining traction as near shoring destinations. We've talked about Colombia, we've talked about Brazil as well and obviously Mexico is an ongoing discussion there. But Guatemala and the Dominican Republic that it talks about here gaining traction for nearshoring I thought was kind of interesting. So that was one we hadn't really talked about before. Steve, I don't know. I welcome your thoughts on this. I've been saying now for four to six months. That probably one of the most important things we can be paying attention to in the global supply chain world, including geopolitical factors as well as Mexico. And heard a Democratic senator.

Can'T remember.

Where she was from on, on CNBC a couple weeks ago and they were talking about tariffs related to Canada and Mexico and she was commenting on, she believes we need to be looking now at Mexico and Canada very differently. Historically, we've dumped everybody together in one bucket with us and NAFTA just said open the borders, let the trucks go. But she was describing much like what I've been thinking about is you've got Russia trying to bring lots of steel in, China trying to bring lots of steel into Mexico to get it to the US Lots of other things like this. And we I think need to be paying very close attention to the Mexico, the relationship with Mexico right now.

I think you're, you're spot on. And I just want to double click into what you said there. I mean, when we, when we enact these tariffs and it does seem like on February 1st we're going to enact these tariffs on, on Canada and Mexico.

Yeah.

Is that the death of NATO? I mean it is that effectively, you mean, right. Nafta.

Yeah, yeah.

The north death and NATO would make Putin happy.

That that would be the Panama Canal situation. Right? Yeah, that would be the death of NATO too. But NAFTA goes down with, NAFTA goes down the minute we put in those tariffs. And then we, we have to treat them differently. They have different commodities that mean different things that impact our inflationary lives differently. So I think they will.

And I don't know statistically where this sits, but man, I wish we had. We, we've got a great guest coming on next month, Sean Dubervac. And Sean is the, previously he's the chief economist for the Consumer Technology association, but now he's a, a global thought leader and speaker, keynote speaker all over the world. I posted some of the things that he was, he's working on this week regarding innovation. But Sean will be with us and he would know this from a statistical standpoint. But the magnitude of the goods coming into the US From Mexico, from other countries far outweighs and dwarfs what we're getting from Canada. So China is not shipping tons of stuff in other countries aren't shipping tons of stuff into Canada. What we're getting from Canada is, I think it's what the current president was talking about yesterday was we've got lots of oil and we got lots of trees here in the US but the other side of that is Mexico. When you start talking about the maquiliador regions that are already in place, the expansion as this article is talking about Dominican Republic, Guatemala and the other areas that are starting from a near shoring standpoint, that's components coming in globally very differently than us getting some tankers of oil from Canada. So to your point, I think that the tariffs could be and I haven't heard any rumblings of this, but I would assume there's some verbiage within the NAFTA agreements about some of this to it could NAFTA could kind of go poof in the next few weeks or, or tomorrow.

Yeah, I, I, I, I, I think it is a shot across the bow of the agreement or, or a threatened to just leave it in and of itself. Well and it's through Mexico. To your point, not only are our are there near shoring investments being made for goods that'll have to go through there, but currently two of the top 15 importers, right, Mexico is our largest importer currently and Brazil is 15. So when you put two top 15s through one border, right and somebody shuts that border, it has a pretty massive and substantial impact. So there will have to be different types of conversations that we have.

Well and, and I'm glad it's we're talking about NAFTA issues versus NATO because Mark, who's in the UK just commented with us that it's pretty important to the UK that the US stays in NATO.

So it was a little, I was just a slip of the tongue. I didn't want to get real political about it, but Panama doesn't have an army and we did threaten to invade. I don't know that there are rules about what happens when member company countries threaten other member countries with an invasion, but I doubt it's nothing. Yeah, I mean that's probably substantial.

I, I think before Tom, we move on. This is a great place to talk about, you know, what we're seeing here with the tariff discussions and so forth is in, in general is back to the the comment that you know, Peter Thiel, the Silicon Valley investor made, you know, during the pre election even was commenting and looking at the current president and saying you take him very seriously but don't take him literally. And I really think what we've already seen in the setting just in the last few weeks is you look at what happened in Colombia with the plane full of illegal immigrants that was sent to Colombia and at first they turned the plane around well, you know what, this grandiose or boisterous call went out immediately about what was going to happen with tariffs. And guess what? Colombian president changed like that. And very quickly. And then with the even. I think this was, I want to say, I think definitely pre inauguration, with the discussion about Canadian tariffs and then some requirements, straight to the new president's house in, in Florida went the Canadian Prime Minister. So I think we're seeing now an administration that is kind of looking at things and saying, I know we haven't done it this way before, but I don't care because that way didn't work. So we're gonna do it this way now. And they're, you know, ruling with an iron fist on some of these things with other countries that we're gonna have to watch and see what happens next.

Yeah, it's going to be interesting times. Brandon has an interesting comment there.

I agree.

Yeah, yeah.

Distributors have to implement country of origin. It's a great way for me to plug in for software. Right. Just as an aside, country of origin is not a field. We typically think of it as a field, but lots of things have multiple components. We need to track the origin of the parts of a lot of our things, not just kits we carry, but as we import things from the global economy, we have to make sure that the portion that has a country of origin is tracked too. So don't think of it as one field. You add to one item. It's an array of fields and percentages that get added to most of the items we stock.

I think that that's. That's fantastic. And that's actually, let's plug companies for a minute because that's data for our customers at Lead Smart Technologies that we can pull out of the Infor system that we connect directly into to bring additional market insights within our customer intelligence and CRM solutions. So, great. Plug there. While we're doing that, before we jump on Brandon, feel free to put a note in the comment. Brandon, I met him a while back, joins us regularly. You can pop in the comments what your organization does, but Brandon's basically got a marketplace, the bearing and power transmission arena, so it'd be good to do that because he's watching and talking to wholesale distributors every day, all day. So, good news. Tom, why don't we roll ahead here?

I want Bob's comment here, though, before we go because I think it's very relevant. Right. And I think this ties in, Steve, to what we were talking about in the beginning of the show. The thing about this Administration is biased to action, not debate. And that's, you know, so when they say they're going to do something, there's a much higher probability will occur compared to other administrations, which is creating the news that we were just talking about and the change and the things that are there. It'll be interesting to see. This is something I've been studying. I won't spend any time on it, but it'll be interesting to see how that plays out in the first 100 days and then how that plays out for the next hundred or two hundred days after that is if we continue to have this level of action that I think we're going to see in the next hundred days and what our tolerance is of that. Of that level of action.

Yeah, well, I saw, I shouldn't say I saw. I heard yesterday that never before has there ever been a stress or an issue on these stenographers in Washington D.C. and it sounds funny, right? But literally the White House is having to hire more stenographers because of the amount of. It was like they compared the first week or couple weeks of the current president's first presidency to the first two weeks of this and it was like 3x the number of words he had spoken that needed to be recorded. Now it's funny is the. And it's. It's our good friend RP that's an advisor to, to the good folks at ors. AI talking about AI and digital twins talk. That. That's a good piece in general. But the first thing that hit my mind yesterday hearing this thing about stenographers was still use those.

That's exactly what I'm outraged. I'm infuriated. We hired more stenography. These are. Listen, I'm sure it's a viable career, but this is a custom built typewriter. We're still. We have video recording that we can save now of the actual event. You can watch my hands fly around like a crazy person who needs a typed word. And of course, great job of transcribing today. I mean it's amazing, right? If you're not using Whisper AI or any of the other ones out there to do transcription of your meetings, you are missing out.

Yep, that is exactly right. So Tom, before we dive too far, let's just mention real quick and then we're gonna want to kind of get moving fairly quickly to the technology spot. We've talked a number of times on the show and consistently to give updates about the. As we talk about supply chain. Right. About the. We've talked about port strikes. We were going to have more of that here coming up to figure things out here shortly. But the other side of that is the Suez Canal. Panama Canal was having issues last year because of lack of rain and there it wasn't as wide and they couldn't get as many ships through. But we've had this Houthi rebel rebel thing here with the Suez Canal in the Red Sea because of the ceasefire in Gaza, they're backing off and are saying they're backing off. And so there's some movement now starting to happen because that was a significant issue as well on supply chains based upon specifically goods getting from Asia to Europe, but also a lot. I can't remember the percentage that goes into U.S. east coast and Gulf Coast U.S. ports that comes through the Suez Canal. So that opening up is going to be powerful.

As I went through this newsletter, I actually sighed a sigh of relief when I read this article, which I immediately sucked back in the very next article because the small business tax break is going away this year and as we, as we covered Tom earlier, these small business distributors are not making a ton of money. I mean, when you're talking about ibda, it's a very small percentage. If this tax deduction goes away, it's going to sting mom and pop American families. And when you combine that with the raising grocery prices because of the interest, this is a 1, 2 punch into the small business of America if this lapses and isn't renewed. I'm really scared about this. As relieved as I am that the supply chain routes are getting back to normal, I'm very scared about, about what the fate of small business is going to be.

So I'm going to Steve, I'm going to tiptoe into waters that I really, really try and avoid. We, you know, we don't mention typically too much political politicians names or presidents names, wanting to stay out of the political component about that. But I, I'm looking at this and I'm thinking that you know, Eric Coplin, Dan Schuberth, you know those good folks at NAW and their team and NAED is getting behind this and as it mentions there and our good friend I think is still, hopefully still with us that commented earlier, Paul Kennedy from DSG or Dakota Supply Group is president at NAED right now. I think we probably have an administration that is probably more likely to push that one through and let it, let it stay from a small business standpoint and driving the economy forward, less regulation, more capitalism. I'm hoping that is the case in this setting. So we'll see. I'm trying to remember the legislative gentleman's name at. Naw, Brian. Is it? Brian, you were just. Yes, it was funny Last, last spring I was after being at isa, I, I flew up to meet with the good folks at the national association of Wholesale Distributors in, in Washington D.C. and Brian was on my flight and it was pretty funny. But. But they're doing some powerful stuff and some hard work as NAD is and others are. So I've got gut says we when we talk about this next that, that, that cuddle hold.

But I really hope you're right and I, you know it was the current administration's actual break. Right. The deduction was passed by them. So I'm, I'm hopeful they'll pass it again. The concern is the focus seems to be much more on massive enterprises than small business time around. I mean it's just, just an observation. I, I really hope you're right because we need that deduction. The large companies don't have to worry. Their deduction was made permanent. So they're, they're in good shape for at least until 2030 or something like that.

Yep.

But the great aw do an amazing job for our industry. They are our voice in, in Washington and they, they tell the lawmakers how important this is. All of them are great. Brian specifically is their legal aid does an amazing job or their lobbyist arm. He does an amazing job for us. And Eric Kaplan has just done such wonderful things. I love the national association of Wholesale Distributors. Great group.

I tend to agree with Bob here though. I think politics. I don't think that we can avoid discussing politics or incorporating maybe politics into business discussions anymore. I don't think the two can be separated. And you can, you don't have to bring your opinion necessarily, but I don't think you can avoid incorporating into the discussion.

It has to be part of a decision making process on anything. It just. How do you, how do you not do that? And it's not. I would say it's geopolitical. It's not just looking. I mean we, we talk a little bit less here about geopolitical, you know, or global political issues. But you look The Friedman said 25 years ago the world is flat.

Right.

And so we live in a global economy. We happen to be impacted a little bit more here. Largest economy in the world. Tom and I live in the People's Republic of California, which is the fourth or fifth largest economy in the world. And we have to pay attention to what's happening domestically. But the global issue is strong as well. Hey, Tom, just because of time, I want to bump ahead to our marketing e commerce segment, which is going to take us from there kind of into some broader discussions about technology. Before we do that, though, this, I was remiss a little bit earlier. Again, I'm Kevin Brown here with my lifelong friend Tom Burton, and our great guest today, Steve Levy. We're together every Friday morning on our live show, which is live on LinkedIn Live, YouTube Live, and Facebook Live. But a large percentage of our audience and growing every week is on listening on podcast format, Apple, YouTube or Apple Spotify, Odyssey, wherever it might be. And because of that, you are not seeing one our three handsome faces, nor are you seeing the newsletter that we publish. So if you're listening versus watching, you'd like to get that newsletter three simple ways, fast and easy. Helloadsmartech.com we'll get that out to you right away, too. If you're active on LinkedIn, just search around the horn in wholesale distribution podcast and that page will pop up. You can subscribe to the podcast and the newsletter. There's. And Then third is www.aroundthehornpod.com and that will give you access to past episodes. Subscription options are there. And so we just want to make sure if you're listening and not watching that you know the difference.

All right, so where did you want to go?

Yeah, let's go. Let's talk about this. Generative AI's role will evolve in 2025. That kind of gets us started about talking about AI and agents. And that'll go to a broader discussion which covers three or four of the articles we have today.

Then we're right back into geopolitical stress again.

That's right.

Good. We'll get to that. There we go. All right.

Yep. So this, this first article about that is tying to. And this is from marketingdive.com and it starts talking about, you know, what we were looking at earlier in the year, and I should really say last year, but the role of AI and generative AI growing even more and more from a marketing standpoint. You know, they've talked about a lot of hype that's gone with things, but then a lot of opportunity that becomes as well. But one of the things I thought about, even though this was from marketingdive.com, this started to really dive into the opportunities that there are across an organization when we start thinking about warehousing and supply chain issues, as well as procurement issues and moving generative AI into other Places within an organization, which I thought was interesting as well.

Yeah. And they're saying here, right. The tech is getting less sexy in 2025, mainly assuming it was ever really truly sexy. Well, I think in the beginning it was sexy when you could create a blog post and you could do some of these things that are here. Right. I think obviously that sexiness has worn off when creating emails and blog posts and articles and so forth. Not that it can't be useful. I just don't think that it's all that sex anymore, I think. And I. There's three articles here that are in this section that actually, to me, kind of fit together.

Yep, that's.

And, and I. And I think the biggest thing that we're seeing is, is, you know, where AI has been all about utility tools. Hey, I got this tool. I can build a blog post, I can write an email, I can do whatever, analyze something. It's been used from a tactical utility tool perspective, not a strategic perspective. And I think as we start to see it move into a strategic perspective, I think we can recover some of that sexiness that maybe has gone away over the last year or two. But I think it's got to be looked at. We're going to talk about this in those next two articles that are here. The next two articles about prioritizing spend. And then I think this last one Here, why most B2B marketing sales projects aren't successful yet. It is coming back to the same thing, which is expectations, but then aligning expectations with not just tactical tools, but strategy and so forth. So I think all of this is kind of interrelated.

I think that's, that's a good point, Tom. And it does kind of tie together. So three articles here. Marketingdive.com was the one that was talking about how generative AI's role will evolve in 2025 as marketers probe its utility. The second one was B2B companies. Big digital technology and cost efficiency, big priorities. This is from our friend Mark Brohan was a guest a while back with us where they talked about 69% of executive believes increased technology investments are necessary to remain competitive strong. And this was across the board of European companies or global research. I'll say 84% of US executives brought that up from that standpoint. So I think what we're seeing to kind of go along, Tom, with what you're saying is that we're getting out of the sexy fun thing and now driving things into the, hey, really? How is this going to drive. Accelerate growth in My organization, efficiencies in my organization help my people in an organization. So I think we're moving from out of that hype cycle scenario maybe and I don't remember all of the phases of, of that, that Gartner curve on that, but I think we're kind of moving out of that to the adoption area that says what does this really mean to me to get something done in my business?

Yep. Steve, any, any take on this?

I like to comment earlier that was it ever really sexy? I mean, a chatbot is not sexy. Right. If you had somebody that could type that stuff really fast and just spit it out. There was, there was no capability there that was new. It was just amazing to us all that it could generate that content from nothing so quickly. I do think that these projects are really important as, as we're trying to realize value from it and going into widespread adoption, we have to continue these projects because every model we use is getting updated daily. I think we're not seeing a lot of marketing value because don't tell OpenAI this, but they're just not that great at marketing. They don't AI language models write a good mediocre story. I mean it's, it's, it's coming up with mediocre content. But that content is getting better. It is learning what's, what's more and more compelling. And I do believe that it eventually will get emotional detection and it will craft the response in an account based or Persona based or a unique based way for every individual. As you get more and more irritated and you hate listening to me ramble on, it'll know it and it'll shut up.

It's interesting you bring that up. Steve is, and I'm seeing this even from a CRM perspective and with our customers, the amount of, I guess you'd call it, Persona data that companies are wanting to start to capture. Right. Not just even about a company, but about the individuals that are there. I mean, think about that. You have in your CRM you have a lot of company information and you know, address and sales and all that kind of stuff, kind of the psychographic data. But do you have some of this information that really kind of tells the story of the business and tells the story of the individual that you're dealing with and then how do you use that to drive your communications? I think that's going to be a big shift as we move forward.

Absolutely. And then of course, when you start to have those questions about storing more and more data about what makes sense, Steve tick and how to sell to Steve. We have to wonder how to secure that right. As these models get more and more advanced, we have to have infrastructure that's more and more secure as, as time goes by. I mean, one of the things I think about often with these AI chatbots is if we make it difficult for OpenAI to make money, maybe they'll start keeping privacy as, as. As a sales tactic. Like, I'm sure that I have asked Chat GPT some really stupid things that I do not want associated with. The Vice President of Enterprise Architecture at Infor asked Chat GPT the following, whether it was write an essay about Napoleon or look, especially early on, I asked it some silly things just to see what would happen. I would pay for that privacy, and we don't want that to happen. So our privacy and concerns become real, real problems as we're aggregating all this data to really help. And that brings us right back into our stories.

Yeah, yeah. So you're. Man, this is great. You should be the moderator as we, as we move through all of this. But, you know, it's interesting you say that before we dive ahead and start talking about Deep seq, which is kind of what's coming next, and even before.

Security, just use Deep seq. What's the big deal?

Yeah, right. So, so before we dive there, though, I think it, it is unique because, you know, Steve, you've been referencing ChatGPT, but I remember from one of our very early conversations and then some conversations at events that we've been at together is the, you use a lot of different models for different things. And I think what's going to be really interesting for us is when we get to a place where we've got, you know, harmonized searches based upon what's the best for us. But it's one tool that's going out. And I know Tom's team is working on some things right now where what you ask our technology at Lead Smart, what you ask it will go decide which model to look at. And so now we get the best of all worlds that will be coming together, because right now I have to sit down and decide. And I'm not a big user of Claude, but I want to be coming because I have so many people telling me about how much better it does at writing and learning, learning your own voice and your own style than ChatGPT does. And I use ChatGPT for kind of, I'll call it, you know, White Paper syndrome sometime to get articles started, but. And things that I need to write started or doing outlines and was even using it last night to help me get started on the landing page that we need on our website. And just astounding the things that it brought up that I wouldn't that it knows because of an agent that was built built an agent about, you know, our company and it was able to take that data and start spitting things out. I hadn't even thought about for a landing page but to go to different models is, is an interesting take and I know you do a lot of that.

Yeah, I, I, I am a multimodal and multi model user of AI probably an addiction at this point. I, I collaborate with it frequently, rarely use raw what's there but I, I'm asking it questions throughout the day. One of the interesting things we did at Infor early on when the models so 3.5 was out, 4 was coming out. I think Anthropic had just released Claude we thought it would be interesting to recreate the Minority Report especially the early models hallucinated more than the current models do. So as a way to combat hallucination and to find out what would be the best answer we would ask the different models and we would write a prompt to evaluate the responses. So we would go out, ask all three models, then take all those responses and ask a fourth model or one of those three models hey, which is better with this outcome in mind. Right. It was a really interesting case we made. It was really great in the lab. It was also really expensive. I mean you're quadrupling all of the tokens you're consuming at any one time. So it, the project didn't last long. We do a lot of proof of proofs of, of concept like that that you know, we fail fast. But I do think that outcomes like that are going to happen as the price falls down. As we get more and more models out there and we get a price decrease, we can start to actually ask multiple models the same question, evaluate the responses, get the best data points from them and begin to learn from them. And then somebody will make a model that's trained off of all that data, I'm sure.

Well, another great, great point with that and that leads us right to our where do we go there. You able to hear me, Tom?

I can hear you. Good, good, good, good.

A little pop up there that kind of leads us into our next section as we talk about technology, cyber security and AI. First article we have there is but it just ties together with a second one which is what is deep sea seek and why is it disrupting the AI sector and then we go into the cyber security risks that Steve was talking about earlier. So why don't we get started on that. Tom, do you want to maybe kick us off with, you know what, what did we see at the beginning of things here? Beginning of the, I guess beginning of the week from Deep Seek.

Well, Deep Seek released a new model, okay. Which in and of itself probably wasn't all that newsworthy. But what was newsworthy and it caused all of the commotion was they stated that the cost of building that model, I believe was $6 million was what they said compared to several hundred million dollars to train a OpenAI model or a llama model or some of the other US centric models. They also said that it was comparable in quality to what it was to the OpenAI top. OpenAI models that are available. And on top of all of that, they said that it was, I believe, 80%. I don't have that number right in.

Front of me, but 80% more efficient run.

Right?

So you have, when you have a model, you have the training part of.

It, which is how you get the.

Data, whatever, then you have the inference part of it, which is when it's running and it's inferring and taking the data and giving you your data back and so forth. So they were saying it was much more inexpensive to run the model.

You're getting a little fuzzy there.

Am I fuzzy to you, Steve, or is it just.

You're right now?

You were. But you're far perfect now.

Okay, so anyway, the bottom line is, right, is that the model was so remarkably less expensive and more efficient that the stock market and the market went crazy, crazy thinking that, oh my God, all these companies that are spending, you know, we talked about Stargate last week, right? Remember, about all the 500 billion dollar infrastructure build out and, and you know, Nvidia, Nvidia and their chips being the heart and soul of all of that and, and so forth. So anyway, that created all the commotion. It became the number one, or is the number one downloaded app now, the Deep Seek app, which I don't fully understand the traction but people are, are downloading. It's also open source, meaning you can take it and download it and potentially install it on your own computers and use it for your own computers. So I, I think again, the, the big concern and the big hoopla was, oh my God, we're way overspending on our, of our hardware, of our infrastructure, of our power supply. I mean, some of the big power companies lost 40% of their of their market value on that same day that Nvidia lost 15%. Right. Because hey, we don't need nuclear power anymore. We don't have a power problem. We're just going to go do this other stuff here. So a lot of reaction, I think react first, ask questions later. I think the questions now are being asked. I think Will brought this up. Is, is, was the actual deep SEQ model built on top of OpenAI? Did they still steal some of that AI? I think Bob is saying here, yeah, you know, cost 6 million, but the government subsidies, I mean, you start talk about peeling the onion here, which nobody's really done. I think you're going to find a lot of things that are not there that all said and then I'll shut up. I think that this is a great wake up call for our industry. I think in the same way we've had efficiency in business become cool, I think efficiency in this world will be in. Steve, your point, right. The cost of some of the things you were doing with the tokens and the cost of making API calls are pretty prohibitive still, to be a practical piece. And there's a, I think it's called Jevons, Jevons paradox, which basically is a paradox that came out from an English economist back in the 1800s. Basically saying that as we increase the efficiency of using a resources or the cost of that resource, the overall usage increases. I think that we have a lot of opportunity. I know for us even there's things that we're not using AI for because of the expense or the cost of it. So if, if cost can come down, I think then the opportunity to take advantage of it becomes more ubiquitous and we all win from that. And okay, I'm done with my.

No, I, I think you're, you're, you're spot on with that. I think this was, you know, we're two and a half years into chat GP dropping on into our lap, right? Roughly just maybe a little short of that. We have companies across the board, companies that we, you know, are in our world and marketplace who went and took many years to go build neural network models. And there's tens of millions of dollars spent to all of a sudden have something drop in a lap that says you could rebuild that now in a week or two with a team and things are changing fast. But you know, to the point earlier and when we were chatting before the, before we even went live today, you know, Steve was talking about, about what was it, a trillion dollars or whatever evaluation that Nvidia lost through all this. But I think Tom, to your point is all of these things happening are, are really valuable to where we're going. Even, even the risk that you know we're kind of leading into the, the security side of this. Even the risk that goes with a product like, like Deep seat, right. And it's astounding to me that in their term you mentioned Tom earlier, you know, in their terms of service they say that they're storing your data. There's data stored in China. To you know, Bob's point earlier about the Chinese government subsidizing. You know I was thinking about before Bob made that comment that even if it was 20x the cost of what they say they built it for, it's a fraction of what anything else has been costing. But when we now we start talking about the security security component of it and it's just astounding to me right that this week the number one downloaded product in the Apple Store and the, the Google Play Store, right in either one of those was this Deep SEQ product with nobody. I don't say nobody obviously because we're thinking about it, we're talking about it here but the depth of people's misguidance I'll even call it astounds me to say wait a minute, we've just spent a year with people up in arms about TikTok. I heard a comment yesterday from you know, a global leader in, in the AI world that said the magnitude and the risk of Deep seek and the data that people are going to be putting into it that's going into Chinese based servers with the Chinese government having access to makes the risk of TikTok look like sesame Street. Was the comment exponentially greater risk but the two number one downloaded apps or the two the. The number one downloaded apps and two of the world's greatest marketplaces for mobile apps is this product. And so this is where and I think it's very important and we've got three pretty good, I'll say two really good minds and a pretty good mind on this stuff is this is where our audience of where our two companies in for and lead Smart supporting wholesale distribution and manufacturers. This is where we can be of help to start really helping the the folks that are here today that are wholesale distributors that are commenting go to the infor of the world or whoever your ERP SP provider is if you've got a different system than that, come to companies like us and ask us for guidance and suggestions on the security of your data because it is so Dangerous to be thinking about letting. And Tom and I are visiting a very large distributor in the Southeast in a couple of weeks talking with them about their digital journey. And one of their senior executives was commenting about I've got all these people buying all these AI related products and we need to put some guardrails on it. That was more about use case and cost versus security. And I think we're in a place right now where we have got to be putting those guardrails in place. A company that we bump into in the CRM space and some deals here and there, they've been down for three weeks after a cyber attack. So you've got hundreds of customers, maybe thousands of customers around the world who can't use their CRM solution because they never asked any questions about what's going on with their data and what are they doing as a provider of a cloud service to make sure their product and system stays up. And we're supporting people, you know, now that are, hey, I need to get another company and, and it's just a big mess right now. So anyways, I got a little soapboxy there for a moment, but I'll throw that back to you guys about the security issue.

Your competitor story by the way, is, is really sad because there's a lot of distributors that are struggling. We have a couple of shared customers that are stuck in that. It's, it's, yeah, that's really shame. What else is a shame is you mentioned the trillion dollars of debt, right. Or the trillion dollars of market cap. So this deep seek model gets announced, China says how much? They spent 6 million to train it. And they never of course used any chips that are under an embargo.

Right.

So they're using low end chips and low money and they were able to.

Make using a Commodore 64 to do it back.

Yeah, yeah. We'll never have a chance to validate what they are running it on and are not running it on because let's face it, it's in China. Right. So the, their claims about the hardware are irrelevant. But what I see happened is a rumor that started in China wiped a trillion dollars of U. S market cap out like that. Jensen personally lost $600 billion. So China started a rumor and affected a Taiwanese billionaire to the tune of 600 million.

Oh, I thought of that Taiwanese connection there.

Yes, this is the first time we're seeing it. I suspect this pattern will repeat because it's an economic warfare. Right? I mean they, they, they effectively accidentally perhaps launched economic warfare, guys. I mean A trillion dollars in a day is a.

So you want to hear another conspiracy theory to all that? The company that owns Deep Seek is a hedge fund. And there's been a lot of conversation that that hedge fund shorted all those stocks before making the announcement.

Why not?

I hadn't heard that either. Great, great insights with all of that. You know, and what's interesting is I didn't get the chance to read the whole article, but David Sachs, who's part of the original PayPal mafia and so forth, is where Elon Musk and others made their big money. You know, he's now what is his title? AI and crypto czar for the Trump administration. He was out yesterday blasting one, it's not true what it what they're saying. Likely two is much of that was built off of OpenAI LLMs. Right. And, and really the depth of all of this and being cautionary about some of the stuff that Steve, that you're talking about with that. And then I know earlier in the week, Ray Dalio, who's a billionaire hedge fund manager and an author and kind of futurist as well, he was on the the all in podcast on kind of a special episode with that and he was talking about these, I'll just use the term lack of a better term geopolitical issues. And Steve, the insight that you brought up to Jensen Wong that you mentioned. Jensen, but Jensen Wong, the founder and CEO of Nvidia that is, you know, however many billions he's worth.

Right.

Is Taiwanese, Taiwanese chips, Chinese, Taiwanese pressure, South China Sea issues and all of those things. Ray Dalio's comment and is raised probably why he's reasonable to be talking about this is not about his money. It's about thinking as a futurist is he said we are in a global civil war, that if the US does not win this race in AI, there are the implications have almost zero to do with computers. It has to do with global dominance.

Absolutely. I mean, and then.

Right.

And the person that will win doesn't just have the most creative people and the best models. It's it's the, the most secure power infrastructure because that's what we're going to find. And we're seeing it now. Right. Technology companies are partnering with nuclear power plants and they're literally taking the mothballs out of the nuclear power plant and firing them back up to power these models, which means people will start to exert pressure on that infrastructure. Right. Likely in the form of drones. So we'll see.

No, I mean you think about you know, the, the. When you think about the risk of war in the future, it's probably, it doesn't mean there won't be human collateral damage or death, but how it happens will be very different to the point of, of drone and robot warfare even. And it, that sounds. And I can't believe it's leaving my mouth because I don't think I've ever watched more than five minutes of a science fiction movie or never read a science fiction book. It's just not my thing. But the things that we've thought about a science fiction are happening right now, today.

Right.

The Jetsons very soon is going to seem silly to us. It's like, of course we do that, right? But the issue of who's controlling that. And it goes back to a comment. I'm not sure who made it earlier. I think it was Bob made a comment about the subsidizing things. It's not just a chip issue and it's not an AI issue, it's an energy issue. And China is way ahead of the US right now in the world in energy production in different forms. Whether it's, it's nuclear, whether it's, it's coal, whether it's wind farms, all of those things are way ahead. And at the Distribution Strategy Group's very first AI summit that they had in Chicago, Zach Cass, who's one of the early employees at OpenAI, he was talking about, yeah, this AI will solve cancer. It can't. Not because of how it's going to work and learn from itself. Right. But the question is, do we have enough power to power the chips to solve cancer.

Right.

So you think about the global and humanity issues that are going with this are way beyond probably anything any of us are qualified to talk about. So interesting time. So good. So let's. My takeaway and my encouragement to people in wholesale distribution and manufacturing is put some guardrails in your business. If you need some thoughts suggested and guidance, reach out to people that you trust about topics like this and really be cautious of where your data is going, what's being loaded into some of these tools, and educate your people on why it's important. So we're kind of running short on time, but let's talk about this agenic AI is here and our CFOs ready. And not just CFOs, but in general, you want to spend time, maybe a couple minutes talking about agents and the agency mindset.

Yeah, boy, that's a whole nother whole show, right? Whole show in and of itself. So Basically what this article is, right, is the concept of agents, which we've talked about on the show. Think about as just AI applications, right? So rather than applications being built with traditional deterministic if then sort of structure, you have applications that are using these models and the quote unquote intelligence of these models to make the decision on how the applications are operating, using your data and so forth. It's very simplistic definition, but agents are becoming to me, it's the tool that is going to bring AI into the mainstream of the business. Right. We just talked about using AI for utilities and tools and so forth, but it certainly hasn't been brought in to the mainstream of the business. Obviously lots of chatter, same things we've been talking about, you know, the costs, right. You know, as in for developing agents. Are you guys doing things like that with some of the, with some of your new releases? Steve?

We are.

Can't talk about it. Can't tell me or you're gonna have to kill me.

I, I, I think that the agents are what make it strange that somebody said that, you know, they're being less sexy that CFOs look at the chat bots. Like, to me, this is the sexiest part of AI absolutely gonna do stuff. Which takes us one step closer to what I really want, which is Rosie from the Jetsons folding my laundry. I hate laundry day. I just don't like it. So I want a robot to fold my laundry. And in order for that to happen, they have to be able to do stuff. Agents is our first step, right? So we have agents entering orders, for example, in the erp, if you take a photo of a stock right room or a handwritten note, we can actually enter that order. They're, they're pretty exciting because every time an agent does something, you have to use your ERP less. That's, that's exciting. Nobody, nobody likes the stuff we make. Honestly, it's, it succeeds best when nobody uses it and we're getting really, really close to that. And, and some of the exciting things are, you know, as we mentioned earlier, AI is really good at recording and transcribing things. And if I can record and transcribe and then do, maybe I'm just having a conversation with the customer service rep and everything happens in the ERP automatically. That's again, we shoot big, right? We wind up delivering small pieces of it, but we like to shoot big and learn capabilities in there with, we string them together.

So I, I, that's, I love that Tom's team's Working on a lot of really cool stuff related agents as well. Tom talks all the time about, you know, AI will really become what it's supposed to be when we have. Tom uses the phrase the killer app that is really able to do so many things. And, and I think we're coming into that place. But we're, it's, it's really a unique time right now from this isn't. And you. We're commenting about Jensen Huang from Nvidia earlier, you know, he said, I can't remember what the first part of it was. It was something like, you know, people were talking about all the jobs that are going to be eliminated. And he said worry less about that. And he said, but he said something like 50% of people aren't going to lose their job to agents, but a hundred percent of people are going to have 50% of their job done by agents. Right. And so, and I didn't quote that exact, but I love the idea and you know, is, is an electrical lineman going to have 50% of his job done by an agent? No. But if you use technology in your day in and day out job or have a computer that you're focused on, it's probably going to come that way. I've done some things this week that I've already with agents that have eliminated even in preparation for the show. I built an agent that gives me my recaps on our articles and so forth and saves me over an hour of preparation. And so the idea. And I was talking to a gentleman about this the other day that's trying to work on some agents and I just told him, I said I'm looking at my time right now that says do I want to work less? No necessary. I like working. But do I want to work on things that are moving the needle in my business? Yes. And so if I can look at things and saying if I could eliminate 30 minutes a month of things that get taken off of my plate, look at what now I'm working on. And if we could ever get to that, let's say it's 25%.

Right.

One, we get back time for things that we want to do and two, with the other part of that time we can use to do things that are more valuable to our workplace. So I think we're just in a amazing spot. And to your point about some of the things that Infor is doing with being able to use some, some images and being multimodal with the AI in that setting. Right. Is the future for wholesale distribution, Tom, we can't hear you.

You're muted again.

What about now?

Now we gotta hear you now.

Okay, well, I wanted to say, but hey, I think that's funny. Well, a year ago, right, I told Kevin agents were the future and he kind of poo pooed it.

I didn't poo poo anything. You say you're.

And now he's like the addicted to agents. You can't, you can't get a word in edgewise without him talking about, about agents. And I think that that's relevant because I think, you know, I've said this right. Once we start bringing agents, really valuable agents and agent strategies into the industry, it will become addicting and it will be. They'll want more. Right, because you use one and you go, wait, what about that? And how can I apply this and how can I do that? We just haven't brought it to the industry yet for them to see the, the killer aspect, killer app aspect of that. I talk about Kevin. So it hasn't moved, it hasn't propagated to the speed that it will, but I think it will this year. And I see you all the time, it's like one leads to another and leads to another, leads to another, leads to another, leads to another. Whereas, you know, a year ago you didn't even know what wanted to spell the word agent. Right? So it's, it's a different, it's a different model.

Except for the federal ones that we're looking for.

That's right, the federal ones, yes. That's what Will was saying.

So yeah, the, the, I just, we are in a great time. But you know, Steve, to your point about some of the things that you're doing is look at how much more efficient a customer service person is related to checking on orders. If there's an agent in the Infor system that's doing things for them. Where, you know, where we're going is, you know, at Lead Smart because we connect into ERP systems, marketing automation systems, E commerce systems, other silo data within an organization. We bring all of that together and now, you know, our customers are getting insights already into seeing, being able to literally from their mobile device and on our mobile app being able to ask questions of their data. And now what we're looking at, the opportunity that's coming for the future for everybody is, is to be able to say, you know what, I've got all these wonderful tools from Infor, my hopefully from other ERP providers as well. But if I'm elite smart customer and I'm using an M&N4 customer. I can see now pieces of my Infor data and how does that relate to my e commerce data and what that customer is doing on their marketing automation journey. What are they consuming? Now all that becomes illuminated and from my smartphone I can just ask questions before I walk in to see a customer. And it brings that siloed data from across the business together. And that's kind of where we're headed with our company is being able to really take that, hey, you know, the finance guy, other people, they need to be in the ERP doing what they're doing. The marketing gal is needing to be in the marketing automation tool. But at the end of the day, when we bring all of that together in a single platform that we can talk to as Tom's talking about, kind of the killer app is where we're trying to head and it's supported by organizations like Infor. At the same time, with the great data that you guys have that said, agents we think are the future, I think we could all agree it's getting late. We have multiple other sections that we're not getting to today, which is our M and A section and sales section and people and so forth. The one thing I did want to hit, Tom, before you go too far, there is. It's going to be interesting. Steve, I'm going to just throw this out to you because you watch these things closely in our sales and M A segment. This newer PE group, QXO that's now gone public trying to looking at an 11 billion dollar of Beacon roofing. Now this is turning into an almost hostile thing. And I think it's kind of unique to find a, an organization that, you know, just pops into the marketplace and their first real deal that they're trying to do is becoming hostile. Thought that was kind of interesting.

It is interesting. I mean, Brad's a brilliant guy. He. Yeah, he knows how to get money out of all of his investments. He. He gets that return on Committed Capital or the Rock. He's. He's sort of the man at it. Yeah, this is a really interesting one, but I was, I was with the folks at Beacon at Naw. So I feel uncomfortable talking a little bit. I don't know what I'm supposed to share and what conversation over bourbon.

Well, just, it just means I'm gonna call you this afternoon. But the.

I already saw it all on AI earlier, so it's already out there. It's not a problem.

Deep Seek told you all about it, right? The CEO from Beacon who I think was at. Naw, wasn't he? But he was also on Jim Cramer's show I think on Tuesday. And so if you want to get a little insight to Beacon's position on it outside of us trying to squeeze Steve for the insights that he knows and I'll just post in the comments here, I'll post Steve's cell phone number and you just reach out anytime you want. But CEO of Beacon was on Jim Cramer show earlier and we obviously easy to find online and that was I think thought he did a very nice job of walking a tightrope of of what happens if they're acquired and what happens if they stay on their own or now a potential other suitor. And you know with with Home Depot buying SRS Distribution, there's was rumors or a couple over the last couple weeks that Lowe's could be looking at this whole deal too. So that'll be something to watch. Tom, we're gonna I think just because of time here skip the other pieces that we have. But we have our People in Leadership segment with some good articles. We added a new segment to the newsletter recently about channel leaders on the move. So as we see kind of some, some movement in the industry of executives and so forth, we're trying to talk about that as well. The last thing though that I wanted to hit Tom, he'll scroll all the way to the bottom is our good friend who I've been friends with for many, many years, Ron Paulson, retired senior executive from Granger. And Ron made a couple of comments earlier today and I was on the phone with him actually yesterday. The son of of of the founder of Granger died a few weeks ago. And RP Ron Paulson wrote a great tribute to the legacy. He worked directly with Mr. Granger and the Granger Foundation. I think the last five years RP was at at Granger. Great guy, great executive. And that article is from posted at the Distribution Strategy Group's website and it's titled thank you Mr. Granger. A tribute to his Legacy. Ron's a great guy. I don't know if you know Ron, Steve, but if you don't, I got to get you introduced to him. He's a super friend. But you know what? It's tough to talk about wholesale distribution without Grainger being in the discussion and the things that the Grainger family did and not just did to grow distribution and become a publicly traded company, but the it's historically been a great place to work and they do wonderful things for the community. So thanks RP for Posting that for writing that article and we've got it posted on the newsletter so we're gonna wind down. Any last thoughts before we close out guys?

Another boring day. Another boring week. Nothing to really.

Yeah. You know that other than the technical difficulties on my end and a couple with Tom there along the way. What a great. A great discussion. Hey Steve, thanks for being our friend. Thanks for being with us. Your insights were extremely valuable. Really good.

Really good.

As I was expecting them to be good. But they were even better with some good insights. I love the tariff on tequila discussion. My. My lovely wife is shares that that passion with you on the Anejo and so we'll go from there. But what I would like to ask you two things. One come back and join us again Steve at some point. Absolutely do that too is whether it's dinner, a drink or just some time. March 31 to April 2 is the upcoming Industrial Supply Association Spring Summit in Nashville. It's going to be a great event.

Probably we can have a hurricane. Should be. Should be safe from hurricanes on that one.

We should. But one I'd love it if we could spend some time and chat again and either break bread or. Or, or have a drink or something. Spend some time talking because I always enjoy our discussions and the ones in person are even better. So hopefully we can make that work.

Awesome. I'll see you. I'll see you at the Gaylord in Tennessee.

That is right. And in relating to that our good friends at isa. I'm due to respond to a note from him yesterday but Brendan Breen, the CEO from from ISA is going to be joining us on the show at least once, maybe twice between now and the event to talk about some of the things happening there. So we're excited about that. It's one of the organizations that we try and support. I know Infor is a huge supporter of the Industrial Supply Association. My last pitch to everybody out there is regardless of whether you're in the H Vac channel, plumbing, electrical, wherever it might be, support your industry association. Stay involved because they make it better. Just. They just make it better. And you're getting the benefits from them already. So support them if you don't. So exciting time. So let's we're going to wind down for the day. The last thing is we couldn't do this every week without the support of the company. Tom and I work for Elite Smart technologies, AI enabled CRM and customer intelligence. If you and your company need to get deeper insights into your customers, your teams and your business in General let us know. We'd love to talk to you. Tom, Steve, thank you again, everybody that commented today. Thank you. Be safe, be good and do kind things and have a wonderful weekend.

Thank you so much.

Thanks, everyone. Have a good weekend.