How Concentration, Clean Data, And Customer Choice Beat Giants

Did I give you enough ground to

That's okay. I'm here back. So how do you how. Well first of all, how long has Built Data been in existence?

the other side of that, that concentration, it is a blessing of good things like Buffett said. But you lose a lot of customers.

And the construction equipment dealers late to the game in rental didn't understand that concentration piece at all. Didn't. It was outside their. Their thinking pattern. Their comfort zone. When you started with nations and then for a while you worked with Smart Equip with Alex, right? Alex Shler.

Sunbelt. I don't know if these numbers still hold or pretty close. I think Sun Belt's return on assets is 50%. So you have $10 million worth of assets in the rental fleet and you're going to spin off $5 million of profit. That's. To an equipment dealer. That makes 2 to 5%. That's obscene. They don't know how to deal with that.

So from that is the beginning and the concentration and the retention being the drivers. How did you. How did you start trying to slice and dice the data?

So. Say that again. 83%.

stop there for a second. Yeah for 27 years you've been digging around in data you've been analyzing things and 27 years later you've got conclusions that stand the test of time but they didn't come in the first year first three years, five years which is why most people don't want to walk through the door that you did what triggered or why or how or what is it about your personality that makes you so curious doesn't matter how many times you don't get the answer you're going to keep on digging because that's what's missing in almost all of us, isn't it?

for people Is John Caskey.

It's not what we're seeing recently though, Nick, is about every 20 years we're losing half of the people in the supply chain.

Again, part of that is the low return they're getting. Part of that is the excessively high investment that's required. Part of that is the process and methodology they've been using, which is I think to some degree why leadership sticks their hands up in the air, said, well, we'll just continue what we've always done because everything's okay. My sales number is going up. And if it isn't going up, when you're dealing with only half the number of competitors, you got a bigger problem, you know, but they didn't, they don't know that because they're not data driven. Which I think everything that you talk of, think of, deal with, and every decision that any of us should make should be data driven. Without it, we're Dead.

The, the thing, and let me interrupt for a second. The thing that that focuses on is that crazy word loyalty.

And almost everything that we have in society is saying to us loyalty doesn't exist anymore. And that's from marriages. That's from all kinds of different directions. I believe our activity, our actions have caused loyalty to become less important. We went to voicemail. Nobody answers the phone anymore. We did the customer service from India. And no disrespect to India or Malaysia or wherever, but it wasn't local. Do we not have enough people here? Oh, and then in the last this year, it's kind of interesting, we're suffering now because we don't have enough employees out there because we're getting rid of the illegal aliens. They were performing a valid function in society. But Ronald Reagan and Tip O' Neal back in 1980 decided that they didn't want the visitors visa to exist. The temporary visa for the agricultural Workers, for instance. The consequences of regulations and governments is really amazing.

And the only way you can fight that, it appears, is like you just said, I've got Sunbelt, I've got United, I've got Herc. And they have an inordinate amount of power. Like you said, they can bury a manufacturer.

Yeah, and that's not just in our industry. This is generic across regions. It's in the paper business, it's in the mining business. You know, one little side, and it's a little weird. You know who the largest forestry company is in America?

Weyerhaeuser. And that's three guys that started in Minnesota. You know what the largest forestry company is in Canada?

MacMillan Bloedel, British Columbia. So in Canada, the forestry companies are given trees to plant. So part of the forest is subsidized, according to America, because we don't do that. So America puts a tariff on it to make it equal. You know who owns McMillan, Bloedel? Weyerhaeuser. So they got both sides of the border. Doesn't matter to them what the governments do. And that's the same thing with those three rental companies. It doesn't matter what the regulators want to do. They've got enough stroke, enough power. They can overcome damn near every obstacle that's out there. If you don't deal with data, you're dead. Like you said, you're blindfolded.

What you're describing really is the competition to a shopping center, to a mall. It's specialized services, specialized products with people that know what they're doing. You go into Walmart, change that. You go into Safeway and you ask for what's the special today in meat. And they'll come up with hamburger, they'll come up with ribeye, they'll come up with New York's, they'll come up with pork chops, whatever the heck it might be. And I'm a bit of a jerk. I say, well, why is that special today? And they can't tell me what's the content of protein on that. They can't tell me. So mom and pop or whoever does the shopping have their tribal knowledge of what's good for the family, Like a dealer has tribal knowledge of what's good for the customer. And here comes rentals, here comes Amazon. They changed the whole damn game. And they don't need the traditional. Doesn't know what hit them. Whole Foods is going to deliver in four hours.

Why does anybody go to the shopping to the grocery store anymore? I got other things to do. I'm too busy. Let me spend some time with my family. It's a real shift, Nick.

Okay.

you.

The thing, the thing that you're pointing at is life cycle management. And one of the flaws that we have is the availability and the accuracy and the cleanliness of data. So I have a question that says I've got data at the oem, I've got data at the rental companies, I've got data at the dealers, I've got data at the contractor level. Why, why don't I have one common database that everybody has access to or with?

But what you're describing is what the Trumax and Carmax and those types of boys do. And go back to Alex Schler and Smart Equip when he started it with Eric the systems guy and John,

was looking at life cycle management he was looking at the total cost from birth to death. And we've often talked, Alex and I and others. Who owns the first machine sale? The OEM dealer or the oem. The OEM if it's selling to a rental company, the OEM dealer if it's a normal customer. Okay, who owns the second sales transaction. That's where Richie brothers got to roast and smart equip and a bunch of other things. Because Ann's vision was an auction company is going to own the second machine. But there's a flaw with that. The auction company then has to provide the same services that whoever sells the first machine does. Example, maintenance services, extended warranty services, field service, response times, all of the happy stuff. But today I've got sensors in almost everything of every piece of capital equipment anywhere that's going to tell me there's a problem. Nobody sells that. Why don't we sell that?

The interesting thing I think is the unit of prominence is changing. We sold a machine for a price million bucks. Not so fast. We rented the machine for $5,000 an hour. Not so fast. I didn't rent the machine, I didn't sell the machine. I'm going to charge you 30 bucks a month. I'm going to charge you 75 bucks a month for these 10 or 15 things. And after so many hours at so much cost per hour, I'm going to change out the machine for nothing. I'm going to keep the price the same. Now we're talking about a doctor, a patient. And instead of the doctor being a pill prescriber or a Plumber, they'll be interested in the health of the patient. Instead of making a million bucks selling a machine and making 3% or $5,000 an hour and making 50%, they're going to be making an inordinate amount of money. And who the heck's going to displace them?

If I sell you a machine, whether it's new, used or whatever, and I'm collectively charging you $3,760 a month and I have somebody monitoring the health of that machine remotely and it's going to give you a call or shut your machine down without your knowledge in a safe circumstance. What's the contract you're going to want? He's going to then all of a sudden realize, well, d. All I'm really worrying about is how much am I going to make per hole or how much per mile of road or how much per trench cost the machine cost the up. It doesn't matter anymore. The whole thing's going to change again. Nick, you're right.

But go back to how you got to where you're at. There's people out there right now trying to figure out what that next iteration is and they're going to be stubborn like you are to get there. And it'll be bringing new data to us. That's going to change the whole thing. And it probably is going to change the kind of equipment that we have available. Many more small. If you look at mining, look at forestry, you probably have two, maybe three manufacturers that have the lion's share of the money in mining, Caterpillar, Komatsu and Hitachi. In forestry, it's a similar type of situation. But now go down. So that's the D10, the 575. The obscenely large machines at very expensive prices. But go down into the middle. The midsize wheel loader on rubber, midsize tractor, midsize crane. And then you go down to the small stuff. Oh, wait a second. Now we've got a different game. Here's Mahindra. They might. And it's a sole product.

They might have 15 million, $20 million. They might have seven, eight employees. It's an old mom and pop type of shop. Everything's fine. And who's going to compete with them? I don't see anybody out there. So take somebody like Bobcat or somebody like Kubota. Kubota is a better example. They're worldwide. 150 horsepower, probably the largest engine Manufacturer out there. Maybe Yanmar would be a little bit of competition. Who's going to compete with them? They're in bobcat skid steers. All of a sudden, Kubota comes out with a skid steer. Oh. See how the dynamic change? World War II starts. There were seven tractor companies going into World War II, all about the same size coming out of World War II. One was head and shoulders above everybody else. And we know it was Caterpillar. You know what made the difference?

Caterpillar got the track contract on tanks. Huh.

Oh, it's the same thing in other industries. You got to identify where the big right problem is. Concern is, whatever. And the guys come back after the war. Corps of Engineers, they were all trained on cat machines.

And did you know that if you have one M and M, you have to walk a block?

Yeah. Somebody actually went through. See? So that's what makes this whole thing so exciting. Who's the one that created the quartz watch movement?

The Swiss. But because it wasn't gears and all that fancy engineering, et cetera, they didn't think much of it. And they showed it at a trade show. And guess what the Japanese sought. That was the end of that.

Who has the best watch mechanism in the world? Omega. Who owns Omega? Swatch? You know, it's the same. It's all over the place. So the trick is to have the data, to have the people that are curious enough about it to have them have enough comfort economically, that they can do this without any necessary gain in sight. And it's amazing what we find. Winter wheat. Invented in Saskatoon, Saskatchewan. University of Saskatchewan. Now we have three seasons of wheat. Soybeans, sorghum, all of these. Every single thing you want to talk about is the same thing here in Hawaii. It's wonderful because everything comes to us from land somewhere. It comes in by boat. Primarily. It comes in. In containers.

You know how the containers get here from California or Seattle? They're hauled by tugs. So there's one expensive machine that can tow two or three boats filled with containers that have no power, no staff, no nothing.

It's all. So what you do with Built Data, and the thing that's intriguing is the number of apostles, the number of followers you have of Built Data's theory is small. Fair comment 100% yep. And how you get mass acceptance let's say is in this kind of change environment is really tough. I was talking to a school this morning, one of our centers of excellence and schools have never had to sell anything. There's been a syllabus, there's been a book, a parent and a child, a teacher and a child. They'll sit down to time this class, this class, they'll place an order to go to the school. School's never had to sell any of that stuff. This particular school has now three people. Only three people. Five different campus locations across the state. Three people in marketing because they've never had to sell. They're trying to put together a modern online PDF type of product book as opposed to a printed book. Just that is a radical shift.

Change is really our enemy.

I think the best illustration to use on that one Nick is since COVID go to a restaurant and it's Pretty general now, 80% plus you're going to get a 1.5% credit card charge. The restaurant doesn't pay a credit card charge. Why should the customer? Well, because the restaurant figured out well I can charge more and the customer is not going to get too upset. Go on a takeout now and pay for the bill. You have to choose a tip or none of the above. It's all of these things. So where I'm going with that we have societal changes, one of which is chips Nvidia and amd one of which is crypto. And crypto's got a lot of fraud in it, a lot of risk in it. But there are some parts of CRISPR that are Just clean and are going to be there forever.

And then you got networks, let alone electricity, let alone the number of people that we're going to have to support the electrical grid, let alone that we lose 50% of the electrical from the source to the user, let alone Fusion's coming. That's going to replace their need for oil and gas. All of this stuff's out there and people are just continuing their life because it's too complicated. And there's not very many people that think this way. Alex is one of them. You're one of them. Steve Cleggs is one of them.

Well, you know, I'm too old to be considered anymore. The, the. So all like this belt data, basically. You've heard my statement. I, I talked to a lot of sales people and sales management. What are you going to sell next year in 2026? Oh, I don't know. I gotta wait till later in the year, really. Do you have a fixed number of customers? Yes. Are they assigned to salesmen? Yes. Do you know what the operating cost is for parts and service to those machines? Yes. You know how many hours are put on it? Yes. Well, how come you don't know what you're going to replace next year? Oh, darn, I never thought of it that way. That's the kind of thing that we need to have people talking about.

Go. Go. Go more deeply. The, the leadership, and that's from supervisors up of any business in our industries. The data they're dealing with is 30, 60 days old.

Why. Why don't we get this stuff every day?

There you go. Okay, so let's stay with that word. We're using a model, and I'm at the counter in a parts department, in a car dealership, in a marina, in a house builder. The stuff that I'm dealing with is too old. But I'm not prepared and understanding enough of what the data means for me to be able to draw a conclusion. I have to rely on somebody else to do it. There's nobody out there that I can look to because I don't know Nick, I don't know his competitors, and they're not there. And you look at it in medicine, it's the same. In repairing cars, it's the same. Try and be a woman going into an automotive repair shop versus a man. There's market segmentation for you.

Try and be somebody who's knowledgeable on health and goes to a doctor and is told to take these pills. You out of your mind? I'm not going to take those things. You know what the consequence, you know what the side effects are. Everything is going to come back to how do we get the knowledge? Where do we go? Google isn't doing it anymore. Copilot isn't doing it. Gemini isn't doing it. Oscar. All these little names that we're coming up with for people to ask questions of, where do they get the answers?

Stay there for a second, because I agree with you 100%. I think we're coming into a new age where it's not going to be that everybody might have the same tools. I'm going to call it tools to make it more generic. But the person who uses those tools is going to be the differentiator. We haven't had that in society for decades, if not millennia, where the person, the individual that's sitting in front of the customer. Now we're going back to Steve and his buyer and seller, and we're taking all the rest of the noise away. So you have something I want to buy, yours have something that you want to sell, and there's nobody other than you and I involved in that. So salesman, equipment salesman, black book, then it goes to CRM CRM came in not to help the salesman, but to have the sales manager be able to manage how many calls the salesman was making.

Exactly. And then here comes Salesforce. And now I've got another wrinkle. Because your database as a dealership in my black book, your database in my CRM, and your database in Salesforce, they're all different. They have different measures, they have different communication, they have different addresses, for instance. And then we get something like EDA Equipment Data Associates that starts tracking everything, every machine that's financed. Now, how the heck does the name get put into the file? How do I match names across three or four databases? And that's what we're dealing with today.

frustration, ulcers, heart attacks.

It hurts people. You know, one of the. I don't know how to characterize this, but the last couple of weeks, you know, I read like an idiot. But one of the things that got my attention the last couple of weeks is paradoxes. And me thinking that it is more important today than ever before that I can keep in my mind completely opposing positions at the same time and be productive. Because I think that's what we're confronting today. My car is consuming too much gas. I haven't had it maintained for three months. My tires are wearing out. I haven't had them balanced and aligned in six months. Not that it's 110 degrees outside. Not that I didn't warm up the engine when I started. So all of these things, and we know this stuff. My subaru And I kind of like this little thing. There's a light on my dashboard. Until that light goes away. In other words, the rpm's down, the temperature of the oil and everything else is back to the right place.

Then I can start. And I've done that since I owned the damn car. My wife had an A6. She's had 12 years, 41,000 miles. She never did that kind of thing. But she didn't put enough miles on it to cause a problem. If you're going to drive at 80 miles an hour, you better ought to have the right fluids and you better ought to have the right temperature and you better ought to have the right filtration or you're going to have trouble. We know all this stuff, but we don't act on it. And we're getting to the point that the prime product is almost too expensive. Except for televisions. Yeah, they're getting cheaper.

And I love you, man, because that's really what it's about, isn't it? It's basically fundamental. It's blocking and tackling.

I lost the sound, so bear with me a second. Something happened here that I have to adjust to.

Okay. That's what it was. Go ahead, nick.

Yeah, yeah, I agree, I agree.

Yeah. No, I agree with you, but how. How do you. How you do that is tricky.

Yeah, yeah. You know, this, this whole thing of change and, and artificial intelligence and data driving us, all of this leads us to a pretty dangerous time, I'm going to say. If we continue to do what we've always done, we're dead. Very few people realize that if you don't seriously get into continuous improvement, process improvement, data analytics, you're dead. But the leadership, they're like me, we're pushing 80. So the consequence for us is nothing. The consequence for the next generation is huge. So I'm talking with a company yesterday and there's three people that they've identified as the replacement of the current executive and they're going to make the transition somewhere in the next Six to eight years. And I said, that's terrific. So you're going to end up with a new boss. Yeah, it's going to be really exciting. I said, well, how expensive is it going to be for the two guys that don't get the job to leave for you?

Well, they're not going to leave, really. Their future is taken away because the, the guy who's taking the job is going to block them for the rest of their career. You think they're going to stay? So we get all kinds of changes in how business operates. Then we, we started collecting sales tax now on education products, which drives me crazy. And it's going to cause us to start thinking about different things. For instance, in the European Union, it's 145 bucks per client. If you're non EU, it's 445. So obviously my pricing module is going to have to change altogether. I said, no, no, I'm not going to change the pricing module. I'm going to have a membership. You want to join and you're in the EU, it's 100 bucks. You want to join and you're in the non EU, it's 500 bucks or some such thing. Because I don't want to just continue to do what we've always done. I have to look at it with fresh eyes.

I don't know many people are looking at their business with fresh eyes. I'd almost want to have a weekend getaway with whomever the players are, sit at a table and have it out. What do we want to change in the next 12 months? What's our biggest risk in the next 12 months? And it's not what you're looking at. It's to the core of their business, how they operate.

Well, no question about it. So there's, there's an, there's a, a project for you. You sell the services, you're going to meet 6 o' clock on Friday night, you're going to have dinner, you're going to explain what we're going to do and then Saturday, Sunday we're going to meet all day, beat each other up. Sunday we're going to have a report, we're going to have a to do list and everybody's in the room, they got their fingerprints all over it. You want to do it? You want to do it? You want to do it or not? And every quarter have a checkpoint and get that kind of embedded in our thinking, in our management. We is a heck of a lot more powerful than I

Yeah, absolutely.

Yeah, that's right.

Well, you've heard, you've heard me use the term virtual garage and you've heard the term stx, which is what we're calling. This is what Steve and I are calling the Virtual garage. What this leads to is we'll have people that are specialists that can go into a company that recognizes they have a need and facilitate. Not do facilitate, because I think you've heard me characterize this. We've got people that are strategic thinkers, we've got people that are doers and we've got people that are implementers. There's probably 75 to 80% of the workforce that's doers. Strategic. That's theory. So I can get that from school. There might be 5 or 10% of the population that do that. The real trick is who's the guy that's going to do. And the gal that's going to do the implementation. Because those dudes and dudettes, they got real skills, baby.

And they're rare skills.

So let's wrap this up because we've been about an hour. What do you think we've gained out of this? Have we exposed what we wanted to expose?

What your guy said should be. Should be every single leader. Where are we going? Christopher Columbus? I'm going to find the new world. Where are we going? I'm going to find the new world. How am I going to get there? Have no idea.

So stay there. Stay there. And there's one man, Charlie Munger. There's one man or woman, Warren Buffett. They're rare entities. They're rare individuals. The trick is for society, for us, you and I, to find them before they become them and help them get there. We're not mentoring people like we used to. We're not coaching people like we used to. We're not allowing people to fail like we need to. If you don't make mistakes, you're not learning. And that's why I call the company Learning Without Scars. I've got the scars, baby. I promise you. Other people don't need to get them because I've had them. Nick, it's a pleasure. And I want to do this again and keep going because I hope people are paying attention and I hope this provokes thinking, because that's what we're trying to do.

So you're welcome to come.

That's okay. Whenever it is, I look forward to it.

And thank you very much, Nick. And thank everybody who's listened to this. And we hope you turn in for another candidate conversation that provokes your thinking. Mahalo. Thank you for listening to our podcast. We appreciate your support. Should you have any thoughts or comments, please don't hesitate to contact us at www.learningwithoutscars.com. the time is now. Mahalo.