John Andersen and I talk about ChatGPT and Dealer Business Systems.

Yeah, you went back to Canada last week or so, didn't you?

Yeah, isn't it? It's nice to be reminded.

Okay, so let's start with Bing and Microsoft and ChatGPT and OpenAI and kick it off with that. Since the last we spoke, which is roughly two weeks ago now, there's been a flurry of activity. What do you make of this stuff?

So we're really.

There's an interesting article or short pricey of one of those things you get in the email every morning about the fact that exactly what you're saying, Microsoft with Bing has a head start of many hundreds of millions of people making comments. utilizing that they've got data now that they can validate. But what I find interesting, let's go backwards in time and look at change in technology and the pace that it took place, the curve that we were on. And let's look at the Walkman. The Sony Walkman came out in the early 80s. And it took... a year or two for anybody to create the same product, at which point they went from tape to disk. And then everybody's scrambling to catch up again. But there was a two to three year interim increment there. And this whole thing went out for about 10 years, maybe a little longer. And Apple with the iPhone replaced the whole thing altogether. It's exempt. It's like a dinosaur.

And then every other technological change that we've seen has gotten shorter and shorter and shorter. This one is from 2015 when the boys got together and decided they wanted to do this to the point that Musk became the point chair and got eight or ten guys to commit to a billion dollars, including Peter Thiel and Elon Musk, to the point that then Microsoft identified this as something that... As you say, that would be a very useful tool for their cloud computing business. And there's really only three of those people, maybe four. And look how fast this has been. And then now juxtapose that with dealer business systems. You know, so I and I didn't mean to provoke a chuckle, but I'm glad I did. We go from the sublime to the ridiculous. Exactly. Change of dealer business systems. I don't care. I don't care who it is. Infor, it's apt on Microsoft. SAP, Oracle, CDK, all of them, none of them are doing anything. That's got to be hurtful for business.

I don't mean their customer business.

One of the things, and I believe you're absolutely right, and Alex Hussler, you and I have talked about this, his famous quote from my perspective, famous, all we've done is go from paper to glass. We haven't fundamentally altered the experience. So today with ChatGPT on Bing, I can go in and I'm looking for a part number. And it can get me to whomever is out there based on a couple of questions. I want the highest quality. I want the one with the least warranty failures. I want the best value, not necessarily the best price. And it'll give it back to me. And it'll go straight to the manufacturer, the person who made it. It'll bypass distribution altogether. The distribution channel, Peter Drucker's famous for saying this. You need three things in business in North America. One is a market. One is a product and one is a distribution channel.

And then more famously, he says the one that we spend the least amount of time on is the distribution channel. And that's where all the money is made or lost. In Charles Handy's case in England, the guy that started the one in School of Economics, he calls it a shamrock. And I like this one much better because I think it makes us more responsive. You need a core of people that are executives that are working on strategy and implementation. You need a bunch of customer service people that relate to customers, satisfy needs, wants, expectations. In other words, do everything that the business needs to do to make it successful and continuing. And then you need a group of outsiders, subcontractors, subject matter experts, consultants, whatever, to make sure you're continually staying ahead of the curve so you don't get stuck like we are now.

No, no, that's, I like the rants. There's a passion involved in that. There's a desire to satisfy needs and wants of customers more than most. We've seemed to have gotten less lost. And I'll go back to Jack Welch. One of the quotes that I like of his, when the world around you is changing faster than you are, the end is near. And what I don't believe that the distribution channel, and it's not just... construction or mining or agriculture. It's any distribution model, whether it's appliances, lawnmowers, anything. We have got lost. The world around us has changed a heck of a lot faster than we have. The distribution channel is where they make money or not. And I speak, as you do, to a lot of owners. And they all tell me the same thing. The last three years, their revenue is greater than it's ever been. Their profit's greater than it's ever been. It's phenomenal. And I say, okay, what do you attribute that to?

Well, I think we've got a good working business model. They said, okay, what do you think is the most important metric that you've got? And they bring back revenue growth. No, no, no. That's a result. What's the most important metric that causes that? And then to a man, they say sales per employee. which gives me an opening, right? And don't do that to me. I said, okay, from 1980 to 2020, that's 40 years. How did your business grow? Oh, it was faster than inflation. It was good. It was 5%,6%. I said, have you any idea why that happened? I said, well, I think we got better at what we did. He said, really? I said, how do you know that? Well, our sales for employees went up. Ah. So now I go back to the metric. 1980 parts was $600,000 per person per year in parts sales. That's everybody in the parts department, not the product support salesman and not the management.

In 2020, most of the guys are dragging about a million and a quarter, a million and a half, a million and three quarters. And they're making a heck of a lot more money. I said, does that hurt you anywhere? He said, no, I don't think so. You know, our sales are up, our profits are up, our customers are still here. I said, that's cool. So since 1980 to 2020, what's happened in the industry? Well, we've consolidated. I said, yeah, that's right. A lot fewer dealers, right? Yeah. Oh, absolutely. So there's fewer people competing for the revenue, correct? Yes. So you just got a bigger share of a smaller market. That's all, right? Oh, I guess so. So let's look at Canada for a second. When I was starting, there were 10 dealers in Canada. Today, there's two for Caterpillar. There's one John Deere dealer in Canada. There's one commensure dealer in Canada. There's two Volvo dealers, one and a bit in Canada. And the same thing's true all the way down.

In the States, it's not as dramatic, but bigger, same number thing. So that volume, that revenue increase is not because they got any better. It's just there were fewer people out there to play with it. But the real teller is, I was doing a... Caterpillar dealer meeting in the Southeast a number of years ago, and I asked the man responsible for Caterpillar's activities, commercial division, United States, what's your market share? And he told me, which surprised the hell out of me, for parts,38.1%. It's infelibly embedded in my mind because in the early days when I arrived, if we weren't over 80%, there was something seriously wrong. The market share for parts has dropped by half, for service has dropped by half. The equipment sales market share is relatively static,20% to 30% for the good guys, maybe occasionally over 30%, and a bunch of people that are 15% and down. The number of dealers pursuing the business is down.

So big surprise, revenue's up, big surprise, profit's up, but huge surprise because nobody measures that your market share's done in half. And nobody knows this is a problem. Nobody thinks this is a problem. Meanwhile, all of the systems guys I talked to, like you, have found they want a better interface. They want a better API. They want to tag on, they want to bolt on Salesforce or some CRM. They want to bolt on some analytics package or some other. They don't want to modify their core business of parts processing, labor processing, sales processing, rental processing, bill payments, invoicing. It's really remarkable. And everybody's flat down and happy it's going to continue. Except guys like Alex Kraft, guys like Max Kramer, guys like Dale Hanna, guys like Steele Clegg, all of whom are in the next level already. Alex has got an Uber for mechanics. It's wonderful. A customer has a repair or maintenance job. He puts it up on the internet.

And here come these guys that are part of Heave. We can do that. We can be there such and such a time. Here's our price. Bang. Next. And there's successes all over the place. Or a customer is looking to rent or buy a machine, new or used. Boom. Sends it out. And a whole bunch of salesmen respond. Or Metz is putting together a dealer business system for small dealers, Kubotos, and bigger than that, mind you. It's with the latest and greatest software language, which is totally different today. It's a completely different structure. And it's intuitive. And Dale communicates to the customer from the machine, all the sensors. So now we've got software that can do diagnostics on every brand available to everybody. We've got electric catalogs for every machine, for every brand that I can access. So I can look for a part. I can look for the repair instructions. I don't even need to be a dealer. Why should I have to have a dealer anymore?

It's an interesting question.

I don't have the hard.

A week or two ago, I was having a conversation with somebody and what it came down to was if you're not It's a Mike Rowe type of issue. If you're not doing things with your hands, if you're not building things, your job's at risk. And for 50 years, the last 50 years, we've been on this pick that everybody has to have a university education. That's how you're going to make the most amount of money. And they compared it against high school leaving. They didn't compare it against blue-collar jobs or working jobs. And, of course, they're true until recently, when in 2015, the U.S. government decided in their wisdom that they were going to guarantee student loans. And what happened is the universities changed their tuition by up to 5,000 percent over that period of time, from whatever the year was to now. And it's, let's say,20 years. It's obscene. I was teasing my grandson, who's going to university next year.

with the fact that my first year was $435 tuition for the year, $200 for books, and I bought used books and sold them back at the end of the year. And he's looking at 50 grand, the cheapest university you can go to per year, not counting books. And says, well, Papi, I can't afford this. I can't do this. So we're changing the whole dynamic of the world, of the people. And then... You mentioned earlier the leadership. Where are those disruptors, etc.? And you and I have talked about this. Jack Hawkins down at Troy University, who's the president of the university, says the kids that are coming out of high school need remediation now because they don't have analytical skills. They don't have critical thinking skills. They don't have good communication skills. And there's a serious lack of leadership skills. And I take that all back to society's participation trophies. Everybody's rewarded for participating.

There's nobody rewarded for excellence anymore. And then you look at the Academy Awards or BAFTA or Screen Actors Guild, these things that have just been happening recently. That's been taken over. We had a little discussion last night at the dinner table with my daughter. We're talking about racism. I said, well, tell me what racism is. And because in Hawaii, we don't have, I mean, you don't notice anything. We got all manner of races here and we all seem to get along quite well. And so she started with a definition and in there that was the word power. I said, wait a second, wait a second. Words matter. Where did power come from? Well, that's what it's defined as today. I said, that's right. They're moving it away from what the racial discrimination circumstance was to an economic discrimination, which allows them to play all kinds of games. So here we come with a business system and every single one of those suppliers.

is touting the latest and greatest. We're on the cloud. We're cheaper. Our transaction price is better. We've got access to more data. We've got these interfaces, but we haven't altered anything emotionally. So your grocery store. Perfect.

No, no. Oh, Ron, I'm. Stay there. Your grocery store, there was a film that I used called Johnny the Bagger, and it was a man who had Down syndrome who was a bagger at a grocery store. And he and his father were very close. And Johnny decided that he was going to write an expression on a piece of paper and put it in every bag that he picked. Have a nice day or a quote from somebody or whatever. So his father helped him. He did it on a computer. He printed a whole bunch of these things, cut them up with scissors, went to work, and he put them in the bags. And the grocery store manager one day noticed this humongously long line behind Johnny's cash. He wasn't the cash register guy. He was the bagger. And he went up to the employees and said, okay, get on the cash. Get on the cash. We've got to get rid of this line. Then he went back to the customers. Said, no, I'm staying here.

I'm staying in line for Johnny because I want to know what his quote is today. And there's examples like that everywhere. St. Andrews by the Sea,30 years ago, there was an AED, CAD convention that I spoke at, and there was a grocery store there. Same thing. Best Fruit, Canada. Wintertime, fresh vegetables and fruits. Forget it. I'm in Hawaii, baby. I can go across the street and pick an apple, a lemon, a lime, a grapefruit, a pineapple. I mean, what is this? It's all fresh. No acid. It's wonderful. The equipment dealer just gives parts, just sells machines, just performs repair and maintenance. And they're happy doing what they're doing, and they haven't changed a damn thing. And the end is near.

Yeah. Fundamentally, everything in life is coming down to the interaction between two people. And that interaction is going to determine whether there's another event. And the first measure of that, at least from surveys, is... Did my expectations get met by that interaction with that other person? If they did, I'll keep going. If they didn't, I'm done. I never tell the person that I'm done. I just go away. Nobody knows I went away. But it all comes down to, do you care about me? What are you doing to me? You don't have milk. Your egg prices are tripled. What about me? I went in. I love Hawaiian eggs because they're different. They're all wild here. I can go to the farmer, the rancher, and buy them directly from him. And for a while, there was a shortage because you couldn't get American mainland eggs here. So there was a run on everything. And then mainland, of course, filled up faster than the local ranches did. So there's only mainland eggs.

I go to my favorite grocery store, which I can walk to, like you. Where'd the eggs go? Well, we can't get them anymore. They're all sold out. My goodness, what are you going to do? He said, well, we're just getting more mainland eggs in here. I said, you know, we don't buy the mainland eggs. He said, yeah, I can tell. They're sitting on my shelf. So why do you keep buying them? Well, some people want them. Okay. And that little discussion is going on all over the place. He didn't show anything about caring. He just relayed information to me. He didn't understand that maybe there was an alternative. Maybe I'm an all-whites guy, and there's a different way to do it. Or maybe, you know, have you tried pancakes for a while? Or what about oatmeal? Well, I need milk. That's true. That's okay. What kind of milk? Oh, do you want coconut milk? Do you want almond milk? Do you want lactose? Do you want nonfat? I mean, what's going on here? So I want milk.

Rather than how do I want milk, they changed a bunch of different milks. Water. flavored water, Coca-Cola. It used to be Coke Classic. Remember what happened when they started broadening the base? And what's that about? It's not about the consumer. It's about market share. Pepsi, the challenge. Coke, the real thing. Kleenex, Kodak, Polaroid. All of these different things, and they're gone. Kodak Film, who makes the most film today? Fuji. What happened to Xerox and copiers? Fujitsu. What about printers? I mean, it's all over. 1980, Toyota comes. Ten years until there's another. Here comes Korea. Takes two or three years. Remember the latter from Russia? All of these, we've had changes. We've had disruptors. We've had people nibbling at the outside. We haven't had any of that in the caring, relationship, emotional intelligence side of systems. That's a different world, John, just like you're pointing out.

lost girlfriends.

What it's doing, John, is it's replacing those things that we don't do with our hands directly ourselves. And then we don't build directly ourselves. It's not yet at the place that it's going to be on the stove making that omelet. It's not at the place that I've got a leak in a pipe and I've got a wrench in my hand underneath the sink. It's not going to replace me changing filters or fluids on my car. It could. It's just not there yet. BMW augmented reality from the 1990s, where the guy goes up, puts on a pair of glasses and looks underneath the hood of a car and it tells him what needs to be done. Orally, with a picture, shows the tools, the torques, everything. I mean, we've got the technology. We've just got to get people catching up to it. And with ChatGPT, and I agree with you, that's why Bing is where I'm going now, because it's integrated within and gives me more things.

And I will give you another reason that Microsoft was invested in it, not just for the cloud, but it's changed the search engine leader of the market, Google. It's challenging them for the first time. And relative to visionaries, they aren't there. I know one guy who's a real disturber. I call them radical reformers. Steve Day, he retired. But Steve was not afraid to try new things. And he was constantly putting things up on the wall to test them out and see if it worked. But I can't think of very many others like him out there working at dealers. That's the problem.

One of the joys of my life recently has been, you mentioned Steve Day. We have 48 of you, including you, that allows me to stay up to speed because you contribute blogs, you contribute podcasts, Zoom meetings like this. I'm constantly pushed by people. We talk about systems. Albright. He was the guy responsible for systems worldwide for Caterpillar for implementation across the dealer world. You think he knows a little bit about systems? What's he doing today? He has his own wife with his wife, his own business with his wife. He's finishing off his PhD. He teaches at Bradley University, finance. Wait a second. These are really special people. And I just use him as one illustration. I'm not going to use you as a parallel, John. That's for sure. But we have. We have all kinds of folks out there that are really smart. They just don't work at the dealerships anymore.

And that's the Charles Handy example that I need to be pulling from outside, those subject matter experts. I need somebody from Google coming into my dealership telling me how they invest their money, how they plan their budget for next year. 70% for improving the operations as they exist today. 20% for a radical transformation. 10% for a moonshot. We don't know if anything's going to come out of that, but if we spend a billion dollars a year,100 million of that is going to be going on just wild whatever you want. Who does that at a dealership anymore? Nobody.

You gave me a great idea. I'm going to try and set up a Zoom meeting for you and I with three or four dealer business people. See if they're prepared to walk into that arena and have a chat with us. Wouldn't that be?

Yeah, exactly right. So I should let you get on with your day. I should thank you. We probably beat this thing up and the dealers up pretty hard today, more than normal. So do you want to close this thing off with anything logical so you can get on with the rest of the beautiful day in Florida?

Yeah, I agree with that 100%. John, as usual, thank you very much for your thinking, for your challenging the status quo and everything that that entails. And I'd like to thank everybody who is still with us on this discussion. It's a very important one in my mind. So thank you for being here. And I look forward to another candid conversation with you, John, in the near future and with everybody listening. 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.