Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
Navigating Change: Strategies and Challenges for Growth in the Construction Equipment Dealership Industry
What happens when traditional risk-taking in the construction equipment dealership industry meets a new generation of risk-averse leaders? Join us for an enlightening conversation with expert Andy Fanter as we explore this intriguing shift. As Andy dives into the intricacies of inventory planning and the struggles that giants like Komatsu, Deere, and Cat face, we uncover the delicate balance between proactive strategy and the evolving demands of the market. Through comparisons with the retail world, such as Starbucks, Andy reveals the challenges dealers face in maintaining customer loyalty and the arduous task of winning back those who have strayed.
As the industry witnesses a steady decline in market share, Andy sheds light on the pressing need to refocus efforts from top-tier clients to a wider customer base. With financial pressures mounting from rising interest rates and industry consolidation, hear how only the most agile players are likely to survive. We discuss the invaluable role of data analytics in decision-making and the transformative potential it holds for dealerships. Listen to insights from Caterpillar executives about leveraging parts, service, and rentals as key revenue streams, and discover why face-to-face interactions and customer service are irreplaceable, even amidst technological advancements.
Innovation is the name of the game as we turn our attention to sales strategy and operational efficiency. Find out why adding more sales representatives and staff in parts departments could be the key to thriving in expanding urban markets. We address the reluctance to embrace change and the risks associated with it, while also exploring how modern educational approaches and technological integration are vital for keeping up with industry demands. From energy trends to demographic shifts, our discussion is rich with knowledge and guidance for anyone aiming to succeed in these challenging times.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. We're going to have a fun discussion this morning. We have Andy Fanter with us. Andy, as a man of many talents, he's posted a couple of blogs recently that got a lot of attention. So good day there, mr Fanter. How are you? I'm doing well, ron. It's great to see you. You too, it's funny. Leading up to this, we were talking about being in the sun and generation changes and societal changes and etc. And, andy, you were pointing out that my generation seemed to be much more risk takers. Is that because today the people aren't as much in the way of risk takers?
Speaker 2:You and my father and other people sent Generation X off to universities to learn. What did we learn in universities? We learned quite a bit, but we learned how to minimize risk and not take as much risk. And there's good and bad in that. And you and I have talked about the consolidation of dealers Komatsu, deere, cat particularly over the last 15 years.
Speaker 2:Billion-dollar dealers now are nothing. I mean the footprint of unit industry possibilities. When you look at RDO or Lender give me as high as 20% of total US units that they have an impact on. So younger managers have come in, the dealerships have gotten bigger, the fall planning meetings come up and I think the consensus becomes well, wow, we're a billion and a half dollars this year. The goal next year is going to be a billion and a half dollars again. Well, as I've told you many times, 85% of the time the US economy is going up and the construction industry usually follows it. So why are we planning for flat?
Speaker 2:Because by about April or May you have four division heads that aren't happy. New machine management's not happy because you didn't order more new machines. So those salesmen are out there scrambling. We try to make trades with the neighboring dealers that aren't doing as well as we are. That takes time from top management to make and it's just like baseball or football. Anytime you make a trade and you really need something, you're probably going to give up more because you have a need. And the other guy's like, yeah, I'll give you this, but we're going to take more than what we're giving you. So now we've got top management busy, new management or new machine side management's not happy. Okay, let's go buy some used equipment and repair it and put it in a rental fleet. And by the way, used division, there's some machines that you're going to sell that now we want to put in a rental fleet. Now the used equipment manager is not as happy because he had a goal to meet by selling some of that equipment to customers in the territory to generate more product support work. Anytime we buy used requires product support works. Now we've got product support division working on used equipment to put in the rental fleet. Meanwhile we tell the rental fleet, well, we've got some machines in there that, yeah, maybe a year and three quarters, two years, we're going to take them out a little bit early because we need to sell those machines Now rental is not happening.
Speaker 2:So by selling season. You've got four divisions unhappy with their prospects because you didn't take any time in the fall to figure out how much risk you wanted to take. And what I mean by risk is, and like I said in my article, cat deer, komatsu dealer, bobcat dealer it doesn't matter what 10 products in your territory do really well, what have you got the markets you're in, what do customers come to see you for? At least sit there and say we're going to take these 10 products, order 10% more from the manufacturer, roll the dice and see what we can get. And that's what I said in the article when the salesman can go out and, hey, we're selling our best products and the customers are happy, you have time with the customer to talk about some of those other products that we know the customer needs that oftentimes we don't have time to talk about.
Speaker 2:Let's pick out an easy one for the big equipment dealers Articulated trucks. It's a necessary evil, they're needed. They break down often as they age, but it's a big item that we need to get in the customer's hands. So if you can tell him hey, we've got the excavators, you like the dozers, you like a couple of loaders that you like, he's satisfied and the customer asks well, what more can you do for us in terms of articulated trucks, because you aren't arguing about the other product lines that you can't get on? Time opens the door to opportunity, but when you start off the year and you know you're going to be behind now you're going into that customer and saying, yeah, we know you want X, y and Z and that's going to be delayed till about July Not what the customer wants to hear.
Speaker 2:And you have a salesman that's covering, instead of selling, more product. And that's what I was trying to explain with the Starbucks model. We've all seen it. Starbucks is offering more products, including almost breakfast, lunch and dinner. The lines are long, the tables are full. People get frustrated. There's lots of competition to go out and get a cup of coffee in the Danish, and so people go do that. And I think Alex Kraft brought up an interesting point. Well, you know, on some of the more technical products, you just can't go somewhere else. That's very true. You can't go everywhere to get a scraper, but for bottom of the you know regular products, 20-ton through 40-ton, excavators, dozers. There are certain products out there. If you don't have it, a competitor will and the hardest customer to get back. In my opinion, ron is the one you lost.
Speaker 1:You know that was the other blog post that you put out. This is a very personal business. I couldn't agree with you more the customer you've lost is the hardest to get back. But we don't even try to get them back. And the thing that distresses me is customer retention has gone down like a rock and that precipitous fall has been matched in market share drop.
Speaker 1:I was talking to the Caterpillar dealers in the Southeast maybe 10, 15 years ago and the head of the United States, uscd, us Commercial Division for Cap was in the room and you know me, I wander around with a mic and a lavalier, around with a mic and a lavalier and we were talking about market share and how data analytics has become a subject that hardly anybody pays attention to anymore. And when I started in 1969, the market share and it was measured by Caterpillar every five years up until 1965 with face-to-face interviews with every customer worldwide In 65, they decided to do it 20% a year. So it was slightly different. But the market share in the early 70s in parts was over 80%, 82, 83 in that range. So I go up to this gentleman and I put the microphone in his face and I asked him. I said, if you don't mind, could you share with us what the market share is for the parts aspect, parts department at a Caterpillar dealer? And he said sure, it's 38.3%. And I was a little surprised that he answered so honestly and I thanked him for that. And then I looked at the room. There was a couple hundred people in there and said, okay, congratulations. Just to use rough numbers, in 1970, we had 40% 80% market share and let's put this at 2010, we've got 40% market share.
Speaker 1:At the rate we're going, another 40 years will be at 20% market share and you're still okay because you don't know how to measure it and that gives you a pass on performance. Your performance is terrible. Ass on performance. Your performance is terrible. You don't know who to cover. Like you said, we're going to take our top 10 machines. That's what we're going to pay attention to. We're going to take our top 5% of the customers, top 100 customers, and we're really going to pay attention to them.
Speaker 1:The business is not with those guys, the business is with the other 90%. Correct, and we never, never, go and talk to the guy who has nothing but competitive equipment. We've just got this model and we're continuing to do what we've always done. And just off of that and land we've found, like you say, their billion dollars is pretty common anymore because there is such a financial need.
Speaker 1:This is a balance sheet business now, and if you can't borrow money you're in trouble. And to add to your woes in the start here, andy, interest rates have doubled, so now a lot of folks that have large rental fleets maybe too much used equipment, maybe too much new equipment are in the situation that they have to sell something to pay for the interest cost not the interest rate, but how much money it is. And guess what? We're seeing dealers fall by the wayside because they can't afford to make those payments and somebody else gobbles them up and the consolidation continues and the Starbucks model looks pretty damn good. Because we're comfortable, we're status quo protectors, we're risk averse and the business is going to hell.
Speaker 2:We're on. 15 years ago, dealers, it didn't matter if you were a deer, a klotzer or a cat. You ordered machines and you wanted market share because nobody wanted to make the dreaded trip to Illinois at that time for all three to talk about their market share walls. You had a goal. Now you're a billion and a half dollars. Oh, cats moved to Dallas. So, yeah, once in a while people go out there and take a beating on their market share. But it's not hanging over your head anymore. If you don't perform for five years in a row, the neighbors are going to buy you. All the buying's happened. Now I mean you want to buy the neighbor. You're going to have to put out some huge capital to buy a billion dollar neighbor. Now I mean it happens. I mean there's some big dealers that buy big dealers out there. Like Cashman got bought up by Empire. That wasn't a small transaction, but the business has got big enough.
Speaker 2:Now, like you said, it's controlling the dealership that people are not in control anymore. They're looking at a status quo, letting the interest rate and the rental fleet drive. What happens at the dealership and what I've learned from you over the years and everybody else, is we are going to give a product to customer X and it is going to break Guaranteed. It doesn't matter how well you take care of it. It will need parts and service. That's where the customer satisfaction and the profitability come in for the dealer. How fast can you get that repair done for the customer? Do you have a rental fleet option for that customer Because he's on a timeline on his job?
Speaker 2:It doesn't matter if you're a housing contractor or a highlight contractor, everybody wants to get their job done and that takes more people and more personal contacts, parts of service reps in the field making continual visits pointing out hey, if you don't get this done, probably in the next couple of months, it's like going to the dentist, you're going to have issues and that's like. Just like you said, it takes more in-person business now really to get the job done, even as the world tries to tell us it can be done more over the computer. Sure, you can monitor a lot of the machine's engine performance on the computer, but there's a lot of things you have to visually see Tracks, for instance, performance on a computer. But there's a lot of things you have to visually see Tracks for instance.
Speaker 1:But you know, we've got. We were told this was coming. In the 1990s, don Fights, when he went around on his fair work tour to the Caterpillar dealers he was the CEO of Caterpillar he said that the dealers were not going to make any money from equipment anymore, nakedly, you're going to make money from parts, from service, from rental. And he went further. He said in 2014, that's 10 years ago, but he didn't say it.
Speaker 1:Doug Oberheim, at that time, the chairman, the dealers who do not adapt to this new reality and perform will receive cancellation notices Quote that will be the last resort, the last outcome and certainly not desirable, but he's made that comment and it's out there. And then another little deal a guy by the name of Stu Levenick, who was the Caterpillar Group president for dealer relations, said quote "'The average dealer or lower performing dealer? He only knows about 40% of his opportunities and they don't do anything about it. And data analytics today we have data coming out the wazoo. We can do all kinds of things, but nobody does any. Do you know of anybody who's got a chief information officer at a Caterpillar dealer or a Komatsu dealer, or a Deere dealer or a Volvo dealer, or any of them?
Speaker 2:There's a couple floating around at some of the bigger cat dealers, but overall we can call it a no. I mean the percentage is so low.
Speaker 1:So we get to the situation where we've got. Take some of the larger dealers, and I don't care the brand. Take some of the larger dealers and I don't care the brand. Caterpillar, komatsu, john Deere probably have between 75% and 80% market share, the three of them combined. In any given geography and if you look at the territories across the United States, the people I've worked with for the last 50 years, there's only two that are prominent in any territory. It's either cat and deer, or it's cat and Komatsu, or it's deer and Komatsu. But two out of the three do really well and the third one kind of is figuring out what to do with it. And then you look inside and this is true generally for America not just America, but the quote, the developed world.
Speaker 1:We've put profits over people for about 20 years now and just look at a basic like GDP. You know we're driving interest rates on GDP policy, on unemployment policy, et cetera, and GDP is a function of goods and service produces compared to the number of people working. So that number is going to go up. If I have fewer people working and it isn't because we've increased productivity in the last 20 years. We did in the previous 20, from 40 years ago to 20 years ago, and that justified the reduction of staff. Go to 20 years ago, and that justified the reduction of staff. But over the last 20 years we haven't improved productivity anywhere. We've had technology advantages. We've had production advantages, machine design and operational advantages. We've got sensors everywhere. Now Hardly anybody's doing any of this stuff.
Speaker 1:Nobody's taking advantage of it. We're in a world where subscription services are the future, if they aren't the past, where you don't buy a machine anymore. A dealer doesn't sell a machine anymore. He gives the guy a machine and it's going to be for the next three years, five years or whatever. And I'm going to give you a bill every month for the hours of consumption you had, and when the life cycle statistics get to the point that your consumption per operating hour hits above the graph, I'm going to give you a new machine, take that one back and put it in the used market. Who's doing that today? We're doing it in cars. We're doing it in other capital goods areas.
Speaker 1:What the heck's the matter with us? We haven't looked at there's nobody out there that's doing anything radical. We have. I counted them this morning we have 68 contributors, like you do, for our blogs and podcasts, et cetera. I call them thought leaders, experienced executives and revolutionary reformers. There are not very many revolutionary reformers today. No, people don't want to take a risk. You know I'm asking this guy you know it's a famous line in the classroom for me what would you do if you weren't afraid you see something that's wrong? Do you speak up? No, because you don't want to get whacked across the side of your head. I was fired five times at the Caterpillar I first started with and I love the guy. If he called me today, if he was still alive and said he was in trouble, I'd be where are you? I'm on my way. I don't see many people like that anymore. Of course that's rare too. It's a tough time, but what a huge, freaking opportunity we have here, ron.
Speaker 2:I won't mention the dealer by name, but I told you the story. I was having an argument with a client that's the same age as I am that was a friend over travel expenses. People have been scratching their heads on why should they charge for travel expenses, and you know people have been scratching their heads on why they want to, why should they charge for travel expenses, thinking I want to make more money off of them. And that really wasn't the case. It was the case of folks there's about 20 to 25 of you and over the last five to eight years you've all consolidated down into two weeks in November. What do you want to see me? Well, I can't be 25 places in 10 days of business, and not only that, they can't plan that well for all of that to happen. So you know I took the risk. I dropped by. I had lunch with my friend and it was like nothing had ever happened.
Speaker 2:Time goes by. We book the meeting date and when does the meeting date fall? Right there in the middle of November. It's like I told you, it's a three-person meeting, but they had all the other meetings lined out that they had to do in the fall. We're doing a lot of meetings in the fall in this industry now and there's some interesting things happening, but and I've got to remind you of this, ron and Dad's reminding me too we are still a slow to evolve industry.
Speaker 1:Tell me about it.
Speaker 2:We're still just digging holes and you know I've been on the dealers here in the last two or three years. It's like folks. You need to get more reps out in the field. The cities are bigger, we're back to pre-COVID traffic. We've got lots of road construction out there now and our salesmen can fall into a road construction traffic's halted just like any other human being and it's hard to go out there and get more people in the field because that means somebody's territory gets squeezed down. But I sat in a meeting earlier this year and watched it happen. Dealers got a goal of they want to be in X number of deals in the territory. They want to be in on it. They'll have to get it and that number's falling. And I told the sales manager you don't have enough people in the field, I know. But he said, andy, you know how it is If you squeeze down the salesman's territory. They get unhappy. So change is hard when you want to add that personal contact in the field to sell parts or sell machines.
Speaker 1:It's really interesting. You know a guy who's a really good friend and worked through the manufacturer at an executive level, went to a dealership and worked at an executive level. He'd worked around me for a long time and heard a lot of my quote, quote theory and he started subscribing to one of them, which was hire somebody in the parts department and in the next three to six months your sales are going to go up. And what would you do if that happened? And I suggested hire another person. So he started executing that and he said it's remarkable, I've done this 10 times now and each time the sales are continuing to go up. I said well, what are you going to do? He says I'm going to keep doing it until the sales stop going up. I said congratulations, you're thinking now and again it's market touches. We've got really strong computing power.
Speaker 1:I started in the 60s at university taking computer science as a minor. That was unit record equipment where I had to learn machine language to program a machine language. To program a machine, you had to define every single position on 132 position print characters to get a report out. Today I can talk to the computer and have it do something for me Artificial intelligence, machine learning, so we get all of that stuff and I can go back 20 years longer with many but say 20 years, let's change that, we'll go to 2000. I can take every transaction of every customer by month, by sale type, new used parts, service, finance, and I can give you graphs on what the hell is going on. And the revenue numbers are going up because pricing has gone up. And I used to bet back in the 70s my favorite manufacturer increased the consumer list price less than he increased the dealer net price and in those days computer systems just measured price changes on the basis of your inventory value. So your inventory is going up 3% because of the price change. Congratulations.
Speaker 1:Nobody looked at the margin change, except for me. Wow. I looked at a lot of other things and the margin dropped by three points over five years. I said you guys are sneaky, you're devious and you're crooks. We used to call them the printing press for money. It was, it was so easy.
Speaker 1:But we've got ourselves in a situation where nobody's doing those analytics anymore and so I want to see all of that. I want to. You know, steve Clegg, who's a contributor with us as well, has a company called Zimtoro and he does data analytics on many different industries. At&t is one of his clients. As an example Very sharp guy, graduate of the retention of customers and the distance the customer's job site is from the dealer location. Intuitively we know that's true, but he's got statistics that hardcore prove it.
Speaker 1:So we start talking about distribution channels and how we should do it. And let's talk about drop boxes. Why don't I have a drop box right at the customer's site and I'll put inventory in there. And the dealers look at me like I'm growing a fourth horn on my head. You want to put inventory out in the field on consignment? Well, it's not consignment, it's theirs. I'll tell them what. I'll put the inventory out there, but you pay the interest, so it's not costing me anything. Go away, and I've got people that do that and you should see the results. It's stunning. It's not mysterious, andy. We know what we need to do, but the people inside the dealership are so risk-averse they're not going anywhere. Territorial competition we can talk about any single aspect of the market and market coverage, and the dealers are not doing anywhere near what they need to do.
Speaker 2:But it takes time to build those relationships. I mean, I've known older salesmen that can sit there and sell a machine by texting on the phone in front of the football game on Sundays. How did you get there, though? You had to meet that customer the first time. Lots of in-person contacts, lots of lunches. They became dependent on you and know hey, whenever they need me, I can text and I can get an answer. Yes, we have that machine. I'm not to get it from another store, but I can have it to you by Wednesday, all by text. But it takes time to develop that relationship.
Speaker 1:You're absolutely true, absolutely right, and you know I say this to every executive. I talk about the top five ten jobs in the company. I want you to have breakfast Breakfast Not lunch or dinner Breakfast With a customer three days a week. I just want you to go have a chat. So I haven't got time for that. I said between six and eight o'clock in the morning. Tell me what you're doing.
Speaker 1:I used to do that in Alberta when I was working with a competitor. I was doing a consulting job with a guy who was the largest broker of caterpillar equipment in the world. His name was Ronnie Miller and all he wanted to do was become a dealer and Cat wouldn't give him a territory in Alberta, which is what he wanted. And Sasha Angus, who'd been there since the beginning of time, was the dealer at the time. So we'd go out to customers and give them a computer terminal. And give them a computer terminal. Any customer that had a computer terminal connected to the Caterpillar dealer. We put a terminal in the same room right beside it the Caterpillar terminal.
Speaker 1:You could never get a price. You could place an order. You could never get availability. You could place an order. We put on the screen price and availability before anything, you could also place an order with us. And guess what happened?
Speaker 1:I met with the vice president of product support in a bathroom in a bar. He wasn't allowed to be seen with me for fear of being fired. He said you're screwing me up. I said why. He said well, you put a computer in every one of our large customers. I said yes, said why. He said well, you put a computer in every one of our large customers. I said yes, doesn't that make sense? He said yeah, but Ron, you're showing them your price, we don't show them our price. I said I know that because my price is lower than your price. And he said well, that's forcing us to bring our price down. And I said well, I'm going to go down again and if you want to keep playing this game, I buy it at a lower price than you do. How do you think this is going to work out for you? He said it's not fair. Fair as in what? It's an interesting world.
Speaker 1:So here's three, two actually major dealership profit drivers. One is the gross margin percentage of sales and the other is the operating excess for sales. Very simple, very obvious, intuitively, it's factually true. And then from there, earning, before interest and taxes, debt to EBIT and that kind of stuff. It's all financial stuff. It's nothing to do with customer retention, it's nothing to do with relationships, it's all to do with financial. So guess what? We've become a financial industry. So guess what We've become a financial industry and what you do with the dealers.
Speaker 1:November, I mean, that's a fool's game. What I do is the last 12 months, and it's every bloody month, it's not once a year. It's too late, it's all gone. And why are we talking about the fall so you can place an order for the manufacturer? That's what we've always done. Do it in March, do it in July? Oh, can't do that, we're on vacation. This is a really. And it's not just our world, andy, this is a lot of worlds. Look at what's happening in automotive, where Ford makes a statement last year that the electric vehicle contract was going to change. There's a new contract and the dealers were not allowed to sell from inventory. The inventory was going to be shipped from the factory every single case and the factory was going to have a model online that would compete directly with the dealers. What do you think that's saying to the distribution channel?
Speaker 2:Right, and there were a lot of dealers that made the investment to do EV and now that's all changed in the last 12 months to do EV, and now that's all changed in the last 12 months.
Speaker 1:Well, and you know, it's never been a good answer. It's, you know, lithium batteries. Lithium as a material is harder to get rid of than uranium. So what the hell are we doing, adding more of these things all over the place? There's, you know, in the Palm Springs area, where I used to live. There's a thing on the east end of that valley called the Salton Sea, and it's a high source for lithium, right? So, okay, what are we going to do? We're going.
Speaker 1:This is an area that was underwater for millennia. You can still find shells on the valley floor, so there was an earthquake a couple years ago. Now, particulate matter in the air is stuff that was underground for several thousands of years and it's not a healthy environment anymore. We've got so many things that are around that get us into different places. Your business should be offering a service every month based on data you get from the dealers that's the last 12 to 24 months and that can help them. It can act on something that's within 30 days, but if you're meeting in November and we're looking at the last 12 months, shit, that stuff's a year old.
Speaker 2:Oh, I've got several clients that are three to four times a year talking to me. But everybody wants that. Last two weeks summary and that's where I made the change during COVID came out of COVID and I said fine people, I'm willing to travel. I turned out to start picking up the travel costs and it was more of a way to weed out who really wants me there and who wants to communicate on Microsoft or Zoom or default. I mean, most of my clients are 15 to 30 years old. They know what I'm going to say. Lots of them don't have a lot of time. I've got five or six clients out there that I like to see. That'll give me three hours of time. That's why I took the gamble on getting the lost client back, because that was one of those clients. I get feedback and I'll get three to four hours of time there when I see him.
Speaker 1:So you know it's it's. It's interesting. As you know, we're in the education business now Cause I didn't want to.
Speaker 2:You've always been in the education business, ron. You just made it. You just made it better now.
Speaker 1:Yeah, that's true. I started teaching at university a long time ago, but a lot of people I did all the parts and service training, management, training for the associated equipment distributors between 1994 and 2015. And in 93, everybody stopped doing training Manufacturers, associations. They stopped because it was too expensive and the market was a little goosey in those days and they said training's too expensive. So Marlene, my wife and I sat down and I said you know, we can do this, it's just we're going to do it in a different way. So I sat in front of a computer with a voice recognition product called ViaVoice from IBM and I talked to my computer all summer. I talked for an hour, I'd go away for two hours and let the computer catch up with me and then I'd edit it and I'd keep on going. We created six books in that period, three for parts, three for service, and it was three-day classes. And then I bring in consulting clients to Palm Springs. Everybody wanted to come in there. They were grateful enough to come in and critique the program and it led us to two-day classes.
Speaker 1:Somebody in front of a classroom, a teacher I call that the sage on the stage. Teachers don't like that comment, but that's what it is. And you know I did that a long time and I wandered around and people still talk about it. I would have round tables, six to eight people at a table, four to six tables in a room, 24 to 32 students at a time. And I'd start with three questions.
Speaker 1:Can anybody here give me a definition of ignorance? And at that time they didn't know me. And who is this jerk? We got to be careful. I don't know what he means, so I would tell them the definition of ignorance is not knowing what to do. Pretty simple, right, guys? Yeah, okay, we'll get the drift. I said okay. The next question is what's the definition of stupidity? And some of them were smarter, they were able to stick their hand up and take a risk. Well, stupidity is knowing what to do but not doing it. I said bingo. And then the last one is what's the definition of insanity? And almost everybody's heard it's either Mark Twain or Albert Einstein that says insanity is continue to do what you've always done, expecting different results.
Speaker 1:So this is the first 15 minutes of every class and I would say, okay, I'm going to give every single one of you a choice. When you leave here, you're going to know what to do, because I'm going to tell you what to do and we're going to debate that, and you'll end up agreeing with me before you leave, which is a fundamental of management. I'm looking for everybody to understand what we're trying to do. I'm looking for everybody to agree that what we're trying to do is the right thing to do, and then everybody will be committed to getting it done. So I'm going to leave you the choice at the end of two days, when you leave here, you're either going to be stupid or you're going to be insane. And looking around the room, I don't see many of you that need to be in a padded room. So how many of you do you want me to call you stupid? And they don't. But they leave. And guess what, andy? It always happened. They left work for two days. They get home, nobody did their job, so they're loaded.
Speaker 1:Say, the class is Monday, tuesday. They go into work Wednesday morning. It takes them until Thursday to catch up with what they missed on Monday, tuesday. What do you mean? Making changes. And I would always ask them give me three things you're going to do when you go back home. And guess what? In the early days I called them all. How'd you do? Almost nothing.
Speaker 1:I can tell you who the stars were. They're the people that started, and boy have they had careers. Because there's very few people. So I split the population down as businesses, into 10% are fine, they're going to be able to figure everything out. They're smart, they'll adapt, they'll adjust, they're going to succeed. Period 70% of the people are working and they're right on the precipice of disaster. They haven't given themselves the opportunity to think about what they'd like to do. They just got a job, which is what my parents' generation, your parents' generation, went through. They were in the depression, they were in the war. They go to school. They'd either leave and go to vocational school, university, or go get a job. They get a job, they get married, they have children. They're stuck.
Speaker 1:And away we go. That's the 70%. Then there's 20% in the middle that don't know which way to go because there's no guidance. If they were given the right leadership and guidance, they might become part of the top 10%. So we've got 10% of the world that are thinkers, 70% of the world that are doers and 20% don't know which way they are.
Speaker 1:And one of our contributors is Ed Gordon, who's got a PhD in economics and a PhD in history, and he says to me 50% of the American workforce by 2030 will not have the skills to be employable. And he comes, he lives in Chicago, he comes down to the desert. In the summer we have lunch. In the winter we have lunch or dinner and catch up and I say okay, let's say it's not 2030, it's 2040. I said the workforce is about 170 million people in America. Let's just say 50 million don't have a job Because they don't have the skills. Nobody is trying to reskill them, which is what we're trying to do with Learning Without Scars. And if you look at the average family of three people husband, wife and child that's 150 million people that are going to be getting income from the government. And then I go up and ratchet it and say, okay, over the last 20 years my lifetime, 50 years we spent hundreds of trillions of dollars on technology and virtually nothing on sociology. Correct, we don't have a clue of what we're going to do.
Speaker 1:I remember one of my first jobs. My great-grandfather started a place for what was called wayward youth, delinquent children. So I went and worked in there as a control figure for six months before I almost lost my mind One of the hardest things I've ever done. But in the process I was taught how to do personality profiling, which is, you know, for criminals. It made me really good at what I do in the construction business. But you've got to find a hole. So we do the Teams meeting, we do the Zoom meeting.
Speaker 1:Andy, a lot of people schools tell me can you have a face-to-face aspect of your training? I said, sure, what do you want that to be? Well, let's have it be a Q&A. She said that's fine, we'll do that. But if I'm going to do that, I want you to start something else. They say, okay, what's that? I want you to start a book club. What A book club.
Speaker 1:I want you to select a book once a month and the same people are going to be on these Zoom or Teams meetings. I want them to read the book and I want you to chat about it and that can be a subject that we talk about. So when was the last book you read? I don't know. Nobody reads anymore. Nobody looks at the research that's out there. Look at in schools. We've got three schools right now. We'll have another two in the next 30 days. That's about 80,000 students that we're touching every single month.
Speaker 1:And the schools tell me you're using technology that we haven't even dreamt of. We do audio tracks on everything, quizzes, we proctor all exams, we use avatars for lectures. It's different genders, different ages, different nationalities, so that we cover everybody. And the schools say how do you do that? You use technology, damn it. Well, that's a lot of work. Of course it's a lot of work.
Speaker 1:I had a school tell me that they could create a class in an hour. I said congratulations, I'm going to give you a subject matter and I'll pay you a thousand bucks for giving me that class in an hour, because it takes me two weeks to put together a class of 80 solid hours after 50 years of experience, and they no longer communicate with me. The school does, but those people are no longer involved in the discussions. It's amazing, andy. Andy, what your dad did Was breaking ice. Nobody was doing what he did when he started. Right, you're picking it up, you're making it better, but the audience that you're dealing with Are not like your father, where they were prepared to listen and take a chance. Now they think they're as smart as you are, and maybe smarter. No, now I think they're as smart as you are, and maybe smarter.
Speaker 2:No, now I'm just overly optimistic all the time.
Speaker 1:But that requires activity, action. And you're not optimistic, you're just optimistic about what they're prepared to do and they're not prepared to do anymore.
Speaker 2:Yeah, it's. You know. You're talking about being able to employ people, ron. I mean, look at all the computer chip plants that we're building in the US and we don't have enough people to man those. When they're done, they're not prepared to take those jobs.
Speaker 1:Or, even better, microsoft is reviving Three Mile Island because that's the place that we're going to get the source of power that they can't have access to anywhere else on the grid.
Speaker 2:And there's another nuclear, closed nuclear plant in Michigan that's going to open.
Speaker 1:Yep Nuclear has been one of the cleanest. Three Mile Island blew everybody. And then what was that in Europe? That was the Russian plant.
Speaker 1:A good friend of mine says I don't understand. Canada uses heavy water. Yeah, the Can-Do nuclear reactor was the safest in the world, but America sells things better than Canadians do. We're too shy. So America's power plant became the plant of the standard. All of this stuff is interesting. It's societal. We've got air, we've got sun, we've got nuclear. They're all clean. Guess what? We have natural gas coming out, the wazoo Canada had. When I was up there at Finning in 1979, I was at a natural gas field that was capped, that had enough capacity to satisfy the world's natural gas needs, the world's needs for a thousand years. T-bone was going to build natural gas filling stations across the country if on-highway trucks would convert to natural gas. Look at Texas got.
Speaker 2:Look at Texas. There's a gas fire plant under construction near Austin on a site where a coal plant used to be. That closed five years ago. Texas is what I use as an example. Those folks down there will build anything, but you start talking about building gas fire power plants. Their legislature fights about that like it's from California.
Speaker 1:Well, and one of the courts in the country just continued to accept that Biden's regulation on methane emission that would essentially shut down any future natural gas wells because they blow it.
Speaker 2:They burn it off. And then we got the problem with the problem with nuclear now in the us. I mean, yeah, we've got three mile island and we've got chernobyl to look back. But the vogelte plant that was completed out in carolina south carolina, georgia border seven years late and I don't know how many billions of cost overrun. It's like people want to build nuclear and it's like folks, even if the plan works right, it's about a seven-year process. Now Gates is trying to do that smaller plant in Wyoming in a shorter amount of time and it'll be interesting to see how that works out. But power is a big problem. That's why the data centers are pouring into Indiana and Ohio. You got reliable power in that area.
Speaker 1:Well, here's a statistic for you from a guy who took mathematics and physics From the point of entry from a power plant into the transmission network, by the time it gets to the end user, 50% of the power is lost, right? Have you heard of anybody doing anything to make that 40%, 30%, to make it better?
Speaker 2:No, sure, sure. He talked about it for a while, then he got busy in politics. Elon Musk is going to create a battery to store power better and eliminate that problem, and he just drifted off into politics and hasn't pursued some of the better ideas that he's had.
Speaker 1:It's an interesting conundrum. And those two blogs I'd love to have you put more out there. I'd like you to concentrate on the economic metric models that you're using and help you promote the business and get more with it, and I'm going to transcribe some of this into blogs et cetera, over the next week or so Before we start whining too much. I think we should cut it off, but I think we've covered a lot of really good ground. Is there anything that we've missed that you'd like to bring up?
Speaker 2:The dealers used to pay attention to single-family housing permits Big tracts of land that get developed utilities, roads leads to. Non-residential construction permits are going to be up 10 this year and for the next two years I have them up 10 as well. You have a large number of 30 year olds moving into the population and the dealers aren't hearing it. I mean, you know this as well as I do, so it's been kind of a strange year this year. So we're probably going to under-order for 2025, with rates coming down, housing going up and Helene and Milton are going to clean up any over-inventory situations that we've had in the last 18 months. I mean, you've seen the horrific damage down there. It's going to be the old 90s scenario.
Speaker 1:You're going to have contractors from understates go there and not come home for five years. Yeah, it's a terrible circumstance. The other thing that's happening about the housing sites and large tracts of land, you know nobody's paying attention to that. You're right, it's. You know what happened to us. That used to be the core of our business. If your population was growing, your business was growing. If your population wasn't, you better get more territory.
Speaker 2:Let's give them a benefit of the doubt. Ron, after 08-09, housing was boring. Not a lot happened, so we forgot about it. Now it's starting to happen again because of demographics. And what people don't understand about demographics is the younger generation 30s and even us, for that matter, with lower inventory available in existing homes, don't like to sit there and make deals on an existing house. They don't want to put in a bid, they want to know they're going to get a home. And so the younger generation goes no, I don't want to go buy some Gen X or Baby Boomer's house and have to redo it. I'm going to go talk to a builder and they're going to build what I want with a completion date.
Speaker 2:And the builders caught on to that, ron. They used to say here's our two models take it or leave it. They figured out over the last five years either we change for the customer or we're going to lose our labor to infrastructure. Never see it again. So Dave helped the people get into the homes and made that even more of a goal for your 30-year-old. I want a new house. I don't want an existing house, I want new. Everybody likes that new car smell. I don't blame them for wanting a brand new house. People say, oh, they're not built as well. Well, maybe they're not. They're only going to be home six hours a day anyway. They're never going to notice the little imperfections that are out there. Yeah.
Speaker 1:It's really funny. Over the last couple of years, when anybody asked me for anything, I've gotten into the habit of just saying yes Confuses the hell out of them, and that allows me to get into a dialogue with them. I said, okay, why is it that you need that? Why is it you want that? And it's very shallow, so that single family home people have lost sight of. Maybe that's something you want to write about.
Speaker 1:What does the development of single family homes mean for the equipment industry? It means nothing but growth and the disaster in Florida. What do you think is going to happen to insurance rates? The last two to three years, insurance has gone up between 20% and 30% across the country because of disasters. It's an interesting world, andy, and that used to be a Chinese curse. May you live in interesting times. Well, these times are interesting, that's for damn sure. I'm going to close it up there, I think, and thank you very much, andy, for the time and thank everybody who's been listening to this candid conversation. We look forward to having you with us at the next one.
Speaker 2:Thanks again, ron, and I'll work on some blogs for you. Thank you, sir. Bye now.
