The Forum with Becky Quick: How to Make a Few Billion Dollars with Brad Jacobs

I'm trying to make money for shareholders. That's what I've always tried to do, and so far we've done it. And I'm trying to follow the same playbook that I've done over and over again and not deviate from that very much. And that playbook is find a big industry, and building products distribution is pretty big, $800 billion. Try to find an industry that grows just by itself organically without me acting as a catalyst, and building products distribution has been growing about 7% per year over the last five years. So you do a lot with 7% organic growth. Try to find an industry that's fragmented enough where there's enough things to buy, because the single biggest lever for value creation in my playbook is accretive M&A. And there's plenty of things to buy here. You've got 7,000 distributors here in the States, you've got 13,000 distributors in Europe. There's 20,000 potential targets out there, which will keep us busy for the next 10 years. I wanted to do something that wouldn't get metaverse'd, wouldn't get, you know, just disrupted by AI or by virtual reality and suddenly not be a business and just go away.

100%. So we've always been tech-forward in all my companies for forever because I believe technology makes a business more efficient. I believe technology helps you identify waste, helps you identify stupid stuff you're doing and like un-stupid it. It helps you find inefficiencies, makes things more planned out. It just makes money. I mean, technology has a good ROI, and therefore you should be tech-forward. You should be very tech-forward. You should embrace technology; it should be your friend. You should position yourself so that all the advances in AI and machine learning and robotics and automation, they should be helping you. And every time new iterations come out, that should actually be improving your business and getting your business even better. So just as we use technology in the warehouse at GXO to get a leg up on the competition and get better margins, better return on capital, we're going to do the same thing here. There's a big warehouse component to this. This is a business that is kind of a supply chain business. You're buying wholesale all kinds of different products, you're storing them in DCs or warehouses, you have a delivery truck component, and technology can help with each part, all parts of that.

Absolutely can help on that, on the demand forecasting, on the route optimization, save a lot of money doing that. And then on the e-commerce, interacting with the customer, digitizing that. I saw Drew Wilkerson here a few minutes ago running RXO, and you look at RXO, the brokerage business. That was 100% manual 10 years ago. I mean, it was just someone talking to someone. And today, 97% of RXO orders are either sourced or covered digitally, no human involvement at all, just pure machine to machine. I think most industries are going that way. I think building products distribution, if you look fast forward 10 years from now, or even less than 10 years, if you look at just the end of this decade, instead of having a roughly 4%, give or take, e-commerce penetration, I think it'll be the majority, and it could be the vast majority. I think a lot of things that customers are just in the habit, because it's the way they've always done it, come into the hub on Monday morning at 7:00 and buy the same things they bought last Monday at 7:00. I don't think that's necessary. I think these things can be bought on the phone. I think these things can be bought on your computer. I think these things can be bought in an automated way without even proactively doing it, because a lot of these things are very predictable and repetitive. So yeah, I'm not down on technology at all. I'm very up on technology. I'm up on using technology, but I didn't want to get into a business that I thought could not exist a few years from now as a result of technology. More machine learning, less metaverse.