#455 - AI vs. Tariffs vs. Global Supply Chains: The New Rules of the E-commerce Game with Bernie

E-Commerce Innovations With Bernie Thompson Welcome to episode 455 of the AM PM podcast. This episode is one that I think you're going to want to listen to maybe even twice and probably come back and revisit in about uh 2 3 years time and see how accurate this is. I'm speaking with Bernie Thompson today. Bernie is an 8 figureure seller, been involved in selling e-commerce since 2009, so about 16 years now. We talk about the challenges and what's happening when it comes to actually manufacturing in China or anywhere else in the world. Some of the challenges with playing by the rules and who's not playing by the rules and how AI is going to affect everything that we're doing from manufacturing to logistics to to selling. I think uh there's a lot of really good uh things you're going to be able to take away from this this episode and some deep thought that you're going to get into. So, please enjoy this episode with Mr. Bernie Thompson. Welcome to the AM PM podcast. Welcome to the AM PM podcast where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus plus this is the podcast for money never sleeps around the clock in the A.M. and are you ready for today's episode? I said are are you you ready? Let's do this. Let's do this. Here's your host, Kevin King. Kevin King, Mr. Bernie Thompson, one of the OGs on the AM PM podcast. Good to see you again, man. Hey, so great to see you, Kevin. We've seen each other a few times lately. uh you know, you run so many great shows, great conferences, uh you know, for sellers to learn stuff and I'm I'm out there trying to learn and at the same time, you know, I'm glad to be here on the show hoping to share, too. Yeah. I remember uh I think the first time I met you, I might have been at one of I think it was in Seattle at one of Steve Simson's events. You were up there and he's like, "There's this there's this eight figureure seller, his name is Bernie Thompson, runs this company." I was like, "Oo, who?" like I never shook at the hand of an eight figure guy. Like was it at at that event or was it somewhere else? Actually, you know, I think Kevin, it was in Global Sources out in Hong Kong. You and I were both speaking back in I don't know 2016 or 2017 or something like that. Oh yeah. Okay. That's where Okay. Yeah. Yeah. Yeah. Yeah. I think that might where it was. Okay. Then then I got to know you a little bit better I think at one of Steve's events or something at something up in Seattle. I just remember some event in Seattle where you came in and uh you're like the the big guy in the room. Uh you know the big the big the big big kahuna the big seller or the big fish in the room and I was like oh this is pretty cool. Uh it's it's Bernie from Pluggable and you had some girl at the time just doing some PPC for you that turns out to be one of the smartest people in the entire ecosystem. uh and has gone on to do big things. But so you got this start. So you you when did you start selling? What Fortunate Timing for Amazon Seller year was that? Uh it was like a day or two ago, right? Yeah, it was a little while ago. It was 2009. Uh you know, very first uh FBA warehouse that opened up. Reno won. Uh and I actually was thought I was just starting an electronics company and then the way the timing worked out you know it was really perfect timing uh for the rise of Amazon and yeah just generally the the rise of e-commerce and and ease of building a brand because you know just prior to this you know I would have had to go to you know to to start electronics brand you know go up to North Dakota go down to Bentonville Arkansas and you know kind of uh you know beg in front of a sales organization or a purchasing organization, you know, to try to get uh some kind of new new brand, new products, uh some shelf space. And so this this kind of infinite shelf space plus FBA plus all the you know momentum that Amazon eventually developed, it it was really fortunate. I I think if I in fact I know if I tried to start the same thing 10 years later, I would have failed. So that was back when you said Reno won. So that was like their very first FBA warehouse. So you must have been like right on the early beginning of when they opened up the marketplace to third party sellers before it was super popular from made popular by like amazing selling machine in like 2011 or something like that where everybody's in this now it's pretty much because of them uh that kind of set off this trend. So you were you were one of the early guys. Yeah. Yeah. The the and I wasn't going to shows or or really networking in those early days. There was one conference that I went to. It was called SCO S coe. And uh it was actually there where um I I sat down for a few hours and talked to this Google engineer uh who uh his wife was running an Amazon business. And he was thinking about quitting and going uh going at it big time. His name was Stephen Yang, the founder of Ankor that went public for 10 billion US uh just a few years ago. So yeah, so it was a funny time where you could have hired Stephen Ankor, Stephen Yang, I mean, well, no, he wouldn't have been hirable. Uh he he had he definitely had uh bigger ambitions than me. Uh you know, but uh but we were there at the same time. Uh I mean I was actually a little a little ahead of where he was at that time and and then you know Ankor uh is an amazing story you know a real flagship for Chinese brands and uh you know has just done amazing. So your background though is so before doing this electronics you come from the IT software engineering background right IBM Microsoft uh you ran a couple companies yourself um before getting into this e-commerce game. Yeah. No, I mean a serious software engineer. That was my degree. I went, you know, out of college worked at IBM on the OS2 operating system. Actually, the the first thing I did was as an intern. Uh you had all these graphics standards back then. You had EGA and VGA and super VGA. And I took OS2's VGA driver and produced a super VGA version that would work at, believe it or not, 800 by 600 uh resolution. and my manage, you know, management was really excited about an intern pulling this off with no support. Uh, and then, uh, you went to work there full-time afterward and then worked at, uh, Microsoft. I ended up managing the USB team. Yeah. And through all that stuff, you know, we we we would try to do our best, uh, to, you know, produce a great product that would be a great experience for people who are connecting devices, uh, you know, on Windows and whatnot. Uh but there was always stuff that the you know you really needed the device maker to do right. So so the good thing was I started this business that became kind of an Amazon business in some ways not as an Amazon business at all. I was trying to build a better device company. I was trying to solve you know kind of some technical customer support and industry issues and and do something in a better way. Uh and then because of the timing in Amazon, you know, that that ended up becoming a big part of the story of of what happened in the end. So when you when you when you went out on your own to do this to fill this little gap where you saw was it chips or circuit boards or was it cables or what were you what did you start off with uh under the pluggable brand? Yeah, it's actually interesting because the first thing I did failed completely. Uh I had been a a an executive at a company called Display Link which is a USB graphics technology and I had actually uh developed their Linux kind of as a side project because I was I was technically a you know a manager or whatever but as a side project I had uh developed a Linux driver for that and then in trying to you know put that to use I developed this terminal system where you could take these USB docking stations Take a Linux PC, just plug one in, and up pops a terminal. Plug another one in, up pops a second terminal off the same machine. And so on and so on and so on, up to, you know, 8, 10, 12 terminals off a single PC. And uh so I thought, well, as long as Display Link's okay with this, I'm going to quit and build a business around this USB thin client, you know, using their their chips, their technology underneath. And so I did that and I spoke at a Linux kernel conference that fall of 2009. There's a video up on YouTube somewhere with with me. I I met I had met Lennin Turvalds, the founder of Linux a bunch of times before because we had both been in that space. Got to see him again there at that conference. But then I brought that product to market on Amazon and it failed entirely. Navigating Tariff Challenges in the Electronics Category Uh there was, you know, crickets on sales. It's it's one of those classic dilemmas and actually we're dealing with this dilemma you know uh very much right now too whereas if you go and innovate on something if you do something that's never been done before it's up to you to educate the market uh and create awareness and create interest and create demand and you know and I I I really the worst at marketing Kevin and and uh it was really showing at that point. I I actually had something that was kind of interesting, but I couldn't get it to sell. So, I sat down with a buddy of mine from Microsoft who's a good friend. And I said, "Well, you know, this is really not going so well. I'm 6 months in. What do you think I should do?" And, you know, my friend said, "Well, you know, you're already multitasking like crazy. It's a oneperson company. You better, you know, kind of focus and stick with this and try to make this thing work." And um I looked at the situation with what was happening with Amazon and some of the timing and ended up making the opposite decision. I ended up saying, "Okay, what I'm going to do is I'm going to actually broaden way out, just get kind of off-the-shelf stuff and uh bring it in under the pluggable brand and then maybe I'll get back to that thin client uh at some point." And I never got back to the thin client. Everything else took off. And so fast forward to today, that brand is still pluggable. You haven't changed the name. 16 years later, it's doing a healthy well, it's doing eight figures. Um, and I know there's been some uh because in that now a lot of people when they say, you know, they're advis advising people to sell on Amazon, they're saying stay the hell away from electronics. Uh, that's a complicated, very cutthroat, very race to the bottom category with a lot of regulations on some on some things and no regulations in the wild west on others. How have you found that to be? I mean, in the beginning, was it like, oh, this is pretty easy. There's not too much stuff. And then over time, uh, more and more sellers from outside the United States coming in and not playing by the rules and cutting corners and not getting certifications and doing all kinds of, uh, crazy stuff. Can you walk me through how how this has evolved from when you first started and things were probably pretty easy compared to now? Yeah. Yeah. The the first few years were Goldilocks because Amazon was in hyperrowth mode and they just they they weren't uh you know over stuffed with partners yet. And uh it was interesting, you know, actually, you know, around the Rise of Chinese Brands in Electronics time we first met Kevin and I, you know, again, I I forget where that was, 2016, 2017, you know, we had already kind of gotten into trouble at that point where the competition was intense in electronics. Like generally everything that's happened competitively has tended to happen a few years earlier in electronics. Why is that? It's a pretty big category. there's a there's a lot of lot at stake and it's a real focal area for China. I mean you have incentives at every level of government within China um in terms of you know financing in terms of tax in terms of um kind of outright support um and certainly trade focus um and uh so so by that time by really 2015 you had a large number of very uh strong and very aggressive Chinese brands in the electronics category. So, you know, fast forward to today in 2025, there's not a lot of Western brands left. I mean, we're we're one of the few and almost I think we're we're perhaps really I mean, I don't I can't even identify another Western brand that started late that's still around. Like, nobody is entering this fresh right now. So, again, I was lucky with my timing uh in 2009. And, you know, and the tariffs actually have not made that better. You'd think they might have, but but what ends up happening is the tariffs have a um an outsized effect uh in electronics uh because the margins are relatively low because of the competition. It's not uncommon for us to be sourcing something, you know, at 50 bucks and selling it at 100, you know, and so it's, you know, and that's that's how brutal the category is. And it's not because we want to. Uh it's because that's the way it goes in electronics. And then when you um you know add in tariffs on that tariffs become are you know a huge part of the equation and and so and then tariff avoidance if if you have competition that's able to avoid tariffs and you're not able to it really picks market winners and losers. And that was actually already beginning to happen with the first round of tariffs back in 2018. even even though the amounts uh were uneven and not as high as they were today, you basically had between 7.5 and 25% since 2018. And that has actually given um a lot of uh brands willing to do tariff avoidance a pretty substantial advantage in the market. And that's much easier for or much more it's ill- advised for an a US citizen and an American company to do that the the kind of aggressive tariff avoidance you will eventually get yourself in trouble. Whereas if you've got a a company that's overseas that you can you know shut down you might lose a shipment uh and then come back in a new form uh you know it's very attractive to avoid those tariffs. And so I think it's also it's been a contributor to why the electronics category has this reputation of being just a very difficult uh category to build a brand in. So what what are some of these tariff avoidance things they're doing? Is it shipping it to other countries? Is it under declaring the value? Is it um sending them in unit by unit by unit using e- packet uh so the US post office pays half the price to send it in or or what what uh what are they doing? What do you what have you been seeing and how's that how's that changed over time or has it? Right. Yeah, it actually hadn't changed much until the spring, but obviously some things are changing and one good thing is you know the elimination or or largely eliminating the dimminimous uh exemption. So, you know, shipments under $800 in declared value um you know that that you know people have been able to get stuff into the US no no hassle. So then you know that becomes a foundation for you know like in electronics you have a relatively high value to weight ratio. So if you can misdeclare the HS code, the categorization of the product, um, you know, it doesn't look like a lot of stuff. And so declared with one HS code, it might be a 25% rate. And then declared with actually not all that different of an HS code, uh, it might be 7.5 or even zero. And, uh, you know, the volume's not that huge, so that's not going to attract attention. Um, it really, you know, so, so HS code, uh, you know, gamesmanship has definitely been part of the game. The other thing the $800 dimminimus gave as an option was, um, importing in bulk into Canada or Mexico and then just trickling into the US in under $800 shipments. And again, if you could fit more into that 800 than somebody legally would, it makes that even more easy, you know, to do that. Um I think the type of products that our average selling price is up over $100 and uh so so what's what's happened to us and that's partially because that's a good area to be in but it's also because we got pushed out of a lot of the 10 2030 $50 products and I think part of the reason that happened is because some of these um tariff avoidance strategies and things around dimminimus uh were especially uh uh determined ative if you're the seller of like a $20 product uh in in electronics um where you don't have a high uh margin but you do you know the um you can basically ship a lot something small like a cable uh you know you can ship a lot in uh potentially under the 800 but there's a lot of other strategies that I mean the um you know simply uh you know underdeclaring the value of goods and by the way that's doesn't have to be something that is they're breaking the rules on. So, um when uh you know you're a factory, a factory brand in China and you're uh declaring your commercial invoice value on the goods, you don't need to include your profit. You can profit shift that to the US in theory and and you might not even have a US taxable entity and keep that off of your declared value of goods and that is perfectly legal. And so kind of as a starting point, most in in on in Amazon on 2025 in 2025, you're mostly competing against factory brands in China or at least the big ones are. And they are legally paying less in tariffs than you on the same good sourced from that same factory. And then there's all the illegal things, you know, just simply declaring a value that's fictitious, not including um, you know, things that you should that are are really kind of inputs into the cost of production like labor. Very easy for them to get away with underdeclaring the value of of of goods in terms of labor and other inputs like that. Um, you know, what's the US government going to do? They get a shipment, they they think that that value looks too low, they ask for a bunch of paperwork justifying, you know, that declared value. I mean, this is another kind of challenge for everybody competing against Chinese companies. Uh, you know, they are really good at paperwork. um the the you know the the commerce kind of flows like water to wherever the business is and and things like paperwork are um you know really just uh you know little hurdles to jump over um and they're very good at jumping over them. So yeah, so it's been an interesting environment where in in you know, especially right now here in 2025, you know, you've got this whole, you know, gigantic set of disruption around tariffs, which kind of the reason for doing that makes sense. But then the different ways of doing it have totally different outcomes depending on whether you really know what's happening and you're really realistic about how to get this done in a way that uh benefits US businesses rather than hurting them. Yeah. I think I just last on last week's episode uh I had Chris Kee on and he was talking and one of their things is protecting against IP right now. AMZ Watchdog is the name of their company and helping uh people protect against IP violations and he he said gave me gave an example of a client that's got selling flashlights and he's like these these factories are now more and more of them are going direct. There's a term for it D uh uh D not DTC that's uh but like DC D or something I I forget the exact name but you know like FBA or whatever it's like factory direct uh now F maybe it's FD FDDD or whatever but there a lot of them are going direct and he said but they can make all kinds of claims that are totally wrong. So, they this guy, Challenges of Western Electronics Industry he's got a flashlight company that was selling like $10 million worth of flashlights or something uh through their Shopify site and they go on Amazon and they can barely sell anything and they're uh and it's just they're trying to help him. He's like a flashlight I forget the exact terminology so forget this is not exact, but he's like a flashlight can't go over I don't know 10,000 lumens which is a measure of light but they'll come on there and they say they're a million lumens. He's like it's totally wrong. There there is no such thing. They'll just lie. or if they need a certification like I know like uh you know Apple to have some of the Apple cables um and you have to actually have a license from Apple for was it US uh for lightning or something like that and that that that takes a 20 cent cable to $4 or or or whatever it is cuz Apple wants a heft a very hefty license fee. So these guys just don't do it but they say it's an Apple certified cable and you buy it and it works for two days and then quits uh or whatever and you have all these problems. So he's like the number one thing is Washington and all the people doing this terrorist they have no clue what's going on. Uh and the people advising them have no clue of what's going on down in the trenches. He's like every single person it should be just like Tik Tok. Tik Tok to sell on Tik Tok shop in the US you have to have a US entity US driver's license all that kind of stuff so that there's a responsible party. Japan uh has you know you got to have a you have this thing in Japan where it's responsible party. Other places you don't have that in the US. He's like, "Everybody selling on Amazon in the US should have to have a US entity, US based, so we can sue them, so we can actually go after them because they have this, not only are they not playing by the rules, but they have this this immunity shield, uh, that makes it next to impossible to enforce. Uh, and it's a problem. Uh, it's a it's a major major problem way beyond this trade imbalance and and stuff there. And Amazon is doubling and tripling down on this. Uh Amazon is like aggressively going after factories and like come on get get let's get our customer a better price. We don't care if the stuff's certified or not. We'll tell tell you just tell us it is. Okay, we'll believe you. Uh and they're doubling down on nobody's really showing this side of things and how bad that actually is. Uh and that's where the fundamental problems and dimminimus like you said helps. you know, he uh back in uh May um Trump dialed that back a little bit, you know, but they put the 90-day um uh changed it back to 30% for 90 days. So, we'll see what happens here come come August. Uh who knows where this is going to go, but there there's problems way beyond on that. um how do we how as western sellers and like yourself you know based here in the west how do we deal with that or or can we even I mean it it's not like it's not you I mean Shenzen's the capital of electronics in the world it used to be Taiwan uh you know I remember when I was a kid everything said all my little race car said made in Taiwan on the bottom but now everything is made in China and primarily electronics is Shenzen's the capital of of that to my understanding and you can't just pick that up and move that to the United States or pick that up and move that to Vietnam. Uh there's just so many things from engineering talent to systems to operations and the the Chinese are really really good at second level innovation. You know, they may not be come up with the original idea, but they're very good at taking whatever you develop uh and then innovating on it and getting it cheaper and cutting corners and doing whatever to make that make it even better. We that's decades to catch up to that. So it's it's what is the what do we do? How do we h how do we deal with this? What are your thoughts on that? Yeah. Well, you know, so and and I think that's why, you know, interestingly, the the problems that are that these tariffs are trying to solve are real problems. It's it's it's all in kind of the way. Yeah. You you know, and I would say that the characterization So, Chinese companies are, like you say, great at second level uh innovation. and you know taking something that exists already, copying it and making it better. But I would say we're long past that thing on like kind of that first innovation. They are the best at that also. I mean they're getting there. You look at Deep Seek and some of the AI stuff and and when you said that statement earlier about how the government was supporting uh the electronics industry there because they knew that they were behind in in the brain hunt and the technology side and they knew that's going to be the weapon of the 21st century is technology and so that's probably one of the reasons they're in you know helping anchors and those guys uh grow along because they need to cultivate that. But absolutely but I agree. Yeah. Yeah. I mean, you look at I think I saw some some study that it used to be the smartest Chinese would come to the west, whether that's the US or Canada or Europe and go to school. A lot of them would end up staying here and working for Microsoft or or IBM or whatever. But now a lot of them are going back and then a lot of them are not even coming here anymore. Uh they're just staying there and going to school and the pool is so high. And you have, you know, I I Challenges in Opening Chip Plant remember a story somebody was trying to open up on a chip plant. And I think it was in Wisconsin or Indiana or somewhere and they're like they got all these subsidies from the US government and they started to do the planning like we can't open it here. We don't have there's nobody that can work this plant. Uh and the China we can bring some Chinese people over and you know give them some uh work visas but they're going to they don't want to a lot of them don't want to be here. They want to go back and you look at you and I go to China quite a bit. China's main cities are far more advanced than any city any city in the United States from every level technology to transportation to infrastructure to you name it. Um they're way ahead and and what do we do? Yeah. Well, you know, I I mean I I don't know how political to get here on on you with your show, Kevin, but you know, I think the first thing is to stop lying to ourselves, you know, and and look at this reality because then after is it a lying or is it a is it a lack of knowledge? Well, both is a lack is it a naivity uh or a a cubris a what they call it? Kubris or whatever a pride of America is the Kubris the pride of America. Is it is it or is it is it lying? Yeah. Well, I think it starts with ignorance and then and then quickly becomes a lie as people try to get more ramped up about this or that, right? Um but uh the reason why, you know, we Strategies for American Manufacturing Competitiveness have to see the the reality is because we got to claw claw our way back intelligently. Um you know, it has it's not going to it's not because we're we're not in the situation we are with certain technologies, certain types of businesses, physical goods generally. We're not in that situation because necessarily like somebody's been ripping us off, let's say, or or you know, to use that kind of terminology. It's more that we've gotten a systematically beat. Some of that is has to do with unfair practices that we got to look out for ourselves and make those unfair practices not function or, you know, or or be policed. Um, but a lot of it is, you know, we got to pump out more engineering grads and we got to continue to attract the best and the brightest from around the world to American universities because we desperately need those people to compete with China who's pumping out 10 times as many engineers uh as we are annually. And of course, some things are changing. I mean, it's unclear exactly how many engineers you're going to need to uh, you know, to turn the manufacturing light bulb, you know, in an era of AI. I mean, maybe people aren't going to be the problem. I'm not sure. Um, but but we do need to be, you know, kind of coolheaded and really you like some of these details that we're just, you know, touching the edges of, you know, you got to go deep on those and pick the right policy changes that are really going to make a difference. You like the one you were highlighting there, Kevin, of, you know, to engage in commerce in the United States, you've got to be legally reachable in the United States. I think it's a great principle. Um, and a s and and and actually by the way, if I were to try to import something into China, that's exactly what China would require of me. I've got to, you know, in order to hold goods in China, I've got to have a Chinese company. So, you know, we're we're underfocusing on some of those super critical details because they're complicated and there's a lot of them. And yet that is the foundation by which we can actually, you know, get more competitive and in and in some industries claw our way back. I mean, there's still industries where we're ahead, but it's less and less each year. And and so, you know, I mean, I'm I'm definitely an advocate of we can't keep doing what we've been doing, you know, the last three three or four decades, you know, uh and and the world can't either. I mean actually the the the US um again this is super political but you know the US had an opportunity to help the rest of the world see that hey this is a problem all of us being dependent on all of our physical goods to come from one country and then work together on a a very methodical strategy to work against that. And what happened instead was just a lot of disruption, including disrupting relationships with our allies. And that's made us weaker and less less able, you know, to build that kind of um, you know, joint action to make some things happen that I think is in kind of everybody's everybody's interest. But it's not too late. I mean, we we can, you know, and and I'm and I love to talk about the kind of company level. What can each of us do as you know as companies and brands and you know tech manufacturers you know basically we uh you know we got to figure out a systemic way rather than you know looking for some sort of um you know magic wand that we can wave. You would have thought we would have learned some lessons during co when it the it highlighted some of the you know the PPV all coming out but it seems like not a whole lot has changed. You know, there's a lot of rhetoric and a lot of talk and a lot of drum beating, but nothing has really changed and and you know, a lot of talk in our our space in the Amazon worlds, oh, just go source, you know, that we were just at recently, two or three people like, oh, just go to Vietnam. Oh, just switch your manufacturing to Mexico or Indonesia. Let's bring it back onshore in the US. It's just and that's you could do some of that in some categories, in some products, but the vast majority you can't. So, what do we do as individual Navigating Global Electronics Manufacturing sellers while we're waiting for government or to sort it sort this out? How do we play or what do we do? Do we we we shut up and uh go become an influencer and creator and do another do another uh do another hot thing right now instead of doing this or what what what do we do? Yeah. Yeah. And I and I think what we do is very dependent obviously on our category and everything like that. I mean, I can talk a little bit about what we're doing. And, you know, it's really I mean, I'd say I mean, just to kind of say the hard and honest part about it to start with, we're getting out of the way of the Chinese brands. You know, if I'm going to go head-to-head with a Chinese brand on a pro on basically the same kind of product, I'm not going to win that battle. Not on Amazon anyway. Um, and so, you know, what what we're doing is trying to get out of that. And so uh you know it it just you know just this Technological Innovations and Global Competition spring we've launched two major technologies um that are patented trademarked involve a combination of hardware and software and actually partially because of AI we're actually able to do more software development than we have in the past with a smaller investment that's kind of more you know we're able to afford and uh so one is uh we came out with a software defined charger that uh it's 10 we have a 10-port model and a sixport model. You plug in the USBC charger you already have. Plug in 10 devices and and by morning they're all charged. Nothing like this has ever existed before. It's patented. Um and you know there's a lot of software involved and so we're kind of getting out of the way of the Chinese by doing it that way. Uh but are you but are but are you they'll just knock you off. I mean the patents don't matter to them. The IP doesn't matter. Last week, we had someone doing something called an easy charger uh on the podcast last week. He was talking about this client that that has an easy charger. It's something that I don't understand exactly how it works, but you plug it in and you know, gives you an extra 6 in from the wall, you know, when you can't fit everything in, but she patented this whole thing. She went through it. He's like, it's a brilliant product. So, evidently it's different than what we may have in our mind. And he said she put it up on Amazon and within two a month 153 counterfeits making all kinds of claims. Within two months she was shut down for IP violation uh on her own product on her own product. So how that that all sounds good like what you're saying here but they don't they don't they don't play by the same rules. They don't care. Uh so how do you how do you actually maybe the software component to yours is the answer that that's a harder thing but to to duplicate um you know but uh h how do you those are good steps don't get me wrong that's that's great steps and I think in the in the right direction but it's still and if you if you do this and you prove that there's there's money here just like the trash business in New Jersey they're going to go there uh you know and start taking over the trash business. So, they're going to follow if you're successful. So, do you do you try to deliberately not be and stay under that radar like I don't want to be a bestseller. I want to be like down here in this niche where they don't really play and just have a lot of products uh you know 50 products instead of four that are doing the same volume or how do you how do you approach that? Yeah, I mean unfortunately that particular strategy of staying under the radar doesn't work in electronics because electronics you generally have a very high what's you know called an NRE non-recurring engineering investment you know in the product. So you know you're kind of forced to actually be to go for high volume and if you haven't hit the high volume you probably haven't paid off you know what you invested into the product which is another thing that makes electronics uh you know a hard category. Yeah, I think the the all the details and and and such matter. U like I mean that's a horrible story what you talked about there with that other person. Now, you know, the first thing I'm thinking is well was that a design patent or a utility patent that she had because design patents are are relatively easy to get. You know, they're they they're on the uh look of the product and the kind of mechanical configuration of the product. Uh and they, you know, might cost a few thousand dollars to get. So, a lot of people are drawn to them. They're a little quicker. Um, you know, utility patent is on how the product functions. Um, and that's a quite a bit of a stronger type of patent to get. Uh, and so when I'm talking about patents, I'm I'm mostly talking about getting utility patents, but you still have enforcability as an issue. And um you Amazon's current process and you know correct me if if you know any anything different Kevin is you know this this patent neutral evaluation process where if somebody makes uh you know a patent accus accusation against another as or another seller um they have to plunk down I think it's $3,000 currently if the other uh seller wants to contest they have to plunk down the same amount of money and then it goes to a neutral arbiter to decide whether or not there is patent infringement and then whoever wins gets to keep their money. Whoever loses loses the money and of course if you you know if you're accused of patent infringement and you lose um you know that as at least uh will be taken down. Um now how well that's really working in practice we haven't tested it. So you Intellectual Property and Sourcing Strategy know we haven't actually um taken down anybody else's asens through that particular process yet. Um we were we were involved with several patent suits uh from years prior prior to the way the current system worked and all of those ones worked out in our favor. Um but um you know we're always thinking about intellectual property you know both kind of avoiding trouble and also you know protecting ourselves. So, so anyways, it so that's a bad story with that other person and and the speed at which she was copied kind of lends me to think that you know either that was a solution that was out there already or um that the copies were really coming from her own factory and that issue is leads to another thing to do which is don't source from China you know and and uh you know there's a obviously the tariffs give you a reason not to source from China because generally although on April 2nd it looked like uh you know tariffs might be more equal around the world and that was a terrible world for for uh you know a US brand but at this point where we're sitting tariff rates generally are higher against uh you know imports from China generally lower for other countries so uh you know we actually were very aggressive about moving out of China starting uh even before the Trump tariffs. I mean, starting back in, I don't know, 2015, 2016, we had begun asking our our supply chain, hey, you know, do you have any options to to move this? And actually, the driving force behind that was this sort of situation um that the person you're talking about hit where, you know, you're sourcing from a factory in China and then you don't realize that that factory or that factory owner's brother or something, you know, they have a brand, too. And so as soon as you bring something to that factory or as soon as you have some success with something they've developed, suddenly you know that same product pops up at it at pricing that you just can't compete with because they're connected, you know, directly with the uh with the factory and and have the other tax and tariff advantages and everything. So yeah, so so I think it's hazardous right now, not just because of tariffs to do sourcing from China. And I know that's a I mean that's not a mainstream position. I think even even today because of how hard it is to source outside of uh China. I mean basically your your options go way down uh when you're uh sourcing outside of China. How much have you been able to move outside of China and has it moved to like Vietnam or is it moved to Cambodia? Hard drives are big in Cambodia. um you know some electronic stuff I know is done in Mexico but uh that's more final assembly stuff and not the actual you know the raw materials are still coming out of China but even moving it out a lot of the raw materials for your goods still having to come from China or or some of the absolutely yeah so it took us eight years uh but we got 90% of our production by revenue out of China last year and it's it's going to go down to single digits this year now That's revenue. Skews are a little bit more mixed because we have a lot of kind of uh low revenue SKs uh that are and they're low revenue actually because they're kind of commodity products. And so those ones uh as um you know the the tariffs increase this year, we're making a lot of EOL decisions. We're just discontinuing a bunch of those SKs and and just not fighting that battle. Um yeah and you know so our you know our strategy was really to focus on um Taiwan and Taiwanese companies as this kind of manufacturer for the world. So you know what happened 30 years ago in China? Well Deng Xiaoping and others opened up the country to commerce um in one way or another you know said within the communist system hey it's glorious to get rich. Um and uh and then really it was Taiwanese companies who came into China and taught them how to manufacture. Uh you know as you you were pointing that out earlier. So you know Foxcon is the poster child for that. The the gigantic manufacturer for Apple that you know has millions of or at least a million employees in China and has been making all our iPhones for the last 15 20 years. Um that's a Taiwanese company. So, you know, there there's this uh supply chain of really knowledgeable people and companies in Taiwan and they have been seeing the same pressures. Basically, they're getting replaced um by Chinese manufacturers. Uh they're kind of on the high end and that's led them to look outside of China. The tariffs have pushed that further. And so, you know, for us it's a mix of uh of Vietnam, Thailand, actually Taiwan itself. Even though it's a small place, they do do still some manufacturing there. Uh and those are kind of the the main places that we've moved to. But in most cases, it's it's um you know, it's these uh companies from Taiwan who have that uh knowhow uh to be able to chip I mean chips, advanced chips. It's Taiwan that's the leader and all that, you know. Yeah, it's all that Taiwan, but even with Taiwan, you got the geopolitical issue there of, you know, China still says that's ours. Uh, give me we're taking this back. So, you still even going to Taiwan, you have the risk of who knows what's going to happen three, four, five, 10 years from now and that may be absolutely part of China again. Um, we we don't know or it's going to start World War II, whatever, whatever it is. So, it it's tough. Why can we not Why can you not just bring it to the United States, right? Why can we not do what's the problem? Is it raw materials? Is it talent? Is it nobody's willing to work for $6 an hour uh to put this stuff together? Uh because you go to Taiwan, uh I was just in Taipei last year. Um and um it's it's a very modern place. There's a lot of money there. Uh there's a lot of very successful people there. It's not like uh at least the Taipei. I mean, maybe out in the countryside's different. I didn't go on the the deep countryside, but it it's a very, you know, it's not as modern as China because the cities aren't, you know, five five years old. Um, but it's a it's a very I think someone told me the average income there is one of the highest in the world. Uh, average, you know, employ uh worker. I forget what the number was, but it's up there very close to if not surpassing the United States as far as uh, you know, average household income. Um, yeah, Taiwan does really well economically. their income uh is uh the the typical salary in Taiwan is quite a bit lower than and and actually at times it's been a real rub for for engineers in Taiwan that sometimes the salaries in mainland China are actually higher for them. I mean that's partially because they're trying to you know do knowledge transfer through you know hiring the right people but uh but yeah in terms of when I said the wages I think I meant across the board on all industries uh as a standard of living versus you I think you're right certain industries it's definitely lower than what you could get somewhere else. Yeah, I I agree. Yeah. No, Taiwan's great. I mean I would love to live in Taiwan. I mean what a wonderful uh place. Taipei is an amazing city, you know, very modern. Yeah. And Manufacturing Support Discrepancy Between Countries uh so you know why can they do some manufacturing there where we struggle you know with that same kind of manufacturing in the US. So I think it's complicated but it's a bunch of different factors. I mean number one has to be you just don't have the support from the supply chain here in the US that you have there. So if I'm in Shenzhen for sure, I mean I can walk a little square kilometer or square mile and I will probably hit like 10 injection molders and you know four or five contract pick and place pick pick and pace places. Um yeah, you know the the the amount of um uh companies that do all the components of manufacturing stuff with all the different materials and all the different processes, they're just everywhere. Um, what's that what's that one market there? It's like I mean they have them for different industries, but I know there's one in electronics like you go into it and it's like all these stalls are like 10 by10 stalls and each one of them has specializes in one thing. Like this guy's got the screws. You need a screw of any size of any head of any length of any whatever is 10,000 different types of screws. uh you know you and then the next guy's got you know something for nails and the next guy's got something for the little piece that you need to put on a semiconductor the hold it down or whatever. It's it's insane. Yeah. And we don't have right there. You get it immediately. You don't need to special order it or wait. Yeah. I remember so many times uh early on where uh you know because I wasn't ordering huge quantities of stuff where I was talking with my supplier uh and said you know hey we can we re get 500 more you know we really need them Amazon's growing fast we're doing the sales he's like okay I'll get one of my guys to go over like to that market and get the parts that they needed to assemble that extra 500. Normally they they would have gone straight to the supplier but because it was a rush you they could kind of walk out their door and walk down the street and find the parts uh you know to do that and I was like wow. Um so so that's a big part of it is you know just that supply chain infrastructure. So then the uh you know another big part is labor and it's both just kind of general availability of labor and then the skills of of the labor and the uh desire or I I hate to use work ethic but it's it's just a different kind of work ethic. I mean they are strong I mean this is not knocking anybody in the US with the work ethic but people in China work their asses off. Um, you know, you got the uh uh I'm there used to be the 999 or or 96 996. 9 hours a No, what? 966. 9 hours six days a week or something. What? Whatever. Yeah. Six days a week. Yeah. Nine hours a day. Six days a week. Um, six to six. Ah, yeah. Whatever it was. But yeah, it's crazy. Yeah. and always nobody's going to do that here except some of the the illegal people that are here to try to make a better life. And and that's the high paid, you know, Labor and Automation in China college educated information workers. For the the factory uh workers, which are often, you know, historically were often a lot of women, often from the countryside. I mean, lots of men, too. For them, it was more that, you know, they would live in a dorm right on the Foxcon campus or right at the factory. And you know suddenly Apple gets a flood of orders you know because the iPhone 4 is more popular than you know than they expected. Well they are literally waking people up in the dorms in China thousands tens of thousands hundreds of thousands of people up and saying make more you know and yeah there's just no equivalent in the United States. Now I will say one thing about all this which is that the other thing that's happening in China which is so amazing to watch is they actually have more robots per capita than we do in the US. So here here in the US we have this huge problem with a lack of labor a lack of labor uh pool lack of skills. So our only solution our you know the the really the only hope for the long term is automation. And I agree in China, they're out automating us right now. If you go into a factory in China today versus 10 years ago, at least in my space of electronics, you're going to find robots all over the factory and automation all over that factory. You go to a contract assembler down in California or somewhere here in the US. Um, yeah, there's pick and place machines for the actual PCBs, but pretty much everything after that is just handwork. We are doing it less efficiently than they're doing it in China. And I was actually kind of surprised about this because I kind of thought the Chinese government because they, you know, they they do, you know, kind of have uh like right now the youth unemployment rate in China is not nothing. It's it's actually kind of high and so don't there's a term for it. They don't want to work. What's that term that Yeah, they lay flat. Uh they lay flat. They lay flat. Yeah. Lay flat. Yeah. Yeah. Yeah. And I don't know how much is is choice or not, but you know, so despite what could be a situation where you might expect a government like China's to say, hey, you know, put these people to work. Actually, China's really focused on kind of winning for the long term. And that includes in, you know, really strong financial encouragement of of robotics and automation. Both because they can develop their own robotics industry that way. That's definitely a part of it, but also because, you know, they really want to kind of win the the long game, not win the short game. To win the short game, you'd put the people to work, but to win the long game, you invest in robotics and automation. And they're doing that in China in a in a Can we compete though on that level in the United States? I mean, you have Musk saying that there's going to be a robot in everybody's house in five or 10 years. And uh I mean, what what is is it is it cost structure here? Is it lack of government support and incentives? Is it what is I mean because that could solve the problem. I mean uh I I mean robot the the small handwork like you said robots that's going to be more difficult. you know, you're painting a a little figurine, you know, a little small little figurine of a toy soldier or something, you probably, you know, that's going to be difficult uh for robots, at least today. I mean, down the road probably, but the bigger the bigger tasks um should be 100% fully automatable. Is it just a money thing? Is it a money and lack of support thing? Yeah, I think I think it is in some ways. I mean, so so the foundation is stability. in order to invest in robotics in a factory environment, you know, you need a you need a stable multi-year time frame uh to make those kind of investments. You mentioned earlier uh the pandemic and PPE, you know, in the pandemic um you know, people were really rightfully upset, you know, that that we couldn't make any of our own masks or PPE here in the US. And so, I don't know if you remember, but at that time there there was that was all over the news. And there was a couple kind of courageous business owners who ra who ramped up either production at a factory that already existed or opened up some new uh capacity producing PPE in the US. Well, within 12 months, those companies were wiped out as the situation normalized and supply flooded in uh from outside the US. So, you know, and tariffs alone doesn't solve that actually. Um, partially because of the uh, you know, the policing and enforcement, partially because it's really just kind of one tool that you need to use among many. And so so yeah, so I think it's it's more of this uh you know, we need an industrial policy in the US that has some sticks like tariffs um that punish people who um you know manufacture outside the US and some carrots uh like you know support uh you know having a highly educated trained workforce. Um you know we don't want illegal immigrants in the United States but you know what America was built on immigrants. we should have a really strong legal immigration process to get the best and the brightest here and also have the kind of people who can, you know, do the factory work that maybe people generally don't want to do. Um, you know, and then Impact of AI on Product Development I read something about, yeah, back on the support thing real quick. I read something there's a factory in China and they had a they were making something for a guy and he's like, I think uh we're going to probably need to double our our sales if things keep going on this trajectory. So the factory just went out. They got funding from the Chinese government and they started building a whole new factory down the road. Uh without a commitment, without, you know, anything, just going, "Okay, we're going to get ahead of this. We're going to go put this factory up and we got 200 guys. We can have this up in 3 weeks." Uh you know, you remember the pandemic, they were building these freaking crazy things and like, you know, working 24/7. That mentality doesn't exist here. Uh, and that's part of our problem is I think it's a mental shift and it's a cultural shift that I don't know that we can do uh without something another 911 type of catastrophe happening that unites us. Yeah. No, I I think you know I hope we actually treat the current situation as Cultural and Mental Shifts in Business you know rather than you know like a trade war or something. We need to treat it more like a Sputnik moment you know like a wakeup call that it's not that we need to you know like punish somebody else. It's that we need to wake up actually uh and do some things different. So So what's going to happen? Is PL pubical going to be around in 5 10 years or are you going to be uh on to uh the next thing? Uh because right it's it's a hard business. Uh you know we were we were solidly profitable for you know our first uh 13 years of existence and then we've had a rough two years. This year we're profitable again uh after two negative years. So, uh, you know, did you have to cut volume in sales to hit that? I mean, and stop, you know, stop the growth to actually hit the profitability or are you still seeing some growth and you're actually able to return to profitability by shifting some of what you what you talked about earlier? Yeah. So, no, I think it's we just a combination of things. Yeah, we did cut back on growth and focused on where we you know some of that focusing I was talking about you know focus focus away from direct competition with China which is basically on commodity products on Amazon and focus everywhere else which is off Amazon sales and non-commodity products. Um so yeah and I think that is uh you know limits our growth because you those years where we could just do commodity products really was an unlock for fast growth because now you don't need to invest as much you know and it it so but those years aren't coming back you know that 2009 to whatever it was 2018 period where growth was easy um so yeah so so it's more of an uphill battle um but we're fighting it and and we're launching new products uh pretty much every every month and we're actually investing more in each one because we have to. Um, and we don't know when we launch them whether that's smart or dumb. Like we won't know really because of, you know, the the ramp time for maybe a year, you know, whether we're going to get that investment back. How's AI affecting what you're doing? I mean, I had a guy on the other podcast that do marketing misfits who's doing custom shoes right now. AI AI shoes. So, you can actually go on, you take you take pictures with your phone of your feet and you send it to them and they can actually customize. They're doing slip-ons and tennis shoes right now, not a not pure athletic, you know, not not to go play basketball. It's going to get to there and they actually create a custom shoe for you. So, influencers can actually have their own custom shoe. And he says it cuts the shoe time 18 down from 18 months and all these costs for molds and something called locks and all this different stuff that you need to make a shoe to to under three months. Uh and so so do you and it's all AI and it's just on the cutting edge and they're going to expand this to a lot of other things as soon as they dial it in. He's got the founder of uh Reebok uh back at him and on his board young 25-year-old kid uh doing this really really sharp guy. Uh you're pretty on top of this and you you have the the science this the u scientific background there and the the programming background. Where do you see this going? Yeah, you know, everything we talked about actually so far here is actually kind of the view from this point in time, but AI kind of changes everything. I mean, actually the the real path forward as you start looking out three, five, seven years um is uh going to be defined by AI and some of the things we talked about where we feel trapped, you know, as company owners or as a as a whole country. uh AI is going to totally shift the playing field and some of the things we feel trapped about we're not going to be trapped on anymore. And you know I think you this is this is the AI companies talk about this year being the year of agents like you said but really I think what what this year is you know even if the agentic stuff goes into next year is the year where kind of everybody realizes software development is never going to be the same. Um, so, uh, the products that we're launching at Pluggable, uh, this spring, u, including some that we launched, uh, late last fall, would not have been possible without, uh, AI help. I mean, we we would have been slower. We would have had to invest more and that slowness and that greater investment would have meant we some of we wouldn't have done the products in some cases. So it's already affecting our velocity of software of product development and we're combining software with hardware more. And then the um yeah the other thing I mean this The Power of AI in Business uh the I'm being a software engineer and actually this is true. We talked earlier about uh Steven Yang of Ankor. Both Stephen and I were software engineers like two of the you know he's got the biggest electronics company in the world at this point in terms of the uh the peripheral space and uh we're not nearly that large. We're like a hundth anchor size but we're you know we've been successful for a long time. Both of us did the same thing back in 2009 2010 2011. We were writing software against the the what was at that time called the MWS API. We were pulling the reports. We were digging through the data. We were building just in time inventory management systems to do purchase orders at the right time, you know, based on the sales velocity, monitoring our listings, you know, looking for, you know, competitors, you know, uh or or or am Amazon processes gone arry, sticking our products in wrong categories and things like that. So I've been doing that for 15 years with software that I handcrafted initially you know kind of back in uh uh 2011 2012 and then in later years I was less involved but I had expensive people who had to maintain and move that software forward. Well come around to 2025 that software is so much easier to make now. Um you know we uh you know we had to recreate a piece of a piece of functionality around day parting that uh the overall system we had a system to do that and that overall system took several years to create before basically in about a month I recreated the day parting tool and I did it totally AI style. So I used a an AI editor called cursor in cursor if you know if you know what you're doing you basically go in and you you just through kind of prompting it's called they're called cursor rules you you define all the boundaries of of what you're going to uh limit the AI really I want you to do it in Python I want you to you know have this deploy on uh you know Google cloud run I want you to only use these libraries and this database don't don't give me a mishmash of stuff focus in on these tools and now go, you know, start pulling the Amazon advertising campaign structure and then start, you know, running uh time jobs to flip uh uh campaigns on and off, you know, to do the day parting functionality. And so I did I actually wanted to understand what was happening with AI coding because I've been dabbling with it. And so this was a good kind of like substantial project and it was amazing how fast it is. I mean, clearly a 10x uh in productivity increase. Is it, you know, kind of problem free? No. There's it's it's it's hard to kind of wrangle this strange intelligence that LLMs are that that are just brilliant in some ways and really dumb in other ways. And and it's kind of like managing a a uh an employee, you know, like man like I've managed a lot of programmers in my career. It feels a little bit like managing a programmer who's precocious but out of control, right? And uh but that but that's what it is, you know, and and you and they and they and they write them in the end code so fast that if you can corral them properly, you can develop software in onetenth the time. And so I think this changes everything. When we talk about all the problems we've been talking about with robotics and automation and how do we compete as a brand, how do we compete as a country? If we can be smarter and faster about applying AI, that's where the real battle actually lies right now and all these other battles that whether we've won them or lost them in the past. I'll tell you what, there's there's preAI and post AI and those battles are passed. We've got a different set of battles ahead of us. And you know, we're not in a bad position. I mean, we've got some of the best AI uh companies in the world are in the US. Yes. Uh China has been way more focused on AI than we have at a national level for way longer. I mean, they've been investing at a national level in AI for over 20 years. I we still don't really have national investment in AI here. We we've got private equity and traditional, you know, startup investment, but um but we're, you know, we're still doing well. Um and uh yeah so I so I think at at for Strategic Implementation of AI in Business each of us you know who are thinking about you know how do I build a company or how do I sustain my company this is the key question is you know h how do I apply AI smartly given you know where AI is right now and and that's such a hard thing to track because you know what AI is right now is changing month to month you know week to week month to month as we approach the singularity and um you know and so You know, you you mentioned uh you know, uh Ritu Java earlier. I I like I I I'm watching everybody, including you, Kevin, and and people like Ritu, you know, the the newsletters. You're just hungry for, you know, these little tips and tidbits about what's really working, what's not. And almost every day I get an unlock where I go, "Oh, that's working. I can do that." And and and now there's a new, you know, kind of tool in the toolbox. And we're all getting like, you know, if we if if you love this stuff, you're getting new tools, uh, you know, new presence in your toolbox. I mean, heck, practically every day now. Yeah. I I don't know what the answer is on that. But what I do know with and I would gamble almost everything on it is that if you're not, you said it exactly, it's how do you implement the AI to have that competitive edge and and keep and keep one step ahead by using the AI of everybody else. And I think that's the competitive advantage that the smart businesses are going to have no matter what they're selling or no matter what they're doing and and constantly be evolving as the AI is constantly changing and and be flexible. And I think that's where you're going to see massive opportunities coming up and people that can come in and help businesses do that I think is is going to be be a major opportunity. That's something that I'm looking to double down on with a company I have called Dragonfish that we were going to go one direction, but I I'm right now um we still have a few things to figure out, but and I don't know the exact answer, but I think we're going to pivot and actually make that company do exactly what you just said, come in and help the PE help people fix these holes and and put AI on top of things to actually take them to the next level and put these at least short-term moes, if not long-term moes. around them uh that's going to allow them to compete. Well, Bernie, we could talk about this I think for another four hours uh and geek out on this stuff. This is uh this is cool stuff. Uh fun. Hopefully those of you listening have uh opened your eyes a little bit and learned a few things uh from this. Uh Bernie's one of the smartest guys I know in the space and he keeps up with everything that's going on. So, what he says, listen to go back and rewind this and listen to it again. download the transcript or something and read it uh and pass this episode on because I think if you look back on this uh put this in the vault and three five years from now come back and listen to this, I think you're going to be like, "Holy cow, those guys were on to something." Uh and and uh they were right. So Bernie, I really appreciate you coming uh and uh and sharing today. This has been uh this has been great. I always love talking to you, Kevin. Thanks so much for having me on. And if people want to reach out or follow you, uh or learn more uh about your thoughts and processes and anything else you're involved in, uh what's the best way for them to do that? Yeah, just just reach out to me at bernieplugible.com. I'm I'm mostly on LinkedIn. I I'm actually, again, I'm not a marketing guy, not a lot of uh you know, sales stuff, but I I will actually make a pitch for something. If anybody is interested in bringing manufacturing back to the US, I would love to have you reach out because uh you know I think it is a big challenge and we're being kind of forced to confront it and uh I'm I'm happy to talk to anybody who's interested in the same thing. Awesome. Well, thanks again Bernie. Thanks again, Kev. The world is changing rapidly right under our feet and if you're not evolving with it, you're going to be missing out. And there's massive opportunities coming, but it takes a change of mindset, a change of culture, and change of approach. But those that stay on the cutting edge of this and implement some of what Bernie and I just talked about and are very well-versed in this are going to be the ones that survive and prosper while a lot of people fall away. So, I hope this episode has given you some really good things to think about and some good ideas. one of the smartest guys in the space that's got a lot of experience. Uh really respect uh Bernie quite a bit. So, thanks for joining us on this episode of the AMM podcast. We'll be back again next week with another awesome guest and another awesome episode. Until then, make sure you're subscribing to my newsletter, billiondollscellers.com. It's free every Monday and Thursday. I cover some of this kind of stuff with AI and everything. So, if you want to stay on the cutting edge, that's where you need to be. Billiondollarcellers.com. Take care and we'll see you all again next