Amid AI hype, true progress depends on the accuracy of sensor-driven data collection.

While the world is flummoxed over the up-and-down nature of tariffs and the political drama they create, one bright spot in the news the past year or so, and impacting our industry more than any, is artificial intelligence, or AI.

Indeed, if your investment portfolio lacks an AI stock, or your customer base doesn’t include a player in the AI world, pundits believe you are missing the boat. But I keep thinking, what exactly powers the boat?

Riding out tariff turmoil takes more than watching the balance sheet.

I took a few economics courses in college, but I’m no Adam Smith. And I have predicted the future reasonably accurately, but no one would mistake me for a prophet. What I do understand, however, after nearly 50 years in manufacturing, most spent as a corporate president, is the impact of costs on profitability. More specifically, the impact of dramatic and unpredictable rising costs on a business’s ability to thrive, survive or founder.

Cost accountants typically separate expenses into two overall buckets: fixed costs and variable costs. Fixed costs may include items such as insurance, occupancy, benefits and so on. Variable costs include materials, supplies, labor, etc. Within a couple of years in manufacturing, however, I realized that in the real world only a small portion of costs are fixed, and the majority are truly variable. While all costs must be watched, monitored and managed, variable costs are the ones that make or break a balance sheet and income statement.