A Family Business Encounters John Oliver
The bakery in upstate New York scores new equipment, great PR, and a few laughs.
Good Morning!
Here are today’s highlights:
So far, artificial intelligence’s impact on search results has been to take us from spam to slop.
Jim Schleckser lists the issues that can make a business unsellable.
Here’s why Luis Rivera, who left an executive chef position to start his own business, charges $13.50 for a brisket sandwich.
The dispute over Elon Musk’s pay package demonstrates the importance of getting compensation incentives right.
PUBLIC RELATIONS
Here’s how a family bakery turned a brush with John Oliver into new equipment and great PR: “A small, family-owned bakery in the Hudson Valley is getting thousands of dollars worth of new kitchen equipment following a good-humored feud with John Oliver. On Sunday's episode of HBO's ‘Last Week Tonight,’ Oliver recounted how the viral back-and-forth stemmed from a stunt on his show where he purchased all of the kitchen equipment from a shuttered Red Lobster in Kingston, NY, at auction. Oliver recreated his own Red Lobster to exclusively manufacture the chain's hallowed cheddar biscuits. But according to local outlet News 12, Oliver had beaten out another suitor.”
“Eric Deising, owner of 59-year-old Deising's Bakery in Kingston, had left a sign on the defunct Red Lobster inquiring about a flat-top oven and convection oven, News 12 reported. ‘John — he's just beating me all over the place,’ Deising told the outlet of missing out on the equipment.”
“Oliver responded to the report on his show Sunday. ‘Last Week’ had already donated all of the Red Lobster equipment, he said, and they hadn't even purchased either item Deising requested to begin with. But Oliver offered a challenge. If the bakery would make and sell bear-shaped cakes with Oliver's face on them, he said he'd gift Deising's new ovens.”
“On Monday, the bakery began selling ‘cake bears’ with Oliver's face affixed with edible paper, News 12 reports. Peter Deising, another owner at the bakery, told Business Insider the items have been a smash hit, with approximately 100 selling every hour. They're priced at $8 apiece.”
“Deising's plans to donate 100 percent of the proceeds from the cake bears to People's Place, a local food pantry, Deising said. ... Deising told BI the kitchen equipment — which he estimates is worth thousands of dollars — is set to be delivered on Thursday.” READ MORE
ARTIFICIAL INTELLIGENCE
We’ve gone from spam to slop: “Slop, at least in the fast-moving world of online message boards, is a broad term that has developed some traction in reference to shoddy or unwanted AI content in social media, art, books, and, increasingly, in search results. Google suggesting that you could add nontoxic glue to make cheese stick to a pizza? That’s slop. So is a low-price digital book that seems like the one you were looking for, but not quite. And those posts in your Facebook feed that seemingly came from nowhere? They’re slop as well.”
“The term became more prevalent last month when Google incorporated its Gemini AI model into its U.S.-based search results. Rather than pointing users toward links, the service attempts to solve a query directly with an ‘AI Overview’ — a chunk of text at the top of a results page that uses Gemini to form its best guess at what the user is looking for.”
“Hence the term slop, which conjures images of heaps of unappetizing food being shoveled into troughs for livestock. Like that type of slop, AI-assisted search comes together quickly, but not necessarily in a way that critical thinkers can stomach.”
“Kristian Hammond, the director of Northwestern University’s Center for Advancing Safety of Machine Intelligence, noted a problem in the current model: the information from AI Overview Is being presented as a definitive answer, rather than as a place to start an internet user’s research into a given subject.” READ MORE
BUSINESS FOR SALE
Jim Schleckser lists the most likely reasons you won’t be able to sell your business: “Consider the buyer's perspective to better prepare your business for sale. My insights are not just theoretical. I've been in your shoes, building and selling businesses. This firsthand experience gives me a unique perspective to offer advice on approaching deals from both sides. Let's look deeper at some of the most critical factors buyers consider that can constrain your dream of selling your business at a premium valuation. You can better prepare and strategize for a successful sale by understanding these factors.”
“Maybe you are the top salesperson or lead engineer. Or maybe you have a knack for marketing. The problem is that when you look for a buyer, they'll first notice how critical you, as the founder, are to the business. That will either cool them to the idea of buying the business or, at best, it might mean that you will have to stick around in the business until the buyer can find a suitable replacement for you.”
“A key barrier to the growth of many small businesses is a lack of or underdeveloped systems and processes. In other words, as the business expands its sales, it needs more people to do all the work. This is an expensive and inefficient way to grow, and most buyers would turn their noses at a business that couldn't grow and scale more efficiently by improving revenue per employee, gaining the benefits of scale.”
“Suppose you want to assure a buyer you aren't hiding anything nefarious in the business. In that case, you will need to have a set of audited financial statements or at least financials that have been reviewed by an outside firm. Ideally, this is also a process you will tackle several years before you decide to sell the business to present a solid track record.” READ MORE
PRICING
Here’s why Luis Rivera, Jr. charges $13.50 for a brisket sandwich in the Bronx: “A New York City native and barbecue aficionado, he became obsessed with a piquant sauce he tasted in 2009 at a Mets game. He set out to recreate it at home, a quest that led him to quit a secure job as an executive chef and enter culinary school. By 2019, he was marketing his own sauces, which evoke flavors of traditional Puerto Rican cooking. He used the Father & Son’s moniker, with a label featuring a snapshot of him and his son stirring a pot. Then the pandemic and an injury kept him home. Mr. Rivera trawled online for insights.”
“In 2021, he started selling his sauces on the weekends at the Gun Hill Brewery in the Allerton neighborhood of the Bronx until it closed last month. A friend brought a smoker for meat to make it easier for customers to taste sauce samples. Food ran out in three hours, he said. ‘The food outshone the sauce,’ he said.”
“For $650 a month, he stores the truck in a Yonkers lot, where he plans to offer takeout and delivery. It would make use of the truck during the week and, he hopes, transform his business into a full-time enterprise.”
“Sometimes he prepares food at a commercial kitchen in Westchester County, which costs him $100 to $300 a visit. He often sleeps in his pickup truck overnight when he cooks meat for an event, and he tailors certain menus. For Co-op City, he added a meat and three-side combo plate for about $20, and to keep families happy, he offered hot dogs, fries, and juice boxes.” READ MORE
COMPENSATION
Brad DeLong argues that tying Elon Musk’s pay to Tesla’s share price turned Tesla into a meme stock: “Mr. Musk changed the world. He wanted to jump-start the decarbonization of human civilization’s energy. He succeeded. He drove Tesla to create the electric vehicle industry as we know it. Yes, he overpromised. But he often over-delivered and over-delivered spectacularly. Truly wonderful things happened with Tesla’s performance as a technology inventor, deliverer, and deployer. But ‘happened’ is in the past tense. Much has changed since 2018, the year Tesla dreamed up an unorthodox pay package that, in theory, tied Mr. Musk’s pay to the company’s performance. Problem is, the performance was not for making high-quality cars or making affordable cars or making cars at scale. The performance was for pushing Tesla’s stock price up.”
“The board promised Mr. Musk — at his urging — that if he made the board and the shareholders truly wealthy by boosting the stock price, by whatever means, he could have 12 percent of the company. Yet I believe this pay package helped drive his descent from visionary business leader to bizarre carnival barker.”
“It was no longer about getting better at making high-quality electric vehicles for which there was strong demand. For Mr. Musk, incentivized by his pay package, it became about a stock price that must go up.”
“After 2018, Mr. Musk went all in. He made noise, particularly on Twitter. He still over-promised, but he no longer over-delivered; instead he jumped from moonshot theme to moonshot theme to boost the meme-stock association of Tesla.” READ MORE
POLICY
New York has passed a law—awaiting the governor’s signature—that makes black market restaurant reservations illegal: “Should she sign it, New York will be the first state in the country to ‘combat the trend of predatory software flooding the online restaurant reservation marketplace,’ a press release states. New York is uniquely qualified to be the first, the city already with arguably the most competitive reservation wars in the country. Trying to get in at Carbone at 6 p.m. on a Friday night for three people? Don’t even bother. As reservation platforms like Resy, Opentable, Tock, and SevenRooms, rise in New York, they’ve made competing for open slots a reality show.”
“There were perhaps some legitimate reasons for the rise of the black market: During the omicron wave, the Reddit group R/FoodNYC lit up with users trying to hawk their nonrefundable, $1,500 fine dining reservations after testing positive for COVID. In the years following, the subReddit has stayed active as a place to transfer a reservation.”
“The bill is lauded by the New York State Restaurant Association. Assemblymember Alex Bores, also backed it: ‘New Yorkers should not have to pay shady middlemen just for the right to a dinner reservation,’ he said. ‘With this legislation, we are ensuring that families can celebrate a graduation, anniversary, or birthday without a $250, $500, or even $1,000 cover charge. We also protect restaurants from increased cancellations and protect workers from lost tips. A true win-win-win.” READ MORE
RETAIL
Once-tiny Asian food shops are now reshaping the American grocery market: “In the 1970s and ’80s, as Asian immigration to the United States soared, grocers like H Mart; Patel Brothers, an Indian grocery founded in Chicago; and 99 Ranch Market, originally focused on foods from China and Taiwan, opened to meet the demand for ingredients that tasted like home. These were tiny mom-and-pop shops in suburban strip malls or outer boroughs with large Asian immigrant populations. They weren’t fancy, but they were vital to their communities. Now, those same shops have transformed into sleekly designed chains with in-store roti machines, mobile-ordering apps and locations across the country — all aiming to serve the fastest growing ethnic group in the United States and the millions of others who now crave flavors like Shin Ramyun, chili crisp, chaat masala, and chai.”
“Last year, Americans bought half a billion packets of Shin Ramyun, the spicy, beefy Korean instant noodle. The bold red-and-black packaging feels inescapable: It’s a staple of college dorm rooms, bodegas, middle-of-the-country Walmarts, and viral TikTok videos.”
“But 30 years ago, the noodles were largely unknown in the United States. No grocery store would stock them, said Kevin Chang, the director of marketing for Nongshim, Shin Ramyun’s parent company. Except, that is, for a few small Korean grocers, including a fledgling shop in Woodside, Queens, called H Mart.”
“The H Mart of today is a $2 billion company with 96 stores and a namesake book (the best-selling memoir ‘Crying in H Mart,’ by the musician Michelle Zauner).” READ MORE
THE ECONOMY
Inflation cooled in May: “For the second straight month, inflation slowed — welcome news for American households and policymakers after a hot start to 2024. The latest CPI figures show overall prices did not rise at all — compared to the 0.3 percent increase in April, while the core measure rose by the same amount. Over the last 12 months ending in May, the index rose 3.3 percent, compared to 3.4 percent in April. The core index rose 3.4 percent over the last 12 months, down from 3.6 percent the prior month.”
“What to watch: The Federal Reserve pushed out the timeline for potential rate cuts this year after signs that inflation appeared harder to stamp out than initially thought and the overall economy has remained strong. The Fed will release its latest interest rate decision Wednesday afternoon.” READ MORE
One way to assess the U.S. economy is by comparing it to those of its peers: “Four years ago, the pandemic temporarily brought much of the world economy to a halt. Since then, America’s economic performance has left other countries in the dust and even broken some of its own records. The growth rate is high, the unemployment rate is at historic lows, household wealth is surging, and wages are rising faster than costs, especially for the working class. There are many ways to define a good economy. America is in tremendous shape according to just about any of them.”
“The American public doesn’t feel that way—a dynamic that many people, including me, have recently tried to explain. But if, instead of asking how people feel about the economy, we ask how it’s objectively performing, we get a very different answer.”
“Right now America’s economic-growth rate is the envy of the world. From the end of 2019 to the end of 2023, U.S. GDP grew by 8.2 percent—nearly twice as fast as Canada’s, three times as fast as the European Union’s, and more than eight times as fast as the United Kingdom’s.”
“‘It’s hard to think of a time when the U.S. economy has diverged so fundamentally from its peers,’ Mark Zandi, the chief economist at Moody’s Analytics, told me. Over the past year, some of the world’s biggest economies, including those of Japan and Germany, have fallen into recession, complete with mass layoffs and angry street protests. In the U.S., however, the post-pandemic recession never arrived. The economy just keeps growing.” READ MORE
THE 21 HATS PODCAST
I Decided to Slow Our Growth: This week, Jennifer Kerhin tells Shawn Busse and Jay Goltz that she finally managed to take her first real vacation since starting her business almost 20 years ago. The vacation is part of a decision she made last year to regroup a bit, in part by backing off on her sales and marketing outreach. The goal is to give her team and herself a bit of a respite while they catch their breath and while Jennifer institutes processes that will improve operations. Of course, that raises an obvious question: Will she be able to turn the growth back on when the time comes?
Plus: Shawn and Jay explain how they’ve eliminated negotiation from their hiring regimens. And all three debate who’s really responsible when owners pay for a marketing plan that doesn’t work: Is it the salesperson who pitched the plan? Or the owner who fell for the pitch?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren