A Revolution in Regulation
The Supreme Court’s decision weakening federal agencies is expected to bring a wave of litigation and uncertainty.
Good Morning!
Here are today’s highlights:
Jason Fried thinks failure is overrated.
WFH brought lots of moms into the workforce. Then came RTO.
Which city has the highest business taxes in the country? (Hint: Shawn Busse probably knows.)
For this entrepreneur, bootstrapping was the secret sauce.
MANAGEMENT
Jason Fried says we really don’t learn much from our mistakes: “For me, it’s a simple shift. I’ve always just felt that some stuff works out better than other stuff. I think that’s the healthiest way to think about it. Just a drop of relative recognition is all it deserves. I also don’t think you’ll find that many lessons looking back on what didn’t work. You probably don’t really know why it didn’t work anyway. It feels good to imagine you do, but there isn’t a long history of people doing the same thing again, swapping this one wrong thing for another presumed right thing, and turning it all around.”
“But if it was so easy to see what went wrong on reflection, shouldn’t there be turnaround stories everywhere you look? More likely, it is a swirling confluence of decisions, ideas, events, timing, conditions, and serendipity that drove it off the map. It’s easy to reflect comfortably on convenient assumptions about the past, but real reasons happen in present conditions.”
“So yeah, some stuff works out better than others. That means some stuff doesn’t work at all. But it’s not a failure, and it doesn’t need a name. It just didn’t pan out as you hoped. Move on, look forward, learn by doing and not reviewing, and get on with it. Next time isn’t that time again, it’s a time that never happened before.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
SCOTUS Unleashes a Regulatory Revolution: This week, Gene Marks and I discuss the Supreme Court’s decision, released on Friday, that takes authority to interpret laws passed by Congress away from federal agencies and gives it to judges. Whatever you think of the merits of the ruling, Gene points out, it creates tremendous uncertainty for businesses trying to comply with the law. For example, a new overtime rule is supposed to go into effect today. Should businesses start following it, Gene asks. Or should they wait to see what happens with pending litigation?
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REGULATION
Corporate lobbyists are ready to start filing lawsuits based on the Chevron ruling: “Mere hours after the Supreme Court sharply curbed the power of federal agencies, conservatives and corporate lobbyists began plotting how to harness the favorable ruling in a redoubled quest to whittle down climate, finance, health, labor, and technology regulations in Washington. The early strategizing underscored the magnitude of the justices’ landmark decision, which rattled the nation’s capital and now appears poised to touch off years of lawsuits that could redefine the U.S. government’s role in modern American life.”
“Some of the most powerful corporate interests under the government’s watch predicted the decision might aid in their ongoing legal clashes with the Biden administration over its policies to cancel student debt, improve overtime pay, ensure net neutrality, protect waterways from pollution and enhance investor safeguards, including the government’s nascent work to regulate cryptocurrency.”
“NFIB already has filed or joined multiple lawsuits against the Biden administration, including two recent cases targeting federal rules that could enhance workers’ benefits and expand overtime pay. Going forward, the group expects lawyers to ‘raise the decision’ on Chevron with judges as they weigh whether the Labor Department repeatedly overstepped its authorities, Milito said.”
“‘I think what this means is a level playing field for anyone who is sued by a federal agency, or who sues a federal agency,’ said Mark Chenoweth, the president of the New Civil Liberties Alliance, which represented one of the plaintiffs in the Supreme Court case that overturned Chevron. The group has received millions of dollars from the conservative political network of billionaire Charles Koch and his late brother, David, and it represents clients in other lawsuits that seek to quash federal regulations.” READ MORE
HUMAN RESOURCES
Is RTO killing work-life balance for moms? “After emerging from the fog of the early pandemic, mothers found that when working from home was combined with reliable child care, the dual demands of work and home were easier to meet. Moms who held demanding full-time jobs could suddenly achieve what had once seemed impossible: the ability to be a fully present parent without compromising their careers. It was a remarkable revelation. Now, with no compelling explanation beyond the nebulous benefit of in-person collaboration and the importance of office ‘culture,’ they were being told the experiment was over.”
“For this story, Bloomberg Businessweek spoke to nearly two dozen women who held jobs ranging from tech executive to administrative assistant at companies as large as Alphabet’s Google and as small as a mom-and-pop business in the Midwest. Some were single parents. Others were married with a high-earning spouse.”
“All wanted to further their careers (which is why many of them asked to go by just their first or middle name or, in some cases, to remain anonymous). But when asked to give up the flexibility remote work afforded—to, as many of them put it, choose between their kids and their jobs—they decided they were done.” READ MORE
Chicago’s minimum wage goes up today: “Chicago’s minimum wage will get its annual increase Monday, when it will hit $16.20 for most workers across the city. Chicagoans familiar with the city’s minimum wage ordinance will notice two significant changes this year. First, the minimum wages for large and small businesses are now equal, not tiered. July 1 also marks the first step in the city’s plan to gradually phase out the tipped minimum wage by 2028. Chicago became the largest U.S. city to agree to independently phase out the subminimum wage when the City Council passed legislation to do so last fall.”
“This summer, the minimum wage for tipped workers will rise to $11.02. The gap between the tipped and standard minimum wages will gradually shrink until they reach parity July 1, 2028.”
“The city’s minimum wage ordinance stipulates that the minimum wage increases at either the rate of inflation or 2.5 percent per year, whichever is lower. The consumer price index rose 3.3 percent over the year in May, meaning this year’s increases will not quite match the rate of inflation.” READ MORE
TAXES
A report finds that Portland has the highest business taxes of any city in the U.S.: “This new take on Portland's tax situation is notable for bringing into focus how a range of taxes come into play for Portland residents and businesses. That's a key point about ‘Portland taxes’: The heavy burden is due to the city, state, county, Metro and TriMet taxes that Portlanders, uniquely, can't escape. ‘Because this tax burden is spread across so many taxes … it can be difficult to appreciate the full burden,’ report author Jared Walczak writes. ‘Unless you’re paying it.’”
“For instance, the nation-highest 20.92 percent top marginal rate that Walczak calculates for C corps is the product of Oregon's 7.6 percent corporate income tax rate and a corporate activity tax with an effective rate of 6.72 percent; Multnomah County's 2 percent business income tax; Metro's 1 percent supportive housing services tax; and, finally, the city's 2.6 percent business license tax and 1 percent clean energy surcharge.”
“The corporate activity tax figure of 6.72 percent that Walczak notes bears explanation: It's based on converting a 0.57 percent tax on gross receipts into the equivalent tax on net income. The calculated effective rate will vary from business to business, but if we assume a profit margin of 7 percent (about the average for small businesses) and an equal split in the cost of labor and goods, the CAT is the equivalent of a 6.72 percent income tax,’ Walczak writes.” READ MORE
THE ECONOMY
Inflation continues to cool: “The Personal Consumption Expenditures index climbed 2.6 percent in May from a year earlier, matching what economists had forecast and down from 2.7 percent previously. After stripping out volatile food and fuel prices to give a better sense of the inflation trend, a ‘core’ price measure was also up 2.6 percent from a year earlier, down from 2.8 percent in the April reading. And on a monthly basis, inflation was especially mild, and prices did not climb on an overall basis.”
“Given Friday’s fresh inflation data, the sticky inflation early in 2024 looks ‘more and more like a bump in the road,’ Omair Sharif, founder of Inflation Insights, wrote in note after the release. ‘However you want to slice and dice it, we’ve made considerable progress on core inflation over the last year.’”
“Inflation remains above the Fed’s 2 percent target, but it is much slower than it was at its 2022 peak, when overall P.C.E. inflation hit 7.1 percent. And a separate but related measure, the Consumer Price Index, reached an even higher peak of 9.1 percent and has now come down sharply as well.” READ MORE
FEATURE
Justin Gill bootstrapped Bachan’s, a barbecue sauce that could be Siracha 2.0: “‘I wanted to build a brand that was approachable and accessible,’ says Gill, ‘one that would work just as well at Whole Foods as it would in Walmart.’ The mass appeal of Bachan’s is one of many reasons why Gill’s sweet and savory sauce started to stick soon after he launched the brand in 2019. A beloved family recipe is another. Bachan’s, named after the Japanese American term for granny, originated from a sauce his own grandmother made for decades. Bachan’s is now the top-selling barbecue sauce at both Amazon and Whole Foods, and the fastest-growing condiment brand in the country. With estimated annual revenue topping $70 million, Bachan’s is having the kind of moment that made Sriracha founder David Tran a billionaire.”
“‘I bootstrapped for so long and took so much personal financial risk to be able to control my business and then become profitable,’ Gill says. He has held onto the majority ownership, even after raising $17 million from investors over two rounds and making sure that all of Bachan’s employees, from the warehouse to the headquarters, own their own shares.’”
“Gill credits his control with fighting for the right terms when dealmaking, instead of going for bigger valuations. He says he has no plans to raise more in the short-term, adding that the company is ‘totally self-sustainable.’”
“After Bachan’s launched in 2019, Gill took it upon himself to hawk the sauce himself. He gave out samples at stores every weekend in that first year—from natural food stores around Northern California to specialty stores near the headquarters in Sebastopol. When the pandemic hit, the home he shares with his wife and three young daughters became Bachan’s fulfillment center.”
“Committed to bootstrapping, Gill took on two personal loans from friends—one for $100,000 was tied to his home—but he couldn’t get a small business loan so he maxed out credit cards. Then he invested the money into more social media ads and bigger production runs. The boost worked, and Bachan’s quickly rose to become the top-selling barbecue sauce on Amazon.” READ MORE
THE 21 HATS PODCAST
This Is Not How This Ends: This week, we bring you what we’re calling an Entrepreneurial Fish Bowl with Chris Hutchinson. As you may remember, we recorded one of these at our 21 Hats Live event in Fort Worth, where I shared some of my challenges trying to build 21 Hats and got feedback from the group. We recorded that conversation and turned it into a podcast episode. This time, we’re doing the same thing except it is Jaime Echt, founder and CEO of The Crafters Workshop, who explains her challenges to a virtual group of 21 Hats entrepreneurs. As you’ll hear, Jaime’s challenges are real: Her sales are down. Her customers are aging. Her lease is up. And she’s not sure what she should do next. We’re going to see if a group of 21 Hats Founding Members can offer some support and advice.
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Thanks for reading, everyone. — Loren