Designed in Ukraine, Made in China, Named by ChatGPT
John Ellis has a day job running a consulting firm called Optics for Hire, but he keeps coming up with product ideas. His latest is a device that finds the edge on a roll of tape.
Here are today’s highlights:
Want to improve your pricing? Stop relying on the founder’s gut.
Sarah Segal asks an important question about the future of SEO.
When businesses are labeled Black-owned, does it help or hurt sales?
As office space empties, could the future of San Francisco lie in manufacturing?
RollRanger was conceived in Massachusetts, designed in Ukraine, made in China — and named by ChatGPT: “John Ellis was at a Las Vegas convention center last week, pitching a product he invented to vanquish a common household headache: finding the ever-so-faint edge on a roll of tape. His objective is to make it the kind of item you’d be able to find in the aisles of your local hardware store, or a big retailer like Staples or Target. But the first step in marketing his new gadget — retail price, $14.99 — was the National Hardware Show, where he had a display in a pavilion devoted to inventors.”
“Ellis is not a newbie to the world of entrepreneurship or inventing. But he’s still looking for a break-out hit. He runs a consulting firm called Optics for Hire that designs lenses and related technology.”
“With the RollRanger, he plans to take a different approach, handling production and distribution himself, and keeping more of the sale price, which he hopes to eventually get under $10.”
“He hired outside consultants to help with package design and a plan for retail distribution, but when it came to choosing a name, he consulted ChatGPT, the recently launched — and free — artificial intelligence engine.”
“‘I said, I need product names for a tool that finds the edge of a roll of tape,’ Ellis says. ChatGPT spat out a set of options. ‘I read them to my family over the holidays, and RollRanger was the one my wife and my sister responded to most.’” READ MORE
President Biden said he wants to eliminate “junk fees.” But would that save consumers money? “Unlike the upcharge for a first-class plane ticket or a dollop of guacamole, many of these fees don’t get customers anything extra in return. Getting rid of some fees and making others more transparent, the White House argues, would save consumers money, allow them to comparison-shop more easily, and increase competition among companies to offer the best price or service. Even if a combination of new regulations and legislation eliminated these fees entirely—which is unlikely given the divided Congress—there is still no guarantee flying or staying in a hotel would be any less expensive, consumer advocates said. Companies could raise prices to replace the lost fee revenue.”
“In late 2021, Marriott settled with the Pennsylvania attorney general over the disclosure of resort fees. As part of the settlement, Marriott agreed to prominently disclose the total price of a hotel stay, including room rate and all other mandatory fees, on the first page of its booking website as part of the total room rate. This didn’t eliminate added resort fees.”
“In 2019, lawmakers introduced a bipartisan House bill that would require hotels and short-term rentals to list their upfront cost, including all fees. The bill didn’t progress.” READ MORE
There are a lot of ways to get pricing wrong: “‘A subscription, in a nutshell, is a quantity discount,’ says Oded Koenigsberg, professor of marketing at the London Business School, who says he sees this and other pricing ‘inefficiencies’ everywhere he shops. Suboptimal pricing models took root during the decade-plus of low inflation we just came out of because few companies had the motivation to alter their strategy. That left them sacrificing potential profits, even as improved data analytics offered the possibility of pricing more precisely, says James Wilton, managing partner at advisory firm Monevate. ‘Subscriptions are often a hangover from the licenses of the early software days,’ Wilton says. Companies are reluctant to shift pricing, fearing that if ‘customers don’t like it, they will leave.’”
“When the economy is strong, companies typically hesitate to let customers go, even unprofitable ones. ‘They want revenue, they want market size,’ Koenigsberg says. But when the business runs into trouble, ‘they’ll remove customers that are drawing them further into the red.’”
“He suggests not waiting for the downturn; even in good times, it’s smart to let go of clients who eat up time and effort but don’t provide enough profit to be worth the trouble.”
“Dan Bernoske, CEO of revenue consulting firm Cortado Group, notes that entrepreneurs often trust their ‘gut instinct’ on pricing. That, though, may not dovetail with what clients are willing to pay.”
“‘One of the biggest challenges,’ Bernoske says, ‘is reducing reliance on the founder.’” READ MORE
Sarah Segal asks an important question about AI-powered search and SEO:
Does designating a business as Black-owned help or hurt sales? “Tech companies from Yelp to Instagram have increasingly been experimenting with ways to highlight and promote Black-owned businesses on their marketplaces. But Michael Luca, an associate professor at Harvard Business School who studies ways in which tech companies can create a more inclusive society, wanted to know one thing: Are these practices actually working? According to a new study he co-authored, which focused on Yelp’s decision to introduce a ‘Black-owned’ business label in June 2020, they are. He found that the feature led to a 30-percent increase in sales for those businesses, suggesting there had been pent-up demand from consumers to support them.”
“The study, which was based on data shared by Yelp, looked at restaurant activity on the platform before and after the Black-owned business button was introduced. Luca found that the label also led to a 10 percent increase in weekly in-person visits to the restaurants, showing that the impact went beyond online engagement and into the real world.”
“Based on previous research, including his own on racial discrimination on short-term rental site Airbnb, Luca thought that highlighting Black-owned businesses might potentially lead to unintended, negative consequences. ‘If you look at the history of social science research, in most cases, when you raise awareness of the race of a Black person in America, it leads to anti-Black discrimination,’ he said.”
“‘Yelp is not putting pictures and names of the restaurant owners on top of every listing,’ he said. ‘Instead, they’re allowing people who want to find a Black-owned business to more easily search for it.’”
“Interestingly, Luca’s research found that the demand for Black-owned businesses on Yelp came largely from white consumers. He said that supports the idea that Yelp’s new label increased inclusivity, instead of, say, increasing the number of Black customers that visited Black-owned restaurants.” READ MORE
Increasingly, customer returns end up in landfill. So maybe companies should charge a little something for returns? “It's hard to know exactly how many returns are sent to landfills because many retailers aren't eager to share this data, said Glenn Richey, chair of the Department of Supply Chain Management at Auburn University's Harbert College of Business. Getting caught trashing or destroying goods can lead to brand-damaging headlines. On the flip side, strategies to avoid tossing returns could be seen as a competitive advantage worth guarding. According to an estimate by the returns tech platform Optoro, as many as 9.6 billion pounds of returns ended up in landfills in 2021 — equivalent to 10,500 fully loaded Boeing 747s. The 2021 figures marked the height of the ecommerce boom and a 65 percent increase in estimated returns headed for landfills from the previous year.”
“Processing a return involves shipping, labor to inspect the item, materials to repack it, and additional shipping to transport it to a store or warehouse to resell — or to another location to be sold on a secondary market where it may sell at a discount.”
“For retailers without strong moral or environmental values, returns are a pretty simple math problem. ‘If it costs more to process an item and get it to sell in another channel than it does to throw it away, then they throw it away,’ Optoro CEO Tobin Moore told Insider.” READ MORE
A developer thinks the future of San Francisco lies with manufacturing: “What Spear Street Capital is betting on in San Francisco is still a hulking skeleton of concrete and metal at the foot of Potrero Hill. But the developer is billing the six-story, 150,000-square-foot structure at 300 Kansas St. as the city’s first ‘ground-up advanced manufacturing project’ in a long time. The project represents a counter-cyclical play that its developer believes could help kick-start a new wave of manufacturing and lab space as the broader office market struggles.”
“The building’s design, which provides three entry points for vehicle loading onto the ground, first and second floors, would be ideal for companies in biotech, robotics, or autonomous vehicles according to [Ethan McCall, vice president of Spear Street Capital].”
“The developer is building ‘on spec’—or without tenants in hand. That could be a risky prospect amid larger uncertainty in the office market. But McCall argued that the strategy works with the typical timeline of startups, characterized by rapid growth and just as rapid contraction.”
“‘It’s much easier to get people interested in a building like this when they can actually stand in it,’ McCall said. ‘As I sit here today, I’m like, I’m pretty happy we’re not building a typical office building.’” READ MORE
LOCATION, LOCATION, LOCATION
It’s not easy staying weird: “Austin is the fastest-growing major metro area in America, having expanded by a third in the past ten years. It is already the eleventh-largest city. New jobs mop up newcomers as fast as they arrive. Every day, the metro area adds three hundred and fifty-five new residents, while two hundred and thirty-eight Austinites depart, many of them squeezed out by high rents and property taxes, or by the disaffection so many of us feel because of the pace of change and the loss of qualities that once defined the city. Austin is now characterized by stifling traffic and unaffordable restaurants. It was never known as a home for billionaires and celebrities, but in the past few years notable refugees from Silicon Valley, Hollywood, and New York have stampeded into town, with different expectations about what Austin should become—and outsized power to shape the city around their desires.”
“Locals point disdainfully to the Hermès shop and the Soho House on South Congress, formerly the funkiest street in town.”
“Elon Musk is just one of the recent billionaire arrivals hanging around Austin. There were two or three until not long ago; now I hear there are fourteen. Imagine you invite the new neighbors to a pool party and they turn out to be elephants. When they jump in, it changes things.”
“Of course, such complaints are signposts of a booming economy—the kinds of problems many people elsewhere would love to have.” READ MORE
Greg Ip writes that America’s tech giants used to be big and innovative: “Now, they are mostly just big. Their growth has ebbed and their innovations have been underwhelming. Some now see artificial intelligence as the next catalyst for growth. But it remains to be seen whether AI produces a genuinely new product, or serves mainly to entrench these companies in markets they already dominate. The pandemic supercharged sales and profits at Apple, Google parent Alphabet, Facebook parent Meta Platforms, Microsoft, and Amazon.com. In 2022, they returned to Earth: profits at all declined even as they rose for the S&P 500 stock index as a whole. Revenue growth at all five lagged behind the overall market.”
“Some of this reflects transitory hiccups from exchange rates and supply-chain problems. Some is more deeply seated. Active worldwide users at Meta’s Facebook and Instagram, Google’s YouTube, and Twitter grew just 1 percent to 3 percent last year, Sensor Tower estimates.”
“It is too early to predict exactly what impact AI will have, except, perhaps, this: It will keep big tech big.” READ MORE
THE 21 HATS PODCAST
Walking Away From a Salary: This week, Sarah Segal tells Shawn Busse and Jay Goltz why she’s decided to take her public relations business back after selling it two years ago to a larger firm so it could handle the back-end stuff and allow her to focus on public relations. For Sarah, the immediate result of the decision to break away has been an exhausting few months starting over, including reincorporating, finding health insurance, and reducing her own pay. Meanwhile, Jay suggests an old-school marketing tactic that involves leveraging an envelope, a stamp, and the post office. And Shawn explains how he created a sales process that has allowed him to remove himself from day-to-day sales.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren