Have Owners Given Employees Too Much?
We all know the risks of not offering enough. What are the risks of offering too much?
Here are today’s highlights:
The rate at which employees are quitting has fallen to pre-pandemic levels.
Here’s how Bird went from startup to unicorn to bankruptcy in record time.
To infinity and beyond: The shop that inspired ‘Toy Story’ is closing down.
Family business of the year: A son sends his father and brother to prison.
THE 21 HATS PODCAST
Have We Been Too Generous With Employees? This week, Mel Gravely, Jaci Russo, and William Vanderbloemen talk about the possibility that, after several years of the Great Resignation and the labor shortage, some owners may have given away the store. We all know the risks of not offering employees enough. What are the risks of offering too much? How do you even know when you’ve crossed the line? The owners also discuss why this might be a good time to consider acquiring other businesses. “I think this is a time to double-down,” says Mel. And Jaci explains how she and her team are reviewing everything the company does to see if AI can be employed to improve each and every process.
Plus: How exactly, in this day and age, are business owners supposed to keep track of all of the subscriptions—and all of the subscription log-ins—that they and their employees have acquired through the years? How much money are they spending on stuff they no longer use? “Thanks a lot,” responds Mel. “I’m starting to sweat.”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
The era of pandemic resignations is officially over: “Workers called it quits less frequently in 2023, a sign confidence in the labor market is falling as the U.S. economy is expected to slow and Americans are taking longer to find new jobs. That is a turnaround from the years just after the pandemic took hold, when resignations surged and companies faced labor shortages. In 2021 and 2022, employers put up billboards seeking workers, eliminated background checks, offered big raises, and handed out signing bonuses to restaurant and factory workers.”
“Last year, workers quit 5.6 million fewer jobs from January through November than the same period in 2022—a decline of 12 percent, according to the Labor Department.”
“The rate at which employees are quitting fell to pre-pandemic levels in recent months while companies’ pace of hiring has normalized. That cooling stands in contrast to a historically low 3.7 percent unemployment rate at the end of last year.”
“December and 2023 data on quits, hiring and job openings will be released at 10 a.m. Eastern time on Tuesday.” READ MORE
Can ChatGPT write an effective investor pitch? “It’s a question Triangle Inno asked, plugging in a quick prompt: Write a pitch for a tech startup seeking to raise $1 million. ChatGPT delivered, but venture investors Inno talked to said the template it created missed the mark with generic language and cliches. The template ChatGPT created was divided into sections labeled intro, the problem, the solution, market opportunity, competitive advantage, traction, revenue model, use of funds, financial projections, investment opportunity, and conclusion. ‘We are not just solving a problem; we are reshaping the landscape,’ the template reads, calling the made-up company a ‘groundbreaking opportunity.’”
“‘Each cliche chews away at the founder's authenticity,’ said Scot Wingo of the Triangle Tweener Fund. ‘The investor is further and further away from understanding your motivation and story. In early stage, it’s often said you are betting on the jockey more than the horse … the entrepreneur really matters.’”
“So for entrepreneurs looking to monetize ChatGPT as they fundraise in 2024, it’s a start, but just part of the prep work.” READ MORE
This is why Bird, the scooter startup once valued at nearly $3 billion, became roadkill: “For all the exuberance about Bird’s potential to be another Uber, the business differed from its role model in one important way: While Uber was mainly a software business that relied on using other people’s cars, Bird was mainly a hardware business that had to spend heavily on its own fleet of vehicles. The electric scooters Bird sprinkled throughout cities had to be purchased, charged, and repaired (according to one analysis, the early scooters that Bird purchased lasted less than 30 days on average). Bird began to design and manufacture its own scooters, hiring an in-house R&D team with aerospace and automotive experience.”
“[CEO Travis] VanderZanden was ‘obsessed’ about vehicle design and creating a green ride ‘better suited for short-term transportation than Tesla cars,’ [Mark] Suster, the Bird investor, told Fortune, though the move would drive up operating expenses.”
“To keep its first-mover advantage, Bird spent enormous sums shipping scooters around the globe and into the U.S. ‘The amount of money we spent on airfreighting in 2018 was mind-blowing,’ a former Bird executive said.”
“Unlike many of its rivals, Bird resisted adopting swappable scooter batteries. When a Bird scooter ran out of juice, a worker had to retrieve the vehicle and replace it with a fully charged scooter.”
“After initially hiring contract workers to maintain its scooters, Bird outsourced the job to ‘fleet managers,’ a franchise-type model that came with major trade-offs. Bird could recommend that fleet managers do things like put more scooters in one city location, but it couldn’t compel them to do so.” READ MORE
Even the best office buildings are feeling the effects of higher interest rates and work from home: “Rents at the highest-end buildings have been falling, while the rate of leasing has been slowing. Tenants have become more sensitive to costs in a world of higher interest rates and lingering concerns about a possible economic slowdown, market participants say. Owners of the most elite buildings escaped this fate for a while by convincing the market they had created a new class of office tower—one that surpassed the traditional Class A building at the top of the pecking order. These landlords persuaded blue-chip tenants that reluctant workers would return if only their offices sparkled with lush roof decks, fully loaded gyms and food prepared by Michelin-starred chefs.”
“‘The ship has sailed on full return to the office for most companies,’ said Rob Sadow, chief executive of Scoop Technologies, a software firm that developed an index that tracks workplace strategies. ‘They’re not going to go from three days a week to five days a week by making their space nicer.’”
“That is one reason why few office developers are considering new ground breakings. Current rents don’t pencil out for building expensive space. The U.S. had only 31 million square feet in office construction starts last year, the lowest level since 2010.”
“In the fourth quarter, 62 percent of companies offered some form of remote work, up from 51 percent one year ago, according to Scoop. On average, those companies with hybrid strategies required workers in the office 2.5 days a week in October, Scoop said. In 2021 and 2022, many companies still expected to bring workers back five days a week and were leasing space with that in mind.” READ MORE
The SBA is revamping its federal contracting program for small, disadvantaged businesses: “The Small Business Administration wants to make it easier for people from disadvantaged backgrounds to work with the government. The SBA unveiled an upgraded program called Empower to Grow last Thursday. This program offers coaching and training services to small, disadvantaged businesses to help founders tap into federal contracting opportunities. It's an expansion of the agency's extant 7(j) management and technical assistance program, which dates back to the Eisenhower administration. The program, which is already in effect, features improvements like custom one-on-one training, a new federal contractor master class, and counselors who are fluent in multiple languages.”
“Empower to Grow is geared toward alleviating some of the tension small businesses tend to encounter in the federal procurement process by helping entrepreneurs find contracts, while also offering tips on bidding and completion.”
“Even without the enhancements, the program seems to be paying off: Entrepreneurs that participated in the 7(j) program during fiscal year 2023 saw a 60 percent success rate on the bids they submitted for federal contracts.” READ MORE
Argentina’s new president says he’s delivering a free-market revolution: “In an interview with The Wall Street Journal, Milei said he wouldn’t waver from his campaign promise to shake up the state-controlled economy, despite the acute short-term economic pain it will bring. ‘There is no Plan B,’ Milei said Tuesday at Casa Rosada, the pink-colored presidential palace in downtown Buenos Aires. ‘There is no room for feelings, for emotions. I can’t afford that luxury. There are 47 million people waiting for answers.’”
“Speaking a day before thousands filled the streets and disrupted air travel to protest his overhauls, Milei asserted that the measures are already showing signs of success. Argentina’s inflation, at 211 percent, is close to reaching its peak, he said, predicting that ‘in two years we will have ended inflation, for sure.’”
“He has begun unwinding regulations that have long choked business, including price controls for food and restrictions on renting apartments that had created housing shortages. He has decreed hundreds of changes and has presented an omnibus bill to Congress to reduce the state’s role in the economy.”
“Many Argentines are anxiously waiting to see if a leader with no governing experience and an eccentric personality—Milei is known as much for his extravagant bouffant as he is for his devotion to raw, unfettered capitalism—can really turn around a country that for decades has lurched from one financial crisis to another. Argentina has defaulted on its sovereign debt nine times.” READ MORE
The shop that inspired ‘Toy Story’ is closing down: “Jeffrey’s Toys, the family-run shop that inspired the ‘Toy Story’ movies, is closing its doors after 86 years, becoming the latest business to join San Francisco’s retail exodus. The shop ‘has been struggling for a number of years,’ the family’s attorney, Ken Sterling, said in a statement, citing ‘perils and violence of the downtown environment, inflation, the decrease in consumer spending and the demise of retail across the world.’”
“The store will permanently close Feb. 10 after four generations of family management, Sterling said in an email interview, adding that he believes it may be the oldest toy store in San Francisco. Matthew Luhn, the store’s co-owner, grew up working at his family’s store and eventually landed a job at Pixar as one of 12 animators working on ‘Toy Story,’ SFGate reported.”
“‘We would have my dad come to give us ideas,’ Luhn told the outlet. ‘When we did reference for almost all the Toy Story films, we always went to Jeffrey’s Toys.’ Luhn worked at Pixar for 20 years as an animator, writer and story director, SFGate reported.”
“Jeffrey’s Toys is among the latest stores to close in downtown San Francisco, with many businesses citing crime, rising costs, and the fallout from the pandemic. In December, Luhn told SFGate that the rent on the family’s 45 Kearny Street store had risen to $20,000 per month.” READ MORE
In case you think your family business has problems: “The father-and-son owners of South Philly's original Tony Luke's cheesesteak shop have each been sentenced to serve 20 months in prison for a decade-long tax fraud scheme, federal prosecutors said. The duo behind the restaurant's flagship store at Oregon Avenue and Front Street had pleaded guilty to concealing the shop's earnings and partially paying employees off the books. They avoided paying more than $1.3 million in taxes, the IRS determined.”
“The cheesesteak brand was splintered into an unaffiliated franchise after Tony Luke Jr. was fired from the South Philly shop in 2015. The franchising lawsuit Tony Luke Jr. filed against his father and brother brought to light details of the fraud that took place at the original location at 39 E. Oregon Ave.”
“Between 2006-2016, Tony Luke Sr. and Nicholas Lucidonio failed to deposit millions of dollars in cash to the company's business bank, federal investigators found. The scheme was aided by the fact that many of the shop's customers paid for their food in cash, prosecutors said.”
“In all, prosecutors said the father and son concealed more than $8 million in cash receipts between 2006-2016.” READ MORE
21 HATS PODCAST: DASHBOARD
Is Microsoft Copilot Pro Ready for Prime Time? This week, Gene Marks says that while he’s excited about all of the great stuff we will eventually be able to do with artificial intelligence, business owners should stay away from Copilot for now. As with a lot of Microsoft products, Gene says, you don’t want to be an early adopter. Plus, Gene explains his not-completely-obvious fraud-prevention strategy: Make your people take vacations.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren