‘I Lost My Way’
When Kurt Wilkin’s recruiting business went south, his mindset quickly followed. It took a conversation with a friend who also was struggling to snap him out of it.
Here are today’s highlights:
Ami Kassar finally decided he had to take cybersecurity seriously.
What do you do when your employees forget how to behave in an office?
The Harvard Business Review reports that the boom in entrepreneurship seems to be lasting.
A mom-and-pop landlord explains why this has not been an easy time for small landlords.
THE ENTREPRENEURIAL LIFE
Kurt Wilkin—a friend of 21 Hats—writes about the overall impact of his recent business reversals: “In March 2020, the world changed. Yes, we all know what happened, but bear with me for a minute. At the time, I was still the CEO of HireBetter—a company devoted to helping good people build great companies by helping them attract, hire, and retain a kick-ass team. Let’s just say that in Q2 of 2020, there wasn’t a lot of growing or hiring going on. In fact, most companies were more in need of what we joke is our alter ego company, FireBetter! While most of the world was still in shock, I immediately thought about what I could do to help. Distilleries paused liquor production and produced hand sanitizer, clothing companies made face masks, and so on. If HireBetter couldn’t help people through our traditional service offerings, what could we do? How could I help? Most of you know that I dove headlong into creating CEO Forums to help leaders deal with the chaos and the unknown—survive the pandemic and thrive on the other side.”
“Things on the HireBetter front were exacerbated by a large bet we made in Q4 of 2022. We did something we’d been wanting to do for years. We acquired a company to add to our service offerings and added a number of talented, passionate people to the HireBetter team. But the acquisition didn’t go as smoothly as we’d hoped. (They never do!) In hindsight, buying another recruiting firm right before a downturn might not have been the best move.”
“With everything going on, I basically lost track of who I was. I found that I became more self-centered and self-absorbed. When I sat down with clients or candidates—or even friends—I found myself thinking, How can this person help me? It seemed like I was no longer interested in challenging and inspiring others. I was looking for someone to solve my problems.”
“The good news is that I had an epiphany when catching up with a longtime friend. He and I have a unique relationship, built partially on our mutual love for sarcasm. We’re badass smartasses. So when I texted a few months back to invite him to a happy hour, I threw in a sarcastic, ‘And thanks for checking on me!’ I was floored when he responded back that he was sorry, and that he had been going through a really tough patch lately.”
“While HireBetter certainly isn’t out of the woods yet, we’re turning the corner. There’s a ton of hard work that went into that, but I believe a big part of it has been refocusing on our purpose—both individually and collectively.” READ THE WHOLE THING
Like a lot of owners, Ami Kassar knew he was ignoring a big risk: “Being an entrepreneur is, by definition, about taking risks. The question is which ones you choose to accept and which ones you try to mitigate. At MultiFunding, we have lagged behind in our IT systems and controls. We have known this for a long time. And yet, despite the reality that we were working with a lot of sensitive customer financial information, fixing our IT was always one of those priorities that kept getting kicked down the road. But I always knew that I would have no one to blame if we had a ransomware attack. Eventually, I decided that I wanted to be able to look my team and my customers in the eye and tell them honestly that we had done everything we could to avoid such an attack.”
“Like many businesses, we had bootstrapped for the first several years, cutting corners to save a dollar here and time there. Our bootstrapped state, which is not atypical for young companies, is the main reason our team members had always worked on a mixture of personal laptops and company-issued devices. This, of course, put us at a higher risk of a data breach.”
“The first step in the process was hiring a director of operations to focus on—among other responsibilities—getting us through the process of protecting our systems and securing our data. His first priority was to pick a vendor to handle the grunt work. If I hadn’t hired him, we would have kept postponing the project.”
“All of the vendors we met recommended switching from the Google platform to Microsoft 365. Where we found differences among the vendors was when we evaluated customer service ratings, monthly service costs, and hardware management.” READ MORE
Do your employees need a trip to charm school? “As companies increasingly recall workers to the office, employees and managers alike are finding that the pandemic made us all a little rusty with in-person conduct. Coworkers are too loud at their desks. People are on their phones during meetings. Shaking hands is no longer a given. Small talk at networking events is ... awkward. Bosses’ solution to this stilted behavior? Charm school. More than 6 in 10 companies will send their employees to office etiquette classes by 2024, according to a July survey of 1,548 business leaders by ResumeBuilder.com.”
“Before the pandemic, the Swann School of Protocol would go out to workplaces about once or twice a month to help train staff on business etiquette. Now, it gets four to six requests a month, said Elaine Swann, founder of the Carlsbad-based training institute.”
“Business etiquette training can include a wide variety of topics — professionalism in the office and on Zoom, giving feedback, proper dress code, remembering names and how to conduct oneself during a business lunch.”
“In a recent survey on office decorum, nearly 75 percent of respondents said they’d take advantage of business etiquette courses if they were offered by their employer, including 93 percent of Gen Z survey respondents.” READ MORE
Is the pandemic boom in entrepreneurship going to last? “In October 2023, over three and a half years after the pandemic’s onset, Americans were still filing 59 percent more applications to start new businesses than they were before the pandemic. The resurgence is all the more remarkable given how deeply startup rates and other measures of economic dynamism languished at or near all-time lows throughout the 2010s. Thus, one of the most intriguing questions facing the U.S. economy right now is whether the pandemic has durably shaken the country out of its entrepreneurial slump. The answer to this question matters inordinately to the health and direction of the economy in the years ahead, affecting everything from job growth to productivity.”
“The arrival of Covid-19 ushered in the first platform-enabled recession. All of a sudden, displaced professional and creative workers could seamlessly pivot to providing their services online, while anyone had the ability to hang a shingle on one of dozens of burgeoning online marketplaces. Digital connectivity was able to provide a safety net (or perhaps more accurately, an entrepreneurial safety valve) to workers in 2020 at a scale and in a stage of maturity that simply did not exist a decade prior.”
“In October 2023, the IRS received 473,000 applications to start a new business. Of those, 154,000 were from the subset of applications that are most likely to translate into new employer enterprises, up a whopping 41 percent above October 2019 levels. Remarkably, these likely employer business applications have even increased over the course of 2023. The longer the boom lasts, the more real it seems and the more economically significant it is likely to be.”
“Observers initially regarded these trends with healthy skepticism, looking for answers to explain them away — opportunism around the Paycheck Protection Program was an early, quickly disproven theory — or suggest they may be small bore — i.e., all gig work. After all, business applications are a leading indicator that represent expressions of intent, not realized economic activity. Yet the surge in business applications was not fleeting; quite the opposite. And business applications have a strong historical track record at predicting future job growth, rooted in the important role that startups play in driving net job creation economy-wide.”
“The startup surge has echoes around the developed world, but nowhere is it as pronounced as in the United States. Data from the OECD show that the number of business establishment openings in the U.S. stood 34 percent over 2019 levels by the end of 2022, equivalent to 356,000 more places of business opening their doors than before the pandemic. Belgium and France come closest, with 22-25 percent increases in establishment entry rates, while battered Germany has enjoyed no pandemic bump, and moribund Italy emerges from the pandemic even worse than it went in on this front.” READ MORE
Despite all of the complaints, Americans are actually pretty happy with their finances: “Americans overall have a surprising degree of satisfaction with their economic situation, according to findings from the Axios Vibes survey by The Harris Poll. That's in spite of dour views among certain subsets of the country — and in contrast to consumer sentiment polls that remain stubbornly weak, partly because of the lingering effects of 2022's inflation. The Axios Vibes poll has found that when asked about their own financial condition, or that of their local community, Americans are characteristically optimistic.”
“Sixty-three percent of Americans rate their current financial situation as being ‘good,’ including 19 percent of us who say it's ‘very good.’ Neither number is particularly low: They're both entirely in line with the average result the past 20 times Harris Poll has asked this question.”
“Americans' outlooks for the future are also rosy. Sixty-six percent think that 2024 will be better than 2023, and 85 percent of us feel we could change our personal financial situation for the better this year. That's in line with Wall Street estimates, which have penciled in continued growth in both GDP and real wages for the rest of the year.”
“More than half of Americans say that if they lost their job tomorrow they'd be OK; that they could find an equivalent or better job quickly; and that ‘my employers need me more than I need them.’ Sixty-three percent of respondents describe their job security as ‘a sure thing.’” READ MORE
Meanwhile, what happened to Germany’s economy? “Since it was rebuilt after World War II, Germany has been Europe’s main driver of economic growth, becoming an industrial powerhouse known for vast factories and fine-tuned engineering. But now its automakers must compete with relatively cheap electric cars from China, and it vies with the United States to attract tech giants. There is a growing realization that Germany has not been successful updating its industry with sufficient flexibility and digital know-how to remain competitive.”
“Last year it contracted 0.3 percent, official figures showed this week, making it not only the largest economy but also the slowest growing among the 20 countries using the euro. Industrial production has fallen five months in a row. ‘The economy is at a standstill in Germany,’ said Siegfried Russwurm, the president of the Federation of German Industries. ‘We don’t see any chance of a rapid recovery in 2024.’”
“Then came a budget crisis in November, causing the government’s popularity to plunge in polls. Many of those disputes were over how to fill a 17 billion-euro ($18.5 billion) gap in the budget after the country’s highest court in November threw out the previous spending plan. That decision was driven by the country’s so-called debt brake, a law enshrined in its Constitution to keep public deficits low.”
“The restrictions on borrowing are preventing the government from making badly needed investments in public infrastructure, from schools and public administration to railways and energy networks.” READ MORE
Consumers are backing off of the weeknight entertainment that remote work encouraged: “Americans, armed with more free time and flexible schedules in the remote-work era, ventured out for dinner and entertainment more often to get through the week. Higher prices also helped propel double-digit growth across the ‘eatertainment’ space for much of the past three years. Now consumers’ appetite for going out on weeknights is slowing. Higher prices have consumers scrutinizing their discretionary spending. The return of after-school activities such as sports and music lessons are keeping families busy. In-person work obligations and trips are filling up schedules.”
“‘Any part of the week was a reason to go out,’ says Eric Wold, an analyst at investment bank B. Riley Financial. ‘Now we’re getting back to where we were, where people have jobs and it may be tougher to go out during the week.’”
“The midweek slowdown could be an early crack forming in consumers’ willingness to spend on experiences—a key corner of the economy that has helped offset slowing spending on goods. Stressed consumers typically pullback on midweek spending to protect their weekend splurges before making other budget cuts, Long says.”
“Puttshack, a chain of tech-infused mini-golf venues started by Topgolf founders Steve and Dave Jolliffe, is seeing the midweek business hold up at its downtown locations, such as those in Boston and London, Chief Marketing Officer Susan Walmesley says. The chain’s suburban locations, which tend to draw more families, are getting stung by the midweek lull.” READ MORE
In a case heard Wednesday, the conservative justices on the Supreme Court sounded ready to upend federal regulatory law: “Members of the Supreme Court’s conservative majority seemed inclined on Wednesday to limit or even overturn a key precedent that has empowered executive agencies, threatening regulations in countless areas, including the environment, health care, and consumer safety. Each side warned of devastating consequences should it lose, underscoring how the court’s decision in a highly technical case could reverberate across wide swaths of American life. Overruling the precedent, Solicitor General Elizabeth B. Prelogar told the justices, would be an ‘unwarranted shock to the legal system.’”
“But Justice Brett M. Kavanaugh responded that there were in fact ‘shocks to the system every four or eight years when a new administration comes in, whether it’s communications law or securities law or competition law or environmental law.’”
“Judging from questions in two hard-fought arguments that lasted a total of more than three and a half hours, the foundational doctrine of administrative law called Chevron deference appeared to be in peril.”
“Supporters of the doctrine say it allows specialized agencies to fill in gaps in ambiguous statutes to establish uniform rules in their areas of expertise, a practice they say was contemplated by Congress. Its opponents, including business groups hostile to what they see as overregulation, counter that it is the role of courts, not executive branch officials, to determine the meanings of statutes.”
“Justice Kagan imagined a new statute addressing artificial intelligence, one that would inevitably have gaps and ambiguities. ‘Congress can hardly see a week in the future with respect to this subject, let alone a year or a decade in the future,’ she said, adding, ‘Congress knows that this court and lower courts are not competent with respect to deciding all the questions about A.I. that are going to come up in the future.’” READ MORE
This has not been an easy time for small landlords: “I am a ‘mom-and-pop’ landlord in Los Angeles. I only own 12 units, which isn’t much compared with large corporations that have thousands of properties. I do not make a living as a landlord. In fact, I make only about $100 a month on a unit whose mortgage is several thousand dollars. Over the last five years, I have felt under attack by elected officials in Los Angeles and wonder just how long I can afford to own rental property in Los Angeles. If the attitude of the elected officials toward landlords in the city doesn’t change, small landlords like me will leave, and the city will be left with only corporate landlords — and slumlords — who don’t care about rental laws or the well-being of their tenants.”
“I’m a big believer in tenants’ rights. It’s true that many landlords treat their tenants poorly. If they didn’t, we wouldn’t need tenants’ rights laws. Also, I believe in rent control — families shouldn’t have their rents raised 10 percent or 20 percent in a year. However, in the name of preventing homelessness, the city and county have passed numerous measures that are making it impossible for small landlords to function and will ultimately hurt vulnerable tenants.”
“For example, in 2023, several years after the COVID crisis began, at a time when unemployment was at record lows and wages were rising at unprecedented rates, landlords were told they still could not raise rent. In the end, small landlords like me took it on the chin as we watched all of our costs increase dramatically.”
“Unfortunately, based on my experience, attorneys representing tenants have learned how to manipulate our court system, drawing out eviction cases. That’s increased the cost to evict a tenant who has stopped paying rent for no legal reason to $20,000 to $30,000 (and ultimately not preventing evictions). How can a small landlord like me absorb that cost? The answer is that we can’t.” READ MORE
THE 21 HATS PODCAST
The Worker Co-Op Solution: In this week’s bonus episode, Cameron Madill takes us on his succession journey, which began years ago when he started having conversations with older business owners, many of whom seemed to feel trapped. They’d had a lot of success, they were proud of the business they’d built, but they weren’t sure what to do with it or how to leave it. None of the usual options seemed terribly appealing. Hoping to write a different ending, Madill, now in his 40s, started looking for better options much earlier than most owners, and the one he landed on was an unusual choice: a worker cooperative. Now, there are aspects of this model that are likely to give some owners pause. For one, a co-op probably isn’t going to produce the biggest payday for a selling owner. And if the owner wants to stick around as CEO, he or she will have to report to a board, and that board can challenge any and all of the owner’s decisions.
But Madill, as he explains in a conversation we recorded late last year, before he stepped down from his role as CEO, decided to sell to his employees anyway. Not only is he glad he did, he thinks co-ops are an option far more owners, especially those struggling to find a buyer, should consider.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren