Is Anybody Listening to Me?
In our latest podcast episode, the owners talk about the challenges of communicating with employees post-pandemic. Plus: Time for a new website!
Good Morning!
Here are today’s highlights:
Should the predatory pricing model of venture capital be illegal?
What will A.I. do to the advertising business? What will it do to humanity?
The recession in the housing industry is already over, which is good news for the rest of the economy.
You can still get early-bird pricing to Shawn Busse’s Catalyst event.
THE 21 HATS PODCAST
This week, Shawn Busse, Paul Downs, and Jennifer Kerhin talk about the challenges of communicating with employees, especially in the post-pandemic world. It’s hard enough to get aligned on mission and vision, but how do you connect with an employee you’ve never actually met in person? Is that even possible? We also discuss Jennifer’s realization that she has over-performed on sales but under-performed on marketing, which is part of the reason she’s re-doing her website. “I need a higher level of prestige,” she tells us, “so, better copy, better photographs, an all-around more sophisticated look. What we had was mom and pop. You know, Wix.” Plus: the panel tackles a question posted on the small business subreddit: “How large can my margins become before I'm ripping off my clients?”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
PRICING
Is Silicon Valley’s business model illegal? “In a new paper titled ‘Venture Predation,’ the two lawyers [Matt Wansley, Sam Weinstein] make a compelling case that the classic model of venture capital — disrupt incumbents, build a scalable platform, move fast, break things — isn't the peak of modern capitalism that Silicon Valley says it is. According to this new thinking, it's anticapitalist. It's illegal. And it should be aggressively prosecuted, to promote free and fair competition in the marketplace. ‘We think real world examples are not hard to find — if you look in the right place,’ Wansley and Weinstein write. ‘A new breed of predator is emerging in Silicon Valley.’”
“Take Uber, one of their key examples. It'd be one thing if the company had simply outcompeted taxicabs on the merits. Cabs, after all, were themselves a fat and complacent monopoly.”
“But that's not what happened. As in a soap opera or a comic-book multiverse, the ending never arrived. Uber kept subsidizing riders and drivers, losing billions trying to spend its competitors into oblivion.”
“Where Wansley and Weinstein break important new ground is on the other legal standard set by the Supreme Court: recoupment of losses. If Uber and WeWork and the rest of the unicorns are perpetual money losers, it sounds like the standard isn't met. But Wansley and Weinstein point out that it can be — even if the companies never earn a dime and even if everyone who invests in the companies, post-IPO, loses their bets.”
“That's because the venture capitalists who seeded the company do profit from the predatory pricing. They get in, get a hefty return on their investment, and get out before the whole scheme collapses.” READ MORE
STARTUPS
Gene Marks says startups are not facing a mass-extinction event: “Capital from venture investors and bank loans is ‘scarce and expensive’ and ‘venture-backed startups are running out of money and facing hard choices.’ The numbers support this: venture capital funding in the first quarter of 2023 was only at 40 percent of the levels seen in the fourth quarter of 2021. But mass extinction? Maybe for people starting up tech businesses based on a shaky premise and dubious cash-flow projections that venture capital firms let fly because money was so cheap and the competition to find the next Uber or Facebook took priority over common sense. Venture capital funding may be in the doldrums right now, but the industry will ultimately recover and is already making investments in the new generation of AI startups that are popping up everywhere.”
“Meanwhile, in the real world that is the rest of the country where people aren’t creating A.I. solutions and instead are opening up restaurants, real estate firms, and healthcare services companies, entrepreneurism seems to be doing just fine.” READ MORE
MARKETING
Is A.I. a boon or a threat to advertising: “The advertising industry is in a love-hate relationship with artificial intelligence. In the past few months, the technology has made ads easier to generate and track. It is writing marketing emails with subject lines and delivery times tailored to specific subscribers. It gave an optician the means to set a fashion shoot on an alien planet and helped Denmark’s tourism bureau animate famous tourist sites. Heinz turned to it to generate recognizable images of its ketchup bottle, then paired them with the symphonic theme that charts human evolution in the film ‘2001: A Space Odyssey.’”
“A.I., however, has also plunged the marketing world into a crisis. Much has been made about the technology’s potential to limit the need for human workers in fields such as law and financial services.”
“Advertising, already racked by inflation and other economic pressures as well as a talent drain due to layoffs and increased automation, is especially at risk of an overhaul-by-A.I., marketing executives said.”
“‘It really doesn’t matter if you are fearful or not: The tools are here, so what do we do?’ said Jackson Beaman, whose AI User Group organized the event. ‘We could stand here and not do anything, or we can learn how to apply them.’” READ MORE
ARTIFICIAL INTELLIGENCE
The people who seem most worried about the scary ramifications of A.I. are the people who know it best: “A.I. panic is having a moment right now. Since ChatGPT’s splashy debut last year, tech leaders and A.I. experts have been warning that large language models — the A.I. systems that power chatbots like ChatGPT, Bard and Claude — are getting too powerful. Regulators are racing to clamp down on the industry, and hundreds of A.I. experts recently signed an open letter comparing A.I. to pandemics and nuclear weapons. At Anthropic, the doom factor is turned up to 11. A few months ago, after I”—NYT reporter Kevin Roose—“had a scary run-in with an A.I. chatbot, the company invited me to embed inside its headquarters as it geared up to release the new version of Claude, Claude 2.”
“I spent weeks interviewing Anthropic executives, talking to engineers and researchers, and sitting in on meetings with product teams ahead of Claude 2’s launch. And while I initially thought I might be shown a sunny, optimistic vision of A.I.’s potential — a world where polite chatbots tutor students, make office workers more productive and help scientists cure diseases — I soon learned that rose-colored glasses weren’t Anthropic’s thing. They were more interested in scaring me.”
“In a series of long, candid conversations, Anthropic employees told me about the harms they worried future A.I. systems could unleash, and some compared themselves to modern-day Robert Oppenheimers, weighing moral choices about powerful new technology that could profoundly alter the course of history.”
“One Anthropic worker told me he routinely had trouble falling asleep because he was so worried about A.I. Another predicted, between bites of his lunch, that there was a 20 percent chance that a rogue A.I. would destroy humanity within the next decade. (Bon appétit!)” READ MORE
HUMAN RESOURCES
The regions benefitting from a recent influx of manufacturing investment now have to find enough workers: “With a tidal wave of new manufacturing-related work consuming Austin, education institutions of all types and sizes are gearing up to meet demand. For years, executives of big tech manufacturers such as Tesla, Samsung and Applied Materials have expressed concern that Central Texas isn't equipped with enough workers to make all these new factories tick. These jobs are new and different. As Austin Community College Vice Chancellor Chris Cervini recently put it: ‘We have a very hard time explaining that this isn't your grandfather's manufacturing job.’’”
“ACC is one of the institutions answering the call for more advanced manufacturing technicians. Its growing campus in the suburb of Elgin — not far from Tesla and other new factories — next year will be largely geared toward these kinds of jobs, Cervini said.” READ MORE
HOUSING
The housing recession is already ending: “The housing market is looking up for Donnie Evans. The Dallas-area builder can finish houses six weeks faster than he could during the pandemic, thanks to mended supply chains for materials from tiles to garage doors. There’s plenty of buyer demand for his homes, which range in price from about $250,000 to $850,000, even as the 30-year fixed mortgage rate hovers near 7 percent, more than twice what it was just 18 months ago. ‘We’re not in a recession,’ Evans said. ‘We’re in a slowdown, somewhat. But I don’t think a recession would be the correct word for it at all.’”
“That’s the growing message from home builders, real estate agents and economists who say last year’s housing market recession — which many feared would linger as the Federal Reserve fought to raise interest rates and crush inflation — has already turned around.”
“That’s good news for the overall economy, too. The housing sector — from contracting jobs to home purchases to mortgage loans — is a major driver of consumer spending and economic growth. It is also one of the industries most sensitive to interest rates, which the Fed pushed up at a historically fast clip beginning in March 2022.” READ MORE
LITIGATION
A long-running dispute between neighboring business owners is threatening to tear apart a charming, little town in Virginia: “This conflict has dragged on for years, creating friction where friendships used to be and often forcing residents to pick sides. The conflict has dragged on so long that some people in The Plains, population 250 or so, have been left to develop theories about what’s driving it, some perhaps more rooted in reality than others: Some fear the Washers’ actions could break the town financially with hearings, lawsuits and paperwork. They even fear the couple’s legal challenge could end up compromising The Plains’ ability to maintain its old-world charm.”
“‘Part of what makes our community special are long-standing social networks and special traditions built on trust,’ the Rev. E. Weston Mathews, rector of Grace Episcopal Church in The Plains, said in a statement to The Washington Post.”
“‘But like so many places in our country, our community is not immune to dangerous conspiracy theories, extremism, and tribalism,’ Mathews continued. ‘In my view, what began as a difficult dispute between two neighboring businesses has become something much greater, is accelerating through social media and is damaging our sense of trust in each other as neighbors in a close-knit village.’” READ MORE
EVENTS
Leaders of owner-operated businesses nationwide are gathering: Now in its fourth year, the Catalyst Summit is taking place on September 7th and 8th in Portland, Oregon. Created by our 21 Hats Podcast regular, Shawn Busse, the event has been designed as a way for you to connect with other visionaries, engage in insightful conversations, and uncover opportunities in your businesses. The theme for this year’s summit is “Bold Type” — and will explore what it means to be bold in business, how other owners have led boldly, and what you should put, “in bold,” at your organization.
The event is designed specifically for owner-operated businesses and the leaders who run them. No salespeople, no solicitors — just peers all facing the same challenges, ready to learn from each other.
The agenda is chock-full of impressive speakers and panelists, including leaders of Inc. 500 companies, "Best for the World" B Corps, and longtime 21 Hats listener, Karla Trotman!
Early Bird Pricing ends July 31st. LEARN MORE
THE 21 HATS PODCAST: DASHBOARD
ChatGPT on Steroids: This week, Gene Marks gives a preview of what Microsoft is cooking up with a product called Copilot that Gene expects to be released before the end of year and that he promises will “rock your world.” Like ChatGPT, Copilot will access data on the internet but it will also be incorporated into all of Microsoft’s existing products so that it will also be able to access data in, say, your customer relations management software. That means you’ll be able to do things like ask Copilot to identify which of your customers you’re actually losing money on. For those of you already experimenting with ChatGPT, here’s a pro tip from Gene. To use ChatGPT well, you need to master the art of asking it the right questions. Gene suggests consulting a helpful library of prompts for small businesses compiled by GoDaddy.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren