Is It Time to Worry About Inflation?

“If everybody else is raising prices, it becomes a lot easier for you to do that, too.”

Good morning!

Today’s highlights: Instagram still isn’t a shopping destination. Air travel has returned—with all of the same problems. And why some think traditional businesses are cooler than venture-backed businesses.

THE ECONOMY

How concerned should we be about inflation? “Higher prices and the other problems that result from an economy that reboots itself are frustrating, but should be temporary. Still, the longer that the surges in prices continue and the more parts of the economy that they encompass, the greater the chances that Americans’ psychology about prices and inflation could shift in ways that become self-sustaining. For the last few decades, companies have resisted raising prices or paying higher wages because they felt that doing so would cost them too much business. That put a damper on inflation across the economy. The question is whether current circumstances are evolving in a way that could change that.”

  • “‘Now the genie’s out of the bottle,’ said Kristin Forbes, an economist at M.I.T. and a former official at the U.S. Treasury and the Bank of England. ‘If everybody else is raising prices, it becomes a lot easier for you to do that, too.’”

  • “What is unusual about this moment is that prices for so many things are rising at once, albeit for different reasons. Some, like airfares, are simply returning to pre-pandemic levels, which shows up in inflation data as a price increase. Others, like lumber prices, reflect high demand along with supply that is fixed in the short run.”

  • “And still others, like the spike in East Coast gasoline prices after a cyberattack shut down a major pipeline, are truly random events that tell us virtually nothing about underlying supply and demand or future inflation.” READ MORE

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We continue to get closer to a pre-pandemic normal: “The New York City subway hit its highest daily ridership since March 13, 2020, with some 2.2 million riders last Friday. More than 1.7 million people traveled through the nation’s airports on Sunday, the most since the start of the pandemic. The San Francisco Symphony held its first in-person performance in more than a year, and the Kansas City Symphony plans to return later this month to its concert hall. On Monday, some restaurants in the U.S. hit a milestone, according to data from OpenTable. Seated diners at reopened restaurants on the reservation platform’s network reached 100 percent of 2019 levels.”

  • “New York, New Jersey, Minnesota, Delaware, Pennsylvania and Rhode Island will lift most economic restrictions this month.”

  • “Already, 28 states have fully reopened, according to research from the Kaiser Family Foundation. In 29 states, all nonessential businesses have reopened, and in 22 states there is no face-mask requirement.”

  • “On Monday, Michigan hit a vaccination rate of 55 percent among those age 16 and older, a mark set by Gov. Gretchen Whitmer allowing in-person work to soon resume for all businesses after two weeks.”  READ MORE

Air travel is back in all of its glory: “Frequent fliers like Tim Slabaugh aren’t thrilled. ‘We had this window in Covid where business travel was just wonderful,’ said the medical-supply company representative, who kept up his travel pace throughout the pandemic. ‘The airports themselves were empty,’ he said. ‘Now, it’s like somebody turned the light switch back on.’ Many people traveling now are vacationers and ‘older folks, hopped up on vaccines,’ he said, rather than travel pros. To get around obstacles such as a rental-cars shortage, Mr. Slabaugh said he has resorted to tricks like booking a car for longer than he needs.”

  • “Fares are rising, middle seats are no longer empty, and everything from parking lots to security lines is getting more congested.” READ MORE

MARKETING

Instagram still isn’t a shopping destination: “When Instagram approached Brooklyn-based shoe brand Gray Matters last year about selling shoes directly through the app, founder and designer Silvia Avanzi figured it would be a great new way to drive sales of her structured mules and block-heel pumps. The social media giant launched Instagram Checkout in 2019, promising a seamless experience that would allow consumers to shop for products without leaving its app. Avanzi figured if potential customers didn’t need to click through to her website to make a purchase, they’d be more likely to buy while browsing, especially as anyone making a repeat purchase on Instagram would already have their payment and shipping details stored on file. She made the switch and waited for the sales to roll in.”

  • “But they didn’t. Between November and May, only one Gray Matters transaction took place via Instagram Checkout.”

  • “Though its launch two years ago was billed as a watershed moment in Instagram’s push to become an e-commerce powerhouse, conversations with six brands suggest that goal may be a ways off.”

  • “Brands said the biggest pain point is that Checkout may promise a more seamless shopping experience, but it doesn’t deliver a better one.” READ MORE

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ENTREPRENEURSHIP

In some circles, running a down-and-dirty, traditional business is cooler than raising venture capital: “The sweaty-startup movement reflects the growing awareness among young entrepreneurs that coming up with the next billion-dollar tech company isn't a reality for most. For many, a six-figure income is plenty, and the best way for them to earn that is by starting a service business or buying one of the 4 million Boomer-owned US businesses poised to turn over to a new generation by 2034. ... These lower-risk businesses tend to be service-oriented, are often home services, and have fairly predictable demand. Think landscaping, auto detailing, house painting, or chimney sweeping. It's the trades and ‘dirty jobs’ that millennials and Gen Z were often told to avoid growing up.”

  • “According to the online business brokerage BizBuySell, 2021 sale prices for existing businesses such as gas stations, construction and home improvement businesses, liquor stores, manufacturers, and distributors were up 30 percent over last year.”

  • “A core tenant of Lean Startup methodology is reaching what's called the ‘minimum viable product,’ or MVP, the quickest version that's ready to sell, to get market feedback as early as possible. For sweaty startups, the MVP is the sale of the advertised service.”

  • “‘The only difference between what Steve Blank preaches for tech startups and what we do is that our job is a lot easier because these businesses are already operational,’ [said self-storage entrepreneur Nick] Huber. ‘We're not trying to figure out if our actual business model is a real business model.’" READ MORE

CYBER SECURITY

We don’t know the details of the Colonial Pipeline hack yet, but Gene Marks says we can guess what happened — and we know what small businesses have to do to avoid a similar fate: “Either a) an employee clicks on a malicious link contained in an email or fake website (this is known as ‘phishing’) or b) a device on a network was compromised because it was running an out-of-date operating system. I’d bet heavily that this is what investigators will find. And sadly, the whole situation could have been avoided if the people in charge of the technology at Colonial Pipeline had done these three things:”

  • “For starters, and most importantly, businesses need to make sure that all of the devices used by their employees are running the most current versions of Microsoft Windows, Apple iOS or Google Android.”

  • “Next, businesses have to commit to ongoing training. That means regular interactions with an outside security or IT firm and the implementation of training software like KnowBe4 and Infosec.”

  • “Finally, all businesses have to make sure that their systems can only be accessed using multi-factor authentication software while also forcing their users to regularly change and use passwords that require alphanumeric entries with symbols.”

  • “According to a recent survey from security firm Infrascale 46 percent of all small businesses have been the targets of a ransomware attack, with almost three-quarters of them (73 percent) paying a ransom.” READ MORE

STARTUPS

There’s an Airbnb for boats: “Boat sales skyrocketed during COVID-19 while other forms of leisure travel like international flights and cruises stayed docked. One startup, GetMyBoat — the self-titled ‘Airbnb of boats’ — is riding that wave of high demand and says it's seen a massive increase in rental bookings ahead of a projected summer travel boom in 2021.”

  • “The company first started in San Francisco in 2013 and has since grown into what it calls the ‘world's largest boat rental and water experience marketplace,’ serving 184 countries.

  • “Customers search where and when they want to rent the boat, a preferred hourly price, the number of passengers, and the type of boat they're looking for — whether it be a jet ski, powerboat, or yacht.” READ MORE

HUMAN RESOURCES

It turns out the CEO of WeWork is not a big proponent of remote work: “‘Those who are least engaged are very comfortable working from home,’ Sandeep Mathrani, the C.E.O. of WeWork said at a Wall Street Journal event on Wednesday. ‘Those who are überly engaged with the company want to go to the office two-thirds of the time, at least.’”

  • “‘People are happier when they come to work,’ he added. The company is betting on people wanting to — or being required to — work outside of their homes once it is safe to do so widely.”

  • “His comments were not received well by many online as many companies and employees consider the post-Covid-19 workplace after more than a year of doing their jobs from home.” READ MORE

REGULATION

Yelp data shows that car-free streets boosted business during the pandemic: “Now local officials are weighing whether to keep these temporary installations — known variously as ‘safe streets,’ ‘slow streets,’ ‘open streets,’ and ‘stay healthy streets,’  among other labels — in place for the long haul. A survey of 43 member cities of the National Association of City Transportation Officials found that 22 were planning on making Covid-era traffic changes permanent, while 16 more were considering it. At the end of April, New York City passed a bill making its Open Streets program — the most extensive in the U.S. — permanent, and California is mulling legislation that would streamline that process.”

  • “But pedestrian-friendly street redesigns often face resistance from business owners, who fear that they’ll lose revenue from inconvenienced drivers.”

  • “A new data analysis by Yelp adds some fresh insights into what really happens to local commerce when vehicle traffic is kept out.”

  • “Eateries in car-free areas saw more consumer interest (based on the amount of views, posted photos and user reviews on Yelp listings) when their streets were strictly limited to pedestrians and cyclists, they found.” READ MORE

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THE 21 HATS PODCAST

Episode 61: I Think People Are Ready to Get Back to Work: Is your office open? Is everyone coming back? Or are you going hybrid? Is everyone getting vaccinated? Are you offering them incentives to get vaccinated? When do the masks come off? Are you having a problem filling jobs? Have you had to increase what you pay? Paul Downs tells us, “The people who really seem to want the job and are enthusiastic about it don't have the skill-set. And the people with the skill-set don't seem to actually care about completing the process. So we did hire one guy who started a week ago Monday, and he quit three hours later.” This week, Paul, Stephanie Stuckey, and William Vanderbloemen compare notes on what they’re experiencing as we all search for that new normal.

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren