Jason Fried Didn’t Mean to Blow Up Basecamp

But as he explains in a 21 Hats Podcast bonus episode, he stands by the policies that led to a third of his employees choosing to leave. And he says the business is doing better than ever.

Good morning!

Here are today’s highlights:

• Would you buy a chain of Las Vegas wedding chapels?

• Manufacturing businesses are moving from shortage to glut.

• Amazon will let third-party sellers interact with customers.

• Are you trying to reach business owners? We have a suggestion.

THE 21 HATS PODCAST

In a special bonus episode, Jason Fried talks about why things got crazy at software maker Basecamp and what it has meant for the business. As you may recall, in the spring of 2021, Fried, CEO and co-owner, issued a blog post edict that eliminated a slew of benefits, shut down a committee that had been attempting to address diversity issues, and barred discussion of all social and political issues on work forums. The email produced a backlash that culminated in a third of the company’s 60-some employees choosing to leave. The rupture was especially stunning coming at Basecamp, which has long had a reputation for treating employees well, including offering remote work long before it was commonplace. When the story broke, some business owners applauded Fried for taking a stand. Others wondered how any policy that resulted in the departure of a third of a company’s employees could be worthy of praise. Basecamp has since re-branded, returning to its original name, 37signals,

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

BUSINESS FOR SALE

Would you buy this chain of Las Vegas wedding chapels? Michael Girdley offers his analysis: “Let’s say you meet someone at the blackjack table and decide to spend your life together starting right now. This is just the business for you! Show up. Pay a few hundred bucks, and you’re married. The numbers: Asking price: $3.41 million. Gross revenue: $2.4 million. Adjusted net income: $1.25 million.”

• “So what’s to like: It’s got a ton going for it. High gross and net margins (52 percent adjusted net income). Customers making once-in-a-lifetime (ok, maybe once-this-year) type decisions and willing to splurge. You get to manage Elvis impersonators marrying people!”

• “So, what’s the catch? My ‘this seems too good to be true’ alarm is going off. It’s too cheap for what is, seemingly, a great business. Things I would look at on this one: What’s up with the location leases? Do I lose these locations soon? How is it getting customers? Google? Flyers? How durable is the revenue? Is the great performance a function of a post-Covid wedding boom? I’d want to see the previous year’s books.” READ MORE

MARKETING

Amazon is going to let brands and merchants send marketing messages to shoppers: “The company announced the initiative Wednesday at the Amazon Accelerate conference in Seattle, where it demonstrates new features to the independent businesses that sell more than half of the products on Amazon.com. Merchants will be able to send free emails to recent shoppers, repeat customers, and their biggest spenders through a new ‘Tailored Audiences’ tool, which will also let sellers monitor the results. The tool has been in testing this year and will be available to all U.S. sellers in early 2023.”

• “The move marks a break with Amazon’s historic reluctance to let independent merchants connect directly with customers for fear of alienating them.”

• “But online sales have slowed from their pandemic highs, and antitrust investigators are probing the power Amazon holds over millions of third-party vendors.”

• “Some merchants also say Amazon makes it hard to create a relationship with even their most loyal buyers.” READ MORE

BUSINESS TRAVEL

Airlines are cracking down on carry-ons: “The industry sees a bright future in charging for carry-on luggage. Global baggage fees hit a record $20.9 billion last year, according to a report from CarTrawler and IdeaWorks, a company that consults with travel companies on ancillary revenue. For example, last year, for flights within Europe, Aer Lingus began requiring passengers to book a more expensive ‘carry-on bag with priority boarding’ fare if they wanted to carry a regulation-size bag of up to 22 pounds on the aircraft. AirAsia now allows travelers to double its regular seven-kilogram (15-pound) carry-on limit — for a fee.”

• “The revenue is substantial. American Airlines, for instance, generated baggage revenue of $1.22 billion in 2021 and a record $7.42 per passenger, according to IdeaWorks and CarTrawler.”

• “Spirit Airlines has one of the highest baggage revenue rates globally: $21.51 per passenger in 2021.” READ MORE

THE ECONOMY

Lots of businesses are moving from shortage to glut: “Just months ago, the chief executive of Scotts Miracle-Gro was bracing for the biggest summer ever. After two years of struggling to fill store shelves, the company had ramped up production to catch up with consumer demand for lawn seed, fertilizer, and other garden products. Investments in new manufacturing capacity were paying off as the 67-year-old CEO prepared for the usual rush of May orders from retailers looking to replenish their stocks. The orders never came, and by Memorial Day, Mr. Hagedorn knew his company was in trouble. Scotts has already cut about 450 jobs, or around 6 percent of its workforce, since May, and more layoffs are coming. Manufacturing plants have been slowed. Cash is dwindling. Nobody is getting bonuses. Instead, the company is in full-blown crisis mode.”

• “‘I love working, but this isn’t exactly the s—hole I was planning to live in toward the end of my career, working my way out of a goddamn latrine,’ Mr. Hagedorn said. ‘But that’s what it is, and that’s where I am.’”

• “Versions of this story are playing out across business sectors, where makers of everything from clothing to kitchen appliances have gone from trying to catch up to demand to buckling under the weight of their own inventory, in a matter of weeks.”

• “Now many companies are cutting jobs, idling plants, and working to undo many of the other steps they took to ensure they would have enough products to sell.” READ MORE

Mortgage rates topped 6 percent for the first time since 2008: “The average rate on a 30-year fixed mortgage climbed to 6.02 percent this week, up from 5.89 percent last week and 2.86 percent a year ago, according to a survey of lenders released Thursday by mortgage giant Freddie Mac. The last time rates were this high was in the heart of the financial crisis almost 14 years ago, when the U.S. was deep in recession. The jump in mortgage rates is one of the most pronounced effects of the Federal Reserve’s campaign to curb inflation by lifting the cost of borrowing for consumers and businesses.”

• “Already, it has ushered in a sea change in the housing market by adding hundreds of dollars or more to the monthly cost of a potential buyer’s mortgage payment, slowing what was a red-hot market not so long ago.”

• “The swift reversal this year has brought tough times to the mortgage industry. Originations topped $4.4 trillion last year but are expected to drop to just over half that in 2022, according to forecasts by the Mortgage Bankers Association, a trade group.” READ MORE

A CONVERSATION ABOUT RECESSION

Is recession really looming? How would it affect my business? What can I do to prepare? Next week I’ll be leading a conversation with John Burns, founder of John Burns Real Estate Consulting in which we’ll discuss these questions and more. The Small Giants Community is hosting this free virtual event on September 21st. LEARN MORE HERE

MANUFACTURING

China is setting up manufacturing facilities in Mexico: “Located in a prime spot between Mexico’s industrial capital and the U.S. border, Hofusan [Industrial Park] has become a haven for Chinese manufacturers looking to sidestep U.S. tariffs and shorten supply chains that have been strained to a breaking point during the pandemic. The 11 plants and warehouses on the 850-hectare (2,100-acre) estate are part of the latest chapter in Chinese capitalism: The country dubbed the world’s factory now also exports white-collar managers to set up and run operations in places such as Vietnam, Thailand, and Mexico.”

• “Three years ago there was just one building on the site. Today, 10 Chinese companies have plants there and three more are being built, say the park’s officials, who expect to have 35 businesses within two years.”

• “Among the park’s tenants are electronics company Hisense, furniture businesses Kuka Home and Sunon Furniture, auto-parts maker Hangzhou XZB, and garden equipment manufacturer Skyish.”

• “Proximity to the world’s biggest consumer market isn’t Mexico’s only selling point. Thanks to the country’s free trade pact with the U.S. and Canada, a chair made at Kuka’s factory in Hofusan can travel across the border duty-free, whereas one shipped to the U.S. from China would be hit with a 25 percent tariff ...” READ MORE

STARTUPS

Partiful wants to be the go-to option for sending online invitations: “Partiful is far from the first digital invitation method, but it is vying to become the most relevant to young people. (One tech publication called the platform ‘Eventbrite but for Gen Z.’) The service, which is free to use, is gaining popularity among people in their 20s who live in big cities and who say it is more streamlined than group texts or Instagram Stories, more casual than Paperless Post, and less embarrassing than Facebook, which has lost its grip on people under 30.”

• “‘Facebook is kind of extinct,’ Ms. Hunt Lee said. With soft multi-colored gradients layered beneath animated confetti or Doge heads, Partiful’s interface looks less like the sober grids of its competitors and more like the blurry experience of spinning across a dance floor.”

• “‘It’s just fun, it’s fresh, and it’s very Gen Z,’ said Carly Adair, 23, who works in tech in Los Angeles.” READ MORE

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Thanks for reading, everyone. — Loren