Of Course, AI Is Eliminating Jobs
But so far, the results are decidedly mixed: “This is word salad.”
Good Morning!
Here are today’s highlights:
A small-town factory finds a surprising source of labor.
Gene Marks says he’s ready if a job candidate brings a parent to a job interview.
The number of million-dollar, one-person businesses is expanding rapidly.
High-end gyms have gone from nice amenities to star attractions.
ARTIFICIAL INTELLIGENCE
AI is already taking a toll on freelancers—but with mixed results: “Jennifer Kelly, a freelance copywriter in the picturesque New England town of Walpole, N.H., feels bad for any young people who might try to follow in her footsteps. Not long after OpenAI’s ChatGPT made its debut, financial advisers who had depended on her 30 years of experience writing about wealth management stopped calling. New clients failed to replace them. Her income dried up almost completely. When she asked, the clients she lost insisted they weren’t using artificial intelligence. But then, months later, some came back to her with an unusual request.”
“The copy they’d been using AI to generate, they sheepishly admitted, wasn’t very good—and could she make it better? ‘It’s not a fix,’ she says of the empty-headed, generic pabulum that AI excels at writing. ‘You redo it.’”
“We can be reasonably certain her story is typical of the experience of tens of thousands, perhaps millions of people, because at least a half dozen studies using data from freelance job boards have been published in the past year, each one building on the previous.”
“Not long after ChatGPT debuted in November 2022, David Erik Nelson, a freelance sales and marketing copywriter in Ann Arbor, Mich., saw a jump in inquiries. ‘I was picking up new clients whose specific complaint was that their previous vendor had been giving them AI-generated content, and hadn’t been straightforward about it,’ says Nelson.”
“The AI had produced smooth prose intended for sales materials, but it was so generic, and often wrong, that it wasn’t about to convince people making six- and seven-figure purchasing decisions. ‘The marketing people think it looks fine,’ says Nelson, ‘but then you hand it to someone who actually knows something about industrial fluid purification, and they’re like, This is word salad.’” READ MORE
McDonald’s has ended its AI drive-thru tests: “In the nearly three years since McDonald’s announced that it was partnering with IBM to develop a drive-through order taker powered by artificial intelligence, videos popped up on social media showing confused and frustrated customers trying to correct comically inaccurate meals. ‘Stop! Stop! Stop!’ two friends screamed with humorous anguish on a TikTok video as an A.I. drive-through misunderstands their order, tallying up 240, 250 and then 260 Chicken McNuggets.”
“In other videos, the A.I. rings up a customer for nine iced teas instead of one, fails to explain why a customer could not order Mountain Dew and thought another wanted to add bacon to his ice cream.”
“So when McDonald’s announced in a June 13 internal email, obtained by the trade publication Restaurant Business, that it was ending its partnership with IBM and shutting down its A.I. tests at more than 100 U.S. drive-throughs, customers who had interacted with the service were probably not shocked.”
“Several researchers and experts in the industry see the McDonald’s exit as an example of how the new technology is not yet meeting expectations. They doubted that the company would make a speedy return to testing A.I. ordering in its drive-throughs.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Yes, Of Course, AI Will Eliminate Jobs: Companies don’t like to admit it, says Gene Marks, but eliminating jobs is kind of the point. So far, it’s mostly big companies with millions to spend that have been able to replace humans with bots, but he believes smaller businesses will soon be doing the same thing. Should we be worried about the number of jobs lost? He doesn’t think so. Plus: Why a lot of businesses still don’t offer 401(k) plans. And if job candidates want to bring a parent along to an interview, Gene says he’s fine with that.
You can subscribe to the 21 Hats Podcast wherever you get podcast
HUMAN RESOURCES
A small-town factory in Minnesota found a new source of workers: “Marvin, which is run by the great-grandchildren of its founder George Marvin, has weathered recessions, depressions and fires that twice destroyed its Warroad factory. Now, it faces a different existential problem: not enough workers at that factory, which employs more than 700 people to assemble its windows. Baby boomers are retiring from the company at a rate of about one a week and the town’s population has hardly budged for decades. That math leaves Marvin with dozens of job openings and few takers.”
“Marvin looked to the south for a remedy. Way south. It came up with a recruitment plan called ‘The Path North,’ which aims to find workers in Puerto Rico and Florida willing to uproot their families and settle in a cold northern town. Recruiting them, mostly via Facebook and other online advertising, has been a challenge. Retaining them has been tough, too.”
“Marvin’s leaders started conversations in 2022 with a Minneapolis-area recruiting agency, Integrated Staffing Solutions, that eventually spawned the hiring program. The agency identifies workers in Puerto Rico and does an initial screen; Marvin does subsequent interviews. New hires get a range of benefits: a $1,500 relocation bonus, airfare and transportation to Warroad, temporary housing, help finding permanent housing, English-language classes and more.”
“Of the 115 workers who came from Puerto Rico between the autumn of 2023 and this month, 63 remain at Marvin, while 52 have left. About half of those stayed in the area and took jobs elsewhere. Most of the others decided Warroad wasn’t for them and returned to Puerto Rico or Florida. Marvin is aiming for a total of 66 Path North recruits this year.” READ MORE
Delivery drivers are getting higher wages but fewer orders: “Food-delivery apps have responded to cities’ new wage-increase requirements for gig workers by ratcheting up fees. Now, they are contending with frustrated consumers, plunging restaurant orders, and an exodus of delivery drivers. Lawmakers in New York City, one of the cities where pay increases for delivery drivers recently were adopted, say that their changes have worked well for workers. Seattle, which implemented similar rules this year, is planning to roll them back because of ‘outcry from drivers and restaurants over its devastating’ impact, Seattle City Council President Sara Nelson said.”
“The delivery companies—whose businesses are built on gig workers they don’t employ full- time—say they can only afford to pay so many workers under the two cities’ latest pay standards. The cities want the companies to pay couriers a minimum hourly wage based on the time they spend delivering orders and reward the most efficient workers.”
“New York City now requires that the companies pay couriers at least $19.56 per hour before tips, up from an average of $5.39 per hour before its rules went into effect in December.” READ MORE
ENTREPRENEURSHIP
Elaine Pofeldt writes that the number of million-dollar, one-person businesses is expanding rapidly: “The number of businesses with no payroll that are hitting $1 million to $2.49 million in revenue rose to 53,460 for the first time in 2021, according to the U.S. Census Bureau. That number was up nearly 48 percent since 2012 when the government started tracking the statistics on nonemployer businesses. Nonemployer businesses are those run by the owners with no formal employees, though sometimes they rely on contractors.”
“Back in 2012, just 29,494 businesses reached this revenue size. Some businesses are going beyond this. Another 2,708 nonemployer businesses hit $2.5-$4.99 million in revenue in 2021, up from 1,900 in 2012. 536 reached $5 million in revenue and more, growing from 386 in 2012.”
“Free and low-cost digital and AI-powered tools are helping entrepreneurs get more done with less funding than in the past. And, at the same time, it is easier than ever to find freelancers and contractors to help grow a business on platforms like Upwork and Freelancer, or to outsource to programs such as Fulfillment by Amazon.” READ MORE
CUSTOMER SERVICE
Here’s an opportunity for smaller businesses to stand out: “Customer experience in the U.S. has declined for the third year in a row, according to research firm Forrester, which analyzed 98,363 consumers’ perceptions of 223 brands across 13 sectors for its latest annual report on the subject. The average score was 69.3 out of 100, its lowest since Forrester’s CX Index study adopted its current methodology in 2016.”
“That figure has fallen consistently from a peak of 72.0 in 2021. Before that, customer experience scores had climbed steadily from the previous low of 69.6, which came in 2017. Pandemic-era frustrations like shipping delays, product shortages and understaffing are now largely in the rearview mirror.”
“But consumers now are skeptical of the value they believe they are getting from companies in a time of shrinkflation and junk fees, said Pete Jacques, a principal analyst at Forrester. ‘Somebody is paying more, but then they’re not seeing the benefit of paying more,’ Jacques said. ‘They’re not getting a better experience that they think should accompany that higher price.’”
“At the same time, many companies looking to improve their customer experience scores are hesitant to invest the cash and resources needed to really do so, Jacques said. Trendy customer-service chatbots fueled by generative artificial intelligence haven’t always helped, he said.” READ MORE
RETAIL
Turning malls into cities is proving harder than expected: “Brookfield Property Partners spent billions in 2018 to assume full ownership of mall-owner GGP when malls were out of favor on Wall Street. Executives at the firm defended this contrarian bet in part by saying that they would turn most of the company’s 125 malls into minicities with residences, offices or hotels as well as stores. Six years later, only two malls, in Atlanta and near Seattle, have been redeveloped in this way, with another two—in North Carolina and Denver—in the pipeline. The slow pace of its redevelopment efforts shows how difficult, expensive and time consuming it is to revamp enclosed malls.”
“Getting approvals from cities and towns is a lengthy and sometimes contentious process, often because of community pushback. And other mall tenants, particularly department stores, often have multi-decade contracts that allow them to block non-retail development.”
“Some of the GGP properties were top tier, such as the enclosed Grand Canal Shoppes in Las Vegas and the open-air Ala Moana Center in Honolulu and Oakbrook Center near Chicago. Today, Brookfield’s highest-quality properties are nearly fully occupied, with tenant sales more than 18 percent above pre-pandemic levels, according to a spokeswoman.”
“But many of the GGP properties were lower tier, and Kingston, then CEO of Brookfield Property Partners, told investors at the time that the company would likely slim down GGP’s 125-mall portfolio to perhaps 100 properties. Many would be redeveloped to add non-retail uses, he said. Adding entertainment venues, residences, workspaces and hotels would future-proof the malls from changes in the retail sector, Kingston said.” READ MORE
BUSINESS MODELS
High-end gyms are less and less about the workout: “The most exclusive ones offer not only state-of-the-art equipment, exercise classes, and spacious locker rooms with cold eucalyptus-scented towels and fancy soaps but also ‘third places,’ locations outside home and work where people can mingle and socialize. That means gyms are now also recreational centers and event spaces. They’re salons and spas. They’re hotels and workspaces. And they’re child care facilities.”
“Gyms, many of which used to be an amenity attached to a hotel or an office building, have now turned the tables and become the star attraction, offering hotel rooms and workspaces as part of their appeal. These kinds of amenities require a lot of space — and this is an ideal time for projects that need large retail space:”
“A shaky commercial real estate sector with high vacancies has opened up opportunities for big gyms, as property owners desperately need anchor tenants that can drive foot traffic to help make their residential and office properties more appealing.”
“The pricing for the upcoming New York space has not yet been determined, but the Life Time Work in Ardmore, Pa., charges $588 for a lounge membership, $776 for a desk, and $1,958 for a private office.” READ MORE
THE 21 HATS PODCAST
What Will Businesses Do if SEO Dies? This week, Shawn Busse, Liz Picarazzi, and Jaci Russo talk about how the marketing world is turning upside down. For decades, business owners have treated search engine optimization as something of a religion. They may not have been able to explain it, but they had faith that, if they obeyed the rules, Google would discover their sites and rank them. But search engines are getting a lot less generous about sharing links, and Shawn fears there’s an apocalypse coming for businesses that rely too heavily on SEO. Jaci’s a little more optimistic: “There'll be some other places to go get free traffic,” she says. “There always are.”
Plus: In a case study ripped right from the subreddit headlines, I ask the three owners: What do you do if a loyal, hard-working employee starts a side hustle selling a product that doesn’t compete with your product but looks a lot like it?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren