Paying Employees to Quit
Even during the labor shortage, one software CEO is offering employees $5,000 to leave their jobs.
Good morning!
Here are today’s highlights:
Should we be holding big events right now?
One legendary venture capitalist continues to stand with Elizabeth Holmes.
How one family built a media empire on their sons’ toy videos.
Is more stimulus money on the way?
THE COVID ECONOMY
The consumer electronics show in Las Vegas is a litmus test: “CES is the first major trade show of 2022, and its organizer — the Consumer Technology Association — has insisted on holding the event in person despite the fast spread of the omicron variant. The World Economic Forum last month postponed its annual meeting in Davos, Switzerland, moving it from January to mid-2022, citing the omicron variant. And JPMorgan Chase said its annual health-care conference in San Francisco scheduled for later this month would be virtual instead of in person. This year’s unorthodox CES raises valuable questions about the future of giant in-person business events.”
“Last month, major companies such as Google, Mercedes-Benz, General Motors, Panasonic and Amazon, and many others, as well as media organizations, pulled out of attending the event in person, citing coronavirus concerns and international travel restrictions.”
“Jean Foster, the CTA’s senior vice president of marketing, said the organization expects between 50,000 and 75,000 attendees to flock to Las Vegas this week. That’s less than half the number of people who attended the last in-person CES, in January 2020 ...”
“All attendees must be vaccinated and show proof of vaccination at one of more than 20 badge pickup sites and customer service centers. After they receive their badges, attendees are entitled to pick up a single box of Abbott BinaxNow coronavirus tests.” READ MORE
There could be more stimulus money on the way: “Democratic and Republican lawmakers have held early discussions about another round of coronavirus stimulus spending as they seek to blunt the fast-spreading omicron variant and its threats to public health and economic recovery. The efforts have focused primarily on authorizing billions of dollars to help an array of businesses — including restaurants, performance venues, gyms and even minor league sports teams — that face another potential blow to their already-battered balance sheets as a result of the evolving pandemic.”
“With coronavirus cases surging to record highs — and some hospitals once again under immense strain — lawmakers have started to worry that the pandemic could unleash fresh economic havoc.” READ MORE
Despite Omicron, layoffs are holding at five-decade lows as employers struggle to find workers: “Initial jobless claims, a proxy for layoffs, totaled a seasonally adjusted 207,000 for the week that ended Jan. 1, the Labor Department said Thursday. The four-week average for claims, which smooths out volatility, was 204,500. That was a slight increase from last month’s level, which was the lowest since 1969. Jobless-claims data can be volatile around the turn of the year and is adjusted to compensate for seasonal fluctuations, such as the end of temporary holiday jobs.”
“Ahead of Friday’s jobs report, which economists expected to show employers added around 422,000 jobs last month, up from 210,000 in November, any softness in the hiring numbers can be attributed to the ‘lack of available workers rather than any weakness in demand for staff,’ said James Knightley, chief international economist for ING Bank.” READ MORE
HUMAN RESOURCES
Even with the labor shortage, one software CEO is offering employees $5,000 to quit their jobs: “Chris Ronzio, CEO and founder of Trainual, SaaS software that helps small businesses onboard employees, says offering employees $5,000 to leave just two weeks after starting employment helps him find and retain top talent and maintain a strong culture. ‘It’s important to know really quickly if we’ve found the right people,’ he says. ‘When you’re interviewing, you really only get a glimpse of the business you’re going to work for and the role. If someone knows a week or two in that this is not their long-term place or position, it gets more expensive to replace them as they take on more work and responsibility. By offering new hires $5,000, we give them the opportunity to opt out after two weeks if they have any sense of doubt.’”
“Ronzio borrowed the idea from Zappos, which gave employees what it called ‘The Offer’: $1,000 to quit about a week into its immersive onboarding process. Zappos used the technique as a way to test commitment—something it valued in its team.”
“‘We had one new software developer that started with us, and five days into his training, he came to us and said, This isn’t really the role that I thought it was going to be when I took the position. I think I’d be better off taking this other offer,' says Ronzio ...”
“‘It made me think, how many other people feel that way but don’t have the courage to say it?’” READ MORE
What would Amazon have to do to reduce employee turnover?
SILICON VALLEY
One of Elizabeth Holmes’ earliest backers continues to stand by her: “Tim Draper, a venture capitalist who wrote Holmes a $1 million check when she dropped out of Stanford at 19 to start Theranos, says he still believes in what Holmes was trying to do. In a response to a series of questions, Draper sent me the following statement via email:
‘This verdict makes me concerned that the spirit of entrepreneurship in America is in jeopardy. What has made America and Silicon Valley great is its ability to recognize what is possible. Elizabeth Holmes is an entrepreneur. She envisions a better future. Entrepreneurs invent and keep iterating until their product works. I still believe in what she was trying to do, and if this scrutiny happened to every entrepreneur as they tried to make this world a better place, we would have no automobile, no smartphone, no antibiotics, and no automation, and our world would be less for it.’
“‘A willingness to bet on these entrepreneurs and their visions has made Silicon Valley the innovation engine of the world. This is the nature of investing in progress.’”
“Draper declined to comment on questions specifically regarding whether any evidence presented in trial had shifted any of his opinions or regarding his thoughts on the near-one million test results Theranos had to void or correct.” READ MORE
Meanwhile, venture funding broke all kinds of records in 2021: “Global venture investment last year totaled $643 billion, compared to $335 billion for 2020—marking 92 percent growth year over year. The figures underscore a dramatic change in the startup funding environment in the past year. Consider that at the end of 2020, almost a year into the pandemic, global venture investment had grown around 4 percent year over year.”
“Unicorn startups—those private companies valued at $1 billion-plus—were minted at an unprecedented pace in 2021, averaging more than 10 each week.”
“Venture funding to Latin America’s startups grew the most in 2021, with close to $19.6 billion invested in the region, or more than 300 percent year-over-year growth.”
“Funding to European startups grew by more than 150 percent year over year, with close to $116 billion invested.” READ MORE
INTERNATIONAL
Is regulation killing China’s entrepreneurial spirit? “The ranks of the unemployed technology workers are swelling, as China’s once vibrant internet industry is hit by a harsh and capricious regulatory crackdown. Under the direction of China’s top leader, Xi Jinping, the government’s unbridled hand is meddling in big ways and small, leaving companies second-guessing their strategies and praying to not become the next targets for crackdown. In place of the pride and ambition that dominated a few years ago, fear and gloom now rule as many tech companies lower their growth targets and lay off young, well-educated workers.”
“Alibaba was slapped with a record $2.8 billion antitrust fine last September. That was followed by a $530 million fine of Meituan, the food-delivery giant, a month later.”
“Weibo, China’s Twitter-like platform, was fined 44 times between January and November. Douban, the popular film- and book-reviewing site, was fined 20 times.”
“‘Restrict this, cancel that. Regulate this, censor that,’ Chen Jian, a stock market investor, wrote on the social media platform Weibo. This country ‘will become a cultural desert eventually.’” READ MORE
PROFILE
How Ryan Kaji’s family turned videos of their son playing with toys into a media empire: “There’s no one way to describe what Kaji, who is now 10 years old, has done across his multiple YouTube channels, cable television shows and live appearances: In one video, he is giving you a tour of the Legoland Hotel; in another, he splashes around in his pool to introduce a science video about tsunamis. But for years, what he has mostly done is play with toys: Thomas the Tank Engine, ‘Paw Patrol’ figures, McDonald’s play kitchens. A new toy and a new video for almost every day of the week, adding up to an avalanche of content that can overwhelm your child’s brain, click after click.”
“In the video, [his mother] wakes Ryan up from a pretend nap. He seems genuinely surprised and begins smacking away at the egg with an inflatable toy. Then he begins pulling some clearly used toys out of the egg and feigning great surprise. The video currently has over a billion views.”
“Ryan also has 10 separate YouTube channels, which together make up ‘Ryan’s World,’ a content behemoth whose branded merchandise took in more than $250 million last year.”
“Even conservative estimates suggest that the Kaji family take exceeds $25 million annually.” READ MORE
THE 21 HATS PODCAST
When Fred Warmbier Wanted to Quit, Deming Brought Him Back: This week, we feature a special guest, Fred Warmbier, owner of a metal-finishing business he founded in Cincinnati in 1998. About 10 years ago, Warmbier was ready to walk away from that business. “It just never seemed like I could have the type of business that I wanted,” he says, “where things worked properly and our employees were happy and our customers were happy.” That changed when he discovered the Deming Management Method through a consultant, Kelly Allan, who helped him tame the chaos. Where does one start with Deming? “You start,” says Allan, who is chairman of the Advisory Council of The W. Edwards Deming Institute, “where the pain is.” As it happens, and as he discusses in this conversation, Fred Warmbier has experienced more than his share of pain.
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