The Afternoon-Fun Economy
A whole bunch of businesses are benefiting from workers who suddenly have more freedom to make creative use of their time. “We call them the remote guys.”
Good Morning!
Here are today’s highlights:
Artificial intelligence is already showing how it could upend market research.
The Great Unretirement: Older workers are coming back to work.
There are conflicting theories on where businesses should do their banking now.
Introducing 21 Hats Office Hours, starting with your chance to ask Ami Kassar anything about banking or finance.
OPPORTUNITIES
Remote work is fueling what’s being called the afternoon-fun economy: “At the Chelsea Piers outdoor golf club, on a recent unseasonably warm Monday afternoon, 55 people were playing golf by 3:45, and a handful were sipping beers. At CutLoose hair salon, in Brooklyn, N.Y., the stylists now watch their clients take Zoom meetings from the salon chairs. And at Skyway Golf Course, in Jersey City, N.J., Steve Mills, a general manager, has noticed that weekday afternoons are jammed with a new group of golfers.”
“‘We call them the remote guys,’ Mr. Mills, 48, said. ‘These were guys we used to see running to the golf course after work. Now they’re able to come out leisurely and get their golf done, instead of changing in the parking lot.’”
“The leisure industry is facing a surge in demand for afternoon services, especially in fitness and cosmetics. It’s the rise of the ‘afternoon-fun’ economy.”
“‘This is an amazing potential reversal,’ [said Nick Bloom, a researcher]. ‘You can have a huge increase in productivity using leisure resources throughout the week. It’s an odd unexpected boost from post-pandemic working from home.’” READ MORE
BANKING
Was working from home a factor in the SVB collapse? “Last week, Silicon Valley Bank was the second-largest bank to fail on record after a $42 billion bank run. Its problems were largely financial—from highly unprofitable investments to an imbalance in the publicly reported numbers in assets and liabilities. But it turns out, it was facing another risk that some other Silicon Valley companies have grappled with: the wide adoption of remote work. When the COVID-19 pandemic began to subside, companies in America’s tech and innovation hub agonized over whether to make remote work permanent. Like many companies, SVB decided to embrace it, and reported in its 2021 filings that it had even onboarded new employees ‘entirely remotely.’”
“In its 2023 annual report released in February, SVB, a majority of whose employees worked remotely, acknowledged some downsides to remote work: ‘More recently, the COVID-19 pandemic has had direct effects on our operations, including by limiting employee travel and increasing telecommuting arrangements,’ SVB said.”
“With the adoption of remote work, SVB said employees may struggle to balance work and life, which could result in ‘reduced productivity and/or significant disruptions in our business operations.’ Other risks from a work-from-home setup for the bank included online connectivity and cybersecurity threats.”
“The bank, in its latest annual report, outlined its plan to stick with flexibility while starting to bring more employees into the office based on their ‘role and function.’” READ MORE
So where do startups put their cash now? “As founders adjust their strategies to help cope with recent volatility, they're looking for safe places to store their cash. Enter the top players of the U.S. financial system: Bank of America, JPMorgan Chase, Wells Fargo, and Citibank, institutions that are seen as too big to fail—not many years after they came close. Eighty-two percent of startups said that they would move funds to a more ‘dominant’ financial institution, according to a recent survey from Startup Snapshot, a data-sharing platform based in Tel Aviv, Israel.”
“‘We saw a 40-year [old] bank unfold in 36 hours, and it seems very unlikely that a top four bank would do the same,’ says Cody Barbo, the founder of San Diego-based estate planning company Trust & Will.”
“Barbo had banked with SVB for more than a decade. The day before the Federal Deposit Insurance Corporation shuttered SVB and placed it in receivership, Barbo had initiated an eight-figure wire transfer: ‘That made me terrified. I've never sent an eight-figure wire before.”
“Now, Barbo and his team have decided to open an account with a major bank since, in his view, it's the safest place to park funds. Many others seem to agree, with Bank of America scooping up more than $15 billion worth of deposits in the wake of SVB's closure, Bloomberg reported on Wednesday.” READ MORE
Kevin O’Leary is telling CEOs to be ready for more bank failures: “‘Shark Tank’ investor Kevin O'Leary is advising startup CEOs he works with to limit their bank deposits in the wake of the Silicon Valley Bank implosion, and says firms need to brace for other possible bank collapses, he warned. ‘We've told our CEOs: do not put any more than 20 percent of liquid assets in any one institution. I don't care who you know or how big they are, there's always the next black swan idiot manager in big and small banks. So we don't know who they are,’ O'Leary said in an interview with Yahoo Finance on Wednesday.”
“O'Leary blasted the SVB's high exposure to long-term bonds. Bond prices have sunk over the past year amid the Fed's interest rate hikes to control inflation, leading to $620 in unrealized losses across all U.S. banks, according to estimates from the FDIC.”
“Other commentators have said that the risk of contagion from Silicon Valley Bank's fallout is low, but O'Leary remains concerned over the impact of regulators' response to the crisis, making all of SVB and Signature Bank's depositors whole, even above the typical $250,000 deposit threshold.”
“That upends the FDIC's usual standards for deposit insurance, and it inherently makes bank stocks more risky, O'Leary said, as bank managers may now feel free to take on more risk to boost stock prices, even if it endangers the safety of deposits.” READ MORE
INTRODUCING: 21 HATS OFFICE HOURS
Got a question about banking or finance? On Monday, March 27, at 5 p.m. ET, Ami Kassar, CEO and founder of MultiFunding, will take any and all questions from 21 Hats Founding Members. For years, Ami has been telling business owners that they should do their banking with smaller, regional banks. Does that advice still hold when so many are moving their money to the big banks? What other advice does Ami have for payroll or credit cards or anything else? Bring your own questions to this Zoom discussion! This is the first in a series of 21 Hats Office Hours that will give Founding Members the opportunity to interact with the 21 Hats podcast regulars and other special guests. Founding members also participate in a monthly CEO Forum.
OFFICE SPACE
The SVB fallout means more trouble for commercial real estate: “The most obvious implication for commercial real estate: lending access will become more difficult. Banks typically capture or contribute to about 40 percent of total commercial real estate lending activity, according to Cushman & Wakefield, referencing data from MSCI Real Capital Analytics. In an emailed response to questions, Abby Corbett, global head of investor insights at Cushman, said the liquidity situation at hand didn’t have to do with underlying credit liquidity issues.”
“Unlike the 2008 global financial crisis and other recessions, real estate wasn't the cause of this meltdown but is going to bear the brunt of it, said Susan Wachter, Albert Sussman professor of real estate and professor of finance at The Wharton School at the University of Pennsylvania, and co-director at the Penn Institute for Urban Research.”
“That's because regional and super-regional banks — the ones facing the most scrutiny right now — disproportionately lend into commercial real estate. Banks weakened by the current crisis will see their growth curtained, Wachter continued, including their ability to lend to real estate.”
“‘This will make it not only pricey to refinance and to get new loans, but it’s also ... going to restrict lending capacity just at a time when, for the soundest of the sectors, there needs to be access to lending,’ she said. ‘This is a process that will unfold over time, and the banks will lack the capacity to refinance and extend (loans) as they have through previous crises.’” READ MORE
PPP LOANS
Just because your loan has been forgiven doesn’t mean you’re done with PPP: “With the Small Business Administration, the Treasury Department and the Internal Revenue Service all ramping up scrutiny of Covid-19 relief programs, experts say small-business owners need to hold on not just to their loan documents but any documents they may need to back up why they took out the loans in the first place.”
“Forms such as the PPP forgiveness application 3508 stressed that borrowers should ‘retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full,’ as well as permit SBA and its inspector general access upon request or in connection with a loan review or audit.”
“Other forms, such as the 3508S, required three years of document retention for payroll and employment records and four years for all other documentation that starts at the time of forgiveness or repayment of the loan.”
“Business owners who used a customized forgiveness portal provided by a lender or were more focused on getting forgiveness might have missed the requirements, Elanjian said, but they should definitely hold on to a wide range of materials.”
“One key document or documents to hold onto was anything that went into the certification and attestation requirements. Those who got loans had to essentially pledge that they were needed at the time to prevent layoffs, or because there was a concern of possible economic damage.” READ MORE
MARKETING
A Boston startup is helping big brands target specific consumer groups: “If you’re shopping for a cold drink online, picture these options: An aerial view of a High Noon hard seltzer can over ice. A White Claw on a ledge by a pool. A sideways can of Truly on a wood table. A Boston startup says it can explain which picture will appeal most to millennial women — the High Noon image — and it can do the same for middle-aged men, college students, or first-time homebuyers, as well as for products from motorcycles to sneakers to toothbrushes. As more consumer decisions happen online, sales have become dependent on the way products are photographed, as opposed to how they appear on a store shelf. Different variations of product images, no matter how big or small, can attract — or repel — potential buyers.”
“Brands typically learn about their customers through studies or focus groups with real people. Though tried and true, these efforts can be expensive and time-consuming, and sometimes they happen so late in a design process that it’s tough to implement feedback. [Jehan] Hamedi saw an opportunity for technology, specifically artificial intelligence, to replace that.”
“Hamedi launched a company, called Vizit, around the technology in late 2021 and raised $10 million from investors last fall. Today, big brands including L’Oreal, Keurig, and the maker of M&M’s and Orbit gum use the software to make marketing decisions.”
“A few years ago, PepsiCo wanted to see if the AI actually worked and put Hamedi to the test during a meeting. The corporation had invested a lot of time and money to figure out which Lay’s potato chip variety appealed most to millennial women, and its executives wanted to know whether Hamedi’s AI system — then an early version of Vizit — could predict the right one.”
“‘They almost fell out of their chairs and were like, How did you do that?’ Hamedi recalled. ‘We basically predicted what they had spent millions of dollars researching.’” READ MORE
HUMAN RESOURCES
Older workers are coming back: “The number of people ages 65 and older working or seeking work has increased by 144 percent in the past 20 years, according to the U.S. Department of Labor. The broader labor force grew by about 13 percent in that time. The trend had been building momentum when it ran up against the wall of the pandemic and retirements soared, but the participation numbers for this cohort are nearly back to pre-pandemic levels. ... SHRM Online discussed the trend with Laurel McDowell, the lead for the Job Connections for Mature Workers Program at global recruiting and staffing firm ManpowerGroup:”
“One of the most significant reasons we see retirees seeking to return to the workforce is that they miss the fulfillment of having a sense of purpose. They take pleasure in being strong contributors, and they also feel the loss of the social interaction and sense of belonging that their workplace and workmates provided to them.”
“Also, the rising costs of health insurance and living expenses in general plus the erosion of retirement savings precipitated many to seek employment again out of financial necessity.”
“Research shows that seasoned employees are more likely to show up to work on time and less likely to call in sick. Mature workers also do not tend to switch jobs as often as their younger colleagues.” READ MORE
ARTIFICIAL INTELLIGENCE
What would happen if you asked GPT-4 to make a business plan?
THE 21 HATS PODCAST
For Wunderkeks, It Really Is Go Big or Go Home: This week, Hans Schrei explains why he’s pursuing a deal with Costco and why his vision is to get Wunderkeks cookies into every supermarket in the country. When Jay Goltz counters that instead of thinking big, or thinking small, maybe Hans should think medium, Hans says that may no longer be possible with consumer packaged goods: “The little brand that grows and thrives by growing little by little doesn't really exist any more in this space,” he says.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren