The CrowdStrike Outage Is Still Affecting Lots of Businesses
Major customers of Microsoft and CrowdStrike are getting IT support, but many smaller businesses are still struggling.
Good Morning!
Here are today’s highlights:
Ami Kassar, who sees the insides of lots of businesses, is seeing some red flags.
Some people think businesses in these industries are easy to start and easy to build. Michael Girdley disagrees.
A major department store decides to try a by-appointment-only business model.
There’s growing interest in buying motels.
SMALLBIZ TECHNOLOGY
Many small businesses are still struggling to resume operations after the global outage: “An owner of a consumer insights research firm couldn’t pay her employees, make Friday’s deadline to sign a contract for a new business or send key research to a key client. A psychiatrist, who runs a virtual mental health practice in Maryland, saw his business hobbled as some of his virtual assistants and therapists couldn’t either make phone calls or log on to their computers. And a restaurant owner in New York City was worried about how he was going to pay his vendors and his workers.”
“The problem appeared to divide those affected into haves and have-nots. Major customers of Microsoft and CrowdStrike are getting IT support to resolve the issues, but many smaller businesses whose Windows PCs may have received the problematic update are still struggling.”
“Take Tsvetta Kaleynska, owner and founder of the Manhattan-based consumer insights company RILA Global Consulting, which has Fortune 500 clients. As of Saturday, she resolved the payroll issue and she got an extension until Monday on the research project.”
“But the prospective client will not move forward with the new contract, cutting her annual earnings by nearly 25 percent, she estimated. The problem: she couldn’t sign the contract because Docusign, which runs on Microsoft software affected by the faulty update, was down.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
What Are You Seeing Out There? As CEO of MultiFunding, Ami Kassar sees a lot of small business P&Ls, and he sees how banks are responding to loan applications. And in his view, the ground is starting to shift But in times of uncertainty, he emphasizes, there are always opportunities.
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ARTIFICIAL INTELLIGENCE
Gene Marks says the world isn’t ready for “digital workers”—at least not yet: “That’s the lesson learned by Sarah Franklin, the CEO of Lattice, a human resources and performance management platform that offers performance coaching, talent reviews, onboarding automation, compensation management, and a host of other HR tools to more than 5,000 organizations around the world. What is a digital employee? According to Franklin, it’s avatars like Devin the engineer, Harvey the lawyer, Einstein the service agent, and Piper the sales agent who have ‘entered the workforce and become our colleagues.’ But these are not real workers. They’re bots powered by AI. They’ve been introduced by companies like customer relationship management giant Salesforce and startups like Cognition.ai and Qualified to perform work in lieu of humans.”
“Seeing an opportunity, Franklin decided to take advantage. On 9 July, the company said that it would begin to support digital employees as part of its platform and treat them like any other employee. ‘Today Lattice is making AI history,’ Franklin pronounced. ‘We will be the first to give digital workers official employee records in Lattice. Digital workers will be securely onboarded, trained and assigned goals, performance metrics, appropriate systems access, and even a manager. Just as any person would be.’”
“The pushback was swift — and, in many cases, brutal, particularly on LinkedIn, which is generally not known for its savage engagement like X. ‘This strategy and messaging misses the mark in a big way, and I say that as someone building an AI company,’ said Sawyer Middeleer, an executive at a firm that uses AI to help with sales research, on LinkedIn. ‘Treating AI agents as employees disrespects the humanity of your real employees.’”
“The backlash — which even earned the post the dubious honor of being included in the ‘LinkedIn Lunatics’ subreddit, was enough to force Franklin to suspend her company’s plans three days after her announcement. Of course, these concerns are legit. But was Franklin in the wrong? Aren’t ‘digital employees’ inevitable?”
“Franklin made the same mistake that Microsoft, Google, and other big tech platforms have made: overhyping something that’s still not ready for prime time in order to achieve a marketing edge. You can’t blame her for her vision. It’s just that she, like many others, executed that vision too soon.” READ MORE
Chinese companies are offering to bring back deceased loved ones with AI avatars: “Whenever stress at work builds, Chinese tech executive Sun Kai turns to his mother for support. Or rather, he talks with her digital avatar on a tablet device, rendered from the shoulders up by artificial intelligence to look and sound just like his flesh-and-blood mother, who died in 2018. ‘I do not treat [the avatar] as a kind of digital person. I truly regard it as a mother,’ says Sun, 47, from his office in China’s eastern port city of Nanjing. He estimates he converses with her avatar at least once a week. ‘I feel that this might be the most perfect person to confide in, without exception.’”
“The company that made the avatar of Sun’s mother is called Silicon Intelligence, where Sun is also an executive working on voice simulation. The Nanjing-based company is among a boom in technology startups in China and around the world that create AI chatbots using a person’s likeness and voice.”
“The rise of AI simulations of the deceased, or ‘deadbots’ as academics have termed them, raises questions without clear answers about the ethics of simulating human beings, dead or alive.”
“In the United States, companies like Microsoft and OpenAI have created internal committees to evaluate the behavior and ethics of their generative AI services, but there is no centralized regulatory body in either the U.S. or China for overseeing the impacts of these technologies or their use of a person’s data.” READ MORE
STARTUPS
Michael Girdley lists five types of business that are harder than they look: “Seventy percent of small businesses fail by year 10. That’s a tough pill to swallow. So what do you do about it? Lots of people want to start a business. So they see that stat, and they start searching for ‘low-failure-rate businesses.’ In those lists, I see the same stuff come up over and over again. These five in particular I’ve seen a million times: laundromats, self-storage, real estate, vending machines, senior care. But here’s the thing: I think these are terrible businesses for someone starting out. Here’s why:”
“If you’re starting a laundromat from scratch, the capital expenditure up front is massive. Look at this picture and think about how much all this stuff costs. The washers, the dryers, the snack machines, the permits, the rent, the cable hookup, the dog food. ... It’s hundreds of thousands of dollars just to get the doors open, before you can make a cent. (Not to mention the loan you’ll have to take out — and probably personally guarantee — to buy all this equipment.)”
“Self-storage businesses have the same capex problems as laundromats, except you have to buy way more land. Then you have to do all the advertising and marketing before you even know if the thing’s going to be profitable. My other issue with self storage: collecting is a pain. You’re constantly having to chase people down to pay their rent. And if they disappear, you’re left with a big pile of junk to get rid of.”
“Buying some vending machines is certainly cheaper than buying real estate. But it’s definitely not nothing. You’ve got to buy the machines and the snacks, and then you have to hit the pavement until you land an agreement to place one somewhere. Here’s the problem: landlords aren’t going to give you a spot for cheap. And if you’re doing well, it’s not hard for a landlord to raise your rent, give the spot to someone else, or just kick you out and do it themselves. Plus, you’re going to spend a big chunk of your life driving around in a van full of chips and candy bars.” SUBSCRIBE HERE
RETAIL
In San Francisco, Saks Fifth Avenue shoppers are buying the by-appointment-only model: “Amid Friday afternoon’s heat, the five posh floors of Saks Fifth Avenue in San Francisco’s Union Square offered a cool elegance that belied the jarring news from the day before: the store is transitioning to an appointment-only model and laying off staff. What will it feel like to go on pre-arranged shopping trips inside a sprawling department store? That is an open question for customers and staffers.”
“Saks Fifth Avenue shoppers who chatted with The Standard were nearly universal in their lack of enthusiasm. Some bristled at the idea that the already high-end store seemed set on only catering to the super well-off.”
“Marlon Seaton, who had popped into Saks to sample colognes, thought the change would cut off a swath of potential shoppers. When asked if he would consider making an appointment, his answer was swift and decisive: ‘Hell no.’”
“While mid-market retailers like Uniqlo and Zumiez have closed in Union Square, the area remains a hub of opulence for high-end watches or Louis Vuitton bags — and the Saks announcement appears to play into that trend. ‘We are seeing retailers with high-end clientele offering appointment service,’ said David Perry, a spokesperson with the Union Square Alliance, adding that the group looks forward to Saks ‘continuing to be a part of Union Square’s luxury market.’” READ MORE
HOSPITALITY
Suddenly, people don’t just want to stay in motels, they want to buy them: “Motels are having a moment. Kimberly Walker, managing partner at Nomada Hotel Group, which owns three motels in California, says she sees a rise in what she calls ‘motel culture.’ It includes people who are interested in owning and renovating motels, as well as travelers — especially young people — with an affinity for them. In recent years, the humble roadside motel that an older generation might dismiss as outmoded at best has begun to appeal to a new group of younger fans, attracted to hit-the-road adventures. Instagram pages celebrating zany motel designs have hundreds of thousands of followers.”
“And streaming services, such as Max, have programs devoted to motel renovation. These programs became especially popular during the pandemic, when cooped-up viewers began dreaming of do-it-yourself projects.”
“The pandemic also changed how travelers viewed motels. A lot of homebound people craved a getaway after being shut up for so long, and motels, which afforded more privacy than many hotels, felt safer health-wise, Ms. Walker said.”
“When the Nomada Group purchased the Skyview in Los Alamos, Calif., for $1.9 million in 2016, it was so rundown and forbidding that locals likened it to the Bates Motel in the movie ‘Psycho.’ But it had 360-degree views of the wine country and a quirky, bright yellow road sign right out of the Rat Pack days.”
“The company, which has outside investors, spent $3 million to overhaul the 33-room property. That included opening a restaurant, the Norman, where guests could dine on Bates burgers. It also included moving the parking lot and replacing it with a large communal space containing Adirondack chairs and a fire pit. The property has a rustic California feel, with a swimming pool surrounded by palm trees and spiky agave plants.” READ MORE
OBITUARY
J. Michael Cline co-founded Fandango, an online ticketing company that changed how Americans went to the movies: Mr. Cline, who was 64, co-founded Fandango in 2000 and left the company in 2011, according to his LinkedIn profile. The company — familiar to many from its splashy logo, an orange ‘F’ in the shape of a ticket stub — was later acquired by Comcast and is currently owned by NBCUniversal and Warner Bros. For years, the company dominated movie-ticket sales, handling ticketing for several major theater chains and making money by charging a processing fee for online ticket sales and by selling advertising on its site.”
“At the time of its launch, Mr. Cline offered a pithy explanation for the company’s name. ‘A Fandango is fast and fun,’ he told Variety. ‘Fandango is the perfect match to a service designed to make going to the movies easier and more enjoyable than ever before.’”
“At his death, he was the executive chairman of Juxtapose, which helped launch a number of tech businesses in areas ranging from health care and wellness to property management.”
“New York City police officers, who responded to a 911 call at the Kimberly Hotel, on East 50th Street between Lexington and Third Avenues, ‘found an unconscious and unresponsive male with injuries indicative of a fall from an elevated position,’ a police spokesman said in a statement. The medical examiner’s office ruled the death a suicide.” READ MORE
THE 21 HATS PODCAST
Family Businesses Aren’t Dysfunctional. They’re Disastrous: This week, in episode 204, Jay Goltz and special guest Cathy Caroll talk about family businesses, with Jay asserting that they are even more combustible than most people realize and with Cathy offering some smart coping strategies. We start with Cathy explaining how her own experiences in a family business propelled her to write a book, Hug of War, and to become a family business coach. Why are family businesses so difficult? Well, says Cathy, it’s because you’re trying to combine a family mindset with a business mindset, which she says, is like “living in socialism and capitalism simultaneously.”
Of course, she says, it also has to do with mixing love and money—“You’re just gonna get sparks”—and with the brutal challenge of transitioning from one generation to the next, when every decision can feel like a repudiation or rejection. Still, it was that stew of anxiety, resentment, and trauma that helped Cathy find her calling, which is to help others do in their family businesses what she could not in hers.
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Thanks for reading, everyone. — Loren