The Difference Between a Founder and a CEO
There’s an inherent conflict between the two roles, says Jason Fried, who has come to believe that being CEO of a smallish business is really just a part-time job.
Here are today’s highlights:
A local bakery offers another lesson in influencer marketing: “I’m embarrassed to say, TikTok.”
The shortage of accountants is getting worse.
You don’t need to be in an office to engage in office politics.
An insurance company CEO says half the insurance companies based in Florida could fail.
Jason Fried, founder and CEO of 37signals, says you can’t really be both a founder and a CEO: “Why's that? Because a founder's job is injecting risk into the business. It's flooding it with new ideas, stuff that seems hard to do, ideas that no one else would dare try, placing the kinds of bets that only someone who started the damn thing would be willing to wager. A founders' job is basically to stay in business by almost always putting it out of business. A CEO's job? Just about the opposite. It's reducing risk, executing diligently to achieve obvious goals, staying in business at all costs. It's primarily about being conservative, keeping the company's collective cool, and not letting things get out of hand. Just about everything that a founder isn't doing. A CEO's job is to stay in business by not allowing the company to do anything so stupid that it could go out of business.”
“Founder is a unique position as it's the one job that can't be replaced. It can be eliminated, certainly, as many companies go founder-free after some time. But once the person who started it isn't there, you can't bring someone else in who started it. The closest thing then becomes a CEO.”
“So I've shifted my personal thinking. As long as I'm still here, I'm picking a side. I'm a founder. That's my strength, that's where I can bring the most. Which means we don't really have a full-time CEO. I'm simply the part-time one that fills the void when we need to bridge the gap, make a final big decision, and move on.” READ MORE
The Container Store says it will honor discount coupons from Bed Bath & Beyond: “The Container Store, which sells home storage and organization supplies, said Wednesday that it will accept ‘a competitor's blue coupon’ at any of its 97 U.S. stores now through May 31. The coupon will be good for 20 percent off a single item, the company said. ‘We're here for you. Welcome to the organization,’ The Container Store posted on Twitter. Bed Bath & Beyond filed for Chapter 11 bankruptcy protection on Sunday after months of uncertainty over its survival.”
“Bed Bath & Beyond's ubiquitous and oversized coupons — known as Big Blue — may have played a role in the company's slow demise. At one point in time, the company sent out hundreds of millions of 20 percent-off mailers every year, which fostered an ‘overreliance on the coupon’ among its customers, Bed Bath's chief merchandising officer said in 2020.”
“Bed Bath & Beyond said it would stop accepting coupons by April 26. Employees who answered the phone Wednesday at four stores said they had stopped accepting coupons the prior day, while two others said shoppers had hours left to redeem them.”
“Liquidation sales will begin Thursday at the remaining 360 Bed Bath & Beyond and 120 Buybuy Baby locations.” READ MORE
A local bakery in Boston scores on TikTok and Instagram: “Brookline is rarely buzzy, but early on a recent Saturday morning there it was: a legit social-media-induced frenzy. It took the form of a line, maybe 75 people long, young, stylish, and determined to get into a small new bakery. What’s going on? I asked as I cruised its length. Who sent you? ‘The Internet,’ the first woman said. And then the people behind her: ‘TikTok,’ ‘TikTok,’ and, ‘I’m embarrassed to say, TikTok.’ I wanted to see the objects of their desire, and since I was standing in front of Lakon Paris Patisserie it would have made sense to simply look inside, only I couldn’t. The bakery was Orange-Line-at-rush-hour packed.”
“So I did what everyone else there had done. I pulled out my phone and fell under the spell of photos and videos of come-hither monkey bread and morning buns and beautiful, decadent croissants — Nutella banana, strawberry cheesecake, pistachio mascarpone — many in the process of being theatrically pulled apart to reveal seductive inner creams.”
“It’s one thing to read about the powerful role social media plays in driving people to restaurants — to know on an intellectual level that there’s an industry of well-compensated influencers and corporate social media strategies, and that these days, even a noodle needs to be ready for its close-up.”
“It’s another to observe firsthand — on an otherwise low-key retail stretch of Beacon Street outside of Coolidge Corner — what it’s like when social media whips devotees into such a frenzy that they travel to some random, often distant, location, where they will prove they are part of things by posting their own giddy shots, thereby summoning even more people, until the circus moves on to some other random, often distant, location.” READ MORE
Should home cooks be allowed to sell perishable food? “Milagros Cruz was down to her last $75, and sleeping in a car, when she heard her mother’s voice guiding her in a dream: My girl, make tamales. Arizona did not make it easy. Though the state promotes itself as a low-tax, low-regulation haven for private enterprise, it does not allow the sale of perishable foods made at home. So for years, a thriving economy of working-class, mostly Latina home cooks has operated underground, selling tacos, tres leches cakes and chile-dusted corn illegally from living rooms and outside laundromats and soccer games. Ms. Cruz, 41, sells her pillowy green-chile and pork tamales near a Phoenix auto-parts store, and worries about getting cited under a state law that punishes home cooks who break the rules with a $500 fine and six months in jail.”
“This month, Republicans who control the state’s fractious legislature came together with Democrats in a moment of unusual bipartisan accord to try to change all that. They passed a bill that would let Arizona’s home cooks register with the state to legally sell perishable foods like salsas and tamales.”
“But Katie Hobbs, the state’s new Democratic governor, vetoed the measure last week, citing concerns about the potential for food-borne illnesses, as well as rats and insects in home kitchens.”
“Her veto set off a ferocious culinary and cultural backlash from the Capitol to kitchens across Arizona, offering a political lesson for the new governor: Do not mess with the tamale makers.” READ MORE
Small businesses are having an increasingly tough time finding accountants: “Pennsylvania accounting firms are contending with a scarce talent market, and it’s driving small and medium-sized firms to rethink how they do business. Hiring is one of the greatest headaches facing local accounting firms, the Pennsylvania Institute of Certified Professional Accountants said in its latest report, released Wednesday, summarizing the state of the profession in Pennsylvania. Pennsylvania has seen the number of active CPA licenses decreasing, as the number of new licensees fails to keep up with the number of people retiring.”
“The local challenge is in line with a shortage of accountants across the U.S., as fewer people are sitting for the CPA exam nationally since 2016. It’s now trickling down to certain regulated businesses, governments and nonprofits that require auditing services.”
“‘Every single accounting firm is challenged right now [with] more work than they can handle,’ Jennifer Cryder, CEO of the PICPA. ‘Smaller organizations are not able to get the services they need because either the fees are so high they can’t afford them, or nobody will take the work.’” READ MORE
Consumers continued to drive economic growth in the first quarter: “Higher interest rates took a toll on the U.S. economy in early 2023, but free-spending consumers are keeping a recession at bay, at least for now. Gross domestic product, adjusted for inflation, rose at a 1.1 percent annual rate in the first quarter, the Commerce Department said on Thursday. That was down from a 2.6 percent rate in the last three months of 2022 but nonetheless represented a third straight quarter of growth after output contracted in the first half of last year.”
“Growth in the first quarter was dragged down by weakness in housing and business investment, both of which are heavily influenced by interest rates. The Federal Reserve has raised rates by nearly five percentage points since early last year in an effort to tamp down inflation.”
“Consumers, however, have proved resilient in the face of both rising prices and higher borrowing costs. Inflation-adjusted spending rose at a 3.7 percent annual rate in the first quarter, up from 1 percent in the prior period. Consumers have been buoyed by a strong job market and rising wages, which have helped offset high prices.”
“Spending slowed as the quarter progressed, however, and forecasters warn that it could weaken further amid headlines about layoffs, bank failures and warnings of a possible recession.” READ MORE
An office tower in San Francisco that was worth $300 million before the pandemic is up for sale—and may fetch 80 percent less: “Before the pandemic, San Francisco’s California Street was home to some of the world’s most valuable commercial real estate. The corridor runs through the heart of the city’s financial district and is lined with offices for banks and other companies that help fuel the global tech economy. One building, a 22-story glass and stone tower at 350 California Street, was worth around $300 million in 2019, according to office broker estimates. That building now is for sale, with bids due soon. They are expected to come in at about $60 million, commercial real-estate brokers say. That’s an 80-percent decline in value in just four years.”
“No market was hit harder than San Francisco, for reasons including its high costs, reliance on a tech industry quick to embrace hybrid work, and quality-of-life issues such as crime and homelessness. The lack of office workers is rippling throughout the financial district, leading restaurants, retailers, and other small businesses to lay off employees or close.”
“Nearly 30 percent of San Francisco’s office space is vacant, which is more than seven times the rate before the pandemic hit, and the biggest increase of any major U.S. city, according to commercial real estate services firm CBRE Group. Today it is hard to know just what office buildings in San Francisco’s financial district are worth, because transactions have practically dried up.” READ MORE
Even in a hybrid world, office politics persist: “The gossip. The suck-up. The bully. Workplaces have been home to these toxic personalities since the beginning of work, and a new survey has found the problem persists in the hybrid world in which employees can be in-person or virtual. About half the 800 U.S. workers surveyed say the negative effects of office politics have stayed the same in the Covid era, while another 25 percent say they expect the disruptive behavior to get worse before it gets better.”
“More than one-third of the surveyed workers said rumor spreading and excessive flattery toward bosses were the most common upsetting behaviors they witnessed, followed by blame-gaming, backstabbing and credit snatching. Rounding out the list were bullying and sabotaging. Half of those polled said they felt pressured to engage in such behaviors, and one in four has quit a job over it.”
“While it's not entirely clear how the shift to more hybrid workplaces will affect the prevalence and impact of office politics for the long term, it’s obvious that one doesn’t need to be in an office to engage in office politics.” READ MORE
In Florida, rising reinsurance costs are nearing a breaking point: “Roughly 30 Florida-based insurance companies remain in operation, and Slide Insurance CEO Bruce Lucas said he expects to see a third or even half of them fail in the next 24 months. Reinsurance — the financial backstop insurance companies purchase to cover unforeseen losses — is the No. 1 challenge pressing the Florida insurance market, the longtime Tampa insurance executive said. ‘It is a certainty, in my opinion, that a lot of companies won’t be able to find reinsurance capacity, and they will go insolvent as a result,’ Lucas told the Tampa Bay Business Journal. Some carriers may be able to find reinsurance, but they won’t be able to afford it and, again, fall into insolvency, he said. ‘That’s happening right now across the state of Florida,’ Lucas said.”
“Increasingly catastrophic storm seasons are raising demand for reinsurance, but fewer reinsurers are offering capacity to the Florida market, Lucas said. Approximately 26 reinsurers write business in the Florida market, according to the Florida Office of Insurance Regulation.”
“The amount of reinsurance coverage purchased by Florida companies in 2022 increased 17 percent, while the cost of that reinsurance increased by 52 percent from 2021, according to FLOIR.”
“Rising reinsurance costs could reach a ‘breaking point’ in June 2023, when Florida catastrophe reinsurance programs are scheduled for renewal, according to an AM Best report.” READ MORE
THE 21 HATS PODCAST
When CEOs Behave Badly: This week, our conversation starts with Shawn Busse and Jay Goltz trying to understand why CEOs keep going viral for their misguided attempts to rally the troops. Shawn suspects CEO screeds have always existed—they just haven’t been recorded. He also thinks they tend to come more from public company CEOs who are beholden to shareholders. Jay thinks they’re just morons. “I really don't understand how someone could be smart enough to run a big company like that,” he says, “and be so completely ignorant. It's shocking to me.” Of course, CEOs of both publicly owned companies and privately owned companies do have to do unpleasant things sometimes, but Shawn and Jay say they’ve learned from their own experiences handling layoffs and recessions. “Do we have to go out of our way to be callous about it?” Jay asks. “I don't think so.” Plus: the very different ways Shawn and Jay manage their hiring processes.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren