The Silver Tsunami Is Building
As more business owners approach retirement, the key question is, What happens to all of their businesses?
Here are today’s highlights:
Don’t look now, but customers are already using ChatGPT to shop.
The evidence is mounting that business owners need to start paying attention to A.I.
The NLRB has restored a standard that counts more workers as employees.
There are more reasons to be optimistic about inflation.
SELLING THE BUSINESS
As the wave of retiring owners builds, more owners consider selling to their employees: “Since founding Dean’s Beans three decades ago, Dean Cycon has built his eponymous coffee company in his own humanitarian vision. The beans are organic and fair trade, the coffee bags tell the stories of the farmers he buys from, and the roasting facility has been powered by solar panels since 2006. But, as his 70th birthday approached, Cycon knew he would need to consider the future of Dean’s Beans with someone else at the helm. A number of ‘progressive business people,’ as he put it, approached Cycon to buy the business. But he suspected they cared more about profits than preserving the culture he had worked so hard to cultivate. So Cycon decided to sell to buyers who were intimately familiar with the mission of Dean’s Beans: His employees, all 16 of them.”
“Dubbed the ‘silver tsunami,’ a wave of aging business owners is poised to roil the economic landscape, especially in New England, where the population already skews older. In Massachusetts, the 55-and-over crowd owns 53 percent of all small businesses — some 68,000 companies, which have more than 775,000 employees and $162 billion in annual revenue — according to Project Equity, an organization that advocates for employee ownership.”
“With only a fraction of businesses put on the market ever selling and family succession not always an option, this demographic trend raises the question: Where will all these businesses end up?” READ MORE
Customers are starting to use ChatGPT to shop: “Over the past few months, Matt Bahr, founder and CEO of the New York City-based post-purchase survey company Fairing, noticed an emerging trend. When asked how they first heard about a product or brand, customers increasingly gave a new answer: ChatGPT. While those responses weren't exceptional in number, there were enough to pique Bahr's interest. In his experience, the early adopters harbinger many more to come. ‘In the first month that we saw TikTok listed as a response, there were about 50 mentions, and now there are hundreds of thousands,’ he says. So far, customers are finding products through ChatGPT by searching relatively open-ended queries, Bahr says. One response to a post-purchase survey for a jewelry brand said that the shopper had prompted ChatGPT to recommend a gift for their wife.”
“That may unlock a slew of new opportunities for retail brands to capture new customers. But they'll have to commit to playing the long game: Currently, ChatGPT is trained with data that cuts off at September 2021, so any products released after that date or website updates made since then won't have an impact on what a person asks the large language model today.”
“The general expectation, however, is that ChatGPT and other generative A.I. models will eventually be able to crawl the internet in real time—so it may be wise to act sooner rather than later.”
“Brands should also use Google to understand what questions shoppers have about their products, says Ryan Pamplin, co-founder and CEO of the San Francisco-based portable blender company BlendJet and ChatGPT enthusiast. ‘Look at the top 10 things that Google suggests after typing in your brand's name,’ he says. ‘You should write content that answers all of those questions in a way that you would like them to be answered.’”
“For instance, customers are likely to ask questions about what they can make in their BlendJet blenders, so the company publishes recipes on its blog. It's all in the vein of ensuring ChatGPT can pull results that may be more favorable to your brand, Pamplin adds.” READ MORE
Artificial intelligence is already having an impact on workplace design: “Historically, offices have been designed based on organizational charts to ‘see who reports to whom and which departments might need to sit next to each other,’ and based on observational studies or staff questionnaires, said Jeremy Myerson, co-author of ‘Unworking: The Reinvention of the Modern Office,’ in a phone interview. Today, with staff members often working from both home and the office, ‘businesses just can’t afford to have swaths of real estate that are underutilized for the week,’ he said. Many businesses are using algorithms and machine intelligence ‘to have a much more real-time, dynamic reading of what’s happening in the space.’ Sensors track people and environmental conditions — temperature, air quality, noise levels, humidity, carbon dioxide levels and daylight. Architects and workplace designers then cross-reference that data to get a better picture of actual needs.”
“And they’re putting the data to use: relocating coffee spots and pantries to more popular corners, rearranging furniture and desks, redesigning lighting, seating people at desks that are better suited to their work and using partitions in smarter ways.”
“Mr. Blum said ZHAI had a computer tool that, in 27 hours, could come up with 100,000 designs for a building’s interior; an architect would have to produce 40 drawings a day for a decade to deliver that many options.”
“He clicked open a flurry of diagrams for the fluid, futuristic Infinitus Plaza in Guangzhou, China, which the firm designed. A.I. was used to come up with options for positioning parts of the building’s core, such as pipes, staircases, and elevator shafts.” READ MORE
A report from McKinsey says A.I. will ad $4.4 trillion to the global economy: “Generative A.I., which includes chatbots such as ChatGPT that can generate text in response to prompts, can potentially boost productivity by saving 60 to 70 percent of workers’ time through automation of their work, according to the 68-page report, which was published early Wednesday. Half of all work will be automated between 2030 and 2060, the report said. McKinsey had previously predicted that A.I. would automate half of all work between 2035 and 2075, but the power of generative A.I. tools — which exploded onto the tech scene late last year — accelerated the company’s forecast.”
“The report arrives as Silicon Valley has been gripped by a fervor over generative A.I. tools like ChatGPT and Google’s Bard, with tech companies and venture capitalists investing billions of dollars in the technology.”
“The vast majority of generative A.I.’s economic value will most likely come from helping workers automate tasks in customer operations, sales, software engineering, and research and development, according to McKinsey’s report. Generative A.I. can create ‘superpowers’ for high-skilled workers, said Lareina Yee, a McKinsey partner and an author of the report.”
“For the most part, economic studies of generative A.I. do not take into account other risks from the technology, such as whether it might spread misinformation and eventually escape the realm of human control.” READ MORE
The NLRB has restored a standard that counts more workers as employees rather than as contractors: “Determining whether a worker is an employee or a contractor has long depended on several variables, including the potential employer’s control over the work and provision of tools and equipment. In 2019, when the board was controlled by appointees of President Donald J. Trump, it elevated one consideration — workers’ chances to make more money based on their business savvy, often described as ‘entrepreneurial opportunity’ — above the others. It concluded that such opportunities should be a key tiebreaker when some factors pointed to contractor status and others indicated employment.”
“That 2019 ruling appeared to be a victory for gig companies like Uber and Lyft, whose supporters have argued that ride-share drivers should be considered contractors in part because of the opportunities they have for potential profit — say, by determining which neighborhoods to work in.”
“The latest decision returned the board to the standard laid out in the Obama era, explicitly rejecting the elevation of entrepreneurial opportunity above other factors.”
“The turnabout was criticized on Tuesday by businesses that rely heavily on contractors. In a statement, Evan Armstrong, chair of the Coalition for Workforce Innovation, which represents companies like Uber and Lyft as well as industry trade groups, said that the ruling ‘decreases clarity and threatens the flexible independent model that benefits workers, consumers, entrepreneurs, businesses, and the overall economy.’” READ MORE
With a “production cliff” looming, the affordable housing crisis is expected to get worse: “Builders have been stymied since the pandemic by higher costs for materials and labor, stricter lending practices, rising interest rates, and supply chain hiccups. The uncertainty threatens to further slow the process of building affordable homes. So many developments have been sidetracked or delayed that some experts expect a ‘production cliff’ to hit in a year or so, meaning fewer new homes coming onto the market. ‘When I started my career 30 years ago, the topic of affordable housing was usually limited to really lower-income clientele, industries and jobs,’ said Albert Milo, president of the affordable housing division of the Related Group, an urban developer. ‘Now, it’s diametrically different. Most areas of the country are talking about teachers, police officers, nurses, professionals struggling to find housing that is affordable for their income.”
“Costs for materials and labor remain stubbornly high. Developers are responding by cutting back, including eliminating amenities, using cheaper materials, setting higher income cutoffs and reducing the number of affordable apartments on projects that mix affordable and market-rate homes.”
“For affordable housing, builders and financiers cobble together different sources of public and private funding. But piecing together the ‘capital stack’ — the complete financing package, which can include loans, tax credits and subsidies — has become more challenging.” READ MORE
The latest report on producer prices offers more optimism on inflation: “Wholesale prices in the United States dropped 0.3 percent from April to May, another sign that inflationary pressures continue to ease in the face of repeated interest rate hikes by the Federal Reserve. The Labor Department’s producer price index — which measures inflation before it reaches consumers — rose 1.1 percent last month from May 2022, it said Wednesday, the smallest year-over-year gain since December 2020. On a month-to-month basis, overall producer prices have now dropped three of the last four months. In May, wholesale inflation was pulled down by a 13.8 percent drop in gasoline prices.” READ MORE
The mass tech layoffs are seeding a new generation of startups: “There is a direct correlation between the ongoing layoffs and an increase in ex-tech staffers becoming founders, according to Antler, an investment firm which also runs founder matchmaking programs. Antler says it's seen a 391 percent increase in program applications from would-be founders in the 12 months after a tech company has announced layoffs. The percentage is an average increase across all tech companies that made layoffs. In 2022, program applications from founders working at tech companies that have made layoffs increased by 111 percent to 1,273. This is despite an acute funding downturn, which makes fundraising a particular challenge for startups right now.”
“One of the hottest sectors among new founders is climate, Antler's report noted. ‘As the world's strongest talent, capital, and political will gravitates towards this issue, we are seeing founders building technology designed to leave a real impact,’ Klink added.”
“U.S. programs have also reported an influx of applicants who were laid off. Y Combinator applications spiked 20 percent to more than 38,000 in 2022, a company spokesperson told Wired. Meanwhile, VC fund Day One Ventures launched a specific ‘Funded Not Fired’ program.’” READ MORE
THE 21 HATS PODCAST
This week, Hans Schrei and Shawn Busse talk about why they put their businesses through accelerators, and Paul Downs explains why he might have done the same thing if accelerators had existed back when he started his business—“although,” he says, “I was probably too dumb to realize the value of it.” Hans, who just completed a 13-week accelerator program with his partner, Luis, also tells us how Wunderkeks fared while he and Luis were in the program, what they got out of it, and why they felt it was worth giving up the equity that was the price of admission. Plus: why Shawn went to an employee’s college graduation and how Paul managed to take a vacation. Oh, and Paul also talks about what surprised him about the recent 21 Hats event in Chicago.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren