What Really Happened at Basecamp

Today’s Highlights: Does digital marketing work without cookies? Did the PPP program help businesses that needed it? Even small amounts of capital can transform a new business.

MARKETING

What happens to small company marketing when cookies go away? “Though the end of third-party cookie tracking is a big win for consumer privacy, companies that have been reliant on the marketing technology are in for a big adjustment. The transition will be even harder for small companies, which tend to have fewer resources to weather shocks. But there is hope. For companies that can pivot into the collection of first-party data—that is, information collected directly from consumers—the end of third-party cookies won't be as tough to stomach. Gone are the days of just being able to ply one potentially interested consumer with ads wherever they go online, says Grayson Lafrenz, CEO and founder of marketing consultancy Power Digital.

  • “Now, companies will need to build out and better use their own customer lists and amp up their customer service efforts. They may also need to invest in good old-fashioned advertising again.” READ MORE

GOVERNMENT SUPPORT

Did the PPP program work? It’s still not entirely clear: “The Paycheck Protection Program, first passed early in the pandemic as part of the CARES Act, was meant to provide loans to help small-business owners like [Andrew] Leckie keep workers on the payroll. Businesses wouldn't have to pay the money back as long as they used most of the loan proceeds to pay staff. But despite plenty of success stories like Leckie's, there's little consensus on how many paychecks it actually protected, a question that lingers as the PPP is due to wind down in coming weeks after it depletes all of its available funds.”

  • “The program, after several extensions passed by Congress, guaranteed more than 10 million loans to small businesses during the pandemic at a cost of more than $770 billion so far.”

  • “‘We really underestimated the ability of lots of not-in-person service businesses to not only continue doing what they're doing, but even do more of it,’ says economist John Friedman of Brown University. ‘As a result of that, a lot of PPP money went to firms that were in fact not really that affected by the pandemic.”

  • “Michael Faulkender, who as assistant Treasury secretary for economic policy in the Trump administration helped craft the loan program] argues that without the loan program, even more people would have been dumped into the unemployment system, which was already overwhelmed by millions of laid-off workers seeking benefits: ‘I think relative to how devastating things could have been, PPP was extraordinarily successful.’” READ MORE

STARTUPS

Even small amounts of money can have an impact on people starting businesses: “When Omari Tatum won a $25,000 grant last month, he was able to immediately purchase new equipment and bolster the workforce of his Black Hawk Security and Neighborhood Watch. It’s just the kind of boost that the local nonprofit GIFT had in mind as it got going last year. GIFT, which stands for Generating Income for Tomorrow, aims to build Black wealth by growing minority-owned businesses — which all too often struggle to access capital. The organization offers grants to burgeoning businesses that show potential but may lack funding. So far it’s given $227,000 in grants to 14 Black-owned businesses.”

  • “The sum is relatively modest, but those funds have already made a huge difference, allowing local companies to hire new employees, purchase new equipment and expand into new spaces.”

  • “‘For somebody to buy into your dream or buy into your idea, it’s remarkable,’ said Tatum. ‘It’s unimaginable, really.’” READ MORE

REGULATION

Mayor Bill de Blassio is pushing a plan to require City Council approval to build any hotel in New York City: “The mayor wants to require City Council approval for any new hotel, anywhere in the city — a layer of scrutiny otherwise reserved for neighborhood-altering projects such as airports, helipads, racetracks, large stadiums and drive-in movie theaters. He has said hotels create more traffic and activity than ordinary buildings, and he has defended the policy as good for both organized labor and community residents. The Council is expected to approve the plan in time for Mr. de Blasio to see it become law before he leaves office this year.”

  • “Analysts said that the lengthy review process to get a permit would change the economics of hotel development, and existing hotels would be likely to grow more expensive.”

  • “City budget officials have calculated that the move could eventually leave New York with insufficient hotel capacity, potentially costing $350 million by 2025 and as much as $7 billion by 2035 in lost taxes, according to a confidential budget office report drafted in February and shared with The New York Times.” READ MORE

MANUFACTURING

Factories are humming, but manufacturers are scrambling for workers and parts: “Matt Guse would hire a dozen machinists — if only he could find them. The owner of MRS Machining, a maker of precision metal parts in rural Augusta, Wis., Mr. Guse finds business is rebounding so quickly as the pandemic’s effect eases that his 47-worker shop is short-handed. ‘I’ve turned down a million dollars’ worth of work in the last two weeks,’  he said. ‘Doing that, it’s hard to go to bed at night when you put your head to the pillow. I have open capacity, but I need more people.’”

  • “At one point, factory production was down substantially because of the pandemic, but it should return to pre-Covid-19 levels by the third quarter of this year, according to Chad Moutray, chief economist for the National Association of Manufacturers.”

  • “The average hourly wage of manufacturing workers is $29.15, while workers in leisure and hospitality, another field that draws people with less education, earn $17.67 an hour.” READ MORE

THE COVID ECONOMY

Consumer confidence rose sharply in April, approaching pre-pandemic levels: “The present situation index, which reflects consumers’ assessment of current business and labor market conditions, surged to 139.6 in April from 110.1 in March. This improvement suggests that the economic recovery strengthened further at the beginning of the second quarter, Ms. Franco said. The expectations index, which gauges short-term outlook for income, business and labor market conditions, also increased, albeit to a lesser degree, to 109.8 in April from 108.3 the prior month. The continued rise in confidence bodes well for consumer spending in the coming months, said Jonathan Silver, founder and chief executive of data platform Affinity Solutions, which collects spending data from credit and debit card transactions.” READ MORE

The pandemic has changed where Americans live: “Suburbs are emerging as the winners from these changes, marking the end of a decade-long growth trend for big cities. Companies intent on lowering overhead and retaining talent are opening offices there, and developers are adding amenities to keep entertainment dollars local. In the largest cities, the changes are helping erase billions of dollars of annual property tax revenue and fueling double-digit decreases in rents. In 2020, higher-income neighborhoods lost more residents to migration than lower-income neighborhoods. With many companies signaling a new openness to remote work after the pandemic ends, cities are bracing for a future where spending on public transportation, lunches and other drivers of the urban economy don’t return to pre-pandemic levels.” READ MORE

Try Morning Report Audio

MANAGEMENT

Here’s what really happened at Basecamp: “The controversy that embroiled enterprise software maker Basecamp this week [noted in yesterday’s Morning Report] began more than a decade ago, with a simple list of customers. Around 2009, Basecamp customer service representatives began keeping a list of names that they found funny. More than a decade later, current employees were so mortified by the practice that none of them would give me a single example of a name on the list. ... Many of the names were of American or European origin. But others were Asian, or African, and eventually the list — titled ‘Best Names Ever’ — began to make people uncomfortable. What once had felt like an innocent way to blow off steam, amid the ongoing cultural reckoning over speech and corporate responsibility, increasingly looked inappropriate, and often racist.”

  • “Employees say the founders’ memos unfairly depicted their workplace as being riven by partisan politics, when in fact the main source of the discussion had always been Basecamp itself.”

  • “Interviews with a half-dozen Basecamp employees over the past day paint a portrait of a company where workers sought to advance Basecamp’s commitment to diversity, equity, and inclusion by having sensitive discussions about the company’s own failures. After months of fraught conversations, [Jason] Fried and his co-founder, David Heinemeier Hansson moved to shut those conversations down.”

  • “The founders’ goal is to reset the culture and focus on making products, he said, not to purge political partisans from the workforce. But to employees, the move was received more as a shift to willful ignorance — about the world around them, and about the lived experiences of the employees who occupied it.” READ MORE

Leave a comment

THE 21 HATS PODCAST

Episode 59: I’ve Had a Love-Hate Relationship With PR: This week, Paul Downs, Jay Goltz, and William Vanderbloemen really wanted to talk public relations. They discussed how to get PR and how to assess the results. They compared the merits of public relations to those of advertising. And they debated whether you need to hire a firm or whether you can do it yourself. One concern all three shared is the cost. This is how Jay put it: “You hire an accountant, you're going to get some accounting. You hire a lawyer, they’ll do some legal work. PR's one of the few things you can pay money for and get absolutely nothing.”

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren