What We All Pay for Bitcoin Mining
The cost of electricity is up 5 percent in Texas because of large-scale bitcoin mines. Across the country, the mining also causes as much carbon pollution as 3.5 million gas-powered cars.
Here are today’s highlights:
More people are canceling subscriptions than are signing up for them.
Fear of a credit crunch continues to build.
The SBA is getting a makeover, but the changes are making some people nervous.
Don’t tell me you’re still serving dog-grade dog food!
People are getting tired of their digital subscriptions: “For two straight quarters, cancellations have outpaced new subscriptions for digital memberships, food-of-the-month clubs, and a host of other purchases, according to personal finance app Rocket Money. Streaming services have been particularly impacted, with cancellations for Netflix, Hulu, and HBO Max and others up 49 percent in 2022 from the previous year, according to subscriber-measurement firm Antenna. ‘People are taking stock of their subscriptions and trying not to make the same mistakes they made in 2022 given that budgets are getting a lot tighter,’ said Courtney Alev, consumer financial advocate at Credit Karma.”
“About a third of respondents to a December Credit Karma survey said their biggest financial mistake last year was paying for services they never used. Americans were also paying about $133 more than the $86 they thought they were paying for subscriptions each month, according to a 2022 survey from market research firm C+R Research.”
“A new proposal from the Federal Trade Commission could make it simpler to break up with your subscriptions. The consumer watchdog wants to require merchants to make it as easy for customers to cancel as it is to sign up, often with just a single click.”
“Apps that help people take stock of their recurring payments such as Rocket Money and ScribeUp aren’t worried a new FTC rule will cut into their user base. Over the past year about 70,000 people have downloaded ScribeUp, a new service that provides a credit card number to use only for recurring payments.” READ MORE
The rise of Bitcoin mining has had the impact of another New York City’s worth of residences drawing on the nation’s power supply: “In some areas, this has led prices to surge. In Texas, where 10 of the [nation’s] 34 mines are connected to the state’s grid, the increased demand has caused electric bills for power customers to rise nearly 5 percent, or $1.8 billion per year, according to a simulation performed for The Times by the energy research and consulting firm Wood Mackenzie. The additional power use across the country also causes as much carbon pollution as adding 3.5 million gas-powered cars to America’s roads, according to an analysis by WattTime, a nonprofit tech company.”
“Many of the Bitcoin operations promote themselves as environmentally friendly and set up in areas rich with renewable energy, but their power needs are far too great to be satisfied by those sources alone.”
“As a result, they have become a boon for the fossil fuel industry: WattTime found that coal and natural gas plants kick in to meet 85 percent of the demand these Bitcoin operations add to their grids.” READ MORE
Businesses should expect rising unemployment insurance taxes: “The unprecedented number of unemployment claims during the early portion of the Covid-19 pandemic, as well as federal assistance to boost both the size and length of the benefits, left many states with historic shortfalls in their unemployment insurance trust funds — shortfalls many have tried to bridge by raising taxes on businesses. State unemployment insurance taxes, on average, increased from 1.72 percent in 2020 to 1.89 percent in 2021 and to 2.3 percent in 2022 — with more increases slated for 2023. It's also likely those tax rates will continue to go up as states seek to rebuild their unemployment insurance trust funds, which were depleted at a rate similar to the Great Recession.”
“Average unemployment insurance tax rates rose to about 3.48 percent in 2013, according to a report by Equifax tracking unemployment insurance tax increases.”
“Karla Dennis, founder of Karla Dennis and Associates, said business owners have to be more mindful than ever of the increasing costs associated with unemployment insurance taxes and employee unemployment claims.”
“She said business owners need to be more aware of former employees who file unemployment claims and challenge the ones they feel don’t qualify. But it’s not just former employees — business owners also need to watch out for fraudulent unemployment claims that come from either made-up people or those who use the identity of a former employee without their knowledge.” READ MORE
Inflation cooled in March: “U.S. inflation eased to 5 percent in March, its lowest level in nearly two years, but underlying price pressures remained elevated. The Labor Department’s consumer-price index measures what consumers pay for goods and services. Inflation remains elevated—well above the 2.1 percent average in the three years before the pandemic and the Fed’s 2 percent target. Core prices, which exclude volatile energy and food categories, have eased more slowly than overall prices, in part because of inflationary pressures from shelter costs. Economists see core prices as a better predictor of future inflation.” READ MORE
Fear of a credit crunch continues to build: “Sarah Puil needs to buy $500,000 to $1 million of premium wine and other inventory by the end of the year to make into the specialty blends that her company sells and ships to customers around the country. But after the collapse of Silicon Valley Bank started a chain reaction that is causing many types of funding to dry up, she is not sure where she is going to get the cash. Boxt, her three-year-old purveyor of upscale boxed wine, is at a vulnerable stage in which access to credit is crucial to its growth and ability to keep producing its red, white and rosé offerings. As banks and other investors retrench because of the turmoil, Ms. Puil and fellow entrepreneurs are finding that borrowing and raising money are more difficult and expensive. ‘It’s all we’re talking about,’ she said.”
“Boxt’s worries offer a hint of the economic fallout facing borrowers across the country as credit becomes harder to get. It is too soon to say how much the banking tumult could slow the economy, but early evidence points to increased caution among banks and investors.”
“‘People are for the first time in some time using the ‘c’ words: credit crunch,’ said Anirban Basu, chief economist at Associated Builders and Contractors, a trade association. ‘What I’m hearing — and what I’m beginning to hear from contractors — is that credit is beginning to tighten.’” READ MORE
The SBA has finalized a new lending rule: “The newly finalized rule would make it easier for employees to use SBA loans to purchase portions of the business they work for. Before, 7(a) loans could only be used if the employee — or group of employees — wanted to purchase the entire interest of an owner in the company. Chris Hurn, CEO of Fountainhead, one of only 14 nonbank lenders approved to make SBA loans, said the tweaks to the SBA lending programs were a good thing and would encourage some businesses to use SBA services.”
“‘I think the removal of the mandate that you had to buy out 100 percent of another party’s interest on behalf of a buyout transaction is a huge step in the right direction. I think that's definitely helpful and that's in alignment with the SBA’s mission to try to expand entrepreneurship,’ Hurn said.”
“The new rule also streamlines SBA’s affiliation requirements, which had been a longstanding series of guideposts on who exercised control over the business. The new rule instead focuses on who owns the business, which is good news for some franchises, as well as businesses where the owner has delegated their authority to others to run.”
“The SBA's new rule would also create a new pathway for businesses or lenders to appeal the denial of SBA loans. The rule allows the SBA to designate a career employee at the agency to review loan denial reconsideration requests or reserves that right for the administrator.” READ MORE
The new SBA rule is part of Isabelle Guzman’s plan to remake the SBA, which is making some people nervous: “In the past year, the agency, under Guzman's leadership, has announced a series of reforms to spur lending to underserved communities. It is expanding the number and types of institutions allowed to participate in some of its most popular business loan programs, inviting in financial technology companies not subject to federal banking regulations. It has already tweaked its rules to allow lenders to charge higher fees on smaller loans, which, while slightly more burdensome for individual borrowers, incentivizes lenders to issue more of them. And the SBA is eliminating long-standing guidelines like its requirement to issue paper loan authorizations—arguing that they're an outmoded safeguard against fraud in the digital age—to streamline a notoriously burdensome approval process.”
“There's also talk of the SBA restarting its long-dormant program of direct lending, which has sparked a firestorm of criticism among lenders that stand to lose market share to the U.S. government.”
“Lynn Ozer worked for the SBA in the 1970s and has served as a lending officer at a handful of banks over the past 40 years [and is now president of MultiFunding]. ‘I am all for improving and streamlining the process,’ Ozer says. ‘But when you're modernizing and letting in non-regulated lenders, while simultaneously removing historically proven guardrails that have gone a long way to make the program run more smoothly, you're doing an experiment and changing all the variables at one time.’"
“Guzman is unfazed. ‘We're looking to charge hard to continue to make reforms,’ she says. ‘Our programs have to continually evolve and adapt to meet the needs [of business owners] and understand their challenges, so that we can be as innovative and as entrepreneurial as they are.’" READ MORE
Some in Gen Z are pushing back on the stereotype that they don’t want to work: “That applies even to 25-year-old Charu Thomas, who earned an engineering degree in 3½ years after completing high school in three years. She founded supply-chain software firm Ox at age 18, raised $3.5 million in funding and, in 2020, made it onto Forbes’s 30 Under 30 list. Yet in a breakfast with investors in the fall, she said they wanted to discuss ‘quiet quitting’ and the motivation of younger entrepreneurs. ‘They had this impression that Gen Z and younger founders were non-responsive, were less legitimate, or lazier,’ said Ms. Thomas on a recent morning from her Bentonville, Ark., office. She had just spent much of the night in the office to oversee a Fortune 500 client’s software deployment, she said, then attended a 9 a.m. staff meeting still in the T-shirt she’d worn the day before.”
“To show colleagues she works hard, 22-year-old Brianna Chang says she chooses to put in as many as 60 hours a week as a supply-chain planner at Microsoft. Ms. Chang said her work ethic was forged as a teenager, when she waited tables in her parents’ Chinese restaurant in Bellingham, Wash.”
“She’s driven in part by the goal of making money to one day support her parents and says she’s disheartened when she sees peers on social media saying they don’t work hard. But, she adds, that makes it easier for her to stand out. ‘A lot of people my age, they are just stuck,’ she says.” READ MORE
THE PET INDUSTRY
The market for human-grade dog food is surging: “Dog ownership boomed during the pandemic, with Americans buying or adopting millions of pets, including canines. Sales of dog food surged to around $25 billion last year, up nearly 39 percent from $18 billion in 2019, according to the consumer research firm NIQ. But as inflation has driven up the prices of even conventional kibble, the options in the dog food aisle have become increasingly bespoke and expensive. There are holistic, plant-based varieties, and those with freeze-dried goat and wild boar. Some options are frozen and raw. Last year, ‘Saturday Night Live’ poked fun at the industry with a skit featuring a couple in a grocery store chiding another shopper for not feeding her pet ‘real food.’”
“Companies like The Farmer’s Dog, Ollie, and others are marketing their fresh pet food as less processed and more closely resembling human diets. Veterinarians and animal nutritionists say many of these new brands are targeting wealthier consumers who treat their animals as if they were children — so-called fur babies — and want to match their dogs’ diets to their own eating habits. Some are selling the food directly to consumers, through subscription services.”
“‘Many are pushing natural or healthy, and people look at the ingredient list and assume because they recognize everything that the diet has to be healthier,’ Dr. Heinze said. ‘It’s giving these companies a health halo, even if there is no science behind it, and the other diet has 40 years of research.’” READ MORE
THE 21 HATS PODCAST
We’re Still Buying Inventory: This week, Jay Goltz tells William Vanderbloemen that even with an inventory glut, a cash crunch, and a weakening economy, he’s not going to stop buying goods for his home store. “It's kind of like cutting Samson's hair,” Jay tells us. “I don't want to mess with telling the buyer, ‘Stop buying stuff.’ Because that's the business we’re in.” All of which has Jay feeling the pressure, but he’s very glad he’s been maintaining a credit line equivalent to 10 percent of sales. Plus: William explains how hiring can go wrong even at a staffing company and how he managed to raise his prices without actually raising his prices.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren