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When CEOs Behave Badly
In this week’s podcast episode, Shawn Busse and Jay Goltz talk about why CEOs keep going viral for the wrong reasons.
Here are today’s highlights:
There’s a whole new class of buyers looking to acquire small businesses.
Small advertisers are experimenting with a new social media app before the big brands jump in.
A new law in Washington, D.C. is forcing restaurants to confront the end of tipped wages.
There may be reason to hope that artificial intelligence will help us with menial tasks so we can focus on creative tasks.
THE 21 HATS PODCAST
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. Oh, and, what would happen if Jay applied for a job at Shawn’s business?
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Small businesses are testing a new social media app, Lemon8: “Described by experts as a mashup of Pinterest and Instagram, Lemon8 launched in Japan in 2020 and quietly arrived in the U.S. and the U.K. this February. The platform—owned by ByteDance, the same parent company as TikTok—surged in early April with 650,000 downloads in the U.S. alone. It's reached a total of 17 million global downloads since launch, according to Apptopia data via Axios. This growth persists despite the looming restrictions to TikTok, which could lead to similar scrutiny for Lemon8. So far, big brands are noticeably absent from the app—and some fake brand accounts have even emerged, since Lemon8 does not currently have a verification process. But Lemon8's newness and emphasis on user-generated content could provide small businesses that create accounts with an opportunity—and an advantage—if the app takes off, social media marketing experts told Inc.”
“Upon opening Lemon8, users will see a grid of posts on their ‘For You’ page similar to Instagram's. But the platform also highlights specific search topics including fashion, food, and wellness. This makes Lemon8 very topic-driven, says Keith Bendes, vice president of strategy and marketing at the influencer marketing platform Linqia.”
“In addition, the app seems to favor images over videos, experts say—a departure from the short-form video focus on TikTok, Instagram Reels, and YouTube Shorts. Early creator content on the app features how-to posts, outfit-of-the-day photos, recipes, and more.”
“Flynn Zaiger, CEO of the New Orleans-based digital agency Online Optimism, says his company joined Lemon8 on March 31. Online Optimism has already experimented with a handful of day-in-the-life and how-to posts.”
“‘Right now, we aren't necessarily advising people that it's the best idea to join yet or that it's a good use of a business's time and effort,’ Zaiger says. ‘But we're on there because we need to be there, as a marketing agency, to see if that changes, to see if more people start trending there, or to be prepared if TikTok gets shut down.’" READ MORE
SELLING THE BUSINESS
An acquisition attorney says there’s a whole new class of potential buyers for traditional small businesses:
Banks say they are demanding tougher terms from small business borrowers: “Western Alliance Bancorp., parent of Bridge Bank, said it’s going to drive a harder bargain for business borrowers to keep their money on deposit with the bank. ‘Going forward, we now need to tie more of the deposit commitment to the loan documents, such that if they do move money, the penalty pricing is severe. Today it’s a nuisance,’ Ken Vecchione, president and CEO of Western Alliance, told those attending this week’s earnings call. ‘If you want a relationship, and the experience that we bring, you’re going to need to bring deposits to the table. That’s what we say, by the way, to all clients that we sit across the table from.”
“We say: ‘We’re happy to make your business very, very successful. That’s what we want to do. You’ve got to do the same for us.’”
“‘Given the uncertain environment, we curtailed loan growth early in the first quarter,’ said Dale Gibbons, chief financial officer at Western Alliance.”
“One strength amid the crisis was Western Alliance’s strategy of keeping the names of banks acquired over the years, such as San Jose’s Bridge Bank, San Diego’s Torrey Pines Bank and Las Vegas’ Bank of Nevada, among others.” READ MORE
In Washington, D.C., restaurant owners are preparing for the end of tipped wages: That’s because of Initiative 82—“a new law effective in March, that calls for restaurants, shops, and other service businesses to raise their share of their tipped employees’ hourly wages to the citywide $17 minimum wage by 2027, starting with a 65-cent bump to $6 on May 1 and $2 bump July 1 to $8. The voter referendum eliminates tip credits, which allow tips to fill the gap between a lower base pay and the area minimum wage. The measure divided the restaurant and consumer industries between dire warnings of closures and high-minded promises of fair wages — and remains to be seen which will be correct.”
“It’s made Shawn Townsend, president and CEO of Restaurant Association Metropolitan Washington, fear many small business owners still aren’t ready for the change and need more clarity from the city on what they can, and cannot, do to absorb those pay hikes.”
“He’s ramping up what he expects will be a $1 million awareness campaign to roll out information sessions and advertising to educate the restaurant industry on compliance, though he’s still seeking public and private funds to help cover that program’s costs.”
“With Initiative 82, D.C. joins the ranks of other jurisdictions that abolished tipped wage credits, including Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington state. Still more are moving in that direction.”
“Among those is Maryland, where a bill was introduced in March to establish a $15 base hourly wage for restaurant servers, though it failed to advance before the legislative session ended April 10.” READ MORE
Small communities are chasing a $3 trillion climate gold rush: “Colleton County in South Carolina is a quiet rural district best known for its hunting, fishing, and recently, a sensational murder trial. Now it is also a player in America’s new gold rush: a scramble for $1 trillion in federal tax incentives and loans for green energy that is fueling a flood of corporate investments and reshaping local economies. The spending is one of the biggest outlays of taxpayer-financed industrial stimulus since Franklin D. Roosevelt’s New Deal. If successful, it could transform the nation’s economy by creating millions of jobs and driving up to $3 trillion in total clean-energy investments during the next decade.”
“The federal laws, most notably the Inflation Reduction Act passed in August, offer huge subsidies aimed at shifting the nation to renewables and building new industries to compete with clean-energy powerhouse China.”
“They sparked about $150 billion in investment announcements in renewables and battery storage in the eight months after the act passed, according to the American Clean Power Association, a clean-energy industry group.” READ MORE
We’re starting to get a real taste of a driverless future: “When the dense, iconic fog rolled in over the residential neighborhood of Balboa Terrace on a recent Tuesday, five matching white SUVs covered in cameras ground to a halt. Confused by the drop in visibility, the Google-owned electric Jaguar I-PACEs tried to pull over and wait out the weather — creating a brief traffic jam. But there was no one inside to yell at. The cars were empty autonomous cars run by software. It was just another day in the life of San Franciscans, who have noticed a sudden increase in the empty vehicles roaming the streets over the past few months.”
“It’s happening in other cities as well, including Phoenix, Austin, and parts of Los Angeles, and the companies have plans to expand to more locations in the coming year.”
“‘Tech companies see us as this place where they can find a higher tolerance for their shenanigans,’ said Marita Murphy, 40, who works in audio production in [San Francisco]. ‘I don’t feel, as someone who lives out here, that I have any control or say over that. It feels like we’re beholden to the will of these companies and their money-making motives.’”
“There was no vote to allow the cars to be tested in San Francisco. The massive technology and automotive companies were given the go-ahead by state agencies, including the California Department of Motor Vehicles, and the city is limited in how much it can regulate the testing programs.” READ MORE
An economic historian thinks ChatGPT will increase productivity—without eliminating jobs: “Instead of eliminating many white-collar jobs altogether, as people are understandably worried it will do, it has the ability to do something much more powerful: to eliminate what’s boring about those jobs, freeing us up to be more stimulated, more creative and more human in our work. In the process it can drastically increase productivity. Most office jobs today are a matter of manipulating data. There are a lot of things A.I. can’t do, but it’s very good at writing code to manipulate data. Office workers all just got their own personal tech consultant. They just need to learn to use it. As a historian, I confess that I was quick to sneer at the idea that ChatGPT could ever do any part of my job. I mean, have you ever asked it to interpret the causes of World War I? It gives you a listicle of contributing factors. And the writing — don’t get me started on the writing.”
“But then I got the idea to ask ChatGPT to write computer code to analyze data sets, which is laborious work that, as an economic historian, I have to do often. There are things I know how to code, and there are things I wish I knew how to code.”
“ChatGPT could do both, easily. Boring, repetitive tasks that I knew a computer should be able to do, but that I didn’t know how to make it do suddenly became as easy as typing in my request. If a historian can do it, anybody can.” READ MORE
Sliding diesel prices are a respite for some, a warning for others: “Record diesel costs made it more expensive to operate excavators at construction sites, run machinery on farms, and haul goods from ports, rail yards, or factory floors. Prices began falling months ago, when a warm winter cut demand for heating fuel and a reshuffling of global oil trade alongside Russia’s war left a glut of diesel supplies on the market. Now—with the Federal Reserve trying to cool business activity by raising interest rates—waning manufacturing output and trade have also dented U.S. appetite for the fuel. The darkening industrial outlook, which contrasts with low unemployment and a robust service sector, has pulled benchmark diesel futures down nearly 25 percent this year, to $2.53 a gallon. Federal record-keepers peg the year-over-year hit to domestic demand at 8.4 percent.”
“Signs of slowing industrial activity have been flashing warnings around the world for months. Global trade and manufacturing production dropped 5.4 percent between September and January, according to the Netherlands Bureau for Economic Policy Analysis.”
“In the U.S., where stores and warehouses remain overstocked after a pandemic-era boom in consumer goods, container imports in the first three months of 2023 slid about 23 percent from the same period last year, according to logistics technology firm Descartes Systems Group.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
America’s Economy Is Better than Americans Think: Yes, demand is tapering, and a recession is looming, says Gene Marks, but this is a great economy and a great country and everyone should stop complaining! Plus: Gene explains how some business owners get the state to pay for their employee training, how restaurants are finally adopting technology, and how to make sure your employees aren’t stealing from you. One tip: if you think an employee is stealing from you, send the employee on vacation.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren