Where Fred Warmbier Turned When He’d Had Enough of His Business
In our latest 21 Hats Podcast episode, the owner explains why he was ready to give up and how he managed not just to tame the chaos but to find joy in his work.
Good morning!
Here are today’s highlights:
How much have you set aside for this year’s raises?
Is it the end of an era in Silicon Valley?
Starbucks is embracing the vaccinate-or-test mandate.
Gene Marks suggests ways to protect your business from inflation.
THE 21 HATS PODCAST
When Fred Warmbier Wanted to Quit, Deming Brought Him Back: This week, we feature a special guest, Fred Warmbier, owner of a metal-finishing business he founded in Cincinnati in 1998. About 10 years ago, Warmbier was ready to walk away from that business. “It just never seemed like I could have the type of business that I wanted,” he says, “where things worked properly and our employees were happy and our customers were happy.” That changed when he discovered the Deming Management Method through a consultant, Kelly Allan, who helped him tame the chaos. Where does one start with Deming? “You start,” says Allan, who is chairman of the Advisory Council of The W. Edwards Deming Institute, “where the pain is.” As it happens, and as he discusses in this conversation, Fred Warmbier has experienced more than his share of pain.
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HUMAN RESOURCES
The Wall Street Journal says there has rarely been a better time to demand a raise: “Companies are setting aside an average 3.9 percent of total payroll for wage increases in 2022, the largest increase since 2008, according to a new report from the Conference Board, a private research group. Organizations are planning on raising salary bands, resulting in higher minimum, median and maximum salaries for certain job titles—which suggests that savvy negotiators at every professional level could see a bump this year. Inflation is a big reason more money is earmarked for raises this year, but the rising cost of groceries and rent—among other things—doesn’t necessarily mean across-the-board pay increases are on the way. But bosses may be more open to negotiation.” READ MORE
There’s a network of business owners that supports a $15 federal minimum wage: “More than 20 states increased their minimum wage as the year began and an additional four states, plus the nation's capital, will see minimum wage raises later in the year, according to Business for a Fair Minimum Wage. The organization is a network of more than 1,000 employers and business organizations that favors a federal minimum wage increase—thinking that runs counter to conventional economic arguments. In fact, the organization recently nabbed hundreds of signatures from businesses and other groups—including the likes of Ben & Jerry's, Patagonia and Dr. Bronner's—in support of its statement advocating for a $15 federal minimum wage.”
“Both businesses and workers get hurt when the minimum is too low, says Holly Sklar, the CEO of Business for a Fair Minimum Wage.”
“‘Minimum wage raises pay off in increased consumer spending and better employee retention, productivity and customer service,’ Sklar says, adding that state increases are ‘vital’ for strengthening the country's economic recovery.” READ MORE
SILICON VALLEY
Does the Elizabeth Holmes conviction signal the end of fake-it-until-you-make-it? “From Stanford University dropout to Theranos’s $9 billion valuation to conviction, it is an epic rise and fall that will be chewed over in the coffee shops and juice bars of Palo Alto, Calif., until the tech industry departs for a new life in Elon Musk and Jeff Bezos’ off-world colonies. For a decade, Ms. Holmes fooled savvy investors, hundreds of smart employees, an all-star board and a media eager to anoint a new star even, or especially, if she had no qualifications. Just as Silicon Valley is a cartoonish version of American notions about the virtues of hard work and getting rich quick, so Ms. Holmes was a heightened version of Silicon Valley.”
“As her self-improvement scheme made clear, she was trying to turn herself into a machine that had no time for anything but work. This was not for her own benefit, of course, but humanity’s.”
“She perfectly encapsulated the Silicon Valley credo that tech was here to serve us, and never mind exactly how it did it, the billions it was making, or whether it even worked.” READ MORE
The investigative reporter who exposed the Theranos fraud and wrote Bad Blood tweeted his reaction to the verdict:
POLICY
Starbucks imposes a vaccinate-or-test requirement: “Starbucks Corp. is requiring its U.S. employees to be vaccinated against Covid-19 or submit to regular testing, one of the first large restaurant chains to take such a step ahead of potential federal vaccination mandates for large employers. Starbucks said Monday that workers in its U.S. cafes, offices, and manufacturing plants must be vaccinated by Feb. 9 or get tested weekly. Workers who choose testing must have a pharmacist or doctor administer it instead of taking one at home, and workers will need to themselves obtain and cover any costs for the tests, the company said in a message to U.S. stores.”
“U.S. workers must disclose their vaccination status by Jan. 10, Starbucks said. The company had previously allowed baristas to report their vaccination status on a voluntary basis.”
“Last month, a federal appeals court reinstated Biden administration rules that require businesses with 100 or more employees to ensure that their workers are vaccinated or tested weekly for Covid-19.”
“The Supreme Court said it would hear oral arguments early this month on emergency appeals filed by groups of employers and Republican officials trying to stop the requirements.” READ MORE
THE COVID ECONOMY
Gene Marks has some suggestions for protecting your business from inflation: “My smartest clients are already doing these seven things to navigate their businesses through 2022′s inflationary environment.” For example:
“Pay down your variable, high-interest credit card debt or shift the balance to cards that offer lower rates. Better yet, refinance this debt into a longer term loan with lower, fixed interest rates, even if that means a second loan on an asset like your house or business property.”
“Avoid those across-the-board price increases and instead target your price increases on specific product lines where your margins are most affected and where customers are most likely to be amenable.”
“My smartest clients aren’t sitting around waiting for prices to rise. For those that have access to capital and bank loans, they’re buying the core materials they need for their businesses now in anticipation of costs going up in 2022.”
“If your landlord wants to keep you as a tenant, talk about a longer term lease with agreed-on, fixed increases. The same goes with higher compensated employees: look to lock in your relationship with a contract.” READ MORE
Factories are reporting an easing of supply-chain problems and related cost increases: “Factories around the world have faced shortages since the end of 2020. A surge in demand for goods such as laptops and bicycles took many by surprise at a time when shipping and other parts of the logistics network were in disarray. Those shortages have held back growth and helped drive a pickup in consumer-price inflation. Central banks around the world are hoping that those problems will ease this year as demand for goods steadies and supply increases, helping to bring inflation rates down without a sharp rise in their key interest rates.”
“But the rapid spread of the new Omicron variant of Covid-19 threatens fresh setbacks if governments impose new lockdowns, or quarantine requirements deprive manufacturers and logistics networks of needed workers.”
“The U.S. purchasing managers index for manufacturing fell to 57.7 in December from 58.3 in November, the slowest pace of growth in 2021, according to data firm IHS Markit.” READ MORE
CANNABUSINESS
Oklahoma has quietly become a boom state for marijuana entrepreneurs: “Ever since the state legalized medical marijuana three years ago, Oklahoma has become one of the easiest places in the United States to launch a weed business. The state now boasts more retail cannabis stores than Colorado, Oregon and Washington combined. In October, it eclipsed California as the state with the largest number of licensed cannabis farms, which now number more than 9,000, despite a population only a tenth of California’s. The growth is all the more remarkable given that the state has not legalized recreational use of marijuana. But with fairly lax rules on who can obtain a medical card, about 10 percent of Oklahoma’s nearly four million residents have one, by far the most of any other state.”
“It costs just $2,500 to get started, compared to $100,000 or more across the state line in Arkansas.”
“And Oklahoma, a state that has long had a tough-on-crime stance, has no cap on how many dispensaries can sell marijuana, the number of cannabis farms or even how much each farm can produce.”
“Because of lower costs for licensing, labor and land, growers can produce cannabis for as little as $100 a pound, and then turn around and sell that for between $3,500 to $4,000 a pound in California or New York …”
“‘The profit margin is astronomical if you can move your operation to Oklahoma and get away with it,’ Mr. Woodward said of Oklahoma growers serving markets elsewhere in violation of state and federal laws.” READ MORE
ENERGY
In Kentucky, a coal mine is being converted into a solar farm: “Hundreds of acres are set to be blanketed with solar panels in the coming year, installed by locals, many of them former miners. The $231 million project, which recently cleared its last regulatory hurdle, may well be the biggest utility-scale coal-to-solar project in the country. It would be a desperately needed economic boost drenched in symbolism: Renewable energy generated from a shuttered mine in the heart of Appalachia, where poverty grinds on in the aftermath of the coal industry’s demise.”
“‘Our bet is we can help make this community, and others like it in coal country, relevant to the opportunities in the green energy economy that everyone agrees is coming,’ said Adam Edelen, a Kentucky native and former Democratic state auditor who is the local developer for the project.”
“Mr. Edelen said the fact that a promised return of coal had failed to materialize helped his cause. ‘I would’ve been run out of the coalfields had I tried to do this six to 10 years ago,’ he said.” READ MORE
TECHNOLOGY
As of today, your BlackBerry will stop working: “After its ‘end-of-life date,’ as BlackBerry calls it, devices running on BlackBerry’s legacy operating systems and software ‘will no longer reliably function,’ the company — which has since pivoted to enterprise software and cybersecurity — reminded users in a news release in late December. Old devices won’t be able to send a text message or dial 911, placing them firmly in the realm of the arcane, in the company of floppy disks and rotary phones. You might still be able to play Brick Breaker though.” READ MORE
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