Yogababble, Fastronauts, and Burrito Bucks
For entrepreneurs, it’s just another day in the life of the American Dream.
Here are today’s highlights:
The war is damaging businesses throughout Europe.
The decline in immigration is exacerbating the labor shortage.
Another unicorn wannabe that knew how to raise money but not revenue has imploded.
Scott Galloway says there’s a clear line between entrepreneurs who will their vision to come true and those who know it’s a fraud.
Restaurant chains are experimenting with advertising in the metaverse: “The metaverse is a term used to describe a virtual environment in which people can use digital avatars to work, play, and shop. The concept has drawn attention particularly since the parent company of Facebook last year promised to spend heavily on building the metaverse and changed its name to Meta Platforms. Wendy’s last week opened a virtual restaurant in Horizon Worlds, the virtual reality game from Meta. Visitors cannot buy food there, virtual or otherwise, but they can play a basketball-themed game located near the restaurant.”
“‘Finding the right way to authentically engage and make that experience a level up was really important to us,’ said Carl Loredo, chief marketing officer at Wendy’s.”
“Chipotle, which built a virtual restaurant onRoblox Corp.’s gaming platform for a Halloween promotion last year, on Thursday is introducing a game and new virtual restaurant in Roblox that mimics the company’s original location in Denver.”
“Up to 100,000 players who successfully roll a virtual burrito in the game will earn ‘Burrito Bucks’ good for real food at Chipotle restaurants in the real world.”
“Brands such as Forever 21 and Estée Lauder last month participated in the first Metaverse Fashion Week, which took place in the virtual world Decentraland. JPMorgan Chase and HSBC Holdings have also announced plans to open up outposts on metaverse-like platforms.” READ MORE
Unlike manufacturers, service businesses are surging: “The country's service sector is firmly on the mend after struggling through the Delta and Omicron waves, according to a new report from the Institute for Supply Management. The association's purchasing managers' index for services firms rose to 58.3 percent from 56.5 percent in March, rebounding after three straight monthly declines. Readings above 50.1 percent indicate the sector is growing, while those below the level signal contraction.”
“‘This is a post-Omicron rebound,’ [Ian Shepherdson, chief economist at Pantheon Macroeconomics] said. ‘Inflation pressures remain intense, but they seem no longer to be intensifying.’”
“But as virus infections ease and services roar back to life, manufacturers are staring down a new obstacle on their way to recovery. ISM's manufacturing PMI slid to 57.1 percent from 58.6 percent in March, signaling the sector grew at a slower pace throughout the month.”
“New orders, production, and order backlogs also worsened as supply-chain issues lingered and inflation held strong at four-decade highs.” READ MORE
THE RUSSIAN INVASION
The war is damaging businesses throughout Europe: “Sergio Amaranti, the Italian shoe company saddled with the mountain of unpaid merchandise, is among thousands of European businesses grappling with a widening blowback from the conflict. ‘It’s scary,’ said Moira Amaranti, who manages the company founded by her father and uncle. She said she worried that the sudden financial loss could destabilize the 47-year-old firm, which sustains her 20 longtime workers and their families. ‘Russia is half of our business,’ she said. ‘And now we have a problem.’”
“Russia’s monthlong war on Ukraine is lashing Europe’s economic rebound from the Covid-19 pandemic, threatening its job-rich recovery.”
“Manufacturers and retailers that were benefiting from renewed growth are adjusting to wild swings in business conditions that have injected fresh uncertainty into economic decision-making.”
“‘I am very worried,’ said Ms. Amaranti, whose priority is to find solutions that will keep her workers paid. ‘A business owner bears the weight of many families.’” READ MORE
Are freight companies turning rookie truck drivers into indentured servants? “Each year, thousands of aspiring truck drivers sign up for training with some of the nation’s biggest freight haulers. But the training programs often fail to deliver the compensation and working conditions they promise. And drivers who quit early can be pursued by debt collectors and blacklisted by other companies in the industry, making it difficult for them to find a new job. At least 18 companies, employing tens of thousands of drivers, run programs aimed at qualifying trainees for a commercial driver’s license, or C.D.L. Typically, to get free training, the new hires must drive for the company for six months to about two years, usually starting at a reduced wage.”
“The American Trucking Associations, a trade association, has warned of a vast truck driver shortage.”
“But researchers and drivers’ representatives maintain that the high turnover occurs because too many large companies fail to make their jobs attractive enough.”
“The industry has been plagued with class-action lawsuits about working conditions and wages, leading to hundreds of millions of dollars in settlements.” READ MORE
Declining immigration is a factor in the labor shortage and increased wages: “For several years after the 2007-09 recession, roughly a million people moved to the U.S. annually. That pace started to slow during the Trump administration and fell to a trickle after the Covid-19 pandemic started. The slowdown has left the U.S. with 2.4 million fewer immigrants of working age—about 1 percent of the working-age population—than if pre-2017 immigration trends had continued, according to Giovanni Peri, a labor economist at the University of California, Davis. The change is being felt as the economy rebounds and many employers struggle to replace workers who were laid off or quit since early 2020, contributing to wage pressure and inflation.”
“San Antonio home builder Ed Berlanga used to be able to call up his framer or painter and ask if they could assemble an additional crew of two or three workers to take on a new project. ‘They would say, I have three cousins in Mexico, I’d like to get them to come work with us,’ he said.”
“Now, no one is coming, Mr. Berlanga said, and he faces more competition for his subcontractors’ time as home demand booms. He is also paying more for almost every service. Paint jobs, which routinely cost him $6 a square foot before the pandemic, now cost $7.50.” READ MORE
In Chicago, a family-owned bakery will close after 100 years: “Dinkel’s was founded in 1922 by Joseph K. Dinkel, an immigrant from Bavaria who was descended from a long line of master bakers. In the early years, Joseph did all the baking while his wife, Antonie, handled the selling. In 1932, Dinkel’s moved into its current location on Lincoln Avenue, and the couple’s son, Norman, began working in the bakery as well. In the 1970s, Norman’s son, Norman Jr., took over; he still owns the place, but it’s managed by his son-in-law — Karl — who grew up in his own family’s bakery in Kansas City.”
“The bakery was also among the first in the city to experiment with cholesterol-free baking with raisin bran muffins due to an egg shortage during World War II. In 1960, Norman Sr. sold the bakery’s secret recipe for cream cheesecake to Beatrice Foods, which resulted in a lawsuit a decade later when Norman Sr. felt the corporation was not marketing the cake properly.”
“In the 1980s, Dinkel’s began a thriving mail-order business with its stollen and strudels, and in 2013, it expanded its cafe and began selling bread and sandwiches for the first time in its history. It also began selling pastry wholesale to local supermarkets.”
“But the pandemic was hard on the bakery: it saw a loss of walk-in traffic, and a winter storm put a damper on Paczki Day, traditionally one of the biggest sales days of the year.”
“‘We survived fat free, we survived sugar free, we survived carb free,’ Karl says. ‘You know, I don’t think we enjoy food in this country like we should.’” READ MORE
Fast, a much-hyped San Francisco-based one-click checkout startup that raised more than $120 million in venture backing, is shutting down: “Fast had stood out in the crowded field of one-click checkout startups after it landed a $102 million infusion of cash in a fundraising round last year led by payments giant Stripe. The company was embarking on its next fundraising round, attempting to bring in new money at a valuation above $1 billion, also known as unicorn status in Silicon Valley, when it ran into trouble. Fast had hired hundreds of employees, including highly paid executives, but the startup's product was generating little revenue, according to several former employees.”
“Several rank-and-file workers, whom the company referred to as ‘Fastronauts,’ told NPR they had noticed Holland pouring significant money into deals aimed at creating marketing buzz, like partnerships with sports teams. They questioned the benefits.”
“‘With Fast,’ said one former employee who requested anonymity out of fear of retaliation, ‘It was like, how quickly can we set money on fire?’” READ MORE
Scott Galloway says there’s a term for the sales pitches offered by entrepreneurs who fake it until they make it: “Yogababble is an attempt to smear Vaseline over the lens of truth, and often used by entrepreneurs to make their company, brand or products appear more compelling than they actually are. It enables founders to fog over the difference between truth and illusion and has become a viable formula for cheap capital — using visionary language to tickle our tribal senses and distract the public from the cold truth of numbers.”
“Let's be clear, ‘entrepreneur’ is a synonym for ‘salesperson,’ and ‘salesperson’ is the pedestrian term for ‘storyteller.’ We entrepreneurs are all impostors who must deploy a fiction or story that captures imaginations and capital to pull the future forward and turn rhyme into reason.”
“No business I have started, at the moment of inception, made any sense — until it did. (Or didn't.) This is not the same as lying. There's a real distinction between an entrepreneur and a liar: Entrepreneurs believe their story will come true, while fraudsters know they are lying and plan to hit the exit before the reality is revealed.” READ MORE
It turns out a lot of our favorite rags-to-riches stories—even Horatio Alger’s—are not quite what they seem: “Americans have always loved fiction that reaffirms our fantasies about wealth and social mobility. Perhaps no cultural figure helped to keep the American dream on life support longer than Horatio Alger, the 19th-century novelist who wrote adventure stories for boys. Alger commanded enormous popularity in his time, and his novels became integral to the enduring fantasy of American egalitarianism. His name is synonymous with the ‘rags to riches’ narrative we seem unable to relinquish.”
“It is deployed so often in the context of economic journalism — often inaccurately — that it has become a capacious mythology with room for any number of misreadings. Malcolm Gladwell, for example, describes Alger’s books as works where ‘young boys born into poverty rise to riches through a combination of pluck and initiative.’”
“Though Alger indeed extols the virtues of hard work, prayer, honesty and saving, his books also hinge upon chance encounters and the noblesse oblige of someone much higher on the class ladder.”
“Hard work matters but not as much as a helping hand from a wealthy patron. In this sense, Alger’s novels are truer than many of the stories that real-life billionaires believe about themselves.” READ MORE
THE 21 HATS PODCAST
Do You Take Money Off The Table? This week, Shawn Busse, Paul Downs, and Jay Goltz discuss their philosophies about taking money out of the business. Of course, you can’t take money off the table unless there’s money on the table. Paul tells us that he now expects to make more money in the next five years than he did in the previous 35. We also talk about content marketing, direct mail, and trade shows. Plus: Was the Paycheck Protection Program, despite the billions of dollars in fraud, a success?
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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