vertical lineJanuary: Week in Review

Jan 23, 2023 | From the Breakroom

By Carson Schatzman, Senior Copywriter

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Each Monday, Athena employees receive a recap of important news stories from the past week. On Thursdays, our morning meeting is dedicated to a quiz testing our ability to retain the information. A free lunch is the reward for the winning team. We’re a competitive group, and the quizzes bring out that spirit. Over time a number of our clients have requested our weekly review as well, so we’ve begun to share it weekly now. See below for what we’re paying attention to and why.

The U.S. Debt Ceiling

A nationwide crisis could be on the horizon as the U.S. has reached its debt ceiling limit, hitting its borrowing cap of $31.4 trillion, The New York Times reports.

What is a debt limit? In simple terms, the U.S. debt limit, or ceiling, is the amount of money the U.S. can borrow to meet financial obligations.

  • If the US doesn’t raise the debt limit, it could fail to pay for government commitments such as bond repayments, military salaries, welfare programs, and the interest on the debt itself.
  • If the government does increase the debt limit, some argue the cycle will continue unless spending is aggressively curtailed.

Extraordinary Measures: As the debt limit loomed, the Treasury was forced in enact “extraordinary measures” by suspending investments and exchanging alternative bonds. Janet Yellen, Treasury Secretary, states extraordinary measures will last through June of 2023, according to The New York Times.

A House Divided

  • Republicans now control the House, which is responsible for U.S. appropriations, and they are looking to cut spending in more aggressive ways.
  • The Biden administration has stated its opposition to any spending cuts as well as support for raising the debt ceiling.
  • While the White House says its “inappropriate” to attach conditions to raising the debt ceiling, Kentucky Senator McConnell struck a reassuring note that “In the end…America must never default on its debt…It never has, and it never will.”

What’s Next: There have been talks in Congress about potentially abolishing the debt ceiling altogether, an idea that Yellen supports but Biden has wholly ruled out as an option. Looking ahead, Congress still has a few months to figure out a way to raise the limit.

Disney Approaches a Century and Looks Ahead

As Disney approaches its centenary celebration this year, technological advancements and unlimited accessible content are raising questions about the future of their platforms, according to The Economist.

Vast Competition: Every hour, YouTube gains more content by duration than Disney+ holds in its entirety. Changes in technology tend to change business culture as well. At one time it was thought that accessible, niche content, like YouTube, would endanger traditional entertainment like box offices, broadcast television, and Disney. As it turns out, companies that owned already popular Intellectual Property – like the vast Disney catalogue – navigated and even profited from that technological shift.

Next Stage: Now, another shift is taking place as new categories of entertainment are on the rise.

  • Young adults already spend more time on video games than broadcast television, and tech giants are gathering gaming IP, like Microsoft’s purchase of Activision.
  • Competitors and tech companies are finding ways to cash in while minimizing risk and overhead by expanding into streaming hardware and software.
  • Developing fields like Virtual Reality may lower the barrier for smaller firms to enter the market and reach profitability.

Looking Ahead: The Economist concludes that much of this century’s pop culture may originate outside of Hollywood, but Disney is also likely to pivot and find its way through these new industry challenges just as it has for the past century.

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Downsizing Across the Tech Industry

Alphabet is cutting 6% of its staff, laying off some 12,000 workers and headlining a week of tech industry downsizing, The Wall Street Journal reports.

Company Correction: Alphabet enjoyed a pandemic-era surge that saw 50% total employee growth across the company. While still taking some $17 billion in operating income for Q3, profits were down 18.5% from the same period in 2021. Investors continue to call for cost-cutting, and layoffs will impact every level of the organization as well as its subsidiaries.

The Makings of a Trend:

  • Microsoft also announced a 5%, or 10,000 person, reduction to its headcount this past week, The Wall Street Journal reports. Hiring will continue in some key strategic areas, and the company is expecting severance will cost around $1.2 billion.
  • Swedish audio streaming platform Spotify has also announced it will lay off 600 people, around 6% of its global workforce. CEO Daniel Ek cites macroeconomic challenges and over-ambitious investing.

More to Come: Rising interest rates have shifted the focus from growth at all cost to sustainable fundamentals, according to The New York Times, and Big Tech and small startups will likely both feel the sting through 2023.

Best of the Rest

Haiti is facing one of its most severe political crises ever as its final 10 senators depart office. President Moïse was assassinated in July 2021, and there are now zero elected officials for the country of 12 million which last held an official election in 2016. [NPR]

Longtime personal finance columnist Michelle Singletary’s Washington Post advice is compiled here; her advice is interactively sorted by money milestone’s likely to be encountered at different ages and stages of life. [WaPost]

In honor of the Eagles’ resounding 38-7 victory in the Divisional Round of the playoffs, here is a piece breaking down receiver route running, as explained by some of the NFL’s best including the Eagle’s own Devonta Smith. [NYTimes]

Center City District Restaurant Week runs through January 28th! Here are 90 fun spots to check out this week. [CCD]

January 17

U.S. Inflation Slowed for the Sixth Straight Month in December

After a rocky first half of 2022, U.S. inflation eased in December, marking six straight months of decline, The Wall Street Journal reports.

New Report: Largely due to improved supply chains and reduced demand, price increases for gas and groceries have started to soften. Although signs of declining inflation are positive, some economists are still concerned about high wage growth that is keeping consumers equipped with disposable income.

By the Numbers:

  • Consumer price index decreased from 7.1% in November to 6.5% in December, following a peak of 9.1% in June
  • Core CPI (excludes volatile energy and food prices) increased at a 3.1% annual rate, the slowest pace in more than a year

Economy at Large: The stock market is also looking up, with the U.S. Treasury lifting bond prices and weighing on yields. In addition to decreasing inflation rates, the U.S. deficit also fell to 1.4 trillion in 2022, down from 2.6 trillion in 2021. As a response to declining spending and a more stable economy, the House, now controlled by Republicans, are pushing for larger spending cuts to further reduce the national debt, according to The New York Times.

The Bottom Line: The Feds have high hopes for 2023, anticipating continued decrease in inflation and lower commodity prices.

Top-Shelf Company Apology

Andrew Benin, CEO of Graza, a popular olive-oil startup, sent an unusual apology email to more than 35,000 people after a holiday shipping disaster, The Wall Street Journal reports.

The Situation: Graza struggled to meet high demand during its first holiday season, leaving many customers without their kitchen staple. With the subject line “Learning from our mistakes,” Benin contacted anyone who ordered from his company in the last 60 days explaining the situation. The email received almost 900 replies within minutes. Overall feedback was extremely positive, with customers thanking Benin for his honesty. Benin, just 30 years old, came up with the idea for Graza while living with his wife’s family in Spain during the pandemic. The squeezable olive oil bottles have been a hit, selling in major markets across the country.

Owning the Mistake: Benin is straying away from traditional crisis PR statements and opting for a more human approach to the problem. He prizes communicating like a person, and not “as a business, with a business tone.”

  • The email was well received, as the company’s marketing emails have an open rate of 58% but this email reached 78%.
  • Benin also purposely excluded a link to the company’s website, as he remarked that the email wasn’t intended to drive traffic, it was simply to apologize.

Why it Matters: Benin’s apology, although unconventional, proved successful in winning his customers back by being upfront and honest, a tactic many businesses can learn from and implement in crisis situations.

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Cracking the Case on High Egg Prices

While inflation has impacted many commodities, egg prices have risen dramatically due largely to an outbreak of avian flu in 2022, Forbes reports.

High Costs: In December 2022, eggs were up 59% on the year – the highest among food items. At $4.25 nationally, the median cost of a dozen eggs in the U.S. is twice as high as the $1.78 a year before. In some areas, such as California where hens must be cage-free, prices are up to some $7/dozen.

Supply & Demand, By the Numbers: Starting in early 2022, the current avian flu outbreak has already affected more birds than the 2015 outbreak.

  • Some 57 million birds across 47 states have been culled due to the virus.
  • Avian flu affects more than 100 bird species and has a 90-100% mortality rate in chickens.
  • Iowa, the largest U.S. egg producer, was hit first and hardest in February 2022.
  • On top of all of this, egg consumption has risen 17% between 2012 and 2021.

Why it Matters: Rising food costs are a point of concern for many, and the surge in prices for a staple like eggs can have an outsized impact on consumer confidence. However, the avian flu’s impact on prices is, ironically, an encouraging reason to believe price stability will return in time. Experts believe lower, post-holiday demand and increased supply after controlling the outbreak will begin to reduce costs each month.

Best of the Rest

Google was recently accused of violating Germany’s digital competition laws, not giving users sufficient choices regarding personal data and sharing across platforms. Europe has been cracking down on major tech companies, implementing a new law called the Digital Markets Act, which could mean trouble for U.S. tech giants. [Wall Street Journal]

In recent AI news, technology is advancing towards crime prevention, using artificial intelligence and machine learning to predict cyber-crimes. So far, companies have managed to significantly reduce cyber incidents and threats, signaling a new wave of data security. [Forbes]

Get excited Philadelphia, our very own Eagles may have a shot at Super Bowl LVII. As one of the top seeds in the NFC, the Eagles have a fighting chance at taking home the trophy. [Inquirer]

JP Morgan is suing Charlie Javice, former-CEO of fintech startup Frank, for falsifying over 4 million user accounts and duping the financial institution into a $175 million acquisition. [Forbes]

In case you missed it, here are the 2023 Golden Globe winners! [New York Times]

January 9

Google’s Campaign for Smoother Messaging

Google has launched a campaign to pressure Apple into fixing the pixelated photos and videos that arise when texting between iPhone and Android, Business Insider reports.

The Ask: When iOS users message Android users, the text is sent in an SMS format. Google wants Apple to adopt the RCS standard, standing for “Rich Communication Services,” which is functionally similar to iMessage and would allow for smoother interoperability across devices and systems. RCS was thought to replace SMS (“Short Message Service”) in 2008, and Google emphasized the outdated technology by wishing SMS a happy 30th birthday last month.

The Campaign: Google’s #GetTheMessage campaign recently launched a digital billboard ad in Las Vegas. The ad reads as a text message to Apple, stating that “the ball may have dropped on 2022, but you don’t have to drop the ball on fixing your pixelated photos and videos,” followed by lines of RCS code.

Market Sharing: In the U.S., some 56% of customers use Apple’s iOS while Android holds the other 44% of the market. Apple CEO Tim Cook claims Apple users don’t care about the issue and those that do should just “buy [their] mom an iPhone.” Google recently took a page from Apple’s playbook by turning Android reactions to SMS texts, such as “liking” a photo or message, into a simple text message describing the reaction to iPhone users.

The Bottom Line: Google will likely continue applying public pressure, and it will be interesting to see the #GetTheMessage campaign’s evolution and impact.

The 2023 Forbes 30 Under 30

Philadelphia 76er’s star Joel Embiid headlines the Forbes 30 Under 30 sports category for his relentless mentality and long-term vision.

League Success: 28-year-old Joel Embiid is already a five-time All-Star and has been runner-up MVP the past two seasons. In August 2021, he signed a four-year supermax contract that will pay $58.2 million in 2026, and he currently brings in about $8 million a year in endorsements.

Keys to Success: Michael Rubin, CEO of Fanatics and former partial owner of the 76ers, recalls that Embiid has been “incredibly inquisitive…trying to be a sponge to how he can grow” since entering the league. Rubin, who is also Embiid’s business mentor, claims Embiid may be the most financially disciplined player in the NBA.

Playing the Long Game: Natural competitiveness and a summer of mentorship has Embiid planning his path “from rich to wealthy.” He recently invested in Mitchell & Ness, a sports apparel brand, and he is approaching investment opportunities with a winner’s refrain: “I’m a tough negotiator, and whatever I want, I’m going to get it,” says Embiid.

  • Case in point: that supermax contract? Embiid negotiated it himself, saving the 4% agent commission.

Philly Love: For all the personal goals and self-assurance, Embiid also invests in Philadelphia. When the Sixers organization planned to cut employee pay early in the pandemic, Embiid offered to cover the difference. And this past October his foundation, In Memory of Arthur, commemorating the loss of his younger brother, pledged $1 million to serve local non-profits.

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An Extended House Speaker Election

After an historic five days and 15 rounds of voting, Kevin McCarthy, a California Republican, was elected speaker of the House of Representatives after midnight on Friday, The New York Times reports.

Procedure: It had been over a century since a House speaker election required multiple ballots. Without a speaker, the House is unable to swear in new members, form committees, or advance legislation. In the end, all 212 Democrats voted for New York’s Hakeem Jeffries, and McCarthy tallied 216 votes. Six Republicans voted “present”, lowering the overall threshold for victory from 218 and granting McCarthy the gavel.

Hard-Line Holdouts: If all members voted, McCarthy could only afford to lose 4 Republican votes. A group of some 20 Republicans, many associated with the hardline House Freedom Caucus, sought concessions from McCarthy before they would clear the way to victory.

Throughout the process, the Republican holdouts managed to secure their desired concessions:

  • A single representative can call for a vote to remove the speaker.
  • The holdout Republicans were promised a third of the seats on the Rules Committee that oversees legislation.
  • Government spending bills are open to free debate, allowing lawmakers to force a vote on proposed changes.

Looking Ahead: With such a narrow majority, the struggle to find consensus even before the new legislative session began may foretell a contentious 118th Congress. Or, as McCarthy would like to frame it, the process may have taught them “how to govern.”

Dive Deeper with insider accounts from The Washington Post.

Best of the Rest

With a wider range of electric vehicles available from legacy car manufacturers and concern about softening demand, as well as production setbacks among other factors, this WSJ short video breaks down how Tesla stock fell 65% throughout 2022. [WSJ]

In 1990, McDonald’s opened in Russia like a portal to the West, and in 2022 it accounted for 7% of all Russian restaurant sales before it’s complete withdraw in May. This Businessweek feature traces McDonald’s grand strategy and the mutual evolution of Russian business and the country’s once-favorite burger spot. [Bloomberg]

Following intriguing advancements in AI in recent years, robotics researchers are now chasing the once-taboo dream of coding consciousness as they seek an invention that will “eclipse everything else we’ve done” as a species. [NYTimes]

The playoff journey to Super Bowl LVII begins next weekend – here is a breakdown of the playoff format, seeding, and each first-round matchup. [Washington Post]

January 3

Southwest Airline’s Operational Nightmare

Southwest Airlines has canceled more than 15,000 flights since December 22nd in a spectacular operational meltdown, according to The Wall Street Journal.

The Issue: CEO Bob Jordan has warned that the company’s growth has outpaced its technology, and he reiterated the need to modernize their operations. When issues like extreme weather arise, the solution for airlines is often to keep operating through them, but problems snowballed in this case. By the 26th, executives took drastic measures to reset, canceling the majority of flights and locking up seats so customers wouldn’t purchase tickets on flights that might be canceled.

Machine Behind the Mess: SkySolver, a system that assigns pilots and attendants to flights, was overwhelmed by the scale of the task, and crews had to attempt manual resourcing solutions on their own. The SkySolver system has also been criticized for puzzling “solutions” like sending a pilot as a passenger from Baltimore to New Hampshire and then back to Baltimore again the next day as passenger without ever flying a plane. Cancelations cascaded on one another, and staff could not keep up with manual efforts to assign crews to planes.

Fallout: Transportation Secretary Buttigieg and others are calling for greater consumer protections; Southwest’s shares fell 11% in the week, and Q4 earnings could take a 3-5% hit because of the debacle.

Shopify Resets Meetings for the New Year

Shopify is instituting new procedures in 2023 to give employees some “calendar relief” that will help make the most of their time, according to Forbes.

Meeting Critical: To begin the new year, every meeting with three or more people has been canceled for two weeks at Shopify. Then, COO Kaz Nejatian has asked workers to be “really, really critical” and only reinstate essential meetings.

Operational Adjustments:

  • The new policy also institutes “meeting-free” Wednesdays.
  • There is a six-hour block on Thursdays for scheduling any large, “all-hands” style meetings of 50+ people.
  • They’ve created a bot to remind people about the policy when scheduling meetings.
  • Shopify expects some 10,000 calendar events will be removed from employee calendars.

More from COO Nejatian:

  • “People join Shopify to build. To make cool sh*t.”
  • “The most important resource we have is the time of individual contributors. Companies are built improperly around the time of the manager rather than the doer.”

Other companies, especially in the tech world, have made similar adjustments to remove meetings, including GitLab’s annual “meeting cleanup” day, Asana’s “meeting doomsdays,” and Slack’s “Focus Fridays.”

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Rogers and Shaw Deal Moves Forward

Rogers Communications’ proposed acquisition of Shaw Communications made significant progress towards approval this past week, according to The Wall Street Journal.

The Merger: Rogers and Shaw, two of Canada’s largest telecom companies, announced their plans in March 2021. The nearly $15 billion USD deal will purportedly help accelerate a 5G rollout and improve service. Canada’s Competition Bureau, the country’s antitrust regulator, sued to stop the deal in May over concerns about further concentrating Canada’s telecom industry.

Clearing Hurdles: Ruling against a government challenge, the Competition Tribunal, which is the country’s merger court, decided the deal is “not likely to prevent or lessen competition substantially” since competitor Quebecor Inc. sells similar products through its Videotron unit.

  • Following the announcement, Rogers and Shaw shares respectively rose 6% and 10%.

What’s Next: Canada’s economic development minister will make the final decision. Rogers and Shaw have already agreed to sell Freedom Mobile to Quebecor, and they have extended the deadline for their deal to January 31st.

Best of the Rest

Science, technology, and health reporters at The Atlantic have compiled a list of 74 things that blew their minds in 2022, including notes about gophers that farm and the Microsoft Excel World Championship. [The Atlantic]

The Journal’s CMO Today section recaps their 22 most read stories about marketing, media, and advertising throughout 2022. [WSJ]

Also in the spirit of launching a new year, here are the most Enduring Images of 2022 according to The Washington Post. [Washington Post]

With at least one lunar landing planned already and the potential for as many as five, here is a 2023 look-ahead for fans of space and astronomy. [NYTimes]

Expanded legalized sports betting, increased minimum wages, and criminal justice reform are a few categories of new state laws set to take effect in 2023 across the U.S. [NYTimes]

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