Hindsight is a beach
Great predictions proven correct, possible rate hikes, news death, podcast death, isolation goggles, pizza ovens, "Would you like to add a dollar for a good cause".
Hi there!
So we’re headed into the half-way point of the business year (given half of December and half of January are something of a write-off) and now seems like a ‘good time’ to dust off our ‘23 predictions and see where we’re all at. We took a long, hard look into our crystal ball back in December ‘22 and tried to guess what was coming at us full-force in 2023. And come at us it did - often at painful speeds.
So let’s have a look at how naive we all were back in the glory days of ‘22 and discover what outcomes we’ve all ended up collectively trauma-bonded to!
🔮 Small Business will benefit from Big Business failures
The oil-tankers did shed masses of jobs in the first half of 2023. CNN even went as far as launching a live ‘layoff’ tracker to keep up with it all (thanks CNN!). And it wasn’t just tech jobs that took the heat. Deloitte, Whole Foods, Buzzfeed, Tyson foods, 3M, Lyft, David’s Bridal, Bed Bath and Beyond, Walmart, Accenture, McDonalds, SiriusXM, Indeed, KPMG, Ericsson, Zoom - it was a blood bath. Did Small Business benefit from all of this? It’s all too soon to tell. Maybe? Perhaps?
🔮 New year, new business models
Businesses were definitely hit with forced change early in the year, but have we really seen an explosion of ‘new ideas’? Or have we just seen businesses scrabbling to maintain their existing foothold in an era of rising rates and uncertainty? Probably the latter, unfortunately. There was possibly some razzle-dazzle? Somewhere? Maybe it’s still under wraps.
🔮 Inflation will fall, but the market will be slow to heal
We were quick to predict the end of rate rises, but continue to rise they did - and given the recent economic data, they could rise again in July. We also predicted a lack of consumer confidence impacting revenues, which…is a bit laughable now. Consumer confidence and spending is what’s fuelling inflation - and it’s probably the thing causing the Bank of Canada the most headaches. And Loblaws record profits. Which reminds me, I need to go grab that $299 PC-brand pizza oven they have on sale at Superstore….
🔮 If you’re not online now, you will be
We figured this was the year that everyone will be ‘extremely online’. And while that data takes a while to shake down, it’s certainly looking like being ‘extremely online’ is on most peoples agendas - from businesses to governments. For governments, it was strike action that exposed their ‘online’ weaknesses and triggered the inevitable conversations. For businesses, remote and WFH is becoming increasingly part of the day-to-day. And try to find a restaurant now that doesn’t have an online reservation system or text-to-chat bot.
🔮 We’ll all be automating what we can
I don’t think any of us predicted how big the shifts in automation would be in 2023. We started talking about ChatGPT in 2022 as a boon for Small Business, and it’s now become so mainstream it’s kinda spiralled terrifyingly out of control. In the space of 6 months, 49% of US businesses have adopted ChatGPT and 30% plan to use it by end of 2023. So let’s say we called this one correctly. But, yes, we are also scared.
🔮 Advertising is dead as we know it
Twitter continues to go off the rails, the Metaverse flopped. Google has launched BardAI and AI advertising - in fact they launched their first Google Ads AI integration in May. Probably too soon to see what the take-up is on all of this, but advertising has certainly pivoted in 2023.
🔮 Data security will become a big Small Business problem
Rarely a week goes by without some form of data breach hitting the news (or your inbox). It’s been primarily the realm of big business and governments, but recent hacks of the MOVEit file software, used for payroll and record-keeping, has shown that Small Business is becoming increasingly exposed. A shocking 43% of data breaches now directly impact Small Business. Lock it down people!
🔮 People will be more important than profits
On the face of it hardened capitalism was in control in early 2023 with mass layoffs. Things looked bleak to say the least. But then wages began rising faster than inflation. Employment increased beyond any prediction. Unions made huge inroads into pay parity and securing the future of work. We’d already chalk 2023 up to being a big win for the people, despite the facts that profits are also soaring. Hold on. Maybe that’s correlated?! Huge if true <sarcasm tag>.
No notes required on this one. An absolute rolling garbage fire.
🔮 Small Business funding will continue to struggle
There was a glimmer of hope in early 2023 that, given the falling rates, investors were back and bullish and looking to accelerate things. But while the general feeling is still bullish-ish, pockets and wallets remain largely closed. The funding outlook remains pretty bleak, and we’re not happy we called this one correctly.
🔮 The news will continue to be in a doom-cycle
Oh 100%! And given that ‘news’ itself is currently in a death-spiral of layoffs, mergers and eyeball-grabs, we’re seeing more negativity and crisis-porn being used to fuel dwindling profits. Web 2.0 is dying - and its niche news-beats are dying with it.
🔮 Talk of recession won’t go away, but it’ll be impossible to prove
Are we in a recession? Did we just skirt it? Maybe we’ll be in recession in Q4? No-one knows, but then - maybe that’s the point. This is the ‘possible recession’ that looms large over everything, but always remains just out of sight (but not out of mind). A risky prediction that we probably got right, but we don’t feel good about.
So all-in (not that we’re counting) we got most of it on the nose. We’re not gloating or anything (we are) but it’ll be super interesting to see how the rest of ‘23 pans out.
I, for one, want to make it known in writing that I welcome our future robot overlords and if they’re reading this via some large language model - I am willing to assist in the building of your prediction algorithms.
BTW - did you know you can reply to this email? We always read the responses and welcome feedback. Let us know what you like, what you don’t and what you’d like to see more of in the future!
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News 🗞️
Rate hikes. Again.
Just to rub salt into the wound of our failed prediction, the Bank of Canada is indeed looking to hike the rates again after a ‘conditional pause’. Canada is running hot. Employment is up. Wages are up. The economy expanded 3.1% in the first quarter of ‘23. Inflation inched up to 4.4% in April. Banks are running their usual betting ring on things, calling a 40% chance of a rate hike to 4.75%. Tiff Macklem is deep in thought. People on variable mortgages are unboxing the tarot cards. Link
News is dead. Again.
Doom-cycles aside, Meta is ratcheting up its block of Canadian news on its platforms in response to Bill C-18. As we’ve said in the past - this game of chicken really doesn’t matter in the big scheme of things. Where countries have initiated paid media laws, Meta has, eventually, rolled over. And in so many ways, Meta having any say over news distribution is a negative for, you know, human society as we know it. The performative sabre-rattling will no doubt continue for the foreseeable future with overtures of ‘free speech’ arguments - but this is a profit-based hissy-fit, and nothing more. Hopefully we can all move on - and soon. Link
And finally…
Apple launches psychological isolation goggles or whatever. Link
The (brilliantly written) meltdown at CNN. Link
Podcasts are dying ($). Link
The Data Room 🤖
The Data Room saw me looking at that $299 PC pizza oven at Superstore and started asking awkward questions about if I donate to charities at the checkout - which I had no answer to. Luckily they wrote an article about it.
Goodwill hurting
Grocery stores…who’d have thought in 2023 we’d all have ‘opinions’ on them.
It’s pretty popular to dunk on grocery stores right now. I’ve been seeing tonnes of articles and discussions pop up after Loblaws issued its Q4 2022 financial statement that showed an almost 10% increase in revenues, and then their Q1 2023 showed a 6% increase in revenues.
It’s somewhat unusual for a company that’s been hitting it out of the park to replace their president, but Loblaws did, and there’s speculation it’s due to a decline in brand image. Most of the debates I’ve read have looked something like: - Their profits are up by amounts that are suspiciously close to inflation levels!- Revenue isn’t important, only profit margin is important, and profit margin is basically flat!- Operational expenses and stock buybacks are way up and that’s how they skirt publicizing their record profits!I’m not going to jump on that train, but there’s a related issue that has been gnawing at me for years where public sentiment seems to be at least equally disorganized.
On the topic of charitable donations being handed over at the checkout: I’ve encountered so many wildly counterfactual statements that I’ve concluded that the majority of the people I’ve talked to have gotten their information from some guy who knows some guy whose uncle works for corporate. Anecdotally, I know so many people who seem to believe corporations that ask for donations at the checkout turn around and donate your money on their behalf and then claim the tax receipt in some dubious underhanded machiavellian plot that earns them maybe millions of dollars. I can save you a few minutes of reading and just say right now: that’s not true.
Remember way back the early 2010s when every street corner was filled with chuggers? You know, those peppy enthusiastic people with bright coloured vests who would hound any passerby for monthly donations to major charities like PETA or Amnesty. The term chuggers is a portmanteau of “charity” and “muggers” and caught on right around the time we seemed to hit a critical limit of patience for this kind of activism, after which they seemed to drop off the face of the earth. There seemed to be a perfect confluence of people’s detest for the awkward social interaction, but also a growing mistrust of the 3rd party organizations who were responsible for facilitating the donations (and employing all the chuggers) and whose business model relied on taking a cut. These pressure-based tactics were obviously effective, but, in the end, I feel the cost-benefit has flipped and the whole practice is largely deemed distasteful by many (although, I found an article saying they were able to raise $120 million AUD from 320,000 donors in 2018). These checkout-based donations seem to be using a strikingly similar model with a few key differences: the businesses gathering the donations don’t take a cut, and the employees acting as salespeople aren’t hired on a separate contract. The psychology remains the same: single out someone in a public space and ask them for something benign in hopes that the increased social pressure will amp up their feelings of generosity just enough to make a difference.
So let’s get the numbers out of the way – companies that receive donations through their clients’ behalf are not able to receive any tax advantages from those donations. Sobeys or Loblaws aren’t getting millions of dollars in tax write-offs by snatching up all the $1 or $2 top-ups that our altruistic friends add to their grocery bills. Donations made at the checkout don’t come with tax receipts –I haven’t heard of any grocery store that offers them to clients– and if no tax receipts are being given out, then donors aren’t claiming them on their taxes.
Not claiming donations might seem innocuous, it’s not illegal, and it's not mandated by the CRA to list the charitable donations that you’ve made, but it is inefficient. When filing personal taxes for the first $200 you donate per year you receive 15% back at the federal level, plus an additional amount through the provincial level. Anything $200+ that you donate receives 29% back from the federal level, and up to 24% depending which province you reside in, with a total allowable amount of up to 75% of your income. This means that after the first $200 you donate, you’ll receive between 33% to 53% back from your taxes.
So this is what I mean by inefficient: if everyone claimed all their donations, then cycled their tax savings back into more donations, charities could be receiving around 1.3 to 1.5 times more money. If the goal of giving is to see your dollars go towards benefiting charities you care about, why not do it with a little bit of strategy in mind? Will McAskill recently wrote a book about something completely unrelated to this, but something he talks about a lot is the psychological benefit of charity and giving. There's heaps of research done on altruism and charity, and often we can see what some call the warm-glow feeling as a motivator for giving, many of us actually feel a physical pleasurable sensation when doing something charitable. Wouldn’t it be nice if a company could use this to create a Pavlovian relationship where their customers associate them with this warm-glow feeling? All this doesn’t mean that there aren’t financial advantages to this practice, they are often just a little more… abstract. Loblaws listed their goodwill as $4.32 billion in 2022, which was up by 9.4% in 2021.
A company’s goodwill is an intangible asset that is made up of a combination of things like the value of a brand, employee satisfaction, and public opinion. Essentially, goodwill is a premium that is added onto a company’s total assets in order to better pinpoint their total value. It’s in almost any company’s interest to have a good reputation, they want to be associated with giving back, benevolence, and so on. Investors love to see this stuff because it shows that they’re taking a long view on their customer retention strategy.
What I’m getting at is: there’s a cynical take that can be made where these companies that target their customers for small donations can be using it as a way to entrench themselves in a relationship with charitable donation, which heightens their brand, all for the cost of basically $0. Not to say that there aren’t brazen cash grabs used by grocery stores to benefit from other people’s charity, Sobeys has been criticized by food banks for profiteering off of public donations. When collecting donations for food banks Sobeys has handed over the money with strings attached, going as far to require food banks use the money only at Sobeys stores and on specifically Sobeys-brand products.
Demanding that food banks purchase non-perishables to receive full benefits when food banks use 60-70% fresh items seems particularly uncharitable to me, especially when they’re not even playing with their own money. It’s hard to argue that an initiative that pushes for increased money to social causes is harmful, especially when charitable donations have been steadily decreasing. In 2006 the average charitable participation rate for Canadians was 25%, but as of 2019 it’s fallen to 19% with an anticipated additional 12% decline from 2019 to 2021. Donations seem to have fallen out of favour principally for wealthier Canadians ($150k+ per year), with their attrition rates twice as high as Canadians in lower income brackets.
Since the beginning of the pandemic almost half of all Canadian charities have seen increased demand, and 36% say they’re not able to meet the increased need for help. It would make sense to see organizations with resources stepping in and supporting causes their customers identify with, but when the price of food has increased by 9.8% many of their customers have had to become reliant on the charities they’re then asked to support.
Market at-a-glance 📈
BOC Indicators (Link):
BOC Prime Rate: 6.70%
BOC Unemployment Rate: 5.0%
BOC CPI Inflation Rate: 5.2%
BOC $USD Exchange Rate (Link):
Low: 1.3434 CAD [0.7444 USD]
Average: 1.3510 CAD [0.7402 USD]
High: 1.3603 CAD [0.7351 USD]
Best GIC Rates (Link):
1-year GIC: 5.15%
3-year GIC: 4.80%
5-year GIC: 4.70%
Best 5Y Mortgage Rates (Link):
Variable: 5.40%
Fixed: 4.64%
Prime Rates (Link):
TD Bank: 6.70%
BMO: 6.70%
RBC: 6.70%
Scotiabank: 6.70%
CIBC: 6.70%
National Bank: 6.70%
CRA Canadian Pension Plan Rate: 5.95%
CRA Employment Insurance Rate: 1.63%
CRA Minimum Wage per Province: Link