June 23, 2020

It Definitely Wasn’t Boring: Q2 in Review

Have you also aged three decades since April 1, 2020?

Have you also aged three decades since April 1, 2020?

The last three months have brought us some of the craziest business news imaginable. The second quarter was a cornucopia of unpredictability—from COVID-19 doing its worst to the economy to widespread protests serving a reckoning for America’s conversations about race.

So how do you make it all make sense? You make a podcast about it. Today on Business Casual, we’re taking a look back at the biggest themes of the second quarter, from innovation and accountability and leadership to...failure.

  • And we’re doing it by bringing some of the best guests this show has ever seen back up to bat, from Arianna Huffington and Mark Cuban to Ian Bremmer and Ray Dalio.

Because as we head into the third quarter of this year, you have to ask yourself: Would you ever, ever have seen these headlines coming just six months ago? I sure wouldn’t have. 

Let us help make sense of today’s headlines. Listen now.


Kinsey Grant, Morning Brew business editor and podcast host [00:00:05] Hey, everybody, and welcome to Business Casual, the podcast from Morning Brew, answering your biggest questions in business. I'm your host and Brew business editor, Kinsey Grant. And now, let's get into it. [sound of a ding]

Kinsey [00:00:17] So when I say, I'm never going to financially recover from this, doesn't it feel like a relic of a bygone era, when the thing that rallied us most was Joe Exotic with a side of quarantine banana bread? Were we ever so young? Well, we were, because it was only three months ago. The second quarter of 2020 has, for all intents and purposes, been a shit show and pardon my French, but that feels like the only appropriate way of describing it. Since April 1st, we've continued to deal with the COVID-19 pandemic and the fallout. 

Kinsey [00:00:48] But, on top of that, we've also declared a recession and experienced widespread protests against systemic racism and police brutality here in the United States. Suffice it to say, the second quarter has been the longest seven years of my life—and I've been lucky. I'm healthy. My family and my friends are healthy. And I have a job that I can do pretty much anywhere, including the floor of my bedroom, where I am recording today's episode. And I hope all of you are doing all right too. It's been a really tough couple of months, but I think it's important to recognize that through it all, we have the opportunity to learn and to make things better for not only the next quarter, but also the next year or decade or generation. 

Kinsey [00:01:30] The lessons from the second quarter were big, so let's work on making the actions that come next even bigger. You're going to see a lot of quarter-in-review content from a lot of outlets over the next couple of days. But in the spirit of using what we've been through to help us figure out where we're going, and instead of just rehashing the news you probably could not escape these last three months, I want to spend some time looking at the bigger picture. What have been the most important, most groundbreaking, most impactful themes in business since April? What's changed and, almost as important, what hasn't changed? 

Kinsey [00:02:04] So today on Business Casual, I am going to take us through Q2. We're gonna take a look back at what's made this maybe the most memorable quarter ever. I think there's a reason that our show both hit 3 million listens and tallied our biggest months for downloads ever during this quarter. There was demand for insight from experts. So today, insight's what you're gonna get. We're gonna start with some of the biggest themes that the Business Casual team and I have been keeping tabs on in the last three months. And then we're gonna close it out with some predictions for the next quarter. 

Kinsey [00:02:33] So, if you're ready, let's get into it. [sound of a ding]

Kinsey [00:02:38] Anyone who knows me knows that I say two things on an almost daily basis. "That's showbiz, baby" is number one and the other, "life comes at you fast." And the latter became one of the most important concepts of Q2. Disruption to business as usual exposed countless problems with business as usual. And that made innovation and restructuring, whether you were ready for them or not, a major theme these last three months. 

Kinsey [00:03:04] Let's let Sweetgreen co-founder Nick Jammet set the scene. 

Nick Jammet, Co-founder of Sweetgreen [00:03:06] For so many of us, the places that we wanted our business to get to, and we thought it was going to be a two-, a three-, or four-year journey. It's just become like a two-, three-, four-month journey. 

Kinsey [00:03:20] Nick was talking about Sweetgreen's pivot to technology and its introduction of entirely new products to its menu. The tech had long been a part of Sweetgreen's DNA, but adding plates and warm meals to a menu that had been salad-exclusive for 13 years was a move that would have taken much more hemming and hawing under normal circumstances. But this last quarter, there was no time for hemming and hawing. It was do or don't. There was no maybe. 

Kinsey [00:03:46] And while we at Business Casual weren't specifically adding new iterations of sweet potato to our go-to-market strategy, the feeling's familiar for us. When you're faced with unprecedented circumstances, you innovate at unprecedented speeds. We saw restaurants that had once sworn off Grubhub or Uber Eats pivot to delivery overnight. We saw entire manufacturing supply chains for things like ventilators and masks shift from far-flung countries to local neighborhoods before our eyes. And we experienced it on this show too. You might have noticed that we upped it to twice weekly, a decision we'd been mulling over for months. 

Kinsey [00:04:22] Turns out all it takes is a pandemic and a recession to get that rear in gear. But not all of the overnight changes to business models laid bare opportunity. Some highlighted just how tired those business models really were, and perhaps none were as tired as the cruise industry. Already, cruises are giant polluting machines with bad reputations. And the fact that we may never say the words "Diamond Princess" without shuddering again—well, that didn't help shine the reputation of what one guest on Business Casual called floating petri dishes. I'll let that guest, Skift CEO Rafat Ali, take it away. 

Rafat Ali, CEO and founder of Skift [00:04:59] The challenge for cruise industry has always been how to attract new cruisers because it has this image of a certain demographic, certain age that are very loyal to it. Correct. Where you are, Florida seems to be a big hub of it. [Kinsey laughs] And so it has always had trouble attracting younger crowds for all these reasons. And obviously, this doesn't do it any favor at all. Even the diehard loyalists—it will chip off that. So they're in trouble for a long time. 

Kinsey [00:05:35] Now, I never thought I'd go on record saying that the cruise industry actually has a lot in common with geopolitical tensions between the United States and China and everywhere else. But, here I am saying just that—just it's COVID-19 showed us how broken the cruise industry's model for demand is after years of failing to invest in the right customer acquisition strategies. The disease also showed us how a similar underinvestment in building a resilient healthcare system stateside put us at a disadvantage in responding to COVID-19 from the jump. Here's our guest, Ian Bremmer, from Eurasia Group. 

Ian Bremmer, Founder of Eurasia Group [00:06:12] Now then, of course, the United States and the Europeans, once we found out about it, we did not react quickly. We didn't get tests up and running. We refused the tests from the World Health Organization. And ours didn't function well to begin with. We didn't build resilience in our healthcare system for surge. And of course, we've been underinvesting for decades in a lot of that capacity. And the same is true in Europe. So as the disease exploded across the wealthier countries, our response was considerably less robust and uncoordinated in comparison to, say, a smaller country like Singapore or bigger countries like Japan and South Korea. 

Kinsey [00:07:04] It comes down to this: Major upheavals in business strategy used to be the kind of thing that took decades to fully implement from the top down. But the coronavirus has showed us that change can happen overnight—for better or for worse. And maybe we'll take that lesson into Q3 and beyond. Now that we know we can turn on a dime, maybe we'll do it more often. But there's one big change that hit us hard and it's one that we can't strategize our way out of on a dime or otherwise, unless maybe your name rhymes with Jerome Powell. The National Bureau of Economic Research says that the recession started officially in February. According to their economists, "The unprecedented magnitude of the decline in employment and production and its broad reach across the entire economy warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions." 

Kinsey [00:07:54] And there you have it. The longest expansion in American history hits the brakes. 

Kinsey [00:08:00] That affects all of us. Recessions have a knack for taking no prisoners. But I'll say this much: There are groups of Americans that bear the brunt of recessions more than anybody else. Low income groups here in the U.S. Are disproportionately affected by economic contractions. Fed Chairman Jerome Powell recently told the Senate Banking Committee this, "The burden of the downturn has not fallen equally on all Americans. Instead, those least able to withstand to the downturn have been affected most." that concept has been exacerbated by buckling hits to minority-owned businesses and that not even the biggest relief package Congress has ever passed can smooth over. 

Kinsey [00:08:40] And in low income households, job losses have been unimaginable. Remember our episode a couple of weeks ago about the labor market? Our guest, LinkedIn chief economist Karin Kimbrough, had this to say about why the average wages and healthcare are on the rise and why that might be not exactly what it seems. 

Karin Kimbrough, Chief economist at LinkedIn [00:08:59] What happened is because all the low wage jobs evaporated. So all that was left were the higher paying, higher wage, maybe more stable jobs, and that somehow perversely influenced the average hourly rate of wages in April in the U.S., and it rose to 8%. So I'm telling you this story because what it meant was so many low wage and less-skilled jobs just really disappeared. And when you ask who's affected, it's the right question to ask. 

Kinsey [00:09:39] Who is affected? It's a question we should probably ask ourselves more often. In this particular economic phenomenon, groups that were affected were groups more at risk already. When restaurants and schools and office buildings shut down indefinitely, the jobs of the people who clean and guard and operate those buildings also shut down indefinitely. And we got a firsthand look at the sprawling domino effect of lost jobs from famed restauranteur Marcus Samuelsson. 

Marcus Samuelsson, Chef and Restaurateur [00:10:07] Our goal is to hire back as many as we can. Obviously, it's going to take months, if not years. Red Rooster, we had [indistinct] 180 employees, on top of that 70 positions. And then all the other people that a restaurant hires. Right. The person who cleans out a window. The person delivers the fish and the chicken. And you know, restaurants are very complex, multilayered, multifaceted industry that has many hands. Actually, the word restaurant means to restore your community. And it's going to take a long time to get all those positions back. Our goal is to hire back as soon as possible, but it's going to take a long time. 

Kinsey [00:10:56] If you can do your job from home, you should really stop complaining about how uncomfortable your WFH setup is. I mean, you're lucky because the way our economy has been designed for the last generation hasn't exactly made it such that anyone can bounce back overnight from unemployment or from the inability to do their job. Because as many a thought leader speaking from their well-stocked home libraries during this pandemic have put it, the economy might be broken. 

Kinsey [00:11:23] They say that we've put the interests of the very wealthy few ahead of those of the not-so-wealthy many. And many of them are also saying that a bent toward the mega-rich is evident in things like stock buybacks, dividends, and C-suite salaries. Now, I'd explain it, but why explain it myself when I can get "Shark Tank" star Mark Cuban to explain it? 

Mark Cuban [00:11:43] Stock buybacks reward the people who sell your stock, which is not a good thing. Two: Most public companies issue stock options and warrants and grants to mostly the people at the top, their executives. And so when you buy back stock, you're typically just buying back the stock you just issued to your executives. And that does nothing for the market, the price, the value of the company or the employees. So I don't think there's a value to stock buybacks at all. 

Kinsey [00:12:10] And stock buybacks are just the beginning of the teardown capitalism got over the last quarter. Let's hear more about it from venture capitalist and outspoken capitalism critic, Chamath Palihapitiya.

Chamath Palihapitiya, Founder and CEO of Social Capital [00:12:22] Look, the pandemic actually highlights the lack of preparedness that we have as a society. That's a function of innovation and productivity. There are choices that we could have made well before this thing happened on all kinds of things that factored the economy and our decision-making towards those of being a resilient one. Instead, we chose to be an efficient economy and we chose to be an economic system focused on the most short-term profits versus the most long-term profits. 

Kinsey [00:12:57] Let's think about that for a minute. Are we actually putting efficiency ahead of resilience? And is there a way to marry the two? For Chamath, that union comes from investing more heavily in research and development, or R&D. Now, one interesting concept from my conversation with Chamath that I've been thinking about a lot in the intervening weeks since we spoke is that only about one-third of the companies in the S&P 500 have R&D budgets. That's about 30%, 35% max that are putting money behind their decisions to think critically about the future. 

Kinsey [00:13:30] We've been at this whole capitalism thing for, what, 300-some-odd years now? I mean, we need to think critically about whether it's an advantage or disadvantage for business. The last quarter has showcased voices on both sides of that argument. I'm going to let you think for a moment about whether or not capitalism is working for you right now. And while you think, we're gonna take a short break to hear from our sponsor. — And now back to Business Casual's quarter in review. 

Kinsey [00:13:57] Before the break, I asked you to think about whether capitalism is working for you. I don't know your answer, but I do know that it's not working for everyone. It's great that the government could step in to send Americans checks to help keep their heads above water when all of this got started. But what's 1,200 bucks when giant corporations are sitting on billions in unpaid taxes? The incentives are misaligned somewhere. And I'm hopeful that we'll talk even more about those incentives next quarter, because clearly the system isn't all that well-oiled, at least not for all of us. 

Kinsey [00:14:29] Now it is well-oiled for a select few. The wealthiest of the wealthy here in the United States do more bidding on our country's behalf than you might know. And that's just one of the many, many responsibilities that come with a private jet. Leadership is tough. 

Kinsey [00:14:44] So let's take a little bit of a harder look at it. This last quarter, and the people I interviewed during it, taught me an interesting lesson. The formula for good, strong leadership doesn't change when the shit hits the fan—it just gets more important. Here's branding genius and Red Antler co-founder Emily Heyward. 

Emily Heyward, Co-founder of Red Antler [00:15:02] So I actually think that the pandemic has not changed the rules of how brands should behave. I think it's highlighted the rules that were already in place. I think that when we think about brand building and the principles that are most important, they haven't shifted. They're actually more important than ever before. 

Kinsey [00:15:23] That certainly doesn't mean having those principles is easy. One of the biggest themes from the past three months is leadership under the microscope. The way that CEOs have acted during Q2 will undoubtedly inform the way that history remembers them—or if it remembers them at all. Let's get the perspective from leadership expert Arianna Huffington. 

Arianna Huffington, founder of The Huffington Post and Founder and CEO of Thrive Global [00:15:44] I think the reason it matters so much is because we know that we're never returning to the past. So imagining and building the future is now the primary task and goal of leadership. And that means that we need our leaders to make decisions from the best of themselves and their best judgment. All the wisdom they can muster, because this is not just maintaining the status quo. This is not just operating in a wave of [indistinct]. This is literally rethinking what is being done. 

Kinsey [00:16:35] Rethinking what is being done—now there is a novel concept in business. But especially in the last couple of weeks of Q2, we saw brands and their leaders do just that—come out and make statements that had long been needed, from supporting the Black Lives Matter movement, to taking a stand against racial injustice, to calling on law enforcement for change. Leaders have in many ways very genuinely stepped up to the plate, and they've done that in a way that, you know, it doesn't make it feel like we're living in the Twilight Zone, which is, frankly, how I felt for many of the past couple of weeks. We've talked a lot on this podcast over the last three months or so about predicting these bonkers times. I mean, no one could have, at least I didn't think that they could have, but one of my guests, and I think you religious listeners probably know who I'm talking about, made an interesting assessment of today's unpredictability or arguably, lack thereof. Ray Dalio, founder of the world's biggest asset manager, Bridgewater, said we should have seen this coming. I'll let him explain. 

Ray Dalio, Founder of Bridgewater Associates [00:17:34] Nothing is new. It just — 

Kinsey [00:17:36] Nothing is new. 

Ray [00:17:36]  It's everything is another one of those things that has happened in the past and happens repeatedly in somewhat different flavors, and that it happens over and over again. And many of these things have never been things that we've experienced before in our lifetimes. But they've happened over and over again. 

Kinsey [00:17:59] Ray contends that this recession could have been seen a mile away. Hindsight is 20/20, but he has a point. I mean, any student of history knows that the economy works in cycles. And if we don't prepare for cyclical pain points, we better prepare for cyclical downturns. And we better invest in leaders who can handle whatever the world throws at them. Increasingly, the world and the consumers that make it up are throwing new standards at businesses and their leaders. 

Kinsey [00:18:22] Consumer spending is the engine of the economy—70% of GDP here in the U.S. So, when consumers start thinking more critically about where they spend their money, corporations take notice. At an individual level, it's an easy and simple choice. You're more likely to give your dollars to a company you trust, whose mission you believe in. But, if the majority of people make that same decision, the momentum swells and that can make or break a business. I think that's a good thing. 

Kinsey [00:18:48] Let's keep pushing the trend from the last quarter of using our money and our preferences to hold businesses and their leaders accountable. Consumers have more power today than maybe ever. Given the rise of social media and this younger generation's wokeness, we're not going to use a laundry detergent just because it's what our parents used when we were growing up. We're gonna use it because that brand took a stand. It prioritized the right things. It communicated effectively its values. Here's Edith Cooper, the former global head of human capital at Goldman Sachs. 

Edith Cooper [00:19:19] And I think that we should start doing more due diligence around whether we are using our, let's say, capital and interest and presence, to support organizations who are doing this for real. And if there is a company that you have seen that is really putting themselves out there, you know, support that company. Please, please do support Black businesses. I'm very proud to be part of the board of Etsy. And it's important because small businesses has always been a very important part of business commerce. 

Kinsey [00:20:05] Let's continue to use our purchasing power for good. We're gonna take a short break to hear from our sponsor. And when we come back, I've got a couple predictions to make. — 

Kinsey [00:20:21] And now back to Business Casual's Q2 in review. I spent a big chunk of this episode talking about the major themes of the second quarter. Among those themes were accelerating innovation and change, a widening gap in who will and will not come out on the other side of this recession, and how consumers are holding businesses accountable. Now, let's talk about what comes next. What do we think that the third quarter will identify as the biggest questions in business? What kind of episodes will we be producing three months from now? 

Kinsey [00:20:51] So with that in mind, here are a few predictions from yours truly and my team of fortune tellers, aka producer Marilyn and producer Josh. Prediction number one: The stock market will continue to diverge from the broader economy. Now, despite the fact that we are basically on the brink of economic collapse at any given moment, according to a lot of indicators and very smart economists and very intelligent experts, in April, the S&P 500 locked its best month in 33 years. 33 years. That's several years older than I am. 

Kinsey [00:21:20] And I think that that continues in Q3 as traders kind of take on their own psyche that feels very, very different and very, very separate from the psyche of economists and the academic community. I think that those traders have a lot of enthusiasm right now about an economic recovery. They're looking for that V-shaped recovery with the swift downfall, a period of unrest, and then a swift return and back to normal in the economy. And I think that that optimism is going to stick around, whether it's founded or not. 

Kinsey [00:21:50] And, you know, I think that this phenomenon we've been seeing of recent weeks with day traders is going to stick around as well. I mean, there's a reason that we are having so many retail investors who aren't part of an institutional bank or an asset manager play the market so much right now. Casinos have been closed for most of this pandemic and live sports are gone. We have nothing left to gamble on. So people are taking out that pent-up frustration on the stock market. And I think that now that they've gotten a taste of what it's like to make money gambling in the stock market, they're not going to quit. 

Kinsey [00:22:21] So I think that we're gonna continue to see more day traders and they're going to move markets more than they already have. Now, prediction number two: The recession will not end in 2020. That V-shaped recovery that I was just talking about, that day traders seem so optimistic about. I don't think it's going to happen. I think you can kiss it goodbye. Think we've spent not enough time really, truly considering how cataclysmic this pause on the economy was. I mean, 40 million people have filed for unemployment here in the United States. 

Kinsey [00:22:49] So, we are going to recover eventually. I just don't think it's going to look like the V-shape that we've been hoping for. The reopening will happen slowly but surely, but also the jobs that were guaranteed before might not be guaranteed now. I think we're going to be going into an entirely different economy. For some, that'll be good, and for a lot, that'll probably be bad. Now, prediction number three: Most experts think that the possibility of another wave of COVID-19 is likely. And I agree. 

Kinsey [00:23:14] So my prediction is that the debate over reopening the economy in states will become even more feverish than it was in Q2. I think now that we have had a chance and gotten a small taste of what it's like to reopen and return to some semblance of normalcy and maybe get a haircut and maybe sit at a restaurant and not use plastic forks and knives from Uber Eats, shutting back down is going to be nearly impossible. I mean, with that, we're gonna be stuck waiting on a vaccine instead of stomping the curve. And I don't think it's good. But I do think that it's probably realistic. 

Kinsey [00:23:43] And finally, prediction number four: Working from home is here to stay. So offices have already begun phased reopenings in a lot of places, and they'll continue to do that in the coming weeks and months. But, I just don't see us going back to five days a week in the office anytime soon. We at Morning Brew aren't planning on starting a phased return to the office until after Labor Day. And I also think that now that we know we can keep things going from pretty much anywhere, why would we or our bosses pay for fancy office space in a city with a super-high cost of living like New York or the Bay Area? 

Kinsey [00:24:17] To me, the suburbs are back and they're becoming home to metropolitan expats looking for more space and maybe fewer rats as long as they have a good Wi-Fi signal. Now, let the record reflect that I say all of these predictions with one particularly large grain of salt. If I learned anything in the second quarter of this year, it's that there is virtually no way of predicting the future unless you are Ray Dalio. But we can try to better understand the present, and that is what we will continue to do here on Business Casual, asking the big questions to the big names. 

Kinsey [00:24:52] Thank you so much for sticking with us these last three months. I know it has been something of a roller coaster of content, but I really hope you had as much fun listening to these episodes as I did recording them. We've got some amazing interviews lined up for the coming weeks, and I'm really excited for you to hear them all. But I do want to know if you have any great ideas for an episode of Business Casual. You know, I'm always all ears, so shoot me an email. 

Kinsey [00:25:14] I'm at Kinsey@morningbrew.com. That's k i n s e y @morningbrew.com. And let me know what you want to hear from us on Business Casual. And while you're thinking about it, make sure that you check out a special edition of Morning Brew's newsletter coming out on June 30th. The team is looking back on what has been a bananas first half of the year, and they're also going to make some of their own predictions for the second half of the year. So it's going to be a can't-miss edition of our daily newsletter. Make sure you are subscribed @morningbrew.com so you don't miss it. And I will see you next time. [sound of a ding]