The Shakeup

Greetings from quasi-quarantine. Last weekend, we began our emergence from hibernation by reopening our drive-thru. We received a great response from the community and sold a lot of beer-to-go. The drive-thru setup was the last operation we had before shutting down, so opening it back up felt like an official (albeit small) step in the direction of “returning to normal”.

However, we know that we’re not returning to normal, and, in fact, “normal” makes for a lousy target. There’s nothing sacred about where we were before. It was a product of circumstances that have since changed. It was a product of habits that emerged from those circumstances, and those habits weren’t necessarily good, anyway. It was in service to a marketplace which does not exist today, and which has an infinitely small probability of returning to the exact same conditions of two months ago. It very well might “come back” faster than some of the gloomier predictions anticipate. But, this has been a shock to a complex system – as such, when the dust eventually settles, we will be in a new equilibrium.

For example, consider that millions of Americans have been forced to cook at home during this 6+ week quarantine. They’ve made some investments: Spent time learning techniques and reading recipes; purchased new equipment, gadgets, and cookbooks; redecorated their “eating space” that they now actually use. They’ve formed new habits: Making their own coffee in the morning, making a grocery list each week, sitting down at the dinner table with the family. They’ve made alterations to their daily lives, some of which will outlast COVID-19, and those that don’t may be replaced by some new idea rather than a reversion to the pre-COVID status quo.

That said, it’s a fool’s errand to try to predict the “new normal” with any degree of precision. Not only are the primary effects uncertain – i.e., we don’t know to what extent people will continue to cook at home – but there are knock-on effects that are far more numerous and far more difficult to identify, and almost impossible to predict. How would this cooking at home impact the supply chains, and how do those impacts affect the workforce, and how do those impacts affect the consumption patterns of those workers’ families? And so on. While these questions make good fodder for conversation, when it comes to serious planning, it’s more prudent to simply assume that the world is being shaken up, and once the shaking stops, we will arrive at some new, randomly selected configuration. Of course, I have a dreadful suspicion that this process is not entirely random, but subject to the will of powerful political institutions that seek to help themselves to the detriment of my business and my family, but I digress.

The Shakeup will have many companies rebuilding themselves from the ground up. Chamath Palihapitiya is a venture capitalist who became my hero as soon as I saw this video where he introduced a wide-eyed CNBC anchor to capitalism. Chamath has had a lot to say about the economic fallout from this crisis, and he shared it on a recent podcast hosted by Mike Pompeo (thanks to Hal for sending it to me). Chamath pointed out that we should expect companies who survive this crisis to employ Zero-Based Budgeting. Rather than copying and pasting last year’s budget as a starting point for next year, they’ll be starting with a blank sheet of paper and provisioning only for expenses that are absolutely necessary. In other words, the question isn’t “what do we cut?”, it’s “what don’t we cut?”. Imagine every company asking that question at the same time.

It’s my opinion that this is a good thing – that this is what every responsible business, household, and government agency should have been doing all along. But this economic reckoning, to the extent that we allow it to happen (to the extent we don’t, we’ll pay for it later), would cause a lot of pain in the short run. We’re already getting desperate emails by the dozen from vendors and solicitors (“We’re here for you in these uncertain times”, “we’re all washing our hands so don’t be afraid to buy our stuff”, etc.). We got an email from someone selling billboard ads lecturing us, “When times are good, you should advertise; when times are bad, you must advertise,” attempting to use ancient-sounding wisdom to dispute the obvious fact that the value of their service has been slashed overnight.

Our suppliers of materials, equipment, and services are clearly feeling the crunch, and soon their suppliers will feel it too. Many of these companies employ people in so-called “good jobs” of the modern American knowledge-economy variety. Once those jobs come under threat of layoffs, furloughs, or paycuts, those employees’ households adopt zero-based budgeting and drastically cut their spending, which puts more downward pressure on companies’ revenues, who then cut their spending further, and so on. This is how an economic depression materializes.

Predicting the future is hard. Even if we’re certain this will happen, again, it’s impossible to say where The Shakeup leaves us. But, given this potential down-side risk from the economy and the almost-inevitable reality that we’ll have a lingering public health concern about crowds, we ought to do what we can to prepare for a world where our previous revenue streams are unattainable. How do we do that?

One way is to innovate. We talked to Houston coffee magnate David Buehrer (Greenway Coffee, Blacksmith, Coral Sword, Morningstar) last week and his wheels are turning, preparing for a world where sales are down 50 or 75%. A world where peak traffic doesn’t exist due to fears of the virus, and/or due to economic depression. He shared some of his ideas – a custom Greenway app where people can order from any of his locations, pay, and pickup; some new large ticket items (merchandise) to sell to rabid fans in lieu of the 10x coffees per week they used to buy; a wholesale coffee program to service offices that are in work-from-home mode.

This is a terrific glimpse into how the crucible of crisis is stimulating people’s ingenuity, and it left me hopeful that we’ll come out of The Shakeup with new ideas and solutions, some of which will be lasting and useful improvements over the previous status quo. This idea of COVID-inspired improvement was expounded upon in an essay by Marc Andreessen called It’s Time to Build, which quickly made the rounds on the internet a couple weeks ago. Andreessen takes a harsh tone, urging us to view this crisis as a wakeup call to the reality that we in The West are plagued by a satisfaction with the status quo and an unwillingness to build.

Every step of the way, to everyone around us, we should be asking the question, what are you building? What are you building directly, or helping other people to build, or teaching other people to build, or taking care of people who are building?

So how do we answer this call? For the record, we did build a pizza oven in our backyard (with the help of Phil Pham from Hughie’s), which ought to count for something. But what are we building that will improve our world, or our community – that will make them permanently better off?

To this, I don’t have a snappy, satisfactory answer. Our focus to date has been on surviving The Shakeup, sustaining minimum damage in the process, and emerging in a position where we can survive whatever new world awaits us. Without knowing what that world looks like, how do we commit to building something?

Perhaps we are building, but in a subconscious, incremental way. To move to a to-go / delivery model, we adopted the Twistee Can, which allows us to package any on-tap product in 16 or 32 oz format without needing specialized can-seeming devices, or requiring the customer to provide a container. We also built a website for online ordering, and Jorge and the team devised a drive-thru setup (recently resurrected) that allows for a seamless, contactless transaction. We’ve begun a weekly Instagram “TV show” which may evolve into a podcast – perhaps an institution that makes our company stronger and more connected. These are no-regrets steps – regardless of where The Shakeup takes us, they’re likely to be positive (or at least neutral), owing to the fact that they didn’t require large commitments.

Then there’s the reopening itself. When the time comes to open the tap room, we’ll have to configure it to accommodate reduced capacity and permanently enhanced sanitation. We’ll also have to develop a staff and work schedule based around our new business environment. It may not be physical building, but opening or reopening a business is a building process nonetheless.

That said, I would accept the criticism that we could do more and better. If our goal is to emerge from The Shakeup with a fighting chance, we ought to have our heads on a swivel looking for opportunities, even when it may seem that the world around us is crashing down. As I said last week, I have faith in localism – I am strongly convinced that we will get through this crisis thanks to our honest, personal relationship with our community. But we must not take that relationship for granted, and instead should seek to nurture it by constantly improving what we bring to the table. In this way, we’re constantly building our business into something better.

This is a very different process than getting a blank sheet of paper and designing “Holler Brewing 2.0” complete with some game-changing applications. Surely many businesses are doing something like that, but we’ll be engaging in our redesign in an incremental, organic fashion, incorporating feedback from our community along the way. The resulting version of Holler Brewing is not possible to predict with any precision, except that I know it will be better than anything we could have achieved via totalitarian design, or via the mediocre aim of returning to normal.

So, while we’re in The Shakeup, with no idea of where and when it will stop, we’re maintaining our focus on long-term survival. To do that we must improve our value proposition in a community and business environment that will be changing, perhaps in radical, unforeseen ways. That requires flexibility, which requires that we maintain a strong balance sheet (i.e., do zero based budgeting and don’t buy billboard ads). It also requires that we have the wherewithal to observe our surroundings and the ability to respond appropriately, and that will require hard work, ingenuity, and risk-taking. Indeed, if we’re going to survive The Shakeup, we must be ready and willing to Build.