Everybody Wants to Rule the World
w.162 | TRUST: A Novel, Energy in Europe, Labor Markets, Tsunami of Fakery
Dear Friends,
Is it September next week? August has gone by all too fast. Regardless of the impending fall, I woke up early to read and write this week.
Comments and responses are always appreciated. See you in September :)
Today's Contents:
Good Reads: Sensible Investing
Macroeconomics: The Fed, Energy in Europe, and Labor
Book Review: TRUST: A novel
Weekly Song: Everybody Wants to Rule the World
Good Reads: Sensible Investing
The New Normal: The Coming Tsunami of Fakery: How the Dead Internet Theory is fast becoming a reality thanks to zero marginal-cost content generated at an infinite scale. Here. The key concept is pasted below.
The Reluctant Prophet of Effective Altruism: William MacAskill’s movement set out to help the global poor. Now his followers fret about runaway A.I. Have they seen our threats clearly, or lost their way? Here in the New Yorker. A friend sent me this article as a reminder of the genre of journalists who make a sport out of making people look petty and ridiculous in their profiles. Something we both have had experience in.
MacAskill has a gap between his front teeth, and he told close friends that he was now thinking of getting braces, because studies showed that more “classically” handsome people were more impactful fund-raisers. A friend of his told me, “We were, like, ‘Dude, if you want to have the gap closed, it’s O.K.’ It felt like he had subsumed his own humanity to become a vehicle for the saving of humanity.”
In a rare free moment, MacAskill, who wears tight-fitting V necks that accentuate his lack of sartorial vanity and his biceps, took me on a tour of the movement’s early sites
Lewis Hamilton: The F1 Superstar on Racism, His Future, and the Shocker that Cost Him a Championship. Here in Vanity Fair. I love a good Lewis profile.
“A lot of people out there are shit talkers,” he tells me. “If I let those words—those projections people are putting out, those little digs—if I let that bring me down, then they win.”
State of the Global Workplace: 2022 Report from Gallup. Here. "Get a bad [boss], and you are almost guaranteed to hate your job.” See the chart below. We see the same chart and analysis every year. People overestimate compensation and underestimate the intangibles, which are only provided by ‘good leadership’, e.g., being a human and using good judgment. Still, if somehow you get a disgruntled employee, you have to revert to the harsh legalistic and administrative processes of traditional Human Resources. These have been designed to protect a company and comply with the law. The more often this happens, the more it seeps into the culture of a company. I don’t think “employee experience” software will solve a leadership challenge.
How Do Past Crashes Compare to Our Current Crash? See below. Sourced from Hedgeye. If the present is like the past, we have more to go, and the bear bounces might get bigger.
The University of Texas system is unlike other colleges because of its oil-rich land assets that are driving record revenue this year. It may be the largest college endowment by the end of year. Article in Bloomberg here. ESG investing is going to be tested as those that are completely divested from oil will underperform.
Macroeconomics: The Fed, Energy in Europe, and Labor
Jackson Hole.
The Fed held its annual conference this week/weekend. Takeaways included the following:
Quantitative tightening (the reverse of quantitative easing) is likely to be painful.
Inflation will likely be high for a while, at least for another year or two.
Here’s the verdict on Powell’s speech from Mohamed El-Erian in the FT:
“dealt well with the present, but left out important past and future issues. I suspect that we will look back on this year’s Jackson Hole speech as a missed opportunity for the Fed to regain control over its policy narrative, as well as to outline what is needed to overcome the considerable policy challenge facing the world’s most powerful and systemically important central bank.”
Energy in Europe
The forward-looking energy markets in Europe are beginning to price in a winter shortage. Prices are spiking. Below shows the one-year ahead power price increasing to almost €1,000 per megawatt hour or 720% year to date.
This thread from an analyst at Nesta had an interesting take: “If I were advising the UK Prime Minister, I would tell them to make a televised statement to the nation along the following lines.”
1. We are in an energy crisis. This crisis is having a dreadful effect on everyone’s finances. And it is going to get worse.
and it goes from there…
US Labor Market
First, the tools economists have for measuring what’s going on with labor markets are capturing a decreasing portion of the new reality of how people work. We have macroeconomic data that ask questions appropriate for the 1960s employment market. I dare say that the world has changed a lot since then.
The unemployment rate measures the number of people who are actively seeking a job. That is influenced by two dynamics: the number of job openings and the number of people seeking employment. Within the number of job openings, it misses the ‘quality’ of those job openings. The salary and benefit information. Additionally ‘jobs’ aren’t distinguished between those requiring 3 hours a week versus 50 hours a week.
So, does the employment rate matter? More economists argue that the number of hours worked per employee is at least as important a data point for policymakers as the employment rate because it’s a barometer of who’s entering the workforce and for what wages.
Here are some other interesting points to consider. If you adjust for inflation, weekly wages are going down and are now at pre-Covid levels (graph below). This doesn’t even include benefits information.
Employment numbers are way up, but GDP is down. That has not happened before for two quarters in a row across 70 years of data. It suggests reduced productivity. Productivity in services is hard to measure vs. productivity in manufacturing. It’s easy to measure the number of cars produced in a factory. It’s hard to tell how well kids learn in the classroom and how many healthcare outcomes are being solved. The productivity of service has a lot of quality issues baked in.
Below is the data from the BLS for business labor productivity (output per hour). It tells a similar story via percent change from the previous quarter at an annual rate.
Why might productivity be going down?
Unsustainable workloads are recalibrating.
During the peak phases of the pandemic, many workplaces were functioning on unsustainable skeleton crews. In macroeconomic data, it looks like super-efficiency; if a business previously operated with 12 people, it managed through with the heroic efforts of 9 for a while. It then looks like a 30% decline in productivity compared to prior norms.
Increased pay for a worker doing a job with less economic output.
You could have a professional quit the medical field, and now they are working 33 hours a week as a Lyft driver. As a nurse, they were producing $50 of goods per hour but taking home $20/hr, and as a Lyft driver, they produce $26 of goods per hour and taking home $21/hr. While it is logical for that individual to switch for higher pay (and other considerations), it’s devastating for the economic output.
There are many interesting labor transitions right now that will play out in big ways over the next several years. I’m keen to make sense of those macro trends and follow them down into specific subsectors.
Book Review: TRUST
By Hernan Diaz. Here on Amazon.
Recommendation: Great fiction read. I don’t read much fiction, but when I do it’s usually finance-fiction. Often fiction can be more truthful in its quips. It should, IMHO, be easier to read. I like to read fiction to build momentum for a more difficult read or arduous task. The sense of completion in adding another book to the pile is so sweet.
What is Trust about? Here is a description from the publisher. These people are professionals, so I’m going to quote them:
Even through the roar and effervescence of the 1920s, everyone in New York has heard of Benjamin and Helen Rask. He is a legendary Wall Street tycoon; she is the daughter of eccentric aristocrats. Together, they have risen to the very top of a world of seemingly endless wealth—all as a decade of excess and speculation draws to an end. But at what cost have they acquired their immense fortune? This is the mystery at the center of Bonds, a successful 1937 novel that all of New York seems to have read. Yet there are other versions of this tale of privilege and deceit.
At once an immersive story and a brilliant literary puzzle, TRUST engages the reader in a quest for the truth while confronting the deceptions that often live at the heart of personal relationships, the reality-warping force of capital, and the ease with which power can manipulate facts.
What was great about it? It weaved together a few complex points that only fully came together at the end and were revealed elegantly. Second, it had some beautiful depictions of generalizable thinking.
Below are my favorite quotes with my commentary after.
No enterprise can fully succeed without a true understanding of human behavior.
Human behavior and human needs.
Every financier ought to be a polymath because finance is the thread that runs through every aspect of life. It is indeed the knot where all the disparate strands of human existence come together.
Human behavior and human needs, again. Systems of human incentives. Common theme.
People who had never even seen a ticker before 1924 became financial experts overnight. It never seemed so easy to “get rich.” No one was concerned that this reckless gambling undermined the foundations of our hard-earned prosperity. Trading became America’s favorite indoor sport.
Remind you of any recent period in America? ;)
The closer one is to a source of power, the quieter it gets. Authority and money surround themselves with silence, and one can measure the reach of someone’s influence by the thickness of the hush enveloping them.
Masterful description.
Why work at a place that makes one thing when I could work at a company that makes all the things? Because that’s what money is: all things. Or at least it can become all things. It’s the universal commodity by which we measure all other commodities.
Uttered in a job interview. “All the things.”
My job is about being right. Always. If I’m ever wrong, I must make use of all my means and resources to bend and align reality according to my mistake so that it ceases to be a mistake.
Spoken by the financier patriarch.
A fortune seldom has one single owner. Many interests and parties are tied to it. Rather than a block of granite, wealth resembles a river basin with multiple tributaries and branches.
God is the most uninteresting answer to the most interesting questions.
Journal entry on a deathbed. Still a great line.
I’ve come to think one is truly married only when one is more committed to one’s vows than the person they refer to.
From someone in a not-great marriage.
Weekly Song: Everybody Wants to Rule the World
Music video here. The vintage polos are the best. Different times.
I love Tears for Fears, so choosing the song was tough. Shout is also fantastic. Head Over Heels is an instant classic.
The message behind Everybody Wants to Rule the World makes it a winner for Declarative Statements. It’s simple, but it fits with this weekly. Why can’t we have nice things like world peace? The endless desire humans have for control and power.
"Everybody Wants to Rule the World" by Tears for Fears
It's my own design
It's my own remorse
Help me to decide
Help me make the
Most of freedom and of pleasure
Nothing ever lasts forever
Everybody wants to rule the world
Thanks for reading, friends. Please always be in touch.
As always,
Katelyn