👋🏻 Hello friends,
Greetings from Saratoga Springs!
Take it easy and enjoy this week's leisurely Sunday Drive around the internet.
The vibe of the week is a somber and respectful one, and frankly, not directly related to the rest of this week's Sunday Drive.
On this Memorial Day weekend, through our family cookouts and enjoyment of a long weekend that is the unofficial start of summer, let us keep in mind its reason and purpose - to remember those who fought and died to protect our freedoms. Whatever your political persuasion, let us honor those who paid the ultimate price in defense of our liberties. "All gave some. Some gave all."
Quote of the Week
"No pressure, no diamonds." - Thomas Carlyle
Chart of the Week
Courtesy of the Federal Reserve Bank of Boston, we see one of the results of the post-2009 era of "free money". According to new research from the Boston Fed, the U.S. economy is becoming more concentrated among companies, which in turn are using their power to push up prices.
The economy is 50% more concentrated than it was in 2005.
Economists Falk Brauning, Jose Fillat and Gustavo Joaquim estimate that is “associated with a significant increase in the pass-through of costs into prices.”
Indeed, they reckon the pass-through becomes about 25 percentage points greater when there is an increase in concentration similar to that witnessed this century.
The pickup in prices lasts for about four quarters.
“Our findings suggest that the increase in industry concentration over the past two decades can be amplifying the inflationary pressures from current supply-chain disruptions and a tight labor market.”
What lies ahead, in my opinion, is a period of decentralization and de-consolidation, and the dispersion of the market power that has accumulated over the last couple of decades.
🤓 The software stack is the new firm - Lost in all the talk of digital nomads and side gigs [...] are the masses of independent professionals who are working on their own and making a living, but not necessarily pursuing their creative passions. Not everyone’s talents lay in the creator class. A lawyer, a recruiter, or even a venture capitalist may not recognize themselves in this new creator economy, but since the onset of the pandemic they are “going solo” — performing the work of existing professions without the infrastructure of a firm — at an astounding clip [see next Drive-by]. There’s a pressing need — and an opportunity — to build vertical-specific tools for workers striking out on their own. Much has been written about the proliferation of vertical software tools that help firms run their businesses, but the next generation of great companies will provide integrated, vertical software for individuals going solo.
📈 Entrepreneurship during the COVID-19 Pandemic - According to a recent paper published by the National Bureau of Economic Research (NBER), applications for new businesses from the U.S. Census Bureau’s monthly and weekly Business Formation Statistics (BFS) fell substantially in the early stages of the pandemic but then surged in the second half of 2020 [...] The pace of applications since mid-2020 is the highest on record (earliest data available is 2004). I believe this is a significant driver of the Great Resignation.
💰 108 years ago, Ford doubled employee wages overnight - the business case for higher pay... 108 years ago when faced with his own version of the Great Resignation, Henry Ford made a bold decision that transformed [his] company's retention rate and productivity.
💡 The fourth Industrial Revolution will be people powered - Companies at the forefront of the technology frontier are empowering their workers with digital technologies—and the skills they need to use them.
📉 Shrinking Japan - Population decline in Japan is accelerating. In 2021, the country saw the largest natural decrease ever, based on subtracting births from deaths, and more people left the country than entered it for the first time in nine years. Even Tokyo saw a decline. Japan is on the leading edge of what is becoming a global population dynamic. Our collective policy and investment decisions will need to evolve to face a world population that is in secular decline.
⏰ What are you waiting for? - This is a really neat article written by Jack Raines. It discusses different views on when and in what ways, one should take risks. With a longer time horizon, risks can be better borne and benefitted from. In light of the above Drive-by about global population decline, I believe that if we focus on our own personal longevity, we can more comfortably afford to take more career, business, and investment risk.
What I'm Working On
I've engaged a marketing firm with expertise in the wealth management industry to help kick start the growth of my financial planning and investment management firm, New Lantern Advisors, which I quietly launched a couple of months ago. My expectation is that the second half of 2022 will show a much higher level of visibility for the firm than has been the case with the earlier "soft launch".
One thing they've suggested already is to consolidate the writing work in this newsletter and on MikeAllison.com to reside on the New Lantern website. I'll give you plenty of notice, but in the coming weeks, you'll likely begin receiving the Sunday Drive from Mike@NewLanternAdvisors.com - same content, just coming from a different email address.
I hope you have a relaxing long weekend and a great week ahead. See you next week...
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