Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.
But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.
April 29, 2019 Narrative Map – US Equities
DealBook Briefing: Uber Wants to Be the Next Amazon [New York Times]
Below is an extended quote from “Horsepower“, an ET note I wrote in August 2017, about the triumph of driving-as-a-service (Uber) and shopping-as-a-service (Amazon). Because it’s not that Uber wants to be the next Amazon. Uber already is an Amazon. They are everywhere today.
Why is productivity growth so miserable?
The first explanation is that we are measuring productivity all wrong today, that the glories of modern technology have succeeded in improving our quality of life even if they are not directly benefitting our gross national product. Put satellite position-tracking technology together with mobile telephony devices and electronic payment networks and voila! … on-demand driving services like Uber magically appear, making transportation a breeze. We’re not buying more cars, but we’re able to consume more driving. It’s what I’ll call “experiential consumption”, and it’s at the heart of all of these on-demand business models that absolutely dominate the modern economy, from transportation to education to food to retail to entertainment to politics. Yes, politics. Think about how you consume the experience of politics today, how it’s served up to you on a plate in on-demand fashion without requiring you to go out and actually participate in a political activity. If you don’t recognize that this is a conscious business model, no different than how Domino’s serves up pizzas in on-demand fashion, then I don’t know what to tell you.
The second (and related) explanation for productivity loss is that job growth since the depths of 2009 has been robust in low value-added sectors like healthcare services or leisure & hospitality, but meager in high value-added sectors like IT or financial services. By value-added we mean how much revenue or profits a human being, driving whatever “tractors” are common in that sector, can add to the firm’s coffers. A new hire in a software company or a bank, armed with all the leverage-increasing technologies and processes available in those fields, can add north of $300,000 to that company’s revenues. Unfortunately, there are fewer people working in IT today than there were in 2007 (!), and essentially no growth in financial services. On the other hand, a new hire in the leisure & hospitality sector adds only $50,000 or so to the hiring company’s revenues, but there are 20% more employees in that sector today than there were in 2007 (value added data from U.S. Commerce Dept. and job change data from U.S. Labor Dept.). The same phenomenon holds true for small business creation over the past decade, which has been dominated by low value-added gigs and personal services. It’s what I’ll call “experiential production”, and it’s at the heart of all the personal training and personal shopping and personal tutoring and “lifestyle” businesses that have cropped up after the Great Recession like mushrooms after a spring rain.
Over the past eight years we have thrown our money into relatively unproductive activities (experiential consumption), and we have thrown our bodies into relatively unproductive jobs (experiential production).
It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder in 200 BC, where instead of a tractor with a 43 horsepower engine to get the work done, we’ve got “a foreman, a foreman’s wife, ten laborers, one ox driver, one donkey driver, one man in charge of the willow grove, and one swineherd”. Because god forbid we miss out on the experience of being a swineherd. Hey, with modern technology, you can
drive for Uber herd swine whenever you like. Just imagine the personal satisfaction, not to mention all that extra cash, that comes with “being your own boss” as an on-demand swineherd.
It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder because it IS intentional.
There is a very stable political equilibrium to be found in convincing a citizenry to trade, in Biblical terms, their birthright for a mess of pottage, or, in early 20th century terms, their townhouse for a string of pearls, or, in early 21st century terms, their sense of self-worth and self-actualization for the meme of “being your own boss” as an on-demand swineherd. There is a very stable political equilibrium to be found in convincing a citizenry to value experience and identity over stuff.
And yeah, I know this is coming across as all materialistic and crass. I know it’s rank heresy to say that it’s better to buy a tractor than to take your family on “the vacation of a lifetime”, that it’s better to stay an extra hour at work crunching on a project than to “take a little me-time” at the yoga studio. I know that it’s social suicide in red states to say that fighting over gender identity and who can use what bathroom is stupidity incarnate, just as it’s social suicide in blue states to say that diversity isn’t even a top three goal of anything that matters, much less an end-all-and-be-all goal, and by the way you’re bonkers if you think the Russians altered the 2016 election by one iota. These are all intentionally manufactured diversions of the first order, combined with a preening overconfidence generated by the wealth effect of intentionally inflated financial assets, creating a politically stable Western society of division, diversion, and debt. Yeah, that’s my heresy.
The Neighborhood’s Black. The New Home Buyers? White. [New York Times]
Longtime residents who have remained now fear that the area’s sudden reinvention will erase the last remaining signs of its history.
“We don’t want to feel like everything is so bad you’ve got to tear it down,” said Lonnette Williams, 72, who lives in an elegant two-story home built by her godfather’s family in 1922. “We want people to value our neighborhood.”
In the frenzy, a real estate agent once told Rosalind Blair Sanders that she wasn’t using her land to its full potential. She runs a child development center on the edge of downtown.
“Everyone has a price,” she was told.
She is baffled over the math of what the children are worth.
Elders in their elegant homes feeling sad … caregivers baffled by cruel modernity’s impact on the children. Not the children!
Here’s a thought experiment. Reverse the race of everyone in the anecdotes and interviews peppering this story and see how it reads.
And you wonder why Amazon isn’t coming to NYC.
In a trade deal with China, the US may get an empty shell [CNBC]
Oh, please. We’ve got the A team hammering this agreement out.
Biggest market risk is an earnings setback that’ll lead to a correction [CNBC]
Blackstone’s Joseph Zidle is warning investors earnings season could go awry.
With almost half of S&P 500 companies reporting quarterly earnings so far, Zidle believes a lot could still go wrong. He lists an earnings setback as the most legitimate risk that would spark a correction.
Must … build … tiny … hurdles … of … worry.
An “earnings recession” is not a thing. Neither is “cyclically-adjusted GDP”.
They are narrative constructions used by both BAWs like David Rosenberg and the levered-long crew at Blackstone to support their business models.
Meet Matt Calkins: Billionaire, Board Game God And Tech’s Hidden Disruptor [Forbes]
“You are what you did at your last game,” he says. “Don’t tell us who you are. Just sit down and show it.”
Such a fun article. And such a great quote.
In the immortal words of Bill Parcells, “You are what your record says you are.”
True story about one of the ride hailing companies. I had occasion to warm-call one of the ground floor investors of one the two main ride hailing companies. I said, “since I have you…can I ask two questions? Firstly, have the drivers figured out that they’re killing their cars and factored replacement cost into their numbers bc that’s a game changer for the drive”? Response: “No they haven’t, and that’s why it works”. Me: “secondly, if Company “X” wants to get into self-driving cars, you know what that makes them”? Response: “No idea”. Me, “that makes them a fleet management company with all manner of cap-ex, maintenance, and logistic costs. These cost are anathema to such a “virtual/experiential” company”. Talk about “virtual to reality”!
That’s why you need to have the right car if you are going to drive. I have been driving for both of these companies and given over 14,000 rides. I get 65 miles per gallon with my Prius in city driving. My gas cost has been a shade over 3 cents per mile, repairs and maintenance over these 120,000 miles has been about 1 cent per mile although I will need a new set of tires this summer. Depreciation comes to 16 cents per mile which assumes the car is worthless after 200, 000 miles. What really helps is that the IRS allows a 52 cent per mile deduction even though my total out of pocket cost isn’t much more than 20 cents. Thus creating a pretty decent source of tax sheltered income.
Even better than the Parcells quote, and contradicting it just a bit, is John Madden’s ‘Winning is a great deodorant’.
I was a weekend caddie at a poshy mid-Atlantic Golf Club for ultra-wealthy elites, i.e. a swineherd of the first order. The ratio of my swineherd earnings to my real job professional earnings was well less than 1::20 hourly. And yet I lasted ten years until my body objected to 2 bags over hilly terrain under army conditions at age 55. I loved every minute of it - and so guilty as charged! Now about the ‘favored quadrant’ of the pin position…
The Macro Tourist has a good post today about not feeling you have to convince people you’re right. To me it aligns well with “don’t tell me, show me”…
Continue the discussion at the Epsilon Theory Forum