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# S3T Feb 27: Ukraine context, Inflation unmasked, Talent moves, Health costs, Web3, Reinsurance, Trout Lilies...
- URL: https://www.s3t.org/s3t-feb-27/
- Published: 2022-02-27T06:28:00.000Z
- Updated: 2022-02-27T06:27:59.000Z
- Author: Ralph Perrine

*The war in Ukraine intensifies concerns about inflation, recently unmasked but rising for decades, undetected by federal measures. The expanding Web3 landscape welcomes workers and consumer-prenuers with a choice: use crypto to build something better? Or just a new kind of lottery ticket?* 

## Ukraine

[Bitcoin donations are pouring in](https://news.bitcoin.com/bitcoin-donations-pour-in-to-help-ukrainian-military-fight-russia-over-5-million-in-btc-raised/?ref=s3t.org) to support Ukraine's civilian backed military who often lack basics like body armor. Here are latest [highlights of the crypto community's response](https://cointelegraph.com/news/crypto-community-reacts-to-russia-s-war-in-ukraine?ref=s3t.org) to the war. The [Ukranian Red Cross is accepting donations](https://www.redcross.org/about-us/news-and-events/news/2022/ukraine-red-cross-delivers-aid-to-families.html?ref=s3t.org). 

[Why Didn't They Stop It?](https://www.lrb.co.uk/the-paper/v44/n04/tony-wood2/why-didn-t-they-stop-it?ref=s3t.org) is is one of the best historical contexts I've seen explaining what led up to the current tragedy playing out in Ukraine (Given its NATO / Western point of view, perhaps it should have been titled "Why didn't WE stop it"). 

## Finance: Inflation

Inflation [concerns sharpened this week](https://www.nytimes.com/2022/02/22/business/economy/ukraine-russia-inflation-fed.html?ref=s3t.org) over fears that oil and other supply may be disrupted by the war in Europe, and concerns of [wage-price spirals in the US](https://www.nytimes.com/2022/02/17/business/economy/wages-rise-labor-shortage.html?ref=s3t.org). 

### Wage Inflation: Geographic Moves...

The "Great Resignation" of 2021 (and significant moves) suggests people are increasingly sensitive to cost and taxes: 

[Americans Moved to Low-Tax States in 2021The pandemic has accelerated changes in the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.![](https://taxfoundation.org/wp-content/themes/tf-wp-theme/images/favicons/android-chrome-192x192.png)Tax FoundationJared Walczak![](https://files.taxfoundation.org/20220104162219/2021-State-Population-Change-2021-state-migration-trends.-Where-are-Americans-moving-to-low-tax-states.-Which-is-the-fastest-growing-state-What-state-is-losing-population-the-fastest.png)](https://taxfoundation.org/state-population-change-2021/?ref=s3t.org)

As people change jobs they typically negotiate for higher salaries so logically - more job changes = upward pressure on wages. 

### And Sector Moves: The Rise of Consumer-Prenuers

Complicating matters, **traditional corporations are now competing for talent (and the *focus* of that said talent) against Web3 entities** which offer increasingly attractive side hustles, as [Squarespace founder Anthony Casalena notes here](As Squarespace founder Anthony Casalena notes,).

💡

*"The decentralized economy, Squarespace predicts, will be all side hustle, all the time."* \- [Joel Stein, NYT](https://www.nytimes.com/2022/02/13/business/how-did-squarespace-know-podcasts-would-get-this-big.html?ref=s3t.org)

So, you can do something fun, something akin to things you used to do *after work*, but now you can make money doing it. [Google search trends ](https://www.thinkwithgoogle.com/intl/en-apac/consumer-insights/consumer-trends/consumer-trends-shaping-future-today-part-time-preneurs/?ref=s3t.org)show the clear spike in interest. See also [The Rise of Covid-Prenuers](https://www.k2e.com/articles/the-rise-of-covid-preneurs/?ref=s3t.org).

Key point: Web3 is probably a bigger force than most recognize (see Web3 Landscape infographic further below). 

### Flawed Inflation Tracking

The makings of our current inflation situation are not recent: **maybe we've had inflation for some time now, and just weren't tracking it completely:**

- Two measures are used - CPI and PCE - [both explained here](https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx?ref=s3t.org). CPI guides Social Security payments, while PCE guides Fed inflation controls.
- Investopedia has [helpful introduction to the concerns](https://www.investopedia.com/articles/07/consumerpriceindex.asp?ref=s3t.org) about whether or not the current federal methods are able to accurately track inflation.
- A dated but [official position of BLS on CPI](https://www.bls.gov/opub/btn/volume-1/consumer-price-index-data-quality-how-accurate-is-the-us-cpi.htm?ref=s3t.org) seems to be "it's mostly accurate, but it could be inaccurate and well, its complicated."

These standard measures seem to have a bias toward a 20th century economy where everyone just consumed manufactured goods, which were produced at lower and lower costs as factories moved to countries with lower wages. The dramatic rise in productivity masked the true inflation that was occurring. 

💡

If you look at things that are non-manufactured, *and require human attention and expertise* like healthcare, childcare, education - all of these were experiencing dramatic rises in cost well before Covid. 

And, and as this thoughtful piece points out, federal inflation measures [do not track the cost of funding your retirement](https://medium.com/alpha-beta-blog/cpi-is-a-highly-flawed-measure-of-inflation-71769e54898b?ref=s3t.org).

## Healthcare and Inflation 

A central chart in [PWCs healthcare cost trend analysis for 2022](https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html?ref=s3t.org) shows healthcare costs *rate of increase* is slowing as health companies lean into digital. But inflation fundamentals are still concerning: 

- Healthcare costs (as paid by consumers) [have outpaced the CPI inflation measure](https://www.pgpf.org/blog/2022/02/why-are-americans-paying-more-for-healthcare?ref=s3t.org) (lot of great charts here, scroll down halfway thru to chart titled "*Prices for medical care typically grow faster than inflation*").
- Pharmaceutical industry profits [continue to be an outlier compared to other industries](https://www.bmj.com/content/376/bmj-2021-067367?ref=s3t.org). As shown below, between 2004-2019 drug spending grew 69%:

> Per capita spending on prescription medicine in the U.S. grew by 69% from 2004 to 2019, compared to 41% on average in comparable countries.  
>  
> From our chart collection on the KFF-[@PetersonCHealth](https://twitter.com/PetersonCHealth?ref%5Fsrc=twsrc%5Etfw&ref=s3t.org) Health System Tracker: [https://t.co/1hu5goRDTJ](https://t.co/1hu5goRDTJ?ref=s3t.org) [pic.twitter.com/Rtr2gW6GT4](https://t.co/Rtr2gW6GT4?ref=s3t.org)
> 
> — KFF (Kaiser Family Foundation) (@KFF) [February 20, 2022](https://twitter.com/KFF/status/1495402364823560196?ref%5Fsrc=twsrc%5Etfw&ref=s3t.org)

- Today [50% of US households carry medical debt](https://www.forbes.com/sites/debgordon/2021/10/13/50-of-americans-now-carry-medical-debt-a-new-chronic-condition-for-millions?ref=s3t.org), up from [19% in 2017 per Census records](https://www.census.gov/library/stories/2021/04/who-had-medical-debt-in-united-states.html?ref=s3t.org).
- Cost of not knowing what to treat: Which condition consumes the most healthcare dollars? Per KFF's excellent [Health System Tracker dashboard](https://www.healthsystemtracker.org/indicator/spending/spending-disease-treatment/?ref=s3t.org), the **largest allocation of disease treatment spend (14%) goes to "ill-defined conditions".**

> Spending on disease treatment [https://t.co/5GZCJzi58h](https://t.co/5GZCJzi58h?ref=s3t.org)
> 
> — Ralph Perrine (@RalphPerrine) [February 20, 2022](https://twitter.com/RalphPerrine/status/1495423945046216708?ref%5Fsrc=twsrc%5Etfw&ref=s3t.org)

The inflation concerns highlight the unsustainable approach of the US healthcare's default toward protecting corporate profits by transferring risk and cost to consumers - a bit like trying to keep a leaking blimp airborne by stealing kid's balloons: 

- Using moral hazard logic to justify one-sided benefits for companies at the cost of consumers.
- Allowing unclear pricing to drive avoidance of healthcare, which then requires more expensive healthcare interventions later.
- Tracking costs on a purely annual basis, without looking at the spillover effects into follow on years and accepting a distorted understanding about how well we are actually managing healthcare costs.

Sadly, so much of what ails healthcare stems from conventional wisdom handed down over the past several decades, accepted without question. The intensifying inflation concerns offer us a chance to finally get serious about rethinking what is possible for US healthcare. **"All the costs, half the care"** is the sad summary of US healthcare in comparison to other developed nations. It doesn't have to be this way. 

## Growing Web3 Landscape

[Excellent infographic](https://twitter.com/sblikstad/status/1497221443200892936/photo/1?ref=s3t.org) showing 250+ Web3 projects and companies organized by business sector. Blikstad notes that this is not complete and may continue to expand. The selection currently seems more focused on consumer entertainment products and services than financial services. 

> The Web3 landscape.   
>  
> We are on the cusp of another paradigm shift, enabled by open data, cryptographic keys, and digital assets. [pic.twitter.com/ZvX7fgadCQ](https://t.co/ZvX7fgadCQ?ref=s3t.org)
> 
> — Sofia Blikstad (@sblikstad) [February 25, 2022](https://twitter.com/sblikstad/status/1497221443200892936?ref%5Fsrc=twsrc%5Etfw&ref=s3t.org)

As I studied this chart I was struck by the the sheer diversity of different approaches being tested. Within each category multiple contestants vie to become the #1, 2, 3 players of the next era. 

It is fascinating - to me - to study the individual candidate projects and gauge their fitness and likelihood of future success. So much to learn here. 

### Tools or Lottery Tickets?

One thing that becomes really clear when scrutinizing these emerging players...there seems to be a very clear choice emerging: 

- Building a better set of foundational tools for better human outcomes?
- Building more interesting casinos or lottery tickets?

I'm sure some initiatives might qualify as both. But in the first, there is an optimistic sense that we can learn from current systems and mistakes and lay the groundwork for a better future. In the 2nd there is almost a fatalistic notion of - everything is chaos - so just give me more efficient ways to roll the dice and see what happens. 

It really comes down to an important choice: **do you choose to see crypto as a way to build something better? or just a new kind of lottery ticket?** 

![](https://storage.ghost.io/c/c7/1e/c71eed42-6fd8-496e-9a70-8c65b93c91e7/content/images/2022/02/IMG_0212.jpeg)

Trout Lily, Durham NC

## Nature Notes

### Spring Wildflowers Starting to Show Up

This week I found the first (for me anyway) Trout Lilies of the year, starting to bloom here and there forest areas near streams (see Photo above). They are typically seen in March here in NC. Learn [more about Trout Lilies](https://www.wildflower.org/plants/result.php?id%5Fplant=eram5&ref=s3t.org) at Wildflower.org. 

### Climate Change - Banks catching up to Reinsurance

The finance world is tuning into climate change, amid growing awareness that [central banks need to be better prepared](https://www.brookings.edu/blog/planetpolicy/2021/11/17/climate-change-will-pose-a-huge-disruption-are-the-worlds-banks-ready/?ref=s3t.org) to address the issue. Projections suggest that climate stress could [pose significant financial threats](https://capitalmonitor.ai/institution/banks/banks-and-regulators-face-off-over-climate-stress-tests/?ref=s3t.org) including "**a 20% increase in loan book losses and a 30% rise in probability of default on credit portfolios."** 

The reinsurance industry has been preparing for climate change for decades now, long before it reached public awareness. Reinsurance and insurance preparations are sometimes impacted by governments eager to dismiss climate risk assessments that are inconvenient - as illustrated by the infamous story of the NC legislature outlawing an NC [state agency forecast describing NC coastline risks](https://www.vox.com/22686124/climate-change-insurance-flood-wildfire-hurricane-risk?ref=s3t.org). 

[Mitigating climate risk | Swiss ReSwiss Re identified the threat of climate change as far back as 1979 and has been analysing its effects on society and the insurance industry ever since.![](https://www.swissre.com/.resources/swissre-web/webresources/img/graphics/favicon-194x194.png)Swiss Re Group![](https://www.swissre.com/dam/jcr:cd6a6fc9-622e-4dea-b740-0fe9423eb7cb/fire-wildfire-red-orange-sky-city-overview-skyscrapers-climate-change.jpg)](https://www.swissre.com/risk-knowledge/mitigating-climate-risk.html?ref=s3t.org)

**Some elements of DeFi have begun interesting forays into risk transfer and insurance-like ideas** that have a lot of potential application to reinsurance and financial planning. The governance approaches offered by these blockchain based architectures could ensure that public goods are not threatened by private agendas, and go a long way toward preventing the kind of political gridlock and corporate protectionism that blocks timely effective action. I would love to see more coverage of these in the Web3 landscape mentioned above. 

### Nature's Best DJ? 

A pair of Song Sparrows have been busy and more visible than usual in our yard, and I wonder if they are making preparations to raise a family here this spring. Here's a fascinating read on the song variability of Song Sparrows and [why Song Sparrows might be Nature's best DJ](https://www.npr.org/2022/02/02/1076963953/song-sparrow-dj-animal-research?utm%5Fsource=pocket-newtab). 

### Final Note 

Thank you again for reading, and forwarding to friends. Continue the discussion on the [S3T Discord](https://discord.gg/DmFwTtss?ref=s3t.org) or [Twitter](https://twitter.com/RalphPerrine?ref=s3t.org). Stay safe and here's hoping for a better week ahead. 

Ralph

*Opinions mine. Not financial advice. I may hold assets discussed.*