On this Labor Day weekend, economic and political cycles seem so unpredictable. But labor movements, water basins, even cicadas all remind us that cycles play out predictably in at least one sense: the loudest part comes near the end.
📈 📉 Macro / Headlines / Trends
Labor Day History
Labor Day was established by Congress as a good will gesture to American laborers June 28, 1894 in the wake of a deadly railroad strike, capping off years of worker exploitation: the average laborer worked 12 hours a day, 7 days a week, including children as young as 5 years old, in extremely unsafe working conditions. Prior to the act of Congress, workers were finding ways to organize, and a number of states (starting with Oregon) and labor organizations began the practice of a "holiday for the laboring classes." The months of unrest in 1894 leading up to the railroad strike, marked the end or at least the beginning of the end of the assumption that workers didn't matter. Today, much work remains to ensure a safe and equitable work opportunities and wages as noted later in this newsletter (see Most Troubling paragraph below) and as analyzed in detail in Thomas Piketty's Capital in the 21st Century.
Putting context around the Friday Jobs Report
Friday's jobs report showed continued job growth, slowing wage growth and slight rise in unemployment, which some interpreted as hopeful signs that Fed policy is starting to tame inflation.
This comes amid signs that stocks are overvalued per the "Buffet Indicator" (link below)...
...and signs the labor market is contracting, as detailed in the thread below - which is worrisome if you consider this contraction would be happening after the pandemic removed a very large number of people from the workforce (and sadly the population).
Most troubling, the participation rate of Black Americans in the labor force has dropped for 3 straight months. Concerns about this relate to research and policy proposals noting that Black Americans can be disproportionately impacted because Black unemployment is typically double that of white workers.
The day before the Friday jobs report, Fortune noted the Fed's worrisome use of the ambiguous phrase "growth recession" and the continuation of the Jackson Hole theme of painful impacts for average Americans. My 2c: Economic management should not be done without sensitivity to those who are disproportionately impacted.
This issue and the economic picture in general is one of a mix of factors making it hard to forecast the mid-term elections. Another factor: The number of women registering to vote is sharply up (some think due to the Roe overturn).
Fashion and the Metaverse
New York's Fall Fashion Week kicks off this coming week as large fashion brands are starting to figure out their strategies for thriving in the metaverse.
Project Practical has notes on the Top 10 Fashion currently involved in metaverse projects.
This year's spring fashion week featured a first metaverse fashion focus with top brands rolling out NFT based digital clothing items that could be "worn" or attached to in game / in world characters or locations.
Digital not Physical is the new Tangible?
On one psychological level it feels funny to pay for digital "non-existent" clothing items that simply appear with other non-physical items on screens or in goggles. The part of me saying this is just silly is on the same wavelength as the generations of parents telling their kids "Quit wastin yer time with video games, stuff's not real!"
But why are digital spaces and possesions starting to feel real to some?
Maybe we are starting to understand the odd permanence of digital: for example, some my digital app subscriptions are now more than 10 years old. I can use them to immediately find digital versions of photos, documents, notes, family records that are from completely different periods of my life.
So much in my physical life has changed during that span of time:
- what I wear,
- what I eat,
- what I buy for my kids,
- where I live,
- what I do...
...all of this has changed so much.
My digital "stuff" is starting to feel like the more stable, more permanent part of my life.
If that is our new mental normal, then I can start to see how people might pay significant sums for something that enriches or aids that digital part of their life. Over time it may come to feel like the more permanent, more valuable, more convenient, less messy part of our lives.
That said, don't fall into the trap of thinking that the companies talking the loudest about the metaverse are the ones who are going to win in the space. The subreddits as well as the gamers in my near and extended family are unanimous that Rockstar Games has - without blockchains or NFTs - set the standard for the experience level and realism required for a truly compelling metaverse. These younger perspectives dismiss the metaverse as a "scam with bad graphics" and do not seem as likely to buy into the arguments about the virtues of decentralization.
🔎 Closer Examination: Economics and Climate Innovation
Why do Americans keep moving to hot dry states in the south and west, leaving water rich towns and regions that are less exposed to droughts, heat waves or wildfires? Look at general perceptions and priorities says Bryan Walsh in this in depth piece on persistent US migration to drought stricken regions:
- Americans are attracted to the promise of cheap housing and sunshine.
- American awareness is shaped by the reporting themes of the popular media, where climate and other less sensational topics get little coverage.
Water and climate economics are not straightforward. As this federal drought vulnerability index shows, you might be surprised by the ranking of your state, because these rankings are based on multiple factors: what preparations your state may have already been forced to make, and what regional acquifers lie underground.
But the longer trend of dwindling water supplies in the West is an old issue that inevitably seems to be coming to the end of a long predicted path - barring meaningful intervention and innovation - as noted in The Promise of the Grand Canyon, John Ross's excellent book about the life and work of John Wesley Powell.
In the period between 1889-1893 Powell used the above map of US Geological Survey data to try to explain to Congress how the water basins of the West should guide plans for land use, irrigation and population growth.
For Senator William Stewart and a handful of powerful "Manifest Destiny" stakeholders, Powell's data was so politically inconvenient they used budget cuts to cripple Powell's Geological Survey work, and set the US on a course of encouraging and growing dense populations in regions with insufficient water supplies.
Opportunities for Water Innovation
So, if budget conscious Americans continue moving to an increasingly hotter, dryer sunbelt, what kinds of opportunities does this create for investors and builders?
- Undervaluation of property in East/Northeastern and Great Lakes regions. Some US citizens may reconsider northern regions as heat and extreme weather take their toll. But bigger moves may come from other parts of the world. As many as a billion people displaced by increasingly unsurvivable heat in the earth's equator band - Latin America, Sub-Saharan Africa Southeat Asia - will begin looking for more hospitable places to live and farm between now and 2050. For families that can come to the US, the Great Lakes region, the Northeast and perhaps the Mid Atlantic East may offer the most attractive locations.
- Water Innovation is a growing investment focus under the larger climate-tech theme. When you lack sufficient water supplies you can import water from other places, manage the water you have more intelligently, or increase your ability to purify and recycle water. Here are a few selected startup examples.
The Need for More Focus and Capital
As these venture metrics show, capital for water innovation so far has largely come from non-profit and government sources, so a special thank you to Ycombinator and Techstars for their leadership in directing funds and energy to this important need.
If you are a founder or investor seeking to understand the water innovation opportunity space, the EPA has developed this comprehensive index to the required innovation and preparation for US water utilities.
As noted earlier, meaningful intervention and innovation are urgently needed to prevent a bitter end to the dreams and security of the populations in the hottest driest parts of the United States, and the hottest most humid parts of the globe.
🍱 Sensible Ideas
I am blessed to be part of a family that knows their way around the kitchen and the campfire. So each week I share what I call "sensible ideas" for good times and good food!
Italian Hot Sauce
We think of hot sauce as a Mexican or a Southern thing - Chalula, Tapatio, Tabasco, Texas Pete - but Casa Firelli is proving hot sauce is an Italian thing too. Firelli hot sauce is made from spicy Calabrian peppers in Parma, Italy (origin story here). Firelli's sweet roasted red pepper flavor and balanced heat (See detailed flavor analysis here) have made it a favorite for our family pasta nights. For example, this week we drizzled Firelli on top of a white sauce pasta with zuchinni and italian sausage.
🌄 Nature Notes
Bugs as Brand Ambassadors?
No, fast food chains are not using bugs to advertise and no, this is not a trademark violation. This is an un-enhanced photo of a Swamp Cicada (one of the more than 3000 species world wide). Swamp Cicadas often have a discernible yellowish golden-arches-kind-of marking on their backs. This one happens to be a lot more pronounced than usual. The individual pictured showed up in our backyard last week. It will live about a month (a very loud and noisy month) as a flying, above ground (did I mention loud and noisy) insect. It spent the last 17 years living silently underground, feeding on grass and tree roots. Which means it began life in 2005, the year MacDonalds turned 50 and introduced salads, WiFi and Happy Meals for adults.
Cicadas have a bigger fanbase than I realized (see Cicadamania.com) and the Fun Facts link below (You can eat them - they taste like asparagus!) The Navy studied cicadas to understand how they create such powerful sound levels (up to 90 decibels) with so little energy, in hopes of finding methods to enable low power active sonar devices. Ah the noisy treasures of summer.
💬 Final Note
Hope you are having a Happy Labor Day weekend! Thank you again for reading and sharing S3T, and best wishes for a successful week.
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Opinions mine. Not financial advice. I may hold assets discussed.
Thanks to CopyPasteCharacter.com for the cool emoticons!