Monday, July 31, 2023

Shopify makes visible the hidden cost of meetings

From the High Lantern Group:
When the Shopify COO grew tired of pointless, time-draining meetings, he launched a calculator embedded in everyone’s calendars. It displays the “cost” of every meeting with three or more people...A typical 30 minute endeavor with three employees can run from $700 up to $1,600. Adding an executive — like Chief Operating Officer Kaz Nejatian, who built the program during a company-wide hack day — can shoot the cost above $2,000…
“No one at Shopify would expense a $500 dinner,” Nejatian said in an interview. “But lots and lots of people spend way more than that in meetings without ever making a decision. The goal of this thing is to show you that time is money. If you have to spend it, you think about it.”

Risk premium for stocks near all time low

WSJ reports:  
The gap between the earnings yield of the S&P 500 and the yield on the 10-year U.S. government bond dropped to around 1.1 percentage point last week, its narrowest since 2002.
And here is the reason:
Bond yields haven’t risen as much, but stocks have taken flight—lifted by investors’ growing optimism about the economy.

In other words, investors are investing as if stocks are only slightly more risky than bonds.  If they change their minds, and think that stocks are more risky than bonds, stock prices will fall which will raise the expected return of investing in stocks or bond prices will rise which will decrease the bond yield, and bring the equity risk premium back up, closer to its mean.

This isn't the first time that the equity risk premium has fallen, See earlier posts to see past instances of this, like in 2008, when Vandy Treasurer Bill Spitz's advised:

  • Avoid Riskier assets 
  • Stick with quality 
  • Be skeptical of the rush to alternatives 
  • Moderate return expectations 
  • Borrow now if you are a marginal credit
But unlike 2008, the Shiller CAPE (cyclically adjusted price to earnings ratio, a measure of value) is not as high, though twice its long run mean of 16.  
DISCLAIMER:  if I really knew what was going to happen, I wouldn't be teaching school.

Sunday, July 30, 2023

Strategist Jim Bradford, RIP

Anyone attending a faculty meeting at a business school would be struck by the irony that those who teach management do it so poorly.  But Dean Jim Bradford (obituary) was different.  Not only had he successfully managed two public companies, and overseen several others as a board member, but he knew how to develop a successful strategy.

When Jim was appointed Dean, he did what he always did when he took over an organization, "first thing you do is grab the checkbook."  Then he combed through the accounting data.  What he saw was an organization with huge fixed costs and declining demand for its flagship product.  But he also noticed that other programs, like the Executive MBA, had small incremental costs.  So he bought better faculty to strengthen the brand, and then expanded the school's portfolio of degrees (Masters of Accountancy, Masters in Finance, Masters of Management in Healthcare) to take advantage of the Vanderbilt brand.  The results have been impressive: as the school moved up in the rankings, revenue and giving have increased faster than costs.

Thank you Jim, and rest in peace.  

Saturday, July 29, 2023

Nurses wages falling

DEMAND INCREASED DURING PANDEMIC:  Nurses willing to pack up and travel to a new hot spot every few months earned as much as $10,000 a week at the height of the pandemic to fill in a shortage of medical staff. The economics of nursing was further thrown out of whack by federal subsidies, which allowed hospitals to pay distorted wages, briefly creating a new class of highly paid nurses. ...
PANDEMIC ENDED AND PRICE FELL:  Brian Tanquilut, an analyst at Jefferies, sees weekly pay for temporary nurses dropping about 15% more to the low $3,000’s a week, helping to improve the bottom line at hospital groups. While a far cry from the peak, it won’t go back to how it used to be either because of what Tanquilut and other industry watchers see as a structural shift in the market.
BUT LONG RUN SUPPLY OF TRAVEL NURSES MAY INCREASE:  Some travel nurses have discovered they like the flexibility and better wages that come along with traveling. Cross Country CEO John Martins said in a recent conference that the work-from-home culture means nurses can more easily bring their remote-working spouses along with them. He estimated the market will grow from 40,000 travel nurses in 2018 to 80,000 in 2023.

PollEverywhere Ch2: the "Optimism Gap"

QUESTION: on a scale of 1 (disagree) to 7 (agree), rate your reaction to this statement, "Although things are getting better for me, for society they are getting worse."


Tuesday, July 25, 2023

Can we improve education in Nashville?

Although test scores are up, only one in four Nashville Public School third-graders is reading at or above grade level. 
Randomized controlled trials tell us that charter schools, school choice, and teacher incentives improve student outcomes (links). 
I think that Alice Rolli is the only one who has a chance of making these kinds of improvements. 

Friday, July 21, 2023

Why are DEI exec's being laid off?

Demand has Fallen:
Diversity, equity and inclusion—or DEI—jobs were put in the crosshairs after many companies started re-examining their executive ranks during the tech sector’s shake out last fall. Some chief diversity officers say their work is facing additional scrutiny since the Supreme Court struck down affirmative action in college admissions and companies brace for potential legal challenges. DEI work has also become a political target.
The number of CDO searches is down 75% in the past year, says Jason Hanold, chief executive of Hanold Associates Executive Search, which works with Fortune 100 companies to recruit HR and DEI executives, among other roles. Demand is the lowest he has seen in his 30 years of recruiting.

Tuesday, July 18, 2023

Old people will reshape the world

Good graphics [GO TO THE PAGE!] from the NYTimes shows that the EU and China will have a bunch of old people, but not enough working age adults to support them.   
  • By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital.
  • Africa is where all the working age adults are, but ... "If large numbers of young adults don’t have access to jobs or education, widespread youth unemployment can even threaten stability as frustrated young people turn to criminal or armed groups for better opportunities."
  • Slightly higher fertility rates and more immigration mean the United States and Australia, for example, will be younger than most other rich countries in 2050

things many wealthier countries take for granted — like pensions, retirement ages and strict immigration policies — will need overhauls to be sustainable.

Monday, July 17, 2023

Americans have grown richer since 2008, but Europeans are becoming Poorer

...An aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth. ...

Where are housing prices headed?



Inventory is pushing up prices, and affordability (the change in monthly payments) is pushing down prices. And it appears this battle will continue … there is no relief in sight for inventory or for mortgage rates.
First, we can be very confident - barring another crisis - that we will not see a large wave of distressed sales and cascading declines in nominal house prices. Lending has been reasonably solid over the last decade, and most homeowners have substantial equity in their homes.
From Chapter 8: In the short run supply of houses ("inventory") is low, but so is demand (due to high interest rates) so we don't know which way price will go. 

From Chatpers 9, 11: Over the longer run, home owners have enough equity in their houses that they will be able to refinance without selling so supply is not going to flood the market as it did in 2009 when a big housing bubble popped. 

And over the longer run

When the baby-boom generation starts moving to retirement homes or warmer climates, inventory will likely increase. But that is mostly a 2030s story, see 

Are the Left and the Right converging on Economics?

The left-leaning Economist thinks so:

Both sides agree that the old order that prized expertise, free markets and free trade—“neoliberalism”, usually invoked as a pejorative—was a rotten deal for America. Corporations were too immoral; elites too feckless; globalisation too costly; inequality too unchecked; the invisible hand too prone to error.
  • ... Both find competition with China to be a justification for industrial policy; 
  • but the new right does not find the threat of climate change to be nearly so moving. 
  • [No desire] reform [Social Security and Medicare] before the trust funds [run out]

Saturday, July 15, 2023

Why parents of daughters are more likely to divorce than those with sons

From the Economist:
Anyone who has—or has been—a teenager knows how turbulent those years can be. Surveys confirm that teenage daughters and fathers, in particular, get on each other’s nerves. They also show that parents of teenage daughters argue more about parenting than do the parents of sons, and that mothers of teenage daughters report significantly more disagreements with their partners over money, and become more open to the idea of divorce. Earlier research has also shown that one of the most common things parents fight over is how much they should control their teenagers’ personal choices, such as how they dress, whom they date and where they work.
In light of all this, it is intriguing to note that Dr Kabatek and Dr Ribar found one type of couple who seem immune to the daughter effect: those in which the father grew up with a sister. Having seen things somewhat from a sister’s point of view may act as a sort of social inoculation. 

Monday, July 10, 2023

Judge halts NYC minimum wage law for gig drivers

CPI reports:
“Our delivery workers have consistently delivered for us — now, we are delivering for them,” New York City Mayor Eric Adams said when announcing the law. “This new minimum pay rate, up by almost $13/hour, will guarantee these workers and their families can earn a living, access greater economic stability, and help keep our city’s legendary restaurant industry thriving.”
On the day of the announcement, DoorDash responded with a blog post in which it said the policy will have unintended consequences and will undermine the workers it aims to support.