Posts Tagged ‘business’
“You get what you measure”*…
Matt Stoller takes the occasion of Trump’s selection of Kevin Warsh to head the Fed (“an orthodox Wall Street GOP pick, though he is married to the billionaire heiress of the Estee Lauder fortune and was named in the Epstein files. He’s perceived not as a Trump loyalist but as an avatar of capital”) to ponder why public satisfaction with the economy is so low (“if you judge solely by consumer sentiment, Trump’s first term was the third best economy Americans experienced since 1960. Trump’s second term is not only worse than his first, it is the worst economic management ever recorded by this indicator”).
Stoller argues that we’re mesuring the wrong things (or, in some cases, the right things in the wrong ways)…
… the models underpinning how policymakers think about the economy just don’t reflect the realities of modern commerce. The fundamental dynamic is that those models were constructed in an era where America was one discrete economy, with Wall Street and the public tied together by the housing finance system. But today, Americans increasingly live in tiered bubbles that have less and less to do with one another. Warsh will essentially be looking at the wrong indicators, pushing buttons that are mislabeled.
While corporate America is experiencing good times, much of the country is experiencing recessionary conditions. Let’s contrast consumer sentiment indicators with statistics showing an economic boom. Last week, the government came out with stats on real gross domestic product increasing at a scorching 4.4% in the third quarter of last year. There’s higher consumer spending, corporate investment, government spending, and a better trade balance. Inflation, according to the Consumer Price Index, is low at 2.6.% over the past year. And while official numbers aren’t out for the final three months of the year, the Atlanta Fed’s GDPNow forecast shows that it estimates growth at 4.2%. And there are other indicators showing prosperity, from low unemployment to high business formation, which was up about 8% last year, as well as record corporate profits…
… Behavioral economists and psychologists have all sorts of reasons to explain that people don’t really understand the economy particularly well. But in general, when the stats and the public mood conflict, I believe the public is usually correct. Often, there are some weird anomalies with the data used by policymakers. In 2023, I noticed that the consumer price index, the typical measure of inflation, didn’t account for borrowing costs, so the Fed hike cycle, which caused increases in credit card, mortgage, auto loan, payday loans, et al, just wasn’t incorporated. The public wasn’t mad at phantom inflation, they were mad at real inflation that the “experts” didn’t see.
I don’t think that’s the only miscalculation…
[Stoller goes on to explain the ways in which “consumer spending” doesn’t tell us much about consumers anymore, about the painful reality of “spending inequality,” and about the obscure(d) problem of monopoly-driven inflation. He concludes…]
… Finally, there’s a more philosophical point, which I don’t think explains the short-term frustrations people feel, but is directionally correct. Do people actually want what the economy is producing? For most of the 20th century, the answer was yes. When Simon Kuznets invented these measurement statistics in 1934, financial value and the value that Americans placed on products and services were similar. A bigger economy meant things like toilets and electricity spreading across rural America, and cars and food and washing machines.
Today? Well, that’s less clear. According to the Bureau of Labor Statistics, the second fastest growing sector of the economy in terms of GDP growth from 2019-2024 was gambling. Philip Pilkington wrote a good essay last summer on the moral assumptions behind our growth statistics. There is no agreed upon notion of what makes up an economically valuable object or activity, so our stats are inherently subtle moral judgments. Classic moral philosophers like Adam Smith believed in the “use value” of an item, meaning how it could be used, whereas neoclassical economists believed in the “exchange value” of an item, making no judgments about use and are just counting up its market price.
Normal people subscribe on a moral level to use value. Most of us see someone spending money on a gambling addiction as doing something worse than providing Christmas presents for kids, but not because of price. However, our GDP models use the market value basis. Kuznets, presumably, was not amoral, he just thought that our laws would ban immoral activities like gambling, and so use value and market value wouldn’t diverge. But they have.
It’s not just things like gambling or pornography or speculation. A lot of previously unmeasured activity has been turned into data and monetized, which isn’t actually increasing real growth but measuring what already existed. Take the change from meeting someone at a party to using a dating app. One is part of GDP, the other isn’t. Both are real, but only one would show a bigger economy.
Beyond that much of our economy is now based on intangibles – the fastest growing sector was software publishing. Is Microsoft moving to a subscription fee model for Office truly some sort of groundbreaking new product? It’s hard to say, while corporate assets used to be hard things like factories, today much of it is intangibles like intellectual property.
A boomcession, where the rich and corporate America experience a boom while working people feel a recession, is a very unhealthy dynamic. It’s certainly possible to create metrics to measure it, and to help policymakers understand real income growth among different subgroups. You could start looking at real income after non-discretionary consumer spending, or find ways of adjusting for price discrimination.
But I think a better approach is to try to knit us into one society again. The kinds of policymakers who could try to create metrics to understand the different experiences of classes, and ameliorate them, don’t have power. Instead, the people in charge still use models which presume one economy and one relatively uniform set of prices, where “consumer spending” means stuff consumers want.
I once noted a speech in 2016 by then-Fed Chair Janet Yellen in which she expressed surprise that powerful rich firms and small weak ones had different borrowing rates, which affected the “monetary transmission channel” the Fed relied on. Sure it was obvious in the real world, but she preferred theory.
Or they don’t use models at all; Kevin Warsh is not an economist, he’s a lawyer and political operative, and is uninterested in academic theory. He cares about corporate profits and capital formation. That probably won’t work out well either.
At any rate, we have to start measuring what matters again. If we don’t, then we’ll continue to be baffled that normal people hate the economy that looks fine on our charts…
The models used by policymakers to understand wages, economic growth, and consumer spending are misleading. That’s why corporate America is having a party, and everyone else is mad. Eminently worth reading in full: “The Boomcession: Why Americans Hate What Looks Like an Economic Boom,” from @matthewstoller.bsky.social (or @mattstoller.skystack.xyz).
* Richard Hamming (and also to the article above, see “Goodhart’s law“)
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As we ponder the pecuniary, we might recall that it was on this date in 1958 that Benelux Economic Union was founded, creating the seed from the European Economic Community, then the European Union grew.
On that same day, Philadelphia doo wop group The Silhouettes started five weeks at the top of the Billboard R&B chart with their first single, “Get A Job.”
“There is no such thing as a dysfunctional organization, because every organization is perfectly aligned to achieve the results it currently gets”*…
… and if we’re not careful, we might not be too pleased with what we get. Sam Altman says the one-person billion-dollar company is coming. Evan Ratliff tells the tale of his attempt to build a completely AI-automated venture…
… If you’ve spent any time consuming any AI news this year—and even if you’ve tried desperately not to—you may have heard that in the industry, 2025 is the “year of the agent.” This year, in other words, is the year when AI systems are evolving from passive chatbots, waiting to field our questions, to active players, out there working on our behalf.
There’s not a well agreed upon definition of AI agents, but generally you can think of them as versions of large language model chatbots that are given autonomy in the world. They are able to take in information, navigate digital space, and take action. There are elementary agents, like customer service assistants that can independently field, triage, and handle inbound calls, or sales bots that can cycle through email lists and spam the good leads. There are programming agents, the foot soldiers of vibe coding. OpenAI and other companies have launched “agentic browsers” that can buy plane tickets and proactively order groceries for you.
In the year of our agent, 2025, the AI hype flywheel has been spinning up ever more grandiose notions of what agents can be and will do. Not just as AI assistants, but as full-fledged AI employees that will work alongside us, or instead of us. “What jobs are going to be made redundant in a world where I am sat here as a CEO with a thousand AI agents?” asked host Steven Bartlett on a recent episode of The Diary of a CEO podcast. (The answer, according to his esteemed panel: nearly all of them). Dario Amodei of Anthropic famously warned in May that AI (and implicitly, AI agents) could wipe out half of all entry-level white-collar jobs in the next one to five years. Heeding that siren call, corporate giants are embracing the AI agent future right now—like Ford’s partnership with an AI sales and service agent named “Jerry,” or Goldman Sachs “hiring” its AI software engineer, “Devin.” OpenAI’s Sam Altman, meanwhile, talks regularly about a possible billion-dollar company with just one human being involved. San Francisco is awash in startup founders with virtual employees, as nearly half of the companies in the spring class of Y Combinator are building their product around AI agents.
Hearing all this, I started to wonder: Was the AI employee age upon us already? And even, could I be the proprietor of Altman’s one-man unicorn? As it happens, I had some experience with agents, having created a bunch of AI agent voice clones of myself for the first season of my podcast, Shell Game.
I also have an entrepreneurial history, having once been the cofounder and CEO of the media and tech startup Atavist, backed by the likes of Andreessen Horowitz, Peter Thiel’s Founders Fund, and Eric Schmidt’s Innovation Endeavors. The eponymous magazine we created is still thriving today. I wasn’t born to be a startup manager, however, and the tech side kind of fizzled out. But I’m told failure is the greatest teacher. So I figured, why not try again? Except this time, I’d take the AI boosters at their word, forgo pesky human hires, and embrace the all-AI employee future…
Eminently worth reading in full: “All of My Employees Are AI Agents, and So Are My Executives,” from @evrat.bsky.social in @wired.com.
Via Caitlin Dewey (@caitlindewey.bsky.social), whose tease/summary puts it plainly:
Ratliff, the undefeated king of tech journalism stunts, is back with another banger: For this piece and the accompanying podcast series, he created a start-up staffed entirely by so-called AI agents. The agents can communicate by email, Slack, text and phone, both with Ratliff and among themselves, and they have free range to complete tasks like writing code and searching the open internet. Despite their capabilities, however, the whole project’s a constant farce. A funny, stupid, telling farce that says quite a lot about the future of work that many technologists envision now…
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As we analyze autonomy, we might we might spare a jaundiced thought for Trofim Denisovich Lysenko; he died on this date in 1976. A Soviet biologist and agronomist, he believed the Mendelian theory of heredity to be wrong, and developed his own, allowing for “soft inheritance”– the heretability of learned behavior. (He believed that in one generation of a hybridized crop, the desired individual could be selected and mated again and continue to produce the same desired product, without worrying about separation/segregation in future breeds–he assumed that after a lifetime of developing (acquiring) the best set of traits to survive, those must be passed down to the next generation.)
In many way Lysenko’s theories recall Lamarck’s “organic evolution” and its concept of “soft evolution” (the passage of learned traits), though Lysenko denied any connection. He followed I. V. Michurin’s fanciful idea that plants could be forced to adapt to any environmental conditions, for example converting summer wheat to winter wheat by storing the seeds in ice. With Stalin’s support for two decades, he actively obstructed the course of Soviet biology, caused the imprisonment and death of many of the country’s eminent biologists who disagreed with him, and imposed conditions that contributed to the disastrous decline of Soviet agriculture and the famines that resulted.
Interestingly, some current research suggests that heritable learning– or a semblance of it– may in fact be happening by virtue of epigenetics… though nothing vaguely resembling Lysenko’s theory.
“Risk comes from not knowing what you’re doing”*…
In a follow-on (in a fashion) to an (R)D earlier this month on financialization and gambling, Liz Hoffman on the striking changes underway in the financial sector…
Wall Street is starting to look a bit like a stage drama where nobody is playing the part that casting assigned.
To build a giant Louisiana data center, Meta raised $29 billion in equity from Blue Owl (a firm known for private credit) and private credit from PIMCO (a firm known for public bonds). Google has piles of cash and a red-hot stock, but is instead bringing its pristine credit rating to the deal table, backstopping crypto miners. The $7 billion that KKR and Apollo are putting into Keurig Dr Pepper is “equity” in the sense that it will help KDP reduce its debt load. But it isn’t coming from their traditional PE funds.
You think companies are built with equity and debt? That’s cute, today’s masters of the universe will chuckle while patting your head.
What used to be called simply “investing” or “lending” has been replaced by “capital solutions” — hybrid equity, kickers, and cash flows tailored to match the returns promised to investors on the other side. Growing pots of money now resemble liquid sand, moldable into whatever shape will fit the money hole in front of it. This shift has been obscured by narratives, overcooked in my view, about a battle between private credit and banks: “There’s one system,” Goldman Sachs President John Waldron told me a few weeks ago, and it’s changing quickly.
Goldman reorganized itself along these lines earlier this year… Apollo, one of the original private-equity firms, is now 80% credit… and firms from Chicago buyout shops to Middle Eastern sovereign wealth funds have launched “capital solutions” arms. Lawyers are jumping in downstream.
Prioritizing what companies actually need over whatever widgets Wall Street happens to sell is good customer service. Personal wealth management got a lot better when firms started asking “how much do you need to retire?” instead of “would you like to buy this structured note?”
And the rise of insurance money in investing has created patient capital that in many cases fits those money holes better than blunter instruments. Much of KKR and Apollo’s Keurig investment will end up in their insurance arms, backed by long-term contracts with the coffee-pod maker, people familiar with the matter said.
But flexible capital will almost certainly overflex, and not everyone with “go-anywhere” money should go anywhere. I suspect that before this cycle is over, we’ll see a few instances that leave everyone asking, “why did they own that?”… Sometimes “capital solutions” just code for investing in distressed companies, which is nothing if not a capital problem in search of a solution, trade publication Private Debt Investor wrote…
“What Wall Street’s obsession with ‘capital solutions’ tells us,” from @semafor.com.
[Image above: source]
* Warren Buffett
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As we go back to basics, we might note that it’s International Accounting Day– a celebration of the field on this date each year that commemorates the publication of Luca Pacioli’s seminal work, Summa de Arithmetica, Geometria, Proportioni et Proportionalita, in 1494, which introduced the double-entry bookkeeping system—a foundational element of modern accounting.
“No one prospers without rendering benefit to others”*…
Revisiting a topic we last considered about six years ago: the modern zipper was invented (or, at least, first patented) in 1913. But, as Michael Knispel explains, story of the zipper-as-we-know-it began in Japan in 1934…
Here’s a test you can do right now. Look down at your jacket. Your jeans. Your bag. Find a zipper—any zipper—and check the pull tab. Three letters. YKK.
Try another. Your backpack. Your hoodie. Your tent, if you’ve got one nearby. YKK.
It’s everywhere. And once you start noticing, you can’t stop. It’s like discovering a secret language written into the fabric of modern life.
Those three letters stand for Yoshida Kōgyō Kabushikigaisha—Yoshida Manufacturing Corporation. And they represent one of the most successful, least-known companies in the world.
YKK produces roughly half of all zippers made globally. Seven billion zippers a year. In some markets—Japan, for instance—their share approaches 90%. If you’ve ever zipped anything, there’s a better-than-even chance it was theirs.
But here’s what fascinates me: they didn’t get there through aggressive expansion or undercutting competitors. They got there by being better. By obsessing over a component most people never think about. By treating the humble zipper not as a commodity, but as a craft.
And after ninety years of that obsession, they’re not resting. They’re constantly evolving—pushing the zipper into territory it’s never been before.
Let me tell you the story…
[And tell it, he does: the company’s remarkable history, turning the to a survey of recent innovations…]
… For most of YKK’s history, innovation meant incremental improvement. Better corrosion resistance. Smoother sliders. More durable coils.
But in the past few years, something’s shifted.
YKK isn’t just refining the zipper anymore. They’re rethinking it entirely.
After ninety years of mastering the fundamentals, they’re finally asking: what else could a zipper be?..
[Knispel recouns recent developments– the “AiryString” (tapeless) zipper, the self-propelled zipper– concluding with “The Revived Collection”…]
… Here’s the most important innovation—and it’s not a single product. It’s a philosophy.
The YKK Revived Collection is a series of repair-focused components designed to keep zippers functional and maximize a product’s lifecycle. The goal is simple but radical: the zipper should never be the reason a product is thrown away.
YKK has developed three main components in the Revived series, each targeting a specific failure mode. Together, they represent a fundamental shift in how YKK thinks about their products—not just as components to be manufactured and sold, but as systems to be maintained and repaired.
Traditional center-front zippers—the kind you find on jackets and hoodies—have a problem. When the slider breaks or the pull tab snaps off, you’re stuck. The standard repair requires cutting off the top stop, that metal or plastic piece that keeps the slider from flying off the end, and replacing the entire slider. It’s destructive, time-consuming, and often requires specialized tools.
The Revived Top Stop changes that. It looks like a standard top stop, but with a zigzag groove pattern cut through it. That channel allows you to orient the slider through the stop and derail it, removing it without cutting anything…
[Knispel explains the ingenious fixes for regular zippers, pocket and accessory zippers, and bag zippers. Then he draws the wisdom they embody…]
… Here’s what ties the Revived Collection together: YKK is building repair infrastructure.
They’re not just selling replacement parts. They’re designing zippers to be repairable from the start, and they’re working with brands, warranty centers, third-party repair shops, and even consumers to make those repairs accessible.
“We’re targeting this for warranty and quality centers, third-party repair centers, potentially in-store retail repairs, and eventually consumer repairs,” says John Holiday, YKK’s Senior Product Development Manager. “We want to make sure the fastener or the zipper is not the reason a product is no longer in use or why it needs to be warrantied.”
That’s a shift. Traditionally, YKK sells zippers to manufacturers in bulk—cut zippers or chain-and-slider assemblies. The Revived components are sold as standalone parts, which means YKK is rethinking its distribution model to make replacement parts available outside traditional manufacturing channels.
I started this piece with a test: look at your zippers. Three letters. YKK.
Now you know why they’re there. Not because of aggressive marketing or locking out competitors. Because a man in 1934 Tokyo decided that if you make something genuinely better—more reliable, more consistent, more thoughtful—success follows naturally.
Ninety years later, YKK still operates on that philosophy. They’re still privately held. Still vertically integrated. Still obsessing over a component most people never think about.
And it looks like they’re not done. They’re constantly evolving…
“The Company That Zips the World | YKK’s Ninety-Year Obsession,” from @carryology.bsky.social.
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As we zip it, we might that on this date– Halloween– in 2005, Gary Estrada, met his goal to visit at Walt Disney World’s Magic Kingdom Haunted Mansion 999 times. Estrada had begun riding in January of that year and finished on Halloween in just ten months. Why 999 times? Because that is how many “happy haunts” are said to live there.
“The real danger is assuming that because you haven’t had a problem yet, you won’t have one soon”*…
Joan Didion once observed that “survivors look back and see omens, messages they missed.” That’s certainly true in investment arena… where stock indices have been hovering near all time highs while everyone awaits the falling of the shoe(s) from Trump’s tariffs and assorted other blows to the economy. Will we look back in the not-too-distant future to signs that it couldn’t, thus wouldn’t, continue?
Omens registered in advance are “early warning signs.” A classic on the economic front is the “cardboard box index“; the output of cardboard boxes is believed to be an indicator of future production of consumer goods, since cardboard containers are so common for packaging and shipping these goods. It’s down.
Mike Schuler, the managing editor of gCaptain weighs in with another…
The U.S. container shipping industry is heading toward what could be one of the most significant volume declines in its six-decade history, according to the latest analysis from shipping expert John McCown.
August data revealed only a slight 0.1% year-over-year increase in inbound container volume at the ten largest U.S. ports, following a temporary reprieve in July when volumes rose 3.2%. Meanwhile, outbound volume in August dropped 2.6%, continuing an erratic pattern that saw a 2.0% increase in July and a 1.7% decrease in June.
The marginal growth in August inbound volumes can be attributed to an exception for goods in transit after the August 7 implementation of revised reciprocal tariffs. “The new tariffs did not apply to containers that were loaded on vessels at their last foreign port of call before August 7 provided they entered the U.S. before October 5,” McCown explains.
This exemption artificially supported August figures, as “the large majority of boxes coming into the U.S. in August being exempt from the tariffs going into effect on August 7.” McCown adds that this mechanism may have even incentivized strategic deployment adjustments where “ships were loaded by August 7 and slow-steamed to the U.S.”
A stark contrast is emerging between U.S. container volumes and global shipping trends. “When U.S. container volume data is compared to global data and data in other major areas, there is a noticeable and widening gap as the downtrends in U.S. lanes are being significantly mitigated by increased volume in other areas,” notes McCown.
Evidence of this divergence can be seen in Far East export figures, which “set a new record and were 6.3% ahead of the same month last year” in July. McCown observes that “world container supply chains have already begun to adapt and reconfigure trading patterns. The U.S. is a less relevant player in world trade today than it was prior to these various tariff initiatives and will become more so as announced plans are implemented.”
The National Retail Federation has revised its projection for 2025, now expecting total inbound volume to decrease by 3.4%. When considering that year-to-date volume through August shows a 3.1% increase, this projection translates to “the remaining four months of 2025 being down 15.7% compared to the same four months in 2024.”
September will likely mark the beginning of more pronounced declines. In a September 17 presentation, the Port of Los Angeles director stated they expected inbound volume to drop 10% compared to the same month last year. Container bookings data supports this outlook, with bookings from China to the U.S. down 26% in the first week of September compared to the same period last year.
The situation could worsen if currently paused reciprocal tariffs on Chinese imports are implemented in mid-November. “If and when those tariffs are implemented, it is highly likely that they would lead to broader declines related to inbound containers to the U.S. from China,” McCown warns.
Adding another layer of complexity is the upcoming USTR ship fee plan targeting ships built in China or operated by Chinese carriers, set to take effect in mid-October. McCown describes this as “moving container volume related to trade lanes involving the U.S. into unchartered waters.” As these lanes account for more than a quarter of global container miles, “there will be a ripple effect that will be felt globally.”
The projected decline represents an unprecedented shift for an industry that has historically grown at rates exceeding U.S. GDP. “For a tangible metric that has consistently for decades grown above U.S GDP, most often at two, three or even more multiples of GDP, the unusual nature of an actual decline in inbound container volume into the U.S. cannot be overemphasized,” McCown states.
While the immediate volume impact is becoming clearer, the inflationary effects of the tariffs will take longer to manifest fully in economic data. McCown notes that “it will not be until at least when the inflation data is released in during the fourth quarter that the inflationary impact of the tariffs can begin to be accurately assessed.”
McCown concludes that the U.S. faces a difficult trade-off: “The more inbound container volume to the U.S. declines, the more commerce and growth will be impacted but the less inflation we will get. The less inbound container volume to the U.S. declines, the more inflation we will get but the less commerce and growth will be impacted. Unfortunately, there is simply no good place to be on that spectrum.”…
For what it’s worth, your correspondent does not share McCown’s confidence that a drop in container volume– in imported goods– will not raise prices. While the goods that don’t arrive won’t be passed along with tariffs baked into their prices, their substitutes, which will, per force, be scare for some time, seem likely to have their prices “bid” up…
“U.S. Container Imports Face Historic Decline as Tariff Effects Take Hold.”
All this said, prediction on the basis of indicators (and omens and signs and early warning signals and the like) is a tricky business. See, for example: “List of dates predicted for apocalyptic events.”
* G. Scott Graham, Early Warning Signals
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As we batten down, we might recall that it was on this date in 2008 that U.S. stock markets, already on edge after the near failure of Wachovia Bank the day before, fell over the edge after the House rejected a bailout plan touted to help ease the ongoing financial crisis. Markets began their decline as soon as it became apparent the bill would fail. The Dow had its worst single day point decline in history, falling 777.68 points… the day that “The Crash of 2008” became real.
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