The Weekly: Edition #94 - April 23rd, 2021
Narratives & Data
“All stories have a curious and even dangerous power. They are manifestations of truth — yours and mine. And truth is all at once the most wonderful yet terrifying thing in the world, which makes it nearly impossible to handle. It is such a great responsibility that it’s best not to tell a story at all unless you know you can do it right. You must be very careful, or without knowing it you can change the world.” ― Vera Nazarian, Dreams of the Compass Rose
Humans have a unique ability to take data and create a narrative to explain a trend. Often times, the narratives - especially in the age of the 24/7 news cycle - are depicted as imminent in nature and happening instantaneously. But reality tends to unfold much slower and trends take time to build and manifest.
Take for example, the WSJ piece on the positive revolution and improvements in US airline safety. We've all seen the headlines surrounding the Boeing 737 accidents and subsequent grounding. The narrative around the safety of Boeing's 737 problems led to intense fears around flying, but the fundamental data points to a much more nuanced story. Indeed, between 2017 and 2019, the global fleet of 737s flew over 500,000 flights with 2 crashes - though the crashes were caused by Boeing 737 errors and deserved a thorough investigation.
Department stores have been 'dead' since 2002 - but have they? The data shows a much slower decline and suggests that their death has been slow and painful, punctuated with headlines that declare their death imminent. There is no doubt that brick and mortar retail is on the way out, or at least will need to fundamentally change their business model in order to survive. But the fact that GameStop is resisting corporate death is proof that narratives don't always play out as fast as predicted.
The death of the office is all the rage today. But as more people get vaccinations and feel safe to interact in close quarters, will social gravity overtake this narrative? Sure, the cat is out of the bag where remote work is concerned. But humans are social creatures at their core and some form of meeting space will be needed for many businesses that are currently operating remotely. The data suggests that occupancy numbers in major metros will take time to equilibrate around the new normal of hybrid work patterns, but it's odd that 2 months into the pandemic, the death of the office was such a ubiquitous narrative.
Perhaps the best schism between reality and narratives occurs in the public equities market. Stock prices reflect prevailing narratives which sometimes diverge wildly from fundamental data. Expectations are always weighed heavily in daily pricing, but the fundamental data weighs heavier over the long-term.
The hard part about parsing through narratives that reflect a different picture than the data is that often, narratives accelerate changes in the human behavior that generates the ground level data. For example, at the onset of the pandemic, most people were just trying to manage day to day because the headline narratives were nothing short of doomsday in nature. The unemployment data was almost as quick to respond. Who is to say how much the doomsday narrative influenced people to preemptively cancel travel plans, avoid public spaces, and cut back on business expenditures? Did the narrative influence behavior that became self-fulfilling in nature? Or was the human response inevitable? Probably a mixture of both.
Data is what matters. But the narrative influences data. And data influences the narrative. It pays to understand both, and how they interact in your business and industry. In determining where truth lies between ground level data and the prevailing narrative, it's good to keep a few points in mind:
1) Is the narrative predictive in nature (and hence may fall prey to recency bias)? E.g. Death of the office.
2) Is the narrative reactive in nature (and based on emotion rather than data)? E.g. a stock price halving over a bad quarter.
3) How great is the chance that the narrative will influence human behavior and accelerate the convergence of ground level data with the prevailing narrative? E.g. Pandemic-centric headlines.
The airline safety revolution (Wall Street Journal)
+ "No commercial airline in the U.S. has had a fatal crash since 2009. Here’s the story of the industry insiders who came together to build new systems and to allay the worst fears of air travelers."
Jeff Bezos' final letter to shareholders (Amazon)
+ "If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out."
Oil and gas landmen are going through a dramatic career change (The Hustle)
+ "Traditionally, landmen track down landowners whose properties sit on oil-rich land and offer them payments for drilling rights. As recently as 2018, rights were going for $17k per acre — and landmen were rewarded with 6-figure paychecks for their work. But a swift shift toward renewables — and a pandemic — dropped the price of shale acreage by 70%+."
100k Club: Digital news subscriptions top 23m (Press Gazette)
+ "English-language publishers now boast more than 23m digital news subscriptions between them, according to Press Gazette’s latest 100k Club ranking."
Advance retail sales in department stores (St. Louis Federal Reserve Data)
+ FRED is a treasure trove of real-time data for many industries. This chart depicts the slow decline of department store sales over the past two decades.
Home is where the meal is: pandemic patterns persist (Deloitte)
+ "Many survey respondents say they expect to buy fresh food and cook more frequently than they did before the pandemic. This pattern of behavior suggests a home consumption holdover from pandemic habits. A mere 7% of U.S. survey respondents say they will cook less after the pandemic than they did before, compared with almost half who say they will cook more. Meanwhile, one in three say they will dine out less than before. Restaurants will likely benefit from an ongoing interest in takeout and delivery, however—40% of consumers say they will do this more than they have in the past."
The return of transportation has begun (Javier Blas)
+ "For the first time since the pandemic started, Americans are driving more than they did in 2019 on interstate highways. Data from the US DOT says all vehicle miles driven on interstate highways were up 1% on the week ending April 11 vs same 2019 week."
3 rules for building a more caring culture — this chief people officer shares lessons from Lambda School & InVision (First Round Review)
+ "“Every single company that I walk into, if I'm in charge of the people function, there are a few fundamentals that are really important to me: creating a great employee experience, enabling a workforce that feels seen and heard, and making an environment where people feel developed,” says Frein."
As restaurants try to return to normal, they can’t find staff (Edible Monterey Bay)
+ "In his recent piece “As Diners Return, Restaurants Face a New Hurdle: Finding Workers,” the New York Times’ Brett Anderson describes labor shortages from Miami to Manhattan, citing a number of reasons. They include a big wave of rehiring as restaurants reopen; potential candidates opting for unemployment benefits over long shifts; migrations away from restaurant-heavy urban centers and away from the industry in general; and fear of risks associated from exposure to strangers at restaurants (particularly indoors). Wood echoes some of that. “If you left when your restaurant closed to go work construction, you’ve been busy as hell,” he says. “You get to work outdoors, and you’re not going to take $10 less an hour to work behind a hot dishwasher.”"
The corporate tax burden: facts and fiction (Aswath Damodaran)
+ "While that system worked well for most of the twentieth century, it started to break down towards the end of that century, as the US became a less dominant player in the global economy, and other countries lowered their corporate tax rates. The first development meant that larger proportions of US corporate income was generated overseas, and the second increased the differential tax rates and thus the repatriation penalty. By 2014, when I wrote this post, the US tax code had become dysfunctional, as the trapped cash cumulated to trillions of dollars and some US companies sought to move their incorporation to other countries. This history is worth emphasizing, because the change in the US corporate tax rate in 2021, from 35% to 21%, accompanied by the abandonment of the global tax model just brought the US closer to the rest of the world in terms of both tax rates and treatment of foreign income."
Lomi is tackling food waste with a home composting machine (The Hustle)
+ "It’s an issue we all deal with. After chopping fruits and vegetables, what do you do with the waste? For many, the process is a complete mess with various plastic bins and misplaced foods. Enter Lomi, a home composting machine that — in as little as four hours — turns food waste into nutrient-rich soil that can be used as fill for basic gardening."
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