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Hi Friend, 

Welcome to October. We are officially in Q4 and, um, it's been a fun week. It's hard to even remember all that happened, but that might be for the best. 

It's a common refrain to hear that we are living through exceptional times. But the reality is that each era and epoch has its share of crisis, uncertainty, and change. History doesn't repeat but it does rhyme. Thanks for the reminder, Billy Joel. 

Today's Contents:

  • Weekly Song: We Didn't Start The Fire
  • Macroeconomics and the Labor Force Participation Rate
  • Wildfires
  • Manage Your Psychology: Bogleheads & Morgan Housel
  • Good Reads

Weekly Song: We Didn't Start The Fire

I found solace this week in We Didn't Start The Fire by Billy Joel. Now, this isn't my favorite Billy Joel song. Not even in the top 3. But it is brilliant. Here's the back story, copied from Wikipedia:

Joel got the idea for the song when he had just turned 40. He was in a recording studio and met a 21-year-old friend who said "It's a terrible time to be 21!" 

Joel replied to him, "Yeah, I remember when I was 21 – I thought it was an awful time and we had Vietnam, and y'know, drug problems, and civil rights problems and everything seemed to be awful." 

The friend replied, "Yeah, yeah, yeah, but it's different for you. You were a kid in the fifties and everybody knows that nothing happened in the fifties". 

Joel retorted, "Wait a minute, didn't you hear of the Korean War or the Suez Canal Crisis?"

Yup. One thing that you definitely learn as you get older is that it's never truly a terrible time to be a 21 year old. 

It was always burning since the world's been turning. 

We Didn't Start The Fire by Billy Joel

Buddy Holly, "Ben Hur", space monkey, Mafia
Hula hoops, Castro, Edsel is a no-go
U-2, Syngman Rhee, payola and Kennedy
Chubby Checker, "Psycho", Belgians in the Congo

We didn't start the fire
It was always burning since the world's been turning

We didn't start the fire
No we didn't light it but we tried to fight it

We Didn't Light It But We Tried to Fight It: Macroeconomics

I've written in the past about the drop in the labor force participation rate, showing data from Trading Economics. I offered one explanation that women are leaving the labor force more rapidly. The NY Times published a story on that topic with the chart below today. 

However, one of the amazing things about writing a newsletter is the subsequent dialogue and research that comes out of the woodwork. For that, I present to you the Harvard honors thesis of Justin Katiraei (advised by Larry Summers): The Mirage of Cyclical Slack: Trends in U.S. Labor Force Participation. His finding is that the labor force participation rate doesn't show any additional slack than what is already picked up in the unemployment rate. Any discrepancy can be attributed to hysteresis, aging, and unemployment. 

Is it a counter to the "women are dropping out from lack of childcare" hypothesis? I don't know. This thesis was published in 2015, so maybe indeed this crisis is different. 

We Didn't Start the Fire, Did We?

They say the most dangerous words in finance are "this time is different." While I can convince myself that is generally true, the one place it gives me pause is the fires on the West Coast - but even that, when you look at the historical data, doesn't look as terrible as I was expecting. Last year was actually a low year in terms of acres burned.  

But the market is responding, and energy consumption patterns are changing. Just today, the Financial Times wrote about how Exxon Mobil's market capitalization has been surpassed by NextEra Energy, a renewables company.

And venture capital dollars are flowing in as documented in The State of Climate Tech 2020: The next frontier for venture capital a report released by PWC. Overall CAGR of 84% since 2013-2019, representing a total of $60B invested in 1,200+ climate tech startups.

It Was Always Burning Since the World's Been Turning: Bogleheads and Morgan Housel

My friend, and DS reader, Gouri always sends insightful material. He sent me an interview he did with Morgan Housel for NYC Bogleheads, a society dedicated to the legacy of John Bogle, founder of Vanguard and pioneer of passive index investing.

It's worth a listen here. or read Morgan's latest blog: Common Causes of Very Bad Decisions. My notes below from the podcast:

  • We always think that the upcoming election is the most important election of our lifetime! But it can’t always be true.
  • Why don't people learn their lesson after a market crash? They learn too precise a lesson. They might learn a lesson about lax mortgage underwriting or dot com IPOs without revenue. But they don’t learn the more general lesson that the world breaks every 5 to 10 years.
  • Morgan explains why he aims for financial independence so that he has the ultimate wealth: Control over your time: this is the most enduring indicator of happiness over time.
  • How luck is the flip side of risk. Some people get lucky. People hate attributing success to luck because it’s seen as negative. Elements of luck are impossible to emulate. 

Sensible Investing: Good Reads

State of GenZ Report. Get it here. GenZ (born between 1995-2010) is now 35% of the global population with $143B in spending power. They matter. The report is mostly a quantitative flip through brands, creators, and apps that I had no idea existed. 

Hims & Hers, a "telemedicine company" went public via SPAC today. Here is the deck. I guess some people don't truly consider them a healthcare company but rather a marketing company capitalizing on the inefficiencies in the healthcare system in the US under certain segments, e.g., they are able to sell Viagra for $3/pill vs $1/pill by making the sale more convenient. 

The New Face of a Founder: Uncovering Black Women as the Next Billion Dollar Founders. All the details in this report. 

Chartr is a website with a bunch of business charts worth an infinite scroll. 

Dfinity is the blockchain vision more real now? The company unveiled its governance and token economic systems this week, achieving some paper valuation of $9.5B. 

Survey of Consumer Finances was updated and released by the Federal Reserve if you want another source of raw economic data.

Alright. Friday done. Wrote this one with wine, rather than a cup of coffee. Have a great weekend.

Thanks for reading, friends. Please always be in touch.  

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Katelyn Donnelly
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