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This week’s letter explores digital nutrition, income inequality and liquidity measures by The Fed, and a documentary of Buffet.
Enjoy.
Digital Nutrition
I’ve been reflecting on things that we consume; not just physical but also digital. From social apps to binge watching TV shows, everything is designed to capture our attention. Whether it’s the emergence of Tiger King on Netflix or swiping up on TikTok videos. They all serve the same purpose; to keep us engaged and hooked. It’s the epitome of junk food (in a digital sense).
The way we think about the food that we eat, how many hours we sleep and people that we surround ourselves with; we should put the same level of effort into our digital nutrition.
We’re consuming more information now than ever before. Our mental filters are on overdrive. Most people can have trouble processing trivial from the important. And because information is ubiquitous, our attention becomes scattered which makes it easy to feel overwhelmed.
Where you spend your attention is where you spend your time. And where you spend your time is where you spend your life.
So, take time these next few days to re-center yourself. Be vigilant about where your time and attention get allocated. Try to monitor your digital nutrition and focus on things that create value. To start, peek at your “screen time” on your phone. In order to manage your digital nutrition, you have to measure it. Start adding time limits to how long you can surf certain apps. This is a good place to start.
Second, start adding positive habits to your day that sparks intellectual curiosity and reduces the need for digital junk.
A few things I’d recommend trying:
5 min meditation in the morning and 5 min before bed
This is a simple breathing exercise. Be present. Don’t think too much about the week ahead or the past. Focus on your diaphragm expanding and contracting and be present in your head. Nothing else matters except for this moment of you breathing in and out.
5 min journaling every day
Journaling, like meditation, is powerful. It stabilizes you and becomes a focal point of how you lead your day. Journal tips below.
My current journal habit includes:
In the morning:
I write down 3 things I’m grateful for.
I write down my 3 core objectives of the day. These are my key priorities. I must complete these. They can be personal or work related or both.
You likely have dozens of tasks or to do list items that you tackle each day. The goal is to not mistake “priorities” from “to do lists.” The two are different. You can still create your to do lists. Just don’t mistake motion for progress.
At night before bed, I answer these questions:
What made today great?
Did I learn something new?
What could’ve made today better?
What are 3 things I’m grateful for? It’s often the same thing I wrote down in the morning. And that’s by design. No day is a bad day when you start your day being grateful and end your day being grateful.
Most of us are knowledge workers. And modern day knowledge workers are like athletes. They train hard (practice), play (performance in the arena), and then reflect (watch film) and recover (ice bath, stretching). They’re expected to perform at the highest levels and keep their mind and body sharp. Journaling and meditation is the reflection and recovery for knowledge workers. It helps keep our minds sharp; helps us stay present and minimize the trivial worries.
Income inequality in the next 10 years
COVID has impacted businesses of all sizes. The Fed has taken drastic measures to ensure markets don’t go into turmoil. This includes $trillions printed. I discussed the impact of “printing money” in my previous letter. One of the side effects of all this liquidity that’s rarely discussed is income inequality.
These liquidity measures taken by The Fed will cause greater income inequality in the next 10 years than we’ve ever experienced before. This stock market rally has trade-offs.
Gini coefficient, a ratio that measures income inequality, is at 0.434 for the United States. Closer to 0, income inequality doesn’t exist. Close to 1, there’s massive inequality. Please note that a perfect 0 can never exist. And a perfect 1 should absolutely never exist.
The United States has been trending higher over the last 30 years. And it’s the highest amongst the G-7.
Now, why is this important? It’s because market participation is available to all, but almost always limited for lower income households. With consumers and small businesses hurting due to COVID, most people earning a wage are focused on saving enough money to make ends meet versus being active market participants. There’s a general fear. They are unable to take advantage of capital gains opportunities.
To give you perspective, here’s a chart by The Federal Reserve of St. Louis showing S&P 500 stock index against the Gini ratio.
The US experienced the emergence of the middle class post WWII. Back then, $trillions in liquidity to keep the economy on life support didn’t exist. Mega cap companies didn’t exist. Today, the five largest S&P 500 stocks have a market cap equal to the bottom 282 S&P 500 stocks. Here’s a visual from July 2018.
Perhaps a dream, but it would be great to have an OKR style framework applied to manage government officials. Gini Coefficient rarely gets discussed by policy makers yet impacts everyone. It should be an OKR. Monetary policy and fiscal policy are managed by two different groups; the Gini ratio can help bridge the gap to ensure the average American is in good shape.
Warren Buffet (Free) HBO Documentary
I am a big fan of Buffet. Everything from his resiliency to his investing framework to his winning track record to his simple lifestyle. When investing or doing anything, really, I ask in my head “what would Warren Buffet do?” To that end, I’d recommend watching this documentary. It’s really good.
Tweet of the week
Links meant to be shared
What 15 years of startups can teach us about investing
Great article by Eric Feng. Capturing the core of what Y Combinator is investing in and why.
Nike reported a giant loss with sales tumbling 38%
First, this was a miss by Wall St analysts. They didn’t set the right targets and expected a mild drop-off. Second, eComm cannot replace retail presence and revenue. Brands like Nike will continue to under-perform until we’re out of COVID. And if Nike is struggling this much, imagine what other large brands are dealing with?
How a remote work boom will affect salaries, jobs, and where people live
WFH is here to stay for many companies. This article highlights key benefits and some trade-offs for activating a permanent policy.