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Several months ago, while walking through my neighborhood in Washington, D.C., I noticed an impressive number of front-lawn placards celebrating and welcoming refugees. The signs made me proud. I like living in a place where people openly celebrate tolerance and diversity.

Several days later, my pride curdled into bitterness. As part of some reporting on housing policy, I found a State Department page offering advice to Afghans and Iraqis resettling in the U.S. The upshot: Stay away from D.C. “The Washington, D.C., metro area including northern Virginia and some cities in California are very expensive places to live, and it can be difficult to find reasonable housing,” the website warns. “Any resettlement benefits you receive may not comfortably cover the cost of living in these areas.”

My city’s prohibitive housing costs flow, in part, from the district’s infamous war against new construction. Much of D.C. is off-limits for new development, thanks to widespread single-family zoning, berserk historical-preservation rules, and a long-standing aversion to taller buildings, which stems from both federal law and local rules. If the city’s housing policies are so broken that the federal government has to explicitly tell immigrants to find somewhere else to live, then signage welcoming refugees is both futile and hypocritical. The same neighborhoods saying yes to refugees in their front yard are supporting policies in their backyard that say no to refugees.

This dynamic—front-yard proclamations contradicted by backyard policies—extends well beyond refugee policy, and helps explain American 21st-century dysfunction.

The front yard is the realm of language. It is the space for messaging and talking to be seen. Social media and the internet are a kind of global front lawn, where we get to know a thousand strangers by their signage, even when we don’t know a thing about their private lives and virtues. The backyard is the seat of private behavior. This is where the real action lives, where the values of the family—and by extension, the nation—make contact with the real world.

Let’s stick with housing for a moment to see the front yard/backyard divide play out. The 2020 Democratic Party platform called housing a “right and not a privilege” and a “basic need … at the center of the American Dream.” Right on. But the U.S. has a severe housing-affordability crisis that is worst in blue states, where lawmakers have erected obstacle courses of zoning rules and regulations to block construction. In an interview with Slate, Senator Brian Schatz of Hawaii, a Democrat, took aim at his own side, saying progressives are “living in the contradiction that they are nominally liberal [but they] do not want other people to live next to them” if their neighbors are low-income workers. The five states with the highest rates of homelessness are New York, Hawaii, California, Oregon, and Washington; all are run by Democrats. Something very strange is going on when the zip codes with the best housing signs have some of the worst housing outcomes.

Housing scarcity pinches other Democratic priorities. Some people convincingly argue that it constricts all of them. High housing costs pervert “just about every facet of American life,” as The Atlantic’s Annie Lowrey has written, including what we eat, how many friends we keep, how many children we bear. “In much of San Francisco, you can’t walk 20 feet without seeing a multicolored sign declaring that Black lives matter, kindness is everything and no human being is illegal,” the New York Times columnist Ezra Klein wrote. But in part because those signs sit in front yards “zoned for single families, in communities that organize against efforts to add the new homes,” the city has built just one home for every eight new jobs in the past decade.

We find a similar discrepancy between stated virtues and outcomes in the realm of green energy. As I wrote last year, liberals own all the backpack buttons denouncing the oil-and-gas industry. But Texas produces more renewable energy than deep-blue California, and Oklahoma and Iowa produce more renewable energy than New York. Yes, wind is abundant in the Midwest, and the Great Plains have lots of space that’s sunny and empty. But the biosphere counts carbon, not excuses. Progressives betray their goals by supporting onerous rules that delay the construction of solar farms and transmission lines that would reduce our dependence on oil and gas.

Granted, although the hypocrisy of NIMBY environmentalists is an irresistibly delicious subject for some writers, it is hardly the only obstacle to building an abundance of clean electricity. Many of the country’s most powerful energy providers play their own word games by loudly advertising their commitment to decarbonization even as they quietly use their political power to block the transition to new energy sources. Here, as in housing, it’s easy to playact as a public crusader, screaming “Everything has to change!” to the world while remaining a private reactionary who whispers, within the back rooms of true power, “But let’s not change anything that matters.”

More broadly, a super-emphasis on language has distracted some Americans from focusing on actual outcomes and working toward material progress.

In the past few years, many employees have encouraged their companies to launch diversity, equity, and inclusion initiatives. These programs address a real problem: the stubborn gaps in pay and responsibility between white men and their nonwhite and non-male colleagues, which are sometimes borne from prejudice in hiring or promotion processes.

But after an initial burst of enthusiasm, follow-up analyses of DEI programs have found that many of them are worse than useless. First, they sometimes rely on pseudoscience, such as unconscious-bias training, which rarely reduces racism and may accidentally reify existing biases. Second, corporations that hold DEI workshops may use them as an excuse not to pursue real corporate change. In the past few years, as corporate diversity programs have proliferated, the share of Black and Asian workers who “trust their employer to do what is right in response to racism” has actually declined. According to one Bloomberg survey, the person with the least credibility on racism within the company is the person in charge of DEI.

All of the appropriate terms for this state of affairs—whitewashing, window dressing, a facade—capture the essence of front-yardism. The problem with these diversity programs isn’t that they’re “woke,” as in “doing too much to help nonwhite Americans.” The problem is that, keeping with this common if dubious definition, they aren’t nearly woke enough. Full of sound and fury signifying nothing, many DEI initiatives are conservative in nature, preserving the status quo and the power of white-male leadership while advertising a politics of radical change. They are the equivalent of a thousand REFUGEES ARE WELCOME signs in a neighborhood where the residents’ policy preferences make local refugee resettlement impossible.

San Francisco public schools offer another lesson in how an obsession with language can cloud a rightful focus on material outcomes. In 2021, the city’s board of education voted to rename more than 40 schools to scrub out racism. Their dragnet caught such not-quite-famous racists as Abraham Lincoln and Senator Dianne Feinstein. (Paul Revere was added to the list, because one committee member misread a History.com article about his role in the Revolutionary War.) At the same time that the district was putting together its list of names, its schools suffered declines in enrollment, attendance, and learning. Math scores fell sharply and, by 2022, only 9 percent of the district’s Black students met or exceeded math standards.

The renaming committee was obviously not exclusively responsible for pandemic-era learning loss. Learning loss was a national trend, and San Francisco didn’t even experience the worst of it. But if, like the San Francisco Unified School District, you’re a school district with a big math-proficiency problem and your policies include discouraging eighth-grade algebra and holding meetings about nomenclature, you might end up with failing students in well-named schools.

Even the American Medical Association has descended into front-yardism. The AMA recently published a 54-page guide on how doctors should talk with patients, called “Advancing Health Equity,” which urges medical professionals to make their language more inclusive. One particularly silly example: It advises doctors to replace the simple phrase low-income people with new terminology that acknowledges “root causes,” such as people underpaid and forced into poverty as a result of banking policies, real-estate developers gentrifying neighborhoods, and corporations weakening the power of labor movements.

I celebrate any emphasis on “root causes.” So let’s talk about the real root causes of dysfunction in America’s expensive and inequitable health-care system. Why is the U.S. one of the only countries in the developed world without universal insurance? A complete analysis might include the AMA’s “explicit, long-standing opposition to single-payer health care.”  Why does the U.S. health system struggle to provide access in rural and low-income areas? One causal factor is the AMA’s steadfast resistance to expanding nurse practitioners’ scope of care. Why does the U.S. have fewer general practitioners per capita than almost any other rich country? It might have something to do with the AMA’s refusal to expand medical-residency slots and other efforts to constrain the number of doctors in America.

Even in science, where empiricism ought to reign, I’ve seen troubling signs of word worship. In 2020, the prestigious journal Nature published its first-ever presidential endorsement, on behalf of Joe Biden. When a group of researchers studied the effect of that endorsement, they found it did nothing to persuade moderate voters and actually made conservatives less trusting of scientific institutions. “The endorsement message caused large reductions in stated trust in Nature among Trump supporters,” the paper concluded. “This distrust lowered the demand for COVID-related information provided by Nature.”

The journal’s article had all the effectiveness of a half-hearted DEI program: a bunch of pretty words doing less than nothing. Nonetheless, in March, the editors of Nature wrote a follow-up essay declaring victory. While they acknowledged that the Biden endorsement had failed to meet every measurable benchmark, they defended their decision on the grounds that “silence was not an option.” “When individuals seeking office” blast science and threaten scientists, they said, “it becomes important to speak up.”

I personally despair of the polarization of science and wish the Nature editorial had, through some magical incantation, depoliticized the vaccine debates. But it didn’t. And that holds an important lesson about the limited ability of words alone to bring about the world that progressives want to live in. The Nature editorial was an experiment, and an independent group of scientists determined that the experiment failed. That’s how science works. For the editors of a science journal to wave it away suggests that the final cause of their politics is to utter the right words, even when those words push them further away from the world they want to build.

Companies hiring DEI consultants to quote Malcolm X in a meeting to cover up a pitiful diversity record; school officials watching math scores plummet for Black kids while they debate whether Lincoln was racist; AMA employees playing word games while limiting the number of physicians; environmentalists buying BEYOND COAL pins while challenging the construction of any clean-energy project that might help the electric grid move beyond coal—what ties these examples together is front-yard theater.

You may have noticed that I’ve mostly focused on progressive causes and left-leaning institutions. This is as deliberate as it is unfair.

It’s deliberate because, to paraphrase Noah Smith, I deeply want progressives to love progress itself, not just the sound of it. When it comes to the virtues of housing affordability, clean-energy abundance, high-quality education, and trustworthy science, I want my political side to turn its signage into signatures, its placards into policies. But my emphasis so far on liberalism is also unfair, because to prattle on about progressive hypocrisy without a similar analysis of the right would profoundly misrepresent the distribution of phoniness in American politics.

When Republicans swept into unified control of the federal government in 2017, Donald Trump promised in his inaugural address to return power to the people, unwind the “American carnage” of previous generations, and restore the manufacturing and coal industries that had been desiccated by decades of neoliberal policies. But once in office, Republicans governed more like plutocrats than populists, trying to slash federal health-insurance coverage (which failed) and to reduce taxes for large corporations by several trillion dollars (which succeeded). On economic and social policy, the Republican Party is a pretzel. The GOP officially opposes “Defund the police” and wants more law enforcement, but Trump is on the record with calls to defund the entire FBI and Department of Justice. Republicans officially seek to “lower the price of housing,” but their pledge to cut appropriated nondefense programs would likely reduce housing assistance, immediately raising the cost of living for millions of low-income renters.

No party claims a monopoly on language theater, either. Many of today’s most influential conservatives are more likely to marinate in indignation over the gender politics of candy, beer, and sneaker commercials than utter anything that might accidentally make contact with poverty, housing, energy, or health-care policy. The most significant GOP leaders, such as Trump and Florida Governor Ron DeSantis, hardly talk about economic policy at all, preferring to direct their furious attention at culture-war issues, including elementary-school curricula, drag-queen story hours, and the scourge of managerial wokeness in our corporations and schools. This postmaterial posturing might serve a strategic purpose. Behind all that fulminating about Disney and DEI, DeSantis’s views on Social Security, Medicare, and the welfare state are deeply unpopular.

While language wars escalate on the right, the phenomenon of front-yard politics may be peaking on the left. San Francisco ultimately abandoned its plan to scrub Lincoln and Feinstein from its buildings. California has voted to begin the long process of dismantling its NIMBY housing laws. Last year, President Biden signed historic laws to expand green-energy production in the U.S., even though the translation of historic spending into historic construction remains uncertain. These are small steps in the right direction.

Words matter. It would be absurd—and deeply self-defeating—for any writer to suggest otherwise. My aim is not to uproot kind-hearted yard signs, or reverse efforts to remove racist surnames from government buildings, or to discourage doctors from speaking respectfully to patients. But these linguistic efforts are only as successful as the difference they make in the world. When a politics of progressive language becomes disconnected from progressive outcomes, the movement loses. Front-yard radicalism multiplied by backyard stasis does not equal progress. It equals nothing at all.

The rich get richer.

Data supports it. In the past three decades, the share of U.S. wealth held by the top 1% has gone from 24% to 32%. Like most cliches, “the rich get richer” became a cliche because it’s true… of money, and power. The powerful tend to aggregate more power, incumbents get reelected 90% of the time.

It makes sense. Money buys you power and influence, which begets more money, which buys more power and influence. This is the basis of capital accumulation and wealth creation — a virtuous upward cycle. It’s also the reason we (should) have progressive taxes and regulation: to prevent the natural order of economics from doing its thing, making rich people richer and poor people poorer.

What makes less sense? Why does one person or firm not have all the power? Why don’t a few families control all the wealth, one or two governments control the globe? Why isn’t there a president of Earth? As much as it seems that power and wealth are centralized, the world’s richest man owns just 0.04% of the world’s net worth.

Throughout history, nobody has come close to amassing total control. The mightiest empires were still minority owners of planet Earth. Before her death in 1901, Queen Victoria oversaw a kingdom that spanned roughly a quarter of the globe’s land surface and ruled just 23% of the world’s population. At its peak in 1300, the Mongol Empire controlled about 18% of the Earth. The Roman Empire was even smaller (4%).

As they gained territory and resources, each empire continued to expand. Brits in 1910 had witnessed six decades of growth. With each land grab came greater stores of resources, more coffee and molasses to import to their island. This created new markets and business opportunities to fund more land grabs. And the wheel turned.

However, from the British Empire to the Qing Dynasty to the Ottomans, they all have one thing in common: They all fall.

Balance

A celestial pillar of the universe is that it abhors absolute control. No individual or institution has ever achieved it. Apex predators cannot eliminate their prey without starving themselves. If there are too many wolves eating too many deer, the wolf population declines, as they run out of deer to feed on. Balance is fundamental to ecological systems, and the same is true (over the long term) in our human-made world.

But Why?

A powerful entity or person collapsing under the weight of their own success is not a novel concept. The Ancient Greeks had a word for it: hubris, an excessive confidence in defiance of the gods. For us, it means excessive confidence preceding downfall. Which more or less equates to the same thing, because for the Greeks, defying the gods almost always led to death.

A more recent version of this ancient story that fits our tech-obsessed moment is Frankenstein. Inebriated on his own brilliance, Dr. Frankenstein tries to defy the natural order and create life. In doing so, he makes something too hideous to contain, and that’s his doom. His last words in the novel are an instruction to “avoid ambition.”

Corporate

Corporate hubris takes various forms. Research shows overconfident CEOs are prone to distorting their investment decisions: They overinvest when cash flows are strong, and cut too deep when they need external financing. Case in point is Meta, where we’re witnessing hubris play out in dramatic form. The unconstrained boy-king is betting his company — his shareholder’s company, really — on a fever dream in which he is God in a world littered with Nissan and Nespresso billboards, a “metaverse.” More recently, FTX founder Sam Bankman-Fried believed he could defy the laws of economics and borrow against large sums of a fake currency he made up. Essentially, Bankman-Fried constructed the Burj Khalifa on a foundation of quicksand. And now comes the fall.

A desire to keep things as they are can also initiate a slow burn to the ground. The innovator’s dilemma is not a function of arrogance, but limits — the limits power imposes. A colleague of mine at NYU, Aswath Damodaran, has done important research on the life cycle of successful corporations. Vibrance and innovation fuel their ascent, but the comforts of cash flows and the desire to keep them flowing make them slow and afraid. The best companies build moats so they can protect their earnings and extend their lifespan. The next best firms recognize they are maturing and age gracefully: They return money to shareholders, distribute dividends, and pay debt down. Also, few CEOs invest the GDP of Costa Rica into a megalomaniacal, yet lame, attempt to replicate our world … without legs. A digital Frankenstein, if you will.

Success can be our undoing when we’re promoted beyond our true capabilities. The Peter principle holds that because people get promoted on the basis of prior performance, they will inevitably rise to the level of their incompetence. Our brains make it easy for our ambition to exceed our ability: The Dunning-Kruger effect describes a demonstrated cognitive weakness, that the less we know about something, the more we overestimate our knowledge. That’s why stupid people, and people who make great cars and then buy media companies, are so dangerous.

This has been a banner week for the powerful coming undone. In no particular order, the largest social network company in history, Meta, which has lost more than two-thirds of its value over the past year, announced it was laying off 11,000 people; the most prominent crypto billionaire lost nearly his entire fortune after he overleveraged his empire to keep it expanding; and the richest man in the world … impregnated a bathroom sink before putting on a master class on how power corrupts.

Elon’s comical first few weeks at Twitter have gone worse than expected, and most people expected a train wreck. As I write this, the most recent news is that Twitter’s senior InfoSec and Privacy executives quit. They haven’t disclosed the details, but it seems likely they were asked to do something they believed to be illegal or unethical. That’s in the midst of an ongoing collapse of verification on the platform, a new policy that “comedy” is allowed (unless you’re making fun of Elon), and a steady flow out the door of the engineers who know how Twitter’s service actually works.

The inevitable collapse of the powerful is a good thing, and I’m glad we live in a universe that embraces this as a governing principle. Absolute power and wealth concentration are incompatible with the innovation that characterizes humanity’s upward movement. The crashing to Earth can cause collateral damage, but it’s a creative destruction.

What is the lesson, what can be learned? Every day, no matter how successful we become, we need to earn our success. We need to be kind and appreciative; we need to surround ourselves with people who will push back on us and question our beliefs and actions. We need to demonstrate humility. You are never more susceptible to a huge mistake than right after a big win, when you begin to believe the falsehood that your success is all about you. Yes, you’re brilliant and hardworking, but greatness is in the agency of others, and timing (and other features of luck) is everything.

The flip side is less discussed but more important. When you’ve fucked up, when things are going poorly — a relationship ends, you have professional disappointment, or you’re in financial stress — forgive yourself. Mourn, then move on. And moving on means finding the people and activities that give you the strength and confidence to believe you have value, that you are the solution to your firm’s needs, and that you could make someone else’s life wonderful. I have known many really successful people. But there’s a distinction between success and happiness. The delta boils down to registering one truth and surviving the accompanying emotions: Much of your failure, and your success, is not your fault.

Life is so rich,

The post Hubris appeared first on No Mercy / No Malice.

The U.S. healthcare industry is a wounded 7-ton seal, drifting aimlessly, bleeding into the sea. Predators are circling. The blood in the water is unearned margin: price increases, relative to inflation, without a concomitant improvement in quality. Amazon is the lurking megalodon, its 11-foot jaws and 7-inch teeth the largest in history. With the acquisition of One Medical, Amazon is no longer circling … but attacking.

Per capita U.S. healthcare spending went from $2,968 in 1980 to $12,531 in 2020 (both in 2020 dollars), more than a threefold increase. The result is a massive industry with 13% of the nation’s workers and total spending accounting for a fifth of U.S. GDP.

Doctor No

Healthcare can boast tangible achievements over the past 40 years. Life expectancy was up from 73.7 in 1980 to 78.8 in 2019 (before Covid knocked it back down a bit). There’s been a revolution in pharmacological treatments, and genetic research is starting to pay dividends. But the financial return — improvement divided by cost increases — has been abysmal. No nation has registered cost increases similar to those of the U.S., and no one spends as much as we do per capita in absolute terms. Yet nearly every developed country has better outcomes, with longer life expectancies, healthier populations, and far less economic stress.

Two-thirds of personal bankruptcies in the U.S. result from healthcare issues — medical expenses and/or time off work. For many middle-class American families, if Mom or Dad gets cancer, there’s a good chance the family will go bankrupt. Forty percent of American adults have delayed or gone without needed care because it’s cost prohibitive. For every improvement in healthcare, it seems our system finds a way to extract a dark lining. That same pharmacological revolution that improved outcomes for millions brought the opioid epidemic. In many areas, our results are lousy at any price: The U.S. has one of the highest infant mortality rates among developed nations.

Beyond spotty efficacy, healthcare offers the second-worst retail experience in the country. (Gas stations retain the No. 1 spot.) Imagine walking into a Best Buy to purchase a TV, and a Blue Shirt associate requests you fill out the same 14 pages of paperwork you filled out yesterday, then you wait in a crowded room until they call you, 20 minutes after the scheduled appointment you were asked to arrive early for, to be seen by the one person in the store who can talk to you about televisions, who has only 10 minutes for you. New York is the wealthiest city in America, yet the average waiting time in an emergency room is 6 hours and 10 minutes.

A good rule of thumb in business is that if it’s bad for the consumer, it’s worse on the other side of the counter. Physicians spend just 27% of their time helping patients — 49% is spent dealing with electronic health records. That includes documentation, order entry, billing, and inbox management. In other words, you spend a decade going to school to get an M.D., only to become a bureaucrat.

No industry has better demonstrated the dis-economies of scale. If we received the same return on our healthcare spending as other countries, we’d all live to a 100 without getting sick. Or, more likely, we’d spend far less, still live longer and healthier lives, and save enough to pay off the national debt in 15 years. U.S. healthcare is the worst value in modern history.

OK, so what to do? At the center of the worst system of its kind, except for all the rest — i.e., capitalism — lies the answer: competition.

Prime Time

Last week, Amazon announced its plans to acquire primary healthcare company One Medical for $3.9 billion. I believe this deal represents the catalyst for a significant societal unlock. I’ve been a member of One Medical for two years and think it’s outstanding. When I contracted Covid, I tapped the One Medical icon on my phone; within a few minutes I was speaking to a nurse practitioner who prescribed Paxlovid and even told me which nearby pharmacies had the antiviral in stock.

With Amazon, the company can recognize its vision. To date, One Medical’s stock has performed poorly — down to $10 per share from $40 at the beginning of 2021. It lost a quarter of a billion dollars last year, and needs capital (which Amazon has: $60 billion in cash). Next, ONEM needs scale. At present the service boasts 736,000 members — impressive. More impressive: More than half of U.S. households are Prime members. The final piece is delivery. One Medical operates a digital health / physical office hybrid business, but you still have to pick up medication from the pharmacy. The obvious upgrade is to have your Paxlovid delivered within hours of a remote consultation. This is Amazon’s core competence — it will happen. Speed and convenience will be so differentiated in healthcare, it will feel alien.

As with most paths to disruption, it’s been long and winding. Four years ago, Amazon teamed up with JPMorgan and Berkshire Hathaway to form Haven, hoping to provide better and more economical healthcare for their combined 1.5 million employees. Despite rocking the stocks of healthcare markets the morning of the press release, it was a headfake and folded in 2021.

Next, Amazon built an in-house service for its employees: Amazon Care. Virtual health services, plus nurses … delivered to your home. It’s doing much better, expanding across the country, and now provides healthcare for other companies. (Hilton is Amazon Care’s largest disclosed customer.) The acquisition of One Medical will couple capital, domain expertise, and installed tech with billing infrastructure, and bring it to 66 million Prime households. Imagine:

“Alexa, I feel feverish and my lower back is aching.”

“Connecting you to an Amazon Prime medical professional now.”

Want to vs. Have to

I predicted Amazon would get into healthcare several years ago. Why? For the same reason Apple is getting into auto: not because it wants to, but because it has to. Amazon stock’s price-to-earnings ratio is 56 — more than double Walmart’s. For the company to maintain its share price, it needs to add a quarter of a trillion dollars in topline revenue over the next five years. It won’t find this kind of revenue in white-label fashion or smart home sales. It has to enter a gargantuan market that lacks scale, operational expertise, and facility with data.

State of Play

A reshaping of healthcare won’t just benefit consumers, but investors. In 2015 healthcare services commanded equivalent multiples to the S&P 500 average. But the market is losing faith in public healthcare companies’ ability to grow in a meaningful way. EV/EBITDA multiples among healthcare services are 33% lower than the S&P 500 average.

Amazon isn’t the only predator sniffing prey. Walmart and Alibaba are both working on their own pharmacy businesses. Uber is working on healthcare transit. And in the private markets, telehealth received $29 billion in venture funding last year, up 95% from 2020.

The obvious and immediate unlock is telehealth, which was accelerated by the pandemic. In a matter of weeks, after the first positive Covid case in the U.S., services the industry insisted had to be delivered in person shifted to Zoom … and we survived. In fact, we thrived. Even once in-person visits were permitted, video house calls remained a thing. McKinsey estimates that the number of telehealth visits has stabilized at 38 times pre-pandemic levels. Doctors adopted the technology, regulators relaxed limitations, and patients saved time as barriers fell. We’re a long way from remote surgery, but huge numbers of patient visits don’t need to be visits at all: A study of 40 million patients during lockdown showed that for certain groups (e.g., people with chronic conditions) outcomes didn’t suffer when visits shifted online. And we’ll only get better at delivering care this way.

The disruption achieved by Amazon will be significant, and the flood of capital, startups, and consumer brands that will follow it into the space will inspire profound change. Mark Cuban launched a pharmacy in January that eliminates middlemen — from the insurer to the pharmaceutical benefit manager. The result? A 90-day supply of acid-reflux treatment that cost $160 is now $17. It’s estimated Medicare would have saved $3.6 billion in one year if it had purchased generic drugs through Cuban’s pharmacy. As other apex predators look for new sources of growth, many will turn their gaze on different limbs of the carcass. Nike could enter healthcare through a wellness positioning: orthopedics, acupuncture, and chiropractic. LVMH, L’Oréal, and Estée Lauder could build the first global plastic surgery brands. The Four Seasons and Hilton might open hospitals. Lennar and Pulte could build “Active Living” communities that Nana will leave feet first, bypassing the expense and tragedy of dying under bright lights surrounded by strangers.

Risks

Privacy is a concern: Your credit card and billing address is one thing, your HIV status another. However, I believe these concerns are overblown — most consumers (60%) feel fine sharing their personal health data over virtual technology. In addition, this is inevitable. Eighty-five percent of physicians believe radical interoperability and data-sharing will become standard practice. Finally, when it comes to handling your personal data, Amazon is the most trusted Big Tech firm. Reminder: Amazon is not Meta.

And What of Antitrust?

Amazon should be broken up (forced to spin off AWS and/or Amazon Fulfillment) and prohibited from advantaging its own products on the platform. It should also be permitted to enter healthcare via acquisition. The acquisition of One Medical is minuscule compared to the larger healthcare market: a $3.9 billion deal, while the largest healthcare company in America, UnitedHealth, has a market capitalization of $498 billion.

Elegant antitrust enforcement should not fall into the trap of believing that some people/firms are good/bad. It should recognize that competition is good, and in each deal the DOJ and FTC should stay focused on the prize: How do we make markets more competitive? E-commerce, digital marketing, and social media are too concentrated, and the FTC should force a divestiture of assets. At the same time, those same companies can foment much-needed competition in what has become a social ill.

We are overweight, depressed, and increasingly broke at the hands of U.S. healthcare. The treatment that offers the best outcomes is the same therapeutic that’s resulted in massive value and prosperity across most of our economy: competition.

Dear Amazon … bring it.

Life is so rich,

P.S. The cost of ads has risen astronomically. If you feel like you’re burning money, you might like our new workshop on Marketing Acquisition Strategy with ex-Slack and Google leader Holly Chen. Enroll now.

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I recently vacationed with friends. As we were wrapping lunch one day, my friend said, “Watch this.” His 11-year-old son walked to the couch and lay on his side. With his arm extended in front of him cradling his phone, he … went vacant. For the next hour, he was comatose. No signs of life other than his open eyes and an occasional finger swipe. “We have to make him stop, pull him out, every time,” his dad said. My head filled with images of opium dens in China. Something about the stillness, the lying on his side.

Elon Musk’s manic toggling between shit-posting and falsehoods have distracted us from what is the ascendant tech firm of 2022. TikTok now commands more attention per user than Facebook and Instagram combined. Downloaded more often than any other app for each of the past five quarters, it was the world’s most visited site in 2021. TikTok has 1.6 billion monthly active users — more than Twitter, Snapchat, and LinkedIn combined.

TikTok bills itself as a social media company, and the app is disrupting Meta by virtue of usurping attention. But that’s not all it’s doing. You can like, comment, and share, but these features exist as leverage points for one thing: watching videos. TikTok is a streaming platform, and the testicles being kicked over and over by TikTok belong to another company, Netflix. Over the past four years, ByteDance (parent company of TikTok) has gone from half the revenue of the original gangster of streaming to double. Six months ago Netflix was worth more than $300 billion — today it’s at $80 billion. And at its last valuation event, ByteDance was valued at, wait for it … $360 billion.

We’ve been watching the streaming wars for the past few years, but we were looking in the wrong place. “Video-based social media” was the Trojan horse. The gatekeepers of the content kingdom were being vanquished while we obsessed over subscriber growth at Disney+. The new occupant’s ascent to the Iron Throne was financed with a different currency — not monthly subscriptions or cable packages, but attention. Specifically, our youth’s attention.

Signal Liquidity

Facebook and Google also are using a new armament in their business war: data. You can sell data to advertisers to inform algorithms so their products and services are more attractive and addictive. But data on its own is a shapeless block. Signals are the mallets and chisels that bring form and utility to the algo. (Note: Re-reading the last sentence, I have to wonder what the half-life of edibles is.) Anyway, if data is the new oil, algorithms are the refineries, and signals make the oil lighter, sweeter, and more valuable.

Cable is heavy, high-sulfur-content crude, as its only signals are weekly Nielsen ratings reports. Netflix gets signals directly, but just a few: what you watch, how long you watch, and whether you recommend the program. In aggregate, that data set can be refined into a powerful recommendation algorithm. But on a per-session basis, when we watch an average of two episodes, the number of signals registered from a typical user is likely no greater than six — so the refining process is slow, arduous work.

Then there’s TikTok, where the average session lasts 11 minutes and the video length is around 25 seconds. That’s 26 “episodes” per session, with each episode generating multiple microsignals: whether you scrolled past a video, paused it, re-watched it, liked it, commented on it, shared it, and followed the creator, plus how long you watched before moving on. That’s hundreds of signals. Sweet crude like the world has never seen, ready to be algorithmically refined into rocket fuel.

With great signal liquidity comes great content. Specifically, unique and personalized content. Netflix suggests ’80s war movies for me, which I knew I liked. What I didn’t know I liked: chiropractors confidently adjusting patients, hot people lecturing me on social justice issues, bloodhounds running in slow motion, and crocodiles ruining the days of befuddled animals looking for a drink of water. Watching Netflix is like going to Universal Studios Florida because you loved Disney. Watching TikTok is going on Safari.

Talent Liquidity

Just as algorithms require large pools of signals, content production requires large pools of talent. For a hundred years, video talent congregated in a few geographies: Los Angeles, Hong Kong, London, and Mumbai. Every HR manager knows there are talented people populating every corner of the Earth. But geography still matters, and the majority of platforms and talent do not find each other. YouTube and Instagram recruited talent faster than any business in history. Until TikTok. Fifty-five percent of TikTok users create their own videos on the platform. That’s a talent pool the depth of the Mariana Trench: 870 million people, or 1,000 times the number of people employed by the entire film and TV industry.

The world’s largest reserve of talent also has a near-zero cost of extraction. The top eight U.S. media firms will spend $115 billion on original content this year. Netflix alone will spend $17 billion. TikTok produces its content for almost nothing —  the company’s payout to top creators is a rounding error, at $200 million per year. The primary incentive it offers is social expression, and the company’s A&R team is the app itself. Users are never more than a few taps from creating their own content — TikTok streamlines the creation process, with an option to create a video at the center of its UI, simple tools for recording and manipulating those videos, and a huge library of licensed music available for the creator’s use. On YouTube and Netflix, there are creators and consumers. On TikTok, they are the same person.

For creators who are in it for more than just expressing themselves, the real TikTok money comes from brand endorsements. And when your total addressable market is 1.6 billion users, your 15 seconds of fame on TikTok can be lucrative. The top creators make as much money as a Fortune 500 CEO or an iconic Hollywood actor.

I Don’t Know, You Pick

The average American adult makes 35,000 decisions every day — from what we wear to what size coffee we order. Each decision puts some degree of strain on our mental capacity. As the day goes on, we get tired and stop wanting to make decisions. It’s called decision fatigue.

The biggest mistake we make in marketing is believing choice is a benefit. No, it’s a tax. Consumers don’t want more choices, they want more confidence in the choices presented. TikTok has taken this to a new level by eliminating the burden of choice entirely. Its content is a continuous stream of videos where the decisions are made for you. Your only choice: what not to watch.

This creates a spiraling effect that welds people — especially young people — to the platform for hours. The prefrontal cortex is responsible for decision-making and impulse control, but this part of the brain doesn’t fully develop until the age of 25. Surprise: Kids can’t stop watching TikTok. TikTok, to its credit, now reminds younger users to take breaks to go outside or get a snack. This is an attempt to differentiate the brand from Meta, which has cemented itself as institutionally incapable of acknowledging or addressing the broader effects of its apps on society.

Compare the TikTok doomscroll to the Netflix experience, where you skim infinite thumbnails trying to figure out what to watch. Then you have to focus for 40 minutes. A big commitment these days. Parents report their kids can’t sit through feature-length films because they’re too slow. I notice with my 10 year-old, when he’s exposed to uninterrupted, quick-hit media, he has a difficult time afterward doing anything that requires focus … including being civil to his parents. Expect an emerging field of academic research looking at the effects on behavior, and the developing brain, of rapid-fire media.

Risks

This attention-arbitraging streaming juggernaut shows no signs of slowing. But there are real risks that could interrupt the company’s trajectory to becoming one of the five most valuable businesses in the world.

For one, competition — rip-off products by Facebook, Instagram, Twitter, YouTube, Snapchat, and Netflix. Of these, Facebook and Instagram are best positioned to compete thanks to Meta’s massive coffers of data and captive audience. But TikTok has years of short-form video data, as well as a grasp on the Holy Grail of social media: Kids think it’s cool. Zuckerberg is understandably anxious — Meta mentioned TikTok five times on its February earnings call.

Another risk is China, specifically the threat that the CCP could weaponize the platform — putting a gentle thumb on the algorithm, for example, to shape minds with content critical of America, capitalism, or the CCP’s detractors.

And then there’s regulation. This is the hallmark risk for corporate businesses, though it’s becoming increasingly irrelevant as our regulatory institutions continue to get derided and trampled. A federal judge in Florida told the CDC it couldn’t mandate the wearing of masks because they don’t “actively clean” the air, and the 5th Circuit has decided the SEC cannot enforce its own rules. That’s for another post. The externalities of any tech firm that grows this fast are severe, because these companies tend to blow by any stop signs as the speed blurs the license plate. Already, the app appears to be linked with eating disorders and depression, and it may even cause motor and verbal tics among teens.

A threat to the well-being of our youth should logically be a catalyst for swift and severe action. It hasn’t been. But TikTok’s Chinese ownership may be the siren America’s regulatory bodies need to register a real threat. In sum, as Josh Brolin said in Sicario, the government’s job is to “overreact.” So far, Uncle Sam hasn’t done his job. So, will TikTok become one of the most valuable companies in the world, or prove to be yet another tech firm whose profits and addictive qualities outpace our ability to govern it? The answer is likely yes.

Life is so rich,

P.S. I’m doing an exclusive AMA with Section4 in June. Become a member by the end of this month to reserve your seat. Ask. Me. Anything.

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Perspective

My week has been a cocktail of layoffs, margin calls, and Covid.  How’s your week going?

Markets are down, the risk of nuclear war is up and, worst of all, it looks as if Cumrocket will not replace the dollar. Professor Adam Alter, my colleague at NYU, says dramas perform best in good times and comedies in bad. So I don’t want to read more bad news … much less write into its shadow. The nitrous oxide (love nitrous) for most bad weeks is a small dose of perspective administered while awake/aware.

One shortcut to this perspective for me is to think about my parents. They’ve both had good lives, but when it comes to opportunities presented as a function of where and when a person was born, I am from a different planet. I saw my dad this week. He is 91, and the paths of conversation are getting narrower and fewer. His favorite: He asks me about my life. The things people pay me for (to speak in front of an audience); how much they pay (a lot); the school field trips my boys take (the Grand Canyon); and that I have a TV show (didn’t tell him the plug was pulled). It used to bother/upset me that he’d ask the same questions over … and over. I then realized it’s just fine, good even, if he finds joy from the same thing.

But, inevitably, I think more often about my mom and the self-worth she instilled in me. The following was written five years ago, when we had fewer than 5,000 subscribers, which means there is a 2% chance you’ve already read it. It felt good writing it, and I hope it does the same for you reading it.

[The following was originally published on August 25, 2017.]

Tethered

In relationships, I’ve gotten so much wrong, with so many people, for so long. With romantic partners, I focused on managing the person, vs. being honest and open, creating an uneasy calm interrupted by shock and disappointment. Professionally, I’ve expected employees to be loyal, as … well, I’m just so fucking awesome — instead of investing in understanding their objectives and calibrating my efforts to address our mutual aspirations.

One place I’ve gotten it right with the people most important to me: affection. I rub my boys’ ears and backs, brush their hair, and roughhouse with them so as to demonstrate my strength, for about a second, and then collapse on them and begin kissing and tickling them. I’ve recorded several minutes of us wrestling, specifically the sound my boys make when they burst into joyous, uncontrollable laughter. This will be the last thing I hear on this planet — I’ve prepared for this.

In contrast, at work, I’m less affectionate than Darth Vader. I work with people on average 20 years younger than me, and the thought of creeping somebody out with an unwelcome hug or hand on their shoulder, in a professional situation, is horrific to me. As a result, I don’t even like to shake hands.

Affection exchange theory, introduced by Professor Kory Floyd, postulates that affection strengthens bonds, provides access to resources, and communicates your potential as a parent, increasing your pool of potential mates. I think it goes even deeper. I know a lot of people who, despite their good fortune, are wandering. Few meaningful relationships, an inability to find reward in their professional lives, too hard on themselves, etc. It’s as if they’re not grounded, never convinced of their worth … wandering.

When I look at my own success, it boils mostly down to two things: being born an American and having someone irrationally passionate about my success (my mom). Though she was raised in a household where there was little affection, my mom couldn’t control herself with her son. For me, affection was the difference between hoping someone thought I was wonderful and worthy, and knowing it.

Every Wednesday night after Boy Scouts, my mom and I would go to dinner at Junior’s Deli on Sepulveda Boulevard in Culver City. I would have the brisket dip, she the lox, eggs, and onions. We talked about our week — we didn’t see each other much in between weekends — only to be interrupted by different waitresses, who would comment on how much I had grown. On the way out, we’d stop at the bakery and buy a quarter pound of halvah. As we stood in the parking lot waiting for the valet to retrieve our lime-green Opel Manta, my mom would grab my hand and, in an exaggerated fashion, swing it back and forth. She’d look at me, and I’d return her gaze with an eye roll, at which point she would burst out in joyous, uncontrollable laughter. She loved me so much …

Having a good person express how wonderful you are hundreds of times changes everything. College, professional success, an impressive mate — these were aspirations, not givens, for a remarkably unremarkable kid in an upper-lower-middle-class household. My mom was 43, single, and making $22,000 a year as a secretary. She was also a good person who gave me the confidence, while waiting for our Opel, to feel connected, and to believe I had value — that I was capable and deserving of all these things. Holding hands and laughing, I was tethered.

Life is so rich,

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