More Than Just Data: Flexibility does not equal 50/50, Averages can hide lots of things, Drink faster, and this might not be a great idea.

I was listening to an interesting podcast this week from the Booth School of Business (University of Chicago) which centered on a paper that Professor John Paul Rollert wrote focusing on the limitations of Capitalism. Worth a listen in my opinion, but what got me thinking is the fact that it’s human nature to try to find patterns, and that many of us seem hardwired to believe that the current trajectory will continue in perpetuity. On the face of it, trying to find patterns makes sense given our ability to reason and rationalize. However, the idea that a trajectory has to continue makes less sense.

When it comes to the trajectory of patterns there is likely an evolutionary reason for this, but the question in my mind is does it do more harm than good? This habit is certainly good for casinos (hey, I just won two hands in a row…I’m hot) since the view of success leads to more bets. Even though winning the last hand does not have any effect on your likelihood of winning the next, many of us will still connect these fictitious dots.

This phenomenon also exists with other behaviors, namely if I did something and enjoyed success that means that others must do the same thing I did in order to succeed. There are likely cases where this is true, but there are so many where it is clearly not. Take residents in a hospital setting. The data is clear that 24 hour shifts, working on next to no sleep, etc., creates negative outcomes, but changing the system is nearly impossible since current doctors slogged through the system, and the feeling is that everyone should have to. Hey it worked for them.

Our education system works in a similar fashion, the typical school schedule is roughly the same as it has been for the past 100+ years. A system built off of a mainly agrarian economy with an average of 10 weeks off in the summer. The data shows that breaks of more than 6 weeks lead to massive learning loss, yet we don’t change. This is the trajectory I was on, therefore, it should be the same for you.

The challenge with this thinking is that dynamics change and if you aren’t adjusting approaches with these changes, you are likely not enjoying the most positive outcomes possible. Understanding change and adjusting are infinitely important to just about everyone, sadly it doesn’t seem hardwired into the human brain or into our capitalistic system (if I took the right lesson away from Professor Rollert).

As always, here are some of the stories that caught our attention this week.

  1)    4 = +1

Most American workers are looking for a balance between remote work and being in the office. Don’t let that fact be conflated with a 50/50 split, and also don’t think that the exact balance is universal. Indeed, preferences on time spent in the office differ greatly by age, and they’ve also fluctuated significantly over the past year.

On average, every age group wants to be in the office a majority of their time (barely), The workers who currently want to spend the most time in the office are those in their 40s; meanwhile, those in their 50s currently want to spend the least amount of time in the office (~56% of the time), followed by workers under 30. At the same time a plurality of all workers feel they are in the office too much.

Short version is it will be tough to keep most people happy.

Three Years of our new work world

2)    +0.1=5%

Inflation has taken center stage over the past two years and the recent report seems to indicate that we are continuing to head in the right direction. In March prices rose by 0.1% which means an average annual increase of 5%. This is the lowest rate in roughly two years, and should be considered good news.

What is more interesting is when you start to look into the numbers. As is often the case, averages can hide a lot and right now there seems to be a lot of volatility in the numbers making the future hard to predict. For example, energy prices are down, food continues to be more expensive. Housing prices are down slightly, but a lot of that comes from one market (San Diego) which is odd.

Within each category, there are also big differences. When it comes to food, the average is an 8.5% increase. But that’s not an even spread. Meats, poultry, fish, and eggs are up 4.3%. Fruits and vegetables are up 2.5%, and cereals and bakery products are up by a whopping 13.5%.

If you enjoy data, this site will definitely help you not do work for the rest of the day.

 US Inflation Calculator

  3)    14% = 280,000 - $1.1M

Baseball fans already know about the new pitch clock being implemented in MLB games, but for those that don’t know, the MLB is making an effort to shorten game times with the aim of bringing in new (and keeping existing) fans who don’t want to sit under stadium lights for four hours. While it’s a great move for overall attendance rates, it also might have a negative effect on another important part of every ballpark: alcohol sales. Cutting down game times (an average of 14% of playing time) can cost ballparks anywhere between $280,000 and $1.1M according to Good Beer Hunting (I have $50 on the founders being from Massachusetts).

While the end goal ultimately will help everyone - more fans will eventually mean more sales - the rising costs of inflation won’t help cover these losses, so vendors and distributors will need to get creative to figure out what to do in the meantime.

 Change Up - Baseball Shrugs Off Pitch Clock’s Possible Blow to Beer Sales

  4)    70% - 82% = +1.5%

In the category of this can’t be good, private equity is likely to get more involved with commercial real estate. According to Bloomberg, “Shadow Lenders” are focusing on commercial real estate, an asset class that traditional banks and the bond market are increasingly backing away from, potentially forcing borrowers to start paying up for deals.

Up until recently, regional banks have made up about 70% of the commercial real estate loans made out by US banks. But the turmoil sparked by the US regional bank crisis combined with rising loan defaults on troubled properties has burned small banks, prompting them to scale back on commercial real estate lending as they reduce risk and shrink balance sheets. Coupled with the fact that the issuing of commercial mortgage bonds is down by 82% year over year, there is less incentive for banks to be involved given the cash flow limitations this combination presents.

Currently, a commercial loan is averaging about 4.5% interest according to the article and private lenders are charging around 6%. This likely will equate to higher rents, which then could mean companies looking to reduce the size of their office space, which means even more trouble for office heavy areas. Yeeeeeesh.

Shadow Lenders on the Rise

We hope you enjoyed this week’s edition and, as always, we look forward to your thoughts and hearing what stories caught your eye this week.