Oct 18 Wage Growth, Inflation outlook, Digital Health, Sec 230, Crypto Abstraction, Defining Change Leadership

🎧 Listen to this on the S3T Podcast!

In this Edition of S3T:

• 📈 Wage growth outpaces inflation: Average salary grew by 4.4% in 2023, surpassing inflation at 3.4%, boosting consumer confidence.
• 💼 Infrastructure investments benefit GOP districts: Republican districts received 4x more funding from the Inflation Reduction Act despite opposition, fueling job creation.
• 🏥 Digital health investment shift: US digital health deals declined in Q3 2024 as investors explore opportunities outside the US, indicating a shift in focus.
• 🔗 AI and crypto convergence: Major players like Larry Fink highlight the potential of blockchain to enhance AI-powered analytics and reshape financial infrastructure.
• 🔐 Crypto abstraction for usability: New design trends in crypto aim to simplify the user experience, hiding complex elements like gas fees to mirror Web2 apps.
• 🖥️ Section 230 debate: Calls to update Section 230 focus on balancing platform accountability for harmful content with protecting free speech online.
• 🚀 Change leadership focus: Learning series emphasizes the importance of prioritization, execution, and empowerment in driving effective change leadership.

Opinions expressed are those of the individuals and do not reflect the official positions of companies or organizations those individuals may be affiliated with. Not financial, investment or legal advice, and no offers for securities or investment opportunities are intended. Mentions should not be construed as endorsements. Authors or guests may hold assets discussed or may have interests in companies mentioned.

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Wage growth vs. inflation numbers and other good news

Markets set new records this week as monthly retails figures beat forecasts, and the Economist issued a report titled "The American economy has left other rich countries in the dust ...with a brazen subtitle: "Expect that to continue."

The average salary grew by 4.4% in 2023 while inflation as averaged by the Consumer Price Index grew 3.4%. For this and more figures including averages state by state see USA Today's aggregation of Bureau of Labor Statistics page.

This BBC piece points to several reasons for the continuing good news: noting our flexible labor market, energy exports, and robust immigration.

Government investment has also played a role: as noted recently, the Inflation Reduction Act sent $Billions in infrastructure investments and jobs to congressional districts across the US - with an interesting twist: Republican districts received 4x more $$ than Democratic districts in spite of the fact that Republican representatives unanimously voted against IRA.

Related: Greg Larkin and team study the evolution of dependence on government - county by county across the US 1970 to present.

Inflation outlook connected to the election

A Wall St Journal quarterly survey of economists has found that most economists believe that inflation, interest rates and deficits will be worse under a Republican administration than under a Democratic one. This may seem counterintuitive to many so I wanted to dig into the underlying reasons.

One reason noted in the article and its accompanying video: Trump's tariffs have proven to be counterproductive, causing prices to go up ...even prices of the US made products. Why? Because the rising prices drive demand for cheaper products (and because companies tend to set raise prices when they see competitors doing the same).

The accompanying video notes that the tarriffs did prompt some foreign companies (like Samsung) to build factories in the US which then created jobs. But when you factor in the additional costs from higher prices, the math still didn't work...each job created cost the taxpayers a multiple of that job's annual salary.

See also: Financial Times International Inflation and Interest Rates tracker

Healthcare: Keep an eye on this

CBInsights says, the US share of digital health deals dropped sharply in Q3 2024 as investors become more interested in healthcare opportunities outside the US. I'm honestly not sure anyone yet has a clear view on that this means, but we have seen:

• the digital health investment theme run its course,
• "mass extinction event" among startups, as noted by Tom Loverro
• failure to make much significant progress on making healthcare more cost effective or affordable.

So is this simply US investors dropping out of digital health? Or is this US investors seeing real opportunities in other regions that are actually not available in the US? Let's see what we learn in the days and weeks ahead.

AI Crypto Convergence for Investors

As noted by NLW this week, Larry Fink (Black Rock) joined those who see a convergence between crypto and AI, saying blockchains can add value to AI powered analytics and give investors much better data than they have now.

In yet another indicator of the coming change to the world's financial architecture, Maya Zahavi chimed in saying Fink is positioning crypto "as a conduit with AI for a different financial infrastructure."

Permissionless Crypto Conference Theme: Crypto Abstraction

As noted by the Bankless Podcast, X commentator Shaa.eth shared 5 Takeaways from Permissionless, one of the larger crypto conferences Oct 9-11. (See Permissionless site here). The 2 that caught my attention were once again, AI, and also a new one "crypto abstraction."

Crypto abstraction refers to a design approach that intentionally shields the user experience from the unique transaction elements of crypto (for example paying "gas" fees for routine transactions). This marks a continuation of crypto's maturity toward true usability.

Most of the DeFi or Web3 apps I've used have had a clunky user experience. And for a long time the industry seemed to be content to just let customers "deal with it." I noticed a shift in 2023, when sessions at Eth Denver seemed to have a recurring theme of improved customer experience and ease of use. Now, the new trend appears to be, design the app to work like Web 2 apps and just basically hide the crypto aspect from the user.

Rethinking Section 230

Originally intended to promote the growth of the Internet by protecting platforms from lawsuits over third-party content, Section 230 of the Communications Decency Act of 1996 is being reconsidered.

Critics including concerned parents whose children have been impacted, are charging that big tech companies are evading even reasonable responsibility, putting profit over customer safety.

They have a point, as repeatedly witnessed in the family tragedies recounted in this long and heartbreaking read.

"Zuckerberg...personally rejected a request for some eighty engineers to insure well-being and safety...the additional staff would have cost Meta 'about fifty million dollars in a quarter when it earned $9.2 billion.'” - New Yorker

The fears of 1996 - that a promising technology would be snuffed out by legal liability - should be completely put to rest by a casual glance at the profits of today's social media companies.

Change Leaders who want to advocate for updating Section 230 may want to consider the following proposals to address concerns about online content while preserving internet innovation:

• Carve-outs for harmful content: Narrowing Section 230 protections by removing immunity for platforms that knowingly allow harmful content like terrorism, child exploitation, or illegal drug sales.
• Algorithm accountability: Limiting protections for platforms that amplify harmful content through recommendation algorithms, holding them liable for resulting harm.
• Duty of care: Requiring platforms to take reasonable steps to prevent harm while retaining some Section 230 protections.
• Transparency and reporting: Mandating platforms to be more transparent about their content moderation practices and impose stricter reporting requirements.

These ideas can be shaped to strike a balance between protecting free speech online and addressing growing concerns about harmful content, particularly in the context of mental health and societal harm.

This issue is tied to the broader issue of our understanding of free speech - its purpose, and where we draw the line between beneficial free speech vs harmful noise and misinformation, and between government censorship vs preserving the ability of communities and individuals to protect themselves and their children from unwanted or harmful content.

Change Leadership Learning Series - Learning Segment #2 :

🗺️ Defining Change Leadership

Welcome to your weekly learning segment on Change Leadership!

Looking at the world through the lens of change leadership will give you better ways to:

• learn,
• prioritize,
• execute,
• empower others,

and above all: demonstrate top-tier effectiveness and maximize your impact. 

So what exactly is change leadership and what do we mean by it? Why is this phrase so important and how is it different from other similar-sounding concepts - like change management?

In Change Leadership Learning Segment #2 you will learn how to define change leadership, and you will learn how to measure the success of a change leadership initiative.

Click here to access Change Leadership Learning Segment #2 now.

Thank you for reading and sharing S3T! Have a wonderful week!