I was scrolling through old posts, figuring out how to stop torturing people with self-referential nested quotes (I’m going to turn the threaded posts into a conglomerated essay collection soon), and realized that I have made some pretty sick calls over the years. So let’s see how some of these turned out:
Doordash is finally going public, and while its business model as outlined in the linked S-1 is “food delivery middleman”, I like to think of it as a large scale bet that humans will continue to grow increasingly lazy over time. While coronavirus has been outlined as a “business risk”, though, it is (in my eyes) largely responsible for the tripling of Doordash’s Q4 2019 revenue in its most recent quarter. And why wouldn’t it be? Large swathes of the highest-demand markets have been shut down to some extent, and a majority of restaurants have been forced to do exclusively takeout/delivery for months. In their highest revenue quarter ever, though, they still lost money. I won’t speculate on the economics of Doordash - there are plenty of people who have done that already. I’m not particularly interested in how much of their revenue comes from "stealing" tips. I’m more curious about whether it’s even possible for their universe of potential customers to ever grow from peak-lockdown levels. Food delivery is inherently a convenience business, but someone who optimizes for convenience above all is the embodiment of laziness. Do we really think it’s possible for America across the board to put in the effort to min/max laziness? Certainly, there are times where the convenience is useful, but for Doordash to realistically grow its business, you’d somehow need delivery ingrained in more brains on a more consistent basis in dozens of millions of Americans forced to stay at home to entertain themselves who are already ordering delivery at a much higher clip than before. In essence, you’d need Americans to become lazy habitually (yes, yes, insert berry plant* here), rather than, at best, staying tenuously coerced into it. With every fad diet and smart-mirror-masquerading-as-“health-conscious lifestyle change” trending upwards, the number of juice bars in a 4 block radius in my old SoHo neighborhood quintupling between 2015 and 2018, and traditional processed-food companies eating dirt, shouldn’t this also be a risk outlined in the S-1? Yoinking McDonald's from UberEats exclusivity was a good first step, but it’s necessary to go further. Short of an exclusive Chick-Fil-A Sunday distribution deal, I just can’t buy in to this one.
Pretty spot on, eh? Food delivery is a constant punching bag for me (see: The ZIRP edition, Mar 2021) but its proliferation was symptomatic of the worst of ZIRP combined with a total warping of demand due to pandemic lockdowns:
I have always reviled the marketing of the gig economy as “entrepreneurship” when the reality is much closer to “preying on people desperate for income”. Remember that axiom about risk transfer externalities a few sentences ago? Well, the flood of cheap VC funding into “gig economy” companies transfers the risk of making ends meet from the business itself to the services it inserts itself into delivering and the people who facilitate the deliveries themselves. As Levy correctly notes, there aren’t sufficient margins in delivery - while food delivery startups such as Grubhub or Doordash command 10-11 figure valuations, they don’t actually make any reliable profit; rather, they are enabled by artificially subsidized cost of capital allowing them to show explosive revenue growth.
Everyoneknowsratesmustrise. The problem with a central bank liquidity-driven market, however, is that they’ve invoked a catch-22: their policy is ineffective if people do not believe that central banks have the power to control inflation, yet if they raise rates and kill speculative bubbles and hit ordinary people’s net worth, they won’t be trusted to control inflation. Thus you get this waiting game - theta decay, shall we call it? - of letting resentment build while hoping that speculative mania naturally pops (as it’s mathematically assured to once a critical mass of people become game for a little wager) so they are deemed lagging, but not responsible. Yet this simply fuels more mania, as there is simply no reason to ever sell as long as central bank liquidity is guaranteed. One wonders how much longer these options have until expiry. Certainly this is an American option, not a European, right?
A question I get nowadays is “why are shitcoins still mooning?” And this ties back to another point I made (see: Is Central Banking a Religion? May, 2023):
Inflation is a bit of a self fulfilling prophecy, and the only “inflation hedge” is to outpace the rate of inflation through rate of return. This is why owning large cap liquidity or real assets is so valuable until the speculative mania tapers off
Since June, we haven’t gone under 3% inflation. By definition, it is sticky. (Turns out, you can’t subsidize demand and blast government spending every which way and not permanently shift the dynamic). The point of rising rates is not to cull investment, but to make it smarter. But when every merger is blocked and agency heads are out of control, investment naturally concentrates (see: NVDA) or offshores. So whether it’s JEO BODEN or Southern California homes, the takeaway is as follows: if inflation doesn't fall, the only thing to do is to continue to try and outpace the rate of return.
This is the core flaw of central banking:
Belief in systems can be rooted in rational thought so long as the system is constructed logically, as mathematics and legal methodology attempt to do. The belief that a set of humans will take the right course of action consistently is more along the lines of faith.
Are policies such as inflation targeting, rate adjustments, and BTFP logically sound and checked powers, or are we just trusting a secluded group to take the right course of action?
This is a good sign the Fed has no reputation anymore. The religion, in a sense, has failed.
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