Industry Consolidation Could Be Holding Back Wage Growth

This article at Slate brings up an interesting hypothesis for restrained growth in wages in recent years. When companies merge, the regulatory bodies focus on the impact the merger would have on prices consumers pay for its products. However, equal focus should be placed on the impact a more consolidated market will have on employers’ power to negotiate lower increases in employee wages.

This can have an pronounced impact in smaller local/regional areas where there may be limited choice among employers for a person in a given trade.

Ellen Pompeo on Asking for What She Deserves

Ellen Pompeo is going to make $20 million per season going forward as the star of ABC’s hit TV show Grey’s Anatomy. In this Hollywood Reporter cover story, she explains why it took so long for her to ask for what she deserves. Some may think she’s being too blunt, but I found her candor necessary given the continued state of unequal pay between men and women.

Specific points that stuck out to me:

— Shonda Rhimes’s advice to Pompeo: “Decide what you think you’re worth and then ask for what you think you’re worth. Nobody’s just going to give it to you.”

— Pompeo is now 48 years old and has been playing this character on Grey’s Anatomy for 14 seasons. She is just now comfortable asking for what she deserves, something she believes only came with age.

— Pompeo: actors always want to do what they’re currently not doing. She believes the executives have a choice: you can hold actors down and attempt to control them, but if you do that, it kills their spirit and causes resentment. When she has been a director on set, she gives the scripts to actors as soon as possible and invites them to casting sessions to they feel part of the process.

Understanding the Screwy Ways We Think About Money

Eric Barker wrote a terrific summary of Dan Ariely’s new book Dollars and Sense: How We Misthink Money and How to Spend Smarter. There are many great anecdotes. A few that stuck out to me were:

Ignore “on sale” signs as well as making price comparisons on a relative basis. It doesn’t matter if an item is a ‘bargain’ if you have no use for it in the first place. Additionally, value each component of a purchase on its own. This is where add-ons to an already large purchase get downplayed because we are spending so much.

— If you want to spend less, pay for things with cash. Paying with cash actually has a similar neurological effect as physical pain.

Instead of considering if the price of something is fair, ask yourself how much you personally value that thing.

Put in place an automatic trigger to re-route some of your income into a savings or 401(k) account when you receive a paycheck. One study showed a group that did this increased their savings by 81% that year.

Don’t let the merchant set the anchor that you compare to the “sale” price (e.g. this sweater used to be $150, but now it’s only $59!). Before shopping for something, go in with a mindset of what you expect to pay and use that as your comparison instead.

Hospitals Often Ill-Prepared to Treat Dementia Patients

The piece below from the Boston Globe sheds light on how the natural environment of a hospital is not conducive to treating dementia patients. Massachusetts is one of the first states attempting to create a set of guidelines that hospitals can follow to better welcome these patients and their families.

The article is not too long and worth a read if you have interest.

Boston Globe

The Difference Between Risk and Uncertainty

This piece by Ben Hunt, The Three-Body Problem, is very good. It starts with fascinating insights into how bees prepare for and survive winters in the northeastern US where Ben lives.

My notes from Ben’s piece are below:

One must understand the difference between risk and uncertainty

Risk is when you have a decent sense of the odds and payoffs. You can apply statistical methods to these decisions, especially when you will be able to make this decision many times.

Uncertainty is when you do not have a good sense of the odds and payoffs. In this case, relying too much on statistical models could kill you, especially if you don’t know how many chances you have or the number of chances is limited. In this situation, game theory needs to be incorporated.

The Three-Body Problem

This is when it is impossible to predict where three variables will be in the future using algorithms that look at the variables’ history. Instead, your only chance of approximating where they will be in the future is by solely looking ahead.

Today, a characteristic (e.g. high-quality company) leading to better performance in that company’s stock is overwhelmed by the actions of a third variable: the monetary policy of central banks.

One’s best strategy in this scenario is to diversify across geographies and asset classes, and, instead of attempting to maximize return, seek to minimize maximum regret (‘minimax’). Each person’s minimax regret is subjective. For some, it might be financial ruin. For others, it may be earning a lower return than their peers.

                It’s important to not rely on computer algorithms to make our decisions during this stage. We’re hardwired pattern-seeking machines, but we must think beyond that. Be humble in knowing we will never understand how a chaotic system like this works, but we can approximately try.

It’s tough to resist The Answer because we want there to be an all-knowing, all-useful solution. Closed-form solutions like this don’t exist though.

Hurdles to Electric Cars Taking Over the World

This summary from the NY Times outlining what has to occur for electric cars to be the dominant automobile on the planet was terrific. I wanted to condense it here:

#1: The cost to construct the motors and components must come down further: The prices for the batteries that go in electric cars have fallen by more than 50% since 2011. However, the powertrain for an electric car still costs $16,000 compared to a $6,000 cost in a car with an internal combustion engine (ICE). It could be another 6-7 years before the costs are equivalent.

#2: The elements needed to make batteries need to be in large supply working through an efficient supply chain: The resources used in batteries for electric vehicles include cobalt and lithium, commodities that have little use in conventional cars. There are two potential issues here: first is mining enough supply to match the fast-growing demand, and second is where the resources are located. For instance, most of the world’s cobalt comes from the Democratic Republic of Congo, a historically unstable area.

#3: More charging stations, lots more charging stations. And the charging needs to be faster: The number of charging stations in the US has gone from several hundred in 2010 to 16,000 today. That’s a good start, but it is still far behind the 112,000 gas stations located in the States.

#4: Users must adjust to the differences of driving an electric car: There is no engine sound, or smell of gas or exhaust. They accelerate faster, and hug lower to the ground. It will be cheaper to maintain over time. Some of these are positives, but drivers will still need to adapt.

#5: Car companies are going to need to invest a lot of money upfront: And we don’t know what the auto transportation environment will look like by the time electric and hybrid vehicles become more mainstream. How cars are sold by dealers and how they’re used by consumers is still up for debate.