Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, butterflies, and whatever else made me think last week.

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In today’s post: the pandemic has had surprisingly few long lasting impacts so far, but the effects of a changing labor composition and our escalating smartphone usage are hastening technology adoption; eventually all payment options become a digital wallet; a record year for stock market flows, and a near record year for IPOs; VR, from motion sickness to pain management; and much more below.

Stuff about Innovation and Technology
VR’s Inverted Kinetosis
Visually-induced motion sickness (VIMS) is a problem for a lot of people using full-immersion VR. The brain is constantly trying to predict the immediate future and place ourselves in that future position. When the prediction doesn’t match sensory data, the brain updates the prediction until it matches. VR throws a wrench into this system by creating an often dramatic mismatch between our visual and vestibular (motion detecting) inputs. Typically, motion sickness is caused by motion that is detected in the inner ear but not seen, whereas VR creates motion that is seen but not felt. It’s likely that an inability to resolve prediction failures is what causes VIMS, according to an article in Frontiers in Human Neuroscience. While still speculative, the researchers note a decrease in information flow to the areas of the brain involved in vestibular signals, which may be the brain’s attempt to stem the influx of contradictory data. Motion sickness is seen in other mammals, and even fish, indicating it’s an ancient feature of the brain, one that’s perhaps related to detecting and protecting against exposure to neurotoxins. The vestibular system also happens to be very close to the part of the brainstem that induces vomiting. As there doesn't yet seem to be any practical way to avoid VIMS, AR that allows some grounding in the real world is likely superior to VR for any activity that involves simulated movement.

VR Pain Management
The FDA has approved EaseVRx to treat chronic low back pain. The at-home VR-based system uses cognitive behavioral therapy and interoception for seven minutes a day over eight weeks as a boost to traditional mindfulness and breathing techniques to break patterns and refocus the mind away from pain. Chronic pain can linger for months or years after the body has already healed from an injury, but with a tool like EaseVRx 66% of the patients in the trial saw a greater than 30% reduction in pain. Interoception teaches us that we have an ability to listen to internal signals from the body, not just the external stimuli in the world (see #272), and the work of the late Dr. John Sarno reveals that chronic pain can often (but, obviously, not always) be intercepted/eased by psychologically addressing the mind-body connection. These techniques are available without VR, but perhaps the added element of immersion will make it easier to practice them. No word yet if there will be a VR program to treat chronic motion sickness from VR.

Amazon’s Terra Firma Acquisitions
Commercial real estate data provider CoStar reports on Amazon’s land grab for US fulfillment space. In a departure from its near-exclusive leasing policy, in 2021 the ecommerce giant acquired 2,200 acres of land for new warehouses and data centers because commercial developers in certain key locations were not keeping pace with enough finished buildings to lease. In Ohio, 700 acres of purchased land will be dedicated to AWS data centers. (Note: the video at the top of the CoStar article contains much more information than the article.) Although the shift to ecommerce was not dramatically accelerated by the pandemic (see last week’s newsletter for the numbers), substantial growth in overall retail demand still translates to significant growth for ecommerce, and, therefore, massive demand for logistics and warehouse space. Amazon's scale and pace of growth in physical space remain challenging for smaller rivals to match.

Digital Wallet Profusion
Buy Now, Pay Later (BNPL) apps appear to be morphing into multipurpose digital wallets, with the single form of digital payment serving as a jumping-off point for building more extensive customer relationships. Klarna is now offering a “Pay Now” option that’s linked to checking accounts, as well as a “Klarna Kard” for offline installment purchases. The BNPL app Affirm has introduced a debit card for physical transactions. They have also expressed “super app” ambitions in payments and will be joining digital wallet incumbent PayPal and other challengers (e.g., Square, Shop Pay) vying for digital transactions. With the rise of so many convenient digital wallet options, entering a credit card number may fast become a thing of the past. As the wallets all grow in size, the fungibility of payment mechanisms inside the apps will likely also increase. The more speculative question is whether the wallet apps themselves will become marketplaces and hubs for ecommerce search and shopping, and whether any of them will become large enough to offer their own closed loop form of payment, cutting out banks and cards.

5G Clickbait
There has been a lot of bad reporting on the FAA looking into potential interference from C-band wireless signals on airplane altimeter function. Much of the sensational reporting is erroneously lumping all 5G signals into the temporary, narrow throttling of power the carriers have agreed to do nationwide, especially near airports. The power down actually only involves the small swatch of spectrum between 3.7-3.98 GHz that was auctioned by the Federal Government in 2020. While this FAA investigation may reflect an abundance of caution, it seems to be more political theater than anything else, as two congressional members are behind the yellow flag. Altimeters receive signals in the 4.2-4.4 GHz range. If interference between bands separated by 200+ MHz were even remotely routine, it would wreak havoc with all sorts of radio communication. So, don’t stop flying (well, maybe cut back a bit if you are a one-percenter per the next paragraph) or bust out your tinfoil hats because 5G, as with all non-ionizing radio signals, is still safe (see also #202).

Miscellaneous Stuff
Commercial Aviation’s Carbon Footprint Power Law
As I read this stat from a year ago that ~1% of the world’s population is responsible for half of the carbon emissions from commercial flights, I couldn’t help but think that a focus on thoughtfully taxing carbon emissions is needed to change behaviors and put the burden of offsetting burned carbon on the companies and those of us who are responsible for it.

Protecting Pollinators
Buried in the $1T US infrastructure bill is a combined $260M for rehabilitating pollinator habitats along roadways throughout the US. The largest program is the $250M Monarch Action, Recovery, and Conservation of Habitat Act, which aims to replace (over the next five years) invasive species with native plants friendly to bees, butterflies, bats, and birds. The western monarch butterfly population has dropped to only 1% of what it was in the 1980s.

Stuff about Geopolitics, Economics, and the Finance Industry
IPO’ing Like it’s 1999
Bloomberg reports that US stock fund inflows in 2021 (year-to-date) amount to more than the last 19 years combined. The ~$900B windfall, a likely result of fiscal stimulus, excess money searching for a home in a world of low rates, and increased retail investor activity during the pandemic, boggles my mind. ETFs took the lion’s share of equity flows at $785B vs. only $108B for mutual funds. The flows have driven stocks to near-record valuations, which, in part, reflect low rates and the lower return thresholds for investors in addition to basic supply-and-demand dynamics as money sloshes around. What’s remarkable is how well markets have done over the last two decades without these types of large inflows. Buoyed by corporate stock buybacks, M&A, private equity takeouts, and a dearth of IPOs, the markets moved higher as the denominator of total buyable shares shrank (PDF), though the smaller base alone doesn’t account for the magnitude of the increased valuations. The denominator reversed this year, with a huge pickup in IPOs and SPACs, but the inflows were more than enough to absorb the supply. 2021 has so far seen 375 traditional IPOs, a trend unrivaled in the past two decades (not since 1999’s 547 and 2000’s 439). In a related sign of the times, S&P has launched the Twitter Sentiment Index using $cashtag Tweets to track sentiment as retail investors have flocked back to markets. As we are fond of saying, the range of outcomes is widening.

Repackaging Climate Change
The Guardian reports that some leaders on the right are shifting from climate change denial to embracing the problem so that they can use it to drive fear of increased immigration. There is likely to be widespread climate-related diaspora in the coming decades if the Earth continues to warm and many regions become uninhabitable (see #256). Perversely, if this amped up xenophobia turns into broader support for climate proposals, it could be a net positive for planet Earth and the people on it, but the continued loss of immigrants into the developed world has negative economic implications as well.

Pandemic-Spawned Digital Butterfly
Predicting the future is impossible – that’s the lesson from complex adaptive systems. Therefore, you want to focus on adaptability and win-win outcomes, which are the ancient truths that guide long-term evolution in any complex system like the global economy. There have been many predictions since the start of the pandemic about what might or might not change, what will stick or bounce, and where the world will end up on the other side. The jury is still out on many predictions, such as the rise in ecommerce as a percent of total retail spending, which has turned out to be not far off the pre-pandemic trendline (see #323). Other pandemic changes seem to have been somewhat temporary, such as telehealth, which is being rolled back in some US states. Indeed, most changes happening in the economy since the pandemic started may simply be a result of all the fiscal and monetary stimulus. In other words, excessive spending in all corners of the economy might be masquerading as behavior changes related to the pandemic. So far, evidence of long-term structural changes is muted or even scarce, with two notable exceptions. First, the pandemic has driven a difficult-to-reverse increase in our addiction to our smartphones thanks to their plethora of distracting social media, gaming, and video apps. Second, there has been a significant compositional change to the labor force. Some meaningful percent of workers (in the US, UK, and parts of Europe) have either left the workforce or shifted to different types of jobs (e.g., from working in a restaurant to doing customer service from home). As we’ve discussed ad nauseum, a combination of early retirements, shift to single-income households, relocations, rising work from home, declining immigration, increasing deaths, and changing demographics (see #320) have reshaped the labor force over the last two years. These labor changes also seem to be closely tied to the pandemic-related prediction of accelerated technological use/implementation across the economy: a fear of labor shortage and risk of rising wages have companies searching high and low for ways to automate jobs, both blue and white collar.

Most tax-filers who survived the pandemic seem to be financially better off following many months of government payments and low interest rates. While the rising economic tide lifted most boats, allowing millions to exit the labor force, it also preferentially inflated the bigger boats and increased the gap between the asset-owner economy and the asset-renter economy (e.g., rapidly rising home prices favoring owners over renters). When, or perhaps it’s still “if”, the money flows back out of the economy with a decline in government stimulus, we may see that the world still looks a lot like it did in 2019. Like the butterfly-effect in chaotic, complex systems, it wasn’t the pandemic itself but rather the unpredictable, emergent impact on the labor force and our increased addiction to screens that may boost the automation of jobs over the long term and accelerate the analog-to-digital transition of the global economy.
✌️-Brad

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