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

Click HERE to SIGN UP for SITALWeek’s Sunday Email.

In today’s post: vintage TV ads from the 1980s and 1990s offer an abundance of perspective and lessons on our world today; another breakthrough in protein modeling should accelerate drug discovery; a little fiber doesn't hurt; misguided interest rate policy from the Fed isn't just a short-term issue, it's also delaying the green transition of the global economy. 

Stuff about Innovation and Technology
Lessons from Vintage Advertising
The term nostalgia has come to mean “a longing for the past”, but the word was originally coined to describe a type of mental illness related to homesickness (it’s derived from the Greek words meaning “homecoming” and “pain”). Recently, the YouTube algorithm got me hooked on watching commercials from the 1980s and 1990s (aka, my formative years). There are countless, hours-long videos that string together all sorts of TV ads. While it’s nostalgic (using the modern definition of the word) to see the ads and be reminded of so many forgotten habits of my youth, a few educational lessons began to emerge after a few (I won’t specify how many!) hours of watching, including one that is more befitting of the original, more painful definition of nostalgia. 

First off, these ads were effective: I remember almost every single ad, promo, preview, etc. I could instantly sing along to every four-decade-old jingle without missing a word...advertising works! Second, it’s fascinating to see how many top brands from that era simply don’t exist anymore. Entire product categories like film cameras (including the first disposable film cameras, various film brands, and film development services) that dominated ad breaks are completely non-existent today. Likewise, fads like low-fat diets and low-cholesterol substitutes that permeated the vernacular in the late 1980s proved rather ephemeral. More durable exceptions include the fast-food and beverage industries. For example, Diet Coke arrived on the scene in 1982 (and needed commercials to explain to consumers why they would love it: “just for the taste of it...Diet Coke!”) The majority of the fashion brands and retail chains that dominated ads back then, however, have vanished. The trend of rising and falling products, brands, and industries is something I’ve also noticed when watching vintage episodes of The Price is Right (if you’re interested, the Pluto TV app from Paramount has two 24/7 TPIR channels for the Bob Barker and the Drew Carey eras). 

A third lesson is about inflation and deflation. Remember the McDonald's McLean Deluxe? (Another non-tasty failure). You could get that in one of the first “value meals” for a couple of bucks. In 1985, when combo meals arrived on the scene, the Big Mac Value Pack was $2.59 (depending on where you were in the country). Today, here in California, the smallest sized Big Mac value meal runs around $13, and that price is set to go up with the recently passed minimum-wage laws for fast-food workers. That’s a little over a 4% annual inflation rate for the “value” meal, which comes in spite of the creation of the industrial agricultural complex over that period, which one might have expected to have made food production more efficient, and thus less prone to inflation. And, that level of inflation doesn’t even account for any alleged burger patty shrinkage. But, what about deflation? There’s the obvious point that we now have a single smartphone that can do the job of 1980s cameras, TVs, game consoles, calculators, etc.; and, in general, electronics have not gone up much in price and in most cases have declined materially. Other categories stand out. The VHS tape for the original 1983 Top Gun sold for $26.95. Now the movie is available in a streaming app for ~$10/month, along with thousands of other titles (including its sequel). Large portions of consumer discretionary spending have completely morphed, with some shrinking, some rising, and many disappearing, like newspaper and magazine subscriptions. Advertising traces the waves of globalization that heralded more value for the price, like the rise of the Japanese car makers, followed by the South Korean brands a decade later. A trip through this advertising time capsule highlights the considerable tumult across the consumer spending economy and recalls the Crimson Permanent Assurance battling the The Very Big Corporation of America in Monty Python’s The Meaning of Life.

Surveying these tendencies for some products to inflate while others deflate, or even be entirely displaced, highlights the differences between the analog and digital parts of the economy. There is no Moore’s Law for beef patties. It’s almost too easy to contrast the lack of innovation coupled with the ongoing consolidation in many analog industries that has led to increased prices and often price collusion, resulting in a large part of the economy being frozen in time, vs. the creative disruption and inferno of innovation in the digital world. Many legacy, analog sectors in the economy remain ripe for disruption, but regulatory capture, consolidation, a lack of adaptability, and low non-zero-sumness are keeping them from progressing.

The last salient theme I noted from my journey through the commercials of my youth was the common culture reflected in the ads (as well as the shows, movies, and sporting events in which they were embedded). Every event, product launch, movie premier, etc. was experienced by a meaningful percent of the population at the time. Or, if we didn’t experience them firsthand, advertising certainly made us all aware of what everyone else was experiencing. I’ve lamented the loss of these common cultural elements in the past, as it seems very unlikely that, in today's fragmented day in age, very many of us could sing a jingle from a new product launch (unless of course it’s a Taylor Swift album). It’s increasingly nostalgic (in both senses, I believe) to think about a society of folks tuning in for a common experience. Perhaps some of this monoculture loss is for the best; but, overall, our painfully fractured and polarized society keeps me longing for my temporally distant youth. 

Commercial, Clean Hydrogen Power
Duke Energy is breaking ground on a 100% clean hydrogen end-to-end power system in Florida. Electrolyzers powered by excess solar will split water into hydrogen and oxygen. The hydrogen will be stored and then burned for fuel in modified GE turbines that can run on up to 100% hydrogen (or a mixture of hydrogen and natural gas) when extra power is needed. 

AlphaFold Enabling Drug Design
The latest version of AlphaFold can solve protein structures that contain non-protein elements, like nucleic acids, ligands (e.g., signaling molecules and synthetic drugs), and PTMs (post-translational modifications of the protein structure). This advance is hugely significant for both drug design and modeling of biologically relevant proteins, as PTMs (of which there are hundreds of types) often alter both structure and function of proteins in critical ways that the bare-bones instructions encoded by DNA/RNA fail to capture.

Miscellaneous Stuff
Boosting Natural GLP-1s
If you’re looking to get the benefits of GLP-1s without jabbing yourself in the stomach, NPR suggests adding a bit of barley to your diet. When the high-fiber grain is consumed by bacteria in the large intestine, the breakdown of beta-glucan (a soluble, fermentable fiber also found in oats and rye) triggers the release of small amounts of GLP-1. The big difference is that elevated levels of GLP-1 from high-fiber foods are fairly short-lived, whereas the GLP-1-mimetic semaglutide drugs are more stable so they can disperse throughout the body and remain active for a prolonged period. This omnipresence is what causes the bigger decrease in appetite and other cravings as opposed to just helping you feel a bit fuller at your next mealtime.

Stuff About Demographics, the Economy, and Investing
High Rates Hurt Green
High interest rates and general lack of demand are cramping the green economic transition, as many green energy projects are no longer penciling out to positive returns thanks to heavier borrowing costs. In one example, Danish energy company Ørsted recently cited high borrowing costs as one significant reason for canceling US offshore wind projects. While government stimulus like the Inflation Reduction Act is aimed at subsidizing and incentivizing green investing (amongst other goals), the higher cost of money coupled with higher cost of materials may strand stimulus dollars. Further slowing the green transition is the weakening of consumer interest in EVs, particularly in the US, which is causing tens of billions of dollars of delays or cancellations in battery and other EV projects. As I’ve argued in the past, today’s high rates are backwards looking and overly penalizing, creating existential risk to our highly levered economy (not to mention highly levered governments) and fail to take into account the oncoming wave of productivity from AI and other technological advances. Central bankers’ misguided policies are even now perversely causing the inflation they are trying to fight. Anyone arguing that “this time it's different” and rates need to stay higher for longer is wildly missing the big picture: the multi-decade trend of accelerating deflationary pressure from technology is only going to get stronger.

✌️-Brad

Disclaimers:

The content of this newsletter is my personal opinion as of the date published and is subject to change without notice and may not reflect the opinion of NZS Capital, LLC.  This newsletter is an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry. 

I may include links to third-party websites as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by NZS Capital, LLC. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which NZS Capital, LLC has no control. In no event will NZS Capital, LLC be responsible for any information or content within the linked sites or your use of the linked sites.

Nothing in this newsletter should be construed as investment advice. The information contained herein is only as current as of the date indicated and may be superseded by subsequent market events or for other reasons. There is no guarantee that the information supplied is accurate, complete, or timely. Past performance is not a guarantee of future results. 

Investing involves risk, including the possible loss of principal and fluctuation of value. Nothing contained in this newsletter is an offer to sell or solicit any investment services or securities. Initial Public Offerings (IPOs) are highly speculative investments and may be subject to lower liquidity and greater volatility. Special risks associated with IPOs include limited operating history, unseasoned trading, high turnover and non-repeatable performance.