My, What Big FAAMGs You Have
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Feeding the FAAMG That Bites You
In America, we like everything big – big cars, Big Gulps, big honking technology companies. Cars, sodas and tech are all basically fine. But we often take them to extremes that are bad for us.
Noah Smith today examines a surprising conundrum of the U.S. economy – startups are dying:
Some of this has to do with the rise of big-box stores (there’s that size thing again) discouraging the creation of new local businesses. But technology startups are also in decline, which seems a little more surprising. One possible explanation is that our most gargantuan tech companies – Amazon.com Inc., Alphabet Inc., Apple Inc., Facebook Inc., Microsoft Corp. (often shortened to FAAMG, like it or not), worth a combined $3.9 trillion – are strangling innovation by discouraging new tech startups.
“Suppose I have a great idea for a new kind of algorithm to match customers with products,” Noah writes. “I could start my own online retailer built around that algorithm, but Amazon could just copy it (rather than acquiring my company), so I don’t.”
At least give Apple credit for recognizing there’s a problem, I guess; it’s the first step in recovery, after all. But without real reform, calls to break up Big Tech will only grow louder.
Find a Cure for Expensive Insulin
The discovery of insulin as a treatment for diabetes happened nearly 100 years ago, and yet insulin is still too expensive for about half of the 100 million people around the world who need it. That’s because drug makers keep finding new ways to tweak the formula to extend their patents and raise prices, write Bloomberg’s editors. Governments need to find new ways to stop this.
Depending on how you read the data, the economy exists in a quantum state of being both strong and weak. Brian Chappatta, for example, notes that wages may be rising, and inflation overall may seem tame. But wages are only barely keeping up with the kind of “bad” inflation – on stuff like tacos and gasoline – that especially bothers consumers.
And Danielle DiMartino Booth looks beyond the decades-low unemployment rate to see incipient signs employers may be losing their appetite for new hiring.
So what do you do with this info if you’re the Federal Reserve? Err on the side of letting the economy run hot for a little while, suggests Karl Smith. It's a lot easier to clean up that mess than to revive an expansion you kill prematurely.
In the Long Run We Are All Dead
Warren Buffett and Jamie Dimon, speaking for a group of CEOs called the Business Roundtable, argued in a Wall Street Journal op-ed last night that public companies should stop forecasting quarterly performance. They want to curb what they call runaway short-termism that does damage to long-term value. Stephen Gandel responds that investors have already ceded so much power to near-omnipotent CEOs (like Buffett and Dimon) that holding companies to quarterly guidance is just about the only power they have left. And Matt Levine points out that of course CEOs would rather not be held to short-term targets, but it’s a way for them to build long-term trust with investors.
China’s debt mountain could be scarier than it looks on the surface, warns Anjani Trivedi.
Not long ago, the Permian shale sector was untouchable. Now it’s M&A bait, writes Liam Denning.
President Donald Trump’s SEC chairman Jay Clayton hasn’t exactly been scaring the world with his fines, observes Stephen Gandel.
Trump is likely to be the anti-Reagan when it comes to union-busting. – Conor Sen
Trump doesn’t understand that negotiations can be win-win; instead, his tend to be lose-lose. – Justin Fox
There’s a good reason nobody cares about Fidelity Magellan’s comeback – most actively managed funds are no longer necessary – Nir Kaissar
Italy shouldn’t expect the European Council to give it any special treatment. – Ferdinando Giugliano
A backwards attitude to LGBTQ rights is holding back Asian financial centers. – Nisha Gopalan
TV used to unite the country; now it makes our divisions worse, writes Kara Alaimo.
If you grew up in the ‘70s or ‘80s and have kids now, then your kids are probably missing out on the experiences that make up your fondest childhood memories – stuff like reading books and not being on a stupid device all the time.
Note: Please send books, suggestions and kicker ideas to Mark Gongloff at email@example.com.
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