Economics

John Maynard Keynes coined the term “animal spirits” to describe the human emotions that drive consumer confidence. In today’s AI-saturated landscape, we’re witnessing new animal spirits emerge as we collectively lose touch with reality and cheer for an algorithmically-driven future filled with generated clickbait, mediocre art, fabricated “facts,” and an endless stream of low-quality content.

When examining human behavior, you can usually answer the “why?” behind most phenomena by analyzing incentives. This principle applies universally—from economics to politics, where elected officials often prioritize certain interests over broader constituent needs. There’s a reason the phrase “follow the money” has become ubiquitous. Many people skip the step of examining incentive structures, then express confusion when others act in ways that seem counterintuitive. Yet once you look at the underlying incentives, motivations typically become clear. Most of the dysfunction we see in modern capitalism can be traced to poorly designed incentive systems.

The big news today is the US Federal Reserve’s big FOMC meeting. The expectation is that the Fed will announce a big rate hike, one of the biggest in decades. The previous rate hike amounted to 0.5%, and the expectation for today is 0.75%. While it’s entertaining watching Jim Cramer and his ilk share their opinions on various matters which–I think–they likely have no clue about, it’s even more interesting learning about how institutions like the Fed really have no clue what they’re doing.

One of the hard truths in startups, especially VC funded startups, is that perception matters more than reality. Many people are able to raise vast amounts of money at high valuations on little more than excitement about the prospect of a viable business some time in the future.

Over the past few weeks I’ve noticed an increase in commercial real estate vacancies around Manhattan, especially ground level retail. Tonight on my walk, I took some photos around Flatiron, NoMad, and Union Square. A few of these places were vacant before the pandemic began, such as the Belgian beer spot, but many are recent casualties.