Month In Review
Inflation, Inflation Everywhere, and Not an Americano to Drink
After adjusting for inflation, wages and salaries declined 3.5% year over year during the second quarter. With inflation running at its highest level in 41 years and wages not keeping pace, reduced purchasing power is forcing Americans to change their lifestyles in ways large and small. Earlier this month, the WSJ profiled Greenwich, CT resident James Duffy, a 25-year-old residential counselor. Duffy has substituted his store-bought Americanos for coffee brewed at home, and is even debating how many bags of chips he really needs to buy. About a third of employers, including large firms like T. Rowe Price and Exxon Mobile, are responding to the situation by considering or planning midyear raises, according to a survey of more than 300 large employers conducted in May by Pearl Meyer, a compensation advisory firm. “The market has moved,” said Michelle Swanenburg, head of human resources at T. Rowe Price. Hopefully, it will move faster so that Mr. Duffy can resume his Americano purchases and indulge in an extra bag of chips.
Speaking of Drinks, the Post-Pandemic Hangover is Brutal
During the pandemic, there was a heated debate as to whether the rapidly accelerating growth in e-commerce and streaming media would reverse as the world reopened or whether these markets would continue to grow off of a higher post-pandemic base. It increasingly appears that those who bet on the reversal scenario were correct. Companies like Shopify and Roku, who aggressively grew their workforces and overall cost structures based on the assumption that strong sales growth would continue, are reeling as the double whammy of slower sales and higher costs erases profits.
Tech Company Layoffs Abound
Getting back to Shopify, the market was prepared for the Canadian online storefront and payment services provider’s disappointing results. Shortly before earnings, Shopify announced a 10% reduction in force. In a blog post announcing the layoffs, CEO Tobi Lutke wrote, “what we see now is the [e-commerce] mix reverting to roughly where pre-Covid data would have suggested it should be at this point.” Shopify is certainly not alone in announcing reductions in hiring or layoffs. Companies in other industries with particularly brutal post-pandemic hangovers, like online trading platforms (Robinhood, Coinbase) and at-home fitness products (Peloton), have announced significant layoffs, while even far better-positioned companies like Microsoft, Google, and Apple have reduced hiring plans. Tesla is also planning to lay off 10% of its workforce, though CEO Elon Musk clarified: “Note, this does not apply to anyone actually building cars, battery packs or installing solar.” Not exactly a reassuring message for the remainder of Tesla’s nearly 100,000 worldwide employees!
Speaking of Musk, the Saga Continues (Shocker!)
We were completely shocked (not!) by Elon Musk’s decision to back out of his acquisition of Twitter. In a (oh, the irony) Twitter post, Musk mocked the company for filing a lawsuit to force him to close the transaction. While Elon *technically* signed a contract obligating him to buy the company, Musk is arguing that the company’s failure to provide data on how many of its subscribers are bots means that he does not, in fact, have to purchase the company. While Twitter *did* disclose as a risk factor in its SEC filings that approximately 5% of its subscribers were bots and that this was only a relatively unreliable estimate, Musk is undeterred. According to Twitter, “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests. Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.” Isn’t the world’s richest man entitled to do such things? Time (and a Delaware judge) will tell!
Lighter Notes
– Take the Money and Run. A worker at a Chilean cold cuts company who normally received a paycheck of $555 was accidentally paid $183,593. After reporting the overpayment to a manager, the company told him to go to his bank to initiate the return of the money. He promised to go there the next day, which he did, but not to return the money! After three days of calls and WhatsApp messages, the company got a message from the worker’s lawyer offering his resignation. Since then, no one has heard from the worker.
– Pighearted. Surgeons at NYU successfully transplanted genetically-engineered pig hearts into two brain-dead people, moving a step closer to a long-term goal of using pig parts to address the shortage of human organs for transplant.
– The Power of Strong AC. In the sweltering summer heat, industrial-strength air conditioning is luring people back to the office. Eric Busseau, a 28-year-old financial consultant in Chicago, says he now decides whether to go to the office based on how hot and humid the forecast says the day will be. “I live in an apartment from like 1924, and I’ve got window air conditioners,” he says, “but it does not compete with the industrial-strength air-conditioning of my office tower.”
– Water Cooler Zoom? Friendships born at the proverbial water cooler have long influenced workers’ careers and personal lives in profound ways. Today, people are finding it difficult to replicate the water cooler experience over Zoom. Andrew Pauly, 32, who works at the Planetary Society, attended a virtual watch party of “2001: A Space Odyssey” with his teammates. “It looks like the real thing. It tastes like the real thing,” Mr. Pauly said. “But our brains know it’s not the real thing.”
– Bend and Blaze. This Brooklyn yoga studio touts “a higher yoga experience,” and it means that literally. Participants are invited to smoke marijuana during the session.
“People want the community, they want to find their stoner circle, they want to find this connection,” says Bend & Blaze instructor Amanda Hitz. Ms. Hitz notices that students in her cannabis-infused classes seem particularly flexible—and laid back.
Image of the Month
U.K. Prime Minister Boris Johnson Resigned on July 7th Following a Series of Scandals
