Lunch at the Labs

Various web links I found to be of interest recently.

• Is Demography Destiny For US GDP Growth?

  The future is still uncertain, of course. But to the extent that demography dictates economic growth, the case appears weak for predicting a significant acceleration in the macro trend. That doesn't preclude an encouraging pop in growth for a quarter or two every so often. But assuming that output will rise on a sustainable basis for the longer run is probably assuming too much.

• Corporations in the Age of Inequality

  Inequality isn't just about individuals - it's risen between companies, too.

  In other words, the increasing inequality we've seen for individuals is mirrored by increasing inequality between firms. But the wage gap is not increasing as much inside firms, our research shows. This may tend to make inequality less visible, because people do not see it rising in their own workplace.
  ...
  What is clear is that over the past 35 years, firms have divided between winners and losers, and between those that rely heavily on knowledge workers and those that don't. Employees inside winning companies enjoy rising incomes and interesting cognitive challenges. Workers outside this charmed circle experience something quite different. For example, contract janitors no longer receive the benefits or pay premium tied to a job at a big company. Their wages have been squeezed as their employers routinely bid to retain outsourcing contracts, a process ensuring that labor costs remain low or go ever lower. Their earnings have also come under pressure as the pool of less-skilled job seekers has expanded, due to automation, trade, and the Great Recession. In the process, work has begun to mirror neighborhoods - sharply segregated along economic and educational lines.

• An Index-Fund Evangelist Is Straying From His Gospel

  Burton Malkiel, 84, who long endorsed passive investing, has had a change of heart.

  Wealthfront stressed that it was not abandoning the essence of Mr. Malkiel's long-held belief in passive investing, and it calls its new approach PassivePlus. "Burt Malkiel is still the high priest of passive investing," said Jakub Jurek, vice president for research at Wealthfront. "To be absolutely clear, we're not stock pickers. There are decades of research on active investors, which show they underperform." At the same time, he said, "there are small adjustments you can make to improve after-tax returns."

  In addition to value and momentum factors, Wealthfront's approach embraces stocks with high dividend yields, low market beta and low volatility, all factors that "have proven robust across long time periods, geographies and asset classes," Mr. Jurek said. (Wealthfront excluded another widely cited factor, small market capitalization, because its investment universe is limited to large-cap issues.)

• Amazon's New Customer

  This is the key to understanding the purchase of Whole Foods: from the outside it may seem that Amazon is buying a retailer. The truth, though, is that Amazon is buying a customer - the first-and-best customer that will instantly bring its grocery efforts to scale.

  Today, all of the logistics that go into a Whole Foods store are for the purpose of stocking physical shelves: the entire operation is integrated. What I expect Amazon to do over the next few years is transform the Whole Foods supply chain into a service architecture based on primitives: meat, fruit, vegetables, baked goods, non-perishables (Whole Foods' outsized reliance on store brands is something that I'm sure was very attractive to Amazon). What will make this massive investment worth it, though, is that there will be a guaranteed customer: Whole Foods Markets.

  In the long run, physical grocery stores will be only one of Amazon Grocery Services' customers: obviously a home delivery service will be another, and it will be far more efficient than a company like Instacart trying to layer on top of Whole Foods' current integrated model.

  I suspect Amazon's ambitions stretch further, though: Amazon Grocery Services will be well-placed to start supplying restaurants too, gaining Amazon access to another big cut of economic activity. It is the AWS model, which is to say it is the Amazon model, but like AWS, the key to profitability is having a first-and-best customer able to utilize the massive investment necessary to build the service out in the first place.

• I Fought For a Better Israel Than This

  Fifty years ago I was a soldier during the Six-Day War. We saved our nation, but the occupation has cost us dearly in the long run.

  In 1967, I was proud to be an Israeli. That is still the case, but a lot more complicated. I am not as at peace with Israel today as I was then and I fear for the future of Israel as a Jewish and democratic country, something that never even occurred to me at the time. In 1967, as a young soldier, I felt like I helped shape the future of my adopted country. I don't feel that way now. I feel unable to change its course and once again I wonder what kind of a future our children and grandchildren will have here. Israel has achieved much over the years, but the occupation has to stop before it conquers us all.

• The Art and Science of Comedic Timing

  People who make their living by making people laugh have a much more nuanced appreciation of comic timing - as an art, rather than a science. Greg Dean, a Los Angeles comedian who has been performing and teaching stand-up for 40 years, said that when people talk about a comedian having great timing, they really mean that he or she has found a way to both lead and respond to the energy of the audience, like a drummer might with a dancer.

Some things to think about concerning life on earth and climate change.

• The Oxygenation Catastrophe

  Approximately 2.3 billion years ago, Earth could have been easily mistaken for a hostile alien planet. Methane spewed into the atmosphere by constant volcanic activity, and fatal UV radiation bombarded the surface without the protection of an ozone layer. The primordial seas were blood red, a hue caused by the massive amounts of suspended iron in the water. It is beneath these red waves in which almost all life on the planet survived, most of which would require a microscope to view. Anaerobic single celled organisms were the dominant life form on earth at the time; they lived in the hostile chemical make up of the primordial sea without the need of oxygen. However just one of these single celled organisms may have caused the greatest extinction event on planet Earth: the Cyanobacteria.

  What was formerly known as blue-green algae, the Cyanobacteria are actually bacteria that have the unique ability of photosynthesis. This single-celled organism had emerged only a few hundred millions years before, at a time where all other organisms relied on methods of anaerobic respiration. By creating its own energy from the sun, this bacterium was able to generate up to 16 times more energy than its counterparts, which allowed it to outcompete and explode in reproduction. This seemingly innocent organism would spell doom for most of life on the planet, as photosynthesis produced free oxygen molecules as a byproduct.
  ...
  In a relatively short amount of time, Earth went from having very little oxygen to what may be the highest levels of atmospheric oxygen it has ever had. This event had wiped out most of life on the planet to which the oxygen was poisonous. Some of these anaerobic organisms were though to have survived by burrowing into the earth where oxygen levels were survivable. What may have the biggest change is that when oxygen accumulated in the methane rich atmosphere, the concentration of this greenhouse gas dwindled, causing temperature levels to drop. They dropped so low in fact, that this oxygen event is thought to have triggered the Huronian glaciation, the longest snowball Earth period.

• Chemists may be zeroing in on chemical reactions that sparked the first life

  Chemical reactions on early Earth could have created all four building blocks of RNA molecules, triggering the beginning of life.

  Now, chemists have identified simple reactions that, using the raw materials on early Earth, can synthesize close cousins of all four building blocks. The resemblance isn't perfect, but it suggests scientists may be closing in on a plausible scenario for how life on Earth began.

• Why Uncertainty About Climate Change Is What Scares Me Most

  If projections about the future of climate change are prone to considerable potential error, we must allow for that error to go in both directions. There is nothing necessarily reassuring about climate change uncertainty; those error bars encompass a space in which our worst nightmares find refuge.

  The moment we concede the uncertainty about climate change projections - magnitude, pace, impact - that Mr. Stephens asks of us, we are obligated to allow for the entire expanse of that potential error. That's what scares me most.