The everyday inflation, deflation, surplus and pension money.

Today I thought about….The everyday inflation, deflation, surplus and pension money.

I doubt I’m alone in being outraged….or rather disappointed…to see the eggs I buy increase in price by $0.30 per dozen. Price increases of a few dollars are more obvious and I’ve noticed a number of my favorite restaurants have increased their prices by a few dollars. 

Some have not increased prices but reduced the quantity. There’s nothing more disappointing than seeing only one chicken schnitzel when the restaurant normally gives two. 

This is what inflation feels like. 

It’s not news that venture funds are funding much of the surplus in our life. All the UberEats discounts….the $5 meals and all kinds of promos for all kinds of service companies (disguised as “tech”) that have provided surplus to my life. I truly can’t complain. Who doesn’t like things to be cheaper, faster, and more convenient? 

With interest rates at lows, large institutional funds are reaching for yield. The pension funds, funded by tax dollars have to take on “riskier” investments since bonds won’t meet their 6-8% annual hurdles so they go into equities and prop up the stock market. But they can’t only do that, so they put ever more money into private investments, propping up real estate and start-up valuations. 

Once again, a generalized view that has many caveats. But, the early money for these fast-growing tech companies…those that provide such great consumer surplus to my life and give the impression of possible deflation as I feel like I can get more in regards to my convenience for each dollar…..is not easy money. Early-stage funds are small. They come from individuals. Some are not so bright. But, entrepreneurs have a mix of smart and dumb ones too. Just like investors. 

The smart entrepreneurs will aim to take money from smart and dumb investors. But the smart ones will give them actual value so the preference is for smart. They fund it to get it ready. Ready for hyper-growth….where consumer surplus can be scaled. 

The funds to scale it…. They come from the big pocketed funds. In many cases….the funds come from larger funds who cannot access these companies early (or choose not to since they are not able to). I imagine pension funds make up a large chunk of such late-stage funding. 

These late-stage funders love advertising how forward-thinking they are to be funding these fast-growing companies. But 10 years isn’t really enough time for a company to really prove to me it’s ‘staying power’ in the world. Uber provides me with much surplus. But, I don’t know if it truly has staying power. Others disagree with me, as they should. 

But let’s say you have companies…that create a feeling of deflation….where the surplus to me is so great….I get more next year for a dollar than the year before. In a world where inflation seems to be the norm... (side note: rents will probably recover in major cities post-COVID, I mean everyone said NYC would die at least 5x in the last few hundred years and it’s still more relevant than ever)….it makes me think that some of this surplus might be a temporary illusion. In some ways, we’ve pulled forward the pension dollars to be saved for the future to fund surplus in our life now. 

We can’t eat IRRs. So, when these fast-growing companies that are funding much of the convenience in my life now eventually die (because you either win it all or die)… then poof….there goes all the pension fund money from taxpayers. Money people may have relied on? Money my generation might’ve relied on decades out? 

Well….we seem to be reaping rewards from it early (right now in fact)….so best to never think about relying on others to properly manage the future for you. Here I think I’m ‘scoring’ it with all kinds of delivery discounts but… there is no free lunch….this is going to fuck up someone really hard somewhere. It’s not the company that’ll get fucked…but those who believed in it. 

No free lunch. Probably a good habit to remember that Google, Instagram, etc… are never truly free. Would be foolish to think so.