Professionally, I focus on creating social benefit startups. In my Saturday morning emails I share what I’m learning and thinking. Topics range from better living and parenting to business and philosophy.
Forecasting Equity Returns. I’ve allocated a lot of our family's money into the stock market, particularly passive strategies. I was convinced by arguments like Stocks for the Long Run and admired Vanguard’s low-cost long-term ethos. While market timing is hard, will the stock market perform nearly as well the next few decades as the last few? For example, one Federal Reserve researcher argues that there are structural reasons why returns will be significantly lower: “Lower interest expenses and corporate tax rates mechanically explain over 40 percent of the real growth in corporate profits from 1989 to 2019. In addition, the decline in risk-free rates alone accounts for all of the expansion in price-to-earnings multiples. I argue, however, that the boost to profits and valuations from ever declining interest and corporate tax rates is unlikely to continue, indicating significantly lower profit growth and stock returns in the future.” Even Vanguard is forecasting much lower US equity returns. Even if you are optimistic about future economic growth, I often remind myself that economic growth is not the same as stock market returns. My friend tells me that GDP growth in the 70s was higher than during later bull markets, yet stocks lost a lot of value primarily due to rising interest rates. Can we forecast a period of higher interest rates than the last 40 years given rising government debt, tightening monetary policy post GFC and Covid, and a politics more comfortable with higher government spending? Now add to that an aging population and declining labor participation. On the growth side, expert forecasters think the chance of AI causing a big increase in economic growth before 2100 is between 4.5% and 25%. Do you think that is our deus ex machina? Given the difficulty of predicting all this, diversification is still a prudent strategy.
Let’s Vote Tech. A friend and I are working on a personal US election project. For startup founders who may be wondering how to engage their company on the topic, we recommend supporting employees in voting. Reminders to register and even paid time off to vote are great! National Voter Registration Day is coming up fast. Check out the one-pager and please share with startup founders or leaders you know. Send your friends to LetsVoteTech.org.
Good Inside. Parents used to put babies outside their windows to get sun and air. And parents used to avoid touching children. So, who knows how current parenting trends will end up in the eyes of history. That said, I recommend the parenting book Good Inside by Dr. Becky. It’s a blend of Nonviolent Communication, Taking Children Seriously, Leadership and Self Deception, the Comfort Crisis and family systems therapy. It suggests working on yourself and your relationship with your child rather than focusing on sticker charts or consequences to shape behavior. The author stands against the “don’t give attention to bad behavior” theory and instead recommends spending time with children connecting on an emotional level. The great evil for her is not that kids will feel negative emotions but that they will feel them alone. Don’t remove all the everyday obstacles in the way of your kid, rather empathize with them about the frustrations they face. I’m curious about the companion app that provides real time parenting advice. I thought about starting a similar company although I didn't figure out distribution. Let me know your thoughts.
Until next time,
Miles
I like Dr Becky’s approach in theory but find her a little grating / unrealistic in practice. My kiddo’s still just about 2, and at this age I’m a huge fan of How to talk so little kids will listen (the classic!) and also The Tantrum Survival Guide which I find deeply underrated! (On the latter, I love learning about what is developmentally normal at a particular age so I can have realistic expectations - helps me so much with frustration!)