Prestigenomics → High Net Weirdness

Hey Neighbor. A new University of Pittsburgh study finds return to office mandates are most common at companies where executives need to justify underperformance. The study suggests such mandates are best understood a demonstration of executive power over well-paid, skilled workers.

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If we were at a cocktail party, you might hear me say the following....

A few drinks later I might mention that Millennials with considerable home equity are seeing absolutely no material benefit [1] to being wealthier than they were a few years ago. There might be a lesson in there.

I might also try to talk about....

→ Uber is rolling out a $18 14-passenger shuttle from Manhattan to LaGuardia. For ridesharers, that’s a deal. For subway takers, not so much. Either way, it’s the latest example of the Economy+ model getting baked into absolutely every aspect of travel. This is going to be everywhere.

→ According to data from Federal Election Commission, GOP campaign operatives have been splashing out at the Capital Grill and Charlie Palmer Steak whereas Dems have been skirting steakhouses in favor of local and Italian joints. It seems that the “steak as status meal” has become implicitly partisan as medium rare has gotten rarer. The number of restaurants serving steak has decreased by almost 15% in the last decade.

→ The number of so-called “ultra-high-net-worth individuals” with $30M+ in assets grew from 157,000 in 2016 to 220,000 in 2023. According to the new data from Capgemini, the bulk of these folks were either entrepreneurs or tech execs and a disproportionate number were American. So we got that going for us, which is nice....

Two articles went dinner-party viral over the last week. The first, a high-key Atlantic screed by Charlie Wurzel, focused on Trump’s “cultural assault on any person or institution that operates in reality.” The other, a low-key WSJ report by Te-Ping Chen, focused on the emergence of an unlikely millionaire class: HVAC contractors. Though apparently disconnected, both articles felt deeply salient to members of the Upper Middle still baffled by the cratering exchange rate between prestige and the U.S. dollar.

Unlike the “real economy,” the prestige economy – a series of brass rings soldered together by diplomas, branding, and media exposure – never recovered from the Great Recession. In 2007, the meek (read: professional college grads) had inherited the Earth. David Brooks declared “the age of discretionary income.” But on the other side of Black Monday, doctors, lawyers, journalists, and architects all started bleeding earning power [2] even as equity became a more viable path to wealth than traditional modes of achievement.

Consider the veterinarian.

Being a veterinarian has historically been kind of like being “Doctor Lite.” It’s a prestigious job in the medical field, but not THE prestigious job. That said, there’s a significant equity upside most civilians don’t know about. A little over 20% percent of veterinarians own or partially own their practices compared to slightly under 50% percent of doctors. But when those veterinarians sell to private equity (gobbling up practices like so much Alpo), they generally command a 5.4x-11.5x EBITDA multiple depending on cashflow. The multiple for a medical clinic? Less than half that and lower than 1x for general practitioners.

Being an entrepreneurial vet is better than being an entrepreneurial doctor, at least in economic terms. Now let’s toss in the HVAC contractors. They command a 5x-8x EBIDTA multiple on their businesses and don’t go into debt getting certified to run them. Equity is an easier path than prestige.

Which brings us to Trump’s “cultural assault” on doctors. Part of the reason anti-medicine rhetoric seems to resonate on the right is Trumps disregard for (verging on denial of ) the prestige economy. With cultural cache subtracted from personal calculus, he’s free to ask a simple question that resonates with millionaire HVAC contractors: If these folks are so smart, why aren’t they rich?

A comprehensive answer requires reckoning with civic values, ideas about public service, and the varied paths to personal fulfillment. The simple answer is this: They thought they would be. They’ll read anything that helps explain why they aren’t.

→ Assouline has released a collection of travel themed candles for people who want their living rooms to smell like Ibiza, Marrakech, Mykonos, Tulum, or Gstaad. What does Gstaad smell like? Juniper berry and black tobacco. (Counterintuitive for a dairy town.)

→ A new theory of taste just dropped courtesy of Scott Alexander. Let’s call it “High Net Weirdness.” When ornaments are no longer expensive enough to be a mark of wealth, wealthy consumer create counterintuitive codes of decoration that turn taste itself into a mark of wealth. Explains that weird trend where rich people put their toilets in the bedroom.

 → Internal TikTok documents reviewed by NPR reportedly show that the social media giant has been algorithmically suppressing videos featuring “not attractive subjects.” The docs have become a scandal, but the truth is that humans avoid not attractive subjects all the time. That’s what cocktail bars are for.

Upper Middle English is looks at idioms, ideas, and bizarre turns of phrase that describe the experience of having a lot while doing too much.

The “Halloween Candy Problem” is a common spend down puzzle used to frighten retirees [3] that can also be incredibly instructive when thinking about using vacation days during the Holidays. The idea setup is simple:

1. The candy giver must make an educated guess as to how much candy they need to meet trick-or-treater demand.

2. The candy giver must figure out how much candy to give each trick-or-treater in order to get rid of as much of the candy as possible without running out.

The most pragmatic solution to the problem is to stock up on slightly more candy than is likely needed then start by handing out candy at a rate commensurate with a more reasonable estimate. From there, treat dispersal can be titrated up or down depending on the number of trick-or-treaters.

This all but guarantees there will still be candy at the end of the night, but it also results in a 50%+ chance that trick-or-treaters arriving later in the evening will get more.

In terms of vacation day usage, that means a lot of professionals wind up with vacation days left to “spend” in November and December, but no vacation planned (that’s the candy guaranteed to be left at the end). What to do? Titrate! Don’t think about it as Q4. Think about it as “3-Day-Weekend Season.”

→ Consumer spending habits, which converged during the pandemic, are diverging again. New Fed data shows spending by low-income households is up 7.9% since 2018 whereas spending by high-income households is up 16.7% (19.4% for households where someone has a graduate degree). Millennial spending is up 31.8%. TL;DR: All the marketing budgets are targeted at us now. [4]

→ Mortgage rate went down roughly .8% in September. That meant the average homebuyer’s purchasing power increased $40,000. For million-dollar home buyers, it was about twice that. Not nothing. But now there’s a bounce….

→ J.P. Morgan’s Jamie Dimon is warning that geopolitical risk may not be fully factored into current stock prices. Not that unusual, but the pull quote gives some pause: “There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history.” Every finance bro’s favorite finance bro may have just dropped a doctrine.

NOTES & FOOTNOTES

[1] In fact, they are wealthier on paper but have effectively less buying power in the real estate market. Better than neither... but not great.

[2] In a sense, architects have been the canary in the coal mine on this. The job pays poorly compared to the cost of the training. The average architect in America probably makes sub-$100K. It’s more in wealthier areas, but it’s basically a middle class gig.

[3] It should reassure the sons and daughters of the many boomers determined to “spend it all” that this is in fact mathematically hard to pull off without going full penury.

[4] Be careful what you wish for. I got an Americano in a Capital One cafe in Boulder yesterday and had to endure a pre-pour debit card pitch. Drink was good tho....