Table of contents
It feels so good to write again after three weeks. Stuff is piling up which I would like to get out of my system, so it's good to let go of some thoughts today.
Speaking of getting things out of my system: I caught Covid‐19 within the last week. But nothing to worry about: I had one night with a fever and since then my body is back to normal except for mild cold symptoms. I won't get into the details of my testing story, but guys: If you are not sure about having it, test yourself and get tested everyday twice.
Well, water under the bridge. Let's hop to the topics moving me at the moment.
Must-read for every knowledge worker
"What is knowledge work?" you might wonder. It is the individual or collective effort to create solutions to unique situations/scenarios like decisions, analysis, designing, planning, communicating or programming.
I read this great article by Dror Poleg, an economic historian (never heard of that subject before; probably similar to Thomas Piketty's), called "Rise of the 10X Class".
To be honest: I almost stopped reading the article before getting really into it. The beginning is completely irrelevant and boring in my opinion. You also have no brief summary or a content table to give you an overview. It really gets good, starting with the paragraph called "Imperfect Stars".
The basic argument is that knowledge work and its income potential has been restricted until today. The most important observation supporting it, was published by Sherwin Rosen in "The Economics of Superstars" (1981). Poleg writes with regards to the technological revolution of music mediums like vinyls or CDs which resulted in high scalability:
[...] “joint consumption technologies” — tools that enable a single seller to reach an unlimited number of customers at a very low (marginal) cost. These technologies introduced new benefits for consumers and new economies of scale for performers. The price of entertainment dropped since it was no longer necessary to go to Covent Garden to hear the world’s greatest singer, and it was possible to listen to the same album again and again at no extra cost.
Combined with the other principle, "imperfect substitution":
[...] ten non-superstars could not replace the economic output of one superstar. It is also difficult to replace one superstar with another: diehard Brad Pitt fans would not watch a film if their favorite star were replaced by the equally popular (but specifically different) Tom Hanks. Rose calls this “imperfect substitution.”
And by bringing both principles together, you get the 10X Class:
This, says Rosen, is where technology comes in. When “imperfect substitution” is combined with “joint consumption technologies,” the result is “the possibility for talented persons to command both very large markets and very large incomes.“
Understanding the principles is important because he then moves on to explain why things have changed for knowledge work, especially within the last two years. He cites a few examples in which managers of big companies say that "top-notch engineers" may be "worth 300 times more" than the average. So, why have salaries of "superstars" like engineers (or knowledge workers in general) been much more equal vertically than in the ones of superstars in the entertainment industry?
Because of geography. As you recall, when “imperfect substitution” is combined with “joint consumption technologies,” the result is “the possibility for talented persons to command both very large markets and very large incomes.“ While music and TV stars can be broadcast from and to anywhere, software engineers can only work in one place. [...] The ability to work remotely changes this equation. And its impact will be compounded by several other factors.
That's when he got me. Almost after 3/4 of the article. If you want to start where I left you, you may continue reading at the paragraph "Ten Times Ten": https://www.drorpoleg.com/rise-of-the-10x-class/
How globalized our food supply chain is
You may have read about the impacts of the war in Ukraine on wheat and other foods like sunflower oil. But the dimension of the first and second order effects which are creating swings in the food market are unprecedented. I was completely mind-blown when I listened to David Friedberg talk about it on the All-in Podcast last week.
A little information upfront. Friedberg states (which I cannot find a source for):
The whole planet earth operates on a 90 day food supply. So, as soon as we stop making food, humans theoretically run out of food within 90 days.
And that was also surprising to me: According to the United Nations, we already have around 770 Mio. people living on less than 1.200 calories/day which is 10% of the global population! Meanwhile, we throw away enough food for another 2 billion people.
Primary effects: Wheat export & planting
Let's begin with the first order effects: About 29% of worldwide wheat comes from Russia or Ukraine which have both banned exports of wheat due to the war. Accepting exports from Russia has also mostly been sanctioned by many countries.
According to a study from 2014 published in the "Earth's Future" magazine called "Feeding humanity through global food trade", about 20% of the world's calories came from wheat which did not substantially change from 1989.
So, not only is the current wheat supply blocked up in both countries, but it also cannot find its way to Africa - which is the continent with the highest amount of undernourished people.
In addition, the future planting season is at high risk due to the crisis in Ukraine which may result in a 80% lower planting amount.
This results not linearly across all nations, but the most vulnerable nations will run out first as they cannot compete with the high prices on commodity markets:
It is a market-dynamic which accelerates the buying (hoarding) of commodities and kicks-out other market-players while prices increase more and more.
Secondary order effect: Fertilizer
All fertilizer is made up of nitrogen, phosphorus or potassium, which is substantial nowadays to growing food.
Nitrogen
Nitrogen from natural gas, whose prices have increased by 100% and in the futures market it looks like it might 4x:
Ammonia (compound of nitrogen and hydrogen) price has increased from 200$/ton to 1.000$/ton (5x)
Phosphorus
Around 10% of the world's phosphates come from Russia. But as (almost, except for gas and oil) every other Market, the export is blocked by Russia, which results in price jumps from before 250$/ton to now 700$/ton.
Potassium
About 25% comes from Russia and due to the blocked export, the price resulted from originally 200$/ton to 700$/ton.
Potential solution: Food waste problem or other main calory foods?
The main question is as a result: How do we get bulk commodities to the places which need them the most?
As already mentioned before: In theory, our food waste could easily compensate for the upcoming crisis. But unfortunately, this is a reverse supply-chain problem which happens at the end consumer level, which means there is not much we can do to redistribute the supply chains somewhere else.
But the generally core calorie-producing commodities, rice, wheat and potatoes and corn tend to go bad at the end of the supply-chain. Perhaps, we could be hopeful about rice which does not seem to be substantially impacted:
It gives me the chills if I think about what could happen in the next 9-15 months. And the sad thing is that it will impact the already suffering people the most and nobody of us will hear from it.
Perhaps you can start joining me to start donating money to the Welthungerhilfe. I have been donating to this organization since late 2020 and researched before on their spending, which seems very focused on the projects.
To finish off: How to accept an Oscar
I am sorry, but I need to say something about that, too. Although no, somebody said it already. Thanks Jim Carrey!
Seriously: We live in the 21st century. How can anybody argue for an over 50-year old man who walks onto the stage (quite a big one, by the way) to smack another over 50-year old man? Are you kidding me?
This is so wrong on so many levels, I don't want to waste my intellect breaking that down because it is not worth it.
But it is also not what I wanted to discuss. I wanted to end on a positive note, on somebody my father brought into my life and is still inspiring me with his genuine love, authenticity, joy, charisma, intellect, humor, etc. Roberto Benigni.
So, what I want you to take into the next week and the new month: Have an impact on the rooms you choose to be in as Roberto had at the Oscars. Look at everybody’s faces.