Sunday Reads #118: The Remote Revolution is coming.
Plus updates on the GME short squeeze, and other link love.
|Jitha Thathachari||Feb 7||1||1|
Welcome to the latest edition of Sunday Reads, where we'll look at a topic (or more) in business, strategy, or society, and use them to build our cognitive toolkits for business.
If you’re new here, don’t forget to check out the compilation of my best articles: The best of Jitha.me. I’m sure you’ll find something you like.
And here’s the last edition of my newsletter, in case you missed it: Sunday Reads #117: How the Gamestonk game will stop. (Would you believe game theory had the answer? 😜)
This week, let’s talk about the megatrend towards remote work. Yes, in time we’ll reach herd immunity (aided by the vaccines), and the pandemic will go away. But things will never go back to the way they were.
Plus, updates on the GME short squeeze (the prediction was right 😞), the world of mRNA, and a very interesting case of reality mirroring fiction.
Here's the deal - Dive as deep as you want. Read my thoughts first. If you find them intriguing, read the main articles. If you want to learn more, check out the related articles and books.
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1. Remote work will change everything.
Now that the vaccines are out, will we go back to the office? Will things be back to the way they were?
No they won’t.
Remote work will be the big trend of the 2020s.
COVID-19 may have caused a move towards remote work, but it won't reverse after the pandemic ends.
Yes, many companies are already planning for a "return to the workplace". But it won't be as straightforward as they expect.
The thing is, employees prefer remote work.
Yes, the first couple of months were hard for many, having to juggle work as well as kids no longer at school. But things got easier once kids went back to school. Now, not only can you work in your pajamas, you can also spend more quality time with your family. Rather than in a commute, listening to a podcast so that your dead time isn't a total waste.
And if employees prefer remote work, then there will be some who are willing to change jobs, to move to an employer who supports a remote working culture.
In the marginal case, guess which employees jump ship first? The ones with the most critical skills, who will be rehired elsewhere in a heartbeat. The ones your company would most sorely miss.
Ergo, you (and your company) will also embrace a remote-friendly work culture. You just don't know it yet.
Bet on a future that will benefit from remote work.
Remote work will affect society, the economy, job market, etc. much more than we realize.
This is the thesis of Packy McCormick's We're Never Going Back.
As he says, the world will become far more productive with the removal of geographical constraints. It will also become more equal, as remote and international hiring explode.
It will become richer with more diverse experiences. People will move more often and experiment with new cities.
As McCormick says:
Work From Home Trade is On. Bet on companies that will benefit from remote work, or produce tech that makes remote work easier. Bet on Zoom, but also bet on Airbnb. Bet on SaaS, but also bet on alternative education.
Short Return Companies. i.e., companies that will benefit from a return to the workplace. There will be a relative bust in tech and infrastructure that supported prior work habits. Think offices, high rises, work suits, parking garages, freeways, and cars.
Get better at skills that are more valuable in a remote world.
How else do you think we can prepare for the coming "remote revolution"? Let me know in the comments.
[PS. This post is from a knowledge worker point of view. Which is a privilege, let's not forget. As I showed in the "Chart of the Week" in Sunday Reads #113, those who can work remote have escaped unscathed (or may have even benefited a bit) from the lockdowns. Those who cannot work remote (e.g., construction site operators) have suffered. A lot.]
2. Update on the GME Short Squeeze.
Last week, I wrote about the GME short squeeze and how it would end, from a game theory perspective.
Well, as I feared, GME has succumbed to gravity.
I wrote a short thread about it on Twitter.
Do check out the thread. But this is where the penny drops 👇:
Edward Cree @ecree429@arjunxkapoor @kevinwlordbarry @ESYudkowsky Is it not the case that if short is 130% then long is necessarily 230%? So to close out the shorts would have to buy ~56% of the long holdings, meaning that the other 44% could be left bagholding when there's no longer a short squeeze to sustain the price?
With so much stock available for the shortsellers to buy, they managed to cover their shorts while the 💎🙌 over at r/wsb continued to hold.
Sad end, but inevitable.
On a related note, I came across a recent paper evaluating the impact of high frequency trading by Robinhood users. The abstract:
Contrasting with recent evidence that retail traders are informed, we find that Robinhood ownership changes are unrelated with future returns, suggesting that zero-commission investors behave as noise traders.
We exploit Robinhood platform outages to identify the causal effects of commission-free traders on financial markets.
Exogenous negative shocks to Robinhood participation are associated with increased market liquidity and lower return volatility among stocks favored by Robinhood investors, as proxied by WallStreetBets mentions. Platform outages are also associated with reduced high frequency trader (HFT) activity, indicative of payments for order flow. However, outages have the strongest effect on stocks neglected by HFTs, suggesting that zero-commission traders have direct negative effects on market quality.
Two interesting insights:
High frequency trading doesn't increase market liquidity, but in fact reduces it.
And if that's not weird enough, YOLO traders reduce liquidity not just on the stocks they trade, but the market as a whole!
I would never have understood this negative liquidity effect before the GME saga. But GME aptly illustrates the negative liquidity effect:
High trading volumes on GME → high volatility → high collateral requirements → brokerages stop allowing trades of GME
More information is not always better than less information.
When the additional information is just noise, it can actually reduce the wisdom of the crowd.
[PS. The negative impact of noise applies to broader decision making as well. As Cedric Chin says in Reduce Noise, Not Cognitive Biases, the key to good decision making is not to eliminate your biases (you can't). Instead, it's to reduce noise in the process.]
3. The World of mRNA.
I wrote about mRNA in Sunday Reads #116, as part of my "rational optimism about the Roaring '20s".
mRNA innovation will unlock significant value, well beyond the COVID vaccine.
Yes, it may be the most lucky coincidence of our time - mRNA tech maturing just when the world needed it to combat Pandemic I.
But mRNA is far from done.
As Antonio Regalado says, The next act for messenger RNA could be bigger than covid vaccines.
Next up - cancer, sickle cell disease, and maybe even HIV.
4. The World of Warcraft.
Did you know: World of Warcraft had a pandemic of its own in the 2000s. It was a fascinating (albeit accidental) study into how people behave when a sudden pandemic hits.
The signs were all the same:
Started in one specific area, but spread rapidly. There, as here, asymptomatic spreaders were the main culprits.
Some people tried to quarantine. But many just didn't pay attention to the risks, and the "virus" continued to spread unabated.
World of Warcraft admins tried to institute voluntary restrictions. But hey, "only fools listen to governments and stay in, right?" 🙄
This is a great twitter thread on the WoW pandemic:
Even Lancet (yes, the prestigious medical journal) published a paper on the topic! The untapped potential of virtual game worlds to shed light on real world epidemics.
Sigh... if only we all played video games like good children.
That's it for this week! Hope you liked the articles. Drop me a line (just hit reply or leave a comment through the button below) and let me know what you think.
See you next week!