🦄 Oct 4 - Fake unicorns, failing giants, supercycles, nuclear AI, IPO pendulum

Welcome to your S3T Edition and Learning Package for the week! Get comfortable, focused and ready for a great reading and learning experience! Start reading here or 🎧 Listen to this on the S3T Podcast!

In this Edition of S3T:

• 📉 Economic Concerns Persist: Inflation is at 2.53% with falling interest rates, but past loans still burden many with high borrowing costs. Confusion about Powellomics vs. Bidenomics dominates economic discourse.
• 🏛️ Fed Independence & Inflation: The Federal Reserve operates independently, but its inflation measures often don’t match the real struggles families face with necessities.
• 🗳️ VP Debate from right, center, and left: Varying interpretations of the debate, but similar open questions that could swing votes. Economic issues remain a central concern in all perspectives.
• 🏠 Housing Supercycle: Housing prices may keep rising due to demographics and falling interest rates, challenging affordability despite political changes.
• 💼 CVS Struggles: CVS considers splitting its retail and insurance units amid competition and missed opportunities, spotlighting the difficulties of large healthcare transformations.
• ⚡ AI & Energy Concerns: AI’s growing demand is driving discussions around nuclear energy, amid concerns about the future power needs of AI technology.
• 💰 IPO Resurgence: IPOs are making a comeback, driven by Private Equity woes and high interest rates, but many Unicorn valuations (85%) are seen as inflated.
• 🚀 AI Regulation & Growth Challenges: AI startups grow fast but require heavy capital, with concerns about the balance between revenue and costs, as seen in OpenAI’s financial projections. Regulatory uncertainty also looms, as shown by the veto of California's AI Safety bill.

Opinions expressed are those of the individuals and do not reflect the official positions of companies or organizations those individuals may be affiliated with. Not financial, investment or legal advice, and no offers for securities or investment opportunities are intended. Mentions should not be construed as endorsements. Authors or guests may hold assets discussed or may have interests in companies mentioned.

Election & economy sentiment through the lens of the VP Debate

Inflation is at 2.53% and interest rates are falling, but changes to monetary policy can last a long time. Many who took out loans over the last two years will still have to carry heavy borrowing costs. Economic concerns remain a key topic, though the in both VP debate and in the continuing national dialogue it is apparent that few understand the difference between Powellomics vs Bidenomics:

• The Federal Reserve acts independently of the White House. Their narrow definition of inflation does not reflect the actual lived experience of families struggling afford necessities.
• The Federal Reserves recent campaign to combat inflation as they define it may on paper look like a win, but in reality, many economist believe it will have done little good for families and small businesses.
• Biden did not invent inflation as some narratives seem to imply. The inflation problem has been with us for decades, spurred on by players from across the political spectrum.

I watched the VP debate and then analyzed the media commentary immediately after and the social media reactions the next morning. Here are my views on what the right, center and left appear to be taking away from this debate, their likes and dislikes and the open questions that still could influence their votes.

Maintaining organizational unity & focus in an election year

In today’s climate, it's essential for leaders to provide reassurance and foster a positive environment. Here are key messages - ways to think and talk with your teams - to address election anxiety, ensure inclusion, and inspire teamwork:

1. Promote Unity and Collaboration: Emphasize that while voting is crucial, the real work begins after the election. The team’s collective efforts to solve problems, serve customers, and improve communities are what make lasting impact. Collaboration will lead to greater results than any individual effort.
2. Ensure Psychological Safety: Create an environment where open, respectful dialogue is encouraged. Staff should feel safe to express their concerns and ideas without fear. Make it clear that threats or intimidation will not be tolerated—fostering mutual respect is key to building an inclusive team.
3. Focus on Shared Purpose: Reinforce the organization’s mission to solve real-world problems for customers and support community well-being. A clear focus on shared goals brings everyone together, motivating the team to work as one.
4. Engage and Overcome Together: Find problems that matter, unite with like-minded colleagues, and work together to bring about positive change. When people collaborate, the impact is magnified, leading to meaningful benefits for the organization and the community.

Change Leadership Mindset: Building a new kind of strength

When we work together to ensure everyone is safer, healthier, and more prosperous, we build a new kind of strength—one that can overcome any threats and challenges the world presents. Together, we create lasting resilience and positive change for all.

Healthcare's ailing giant: Aetna CVS breakup?

CVS - seeking a turnaround plan for its struggling business - considers splitting its retail and insurance units - after repeatedly cutting its earning outlook. Factors in play:

• Fallout from PBMs, and competition from new rivals (Amazon, Walmart, Target)
• Medicare Advantage losses and headwinds
• Failure to read the tea leaves as this 2023 Reddit thread describes. The on-the -ground experiences shared by CVS customers and staff in this thread read like a fulfillment of the warnings AMA gave in their original opposition to the merger.

This comes in the wake of the CVS-Aetna merger, and a string of related strategic moves including the acquisition of Oak Street Health. This is not the first case of large well capitalized healthcare transformation efforts that struggle or fail. Underscores just how badly the US is failing to do its homework on the next generation financial model for healthcare.

IPO vs PE Pendulum swings

IPOs are coming back into style, amid Private Equity woes, partially driven by high interest rates, which raised the cost of debt.

Related: CBInsights shares their latest Unicorn list: 1248 companies valued at $1B or more. CBInsights says 85% of these valuations are illegitimate.

Housing supercycle may counter affordability

Housing - the world's biggest asset class - may continue price rises for years to come, per this Economist piece, thanks to the combined impacts of demographics, immigration (that won't slow regardless of political machinations) and now falling interest rates.

AI regulations - the search for "Workable Guardrails" continues

CA Governor Gaven Newsom vetoed the AI Safety bill on Sunday Sept 29, with this note explaining his reasoning ...er should we say big tech's reasoning. Meanwhile, OpenAi continues its mutation from non-profit to for profit, gaining $ and shedding talent along the way.

Mixed messages on AI revenue

Yes AI startups get to $30M revenues faster than previous startups BUT they need way more capital too. Decoder previously noted OpenAI is on track for ~$4B revenues but $8.5B in costs for 2024. Hence the jitteriness, as indicated by the market selloff in early Sept when Goldman Sachs misread OpenAIs web traffic. So...FT says diversify.

AI, crypto & nuclear oh my!

Some crypto miners are diversifying to AI compute, and there is talk AI may drive new demand for nuclear energy.

Personally, in this age of killer drones and exploding pagers, I’m not sure if we actually want nuclear power plants popping up everywhere in our communities and states, just so we can power all of our ChatGPT, CoPilot and Anthropic AI assistants… but believe it or not that’s the conversation that’s being had right now!

Get Ready to Level Up!

Starting next week Oct 11, this section will feature your Change Leadership Learning Segment for the week, taken from the S3T Change Leadership Learning Series, a unique 23 week leadership course offered to paying members.

If you not yet gotten your full access membership sign up now for your 30 day free trial so you can join this learning series which starts next week (Oct 11) and runs through March 2025.

The S3T Change Leadership Learning Series will get you started on a lifelong journey of change leadership, by taking you through 3 tiers of learning, 

• 101: The basics of change leadership 
• 201: Learn to apply change leadership skills at personal, org and macro levels
• 301: Learn advanced skills for dealing with specific challenges in large regulated industries or other complex scenarios.

The levels are described in more detail below. 

Change Leadership 101 

• What and Why (2 learning segments)
• The Change Leader mindset (4 learning segments)

Change Leadership 201

• Activating Change Leadership on a Personal Level (4 learning segments)
• Activating Change Leadership at the Organizational Level (4 learning segments)
• Activating Change Leadership at the Industry or Macro Level (4 learning segments)

Change Leadership 301

• Learn to navigate and resolve special challenges encountered in complex change leadership scenarios. (5 learning segments)

Sign up now for your 30 day free trial - and start getting the Change Leadership Learning Series lessons in your inbox each week, along with full access to the S3T.ORG learning platform.

🔒 For Full Access Members

Smarter More Inclusive Annual Planning

Leading companies are learning how to turn the budget season into a company-wide conversation instead of a zero-sum game, and gather insights not just numbers. Click the link above for the downloadable guide that shows your leadership team how your annual planning season can boost your culture and competitive advantage.

Annual Review Season: Signaling & perspective taking

Annual review season brings crucial conversations when managers walk the delicate balance between the company's budget constraints vs. its needs for highly engaged & empowered employees. Each year may feel more challenging than the last - especially for companies that rely on technical talent. Learn how to avoid the trap of saying the right things but sending the wrong signals this Annual Review season.

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