White Collar Woes

Plus: We know what VCs had on their grills and it wasn’t plant-based meat. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 5, 2023

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TOGETHER WITH

Good morning.

Entrepreneur and investor Peter Thiel once lamented humanity’s technological stagnation by saying “We were promised flying cars, and all we got was 140 characters.” Patience, Peter, patience.

This week, the Federal Aviation Administration approved what startup Alef Automotive is calling a flying car. At the going rate of $300,000, its Model A can reportedly drive on public roads and park like any other car, but it can also take off vertically and has a flying range of 110 miles. The FAA’s approval only clears the craft for testing, and it still needs approval from the National Highway Traffic Safety Administration before hitting any roadways for real, so in the meantime, we’ll have to settle for jetpacks.

Morning Brief

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America’s upper crust is having a tough year.

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How to lose friends and alienate influencers.

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VCs look beyond plant-based meat.

Economy

We Are in a Recession, If You Ask High-Earning Americans

It’s a quandary worthy of Shakespeare: Are we, or are we not, in a recession? The answer, it turns out, may depend on your tax bracket.

The unemployment rate still hovers around historic lows, inflation is finally falling, and GDP keeps ticking up. But for high-earning Americans, fresh off a couple of rollicking pandemic years, it’s beginning to feel a bit more like a recession, according to a recent analysis by The Wall Street Journal.

Down and Out in the Metropolitan and Union Clubs

Oh, how the tables have (slightly) turned. Thanks to the tight labor market, wage growth among lower-paid and less-educated laborers has finally outstripped that of their higher-paid and higher-educated counterparts after four decades of increasing wage inequality, according to a recent research paper published by the National Bureau of Economic Research. That dovetails with Labor Department data that shows recent wage growth among the highest earners in the bottom 10% has surpassed the rate of inflation, while those in the 90th percentile have seen wages fall behind rising prices. Meanwhile, ritzy jobs in the New York City securities industry saw a sizable 26% haircut to typical end-of-year bonuses in 2022, down to, ahem, just $176,700, according to state-level data.

And it’s not just income where society’s upper crust (or, at least, the lowest rungs of the upper class) are feeling the sting. There’s a reason why newspaper business sections feature seemingly contradictory headlines about both historically low unemployment rates and massive waves of high-profile layoffs:

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Roughly one-third of layoffs announced by American companies this year have stemmed from tech; Meta, for example, where the median salary is nearly $300,000, has cut thousands of employees so far this year. Wall Street has been far from immune to layoffs this year as well.

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Meanwhile, Bank of America Institute economists say the number of households earning at least $125,000 receiving unemployment benefits was up 40% in April compared to a year before, a spike five times that of households earning less than $50,000. And that’s only in the 30 states in which laid-off workers receive benefits via direct deposit — a list of states that crucially doesn’t include California and its ailing tech hub.

The downturn has led, unsurprisingly, to some belt-tightening. The Bank of America Institute economists also found that discretionary credit and debit card spending dipped in April year-over-year for high-income households, even though it increased for most other households.

Of Course…: Surely you’ve shed a crocodile tear or two by this point — high-earning Americans will likely be okay, even if they’re increasingly living paycheck to paycheck. But in California, home to an outsized share of the nation’s homeless population, loss of job or income was listed as the leading cause for homelessness in a new comprehensive study from researchers at the University of California. Meanwhile in Los Angeles, the homeless capital of the nation, rates soared roughly 10% last year, according to a recent annual report.

– Brian Boyle

Marketing

The FTC Closes In on Influencers

Being your #bestself isn’t as profitable when you have a big watermark splashed over your perfect #nofilter face.

The US Federal Trade Commission updated its guidelines on how influencers and celebrities (honestly, is there even a difference between them anymore?) endorse products on social media. Basically, a barely visible “#ad” in the text beneath an Instagram post isn’t going to cut it anymore.

The Circle of Influence Tightens

It’s hard to estimate exactly how big the influencer marketing industry is, because who exactly constitutes an influencer is pretty fuzzy. Influencer Marketing Hub estimates the sector was worth around $16.4 billion in 2022, as did McKinsey. Influencers (or creators, another flavor of influencer that generates more original content) can make money directly from the various platforms they work on — YouTube, TikTok, and Instagram all have programs that let creators profit off the companies directly — but endorsements are where the serious money lies.

According to McKinsey, even relatively obscure influencers can bag a five-figure payday for a single post, and celebrities can go higher than six figures.

The FTC isn’t looking to limit influencers’ pay with its new rules, it just wants them to be a bit more explicit about the fact they’re getting paid to gush about those new sneakers they just “bought”:

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Influencers won’t be allowed to use disclosures anywhere where there’s a chance an idly doom-scrolling user might not see them, which in essence means they’ll have to place their disclosures on their actual videos.

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That could put a slight damper on influencers’ whole vibe, but it’s also a warning to brands that might want to get some 21st-century shilling done. “I think the whole influencer endorser landscape or environment [and] every party involved in it is on notice now,” Allison Fitzpatrick, a partner at law firm Davis+Gilbert, told The Wall Street Journal.

Red Tape Everywhere: New disclosure requirements are also making life miserable for Meta, which suffered yet another setback on Tuesday when the EU decreed that Facebook will need to ask users’ permission before showing them personalized ads. Mind you, judging by how much attention European web users pay to the cookie permission pop-ups they endlessly have to click through, it might not change their habits much.

– Isobel Asher Hamilton

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Food

Plant-Based Meats Are Looking Undercooked

(Photo credit: UBC Media Relations/Flickr)

Tasting like chicken but costing a lot more will only get you so far as a business today, no matter how good you think it may be for the planet.

Amid rising interest rates and soaring inflation, plant-based meat startups are seeing their popularity start to fade. Consumers on a budget seem to have lost their taste for the product, and venture capitalists, which have funded many startups within the sector, are taking notice.

Money’s Too Tight for Beyond Steak

A major selling point for plant-based meats was that they created far fewer greenhouse emissions than harvesting livestock. However, many shoppers no longer have the luxury of engaging in conscious consumerism. Plant-based advocacy group The Good Food Institute reported that per pound plant-based meat is twice as expensive as beef, three times the price of pork, and four times more expensive than chicken.

And less demand means less funding for alternative-meat startups. According to PitchBook data reported by the Financial Times, VCs invested just $75.2 million into plant-based startups in this year’s first quarter, down nearly 90% from $703 million a year earlier. The effects can be felt throughout the industry:

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California-based Tattooed Chef recently announced it was filing for Chapter 11 bankruptcy after failing to secure enough funding and is currently seeking a buyer. Last month, UK’s Meatless Farm laid off its staff and shuttered its website after major shareholder SK Inc pulled out of a planned $38 million capital injection. It was quickly saved and acquired by chicken maker VFC for $13 million.

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In March, Nestlé pulled its Garden Gourmet products from UK and Irish store shelves along with two of its other plant-based brands — Wunda and Mezast — to focus on its “core” portfolio. In the summer of 2019, Beyond Meat — one of the premier plant-based brands — saw its stock price hit a peak of $235. It now sits at less than $15.

Back to the Lab: With prospects dimming for plant-based meat, its cousin — lab-grown meat made from live animal cells — is also facing strong headwinds. Though companies Upside Meat and GOOD Meat received FDA and US Department of Agriculture approval last month, it might be a while before the industry catches on. Nutritionist Diana Rodgers told The New York Post “I’d rather eat my shoe than lab-grown meat.” One study — yet to be peer-reviewed — from the University of California, Davis, argues that lab-grown meat production can be magnitudes worse for the environment than traditional meat. For the summer barbecue season, maybe you should just reach for the portobello mushrooms instead.

– Griffin Kelly

Extra Upside

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You got us: Firms including Meta, Google, Amazon, and Apple concede they are digital “gatekeepers” under new EU regulation.

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Round Two: Yahoo wants to go public again.

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¹ Largest PE digital platform for B2C by AuM (Moonfare).

² Capital IQ, Hamilton Lane, February 2022

³ Ibid.

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