Edition 10: What went wrong in 1971?
Also: HENRYs on the rise, and why TikTok and ByteDance keep winning
Happy Sunday! It’s been another beautiful week in San Francisco, with “summer” in full swing - blue skies and 80 degree balmy weather that almost makes me forgive the torrid heat and smoke of the past few months.
For those of us in California, I’ve been reading up on the propositions on CalMatters, a nonpartisan and very approachable website that does a good job explaining each prop at a high level and showing which notable organizations are for and against. Votes are due in just about two weeks!
As the crises (plural) of this year weigh on us, it’s natural to wonder - when did everything start to go wrong? This website collects dozens of charts that point a finger to one year - 1971 - when the seeds of slowing growth and economic inequality might have been sown. Take a look:
As we become increasingly productive and well-connected (thanks to software, the internet, better manufacturing processes, etc etc) our compensation has not appreciated to the same degree.
It’s well known that record numbers of 20 and 30 somethings live at home with their parents, as home ownership is increasingly unaffordable. Are millennials and Gen Y/Z producing less value? Or are they undercompensated for their effort? Data suggests the latter.
In the last 30 years, the earnings growth of the bottom 90% of earners has remained largely stagnant, versus the meteoric rise in value of the top 1%. Occupy Wall Street may really have been on to something - but as the fortunes of billionaires continue to rise amidst the pandemic, it seems little has changed.
Though inflation has tapered off since 2018, we’re still looking back at a historic climb since 1971.
The unprecedented federal stimulus this year is only the latest in a long line of federal debt increases that really hit exponential stride around 1971.
All this and more metrics chart the stagnation of the American dream. More than ever, generation wealth eludes the vast majority of the populace. What happened in 1971? What happened in the land of opportunity?
What happens to a dream deferred?
Does it dry up
like a raisin in the sun?
Or fester like a sore—
And then run?
Does it stink like rotten meat?
Or crust and sugar over—
like a syrupy sweet?
Maybe it just sags
like a heavy load.
Or does it explode?
Harlem, by Langston Hughes
The HENRY designation is short for “high earners not rich yet.” The acronym system of identification has become popular with analysts, however, this consumer classification has gone largely ignored by enterprise retailers.
A HENRY is just another label for a young professional, also called a yuppie, the sort of category myself and most of my friends fall into. We vacation often, treat ourselves with large discretionary purchases, and aspire upwards the corporate ladder - or to make a name for ourselves in one creative field or another. We’re ambitious and forthright in our desire to reach the upper echelons of society.
Like Indiana Jones leaping heroically from a collapsing bridge to solid ground, HENRYs are the social movers escaping a shrinking middle class, looking to expand their fortunes in a shifting economic and social landscape. Beyond the STEM graduates, these include people embracing new methods of value creation - social media, ecommerce arbitration, day trading - navigating the modern world to establish their fortunes.
This cohort of professionals is a cross-section of race, ethnicity, and gender though many share similar traits in quality of education, career, and social standing. This psychographic is due to become the key study in the next five to 10 years of retail marketing and communications development. HENRY is beginning to live up to its name. There is a new guard of creative leaders, solo capitalists, and ascendant executives to show for it.
Retail for the middle class may be collapsing, but savvy businesses (Allbirds, Lululemon, Peloton) are locking on to HENRYs and following them upmarket.
Another week, another deep dive on ByteDance/TikTok. The truly explosive growth of TikTok and its parent company ByteDance has captured the attention of tech analysts worldwide, and this excerpt from a book on the ByteDance phenomenon is full of interesting gems.
What I found particularly approachable here is how it explains the shift in how we interact with software. I love to think really deeply about our relationships with the interfaces around us, and why some internet companies have succeeded beyond others. What is it about TikTok that makes it so salient to consumers today?
We first start with the seismic shift in how we are presented with content. In the early days of the internet, the internet was a library, or a collection of information and storefronts. You had to know what you wanted, and you were presented with options - from Yahoo, the internet portal, to Google (and the myriad of now forgotten search engines), which led you to exactly what you wanted. The flow was something like:
I know what I want
I go to the internet to figure out how to find it
The internet presents me with the answer
As the sheer amount of information and content on the internet exploded beyond human comprehension, the model has flipped on its head. We now have more information than we know what to do with. There are countless hours of Youtube videos, Spotify songs, that will never be seen or heard. There is simply too much content for humanity to deal with. Now, we have information looking for consumers.
Enter artificial intelligence and recommendation engines. Software has become the matchmaker between person and information - no longer do we need to know what we want, because software will tell us what we want and bring it straight to our doorstep. As I’ve touched on before, software has begun to know us better than we know ourselves. A truly thrilling revelation.
The above chart neatly breaks out the ways we encounter information on the internet, ordered by how long the approaches have been around:
Curation: the ability to find information in a central relevant source - digital portals, best of lists, storefronts.
Search: the ability to find exactly what you’re looking for.
Subscription: the ability to follow a source for a continuous stream of related content.
Social: the ability to follow along with your friends and family.
Recommendation: the proactive push of information you might enjoy to your doorstep.
The final piece of the TikTok puzzle: leveraging our fractured attention spans to create a sticky, recurring experience.
When the internet was younger, we spent more time in concentrated activities - AIM chats, Facebook games, Youtube binges. As our attention has moved to mobile and push notifications compete for mindshare, our sessions get shorter and shorter - and multitasking dominates the day.
TikTok, with bite sized (15-60 seconds) and algorithm-recommended content, captures the generational moment of the latest internet age: that urge to check your phone for a few minutes at a time while in line at the deli counter, while waiting for a meeting to start. It seizes your attention by drawing on a near-limitless stream of new content to deliver the most enticing clips. And it learns your interests at incredible speed, guaranteeing straightforward monetization in the form of highly targeted ads.
Altogether a formidable machine, it’s clear to see how TikTok has taken over as a dominant social media force in both East and Western markets - and it’s just one of ByteDance’s many operations, all of which share the same critical machine learning infrastructure that powers the irreplaceable recommendation engine.
ByteDance has grown from a team of 300 in 2014 to well over 55,000 last year. There’s no telling where this train is stopping, but it’s clear that the whole world is watching with great interest.