ZBB Your Life
Zero Based Budgeting (ZBB) is not a new concept, but I think it is going to become more ubiquitous in the zeitgeist in the coming months and years. First, because government budgeting is always of much concern in an election year. Secondly, the changing tide in efficiency in the workplace. And thirdly, because of the rapidly commoditizing enterprise software market. It’s not that we will all be asked to do more with less (although that may be the case in many scenarios), it’s that we can do more with less.
Everything will need to get re-underwritten in the upcoming economy. This is the concept of ZBB. Every year, you look at your entire P&L from first principles and decide what goes and what stays. There is no “anniversary-ing”, or “this-is-the-way-we’ve-always-done-it-ing” or “so-and-so-needs-this-with-no-further-validation-ing”. Everything gets examined. Everything gets scrutinized. Maybe you’ll do the exercise and determine that no changes are needed. But more than likely, especially in such a rapidly changing environment, you’ll discover new solutions to old problems. It would be almost impossible not to.
But it’s not just about business. What if we took this concept and applied it to macro and micro aspects of our life? That’s what I am doing as I prepare for 2024. I’m taking stock of my wins and losses, revisiting my decision making, and applying ZBB:
Investing - As interest rates and consumer demand change, so does the cost of capital in every sector, and with it the benchmark for internal rate of return for each individual entity. ZBB your IRR.
Politics - Democrats are tasked with the difficult position of convincing an incumbent step down in order to win. ZBB your party.
Religion - People have to realize the benefits to community that religion provides and not focus on the zealotry that drives it apart. ZBB your understanding.
Health - Normalize not eating junk, put McDonald’s out of business. ZBB your calories.
Society - If something isn’t serving you personally, don’t keep it around out of nostalgia. ZBB your relationships.
Media - The things you consume shape your mind, body, and soul. ZBB your information diet.
Style - How you present yourself to the world is a reflection of how you feel about yourself, but the world also reflects back at you. ZBB your closet.
I am reminding of a quote the great Lil Wayne once said:
“Work hard. Be somebody. Be something more than what you see in the mirror. Let the world be your mirror. Don’t let ‘em judge you, cuz the mirror can’t judge you. You judge what you see in the mirror.”
2023 Prediction Recap
OK now let’s do a quick review of some of my 2023 Predictions.
Continued Rate Hike Slowdown: Nailed it, but they tapered off slightly quicker than I thought. I called a peak of 5.75 in Q3, and I was off by about a quarter point. Most of my predictions were slightly to quite pessimistic in retrospect. TBD how I adjust my outlook for 2024. I kinda think it’s gonna rip as JPow gets the money printer warmed up in time for November, bringing an end to the Vibecession.
Market Fake Out: Kinda sorta close. I predicted a local S&P top of 4000 at the end of Q1, driven by Meta and Google, but the top of 4200 came quicker than expected. As predicted, both companies beat their Q1 earnings, but I thought there would be more malaise as consumer demand (and thus ad spend) tapered off through Q2 and beyond. There was a pullback I was expecting, but there was no “lower bottom”. Both companies continued to grow all year, a reminder that US consumers-gonna-consume and advertisers-gonna-advertise.
HOOD vs DKNG spread trade: Nailed it. HOOD went from 8 to 12 with some peaks and valleys, which was honestly better than I imagined for them. DKNG went straight up and to the right from 11 to 35. The takeaway here is that the average consumer trading on his or her smart phone is more confident gambling on sports than business. There is some irony here somewhere.
No Significant Big Tech Launches: Nailed it. Although Apple hinted at Vision Pro in 2024. 2024 prediction preview: this product will slap. Extremely hard, and in the face of all the haters. Just like Cybertruck will literally be fueled by sheer contempt. Imagine getting passed on your local freeway by some tech bro in a beanie going 100mph in his Cybertruck in full self driving mode while wearing a Vision Pro sipping a matcha latte. I can already smell the future.
Google Search is Not Dethroned: Nailed it. The non-monetizable search query volume is of course moving away to other platforms, but if you need to find a product and don’t know the domain (which is the most common monetizable search query), Google is still the default consumer choice, even for the most ardent AI users.
Main Street Layoffs Signal the Beginning (of the End): Whiffed hard. The Fed seems to be in the middle of orchestrating the soft landing they had hoped for. I thought the tech layoffs would be indicative of things to come, but it turns out there was consumer demand left in the tank to allow companies to weather the storm.
A Second (Lower) Bottom: Whiffed hard. The pullback after Q1 that I had predicted was decidedly not lower. The S&P dipped under 4000 for a beat, and proceeded to continue its path back to achieving an all-time high, which should happen any moment now.
More Centralized Exchange Collapses: Pretty damn close! After the FTX debacle, I thought for sure more CEXs would be further scrutinized and found out. CZ, the founder of Binance, the largest centralized exchange, recently plead guilty to money laundering, but Binance itself is still active. My audacious bet was actually that Binance specifically was going to blow up. It still may, if the CZ charges are an allusion of deeper structural issues within the company ethos.
Increasing Bitcoin Maximalism Exposed: Whiffed but I think I am still super early on this one. BTC is the mainstream cryptocurrency, and synonymous with crypto itself, but at some point the public evangelism (or “shilling” if you please) will get exposed for what it is. Pretty soon we will have ETFs that include BTC, so all investors will be able to participate in it without directly having keys to their own coins. This will surface politicians and public figures to be claiming it as the “one true crypto” in an overt albeit legal display of equity promotion designed to eliminate all competition. This one may be a few years away, but there will be blood.
Biden Runs Again, and No One Challenges from the Left: This was a layup that I called too early and should have saved for 2024 but I nailed it hard. There was no way that an incumbent was going to step down willingly, but still it seems obvious to most that he probably should, sooner rather than later. I talked last week about how the Left has just been fractured. Man, imagine if we could gamble on US elections on DraftKings!
2024 predictions to come!