Do Better Better #7: The New Externalities

Important, Not Important

With (waves hands) “everything” going the way it is right now, it’s easy to feel boxed in. 

It’s easy to doom-scroll through the news and feel like “everything” is falling apart. Even if your state isn’t currently on fire, or underwater, you’re probably still stuck inside your home. Your kid’s school isn’t open, your office isn’t open, our political leadership is off the grid. Sure, your sensible index funds are up-ish, but you’re acutely aware that a few tech behemoth companies are carrying the load for all the rest.

And this is all under the assumption that you’re not one of the unlucky many where your state is on fire, or recently underwater, and you’ve still got to go to work, to an hourly wage job, to an office, a factory line, driving the bus, serving food, or helping patients. 

Maybe you don’t have kids. Maybe you do. If you do, and you are at a job, your kid’s still not at school, but now there’s no one home to help them with Schoology or Google Classroom or Clover, and you couldn’t afford to buy any of the FAANG shares anyways, nor would you, because food and rent are your primary concern, not earning expectations.

The point is: it’s perfectly normal to feel pretty exposed right now. To “everything”.

But as always, our goal is to get down to brass tacks. Thus, there are two primary questions to consider today, considering “everything”:

  1. What, exactly, are you exposed to?

  2. What are the adjustment costs of your exposures?

And as always, it’s helpful as you’re evaluating these to apply the questions not only to yourself, but to your family, and to your company, too. You should be able to discover a number of interrelated factors among them, many of which you might not have considered before.

The framework for approaching this evaluation remains the same whether you’ve got dependents or not, investments or not, employment or not. It’s never a bad time to take stock of your current situation, and that’s never been more true than right now, because, well, you know.


I’d recommend starting discovery with your industry, whether you’re a board member or a freelancer, and then working your way down to ground level.

Questions might include — what’s changed over the past decade, and why? What about over the past year? Who are the industry leaders by revenue, profit, and growth? Are they privately held? Will they remain so? Why or why not? Is R&D growing? Is overhead growing? Is that a good thing? Is it because those companies are investing more in people? Is your industry resource-limited? Does it have to be? Who has a resource moat? Anyone? Is your industry geographically limited? Back up -- why? And if so, how does the climate crisis affect either that resource, or your geography, if at all? You sure about that? Will a clean jobs guarantee change anything above? Why not?

Timely questions include whether a future where remote work is universally accepted and appreciated is something your industry and company is prepared to incorporate, if not a strength on which to make your workplace more attractive.

What was your industry’s last major innovation? What led to the shift -- abundance? Scarcity? Consolidation? Moore’s Law?

Pivot these questions a bit and you have the same questions, but for your family, and yourself.

How’s your health? How’s everyone else’s health? How will that change? Where are your major recurring, immovable costs now, in 5 years, in 10 years? Do you own a home in an area threatened by sea level rise or rising floodplains? Do you still have student loan debt? How will a new administration potentially affect it? When is your insurance due to be renewed? Speaking of insurance, how’s life insurance looking? How about estate planning? What’s your family medical history? Do your kids know about it?

Get timely. Get specific. Do you live out west? How does that air taste? Do you think the health ramifications of these fires wash away with the fires themselves?

You get the idea. Once you’ve got a nice list of things that would make or break your world as you know it, it’s time to assess adjustment costs. For any of the questions above, are you prepared for the mitigation, adaptation, or relocation of self, family, assets, bandwidth, or other resources, personal or corporate? Inversely, what resources would be required to prepare for, to investigate, or to commence answering them? Do you already have those resources at hand? Can you raise them, with a phone call, a side job, or a capital raise?

Should you get more education? From where? Should you move? Should your parents? Should you merge with another company, to cover more ground? How can you invest more in younger, more diverse workers? Should you join your children’s school PTA? What, specifically, do you have to offer? Accounting skills? Fundraising? Artistic?

Our world is more connected than ever before, and I highly recommend tools like mindmaps to fully consider the nexus of you. Externalities are everywhere, but you can’t do anything about them (including ignoring them) if you don’t have a realistic picture of the current facts on the ground.


The most famous examination of externalities exists in the stock market. Or doesn’t.

Longtime investors are happy to hop on their soapbox to tell you that any retail investor who thinks they’ve got a lead on an undervalued share is paying a premium anyway because -- short of insider trading -- any externalities they could have in mind are already baked in.

Which is interesting. Because stock values are theoretically intended to reflect both the current state of a business, and its future profits. Meanwhile, the S&P 500 is up 40%ish since I locked my family inside my house because a pandemic showed up and killed at least 200,000 Americans, while anywhere between 18 and 30 million Americans are out of work, or looking for work (or staying home and not looking for work because...we told them to stay home), while the West burns and suffocates and the coastal South drowns and bakes, while a housing crisis looms, while the poor cannot afford food and drinking water, while we await a probable constitutional crisis and the least peaceful transfer of power in our history.

That longtime investor might argue “Yes, but none of those things are directly linked to any one company’s fundamentals or future profits.” And then you could reply “But does that company employ people who need to buy food or breathe air or retain home insurance in the face of fires or floods?”

Unfortunately, those longtime investors have two hundred years or so of quarterly reports that prove that politics, and war, and other existential crises aren’t externalities that move the needle. And they’re not wrong. But I firmly believe that the past will increasingly fail to predict the future, more than ever before. 

All we have are the facts on the ground, and what we can extrapolate to near-term implications. 

And the facts on the ground are both exciting, and devastating. Across the globe, our youngest workers and voters are diverse, scared, and angry. Much of their future is already written thanks to the generations that came before them, but they are desperately trying to rewrite what they can. Because the future’s here early.

The facts on the ground also show that ESG (environmental, social and corporate governance)-type management styles and investments are beneficial to owners, employees, shareholders, and, increasingly, citizens of the world. Sure, maybe it took a pandemic to really kick that momentum into gear, but then again, the previous set of facts on the ground are what made this pandemic inevitable -- don’t let anyone tell you different.

I’m not arguing that your industry is in trouble, that you should park all your money in cash, that you should exclusively hire energy over experience, that bars will never reopen and you’ll never serve another drink again, that code is dead, that no one will ever buy your screenplay, that AI is coming for your market research job, or that there isn’t still money to be made in the public markets. Far from it.

I’m simply trying to help you think about your place in all of this.

I’m arguing, at least in that last example, that ESG-type investing is the tip of the iceberg, and more broadly (because I am a generalist if nothing else) that the world is more connected than ever before, that is changing faster than it ever has before, that much of that change is both because of us and now out of our control, and that people, companies, and industries that don’t explore and adjust for externalities are going to be under water in more ways than one, and soon.

— Quinn

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