Everyone Hates Inflation (EP.231)

Episode Summary

Executive Summary: The episode centered on the inflation surge and its political, behavioral, and market effects, arguing that while prices are painful, the counterfactual of doing nothing during the pandemic would have been worse. The hosts also explored crypto’s fast-evolving Web3/DAO world—highlighting ENS, ConstitutionDAO, and the risks of self-custody—before turning to earnings from Coinbase, DoorDash, and Disney as examples of changing consumer behavior, platform economics, and market resilience.

Main Topics: Inflation and public anger (Priority: 5/5): The hosts debate why inflation is so unpopular, how it is affecting groceries, gas, and psychology, and why messaging from politicians has been poor despite the economy being better than the alternative counterfactual. Policy, supply chains, and the Fed (Priority: 5/5): They argue that supply-chain fixes and better government messaging would help more than rate hikes, and that the inflation problem is being driven more by pandemic-era demand/supply distortions than by traditional overheating. Crypto, Web3, and DAOs (Priority: 5/5): A long discussion covered ENS, token incentives, DeFi communities, ConstitutionDAO, and the idea that Web3 could shift value from platforms to users, while also warning about inequality and fragility in crypto ecosystems. Personal crypto security failure (Priority: 4/5): One host recounts being phished after connecting a MetaMask wallet and entering a recovery phrase, losing tokens and NFT-related assets, which becomes a cautionary tale about self-custody and scams. Earnings and platform business models (Priority: 4/5): They review Coinbase, DoorDash, and Disney earnings to illustrate how crypto exchanges, delivery platforms, and media companies are affected by user behavior, pricing power, and demand pull-forward. Consumer behavior, sentiment, and nominal thinking (Priority: 4/5): The episode stresses that people react to prices in nominal terms, not real returns, and that consumer sentiment surveys can diverge sharply from actual labor and spending conditions.

Key Arguments: Inflation is politically and psychologically damaging even when the alternative path (doing nothing during COVID) would likely have been worse. The government and White House failed to frame inflation as a supply-chain and pandemic normalization issue, which worsened public perception. Rate hikes would not solve supply-chain bottlenecks, so the Fed should be cautious about reacting too aggressively. Lower-income households are not uniformly the biggest losers from inflation; many have benefited from higher wages and government aid. The middle class is likely feeling the most pressure because they lack the asset gains of the wealthy and the wage gains or aid of the lowest earners. Crypto/Web3 is built on incentives, and DAOs may eventually reshape how platforms distribute value and governance. Self-custody and decentralized systems create real risks; traditional finance-style safeguards will likely be necessary for mass adoption. Stocks can still be a reasonable inflation hedge because companies with pricing power can pass costs through to consumers. Consumer sentiment is a poor guide to actual economic conditions; behavior and labor-market data matter more. Subscription and platform businesses like DoorDash and Disney are seeing strong pricing power or pull-forward effects, but future growth may slow after the initial surge.

Data Points: U.S. inflation rate: 6.2% year over year - Highest inflation reading since November 1990 U.S. inflation rate in 1990: 6.3% - Used as historical comparison Monthly inflation pace: 0.94% - Highest month-over-month increase since 2008 Average family gas cost increase: $800 more per year - Estimate cited in discussion of household impact Steak price increase: 24% - Year-over-year grocery price example Bacon price increase: 20% - Year-over-year grocery price example Pork chops price increase: 16% - Year-over-year grocery price example Egg price increase: 12% - Year-over-year grocery price example Fish price increase: 11% - Year-over-year grocery price example Chicken price increase: 9% - Year-over-year grocery price example Inflation in the first half of 2022 (forecast mentioned): 4% to 6% - Cullen Roche projection referenced by hosts 30-year mortgage rate in 1990: 9.9% - Historical inflation-era comparison 30-year Treasury yield in 1990: 8.4% - Historical inflation-era comparison 10-year Treasury yield in 1990: 8.3% - Historical inflation-era comparison 2-year Treasury yield in 1990: 7.5% - Historical inflation-era comparison Current 30-year Treasury yield: 1.9% - Comparison to 1990 rates Current 10-year Treasury yield: 1.6% - Comparison to 1990 rates Current 2-year Treasury yield: 0.5% - Comparison to 1990 rates Top 10% stock and financial asset ownership: 89% - Used to argue wealthier households benefit more from financial asset inflation Bottom 90% share of stocks and financial assets: 10% to 11% - Used to contrast asset ownership with debt burdens Bottom 90% share of household debt: 75% - Used to show debt burden concentrated below the top 10% Disposable income for bottom families: 9.5% higher in 2021 vs. 2019 - Washington Post reference about finances after pandemic Lowest earning quartile wage growth: 5.1% - Atlanta Fed wage growth chart referenced by Liz Ann Saunders ENS airdrop value: $2 billion - Ethereum Name Service token distribution ENS personal token value received: About $2,500 - Host’s estimated value from 40 tokens Crypto loss from phishing incident: About $5,000 - Value lost from MetaMask wallet, ENS, and tokens ConstitutionDAO fundraising goal: $20 million - Attempt to buy a rare copy of the U.S. Constitution at Sotheby’s Constitution print count: 500 printed; 13 remaining - Explanation of rarity and historical context Coinbase institutional trading volume: 72% - Mark Rubenstein note on market structure Coinbase retail trading revenue share: 94% - Retail still generates most revenue despite lower volume share DoorDash Dashers: Over 3 million - Quarterly operating scale DoorDash revenue: $2.8 billion - Mentioned during earnings discussion DoorDash market cap: $84 billion - Illustrates market optimism despite losses DoorDash free cash flow: $48 million positive - Quarterly cash generation referenced DoorDash spend on delivery membership: $9.99/month - DashPass pricing mentioned Disney+ subscribers in Oct. 2020: 74 million - Subscriber growth context Disney+ subscribers in Oct. 2021: 118 million - Shows strong pull-forward and later slowdown Disney+ net additions in latest quarter: 2.1 million - Sharp slowdown from prior quarter Disney+ net additions in prior quarter: 12.4 million - Used to show deceleration U.S. personal savings rate peak: Almost 30% - Pandemic-era spike mentioned Current U.S. personal savings rate: Well below 9% - Used to discuss labor market and spending dynamics Consumer sentiment: 10-year low - Michigan Consumer Sentiment Index reference

Pivotal Quotes: "The alternative would have been way worse." — Michael Batnick: Argument that pandemic checks and policy support were preferable to inaction despite resulting inflation "The genie is out of the bottle now." — Michael Batnick: On the likelihood that future recessions will again trigger fiscal stimulus and inflation concerns "Everything is amazing and no one is happy." — Both hosts: Used to describe the contradiction between strong wages, jobs, and assets versus widespread frustration over inflation

Implications: Inflation may stay politically toxic even if broad household finances are improving. Web3 could create new ownership models, but security and inequality are major hurdles. Investors should watch pricing power, consumer behavior, and whether policymakers misread inflation or overreact.