~ Welcome to #thebalance 51 ~
October coming up. My favorite month of the year. Hopefully some big news for me to follow, stay tuned!
Make sure you check out the new ‘fall flow’ Spotify playlistin #otherthings below!
❤️ Likes, shares, and ‘my contacts’ adds are appreciated! It helps others discover what they have been missing out on while ensuring gmail doesn’t junk this thing either :)
⬇️ #thinkingthings, #followerthings, and #otherthings ⬇️
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🤔🤔 #thinkingthings
🟥 >>>> The State of Climate Tech
An area that is increasingly becoming near and dear to my heart (and hopefully yours too), climate change and the imminent crisis facing the future of humanity over the course of the next decade and beyond. We are still in a position where we can fight and maybe even reverse the negative effects we have had on the planet… its not too late, but the countdown sure is coming fast.
I am highlighting a report published recently by PwC in tandem with one of my favorite thought leaders/ information curators, Azeem Azhar, where they cover in length key developments of the ‘climate tech’ space and where I believe a large portion of the innovation, growth, and wealth generation (…for the better of the planet too!) will come from for the next generation.
Climate change is already a major test for humanity and will continue to grow in scope (just look at NASA’s findings). It also represents a significant opportunity to adapt and change our behavior for the better… while driving tremendous return on capital for many of the entrepreneurs and investors funding this next wave. Thus, we have the Climate Tech report, a few highlights below:
“Climate tech” encompasses a broad set of sectors which tackle the challenge of decarbonizing the global economy, with the aim of reaching net zero emissions before 2050. This includes low-to-negative carbon approaches to cut key sectoral sources of emissions across energy, built environment, mobility, heavy industry, and food and land use; plus cross-cutting areas, such as carbon capture and storage, or enabling better carbon management, such as through transparency and accounting.
The United Nations (UN) Secretary-General has labelled climate change ‘the defining issue of our time’.
In response, the world has increasingly committed to ‘net zero’ greenhouse gas emissions. The 2015 Paris Agreement saw world leaders agree to limit a global temperature rise by the end of the century to well below 2°C, and to pursue efforts to limit the temperature increase even further to 1.5°C. Since then, over 120 nations – representing nearly half the world’s GDP ($39 trillion) – have set or are proposing to set a net zero target before 2050 which is aligned to the 1.5C threshold.
We need faster, bolder innovation in climate tech, and startup innovation can help deliver this. The startup/venture ecosystem is geared up to deliver fastgrowing, highly scalable companies with a technological edge, which is exactly what is needed now for climate. The special recipe is the combination of human capital with novel technologies, often wrapped in business models which challenge or disrupt the status quo. For example, companies like Apple, Amazon, Google, Genentech, Uber and Tesla have created or transformed industries, markets, and daily behavior, in under a decade since their inception.
Governments, businesses, and international organisations have a deliberate focus on reducing GHG emissions across all sectors of the economy. There are, however, five key sectors which contribute the majority of emissions, and which remain key ‘challenge areas’
Investment has grown at almost 5x the rate of the overall global venture capital market between 2013-2019, or 84% compounded annually.
In the seven-year period, mobility and transport have made up 63% of all funding. This is largely because of the drive towards electrification of cars and other modes of transport. The other sectors are rather earlier in their maturity curve and don’t weight as heavily.
Last year alone, climate tech investments made 6% of global VC activity in 2019. This is still small beer but is a ratio worth tracking.
More companies are being funded and deals are slowly getting bigger.
>>> Dive deeper. See the full report here.
🟥 >>>> Property Taxes Apples to Apples
Sharing an original post written by my friend, Kris Abdelmessih, where he gets into the weeds comparing two states’ (New Jersey and California) property taxes and how it ties to our cost of living re: home ownership in America these days.
Although his analysis focuses solely on two states (neither, of which I have lived in), I still found his post as a helpful framework for thinking about wealth generation (or, conversely, money you are leaving on the table) through home ownership. Its an even more relevant topic these days for my fellow millennials, many of whom are first time home buyers! Pay attention, friends… especially with that certain election coming up.
Also, be sure and give Kris’ newsletter/ website, Party at the Moontower (…name that movie) a follow! Its a must read for me each and every week. The guy knows his numbers.
Snippets from his post this week below:
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You will be working from home more often. Not all of you but many of you. That means browser tabs devoted to Zillow searches in Austin, Nashville, Vegas, Denver, and Miami. Geo-arbitrage won’t be as dramatic as software devs had hoped since the big companies will cut your pay when you leave, but in some of these places you could sustain a 20% pay cut and still be better off (at least if you’re leaving SF).
One of the biggest inputs into cost-of-living comparisons are so-called SALT (state and local) taxes. Since 2018, SALT deductions are limited to $10,000. They were previously uncapped. This has created even larger disparities in cost-of-living between states. CA, IL, NJ, and NY have income taxes that get a bit handsy with their residents.
Beyond state income taxes, one needs to consider property taxes for a more complete picture. Texans enjoy zero state income tax but hefty property taxes. NJ residents are assaulted from both ends — above average state income taxes and punitive property taxes. How about CA? The state income tax, gas tax and the cost of renewing a vehicle registration are nothing short of sunny weather ransoms.
Property Taxes: Apples to Apples
The effect of property taxes depends on 2 core variables. The property tax rate and the assessed value. If you are weighing a house in CA to a house in NJ you want to make an apples-to-apples comparison. How do you do that when the rates are different and the methods of assessing value are different?
Assessed Value Effect
Property taxes are waged on assessed value. In NJ, assessed value resets whenever a home trades. So if you buy a $1,000,000 home and the property tax rate is 1% you owe $10,000 per year in property tax. As the estimated market value of your home changes, your assessed value changes. So if your market value jumps 15% in one year you can expect a big increase in your tax bill. It may lag the full market return but the idea is the assessed value tracks the value of the home. Downturns in prices require homeowners to plead their case that the home’s value has declined if they want relief on their taxes.
Assume:
Each home costs $1,000,000
Each has a property tax of 2.5%. We are isolating the assessed value effect so need to hold the tax rate constant.
Each home has a real (inflation-adjusted) return of 2% per year.
The only difference is the CA home is assessed only when you buy it, but the NJ home is assessed each year.
The CA home’s IRR will be .14% after-tax while the NJ home’s IRR is -.52%.
Rate Effect
What if you wanted to compare the price of homes in 2 places with different property tax rates? Let’s pretend CA no longer had Prop 13. Like NJ, it’s property taxes were re-assessed annually. This allows us to simply isolate the impact of differing tax rates.
Let’s assume:
Each home costs $1,000,000
CA tax rate is 1%
NJ tax rate is 2.5%.
The homes do not appreciate over 30 years (just to keep it simple)
Let’s explore 2 methods of comparison:
The Mortgage Method: If the homes do not appreciate then their assessed value remains fixed at $1mm. This makes it easy — the CA home owes $10,000/yr in taxes and the NJ home owes $25,000. On a monthly basis, the NJ home costs an extra $1,250. If mortgage rates are 3% we can find that a $300,000 30-year mortgage corresponds to a $1,250 monthly payment. So we can say that a $1mm house in CA costs the same as a $700,000 house in NJ since the $700,000 plus an additional $300,000 mortgage would equate to the cost of the CA home.
The IRR Method: The IRR on your home’s value will approximately differ by the spread in the tax rates. In the table below, we see that the CA home returns 1.44% more (close to 1.50%) over 30 years. If we use an inflation rate of 3% to keep consistent with what I chose as a mortgage rate, we find that the NJ home costs you $300,000 more over the 30 year holding period than the CA home, matching the result from the mortgage method.
In sum:
Prop 13 allows homes to be a call option on home appreciation/inflation
High property taxes on homes that are re-assessed require rapid appreciation to not render the home ‘dead money’
Compare homes with different property taxes by amortizing the difference in monthly payments into a mortgage
🟥 >>>> Saying yes, when you mean no
As an entrepreneur, I have become obsessed with allocating my time more thoughtfully (and leveraging my time too - see last week’s issue for tips here). Below is a nice primer on how to get better at ‘saying no’ and prioritizing yourself/ what you need to get done.
One counter point - on the flip side, ‘saying yes’ and being down for anything is definitely a trait I have never gotten away from (nor do I want to!)… the secret is allocating the ‘yes’ thoughtfully and effectively… knowing what’s the most important to you and doubling down on it… with a couple of a soft no’s here and there like the true Minnesotan that I am 😉
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It can be tempting to say yes to things you just don't want to do. Might as well just get it done so nothing bad happens, right?
There's a high price for constantly aiming to make other people happy.
"We suppress and repress who we are to please others," says Natalie Lue. She coaches people to curb their people-pleasing tendencies.
When your top priority is to be liked all the time, you aren't in touch with what you need." You are going to find it very, very difficult to do what you need to do for you," Lue says.
People pleasing isn't something that just pushovers do. Perfectionists tend to be prone to people pleasing.
Get some data
Over a week, observe how you spend your time and energy. Lue recommends keeping note of how many times you say yes, no or maybe to a request. Don't judge it — just observe — she says.
"What type of things tend to stress you out? What [is it] that [sets] you off? Pay attention to that," says Lue. This helps identify the times when you say no and everything turns out fine — so you know what situations you can say no to in the future.
Keeping notes also reveals the kinds of requests or people who might cause you anxiety.
Understand your bandwidth — and learn to respect it
Along with collecting data about how many times you said no in a week, try documenting your energy level and your calendar. How full was your plate? Did saying yes to too many things mean your days were too busy?
"We might look at our week [and realize], 'I spend, like, 90% of my week doing stuff that feels like I'm trapped. ... This is why I'm anxious,' " explains Lue.
The next time someone asks you for something, assess your time and energy before taking on new responsibilities. She says people pleasers spend a lot of energy going out of their way for others, expecting that energy source to keep renewing itself.
"But the way that we're spending our bandwidth means that, actually, we affect our emotional, mental, physical and spiritual health," she says.
Learn the difference between desire and obligation
"If you do things from a place of guilt or obligation, it is guaranteed to lead to resentment," she says. Because when a people pleaser doesn't see someone spending the same amount of time or energy on them, that can make the people pleaser feel robbed.
Start to notice the kinds of requests that align with your values or make you feel good. Of course, there are some tasks that will just have to get done. But Lue says being intentional with saying yes can be eye-opening.
Before you say yes, pause
"There is great power in the pause," says Lue. Often a people pleaser jumps to say yes to get rid of any perceived tension or anxiety.
Pausing not only buys you a little time but helps you assess what's really behind the request. Was this a demand? Or was it just a suggestion? This quiets anxious thoughts that might lead you right back to people-pleasing.
Learn the art of the soft no
Lue says there's a difference between a "hard no" and a "soft no." A hard no is clear, concise and brief — "No, thank you" or a "Thanks so much for asking. But I'm not able to this week."
A soft no might be easier for a recovering people pleaser. That's when you give more of an explanation. For example: "Thank you so much for asking me to do this project. It sounds really exciting, but I don't have the bandwidth for it at this time." Simple.
📲🧑🏽🤝🧑🏻 #followerthings
“Basically, better input plus mediocre IQ beats bad input and genius IQ every time, so boundary intelligence is leverage.”
My new COVID era obsession for real tho … stretching (yoga)
Keep hustlin, whatever it is you’re doin. Even one of the top companies in the world ‘failed’ (several times) before success. Perseverance pays off.
📚⏯️🎤 #otherthings
With my favorite month of the year coming up (but not because I was born in October or anything), it just felt right to make a playlist. I will continue to add to it over the coming weeks, but give it a listen/follow if you’re feelin’ musical.
FALL FLOW 10/20: The playlist has more of an overall chill flow vibe, with some of my timeless favorites sprinkled in. It only felt right to name it ‘fall flow’ given this being the year of ebbs and flows… 2020 has been a balancing act for many of us no doubt.
Give it a listen 👂, fade out, and find yo’ flow.
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Stay safe out there. Peace and love to all y’all.
Curiously,
-Block
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About me:
My friends call me Block. I am the CSO & Cofounder at Alkemi.Network, a company focused on bridging digital finance for institutions. This newsletter is my passion project.
I am endlessly curious and blissfully dissatisfied. I love new ideas, obsessed with all things technology, and am always seeking to broaden my perspective while striving for balance, of course.
I am a futurist, investor, entrepreneur, builder, advisor, life long learner, hockey player, traveler, podcast addict, hip-hop head, e-newsletter junkie, event planner, and comedic-short producer. Follow me on Twitter here and Instagram here.
“Find a question that makes the world interesting.” - Paul Graham