How Many Santas

Guest post by Ted Lamade, Managing Director at The Carnegie Institution for Science

As anyone who has ever been to New York City around Christmas knows, there is no better place this time of year. Go with your kids and it is even better. It starts with the looks on their faces when they pop out of Penn Station, stare up at the skyscrapers, see the endless hot pretzel stands that litter the sidewalks, and spot a slightly weathered Santa waving a giant bell at a Salvation Army stand next to a guy dressed as Elmo. This is followed by things like walking past the carriages in Central Park, seeing the lights on 5th Avenue, and experiencing Times Square for the first time.

My family made the trek up I-95 to the Big Apple two weekends ago and it didn’t disappoint. It never does.

Now I have two sons. The older one is my Mini-Me, while the younger one is much more like my wife. The older one asks a lot of questions on an ordinary day, so you wouldn’t believe how many he asks when he is in a new place, especially a place like New York City. In fact, they were nonstop the entire weekend, but one line of questioning stood out in particular.

As we were walking to Penn Station to catch our train home, he asked me,

“How are there so many Santas in New York? I saw one outside Penn Station, two in Central Park, one in front of FAO Schwartz, and like fifty at the Rockettes. Who are they? Do they work for the real Santa? Are they elves? Was the Santa at the end of the Macy’s Day Parade the real Santa? If so, why does he show up on Thanksgiving?”

While I am confident my son has at least a couple more years of believing in Santa, he is clearly starting to question the North Pole’s massive logistics operation that makes Amazon’s look like a generic lemonade stand.

So, how did I respond to his questioning?

Like most parents under these circumstances, I stretched the truth…a lot.

“You’re right, they’re clearly not the real Santa, but they do work for Santa.”

“While they aren’t elves, they help Santa in other ways.”

“No, the Santa in front of Macy’s on Thanksgiving wasn’t the real Santa. He’s just there to welcome in the Christmas season.” Or something to that effect.

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As I worked my way through his Santa interrogation while we navigated the streets of Manhattan, something dawned on me. My son is living through such an amazing point in his life due his current level of innocence. He truly believes that if he is good all year, a chubby, jolly, rosy-cheeked old man with a white beard will fly through the air in his sleigh pulled by eight reindeer, climb down the chimney, and leave gifts for him under a Christmas tree. He is too young to Google whether Santa is real or check Facebook to see if there were any sightings of him in the sky.

Said another way, some degree of ignorance, as the British poet Thomas Gray explained, can be bliss.

For his sake, I hope he maintains this innocence and ignorance for a while longer. For my sake, I wish I could too. For that matter, we all might benefit if we could.

Why do I say this?

Because it makes you less jaded. Less sure of yourself. More open to the vast possibilities the world has to offer. More willing to ask questions others don’t dare to. More willing to change your mind.

Don’t get me wrong. Too much innocence or ignorance is not great either, especially for an adult. Experience is needed in order to be informed, resilient, equipped for the challenges life throws at you, and prepared to handle difficult situations.

So, given that contrast, how much is the right amount?

It is hard to tell, but I think we all could use a bit more of it these days.

The fact is technology and the speed at which information travels have accelerated the end of our innocence. We read more, hear more, and see more. Sometimes it is accurate, oftentimes it is biased, and other times it is downright false. Either way, given so much of it is negative in nature, it is unfortunately changing the way we parent our kids, lead our lives, and yes, invest portfolios.

Parents used to let their kids run free during the summers and generally come and go as they pleased. Now we keep tabs on them at all times through GPS trackers, cell phones, and iWatches. Even when we give them some freedom, we worry endlessly about their safety because of kidnappings or crimes we read about online in cities thousands of miles away. Are our kids safer? Maybe, but at what cost?

Kids used to constantly push limits and boundaries to find out what they could get away with. Today, given that iPhones and cameras are everywhere, they know that anything they do runs the risk of being caught on tape and broadcast across social media within minutes. This has certainly reduced some bad behavior, but at what cost?

Kids also used to follow teams and watch big games. Today, with the rise of YouTube, they follow individuals and watch big plays (or in many cases create their own) — plenty of goals, winning shots, strike outs, and celebrations, but very few mistakes, dropped passes, missed shots, or heaven forbid, losses. Meanwhile, with the rise of Instagram and TikTok, they are doing the same thing socially by creating accounts that only capture the positive things in their lives (half the time airbrushed) or watching others do the same thing.

This is just the tip of the iceberg.

So, why does this matter?

It matters because it is dramatically changing how society thinks about risk.

For kids, it matters because it will potentially inhibit their ability to figure out where risks reside, how far to push boundaries, and how to differentiate recoverable risks from irrecoverable ones (i.e., risks that are part of growing up versus those that will leave severe physical, mental, or other future scars). At the same time, by prioritizing victories and highlights over losses and lowlights, they are creating false realities for themselves and others. This is also creating a generation of kids who are increasingly hard to satisfy and more concerned with things like work-life-balance than ever before.

For parents, it matters because we risk going overboard to protect our kids from short-term risks at the expense of their long-term adaptability and durability. Much like how avoiding low-risk germs makes you more vulnerable to higher-risk ones later on, protecting kids from ordinary, low-probability risks when they are young makes them increasingly vulnerable to more severe risks when they become adults.

For investors, it matters because this has the potential to fundamentally alter society, the economy, and financial markets for many years to come. Given the fact that spotting long-term secular trends and changes is critical for any investor, this is something worth paying attention to. That said, while many investors today are focused on things like relations with China, artificial intelligence, and ESG, it is nearly impossible to predict how those are going to unfold. However, the impact certain technologies are having on children, parents, and society more broadly are already starting to present themselves in more predictable and impactful ways.

This sounds pessimistic in nature, but given it is the holiday season, here is a more optimistic take.

The fact is, while capitalism is far from perfect, it does two things extremely well. First, it incentivizes people to solve problems. When something goes wrong, both human and financial capital almost always flows into ventures that attempt to solve it. Second, it rewards those who are willing to work hard to identify those problems and take prudent risks to solve them.

Today, I can honestly think of few problems more significant than the one social media, cell phones, and other related technologies are having on society. This said, we are starting to see the earliest signs that people are waking up to it.

The question is, will we do anything about it?

Personally, I wouldn’t hold my breath that Congress will do anything given its current level of dysfunction. I also wouldn’t expect the tech incumbents to do much either because they aren’t incentivized to (if anything they are highly dis-incentivized to).

If not, where will it come from?

Where it always comes from…entrepreneurs.

Look no further than products like the Gabb Phone, which is in essence a “dumbphone” that looks like a smartphone. It restricts kids access to the internet, social media, and explicit content, while providing a high quality (and looking) product that enables kids to communicate with their families and friends. In an age in which studies have shown that cell phones, and social media are hurting kids’ sleep, grades, and mental health, the Gabb seems like a good step in the right direction. As to how it’s doing, the original Gabb phone is already sold out with two weeks left to go until Christmas.

How about the question of rewarding those who work hard to identify problems and take prudent risks to solve them?

I can’t tell you how many people I have spoken with in the past year who tell me their biggest challenge is finding young people who are willing to grind and/or make a firm commitment to their company, let alone simply work from the office.

At the same time, I have heard other people lament how hard it is to get high quality, decent paying jobs.

Quite the contrast.

So, what is the solution?

For companies or funds struggling to find talent willing to grind, in my experience the balance of power between companies and employees waxes and wanes over time. Personally, my generation started our careers in the years shortly before the financial crisis and we found out very quickly how invaluable we weren’t. Plenty of newly minted college graduates went from having a plethora of options to having very few. Today, we appear to be on the opposite end of that spectrum, but in my experience things can change very quickly.

For those who are having a hard time finding the right opportunity, the best advice I have heard has come from Dana White of the UFC when he said,

“If you are a savage and you get out there, grind hard, and want it bad enough, you can achieve anything. In this world in which most kids want to work-from-home, it is even easier.”

He gets explicit in his message, so I am not going to provide a link, but he makes a great point. I get the sense companies are craving young people who want to work hard, put in the hours, go the extra mile, and yes, do it from the office. A future post is going to dive deeper into this topic, so I won’t go too far on it, but in many ways I think it could be easier than ever for a young person to differentiate themselves. In fact, as an investor, the number one thing I look for these days are people who have overcome adversity and prioritize being a “team player/grinder” as opposed to a “highlight reel” player.

Given all of this, as we head into the end of the year, I have started asking myself, “If I could give my sons anything for Christmas, what would it be?”

In short, I would like to give them more freedom to make mistakes, more incentive to grind, more encouragement to be team players as opposed to highlight players, and less distracting technology.