Lumber Crisis

2021, among other things like toilet paper, boba tea and pickle jars, saw a shortage in limber. Let’s try to understand what led to the shortage and the subsequent high prices.

After the financial crash of 2008, home building took a hit. Causing the lumber prices to fall. In addition to that, a lot of woodlands were lost to bark eating beetles. And this eventually led to the fall of prices in 2008.

Prior to the Covid crisis, in a similar fashion we lost about 6.2m acres of woodlands to wildfires in 2017-18. And when the pandemic came, investors expected history to repeat itself and they were short on the prices (expecting them to go down). Similarly, wood suppliers cut production in anticipation of low demand.

But what happened was that more people wanted to renovate their homes, and complete all the projects they always wanted to do. Now since, they have no other option but to do it. Combine a weening supply and a surging demand led to a 377% increase in the price of wood this year.

Reference

Why is lumber so expensive right now?

Greenfield vs. Brownfield

Greenfield and Brownfield investments are ways in which a company can expand into other countries. They are 2 different types of foreign direct investment.

Greenfield investment is when the company builds necessary resources from scratch in the new country. This could include building new plants, distribution centres etc. Greenfield option makes more sense if the business operations are unique and custom made for the company. It is more risky as it is the more expensive option of the two. If the operations are near one-of-a-kind, it would be cheaper to build it from scratch and operate it like existing parts of the business. A good example of this is the Gigafactory tesla is building in Germany.

Brownfield investment is when the company relies on acquiring existing companies and facilities. This makes sense when business operations are rather existing. In some cases, facilities are leased instead of purchasing. This could be an interim solution before companies can take the leap to build their own facilities in a new market.

This way of thinking can be applied to personal projects as well. Would it be easier to update your personal website by making tweaks or to rewrite it from scratch.

Excel

Excel is a remarkable piece of software. It is used by people from every walk of life. Whether you are developer, data scientist, statistician, analyst. You name it. You can have these wonderful tools that can spit out different kinds of data. Or have scripts to do complex calculations. But at the end of the day, you copy it to an excel workbook to send it off to someone or to do some simple tasks like extrapolation, sorting etc.

They even had to change a DNA naming convention due to a bug in Excel.

Excel is unbundling. SaaS like Airtable and Google sheets are the biggest of them. They connect a typical column-row sheet to the internet. Opening up lot more possibilities. And these services also connect to API services like Zapier. Making it possible to connect it to other applications to read, write or manipulate data.

Excel has a very peculiar architecture. Most pieces of software get more bloated with more features. However, the opposite is true for Excel. Over the years, the amount of features introduced strengthened and expanded it’s use-cases even more. That is a very hard thing to achieve in the software world.

Special Economic Zones

A special economic zone(SEZ) is a designated area in a country with special economic regulations to incentivize foreign direct investment. Usually these incentives are in the form of tax reductions, labour regulations, customs etc.

A SEZ became popular in the mid 20th century. The primary purpose were to attract foreign investments. Now they are being used to attract domestic investments and for eventually encouraging investments outside of the zone as well.

A second order outcome of having a special economic zone that attracts a lot of companies in the same geographical is the there are more chances of cross-pollination. In terms of employees, competence and technology. Synergies like having a large part of supply chains concentrated in a small area is attractive for businesses. It can save costs and both ends of the chain and improve the pace of innovation. A textbook example is the Shenzen Economic Zone. It really found the sweet spot for manufacturing electronic goods and soon dwarfed global supply chains.

The economic activity from a SEZ usually spills over outside of the SEZ too. SEZ that are big enough can eventually have cities built around them to facilitate the labour market and provide better logistical support for the SEZ.

Barnum Effect

Barnum Effect, also known as Forer Effect, is the tendency to take general statements and interpret it from a personal point of view. A very common example where the Barnum Effect is exploited is in horoscopes and fortune telling. You can commonly see sentences like “When something good lands in our lap, we frequently fail to appreciate it, because we immediately begin the process of protecting, coveting, and ultimately hoarding our treasures.” This sentence can have different meaning because as we read it we relate it to our life experiences.

The more personal input you give in the process, even stronger is the effect. Personality tests like MBTI can seem more accurate then they are. Especially if it is combined with confirmation bias. If the tests, for any reason tells you something that you knew or wanted to be true. It is highly likely that you will believe it. People won’t believe or pay attention to general statements that are considered negative.

Internet Money

One use case that will for sure be filled with cryptocurrencies like Ethereum in the coming years is that of internet money.

Just like we had an era of web-first applications and shops, which then became mobile-first. Internet-first money is yet be fully realized. Money that is not tied to a physical entity per se, but at the same time can store and be a medium of exchange of value over the internet.

Money, Paypal credits, Credit are all good forms of value individual users or businesses use to transfer wealth between each other. This can be done via online too but the underlying mechanism is still tied to bank accounts and balance ledgers maintained by different banks. The internet only acts as a proxy for the transaction.

Internet money, on the other hand has the capability to sustain the transaction and it’s underlying mechanism end-to-end within the internet. Imagine if API’s wanted to exchange money and not users or businesses. Internet money would be the default way to do it.

By the looks of it, cryptocurrencies are the most poised to fill in this use-case.