So. To write this letter, I need to read a lot of news. And I am really tired of reading it.
Mainly because my head cannot combine the two types of articles I get. The math ain't mathing.
Type 1 news reads something like this.
Ilya Sutskever's Safe Superintelligence, no product, no revenue, valued at $32 billion.
Mira Murati's Thinking Machines raising $2 billion at a $12 billion valuation before shipping anything at all.
Meta paying $14.3 billion for half of Scale AI.
The original Birkin bag sold at Sotheby's for €8.6 million, record gold, record art, record World Cup tickets.
Money made by narratives spent on narratives, the machinery we dissected in Fomonomics.
Type 2 news is sadder, and the numbers are smaller.
Twenty-nine percent of buy-now-pay-later users now finance groceries in instalments; 54% say they couldn't make ends meet without the instalment plan.
A record 6% of Americans in Vanguard 401(k) plans raided their own retirement accounts for hardship withdrawals last year, the top reasons being, in order, avoiding eviction or foreclosure and paying medical bills.
Moody's counts half of American states as effectively in recession, consumers "hanging on by their fingertips," and the bottom 80% growing spending by 2.6%, which, after inflation, is the polite word for shrinking.
Consumer sentiment is down roughly 30% year-on-year, while index funds hit record highs.
Now, all of this is US news, but it is not my fault that the US of A has better statistics.
And as I wrote in the last letter, the taxi drivers of Grozny report the same picture, which, to me, is as credible as Bloomberg.
Either the economy has developed a split personality, or somebody is on something.
Figuratively and literally.
And here I must note, purely as a matter of public record, that Silicon Valley's drug of choice is ketamine.
Street name: Special K.
Prescribed, microdosed, openly discussed on podcasts by the people building your future. Including, famously, the gentleman currently scheduled to become humanity's first trillionaire.
I am not saying the economy is on ketamine.
I am saying the economy is exhibiting the symptoms:
dissociation from reality
feelings of floating
and absolute certainty that everything is fine while the body stops responding
Well.
Good news, everyone! You are not hallucinating.
The condition's name is the K-shaped economy… hehe, see what I did there.
The letter K has two arms.
The upper arm, asset owners and narrative peddlers, floats upward, pleasantly numb.
The lower arm, wage earners, is going through withdrawal.
Data, you would demand!
And I have this stuff.
The New York Fed: spending has been K-shaped since late 2023, driven by households earning $125,000+, and correlated to asset prices, not income.
Translation: high-income people are spending more because they think their assets are worth more, not because their income is higher.
Moody's Mark Zandi: the top 20% now account for nearly 60% of all US consumer outlays; his clinical term is "astounding."
Their spending is up 6.5% in a year while the bottom 80% managed 2.6%.
Which is below inflation.
Which is below zero.
Bank of America: the top 10% spend nearly as much on non-essentials as the bottom 70% combined.
And the credit bureau TransUnion reports the K is "alive and well." Wonderful. Good stuff.
Is any of this new?
Please.
"The rich have become richer, and the poor have become poorer"
“To him that hath, more shall be given; from him that hath not, even that shall be taken”.
And, as we Muslims believe, in the direct words of God Almighty:
Qur'an 59:7, commanding that wealth be shared (translated) "…so that it may not merely circulate among your rich."
Because here is the part that concerns us, the simple managers, the designated drivers of this economy.
The K is now being cooked inside companies.
Lower arm first.
Algorithmic wage-setting. Uber's gift to civilisation pays every worker a personalised, opaque, constantly recalculated rate. Algorithmic wage discrimination.
The model is now being exported to "Uber for nurses" platforms, where a machine learns the exact minimum each nurse will accept.
Your pay, personalised downward by software that knows when you're desperate.
And if you think nobody is currently pitching an HR-system module that does this to white-collar employees… I tell you… please.
Upper arm.
Executive pay has gone fully narrative-based, the reference case being the largest package in corporate history, approaching a trillion dollars, tied to milestones made substantially of robotaxis and robots that do not commercially exist. Bonuses based on prophecies.
And it will reach your office, if it hasn't. The same leadership, the same quarter, occasionally the same all-hands: the future is uncertain, profits are fragile, we must pursue bold AI-driven efficiencies… hyper-cuts, freezes, doing-more-with-less… and also, in unrelated news, executive retention requires a substantially enhanced incentive package, because the times are so demanding.
Diagnosing cost discipline for others while self-prescribing bonuses is not leadership.
So. I got a bit distracted with being angry.
The lesson. And this time it is not a suggestion.
We resist. Not on barricades, in meeting rooms and teams calls. This newsletter believes in moral seriousness, the Drucker kind: the proof of a management is integrity of character, and a manager who inflates the upper arm by grinding down the lower one has failed the proof, whatever the share price is hallucinating that day.
Being a good person…at every level, on every budget line… has never mattered more.
And here at Meme Guide to Management, we have suggestions on how:
Pay people what the work is worth, not what the algorithm, or the la-la-land discussion in the meeting room, says they'll tolerate.
Refuse the two-faced quarter reports. If the message going down is "uncertainty, discipline, do more with less," then the message going up gets the same test: what are we cutting up here?
Protect the bottom of your own K. Every org has one: the coordinators, the analysts, the people whose names aren't in the deck. When cuts come, the cheapest heads go first, precisely because nobody in the room owes them anything. Owe them something. Know their work well enough to defend it with specifics. And know this: the one senior useless exec that every company has probably wastes more resources than all of your coordinators together.
Apply the camera test to layoff language. "Streamlining." "Right-sizing." "Doing more with less." If a sentence about eliminating someone's livelihood cannot name what a camera would see, do not repeat it. Say the true sentence "we are cutting eight roles to hit a margin number" or say nothing. Euphemism is how the shameless recruit the decent.
Talk to your own taxi drivers. Twenty minutes a week with the people closest to the ground. When the dashboard says thriving and the receptionist says drowning, believe the receptionist, and say so upward, in writing.
And hire for character like it's a hard skill, because it is now the scarcest one. One question in every interview about a time the candidate paid a personal cost to do the right thing. No good answer, no offer, whatever the CV says. Drucker didn't call integrity a nice-to-have. He called it the proof.
The whole economy is on Special K. Somebody in the building has to stay sober.
Might as well be us.
Talk soon,
Sultanbek
