Maybe we aren’t as connected as we think. Perhaps we’re making financial decisions based on inaccurate economic data, and just because everyone is using the same information doesn’t make it correct. As I try to figure everything out for my club members, I find myself perplexed by the discrepancies in results. Last week, I appeared on CNBC and stated that the Consumer Price Index (CPI) overestimated some of its inputs. However, I knew that this statement was bordering on arrogance. My co-anchor, David Faber, questioned how I knew this, and I replied that I was doing a better job than the US Bureau of Labor Statistics in calculating the index. Although David laughed, I meant it.
I checked prices at top apparel outlets and integrated e-commerce pricing and sales regularly. Even the bargain retailers like Ollie’s Bargain Outlet (OLLI) in Quakertown, Pennsylvania, caught my attention. David was surprised at my comprehensive approach, but I argued that not having a real life gave me an edge over researchers who compile the data. Although researchers investigate many fields, can they check in correctly? Do they read research that indicates this year is more promotional than last year? Do they go to the store and write down prices like I do? Do they compare COST prices with mall prices? The answer is no.
I grew up going with my father to sales calls on Saturdays. He sold boxes, bags, gift wrap, scotch tape, and stretch bands to retailers. We traveled all over the Philadelphia area, South Jersey, Allentown, Burra Sinwyd, and New Hope. At the mall, he held a bag of samples in one hand and me in the other. He took me to shirt shops, menswear stores, jewelry stores, and hobby shops, among other places. Pop never sold anything because I loved Shakespeare, Renoir, and opera too much. However, he wanted to show me that life had more to offer than being kicked in the head by cashiers, assistant managers, and stockists.
As I grew up, my father taught me what sells and why. He took me to Kmart, Sears, Kaldor, Bradley’s, and explained why none of them worked. He then took me to Walmart and explained step by step why his customers weren’t successful. When he took me to COST, he said Walmart had finally reached a point of rivalry, and given how many customers Walmart was wasting, no surprise. If I had to sum it all up, I think he learned two big things. One was that my father really loved me, even during political conflicts and after my mother’s early death. Second, he learned how to find bargains.
Although I may not know all the inputs, I do know that government data isn’t always accurate. I’ve been running restaurants for twelve years and have studied pricing endlessly to figure out what attracts and keeps people away. I’ve also talked to people in restaurant chains and liquor stores. While CPI isn’t entirely wrong, it’s a sloppy way to price items. I’m not saying that we should ignore CPI, but we should emphasize wages for those who are particular about it. Advertisers and marketers collect data every second, whereas the most important wage data is collected only once a month. Why should we have to wait for data when technology can give us more information?
Furthermore, I don’t think the government applies the data correctly. We make many decisions based on how the Federal Reserve reacts to data, but that isn’t enough. It makes sense for short-term futures trading, but not for long-term investment. Inflation can degrade or destroy portfolios, and looking at apparel and rental prices and measuring them against difficult mortgage rates shows that we don’t see the forest for the trees. The big picture is the innovative solutions that companies come up with to deal with massive retirements, big immigration walls, and massive deaths from the pandemic. There are probably 4-5 million workers, and we need to find a way to innovate quickly. However, we haven’t done it fast enough because of a big mismatch in tech that enterprise still hasn’t acknowledged in its love for software.
Our generation has many wealthy children who have become millionaire inventors and hedge fund managers thanks to enterprise software, an area where smart people realized that the money would come. They aren’t productive outside the office and certainly not on the factory floor. If there were a departure from enterprise software, it would be for fintech. However, it doesn’t say anything about how to make food cheaper or clothes cheaper. How can we import goods while keeping prices down and at the same time eliminate millions of high-paying jobs? We need a college education that costs less than $90,000 a year.