Episode 326: How to Thrive in an Emotion-Driven Economy (with Kyla Scanlon)

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of Common Skew.

The Wall Street Journal called her the 27-year-old economic advisor for Gen Z. Jared Bernstein, chair of White House Council of Economic Advisers, considers her one of the most impressive thinkers about the economy today. Our guest on this Skewcast is Kyla Scanlon, founder of the financial education company Bread and a prolific creator. She writes a weekly newsletter, makes YouTube videos, hosts the Let's Appreciate podcast, and posts almost daily short-form videos about the economy and markets. Her first book, In This Economy: How Money and Markets Really Work, was published in May 2024. Kyla has written for Bloomberg Opinion, New York Magazine, the Financial Times, and the New York Times, as well as many other major publications. Her main goal is to conduct human-centric economic analysis. To help connect the dots between what is happening and why it's happening. All of which is why we are so thrilled that Kyla is one of our keynote speakers at SKUCON in Las Vegas on January 12th. For over a decade, SKUCON has been the gathering place for the industry's most forward-thinking minds. Each year, speakers are handpicked based on high-impact topics and current trends. If you want to kick off your year with a healthy dose of optimism and inspiration, come learn how to be brilliant at a moment's notice with creative coach Todd Henry. He's the author of the bestselling book, Geek to Accidental Creative. Also join us to hear more from our guest today, Kyla Scanlon, as QCon Kyla will be talking about economic trends heading into 2025. And don't miss our amazing closing keynote, Ben Higgins from The Bachelor fame, as he shares how to build a generous business and how they are doing it through Generous Coffee. And of course, industry know-how from the pros who do it best on topics from mergers and acquisitions to AI and more. SkuCon always sells out. There's limited seating, so if you want to secure your spot, don't wait. Register today at skucon.com. Today's episode is brought to you by Common Skew, the work from anywhere platform that powers your connected workflow, enabling you to process more orders and dramatically grow your sales. To learn more, visit commonskew.com. Now here's my chat with Kyla. Kyla, thank you for joining us for the SkewCast. It's really an honor to have you on the show.

Oh yeah, thanks for having me.

I want to talk first about vibology and emotion economy, and we'll explain what that means in just a minute. But this year, it seems I have heard more business people talk about the economy as the reason for lackluster sales or flatline sales. Noah Smith from No Opinion said essentially there are 4 things you want from a macro economy. One is high employment rates so that everyone who wants a job has a job. Number 2, low and stable inflation rates so that people know how much a dollar will be worth a month from now. 3, fast wage growth so that regular working people are taking home their share of economic growth. And then 4, fast productivity growth because ultimately that's what creates durable gains and living standards. And he writes, quote, right now the US economy is giving us all those things, end quote. So why do we keep hearing people, particularly I in my world, talk about a tough economy?

Yeah, it is a tough economy. I think that's why we do hear about it. Like what Noah is pointing out is true, that inflation has trended downwards, that we have a pretty stable job market, that wages have grown adjusted for inflation. Like all the metrics are trending in the right direction, but there's still that disconnect between data and sentiment. And a lot of the sentiment and data disconnect is driven by things like structural affordability. And so we can have inflation trending downward, but that doesn't negate the fact that we had really high inflation for 3 years. And inflation going down doesn't mean that prices are going down. It just means that prices have stopped going up so fast. And then we have a housing crisis. We have issues with elder care and childcare, and those all impact how people perceive and work within the economy. And so the metrics are telling a story, which is important that like the economy is strong, but the economy is also an incredibly personal experience. Everybody has a personal experience with the inflation rate, with the jobs market, with the housing market. And so that's why you might see negative sentiment as first, well, it might feel bad and actually be bad.

The Wall Street Journal credited you with creating the term vibe session in 2022 to describe this disconnect between economic data and customer sentiment. And since we're talking to an audience of business owners and sales leaders, can you speak to this idea of vibes and how it impacts the way we think about the economy? And in your book, which we'll link to in our show notes, In This Economy, you refer to the uncertainty cake. Can you explain that?

Oh, sure. Yeah, I think the idea behind vibes is that sentiment is extremely important, especially in the attention economy. We all know how everybody feels all the time because of social media, and you're just constantly tuned in. And so sentiment moves a lot faster than it maybe would have before we had all of this technology that was right at our fingertips. And there's a lot of research confirming the idea of vibes, as I called it in the book. George Soros has a concept called reflexivity, which is basically the same thing that how people how people feel about a certain situation will ultimately impact the pricing of a certain situation. If everyone is like, the prices of homes are going to go up, we better get in there fast, it's going to push home prices up, creating that, that feedback loop. And then Keynes has animal spirits, same sort of idea applied to markets. And so vibes are really just this idea that we should probably pay attention to how people feel about the economy because we can have all the good data in the world, but if people feel bad, The worry is that it's going to be a self-fulfilling prophecy. Hmm.

Oh, such a great point. Let's talk a little bit about stock markets and how it impacts the way we think about the economy. Because in your book, you wrote that the stock market is bizarre because, as Wasteland Capital pointed out, no one really agrees with what's going on at any given point. The industry is based on making money off people disagreeing on what will happen and why. And there's this great interview with you and Austan Goolsbee, the president of the Federal Reserve Bank of Chicago. You mentioned that only 40% of Americans participate in the stock market. So how should we as business leaders respond to the fluctuations in the stock market, particularly since they really command so much of the headline news today.

Yeah, I think the thing with the stock market is that it is important to be invested in it. And so one of my favorite charts is from the Federal Reserve and it's the distribution of financial assets. And so basically it shows what assets people own across different income groups. And so if you look at the bottom 50%, all of their wealth is tied up into their house, right? That's where most of their money is coming from, where most of their money is stored. But if you look at the top 10%, all of their wealth is in ownership in equities. And so I think when we think about the volatility and the movement and the fluctuations in the stock market, one way to interpret that is I should invest, especially for the long term, even though it's volatile over the long run, the stock market does tend to go up if the US economy is growing. And so I think that would be like the main way to think about it is that the day-to-day fluctuations really don't matter unless you're an investment manager, but they are good for an average person to capture over the long run if they want to build wealth.

Our industry is very tariffs in global trade, and I'm sure a lot of industries are, but are in particular because we deal with merchandise. And the strength of the US dollar, as has often been, is a shining light right now. But former President Trump is advocating for weakening the dollar to support stronger American exports. But politics aside, and I really do mean that, what would weakening the dollar mean for the economy in the short term and the long term?

Yeah, I think that's a really tough foreign policy move to make. Messing with the dollar in that way can make a lot of foreign trade partners pretty upset with us. And so weakening the dollar would probably not be a smart move. It's best to let it do what it needs to. And so I would say like also tariffs are really a tough thing. Like strategically they can be a pretty good tool in order to send a message, but blanket tariffs, maybe not so much. And so really it's just about making sure that the free market can allow currencies to do what they need. But when you start to intervene with that, it can be quite complicated and not good for anybody involved.

Our industry deals with a lot of imports, and so tariffs have a direct impact on what we do. And we're hearing a rise in talk from both sides of the aisle about tariffs and raising tariffs. So it's a continual concern that we're seeing, and I'm sure it's going to continue to be in the news for a while.

Yeah, I know tariffs are popular. It's a big part of candidate Trump's campaign and what those essentially are is tax on imports, as I'm sure your audience knows. But what that cost ends up doing is getting passed down to consumers, right? So nobody wants to deal with it. And so eventually, like, goods become more expensive. It becomes more expensive to do business. It really creates a quite complicated business environment, and it's normally not recommended to do that. It's a pretty punishing tool. Yeah.

Yeah. Speaking of both candidates and presidential nominee Harris's economic policy, she's both providing tax cuts for small business startups while also wanting to raise raise the corporate tax from 21% to 28%. How do you think the rise in corporate tax rates might affect businesses? Do you see businesses limiting their investments due to rising tax rates like that?

I think the big concern is that they would let people go. That's what some research has pointed out, that it would impact the labor force if tax rates were increased. And so that's, of course, a big worry. Like, we want a strong labor force. We want everybody wants a job to have a job. And so I think that that's the primary concern. And then of course, limiting investment, finding alternatives, doing fancy accounting, it might become more common. But we have to figure out this balance between all of that. Like we do really, like the way that the government makes money is by issuing bonds and saying, okay, that's one way that we're going to make money or by raising taxes. That's a very reductive way to explain it, but we are facing a pretty big government debt situation and we need to get that under control eventually. And one way to do that would be to raise taxes either on corporations or individuals, both of which is extraordinarily unpopular.

Very hard to do, but the deficit is so big. Going back to advice for business owners and leaders for better financial understanding, because if there's anything that you have done, I think it's that you've given a lot of us a lot of hope in terms of financial literacy in the world, not just for your generation, but for a lot of us that were undereducated in financial literacy. And I've seen firsthand how economic headlines change the way business leaders think. And, and speaking mostly to small business, I can remember how recessions and even the threat of recessions directly impacted our decisions, where we were making investments, our strategy. Going back to this question, but just not about the stock market, how do we keep the dramatic fluctuations in the headline news keeping us from rocking our boat and making sound business decisions as we move forward?

No, it's definitely hard. The part of the other idea behind the vibe session is like this idea of structural affordability, right? Like housing, childcare, eldercare. But then another big part of it is media headlines because media headlines have trended negative over time. There's plenty of charts showing if you do a sentiment analysis that it has become more negative. And then of course it's going to be harder as a business owner to figure out what's happening and what you should do. There's a headline from Bloomberg from a about 2 years ago in October 2022, and they were like, there's essentially the headline was like, there's a 100% chance of a recession by year end. And of course we did not have a recession, but if you read that headline, you're probably like, I need to prepare my business. Maybe I need to do layoffs. Maybe I need to like not order as many units or something, whatever it is. And so I think the biggest thing is just having a long-term strategy, just knowing a 5-year plan, having savings, making sure that you yourself are investing and having a retirement diversifying away from the business and making sure that if you can, your entire net worth isn't in the business, all of which is quite difficult to do as a small business owner. I am a small business owner and I get it. So I think that's the biggest thing is just diversification and trying to know that most storms, business cycles only last 2 to 3 years usually.

That's such a great point. And I loved your point about the 5-year plan too, because I think a lot of that can keep us out of the sort of knee-jerk reaction to what's going on in the headlines. Back to a topic that I know you're really passionate about is financial literacy as individuals. And I'm going to suggest your book. We'll link to this, your Substack newsletter. Are there shortcuts you found to getting a grasp on the economy, or are there publications you refer? Sort of thinking of the individual now listening, the salesperson, the marketing professional, all of us. How can we better our own financial literacy? And by the way, I'm asking you all the hard questions. Like, how's he cut? I love that you field all of these with no problem, but go ahead.

Thank you. I, I think that My book is a good place to start. But I think the thing is, the way that I think about it is just as we know the mitochondria is the powerhouse of the cell, we don't know everything about biology. Like, I don't know everything about biology, and a biologist doesn't need to know everything about the economy, right? They just have to have that foundational understanding. And so I think that's the biggest thing is like just using books like mine. Basic Economics is another really dense book. Henry Hazlitt has a book called Economics in One Lesson. There's Morgan Housel's Psychology The Psychology of Money, which is a good overview for the behavioral aspect of it. Money by Jacob Goldstein is another good book. So there's plenty of books out there that if you read one of them, you'll probably get at least a decent foundational knowledge. But that's all people need to do. Like you don't have to become an expert. You just need to know, okay, I know what inflation is. I know what the Federal Reserve is doing. I know what a bond is. I know how to open up a brokerage account and invest in the S&P 500, not investment advice, but let's say you choose to do that. And so that's the biggest thing is just having that mitochondria as a powerhouse of the cell idea, and then making sure that you are taking advantage of that knowledge by investing.

You're speaking to a lot of wage— sorry, business owners. And can we talk about the wage disparity between what Gen Z is dealing with compared to previous generations? I don't know if wage disparity is the right phrase here, but if it's not wage disparity, this cost of living impact on Gen Z compared to previous generations, is there such a disparity? And if so, what can we do about that?

Yeah, no, Gen Z. So I'm a cusper, so I'm an old Gen Z, and it's a really interesting generation to be a part of and then also to study because this is a generation that was born into the tech bubble, was 10 years old during the Great Recession, graduated and had young adulthood into a pandemic. And so everything that was formative was heavily impacted. And it's interesting because there's this bifurcation that happens in the economy across the board, right? But there's a bifurcation specifically in Gen Z where 1 in 4 Gen Z do own homes, but 78% of those people have help from their parents. And so you have this growing gap between— and it's happening with millennials too. The greatest wealth transfer ever is about to happen. And it starts, I think, next year where boomers and Gen Xers are passing on money to millennials and Gen Z.. And so some people are going to heavily benefit from that. Others will not. And so you're going to see an increase in a bifurcation in that as well. Gen Z has actually experienced pretty decent wage gains relative to other demographics, but Gen Z has had a very hard time getting a job. The people that are graduating right now are, it's really tough out there. And so I think that's the biggest worry is wage-wise they've been doing okay, but it's tough to get a job. There's wealth inequality happening in the generation. And then also the worries of displacement by AI, which I think everybody is quite concerned about. And then housing is of course quite out of reach too. And so in terms of how we fix it, I really wish I had an answer. I do a lot of research around this and try my best to talk about housing policy and talk about what the government is doing, but it really does boil down to allocation of resources and what does it look like for the older generations to pass on some wealth outside of just to their, to their children, I think is going to have to be the answer. And I don't, that's not popular, but it's probably going to have to happen.

Yeah. Yeah. We are very excited about your keynote at SKUCon, by the way, after hearing your 2024 economic outlook commentary, I've been sharing one of your takeaways with our industry and that is how the culture loves the algorithm, but we're also fatigued by it and sort of more tactile and vintage forms of connection will continue to rise. And one of your predictions is that we'll learn better how to live with risk. That's probably a very post-pandemic thing that's come to the surface. But do you think we've done that this year? And does that also explain how we've been able to avoid a recession?

Yeah, I think we have done that this year. There's a lot of— because everything is so public and like constant and the social media feeds are— they never stop. You are exposed to the worst things ever all the time. And I think most people have adopted their own risk metrics to that. And I do think it is going to impact how we think about the economy and how people think about decisions and what they think about their futures. And I think more people are going to be willing to take on that risk because they're seeing how fragile some parts of the world are. And so it's not a bad thing, but it'll just be interesting, especially with, again, the rise of AI and what that could mean for some jobs.

Your book, In This Economy— congratulations, by the way, on a monumental achievement. Not only did you tackle the seemingly impossible task of explaining how the economy works, you did it in such an approachable way. And some of my favorite Kyla-isms, if you will, or one of them is we often forget that the economy really is a bunch of people hanging around. At the basic level, economics is the study of change. And then my favorite is if you can overcomplicate simple things loudly, people will pay attention. That is such a great statement. You refer to your work as cultural anthropology more than economics sometimes.

Why do Why do you think that? Yeah, so a lot of it is the people-centric nature of it. I'm an economist by training, but a lot of my analysis is more so like, why are people responding to the way to things of the way that they do, especially the social media content creator. Like you just get a lot of information about how people are responding to things. And so I cover inflation and the labor market and housing policy, but the main thing I'm concerned about is how do people respond to these things? Like we can have the best policy in the world, but if people aren't receptive receptive to it, or they don't know how to take it from idea to execution, none of that matters. And so what I try to do is understand the culture that we're living in, this attention economy, and then figure out how to best deliver a message of economics within all of that. And so that's why I call it cultural anthropology. I'm sure cultural anthropologists out there being like, that's not what that is, but that seemed to be the best term.

Yeah. As a creator myself and a productivity nerd, you wake at 3 AM, you bike 100 to 300 miles per week and produce not only thoughtful commentary, but deeply intense essays on economic policy. How did you, how do you manage to get so much done?

Oh, um, it's really the lack of sleep, I think. But I don't know, I'm sure you're, you can relate, like when you love something, there's nothing else that you would rather be doing and it's all your waking thoughts are devoted to it. So when I'm on the bike, I'm thinking about policy or I'm thinking about how to frame a certain message or I'm thinking about how to tell a certain story. And so a lot of my time is devoted to thinking, which I'm really grateful for. And then I'm able to talk to really amazing people. Like, a big part of my job right now is traveling and going to various events, and I get to meet a lot of people and talk to them. And so my life is just very information-rich and very knowledge-rich, and I'm able to sift through that pretty quickly now and translate it.

Yeah, speaking of knowledge-rich and information, one of the favorite questions that the community likes to ask our guests is what's an article, book— as we're wrapping up here— what's an article, What's a book or podcast you've listened to lately that's really made an impact on the way you think?

I am reading Parable of the Sower, or S-O-W-E-R. I don't know if you've ever read that. It's by Octavia Butler. I would— yeah, it's pretty intense, but it's this gorgeous novel that is a reflection that was written in, I believe, the 1990s, and it's set in 2024. And it's this look at what it looks like when all the resources are depleted, when we don't take care of one another, when community deteriorates. And so that's been a really impactful novel for me that I'm working through at the moment. But I read quite a bit, and I, I have a Goodreads account where I post most of the books that I'm reading.

Oh great, okay, we'll link to that.

Yeah, yeah, yeah, yes, because I try— I, I really believe in fiction as an informant for non-fiction work.

I totally agree. I totally agree. Kyla, thank you so much for spending your time with us today, and at SCUCon in January, we're very excited about your keynote then. But we really appreciate it, and we wish you best as you continue on what, what is becoming a very amazing career. Thank you for guiding so much of us toward more financial literacy.

Thank you.

Thanks so much for tuning in to this episode of SkuCast. Be sure to keep up with our latest content by subscribing to SkuCast on iTunes or to our blog at community.commsku.com. Until next time, friends, thanks so much Thanks for listening.