GLOSSARY: Smoke and mirrors won't fix anything

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Measuring the things that matter

One of the mottos at O'Reilly (and a recurring theme in Tim O'Reilly's book WTF?: What's the Future and Why It's Up to Us) is "work on the stuff that matters." But to do that, you need to decide not only what matters—but also what will move the needle. And as we've observed in this newsletter in the past, things change rapidly and sometimes our measurement tools are left behind: economic indicators or regulations that don't reflect the next economy we're currently living in, for example. Here are a few instances of indicators that can mislead.

The real inflation driver

It's housing.

While the Federal Reserve rate-hiking campaign to tame inflation seems to be working, shelter inflation was responsible for 90% of the Consumer Price Index's otherwise modest monthly gain last month. Shelter inflation includes rents, hotels, and lodging, as well as home insurance. It's up 7.7% from a year ago—and within $16 of reaching an all-time record. Which begs the question: if we care about tempering inflation, why aren't we doing more to address housing shortages?

+ "First American City to Tame Inflation Owes Its Success to Affordable Housing"

+ ICYMI: "Maybe Treating Housing as an Investment Was a Colossal, Society-Shattering Mistake."

Can you get paid to NOT mine Bitcoin?

In what Matt Levine calls "a miracle of financial engineering," Bitcoin miner Riot Platforms Inc. made millions of dollars in the second quarter by selling unused power rather than producing the tokens while the crypto-mining industry continued to grapple with falling digital asset prices. As Levine writes: "Modern finance created the problem (Bitcoin mining) and the solution (paying people not to mine Bitcoin); the overall result is that nothing happens and yet people get paid."

The system is similar to carbon credits or farm subsidies that pay farmers not to farm. While the goals are often laudable—protecting farmers from bankruptcy, saving energy, reducing water loss or environmental damage—poorly designed policies and lack of transparency can create an illusion of doing something without actually making a difference. It can also lead to gaming the system—paying people who've never farmed not to farm, for example. These types of policies must focus more on effecting change and less on reward.

+ "How to Choose Carbon Credits That Actually Cut Emissions"

+ "Why All Carbon Credits Aren't Created Equal"

+ "A Program That Pays Farmers Not to Farm Isn't Saving the Planet."

+ ICYMI: Recoding America by Jennifer Pahhlka

Dealing with extreme weather conditions

Regions that are accustomed to particular weather patterns are hardening their infrastructures, creating early warning systems, and designing escape routes to prepare for increased extreme weather events, but historical weather patterns are no longer sufficient indicators for planning.

Historic heat waves are not just breaking records in areas accustomed to high heat but hitting regions—like Canada, the US Northwest, and the UK—that are unprepared for them. Drought is not just impacting desert regions in Africa and the American Southwest but is also having unexpected consequences in places like Europe and nearly half of the US.

Catastrophic wildfires such as the Tubbs and Camp Fires in California, the "Black Summer" Australian wildfires of 2019-2020, and the recent wildfires in the Mediterranean regions caught firefighters in drought-afflicted regions off guard with their speed and ferocity. But firefighters in other regions—Canada or Hawaii , for example—are even less prepared. The lessons learned in these disasters must be applied even in areas that don't normally experience them.

There've been severe floods in areas like the US South and Midwest, which have built systems of dams, levees, and spillways to deal with them, but there has also been unprecedented flooding in places like Vermont that haven't previously needed extensive water control infrastructure. As communities struggle to prepare for these events, they're implementing better warning systems and calling on residents to do things that haven't been required before. Case in point: Chicago is asking residents to forgo showers and limit toilet flushing to reduce sewer levels ahead of potential flooding.

+ "Climate Change: How Extreme Weather Is Driving US Costs of Living Higher"

+ "Attributing Extreme Weather to Climate Change"

+ In addition to the immediate effects of an extreme weather event, long-term effects must also be planned for.