The CQ | Why Tech's Prevailing Value Proposition is Post Peak
Plus the Forerunner Team's Must-Reads of the Week
The CQ is Forerunner’s weekly newsletter rounding up the most pressing consumer news and analysis, plus some bonus musings from our investment team. Subscribe now to get the latest edition in your inbox every weekend.
By Kirsten Green, Forerunner’s Founder and Managing Partner
Over the past few years, I’ve increasingly thought about the growing sense of bloat and superfluousness that’s weighing on the consumer. There’s a deluge of options, information, purchasing research, and comparison inherent to nearly every dimension of our health, finances, personal interests, home lives, and so forth. Rather than empower us with optionality, this degree of access is bogging consumers down, leading to an acute sense of decision paralysis at seemingly every turn (new research shows that 74% of consumers abandon purchasing decisions simply because they feel overwhelmed by the volume of choice).
This is without doubt a byproduct of the past decade+ of tech innovation focusing on access. “Democratizing access” has underpinned the thesis of the lion’s share of startups — and it has been an excellent place to build from. But access now feels counterproductive. More is no longer more, signaling that the prevailing value proposition of the tech industry is post peak.
At Forerunner, we obsess over values shifts and technology shifts — and an intersection of the two is where things get really interesting. This shift away from access is significant, particularly because it dovetails with the current major technology shift: gen AI. Rather than wanting more options or the agency to do things alone for themselves, consumers are now craving products and services that edit the vastness of what’s available to them and do things with them, or better yet, for them. Gen AI is uniquely suited to accelerate this value opportunity, and on a scale that we haven’t seen before.
In our latest research efforts, we explore this shift from access to edit, and how that’s changing the way companies are built, where value is created, and what opportunities are poised to capture consumers’ hearts and minds in this new paradigm.
Read more about this in our latest investment thesis — and feel free to reach out with feedback or ideas.
What We’re Talking About on Slack:
U.S. jobs data return to center stage as Fed mulls rate-cut size. The Federal Reserve is preparing to cut interest rates, but the size of the reduction hinges on upcoming U.S. employment data. The focus has largely shifted from inflation to job market conditions, especially after July’s jobs report showed rising unemployment, which spooked markets and triggered recession fears. Now with the much awaited August's jobs report, the data shows continued cooling of the labor market with slight improvements to unemployment (down to 4.2% from 4.3%). The Financial Times reports, “Investors are still unsure whether there will be a quarter-percentage point, or a half percentage point cut, at the Fed’s mid-September meeting. Futures suggest a quarter-point cut is most likely, but pricing implies a 30% probability it will be deeper, per the CME’s FedWatch tool.”
Americans’ economic mood brightens—a bit. It may have something to do with gas prices falling (a gallon of regular dropped to $3.31 on average from $3.81 a year earlier), mortgage rates declining (the average rate on a 30-year fixed mortgage decreased to 6.35% from 7.22% in early May), and the expected interest rate cut on the horizon. Several new reports reveal evidence of the slight boost. According to an August Wall Street Journal survey, 34% of respondents said the economy is improving, up from 26% in early July; those who thought the economy was getting worse decreased from 54% to 48%. The University of Michigan’s consumer sentiment gauge increased 2.3% since July. As for consumer spending, the most recent report said it rose 0.5% in July from June, which is up 5.3% from a year earlier.
The rise of the pint-size startup is reshaping the U.S. economy: The Wall Street Journal reports that the number of employees at companies created since the pandemic has declined. According to Census Bureau data, the average number of employees a business had at the turn of the century was 5.8. In 2019, the number was 5.3. But businesses launched between March 2020 and March 2021 had only 4.6 employees. Data from Gusto shows that businesses launched in 2021 added fewer jobs on average in their second year than in their first year, as they dealt with a tight labor market and rising prices; meanwhile businesses launched in 2022 faced even more challenges—they hired less and failed more often than those that started in 2021. Several contributing factors are making it possible for companies to work with a leaner staff: the expansion of remote work, more advanced software tools, and hiring contractors to be more agile in the face of economic headwinds and seasonal changes. “Business owners have become pretty experimental and pretty savvy about how to do more with less. It’s entirely possible we are moving towards a model where there are lots of businesses that are smaller.”
Americans say it takes $2.5 million to be considered wealthy, up 14% from last year, according to the annual Charles Schwab Modern Wealth survey. “The notion of wealth combines both numbers and emotions. The jump from $2.2 million to $2.5 million demonstrates both sides—the cost of living is rising, as are, it’s likely, most Americans’ more emotion-fueled views of what it takes to be wealthy.” Generationally, boomers say $2.8 million is the magic number, while millennials say it’s $2.2 million. The average net worth considered to be “financially comfortable,” is $778,000, down from last year’s $1 million.
The Wall Street Journal takes a look at the extreme renters who own nothing, not even their jeans. A new Credit Karma survey says that more than one in four Americans rent or lease their car, clothing, electronics or furniture. Considering how much prices have increased over the last few years, renting some items—particularly things that will only be used a few times, like maternity clothes, camping equipment, or tools—can feel like a way to save money, even though you are making payments on something you’ll never own. And these days, almost anything is rentable, from your everyday wardrobe to Christmas trees and caskets. But some people don’t mind spending more to rent because they prefer the novelty of something new and the flexibility of having less stuff if they move. Says one 28-year-old who opted for leasing a car over buying, “It’s a hard pill to swallow, to throw $25,000 in something that’s obviously going to depreciate.”
More young men are becoming NEETs than women—not in employment, education, or training. In the U.S., about 11.2% of young people are NEETs and one in five men under 25 is unemployed and not looking for a job. Meanwhile, the number of Gen Z female college grads in the workforce has steadily increased. According to the CEO of a global recruitment agency, “Women tend to be more flexible in accepting job offers, even if they’re not perfectly aligned with their career goals or are part-time or they are overqualified for. Men, on the other hand, often hold out for roles that align more closely with their ideal career path or offer what they perceive as adequate compensation and status.”
These new AI bots will do just about anything for you. The next evolution of artificial intelligence will be autonomous AI “agents” that won’t have to interact much with people to complete tasks. A few currently in development are Priceline’s AI named “Penny” that can call hotels to make special requests with the concierge, Grindr’s AI-powered “wingman” that will help you find and plan dates, and a Siri bot that can pull up your passport number on your iPhone and other ways to make traveling easier. There are even shopping bots that will scour listings and look for sales, and financial ones that will offer real-time investment advice.
The New York Times explains how AI can help start small businesses. From writing code and translating complicated legal documents to creating social media posts, editing copy, and answering payroll questions, entrepreneurs are turning to generative AI to help them do more with less and get their companies off the ground more quickly and efficiently than they would have been able to on their own. Gusto found that about a fifth of businesses created last year said they were using generative AI to efficiently carry out tasks like market research, contract reviews, bookkeeping, and job postings. “There is every reason to believe that that is the likely path—that businesses are going to get to profitability faster and they will get to scale faster and that they will actually be a little more stable in the end.”
The U.S. fertility rate reached a record low in 2023. According to CDC data, the fertility rate declined 3% in 2023—just under 3.6 million babies were born last year, about 68,000 fewer than the year before. Since 2007, when the fertility rate was at its most recent high, the general fertility rate has dropped 21%. While the teen birth rate hit a record low in 2023, the birth rate was highest among women ages 30 to 34. In terms of prenatal care, about 2.3% of pregnant women had no prenatal care in 2023, up 5% from the year before. Nearly 5% of women had prenatal care only in their third trimester.
Why creators have stopped editing their content: Stripped-down videos free of camera cuts, captions, or edits are performing exceptionally well. Comedic YouTuber Dan Hentschel gained more than 160,000 subscribers and 12 million collective views in the four months since he simplified his posts. Fitness YouTuber Sam Sulek amassed more than 3.5 million subscribers in just over a year with videos featuring just his workouts and not much else. Even MrBeast has traded “the ultra fast paced/overstim era of content” for the no-edit approach, saying “views have skyrocketed!” An executive at an influencer marketing company says, “The no-edit format feels more intimate. It’s as if you’re hanging out with your friend at the gym, going for a car ride, or just hanging out at home. These no-edit creators, in particular, replicate face-to-face communication, which creates a sense of intimacy. They speak directly into the camera as if they’re looking at you directly.” Not to mention, the posts take a lot less time and effort to produce.
Portfolio News:
Duckbill CEO Meghan Joyce appears on CBS Mornings to talk about how the Duckbill app is like “a personal assistant in your pocket.”
Business Insider profiles Headway CEO Anton Pavlovsky, reporting how he shifted to an AI-focused strategy that boosted the company’s ad performance by 40%.
Glossier makes WWD’s list of the most powerful beauty brands of 2024.
Henley Vazquez, Co-founder Fora, speaks to CBS News about the importance of taking a staycation before summer ends.
Lindsay Dahl, Ritual’s chief impact officer, talks about building a mission-driven brand on the Glossy Beauty Podcast.
Wonder CEO Marc Lore joins the Leading Indicator podcast to discuss the food delivery space and his expansion plans for the brand.
The Washington Post illustrates what it’s like to work as a telemedicine veterinarian through the point of view of Abel Gonzalez, clinical director at Dutch.
There are ~628 other open jobs at Forerunner portfolio companies, check them out.