New Year, New Soon-to-be-Regretted Bold Predictions

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Happy Monday (and New Year's... sue me), folks.

I hope that you all enjoyed the last few weeks of time with loved ones. I personally felt like I was living inside of Christmas Vacation for most of it as I juggled family, travel, and squirrels in the Xmas tree from the strange confines of my childhood bedroom. So that was fun.

You might also notice that the newsletter got a makeover. I busted out the 8th grade art class skillset and threw together a thumbnail seen at the beginning of the email and a spiffy new content break. Let me know your thoughts. If you have any recs or suggestions, go ahead and send those my way, too, along with forty-five forms of valid design qualifications.

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This newsletter is a bit different than the normal ones. To start the year, I'm going to be about as original as Disney making another Marvel movie and replace my weekly startup spotlight with my 2023 business predictions. If just 1 of these hits, I promise to be insufferable and flaunt it like I'm some sort of Oracle of Cambridge.

Now, broken down by topic, here are my thoughts on how this year plays out:

Energy

2023 will ride the wave that began to form in 2022 and spell a big year of progress for the green energy sector. In fact, I'm picking green energy as the biggest winner of the year.

This run will be driven by the core generators like solar and wind despite the hype surrounding nuclear following the recent promising fusion experiments. Ongoing energy uncertainty, spurred in part by ongoing geopolitical conflict, will encourage the government to continue incentivizing green energy investments.

Solar energy will experience a boost as a result of favorable legislation last year that will go into effect this year. On the demand side, the Solar Investment Tax Credit kicked in on the first, allowing homeowners to claim 30% of photovoltaic cell installment costs as a tax credit. There will also be a boost to supply as the Commerce Department overturned numerous crippling tariffs on imports from China, a significant development in lowering solar costs when 80% of panels come from our rival across the Pacific.

A number of offshore wind projects in the Northeast are also expected to finalize construction this year, and the benefits of cheap, clean energy will be realized by millions of people which will help to further destigmatize the negatives around turbines.

Possibly the most discussed use case for green energy has been EVs, and this sector has the potential to boom in 2023. This past year, these vehicles were in high demand despite being hella expensive. Suppliers weren't able to meet this demand, largely because of supply chain breakdowns. Both demand and supply side pressure position the industry to make a dent in national automobile numbers.

The biggest development here is the widespread introduction of the Ford F-150 Lightning, a truck which was available in 2022 though not at a large enough scale to meet consumer demand. Most people aren't able to afford Teslas, and combined with EV tax credits as part of the Inflation Reduction Act making electric cars more affordable for all cars anyways, an EV which is actually accessible to most people (the Ford F series has been the best selling vehicle in the US for 40 consecutive years) spells a major step forward for the industry.

However, there are two significant challenges to green energy. First, the hype around the nuclear fusion experiment will fuel an inflow of VC $ into startups working on this product despite the fact that the technology is still a decade plus away from true application. While it might not be apparent this year, novel green tech might be the bubble we are all talking about in 2024 or 2025.

There will also be a political challenge to the industry. Already, there is conflict over corporate reporting standards of renewable energy use. I don't anticipate this being rectified anytime soon. Further, we've already seen a trend of state governments fighting back against "woke" investing with the likes of Florida and Louisiana pulling capital out of ESG funds. Don't expect this to change this year as the idea of green energy becomes even further politicized.

Consumer and Entertainment

Even in an economic downturn, people like to be entertained.

We've seen numerous social media startups like BeReal and Sidechat emerge over the last year, and though the former in particular gained quite the following, the conditions are right for this year to be the one where we finally see another true behemoth emerge.

Don't think I need to rehash that Twitter has been going through it lately, but with new, often unpopular changes to the platform seemingly every day and moral objections to soon-to-be-replaced-according-to-his-own-poll CEO Elon Musk, millions of users are looking for an alternative to share their 280 (for now) character thoughts.

Further, there has been talk of banning TikTok for over a year now, and 2023 is the year it finally happens. This further opens a hole in the social media habits of tens of millions of people.

There will be a massive base of social media users searching for a new home, and Instagram's own suckiness lately means that there will be a prime opportunity for a new company to capture it.

If 2021 was the clouds for the streaming industry, 2022 nearly put all of these companies 6 feet under. 2023 will be the sector's Reconstruction era.

First, there will be a major acquisition in the space. Too many players entered when launching [insert company name here] Plus was all the rage, and in our inflationary environment, consumers are struggling to justify paying $12/mo for each of them. Introducing ads and raising prices was the writing on the walls to signal that streaming isn't quite the money printer that many had thought it could be. One of the larger companies, whether Netflix, Amazon, or Disney, is going to acquire a smaller one.

The acquisitions won't stop there, either. Netflix is going to give in and copy Amazon in acquiring the media rights for a live sports league. CEO Reed Hastings has been adamant that the company would never consider this strategy, but he also said the same thing about introducing ads, and now you have to watch Burger King commercials before you can binge Stranger Things.

Too much money is being brought in by sports, and Netflix will recognize that The Gray Man doesn't bring in the type of revenue that the NFL does. Look for them to scoop up a small league, like surfing or pickleball.

Mickey is also feeling the heat, and he has entrusted his former handler, Bob Iger, to return to the CEO role to right the Jungle Cruise ship. One of Iger's most impactful Y1 moves will be ridding the company of some of its baggage, possibly ESPN. Expect the House of Mouse to love the sports behemoth enough to set it free as an indie company.

Even bolder, the Discovery and HBO merger bombs, prompting CEO David Zaslav to license the company's major IP to major competitors. By EOY, you'll be able to watch Lord of the Rings AND Harry Potter on Prime Video.

So which studio takes home the crown for the biggest release of the year? Despite growing Marvel fatigue from fans, it will be Disney with Guardians of the Galaxy Vol. 3 which will have the biggest box office run.

Peloton was a popular name in acquisition talks for much of 2022 due to the company's foray into downhill skiing as its stock plummeted 90% from pandemic era highs. 2023 is the year that the company is finally acquired, though not by the two most commonly-linked names in Apple and Amazon. Instead, it will be Nike that decides to (just) do it as it recognizes how cool Robin Arzón would look with a Swoosh.

Finance

The vibes for big banks in 2022 weren't very chill, and 2023 could cause those Patagonia-wearing finance bros to hit the bottles particularly hard this year.

Starting with the negative, Wells Fargo goes under. Frankly, I don't completely understand how the company has any business as is, but the potentially recessionary environment of this coming year and the growing consumer distrust following ANOTHER year of fines spells the end of the road for the bank. If the company doesn't completely sell (there were rumors of a Goldman buyout in 2020), expect the company to sell off significant arms of the business and take massive steps back.

Equity investing was tough last year, and this trend looks to continue this year. As such, the allure of alternative investments, particularly those in the safer, fixed income category, will be stronger than ever for consumers. As such, one of the popular fintech apps will introduce bond trading to the platform. My money is on Robinhood who had already expanded to offer services such as IRAs.

Finally, auditing and data transparency have big years. Though tradfi's fraud scares occurred years before crypto's this year, the FTX scars will fuel investor demand for accurate and transparent information about the health of the companies they are investing in, and with more investors seeking to combine financial returns with more personal values-based investments like ESG commitment, the demand for companies providing comprehensive auditing services or data transparency will grow.

Crypto

At this point, I can probably just C&P the "2022 was a bad year for this industry" opening. However, unlike with a few of these other industries, I expect crypto to have a strong rebound year.

Many have written it off, but quietly, whales (big money hodlers) have been further accumulating and building up their holdings. As such, despite a strong sentiment behind crypto in favor of "democratizing wealth," inequality in the crypto space will only continue to widen in 2023. Many retail investors were burned and were unable to weather the storm that was BTC's 60+% drop, and more will be skeptical of aping back in until most of the gains are already realized.

This is particularly disappointing given that I expect major cryptocurrencies to claw back much of their lost value, with both BTC and ETH doubling by the EOY. Altcoins will experience some residual gains, but most of the bounce back will be led by the "more reliable" tokens.

However, consumers will still benefit from a strong year for the industry even if it's not from wealth appreciation. Instead, this year is the year where web3 use cases FINALLY find some traction. NFTs will experience a resurgence for actual use cases such as subscriptions and connecting with creators, though perhaps the most promising sector for applications will be that of ticketing (thanks Ticketmaster...)

The value of blockchains for data immutability will also finally be recognized and experimented with by both corporations and governments alike. Companies will realize that transparent transactions have value for monitoring expenses and income, and combined with the growth in auditing that tradfi will experience, more companies will look to fill the hole left behind by major auditing services neglecting to service companies dealing with crypto.

Growing mistrust in the government will also encourage more governments to experience with the use cases for blockchain, particularly for the same purposes as companies and to empower the public with confidence in the destinations of their tax expenses. More bold yet? Miami explores blockchain voting.

A few major companies explored the use of central bank digital currencies (CBDC), and with a rebound in the sector as a whole, I expect at least one more major world power, perhaps the UK under Rishi Sunak, to do the same. At least one country will also formalize the experiment and make the use of CBDCs permanent.

Finally, the move from CeFi to DeFi will only continue, led by Uniswap. Even in the CeFi space, transparency will reign supreme, leading to Coinbase overcoming Binance as the top centralized exchange in the space because of CEO Brian Armstrong's commitment to reserves transparency and CZ's lack thereof.

Big Tech Shakeups

Many John Rockefeller apologists were frightened when Biden appointed Lina Khan, notorious antitrust advocate, as chairwoman of the Federal Trade Commission. It turns out that they were right to be as she has certainly lived up to this reputation thus far.

2022 was a record low for M&A activity. The biggest deal of the year, Microsoft's purchase of Activision Blizzard, was sued by the FTC for being anticompetitive. Since, the FTC has begun to crack down on noncompete clauses, and as Khan look to further spread her wings and scare the leather pants off of execs like Jeff Bezos for another year, Big Tech is in for another rough year.

Google is also sweating because of the emerging promise of generative AI in search engines, particularly Chat GPT. Google has maintained a quasi-monopoly on the search engine market for a decade, but that will finally change this year because of the recent integration of Chat GPT in Bing.

This isn't even the only competition that the company is facing, either. One of the more covert developments in the web3 space has been that of decentralized search engines which harness the power of the masses in incentivizing non-big tech developers to produce more accurate search algorithms to provide better results than Google can.

One of the most promising tech releases of this coming year is the release of Matter, an interoperability service for smart home products from more than a dozen providers including Apple, Amazon, and Samsung. This solution will allow for a better IoT experience for consumers, and its success will fuel future interoperability standards to better serve consumers, especially given the crackdown on company-specific products in Europe and potentially the US.

Labor

Who knew how important following unemployment numbers could be?

For the past year, every economist has had more circles around data release days than they had around Christmas. That's because these metrics are driving the Fed's interest rate decisions and thus the rest of the market. Leaving it out of my predictions would be irresponsible, and I refuse to let my parents down.

It will turn out that individuals taking ownership over their professional lives and neglecting the "college to traditional workforce" pipeline that worked 30 years ago wasn't a phase, Mom. The side hustle economy will continue to thrive as more people look at secondary sources of income.

These hustlers will also look at ways to stand out in the current job market, and this will lead to greater demand for education and higher qualifications from individuals. There will be a record high number of applications for more degrees on the office wall and a growth in for-profit and niche educational platforms.

The power of the people will be complemented by growing antitrust efforts from Khan and the FTC, but it will also lead to more companies adopting automation. Personal M3GANs taking over your local Taco Bell has been talked about for years, but this is the year that many service industry businesses really invest in robots and drive-through only locations.

This will add further fuel to the unionization fire which might have seemed hot last year, but will only amplify over the next (checks calculator and calendar) 356 days. Even more importantly, the labor movement hits more high skill professions, including finance which has already seen growing unrest from overworked employees over the last few years. JPM union incoming.

Finally, for years, tools and platforms have been introduced to help the CS kid that can't order at a restaurant on his own to become the Zuckerberg. We've reached the tipping point, and the pendulum will swing back the other way with more comprehensive low and no code tools and platforms to help the B-School kids turn "Yo I've got a trillion dollar idea" into "Which font should I use for the company-provided fleeces?"

International

It turns out that war in Europe isn't great for international markets. Unfortunately, the geopolitical chaos won't end there, and 2023 could bring even greater violence which pulls more countries into the conflict.

The geopolitical turmoil will make investors more nervous than ever, and combined with the Fed overcorrecting with interest rate hikes and plunging the US into a recession, the market as a whole is going to have another bad buzzcut phase.

However, the turmoil will help certain sectors experience massive success. A few of these industries are your typical winners during war (see: steel, defense, cybersecurity), but a few other industries will thrive for reasons related to nationalization. Both COVID and the war in Ukraine exposed governments to the potential downsides of globalization, and more of these groups will begin to encourage companies to onshore their operations.

In the US, this has already been seen with companies bringing semiconductor foundries home, but the benefits of self-sufficiency will also be witnessed in agtech and green energy. Really any industry in which the United States relies on China will see a major pull for domestic investment and production.

Competition could also spur major developments in China. Already facing facing pressure internally from growing anti-autocratic political movements, China will feel the need to make big, flashy shows of power to both legitimize itself to its people and to Western rivals. No industry is more visible than space, and China will unquestionably surpass the United States as the world's biggest cosmic power as it invests in major accomplishments.

However, China will also make significant progress in AI and semiconductors, both of which will be driven by government necessity. China is already a leader in artificial intelligence, and government support for the technology will grow with an increasing need to control protest movements, a feat which is aided by AI capacity. Further, China will continue to invest heavily in its own domestic semiconductor production as it understands the instability of its economy in the event that it loses access to imports from Taiwan and the Western world.

I hate to end on a grim note, but if the United States no longer relies on Taiwan for its semiconductor needs (the country currently producers >80% of the global supply) and the combination of the US and China are able to supply the rest of the world with chips, the US' commitment to protecting Taiwan from China will experience a dramatic drop.

Industry of the Year Picks

As mentioned before, green energy is my pick for the biggest winner of 2023. However, two others that are poised to break out:

Cybersecurity. Everyone and their goldfish was hacked this year. Your data is floating around online for anyone with internet access and a lack of proper upbringing to find. Anyone that can help companies avoid sending "Sorry we gave your credit card info to North Korean hackers" apology cakes to their customers is going to have plenty of investor capital to work with.

Semiconductor and alternatives. Semiconductors will be a major story through 2023 as companies invest tens of billions into domestic foundries. However, this year will also be one of exploration as engineers explore potential alternatives to silicon chips, potentially either graphene or quantum computing-produced qubits.

Company of the Year

Hide your doctors cause this seems like an Apple kinda year.

After losing a whopping near 30% of value last year, Tim Cook will be more motivated than ever to make major waves for everyone's favorite fruit. While Zuck already bought himself a "Chief of the Metaverse" plaque for his desk, it will be Apple that makes the most progress this year, both on the software side but also in devices.

Apple makes significant progress with its AR and VR tech, and the company explores ways to integrate this with its existing products like FaceTime. Further, the company will make traction with its own headset. The Consumer Electronics Show brought rumors of a headset which could be released by EOY with a price tag of nearly $3k. This will be prohibitively expensive for most consumers, but companies will be willing to experiment with enterprise applications, and it will still be more impressive than anything Zuck's no legs lookin' ass drops.

This is also the year that the company rolls out its expanded Apple Wallet features, including supporting digital driver's licenses and passports. We're one step closer to putting wallet producers out of business.

Not every piece of Apple news will be good for them, though. Europe already ruled that Apple will be forced to allow App Store competitors, and this will open the door to a more developer-friendly competitor to emerge, both in Europe but also elsewhere as other countries begin to feel pressure to crack down on the company's app marketplace monopoly.

Gonna go out on a limb here and guess that some of you might not agree with every one of these. Let me know which ones make me look like an idiot, or which ones you think I missed. Would love to hear your thoughts.

Back to a regular edition hitting your inbox later this week.

Cheers to another day,

Trey

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