What I Read This Week…

The Fed is losing credibility with markets, OpenAI and Google are paying content creators for unused video footage, and lifestyle changes prevent metabolic diseases more effectively than medications

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Caught My Eye…

• The Federal Reserve is losing credibility with markets. What's going on? The Federal Reserve has reduced the Federal Funds Rate by 1% since September, justifying their rate-cutting cycle by claiming job gains were slowing and inflation was moving toward their 2% target. However, recent data contradicts both claims: job gains remain solid (256,000 in December, though the reliability of this number is questionable), and inflation shows persistence rather than moving toward the 2% target. Meanwhile, long-term bond markets have directly challenged the Fed's policy - the 10-year Treasury yield has risen from 3.6% to 4.77% despite rate cuts, a rare occurrence seen only twice since the 1980s, and Bank of America now predicts rate hikes may be more likely than cuts in 2025. Why does Fed credibility matter? The Fed's monetary policy works largely through market expectations - when the Fed says it will do something, markets need to believe it for its monetary policies to be effective. When the Fed cuts rates, it's trying to make borrowing cheaper throughout the economy. But if markets don't believe in the Fed's economic assessment or policy decisions, they can push back through higher long-term rates, essentially canceling out the Fed's intended effects. This is exactly what we're seeing now - the unusual rise in Treasury yields despite Fed rate cuts suggests markets fundamentally disagree with the Fed's view of the economy, making their policy tools less effective at a time when they might need them most.

• Companies like OpenAI and Google are paying content creators for unused video footage to train their LLMs. These companies are offering between $1-4 per minute for unpublished content, with premium rates for high-quality formats like 4K video, drone footage, and 3D animations. The market is organizing around this demand - talent agencies and specialized platforms like Troveo are emerging to facilitate these deals. The focus on exclusive, unused content reflects AI companies' need for unique training data that their competitors haven't already incorporated into their models. As public data from the internet becomes increasingly exhausted and more high-quality LLMs are available on the market, companies are competing for proprietary data and unique data sources as the competitive edge to differentiate their models' capabilities. This shift is also creating a new revenue stream for content creators, who can now monetize footage that would otherwise go unused.

• A new study in Nature Medicine shows that lifestyle changes prevent cardiometabolic diseases more effectively than medications. What did researchers find? Combined lifestyle interventions - which include targeting sedentary behavior, physical activity, and diet - reduce Type 2 diabetes risk by 40% over 3-6 years in controlled studies, performing twice as well as the diabetes drug metformin. The study notes that unhealthy behaviors often cluster together, increasing the risk of premature death - which is why addressing multiple lifestyle factors at once is crucial. The benefits of these lifestyle changes can persist for up to 20 years and improve multiple health markers including weight, blood pressure, and cholesterol. However, when these programs move from controlled studies to real-world healthcare settings, their effectiveness drops by 50-67%. To address this, the researchers recommend policy changes like designing walkable neighborhoods, increasing access to green spaces, implementing sugar taxes, and subsidizing healthy foods, to create environments that make healthy living accessible to more people.

Other Reading…

• Stavridis Says Trump’s Plan for Greenland is ‘Not a Crazy Idea’ (The Hill)

• California’s Wildfire Insurance Catastrophe (WSJ)

• Leading Candidate for DNC Chair Sees Party in Crisis (WSJ)

• How Hard Is It to Run the Pentagon? (The Economist)

• OpenAI Has Begun Building Out its Robotics Team (VentureBeat)

• Common Misconceptions About the Complexity in Robotics Vs AI (Harimus Blog)

• The Rise and Fall of "Fact-Checking" (Nate Silver)

• The Washington Post Is Mired in Financial Challenges and Internal Drama (WSJ)

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