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He Stole Hundreds of iPhones and Looted People’s Life Savings. He Told Us How.

RUSH CITY, Minn.—Before the guards let you through the barbed-wire fences and steel doors at this Minnesota Correctional Facility, you have to leave your phone in a locker. Not a total inconvenience when you’re there to visit a prolific iPhone thief.

I wasn’t worried that Aaron Johnson would steal my iPhone, though. I came to find out how he’d steal it.

“I’m already serving time. I just feel like I should try to be on the other end of things and try to help people,” Johnson, 26 years old, told me in an interview we filmed inside the high-security prison where he’s expected to spend the next several years.

For the past year, my colleague Nicole Nguyen and I have investigated a nationwide spate of thefts, where thieves watch iPhone owners tap their passcodes, then steal their targets’ phones—and upend their financial and digital lives.

Johnson, along with a crew of others, operated in Minneapolis for at least a year during 2021 and 2022. In and around bars at night, he would befriend young people, slyly learn their passcodes and take their phones. Using that code, he’d lock victims out of their Apple accounts and loot thousands of dollars from their bank apps. Finally, he’d sell the phones themselves.

It was an elaborate, opportunistic scheme that exploited the Apple ecosystem and targeted trusting iPhone owners who figured a stolen phone was just a stolen phone.

Last week, Apple announced Stolen Device Protection, a feature that likely will protect against these passcode-assisted crimes.

Yet even when you install the software, due in iOS 17.3, there will be loopholes. The biggest loophole? Us. By hearing how Johnson did what he did, we can learn how to better secure the devices that hold so much of our lives.

How he got started

Johnson isn’t a sophisticated cybercriminal. He said he got his start pickpocketing on the streets of Minneapolis. “I was homeless,” he said. “Started having kids and needed money. I couldn’t really find a job. So that’s just what I did.”

Soon he realised the phones he was nabbing could be worth a lot more—if only he had a way to get inside them. Johnson said no one taught him the passcode trick, he just stayed up late one night fiddling with a phone and figured out how to use the passcode to unlock a bounty of protected services.

“That passcode is the devil,” he said. “It could be God sometimes—or it could be the devil.”

According to the Minneapolis Police Department’s arrest warrant, Johnson and the other 11 members of the enterprise allegedly accumulated nearly $300,000. According to him, it was likely more.

“I had a rush for large amounts at a time,” he said. “I just got too carried away.”

In March, Johnson, who had prior robbery and theft convictions, pleaded guilty to racketeering and was sentenced to 94 months. He told the judge he was sorry for what he did.

How he did it

Here’s how the nightly operation would go down, according to interviews with Johnson, law-enforcement officials and some of the victims:

Pinpoint the victim. Dimly lit and full of people, bars became his ideal location. College-age men became his ideal target. “They’re already drunk and don’t know what’s going on for real,” Johnson said. Women, he said, tended to be more guarded and alert to suspicious behaviour.

Get the passcode. Friendly and energetic, that’s how victims described Johnson. Some told me he approached them offering drugs. Others said Johnson would tell them he was a rapper and wanted to add them on Snapchat. After talking for a bit, they would hand over the phone to Johnson, thinking he’d just input his info and hand it right back.

“I say, ‘Hey, your phone is locked. What’s the passcode?’ They say, ‘2-3-4-5-6,’ or something. And then I just remember it,” Johnson described. Sometimes he would record people typing their passcodes.

Once the phone was in his hand, he’d leave with it or pass it to someone else in the crew.

Lock them out—fast. Within minutes of taking the iPhones, Johnson was in the Settings menu, changing the Apple ID password. He’d then use the new password to turn off Find My iPhone so victims couldn’t log in on some other phone or computer to remotely locate—and even erase—the stolen device.

Johnson was changing passwords fast—“faster than you could say supercalifragilisticexpialidocious,” he said. “You gotta beat the mice to the cheese.”

Take the money. Johnson said he would then enrol his face in Face ID because “when you got your face on there, you got the key to everything.” The biometric authentication gave Johnson quick access to passwords saved in iCloud Keychain.

Savings, checking, cryptocurrency apps—he was looking to transfer large sums of money out. And if he had trouble getting into those money apps, he’d look for extra information, such as Social Security numbers, in the Notes and Photos apps.

By the morning, he’d have the money transferred. That’s when he’d head to stores to buy stuff using Apple Pay. He’d also use the stolen Apple devices to buy more Apple devices, most often $1,200 iPad Pro models, to sell for cash.

Sell the phones. Finally, he’d erase the phone and sell it to Zhongshuang “Brandon” Su who, according to his arrest warrant, sold them overseas.

While Johnson did steal some Android phones, he went after iPhones because of their higher resale value. At bars, he’d scope out the scene—looking for iPhone Pro models with their telltale trio of cameras. He said Pro Max with a terabyte of storage could get him $900. Su also bought Johnson’s purchased iPads.

Su pleaded guilty to receiving stolen property and was sentenced to 120 days at an adult corrections facility in Hennepin County, Minn. Neither Su nor his lawyer responded to requests for comment.

On a good weekend, Johnson said, he was selling up to 30 iPhones and iPads to Su and making around $20,000—not including money he’d taken from victims’ bank apps, Apple Pay and more.

How you can prevent it

A week after my trip to Minnesota, Apple announced Stolen Device Protection. The security setting will likely foil most of Johnson’s tricks, but it won’t be turned on automatically.

If you don’t turn it on, you’re as vulnerable as ever. Switching it on adds a line of defence to your phone when away from familiar locations such as home or work.

To change the Apple ID password, a thief would need Face ID or Touch ID biometric scans—that is, your face or your finger. The passcode alone won’t work. And the process has a built-in hourlong delay, followed by another biometric scan. This same slow process is also required for adding a new Face ID and disabling Find my iPhone.

Some functions, such as accessing saved passwords in iCloud Keychain or erasing the iPhone, are available without the delay but still require Face ID or Touch ID.

A criminal might still be motivated to kidnap a person with lots of money, then slowly break through these layers of security. However, the protections will likely dissuade thieves who just want to grab phones and flee the scene.

So what loopholes remain? A thief who gets the passcode could still buy things with Apple Pay. And any app that isn’t protected by an additional password or PIN—like your email, Venmo, PayPal and more—is also vulnerable.

That’s why you should also:

  • Add a distinct passcode to money apps, like Venmo and Cash App.
  • Delete any notes or photos that include personal information such as passwords or Social Security numbers. Store that stuff in a secure note inside a third-party password manager, such as Dashlane or 1Password.
  • Create a stronger iPhone passcode—one that uses letters and numbers.

The most obvious is Johnson’s advice: Watch your surroundings and don’t give your passcode out.

If this crime has taught us anything, it’s that a single device now contains access to our entire lives—our memories, our money and more. It’s on us to protect them.

—Nicole Nguyen contributed to this article.

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Australian shoppers adopt new strategy for Boxing Day sales

Cost of living pressures are expected to impact Boxing Day sales with more Australians planning to spend less, new consumer research shows.

The survey conducted on behalf of the Commonwealth Bank showed almost one in two people, or 49 percent of Australians, expect to spend during the annual post Christmas sale period, up from 42 percent last year and 40 percent in 2021. However, the average planned spend this year is expected to be $475.70, or $4.6bn nationally, down from $483.20 in 2022 and $557.05 in 2021.

People under the age of 39 are most likely to spend over this period as they use the sales to buy necessities, CBA chief economist Stephen Hlamarick said. 

“The increase we’ve seen in spending at discount and variety stores in November is partly explained by Christmas and holiday shopping with discretionary spend up 1.9 percent,” he said. “However, people are also using the sales to stock up on essentials – with essential spending edging up 0.3 per cent. 

“Essential spending usually falls after the “gift giving” period. However, given consumers are clearly seeking sales bargains for both essential and discretionary items, Boxing Day sales could also see a similar trend with a larger share of essential spending.”

CBA personal finance expert Jess Irvine said it was important for shoppers to have a plan before heading out.

“For anyone planning to use Boxing Day as an opportunity to bag a bargain, it is important to have a clear plan in advance of which items you plan to purchase. Write a list and stick to it to limit impulse purchases” said Ms Irvine.

“A good rule of thumb is that if the first time it occurs to you to purchase something is during a sale period, you probably don’t need it.

“If you are stocking up, make sure to do your research and check first for any cashback offers that may be available for that retailer. 

She also warned to be wary of suspicious text messages or online scams.

“Stay scam aware when shopping, as scammers are known to be more active during sales periods,” Ms Irvine said. “Always remember to remain cautious, especially at this busy time of year, and stop, check and reject any suspicious websites or text messages.”  

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The Met to Return 16 Statues to Cambodia and Thailand Over Trafficking Concerns

The Metropolitan Museum of Art has agreed to return 14 sculptures to Cambodia and two to Thailand, removing from its collection all Khmer-era artworks associated with an art dealer accused of selling antiquities illegally.

The Met said Friday it will temporarily display a selection of the 16 sculptures while arrangements are made for their repatriation. The works were made between the ninth and 14th centuries in the Angkorian period, the museum said. The Khmer empire ruled much of what is now Cambodia, Laos, Thailand and Vietnam from about 802 to 1431.

The sculptures are associated with art dealer Douglas Latchford, who was indicted in 2019 by the U.S. attorney’s office for the Southern District of New York, which said he orchestrated a multiyear scheme to sell looted Cambodian antiquities on the international art market. The indictment was dropped after Latchford’s death in 2020. Authorities later secured a $12 million civil forfeiture against his estate for stolen Southeast Asian antiquities they alleged Latchford had sold.

The Met said it cooperated with authorities in the U.S. and Cambodia following Latchford’s indictment and received information that made it clear the sculptures should be returned.

“The Met is pleased to enter into this agreement with the U.S. attorney’s office, and greatly values our open dialogue with Cambodia and Thailand,” said Max Hollein, the director and chief executive of the Met.

U.S. Attorney Damian Williams said in a statement Latchford was believed to have run “a vast antiquities trafficking network,” an allegation Latchford had denied. He urged cultural institutions and private collectors to remain vigilant about antiquity trafficking.

Many countries and cultures that were colonised have for decades asked institutions to return stolen artefacts. That effort has gained more traction in recent years, with many museums now openly acknowledging that some items in collections were gained through colonial exploitation and looting.

The Cambodian government in recent years has asked the Met and other museums to return artworks taken from their countries of origin under murky circumstances.

In 2013, the Met returned two 10th-century Cambodian stone statues, known as the “Kneeling Attendants,” which were also associated with Latchford. The statues were from the Koh Ker temple in the same province as the Angkor Wat temples. Officials said they believe they were stolen from the temple in the 1970s. The Met had acquired the statues from donors between 1987 and 1992, it said at the time.

One of the most high-profile repatriation efforts involves the Benin Bronzes, West African artefacts stolen more than a century ago from what is now Nigeria.

Roughly 3,000 to 5,000 artifacts were pillaged from the Kingdom of Benin by British soldiers in the late-19th century as the U.K. expanded its colonial empire in West Africa.

Many of the Benin Bronzes—a name used to cover a variety of artwork, including carved elephant tusks, brass plaques, and wooden heads—wound up in private collections and museums in Europe and the U.S. The Met returned three artifacts to Nigeria in 2021.

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The Office Market Had It Hard in 2023. Next Year Looks Worse.

Office building owners, hammered by falling demand and high interest rates, struggled in 2023. But they mostly managed to stay afloat.

That is going to be a lot harder to do next year.

Many landlords have been able to extend their loans, often by putting in more capital. But a lot of those extensions are now expiring, and owners are losing hope that occupancy rates will rebound soon.

That means many more office landlords will be compelled to pay off their mortgages, sell their properties at a steep discount or hand their buildings over to their creditors.

“In 2024, it’s game time,” said Scott Rechler, chief executive of RXR Realty, a major owner of office buildings in the New York region. “Owners and lenders are going to have to come to terms as to where values are, where debt needs to be and right-sizing capital structures for these buildings to be successful.”

Office demand shows no sign of returning to pre pandemic levels. While the number of full-time remote employees has dwindled, hybrid workplace policies look here to stay. In the fourth quarter, 62% of U.S. businesses allowed employees to work from home some days of the week, up from 51% in the first quarter, according to Scoop Technologies.

Return-to-office rates also stalled for most of 2023. Kastle Systems, which tracks security-card swipes in 10 major U.S. cities, said that average office attendance is about half of its pre pandemic level. Placer.ai, which tracks mobile phone data, puts it in the 60% to 65% range. But it also said the return rate has topped out.

The office market has shown “some monthly fluctuations but little real change in the overall trajectory,” Placer.ai said in a November report.

The U.S. office vacancy rate stands at a record 13.6%, up from 9.4% at the end of 2019, according to data firm CoStar Group. The firm is forecasting it will rise to 15.7% by the end of 2024 and will peak above 17% by the end of 2026.

That vacancy rate is poised to push higher because nearly half of office leases signed before the pandemic haven’t expired, CoStar said. When they do, many of the businesses will likely take less space than they are currently occupying, whether they are renewing or relocating.

Take the case of Chicago law firm Neal Gerber Eisenberg, which signed one of the city’s largest 2023 office leases earlier this fall. The firm, which has grown steadily throughout the pandemic, adopted a policy that requires employees to work from the office at least eight days a month. Neal Gerber leased 90,000 square feet at its new location, down from the 113,000 square feet it will be giving up.

Beyond the longer-term decline in demand, office landlords are still contending with high interest rates. Landlords that have to refinance debt borrowed when rates were at historic lows will face much higher borrowing costs as high vacancy is putting rents and incomes under pressure.

In recent weeks, inflation has been declining and the Federal Reserve is likely to ease interest rates in 2024. That will soften the blow. But landlords still face a financial squeeze, analysts say.

“If you have a mortgage that’s expiring at 3% or 4%, there’s no way you’re refinancing at 3% or 4%,” said Steve Sakwa, an analyst with Evercore ISI. Even though rates have come down, he added, property owners are still looking at rates that could be double their expiring rates to refinance.

Not all the signals are bleak for the office market in 2024. Demand is still strong for the highest quality and best-located space in many markets from tenants willing to pay high rents to encourage employees to return to offices.

Developers have retreated from new construction in the sector, so there’s little competition from new supply. The 30 million square feet in office construction starts in 2023 was the lowest amount since 2010, according to CoStar.

Cities such as San Francisco, New York and Boston are lowering costs and streamlining the process for converting obsolete office buildings into apartments. While this isn’t expected to result in a big decline in vacancy, the actions might bring more activity to business districts, giving a psychological boost to downtown landlords and businesses.

But the steadily rising number of owners who are defaulting on their mortgages because of falling rent rolls looms over the market. The delinquency rate of bank loans and loans converted into commercial mortgage-backed securities currently is over 6% compared with below 1% before the pandemic hit, according to data firm Trepp.

High delinquencies combined with the dismal office outlook already have convinced some owners to hand properties back to lenders or sell for sharply discounted prices.

In Stamford, Conn., the owner of One Stamford Forum, a 500,000-square-foot building whose tenants include troubled Purdue Pharma, this fall gave the building back to its creditors, according to Trepp. In San Francisco, buyers have purchased office buildings like 60 Spear Street and 350 California Street for fractions of what they were worth before the pandemic.

Trepp is projecting that the office delinquency rate could be over 8% by the second half of next year. As more landlords default, the new owners that replace them—buying in at greatly reduced prices—will likely put more pressure on the market because they’ll be able to charge lower rents and still make a profit.

“What could be catastrophic is if you start seeing corporate profit pressures leading to continued or accelerated pace of office downsizing,” said Stephen Buschbom, Trepp’s research director.

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More Americans Than Ever Own Stocks

 

The share of Americans who own stocks has never been so high.

About 58% of U.S. households owned stocks in 2022, according to the Federal Reserve’s survey of consumer finances released this fall. That is up from 53% in 2019 and marks the highest household stock-ownership rate recorded in the triennial survey. The cohort includes families holding individual shares directly and those owning stocks indirectly through funds, retirement accounts or other managed accounts.

The data provide the most comprehensive snapshot yet of how the Covid-era explosion in investing has reshaped Americans’ personal finances. Stuck at home during the pandemic with extra cash, millions jumped into the stock market for the first time. The elimination of commission fees on stock trading across U.S. brokerages made investing cheaper than ever.

“It created a whole generation of investors,” said Anthony Denier, chief executive of mobile brokerage Webull U.S.

Most households own stocks through a retirement account, such as a 401(k), but more Americans in the past few years have invested in individual shares directly. Direct stock ownership increased to 21% of families in 2022 from 15% in 2019—the largest increase on record since the survey began in 1989.

As more households bought individual shares, those newer entrants invested with less money than longtime stockholders. The median value of households’ direct stockholdings nearly halved from 2019 to about $15,000 in 2022, adjusted for inflation.

When the stock market crashed in early 2020, Nick Luczak, then a sophomore at the University of Michigan, used the $57 in his checking account to open a brokerage account on Robinhood and buy whichever stocks he could afford. Once the pandemic forced him off campus to live with his parents, he began researching the market and buying more stocks.

“I said, ‘Well, I have all this spare time. There’s no reason at all I shouldn’t be trying to make the most money possible from this,’” Luczak said.

Luczak and his fraternity brothers started a group chat to discuss markets and stock picks. He said he made a profit investing in Amazon.com and watched his friends make, then lose, thousands of dollars trading meme stocks such as GameStop and AMC Entertainment Holdings in 2021. At one point, he considered becoming a day trader.

Now, Luczak, 24 years old, is focused on long-term investing. A salesman in Dallas, he is studying to become a certified financial planner.

Brokerages in recent years have made trading free and easy. Newer apps like Robinhood and Webull helped popularise zero-commission stock trading on smartphones. Charles Schwab, TD Ameritrade and E*Trade all eliminated commission fees for stocks at the end of 2019. Fidelity and Schwab introduced fractional stock trading in 2020, allowing individuals to buy and sell slivers of shares.

“It’s become more accessible,” said Ashley Feinstein Gerstley, a certified financial planner and founder of The Fiscal Femme. “We’ve been debunking in the last few years the myth that you have to be rich or work on Wall Street to invest.”

The share of households owning stocks increased across all income levels from 2019 to 2022. Upper-middle-income families recorded the biggest jump in stock ownership.

Over those three years, stocks climbed to new highs. The S&P 500 rose 16% in 2020 and 27% in 2021. Even after a 19% drop last year, the benchmark stock index notched gains over the three-year period. The S&P 500 is up 23% in 2023.

Stock-market gains and rising home prices helped boost household wealth. Households’ median net worth climbed 37% from 2019 to 2022, adjusted for inflation, the largest increase in the survey’s history. The median value of a U.S. household’s primary residence surged to $323,200 in 2022, surpassing levels from before the 2007 housing market crash.

Americans’ penchant for stocks is distinct. U.S. households held about 39% of their financial assets in equities in 2022, according to Organization for Economic Cooperation and Development data, a higher allocation than most other countries in the data set.

That appetite for stocks has been tested since the Fed began raising interest rates last year at the fastest clip since the 1980s and pledged to keep rates higher for longer. Investors have been flocking to assets with little risk such as money-market funds that are now offering some of the highest yields in years. Everyday investors, who rarely own bonds directly, are taking a second look at assets such as Treasurys and corporate bonds.

Fernando Soto, head of private banking in Chicago at Brown Brothers Harriman, said he has fielded more questions from clients about fixed-income investing and more requests from clients to buy bonds in 2023. In his personal portfolio, he increased his allocation to fixed-income this year.

“There’s a big shift,” Soto said. “This is the new normal.”

How has the higher rate environment shifted American household finances? The Fed consumer finance survey in 2025 will likely paint the fullest picture.

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America Had ‘Quiet Quitting.’ In China, Young People Are ‘Letting It Rot.’

China’s ruling Communist Party wants the country’s young people to be ambitious, work hard and prepare for adversity.

Li Jiajia just wants to win the lottery.

Demoralised by a weak economy, unfulfilling jobs and a paternalistic state, young Chinese such as Li are looking for pathways out of the carefully scripted lives their elders want for them, putting themselves at odds with the country’s priorities.

After moving to Beijing from her hometown in southeastern China in April, the 24-year-old Li found her new job as a content creator at a technology startup uninspiring. She said she has no desire to climb the corporate ladder, especially when the number of high-paying Chinese tech jobs is shrinking.

The ever-present role of the state in daily life is stultifying, she said. Though she wanted to be a journalist in high school, she gave up when she realised how heavily the government censors the media.

For Li, scratching lottery tickets offers a moment of escapism. PHOTO: GILLES SABRIE FOR THE WALL STREET JOURNAL

She says she knows she probably won’t win the lottery. But when she plays, at least she can dream of a better life—most likely abroad.

“I want to leave here and live the life I want,” Li said. “It won’t happen overnight, but for now, the thrill of scratching lottery tickets gives me a little break.”

Since China’s government cracked down on disaffected students in Tiananmen Square in 1989, most young people, who came of age in an era of rapid economic growth and rising affluence, have done what they are supposed to do—and been rewarded for it.

They studied diligently to get into prestigious universities, clocked gruelling hours at fast-growing companies and followed traditional expectations of career and family, riding China’s boom to material success.

Many are still doing that. But a growing number of middle-class urbanites in their 20s and 30s in China have begun to question that trajectory, if not reject it entirely, as prospects of upward mobility fade.

More than two years of harsh government Covid controls left some pondering the role of the Communist Party and other sources of authority in their lives, or even the meaning of life and who they aspire to be—questions many had never contemplated before.

Record youth unemployment that topped 21% this year has further dented confidence in traditional paths to achievement in China. Some, like Li, are also frustrated about other issues, such as violence against women in China or government efforts to prevent people from accessing foreign apps such as Twitter or Instagram.

Many are quitting their jobs and turning to meditation and other forms of spirituality. Some are moving far from China’s megacities to start lives anew in places like Dali, a southwestern city famous within China as a hub for digital nomads and dropouts.

Others are flooding fortune-teller stands and Buddhist temples in mountainous areas, or exploring Chinese and Western philosophers and writers from Laozi to Hermann Hesse. Some are throwing “quitting parties” with banners celebrating their newfound freedom.

“This generation has had a lot of resources invested in them,” said Sara Friedman, professor of anthropology and gender studies at Indiana University, who studies Chinese society.

“They have worked really hard. They have been pushed really hard. And to then say, ‘I’m stepping out of this rat race, I’m opting out,’ is a pretty radical decision to be making.”

Young visitors pray at the Lama Temple in Beijing. PHOTO: GILLES SABRIE FOR THE WALL STREET JOURNAL
From ‘lying flat’ to ‘letting it rot’

Social-media discussions about temple visits and anxiety—a central preoccupation of many young Chinese—have surged in 2023, according to BigOne Lab, a research firm.

About 34% of surveyed respondents in their mid-20s quit or were considering resigning from jobs in China’s consumer internet sector—a major employer of young people—in the first half of 2023, according to China’s job-seeking and social platform Maimai.

Playing the lottery has become especially trendy for 20- and 30-somethings, whose purchases of lottery tickets helped push sales to $67 billion from January to October, a 53% jump from the previous year and averaging $48 per person in China.

Catchphrases describing the mood have worked their way into everyday discourse. First, in 2020, was the arcane sociological term neijuan, or “involution,” which referred to situations in which people work hard and compete without anyone getting ahead.

That was followed by “touching fish.” The phrase, borrowed from a Chinese idiom, referred to executing small rebellions at work, such as taking long toilet breaks, doing online shopping or reading novels in the office.

Next was “lying flat,” a form of mundane resistance that involves dragging one’s feet at work or dropping out of the workforce altogether. Last year, the phrase “let it rot” spread to describe young people who have completely given up.

A survey conducted by Tsingyan Group, a research firm, last year found that approximately 96% of nearly 6,000 respondents in China were aware of people “lying flat” to various degrees in their vicinity. The concept held more appeal among people ages 26 to 40 than other Chinese, the survey showed.

“It’s a very passive form of resistance,” said Silvia Lindtner, an ethnographer at the University of Michigan. “It’s definitely a very difficult moment, but it could also be seen as a hopeful moment where there is pressure, in some ways, on the leadership.”

Echoes of the 1960s

In some ways the ennui resembles the “quiet quitting” phenomenon of post pandemic America—or, going back further, the rejection of social norms by young people across the Western world in the 1960s.

In those days, two decades of fast economic growth and wider affluence gave young people more choices than previous generations. Many responded by challenging their parents’ way of life.

For many young urbanites in cities such as Beijing, traditional paths to success have become less reliable and less attractive. PHOTO: GILLES SABRIE FOR THE WALL STREET JOURNAL

In China, where open protests are rarely possible, young people are now rebelling in other ways.

“Lying flat is a latent resistance to the moral blackmailing of society,” said Amy Yan, a 27-year-old Shenzhen resident who once worked as a buyer for her family’s export business. When the business went bankrupt last year after her parents lost their assets in a financial scam, it reinforced her belief that she should give priority to her spirituality.

Even before the bankruptcy, she had decided that accepting the corporate grind and meeting traditional expectations of marriage and children would interfere with her desire to explore her spirituality.

Following the family crisis, she put her savings of $27,000 into supporting a tiny Taoist ashram she had started with a few fellow practitioners.

Coming into Beijing’s crosshairs

Communist Party leaders have long worried young people could stir unrest, as they did in 1989. The party needs young people to get on board with Beijing’s priorities, not just to keep the economy humming and avoid instability, but to help make China stronger in an era of great-power competition with the U.S.

In a speech at last year’s Communist Party congress, widely quoted in Chinese media, leader Xi Jinping laid out his vision for young people, urging them to have “ideals, courage, a willingness to endure hardship and a dedication to strive” to help “build a modernised socialist country.”

In a 2021 article published in the top party journal Qiushi, he specifically warned against “lying flat.” Discussions of the phenomenon have often triggered censorship online.

If all the young people who had dropped out of China’s labor force and relied financially on their parents were counted, China’s real youth unemployment rate could be as high as 46.5%, according to calculations earlier this year by a Peking University professor.

The Communist Party Youth League—with more than 70 million members—has published commentary on its official WeChat account criticising college graduates for having too much pride. Job seekers “should not refuse to enter the workforce due to the difficulty of finding a job or choose to ‘lie flat’ out of fear of ‘involution,’” the article read.

Greater affluence—but an uncertain future

Until recently, China’s economic progress seemed to be unstoppable, with per-capita incomes surging to around $13,000 in 2022 from less than $1,000 in 2000, according to the World Bank.

But economic growth has slowed. Many economists worry China could get stuck in the “middle-income trap,” in which a country’s progress plateaus before it gets rich. Per-capita incomes in the U.S. were around $76,000 last year.

Academic research shows that social mobility for many groups in China has stalled, meaning it has become harder for people without connections to get ahead.

Many employers that young people gravitated to, including Alibaba, Tencent and ByteDance, have been shedding staff amid weak growth and government clampdowns on the private sector. Tech salaries have declined in the past three years, according to Maimai, and opportunities for initial public offering payouts have faded, leaving many who used to work “996” schedules—9 a.m. to 9 p.m., six days a week—wondering what the point was.

It is also true that many more middle-class young people—especially those without children and mortgages—can afford to drop out of the rat race today than in previous eras.

Some plan to leave: Net emigration from China, which fell to 125,000 in 2012 as the country’s economy boomed, rebounded to more than 310,000 in the first 11 months of 2023, according to United Nations data.

Others want to stay—but on their own terms.

Huang Xialu quit her high-stress job as a product manager at one of China’s largest video-streaming companies in April, so she could focus more on spiritual retreats. For a long time before that, the 33-year-old said she had struggled with a lack of purpose.

“I had a very urgent sense that if I didn’t listen to my gut and take a break to explore what I truly wanted to do in this world, it would be too late,” she said.

In the months following Huang’s resignation, she traveled to Dali, where she worked on a tarot-reading stand, took a training course in life coaching and learned to make pottery.

To Huang, lying flat is the opposite of being passive—it is a path for taking control of one’s own life when wading through uncertain terrain, she said.

Now she has become a certified life coach, helping individuals who are as confused as she was to find a way forward. Her income is less stable.

But “I haven’t regretted quitting for a second,” she said.

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Tired of the same old holiday options? Take these trips with a twist for tenacious travellers

 They were knitting in the piano lounge, crocheting at the bar and pulling out their craft bags during bingo. For the ladies of the Unwind craft group, casting on and off was just as important as seeing the sites on their cruise to New Zealand.

The group of women who met at Melbourne’s Unwind Craft Café have set off on four craft cruises together and every time owner Robyn Scipione announces a new trip, it sells out in hours. Part of the attraction is to learn new sewing skills, but a much bigger part is to connect with each other while relaxing on the high seas.

If a knitting cruise sounds unusual, consider this – Carnival has a four-night cat lover’s cruise from Florida to Mexico, there is a Star Trek cruise to Aruba with Royal Caribbean and there’s even a nude cruise out of Tampa, Florida, also available through the popular cruise company.

But it’s not just cruises that offer special interest travel options. Whether you are looking to walk in the footsteps of the Anzacs, want to pick up a cooking tip or two from an Italian nonna or sing along to your favourite band, there is a trip for that.

Anna Shannon, a former Flight Centre travel agent, set up a website called TravelAgentFinder.com.au that helps connect travellers with agents that specialise in specific areas of travel. It could be as simple as finding a Disneyland expert, or as complex as someone looking to trace their ancestor’s footsteps on the Western Front.

“Themed travel is definitely on the rise and it makes sense to me,” the travel expert says. “Travelling is awesome, but when you’re travelling with like-minded people who share your passion for X, Y or Z, it’s an even more enriching experience.”

She says music themed cruises are gaining in popularity, as are crafting cruises, sport-themed travel packages and yoga and wellness tours that combine a love of yoga with traditional yogi cultures to countries like Indonesia, India or Sri Lanka. 

Anna Shannon helps match travellers with their interests through her travel website.

Scipione says her crafting cruises are usually more about the connections people make on the trip than the knitting or the destinations they travel to.

“I can tell you about six million stories of the friendships that have formed at our knitting sessions, especially amongst solos,” she says. “There was one lady who used to cruise with her husband before he died and now comes along to our craft cruises. She told me it actually saved her, and I believe her because we could see she was in a bad place when she came into the shop.”

As you might expect, the majority of the crafters are older ladies. But Scipione says young knitters are increasingly attracted to the concept with three generations, including a 10-year-old girl, joining them once.

Mat McLachlan combined his love of history with his family’s business in travel when he launched Mat McLachlan Battlefield Tours in 2008. That first year the historian and author took 34 people on an ANZAC Day on the Western Front tour, in 2009, he took 50 and in 2010 it ballooned to 600 people.

“All our tours are led by expert historians who bring the history to life and share stories of the ANZACS, so no matter where your knowledge lies, our battlefield tours are designed to be an enriching experience,” says McLachlan who hosts military tours to France, Belgium, Gallipoli, Vietnam, Darwin and more.

cial interest travel incorporates food and wine. Celebrity chefs have long led tours exploring gastronomic centres of the world. Since the early noughties, French chef Gabriel Gate has led food tours of his homeland and now takes river cruisers through Southern France with Scenic. Vietnamese chef Luke Nguyen hosted several food trips on the Mekong River in Vietnam and Cambodia introducing travellers to local produce and then teaching them to cook with them.

Television host Maeve O’Meara launched Gourmet Safaris 25 years ago after she showed her mother’s group to her favourite Lebanese restaurant in Sydney. She started by leading walking tours around Sydney’s food villages, then to locations like Victoria’s High Country, South Australia and Tasmania. Demand led to O’Meara to take her food tours overseas to Sardinia and Corsica, the Greek Islands, Portugal and Spain.

Maeve O’Meara has taken her Gourmet Safaris business to places like Portugal, Spain and Greece to provide travellers with unique gourmet experiences.

“The visits to private homes and estates, both overseas and in Australia, and tapping in to local and regional seasonal food with guided trips through produce markets, cooking demonstrations and classes, there’s nothing like it,” O’Meara says.

Sharon Summerhayes is a cruise specialist and owner of Deluxe Travel and Cruise. She is the highest seller of the famous Rock the Boat music cruises who bring headline acts like Suzi Quatro, Jimmy Barnes and Daryl Braithwaite to the high seas. She says the cruises will charge about 30 per cent more than a standard cruise but for that you get rock shows each night and the chance to bump into the artists at the bar or poolside.

“They are so much fun, especially for single people,” Summerhayes says. “There is such camaraderie among the guests because they all have something in common. You can go to the bar by yourself and you will be guaranteed to find someone with the same music taste as you. 

“And by the time you leave the ship, you’ll have 20 new friends.”

Briony Thomas, the cruise specialist who helps Scipione organise her crafting cruises, says she has been so inspired by the interest in themed cruises she wants to launch a true crime cruise.

“You need the niche, or theme, to be really specific or else it won’t work,” says Thomas, director of Tailored Travel & Cruise. 

“I thought about doing a friendship cruise, but it’s too broad. Rather, a true crime cruise will bring like-minded people together and friendship will be the result anyway.”      

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The Tipping Backlash Has Begun

US: People are cutting back on tipping, frustrated by ubiquitous requests for gratuities.

As of November, service-sector workers in non restaurant leisure and hospitality jobs made $1.28 an hour in tips, on average, down 7% from the $1.38 an hour they made a year prior. The data is according to an analysis of 300,000 small and medium-size businesses by payroll provider Gusto.

The tipping slowdown is a gloomy development for all types of workers who rely on holiday tips as a chunk of their annual income. It reflects a broad frustration with the proliferation of tip requests at dry cleaners and bridal boutiques and even self-checkout machines that have sprung up since the pandemic.

Mary Medley, a Denver retiree who described herself to The Wall Street Journal in July as a unilaterally prolific tipper, is one of those who has become more discerning in recent months.

“It feels not as good to tip now that it’s popping up everywhere,” says Medley, 70 years old. “What started out to be a way to acknowledge excellent personal service feels like it’s become a way to help supplement worker compensation.”

There is a cost to the tipping slowdown, however, say economists and business owners. When people tip less, workers suffer, says Jonathan Morduch, a professor of public policy and economics at New York University.

“We’re in a situation where workers still want and expect and need tips to some degree,” Morduch says.

Up next

Some businesses are raising worker pay in part as a response to lower gratuities.

Dan Moreno, founder of Miami-based Flamingo Appliance Service, says he has noticed a slowdown in customers leaving tips for their repair people since the Journal spoke with him in July. The average base wages for his techs have gone up about 10% since then, though he hasn’t eliminated the prompt from point-of-sale machines.

“I don’t know if that’s because customers are just over it. I’ll tell you, personally, I’m a little bit over it,” Moreno says of how his own tipping habits have changed over the past year.

Meanwhile, governments have started to get involved.

In October, Chicago became the second-largest U.S. city to vote to require tipped workers to make the full minimum wage. The full federal minimum wage is $7.25 an hour, while the federal tipped minimum wage many bar and restaurant workers earn is $2.13 an hour. Legislation to get rid of tipped minimums is moving in eight states and measures are on the ballot in an additional four, according to worker-advocacy organisation One Fair Wage.

“There’s an ongoing rejection of the whole system by both workers and consumers who have been increasingly pissed about it,” says Saru Jayaraman, director of the Food Labor Research Center at the University of California, Berkeley and president of One Fair Wage, an advocate for higher wages for restaurant workers.

Restaurant workers earned an average of $3.83 an hour in tips and overtime in November, according to technology company Square, up 8% from the previous year. Between November 2020 and November 2022, that amount rose 50% from $2.36 to $3.54 an hour.

While governments, workers and owners wrestle with what to do about tipping, consumers have embraced the humour in tipping’s massive expansion into so many parts of life. Jokes mocking tipping’s proliferation have spread on social-media sites. In one image, a police officer holds out a tablet with different tip options after giving someone a speeding ticket. In another, someone pretends to ask for a tip for letting a stranger pet her dog.

Garrett Bemiller, a 26-year-old who works in communications, started to question his standard practice of always leaving 20% after being asked for a tip at a self-serve checkout station at an OTG gift shop in New Jersey’s Newark Liberty International Airport in April.

“We all know how absurd it is that it almost relieves some of that guilt in saying no,” he says.

He now always hits “No Tip” when he’s buying a black coffee—even when friends are watching.

Holiday tips

One area people might not cut back is tipping for the holidays.

Of the 2,413 U.S. adults surveyed by financial services company Bankrate, 15% said they planned to leave more-generous tips for workers including housekeepers, child-care workers, landscapers and mail carriers this year. About 13% said they planned to leave less.

Median amounts are so far up from last year across the six types of service providers Bankrate asked about.

“It seems that people view holiday tipping differently, perhaps because of the holiday spirit and also because of the regular interaction with many of these service providers,” Bankrate analyst Ted Rossman says.

Bemiller plans to give the super in his New York City building $100—not because he feels like he has to, but because he wants to.

“She helps me so much throughout the year and that tip seems genuinely justified,” he says.

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Good News: You Don’t Have to Sleep With Your Spouse

Ever tried to get a good night’s sleep with your partner snoring or tossing around restlessly next to you?

You’re gonna like this: Therapists and sleep scientists say it’s OK for couples to sleep apart as a growing body of research shows the striking importance of sleep. It’s a reversal from the long-held marriage tenet that once partners move to separate beds, the romance is dead.

Sleep is “essential for a healthy body, mind and relationship,” says Wendy Troxel, clinical psychologist, sleep scientist at Rand and author of a book on couples sleeping. “It’s important to prioritise it.”

Therapists have a caveat. If you and your partner do move to separate beds, you need to find a way to continue to be intimate, both emotionally and physically. Co-sleeping provides important benefits for a couple, such as emotional closeness and opportunities for cuddling, sex and conversation. Partners who sleep well together should stick with it.

In the beginning of their marriage, Mark and Paula White shared the same bed. But neither of them was getting a good night’s rest. Paula is a night owl who keeps the TV on, even when she’s asleep. Mark keeps a fan running at the foot of the bed and happily wakes up at 3 a.m.

Once, he flipped over in his sleep and accidentally punched her in the face. Another time, his snoring and “garlicky breath” made her snap and scream: “I can’t breathe! You’re taking my air!”

That was 32 years ago. Since then, the Whites have mostly slept in separate rooms, even choosing separate beds on vacation.

“We’re better people and we have a better relationship because we get better sleep,” says Paula, 60, a business owner in New Albany, Ohio.

When we sleep well, we stave off a host of physical- and mental-health problems, such as diabetes, hypertension and depression. Our relationships improve, because we’re less irritable, less frustrated, and better at communication and problem-solving. When we’re cranky, we tend to take it out on the person closest to us.

Better sleep can boost our sex lives, too. One of the main reasons couples stop having sex is because they’re too damn exhausted.

“This is why couples say one of their most satisfying sexual experiences is when they go on vacation,” says Sari Cooper, a certified sex and couples therapist in New York. “They get time to rest.”

Here’s how psychologists suggest you can successfully sleep apart.

Have a conversation

Don’t stomp off out of bed. It could make your partner feel rejected. Both people need to be OK with the arrangement for it to work.

Choose a time when you are both well-rested. Don’t talk about this in the bedroom.

Ask your partner: Are you sleeping OK? Explain that you want both of you to sleep well. Be reassuring that this is about sleep and not attraction.

Don’t blame. Use “I” instead of “you.” Try: “I get cold at night,” not “you are a blanket hog.”

Keep it targeted. This isn’t the time to talk about everything wrong in your relationship. “Stay focused on how you can be a better partner if you are better slept,” Rand’s Troxel says.

Try it part-time

This doesn’t have to be a full-time arrangement. You can sleep apart during the workweek, or take a break when one person is in a bout of insomnia.

This temporary approach is especially helpful when one partner wants to sleep apart and one doesn’t, Troxel says.

Plan regular intimacy dates

When you sleep in separate beds, there are fewer opportunities for spontaneous sex or even just snuggling. “You need to be intentional about creating the seduction, flirtation and planning to make it happen,” says Cooper, the sex therapist.

Pick a day when you know you will be most relaxed and plan to go to bed an hour earlier. (You’ll want energy!) Build the anticipation beforehand. Send a flirty text or leave a note on your partner’s bed.

And remember: Not all intimacy has to be sexual.

Get in bed together for a little bit each night

Cuddle. Watch a movie. Engage in pillow talk. Then say good night and head off to your separate beds.

“You can shoot for the best of both worlds: time awake in bed together and good sleep,” says Zlatan Krizan, a certified sleep scientist and professor of psychology at Iowa State University.

The Whites, who have been married 33 years, sometimes watch a movie in bed and snuggle. When they want to be intimate, they plan a date night or simply visit each other’s bedroom. Sometimes Paula tells her husband, “I’ll leave the red light on for you tonight.” Both spouses say sex is more pleasurable now because they aren’t so tired and tense.

They have one bedtime ritual they never skip, though. They go upstairs together, kneel on each side of Paula’s bed, and say their prayers. Then they kiss good night and head off to their own rooms.

“Now, when we’re together, we know it’s going to be quality time,” Mark, 61, says.

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How Office Design Has to Change in a Postpandemic Workplace

Over the past four years, a contentious conversation has played out in the world of design: What is the future of work, and what should it actually look like?

The conversation, once a place of common ground, takes as self-evident our desire not to return to where we were before the pandemic, but to move forward in showcasing a new visual expression of what work can be.

In many ways, that means a wholesale rethinking of how an office looks. As functions change, so must form. But as anybody who has cursed or praised their workspace knows all too well, design has the potential to be an optimistic act, where invention and ideas have the power to change our lives for the better.

Rarely have we needed that optimism more than we do now in our post pandemic workplace. In our quest, designers have embraced three universal truths about the reinvented workplace: the widespread adoption of hybrid work models; the importance of well-being in the workplace; and the increased desire to make the workplace meaningful. These three priorities have prompted designers to undertake a fresh journey in conceptualising and designing workspaces crafted for a new era.

The Cubes, shown at the Menlo Park, Calif., offices of Facebook parent Meta Platforms, are that company’s way to solve the noisy office. PHOTO: CAROLYN FONG FOR THE WALL STREET JOURNAL
The new hybrid workplace

There was a time when the design of an office was simple and straightforward. Everyone had a desk, meetings occurred in conference rooms, and social moments were allocated to corner water coolers, small footprint kitchens and a copy room.

Over the past few decades, the design of the workplace has seen a tremendous evolution beyond the simple and toward the diverse, with workplaces introducing such elements as game rooms, meditation spaces, all-hands assembly halls, screening rooms, full catering kitchens, coffee bars, podcast studios, gyms—just to name a few!

But in many ways, those changes are minor compared with what must happen now. Workers’ expectations changed during the pandemic. They got used to many of the pleasures of a home environment—and they want some of those pleasures transferred to the workplace; the separation between what work looks like and what home looks like can’t be as stark as it once was. The generational differences also became more apparent, as new workers began their careers working from home, making their expectations of the workplace often different from previous generations’.

In addition, home has become a place for “solitary” work time, which means the office becomes a place that has to be more conducive to collaboration and less a place to get away by oneself.

What exactly might that look like? In some cases, desks are being replaced with lounge- configured soft seating and warmer temperature lighting; conference rooms are being removed from their enclosures and being brought out into the open; and private offices are being made bookable, so that more people can access them when they need focus days in the office.

It may appear that these simple changes wouldn’t have a large visual impact on the built environment, but they do. Bringing conferencing into the open, offices are visually shifting to a more active and dynamic space where collaboration and activity are front and centre. And where clients lean toward more social and soft seating, the overall vibe quickly moves from a familiar office to more of a buzzy cafe where coming together occurs across a coffee table in lieu of a conference table. It can make all the difference.

Amazon’s new office space in Midtown Manhattan is a former Lord & Taylor flagship store. The conversion was designed by architecture firm WRNS Studio. PHOTO: THALIA JUAREZ FOR THE WALL STREET JOURNAL
The new Amazon office space focuses on social spaces that promote collaboration and interaction, with ample access to natural light. PHOTO: THALIA JUAREZ FOR THE WALL STREET JOURNAL
Workplace wellness

During the post pandemic recovery period, our clients expressed heightened concern for the safety of their staff. People want to feel protected and healthy when returning to work. That means investing in the mechanical systems and ventilation strategies that clean and move the air within a space, and in materials that remove or reduce airborne toxins and harmful materials from daily touch.

The most visible tie to wellness comes from a renewed desire to connect to nature. That can be a view outdoors, outdoor terraces or designing opportunities to bring nature indoors with lush and verdant interior landscapes. Whether it be the visual connection to, or the direct ability to touch and engage with landscape, the impact on the visual environment is tremendous.

To complement this natural touch, we are also seeing an investment in the use of natural daylighting in spaces through more-intelligent lighting controls and a reduction of artificial lighting in favour of natural daylighting.

It’s more than work

Work and life were distinct in the past, but in the past decade, offices have expanded to include more aspects of daily life. The post pandemic office accelerated that expansion. Today, office design aims to blur these boundaries by inviting everyday experiences into the workspace. This is perhaps the most important, and it’s a notion we call “life-ing.”

We are seeing a concerted shift toward making the work environment far more participatory with the outside world due to two critical factors—an abundance of space and a need for energy in the workplace. For companies moving toward hybrid, the overall reduction in staff population comes with it a feeling of emptiness in the office. If it feels empty, productivity and absenteeism increase.

In an effort to fill that void, we challenge our clients: Bring the community and the public into, at minimum, 10% of their footprint through programming that defines new purpose for the workplace. Where once an organisation’s workspace was purely focused on its own work, these spaces now invite events, community and ways of coming together into their workplaces without a desk in sight.

For our client Spotify’s Content Campus in the Los Angeles Arts District, we designed a space that is a collection of music and podcast facilities that connects artists with what they need to launch their careers—including listening rooms, recording studios and a screening room. We also included a 900-person music venue for live performances that is easily configured to open up to the surrounding neighbourhood.

A recording studio control booth in Spotify’s Los Angeles office, which was designed by RIOS. PHOTO: EMANUEL HAHN FOR THE WALL STREET JOURNAL

The most interesting part throughout these production spaces are the workplaces for
Spotify’s employees. They are scattered between these active spaces and adorned with traditional, but bookable, desks. Open and flexible collaboration areas are woven through the space, made up of lounge seating, high-top tables and comfortable nooks, various sized conference rooms, game rooms and coffee lounges.

Creativity is further fueled by vibrant, full-height artist murals, and soft music plays across the full space. The mixing of the traditional and familiar work environments with the artists’ spaces creates a visual atmosphere that celebrates the overlap of functions to make the overall experience much more than a traditional office space.

Community programming

At our own headquarters in Los Angeles, we have challenged ourselves to use our abundance of newfound space with opportunities to change the visual fabric of our office through new community-driven programming.

For example, our space once defined as our “all hands” now flexes as community space for our neighbours by serving as a polling place, community events, and as a shared co-working site for clients, collaborators and neighbourhood researchers. What makes this adjustment successful is the anticipation of the unexpected: Seeing the community step inside our doors and develop new connections that you wouldn’t ordinarily find in the workplace disrupts the day-to-day with renewed and visible energy.

Surprise, disruption and renewed energy are the hallmarks of what the next five years could bring, as designers take advantage of a remarkable opportunity to shift away from how work has been defined over the past decades.

As workplace design evolves, we know that the experience of work is more meaningful when we broaden the circle of influence and are connected to who we are—both at work and in life. We all see the reward from opening the doors and embracing the outside world inside the office. In the decades to come, I hope to look back on this moment as the moment the workplace, once again, became irresistible.

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What the Stock Market Taught Us This Year: Don’t Fall for These Investing Traps

The uncertainty around near-term interest rates has dominated the story of the stock market in 2023. Perhaps not since the 1970s—when runaway inflation and sky-high interest rates were the crisis du jour—has monetary policy affected investment outcomes in such a pronounced way.

Yet look more closely, and it would seem that Wall Street has been more influenced by perception than reality: Company and individual balance sheets remain mostly healthy, businesses are battle tested and unemployment remains low. Similarly, the malaise surrounding the economic environment belies what we are seeing. Cruise ships are sold out, restaurants are packed, holiday shopping was off to a strong start and 82% of S&P 500 companies reported a positive earnings surprise in the third quarter.

Still, a nervous atmosphere has undercut stock performance. Scores of share prices have been lacklustre as company fundamentals have been eclipsed by macroeconomic conjecture. We have lost the trees in the forest.

But as someone once declared, “It is a market of stocks, not a stock market.” This is a wise reminder that no matter the conditions, there are investment opportunities to be had. In fact, the more economic obfuscation, the more sectors are hammered, the more stocks are orphaned, the better the odds of long-term investment success.

After a year of hand-wringing through monetary policy guesswork and market fluctuations, many wonder how best to maneuvre in the new year. Here’s our advice: Avoiding some of the biggest market traps can be a winning strategy.

Don’t Fed-watch

“Don’t fight the Fed” is a well-known market mantra. The idea is to buy stocks when the Fed is lowering interest rates and sell when the Fed is raising them.

This psychology has dominated the stock market all year, creating a futile guessing game. Are they still raising rates? For how much longer? Will rates fall soon? Will it be a hard landing or a soft landing? But this Fed obsession, reacting to every pronouncement, simply sucks up time. It has all been noise. Despite the fear and uncertainty, dire predictions didn’t come true.

What that means is that sectors that sold off because of heightened fears—including banks, some industrial names and anything real estate related—could be well-positioned for investors willing to take a longer-term view.

After surviving a midyear crisis, for instance, the banking sector is already beginning to show signs of recovery as market anxiety subsides. Similarly, oversold housing-related stocks should rebound once people adjust to the new rate environment, and the U.S. housing shortage, exacerbated by the pandemic, drives new construction.

It doesn’t mean every sector that got hit by investor angst is ripe for buying. Commercial real estate is an obvious example. But it does mean that if you invested by watching the Fed like a tennis match, and then reacting to every volley, you will get it wrong.

Don’t buy the hype

The selloff in many areas has inflicted pain that has been concealed by the cap-weighted dominance of a few celebrity stocks in the S&P 500 index. A handful of tech and tech-related stocks, weight-loss drugs and artificial-intelligence providers offer the sum total of stock-market outperformance this year. Beyond these headliners, there is less and less attention on individual names.

Those tech behemoths, dubbed the “Magnificent Seven,” account for more than 30% of the index and 87% of its return through October. Let us say that again: Just seven stocks represent one-third of the S&P 500 index. Some now consider Google parent Alphabet, Amazon.com, Apple, Facebook parent Meta Platforms, Microsoft, Nvidia and Tesla to be defensive businesses that can grow through any economic cycle.

We’ve seen this before, and the lesson is always the same: Winner-takes-all can dominate over shorter time frames but is rarely a winning bet in the long run. At some point, this narrow market supremacy will end, to the benefit of many overlooked issues.

In other words, these hyped celebrity stocks have more downside than upside from here. There are more-compelling opportunities to be had.

For example, the small-fry stocks found in the Russell 2000 index are among the most neglected shares waiting to get their due. The index has been languishing in a bear market since 2021—partially driven by their perceived economic sensitivity and partially driven by Wall Street indifference.

The result is that the total market cap of the Magnificent Seven is now three times the size of every single stock in the Russell 2000 index combined—making just seven stocks the equivalent of 6,000 small-cap names. On average, 47 analysts follow the typical Magnificent Seven stock versus just five for a small-cap name. Nine percent of smaller companies have no followers at all.

Here’s the silver lining: Less coverage means more market inefficiency means more opportunities. Stock prices trade on fundamentals. And when those solid fundamentals shine through, share prices rise. Additionally, when tepid U.S. growth inevitably picks up, small-caps are poised to strongly outperform as they have done every other time in the past.

The upshot is that you can go ahead and buy the hype if you want to, blinded by the celebrity names. But that’s not where the upside opportunities are likely to be.

Don’t anchor to the here and now

This time is different. Except it hardly ever is.

That’s a lesson investors rarely learn. Case in point: the extremely low interest rates that have persisted for much of the past two decades. Over the past 50 years, U.S. interest rates have averaged 5.98%. Today’s 5.5% rate seems high compared with the 0.25% paid during the recession of 2008, but no comparison to 1980 when rates topped out at 20%.

Similarly, at the start of the new millennium, a 30-year fixed-rate mortgage was 8.08%—basically in line with 2023 levels, but significantly higher than the bargain 2.96% rate that could be had just two years ago.

Higher interest rates now feel like a shock to our systems because we got anchored to some extreme lows. When considered in the full context of a longer history, though, they are in line.

Now people are anchored to the S&P 500 beating everything else. But just as we have seen with interest rates in 2023, the trend will revert to the mean, even if it takes a while.

Don’t fear volatility

Although it may feel uncomfortable, it is often easier to invest at the extremes—when valuations are crushed, buy signals are blaring and the bad news is priced in. Such conditions have the greatest profit potential, but the inherent volatility makes investors nervous.

This angst is playing out in the price action surrounding earnings announcements. FactSet reports that stocks are getting hit harder for negative earnings surprises. In turn, this drives up their volatility. In the third quarter, an earnings miss cost the typical company 5.2% in market value—more than twice the 2.3% average over the past five years.

Instead of running for the exits, we view volatility as our friend and actively seek to take advantage of the price movements. Everyone says they want to buy low, but when the opportunity arises, many wait for the dust to settle and miss the moneymaking moment.

Don’t bet against America

The market has turned more optimistic as the year winds down and we see plenty of value-beneath-the-surface stocks.

But even if investors have found some trees, they still have some concerns about the forest. Two terrible wars, congressional dysfunction, a border emergency and mounting unrest lurk over our economy as well as those around the globe.

In these unnerving moments, we are comforted by the faith in the resiliency of our capitalist democracy from capitalism’s own Yoda, Warren Buffett. He wrote in the 2012 Berkshire Hathaway shareholder letter, “Of course, the immediate future is unknown; America has faced the unknown since 1776…. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favour.”

Indeed, our markets have overcome a Great Depression, multiple recessions, global and regional conflicts, a modern-day pandemic and all other kinds of unforeseeable blows. Through it all, America has endured, and we have every reason to believe she will continue to do so.

Mellody Hobson is co-CEO and president, and John W. Rogers Jr. is founder, co-CEO and chief investment officer, of Ariel Investments.

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The Biggest Winners and Losers From the Work-From-Home Revolution

The fivefold increase in working from home ushered in by the pandemic is perhaps the largest change to hit U.S. labor markets since World War II. It has touched just about every manager in America, reshaped industries including real estate and business travel, and led to an exodus from city centres to the suburbs.

And working from home is here to stay—at least in a hybrid model where a commute to the office is limited to just a few days each week. Tracking detailed survey data, we see working-from-home levels were rapidly dropping from 2020 to 2022. But by early 2023 they stabilised and have remained flat ever since. Hybrid working has become the new normal for millions of professionals and managers across America.

So, it’s time to tally up the impact. Looking ahead to 2024 and beyond, who are the biggest winners and losers from the work-from-home revolution?

Start with the losers

The biggest losers are likely city-centre office and retail property owners. The massive shift to home working has created a doughnut effect in major cities around the world. Millions of employees are no longer commuting every day, leaving many offices half-filled and retail stores struggling for customers. The owners of this real estate—often pension funds, family firms and endowments—have collectively lost hundreds of billions of dollars of investments.

In the long run, the sector will slowly recover as supply contracts. New construction has slowed, some empty buildings are slowly being converted to residential accommodation, and some lower-quality offices will be torn down. But recovery will take years to complete. Winter has come for the office sector. One forecast that a major leasing company shared with me was it would take until 2033 for occupancy to recover to pre pandemic levels in San Francisco—perhaps the hardest hit city.

Another loser has been mass-transit rail systems. Ridership has dropped by 30% nationally as commuters shift from a five-day commuting schedule to two or three days a week. These commuter rail systems have high fixed costs due to inflexible track and train costs, alongside rigid union-controlled labor expenses.

Large drops in ridership revenue translate into larger budget deficits. To date these deficits have been bailed out by pandemic-era federal and state subsidies. But the fear is unless public transit costs can be right-sized, once these subsidies run out they will see devastating service cuts or outright closure.

Growing up in Britain, I heard about the infamous Beeching cuts of the 1960s, which cut station numbers by 55% and devastated rail travel. I fear something similar happening to U.S. transit for 2024 and beyond unless operators and unions can align cost with revenues.

The third big loser has been big cities. American cities occupy surprisingly small spaces. For example, San Francisco is less than 50 square miles, comprising just the tip of a peninsula. So, when city-centre residents fled for the suburbs, they took their tax dollars with them.

As we know from the experience of New York in the 1970s, cities can adjust by cutting expenditures. But this will be painful and risks a hollowing out of city centers if key services like police and education are cut. Indeed, bond markets have already cut the prices of many city municipal bonds, providing an ominous signal of the budgetary struggles ahead.

But there are winners

It isn’t all gloomy, particularly for the biggest work-from-home winners: the workers. In national surveys, employees report they value the ability to work from home two or three days a week as much as an 8% pay increase. Multiplied across the roughly 70 million Americans who are currently working from home, this is a perk valued at roughly $500 billion a year. This vast dividend has benefited employees through less commuting and lower stress, alongside more personal, leisure and family time.

One recent study highlighted how the typical U.S. home-working employee spends 40 minutes more a week on child care from the time saved from avoiding the daily commute. This will have longer-run effects ranging from higher labor-force participation rates—possibly pushing up growth rates—to potentially even a fertility dividend as parenting becomes somewhat easier.

Another winner is the environment, thanks to reduced travel and energy needs. A recent study found working from home two days a week reduces pollution by about 15%. This comes from lower commuting emissions alongside additional savings from lower office energy bills. A double dividend is the reduced congestion on emptier roads, with traffic speed data from Inryx suggesting the morning commute is 10% faster.

And perhaps the biggest work-from-home winner are companies. Research finds that hybrid working three days a week in the office has a net neutral on employee productivity, while allowing firms to save on recruitment and retention costs. Firms can save money by trimming office expenses while using remote working to lower labour costs by hiring employees outside major cities.

U.S. firms made about $1 trillion higher profits in 2022 than in 2019, an increase of almost 50%. While many factors likely contributed to this, including the strong economic growth, it is notable this happened alongside the fivefold surge in working from home. Indeed, the mass adoption of hybrid working by millions of firms across the U.S. and Europe is perhaps the strongest evidence of its positive impact on profitability.

Looking further out, the biggest change will almost surely come from the new technologies we use to work remotely. When I first started working in the 1990s, working remotely meant conference calls and emailing files. Now we telecommute and share files on cloud networks.

The future likely heralds similarly large changes. In discussions with startups and tech firms, I hear about systems for holographic meetings, wall-size screens and global connectivity. This technology means working from home hasn’t just stabilised but is now moving into its longer-run phase of expansion. Ten years from now we will look back at 2023 as the beginning of the long bull market in hybrid working.

Nicholas Bloom is a professor of economics at Stanford University.

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Marie Antoinette Chair Sells for a Record US$2.8 Million

A royal chair created for the boudoir of Marie Antoinette achieved €2.6 million (US$2.8 million) Thursday evening at Sotheby’s in Paris, setting a record for a single 18th-century chair.

The sale was the first in a series of four physical and online auctions being held this month featuring the collection of the late Hubert Guerrand-Hermès, a fifth-generation descendant of Thierry Hermès, founder of the French luxury house.

“Tonight’s sale was a celebration of prestigious provenance, as the undeniable response to Hubert Guerrand-Hermès’ eye for collecting showcased the continued demand for the most elevated world of refinement,” Mario Tavella, president of Sotheby’s France and chairman of Sotheby’s Europe, said in a news release.

The Louis XVI gilt walnut chair, made circa 1784-85, ignited a “flurry of bidding,” according to Tavella. It was one of 60 pieces sold on Thursday for a total of nearly €23 million, with fees, triple a pre-sale high estimate of nearly €9 million (which did not include fees). More than 80% of lots sold for more than their high estimates.

Guerrand-Hermès was a passionate, wide-ranging collector. The 1,000-plus items being auctioned across the four sales span centuries and include royal furniture and rare books in addition to works by contemporary artists such as Antony Gormley and Anish Kapoor.

Collectors appeared drawn to Guerrand-Hermès’ diverse tastes, fiercely bidding as much for the contemporary art as the 18th-century furniture, according to Tavella.

While the record-setting, carved, and regilded Louis XVI chair—which was thought to have been created for Queen Marie-Antoinette’s intimate personal rooms at Versailles—stole the headlines, the top lot of the evening was a monochrome canvas by Pierre Soulages, Painting 130 x 162 cm, February 28, 1970, which sold for €3.1 million —the highest price for a 1970s work by the French artist. Guerrand-Hermès had bought the painting at a Sotheby’s Paris auction nearly 14 years ago for €720,750

Guerrand-Hermès, who died in 2016 at the age of 75, had been vice chairman of Emile Hermès SARL, which represents the family shareholders, and general manager of the group’s real estate companies. He also served as a foreign trade adviser to the French government and was made an officer of France’s Legion of Honor in 1999.

The Guerrand-Hermès auctions will continue this week with a focus on the Duchesse de Berry—described by Sotheby’s as “one of the most famous and fascinating aristocratic figures of the 19th century.”

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The stairway to heaven for wine lovers

Tony Hayek first became interested in wine as a student at Newcastle University. Living adjacent to one of Australia’s best known wine growing regions, the Hunter Valley, for a while he dated a woman who worked in the industry and taught him what she knew.

He has been hooked ever since.

“Over the next 25 years, I collected wine in drinkable quantities,” he says. “As I became wealthier, I started buying wine in batches of six — I’d drink one or two and put the others away — but I didn’t really have anywhere to store them so it capped out at 300 or 400 bottles.”

In his former home, he turned a workshop under the house into a wine cellar of sorts. It wasn’t temperature controlled but it allowed him to enjoy his wine when and where he wanted. But when he and his wife Toni had the chance to build their dream home in Sydney’s north west in 2017, plans for a cellar were a bit basic.

“The builder engaged a cabinetmaker to put together a plan for a wine cellar but it was a bit boring — mostly just shelving,” Hayek says.

Instead, the couple hired kitchen and bathroom design specialists, Studio Minosa.

“They did this magnificent design,” Hayek says. “I was still recovering from the cost of building when the Minosa quote came in at $150,000 so I initially put it on the backburner. Finally, I bit the bullet and we got it done in 2020.”

As a result, Hayek says much of his time at home during the pandemic was spent below ground.

Tony Hayek’s cellar design by Studio Minosa is more than just a place to store his wine collection.

“It’s my ‘pinch myself’ room,” he says. “Every time I walk in there, I can’t believe it’s in my house. I spent a lot of my COVID time researching wine.  That was how I stocked my cellar and it went from 400 to 800 bottles. I want to know what’s in my cellar and have a relationship with it.”

While Tania MacPhee, managing director of MacPhee’s wine cellaring specialists, says wine cellars were becoming more popular prior to the pandemic, demand grew even further during lockdown when people used their untapped travel funds to create wine spaces they could enjoy.

“We started as an off-site wine storage business 22 years ago. Since then, the market has absolutely shifted,” she says. “Where wine cellars back then were predominately functional spaces in the basement or garage, today, wine enthusiasts are wanting to proudly display their wine collections, making them a feature of their home.”

She says the demand for purpose-built cellars has been driven by an educated audience who travel regularly and appreciate the value of a good drop. For those who have invested heavily, it’s important to keep wines in optimum conditions.

The challenge is maintaining an even temperature range to avoid wine “spoiling”, which alters its taste, smell and the consumer’s overall enjoyment. In wine making regions in Europe, the ideal temperature range around 12 to 14 degrees may be achievable without refrigeration due to their cellars being two metres below the earth, but MacPhee says it’s virtually impossible to guarantee in Australia where our cellar spaces are often beside a garage and under a concrete slab, acting as a hot box in summer — and a freezer in winter. “It’s the fluctuation in temperature that is detrimental to wine.”

“While a basement might seem cool at 26 degrees compared with hot Summer temperatures outside, it’s still not cool enough for wine,” she says.

For those who don’t have the space for a full cellar, or would rather have their wines on display, MacPhee says ‘wine walls’ are a popular choice.

“People are going to beautiful restaurants where they have these wine walls where guests can see individual bottles of wine,” she says. “And they want to recreate that in their homes.”

Wine walls are typically two or three metres wide and at least 600mm deep, she says.

Wine walls can be installed in living spaces for easy access and display. Image: MacPhee’s wine cellar specialists

“Depending on the location of the wine cellar relative to the rest of the home, $20,000 is the starting point for a very basic climate controlled space with insulation,” she says. “A wine wall with bespoke cabinetry can cost between $80,000 and $100,000 or more.”

“All wine needs to be cellared at the same temperature but when it comes to drinking, it is only then that individual wine varietals should be served at different temperatures”, MacPhee says.  Some wine fridges provide two temperatures, in two separate zones. There’s even an under bench wine cabinet which is designed for the kitchen.

“It has multiple temperatures all in one zone, where you can place champagne at the bottom at six degrees, then Aromatic whites on the shelf above at 8 degrees, then it gradually goes up to 18 degrees for your heavy bodied reds.” she says. “We call it the ‘instant gratification wine cabinet’.”

General manager at Gaggenau, Robert Warner says wine lovers are investing in larger quantities of high quality wines so it simply makes sense that they are looking for accessible storage options at home.

“If you are buying a $100 bottle of wine and then you decide to buy the whole case, that’s $1200,” he says. “Do you want to risk it going off in a year or two because you haven’t stored it properly?”

He admits there is more to it than having your favourite drop within easy reach and ready to drink.

“There’s a bit of theatre to it,” he says. “It’s a lifestyle and interaction with like-minded people. Luxury living is about being personalised while still feeling connected with other people.”

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The benefits – and costs – of working from home

The number of Australians working from home is falling, as employers encourage staff back to the office. New data from the Australian Bureau of Statistics shows 37 percent of employed people regularly work from home, a 3 percent fall since August 2021. In 2021, NSW and Victoria were subject to a series of lockdowns to contain the spread of COVID-19. Victorians went through six lockdowns during 2020 and 2021 with Sydneysiders restricted to a 5km radius of home from August to October 2021. All but essential workers were directed to work from home. 

As restrictions have lifted, however, many workers have been interested in retaining the option to work from home. The trend has resulted in office vacancy rates of 16.2 percent in Melbourne, 14.4 percent in Sydney, 12.6 percent in Brisbane and 18.5 percent in Perth, according to data service Statista.

In its 2023 Year in review, McCrindle research says cost of living pressures have influenced the desire to work from home, which it estimates to save the average Australian worker $6,359, or 9 percent of after tax savings.

“Three years on after the COVID-19 pandemic, hybrid work formats have become embedded into work culture,” the report noted. 

However, not all aspects of working from home were considered positives, the research found.

“While positioned on flexibility, hybrid workers are feeling the impact of remote work compared to the workplace,” it said. “More than half of Australian workers (59%) suspect that those working in the workplace get better opportunities than those working from home. 

“Seven in ten (70%) workers believe that working in the workplace leads to a greater sense of recognition and appreciation of their efforts to commute to the workplace.”