[Week 2 of 2026] Machines, Makeup, and Money

Welcome back to Price and Prejudice with a few musings from Week 2 of 2026.

The Coordination Problem on Four Wheels

This article argues that we have reached the "Go Full San Francisco" moment for autonomous vehicles. The core shift is the move from cautious, geofenced experimentation to aggressive highway integration. Waymo is now operating across the entire SF Peninsula and into San Jose, but this expansion has hit a literal speed bump: the law. AVs are programmed to obey technical speed limits, whereas human drivers on freeways almost universally treat those limits as a floor rather than a ceiling. This creates a friction point where the perfect robotic behavior becomes a hazard to the flow of traffic, forcing a choice between legal purity and operational safety.

The interesting aspect of this story is that the primary hurdle for self-driving cars is no longer the machine's inability to see the world, but its inability to lie about it. Humans navigate the world through a series of socially accepted law-breakings—driving 74 mph in a 65 mph zone is the lubricant of the American highway. By forcing robots to be the only honest actors in a dishonest system, we are creating a new kind of uncanny valley for traffic. The story isn't about AI failing to learn our roads; it's about the legal system failing to codify our actual behavior. We are essentially asking robots to participate in a game where everyone else is cheating, then wondering why the robots look like the ones making the mistakes.

For investors, the long-term play isn't just about which car drives better; it's about who captures the new productivity dividend. If availability of autonomous cars scales from 15% to 30% of the urban population by the end of 2026, as some analysts suggest, we are looking at billions of hours of human attention being re-auctioned to the highest bidder. This is a structural shift in the attention economy; when the steering wheel becomes optional, the car transforms into a mobile office or a theater. The real winners may not be the companies building the sensors, but the ones owning the interface that fills the vacuum of the formerly dead time spent commuting.

The Lipstick Index in the Age of Robots

This WSJ article discusses the strategy outlined by Sephora's leadership that prioritizes high-touch attractive retail to maintain its lead in the $450 billion beauty industry. Despite a broader luxury downturn, the company is doubling down on omni-channel defense: building automated warehouses, launching its own influencer affiliate platforms to bypass third parties, and securing exclusivity deals that keep roughly half of its 300 upscale brands off competitors' shelves.

The irony of Sephora’s current success is that the more digitized and cut-throat the market becomes, the more the company leans into the physical, tactile experience of the old store model. It’s a transition from simple retail to lifestyle infrastructure, where the store is less a place to buy and more a "destination of happiness" that justifies a 40/60 revenue split with brand founders.

For investors, the Sephora narrative serves as a masterclass in moat-building through curated scarcity and high barrier-to-entry ecosystems. The hidden fees mentioned in the article—where brands must generate upwards of $9 million just to break even after paying for floor teams and animation ads—reveal that Sephora is no longer just a shop; it is a platform that rents out its prestige and foot traffic.

A New K in America

In his latest analysis, Paul Krugman highlights a structural shift in the American income distribution, identifying what he calls a "New K." The core argument is that the post-pandemic compression—a rare period where the bottom quintile of earners saw faster wage growth than the top—has decoupled. We are returning to a regime where productivity gains are being captured primarily by capital and high-skill services, while the "bottom arm" of the K-shaped recovery faces a plateau.

To make sense of this, one has to look at the "New K" as a return to the long-term trend of capital-biased technological change, temporarily interrupted by a massive fiscal shock. The irony of the last few years was that the low-end of the labor market had the most leverage because they were the most essential yet the least mobile. Now, we are seeing a reversion to the mean. The story isn't necessarily about policy failure, but about the sheer physics of the labor market: when the emergency liquidity dries up, the structural advantages of asset owners and high-human-capital workers reassert themselves with a vengeance.