Agglomeration: A Defense of the Remote Worker
It all begins with an idea.
“Heads of all departments and agencies in the executive branch of Government shall, as soon as practicable, take all necessary steps to terminate remote work arrangements and require employees to return to work in-person at their respective duty stations on a full-time basis, provided that the department and agency heads shall make exemptions they deem necessary.”
(The White House 2025)
The President’s Claim
Amid a wave of executive orders on January 20th, 2025, Donald J. Trump issued this executive memorandum that effectively ended federal remote work. Following years of mandated telecommuting, it seemed as though remote and hybrid work was here to stay, benefiting those limited in commuting ability because of distance, income, or disability. Trump has framed remote work as an aberration to be corrected: to him, remote work is equivalent to laziness, an economic ailment. The economic basis of the president's actions is ultimately flawed, utilizing agglomeration to promote density without taking into consideration how remote work provides a denser environment, measured in interaction frequency, information flow, and network reach. Agglomeration is traditionally defined, based on Alfred Marshall's theory, as the benefits firms and people gain from being located near one another in cities and industrial clusters. While traditional agglomeration emphasizes co-location, digital tools and new work practices have extended agglomeration benefits beyond geographic proximity. Agglomeration should not be limited to the city, but expanded into mass digital networks that allow individuals to work despite time differences and miles of distance. While the economic limitations of remote work should be acknowledged, Marshall’s classic triad of input sharing, labor pooling, and knowledge spillovers, alongside expert insights and recent research, demonstrates that remote and hybrid models harness many of the same forces in modern form. The demand for flexibility from underrepresented groups and evidence of “virtual agglomeration” effects justify making hybrid work a normalized part of the post-pandemic economy. President Trump’s executive order assumes productivity depends solely on benefits from physical proximity; modern forms of virtual agglomeration demonstrate that remote and hybrid work sustains, and often even amplifies, the same economic efficiencies Marshall identified in cities.
Marshall’s Three Forces of Agglomeration Economics
Alfred Marshall’s Principles of Economics (1890) explains how firms and agents benefit from geographic concentration. More specifically, the book analyzes how input sharing, labor market pooling, and knowledge spillovers make clustering economically efficient (Rosenthal and Strange 2020). Input sharing occurs when firms, nearby due to urban concentration, access specialized suppliers and services at a lower cost due to proximity. In digital environments, input sharing occurs not through physical suppliers but through shared digital infrastructure such as cloud platforms. Labor pooling creates a thicker job market in which employers can better match with skilled workers, while employees enjoy more opportunities due to their close proximity to them. Finally, knowledge spillovers capture the informal exchanges of ideas, innovations, and tacit know-how that emerge from face-to-face interactions within the workplace or out-of-office interactions between specialized actors. Can a digital workspace not achieve the same effects? Furthermore, does the heightened proximity and ease of digital communication enhance the productive efficiency of agglomeration?
Marshall’s agglomeration economics demonstrates why industrialization and urbanization strengthened and created a booming American economy. Empirical studies confirm that doubling a city’s employment can raise productivity by roughly 4–8% (UK Department for Transport 2022). This demonstrates the effectiveness of Marshall’s theory. However, distance attenuates these effects. Input sharing extends across regions, labor pooling across metro areas, but knowledge spillovers remain intensely local (Rosenthal and Strange 2020). The idea of closeness in a digital age is rapidly changing. With high-speed internet, cloud computing, and video conferencing, the definition of “closeness” is evolving to change the workforce landscape. These interactions have been coined as “virtually inhabitable cities” that act “as an alternative to future data-driven smart cities,” reenacting the agglomeration benefits of densely populated cities completely online (Bibri and Allam 2022). Earlier urban theorists anticipated this transformation. As early as the late 1990s, Aurigi and Graham (1997) warned that the rise of “virtual cities” could reshape physical urban space and deepen digital divisions between connected and disconnected communities.
Agglomeration in the Digital Era
COVID-19 shocked the economy with a proliferation of digital workplaces, a necessary survival mechanism with unprecedented long-term impacts on how business models exist today. If workers can seamlessly communicate and collaborate online, perhaps some benefits of clustering can occur without co-location, a form of virtual agglomeration. In their comprehensive study, “How Close Is Close?” (2020), Stuart Rosenthal and William Strange conclude that agglomeration effects indeed “attenuate with distance,” with nearby activity exerting the strongest impact on productivity. Proximity matters at every scale, from office buildings all the way to counties. This finding, often cited by policymakers like Trump to justify returning to office spaces, overlooks how the meaning of “proximity” has evolved in the digital age. Productivity gains from knowledge spillovers decay most sharply over very short distances, reinforcing the intuition that informal learning is easiest when people frequently bump into each other. Informal interactions are not likely to happen in formal digital environments with few opportunities for bumping into each other. Empirical research supports this limitation: Emanuel, Harrington, and Pallais (2023) find that in-person proximity still enhances on-the-job learning and short-term productivity, suggesting that hybrid models can better balance training needs with remote flexibility.
Everything is scheduled, online chats are extremely formal in most cases, and moments for human interaction, face-to-face, are all but eliminated. Yet Rosenthal and Strange also acknowledge the role of modern communication: “whilst information technology allows for effective communication with distant partners, these distant interactions are complementary to in-person interactions” (Rosenthal and Strange 2020). Pre-COVID, digital communication was a supplement, not a replacement for real-life workplaces. A video call was a great way to maintain connection with travelling colleagues or distant clients, but not a substitute.
In 2020, with the mandated distancing due to the COVID-19 pandemic, the culture around virtual meetings changed. The scale and use of digital communication rapidly scaled with new technologies and understandings of what a virtual city may look like. Professor Balázs Zélity, an economist at Wesleyan University, notes that the widespread experiment with remote work “effectively widened the potential of knowledge spillovers” by normalizing virtual interaction (Zélity 2025). The “New Normal” is all too memorable a phrase for anyone working during COVID. Tools like always-on messaging, video conferencing, and shared cloud drives mean that ideas can circulate within an industry beyond the confines of a single ZIP code. An aspiring software engineer in rural Connecticut, for instance, in Middletown, can now actively participate in brainstorming sessions with developers in Silicon Valley without ever setting foot in a Bay Area office, effectively tapping into the creative “air” Marshall identified as central to the benefits of agglomeration. Professor Zélity, however, acknowledges that there is a loss: “proximity still matters for the most tacit knowledge exchange,” specifically the casual conversations that occur within formal work locations (Zélity 2025). Despite this, digital connectivity has stretched the radius of collaboration, allowing input sharing and labor pooling to occur on national or global scales and enabling partial knowledge spillovers via virtual means.
Crucially, remote work has enabled a form of labor market pooling across geography, eliminating the barrier that was land and ocean. The evolving virtual city is a never-ending pool of talent for firms to hire from, with the ability to hire the best person, no longer restricted by location. A study of a large business-process outsourcing firm in Turkey found that when the company shifted to fully remote work, its workforce became the most educated it had ever been and experienced, on average, and more diverse, without an increase in wage costs overall (Emanuel and Harrington 2024, 540). Remote work enabled the firm to tap into underrepresented workforce groups like married and pregnant women and non-urban candidates. In essence, the labor pooling benefit of agglomeration (usually confined to big cities) was partly achieved via the internet, meaning input sharing in a remote context can be done through the means of shared digital infrastructure and services.
The Doughnut Effect and Inclusion
The rise of remote work has transformed not only firms but also urban geography. Economists Arjun Ramani and Nicholas Bloom (2024) call this the “doughnut effect,” describing how city centers were hollowed out as professionals relocated to suburban and exurban areas. Between 2020 and 2024, the 12 largest U.S. cities lost roughly 8% of their downtown residents, with most relocating to nearby suburbs (Bloom, Ramani, and Alcedo 2024). As office vacancies rose, businesses closed, and downtown retail declined. Yet this decentralization does not signal the end of agglomeration; rather, it redistributes it. Remote workers still participate in urban economies virtually, forming a web of connected hubs, suburban coworking spaces, satellite offices, and home workstations that extend agglomeration outward. Agglomeration doesn’t necessarily have to depend on real proximity when digital communication has broken down the geography of the workspace. This shift alleviates congestion and spreads opportunity to peripheral regions, though it poses challenges for urban planners managing excess office space and declining transit ridership. Attempts to reverse this shift ignore the economic reorganization already underway, privileging outdated urban cores over emerging distributed networks of productivity.
Equally significant are remote work’s social and inclusion effects. For many underrepresented groups, telework has expanded access to employment. People with disabilities, for example, experienced record employment levels by 2023 due in large part to the normalization of remote work (National Organization on Disability 2023). Remote options removed barriers such as inaccessible commutes or office environments. However, as some firms reversed remote policies, disability employment gains began to decline (NOD, 2023). For workers with disabilities, flexibility is not a perk; it is an accommodation that enables full participation in the labor market. A nationwide rollback of remote work would disproportionately harm these same workers, contradicting the administration’s stated commitment to expanding labor participation.
Furthermore, remote work has changed the job market of those in rural or economically disadvantaged regions. A 2025 study by Generation, a workforce nonprofit, found that 75% of midcareer workers in Appalachia and the rural South were willing to retrain for remote jobs (Generation 2025). In these areas, where local employment opportunities are scarce, remote work functions as an economic lifeline. Companies no longer necessarily need to expand to a region with remote work options available. It allows residents to earn metropolitan-level wages while contributing to their local economies, reducing geographic inequality. Remote flexibility aids caregivers and low-income workers by reducing commuting costs and offering greater control over schedules. These benefits improve labor force participation and job retention, particularly for single parents. During the pandemic, remote-capable jobs buffered many households from unemployment shocks (UK Department for Transport 2022). Maintaining hybrid options can thus promote economic equity and preserve workforce diversity.
The President’s Misconceptions
Mr. President, your directive to “terminate remote work arrangements” overlooks the changing realities of how modern agglomeration economies function. While the traditional model holds that productivity depends on dense physical clusters, recent evidence shows a more complex picture. Research by Sitian Liu and Yichen Su (2022) finds that occupations with high work-from-home adoption saw a significant decline in the urban wage premium, suggesting that the benefits of proximity are shifting, not disappearing. Moreover, the study by Arjun Ramani et al. (2024) argues that while remote work does challenge the traditional concentration of economic activity, it also creates “virtual” agglomeration spaces that extend labor markets and knowledge spillovers beyond downtown offices. Given this evidence, mandating a full return to in-person work would not necessarily restore productivity but may end up constraining it. The President's policy posits a return to the old city model, but in doing so, it risks ignoring the inclusionary, flexible, and hybrid opportunities that remote work offers: expanding access for those constrained by geography, disability, or caregiving demands; reducing congestion and carbon emissions; and dispersing productivity gains outward rather than confining them to megacity cores. To insist on full-time on-site attendance is to treat the remote worker as a deviation instead of recognizing them as a component of the emerging economic geography. The future of agglomeration is neither a full reversion to pre-pandemic norms nor an abandonment of proximity; it is the new hybrid, networked, and inclusive. Mr. President, you are wrong; remote and hybrid work are not the enemy of productivity, they are its next iteration.
Sources:
Aurigi, Alessandro, and Stephen Graham. 1997. “Virtual Cities, Social Polarization, and the Crisis in Urban Public Space.” Journal of Urban Technology 4 (1): 19–52.
Bibri, Simon Elias, and Zaheer Allam. 2022. “The Metaverse as a Virtual Form of Data-Driven Smart Cities: The Ethics of the Hyper-Connectivity, Datafication, Algorithmization, and Platformization of Urban Society.” Computational Urban Science 2 (22). https://doi.org/10.1007/s43762-022-00050-1.
Bloom, Nicholas, Arjun Ramani, and Joel Alcedo. 2024. “How Working from Home Reshapes Cities.” Proceedings of the National Academy of Sciences 121 (45): e2408930121. https://www.pnas.org/doi/10.1073/pnas.2408930121.
Emanuel, Natalia, and Emma Harrington. 2024. “Working Remotely? Selection, Treatment, and the Market for Remote Work.” American Economic Journal: Applied Economics 16 (4): 528–59.
Emanuel, Natalia, Emma Harrington, and Amanda Pallais. 2023. “The Power of Proximity to Coworkers: Training for Tomorrow or Productivity Today?” NBER Working Paper no. 31880. Cambridge, MA: National Bureau of Economic Research. https://www.nber.org/papers/w31880.
Generation. 2025. “New Research Underscores the Importance of Remote Work for U.S. Rural Communities.” Generation Newsroom, July 10, 2025. https://www.generation.org/news/remote-work-rural-communities.
Liu, Sitian, and Yichen Su. 2022. “The Effect of Working from Home on the Agglomeration Economies of Cities: Evidence from Advertised Wages.” Federal Reserve Bank of Dallas Working Paper. https://mpra.ub.uni-muenchen.de/113108/.
National Organization on Disability (NOD). 2023. Disability in the Workplace: 2023 Insights Report. https://nod.org/wp-content/uploads/Disability-in-the-Workplace-2023-Insights-Report.pdf.
Rosenthal, Stuart S., and William C. Strange. 2020. “How Close Is Close? The Spatial Reach of Agglomeration Economies.” Journal of Economic Perspectives 34 (3): 27–49.
The White House. 2025. “Return to In-Person Work.” Presidential Memorandum, January 20, 2025. https://www.whitehouse.gov/presidential-actions/2025/01/return-to-in-person-work/.
UK Department for Transport. 2022. Agglomeration under COVID-19. Government of the United Kingdom.
Zélity, Balázs. 2025. Personal interview, October 15, 2025.
The Psychology Behind Market Movement
It all begins with an idea.
Traditional finance assumes that investors make decisions based on logic, fundamentals, and long-term reasoning. Yet in real markets, stocks rise and fall not only because of earnings reports or economic data but because of emotions like fear, greed, panic, and confidence. A headline can trigger a sell-off; a viral post can spark a rally. Speculative bubbles inflate when optimism outruns reality, and crashes happen when panic outweighs patience. Markets are not machines; they are human environments that react to stress and uncertainty. While traditional finance emphasizes rational decision-making, the reality of the markets shows that psychology plays a central role in whether investors buy, sell, or hold. Internal factors such as fear, greed, overconfidence, and loss aversion, combined with external influences like herd behavior, media narratives, and social sentiment, create irrationality. Understanding these psychological drivers not only explains market volatility but also provides investors with a framework for making more disciplined and strategic decisions. The most successful investors are not simply those with the best data, but those who understand how emotion moves capital and think clearly when others do not.
Close observation of people’s behavior in markets reveals the key role emotion plays in decision-making. Fear often causes investors to exit too early, even when a company’s underlying fundamentals, such as revenue, earnings, and long-term growth prospects, have not changed. On the other hand, greed makes people chase returns after prices have already peaked. Loss aversion makes it harder to cut a losing position than to take a winning one. Behavioral economists like Daniel Kahneman and Amos Tversky showed that investors consistently depart from rational models when faced with uncertainty or risk (Investopedia 2023). That is why market psychology refers to the collective emotional state of investors at any given time. When emotions swing, the market swings with them. The term “animal spirits”, used by John Maynard Keynes, describes this emotional force behind financial decisions. He was an English economist in the early 1900s who concluded that investors may tell themselves that they are being rational, but the data show otherwise (Investopedia 2023). Market psychology can push prices higher even when earnings and performance do not justify it, or the opposite, dropping prices far below fair value due to panic selling. Markets do not always fall because companies are weak, and they do not always rise because companies are strong. More often than not, they move because of fear, excitement, or uncertainty (Forbes 2024). In these moments, markets reflect human instincts more than financial reality..
Markets are meant to reflect value. If a company’s performance is strong, stock prices should rise, and if its performance is weak, stock prices should fall. Yet history shows that prices often move without any underlying change in performance. This is because investors are responding to emotion rather than information. During the COVID-19 crash in March 2020, the S&P 500 fell more than 30 percent in just 22 trading days, even though many companies were still producing revenue and some were growing. The VIX, which measures volatility in the market, spiked to 82.69 during the same month, the highest ever recorded closing price (TD 2024). Nothing in the financial data justified that kind of panic; it occurred purely from investors operating in fear. Similarly, during the dot-com bubble, companies with minimal revenue saw stock prices soar. For example, the NASDAQ rose 582% from 751.49 to 5132.52 between January 1995 and March 2000, only to collapse by roughly 75% from March 2000 to October 2002 (CFI Team 2015). Investor losses were estimated at around 5 trillion dollars. Both cases show the same pattern: fear driving the crash, and emotion setting the price. The disconnect between price and value becomes the widest when investors stop analyzing and start reacting.
This emotional influence is why technical analysis exists. Technical indicators help identify when people are buying or selling based on sentiment rather than value. That is how traders spot panic selling, momentum swings, or retail-driven spikes (Investopedia 2023). Tools such as n-Balance Volume, Open Interest, and Accumulation or Distribution reflect the mood of the market. For example, when OBV diverges from the price, it signals that the volume trend contradicts the price trend and that sentiment towards the stocks may be faltering (Molital Oswal 2025). Behavioral signals such as herd movement, confirmation bias, and recency bias compound these distortions. Fear of missing out makes people buy at the top, and fear of losing money makes them sell at the bottom. These are not random mistakes, but predictable psychological traps that repeat over time (Forbes 2024).
The clearest measurement of emotion in the market is the VIX, or Volatility Index. Also called the “fear index”, this index tracks the market’s expectation of volatility over the next 30 days based on S&P options pricing. In the United States, it is widely known as the fear index because high VIX levels reflect uncertainty among investors (TD 2024). A VIX reading below 15 reflects steady conditions, while levels above 30 indicate elevated fear and potential for large market swings. During major market crises, like the 2008 financial crisis, spikes in the VIX aligned with the panic-driven selloffs, even among some of the largest companies in the world (TD 2024). The VIX can also be a forward-looking tool that skilled investors use to anticipate opportunities. A study from Hartford Funds analyzed moments when the VIX rose above 40, a level considered extreme fear in the market. In every case, the spikes were followed by strong positive returns in the S&P 500 through one, three, and five years (Hartford Funds 2024). When emotions were at their highest, prices were at their lowest, and the data showed that staying invested or even buying created long-term upside. Ultimately, fear collapses prices, and discipline turns collapse into entry. That is how investors who understand psychology in the market use it to their advantage.
That mindset is not just a theory; it is a strategy used by some of the most respected names in finance. Simon Hallet, chief investment officer of the global investment firm Harding Loevner, said, “There is a behavioral edge in any market…markets are still driven by humans suffering behavioral biases” (Hallet 2019). In other words, if most investors are unaware of how psychology affects their decisions, then those who are aware have a built-in advantage. Herman Brodie, a behavioral finance specialist who advises the investment management firm T. Rowe Price, explains why this advantage exists. Humans inherently experience losses at more than twice the intensity of gains, a core finding of loss aversion in his behavioral research (Brodie 2025). This is why many people sell too early during downturns or hold too long during rallies. None of this means that emotion can be removed from investing. It means it has to be understood and managed. Fear and greed are not weaknesses; they are signals. A disciplined investor does not ignore those signals, but they do not surrender to them either. That is why Hallett built an investment strategy that assumes people will act irrationally, and the investor’s job is to anticipate the crowd, not follow it (Hallett 2019). Behavioral finance is not a substitute for traditional analysis. It helps reveal the gap between value and perceived value, where the smartest investors find their edge.
Investing is often described as a numbers game, but markets move on more than math. They move on emotion, greed, and loss aversion shape decisions just as much as earnings reports and interest rates. Throughout history, the biggest crashes and rallies have always been triggered by not fundamentals but the emotional reactions of millions of investors reacting at once. That is why the best investors are not just fluent in balance sheets and cash flows but understand the psychological forces that drive capital. They use tools like the VIX to measure sentiment, not just volatility, and they rely on discipline when others react. In the end, the market will always be human-driven, which means psychology will always matter. In a world where emotion moves money, self-awareness is not just an advantage; it is a requirement.
References
Brodie, Herman. “Decoding Behavioral Finance: Interview with Herman Brodie.” T. Rowe
Price, 2025.
CFI Team. “Dotcom Bubble.” Corporate Finance Institute, 2015.
https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/dotc
“Forbes Advisor: Market Psychology—Understanding Emotional Drivers of Market Trends.”
Forbes, June 30, 2024.
Hallett, Simon. “Wherever We Can, We’ve Added Something That’s Based Upon Behavioral
Finance.” The Meb Faber Show, December 4, 2019.
Hartford Funds. “When Fear Runs High, Time to Buy?” Hartford Funds, 2024.
Investopedia. “Market Psychology.” Investopedia, 2023.
https://www.investopedia.com/terms/m/marketpsychology.asp.
Motilal Oswal. “The Psychology of Trading: How to Use Technical Indicators.” Motilal Oswal
Learning Centre, 2025.
TD Bank Group. “Understanding VIX.” TD Direct Investing, 2024.
https://www.td.com/ca/en/investing/direct-investing/articles/understanding-vix.
e.l.f. Beauty Snatches Up Fem-Founded Rhode, Moving Into The High-End Market And DTC Sales
It all begins with an idea.
Following a 2024 downturn for the beauty market’s mergers and acquisitions, e.l.f. Beauty LLC agreed to purchase Rhode in the largest beauty acquisition of this year. Closing on May 28th, 2025, at a potential total valuation of $1 billion, Vogue described the acquisition as “one of the most high-profile beauty deals in recent years.”Estimated at a total market cap of approximately $62.97 billion, the beauty market is booming. It is even expected to grow at a CAGR of 6.1% until 2030 (Grand View Research 2024). With skincare representing up 42.8% of the total beauty market, Rhode and co-founder Hailey Bieber have made a bold entrance into the industry.
Founded in 2022 by Hailey Bieber and fellow co-founders Lauren Ratner and Michael Ratner, Rhode is actively expanding the frontier of influencer-centered marketing. Despite having zero retail presence and offering only 10 SKUs, Rhode generated $212 million in direct-to-consumer sales in the twelve months ending March 31, 2025, driven by its strong social media presence (Business Wire 2025). Bieber’s influence and creative guidance for Rhode have created a cult following, particularly among Gen-Z and millennial consumers. Leading with minimalistic, “clean-girl” campaigns, Rhode has created 366% year-over-year earned media value growth from 2022 to 2023, reaching a total of $248 million (e.l.f. 2025). Tarang P. Amin, CEO of e.l.f., described Rhode’s vision most effectively: “[Bieber and the Rhode team] disrupted beauty” (e.l.f. 2025). By creating a world beyond their luxury products through PR trips, viral phone cases, and pop-ups, Rhode capitalizes well on the branding potential of social media. In 2024, Rhode brought the “Rhode Summer Club” to life in Mallorca, Spain, for a group of influencers. Rather than a typical PR trip where the buzz revolves around partying and loud, active events, Rhode leaned into their expertise and brought their clean, cool campaign to life. Instead of forcing the PR trip to be loud, they simply gave their invitees an experience aligned with the brand to generate the best possible content for Rhode. For two weeks in Mallorca, they were brought to the “Rhode Summer Club”, a pop-up takeover of Beach Club Gran Folies, and all guests were given exclusive Rhode sun loungers, towels, ice cream treats, beach inflatables, and more (Rhode 2025). Mallorca displayed a world beyond their products and exemplifies one of many successful social media campaigns that catapulted their success.
Rhode’s rapid rise through viral, minimalistic campaigns ultimately drew the attention of e.l.f Beauty, highlighting how effective social media campaigns can translate into real market value. Before acquiring Rhode, e.l.f. Beauty, which had a market capitalization of $7.34 billion at the time the deal closed, was already thriving by appealing to price-sensitive consumers through its wide distribution network and strong brand recognition. Over the past five years, e.l.f. 's stock price increased by 538% and is currently in a high-growth stage compared to more mature competitors such as L’Oréal, whose stock has only risen 35.54% in the last 5 years. Known for the accessibility and affordability of its e.l.f Cosmetics and e.l.f. SKIN lines, the brand appeals primarily to a younger demographic while also capturing a broad base of price-sensitive consumers across age groups. As a multi-brand company, e.l.f. Beauty recently made acquisitions to venture into the luxury cosmetics space. For example, e.l.f. Beauty’s first foray into the high-end market was in 2020 when they acquired W3LL People and launched Keys Soulcare. With its acquisition of Naturium in 2023 for $355 million, e.l.f. Further advanced its campaign to compete in the luxury sector. However, the Rhode acquisition represents its most aggressive move yet into premium cosmetics.
e.l.f. funded the deal with $600 million in fully committed debt financing, $200 million of stock (~2.6 million shares), and a $200 million earnout over the next three years based on performance. This constitutes a total purchase price of $800 million that could potentially reach $1 billion if Rhode achieves all its milestones. The purchase price represented a multiple of 3.8x LTM sales, and the entire management team of Rhode is staying on board. Additionally, Hailey Bieber is now Chief Creative Officer and Head of Innovation at the joint company and plans to continue leading the vision of the brand. Notably, J.P. Morgan Securities LLC and Moelis & Company LLC served as financial advisors to Rhode on the deal.
Fore.l.f., the strategic benefits of this deal are compounded by operational and marketing synergies. Rhode offers e.l.f. a stronger presence in the high-end market, a platform for DTC sales, and a modern and powerful social media presence. e.l.f. Beauty can leverage its strong retail presence to expand Rhode’s reach and offer multiple sales channels to attract new customers. In early September, just a few months after the acquisition, Sephora began to carry rhode products on its shelves. 70% of Rhode’s social media following is international, but international customers represent just 20% of their sales (Andreeva 2025). With such pent-up demand and lack of supply outside of the US, e.l.f. Beauty can leverage its extensive resources and international presence to expand Rhode’s distribution footprint. Before the Rhode acquisition, e.l.f. Beauty was projected to more than double their sales over time to over $3 billion. With the Rhode acquisition, e.l.f. is gaining a cultishly loyal consumer base and a young, rapidly growing company with lots of potential. According to Piper Sandler’s study, by expanding its current catalog of 12 SKUs to 35 SKUs, Rhode can generate $104.9 million in annual sales from Sephora alone.
Despite taking on $600 million in debt plus the cost of making further investments to expand their logistic and marketing infrastructure, Rhode is still expected to be accretive to e.l.f. 's EBITDA margin. As of the end of e.l.f. Beauty’s latest fiscal year, e.l.f.’s net debt to EBITDA multiple is around 2.14x while Ulta Beauty’s is approximately 1.81x. Though this multiple sits higher compared to its peers, e.l.f. has a debt to shareholders' equity ratio of 0.64, which is low relative to comparable entities like Ulta Beauty, whose ratio sits at 1.4. Additionally, they operate at a very high gross margin compared to Ulta: 69% versus 39.2%. This indicates that, between the company’s balance sheet and e.l.f. Beauty’s rapid growth, the company is in a position to commit to $600 million in new debt.
The combination of the two companies is already delivering results, evidenced by Rhode products’ immediate success in Sephora, reportedly amassing $15 million in first-day sales (Yahoo Finance 2025). Moving forward, if Rhode continues at its current pace, there is a high chance the company will receive the full $200 million earnout over the next few years. If that ends up being the case, the purchase price multiple to LTM would jump from 3.8x to 4.7x, consistent with L’Oréal’s acquisition of Aesop in 2023.
Though some critics may believe that Rhode’s valuation is inflated due to its viral online presence, the most recent numbers suggest that e.l.f. Beauty made an opportunistic acquisition, and the purchase price for Rhode may have carried significant potential given the synergies between components of the two companies. It is empowering to see a female-founded business not only disrupt the industry but also have Hailey Bieber’s creative, female-forward vision work legitimized by its $1 billion valuation.
References
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Andreeva, Anna. “Piper Sandler & Co. Equity Report,” n.d.
“Cosmetics Market Size, Share and Growth Report, 2030.” Cosmetics Market Size, Share And Growth Report, 2030. Accessed November 6, 2025. https://www.grandviewresearch.com/industry-analysis/cosmetics-market.
“E.l.f. Beauty Announces Definitive Agreement to Acquire Rhode in $1 Billion Deal.” Global Press Release & Newswire Distribution Services, May 28, 2025. https://www.businesswire.com/news/home/20250528613364/en/e.l.f.-Beauty-Announces-Definitive-Agre.l.f. Beauty Announces Definitive Agreement to Acquire rhode in $1 Billion Dealeement-to-Acquire-rhode-in-%241-Billion-Deal.
“E.l.f. Beauty Announces Definitive Agreement to Acquire Rhode in $1 Billion Deal.” – e.l.f. Beauty. Accessed November 6, 2025. https://investor.elfbeauty.com/stock-and-financial/press-releases/landing-news/2025/05-28-2025-210536607.
“E.l.f. Beauty Announces Fourth Quarter and Full Fiscal 2025 Results.” – e.l.f. Beauty. Accessed November 6, 2025. https://investor.elfbeauty.com/stock-and-financial/press-releases/landing-news/2025/05-28-2025-210551641.
“E.l.f. Beauty Announces Second Quarter Fiscal 2026 Results.” – e.l.f. Beauty. Accessed November 6, 2025. https://investor.elfbeauty.com/stock-and-financial/press-releases/landing-news/2025/11-05-2025-210907147.
“events” – rhode. Accessed November 24, 2025. https://www.rhodeskin.com/pages/events?srsltid=AfmBOoouwGlI8eCst_cPD53pjxnoM72hWWF0eNkzY09-YlNYgWFog0NO
“Hailey Bieber’s Rhode X Sephora Launch Sales Blew Rihanna’s Fenty ‘out of the Water,’ Source Claims.” Yahoo! Accessed November 6, 2025. https://www.yahoo.com/entertainment/celebrity/articles/hailey-bieber-rhode-x-sephora-183000311.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAA8cM2wsDSPsm999sA-3ytF5Sh3aFseOFAvB6yUj7-WBfHXfQYGLRX1rcGC2ZzcpngMmiGRY3r1tAra9ANwL0K3esGFSmHsirmv_8uDV5rn49vw_W1NyfhEkjsjBCuLN5m3CGB0pFfXaSMHM4p8F4mYr8jNlye4oohJScx-XjvC2.
Morris, Jessica Chia. “Beauty’s M&a Outlook: Which Deals Will Get Done in an Uncertain Market?” Vogue, May 12, 2025. https://www.vogue.com/article/beautys-manda-outlook-which-deals-will-get-done-in-an-uncertain-market.
Scott, Nateisha. “Rhode to Be Acquired by Elf Beauty for $1 Billion.” Vogue, May 28, 2025. https://www.vogue.com/article/rhode-to-be-acquired-by-elf-beauty-for-dollar1-billion.
Scott, Nateisha. “What Investors Want from Beauty Brands in 2025.” Vogue, January 3, 2025. https://www.vogue.com/article/what-investors-want-from-beauty-brands-in-2025.
U.S. Securities and Exchange Commission. Accessed November 6, 2025. https://www.sec.gov/search-filings.
“Ulta Beauty 10-K.” Ulta Beauty, inc._february 1, 2025. Accessed November 6, 2025. https://www.sec.gov/Archives/edgar/data/1403568/000155837025003810/ulta-20250201x10k.htm.
Ulta Beauty announces second quarter fiscal 2025 results :: Ulta Beauty, Inc. (ULTA). Accessed November 6, 2025. https://www.ulta.com/investor/news-events/press-releases/detail/213/ulta-beauty-announces-second-quarter-fiscal-2025-results.
Private Equity: The Meteoric Rise and Warning Signs
It all begins with an idea.
Private equity (PE) is an investment made by a specialized firm that raises capital from institutional investors like insurance companies, pension funds, and university endowments to buy and manage companies privately. These purchases are often highly leveraged to amplify returns, and the sponsor company, or PE firm, usually has an investment time horizon of ten years. A PE fund’s lifecycle has a fixed period to gather capital, a search period to look for investments and buy portfolio companies, a holding period to improve operations or scale the businesses they bought, and an exit from the investment to realize profits. Exits can include initial public offerings (IPOs), sales to strategic buyers, or sales to other private equity sponsors.
In recent years, alternative investments like private equity and private credit have grown at a remarkable rate. Private market assets under management (AUM) reached roughly $13.1 trillion as of mid-2023. This reflects a near 20% growth rate in AUM per year since 2018 (McKinsey 2024). The amount of money invested in private assets has skyrocketed recently because of the unbelievable returns that these investments have realized. Typically, investors flock to outperforming assets, and in this case, investors are piling their money into PE because of its outperformance. Cambridge Associates collected a sample of around 1,700 realized buyout and growth equity companies acquired from 2000 to 2020. The gross internal rate of return (IRR) for these companies was 18.6% (Cambridge Associates 2022). This significantly beats the performance of public markets. The S&P 500 historically returns around 10% per year. The influx of capital resulted in a record high amount of dry powder (undeployed capital) among PE firms. The $3.7 trillion in ready-to-use capital gives firms the ability to pursue deals even when public markets are volatile (McKinsey 2024). This can give private investments like PE an advantage over the public markets, as they have had growing returns and provide diversification for investors. In 2024, deal‑making rebounded strongly after two years of decline (McKinsey 2025). Buyout investment value rose about 37% year over year, reaching roughly $602 billion globally. Also, global exit value increased by 34% to about $468 billion, suggesting renewed liquidity for investors (Bain 2025). This positive news has continued the PE frenzy and resulted in the continued interest of investors.
Despite the attractive returns and unmatched growth, several indicators suggest the private equity market may be showing some warning signs. Analysts from Bain and McKinsey highlight elevated entry multiples, meaning firms are paying historically high prices for companies, while the volume of dry powder remains at near record levels (McKinsey 2025, Bain 2025). The excess cash can make PE firms more aggressive in their investments and can lead them to overvaluing and overpaying for portfolio companies. In addition, exiting investments is becoming more challenging, with longer holding periods and fewer IPO or strategic sale opportunities for older assets. These factors are potential signs of an overheated market.
Private equity firms are paying historically high prices for companies, often measured by EBITDA multiples. While this can reflect strong underlying business fundamentals, high entry multiples leave less room for future upside and make achieving targeted returns more challenging. Consistently high multiples can signal a crowded market with intense competition and risk. If earnings growth slows or the economic environment shifts, firms may struggle to meet their expected exit valuations. Private equity firms simply paid too much for companies they bought out in 2021 during a period of low rates (CNBC 2025). This will likely cause difficulty exiting investments at the end of the lifecycle of these funds.
Private equity firms have a record high amount of dry powder. While this provides flexibility to pursue deals, it can lead to risky investment decisions. A high amount of dry powder is typically not a positive sign, even though it does mean that investors are trusting PE firms with their money. Sponsors need to invest the money in their fund in order to generate a return for their investors. If the money is not being used, it is losing value. For investors, an environment of excessive dry powder raises the risk that deals are done at inflated valuations, which may compress future returns and increase the potential for underperformance.
Exiting investments through IPOs or strategic sales is a key way private equity firms realize returns for their investors. However, exits are becoming more difficult. The IPO market has been slowing (although it has been showing strong signals in 2025), strategic buyers have been selective, and older assets are accumulating on balance sheets. Longer holding periods tie up investor capital and delay liquidity, which makes it harder for investors to generate a return and reinvest. In 2024, the average buyout holding period was 6.7 years, much higher than the 20-year average of 5.7 years (CFA 2025). PE firms are holding portfolio companies for longer periods because they are having difficulty exiting and receiving the desired return on investment. Buyers and sellers are not agreeing on the valuations of companies, which is likely the case because the seller purchased the company at too high a price and is having difficulty making a profit (S&P Global 2025). One strategy that private equity firms have resorted to is continuation funds. This is when a firm transfers assets in a portfolio to another portfolio. This creates a new investment vehicle and gives investors the option to cash out or continue into the new structure. Analysts at Greenhill & Co. believe that 20% of private equity portfolio company exits could come from this strategy of continuation funds (CFA 2025). Continuation funds give the PE firm more time to exit a portfolio company because it could not exit within the ten-year lifecycle of the fund.
Private equity has experienced extraordinary growth over the past several years, fueled by strong returns, abundant capital, and increasing investor interest. Yet, the same factors that have driven this boom, such as high valuations, record levels of dry powder, and more challenging exit conditions, also serve as cautionary signals for investors. These warning signs do not guarantee any sort of bubble, however. The industry could cut back to more reasonable valuations without a major crash-like event. Entry multiples for the industry declined for the first time in nearly a decade in 2022 from 11.9 to 11 times EBITDA (McKinsey 2024). John Romeo, Managing Partner at consulting firm Oliver Wyman, believes that private equity could go through a period of difficulty because of the high valuations during the COVID-19 pandemic and recovery, but he is confident that this will only be a temporary setback and private equity will thrive long-term (CNBC 2025). This could be a signal that the private equity boom is temporarily slowing down to more reasonable levels and could continue its growth in the future. Regardless, investors should be wary and keep an eye out for signs of a potential drawback of private equity returns in the current, evolving private market environment.
References
Bain & Company. (2025, March 3). Dealmaking rebound sees private equity recovery taking shape — Bain & Company Global PE Report. https://www.bain.com/about/media-center/press-releases/20252/dealmaking-rebound-sees-private-equity-recovery-taking-shape-bain-global-private-equity-report/
Cambridge Associates. (2022, November 3). US Private Equity Looking Back, Looking Forward: Ten Years of CA Operating Metrics. https://www.cambridgeassociates.com/insight/us-private-equity-looking-back-looking-forward-ten-years-of-ca-operating-metrics
CFA Institute. (2025, October 29). Private Equity’s New Exit Playbook. https://blogs.cfainstitute.org/investor/2025/10/29/private-equitys-new-exit-playbook/
CNBC. (2025, June 6). Peak private equity? Sector gets defensive about its ability to generate top returns. https://www.cnbc.com/2025/06/06/private-equity-swelled-into-a-bank-rivaling-behemoth-challenge-ahead.html
McKinsey & Company. (2024, March 28). Global Private Markets Report 2024: Private markets in a slower era. https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report-2024
McKinsey & Company. (2025, May 20). Global Private Markets Report 2025: Braced for shifting weather. https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report
S&P Global Market Intelligence. (2025, January 15). Private equity exit value falls to 5-year low.https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/1/private-equity-exit-value-falls-to-5year-low-86896433
Conflict of Interest in the Capital: Curbing Insider Trading Among Lawmakers
It all begins with an idea.
At the heart of the American Dream is the promise of upward mobility and financial security. Politicians are among the group of Americans who have achieved this dream. Congresspeople commonly have a net worth that far exceeds the salary of their position multiplied by the number of years they have held it. If not from salary, where does this wealth come from? The answer is insider trading, an illegal and morally questionable process of using non-public information to profit from the stock market (Investor 2025). Though illegal, the enforcement of insider trading is spotty. The prevalence of insider trading in Washington, D.C., and its lack of enforcement undermine the efforts of the American public, who have earned their income and must trade in the stock market using only publicly available information.
In comparison to other major news events, the issue of insider trading may seem insignificant, but this doesn’t mean it should be overlooked. According to Investor, insider trading is “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, based on material, nonpublic information about the security” (Investor 2025), and it ruins the integrity of the stock market. Insider trading is comparable to someone from the future travelling through time and betting on a sports game that has already taken place, profiting from their knowledge of its outcome. In that case, there is no upper limit to what they can safely bet on that game. Insider trading undermines the public's effort to make a profit from the stock market and essentially removes any risk of financial loss. Defined by the US Securities and Exchange Commission (SEC), an insider is “an officer, director, 10% stockholder, and anyone who possesses inside information because of his or her relationship with the Company or with an officer, director, or principal stockholder of the Company” (SEC 2015). From this definition, it is just as illegal for someone with close relations to a principal stockholder of a company to trade using non-public information as it is for that stockholder to do so. The problem that faces Washington is that politicians likely obtain information from what the SEC would consider “insiders,” allowing them to make more money than the public can.
The theory that lawmakers have used non-public information to turn an illegal profit from the stock market isn’t just an Internet accusation that holds no weight. Congresspeople have been accused of this crime numerous times, and some have been prosecuted and found guilty. For example, Chris Collins, a member of the U.S. House of Representatives, was sentenced to 26 months in prison after tipping off his son using insider information (Breuninger 2020). In June 2017, Collins learned that a drug developed by an Australian biotech firm, which was being used to treat multiple sclerosis, had performed poorly in clinical trials. After obtaining this information before it was made public, Collins called his son, who, along with his wife and other family members, had sold their shares in Innate Immunotherapeutics, the firm that had produced the drug (Breuninger 2020). After the results of the clinical trials were disclosed to the public, the price of one share of Innate dropped by 92 percent, saving Chris Collins and several members of his family from a significant loss. Fast forward to January 2020, and Chris Collins was sentenced to 26 months in prison for conspiracy to commit securities fraud and was also ordered to pay a $200,000 fine (Breuninger 2020).
Another example of insider trading in Washington is the conviction of Steve Buyer, a U.S. House of Representatives member from Indiana. In 2018, Buyer was involved in two separate insider trading schemes, placing profitable securities trades based on stolen information obtained from consulting work (Department of Justice 2023). In March and April 2018, Buyer purchased shares of Sprint Corporation before it merged with T-Mobile on April 29, 2018, in a deal valued at $26.5 billion (Department of Justice 2023). Later, from June to August 2019, he participated in the trading of Navigant Consulting shares, which were acquired by the consulting and advisory firm Guidehouse. In the trading of Sprint shares, the Buyer made $126,000, and in the trading of Navigant shares, the Buyer made a profit of $223,000, all of which was made illegally (Department of Justice 2023).
The primary question is whether Congress has an insider trading problem, and if so, how can it be halted? Unfortunately, the two previous examples of insider trading are far from outliers. The statistics regarding the U.S. Lawmakers’ investing portfolios performances are damning: “A recent report by Unusual Whales, a platform that tracks stock disclosures from lawmakers, found that at least 20 members of Congress had returns that were greater than the S&P 500, and that at least five had returns of over 100%, with an additional two members earning a return of more than 95%” (Williams 2025). Outperforming the S&P 500, a stock index that tracks 500 of the largest corporations, is enviable and difficult to achieve. Outperforming the S&P 500 is rare and essentially unheard of for a non-professional investor. All signs point to the abuse of non-public information, which is also being perpetrated by a group of people who “earn $174,000 annually, nearly three times the salary of the average American, they are provided with a sizable per diem for lodging and meals during their travels across the nation and abroad, they have the best health insurance that money can buy, and many will eventually benefit from a solid pension” (Williams 2025). Insider trading by Congresspeople is disheartening because of the principles that elected officials are purported to uphold, and regardless of its legality, it demonstrates an abuse of power. In addition to the benefits of working in Congress, the American people cannot invest effectively because they lack access to the specialized knowledge that Congresspeople possess. It is unfair to those pursuing the American dream to continue looking the other way on insider trading in Washington, D.C.
So what can be done? In most instances of illegal activity, the solution is to pass legislation that prevents further crimes from being committed. In this case, that’s part of the solution, as a bill called the “Restore Trust in Congress Act” has been introduced in the House of Representatives, banning members of Congress from owning individual stocks and from insider trading (George Whitesides 2025). This proposed legislation is a step in the right direction. Allowing members of Congress to hold individual securities is more dangerous than allowing them to trade mutual funds or ETFs (exchange-traded funds). Investing in the S&P 500 as a whole does not allow for insider trading in the way that trading individual stocks does. Insider information is more useful when it pertains to individual stocks. But the lack of specificity in phrasing, demonstrated in the bill’s wording “banning members from insider trading,” is problematic. Members of Congress are already not allowed to engage in insider trading. Passing more legislation that prohibits an activity already deemed illegal is futile. The problem is in the enforcement. The SEC has already demonstrated in the Chris Collins and Steve Buyer cases that it has the ability to step in and crack down on insider trading. However, the profits of other Congresspeople in the stock market suggest that insider trading in Washington is much larger than that of just Collins and Buyer. The key to solving the insider trading issue does not lie in the legislation, but rather in the enforcement. There would be no need for the “Restore Trust in Congress Act” if there were greater enforcement of anti-insider trading laws. The solution to the problem lies in the SEC’s desire to crack down on insider trading, not the House of Representatives’ ability to pass new legislation.
Congresspeople and their prolific trading undermine public confidence in the stock market and the integrity of the government. The cases of Chris Collins and Steve Buyer exemplify how serious breaches of trust can occur when public officials abuse private information for personal gain. Meanwhile, the investment activity of many members of Congress continues to raise questions about transparency in public service. Ultimately, the solution does not lie solely in drafting new legislation but in ensuring that existing insider trading laws are enforced. Strong, consistent enforcement sends a clear message that no one is above the law, and it is this commitment to transparency that will restore trust in government institutions.
References
“Former Congressman Sentenced to 22 Months in Prison for Insider Trading.” Southern District of New York | Former Congressman Sentenced To 22 Months In Prison For Insider Trading | United States Department of Justice, September 19, 2023. https://www.justice.gov/usao-sdny/pr/former-congressman-sentenced-22-months-prison-insider-trading.
“Insider Trading.” Insider Trading | Investor.gov. Accessed October 18, 2025. https://www.investor.gov/introduction-investing/investing-basics/glossary/insider-trading.
KevinWilliamB. “Ex-New York Congressman Chris Collins Sentenced to 26 Months for Insider-Trading Tip to Son.” CNBC, January 18, 2020. https://www.cnbc.com/2020/01/17/chris-collins-sentenced-to-26-months-for-insider-trading-tip.html.
“Rep. George Whitesides Leads Way to Legislation to Ban Members of Congress from Trading Stocks.” Representative George Whitesides, September 8, 2025. https://whitesides.house.gov/media/press-releases/rep-george-whitesides-leads-way-legislation-ban-members-congress-trading.
Sec.gov. Accessed October 18, 2025. https://www.sec.gov/Archives/edgar/data/1164964/000101968715004168/globalfuture_8k-ex9904.htm.
Williams, Armstrong. “The Insider Trading Game on Capitol Hill Must Stop.” KOMO, January 14, 2025. https://komonews.com/news/armstrong-army-strong/the-insider-trading-game-on-capitol-hill-must-stop.