The Sunday Drive - 01/21/2024 [#94]

👋🏼 Hello friends,

Let's enjoy a leisurely Sunday Drive around the internet. 

🎶 Vibin'

For no particular reason, lately I’ve been missing my home state of Texas a little more than usual. So this week, I’m vibin’ to one of favorite Texas artists. I hope you enjoy Wave on Wave by Pat Green. It has always been one my favorites.

💭  Quote of the Week‌

📈  Charts of the Week

 

It’s been one heck of a growth cycle the last decade or more. As a result, value stocks haven’t been this attractive relative to expensive stocks in over a century. Wow.

However, the second chart is even more interesting and highlights what isn’t supposed to exist in the world of investing…a free lunch.

 

At least according to GMO and their data going back to 1983 - roughly the beginning of the secular bull market in stocks - investing in high quality, attractively valued stocks has yielded significantly better returns than investing in lower quality value stocks. Importantly, they’ve done so with significantly lower risk as well.

This upends the traditional investing notion of a positive relationship between risk and reward. Something to keep in mind if we do start to see a period of sustained outperformance by value stocks in the coming quarters.

🚙 Interesting Drive-By's

This week we have articles on financial advice, AI and its potential impact on the economic order, and remote work:

🤗 A New Paradigm for Financial Advice - from Bradley Jenson

As we near the beginning of the second quarter of the 21^st century, we can anticipate that artificial intelligence will create a major disruption in the financial advisory industry and decrease demand for financial advisors. But it need not have a negative impact on your practice as in the imagined scenario above. Why not?

There is one thing that artificial intelligence can’t do: It can’t be human.

Several years ago, Dr. Bob Seaberg, who writes “Insights for the Influential Advisor,” wrote that, “Wealth advisory is a relationship business. Given the demographic and technological changes underway, it’s high time for advisors to invest or reinvest in relationship building skills.”

Now, more than ever, relationship-building skills should be at the very core of our financial advisory practices. It’s time to be very intentional about this. At the 2023 Raymond James Life Planning Symposium, Dr. Seaberg spoke about the importance of financial advisors functioning as coaches for their clients. [link]

🤔 The Knowledge Economy is Over. Welcome to the Allocation Economy - from Dan Shipper

Time isn’t as linear as you think. It has ripples and folds like smooth silk. It doubles back on itself, and if you know where to look, you can catch the future shimmering in the present.

(This is what people don’t understand about visionaries: They don’t need to predict the future. They learn to snatch it out of the folds of time and wear it around their bodies like a flowing cloak.)

I think I caught a tiny piece of the future recently, and I want to tell you about it.

Last week I wrote about how ChatGPT changed my conception of intelligence and the way I see the world. I’ve started to see ChatGPT as a summarizer of human knowledge, and once I made that connection, I started to see summarizing everywhere: in the code I write (summaries of what’s on StackOverflow), and the emails I send (summaries of meetings I had), and the articles I write (summaries of books I read).

Summarizing used to be a skill I needed to have, and a valuable one at that. But before it had been mostly invisible, bundled into an amorphous set of tasks that I’d called “intelligence”—things that only I and other humans could do. But now that I can use ChatGPT for summarizing, I’ve carved that task out of my skill set and handed it over to AI. Now, my intelligence has learned to be the thing that directs or edits summarizing, rather than doing the summarizing myself.  [link]

💡 An Early Look at the Labor Market Impact Potential of Large Language Models from OpenAI

Note from Me: I don’t usually link to academic papers in The Sunday Drive,. However, I do think that the impact of AI on the labor market is an important topic to understand and that it will have significant investing and economic implications over time.

ABSTRACT

We investigate the potential implications of large language models (LLMs), such as Generative Pre-trained Transformers (GPTs), on the U.S. labor market, focusing on the increased capabilities arising from LLM-powered software compared to LLMs on their own. Using a new rubric, we assess occupations based on their alignment with LLM capabilities, integrating both human expertise and GPT-4 classifications. Our findings reveal that around 80% of the U.S. workforce could have at least 10% of their work tasks affected by the introduction of LLMs, while approximately 19% of workers may see at least 50% of their tasks impacted. We do not make predictions about the development or adoption timeline of such LLMs. The projected effects span all wage levels, with higher-income jobs potentially facing greater exposure to LLM capabilities and LLM-powered software. Significantly, these impacts are not restricted to industries with higher recent productivity growth. Our analysis suggests that, with access to an LLM, about 15% of all worker tasks in the US could be completed significantly faster at the same level of quality. When incorporating software and tooling built on top of LLMs, this share increases to between 47 and 56% of all tasks. This finding implies that LLM-powered software will have a substantial effect on scaling the economic impacts of the underlying models. We conclude that LLMs such as GPTs exhibit traits of general-purpose technologies, indicating that they could have considerable economic, social, and policy implications. [link]

🏢 Don’t Sleep With Your Boss - from Dror Poleg

Yes, old work is done better in person. But new work will ultimately produce the greatest value.

Compassion. Compassion is what I felt watching a recent video of executives trying to bring their employees back to the office. I felt compassion and pity. And then I cringed.

In the video, Internet Brands CEO Bob Brisco tells employees he's no longer "asking or negotiating at this point"; instead, he is "informing" them of how things will be from now on. Like many executives, Brisco is going through the Five Stages of Office Grief: He is done with bargaining, but he doesn't realize that the next step is not victory — it's depression. [link]

 

👋🏼 Parting Thought

Hype about AI and LLMs (Large Language Models) in a nutshell…

 

If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X ‘em?) at me.

Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed.

‌I hope you have a relaxing weekend and a great week ahead. See you next Sunday...

Your faithful financial provocateur,

-Mike‌