'A Historic Dislocation'

+ Mind the Gap, Owen Lamont, Elad Gil, Aswath Damodaran, Jason Zweig & More

Author

The Idea Farm
September 14, 2025

“All of these Ph.D.s over there (Federal Reserve ), I don't know what they do... This is like Universal Basic Income for academic economists.”

— Scott Bessent

Research

Erik Brynjolfsson & others examine changes in the labor market for occupations exposed to generative artificial intelligence using high-frequency administrative data from the largest payroll software provider in the United States. They find six key facts, all of which support the hypothesis that the AI revolution is beginning to have a significant and disproportionate impact on entry-level workers in the American labor market.

The WSJ summarized the key points of the paper.

Robeco explains the benefits of thematic investing, along with their data-driven investment framework for doing so in both high-growth innovators with stable incumbents.

Source: Robeco. All figures are in EUR. Data as per end of April 2025.

Rethinking Risk Management and the Myth of “Missing the Best Days" (15 pages)

This paper challenges the conventional wisdom that staying fully invested to avoid missing the market’s best days is the optimal strategy. It argues that both the best and worst days tend to occur during high-volatility periods, often in bear markets, when reducing exposure is prudent.

As of July 29, 2025, the Bloomberg Municipal Bond Index has returned -0.79% year to date (YTD), compared to 3.60% for Treasuries, 3.97% for U.S. bonds, 4.44% for investment-grade corporates and 5.15% for high-yield corporates. However, Morgan Stanley thinks this divergence may mark not just a deviation, but a potentially compelling opportunity.

Source: Morgan Stanley, Bloomberg, as of January 31, 2025.

Morningstar’s annual report finds that investors captured most, but not all, of their funds’ aggregate total returns over the decade ended Dec. 31, 2024. They found a 1.2% “investor return gap," which is explained by the timing and magnitude of investors' purchases and sales of fund shares during the 10-year period. This gap is equivalent to around 15% of the funds’ aggregate total return.

Jeff Ptak summarizes the key takeaways here.

This paper explains why understanding hindsight and survivorship bias can help CTA investors make better decisions, avoid costly mistakes, and achieve better outcomes.

Data source: Barclayhedge/Backstop CTA database | CTAs | Efficient Capital Management® LLC. As of September 1, 2025.

Bonus Content

Owen Lamont says while markets often crash, they’re never crashing. Link

Wall Street’s big, bad idea for your 401(k). Link

The international value premium returns after more than a decade in exile. Link

Elad Gil walks through where he sees AI market leaders for the next 1-2 years. Link

What’s the role that cash holdings play in a business? Why should businesses often not pay out what they have available to shareholders? Professor Damodaran answers both questions. Link

AngelList published The State of U.S. Early-Stage Venture & Startups: H1’25. Link

Fidelity published their inaugural State of the American Investor study. Link

Podcasts

8/19/2025 - 98 minutes

Oscar Health’s CEO covers the near-death experience that shaped so much of his life and leadership framework, how a decision to raise wages actually increased shareholder returns, his strategy at Oscar Health & more.

8/19/2025 - 49 minutes

Lawrence is the founder of a firm that specializes in founder-led companies globally and recently published a book on the topic. He walks through the characteristics that make these companies successful compared to their peers.

8/16/2025 - 61 minutes

Professor Damodaran covers his investing philosophy, asset allocation, position sizing rules, lifecycle diversification, and the lessons he’s learned from decades of investing his own wealth.

What Else Is Happening