Quote of the week:

“Most of the returns in stocks are concentrated in sharp bursts beginning in periods of great pessimism or fear.” – Bill Miller

Exploring the implications of “transformative” AI 

In a recent essay, Max Roser, of Our World in Data, makes a compelling argument that the introduction of “transformative” artificial intelligence will be as consequential to humanity as the agricultural revolution 10,000 years ago—and the industrial revolution of the late 1700s. The big question, of course, is whether or not this is a good thing for society. I agree with Max here—while AI will potentially enable profound deflationary forces and efficiencies across industries, the risks of unleashing complex AI systems are hard to predict. “All major technological innovations lead to a range of positive and negative consequences,” Max writes. “For AI, the spectrum of possible outcomes – from the most negative to the most positive – is extraordinarily wide.” He continues:

“Transformative AI is not defined by any specific capabilities, but by the real-world impact that the AI would have. To qualify as transformative, researchers think of it as AI that is ‘powerful enough to bring us into a new, qualitatively different future.’ In humanity’s history, there have been two cases of such major transformations, the agricultural and the industrial revolutions. Transformative AI becoming a reality would be an event on that scale. Like the arrival of agriculture 10,000 years ago, or the transition from hand-to-machine manufacturing, it would be an event that would change the world for billions of people around the globe and for the entire trajectory of humanity’s future.”

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Warren Buffett, David Tepper, and the “lifestyle of hunter gatherers”

Frederik Gieschen wrote a smart piece this week about the day-to-day lifestyles of notable investors, including Buffett, Lynch, Tepper, Soros, and others. In particular, Frederik’s essay examines how these investors balance the intensity of navigating day-to-day market volatility with the requisite patience that’s necessary to succeed over the long-term. I enjoyed Frederik’s comparison of value investors to the lifestyle of hunter gatherers, which he describes as “consecutive days of light to moderate physical activity, occasional days of strenuous exertion being followed by relatively easy days of rest and relaxation.” He continues: 

“It’s a metaphor we can apply to different types of investors. For example, passive investors and trend followers could be considered the market’s jellyfish, the Ocean’s Most Efficient Swimmers: ‘Jellyfish never stop. Twenty-four hours a day, seven days a week, they move through the water in search of food on journeys that can cover several kilometers a day. They are more efficient than any other swimmer, using less energy for their size than do graceful dolphins or cruising sharks.’ In contrast, active investors invest significant time and energy to do a deal or solve a complex investment puzzle. In the framework of carnivory they are a large predator animal and facing a high cost of hunting. Granted, long days staring at documents and spreadsheets don’t seem as exciting as a cheetah’s high-speed chases. But like the big cats, these investors face the high cost of a focused effort in pursuit of an uncertain payoff.”

A few more links I enjoyed:

Michael Mauboussin – Sharpening Investor & Executive Toolkits – via Invest Like the Best
“Michael Mauboussin is the Head of Consilient Research at Counterpoint Global. We discuss his research on market share and capital allocation, examples of the relationship between value creation and market power, and which recent market phenomena have provided the biggest surprises.”
Institutional Failure: A Future of Finance Worldview – via Dave Nadig
“The argument I will make on stage — with ample help from people much smarter than me about this stuff — is that in the run since the Industrial Revolution, the system we’ve invented is now remarkably detached from the collective intelligence that solving the polycrisis will require. Institutions compete in a world of multipolar traps, where the benefit of the species as a whole is rarely the stated objective and often is shuffled aside, in favor of the success of the institution itself.”

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