What we’re reading (9/27)
“How Zillow Got On Track For First Profitable Year Since 2012” (Wall Street Journal). “Zillow has focused on boosting revenue from services such as rentals and mortgages, while slowing head count growth following a hiring surge in 2021, to reach its profitability goal under U.S. generally accepted accounting principles, Chief Financial Officer Jeremy Hofmann said. ‘Even if the housing market were to stay where it is, we think there’s a lot of growth to come,’ Hofmann said.”
“AI-Generated ‘Workslop’ Is Destroying Productivity” (Harvard Business Review). “A confusing contradiction is unfolding in companies embracing generative AI tools: while workers are largely following mandates to embrace the technology, few are seeing it create real value. Consider, for instance, that the number of companies with fully AI-led processes nearly doubled last year, while AI use has likewise doubled at work since 2023. Yet a recent report from the MIT Media Lab found that 95% of organizations see no measurable return on their investment in these technologies. So much activity, so much enthusiasm, so little return. Why?”
“Big Banks Behaving Badly” (The American Prospect). “In the old days of relationship banking, a local official worked with small-business owners to prevent catastrophe, aiding businesses and the bank’s bottom line. But after decades of bank consolidation, about half of all companies now use large institutions as their primary financial services provider, according to the 2023 Small Business Credit Survey from the Federal Reserve Banks. This often puts key financial decision-makers far from the millions of businesses they serve, without the stake in community success that characterized previous eras. In these instances, off-ramps with mutual benefit were ignored, promises made were not kept, and emotion seemed to take precedence over sound decision-making.”
“Hedge-Fund Stars Are Making So Much Now That They Are Hiring Agents” (Wall Street Journal). “Compared with, say, outfielders, portfolio managers have to evaluate job offers with more complex structures. There’s the amount they’d need to cover deferred and forgone pay at their current employer and the budget needed to staff a team of analysts. There’s the cut of investment gains portfolio managers generate that they get to keep, usually around 20%, and the accelerated payouts they can get on early profits. There’s also the length of the contract itself, usually around three years but sometimes longer.”
“Brace Yourself: Here Comes Stagflation!” (Tyler Cowen, The Free Press). “It seems increasingly likely that the American economy is sleepwalking toward stagflation. In case you’re wondering, that is not a good thing…If I had to guess, I think there’s a decent chance that 18 months from now, America could well have an inflation rate of 4 percent (up from last year’s 2.5 percent) and an unemployment rate of 7 percent, well above the current 4.3 percent.”
