[Week 26, 2025] Portfolio Logic

Welcome back to Price and Prejudice with a few musings from Week 26 of 2025.

Firms as a Portfolio of Workers

A traditional view treats firms as production functions, – entities that combine capital and labor to maximize outputs, with workers as relatively fungible inputs whose marginal productivity determines their compensation. Arguably, for knowledge work in particular, this framing is somewhat incomplete as individual capabilities can't be easily separated from collective outcomes. The resource-based view of firm strategy recognized this decades ago, arguing that firms are bundles of resources and capabilities, but even that framework tends to treat human capital as an aggregate stock rather than a portfolio of discrete and tradeable assets.

This WSJ piece on Zuckerberg's AI recruiting blitz reveals a transition towards viewing firms as true portfolios of individual workers. Meta is effectively acquiring assets with specific return profiles, offering $100 million packages and considering outright startup purchases as alternative routes to the same intellectual property. Of course, this "portfolio view" isn't confined to the tech sector. Investment banks and hedge funds have the most explicit systems for treating individual talent as revenue-generating assets. European football clubs have also operated this way for decades, treating players as appreciating assets whose value derives from both current performance and future transferability. Academic institutions engage in similar portfolio construction when they hire faculty, although they probably disguise the portfolio logic a bit.

SPAC Revival

Financial fads follow lifecycles of varying lengths, though most seem to require a minimum dormancy period before rehabilitation becomes possible. The dot-com boom ran roughly six years before its collapse, while the subprime mortgage craze lasted about eight years and took over a decade to resurface in new forms. This FT piece on the SPAC market revival suggests a much shorter four-year cycle may be emerging. After peaking in 2021 followed by a dramatic collapse, " SPACs are now drawing record Wall Street attendance, largely driven largely by cryptocurrency-related deals. Perhaps it takes the revival of one dismissed financial innovation to resurrect another, offering just enough conceptual distance from the original failures while offering investors the comfort of familiar structures wrapped around newly fashionable assets.

The Academic Gig

I wrote up a short piece reflecting on my first year as a finance professor at Columbia. It is mostly just a way to collect thoughts before they dissipate, but hopefully they offer some insights into the strange profession of being an academic. One thing that I emphasize is the nature of academic competition: academics compete not only with their contemporaries but also with the accumulated wisdom of every economist who came before us. This temporal dimension creates a peculiar form of intellectual humility – unlike most professions where you're measured against current peers, academics must constantly prove their relevance against the entire history of their field.

In the context of finance, academics and industry maintain a symbiotic relationship that cuts both ways. Finance academia has provided conceptual frameworks that reshaped entire industries (e.g. option pricing, efficient markets hypothesis, modern portfolio theory), but industry also provides the raw material that keeps academic research relevant (e.g. market anomalies, new institutional arrangements)

One important difference is that for industry, money serves as the ultimate criterion of success, while for academics, publishing and presenting become the primary measures of achievement. This creates interesting dynamics that potentially introduce frictions in communication between the two worlds – practitioners may dismiss elegant theories that don't generate profits, while academics might overlook profitable strategies that lack theoretical sophistication.