[Week 40 of 2025] Agents, Adaptation, and Algorithms

Welcome back to Price and Prejudice with a few musings from Week 40 of 2025.

Agents of Alpha

Every mature industry eventually invents representation. Movie stars got agents when studios stopped owning them; athletes got them when free agency arrived. Now hedge funds have one. This WSJ article profiles Ryan Walsh, a former portfolio manager turned agent for traders and stock pickers, which is a profession that didn’t exist until hedge-fund contracts started to look like Major League Baseball deals. It’s a natural evolution: once your labor market is liquid enough, someone will emerge to help you sell yourself more expensively.

The economics make sense. When contracts run to 30 pages and include clauses for stop-outs, clawbacks, and deferred compensation, it’s worth having a professional negotiator who’s seen a hundred of them. The fee he charges is basically a tax on opacity, paid by people whose comparative advantage doesn’t include reading fine print. The model also fits the current multimanager landscape: firms are drowning in capital but short on credible traders, while mid-tier PMs are just fungible enough to poach yet scarce enough to fight over. In that environment, representation isn’t luxury—it’s price discovery for human capital.

Survival of the Fittest Investors

We’ve been borrowing ideas from biology for decades. Computer scientists built genetic algorithms; economists wrote about evolutionary games; management consultants still talk about “ecosystems” with alarming sincerity. The appeal is obvious: evolution offers a grand, self-organizing story about how complexity emerges from competition.

This new CFA Institute essay by Drew Estes takes the analogy further. He argues that investing is a kind of financial selection—the market’s version of mate selection—where capital allocators play the role of peahens, choosing which firms get to reproduce. Ideally, those choices track real consumer preferences, so only the economically “fit” survive. But just as peahens can fixate on bright feathers instead of survival traits, investors can fixate on seductive narratives—momentum, “Green” signaling, whatever’s in fashion. The result is a quasi-evolutionary arms race where everyone optimizes for what attracts capital, not what creates value.

It’s a sharp argument, though maybe a bit too Darwinian. Firms don’t die just because their stock price does, and maladapted investor preferences don’t always take the species down—sometimes they just fund the next SPAC. Still, Estes’s point lands: the market may be evolving, but not necessarily toward truth or efficiency. Sometimes it’s just evolving toward prettier tails.

Build-a-Benchmark

Public.com, the Tiger Global-backed investing app, is offering “DIY indexing” for as little as $1,000—a retail version of direct indexing that once required at least $250,000 and a private banker. The pitch: pick a benchmark, delete the stocks you don’t like, and get tax-loss harvesting along the way, all for a shockingly low 0.19% fee.

It’s a nice mix of access and temptation. On one hand, this is genuine financial democratization: the tax and optimization tricks once reserved for the wealthy are now available to anyone with a thousand dollars and an opinion. On the other, it’s also indulgence—a chance for retail investors to play God with the S&P 500. The irony is that index funds were invented to stop people from doing exactly that. Direct indexing gives investors back the steering wheel, which sounds empowering right up until they drive into underperformance.

Podcasts

• This Acquired episode on Rolex traces how a small London partnership, Wilsdorf & Davis, evolved into the world’s most recognized luxury watchmaker. The fun twist is that Davis, the financier rather than the watchmaker, still got his name on the door. If you don't know much about watches, this episode also serves as a nice introduction.