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- [00:00]
Dr. Ben Zweig
Foreign.
- [00:05]
Robert Brokamp
What to know about your stock's workforce and the changing nature of the s and P500. That and more on this Saturday personal finance edition of Motley fool money. I'm Robert Brockamp, and this week I speak with Dr. Ben Zweig, the CEO of Revelia Labs, about the insights that could be gleaned from a company's hiring, firing, pay and other factors. But first, let's discuss some items that caught my attention from last week. You know, while we talk a lot about investing in individual stocks here at the Motley fool, we're also big fans of index funds. We have them in our company 401, and they're among the most popular choices. And the index that is most tracked by index funds is the S&P 500. It can be an outstanding investment to buy and hold for decades, but the index itself changes all the time. Sam Rowe, writing on his ticker substack that's spelled TKER, cited research from Goldman Sachs which found that since 1985, 20% of the index's constituents turn over every five years on average, and the amount of time spent in the index is getting shorter. Back in the 1970s, the average company lifespan in the index was 29.3 years, whereas it has been 18.3 years so far in the 2000s. In fact, six of the magnificent seven have been added in the past 25 years. As Sam wrote, quote, in any given period, there are stocks driving the overall market higher, and often many of these market leaders eventually stumble and underperform. But other stocks always emerge to take the baton and extend the market's very long trend higher, end of quote. For our next item, we'll remind you that this is an election year, and a few recent articles have pointed out that the US Senators who will be elected or reelected this year to six year terms will likely have a say in how Social Security's shortfall will be resolved. Currently, benefits are funded from taxes paid by workers, employers and about half of Social Security beneficiaries, with the rest coming from a trust fund established almost a century ago. However, that fund could be depleted by 2032, a couple of years sooner than expected due to several factors including a slowdown in employment, a reduction in immigration and tax breaks in the one big beautiful bill that will result in fewer beneficiaries paying taxes on their benefits. Without a fix, the benefits will be cut by 20 to 25% when the trust fund is exhausted. What could that fix be? Well, likely it will be some combination of higher taxes. Later claiming ages means testing benefits and or changes to the benefit formula. What changes might be most palatable to you? Well, you can see the options and their impact by taking the Social Security Challenge from the American Academy of actuaries@actuary.org SocialSecurity and before you vote this year, file find out what changes the candidates plan to support. And now we come to the number of the week, which is 2.7%. That's the most recent reading for the Consumer Price Index, announced this past Tuesday, indicating that while inflation isn't accelerating, prices are also not coming down. And as pointed out in an article from the editorial board of the Wall Street Journal, many Americans are feeling the pinch because some everyday essentials such as shelter, food, medical care and energy have experienced price increases above the rate of overall inflation. Meanwhile, wage growth for many workers has stalled, as has the job market itself. According to a recent survey of consumer expectations from the Federal Reserve bank of New York, the perceived probability of finding a job in three months if one's current job was lost fell to 43.1%, the lowest reading since the survey began in 2013. Thanks to lower interest rates and more tax breaks, a lot of stimulus will be flowing into the economy this year. Hopefully it will result in wage and job growth without nudging up inflation. We shall see Next up, what you can learn from the employees of the companies in your portfolio when Motley Fool Money continues.
- [04:02]
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- [05:00]
Robert Brokamp
Upcoming episode of Motley Fool Conversations, which can be found on the Fool's YouTube channel. I spoke with Dr. Ben Zweig, a professor at NYU and the CEO of Revelio Labs, which provides workforce analytics for employers and investors in. He's also the author of a new book, Job Building A Language for Workforce Intelligence. This is just a portion of our discussion, so make sure you go to YouTube to see the whole conversation when it's available later next week. In this segment, we discuss how knowing a company's workforce can make you a better investor. Welcome, Ben.
- [05:30]
Dr. Ben Zweig
Thank you. Thanks for having me.
- [05:31]
Robert Brokamp
If you don't mind, let's start with an example from your book in terms of how you were analyzing what was going on at Meta and anticipating how they were going to change their strategy.
- [05:41]
Dr. Ben Zweig
Yeah, that was a wild story. So we had done this analysis with a journalist at Bloomberg. His name is Matt Boyle. He runs the con called Work Shift. It's about the future of work. And we, together with this journalist, we discovered that right after Facebook had done the rebrand to Meta, they had been hiring all these. All these people that were skilled in VR and ar, you know, all these. All these kind of metaverse types of people, you know, people that were skilled in metaverse technologies. And what we had seen in this collaboration with Bloomberg was a reversal of that. So at Meta, they had basically stopped hiring people with VR and AR skills, like, immediately. You know, it just completely dropped off. And we saw this and we were like, wow, you know, this is a huge reversal of their strategy. It's a big deal. So we, we wrote an article about it and, and then we heard from the Meta Talent Intelligence team and their public relations team, and they had said, hey, this is not coming from us. Like, we didn't announce this. You know, we, we are going to contest these findings. So we said, oh, my God. Okay, you know, maybe this is wr some way. Let's check it out. You know, what are the keywords that you're using? Maybe let's, you know, try to align so that our trends look the same. And we had worked with them for a little while and basically got the same trend. And we thought, this is a real thing. And, you know, the, the ability to basically categorize these things into. Into skills and activities can. Can uncover a very large business shift. And it turned out the same way. So we said, hey, you know, we are sticking with it. That's journalistic integrity. You know, we're not gonna, we're not gonna back off. And we didn't back later, they had made a public announcement that they were retreating from their VR strategy. So, you know, we got vindicated. But it was. It was pretty scary at the time. I don't know if you realize how intimidating you are in the media. But you know, we felt it.
- [07:32]
Robert Brokamp
I'm not personally, but I could see how that would be a little scary. Yeah, so that's a great example. And the one hand, like it's so obvious. Right. Most companies do spend most of their money on their workforce. Like you of course should be looking at what's going on, but it's difficult. You point out in the book that there are four key pieces of data that people should look at. Employee profiles, job postings, employee perception and salary benchmarks. And I don't know if you want to talk about each of those or just them in general in terms of what they can tell you about a company.
- [08:02]
Dr. Ben Zweig
Yeah, the reason why I think of those four segments is really just because that's the data that's available. So it's not that these are, you know, the comprehensive set of information that we'd like. I mean ideally I'd love to get data on employee performance, but performance ratings are just not out there. So that's just a non starter. So this collection of data is really based on what exists and what's feasible to collect. But with that you can identify a really good set of what's happening at a company that you have no affiliation to. And for investors, investors are in the business of understanding companies that they don't have an affiliation to. So we can't really be looking at internal HR data. Although that's got things like employee performance that would be nice to have. But yeah, the most powerful source of information is online profiles that can tell you start dates, end dates, where you get the full workforce dynamics of a company. You can see how many people they have, how many people are coming in in a given time period, how many people are leaving in a given time period. So the full stocks and flows of employees and how that breaks down by various employee characteristics, by occupation, geography, skill, seniority. So then with that you can, you know, what is the attrition rate, let's say of some key role and let's say a bunch of salespeople are quitting at SAP. Maybe you want to short their stock, maybe they're not going to hit their targets next quarter. So that's a really good indication of, you know, who's coming, who's leaving. So that that really comes from profiles, from postings. You get a forward looking proxy for expected hires, of course you get the actual hires from the inflows, but you get a good proxy, you know, if a company has a hiring freeze or if they're if they're hiring for a certain key role. You know, that meta example was really from postings we can see, you know, what do they want? How is their demand trending for a certain key role, key skill, something like that. Employee perception, I think is kind of the most underrated one. And there you can see like what people are writing about how they feel about a company. And employees know a great deal about what's happening inside a company. So if you see that business outlook is trending up or trending down, that tells you something about what is the inside scoop of what's happening at this company. How do people feel about, you know, an upcoming merger or a new return to office policy or something like that? You get the real inside view. And then I think it's important to list out pay as distinct from all of those because, you know, we can get data from how much people make from a variety of sources. And now with pay transparency, with new legislation around pay transparency, that's so much more out there. And you know, prices contain so much information about, you know, the relative bargaining power between workers and firms and just how those are being, you know, shifted from one role to another, what it implies about retention. So, so there, there's so much information about how much people make and what that tells you about a company's strategy. So I think that's tremendously powerful. There are also more tertiary data sets out there. There's layoff notices, there's immigration filings, there's freelance platform data. There's a lot out there, but I'd say those four are really the, the biggest to pay attention to.
- [11:11]
Robert Brokamp
Let's move on to how this information can help workers. You wrote in the book, finding a good employer is like finding a spouse. It doesn't happen overnight. You have to kiss a lot of frogs.
- [11:19]
Dr. Ben Zweig
Yeah, you definitely do. Just to belabor that analogy to a point of usefulness, perhaps if you live in a very small town, I think there was some data on this that shows kind of the generational split of where people found their spouses and found that in our sort of great grandparents era, something like 30% of people, like I'm butchering this metric. It was in Aziz Ansari's book Modern Romance, which is excellent, but documents that like some extremely high share of marriages were people that met in their own building and then, and then extending outside of that was like, you know, in their very narrow neighborhood. And now of course, you know, you know, people find partners from all over. So, so it's a much more distributed market. Than it's been back when, when people lived in small villages. And of course buildings are only relevant to large urban centers. But I think the point I want to make here is that you know, a lot of people in labor markets, candidates, job seekers, have a sense of what are the contending occupations. From a very, very narrow viewpoint. When people go out to the market and start looking for a job, maybe after high school or after college, they don't know the occupations that even exist out there. You know, I think a lot about occupations and I still discover new occupations that I didn't know existed. But if you are from a rural area, there's a very small chance that you've ever heard of like what a DevOps manager does. You know, these, these are things that are obscure even as you get deeper and deeper into it. And what, what ends up happening is that workers select into occupations based on what their parents do, what their relatives do, what their friends parents do, what their parents friends do. You know, these are, this is just like what they see and that could be extremely narrow. So their sense of what's out there, very, very limited. And if you take it even further, you know, I have a 4 year old daughter and if you ask her what, what she wants to be, you know, there are only a few jobs that she's heard of and it's like ballerina or zookeeper or astronaut, you know, these are a very small share of the, of the global labor market to say the least. And that expands as we grow, but not, not that much. So I think, you know what, what's really required is a lot more visibility, a good, a good source of information about what are the occupations that are out there and details about those occupations. You know, how much money do people make, how long do they stay here, what kind of options does it open up when you exit? How do people like, you know, what's the work life balance like? What are the other types of workers that you'll work with? Is it social? You know, these are things that people can get a sense of that would be very valuable right up front. Right up front in their job search.
- [14:01]
Robert Brokamp
I don't know if you have an opinion on this, but obviously people are looking for jobs based on what they see on whatever. LinkedIn. Indeed. Or whatever. Given your experience and your analysis, if you were to look at a job description, how much would you say like that, yep, that's 100% accurate. Or do you feel like that? Probably. Generally most people end up doing only 70% of what they thought they were doing when they got that job.
- [14:26]
Dr. Ben Zweig
Yeah, this is a huge question. So I think this is one of the most important questions in the age of AI. I'll get to why I think that's such a critical point. But just to kind of validate your presumption, you know, when you enter a job, there's some set of information about what you're expected to do. So these are the responsibilities. Then you start. First of all, it may have been wrong from the beginning. This may have been written by someone who just doesn't really know or has a very vague sense of what they want people to do. Or maybe, you know, as a candidate, you are good at some parts of it and maybe bad at other parts of it, and they decide, let's kind of, you know, reconfigure this job to match the profile of the candidate. You know, that. That happens all the time as well. But I think what's changing most rapidly is the extent to which jobs actually transform after you start. So let's say it was well written and, and it was, it was purposeful. But then you start and a few things change. One is that the demands on the business change. So for me, in my firm, we have, I don't know, 70 people or so. We're a relatively small company, and the demands on the business change every day. Every day there's a new client request and they say, hey, can you guys do this new thing? And we say, well, for the right price, we'll make it happen. And then figure out who to staff on this. And then we go around and say, hey, who's got the bandwidth, the skills? Who do we trust if it's high stakes or low stakes? And then we figure out who should do what. So we are kind of reconfiguring, you know, what people do based on the changing demands of the business. There's also changes on the labor supply side of it. Maybe someone quits. And, you know, when someone quits, you know, we have to figure out who can take over their workload, who can maintain whatever they were maintaining, who can work on the projects that they were working on. Or maybe we find out that someone we hired is just extraordinary and they've automated something or they've taken on some, some new work or something like that. Or maybe, you know, someone starts doing something and they say, hey, you know, I actually really don't like this work. I'd rather be working on something different. Can I move teams? Can I, can I move projects? Or I don't like working with this person. Or whatever it is. But these things change all the time because of changing demands of the business, changing composition of the employees that you have. You know, one, one point I make in the book is that it's really the role of managers to be the liaison between the needs of the business and what the workers can provide. And that is management in a nutshell. You know, management standing on one foot is job reconfiguration. And now with AI, you know, one thing to say about AI is that, or really any technology is that it does not automate jobs wholesale. It automates components of jobs, it automates tasks. And then what firms need to do and workers need to do is reconfigure their workload to, to adapt to some parts of that workload being automated. So that's something that has increased the need to reconfigure the work activities in the job. And one argument that I make in the book is that this reconfiguration is trackable. You know, we should be able to see what people do today, what people do a year from today, and how that changes, how that transforms. You know, we have all this information about what people do and being able to track that leads us to be able to manage it.
- [17:58]
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- [19:10]
Robert Brokamp
And this week I want you to get off your rear ends, literally. Over my podcasting career, I've done several episodes on the connection between fiscal and physical well being. The evidence is clear that healthier people are wealthier and the other way around. The causes and effects go both ways. Which brings us to a recent study from researchers at Griffith University and the University of Queensland in Australia, which found that a regular routine of sitting for 30 minutes and standing for 15 minutes while working reduced back pain and stress and improved concentration and productivity. As someone who has a desk that could be lowered and raised, I can attest to the benefits of going up and down throughout the day, so I encourage you to give it a try. And it doesn't require a new desk. Search online and you'll find plenty of clever solutions people have come up with to be able to work while standing. And that, my friends, is the show. Thanks for listening. And thanks to Bart Shannon, the engineer for this episode. As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our Show Notes. I'm Robert Brokamp. Full on everybody like.