The Tortoise Speaks...

A blog which periodically revisits evergreen investment principles!

Thinking-as-a-Service in the Age of AI

Two hundred years ago, music was a live event. You heard it once, in a room, with other people. Today, a song written in Lagos reaches a teenager in Seoul on the day of release. What happened in between was not just a technology story. It was a cultural, cognitive, and a biological one.  

The entire human history is marked by introduction of technologies or abilities that have led to such evolution. They span from say introduction of languages and words, religion, cooking to electricity, the internet, and now it seems – Artificial Intelligence (AI). 

Transformations like these have reshaped the way our brains are wired, how we think, what we value, and how we behave. They also affect the way ideas are created, selected, and passed on. In evolutionary biology terms, that is variation, selection, and transmission that govern the intensity of these transformations. 

To understand this, let’s take music technology as an example. It not just participated but controlled all three.

From Tansen to Taylor Swift: How Technology Transformed Music 

The advent of technology proved to be a boon for music. It boosted variation by enabling new kinds of music to be created by generating sound with the help of different technologies. For example, the invention of synthesizers in the 20th century let musicians create new sounds. They could explore textures that acoustic instruments couldn’t reach. 

Selection has been in the hands of a few who control the lion’s share of listening minutes. It was in the hands of DJs at radio stations in the 20th century. Today, recommendation algorithms of streaming and social media platforms select songs with high retention as well as highest danceability, energy and positivity. 

Transmission was re-designed too. Imagine yourself in the 16th century. Your favourite artist, Tansen, sang his latest music. You wouldn’t have been able to listen to him unless you attended it live inside Akbar’s courtroom. There was no storage medium except a human being’s memory. Now fast-forward to today where we can listen to our favourite artists whenever and wherever we want. In the past, music travelled through live performance and memory. Now it moves instantly across platforms.  

Transmission is controlled by the medium, shaped by recommendation systems and platform incentives. There is possibly a lot of music you would’ve liked but weren’t recommended simply because it wasn’t suggested to you by the algorithm. 

That was music. Now imagine that kind of transformative power applied to thought itself.

And then came AI  

Artificial Intelligence (AI) is now doing something similar, but at a speed and scale we could never have imagined. AI here includes recommendation algorithms, Gen AI, etc. Let me explain how AI controls variation, selection and transmission.  

Variation is supercharged. Anybody can know anything and it is a matter of asking the LLM the right questions. Not only are tasks getting easier, but humans are exposed to ideas that they couldn’t think of. Chess Grandmasters now prepare for tournaments using computers to understand all the possibilities created by each move. 

Selection is run by recommendation engines. They determine which news stories reach millions, which musical artists find audiences and which political arguments gain traction. When you look at Elon Musk’s $44 bn acquisition of Twitter from the lens of being able to control the narrative, it might start making a little more sense. 

Transmission is controlled by the handful of GenAI models answering to everyone in the world, based on the knowledge base they are trained on. Given that training data is similar and models are few, outputs for a given question could be similar. (This is called output homogenization; a concept we’ll return to as deserves its own attention).  

Now you’d think that this kind of transformation would be life-changing, and you wouldn’t be wrong. But the mechanics of change do not capture the full picture. What does this transformation do to us? The answer, it turns out, is both fascinating and concerning. 

AI’s benefits come with some troubling side effects 

  1. Cognitive offloading (or Thinking-as-a-Service): This is the tendency to use external aids to offload/ reduce mental efforts and free up space in the working memory. We all do this: using a calendar instead of memorizing dates, or a map instead of learning directions.  

    The problem is that when we outsource thinking to AI, we may be outsourcing the very mental work that builds expertise.  

  1. This can hinder new skill formation: AI assistance produces significant productivity gains, particularly for novice professionals who outsource some thinking onto AI. While it may lead to a lower turnaround time, it can hamper new skill development if the task was meant to teach/ hone an important skill (example analysing the financials of a company).  
    For more information on this, read How AI Impacts Skill Formation by Judy Hanwen Shen & Alex Tamkin in their 2026 study.
  1. This can also erode critical thinking skills: Critical thinking is the ability to analyse, evaluate, and synthesize information to form a judgment. It is like a muscle; you build muscles by using them. If you frequently outsource thinking to AI, critical thinking will, like any other unused muscle, atrophy over time.  
    Read more on this: Is AI Eroding Our Critical Thinking Skills? By Alexandra Schirn  
    The extended hollowed mind: why foundational knowledge is indispensable in the age of AI by Christian R. Klein and Reinhard Klein  

A huge amount of cognitive offloading is like using crutches before you even learn to walk. It just doesn’t make sense.  

You might, however, end up getting a good price for your brains later because: 

(Source: The film ‘3 Idiots’) 

  1. Algorithmic monoculture and outcome homogenization (everyone’s AI has the same brain): Let me explain this in English. Algorithmic monoculture occurs when many decision-makers rely on similar algorithms to make a particular decision. Similar algorithms might mean the same algorithms or different algorithms trained on the same datasets. Logically this would mean the results may also be quite similar. This is called outcome homogenization.  
    Read more on this: Does Algorithmic monoculture lead to outcome homogenization?  
    A simple example is a person applying for jobs who keeps getting rejected because every firm uses the same software during the early stages of recruiting. This is not even hypothetical – >1000 companies (including >60% of Fortune 100 companies) rely on HireVue – same algorithm, same filters, same rejections… 
  1. Herding risk: This is related to the one above. It is a risk where traders make similar decisions due to algorithmic monoculture and outcome homogenization. This type of AI-related herding risk is a concern, as it could enhance systemic risk in financial markets, particularly in times of price volatility. 
    It has even been identified as a potential risk by the Congressional Research Service, USA
  1. Erosion of self-awareness and increased overconfidence: A study published by Aalto University found that AI use flattens or sometimes reverses the Dunning-Kruger effect (a cognitive bias where people with low ability in a specific area greatly overestimate their own competence there). With the rising use of AI, people lose the ability to self-assess one’s own performance accurately. They tend to overestimate their abilities. You can read about the 2026 study: AI makes you smarter but none the wiser: The disconnect between performance and metacognition. 
  1. Attention span: You’ve made it this far into the article. Well done. But if your attention is starting to wander, you’re not alone. It could be that my writing is boring you. Some research, however, also suggests the onslaught of technology is making it harder for us to focus, and AI could compound the problem.  

A Practical Guide to Using AI Without Losing Your Mind 

This may sound alarming, and in many ways it is. But this doesn’t mean that we should shun AI. The solution isn’t Luddism; it’s intentionality. Instead of engaging with it as a crutch, you should use it as a tool. Some good and simple AI practices that I (a novice) have learnt from watching other smart folks would be: 

  1. For deep learning, the output is not the end goal: The output is a starting point through which learning is going to happen. Alternatively, AI could be used to automate all the grunt work so that you’ve saved more time for deep learning. 
  1. Don’t just blindly accept what the AI says: If you wouldn’t accept a stranger’s answer to your question, then the same rule should apply for AI. You should form your own judgement first and then use AI to challenge or pressure test it. 
  1. Develop base competence and build on top of it using AI: Like pilots who master manual flying despite autopilot, you should follow traditional training to gain real expertise. This is important, even if AI seems faster. Once you have that strong foundation, you can learn to use AI as an advanced tool. 
  1. Visualization of information: I personally use AI a lot to visualize information. It is excellent in generating interactive charts and analogical pictures which helps me explain lengthy topics to others in a picture or two. 
  1. Ensure sources are verified and tagged: Research insights can be original or borrowed (say from AI). One needs to ensure that sources cited by the AI model make sense and are not hallucinated. One also needs to ensure to let other people know if information shared is AI generated. FYI, I used some help from AI while thinking about the negatives of AI. It was very ironic. 
  1. Work your brain a little longer before using AI: For creative/critical thinking tasks, our brains generate unexpected connections only when given time to struggle. Instead of surrendering to AI immediately, spend some time with a blank page and work on your original ideas. One could use AI to refine the original work later. 

All in all, AI should surely be used, just with care. AI is powerful because it makes thinking faster, cheaper, and more accessible. But speed is not the same as wisdom. The goal should be to use machines to complement human intelligence, not to replace it. 

As I was typing this essay on MS Word, I made enough grammatical errors that it would’ve provoked my English teacher. However, thanks to the auto-check feature (another AI application), I corrected most of the errors. While it’ll make my teacher less angry, I will be atrophying my grammatical abilities, cheers. 

Disclaimer: Views are personal.
Statutory Disclaimer:
https://amc.ppfas.com/schemes/riskometer-with-media-disclaimers/

A Machine for Your Job

“Never send a human to do a machine’s job” – “Agent” Smith

This is a dialogue from the 1999 Action/Sci-fi film – The Matrix. The film showed a very gloomy outcome for the human race. It showed a world where machines become self-aware. The machines realize that they need to dominate the human race to survive and grow. The quote has never seemed more appropriate than it does today. Especially when we choose to call the AI tools “Agents”.

I could’ve written this entire article (maybe I still should) using an LLM. At least to make it more entertaining & readable. But that would mean sending a machine to do a human’s job.

The narrative around jobs & layoffs is horrible right now. The capital vs labour debate has never been this stark. AI-enabled automation may have become a convenient excuse to resize the employee base. The past automation cycles at least gave a few years for the transition. AI models are seeing a lot of quality improvements; their recent capabilities make it seem like we will all be out of a job tomorrow.

The worst part is being asked why does your job even exist?

What is the machine’s job?

The machine’s job is to reduce human labour.

There’s a difference between labour-reducing technology & labour-replacing technology. A crane can lift heavy objects. This doesn’t mean a manual labourer cannot lift the same object by breaking it into small loads. There is a size & scale difference in the unit of labour a machine can replace. The economy works on this productivity formula.

For the cost of using that machine, how much worth of human labour will it replace?

The machine can definitely bring in these benefits. The machine can bring productivity gains in another way as well. Someone designs the machine. Someone builds it. Someone sells it & someone is an expert in using it.

For a unit of labour that the machine replaces, there are a variety of jobs & tasks it creates. This has been the logic behind our industrial economy since the Industrial Revolution. This is the job of the machine.

It breaks down the units of labour consumed & frees up the human to extract more value from their labour. If our entire job was to do one task, then the job loss to a machine is a very real possibility for us. If the value of your labour multiplies by using a machine, then your total value goes up.

That brings us to the question…

What is a human’s job?

Or rather — what is a job fit for a human? There are parts of labour which a machine couldn’t do well. Imagining the possibility of the job to exist. Thinking through the steps needed to execute the job. Finding and organizing the right combination of resources to get the job done.

There’s a reason why Al-doomers don’t like the idea of AI technology developing – the belief that AI can become super intelligent. They believe that AI can learn to organize itself against humanity. A bit like The Matrix.

The human’s job is to provide guidance, resources & validation. To do each of these tasks well, the human needs to develop the skill & capability for the job. The resources come in the form of money. Money helps educate us, the money helps in buying computing power or tokens (as it is also called). The resource would also come in the form of time devoted to guiding the system & verifying the output.

People today work with Al agents to automate some tasks. They may sometimes fear that they are training the machine to replace themselves. That’s a very limited view of our own jobs. This means that we have stopped learning & evolving our skills. This also means we have decided that we know the boundaries of our work. Both are okay if that’s what we want. However, many jobs are not always hierarchical in nature. Jobs can also improve the breadth of the work one can do. If a machine helps a human improve breadth, that’s a good outcome. If a machine still helps to find a sense of meaning & purpose in our work, that’s a good co-working outcome.

Too much work?

Is this situation creating more work to be done by less people? On the contrary, it is separating important work from the more labour-consuming work. It is not definite if we will need less or more people.

I could’ve used an LLM-based tool to write this article. Someone else can take the same topic and come up with a much better post.

But my job behind the pen is not to only put ink on paper & create a soup of familiar-sounding words. My job is to think through the impact of technology on myself, my ability to learn and understand the world. My job is also to interpret what can work well & what won’t. An AI tool can make you feel all those things, but it will not help create the action necessary to take the next step. To do the work. To write with meaning.

Disclaimer: Views are personal.
Statutory Disclaimer:
https://amc.ppfas.com/schemes/riskometer-with-media-disclaimers/


Marathons & Money – A story of long-term compounding

Since the 5th century BC, when Pheidippides ran from Marathon to Athens to deliver the news of a battle victory; running 42.195km has remained the pinnacle of endurance activities.

Marathons are a great metaphor for careers, building businesses and winning in life. And the common phrase you will often hear is “Investing is a marathon not a sprint”. But how many people who use this line have actually run one? As both a marathon runner and a long-term investor here are ten of my favourite insights on the parallel between the two:

  1. You don’t run 42km once. You run one kilometre forty-two times.
    Insight: Break the big task up into smaller goals and SIPs are the best way to do this. 
  2. A marathon is a 10km race with a 32km warmup.
    Insight: Compounding is back ended.
  3. Every uphill has a downhill.
    Insight: In markets, things are never as good or as bad as they seem.
  4. To finish first, you must first finish
    Insight: It doesn’t matter how late you started, how little you are saving or how far away your financial goal is. Just keep going!
  5. It never gets easier, you only get faster
    Insight: Progress is the essence of life. Keep growing and raising your ambition.
  6. You only see the runners in front of you, never those behind you
    Insight: Appreciate everything you have and how far you have come in life. Gratitude and contentment are pillars of long-term compounding.
  7. The hardest part is not finishing, it is believing you can finish
    Insight: Self-belief is your greatest source of strength. And focus on the present and only on the present. 
  8. A marathon is not run on the road. It is run in the six inches between your ears.
    Insight: Equanimity is the secret to success in long-term investing.
  9. For every minute you gain on the first half, you will give back three in the second half.
    Insight: Stay patient and stick to your plan. There are no shortcuts to getting rich.
  10. It takes a team to run a marathon alone
    Insight: Acknowledge and celebrate the role your financial advisor, family and friends play in your financial success.

Disclaimer: Views are personal  

Statutory Disclaimer:
https://amc.ppfas.com/schemes/riskometer-with-media-disclaimers/ 

How PRC Rating Matters in Liquid Funds

Have you thought about the PRC rating in liquid funds? Do you know why it matters and what the matrix represents for these funds?

The PRC (Potential Risk Class) matrix, introduced by SEBI, requires debt funds to disclose the maximum level of risk they intend to take in the future based on their current and future investments.

This matrix evaluates two major risks that debt mutual funds are exposed to:

1. Credit Risk – the risk that the issuer of security may default.

2. Interest Rate Risk – the risk of the security’s value fluctuating due to changes in interest rates.

The position of the debt scheme in the matrix shall be displayed by the AMCs by this matrix. Here is have a look at the matrix –  

Let me interpret it for you, the Rows I,II and III represent the interest rate risk a fund can take with Row I being the relatively low risk (Macaulay Duration ≤ 1 year), Row II being the moderate risk (Row II: Moderate risk (Macaulay Duration ≤ 3 years) and Row III being the relatively high interest rate risk (Any Macaulay Duration). In the case of liquid funds, investments are restricted to securities with maturity up to 91 days. Because of this short duration, interest rate risk is minimal. Therefore, liquid funds are always placed in the Row “I” category, indicating relatively low-interest rate risk.

However, the PRC rating still matters because liquid funds can differ in credit risk, depending on the type of short-term instruments they choose—ranging from very high-quality (AAA rated) securities to slightly lower-rated ones. Category ranges from columns A to C represents the credit risk a fund is willing to take, Column A being the lowest and Column C being the highest. 

SEBI has assigned a Credit Risk Value (CRV) to different categories of debt securities. The higher the CRV, the lower the potential credit risk—and vice versa.

· Government securities (G-Secs), State development loans/Treasury Bills/ Repo on Government Securities/TREPS / Cash carry a CRV of 13 

· AAA-rated securities have a CRV of 12 

· AA+ securities have a CRV of 11

· AA securities have a CRV of 10 and so on

Classification based on the weighted average CRV of a fund’s portfolio: 

· CRV ≥ 12 → Classified as “A” class (relatively low credit risk) 

· CRV of 10–11 → Classified as “B” class (moderate credit risk)

· CRV < 10 → Classified as “C” class (relatively high credit risk) 

Although moderate credit-risk funds should theoretically outperform low credit-risk funds on a risk-adjusted basis, the performance differential has meaningfully narrowed over the past one year. This trend has been influenced by improved market flows, compression in credit spreads, and a strategic tilt among fund managers toward lower credit-risk instruments. 

Median Rolling returns of PRC A-I vs B-I Liquid Funds

Source: ICRAMFI360, PPFAS Research

The spread between median rolling returns of A-I and B-I rated liquid funds has been reduced over the past year with better liquidity conditions since April 2025. A fund that takes higher credit risk may offer slightly higher returns but with increased potential volatility or credit events. Since liquid funds are designed primarily for short-term goals and emergency requirements, safety and liquidity should be preferred over returns.

Disclaimer – The views are personal. Macaulay Duration (Duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk between securities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights are nothing, but the present value of the cash flows themselves. It is expressed in years/days. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero-coupon securities where they are the same. The Potential Risk Class (PRC) matrix, mandated by SEBI, discloses the maximum interest rate and credit risk a debt scheme may assume. PRC classification provides transparency on permissible risk boundaries but does not guarantee safety, liquidity, or returns. Past performance, including the mentioned narrowing of return differentials between A‑I and B‑I liquid funds, is not indicative of future results. Investors should evaluate their objectives and risk tolerance and consult the respective Scheme Information Document (SID), Key Information Memorandum (KIM), and professional advisors before investing. 

 Mutual Fund investments are subject to market risks, read all scheme related documents carefully

Curveball in Credit How Bear steepening is repricing risk and opportunity

Corporate bond yields attracted strong investor interest up to July 2025, with record-high issuances being comfortably absorbed by the market. Spreads remained attractive relative to State Development Loans (SDLs). Backed by the RBI’s liquidity easing measures and a cumulative 100 bps of rate cuts in CY2025, overall liquidity conditions have turned comfortable. Corporate bonds continued to offer appealing spreads as investors sought to lock in higher yields amid expectations of further rate declines. Notably, the corporate bond curve, which had remained inverted last year amid liquidity deficit conditions, has now steepened in line with improving market dynamics.

Bond Yield Curve (31st July,2025) Source: CCIL (Yields are annualized)

Following the August 2025 monetary policy meeting, a more cautious tone has emerged. Fiscal concerns linked to GST reforms, tariff-related announcements, and subdued bank demand have driven yields higher across G-Secs and SDLs. Elevated state borrowing has also added pressure, with issuances in FY25 (up to 15 August 2025) rising to Rs 3.80 lakh crore compared to Rs 2.53 lakh crore in the same period of FY24. As a result, SDL spreads over G-Secs have widened sharply to 70–80 bps, well above their usual 45–50 bps range. Lower participation from insurance and pension funds—particularly at the longer end, where they typically dominate—has further contributed to the steepening.

In contrast, corporate bond issuances remained muted in August 2025 as issuers refrained from locking in debt at elevated interest rates. A few attempted issues were eventually withdrawn amid higher investor bid expectations. The combination of elevated SDL yields and subdued corporate supply has driven a sharp compression in AAA PSU corporate bond spreads over the past month. While the PSU corporate bond yield curve remains steep, spreads have narrowed considerably—turning unattractive beyond the 2–3-year segment, where they have even slipped into negative territory. The government bond yield curve including SDLs has now turned more attractive, with unusual spreads emerging from the recent steepening. However, given these unusual circumstances, the expectation is that the RBI to intervene and stabilize the market through appropriate measures.

Yield Curve (26th August ,2025) Source: CCIL (Yields are annualized)

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