Sunday, April 17, 2016

Investment thesis #1: The ascent of man

The video clip from the movie "2001: A Space Odyssey" is instructive. The one tribe of proto-humans is run off from the watering hole by another more aggressive tribe. Then one of the proto-humans from the weaker tribe discovers that a thigh bone can be used as a tool. In this case, use of a tool as a club. The weaker tribe then reclaims the important resource by using their advantage that their weapons affords them. Thus begins the ascent of man. From this early discovery we continue to advance our cumulative knowledge.

My first investment thesis for the next 10-20 years is the continued ascent of man. I was reminded of this principle while recently reading "My Electrician Drives a Porsche". The author highlighted the idea but I had heard it mentioned many years ago by author Doug Casey. I believe Mr. Casey was referring to the 1973 BBC program "The Ascent of Man".

Doug Casey on the Ascent of Man:

A key fact my mind keeps returning to is that there are more engineers and scientists alive today than there have been in all of the rest of human history combined. And all of these people want to become the next Steve Jobs or Albert Einstein – they all want to become immensely wealthy or make major breakthroughs. The path to the former is by inventing better technologies, and the path to the latter adds to the understanding that allows us to do the same. These people are as motivated as any alive, and I expect a good number of them will succeed.

The idea behind the the ascent of man trend is that man, alone among the animals, is capable of imagination and reason. Because of these traits he is able to make his environment conform to his will instead of adapting to natures will.

The ascent of man has been the longest trend in our history. It pays to follow a trend that is in place. Man has come from hunter gatherers grubbing out a living on the land to beginning the exploration of space. Barring any self inflicted stupidity like a nuclear war or an unfortunate accident like a meteor strike this trend is bound to continue.

What is even more exciting is not only will the ascent of man continue but it is going to accelerate. It will accelerate due to the increase in computing power due to Moore's Law. The internet and world wide web will also speed up this trend. People all over the world are now able to communicate with each other virtually for free. They can find like minded people and collaborate and assist each other on projects and ideas. They have access to the same stores of knowledge as everyone in the developed world.

The world population will be approaching 9.6 billion people by 2050. Much of this growth in population will come from frontier and emerging economies. As these places get wired up to the internet and become more developed the opportunities for gifted minds in these societies to come to the forefront and contribute to the collective knowledge base will increase exponentially. It is like a giant super-computer that has additional computing chips added to it everyday.

Everyday we are bombarded with a new supposed crisis. Whether it is climate change, over population, resource depletion, etc... we are told the end is near. We have been through two world wars, famines, natural disasters, man made disasters, etc... yet man has recovered, rebuilt, and moved forward. I anticipate the same will continue for years into the future.

Is there any actionable investment themes from this short essay. Not really except to say that one should keep their eye on the medium and long term and understand that all sorts of negative items will be in the news. It pays to take most of these crisis with a grain of salt as the future is going to be a lot more amazing than most of us can even imagine.

Remembering that we have overcome similar negative circumstances and problems, or they were proven to be non-events (Y2K), in the past will help to view crisis as an opportunity. Lack of water and arable land, energy shortages, climate change, etc...are all just problems looking for a solution. Most of the time these problems and the solutions to them are actionable for investment purposes if you know where to look.

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