The Winds of Change

Summary

• The pandemic caused a two-year period where daily life felt static, resembling Groundhog Day, with minimal changes to routines or travel.
• The last 12 months included a presidential election, increased focus on race, inequality, & climate change, & the development & distribution of vaccines.
• The Delta variant spurred a reemergence of Covid-19 despite the initial subsidence of the virus.
• The U.S. economic resurgence began in the third quarter of 2020 with the greatest quarterly GDP gain in history & continues to this day.
• Securities markets rallied starting in March 2020 & have continued to rise.
• Concerns regarding rising inflation are well-founded, yet there is no consensus on the primary cause or whether it will be transitory or long-lasting.
• The investment environment remains similar to previous months regarding GDP, inflation, & interest rates.
• The author contrasts the static environment of the 1950s & 1960s with the current era where change occurs daily.
• The "Nifty Fifty" growth companies of the late 1960s held price/earnings ratios up to 80 or 90 based on the belief they could never be disrupted.
• Investors who held "Nifty Fifty" stocks for five years starting in 1969 lost almost all their money due to high multiples & vulnerability to change.
• Many former "Nifty Fifty" companies like Kodak, Polaroid, Xerox, IBM, & Avon were disrupted or acquired as technology evolved.
• The modern business environment is virtual, digital, & information-oriented rather than focused on agriculture or physical manufacturing.
• Information-based businesses have exceptional profitability, low incremental production costs, & the ability to scale without proportional increases in capital or labor.
• Technology & information play a larger role in business, making labor less necessary compared to the past.
• One hundred years ago, machine-powered equipment reduced labor needs in agriculture, displacing workers who found employment in manufacturing.
• In the 21st century, manufacturing jobs are declining due to foreign competition & automation, while tech industries rise without being labor-intensive.
• Workers displaced from manufacturing often lack the education required for new tech jobs, & public education quality is declining.
• The author worries about employment for displaced workers & suggests government support payments may not adequately replace the non-monetary benefits of work.
• Cathie Wood argues that the economy faces a risk of deflation rather than inflation due to technological innovation.
• Wood identifies five deflationary platforms: DNA sequencing, robotics, energy storage, artificial intelligence, & blockchain technology.
• Wood predicts that automation & artificial intelligence will increase productivity & GDP, potentially reaching $40 trillion by 2035 instead of $28 trillion.
• GDP can grow even if the number of hours worked declines, as technology boosts output per hour worked.
• Technology has the potential to boost GDP while simultaneously increasing unemployment.
• The two-day weekend was established in the early 1900s by Henry Ford to increase car sales.
• Traditional patterns of full-time employment & career advancement are changing as computers make work arrangements more flexible.