095: Versus “The Gathering Darkness,” Part 4 – Support Ownership of Great Businesses By Observing Inconceivable Progress

0:00:00 – Jonathan DeYoe
When an innovation proves valuable, that value will find its way to the bottom line of publicly traded companies. If it’s really valuable, one of the companies in our global index will buy it outright and capture the lion’s share of that value for their shareholders. In case you’re not clear about this yet, we are the shareholders.

0:00:23 – Speaker 2
Do you think money takes up more life space than it should? On this show, we discuss with and share stories from artists, authors, entrepreneurs and advisors about how they mindfully minimize the time and energy spent thinking about money. Join your host, jonathan Dio, and learn how to put money in its place and get more out of life.

0:00:48 – Jonathan DeYoe
Hey, welcome back to Mindful Money. Today I’m continuing to lay out the case for owning shares in the great companies of the US and the world. If you’re just tuning in for the first time, I would encourage you to go back and listen to some of the prior episodes that lead into today. This is where we’ve been so far. Four weeks ago, we determined two things First, that wealth is created by owning great businesses and, second, that the reason most people decide to not own them or own less of them is where we summarize it as the gathering darkness. Three weeks ago, we talked about how the words we choose to describe the ownership of great businesses can affect our commitment to owning them. Two weeks ago, we discussed how important it is for investors to have an adult memory and actively cultivate their knowledge of history to sort of see how progress is always happening behind the darkness, and last week I laid out the first, my favorite, unique characteristic of rational, profit-seeking businesses, which is their absolute refusal to lose money for any longer than necessary. This week, I wanted to complete the story by expressing the second of the two great reasons for owning equities or the great companies of the United States and the world Innovation. Second only to love human ingenuity and its expression through innovation is the greatest force on earth. The exponential growth of human knowledge shows up powerfully in the growth of the great companies of the US and the world. These two complementary ideas, innovation on one hand, and capital protection on the other, form the foundation of my preference for equities over any other investment. Nothing else combines both passivity and return in quite the same magical way. So let’s talk about innovation.

My daughter, annie, has an iPhone 11. It works beautifully, though there are minor grumblings that there’s not enough storage for her photos and videos. It’s so 2019. So for our stories today, we have to imagine a different young woman, one with far better parents who keep her in the latest technology. She’s in high school. She’s getting off the bus to start her day. It’s completely normal Tuesday. For her birthday, a month ago, her parents purchased the latest and greatest the iPhone 15.

This device phone camera, video camera, calendar, video game, console, weather station, alarm clock, television, music player, music catalog, biometric scanner, watch, gps, library, flashlight, shopping device I think you probably get the picture. This device in a teenage girls backpack commands more computing power that existed in all the IBM mainframes on the planet the year I was born 1971. I think I need to repeat that because you can’t miss this one. One small handheld device operated by a teenager in 2023 has more computing power than a computer the size of a city block operated by multiple PhD level technicians in 1971. That one device replace and I mean making completely obsolete 50 other common devices that have been used by kids, teens and adults of all ages in every career for generations. It’s also incredibly easy to use and every single teenager has one, and most grandparents have one as well, and almost everyone else of every age in between has one.

But that’s not all. Anyone using this small handheld device can look up all the public information in the world on any subject, for no cost. The information accessible in seconds with this device would have been impossible to access when I was born without months of effort, multiple librarians, armies of bibliography, cross-referencing academics and the ability to travel around the world to locate rare written materials. Now it’s available at any time, from anywhere, to anyone with a small handheld device. But that also is not all. As we mentioned, all the information on nuclear physics, industrial biochemistry, history, any period, any location, and even all the information you might want to find on giraffes or penguins or how to remodel your bathroom is available on this device. However, some of the information you find will be in another language. Not to worry, the phone will translate it for you.

It’s not merely that we were unprepared for this or that it was unpredictable. It is that we could not have conceived the possibility of such a device. Any mention of such a device since, say, 1970 or the year I was born 1971, would have been laughed off as impossible science fiction. The idea of the modern smartphone was utterly and completely ridiculous in 1970. It was conceived, innovated, developed, iterated and delivered by a great company. Every single one of us enjoys the benefits of this technology. The financial benefits, however, accrue to that company’s shareholders. We are shareholders.

You actually don’t have to go back much further to find time periods without telephones, radios, tvs, airplanes, cars, electricity, indoor plumbing. My dad, when he was growing up in the houses he and his family lived in as a kid, didn’t have electricity or indoor plumbing. Each of these technologies were pressed by the great companies of the US and the world, and these companies were and are great long-term investments. What’s more, the inconceivable progress never stops. I mean, many people say well, we can’t see it’s not happening now, but that was all stuff that happened 20 years ago.

Since the turn of the century, there have been so many incredible discoveries and inventions. It’s hard to know which will have the greatest long-term effect on the individual or collective lives. We already mentioned smartphones. Perhaps the most ubiquitous innovation today is the electric vehicle. I purchased my first Tesla in 2016, but before that I owned a couple hybrids a Honda Insight and a Toyota Prius. Today, every automotive brand is developing their own EV platform and many have committed to stopping the production of their internal combustion engines altogether. And there are companies working on EV trucks and ships and planes. Talk about changing the dynamics of both transportation and energy usage around the world.

3d printing started out with printing these small physical objects, toys like out of plastic resin from digital designs. It’s now scaled to enable printing affordable housing units and has been fine-tuned to print human organs. Capsule endoscopy reduces the need for traditional invasive endoscopic procedures. The pill cam is transforming gastroenterology and making ordinarily horrible medical procedures more bearable. As a 52-year-old, this might be my favorite.

Crypto is still a bit of a solution searching for a problem, but the underlying technology, the blockchain, is already changing the world. The blockchain’s method of recording data in a decentralized, tamper-resistant ledger is changing how we think about digital transparency and security, and it’s improving the product validation in supply chain management. Streaming audio and video services are changing how we consume music and movies. Netflix and the like are changing product distribution for the entire entertainment industry. Smart home appliances like Amazon’s Echo and Google’s Home enable both on-site voice enabled control of your home environment and improve remote management of household systems like heating and lighting. The Smart Home’s little brother, which is kind of the Internet of Things, improves decision-making across industries, makes our homes just a little bit more convenient. You may not have this fridge yet, but your next refrigerator is going to sense when you’re running low on milk and it will order it for you so you never run out.

Quantum computing is exponentially faster and will enable humans to solve problems that have thus far been completely out of reach. We don’t yet know where this is gonna lead, but Star Trek just got a little bit closer. Combine this with some improved 3D printing technology and, like Captain Picard, you’re gonna be able to order T-Gray Earl Hot from a nearby replicator. Human genome mapping has opened the door to better understanding both our genetic traits and our health, think personalized medicine, the careful removal of genetic birth defects and maybe even enhanced humans, and all the ethical questions this will bring up. And there’s so many more than these. What about GPS and drone technology, hydrogen fuel cells, reusable rockets, autonomous vehicles, cloud computing, biometric scanning, virtual reality, augmented reality, machine learning, low-cost renewable energies and artificial intelligence?

The last 20 years has been filled with inconceivable progress, but we can’t see it over the headlines of pandemics and elections and everything else. Most technology firms, universities and consulting companies will tell you that innovation is accelerating. And how could it not? More brains, smarter brains, more connected brains, more diverse brains, all thinking and tackling problems together. Innovation doesn’t have a choice but to accelerate. The year 2023 fully participated in this acceleration. One of my favorite annual lists came out in late 23. And if you get a chance, check out Time Magazine’s list of the best inventions in 2023 and then in Perenn. So far, we can’t know which of these are gonna stand the test of time, which are gonna lead to even greater innovation, or which will just appear on the stage and then disappear shortly thereafter, probably to be replaced by 10 new ideas.

Progress on a scale that’s been literally inconceivable is delivered on a regular basis by the great companies of the United States and the world. We can participate in the profits of these businesses by owning as broadly as possible so as not to miss anything shares of global all cap equity indices. Rational, profit seeking businesses will seek out, test and utilize all new innovations at their disposal to create new products, expand into new markets, reduce prices to their customers. When an innovation proves valuable, that value will find its way to the bottom line of publicly traded companies. If it’s really valuable, one of the companies in our global index will buy it outright and capture the lion’s share of that value for their shareholders. In case you’re not clear about this yet, we are the shareholders. Last week we talked about the first of two great reasons for owning equities they protect our capital. This week, we sort of completed the discussion by expressing the second of two great reasons for owning equities human ingenuity, as expressed in innovation. These two comp and our ideas completely express my reasons for being a shareholder.

I do not need to hold on tight to equities. I am not white knuckling my equity ownership and you don’t need to either. I love owning shares of the great companies of the US and the world. I love that the companies produce all the things I need and want. I love that they come up with intriguing new products and services to fascinate and delight myself and all of my fellow humans. Finally, I love that it’s so incredibly easy for us to participate in the profits they produce.

Publicly traded equity ownership provides remarkably consistent long-term returns. Short-term is a crap shoot. No one has any idea, no one can predict, and it’s perhaps the only true passive investment out there. If there was a single reason that I think I was put on this earth, it was to help you love equity ownership as well. I wanna say thanks for listening. I’m gonna be back again next week to talk about why I love owning the great companies of the US and the world, specifically for retirement income planning reasons. You may have been asked if you’d rather have growth or income. I’m here to tell you you’re gonna love growth of income. Thanks for joining us. Thanks for listening.

0:13:15 – Speaker 2
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