Innovation Update

by | Jan 25, 2019 | Investing

Contemplating just a few of the amazing things that are changing our world right before our eyes

Out with the old, in with the new

Our last few letters, written during what we might call the December Debacle, discussed the falling equity markets, and even looked back at the three previous bear markets as we experienced what John Bussel, our Chief Investment Officer, noted was our fourth! Time does fly when you are having fun.

We all know by now that equity markets had a bad year in 2018, and we have included some summary numbers and charts showing what it looked like, but with bonds flat (Barclays Agg
+0.00%) and the S&P 500 down only modestly (-4.4%) losses were not extreme. It is painful to have losses, especially when they worsen suddenly right at the end of the year (Merry Christmas!), but perhaps the New Year offers hope, and we would like to focus on a select few things to highlight along those lines.

In reading some articles this morning, I was reminded of a letter John wrote for us a while back, during the painfully slow semi-recovery our economy experienced after the Great Recession of 2007-09. In that letter John pointed to some of the amazing innovation the world was experiencing as one of the reasons that the equity markets enjoyed a robust recovery even as the overall economy did not. Businesses like Apple were changing the world with remarkable innovation, and it all happened so fast we didn’t even seem to realize it.

As we experience our day-to-day world, with all its headlines, problems and distractions, not to mention tragedies and setbacks, it is easy to overlook all the positive change happening as well. Let’s take a few minutes to enjoy contemplating some great stuff coming our way.


Dating myself once more, I admit I remember waiting in huge long lines to get gas during the 70’s, when we had not one, but two oil crises, as OPEC put the squeeze on us. Our dependence on foreign oil was a serious problem.

Fast forward to 2019. The U.S. has become one of the major energy-producing and exporting nations once again, as a result of powerful new techniques for exploring and extracting fossil fuels. The growth and continuing innovations in

remarkable. Meanwhile, a major source of oil consumption may be changing as well, not to mention our primary means of transportation.

Rethinking the automobile

This morning, I read an article about what Nissan was showing at the North American International Auto show in Detroit. It reminded me of another opinion I read recently in which the central idea was that electric vehicles were here, in our immediate future, and were radically better than our current vehicles. So, change the oil on your current vehicle a few more times–it is the last gas-powered car you will ever own! He may or may not be right, but it certainly got me thinking.

We are not talking tweaks here. We are talking no need for an engine compartment at all. Small car with old fashioned huge interior space. And in self driving mode, all the controls disappear, and the seats face each other. So we can talk, unless we are texting – but this time safely.

No emissions. Obviously, the power has to be produced, but now we have total flexibility in how we produce it, no longer being married to oil. No more gas stations everywhere. And think what a change that will be in places like China and India where pollution from cars (among other things) is part of the downside of their rapidly growing economies. See our next
“emerging markets” topic.

The global middle class

While no one was looking, the world just passed an incredible milestone, according to the Brookings Institute. More than half of the world’s people are now middle class or better. For someone who grew up being told “clean your plate, children are starving in ___,” this is news. Those children are now being fed and educated, and they will have jobs, homes and medical care. It takes your breath away.

Please, somebody, alert the media! Can we take a break from domestic politics for 10 minutes to observe that the world has improved in a fundamental way and has achieved something never before seen in our thousands of years of recorded history? No? Oh well…

Amazon in India

As we read about Amazon’s new presence in New York, they are also expanding rapidly around the world, especially in India. Interesting article and it gives you a sense of how much growth and positive (although sometimes bumpy) change is taking place in emerging markets. Can you imagine what the world will look like in 20 years?

To end on a sad but grateful note, RIP Jack Bogle, Founder of Vanguard and the pioneer of index fund investing for the general public.

Best Regards

Roger Hewins

Meredith, Sam. “US Will ‘Reinforce Its Leadership’ as the World’s Top Crude Producer in 2019, IEA Says.” CNBC, CNBC, 18 Jan. 2019, worlds-top-crude-producer.html .

Eisenstein, Paul A. “Nissan Challenges Tesla in Massive Shift to Electric with ‘Complete Reinterpretation’ of the Car.” CNBC, CNBC, 17 Jan. 2019, to-electric-autos.html .

Kharas, Homi, et al. “A Global Tipping Point: Half the World Is Now Middle Class or Wealthier.”, The Brookings Institution, 27 Sept. 2018, point-half-the-world-is-now-middle-class-or-wealthier/ .

Kim, Eugene. “Amazon Is on a Hiring Spree in India, Even as New Restrictions on Foreign Sellers Loom.” CNBC, CNBC, 17 Jan. 2019, foreign-sellers-coming.html.