Perspectives

ECONOMIC COMMENTARY

The old saying “the more things change, the more they stay the same” is appropriate in many areas of our lives, but not in the world of innovation and technology. In fact, we have come to depend on and respond to technological advances that completely displace our old way of doing business. Some of us can easily recall how we thought the Sperry Rand computer was the pinnacle of electronic data engineering. Then came Digital Equipment and all the minicomputers. Now our mobile devices can process and display information on a scale that was inconceivable in the early stages of the digital revolution. How our lives have changed.

Imagine the economic fallout from Covid if we didn’t have the capacity to work remotely? Even though companies like ours had no ability to work in-office, we were still able to meet our clients’ needs. The economy did not fall apart. Business continued without interruption. What a remarkable story, one that was only possible because of the important investments in technology that had been made by the public and private sectors.

We are again on the precipice of a whole new world with Artificial Intelligence (AI). Although AI is a buzz word and people have been scrambling to figure out its potential impact, my suggestion is that we have no idea of the magnitude of AI’s influence on our world. As we were totally unaware of what companies like Google, Tesla, and Apple would do to our lives, this is the same situation in spades. AI will allow businesses to become more profitable and efficient. It will drive up profit margins and allow for a new level of growth.

We unfortunately live in a world where cooperation is no longer the mantra. Now countries look inside their own borders for solutions at the expense of collaboration. Many of the world’s most mature economies enjoy little population growth. For those on the lower end of the income scale, the prospect for a better life must come from increased productivity (output per man hours). Which leads back to AI. As this technology becomes developed and rolled out, it will bring a new opportunity for economic growth, and not just for the top wage earners, but for the broader population as well.

There will be plenty of discussion about disruptions and job losses, even as new opportunities become apparent. This tension has always been there. The history of social development is all about reinventing. The key point is we will not know the degree and extent of the changes we are about to witness, but it will be profound. Most likely it will impact all of our lives and much of what we do.

Just as we had no idea that Covid was on our doorstep but had the capability to tackle it, mature economies might be more equipped than we think in their struggle to find growth. While AI has been in our lives for a few years, its power is becoming more evident, its uses more extensive. Maybe, just maybe, we have a need for a new technology and it comes into our lives at the most important point.

Although I can’t begin to predict where all this is going, its evolution is occurring at precisely the right time. All pretty neat. It fits in with my underlying belief that capitalism is a living, breathing energy which creates and sustains. And it is consistent with my long expressed themes of lower interest rates and equity markets reflecting faith in the future. Therefore, we continue to invest with the belief that healthy change is a fact and, although there are many concerns, we must live with the belief that innovation and technology take humanity to the next level of healthy existence.

Harold G. Kotler, CFA

Founder-Chairman, Chief Investment Officer