Going, Going, Gone: The 2019 Rapid-Fire Investment Spurt

There’s an interesting trend happening before our eyes…one apparent across nearly all industries…and it’s probably not good for you.

It’s the ‘spurt’ world we now live in.

Items of interest — whether musicians, stocks, inventions, brands, whatever — seem to have shorter and shorter lifespans.

Where a musician would stay on the top charts for weeks and months, they now only appear for days.

A short ‘spurt’ to the top…then an equally dramatic fall from grace.

Same thing with inventions. Or celebrities. Or cars.

They steal the spotlight for a short moment, then disappear from the face of relevancy…

It wasn’t always this way.

Queen’s Bohemian Rhapsody, for example, held the #1 spot on the charts for nine weeks straight.

These days, artists are lucky to appear on the charts for a week…then they disappear off into obscurity.

Earlier this year, Dodge stole headlines with the launch of their 808hp Dodge SRT Demon. I followed the monster muscle car closely…But now, just a few months later, the powerful model is only a faint memory in the minds of car enthusiasts.

Rewind 50 years, to the era of the Ford Mustang…and you’d find decade-old models just as relevant as the day they came out.

Companies can be the same.

I was just reading in the NZ Herald about the Aussie company Appster. In a few short years, it went from a uni dormitory idea to ‘the next Apple’…with the two founders going from broke students to being worth an estimated $62.7 million.

Then just like Appster appeared, it disappeared…falling into liquidation earlier this month.

But some of the old guard — General Electric, Johnson & Johnson, Chevron or Ford — have seemingly built empires for generations.

The fastest-growing company of 2017 was Natural Health Trends. They didn’t even make it into the top 100 this year. You probably don’t even know who they are…I didn’t.

Just like that, they evaporated…

Certainly the bitcoin speculators of Christmas 2017 know how this feels. In August of 2017, the price of a bitcoin was US$3,500. By Christmas, it was over US$17,000. A year later, back to $3,500.

Like a thief in the night, it came and went.

(We think that cryptocurrency and blockchain continue to hold promise, despite the incredible roller coaster of a ride this past year)

Why is this? Why are the chart-topping lifespans of everything becoming shorter by the day?

I believe there are three separate forces at play causing this ‘spurt’ phenomenon.

The first being Moore’s Law.

In 1975, Gordon Moore, the co-founder of Intel, basically theorised that semiconductors would halve in size/double in density every two years. And that’s led to the exponential development across modern technology.

Sensors are getting wildly small. Screens are packing more pixels than ever. Cameras are gaining resolution while getting smaller themselves. Phones getting faster and more capable.

It means that technology is improving exponentially…and so innovations are relevant for shorter and short times.

Think about the printing press.

Gutenberg’s press was relevant for 400 years. Then industrial printing presses changed the game for hundred years. Offset for a couple decades. Thermal in the 90s. Inkjet. Laser. Now 3-D printing.

This phenomenon affects all things, from inventions to cars to cryptocurrencies.

The second factor is competition, specifically competition spawning from the development of globalisation.

As the world ‘flattens’ due to growing globalisation…stuff becomes cheaper. Components and raw materials become more easily available… Through trade, haves and have-nots can balance their resources for a low price threshold.

It means that the price of making things or building things has become cheaper, so companies are able to get the ball rolling for less and faster.

The result? More and more companies forming quickly. When a new idea shows promise, a host of competitors can spring up basically overnight.

This also happens at an individual level for things like labour.

If a company posts a job today, they’re posting it online…and they’ll receive applications from potentially hundreds of applicants from around the world.

50 years ago, that job ad would go into the local paper and reach a small circle of people.

So apply this idea to music, and you’ll see why songs and musicians don’t last too long these days.

They’re competing against any yahoo with a smartphone anywhere in the world. Just record your song, upload it to YouTube and you could be on the Billboard 100 in no time. But you’ll also fall off just as quickly.

The third factor at play that I see is the self-fulfilling prophecy.

20th century sociologist Robert Merton coined the term…and it basically means that by holding on to and acting upon a false idea can eventually cause that idea to become true.

His example was of a perfectly-solvent bank where a large group of customers happened to arrive at the same time. Seeing the crowd, the customers worry that something is wrong at the bank, so people are coming to pull out their money…so each one pulls out their money.

Suddenly there’s a huge run on the bank, causing the solvent bank to become insolvent — making the originally false idea true.

I believe this concept — the self-fulfilling prophecy — is at play in today’s culture. People plan for things not to last…so they don’t.

People think their career won’t last more than 10 years…so they plan around finding a new job within 10 years.  When they get the new job, it fulfils the original fear…even though they might have been able to stay in that position for the rest of their life.

They buy cars to last five years…and even though the car might last 10, they swap out after five. Then car manufacturers realise they can build cars to last only five years, so they do.

Same thing with relationships, or houses, or tools, or investments…

The list goes on infinitely.

By assuming things won’t last, we propel the downward spiral of how long things do last.

And in investing, this phenomenon plays out in a weird way.

Folks used to plan on holding stocks for decades, or even generations. They’d buy a stock of Colgate [NYSE:CL] to hold until they die, so they could give it to their children.

(Which by the way represents a 6,500% return between 1978 and 2018).

These days, a long-term shareholder holds a stock for 2.8 years. A short-term investor is in for just seven months.

The time horizon for investors has shortened dramatically as part of this downward spiral.

Altogether, we’re seeing ideas manifest in shorter and shorter times. Maybe we should be happy about that…since it means progress is progressing exponentially faster. But it sure is hard to keep up. And it’s even harder to stay ahead.

Does this mean that the ordinary person has to match the pace of the world to get ahead? Or is it possible there is some wisdom in the tortoise and the hare?

Maybe the fast-moving masses are actually confused and reactionary. Maybe in the messy swarm of data there is only a nugget of truth for the patient, considering reader to uncover.

It’s easy to ‘fall behind’ in a fast-moving world. But maybe the broader view is one from a step back.

Cheers,

Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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