Challenging the Idea of Maximization
Coverage of the 2014 Global Investment Conference.
BY Spencer P. Glendon | June 18, 2014
Investors are eager for more: more returns, more opportunities, more information, more tools and more ideas. There are, arguably, no concepts as central to investing and economics as growth and maximization. However, it’s important to challenge the primacy, and even the wisdom, of “more.”
The financial crisis and recession have revealed that the quantity of physical output is not necessarily related to the health of the economy; instead, production is merely a tool—and likely an inefficient one—to create employment. Preferences and technologies are changing in ways that are likely to make “more” a less powerful investment theme, both because growing economies and new consumers are much less likely to have large basements, attics and storage spaces—and because smaller, more carefully made goods and services are growing as a share of consumption.
When you compare the cost of a delicious $5 tomato to that of an entire pizza, are you seeing inflation? Decreased productivity? Or a different form of value altogether?
New technologies are making ownership less important than access and use. The ability to keep track of people, places and things is making it possible for individuals to operate taxis and share bicycles and cars, and for homeowners to become part-time hoteliers, increasing the availability and usage of their capital investments. In future, you will, in fact, pay to limit your supply of information: good filters will be extremely valuable.
This will be the first time in history when people will pay to have less information.
Finally, issues of longevity will be crucial to all financial markets. In the U.S., there is growing evidence that medical intervention will allow even the unhealthy to live longer lives. This is a complex moral, social and financial concern. What are the practical implications of these observations, which investors will have to grapple with over the coming years?
Societies that can get to a socially acceptable “less” in the treatment of the ailing elderly will have better fiscal health and be better places to invest.
Ultimately, investors who learn to understand changing measurements, think about competition from non-corporate suppliers of capital, choose good filters for their information and become comfortable thinking about morally complex issues, will have an advantage.
Spencer P. Glendon is director of macroanalysis research, Wellington Management Company, LLP