There is quite a lot of bad news around and yet the markets are holding up remarkably well. Troops and weapons are being assembled across the borders of Europe from the Baltic to the Mediterranean. Facebook (woops Meta!) has lost $200b which is ½ of the $400b the TARP bailout needed to tap for the whole system! Tesla and crypto have all been bashed by the markets. The President of the US is pretty much falling asleep during his own speeches and then needing to be led away from the podium. The British Prime Minister was partying during a national emergency and while the Queen sat tragically alone mourning her deceased husband and worse, the Prime Minister then repeatedly lied about it, thus destroying what little public trust was in place. The US debt has exceeded $30T for the first time, inflation keeps ticking up and restaurants and shops everywhere are still pretty much empty.
And yet….
And yet, the markets have not collapsed. They are levitating. Why? What are we waiting for? The answer is simple. It’s two things. 1. There is so much money in the system that it just keeps moving around the markets rather than retracting from the markets altogether. The TARP money plus the COVID stimulus together have created the greatest protective coating around the world economy. Money is a buffer that makes the economy like a Michelin Man. It just bounces in response to any kind of pressure. Money moves fluidly from one sector or style of investing to another. No one can stay in cash because inflation is eroding the value of cash every day.
2. It’s because new investable innovations are coming even faster than ever. The speed and magnitude of innovation is compelling. This helps explain why we see a record number of investors piling into start-ups. $621B arrived in 2021 for start-ups, “shattering all records”. Yes, the weight of money is pushing investors into earlier-stage investments. Even the majors like Sequoia are systematically targeting budding start-ups now.
The scale and pace is hard for most to understand in part because most people are so siloed. For decades those with the greatest specializations were rewarded the most. But, now that change is happening rapidly and across so many different silos simultaneously, those who have a good knowledge of many sectors and subjects are best placed to see broader patterns. Now polymaths are more valuable than specialists.
To be clear, a polymath is not a Rennaisance Man who skims across the tops of multiple subjects. A polymath does a deep dive on many subjects simultaneously. This is a moment in history that will reward those who do this. It might be time to look into Athanasius Kircher, a Jesuit Priest, known as a “Master of 100 Arts”. He was a great figure from history who almost singlehandedly gave life to the Renaissance. He set in place the intellectual foundation for our modern beliefs that science and math could be a method and should drive discovery and decision-making. Kircher was a deep scholar of medicine, physics, astronomy, geology, math, history, music, and a linguist. He seems to have been a translator fluent in many European languages but also Arabic, Coptic (modern Egyptian) and hieroglyphs, and Mandarin Chinese. He translated the Arabic texts that ended the dark ages by restoring philosophy, mathematics, art, and poetry into the European thought process. Today we find it hard to imagine that anyone can do a deep dive on so much. Yet, polymaths have been present throughout history. They are very valuable now. Why? Because they see patterns rippling across seemingly unrelated fields. They also tend to be brave enough to jump across the boundaries of subject disciplines and thus make the greatest discoveries.
A polymathic view of the world economy looks like this:
The digitization trend has only just begun. Tech Republic says that Companies across all sectors are spending a record $23m on average building the APIs that are essential for collaboration and innovation. Gartner says that 30% of all organizations will be up and running in the digital twin/metaverse space by 2026 when some $42b will be spent on this new space.
Now we can create the materials and processes we need atom by atom. This matters given that Jeff Currie, the Head of Commodities Research at Goldman, says we’re having “a molecule crisis” where we don’t have enough of anything, not “oil, gas, copper” or anything else. So, where will the money go? In the past you would have bought smaller and riskier mining companies. Today you need to buy firms involved in molecular discovery and new materials. Inventors are relentlessly producing revolutionary new materials.
New discoveries are requiring less money, less infrastructure and are spreading faster. You don’t need government or corporate labs anymore to innovate. Steve Jobs and Bill Gates were exceptions back in the 1970s. Many tried and few succeeded. Today a 22-year old called Sam Zeloof is building microchips in his garage amidst a global chip shortage and attracting the attention of Wired Magazine. Today, many try and many succeed. The ratio of effort to success is better than ever before. Today you do not even need a garage. People are innovating wherever they may be, including online.
So, we should not be surprised to see contradictory headlines. Ford halts production due to severe chip shortages even as Detroit may emerge as a new epicenter of chip production. The University of Michigan at Dearborn is already beta testing a chip production curriculum in anticipation of a new 200-acre campus funded by Danny Wilkerson the owner of Detroit Microsystems and Ya Sha (Alex) Yi, an MIT Presidential Fellow who specializes in chip-related research. The new facility, the Invictus Innovation EV campus, will be devoted to chip manufacturing and innovation.
Or, consider container shipping. That market is having its best ever results and shipmakers are looking to restart production in the US, Mexico and the EU. High shipping costs are causing manufacturing to return to the West across the board. Companies are realizing that automation, autonomy, and robotics mean that they no longer need as much labor anyway. Meanwhile, new technologies are allowing shipping to become greener and capable of producing ever fewer emissions as well. Geopolitics will only accelerate this trend. That’s investable too. The creation of materials and solutions at the molecular level will also start to reduce the need to ship things across the planet. So, expect shipping to become very efficient and very niche in the coming years. Companies that get the matching software sorted are winners, like Flexport.
Meanwhile, the market has hardly begun to really comprehend what digitization and fractionalization will ultimately mean for efficiency and profits. The Digital Dollar is coming even if the regulators are going slow for now. The super and quantum computers needed to manage all this data are coming too. The spin-offs from these efforts are going to permeate through the economy.
It’s a race. Bad news versus new opportunities. So far, the new opportunities are winning in this race. Levitation is a result of innovation plus Michelin Man-like buffers. Even when the correction comes, I wonder if it will bounce, catching the bears by surprise?
New ideas just keep bubbling up!
Gosh, Pippa! If the purpose of your blogs is to get us pueblos thinking, you hit the spot yet again! Thanks for the meditation material and god speed! :)
I love your blogs abs writings Pippa. You always make me think. Hope to see you in NC in May!