Economic Evolution

Economic Evolution is a continuing stream of new product and service improvements and occasional major impact innovations added to the already existing products and services causing changes to the world and local economy, accepted economic and social assumptions and world and local community political relationships between government, people and business. Some changes can be minor in a lifetime; others can change the world quickly or over a period of decades. The ever changing relationship between government, business and people can help or hinder the economic growth or contraction from these changes.

Pieces to the Economic Evolution Puzzle

Investors and markets hate uncertainty but there are times when change creates it. People and politicians don’t want to give up what they have so they resist change. Their resistance slows advances and solutions to economic growth. Different human nature traits create different outcomes that only time can reveal. Nobody can know what happens next but they can become aware of things that force changes, watch for them and adapt investment strategies to them. Debt represents the good and bad effects of compounding.

Other Thoughts

  • Wealth migrates to opportunities and good treatment. It avoids abuse.
  • Industry (hard work) can win over the advantages of wealth.
  • Time does away with advantages. People will fight to get advantages.
  • Corruption and crime are common in time of major change.
  • Moral outrage against corruption is a common precursor to change.
  • If poor nations with low prices can give credit, rich nations lose.
  • The decline of almost every nation has started from within itself, and completed by causes acting from outside its borders.

Economic Ages

The Ages reflect a major advancement from an invention or climate change.
  • Hunter/gatherer
  • Agricultural
  • Industrial
  • Information

Reasons for Unexpected Changes

  • Human nature
  • Unintended consequences of leadership decisions, concepts and legislation/regulations
  • Charismatic leaders
  • Natural disasters
  • Random events and accidents
  • Correcting economic excesses

Things to keep in mind to understand the Information Age:

There will be major political shifts. Incomes usually fall during a transition. Changes won’t be recognized before they happen. There’s likely to be cultural clashes between old and new values including violence to protect the old. Corruption, moral decline and inefficiency appear in the final stages of an Age. There will less time to adapt to the changes. Selected Implications and Strategies: Citizenship is obsolete and in the U.S., it has liabilities. Violence will become more random; organized crime will grow in scope. Areas of economic opportunities and security will shift. The fastest growing and most important new economy won’t be China, it will be the cybereconomy!!
Encryption will become more important for commerce to keep governments out of their assets. Corporations will get more “virtual”. Expect a slowdown in consumption in the U.S. and other countries. Central banks may disappear as a new “cybermoney” grows and is accepted. Deflation is likely and debt should be avoided. The taxing capacity of nations will decline. Expect continued deficits and high real-interest rates. The growing danger of crime, like embezzlement and undetectable theft, will make morality and honor among associates more crucial and valued. Incomes of the very rich will rise faster than others.
The information age eliminates many advantages of location/geography, shortens product cycle lives, will have smaller businesses which won’t use mass production and will be more competitive which will probably force lower pay and fewer unions.

Looking to the Future

Big changes are likely to create big and recurring amounts of uncertainty which markets hate. Uncertainty brings opportunities as well as rising and falling markets. Investors will need to think about how change will influence their portfolios and strategies and make adjustments.
We are giving away our wealth by giving our manufacturing and agriculture to others by importing what we could do ourselves. Retail distribution only reallocates the wealth from us to others. We have gotten fat and happy while others are working hard to get what we have now. (Competition, envy and rivalry causing relative power/wealth change.)
We, like others with power and wealth in the past, our government will fight to preserve what we have with progressively increasing taxes and regulations which will only weaken us further-to the advantage of others. We, as individuals, can help our personal situations. We need the government to do the same by doing what is economically rational for the country rather than fighting for political advantage which only hinders our futures.

Final Thoughts

I started out nervous about this subject but as I got into it, I realized that the Information Age stocks are in a new growth area and a new investment area to be added to Industrial and Agricultural Age stocks. There will be times when I need to go with some defensive stocks and an income allocation.
I will also assume lower price-earnings ratios because of the uncertainty from unexpected events occurring By being alert to changing market and economic conditions, I’ll be better prepared for the opportunities and downdrafts coming. Investing will be more work in the future, but as history has shown, work can be rewarded with wealth.

Sources Used

There were three books used as research for this presentation. If you would more details, they were:

An Inquiry into the Permanent Causes of the Decline and Fall of Powerful and Wealthy Nations by William Playfair.  It was written in 1805 (it’s not a typo)

The Sovereign Individual-How to survive and thrive during the collapse of the welfare state by James Dale Davidson & Lord William Rees-Mogg. It was written in 1997

The World is Curved-Hidden Dangers to the Global Economy by David M. Smick. It was written in 2008.