The distinction of the skilled investor lies in the discipline of applying the lessons and principles from history to the future. As Wayne Gretzky - widely regarded as the greatest ice-hockey player - eloquently puts it: “I skate to where the puck is going to be, not where it has been.” However, in applying Gretzky’s principle of figuring out the future, a material danger immediately presents itself in the form of forecasting.
However, as much as hanging on to point forecasts can feed poor investment decisions, a variation on Gretzky’s point is that if we can’t figure out the exact future location of the puck, perhaps working out its general travel direction could give us a powerful information advantage. As John Maynard Keynes put it: “It is better to be roughly right than precisely wrong.
Fewer babies. In 1950, women had an average of 4.7 children, leading to global fears about a “population explosion”. Since then, higher incomes and gains in education have translated into the global fertility rate steadily falling to 2.4 children per woman in 2018. Note, when the rate drops below 2.1, populations start to shrink - what demographers refer to as a “baby bust”.
Smarter machines. A third immutable force is the rise of machines, and specifically intelligent machines. Since 1960, computing power has, on average, doubled every 18 months. More pictures are now taken every two minutes than were taken in the entire 19th century. In terms of raw computing power, computers now rival the abilities of mouse brains.
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