When attempting to discern what’s happening in the world and how it affects investment decisions, the question is always, “What’s really important?” as opposed to, “Who is making the most noise at the moment?” At the moment, there is a tremendous amount of noise which is obscuring the fact that a new world is taking shape before our eyes. But we’re so tuned into the noise from the old world that we barely notice.
The old world’s noise comes in many forms. It is the shouting and threats of war between Israel and Iran. Could there be a war? Yes, but it would do enormous damage to both nations. Bank of Israel governor Stanley Fischer warned of grave economic damage to the country, which one study has put at upwards of $42 billion – equivalent to more than 20% of Israel’s GDP. But the costs to Iran are just as large: Iran spent $200 billion in its stalemate war with Iraq during the 1980s. A war today might cost three or four times as much and would bankrupt the nation, while spiking oil prices by as much as 30%.
But Iran and Israel are not the only noise. What began as a shout for freedom in Tunisia and Egypt has devolved into bloody civil wars in Syria and Yemen. What has been a war of words between China and its neighbors has escalated into dueling activists occupying worthless bits of rock in the middle of the South China Sea. Then there’s the noise over debt – Eurozone and American government varieties. The endless wrangling over how to pay down debts incurred obscures the larger and more important question of how to generate employment and opportunity in nations that once seemed to have been in command of both problems. And who can forget the increasingly shrill noise of campaign rhetoric in the U.S., whose political parties and political action groups will spend an estimated $9.6 billion attempting to do what exactly?
Instead of trying to cope with the noise, perhaps its time to jam some cotton into our ears and use our eyes instead to figure out what’s really going on in the world. When I do that, I see some pretty marvelous things. I see a world where cell phones have opened up the world to true global communications. In 2009, the peak year for landlines, there were only 18.8 landlines per 100 people worldwide. By last year that number had declined slightly, but cellular ownership has become nearly universal at 82 cell lines per 100 people globally. Even more important is how quickly those cell phones are being converted to smart phones, which, since their introduction in 2006 have taken over 40% of the market in the U.S. and 36% of the global market.
But smart phones and tablet computers, which are taking over the computing market at an even faster rate than smart phones penetrated telephony, are just the beginning. At the moment, most of the more than a million phone apps are designed for personal use. There are endless games and ways to arrange your photo and music collections, but as tablets and smart phones begin to make their way into businesses and institutions, the number of apps will increase at an even faster rate than the 26,000 new apps per week that already come to the market. Diagnose what ails you? There’ll be an app for that. Run a factory? Ditto. Welcome to the world of smarter machines.
They’ll be helped along by smarter people. Back in the late 1960s, Temple University labor economist Seymour Wolfbein rashly predicted that in the future, everybody would have not five jobs in their lifetime, but five professions, and that constant education would become the norm. Wolfbein had the last laugh, it turns out: for-profit universities have become one of the ten fastest growing industries in the U.S. as they feed the growing need for continual re-skilling. They will soon become one of the fastest growing industries in the world.
I see a world where smart nations and businesses are rushing to meet the future with vast new infrastructure projects that improve the flow of global trade. The opening of a new channel in the Panama Canal in 2014 will not just mean faster shipping times from Asia to the east coast of the U.S. It also means improved access for South American goods heading for Asia, especially Brazilian and Argentine agricultural commodities. But it’s also a boon to a smaller nation like Costa Rica, which is building a huge new port to improve global access for its coffee, bananas and pineapples. It’s Mexico, which has become a major second supplier for China, building its own new Pacific port to avoid bottlenecks and extra shipping costs across the border in Los Angeles, and it’s Brazil, which has announced plans with Peru to build a $700 million transcontinental highway to open up South America’s vast inland areas to global trade and development.
The world’s population continues to grow, having recently passed 7 billion, according to the U.N. Where are all those people – more than 200,000 net new folks each day – going to live? It could be the vast and growing slums of the world, but I look at the growth of modern cities in China and South Korea and along the Arabian peninsula, and I see the possibilities for better lives for hundreds of millions of people even as urbanization increases. The construction opportunities will not only generate hundreds of billions of dollars worth of work; they’ll generate tens of million of jobs, and the need for a raft of new building technologies. Already in the U.S., “green” and sustainable building has become one of the largest industries, even in the midst of a housing downturn. In parts of Europe, green building is even more advanced. It is only a matter of time before increasingly energy-efficient building and buildings become the norm.
Which brings us to the issue of resources. Back in 1972, the Club of Rome think tank published “The Limits of Growth”, a report based on a computer model that showed that the world was running out of everything. This Malthusian model was pushed aside by the Green Revolution in agriculture, rapidly declining birth rates in most nations and improvements in manufacturing technology that raised output per worker significantly. Now, there is a new clamor over shrinking resources, brought on by the belief that we are running out of energy, clean water and hospitable climate. All of these are real problems, to be sure, but they are also problems that can be solved.
In short, there are plenty of problems in the world, and some of them may blow up at great monetary and human cost. But I continue to see a world of possibilities, and with that, opportunities – even in the problems.