From Relevance to Obsolescence and Its Relation to Your Portfolio

Marshall W. Gifford |

by Marshall W. Gifford

1/2024

I recently returned from a trip to England, and while walking around London, was struck by the dichotomy of old and new. New technology seamlessly integrated with the old world, and I wanted to share some observations. It had been more than two decades since my last visit to London in April 2000. One of the first things I did before boarding the train was to visit a cash machine and withdraw £200. I figured I would need some cash along the way, whether it be for a pint in a British pub or tipping street performers in Covent Garden or Leicester Square. Anyone that has frequented rural Wisconsin or Minnesota knows there are still many places that only accept cash, and I wanted to be prepared. However, to my surprise, I left London without ever needing to use the cash. The established infrastructure for contactless payments was surprising. I tend to be a credit card guy, but one of the newest technologies I have embraced is Apple Pay on my Apple Watch. I used my watch to pay for the train and open the gate each time I got on and off the Underground. I used it to pay for every meal, and even street performers had contactless devices to tip them instantly from my watch. The obsolescence of cash was striking.

This experience prompted me to reflect on other things that have become obsolete since my last visit in 2000. Most notably in London would be the iconic red phone booths. I didn’t see a person in any, but they are still everywhere. I also noticed almost no one was carrying a map. In 2000, we would navigate the streets with large foldable maps. It’s difficult enough driving on the opposite side of the road, let alone trying to read a map of curving roads that were built prior to the advent of grids and automobiles. Even Clark Griswold got lost near Big Ben and Parliament prior to the advent of GPS!

Expanding my thoughts globally, I considered what else has been phased out since the turn of the century 23 years ago.  A few things that came to mind:

  • Encyclopedias
  • Cassette Tapes
  • CDs
  • Floppy Discs
  • VCRs
  • The Blackberry
  • Paper Airline Tickets
  • The Walkman
  • Yellow Pages
  • Film Cameras (for the most part)
  • Landline Phones
  • Typewriters
  • Phonebooks
  • Video Stores
  • Standalone Calculators

I’m sure I could come up with more, but you get the point.

Now, if we step back and apply this to business, it is fascinating to find that three of the current top 10 most valuable companies in the world either didn’t exist or were virtually unknown in the year 2000. Tesla was founded in 2003, Meta (Facebook) went public in 2012, and Amazon, which went public in 1997 and was primarily an online bookstore at the time. 1 My point is that in the year 2000, I thought the world was already quite advanced, yet companies that many of us use daily either didn't exist or offered fractions of what they do today. I didn’t mind watching the preselected movie projected mid-cabin 30 feet in front of me on the flight to London in April of 2000, but I much prefer the 1000+ entertainment options I can access on Delta now. The pace of progress is often imperceptible on a day-to-day basis, but it becomes strikingly evident when viewed retrospectively, and this advancement provides us with opportunities.

In 1889 Charles H. Duell was the Commissioner of the US patent office. He is widely quoted as having stated that the patent office would soon shrink in size and eventually close because everything that can be invented has been invented. Providing some perspective to this comment, it might not sound so crazy. From 1876 to 1889 the following were invented:

  • 1876 Telephone
  • 1878 Phonograph
  • 1879 Light Bulb
  • 1886 Automobile
  • 1888 Kodak Camera
  • 1888 Electric Streetcar

However, this was before the airplane in 1903 and the assembly line in 1913, which first was used to construct cars at the Highland Park Ford Plant (now repurposed as a premier housing and retail project in the Twin Cities).  Other notable inventions since 1889 would include:

  • 1939 Jet Engine
  • 1942 Nuclear Power
  • 1950 Color Television
  • 1974 Personal Computer
  • 1991 World Wide Web
  • 2007 iPhone

With the advent of the iPhone, everyday people had a very powerful phone, computer, calendar, map, flashlight, credit card, music library, newspaper, weather forecast, vacation planner, communication device in their pocket. Which, as we know, changed how the world operates. In today’s 24-hour news cycle, it is easy to adopt a pessimistic view of the future.  A common mistake investors make is we fail to realize how many things have yet to be invented, and that we won’t solve our most significant challenges with the technology we have today.

As I have expressed before, the world isn’t getting worse. If you want to see something humorous, google “world’s first automobile” and you will discover that it looks like a tricycle with a motor. Sit in a new car today. Not only are you warm and dry, but it will drive itself, park itself, stop to avoid a crash, change volume or stations with a hand signal, seamlessly switch between gas and electric motors, and accelerate from 0-60 in under 5 seconds.  What does this mean for us as investors? As this new technology makes old technology obsolete, we win.

Technologies don’t become extinct because we dislike them; they become obsolete because we find something else more appealing, better, or more convenient. I really liked walking the rows and scanning the walls at Blockbuster Video on Friday nights for a movie to watch. I didn’t even mind rewinding the tape and taking it back on Saturday, however, I much prefer scrolling for options in my living room to get the same entertainment without being required to drive there twice in 24 hours. I didn’t mind cruise control that required me to brake and reset it every time I encountered a slower car, but I like the adaptive cruise that does all that for me better. It is not only more convenient but also safer.  

What does this mean to investors as this gradual advancement of society takes place? It means that we, and the companies providing these services, benefit.  During the height of the tech bubble at the end of 2000 the S&P 500 was at 1320.28. Even if you had invested during the tech mania and ridden out the ensuing drop, as of December 29, 2023, it closed at 4769.83.2 As I have noted before, to be successful at accumulating wealth you need to spend less than you earn, invest on a regular basis, be patient, and have faith in the future. Sometimes the hardest of these is faith in the future, and I think that is my point. Here’s to 2024 and beyond!

 

Take Care,

 

Marshall W. Gifford, CLU, ChFC
Founder & Senior Partner | Founder, North Star Medical Division
Gifford Financial, The MD & DDS Specialists
A Division of North Star Resource Group

2701 University Avenue SE
Suite 100
Minneapolis, MN 55414
(612) 617-6119
Marshall@giffordfinancial.com

 

1Investopedia; https://www.investopedia.com/biggest-companies-in-the-world-by-market-cap-5212784

2FedPrimeRate; https://www.investopedia.com/biggest-companies-in-the-world-by-market-cap-5212784

 

Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. Neither asset allocation nor diversification guarantee against loss. They are methods used to manage risk. 

The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete.