Humans Are Amazing

Despite all our foibles, we humans are amazing.  Collectively amazing. 

Backtrack to March of this year.  The world was falling apart.  The market was in free-fall and there was talk of the world entering something equivalent to the Great Depression.  The only way out would be a vaccine, but that would take years.  Even in a best-case scenario, a vaccine would take eighteen months.  Absolute best-case.  Scientists had never come up with a vaccine in that time frame before.

Here we are, the beginning of December, just nine months later, and we have not one, but three vaccines ready to roll-out. 

Take a moment and think about that. 

What an extraordinary story of human ingenuity.  The best brains on the planet combined with unlimited resources achieved the impossible. 

Science and technology have saved us, again.  It has been doing so for hundreds of years.

In 1894 the Times of London ran a story that predicted that within 50 years every street in London would be buried under 9 feet of manure.  It became known as the Great Horse Manure Crisis of 1894 and was talked about in every major city in the world.

The first international urban-planning conference was held four years later in New York.  It was scheduled to last for ten days but was abandoned after three because none of the delegates could see any solution to the vast problem of horses and their muck.  Of course we know how this ended.  Henry Ford saved us.

The most modern example of such a prediction of doom is the story of Peak Oil.  The theory several decades ago was that, and the current trends, the world’s crude oil production would peak around 2004-2005 and then start an irreversible decline.  Humans were doomed.

This theory has largely been forgotten now because we found new ways of extracting oil and new technology was developed that reduced our dependence on the stuff.

These are classic cases of humans extrapolating out a trend without understanding how we create new technologies to respond to incentives. 

This year scientists achieved something that they had never achieved before because the incentives were so strong.  Charlie Munger once said, ‘show me the incentives and I will show you the outcome’.

I say this over and over, but the greatest resource on the planet is human ingenuity.  The only way to benefit from this resource is to own companies – global companies.  The stock market is driven by human ingenuity and the profits that flow from it.  Human ingenuity does not show up in the price of your house, or in the value of the cash in your bank account.

The US market (S&P 500) today stands at 3,691, a whisker off the all-time high of last week.  It bottomed on March 23rd of this year at 2,192.  The almost 70% rally came before the vaccine was announced. 

There are so many lessons from this year, but perhaps the most important is that it never pays to bet against us. Not now, not then, and not ever.

Georgie

georgie@libertywealth.ky