Thursday, May 14, 2009

The New Illiterates... Part 1

In advance, this isn't really about investing, but more so a lead-in to a coming post or 2 on the historical roles of eroding economic moats and people willingly becoming illiterate.

Living in the day and age we do, we don't appreciate what we have or the rate at which we have advanced (even in my short life). For example; just a few years ago, I remember getting my first cell phone: a candy bar style Nokia that had one of the gray screens (complete with an antenna that you could pull out!). I vividly remember calling my grandmother after a few hours of having said phone, to test it out- she was quite impressed that I had a cell phone. After all, it was a time when they were pretty expensive (maybe it was just eastern KY being 10 years behind the times, but nonetheless...).

Presently, no one that I know of within a decade of my age has a land line. My current phone is the G1; more of a computer than a phone.

I even remember my family getting our first PC, before which, we had a Commador64. At the time, I recall thinking that a gigabyte was such a vast amount of memory, which could never be used... Now, it is pretty common to have Micro SD cards in our phones that are 16 gigs!

My point is that we live in a rapidly advancing world, with our standard of living constantly going up. Two seemingly unrelated items are commonly related through the field of internet search. Recently, a few members of my family were talking about St. Louis and the National Boy Scout Museum being close by in Murray, KY. I typed in the phrase "national scout museum location" on my phone, and found out that the museum had been moved to Texas within 30 seconds.

If I want to find my favorite mewithoutYou song by typing in some of the lyrics, I can type in a few, find the name of the song, and even one of the band's pirated youtube videos. I can do all of this from my cell phone (including watching the youtube video) JUST 5 YEARS AGO, THIS WAS NOT POSSIBLE. 3 years ago, it wasn't accessible to mere mortals, such as you and I. Today, one of my tenants, who is a single mom with 3 kids, who works the dead shift at Wal-Mart, has the same phone that I do; complete with a full data plan (all of which, is a testament to the goodness of capitalism)!

When thinking about these huge advances in both the scope and affordability of technology, I can see 3 things pretty clearly (but I am sure there are many more that I am completely missing):

1) It is no surprise that 'old' people don't get new things (as they are not used to the new, drastic nature of the exponential curve in regard to the change in technology)... even my older brother, who is just under 10 years older than I (even with me having a limited knowledge), has a much harder time figuring out computer issues than I do. This is despite being a hell of an electrical engineer that does controls programing; he's also much smarter than I- by a factor of about 10,000.

2) I can understand why people got stuck up in the tech bubble-after all, communications systems have done more to increase our standard of living than anything else in my short time on this earth. This is a concept that is strikingly similar to the speech that Warren Buffet gave in Sun Valley about car and tech companies roughly a decade ago; importance to society doesn't equate to economic viability... historically, take a look at airlines, airfreight, rails, tulips, etc.etc.etc.

3) Companies die all the time and things have the ability to change faster now than ever before. (Alta Vista v. Yahoo!, Yahoo! v. Google, and now, for better or worse, Apple v. Microsoft v. Google)

Obviously, the conclusion I draw from this is that we need to invest in companies that we understand, with a huge margin of safety. If we feel that we 'get' a tech company, then that is great! Value it and buy accordingly. I would love to buy google for 5x earnings. If not, then it is OK to wait for a grand slam. So much of investing is about not screwing up.

On the note of 'old' people not getting changing technology, I think that they generally do pretty well, after all, if you would have given my grandmother a microwave in 1930, she probably would have thought it to be a 'devil box' or something... if you ease them into it, I guess things work out pretty well.

On that note, I am pretty interested to see how I (and people my age) adapt to the rapid changes that are coming... especially when I am, say, 80 years old and have a walker-or maybe, new mechanical legs. :-)

1 comment:

Sivaram Velauthapillai said...

What? Mechanical legs when we get old? That's so primitive. Anything less than aritificial heart/eye/liver/arm&leg implants to prolong my life would be a huge dissapointment. Yes, kids might call me an android but I can handle that ;)

Anyway, interesting post. I look forward to hearing what's on your mind, with your next post. I think you capture the nature of humanity. Some of the changes right now have occurred rapidly and have been really large (particularly in telecommunications) but I don't think it's anything "different" from the past.

I would argue that the technological advances in the 1920's--automobiles, airplanes, and electricity for the home--were just as big. As long as science is allowed to flourish, it seems to come in bursts.

In my opinion, what is different now is that the pace seems much faster and most of the advancement impacts information. Regarding the first point, it's hard to say if the current environment is indeed changing much more rapidly or if it's just our perception.

As for the latter point, I think what is very different now (compared to the last hundread or so years) is that many of the advancements impact information (hence the boom in information technology.) Your example with the mobile phone is really good in illustrating it. It's amazing how easy it is to access information now. Just 10 or 15 years ago, it would have taken some effort to figure out, say, how to replace the hard drive on your computer. Right now, a total newbie can find detailed instructions or videos showing how to do it. Ten years ago, if someone wanted to, say, find travel information for a vacation, they were limited to the knowledge of their friends & family, newspapers, or books they were able to locate. Right now, you can literally find information on the webe for any vacation anywhere.