Cognitive Investments

From Cognitive Investments' newest white paper: "Technology Revolutions + Investing" ?? YOU SAY YOU WANT A REVOLUTION? "Creating new wealth – and out-maneuvering the inflation that erodes existing wealth – means looking into the future. Innovation is the process through which the future is created. New ways of doing things replace the old ways: cars replace horses, computers replace typewriters, the fast-casual Chipotle model replaces TGI Friday’s with all its crazy stuff on the walls. To “innovate” means, literally, to introduce what is new. And each time we transition to something new and better, wealth grows." - Robert L. Summary: ? Over a long time horizon (10+ years), innovation is what creates new wealth in the economy. You need to think of innovation as the cornerstone of your investment portfolio, not a speculative side pocket. ? General Purpose Technologies (GPTs) – those, like computing or steel, that become a cheap and ubiquitous input across many areas – are the kind of innovations that drive revolutionary change across an entire society. The best way to build long-term wealth is to focus on GPTs. ? We are reaching the mature phase of the computing GPT revolution: society has already entered a new “techno-economic paradigm” in which we are adapting nearly all our ways to ubiquitous computing. Other GPTs, such as genetic sequencing, solar PV cells, 3D-printed metals, and orbital lift (e.g. putting stuff into space), are more nascent and will perhaps be even more impactful over the next generation, creating techno-economic paradigms of their own. ? Some businesses harness technology revolutions and thrive – but most don’t. From 1990-2020, only ~2% of publicly traded companies (1 in 42) accounted for > 100% of net wealth creation in the stock market. By contrast, 58% of publicly-traded companies destroyed investors’ wealth. Passively owning a broad stock market index, by definition, puts an investor on the wrong side of history. ? To grow your wealth long term, you must align your assets with disruptive innovation in a way that 1) can work at sufficient scale to accommodate your core investment portfolio, and 2) isn’t too speculative or risky. The best strategy is to invest in strongly-positioned, public companies that are harnessing revolutionary GPTs to get bigger and better over time. ? Because GPTs operate along a predictable framework (think “Moore’s Law,”), it is possible to identify these businesses without resorting to sci-fi speculation about the future. Want to learn more? Link to full paper in comments.