This blog is something of a philosophical one, on a topic which is commonly discussed. So often people say the future is doomed – that we are doomed – but we couldn’t disagree more.
In fact, we think the present is better than the past, no matter what metric you use – health, mortality, wealth – overall, the average is consistently better. There are, of course, always exceptions to this, so we are generalising a little.
One of the most common things we hear is how tough times are for first home buyers. But the reality is that our expectations have changed, too. Many young people drive expensive SUVs and want four bedroom houses with the latest home theatre systems.
We actually think that the economic future of the world is bright. Companies have grown by 10% each year over the last 200 years. It’s easy to say that’s going to end sometime. But we believe it’s a lot less dire than people make out.
Think about obstacles in life like a hurdle we need to jump. The first hurdle is poverty and each year there are millions of people racing to get over it. People started the race during the time of industrialisation hundreds of years ago. In our developed world, we jumped that hurdle and moved out of poverty. Everyone has something to eat. We have things that meet all our basic needs like electricity, clean water and food. But sadly, there are still billions of people around the world who haven’t jumped that first hurdle and still don't have the essentials needed to survive.
When you’ve jumped the first hurdle you don’t have too much to worry about in order to get by. So then we start approaching the next step, or in this metaphor, the next jump. This next hurdle is the ‘middle class’. The vast majority of people in the developed world are in this category. Most people in Australia have their basic needs met and have money left over for cars, IPhones and overseas holidays.
So once we get over the first hurdle, that middle class income more or less becomes disposable. Think about the people who have not got over that first hurdle yet. When they do, they'll have money to spend, too, and the biggest companies of the world will benefit from that economically.
Of course, we don’t know who the biggest companies of the world will be in the future. That’s why it’s important to invest in a diversified range of companies to ensure you’re always invested in the best ones, regardless of what those companies might be.
Regardless of how many people climb the wall or how quickly they climb it, we still need to own as many of the greatest companies as we possibly can to get the most financial benefit. And when you think about life and society in terms of these hurdles – the future certainly is brighter than we think!
