Part of investing is looking forward, we want to ensure our investments will continue to be profitable and pay dividends, we also want the company to stay in business and grow. If the company has a natural monopoly, it makes it easier, if not then we occasionally we need to look at how things fit in and if we believe the company is doing the correct thing. There is a book called How We Got to Now – 6 Innovations that made the Modern World by Steven Johnson, published by Penguin, NY, 2014. Mr. Johnson has written other books which you may want to check out.
If you look at our society and there are many wonders, how did or what needed to happen to arrive at where we are? In Mr. Johnson’s book the 6 important ingredients are glass, cold, sound, clean, time and light. You might add a category, but it is differently an interesting way to see how the world we know evolved to where it is. If you can see what Mr. Johnson sees, that will help you invest and notice if the companies you invest in do not seem to be getting in, how to connect the dots for the future.
Part of your day was likely hearing music, probably recorded, have you ever considered when he recorded music? For thousands of years, we as a society could not because we did not how and we did not know how we hear. Two key developments were needed, one from physics, the other from anatomy. From the 1500’s, scientists began to work under the assumption that sound travelled through the air in invisible wave. Edouard-Leon Scott de Martinville made a conceptual leap that sound waves could be pulled out of the air and etched onto a recording medium. He invented the phonautograph. In terms of the playback of the sound, Alexander Graham Bell, although what Bell thought the telephone was going to be used for, people did not use it. Bell envisioned the telephone as a method to share live music; when Tomas Edison invented the phonograph he thought it would be used as a means of sending letters through the postal system. The reverse is how the rest of the world used them. People used to the phonograph to listen to music, the telephone to communicate with friends.
One of the great result of the AT&T monopoly before it was divided, now it is 4 companies was Bell Labs. Why was Bell so good? John Gertner’s book The Idea Factory reveals it was not just the diversity of talent, and the tolerant of failure, and the willingness to make big bets. The justice department in 1956, allowed AT&T to have a monopoly, but any patented invention that had originated in Bell Labs would have to be freely licensed to any American company that found it useful, and all new patents would have to licensed for a modest fee. Meaning all ideas were shared, and AT&T would make profits.
Radio came about because of the invention of the vacuum tube. Radio opened up music in the country, first jazz was very popular because the music was clearer than symphony music. From jazz, there was a short period till rock n roll. With the internet the world is your oyster.
Sound waves travel 4 times faster underwater than they do through the air. This lead to safety for shipping including sonar. Sonar is used to find fish, to find icebergs and submarines ( a wonderful movie is the Hunt for Red October) and the same idea became ultrasound to determine the health and sex of the unborn child.
Linking to dividend paying stocks, it is hard to imagine living without communications today. The smartphone and all its features but equally important as the technology was developed what did we see. The inventors were trying to solve problems, but what did the public or consumers use the products for. As investors, you are balancing great new products and the demand for them and how to make money from them. Never an easy answer looking at many alternatives.
There are more questions than answers, till the next time – to raising questions.