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.
Every since fire was first used, we needed light to move around. The evolution from fire to artificial light or light bulbs is a long one. From the fire to portable fire or candles. How were candles made? The best time was from beeswax, but they were expensive so most people used tallow from animal fat. The downside was foul odor and thick smoke.
The next evolution came from whales, somehow the spermaceti in the whales skull was a great improvement on tallow, better light, no smoke. President George Washington estimated he spent $15,000 a year in today’s money burning spermaceti candles. The whaling industry which killed 300,000 sperm whales created beautiful seaside towns of Nantucket and Egartown.
The next stage was to use kerosene, when the Rockerfellers went into the oil business there was little demand for oil, but kerosene large market. Eventually the car was produced and light bulk came to being.
If you think about light bulbs the name Thomas Edison comes up, but reality is people were trying to invent the light bulb for 80 years till Edison came up with the final pieces of the puzzle. The reason it took so long was the light bulb has 3 parts: some kind of filament that glows when an electrical current runs through it’ some mechanism to keep the filament from burning out too quickly and a means of supplying electric current to start the reaction in the first place. Why does Edison get much of the credit?
Edison was a master of marketing and PR. He helped the press; he would announce solutions to scare off competitiors; and he did manage to show light bulbs that would last 5 minutes, and in 1882 he did produce a light bulb that was well ahead of his competitors.
Edison found a filament that worked and equally important was the team he had assembled around him. The people were diverse in nationality and professional expertise. Edison did not just invent new technology, he invented an entire system for inventing, to make the teams creative: assembling diverse skills in a work environment that valued experimentation and accepted failure; incentivizing the group with financial rewards that were aligned with the overall success of the organization; and building on ideas that originated elsewhere. He said he was more of a sponge than inventor.
Another aspect to light is taking photographs when it is dark or flash photography. The person who invented it was interested in showing public health problems, but to see the problems people had to see what happens after dark or when the lights go out.
If you have been to Las Vegas, for many years they had no street lights because of the neon signs of the hotels. Thanks to the electricity generated by the Hoover Dam bringing electricity to the desert; and technology from France, an opportunity came forth and although neon signs are in Times Square, Las Vegas skyline is neon signs not buildings.
If you buy 99% of products there is a bar code on it. The bar code is called a Universal Product Code and uses a laser to scan it. The bar code greatly reduced the costs of maintaining a large inventory and thus allowed for stores to get bigger.
Linking to dividend paying stocks, in this book, the author looked at 6 basic ideas and linked them to improvements in how we live. It is a very interesting perspective and needs a great deal of information to connect the dots. If you can do this, you might see trends a little easier and maybe profit from them. The information also shows there are always many alternatives to solve problems, but are they the correct problems to be solved in order to make money? Dividend producing companies have a track record of doing that, but life does change over time.
There are more questions than answers, till the next time – to raising questions.