You will read on the internet that:
• Knowledge doubled from 100 BC to 1700 (1800 years)
• Doubled again between 1700 and 1900 (200 years)
• Doubled again between 1900 and 1950 (50 years)
• Doubled again between 1950 and 1970 (20 years)
• Doubled again between 1970 and 1980 (10 years)
• Doubled again between 1980 and 1988 (8 years)
We were told in the 90s that knowledge doubled every 2 years. It is now believed to double every year.
According to IBM, the build out of the “internet of things” will lead to the doubling of knowledge every 12 hours.
What does this mean for the stock market?
We have no idea how this is calculated and it is obviously just based off estimates. But it is safe to say that knowledge is growing at a faster rate and it is accelerating. Simple compounding illustrates how big the numbers get. If we assume that current knowledge equals 1. And if we assume that knowledge growth will not accelerate but remain constant at 100% per year. Then by the time a child born today turns 10 years old there will be 1024 lots of knowledge. By the time they turn 30 there will be over 1
million lots of knowledge. By the time they turn 50 in the year 2067 there will be 1,125,899,906,842,624 lots of knowledge.
There is no way that we can imagine what the world will look like in 2067. But we can look at history and think of the tremendous change that occurred between 1900 and 1988 when knowledge doubled 4 times. One can only imagine what will happen over the next 50 years.
We also know that from 1900 to 1988 the stock market appreciated at a faster rate than knowledge, growing 41x. While it would not be reasonable to expect the stock market to continue to outpace knowledge growth in the future we believe that it is a safe bet to assume that the stock market will be worth more in 50 years than today.
We do not know what those businesses will look like or be comprised of but we believe
that over the long-term stock market growth will be correlated with knowledge.
There will of course continue to be times of panic such as the Great Depression, the bear market of the 70s, the 1987 crash, the internet bubble and the financial crisis of 08-09. These will be unavoidable and are always around the corner. However, knowledge is power and we believe that it will create the opportunities for stock market growth over the long term.