For those of you who were born in the 1970s and 1980s, like myself, this is an exciting year, because it marks the 30th anniversary of Marty McFly's trip back in time in Back to the Future -- and, eventually, forward in time in Back to the Future II.
It's enough to make you shout, "Great Scott!"
Has it really been 30 years?
As the calendar year rolled over into 2015, news and entertainment outlets began churning out predictions of what Back to the Future II got right -- and what it got horribly wrong. If you recall, Back to the Future II's future time travel date is Oct. 21, 2015, so futurists are eager to see how accurate director Robert Zemeckis' vision of future society was.
Obviously, there were quite a few things the movie series got wrong about the future. There aren't skyways filled with mass-produced flying cars, we're no longer using fax machines, and we can't hydrate a pizza in three seconds (but imagine how this would change college dorm rooms across America if it were a reality!).
But Zemeckis also got a handful of things very right. He foresaw 3-D technology (think of the "Jaws 19" hologram), he rightly assumed that teleconference would become the norm, and the movie correctly predicts that the Chicago Cubs are cursed forever. Sorry, Cubbies fans -- your team just can't catch a break.
Three investing lessons that are timeless
Yet if you step back and look at Back to the Future from the perspective of an investor, you'll also discover that it has three important lessons it can teach us.
No. 1: Innovation is critical, and failure is OK
The opening scene of Back to the Future teaches us a lot about where the movie and the eventual trilogy will head. Aside from the fascination with wall clocks, we're introduced early to Doc Brown's numerous household inventions and learn quickly that he's a scientist who's always trying to improve the world around him.
This isn't so different from corporations today: Innovation remains the cornerstone of their success. We're all aware of how technological advances influence our lives, but industries other than consumer tech are constantly innovating in order to boost their business and make our lives better. Restaurants are thinking of new foods for us to try, chemical companies are testing new manufacturing processes that could decrease the costs of the products we buy, and biotechnology companies are looking into ways to cure cancer and other infectious diseases.
In other words, innovation is a measure of success that investors can use to determine whether a company has a bright and sustainable future.
But in the quest to innovate, it's also OK to fail. In fact, as Elon Musk, CEO of electric-vehicle maker Tesla Motors (NASDAQ:TSLA), has iterated: "Failure is an option here. If things are not failing, you are not innovating enough."
Clearly, not all of Doc Brown's inventions work as intended, but that doesn't stop the wacky scientist from forging ahead with his research -- which eventually leads to an incredible breakthrough. All it takes is one game-changing invention -- a time machine, a hepatitis C cure, a smartphone -- to completely change the outlook for a company or an entire industry.
No. 2: The power of branding
Back to the Future was an absolute monster in the box office, generating sales of $389 million worldwide compared to a production budget of roughly $20 million. Can you say "blockbuster"? Keep in mind this figure doesn't even factor in inflation since 1985!
Not surprisingly, Back to the Future II was loaded with product placements following the success of the original, leading us to the next important investment conclusion: Brand loyalty and brand awareness matter.
Look closely and you'll see pitches for PepsiCo, Pizza Hut, Black & Decker (now a part of Stanley Black & Decker), and AT&T, to name a few. However, what people might remember most from Back to the Future II are the Nike (NYSE:NKE) MAG shoes that Marty McFly wore. As should come as no surprise, Nike is planning to release replicas of these shoes to consumers this year in celebration of the 30th anniversary of Back to the Future.
These product placements and the subsequent sale of Nike's MAG shoe this year may seem like novelties, but they're invaluable impressions that millions of eyes see on a regular basis, both in theaters and at home. They also help to build up a brand's image and recognition. Imagine how much buzz those Nike MAG shoes will generate going forward. That sort of word-of-mouth advertising is invaluable to businesses.
The point here is that the more a brand is tied to American culture, or the more loyalty customers show to a brand, the better the business is likely to perform over the long term.
No. 3: Betting on the good guy usually pays off
Finally, following the plot of many movies before it, Back to the Future presents us with the constant struggle between the protagonist (in this case Marty McFly) and the antagonist (Biff and the entire Tannen family through Back to the Future III). We're left constantly rooting for Marty to succeed in his efforts to thwart Biff and his relatives' attempts to spoil Marty's future (or past).
Betting on the good guy is common practice in the movies -- and it's also a pretty successful practice in the investing world. Of course, the good guy won't always win on Wall Street, but socially conscious businesses that strive to change the world for the better are likely to be successful more often than not.
A good example here is Chipotle Mexican Grill (NYSE:CMG). Why is Chipotle a "good guy"? I believe it's because Chipotle is proactive about implementing certain socially responsible business practices. It buys vegetables from local growers, it uses meat (when possible) that hasn't been exposed to antibiotics or hormones, and it recently pulled pork products from its menu in about a third of its restaurants after discovering that one of its suppliers didn't adhere to its animal-welfare standards. That's a company people can believe in, eat at, and invest in for the long run.
Now, rewatching the Back to the Future series isn't likely to send your portfolio from a dead stop to 88 mph in a flash -- nor will it give the Cubs a better chance of winning a World Series. But picking out these subtle clues, and perhaps even more that I may have missed, could just make you an even better investor.
Now that's heavy!