It's always hard to predict the next big thing, and the faster change gets, the harder it becomes. But there's a lot of money to be made for those who do it successfully, so investors are sure to keep trying. That said, nobody wants to get caught with too many of their eggs in a promising-looking basket that's actually headed for a cliff.
In this clip, Motley Fool co-founder David Gardner goes over some of the pitfalls of trying to predict future trends, and offers his best suggestion about how to get around them to invest in quality companies that will still be around in a few decades.
See the full podcast by clicking here. A transcript follows the video.
This podcast was recorded on Jan. 15, 2016.
Alison Southwick: So, a lot of people have made predictions that were pretty awful. How do you, when you're looking at technology, separate, "This is crazy stuff, this is 'Jetsons' stuff that's never going to happen," versus "You know what? I think this actually has some legs, and this really is the way of the future."
David Gardner: I don't think it's that easy to do anymore, and that's really my primary point, because I think this is an important point and maybe not everybody shares this perspective. In case this adds value, I'll say this briefly: The ability to predict where things are headed has been narrowing over the course of time, dramatically. Like, 3,000 years ago, in ancient Egypt, you are I could have made a good prediction about where the world was headed in the next 100 years or so. We'd say, "Our grandkids, our great-grandkids would probably be farming, and irrigation will be important, and the Nile, we'll want that to overrun its banks," and you would have made a good call.
But as you fast forward through time, I grew up in the 1970s, and I would say, back then, you could have made about a 20- to 25-year prediction decently -- that's why, for people who were doing it 50 years ahead of time in the 1960s, that's really impressive to me. By the time we reached, I'm going to say 1993 -- and here's a specific reason why, because there was an AT&T (T 0.05%) campaign in 1993, which you can watch on YouTube, it's definitely there and I highly recommend it. Go Google "1993 AT&T ads." They were saying things like, "How would you like to drive across the country without a map? You will. And AT&T will bring you there."
It was a series of ads where they were looking at life 10 years ahead of time, and literally within about 10 years, 1993 to 2003, GPS systems were in cars and ubiquitous. So, you go back and watch those ads, and it's hilarious because they totally nailed it. Of course, what's hilarious is AT&T didn't bring us any of those things. They had Bell Labs, they had people who could see it, but they literally didn't create things like GPS. So, I would say, the window had narrowed to 10 years then. Today, it's more like three to five years now.
So, if you think about that and the implications of that, you're seeing that it's increasingly difficult specifically to know or say with confidence what the world will be like five years from today. It's much harder than it ever has been in the course of human history. So, I just think that's a profound point to recognize. For me, the investment implications, as somebody who's trying to pick stocks within this, is don't think about the trends or specific products so much. Ask yourself, "Who are the people that I want to be invested in?" You mentioned, was it the World's Fair?
Southwick: From around 1964's World's Fair.
Gardner: Yeah. So, I was reading a book recently about the 1876 Centennial Exhibition, which was kind of the same thing, 100 years after the founding of America, and Alexander Graham Bell was there in a very small room. Think of the Consumer Electronics Show today, where there's thousands of yards and lots of rooms everywhere. It was kind of like that back then in 1876 -- by the way, the Statue of Liberty's hand was all that was completed, and it was there, about 20 feet tall, just the hand. But, Alexander Graham Bell was there, being largely ignored, and he had the telephone and he was showing it off to people.
So, I'm not even sure where I'm going with that, other than to say, it was a lot easier back then to kind of see where the world was headed. But, the answer is, invest in Alexander Graham Bell. Invest in Elon Musk. Find the people -- Reed Hastings, Jeff Bezos -- who truly are creating the future. To me, that's a much more sustainable way to invest successfully than to try to guess whether the Roomba 4 is going to go autonomous and start taking over your house.
Southwick: Taking over! Agh!