My major takeaway from 2021 is a simple one, and as basic as it may initially sound, it is a foundational pillar of my investment thesis about the future.
People today, of all ages, have come to expect life to be easy.
It may sound like the start of a ‘get off my lawn’ style rant from an old man, but it is not. It’s an observation of the way society and the consumer has evolved over many years. It is especially important to understand because the overriding psychological mindset of the population drives all consumer behaviour and ultimately the businesses and stocks, we invest in.
Almost all of the technological trends evolving today are driven by removing friction from existing processes and creating faster, more efficient ways of doing business and consuming goods and services. The rise of the entire buy now, pay later sector is a case in point. We expect life to be easy. We want everything now and we don’t want to wait. We want tv and movies streamed on demand. We want our food delivered on demand.
On the downside, we have come to expect governments to bail us out on demand. We have come to expect employers to fix our problems. We don’t expect to deal with any of the pain. We talk about accountability but rarely with respect to our ourselves. As a society we seem unable to deal with a situation if isn’t easy. Presumably giving every kid a trophy for the past 35 years hasn’t helped this.
Today, the relationship between government and the people has developed into a similar dynamic to that of the parent and the spoiled brat child we all know from somewhere. Parent says no, spoiled brat cries, parent gives in. It is a recipe for disaster for both the future of the child and the economy.
What has been lacking is for government to ignore the cries of the people and let them endure a degree of genuine hardship, for their own good in the long run. For the last 15 years, pandering governments have offered continuous accommodations, money printing and economic stimulus at the hint of every problem.
Thankfully, this will soon stop.
The fact that there is now higher inflation, regardless of the causes, will necessitate governments increasing interest rates and pulling back from their excessively accommodative stances going forward. It will be interesting to see if governments hold their nerve. In the past they have not followed through, but it is now overdue.
Of course, this goes in cycles.
Hard times develop resilience and patience in the population. Whether through The Great Depression or WW1 and WW2, the generations that lived through genuinely tough times had their work ethic and perspective on life shaped by those experiences. It also shaped the consumer behaviours of the day and the companies that grew to meet their needs. It’s no different today as companies meet new needs.
Conversely, success leads to complacency and then to failure and ultimately change. It applies to nations as much as it does to technological disruption or your favourite sporting team.
From a societal perspective, those that experience relatively easy times become complacent and entitled. In the absence of any unexpected and genuine hardships, the rise of technology will continue to enable easier and easier lives, facilitating everything ‘on demand’ and the expectation of more to come.
In my opinion, the continued rise of technology is the most important and impactful investment theme in the world today. But the most important factor driving the consumer behaviours, that build the businesses we invest in for the future, is overwhelmingly that people have come to expect their lives to be easy.
General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.