My interest is in the Future because I am going to spend the rest of my life there. - Charles Kettering
In a recent post on Value Traps, I promised that I would offer what is the #1 way to hone one's ability to recognize a 'value trap'. The answer's simple: Become a 'Futurist'.
Before I tell you what a Futurist is, allow me to briefly explain how I stumbled across Futurism.
In 2001, and from the furthest city in the world from Jerusalem – Sydney – I watched intently (and with great disapproval) at how the political and social situation in Israel was unfolding. I couldn't bear being a distant sideline observer, and wanted to become more involved in Israeli 'policy-shaping'. And so, in the first half of that year, I left Australia and abandoned the world of entrepreneurialism, venture capital and financial markets to begin a new career path.
Soon after arriving in Israel, I found myself working under Professor Yehezkel Dror, Israel Prize Recipient, and one of the country's foremost thinkers and policy-planners. With his guidance I co-wrote the "The External Mirrors of Israel: A Comparative study of Israel and it's Neighbors" which was presented at the 2001 Herzliya Conference.
Dror introduced me to a field which immediately appealed to my love of history and sense of curiosity: Futurist Studies or Futurism. As I immersed myself in the reading material, I quickly recognized the similarities and importance of this field to my former profession – and to Value Investing.
So what's a Futurist?
Imagine that we're all passengers on one of the ships on Columbus' fleet. The Futurist's role is to sit in the little 'lookout perch' (called a 'crow's nest) at the top of the ship's mast and to scan the horizon in search of possible danger such as hidden reefs, enemy ships, or changing weather patterns. In fact, anything that might affect the ship's course, mission or safety. He relays all relevant information to the ship's captain and crew, who take such information with the required seriousness, and they respond as needed.
OK – enough with the metaphor. Adopting a multidisciplinary perspective, Futurists examine various long term trends with the hope of identifying the threats and opportunities that face all of mankind in the future. Futurists study and seek patterns of 'change'. To see what I mean, take a look at what I believe is one of the most eye-opening videos on YouTube today:
Futurists pose the question: "how will our lives be different 25 (or more) years from now?" Areas of interest include:
- Demographics: How do the trends of living longer, getting married later and having fewer children affect society, the labor force, social welfare, taxes, etc.
- Religion: What's happening in the world's major religions?
- Education: How are learning habits changing?
- Health: What are the trends and developments regarding health, diseases, nutrition, obesity, medication and health care?
- Work Lives: How is our work lives changing? Are we working more or less than previous generations? How does this affect our family units, education and social values?
- Wealth: Which professions and industries are valued the most by modern society – and why?
- Recreation: What are the trends with regards to how much free time we enjoy and how we choose to spend it?
- Environment and Ecology: What are the environmental and ecological challenges that we have created for ourselves – and how can they be addressed?
- Science & Technology: What are the new frontiers? Space? DNA engineering? New forms of planetary and inter-planetary travel. New forms of communication and knowledge-sharing.
- World Conflicts: How have global conflicts changed in the past century?
Examining such issues, futurists most of all seek to identify 'disruptive trends' or 'ruptures' in history. These are changes so significant that Futurists predict they will have a major impact on our future lives.
Back to the metaphor: unlike a ship's captain or crew whom listens and acts according to what the ship's lookout sees, mankind and its leaders do not have the same inclination to heed futurist thought. Futurists are sometimes ignored and often ridiculed, as states, world leaders, industries, and multinational corporations continue to focus on individual short-term interests over collective long-term security.
Ironically, if a Futurist succeeds in his role as a 'policy shaper', then the leaders he works for will have found ways to navigate around the threats that he identified, and his predictions will never eventuate.
The interesting thing about 'futurist thinking' is that when a person is revealed to it, they are usually not surprised at its findings. This is because the trends discussed are happening before our very eyes, and happening ever so slowly that we fail to ask the important question: 'So What?' We usually know what's going on – but fail to recognize the long-term implications that they have on our lives. Perhaps this is because we are so focused with the short term day-to-day distractions that lie immediately before us that we rarely manage to lift our heads and set our eyes on the horizon? I don't know. What I do know however is that if we are unable to look to the distance, we should at least pay some attention to those that can.
So how does this bear any relevance to Value Investors?
Futurist thinking and Value Investing go hand in hand. Value Investors are by nature, long-term oriented, and seek to gain understanding on 'what's going on?' from the long perspective. Such an understanding allows Value Investors to identify what will be important markets and industries in the future and what industries are waning and should be avoided. (Take a look at my recent post on Gannett to see how recognizing the changing trends on how we consume news would have prevented you from erringly invested in a 'value trap'.)
When reading Berkshire Hathaway Annual reports and Letters to Shareholders one gets the distinct impression that Buffett is a Futurist at heart. His writings also bear the tone of a ship's lookout that is desperately trying to get the attention and warn the captain and crew below. Just take a look at these two recent examples:
America's Growing Trade Deficit is Selling the Nation Out from Under Us. Here's a Way to Fix the Problem - and We Need to Do It Now! - by Warren Buffett, Fortune Magazine, October 6, 2004
What Worries Warren - by Warren Buffett, Fortune Magazine, March 3, 2003
In the coming posts I intend to introduce some Futurist thought, although I doubt that any of it will be new to you. In these, I hope to answer the 'So What?' question by pointing to what I believe are the main long term drivers of the future and the Value Investing opportunities that we can patiently lie in ambush for.
Some Additional Futurist Resources
Recommended Futurist Reading:
(Tip: Hover your mouse over the title of the book for additional information on it).
Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
Revolutionary Wealth: How it will be created and how it will change our lives
The Third Wave
Future Shock
Powershift: Knowledge, Wealth, and Power at the Edge of the 21st Century
Seeing What's Next: Using Theories of Innovation to Predict Industry Change
Medici Effect: What Elephants and Epidemics Can Teach Us About Innovation
The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010
The Roaring 2000s: Building The Wealth And Lifestyle You Desire In The Greatest Boom In History
Guns, Germs, and Steel: The Fates of Human Societies
Collapse: How Societies Choose to Fail or Succeed
The Third Chimpanzee: The Evolution and Future of the Human Animal (P.S.)
The Art of the Long View: Planning for the Future in an Uncertain World
Inevitable Surprises: Thinking Ahead in a Time of Turbulence
1 comment:
great post
enjoy to read it!
Dror.
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