Think before you leap

by Arno Lawrenz | Jun 06, 2016
There is an oft-repeated quote, attributed to one Thomas J. Watson, which goes something like this: “I think there is a world market for maybe five computers.”

There is an oft-repeated quote, attributed to one Thomas J. Watson, which goes something like this: “I think there is a world market for maybe five computers.”  Well, we all know that he was quite wrong, and even today practically everyone we know has a computer of sorts in their household – even to the extent that we can consider our mobile phones to be computers. By another definition, for the techies out there, we have computers (and even phones and tablets) which have quad-core processors embedded in them, so technically you get four computers in one. News Flash : Intel just announced their very first 10-core processor desktop machine… Ha ha, Mr Watson, not such an elementary market indeed!

Nonetheless, despite the fact that it is very hard to actually ascribe that specific quote to said Mr Watson, the important point would really be that at the time that he supposedly made that quote in 1943, he was the president of IBM. So here we have the president of a computer company saying that we are only going to be able to sell five of these things. That probably went down really well at the annual staff jamboree... you know, the sort of conversation that goes something like, “Well, gee, maybe it’s time to close up shop then.”

Well, here we are over 70 years later and they are still going, well, strong-ish.  Warren Buffett’s Berkshire Hathaway is the single largest stockholder, and in 2011, IBM’s market cap exceeded that of Microsoft for the first time. They also make more money from IT support services than they do from selling computers, so maybe they are closing up shop? Sadly though, 2011 appeared to be the peak, for since then Microsoft’s value has more than doubled while IBM’s has declined, to the extent that a mere 5 years later, we now have Microsoft more than twice as big as IBM. OK, so what’s the point here?  Well, apart from highlighting the dangers of making predictions about global supply and demand – in whatever the industry – and using the past as a guide to the future, we should be mindful that even those in senior positions, who should perhaps be privy to even better insights than the average Jane or Joe, can make calls that would make even the Joes and Janes blush.

This is also because of the non-linear nature of any economy or society, and that makes it extremely hard to forecast extreme events well in advance of them happening. We can of course pick up on trends, and follow them slavishly.  But what you get then is something that works until it doesn’t.  It’s like having a car that starts reliably every morning and faithfully delivers you to your work every day, until one day, with no warning, it just refuses to start. Nobody is going to be happy.  Well, except maybe the taxi drivers and the car salespeople who no doubt will be all over you to sell you a new car.

In the same way, at Ashburton, we endeavor to understand where markets are going and what products our clients will want – not just this year, or next year, but for the long term.  Yeah, really, we do mean more than one year by that.  And so the ability to shift and change with the times is an important attribute.  There will be times when some products no longer make sense, and need to be closed down.  Then there may well be a time when most of our revenue will come from products that are only in the incubation stage at the moment.  In the same way that Mr Watson at the time could never have envisaged that almost everyone would own their own computing device, there will be investment products which you have never heard of that may well dominate your portfolio in years to come.  We aim, as a new generation investment manager, to be your present and future partner at the forefront of such developments.