Is this time different? If you think so, let’s hear why.
Bits vs. Atoms!
But it’s not a direct correlation, the market, via supply and demand, reduces the difference. But there is sufficient bias left in favor of Bits to make investing in knowledge better than investing in industry provided you don’t buy at bubble prices.
A second reason that it’s not a direct correlation is that industry is increasingly incorporating knowledge into manufacturing. Last week I was watching a video about the design and construction of the latest class of American nuclear submarines. According to the video it came in cheaper and in less time than a comparable project a few decades earlier and the main driver was the use of computer based CAD-CAM technology, no more paper designs. I was reminded of our use of PERT-CPM (Program Evaluation and Review Techniques - Critical Path Method) in our consulting business back in 1965-75. PERT was developed by GE to build the Polaris launching submarines!
One reason I think Bits vs. Atoms still gives knowledge a large advantage is that value investors are still using 15th century accounting methods made worse by GAAP-CRAP to pick stocks and that includes basing “sell-all” on historic P/E ratios. Businesses are way too complicated to be explained and predicted by accounting.
Denny Schlesinger