What should you know?
It’s common to hear people talk about stock markets these days as though the only companies that matter are large-cap US technology stocks. The argument goes something like this:
“We live in a time now where technology dominates our economy. As such, the big US companies who own these technologies (Microsoft, Apple, Amazon, etc.) have vast market values and will always be the leading companies of the world”
That could turn out to be true, but there is a case to the contrary when we look at history.
The chart below shows the major innovation cycles of the past:
Why should you care?
When we talk about ‘technology’, we usually consider the newest innovations of our time. Today, it is cloud computing, AI, and software so we think of those companies as being ‘tech’.
We tend to forget that many companies that we may now consider antiquated, were the pioneering ‘tech’ companies of their day.
In 1960 the top 10 stocks represented 31% of total US stock values, which is similar to the concentration of the largest 10 companies today. Of those 10 companies, 7 would have been considered ‘tech’ companies at that time.
AT&T (communications), General Motors (automotive transportation), DuPont and Union Carbide (both chemicals companies), Kodak (film for cameras), IBM (computing) and General Electric (industrial and consumer goods) were all highly innovative businesses driving the global economy.
Today, these sound like old-fashioned businesses operating in old-fashioned industries.
Technology is evolving faster than ever before. History indicates that it could be dangerous to assume today’s big tech companies will retain their position at the top indefinitely.
