Any Happy Returns

Chapter 11The Post‐Modern Cycle and Technology

An electrical signal in the brain moves at 1/100,000th the speed of the signal in a silicon chip!

—Bill Gates

The excitement around the Fourth Industrial Revolution and the commercialisation of the internet initially generated one of the biggest financial bubbles in history. The bubble reached a peak at the turn of the century, before experiencing a spectacular collapse. Like many bubbles built around new technologies throughout history, it was not without foundation. Investors correctly recognised that a major new cycle of innovations would have a profound impact on growth and profitability in the future. The problem was that the scale and timing of the likely returns were overstated at the time, and many of the eventual winners did not yet exist.

As with previous similar bubbles, the eventual collapse wiped out many of the new entrants, but the technologies that drove the bubble survived; the technology sector, after a period of significant de‐rating, re‐emerged as the main driver of performance and profits in the post‐financial‐crisis period. With the recent focus on new technologies, particularly around artificial intelligence (AI), the significance of technology for stock markets and economies is likely to remain crucial in the Post‐Modern Cycle.

While tech stocks have been the main driver of equity market returns since the financial crisis of 2007/08, their performance has come in four distinct phases:

1. 2010–2019. Outperformance ...