A Golden Age May Be Around the Corner

“We Have Been Here Before, Actually”

The election is on everyone’s mind and many are wondering what effect it will have on the market. The

most effective way to address the topic is to employ the concept of “a picture is worth a thousand

words.” We will get through whatever happens. We believe the long-term future remains bright.

A Golden Age May Be Around the Corner

Carlota Perez wrote the book Technological Revolutions and Financial Capital- The Dynamics of Bubbles

and Golden Ages. One of the things we like about her is that she was born in Venezuela and now lives in

England- so she has no skin in the game when it comes to politics in the United States- and we like that

she thinks in half-century blocks of time.

In the book, Perez describes the phases of the last five technological revolutions: 1771 Industrial

Revolution; 1829 Age of Steam and Railways; 1875 Age of Steel, Electricity and Heavy Engineering; 1908

Age of Oil, the Automobile, and Mass Production; and 1971 Age of Information and

Telecommunications. Each technological revolution starts with a new technology that is developed and

applied in ingenious ways. New technology transforms both business and society over the course of a

few decades. Several storied businesses fail, and others fall from prominence. Several long-lived social

etiquettes are disregarded, and others are replaced. Tension builds as changes occur. New

wealth primarily accumulates in a small portion of the population while a much larger portion of the

population does not become much wealthier or even struggles to make ends meet while working full

time. Government regulations have not yet been updated to reflect the new reality. The start of the first

phase is marked by great energy and optimism, and the end of the first phases is marked by mounting

tensions.

Each technological revolution then hits a turning point, which is marked by political polarization,

populism, civil unrest, and an economic decline. Tensions at the turning point are resolved by the

election of centrist leaders, who gradually nudge both the society and the economy to more balanced

positions. Government regulations are clumsily updated to incorporate new dynamics. We believe we

are currently at a turning point.

Finally, a golden age comes when all the benefits of the no-longer-new-technology are spread across the

population. By the time the golden age comes, many industries will have developed into oligopolies that

are tired of ferocious competition and a growth at all cost imperative. Secure in the ability to produce

satisfactory revenues and profit margins, the oligopolies pay higher wages, and the top brass no longer

takes the lion’s share. The economy has the potential for steady adequate growth during the golden

age.

Here is what the shift to the golden age might look like at Disney. First of all, we do not know anyone

who, if they solely controlled Disney, would have paid CEO Bob Iger $65.7 million for his efforts in 2018.

Mr. Iger’s compensation package was approximately 1,424 times what the median employee earned in

2018. (1) In our opinion, he is not worth it, and probably nobody is. A golden age Disney might cut

Mr. Iger’s compensation by at least 2/3rds, full time employees would be compensated at a level that

provided security, and we expect business would improve for Disney.

We had hoped the great recession had marked the turning point to a gilded age, but alas, there was not

enough change to complete the turning point. The protests that have been occurring simultaneously

around the world tend to be focused on issues that have striking similarity. U.S. citizens are far from

alone in how they feel about politics, society, or the economy. The opportunity for centrists to be

elected to office continues to grow. To us this resembles 1848 revolutions that marked the turning

point in the 1829 Age of Steam and Railways, and the golden age that followed seems well worth the

struggle to get to it.

What this means for your investments is that higher volatility may persist, but we expect it will be

worthwhile to remain disciplined investors through the turning point and into another potential golden

age.

Redmond Asset Management, LLC October 2020

(1). https://www.cnbc.com/2019/04/23/disney-ceo-bob-iger-earns-1000-times-as-much-as-a-typicalemployee.html

The opinions contained in the preceding commentary reflect those of Redmond Asset Management, LLC. The stated opinions are for general information only and are not meant to be predictions or an offer of individual or personalized investment advice. They also are not intended as an offer or solicitation with respect to the purchase or sale of any security. This information and these opinions are subject to change without notice. Any type of investing involves risk and there are no guarantees. Redmond Asset Management, LLC does not assume liability for any loss which may result from the reliance by any person upon any such information or opinions. Redmond Asset Management, LLC (RAM) is an independent, SEC registered investment management firm located in Richmond, VA and is not affiliated with any parent organization. RAM was founded in 2005 and registered with the SEC on 22 Dec 2005. The company offers investment management services for equity, balanced and fixed income portfolios to corporate, institutional, and individual investors.