Our government has allowed Amazon to develop a monopoly in Internet commerce. Google has been allowed a monopoly in search, as well as online and mobile advertising. Facebook has a monopoly in online and mobile advertising as well. These companies have all our data and hold our privacy for their high profit margins.
It is chronological snobbery to look back at history and think that people of the past made poor decisions and for us to think that we are so much smarter today. If the brightest mind of their time can become intoxicated by periods of financial Euphoria, why couldn’t ours? We also must admit the obvious elephant in the room as Walpole did. We are diverting the genius of our society from trade and industry. If you are a twenty-something person in America, it’s very possible you’d believe that technology companies are the only way to produce large amounts of personal business success. All the while, we are watching genius mainly go to the technology sector in hopes it will leak back into other places of society like Stich Fix, Uber and Grub Hub have in fashion, transportation and fast food.
The opportunity cost of society’s time and capital used in this financial euphoria could be mercilessly painful just as the cost of money is beginning to rise. We will have millions of coders and self-proclaimed technologists in society, much like London in 1720 had too many stockjobbers. As we recognize that the government isn’t there to allocate capital correctly (W.P.P.S.S.—Washington Public Power Supply System) or decide what an equitable society is from the start (schools before Brown v. Board of Education), we must come to grips that they have done it again as the King of England did in 1720. Only in the recent year has the political class begun to question the power over society these companies control. In the South Sea Episode, the greatest mind of science was more interested in stockjobbing. In today’s episode, the great minds of capitalism are more interested in computer science. As Walpole stated, “an evil of first-rate magnitude.”
Cole Smead, CFA, is managing director and portfolio manager at Smead Capital Management.