Thinking long term - really really, long term

David Miller

It was interesting to see the Chancellor chose to encourage the under 40s to invest for their old age in March’s Budget.

I have long thought retirement funded by governments and employers will come to be seen as unique to the 20th Century.

But if there were a message from the five central banks we heard from, it was a sense that negative interest rates, although fine in theory, have unintended consequences in the real world and so are best avoided if at all possible.

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Physicists and mathematicians accept strange things happen to their models at extremes and when they start talking about a singularity, you know that the old rules no longer apply. Now it’s the time for central bankers to recognise this as well.

When interest rates are zero or negative, people save rather than spend and banks get even more cautious about lending.

Nevertheless, it seems low interest rates will be with us for some time to come and so the search for other sources of return remains a priority.

Successful investment in new companies might be risky, but it’s very rewarding for those that find the needle in the haystack. I was, therefore, interested to meet an investor who specialises in finding the winners, many of which start life in the academic world.

The key to investment success is about identifying the right time to get involved. New technology may be valuable, but so is investors’ capital. Investing in agriculture is also more complicated than it seems.

Buying the land is just the start. After that you need to invest in people, local infrastructure and transportation. Venturing away from listed securities isn’t something to be undertaken lightly.

Man versus machine has been in the news as the best ‘Go’ player in the world took on the Google financed AlphaGo computer and lost 4-1. It seems the only way to beat the machine was to make unorthodox moves which, to quote Mr Spock from Star Trek, ‘did not compute’.

This has a resonance for those of us involved in financial markets where the rapid increase in computing power is encroaching on many aspects of our day to day activities. Where humans score is not in beating a specific target, but in judging which target to try to beat.

You can program a computer to win at chess and ‘Go’, but in the real world, the rule book keeps changing. So far the machines aren’t intelligent enough to play a simultaneous game of chess and Go, while out bluffing all of us at the same time.

For the moment, simplistic models are driving a misallocation of capital, which is presenting those prepared to exercise judgement with many interesting investment opportunities.

The benefits of long-term investment and the impact of increasing life expectancy was brought home when I attended an impressive performance of Verdi’s Pater Noster and Requiem, performed by the combined choirs and orchestras of the Dulwich Foundation schools, to mark the 400th anniversary of Edward Alleyn’s original endowment.