The law of accelerating returns is a simple yet powerful economic concept, which could easily unlock 1,000%-plus returns in the stock market, help you explain America’s widening wealth gap, and give you the edge in a debate against Donald Trump, Bernie Sanders or Elizabeth Warren.
Sound too good to be true? It’s not.
The law of accelerating returns may be the most important economic concept you’ve never heard of, with broad implications across the stock market, the economy and politics. Better yet, it’s really easy to understand.
Our very own Eric Fry — one the world’s top investors who is renowned for his ability to identify global investment trends — believes the law of accelerating returns is one of the most important investment trends of our era, and he’s giving investors an exclusive look into his top stock picks that align with this investment megatrend.
But, first, let’s take a deeper look at the law of accelerating returns. Specifically, what is it, and why does it matter?
The Law of Accelerating Returns Will Change Markets, Economies and Politics
At its core, the law of accelerating returns is the idea that technological change isn’t linear — it’s exponential. That is, the rate at which technology changes, actually accelerates over time. For example, technology changes faster today than it did in 2000, and it changed faster in 2000 than it did in 1950.
Futurist Ray Kurzweil first coined the term in 1999. At the time, he was simultaneously inspired and awed by the fact that, in just a few dozen years, U.S. corporations transformed the concept of a computer into a mainstream, widely adopted consumer product. He was similarly enthralled by the internet — which was essentially a science fiction concept in the 1970s — and how one out of every two Americans were using the technology by the turn of the century.
After all, it took humans thousands of years to figure out the wheel, stone tools, and fire. Turning computers and the internet into a reality in roughly thirty years was a landmark accomplishment.
And yet, by modern standards, that’s almost slow.
The 21st Century has been marked by an unprecedented acceleration in technological change. The iPhone wasn’t a thing until 2007. Nor was streaming television or cloud computing. Today, less than 15 years later, everyone has an iPhone, every household subscribes to a streaming service, and every enterprise is on the cloud.
And, the craziest part is that this is just the tip of iceberg. This acceleration in technological change will only continue over the next decade and beyond. As it does, it will have huge implications on the stock market, economy and politics.
Why It Matters for Investors
The law of accelerating returns matters because it has profound systemic implications for investors.
With respect to the stock market, the law of accelerating returns essentially implies that companies that are aligned with technological change will continue to succeed. Meanwhile, companies that are out-of-sync with technological change will remain sluggish (at best). That’s because as technological change accelerates, companies levered to that change will reap all the rewards. Companies without exposure to that change will be left in the dust.
Just look back at the past twenty years for proof. Companies which have been levered to technological change — Apple (NASDAQ:AAPL) and the iPhone, Netflix (NASDAQ:NFLX) and streaming TV, Amazon (NASDAQ:AMZN) and e-commerce, Tesla (NASDAQ:TSLA) and electric vehicles, Facebook (NASDAQ:FB) and digital advertising — have seen their revenues, profits, and stock prices soar. Meanwhile, companies without exposure to technological change — General Electric (NYSE:GE), Macy’s (NYSE:M) and Exxon Mobil (NYSE:XOM), for example — have struggled.
This trend will persist. The best-performing stocks in the market will be those aligned with accelerating technological change. To see which stocks best align with this investment megatrend, I point readers to Eric Fry’s 1,000% Portfolio.
Why It Matters for the Economy and Politics
Meanwhile, with respect to the economy, the law of accelerating returns explains America’s widening wealth inequality.
Importantly, technological change doesn’t just drive revenue momentum; it also drives cost savings. Amazon figured out how to sell items without needing stores, or even needing employees for those stores. This simultaneous revenue growth and improved efficiency translates into more revenue and market value per employee, which leads to more concentration of wealth among fewer individuals.
The more technological change accelerates, the more the few aggregate all the wealth. Thus, the law of accelerating returns is why we have a widening wealth gap problem in the U.S. It’s also why this problem may not get better anytime soon.
Lastly, the recurring phenomena of accelerating technological change has profound implications on politics. Bernie Sanders isn’t going to fix the wealth gap problem. Nor is Elizabeth Warren. Or Donald Trump. Their policies all broadly miss the point. The only way to fix the wealth gap is to address the core issue — the law of accelerating returns and the aggregation of those accelerating returns among fewer and fewer individuals.
No candidate, save maybe Andrew Yang, is presently tackling this issue.
The law of accelerating returns is the most important economic concept you’ve never heard of, with broad and significant implications across the stock market, the economy and politics.
Over the next few months, InvestorPlace will be allocating significant resources to helping our readers make better investment decisions that align with this important economic concept, starting with some important observations from one of financial media’s savviest minds — Eric Fry.
Fry’s reputation of picking more than forty 1,000% winners — all without using options or other high-risk strategies — speaks for itself. And in just a year, you can learn how to build a portfolio of emerging and disruptive technologies.
Luke Lango is an equities trader and portfolio manager. He is the founder of a San Diego-based investment fund — L&F Capital Management, LLC — which focuses on overlaying fundamental analysis with behavioral economics to identify both short-term trading and long-term investment opportunities. The fund focuses on investments in the consumer and technology sectors, but has exposure to and dabbles in all industries. Luke graduated from the California Institute of Technology (Caltech) with a degree in Applied Mathematics & Economics. An entrepreneur at heart, Luke has spent much of his free time in the startup tech world, with his most recent venture being a crowdsourced experience curation platform called Fantastic. As of this writing, Luke was long NFLX and FB.