“The advances we’ve seen in the past few years – cars that drive themselves, useful humanoid robots, speech recognition and synthesis systems, 3D printers, Jeopardy! Champion computers – are not the crowning achievements of the computer era. They’re the warm-up acts. As we move deeper into the second machine age, we’ll see more and more such wonders, and they’ll become more and more impressive.”
The Second Machine Age, Erik Brynjolfsson and Andrew McAfee
In the above book the authors write about the game of chess and grains of rice to illustrate exponential growth (see An Illustration of Exponential Growth).
Here’s a quick synopsis of this story.
The emperor asked the inventor of the game of chess to name his reward. The inventor thought it appropriate to use the chess board and asked for one grain of rice on the first square, two on the second, four in the third and continue to double the grains of rice in each successive square.
By the end of the 32nd square the emperor would have owed the inventor the equivalent of a large rice field, which seemed reasonable
However, the emperor was alarmed to observe that by the 64th square he would owe the inventor more rice than had ever been grown in the history of the world. Upon entering the second half of the chess board, exponential growth really kicked in.
The authors wanted to determine if this concept of exponential growth could be applied to the business world. They determined that the concept of information technology first occurred in business statements in 1958. Using Moore’s Law of doubling every 18-months they determined that U.S, business entered the equivalent of the second half of a chess board – and the possibility of exponential growth began – in 2006.
The significance of that date can be illustrated by The Ascendance of Technology in the Investment World.
(Each of these “links” can be read in less than fifteen minutes.)
One might think that all of this is just intellectual poppycock. Exponential growth – outside of Moore’s Law – simply couldn’t exist in the world of business.
I decided to create a chart of the Nasdaq Composite – which is heavily weighted towards technology – to determine if exponential growth was possible in the world of investing, even with a broad-based market average.
Please note when the date 2006 appears on the following chart.
Quid erat demonstrative. It has been proven. The above is a typical “hockey stick” performance chart that reflects exponential growth.
Yes, that’s compelling. However, it poses a key question.
The COMP is, as stated, an average of lots of individual stocks. How does an investor discover individual stocks whose market performance is even better than the remarkable average performance of the COMP?
I’m convinced that the secret to this discovery process is to identify companies that are consistently generating extraordinary revenue growth. I’ve developed proprietary screening metrics that help with this discovery. Those metrics have been designed to limit risk and enhance returns.
Do those metrics work? See for yourself. . .
To provide investment guidance for Members, I launched a $500,000 Model Portfolio (EGS-1) in July 2018. Here’s the performance of that portfolio from launch to the market close on July 30, 2021:
S&P 500 + 62.5%
Nsdaq Composite + 96.9%
EGS-1 Portfolio +219.1%
In dollar terms, the portfolio has grown from the original $500,000 to $1,595,616.40.
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