Technology and The Titans

The Revolution might not be televised after all. This week’s issue of The Economist is very telling... the headline reads:

“Technology Isn’t Working

The digital revolution has yet to fulfill its promise of higher productivity and better jobs”

We are always celebrating the rise of technology and its promise of a new world, but what if it is only giving us the old world at a faster speed? However, I am beginning to wonder if it will make a serious difference for the individual’s wallet and conditions as there has been no economic revolution or even a societal revolution.

Let’s consider productivity, or lack thereof. The American output per person soared almost one hundred percent, as the industrial revolution moved full steam ahead. We were transitioning from the agricultural society to the industrial society. Although the last 13 years were the most incredible time of technology innovation. Our productivity has declined to almost half of that period when a mule and plow was considered high-tech. The first two industrial revolutions created more jobs and higher wages, but those wages and output per person are collapsing in the age of the Selfie.

When I saw the wireless (radio) come about, and the TV, which played a significant role early on in America, it changed things: people were able to watch what went on in the south during the Civil Rights Movement and the Vietnam War was the first war televised. Nevertheless, I do not think the internet and technology era has lived up to the hype. Where are all the would-be people’s revolutions around the world? Technology was supposed to free the oppressed, but despite the hype of the Arab Spring, and the messages coming out of Hong Kong... I see nothing. Maybe it is still early, or maybe it is happening and I have not been paying attention.

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Battle of the Ages

The Battle of the Ages…Battle of the Titans

Last week, Warren Buffett announced the purchase of the Van Tuyl Group, which will become Berkshire Hathaway Automotive. With the deal, the Oracle of Omaha will receive the following:

• 5^th Largest auto dealer group
• 78 Dealerships
• 100 Franchisees in ten states
• $8 Billion in annual revenue

The news comes the day after the industry posted strong sales for the month of September, however, many industry watchers think the low-hanging fruit is gone and sales could begin to fade. The 17.5 million rate dipped by an entire million last month, which has some industry-watchers concerned.

Franchise Models in Trouble

Over the long run, fluctuating sales may not be the biggest challenge for the industry. Like Uber (taxis) and Airbnb (hotels), Telsa has been upsetting the establishment apple cart, threatening to make “business as usual” obsolete. Elon Musk wants to sell cars directly to customers, bypassing the franchise model. He has gone on the attack against the industry and their pals in government. His comments sting:

“… an even bigger conflict of interest with auto dealers is that they make most of the their profits from service, but electric cars require much less service than gasoline cars… going a step further, I have made it a principle within Tesla that we should never attempts to make servicing a profit center.”

Musk, who knows how to work the system better than anyone, has been going hard at state legislators to allow the direct-to-consumer model. I am betting on Musk to win, it will be a win for consumers, too.

Inflection Point?

There are contradictions for October and mixed messages regarding the market. It has been less than a week, and October has been anything but uneventful. I have a surprising stat; out of the 13 times the first trading day in October was off by more than one percent, 12 of those times, the market finished the year higher. Another stat; if your portfolio does not seem to reflect the market being near all-time highs, there is a reason for that. Individual stocks are trading near 52-week lows, while diversified portfolios and indices are near 52-week highs.

Moreover, I think last Thursday was the inflection point, but that does not mean that volatility will fade or become less intense. Keep in mind, we begin earnings season this week, too.