This 209 Year Old Graph Will Teach You A Lot About Global Growth by Will Ortel
It’s easy to forget that business and commerce have been around for a long time, in fact almost as long as civilization itself.
William Playfair—who among other things, invented the bar chart—published a book in 1805 which investigated the causes of decline and fall of wealthy nations.
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
The chart below was in the very front of the book. It’s particularly provocative when read alongside modern attempts to look at the way that the economic productivity of countries changes over time, like this excellent Yearbook of Investment Returns from Credit Suisse.
Both excellent works serve as reminders that investors are well served by periodically remembering how dramatically things can change over time. In the graph below, the United States of America is newly ascendant in the international scene: a true emerging market. Russia, England, France, and Germany are the world’s economic powerhouses. China and India are not mentioned.
It’s amazing what can change in a few hundred years, or even in a few decades.
To choose an example of a drastic change closer to living memory, did you know there was a time when serious businesspeople doubted that a South Korean company could produce a microwave? In “The Silent War“, a 1990 book about the future of competition in business, the author details what Samsung had to overcome in order to compete.
A glance at their market share in products that require highly advanced manufacturing processes, like hard drives and flash memory, makes it almost funny that there exists in living memory a time when serious businesspeople were skeptical they could pull something like that off. In the 45 years since Samsung’s founding, the competitive landscape in business has altered so much it is barely recognizable.
The investment ramification of this walk through history is straightforward: what’s changing under your feet? Hit play on the chart below, and watch as the circles (which correspond to a local GDP Growth rate in a given year) and consider how you’d go about making sense of this seemingly random flickering of expansion and contraction.
If you had to try and fit it into a chart as simple as Playfair’s, could you? What would you emphasize?
(If you can’t see the chart, try refreshing the page or clicking here)
If you found this intriguing, consider subscribing to Inside Investing.
This was previously published on Inside Investing at the CFA Institute.
Copyright © 2008–2014 Will Ortel
All Rights Reserved.
Contact author for limited redistribution permission.
William Ortel manages Inside Investing and is a member of its founding team. Previously, he was a research analyst at Newport Value Partners, an associate in the chairman’s office at Indo-MIM, and an intern in quantitative equity trading at Oppenheimer & Company. Ortel completed his bachelor’s degree at Fordham University in three years while working full time at CFA Institute.
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.