sketching out long-term stock market themes (i)

I think next year will be one where secular forces rather than the business cycle will be the most important economic factor in determining stock performance.  So I’m going to write a number of posts to try to work out, at least to myself, what those forces are and how they’ll affect stocks.

This post is probably just a warm-up.

WWII ended a very long time ago.  But I think the mentality of that era still has an influence–most of it not so helpful today–on the way business is conducted in the US, especially for large, mature corporations.  I see three important areas:  organization, competition and communication.


Many mature corporations in the US have been set up along military lines by citizen-soldiers returning from Europe and the Pacific.  Hey, it worked in the war, didn’t it.

That is, the firms they built have a cascading management hierarchy that’s based on face-to-face communication and on control from the top of workers who have progressively diminishing amounts of decision-making responsibility as we go down the organization chart.  At the top are “generals” who give orders; at the bottom are “privates,” who don;t think too much–they just execute.  Everyone drinks the corporate Kool-aid.  Seniority counts for infinitely more than brains.

Examples:  governments, almost any financial company, publishing,  MSFT.

This now-outmoded structure required large numbers of “lifers,” –willing, but not necessarily well-trained, workers who learned on the job.  In the pre-internet world, their large size was a strong protective barrier against competitors.  No longer.

Implications:  As mature corporations continue to lose market share to sleeker, smarter, more nimble rivals, demand for worker bees, already shrinking, will continue to lessen.  For a lot of industries, this is not news.  The important thing, to my mind, is that there are still a lot of large domestic-oriented corporations with loads of labor fat (think: bank branches vs. peer-to-peer lending).

The political/social side of this issue is how to retrain displaced workers.  The investment side is the huge scope for innovative firms to still take market share from inertia-bound behemoths.

More tomorrow.



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