At the time of World War II the military employed a room full of people to calculate how to aim the big artillery guns. They had to calculate given the distance, weather conditions and type of shell and gun how to aim the gun to hit the target. The army went to a company and asked if they would design a machine to do what that room full of calculating people were doing. That company went to work and designed such a machine. Their CEO later testifying before the US Congress was asked how many of the machines would the company expect to make. Between 4 and 5 would be all was the response. Four to five total forever.

We know differently now. The people in the room who calculated by hand how to aim the guns had the job title of “Computer” and the company that designed the machine was International Business Machines that we know as IBM.

Many people know that story. But the high crime rate in the wild, wild west also came into play in making the computer work. Without that crime wave it is possible the development of the computer would have been delayed or might never have happened.

Railroads carried not only passengers from the east coast to the west coast and visa-versa, but also gold and cash. Willie Sutton was once asked why he robbed banks. “Because that is where the money is,” he responded. The trains were also a target of robberies. Unlike the movie Butch Cassidy and the Sundance Kid, most robbers would board the train as passengers and wait for a preplanned time when the train was out in the country side to rob the train. They would disguise themselves so as not to be recognized. An ingenious proposal was made to the railroads. Cards with holes punched in them would be made for each passenger and detail the person’s color or eyes, hair, distinguishing marks, physical characteristics. After a robbery, the cards would be compared to the remaining passengers. The railroads would have an accurate description of those passengers who were missing and had robbed the train.

The card system was never widely accepted by the railroads. But it did inspire one Henry Hollerith, a census worker who realized such cards could dramatically increase productivity in taking the census. And, in fact, it did. The 1890 census took only six weeks to complete whereas the 1880 census had taken almost 18 weeks to finish. That reduction in time was in spite of the fact the population of the United States had grown to 60 million in 1890 from 50 million counted in 1880,

The machine card counter was so successful that Hollerith patented it and set up The Tabulating Company in 1896. The Tabulating Company would change its name to the International Business Machine Company (IBM) in 1911. The punch card system would continue to be used for computers until the 1980s when floppy discs replaced them1.

The floppy disc was itself replaced in the 1990s by the CD and the CD was replaced by the thumb drive in the 2000s.

We are living in a world where change is taking place at an ever increasing (exponentially increasing) rate. Companies will rise from almost nothing to dominate their market only to be replaced by another company which has developed a competing disruptive technology. Not that many years ago investors could buy the stock in a great company, a blue chip company, and hold that stock for decades. Not so anymore. There are still companies that will reward an investor who buys and holds for years. But the time is shorter and requires greater sensitivity to what is happening in that company’s market. Blue chip stocks can become “black and blue chips” at an ever more rapid rate. We are seeing some of the DOW Jones Industrials experiencing slowing sales and competition that is encroaching on their markets.

In 1966 the DOW included stocks like Union Carbide, Johns Manville, US Steel, Bethlehem Steel, Anaconda Copper, Swift and Co, Sears, American Tobacco. Today some of those companies no longer exist and those that do are no longer the Blue Chips they once were. That was almost 50 years ago. The current DOW has companies that did not exist in 1966- Microsoft, Intel, Walmart, Southwest Bell, xxx. My guess is in the next 15-20 years we will see a similar turnover in the stocks that now make up the DOW. Some of today’s DOW stocks will be replaced by companies which may not even exist today.

This means that it is even more important to be ahead of the curve and very sensitive to what is happening in the markets, finding the emerging companies and selling those which have peaked and are no longer growing. I build portfolios around a theme. For the last several years the theme has been “The Times They Are A Changin” Yes, Bob Dillon wrote the song in 1964, but it seems like it is so appropriate today. It is a volatile time. It is an unsure time. It is an exciting time.

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Mike Adams
President and Principal
Adams Financial Concepts LLC

1 Napoleon’s Hemorrhoids: And Other Small Events That Changed History by Phil Mason