Back to the Future of Innovation

For our 300th Alger On the Money, we take a ride in our proverbial time machine and reflect on three centuries of technological innovation. With
innovation happening at an exponential pace, this has profound implications for investors looking to find potential opportunities into future.

• As illustrated in the chart above, technological innovations are diffusing through society with extraordinary speed. Older innovations like the stove and steam engine took well over a century to reach 50% penetration of U.S. households. By contrast, newer innovations such as social media and tablets have taken 9 and 7 years, respectively.
• History shows that innovation does not stop during difficult economic times, as people and corporations continue to generate new ideas to improve productivity. In fact, technological advances like the internet and social media were born around periods of economic contractions. Moreover, automobile companies that were created in the early 1900s were able to grow during the Great Depression when traditional goods and services were struggling.
• While investors may be concerned about whether we’re heading into a recession, in our view, productivity and innovation, not economic cycles or central banks are the most important long term drivers of corporate earnings growth.