Don't panic about subprime lending or rogue traders. This is a time to be optimistic. Prosperity and profit still depend, above all, on human ingenuity. Wetware is still the main asset you're holding in any well-diversified stock portfolio. No serious student of science technology can be anything but bullish about the long-term prospects for profit and growth in the ingenuity-driven economy.
Information technology. IT translates human ingenuity into binary code, imprints it on molecular-scale substrates and mass-produces it more cheaply than newsprint. The quantity of processing power or storage capacity you get per device and per dollar still doubles every few years. Because they materialize our own intelligence, these technologies can streamline, improve and automate anything. Nothing will stop them from continuing to boost labor productivity in every sector of the economy. The highly automated factory, to pick only one example, can out-compete any assembly line in the world that runs the old-fashioned way, even if its workers are plugging in widgets and tightening bolts for 30 cents an hour.
High-speed communication. Wired and wireless technologies are still improving, and faster than ever before. So the cost of trade continues to fall, and that lowers the effective cost of everything that's traded: raw materials, labor, durable assets, consumer goods, capital, commodities and money itself. In every market--and at every step from suppliers of raw materials to consumers of finished goods--faster, cheaper communication lowers the cost of producing and consuming.
Digital power. Electrical drive trains are displacing mechanical ones in factories, ships, hybrid cars and all the other heavy-lifting sectors of the economy. They're made possible by semiconductor chips that can handle megawatts of power, rather than the microwatts that move the bits through a laptop. Moving power this way is far lighter, faster, more precise and more efficient than moving it mechanically through shafts and gears. Sibling semiconductors are used in light-emitting diodes, solid-state lasers and other technologies that generate heat and light far more precisely and efficiently than conventional welders, torches, ovens and bulbs. Solar cells use similar materials to do the same in reverse. And as everywhere else in the semiconductor industry, performance doubles and redoubles, and prices keep falling.
Biotech. Yet another hockey stick, and this one is right at the bend, at about the point where silicon was two decades ago. Gene sequencers can now read all the code that makes life tick. Biochemists can cut, splice and reassemble it. Scientists now have the tools readily at hand to copy anything that life can build, and beat it at its own game. They will soon bioengineer bacteria to melt oil out of tar sands, turn grass into diesel fuel and scavenge natural resources of every kind out of low-grade, thinly dispersed deposits. They can design drugs to replace, boost or suppress anything in nature. While the designing isn't cheap, pharmacology is much cheaper and vastly more effective than hands-on medicine. The real cost of health care is falling and will fall faster as these technologies continue to improve.
Nanotech. The tools of the semiconductor industry are now being harnessed to mass-produce microsensors that let microprocessors see, hear and feel what's going on all around. Chip-scale sensors already tell an SUV's master computer when the vehicle is about to roll over and the Wii game controller when the live player wants to swing the virtual bat. Within a decade or two sensors will allow microprocessors to see, hear and feel far better than we can. Microengineered materials are simultaneously transforming the manufacture of clothes, cars, jets--just about everything people make--because they're far stronger, lighter and more functional than metals, plastics and natural fibers.
Can bad government policies impoverish us all, nevertheless? Not easily. Ingenuity is too compact, powerful and portable to be defeated by inept public policy that's implemented only here or there. Know-how is as portable as capital; it can go where it's welcome and walk away from incompetent central bankers, kleptocrats, tax collectors and economically irrational regulators of every stripe. Lower prices, higher wages, better health insurance and a clean environment can attract enterprise, capital and skilled labor from places that lack them. No individual government runs the show anymore.
So sell everything and buy gold if you think that terrorists, despots or feudal theocracies might soon pull off something big enough to stifle global trade. Otherwise, buy and hold.
Original Source: http://www.forbes.com/columnists/free_forbes/2008/0225/080.html