The old adage, "The more things change, the more they stay the same," is proven every day in financial markets, the economy, politics, and investing.
The truth is that most events in these areas are not truly transformative. They are simply the continuation of trends that have been developing for months, years, or even decades. Meaningful change is often like trying to turn a battleship around in a narrow river. It is slow, difficult, and rarely happens all at once.
Market prognosticators are constantly trying to identify the "next big thing." However, the odds often favor the current leader rather than an emerging challenger.
Nowhere has this been more apparent than in technology since the turn of the century. The dominant technology companies have maintained their advantages in several predictable ways. They have reinvested enormous cash flows into research and development. They continue to attract and retain the best talent. They have the financial resources to acquire competitors when they cannot build a solution internally. Their scale and reputation also give them access to capital, customers, data, and other resources that are often unavailable to smaller competitors.
The same principle applies across many other areas of the market.
The largest retailers benefit from significant purchasing, distribution, and cost advantages over smaller competitors. The largest financial companies use their history, scale, and reputation to continue gathering assets. Energy companies rely on decades of experience and established relationships to secure access to valuable resources and development opportunities.
It may be more exciting to claim that you can predict the future or identify the next great enterprise before everyone else. The problem is that there is little evidence that this can be done regularly or consistently.
Rather than trying to predict which company will become the next winner, we have found it more profitable to invest in companies that have already won and have the resources, talent, scale, and competitive advantages necessary to extend that success well into the future.