The Death of American Research and Development: "Since 2004, growth in what economists call Total Factor Productivity—or the measure of how well an economy combines labor and capital to create economic growth—has been half of what it was in the prior decade. IMF economists recently compared the productivity growth in various American states and found that those where R&D spending was the highest also showed faster TFP growth."
The article admits that it is surprisingly difficult to get good data on R&D trends - many do not disclose at all or in the same way. However the views available do all seem to point to a reduction in spend and scientific output. While it may be the case that a Steve Jobs leveraged the breakthroughs of others, it was probably easier for him to do that when those others were in the same regional area.
So, it's clearly the annual meeting season coming up, when we get to see another letter from Larry Fink pushing for a longer term outlook.
Larry Fink Wants Companies to Talk More About the Future - Bloomberg View: "If you own the whole market, you are unlikely to get a lot of performance by choosing the best projects to invest in, or to develop any particular skill set in doing that. You're choosing all the companies, with all the projects. You're much more likely to get performance by letting the managers of all those companies discover new projects and allocate capital to them. If they give the capital back to you, you're just going to index it anyway. You're not going to make the wild bets on the future. You're relying on corporate managers to do that."
Bloomberg had an interesting spin questioning just how comfortable should we all be with the index firms calling the shots...
".....All those CEOs woke up today with a letter from the owner -- who they now know regularly meets with other owners to decide how companies should be run -- suggesting that maybe they should lobby for more infrastructure spending. Will they? Should they? Is the power of giant diversified asset managers maybe just the tiniest bit worrying? "
Perhaps they are friends with Ackman who bemoaned the influence of these firms in his own annual letter.
"Last year, index funds were allocated nearly 20% of every dollar invested in the market. That is up from 10% fifteen years ago. Scroll through the ownership registry of corporate America and the top three holders are typically Vanguard, Blackrock, and State Street. As the biggest managers of index funds, they often cumulatively own 12%, and as much as 20%, of nearly every public company....
If the index fund trend continues, and it looks likely to do so, what happens when index funds control Corporate America?" (http://assets.pershingsquareholdings.com/2014/09/Pershing-Square-2015-Annual-Letter-PSH-January-26-2016.pdf)
And perhaps he is just having a very bad year with Valeant. Got to blame someone else, after all.
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