What History Teaches Us About Today’s Market

**Travis Hoium** (0:02)
What can history teach us about the market today? Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Lou Whiteman and Andy Cross. So we are kind of in this doldrum phase of the market. Second quarter earnings season has not started yet. We're in the middle of summer, so I thought this was a good opportunity. Take a little bit of a step back. Guys, we've got this big technology change that's coming, that is absolutely driving the market. That's artificial intelligence if you have not been paying attention for the last three or four years. But what does this mean historically and what can we learn from at least the technology changes that have happened in probably our lifetimes? I'm thinking about the PC, the Internet, and mobile. So Andy, I want to start with you. Just a little bit, if we go all the way back to the PC, what can we learn about those early days? Because that's the first time that I remember things really changing.
You have my grandpa who had no interest in understanding what was going on. Then you had my dad who was intrigued, and he thought it was cool when we got a computer and we got prodigy. Then I was living in the computer lab in second grade. So it seems like we're in that same area today where there's something there, but it isn't quite fully formed yet.

**Andy Cross** (1:27)
When you say all the way back, Travis, I think you're dating me because I think most people may be listening to this, think 80s and 90s, they picture like big shoulder pads, maybe dial-up modems, Alan Green's spans, eyebrows.
But if you look at what happened during the 80s and 90s, they were incredible time for investors. For a host of different reasons, we came into the 80s with higher interest rates than we've had over the last couple of years even. Paul Volcker came in, slammed them down.

**Travis Hoium** (1:55)
Short-term rates were almost 20 percent, right?

**Andy Cross** (1:57)
Exactly. They were exceptionally high. Then the Fed came in, put the hammer to those, pushed them back down. That was painful in the short-term, but exceptionally good for investors across almost all asset classes really in the 80s. But what was really, I think, as you teed us up, Travis, was this technological evolution. I mean, the PCs were just really starting to get going. If you think about some of the data in 1984, only about 8 percent of US households owned a personal computer. But by 1990, that had doubled to more than 15 percent. By 1997, before you start to get into the really crazy days, that was up to nearly more than a third of households owned PCs.

**Travis Hoium** (2:45)
But just think about that. 1997, only a third of households had a computer. I mean, if you're under 30 years old at this point, that seems crazy that this technology that is kind of everywhere, a PC, a mobile phone, still had relatively low penetration even at that point.

**Andy Cross** (3:04)
Yeah, it goes to show you that some of this penetration, this is actually why I think what we've seen with so many of, whether it's OpenAI or Anthropic or Gemini, the explosion in the use of these AI tools. But technological, there are more evolutions than revolution. Even when the iPhone came out in 2007 or so, it took some time for it all to get going, and it really wasn't until the App Store got going that it really started to take off in that ecosystem. So that technological progress takes some time to build out. I think what we're seeing right now, the parallel with what I'm seeing is, you're seeing the foundationals being laid.
Some of it is going to be exceptionally capital well-spent, and some of it will be wasted, but you're seeing this capital being spent, being laid for the foundation of our transition. It was the PCs, it was the Internet, it was Cloud computing, mobile a little bit in there, and now we're seeing it with AI.

**Lou Whitman** (4:01)
Yeah. The real takeaway is that we need to build the virtuous cycle. We need more than just the infrastructure. Because my household was one of the households that had a PC prior to 97 You know what we did with it? It was basically a typewriter with a screen. It was a typewriter where it was easier to delete. Because there just wasn't that many uses for it. We had a Commodore 64 way back when. I used to type in and program games and do that, but it was a novelty. It wasn't a productivity tool the way it was once again. This virtuous cycle, whether it's the Internet, where it's all the early days of Windows and Office, where we can do things with those. It's not enough to just invent the technology. It's not enough to just invent the software. It has to be this point where everything's coming together, where this is affordable, it's useful, and that's when, to a lesser extent. I mean, enterprises will kind of force it through, but definitely on the consumer side. But even on the enterprise, you need just all of these things working together for something to take off.