We like to talk about thematic investing. It makes us sound sophisticated. It makes us sound like we just might have Nostradamic tendencies.
One-off investing is for nebbishes. We thematic types take into account manifold forces at play, analyze their confluence and then harmonize our investments to take full advantage.
It all sounds so metaphysical.
As long as we’re on the case, we might want to give economist Tyler Cowen a fair hearing. He says the United States is gravitating toward a new theme, one significantly different than its past.
Cowen, author of a new book titled Average Is Over, says the nation’s growing gap between rich and middle class and poor is only going to become more pronounced. But rather than the 1 percent running roughshod over the 99 percent, an upper class representing about 15 percent of the population will rise and do extremely well and be very politically powerful.
The traditional American middle class will slump to lower middle class, though they will not be the daft lower middle class of the past. Members of this slumping segment of the population will be well educated, cultured and creative. (You will be more apt to find them at an Impressionist art exhibition than a NASCAR rally.) But their soft skills won’t have the monetary value they once did.
The upper class will be dominated by professionals and entrepreneurs with outstanding technological and scientific skills. The truly skilled also will have an easier time being discovered and achieving prosperity because we are facing a future where everything will be measured. Workers will have the equivalent of credit scores that make available to the world how many jobs we’ve had and how reliable we are. Also measured will be the number of traffic tickets we’ve accumulated and lawsuits filed against us. Screw up early in life, and it’s liable to dog you the rest of your mortal days. Do great things, and the professional world will quickly recognize you’ve got the chops and will embrace and reward you.
It will be a repressive environment to many, Cowen acknowledges. On the other hand, he says, it will be a fantastically creative society with many people liberated from oppressive manufacturing and service jobs that will instead be carried out by computers and robotics. The world’s best education will be available online and free of charge.
“I think there’s a lot about this future that will be enormously, fantastically exciting,” he says.
Yes, it is just one economist’s view of the future, but one that doesn’t sound at all far-fetched. If Cowen is right, what are the implications for real estate investing?
Let’s get thematic. Let’s just make sure we get it right. We’re being measured, after all.
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Mike Consol is editor of The Institutional Real Estate Letter – Americas.
