Technological change has always played a role in displacing more manual forms of labour. It has also been pivotal in improving overall economic productivity and acted as a catalyst for the creation of new jobs.
Increasing computational power is driving rapid advancements in automation and artificial intelligence, which will likely have a huge positive impact on industries such as healthcare and transportation as well as improving everyday life for many.
However, the pace of change is such that governments are struggling to provide a safety net for those detrimentally impacted by this.
In his farewell speech, Barack Obama warned: “The next wave of economic dislocations won’t come from overseas. It will come from the relentless pace of automation that makes a lot of good middle-class jobs obsolete.”
One only has to read about the likes of Amazon Go, which obviates the need for cashiers, or progress in driverless technologies and robotics, to appreciate this point.
Bill Gates and Elon Musk are famed technologists. Yet both argue that we need to be better prepared for the impact current technological trends could have on society. Mr Gates suggested that robots should be taxed while Elon Musk is a proponent of a universal basic income to provide those displaced by technology with a monthly amount to cover basic expenses. The merits of such ideas are debatable, yet they highlight the risks of growing inequality
Donald Trump’s success is arguably an example of how rising inequality is transforming the political landscape. While the richest in America have become wealthier, median incomes have stagnated, emphasising why many have become disenchanted with the status quo.
New political imperatives will impact the corporate world, both in the US and elsewhere. Many companies have pursued an aggressive form of capitalism, cutting costs and issuing cheap debt to finance share buybacks rather than investing for the future, profiting the few at the expense of the many. Whether this is sustainable in the current climate, with bond yields rising, remains to be seen.
Against such a backdrop it is important for fund managers to consider the long-term durability of companies in which they invest. The team at Stewart Investors does this. It invests with a long-term mindset in good quality companies it believes are reasonably priced. It aligns with those it considers the best custodians of shareholder capital: stewards who underpin enduring franchises through an appreciation of management, employees, shareholders and consumers.
An example is the team’s investment in Unilever. Rather than join the chorus calling for cost cutting following Kraft Heinz’s approach for the company, Stewart Investors defends Unilever’s approach. It believes Unilever strikes a balance between cutting excess corporate fat and supporting growth through judicious levels of investment. As highlighted on Unilever’s website, the company is aware that “growth at the expense of people or the environment is both unacceptable and commercially unsustainable”.
By emphasising the importance of all stakeholders, Unilever has strengthened its supply chain and distribution network as well as burnished its brands. This winning formula should continue.
