Business Times of Edmond, Oklahoma March 2020 - Page 28

BUSINESS MATTERS NICK MASSEY A stute I nvestor Looking for the Next Horse Manure Trade D id you know there was a horse manure crisis in 1894? No, I wasn’t there, but it’s a great story about changing economies. This isn’t just another stinking economics story. The problem was that at the turn of the 20th century, cities were drowning in the stuff. By the year 1900, the city of London had more than 50,000 horses employed for human transport. The horses pulled 11,000 Hansom cabs (a kind of two-wheeled horse- drawn carriage) and several thousand horse- drawn buses, requiring 12 horses each. In addition to that, there were horse-drawn carts and pack-laden dray horses delivering goods all over the place. They were the FedEx and UPS trucks of their day. According to Historic UK, a history website, the London horse population led to major problems. Consider the fact that a single horse averages 15 to 35 pounds of manure every single day. Multiply that by well over 50,000 animals, and that’s a lot of …., well, you know what. Then factor in the problem of nowhere to put the manure, plus the great buzzing swarms of disease- spreading flies attracted to it. I had never thought about it before, but I’ll bet you had not either. Along with the manure, the average horse produced two pints of urine per day, which flowed directly into the streets. And because the life of a London horse was hard, the typical horse lifespan was around three years, which meant horses were dropping dead on a daily basis. That meant even more flies and disease, thanks to routinely abandoned horse carcasses. 28 March 2020 | The Business Times If you think London sounds bad, New York was even worse. New York reportedly had a population of 100,000 horses at the time, producing 2.5 million pounds of manure per day. This is probably more information than you ever needed on this subject, but bear with me as there is a moral to this story. The London Times newspaper predicted: “In 50 years, every street in London will be buried under nine feet of manure.” The cities appeared doomed, or at best hobbled by their own transport networks. Of course, as we know from the vantage point of history, that isn’t what happened at all. Less than a quarter century later the problem was 100% solved. It was solved completely by replacing the horse with a significantly different and disruptive technology called the automobile. The man who saved the day was Henry Ford. In October 1908, Ford introduced the Model T, which quickly became America’s car. Ford did not invent the automobile, nor did he invent the assembly line. But he put the two concepts together, creating the world’s first mass-manufactured driving machine. As a result of Ford’s genius, city horses were put out of business. As they disappeared from the streets, their manure and carcasses did also. One of the investing lessons here is to “expect the unexpected,” particularly in regard to technology. There have been multiple episodes in human history where a present-day system created a severe problem, and then a new technology didn’t just solve the problem, but changed the paradigm entirely. For example, Britain was worried about chopping down all its forests for wood power before switching to coal-powered steam. The world feared running out of whale blubber before discovering the merits of petroleum. “Peak oil” meant the world’s crude oil supply was destined to run out until fracking blew that theory to pieces. On it goes. It seems hard to picture now, but fossil fuels are likely next in line to get buggy- whipped. This isn’t a recipe for complacency though. When new technologies are deployed to solve old problems, whole industries and sectors can be wiped out. The “creative destruction” process famously described by the economist Joseph Schumpeter is deadly serious about the “destruction” part. If you were the heir to a buggy whip fortune in 1908, Henry Ford was your worst enemy. There are multiple lessons here. First, it teaches us to be optimistic. There are incredible technologies being created every day; some of which will change the whole world in ways we can’t imagine. It also teaches us to be skeptical, particularly in regard to apocalyptic pronouncements and breathless newspaper headlines. And, it teaches us to be cautious and creative. We want to avoid investing in the 21st century equivalent of buggy whip industries, while keeping an eye out for the game changers of the new age. Thanks for reading. NICK MASSEY is President of Massey Financial Services in Edmond, Okla. Nick can be reached at Investment advice offered through Householder Group Estate and Retirement Specialists, a registered investment advisor.