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Been feeling pretty good about the stock price lately. I am going to be a net seller going forward, so a high price is good for me.

We're a bit ahead of SPY year to date, which is pleasing.

We are lagging SPY on 1 year, 10 year, 15 year and even 20 year comparisons. That's not so cool.

https://stockcharts.com/freecharts/perf.php?SPY,BR...

Nothing actionable. Just tired of all the political/conspiracy mumbo jumbo.

First, thanks for sharing that cool chart of BRK vs SPY. Really tells a long story in a short glance.

Trying to read the end-points from the graph, I get a 1.7% TOTAL - not annual - win for the SPY over 20 years. (Jim probably has more accurate numbers.) I personally find that a rather remarkable performance by BRK given the difference in risks taken for the reward received. And it's all happened since circa 2019 with the big tech stock explosions.

At today's prices I'd far rather hold BRK than SPY.

Not a critique of your post - just my viewpoint.

Munger taught us to adjust expectations. For myself, I'm reminded of an old expression: "What do you want, an egg in your beer?" From a Google search I find it to mean:

“Egg in your beer” as phrase, rather than a drink, generally denotes getting something for nothing or having/asking for too much of a good thing. For the WWII context, this makes a lot of sense – both eggs and beer were relatively-hard-to-come-by for soldiers, so combining the two would be asking for an awful lot.

I'll be very pleased if BRK performance continues to match the SPY long term. I'll sleep well. And I love the potential for a step-up in value for my heirs.

"Been feeling pretty good about the stock price lately.
I am going to be a net seller going forward, so a high price is good for me."

------------------

I have similar feelings at pleasant times like this however 2 things always come to mind.......

first......sending an April check to Washington & Sacramento for ~ 33% of the proceeds!
second.....making sure my medicine cabinet has a full supply of Zantac & Nytol knowing I am making future $$ decisions instead of Omaha.

As mentioned in a prev post, giving up a small % for the decisions to remain at HQ is well worth the price for me.

As per the current YTD,1,3,5,10,15,20 yr relative comparisons of BRK & SPY,
they are, +5.5%, -4.7%, +3.1%, -0.1%, -0.3%, -1.1%, & -0.1%
The last few numbers are well within the -1 to -2% that I accept for a good nights sleep when things invariably hit the fan!

ciao

Do these comparisons between BRK and SPY take into account the dividends paid by SPY?

Do these comparisons between BRK and SPY take into account taxes paid in taxable accounts?

Yes, the SPY #’s are total return as determined by the following web sites from May 7th of the appropriate yr thru May 15, 2024.
Also , I forgot to indicate the +/- comparison’s are “%/Yr” so the -0.1%/“yr” indicated for the 20 yr period, (May7,2004 to May15,2024), a Berkshire only account would result in a little over 2% less than an equivalent starting value SPY account.

https://dqydj.com/etf-return-calculator/

https://dqydj.com/etf-return-calculator/

ciao

“ Do these comparisons between BRK and SPY take into account taxes paid in taxable accounts?”
——————————-
Good point, no they do not…..
& it begs the question that taxable vs tax free retirement ……& Monaco account holders can reach opposing points of view.

ciao

As per the current YTD,1,3,5,10,15,20 yr relative comparisons of BRK & SPY,
they are, +5.5%, -4.7%, +3.1%, -0.1%, -0.3%, -1.1%, & -0.1%

As always, somebody in the thread is required to point out that the S&P's price return has roughly tied Berkshire's only by getting more expensive, since Berkshire has risen in value more quickly.

For example: to make money, you have to sell stuff. It's an imperfect metric, but not useless--in the long run profits, therefore value, can't rise faster than sales do.

Berkshire real sales per share growth last 10 years: 5.50%/year, approximating value generation.
S&P sales: Up 1.66%/year. Add 1.88%/year average dividend yield to get real total value generation 3.54%/year, lagging Berkshire by 1.96%/year.

Berkshire real sales per share growth last 20 years: 6.93%/year, approximating value generation.
S&P sales: Up 1.61%/year. Add 1.96%/year average dividend yield to get real total value generation 3.57%/year, lagging Berkshire by 3.37%/year.

But a lot of things in the index have become a lot more expensive--higher price per unit value--so the market returns are remarkably close in this era.

And as the OP says, nothing actionable, just observations.
Maybe Berkshire's value growth will slow down to that of the index and the tie will continue. Or maybe the S&P 500 will stop getting more expensive and Berkshire might pull ahead. We'll see.

Jim


(all figures a couple of quarters old, since those are the ones I had handy)

PortfolioVisualizer.com just changed. The layout is terrible, and they limited the backtest period to 10 years for the free tier. 10 years is useless. To get more you have to subscribe for $360/yr.
The key advantage is that it allows you to include reinvested dividends, so you can get total returns. Most charting sites are price-only, so you cannot get total return.


Other similar sites:
https://testfol.io/
https://valueinvesting.io/backtest-portfolio


https://testfol.io/ looks good for simple portfolio backtests. No date period restrictions.
Can choose to reinvest dividends (the default). Start & end dates are M/D/Y, not just M/Y.
Free. Can have many portfolios, not just 3.

No identification of the author.
Backtest results & stastics are presented as text and charts.

Same backtest as the stockcharts link:
https://testfol.io/?d=eJytj0FrwzAMhf%2BLzg64Zd0g57...

Results: (2004-05-07 - 2024-05-15)
Statistics
      end       cagr              maxdd             sortino  ulcer UPI
brk $67,821.23  10.03%  10.03%  -53.86% 21.20%  0.38  0.57  14.34 0.56
spy $70,609.67  10.25%  10.25%  -55.19% 18.97%  0.44  0.61  12.77 0.65

https://valueinvesting.io/backtest-portfolio
Looks similar. Start & end dates are M/Y, like PortfolioVisualizer
Register a free account for unlimited access.

As always, somebody in the thread is required to point out that the S&P's price return has roughly tied Berkshire's only by getting more expensive,

Also that S&P500 is dominated by a handful of tech stocks that have been on a roar. QQQ has virtually the same top stocks but they are a much larger percentage of assets. And QQQ has been doing much much much better than SPY.

Eventually SPY & QQQ will come crashing down when a bear market hits. BRK will not crash nearly as much.

I agree. A 1.7% total win for the SPY vs. BRK over 20 years is actually a win for BRK given that, during this period, SPY has gone from (probably) fairly valued to significantly overvalued (figures will vary, but 40%-50% overvaluation comes to mind), whereas the same cannot be said about BRK at both end points.

This is (hopefully) not a post-hoc justification because I hold BRK, but not SPY. Instead, it's a statement that valuation matters A LOT.

Sorry, I did not see Jim's response above before posting. He has already covered the difference in valuation. Thanks,Jim.

Considering that the hook that wealth managers set for fish like us individuals is, "but you've underperformed risk-adjusted", BRK holders being able to say, "yeah, no, I'm good" with one (1) decision is pretty fantastic.

The bottom line is that while sales/ profit expansion can continue at something resembling the current rate, multiple expansion is finite. It may be long term but it can’t go on forever. BRK and the S&P are different animals. Perhaps if the long term returns were not coincidentally so close more people would recognize that.

It doesn’t help that WEB often compares two.

For example: to make money, you have to sell stuff. It's an imperfect metric, but not useless--in the long run profits, therefore value, can't rise faster than sales do.

Of course they can. Bring down the costs. COGS for a heavy non-recurring cost company like Meta and maybe even NVidia and in general all tech companies don't follow this logic at all.

For example: to make money, you have to sell stuff. It's an imperfect metric, but not useless--in the long run profits, therefore value, can't rise faster than sales do.
...
Of course they can. Bring down the costs. COGS for a heavy non-recurring cost company like Meta and maybe even NVidia and in general all tech companies don't follow this logic at all.

No, it's a mathematical impossibility.
If profits rose faster than sales over the long run, then soon enough profits would exceed revenues, which obviously can never happen.
Net margins can change for sure, with good and bad years and good and bad decades. Taxes go up and down, and interest costs go up and down. And some companies will have much higher ranges than others.

But over time net margins are DEFINITELY limited to a range, forever. This is true both of the market as a whole, and for every individual company within it.

Jim

For example: to make money, you have to sell stuff. It's an imperfect metric, but not useless--in the long run profits, therefore value, can't rise faster than sales do.

Profits can't exceed sales, but profits can rise faster than sales. Assume 100 year outlook (fairly long run), sales flat, profit margin increases each year from 10% to 20% over 100 year period. i.e. profit rising faster than sales.

Probably semantics/definition around the word "faster".

Aussi

in the long run profits, therefore value, can't rise faster than sales do.
...
Of course they can. Bring down the costs. COGS for a heavy non-recurring cost company like Meta and maybe even NVidia and in general all tech companies don't follow this logic at all.
...
No, it's a mathematical impossibility.
If profits rose faster than sales over the long run, then soon enough profits would exceed revenues, which obviously can never happen.


It is not a mathematical impossibility that profits rise faster than sales, even over a long period of time, and that is exactly what has been happening for many decades now. This may explain a small part of the increase in the S&P's price to sales ratio.

If profits rise faster than sales over the long run, going from, say, 8% of sales to 12% of sales as they have over the last 60 years, that doesn't mean that profits ever exceed revenues. And it is possible for them to keeping rising for decades more, from 12% to 16% in the next 60 years for example, which is what most of us would call a 'long run'.

And even if 'long run' meant 'for an infinite time', it is STILL possible, as long as the increase slows. For instance, they could go up by 2% in the next 20 years (2024-2044), 1% in the subsequent 20 years, another 0.5% in the next 20 years, and so on, without ever exceeding 16%.

We can all agree that profits can never pass 100%, and even the hypothetical company that found a way to make its products with zero cost would still have to pay taxes, so their gross margin might be 100% but after tax that would still 'only' be, say, 80%. But it is not hard to imagine profit margins rising a little bit from 12% over a long period, or even over an infinitely long period, provided that the decade by decade rise becomes smaller and smaller.

dtb

in the long run profits, therefore value, can't rise faster than sales do.


Of course they can. Bring down the costs. COGS for a heavy non-recurring cost company like Meta and maybe even NVidia and in general all tech companies don't follow this logic at all.


No, it's a mathematical impossibility.
If profits rose faster than sales over the long run, then soon enough profits would exceed revenues, which obviously can never happen.

You are confusing two things. It’s of course true that margins are range bound, that is obvious. But that doesn’t mean that profits can’t rise faster than sales over the long run. They can, they are just bound by their range.

You are confusing two things. It’s of course true that margins are range bound, that is obvious. But that doesn’t mean that profits can’t rise faster than sales over the long run. They can, they are just bound by their range.

Mungofitch is aptly reminding that (1) the historical rate of real sales increase is lower than many realize, and will likely continue to be low, and (2) long term earnings cannot rise significantly faster than sales, and I add - especially if they already rose a lot and we have to start from here.

The crucial point is the last half of the above sentence -
when looking in the rear vision mirror we observe earnings rose at a rapid rate. But this was largely owing to a one-time near unprecedented expansion in margins (partly helped by improved taxation conditions).

The point is that margins cannot continually rise particularly *from the present near historically high level* at the same rate that they rose in recent history which we may just mistakenly assume from casual observation.
One gets used to EPS rising a lot and start to think of it normal and perpetual.

The problem is that we now have historically high margins so it is more likely that a random time in the future (pick and time, 10 years away or 20 years away), margins will be lower than they are today. The world changes, and there is far more room below than room above.

Or if optimistic, at that point in time, the margins will still be around the same as today without any decline - in which case we have a much lower rate of earnings increase until that point in time (owing to the past margin expansion having stopped for 13 whole years).

In my earlier post about small caps (S&P600) I cited the sales incesse of both small caps and the broad market:

https://www.shrewdm.com/MB?pid=764838264
.. for example revenue per share + dividends of the S&P600 rose 10% per year the last 20 years, versus merely 7% for the S&P500

By the logic of limited available capital destinations (by this I mean that in aggregate, most people must be invested in the cap weighted S&P500 or on average rather correlated), most investors might expect further sales increases to match the past dividend + sales increase of the S&P500. So that means around the 7% as the last 20 years.

But half of that 7% was inflation, and the remaining 3.5% can be nearly halved again after taking out the dividend - so the actual real rise in intrinsic value at a per share level (for real capital gains) for most investors is down to about 2% per year if we have no expanding margins. If we have declining margins, we will of course have lower capital gains. Margins falling from their present 13% to even their still fairly high average 20 year level of 10%, is a 23% fall in the EPS - and that alone would more than wipe out the real 2% sales increase for 13 whole years.

In the future, if we are lucky to retain the present very high margins, then that 2% real rise in sales would permit the same 2% rise in the real EPS, and if valuations remain at their present very high level (I’m talking about only the broad market) then that 2% is also the real capital gains the average investor can hope for from stocks, other than dividend.

That is why investors become much wealthier if stocks trade perpetually very cheaply - as the dividend yield along the way remains much higher. Presently we have to acceot very low yields.

The above is what most investors are faced with whether they pay attention or not, as most investors - by the aggregate of shares held - will have returns similar to the S&P500 *only*.

By financial logic, only a small minority of investors are able to get the superior S&P600 returns. By holding the S&P600 (small caps) instead of the S&P500 (large caps) the future returns will be higher because of 3 *mutually exclusive* points:
1. Both the S&P600 (small cap) and S&P400 (mid cap) the rate of sales increase, the last 20 years, was 3% higher than the S&P500 (large cap), and the studies that go back much further show the similar trend (Gosh, it seems easy to stand amongst precious few with a 3% outperformance over a 40+ year full career).
2. We are starting today from a price to sales valuation that is far less elevated (in each case compared to their own average level) for the S&P600 compared to the S&P500.
3. For the S&P600 we are starting from having moderately less elevated margins of 6% verus 5.5% 20-year average (so there is either more opportunity for further margin expansion or less far to fall in case of margin compression). For the S&P500 margins are 30% above their 20-year average, and 33% above for the S&P400 - so they are least elevated (at 9% above their norm) only for the S&P600.

Bt the way, is anyone else smelling some increased greed in the atmosphere? When there is greed in the psychology it spreads by osmosis. We catch commentary on TV and become unwittingly infected. Seeing quotes high, we start to talk about forward earnings instead of present earnings - and then, we block out the past bad times. We also watch others block out bad times, and we copy them, being kind social creatures. We atart to just assume that what is “good” (high margins, good tax conditions, high price to book value ratios, etc) is are permanent conditions - and what is bad won’t reoccur as in only out of date boring stuff that belongs to the past.

As I wrote the average equity investor is, by mathematical necessity, having returns correlated to the cap weighted S&P500. So most cannot avoid returns similar to this index. These returns have been lately elevated owing to both increasing expansions and increasing evaluations, rather than the underlying real sales rising at some magical level.

Berkshire Hathaway, like the S&P600, has accumulated underlying value at a higher rate than the S&P500, but the 20 year total returns of all 3 were similar. You want to be on a vehicle that it is actually moving faster than an average one, rather than a vehicle moving slower but the consensus opinion - for the moment - that it is flying along, even if it isn't. Yes, unlike an actual slow moving bus, with markets you can sell out to that consensus opinion, but remaining in the slow bus with everyone inside it believing it has moved really far doesn’t make it so.

- Manlobbi

Excellent post Manlobbi. I agree with both you and the original poster on the points made on valuation. The point of my post was simply to point out (probably obvious to everyone but me which perhaps made my post obsolete!) that they are two different things.

I like to remind myself of simple things because that is normally where I go wrong in my thinking.

The max number of people living on ground floor in Sweden is bound by the area of Sweden but that doesn’t mean that number of people living on ground floor in Sweden can’t grow faster than the area of Sweden over the long term and it has.

The max number of drinks I can have in a week is bound by the amount of time in a week but that doesn’t mean that the number of drinks I have per week can’t grown faster than the amount of time in a week over the long term and it has.

The max amount of carbon in the atmosphere is bound by the size of the atmosphere but that doesn’t mean that carbon in athmosphere can’t grow faster than size atmosphere over the long run and it has.

No, it's a mathematical impossibility.
....

True. But. Not for an investor's time horizon. In the long term we are all dead.

A tech company can start with a close-to-infinite negative net margin and get close-to-100% positive net margin in 25 years. To make money on that stock, that's all that matters. How many examples have we seen in tech? Meta, Google, NVidia to name some.

And of course during that long but finite period profits are rising faster than sales. And when they don't, the next shiny thing has already taken over, taking the baton of increasing market cap from the now-staid old world company.

You can decry growth investing because they count profit growth twice, once in increasing earnings and once in increasing P/E. They have and they do, however illogical. And they have made a lot more money over the last 30 years. Nobody knows about the next 30. Maybe it's a low interest rate phenomenon, maybe increased risk taking, but even now when economic activity should be deterred, it's not. So as someone said, maybe the 70s was a special time for value investors never be repeated again

A tech company can start with a close-to-infinite negative net margin and get close-to-100% positive net margin in 25 years.

That's the popular belief of some investors it would seem, but no, of course that can't happen. Those people are mistaking the cycle for a trend, a rookie mistake.

There is no way that any real firm's net margin is ever going to stabilize anywhere near 100%.
Even the best businesses with tiny marginal costs have pesky things like buildings and computers and employees and taxes and exchange fees....
And, these days, maybe a line item for fines.
(I say "real" companies, meaning actual product and/or service firms, because there are some odd beasts out there like closed end royalty funds or whatever)
About the highest I know of among big firms are CME group and Visa, both at around 55% lately, and well out on the tail of the bell curve.
As an aside, it's easy to see why people like toll collector firms.

Any sane investor should realize that if real sales for the S&P 500 rise at (say) 2.5%/year in the next 20 years, or whatever figure near that you might choose, then there is no conceivable reason to assume that aggregate net profits will rise any faster than that.

Especially, as Manlobbi and others pointed out, they are definitely at the high end of the historically observed range these days. For the last ~20 years each dollar of sales has been worth 62% more in net profit for shareholders than it used to be in the prior ~50 years. Maybe that will last and maybe it won't, but historically it's quite the number. From January 1950 up till mid 2004, the absolute peak quarter net margin figure for aggregated non-financial US corporations was 8.48% and the median was 6.11%. So a lasting move down from recent figures around 11% would not be a big shocker.

Random math to illustrate the concern: imagine that net margins gradually fell from today's roughly 11% back to the old normal of 6.1%, and that squiggly fall took place over 50 years. Let's say real sales rise at inflation + 2.5%/year in that time. In that scenario, real net profits would have risen at only 1.26%/year. We have no way of knowing what the future value will be, but we know that a multi-decade norm around 6.1% is possible because it has already happened before. This is emphatically NOT a prediction, jsut an illustration of the implications of what an investor's life would look like if the recent very high net margins are NOT permanent.

Jim

Any sane investor should realize that if real sales for the S&P 500 rise at (say) 2.5%/year in the next 20 years, or whatever figure near that you might choose, then there is no conceivable reason to assume that aggregate net profits will rise any faster than that.

If the mix of companies changes in the S&P 500, why would profit margins not change? The lifespan of a company on the S&P 500 is dropping. 30 years ago the average was 25 to 30 years, now it is about 15 years. So in the next 20 years you could perhaps expect a turnover of maybe 200 companies (10 per year) in the S&P 500 which could have a large positive or negative impact on the change in net aggregate profits compared to sales.


https://qz.com/1587963/how-the-sp-500-is-built-and...

Aussi

Mungofitch wrote:
Random math to illustrate the concern: imagine that net margins gradually fell from today's roughly 11% back to the old normal of 6.1%, and that squiggly fall took place over 50 years. Let's say real sales rise at inflation + 2.5%/year in that time. In that scenario, real net profits would have risen at only 1.26%/year.

I asked GPT 4o how much revenues had risen for 3 large members of the SP500 annualized over the last 20 years and it obliged with the following table:

Company	Revenue 2004 (billion USD)	Revenue 2024 (billion USD)	Annualized Growth Rate (CAGR)
Amazon		6.92				590.74				24.7%
Apple		8.28				394.33				16.6%
Google		3.19				279.82				23.1%

Won't
Is there some reason to believe that this relatively long-lived trend will sink back to inflation+2.5% sometime soon?

R:

For the last ~20 years each dollar of sales has been worth 62% more in net profit for shareholders than it used to be in the prior ~50 years. Maybe that will last and maybe it won't, but historically it's quite the number. From January 1950 up till mid 2004, the absolute peak quarter net margin figure for aggregated non-financial US corporations was 8.48% and the median was 6.11%. So a lasting move down from recent figures around 11% would not be a big shocker.

During the last 50 years there have been several accounting standard changes especially around depreciation and how purchases of companies are handled and also companies spending on capital versus research and branding. To consider that net margins may mean revert I think you have to also consider the requirement for accounting standards and company spending and capital allocation profiles to mean revert.

Aussi

Company Revenue 2004 (billion USD) Revenue 2024 (billion USD) Annualized Growth Rate (CAGR)
Amazon 6.92 590.74 24.7%
Apple 8.28 394.33 16.6%
Google 3.19 279.82 23.1%


Amazing that this has gone on for 20 years?

You are putting too much emphasis on history. The nature of the companies that used to be the hotshots in the 50s and 60s and 70s and 80s and 90s and 2000s and 2010s have changed as have the biggest (by market cap) companies that are included in the S&P 500.

Old companies just did not have the infinite scalability that the new companies do. I do not mean Amazon (except AWS) and Tesla, I mean, Nvidia, Google, and Meta.

Even Microsoft has shifted from selling products to selling subscriptions. I don't own Word anymore unless I subscribe to 365. Buffett as usual picked a dead horse called Apple. Worked when Apple was truly cheap but with the EU ruling against Apple Store monopoly, hard to see why it will going forward. The robber barons are back. Form a monopoly, fleece the consumers and rob their data. At least in US, nobody can or will stop them from making infinite profit.

Any sane investor should realize that if real sales for the S&P 500 rise at (say) 2.5%/year in the next 20 years, or whatever figure near that you might choose, then there is no conceivable reason to assume that aggregate net profits will rise any faster than that.

There is a way and I believe it’s partly responsible for the current trend in rising profit rates: growing inequality. Wages have been stagnant or declining for s as large segment of the workforce for 40+ years even as productivity has increased. There is no reason why this trend cannot continue.

Wages have been stagnant or declining for s as large segment of the workforce for 40+ years even as productivity has increased. There is no reason why this trend cannot continue.

Until the pitchforks come out, you mean.

I recall that a similar era in the late 1800’s precipitated a long era of unionization and labor strife, although astute observers had plenty of time to react to that. Same this time, unless it happens quickly, like a real revolution occasionally does: overnight.

Exactly. Since the global working class seems enamored with right wing populism, bordering on fascism, I don’t see a political movement capable of reversing this long secular trend anytime soon.

There is a way and I believe it’s partly responsible for the current trend in rising profit rates: growing inequality. Wages have been stagnant or declining for s as large segment of the workforce for 40+ years even as productivity has increased. There is no reason why this trend cannot continue.

Sure there is!
The cycle can continue a bit longer, but the trend can not continue indefinitely. If the profits keep going up and the wages keep going down as fractions of GDP, at some point people would be paying their employers to go to work. You'd probably have very widespread strikes and social upheaval even in the US long long before that.

Besides, the US labour share of GDP hasn't fallen as much as some people think. It fell from 61.7% to 60.4% in the ~2 decades 2004-2020, not exactly a crash. The rise in corporate profitability as a share of the pie came more at the expense of the government (falling taxes) and bondholders (lower interest) than from crushing the workers.

Jim

The rise in corporate profitability as a share of the pie came more at the expense of the government (falling taxes) and bondholders (lower interest) than from crushing the workers.

To be fair, that observation skips over some real issues because it's discussing pay for the average US worker. I imagine that the average worker has done much better than the median worker, as I suspect the deviation in salaries has risen. So the pay distribution curve is a valid topic of social policy, and maybe an entirely valid complaint for Joe Median. I would guess that the percentage of US GDP going to the 90% of workers with the lowest total compensation has fallen a noticeable amount.

For shareholders the distinction between median and average is moot--pay is an expense rather than a profit whether it's all going to the boss or it's divvied up equally.

Jim

Sure there is!
The cycle can continue a bit longer, but the trend can not continue indefinitely. If the profits keep going up and the wages keep going down as fractions of GDP, at some point people would be paying their employers to go to work. You'd probably have very widespread strikes and social upheaval even in the US long long before that.

Besides, the US labour share of GDP hasn't fallen as much as some people think. It fell from 61.7% to 60.4% in the ~2 decades 2004-2020, not exactly a crash. The rise in corporate profitability as a share of the pie came more at the expense of the government (falling taxes) and bondholders (lower interest) than from crushing the workers.



Human labor is quickly becoming the equivalent of the horse in a world full of tractors.

Human labor is quickly becoming the equivalent of the horse in a world full of tractors.

Maybe so, but I'd venture to say horses today are better taken care of than they were when their use was utilitarian rather than recreational. In that way, maybe they're more valued. I for one, would like human labor to be more valued.

Of course, there are also way less horses today than when they were used for transportation. Their breeding was controlled so when there was less demand for them as transportation, we simply bred less of them. Following your metaphor, society will need to figure out what it wants to do with less required human labor. In the past, there has been a mixture of more recreation time (adding weekends & holidays), and new industries to soak up the extra human labor.

There's a discussion on the reduction of labor required per ton-mile on the BNSF railroad in one of the Annual Reports. The amount of labor it used to eat up is staggering. There's also similar productivity gains in the history of harvesting. The History Channel's Modern Marvels show has an excellent episode on it. The metric there is how much labor per acre is required for harvesting. From using hands, to a sickle, to a scythe, all the away to modern combines.

When teachers are asking my elementary and middle school kids what careers they want when they graduate, I like to remind them that people make careers out of being on YouTube, editing videos, and adding it to things they already do, and that's something that wasn't invented when I graduated.

Human labor is quickly becoming the equivalent of the horse in a world full of tractors.

value or go home:
Maybe so, but I'd venture to say horses today are better taken care of than they were when their use was utilitarian rather than recreational. In that way, maybe they're more valued. I for one, would like human labor to be more valued.

Good point. Once horses became nothing but our pets, useful for recreational activities and not much more, they had an easier life. Just as once humans become useless and are just kept up by the AIs that then run the world, our life will probably be a lot easier too.

R:

"Human labor is quickly becoming the equivalent of the horse in a world full of tractors."

This does not bode well for humanity in a world where sustenance is secured through paid labor.

" This does not bode well for humanity in a world where sustenance is secured through paid labor."

Employment stats.

https://www.bls.gov/emp/graphics/total-employment....

<<<<Human labor is quickly becoming the equivalent of the horse in a world full of tractors.>>>>

On the subject of Productivity at the Macro level, there’s a book of epic contrarian view on the subject. Robert Gordon’s “The Rise and Fall of American Growth”- a short summary is below.

The golden century 1870-1970 was a monumental one for productivity. The period 1970-now, not so much and especially in contrast. There’s been all kinds of consumer excess from the Information and Communication technology (ICT) but it hasn’t matched the productivity of the golden century. Techno-optimists would like to project that things like AI will be like, say, electricity in terms of societal impact. That remains to be seen. The third Industrial Revolution of ICT has little to show for, let alone the so-called fourth IR. Cool, yes, productive, no!

"I recall that a similar era in the late 1800’s precipitated a long era of unionization and labor strife, although astute observers had plenty of time to react to that. Same this time, unless it happens quickly, like a real revolution occasionally does: overnight."

I'm not sure if it could play out the same way today. For a few reasons. Let's say there is union agitation that hikes worker pay in the USA. That has an instant effect of increasing the prices of products made in the USA. And what almost immediately follows is that those same things made outside the USA are cheaper. So, in a globalized world, the consumers of "stuff" shift their purchases from USA-made stuff to foreign-made stuff. Now they may (they will!) also agitate for government to step in and inhibit the foreign stuff. But government will be reticent to do so because that increases inflation. And increased inflation means higher interest rates. And because government constantly (multiple times a week) refinances ALL their debt, and ALL the interest on their debt, and some of their current spending, that would mean higher and higher interest payments. Which means less money for the current government to spend (because it's going to interest).

How do you take a pitchfork to a treasury bond?

I'm not sure if it could play out the same way today. For a few reasons. Let's say there is union agitation that hikes worker pay in the USA. That has an instant effect of increasing the prices of products made in the USA. And what almost immediately follows is that those same things made outside the USA are cheaper. So, in a globalized world, the consumers of "stuff" shift their purchases from USA-made stuff to foreign-made stuff. Now they may (they will!) also agitate for government to step in and inhibit the foreign stuff. But government will be reticent to do so because that increases inflation. And increased inflation means higher interest rates. And because government constantly (multiple times a week) refinances ALL their debt, and ALL the interest on their debt, and some of their current spending, that would mean higher and higher interest payments. Which means less money for the current government to spend (because it's going to interest).

How do you take a pitchfork to a treasury bond?

One might argue that all of this and more has been happening in France for a while. A tentative lesson: just because it's not in the long term best interests of the population OR of the politicians doesn't mean it won't become the law of the land.

As for the pitchfork question, the question is more whether the bond market can take a pitchfork to you. The answer is "yup!"

Jim

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