More thoughts on Imagination Era


Here are more thoughts on the Imagination Era and how we can get a head start on investing in areas that will be the wave of the future.

As you read these ideas, we can be pretty sure that none of them will be totally correct. Economic forecasting and social trends are like forecasting weather. The future cannot be clearly foreseen. There are too many variables.

Yet these points can help us see into the future as it unfolds.

Imagination Era Thought #1: The information era has peaked. We can still make money in Microsoft and the .coms. But the really easy big billions have now been made in the Information Era.

The first industrial wave water-textiles-iron, lasted sixty years (1785-1845). The second wave steam-rail-steel, lasted 55 years (1845-1900). The third wave electricity- chemicals-internal combustion engine, lasted 50 years (1900-1950), the fourth wave petrochemicals-electronics-aviation, only 40 years 1950-1990) and the fifth wave which we are now in, digital networks-software-new media, is after a decade already near or nearing its peak. Each wave has been shorter and sharper. Each series of innovations has saturated the market faster than in the previous wave. If this wave has thirty years of life, it is already through its infancy and well into maturity.

* Imagination Era Thought #2: We can see the Imagination Era every day. Eras do not start and stop in a day. We still have textiles and foundries, railroads, airplanes, etc. New airlines and car manufacturers still begin. The sixth wave is already beginning to form. Chances are it will rise even faster and sharper than all those in the past.

* Imagination Era Thought #3: Whatever can be automated will.

* Imagination Era Thought #4: Excellence and value will be taken for granted. In the industrialized world (remember investing in emerging nations will be different) the main mode of production will be automated assembly lines turning out low cost, highly usable, dependable products. Innovations in production will take place very quickly within an industry. Whenever someone comes up with a new, better idea for a product, all competitors will upgrade to match the innovation very quickly. The value of patents and proprietary design will fall dramatically (if there are any patents left at all). There will be very little difference in utilitarian value from one competing product to the next. For example, it is understood today that most cars will run without trouble for 40,000, 80,000, even 120,000 miles. Almost any watch you buy will keep accurate, dependable time. Buy a radio or TV and you expect it to work immediately, easily and to keep working without much fuss.

* Imagination Era Thought #5: The story will reign king! People will buy products based on the story behind the product. For example consumers won't buy the cheapest, best time keeping watch. They will buy a story behind non functional features which they imagine represents values relative to their lives. Those who imagine themselves rugged individualists will buy tough, bulky, shock proof, watches that are water resistant to 300 feet depths, even though they never plan to dive. (Swiss Army watches, for example.) Those who imagine themselves to be active sports types might choose a Rolex Yachtsman, etc.

Car buyers won't choose value and technological superiority. They will choose a car that has a story which represents the life style they imagine. Consumers will buy on a far more emotional basis than before and the emotions will be based on their imagination, hence the name Imagination Era.The brand will become the story. We can see this clearly by studying the history of Marlboro country. In the 1950s the tobacco firm, Phillip Morris, was an obscure British company with a pitifully small share of the American tobacco market. RJ Reynolds was king and the leading cigarette was Winston. Marlboro was a cigarette targeted for women smokers with the slogan "Mild as May" and was going nowhere. Then under new management this all changed. The new managers created a new image for the cigarette, the rugged image of the Marlboro Man. This image along with the bold red and white, crush proof box helped Phillip Morris become the world's leading cigarette manufacturer and pushed Marlboro into the top selling cigarette in the world. This happened despite the fact that RJ Reynolds revamped Winston so the two cigarettes were literally identical in chemical composition (with the same additive additives, etc.). Where Winston could not compete was in the story, the spirit of the Marlboro Man was successfully placed in people's imagination. Today this story is more than smoke! Marlboro country has become a brand that sells clothes, trips and many types of consumer products beyond tobacco.

Take Disney as an example. They've used the brand story to move from cartoons to movies to theme parks to an entire development of houses with a certain implied lifestyle. Disney's story is one of family values and this has appealed to millions of consumers in a multitude of ways.

* Imagination Era Thought #6: Values will be as or even more important than the economic value.. Consumers will base their buying decisions on private internal values that will grow in importance. We can see this trend already developing. For example many businesses have already learned it is good business to now give part of their profits to some type of charity.Some businesses have become their values, such as the ice cream company, Ben & Jerry. Such companies form a new corporate culture each expressing their values through the way they do business. Such firms express a set of values which states how the firm's convictions differ from the norm. Consumers who imagine these convictions are good will buy from these firms because they feel this firm has the ecologically correct or wholesome values that match how they (the consumer) feels.

In the Imagination Era consumers will perceive these values to be of increasing importance and will increasingly follow their feelings even when their imaginings may be wrong. In the early stages of this era this may lead businesses to profess convictions that are not really felt simply to attract customers. This will be a big mistake I believe Bill Clinton, the Democratic Party and Al Gore made. Consumers have too much access to too much information to be fooled for long.

This is why Perrier suffered greatly when it was discovered there was pollution in their process of adding carbonation to the drink. The story behind Perrier was French, fresh and naturally bubbly straight from the spring. The pollution was not the problem. The awareness that the water was not naturally carbonated destroyed the myth of its bubbly freshness and sparkle. Consumers were not buying water or even taste from Perrier. They bought the image of fresh French, naturally bubbly, mineral water.

This is also why the recent negatives the Disney empire has received (over management battles, golden parachutes and less than wholesome movies produced by Disney subsidiaries) could be great disasters to the Disney world. These events may be perceived as something less than clean, wholesome and good for the family and kids. If consumers imagine Disney as something less than a company that promotes family values, the luster of their products could be irrevocably tarnished.

The point is that imagination is everything. The products, management and work force of a firm may or may not be as the public perceives. Disney may be a wholesome firm or may be a money grubbing, totally ruthless organization. Perrier may be pure or may come from cesspools. The Marlboro Man may be a rugged individualism or a complete pansy. But what affects consumers is the public image.

As investors we want to choose companies that have images that reflect true values because in this day and age the public is well informed and enlightened. Information is too readily available and this trend of transparency will grow. Bill Clinton learned this the hard way. There have been many married presidents who, it has been suggested, had an extramarital involvement while in office (Roosevelt, Eisenhower, Kennedy etc.), but those were days when information could be more easily contained.Today we also suffer a crisis of values. The image of many local community, government, religious and business leaders has been tarnished. Most consumers are cynical. Yet they also desperately want someone or something in which to believe. They are looking hard at not just what every business says but what it does. They will stick (even if it costs more and is less convenient) with businesses that act by principles they preach.

The Imagination Era will be highlighted by savage competition. We are seeing this starting to take place already.

Soon, consumers will be so informed that no one will be able to compete on price and value. Only stories will sell and successful companies will need successful stories that last. It will become increasingly difficult for businesses (as it has for politicians) to use duplicity in the market place. (If you don't agree ask Newt Gingrich who led the attack on President Clinton's sexual affairs and ended up losing his job over his own similar foibles.) Values will become more valuable than value in the Imagination Era!

Big Markets

What does knowing all this mean? If we think through how consumers will react, we can start to see markets that will grow. If we understand which markets will expand then we can look for companies that providing products and services in these areas. Here are eight markets that Rolf Jensen believes will prosper which he outlined in the "Dream Society"

Next message we will follow this line of thought and review the markets that are prospering now as the imagination era unfolds. Until then, good global business and investing!

Gary


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