North Korea: risks or rewards?

North Korea: risks or rewards?

Among the many current issues worrying investors, the geopolitical risk surrounding North Korea is often near the top of the list. At its core, the worry from a narrow investment perspective is that if a major conflict erupts into a full-fledged war, this would be – to say the least – highly disruptive to the world economy. It’s a worry, and indeed a reasonable one given the country’s history of authoritarianism and isolation. What’s more, the risks have been magnified by North Korea’s new nuclear capabilities. However, this view skews towards a pessimistic interpretation of how the future will unfold. What if things don’t turn out quite so poorly? The market, as ever, has its contrarians. We read with interest the story of Busan Industrial’s recent stock surge of 500% since late April. Its Korean investors are betting (with gusto!) that the small cap South Korean construction company will be a big beneficiary if relations with North Korea thaw and the two economies become more connected over time.  (The Wall Street Journal, June 12, 2018)

A good idea is hard to find

How much effort do we have to put in to come up with a good idea? The romantic view of “ideation” is that, like Newton’s experience with the falling apple, great ideas are borne from a flash of insight seemingly derived from thin air. However, the more pragmatic reality is that many of the world’s great ideas come from years of hard-slogging research. In a sobering academic paper, professors from Stanford and MIT came to the conclusion that it’s getting that much harder to find new, breakthrough ideas:

“We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find.” (Bloom, Jones, Van Reenen, and Webb, “Are Ideas Getting Harder to Find?,” March, 2018)