Humans, a Growth SpeciesHamish Maxwell, Investment Specialist, Clients Department
From early stone tools to a planned base on Mars, humans have achieved remarkable things. Hamish Maxwell explores our species’ urge to know more and do more, and what it means for us as investors.
An overview of our species might read something like the following: homo sapiens, or what we recognise as modern humans, evolved around 300,000 years ago in Africa. Humans then began to spread from that continent around 100,000 years ago and now call nearly every type of climate and terrain on earth ‘home’. We’ve even created a habitation outside earth’s atmosphere in the form of the International Space Station, and there are credible plans being formed to create a base soon on Mars. Rather impressive progress, we might agree.
Our journey has not always been smooth, though. Around 70,000 years ago, humans came very close to extinction. A climate event, caused by a massive volcano erupting and blocking out the sun, very nearly wiped us out before we’d even got going. Had we already formed the International Union for Conservation of Nature by then, it would have quickly classified us as an endangered species. There were only a few thousand of us left at this low point, clustered along the shore, clinging to life largely on a diet of shellfish (it’s a wonder we can so much as look at oysters nowadays). A head count of life on earth would have ranked us as insignificant among the planet’s faunae and a visitor to earth might not have even noticed us. We lived a local, unremarkable life, subsisting on whatever we could get our hands on by hunting and gathering.
However, environmental challenges such as this, and many others that we faced over the years, were overcome by what Charles Darwin termed the ‘natural selection’ of random mutations, or ‘evolution’, which equipped us with a very powerful set of physical, mental and cultural characteristics, that continue to define us today.
Thanks to these characteristics, a visitor to earth now could hardly miss us. These days, we are a planet-dominating, smartphone-wielding, space-travelling, genome-unlocking, super-species. Or ‘growth species’, as we’ll coin it. Our ability to invent, innovate and improve seems to know no bounds. For instance, when the phenomenal scientific motivating force known as Moore’s law – the doubling in the speed and capability of computers roughly every two years – recently came up against the obstacle that microchips were becoming so small that electrons were leaking from them, some especially smart humans designed a miniscule insulator, offering 15 more years of easy Moore’s law, as Dutch lithography company ASML put it. Also, as evidence began mounting that carbon emissions are seriously harming our environment, humans (driven by a visionary named Elon Musk) set about harnessing the chemistry of lithium and nickel (and some inventions of a long-dead visionary called Nikola Tesla) to propel not just clean cars, but potentially our whole clean energy future. And when we began ticking off the diseases we’d defeated through medical science but remained painfully aware of the threat posed by cancer, a Danish biotech company called Genmab harnessed the microscopic but tremendous powers of our own immune system to combat it, making very encouraging progress.
The list goes on. There are so many examples of us using our intelligence and propensity to innovate and invent to achieve the remarkable. Developments such as these, and countless others that we can lay claim to, have allowed us to grow in all sorts of ways. In population, life-expectancy, health, productivity and economy. Evolution has turned us into a growth species.
So, let’s consider some of the evolutionary characteristics that make us a growth species. What are the things that, by making us human, give us our innate propensity for growth? Some of these characteristics are obvious just to look at. We’re bipedal for a start, freeing up our hands to do other things besides crawling (crawling isn’t a particularly value-adding activity). We also have opposable thumbs, so those freed-up hands can use tools. We have binocular vision too, allowing us to accurately assess things by sight. Plus we have large heads to hold big brains.
Mentioning our brains brings us to the next category of evolutionary characteristics that defines us as a growth species: our intelligence. We really are very clever. Humans can rationalise complex abstract ideas and use our memories and imaginations to form original thoughts and create solutions to problems, like no other animal can. We’ve also developed sophisticated means of communicating with each other (speech was such a game changer), allowing us to share solutions to problems and to pool our resources in other ways too. In fact, our minds are very much geared for us to be a sociable species, which helps us to scale our individual achievements across whole populations, combining strengths and insights to greater effect. There is clear evidence that no human can live truly independently, and most people live lives that are very far from independent. By working within a society, people can focus on a particular profession and skillset, thereby becoming highly proficient in their work. A car technician, for instance, can become highly skilled because they know that others are taking care of architecture and healthcare. A technician can then train the next generation of technicians because we are sociable and have memories and ways to communicate.
Blended with our intelligence is avid curiosity, which has paid great dividends over deep time. By incessantly wondering and wandering, we diversified our species and invested in long-term growth. By contrast, our earlier evolutionary cousins, such as the Neanderthals, and lesser known Denisovans and Heidelbergenses, seem to have lacked in curiosity. They did not (or perhaps, could not) habitually ask ‘what if?’ The price they eventually paid was extinction. Archaeologists reveal that during another major climate emergency, about 40,000 years ago, some of the last Neanderthals retreated into a cave in the Rock of Gibraltar and perished. The poor ignorant creatures couldn’t conceive that their means of survival may have lain over the mountain, or across the bay, or among their tools. Under the same circumstances, homo sapiens went looking for oysters and ways to open them.
If there is a lesson here, it is to embrace our curiosity and continue to invest in the big ‘what ifs?’ Fortunately, though, our curiosity is innate and drives us to understand things like anthropogenic climate change and to use our tools to find solutions, at home and among the stars.
In the 2019 book Transcendence: How Humans Evolved Through Fire, Language, Beauty and Time, Gaia Vince builds on our understanding of our evolutionary journey and makes observations that support my assertion that we are indeed a growth species. Vince argues that:
Our unique ability – compared with other species – to determine the course of our own destiny rests on a special relationship between our genes, environment and culture going back into deep time. It is our collective culture, rather than our individual intelligence, that makes humans unique.
Cultural evolution then, not just physical and mental evolution, is a powerful force which allows us to grow in ways that other species cannot. Vince further argues that the key ingredients that make human progress exponential are large, well-educated populations, which are well enough connected to exchange ideas freely. It’s no wonder then, that as human populations have grown and become better educated and connected, our growth has become explosive.
Consequently, our tools are now evolving exponentially too. We began with stone axes. But now consider the economist Brian Arthur defining ‘combinatorial evolution’ as new technological combinations arising out of the collection of previous ones; the philosopher Thomas Kuhn, describing the ‘structure of scientific revolutions’ as intermittent instances of genius which change paradigms for everyone; the development specialist Carlota Perez, explaining how powerful combinations of capital and science create regular and valuable industrial revolutions; and the futurist Ray Kurzweil, optimistically predicting our species’ further evolution through artificial intelligence. Moore’s law has already been mentioned but deserves repeated kudos.
So, ‘humans, a growth species’ – but what does this mean to us as growth investors? Rather a lot, actually.
It means we can understand what drives long-term growth in the businesses we invest in, not just at the economic and technological levels, but also at the atavistic, behavioural level. In helping us to understand how we arrived at this period of deep societal and economic transformation, it reminds us why growth investing yields such promise over the long term. Some scientists assert that we’re even living in a new epoch: 'the age of invention and human influence on the world, called the Anthropocene'. Provided we make the Anthropocene sustainable, with greater concern for impact and social licence, the progress we could continue to make throughout the human epoch is tantalising.
It’s no coincidence that innovation abounds, and it’s not just a phase we’re going through. Rather, growth is part of our very nature. Innovation, invention and improvement are central to what it is to be human – tendencies we evolved to survive and beat the odds. As investors, therefore, I argue that it’s directly relevant that humans are a growth species, because over the long term we can expect a lot more growth: it’s what we do.
IMPORTANT INFORMATION AND RISK FACTORS
The views expressed in this article are those of Hamish Maxwell and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in March 2021 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Any stock examples and images used in this article are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us. Any individual examples will represent only a small part of the overall portfolio and are inserted purely to help illustrate our investment style.
This article contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this article are for illustrative purposes only.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.
Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.
Baillie Gifford Investment Management (Europe) Limited provides investment management and advisory services to European (excluding UK) clients. It was incorporated in Ireland in May 2018 and is authorised by the Central Bank of Ireland. Through its MiFID passport, it has established Baillie Gifford Investment Management (Europe) Limited (Frankfurt Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in Germany. Baillie Gifford Investment Management (Europe) Limited also has a representative office in Zurich, Switzerland pursuant to Art. 58 of the Federal Act on Financial Institutions ("FinIA"). It does not constitute a branch and therefore does not have authority to commit Baillie Gifford Investment Management (Europe) Limited. It is the intention to ask for the authorisation by the Swiss Financial Market Supervisory Authority (FINMA) to maintain this representative office of a foreign asset manager of collective assets in Switzerland pursuant to the applicable transitional provisions of FinIA. Baillie Gifford Investment Management (Europe) Limited is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co.
Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司 is wholly owned by Baillie Gifford Overseas Limited and may provide investment research to the Baillie Gifford Group pursuant to applicable laws. Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司 is incorporated in Shanghai in the People’s Republic of China (PRC) as a wholly foreign-owned limited liability company under the Company Law of the PRC, the Foreign Investment Law of the PRC and its implementing rules, and other relevant laws and regulations of the PRC. Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司 is registered with the Shanghai Municipal Administration for Market Regulation, with a unified social credit code of 91310000MA1FL6KQ30, with its registered office at Unit 4203-04, One Museum Place, 669 Xin Zha Road, Jing An District, Shanghai 200041, China. Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司 is a registered Private Fund Manager with the Asset Management Association of China and manages private security investment fund in the PRC, with a registration code of P1071226.
Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 and a Type 2 licence from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Room 3009-3010, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong. Telephone +852 3756 5700.
Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.
Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.
This material is provided on the basis that you are a wholesale client as defined within s761G of the Corporations Act 2001 (Cth). Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth). It is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001 (Cth) in respect of these financial services provided to Australian wholesale clients. Baillie Gifford Overseas Limited is authorised and regulated by the Financial Conduct Authority under UK laws which differ from those applicable in Australia.
Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.
Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.
The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission ('OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.
Baillie Gifford Overseas Limited (“BGO”) neither has a registered business presence nor a representative office in Oman and does not undertake banking business or provide financial services in Oman. Consequently, BGO is not regulated by either the Central Bank of Oman or Oman’s Capital Market Authority. No authorization, licence or approval has been received from the Capital Market Authority of Oman or any other regulatory authority in Oman, to provide such advice or service within Oman. BGO does not solicit business in Oman and does not market, offer, sell or distribute any financial or investment products or services in Oman and no subscription to any securities, products or financial services may or will be consummated within Oman. The recipient of this document represents that it is a financial institution or a sophisticated investor (as described in Article 139 of the Executive Regulations of the Capital Market Law) and that its officers/employees have such experience in business and financial matters that they are capable of evaluating the merits and risks of investments.
This strategy is only being offered to a limited number of investors who are willing and able to conduct an independent investigation of the risks involved. This does not constitute an offer to the public and is for the use only of the named addressee and should not be given or shown to any other person (other than employees, agents, or consultants in connection with the addressee’s consideration thereof). Baillie Gifford Overseas Limited has not been and will not be registered with Qatar Central Bank or under any laws of the State of Qatar. No transactions will be concluded in your jurisdiction and any inquiries regarding the strategy should be made to Baillie Gifford.
Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This document is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.
Hamish Maxwell Investment Specialist, Clients Department
Hamish joined Baillie Gifford in 2017 and is an international equities Investment Specialist in our Clients Department. Just prior to joining Baillie Gifford, he achieved an MBA from Cass Business School and was recipient of the EU Award. Earlier in life, Hamish also completed post-graduate Law at the University of Sussex, but a well-known economic event in 2008 encouraged him to pursue a different interest professionally, i.e., join the Royal Navy as a Commissioned Officer. Hamish served in aircraft carriers, mine-hunters and trident nuclear submarines and was awarded top-of-class by HRH Prince Edward.
YOU MAY ALSO LIKEInsights.Visit Baillie Gifford's Insights page.Glasgow climate pact: from risk to opportunity.For Global Stewardship, climate opportunities go hand in hand with climate challengesUK Growth Fund Manager Update.Investment manager Iain McCombie gives an update on the positioning and activity of the Baillie Gifford UK Growth Fund portfolio.