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Over a year ago I concluded that everything I know about investing is obsolete and useless. I had solid statistical proof that that was the case several years before, but could not bring myself to admit it is different this time. Things will never be like they used to be. Times have changed and what worked well for the past 30 years does not work at all any more.

I spent the past 18 months reading and studying thousands of papers, reports and analyst recommendations. I read wordy books, engaged in thousands of online and in-person conversations with smart people I respect and admire and spent agonizing days and nights trying to figure out how to invest my lifetime savings.

My conclusions are tentative, unsupported by any particular school of economic thought and uniquely mine. Act on them at your own risk. They are more far reaching than just how to invest. They are the basis for a new mindset and way of viewing wealth in general. Wealth and power go hand in hand, so it has social, political and and personal implications far beyond and removed from the world of investing.

The first obvious thing is that the flow of money and information is: 1) global; and 2) near instantaneous. Those flows have been speeding up for a long time but have now reached the limit of instantaneous. You just can't get any faster than that.

Money has ceased to be a tangible thing. It is just more information to be transferred. Seldom does tangible money change hands any more – just information about who it would belong to if it existed. So, even when we talk about the transfer of money, we are just talking about the transfer of information. We can talk about information and consider money a subset.

The people, institutions and businesses that control information and the flow of it hold tremendous power that trumps military might and wealth. That shifts the power centers of the world from those who have, to those who know. They may be one and the same, but that is far from a forgone conclusion at this point.

So investment consideration number one might be to invest in those companies that control the storage and flow of important information. Just peachy – there is the answer. I knew it all along – just buy Cisco, Verizon and Oracle, hold them forever.

But it isn't just peachy or that simple. Why not? Because the government is not going to let Cisco, Oracle and Verizon run the show if they can prevent it. When it looked like the oil companies were going to dominate by controlling a vital resource, they were brought to heel with punitive taxes, court rulings and regulation.

They were effectively driven out of the USA, but welcomed in other parts of the world. The nations that welcomed them are now ascendant while the USA flounders. Take note of that because it could be very important for American investors.

The second obvious thing is that instant information requires instant decisions. Therein lies the weakness of governments and the reason why the fight for control of information will likely create some serious conflict and chaos. It may even destroy government as we have known it in the past. For all the media coverage of elections and politicians, governments are essentially bureaucracies. They do not change when the figureheads change.

A bureaucracy cannot make real time decisions or even share accurate information with other bureaucracies within the government. Their primary concern is self preservation, budget and shifting blame to rivals. The spectacle of the President pouting like a two-year old with a wet load in his diaper while Congress addresses problems that are decades old with laws they don't even take time to read and the courts try to dictate daily life in schools, housing projects and the citizen's private bedroom is tragically comic.

The government bureaucracy will lose the information war in the end, not because they don't have information, but because they cannot make wise decisions and change them when they are no longer wise.

This is not just peachy because the bureaucrats have historically responded with totalitarian force when they are endangered. Any government has the power to crush its' jurisdiction back into the dark ages. Around the world it has happened too often to dismiss lightly. It can happen in the USA. (Note that is “can”, not “will”)

So, overlaying the investment field is the prospect of failing government institutions. It would seem to me that investments should be directed toward filling the voids left by government failure. That will be different from region to region and community to community. Areas of government inadequacy include things from the national level (prisons, security, education etc) to the local (street maintenance, garbage collection, park landscaping, janitorial services). It will take some imaginative thinking to come up with investments that are suitable for every individual and they may not fit neatly in a 401k or IRA.

My conclusion at this point is that investment thinking should be focused on information gathering, storage and dissemination; and secondarily on areas of government inadequacy.

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