What a year it has been!

One of our themes this year has been the progress achieved across so many measures of human life, health and prosperity, and that offers a justified cause for hope that we can overcome the challenges we face from poverty to conflict, disease and climate change through determination and innovation.  The corollary to it is the negativity bias that pervades so much of our discourse.  Lord Browne of Madingley spoke about both progress and negativity in his comments to us last month and highlighted the importance of having a positive approach to push back the frontiers of the possible: “When we achieve this more inclusive and optimistic mindset, we unshackle our imaginations, and threats such as antibiotic resistance and climate change cease to be existential. They are just another set of problems to be solved”.

We think of this not just because we believe strongly in progress and innovation but because the negativity bias has a direct impact on how we think about risks and opportunities.  Being positive about something and seeing its potential is perceived as an opportunistic sales pitch whereas being negative and pointing out the problems and challenges is perceived as providing impartial advice.  Being positive also bears the risk of constant repetition.  We aspire to Warren Buffett’s ability to say the same thing in different and inspiring ways over five decades but have to admit that we have a long way to go.

At the beginning of this year we wrote:

As we enter 2019, we continue to be constructive on the global economy despite the fact that growth is expected to slow somewhat from the strong progress we have seen over the past several years.  We also are alert to the current geopolitical turmoil, which is likely to intensify over the next couple of months, and to central bank policy decisions, which could impact upon this view.

However, we believe that our investments have strong prospects and that they can do well this year.  Our focus is on the quality and value of the assets we own, and this should allow us to weather the increased volatility we have witnessed and look at it as an opportunity, not a risk.  Our outlook is almost entirely consistent with what we thought at the beginning of 2018 and we expect it to prevail this year as well.

What should we say?  We are at the close of a spectacular year for investment returns for our investments in great global companies with a 26% return in US dollars and yet our outlook is largely unchanged, as is our approach. 

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