Louis-Vincent Gave, Coauthor
"Our Brave New World"

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History never repeats itself; but it often rhymes. This simple fact explains why so many financial analysts, market strategists and portfolio managers like to study past economic cycles and market reactions before taking investment decisions. For over ten years now, a wide majority of economists have drawn on historical parallels to warn us that the expansion of the past decade in US consumption was unsustainable and likely to end in tears. So far, and despite the strength of the above thought process and the numerous historical parallels, the dreaded meltdown has completely failed to materialize. 

So what is the next step? When a thought process fails, i.e.: when History fails to rhyme, analysts can typically respond in one of four ways: 1- Shut up and crawl under the carpet. This is usually an expensive proposition. 2- Pretend that the numbers are wrong and that, despite all the signs, they are right. 3- Hope that one is simply "early" and that one's scenario is about to unfold. 4- Admit that one has been wrong, and try to find out where the mistakes lie. This is the most intellectually honest stance to take and the one that we wish to adopt. 

The reason so many analysts drag their feet in admitting that History has failed to rhyme this time around is that it would lead one to the dreaded conclusion that "things are different this time." And yet, this is exactly what we do in our latest effort entitled "Our Brave New World." Over twenty chapters, we describe how companies today are more efficient with their use of capital and labor than they have ever been in the past. Today, companies no longer operate on the business models used one generation ago. Relationships between countries have evolved. Social structures are transforming themselves at a rapid pace. And all this is having an impact on financial markets? The world has changed. So shouldn't our way of analyzing it evolve as well?