Is it possible for seven stocks to represent the economic activity of the other 493? Especially when six of the seven are essentially in the same business. Advertising, communication or both.  As we all know, there are 500 stocks in the Standard & Poor’s index. What is less widely known is, the S&P index was introduced in 1957 to the “modern” era of investing as a measure of professional performance. Prior to that epochal event, the Dow Jones Industrial Average was the standard reference for well over 100 years. The shift toward the index was driven by the growing importance of the then new sector known as electronics that eventually became called technology.

We previously wrote about the “Godfather” of technology, Harvard Business School professor and Major General in the United States Army, Georges Doriot. Returning from World War II, he formed American Research and Development. It was the first public venture capital firm; previously, venture capital firms were family sponsored. The success he had in funding Digital Equipment had never been experienced before. Its impact on the then new computer technology industry was breathtaking. Yet for him, it had nothing to do with money.  His motivation was to create jobs for the thousands of homecoming soldiers. Not only did he touch their lives, but the careers of over 7,000 students.

The current hyperbolic Artificial Intelligence phase of technology doesn’t carry the same sense of importance to me. Perhaps it will be for the investment banking firms, accounting and legal firms that undoubtedly will be involved in their formation. It’s somewhat reminiscent of the robotics wave in the 1960’s or the calculator ‘magic” in the 1970s. AI speed, while amazing, does not yet seem able to carry the nuances of human experience. And it’s arguable whether a machine ever will, especially when we don’t fully understand ourselves. This reality has already generated subliminal public fear.

Despite this fear, Artificial Intelligence is being hailed as possibly the greatest creation since Johannes Guttenberg assembled the printing press in 1440. While AI could enable new social discoveries in the future, the current “Magnificent Seven” does not appear to offer anything new in terms of product or service. The seven: Apple, Microsoft, Alphabet (Google), Amazon, NVIDIA, Tesla and Meta (Facebook).

The phrase “Magnificent Seven” came from the gifted financial writer Michael O’Rourke who opined, “It seemed fitting when they were responsible for 88% of the market gains …” As many readers might know, it was originally a Japanese Samari story of seven warriors who “take on” thirty criminals who are terrorizing a small village. Later (1960) the story was made into a western “spaghetti” movie saga that reinforced the theme of how a righteous few can take on many who are evil. It’s a theme that works best in movies.  However, even there just two of the “Magnificent Seven” survived.

For our economy to continue to advance, new opportunities must be created. A service or product we didn’t have before. A car. A plane. Computer. Television. Smart phone. It’s not the 100^th variation of what my mother used to call her “Lay Away Plan” at the local discount store. And I don’t “see” this occurring from any of the “Magnificent” seven stocks. All advance further communication, but an Apple iPhone 15 is not expected to create thousands of new jobs. Yet many seem to think these “Magnificent Seven” new channels are the 21^st century’s Guttenberg printing presses. What’s forgotten is the press facilitated the spread of knowledge which enabled the advancement of society. These new “presses” will also. But they are not the new products and services they will help create.