MIB: Joe Davis, Vanguard’s Chief Economist

This week, we speak with Joseph H. Davis, Ph.D. He is Vanguard Group’s global chief economist and head of Vanguard Investment Strategy Group; he is also a member of the senior portfolio management team for Vanguard Fixed Income Group. (Vanguard manages over $5 trillion dollars in assets).

Following the dotcom bust, Davis began hunting foe a better way to describe the innovation and creativity boom. Particularly, how the genuine rate of innovation impacts productivity and economic activity. He describes this “Ideas Multiplier” as a better way to think about technology and global trade. New ideas ebb and flow from different parts of the world, ebbing and flowing in long waves.

The rates of idea creation accelerates and decelerates through time and place. Davis and his team traced the development of two million ideas throughout history (using books, research papers, etc.). The ratio of good to bad ideas in 1980 was 40 to 1; at other times the rate of influential ideas peaked at 200 to 1. Over the past decade, this leading economic indicator — its ahead of changes in productivity gains by 4-5 years — is now running at 400 to 1.

There are 5 fields today with a higher idea multiplier than the computers did in the 1990s:

1. Materials Sciences

2. Oncology

3. Agriculture and Plant Sciences

4. Genetics and Genomics

Davis notes that the multiplier for Genetics and Genomics was the biggest one of full list. Note AI is not included, as the gains will be the application within these other fields. (There is a forthcoming paper on the idea multiplier in the future).

His favorite books are here; a transcript of our conversation is posted here.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

Next week, we speak with Neil Dwane, portfolio manager, and the Global Strategist with Allianz Global Investors, which manages about $591 billion dollars.




Joe Davis’ favorite books


The Idea Factory: Bell Labs and the Great Age of American Innovation by Jon Gertner


A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton Malkiel


The Wright Brothers by David McCullough

Hundred Year Marathon by Michael Pillsbury

Franklin Barbecue: A Meat-Smoking Manifesto by Aaron Franklin and Jordan Mackay

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