Sir John Templeton, Founder, Templeton Mutual Funds
THE ACCELERATING PACE OF PROGRESS
Chairman: David A. Edmison, President, The Empire Club of Canada
Head Table Guests
Mary R. Byers, author and Director, The Empire Club of Canada; Tom Harper, syndicated columnist and best selling author of religious books; Neil Jacoby, President, Shell Canada Pension Fund Management Inc.; Jim Gallagher, Executive Vice-President, Toronto Stock Exchange; Eric L. R. Jackman, Ph.D., President, Invicta Investments Incorp. and a Past President, The Empire Club of Canada; Charles B. Johnson, President and CEO, The Franklin Templeton Group, San Mateo, California; Robert B. Schultz, Chairman and CEO, Midland Walwyn Capital; Bruce S. MacGowan, Chairman, Templeton Management Limited and Secretary and Treasurer, Templeton Growth Fund, Ltd.; Diana Chant, Partner, Price Waterhouse and Treasurer, The Empire Club df Canada; Robert Bertram, Senior Vice-President, Investments, Ontario Teachers Pension Plan Board; Prof. Jean Marc Laport, President, Toronto School of Theology; Ed Waitzer, Chairman, Ontario Securities Commission; Donald F. Reed, President and CEO, Templeton Management Limited, Toronto, Ontario and Chairman of the Portfolio Management Committee of Templeton Worldwide, Inc.; and K. Michael Edwards, President and COO, Richardson Greenshields of Canada Ltd.
Introduction by David Edmison
In his book "The Crowd" written in 1895, French author and social scientist, Gustave Lebon, talked about the behaviour of crowds. He based his studies on the experience of the French Revolution.
Lebon points out the differences between individual behaviour and crowd behaviour. As a crowd, individuals form a collective mind and their behaviour can be quite, quite different from what each individual themselves would do. Crowd psychology is usually characterised by reaction, rather than thinking.
The stock market, to a large extent, is governed by crowd psychology and sentiment. This, of course, means price movements can be, and often are, irrational. At these times sound, objective investment expertise is crucial.
Euripides wrote many years ago: "Along with success, comes a reputation for wisdom." Today there are many intelligent investment managers but there are only a few wise managers. Our guest is such a man. He has a reputation of moving against "the crowd." Perhaps living 1,000 miles away from the clamour of Wall Street on a quiet island may explain this. In his over 50 years of business experience Sir John Templeton has displayed that unique ability to see value and opportunity, where others do not.
As an example, 16 years ago The Empire Club hosted a lunch and our guest was John Templeton. At that time there was a considerable degree of uncertainty in the financial markets. The Federal Reserve Board Chairman, Paul Volker, had recently returned from a meeting with the I.M.F. and was adopting a restrictive monetary stance. Inflation was the number-one enemy and interest rates were on the rise. Stock prices were very volatile and had been under some recent pressure. The crowd sentiment was decidedly bearish.
Our guest did what few would contemplate. He forecast where he expected stock prices to go within eight years. He stated: "There's a better-than-even chance that within eight years New York stock prices will quadruple." Now I think we can appreciate that, irrespective of the time it was given, this was a bold forecast.
Well, eight years later the Standard and Poors Industrial averages experienced a total return of almost 450 per cent, more than quadruple their levels of November 1979. It is this type of prescience that has earned our guest the reputation as one of the world's pre-eminent investors. Now, I say world because John Templeton was one of the first investors to look beyond traditional borders. This, of course, is reflected in the performance of the Templeton Growth Fund. Anyone fortunate enough to have invested $10,000 in the fund in 1954 would have assets today, including dividends reinvested, worth over $3,000,000.
Throughout his distinguished career, Sir John has exhibited unbridled optimism and faith. This faith has extended beyond his business pursuits. In fact he has long maintained that spirituality, not economics, has been the single most important aspect of his life. As a testament to this belief he established, in 1972, the Templeton prize for progress in religion to recognise spiritual values in people. The first person to receive this award, which is presented each year by His Royal Highness Prince Philip, was Mother Theresa. This award is the world's largest prize for progress in religion. Sir John has been described as a money manager with a heart of gold.
Ladies and gentlemen, I ask you to warmly welcome our special guest, Sir John Templeton.
As your president mentioned, I addressed The Empire Club of Canada on a previous occasion. At that time, 16 years ago, my topic for you was investing, and economic and investment prospects. I could perhaps say more about investing, but today I wish to discuss something we easily lose sight of--the accelerating rate of progress.
We worry too much. Most of us spend so much of our time mired in our daily problems that we become blind to the awesome transformation that is taking place around us. Today I ask you to step back a bit and put into perspective the magnitude of change that we are so fortunate to be experiencing. We can see these changes in five aspects.
The first aspect of change is economic.
We live in a period of prosperity never seen before in history. In Canada, Gross Domestic Product today is 63 times what it was just 50 years ago. The average weekly wage has increased in real terms by 85 per cent. When I was born, the uniform wage of an unskilled man was only 10 cents an hour. Today, the average factory worker in Canada earns more than 100 times that. Even after adjusting for inflation, the increase is still 10 times.
Not only do we earn more, but also our quality of life has increased. In just my lifetime, real consumption per person worldwide has more than quadrupled. It is the first time that such quadrupling in the standard of living has occurred in the span of a single person's life.
In the last 50 years, real goods consumption per capita has more than doubled. We all have conveniences that the richest, most powerful emperors and potentates of the past never enjoyed, let alone imagined.
Recent work by a Yale University economist suggests that researchers, at least in the United States, have understated real wage growth by failing to account for qualitative improvements in goods and services. Adjusting for quality improvement means that the standard of living in America may have increased by a factor of 75 times since 1800! Even conventional measures suggest it has increased by 13 times, still a tremendous amount.
Though Canada did not exist as a nation in 1800, its economic growth has closely paralleled America's--especially in the 50 years since the end of the Second World War. Now, of course, Canada is one of the world's most productive industrial economies, with a standard of living among the very highest.
Today, in the quality of life Canada ranks first in the world. The United Nations Development Program has measured such things as life expectancy, educational attainment and basic purchasing power of the people in 173 countries. On the agency's scale of the quality of life, Canada placed first with a score of 93 per cent in last year's survey.
In the past 25 years, Canada has created more than five million new jobs, a remarkable achievement compared to the U.S. increase of 25 million in the same period.
Looking around the world, the growth that has taken place in just this century has been equally impressive. Today, people worldwide consume 20 per cent more food per person than just 50 years ago. In low-income countries 25 years ago, people on average were fed 80 per cent of what the World Bank considered the necessary daily requirement. Today, even the lower-income countries exceed 100 per cent of that requirement.
People benefit from buying more than 100 times as much energy as they did a century earlier. One of the reasons for Canada's fast economic growth has been the availability of cheap electric power beginning early in this century, and the development of the petroleum industry in the past 50 years.
Sports are an indicator of improved quality of life. It's estimated the number of people playing sports has increased 10 times in just the last century. We have time away from work for leisure activities. Few people had such leisure time a century ago, or could afford the expense of participating in sports.
If you look further back to 1776, when Adam Smith published his great book, "An Inquiry Into the Nature and Causes of the Wealth of Nations," you will see that 85 per cent of the world's population had to work in agriculture just to produce enough food. Today in North America, less than four per cent work on farms, and they produce great surpluses. Dire predictions that farming output would be unable to meet the food needs of a rapidly expanding population failed to account for the incredible productivity gains that have occurred. Just in the last 30 years, improvements in farming methods, crop varieties, pesticides and fertilisers have helped triple agricultural production per acre.
Since the time of Adam Smith's writing, the yearly production of goods and services has increased 100-fold. In fact, more than half the goods produced in history have been produced in the past 200 years. Before Adam Smith,
there were fewer than 1,000 corporations on earth. Today, corporations are being created at the rate of 4,000 every business day.
Underlying this growth is the increasing acceptance of the importance of free trade and enterprise within and among nations. The trend toward greater free-market economies accelerated in the 1980s as the number of privatisations of corporations began to outpace nationalisations. Privatisations to the public of state-owned enterprises around the world have soared, increasing by a factor of 30 just since 1985 because the failures of socialism have grown more blatant and unbearable. And of course we have examples of privatisation in Canada, with such state organisations as Air Canada, Petro-Canada and perhaps next, Canadian National, becoming owned by the public.
Global restructuring is expected to bring four billion new people into the free-market system, four times the number who lived in free markets just a decade ago. People around the world are beginning to experience more freedom as well. According to a study by Freedom House, 1990 was the first year ever when there were more free countries than not-free countries. It was also the first time there were more people living in freedom than those still under repressive regimes.
This trend toward greater capitalism and freedom unleashes tremendous potential for efficiency gains and even greater wealth potential. So does the shift away from regulation and isolation toward free trade. World exports today in real terms are more than 11 times what they were just 40 years ago. Numerous institutions have arisen to protect the principles that have fostered this dramatic growth and to spread the preconditions necessary to continue free trade throughout the world. Consider this:
Just 50 years ago, there was no General Agreement on Tariffs and Trade, no Organisation for Economic Cooperation and Development, no World Bank, no International Monetary Fund, no International Bank of Reconstruction and Development, no European Union, no North American Free Trade Agreement, and no World Trade Organization.
New International Monetary Fund revisions indicate that world output is growing faster than we had realised--more than 20 per cent faster, in fact. Standards of living in some of the developing countries are rising eight per cent yearly on average. This means that the standard of living can double each nine years.
As income levels rise, so will consumer spending, creating new opportunities not only for local businesses but also for companies in the industrialised countries. They will find massive new marketplaces opening up for their products. In India, for example, the middle class is estimated to be almost equal in size to the entire population of the U.S., and is growing by 20 per cent per year. One corporation in India now has more shareholders than the total number of Americans who own any shares!
The second aspect of change is medical.
Remarkable advances have been witnessed in science in all areas and all around the world. Take the field of medicine, for example. Death from tuberculosis, typhoid fever, diphtheria, syphilis, pneumonia and diabetes is now only a tiny fraction of what it was 50 years ago. Miscarriages have been cut by half. So has the number of infants that die in the first year of life.
Even in areas where we still face significant challenges we should be encouraged by the progress that has been made. Back in the 1930s, the five-year survival rate for cancer patients was just 20 per cent. Today, it is better than 50 per cent. Recent work in new areas of medical science, such as biotechnology, gives hope for developing treatment for such afflictions as multiple sclerosis, arthritis and AIDS.
Health care is much better. Over the last 50 years, the number of physicians practising in Canada has quadrupled.
Records kept by a university show students now average 10 inches taller than they did 200 years ago, probably because of better health and nutrition. It is estimated that 65 per cent of all people who ever lived beyond age 65 are alive today. In the industrialised world, the number of people who live to over 100 has doubled every decade since 1950. What's more, life expectancy has doubled in the past 200 years in the U.S., and possibly through the industrialised world. Never before in world history have 20 years gone by when such a small fraction of the world's population has died of starvation.
Many say that 50 per cent of all that is known in medicine has been discovered the last 15 years, and 90 per cent in the present century. When we realise that more than half of all research scientists who ever lived are alive today, we can see that this incredible pace of advancement is likely to continue into the future.
The third aspect of change is technological.
An area that has seen unparalleled growth is technology and communications. Today, eight times as much is spent on electronic equipment as was just 25 years ago. This includes video and audio equipment, as well as personal computers.
In the last 40 years, the number of telephones in use in Canada has tripled. And 40 years ago, Canada already had one of the best telephone systems in the world. There is now a telephone line for almost every two people.
Currently, another great improvement in telephone service is under way. An ordinary copper telephone wire can carry 48 conversations, but new fibre optic lines carry 8,000 conversations. By the end of the century, a single fibre may have 10,000 to 100,000 times the present carrying capacity. That means a single strand of glass fibre may be able to handle all the calls that take place today on the busiest days of the year, such as Mother's Day. Of course, the new technology means it will be possible to have video telephones, and other services that today are still experimental.
Communications firms used to be messengers, but now they are more like builders of super-highways. In the past, communications systems handled messages directly for others. Remember the telegram and cablegram, and the person-to-person long-distance phone call? Now individuals control their own electronic communications. They originate the message and make the connections themselves.
And remember that only 50 years ago there were no photocopiers, no lasers, no microchips, no satellites in space, no fax machines, no E-mail, no bar-code scanners, no Internet, no on-line data services. Today, one quarter of the homes in Canada have a personal computer, a machine that was still new just a decade ago.
But 50 years ago there were also no video cassette recorders. But by 1990 alone, more than 250 million were made. Nor were there cellular phones, now used by more than 20 million people in North America, and many more people worldwide. Think how much each of these devices has transformed the way we are able to connect and work with one another.
As amazing as these inventions are, it is even more amazing how quickly they become obsolete. Take the cellular phone: it is already changing to digital technology. This will permit cellular phones to transmit data in many forms, as well as conversations. Take the microchip: it is estimated that every 18 months the power of the computer microprocessor doubles! That means computers a few years from now may be 70 times as powerful.
Just in my lifetime, five times as many books are published yearly, more each month than in the entire historical period before John Cabot and Jacques Cartier voyaged across the Atlantic to explore Canada. More than half the books ever written were written in the past 50 years.
In 50 years, travel has become easier and faster and more comfortable, with better highways and better aircraft. During the 1980s, the number of Canadians travelling abroad doubled. That excludes visits of more than a day to the U.S., which increased more than 50 per cent.
As communications and travel have grown, so have new ideas and inventions. Three times more patents are filed for new inventions than were filed just 50 years ago. More than 25 times as much is spent on research and development. There are four times as many scientists and engineers in the world. More than half of all discoveries in natural science have been made during this century. In the United States alone, more than $120 billion is spent annually on research and development, more than in the entire history of the world before I was born. Worldwide, more than $2 billion is allocated to scientific development each business day.
It took from the time of Christ to the mid-eighteenth century for knowledge to double. It doubled again 150 years later, and then again in only 50 years. Incredibly, in the most recent 30 years, more new information has been produced than in all the previous 5,000 years!
Take mathematics, for instance. It has branched into a multitude of specialties. A pile of perhaps a dozen books would sum up what's known in one special field of higher mathematics. You could fill a stadium with piles of books, each pile representing the essential knowledge of a single branch of mathematics. And few mathematicians would be expert in more than a few of them.
Today, according to author John Naisbitt, the amount of information available is doubling every two and a half years. At that rate, there will be more than 1,000 times as much information available in the next 25 years.
An increasing proportion of the population works in information-related occupations--two-thirds, it's now estimated in the United States. For the past four years, the U.S. has been spending more money on computers and communications than on all other capital equipment combined. The rest of the world, of course, is following this trend.
Progress of this magnitude in such a short time is truly a revolution, one whose astounding implications we have yet to fully understand. Remember that when the telephone was introduced, a British leader said that while it was fine for the United States, it would not be needed in England--which was small and had many messenger boys.
And remember the recommendation made to an American president almost 100 years ago to close the U.S. Patent Office, because everything that could be discovered had been discovered!
I believe one of the most significant implications of this information revolution lies in its seemingly infinite nature. Our economic prosperity is no longer primarily a function of limited natural resources, but is becoming progressively more heavily dependent on the self-perpetuating, limitless body of knowledge. We have traditionally thought of wealth in terms of things like gold or land. Increasingly wealth has become intangible, rooted in knowledge and its application. This bodes well for a continuation and acceleration of the underlying trend toward prosperity that has blessed mankind in this century.
The fourth aspect of change is education.
Two things have happened in education. First is the explosion in both the volume and rate at which information is available. Second is the greater level of prosperity. Combined, they have afforded more and more people the opportunity to learn. A progressively higher level of learning will become an essential part of this continuing transformation. This will enhance the future course of nearly every field of study and every line of work. We need to develop the analytical skills necessary to harness the powers of knowledge that will drive the engine of economic growth in the future.
Despite the negative news we constantly hear about the state of education, astounding progress has been made. The number of students attending university in Canada has increased seven times since 1951. Today, eight out of 10 Canadians have at least a high-school education. Until the First World War, few Canadian children had that opportunity.
When I was born, there were only two graduate schools of business in the world. Today there are more than 600 in North America alone.
The level of education is improving around the globe. In China, the literacy rate has increased from less than 20 per cent in 1950 to more than 60 per cent today. In Indonesia, it has gone from nine per cent in 1930 to also more than 60 per cent today. The same story is being repeated throughout the developing world. The percentage of children enrolled worldwide in secondary education has more than doubled--to more than 65 per cent, just since 1970.
The more we are able to take advantage of the information explosion around us and the more we are able to liberate our minds from routine tasks and to cultivate high degrees of analytical thinking, the greater the prosperity with which we will be rewarded.
The fifth aspect of change is spiritual.
In my lifetime, natural scientists have studied spiritual matters as never before. The Templeton Foundation Prizes for Progress in Religion focus attention on people who are doing new and original thinking in religion. I regard spiritual development as more important than progress in all other fields combined.
It is encouraging that there are multitudes of new organisations working in the field of progress in religion, such as the American Scientific Affiliation, the Christian Medical Society, Christians in Science, the International Academy of Religious Sciences, the Centre for Advanced Study in Religion and Sciences, the Humility Theology Information Centre, and the Centre of Theological Inquiry.
This century has witnessed the formation of the World Council of Churches, the Canadian Council of Churches, the Friends Service Committee, the National Association of Evangelicals, Church World Service, Campus Crusade, Word of Life, Youth for Christ, the Fellowship of Christian Athletes, the Pentecostal World Congress, the Zygon Journal and Christian Businessmen's Fellowship.
In studying the connections of science and religion, more than 40 organisations are now publishing newsletters. Additional spiritual research organisations are being formed almost every year.
We should all work toward having at least one-tenth as much spent on spiritual research as on material research. That would be $200 million each day! I hope eventually this will happen. And if it does, new beneficial concepts can be developed, and spirituality will again be far more important than all other areas of life combined.
The beneficial effects of religion on our attitudes, our motivations, our interactions with people, our goals, our ethics and on our basic well-being can have immeasurable value.
In summary, I offer you these thoughts:
We are truly blessed to have been part of the remarkable progress that has occurred in such a short time. Change is rarely smooth and painless. Disappointments and setbacks will occur along the way. Unfortunately, too often we focus on the negatives and lose sight of the multitude of blessings that surround us, and the limitless potential that exists for the future.
A glimpse back at history is a powerful reminder of how rapidly our world is advancing. Humans become increasingly more healthy, wealthy and wise. The outlook for our future and that of our grandchildren and of their grandchildren is remarkable indeed. All of us should be overwhelmingly grateful to live in this most exciting, prosperous and peaceful time ever in world history.
The appreciation of the meeting was expressed by Eric L. R. Jackman, Ph.D., President, Invicta Investments Incorp. and a Past President, The Empire Club of Canada