Answer to “Why do investments grow over time?”

Answer to “Why do investments grow over time?”Someone asked the question: “Why do investments grow over time?”

It is a powerful question (if the question is being asked with a philosophical bent of mind) !!

In my opinion, investments, at an overall level, grow over time, due to increase in the productivity of mankind.

The growth of civilizations, advancements in technologies, improvements in our ways of living, improvements in the quality of our lives, are mostly due to the intelligence and enterprise of mankind. This has resulted in a progressive increase in our productivity over millennia.

There have always been periods of social tensions (ex: raids by Genghis Khan), climate change (ex: ice age), natural calamities (ex: meteor strikes), outbreak of diseases (ex: bubonic plague), wherein our overall productivity did decrease. However, due to the resilience of our kind, our productivity has always picked up from the lows.

At a fundamental level, an investment is nothing but our tangible bet on the future utility of an entity/resource (perceived or inherent). And usually this entity/resource, at an overall level, increases in value as the productivity of our societies increases. Hence, investments grow over time.

This post was originally published at the QuietGrowth Australia blog at this link.

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