Most years since 2009, we have attended the Portfolio Construction Forum, a conference based in Sydney that we follow each year.
It is one of the better investment conferences on the calendar. The quality of the speakers is consistently high, and the format forces you to think rather than just absorb a presentation.
Over the years we have heard some very good calls, and some that turned out to be wrong. We have also heard the phrase ‘this time is different’ regularly, at conferences and in the financial media.
Usually it is not.
That is not a criticism. Investors and economists are paid to think about what might change, and the honest ones will tell you that most of the time the world turns out to be more resilient than the pessimists expected.
Markets have survived wars, financial crises, pandemics, and the kind of geopolitical noise that would have seemed extraordinary in any previous era. The default position of ‘things will probably keep working’ has been right far more often than it has been wrong.
But every so often something shifts at a level that is harder to dismiss.
This year felt like one of those times.
Two presentations stayed with us.
The first was from Jonathan Pain. Jonathan has a track record worth paying attention to. He was one of the very few people speaking at a major investment conference in early 2020 who identified COVID-19 as something that would fundamentally disrupt the global economy. Most of the room was not ready to hear it. He was right.
This year he was talking about artificial intelligence. His argument was not about which companies to buy or what the productivity numbers might look like. It was more fundamental than that.
He was describing a world in which every person on the planet, regardless of where they were born or what they could afford, would soon have access to what he called a superbrain: a system carrying the equivalent knowledge of millions of specialists, available on a phone.
That is not a minor efficiency gain. It is a change in the architecture of human capability.
The second presentation was the Da Vinci Lecture, delivered by Oliver Hartwich, who is the Executive Director of the New Zealand Initiative. Oliver is a careful thinker, not given to hyperbole, and his lecture was all the more striking for that.
He was not making a short-term investment call. He was describing something much longer in the making: the gradual erosion of the institutional framework that has underpinned global stability, and with it the conditions that investors have largely been able to take for granted for the past thirty-odd years.
His starting point was historical. The rules-based international order that most of us have operated within our entire working lives did not arrive by accident. It was constructed deliberately after 1945, built on institutions like the United Nations, the International Monetary Fund, and the World Trade Organization.
These institutions were imperfect, as all human constructions are, but they created something valuable: a shared set of expectations about how countries would behave, how disputes would be resolved, and how trade would flow.
Investors, whether they knew it or not, were pricing that stability into everything.
What Oliver was describing is the systematic weakening of that framework.
The WTO’s ability to resolve trade disputes has been effectively paralysed for years. The United Nations Security Council is increasingly unable to act when the major powers disagree, which is most of the time.
The willingness of the United States to act as the guarantor of international order, the role it has played since the Second World War, is genuinely in question in a way it was not a decade ago.
These are not temporary disruptions. They look more like structural changes.
He also talked about something we found harder to dismiss than expected: the decline in the civic and educational foundations that underpin good governance.
International measures of educational attainment have been falling in many developed economies. Civic knowledge is declining. He described a shift from careful, analytical reasoning toward something more reactive and tribal in how people engage with information.
The consequences for policy are not abstract. When leaders optimise for signalling to their base rather than effective governance, the quality of decisions deteriorates in ways that eventually affect everyone.
Geopolitics, as a factor in investment planning, had largely been in the background from the fall of the Berlin Wall in 1989 until roughly the COVID period. That is a long time.
Most of the frameworks investors use, and most of the assumptions built into financial models, were developed during that era of relative stability.
What Oliver and Jonathan were both describing, from different angles, is a world where geography matters again, where the institutions that used to smooth over conflict are weaker, and where the pace of change in both technology and political structure is faster than our planning models were designed to handle.
The right response to any of this is not alarm.
Jonathan Pain himself was not pessimistic in any simple sense. He was pointing at disruption and also at opportunity. The AI transformation he described is genuinely two-sided: the same technology that displaces existing industries creates new ones, and the access it provides to people who previously had none is one of the more significant shifts happening in the world right now.
But the right response is also not to file this under ‘another round of this time is different’ and move on.
Something has shifted in the underlying conditions.
The question for us, working with clients who are building and drawing on their savings over the next twenty to thirty years, is what that means in practice.
That is what we want to think through in the next article. The short version is that the assumptions we use in building your financial plan were designed precisely for a world where uncertainty is real and returns are not guaranteed.
But it is worth explaining what those assumptions actually are, how they were constructed, and why we believe they hold even in the environment Oliver Hartwich and Jonathan Pain were describing.
Next month, part two.
