My 11-year-old son, Archer, is in the sixth grade. Tiffany and I recently gifted him his first iPhone. As a society, we often take for granted the incredible technology we hold at our fingertips. His iPhone 15 boasts 256 gigabytes of storage and runs on the Apple A16 Bionic Chip. For context, a gigabyte represents a billion bytes, so 256 billion bytes. The A16 chip is mind-bogglingly powerful, featuring 16 billion transistors capable of processing 17 trillion operations per second. We spent $500 on it.

In contrast, when I was a freshman in high school in 1985, my parents bought me an IBM PC Jr. equipped with a monitor and a floppy disk drive. Depending on your age, you may already realize that this device was too large to fit in my pocket and was not mobile. It also lacked the capability to make phone calls or take pictures. The internet was still in its infancy, and America Online had not been invented yet. Despite these limitations, it was still an extraordinary tool for me. This remarkable technological machine offered me 128 kilobytes, which translates to 128 thousand bytes. It came with an Intel 8088 chip that boasted only 29,000 transistors and just processed up to 1 million instructions per second. We paid $1,000 for it.

Now, I’ve provided a lot of numbers, but here’s the astonishing part: the technology in my son’s pocket is half the cost and SEVENTEEN MILLION times more powerful than what I had access to 40 years ago.

It’s not just that no one could have predicted this phenomenon; we couldn’t even imagine it. In the spirit of the movie “The Princess Bride,” the character Vizzini exclaims, “Inconceivable!” Even Moore’s Law, a theory that predicted technological advancements, didn’t anticipate the significant price reductions.

Investing in ownership of companies, whether public or private equities/stocks, is the most effective way to capitalize on this innovation. Using the S&P 500 as our benchmark, investing in the S&P 500 from January 1, 1985, to January 1, 2025, resulted in a remarkable growth of $10,000 into $859,749.* This translates to an impressive 11.77% annual return. Of course, we encountered several significant price declines along the way, but all of them were temporary.

Let’s extrapolate those same returns over the next 40 years. If we start our projected hypothetical with an S&P 500 of 6,500, then 40 years from now, assuming a 7% rate of return, the index would reach 97,333.

The future is so bright that I have to wear shades.

*Hypothetical Illustration for S&P 500 TR USD (USD, SPXT)(IDX)  01-01-1985 to 01-01-2025

S&P 500 Index is a capitalization-weighted index calculated on a total return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies.

Past performance is no guarantee of future results.