Innovation and growth march to their own drumbeat

© SpaceX

Please remember that the value of an investment can fall and you may not get back the amount invested.

Innovators draw on past discoveries to develop their ideas. Then companies combine them to create new products.

Take Moderna’s mRNA vaccines. The firm pioneered a way to teach cells to trigger an immune response by building on earlier work. And it relies on genomic sequencing, cloud computing and other technologies to engineer its treatments for Covid, cancer and other diseases.

Each technological breakthrough unlocks a multitude of novel combinations, strengthening the drumbeat of innovation. And that drumbeat also benefits from the fact that some technologies advance exponentially.

For example, a regular doubling of computing power helped drive progress over the past 60 years. And artificial intelligence’s accelerated pace of development holds promise for the decades ahead. Adoption rates also appear to be speeding up, as evidenced by the ChatGPT chatbot amassing 100 million users in just two months.

Innovation’s drumbeat didn’t result from low interest rates or cheap money, and it will continue regardless of current economic gyrations. Over the long term, this should lead to productivity gains and economic growth. Baillie Gifford seeks to invest in companies that either will gain sustainable advantage from innovation-led change or have assets that will rise in value as a result.

Technologies scale over time

Sources: Alphabet, BloombergNEF, computerhistory.org, Illumina, NVIDIA, Our World In Data, Telegeography.

The alchemy of innovation

How some of our portfolio companies combine technologies

Progress powers prosperity

Global gross domestic product (GDP) per capita adjusted for inflation and differences in costs of living between countries. Data shown in US dollars at 2011 prices.
Sources: Our World In Data, Maddison Project Database 2020 (Bolt and van Zanden, 2020).

1844: Samuel Morse demonstrates the telegraph by sending the message “what hath God wrought” in code.

1879: Thomas Edison creates an incandescent carbon filament electric light bulb in his New Jersey lab.

1886: Carl Benz reveals the first car powered by a gasoline engine to the public and applies for a patent.

1897: Guglielmo Marconi sends the radio message, “can you hear me”, across the Bristol Channel, which his colleagues receive.

1903: In North Carolina, brothers Wilbur and Orville Wright achieve the first sustained flight of a powered aircraft.

1913: BASF starts making fertiliser at a German factory using the Haber-Bosch process, which combines nitrogen and hydrogen, helping farmers to increase crop yields.

1926: John Logie Baird gives the world’s first public demonstration of television in London.

1935: Sir Robert Watson-Watt demonstrates a radar-based system for detecting aircraft to the UK’s Air Ministry.

1944: Pfizer begins large-scale penicillin production in the US, making it the first mass-made antibiotic.

1957: Russia launches Sputnik into orbit, Earth’s first artificial satellite

1958: Texas Instruments engineer Jack Kilby creates the first integrated circuit, which becomes better known as the microchip.

1971: John Blankenbaker builds the Kenbak-1, which many historians later recognise as the first personal computer.

1983: The internet gets established thanks to the creation of the Transfer Control Protocol/Internetwork Protocol (TCP/IP), which gives different computer networks a standard way to communicate.

1991: Sony releases the first commercial lithium-ion battery to power its Handycam video recorder.

1994: Amazon, Pizza Hut and others debut secure ecommerce payment systems, giving customers the confidence to shop online.

1997: Wifi’s launch is marked by the release of the 802.11 protocol, providing wireless data transfer speeds of up to two megabits per second.

1999: The Human Genome Project declares the start of full-scale human genome sequencing after scientists decipher the DNA code of a human chromosome.

2006: Amazon launches its cloud computing business with Elastic Compute Cloud (EC2), which lets customers run their applications remotely on its hardware.

2007: Steve Jobs unveils Apple’s first iPhone and puts it on sale the same year, paving the way to the mass adoption of smartphones.

2012: Scientists at Google train a neural network to recognise when cats appear in YouTube clips, leading to the widespread use of AI to analyse video.

2017: SpaceX launches a ‘pre-flown’ booster – a nine-engine rocket base – into space, allowing the firm to reuse the most expensive parts of its Falcon 9 rockets.

2020: Moderna and Pfizer-BioNTech release Covid-19 vaccines based on messenger ribonucleic acid (mRNA) technology.

2022: OpenAI launches ChatGPT, sparking widespread use of its generative artificial intelligence chatbot, which can respond to a wide range of text-based queries.

At the time of publication, in addition to Scottish Mortgage, the following trusts were invested in the companies mentioned above:

Illumina – Keystone Positive Change, Monks

Moderna – Keystone Positive Change, Monks, US Growth

NVIDIA – Monks, US Growth

Roblox – US Growth

SpaceX – Edinburgh Worldwide, Monks, US Growth

Spotify – European Growth, Monks

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This communication was produced and approved in October 2023 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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