The Obligatory Investing Lesson From Blade Runner

The interior of Los Angeles' famous Bradbury Building, where Rick Deckard and Roy Batty had their climactic encounter in "Blade Runner." Photo by Elisabeth Dellinger.

Because we're so friendly (or something), investors regularly ask our opinions on articles and books-and occasionally, those books are works of fiction. One title making the rounds earlier this year was The Mandibles, by Lionel Shriver, a family saga set in a fictional US destroyed by the mother of all financial crises. Spoiler alert: I didn't read it (sorry). But the description reminded me of other recent novels imagining economic calamity in the hypothetical near-future. Gary Shteyngart's Super Sad True Love Story, published in 2010, imagined an America in hoc to Venezuela, whose oil might led it to dominate the western hemisphere. (Oops.) Ernest Cline's Ready Player One, from 2011, saw a country ravaged by the aftermath of peak oil. (Oops.) And who can forget "Blade Runner," whose sequel just hit theatres? The 1982 film, set in an imaginary 2019, pegged Atari and Pan Am as global titans and Japan the world's economic superpower.^[i] All take whatever happened in the very recent past and project it far into the future. It's great entertainment sometimes, but it's also a shining example of a classic investment error.

A recent Wall Street Journal article highlighted this pretty well, asking that ancient question, "Science Affliction: Are Companies Cursed by Cameos in Blade Runner?" After all, as the article observed, of all the companies portrayed as global giants in Ridley Scott's classic, only Coca Cola survived:

Atari, whose logo shines on the street behind [Harrison] Ford in the original film, held an 80% share of the home videogame market in 1982. Within a year of its cameo, the company was dumping truckloads of unsold games into a New Mexico landfill, victim of a massive industry slump.

Headphone maker Koss Corp., featured on an electronics store in the original "Blade Runner," filed for chapter 11 reorganization in 1984. Shortly after its appearance, food-processor pioneer Cuisinart s Inc., settled a price-fixing lawsuit and eventually landed in bankruptcy court. RCA Corp. and Bell Telephone, whose logos got screen time in the 1982 film, ceased to exist.

By the time airline Pan Am sought chapter 11 protection in 1991, the jinx seemed noteworthy enough that movie magazine Premiere ran an item titled "The 'Curse' of Blade Runner." Premiere folded in 2007.

(To the set designers' credit, it appears the Pan Am skyscraper from the original features in the sequel-alternate timelines are groovy like that.)

Obviously, the talented Mr. Scott and his creative team weren't making an economic forecast. They were just doing what was logical based on who ruled Corporate America at the time. In 1982, Nintendo had only handheld videogames (without interchangeable cartridges) to its name. Super Mario probably wasn't even a figment of Shigeru Miyamoto's imagination yet. Sega was huge in arcade games but hadn't entered the home console market. Atari's only real competition was the Commodore 64, and in 1982, it wasn't immediately obvious that their legendary price war would tank Atari the next year.^[ii] And anyway, what looks better in glowing neon: "Atari," or "Commodore"?

Same goes for the other companies. Pan Am is a footnote now, but it was huge in the mid-to-late 20^th century. Ditto RCA, a titan of the analog age. Ma Bell still had a national monopoly.^[iii] Highlighting these was as logical as "Demolition Man" foreseeing Taco Bell putting every other restaurant chain out of business by 2032. Don't underestimate the buying power of kiddos with the munchies.

Projecting the recent past into the far future is easy, whether or not recency bias is at work. Accurately foreseeing it is a lot harder. According to "Back to the Future II," we were all supposed to have flying cars two years ago. The original "Star Trek" figured genetically engineered supermen (including one Khan Noonien Singh) would take over earth by the early 1990s, leading to the devastating Eugenics Wars from 1992 - 1996. "Star Trek: The Next Generation" doubled down on that history, adding World War III from 2026 - 2053-a nuclear holocaust that would destroy most major cities and kill 600 million people. Oh, and lest we forget, according to "Terminator," Skynet should have become self-aware a decade ago.

This is all in good fun, but it also shows why stocks don't discount the far future. It's just too unknowable. Markets move on probabilities, not possibilities, and it's impossible to measure probabilities more than a couple years out. Sometimes less, if you're talking about Atari in 1982. Not that any of you are thinking of ditching stocks because "Blade Runner," "Star Trek" or "Terminator" might actually come true, but it's illustrative. These films and the books mentioned earlier show just how bad humans are at conceiving the future-true whether our visions are based on taking the recent past to 11 or something more fanciful.