This article was written for Equities magazine in February 1999. The primary intent of the authors was not to predict the future of the American stock market but to demonstrate how the secularization of culture can encourage us to think too small about time and reward.

The odds are better than even that the Dow Jones Industrial Average will advance to the one million level during the coming century.

That prediction will strike many investors as very optimistic. Yet it would only require the Dow to compound at an annual rate less than five percent.

The Dow at a million seems so very optimistic as many investors have developed a perspective of time and economic reality that is much too small. This smaller perspective often leads to rapid trading of short-term trends for relatively small rewards. Yet over a life-time, even a ten-fold increase in an investor's capital is relatively inconsequential. So while it could be enriching for a few speculators to trade in ventures like the Internet, it will probably be far more rewarding for most investors to prudently manufacture phones for the eighty percent of the world's population yet to obtain them in their homes. In other words, the celebration of a new century could be a wonderful time not only to reflect but also to visualize a much larger and potentially far more enriching prospect for the coming century.

Over the short-term, economic reality may resemble a wavy line with many ups and downs. But from a long-term perspective, it more resembles an increasingly upward sloping line, indicating progress may be speeding up. For example, when adjusted for inflation, the typical American enjoyed $4,500 of purchasing power as the twentieth century began. In the decades since, the Great Depression, several recessions, too many wars, frequent energy shortages and other economic challenges rolled in as waves on the sand. Yet Americans on average will still enjoy $30,000 of annual purchasing power as the century comes to a close. That six-fold increase in real income quite probably puts the average American in the top one percent of all consumers in human history.

Reflect for a few minutes on what that remarkable achievement means for the average American. When the century began, there were only eight thousand automobiles in the United States and it would be a few years before the first Fords and Harley Davidsons would roll off assembly lines for the masses. Typewriters, airplanes, and gas-powered lawn mowers had not been invented for them. Einstein's Theory of Relativity was not yet perplexing them. They had not yet been comforted by Gideon Bibles while on lonely business trips or shared the fellowship of a Rotary Club while at home. They could only anticipate about fifty years of life expectancy at birth. The Dow Jones Industrial Average fluctuated near the 100 level during the first three decades of the century. It was at 45 near the bottom of the Great Depression and had risen to only 117 the day Pearl Harbor was bombed. At century's mid-point, the Dow Industrial price/earnings (P/E) ratio was seven, indicating investors were still most skeptical of the merits of share ownership. Still, as the century comes to a close, the Dow has increased an hundred-fold. That is approximately the same increase needed to achieve the one million level by next century's end. Yet the Dow's P/E ratio is four times that of fifty years ago. Investors are far more hopeful about the future. If waves are still economic reality, investors may be too euphoric in the short-term. Yet over the long-term, their optimism may be rewarded.

Economic progress has largely been a function of four factors. The first three are time, energy and information. In medieval cultures, people invested significant time and human energy in subsistence agriculture. Annual economic growth in the West averaged only one-tenth of one percent during the centuries between the fall of the Roman Empire until the founding of America. But with the Enlightenment, rapidly increasing knowledge--largely about how to utilize alternative energy sources--caused the curve of economic progress to bend increasingly heavenward. Earlier this decade, Americans were so disenchanted with 2.5% economic growth during recent years that "the economy stupid" became a rallying cry for politicians. Yet today, the shares of information technology companies command extraordinary valuation levels. That suggests investors now believe our greatly expanding knowledge may increase the annual rate of progress to 3.5%--and perhaps even higher--during the decades immediately ahead. While such valuations may indeed be optimistic in the short-term, the economic growth they anticipate may prove quite realistic in the next thirty years and thereafter.

Yet even that far more rapid growth may pale later in the century as we increasingly develop the fourth--and perhaps most dynamic--power for progress. That is the power of the human spirit. It has long been observed that the spirit can complement the mind and body in the development of greater riches. As America was being founded, Alexis de Tocqueville observed that spiritual people "do not shift from day to day, chasing some new object of desire, but have settled designs which they never tire in pursuing...that is why religious nations have often achieved such lasting achievements...religions instill a general habit of behaving with a future in view."

There is encouraging evidence in the business culture that we are beginning again to tap our vast spiritual resources in the pursuit of a richer future. For example, the front page of the Wall Street Journal recently detailed how the World Bank, Lucent Technologies, Elf Atochem and other organizations around our world are teaching employees how "being spiritual can improve productivity, employee relations and customer service." One company reportedly saved "as much as $2 million in operating costs by showing people how to be more inspired about work."

There is also evidence in popular culture that this enriching spiritual development is spreading. The recent movie Simon Birch is an inspiring story of how even a most seemingly unproductive person can enrich many lives when that person is enthused with a sense of divine destiny. The blockbuster book entitled The Testament is indeed a near biblical story that money is most enriching when it is a result of true productivity and is utilized for the community at large. As wonderfully entertaining as these examples are, they simply reflect John Paul's feeling that we may be entering a new "springtime of the human spirit." If so, our prediction may prove quite conservative.

When people look back a century from now, they may see that our world is not deciding between socialism and capitalism, but between two differing forms of capitalism. One has often been called "casino capitalism." We call the other "creative capitalism." Casino capitalists see money as an end unto itself, with winners simply profiting from losers with little or no wealth creation involved. But creative capitalists see money in the larger perspective, as a by-product of wealth creation for humanity.

It was this creative spirit that encouraged Robert Lutz, the former President of Chrysler, to write recently that "the primary purpose of business is not to make money" is one of his laws of business. He went on to explain the primary purpose of Chrysler was to create cars that buyers might use and enjoy. The by-product of that creative activity was to once again make profits that had not been enjoyed when previous management may have deemed the making of money as Chrysler's primary purpose. It is ultimately that slight but crucial difference in perspective and spirit that created great wealth, not only for Chrysler shareholders, but for the employees, suppliers, and customers of Chrysler as well.

As this century comes to a close, the Mercedes-Benz of a new Europe has joined with the new Chrysler of America for the journey across the coming century. It will be a far richer journey--in all areas of life--if all of us join them in the driving spirit of creative capitalism. Operating within that spirit, free competition under law not only serves to teach ethics but also to enrich us all.

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