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The average company will not catch up easily or quickly, and there can be a lot of pain along the way. But this is clear. If you back up 5 years even, you see a world where the Mag 7 basically represents seven quasi monopolies, half monopolies, or at the very worst duopolies and oligopolies, right? A handful of firms dominating the industry.
You got a whiff of competition in the cloud, but you had three of them converging. But they got on very happily. They either got on the telephone to each other, or more likely, they just deduced that if they behaved in a discrete way, the enemy would not get in a price war, and they did. And so all three of them became a well-behaved oligopoly, and they made tons of money.
That's okay. But now, we are faced with an utterly different world, where all seven of these guys, plus another 15 around the edges, are showing their hairy chests and beating their hairy chests, and saying, "My 120 billion this year is better than your 82." Every one of them mean to win the AI war.
They realize that those people to break through into a new level of technology will become trillionaires, etc., and they mean to be there first. So we have gone from a monopoly world to a brutal competitive world, and we will stay there for years, and there will be blood in the streets, because these are aggressive, take-no-prisoner type companies with lots of money, and they are heading right into each other's teeth, and it will be exciting to watch.
But this is unlike, dear viewer, this is unlike anything we have been saying for the last 20-30 years as we watched Amazon inherit retailing and Tesla inherit EVs and etc. Unless I'm missing it, and it's a complicated business, I would say absolutely not. As far as I can tell, junky stocks are beating safe stocks.
We have an an where we go long quality and short junk and it's being bashed around the ears. But in 2021, you had a perfect example where the super blue chips were doing well, but the flakier ones had peeled off. For example, Cathie Wood's portfolio. She had been brilliant off the COVID low and then starting a few months into 2021, Cathie Wood's portfolio started to go off.
It fell off and it lost a lot of headway. And one by one, you remember the meme stocks? They were taken out and shot as the market climbed handsomely through the year. They were shooting the meme stock and I inadvertently owned a meme stock, QuantumScape. I had a huge position. That was the only terms we could get the stock on, 5% of the company and that was far too big for the foundation that we run for the protection of the environment.
So, that was the only thing I owned myself and so I watched it come as a SPAC at 10 in late 2020 and while the market was still roaring upwards, it came as a SPAC at 10 four times my money. Not bad. Much better than a kick in the pants and in three months, it went to 131. At 131, it was worth more than General Motors.
It was a research lab that was going to develop one day, we hope, a solid state battery. But today, they still don't have a commercial product on the market. But they will, I think, in a year or so. In any case, they did not then. It was an idea still and yet it sold for more than General Motors. There was never an idea that scale in 1929, by the way.
That you have to admit, to be worth more than a seasoned firm selling millions and millions of cars when you have a research lab with the years to go before you have any sales, forget profits. It peaked sadly for me in December 2020 and then all the other meme stocks peaked in the first half of the year and Cathie Wood's portfolio peaked about mid-year and so on and so forth.
It was classic. It was just like the behavior in 1929, 1972. Better than 1972, better than everything except 1929. And we do not see that definitive behavior. And I'll tell you why it happened. I was talking about Mr. Prince, when the music's playing we've got to keep dancing, but you don't have to keep dancing with Puma Tech.
Puma Tech is my favorite example since it was the most advanced stock in 199 in that bubble. And mysteriously, in the next few months, people made sure they recycled out of the Puma Tech into the Coca-Colas. So, Mr. Prince was still dancing, but he was veering towards the Coca-Colas. And why not? History tells you in 1929, etc., it is better to go over the waterfall with Coca-Cola, with the survivors, than it is with the Puma Tech, which quickly ceased to exist.
And Coca-Cola, of course, did not. So, it's a strategy that makes sense. And you can imagine how it would happen. They say, "Yeah, I'm optimistic. The market's been lovely, but this is getting ridiculous. I better make sure I play the game, but at least I will play it with survivors." So, I understand I see why it only happens in extremes, and it clearly happened in 2021.
And 2022 was a very nasty bear market in case people have forgotten already. S&P down 25, growth stocks down 35, Mag 7 down 40, the worst year in the history of the bond market. And then, I like to say, "My nice prediction, my wonderful bear market, was rudely interrupted by the event AI introducing in October '22, ChatGPT." Wow.
And that ruined the bear market. The following 10 months, all the other stocks on average were down, by the way. They couldn't quite believe that the bear market was over, but the Mag 7 doubled and dragged the S&P with it. And then, 10 months later, the rest of the stocks threw in the towel and joined in the bull market.
And my belief is that we would have gone into a minor recession. Why didn't we? Because they stepped up the CapEx for AI to such a huge degree that if you back it out of that time period, it appears to account for all of the GDP growth. So, we would have approached a zero growing GDP. As Keynes explained, animal spirits is very important.
As the market goes down and growth rate of the economy goes down, animal spirits sometimes can get very pessimistic. They affect the investment rate and you slide into a recession. How do you prove it? My guess is that in 2023, we would have moved into a recession and the market would have gone down another 25%.
And AI headed it off. So, now we're in terra incognita. We've never been here before where a major event, AI, with massive capex, unprecedented in any era, even including railroads as a percentage of GDP, we have a bubble forming out of a bubble that was only halfway completed, only halfway deflated, and then resuscitated by this magnificently complex and important business, AI.
I have come to believe that purpose is pretty darn important. But, as you get older, you don't want to be sitting around thinking, "What a useless life. What was it all about?" In the end, it's about kind of doing your or trying to improve the system in some way that you can. So, my recommendation to anyone who's kind of young and so on is to make sure that your career is likely to be useful.
Be an engineer. Be a scientist. Be in the health business. Be anywhere where you know that what you're doing is useful. Start a new company. I think venture capitalism is the very, very best of modern capitalism. I think capitalism is a bit fat and happy and too monopolistic. But, I do think that the venture capital world generates very important new ideas.
If you look at the Magnificent Seven, ask yourself this, how many of them came out of the venture capital business 50 years ago, 30 years ago, 25 years ago? GMO was started a month or two after Apple and Microsoft. It's a really good idea to have a target and keep going. And it's particularly important when you've retired.
otherwise you sit around playing golf and wondering what it's all about. And there are so many really important risks. Risks that could bring culture, civilization, safety, growth to a screeching end in the not too distant future unless we address them. There's the chemicals that we swim through every day, the food we eat covered in toxic chemicals, the fertility rate of our species is going to hell in a handbasket.
This is all a matter of public record. So, we're busy going out of business as a species. The trouble with capitalism it's killing off its own market by resolutely defending their right to produce toxins. And they were thinking of going to the Supreme Court to make sure that fossil fuel companies and chemical companies could not be sued for the damage they create.
So, fine, go ahead, but at least toxicity is regional. If they want to behave pretty well in the EU, they live longer and healthier. If you want to behave badly in the US, the reverse. And we're the only country 15 years ago our life expectancy was long and our healthy years have done even worse. Let me give you one example.
In cosmetic, there are 10,000 chemicals. The EU has banned 1,500. Canada has banned about 550 and the US has banned 12. And as a Brit, my tendency is to say fine, you guys want to kill yourselves, go ahead, but it seems like a bad idea, doesn't it? And then we have climate change. If unaddressed, that will make life very unpleasant.
The last two years, by the way, for the first time, it's about a half a percent of global GDP preventing climate disasters, fixing them, etc. That is going to get steadily worse. And everyone in the world realizes this is a serious topic now except the US. Not a good place to be. So, these are really serious topic and there are plenty of others.
Even worrying about AI and trying to decode some of the problems would be pretty worthwhile, but most jobs, in fact, are just making a living and I recognize someone has to do them, but if you have a choice, pick something useful. The really impressive thing about Homo sapiens is it doesn't like to deal with long-term, and it doesn't like pessimism.
I suspect that we're optimistic because it helps you to survive. If you look at the millions of years as we developed, I think pessimism is probably not very helpful, and that willingness to see the bright side and keep on driving to any dangers that came along was helpful. Who needed the long-term for 99.9% of our history as a species?
Who needed to worry about the long-term? Eventually, no doubt painfully, we learned to try and save enough for the winter, to stash away enough potatoes or whatever, roots, berries. And that was it. So, as a species, we do not do unpleasant news, and we do not do long-term. And my advice to the investor is try and fight those two tendencies.
Try and be realistic rather than systematically looking for the good news, and try and focus on, say, a five-year horizon. What is going on? So, since the war broke out with Iran, the S&P's up 5%. Oh, I get it. That war must be good for us. I'll tell you, it's very, very good for profits of US oil companies.
Not very good for the people who buy their product, but terrific for the oil company. But, can't you tell, dear listener, that since the war, this has not been very good for the world, for Europe, for anybody who needs oil? The only two who look even semi-reasonable are Russia and the US. The US is oil and gas neutral.
We don't need to import oil and gas. All that's happened in the US is, as the prices went up, the oil companies made the money, the people buying at the pump lost equal and offsetting amount, but together we did okay. In Europe, everyone is bleeding. In the Far East, in China, Japan, they're all bleeding.
But, Russia is making money, and the US is merely shipping money from the poor to the rich. So, try and overcome these two tendencies, and you will be one of the better investors.
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