Season 5, Post 34: Postcard from America

Your author has just returned from his latest trip to the United States. Despite the best efforts of thunder, lightning, torrential rain and corresponding airport closures plus flight delays, it was still possible to meet with more than ten companies across six different states and two time zones. Not a single meeting was missed, even if one physical interaction did have to be replaced with a Zoom call (blame the weather). At a high-level, it is always fascinating to learn about the future from multiple different perspectives, but a week in the States also provided a wonderful insight into the country’s current mood.

America appears to be an angry and divided country. This was the impression formed from talking with various business executives, investors, friends, taxi drivers and strangers in airport queues. Politics and the seemingly intractable rift between Republican and Democrat viewpoints bubbled near the surface in almost every conversation. Next year’s Presidential Election and the potential machinations of Donald Trump along the way seems to be a clear flashpoint. Inequality was another recurring theme, particularly in the context of mixed messages about the health of the economy. There was no apparent consensus about when/ whether the US would enter recession. Separately, fears about a possible resurgence of COVID-19 remain high and mask-wearing was markedly more prevalent in the US than in Europe.

At least, there were good causes for optimism when thinking about the future. One of the few topics on which there appears to be clear bipartisan support is for ongoing infrastructure investment in the US. It was pointed out to us on several occasions that there are currently more renewable projects being developed in Republican than Democrat states and that irrespective of which party wins the Presidency in 2024, the incentives embedded in the Inflation Reduction Act are (broadly) here to stay. China is, in crude terms, seen as the common enemy. During our trip, we were lucky enough to visit the largest solar manufacturing facility in the western hemisphere, located in Perrysburg, Ohio (a Republican state). We heard in a different meeting with a major infrastructure solutions provider that it had “never seen a more attractive runway” for growth, with opportunities – in both renewables and grid modernisation – running for 20 years and beyond. 

Unsurprisingly, AI was another subject that received a lot of discussion, although the debate seemed more nuanced than hubristic. This may have been a partial function of being primarily on the East Coast as opposed to in California, but the key message was that AI should be thought of as an enabler. Many businesses said that they had already been using it for a long time – no-one, obviously, wants to admit to being a laggard – and that its main benefit lay in allowing more to be done with less. AI is being seen and used by many as a tool to cut costs. Employees can often be redeployed to do things more efficiently elsewhere in the business. Another key benefit that was highlighted to us is that while everyone has (internal) datasets, AI can now allow for these to be presented and leveraged more effectively than previously.

One final observation that was highly reassuring to us is that almost every business with whom we spoke highlighted that it was doubling down on innovation at present. A prevailing view seems to be that regardless of whether the economy enters recession, higher interest rates will pressure less well-funded businesses, thereby creating an opportunity for larger, leading players to press home their advantages. We were particularly impressed with developments in new solar module (thin film) technologies, advanced water metering and monitoring devices and the potential to grow biometrics in the payment ecosystem. We will explore some of these topics in more detail in future Blog posts.

14 September 2023

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in First Solar, Mastercard and Zebra Technologies. The author of this piece has no personal direct investment in either business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

Photos courtesy of the author

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Alex Gunz, Fund Manager