Hello, Reader.
If you were to compare human beings to companies, there aren’t many similarities to hang your hat on.
For starters, we are, obviously, alive, and companies are not.
However, companies are living, breathing organisms – they just so happen to subsist on a steady diet of market share gains and/or expanding profit margins.
And also much like us fragile humans, companies enjoy a lifetime of indeterminate length. But their lifespans do eventually come to an end.
Most investors ignore or overlook this important reality. They tend to think of their core investments as “forever stocks.”
But that sort of perspective can be a dangerous one – especially now that artificial intelligence is running amok in the global economy.
AI is spawning thousands of such companies, many of which will conquer and replace established companies that may seem indomitable today, if not immortal.
That’s the process an Austro-Hungarian economist by the name of Joseph Schumpeter called “creative destruction”… and it is an inescapable facet of economic lifecycles.
As investors, therefore, we cannot afford to bemoan new technologies like AI; we must embrace them. Companies will come and go, whether we like it or not.
Take Blockbuster Inc., for example. It was the king of the hill in the movie rental business. But then along came rental channels that provided a measure of efficiency, like when Netflix began offering DVDs by mail.
So, our mission is to cozy up to the up-and-comers, and steer clear of the down-and-outers.
Unfortunately, because the process of creative destruction resembles a chaotic war zone, we cannot always identify the winners or the losers immediately. But this essential two-part test can help cut through the fog of war to provide clarity and insight, long before the hostilities end.
The test relies on one word: efficiency.
Since the process of creative destruction is a war of efficiency, the creator-victors of this war provide efficiency gains, or utilize them. The “destroyee”-victims do not.
It is the secret sauce that converts upstart companies into world dominators.
Recent geopolitical events – like the U.S.’s strikes against Iran’s nuclear sites over the weekend and Iran’s missile attack on a U.S. base in Qatar today – also work to highlight the importance of efficiency, as companies that can quickly adapt or secure their supply chains using advanced technologies like AI will become victors.
So, when analyzing new investment opportunities, or evaluating existing positions in your portfolio, ask yourself these two questions…
- Is this company introducing a significant efficiency boost, relative to the established, market-leading product or service?
- Is this company applying new technologies to boost the efficiency of its operations?
If the answer to either question is “Yes,” congratulations – you’ve probably got a creative winner on your hands.
If the answer to both questions is “Yes,” you’ve definitely got one.
The inverse is also true, of course. Companies that elicit a “No” answer to both questions are heading for the “destroyee” side of the creative-destruction spectrum.
Efficiency gains do not always show up immediately in financial statements, but they do show up eventually in various ways: Expanding profit margins, a growing market share, rising revenues, or all of them at once.
One of America’s earliest success stories illustrates the power of efficiency.
But first, let’s take a quick look back at what we covered here at Smart Money last week.
Smart Money Roundup
Game On: Inside Meta’s $15 Billion Quest for the AGI Trophy
June 16, 2025
In the world of artificial intelligence, companies are joining forces to achieve the intangible artificial general intelligence (AGI) trophy, one that will award the winner market dominance and massive profits. And now, Meta Platforms Inc. (META) seems to have found its partner in the AGI race. Continue reading to learn Meta’s latest developments in AI, and the best way to play AGI as it continues to quickly develop.
What Gold Knows That Congress Keeps Ignoring
June 18, 2025
Few of us lose any sleep over the U.S.’s soaring indebtedness. But “not yet” is not the same thing as “not ever.” The U.S. has started to probe the outer limits of debt accumulation… and the gold market is watching. In Wednesday’s issue, I share why gold has been soaring right along with U.S. debt levels and why it deserves an allocation in your investment portfolio. I also coverone of the best gilded investments for you to make.
Take This One Step to Avoid AI’s Extinction Event
June 21, 2025
Innovation doesn’t just build new industries – it burns the old ones to the ground. And right now, we’re seeing a wildfire of creative destruction triggered by AI. It’s the kind of event that permanently rewrites the investing landscape. If you’re holding the wrong companies, you won’t just underperform – you’ll get wiped out. Click here to find out how to keep your portfolio on the right side of that Darwinian reckoning and while continuing to profit through.
AI Is Out-Trading Wall Street – Here’s How You Can, Too
June 22, 2025
As Citadel CEO Ken Griffin put it: “The role of human discretion in trading is diminishing. The future belongs to those who can build the best models.” Until now, these kinds of models were the exclusive domain of Wall Street giants. Thanks to the biggest breakthrough so far in TradeSmith’s 20-year history, self-directed investors like you can now tap into the power of AI-assisted trading. TradeSmith CEO Keith Kaplan shares more details in Sunday’s issue, including the steps you should take to incorporate this tool into our investment strategy.
Looking Back… and Looking Ahead
As I mentioned, this earlier American success story had the secret efficiency sauce…
Ford Motor Co. (F).
During its formative years in the early 1900s, this company’s profile would have provided a resounding “Yes” to both of my efficiency tests.
When Henry Ford sold his first Model T vehicles in 1908, the sticker price was $850. But after he and his team had developed an efficient moving assembly line in 1913, he was able to price the Model T at just $440.
Thanks to additional refinements, Model T prices continued falling for several years, until finally bottoming out at $260 in 1925. Not surprisingly, as sticker prices dropped year by year, annual sales skyrocketed.
Case studies of corporate successes like Ford inform my investment process at Fry’s Investment Report. Up and down the portfolio, we find companies that are either introducing new efficiencies, applying new efficiencies, or both.
Take Corning Inc. (GLW), for example.
The company’s market-leading products across several high-demand categories provide dramatic efficiency gains. Its fiber-optic components significantly boost data-transmission capacity in numerous end uses, like data centers.
Including…
- A Korean company that emulates the Amazon-like business model to revolutionize retail commerce in the country – i.e., the goods come to your door, rather than you going to where the goods are sold.
- An energy firm that uses state-of-the-art electric fracking rigs in combination with AI technology to deliver market-leading efficiencies in the oil extraction business.
To learn more about these companies – and the rest of my efficiency plays – join me at Fry’s Investment Report today.
And what’s more: Our partners at TradeSmith are using AI to level the trading playing field between the everyday investor and Wall Street. They’ve developed a powerful AI tool designed, called TradeSmith GPT.
It identifies precise “profit windows,” or the ideal timeframe to trade a stock on any given day.
And on Wednesday, June 25 at 10 a.m. Eastern time, TradeSmith CEO Keith Kaplan will host a free broadcast presentation to unveil this breakthrough.
I will share more about this breakthrough later this week; but for now, when you sign up for the event, you will receive access to a “lite” version of the system to try it out yourself.
Click here to sign up for free.
Regards,
Eric Fry
