2009 Annual Letter from Bill Gates

http://www.gatesfoundation.org/annual-letter/Pages/2009-bill-gates-annual-letter.aspx

This is the first annual letter from Mr. Bill Gates after he took full-time position at Bill & Melinda Gates Foundation. The foundation's philanthropic effort is very admirable, and Mr. Gates added a brief commentary on the latest economic crises. It's no surprise him and Mr. Buffett are great friends. Their outlooks on the market are similar in many ways.

Warren recently sent me an excerpt from John Maynard Keynes’ essay “The Great Slump of 1930,” which applies to this crisis as well:

"This is a nightmare, which will pass away with the morning. For the resources of nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time."

History is hind sight 20/20 but nevertheless a great source of learning. Living standard improved at a drastic rate in the last century and will continue to do in a peaceful world. Even with the dot.com bust in 2003, many technologies developed during that time frame have totally changed the way we interact with the world today, and that is just merely six years ago. I fully echo what Mr. Gates wrote that although short-term volatility is unknown, there is high possibility that we will be better off in a longer horizon such as five to ten years.

If you take a longer timeframe, such as five to ten years, I am very optimistic that these problems will be behind us. A key reason for this is that innovation in every field—from software and materials science to genetics and energy generation—is moving forward at a pace that can bring real progress in solving big problems. These innovations will help improve the world and reinvigorate the world economy.

Seth Klarman stated in his book "Margin of Safety" that aside from sticking to value investing approach, it is also important to identify growth catalysts to realized a company's intrinsic value. Mr. Gates has offered a great starting point for investors who are seeking to invest in the next leading industry such as software, materials science, genetics and energy generation. Given the current market condition, there are plenty opportunities to find companies within these industries at a much attractive price based on fundamental valuations.