The medieval quest for gold led to the practice of alchemy. Alchemy was the study to transform regular metals into gold. Mastering the transformational process would lead to untold riches. Such wizardry seems comical even to today’s adolescents. The direct goal of alchemy was never achieved. After all, gold is gold, and copper is copper.

In an odd twist of fate, alchemy spawned the riches practitioners sought. No, not creating gold from non-gold. Seeking molecular transformation, alchemists explored minerals and acids, which led to the development of pharmacology and chemistry. The application of pharmacology and chemistry enriched our lives and solved our problems. Hence, alchemy was able to fulfill its objective, just not in the fashion imagined.

The paramount driver was human ingenuity. We take so much for granted with today’s modern conveniences. The world’s knowledge is at our fingertips through these little handheld computers. Think back to 2007. Nokia flip phones were ubiquitous. Who could replace the cell phone giant Nokia?!? Yet, Apple Computer had just announced the introduction of the iPhone, a pocket-sized touch-screen device with the operational capacity of a computer. Questions abound, “What’s an app?” Nokia quickly lost its cell phone dominance.

Remember DVDs mailed in red Netflix envelopes? About 15 years ago, Netflix introduced streaming videos. DVDs are all but gone today. Blockbuster disappeared because they did not innovate. Even further, whoever thought Hollywood would lose its grip on movies and TV shows? Yet, non-traditional production companies, i.e., Netflix, Hulu, and Prime, have become major Hollywood competitors.

The above progress was a result of human ingenuity and creativity, an economic alchemy of sorts. Netflix moved from a DVD mail-service to a streaming service to movie/TV production because they changed with the times. Losers missed out because they disregarded market dynamics.

At a broader level, it’s human ingenuity that solves problems. Industrialization, effective fertilizers, and enhanced farming techniques reduced the U.S. agricultural working population percentage to around 2% from around 90% in the days of Abraham Lincoln1. Likewise, the transition from horse and buggies to internal combustion engines to EVs is attributable to the human mind. Although the future is unknown, solutions for the current-day and future problems rest in creative ingenuity, a.k.a. economic alchemy. The catch is that future solutions are accompanied by uncertainty. Who knows exactly how problems will be solved?

No one likes uncertainty. From an investment perspective, uncertainty leads to volatility. Volatility is a natural byproduct of investing as companies attempt to develop solutions to problems while maneuvering through current market challenges. The last few months have conditioned investors with below average volatility, giving the illusion that the recent volatility uptick is abnormal. Yet, the reality is the market has returned to the historic average.