Signal Through the Noise: An Investment Thesis for the Next Economy

By Garvin Jabusch and Erika Karp, Green Alpha Investments

We were recently asked a question that gets to the very heart of modern investing: “Do you see a path to breaking the media echo chamber, and how is it affecting the market?”

It’s a critical question. The power of narrative to shape market sentiment is not a new phenomenon. One could argue it’s foundational to the concept of a public market. When the first financial broadsheets began circulating in 17th-century Amsterdam, they represented a technological leap. That innovation, however, immediately preceded the speculative frenzy of Tulip Mania. Information, it turned out, was not the same as wisdom.

Today, the velocity, volume, and personalization of narrative are amplified by algorithms designed for engagement, not accuracy. These echo chambers create a powerful “narrative gravity,” pulling asset prices toward a compelling story, often entirely divorced from the underlying reality of a business. This is the “noise.”

Our work is to find the “signal” through this noise. We believe that while narratives can dominate the day, a company’s fundamental economic reality always wins the decade. This conviction is the core of our investment thesis, a practice of “time arbitrage” that has proven valid for centuries; as Warren Buffett’s famous quote goes, “The stock market is a device for transferring money from the impatient to the patient.”

A Tale of Two Assets: Tulips and the VOC

To understand the dynamic, we can stay in the 17th century. While broadsheets fueled the speculative, narrative-driven bubble in tulip bulbs—assets with no underlying cash flow—a disciplined investor could have looked elsewhere. They could have invested in the Dutch East India Company (VOC).

The VOC was a groundbreaking enterprise for its time: the world’s first multinational corporation and the first to issue stock, holding a government-granted monopoly on the highly profitable spice trade. It was a tangible, innovative, and productive engine of the global economy. It was the signal. The Tulip Mania was the noise. An investor who ignored the frenzy and focused on the fundamental value of the VOC was positioned for tremendous long-term returns, long after the tulip market collapsed.

Today’s Signals: Monopolies on the Future

This dynamic is more potent than ever. The modern parallel is stark. A speculative meme stock or cryptocurrency is today’s tulip bulb—its value driven almost entirely by narrative and social momentum, not by productive capacity or intrinsic value.

The modern VOC is a company like Taiwan Semiconductor Manufacturing Company (TSMC), or, even more so, ASML. These companies represent the ultimate signal. TSMC has a near-monopoly on the fabrication of the world’s most advanced microchips. But ASML stands a step above: it is the world’s sole manufacturer of the extreme ultraviolet (EUV) lithography machines that TSMC and others must use to make those chips.

ASML represents an absolute technological choke point on the entire digital economy. Investing in such a company is the epitome of focusing on the signal. Its value is not a story; it is a fundamental reality of physics, engineering, and indispensableeconomic productivity, adding up to a monopoly with a nearly uncrossable moat.

Can’t Stop the Signal

This brings us to the core of our philosophy, best captured by a line from the film Serenity: “Can’t stop the signal.” In the market, the “signal” is the undeniable truth of a company’s economic reality and its indispensable role in the emerging economy. The market’s daily narratives and speculative frenzies are merely attempts to jam that signal. But eventually, the truth of innovation and productivity gets through.

The Grand Application: The Energy Transition

Nowhere is this “signal vs. noise” dynamic clearer than in the global energy transition. We believe this is the ultimate time arbitrage opportunity of our era.

The Noise is the incumbent narrative that argues for the long-term necessity of fossil fuels. This story serves to protect the value of existing assets and infrastructure. It focuses on the short-term challenges of the transition while fundamentally ignoring the relentless, predictable, and unstoppable trajectory of clean technology.

The Signal is the fundamental economic and technological force of the deflationary cost-down curve of renewables and electrification. This is driven by principles like Wright’s Law, which states that for every cumulative doubling of production for a given technology, its costs fall by a consistent and predictable percentage. Essentially, the more we make of something over time—be it solar panels, wind turbines, or batteries—the better and cheaper we get at making it. Once built, the marginal cost of their fuel—sun and wind—is zero. This is a mathematical reality that is rewriting the laws of energy economics. As clean, nearly free electricity becomes abundant, the incentive to electrify everything from transportation to heavy industry becomes irresistible.

Our mission is not to predict the chaotic fluctuations of the noise. Our work is to identify the powerful, inevitable signals of innovation and productivity. We believe the signal is clear: the Next Economy will be powered by deflationary, technologically superior, and sustainable systems. By investing in that signal, we are positioning our portfolios for what we believe is the undeniable economic reality that is already taking shape.

As of the date of this publication, portfolios managed by Green Alpha Advisors, LLC held positions in Taiwan Semiconductor Manufacturing Company (TSMC) and ASML Holding N.V. (ASML). These securities were mentioned for illustrative purposes only to explain our investment thesis and do not constitute a recommendation to buy or sell any security. Holdings are subject to change at any time without notice.

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