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Tony J. DiGiovanni

CFA® Chief Investment Officer

The Taoist Farmer

“There was a farmer whose horse ran away. That evening, the neighbors gathered to commiserate with him, since this was such bad luck. He said, ‘Maybe.’ The next day the horse returned, bringing with it six wild horses, and the neighbors came exclaiming at his good fortune. He said, ‘Maybe.’ The following day, his son tried to saddle and ride one of the wild horses, was thrown, and broke his leg. Again, the neighbors came to offer their sympathy for the misfortune. He said, ‘Maybe.’ The day after that, conscription officers came to the village to seize young men for the army, but because of the broken leg the farmer’s son was rejected. When the neighbors came to say how fortunately everything had turned out, he said, ‘Maybe.’”

Source: Tao: The Watercourse Way, by Alan Watts (as retold on the Sofo Archon website)

This is one of my favorite parables.

As the father of six, I wish I had been able to embrace such a perspective more often instead of climbing aboard the parenting roller coaster of all the highs and lows I’ve experienced over the years. As we wrap up another fantastic year in the stock and bond markets, I’m trying to channel my inner Tao, and this parable feels especially appropriate for 2025.

One might say, look at our good fortune. We’re in the midst of a tremendous investment boom propelled by the rise of artificial intelligence (AI). Our Taoist farmer would reply, “Maybe.” This is reminiscent of the late 1990s, when a massive investment boom centered around telecommunications and the rise of the internet pushed stock markets to new highs and elevated valuation levels. As it turned out, much of that investment was ill-advised. Think of the Pets.com–type companies, complete with sock-puppet Super Bowl ads that must have cost a fortune. Well then—perhaps that’s bad news for the market. “Maybe.”

One key difference today, compared with 25 to 30 years ago, is the quality and scale of the companies making these AI investments. Today, much of the spending is coming from firms like Alphabet (Google), Microsoft, Tesla, Meta (Facebook), and Nvidia. These companies are arguably stronger and more powerful than many governments, including our own. The combined market value of the top ten companies in the S&P 500 exceeds $24 trillion and accounts for roughly 40% of the index’s total value. For perspective, the gross domestic product of the entire U.S. economy is about $30 trillion. The top seven technology companies (all in the S&P 500’s top ten) are estimated to have spent more than $500 billion on AI-specific investments in 2025 alone. That must make these investments more secure and more likely to succeed. “Maybe.”

Whenever a large amount of money chases the same idea, prices tend to escalate, and valuation levels can get stretched, often leading to suboptimal investment returns going forward.

The dotcom boom of the 1990s led to the dotcom bust of the early 2000s. The S&P 500 fell more than 50% in the first three years of this century when investment returns failed to meet expectations. The Nasdaq, with its heavier concentration in technology companies, fell a staggering 78% during that period. That’s terrible news and doesn’t bode well for the stock market going forward. “Maybe.”

The stock market, however, offers far more opportunities than just technology companies. While tech firms may be doing much of the heavy lifting in research and development, those investments will benefit many other industries. A simple example is electric utilities. AI requires significantly more power than most other internet-based computations, which will drive investment in the electric grid and potentially lead to higher returns for those companies involved. Others will benefit from the productivity enhancements these tools provide. From its peak in March 2000, the S&P 500 was essentially flat over the following decade. Yet during that same period, mid-cap and small-cap indexes rose about 80%, and international stocks gained roughly 20%. That’s good news, so perhaps we should just invest in those areas and all will be well. “Maybe.”

This is where we truly need to channel our inner Taoist.

Nobody really knows where this AI investment boom will lead. I’m reminded of a quote from Bill Gates’s 1996 book, The Road Ahead: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” We’re now more than ten years into the internet era, and it’s still difficult to say whether it has helped us more than it has hurt us. From an efficiency standpoint, the internet seems to be a net positive; it’s hard to imagine our jobs today without an internet connection. However, it has also brought meaningful downsides. Instant access to an abundance of instant news may not be the best thing for us, as we struggle under an avalanche of truth and fiction. Search algorithms often trap us in echo chambers, contributing to the toxic political environment we see today. So, is it good or bad, Taoist farmer?

At White Pine, we’re analyzing and increasing our use of AI. We see it helping us reduce costs on certain research tools over time and improve our efficiency in gathering answers to complex questions. We also plan to incorporate these tools to support our estate planning work. Still, we’re hesitant to completely embrace the technology as some of the answers to our questions so far haven’t been completely accurate or true. I recently saw a cartoon of a person in a hospital bed who was interacting with an AI chatbot. He asked, “I thought you said those berries weren’t poisonous?” The AI bot responded, “I’m sorry. You’re right, they could kill you if you eat them.”

All in all, 2026 looks like it will be an intriguing year filled with both challenges and opportunities. As we navigate the complexities in the investment landscape and our personal lives, let us remember the wisdom of the Taoist farmer: Every event can have multiple interpretations, and each twist of fate brings lessons to learn. May you embrace the good fortune that comes your way and find the silver lining in the difficulties.

Sincerely,

All investment related data came from Bloomberg, LLC. The Standard & Poors 600 and 400 indices were used for small and mid-cap returns. MSCI EAFE index was used for international returns.