February 27, 2025 | Podcast
The Active Share Podcast
The Active Share Podcast
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What drives growth on a global scale? And why does growth occur? On the 50th episode of The Active Share, Hugo is joined by William Blair’s Olga Bitel, partner, global strategist, and Simon Fennell, partner, portfolio manager, for an insightful conversation on the outlook for 2025. Through the lens of economic growth, they discuss key topics such as accelerating innovation, artificial intelligence (AI), the insatiable demand for compute power, growth dynamics across emerging markets (EMs), and the impact of what Olga calls the “perpetual growth machine.”
Comments are edited excerpts from our podcast, which you can listen to in full below.
Olga Bitel: That’s a billion-dollar question. We think economic growth happens when human ingenuity is combined with innovative resources to create new ways of doing things. We call this process the perpetual growth machine (PGM).
Now, economic growth is highly diffused, organic, and continuous. It's born out of each person's innate desire to better our condition in life. But at the same time, our individual and collective appetite for improvement is constantly bumping up against others' unwillingness to change. The result of this continuous tug of war is then measured as economic growth.
Innovation is also accelerating. More of us can spend our productive lives doing things that enable us to solve different problems such as electric vehicles (EVs), cheaper compute power, or more efficient infrastructure rather than in fields growing carrots.
There is no better time to be part of the PGM. It’s revved up and going full speed.
Olga: It's both. And that's a key hallmark of innovation.
Whenever innovation has been commercialized, the costs of new products or services declines exponentially, with availability becoming ubiquitous. More people can then use the products or services in ways we could not imagine 10 years ago.
A good example is 4G, which led to the development of Uber. The folks behind 4G didn’t sit around and think, “How can our tool be useful?” They were solving a connectivity problem. But then others elsewhere said, “This new technology is available. What can we do with it?” As growth investors, that organic process excites us.
Simon Fennell: I think opportunities lie in problems. Every day, society, individuals, and institutions face challenges—but innovation comes from seeing them differently and finding new solutions. That’s the driving force of the PGM.
At the University of Edinburgh, my alma mater, we saw this in action. The university’s Regius Chair of Engineering, Themis Prodromakis, and his team are exploring a radical shift in compute architecture, potentially moving beyond complementary metal-oxide-semiconductor (CMOS) technology and challenging long-held theories like John von Neumann’s “hidden variable” concept.
And as Moore’s Law slows, the key question becomes: how do we get more compute power for less cost and energy? The University of Edinburgh’s researchers may have an answer. Whether it takes off remains to be seen, but this is exactly the kind of breakthrough that fuels perpetual growth.
We also saw this mindset at work in drug discovery. Professors Kenny Baillie and Johnny Mullins and their team are tackling long development timelines for new compounds, which are often a decade or more. How do we speed that up? Could we bring it down to six or seven years? The impact would be profound.
Will we ever run out of problems? No. The human condition ensures we’ll always find something to improve. But as our tools advance, so will our ability to solve bigger, more complex challenges. Institutions across the United Kingdom and Europe are proving that the PGM is not only alive and well—it’s accelerating in ways we might not have expected.
“As our tools advance, so will our ability to solve bigger, more complex challenges.” — Simon Fennell, Partner
Olga: There’s no shortage of groundbreaking discoveries. Last year’s Nobel Prize winners are a great example—one award recognized the breakthrough that allows computers to fold and decode human proteins. Just a few years ago, it took a Ph.D. student four to five years to fold a single protein, meaning humanity had only managed to fold a couple hundred thousand, with hundreds of millions still to go.
Today, a computer program can fold any protein in 30 seconds. That dataset is now freely available to labs worldwide, opening possibilities we can’t yet fully grasp such as new disease treatments and agricultural breakthroughs.
At the University of Edinburgh, we also saw glimpses of computational and synthetic biology, where lab-created organisms and reactions replace years of real-world experimentation. What once took weeks or years now happens in minutes or hours. The potential applications are staggering—bacteria can now clean oceans, capture carbon, improve transportation, and more. Universities such as Edinburgh are already making these possibilities a reality.
Simon: In 2024, we saw extraordinary U.S. exceptionalism in growth, reflected in both market performance and corporate, sector, and national-level numbers. The United States continues to lead in technology, leveraging a vast domestic market, a strong venture capital ecosystem, and world-class academic institutions that drive commercialization.
Companies such as NVIDIA have defined entire industries, with unprecedented growth rates and returns on invested capital. The surge in demand for compute power, fueled by AI and large language models (LLMs), has only accelerated this trend.
In addition, the recent Nobel Prize in chemistry for Demis Hassabis, John Jumper, and David Baker’s protein structure prediction model underscores how academic breakthroughs are rapidly moving into commercialization and market adoption.
But while the United States has led in terms of growth, growth isn’t confined to one region. We’ve seen solid expansion across Southeast Asia, with strong momentum in India, and even some bright spots in Latin America. Europe and China have been relative disappointments, but there’s growing recognition—particularly in France and Germany—that Europe needs a clearer growth roadmap to remain competitive.
Going into 2025, the PGM remains strong, with the potential for other regions to start closing the gap with the United States.
Olga: That’s another billion-dollar question. For years, the United States didn’t practice what it preached in terms of fiscal policy. In a democracy, short-term spending that wins votes tends to take priority over long-term investment in research and development (R&D). Europe has the scientific expertise and innovation potential to compete, but funding hasn’t always gone where it’s needed.
A key factor is the U.S. military-industrial complex, historically a powerhouse for innovation. Take the early 2000s Defense Advanced Research Projects Agency (DARPA) competitions for EVs—20 years later, we’re still seeing major breakthroughs.
Europe, by contrast, has lacked that scale of military-driven R&D, but there’s now a growing recognition that increasing investment is critical, along with addressing institutional hurdles such as regulatory burdens and a weaker venture capital culture.
But U.S. exceptionalism—like any growth story—doesn’t last forever. There’s always room for others to emerge. We’re already seeing shifts in China, and history shows that today’s winners aren’t guaranteed to stay on top in the next decade.
“U.S. exceptionalism—like any growth story—doesn’t last forever.” — Olga Bitel, Partner
Olga: The short answer is both. The longer answer starts in 2013, when India launched major monetization and efficiency reforms, which helped dramatically improve the delivery of payments to more than 90% of its population.
This unleashed liquidity that fueled infrastructure development and capital markets, driving a step change in growth. And by freeing up resources for physical and digital infrastructure, India enabled price discovery, better mobility, and stronger connectivity in remote areas, which has been critical for sustained expansion.
China, on the other hand, has already completed its infrastructure buildout, which is now among the world’s best. But more recently, it has scaled down its real estate sector, a less productive part of its economy, creating a difficult but necessary transition.
But beneath the surface, China remains highly innovative. Resources have shifted toward clean energy, batteries, EVs, robotics, and biotech.
A striking example is Western pharma giants acquiring Chinese biotech firms for breakthrough treatments in cancer and diabetes—showing China’s emergence as a leader in key areas of human health. Meanwhile, China’s EV sector has exploded, going from near-zero sales in 2000 to over $10 billion in just a few years, offering globally competitive models at a fraction of Western prices.
The global response to China has, in part, been about slowing its innovation machine, but India’s growth story remains exciting, even if the next phase will be tougher. Both nations are evolving, just on very different paths.
“Beneath the surface, China remains highly innovative.” — Olga Bitel, Partner
Simon: It’s always telling to see which companies rise to the top of their indices. Tech, especially AI, has dominated, with the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) driving enormous free cash flow through superior products, services, management, and innovation. This is no accident—it’s the result of a broader PGM that spans industries, sectors, and geographies.
In Europe, luxury goods, led by Louis Vuitton Moët Hennessy (LVMH), have been a long-time growth driver, though they’ve now been surpassed by the rapid rise of glucagon-like peptide (GLP)-1 drugs, with Eli Lilly and Novo Nordisk leading the way in obesity treatments. The pace of innovation in this space is staggering, and production bottlenecks appear to be the only limiting factor.
We’ve also seen continued growth in EVs, tech, and defense sectors where cross-industry overlap is creating new opportunities. Finance has played a key role, too, with both traditional and alternative finance experiencing strong growth globally. While the United States leads in investment, Europe has notable players in alternative asset management and private credit.
The nature of growth is broad and multi-layered, and tech remains central. As we look to the future, we can’t yet fully imagine what breakthroughs will usher in the next decade. But when we look back in 10 years, it will all seem inevitable.
Olga: The industrial sector remains strong and has shifted from large, centralized products to smaller, smarter, and more distributed technologies—think modular nuclear reactors, drone-powered solutions, and next-generation battery technology. By the 2030s, we could see smaller, quieter supersonic planes filling our skies.
Beyond industry, a surprising growth story is footwear. Major brands have struggled to innovate, while newer, more agile companies have stepped in, driven not just by fashion but by technology solving real podiatry issues. It’s another example of the PGM at work.
Geographically, while U.S. and Indian growth stories have dominated headlines, Eastern Europe, Greece, and Italy have quietly delivered superior returns in recent years. Even Costa Rica—a country better known for tourism—is emerging as an unexpected growth hub.
Looking ahead to 2025 and 2026, a potential wildcard for growth is a peace dividend. A ceasefire in Ukraine or lasting stability in the Middle East could free up resources to rebuild economies, expand productive capacity, and create new opportunities for prosperity. Growth isn’t just happening in expected places; it’s increasingly widespread and unpredictable.
Simon: I’m interested in the surprises—new companies emerging in unexpected ways and transforming industries we thought we knew.
For example, at the University of Edinburgh, Jasmin Paris achieved incredible feats that defied expectations for a senior woman in athletics. Similarly, Vincent Bouillard’s winning performance at the Ultra Trail du Mont-Blanc (UTMB) last year shows how quickly competition can change and how industries can be redefined by breakthroughs in places you least expect.
Tech is an obvious example, but sports and athletics are also evolving rapidly. When industries intersect, the results can be fascinating.
We’ll continue to see these surprising developments, not just in business but in politics as well. 2024 was a year of elections, and we should be prepared for leadership changes and the continued dynamic nature of both growth and industry.
“I’m interested in the surprises—new companies emerging in unexpected ways and transforming industries we thought we knew.” — Simon Fennell, Partner
Olga: Yes, but with one important caveat. Investors, or any productive stewards of capital across industries, typically embrace uncertainty but dislike volatility. And to the extent that we are likely to see more volatility in international relations, much of that volatility may manifest itself in investments that are postponed or forgone. Volatility can also manifest in market returns and market leadership that whipsaw back and forth.
Over the next several years, I fear that much of the underlying growth will end up being masked by a significant increase in volatility. And as growth investors, it will be incumbent upon us to be diligent about who is solving what needs and what problems.
Simon: I agree. Problems create opportunities. Entrepreneurs and businesses solving those problems will be rewarded, and the volatility we may see comes from institutions, companies, and countries resisting change or trying to protect their own interests.
As growth investors, we need to focus on where that growth is coming from—not just from new startups, but from understanding which industries are evolving. Volatility also stems from overpaying or overestimating the potential of solving these problems. But new technology is genuinely helping drive change, and that’s where the paradigm shift is happening.
While there are downsides for incumbents, this shift should make growth investors optimistic. The potential to solve major problems opens the door to significant, sustainable value creation.
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