Two weeks ago, I had both of my hips replaced. While this wasn’t the most fun way I could think of to spend a few beautiful summer days, it did teach me a couple things.

First, I got to find out why so many seniors put tennis balls on the bottoms of their walkers. I always wondered why people did this, and now I know the answer: tennis balls make it easier to slide the walker around and keep your floors from getting scratched. Who knew?

The other thing this whole experience got me thinking about was how remarkable we humans are when it comes to our ability to innovate. Not too many years ago, hip replacement was a major surgery, and the idea of getting both hips done at once was pretty much unheard of. Today, because of less invasive techniques and better implants, we’re not only able to do both hip replacements at the same time. We can also recover much faster from the surgery, and have the retreads last significantly longer.

Thanks to advances like these, as of this writing, I’m already up and about again (albeit with the help of a walker) and starting to get back to work (at least from my home office). But while I was laid up in bed staring out my window, I got to thinking about how innovation impacts almost every aspect of our lives. This is true for my shiny new hips, and it’s equally true when it comes to investing in capital markets.

As a financial advisor with nearly four decades of experience under my belt, one of the most common questions I get asked whenever the markets are going up is how long can the current rate of growth last? My standard response is to point out that the Dow Jones Industrial Average is roughly 30 times higher today than it was when I started in this business some 37 years ago. But surely there must be an upper limit to all this growth, where things will eventually just permanently level off, right?

The short answer is, there almost certainly would be just such a ceiling to market growth, except for one very important thing: the power of innovation.

Back when innovation as we know it today didn’t really exist (basically, most of human history up until the Industrial Revolution), the global economy simply didn’t grow much from one year (or decade) to another. Between the years 100 and 1500, the size of the world economy was essentially a flat line. Two per cent of the population had all the wealth, while the other 98 per cent starved.

Then around the year 1500, the rule of law showed up, and a handful of countries began to experiment with something called free markets. This remarkable innovation led to an extraordinary growth spurt in the global economy, the effects of which we’re still witnessing today.

Between 1500 and 1820, for example, the global Gross Domestic Product (GDP) grew by an average of 0.3 per cent per year. While this might not seem like a lot, after all those centuries of stagnation, even this relatively modest level of steady growth led the global economy to triple in just 320 short years, from $430 billion in 1500 to around $1.2 trillion in 1820.

But that was just the start. After 1820, innovation – and the global economy – really got going. Between 1820 and 1900, the average annual global growth rate rose from 0.3 per cent to around 1.3 per cent. Between 1900 and 2018, as everything from steam trains to cell phones began to appear, the global economy averaged an annual growth rate closer to 3 per cent a year, while the global GDP grew to a staggering $121 trillion.

All this incredible growth is the fruit of one thing, and one thing only: innovation. And the pace of innovation today – like the global economy itself – just keeps growing faster and faster. But what about the future? Can this 500-year track record of economic growth possibly keep on going, when there are so many daunting challenges looming on the horizon?

Don’t ask me. Ask the experts. According to the United Nations’ Intergovernmental Panel on Climate Change (IPCC), even in the face of seemingly catastrophic crises like global climate change, their middle-of-the-road forecast projects that the global economy will still grow by about 2.8 per cent per year over the next century. This means that, by the year 2100, the global GDP will have reached around $600 trillion. That’s five times the size of the world economy as it stands today.

It’s not that innovation is always beneficial. The whole reason the IPCC even exists is to help us deal with the climate change that’s a direct result of all that relentless innovation. And some of our more ubiquitous innovations, like social media, are seen by many as having a significant negative impact on global rates of depression and the spread of misinformation.

But whether we like it or not, for good or ill, innovation is here to stay. And from better hip surgeries to electric vehicles, artificial intelligence and a whole slew of other things we haven’t even begun to imagine yet, innovation will continue to lead the markets higher for many, many lifetimes to come.

This article is supplied by Alan MacDonald, an investment advisor with RBC Dominion Securities Inc. Member–Canadian Investor Protection Fund.