01 Oct Thank You Jack – 2025 Q4 Commentary

John Stewart Darrell, whom we all know as Jack, founded the John Stewart Darrell & Company in 1975, 50 years ago this December! Jack’s goal was simple, to serve clients the best that he could. With three clients, one who is still a client, and assets under management of $900,000 ($5 million in today’s dollars), Jack worked to connect with a client base and build a business that could endure. Never one to advertise much, Jack built the business by listening to friends, family, and neighbors talk about their needs and goals. Over time, Jack was able to help meet those clients’ needs and improve their financial livelihoods and outcomes.

Jack would be embarrassed to hear us refer to him as a visionary. However, he had a vision to build an independent Registered Investment Advisor (RIA). As a custodian for our clients Jack chose Charles Schwab & Co., Inc. (Schwab), which was a fledging low-cost broker at the time. Jack saw that he and his organization could provide clients with the lowest cost structure to manage their investments while not compromising on service. As one of Schwab’s first RIA clients Jack started a relationship that has lasted 42 years. With the recent acquisition of TD Ameritrade, Schwab is easily the largest custodian for independent RIAs.

Along with setting a course with Schwab, Jack also was an absolute visionary on fee structure. Jack had come from a New York City brokerage firm and was dissatisfied with the commission based, “churn and burn,” fee structure he witnessed there. When Jack came to Charlottesville to start his business, he wanted to align his clients’ interests and his interests, and utilized a “fee only” structure. That meant that if his clients assets increased in size, he did better, and if those assets decreased, he made less money. This structure has become the industry standard today, but Jack was early to implement it. He wanted to do what was in our clients’ best interests from the beginning.

A financial fiduciary is defined as a “person or organization that has a legal and ethical duty to act in the best interests of their client when managing their money or giving financial advice.” The industry emphasizes this word today, but to Jack and our firm, it exists as a part of the fiber of the firm. None of the partners could imagine doing this job without being fiduciaries. This was another part of Jack’s vision. He simply assumed he was a fiduciary and he wanted to work with all of his friends, his family, his neighbors, and people he cared about. Even though Jack might not have realized at the time he was creating a corporate culture, he was and it is part of the reason clients become clients. None of us shy away from managing friends’ money because we could not imagine not trying to make those peoples’ financial lives better. That started with Jack Darrell!

One does not build a wealth management practice just on lofty ideals and a solid ethical compass. Jack has a magnetic personality. We refer to him as the Mayor of Farmington, where he is as likely to be seen at a client luncheon as he is watching the big game. Many client conversations over the years have reminisced about Jack keeping the client calm during a stretch of particular market turmoil – and very importantly for his/her financial health, keeping that person invested in the market! A frequent quote we hear is, “I just held on because Jack told me to.” One thing we remind those clients is that Jack was not just paying them lip service during a tumultuous time. The reason Jack remained calm during those stretches is the same reason we remained calm in April of this year, Jack has a profound sense of optimism for the United States of America and our capitalistic system. Whatever the concern of the day, Jack knew that company management teams and all of us were doing our best to navigate through it. He believed deeply that the best management teams and companies would prevail and we live within a system that encourages and allows that. That optimism acted as a lighthouse for Jack and it is part of today’s Morris & Wells corporate culture that Jack helped ingrain.

Jack knows about lighthouses. As a long-term sailor, Jack solo captained a 38 foot sail boat into his mid-seventies. His knowledge of markets and market history, as well as, his ability to connect history to the current situation always impressed clients. However, the boldness to climb a rigging by oneself in his seventies tells us a lot about the man. As does his personal vehicle, a 2003 Volvo station wagon, and ability to go on a two month trip with a single piece of hand luggage and his pup, Gussy.

Jack is the definition of one of a kind. He is a kind and generous man, who loves his four children and all of their families. He is a trailblazer in his chosen profession. He is a man of faith, which is important because he has faced tragedy during the course of running this business. He lost his wife Renee in 2012 and his grandson Stewart in 2020, and had to navigate that while also thinking about you, the client. There is not a roadmap for that type of tragedy, nor how to handle it as a business owner.

Jack had hired well though. The culture mentioned above was ingrained in Jack’s first business partner, Charles King (Charlie). Jack and Charlie partnered in 1986, and John Stewart Darrell & Co., became Darrell & King Investment Counsel. Then Elizabeth Morris (Beth) joined Jack and Charlie in 1993. What Jack poured into Beth in terms of education, mentorship, and firm culture, Beth returned to Jack during his difficult times in multiples of kindness and caring. John Wells joined the team in 2011 and going on several road trips to clients with Jack, soon realized and understood all of this culture and bonding that formed the foundation of the firm. It was and remains a beautiful thing and Jack built it.

As of December 31, 2025, Jack will officially retire from the business he built and guided. We believe Morris & Wells is in great shape, and Jack and Charlie have done a wonderful job with our succession plan and charting a path for the next 40 years. Thank you Jack. We love you!

Artificial Intelligence Buildout versus Artificial Intelligence Application

We wanted this newsletter’s focus on Jack and what he has meant to us and to you. However, we live in a world that does not slowdown and we would like to spend a little time on a discussion topic that we frame as Artificial Intelligence (AI) Buildout versus Artificial Intelligence Application. Think of the former as the construction of what the world needs to run AI and the latter of what the world does with AI. We have invested in a number of companies that have focused heavily on building out the infrastructure around AI. Graph 1, below, shows four mega-sized US technology companies and how their quarterly capital expenditure (capex) has increased over the last decade. This encompasses all of those companies’ spending on their various business lines, but a significant portion of the increase is a result of spend on data centers, semi-conductors, and other infrastructure to run their AI and their clients’ cloud computing and AI.

This results in that capex accounting for a noticeable higher portion of GDP. Graph 2, below, illustrates the telecom companies’ spend during the dot-com bubble compared to the so called Hyperscaler (providers of cloud computing services at massive scale) companies’ capex from 2021 to present and projected out to 2028. As a percentage of GDP the Hyperscalers’ spend is already significantly higher than was the spend for the Telecom buildout, and projected to increase even more. Capex spending for AI has increased significantly and has happened with an enthusiasm similar to the telecom buildout in the dot-com era.

This clear and sudden growth in spending supports GDP and stock market growth. OpenAI released its AI chatbot, ChatGPT, to the public on November 30, 2022, a couple months after the start of the most recent bull market. Graph 3, from Fidelity Investments below, illustrates 27 bull markets since 1930. What we have experienced since September 2022 seems typical when compared to those other 26 bull markets. The world has experienced a significant increase in spend on a new technology recently. At some point, just like in the late 1990’s, that spend will have captured all of the demand and the infrastructure will look oversupplied. However, similar to following the telecom buildout of the dot-com era, the world and companies will figure out how to maximize the potential of AI, like it did with the internet in the ensuing two decades. We do not know when or how the use of AI will manifest itself most. However, we know we need to be looking for opportunities to invest in businesses that will leverage AI for revenue growth and increased profitability.

Morris & Wells has made two relatively recent investments in businesses that appear to harness the power of AI and large language models to build products and services that they sell. One business has pivoted from a call center business to a call center business that leverages AI instead of humans to lower the cost of call centers for large multi-national businesses. Another business utilizes machine learning and AI to create highly technical Advanced Driver Assistance Systems (ADAS) – think lane assist and smart cruise control. That Company ultimately will apply its technology to Full Self Driving systems that can be fit to several Original Equipment Manufacturers’ automobiles. These specific companies may not be the long-term winners in terms of the application of AI, but both have shares that look like reasonable values and whose AI related business is growing strongly. We find ourselves in the midst of a new technology cycle, with a potentially long runway for growth. Just like Jack, we maintain a high level of optimism for this cycle and continue to try and identify the winners.

If you have any questions about the above or anything else, please contact us. During the fourth quarter, we hope to have a coffee social. Thank you to all who have stopped by the new office. We look forward to seeing more of you. Thank you for your trust and ongoing support!