Today’s Money Weekend will talk about the most important industry of the next decade: technology. Some of the changes are shaping up to be like King Kong let loose in the city: highly disruptive. And that’s putting it mildly.
The first thing to do is to make sure you’re not in the path of the beast and in the companies getting knocked down. The second is to consider the businesses that stand to benefit after he’s crashed through. Technological change will rebuild economies and industries just as it destroys them.
You might know already that Money Morning editor Kris Sayce is about to launch his new service, Revolutionary Tech Investor. He and technology analyst Sam Volkering will hunt all over the world to find the best companies who can make a motza from tech development. It’s an exciting project.
Take the latest report from the McKinsey Global Institute for example. It’s called ‘Disruptive technologies: Advances that will transform life, business, and the global economy.’
They argue that we’re on the verge of some massive changes over the next decade or more in 12 key sectors. These will impact how we live and work, not to mention reshaping whole industries and economies. The evolutionary rule will stand supreme: adapt or die.
What are the key sectors? Check them out, in order of the size of their potential impact. They are:
We’re talking stuff, in the words of the report, that has ‘the potential to affect billions of consumers, hundreds of millions of workers and trillions of dollars of economic activity across industries.’
If you consider the growth in tablets and smartphones, the possibilities and changes of just the top one are already pretty amazing. These barely existed a few years ago. Now they’re in the hands of one billion people and deliver the potential to bring billions more people online in the developing word.
Don’t forget the app economy of Apple and Android and all the new ways of servicing and reaching consumers. It has generated new payment systems in banking and new channels for advertisers. It’s generating astonishing amounts of data. Mobile technology will also soon feed into ‘wearable tech’ like Google Glass.
A quick snapshot of winners and losers from this kind of change is Nokia and Samsung. Nokia’s share price has collapsed from $58 in 2000 to around $3.50 today. Samsung, on the other hand, is now outselling Apple in the smart phone market.
If Joseph Schumpeter were alive, we’d encourage him to take a bow. One of the best insights from economics is thanks to his famous expression ‘creative destruction’.
It’s the idea that the heroes of the free market, the innovators and the entrepreneurs, will always hustle to disrupt the established order. Old institutions get swept away and replaced. That’s what we’re talking here. The winds of change seem to be blowing across so many different industries at the same time.
The projections in the McKinsey report are only to 2025. Twelve years away is not that long really. Will 2013 feel like a lifetime ago when we get there?
It’s true that the McKinsey report writers admit that a lot of the numbers they throw up and the scenarios they predict are at best educated guesses. There are simply too many variables to be precise. But you can only call it how you see it, and they see big change.
It’s a world where you better have the right skills in information technology if you’re a worker and a pretty nimble business plan if you’re a company. The report sums it up like this:
‘By the time the technologies that we describe are exerting their influence on the economy in 2025, it will be too late for businesses, policy makers, and citizens to plan their responses. Nobody, especially business leaders, can afford to be the last person using video cassettes in a DVD world.’
The idea for investors, of course, is to try and get ahead of these changes before they’re obvious and gauge the right areas to profit. That’s the task Kris Sayce and Sam Volkering have set themselves. Stay tuned for Kris’s report on where he thinks the best action is.
Of course, an investment you may be more familiar with is property. You might recall we discussed the out and out property bull Phil Anderson last week and the presentation he gave called Remembering the Future. It’s available on DVD if you’re interested.
Before we say another word, we must admit that we have no major stake in this debate. We don’t own property, don’t invest in it and don’t pretend to know anything about the property market other than the fact that it’s expensive in Melbourne, where we live. Perhaps that’s a mistake. Phil thinks real estate people should learn about stocks, and stock market people should learn about real estate.
This is one reason Phil was 100% in cash in 2007. He saw a banking crisis on the horizon at the time. Little titbits like that make us curious enough to read his book, The Secret Life of Real Estate. We’ll let you know what we discover.
But Phil’s bullish call on property has certainly got plenty of people interested (and angry), so we’ve got some snippets from the rough cut of his Remembering the Future talk below for you. If you haven’t heard of him, Phil’s research has led him to conclude there is an 18 year US real estate cycle that you can use to time the property market in America, the UK and Australia.
Callum Newman.
Editor, Money Morning
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PS. Don’t forget if you want to keep track of the latest things we’re reading and brief commentary on events that happen through the day, check out our Google+ page and Kris Sayce’s as well.
From the Port Phillip Publishing Library
Special Report: How to Buy Better Stocks
Daily Reckoning: Why it’s Going to Get Ugly When Interest Rates Rise Again
Money Morning: Signs of Stress in the US Bond Markets
Pursuit of Happiness: Improving Your Life Through New Technology