A friend told me a while back about a financial planning seminar he’d attended, where the wealth management advisers waxed enthusiastically about growth and value stocks, citing several examples of corporations and enterprises that met their criteria for each category.
Not satisfied with their explanations, he asked them where a company such as Amazon, with its vast, online distribution network, would fit in their scheme of things. Or Google. Or Facebook. Would such companies be considered growth or value stocks?
The answer surprised him. Neither. And the reason? None of those ventures had any tangible ‘product’. To the financial advisers, they were too impalpable to be categorized. Their core business exists in the ether, as it were. It’s just technology.
My friend considered this ludicrous. When one looks ahead to the next decade, one must be impressed by the role technology will play in what some have described as a fourth industrial revolution—the first occurring when machines were developed to supplant manual labour in the early nineteenth-century; the second when mass manufacturing methods appeared later in that century and into the next; and the third when digital technology began to overtake mechanical and analog processes in the late twentieth-century.
And what will this fourth revolution look like? How will it affect, not people of my generation so much, but our children and grandchildren? I recently read a summary of issues discussed at a conference sponsored by Singularity University, a consortium of information-technology innovators and providers, and it gave me pause. If these leading-edge thinkers are to be believed, the revolution will encompass a period of exponential growth unmatched in previous history.
Consider the following, gleaned from the aforementioned online summary. Computer software and operating systems will discombobulate traditional business models, as we are already seeing with such companies as Uber, which owns no cars, and Airbnb, which owns no properties.
Computers will become ever more powerful, as demonstrated by the IBM Watson, which is able to offer basic legal advice within seconds, to a greater degree of accuracy than its human counterparts, and which can diagnose cancer more accurately than doctors. What need will there be for generalist lawyers or doctors in a few more years, as computers become arguably more intelligent than humans?
Smartphones will be available and affordable to almost three-quarters of the world’s population within the next five years. That means everyone will have access to the same information, to the same teaching, to the same outcomes in learning, and in the language of their choice. Education will become not only affordable, but entertaining.
A medical device will soon be beta-tested to work with smartphones; it will analyse more than four-dozen bio-markers deduced from retina scans, blood samples, and breath tests, and identify diseases threatening our health. Within a few years, the technology will become inexpensive enough that almost everyone alive will have access to effective, low-cost medicine.
Efficient, green-energy solutions will develop much more quickly than has heretofore been the case. Solar energy, for example, will drive traditional fossil-fuel providers out of business as it becomes less and less costly. With the cheap electricity it generates, desalination efforts will expand, providing the world with an increase in the amount of potable water available for its ever-increasing population.
Electric and self-driving cars are already here. When they become more prevalent and affordable—and they will—entire industries will be disrupted. Who will need a car when a ride can be summoned as needed via smartphone? No maintenance costs. No insurance costs. No parking costs. In fact, no need for the vast tracts of urban land that are given over to parking lots. Perhaps most importantly, a dramatic reduction in the number of people who die every year in automobile accidents.
What will happen to the Fords, the General Motors, the Volkswagens of the automobile industry when the Teslas, Apples, and Googles begin to market vehicular computers for the masses? And what of the large insurance companies? With fewer accidents, not to mention the medical advances cited earlier, their medical and car insurance lines will wither and die.
For young people about to enter the workforce, what does all this mean? It is anticipated that up to 80% of the jobs we count on now will become obsolete in the next twenty years. Will there be enough new jobs to replace them? And if so, what sort of jobs will they be? With the increase in longevity we witnessed during the twentieth-century expected to grow more rapidly, there is an obvious need to develop vocational and avocational pursuits for the escalating population.
So, for my friend and me, and for anyone who is thinking about financial planning for the future, where is the growth, and where is the value, if not in the technology-driven industries driving the revolution?
If you doubt these trends, please call me and make an offer on the once-valuable Kodak and Fujifilm stocks I still have in my portfolio!