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Investing in a Disruptive World: How Technology Has Changed Everything
Traders Magazine Online News, August 23, 2018
This article first appeared in SiliconIndia Magazine
In the grand scheme of technological advancement, it wasn't long ago that smartphones were the emerging technology of the day. Within a little more than a decade, they've become fundamental to everyday life in much the same way as other defining modern technologies like social media, streamed entertainment content, cloud computing and e-commerce.
This road from disruption to the new normal has been paved over by these overarching popular technologies, and this time frame gets shorter with each new cycle. Now, another crop of disruptive technologies like machine learning, image recognition, bioinformatics, big data, 3D printing, drones and wearable/implantable technologies may remake the world.
Yet even if technological disruption is a given, harnessing the pace of change can be difficult. The paradigm around disruptive technology as an economic driver has shifted. As a result, investors need to take a hard look at how technology factors into building a portfolio that keeps up with the pace of innovation.
What makes a technology company?
On the face of it, identifying a technology company seems a rather easy task. The likes of Facebook, Amazon and Google are at the top of the list, but look closer and the distinctions become less clear. These companies transcend sectors and industries: Amazon may be best known for its e-commerce arm, but it's also a national grocer, and it takes in more revenue from cloud computing than it does from selling consumer goods. Google, similarly, is developing driverless cars—an arena where auto companies like Ford and Tesla are already active—and Facebook is flirting with the idea of a dating service.
The common thread is technology. While the most high-profile disruption has played out in retail, sectors such as finance, health care, energy, manufacturing and communications have likewise felt the influence of these developments. Technology has changed the way we think, buy, talk, learn, drive, watch, listen, read, work, live—and invest.
Investing for the 21st century
Just as technology has fundamentally transformed everyday life and how we approach it, so too has it altered investing and the decision-making behind it.
There's a new market dynamic: Where once industrials ruled, the scepter is now in the hand of technology. The role of cornerstone companies that generate cash and pay dividends has been filled by Microsoft, Cisco and Intel. The FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks lead the way in innovation and ubiquity, generating continued growth, while exciting new disruptors in diverse areas—robotic surgery, AI, mobile payments—push the boundaries of what were and were not previously considered tech sectors.
But technology is hardly an exclusive club of niche Internet startups or the latest apps. It goes beyond the traditional sector classifications to affect all types of companies under the unifying perspective that technology is a driving force of change and progress more than a label.
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