It was Little Red Riding Hood who naively said “What Big Teeth You Have’ to the Big Bad Wolf. His response “All the better to eat you with’ has struck terror into the hearts of many a child.
This same feeling of terror is currently being felt by many segments of society as technology bares its metaphoric “FAANGs”: Facebook, Amazon, Apple, Netflix and Google (now renamed Alphabet).
It’s not just the older or less tech savvy people that are feeling the heat. Old business models are under pressure as the relentless technology gains are disrupting commerce.
In 1997, Amazon’s letter to shareholders proudly included the following statement:
“We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.”
Now think about this for a moment. Think about these strategic partners.
- America Online
How many of these “important strategic partners” still exist in a meaningful way today? Apart from maybe Yahoo!, (who I think the only person who still uses it is my mother), the answer would have to be NIL!
Technology is moving forward at a relentless pace – paving the way for opportunity whilst leaving a trail of destruction behind.
With the rapid changes occurring it makes you wonder which of the FAANGs will soon pale into insignificance?
But before they do enormous productivity gains will be created which can only be manifested back into share and property prices.
The thing about the FAANGs is its only their dominate market position that creates a barrier to entry. Unless they continually reinvent themselves their technology will age and gather dust and become completely superfluous, just like the once mighty Commodore 64…..
Compare this with an industry with very high barriers to entry like gaming or infrastructure that are protected by Government Granted licenses.
The investment world is on steroids now – Driverless Cars, Nano-Computers, Bitcoins, Virtual Reality, Robotics, Deep Learning and so the list goes on. All of which will be attacking traditional industries and markets.
As investors, we need to be nimble and on the lookout for those disruptive companies that will make industries and entire sectors as redundant as a Sony Walkman. New business will rise to dominate future industries, redefining old markets just like MacDonald’s and Coca-Cola did before them. But which ones will they be?
Understanding the cycle provides us with an unfair advantage, enabling us to see Bubbles and Crashes before they occur.
This is an exciting cycle of change and opportunity. As the blacksmiths of days gone by found out the hard way, it can be painful to be married to an old way of thinking…
At Calnan Flack we are always challenging our thinking, looking for the opportunities. Currently, there are so many investment opportunities available and we would love to help you. So whether you are seeking education or require some assistance with you investing – we are here to help make your investment life better. We would love to hear from you.