We are in a period of abundance. If you haven’t read my piece on A Case for Investing in India, please read it . If you have read it, please read it again. We are in an age of changes that will shock your existence on earth in a way that has not happened in the last 2000 years. What I mean is you will see more progressive and life changing changes in the next 20 years than what the human race has not seen collectively in the last 2000 years. That is a very bold statement to make.
The companies and technologies that drive this age will focus on trends like precision medicine, artificial intelligence, cloud computing, quantum computing, 5G wireless networks and the next generation of clean energy production.
But we have to be very careful. Just because you see cloud computing or 5G tagged to a company, beware of chasing after it. Find out more about their technology, edge and competition. It is a dog-eats-dog world . An established company can be completely decimated by another disruptive technology. Think what happened to Kodak. The iPhone killed the company. Companies like Blackberry never saw the revolution that was taking place in the smart phone industry. In a way it will be like the dot.com bust of the late 1990s and 2000s. During that time, companies were going public at ridiculous levels with absurd valuations. Most of them only had a vague business plan and a ‘dot-com’ added to their brand name.
As I mentioned before, you had a choice in investing in Pet.com or Amazon. The difference was night and day. The choice was between choosing black or white. One sent you to hell while the other sent you to heaven. One sent you to the poor house whereas the other to the rich house. But at that time you were probably confused. You didn’t know for sure which one will shoot for the stars.
The same situation exists now with a twist.
There is no doubt the pandemic has forged a new economic environment. One of the main things what the pandemic did was it advanced the timetable of some tech trends that was in the pipeline by 5 to 10 years. A move towards teleworking has been in existence since last 20 years. No company was willing to take that as a permanent solution .
Instead, companies became more centralized and urban centers started to grow. Companies and managers were reluctant to have their workforces go remote. Managers were obsessed with oversight and supervision. They wanted to physically see what their employees were doing all day.
Now, Covid changed that forever. So new businesses have emerged to make this remote working smoothly. For instance, Pinterest spent over nearly 90 mio dollars to break its contract on a San Francisco office complex. They won’t need the space in a remote work environment.
In the aftermath of the pandemic many online retailers showed an increase of about 75% in online orders following the economic lockdowns. There was a mental block with many people in various sectors of the economy in using online services. And now as consumers understand how convenient these services are, there will be no turning back. So companies that will aide this transition and come out with better and intelligent solutions will do very well.
Earlier in the year, Nokia had released data saying that most wireless networks around the world would see 30 to 45 pct growth in traffic over a year. But that almost happened in over a period of just four weeks during the lockdowns. Some of the statistics and numbers are mind blowing. All because people have been working and entertaining themselves from home.
Videoconferencing for both work and socializing has spiked more than 300% and gaming traffic has exploded to 400% because kids were staying home from school. If you put this in perspective and context network data traffic should more than double every 12 months. Talk about exponential growth.
But please do not assume all technology investments will be winners in the years ahead. In fact, investing in some very established tech companies now will be outright dangerous. Some stocks have reached absurd valuations. And many of them will have a crash landing.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.