Technology When InvestingsteemCreated with Sketch.

in #technology4 years ago

Things are changing very quickly. This is something that even the average person is able to recognize. Technological progress is advancing at a pace we never saw before. This only makes sense as the baseline we are starting at continually gets higher. Our computers are more powerful, networks faster, robotics more advanced, and algorithms deeper.

In short, this is the world we live in.

What is interesting is we see a number of industries that are stagnant. Accounting, for example, does not change much from one decade to the next. The same is true for finance. Economics is another field where people are still using ideas from 70 or 80 years ago.

Unfortunately, this is the realm most people live in. When we look at the world of investing, most information is focused in these areas. This means analysts, guests and hosts on shows, and anyone giving a perspective comes from this background.

To me, this is all wrong.


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Simply put, if one does not understand technology, he or she essentially has no idea what is going on.

Thus, when investing, it is best to understand technology before going any further. Without that as a basis, catastrophe is likely to ensue.

Disruption is taking place everywhere. Looking at the world of stocks, the most successful companies over the last few years are either mega tech or traditional companies who are applying the hell out of technology to their existing business.

Yes, you can look at the balance sheet, cash flow statement, and a host of other metrics to size up a company. The sad reality is that is only a minor part of the story.

I will use Wal-Mart as an example. I really have not looked at their numbers of late. That said, I can tell you that Wal-Mart is going to be one of the success stories over the next half decade. Why can I say that? Because I understand what they are doing with technology and how it fits into the business model.

As a disclaimer, I am using companies I have no investment in.

Wal-Mart made a decision a few years back to spend a fortune on technology. Now, they are starting to reap the benefits of that. They are implementing robot shelf scanners and floor cleaners in addition to automated checkout. This is all done to reduce the labor costs in each of their stores.

Of all the metrics, the amount of labor per sale is key. This is what companies are starting to hone in on. The only way this can be a success is through technology. Amazon is able to sell items for less because their labor cost, per sale better than the competition.

And what is Amazon always focusing upon? Automating more of the process to further reduce labor.

This is just one way technology is altering the world of investing. Entire industries are getting obliterated simply because of the advancements in this area.

Remember a company called Blockbuster? What happened to it? Bankruptcy.

Many will point to a series of numbers to show why they are bankrupt. The simple truth is they were "teched" out. Streaming killed their business. Netflix was a decent company when it was a "DVD shipper" but it really took off when streaming became mainstream.

Costs were reduced while convenience increased. Blockbuster stood no chance.

How about the paper industry? Do you think they are doing well? I spent 20 years in an industry that was based upon paper and I can tell you, it is sucking wind. People kept talking like it was 1999 instead of 2019.

We live in a digital world. Paper is friction. It is slow, expensive, and a pain to maintain. In a world full of data, how do you think companies that deal in paper, printers, copiers, or toner are doing to do over the next decade? The answer is not very well.

How is blockchain and cryptocurrency going to change things? What will 3D printing do and what industries will it completely disrupt (hint: dental labs don't look so good)? How will AI continue to evolve and shape how business applications are used?

The key is to understand what is taking place and which companies are adjusting. Home Depot has done exceptional while Lowe's is having to shutter stores. Why is that? Home Depot got a major jump in the development and implementation of technology. The same is true for McDonalds, Dominos, and Disney.

Without a broad sense of where technology is going, or could go potentially, one is going to be blind to some of the pitfalls that will bite many companies (industries). This goes for both investors and, especially, corporate executives. The events at Kodak and Blockbuster are not isolated cases. People get focused upon numbers and traditional metrics while missing the tsunami that is about to hit them.

We all heard of the impact of autonomous cars and what that will cause when that technology is perfected. However, have you ever considered what the impact will be on the motel industry? How many rooms are booked each night next to highways by people traveling long distance? With autonomous cars, that potentially could be eliminated.

An even more important question: have the executives at the companies that own all the motels given it any thought?

If they are like the ones at Wal-Mart, then the answer is yes. However, if they are like those who were running Kodak, then the answer is negative.

Fidelity, TD Ameritrade, and a few other brokerage services eliminated their commissions on trades this week. This was a response to a technological change in their industry. Suddenly, an app was free to download and did not charge for trades. Who could have envisioned that happening a couple years ago?

Brokerage houses make a lot of money from commissions on trading. They now had to give all that up to remain competitive. This is how quickly things can change.

We know that autonomous vehicles will affect trucking and taxi service. That one is fairly obvious.

But how will drones and flying taxis affect UPS and FedEx? What will 3D printing do to those companies? In fact, what will additive manufacturing (3d printing) do to the food industry? How does the threat of virtual reality affect the airline industry?

All of these are questions most investors and Wall Street people are not asking. They completely miss the technological aspect of things. Of course, if one is looking at a 90 day window or on a swing trade basis, then none of this matters. But for those who have long term views, it is imperative that questions like these are considered.

I can tell you, as we go forward, this is only going to get worse. Failure to start looking now will only put one further behind.


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Andrew Yang, 2020. By the way, did Fidelity announce 0 commissions? I have been waiting for that but can't find anything on that. I know e*trade, ameritrade, and schwab have.

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