I recently had the opportunity to attend a conference that centered on the big ideas in technology happening right now. Hearing from such people as Andrew McAfee (author of the 2012 book Race Against the Machine and his most recent The Second Machine Age), Steven Kotler (author of Abundance: The Future Is Better Than You Think), and Charles Songhurst (former Head of Corporate Strategy at Microsoft), I can make a few blanket statements.
First, these guys are humbled, awestruck, and blown away by the advances being made in technology; specifically in robotics, 3D printers, and in general computing power. Second, the individual and the consumer will be empowered by this technology. Lastly, don’t try to pick the winning company, rather win by picking the area as a whole.
This last point may seem to some as a “coward’s way out”, but consider the CNN Money article from December 31, 1998, Year of the Internet Stock. In this article Amazon, eBay, AOL, TheGlobe.com, Cyberian Outpost, and a few other names that have since been lost to history, are listed as stocks that had a great year and are part of the revolution. In the 15 years (1/1/1999 to 12/31/2013) following this article, Amazon and eBay clearly have proven to be the winners among the group, returning a cumulative return of 644.81% and 445.81% respectively as the others essentially went to zero. However, if you broaden the technology space, Apple would have been the big winner with an astonishing 5,569.77% cumulative return for this 15-year period. In other words, the idea that the internet was going to be a game changer in the way we communicate and the technologies we use was right, but our clever execution by picking the few likely winners likely would have missed the boat.
Now, let’s fast forward to today as we stare upon a robotic and biotech revolution. While there are a few select names that seem to be the smart bets to land among the big winners—given the magnitude of impact these two areas will have on the way we live and the uncertainty in the specifics of the path this change will actually take—picking an individual winner involves a level of hubris, while diversification within this idea can add value.
I left the conference fully convinced that these concepts, both current and future, are going to change the world; however, I remain very cautious regarding the execution and process. Without giving any type of recommendation, there exists at least half a dozen Biotech-focused ETFs. Late last year, the first robotics-focused ETF (ROBO) was launched—and it won’t be the last. All of these are less exciting answers to investing in new technologies versus trying to pick the winner, but as the American poet Ogden Nash once wrote, “Too clever is dumb.”