INSIGHTS

IGNORE THE TECH REVOLUTION AT YOUR PERIL

Mark Lister, 27 June 2017

The director of automation at carmaker General Motors made some interesting comments in April. He was talking about connecting a quarter of their factory robots to the internet. Apparently they detect faults quicker, reducing down-time and making the factory run more smoothly.

All very interesting, but the quote that struck me was when he said the “amount of technology coming at us in the next five years is probably more than we’ve seen in the last 50”.

He could be right. In addition to robotics, we’re seeing major steps forward in cloud computing, artificial intelligence, big data and machine learning.

Some of that is a little frightening, especially for people who grew up watching The Terminator. There’s a fear numerous industries will be disrupted, and some jobs will become obsolete. I don’t doubt that at all.

Technological advances aren’t new, nor is significant change for workers in certain industries.

In the 19th century over half the US workforce was involved in farming. Then came the industrial revolution, so by the 1920s that had collapsed to barely 20 per cent. Similarly, the horse population declined sharply with the advent of the motorcar last century, putting a whole range of people out of business.

There will be winners and losers when it comes to technological change, but the net result is almost always an improvement in living standards. Some of the advances around the corner sound pretty amazing. They’re even talking about things like disease prediction in health circles.

It certainly feels like we are in the early stages of a period of major change. We are witnessing it in retail, with the emergence of Amazon and Alibaba. The taxi industry has been shaken up by Uber, and the travel industry is dealing with the likes of Airbnb. Then there’s the media and TV sector, which are also in the thick of it.

Who’s next? Well, probably everyone to a degree. Health and education seem to come up often, and I’ve even heard construction touted as an industry that could be in the firing line.

For investors, ignore these trends at your peril. These days, technology is the biggest sector in the S&P 500, and the best-performing one so far this year. A lot of the tech giants are quite profitable these days, too, and some even pay a dividend. It’s not 1999 any more.

The real excitement is probably in the startups, but for those who want a slice of the action with a little less risk, there are other options.

If there’s money to be made, the likes of Google, Apple and Amazon have a knack of finding a way to take advantage. There are also many funds that invest in the tech space, some passive and some active. I know investors who like these so they can play the theme, without being forced to choose which individual company will benefit from it.

If that GM executive is right, and 50 years of technology is coming between now and 2022, investment in the tech sector isn’t just for the younger crowd.

This article was published by The New Zealand Herald on 28 June 2017