The Technological Arms Race: Implications for Investors

November 2016
Hamish Douglas, CEO, CIO, and Lead Portfolio Manager, Global Equities

We are often reminded of the sage advice from Sir John Templeton: “The four most dangerous words in investing are ‘this time it’s different’.” As investors, we need to question whether we are entering a new technological and machine age over the next 10-25 years that could disrupt most businesses and possibly society as we know it.

In this regard, the new technological and machine age may be more important than the industrial revolution. Quite possibly, this time it is different and whilst heeding Sir Templeton’s advice, as prudent investors we cannot ignore the technological developments that are almost certain to provide substantial threats and opportunities to businesses.

There are numerous powerful lessons on the rapid disruption of businesses from technological innovation. In 1998, Kodak sold 85% of all photographic film, by 2012 it filed for bankruptcy. What is surprising about the Kodak story is that it invented the digital camera, yet was effectively destroyed by its own invention. Nokia became the world’s largest mobile phone manufacturer in 1998 with a 40% market share. In 2013 Nokia sold its loss-making mobile phone business to Microsoft. Google was founded in 1998 and by 2015 had grown its share of the global advertising market to 14%, while newspapers’ share of global advertising fell from 35% in 1999 to 12% in 2015.

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