Capital at risk
Actual investors imagine ‘what if?’ Not ‘what is’.
Foreseeing the positive consequences of big technological shifts is vital for investors argues Baillie Gifford partner Stuart Dunbar.
What if the cost of putting objects into orbit dropped by 98 per cent? What if virtually everyone in China spent on average 90 minutes per day on one app that provides payments, communications and dozens of other services? (They already do – WeChat). What if completely autonomous transport – not just cars, but trucks, planes, trains and drone deliveries – finally arrives?
These are not fanciful flights of the imagination, they are real things that are in the process of happening now. To invest successfully, it’s not always necessary to be the first to observe something, it’s often more important to embrace the possibilities even amidst uncertainty. The mathematical truth of Amazon’s Jeff Bezos's observation that “Given a 10 per cent chance of a 100-times payoff, you should take that bet every time” is self-evident. But most investors, and the management of the companies in which they invest, are uncomfortable with the prospect of being wrong.
Beyond the obvious
We differ. We think not only about the first-order effects of change (for example, electric vehicle sales disrupting incumbent auto manufacturers) but also about the knock-on consequences. What does it mean for the architecture of city centres if car transport becomes a service rather than an item of ownership? What happens in healthcare if drone delivery of urgent medical supplies becomes more widespread? What are the consequences of tens of millions of previously unbanked citizens of Latin America being brought into the global financial system?
Big changes in behaviour take time, but they often go much further than anyone anticipated. Look at the bewildering number of activities which now pivot around ownership of a smartphone, from socialising to gaming, to banking and investment, to physical navigation. More recently, we’ve started using them for planning and decision-making with the aid of AI apps. There are now almost two million apps in Apple’s App Store and the company is worth over $3tn – and that’s only part of the mobile and digital ecosystem.
What other changes of this magnitude might be just around the corner? We think areas such as drug discovery and personalisation, specialist digital financial services and the continuing rebuild and electrification of our global infrastructure offer intriguing possibilities. We just have to keep asking ‘What if?’
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