Is it possible now, given all the information we have, to predict which sectors and organisations are going to succeed?
Take crypto-currencies, for example. What’s going to happen with them?
There is a proliferation of Initial Coin Offerings (ICOs) taking place – moving from pure currencies to valuing virtually anything, from content on platforms like Steemit to studies on tracking tuna fish.
The big choice many of us face is how to engage with a world of applications that start to bring some of these technologies together.
Software, for example, is increasingly sold only as a service, accessed through a web-browser or API with a sprinkling of blockchain to prepare for the future.
This creates a problem for buyers of such technology – especially ones that are expected to be transformational.
The first is that we don’t know which one will be the next google or facebook.
When it comes to a product designed for everyone – the more people that use it, the more we feel like we need to use it to connect with the others on there.
It’s not like we choose between competing platforms.
Once one platform is ahead, it dominates the space in a winner-takes-all way because there is no physical capacity in terms of the number of users it can serve in the way an airline only has a certain number of seats at any one time.
Warren Buffett, writing in 1999, described two industries that were expected to be transformational as well.
Cars and planes have changed people’s lives. Yet, during the course of the last century, there have been over 2,000 car makers and 300 airlines.
We are now down to a few global car makers – with Tesla being the first major disrupter of the status quo in a long time.
Airlines, at the start of this century, may have made a grand total of zero money between them.
Clearly – technology benefits us. It makes us more productive and transforms the way in which we do things.
The challenge is working out which technologies are going to do that – it’s based on survival of the fittest and the luckiest.
The lesson we should take, according to Buffett is this:
The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.