Most current innovations have yet to reach their potential, and new innovations are essential to address the most critical issues we confront, whether that is climate change, food scarcity, water shortages, or more effective distribution of innovation itself. Advanced technologies can be many things, but several areas, including artificial intelligence, life sciences, and software innovations provide the most potent platform for new opportunities, disruptive innovation, and value creation. Software will disrupt the most important industries in the world, especially finance, life sciences, and communications. These will be the fundamental innovations that will drive value creation over the course of the next year, and from now on.
Brilliance combined with quirkiness and rule-breaking perpetuates an image of daring entrepreneurs and risk-taking capitalists generating outsized wealth. This simply doesn’t happen unless what is created matters. While we might question how much one needs to play a videogame or interact with social media, an advanced society needs advanced solutions to the intractable problems it faces. As John F. Kennedy said, “Our problems are man-made, mankind can solve them, as well.” Perhaps. The harsh reality is that brilliant, hard-working entrepreneurs and thoughtful investors lose much more often than they win. We need their risk-taking and willingness to lose. It’s how we win. We need the benefits technological innovation delivers even if we don’t understand that innovation’s ultimate purpose.
Look at the facts not the opinion about the facts. Anyone holding themselves out as an expert has, a very deep but narrow knowledge base that is rarely universally applicable. Fundamentally, listening to opinions rarely give useful insight. Often, it assumes looking backward but does not apply to the current situation. Global commerce, trade (and trade wars) tariffs, flexible manufacturing, and global markets, along with technological innovation and automation create significant pressures against inflation, regardless of employment levels. These are the set of facts to be considered, not an assumed economic model where few people understand the actual inputs from 50 years ago.Another example looks at revenue projections based on historical business models. But what happens when those business models are changing? We discussed the example of the metamorphosis from Blockbuster to Netflix where a fundamental change in the business model made revenue projections from the historical model meaningless. Then, Netflix had to change their business model again to one of the original production and international expansion – once again obviating existing models for revenue. Facts are what happened. Specific and verifiable. Knowledge is the appropriate combination of facts. Knowledge comes from understanding the facts that matter. Wisdom is the insight that leads to prediction. At its core, any investment strategy predicts the future. To predict the future effectively one needs the wisdom to grasp what will happen. Of course, this cannot be known, and there are many random events that can affect the future (see Anti-fragile and Fooled by Randomness by Naseem Taleb), and uncertainty should always be factored into any investment decisions or predictions.