The current volatility and dramatic market declines causing heightened investor anxiety belies an important, accelerating, innovation cycle that deserves to garner more investor attention. But as we all know investing can be a very emotional business. The notion that global growth is slowing and macroeconomic issues abound doesn’t change the fact that these cyclical forces are merely masking profound fundamental secular developments that will alter society- how we live, work, and play. And again, these changes may well be accelerating. In some instances, 2019 may serve as a coming out party.
In front of our eyes, more and more devices, things, are becoming connected to each other. The internet of things, “IoT”, is happening. Along with improvements in artificial intelligence, machine learning, and predictive analytics, real time alterations to devices and networks will become standard, improving reliability and functionality. So imagine applying these technologies to networks and devices of all sorts. This will improve efficiency, likely lower costs, enhance productivity, and enable new applications. And of course, there are leading companies, both private and public, leading the charge in these areas.
A foundation for these technologies are new communication networks, 5G, for example. This emerging cellular approach will feature higher frequency bandwidth permitting faster, more reliable, higher density, full duplex transmission rates. Not without its challenges, it will require smaller base stations and a set of newer approaches to the overall topology, but this in turn creates investment opportunity. 5G will be needed for things like autonomous driving and even 4K streaming (the next video standard) to your newly improved higher resolution video watching or game player device.
A profound change in software is coming. We’ve had the move to the cloud, a change in business model from license to subscription, and next up will be incorporating technology from crypto currencies- blockchain. Simply stated, blockchain technology uses a distributed ledger rather than a centralized ledger for storing data. Practically, what it allows for is much more secure data protection, and in combination with other technologies we will see improvements in financial services, supply chains, and areas unimagined today. This is catalyzing a wholesale upgrade cycle in software and the associated infrastructure.
Changes in healthcare will also have a profound impact on our lives. In early 2019 we will get various data readouts from clinical trials where gene therapy and gene editing have been applied to humans for the first time. Early indications are very encouraging as new life savings approaches targeting various deadly diseases are showing efficacy. We will also likely start to get the first FDA approvals of some of these new approaches. So after an extended period of consolidation, we believe areas like biotechnology could flourish in 2019 despite the macro headwinds concerning investors.
Software, infrastructure, communications, healthcare all show investment promise as part of this innovation cycle. It may not feel like it now. Market corrections are never very pleasant. But we would urge investors to stay focused on the prize.
Merry Christmas,
Bruce