Part of being a successful contrarian investor is being able to watch trends, see how the world is changing and adapt to it. The small changes of today will grow into large shifts tomorrow. In the world of technology the new breakthroughs of today will serve as building blocks for advancements in the future. Of course, no one knows exactly what the future entails, but by watching trends you can anticipate how the world will shape up over the next couple of years
The only thing that is guaranteed in life, other than death and taxes, is change. Some people are afraid of change and stubbornly cling on to the "old way of things," but the successful forward looking investors and visionaries embrace change and benefit from it. By adapting to change and adjusting your strategies you are likely to find opportunities early, before most others.
Technology is not only changing and becoming more advanced but the rate of the change is also increasing. According to inventor and futurist Ray Kurzwiel, advancements in technology are growing exponentially. You can see this exponential growth in the semiconductor industry. In 1965 Gordon E. Moore predicted that the number of transistors that can be placed inexpensively on an integrated circuit would double about every 18 months. Despite early critics and naysayer the rate of growth in computing power has only increased over the past decades; now doubling every 12-14 months.
Despite all these advancements it may not feel like technology is growing exponentially. Sure, new computer models are being released every year. But we rarely see new revolutionary technologies, or do we? Part of the reason we may not feel the rapid growth of technological innovations is because we look at the world from a day-to-day perspective. Not much happens from day-to-day and once a new technology has emerged we quickly take it for granted and we feel that it has been around all along.
But radical changes are taking place even though we don't notice them in our busy lives. You may appreciate these changes more by looking at the progress made over the last five, ten, and twenty years. For example, if someone would have told you 20 years ago that there would be a virtual network connecting everyone on the globe, or that people would carry pocket size device (smart phones) that with a press of a button can access almost all human knowledge, many would probably not have believed you.
The chart below shows the rapid growth in technology. Just during the last 100 years the progress in technology has exploded, and we should expect this growth to continue. The internet has made the distribution of information available to virtually anyone; fostering an environment for collaboration and sharing of ideas. In addition, there are currently more engineers and scientists in the field today than all the accumulated engineers and scientists throughout history. The combination of these two variables will lead to greater growth in the field of science with evermore discoveries and innovations.
We may be closer to new scientific breakthroughs than most people realize. In a not so distant future; innovations currently in infant stages, in computer technology and biotechnology will emerge and change the world beyond recognition. The building blocks are already in place, serving as a foundation for new innovations. I see the following trends emerging over the years and decades to come.
Miniaturization of computers
Computers are becoming smaller and smaller. They have shrunk from gigantic mainframe computers the size of a house in the 1960s, only available in universities and government laboratories, to desktop computers, laptops, and now smart phones. At the current rate of change, computers will soon be small enough to fit inside your clothing.
Moore's law is still alive and well and the rate of growth is only increasing in speed; now doubling almost every year. Just last year, a technology revolution occurred, with the advent of the Tri-Gate transistor, and almost nobody outside the high-tech world noticed. In May, Intel displayed what they call the Tri-Gate transistor; a three-dimensional transistor in which electrons flow not just in a flat channel but along three sides of a raised fin. What's significant about this chip is not only its improved computing performance, but it will be smaller and only use half the power of a regular chip; thereby generating less heat. All this means faster, lighter, and cooler computers. The chip is scheduled to enter the market sometimes in 2012.
As computers continue to shrink in size the necessity for a different communicate interface is needed. A keyboard and mouse worked well for a stationary desktop or laptop but those tools are not as effective for a smartphone or even smaller devices. Luckily, there are already devices in development capable of communicating with the user through other means such as responding to a user's eye movements.
Google (GOOG), for example is already working on glasses with a built in heads-up display that has the ability to connect to a wireless network. It has been rumored by employees at Google that the glasses will communicate with your smart phone through Bluetooth and provide data on your location via GPS and motion sensors. It will connect to Google's cloud and relay information of your surroundings, including locations or friends nearby and objects that they look at, allowing you to make calls, use a number of different applications, and connect with friends.
Controlling the glasses will be a bit unique; you will need to tilt your head to scroll and click when reading through information on the display. But sources at Google have said that this function is actually a lot easier to use than it sounds, and will not be noticeable to others.
Meanwhile, Lumus limited is another company also developing a new line of video glasses that the user can see through. The transparent lenses displays to the eye what looks like an 87-inch screen, while allowing you to see what's going on in front of you at the same time.
The video quality is currently at 720p, with a 1080p version in development. The glasses can display content from devices like an iPhone through the use of a special adapter. Besides watching movies, the idea is that the glasses could be used for things like presentations, where you want to read a speech while focusing on your audience or for directions to a location while you're walking around.
Computers, smart phones and other electronic devices may be receiving most of coverage by the media, but it is not the only field where technology is making a lot of progress. Rapid advances are also being made in biotechnology and biomedicine. For example, scientists at MIT developed a double-stranded RNA activated caspase oligomerizer (DRACO) drug last year that can fight viruses as effectively as antibiotics fight bacteria. It is designed to trigger suicide in cells that have been infected by a virus. In lab tests, it was effective against 15 viruses, including the rhinovirus, which causes colds; H1N1 influenza; dengue fever; and poliovirus.
Other progress on the horizon is in made in nanomedicine, which is basically the application of nanotechnology to medicine like diagnosis and treatment of disease. There are several applications within the realm of nanotechnology that are making headway.
These applications include; diagnostics, sensors and surgical tools used outside the patient, imaging agents and monitoring technologies that can be used for diagnostic and sensing on a cellular level inside of the patient, and finally biomaterials used for drug delivery and tissue engineering to promote tissue repair.
Nanotechnology and Nanomedicines is still in an infant stage with first generation technologies like liposomes and PEGylated used for delivering pharmaceutical drugs and nutritional supplements. But more sophisticated nanotechnology is in development.
For example, advancements are being made in technology that can be used to treat cancer. One promising new technique, currently in a development stage, involves delivering a drug made up of small packages of nanoparticles to a tumor. Once the packages are surrounding the cancerous cells, ultrasound will be directed at the target, breaking the packages and releasing the drug to killing the tumor. Other unrelated lines of research include using antibodies to deliver gold or other metallic nanoparticles to a cancer cell and then use radio waves to heat up the metal and burn the cells in the tumor.
We may still be far away from the ultimate goal of having live nanobots (live molecular size robot) in our bodies able to travel to a problem cell and repair it on the fly without any other intervention or medical procedures. Nonetheless, advancement in this area has already been made. Researchers at Harvard have made an organic type of nanobot from DNA with the ability to seek out specific cells and give a set of molecular instruction; like telling cancer cells to kill themselves.
All this is great but what are the investment implications? So far many of the cutting edge companies in the field of nanomedicine are still privately held, backed by venture capital. But a day will come when these companies go public. In the meantime, a public company to watch is Arrowhead Research Corporation (ARWR), a nanomedicine company developing leading drug-delivery systems.
Commercialization of 3D Printing
A revolution in manufacturing is under way. It is in its infant stage, but it will likely reach epic proportions in this coming decade. This technology will turn the economics of manufacturing upside down and change the way products are made, marketed and sold.
Despite relatively unknown, this industry is already generating $1 billion in sales. And the stage is set for massive growth in the years to come. Manufacturers of 3D printers like 3D Systems (DDD) and Stratasys (SSYS) are both generating more than $140 million per years in revenue, and growing rapidly.
Prominent clothing designers, aerospace companies, automotive manufacturers, and consumer electronics companies are already using 3D additive manufacturing (3D printing) to quickly produce prototypes. 3D printing allows them to quickly and inexpensively go from the drawing board to tangible model or prototypes. Many of the products you have at home today have been designed and prototyped with the help of a 3D printer. But we haven't seen anything yet, and real change will take hold once these devices become so inexpensive that every family can afford one.
What exactly is 3D printing?
It is simply the process of putting together a three dimensional object, layer by layer, as opposed to the traditional practice of subtractive manufacturing where multiple subcomponents make a final product. The advantage of 3D additive manufacturing is that one machine, the 3D printer, builds the part from start to finish without the need for any additional processes, treatments, or special handling. 3D printing starts with a three-dimensional CAD drawing that is fed to the 3D printer. The printer then employs one of six manufacturing technologies to create the desired object.
The possibilities for this technology are virtually limitless and somewhere in the future lies the vision that we can instantly download a drawing and manufacture any products, anytime and anywhere. We may well be a decade(s) away from this technology becoming mature, but once here it will revolutionize the way of commerce, just like the internet did in the 1990's.
How does these emerging technologies relate to investing? These technologies are still in their infant stages but at some point some emerging companies is going to deliver these products to the market at an affordable price point. And perhaps the next Microsoft (MSFT) or Apple (AAPL) has already been born.
Huge returns will be made by investors with the insight to find the next great innovator. The chart shows the returns of the technology leaders of the last decade. Whether companies like 3D Systems, Stratasys, Lumus Limited, or Arrowhead Research Corporation will become the new leaders in their field remains to be seen. Nonetheless, we should expect to see exciting new technologies emerging over the next couple of years.